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Fourth quarter unkind to Danka

The copier and printer company expects to report $46-million in operating losses and $83-million in other losses and charges.

By JEFF HARRINGTON
Published May 28, 2005

If Danka Business Systems sold office copiers that ran only on red ink, it would be in fine shape.

But competing in today's copier industry and keeping up with new financial requirements has proved to be a difficult and costly undertaking.

The British company, which has its U.S. headquarters in St. Petersburg, warned Friday that it expects to report an operating loss of $46-million for its fourth fiscal quarter.

That figure doesn't include an estimated impairment loss of $70-million to write down the value of its Europe/Australia unit and $13-million in restructuring charges.

A year ago, Danka also ended its fiscal year on a low note, taking a $51-million charge against deferred tax assets and a $31-million restructuring charge to push its net quarterly loss to about $101-million.

The company projected fourth-quarter revenues of about $300-million compared to $344-million in the year-ago period. It ended the quarter with $98-million in cash, up about $9-million from the third quarter ended Dec. 31.

For the fiscal year, Danka projected revenues of about $1.233-billion with operating losses, before restructuring and impairment charges, of $39-million.

Official results will be released by June 14, the company said.

Danka, which sells and repairs office copiers and printers, is laying off about 12 percent of its 8,000-member work force in a cost-cutting move begun in January. The cuts were expected to include as many as 110 of the company's 1,100 Tampa Bay area employees.

A Danka spokesman said Friday no more cuts are planned.

In a statement, chief executive Todd Mavis called the size of the latest operating loss disappointing. It was exacerbated, he said, by numerous one-time charges.

"While I was disappointed with our operational performance in a few areas," Mavis added, "I was encouraged by the progress we made with several strategic initiatives."

Specifically, the CEO applauded efforts to build "dynamic relationships" with customers so that Danka captures a bigger slice of the money those companies spend on print.

Mavis placed part of the blame for quarterly results on the "costs and distractions" to comply with stricter internal accounting rules under the Sarbanes-Oxley Act of 2002.

Specifically, he cited Section 404 of the corporate-governance law. Danka spent $9-million on Section 404 compliance last quarter and made $5-million worth of adjustments in how it accounts for rental equipment, parts and inventory, property tax and information technology.

Danka's stock fell 8 cents, or 6 percent, Friday to close at $1.27 per share. During the day, shares reached a low of $1.15, a penny above the 52-week low the stock hit in April.

Jeff Harrington can be reached at harrington@sptimes.com or 813 226-3407.

[Last modified May 28, 2005, 00:08:13]