(Please see the bottom of this page for details regarding the resignation of Daisytek President and CEO Jim Powell)
Office and computer supply distributor Daisytek expects "significant" fourth-quarter losses and warned that one or more of its U.S. subsidiaries may file for Chapter 11 bankruptcy protection if it fails to find alternative financing. The company is trying to reach agreements with its U.S. vendors, but noted that the vendors had not taken any action against it.
While negotiating with its current lenders, Daisytek said it is pursuing several financing alternatives. A global financing institution has begun due diligence procedures on a proposed credit facility that could replace the company's current U.S. and Canadian facilities. In addition, Daisytek is negotiating with a number of parties interested in purchasing portions of the company's assets.
"Because we are reviewing all of our strategic initiatives and customer and vendor relationships, our team needs to reassess the balance sheet and make adjustments with respect to the realizable value of receivables, inventory, deferred costs and other assets," chief financial officer Jack Kearney said. "We expect these balance sheet adjustments to be material."
The company said it is executing a number of reorganization alternatives and profitability improvements. Cost-saving plans to date are expected to improve cash flow by more than $16 million annually. Executive officers and outside Board members have taken interim, voluntary pay cuts, including a reduction of 32 percent for President and CEO Jim Powell, 20 percent for certain other executive vice presidents and outside Board members, and 5 to 15 percent for most vice presidents.
"The management team is prepared to do whatever it takes to get Daisytek through this difficult time," Powell said. Daisytek expects to provide financial results and a more detailed summary of fourth-quarter operations in a news release in June.
UPDATE: Since the release of the above information on April 28, Daisytek has announced the resignation of President and CEO Jim Powell as well as Ralph Mitchell, the company’s executive vice president and chief financial officer. The company cited "personal reasons" as the explanation of the resignations. Dale A. Booth has been named interim president and CEO. Also, John D. (Jack) Kearney has accepted the newly created role of executive vice president and chief restructuring officer.
