SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (date of earliest event
reported):
August 7, 2002
Daisytek International Corporation
(Exact Name of Registrant as Specified in Charter)
Delaware 0-25400 75-2421746
- ----------- --------- ----------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
1025 Central Expressway South, Suite 200
Allen, Texas 75013
(Address of Principal Executive Offices, including zip code)
(972) 881-4700
(Registrant's Telephone Number, including area code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
On August 7, 2002, Daisytek International
Corporation issued a press release filed herewith as
Exhibit 99.1, regarding earnings for the quarter ended June
30, 2002.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired
Not applicable
(b) Pro forma financial information
Not applicable
(c) Exhibits
99.1 Press Release dated August 7, 2002.
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DAISYTEK INTERNATIONAL CORPORATION
By: /s/ RALPH MITCHELL
------------------------------
Ralph Mitchell
Chief Financial Officer,
Executive Vice President - Finance
Dated: August 8, 2002
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Index to Exhibits
Exhibit
Number Description
------ -----------
99.1 Press Release dated August 7, 2002.
4
Exhibit 99.1
Daisytek Earnings Beat Expectations, Revenue Grows 47% U.S., Australia, Canada,
Mexico, U.K. Deliver Solid Performance
ALLEN, Texas--Aug. 7, 2002--Daisytek International Corporation
(Nasdaq:DZTK) today announced first quarter net income from continuing
operations of $3.6 million and diluted earnings per share of $0.19, excluding
special charges. Revenues for the quarter increased 47% to $402.5 million
compared to last year's quarterly revenues of $273.0 million, primarily due to
consolidation of ISA International plc for two months. Revenue growth, excluding
ISA, was 17%. As previously announced, the inclusion of ISA International had a
short-term dilutive impact on net income, which as adjusted, represents an 18%
decrease over the prior year adjusted net income of $4.5 million. Corresponding
first quarter diluted earnings per share of $0.19 (on 19.4 million shares)
compares to prior year diluted earnings per share of $0.28 (on 16.0 million
shares).
After accounting for special charges, first quarter net income
from continuing operations was $2.2 million, a 27% increase over the
same quarter last year of $1.8 million. Diluted earnings per share
from continuing operations were $0.12 this year versus $0.11 in last
year's quarter, using share counts above.
Daisytek considers its adjusted presentation of earnings, which
excludes nonrecurring charges and discontinued operations, to be the
most relevant benchmark of the company's operating performance. The
information in this release relates to Daisytek's adjusted financial
data, unless otherwise noted.
"Daisytek has delivered impressive revenue growth throughout all
of our divisions. Organic growth was within our stated range of
10-15%. Earnings exceeded our expectations, and are poised for further
growth through some exciting initiatives worldwide," said Jim Powell,
president and CEO.
Achievements for the first quarter include:
-- Consolidated revenue growth of 47%.
-- Overall U.S. revenue growth of 25%.
-- Solid international revenue growth, excluding Europe and
Argentina, of 19%.
-- Expanded into the European market with the acquisition of ISA,
which has annual revenues over $500 million.
-- ISA revenue growth of almost 20%.
-- Opened new sales and distribution center in Guadalajara,
Mexico.
-- New U.S. regional distribution center in Bakersfield, Calif.,
is now operational.
-- Landed new consumer-convenient agreements in the U.S., Canada
and Mexico.
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-- New U.S. regional distribution center in Albany, N.Y., on
track for October opening.
-- Office products integrated catalog to be launched by October.
In the first quarter, revenue growth for the U.S. division was 25%
compared to the prior year's quarter. Daisytek's initiative to drive
sales through the consumer-convenient channel - which includes
grocery, drug, online and other resellers - continues to produce
excellent results, with first quarter revenues up approximately 50%
over the prior year, producing an annualized run rate in excess of
$100 million for this channel.
The company's plan to expand its existing offering of office
products is on track for a full launch by October. In California the
Daisytek team has opened the first new regional distribution center
and is already shipping hundreds of customer orders per day. This
facility is critical to support the expansion into office products and
our goal to provide a low-cost one-box solution for computer and
office supplies.
International revenues (which exclude ISA's European territory),
excluding Argentina, grew 19% year-on-year. Including Argentina,
revenue growth was almost 10%, in U.S. dollars. Daisytek's divisions
in Australia, Canada and Mexico all delivered strong results. As well
as geographic expansion into Guadalajara and Quebec this past quarter,
the company also signed several new drug and grocery chains to
contracts in Canada and Mexico, including a contract that will give
shoppers in Radio Shack stores across Canada access to more than 60
SKUs in more than 600 locations.
Daisytek's offer for all of the shares of ISA International, a
pan-European distributor of computer supplies, which indirectly owns
47% of Kingfield Heath Ltd., a U.K.-based wholesaler of office
products, was declared successful and closed on July 10. Daisytek has
commenced exercising its rights to compulsorily acquire all shares not
yet tendered under the offer in accordance with U.K. regulations.
"The ISA transaction positions Daisytek to achieve significant
earnings growth for Daisytek shareholders, and both ISA and Kingfield
Heath have shown signs that our timing was good and our decision
sound. ISA's revenue growth was 19% year-on-year for the full
three-month period ended June 30, 2002," said Powell. "The French and
German operations continue to deliver improved results and we are
optimistic that ISA will become accretive in the latter part of this
fiscal year."
Overall gross margins were approximately 10%. This quarter's SG&A
was approximately 8% of total revenue. Resulting EBIT (excluding
certain charges) for the first quarter as a percentage of net revenues
was slightly under 2%, basically in line with expectations given the
short-term dilution from ISA and U.S. restructuring activities.
Net debt (total debt less cash) increased to approximately $203
million during the quarter. This increase was mainly attributable to
ISA's acquisition cost, ISA assumed debt and increases in working
capital, deriving from revenue growth during the quarter and stocking
at the two new regional distribution centers. Daisytek announced that
it had closed a new three-year $250 million syndicated senior secured
debt facility led by Bank of America, N.A. in the United States. In
addition to this U.S. facility, the company has a further $100 million
of asset-based credit facilities with a variety of international
lenders. These combined facilities are sufficient to meet Daisytek's
current growth projections.
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The company, in the June 30, 2002, quarter, recorded after-tax
restructuring and nonrecurring charges of $1.4 million, including $0.6
million related to warehouse and distribution initiatives, $0.7
million related to back-office improvements and $0.1 for debt
termination costs. Further charges will be recognized as incurred over
an estimated 12 months.
The effective tax rate of 27% (on adjusted earnings) for the first
quarter of fiscal 2003 includes a $0.3 million recovery of previously
paid state income taxes.
The company is providing updated guidance to the market to help
facilitate a better understanding of Daisytek's outlook. These
estimates are the company's current targets, and are not predictions
of actual performance. The company's actual performance may differ
from its projections; therefore, the forward-looking information below
must be read in conjunction with the business risks listed below as
well as with those highlighted in Daisytek's 10-K for the fiscal year
ended March 31, 2002.
Ralph Mitchell, executive vice president and CFO, said,
"Daisytek's combined revenue for Fiscal 2003 is projected to be $1.8
billion to $1.9 billion. We expected earnings dilution from the
consolidation and funding of ISA (and its 47% investment in Kingfield
Heath) in the first two quarters of our FY03, due to the seasonality
of the European businesses and the ongoing operational improvement
initiatives in ISA's continental operations. We are targeting
breakeven with funding costs in our third and fourth quarters or
possibly a small accretion, after funding costs, for ISA during these
quarters. Our EPS guidance for this year remains as $1.05 to $1.10 per
diluted share. By next fiscal year, ending March 2004, we expect ISA
to be significantly net accretive for the full fiscal year. Our EPS
guidance for FY04 is $1.40 to $1.50 per diluted share with revenue
growth of at least 10-15%."
"We believe our geographic and product expansions will establish
Daisytek as the world's leading distributor of computer supplies,
office products and accessories. In North America we intend to
establish the most cost-effective national supplies distribution model
in the industry. We have added a major European presence, which we
believe has significant upside potential. Ultimately, we believe that
our focus on supply-chain efficiencies and dedicated cost management,
coupled with our strategies for the long term, will create significant
shareholder value," said Powell.
Daisytek's strategies for future growth are based on the
following:
-- Capitalizing on the strong growth in computer supplies;
-- Expanding the supplies offering to include a full line of
office products;
-- Investing in the development of emerging, higher growth
customer channels such as drug and grocery chains and the
Web-based divisions of major corporate resellers;
-- Developing new client services, such as the customer care and
demand generation services of the fee-based VirtualDemand
division;
-- Expanding products and services described above into new and
existing international markets; and
-- Pursuing financially attractive acquisitions that support
these strategies.
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"As well as these growth strategies, we are committed to being the
low cost provider in each of our markets," said Powell. "We will
leverage our skills and our infrastructure to become the world's
largest supplier of computer supplies, office products and
accessories."
Items excluded from the unaudited, adjusted historical financial
presentation for the periods ended June 30, 2002 and 2001 are
summarized below (in thousands):
Quarter Ended June 30,
-----------------------------
-----------------------------
2002 2001
------------ ------------
GAAP net income $2,242 $ 1,771
Reconciling items,
net of tax:
Restructuring and
other non-recurring
charges 1,399 --
Reacquisition
of Memphis hub -- 2,725
Discontinued
operations
(BSD) -- (35)
======= =======
Adjusted net income $3,641 $ 4,461
======= =======
Daisytek will conduct an earnings conference call today at 9 a.m.
CST. Please dial 801-303-7410 by 8:50 a.m. and ask to be included. Two
hours later, a recorded playback can be heard for 14 days at
402-220-1490 using access code 1397. Check www.daisytek.com for more
details on the call, playback and webcast. NOTE: If you encounter
telecommunications difficulties during the call, please redial the
call-in number immediately.
About Daisytek
Daisytek International is a worldwide distributor of computer and
office supplies, peripherals and professional tape media. In addition,
it offers fee-based marketing, demand-generation and fulfillment
services. Daisytek sells its products and services in the United
States, Europe, Canada, Australia, Mexico and South America,
distributing more than 25,000 products from about 500 manufacturers,
including printer supplies, magnetic and data storage media, video and
motion picture film. This news release and more information about
Daisytek are available at www.daisytek.com. The company's annual
report is at www.dztkannualreport.com. These Web sites are not part of
this release. Daisytek is a registered trademark of Daisytek,
Incorporated. All rights reserved.
The matters discussed in this news release contain both historical
and forward-looking statements. All statements other than statements
of historical fact are, or may be deemed to be, forward-looking
information within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Act of 1934, as
amended. You can identify these statements by the fact that they do
not relate strictly to historical or current facts, but rather reflect
our current expectations concerning future results and events.
Forward-looking statements relating to such matters as our financial
condition and operations, including forecasted information, are based
on our management's current intent, belief or expectations regarding
our industry or us. These forward-looking statements including
forecasts are not guarantees of future performance and involve risks,
uncertainties and assumptions that are difficult to predict. In
addition, some forward-looking statements are based upon assumptions
as to future events that may not prove to be accurate. Therefore,
actual outcomes and results may differ materially from what is
expected or forecasted in such forward-looking statements. We
undertake no obligation to update publicly any forward-looking
statement for any reason, even if new information becomes available or
other events occur in the future.
Certain factors, including but not limited to, general economic
conditions, industry trends, the loss of or inability to hire skilled
personnel, the loss of key suppliers or customers, the loss or
material decline in service of strategic product shipping
relationships, customer demand, product availability, competition
(including pricing and availability), risks inherent in acquiring,
integrating and operating new businesses and investments,
concentrations of credit risk, distribution efficiencies, capacity
constraints, technological difficulties, the volatility of our common
stock, economic and political uncertainties arising as a result of
terrorist attacks, seasonality, exchange rate fluctuations, foreign
currency devaluations and the regulatory and trade environment (both
domestic and foreign) could cause our actual results to differ
materially from the anticipated results or other expectations
expressed in our forward-looking statements. There may be additional
risks that we do not currently view as material or that are not
presently known.
Other factors that could affect Daisytek are set forth in
Daisytek's 10-K for the fiscal year ended March 31, 2002.
- financial statements follow -
8
Daisytek International Corporation and Subsidiaries, Excluding
Restructuring and Nonrecurring Charges and Discontinued Operations
Unaudited Adjusted Consolidated Statements of Operations
The following is an unaudited adjusted historical financial
presentation of the results of operations of Daisytek International
excluding restructuring and nonrecurring charges and the income (loss)
from operations of a discontinued subsidiary. Restructuring and other
nonrecurring charges of $2.2 million are excluded from first quarter
2003 adjusted historical financial results. First quarter 2002
adjusted historical financial results exclude a nonrecurring charge of
$4.4 million related to Daisytek's May 2001 acquisition of
distribution assets in its Memphis Superhub facility from PFSweb and
the termination of certain transaction management service agreements
between Daisytek and PFSweb, shown as nonrecurring costs in the GAAP
financial statements.
Daisytek based the following unaudited adjusted historical
financial data on available information and certain estimates and
assumptions. Daisytek believes that such assumptions provide a
reasonable basis for presenting the results of Daisytek International
on a stand-alone basis. This unaudited adjusted financial information
does not reflect what our results of operations may be in the future.
(In Thousands, Except Per Share Data)
Fiscal Year 2002
----------------------------------------------------
-------------- -------------------------------------
June 30, Sept. 30, Dec. 31, March 31, June 30,
2001 2001 2001 2002 2002
---------- ---------- -------- ---------- ------
Net sales $272,952 $278,769 $309,338 $323,971 $402,496
Cost of
sales 241,504 249,148 277,500 290,487 363,807
-------- -------- -------- -------- --------
Gross profit 31,448 29,621 31,838 33,484 38,689
Selling,
general and
administrative
expenses 22,649 22,742 22,176 23,143 31,944
-------- -------- -------- -------- --------
Income from
operations 8,799 6,879 9,662 10,341 6,745
Interest
expense 1,554 1,786 1,850 2,031 2,928
-------- -------- -------- -------- --------
Income before
income taxes 7,245 5,093 7,812 8,310 3,817
Provision for
income taxes 2,784 1,884 2,811 3,133 1,021
-------- -------- -------- -------- --------
Income before
equity in
net income
of affiliate
and minority
interest 4,461 3,209 5,001 5,177 2,796
Equity in net
income of
affiliate
and minority
interest -- -- -- -- 845
-------- -------- -------- -------- --------
Adjusted net
income $ 4,461 $ 3,209 $ 5,001 $ 5,177 $ 3,641
======== ======== ======== ======== ========
Net income per
common share:
Basic $ 0.30 $ 0.21 $ 0.31 $ 0.29 $ 0.20
Diluted $ 0.28 $ 0.19 $ 0.29 $ 0.27 $ 0.19
Items excluded from the unaudited, adjusted historical financial
presentation for the periods presented above are summarized below (in
thousands):
Fiscal Year 2002
----------------------------------------------------
-------------- ------------- ------------- ---------
June 30, Sept. 30, Dec. 31, March 31, June 30,
2001 2001 2001 2002 2002
-------- ---------- -------- -------- --------
GAAP net
income $ 1,771 $ 2,089 $ 3,116 $ 3,877 $ 2,242
Reconciling
items, net
of tax:
Restructuring
and other
nonrecurring
charges -- -- 1,885 1,300 1,399
Reacquisition
of Memphis hub 2,725 -- -- -- --
Discontinued
operations (35) 1,120 -- -- --
-------- -------- -------- -------- --------
Adjusted net
income $ 4,461 $ 3,209 $ 5,001 $ 5,177 $ 3,641
======== ======== ======== ======== ========
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Daisytek International Corporation and Subsidiaries
Unaudited Adjusted Consolidated Balance Sheet Data
(In Thousands)
June 30, March 31,
2002 2002
---------- -----------
Total assets $ 573,889 $ 414,390
Working capital,
excluding debt
and cash $ 278,450 $ 206,264
Total net debt,
excluding cash $ 202,938 $ 111,640
Shareholders'
equity $ 199,292 $ 196,020
Daisytek International Corporation and Subsidiaries
Unaudited Consolidated Statements of Operations
(In Thousands, Except Per Share Data)
The following presentation of Daisytek International Corporation
is based on generally accepted accounting principles.
Three Months Ended
June 30,
2002 2001
------------- -----------
Net revenues $ 402,496 $ 272,952
Cost of revenues 363,807 241,504
---------- -----------
Gross profit 38,689 31,448
Selling, general
and administrative
expenses 31,944 22,649
Restructuring and
nonrecurring costs 2,153 4,425
---------- -----------
Income from
continuing
operations 4,592 4,374
Interest expense, net 2,928 1,554
---------- -----------
Income from continuing
operations before
income taxes 1,664 2,820
Provision for income taxes 267 1,084
---------- -----------
Income from continuing
operations before
equity in net income
of affiliate and
minority interest 1,397 1,736
Equity in net income of
affiliate and minority
interest 845 --
---------- -----------
Income from
continuing
operations 2,242 1,736
Discontinued operations
Income from operations
of discontinued
subsidiary,
net of tax -- 35
---------- -----------
Net income $ 2,242 $ 1,771
========== ===========
Net income per common share:
Basic
Income from continuing
operations $ 0.12 $ 0.12
Income from operations
of discontinued subsidiary,
net of tax -- --
---------- -----------
Net income $ 0.12 $ 0.12
=========== ===========
Diluted
Income from continuing
operations $ 0.12 $ 0.11
Income from operations of
discontinued subsidiary,
net of tax -- --
---------- -----------
Net income $ 0.12 $ 0.11
========== ===========
Weighted-average common
and common share
equivalents outstanding:
Basic 17,990 14,729
Diluted 19,415 15,995
CONTACT: Daisytek International Corporation
Jim Powell or Ralph Mitchell, 972/881-4700
or
Michael A. Burns & Associates
Craig McDaniel, 214/521-8596
Mobile: 214/616-7186
cmcdaniel@mbapr.com
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