8-K 1 a4229642.txt DAISYTEK FILES FORM 8-K 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) 1 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 3 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. 5 -- 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. 6 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. 7 "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 10