Daisytek Acquires Storage Media Distributor and Australian Wholesaler

Investment Supports New Product and International Expansion Strategies Daisytek Internatrional Corp. (DZTK) bought Digital Solution LLC, a value-added distributor of computer media accessories and supplies, for cash; and the company's Daisytek Australia unit bought office products wholesaler General Stationery Supplies for cash.

ALLEN, Texas (PRWEB) July 21, 2001 - Daisytek International (Nasdaq: DZTK), a $1.2 billion wholesale distributor of computer and office supplies and provider of marketing and demand-generation services, has completed the acquisition of Digital Storage, LLC, a value-added distributor of computer media, accessories and supplies.
   Founded in 1986 and based in Columbus, Ohio, Digital Storage markets new technology computer media, accessories and supplies that include tape backup media, optical disks, CD and DVD media, removable disk cartridges, diskettes, printer accessories, cleaning products, media storage racks and labels, and other accessories to a variety of U.S. and Canadian customers.
   "Digital Storage is an exceptionally well-run company. This transaction will not only supplement Daisytek's product range, but will bring more than 1,500 incremental customers, including many value-added resellers (VARs), system integrators, cataloguers and media specialists," said Jim Powell, president and CEO.
   George Babyak, who will remain as president of Digital Storage, said, "Daisytek has been a great competitor for years and we have tremendous respect for all that they have accomplished. Having Daisytek as a partner, especially with its global reach, will give us new resources and enable Digital Storage to continue to grow and tap into new markets."
   Audited revenues for Digital Storage for the year ended Dec. 31, 2000, were approximately $118 million. The cash purchase will include a deferred element and an earn-out, and the acquisition is expected to add approximately $14 million of debt to Daisytek's balance sheet. Other terms were not disclosed.
   In a separate transaction, Daisytek Australia, a wholly owned subsidiary of Daisytek International and Australia's leading wholesale distributor of information technology consumables, recently completed the acquisition of office products wholesaler General Stationery Supplies. This move is the latest step in Daisytek's growth strategy for its Asia Pacific region and puts Daisytek a step closer to becoming the only national supplies wholesaler in Australia with a complete computer consumables and office products solution.
   General Stationery Supplies is based in Brisbane, has strong markets in Queensland and New South Wales, and will bring hundreds of new customers and about 8,000 additional product SKUs to Daisytek in Australia. With this most recent acquisition, Daisytek is moving towards true national coverage, by now having a sales and distribution center in Brisbane, headquarters and a distribution center in Sydney, a recently opened office and distribution center in Perth, and the planned opening of an office in Melbourne in early 2002.
   "The acquisition of General Stationery Supplies gives us access to an Australian $2 billion (approximately US$1 billion) office products market and brings our Australian operations in line with those in the United States where we have successfully begun to integrate a full line of office products with our traditional offering of computer supplies," Powell said.
   General Stationery Supplies' audited revenues for the year ended April 30, 2001, were approximately A$11 million (approximately US$5.5 million). The cash purchase will include a deferred element and an earn-out, and this transaction is expected to add debt of approximately A$4 million (approximately US$2 million) to Daisytek's balance sheet. Other terms were not disclosed.
    "These transactions are part of Daisytek's strategy to pursue strategic acquisitions in support of the company's goals to expand its product range and grow in profitable international markets. We expect these acquisitions to provide a net positive impact to our bottom line for this fiscal year," said Ralph Mitchell, executive vice president and chief financial officer.
    "As we recently announced, our decision not to renew the IBM master distribution agreements, expiring later this year, represents one of the final steps to complete our separation from our former subsidiary PFSweb and has allowed us to redeploy debt capital to higher return businesses such as the transactions announced today. These transactions will partially offset the distribution agreement revenues and are expected to be more profitable and accretive to earnings for the current fiscal year. We continue to see many opportunities, for both potential corporate acquisitions and customer growth," said Powell.
   Daisytek will announce its earnings results for the quarter ended June 30 and provide a business update, including improved earnings guidance, in a conference call on Aug. 8. Further details will be announced soon.
   

About Daisytek
Daisytek is a leading wholesale distributor of computer and office supplies and professional tape products, in addition to providing marketing and demand generation services. Daisytek sells its products and services in the United States, Canada, Australia, Mexico and South America. Daisytek distributes more than 17,000 nationally known, name-brand computer and office supplies products and over 2,800 professional tape products from numerous manufacturers. Daisytek is headquartered in Allen, Texas. This news release and more information about Daisytek are available at www.daisytek.com. This Web site is 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 key suppliers or customers, the loss of strategic product shipping relationships, customer demand, product availability, competition (including pricing and availability), risks inherent in acquiring, integrating and operating new businesses, concentrations of credit risk, distribution efficiencies, capacity constraints, technological difficulties, exchange rate fluctuations, 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. In addition, statements in this press release relating to the expected benefits of the contemplated transaction are subject to risks relating to the timing and successful completion of transitioning certain information technology, integration of the acquired assets into Daisytek's operations, unanticipated expenditures and changing relationships with customers, suppliers and strategic partners. 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, 2001.