Comdisco Records Q2 Losses, Cuts 250 Jobs
Primarily as a result of recording additional reserves for credit losses for its Ventures operations, Comdisco reported a second-quarter loss from continuing operations of $8 million, or $.05 per common share, compared with earnings from continuing operations of $71 million, or $.44 per common share, for the year earlier period.
Overall, the company had a net loss of $54 million, compared with net earnings of $43 million for the year earlier period. Total revenue for the quarter was $940 million, compared with $1.0 billion for the prior year period. In response to these results, Comdisco’s board of directors voted to suspend the payment of quarterly dividends on its common stock until the company’s liquidity and capital position warrants the resumption of dividend payments.
During the second quarter of fiscal 2001, the company initiated a strategic review of all business segments. As a result of this review and deteriorating market conditions, it was determined that write-offs and reserve provisions should be recorded for certain assets of its Ventures operation. In addition, additional reserves and write offs were taken relative to the exit costs of Prism Communication Services and Network Services.
Chairman and CEO Norm Blake explains,”It is clear that the growth and profitability of our core businesses have been challenged by the cost and availability of funds, as well as structural costs. In addition, the company incurred higher interest costs, which in part, are associated with the debt incurred to finance discontinued operations. Moreover, it was necessary to take additional write-offs and reserves associated with the previously announced decisions to exit Prism Communication Services and Network Services.''
This week, Comdisco announced a two-year plan to rationalize its use of outside services, non-labor costs and workforce to improve profitability. The first phase will be to cut Comdisco’s North American workforce by 250 positions, half of those in Comdisco’s corporate headquarters. As a result of this reduction, Comdisco will take a one-time charge in the range of $6 million to $8 million in its fiscal third quarter ending June 30, 2001. On an annualized basis, the first phase of the plan is expected to result in an estimated labor cost savings of approximately $20 million. When the two-year plan is completed, it is expected to yield an approximate annualized savings or improvement to EBITDA of $145 million, net of employee retention costs.