GTSI gets notice of default from creditors

GTSI's creditors have sent the information technology company a notice of default on some agreements related to pretax earnings from the previous 12 months. The company announced the notice but did not provide many details.

By late this afternoon, GTSI’s stock had dropped about 10.5 percent, from $7.54 at Thursday's close to $6.75.

The company is negotiating with the lenders for more time, but it said they have elected to have the loan facilities end May 31 rather than grant an additional one-year renewal, according to GTSI's statement.

That means the loan balance will be payable on that date. The company did not disclose the amount. GTSI is trying to arrange new financing to meet long-term needs, according to the announcement.

"We are diligently working with our lenders and are confident that the matters at hand will be resolved in a timely fashion," said Jim Leto, newly hired president and chief executive officer of GTSI, in a written statement. "We have a healthy balance sheet, solid collateral for lending and continue to meet all of our financial obligations."

Leto pointed to difficulties in implementing an enterprise resource planning system, which officials had blamed for delivery slowdowns that contributed to drops in financial performance in 2005. The system problems "exposed weaknesses in our processes and procedures," he said.

"While customer satisfaction has rebounded of late, outstanding delivery issues, excess inventory matters and stabilization of our supply chain remain outstanding issues," he said.

GTSI also announced that it will not report its fourth-quarter and year-end 2005 financial results March 7 as it had planned. No new date has been set.