RESPONSE FROM GILPIN
On the morning of Friday, April 21, Mike Pearson received a call from Gerald Gilpin informing Mike that Gilpin was refusing to pay the contractual rebate due on July 1 and demanding $4.4 million for printed stock inventory, pending orders, and outstanding invoices. Gerald indicated that he expected a wire transfer in their account before the end of the next business day; otherwise he would cut off supply immediately.
Mike checked the computer system to see where Rocky Plains stood with Gilpin immediately after Gerald Gilpin’s call. He estimated that Gilpin would owe Rocky Plains approximately $690,000 for its annual rebate in July, accounts payable to Gilpin were $442,398, pending orders were $583,165 and total label inventories at Rocky Plains were $846,835. A major concern, however, was potential production problems caused by label shortages, and Mike expected that production interruptions could start as early as Tuesday, April 25. Recognizing the significance of the problem, Mike knew he needed to come up with a plan quickly.