SED International Holdings, Inc. (OTCBB: SECX), a
multinational supply chain management provider and distributor of
leading computer technology, consumer electronics, small appliances
and cellular products, today announced financial results for the
fiscal 2011 second quarter ended December 31, 2010.
Second Quarter Fiscal 2011 Financial Highlights,
Year-over-year Comparisons:
- Net sales increased 11.8% to $157.0
million.
- Microcomputer product sales, including
handling revenue, increased 19.5% to $138.1 million.
- Consumer electronics product sales were
$18.9 million, compared with $24.8 million in the first quarter of
fiscal 2010.
- U.S. domestic sales, including exports
after eliminations, increased 8.6% to $123.1 million.
- Latin American sales increased 25.1% to
$33.9 million, after translation into U.S. dollars. When measured
in local currencies, Latin American sales increased 18.9%.
- Operating income improved to $1.2
million compared with a loss of ($1.2) million in the second
quarter of fiscal 2010 which included a $1.6 million employment
settlement charge related to the early retirement of a senior
executive.
- Net income grew to $0.9 million or
$0.18 per diluted share in the second quarter of fiscal 2011
compared with a net loss of ($1.4) million or ($0.31) per diluted
share in 2010.1
- Gross margin as a percentage of net
sales improved to 5.8% in the second quarter of fiscal 2011 from
5.1%, as a result of increases in e-commerce sales, the company’s
operations initiatives, and currency exchange from SED’s Latin
American subsidiaries.
- As of December 31, 2010 cash and cash
equivalents were $4.8 million, net trade receivables were $60.1
million, net inventories were $54.9 million, working capital was
$19.9 million and total shareholder’s equity was $21.3
million.
- SED’s Return on Invested Capital, or
ROIC, for the second quarter of fiscal 2011 was 6.5%. SED’s ROIC
metric is calculated on an annualized basis using after-tax
operating income divided by average quarter end stockholders’
equity and debt, net of cash.
- To support SED’s growth, its U.S.
revolving credit facility with Wells Fargo (formerly Wachovia Bank)
was increased from $50 to $55 million with opportunity to increase
to $75 million over time and subject to meeting certain criteria.
This is in addition to the $3.7 million unsecured line of credit
with Helm Bank (formerly Banco de Credito (Colombia)).
- At December 31, 2010, available
borrowings under SED’s revolving credit facility with Wells Fargo
were $14.9 million after deducting $1.8 million in reserves for
outstanding letters of credit and $3.7 million under its line of
credit with Helm Bank.
Six Months Ended December 31, 2010 Financial Highlights,
Year-over-year Comparisons:
- Net sales increased 11.3% to $298.6
million.
- Microcomputer product sales including
handling revenue, increased 16.2% to $261.6 million compared with
$225.2 million in fiscal 2010.
- Consumer electronics product sales were
$37.0 million, compared with $43.2 million for the six months ended
December 31, 2009.
- U.S. Domestic sales, including exports
after eliminations, increased 7.2% to $230.2 million.
- Latin American sales increased 27.4% to
$68.4 million, after translation into U.S. dollars. When measured
in local currencies, Latin American sales increased 21.5%.
- Operating income in fiscal 2011
improved to $2.4 million, compared with an operating loss of
($94,000) in 2010, which included a $1.6 million employment
settlement charge related to the early retirement of a senior
executive.
- Net income in fiscal 2011 grew to $1.6
million, or $0.32 per diluted share, compared with a net loss of
($0.9) million, or ($0.21) per diluted share in 2010.2
- Gross margin as a percentage of net
sales increased to 5.5% from 5.2%.
Second Quarter Fiscal 2011 Corporate Highlights
- Appointed new Chief Financial Officer
Stan Baumgartner, a seasoned financial executive with an extensive
Fortune 500 background.
- Added three new key vendors: Boss
Electronics for tablet PCs, Security Labs for security camera
systems, and Razer for gaming accessories.
- Reserved an additional $250,000 for
purchases under its stock repurchase program under which 87,000
shares of SED were repurchased at an average price of $3.00 during
the second quarter of fiscal 2011. Since the inception of the
repurchase plan in August 2009, SED had repurchased a total of
192,898 shares at an average cost of $2.76 as of December 31,
2010.
“Our second quarter growth and improved profitability
demonstrated continuing execution of our operational initiatives,
success in developing higher margin product categories, and deeper
penetration within specific market segments, most notably
e-commerce and Latin America. The combination of operational
execution and a growing accessory business resulted in higher gross
margins, which, including currency exchange, improved by 68 basis
points year-over-year and 79 basis points sequentially,” said
Jonathan Elster, SED’s President and Chief Executive Officer. “Our
increase in domestic revenues was primarily driven by double digit
growth in our computer and hard drive product lines as well as
strong sales among our e-commerce customer base, particularly
during the 2010 holiday season. We continued to gain traction in
the Latin American market with nearly 30% sales growth year-to-date
driven by sales of computer products, printers and consumable
printer products.
“Additionally, we remain focused on expanding our relationships
with important industry players that enhance our vendor line card
and diversify our offerings. During the quarter we also welcomed a
key addition to our management team, Stan Baumgartner, our new CFO.
Stan brings a wealth of financial expertise and public company
experience that will prove invaluable to SED as we continue to
execute on our growth initiatives and create value for our
shareholders,” Mr. Elster concluded.
Conference Call
SED’s CEO and CFO will host a teleconference and webcast on
Thursday, February 10 beginning at 4:30 p.m. Eastern standard time
to discuss the Company’s financial results and recent developments.
Interested parties may participate in the conference call by
dialing 1-877-941-8416 in the United States and Canada, and
1-480-629-9808 internationally. For those unable to participate, an
audio replay of the call will be available beginning approximately
one hour after the conclusion of the live call through February 23,
2011. The audio replay can be accessed by dialing 1-800-406-7325
from the U.S. or Canada, or 1-303-590-3030 internationally, and
entering access ID Number 4406396#.
The call will be also be available as a live, listen-only
webcast on the “Investor Relations” section of the Company’s
website at http://www.sedonline.com. Following the live webcast, an
online archive will be available for 90 days.
For more detailed information on the Company’s financial
results, please refer to SED’s related Form 10-Q filed with the
U.S. Securities & Exchange Commission, which will be accessible
online at www.sec.gov or www.SEDonline.com.
ABOUT SED INTERNATIONAL HOLDINGS, INC.
Founded in 1980, SED International Holdings, Inc. is a
multinational, preferred distributor of leading computer
technology, consumer electronics, small appliances and cellular
products. The Company also offers custom-tailored supply chain
management services ideally suited to meet the priorities and
distribution requirements of the e-commerce, Business-to-Business
and Business-to-Consumer markets. Headquartered near Atlanta,
Georgia with business operations in California; Florida; Georgia;
Texas; Bogota, Colombia and Buenos Aires, Argentina, SED serves a
customer base of over 10,000 channel partners and retailers in the
U.S. and Latin America. To learn more, please visit
www.SEDonline.com; or follow us on Twitter @SEDIntl.
Statements made in this Press Release that are not historical or
current facts are "forward-looking statements.” These statements
often can be identified by the use of terms such as "may," "will,"
"expect," "believes," "anticipate," "estimate," "approximate" or
"continue," or the negative thereof. The Company wishes to caution
readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made. Any
forward-looking statements represent management's best judgment as
to what may occur in the future. However, forward-looking
statements are subject to risks, uncertainties and important
factors beyond the control of the Company that could cause actual
results and events to differ materially from historical results of
operations and events and those presently anticipated or projected.
These factors include adverse economic conditions, entry of new and
stronger competitors, inadequate capital, unexpected costs, failure
to gain product approval in foreign countries and failure to
capitalize upon access to new markets. The Company disclaims any
obligation to revise any forward-looking statements to reflect
events or circumstances after the date of such statement or to
reflect the occurrence of anticipated or unanticipated events.
These factors and others are discussed in the "Management's
Discussion and Analysis" section of the Company's Reports on Forms
10-K and 10Q available at www.sec.gov.
1 Net Income for the second quarter of fiscal 2010 included a
$1.6 million employment settlement charge related to the early
retirement of a senior executive. Excluding the settlement charge,
net income for the second quarter of fiscal 2010 was $0.2 million
or $0.05 per diluted share on a pro forma basis.
2 Net Income for the six months ended December 31, 2009 included
a $1.6 million employment settlement charge related to the early
retirement of a senior executive. Excluding the settlement charge,
net income for the six months ended December 31, 2009 was $0.16 per
diluted share.
SED International Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in
thousands, except share and per share amounts)
December 31, 2010
June 30, 2010
(Unaudited) (Note 1) ASSETS Current
assets:
Cash and cash equivalents
$ 4,769 $ 7,445
Trade receivables, net of allowance for
doubtful accounts of $654 and $542,
respectively
60,094 53,893 Inventories 54,898 47,948 Deferred tax assets, net
362 313 Other current assets 6,385 3,897 Total
current assets 126,508 113,496 Property and equipment, net 1,396
926 Total assets $ 127,904 $ 114,422
LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities: Trade accounts payable $ 63,555 $ 61,955 Accrued and
other current liabilities 8,555 10,129 Revolving credit facilities
34,497 22,297 Total liabilities 106,607 94,381
Commitments and contingencies Shareholders'
equity:
Preferred stock, $1.00 par value;
authorized: 129,500 shares, none issued
—
—
Common stock, $.01 par value; 100,000,000
shares authorized; 6,749,031 shares issued and
4,913,250 shares outstanding at December 31, 2010
and 6,739,031 shares issued and 5,044,540
shares outstanding at June 30, 2010
68 68 Additional paid-in capital 70,122 69,957 Accumulated deficit
(31,607 ) (33,229 ) Accumulated other comprehensive loss (3,789 )
(3,668 )
Treasury stock 1,835,781 shares at
December 31, 2010 and 1,694,491 shares at June 30,
2010, at cost
(13,497 ) (13,087 ) Total shareholders' equity 21,297 20,041
Total liabilities and shareholders' equity $ 127,904
$ 114,422
SED International Holdings, Inc. and
Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (Dollars in thousands, except share and per share
amounts) (Unaudited) Three Months
Ended Six Months Ended December 31,
December 31, 2010 2009 2010
2009 Net sales $ 156,950 $ 140,424 $ 298,629 $
268,363 Cost of sales 147,803 133,229 282,322
254,432 Gross profit 9,147 7,195 16,307
13,931 Operating expenses: Selling, general and
administrative expense 7,225 6,217 13,590 12,263 Employment
contract settlement expense — 1,600 — 1,600 Depreciation and
amortization expense 117 99 213 204 Foreign currency transaction
loss (gain) 568 482 121 (42 ) Total operating
expenses 7,910 8,398 13,924 14,025
Operating income (loss) 1,237 (1,203 ) 2,383 (94 )
Interest (income) expense: Interest income (11 ) (28 ) (27 ) (47 )
Interest expense 263 348 495 790
Interest, net 252 320 468 743 Income
(loss) before income taxes 985 (1,523 ) 1,915 (837 ) Income tax
expense (benefit) 101 (151 ) 293 83 Net income
(loss) $ 884 $ (1,372 ) $ 1,622 $ (920 ) Basic
income (loss) per common share: $ .19 $ (.31 ) $ .35
$ (.21 ) Diluted income (loss) per common share: $ .18
$ (.31 ) $ .32 $ (.21 ) Weighted average number of
common shares outstanding: Basic 4,583,000 4,427,000 4,629,000
4,344,000 Diluted 5,038,000 4,427,000 5,056,000 4,344,000