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SED International Holdings Reports Fiscal Year 2011 And Fourth Quarter Financial Results

Stocks in this article: SED

SED International Holdings, Inc. (Amex: SED), multinational supply chain management provider and distributor of leading computer technology, consumer electronics and small appliances, today announced financial results for the fiscal year and fourth quarter ended June 30, 2011.

Fiscal Year 2011 Financial Highlights, Year-over-year Comparisons:

  • Net sales increased 12.1% to $607.0 million.
  • Microcomputer product sales, including handling revenue, increased 16.1% to $537.7 million.
  • Consumer electronics product sales declined 11.7% to $69.3 million.
  • Domestic sales, including exports and after eliminations, increased 10.2% to $467.9 million.
    • Our U.S. export business sales for the period, net of eliminations, grew by 5.5% to $89.8 million from $85.1 million in fiscal year 2010.
  • Latin America sales increased 19.7% to $139.1 million after translation into U.S. dollars. When measured in local currencies, Latin American sales increased 15.4%.
  • Gross margin was 5.2%, compared with 5.3% in fiscal 2010. When accounting for the impact of foreign currency translation, gross margin decreased by 3 basis points year-over-year. The decrease in gross margin was due primarily to product mix in the U.S., including increased sales of lower margin hard drives and software products, as well as lower gross margins on export sales from the U.S. Gross margins in Latin America net of foreign currency transactions increased by approximately 50 basis points in fiscal 2011 compared with fiscal 2010.
  • Operating income improved to $4.9 million, compared with $2.0 million in fiscal year 2010. The fiscal 2010 period includes a $1.6 million provision for a contract settlement. Excluding the fiscal 2010 provision for a contract settlement, operating income increased 36% year-over-year.
  • Net income grew to $3.1 million, or $0.63 per diluted share, compared with $302,000, or $0.06 per diluted share in fiscal year 2010. Excluding the aforementioned $1.6 million provision in the fourth quarter of fiscal 2010, net income increased 64% year-over-year.
  • SED’s Return on Invested Capital, or ROIC, for the 2011 fiscal year was 6.6%, compared with 6.1% in the 2010 fiscal year. * SED’s ROIC metric is calculated on an annualized basis using operating income divided by an average of quarter-end stockholders’ equity and debt, net of cash.
  • As of June 30, 2011 cash and cash equivalents were $4.8 million. Net trade receivables were $64.3 million, net inventories were $63.4 million, working capital was $20.8 million, and total shareholder’s value was $22.7 million.
  • At June 30, 2011, available borrowings under SED’s credit facilities with Wells Fargo and Helm Bank were approximately $18.2 million, after deducting $5.7 million in reserves for outstanding letters of credit.

*Excludes a $1.6 million employee contract settlement charge related to the early retirement of a senior executive.

Fourth Quarter Fiscal 2011 Financial Highlights, Year-over-year Comparisons:

  • Net sales increased 14.6% to $152.6 million.
  • Gross margin decreased by 64 basis points year-over-year to 4.7%, primarily due to a higher percentage of sales from lower margin hard drives and software products. When accounting for the impact of foreign currency transaction gains and/or losses, gross margin decreased by 31 basis points year-over-year.
  • Operating income declined 6.0% to $933,000 due primarily to lower gross margins and a 9.7% increase in SG&A expense associated primarily with higher selling costs related to increased sales.
  • Net income was $443,000, or $0.09 per diluted share, compared with $663,000, or $0.14 per diluted share in the fourth quarter of fiscal 2010.

“Although our business was impacted in the fourth quarter by a decline in consumer confidence and weak margins resulting from sales mix of lower margin products, our fundamentals remain strong,” said Jonathan Elster, President and Chief Executive Officer of SED. “We are focusing our sales efforts on higher margin product categories and expect that our new vendor additions as well as new products and a Northeast U.S. presence, obtained by the ArchBrook Laguna transaction, will restore and eventually improve operating margins to historical levels. In addition to ramping our higher margin small appliances business through the launch of an SED Lehrhoff division, we are placing great emphasis on sales segmentation to arm our sales team with dedicated channel-specific expertise to boost sales and improve our margin profile.”

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