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SED International Announces Second Quarter 2012 Financial Results

The call also will be available as a live, listen-only webcast on the “Investor Relations” section of the SED International website at http://www.sedonline.com. Following the live webcast, an online archived webcast will also be available at the SED International website.

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, housewares, and personal care 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; New Jersey; Texas; Bogota, Colombia and Buenos Aires, Argentina, SED serves a customer base of over 10,000 channel partners and retailers in the US and Latin America. To learn more, please visit www.SEDonline.com; or follow us on Twitter @SEDIntl.

Safe Harbor

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," "believe," "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 10-Q available at www.sec.gov .

Non-GAAP Financial Measures

This press release includes the non-GAAP financial measure earnings before interest, tax, depreciation, amortization, and gain on acquisition, (“EBITDA”). This non-GAAP term, as defined by the Company, may not be comparable to similarly titled measures used by other companies. EBITDA is not a measure of financial performance under generally accepted accounting principles. Items excluded from EBITDA are significant components in understanding and assessing financial performance. EBITDA should not be considered in isolation or as a substitute for net income, operating income and other consolidated earnings data prepared in accordance with GAAP or as a measure of our profitability. The Company’s management believes that EBITDA represents a key operating metric for its business and this measure is useful to investors. A reconciliation of EBITDA to GAAP Net Income for the three and six months ended December 31, 2011 and 2010 is included with this press release.

SED INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)

           
December 31, 2011 June 30, 2011
 
ASSETS
Current assets:
Cash and cash equivalents $ 7,461 $ 4,751
Trade accounts receivables, less allowance for doubtful accounts of $874 and $783, respectively

58,450

64,335
Inventories 55,671 63,359
Deferred tax assets, net 535 443
Other current assets 9,022   6,617  
Total current assets 131,139 139,505
Property and equipment, net 3,351 1,928
Intangible assets, net 323    
Total assets $ 134,813   $ 141,433  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 63,996 $ 70,681
Accrued and other current liabilities 10,535 9,581
Revolving credit facilities 35,288   38,430  
Total current liabilities 109,819   118,692  
 
Commitments and contingencies
 
Shareholders' equity:
Preferred stock, $1.00 par value;129,500 shares authorized, none issued

Common stock, $.01 par value; 100,000,000
shares authorized; 7,086,188 shares issued
and 4,952,352 shares outstanding at December
31, 2011 and 6,979,161 shares issued and
4,867,697 shares outstanding at June 30, 2011
70 70
Additional paid-in capital 70,877 70,648
Accumulated deficit (27,175 ) (30,112 )
Accumulated other comprehensive loss (3,987 ) (3,171 )
Treasury stock 2,131,836 shares and

2,111,464 shares, at cost

(14,791 ) (14,694 )
Total shareholders' equity 24,994   22,741  
Total liabilities and shareholders' equity $ 134,813   $ 141,433  
 

SED INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

(Unaudited)

           
Three Months Ended Six Months Ended
December 31, December 31,
2011 2010 2011 2010
 
Net sales $ 150,925 $ 156,950 $ 306,764 $ 298,629
Cost of sales 137,287   147,803   285,607   282,322  
Gross profit 13,638   9,147   21,157   16,307  
 
Selling, general and administrative expense 8,894 7,225 16,809 13,590
Depreciation and amortization expense 187 117 312 213
Foreign currency transaction loss 282 568 933 121
Acquisition-related costs     370    
Total operating expenses 9,363   7,910   18,424   13,924  
Operating income 4,275 1,237 2,733 2,383
 
Interest income (7 ) (11 ) (15 ) (27 )
Interest expense 395 263 699 495
Gain on acquisition     (998 )  
Income before income taxes 3,887 985 3,047 1,915
Income tax expense 121   101   111   293  
Net income $ 3,766   $ 884   $ 2,936   $ 1,622  
 
Basic income per common share: $ .79   $ .19   $ .61   $ .35  
Diluted income per common share: $ .78   $ .18   $ .60   $ .32  
Weighted average number of common shares outstanding:
Basic 4,779,000 4,583,000 4,815,000 4,629,000
Diluted 4,826,000 5,038,000 4,884,000 5,056,000
 

SED INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

     
Six Months Ended

December 31,

2011       2010
Operating activities:
Net income $ 2,936 $ 1,622
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 312 213
Deferred tax assets (130 ) (49 )
Stock compensation 229 165
Gain from acquisition (998 )
Provision for losses on trade accounts receivable 221 550
Changes in operating assets and liabilities, net of assets acquired:
Trade accounts receivable 4,617 (6,829 )
Inventories 11,543 (7,022 )
Other current assets (2,896 ) (2,553 )
Trade accounts payable (5,057 ) 1,815
Accrued and other current liabilities 1,444   (1579 )
Net cash provided by (used in) operating activities 12,221   (13,667 )
 
Investing activities:
Purchases of equipment (1,721 ) (698 )
Cash used in acquisition (4,376 )  
Net cash used in investing activities (6,097 ) (698 )
 
Financing activities:
Net (repayments) borrowings under revolving credit facilities (3,142 ) 12,200
Purchases of company common stock (97 ) (410 )
Net cash (used in) provided by financing activities (3,239 ) 11,790  
Effect of exchange rate changes on cash and cash equivalents (175 ) (101 )
Net increase (decrease) in cash and cash equivalents 2,710 (2,676 )
Cash and cash equivalents:

Beginning of period

 

4,751

 

7,445

 
End of period $ 7,461   $ 4,769  
 

SED INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES

Reconciliation of Selected GAAP Measures to Non-GAAP Measures (1) (Unaudited)

(In thousands)

   
Three Months Ended   Six Months Ended
December 31, December 31,
2011   2010 2011   2010
Reconciliation of GAAP net income to Non-GAAP adjusted EBITDA is as follows:
GAAP net income $ 3,766 $ 884 $ 2,936 $ 1,622
Depreciation and amortization 187 117 312 213
Stock awards amortization (2) 114 60 229 165
Interest income (7 ) (11 ) (15 ) (27 )
Interest expense 395 263 699 495
Income tax expense 121 101 111 293
Gain on acquisition (3)           (998 )    
Non-GAAP adjusted EBITDA $ 4,576   $ 1,414   $ 3,274   $ 2,761  
 

(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered as a substitute for comparable GAAP measures and should be read only in conjunction with our financial statements prepared in accordance with GAAP and our press release, which explains our use of non-GAAP measures.

(2) Stock award amortization related to non-cash charges for stock awards.

(3) Gain on the acquisition of the Lehrhoff assets recorded as a bargain purchase under ASC 805.





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