SOURCE:
Merisel
2008-08-14 08:24:00
Merisel, Inc. Announces Earnings for Second Quarter 2008
(In Thousands Except for per Share Amounts)
NEW YORK, NY–(EMWNews – August 14, 2008) – Merisel, Inc. (
provider of visual communications and brand imaging solutions to the
consumer products, retail, advertising and entertainment industries, today
reported financial results for the Second Quarter ended June 30, 2008.
Merisel reported a loss of ($0.20) per share for the Second Quarter 2008
versus a loss of $0.00 per share for the Second Quarter of 2007.
Discontinued Operations in the current and prior year were immaterial to
the quarter’s results. Results in the current year and prior year were
impacted by expenses recorded in SG&A for legal costs and investment
banking fees associated with the Company’s decision to enter into a merger
agreement with TU Holdings, Inc. (a wholly owned portfolio company of
American Capital Strategies, Ltd.) In the current year, these expenses
amounted to $1,106 or ($0.14) per share. In the prior year the expenses
related to the sale process amounted to $674 or ($0.08) per share.
For the six months ended June 30, 2008, the Company reported a loss ($0.35)
per share compared to income of $0.08 per share for the first six months of
2007. Excluding Discontinued Operations, results for the first six months
of 2008 were a loss of ($0.35) per share compared to income of $0.06 per
share for the first six months of 2007.
Results for the six months ended June 30, 2008 were impacted by $1,940 or
($0.25) per share of expenses (in SG&A) for legal costs and investment
banking associated with the Company’s decision to enter into a merger
agreement with TU Holdings, Inc. (a wholly owned portfolio company of
American Capital Strategies, Ltd.). For the six months ended June 30,
2007, the expenses related to the sale process amounted to $674 or ($0.08)
per share.
“The slowing U.S. economy has noticeably impacted our industry, our retail
clients and as a result Merisel revenues in the first half of 2008,” said
Donald R. Uzzi, Chairman and CEO of Merisel. “While we have experienced a
reduction in client marketing activities, we have maintained client market
share. Importantly this environment has enabled us to take a comprehensive
look at our cost structure and identify additional savings and efficiencies
from which we will benefit going forward. Merisel’s balance sheet remains
strong and we continue to provide clients with the highest level of quality
and service,” stated Mr. Uzzi.
RESULTS OF OPERATIONS (amounts in thousands except as noted or in per share
data)
The Company reported a loss of $(1,586) or $(0.20) and $(2,772) or $(0.35)
per share for the three and six months ended June 30, 2008, respectively,
as compared to net loss of $(17) or $0.00 per share and net income of $635
or $0.08 for the three and six months ended June 30, 2007, respectively.
These results include income from discontinued operations of $4 or $0.00
per share for the three months ended June 30, 2008. There was no income
from discontinued operations for the six months ended June 30, 2008. This
compares to a loss of $(19) or $0.00 per share and net income of $131 or
$0.02 per share from discontinued operations for the three and six months
ended June 30, 2007, respectively.
Three Months Ended June 30, 2008 as Compared to the Three Months Ended June
30, 2007
Net Sales — Net sales were $20,342 for the three months ended June 30,
2008 compared to $22,273 for the three months ended June 30, 2007. The
decrease of $1,931 or 8.7% was due to weakening demand for our client
services due to softer economic conditions throughout the United States.
Gross Profit — Total gross profit was $8,607 for the three months ended
June 30, 2008 compared to $10,797 for the three months ended June 30, 2007.
The decrease in total gross profit of $2,190 or 20.3% was primarily due to
the 8.7% decline in net sales. Gross margin percentage decreased to 42.3%
for the three months ended June 30, 2008 from 48.5% for the three months
ended June 30, 2007. This decrease resulted from disproportionately larger
percentage decreases in sales when compared with smaller percentage
decreases in production labor, increases in outside purchases, delivery and
shipping costs, and depreciation on production equipment.
Selling, General and Administrative — Total Selling, General and
Administrative expenses increased to $10,406 for the three months ended
June 30, 2008 from $9,782 for the three months ended June 30, 2007. The
increase of $624 or 6.4% was due to $432 of legal costs and investment
banking fees associated with the Company’s decision to enter into a merger
agreement with TU Holdings, Inc with the balance of the increase
attributable to higher expenses for bad debts of $176,
depreciation/amortization of $143, and maintenance of $84. These increases
were offset by decreases of $222 in selling and commission expenses. Total
Selling, General and Administrative expenses as a percentage of sales
increased to 51.2% for the three months ended June 30, 2008 compared to
43.9% for the three months ended June 30, 2007.
Interest Expense, Net — Interest expense decreased to $24 in the three
months ended June 30, 2008 from $112 in the three months ended June 30,
2007. The decrease was due to a $88 reduction in interest expense resulting
from lower installment note balances.
Income Taxes — The Company recorded an income tax benefit of $789 for the
three months ended June 30, 2008 compared to a provision of $386 for the
three months ended June 30, 2007. Income tax expense in the current quarter
is recorded at an effective tax rate of 43.4%, which compares to a 43.7%
tax rate in the second quarter of 2007.
Discontinued Operations — The Company recorded income from discontinued
operations of $4 during the three months ended June 30, 2008 related to
return of a legal retainer and a loss of $19 consisting of other expenses
for the three months ended June 30, 2007.
Net Income — As a result of the above items, the Company had net loss of
$1,030 for the three months ended June 30, 2008 compared to income of $498
for the three months ended June 30, 2007.
Six Months Ended June 30, 2008 as Compared to the Six Months Ended June 30,
2007
Net Sales — Net sales were $41,694 for the six months ended June 30, 2008
compared to $46,207 for the six months ended June 30, 2007. The decrease
of $4,513 or 9.8% was due to weakening demand for our client services due
to softer economic conditions throughout the United States.
Gross Profit — Total gross profit was $17,994 for the six months ended
June 30, 2008 compared to $21,526 for the six months ended June 30, 2007.
The decrease in total gross profit of $3,532 or 16.4% was primarily due to
the 9.8% decline in net sales. Gross margin percentage decreased to 43.2%
for the six months ended June 30, 2008 from 46.6% for the six months ended
June 30, 2007. This decrease resulted from disproportionately larger
percentage decreases in sales when compared with smaller percentage
decreases in production labor, and increases in outside purchases, delivery
and shipping costs, and depreciation on production equipment.
Selling, General and Administrative — Total Selling, General and
Administrative expenses increased to $20,887 for the six months ended June
30, 2008 from $18,588 for the six months ended June 30, 2007. The increase
of $2,299 or 11.0% was due to $1,266 of legal costs and investment banking
fees associated with the Company’s decision to enter into a merger
agreement with TU Holdings, Inc., with the balance of the increase
attributable to higher expenses for professional fees of $270, bad debts of
$389, depreciation/amortization of $248, and maintenance of $115. Total
Selling, General and Administrative expenses as a percentage of sales
increased to 50.1% for the six months ended June 30, 2008 compared to 40.2%
for the six months ended June 30, 2007.
Interest Expense, Net — Interest expense decreased to $25 in the six
months ended June 30, 2008 from $276 in the six months ended June 30, 2007.
The decrease was due to a $150 reduction in interest expense resulting from
lower installment note balances coupled with a $101 increase in interest
income due to higher balances in short-term interest-bearing investments
classified as cash.
Income Taxes — The Company recorded an income tax benefit of $1,249 for
the six months ended June 30, 2008 compared to a provision of $1,139 for
the six months ended June 30, 2007. Income tax expense for both periods is
recorded at an effective tax rate of 42.8%.
Discontinued Operations — The Company recorded income from discontinued
operations of $4 related to return of a legal retainer offset by legal fees
of $4 for the six months ended June 30, 2008. The Company recorded income
from discontinued operations of $131 for the six months ended June 30,
2007. This figure consists of the sale price of $1,192, net of cost basis
of $914 and taxes of $112 and other expenses of $35. The Company recorded
a loss of $19 consisting of other expenses for the three months ended June
30, 2007.
Net Income — As a result of the above items, the Company had net loss of
$1,669 for the six months ended June 30, 2008 compared to income of $1,654
for the six months ended June 30, 2007.
About Merisel
Merisel, headquartered in New York, N.Y., is a leading visual
communications and brand imaging solutions provider to its clients. Merisel
provides a broad portfolio of digital and graphic services to clients in
the retail, manufacturing, beverage, cosmetic, advertising, entertainment
and consumer packaged goods industries. These solutions are delivered to
clients through its portfolio companies: ColorEdge, Crush Creative, Comp
24, It’s in the Works, Dennis Curtin Studios, AdProps, and Fuel Digital.
Merisel has sales offices in New York City, Atlanta, Chicago, Los Angeles,
Orlando, and Portland, Oregon and production facilities in New York, New
Jersey, Atlanta and Los Angeles to ensure the highest quality solutions and
services to our clients. Learn more at www.merisel.com.
Forward-Looking Statements
This press release may contain forward-looking information regarding
Merisel that is intended to be covered by the safe harbor for “forward-
looking statements” provided by the Private Securities Litigation Reform
Act of 1995. Any such forward-looking statements are inherently speculative
and are based on currently available information, operating plans and
projections about future events and trends. As such, they are subject to
numerous risks and uncertainties. Actual results and performance may be
significantly different from expectations. Merisel undertakes no obligation
to update any such forward-looking statements. Please see Merisel’s filings
with the Securities and Exchange Commission, including Merisel’s Annual
Report on Form 10-K, for a discussion of specific risks that may affect
performance.
MERISEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
-------- -------- -------- ---------
Net sales $ 20,342 $ 22,273 $ 41,694 $ 46,207
Cost of sales 11,735 11,476 23,700 24,681
-------- -------- -------- ---------
Gross profit 8,607 10,797 17,994 21,526
Selling, general & administrative
expenses 10,406 9,782 20,887 18,588
-------- -------- -------- ---------
Operating income (loss) (1,799) 1,015 (2,893) 2,938
Interest expense, net 24 112 25 276
-------- -------- -------- ---------
Income (loss) from continuing
operations before provision for
income tax (1,823) 903 (2,918) 2,662
Income tax (benefit) provision (789) 386 (1,249) 1,139
-------- -------- -------- ---------
Income (loss) from continuing
operations (1,034) 517 (1,669) 1,523
Income (loss) from discontinued
operations, net of taxes 4 (19) - 131
-------- -------- -------- ---------
Net income (loss) (1,030) 498 (1,669) 1,654
Preferred stock dividends 556 515 1,103 1,019
-------- -------- -------- ---------
Net income (loss) available to
common stockholders $ (1,586) $ (17) $ (2,772) $ 635
======== ======== ======== =========
Income (loss) per share (basic and
diluted):
Income (loss) from continuing
operations available to common
stockholders $ (0.20) $ 0.00 $ (0.35) $ 0.06
Income from discontinued
operations, net of taxes 0.00 0.00 0.00 0.02
-------- -------- -------- ---------
Net income (loss) available to
common stockholders $ (0.20) $ 0.00 $ (0.35) $ 0.08
======== ======== ======== =========
Weighted average number of shares
Basic 7,893 7,774 7,889 7,768
Diluted 7,893 8,018 7,889 8,014
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