Science & Technology
Science and Technology
Science and Technology
Wed, April 1, 2009
Tue, March 31, 2009
Merisel: Merisel, Inc. Announces Fourth Quarter 2008 Results
NEW YORK, NY--(Marketwire - March 31, 2009) - Merisel, Inc. (
Merisel reported a loss of ($.72) per share for the Fourth Quarter 2008 versus income of $4.13 per share for the Fourth Quarter of 2007. For the twelve months ended December 31, 2008, the Company reported a loss of ($1.12) per share versus income of $4.22 per share in 2007.
"Merisel's results, along with the global service industry as a whole, were negatively impacted by the worldwide economic recession," stated Donald R. Uzzi, Chairman and CEO. "As the consumer retrenches so have our retail clients as they adjust to market demand. Importantly, through these turbulent times Merisel continues to maintain its leadership in the retail and fashion/apparel graphics market... and is working diligently to support the needs of our clients."
Excluding the impact of unusual items for 2008 and 2007 operating results were a loss of $2,211 in 2008 compared to income of $6,234 in 2007.
"Our operating results in 2008 while disappointing do not tell the full story as we achieved several important objectives," said Mr. Uzzi. "Specifically, we continued to reduce our cost structure and maintained strong liquidity. At year end we had approximately $10,000 in available cash and preserved our strong balance sheet."
The unusual items in 2008 results include:
-- A non-cash goodwill impairment charge of $6,750 or ($.87) per share. -- Expenses of $2,365 or ($.30) per share resulting from TU Holdings, Inc. (a wholly owned subsidiary of American Capital Strategies Ltd.) failure to complete a merger agreement with the Company. The matter is currently in litigation. -- A tax benefit of $4,840 or $.62 resulting from the Full Year loss.
The unusual items in 2007 results include:
-- A one-time income tax benefit of $31,375 or $3.91 per share resulting from the reduced valuation allowance against our deferred tax asset. -- Expenses of $1,827 or ($.23) per share resulting from the anticipated sale of the Company to TU Holdings, Inc.
"Merisel's Account Managers across all Divisions continue to bring clients new and innovative solutions to meet their graphics needs. The Company continued to invest during 2008 in technology and manufacturing equipment to support this innovation," said Mr. Uzzi. "This has further enabled Merisel to win new clients giving us a stronger market footprint to leverage as the economy begins to improve."
Results of Operations (In thousands except per share amounts)
The Company reported a loss to common stockholders of $8,736 for 2008 (after giving account to a $6,750 non-cash charge for goodwill impairment) compared with income of $33,848 for 2007. The 2007 results include income from discontinued operations of $145. There was no income from discontinued operations for 2008.
Comparison of Fiscal Years Ended December 31, 2008 and December 31, 2007
Net Sales -- Net sales were $84,178 for the year ended December 31, 2008 compared to $93,181 for the year ended December 31, 2007. The decrease of $9,003 or 9.7% was due to weakening demand due to softer economic conditions throughout the United States.
Gross Profit -- Total gross profit was $36,028 for the year ended December 31, 2008 compared to $43,890 for the year ended December 31, 2007. The decrease in total gross profit of $7,862 or 17.9% was due to the 9.7% decline in net sales and a 430 basis point reduction in gross profit margin. Gross margin percentage decreased to 42.8% for the year ended December 31, 2008 from 47.1% for the year ended December 31, 2007, while costs for raw materials, outside purchases, delivery and shipping expenses, and depreciation on production equipment were flat with 2007, they increased as a percentage of sales. Actual production labor costs for the year ended December 31, 2008 decreased from prior year but remained flat as a percentage of sales.
Selling, General and Administrative -- Total Selling, General and Administrative expenses increased to $40,475 for the year ended December 31, 2008 from $38,316 for the year ended December 31, 2007. The increase of $2,159 or 5.6% was due to $538 of legal and investment banking fees with the balance attributable to higher expenses for professional fees $684, an increase in bad debt expense $208, and an increase in depreciation/amortization $497. Total Selling, General and Administrative expenses as a percentage of sales increased to 48.1% for the year ended December 31, 2008 compared to 41.1% for the year ended December 31, 2007. Higher rates of sales commissions represented 70 basis points of this increase.
Goodwill Impairment -- For the year ended December 31, 2008, the Company recorded goodwill impairment in the amount of $6,750. The impairment is a result of our annual goodwill impairment test.
Interest Expense -- Interest expense for the Company decreased by $345 or 40.2% from $859 for the year ended December 31, 2007 to $514 for the year ended December 31, 2008. The change primarily reflects decreased loan balances from principal payments on capital leases and installment notes.
Interest Income -- Interest income for the Company decreased by $88 or 18.6% from $473 for the year ended December 31, 2007 to $385 for the year ended December 31, 2008. The change primarily reflects lower average balances in short-term interest-bearing investments classified as cash.
Income Taxes -- The Company recorded an income tax benefit of $4,840 for the year ended December 31, 2008 compared to $30,594 for the year ended December 31, 2007. Income tax benefit for the year ended December 31, 2008 is recorded at an effective tax rate of (42.7%) as compared to (559.9%) for the year ended December 31, 2007. During the year ended December 31, 2007, the Company reduced its valuation allowance on its deferred tax assets and recorded a deferred tax benefit in the amount of $31,375.
Discontinued Operations -- The Company did not have income from discontinued operations during the year ended December 31, 2008. The Company recorded income from discontinued operations of $145 for the year ended December 31, 2007 related to the sale of real property transferred to the Company in settlement of a note receivable. This figure consists of the sale price of $1,192, net of cost basis of $914 and taxes of $112 and other expenses of $21.
Net Income -- As a result of the above items, the Company had net loss of $6,486 for the year ended December 31, 2008 compared to income of $35,927 for the year ended December 31, 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, 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 ].
Cautionary Statement
This release contains statements concerning Merisel's expectations for future performance, and are forward-looking statements as that term is used in 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. The Company undertakes no obligation to update any such forward-looking statements. Please see the Company's filing with the Securities and Exchange Commission, including the Company'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 Year Ended December 31 December 31 2008 2007 2008 2007 -------- -------- -------- -------- Net sales $ 20,877 $ 24,055 $ 84,178 $ 93,181 Cost of sales 12,508 12,299 48,150 49,291 -------- -------- -------- -------- Gross profit 8,369 11,756 36,028 43,890 Selling, general & administrative expenses 10,229 10,241 40,475 38,316 Asset impairments 6,750 - 6,750 - -------- -------- -------- -------- Operating income (loss) (8,610) 1,515 (11,197) 5,574 Interest expense, net 51 36 129 386 -------- -------- -------- -------- Income (loss) from continuing operations before provision for income tax (8,661) 1,479 (11,326) 5,188 Income tax benefit (3,700) (32,178) (4,840) (30,594) -------- -------- -------- -------- Income (loss) from continuing operations (4,961) 33,657 (6,486) 35,782 Income from discontinued operations, net of taxes - 2 - 145 -------- -------- -------- -------- Net income (loss) (4,961) 33,659 (6,486) 35,927 Preferred stock dividends 579 536 2,250 2,079 -------- -------- -------- -------- Net income (loss) available to common stockholders $ (5,540) $ 33,123 $ (8,736) $ 33,848 ======== ======== ======== ======== Income (loss) per share (basic): Income (loss) from continuing operations available to common stockholders $ (0.72) $ 4.25 $ (1.12) $ 4.32 Income from discontinued operations, net of taxes 0.00 0.00 0.00 0.02 -------- -------- -------- -------- Net income (loss) available to common stockholders $ (0.72) $ 4.25 $ (1.12) $ 4.34 ======== ======== ======== ======== Income (loss) per share (diluted): Income (loss) from continuing operations available to common stockholders $ (0.72) $ 4.13 $ (1.12) $ 4.20 Income from discontinued operations, net of taxes 0.00 0.00 0.00 0.02 -------- -------- -------- -------- Net income (loss) available to common stockholders $ (0.72) $ 4.13 $ (1.12) $ 4.22 ======== ======== ======== ======== Weighted average number of shares Basic 7,608 7,793 7,797 7,793 Diluted 7,608 8,027 7,797 8,016
