SOURCE: Merisel

May 15, 2008 16:05 ET

Merisel, Inc. Announces Earnings for First Quarter 2008

(In Thousands Except for per Share Amounts)

NEW YORK, NY--(Marketwire - May 15, 2008) - Merisel, Inc. (PINKSHEETS: MSEL), a leading provider of visual communications and brand imaging solutions to the consumer products, retail, advertising and entertainment industries, today reported financial results for the First Quarter ended March 31, 2008.

Merisel reported a loss of ($.15) per share for the First Quarter 2008 versus income of $.08 per share for the First Quarter of 2007. Excluding Discontinued Operations, Merisel reported earnings of $.06 per share in the First Quarter of 2007. Results 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.). These expenses amounted to $742 or ($.09) per share.

"The uncertainty surrounding the U.S. economy has negatively impacted retailers and the consumer discretionary segments... and Merisel is not immune," said Donald R. Uzzi, Chairman and CEO of Merisel. "Importantly we have maintained our blue chip client base as well as our client market share as Merisel continues to play an instrumental role in their consumer marketing equation. While we are never pleased with a quarterly loss, our balance sheet remains strong and we continue to execute a diligent cost reduction plan," stated Mr. Uzzi.

RESULTS OF OPERATIONS (amounts in thousands except as noted or in per share data)

The Company reported a loss of $(1,186) or $(0.15) per share for the three months ended March 31, 2008 as compared to net income of $652 or $0.08 per share for the three months ended March 31, 2007. The loss this quarter includes $4 of expense or $0.00 per share from discontinued operations as compared to income of $150 or $0.02 per share from discontinued operations for the three months ended March 31, 2007.

Three Months Ended March 31, 2008 as Compared to the Three Months Ended March 31, 2007

Net Sales - Net sales were $21,352 for the three months ended March 31, 2008 compared to $23,934 for the three months ended March 31, 2007. The decrease of $2,582 or 10.8% resulted from weakening industry demand due to the continuation of economic uncertainty in the U.S.

Gross Profit - Total gross profit was $9,387 for the three months ended March 31, 2008 compared to $10,729 for the three months ended March 31, 2007. The decrease in total gross profit of $1,342 or 12.5% was primarily due to the 10.8% decline in net sales. Gross margin percentage decreased to 44.0% for the three months ended March 31, 2008 from 44.8% for the three months ended March 31, 2007 due to an unfavorable shift in business mix from higher margin prototype and retouching to lower margin wide format.

Selling, General and Administrative - Total Selling, General and Administrative expenses increased to $10,481 for the three months ended March 31, 2008 from $8,806 for the three months ended March 31, 2007. The increase of $1,675 or 19.0% was due to $742 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, bad debts, depreciation/amortization, and maintenance. Total Selling, General and Administrative expenses as a percentage of sales increased to 49.1% for the three months ended March 31, 2008 compared to 36.8% for the three months ended March 31, 2007.

Interest Expense, Net - Interest expense decreased to $1 in the three months ended March 31, 2008 from $164 in the three months ended March 31, 2007. The decrease was due to a $62 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 $460 for the three months ended March 31, 2008 compared to a provision of $753 for the three months ended March 31, 2007. Income tax expense in the current quarter is recorded at an effective tax rate of 42.0% which compares to a 42.8% tax rate in the first quarter of 2007.

Discontinued Operations - Loss from discontinued operations for the three months ended March 31, 2008 was $4 related to professional fees. Income from discontinued operations for the three months ended March 31, 2007 was $150 related to the sale of property for a purchase price of $1,192 net of cost basis of $914 and taxes and other expenses of $128.

Net Income - As a result of the above items, the Company had net loss of $639 for the three months ended March 31, 2008 compared to income of $1,156 for the three months ended March 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
                                                            March 31,
                                                          2008      2007
                                                        --------  ---------
Net sales                                               $ 21,352  $  23,934

Cost of sales                                             11,965     13,205

                                                        --------  ---------
Gross profit                                               9,387     10,729

Selling, general & administrative expenses                10,481      8,806

                                                        --------  ---------
Operating income (loss)                                   (1,094)     1,923

Interest expense, net                                          1        164

                                                        --------  ---------
Income (loss) from continuing operations before
 provision for income tax                                 (1,095)     1,759

Income tax (benefit) provision                              (460)       753

                                                        --------  ---------
Income (loss) from continuing operations                    (635)     1,006

Income (loss) from discontinued operations, net of
 taxes                                                        (4)       150
                                                        --------  ---------
Net income (loss)                                           (639)     1,156
Preferred stock dividends                                    547        504
                                                        --------  ---------
Net income (loss) available to common stockholders      $ (1,186) $     652
                                                        ========  =========

Income (loss) per share (basic and diluted):
Income (loss) from continuing operations available to
 common stockholders                                    $  (0.15) $    0.06
Income from discontinued operations, net of taxes           0.00       0.02
                                                        --------  ---------
Net income (loss) available to common stockholders      $  (0.15) $    0.08
                                                        ========  =========
Weighted average number of shares
  Basic                                                    7,881      7,774
  Diluted                                                  7,881      7,805

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