THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission File Number 0-16345
SED International Holdings, Inc.
(FORMERLY KNOWN AS SOUTHERN ELECTRONICS CORPORATION)
(Exact name of Registrant as specified in its charter)
DELAWARE 22-2715444
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4916 North Royal Atlanta Drive, Tucker, Georgia 30085
(Address of principal executive offices) (Zip code)
(770) 491-8962
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No ______
At January 31, 1998, there were 10,421,220 shares of Common Stock,
$.01 par value, outstanding.
<PAGE>
SED International Holdings, Inc.
And Subsidiaries
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements:
Condensed Consolidated Balance Sheets 2
Condensed Consolidated Statements of Earnings 3
Condensed Consolidated Statements of Stockholders'
Equity 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial
Statements 6-7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-11
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings 12
Item 2 - Changes in Securities 12
Item 3 - Default Upon Senior Securities 12
Item 4 - Submission of Matters to a Vote of Security
Holders 12
Item 5 - Other Information 12
Item 6 - Exhibits and Reports on Form 8-K 13
<PAGE>
<TABLE>
ITEM 1: FINANCIAL STATEMENTS
SED International Holdings, Inc.
And Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, June 30,
ASSETS 1997 1997
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,309,000 $ 783,000
Trade accounts receivable, net 79,232,000 55,745,000
Inventories 141,824,000 112,813,000
Deferred income taxes 1,223,000 1,223,000
Other current assets 2,087,000 1,219,000
------------ ------------
TOTAL CURRENT ASSETS 226,675,000 171,783,000
PROPERTY AND EQUIPMENT, net 8,223,000 6,469,000
INTANGIBLES, net 20,112,000 19,077,000
------------ ------------
$255,010,000 $197,329,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $105,359,000 $ 88,070,000
Accrued liabilities 5,931,000 4,363,000
Income taxes payable 1,489,000 --
------------ ------------
TOTAL CURRENT LIABILITIES 112,779,000 92,433,000
REVOLVING BANK DEBT 33,000,000 56,000,000
STOCKHOLDERS' EQUITY:
Preferred Stock
129,500 shares authorized, none issued
Common stock, $.01 par value; 100,000,000 shares
authorized; 10,751,003 shares (December 31, 1997)
and 7,522,786 shares (June 30, 1997) issued 108,000 75,000
Additional paid-in capital 69,065,000 12,719,000
Retained earnings 43,145,000 39,095,000
Treasury stock, at cost, 329,883 shares
(December 31, 1997) and 325,590 shares
(June 30, 1997) (2,792,000) (2,715,000)
Prepaid compensation - stock awards (295,000) (278,000)
------------ ------------
109,231,000 48,896,000
------------ ------------
$255,010,000 $197,329,000
============ ============
</TABLE>
<PAGE>
<TABLE>
SED International Holdings, Inc.
And Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
NET SALES $215,772,000 $153,286,000 $429,804,000 $313,400,000
COST AND EXPENSES
Cost of sales including buying
and occupancy expenses 202,584,000 143,446,000 405,009,000 294,559,000
------------ ------------ ------------ ------------
Gross Profit 13,188,000 9,840,000 24,795,000 18,841,000
Selling, general, and
administrative expenses 8,230,000 6,259,000 15,004,000 11,958,000
Start-up expenses -- -- 1,400,000 --
------------ ------------ ------------ ------------
OPERATING INCOME 4,958,000 3,581,000 8,391,000 6,883,000
INTEREST EXPENSE, NET 624,000 424,000 1,748,000 755,000
------------ ------------ ------------ ------------
EARNINGS BEFORE INCOME TAXES 4,334,000 3,157,000 6,643,000 6,128,000
INCOME TAXES 1,693,000 1,212,000 2,593,000 2,365,000
------------ ------------ ------------ ------------
NET EARNINGS $ 2,641,000 $ 1,945,000 $ 4,050,000 $ 3,763,000
============ ============ ============ ============
NET EARNINGS PER COMMON SHARE:
Basic $.26 $.27 $.46 $.52
Diluted .25 .25 .43 .49
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 10,190,000 7,151,000 8,714,000 7,179,000
Diluted 10,683,000 7,826,000 9,312,000 7,652,000
</TABLE>
<PAGE>
<TABLE>
SED International Holdings, Inc.
And Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS
OF STOCKHOLDERS' EQUITY
(Unaudited)
Prepaid
Common Stock Additional Compensation
Par Paid-In Retained Treasury Stock Stock
Shares Value Capital Earnings Shares At Cost Awards
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, June 30, 1997 7,522,786 $75,000 $12,719,000 $39,095,000 325,590 $(2,715,000) $(278,000)
Issuance of common stock
net of offering costs 3,000,000 30,000 54,280,000
Stock options exercised 144,698 2,000 947,000
Amortization of stock
awards 57,000
Stock awards issued 5,800 85,000 (85,000)
Stock awards canceled (2,000) (11,000) 11,000
Treasury stock purchased 4,293 (77,000)
Issuance of common stock
in business combination 79,719 1,000 1,045,000
Net earnings 4,050,000
--------- ------- ----------- ----------- ------- ----------- ---------
BALANCE, December 31, 1997 10,751,003 $108,000 $69,065,000 $43,145,000 329,883 $(2,792,000) $(295,000)
========== ======== =========== =========== ======= =========== =========
</TABLE>
See notes to condensed consolidated financial statements.
PAGE
<PAGE>
<TABLE>
SED International Holdings, Inc.
And Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
December 31,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 4,050,000 $ 3,763,000
Adjustments to reconcile net earnings
to net cash used in
operating activities
Depreciation and amortization 1,245,000 754,000
Compensation - stock awards 57,000 64,000
Changes in assets and liabilities, net of
effects of acquired business (32,496,000) (21,684,000)
------------ -----------
Net cash used in
operating activities (27,144,000) (17,103,000)
------------ -----------
INVESTING ACTIVITIES:
Purchases of equipment, net (2,253,000) (1,328,000)
Purchase of business, net of cash acquired (370,000) --
Purchase of distribution rights (963,000) --
------------ -----------
Net cash used in investing activities (3,586,000) (1,328,000)
------------ -----------
FINANCING ACTIVITIES:
Borrowings (payments) under line of credit, net (23,000,000) 20,390,000
Proceeds from issuance of common stock, net 55,333,000 201,000
Purchase of treasury stock (77,000) (1,325,000)
------------ -----------
Net cash provided by financing activities 32,256,000 19,266,000
------------ -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,526,000 835,000
CASH AND CASH EQUIVALENTS, beginning of period 783,000 769,000
------------ -----------
CASH AND CASH EQUIVALENTS, end of period $ 2,309,000 $ 1,604,000
============ ===========
</TABLE>
<PAGE>
SED International Holdings, Inc.
And Subsidiaries
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended December 31, 1997 and 1996
A. Corporate Name Change:
On November 12, 1997, Southern Electronics Corporation changed
its corporate name to SED International Holdings, Inc. The
stockholders of Southern Electronics Corporation approved the
name change at the 1997 Annual Meeting of Stockholders held on
November 11, 1997.
B. Interim Financial Statements:
The accompanying condensed consolidated financial statements of
SED International Holdings, Inc. and its subsidiaries (the
"Company") have been prepared without audit. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) considered necessary for a fair presentation have
been included. The results of operations for the six (6) months
ended December 31, 1997 are not necessarily indicative of the
operating results for the full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
It is suggested that these financial statements be read in
conjunction with the consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K,
filed with the Securities and Exchange Commission for the year
ended June 30, 1997.
C. Purchase of Business:
On November 30, 1997, the Company acquired the outstanding stock
of Magna Distribuidora Ltda. (Magna), a distributor of computer
peripherals and software products located in S o Paulo, Brazil
for approximately $1,416,000, including $370,000 in expenses,
consisting of 79,719 shares of the Company's common stock valued
at $1,046,000 and $370,000 in cash. Of the 79,719 shares,
54,039 are being held in escrow through November 30, 2002 subject
to the indemnification provisions of the acquisition. The Company
is also required to pay additional consideration through November
30, 1999 based on the net earnings of Magna, as defined. Such
additional consideration, if paid, will be recognized as
goodwill.
This acquisition has been accounted for using the purchase method
of accounting. Goodwill arising from this acquisition is being
amortized using the straight-line method over 30 years. The
operating results of the acquired business are included in the
Company's consolidated statements of earnings from the date of
acquisition.
D. Start-up Expense:
As a result of a transaction with Globelle, Inc. (Globelle) in
June 1997, the Company acquired the distribution rights for
certain significant vendor lines in the United States and
subsequently hired 36 experienced sales people formerly with
Globelle. Because the Globelle transaction was not an
acquisition of a going business concern, a transition period
followed the close of that transaction during which the
newly-hired sales people became acclimated to the Company's
policies, procedures, and product offerings, and the inventory of
new product lines became stocked at the Company's warehouses. As
a result of this transaction, the Company incurred start-up
expenses principally during the first fiscal quarter ended
September 30, 1997 reflecting costs associated with the hiring of
new sales people, opening new sales offices and other transition
expenses.
<PAGE>
E. Stockholders' Equity:
The Company completed a secondary stock offering of 3,000,000
primary shares of common stock effective on October 6, 1997 with
proceeds to the Company of $54,280,000, net of offering costs.
On November 11, 1997 the Company's stockholders approved an
increase in the number of shares of common stock authorized for
issuance to 100,000,000 from 25,000,000.
F. Earnings Per Share:
Beginning with the quarter ended December 31, 1997, earnings per
share ("EPS") is computed in accordance with Statement of
Financial Accounting Standards Number ("SFAS") 128. All prior
period EPS data has been restated to conform with SFAS 128.
Under SFAS 128, presentation of basic and diluted EPS on the
income statement is required. Basic EPS is computed by dividing
income available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted EPS
is computed similarly to fully diluted EPS under Accounting
Principles Board No. 15. For all periods presented, the
Company's diluted EPS differs from basic EPS solely from the
effect of dilutive stock options.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CONSOLIDATED RESULTS OF OPERATIONS
Three Months Ended December 31, 1997 Compared to Three Months Ended
December 31, 1996
On November 30, 1997, the Company acquired the outstanding stock of
Magna Distribuidora, Ltda. (Magna), a distributor of computer
peripherals and software products located in S o Paulo, Brazil. The
operating results of Magna for December 1997 were included in the
consolidated results of operations for the quarter ended December 31,
1997 and were immaterial.
Net sales increased 40.8%, or $62.5 million, to $215.8 million in the
second quarter ended December 31, 1997, compared to $153.3 million in
the second quarter ended December 31, 1996. This growth resulted from
an increase in both United States net sales and export net sales,
principally into Latin America. Sales of microcomputer products
represented approximately 86.6% of the Company's second quarter ended
December 31, 1997 net sales compared to 92.2% for the second quarter
ended December 31, 1996. Sales of wireless telephone products
acounted for approximately 13.4% of the Company's second quarter ended
December 31, 1997 net sales compared to 7.8% for the second quarter
ended December 31, 1996.
Gross profit increased 34.0%, or $3.4 million, to $13.2 million in the
second quarter ended December 31, 1997 compared to $9.8 million in the
second quarter ended December 31, 1996. Gross profit as a percentage
of net sales decreased to 6.1% in the second quarter ended December
31, 1997 from 6.4% in the second quarter ended December 31, 1996. The
dollar increase in gross profit relates directly to the increase in
net sales. The decrease in the gross profit percentage was primarily
due to continued highly competitive pricing.
Selling, general and administrative expenses increased 31.5%, or $1.9
million, to $8.2 million in the second quarter ended December 31,
1997, compared to $6.3 million in the second quarter ended December
31, 1996. These expenses as a percentage of net sales decreased to
3.8% in the second quarter ended December 31, 1997 compared to 4.1% in
the second quarter ended December 31, 1996. The dollar increase in
these expenses was primarily due to increased salaries and commissions
for salespeople and expanded sales and distribution facilities. The
percentage decrease in these expenses was primarily due to the
Company's ability to control variable costs over a larger sales base.
Net interest expense increased 47.2%, or $.2 million, to $.6 million
in the second quarter ended December 31, 1997 compared to $.4 million
in the second quarter ended December 31, 1996. Interest expense as a
percentage of net sales was 0.2% in each of the second quarters ended
December 31, 1997 and December 31, 1996. The increase in interest
expense was primarily due to borrowing costs associated with funding
increased levels of working capital.
Income tax expense was recorded at an effective annual rate of 39.1%
in the second quarter ended December 31, 1997 compared to 38.4% in the
second quarter ended December 31, 1996.
Six Months Ended December 31, 1997 Compared to Six Months Ended
December 31, 1996
Net sales increased 37.1%, or $116.4 million, to $429.8 million for
the six months ended December 31, 1997 compared to $313.4 million for
the six months ended December 31, 1996. This growth resulted from an
increase in both United States net sales and export net sales,
principally into Latin America. Sales of microcomputer products
represented approximately 85.6% of the Company's net sales for the six
months ended December 31, 1997 compared to 93.0% for the six months
ended December 31, 1996. Sales of wireless telephone products
accounted for approximately 14.4% of the Company's net sales for the
six months ended December 31, 1997 compared to 7.0% for the six months
ended December 31, 1996.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (continued)
Gross profit increased 31.6%, or $6.0 million, to $24.8 million in
the six months ended December 31, 1997 compared to $18.8 million for
the six months ended December 31, 1996. Gross profit as a percentage
of net sales decreased to 5.8% in the six months ended December 31,
1997 from 6.0% in the six months ended December 31, 1996. The dollar
increase in gross profit relates directly to the increase in net
sales. The decrease in the gross profit percentage was primarily due
to continued highly competitive pricing.
Selling, general and administrative expenses (excluding $1.4 million
of start-up expenses) increased 25.5%, or $3.0 million, to $15.0
million for the six months ended December 31, 1997, compared to $12.0
million for the six months ended December 31, 1996. These expenses as
a percentage of net sales decreased to 3.5% for the six months ended
December 31, 1997 compared to 3.8% for the six months ended December
31, 1996. The dollar increase in these expenses was primarily due to
increased salaries and commissions for salespeople and expanded sales
and distribution facilities. The percentage decrease in these
expenses was primarily due to the Company's ability to control
variable costs over a larger sales base.
As a result of a transaction with Globelle, Inc. (Globelle) in June
1997, the Company acquired the distribution rights for certain
significant vendor lines in the United States and subsequently hired
36 experienced sales people formerly with Globelle. Because the
Globelle transaction was not an acquisition of a going business
concern, a transition period followed the close of that transaction
during which the newly-hired sales people became acclimated to the
Company's policies, procedures, and product offerings, and the
inventory of new product lines became stocked at the Company's
warehouses. As a result of this transaction, the Company incurred
$1.4 million of start-up expenses during the fiscal quarter ended
September 30, 1997 reflecting costs associated with the hiring of new
sales people, opening new sales offices and other transition expenses.
Net interest expense increased 131.5%, or $1.0 million, to $1.8
million for the six months ended December 31, 1997 compared to $.8
million for the six months ended December 31, 1996. Interest expense
as a percentage of net sales increased to .4% for the six months ended
December 31, 1997 compared to .2% for the six months ended December
31, 1996. The increase in interest expense was primarily due to
borrowing costs associated with funding increased levels of working
capital.
Income tax expense was recorded at an effective annual rate of 39.0%
for the six months ended December 31, 1997 compared to 38.6% for the
six months ended December 31, 1996.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (continued)
Financial Condition, Liquidity, and Capital Resources
The Company's liquidity requirements arise primarily from the funding
of working capital needs, including inventories and trade accounts
receivable. Historically, the Company has financed its liquidity
needs largely through internally generated funds, borrowings under its
credit agreement and vendor lines of credit. The Company derives all
of its operating income and cash flow from its subsidiaries and relies
on payments from its subsidiaries to generate the funds necessary to
meet its obligations. As the Company pursues its growth strategy and
acquisition opportunities both in the United States and in Latin
America, management believes that exchange controls in certain
countries may limit the ability of the Company's present and future
subsidiaries in those countries to make payments to the Company.
Operating activities used $27.1 million of cash in the six months
ended December 31, 1997. The use of cash resulted primarily from
increases of $19.8 million in accounts receivable and $24.9 million in
inventory, partially offset by net earnings of $4.1 million and a
$10.6 million increase in accounts payable, net of the effects of
acquired business.
Investing activities used $3.6 million of cash in the six months ended
December 31, 1997. The use of cash was primarily due to the purchase
of equipment and distribution rights.
Financing activities provided $32.3 million. On October 6, 1997, the
Company received $54.3 million net of costs from a public stock
offering of 3,000,000 primary shares of Common Stock. The net
proceeds from this stock offering were used to reduce indebtedness
under the Company's credit agreement. Additional financing activities
relate to the exercise of stock options for $.95 million and net
borrowings of $31.3 million under the Company's Credit Agreement.
The Company, and its subsidiary, SED International, Inc., are parties
to a credit agreement, which provides for a secured line of credit of
$100.0 million. The Company may borrow at the prime rate offered by
Wachovia Bank, N.A. (8.50% at December 31, 1997) or the Company may
fix the interest rate for periods of 30 to 180 days under various
interest rate options. The credit agreement requires a commitment fee
of 0.25% of the unused commitment. The credit agreement is secured by
accounts receivable and inventory and requires maintenance of certain
minimum working capital and other financial ratios and has certain
dividend restrictions. The credit agreement expires in August 2000.
At December 31, 1997, the Company had principal borrowings of $33.0
million under the credit agreement at a weighted average interest rate
of 7.77% per annum.
In the event the Company seeks to grow more rapidly than presently
contemplated, whether through internal growth or growth through
acquisitions, the Company may need to seek additional financing, which
financing may not be available to the Company on acceptable terms.
Management believes that the credit agreement, together with vendor
lines of credit, the proceeds from the recently completed public
offering, and internally generated funds, will be sufficient to
satisfy its working capital needs during fiscal 1998. The credit
agreement permits up to $30.0 million to be borrowed for the purpose
of financing acquisitions, subject to a limitation of $15.0 million
for any one acquisition, and further subject to compliance with the
other terms of the credit agreement.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (continued)
Forward-Looking Information
The matters discussed herein contain certain forward-looking
statements that represent the Company's expectations or beliefs,
including, but not limited to, statements concerning future revenues
and future business plans. When used by or on behalf of the Company,
the words "may," "could," "should," "would," "believe," "anticipate,"
"estimate," "intend," "plan," and similar expressions are intended to
identify forward-looking statements. These statements by their nature
involve substantial risks and uncertainties, certain of which are
beyond the Company's control. The Company cautions that various
factors, including the factors described under the captions "Risk
Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in the Company's
Registration Statement on Form S-3 (SEC File No. 333-35069) as well as
general economic conditions and industry trends, the level of
acquisition opportunities available to the Company and the Company's
ability to negotiate the terms of such acquisition on a favorable
basis, a dependence upon and/or loss of key vendors or customers, the
loss of strategic product shipping relationships, customer demand,
product availability, competition (including pricing and
availability), concentrations of credit risks, distribution
efficiencies, capacity constraints and technological difficulties
could cause actual results or outcomes to differ materially from those
expressed in any forward-looking statements of the Company made by or
on behalf of the Company. The Company undertakes no obligation to
update any forward-looking statement.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The Company's 1997 Annual Meeting of Stockholders was held
on November 11, 1997 for the following purposes: (i) to
elect two Class II directors for terms to expire at the 2000
Annual Meeting of Stockholders; (ii) to consider and approve
the Southern Electronics Corporation 1997 Stock Option Plan;
(iii) to consider and approve an amendment to the Company's
Certificate of Incorporation increasing the authorized
shares of the Company's Common Stock from 25 million to 100
million shares; and (iv) to consider and approve an
amendment to the Company's Certificate of Incorporation
changing the name of the Company from "Southern Electronics
Corporation" to "SED International Holdings, Inc." The
voting results on the foregoing matters, which were all
approved, were as follows:
Proposal 1 - Election of Directors
Authority
Nominee For Withheld Against
Gerald Diamond 5,912,218 4,702 586,539
Joel Cohen 5,893,218 23,702 586,539
Proposal 2 - Southern Electronics Corporation 1997 Stock
Option Plan
For Against Abstained Broker Non-Votes
5,524,767 947,047 31,645 543,750
Proposal 3 - An amendment to the Company's Certificate of
Incorporation increasing the authorized shares of the
Company's Common Stock from 25 million to 100 million shares
For Against Abstained Broker Non-Votes
4,740,856 1,751,079 11,524 543,750
Proposal 4 - To consider and approve an amendment to the
Company's Certificate of Incorporation changing the name of
the Company from "Southern Electronics Corporation" to "SED
International Holdings, Inc."
For Against Abstained Broker Non-Votes
6,456,062 19,665 27,732 543,750
Item 5. Other Information
None
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits.
Exhibit
Number Description
10.1 Form of Second Amendment, dated October 15,
1997, among National City Bank, Columbus,
Wachovia Bank of Georgia, N.A., the
Registrant and SED International, Inc., a
wholly-owned subsidiary of the Registrant, to
Revolving Credit Agreement dated as of June
29, 1995 among National City Bank, Columbus,
Wachovia Bank of Georgia, N.A., the
Registrant and SED.
27.1 Financial Data Schedule
b) Reports on Form 8-K
Report on Form 8-K dated December 1, 1997 (filed December
15, 1997) reporting the acquisition of all of the
outstanding capital stock of Magna Distribuidora Ltda. by
SED International Holdings, Inc. and its wholly-owned
subsidiary, SED International, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
SED International Holdings, Inc.
(Registrant)
February 13, 1998 /s/Gerald Diamond
Gerald Diamond
Chief Executive Officer
Chairman of the Board
(Principal Executive Officer)
February 13, 1998 /s/Larry G. Ayers
Larry G. Ayers
Vice President-Finance and
Treasurer
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
10.1 Form of Second Amendment, dated October 15, 1997, among
National City Bank, Columbus, Wachovia Bank of Georgia,
N.A., the Registrant and SED International, Inc., a
wholly-owned subsidiary of the Registrant, to Revolving
Credit Agreement dated as of June 29, 1995 among
National City Bank, Columbus, Wachovia Bank of Georgia,
N.A., the Registrant and SED.
27.1 Financial Data Schedule
<PAGE>
Exhibit No. 10.1
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT
AGREEMENT (this "Amendment") is dated as of the 15th day of October,
1997, among SOUTHERN ELECTRONICS CORPORATION and SED INTERNATIONAL,
INC., jointly and severally (collectively, the "Borrowers"), WACHOVIA
BANK, N.A., as Agent (the "Agent") and WACHOVIA BANK, N.A. and
NATIONAL CITY BANK OF COLUMBUS, as Banks (collectively, the "Banks");
W I T N E S S E T H:
WHEREAS, the Borrowers, the Agent and the Banks executed and
delivered that certain $100,000,000 Amended and Restated Credit
Agreement, dated as of the 13th day of August, 1997, as amended by
First Amendment to Amended and Restated Credit Agreement, dated as of
September 22, 1997 (as so amended, the "Credit Agreement");
WHEREAS, the Borrowers have requested and the Agent and the
Banks have agreed to make certain amendments to the Credit Agreement,
subject to the terms and conditions hereof;
NOW, THEREFORE, for and in consideration of the above
premises and other good and valuable consideration, the receipt and
sufficiency of which hereby is acknowledged by the parties hereto, the
Borrowers, the Agent and the Banks hereby covenant and agree as
follows:
1. Definitions. Unless otherwise specifically defined
herein, each term used herein which is defined in the Credit Agreement
has the meaning assigned to such term in the Credit Agreement. Each
reference to "hereof", "hereunder", "herein" and "hereby" and each
other similar reference and each reference to "this Agreement" and
each other similar reference contained in the Credit Agreement from
and after the date hereof refer to the Credit Agreement as amended
hereby.
<PAGE>
2. Amendment to Sections 2.05(a). Section 2.05(a) of the
Credit Agreement is hereby amended by deleting such Section in its
entirety and substituting therefor the following:
"(a) 'Applicable Margin' means:
(i) for the period commencing on the Closing Date to and
including October 14, 1997,(w) for any Base Rate Loan,
0.00%, and (x) for any Euro-Dollar Loan, 2.75%;
(ii) for the period commencing on October 15, 1997, to
and including the first Performance Pricing Determination
Date, (y) for any Base Rate Loan, 0.00%, and (z) for any
Euro-Dollar Loan, 1.25%; and
(iii) from and after the first Performance Pricing
Determination Date, the percentage determined on each
Performance Pricing Determination Date by reference to the
table set forth below as to such type of Loan and the
Leverage Ratio calculated by the Agent from the most recent
10-Q quarterly statement described in Section 6.01(i) for
the quarterly period ending immediately prior to such
Performance Pricing Determination Date.
Applicable Margin
Leverage Ratio Euro-Dollar Loan Base Rate Loan
[LESS THAN OR
EQUAL TO] 1.0 1.00% 0.0%
[GREATER THAN] 1.0
and [LESS THAN OR
EQUAL TO] 2.0 1.25% 0.0%
[GREATER THAN] 2.0
and [LESS THAN OR
EQUAL TO] 2.5 1.50% 0.0%
[GREATER THAN] 2.5
and [LESS THAN OR
EQUAL TO] 3.5 1.75% 0.0%
[GREATER THAN] 3.5
and [LESS THAN OR
EQUAL TO] 5.0 2.00% 0.0%
[GREATER THAN] 5.0
and [LESS THAN OR
EQUAL TO] 6.0 2.50% 0.0%
[GREATER THAN] 6.0 3.00% 0.50%
In determining interest for purposes of this Section
2.05 and fees for purposes of Section 2.06, the Borrowers
and the Banks shall refer to the Borrowers' most recent 10-Q
consolidated quarterly financial statements delivered
pursuant to Section 6.01(i). If such financial statements
require a change in interest pursuant to this Section 2.05
or fees
<PAGE>
pursuant to Section 2.06, the Borrowers shall deliver to the
Agent, along with such financial statements, a notice to
that effect, which notice shall set forth in reasonable
detail the calculations supporting the required change. The
"Performance Pricing Determination Date" is the first day of
the month after the date of receipt of such financial
statements pursuant to Section 6.01(i). Any such required
change in interest and fees shall become effective on such
Performance Pricing Determination Date, and shall be in
effect until the next Performance Pricing Determination
Date, provided that: (i) for Euro-Dollar Loans, changes in
interest shall only be effective for Interest Periods
commencing on or after the Performance Pricing Determination
Date; and (ii) no fees or interest shall be decreased
pursuant to this Section 2.05 or Section 2.06 if a Default
is in existence on the Performance Pricing Determination
Date. In the event that the Borrowers fail to deliver their
10-Q quarterly financial statements to the Agent and the
Banks on or before the 45th day after the end of any Fiscal
Quarter, then the Applicable Margin shall be the highest
Applicable Margin then in effect until the next Performance
Pricing Determination Date."
3. Restatement of Representations and Warranties. Each of
the Borrowers hereby restates and renews each and every representation
and warranty heretofore made by it in the Credit Agreement and the
other Loan Documents as fully as if made on the date hereof and with
specific reference to this Amendment and all other loan documents
executed and/or delivered in connection herewith.
4. Effect of Amendment. Except as set forth expressly
hereinabove, all terms of the Credit Agreement and the other Loan
Documents remain in full force and effect, and constitute the legal,
valid, binding and enforceable obligations of the Borrowers. The
amendments contained herein will be deemed to have prospective
application only, unless otherwise specifically stated herein.
5. Ratification. Each of the Borrowers hereby restates,
ratifies and reaffirms each and every term, covenant and condition set
forth in the Credit Agreement and the other Loan Documents effective
as of the date hereof.
6. Counterparts. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered will be
deemed to be an original and all of which counterparts, taken
together, will constitute but one and the same instrument.
7. Section References. Section titles and references used
in this Amendment have substantive meaning or content of any kind
<PAGE>
whatsoever and are not a part of the agreements among the parties
hereto evidenced hereby.
8. No Default; Release. To induce the Agent and the Banks
to enter into this Amendment and to continue to make advances pursuant
to the Credit Agreement, each of the Borrowers hereby acknowledges and
agrees that, as of the date hereof, and after giving effect to the
terms hereof, (i) there exists no Default or Event of Default, (ii)
there exists no right of offset, defense, counterclaim, claim or
objection in favor of the Borrowers arising out of or with respect to
any of the Loans or other obligations of the Borrowers owed to the
Banks under the Credit Agreement, and (iii) the Agent and each of the
Banks has acted in good faith and has conducted its relationships with
each of the Borrowers in a commercially reasonable manner in
connection with the negotiations, execution and delivery of this
Amendment and in all respects in connection with the Credit Agreement,
each of the Borrowers hereby waiving and releasing any such claims to
the contrary.
9. Further Assurances. Each of the Borrowers agrees to take
such further actions as the Agent reasonably requests in connection
herewith to evidence the amendments herein contained to the Borrowers.
10. Governing Law. This Amendment is governed by, and
construed and interpreted in accordance with, the laws of the State of
Georgia.
11. Conditions Precedent. This Amendment becomes effective
only upon execution and delivery of this Amendment by each of the
parties hereto.
[Signatures On Next Page]
<PAGE>
IN WITNESS WHEREOF, the Borrowers, the Agent and each of the
Banks has caused this Amendment to be duly executed, under seal, by
its duly authorized officer as of the day and year first above
written.
SOUTHERN ELECTRONICS
CORPORATION
By:_________________________(SEAL)
Title:
SED INTERNATIONAL, INC.
By:_________________________(SEAL)
Title:
WACHOVIA BANK, N.A.,
as Agent and as a Bank
By:_________________________(SEAL)
Title:
NATIONAL CITY BANK OF COLUMBUS
By:_________________________(SEAL)
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SED
INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AS OF AND FOR THE PERIOD ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 2,309,000
<SECURITIES> 0
<RECEIVABLES> 79,232,000
<ALLOWANCES> 1,893,000
<INVENTORY> 141,824,000
<CURRENT-ASSETS> 226,675,000
<PP&E> 8,223,000
<DEPRECIATION> 4,532,000
<TOTAL-ASSETS> 255,010,000
<CURRENT-LIABILITIES> 112,779,000
<BONDS> 0
0
0
<COMMON> 108,000
<OTHER-SE> 109,123,000
<TOTAL-LIABILITY-AND-EQUITY> 255,010,000
<SALES> 429,804,000
<TOTAL-REVENUES> 429,804,000
<CGS> 405,009,000
<TOTAL-COSTS> 405,009,000
<OTHER-EXPENSES> 16,404,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,748,000
<INCOME-PRETAX> 6,643,000
<INCOME-TAX> 2,593,000
<INCOME-CONTINUING> 4,050,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,050,000
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.43
</TABLE>
