SED International Holdings, Inc. (OTC: SEDN), a multinational supply
chain management provider and distributor of leading computer technology
components and IT storage solutions, today announced that it has signed
a new $8 million funding facility with Allied Affiliated Funding.
"When the new Board joined SED back in October 2013, SED had $17 million
in debt under its facility with Wells Fargo. That number has since been
reduced to zero and as we transition to Allied, we will do so without
any outstanding bank debt," said Sham Gad, Chairman and Chief Executive
Officer of SED. "Our new relationship with Allied sets the stage for SED
to rescale its business with a stable source of capital for the first
time since we joined the Company."
As SED continues to restructure and work diligently to cure the
Company's delinquent filing status, we can provide the following brief
SED has spent the past eight months refocusing its business as a
distributor of technology components and IT solutions. The Company has
exited from the housewares and consumer electronics business that
resulted from the Company's acquisition of Lehrhoff a couple of years
ago. By all accounts that acquisition was a catastrophic mistake by the
Company. An approximate $4.1 million acquisition price led to what we
estimate to be in excess of $15 million in additional cash burn.
SED has rationalized its supplier base from nerly 100 to less than 30
core vendors. These core partners, which constitute the most innovative
IT suppliers in the industry, provide the platform for SED to become a
niche IT distribution partner to our customers.
SED has significantly reduced its operating cost structure. The U.S. and
Miami export operations have a current headcount of approximately 50,
versus over 300 a year ago. We found a replacement tenant for our 60,000
sq. ft. Southern California distribution center and are currently
subleasing approximately 8,000 sq. ft. from that new tenant.
Additionally, the Company recently signed a lease to open a new 7,000
sq. ft. facility in San Jose, California, putting SED within a 50 mile
radius of many of our key suppliers and numerous new customers. Our
export business in Miami is moving to a newer facility this month upon
lease expiration. All in all, we estimate that our facilities expense is
being reduced by over 70% as a result of these changes. Most
importantly, we believe the reduction in square footage is more than
enough to support the scaling up of SED as we focus on distributing
higher margin, faster moving, IT products and solutions.
SED Latin America continues to operate soundly. We sold our Argentinian
operation to a local partner leaving SED Latin America with our
Colombian operations. The Argentinian businesses represented less than
10% of our Latin American revenues but represented a significant cash
burn on our operations.
We also believe SED's relationships and credibility with its core vendor
partners continue to improve dramatically as evidenced by the recent
selection of SED by Seagate Technologies to be one of two distributors
in supporting Seagate's surveillance market. Seagate has followed-up
with its commitment by enhancing marketing allocation to SED as well as
the reestablishment of a credit line for SED. SED is currently working
with its other core suppliers in attempts to obtain expanded credit
SED still faces the significant challenge of overcoming its legacy
liabilities. SED has made significant progress to date on resolving many
of these liabilities, however, work remains with respect to the
Company's liabilities in order to complete the restructuring and growth
of SED going forward.
SED has begun working with its new auditor on the fiscal year 2014,
ending June 30, financial statements. The Company expects that it will
release its 2014 annual financials in September or October of this year.
SED's commitment to its stakeholders remains unwavering. Lots of hard
work remains ahead but SED has an amazing team of executives and
associates who are working tirelessly to transform SED into an efficient
operation with uncompromising integrity, and a credible and loyal
partner to both our suppliers and customers.
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