Merisel Settles Lawsuit, Posts Loss

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TWICE Staff Report

Merisel reported a first-quarter loss of $20.5 million, primarily due to a one-time charge of $21 million the company paid to settle an ongoing legal action.

Without the one-time charge the distributor would have posted a $491,000 profit on sales of $1.3 billion for the period ended March 31. Merisel had earnings of $3.6 million on sales of $1.1 billion during the same period last year. Gross margins were 5.19%, compared with 5.26% for fourth-quarter 1998 and 5.61% for first-quarter '98.

Merisel chairman/CEO Dwight A. Steffensen said the company was "pleased with our U.S. retail sales growth of 46%, but we're not satisfied with our U.S. VAR and commercial sales growth of 1% and 2%, respectively."

"We believe we are making the right investments to accelerate sales-growth trends with our VAR and commercial customer groups," he continued. "Given current margin pressures in the channel, we are driving initiatives that focus on increasing efficiencies, reducing costs, driving additional growth with existing infrastructure, and differentiating Merisel from our competitors."

In a written statement Steffensen hinted that Merisel will be under financial pressure for the remainder of the year as the company is affected by increased operating expenses to ensure year-2000 compliance.

Merisel's settlement agreement that provides for the dismissal of litigation pending between the company and certain holders and former holders of its 12.5% senior notes. As a result, Merisel recorded a one-time charge in the first quarter of $21 million, which represents legal costs related to the settlement. Specifics on the settlement were not available.

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