European Micro Holdings Announces Second Quarter Results

Business Wire, Feb 21, 2001

Business & Technology Editors

MIAMI--(BUSINESS WIRE)--Feb. 21, 2001

European Micro Holdings, Inc. (Nasdaq National Market:EMCC) ("EMCC") today announced financial results for its fiscal 2001 second quarter ended December 31, 2000 (see attached tables).

Total net sales for the fiscal 2001 second quarter decreased to $26.8 million from $34.5 million for the same period last year. For the first half of fiscal 2001, total net sales were $55.8 million as compared to $67.3 million in the same period of fiscal 2000. Lower total net sales for the fiscal 2001 second quarter were primarily attributable to higher sales recorded in the second quarter of fiscal 2000 at the Company's European operations in anticipation of possible Year 2000 concerns (a similar surge in sales was not experienced during the second quarter of fiscal 2001), as well as unfavorable currency exchange rates from pounds sterling to U.S. dollars. Lower European sales were partially offset by higher sales at the Company's United States operations due to a shift from selling server options and other computer parts to configuring and selling complete systems. Also offsetting lower European sales was increased availability of product from the Company's Colchester (Singapore) subsidiary.

Fiscal 2001 second quarter gross margins decreased slightly to 10.3% from 10.7% for the same period last year; gross margins for the first half of fiscal 2001 were 10.6% versus 11% for the same period last year. EMCC reported a net loss for the second quarter of fiscal 2001 of $154,000, or $0.03 per share, versus net income of $11,000, or $0.00 per share, for the same period last year. The net loss for the first half of fiscal 2001 was $222,000, or $0.04 per share, as compared to net income of $218,000, or $0.04 per share, for the first six months of fiscal 2000.

In a joint statement, John Gallagher and Harry Shields, Co-Presidents and Co-Chairmen of EMCC, commented, "Despite lower overall results, we are encouraged by the continued strength in our U.S. operations and the buying generated from our Far East operations. Supporting our efforts will be the funding available through the previously announced $20 million, long-term financing commitment."

European Micro Holdings, Inc. is an independent, focused distributor of microcomputer products. The Company monitors and capitalizes on worldwide market-price disparities to purchase a select group of in-demand products from other distributors in 28 countries in 13 currencies. Utilizing its multi-lingual sales staff, European Micro then quickly and efficiently sources these products to its customer base, which includes value-added resellers, corporate resellers, retailers, direct marketers and distributors throughout the world. The vast majority of the products sold by European Micro are manufactured by well-recognized companies such as IBM, Compaq, Hewlett-Packard and 3Com.

Statements contained in this news release regarding expected financial results of the Company are forward-looking statements, subject to uncertainties and risks, many of which are beyond the Company's control, including, but not limited to, pricing strategies of the manufacturers, gross margins, reliance on key markets, suppliers, and products, availability of product from resellers, purchasing strategies, currency fluctuations, dependence on key personnel and trade restrictions, each of which may be impacted, among other things, by economic, competitive or regulatory conditions. These and other applicable risks are summarized under the caption "Risk Factors" in the Company's prospectus dated April 6, 1998 and in the Company's Annual Report on Form 10-K for the year ended June 30, 2000 as filed with the Securities and Exchange Commission. Forward-looking statements by their nature involve substantial risks and uncertainties. As a result, actual results may differ materially depending on many factors, including those described above. The Company cautions that historical results are not necessarily indicative of the Company's future performance.

                     EUROPEAN MICRO HOLDINGS, INC.
            Consolidated Condensed Statements of Operations
                 (In thousands, except per share date)


                   Three Months Ended             Six Months Ended
                      December 31,                   December 31,
                      ------------                   ------------
                   2000          1999            2000           1999
                   ----          ----            ----           ----
                      (Unaudited)                    (Unaudited)
Sales:
  Net sales      $ 26,657     $ 33,651        $ 55,671       $ 65,396
  Net sales to
    related
    parties            93          895             147          1,914
                 --------     --------        --------       --------

    Total net
      sales        26,750       34,546          55,818         67,310
                 --------     --------        --------       --------

Cost of
goods sold:
  Cost of goods
    sold to
    third parties (23,900)     (29,969)        (49,758)       (58,045)
  Cost of goods
    sold to
    related
    parties           (89)        (872)           (143)        (1,863)
                 --------     --------        --------       --------

    Total cost
      of goods
      sold        (23,989)     (30,841)        (49,901)       (59,908)
                 --------     --------        --------       --------

Gross profit        2,761        3,705           5,917          7,402

Operating expenses:
  Selling, general
    and
    administrative
    expenses       (2,596)      (3,357)         (5,479)        (6,423)
                 --------     --------        --------       --------

Operating profit  $   165     $    348        $    438       $    979

  Interest income       2           20              17             59
  Interest expense   (262)        (309)           (573)          (528)
  Equity in net
    income of
    unconsolidated
    subsidiaries       --            2              --             --
                 --------     --------        --------       --------

Income (loss)
  before income
  taxes               (95)          61            (118)           510
                 --------     --------        --------       --------

  Income taxes
    expense           (59)         (50)           (104)          (292)
                 --------     --------        --------       --------

Net income
  (loss)          $  (154)    $     11        $   (222)      $    218
                 ========     ========        ========       ========

  Net income
    (loss) per
    share - basic $ (0.03)    $   0.00        $  (0.04)      $   0.04
                 ========     ========        ========       ========

  Net income
    (loss) per
    share -
    diluted       $ (0.03)    $   0.00        $  (0.04)      $   0.04
                 ========     ========        ========       ========

Weighted Average
  Shares
  Outstanding
  - basic       4,943,057    5,047,911       4,938,478      5,033,459
                =========    =========       =========      =========

Weighted Average
  Shares
  Outstanding
  - diluted     4,943,057    5,047,911       4,938,478      5,033,956
                =========    =========       =========      =========