Financial Highlights for the Second Fiscal Quarter Ended May 31, 2018

  • Net sales of $7.3 million, compared to $7.4 million in the prior-year-period
  • Gross profit of $1.9 million, compared to $1.8 million in the prior-year-period, a 7.1% year-over-year increase
  • Gross profit margin of 26.4%, compared to 24.1% in the prior-year period
  • Net income of $168,309; EPS of $0.03

Operational Highlights

  • Growing customer engagement across business lines resulting in new customer component approvals
  • Challenge business segment continued new product development driving increased sales
  • Leveraging efficiencies across sales groups to drive profitability and new opportunities
  • Expansion of Challenge business segment’s engineering team and capabilities successfully meeting growing customer demand for new product designs   

DEER PARK, N.Y., July 16, 2018 (GLOBE NEWSWIRE) -- Surge Components, Inc. (“Surge” or “the Company”) (OTC Pink:SPRS), a leading supplier of capacitors, discrete semi-conductors and audible/sounding devices, today announced financial results for the second fiscal quarter 2018.  

Ira Levy, President and Chief Executive Officer of Surge, said, “I am pleased with the Company’s execution in the second quarter. On a year-over-year basis, gross profit increased 7.1% and profit margins expanded to 26.4% due to a continued focus on the efficient management of the business and sales to new and existing higher-margin customers.

“While profitability was strong, our net sales in the quarter declined 2.3% year-over-year due to a slowdown in certain customers’ production levels. Due to a global electronic components shortage, certain customers were unable to source sufficient components to complete product assemblies. With stronger product availability at our factories and leveraging our superior supply chain, we believe there may be a potential opportunity for us to win business from new customers seeking alternative suppliers.

“Additionally, we are working closely with our customers to identify ways to mitigate the impact of tariffs recently levied against Chinese goods by the U.S. government. We are currently reviewing various solutions to help minimize the expense impact on our business and our customers, including shipping components from Asia directly to our customers’ manufacturing facilities in Mexico and Canada, or to their bonded inventory warehouses on the border. 

“Through all of these efforts, we remain committed to maximizing profitability on a global scale across our organization. Our focus is on ensuring that we have the right resources to compete and to create maximum efficiency in the business to drive long term shareholder value.”

Results of Operations for the Three Months Ended May 31, 2018

Net sales for the three months ended May 31, 2018 decreased by 2.3% to $7.3 million, as compared to net sales of $7.4 million for the three months ended May 31, 2017.  The decrease in net sales for the three month period is primarily attributable to a reduction in business with certain existing customers as well as a slowdown in production from certain customers due to a shortage of certain necessary components to complete their assemblies.  A portion of the decline was also due to a decrease in commission income resulting from a decrease in the percentage earned for certain customers.

Gross profit for the three months ended May 31, 2018 increased by 7.1% to $1.9 million, as compared to $1.8 million for the three months ended May 31, 2017. The increase in gross profit for the three month period is primarily attributable to increased business with new and existing customers with higher profit margins. Gross profit margin as a percentage of net sales increased to 26.4% for the three months ended May 31, 2018, as compared to 24.1% for the three months ended May 31, 2017. The increase in gross profit margins for the three month period was driven by increased sales with new and existing customers.

Selling and shipping expenses for the three months ended May 31, 2018 decreased 3.5% to $637,418, as compared to $660,198 for the three months ended May 31, 2017. The decrease in selling and shipping expenses for the three month period was primarily attributable to declines in commission expense, travel expenses and shipping expenses, offset by increases in entertainment expenses. 

General and administrative expenses for the three months ended May 31, 2018 decreased 9.9% to $1.1 million, as compared to $1.2 million for the three months ended May 31, 2017. The decrease for the three month period is primarily attributable to declines in legal fees incurred by the Company during the proxy contest and related settlement with certain shareholders in 2017 as well as the completed tender offer. The Company is in discussions with its insurance carrier regarding reimbursement for some of the costs incurred in connection with the proxy contest and related settlement .Offsetting the decline was an increase in staffing and utilities expenses and increases in computer expenses and director fees. This was partially offset by decreases in temporary help and consulting expenses as well as a decrease in officers compensation, stock promotion expenses and office expenses. 

Net income for the three months ended May 31, 2018 increased to $168,309, as compared to a net loss of $103,334 for the three months ended May 31, 2017.

This press release should be read in conjunction with the consolidated financial statements included in the Company’s most recent quarterly report on Form 10-Q, which can be found at www.surgecomponents.com and at www.sec.gov . 

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements.  All statements other than statements of historical facts contained herein, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements.  These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, forward-looking statements can be identified by terms such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other similar words.  These statements are only predictions and are based largely on our current expectations and projections about future events and financial trends that may affect our business, financial condition and results of operations.  We discuss many of the risks in greater detail under the heading "Risk Factors" in our Annual Report on Form 10-K.  These forward-looking statements represent our estimates and assumptions only as of the date of this press release.  We assume no obligation to update any forward-looking statements for events or circumstances occurring after the date of this press release, except as required by law.

Investor Contacts:

Sloane & Company

Erica Bartsch, ebartsch@sloanepr.com

212-486-9500