UNITED STATES

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 ~~March~~June 3130, 2013

¨	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: 333-134090

LOGO

Intcomex, Inc.

(Exact name of registrant as specified in its charter)

Delaware		65-0893400
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
(State or other jurisdiction ofincorporation or organization)		(I.R.S. EmployerIdentification No.)

3505 NW 107^th Avenue, Suite A, Miami, FL 33178

(Address of principal executive offices) (Zip Code)

(305) 477-6230

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of ~~May~~August 1012, 2013, the registrant had 167,~~819~~947 shares of Common Stock, par value $0.01 per share, outstanding. There is is no public trading market for the stock.

INTCOMEX, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

	~~Page~~		Page
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Item 1.	Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012		3
	Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012			3
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (Unaudited) – Three months ended March 31, 2013 and 2012		4
	Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (Unaudited) – Three and six months ended June 30, 2013 and 2012			4
Condensed Consolidated Statements of Cash Flows (Unaudited) – Three months ended March 31, 2013 and 2012		5
	Condensed Consolidated Statements of Cash Flows (Unaudited) – Six months ended June 30, 2013 and 2012			5
~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~	Notes to Condensed Consolidated Financial Statements (Unaudited)	6		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.		29
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			32
Item 3. Quantitative and Qualitative Disclosures About Market Risk.		43
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			49
Item 4. Controls and Procedures.		43
Item 4.	Controls and Procedures			49
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.		44
Item 1.	Legal Proceedings			50
Item 1A. Risk Factors.		44
Item 1A.	Risk Factors			50
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.		44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			50
Item 3. Defaults Upon Senior Securities.		44
Item 3.	Defaults Upon Senior Securities			50
Item 4. Mine Safety Disclosures.		44
Item 4.	Mine Safety Disclosures			50
Item 5. Other Information.		44
Item 5.	Other Information			50
Item 6. Exhibits.		45
Item 6.	Exhibits			51
Signatures		46		52

Part I — FINANCIAL INFORMATION

Item 1.

Financial Statements.

INTCOMEX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

	March 31,2013			December 31,2012
	June 30,2013			December 31,2012
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	2451,~~522~~744		$	30,586
Restricted cash		~~218~~207			226
Trade accounts receivable (net of allowance for doubtful accounts of $6,243 and $5,944 at March 31, 2013 and December 31, 2012, respectively)		147,506			142,431
Trade accounts receivable (net of allowance for doubtful accounts of $6,681 and $5,944 at June 30, 2013 and December 31, 2012, respectively)		140,952			142,431
Inventories		~~176~~152,~~521~~544			163,355
Prepaid expenses, notes receivable and other		7165,~~110~~952			73,543
Due from related parties		~~471~~507			505
Total current assets		~~420~~411,~~348~~906			410,646
Property and equipment, net		1514,~~514~~936			14,598
Goodwill		18,~~221~~061			18,069
Identifiable intangible assets		~~851~~727			906
Notes receivable and other		17,~~926~~575			17,983
Total assets	$	~~472~~463,~~860~~205		$	462,202
Liabilities and Shareholders’ Equity
Liabilities
Current liabilities
Lines of credit	$	5143,~~164~~567		$	50,021
Current maturities of long-term debt		10,~~241~~254			10,253
Accounts payable		216,~~803~~082			212,210
Accrued expenses and other		2530,~~522~~837			21,665
Due to related parties		4140			40
Total current liabilities		~~303~~300,~~771~~780			294,189
Long-term debt, net of current maturities		98,~~533~~761			97,455
Other long-term liabilities		4,~~178~~109			4,083
Total liabilities		~~406~~403,~~482~~650			395,727
Commitments and contingencies
Shareholders’ equity
Common stock, voting $0.01 par value, 200,000 shares authorized, 168,688 shares issued and 167,819 outstanding		2			2
Common stock, voting $0.01 par value, 200,000 shares authorized, 168,816 shares issued and 167,947 outstanding		2			2
Additional paid in capital		64,~~130~~217			64,062
Treasury stock, 869 shares		(508	)		(508	)
Retained earnings		~~6,737~~718			7,756
Accumulated other comprehensive loss		(34,~~983~~874	)		(4,837	)
Total shareholders’ equity		6659,~~378~~555			66,475
Total liabilities and shareholders’ equity	$	~~472~~463,~~860~~205		$	462,202

The accompanying notes are an integral part of the condensed consolidated financial statements.

INTCOMEX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(Dollars in thousands, except per share data)

(Unaudited)

	Three Months EndedMarch 31,
	Three Months EndedJune 30,						Six Months EndedJune 30,
	2013			2012			2013			2012
Revenue	$	~~351~~361,~~618~~533		$	~~390~~347,~~500~~335		$	713,151		$	737,835
Cost of revenue		~~321~~330,~~565~~356			~~356~~317,~~468~~646			651,921			674,114
Gross profit		3031,~~053~~177			3429,~~032~~689			61,230			63,721
Operating expenses
Selling, general and administrative		2324,~~995~~309			23,~~705~~575			48,304			47,280
Depreciation and amortization		1,~~050~~120			1,~~180~~181			2,170			2,361
Total operating expenses		25,~~045~~429			24,~~885~~756			50,474			49,641
Operating income		5,~~008~~748			94,~~147~~933			10,756			14,080
Other expense (income)
Interest expense		5,~~380~~603			5,~~378~~551			10,983			10,929
Interest income		(~~140~~176	)		(8659	)		(316	)		(145	)
Foreign exchange gain		(10	)		(2,714	)
Foreign exchange loss		4,940			3,359			4,930			645
Other (income) expense, net		(253	)		76
Other income, net		(105	)		(4,201	)		(358	)		(4,125	)
Total other expense		410,~~977~~262			24,~~654~~650			15,239			7,304
Income before provision for income taxes		31			6,493
(Loss) income before provision for income taxes		(4,514	)		283			(4,483	)		6,776
Provision for income taxes		1,~~050~~505			~~1,176~~159			2,555			1,335
Net (loss) income	$	(16,019	)	$	~~5,317~~124		$	(7,038	)	$	5,441
Net (loss) income per weighted average share of common stock:
Basic	$	(635.0786	)	$	310.7674		$	(41.94	)	$	32.50
Diluted	$	(635.0786	)	$	310.6674		$	(41.94	)	$	32.44
Weighted average number of common shares used in per share calculation:
Basic		167,~~819~~840			167,~~388~~460			167,830			167,424
Diluted		167,~~819~~840			167,~~928~~760			167,830			167,724
Comprehensive (loss) income:
Net (loss) income	$	(16,019	)	$	~~5,317~~124		$	(7,038	)	$	5,441
Foreign currency translation gain		854			1,215
Foreign currency translation adjustment		(891	)		(979	)		(37	)		236
Total comprehensive (loss) income	$	(~~165~~6,910	)	$	~~6,532~~(855	)	$	(7,075	)	$	5,677

The accompanying notes are an integral part of the condensed consolidated financial statements.

INTCOMEX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Three Months EndedMarch 31,
	Six Months EndedJune 30,
	2013			2012
Cash flows from operating activities:
Net (loss) income	$	(17,~~019~~038	)	$	5,~~317~~441
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Stock-based compensation expense		68			28
Share-based compensation expense		155			50
Depreciation expense		~~946~~1,963			~~979~~1,959
Amortization expense of identifiable intangible assets		104			201
Amortization expense of debt issuance costs and discount		1,394			1,252
Amortization expense of debt issuance costs and discount		695			615
Amortization expense of identifiable intangible assets		207			402
Bad debt expense		~~427~~809			~~177~~398
Inventory obsolescence expense		(64412	)		12,~~416~~971
Deferred income tax expense		167			(508	)
Deferred income tax expense (benefit)		270			(1,775	)
Gain on sale of subsidiary		(375	)		—
Loss on disposal of property and equipment and other		—			5
Gain on termination of non-compete agreement		—			(4,285	)
Loss (gain) on disposal of property and equipment and other		128			(1	)
Change in operating assets and liabilities:
(Increase) decrease in:
Decrease (increase) in:
Trade accounts receivables		~~(5,371~~607	)		(215,~~122~~923	)
Inventories		~~(12~~11,~~596~~339	)		(3114,~~380~~036	)
Prepaid expenses, notes receivable and other		27,~~405~~178			(~~884~~7,180	)
Due from related parties		34(2	)		(78236	)
Increase (decrease) in:
Accounts payable		43,~~159~~739			12(11,~~145~~992	)
Accrued expenses and other		39,~~735~~042			2(1,~~320~~789	)
Due to related parties		1—			(1	)
Net cash used in operating activities		(6,684	)		(30,770	)
Net cash provided by (used in) operating activities		29,004			(34,745	)
Cash flows from investing activities:
Purchases of property and equipment		(1,~~024~~618	)		(~~848~~1,328	)
Proceeds from sale of subsidiary		506			—
Proceeds from notes receivable and other		817			713
Proceeds from disposition of assets		854			416
Net cash used in investing activities		(~~502~~1,041	)		(~~837~~1,299	)
Cash flows from financing activities:
Borrowings under lines of credit, net		1,143			23,155
(Payments) borrowings under lines of credit, net		(6,454	)		28,159
Proceeds from borrowings under long-term debt		32			—45
Payments of long-term debt		(81170	)		(~~181~~385	)
Net cash provided by financing activities		1,094			22,974
Net cash (used in) provided by financing activities		(6,592	)		27,819
Effect of foreign currency exchange rate changes on cash and cash equivalents		28(213	)		~~179~~(12	)
Net decrease in cash and cash equivalents		(6,064	)		(8,454	)
Net increase (decrease) in cash and cash equivalents		21,158			(8,237	)
Cash and cash equivalents, beginning of period	$	30,586		$	25,707
Cash and cash equivalents, end of period	$	2451,~~522~~744		$	17,~~253~~470
Non-cash investing and financing activities:
Property acquired through financing	$	818		$	—

The accompanying notes are an integral part of the condensed consolidated financial statements.

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

Note 1. Organization and Basis of Presentation

Nature of Operations

Intcomex, Inc. (“Intcomex”) is a United States (“U.S.”) based pure play value-added international distributor of information technology (“IT”) products focused solely on serving Latin America and the Caribbean (the “Region”). Intcomex distributes computer equipment, components, peripherals, software, computer systems, accessories, networking products, digital consumer electronics and mobile devices to more than 50,000 customers in 39 countries. Intcomex offers single source purchasing to its customers by providing an in-stock selection of more than 12,000 products from over 130 vendors, including many of the world’s leading IT product manufacturers. The Company operates a sales and distribution center in the U.S. (the “Miami Operations”) and 2519 sales and distribution centers in Latin America and the Caribbean with in-country operations in 11 countries – Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Jamaica, Mexico, Panama, Peru and Uruguay, collectively, (the “In-country Operations”).

Organization

The accompanying unaudited condensed consolidated financial statements include the accounts of Intcomex (the “Parent”) and its subsidiaries (collectively referred to herein as the “Company”) including the accounts of Intcomex Holdings, LLC (“Holdings”) (parent company of Software Brokers of America, Inc. (“SBA”), a Florida corporation), IXLA Holdings, Ltd. (“IXLA”), IFC International, LLC, a Delaware limited liability company (“IFC”) and Intcomex International Holdings Cooperatief U.A., a Netherlands cooperative (“Coop”). SBA is the parent company of ~~four~~five subsidiaries located in Florida. IXLA is the Cayman Islands limited time duration holding company of 19 subsidiaries located in Central America, South America and the Caribbean. IFC and Coop are the parent companies of Intcomex Holdings SPC-I, LLC (“Intcomex SPC-I Mexico”), a dually formed company in the U.S. and Mexico and parent company of Comercializadora Intcomex S.A. de C.V. (“Intcomex Mexico”). The unaudited condensed consolidated financial statements reflect the Company as the reporting entity for all periods presented.

Use of Accounting Estimates

The Company prepares its unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The principles require the Company to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, the reported amounts of revenues and expenses, cash flows and the related footnote disclosures during the reporting period. On an on-going basis, the Company reviews and evaluates its estimates and assumptions, including but not limited to, those that relate to the realizable value of accounts receivable, inventories, identifiable intangible assets, goodwill and other long-lived assets, income taxes and contingencies. Actual results could differ from these estimates.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with the instructions to the Quarterly Report on Form 10-Q (“Quarterly Report”) and Article 10 of Regulation S-X, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not include certain information and disclosures normally required for comprehensive annual consolidated financial statements. Therefore, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2012, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 25, 2013 (“Annual Report”). The results of operations for the three and six months ended ~~March~~June 3130, 2013 may not be indicative of the results of operations that can be expected for the full year.

In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all material adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position of the Company as of ~~March~~June 3130, 2013, and its results of operations for the three and six months ended ~~March~~June 3130, 2013 and 2012 and its statements of cash flows for the ~~three~~six months ended ~~March~~June 3130, 2013 and 2012. All significant intercompany accounts and transactions have been eliminated in in consolidation.

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

Basis of Presentation

Certain immaterial reclassifications have been made to prior period balances in order to conform to the current period’s presentation.

Restricted cash balance relates to a deposit held to meet certain obligations under an agreement with one of ~~our~~the Company’s vendors. Restricted cash is recorded at cost, which approximates fair value.

The Company evaluated subsequent events through the date it issued its unaudited condensed consolidated financial statements, the date the Company filed its Quarterly Report.

Fair Value of Financial Instruments

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures (“ASC 820”) establishes a framework for all fair value measurements and expands disclosures related to fair value measurement and developments. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 requires that assets and liabilities measured at fair value are classified and disclosed in one of the following three categories:

Level 1—Quoted market prices for identical assets or liabilities in active markets or observable inputs;

Level 2—Significant other observable inputs that can be corroborated by observable market data; and

Level 3—Significant unobservable inputs that cannot be corroborated by observable market data.

The carrying amounts of cash and cash equivalents, restricted cash, trade ~~accounts~~ accounts receivable, notes receivable and other, accounts payable, accrued expenses and other approximate fair value because of the short-term nature of these items. The carrying amounts of outstanding short-term debt approximate fair value because ~~interest~~ interest rates over the term of these financial instruments approximate current market interest rates available to the Company. The current market price of outstanding long-term debt approximates fair value because the Company’s $110,000 ~~aggregate~~ aggregate principal amount 13 1/4% Second Priority Senior Secured Notes due December 15, 2014 (the “13 1/4% Senior Notes”) are currently publicly tradable. The 13¼ 1/4% Senior Notes are measured at fair value and are classified in the Level 1 category of ASC 820, as the fair value is measured at the quoted market price for identical liabilities in an active market. As of ~~March~~June 3130, 2013 and December 31, 2012, the 13 1/4% Senior Notes were tradable at ~~103~~100.00 and 101.50, respectively, of the principal amount.

The Company is exposed to fluctuations in foreign exchange rates and reduces its exposure to the fluctuations by periodically using derivative financial instruments and entering into derivative transactions with large multinational banks to manage its primary risk, foreign currency price risk. The Company’s derivative transactions are comprised of the following types of instruments:

Foreign currency forward contracts—Derivative instruments that convert one currency to another currency and contain a fixed amount, fixed exchange rate used for conversion and fixed future date on which the conversion will be made. The Company recognizes unrealized loss (gain) in the unaudited condensed consolidated statements of operations and comprehensive (loss) income for temporary fluctuations in the value of non-qualifying derivative instruments designated as cash flow hedges, if the fair value of the underlying hedged currency increases (decreases) prior to maturity. The Company reports realized loss (gain) upon conversion if the fair value of the underlying hedged currency increases (decreases) as of the maturity date.

Foreign currency collars—Derivative instruments that contain a fixed floor price (put option) and fixed ceiling price (call option). If the market price exceeds the call option strike price or falls below the put option strike price, the Company receives the fixed price or pays the counterparty bank the market price. If the market price is between the call and put option strike prices, neither the Company nor the counterparty bank are required to make a payment.

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

The amount required to enter into similar offsetting contracts with similar remaining maturities based on quoted market prices approximates the fair value of derivative financial instruments. The Company’s foreign currency forward contracts are measured on a recurring basis based on foreign currency spot rates quoted by financial institutions (Level 2) and are marked-to-market each period with gains and losses on these contracts recorded in foreign exchange (gain) loss in the Company’s unaudited, condensed consolidated statements of operations in the period in which the value changes with the offsetting amount for unsettled positions included in other current assets or liabilities in the unaudited condensed, consolidated balance sheets. The location and amounts of the fair value in the balance sheets and (gain) loss in the statements of operations and comprehensive (loss) income related to the Company’s derivative instruments are described in “Note 89. Fair Value of Derivative Instruments” in these Notes to Condensed Consolidated Financial Statements (Unaudited). There were no changes to ~~our~~the Company’s valuation methodology for assets and liabilities measured at fair value for the three and six months ended ~~March~~June 3130, 2013 and 2012. AsThe Company did not have any foreign currency collars or contracts outstanding as of ~~March~~June 3130, 2013, ~~the~~and ~~notional~~December 31, ~~amount~~2012. ofFor the ~~foreign~~three ~~currency~~and ~~forward~~six ~~contract~~months ~~outstanding~~ended inJune 30, ~~one~~2013, of the Company’s ~~In-Country~~recognized ~~Operations~~a ~~was~~gain of $~~5,760.~~17 ~~The~~and ~~Company~~a ~~did~~loss ~~not~~of ~~have~~$66, ~~any~~respectively, on the foreign currency ~~collars~~forward contracts or ~~contracts~~ collars outstanding. asFor ofthe ~~December~~three and six months ended June 3130, 2012., ~~The~~the Company recognized a loss of $830 and $569, respectively, on the foreign currency forward contracts or collars outstanding ~~for the three months ended March 31, 2013 and 2012~~.

Off-Balance Sheet Arrangements

The Company has agreements with unrelated third parties for factoring of specific accounts receivable in several of its In-country Operations. The factoring is treated as a sale in accordance with FASB ASC 860, Transfers and Servicing, and is accounted for as an off-balance sheet arrangement. Proceeds from the transfers reflect the face value of the account less a discount, which is recorded as a charge to interest expense in the Company’s consolidated statements of operations in the period the sale occurs. Net funds received are recorded as an increase to cash and a reduction to accounts receivable outstanding in the consolidated balance sheets. The Company reports the cash flows attributable to the sale of receivables to third parties and the cash receipts from collections made on behalf of and paid to third parties, on a net basis as trade accounts receivables in cash flows from operating activities in the Company’s unaudited condensed consolidated statement of cash flows.

The Company acts as the collection agent on behalf of the third party for the arrangements and has no significant retained interests or servicing liabilities related to the accounts receivable sold. In order to mitigate credit risk related to the Company’s factoring of accounts receivable, the Company may purchase credit insurance, from time to time, for certain factored accounts receivable, resulting in risk of loss being limited to the factored accounts receivable not covered by credit insurance, which the Company does not believe to be significant.

As of ~~March~~June 3130, 2013 and December 31, 2012, the Company factored approximately $1726,~~616~~391 and $23,538, respectively, of accounts receivable pursuant to the Company’s agreements, representing the face amount of total outstanding receivables. For the three and six months ended ~~March~~June 3130, 2013, the Company incurred approximately $550 and $850 in expenses pursuant to the agreements. For the three and six months ended June 30, 2012, the Company incurred approximately $~~300~~105 and $405, respectively, in expenses pursuant to the agreements.

Computation of Net (Loss) Income per Share

The Company reports both basic and diluted net (loss) income per share. Basic net (loss) income per share excludes dilution and is computed by dividing net (loss) income by the weighted average number of common shares outstanding during the period. Diluted net (loss) income per share is computed using the weighted average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares primarily reflect the potential dilution that could occur if stock options and other commitments to issue common stock were exercised using the treasury stock method.

FASB ASC 260, Earnings per Share, requires that employee equity share options, non-vested shares and similar equity instruments granted by the Company be treated as potential common shares outstanding in computing diluted net (loss) income per share. Diluted shares outstanding include the dilutive effect of in-the-money options which is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock options, the amount of compensation cost for future service that the Company has not yet recognized, and the amount of tax benefits that would be recorded in additional paid in capital when the award becomes deductible are assumed to be used to repurchase shares.

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

The following table sets forth the computation of basic and diluted net (loss) income per weighted average share of common stock for the periods presented:

	For the Three Months EndedMarch 31,
	For the Three Months EndedJune 30,					For the Six Months EndedJune 30,
	2013			2012		2013			2012
Numerator for basic and diluted net (loss) income per share of common stock(1):
Net (loss) income	$	(16,019	)	$	~~5,317~~124	$	(7,038	)	$	5,441
Denominator:
Denominator for basic net (loss) income per share of common stock–weighted average shares		167,~~819~~840			167,~~388~~460		167,830			167,424
Effect of dilutive securities:
Stock options and unvested restricted shares of common stock(1)		—			~~540~~300		—			300
Denominator for diluted net (loss) income per share of common stock–adjusted weighted average shares		167, ~~819~~840			167, ~~928~~760		167,830			167,724
Net (loss) income per weighted average share of common stock:
Net (loss) income per share of common stock:
Basic	$	(635.0786	)	$	310.7674	$	(41.94	)	$	32.50
Diluted	$	(635.0786	)	$	310.6674	$	(41.94	)	$	32.44

(1) The stock options were ~~anti-dilutive~~antidilutive for the three and six months ended ~~March~~June 3130, 2013, as the Company had a net loss for the ~~quarter~~periods. The stock options were antidilutive for the three and six months ended ~~March~~June 3130, 2012, as the fair value was below the exercise price of the stock options. The ~~shares of~~ restricted ~~Common~~common ~~Stock~~stock were antidilutive for the three ~~months~~and ~~ended~~six ~~March 31, 2013. The shares of restricted Common Stock were dilutive for the three~~ months ended ~~March~~June 3130, ~~2012~~2013.

Note 2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in “Note 1. Organization and Basis of Presentation” of the ~~audited~~ Notes to Consolidated Financial Statements and “Critical Accounting Policies and Estimates” of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report. These accounting policies have not significantly changed.

Recently Issued and Adopted Accounting Guidance

Recently Issued Accounting Guidance

In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740) Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This update provides that an entity that has unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date should present the unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. This update is effective for reporting periods beginning after December 15, 2013. The Company does not believe the adoption of this guidance will have a material impact on the Company’s unaudited condensed consolidated financial statements.

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

In July 2013, the FASB issued ASU 2013-10, Derivatives and Hedging (Topic 815): Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes (A Consensus of the FASB Emerging Issues Task Force) provided that an entity that enters into derivative and hedging transactions. This update permits the spread between London Interbank Offered Rate (“LIBOR”) and Overnight Index Swap Rate (“OIS”), or the Fed Funds Effective Swap Rate, to be used as a U.S. benchmark interest rate for hedge accounting purposes in addition to the benchmark interest rates on direct Treasury obligations of the U.S. government (“UST”) and the LIBOR swap rate. This update also removes the restriction on using different benchmark rates for similar hedges. This update is effective prospectively for qualifying new or redesigned hedging relationships entered into on or after July 17, 2013. The Company does not believe the adoption of this guidance will have a material impact on the Company’s unaudited condensed consolidated financial statements.

Recently Adopted Accounting Guidance

In February 2013, the ~~Financial Accounting Standards Board (“~~FASB”) issued ~~Accounting Standards Update (“~~ASU”) 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This update provides that an entity that reports items of accumulated other comprehensive income improves the transparency of reporting reclassifications by presenting the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income, either on the face of the statement where net income is presented or in the notes, but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. This update is effective for reporting periods beginning after December 15, 2012. The Company adopted this guidance on January 1, 2013. The adoption of this guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

In July 2012, the FASB issued ASU 2012-02, Intangibles-Goodwill and Other (Topic 350) which amended then existing guidance by giving an entity the option not to calculate annually the fair value of an indefinite-lived intangible asset if the entity determines that it is not more likely than not that the asset is impaired. Previous guidance required an entity to test indefinite-lived intangible assets for impairment, on at least an annual basis, by comparing the fair value of the asset with its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, an entity should recognize an impairment loss in the amount of that excess. This update is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The Company adopted this guidance on January 1, 2013. The adoption of this guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

9Note 3. Brightpoint Transaction

On June 29, 2012, the Company entered into an agreement with Brightpoint Latin America and Brightpoint International Ltd. (collectively herein referred to as “Brightpoint”) to, among other things: (1) eliminate the mutual non-competition covenants included in the agreement dated March 16, 2011, between the Company and Brightpoint, pursuant to which the Company effectively issued an aggregate 38,769 shares of its common stock to Brightpoint, or an approximate 23 percent of the Company’s outstanding common stock from (i) the sale of 25,846 shares of its common stock in exchange for $15,000 in cash and (ii) the acquisition of certain assets consisting of certain Latin America operations and equity from Brightpoint and the assumption of certain liabilities associated with the operations and equity (the “Purchase Agreement”) underlying the investment agreement dated April 19, 2011, between the Company and two of its subsidiaries, Intcomex Colombia LTDA (“Intcomex Colombia”) and Intcomex de Guatemala, S.A., (“Intcomex Guatemala”) (the “Brightpoint Transaction”) and the fifth amended and restated shareholders agreement dated April 19, 2011, between the Company and its shareholders (the “Shareholders Agreement”); and (2) terminate the intellectual property license agreement dated April 19, 2011, between the Company and Brightpoint in which Brightpoint granted the Company the right to use certain intellectual property (the “License Agreement”) with immediate effect, provided that the Company retain the right to use the Brightpoint names and logos for a period of 90 days from June 29, 2012. The Company received $5,000 from Brightpoint in July 2012 and recognized a gain of $4,285 as a result of the transaction.

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

~~Note~~On 3.June 29, ~~Property~~2012, the Company entered into a separate agreement with Brightpoint pursuant to which Brightpoint permanently and ~~Equipment~~irrevocably waived all of its voting and information rights in exchange for a release from certain mutual non-competition provisions contained in the Fifth Amended and Restated Shareholders Agreement and Brightpoint granted to the Company an option to purchase the Company’s 38,769 ~~Net~~shares of common stock held by Brightpoint for $3,000, less dividends, exercisable for five years from the date of a closing of a change of control of Brightpoint (the “Release Agreement”). The Company remains precluded from exercising the option pursuant to the terms of the indenture governing the Company’s 13 1/4% Senior Notes.

Note 4. Property and Equipment, Net

Property and equipment, net consisted of the following:

	As of
	March 31,2013			December 31,2012
	June 30,2013			December 31,2012
Property and equipment, net
Land	$	1,~~989~~976		$	716
Building and leasehold improvements		10,139			10,067
Office furniture, vehicles and equipment		13,266			13,355
Office furniture, vehicles and equipment		13,618			13,355
Software		12,663			12,126
Warehouse equipment		2,788			2,780
Building and leasehold improvements		10,110			10,067
Software		12,462			12,126
Warehouse equipment		2,878			2,780
Total property and equipment		40,~~996~~893			39,044
Less accumulated depreciation		(25,~~482~~957	)		(24,446	)
Total property and equipment, net	$	1514,~~514~~936		$	14,598

Note 45. Goodwill and Identifiable Intangible Assets, Net

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired. In connection with the annual impairment test, the Company uses current market capitalization, control premiums, discounted cash flows and other factors as the best evidence of fair value and to determine if its goodwill is impaired. The impairment charge represents the extent to which the carrying values exceed the fair value attributable to the goodwill. Fair values were determined based upon market conditions, the income approach which utilized cash flow projections and other factors.

~~The~~11 changes in the carrying amount of goodwill relate to the accumulated foreign currency translation effect of the Mexican Peso on previously acquired goodwill and consisted of the following for the periods presented:

	MiamiOperations			In-CountryOperations			Total
As of December 31, 2012
Goodwill	$	14,204		$	22,642		$	36,846
Accumulated impairment losses		(11,531	)		(7,246	)		(18,777	)
Total goodwill	$	2,673		$	15,396		$	18,069
Activity:
Translation adjustment	$	—		$	152		$	152
Total activity	$	—		$	152		$	152
As of March 31, 2013
Goodwill	$	14,204		$	22,794		$	36,998
Accumulated impairment losses		(11,531	)		(7,246	)		(18,777	)
Total goodwill	$	2,673		$	15,548		$	18,221

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

~~There~~The ~~were~~changes noin ~~impairment~~the ~~charges~~carrying ~~recorded~~amount ~~against~~of goodwill ~~for~~relate to the ~~three~~accumulated ~~months ended~~foreign ~~March 31,~~currency ~~2013~~translation effect of the Mexican Peso on previously acquired goodwill and ~~2012.~~consisted of the following for the periods presented:


	Miami Operations			In-Country Operations			Total
As of December 31, 2012
Goodwill	$	14,204		$	22,642		$	36,846
Accumulated impairment losses		(11,531	)		(7,246	)		(18,777	)

Total goodwill	$	2,673		$	15,396		$	18,069
Activity:
Translation adjustment	$	—		$	8		$	8

Total activity	$	—		$	8		$	8
As of June 30, 2013
Goodwill	$	14,204		$	22,634		$	36,838
Accumulated impairment losses		(11,531	)		(7,246	)		(18,777	)

Total goodwill	$	2,673		$	15,388		$	18,061

There were no impairment charges recorded against goodwill for the three and six months ended June 30, 2013 and 2012.

Identifiable Intangible Assets, Net

Identifiable intangible assets, net consisted of the assets of Intcomex Mexico, Intcomex Colombia ~~LTDA (“Intcomex Colombia”)~~ and Intcomex de Guatemala, ~~S.A. (“Intcomex Guatemala”)~~ including the following:

As of March 31, 2013	GrossCarryingAmount		AccumulatedAmortization			CumulativeForeign CurrencyTranslation Effect			NetCarryingAmount		Useful Life(in years)
As of June 30, 2013	GrossCarryingAmount		AccumulatedAmortization			CumulativeForeign CurrencyTranslation Effect			NetCarryingAmount		UsefulLife(in years)
Identifiable intangible assets, net
Customer relationships – Intcomex Mexico	$	3,630	$	(2,~~849~~944	)	$	(91112	)	$	~~690~~574		10.0
Customer relationships – Intcomex Colombia, Intcomex Guatemala		258		(97105	)		—			~~161~~153		5.0
Total identifiable intangible assets, net	$	3,888	$	(23,~~946~~049	)	$	(91112	)	$	~~851~~727
As of December 31, 2012	GrossCarryingAmount		AccumulatedAmortization			CumulativeForeign CurrencyTranslation Effect			NetCarryingAmount		UsefulLife(in years)
Identifiable intangible assets, net
Customer relationships – Intcomex Mexico	$	3,630	$	(2,758	)	$	(140	)	$	732		10.0
Customer relationships – Intcomex Colombia, Intcomex Guatemala		258		(84	)		—			174		5.0
Total identifiable intangible assets, net	$	3,888	$	(2,842	)	$	(140	)	$	906

As of December 31, 2012	GrossCarryingAmount		AccumulatedAmortization			CumulativeForeign CurrencyTranslation Effect			NetCarryingAmount		Useful Life(in years)
Identifiable intangible assets, net
Customer relationships – Intcomex Mexico	$	3,630	$	(2,758	)	$	(140	)	$	732		10.0
Customer relationships – Intcomex Colombia, Intcomex Guatemala		258		(84	)		—			174		5.0
Total identifiable intangible assets, net	$	3,888	$	(2,842	)	$	(140	)	$	906

For the three and six months ended June 30, 2013, the Company recorded amortization expense related to the intangible assets of $103 and $207, respectively. For the three and six months ended June 30, 2012, the Company recorded amortization expense related to the intangible assets of $201 and $402, respectively. There was no impairment charge for identifiable intangible assets for the three and six months ended June 30, 2013 and 2012.

~~For~~Pursuant to the transaction ~~three~~in ~~months~~which ~~ended~~the ~~March 31,~~Company ~~2013~~received ~~and 2012~~$5,000 ~~the~~from ~~Company~~Brightpoint ~~recorded~~in ~~amortization~~July ~~expense related~~2012 toand ~~the~~recognized ~~intangible~~a ~~assets~~gain of $~~104 and $201~~4,285, ~~respectively.~~the ~~There~~Company ~~was~~included nothe ~~impairment~~gain ~~charge~~in ~~for~~other ~~identifiable~~(income) ~~intangible~~expense ~~assets~~in ~~for~~its ~~the~~unaudited, ~~three~~condensed ~~months~~consolidated ~~ended~~statements ~~March 31,~~of ~~2013~~operations and comprehensive ~~2012~~(loss) income.

1112

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

Note 56. Lines of Credit

The Company’s lines of credit are available sources of short-term liquidity for the Company. Lines of credit consist of short-term overdraft and credit facilities with various financial institutions in the countries in which the Company and its subsidiary operations conduct business consisting of the following categories: asset-based financing facilities, letter of credit and performance bond facilities, and unsecured revolving credit facilities and lines of credit.

The outstanding balance of lines of credits consisted of the following:

	As of
	March 31,2013		December 31,2012
	June 30,2013		December 31,2012
Lines of credit
Lines of Credit
Miami Operations:
SBA – Miami	$	4034,~~011~~788	$	38,574
In-country Operations:
Intcomex Guatemala		4,124		4,120
Intcomex Peru S.A.C.		3,188		3,285
Intcomex Peru S.A.C.		3,227		3,285
Intcomex Guatemala		2,416		4,120
Intcomex de Ecuador, S.A.		1,004		5
Computación Monrenca Panama, S.A.		1,500		—
Intcomex S.A. – Chile		1,003		1,084
Intcomex de Ecuador, S.A.		1,002		5
Computación Monrenca Panama, S.A.		1,000		—
Intcomex Colombia		518		599
Intcomex Colombia		546		599
Intcomex S.A. de C.V. – El Salvador		155		1,424
Intcomex S.A. de C.V. – El Salvador		249		1,424
Intcomex S.A. – Chile		—		1,084
Intcomex Costa Rica Mayorista en Equipo de Cómputo, S.A.		—		800
T.G.M., S.A. – Uruguay		—		130
T.G.M., S.A. – Uruguay (“Intcomex Uruguay”)		—		130
Total lines of credit	$	5143,~~164~~567	$	50,021

The change in the outstanding balance of lines of credit was primarily attributable to the ~~increased~~decreased borrowing in the Company’s Miami Operations under its senior secured revolving credit facility. As of ~~March~~June 3130, 2013 and December 31, 2012, the total remaining credit amount available was $3438,~~509~~917 and $36,588, respectively.

SBA Miami—PNC Bank Revolving Credit Facility

On July 25, 2011, SBA, together with its consolidated subsidiaries, entered into a revolving credit and security agreement with PNC Bank (the “PNC Credit Facility”) providing for a secured revolving credit facility including standby letters of credit commitments. SBA’s obligations are secured by a first priority lien on all of its assets. Pursuant to its guaranty agreement with PNC Bank, the Company guarantees the performance of SBA’s obligations under the PNC Credit Facility.

On January 25, 2012, SBA, together with its consolidated subsidiaries, executed a first amendment to the PNC Credit Facility increasing the maximum amount available for borrowing under the facility from $30,000 to $50,000, including standby letters of credit commitments in an aggregate undrawn face amount of up to $3,000. The borrowing capacity under the PNC Credit Facility is based upon 85.0% of eligible accounts receivable, plus the lesser of: (i) 60.0% of eligible domestic inventory; (ii) 90% of the liquidation value of eligible inventory; or (iii) $25,000, as amended. The PNC Credit Facility has a three-year term and is scheduled to mature on July 25, 2014. SBA uses the PNC Credit Facility for working capital, capital expenditures and general corporate purposes.

Borrowings under the PNC Credit Facility bear interest at the daily PNC Bank prime rate plus applicable margin of up to 0.50%, but not less than the federal funds open rate plus 0.50%, or the daily LIBOR rate plus 1.0%, whichever is greater. Alternatively, at SBA’s option, borrowings may bear interest at a rate based on 30, 60 or 90 Day LIBOR plus an applicable margin of up to 2.75%, and in each such case payment is due at the end of the respective period. Additional default interest of 2.0% is payable after an event of default. The PNC Credit Facility also requires SBA to pay a monthly maintenance fee and commitment fee of 0.375% of the unused commitment amount.

1213

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

The PNC Credit Facility contains provisions requiring the Company and SBA to maintain compliance with minimum consolidated fixed charge coverage ratios each not less than 1.00 to 1.00 for the Company and 1.10 to 1.00 for SBA, in each case, for the four quarter period as of the end of each fiscal quarter. The PNC Credit Facility is subject to several customary covenants and certain events of default, including but not limited to, non-payment of principal or interest on obligations when due, violation of covenants, creation of liens, breaches of representations and warranties, cross default to certain other indebtedness, bankruptcy events and change of ownership or control. In addition, the PNC Credit Facility contains a number of covenants that, among other things, restrict SBA’s ability to: (i) incur additional indebtedness; (ii) make certain capital expenditures; (iii) guarantee certain obligations; (iv) create or allow liens on certain assets; (v) make investments, loans or advances; (vi) pay dividends, make distributions or undertake stock and other equity interest buybacks; (vii) make certain acquisitions; (viii) engage in mergers, consolidations or sales of assets; (ix) use the proceeds of the revolving credit facility for certain purposes; (x) enter into transactions with affiliates in non-arms’ length transactions; (xi) make certain payments on subordinated indebtedness; and (xii) acquire or sell subsidiaries.

AsOn ~~of March~~May 3110, 2013, SBA’s ~~outstanding~~obtained ~~draws~~a ~~against~~waiver of default for the ~~PNC~~guarantor ~~Credit~~fixed ~~Facility~~charge ~~were~~coverage ~~$40,011,~~ratio ~~net~~that existed as of $1March 31,~~450~~ 2013. ofAdditionally, ~~excess~~SBA ~~cash~~obtained ~~in bank,~~an ~~and~~amendment to the ~~remaining~~PNC ~~amount~~Credit ~~available~~Facility ~~was~~which ~~$9,989.~~amended Asthe ofrequired ~~December 31,~~guarantor ~~2012,~~fixed ~~SBA’s~~charge ~~outstanding~~coverage ~~draws~~ratio ~~against~~for the ~~PNC~~Company ~~Credit~~to ~~Facility~~be ~~were~~not ~~$38,574,~~less ~~net~~than of0.84 ~~$193~~to ~~excess~~1.00 ~~cash~~for inthe ~~bank,~~four ~~and~~quarter ~~the~~period ~~remaining~~ended ~~amount~~as ~~available~~of ~~was $11~~June 30,~~426~~ 2013. For Asthe four quarter period ending as of ~~March~~ September 3130, 2013, and ~~December 31,~~for ~~2012~~each quarter thereafter, ~~SBA~~the ~~did~~guarantor ~~not~~fixed ~~have~~charge ~~any~~coverage ~~outstanding~~ratio ~~undrawn~~remains ~~stand-by~~the ~~letters~~same ofas ~~credit~~prior to the amendment, not less than 1.00 to 1.00.

~~On May~~As of June 1030, 2013, SBA ~~obtained~~was ain ~~waiver~~compliance ofwith ~~default~~all ~~for the guarantor fixed charge coverage ratio that existed as~~ of ~~March 31,~~its ~~2013.~~covenants ~~Additionally,~~under ~~SBA obtained an amendment to~~ the PNC Credit Facility ~~which amended the required guarantor fixed charge coverage ratio for the Company to be not less than 0~~.84 to 1.00 for the four quarter period ending as of June 30, 2013. For the four quarter period ending as of September 30, 2013, and for each quarter thereafter, the guarantor fixed charge coverage ratio remains the same as prior to the amendment, not less than 1.00 to 1.00.

As of June 30, 2013, SBA’s outstanding draws against the PNC Credit Facility were $34,788, net of $6,565 of excess cash in bank, and the remaining amount available was $15,212. As of December 31, 2012, SBA’s outstanding draws against the PNC Credit Facility were $38,574, net of $193 excess cash in bank, and the remaining amount available was $11,426. As of June 30, 2013 and December 31, 2012, SBA did not have any outstanding undrawn stand-by letters of credit.

In-country Operations Lines of Credit

The Company’s In-country Operations have lines of credit with various local financial institutions. The lines of credit carry interest rates ranging from 14.0% to 11.0% with maturity dates from ~~May~~September 2013 to July 2014.

As of ~~March~~June 3130, 2013 and December 31, 2012, Intcomex S.A. (“Intcomex Chile”) had undrawn stand-by letters of credit of $2115,~~450~~175 and $21,200, respectively.

13Note 7. Long-Term Debt

Long-term debt consisted of the following for the periods presented:


	As of
	June 30, 2013			December 31, 2012
Long-Term Debt, Net of Current Portion
Intcomex, Inc. –13¹/₄% Senior Notes, net of discount of $2,142 and $2,827 at June 30, 2013 and December 31, 2012, respectively	$	107,858		$	107,173
Other, including various capital leases		1,157			535

Total long-term debt		109,015			107,708
Current maturities of long-term debt		(10,254	)		(10,253	)

Total long-term debt, net of current portion	$	98,761		$	97,455

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

Note 6. Long-Term Debt

Long-term debt consisted of the following for the periods presented:

	As of
	March 31,2013			December 31,2012
Long-term debt, net of current portion
Intcomex, Inc. –131/4% Senior Notes, net of discount of $2,491 and $2,827 at March 31, 2013 and December 31, 2012, respectively	$	107,509		$	107,173
Other, including various capital leases		1,265			535
Total long-term debt		108,774			107,708
Current maturities of long-term debt		(10,241	)		(10,253	)
Total long-term debt, net of current portion	$	98,533		$	97,455

Intcomex, Inc. –13¹/₄% Senior Notes

As of ~~March~~June 3130, 2013, the Company had $110,000 aggregate principal amount outstanding on its 13 1/4% Second Priority Senior Secured Notes due December 15, 2014 with an interest rate of 13.25% per year, payable semi-annually on June 15 and December 15 of each year (the “13 1/4% Senior Notes”). The 13 1/4% Senior Notes are registered under the Securities Act of 1933 and do not bear any legend restricting transfer.

In accordance with the terms of the 13¹/₄% Senior Notes, the Company redeemed $5,000 aggregate principal amount of the 13¹/₄% Senior Notes as of December 15, 2011 and 2012 and, subject to certain requirements, is required to redeem $10,000 aggregate principal amount of the 13¹/₄% Senior Notes on December 15, 2013, at a redemption price equal to 100% of the aggregate principal amount of the 13¹/₄% Senior Notes to be redeemed, together with accrued and unpaid interest to the redemption date.

The indenture governing the Company’s 13¹/₄% Senior Notes imposes operating and financial restriction on the Company. These restrictive covenants limit the Company’s ability, among other things to: (i) incur additional indebtedness or enter into sale and leaseback obligations; (ii) pay certain dividends or make certain distributions on the Company’s capital stock or repurchase the Company’s capital stock; (iii) make certain investments or other restricted payments; (iv) place restrictions on the ability of subsidiaries to pay dividends or make other payments to the Company; (v) engage in transactions with shareholders or affiliates; (vi) sell certain assets or merge with or into other companies; (vii) guarantee indebtedness; and (viii) create liens.

On June 14, 2012, the Company made a mandatory semi-annual interest payment of $7,619 on ~~the~~its 13 1/4% Senior Notes.

On September 5, 2012, the Company purchased $1,000 face value of its 13¹/₄% Senior Notes in an arm’s length transaction, at 102.25 of face value plus accrued interest. The Company recognized a loss on the redemption of the 13¹/₄% Senior Notes of $23 for the year ended December 31, 2012, which is included in other expense, net in the consolidated statements of operations and comprehensive (loss) income. On December 14, 2012, the Company redeemed $4,000 face value of its 13¹/₄% Senior Notes as required by the indenture governing the Company’s 13¹/₄% Senior Notes, at 100.00 of face value. Also, on December 14, 2012, the Company made a semi-annual interest payment of $7,553, satisfying the Company’s December 15, 2012 redemption requirement.

AsOn ~~of March~~June 3114, 2013 ~~and December 31~~, ~~2012,~~ the ~~carrying value~~Company ofmade ~~the~~a ~~$110,000~~mandatory ~~principal~~semi-annual ~~amount~~interest payment of ~~the remaining outstanding 13 1/4% Senior Notes was~~ $~~107~~7,~~509~~288 ~~and~~on ~~$107,173,~~its ~~respectively. As of March 31, 2013, the Company was in compliance with all of the covenants and restrictions under the~~ 13 1/4% Senior Notes.

14As of June 30, 2013 and December 31, 2012, the carrying value of the $110,000 principal amount of the remaining outstanding 13 1/4% Senior Notes was $107,858 and $107,173, respectively. As of June 30, 2013, the Company was in compliance with all of the covenants and restrictions under the 13 1/4% Senior Notes.

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

Note 78. Income Taxes

~~Income~~Provision ~~tax~~for ~~provision~~income taxes consists of the following for the periods presented:

	For the Three Months EndedMarch 31,
	For the Three Months EndedJune 30,						For the Six Months EndedJune 30,
	2013			2012			2013			2012
Income tax provision
Income Tax Provision
Current expense:
Federal and state	$	—		$	—		$	—		$	—
Foreign		~~883~~1,402			1,~~684~~426			2,825			3,110
Total current expense		~~883~~1,402			1,~~684~~426			2,825			3,110
Deferred expense (benefit):
Deferred (benefit) expense:
Federal and state		~~280~~36			—			316			—
Foreign		~~(113~~67	)		(~~508~~1,267	)		(46	)		(1,775	)
Total deferred expense (benefit)		167			(508	)
Total deferred benefit		103			(1,267	)		(270	)		(1,775	)
Total provision for income taxes	$	1,~~050~~505		$	~~1,176~~159		$	2,555		$	1,335

A reconciliation of the statutory federal income tax rate and effective rate as a percentage of ~~income~~(loss) income before provision for income taxes consisted of the following for the periods presented:

	For the Three Months Ended March 31,
	For the Three Months EndedJune 30,												For the Six Months Ended June 30,
	2013			%			2012			%			2013			%			2012			%
Effective tax rate
(Loss) income before provision for income taxes:
U.S.	$	(3,~~543~~593	)				$	(~~1,333~~362	)				$	(7,136	)				$	(1,695	)
Foreign		~~3,574~~(921	)					~~7,826~~645						2,653						8,471
Income before provision for income taxes	$	31					$	6,493
(Loss) income before provision for income taxes	$	(4,514	)				$	283					$	(4,483	)				$	6,776
Tax expense at statutory rate	$	10(1,535	)		34	%	$	~~2,207~~96			34	%	$	(1,524	)		34	%	$	2,304			34	%
State income taxes, net of federal income tax provision		(128	)		(413	)%		(144	)		(2	)%
State income taxes, net of federal income tax provision (benefit) for income taxes		(240	)		5	%		(45	)		(16	)%		(368	)		8	%		(190	)		(3	)%
Effect of tax rates from non-U.S. operations		~~(222~~1,608	)		(~~716~~35	)%		(~~1,311~~433	)		(20153	)%		1,386			(31	)%		(1,744	)		(25	)%
Change in valuation allowance		1,~~390~~672			~~4,484~~(37	)%		~~424~~541			6191	%		3,061			(68	)%		965			14	%
Effective tax provision for income taxes	$	1,~~050~~505			~~3,389~~(33	)%	$	~~1,176~~159			1856	%	$	2,555			(57	)%	$	1,335			20	%

The effective tax provision ~~decreased~~increased by $~~126~~1,346, to $1,~~050~~505 for the three months ended ~~March~~June 3130, 2013, as compared to $~~1,176~~159 for the three months ended ~~March~~June 3130, 2012. The change was primarily due to the lower taxable earnings in the Company’s ~~In-country~~U.S. ~~Operations~~ and ~~Miami~~foreign ~~Operations~~operations, primarily offset by the increased levels of valuation ~~allowances~~ allowances recorded against the U.S. net operating losses (“NOLs”). The effective tax provision increased by $1,220, to $2,555 for the six months ended June 30, 2013, as compared to $1,335 for the six months ended June 30, 2012. The change was primarily due to the lower taxable earnings in the Company’s U.S. and foreign operations, primarily offset by the increased levels of valuation allowances recorded against the U.S. NOLs.

1516

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

The Company’s net deferred tax assets were attributable to the following:

	As of
	March 31,2013			December 31,2012
	June 30,2013			December 31,2012
Deferred tax assets
Deferred Tax Assets
Current assets:
Allowance for doubtful accounts	$	1,~~468~~583		$	1,380
Inventories		~~903~~702			961
Accrued expenses		~~886~~912			992
Other		1,~~287~~310			1,309
Total current assets		4,~~544~~507			4,642
Non-current assets:
Tax goodwill		61—			123
Net operating losses		2527,~~444~~138			26,727
Other		3,~~199~~202			2,953
Valuation allowances		(1517,~~353~~025	)		(16,528	)
Total non-current assets		13,~~351~~315			13,275
Total deferred tax assets	$	17,~~895~~822		$	17,917
Deferred tax liabilities
Deferred Tax Liabilities
Current liabilities:
Other	$	(~~121~~230	)	$	—
Total current liabilities		(~~121~~230	)		—
Non-current liabilities:
Fixed assets		(1,~~310~~238	)		(1,388	)
Amortizable intangible assets		(~~397~~246	)		(296	)
Other		(32176	)		(31	)
Total non-current liabilities		(1,~~739~~660	)		(1,715	)
Total deferred tax liabilities		(1,~~860~~890	)		(1,715	)
Net deferred tax assets	$	1615,~~035~~932		$	16,202

As of ~~March~~June 3130, 2013 and December 31, 2012, the balance of SBA’s tax goodwill was $~~165~~0 and $329, respectively. SBA recorded tax goodwill of approximately $9,843 in July 1998, which is being amortized for tax purposes over 15 years. SBA established $262 of deferred tax assets for foreign withholding taxes paid in El Salvador during 2005.

As of ~~March~~June 3130, 2013 and December 31, 2012, the Company’s U.S. federal and state of Florida NOLs resulted in $2426,~~911~~583 and $23,523, respectively, of deferred tax assets, which will begin to expire in 2026. The Company analyzed the available evidence related to the realization of the deferred tax assets, considered the global economic environment and continues to believe it is more likely than not that the Company will not recognize a portion of its deferred tax assets associated with the U.S. NOL carryforwards. Factors in management’s determination include the performance of the business and the feasibility of ongoing tax planning strategies.

~~The~~17 Company establishes a valuation allowance against its NOLs when it does not believe that it will realize the full benefit of the NOLs. As of March 31, 2013 and December 31, 2012, the Company recorded a valuation allowance of $15,353 and $16,528, respectively, against the respective NOLs, of which $14,971 and $13,581, respectively, related to the U.S. and $382 and $2,947, respectively, related to the Company’s In-country Operations.

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

The Company establishes a valuation allowance against its NOLs when it does not believe that it will realize the full benefit of the NOLs. As of June 30, 2013 and December 31, 2012, the Company recorded a valuation allowance of $17,025 and $16,528, respectively, against the respective NOLs, of which $16,643 and $13,581, respectively, related to the U.S. and $382 and $2,947, respectively, related to the Company’s In-country Operations.

The Company’s NOLs, deferred tax asset resulting from the NOLs and the related valuation allowance consisted of the following for the periods presented:

	As of March 31, 2013								As of December 31, 2012
	As of June 30, 2013										As of December 31, 2012
	GrossNOL		NOLDeferredTax Asset		ValuationAllowance		NOLExpiration		~~GrossNOL~~		GrossNOL		~~NOLDeferredTax Asset~~		NOLDeferredTax Asset		~~ValuationAllowance~~		ValuationAllowance		~~NOLExpiration~~	NOLExpiration
U.S. federal and state	$	6569,~~449~~865	$	2426,~~911~~583	$	1416,~~971~~643	~~2026~~	2026	$	~~61,705~~	$	61,705	$	~~23,523~~	$	23,523	$	~~13,581~~	$	13,581	~~2026~~		2026
Foreign
Intcomex Argentina S.R.L.		—		—		—	—	—		~~7,332~~		7,332		~~2,565~~		2,565		~~2,565~~		2,565	~~2012~~		2012
Intcomex Jamaica Ltd		~~454~~520		~~151~~173		—				~~769~~		769		~~257~~		257		—		—
Intcomex Mexico		1,273		382		382	~~2018~~	2018		~~1,273~~		1,273		~~382~~		382		~~382~~		382	~~2018~~		2018
Total foreign	$	1,~~727~~793	$	~~533~~555	$	382			$	~~9,374~~	$	9,374	$	~~3,204~~	$	3,204	$	~~2,947~~	$	2,947
Total	$	6771,~~176~~658	$	2527,~~444~~138	$	1517,~~353~~025			$	~~71,079~~	$	71,079	$	~~26,727~~	$	26,727	$	~~16,528~~	$	16,528

A future ownership change could limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income and tax. In general, an “ownership change” as defined by Section 382 of the Internal Revenue Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups.

The undistributed earnings in foreign subsidiaries are permanently invested abroad and will not be repatriated to the U.S. in the foreseeable future. Because they are considered to be indefinitely reinvested, no U.S. federal or state deferred income taxes have been provided on these earnings. Upon distribution of those earnings, in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries in which the Company operates. It is not practicable to determine the U.S. foreign income tax liability that would be payable if such earnings were not reinvested indefinitely because of the availability of U.S. foreign tax credits.

The Company files tax returns in the state of Florida, the U.S. and in various foreign jurisdictions and is subject to periodic audits by state, domestic and foreign tax authorities. By statute, the Company’s U.S. tax returns are subject to examination by the Florida Department of Revenue and the Internal Revenue Service for fiscal years 2009 through 2011. The Company is subject to inspection by the tax authorities under the applicable law in the foreign jurisdictions throughout Latin America and the Caribbean in which the Company conducts business, for various statutes of limitation.

The Company believes its accruals for tax liabilities are adequate for all open fiscal years based upon an assessment of factors, including but not limited to, historical experience and related tax law interpretations. The Company does not have any unrecognized tax benefits as of ~~March~~June 3130, 2013 and does not anticipate that the total amount of unrecognized tax benefits related to any particular tax position will change significantly within the next 12 months. The Company classifies tax liabilities that are expected to be paid within the current year, if any, as current income tax liabilities and all other uncertain tax positions as non-current income tax liabilities. The Company recognizes interest and penalties related to income tax matters in the provision for income taxes in the Company’s unaudited condensed consolidated statements of operations and comprehensive (loss) income.

1718

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

Note 89. Fair Value of Derivative Instruments

The Company accounts for derivative instruments and hedging activities in accordance with FASB ASC 815, Derivatives and Hedging. The Company is exposed to certain risks related to its ongoing business operations including fluctuations in foreign exchange rates and reduces its exposure to these fluctuations by using derivative financial instruments from time to time, particularly foreign currency forward contracts and foreign currency option collar contracts. The Company enters into these foreign currency contracts to manage its primary risks including foreign currency price risk associated with forecasted inventory purchases used in the Company’s normal business activities, in a currency other than the currency in which the products are sold. The Company has and expects to continue to utilize derivative instruments with respect to a portion of its foreign exchange risks to achieve a more predictable cash flow by reducing its exposure to foreign exchange fluctuations. The Company enters into foreign currency forward and option collar contracts with large multinational banks.

All derivative instruments are recorded in the Company’s consolidated balance sheets at fair value, which represents the amount required to enter into similar offsetting contracts with similar remaining maturities based on quoted market prices. The derivative instruments are not designated as hedging instruments and therefore, the changes in fair value are recognized currently in earnings during the period of change. The notional amount of forward exchange contracts is the amount of foreign currency bought or sold at maturity and is indicative of the extent of the Company’s involvement in the various types and uses of derivative instruments, but not a measure of the Company’s exposure to credit or market risks through its use of derivative instruments.

As of ~~March~~June 3130, 2013, ~~the~~and ~~notional amount of the foreign currency forward contract outstanding in one of the Company’s In-country Operations was $5,760. As of~~ December 31, 2012, the Company did not have any derivative instruments outstanding. A summary of the location and amounts of the ~~fair value in the consolidated balance sheets and~~ loss in the statements of operations and comprehensive (loss) income related to the Company’s derivative instruments during the periods presented consisted of the following:

	Location of Fair Value(2)in Balance Sheet				As of
	Location of (Income) Loss in Statements of Operations and Comprehensive (Loss) Income		For the Three MonthsEnded June 30,								For the Six MonthsEnded June 30,
					March 31,2013				December 31,2012
			2013				2012				2013		2012
Derivatives instruments not designated or qualifying as hedging instruments under ASC 815(1):
Derivative instruments not designated or qualifyingas hedging instruments under ASC 815:
Foreign currency contracts	Other (income) expense	~~Other liabilities~~	$	(17	$)	83	$	—	$	—	$	66	$	569
Total			$	(17	$)	83	$	—	$	—	$	66	$	569

~~(1)~~19 Further information on the Company’s purpose for entering into derivative instruments not designated as hedging instruments and the overall risk management strategies are discussed in Part I—Financial Information, 1A. “Risk Factors” of the Company’s Annual Report.

(2) Fair value is classified and disclosed as Level 2 category where significant other observable inputs that can be corroborated by observable market data.

	Location of Loss inStatements of Operations andComprehensive (Loss) Income		For the ThreeMonths EndedMarch 31,
			2013		2012
Derivative instruments not designated or qualifying as hedging instruments under ASC 815:
Foreign currency contracts		Other expense	$	83	$	569
Total			$	83	$	569

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

Note 910. Share-Based Compensation

The Company recognizes compensation expense for its share-based compensation plans utilizing the modified prospective method for awards issued, modified, repurchased or canceled under the provisions of FASB ASC 718, Compensation-Stock Compensation. Share-based compensation expense is based on the fair value of the award and measured at grant date, recognized as an expense in earnings over the requisite service period and is recorded in salary, wages and benefits in the consolidated statements of operations as part of selling, general and administrative expenses.

Compensation expense related to the Company’s share-based compensation arrangements consists of the following for the periods presented:

	For the Three Months EndedMarch 31,
	For the Three Months EndedJune 30,				For the Six Months EndedJune 30,
	2013		2012		2013		2012
Share-based compensation arrangements charged against income:
Share-based compensation arrangements charged against (loss) income:
Stock options(1)	$	—	$	—	$	—	$	—
Restricted shares(2)		6887		2823		155		50
Total	$	6887	$	2823	$	155	$	50

(1)	Stock options were issued pursuant to the 2007 Founders’ Grant Stock Option Plan (the “2007 Founders’ Option Plan”).

(2)

Restricted shares were issued pursuant to the annual equity compensation in 2009, 2010 and 2011 to certain Directors for service on the Company’s Board (collectively the “2009, 2010 and 2011 Restricted Stock Issuances”) and the restricted stock compensation plan for eligible employees (“Employee Restricted Stock Plan”).

Outstanding compensation costs related to the Company’s unvested share-based compensation arrangements consisted of the following:

	As of
	March 31,2013		December 31,2012
	June 30,2013		December 31,2012
Outstanding compensation costs for unvested share-based compensation arrangements:
Stock options(1)	$	—	$	—
Restricted shares(2)		~~815~~853		683
Total	$	~~815~~853	$	683

(1)	Stock options were issued pursuant to the 2007 Founders’ Option Plan.

(2)	Restricted shares were issued pursuant to the 2009, 2010 and 2011 Restricted Stock Issuances.

As of ~~March~~June 3130, 2013 and December 31, 2012, the outstanding compensation costs for unvested share-based compensation arrangements will be recognized over a weighted-average period of 2.01 and 1.9 years, respectively.

~~Stock~~20 ~~Options~~

In February 2007, options to acquire an aggregate of 1,540 shares of Class B common stock, non-voting were granted under the 2007 Founders’ Option Plan to certain management employees and independent, non-employee directors. The options were granted at an exercise price of $1,077 per share, which was equal to the fair value of the common stock on the date of grant. The weighted-average grant date fair value of the options granted for the year ended December 31, 2007 was $566 per share. The shares vest ratably over a three-year vesting period of one-third per year on the annual anniversary date and expire 10 years from the date of grant. There were no stock options granted for the three months ended March 31, 2013 and 2012. As of March 31, 2013 and December 31, 2012, all of the outstanding options were vested.

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

Stock Options

In February 2007, options to acquire an aggregate of 1,540 shares of Class B common stock, non-voting were granted under the 2007 Founders’ Option Plan to certain management employees and independent, non-employee directors. The options were granted at an exercise price of $1,077 per share, which was equal to the fair value of the common stock on the date of grant. The weighted-average grant date fair value of the options granted for the year ended December 31, 2007 was $566 per share. The shares vest ratably over a three-year vesting period of one-third per year on the annual anniversary date and expire 10 years from the date of grant. There were no stock options granted for the three and six months ended June 30, 2013 and 2012. As of June 30, 2013 and December 31, 2012, all of the outstanding options were vested.

A summary of the stock option activity and changes under the 2007 Founders’ Option Plan consisted of the following for the periods presented:

	Shares			Weighted-AverageExercise Priceper Share(in dollars)		Weighted-AverageRemainingContractual Term(in years)
Outstanding at January 1, 2012		860		$	1,077		5.1
Granted		—			—
Exercised		—			—
Forfeited or expired		(200	)		—
Outstanding at December 31, 2012		660		$	1,077		4.1
Granted		—			—
Exercised		—			—
Forfeited or expired		—			—
Outstanding at March 31, 2013		660		$	1,077		3.8
Outstanding at June 30, 2013		660		$	1,077		3.6
Vested at March 31, 2013		660		$	1,077		3.8
Vested at June 30, 2013		660		$	1,077		3.6
Exercisable at March 31, 2013		660		$	1,077		3.8
Exercisable at June 30, 2013		660		$	1,077		3.6

The stock options were antidilutive for the three and six months ended ~~March~~June 3130, 2013, as the Company had a net loss for the ~~quarter~~periods. The stock options were antidilutive for the three and six months ended ~~March~~June 3130, 2012, as the fair value of the stock was below the exercise price of the stock options. The fair value of the options was determined using the Black-Scholes option pricing model as of April 23, 2007, the measurement date or the date the Company received unanimous approval from shareholders for the 2007 Founders’ Grant Stock Option Plan. The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options, and requires the input of subjective assumptions, including expected price volatility and term. Changes in these subjective assumptions can materially affect the fair value of the estimate, and therefore, existing valuation models do not provide a precise measure of the fair value of the Company’s employee stock options. Projected data related to the expected volatility and expected life of stock options is ~~typically~~ typically based upon historical and other information. The fair value of the options granted in 2007 was estimated at the date of grant using the following assumptions:


Expected term	6 years
Expected volatility	37.00	%
Dividend yield	0.00	%
Risk-free investment rate	4.58	%

~~The~~21 expected term of the options granted under the 2007 Founders’ Option Plan is based on the simplified method for estimating the expected life of the options, as historical data related to the expected life of the options is not available. The Company used the historical volatility of the industry sector index, as it is not practicable to estimate the expected volatility of the Company’s share price. The risk-free investment rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve of the same maturity in effect at the time of grant. The Company estimates forfeitures in calculating the expense relating to stock-based compensation. At the grant date, the Company estimated the number of shares expected to vest and will subsequently adjust compensation costs for the estimated rate of forfeitures on an annual basis. The Company will use historical data to estimate option exercise and employee termination in determining the estimated forfeiture rate. The estimated forfeiture rate applied as of the option grant date was 1.0%.

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

The expected term of the options granted under the 2007 Founders’ Option Plan is based on the simplified method for estimating the expected life of the options, as historical data related to the expected life of the options is not available. The Company used the historical volatility of the industry sector index, as it is not practicable to estimate the expected volatility of the Company’s share price. The risk-free investment rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve of the same maturity in effect at the time of grant. The Company estimates forfeitures in calculating the expense relating to share-based compensation. At the grant date, the Company estimated the number of shares expected to vest and will subsequently adjust compensation costs for the estimated rate of forfeitures on an annual basis. The Company will use historical data to estimate option exercise and employee termination in determining the estimated forfeiture rate. The estimated forfeiture rate applied as of the option grant date was 1.0%.

Restricted Shares of Common Stock

In March 2013, the Company’s Board of Directors authorized the issuance of 123 restricted shares of the Company’s Common Stock, with a 2.75-year cliff vesting period, to each of ~~the~~Adolfo ~~Company’s~~Henriques and ~~directors~~Thomas ~~Messrs~~A. ~~Henriques and~~ Madden, as directors of the Company, annual equity consideration for their board membership for the years 2012 and 2013 (collectively the “2012-2013 Restricted Stock Issuance”).

In April 2013, the Company authorized the grant of 185 vested, restricted shares of the Company’s Common Stock for Juan Carlos Riojas, the Company’s Chief Financial Officer, pursuant to his executive employment agreement with the Company with an effective date of May 13, 2013, as a one-time sign-on bonus incentive for Mr. Riojas to accept the terms of the agreement. In accordance with the terms of the agreement, the shares will be issued on the earliest of (a) the consummation of a change of control; (b) the date of termination; and (c) 36 months following the effective date of the agreement.

In June 2013, the 64 and 64 restricted shares of Common Stock that were issued in June 2010 to each of Messrs. Henriques and Madden, respectively, vested.

A summary of the unvested restricted shares of the common stock award activity and changes consisted of the following during the periods presented:

	RestrictedCommon Stock(in shares)			Weighted-Average Grant-~~Date~~DateFair ~~Fair~~ Value per Share(1)(in dollars)
Unvested Balance at January 1, 2012		540		$	870
Granted		1,444		$	580	(2)
Vested		(448	)	$	555
Forfeited		(48	)	$	580
Unvested Balance at December 31, 2012		1,488		$	598
Granted		~~246~~431		$	812	(2)
Vested		—(128	)	$	—781
Forfeited		—(22	)	$	—580
Unvested Balance at March 31, 2013		1,734		$	628
Unvested Balance at June 30, 2013		1,769		$	637

(1)	The fair value was determined using the weighted-average fair value per share to reflect the portion of the period during which the shares were outstanding.

(2)	The fair value was determined as of the date the Company granted the shares.

~~Note~~22 ~~10. Commitments and Contingencies and Other~~

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

Note 11. Commitments and Contingencies and Other

Commitments and Contingencies

The Company accrues for contingent obligations when the obligation is probable and the amount is reasonably estimable. As facts concerning contingencies become known, the Company reassesses its position and makes appropriate adjustments to the financial statements. Estimates that require judgment and are particularly sensitive to future changes include those related to taxes, legal matters, the imposition of international governmental monetary, fiscal or other controls, changes in the interpretation and enforcement of international laws (in particular related to items such as duty and taxation), and the impact of local economic conditions and practices, which are all subject to change as events evolve and as additional information becomes available.

Legal Proceedings

As part of the Company’s normal course of business, the Company is involved in certain claims, regulatory and tax matters. In the opinion of the Company’s management, the final disposition of such matters will not have a material adverse impact on the Company’s results of operations and financial condition.

Leases

The Company leases office, warehouse facilities and warehouse equipment under non-cancelable operating leases that expire on various dates through 2021, including SBA’s office and warehouse space in Miami, Florida. SBA’s agreement for the lease of the Miami office, warehouse facilities and warehouse equipment is for 172,926 square feet at monthly base rent expense of $120 with an annual 2.2% escalation clause. The lease has a termination date of August 31, 2021.

21Note 12. Additional Paid in Capital

For the three and six months ended June 30, 2013, total compensation expense for share-based compensation arrangements charged against income was $87 and $155, respectively. For the three and six months ended June 30, 2012, total compensation expense for share-based compensation arrangements charged against income was $23 and $50, respectively. For a detailed discussion of the share-based compensation, see “Note 10. Share-Based Compensation” in these Notes to Condensed Consolidated Financial Statements (Unaudited).

On December 31, 2012, the Company withheld 17 shares of restricted Common Stock that were issued on July 1, 2012, as compensation to eligible employees under the Employee Restricted Stock Plan who elected to have a certain number of their vested shares withheld for income tax purposes. As of June 30, 2013 and December 31, 2012, the common shares had a fair value of $812 per share.

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

Note 1113. ~~Additional~~Segment ~~Paid~~Information ~~in Capital~~

For the three months ended March 31, 2013 and 2012, total compensation expense for share-based compensation arrangements charged against income was $68 and $28, respectively. For a detailed discussion of the share-based compensation, see “Note 9. Share-Based Compensation” in these Notes to Condensed Consolidated Financial Statements (Unaudited).

On December 31, 2012, the Company withheld 17 shares of restricted Common Stock that were issued on July 1, 2012 as compensation to eligible employees under the Employee Restricted Stock Plan who elected to have a certain number of their vested shares withheld for income tax purposes. As of March 31, 2013 and December 31, 2012, the common shares had a fair value of $812 per share.

Note 12. Segment Information

FASB ASC 280, Segment Reporting provides guidance on the disclosures about segments and information related to reporting units. The Company operates in a single industry segment, that being a distributor of IT products. The Company’s operating segments are based on geographic location. Geographic areas in which the Company operates include sales generated from and invoiced by the Miami Operations and sales generated from and invoiced by all of the Latin American and Caribbean subsidiary operations. The subsidiary In-country Operations conduct business with sales and distribution centers in the following countries: Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Jamaica, Mexico, Panama, Peru, and Uruguay. The In-country Operations have been aggregated as one segment due to similar products and economic characteristics. The Company sells and distributes one type of product line, IT products, and does not provide any separately billable services. It is impracticable for the Company to report the revenues from external customers for the group of similar products within the product line because the general ledger used to prepare the Company’s financial statements does not track sales by product.

Inter-segment revenue primarily represents intercompany revenue between the Miami Operations and the In-country Operations at established prices. Intercompany revenue between the related companies is eliminated in consolidation. The measure for the Company’s segment profit is operating income. Financial information by geographic operating segment consisted of the following for the periods presented:

	For the Three Months EndedMarch 31,
	For the Three Months EndedJune 30,						For the Six Months EndedJune 30,
	2013			2012			2013			2012
Statement of Operations Data:
Statement of Operations Data
Revenue:
Miami Operations
Revenue from unaffiliated customers(1)	$	~~105~~99,~~395~~050		$	~~127~~92,~~263~~523		$	204,445		$	219,786
Intersegment		8079,~~641~~498			8580,~~287~~166			160,139			165,453
Total Miami Operations		~~186~~178,~~036~~548			~~212~~172,~~550~~689			364,584			385,239
In-country Operations
In-country Operations, excluding Intcomex Chile		~~171~~183,~~730~~458			~~186~~184,~~441~~191			355,188			370,632
Intcomex Chile		7479,~~493~~025			7670,~~796~~621			153,518			147,417
In-country Operations		~~246~~262,~~223~~483			~~263~~254,~~237~~812			508,706			518,049
Eliminations of inter-segment		(8079,~~641~~498	)		(8580,~~287~~166	)		(160,139	)		(165,453	)
Total revenue	$	~~351~~361,~~618~~533		$	~~390~~347,~~500~~335		$	713,151		$	737,835
Operating income:
Miami Operations	$	1,~~435~~404		$	~~3,742~~683		$	2,838		$	4,425
In-country Operations		34,~~573~~344			54,~~405~~250			7,918			9,655
Total operating income	$	5,~~008~~748		$	94,~~147~~933		$	10,756		$	14,080

2224

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

	As of
	March 31,2013		December 31,2012
	June 30, 2013		December 31, 2012
Balance Sheet Data:
Balance Sheet Data
Assets:
Miami Operations	$	~~195~~174,~~135~~226	$	182,522
In-country Operations
In-country Operations, excluding Intcomex Chile		~~141~~131,~~004~~989		147,074
Intcomex Chile		~~136~~156,~~721~~990		132,606
In-country Operations		~~277~~288,~~725~~979		279,680
Total assets	$	~~472~~463,~~860~~205	$	462,202
Property & equipment, net:
Miami Operations	$	5,~~632~~363	$	5,762
In-country Operations		9,~~882~~573		8,836
Total property & equipment, net	$	1514,~~514~~936	$	14,598
Goodwill:
Miami Operations	$	2,673	$	2,673
In-country Operations		15,~~548~~388		15,396
Total goodwill	$	18,~~221~~061	$	18,069

(1)	For purposes of geographic disclosure, revenue is attributable to the country in which the Company’s individual business resides.

Note 1314. Guarantor Condensed Consolidating Financial Statements

The 13¹/₄% Senior Notes are unconditionally guaranteed on a senior secured basis by each of the Company’s existing and future domestic restricted subsidiaries (collectively, the “Subsidiary Guarantors”), but not the Company’s foreign subsidiaries (collectively, the “Non-Guarantor Subsidiaries”). Each of the note guarantees covered the full amount of the 13¹/₄% Senior Notes and each of the Subsidiary Guarantors is 100% owned by the Company. Pursuant to Rule 3-10(f) of Regulation S-X under the rules promulgated under the Securities Act of 1933, the Parent company has prepared condensed consolidating financial information for the Parent company, the subsidiaries that are Guarantors of the Company’s obligations under the Original 13¹/₄% Senior Notes and 13¹/₄% Senior Notes on a combined basis and the Non-Guarantor Subsidiaries on a combined basis.

The indentures governing the 13¹/₄% Senior Notes and the security documents executed in connection therewith provide that, in the event that Rule 3-16 of Regulation S-X under the rules promulgated under the Securities Act of 1933, or any successor regulation, requires the filing of separate financial statements of any of the Company’s subsidiaries with the SEC, the portion or, if necessary, all of such capital stock pledged as collateral securing the 13¹/₄% Senior Notes, necessary to eliminate such filing requirement, will automatically be deemed released and not have been part of the collateral securing the 13¹/₄% Senior Notes.

The Rule 3-16 requirement to file separate financial statements of a subsidiary is triggered if the aggregate principal amount, par value, or book value of the capital stock of the subsidiary, as carried by the registrant, or the market value of such capital stock, whichever is greatest, equals 20% or more of the principal amount of the notes. These values are calculated by using a discounted cash flow model that combines the unlevered free cash flows from the Company’s annual five-year business plan plus a terminal value based upon the final year earnings before interest, taxes, depreciation and amortization, or EBITDA, of that business plan which is then multiplied by a multiple based upon comparable companies’ implied multiples, validated by third-party experts, to arrive at an enterprise value. Existing debt, net of cash on hand, is then subtracted to arrive at the estimated market value.

2325

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

Supplemental financial information for Intcomex, its combined Subsidiary Guarantors and Non-Guarantor Subsidiaries is presented below.

CONDENSED CONSOLIDATING BALANCE SHEET

As of ~~March~~June 3130, 2013

INTCOMEX,INC.(PARENT)

GUARANTORS

NON -GUARANTORS

ELIMINATIONS

INTCOMEX,INC.CONSOLIDATED

Current assets

Cash and equivalents

—

~~186~~50

2451,~~336~~694

—

2451,~~522~~744

Trade accounts receivable, net

—

8782,~~356~~154

~~142~~132,~~119~~664

(8173,~~969~~866

)

~~147~~140,~~506~~952

Inventories

—

5337,~~693~~056

~~122~~115,~~828~~488

—

~~176~~152,~~521~~544

Other

42,~~933~~926

46,~~603~~151

~~106~~102,~~246~~693

(8185,~~983~~104

)

7166,~~799~~666

Total current assets

42,~~933~~926

~~145~~125,~~838~~411

~~395~~402,~~529~~539

(~~163~~158,~~952~~970

)

~~420~~411,~~348~~906

Long-term assets

Property and equipment, net

3,~~828~~655

1,~~805~~708

9,~~881~~573

—

1514,~~514~~936

Investments in subsidiaries

193,~~748~~212

~~269~~267,~~839~~382

—

(~~463~~460,~~587~~594

)

—

Goodwill

2,673

7,418

87,~~130~~970

—

18,~~221~~061

Other

13,~~372~~278

~~112~~122,~~584~~499

41,~~240~~756

(~~111~~119,~~419~~231

)

18,~~777~~302

Total assets

~~256~~255,~~554~~744

~~537~~524,~~484~~418

~~417~~421,~~780~~838

(738,~~958~~795

)

~~472~~463,~~860~~205

Liabilities and shareholders’ equity

Current liabilities

1713,~~655~~536

~~235~~222,~~361~~591

~~231~~240,~~953~~873

(~~181~~176,~~198~~220

)

~~303~~300,~~771~~780

Long-term debt, net of current maturities

9798,~~694~~001

—

~~839~~760

—

98,~~533~~761

Other long-term liabilities

7484,~~827~~652

18,~~041~~012

13,~~272~~417

(~~101~~111,~~962~~972

)

4,~~178~~109

Total liabilities

~~190~~196,~~176~~189

~~253~~240,~~402~~603

~~246~~255,~~064~~050

(~~283~~288,~~160~~192

)

~~406~~403,~~482~~650

Total shareholders’ equity

6659,~~378~~555

~~284~~283,~~082~~815

~~171~~166,~~716~~788

(~~455~~450,~~798~~603

)

6659,~~378~~555

Total liabilities and shareholders’ equity

~~256~~255,~~554~~744

~~537~~524,~~484~~418

~~417~~421,~~780~~838

(738,~~958~~795

)

~~472~~463,~~860~~205

2426

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2012

INTCOMEX,
INC.
(PARENT)

GUARANTORS

NON-
GUARANTORS

ELIMINATIONS

INTCOMEX,
INC.
CONSOLIDATED

Current assets

Cash and equivalents

—

30,546

—

30,586

Trade accounts receivable, net

—

76,784

142,447

(76,800

)

142,431

Inventories

—

49,943

113,412

—

163,355

Other

42,428

7,328

105,074

(80,556

)

74,274

Total current assets

42,428

134,095

391,479

(157,356

)

410,646

Long-term assets

Property and equipment, net

3,893

1,870

8,835

—

14,598

Investments in subsidiaries

187,610

263,125

—

(450,735

)

—

Goodwill

2,673

7,418

7,978

—

18,069

Other

13,172

110,899

4,650

(109,832

)

18,889

Total assets

249,776

517,407

412,942

(717,923

)

462,202

Liabilities and shareholders’ equity

Current liabilities

12,938

224,088

231,262

(174,099

)

294,189

Long-term debt, net of current maturities

97,399

—

97,455

Other long-term liabilities

72,964

18,068

13,834

(100,783

)

4,083

Total liabilities

183,301

242,156

245,152

(274,882

)

395,727

Total shareholders’ equity

66,475

275,251

167,790

(443,041

)

66,475

Total liabilities and shareholders’ equity

249,776

517,407

412,942

(717,923

)

462,202

2527

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended ~~March~~June 3130, 2013

	INTCOMEX,INC.(PARENT)			GUARANTORS			NON-GUARANTORS			ELIMINATIONS			INTCOMEX,INC.CONSOLIDATED
Revenue	$	—		$	~~186~~178,~~036~~549		$	~~246~~262,~~223~~481		$	(8079,~~641~~497	)	$	~~351~~361,~~618~~533
Cost of revenue		—			~~176~~169,~~528~~050			~~225~~241,~~678~~091			(8079,~~641~~785	)		~~321~~330,~~565~~356
Gross profit		—			9,~~508~~499			2021,~~545~~390			—288			3031,~~053~~177
Operating expenses		3,~~074~~004			5,~~000~~089			1617,~~971~~336			—			25,~~045~~429
Operating (loss) income		(3,~~074~~004	)		4,~~508~~410			34,~~574~~054			—288			5,~~008~~748
Other expense, net Interest expense, net		4,966			546			(272	)		—			5,240
Other expense, net
Other, net		(5,283	)		(4,996	)		656			9,360			(263	)
Interest expense, net		5,004			597			(174	)		—			5,427
Total other (income) expense		(317	)		(4,450	)		384			9,360			4,977
Other, net		(355	)		641			6,211			(1,662	)		4,835
(Loss) income before (benefit) provision for income taxes		(2,757	)		8,958			3,190			(9,360	)		31
Total other expense (income)		4,649			1,238			6,037			(1,662	)		10,262
(Benefit) provision for income taxes		(1,738	)		1,826			962			—			1,050
(Loss) income before (benefit) provision for income taxes		(7,653	)		3,172			(1,983	)		1,950			(4,514	)
Net (loss) income	$	(1,019	)	$	7,132		$	2,228		$	(9,360	)	$	(1,019	)
(Benefit) provision for income taxes		(1,634	)		1,671			1,468			—			1,505
Net (loss) income	$	(6,019	)	$	1,501		$	(3,451	)	$	1,950		$	(6,019	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended ~~March~~June 3130, 2012

	INTCOMEX,INC.(PARENT)			GUARANTORS			NON-GUARANTORS			ELIMINATIONS			INTCOMEX,INC.CONSOLIDATED
Revenue	$	—		$	~~212~~172,~~550~~689		$	~~263~~254,~~237~~812		$	(8580,~~287~~166	)	$	~~390~~347,~~500~~335
Cost of revenue		—			~~200~~164,~~641~~102			~~241~~233,~~237~~710			(8580,~~410~~166	)		~~356~~317,~~468~~646
Gross profit		—			118,~~909~~587			2221,~~000~~102			~~123~~—			3429,~~032~~689
Operating expenses		3,~~481~~013			4,~~686~~891			16,~~718~~852			—			24,~~885~~756
Operating (loss) income		(3,~~481~~013	)		73,~~223~~696			54,~~282~~250			~~123~~—			94,~~147~~933
Other expense, net Interest expense, net		4,899			676			(283	)		—			5,292
Other expense, net
Other, net		(11,035	)		(11,046	)		(2,374	)		21,817			(2,638	)
Interest expense, net		4,938			770			(216	)		—			5,492
Total other (income) expense		(6,136	)		(10,370	)		(2,657	)		21,817			2,654
Other, net		(6,967	)		(2,490	)		3,784			4,831			(842	)
Income (loss) before (benefit) provision for income taxes		2,655			17,593			7,939			(21,694	)		6,493
Total other (income) expense		(2,029	)		(1,720	)		3,568			4,831			4,650
(Benefit) provision for income taxes		(2,662	)		2,471			1,367			—			1,176
(Loss) income before (benefit) provision for income taxes		(984	)		5,416			682			(4,831	)		283
Net income (loss)	$	5,317		$	15,122		$	6,572		$	(21,694	)	$	5,317
(Benefit) provision for income taxes		(1,108	)		916			351			—			159
Net income (loss)	$	124		$	4,500		$	331		$	(4,831	)	$	124

2628

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF ~~CASH~~OPERATIONS ~~FLOWS~~

~~Three~~Six Months Ended ~~March~~June 3130, 2013

	INTCOMEX,INC.(PARENT)			GUARANTORS			NON-GUARANTORS			ELIMINATIONS			INTCOMEX,INC.CONSOLIDATED
Cash flows from operating activities	$	(1,443	)	$	(46	)	$	(5,195	)	$	—		$	(6,684	)
Revenue	$	—		$	364,585		$	508,704		$	(160,138	)	$	713,151
Cash flows from investing activities Purchases of property and equipment, net		(313	)		(65	)		(646	)		—			(1,024	)
Cost of revenue		—			345,578			466,769			(160,426	)		651,921
Other		1,794			(1,180	)		(92	)		—			522
Gross profit		—			19,007			41,935			288			61,230
Cash flows from investing activities		1,481			(1,245	)		(738	)		—			(502	)
Operating expenses		6,078			10,089			34,307			—			50,474
Cash flows from financing activities Borrowings (payments) under lines of credit, net		—			1,437			(294	)					1,143
Operating (loss) income		(6,078	)		8,918			7,628			288			10,756
Proceeds from borrowings under long-term debt		—			—			32			—			32
Other expense, net
Payments of long-term debt		(38	)		—			(43	)		—			(81	)
Interest expense, net		9,970			1,143			(446	)		—			10,667
Cash flows from financing activities		(38	)		1,437			(305	)		—			1,094
Other, net		(5,638	)		(4,355	)		6,867			7,698			4,572
Effects of exchange rate changes on cash		—			—			28			—			28
Total other expense (income)		4,332			(3,212	)		6,421			7,698			15,239
Net increase (decrease) in cash and cash equivalents		—			146			(6,210	)		—			(6,064	)
Income (loss) before (benefit) provision for income taxes		10,410			12,130			1,207			(7,410	)		(4,483	)
Cash and cash equivalents, beginning of period		—			40			30,546			—			30,586
(Benefit) provision for income taxes		(3,372	)		3,497			2,430			—			2,555
Cash and cash equivalents, end of period	$	—		$	186		$	24,336		$	—		$	24,522
Net (loss) income	$	(7,038	)	$	8,633		$	(1,223	)	$	(7,410	)	$	(7,038	)

27CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Six Months Ended June 30, 2012

INTCOMEX,
INC.
(PARENT)

GUARANTORS

NON-
GUARANTORS

ELIMINATIONS

INTCOMEX,
INC.
CONSOLIDATED

Revenue

—

385,239

518,049

(166,453

)

737,835

Cost of revenue

—

364,743

474,947

(166,576

)

674,114

Gross profit

—

20,496

43,102

123

63,721

Operating expenses

6,494

9,577

33,570

—

49,641

Operating (loss) income

(6,494

)

10,919

9,532

123

14,080

Other expense, net

Interest expense, net

9,837

1,446

(499

)

—

10,784

Other, net

(18,002

)

(13,536

)

1,410

26,648

(3,480

)

Total other (income) expense

(8,165

)

(12,090

)

911

26,648

7,304

Income (loss) before (benefit) provision for income taxes

1,671

23,009

8,621

(26,525

)

6,776

(Benefit) provision for income taxes

(3,770

)

3,387

1,718

—

1,335

Net income (loss)

5,441

19,622

6,903

(26,525

)

5,441

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

~~Three~~Six Months Ended ~~March~~June 3130, ~~2012~~2013

	INTCOMEX,INC.(PARENT)			GUARANTORS			NON-GUARANTORS			ELIMINATIONS		INTCOMEX,INC.CONSOLIDATED
Cash flows from operating activities	$	~~307~~(10,922	)	$	~~(21~~15,~~844~~191	)	$	(824,~~270~~735	)	$	—	$	~~(30~~29,~~770~~004	)
Cash flows from investing activities Purchases of property and equipment, net		(295	)		(43	)		(510	)		—		(848	)
Cash flows from investing activities
Other		963			(1,113	)		161			—		11
Purchases of property and equipment, net		(607	)		(205	)		(806	)		—		(1,618	)
Cash flows from investing activities		668			(1,156	)		(349	)		—		(837	)
Other		11,607			(11,190	)		160			—		577
Cash flows from financing activities Borrowings (payments) under lines of credit, net		—			23,281			(126	)				23,155
Cash flows from investing activities		11,000			(11,395	)		(646	)		—		(1,041	)
Payments of long-term debt		(12	)		(99	)		(70	)		—		(181	)
Cash flows from financing activities
Cash flows from financing activities		(12	)		23,182			(196	)		—		22,974
Borrowings (payments) under lines of credit, net		—			(3,786	)		(2,668	)				(6,454	)
Effects of exchange rate changes on cash		—			—			179			—		179
Payments of long-term debt		(78	)		—			(60	)		—		(138	)
Net increase (decrease) in cash and cash equivalents		—			182			(8,636	)		—		(8,454	)
Cash flows from financing activities		(78	)		(3,786	)		(2,728	)		—		(6,592	)
Cash and cash equivalents, beginning of period		—			40			25,667			—		25,707
Effects of exchange rate changes on cash		—			—			(213	)		—		(213	)
Cash and cash equivalents, end of period	$	—		$	222		$	17,031		$	—	$	17,253
Net increase in cash and cash equivalents		—			10			21,148			—		21,158
Cash and cash equivalents, beginning		—			40			30,546			—		30,586
Cash and cash equivalents, end	$	—		$	50		$	51,694		$	—	$	51,744

~~Note~~CONDENSED ~~14.~~CONSOLIDATING ~~Restructuring~~STATEMENT ~~Plan~~OF CASH FLOWS

InSix ~~late~~Months ~~March~~Ended ~~2012, the Company’s management implemented a plan to cease operations of Intcomex Argentina by December~~June 3130, 2012. The Company did not record any expenses related to these restructuring actions for the three months ended March 31, 2013. The Company recorded $621 in expenses related to these restructuring actions for the three months ended March 31, 2012. The restructuring included involuntary workforce reductions and employee benefits and other costs incurred in connection with vacating leased facilities. These expenses were recorded as operating expenses in the consolidated statement of operations and comprehensive (loss) income. As of December 31, 2012, all of the payments related to restructuring actions were made. On January 15, 2013, the Company completed the sale of Intcomex Argentina for $506 and recognized a gain of approximately $375 in other income in the unaudited condensed consolidated statements of operations and comprehensive (loss) income.

The Company did not consider its In-country Operations in Argentina to be material. At December 31, 2012, Intcomex Argentina’s total assets represented 0.04% of the Company’s total consolidated assets. For the three months ended March 31, 2012, Intcomex Argentina’s total revenues represented approximately 1.0% the Company’s total consolidated revenues. Intcomex Argentina’s operating loss was $1,134 for the three months ended March 31, 2012, and represented 12.4%, of the Company’s consolidated operating income on an absolute value basis. Accordingly, the Company did not present its In-country Operations in Argentina as discontinued operations.


	INTCOMEX, INC. (PARENT)			GUARANTORS			NON- GUARANTORS			ELIMINATIONS		INTCOMEX, INC. CONSOLIDATED
Cash flows from operating activities	$	(10,163	)	$	(17,102	)	$	(7,480	)	$	—	$	(34,745	)

Cash flows from investing activities
Purchases of property and equipment, net		(470	)		(97	)		(761	)		—		(1,328	)
Other		10,658			(10,964	)		335			—		29

Cash flows from investing activities		10,188			(11,061	)		(426	)		—		(1,299	)

Cash flows from financing activities											—
Borrowings (payments) under lines of credit, net		—			28,431			(272	)		—		28,159
Payments of long-term debt		(25	)		(200	)		(115	)		—		(340	)

Cash flows from financing activities		(25	)		28,231			(387	)		—		27,819

Effects of exchange rate changes on cash		—			—			(12	)		—		(12	)

Net increase (decrease) in cash and cash equivalents		—			68			(8,305	)		—		(8,237	)
Cash and cash equivalents, beginning		—			40			25,667			—		25,707

Cash and cash equivalents, end	$	—		$	108		$	17,362		$	—	$	17,470

2830

INTCOMEX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

Note 15. Restructuring Activities

In-country Operations: Argentina

In late March 2012, the Company’s management implemented a plan to cease operations of Intcomex Argentina by December 31, 2012. The Company did not recognize any restructuring expenses related to the restructuring actions of Intcomex Argentina for the three and six months ended June 30, 2013. The Company recognized restructuring expenses related to Intcomex Argentina of $621 for each of the three and six months ended June 30, 2012. The Company recognizes restructuring expense in selling, general and administrative in operating expenses in its unaudited condensed consolidated statement of operations and comprehensive (loss) income. As of December 31, 2012, the Company made all of the payments related to its restructuring actions.

On January 15, 2013, the Company completed the sale of Intcomex Argentina for $506 and recognized a gain of $375. The Company recognized the gain on the sale of Intcomex Argentina in other income in the unaudited condensed consolidated statements of operations and comprehensive (loss) income.

As of January 15, 2013 and December 31, 2012, Intcomex Argentina’s total assets represented less than 0.1% of the Company’s total consolidated assets. For the three and six months ended June 30, 2013, Intcomex Argentina’s total revenues represented less than 0.1% of the Company’s total consolidated revenues. For the three and six months ended June 30, 2012, Intcomex Argentina’s total revenues represented 0.1% and 0.6%, respectively, of the Company’s total consolidated revenues. Intcomex Argentina’s operating loss was $0 for each of the three and six months ended June 30, 2013. Intcomex Argentina’s operating loss was $309 and $1,443, respectively, for the three and six months ended June 30, 2012, representing 6.3% and 10.3%, respectively, of the Company’s consolidated operating income on an absolute value basis. Intcomex Argentina’s results of operations and financial position were not significant enough to qualify as a discontinued operation and, accordingly, the Company did not present Intcomex Argentina in discontinued operations in its consolidated statement of operations and comprehensive (loss) income.

In-country Operations: Mexico, Uruguay & Colombia

The Company analyzed initiatives that enhance and improve its productivity and overall effectiveness and efficiency.

During the six months ended June 30, 2013, the Company implemented restructuring and rebalancing actions designed to enhance and improve its operating productivity, right-size its workforce and streamline its management structure in its In-country Operations in Mexico, Uruguay and Colombia. The Company recognizes restructuring expenses related to terminations and other direct costs associated with implementing these restructuring and rebalancing initiatives in selling, general and administrative in operating expenses in its unaudited condensed consolidated statement of operations and comprehensive (loss) income. For the three and six months ended June 30, 2013, the Company recognized restructuring expenses of $517 and $910, respectively, of which $446 and $446, respectively, related to Intcomex Mexico, $71 and $414 respectively, related to Intcomex Uruguay and $0 and $50, respectively, related to Intcomex Colombia. The Company recognized restructuring expenses related to Intcomex Argentina of $621 for each of the three and six months ended June 30, 2012. The restructuring expenses did not qualify for a major statement of operations caption and, accordingly, the Company did not present restructuring expenses as a separate line item in its unaudited condensed consolidated statement of operations and comprehensive (loss) income.

The Company expects to incur additional restructuring expenses in its In-country Operations in Colombia and its Miami Operations during the third quarter of 2013.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This Quarterly Report on Form 10-Q, or Quarterly Report, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts are statements that could be deemed forward-looking statements. These statements are based on current expectations, beliefs, estimates, forecasts, projections and management’s assumptions about our company, our future performance, our liquidity and the Information Technology, or IT, products distribution industry in which we operate. Words such as “anticipate,” “assume,” “believe,” “estimate,” “expect,” “intend,” “goal,” “plan,” “seek,” “project,” “target” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances including but are not limited to, management’s expectations for competition, revenues, margin, expenses and other operating results, capital expenditures, liquidity, capital requirements, acquisitions and exchange rate fluctuations, each of which involves numerous risks and uncertainties are forward-looking statements. These forward-looking statements are only predictions and are subject to risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements should, therefore, be considered in light of various factors, including those identified below, elsewhere herein and under “Part II —Other Information, Item 1A. Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 25, 2013, or Annual Report, under “Part I. Item 1A. Risk Factors” and elsewhere therein. These risks and uncertainties include, but are not limited to the following:

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adverse changes in general economic, political, social and health conditions and developments in the global environment and throughout Latin America and the Caribbean in the markets in which we operate or plan to operate, which may lead to a decline in our business and our results of operations;

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adverse changes in the telecommunications devices market and distribution methods of mobile devices, particularly in Latin America and the Caribbean, and the ability for our suppliers and venders to provide us products in a timely manner;

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business interruptions due to natural or manmade disasters, extreme weather conditions including but not limited to, earthquakes, fires, floods, hurricanes, medical epidemics, power and/or water shortages, telecommunication failures, tsunamis;

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competitive conditions and fluctuations in the foreign currency in the markets in which we operate or plan to operate;

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market acceptance of the products we distribute, adverse changes in our relationships with vendors and customers or declines in our inventory values;

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credit exposure to our customers’ financial condition and creditworthiness;

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operating and financial restrictions of our creditors and sufficiency of trade credit from our vendors;

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dependency on accounting and financial reporting, IT and telecommunications management and systems;

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difficulties in maintaining and enhancing internal controls and management and financial reporting systems;

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compliance with accounting rules and standards, and corporate governance and disclosure requirements; and,

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difficulties in staffing and managing our foreign operations or departures of our key executive officers.

This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative but not exhaustive. In addition, new risks and uncertainties may arise from time to time. Accordingly, all forward-looking statements should be evaluated with an understanding of their inherent uncertainty. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date they were made. We do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.

Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statement because of certain factors discussed below or elsewhere in this Quarterly Report or included in our Annual Report. The following discussion and analysis of our financial condition and results of operations should be read together with the audited consolidated financial statements and notes thereto, which are included in our Annual Report, and our unaudited condensed consolidated financial statements for the fiscal quarter and year to date period ended ~~March~~June 3130, 2013, which are included in this Quarterly Report.

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Overview

We believe we are the largest pure play value-added distributor of IT products focused solely on serving Latin America and the Caribbean, or the Regions. We believe the continued convergence of IT, consumer electronics and mobile “smart” device technology extends our products offerings beyond traditional computer based IT products into complimentary products that address consumer demand for mobile computing devices, such as smart phones and tablets, throughout the Regions. We distribute computer equipment components, peripherals, software, computer systems, accessories, networking products, digital consumer electronics and mobile devices to more than 50,000 customers in 39 countries. We offer single source purchasing to our customers by providing an in-stock selection of more than 12,000 products from over 130 vendors, including the world’s leading IT product manufacturers. From our headquarters and main distribution center in Miami, we support a network of 2519 sales and distribution operations in 11 Latin American and the Caribbean countries, or our In-country Operations.

Our results for the three months ended ~~March 31,~~June 30 2013, reflect aan ~~decrease~~increase in revenue as compared to the corresponding period in 2012. Revenue ~~decreased~~increased $3814.92 million, or 104.01% to $~~351~~361.65 million for ~~the~~ the three months ended ~~March~~June 3130, 2013, as compared to $~~390~~347.53 million for the three months ended ~~March 31~~June 30, 2012. Gross profit ~~decreased~~increased $41.05 million, or 115.70%, to $31.2 million for the three months ended June 30, 2013, from $29.7 million for the three months ended June 30, 2012. Total operating expenses increased $0.7 million, or 2.7% to $25.4 million for the three months ended ~~March 31~~June 30, 2013, as compared to $3424.08 million for the three months ended ~~March~~June 3130, 2012. Other expense, net increased $5.6 million, to $10.3 million for the three months ended June 30, 2013, from $4.7 million for the three months ended June 30, 2012. The ~~decrease~~increase in ~~gross~~other ~~profit~~expense, net was primarily attributable to the ~~result~~absence of the ~~lower~~$4.3 ~~average~~million ~~selling~~gain ~~price~~recognized ofon the ~~several~~termination of ~~our~~the ~~core~~mutual ~~products,~~non-compete ~~most~~agreement ~~notably~~with ~~mobile~~Brightpoint ~~devices~~during the three months ended June 30, ~~offset~~2012 byand the ~~decline~~foreign exchange losses of $4.9 million, in ~~the inventory~~Chile ~~obsolescence~~and ~~provision~~Colombia, ~~for~~during the three months ended ~~March~~June 3130, 2013, as compared to foreign exchange losses of $3.4 million during the same period in 2012. Net loss was $6.0 million for the three months ended June 30, 2013, as compared to net income of $0.1 million for the three months ended June 30, 2012.

~~Total~~Our ~~operating~~results ~~expenses~~for ~~remained~~the ~~relatively~~six ~~steady~~months atended June 30, 2013, reflect a decrease in revenue as compared to the corresponding period in 2012. Revenue decreased $2524.07 million, or 3.3% to $713.2 million for the ~~three~~six months ended ~~March~~June 3130, 2013, as compared to $24737.8 million for the six months ended June 30, 2012. Gross profit decreased $2.5 million, or 3.9%, to $61.2 million for the six months ended June 30, 2013, from $63.7 million for the ~~three~~six months ended ~~March 31~~June 30, 2012. ~~Other~~Total ~~expense,~~operating ~~net~~expenses increased $20.38 million, or 871.57% to $550.04 million for the ~~three~~six months ended ~~March 31~~June 30, 2013, as compared to $249.6 million for the six months ended June 30, 2012. Other expense, net increased $7.9 million, to $15.2 million for the ~~three~~six months ended ~~March 31~~June 30, 2013, from $7.3 million for the six months ended June 30, 2012. The increase in other expense, net was primarily attributable ~~driven~~to by the foreign exchange losses of $24.79 million, ~~decline~~primarily in ~~foreign~~Chile ~~exchange~~and ~~gains~~Colombia, ~~for~~during the ~~three~~six months ended ~~March 31~~June 30, 2013, as compared to foreign exchange losses of $0.6 million during the same period in 2012 and the absence of the $4.3 million gain recognized on the termination of the mutual non-compete agreement with Brightpoint. Net loss was $7.0 million for the six months ended June 30, 2013, as compared to net income of $5.4 million for the six months ended June 30, 2012.

~~Net~~33 ~~loss was $1.0 million for the three months ended March 31, 2013, as compared to net income of $5.3 million for the three months ended March 31, 2012.~~

Factors Affecting Our Results of Operations

The following events and developments have in the past, or are expected in the future to have, a significant impact on our financial condition and results of operations:

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Impact of price competition, vendor terms and conditions. Historically, our gross profit margins have been impacted by price competition, changes to vendor terms and conditions, including but not limited to, reductions in product rebates and incentives, our ability to return inventory to manufacturers, and time periods during which vendors provide price protection. We expect these competitive pricing pressures and modifications to vendor terms and conditions to continue into the foreseeable future.

• Sale of ~~Mobile~~mobile ~~Devices~~devices. Due to the continued convergence of IT products and mobile devices, we launched our initial foray into the mobile devices market in the latter half of 2010. In April 2011, we completed our strategic transaction with Brightpoint, Inc. which facilitated our further expansion into the wireless mobile devices distribution market. Additionally, we ~~have~~ entered into contracts with certain mobile devices manufacturers for the distribution of their products throughout Latin America and the Caribbean.

• Shift in revenue to In-country Operations. One of our growth strategies ishas been to expand the geographic presence of our In-country Operations into areas in which we believe we can achieve higher gross margins than our Miami Operations. Miami gross margins are generally lower than gross margins from our In-country Operations because the Miami export market is more competitive due to the high concentration of other Miami-based IT distributors who compete for the export business of resellers and retailers located in Latin America or the Caribbean. In addition, these resellers and retailers generally have larger average order quantities than customers of our In-country Operations segment, and as a result, benefit from lower average prices. Revenue from our In-country Operations grew by an average of 18.1% annually between 2002 and 2012, as compared to growth in revenue from our Miami Operations of an average of 11.3% annually over the same period. Revenue from our In-country Operations accounted for 72.6% and 71.3%, respectively, of consolidated revenue for the three and six months ended June 30, 2013, and 73.4% and 70.2%, respectively, for the three and six months ended June 30, 2012. While the sales of mobile devices have significantly decreased in our Miami Operations for the three and six months ended June 30, 2013, as compared to the same period in 2012, sales of mobile devices have significantly increased in our In-country Operations. We continue to expect the expansion and growth of the sales of mobile devices in our In-country Operations at a faster rate than our Miami Operations over the long term, particularly as we have worked toward shifting more of our mobile device sales to our In-country Operations.

• Exposure to fluctuations in foreign currency. A significant portion of the revenues from our In-country Operations is invoiced in currencies other than the U.S. dollar and a significant amount of the operating expenses from our In-country Operations are denominated in currencies other than U.S. dollar. In markets where we invoice in local currency, including Chile, Colombia, Costa Rica, Guatemala, Jamaica, Mexico and Peru, appreciation of a local currency could have a marginal impact on our gross profit and gross margins in U.S. dollar terms. In markets where our books and records are prepared in currencies other than the U.S. dollar, appreciation of the local currency will increase our operating expenses and decrease our operating margins in U.S. dollar terms. Our unaudited condensed consolidated statements of operations and comprehensive (loss) income includes foreign exchange losses of $4.9 million and $4.9 million, respectively, for the three and six months ended June 30, 2013, and foreign exchange losses of $3.4 million and $0.6 million, respectively, for the three and six months ended June 30, 2012. We periodically engage in foreign currency forward contracts and foreign currency option collar contracts when available and when doing so is not cost prohibitive. In periods when we do not engage in such contracts, foreign currency fluctuations may adversely affect our results of operations, including our gross margins and operating margins.

benefit from lower average prices. Revenue from our In-country Operations grew by an average of 18.1% annually between 2002 and 2012, as compared to growth in revenue from our Miami Operations of an average of 11.3% annually over the same period. Revenue from our In-country Operations accounted for 71.8%, 69.8% and 78.6% of consolidated revenue for the years ended December 31, 2012, 2011 and 2010, respectively. While the recent increase in sales related to mobile devices has resulted in a greater increase in revenue from our Miami Operations than our In-country Operations, we still expect the expansion of our In-country Operations to grow at a faster rate than our Miami Operations over the long term, particularly as we work toward shifting more of our mobile device sales to our In-country Operations.

• Exposure to fluctuations in foreign currency. A significant portion of the revenues from our In-country Operations is invoiced in currencies other than the U.S. dollar and a significant amount of the operating expenses from our In-country Operations are denominated in currencies other than U.S. dollar. In markets where we invoice in local currency, including Chile, Colombia, Costa Rica, Guatemala, Jamaica, Mexico and Peru, appreciation of a local currency could have a marginal impact on our gross profit and gross margins in U.S. dollar terms. In markets where our books and records are prepared in currencies other than the U.S. dollar, appreciation of the local currency will increase our operating expenses and decrease our operating margins in U.S. dollar terms. For the three months ended March 31, 2013 and 2012, our consolidated statements of operations and comprehensive (loss) income includes foreign exchange gain of less than $0.1 million and $2.7 million, respectively. We periodically engage in foreign currency forward contracts when available and when doing so is not cost prohibitive. In periods when we do not, foreign currency fluctuations may adversely affect our results of operations, including our gross margins and operating margins.

•

Trade credit. All of our key vendors and many of our other vendors provide us with trade credit, an important source of liquidity to finance our growth. Although our overall available trade credit has increased significantly over time, from time to time the trade credit available from certain vendors has not kept pace with the growth of our business with them. During periods of economic downturn, our vendors may reduce the level of available trade credit extended to us as a result of our liquidity at the time.

It is necessary for us to increase our use of available cash or borrowings under our credit facility to the extent available in order to pay certain vendors for their products, which adversely affects our liquidity and can adversely affect our results of operations and opportunities for growth. We purchase credit insurance to support trade credit lines extended to our customers, which has been restricted due to regional or global economic events or disruptions in the credit markets. Periodically, credit insurers may tighten the requirements for extending credit insurance coverage thereby limiting our capacity to extend trade credit to our customers and the growth of our business throughout the Regions.

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Increased levels of indebtedness. During December 2009, we completed a cash tender offer for $96.9 million aggregate principal amount of our Prior 11³/₄% Senior Notes outstanding. We financed the tender offer with the net cash proceeds of $120.0 million aggregate principal amount of the Original 13¹/₄% Senior Notes, that were sold in a private placement transaction and closed on December 22, 2009, with an interest rate of 13.25% per year, payable semi-annually on June 15 and December 15 of each year, commencing on June 15, 2010. We used the proceeds from the sale of the Original 13¹/₄ % Senior Notes to repay our borrowings under and renew our senior secured revolving credit facility, repurchase, redeem or otherwise discharge our Prior 11³/₄% Senior Notes and the balance for general corporate purposes.

Additionally, on January 25, 2012, Software Brokers of America, Inc., or SBA, together with its consolidated subsidiaries, executed an amendment to the PNC Credit Facility, increasing the maximum amount available for borrowing under the facility from $30.0 million to $50.0 million, including standby letters of credit commitments in an aggregate undrawn face amount of up to $3.0 million.

For the three and six months ended ~~March~~June 3130, 2013, interest expense was $5.6 million and $11.0 million, respectively and for the three and six months ended June 30, 2012, interest expense was $5.46 million and $10.9 million, respectively.

•

Goodwill impairment. Goodwill represents the excess of the purchase price over the fair value of the net assets. We perform our impairment test of our goodwill and other intangible assets on an annual basis. The goodwill impairment charge represents the extent to which the carrying values exceeded the fair value attributable to our goodwill. Fair values are determined based upon market conditions and the income approach which utilizes cash flow projections and other factors. Our future results of operations may be impacted by a prolonged weakness in the economic environment, which may result in a further impairment of any existing goodwill or goodwill and/or other long-lived assets recorded in the future.

In connection with our goodwill impairment testing and analysis conducted in 2012, we noted that as of December 31, 2012, the fair value of Comercializadora Intcomex S.A. de C.V., or Intcomex Mexico, and Intcomex Costa Rica Mayorista en Equipo de Cómputo, S.A., or Intcomex Costa Rica, exceeded the carrying value of the reporting units by 5.5% and 5.4%, respectively. The fair values of Intcomex Mexico and Intcomex Costa Rica were determined using management’s estimate of fair value based upon the financial projections for the respective businesses. As of December 31, 2012, the balance of Intcomex Mexico’s goodwill was $3.0 million, which represented 12.6% of the carrying value of Intcomex Mexico and less than 1.0% of our total assets. As of December 31, 2012, the balance of Intcomex Costa Rica’s goodwill was $3.0 million, which represented 15.0% of the carrying value of Intcomex Costa Rica and less than 1.0% of our total assets.

There were no goodwill impairment charges recorded for the three and six months ended ~~March~~June 3130, 2013 and 2012.

• Deferred tax assets. Deferred income tax represents the tax effect of the differences between the book and tax bases of assets and liabilities. Deferred tax assets, which also include net operating loss, or NOL, carryforwards for entities that have generated or continue to generate operating losses, are assessed periodically by management to determine if their future benefit will be fully realized. If it is more likely than not that the deferred income tax asset will not be realized, then a valuation allowance must be established with a corresponding charge to net (loss) income . Such charges could have a material adverse effect on our results of operations or financial condition.

As of ~~March~~June 3130, 2013 and December 31, 2012, our U.S. and state of Florida NOLs resulted in $2426.96 million and $23.5 million, respectively, of deferred tax assets, which will begin to expire in 2026. As of ~~March~~June 3130, 2013, we did not have any NOLS for Intcomex Argentina, S.R.L., or Intcomex Argentina, as we completed the sale of the subsidiary on January 15, 2013. As of ~~March~~June 3130, 2013 and December 31, 2012, Intcomex Mexico had $1.3 million in NOLs resulting in $0.4 million of deferred tax assets, which will expire in 2018.

We35 periodically analyze the available evidence related to the realization of the deferred tax assets, considered the current negative economic environment and determined it is now more likely than not that we will not recognize a portion of our deferred tax assets associated with the NOL carryforwards. Factors in management’s determination include the performance of the business and the feasibility of ongoing tax planning strategies. As of March 31, 2013 and December 31, 2012, we had a valuation allowance of $15.0 million and $13.6 million, respectively, related to our U.S. and state of Florida NOLs and $0.4 million and $2.9 million, respectively, related to our foreign NOLs, as management does not believe it will realize the full benefit of these NOLs. Our future results of operations may be impacted by a prolonged weakness in the economic environment, which may result in further valuation allowances on our deferred tax assets and adversely affect our results of operations or financial condition.

•We ~~Restructuring~~periodically ~~Charges.~~analyze ~~For~~the available evidence related to the ~~three~~realization ~~months~~of ~~ended~~the ~~March~~deferred tax 31assets, ~~2012,~~considered wethe ~~recorded~~current ~~$0.6~~negative ~~million~~economic ~~related~~environment toand ~~the~~determined ~~restructuring~~it ~~actions~~is now more likely than not that we ~~implemented~~will tonot ~~significantly~~recognize ~~reduce~~a portion of our ~~In-country~~deferred ~~Operations~~tax inassets ~~Argentina~~associated with the NOL carryforwards. ~~The~~Factors ~~restructuring~~in ~~included~~management’s determination ~~involuntary~~include ~~workforce~~the ~~reductions~~performance of the business and ~~employee~~the ~~benefits~~feasibility of ongoing tax planning strategies. As of June 30, 2013 and ~~other~~December 31, ~~costs~~2012, ~~incurred~~we inhad ~~connection~~a ~~with~~valuation ~~vacating~~allowance ~~leased~~of ~~facilities~~$16.6 ~~The~~million ~~charges~~and ~~were~~$13.6 ~~recorded~~million, inrespectively, related to our ~~statements~~U.S. and state of ~~operations~~Florida asNOLs anand ~~increase~~$0.4 million and $2.9 million, respectively, related to our ~~operating~~foreign ~~expenses.~~NOLs, ~~For~~as management does not believe it will realize the ~~three~~full ~~months~~benefit ~~ended~~of ~~March~~these ~~31,~~NOLs. ~~2013~~Our future results of operations may be impacted by a prolonged weakness in the economic environment, wewhich ~~did~~may ~~not~~result ~~incur~~in ~~any~~further ~~restructuring~~valuation ~~charges~~allowances on our deferred tax assets and adversely affect our results of operations or financial condition.

32• Restructuring charges. We periodically analyze opportunities and initiatives that positively impact our productivity and streamlines our operations and improve our overall operational and financial performance.

In late March 2012, management implemented a plan to cease operations of Intcomex Argentina by December 31, 2012. We did not recognize any restructuring expenses related to the restructuring actions of Intcomex Argentina for the three and six months ended June 30, 2013. We recognized restructuring expenses related to Intcomex Argentina of $0.6 million for each of the three and six months ended June 30, 2012. We recognize restructuring expense in selling, general and administrative in operating expenses in our unaudited condensed consolidated statement of operations and comprehensive (loss) income. As of December 31, 2012, we made all of the payments related to our restructuring actions. On January 15, 2013, we completed the sale of Intcomex Argentina for $0.5 million and recognized a gain of $0.4 million. We recognized the gain on the sale of Intcomex Argentina in other income in the unaudited condensed consolidated statements of operations and comprehensive (loss) income.

As of January 15, 2013 and December 31, 2012, Intcomex Argentina’s total assets represented less than 0.1% of our total consolidated assets. For the three and six months ended June 30, 2013, Intcomex Argentina’s total revenues represented less than 0.1% of our total consolidated revenues. For the three and six months ended June 30, 2012, Intcomex Argentina’s total revenues represented 0.1% and 0.6%, respectively, of our total consolidated revenues. Intcomex Argentina’s operating loss was $0 for each of the three and six months ended June 30, 2013. Intcomex Argentina’s operating loss was $0.3 million and $1.4 million, respectively, for the three and six months ended June 30, 2012, representing 6.3% and 10.3%, respectively, of our consolidated operating income on an absolute value basis. Intcomex Argentina’s results of operations and financial position were not significant enough to qualify as a discontinued operation and, accordingly, we did not present Intcomex Argentina in discontinued operations in our consolidated statement of operations and comprehensive (loss) income.

During the six months ended June 30, 2013, we implemented restructuring and rebalancing actions designed to enhance and improve our operating productivity, right-size our workforce and streamline our management structure in our In-country Operations in Mexico, Uruguay and Colombia. We recognize restructuring expenses related to terminations and other direct costs associated with implementing restructuring and rebalancing initiatives in selling, general and administrative in operating expenses in our unaudited condensed consolidated statement of operations and comprehensive (loss) income. For the three and six months ended June 30, 2013, we recognized restructuring expenses of $0.5 million and $0.9 million, respectively, of which $0.4 million and $0.4 million, respectively, related to Intcomex Mexico, $0.1 million and $0.4 million respectively, related to Intcomex Uruguay and $0 and $50, respectively, related to Intcomex Colombia. We recognized restructuring expenses related to Intcomex Argentina of $0.6 million for each of the three and six months ended June 30, 2012. The restructuring expenses did not qualify for a major income statement caption and, accordingly, we did not present restructuring expenses as a separate line item in our unaudited condensed consolidated statement of operations and comprehensive (loss) income. We expect to incur additional restructuring expenses in our In-country Operations in Colombia and our Miami Operations during the third quarter of 2013.

Results of Operations

We report our business in two operating segments based upon the geographic location of where we originate the sale: Miami and In-country. Our Miami segment, or Miami Operations, includes revenue from our Miami, Florida headquarters, including sales from Miami to our in-country sales and distribution centers and sales directly to resellers, retailers and distributors that are located in countries in which we have in-country sales and distribution operations or in which we do not have any in-country operations. Our in-country segment, or In-country Operations, includes revenue from our in-country sales and distribution centers, which have been aggregated because of their similar economic characteristics. Most of our vendor rebates, incentives and allowances are reflected in the results of our Miami segment. When we consolidate our results, we eliminate revenue and cost of revenue attributable to inter-segment sales, and the financial results of our Miami segment discussed below reflect these eliminations.

Comparison of the quarter ended ~~March~~ June 3130, 2013 versus the quarter ended ~~March~~June 3130, 2012

The following table sets forth selected financial data and percentages of revenue for the periods presented:

	Three Months EndedMarch 31, 2013						Three Months EndedMarch 31, 2012
	Three Months EndedJune 30, 2013						Three Months EndedJune 30, 2012
	Dollars(in thousands)			Percentageof Revenue			Dollars(in thousands)		Percentageof Revenue
Revenue	$	~~351~~361,~~618~~533			100.0	%	$	~~390~~347,~~500~~335		100.0	%
Cost of revenue		~~321~~330,~~565~~356			91.54	%		~~356~~317,~~468~~646		91.35	%
Gross profit		3031,~~053~~177			8.56	%		3429,~~032~~689		8.75	%
Selling, general and administrative		2324,~~995~~309			6.87	%		23,~~705~~575		6.08	%
Depreciation and amortization		1,~~050~~120			0.3	%		1,~~180~~181		0.3	%
Total operating expenses		25,~~045~~429			7.10	%		24,~~885~~756		67.41	%
Operating income		5,~~008~~748			1.46	%		94,~~147~~933		21.34	%
Other expense, net		410,~~977~~262			12.48	%		24,~~654~~650		01.73	%
Income before provision for income taxes		31			0.0	%		6,493		1.7	%
(Loss) income before provision for income taxes		(4,514	)		(1.2	)%		283		0.1	%
Provision for income taxes		1,~~050~~505			0.34	%		~~1,176~~159		0.30	%
Net (loss) income	$	(16,019	)		(01.37	)%	$	~~5,317~~124		10.40	%

Revenue. Revenue ~~decreased~~increased $3814.92 million, or 104.01%, to $~~351~~361.65 million for the three months ended ~~March~~June 3130, 2013, from $~~390~~347.53 million for the three months ended ~~March~~June 3130, 2012. ~~The~~Our ~~decline~~revenue ingrowth ~~revenue~~was driven by the increased demand for our products throughout Latin America and the Caribbean combined with our efforts to grow and diversify our product offerings. Revenue growth was driven primarily by the ~~decrease~~increase in sales of ~~mobile~~printers ~~devices~~ of $317.47 million, ~~and~~basic ~~notebook~~“white-box” ~~computers~~systems of $125.91 million, hard disk drives of $4.1 million and tosoftware ~~a lesser~~of ~~extent~~$0.9 million, offset by the decrease in sales of ~~basic~~mobile ~~“white-box”~~devices ~~systems,~~of ~~central~~$5.1 ~~processing~~million ~~units, or CPUs,~~ and ~~monitors~~notebook computers of $23.18 million,. ~~partially~~We ~~offset~~continue byto experience a shift of revenue from our Miami Operations to our In-country Operations. While the ~~increase~~sales of mobile devices decreased $9.5 million in our Miami Operation for the three months ended June 30, 2013, sales of ~~printers,~~mobile ~~hard~~devices ~~disk~~increased ~~drives~~$4.4 ~~and~~million ~~software~~in our In-country Operations. We experienced a 217.7% decrease in unit shipments across our core product lines for the three months ended ~~March~~June 3130, 2013, as compared to the same period in 2012. We experienced a 1224.04% ~~decrease~~increase in average sales prices across ~~several of~~ the same core products for the three months ended ~~March~~June 3130, 2013, as compared to the same period in 2012, due to the impact of pricing on ~~mobile~~central ~~devices~~processing units, ~~hard~~or ~~disk~~CPUs, ~~drives~~ and ~~software~~printers. Revenue derived from our In-country Operations ~~decreased~~increased $177.07 million, or 63.50%, to $~~246~~262.2 5 million for the three months ended ~~March~~June 3130, 2013, from $~~263~~254.28 million for the three ~~same~~months ~~period~~ended inJune 30, 2012. Revenue derived from our In-country Operations accounted for 7072.06% of our total revenue for the three months ended ~~March~~June 3130, 2013, as compared to 6773.4% of our total revenue for the ~~same~~three ~~period~~months inended June 30, 2012. The ~~decline~~growth in revenue from our In-country Operations was ~~primarily~~mainly driven by the overall ~~decrease~~increase in sales in ~~El Salvador~~Chile, ~~Colombia, Peru~~ and ~~Guatemala~~, ~~and~~ to a lesser extent, ~~Mexico,~~ also driven by the increase in sales in Costa Rica and ~~Jamaica~~Guatemala, partially offset by the decrease ~~increase~~ in sales inof ~~Ecuador~~Colombia and Peru. This ~~decline~~growth was driven by the ~~decrease~~increase in sales of ~~notebook computers and~~ basic “white-box” systems, mobile devices, software and printers. Revenue derived from our Miami Operations ~~decreased~~increased $216.9 5 million, or 177.21%, to $~~105~~99.41 million for the three months ended ~~March~~June 3130, 2013 (net of $8079.65 million of revenue derived from sales to our In-country Operations) from $~~127~~92.35 million for the ~~same~~three ~~period~~months inended June 30, 2012 (net of $8580.32 million of revenue ~~derived~~ derived from sales to our In-country Operations). The ~~decline~~growth in revenue derived from our Miami Operations ~~was~~reflected ~~primarily~~the ~~driven~~increased bysales ~~the~~volume ~~decrease~~of inhard ~~sales~~disk ofdrives ~~mobile~~and ~~devices~~printers, ~~partially~~ offset by the ~~increase~~decrease in sales of ~~printers~~mobile ~~and hard disk drives~~devices.

3337

Gross profit. Gross profit ~~decreased~~increased $41.05 million, or 115.70%, to $3031.02 million for the three months ended ~~March~~June 3130, 2013, from $3429.07 million for the three months ended ~~March~~June 3130, 2012. The ~~decrease~~increase was primarily driven by ~~lower~~higher sales volume in our In-country Operations and our Miami Operations, ~~partially~~and ~~offset by~~ the decline in the inventory obsolescence provision of $1.59 million for the three months ended ~~March~~June 3130, 2013, as compared to the same period in 2012. ~~As a percentage of revenue, gross margin was 8.5% for the three months ended March 31, 2013, as compared to 8.7% for the same period in 2012.~~ Gross profit from our In-country Operations ~~decreased~~increased $10.75 million, or 72.52%, to $2021.48 million for the three months ended ~~March~~June 3130, 2013, from $2221.13 million for the ~~same~~three ~~period~~months inended June 30, 2012. The ~~decline~~ improvement in gross profit from our In-country Operations was driven by the ~~decrease~~increase in sales volume of ~~notebook computers and~~ basic “white-box” systems ~~in El Salvador~~, mobile ~~Colombia~~devices, ~~Peru~~software and ~~Guatemala~~printers, ~~and~~particularly toin aChile ~~lesser extent, Mexico, Costa Rica~~ and ~~Jamaica,~~ ~~offset by the increase in sales in Ecuador~~Guatemala. The decline in gross profit from our In-country Operations was partially offset by the decrease in the inventory obsolescence provision of $0.4 million for the three months ended March 31, 2013, as compared to the same period in 2012. Gross profit from our In-country Operations accounted for 6769.98% of our consolidated gross profit for the three months ended ~~March~~June 3130, 2013, as compared to 6471.87% for the three ~~same~~months ~~period~~ended inJune 30, 2012. Gross profit from our Miami Operations ~~decreased~~increased $21.40 million, or 1912.40%, to $9.64 million for the three months ended ~~March~~June 3130, 2013, ~~from~~as compared to $128.04 million for the ~~same~~three ~~period~~months inended June 30, 2012. The ~~decline~~growth in gross profit from our Miami Operations was driven by ~~the~~ ~~decrease in sales of mobile devices, partially offset by~~ the ~~increase~~increased in sales of ~~printers and~~ hard disk drives. ~~The~~As ~~decline~~a inpercentage ~~gross~~of ~~profit~~revenue, ~~from~~gross ~~our~~margin ~~Miami Operations~~ was ~~partially offset by the decrease in the inventory obsolescence provision of $1~~8.16% ~~million~~ for the three months ended ~~March~~June 3130, 2013, as compared to 8.5% for the ~~same~~three ~~period~~months ended inJune 30, 2012.

Operating expenses. Total operating expenses ~~remained~~increased ~~relatively~~$0.7 ~~steady~~million, ator 2.7%, to $25.04 million for the three months ended ~~March~~June 3130, 2013, as compared to $24.98 million for the three months ended ~~March~~June 3130, 2012. Excluding the effects of strengthening foreign currencies, the increase in operating expenses resulted from higher salary and payroll-related expenses of $0.9 million, partially offset by lower marketing and advertising expenses of $0.3 million. As a percentage of revenue, operating expenses ~~increased~~decreased slightly to 7.10% for the three months ended ~~March~~ June 3130, 2013, as compared to 67.41% for the ~~same~~three ~~period~~months inended June 30, 2012. As a percentage of total operating expenses, salary and payroll-related expenses increased to ~~$14~~59.7 ~~million, or 58.6~~% of total operating expenses for the three months ended ~~March~~ June 3130, 2013, as compared to ~~$14~~57.~~4 million, or 58.0~~3% ~~of total operating expenses~~ for the ~~same~~three ~~period~~months inended June 30, 2012. Operating expenses from our In-country Operations increased $0.14 million, or 1 2.02%, to $1617.84 million for the three months ended ~~March~~June 3130, 2013, as compared to $1617.70 million for the ~~same~~three ~~period~~months inended June 30, 2012. Excluding the effects of strengthening foreign currencies, ~~due~~the toincrease resulted from higher salary and payroll-related expenses of $0.7 million, of which $0.5 million related to severance expenses as part of our restructuring efforts in Mexico and Uruguay. Operating expenses from our In-country Operations increased from the effects of strengthening foreign currencies of $0.1 million primarily in Chile and Mexico. Operating expenses from our Miami Operations ~~remained~~increased ~~steady~~$0.3 atmillion, or 3.8%, to $8.2 0 million for the three months ended ~~March~~June 3130, 2013, ~~and~~as compared to $7.7 million for the three months ended June 30, 2012, due to the higher salary and payroll-related expenses of $0. 2 million.

Operating income. Operating income ~~decreased~~increased $40.18 million, or 4516.25%, to $5.07 million for the three months ended ~~March~~June 3130, 2013, from $94.19 million for the three months ended ~~March~~June 3130, 2012., ~~The decline was primarily~~ due to the ~~lower~~higher sales in our In-country Operations and our Miami Operations. Operating income from our In-country Operations ~~decreased~~ increased $10.81 million, or 332.92%, to $34.63 million for the three months ended ~~March~~June 3130, 2013, from $5.4.2 million for the ~~same~~three ~~period~~months inended June 30, 2012. Operating income from our Miami Operations ~~decreased~~increased $20.37 million, ~~or 61.7%,~~ to $1.4 million for the three months ended ~~March~~June 3130, 2013, ~~from~~as compared to $30.7 million for the ~~same~~three ~~period~~months inended June 30, 2012.

Other expense, net. Other expense, net increased $25.36 million, ~~or 87.5%,~~ to $510.03 million for the three months ended ~~March~~June 3130, 2013, from $24.7 million for the three months ended ~~March 31~~June 30, 2012. The increase in other expense, net was primarily attributable to the absence of ~~foreign~~the ~~exchange~~$4.3 ~~gains~~million ~~for~~gain recognized on the termination of the mutual non-compete agreement with Brightpoint during the three months ended ~~March 31,~~June ~~2013~~30, as2012 ~~compared~~and to the foreign exchange ~~gains~~losses of $24.79 million, ~~primarily~~ in Chile, Colombia and ~~Colombia~~Peru, ~~for~~during the three months ended June 30, 2013, as compared to $3.4 million during the same period in 2012.

Provision for income taxes. Provision for income taxes decreased $0.1.3 million, ~~or 10.7%,~~ to $1.15 million for the three months ended ~~March~~June 3130, 2013, from $10.2 million for the three months ended ~~March 31~~June 30, 2012. The ~~change~~decrease was ~~primarily~~ due to ~~the~~ lower taxable earnings in our U.S. ~~In-country Operations~~ and ~~our~~foreign ~~Miami Operations~~operations, primarily offset by the increased levels of valuation allowances recorded against the U.S. NOLs.

Net (loss) income. Net loss was $16.0 million for the three months ended ~~March~~June 3130, 2013, as compared to net income of $50.31 million for the three months ended ~~March~~June 3130, 2012.

3438

Comparison of the six months ended June 30, 2013 versus the six months ended June 30, 2012

The following table sets forth selected financial data and percentages of revenue for the periods presented:


	Six Months Ended June 30, 2013						Six Months Ended June 30, 2012
	Dollars (in thousands)			Percentage of Revenue			Dollars (in thousands)		Percentage of Revenue
Revenue	$	713,151			100.0	%	$	737,835		100.0	%
Cost of revenue		651,921			91.4	%		674,114		91.4	%

Gross profit		61,230			8.6	%		63,721		8.6	%
Selling, general and administrative		48,304			6.8	%		47,280		6.4	%
Depreciation and amortization		2,170			0.3	%		2,361		0.3	%

Total operating expenses		50,474			7.1	%		49,641		6.7	%

Operating income		10,756			1.5	%		14,080		1.9	%
Other expense, net		15,239			2.1	%		7,304		1.0	%

(Loss) income before provision for income taxes		(4,483	)		(0.6	)%		6,776		0.9	%
Provision for income taxes		2,555			0.4	%		1,335		0.2	%

Net (loss) income	$	(7,038	)		(1.0	)%	$	5,441		0.7	%

Revenue. Revenue decreased $24.7 million, or 3.3%, to $713.2 million for the six months ended June 30, 2013, from $737.8 million for the six months ended June 30, 2012. Our decline in revenue was primarily by the decrease in sales of mobile devices of $36.5 million, notebook computers of $16.7 million, offset by the increase in sales of printers of $13.0 million and hard disk drives of $8.0 million. We continue to experience a shift of revenue from our Miami Operations to our In-country Operations. While the sales of mobile devices decreased $43.0 million in our Miami Operation for the six months ended June 30, 2013, sales of mobile devices increased $6.5 million in our In-country Operations. We experienced a 10.3% decrease in unit shipments across our core product lines for the six months ended June 30, 2013, as compared to the same period in 2012. We experienced a 4.1% increase in average sales prices across the same core products for the six months ended June 30, 2013, as compared to the same period in 2012, due to the impact of pricing of CPUs, memory products, basic “white-box” systems and printers. Revenue derived from our In-country Operations decreased $9.3 million, or 1.8%, to $509.0 million for the six months ended June 30, 2013, from $518.0 million for the six months ended June 30, 2012. Revenue derived from our In-country Operations accounted for 71.3% of our total revenue for the six months ended June 30, 2013, as compared to 70.2% of our total revenue for the six months ended June 30, 2012. The decline in revenue from our In-country Operations was mainly driven by the overall decrease in sales in El Salvador, Colombia and Peru, and, to a lesser extent, also driven by the decrease in sales in Jamaica, Panama and Mexico. This decline was driven by the decreased sales of notebook computers, and to a lesser extent, monitors and hard disk drives, partially offset by the increased sales of mobile devices. Revenue derived from our Miami Operations decreased $15.3 million, or 7.0%, to $204.4 million for the six months ended June 30, 2013 (net of $160.1 million of revenue derived from sales to our In-country Operations) from $219.8 million for the six months ended June 30, 2012 (net of $165.5 million of revenue derived from sales to our In-country Operations). The decline in revenue from our Miami Operations reflected the decreased sales of mobile devices, and to a lesser extent, CPUs, partially offset by the increase sales of hard disk drives and printers.

Gross profit. Gross profit decreased $2.5 million, or 3.9%, to $61.2 million for the six months ended June 30, 2013, from $63.7 million for the six months ended June 30, 2012. The decrease was primarily driven by lower sales volume in our In-country Operations and our Miami Operations, offset by the decline in the inventory obsolescence provision of $3.4 million for the six months ended June 30, 2013, as compared to the same period in 2012. Gross profit from our In-country Operations decreased $1.2 million, or 2.7%, to $42.2 million for the six months ended June 30, 2013, from $43.3 million for the six months ended June 30, 2012. The decline in gross profit from our In-country Operations was driven by the decrease in sales of notebook computers, particularly in Colombia, Peru, El Salvador, Guatemala, Ecuador and Uruguay. Gross profit from our In-country Operations accounted for 68.9% of our consolidated gross profit for the six months ended June 30, 2013, as compared to 68.0% for the six months ended June 30, 2012. Gross profit from our Miami Operations decreased $1.3 million, or 6.4%, to $19.1 million for the six months ended June 30, 2013, as compared to $20.4 million for the six months ended June 30, 2012. The decline in gross profit from our Miami Operations was driven by the decreased sales volume of mobile devices. As a percentage of revenue, gross margin remained steady at 8.6% for the six months ended June 30, 2013 and 2012.

Operating expenses. Total operating expenses increased $0.8 million, or 1.7%, to $50.5 million for the six months ended June 30, 2013, as compared to $49.6 million for the six months ended June 30, 2012. Excluding the effects of strengthening foreign currencies, the increase in operating expenses resulted from higher salary and payroll-related expenses of $1.0 million, partially offset by lower marketing and advertising expenses of $0.4 million. As a percentage of revenue, operating expenses increased to 7.1% for the six months ended June 30, 2013, as compared to 6.7% for the six months ended June 30, 2012. As a percentage of total operating expenses, salary and payroll-related expenses increased to 59.1% of total operating expenses for the six months ended June 30, 2013, as compared to 57.7% for the six months ended June 30, 2012. Operating expenses from our In-country Operations increased $0.6 million, or 1.6%, to $34.2 million for the six months ended June 30, 2013, as compared to $33.7 million for the six months ended June 30, 2012. Excluding the effects of strengthening foreign currencies, the increase resulted from higher salary and payroll-related expenses of $0.8 million related to severance expenses as part of our restructuring efforts in Mexico and Uruguay. Operating expenses from our In-country Operations increased from the effects of strengthening foreign currencies of $0.3 million primarily in Chile and Mexico. Operating expenses from our Miami Operations increased $0.2 million, or 1.8%, to $16.2 million for the six months ended June 30, 2013, as compared to $16.0 million for the six months ended June 30, 2012.

Operating income. Operating income decreased $3.3 million, or 23.6%, to $10.8 million for the six months ended June 30, 2013, from $14.1 million for the six months ended June 30, 2012, due primarily to the lower sales of mobile devices in our Miami Operations and our In-country Operations. Operating income from our In-country Operations decreased $1.7 million, or 18.0%, to $7.9 million for the six months ended June 30, 2013, from $9.7 million for the six months ended June 30, 2012. Operating income from our Miami Operations decreased $1.6 million, or 35.9%, to $2.8 million for the six months ended June 30, 2013, from $4.4 million for the six months ended June 30, 2012.

Other expense, net. Other expense, net increased $7.9 million, to $15.2 million for the six months ended June 30, 2013, from $7.3 million for the six months ended June 30, 2012. The increase in other expense, net was primarily attributable to the foreign exchange losses of $4.9 million, primarily in Chile and Colombia, during the six months ended June 30, 2013, as compared to the foreign exchange losses of $0.6 million during the same period in 2012, and the absence of the $4.3 million gain recognized on the termination of the mutual non-compete agreement with Brightpoint.

Provision for income taxes. Provision for income taxes increased $1.2 million, to $2.5 million for the six months ended June 30, 2013, from $1.3 million for the six months ended June 30, 2012. The increase was due to lower taxable earnings in our U.S. and foreign operations primarily offset by the increased levels of valuation allowances recorded against the U.S. NOLs.

Net (loss) income. Net loss was $7.0 million for the six months ended June 30, 2013, as compared to net income of $5.4 million for the six months ended June 30, 2012.

Liquidity and Capital Resources

The IT products distribution business is working-capital intensive. Historically, we have financed our working capital needs through a combination of cash generated from operations, trade credit from manufacturers, borrowings under revolving bank lines of credit (including issuance of letters of credit), asset-based financing arrangements that we have established in certain Latin American markets and the issuance of our $120.0 million aggregate principal amount ~~131~~ 13 1/4% Second Priority Senior Secured Notes due December 15, 2014, or our ~~131~~13 1/4% Senior Notes.

Our cash and cash equivalents were $2451.57 million as of ~~March~~June 3130, 2013, as compared to $30.6 million as of December 31, 2012. Our working capital ~~remained~~decreased ~~relatively~~to ~~steady at~~ $~~116~~111.61 million as of ~~March~~June 3130, 2013, as compared to $116.5 million as of December 31, 2012. We believe our existing cash and cash equivalents, as well as any cash expected to be generated from operating activities, will be sufficient to meet our anticipated cash needs for at least the next 12 months.

Changes in Financial Condition

The following table summarizes our cash flows for the periods presented:

	For the Three Months EndedMarch 31,
	For the Six Months EndedJune 30,
	2013			2012
	(Dollars in thousands)
Cash flows used in operating activities	$	(6,684	)	$	(30,770	)
Cash flows provided by (used) in operating activities	$	29,004		$	(34,745	)
Cash flows used in investing activities		(~~502~~1,041	)		(~~837~~1,299	)
Cash flows provided by financing activities		1,094			22,974
Cash flows (used in) provided by financing activities		(6,592	)		27,819
Effect of foreign currency exchange rate changes on cash and cash equivalents		28(213	)		~~179~~(12	)
Net decrease in cash and cash equivalents	$	(6,064	)	$	(8,454	)
Net increase (decrease) in cash and cash equivalents	$	21,158		$	(8,237	)

Cash flows from operating activities. Our cash flows from operating activities resulted in a ~~requirement~~generation of $629.70 million for the ~~three~~six months ended ~~March 31~~June 30, 2013, as compared to a requirement of $3034.87 million for the ~~three~~six months ended ~~March 31~~June 30, 2012. The ~~variance~~change was primarily driven by the ~~change~~decline in ~~trade~~inventory ~~accounts~~levels ~~receivable~~resulting ~~which resulted~~ in a decreased usage of cash of $1525.84 million. ~~The~~for ~~change~~the ~~between~~six months ended June 30, 2013, as compared to the ~~quarters~~six months ended June 30, 2012. The change was also driven by the ~~decrease~~increased inaccounts ~~inventory~~payable, net of ~~related~~increased ~~days~~trade in accounts ~~payable~~receivables, ~~which~~resulting ~~resulted~~ in a decreased usage of cash of $1022.83 million., ~~These~~partially ~~favorable variances were~~ offset by ~~various other working capital movements driven by~~ the decrease in operating income.

Cash flows ~~from~~ from investing activities. Our cash flows from investing activities resulted in a requirement of $01.50 million for the ~~three~~six months ended ~~March 31~~June 30, 2013, as compared to a requirement of $01.83 million for the ~~three~~six months ended ~~March 31~~June 30, 2012. The ~~variance~~ change was primarily driven by the purchase of property and equipment in our In-country Operations and our Miami Operations, partially offset by the proceeds from the sale of Intcomex Argentina.

Cash flows from financing activities. Our cash flows from financing activities resulted in a ~~generation~~requirement of $16.16 million for the ~~three~~six months ended ~~March~~June 3130, 2013, as compared to a generation of $2327.08 million for the ~~three~~six months ended ~~March~~June 3130, 2012. The change was primarily ~~the~~driven ~~result~~by of the ~~lower~~decline in net borrowings under our lines of credit by our Miami Operations and ~~for~~our ~~the~~In-country ~~three~~Operations ~~months~~in ~~ended~~Guatemala, ~~March 31~~and to a lesser extent, ~~2013~~in El Salvador, Chile and Costa Rica.

3541

Working Capital Management

The successful management of our working capital needs is a key driver of our growth and cash flow generation. The following table sets forth certain information about the largest components of our working capital: our trade accounts receivable, inventories and accounts payable:

	As ofMarch 31, 2013			As ofDecember 31, 2012
	As ofJune 30, 2013			As ofDecember 31, 2012
	(Dollars in thousands)
Balance sheet data:
Trade accounts receivable, net of allowance	$	~~147~~140,~~506~~952		$	142,431
Inventories		~~176~~152,~~521~~544			163,355
Accounts payable		216,~~803~~082			212,210
Other data:
Trade accounts receivable days (1)		3735.8			3637.28
Inventory days (2)		4942.4			4547.54
Accounts payable days (3)		(60.70	)		(5961.16	)
Cash conversion cycle (4)		2618.52			2223.6

(1) Trade accounts receivable days is defined as our consolidated trade accounts receivable (net of allowance for doubtful accounts) as of the last day of the period divided by our consolidated revenue for such period times 90181 days for the ~~three~~six months ended ~~March~~June 3130, 2013 and 92184 days for the ~~three~~six months ended December 31, 2012. Our consolidated trade accounts receivable for our In-country Operations include value added tax at a rate of between 5% and 27% (depending on the country). The exclusion of such value added tax would result in lower trade accounts receivable days.

(2) Inventory days is defined as our consolidated inventory as of the last day of the period divided by our consolidated cost of goods sold for such period times 90181 days for the ~~three~~six months ended ~~March~~June 3130, 2013 and 92184 days for the ~~three~~six months ended December 31, 2012.

(3) Accounts payable days is defined as our consolidated accounts payable as of the last day of the period divided by our consolidated cost of goods sold for such period times 90181 days for the ~~three~~six months ended ~~March~~June 3130, 2013 and 92184 days for the ~~three~~six months ended December 31, 2012.

(4)	Cash conversion cycle is defined as our trade accounts receivable days plus inventory days less accounts payable days.

Cash conversion cycle days. One measurement we use to monitor working capital is the cash conversion cycle, which measures the number of days to convert trade accounts receivable and inventory, net of accounts payable, into cash. Our cash conversion cycle ~~increased~~decreased to 2618.52 days as of ~~March~~June 3130, 2013, from 2223.6 days as of December 31, 2012. Trade accounts receivable days ~~increased~~decreased to 3735.8 days as of ~~March~~June 3130, 2013, from 3637.28 days as of December 31, 2012. Inventory days ~~increased~~decreased to 4942.4 days as of ~~March~~June 3130, 2013, from 4547.54 days as of December 31, 2012, ~~due~~which is reflective of our efforts to ~~growth~~reduce in inventory levels in our Miami ~~and In-country~~ Operations. Accounts payable days ~~increased~~decreased to 60.70 days as of ~~March~~June 3130, 2013, as compared to 5961.16 days as of December 31, 2012, due to the ~~increase~~decline in inventory related payables, primarily for mobile devices.

Trade accounts receivable. We principally sell products to a large base of third-party distributors, resellers and retailers throughout Latin America and the Caribbean and to other Miami-based exporters of IT products to Latin America and the Caribbean. Credit risk on trade receivables is diversified over several geographic areas and a large number of customers. No one customer accounted for more than 21.2% of sales for the ~~three~~six months ended ~~March~~June 3130, 2013 and 32.80% of sales for the ~~three~~six months ended ~~March~~June 3130, 2012. We provide trade credit to our customers in the normal course of business. The collection of a substantial portion of our receivables is susceptible to changes in Latin America and Caribbean economies and political climates. We monitor our exposure for credit losses and maintain allowances for anticipated losses after giving consideration to delinquency data, historical loss experience, and economic conditions impacting our industry. The financial condition of our customers and the related allowance for doubtful accounts is ~~continually~~ continually reviewed by management.

Prior to extending credit to a customer, we analyze the customer’s financial history and obtain personal guarantees, where appropriate. Our In-country Operations make provisions for estimated credit losses but generally do not use credit insurance. Our Miami Operations uses credit insurance and makes provisions for estimated credit losses. Our Miami Operations has a credit insurance policy covering trade sales to non-affiliated buyers. The policy’s aggregate limit is $35.0 million with an aggregate deductible of $1.0 million; the policy expires on August 31, 2013. In addition, 10% or 20% buyer coinsurance provisions and sub-limits in coverage on a per-buyer and per-country basis apply. The policy also covers certain large, local companies in Costa Rica, El Salvador, Guatemala, Jamaica and Peru. Our large customer base and our credit policies allow us to limit and diversify our exposure to credit risk on our trade accounts receivable.

3642

Inventory. We seek to minimize our inventory levels and inventory obsolescence rates through frequent product shipments, close and ongoing monitoring of inventory levels and customer demand patterns, optimal use of carriers and shippers and the negotiation of clauses in some vendor supply agreements protecting against loss of value of inventory in certain circumstances. The Miami distribution center ships products to each of our In-country Operations approximately twice per week by air and once per week by sea. These frequent shipments result in efficient inventory management and increased inventory turnover. We do not have long-term contracts with logistics providers, except in Mexico and Chile. Where we do not have long-term contracts, we seek to obtain the best rates and fastest delivery times on a shipment-by-shipment basis. Our Miami Operations also coordinates direct shipments to third-party customers and each of our In-country Operations from vendors in Asia.

Accounts payable. We seek to maximize our accounts payable days through centralized purchasing and management of our vendor back-end rebates, promotions and incentives. This centralization of the purchasing function allows our In-country Operations to focus their attention on more country-specific issues such as sales, local marketing, credit control and collections. The centralization of purchasing also allows our Miami operation to control the records and receipts of all vendor back-end rebates, promotions and incentives to ensure their collection and to adjust pricing of products according to such incentives.

Capital Expenditures and Investments

Capital expenditures increased to $12.84 million, of which $0.8 million was financed, for the ~~three~~six months ended ~~March~~June 3130, 2013, as compared to $01.83 million, none of which was financed, for the ~~three~~six months ended ~~March~~June 3130, 2012.

Our future capital requirements will depend on many factors which will affect our ability to generate additional cash, including the timing and amount of our revenues, the timing and extent of spending to support our product offerings and introduction of new products, the continuing market acceptance of our products and our investment decisions. We believe that our existing cash and cash equivalents will be sufficient to meet our anticipated cash requirements for working capital and capital expenditures for the foreseeable future. Thereafter, if cash generated from operations and financing activities is insufficient to satisfy our working capital requirements, we may seek additional funding through bank borrowings or other means. There can be no assurance that we will be able to raise any such capital on terms acceptable to us or at all. We anticipate that capital expenditures will be approximately $3.5 million per year over the next few years, as we have no further facility expansion needs. We have the option to purchase the warehouse and office facility located in Mexico City, Mexico, which we currently lease, prior to December 31, 2013, the option termination date. If we exercise this option, our capital expenditures will increase by $3.0 million in the year of exercise.

Capital Resources

We currently believe that our cash on hand, anticipated cash provided by operations, available and anticipated trade credit and borrowings under our existing credit facility and lines of credit, will provide sufficient resources to meet our anticipated debt service requirements, capital expenditures and working capital needs for the next 12 months. If our results of operations are not as favorable as we anticipate (including as a result of increased competition), our funding requirements are greater than we expect (including as a result of growth in our business), or our liquidity sources are not at anticipated levels (including levels of available trade credit), our resources may not be sufficient and we may have to raise additional financing or capital to support our business. In addition, we may not be able to accurately predict future operating results or changes in our industry that may change these needs. We continually assess our capital needs and may seek additional financing as needed to fund working capital requirements, capital expenditures and potential acquisitions. We cannot assure you that we will be able to generate anticipated levels of cash from operations or to obtain additional debt or equity financing in a timely manner, if at all, or on terms that are acceptable to us. Our inability to generate sufficient cash or obtain financing could hurt our results of operations and financial condition and prevent us from growing our business as anticipated.

We have lines of credit, short-term overdraft and credit facilities with various financial institutions in the countries in which we conduct business. Many of the In-country Operations also have limited credit facilities. These credit facilities fall into the following categories: asset-based financing facilities, letters of credit and performance bond facilities, and unsecured revolving credit facilities and lines of credit. The lines of credit are available sources of short-term liquidity for us.

As of ~~March~~June 3130, 2013 and December 31, 2012, the total amounts outstanding under our lines of credit, overdraft and credit facilities were $5143.26 million and $50.0 million, respectively, of which $4034.08 million and $38.6 million, respectively, related to our Miami Operations and $118.28 million and $11.4 million, respectively, related to our In-country Operations.

3743

SBA Miami—PNC Bank Revolving Credit Facility

On July 25, 2011, SBA, together with its consolidated subsidiaries, entered into a revolving credit and security agreement with PNC Bank, or the PNC Credit Facility, providing for a secured revolving credit facility including standby letters of credit commitments. SBA’s obligations are secured by a first priority lien on all of its assets. Pursuant to its guaranty agreement with PNC Bank, we guarantee the performance of SBA’s obligations under the PNC Credit Facility.

On January 25, 2012, SBA, together with its consolidated subsidiaries, executed a first amendment to the PNC Credit Facility increasing the maximum amount available for borrowing under the facility from $30.0 million to $50.0 million, including standby letters of credit commitments in an aggregate undrawn face amount of up to $3.0 million. The borrowing capacity under the PNC Credit Facility is based upon 85.0% of eligible accounts receivable, plus the lesser of: (i) 60.0% of eligible domestic inventory; (ii) 90% of the liquidation value of eligible inventory; or (iii) $25.0 million, as amended. The PNC Credit Facility has a three-year term and is scheduled to mature on July 25, 2014. SBA uses the PNC Credit Facility for working capital, capital expenditures and general corporate purposes.

The PNC Credit Facility contains provisions requiring us and SBA to maintain compliance with minimum consolidated fixed charge coverage ratios each not less than 1.00 to 1.00 for us and 1.10 to 1.00 for SBA, in each case, for the four quarter period ending as of the end of each fiscal quarter. The PNC Credit Facility is subject to several customary covenants and certain events of default, including but not limited to, non-payment of principal or interest on obligations when due, violation of covenants, creation of liens, breaches of representations and warranties, cross default to certain other indebtedness, bankruptcy events and change of ownership or control. In addition, the PNC Credit Facility contains a number of covenants that, among other things, restrict SBA’s ability to: (i) incur additional indebtedness; (ii) make certain capital expenditures; (iii) guarantee certain obligations; (iv) create or allow liens on certain assets; (v) make investments, loans or advances; (vi) pay dividends, make distributions or undertake stock and other equity interest buybacks; (vii) make certain acquisitions; (viii) engage in mergers, consolidations or sales of assets; (ix) use the proceeds of the revolving credit facility for certain purposes; (x) enter into transactions with affiliates in non-arms’ length transactions; (xi) make certain payments on subordinated indebtedness; and (xii) acquire or sell subsidiaries.

AsOn May 10, 2013, SBA obtained a waiver of default for the guarantor fixed charge coverage ratio that existed as of March 31, 2013. Additionally, SBA’s ~~outstanding draws~~obtained ~~against~~an amendment to the PNC Credit Facility ~~were~~which ~~$40.0~~amended ~~million,~~the ~~net~~required ofguarantor ~~$1.5~~fixed ~~million~~charge ~~excess~~coverage ~~cash~~ratio infor ~~bank,~~us ~~and~~to ~~the~~be ~~remaining~~not ~~amount~~less than ~~available~~0.84 ~~was~~to ~~$10~~1.000 ~~million~~for the four quarter period ended as of June 30, 2013. AsFor the four quarter period ending as of ~~March~~September 3130, 2013, ~~SBA~~and ~~did~~for ~~not~~each ~~have~~quarter ~~any~~thereafter, ~~outstanding~~the ~~undrawn~~guarantor ~~standby~~fixed ~~letters~~charge ofcoverage ~~credit.~~ratio remains the same as prior to the amendment, not less than 1.00 to 1.00.

OnAs ~~May 10~~of June 30, 2013, ~~SBA~~and ~~obtained~~December ~~a waiver of default for the guarantor fixed charge coverage ratio that existed as of March~~ 31, ~~2013. Additionally~~2012, SBA’s ~~obtained~~outstanding andraws ~~amendment to~~ against the PNC Credit Facility ~~which~~were ~~amended~~$34.8 ~~the~~million ~~required~~and ~~guarantor~~$38.6 ~~fixed~~million, ~~charge~~respectively, ~~coverage~~net ~~ratio~~of ~~for~~$6.6 usmillion toand be$1.5 ~~not~~million, ~~less~~respectively, ~~than~~excess ~~0.84~~cash toin ~~1.00~~bank, ~~for~~and the ~~four~~remaining ~~quarter~~amount ~~period~~available ~~ending~~was ~~as of June 30, 2013~~$15.2 ~~For~~million ~~the~~and ~~four~~$11.4 ~~quarter~~million, ~~period~~respectively. ~~ending~~As as of ~~September~~ June 30, 2013, and ~~for~~December ~~each~~31, ~~quarter thereafter~~2012, ~~the~~SBA ~~guarantor~~did ~~fixed~~not ~~charge~~have ~~coverage~~any ~~ratio~~outstanding ~~remains~~undrawn ~~the~~standby ~~same~~letters asof ~~prior to the amendment, not less than 1~~credit.00 ~~to 1.00.~~

38As of June 30, 2013, SBA was in compliance with all of its covenants under the PNC Credit Facility.

Intcomex, Inc. – 13¹/₄% Senior Notes

As of ~~March~~June 3130, 2013, we had $110.0 aggregate principal amount outstanding of our 13 1/4% Second Priority Senior Secured Notes due December 15, 2014 with an interest rate of 13.25% per year, payable semi-annually on June 15 and December 15 of each year. Our 13 1/4% Senior Notes are registered under the Securities Act of 1933 and do not bear any legend restricting transfer.

In accordance with the terms of the 13¹/₄% Senior Notes, we redeemed $5.0 million aggregate principal amount of the 13¹/₄% Senior Notes as of December 15, 2011 and 2012 and, subject to certain requirements, are required to redeem $10.0 million aggregate principal amount of the 13¹/₄% Senior Notes on December 15, 2013, at a redemption price equal to 100% of the aggregate principal amount of the 13¹/₄% Senior Notes to be redeemed, together with accrued and unpaid interest to the redemption date.

The indenture governing our 13 ¹/₄% Senior Notes imposes operating and financial restriction on us. These restrictive covenants limit our ability, among other things to: (i) incur additional indebtedness or enter into sale and leaseback obligations; (ii) pay certain dividends or make certain distributions on our capital stock or repurchase our capital stock; (iii) make certain investments or other restricted payments; (iv) place restrictions on the ability of subsidiaries to pay dividends or make other payments to us; (v) engage in transactions with shareholders or affiliates; (vi) sell certain assets or merge with or into other companies; (vii) guarantee indebtedness; and (viii) create liens.

The 13 1/4% Senior Notes contain a single financial restrictive covenant. We must maintain a consolidated leverage ratio not to exceed 4.75 to 1.00. Our failure to comply with the restrictive covenant could result in an event of default, which, if not cured or waived, could result in either of us having to repay our respective borrowings before their respective due dates. IfWhile we are actively analyzing various refinancing options aimed at lowering interest rate on our long term debt, improving liquidity and enhancing overall financial flexibility, no assurances can be given that we will be able to obtain such financing or improve terms. If we are forced to refinance these borrowings on less favorable terms, our results of operations or financial condition could be harmed. In addition, if we are in default under any of our existing or future debt facilities, we also will not be able to borrow additional amounts under those facilities to the extent they would otherwise be available. As of ~~March 31~~June 30, 2013 and December 31, 2012, we had a consolidated total leverage ratio of 43.1668 to 1.00 and 3.32 to 1.00, respectively.

On June 14, 2012, we made a mandatory semi-annual interest payment of $7.6 million on our 13 ¹/₄% Senior Notes.

On September 5, 2012, we purchased $1.0 million face value of our 13 ¹/₄% Senior Notes in an arm’s length transaction, at 102.25 of face value plus accrued interest. We recognized a loss on the redemption of our 13¹/₄% Senior Notes of $23.0 thousand for the year ended December 31, 2012, which is included in other expense, net in the consolidated statements of operations and comprehensive (loss) income. On December 14, 2012, we redeemed $4.0 million face value of our 13 ¹/₄% Senior Notes, as required by the indenture governing our 13¹/₄% Senior Notes, at 100.00 of face value. Also, on December 14, 2012, we made a semi-annual interest payment of $7.6 million, satisfying our December 15, 2012 redemption requirement.

AsOn ~~of March~~June 3114, 2013, ~~and~~we ~~December 31,~~made ~~2012,~~a ~~the~~mandatory ~~aggregate~~semi-annual ~~principal~~interest ~~amount~~payment of ~~the remaining outstanding 13 1/4% Senior Notes was~~ $~~110~~7.03 million, ~~and~~on ~~the~~our ~~carrying value was $107.5 million and $107.2 million, respectively. As of March~~13 ~~31, 2013 and December 31, 2012, we were in compliance with all of the covenants and restrictions under the 131~~1/4% Senior Notes.

As of June 30, 2013 and December 31, 2012, the aggregate principal amount of the remaining outstanding 13 ¹/₄% Senior Notes was $110.0 million, and the carrying value was $107.9 million and $107.2 million, respectively.

As of June 30, 2013 and December 31, 2012, we were in compliance with all of the covenants and restrictions under the 13¹/₄% Senior Notes.

Off-Balance Sheet Arrangements

We have agreements with unrelated third parties to factor specific accounts receivable in several of our In-country Operations. The factoring is treated as a sale in accordance with FASB ASC 860, Transfers and Servicing, and is accounted for as an off-balance sheet arrangement. Proceeds from the transfers reflect the face value of the account less a discount, which is recorded as a charge to interest expense in our consolidated statements of operations and comprehensive (loss) income in the period the sale occurs. Net funds received are recorded as an increase to cash and a reduction to accounts receivable outstanding in our consolidated balance sheets. We report the cash flows attributable to the sale of receivables to third parties and the cash receipts from collections made on behalf of and paid to third parties, on a net basis as trade accounts receivables in cash flows from operating activities in our consolidated statement of cash flows.

We act as the collection agent on behalf of the third party for the arrangements and have no significant retained interests or servicing liabilities related to the accounts receivable sold. In order to mitigate credit risk related to our factoring of accounts receivable, we may purchase credit insurance, from time to time, for certain factored accounts receivable, resulting in risk of loss being limited to the factored accounts receivable not covered by credit insurance, which we do not believe to be significant.

3945

Indemnity Letter Agreement

On March 16, 2011, we entered into an indemnity letter agreement with Anthony and Michael Shalom, or the Shaloms, and a CVCI subsidiary, CVCI Intcomex Investment LP, or CVCI Investment, pursuant to which we agreed to return approximately $0.9 million, or the Reimbursement Amount, to the Shaloms. The return of the Reimbursement Amount is a result of an overpayment by the Shaloms of an indemnification payment owed to CVCI Investment and paid to us pursuant to an indemnity agreement letter between the Shaloms and CVCI Investment, dated as of June 29, 2007. The Reimbursement Amount represents a refund claimed by the Shaloms, as a result of a tax benefit recognized by us in connection with the gross indemnifiable loss. Accordingly, the original indemnification payment exceeded the ultimate indemnifiable loss because it did not account for the effect of this tax benefit. The Reimbursement Amount is equal to the indemnifying shareholders’ prorata share of the tax benefit recognized. The Reimbursement Amount is payable at the earlier of: (i) such time that such payment is not prohibited by any agreement by which we or any of its subsidiaries is bound; and (ii) a change of control other than that as a result of an IPO.

Restricted Stock Grant Agreements

In March 2013, our Board of Directors authorized the issuance of 123 restricted shares of Common Stock, with a 2.75-year cliff vesting period, to each of the following Company’s directors: Messrs. Henriques and Madden, as annual equity consideration for their board membership for the years ended December 31, 2012 and 2013.

In April 2013, we authorized the issuance of 185 vested, restricted shares of the Common Stock for Messr. Riojas, pursuant to the executive employment agreement with an effective date of May 13, 2013, as a one-time sign-on bonus incentive for Messr. Riojas to accept the terms of the agreement. In accordance with the terms of the agreement, the shares will be awarded on the earliest of (a) the consummation of a change of control; (b) the date of termination; and (c) 36 months following the effective date of the agreement.

Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in conformity with U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and judgments related to assets, liabilities, contingent assets and liabilities, revenue and expenses. Our estimates are based on our historical experience and a variety of other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making our estimates about the carrying values of assets and liabilities that are not readily apparent from other sources. Although we believe our estimates, judgments and assumptions are appropriate and reasonable based upon available information, these assessments are subject to various other factors. Actual results may differ from these estimates under different assumptions and conditions.

We believe the following critical accounting policies are affected by our significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition. Revenue is recognized when persuasive evidence of an arrangement exists, the sales price is fixed or determinable, collection of the related receivable is reasonably assured and delivery has occurred. Delivery to customers occurs at the point of shipment, provided that title and risk of loss have transferred and no significant obligations remain. We allow our customers to return defective products for exchange or credit within 30 days of delivery based on the warranty of the OEM. An exception is infrequently made for long-standing customers with current accounts, on a case-by-case basis and upon approval by management. A return is recorded in the period of the return because, based on past experience, these returns are infrequent and immaterial.

Our revenues are reported net of any sales, gross receipts or value added taxes. Shipping and handling costs billed to customers are included in revenue and related expenses are included in the cost of revenue.

We extend a warranty for products to customers with the same terms as the OEM’s warranty to us. All product-related warranty costs incurred by us are reimbursed by the OEMs.

Accounts Receivable. We provide allowances for doubtful accounts on our accounts receivable for estimated losses resulting from our customers’ inability to make required payments due to changes in our customers’ financial condition or other unanticipated events, which could result in charges for additional allowances exceeding our expectations. These estimates require judgment and are influenced by factors, including but not limited to, the following: the large number of customers and their dispersion across wide geographic areas; the fact that no single customer accounted for more than 21.2% and 32.80%, respectively, of our consolidated revenue for the ~~three~~ six months ended ~~March~~June 3130, 2013 and 2012; the continual credit evaluation of our customers’ financial condition; the aging of our customers’ receivables, individually and in the aggregate; the value and adequacy of credit insurance coverage; the value and adequacy of collateral received from our customers (in certain circumstances); our historical loss experience; and, increases in credit risk due to an economic downturn resulting in our customers’ inability to obtain capital. Uncollectible accounts are written-off against the allowance on an annual basis.

Vendor Programs. We receive funds from vendors for price protection, product rebates, marketing and promotions and competitive programs, which are recorded as adjustments to product costs or selling, general and administrative expenses according to the nature of the program. Some of these programs may extend over one or more quarterly reporting periods. We recognize rebates or other vendor incentives as earned based on sales of qualifying products or as services are provided in accordance with the terms of the related program. We provide reserves for receivables on vendor programs for estimated losses resulting from vendors’ inability to pay or rejections of claims by vendors. These reserves require judgment and are based upon aging and management’s estimate of collectability.

Inventories. Our inventory levels are based on our projections of future demand and market conditions. Any unanticipated decline in demand or technological changes could cause us to have excess or obsolete inventories. On an ongoing basis, we review for estimated excess or obsolete inventories and make provisions for our inventories to reflect their estimated net realizable value based upon our forecasts of future demand and market conditions. These forecasts require judgment as to future demand and market conditions. If actual market conditions are less favorable than our forecasts, additional inventory obsolescence provisions may be required. Our estimates are influenced by the following considerations: the availability of protection from loss in value of inventory under certain vendor agreements; the extent of our right to return to vendors a percentage of our purchases; the aging of inventories; variability of demand due to an economic downturn and other factors; and, the frequency of product improvements and technological changes. Rebates earned on products sold are recognized when the product is shipped to a third party customer and are recorded as a reduction to cost of revenue.

Goodwill, Identifiable Intangible and Other Long-Lived Assets. We review goodwill at least annually for potential impairment or between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Our annual impairment review requires extensive use of accounting judgment and financial estimates, including projections about our business, our financial performance and the performance of the market and overall economy. Application of alternative assumptions and definitions could produce significantly different results. Because of the significance of the judgments and estimates used in the processes, it is likely that materially different amounts could result if different assumptions were made or if the underlying circumstances were changed.

Our goodwill represents the excess of the purchase price over the fair value of the net assets of acquired businesses. Potential impairment exists if the fair value of a reporting unit to which goodwill has been allocated is less than the carrying value of the reporting unit. The amount of an impairment loss is recognized as the amount by which the carrying value of the goodwill exceeds its implied value.

Future changes in the estimates used to conduct the impairment review, including revenue projections, market values and changes in the discount rate used could cause the analysis to indicate that our goodwill is impaired in subsequent periods and result in a write-off of a portion or all of the goodwill. The discount rate used is based on our capital structure and, if required, an additional premium on the reporting unit based upon its geographic market and operating environment. The assumptions used in estimating revenue projections are consistent with internal planning.

Our intangible assets are presented at cost, net of accumulated amortization. Intangible assets are amortized on a straight line basis over their estimated useful lives and assessed for impairment. We recognize an impairment of long-lived assets if the net book value of such assets exceeds the estimated future undiscounted cash flows attributable to such assets. If the carrying value of a long-lived asset is considered impaired, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset for assets to be held and used, or the amount by which the carrying value exceeds the fair value less cost to dispose for assets to be disposed. Fair value is determined using the anticipated cash flows discounted at a rate commensurate with the risk involved. We test intangible assets for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

In addition, we review other long-lived assets, principally property, plant and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the carrying amount of an asset exceeds the asset’s fair value, we measure and record an impairment loss for the excess. We assess an asset’s fair value by determining the expected future undiscounted cash flows of the asset. There are numerous uncertainties and inherent risks in conducting business, such as general economic conditions, actions of competitors, ability to manage growth, actions of regulatory authorities, pending investigations or litigation, customer demand and risk relating to international operations. Adverse effects from these or other risks may result in adjustments to the carrying value of our other long-lived assets.

There are numerous uncertainties and inherent risks in conducting business, such as but not limited to general economic conditions, actions of competitors, ability to manage growth, actions of regulatory authorities, pending investigations and/or litigation, customer demand and risk relating to international operations. Adverse effects from these risks may result in adjustments to the carrying value of our assets and liabilities in the future, including but not necessarily limited to, goodwill.

Income taxes. We account for the effects of income taxes resulting from activities during the current and preceding years. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases as measured by the enacted tax rates which will be in effect when these differences reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date under the law. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized, unless it is more likely than not that such assets will be realized.

We are subject to income and other related taxes in areas in which we operate. When recording income tax expense, certain estimates are required by management due to timing and the impact of future events on when income tax expenses and benefits are recognized by us. We periodically evaluate our NOLs and other carryforwards to determine whether gross deferred tax assets and related valuation allowances should be adjusted for future realization in our consolidated financial statements.

Highly certain tax positions are determined based upon the likelihood of the positions sustained upon examination by the taxing authorities. The benefit of a tax position is recognized in the financial statements in the period during which management believes it is more likely than not that the position will be sustained.

In the event of a distribution of the earnings of certain international subsidiaries, we would be subject to withholding taxes payable on those distributions to the relevant foreign taxing authorities. Since we currently intend to reinvest undistributed earnings of these international subsidiaries indefinitely, we have made no provision for income taxes that might be payable upon the remittance of these earnings. We have also not determined the amount of tax liability associated with an unplanned distribution of these permanently reinvested earnings. In the event that in the future we consider that there is a reasonable likelihood of the distribution of the earnings of these international subsidiaries (for example, if we intend to use those distributions to meet our liquidity needs), we will be required to make a provision for the estimated resulting tax liability, which will be subject to the evaluations and judgments of uncertainties described above.

We conduct business globally and, as a result, one or more of our subsidiaries file income tax returns in U.S. federal, state and foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities in the countries in which we operate. We are currently under ongoing tax examinations in several countries. While such examinations are subject to inherent uncertainties, we do not currently anticipate that any such examination would have a material adverse impact on our consolidated financial statements.

Commitments and Contingencies. We accrue for contingent obligations when the obligation is probable and the amount is reasonably estimable. As facts concerning contingencies become known, we reassess our position and make appropriate adjustments to the financial statements. Estimates that require judgment and are particularly sensitive to future changes include those related to taxes, legal matters, the imposition of international governmental monetary, fiscal or other controls, changes in the interpretation and enforcement of international laws (in particular related to items such as duty and taxation), and the impact of local economic conditions and practices, which are all subject to change as events evolve and as additional information becomes available.

As part of our normal course of business, we are involved in certain claims, regulatory and tax matters. In the opinion of our management, the final disposition of such matters will not have a material adverse impact on our results of operations and financial condition.

4248

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in our quantitative and qualitative disclosures about market risk during the fiscal quarter covered by this Quarterly Report from those disclosed in our Annual Report. For a detailed discussion of the quantitative and qualitative disclosures about market risk, see Part II. Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report.

Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of management, including ~~the~~our ~~Company’s~~ principal executive officer and principal financial officer, ~~the~~we ~~Company~~have ~~has~~ evaluated the effectiveness of its disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act for the end of the period covered by this Quarterly Report. Based on that evaluation, ~~the~~our ~~Company’s~~ principal executive officer and principal financial officer have concluded as of ~~March~~June 3130, 2013, that these controls and procedures were effective to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC, and is accumulated and communicated to management, including the principal executive officer and the principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during the quarterly period ended ~~March~~June 3130, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4349

Part II — OTHER INFORMATION

Item 1.

Legal Proceedings.

As of ~~March~~June 3130, 2013, we had no material legal proceedings pending. From time to time, we are the subject of legal proceedings arising in the ordinary course of business. We do not believe that the outcome of any legal proceedings currently pending or or threatened will have a material adverse ~~affect~~effect on our business, future consolidated results of operations and financial condition.

Item 1A.

Risk Factors.

In addition to the other information set forth in this Quarterly Report, readers should carefully consider the risk factors discussed in Part I—Financial Information, 1A. “Risk Factors” in our Annual Report, which could materially affect our business, future consolidated results of operations and financial condition. The risk factors described in the Annual Report may not be the only risk facing our Company. Additional risks and uncertainties that we currently deem to be immaterial or are not currently known to us may also materially and adversely affect our business, consolidated results of operations and financial condition.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

Not applicable.

Item 3.

Defaults Upon Senior Securities.

Not applicable.

Item 4.

Mine Safety Disclosures.

Not applicable.

Item 5.

Other Information.

OnNot ~~May 10, 2013, SBA obtained a waiver of default for the guarantor fixed charge coverage ratio that existed as of March 31, 2013~~applicable. Additionally, SBA obtained an amendment to the PNC Credit Facility which amended the required guarantor fixed charge coverage ratio for us to be not less than 0.84 to 1.00 for the four quarter period ending as of June 30, 2013. For the four quarter period ending as of September 30, 2013, and for each quarter thereafter, the guarantor fixed charge coverage ratio remains the same as prior to the amendment, not less than 1.00 to 1.00.

4450

Item 6.

Exhibits.

Exhibit No.		Description
#10.1		Restricted Stock Grant Agreement, dated as of March 31, 2013, between Intcomex, Inc. and Adolfo Henriques.*
#10.2		Restricted Stock Grant Agreement, dated as of March 31, 2013, between Intcomex, Inc. and Thomas Madden. *
10.3		Second Amendment to Revolving Credit and Security Agreement and Waiver, dated as of May 10, 2013 by and among Software Brokers of America, Inc., and its consolidated subsidiaries, as Borrower, and PNC Bank, National Association, as Lender and as Agent. *
31.1		Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2		Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INS		XBRL Instance Document**
101. INS		XBRL Instance Document**
101.SCH		XBRL Taxonomy Extension Schema**
101. SCH		XBRL Taxonomy Extension Schema**
101.CAL		XBRL Taxonomy Extension Calculation Linkbase**
101. CAL		XBRL Taxonomy Extension Calculation Linkbase**
101.DEF		XBRL Taxonomy Extension Definition Linkbase**
101.LAB		XBRL Taxonomy Extension Label Linkbase**
101.PRE		XBRL Taxonomy Extension Presentation Linkbase**
101. PRE		XBRL Taxonomy Extension Presentation Linkbase**

*	Filed herewith.

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

#51 ~~Indicates a management contract or a compensatory plan or arrangement.~~

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.

Signature	Title	Date
/s/ Anthony Shalom		May 13, 2013
/s/ Anthony Shalom Anthony Shalom	Chairman of the Board of Directors	August 13, 2013
Anthony Shalom	Chairman of the Board of Directors
/s/ Michael F. Shalom Michael F. Shalom	President and Chief Executive Officer	August 13, 2013
/s/ Michael F. Shalom
/s/ Juan Carlos Riojas Juan Carlos Riojas	Chief Financial Officer (Principal Accounting Officer)	August 13, 2013
Michael F. Shalom	President and Chief Executive Officer	May 13, 2013
/s/ Jose I. Ortega
Jose I. Ortega	Interim Chief Financial Officer	May 13, 2013

Exhibit Index

Exhibit No.		Description
10.1		Restricted Stock Grant Agreement, dated as of March 31, 2013, between Intcomex, Inc. and Adolfo Henriques.
10.2		Restricted Stock Grant Agreement, dated as of March 31, 2013, between Intcomex, Inc. and Thomas Madden.
10.3		Second Amendment to Revolving Credit and Security Agreement and Waiver, dated as of May 10, 2013 by and among Software Brokers of America, Inc., and its consolidated subsidiaries, as Borrower, and PNC Bank, National Association, as Lender and as Agent.
31.1		Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document
101. INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101. SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101. LAB		XBRL Taxonomy Extension Label Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101. PRE		XBRL Taxonomy Extension Presentation Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase

4652

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Filing Compare · Intcomex, Inc.