May 1, 2012

Systemax Reports First Quarter 2012 Financial Results

PORT WASHINGTON, N.Y.--(BUSINESS WIRE)-- Systemax Inc. (NYSE: SYX) today announced financial results for the first quarter ended March 31, 2012.

 

Performance Summary

(U.S. dollars in millions, except per share data)
Highlights     Quarter Ended
      March 31,
      2012     2011
Sales     $913.6     $ 929.9
Gross profit     $130.7     $130.5
Gross margin     14.3%     14.0%
Operating income     $10.6     $18.6
Operating margin     1.2%     2.0%
Diluted earnings per share     $0.19     $0.36
Special charges, net     $1.9     $0.5
Special charges, net, per diluted share, after tax     $0.03     $0.01
   

First Quarter 2012 Financial Highlights:

  • Consolidated sales declined 2% to $913.6 million in U.S. dollars. On a constant currency basis, sales declined 1%.
  • Business to business channel sales grew 7% to $512.7 million in U.S. dollars. On a constant currency basis, sales grew 8%.
  • Consumer channel sales declined 11% to $400.9 million in U.S. dollars. On a constant currency basis, sales declined 10%.
  • "Same store" business to business sales grew 8% and same store consumer sales declined 14% on a constant currency basis.
  • Special charges incurred were approximately $1.9 million on a pre-tax basis, or $0.03 per diluted share after tax, consisting of costs associated with senior staffing changes in our North America technology business, legal and professional fees related to the previously disclosed investigation and settlement with a former officer and director, and costs related to the planned closing and relocation of one of our smaller distribution centers to a new, significantly larger distribution and call center for our Industrial Products business.
  • Operating income decreased 43% to $10.6 million, primarily as a result of performance in our North America technology business.
  • Diluted earnings per share (EPS) was $0.19.

Richard Leeds, Chairman and Chief Executive Officer, commented, "On an overall basis, I am disappointed in our results for the quarter. The performance of our North America technology consumer business was below our internal expectations and masks the strong performance in the rest of the business. We are highly focused on re-establishing revenue growth and improving profitability in this business. The highlight of the quarter was our B2B operations. Our industrial products business grew 28%, which was its 8th consecutive quarter of organic revenue growth exceeding 25%. Our technology B2B businesses in both Europe and North America had another quarter of solid revenue growth."

"Our efforts to improve margins showed mixed performance. We recorded our fifth consecutive quarter of year over year gross margin improvement and reduced operating costs across most of our businesses. However, consolidated operating margin was significantly impacted by the results of our North America technology business. With a strong balance sheet, including cash balances of $111 million, a truly multi-channel and web-centric model which is diversified by market, geography and channel, Systemax remains well positioned for the future," Leeds concluded.

       

Channel

   

Quarter Ended
March 31,

   

2012

   

% of
Sales

   

Change y/y

   

2011

   

%
of Sales

Business to business1     $512.7     56%     7%     $480.5     52%
Consumer2     $400.9     44%     -11%     $449.4     48%
Consolidated Sales     $913.6     100%     -2%     $929.9     100%
1   Includes sales from managed business relationships, including outbound call centers and extranets, and the entire Industrial Products and Corporate segments
2 Includes sales from retail stores, consumer websites, inbound call centers and television shopping
 

Supplemental "Same Store" Channel Growth1 — Q1 2012 vs. Q1 2011

Channel     Change
Business to business     8%
Consumer     -14%
Consolidated Sales     -2%
1   Excludes revenue at retail stores, websites and call centers operating for less than 14 full months as of the beginning of the current comparison period and computed on a constant currency basis. The method of calculating comparable store and channel sales varies across the retail and direct marketing industry. As a result, Systemax's method of calculating comparable sales may not be the same as other companies' methods.
 

Supplemental Product Category Sales Summary

(in millions)
Product Category    

Quarter Ended
March 31,

    2012     % of Sales     Change y/y     2011     % of Sales
Computers     $262.2     29%     20%     $218.7     24%
Computer accessories & software     $259.6     28%     -4%     $270.6     29%
Consumer electronics     $167.0     18%     -19%     $205.6     22%
Computer components     $108.5     12%     -24%     $142.5     15%
Industrial products     $90.4     10%     28%     $70.8     8%
Other     $25.9     3%     19%     $21.7     2%
Consolidated Sales     $913.6     100%     -2%     $929.9     100%
 

Supplemental Business Unit Sales Summary

(in millions)
Business Unit    

Quarter Ended
March 31,

    2012     % of Sales     Change y/y     2011     % of Sales
Technology Products     $821.9     90%     -4%     $858.3     92%
Industrial Products     $90.4     10%     28%     $70.8     8%
Corporate and Other     $1.3     -%     63%     $0.8     -%
Consolidated Sales     $913.6     100%     -2%     $929.9     100%

In the first quarter of 2012 working capital grew by $14.4 million to $369.1 million, and cash and cash equivalents increased by $13.7 million to $111.0 million at March 31, 2012. The Company had availability under its credit facility of approximately $110.4 million and total cash and available liquidity of approximately $221.4 million at March 31, 2012. Short and long-term debt totaled approximately $9.1 million at March 31, 2012.

The Company's effective tax rate for the first quarter was 32.6% compared to 30.8% in the first quarter of 2011. The higher tax rate is the result of higher projected taxable income in jurisdictions with higher tax rates in 2012 as compared to 2011.

Earnings Conference Call Details

Systemax Inc. will host a teleconference to discuss its first quarter 2012 results today, May 1, 2012 at 5:00 p.m. Eastern Time. A live webcast of the teleconference will be available on the Company's website at www.systemax.com in the investor relations section. The webcast will also be archived on www.systemax.com for approximately 90 days.

About Systemax Inc.

Systemax Inc. (http://www.systemax.com), a Fortune 1000 company, sells personal computers, computer components and supplies, consumer electronics and industrial products through a system of branded e-Commerce websites, retail stores, relationship marketers and direct mail catalogs in North America and Europe. The primary brands are TigerDirect, CompUSA, Circuit City, MISCO, WStore and Global Industrial.

Forward-Looking Statements

This press release contains forward-looking statements about the Company's performance. These statements are based on management's estimates, assumptions and projections and are not guarantees of future performance. The Company assumes no obligation to update these statements. Actual results may differ materially from results expressed or implied in these statements as the result of risks, uncertainties and other factors including, but not limited to: (a) unanticipated variations in sales volume, (b) economic conditions and exchange rates, (c) actions by competitors, (d) the continuation of key vendor relationships, (e) the ability to maintain satisfactory loan agreements with lenders, (f) risks associated with the delivery of merchandise to customers utilizing common carriers, (g) the operation of the Company's management information systems, and (h) unanticipated legal and administrative proceedings. Please refer to "Risk Factors" and the Forward Looking Statements sections contained in the Company's Form 10-K for a more detailed explanation of the inherent limitations in such forward-looking statements.

SYSTEMAX INC.
Condensed Consolidated Statements of Operations — Unaudited

(In thousands, except per share amounts)

       
Quarter Ended
March 31*
2012 2011
Net sales $913,578 $929,867
Cost of sales 782,924 799,369
Gross profit 130,654 130,498
Gross margin 14.3% 14.0%
Selling, general and administrative expenses 118,225 111,369
Special charges 1,865 504
Operating income 10,564 18,625
Operating margin 1.2% 2.0%
Interest and other (income) expense, net 52 (979)
Income before income taxes 10,512 19,604
Provision for income taxes 3,429 6,038
Effective tax rate 32.6% 30.8%
Net income $7,083 $13,566
Net margin 0.8% 1.5%
 
Net income per common share:
Basic $0.19 $0.37
Diluted $0.19 $0.36
 
Weighted average common and

common equivalent shares:

Basic 36,836 37,157
Diluted 37,051 37,708
 

SYSTEMAX INC.

Condensed Consolidated Balance Sheets
(In thousands)
       
March 31* December 31*
2012 2011
Current assets:
Cash and cash equivalents $110,987 $97,254
Accounts receivable, net 281,536 268,980
Inventories 387,222 372,244
Prepaid expenses and other current assets 41,237 38,678
Total current assets 820,982 777,156
Property, plant and equipment, net 69,259 70,699
Goodwill, intangibles and other assets 66,518 66,695
Total assets $956,759 $914,550

 

Current liabilities:
Short-term debt $2,588 $2,552

Accounts payable, accrued expenses, and other current liabilities

449,331 419,900
Total current liabilities 451,919 422,452
Long-term debt 6,561 7,133
Other liabilities 31,541 30,673
Shareholders' equity 466,738 454,292
Total liabilities and shareholders' equity $956,759 $914,550

* Systemax manages its business and reports using a 52-53 week fiscal year that ends at midnight on the Saturday closest to December 31. For clarity of presentation, fiscal years and quarters are described as if they ended on the last day of the respective calendar month. The actual fiscal quarter ended on March 31, 2012. The first quarters of both 2012 and 2011 included 13 weeks.

Investor/Media Contacts:
Brainerd Communicators, Inc.
Dianne Pascarella / Nancy Zakhary
212-986-6667
pascarella@braincomm.com
nancy@braincomm.com

Source: Systemax Inc.

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