PFSweb, Inc. (Nasdaq: PFSW), a global provider of integrated
business process outsourcing (BPO) solutions, today announced
financial results for the second quarter ended June 30, 2005. Net
revenue in the second quarter totaled $84.9 million compared to
$80.0 million in the same period last year, an increase of 6%.
Service fee revenue climbed 47% to a record $16.3 million in the
2005 second quarter from $11.0 million in the year-earlier period.
Product revenue in the second quarter was $63.4 million versus
$65.3 million in the same period a year ago. PFSweb's net loss for
the second quarter ended June 30, 2005 was $546,000, or $0.02 per
basic and diluted share, compared to net income of $479,000, or
$0.02 per basic and diluted share, in the second quarter of 2004.
Results for the 2005 second quarter include incremental costs of
approximately $0.2 million related to the previously announced
relocation of two distribution facilities to the new Airways
Distribution Center in Southaven, Miss. Earnings before Interest,
Taxes, Depreciation and Amortization (EBITDA) in the second quarter
of 2005 totaled $1.6 million versus $2.2 million in the same period
last year. Gross profit increased to $8.0 million from $7.9 million
in the 2004 second quarter. The weighted average common shares
outstanding on a diluted basis for the three months ended June 30,
2005 were 22,419,000 shares compared to 23,129,000 in the prior
year. Mark Layton, Chief Executive Officer of PFSweb, said, "Our
June quarter results reflect strong growth in service fee revenue
for the second consecutive quarter as we continued the rollout of
new business signed last year. Our strategy to enhance service fees
through large contracts with Fortune 500 and Global 1000 companies
led to 47% growth in service fee revenue during this past quarter.
With the initial implementation of our new contracts now complete,
we will focus on increasing productivity and reducing operating
expenses from this business to drive greater gross profit results."
For the six months ended June 30, 2005, net revenues totaled $166.7
million compared to $157.5 million in the 2004 six-month period, an
increase of 6%. Service fee revenue increased 67% to $30.4 million
compared to $18.2 million and product revenue was $127.1 million
versus $133.9 million for the six months ended June 30, 2004. The
Company's net loss for the six months ended June 30, 2005 narrowed
to $760,000, or $0.03 per basic and diluted share, compared to a
net loss of $1.3 million, or $0.06 per basic and diluted share, in
the corresponding period in 2004. EBITDA for the six months ended
June 30, 2005 climbed 55% to $3.4 million from $2.2 million in the
same period last year. Gross profit rose to $15.3 million for the
first six months in 2005 from $13.9 million in the year-earlier
period, an increase of 10%. Tom Madden, PFSweb Chief Financial
Officer, said, "In the June 2005 quarter, PFSweb maintained its
strong growth in service fee revenue. Results in the quarter were
impacted by additional expenses in supporting new and existing
contracts as well as costs for the relocation of facilities from
Memphis to Southaven. Our 306,000-square-foot expansion in the
advanced Airways Distribution Center was completed on schedule in
the month of June and we now operate a total of 908,000 square ft.
in Southaven. We expect our relocation efforts to enhance our
operating efficiencies and leading world-class service as we
continue to grow the business. During the June 2005 quarter, our
SG&A expenses also increased from the corresponding period of
the prior year and on a sequential quarterly basis due to the
unfavorable impact of exchange rates, increased sales and marketing
costs and certain personnel related costs. "In the current third
quarter, we expect to incur additional relocation related charges
of approximately $1.0 million, which includes a previously
unanticipated, incremental charge estimated to be approximately
$0.5 million related to a lease termination, bringing our total
expected relocation related expenses to approximately $1.2
million." Mr. Layton concluded, "PFSweb has made key investments in
sales and marketing this year to generate a stable, more profitable
revenue stream. This strategic focus to broaden our client base by
targeting additional blue-chip companies has lengthened our sales
cycle. We remain confident in our ability to sign new long-term
contracts, as well as additional project work, that will drive
future service fees and stronger gross margins. We are pleased by
our recently announced agreement with greenMango and are targeting
more to follow in the second half of 2005. Our pipeline for
potential new business remains strong, including current pending
proposals totaling more than $40 million in annual service fees. As
always, however, it is difficult to predict how many proposals we
will win. "For the current fiscal year, we are now anticipating
service fee revenue to achieve 30% to 40% growth, while product
revenue is now expected to decline approximately 5% as compared to
the prior year. We continue to target to achieve earnings per share
of $0.02 to $0.05 in 2005, excluding the impact of relocation
related costs expected to total approximately $1.2 million, or
$0.05 per share (or a loss of $0.03 to $0.00 per share including
the impact of such costs). We do not believe such costs are
reflective of our core business activities." PFSweb has scheduled a
conference call for Monday, August 15, 2005 at 10:00 a.m. Central
Time (11:00 a.m. Eastern Time). To listen to the call, please dial
(973) 409-9255 at least five minutes before the scheduled start
time. Investors can also access the call in a "listen only" mode
via the Internet at the Company's website, www.pfsweb.com. Please
allow extra time prior to the call to visit the site and download
any necessary audio software. A digital replay of the conference
call will be available through August 29, 2005 at (973) 341-3080,
pin number: 6310468. The replay also will be available at the
company's web site for a limited time. Non-GAAP Financial Measures
This news release contains the non-GAAP measure EBITDA. EBITDA or
earnings before interest, taxes, depreciation, and amortization,
and excluding equity in earnings of affiliate, is widely used by
analysts, investors and other interested parties. We present EBITDA
because we believe it is useful in evaluating our operating
performance compared to that of other companies in our industry, as
the calculation of EBITDA eliminates the effect of financing,
income taxes and the accounting effects of capital spending, which
items may vary from different companies for reasons unrelated to
overall operating performance. About PFSweb, Inc. PFSweb develops
and deploys integrated business infrastructure solutions and
fulfillment services for Fortune 1000, Global 2000 and brand name
companies, including third party logistics, call center support and
e-commerce services. The company serves a multitude of industries
and company types, including such clients as Adaptec (Nasdaq:ADPT),
CHiA'SSO, FLAVIA(R) Beverage Systems, Hewlett-Packard (NYSE:HPQ),
iGo/Mobility Electronics (Nasdaq:MOBE), International Business
Machines (NYSE:IBM), Nokia (NYSE:NOK), Pfizer, Inc. (NYSE:PFE),
Raytheon Aircraft Company, Rene Furterer USA, Roots, Inc.,
Smithsonian Institution and Xerox (NYSE:XRX). The matters discussed
in this news release, particularly information regarding future
revenue, earnings, business plans and goals, consist of
forward-looking information within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 and are subject to and involve risks and
uncertainties, which could cause actual results to differ
materially from the forward-looking information. Such statements
are not guarantees of future performance and involve risks,
uncertainties and assumptions that are difficult to predict. These
statements are based on assumptions and estimates that management
believes are reasonable based on currently available information;
however, management's assumptions and the Company's future
performance are both subject to a wide range of business risks and
uncertainties, and there is no assurance that these goals and
projections can or will be met. Any number of factors could cause
actual results to differ materially. The Company undertakes no
obligation to publicly update or revise any forward-looking
statements. All forward-looking information contained herein is
subject to the risk factors and uncertainties described in the
Company's filings with the Securities and Exchange Commission,
which risk factors and uncertainties are incorporated by this
reference as though fully set forth herein. -0- *T Exhibit A
PFSweb, Inc. and Subsidiaries Unaudited Condensed Consolidated
Statements of Operations (A) (In Thousands, Except Per Share Data)
Three Months Ended Six Months Ended JUNE 30, JUNE 30,
------------------ ------------------- 2005 2004 2005 2004 --------
------- -------- -------- Revenues: Product revenue, net $ 63,438
$65,304 $127,068 $133,874 Service fee revenue 16,298 11,034 30,383
18,165 Pass-through revenue 5,134 3,682 9,284 5,466 --------
------- -------- -------- Total revenues 84,870 80,020 166,735
157,505 -------- ------- -------- -------- Costs of revenues: Cost
of product revenue 59,613 61,723 119,250 126,176 Cost of service
fee revenue 12,102 6,714 22,870 11,967 Pass-through cost of revenue
5,134 3,682 9,284 5,466 -------- ------- -------- -------- Total
costs of revenues 76,849 72,119 151,404 143,609 -------- -------
-------- -------- Gross profit 8,021 7,901 15,331 13,896 Selling,
general and administrative expenses 7,952 6,910 14,918 14,042
-------- ------- -------- -------- Income from operations 69 991
413 (146) Interest expense, net 474 324 793 752 -------- -------
-------- -------- Income (loss) from before income taxes (405) 667
(380) (898) Income tax provision 141 188 380 390 -------- -------
-------- -------- Net income (loss) $ (546) $ 479 $ (760) $ (1,288)
======== ======= ======== ======== Net income (loss) per share:
Basic $ (0.02) $ 0.02 $ (0.03) $ (0.06) ======== ======= ========
======== Diluted $ (0.02) $ 0.02 $ (0.03) $ (0.06) ======== =======
======== ======== Weighted average number of shares outstanding:
Basic 22,419 21,239 22,278 21,212 ======== ======= ========
======== Diluted 22,419 23,129 22,278 21,212 ======== =======
======== ======== EBITDA (B) $ 1,579 $ 2,201 $ 3,425 $ 2,190
======== ======= ======== ======== (A) THE FINANCIAL DATA ABOVE
SHOULD BE READ IN CONJUNCTION WITH THE AUDITED CONSOLIDATED
FINANCIAL STATEMENTS OF PFSWEB, INC. INCLUDED IN ITS FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 2004. (B) A RECONCILIATION OF NET
INCOME (LOSS) TO EBITDA IS AS FOLLOWS: Three Months Ended Six
Months Ended JUNE 30, JUNE 30, ------------------
------------------- 2005 2004 2005 2004 -------- ------- --------
-------- Net income (loss) $ (546) $ 479 $ (760) $ (1,288) Income
tax provision 141 188 380 390 Interest expense, net 474 324 793 752
Depreciation and amortization 1,510 1,210 3,012 2,336 --------
------- -------- -------- EBITDA $ 1,579 $ 2,201 $ 3,425 $ 2,190
======== ======= ======== ======== EXHIBIT A (CONTINUED) PFSweb,
Inc. and Subsidiaries Consolidated Balance Sheets (In Thousands,
Except Share Data) June 30, December 31, 2005 2004 (UNAUDITED)
------------ ------------- ASSETS -------- CURRENT ASSETS: Cash and
cash equivalents $ 13,439 $ 13,592 Restricted cash 937 2,746
Accounts receivable, net of allowance for doubtful accounts of $435
and $504 at June 30, 2005 and December 31, 2004, respectively
43,818 41,565 Inventories, net 46,384 44,947 Other receivables
7,464 8,061 Prepaid expenses and other current assets 3,423 3,349
----------- ------------ Total current assets 115,465 114,260
----------- ------------ PROPERTY AND EQUIPMENT, net 13,812 14,264
RESTRICTED CASH 300 675 OTHER ASSETS 1,261 1,128 -----------
------------ Total assets $ 130,838 $ 130,327 ===========
============ LIABILITIES AND SHAREHOLDERS' EQUITY
-------------------------------------- CURRENT LIABILITIES: Current
portion of long-term debt and capital lease obligations $ 24,232 $
19,098 Trade accounts payable 57,911 61,583 Accrued expenses 9,881
10,971 ----------- ------------ Total current liabilities 92,024
91,652 ----------- ------------ LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS, less current portion 7,049 7,232 OTHER LIABILITIES
1,731 1,517 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY:
Preferred stock, $1.00 par value; 1,000,000 shares authorized; none
issued and outstanding -- -- Common stock, $0.001 par value;
40,000,000 shares authorized; 22,521,308 and 21,665,585 shares
issued at June 30, 2005 and December 31, 2004, respectively; and
22,435,008 and 21,579,285 outstanding at June 30, 2005 and December
31, 2004, respectively 23 22 Additional paid-in capital 58,599
56,645 Accumulated deficit (29,837) (29,077) Accumulated other
comprehensive income 1,334 2,421 Treasury stock at cost, 86,300
shares (85) (85) ----------- ------------ Total shareholders'
equity 30,034 29,926 ----------- ------------ Total liabilities and
shareholders' equity $ 130,838 $ 130,327 =========== ============
Exhibit B PFSweb, Inc. and Subsidiaries Unaudited Consolidating
Statements of Operations for the Three Months Ended June 30, 2005
(In Thousands) BUSINESS SUPPLIES DISTRIBUTORS PFSWEB, HOLDINGS, LLC
ELIMINATIONS CONSOLIDATED INC. ----------- -------------
------------ ------------ REVENUES: Product revenue, net $ - $
63,438 $ - $ 63,438 Service fee revenue 16,298 - - 16,298 Service
fee revenue, affiliate 2,345 - (2,345) - Pass-through revenue 5,190
- (56) 5,134 ----------- ------------- ------------ ------------
Total revenues 23,833 63,438 (2,401) 84,870 COSTS OF REVENUES: Cost
of product revenue - 59,613 - 59,613 Cost of service fee revenue
12,801 - (699) 12,102 Pass-through cost of revenue 5,190 - (56)
5,134 ----------- ------------- ------------ ------------ Total
costs of revenues 17,991 59,613 (755) 76,849 -----------
------------- ------------ ------------ Gross profit 5,842 3,825
(1,646) 8,021 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 6,864
2,734 (1,646) 7,952 ----------- ------------- ------------
------------ Income (loss) from operations (1,022) 1,091 - 69
EQUITY IN EARNINGS OF AFFILIATE 367 - (367) - INTEREST EXPENSE
(INCOME), NET (56) 530 - 474 ----------- ------------- ------------
------------ Income (loss) before income taxes (599) 561 (367)
(405) INCOME TAX PROVISION (BENEFIT) (53) 194 - 141 -----------
------------- ------------ ------------ NET INCOME (LOSS) $ (546) $
367 $ (367) $ (546) =========== ============= ============
============ A reconciliation of net income (loss) to EBITDA
follows: Net income (loss) $ (546) $ 367 $ (367) $ (546) Income tax
expense (benefit) (53) 194 - 141 Interest expense (income) (56) 530
- 474 Equity in earnings of affiliate (367) - 367 - Depreciation
and amortization 1,510 - - 1,510 ----------- -------------
------------ ------------ EBITDA $ 488 $ 1,091 $ - $ 1,579
=========== ============= ============ ============ Exhibit B
(continued) PFSweb, Inc. and Subsidiaries Unaudited Condensed
Consolidating Balance Sheets as of June 30, 2005 (In Thousands)
BUSINESS SUPPLIES DISTRIBUTORS PFSWEB, HOLDINGS, LLC ELIMINATIONS
CONSOLIDATED INC. --------- ------------- ------------
------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $
10,384 $ 3,055 $ - $ 13,439 Restricted cash 583 354 - 937 Accounts
receivables, net 16,999 26,926 (107) 43,818 Inventories, net -
46,384 - 46,384 Other receivables - 7,464 - 7,464 Prepaid expenses
and other current assets 1,834 1,589 - 3,423 -------- ------------
----------- ------------ Total current assets 29,800 85,772 (107)
115,465 -------- ------------ ----------- ------------ PROPERTY AND
EQUIPMENT, net 13,812 - - 13,812 NOTE RECEIVABLE FROM AFFILIATE
7,005 - (7,005) - RESTRICTED CASH 300 - - 300 INVESTMENT IN
AFFILIATE 6,863 - (6,863) - OTHER ASSETS 1,261 - - 1,261 --------
------------ ----------- ------------ Total assets $ 59,041 $
85,772 $ (13,975) $ 130,838 ======== ============ ===========
============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT
LIABILITIES: Current portion of long-term debt and capital lease
obligations $ 7,775 $ 16,457 $ - $ 24,232 Trade accounts payable
5,621 52,397 (107) 57,911 Accrued expenses 6,882 2,999 - 9,881
-------- ------------ ----------- ------------ Total current
liabilities 20,278 71,853 (107) 92,024 -------- ------------
----------- ------------ LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS, less current portion 7,049 - - 7,049 NOTE PAYABLE TO
AFFILIATE - 7,005 (7,005) - OTHER LIABILITIES 1,731 - - 1,731
COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Common stock 23
- - 23 Capital contributions - 1,000 (1,000) - Additional paid-in
capital 58,599 - - 58,599 Retained earnings (accumulated deficit)
(29,886) 4,336 (4,287) (29,837) Accumulated other comprehensive
income 1,332 1,578 (1,576) 1,334 Treasury stock (85) - - (85)
-------- ------------ ----------- ------------ Total shareholders'
equity 29,983 6,914 (6,863) 30,034 -------- ------------
----------- ------------ Total liabilities and shareholders' equity
$ 59,041 $ 85,772 $ (13,975) $ 130,838 ======== ============
=========== ============ *T
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