PFSweb, Inc. (Nasdaq: PFSW), a global provider of business process
outsourcing (�BPO�) solutions for both online and traditional
commerce, today announced its financial results for the second
quarter and six months ended June 30, 2007. Summary of consolidated
results for the second quarter ended June 30, 2007: Total reported
revenue was $108.4 million, compared to $109.3 million for the
second quarter of 2006; -- eCOST.com revenue was $27.1 million,
compared to $21.6 million in the first quarter of 2007 and $28.8
million for the same period in 2006; Adjusted EBITDA (as defined)
was $3.4 million versus $3,000 for the same period last year; Net
income was $154,000, or $0.00 per basic and diluted share, compared
to a net loss of $3.2 million, or $0.07 per basic and diluted
share, for the second quarter of 2006; Merchandise sales (as
defined) totaled approximately $649 million for the second quarter
of 2007 versus $662 million for the same period last year; Total
cash, cash equivalents and restricted cash equaled $16.9 million as
of June 30, 2007. Summary of consolidated results for the six
months ended June 30, 2007: Total reported revenue was $212.8
million, compared to $220.0 million for the six months ended June
30, 2006; Adjusted EBITDA (as defined) was $4.1 million versus $1.6
million for the same period last year; Net loss was $2.2 million,
or $0.05 per basic and diluted share, compared to a net loss of
$4.8 million, or $0.12 per basic and diluted share, for the six
months ended June 30, 2006; Merchandise sales (as defined) totaled
nearly $1.3 billion versus $1.2 billion for the same period last
year. Please note that the prior year�s six months consolidated
results only include the financial results for eCOST.com from the
date the merger closed on February 1, 2006 through June 30, 2006.
Mark Layton, Chairman and Chief Executive Officer of PFSweb,
stated, �We are pleased to report our first quarter of
profitability on a consolidated basis since the merger of eCOST.com
was completed approximately 18 months ago. Furthermore, Adjusted
EBITDA grew from just $3,000 in the second quarter of 2006 to $3.4M
in 2007. We believe this quarter was another solid step in the
execution of our strategic plan to drive growth and improve
financial performance by leveraging our world class technology and
operational infrastructure across multiple channels. We have a good
outlook for each of our businesses and I believe our overall
financial health is rock solid. We believe we remain on track to
meet our goal of consolidated annual revenue of $420 to $435
million and Adjusted EBITDA of $8 to $10 million in 2007.� Summary
of results by business: Service Fee Business: For the second
quarter of 2007, Service Fee revenue increased 9% to $17.6 million,
compared with $16.2 million for the same period in 2006. The
Service Fee business reported Adjusted EBITDA of $1.9 million for
the second quarter of 2007, compared to $2.0 million for the same
period last year. For the six months ended June 30, 2007, Service
Fee revenue increased 8% to $34.6 million, from $32.1 million for
the same period in 2006. The Service Fee business reported Adjusted
EBITDA of $2.2 million for the six months ended June 30, 2007,
compared to $3.3 million for the same period last year. The drop in
Adjusted EBITDA is primarily attributable to a decrease in project
work in 2007, lower gross profit margins on certain new client
implementation activity, as well as increased SG&A costs
primarily related to additional facility and personnel related
expenses. Mike Willoughby, President of PFSweb�s services divisions
commented, �We are pleased with the revenue growth experienced from
the new contracts signed in the fourth quarter of 2006 and first
quarter of 2007. This is the first quarter that all of these
contracts, including Lego and Riverbed, have been fully
implemented. Gross margins for the business remain within our
targeted range of 25-30%. Next week we are hosting a ribbon cutting
ceremony with the executive team of Lego at our Memphis
distribution facility to formally launch the new initiative.
Looking ahead, we are excited by the potential for new contracts as
our new business pipeline has strengthened to approximately $38.5
million, compared to $25 million at the end of the first quarter.�
Supplies Distributors Business: For the second quarter of 2007,
Supplies Distributors revenue was $57.6 million, compared to $60.9
million for the same period last year. Adjusted EBITDA was $2.1
million for the second quarter of 2007, compared to $1.6 million
for the same period last year. For the six months ended June 30,
2007, Supplies Distributors revenue was $116.4 million, compared to
$129.3 million for the same period last year. Adjusted EBITDA was
$3.4 million for the six months ended June 30, 2007, a slight
increase compared to $3.3 million for the same period last year.
Mr. Willoughby continued, �During the second quarter, results for
the Supplies Distributors business were within our expectations,
and margins improved to 8%, slightly above their normal range due
to the impact of certain incremental inventory cost reductions.
However, revenue for the six month period declined due to reduced
vendor promotional activity, the impact of foreign currency
fluctuations and lower unit volumes in the first quarter of 2007.�
eCOST.com Business: For the second quarter of 2007, eCOST.com
revenue was $27.1 million, compared to $21.6 million in the first
quarter of 2007 and $28.8 million for the same period in 2006.
Adjusted EBITDA for eCOST.com in the quarter was a loss of $0.6
million, compared to an Adjusted EBITDA loss of $0.9 million for
the first quarter of 2007 and a loss of $3.6 million for the same
period last year. For the six months ended June 30, 2007, eCOST.com
revenues were $48.7 million, compared to $50.6 million for the same
period in 2006. Adjusted EBITDA for eCOST.com in the six months
ended June 30, 2007 was a loss of $1.5 million, compared to a loss
of $4.9 million for the same period last year. Please note, the
prior year period results for eCOST.com reflect only five months of
activity from the date of acquisition of February 1, 2006 through
June 30, 2006. Mr. Layton continued, �The eCOST.com business
continues to show substantial improvements. Revenue for eCOST.com
has increased sequentially in each of the last three quarters.
Also, gross profit margins have improved strongly year-over-year,
while costs have trended down. This has led to a sharp reduction in
eCOST.com�s losses versus the second quarter of 2006.� �During the
quarter, eCOST.com went live with several new enhancements that we
believe will help drive overall growth and improved margins. These
incremental enhancements include: the launch of a new home and
outdoor products category, improved product detail pages and
multiple images of products, addition of a related accessories tab
to the product detail page, a new shopping cart �jump page� that
also offers related products and other features, and improved �hot
product� presentation in each of our major product categories. With
these and many other improvements underway, we believe we are
well-positioned for continued growth and are excited by the
momentum we are seeing in the eCOST.com business.� Mr. Layton
concluded. Significant operating events for second quarter of 2007:
The Service Fee business successfully implemented a customized
order management and logistics solution for LEGO Brand Retail The
Service Fee business successfully implemented a customized
international logistics and product configuration solution for
Riverbed Technology Opening of a new Customer Care facility in
Manila, Philippines to house customer service operations and
additional support functions for eCOST.com Addition of new home and
outdoor products and expansion of eCOST.com�s proprietary Bargain
Countdown� Enhanced real time product listing capabilities on
eCOST.com through a partnership with Etilize eCOST.com added 3 new
Virtual Warehouses in the second quarter of 2007, bringing the
total number of Virtual Warehouses to 12. Virtual Warehouses enable
eCOST.com to market more new products, expand product categories
and are targeted to generate higher margins on sales. Financial
Guidance for Fiscal Year 2007 PFSweb continues to target total
consolidated revenues, excluding pass-through revenues, of
approximately $420 million to $435 million and consolidated
Adjusted EBITDA of $8 � $10 million for 2007. Capital expenditures
for 2007 are estimated to be approximately $3 - $5 million,
excluding costs related to the implementation of new business
contracts for the Service Fee Business. Achieving these targets
will depend upon, among other things, achieving and maintaining the
currently expected significant improvement in operations from
eCOST.com and continued strong performance from our Service Fee and
Supplies Distributors businesses on a year-over-year basis.
Conference Call Information Management will host a conference call
at 10:00 a.m. Central Time (11:00 a.m. Eastern Time) on August 14,
2007 to discuss the latest corporate developments and results. To
listen to the call, please dial (888) 823-7459 and enter the pin
number (9081135) 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 September 14, 2007 at (877)
519-4471, pin number (9081135). 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 measures Earnings
Before Interest, Taxes, Depreciation and Amortization (�EBITDA�)
and Adjusted EBITDA. EBITDA represents earnings (or losses) before
interest, taxes, depreciation, and amortization. Adjusted EBITDA
further eliminates the effect of stock-based compensation, merger
integration related expenses and a loss on a sales transaction to a
former eCOST.com customer. EBITDA and Adjusted EBITDA are used by
management, analysts, investors and other interested parties in
evaluating our operating performance compared to that of other
companies in our industry, as the calculation of EBITDA and
Adjusted EBITDA eliminates the effect of financing, income taxes,
the accounting effects of capital spending, stock-based
compensation, merger related expenses and certain other expenses,
which items may vary from different companies for reasons unrelated
to overall operating performance. Merchandise Sales Merchandise
sales represent the estimated value of all fulfillment activity
that flows through PFSweb including whether or not PFSweb is the
seller of the merchandise or records the full amount of such sales
on its financial statements, excluding service fee revenues that
PFSweb might recognize for the underlying sales transactions.
PFSweb uses merchandise sales as an operating metric to allow
investors to gain a more thorough understanding of its business and
business volume, in addition to GAAP net revenue. About PFSweb,
Inc. PFSweb develops and deploys integrated business infrastructure
solutions and fulfilment 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 LEGO,
Riverbed, Fathead, CHiA�SSO, FLAVIA� Beverage Systems,
Hewlett-Packard, International Business Machines, Hawker Beechcraft
Corp. (formerly Raytheon Aircraft Company), Rene Furterer USA,
Roots Canada Ltd. and Xerox. Through its wholly owned eCOST.com
subsidiary, PFSweb also serves as a leading multi-category online
discount retailer of high-quality new, "close-out" and manufacturer
recertified brand-name technology and consumer electronics for
consumers and small to medium size business buyers. The eCOST.com
brand markets approximately 110,000 different products from leading
manufacturers such as Apple, Canon, Citizen, Denon,
Hewlett-Packard, Nikon, Onkyo, Seiko and Toshiba primarily over the
Internet and through direct marketing. To find out more about
PFSweb, Inc. (NASDAQ: PFSW), visit the company's websites at
http://www.pfsweb.com and http://www.ecost.com. The matters
discussed herein consist of forward-looking information under the
Private Securities Litigation Reform Act of 1995 and is subject to
and involves risks and uncertainties, which could cause actual
results to differ materially from the forward-looking information.
PFSweb's Annual Report on Form 10-K for the year ended December 31,
2006 identifies certain factors that could cause actual results to
differ materially from those projected in any forward looking
statements made and investors are advised to review the Annual
Report and the Risk Factors described therein. These factors
include: our ability to retain and expand relationships with
existing clients and attract and implement new clients; our
reliance on the fees generated by the transaction volume or product
sales of our clients; our reliance on our clients' projections or
transaction volume or product sales; our dependence upon our
agreements with IBM; our dependence upon our agreements with our
major clients; our client mix, their business volumes and the
seasonality of their business; our ability to finalize pending
contracts; the impact of strategic alliances and acquisitions;
trends in the e-commerce, outsourcing, government regulation both
foreign and domestic and the market for our services; whether we
can continue and manage growth; increased competition; our ability
to generate more revenue and achieve sustainable profitability;
effects of changes in profit margins; the customer and supplier
concentration of our business; the unknown effects of possible
system failures and rapid changes in technology; foreign currency
risks and other risks of operating in foreign countries; potential
litigation; potential delisting; our dependency on key personnel;
the impact of new accounting standards and changes in existing
accounting rules or the interpretations of those rules; our ability
to raise additional capital or obtain additional financing; our
ability and the ability of our subsidiaries to borrow under current
financing arrangements and maintain compliance with debt covenants;
relationship with and our guarantees of certain of the liabilities
and indebtedness of our subsidiaries; whether outstanding warrants
issued in a prior private placement will be exercised in the
future; our ability to successfully the anticipated benefits of the
merger: eCOST's potential indemnification obligations to its former
parent; eCOST's ability to maintain existing and build new
relationships with manufacturers and vendors and the success of its
advertising and marketing efforts; eCOST's ability to increase its
sales revenue and sales margin and improve operating efficiencies
and eCOST�s ability to generate a profit and cash flows sufficient
to cover the values of its intangible assets. PFSweb undertakes no
obligation to update publicly any forward-looking statement for any
reason, even if new information becomes available or other events
occur in the future. There may be additional risks that we do not
currently view as material or that are not presently known. 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, 2007 2006 2007 2006
REVENUES: � � Product revenue, net $ 84,678 $ 89,650 $ 165,135 $
179,854 Service fee revenue 17,646 16,209 34,608 32,128 Pass-thru
revenue � 6,076 � � 3,445 � � 13,064 � � 7,990 � Total revenues �
108,400 � � 109,304 � � 212,807 � � 219,972 � � COSTS OF REVENUES:
Cost of product revenue 77,798 84,486 152,569 168,809 Cost of
service fee revenue 12,635 11,366 25,299 22,745 Cost of pass-thru
revenue � 6,076 � � 3,445 � � 13,064 � � 7,990 � Total costs of
revenues � 96,509 � � 99,297 � � 190,932 � � 199,544 � Gross profit
� 11,891 � � 10,007 � � 21,875 � � 20,428 � SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 10,427 11,637 21,419 22,429 STOCK-BASED
COMPENSATION 188 241 397 480 MERGER INTEGRATION EXPENSE - 449 150
642 AMORTIZATION OF IDENTIFIABLE INTANGIBLES � 204 � � 204 � � 408
� � 341 � Total operating expenses � 10,819 � � 12,531 � � 22,374 �
� 23,892 � Income (loss) from operations 1,072 (2,524 ) (499 )
(3,464 ) INTEREST EXPENSE (INCOME), NET � 658 � � 517 � � 1,242 � �
948 � Income (loss) before income taxes 414 (3,041 ) (1,741 )
(4,412 ) INCOME TAX PROVISION (BENEFIT) � 260 � � 143 � � 466 � �
359 � NET INCOME (LOSS) $ 154 � $ (3,184 ) $ (2,207 ) $ (4,771 ) �
NET LOSS PER SHARE: Basic $ 0.00 � $ (0.07 ) $ (0.05 ) $ (0.12 )
Diluted $ 0.00 � $ (0.07 ) $ (0.05 ) $ (0.12 ) � WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING: Basic � 46,477 � � 43,072 � � 46,476
� � 39,011 � Diluted � 47,011 � � 43,072 � � 46,476 � � 39,011 � �
EBITDA $ 3,166 � $ (687 ) $ 3,589 � $ 125 � Adjusted EBITDA $ 3,354
� $ 3 � $ 4,136 � $ 1,636 � � (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, 2006. (B) A reconciliation of net income (loss)
to EBITDA and Adjusted EBITDA follows: � Three Months Ended Six
Months Ended June 30, June 30, 2007 2006 2007 2006 Net income
(loss) $ 154 $ (3,184 ) $ (2,207 ) $ (4,771 ) Income tax expense
(benefit) 260 143 466 359 Interest expense (income) 658 517 1,242
948 Depreciation and amortization � 2,094 � � 1,837 � � 4,088 � �
3,589 � EBITDA $ 3,166 $ (687 ) $ 3,589 $ 125 Stock-based
compensation 188 241 397 480 Merger integration related expenses -
449 150 642 Loss on sales transaction to former eCOST customer � -
� � - � � - � � 389 � Adjusted EBITDA $ 3,354 � $ 3 � $ 4,136 � $
1,636 � PFSweb, Inc. and Subsidiaries Unaudited Condensed
Consolidated Balance Sheets (In Thousands, Except Share Data) � �
June 30, December 31, 2007 2006 ASSETS CURRENT ASSETS: Cash and
cash equivalents $ 15,088 $ 15,066 Restricted cash 1,838 2,653 �
Accounts receivable, net of allowance for doubtful accounts of
$1,891 and $2,352 at June 30, 2007 and December 31, 2006,
respectively 48,251 49,341 Inventories, net of reserves of $2,176
and $2,987 at June 30, 2007 and December 31, 2006, respectively
44,631 47,670 Other receivables 10,902 10,774 Prepaid expenses and
other current assets � 3,449 � � 3,531 � Total current assets �
124,159 � � 129,035 � � PROPERTY AND EQUIPMENT, net 12,119 12,884
IDENTIFIABLE INTANGIBLES 6,227 6,647 GOODWILL 15,362 15,362 OTHER
ASSETS � 840 � � 848 � Total assets � 158,707 � � 164,776 � �
LIABILITIES AND SHAREHOLDERS EQUITY CURRENT LIABILITIES: Current
portion of long-term debt and capital lease obligations $ 28,533 $
23,802 Trade accounts payable 56,337 62,596 Accrued expenses �
22,325 � � 21,485 � Total current liabilities � 107,195 � � 107,883
� � LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current
portion 2,653 6,076 OTHER LIABILITIES � 1,828 � � 1,977 � Total
liabilities � 111,676 � � 115,936 � � � COMMITMENTS AND
CONTINGENCIES � SHAREHOLDERS' EQUITY: Preferred stock, $1.00 par
value; 1,000,000 shares authorized; none issued and outstanding - -
Common stock, $.001 par value; 75,000,000 shares authorized;
46,563,008 and 46,553,752 shares issued at June 30, 2007 and
December 31, 2006, respectively; and 46,476,708 and 46,467,452
outstanding as of June 30, 2007 and December 31, 2006, respectively
47 47 Additional paid-in capital 91,699 91,302 Accumulated deficit
(46,561 ) (44,354 ) Accumulated other comprehensive income 1,931
1,930 Treasury stock at cost, 86,300 shares � (85 ) � (85 ) Total
shareholders' equity � 47,031 � � 48,840 � Total liabilities and
shareholders' equity $ 158,707 � $ 164,776 � PFSweb, Inc. and
Subsidiaries Unaudited Consolidating Statements of Operations For
the Three Months Ended June 30, 2007 (In Thousands) � Supplies
PFSweb Distributors eCOST Eliminations Consolidated REVENUES:
Product revenue, net $ - $ 57,595 � $ 27,083 $ - $ 84,678 � Service
fee revenue 17,646 - - - 17,646 Service fee revenue - affiliate
2,040 - - (2,040 ) - Pass-thru revenue � 6,145 � � - � � - � � (69
) � 6,076 � Total revenues � 25,831 � � 57,595 � � 27,083 � �
(2,109 ) � 108,400 � � COSTS OF REVENUES: Cost of product revenue -
52,912 24,886 - 77,798 Cost of service fee revenue 13,297 - - (662
) 12,635 Cost of pass-thru revenue � 6,145 � � - � � - � � (69 ) �
6,076 � Total costs of revenues � 19,442 � � 52,912 � � 24,886 � �
(731 ) � 96,509 � Gross profit � 6,389 � � 4,683 � � 2,197 � �
(1,378 ) � 11,891 � SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
6,363 2,623 2,819 (1,378 ) 10,427 STOCK-BASED COMPENSATION 188 - -
- 188 MERGER INTEGRATION EXPENSE - - - - - AMORTIZATION OF
IDENTIFIABLE INTANGIBLES � - � � - � � 204 � � - � � 204 � Total
operating expenses � 6,551 � � 2,623 � � 3,023 � � (1,378 ) �
10,819 � Income (loss) from operations (162 ) 2,060 (826 ) - 1,072
INTEREST EXPENSE (INCOME), NET � 11 � � 661 � � (14 ) � - � � 658 �
Income (loss) before income taxes (173 ) 1,399 (812 ) - 414 INCOME
TAX PROVISION (BENEFIT) � (186 ) � 446 � � - � � - � � 260 � NET
INCOME (LOSS) $ 13 � $ 953 � $ (812 ) $ - � $ 154 � � EBITDA $
1,676 � $ 2,065 � $ (575 ) $ - � $ 3,166 � Adjusted EBITDA $ 1,864
� $ 2,065 � $ (575 ) $ - � $ 3,354 � � � A reconciliation of net
income (loss) to EBITDA and Adjusted EBITDA follows: � Net income
(loss) $ 13 $ 953 $ (812 ) $ - $ 154 Income tax expense (benefit)
(186 ) 446 - - 260 Interest expense (income) 11 661 (14 ) - 658
Depreciation and amortization � 1,838 � � 5 � � 251 � � - � � 2,094
� EBITDA $ 1,676 $ 2,065 $ (575 ) $ - $ 3,166 Stock-based
compensation � 188 � � - � � - � � - � � 188 � Adjusted EBITDA $
1,864 � $ 2,065 � $ (575 ) $ - � $ 3,354 � PFSweb, Inc. and
Subsidiaries Unaudited Consolidating Statements of Operations For
the Six Months Ended June 30, 2007 (In Thousands) � Supplies PFSweb
Distributors eCOST Eliminations Consolidated � REVENUES: Product
revenue, net $ - $ 116,405 $ 48,730 $ - $ 165,135 Service fee
revenue 34,608 - - - 34,608 Service fee revenue - affiliate 4,066 -
- (4,066 ) - Pass-thru revenue � 13,241 � � - � - � � (177 ) �
13,064 � Total revenues � 51,915 � � 116,405 � 48,730 � � (4,243 )
� 212,807 � � COSTS OF REVENUES: Cost of product revenue - 107,851
44,722 (4 ) 152,569 Cost of service fee revenue 26,599 - - (1,300 )
25,299 Cost of pass-thru revenue � 13,241 � � - � - � � (177 ) �
13,064 � Total costs of revenues � 39,840 � � 107,851 � 44,722 � �
(1,481 ) � 190,932 � Gross profit � 12,075 � � 8,554 � 4,008 � �
(2,762 ) � 21,875 � SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
13,451 5,126 5,604 (2,762 ) 21,419 STOCK-BASED COMPENSATION 397 - -
- 397 MERGER INTEGRATION EXPENSE - - 150 - 150 AMORTIZATION OF
IDENTIFIABLE INTANGIBLES � - � � - � 408 � � - � � 408 � Total
operating expenses � 13,848 � � 5,126 � 6,162 � � (2,762 ) � 22,374
� Income (loss) from operations (1,773 ) 3,428 (2,154 ) - (499 )
INTEREST EXPENSE (INCOME), NET � 47 � � 1,226 � (31 ) � - � � 1,242
� Income (loss) before income taxes (1,820 ) 2,202 (2,123 ) -
(1,741 ) INCOME TAX PROVISION (BENEFIT) � (329 ) � 795 � - � � - �
� 466 � NET INCOME (LOSS) $ (1,491 ) $ 1,407 $ (2,123 ) $ - � $
(2,207 ) � EBITDA $ 1,809 � $ 3,438 $ (1,658 ) $ - � $ 3,589 �
Adjusted EBITDA $ 2,206 � $ 3,438 $ (1,508 ) $ - � $ 4,136 � � � A
reconciliation of net income (loss) to EBITDA and Adjusted EBITDA
follows: � Net income (loss) $ (1,491 ) $ 1,407 $ (2,123 ) $ - $
(2,207 ) Income tax expense (benefit) (329 ) 795 - - 466 Interest
expense (income) 47 1,226 (31 ) - 1,242 Depreciation and
amortization � 3,582 � � 10 � 496 � � - � � 4,088 � EBITDA $ 1,809
$ 3,438 $ (1,658 ) $ - $ 3,589 Stock-based compensation 397 - - -
397 Merger integration expense � - � � - � 150 � � - � � 150 �
Adjusted EBITDA $ 2,206 � $ 3,438 $ (1,508 ) $ - � $ 4,136 �
PFSweb, Inc. and Subsidiaries Unaudited Condensed Consolidating
Balance Sheets as of June 30, 2007 (In Thousands) � � Supplies
PFSweb Distributors eCOST Eliminations Consolidated ASSETS CURRENT
ASSETS: Cash and cash equivalents $ 11,352 $ 2,196 $ 1,540 $ - $
15,088 Restricted cash 49 980 809 - 1,838 Accounts receivable, net
15,760 28,936 4,231 (676 ) 48,251 Inventories, net - 39,663 4,968 -
44,631 Other receivables 958 9,944 - - 10,902 Prepaid expenses and
other current assets � 1,538 � � 1,451 � � 460 � � - � � 3,449 �
Total current assets � 29,657 � � 83,170 � � 12,008 � � (676 ) �
124,159 � � PROPERTY AND EQUIPMENT, net 11,810 38 271 - 12,119
NOTES RECEIVABLE FROM AFFILIATES 17,645 - - (17,645 ) - INVESTMENT
IN AFFILIATES 37,737 - - (37,737 ) - IDENTIFIABLE INTANGIBLES - -
6,227 - 6,227 GOODWILL - - 15,362 - 15,362 OTHER ASSETS � 700 � � -
� � 140 � � - � � 840 � Total assets � 97,549 � � 83,208 � � 34,008
� � (56,058 ) � 158,707 � � LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES: Current portion of long-term debt and capital
lease obligations $ 13,450 $ 15,075 $ 8 $ - $ 28,533 Trade accounts
payable 4,613 44,645 7,755 (676 ) 56,337 Accrued expenses � 10,123
� � 7,771 � � 4,431 � � - � � 22,325 � Total current liabilities �
28,186 � � 67,491 � � 12,194 � � (676 ) � 107,195 � � LONG-TERM
DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion 2,653 - -
- 2,653 NOTES PAYABLE TO AFFILIATES - 6,005 11,640 (17,645 ) -
OTHER LIABILITIES � 1,454 � � - � � 374 � � - � � 1,828 � Total
liabilities � 32,293 � � 73,496 � � 24,208 � � (18,321 ) � 111,676
� � COMMITMENTS AND CONTINGENCIES � SHAREHOLDERS' EQUITY: Common
stock 47 - 19 (19 ) 47 Capital contributions 1,000 (1,000 ) -
Additional paid-in capital 91,699 - 28,059 (28,059 ) 91,699
Retained earnings (accumulated deficit) (28,336 ) 6,229 (18,278 )
(6,176 ) (46,561 ) Accumulated other comprehensive income 1,931
2,483 - (2,483 ) 1,931 Treasury stock � (85 ) � - � � - � � - � �
(85 ) Total shareholders' equity � 65,256 � � 9,712 � � 9,800 � �
(37,737 ) � 47,031 � Total liabilities and shareholders' equity $
97,549 � $ 83,208 � $ 34,008 � $ (56,058 ) $ 158,707 � PFSweb, Inc.
and Subsidiaries Unaudited Consolidating Statements of Operations
For the Three Months Ended June 30, 2006 (In Thousands) � Supplies
PFSweb Distributors eCOST Eliminations Consolidated REVENUES:
Product revenue, net $ - $ 60,867 $ 28,783 $ - $ 89,650 Service fee
revenue 16,209 - - - 16,209 Service fee revenue - affiliate 2,075 -
- (2,075 ) - Pass-thru revenue � 3,575 � � - � � - � � (130 ) �
3,445 � Total revenues � 21,859 � � 60,867 � � 28,783 � � (2,205 )
� 109,304 � � COSTS OF REVENUES: Cost of product revenue - 56,776
27,721 (11 ) 84,486 Cost of service fee revenue 11,996 - - (630 )
11,366 Cost of pass-thru revenue � 3,575 � � - � � - � � (130 ) �
3,445 � Total costs of revenues � 15,571 � � 56,776 � � 27,721 � �
(771 ) � 99,297 � Gross profit � 6,288 � � 4,091 � � 1,062 � �
(1,434 ) � 10,007 � SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
5,827 2,542 4,702 (1,434 ) 11,637 STOCK-BASED COMPENSATION 241 - -
- 241 MERGER INTEGRATION EXPENSE - - 449 - 449 AMORTIZATION OF
IDENTIFIABLE INTANGIBLES � - � � - � � 204 � � - � � 204 � Total
operating expenses � 6,068 � � 2,542 � � 5,355 � � (1,434 ) �
12,531 � Income (loss) from operations 220 1,549 (4,293 ) - (2,524
) INTEREST EXPENSE (INCOME), NET � (30 ) � 538 � � 9 � � - � � 517
� Income (loss) before income taxes 250 1,011 (4,302 ) - (3,041 )
INCOME TAX PROVISION (BENEFIT) � (200 ) � 343 � � - � � - � � 143 �
NET INCOME (LOSS) $ 450 � $ 668 � $ (4,302 ) $ - � $ (3,184 ) �
EBITDA $ 1,765 � $ 1,552 � $ (4,004 ) $ - � $ (687 ) Adjusted
EBITDA $ 2,006 � $ 1,552 � $ (3,555 ) $ - � $ 3 � � � A
reconciliation of net income (loss) to EBITDA and Adjusted EBITDA
follows: � Net income (loss) $ 450 $ 668 $ (4,302 ) $ - $ (3,184 )
Income tax expense (benefit) (200 ) 343 - - 143 Interest expense
(income) (30 ) 538 9 - 517 Depreciation and amortization � 1,545 �
� 3 � � 289 � � - � � 1,837 � EBITDA $ 1,765 $ 1,552 $ (4,004 ) $ -
$ (687 ) Stock-based compensation 241 - - - 241 Merger integration
expense � - � � - � � 449 � � - � � 449 � Adjusted EBITDA $ 2,006 �
$ 1,552 � $ (3,555 ) $ - � $ 3 � PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations For the Six Months
Ended June 30, 2006 (In Thousands) � Supplies PFSweb Distributors
eCOST Eliminations Consolidated REVENUES: Product revenue, net $ -
$ 129,282 $ 50,572 $ - $ 179,854 Service fee revenue 32,128 - - -
32,128 Service fee revenue - affiliate 4,502 - - (4,502 ) -
Pass-thru revenue � 8,217 � � - � � - � � (227 ) � 7,990 � Total
revenues � 44,847 � � 129,282 � � 50,572 � � (4,729 ) � 219,972 � �
COSTS OF REVENUES: Cost of product revenue - 120,730 � 48,121 (42 )
168,809 Cost of service fee revenue 24,071 - - (1,326 ) 22,745 Cost
of pass-thru revenue � 8,217 � � - � � - � � (227 ) � 7,990 � Total
costs of revenues � 32,288 � � 120,730 � � 48,121 � � (1,595 ) �
199,544 � Gross profit � 12,559 � � 8,552 � � 2,451 � � (3,134 ) �
20,428 � SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 12,388 5,248
7,927 (3,134 ) 22,429 STOCK-BASED COMPENSATION 480 - - - 480 MERGER
INTEGRATION EXPENSE - - 642 - 642 AMORTIZATION OF IDENTIFIABLE
INTANGIBLES � - � � - � � 341 � � - � � 341 � Total operating
expenses � 12,868 � � 5,248 � � 8,910 � � (3,134 ) � 23,892 �
Income (loss) from operations (309 ) 3,304 (6,459 ) - (3,464 )
INTEREST EXPENSE (INCOME), NET � (65 ) � 992 � � 21 � � - � � 948 �
Income (loss) before income taxes (244 ) 2,312 (6,480 ) - (4,412 )
INCOME TAX PROVISION (BENEFIT) � (499 ) � 858 � � - � � - � � 359 �
NET INCOME (LOSS) $ 255 � $ 1,454 � $ (6,480 ) $ - � $ (4,771 ) �
EBITDA $ 2,797 � $ 3,307 � $ (5,979 ) $ - � $ 125 � Adjusted EBITDA
$ 3,277 � $ 3,307 � $ (4,948 ) $ - � $ 1,636 � � � A reconciliation
of net income (loss) to EBITDA and Adjusted EBITDA follows: � Net
income (loss) $ 255 $ 1,454 $ (6,480 ) $ - $ (4,771 ) Income tax
expense (benefit) (499 ) 858 - - 359 Interest expense (income) (65
) 992 21 - 948 Depreciation and amortization � 3,106 � � 3 � � 480
� � - � � 3,589 � EBITDA $ 2,797 $ 3,307 $ (5,979 ) $ - $ 125
Stock-based compensation 480 - - - 480 Merger integration expense -
- 642 - 642 Loss on sales transaction to former eCOST customer � �
389 � � � 389 � Adjusted EBITDA $ 3,277 � $ 3,307 � $ (4,948 ) $ -
� $ 1,636 � eCOST.com, Inc. Selected Operating Data � Three Months
Ended June 30, 2007 2006 � Total Customers (1) 1,698,797 1,581,606
� Active Customers (2) 231,601 351,157 � New Customers (3) 25,417
70,590 � Number of Orders (4) 64,111 89,898 � Average Order Value
(5) $ 422 $ 340 � Advertising Expense (6) $ 303,921 $ 986,293 �
Cost to Acquire a New Customer (7) $ 9.76 $ 13.97 � � (1) Total
customers have been calculated as the cumulative number of
customers for which orders have been taken from eCOST.com's
inception to the end of the reported period. � (2) Active customers
consist of the approximate number of customers who placed orders
during the 12 months prior to the end of the reported period. � (3)
New Customers represent the number of persons that established a
new account and placed an order during the reported period. � (4)
Number of orders represents the total number of orders shipped
during the reported period (not reflecting returns). � (5) Average
order value has been calculated as gross sales divided by the total
number of orders during the period presented. The impact of returns
is not reflected in average order value. � (6) Advertising expense
includes the total dollars spent on advertising during the reported
period, including internet, direct mail, print and e-mail
advertising, as well as customer list enhancement services. � (7)
Catalog expense ($55,858) was not included in the 2007 calculation
as it is used for retention and not acquisition. Previously,
certain customer retention costs as reported were included in the
cost to acquire new customers.
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