PFSweb, Inc. (Nasdaq: PFSW), an international business process
outsourcing provider of end-to-end web commerce solutions and an
online discount retailer, today announced its financial results for
the fourth quarter and year ended December 31, 2007, which included
2007 Adjusted EBITDA results in excess of previously provided
guidance. Summary of consolidated results for the fourth quarter
ended December 31, 2007: -- Total reported revenue was $122.0
million, compared to $109.0 million for the fourth quarter of 2006;
-- eCOST.com revenue increased 35% to $28.5 million, compared to
$21.1 million for the same period in the prior year; -- Adjusted
EBITDA (as defined) was $3.5 million versus $0.9 million for the
same period in the prior year; -- Net income, calculated in
accordance with U.S. generally accepted accounting principles
(GAAP), was $0.7 million or $0.01 per basic and diluted share,
compared to a net loss of $6.5 million, or $0.14 per basic and
diluted share, for the fourth quarter of 2006; -- Non-GAAP net
income (as defined) was $1.1 million or $0.02 per basic and diluted
share, compared to a non-GAAP net loss of $2.5 million, or $0.05
per basic and diluted share, for the fourth quarter of 2006; --
Merchandise sales (as defined) totaled approximately $850 million
for the fourth quarter of 2007 versus approximately $789 million
for the same period in the prior year; -- Total cash, cash
equivalents and restricted cash equaled $16.3 million as of
December 31, 2007. Summary of consolidated results for the year
ended December 31, 2007: -- Total reported revenue was $446.8
million, compared to $423.3 million for the year ended December 31,
2006; -- Adjusted EBITDA (as defined) was $10.9 million versus $2.5
million for the same period in the prior year; -- GAAP net loss was
$1.4 million or $0.03 per basic and diluted share, compared to a
net loss of $14.5 million, or $0.34 per basic and diluted share,
for the year ended December 31, 2006; -- Non-GAAP net income (as
defined) was $0.2 million, or $0.00 per basic and diluted share,
compared to a non-GAAP net loss of $9.4 million, or $0.22 per basic
and diluted share, for the year ended December 31, 2006; --
Merchandise sales (as defined) totaled nearly $2.9 billion versus
$2.7 billion for the year ended December 31, 2006. Please note that
the prior year�s consolidated results only include the financial
results for eCOST.com from the date the merger closed on February
1, 2006 through December 31, 2006. Mark Layton, Chairman and Chief
Executive Officer of PFSweb, stated, �2007 was a significant year
for PFSweb, as we reported a substantial improvement in our bottom
line performance, including our third consecutive quarter of
profitability, and achieved $10.9 million in Adjusted EBITDA,
exceeding our previously provided guidance for the year. In
addition, we have won several new client agreements for the Service
Fee business and expanded eCOST.com into new, higher margin product
markets, including home, sports and leisure merchandise. We believe
these activities have great potential to be significant factors in
boosting our growth in 2008.� Summary of results by business:
Service Fee Business: For the fourth quarter of 2007, Service Fee
revenue increased 11% to $21.5 million, compared with $19.4 million
for the same period in 2006. The Service Fee business reported
Adjusted EBITDA of $2.2 million for the fourth quarter of 2007,
compared to $1.2 million for the same period in the prior year. For
the year ended December 31, 2007, Service Fee revenue increased 11%
to $74.5 million, from $67.1 million in 2006. The Service Fee
business reported Adjusted EBITDA of $6.5 million for the year
ended December 31, 2007, compared to $4.6 million in the prior
year. Mike Willoughby, President of PFSweb�s Services Division,
commented, �In the fourth quarter, the Service Fee business
continued to demonstrate consistent top line growth that was
in-line with the performance we exhibited earlier in the year. This
growth is attributable to several new clients that were added in
2007 and late 2006 and increased project activity recorded in the
fourth quarter of 2007. Looking to 2008, we are excited by a robust
pipeline of pending proposals, currently valued based on client
projections at approximately $35 million. Further, we believe our
recently announced collaboration with Demandware can provide a
significant competitive advantage in delivering to clients a
complete end-to-end solution, while maintaining and stringently
adhering to the established brand standards of each client.�
Supplies Distributors Business: For the fourth quarter of 2007,
Supplies Distributors revenue was $60.6 million, compared to $59.8
million for the same period in the prior year. Adjusted EBITDA was
$1.6 million for the fourth quarter of 2007, compared to $1.3
million for the same period in the prior year. For the year ended
December 31, 2007, Supplies Distributors revenue was $235.4
million, compared to $245.0 million during the prior year. Adjusted
EBITDA was $6.6 million for the year ended December 31, 2007, as
compared to $7.6 million in 2006. Mr. Willoughby continued, �In the
fourth quarter, Supplies Distributors� revenue remained relatively
constant compared to the prior year period. On a calendar year
basis, the decline in revenue in 2007 from 2006 reflects a decline
year-over-year due to reduced vendor promotional activity, the
impact of foreign currency fluctuations and lower unit volumes as
compared to the prior year.� eCOST.com Business: For the fourth
quarter of 2007, eCOST.com revenue increased 35% to $28.5 million,
compared to $21.1 million in the fourth quarter of 2006. Adjusted
EBITDA for eCOST.com in the quarter was a loss of $0.3 million, a
significant improvement as compared to a loss of $1.6 million in
the same quarter of 2006, and a continued improvement as compared
to a loss of $0.4 million in the third quarter of 2007, a loss of
$0.6 million in the second quarter of 2007 and a loss of $0.9
million for the first quarter of 2007. For the year ended December
31, 2007, eCOST.com revenues increased 18% to $104.1 million,
compared to $88.3 million in 2006. Adjusted EBITDA for eCOST.com in
2007 was a loss of $2.2 million, compared to a loss of $9.7 million
in 2006. The prior year results for eCOST.com reflect only 11
months of activity from the date of acquisition of February 1, 2006
through December 31, 2006. Mr. Layton continued, �In the fourth
quarter of 2007, eCOST.com increased revenue by 35% from the prior
year period, and improved gross margins to 9%, compared to 8% in
the third quarter of 2007. Specifically, the improving fundamentals
in the eCOST.com business continue to be driven by a broader mix of
products, improved pricing and freight controls and a greater
number of Virtual Warehouse agreements. �In the coming weeks we
will begin to aggressively market an increased number of home,
sports and leisure products on eCOST.com. This will bring the total
number of SKU�s available at eCOST.com to 170,000. We plan to
continue our emphasis on expanding into new product categories and
increasing the total merchandise available on the site as we
believe these actions have great potential to drive continued sales
growth and gross margin expansion in 2008,� concluded Mr. Layton.
Significant operating events for fourth quarter of 2007 and 2008
year-to-date: -- Service Fee Business signed three new clients
totaling $6 to $8 million in annualized service fee revenue, based
on client projections once fully implemented. -- Urban Brands
selected PFSweb to support its Marianne and Ashley Stewart Online
Stores -- The Discovery Channel Store, Inc. signed a new agreement
selecting PFSweb to provide a seamless solution in the U.S. that
supports its catalog and eCommerce business -- PFSweb launched a
new European eCommerce site for a major outdoor lifestyle brand.
Under this agreement, PFSweb will provide a complete end-to-end
solution, including ongoing site management, customer care
services, fulfillment and on-line payment processing -- PFSweb
implemented and launched a new eCommerce site for a large retail
farm and ranch store chain in November 2007 for which it is
providing technology, customer care and fulfillment services. --
PFSweb implemented a customer care solution on behalf of a Fortune
100 big box retailer in October 2007. -- PFSweb signed a multi-year
extension for a large Fortune 500 consumer products Service Fee
client and one year extension for a large media client. -- In
February 2008 PFSweb and Demandware launched a next-generation
solution for end-to-end eCommerce. Competitively, we believe that
this combination provides one of the most compelling single source
eCommerce outsourcing solutions available in the industry. This
strategically important partnership collectively empowers online
retailers and brands with total control over their entire shopping
experience and a continuous competitive differentiation. --
eCOST.com added one new "super VW" relationship that in itself
brings over 600 new supplier relationships and over 40,000
additional SKU's. -- PFSweb expects to complete renewals,
extensions or amendments on certain of its asset-based financing
facilities for its Service Fee and Supplies Distributors business
segments with terms that are similar to or improved from prior
agreements. Financial Guidance for Fiscal Year 2008 PFSweb is
currently targeting total consolidated revenues, excluding
pass-through revenues, of approximately $445 million to $475
million and consolidated Adjusted EBITDA of $10 � $12 million for
2008. Non-GAAP net income, which excludes the impact of stock-based
compensation and amortization of identifiable intangible assets, is
targeted to be approximately $1 - $3 million for 2008. Our 2008
adjusted EBITDA guidance reflects the impact of restructuring one
client contract. We expect this restructuring will result in lower
service fee revenue under the contract and reduced capital asset
charges on related equipment. Conference Call Information
Management will host a conference call at 9:00 a.m. Central Time
(10:00 a.m. Eastern Time) on March 26, 2008 to discuss the latest
corporate developments and results. To listen to the call, please
dial (888) 694-4728 and enter the pin number (38668568) 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 April 26, 2008 at (800) 642-1687, pin number (38668568).
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 non-GAAP net income (loss), Earnings
Before Interest, Income Taxes, Depreciation and Amortization
(�EBITDA�), and Adjusted EBITDA. Non-GAAP net income represents net
income calculated in accordance with U.S. GAAP as adjusted for the
impact of non-cash stock-based compensation expense, amortization
of identifiable intangible assets and impairment of goodwill.
EBITDA represents earnings (or losses) before interest, income
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. Non-GAAP net income, 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
non-GAAP net income eliminates the effect of stock-based
compensation, amortization of intangible assets and goodwill
impairment and EBITDA and Adjusted EBITDA further eliminates the
effect of financing, income taxes, the accounting effects of
capital spending, certain other merger related expenses and certain
other expenses, which items may vary from different companies for
reasons unrelated to overall operating performance. PFSweb believes
these non-GAAP measures provide useful information to both
management and investors by excluding certain expenses that may not
be indicative of its core operating results. These measures should
be considered in addition to results prepared in accordance with
GAAP, but should not be considered a substitute for, or superior
to, GAAP results. These non-GAAP measures included in this press
release have been reconciled to the GAAP results in the attached
tables. 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 fulfillment
services for Fortune 1000, Global 2000 and brand name companies,
including third party logistics, call center support and eCommerce
services. The company serves a multitude of industries and company
types, including such clients as LEGO, Riverbed, Fathead, CHiA�SSO,
MARS Drinks North America (formerly 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 products across a broad group of categories,
including technology, consumer electronics, home and sports and
leisure. The eCOST.com brand markets approximately 170,000
different products from leading manufacturers such as Sony, JVC,
Canon, Hewlett-Packard, Denon, Onkyo, Garmin, Panasonic, Toshiba
and Microsoft 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 and Form
10-Q for the three and nine-months ended September 30, 2007
identify 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 Form
10-Q 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; 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 � Twelve Months Ended
December 31, December 31, 2007 � 2006 2007 � 2006 REVENUES: Product
revenue, net $ 89,102 $ 80,864 $ 339,500 $ 333,311 Service fee
revenue 21,474 19,375 74,480 67,056 Pass-thru revenue � 11,424 �
8,758 � � 32,822 � � 22,886 � Total revenues � 122,000 � 108,997 �
� 446,802 � � 423,253 � � COSTS OF REVENUES: Cost of product
revenue 82,392 75,719 313,835 311,417 Cost of service fee revenue
15,164 14,685 53,375 49,274 Cost of pass-thru revenue � 11,424 �
8,758 � � 32,822 � � 22,886 � Total costs of revenues � 108,980 �
99,162 � � 400,032 � � 383,577 � Gross profit � 13,020 � 9,835 � �
46,770 � � 39,676 � SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
11,553 11,028 44,057 45,189 MERGER INTEGRATION EXPENSE - 365 150
1,495 AMORTIZATION OF IDENTIFIABLE INTANGIBLES 204 204 806 749
GOODWILL IMPAIRMENT � - � 3,507 � � - � � 3,507 � Total operating
expenses � 11,757 � 15,104 � � 45,013 � � 50,940 � Income (loss)
from operations 1,263 (5,269 ) 1,757 (11,264 ) INTEREST EXPENSE,
NET � 486 � 607 � � 2,342 � � 2,112 � Income (loss) before income
taxes 777 (5,876 ) (585 ) (13,376 ) INCOME TAX PROVISION � 116 �
574 � � 799 � � 1,154 � NET INCOME (LOSS) $ 661 $ (6,450 ) $ (1,384
) $ (14,530 ) NON-GAAP NET INCOME (LOSS) $ 1,059 $ (2,525 ) $ 186 �
$ (9,375 ) � NET INCOME (LOSS) PER SHARE: Basic $ 0.01 $ (0.14 ) $
(0.03 ) $ (0.34 ) Diluted $ 0.01 $ (0.14 ) $ (0.03 ) $ (0.34 ) �
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic � 46,487 �
46,461 � � 46,480 � � 42,762 � Diluted � 47,931 � 46,461 � � 46,480
� � 42,762 � � EBITDA $ 3,320 $ (3,226 ) $ 9,937 � $ (3,788 )
ADJUSTED EBITDA $ 3,514 $ 860 � $ 10,851 � $ 2,502 � � (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, 2007. PFSweb, Inc. and
Subsidiaries Reconciliation of certain Non-GAAP Items to GAAP (In
Thousands, Except Per Share Data) � � Three Months Ended � Twelve
Months Ended December 31, December 31, 2007 � 2006 2007 � 2006 NET
INCOME (LOSS) $ 661 $ (6,450 ) $ (1,384 ) $ (14,530 ) Income tax
expense 116 574 799 1,154 Interest expense 486 607 2,342 2,112
Depreciation and amortization � 2,057 � 2,043 � � 8,180 � � 7,476 �
EBITDA $ 3,320 $ (3,226 ) $ 9,937 $ (3,788 ) Stock-based
compensation 194 214 764 899 Merger integration related expenses -
365 150 1,495 Loss on sales transaction to former eCOST customer -
- - 389 Goodwill impairment � - � 3,507 � � - � � 3,507 � ADJUSTED
EBITDA $ 3,514 $ 860 � $ 10,851 � $ 2,502 � � � Three Months Ended
Twelve Months Ended December 31, December 31, 2007 2006 2007 2006 �
NET INCOME (LOSS) $ 661 $ (6,450 ) $ (1,384 ) $ (14,530 )
Stock-based compensation 194 214 764 899 Amortization of
identifiable intangible assets 204 204 806 749 Goodwill impairment
� - � 3,507 � � - � � 3,507 � NON-GAAP NET INCOME (LOSS) $ 1,059 $
(2,525 ) $ 186 � $ (9,375 ) � NET INCOME (LOSS) PER SHARE: Basic $
0.01 $ (0.14 ) $ (0.03 ) $ (0.34 ) Diluted $ 0.01 $ (0.14 ) $ (0.03
) $ (0.34 ) � NON-GAAP NET INCOME (LOSS) Per Share: Basic $ 0.02 $
(0.05 ) $ 0.00 � $ (0.22 ) Diluted $ 0.02 $ (0.05 ) $ 0.00 � $
(0.22 ) PFSweb, Inc. and Subsidiaries Unaudited Condensed
Consolidated Balance Sheets (In Thousands, Except Share Data) � �
December 31, � December 31, 2007 2006 ASSETS CURRENT ASSETS: Cash
and cash equivalents $ 14,272 $ 15,066 Restricted cash 2,021 2,653
Accounts receivable, net of allowance for doubtful accounts of
$1,483 and $2,352 at December 31, 2007 and December 31, 2006,
respectively 48,493 49,186 Inventories, net of reserves of $2,080
and $2,987 at December 31, 2007 and December 31, 2006, respectively
46,392 47,670 Other receivables 10,372 10,774 Prepaid expenses and
other current assets � 2,608 � � 3,531 � Total current assets �
124,158 � � 128,880 � � PROPERTY AND EQUIPMENT, net 11,918 12,884
IDENTIFIABLE INTANGIBLES 5,824 6,631 GOODWILL 15,362 15,362 OTHER
ASSETS � 911 � � 864 � Total assets � 158,173 � � 164,621 � �
LIABILITIES AND SHAREHOLDERS EQUITY CURRENT LIABILITIES: Current
portion of long-term debt and capital lease obligations $ 22,238 $
23,802 Trade accounts payable 56,975 62,441 Accrued expenses �
22,438 � � 21,485 � Total current liabilities � 101,651 � � 107,728
� � LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current
portion 6,378 6,076 OTHER LIABILITIES � 1,302 � � 1,977 � Total
liabilities � 109,331 � � 115,781 � � � 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;
46,574,189 and 46,553,752 shares issued at December 31, 2007 and
December 31, 2006, respectively; and 46,487,889 and 46,467,452
outstanding as of December 31, 2007 and December 31, 2006,
respectively � � 47 47 Additional paid-in capital 92,084 91,302
Accumulated deficit (45,738 ) (44,354 ) Accumulated other
comprehensive income 2,534 1,930 Treasury stock at cost, 86,300
shares � (85 ) � (85 ) Total shareholders' equity � 48,842 � �
48,840 � Total liabilities and shareholders' equity $ 158,173 � $
164,621 � PFSweb, Inc. and Subsidiaries Unaudited Consolidating
Statements of Operations For the Three Months Ended December 31,
2007 (In Thousands) � � � Supplies � � � PFSweb Distributors eCOST
Eliminations Consolidated REVENUES: Product revenue, net $ - $
60,639 $ 28,463 $ - $ 89,102 Service fee revenue 21,474 - - -
21,474 Service fee revenue - affiliate 2,083 - - (2,083 ) -
Pass-thru revenue � 11,592 � - � - � � (168 ) � 11,424 Total
revenues � 35,149 � 60,639 � 28,463 � � (2,251 ) � 122,000 � COSTS
OF REVENUES: Cost of product revenue - 56,496 25,896 - 82,392 Cost
of service fee revenue 15,855 - - (691 ) 15,164 Cost of pass-thru
revenue � 11,592 � - � - � � (168 ) � 11,424 Total costs of
revenues � 27,447 � 56,496 � 25,896 � � (859 ) � 108,980 Gross
profit � 7,702 � 4,143 � 2,567 � � (1,392 ) � 13,020 SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES 7,464 2,564 2,917 (1,392 )
11,553 AMORTIZATION OF IDENTIFIABLE INTANGIBLES � - � - � 204 � � -
� � 204 Total operating expenses � 7,464 � 2,564 � 3,121 � � (1,392
) � 11,757 Income (loss) from operations 238 1,579 (554 ) - 1,263
INTEREST EXPENSE (INCOME), NET � 24 � 467 � (5 ) � - � � 486 Income
(loss) before income taxes 214 1,112 (549 ) - 777 INCOME TAX
PROVISION (BENEFIT) � 110 � 6 � - � � - � � 116 NET INCOME (LOSS) $
104 $ 1,106 $ (549 ) $ - � $ 661 NON-GAAP NET INCOME (LOSS) $ 298 $
1,106 $ (345 ) $ - � $ 1,059 � � EBITDA $ 2,030 $ 1,583 $ (293 ) $
- � $ 3,320 ADJUSTED EBITDA $ 2,224 $ 1,583 $ (293 ) $ - � $ 3,514
� � A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED
EBITDA follows: � NET INCOME (LOSS) $ 104 $ 1,106 $ (549 ) $ - $
661 Income tax expense (benefit) 110 6 - - 116 Interest expense
(income) 24 467 (5 ) - 486 Depreciation and amortization � 1,792 �
4 � 261 � � - � � 2,057 EBITDA $ 2,030 $ 1,583 $ (293 ) $ - $ 3,320
Stock-based compensation � 194 � - � - � � - � � 194 ADJUSTED
EBITDA $ 2,224 $ 1,583 $ (293 ) $ - � $ 3,514 � A reconciliation of
NET INCOME(LOSS) to NON-GAAP NET INCOME (LOSS) follows: � NET
INCOME (LOSS) $ 104 $ 1,106 $ (549 ) $ - $ 661 Stock-based
compensation 194 - - - 194 Amortization of intangible assets � - �
- � 204 � � - � � 204 NON-GAAP NET INCOME (LOSS) $ 298 $ 1,106 $
(345 ) $ - � $ 1,059 PFSweb, Inc. and Subsidiaries Unaudited
Consolidating Statements of Operations For the Year Ended December
31, 2007 (In Thousands) � � � Supplies � � � PFSweb Distributors
eCOST Eliminations Consolidated REVENUES: Product revenue, net $ -
$ 235,357 $ 104,143 $ - $ 339,500 Service fee revenue 74,480 - - -
74,480 Service fee revenue - affiliate 8,150 - - (8,150 ) -
Pass-thru revenue � 33,248 � � - � - � � (426 ) � 32,822 � Total
revenues � 115,878 � � 235,357 � 104,143 � � (8,576 ) � 446,802 � �
COSTS OF REVENUES: Cost of product revenue - 218,642 95,199 (6 )
313,835 Cost of service fee revenue 56,039 - - (2,664 ) 53,375 Cost
of pass-thru revenue � 33,248 � � - � - � � (426 ) � 32,822 � Total
costs of revenues � 89,287 � � 218,642 � 95,199 � � (3,096 ) �
400,032 � Gross profit � 26,591 � � 16,715 � 8,944 � � (5,480 ) �
46,770 � SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 28,012 10,138
11,387 (5,480 ) 44,057 MERGER INTEGRATION EXPENSE - - 150 - 150
AMORTIZATION OF IDENTIFIABLE INTANGIBLES � - � � - � 806 � � - � �
806 � Total operating expenses � 28,012 � � 10,138 � 12,343 � �
(5,480 ) � 45,013 � Income (loss) from operations (1,421 ) 6,577
(3,399 ) - 1,757 INTEREST EXPENSE (INCOME), NET � 119 � � 2,274 �
(51 ) � - � � 2,342 � Income (loss) before income taxes (1,540 )
4,303 (3,348 ) - (585 ) INCOME TAX PROVISION (BENEFIT) � (361 ) �
1,160 � - � � - � � 799 � NET INCOME (LOSS) $ (1,179 ) $ 3,143 $
(3,348 ) $ - � $ (1,384 ) NON-GAAP NET INCOME (LOSS) $ (415 ) $
3,143 $ (2,542 ) $ - � $ 186 � � EBITDA $ 5,728 � $ 6,596 $ (2,387
) $ - � $ 9,937 � ADJUSTED EBITDA $ 6,492 � $ 6,596 $ (2,237 ) $ -
� $ 10,851 � � � A reconciliation of NET INCOME (LOSS) to EBITDA
and ADJUSTED EBITDA follows: � NET INCOME (LOSS) $ (1,179 ) $ 3,143
$ (3,348 ) $ - $ (1,384 ) Income tax expense (benefit) (361 ) 1,160
- - 799 Interest expense (income) 119 2,274 (51 ) - 2,342
Depreciation and amortization � 7,149 � � 19 � 1,012 � � - � �
8,180 � EBITDA $ 5,728 $ 6,596 $ (2,387 ) $ - $ 9,937 Stock-based
compensation 764 - - - 764 Merger integration expense � - � � - �
150 � � - � � 150 � ADJUSTED EBITDA $ 6,492 � $ 6,596 $ (2,237 ) $
- � $ 10,851 � � A reconciliation of NET INCOME (LOSS) to NON-GAAP
NET INCOME (LOSS) follows: � NET INCOME (LOSS) $ (1,179 ) $ 3,143 $
(3,348 ) $ - $ (1,384 ) Stock-based compensation 764 - - - 764
Amortization of intangible assets � - � � - � 806 � � - � � 806 �
NON-GAAP NET INCOME (LOSS) $ (415 ) $ 3,143 $ (2,542 ) $ - � $ 186
� PFSweb, Inc. and Subsidiaries Unaudited Condensed Consolidating
Balance Sheets as of December 31, 2007 (In Thousands) � � � �
Supplies � � � PFSweb Distributors � eCOST Eliminations �
Consolidated ASSETS CURRENT ASSETS: Cash and cash equivalents $
10,835 $ 1,757 $ 1,680 $ - $ 14,272 Restricted cash 50 1,464 507 -
2,021 Accounts receivable, net 21,366 25,126 2,585 (584 ) 48,493
Inventories, net - 39,596 6,796 - 46,392 Other receivables 211
10,161 - - 10,372 Prepaid expenses and other current assets � 923 �
� 1,321 � 364 � � - � � 2,608 � Total current assets � 33,385 � �
79,425 � 11,932 � � (584 ) � 124,158 � � PROPERTY AND EQUIPMENT,
net 11,549 21 348 - 11,918 NOTES RECEIVABLE FROM AFFILIATES 18,645
- - (18,645 ) - INVESTMENT IN AFFILIATES 38,609 - - (38,609 ) -
IDENTIFIABLE INTANGIBLES - - 5,824 - 5,824 GOODWILL - - 15,362 -
15,362 OTHER ASSETS � 762 � � - � 149 � � - � � 911 � Total assets
� 102,950 � � 79,446 � 33,615 � � (57,838 ) � 158,173 � �
LIABILITIES AND SHAREHOLDERS EQUITY CURRENT LIABILITIES: Current
portion of long-term debt and capital lease obligations $ 10,063 $
12,175 $ - $ - $ 22,238 Trade accounts payable 5,615 43,265 8,679
(584 ) 56,975 Accrued expenses � 11,604 � � 7,416 � 3,418 � � - � �
22,438 � Total current liabilities � 27,282 � � 62,856 � 12,097 � �
(584 ) � 101,651 � � LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS,
less current portion 6,378 - - - 6,378 NOTES PAYABLE TO AFFILIATES
- 6,005 12,640 (18,645 ) - OTHER LIABILITIES � 998 � � - � 304 � �
- � � 1,302 � Total liabilities � 34,658 � � 68,861 � 25,041 � �
(19,229 ) � 109,331 � � COMMITMENTS AND CONTINGENCIES �
SHAREHOLDERS' EQUITY: Common stock 47 - 19 (19 ) 47 Capital
contributions - 1,000 - (1,000 ) - Additional paid-in capital
92,084 - 28,059 (28,059 ) 92,084 Retained earnings (accumulated
deficit) (26,288 ) 6,601 (19,504 ) (6,547 ) (45,738 ) Accumulated
other comprehensive income 2,534 2,984 - (2,984 ) 2,534 Treasury
stock � (85 ) � - � - � � - � � (85 ) Total shareholders' equity �
68,292 � � 10,585 � 8,574 � � (38,609 ) � 48,842 � Total
liabilities and shareholders' equity $ 102,950 � $ 79,446 $ 33,615
� $ (57,838 ) $ 158,173 � PFSweb, Inc. and Subsidiaries Unaudited
Consolidating Statements of Operations For the Three Months Ended
December 31, 2006 (In Thousands) � � � Supplies � � � PFSweb
Distributors eCOST Eliminations Consolidated REVENUES: Product
revenue, net $ - $ 59,780 $ 21,084 $ - $ 80,864 Service fee revenue
19,375 - - - 19,375 Service fee revenue - affiliate 2,103 - -
(2,103 ) - Pass-thru revenue � 8,901 � � - � - � � (143 ) � 8,758 �
Total revenues � 30,379 � � 59,780 � 21,084 � � (2,246 ) � 108,997
� � COSTS OF REVENUES: Cost of product revenue - 56,093 19,626 -
75,719 Cost of service fee revenue 15,258 - - (573 ) 14,685 Cost of
pass-thru revenue � 8,901 � � - � - � � (143 ) � 8,758 � Total
costs of revenues � 24,159 � � 56,093 � 19,626 � � (716 ) � 99,162
� Gross profit � 6,220 � � 3,687 � 1,458 � � (1,530 ) � 9,835 �
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 6,984 2,437 3,137
(1,530 ) 11,028 MERGER INTEGRATION EXPENSE - - 365 - 365
AMORTIZATION OF IDENTIFIABLE INTANGIBLES 204 204 GOODWILL
IMPARIMENT � - � � - � 3,507 � � - � � 3,507 � Total operating
expenses � 6,984 � � 2,437 � 7,213 � � (1,530 ) � 15,104 � Income
(loss) from operations (764 ) 1,250 (5,755 ) - (5,269 ) INTEREST
EXPENSE (INCOME), NET � (13 ) � 623 � (3 ) � - � � 607 � Income
(loss) before income taxes (751 ) 627 (5,752 ) - (5,876 ) INCOME
TAX PROVISION (BENEFIT) � 328 � � 246 � - � � - � � 574 � NET
INCOME (LOSS) $ (1,079 ) $ 381 $ (5,752 ) $ - � $ (6,450 ) NON-GAAP
NET INCOME (LOSS) $ (865 ) $ 381 $ (2,041 ) $ - � $ (2,525 ) �
EBITDA $ 995 � $ 1,254 $ (5,475 ) $ - � $ (3,226 ) ADJUSTED EBITDA
$ 1,209 � $ 1,254 $ (1,603 ) $ - � $ 860 � � � A reconciliation of
NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows: � NET
INCOME (LOSS) $ (1,079 ) $ 381 $ (5,752 ) $ - $ (6,450 ) Income tax
expense (benefit) 328 246 - - 574 Interest expense (income) (13 )
623 (3 ) - 607 Depreciation and amortization � 1,759 � � 4 � 280 �
� - � � 2,043 � EBITDA $ 995 $ 1,254 $ (5,475 ) $ - $ (3,226 )
Stock-based compensation 214 - - - 214 Merger integration expense -
- 365 - 365 Goodwill Impairment � - � � - � 3,507 � � - � � 3,507 �
ADJUSTED EBITDA $ 1,209 � $ 1,254 $ (1,603 ) $ - � $ 860 � � A
reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS)
follows: � NET INCOME (LOSS) $ (1,079 ) $ 381 $ (5,752 ) $ - $
(6,450 ) Stock-based compensation 214 - - - 214 Amortization of
intangible assets - - 204 - 204 Goodwill impairment � - � � - �
3,507 � � - � � 3,507 � NON-GAAP NET INCOME (LOSS) $ (865 ) $ 381 $
(2,041 ) $ - � $ (2,525 ) PFSweb, Inc. and Subsidiaries Unaudited
Consolidating Statements of Operations For the Year Ended December
31, 2006 (In Thousands) � � � Supplies � � � PFSweb Distributors
eCOST Eliminations Consolidated REVENUES: Product revenue, net $ -
$ 244,979 $ 88,332 $ - $ 333,311 Service fee revenue 67,056 - - -
67,056 Service fee revenue - affiliate 8,518 - - (8,518 ) -
Pass-thru revenue � 23,372 � � - � - � � (486 ) � 22,886 � Total
revenues � 98,946 � � 244,979 � 88,332 � � (9,004 ) � 423,253 � �
COSTS OF REVENUES: Cost of product revenue - 227,362 84,107 (52 )
311,417 Cost of service fee revenue 51,813 - - (2,539 ) 49,274 Cost
of pass-thru revenue � 23,372 � � - � - � � (486 ) � 22,886 � Total
costs of revenues � 75,185 � � 227,362 � 84,107 � � (3,077 ) �
383,577 � Gross profit � 23,761 � � 17,617 � 4,225 � � (5,927 ) �
39,676 � SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 26,491 10,003
14,622 (5,927 ) 45,189 MERGER INTEGRATION EXPENSE - - 1,495 - 1,495
AMORTIZATION OF IDENTIFIABLE INTANGIBLES - - 749 - 749 GOODWILL
IMPAIRMENT � - � � - � 3,507 � � - � � 3,507 � Total operating
expenses � 26,491 � � 10,003 � 20,373 � � (5,927 ) � 50,940 �
Income (loss) from operations (2,730 ) 7,614 (16,148 ) - (11,264 )
INTEREST EXPENSE (INCOME), NET � (111 ) � 2,215 � 8 � � - � � 2,112
� Income (loss) before income taxes (2,619 ) 5,399 (16,156 ) -
(13,376 ) INCOME TAX PROVISION (BENEFIT) � (883 ) � 2,037 � - � � -
� � 1,154 � NET INCOME (LOSS) $ (1,736 ) $ 3,362 $ (16,156 ) $ - �
$ (14,530 ) NON-GAAP NET INCOME (LOSS) $ (837 ) $ 3,362 $ (11,900 )
$ - � $ (9,375 ) � EBITDA $ 3,690 � $ 7,625 $ (15,103 ) $ - � $
(3,788 ) ADJUSTED EBITDA $ 4,589 � $ 7,625 $ (9,712 ) $ - � $ 2,502
� � � A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED
EBITDA follows: � NET INCOME (LOSS) $ (1,736 ) $ 3,362 $ (16,156 )
$ - $ (14,530 ) Income tax expense (benefit) (883 ) 2,037 - - 1,154
Interest expense (income) (111 ) 2,215 8 - 2,112 Depreciation and
amortization � 6,420 � � 11 � 1,045 � � - � � 7,476 � EBITDA $
3,690 $ 7,625 $ (15,103 ) $ - $ (3,788 ) Stock-based compensation
899 - - - 899 Merger integration expense - - 1,495 - 1,495 Loss on
sales transaction to former eCOST customer - - 389 - 389 Goodwill
Impairment � - � � - � 3,507 � � - � � 3,507 � ADJUSTED EBITDA $
4,589 � $ 7,625 $ (9,712 ) $ - � $ 2,502 � � A reconciliation of
NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows: � NET
INCOME (LOSS) $ (1,736 ) $ 3,362 $ (16,156 ) $ - $ (14,530 )
Stock-based compensation 899 - - - 899 Amortization of intangible
assets - - 749 - 749 Goodwill Impairment � - � � - � 3,507 � � - �
� 3,507 � NON-GAAP NET INCOME (LOSS) $ (837 ) $ 3,362 $ (11,900 ) $
- � $ (9,375 ) PFSweb, Inc. and Subsidiaries Unaudited Condensed
Consolidating Balance Sheets as of December 31, 2006 (In Thousands)
� � � Supplies � � � PFSweb Distributors � eCOST Eliminations �
Consolidated ASSETS CURRENT ASSETS: Cash and cash equivalents $
11,691 $ 2,021 $ 1,354 $ - $ 15,066 Restricted cash 196 2,249 208 -
2,653 Accounts receivable, net 18,667 27,306 3,492 (279 ) 49,186
Inventories, net - 41,552 6,118 - 47,670 Other receivables 147
10,627 - - 10,774 Prepaid expenses and other current assets � 1,995
� � 1,454 � 82 � � - � � 3,531 � Total current assets � 32,696 � �
85,209 � 11,254 � � (279 ) � 128,880 � � PROPERTY AND EQUIPMENT,
net 12,617 40 227 - 12,884 NOTES RECEIVABLE FROM AFFILIATES 17,145
- - (17,145 ) - INVESTMENT IN AFFILIATES 37,049 - - (37,049 ) -
IDENTIFIABLE INTANGIBLES - - 6,631 - 6,631 GOODWILL - - 15,362 -
15,362 OTHER ASSETS � 722 � � - � 142 � � - � � 864 � Total assets
� 100,229 � � 85,249 � 33,616 � � (54,473 ) � 164,621 � �
LIABILITIES AND SHAREHOLDERS EQUITY CURRENT LIABILITIES: Current
portion of long-term debt and capital lease obligations $ 10,252 $
13,550 $ - $ - $ 23,802 Trade accounts payable 6,531 48,770 7,419
(279 ) 62,441 Accrued expenses � 10,902 � � 7,398 � 3,185 � � - � �
21,485 � Total current liabilities � 27,685 � � 69,718 � 10,604 � �
(279 ) � 107,728 � � LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS,
less current portion 6,076 - - - 6,076 NOTES PAYABLE TO AFFILIATES
- 6,505 10,640 (17,145 ) - OTHER LIABILITIES � 1,528 � � - � 449 �
� - � � 1,977 � Total liabilities � 35,289 � � 76,223 � 21,693 � �
(17,424 ) � 115,781 � � COMMITMENTS AND CONTINGENCIES �
SHAREHOLDERS' EQUITY: Common stock 47 - 19 (19 ) 47 Capital
contributions 1,000 (1,000 ) - Additional paid-in capital 91,302 -
28,059 (28,059 ) 91,302 Retained earnings (accumulated deficit)
(28,254 ) 5,865 (16,155 ) (5,810 ) (44,354 ) Accumulated other
comprehensive income 1,930 2,161 - (2,161 ) 1,930 Treasury stock �
(85 ) � - � - � � - � � (85 ) Total shareholders' equity � 64,940 �
� 9,026 � 11,923 � � (37,049 ) � 48,840 � Total liabilities and
shareholders' equity $ 100,229 � $ 85,249 $ 33,616 � $ (54,473 ) $
164,621 � eCOST.com, Inc. Selected Operating Data � � Three Months
Ended December 31, 2007 � 2006 � Total Customers (1) 1,752,697
1,645,645 � Active Customers (2) 165,319 195,392 � New Customers
(3) 32,438 29,915 � Number of Orders (4) 83,723 74,770 � Average
Order Value (5) $ 339 $ 272 � Advertising Expense (6) $ 219,841 $
408,271 � Cost to Acquire a New Customer (7) $ 6.78 $ 13.65 � � (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 of $104,977 and $29,729 was not included in the
2007 and 2006 calculation, respectively as it is used for retention
and not acquisition.
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