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 second quarter and six months ended June 30, 2008. Summary of
consolidated results for the second quarter ended June 30, 2008:
Total reported revenue was $110.7 million, compared to $108.4
million for the second quarter of 2007; Adjusted EBITDA (as
defined) was $2.5 million versus $3.4 million for the same period
last year; Net income was $62,000, or $0.01 per basic and diluted
share, compared to a net income of $154,000, or $0.02 per basic and
diluted share, for the second quarter of 2007; Non-GAAP net income
(as defined) was $0.4 million, or $0.04 per basic and diluted
share, compared to non-GAAP net income of $0.5 million, or $0.06
per basic and $0.05 per diluted share, for the second quarter of
2007; Merchandise sales (as defined) totaled approximately $631
million for the second quarter of 2008 versus $649 million for the
same period last year; Total cash, cash equivalents and restricted
cash equaled $17.8 million as of June 30, 2008 compared to $16.3
million as of December 31, 2007. Summary of consolidated results
for the six months ended June 30, 2008: Total reported revenue was
$229.2 million, compared to $212.8 million for the six months ended
June 30, 2007; Adjusted EBITDA (as defined) was $5.2 million versus
$4.1 million for the same period last year; Net income was
$476,000, or $0.05 per basic and diluted share, compared to a net
loss of $2.2 million, or $0.22 per basic and diluted share, for the
six months ended June 30, 2007; Non-GAAP net income (as defined)
was $1.2 million, or $0.12 per basic and diluted share, compared to
a non-GAAP net loss of $1.4 million, or $0.14 per basic and diluted
share, for the same period last year; Merchandise sales (as
defined) totaled nearly $1.4 billion versus $1.3 billion for the
same period last year. Mark Layton, Chairman and Chief Executive
Officer of PFSweb, stated, �During the second quarter we continued
to perform within our expectations for this year, delivering our
fifth consecutive profitable quarter and Adjusted EBITDA of $2.5
million. Notwithstanding the macroeconomics affecting the U.S.
retail industry, our diversified roster of new and existing clients
and customers in multiple industries have allowed us to increase
revenue, generate positive cash flow and maintain a sound balance
sheet during this year.� All share data and per share data in this
press release reflect the impact of the Company�s 1 for 4.7 reverse
stock split effected June 2, 2008. Summary of results by business:
Service Fee Business: For the second quarter of 2008, Service Fee
revenue increased 20.4% to $21.3 million, compared with $17.6
million for the same period in 2007. The Service Fee business
reported Adjusted EBITDA of $1.0 million for the second quarter of
2008, compared to $1.9 million for the same period last year. For
the six months ended June 30, 2008, Service Fee revenue increased
21.5% to $42.1 million, from $34.6 million for the same period in
2007. The Service Fee business reported Adjusted EBITDA of $2.7
million for the six months ended June 30, 2008, compared to $2.2
million for the same period last year. Mike Willoughby, President
of PFSweb�s services division, commented, �Second quarter revenue
for our Service Fee business, which increased approximately 20%
from the prior year period, was driven by new contracts, temporary
increased activity for one of our largest Service Fee clients and
incremental project activity. Over the past several months, we
participated in the launch of a new web commerce site for Ashley
Stewart providing order management, customer care and fulfillment
services for the initiative. We also completed the development of a
new platform for Roots.com. This new platform utilizes our enhanced
end-to-end offering, which features the Demandware eCommerce
platform and integration with select interactive marketing
partners, including Sitebrand and Coremetrics. The Roots.com
Canadian and U.S. online storefronts, which also feature a new user
experience design by Fluid, were officially launched last week. �I
am also pleased to report continued progress in winning new
business, including both signed contracts as well as contracts
still being finalized, which we partially attribute to our new
end-to-end offering. PFSweb will formally announce each agreement
in a press release or quarterly conference call if such disclosure
is approved by the client. Many of these new arrangements are with
brand name companies that are either moving from one of our
competitors� services to take advantage of our new end-to-end
offering or are looking to take advantage of the eCommerce space
for the first time. We believe these new client wins demonstrates
significant demand for our Service Fee business, particularly with
our new end-to-end offering. Our current pipeline for potential new
business is in excess of $35 million, including contracts still
being finalized, which is in line with our expectations for this
time of year and is targeted to increase during the fall season.�
Supplies Distributors Business: For the second quarter of 2008,
Supplies Distributors revenue was $60.0 million, compared to $57.6
million for the same period last year. Adjusted EBITDA was $2.1
million for the second quarter of 2008, consistent with $2.1
million for the same period last year. For the six months ended
June 30, 2008, Supplies Distributors revenue was $122.3 million,
compared to $116.4 million for the same period last year. Adjusted
EBITDA was $3.7 million for the six months ended June 30, 2008, a
slight increase compared to $3.4 million for the same period last
year. Mr. Willoughby continued, �For the quarter and first half of
2008, the Supplies Distributors business has continued to perform
well. Revenue increased approximately four percent in the second
quarter and gross margins were approximately 8%, which is slightly
above their normal range due to the impact of certain incremental
inventory cost reductions.� eCOST.com Business: For the second
quarter of 2008, eCOST.com revenue was $23.0 million, compared to
$27.1 million for the same period in 2007. Adjusted EBITDA for
eCOST.com in the quarter was a loss of $0.6 million, consistent
with the Adjusted EBITDA loss of $0.6 million for the same period
last year. For the six months ended June 30, 2008, eCOST.com
revenues were $51.0 million, compared to $48.7 million for the same
period in 2007. Adjusted EBITDA for eCOST.com in the six months
ended June 30, 2008 was a loss of $1.2 million, compared to a loss
of $1.5 million for the same period last year. Mr. Layton
continued, �Considering the macroeconomic forces pressuring the
entire U.S. retail industry, we believe the overall health of
eCOST.com continues to improve due to the enhancements we have made
to the site and underlying business. During the quarter, eCOST.com
experienced a softening in its business to business segment, and
its business to consumer segment was relatively flat compared to
last year. We improved our gross profit margin through
implementation of new and more sophisticated automated pricing
tools and from a growing mix of higher margin product sales,
including our new �For the Home� and �Sports and Leisure� stores,
especially in our business to consumer segment, and we continue to
focus increased efforts here. �Throughout the quarter we continued
to make progress towards the overall site redevelopment and
launching our new �For the Home� and �Sports and Leisure� products.
We remain confident our continued emphasis on making site
enhancements, introducing new products and focus on achieving
higher gross margins will help us in our goal to achieve cash flow
breakeven at eCOST.com,� Mr. Layton concluded. Financial Targets
for Fiscal Year 2008 PFSweb continues to target total consolidated
revenues, excluding pass-through revenues, of approximately $445
million to $475 million and consolidated Adjusted EBITDA of $10 �
$12 million for calendar year 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. However, further weakening in the U.S.
economy may cause us to fall toward the lower end of these targets.
Conference Call Information Management will host a conference call
at 9 a.m. Central Time (10 a.m. Eastern Time) on August 14, 2008 to
discuss the latest corporate developments and results. To listen to
the call, please dial (888) 562-3356 and enter the pin number
(59375549) 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, 2008 at (800) 642-1687, pin
number (59375549). The replay also will be available at the
Company�s website 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 (loss) represents net income (loss) calculated in accordance
with U.S. GAAP as adjusted for the impact of non-cash stock-based
compensation expense and amortization of identifiable intangible
assets. EBITDA represents earnings (or losses) before interest,
income taxes, depreciation, and amortization. Adjusted EBITDA
further eliminates the effect of stock-based compensation and
merger integration related expenses. Non-GAAP net income (loss),
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 (loss) eliminates the effect
of stock-based compensation and amortization of intangible assets
and EBITDA and Adjusted EBITDA further eliminates the effect of
financing, income taxes, the accounting effects of capital spending
and certain other merger related 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
e-commerce services. The company serves a multitude of industries
and company types, including such clients as LEGO, Discovery
Commerce, Riverbed, MARS Drinks North America, Hewlett-Packard,
International Business Machines, Hawker Beechcraft Corp., 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 merchandise for
consumers and small to medium size business buyers. The eCOST.com
brand markets approximately 170,000 different products from leading
manufacturers such as Sony, JVC, Canon, Hewlett-Packard, Garmin,
Panasonic, Toshiba, Microsoft, Kitchen Aid, Panasonic, Black &
Decker, Cuisinart, Coleman, Wilson and Nike 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,
2007 and Quarterly Report on From 10-Q for the quarter ended June
30, 2008 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 and Infoprint Solutions; 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; the impact of our reverse
stock split; 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 renew or replace
our credit facilities or find alternative financing; 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
achieve the anticipated benefits of the eCOST 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, 2008 2007
2008 2007 REVENUES: Product revenue, net $ 83,048 $ 84,678 $
173,339 $ 165,135 Service fee revenue 21,254 17,646 42,066 34,608
Pass-thru revenue � 6,382 � 6,076 � 13,748 � 13,064 � Total
revenues � 110,684 � 108,400 � 229,153 � 212,807 � � COSTS OF
REVENUES: Cost of product revenue 76,368 77,798 160,347 152,569
Cost of service fee revenue 15,105 12,635 28,949 25,299 Cost of
pass-thru revenue � 6,382 � 6,076 � 13,748 � 13,064 � Total costs
of revenues � 97,855 � 96,509 � 203,044 � 190,932 � Gross profit �
12,829 � 11,891 � 26,109 � 21,875 � SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 11,849 10,615 23,943 21,816 MERGER
INTEGRATION EXPENSE - - - 150 AMORTIZATION OF IDENTIFIABLE
INTANGIBLES � 201 � 204 � 403 � 408 � Total operating expenses �
12,050 � 10,819 � 24,346 � 22,374 � Income (loss) from operations
779 1,072 1,763 (499 ) INTEREST EXPENSE, NET � 366 � 658 � 696 �
1,242 � Income (loss) before income taxes 413 414 1,067 (1,741 )
INCOME TAX PROVISION � 351 � 260 � 591 � 466 � NET INCOME (LOSS) $
62 $ 154 $ 476 $ (2,207 ) � NET INCOME (LOSS) PER SHARE (B) Basic $
0.01 $ 0.02 $ 0.05 $ (0.22 ) Diluted $ 0.01 $ 0.02 $ 0.05 $ (0.22 )
� WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (B): Basic � 9,900
� 9,889 � 9,896 � 9,888 � Diluted � 10,037 � 10,002 � 10,045 �
9,888 � � � � � NON-GAAP NET INCOME (LOSS) $ 391 $ 546 $ 1,208 $
(1,402 ) EBITDA $ 2,341 $ 3,166 $ 4,906 $ 3,589 � ADJUSTED EBITDA $
2,469 $ 3,354 $ 5,235 $ 4,136 � � (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. (B) Historical share and per
share data has been restated to represent the effect of the
1-for-4.7 reverse stock split that occurred on June 2, 2008.
PFSweb, Inc. and Subsidiaries Reconciliation of certain Non-GAAP
Items to GAAP (In Thousands, Except Per Share Data) � � � � � Three
Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007
NET INCOME (LOSS) $ 62 $ 154 $ 476 $ (2,207 ) Income tax expense
351 260 591 466 Interest expense 366 658 696 1,242 Depreciation and
amortization � 1,562 � 2,094 � 3,143 � 4,088 � EBITDA $ 2,341 $
3,166 $ 4,906 $ 3,589 Stock-based compensation 128 188 329 397
Merger integration related expenses � - � - � - � 150 � ADJUSTED
EBITDA $ 2,469 $ 3,354 $ 5,235 $ 4,136 � � � Three Months Ended Six
Months Ended June 30, June 30, 2008 2007 2008 2007 � NET INCOME
(LOSS) $ 62 $ 154 $ 476 $ (2,207 ) Stock-based compensation 128 188
329 397 Amortization of identifiable intangible assets � 201 � 204
� 403 � 408 � NON-GAAP NET INCOME (LOSS) $ 391 $ 546 $ 1,208 $
(1,402 ) � NET INCOME (LOSS) PER SHARE: Basic $ 0.01 $ 0.02 $ 0.05
$ (0.22 ) Diluted $ 0.01 $ 0.02 $ 0.05 $ (0.22 ) � NON-GAAP NET
INCOME (LOSS) Per Share: Basic $ 0.04 $ 0.06 $ 0.12 $ (0.14 )
Diluted $ 0.04 $ 0.05 $ 0.12 $ (0.14 ) PFSweb, Inc. and
Subsidiaries Unaudited Condensed Consolidated Balance Sheets (In
Thousands, Except Share Data) � � � � � June 30, December 31, 2008
2007 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 13,972 $
14,272 Restricted cash 3,836 2,021 Accounts receivable, net of
allowance for doubtful accounts of $999 and $1,483 at June 30, 2008
and December 31, 2007, respectively 39,669 48,493 Inventories, net
of reserves of $2,358 and $2,080 at June 30, 2008 and December 31,
2007, respectively 52,715 46,392 Other receivables 15,995 10,372
Prepaid expenses and other current assets � 3,795 � � 2,608 � Total
current assets � 129,982 � � 124,158 � � PROPERTY AND EQUIPMENT,
net 11,122 11,918 IDENTIFIABLE INTANGIBLES 5,421 5,824 GOODWILL
15,362 15,362 OTHER ASSETS � 933 � � 911 � Total assets � 162,820 �
� 158,173 � � LIABILITIES AND SHAREHOLDERS EQUITY CURRENT
LIABILITIES: Current portion of long-term debt and capital lease
obligations $ 17,601 $ 22,238 Trade accounts payable 69,117 56,975
Accrued expenses � 22,357 � � 22,438 � Total current liabilities �
109,075 � � 101,651 � � LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS, less current portion 2,561 6,378 OTHER LIABILITIES �
831 � � 1,302 � Total liabilities � 112,467 � � 109,331 � � �
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; 9,911,762 and 9,909,401 shares issued at June
30, 2008 and December 31, 2007, respectively; and 9,930,123 and
9,891,040 outstanding as of June 30, 2008 and December 31, 2007,
respectively � � 10 10 Additional paid-in capital 92,496 92,121
Accumulated deficit (45,262 ) (45,738 ) Accumulated other
comprehensive income 3,194 2,534 Treasury stock at cost, 18,361
shares � (85 ) � (85 ) Total shareholders' equity � 50,353 � �
48,842 � Total liabilities and shareholders' equity $ 162,820 � $
158,173 � PFSweb, Inc. and Subsidiaries Unaudited Consolidating
Statements of Operations For the Three Months Ended June 30, 2008
(In Thousands) � � � � � � � Supplies PFSweb Distributors eCOST
Eliminations Consolidated REVENUES: Product revenue, net $ - $
60,025 $ 23,023 $ - $ 83,048 Service fee revenue 21,254 - - -
21,254 Service fee revenue - affiliate 2,069 - - (2,069 ) -
Pass-thru revenue � 6,389 � � - � - � � (7 ) � 6,382 Total revenues
� 29,712 � � 60,025 � 23,023 � � (2,076 ) � 110,684 � COSTS OF
REVENUES: Cost of product revenue - 55,247 21,121 - 76,368 Cost of
service fee revenue 15,771 - - (666 ) 15,105 Cost of pass-thru
revenue � 6,389 � � - � - � � (7 ) � 6,382 Total costs of revenues
� 22,160 � � 55,247 � 21,121 � � (673 ) � 97,855 Gross profit �
7,552 � � 4,778 � 1,902 � � (1,403 ) � 12,829 SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 7,946 2,721 2,585 (1,403 ) 11,849
AMORTIZATION OF IDENTIFIABLE INTANGIBLES � - � � - � 201 � � - � �
201 Total operating expenses � 7,946 � � 2,721 � 2,786 � � (1,403 )
� 12,050 Income (loss) from operations (394 ) 2,057 (884 ) - 779
INTEREST EXPENSE (INCOME), NET � (1 ) � 361 � 6 � � - � � 366
Income (loss) before income taxes (393 ) 1,696 (890 ) - 413 INCOME
TAX PROVISION (BENEFIT) � (249 ) � 600 � - � � - � � 351 NET INCOME
(LOSS) $ (144 ) $ 1,096 $ (890 ) $ - � $ 62 NON-GAAP NET INCOME
(LOSS) $ (16 ) $ 1,096 $ (689 ) $ - � $ 391 � � EBITDA $ 919 � $
2,063 $ (641 ) $ - � $ 2,341 ADJUSTED EBITDA $ 1,047 � $ 2,063 $
(641 ) $ - � $ 2,469 � � A reconciliation of NET INCOME (LOSS) to
EBITDA and ADJUSTED EBITDA follows: � NET INCOME (LOSS) $ (144 ) $
1,096 $ (890 ) $ - $ 62 Income tax expense (benefit) (249 ) 600 - -
351 Interest expense (income) (1 ) 361 6 - 366 Depreciation and
amortization � 1,313 � � 6 � 243 � � - � � 1,562 EBITDA $ 919 $
2,063 $ (641 ) $ - $ 2,341 Stock-based compensation � 128 � � - � -
� � - � � 128 ADJUSTED EBITDA $ 1,047 � $ 2,063 $ (641 ) $ - � $
2,469 � A reconciliation of NET INCOME(LOSS) to NON-GAAP NET INCOME
(LOSS) follows: � NET INCOME (LOSS) $ (144 ) $ 1,096 $ (890 ) $ - $
62 Stock-based compensation 128 - - - 128 Amortization of
intangible assets � - � � - � 201 � � - � � 201 NON-GAAP NET INCOME
(LOSS) $ (16 ) $ 1,096 $ (689 ) $ - � $ 391 PFSweb, Inc. and
Subsidiaries Unaudited Consolidating Statements of Operations For
the Six Months Ended June 30, 2008 (In Thousands) � � � � � � �
Supplies PFSweb Distributors eCOST Eliminations Consolidated
REVENUES: Product revenue, net $ - $ 122,347 $ 50,992 $ - $ 173,339
Service fee revenue 42,066 - - - 42,066 Service fee revenue -
affiliate 4,220 - - (4,220 ) - Pass-thru revenue � 13,706 � � - � -
� � 42 � � 13,748 Total revenues � 59,992 � � 122,347 � 50,992 � �
(4,178 ) � 229,153 � COSTS OF REVENUES: Cost of product revenue -
113,499 46,848 - 160,347 Cost of service fee revenue 30,322 - -
(1,373 ) 28,949 Cost of pass-thru revenue � 13,706 � � - � - � � 42
� � 13,748 Total costs of revenues � 44,028 � � 113,499 � 46,848 �
� (1,331 ) � 203,044 Gross profit � 15,964 � � 8,848 � 4,144 � �
(2,847 ) � 26,109 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
16,259 5,139 5,392 (2,847 ) 23,943 AMORTIZATION OF IDENTIFIABLE
INTANGIBLES � - � � - � 403 � � - � � 403 Total operating expenses
� 16,259 � � 5,139 � 5,795 � � (2,847 ) � 24,346 Income (loss) from
operations (295 ) 3,709 (1,651 ) - 1,763 INTEREST EXPENSE (INCOME),
NET � (61 ) � 750 � 7 � � - � � 696 Income (loss) before income
taxes (234 ) 2,959 (1,658 ) - 1,067 INCOME TAX PROVISION (BENEFIT)
� (444 ) � 1,035 � - � � - � � 591 NET INCOME (LOSS) $ 210 � $
1,924 $ (1,658 ) $ - � $ 476 NON-GAAP NET INCOME (LOSS) $ 539 � $
1,924 $ (1,255 ) $ - � $ 1,208 � � EBITDA $ 2,353 � $ 3,719 $
(1,166 ) $ - � $ 4,906 ADJUSTED EBITDA $ 2,682 � $ 3,719 $ (1,166 )
$ - � $ 5,235 � � A reconciliation of NET INCOME (LOSS) to EBITDA
and ADJUSTED EBITDA follows: � NET INCOME (LOSS) $ 210 $ 1,924 $
(1,658 ) $ - $ 476 Income tax expense (benefit) (444 ) 1,035 - -
591 Interest expense (income) (61 ) 750 7 - 696 Depreciation and
amortization � 2,648 � � 10 � 485 � � - � � 3,143 EBITDA $ 2,353 $
3,719 $ (1,166 ) $ - $ 4,906 Stock-based compensation � 329 � � - �
- � � - � � 329 ADJUSTED EBITDA $ 2,682 � $ 3,719 $ (1,166 ) $ - �
$ 5,235 � A reconciliation of NET INCOME(LOSS) to NON-GAAP NET
INCOME (LOSS) follows: � NET INCOME (LOSS) $ 210 $ 1,924 $ (1,658 )
$ - $ 476 Stock-based compensation 329 - - - 329 Amortization of
intangible assets � - � � - � 403 � � - � � 403 NON-GAAP NET INCOME
(LOSS) $ 539 � $ 1,924 $ (1,255 ) $ - � $ 1,208 PFSweb, Inc. and
Subsidiaries Unaudited Condensed Consolidating Balance Sheets as of
June 30, 2008 (In Thousands) � � � � � � � � Supplies PFSweb
Distributors eCOST Eliminations Consolidated ASSETS CURRENT ASSETS:
Cash and cash equivalents $ 12,217 $ 1,698 $ 57 $ - $ 13,972
Restricted cash 1,575 1,644 617 - 3,836 Accounts receivable, net
14,294 24,249 1,713 (587 ) 39,669 Inventories, net - 45,731 6,984 -
52,715 Other receivables - 15,995 - - 15,995 Prepaid expenses and
other current assets � 2,275 � � 1,421 � 99 � � - � � 3,795 � Total
current assets � 30,361 � � 90,738 � 9,470 � � (587 ) � 129,982 � �
PROPERTY AND EQUIPMENT, net 10,664 92 366 - 11,122 NOTES RECEIVABLE
FROM AFFILIATES 19,595 - - (19,595 ) - INVESTMENT IN AFFILIATES
39,242 - - (39,242 ) - IDENTIFIABLE INTANGIBLES - - 5,421 - 5,421
GOODWILL - - 15,362 - 15,362 OTHER ASSETS � 788 � � - � 145 � � - �
� 933 � Total assets � 100,650 � � 90,830 � 30,764 � � (59,424 ) �
162,820 � � LIABILITIES AND SHAREHOLDERS EQUITY CURRENT
LIABILITIES: Current portion of long-term debt and capital lease
obligations $ 5,126 $ 12,475 $ - $ - $ 17,601 Trade accounts
payable 9,156 53,590 6,958 (587 ) 69,117 Accrued expenses � 11,748
� � 8,043 � 2,566 � � - � � 22,357 � Total current liabilities �
26,030 � � 74,108 � 9,524 � � (587 ) � 109,075 � � LONG-TERM DEBT
AND CAPITAL LEASE OBLIGATIONS, less current portion 2,561 - - -
2,561 NOTES PAYABLE TO AFFILIATES - 5,505 14,090 (19,595 ) - OTHER
LIABILITIES � 597 � � - � 234 � � - � � 831 � Total liabilities �
29,188 � � 79,613 � 23,848 � � (20,182 ) � 112,467 � � COMMITMENTS
AND CONTINGENCIES � SHAREHOLDERS' EQUITY: Common stock 10 - 19 (19
) 10 Capital contributions - 1,000 - (1,000 ) - Additional paid-in
capital 92,496 - 28,059 (28,059 ) 92,496 Retained earnings
(accumulated deficit) (24,150 ) 6,761 (21,162 ) (6,711 ) (45,262 )
Accumulated other comprehensive income 3,191 3,456 - (3,453 ) 3,194
Treasury stock � (85 ) � - � - � � - � � (85 ) Total shareholders'
equity � 71,462 � � 11,217 � 6,916 � � (39,242 ) � 50,353 � Total
liabilities and shareholders' equity $ 100,650 � $ 90,830 $ 30,764
� $ (59,424 ) $ 162,820 � 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 6,551 2,623 2,819 (1,378 )
10,615 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 NON-GAAP NET INCOME
(LOSS) $ 201 � $ 953 $ (608 ) $ - � $ 546 � 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 � A reconciliation of NET INCOME (LOSS) to NON-GAAP NET
INCOME (LOSS) follows: � NET INCOME (LOSS) $ 13 $ 953 $ (812 ) $ -
$ 154 Stock-based compensation 188 - - - 188 Amortization of
intangible assets � - � � - � 204 � � - � � 204 NON-GAAP NET INCOME
(LOSS) $ 201 � $ 953 $ (608 ) $ - � $ 546 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 13,848 5,126 5,604 (2,762 ) 21,816 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 )
NON-GAAP NET INCOME (LOSS) $ (1,094 ) $ 1,407 $ (1,715 ) $ - � $
(1,402 ) � 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 � � A
reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS)
follows: � NET INCOME (LOSS) $ (1,491 ) $ 1,407 $ (2,123 ) $ - $
(2,207 ) Stock-based compensation 397 - - - 397 Amortization of
intangible assets � - � � - � 408 � � - � � 408 � NON-GAAP NET
INCOME (LOSS) $ (1,094 ) $ 1,407 $ (1,715 ) $ - � $ (1,402 )
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 10 - 19 (19 ) 10 Capital
contributions - 1,000 - (1,000 ) - Additional paid-in capital
92,121 - 28,059 (28,059 ) 92,121 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 � eCOST.com, Inc. Selected Operating Data �
� � � Three Months Ended June 30, 2008 2007 � Total Customers (1)
1,805,076 1,698,797 � Active Customers (2) 171,794 231,601 � New
Customers (3) 29,440 25,417 � Number of Orders (4) 61,851 64,111 �
Average Order Value (5) $ 364 $ 422 � Advertising Expense (6) $
171,252 $ 303,921 � Cost to Acquire a New Customer (7) $ 5.69 $
9.76 � � (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 $3,842 and $55,858
was not included in the 2008 and 2007 calculation, respectively, as
it is used for retention and not acquisition.
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