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 third quarter and nine months ended September 30, 2008. Summary
of consolidated results for the third quarter ended September 30,
2008: Total reported revenue was $109.9 million, compared to $112.0
million for the third quarter of 2007; Adjusted EBITDA (as defined)
was $2.5 million versus $3.2 million for the same period last year;
Net income was $43,000, or $0.00 per basic and diluted share,
compared $162,000, or $0.02 per basic and diluted share, for the
third 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 $0.05 per basic and diluted share,
for the third quarter of 2007; Merchandise sales (as defined)
totaled approximately $713 million for the third quarter of 2008
versus $751 million for the same period last year; Total cash, cash
equivalents and restricted cash equaled $17.5 million as of
September 30, 2008 compared to $16.3 million as of December 31,
2007. Summary of consolidated results for the nine months ended
September 30, 2008: Total reported revenue was $339.1 million,
compared to $324.8 million for the nine months ended September 30,
2007; Adjusted EBITDA (as defined) was $7.7 million versus $7.3
million for the same period last year; Net income was $0.5 million,
or $0.05 per basic and diluted share, compared to a net loss of
$2.0 million, or $0.21 per basic and diluted share, for the nine
months ended September 30, 2007; Non-GAAP net income (as defined)
was $1.6 million, or $0.16 per basic and diluted share, compared to
a non-GAAP net loss of $0.9 million, or $0.09 per basic and diluted
share, for the same period last year; Merchandise sales (as
defined) totaled nearly $2.1 billion in both the 2008 and 2007 nine
month periods ended September 30. Mark Layton, Chairman and Chief
Executive Officer of PFSweb, stated, �We are pleased to announce
that the third quarter of 2008 represents our sixth consecutive
quarter of profitability, which was driven by another strong
quarter of measurable growth in our Service Fee business. These
positive results are especially significant when considering the
economic challenges currently facing the global economy.� All share
data and per share data in this press release reflects the impact
of the Company�s 1 for 4.7 reverse stock split effective June 2,
2008. Summary of results by business: Service Fee Business: For the
third quarter of 2008, Service Fee revenue increased 24% to $22.9
million, compared with $18.4 million for the same period in 2007.
The Service Fee business reported Adjusted EBITDA of $1.5 million
for the third quarter of 2008, compared to $2.0 million for the
same period last year. For the nine months ended September 30,
2008, Service Fee revenue increased 23% to $65.0 million, from
$53.0 million for the same period in 2007. The Service Fee business
reported Adjusted EBITDA of $4.2 million for the nine months ended
September 30, 2008, compared to $4.3 million for the same period
last year. Mike Willoughby, President of PFSweb�s services
division, commented, �Our Service Fee revenue growth for both the
three and nine months ended September 30, 2008 is attributable to
new contracts, temporary increased activity occurring from January
2008 and ending September 2008 for our U.S. government contract and
incremental project activity. We continue to sign new Service Fee
clients and maintain a robust pipeline of potential new business,
which is currently in excess of $30 million. In particular, as
announced last week, we recently signed agreements with several
luxury goods and fashion apparel companies, and plan to launch
their programs throughout 2009. Further, our business remains
competitive internationally, especially in Europe where we just
launched a program for Comptoir des Cotonniers. We are excited
about the success we are experiencing in engaging new clients and
prospects with the end-to-end ecommerce offering we unveiled
earlier this year. This new business is targeted to partially
offset the impact of the non-renewal, effective early in 2009, of a
large client engagement with an agency of the U.S. government. This
nonrenewal, as well as the continuing economic downturn, will
affect our service fee revenue and growth outlook for 2009,
although our flexible business model should permit us to reduce
some of our variable costs and redeploy a portion of our existing
infrastructure to other client activities to partially offset the
impact of these events.� Supplies Distributors Business: For the
third quarter of 2008, Supplies Distributors revenue was $55.4
million, compared to $58.3 million for the same period last year.
Adjusted EBITDA was $1.4 million for the third quarter of 2008,
relatively consistent with $1.6 million for the same period last
year. For the nine months ended September 30, 2008, Supplies
Distributors revenue was $177.8 million, compared to $174.7 million
for the same period last year. Adjusted EBITDA was $5.1 million for
the nine months ended September 30, 2008, a slight increase
compared to $5.0 million for the same period last year. Mr.
Willoughby continued, �Our Supplies Distributors business continues
to perform well and meet our Adjusted EBITDA expectations. Revenue
for the 2008 nine month period reflects an increase year over year
due to the negative impact of foreign currency fluctuations during
the 2007 period that created alternative purchasing channels for
certain customers, which did not occur in 2008.� eCOST.com
Business: For the third quarter of 2008, eCOST.com revenue was
$23.7 million, compared to $27.0 million for the same period in
2007. Adjusted EBITDA for eCOST.com in the quarter was a loss of
$0.5 million, relatively consistent with the Adjusted EBITDA loss
of $0.4 million for the same period last year. For the nine months
ended September 30, 2008, eCOST.com revenues were $74.7 million,
compared to $75.7 million for the same period in 2007. Adjusted
EBITDA for eCOST.com in the nine months ended September 30, 2008
was a loss of $1.7 million, compared to a loss of $1.9 million for
the same period last year. Mr. Layton continued, �While eCOST.com�s
revenue declined $4 million for the quarter, we are pleased to
report that our business-to-consumer (B2C) segment, which now
represents 60% of eCOST.com�s revenue, increased 9% over the same
period in the prior year. Because of the more attractive financial
characteristics of this B2C segment, including a higher gross
margin, we expect to continue to place increased focus on further
improving product breath, daily deal offerings and overall service
to this segment. This past week, eCOST.com unveiled a number of
significant enhancements to its website. These enhancements include
a feature packed new edition of our patented Bargain Countdown�
shopping section, 10,000 new products in the office equipment and
supply category, and a new, rich shopping cart and checkout
experience. Collectively, these improvements will provide shoppers
at eCOST.com improved functionality, shopping speed and overall
customer experience just in time for the holiday season.� Financial
Targets for Fiscal Year 2008 As announced on November 7, 2008,
PFSweb�s consolidated financial targets�for the year ended December
31, 2008 are total consolidated revenues for 2008 excluding
pass-through revenues, of approximately $425 million to $440
million; Adjusted EBITDA of $10 � $12 million; and non-GAAP net
income, which excludes the impact of stock-based compensation and
amortization of identifiable intangible assets, of approximately $1
- $3 million for 2008. Further weakening in worldwide economic
conditions may cause the Company to fall toward the lower end of
these targets. Conference Call Information Management will host a
conference call at 9:30 a.m. Central Time (10:30 a.m. Eastern Time)
on November 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 (72555898) 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 December
14, 2008 at (800) 642-1687, pin number (72555898). 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, 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 200,000
different products from leading manufacturers such as Sony,
Hewlett-Packard, Onkyo, Denon, JVC, Canon, Nikon, Panasonic,
Toshiba, Microsoft, Dyson, Kitchen Aid, Braun, Black & Decker,
Cuisinart, Coleman, and Citizen 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
September 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 Nine Months Ended September 30, September 30, �
2008 � 2007 � 2008 � 2007 � REVENUES: Product revenue, net $ 79,157
$ 85,263 $ 252,496 $ 250,398 Service fee revenue 22,900 18,398
64,966 53,006 Pass-thru revenue � 7,852 � 8,334 � 21,600 � 21,398 �
Total revenues � 109,909 � 111,995 � 339,062 � 324,802 � � COSTS OF
REVENUES: Cost of product revenue 73,128 78,874 233,475 231,443
Cost of service fee revenue 15,588 12,912 44,537 38,211 Cost of
pass-thru revenue � 7,852 � 8,334 � 21,600 � 21,398 � Total costs
of revenues � 96,568 � 100,120 � 299,612 � 291,052 � Gross profit �
13,341 � 11,875 � 39,450 � 33,750 � SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 12,454 10,678 36,397 32,493 MERGER
INTEGRATION EXPENSE - - - 150 AMORTIZATION OF IDENTIFIABLE
INTANGIBLES � 202 � 204 � 605 � 612 � Total operating expenses �
12,656 � 10,882 � 37,002 � 33,255 � Income (loss) from operations
685 993 2,448 495 INTEREST EXPENSE, NET � 426 � 615 � 1,123 � 1,857
� Income (loss) before income taxes 259 378 1,325 (1,362 ) INCOME
TAX PROVISION � 216 � 216 � 806 � 683 � NET INCOME (LOSS) $ 43 $
162 $ 519 $ (2,045 ) � NET INCOME (LOSS) PER SHARE (B) Basic $ 0.00
$ 0.02 $ 0.05 $ (0.21 ) Diluted $ 0.00 $ 0.02 $ 0.05 $ (0.21 ) �
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (B): Basic � 9,913 �
9,889 � 9,902 � 9,889 � Diluted � 9,972 � 10,113 � 9,991 � 9,889 �
� � � � NON-GAAP NET INCOME (LOSS) $ 354 $ 538 $ 1,562 $ (863 )
EBITDA $ 2,361 $ 3,014 $ 7,267 $ 6,603 � ADJUSTED EBITDA $ 2,470 $
3,186 $ 7,705 $ 7,323 � � (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
Nine Months Ended September 30, September 30, � 2008 � 2007 � 2008
� 2007 � NET INCOME (LOSS) $ 43 $ 162 $ 519 $ (2,045 ) Income tax
expense 216 216 806 683 Interest expense 426 615 1,123 1,857
Depreciation and amortization � 1,676 � 2,021 � 4,819 � 6,108 �
EBITDA $ 2,361 $ 3,014 $ 7,267 $ 6,603 Stock-based compensation 109
172 438 570 Merger integration related expenses � - � - � - � 150 �
ADJUSTED EBITDA $ 2,470 $ 3,186 $ 7,705 $ 7,323 � � � Three Months
Ended Nine Months Ended September 30, September 30, � 2008 � 2007 �
2008 � 2007 � � NET INCOME (LOSS) $ 43 $ 162 $ 519 $ (2,045 )
Stock-based compensation 109 172 438 570 Amortization of
identifiable intangible assets � 202 � 204 � 605 � 612 � NON-GAAP
NET INCOME (LOSS) $ 354 $ 538 $ 1,562 $ (863 ) � NET INCOME (LOSS)
PER SHARE: Basic $ 0.00 $ 0.02 $ 0.05 $ (0.21 ) Diluted $ 0.00 $
0.02 $ 0.05 $ (0.21 ) � NON-GAAP NET INCOME (LOSS) Per Share: Basic
$ 0.04 $ 0.05 $ 0.16 $ (0.09 ) Diluted $ 0.04 $ 0.05 $ 0.16 $ (0.09
) � PFSweb, Inc. and Subsidiaries Unaudited Condensed Consolidated
Balance Sheets (In Thousands, Except Share Data) � � � � September
30, December 31, 2008 � 2007 � ASSETS CURRENT ASSETS: Cash and cash
equivalents $ 14,701 $ 14,272 Restricted cash 2,780 2,021 Accounts
receivable, net of allowance for doubtful accounts of $875 and
$1,483 at September 30, 2008 and December 31, 2007, respectively
41,064 48,493 Inventories, net of reserves of $2,205 and $2,080 at
September 30, 2008 and December 31, 2007, respectively 50,005
46,392 Other receivables 12,253 10,372 Prepaid expenses and other
current assets � 3,126 � � 2,608 � Total current assets � 123,929 �
� 124,158 � � PROPERTY AND EQUIPMENT, net 12,422 11,918
IDENTIFIABLE INTANGIBLES 5,219 5,824 GOODWILL 15,362 15,362 OTHER
ASSETS � 990 � � 911 � Total assets � 157,922 � � 158,173 � �
LIABILITIES AND SHAREHOLDERS EQUITY CURRENT LIABILITIES: Current
portion of long-term debt and capital lease obligations $ 20,802 $
22,238 Trade accounts payable 62,860 56,975 Accrued expenses �
21,265 � � 22,438 � Total current liabilities � 104,927 � � 101,651
� � LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current
portion 2,535 6,378 OTHER LIABILITIES � 991 � � 1,302 � Total
liabilities � 108,453 � � 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;
9,931,137 and 9,909,401 shares issued at September 30, 2008 and
December 31, 2007, respectively; and 9,912,776 and 9,891,040
outstanding as of September 30, 2008 and December 31, 2007,
respectively 10 10 Additional paid-in capital 92,610 92,121
Accumulated deficit (45,219 ) (45,738 ) Accumulated other
comprehensive income 2,153 2,534 Treasury stock at cost, 18,361
shares � (85 ) � (85 ) Total shareholders' equity � 49,469 � �
48,842 � Total liabilities and shareholders' equity $ 157,922 � $
158,173 � � PFSweb, Inc. and Subsidiaries Unaudited Consolidating
Statements of Operations For the Three Months Ended September 30,
2008 (In Thousands) � � � � � � � � � Supplies PFSweb Distributors
eCOST Eliminations Consolidated REVENUES: Product revenue, net $ -
$ 55,448 $ 23,709 $ - $ 79,157 Service fee revenue 22,900 - - -
22,900 Service fee revenue - affiliate 1,886 - - (1,886 ) -
Pass-thru revenue � 7,859 � � - � - � � (7 ) � 7,852 Total revenues
� 32,645 � � 55,448 � 23,709 � � (1,893 ) � 109,909 � COSTS OF
REVENUES: Cost of product revenue - 51,604 21,524 - 73,128 Cost of
service fee revenue 16,265 - - (677 ) 15,588 Cost of pass-thru
revenue � 7,859 � � - � - � � (7 ) � 7,852 Total costs of revenues
� 24,124 � � 51,604 � 21,524 � � (684 ) � 96,568 Gross profit �
8,521 � � 3,844 � 2,185 � � (1,209 ) � 13,341 SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 8,515 2,417 2,731 (1,209 ) 12,454
AMORTIZATION OF IDENTIFIABLE INTANGIBLES � - � � - � 202 � � - � �
202 Total operating expenses � 8,515 � � 2,417 � 2,933 � � (1,209 )
� 12,656 Income (loss) from operations 6 1,427 (748 ) - 685
INTEREST EXPENSE (INCOME), NET � (50 ) � 466 � 10 � � - � � 426
Income (loss) before income taxes 56 961 (758 ) - 259 INCOME TAX
PROVISION (BENEFIT) � (213 ) � 429 � - � � - � � 216 NET INCOME
(LOSS) $ 269 � $ 532 $ (758 ) $ - � $ 43 NON-GAAP NET INCOME (LOSS)
$ 378 � $ 532 $ (556 ) $ - � $ 354 � � EBITDA $ 1,432 � $ 1,429 $
(500 ) $ - � $ 2,361 ADJUSTED EBITDA $ 1,541 � $ 1,429 $ (500 ) $ -
� $ 2,470 � � A reconciliation of NET INCOME (LOSS) to EBITDA and
ADJUSTED EBITDA follows: � NET INCOME (LOSS) $ 269 $ 532 $ (758 ) $
- $ 43 Income tax expense (benefit) (213 ) 429 - - 216 Interest
expense (income) (50 ) 466 10 - 426 Depreciation and amortization �
1,426 � � 2 � 248 � � - � � 1,676 EBITDA $ 1,432 $ 1,429 $ (500 ) $
- $ 2,361 Stock-based compensation � 109 � � - � - � � - � � 109
ADJUSTED EBITDA $ 1,541 � $ 1,429 $ (500 ) $ - � $ 2,470 � A
reconciliation of NET INCOME(LOSS) to NON-GAAP NET INCOME (LOSS)
follows: � NET INCOME (LOSS) $ 269 $ 532 $ (758 ) $ - $ 43
Stock-based compensation 109 - - - 109 Amortization of intangible
assets � - � � - � 202 � � - � � 202 NON-GAAP NET INCOME (LOSS) $
378 � $ 532 $ (556 ) $ - � $ 354 � PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations For the Nine
Months Ended September 30, 2008 (In Thousands) � � � � � � � �
Supplies PFSweb Distributors eCOST Eliminations Consolidated
REVENUES: Product revenue, net $ - $ 177,795 $ 74,701 $ - $ 252,496
Service fee revenue 64,966 - - - 64,966 Service fee revenue -
affiliate 6,106 - - (6,106 ) - Pass-thru revenue � 21,565 � � - � -
� � 35 � � 21,600 Total revenues � 92,637 � � 177,795 � 74,701 � �
(6,071 ) � 339,062 � COSTS OF REVENUES: Cost of product revenue -
165,103 68,372 - 233,475 Cost of service fee revenue 46,587 - -
(2,050 ) 44,537 Cost of pass-thru revenue � 21,565 � � - � - � � 35
� � 21,600 Total costs of revenues � 68,152 � � 165,103 � 68,372 �
� (2,015 ) � 299,612 Gross profit � 24,485 � � 12,692 � 6,329 � �
(4,056 ) � 39,450 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
24,774 7,556 8,123 (4,056 ) 36,397 AMORTIZATION OF IDENTIFIABLE
INTANGIBLES � - � � - � 605 � � - � � 605 Total operating expenses
� 24,774 � � 7,556 � 8,728 � � (4,056 ) � 37,002 Income (loss) from
operations (289 ) 5,136 (2,399 ) - 2,448 INTEREST EXPENSE (INCOME),
NET � (110 ) � 1,216 � 17 � � - � � 1,123 Income (loss) before
income taxes (179 ) 3,920 (2,416 ) - 1,325 INCOME TAX PROVISION
(BENEFIT) � (658 ) � 1,464 � - � � - � � 806 NET INCOME (LOSS) $
479 � $ 2,456 $ (2,416 ) $ - � $ 519 NON-GAAP NET INCOME (LOSS) $
917 � $ 2,456 $ (1,811 ) $ - � $ 1,562 � � EBITDA $ 3,785 � $ 5,148
$ (1,666 ) $ - � $ 7,267 ADJUSTED EBITDA $ 4,223 � $ 5,148 $ (1,666
) $ - � $ 7,705 � � A reconciliation of NET INCOME (LOSS) to EBITDA
and ADJUSTED EBITDA follows: � NET INCOME (LOSS) $ 479 $ 2,456 $
(2,416 ) $ - $ 519 Income tax expense (benefit) (658 ) 1,464 - -
806 Interest expense (income) (110 ) 1,216 17 - 1,123 Depreciation
and amortization � 4,074 � � 12 � 733 � � - � � 4,819 EBITDA $
3,785 $ 5,148 $ (1,666 ) $ - $ 7,267 Stock-based compensation � 438
� � - � - � � - � � 438 ADJUSTED EBITDA $ 4,223 � $ 5,148 $ (1,666
) $ - � $ 7,705 � A reconciliation of NET INCOME(LOSS) to NON-GAAP
NET INCOME (LOSS) follows: � NET INCOME (LOSS) $ 479 $ 2,456 $
(2,416 ) $ - $ 519 Stock-based compensation 438 - - - 438
Amortization of intangible assets � - � � - � 605 � � - � � 605
NON-GAAP NET INCOME (LOSS) $ 917 � $ 2,456 $ (1,811 ) $ - � $ 1,562
� PFSweb, Inc. and Subsidiaries Unaudited Condensed Consolidating
Balance Sheets as of September 30, 2008 (In Thousands) � � � � � �
� � � � Supplies PFSweb Distributors eCOST Eliminations
Consolidated ASSETS CURRENT ASSETS: Cash and cash equivalents $
12,024 $ 2,463 $ 214 $ - $ 14,701 Restricted cash 1,575 926 279 -
2,780 Accounts receivable, net 17,071 23,338 1,736 (1,081 ) 41,064
Inventories, net - 42,607 7,398 - 50,005 Other receivables - 12,253
- - 12,253 Prepaid expenses and other current assets � 1,569 � �
1,466 � � 91 � � - � � 3,126 � Total current assets � 32,239 � �
83,053 � � 9,718 � � (1,081 ) � 123,929 � � PROPERTY AND EQUIPMENT,
net 11,924 81 417 - 12,422 NOTES RECEIVABLE FROM AFFILIATES 20,845
- - (20,845 ) - INVESTMENT IN AFFILIATES 37,901 - - (37,901 ) -
IDENTIFIABLE INTANGIBLES - - 5,219 - 5,219 GOODWILL - - 15,362 -
15,362 OTHER ASSETS � 850 � � - � � 140 � � - � � 990 � Total
assets � 103,759 � � 83,134 � � 30,856 � � (59,827 ) � 157,922 � �
LIABILITIES AND SHAREHOLDERS EQUITY CURRENT LIABILITIES: Current
portion of long-term debt and capital lease obligations $ 8,257 $
12,545 $ - $ - $ 20,802 Trade accounts payable 8,185 49,089 6,667
(1,081 ) 62,860 Accrued expenses � 12,651 � � 6,122 � � 2,492 � � -
� � 21,265 � Total current liabilities � 29,093 � � 67,756 � �
9,159 � � (1,081 ) � 104,927 � � LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS, less current portion 2,535 - - - 2,535 NOTES PAYABLE
TO AFFILIATES - 5,505 15,340 (20,845 ) - OTHER LIABILITIES � 792 �
� - � � 199 � � - � � 991 � Total liabilities � 32,420 � � 73,261 �
� 24,698 � � (21,926 ) � 108,453 � � COMMITMENTS AND CONTINGENCIES
� SHAREHOLDERS' EQUITY: Common stock 10 - 19 (19 ) 10 Capital
contributions - 1,000 - (1,000 ) - Additional paid-in capital
92,610 - 28,059 (28,059 ) 92,610 Retained earnings (accumulated
deficit) (23,349 ) 6,104 (21,920 ) (6,054 ) (45,219 ) Accumulated
other comprehensive income 2,153 2,769 - (2,769 ) 2,153 Treasury
stock � (85 ) � - � � - � � - � � (85 ) Total shareholders' equity
� 71,339 � � 9,873 � � 6,158 � � (37,901 ) � 49,469 � Total
liabilities and shareholders' equity $ 103,759 � $ 83,134 � $
30,856 � $ (59,827 ) $ 157,922 � � PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations For the Three
Months Ended September 30, 2007 (In Thousands) � � � � � � � �
Supplies PFSweb Distributors eCOST Eliminations Consolidated
REVENUES: Product revenue, net $ - $ 58,313 $ 26,950 $ - $ 85,263
Service fee revenue 18,398 - - - 18,398 Service fee revenue -
affiliate 2,001 - - (2,001 ) - Pass-thru revenue � 8,415 � � - � -
� � (81 ) � 8,334 Total revenues � 28,814 � � 58,313 � 26,950 � �
(2,082 ) � 111,995 � COSTS OF REVENUES: Cost of product revenue -
54,295 24,581 (2 ) 78,874 Cost of service fee revenue 13,585 - -
(673 ) 12,912 Cost of pass-thru revenue � 8,415 � � - � - � � (81 )
� 8,334 Total costs of revenues � 22,000 � � 54,295 � 24,581 � �
(756 ) � 100,120 Gross profit � 6,814 � � 4,018 � 2,369 � � (1,326
) � 11,875 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 6,699 2,448
2,857 (1,326 ) 10,678 AMORTIZATION OF IDENTIFIABLE INTANGIBLES � -
� � - � 204 � � - � � 204 Total operating expenses � 6,699 � �
2,448 � 3,061 � � (1,326 ) � 10,882 Income (loss) from operations
115 1,570 (692 ) - 993 INTEREST EXPENSE (INCOME), NET � 48 � � 582
� (15 ) � - � � 615 Income (loss) before income taxes 67 988 (677 )
- 378 INCOME TAX PROVISION (BENEFIT) � (142 ) � 358 � - � � - � �
216 NET INCOME (LOSS) $ 209 � $ 630 $ (677 ) $ - � $ 162 NON-GAAP
NET INCOME (LOSS) $ 381 � $ 630 $ (473 ) $ - � $ 538 � EBITDA $
1,875 � $ 1,576 $ (437 ) $ - � $ 3,014 ADJUSTED EBITDA $ 2,047 � $
1,576 $ (437 ) $ - � $ 3,186 � � A reconciliation of NET INCOME
(LOSS) to EBITDA and ADJUSTED EBITDA follows: � NET INCOME (LOSS) $
209 $ 630 $ (677 ) $ - $ 162 Income tax expense (benefit) (142 )
358 - - 216 Interest expense (income) 48 582 (15 ) - 615
Depreciation and amortization � 1,760 � � 6 � 255 � � - � � 2,021
EBITDA $ 1,875 $ 1,576 $ (437 ) $ - $ 3,014 Stock-based
compensation � 172 � � - � - � � - � � 172 ADJUSTED EBITDA $ 2,047
� $ 1,576 $ (437 ) $ - � $ 3,186 � A reconciliation of NET INCOME
(LOSS) to NON-GAAP NET INCOME (LOSS) follows: � NET INCOME (LOSS) $
209 $ 630 $ (677 ) $ - $ 162 Stock-based compensation 172 - - - 172
Amortization of intangible assets � - � � - � 204 � � - � � 204
NON-GAAP NET INCOME (LOSS) $ 381 � $ 630 $ (473 ) $ - � $ 538 �
PFSweb, Inc. and Subsidiaries Unaudited Consolidating Statements of
Operations For the Nine Months Ended September 30, 2007 (In
Thousands) � � � � � � � � Supplies PFSweb Distributors eCOST
Eliminations Consolidated REVENUES: Product revenue, net $ - $
174,718 $ 75,680 $ - $ 250,398 Service fee revenue 53,006 - - -
53,006 Service fee revenue - affiliate 6,067 - - (6,067 ) -
Pass-thru revenue � 21,656 � � - � - � � (258 ) � 21,398 � Total
revenues � 80,729 � � 174,718 � 75,680 � � (6,325 ) � 324,802 � �
COSTS OF REVENUES: Cost of product revenue - 162,146 69,303 (6 )
231,443 Cost of service fee revenue 40,184 - - (1,973 ) 38,211 Cost
of pass-thru revenue � 21,656 � � - � - � � (258 ) � 21,398 � Total
costs of revenues � 61,840 � � 162,146 � 69,303 � � (2,237 ) �
291,052 � Gross profit � 18,889 � � 12,572 � 6,377 � � (4,088 ) �
33,750 � SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 20,547 7,574
8,460 (4,088 ) 32,493 MERGER INTEGRATION EXPENSE - - 150 - 150
AMORTIZATION OF IDENTIFIABLE INTANGIBLES � - � � - � 612 � � - � �
612 � Total operating expenses � 20,547 � � 7,574 � 9,222 � �
(4,088 ) � 33,255 � Income (loss) from operations (1,658 ) 4,998
(2,845 ) - 495 INTEREST EXPENSE (INCOME), NET � 96 � � 1,807 � (46
) � - � � 1,857 � Income (loss) before income taxes (1,754 ) 3,191
(2,799 ) - (1,362 ) INCOME TAX PROVISION (BENEFIT) � (471 ) � 1,154
� - � � - � � 683 � NET INCOME (LOSS) $ (1,283 ) $ 2,037 $ (2,799 )
$ - � $ (2,045 ) NON-GAAP NET INCOME (LOSS) $ (713 ) $ 2,037 $
(2,187 ) $ - � $ (863 ) � EBITDA $ 3,684 � $ 5,013 $ (2,094 ) $ - �
$ 6,603 � ADJUSTED EBITDA $ 4,254 � $ 5,013 $ (1,944 ) $ - � $
7,323 � � � A reconciliation of NET INCOME (LOSS) to EBITDA and
ADJUSTED EBITDA follows: � NET INCOME (LOSS) $ (1,283 ) $ 2,037 $
(2,799 ) $ - $ (2,045 ) Income tax expense (benefit) (471 ) 1,154 -
- 683 Interest expense (income) 96 1,807 (46 ) - 1,857 Depreciation
and amortization � 5,342 � � 15 � 751 � � - � � 6,108 � EBITDA $
3,684 $ 5,013 $ (2,094 ) $ - $ 6,603 Stock-based compensation 570 -
- - 570 Merger integration expense � - � � - � 150 � � - � � 150 �
ADJUSTED EBITDA $ 4,254 � $ 5,013 $ (1,944 ) $ - � $ 7,323 � � A
reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS)
follows: � NET INCOME (LOSS) $ (1,283 ) $ 2,037 $ (2,799 ) $ - $
(2,045 ) Stock-based compensation 570 - - - 570 Amortization of
intangible assets � - � � - � 612 � � - � � 612 � NON-GAAP NET
INCOME (LOSS) $ (713 ) $ 2,037 $ (2,187 ) $ - � $ (863 ) � 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 September 30, � 2008 �
2007 � Total Customers (1) 1,839,824 1,720,259 � Active Customers
(2) 178,610 162,583 � New Customers (3) 34,748 21,462 � Number of
Orders (4) 71,575 64,975 � Average Order Value (5) $ 323 $ 405 �
Advertising Expense (6) $ 273,935 $ 219,800 � Cost to Acquire a New
Customer (7) $ 5.62 $ 7.08 � � (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 $78,814 and $67,811 was not included in the 2008
and 2007 calculation, respectively, as it is used for retention and
not acquisition. �
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