SYX Systemax Inc

Systemax Inc. (NYSE:SYX), a leading distributor and manufacturer of PC hardware, related computer products and industrial products in North America and Europe, today announced results for the fourth quarter and year ended December 31, 2005. Net sales for the fourth quarter increased 5.5% to a record $583.0 million compared to $552.4 million in the year-ago quarter. Income from operations increased more than three-fold to $18.5 million from $5.9 million during the fourth quarter of 2004. Richard Leeds, Chairman and Chief Executive Officer said, "I am pleased to report this sharp increase in operating income, which resulted from a combination of increased sales and the positive effects of the cost cutting, streamlining and restructuring actions that we have taken during the last two years." Net income was $3.4 million or $.09 per diluted share compared to $5.1 million or $.14 per diluted share in the prior year period. Fourth quarter net income in 2005 was adversely affected by an unusually high tax rate which resulted from the write-off of approximately $10 million, or $.27 per diluted share, of deferred tax assets related to carryforward losses and other timing differences in the United Kingdom. For the year ended December 31, 2005, net sales increased 9.7% to a record $2.116 billion compared to $1.928 billion in the prior year. Income from operations increased to $34.8 million from $19.0 million last year. Net income for 2005 increased 12.3% to $11.4 million or $.31 per diluted share from $10.2 million or $.29 per diluted share last year. Net income in 2005 was adversely affected by an unusually high tax rate which resulted from the write-off in the fourth quarter of a reserve of approximately $10 million, or $.27 per diluted share, of deferred tax assets related to carryforward losses and other timing differences in the United Kingdom. Gilbert Fiorentino, CEO of Tiger Direct, commented that the Company remains focused on controlling its costs and completing the streamlining that began two years ago. "We believe that we have taken the correct steps in Europe and have begun to see improved performance in all the markets we serve. Sales in North America climbed 15.3% this year and our sharply increased operating income was enhanced by Tiger Direct's continued strong growth in internet sales, principally to the consumer sector," added Mr. Fiorentino. Steven Goldschein, Chief Financial Officer, commented that the Company's balance sheet continued to be very strong. Cash and short-term investments increased to $70.9 million at the end of the year compared to $36.3 million a year ago. He added, "We have concentrated on managing inventory levels and have successfully been able to increase sales without increasing inventory." Mr. Goldschein noted that the Company's reporting of its 2005 results was delayed as a result of a change at year end of its independent registered public accounting firm and delays caused by last year's restatements. He added, "We are now working diligently to prepare our financial statements for the first and second quarters of 2006. We currently anticipate first quarter results will be released on or about August 7, 2006." Systemax Inc. (www.systemax.com) utilizes an integrated system of branded e-commerce web sites, direct mail catalogs and relationship marketers to sell PC hardware, related computer products and industrial products in North America and Europe. Systemax is a Fortune 1000 company. -0- *T SYSTEMAX INC. Condensed Consolidated Statements of Operations (In thousands, except per common share amounts) Year Ended Year Ended Quarter Ended Quarter Ended Dec. 31, 2005 Dec. 31, 2004 Dec. 31, 2005 Dec. 31, 2004 --------------------------------------------------------- Net sales $2,115,518 $1,928,147 $582,966 $552,389 Cost of sales 1,808,231 1,641,681 497,299 481,139 --------------------------------------------------------- Gross profit 307,287 286,466 85,667 71,250 Selling, general & administrative expenses 268,327 260,111 66,521 64,019 Restructuring and other charges 4,151 7,356 657 1,315 --------------------------------------------------------- Income from operations 34,809 18,999 18,489 5,916 Interest and other expense, net 1,935 2,443 (417) 655 --------------------------------------------------------- Income before provision for income taxes 32,874 16,556 18,906 5,261 Provision for income taxes 21,433 6,368 15,500 158 --------------------------------------------------------- Net income $11,441 $10,188 $3,406 $5,103 ========================================================= Net income per common share: Basic $.33 $.30 $.10 $.15 ==== ==== ==== ==== Diluted $.31 $.29 $.09 $.14 ==== ==== ==== ==== Quarter 1* Quarter 2* Quarter 3* 2005 2005 2005 Net sales $537,908 $506,142 $488,502 Cost of sales 458,133 434,777 418,022 ------------------------------------------ Gross profit 79,775 71,365 70,480 Selling, general & administrative expenses 72,643 67,138 62,025 Restructuring and other charges 1,975 1,077 442 ------------------------------------------ Income from operations 5,157 3,150 8,013 Interest and other (income) expense, net 571 505 1,276 ------------------------------------------ Income before provision for income taxes 4,586 2,645 6,737 Provision for income taxes 1,948 1,123 2,862 ------------------------------------------ Net income $2,638 $1,522 $3,875 ========================================== Net income per common share: Basic $.08 $.04 $.11 ==== ==== ==== Diluted $.07 $.04 $.11 ==== ==== ==== * Reflects certain changes from results previously disclosed. SYSTEMAX INC. Condensed Consolidated Balance Sheet (In thousands) ASSETS December 31, 2005 ------ ----------------- CURRENT ASSETS: Cash, and cash equivalents $70,925 Accounts receivable, net 143,001 Inventories, net 189,502 Prepaid expenses and other current assets 18,477 Deferred tax assets - current 9,227 ----------------- Total current assets 431,132 PROPERTY, PLANT AND EQUIPMENT, net 57,259 DEFERRED TAX ASSETS - NON CURRENT 14,100 OTHER ASSETS 2,053 ----------------- TOTAL ASSETS $504,544 ----------------- LIABILITIES AND SHAREHOLDERS' EQUITY: ------------------------------------- CURRENT LIABILITIES: Current portion of long-term debt and notes payable to bank $26,773 Accounts payable 171,667 Accrued expenses and other current liabilities 62,888 ----------------- Total current liabilities 261,328 ----------------- LONG-TERM DEBT 8,028 ----------------- OTHER NON-CURRENT LIABILITIES 2,346 ----------------- SHAREHOLDERS' EQUITY: Common stock 382 Treasury stock (40,772) Additional paid-in capital 177,574 Retained earnings 98,927 Accumulated other comprehensive income 893 Unearned restricted stock compensation (4,162) ----------------- Total shareholders' equity 232,842 ----------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $504,544 ----------------- *T Forward-Looking Statements This press release contains forward-looking statements about the Company's performance. These statements are based on management's estimates, assumptions and projections and are not guarantees of future performance. The Company assumes no obligation to update these statements. Actual results may differ materially from results expressed or implied in these statements as the result of risks, uncertainties and other factors including, but not limited to: (a) unanticipated variations in sales volume, (b) economic conditions and exchange rates, (c) actions by competitors, (d) the continuation of key vendor relationships, (e) the ability to maintain satisfactory loan agreements with lenders, (f) risks associated with the delivery of merchandise to customers utilizing common carriers, (g) the operation of the Company's management information systems, and (h) unanticipated legal and administrative proceedings. Please refer to the Forward Looking Statements section contained in Item 7 of the Company's Form 10-K for a more detailed explanation of the inherent limitations in such forward-looking statements.