Systemax Inc. (NYSE:SYX) today announced results for the fourth
quarter and full year of 2006. 2006 Fourth Quarter Results Net
sales increased 11% to $648 million compared to $583 million in the
fourth quarter of 2005. Sales of computers, computer supplies and
consumer electronics grew by 11%, and sales of industrial products
grew by 15%. Sales transacted via the internet grew 16% to $235
million compared to $203 million in the fourth quarter of 2005.
Gross margin was 12.9% compared to 14.7% in the fourth quarter of
2005. The decrease in gross margin was primarily attributable to
price discounting for computer and consumer electronics products.
Operating income was $11.3 million compared to $18.5 million in the
fourth quarter of 2005. The decrease was primarily attributable to
the gross margin effect of the price discounting. Net income was $8
million, or $.22 per diluted share, compared to $3.4 million, or
$.09 per diluted share in the fourth quarter of 2005. The fourth
quarter of 2005 was adversely affected by an unusually high
effective tax rate resulting from the establishment of a valuation
allowance of approximately $10.2 million for deferred tax assets in
the United Kingdom. 2006 Full Year Results Net sales increased 11%
to $2.3 billion compared to $2.1 billion in 2005. Sales of
computers, computer supplies and consumer electronics grew by 11%,
and sales of industrial products grew by 13%. Sales transacted via
the internet increased 26% to $819 million compared to $650 million
in 2005. Gross margin was 14.6% compared to 14.5% in 2005.
Operating income was $61.9 million compared to $34.8 million in
2005. Net income was $45.1 million, or $1.22 per diluted share,
compared to $11.4 million, or $.31 per diluted share in 2005. The
prior year�s net income was adversely affected by the
aforementioned deferred tax asset valuation allowance. Richard
Leeds, Chairman and Chief Executive Officer said, �I am very
pleased with our full year 2006 consolidated results, highlighted
by our 11% growth in sales, 26% growth in internet sales, 78%
growth in operating income and 294% growth in diluted earnings per
share. The strong results evidence the continuing success of the
reorganization that we undertook several years ago, the soundness
of our business model and the robust growth in the markets in which
we participate. Although gross margin dipped during the fourth
quarter, our objective is to manage the business from a longer-term
perspective and we are pleased that we maintained our gross margin
for the full year of 2006 comparable to 2005 and that we lowered
selling, general and administrative expense as a percentage of
sales from 12.7% in 2005 to 12.0% in 2006. Our long-term goal is to
closely manage our product pricing to balance sales growth, gross
margin and overall profitability. As a result of our strong 2006
financial performance and our strong balance sheet, I am pleased to
announce that our Board of Directors has declared a special
dividend for our shareholders. This dividend was declared on March
14, 2007 by our Board to be $1.00 per share and will be paid on
April 12, 2007 to shareholders of record on April 2, 2007.� Gilbert
Fiorentino, Chief Executive Officer of TigerDirect.com and the
computer, computer supplies and consumer electronics segment noted,
�2006 saw sales growth both in North American and European computer
and consumer electronic products. North American computer product
sales grew 7 % in the fourth quarter and 13 % for the full year
compared to 2005, driven primarily by growth in internet sales and
our private label products. European sales grew 18% in the fourth
quarter and 7% for the full year compared to 2005, also driven
primarily by growth in internet sales and public sector customers.�
Richard Leeds, commenting on other operations, noted �in the
industrial products segment, sales grew 15% in the fourth quarter
and 13% for the full year compared to 2005, driven primarily by new
customers who procure from us via the internet, competitive
advantages due to our worldwide sourcing strategy, and aggressive
pricing. Industrial product sales transacted via the internet grew
47 % in the fourth quarter and 48% for the full year compared to
2005. Our ProfitCenter Software subsidiary continued the successful
development of its software as a service platform and signed 22
customer implementation and hosting contracts during 2006. As a
hosted software service, revenues from both hosting and
implementation are recognized over the contractual hosting period
and for 2006 were not significant. Larry Reinhold, Chief Financial
Officer, noted that the Company�s overall financial condition
remains solid as evidenced by its working capital of $229 million,
which included cash and equivalents of $87 million, and over $84
million in available borrowing capacity under its credit facilities
in place. Operationally, days sales outstanding were 23 days at
December 31, 2006 and inventory turned over 10 times during 2006.
Mr. Reinhold added, �I have been impressed during my early tenure
by the company and its platform for profitable sales growth.�
Systemax Inc. (www.systemax.com), a Fortune 1000 company, utilizes
an integrated system of branded e-commerce web sites, direct mail
catalogs and relationship marketers to sell personal computers,
computer supplies, consumer electronics and industrial products in
North America and Europe. It also manufactures and sells personal
computers under the Systemax and Ultra brands. SYSTEMAX INC.
Condensed Consolidated Statements of Operations � Unaudited (In
thousands, except per share amounts) � Year Ended Quarter Ended
December 31, December 31, 2006� 2005� 2006� 2005� Net sales
2,345,165� $2,115,518� $647,974� $582,966� Cost of sales 2,002,246�
1,808,231� 564,702� 497,299� Gross profit 342,919� 307,287� 83,272�
85,667� Gross margin 14.6% 14.5% 12.9% 14.7% Selling, general and
administrative expenses 281,015� 268,327� 71,985� 66,521�
Restructuring and other charges � 4,151� -� 657� Operating income
61,904� 34,809� 11,287� 18,489� Operating margin 2.6% 1.6% 1.7%
3.2% Interest and other (income) expense, net (7,791) 1,935� (680)
(417) Income before income taxes 69,695� 32,874� 11,967� 18,906�
Provision for income taxes 24,548� 21,433� 3,934� 15,500� Net
income $45,147� $11,441� $8,033� $3,406� Net margin 1.9% 0.5% 1.2%
0.6% � Net income per common share: Basic $1.29� $.33� $.23� $.10�
Diluted $1.22� $.31� $.22� $.09� � Weighted average common and
common equivalent shares: Basic 34,960� 34,646� 35,177� 34,726�
Diluted 36,881� 36,488� 37,258� 36,510� SYSTEMAX INC. Condensed
Consolidated Balance Sheets (In thousands) � December 31, 2006�
2005� Current assets: Cash and cash equivalents $86,964� $63,291�
Accounts receivable, net 164,615� 150,635� Inventories 233,136�
192,102� Prepaid expenses and other current assets 34,004� 25,104�
Total current assets 518,719� 431,132� Property, plant and
equipment, net 48,586� 57,259� Deferred income taxes and other
assets 16,214� 16,153� Total assets $583,519� $504,544� � Current
liabilities: Short-term debt $12,788� $26,773� Accounts payable and
accrued expenses 277,174� 234,555� Total current liabilities
289,962� 261,328� Long-term debt 483� 8,028� Other liabilities
4,226� 2,346� � Shareholders� equity 288,848� 232,842� Total
liabilities and shareholders� equity $583,519� $504,544�
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
�Risk Factors� and the Forward Looking Statements sections
contained in the Company�s Form 10-K for a more detailed
explanation of the inherent limitations in such forward-looking
statements.
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