Systemax Reports Second Quarter Results
August 08 2007 - 4:05PM
Business Wire
Systemax Inc. (NYSE:SYX) today announced results for the second
quarter and six months ended June 30, 2007. Net sales for the
quarter increased 18% to $647 million compared to $547 million in
the second quarter of 2006. Sales of technology products
(computers, computer supplies and consumer electronics) grew by 19%
and sales of industrial products grew by 12%. Gross margin improved
to 15.3% from 14.1% in the second quarter of 2006 and operating
income was $20.1 million compared to $10.6 million in the second
quarter of 2006. Net income was $13.8 million, or $.37 per diluted
share, compared to $7.1 million, or $.19 per diluted share, in the
second quarter of 2006. For the six months ended June 30, 2007, net
sales increased 18% to $ 1.3 billion from $1.1 billion during the
same period last year. Net income increased 12% to $27.7 million or
$.73 per diluted share compared to $24.7 million or $.67 per
diluted share a year ago. Included in net income for the six months
ended June 30, 2007 is an after tax gain of approximately $1.5
million or $.04 per diluted share related to a lawsuit settlement
and included in net income for the six months ended June 30, 2006
is an after tax gain of $4.3 million, or $.12 per diluted share
from the sale of a warehouse facility. Richard Leeds, Chairman and
Chief Executive Officer, said �I am very pleased with second
quarter 2007 consolidated results, highlighted by our 18% growth in
sales, improved gross margin and 90% growth in operating income.
Although we are still in an intensely competitive environment, we
experienced less price discounting in the quarter and we are
pleased that our consolidated gross margin has shown improvement in
the last two consecutive quarters. Gross margin improved from 12.9%
in the fourth quarter of 2006 to 14.3% in the first quarter of 2007
and 15.3% in the second quarter of 2007. We also maintained good
control over our cost structure as selling, general and
administrative expense as a percentage of sales in the quarter was
flat at 12.2 % compared to the second quarter 2006, despite
increased consulting and staffing costs associated with the
requirements of Section 404 of the Sarbanes-Oxley Act.� Gilbert
Fiorentino, Chief Executive Officer of TigerDirect.com and the
technology products segment, noted, �the trend of strong sales
growth in both the North American and European markets continued in
the second quarter. North American technology product sales grew
15% in the quarter, driven by growth in all sales channels.
European sales grew 26% overall, 17 % after taking into account
exchange rate effects, in the second quarter 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 12 % in the second quarter compared to
2006, driven primarily by increased internet sales and continuing
competitive advantages due to our worldwide sourcing and aggressive
pricing strategies. Industrial product sales transacted via the
internet grew 34% in the second quarter of 2007. � Larry Reinhold,
Chief Financial Officer, noted that the Company�s overall financial
condition remains solid as evidenced by its working capital of $231
million, which included cash and equivalents of $82 million. Cash
flow from operations for the quarter was approximately $27 million
and for the first six months of 2007 was over $45 million.
Operationally, days sales outstanding were 25 days at June 30, 2007
and inventory turned at an annual rate of approximately 9 times
during the quarter. Our effective tax rate was 36.1% for the first
six months of 2007, up slightly from the prior year. 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) � Three Months Ended Six
Months Ended June 30, June 30, � 2007 � 2006 � 2007 � 2006 Net
sales $ 647,102 $ 547,242 $ 1,323,224 $ 1,122,150 Cost of sales �
547,784 � 469,872 � 1,127,232 � 954,017 Gross profit 99,318 77,370
195,992 168,133 Gross margin 15.3% 14.1% 14.8% 15.0% Selling,
general and administrative expenses � 79,249 � 66,796 � 154,386 �
136,681 Operating income 20,069 10,574 41,606 31,452 Operating
margin 3.1% 1.9% 3.1% 2.8% Interest and other (income) expense, net
� (956) � (145) � (1,698) � (6,768) Income before income taxes
21,025 10,719 43,304 38,220 Provision for income taxes 7,263 3,613
15,647 13,557 Effective tax rate � 34.5% � 33.7% � 36.1% � 35.5%
Net income $ 13,762 $ 7,106 $ 27,657 $ 24,663 Net margin 2.1% 1.3%
2.1% 2.2% � Net income per common share: Basic $ .38 $ .20 $ .77 $
.71 Diluted $ .37 $ .19 $ .73 $ .67 � Weighted average common and
common equivalent shares: Basic 36,006 35,229 35,863 34,802 Diluted
37,686 36,981 37,644 36,563 SYSTEMAX INC. Condensed Consolidated
Balance Sheets (In thousands) (unaudited) � � June 30, 2007
December 31, 2006 Current assets: Cash and cash equivalents $
81,823 $ 86,964 Accounts receivable, net 174,966 164,615
Inventories 248,703 233,136 Prepaid expenses and other current
assets � 32,530 � 34,646 Total current assets 538,022 519,361
Property, plant and equipment, net 49,290 48,586 Deferred income
taxes and other assets � 15,001 � 16,214 Total assets $ 602,313 $
584,161 � Current liabilities: Short-term debt $ 571 $ 12,788
Accounts payable and accrued expenses � 306,656 � 277,174 Total
current liabilities 307,227 289,962 Long-term debt 367 483 Other
liabilities 6,029 4,226 � Shareholders� equity � 288,690 � 289,490
Total liabilities and shareholders� equity $ 602,313 $ 584,161
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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