Systemax Reports All-Time Record First Quarter Results
May 08 2008 - 4:03PM
Business Wire
Systemax Inc. (NYSE:SYX) today announced its financial results for
the first quarter of fiscal 2008. Net sales for the quarter
increased 7.2% to $725 million compared to $676 million in the
first quarter of 2007. Sales of technology products grew by 7% and
sales of industrial products grew by 11%. Gross margin for the
quarter improved to 15.8% from 14.3% last year. Operating income
increased 28% to $27.5 million compared to $21.5 million last year.
Operating margin improved to 3.8% from 3.2% last year. Net income
increased 30% to $18.1 million, or $.48 per diluted share, compared
to $13.9 million, or $.37 per diluted share, last year. Included in
net income in the first quarter of 2007 is an after-tax gain of
approximately $1.5 million, or $.04 per diluted share, related to a
lawsuit settlement. Richard Leeds, Chairman and Chief Executive
Officer, said, �Our first quarter 2008 results � highlighted by our
continued growth in sales, improved gross margin, growth in
operating income and the completion of the acquisition of certain
CompUSA assets � are impressive considering the challenges we are
facing in the current economic environment. We focused much of our
attention during the quarter on the CompUSA acquisition, and we
believe we have positioned this business for strong growth in the
future. Our operating income continues to grow at a faster rate
than revenues, demonstrating the leverage in our business model.
Our consolidated gross margin again improved in the first quarter
as it did consistently throughout 2007. Our selling, general and
administrative expenses, excluding start-up costs associated with
the CompUSA acquisition, have remained relatively stable as a
percentage of sales, despite significantly increased consulting and
staffing costs associated with the requirements of Section 404 of
the Sarbanes-Oxley Act.� Gilbert Fiorentino, General Manager of
Systemax�s Technology Products segment, noted, �Sales increases in
both the North American and European markets continued in the first
quarter. North American and European technology product sales each
grew 7%. In North America, we completed the CompUSA acquisition in
the quarter; the new, improved CompUSA.com was acquired in early
January and has been operational and generating sales since mid
January. We also acquired, refurbished and restocked 16 former
CompUSA retail stores during March and April. Sales from these
stores was not significant during the quarter as most of the grand
reopenings occurred in April. Total sales from CompUSA were
approximately $18 million during the quarter. In Europe, the effect
on sales of exchange rate changes was approximately $18 million. We
now operate under the three strong primary brands � TigerDirect and
CompUSA in North America and Misco in Europe � and we are well
positioned in each of our multiple sales channels � business to
business, business to consumer, retail and television shopping.�
Richard Leeds, commenting on other operations, noted that �in the
industrial products segment, sales grew 11% in the first quarter,
driven primarily by increased internet sales and continuing
competitive advantages due to our worldwide sourcing and aggressive
pricing strategies. In our hosted software segment, our
ProfitCenter Software business continued product development and
has moved closer to bringing several significant customers live.�
Larry Reinhold, Chief Financial Officer, noted that the Company�s
overall financial condition at March 31, 2008 remains solid after
completing the CompUSA acquisition. Working capital was $227
million, including cash and equivalents of $98 million. The $1.00
per share special dividend declared by our board of directors
during March aggregating $37.1 million was paid during the first
week of the second quarter. Cash flow from operations was
approximately $9 million. Included in this amount was an $18
million increase in inventory, most of which was for the initial
stocking of the CompUSA retail stores. Capital expenditures
aggregated $36 million, which included $30.4 million for CompUSA.
Days sales outstanding were 26 days at March 31, 2008, and
inventory turned at an annual rate of approximately 9.5 times
during the first quarter. Our effective tax rate was 36.1% in the
first quarter, down from 37.6% last year. Systemax Inc.
(www.systemax.com), a Fortune 1000 company, sells personal
computers, computer supplies and accessories, consumer electronics
and industrial products through a system of branded e-commerce web
sites, direct mail catalogs, relationship marketers and retail
stores in North America and Europe. The primary brands are
TigerDirect, CompUSA, Misco and Global Industrial. It also
manufactures and sells personal computers under the Systemax and
Ultra brands and develops and markets ProfitCenter Software, a
web-based, on-demand application for multichannel direct marketing
companies. SYSTEMAX INC. Condensed Consolidated Statements of
Operations � Unaudited (In thousands, except per share amounts) �
Quarter Ended March 31*, 2008 2007 Net sales $724,737 $676,122 Cost
of sales 610,057 � 579,448 � Gross profit 114,680 96,674 Gross
margin 15.8 % 14.3 % Selling, general and administrative expenses
87,147 � 75,137 � Operating income 27,533 21,537 Operating margin
3.8 % 3.2 % Interest and other (income) expense, net (728 ) (742 )
Income before income taxes 28,261 22,279 Provision for income taxes
10,200 8,384 Effective tax rate 36.1 % 37.6 % Net income $18,061 �
$13,895 � Net margin 2.5 % 2.1 % � Net income per common share:
Basic $.50 $.39 Diluted $.48 $.37 Weighted average shares
outstanding: Basic 36,206 35,718 Diluted 37,628 37,701 SYSTEMAX
INC. Condensed Consolidated Balance Sheets (In thousands) � March
31*, December 31*, 2008 2007 (Unaudited) Current assets: Cash and
cash equivalents $98,731 $128,021 Accounts receivable, net 215,654
206,940 Inventories, net 269,238 250,222 Prepaid expenses and other
current assets 25,646 23,815 Total current assets 609,269 608,998
Property, plant and equipment, net 51,069 47,580 Goodwill,
intangibles and other assets 49,675 19,802 Total assets $710,013
$676,380 � Current liabilities: Short-term debt $2,110 $4,302
Accounts payable and accrued expenses 380,356 330,343 Total current
liabilities 382,466 334,645 Long-term debt 347 254 Other
liabilities 5,624 5,646 � Shareholders� equity 321,576 335,835
Total liabilities and shareholders� equity $710,013 $676,380 *
Systemax manages its business and reports using a 52-53 week fiscal
year that ends at midnight on the Saturday closest to December 31.
For clarity of presentation, fiscal years and quarters are
described as if they ended on the last day of the respective
calendar month. The actual fiscal quarters ended on March 29, 2008
and December 29, 2007. The first quarters of both 2008 and 2007
included 13 weeks. 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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