Table
of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2008
or
o
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
COMMISSION
FILE NUMBER 1-13792
Systemax Inc.
(Exact name of
registrant as specified in its charter)
Delaware
|
|
11-3262067
|
(State or other
jurisdiction of
|
|
(I.R.S. Employer
|
incorporation or
organization)
|
|
Identification
No.)
|
11 Harbor
Park Drive
Port
Washington, New York 11050
(Address of
principal executive offices, including zip code)
Registrants
telephone number, including area code:
(516) 608-7000
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes
x
No
o
Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer,
non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2
of the Exchange Act).
Large accelerated filer
o
|
Accelerated filer
x
|
Non-accelerated filer
o
|
Smaller reporting company
o
|
Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act)
Yes
o
No
x
The number of
shares outstanding of the registrants Common Stock as of August 1, 2008 was 36,640,185
Table of
Contents
Available Information
We
maintain an internet web site at www.systemax.com. We file reports with the
Securities and Exchange Commission (SEC) and make available free of charge on
or through this web site our annual reports on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K, including all
amendments to those reports. These are
available as soon as is reasonably practicable after they are filed with the
SEC. All reports mentioned above are
also available from the SECs web site (www.sec.gov). The information on our
web site is not part of this or any other report we file with, or furnish to,
the SEC.
Our
Board of Directors has adopted the following corporate governance documents
with respect to the Company (the Corporate Governance Documents):
·
Corporate Ethics Policy for officers,
directors and employees
·
Charter for the Audit Committee of
the Board of Directors
·
Charter for the Compensation
Committee of the Board of Directors
·
Charter for the Nominating/Corporate
Governance Committee of the Board of Directors
·
Corporate Governance Guidelines and
Principles
In
accordance with the corporate governance rules of the New York Stock
Exchange, each of the Corporate Governance Documents is available on our
Company web site (www.systemax.com) or can be obtained by writing to Systemax
Inc., Attention: Board of Directors (Corporate Governance), 11 Harbor Park
Drive, Port Washington, NY 11050.
3
Table of Contents
PART I - FINANCIAL INFORMATION
Item
1.
Financial Statements
Systemax
Inc.
Condensed Consolidated
Balance Sheets
(In thousands)
|
|
June 30,
|
|
December 31,
|
|
|
|
2008
|
|
2007
|
|
|
|
(Unaudited)
|
|
|
|
ASSETS:
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
66,775
|
|
$
|
128,021
|
|
Accounts receivable, net
|
|
216,589
|
|
206,940
|
|
Inventories
|
|
290,697
|
|
250,222
|
|
Prepaid expenses and other current assets
|
|
14,677
|
|
14,455
|
|
Deferred income tax assets, net
|
|
9,315
|
|
9,360
|
|
Total current assets
|
|
598,053
|
|
608,998
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
53,976
|
|
47,580
|
|
Deferred income tax assets, net
|
|
16,367
|
|
18,652
|
|
Goodwill, intangibles and other assets
|
|
31,483
|
|
1,150
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
699,879
|
|
$
|
676,380
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY:
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Short-term borrowings, including current portions of long-term debt
|
|
$
|
1,634
|
|
$
|
4,302
|
|
Accounts payable
|
|
282,884
|
|
248,673
|
|
Accrued expenses and other current liabilities
|
|
72,761
|
|
81,670
|
|
Total current liabilities
|
|
357,279
|
|
334,645
|
|
|
|
|
|
|
|
Long-term debt
|
|
465
|
|
254
|
|
Other liabilities
|
|
5,739
|
|
5,646
|
|
Total liabilities
|
|
363,483
|
|
340,545
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
Preferred stock
|
|
|
|
|
|
Common stock
|
|
389
|
|
383
|
|
Additional paid-in capital
|
|
177,395
|
|
173,381
|
|
Treasury stock
|
|
(26,074
|
)
|
(26,324
|
)
|
Retained earnings
|
|
171,160
|
|
176,684
|
|
Accumulated other comprehensive income
|
|
13,526
|
|
11,711
|
|
Total shareholders equity
|
|
336,396
|
|
335,835
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
699,879
|
|
$
|
676,380
|
|
See notes to
condensed consolidated financial statements.
4
Table of Contents
Systemax Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Net sales
|
|
$
|
756,035
|
|
$
|
647,102
|
|
$
|
1,480,772
|
|
$
|
1,323,224
|
|
Cost of sales
|
|
639,987
|
|
547,784
|
|
1,250,044
|
|
1,127,232
|
|
Gross profit
|
|
116,048
|
|
99,318
|
|
230,728
|
|
195,992
|
|
Selling, general & administrative expenses
|
|
94,992
|
|
79,249
|
|
182,139
|
|
154,386
|
|
Operating income
|
|
21,056
|
|
20,069
|
|
48,589
|
|
41,606
|
|
Interest and other income, net
|
|
(459
|
)
|
(956
|
)
|
(1,187
|
)
|
(1,698
|
)
|
Income before income taxes
|
|
21,515
|
|
21,025
|
|
49,776
|
|
43,304
|
|
Provision for income taxes
|
|
7,974
|
|
7,263
|
|
18,174
|
|
15,647
|
|
Net income
|
|
$
|
13,541
|
|
$
|
13,762
|
|
$
|
31,602
|
|
$
|
27,657
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
.37
|
|
$
|
.38
|
|
$
|
.87
|
|
$
|
.77
|
|
Diluted
|
|
$
|
.36
|
|
$
|
.37
|
|
$
|
.84
|
|
$
|
.73
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
36,630
|
|
36,006
|
|
36,418
|
|
35,863
|
|
Diluted
|
|
37,590
|
|
37,686
|
|
37,452
|
|
37,644
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
|
|
$
|
|
|
$
|
|
|
$
|
1.00
|
|
$
|
1.00
|
|
See notes to
condensed consolidated financial statements.
5
Table of
Contents
Systemax
Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2008
|
|
2007
|
|
Cash flows from operating activities:
|
|
|
|
|
|
Net income
|
|
$
|
31,602
|
|
$
|
27,657
|
|
Adjustments to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
4,846
|
|
4,334
|
|
Provision (benefit) for deferred income taxes
|
|
2,183
|
|
635
|
|
Provision (reduction) for returns and doubtful accounts
|
|
891
|
|
2,810
|
|
Compensation expense related to equity compensation plans
|
|
1,785
|
|
1,472
|
|
Excess tax benefit from exercises of stock options
|
|
(1,204
|
)
|
(1,751
|
)
|
(Gain) loss on dispositions and abandonment
|
|
13
|
|
6
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Accounts receivable
|
|
(14,597
|
)
|
(14,006
|
)
|
Inventories
|
|
(39,083
|
)
|
(14,323
|
)
|
Prepaid expenses and other current assets
|
|
5,929
|
|
10,867
|
|
Accounts payable, accrued expenses and other current liabilities
|
|
26,170
|
|
26,496
|
|
Net cash provided by operating activities
|
|
18,535
|
|
44,197
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Purchase of CompUSA
|
|
(30,649
|
)
|
|
|
Purchases of property, plant and equipment
|
|
(10,729
|
)
|
(4,215
|
)
|
Proceeds from disposals of property, plant and equipment
|
|
58
|
|
|
|
Net cash used in investing activities
|
|
(41,320
|
)
|
(4,215
|
)
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of borrowings from banks
|
|
(2,969
|
)
|
(12,408
|
)
|
Proceeds from (repayments of) long-term debt and capital lease
obligations, net
|
|
329
|
|
(93
|
)
|
Dividends paid
|
|
(37,126
|
)
|
(36,588
|
)
|
Proceeds from issuance of common stock, net of repurchases
|
|
908
|
|
691
|
|
Excess tax benefit from exercises of stock options
|
|
1,204
|
|
1,751
|
|
Net cash used in financing activities
|
|
(37,654
|
)
|
(46,647
|
)
|
|
|
|
|
|
|
Effects of exchange rates on cash
|
|
(807
|
)
|
322
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
(61,246
|
)
|
(6,343
|
)
|
Cash and cash equivalents beginning of period
|
|
128,021
|
|
86,964
|
|
Cash and cash equivalents end of period
|
|
$
|
66,775
|
|
$
|
80,621
|
|
|
|
|
|
|
|
Supplemental disclosures of non-cash investing and financing
activities:
|
|
|
|
|
|
Acquisitions of equipment through capital leases
|
|
$
|
653
|
|
$
|
148
|
|
See notes to condensed consolidated financial
statements.
6
Table
of Contents
Systemax Inc.
Condensed Consolidated Statement of Shareholders Equity (Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
Number of
Shares
Outstanding
|
|
Amount
|
|
Additional
Paid-in
Capital
|
|
Treasury
Stock,
At Cost
|
|
Retained
Earnings
|
|
Comprehensive
Income,
Net of Tax
|
|
Comprehensive
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
January 1, 2008
|
|
36,092
|
|
$
|
383
|
|
$
|
173,381
|
|
$
|
(26,324
|
)
|
$
|
176,684
|
|
$
|
11,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation expense
|
|
|
|
|
|
1,785
|
|
|
|
|
|
|
|
|
|
Issuance of
restricted stock
|
|
100
|
|
1
|
|
254
|
|
|
|
|
|
|
|
|
|
Exercise of
stock options
|
|
444
|
|
5
|
|
653
|
|
250
|
|
|
|
|
|
|
|
Income tax
benefit on stock-based compensation
|
|
|
|
|
|
1,322
|
|
|
|
|
|
|
|
|
|
Change in
cumulative translation adjustment, net
|
|
|
|
|
|
|
|
|
|
|
|
1,815
|
|
$
|
1,815
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
(37,126
|
)
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
31,602
|
|
|
|
31,602
|
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
33,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
June 30, 2008
|
|
36,636
|
|
$
|
389
|
|
$
|
177,395
|
|
$
|
(26,074
|
)
|
$
|
171,160
|
|
$
|
13,526
|
|
|
|
See notes to condensed
consolidated financial statements.
7
Table of Contents
Systemax
Inc.
Notes to Condensed
Consolidated Financial Statements (Unaudited)
1.
Basis of
Presentation
The accompanying
condensed consolidated financial statements of the Company and its wholly-owned
subsidiaries are unaudited and have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and the rules and regulations of the Securities and
Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
of America are not required in these interim financial statements and have been
condensed or omitted. All significant intercompany accounts and transactions have
been eliminated in consolidation. Certain prior year amounts have been
reclassified to conform to current year presentation.
In the
opinion of management, the accompanying condensed consolidated financial
statements contain all normal and recurring adjustments necessary to present
fairly the financial position of the Company as of June 30, 2008 and the
results of operations for the three and six month periods ended June 30,
2008 and 2007, cash flows for the six month periods ended June 30, 2008
and 2007 and changes in shareholders equity for the six month period ended June 30,
2008. The December 31, 2007
condensed consolidated balance sheet has been derived from the audited
consolidated financial statements included in the Companys Annual Report on Form 10-K
for the year ended December 31, 2007.
These
condensed consolidated financial statements should be read in conjunction with
the Companys audited consolidated financial statements as of December 31,
2007 and for the year then ended included in the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 2007. The results for the three and six months
ended June 30, 2008 are not necessarily indicative of the results for an
entire year.
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 herein, fiscal years and quarters are referred to as if they ended
on the traditional calendar month. The
actual fiscal quarter ended on June 28, 2008. The second quarters of both
2008 and 2007 included 13 weeks, and the six month periods of both 2008 and
2007 included 26 weeks.
2.
Acquisition of
CompUSA
On January 5, 2008, the Company, through
various subsidiaries, entered into an asset purchase agreement with CompUSA
Inc., a Delaware corporation. Pursuant to the Purchase Agreement, the Company
acquired certain assets and liabilities related to the e-commerce business of
CompUSA Inc., certain intellectual property rights owned by CompUSA, and the
E-Commerce Business for $18.9 million in cash.
The Company completed its acquisition of the E-Commerce Business on January 10,
2008. Pursuant to the Purchase
Agreement, the Company also acquired sixteen retail leases from CompUSA Inc.
and certain fixtures located at these locations. The closing of the acquisition
of each lease was subject to the receipt of the consent of the landlord, if
required, under the terms of a lease.
During February and March 2008 the Company completed the
acquisition of these sixteen store leases and fixtures for an aggregate
purchase price of approximately $11.7 million. This acquisition accelerates the
Companys planned expansion into the retail market place and gives the Company
28 retail storefronts operating in North America and Puerto Rico.
A preliminary purchase price allocation has
been completed and the Company has recorded assets of approximately $17.0 million for Trademarks and Trade
Names, $8.0 million for Domain Names, $.4 million for Client Lists, $.9 million
for fixed assets and $4.3 million for Goodwill. The Company expects to amortize
its Client Lists over a 5 year period and depreciate its fixed assets over a
similar period. All other assets are indefinite lived.
The Company was assigned the rights and
prospective obligations of the tenant for each of the 16 retail stores
acquired. The following table details the contractual obligations related to
the assigned leases
(in thousands
):
|
|
2008
|
|
2009
|
|
2010
|
|
2011
|
|
2012
|
|
After 2012
|
|
Retail store
operating leases
|
|
$
|
4,669
|
|
$
|
5,067
|
|
$
|
4,695
|
|
$
|
4,105
|
|
$
|
3,699
|
|
$
|
13,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
Table of Contents
3.
Stock-based
Compensation Plans
Pre-tax stock-based
compensation expense for the six months ended June 30, 2008 and 2007 was
$1,785,000 and $1,472,000 respectively.
The Company continues to use
the simplified method for determining expected life of a stock option as
permitted in SEC Staff Accounting Bulletin 110 for options qualifying for
treatment (plain-vanilla options) due to the limited history the Company
currently has with option exercise activity.
4.
Net Income per
Common Share
Net
income per common share - basic was calculated based upon the weighted average
number of common shares outstanding during the respective periods
presented. Net income per common share -
diluted was calculated based upon the weighted average number of common shares
outstanding and included the equivalent shares for dilutive options outstanding
during the respective periods. The dilutive effect of outstanding options
issued by the Company is reflected in net income per share - diluted using the
treasury stock method. Under the treasury stock method, options will only have
a dilutive effect when the average market price of common stock during the
period exceeds the exercise price of the options. The weighted average number
of stock options outstanding excluded from the computation of diluted earnings
per share was 597,000 and 238,000 shares for the three months ended June 30,
2008 and 2007, and 603,000 and zero shares for the six months ended June 30,
2008 and 2007, respectively, due to their antidilutive effect.
5.
Comprehensive
Income
Comprehensive
income consists of net income and foreign currency translation adjustments, net
of tax, and is included in the Condensed Consolidated Statement of Shareholders
Equity. For the three month periods ended June 30, 2008 and 2007,
comprehensive income was $13,598,000 and $15,596,000, respectively. For the six
month periods ended June 30, 2008 and 2007, comprehensive income was
$33,417,000 and $29,984,000, respectively.
6.
Credit Facilities
The Company maintains a $120
million (which may be increased by up to $30 million, subject to certain
conditions) secured revolving credit agreement with a group of financial
institutions which provides for borrowings in the United States and United
Kingdom. The borrowings are secured by all of the Companys domestic and United
Kingdom accounts receivable, the domestic inventories of the Company, general
intangibles and the Companys shares of stock in its domestic subsidiaries and
the Companys United Kingdom headquarters building. The credit facility expires
and the outstanding borrowings thereunder are due on October 26, 2010. The
revolving credit agreement contains certain financial and other covenants,
including maintaining a minimum level of availability and restrictions on
capital expenditures and payments of dividends. The Company was in compliance
with all of the covenants as of June 30, 2008. As of June 30, 2008,
eligible collateral under the agreement was $118.4 million, total availability
was $107.4 million and there were outstanding letters of credit of $11.0
million and there were no outstanding advances.
The Companys Netherlands
subsidiary maintains a 5.0 million ($7.9 million at the June 30, 2008
exchange rate) credit facility with a local financial institution. At June 30,
2008 there were .7 million ($1.1 million) of borrowings outstanding with
interest payable at a rate of 7.4%. Borrowings under the facility are secured
by the subsidiarys accounts receivable and are subject to a borrowing base
limitation of 85% of the eligible accounts. The facility expires in November 2008.
7.
Product Warranties
Provisions
for estimated future expenses relating to product warranties for the Companys
assembled proprietary products are recorded as cost of sales when revenue is
recognized. Liability estimates are determined based on management judgment
considering such factors as the number of units sold, historical and
anticipated rates of warranty claims and the likely current cost of corrective
action. The changes in accrued product
warranties were as follows:
9
Table of
Contents
|
|
Six months ended
June 30, 2008
|
|
|
|
(in thousands)
|
|
Balance,
beginning of year
|
|
$
|
914
|
|
Charged to
expense
|
|
532
|
|
Deductions
|
|
(672
|
)
|
Balance, end of
period
|
|
$
|
774
|
|
8.
Segment
Information
Systemax
is primarily a direct marketer of brand name and private label products. Our
operations are organized in three reportable business segments Technology
Products, Industrial Products and Hosted Software. Our Technology Products
segment sells computers, computer supplies and consumer electronics which are
marketed in North America and Western Europe.
Most of these products are manufactured by other companies. We assemble our own personal computers (PCs)
and sell them under the trademarks
Systemax
and
Ultra
. We also sell
certain computer-related products manufactured for us to our own design under
the trademark
Ultra
. Technology Products accounted for 92% of our
net sales in 2008. Our Industrial Products segment sells a wide array of material
handling equipment, storage equipment and consumable industrial items which are
marketed in North America. Most of these products are manufactured by other
companies. Some products are
manufactured for us to our own design and marketed under the trademarks
Global
,
GlobalIndustrial.com
and
Nexel.
Industrial products accounted
for 8% of our net sales in 2008. In both of these segments we offer our
customers a broad selection of products, prompt order fulfillment and extensive
customer service. Our Hosted Software segment, which became a reportable
segment in 2006, participates in the emerging market for on-demand, web-based
business software applications through the marketing of our PCS ProfitCenter
Software
application.
The
Companys chief operating decision-maker is the Companys Chief Executive
Officer. The Company evaluates segment performance based on operating income,
before net interest, foreign exchange gains and losses, restructuring and other
charges and income taxes. Corporate costs not identified with the disclosed
segments and restructuring and other charges are grouped as Corporate and
other expenses. The chief operating decision-maker reviews assets and makes
capital expenditure decisions for the Company on a consolidated basis only. The
accounting policies of the segments are the same as those of the Company.
Financial information
relating to the Companys operations by reportable segment was as follows (in
thousands):
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
June 30
|
|
June 30
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
Technology
products
|
|
$
|
694,350
|
|
$
|
591,072
|
|
$
|
1,361,647
|
|
$
|
1,215,239
|
|
Industrial
products
|
|
61,617
|
|
55,835
|
|
118,979
|
|
107,709
|
|
Hosted software
|
|
68
|
|
195
|
|
146
|
|
276
|
|
Consolidated
|
|
$
|
756,035
|
|
$
|
647,102
|
|
$
|
1,480,772
|
|
$
|
1,323,224
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss):
|
|
|
|
|
|
|
|
|
|
Technology
products
|
|
$
|
23,391
|
|
$
|
20,820
|
|
$
|
53,714
|
|
$
|
44,385
|
|
Industrial
products
|
|
6,732
|
|
5,575
|
|
12,233
|
|
10,167
|
|
Hosted Software
|
|
(4,482
|
)
|
(2,947
|
)
|
(8,604
|
)
|
(5,964
|
)
|
Corporate and
other expenses
|
|
(4,585
|
)
|
(3,379
|
)
|
(8,754
|
)
|
(6,982
|
)
|
Consolidated
|
|
$
|
21,056
|
|
$
|
20,069
|
|
$
|
48,589
|
|
$
|
41,606
|
|
10
Table of Contents
Financial information
relating to the Companys operations by geographic area was as follows (in
thousands):
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
United States:
|
|
|
|
|
|
|
|
|
|
Industrial
products
|
|
$
|
61,617
|
|
$
|
55,835
|
|
$
|
118,979
|
|
$
|
107,709
|
|
Technology
products
|
|
401,139
|
|
337,421
|
|
767,056
|
|
688,641
|
|
Hosted software
|
|
68
|
|
195
|
|
146
|
|
276
|
|
United States
total
|
|
462,824
|
|
393,451
|
|
886,181
|
|
796,626
|
|
Other North
America
|
|
49,094
|
|
37,628
|
|
98,093
|
|
74,842
|
|
North America
total
|
|
511,918
|
|
431,079
|
|
984,274
|
|
871,468
|
|
Europe
|
|
244,117
|
|
216,023
|
|
496,498
|
|
451,756
|
|
Consolidated
|
|
$
|
756,035
|
|
$
|
647,102
|
|
$
|
1,480,772
|
|
$
|
1,323,224
|
|
Revenues are attributed to countries based on the
location of the selling subsidiary.
9.
Contingencies
Litigation
Kevin Vukson v.
TigerDirect, Inc., OnRebate.com Inc. and Systemax Inc.
On October 18, 2007,
Kevin Vukson filed a class action complaint in U.S. District Court (E.D.N.Y.)
against TigerDirect, Inc., OnRebate.com Inc. and Systemax Inc. on behalf
of himself and all OnRebate customers whose rebates were denied or delayed.
(OnRebate.com Inc. is a rebate processing company owned by Systemax.) Vuksons
Complaint alleges that since 2004 Systemax, TigerDirect and OnRebate conducted
a deceptive and unlawful enterprise by failing to pay rebates that should have
been paid and delaying unnecessarily the payment of other rebates that were
paid. Vukson alleges claims arising under Floridas Unfair, Deceptive Trade
Practice Act, the federal RICO statute, along with claims for breach of
contract, conspiracy to commit fraud and unjust enrichment. Systemax, TigerDirect
and OnRebate moved to dismiss the Complaint and to transfer the matter to the
Southern District of Florida. The Court has ruled in favor of Systemax with
respect to the motion to transfer the Complaint to the Southern District of
Florida. The Court has not ruled on the
motion to dismiss or certified a class. The Company intends to vigorously
defend this case.
State of Florida, Office
of the Attorney General Subpoena.
On January 2, 2008
the Company received a subpoena for documents from the Florida Attorney Generals
Office relating to the payment and processing of rebates by the Company. On January 30,
2008 the Company received a second subpoena for additional documents. The
Company is cooperating with the Florida Attorney Generals investigation and
has provided a substantial number of documents in response to the subpoenas.
Item 2.
Managements Discussion and Analysis of
Financial Condition and Results of Operations.
Forward
Looking Statements
This report contains
forward looking statements within the meaning of that term in the Private
Securities Litigation Reform Act of 1995 (Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Additional written or oral forward looking
statements may be made by the Company from time to time, in filings with the
Securities and Exchange Commission or otherwise. Statements contained in this report that are
not historical facts are forward looking statements made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statements may include, but
are not limited to, projections of revenue, income or loss and capital
expenditures, statements regarding future operations, financing needs,
compliance with financial covenants in loan agreements, plans for acquisition
or sale of assets or businesses and consolidation of operations of newly
acquired businesses, and plans relating to
11
Table of Contents
products or services of
the Company, assessments of materiality, predictions of future events and the
effects of pending and possible litigation, as well as assumptions relating to
the foregoing. In addition, when used in
this discussion, the words anticipates, believes, estimates, expects, intends,
plans and variations thereof and similar expressions are intended to identify
forward looking statements.
Forward-looking
statements in this report are based on the Companys beliefs and expectations
as of the date of this report and are subject to risks and uncertainties which
may have a significant impact on the Companys business, operating results or
financial condition. Investors are cautioned that these forward-looking
statements are inherently uncertain. Should one or more of the risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results or outcomes may vary materially from those described herein.
Statements in this report, particularly in Item 2. Managements Discussion and
Analysis of Financial Condition and Results of Operations and the Notes to
Condensed Consolidated Financial Statements, describe certain factors, among
others, that could contribute to or cause such differences.
Readers are cautioned not
to place undue reliance on any forward looking statements contained in this
report, which speak only as of the date of this report. We undertake no obligation to publicly
release the result of any revisions to these forward looking statements that
may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unexpected events.
Critical
Accounting Policies and Estimates
The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements, and revenues and expenses during the period. Significant
accounting policies employed by the Company, including the use of estimates,
were presented in the Notes to Consolidated Financial Statements of the Companys
2007 Annual Report on Form 10-K.
Critical accounting
policies are those that are most important to the presentation of our financial
condition and results of operations, require managements most difficult,
subjective and complex judgments, and involve uncertainties. The accounting
policies that have been identified as critical to our business operations and
understanding the results of operations pertain to revenue recognition,
accounts receivable and allowance for doubtful accounts, inventories,
long-lived assets, income taxes and accruals. The application of each of these
critical accounting policies and estimates was discussed in Item 7 of the
Companys Annual Report on Form 10-K for the year ended December 31,
2007. There have been no significant changes in the application of critical accounting
policies or estimates during 2008. Management believes that full consideration
has been given to all relevant circumstances that we may be subject to, and the
condensed consolidated financial statements of the Company accurately reflect
managements best estimate of the consolidated results of operations, financial
position and cash flows of the Company for the periods presented. Because of
the uncertainty in these estimates, actual results could differ from estimates
used in applying the critical accounting policies. We are not aware of any
reasonably likely events or circumstances which would result in different
amounts being reported that would materially affect its financial condition or
results of operations.
Overview
Systemax is primarily a
direct marketer of brand name and private label products. Our operations are
organized in three reportable business segments Technology Products,
Industrial Products and Hosted Software. Our Technology Products segment sells
computers, computer supplies and consumer electronics which are marketed in
North America and Western Europe. Most
of these products are manufactured by other companies. We assemble our own PCs and sell them under
our own trademarks Systemax and Ultra.
We also sell certain computer-related products manufactured for us to
our own design under the trademark Ultra. For the six months ended June 30,
2008, Technology products accounted for 92% of our net sales. Our Industrial Products segment sells a wide
array of material handling equipment, storage equipment and consumable
industrial items which are marketed in North America. Most of these products are manufactured by
other companies. Some products are
manufactured for us to our own design and marketed under the trademarks
Global, GlobalIndustrial.com and Nexel. Industrial products accounted for 8%
of our net sales for the six months ended June 30, 2008. In both of these product groups, we offer our
customers a broad selection of products, prompt order fulfillment and extensive
customer service. Our Hosted Software
segment, which became a reportable segment in 2006, participates in the
emerging market for on-demand, web-based business software applications through
the marketing of our PCS ProfitCenter Software application. See Note 11 to the consolidated financial
statements additional financial information about our business segments as well
as information about our geographic operations.
12
Table of Contents
The market for computer
products and consumer electronics is subject to intense price competition and
is characterized by narrow gross profit margins. The North American industrial
products market is highly fragmented and we compete against multiple
distribution channels. Distribution is working capital intensive, requiring us
to incur significant costs associated with the warehousing of many products,
including the costs of leasing warehouse space, maintaining inventory and
inventory management systems, and employing personnel to perform the associated
tasks. We supplement our on-hand product availability by maintaining
relationships with major distributors and manufacturers, utilizing a
combination of stocking and drop-shipment fulfillment.
The discussion of our
results of operations and financial condition that follows will provide
information that will assist in understanding our financial statements, the
factors that we believe may affect our future results and financial condition
as well as information about how certain accounting principles and estimates
affect the consolidated financial statements. This discussion should be read in
conjunction with the condensed consolidated financial statements included
herein.
Results
of Operations
Three and
Six Months Ended June 30, 2008 compared to the Three and Six Months Ended June 30,
2007
Key Performance
Indicators (in thousands):
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2008
|
|
2007
|
|
%
Change
|
|
2008
|
|
2007
|
|
% Change
|
|
Net
sales by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology
products
|
|
$694,350
|
|
$591,072
|
|
17.5
|
%
|
$1,361,647
|
|
$1,215,239
|
|
12.0
|
%
|
Industrial
products
|
|
61,617
|
|
55,835
|
|
10.4
|
%
|
118,979
|
|
107,709
|
|
10.5
|
%
|
Hosted software
|
|
68
|
|
195
|
|
(65.1
|
)%
|
146
|
|
276
|
|
(47.1
|
)%
|
Total net sales
|
|
$756,035
|
|
647,102
|
|
16.8
|
%
|
$1,480,772
|
|
$1,323,224
|
|
11.9
|
%
|
Net
sales by geography:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$511,918
|
|
431,079
|
|
18.8
|
%
|
$984,274
|
|
$871,468
|
|
12.9
|
%
|
Europe
|
|
244,117
|
|
216,023
|
|
13.0
|
%
|
496,498
|
|
451,756
|
|
10.0
|
%
|
Total net sales
|
|
$756,035
|
|
$647,102
|
|
16.8
|
%
|
$1,480,772
|
|
$1,323,224
|
|
11.9
|
%
|
Gross
margin
|
|
15.3
|
%
|
15.3
|
%
|
|
%
|
15.6
|
%
|
14.8
|
%
|
.8
|
%
|
Selling, general
and administrative costs
|
|
$94,992
|
|
$79,249
|
|
19.9
|
%
|
$182,139
|
|
$154,386
|
|
18.0
|
%
|
Selling, general
and administrative as a % of net sales
|
|
12.6
|
%
|
12.2
|
%
|
.4
|
%
|
12.3
|
%
|
11.7
|
%
|
.6
|
%
|
Operating income
|
|
$21,056
|
|
$20,069
|
|
4.9
|
%
|
$48,589
|
|
$41,606
|
|
16.8
|
%
|
Operating
margin
|
|
2.8
|
%
|
3.1
|
%
|
(.3
|
)%
|
3.3
|
%
|
3.1
|
%
|
. 2
|
%
|
Effective income
tax rate
|
|
37.1
|
%
|
34.5
|
%
|
2.6
|
%
|
36.5
|
%
|
36.1
|
%
|
.4
|
%
|
Net income
|
|
$13,541
|
|
13,762
|
|
(1.6
|
)%
|
$31,602
|
|
$27,657
|
|
14.3
|
%
|
Net
margin
|
|
1.8
|
%
|
2.1
|
%
|
(.3
|
)%
|
2.1
|
%
|
2.1
|
%
|
|
%
|
The
Technology Products sales increase was driven by increased internet and retail
store sales, primarily the result of the acquisition of the CompUSA ecommerce
business and re-opening sixteen retail stores, private label product sales and
expanded product offerings. Sales
attributable to CompUSA web and retail were $58.1 million for the second
quarter of 2008 and $76.4 million for the first six months of 2008. The Industrial Products sales increase
resulted from the Company increasing its market share through competitive
pricing advantages and increased internet sales. Both North America sales and
Europe sales increased in the second quarter and the first six months as
compared to the same periods in the prior year. Movements in foreign exchange
rates positively impacted the European sales comparison by approximately $18
million in the second quarter and $36 million for the first six months of 2008.
Excluding the movements in foreign exchange rates, European sales would have
increased 5% in the second quarter and 2% for the first six months of 2008. The
increase in our North American sales resulted from sales growth in both our
Technology Products and Industrial Products groups. This increase was primarily
a result of our continuing internet initiatives, increased retail sales,
primarily the result of the acquisition of the CompUSA ecommerce business and re-opening
sixteen retail stores and expansion of our product offerings. The increase in
our European sales was the result of
improved business to business sales. Consolidated gross margin was
unchanged for the three month period ended June 30, 2008 and improved by 80
basis points for the six months ending June 30, 2008 compared to the same
periods in 2007. Gross margin is dependent on variables such as product mix,
vendor price
13
Table of Contents
protection
and other sales incentives, competition, pricing strategy, cooperative
advertising funds required to be classified as a reduction to cost of sales and
other variables, any or all of which may result in fluctuations in gross
margin.
The
increase in selling, general and administrative expenses in the second quarter
of 2008 was primarily the result of $9.7 million of increased salaries and
related payroll taxes, $2.4 million of professional fees and telephone
maintenance charges, $2.4 million of increased rent costs, and $1.3 million of
increased credit card fees. Included in these cost increases are approximately
$6.2 million of costs related to CompUSA operations.
The increase in selling,
general and administrative expenses in the first six months of 2008 was
primarily the result of $17.1 million of increased salaries and related payroll
taxes, $4.1 million of professional fees and telephone maintenance charges,
$3.8 million of increased rent costs, and $1.3 million of increased credit card
fees. Included in these cost increases are approximately $8.3 million of costs
related to CompUSA operations and $.7 million in severance costs. Included in the six months of 2007 is a gain
of approximately $2.4 million from a lawsuit that was settled favorably.
Excluding this gain selling, general and administrative expenses would have
increased 16.1% in 2008 as compared to 2007.
The Companys effective
tax rate for the quarter was 37.1% up from 34.5% in the second quarter of 2007,
primarily the result of increased taxable income in the United Kingdom where we
had a deferred tax valuation allowance in the prior year. The effective tax
rate for the six months was 36.5% in 2008, up slightly from 36.1% in 2007.
Financial
Condition, Liquidity and Capital Resources
Our primary liquidity
needs are to support working capital requirements in our business, to fund
capital expenditures, and to fund special dividends declared by our Board of
Directors and to fund acquisitions. We rely principally upon operating cash
flow and borrowings under our credit facilities to meet these needs. We believe
that cash flow available from these sources will be sufficient to meet our
working capital requirements as well as any interest and debt repayments in the
next twelve months and thereafter.
Selected liquidity
data (in thousands):
|
|
June 30, 2008
|
|
December 31,
2007
|
|
$ Change
|
|
Cash and cash
equivalents
|
|
$
|
66,775
|
|
$
|
128,021
|
|
$
|
(61,246
|
)
|
Accounts
receivable, net
|
|
$
|
216,589
|
|
$
|
206,940
|
|
$
|
9,649
|
|
Inventories ,net
|
|
$
|
290,697
|
|
$
|
250,222
|
|
$
|
40,475
|
|
Prepaid expenses
and other current assets
|
|
$
|
14,677
|
|
$
|
14,455
|
|
$
|
222
|
|
Accounts payable
|
|
$
|
282,884
|
|
$
|
248,673
|
|
$
|
34,211
|
|
Accrued expenses
and other current liabilities
|
|
$
|
72,761
|
|
$
|
81,670
|
|
$
|
(8,909
|
)
|
Short term
borrowings
|
|
$
|
1,634
|
|
$
|
4,302
|
|
$
|
(2,668
|
)
|
Working capital
|
|
$
|
240,774
|
|
$
|
274,353
|
|
$
|
(32,679
|
)
|
Our working capital
decreased in the first six months of 2008 as the result of the use of
approximately $30.6 million cash for the purchase of certain CompUSA assets,
and an increase in inventory, primarily related to purchasing inventory for the
16 CompUSA retail stores. Accounts payable balances increased by approximately
$34.2 million and a cash dividend of $37.1 million was paid in the second
quarter. Our inventory turnover
decreased from 10 times to 9.2 times on an annual basis primarily the result of
the restocking of the 16 acquired CompUSA retail stores. Future accounts receivable
and inventory balances will continue to fluctuate with changes in sales volume
and the mix of our net sales between consumer and business customers.
The decrease in cash
provided by operations in the first six months of 2008 resulted from changes in
our working capital accounts, which used $22.8 million in cash compared to $7.3
million generated in 2007, primarily the result of an increase in inventories
related to the CompUSA acquisition. Cash generated from net income adjusted by
other non-cash items provided $41.3 million for the six months ended June 30,
2008 compared to $36.9 million provided by these items for the six months ended
June 30, 2007, primarily as a result of an increase in our net income in
the first six months of 2008.
Cash flows used in
investing activities during the first six months of 2008 were primarily for the
CompUSA acquisition and for capital expenditures in retail stores and
information technology. Cash flows used in investing activities during 2007
consisted primarily of upgrades and enhancements to our information and
communications systems hardware and facilities costs.
Net cash of $37.7 million was used in financing activities for the six months of 2008. We repaid approximately $3.0 million in
14
Table of Contents
short-term loans and we paid $37.1 million for a special dividend. Proceeds and excess tax benefits from stock option exercises provided approximately $2.1 million of cash. In the first six months of 2007, we repaid $12.4 million in short-term loans and paid $36.6 million for a special dividend. Proceeds from stock option exercises, net of repurchases and excess tax benefits, provided approximately $2.4 million of cash.
Under our $120 million (which may be increased by up to $30 million, subject to certain conditions) secured revolving credit agreement for borrowings in the United States and United Kingdom, as of June 30, 2008, eligible collateral was $118.4 million and total availability was $107.4 million. There were outstanding letters of credit of $11.0 million and there were no outstanding advances as of June 30, 2008. The borrowings are secured by all of the domestic and United Kingdom accounts receivable, the domestic inventories of the Company, general intangibles, the Companys shares of stock in its domestic subsidiaries and the Companys United Kingdom headquarters building. The credit facility expires and the outstanding borrowings thereunder are due on October 26, 2010. The revolving credit agreement contains certain financial and other covenants, including maintaining a minimum level of availability and restrictions on capital expenditures and payments of dividends. We were in compliance with all of the covenants under this facility as of June 30, 2008.
Under our Netherlands 5
million ($7.9 million at the June 30, 2008 exchange rate) credit facility,
at June 30, 2008 there was approximately .7 million outstanding under
this line ($1.1 million). This facility expires in November 2008.
We also have certain
obligations with various parties that include commitments to make future
payments. Our principal commitments at June 30, 2008 consisted of
repayments of borrowings under our credit agreements, payments under operating
leases for certain of our real property and equipment and payments under
employment and other service agreements.
Our current and
anticipated needs for cash include funding growth in working capital, capital
expenditures necessary for future growth in sales and potential expansion
through acquisitions. We believe that our cash balances and our availability
under credit facilities will be sufficient to fund our working capital and
other cash requirements for the next twelve months.
We maintain our cash and
cash equivalents primarily in money market funds or their equivalent. As of June 30,
2008, all of our investments had maturities of less than three months. Accordingly, we do not believe that our
investments have significant exposure to interest rate risk.
Off-balance Sheet Arrangements
The Company has not
created, and is not party to, except as described above, any special-purpose or
off-balance sheet entities for the purpose of raising capital, incurring debt
or operating the Companys business. The Company does not have any arrangements
or relationships with entities that are not consolidated into the financial
statements that are reasonably likely to materially affect the Companys
liquidity or the availability of capital resources.
Item 3.
Quantitative and Qualitative Disclosure
About Market Risk.
We are exposed to
market risks, which include changes in U.S. and international interest rates as
well as changes in currency exchange rates (principally Pounds Sterling, Euros
and Canadian dollars) as measured against the U.S. dollar and each other.
The translation of
the financial statements of our operations outside of the United States is
impacted by movements in foreign currency exchange rates. Changes in currency
exchange rates as measured against the U.S. dollar may positively or negatively
affect sales, gross margins, operating expenses and retained earnings as
expressed in U.S. dollars. We have limited involvement with derivative
financial instruments and do not use them for trading purposes. We may enter into foreign currency options or
forward exchange contracts aimed at limiting in part the impact of certain
currency fluctuations, but as of June 30, 2008 we had no outstanding
forward exchange contracts.
Our exposure to
market risk for changes in interest rates relates primarily to our variable
rate debt. Our variable rate debt includes short-term borrowings in Europe
under our credit facilities. As of June 30, 2008, the balance outstanding
on our variable rate debt was approximately $1.1 million. Based on our market
sensitive instruments as of June 30, 2008, a hypothetical change in
average interest rates of one percentage point is not expected to have a
material effect on our financial position, results of operations or cash flows
for the fiscal year.
15
Table of
Contents
Item 4.
Controls and Procedures
Under the supervision and
with the participation of the Companys management, including the Companys
Chief Executive Officer and Chief Financial Officer, the Company carried out an
evaluation of the effectiveness of the design and operation of the Companys
disclosure controls and procedures as of June 30, 2008. As part of this
evaluation we identified a significant deficiency, as defined under Auditing
Standard No. 5: An Audit of Internal Control Over Financial Reporting That
is Integrated With an Audit of Financial Statements, in our internal controls
over financial reporting as of June 30, 2008. This significant deficiency
is:
The Company consolidates
its worldwide financial results from disparate underlying financial and
operational systems that have various functional limitations and few automated
interfaces. This results in a consolidation process that is heavily reliant on
manual review procedures and manual adjustments. Our control over this
consolidation process primarily consists of corporate review procedures. The
design and operation of this control process may not prevent or detect
misstatements on a timely basis. This significant deficiency does not, in our
judgment, rise to the level of a material weakness in internal controls over
financial reporting because we believe that the controls in place would prevent
or detect a material misstatement. Based upon this evaluation, the Companys
Chief Executive Officer and Chief Financial Officer have concluded that the
Companys disclosure controls and procedures are effective.
Changes
in Internal Control Over Financial Reporting
There have been no
changes in the Companys internal controls over financial reporting during the
quarterly period ended June 30, 2008 that have materially affected, or are
reasonably likely to materially affect, the Companys internal control over
financial reporting.
Recent
Accounting Pronouncements
Effective January 1,
2008, the Company adopted SFAS 157 and SFAS 159. In September 2006, the
Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No.157 Fair Value Measurements. This statement
was issued to increase consistency and comparability in fair value measurements
and for expanded disclosures about fair value measurements. In February 2008,
the FASB issued FASB Staff Position No. FAS 157-2, Effective Date of FASB
Statement No. 157 (FSP 157-2) which amends SFAS 157 to delay the
effective date of SFAS 157 for nonfinancial assets and nonfinancial
liabilities, except for those items that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least
annually). FSP 157-2 delays the
effective date of SFAS 157, for certain items, until fiscal years beginning
after November 15, 2008. The Company is currently evaluating the potential
impact, if any, of FSP 157-2. In February 2007,
the FASB issued SFAS No. 159 The Fair Value Option for Financial Assets
and Financial Liabilities (including an amendment of FASB Statement No. 115).
This interpretation was issued to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported earnings
caused by measuring related assets and liabilities differently without having
to apply complex hedge accounting provisions. Since we do not have any
financial assets and liabilities that are required to be recorded at fair
value, the only impact of these adoptions will be on the disclosures required
by SFAS No. 107, Disclosures about Fair Value of Financial Instruments in
our Annual Report on Form 10-K for the year ended December 31, 2008.
In June 2008, the
FASB issued FASB Staff Position No. EITF 03-6-1 Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities (FSP EITF -3-6-1). This FSP was issued to clarify that instruments
granted in share-based payment transactions can be participating securities
prior to the requisite service having been rendered. The guidance in this FSP
applies to the calculation of Earnings Per Share (EPS) under Statement 128
for share-based payment awards with rights to dividends or dividend
equivalents. Unvested share-based payment awards that contain nonforfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are
participating securities and shall be included in the computation of EPS
pursuant to the two-class method. This FSP is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those years. All prior-period EPS data presented shall
be adjusted retrospectively (including interim financial statements, summaries
of earnings, and selected financial data) to conform with the provisions of
this FSP. The Company is currently evaluating the impact of this FSP on its
consolidated financial statements.
In December 2007,
the FASB issued SFAS No. 141R, Business Combinations, which replaces
FASB Statement 141. SFAS No.141R retains the requirement that the acquisition
method of accounting be used for business combinations. The objective of SFAS No. 141R
is to improve the relevance, representational faithfulness and comparability
that reporting entities provide in their financial reports about business
combinations and their effects. SFAS 141R establishes principles and
requirements for
16
Table of Contents
how an acquirer 1)
recognizes and measures identifiable assets acquired, the liabilities assumed
and any noncontrolling interest in the acquiree, 2) recognizes and measures the
goodwill acquired in the combination or a gain from a bargain purchase and 3)
determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. SFAS No. 141R is effective for business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning after December 15, 2008. The Company is
currently evaluating the potential impact, if any, of this pronouncement.
In December 2007,
the FASB issued SFAS No. 160, Accounting and Reporting of Noncontrolling
Interest (SFAS No. 160). The objective of SFAS 160 is to improve the
relevance, comparability and transparency of the financial information that
reporting entities provide related to noncontrolling interests, sometimes
referred to as minority interests. SFAS No. 160 requires, among other
things, that noncontrolling interests be shown separately in the consolidated
entitys equity section of the balance sheet. SFAS No. 160 also
establishes accounting and reporting standards for ownership interest in
subsidiaries held by parties other than the parent, for presentation of amounts
of consolidated net income attributable to the parent and the noncontrolling
interest, for consistency in accounting for changes in a parents ownership
interest when the parent retains a controlling interest, for the valuation of
retained noncontrolling equity interests when a subsidiary is deconsolidated
and for providing sufficient disclosure that identifies and distinguishes the
interests of the parent and the interests of the noncontrolling owners. SFAS No. 160
is effective beginning January 1, 2009. The Company is currently
evaluating the potential impact, if any, of this pronouncement.
PART II
- OTHER INFORMATION
Item 1.
Legal Proceedings
Systemax is a
party to various pending legal proceedings and disputes arising in the normal
course of business, including those involving commercial, employment, tax and
intellectual property related claims, none of which, in managements opinion,
is anticipated to have a material adverse effect on our consolidated financial
statements.
Item
4.
Submission of Matters to a Vote of Security Holders
The 2008 annual meeting of the stockholders
of the Company was held on June 12, 2008. Each of the seven candidates for
the position of director (Richard Leeds, Bruce Leeds, Robert Leeds, Gilbert
Fiorentino, Robert D. Rosenthal, Stacy S. Dick and Ann R. Leven) was re-elected.
The matters voted upon at the meeting and the
number of votes cast for, against or withheld (including abstentions) as to
each matter, including nominees for office, are as follows:
Richard Leeds
|
|
For:
|
32,437,265
|
|
|
|
Against:
|
2,654,960
|
|
|
|
|
|
|
Robert Leeds
|
|
For:
|
32,437,362
|
|
|
|
Against:
|
2,654,960
|
|
|
|
|
|
|
Bruce Leeds
|
|
For:
|
32,437,265
|
|
|
|
Against:
|
2,654,958
|
|
|
|
|
|
|
Gilbert Fiorentino
|
|
For:
|
32,437,265
|
|
|
|
Against:
|
2,654,958
|
|
|
|
|
|
|
Robert D. Rosenthal
|
|
For:
|
32,437,613
|
|
|
|
Against:
|
2,654,610
|
|
|
|
|
|
|
Stacy S. Dick
|
|
For:
|
32,437,613
|
|
|
|
Against:
|
2,654,610
|
|
17
Table
of Contents
Ann R. Leven
|
|
For:
|
32,437,613
|
|
|
|
Against:
|
2,654,610
|
|
2. Approval of the Companys Executive Incentive Plan:
|
|
For:
|
32,175,520
|
|
|
|
Against:
|
3,145,679
|
|
|
|
Abstain:
|
23,850
|
|
3.
Approval of amendments to the Companys
1999 Long-Term Stock Incentive Plan:
|
|
For:
|
32,176,674
|
|
|
|
Against:
|
3,146,025
|
|
|
|
Abstain:
|
23,350
|
|
4. Ratification of Ernst & Young as the Companys
Independent Registered Accountants for 2008:
|
|
For:
|
32,178,859
|
|
|
|
Against:
|
3,144,840
|
|
|
|
Abstain:
|
21,350
|
|
Item 6.
Exhibits
31
|
|
Certifications of the Chief Executive Officer and
Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
32
|
|
Certifications of the Chief Executive Officer and
Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
18
Table of
Contents
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
|
SYSTEMAX INC.
|
|
|
|
|
Date:
August 7, 2008
|
By:
|
/s/ Richard Leeds
|
|
|
|
Richard Leeds
|
|
Chairman and Chief Executive Officer
|
|
|
|
|
|
By:
|
/s/ Lawrence P. Reinhold
|
|
|
|
Lawrence P. Reinhold
|
|
Executive Vice President and Chief Financial Officer
|
19
Systemax (NYSE:SYX)
Historical Stock Chart
From May 2024 to Jun 2024
Systemax (NYSE:SYX)
Historical Stock Chart
From Jun 2023 to Jun 2024