SYX Systemax Inc

Systemax Inc. (NYSE:SYX) today announced financial results for the third quarter and nine months ended September 30, 2009.

Financial highlights for the quarter ended September 30, 2009:

• Consolidated sales grew 2% to $753.9 million in U.S. dollars. On a constant currency basis, sales grew 6%.
• Consumer sales grew 10% to $426.2 million in U.S. dollars. On a constant currency basis, sales grew 12%.
• “Same store” consumer sales grew 6%.
• Business to business sales were $327.7 million in U.S. dollars, a 7% decline. On a constant currency basis, sales declined 1%.
• One-time pre-tax charges were $1.0 million, or approximately $0.02 per diluted share after tax, for costs related to the WStore acquisition and exiting the Hosted Software business.
• Diluted earnings per share grew 13% to $0.34.

 

Performance Summary

(U.S. dollars in millions, except per share data)

Highlights   Quarter Ended Sept 30,   Nine Months Ended Sept 30, 2009   2008 2009   2008 Sales $753.9 $739.5 $2,227.7 $2,220.3 Gross profit $112.8 $115.4 $327.4 $343.9 Gross margin 15.0% 15.6% 14.7% 15.5% Operating income $19.4 $20.4 $43.1 $67.6 Operating margin 2.6% 2.8% 1.9% 3.0% Diluted earnings per share $0.34 $0.30 $0.74 $1.14 One time charges, pre-tax $1.0 - $7.3 $0.8 One-time charges, after tax, per diluted share $0.02 - $0.12 $0.01  

Richard Leeds, Chairman and Chief Executive Officer, said, “Systemax posted solid overall third quarter results, growing top line sales on a U.S. dollar basis as well as on a constant currency basis. We did see some erosion in overall gross margin, resulting from the continued impact of discounted shipping and product mix changes; however gross margin for the quarter was up sequentially. We carefully controlled our operating costs, despite headcount growth for new retail stores and one-time charges, which resulted in strong bottom line earnings growth.”

Channel sales for the three and nine months ended September 30, 2009:

  Channel Sales Summary

(in millions)

Channel   Quarter Ended Sept 30,   Nine Months Ended Sept 30 2009   2008 2009   2008 Consumer1 $426.2 $389.2 $1,310.3 $1,154.4 Business to business2 $327.7   $350.3   $917.4   $1,065.9 Consolidated sales $753.9 $739.5 $2,227.7 $2,220.3  

1Includes sales from retail stores, consumer websites, printed catalogs and television shopping

2Includes sales from managed business relationships, including outbound call centers and extranets

Comparable “same store” channel sales growth for the three months ended September 30, 2009 versus the three months ended September 30, 2008:

                Channel3 Change Consumer 6.0% Business to business -4.0%  

3Comprised of revenue at retail stores, websites and call centers operating for at least 14 full months. The calculation of the comparable store sales percentage change excludes the effect of fluctuations in foreign currency exchange rates. The method of calculating comparable store and channel sales varies across the retail and direct marketing industry. As a result, Systemax’s method of calculating comparable sales may not be the same as other companies’ methods.

Richard Leeds continued, “Our consumer channels in North America reported our strongest results. We are broadening our reach in the consumer electronics market, both through our retail stores and our e-Commerce websites. CompUSA recently opened two new brick and mortar stores, with another planned to open later this month. We have also signed leases for stores in several new markets that will open in the coming months, and we are continuing the conversion of our existing stores to our proprietary Retail 2.0 format. Circuit City has successfully reactivated many of its former customers, and sales from CircuitCity.com contributed to our overall sales growth. We remain very optimistic about the long-term possibilities for this valuable asset. As in the past, TigerDirect continues to be a market leader in the online retailing of computer and consumer electronics.”

“Our business to business channel operations – including MISCO in Western Europe and Global Industrial in the U.S. – are still generally impacted by the worldwide economic slowdown; however, we are now cautiously optimistic that we have seen the bottom. We continue making prudent investments to improve our positioning while carefully controlling our costs. During the quarter we completed the acquisition of WStore Europe, a B2B supplier of IT products with operations in France and in the United Kingdom, significantly strengthening our presence in those markets. In our Industrial business, we recently deployed an entirely new ecommerce website (www.globalindustrial.com) that we believe is generationally more advanced than the sites of any other company in the sector.”

Supplemental product category sales for the three and nine months ended September 30, 2009:

  Product Category Sales Summary

(in millions)

Product Category   Quarter Ended Sept 30,   Nine Months Ended Sept 30, 2009   2008 2009   2008 Computers $183.5 $141.5 $559.1

$369.6

Consumer electronics $172.6 $161.5 $521.2

$509.4

Computer components $130.1 $132.1 $363.7 $411.8 Computer accessories & software $200.2 $225.6 $431.1 $696.3 Industrial products $52.0 $63.2 $146.5 $182.2 Other $15.5   $15.6   $206.1  

$51.0

Consolidated sales $753.9 $739.5 $2,227.7 $2,220.3  

Business unit sales for the three and nine months ended September 30, 2009:

  Business Unit Sales Summary

(in millions)

Business Unit   Quarter Ended Sept. 30,   Nine Months Ended Sept. 30, 2009   2008 2009   2008 Technology Products – North America $500.0 $448.9 $1,500.7 $1,314.1 Technology Products – Europe $201.8 $227.2 $579.3 $723.7 Industrial Products $52.0 $63.2 $146.5 $182.2 Software Solutions $0.1 $0.2 $1.2 $0.3 Consolidated Sales $753.9 $739.5 $2,227.7 $2,220.3  

Working capital as of September 30, 2009 was $256.8 million, including cash and cash equivalents of $102.1 million. The Company has an undrawn credit facility of $120.0 million and total cash and available liquidity of approximately $199.0 million. Short term debt totaled approximately $18.8 million at September 30, 2009 and included approximately $17.1 million in revolving debt assumed as part of the WStore acquisition as well as capitalized lease obligations. Cash flow provided by operations for the first nine months of 2009 was approximately $14.2 million and capital expenditures were $13.7 million. The Company’s effective tax rate for the first nine months of 2009 was 36.3%, down from 37.3% last year. Included in the 2009 rate is a reversal of tax reserves of approximately $1.0 million as the result of statute expirations. Excluding this reserve reversal, the Company’s effective tax rate in 2009 was 38.7%. This higher effective tax rate this year is primarily the result of a higher percentage of taxable income in the U.S. where corporate tax rates for the Company are typically highest.

Earnings Conference Call Details

Systemax Inc. will host a teleconference to discuss its third quarter and the first nine months of 2009 results today, Tuesday, November 10, 2009 at 5:00 p.m. Eastern Time. To access the teleconference, please dial 877-604-9673 (U.S. callers) or 719-325-4790 (Int’l callers) and reference passcode 7435037 ten minutes prior to the start time. The teleconferencing will also be available via live webcast on the Company’s Web site at www.systemax.com. A replay of the conference call will be available through Tuesday, November 17, 2009. It can be accessed by dialing 888-203-1112 (U.S. callers) or 719-457-0820 (Int’l callers), passcode 7435037. The webcast will also be archived on www.systemax.com for approximately 90 days.

About Systemax Inc.

Systemax Inc. (http://www.systemax.com), a Fortune 1000 company, sells personal computers, computer supplies, consumer electronics and industrial products through a system of branded e-Commerce web sites, retail stores, relationship marketers and direct mail catalogs in North America and Europe. The primary brands are TigerDirect, CompUSA, Circuit City, MISCO, WStore and Global Industrial.

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.

 

SYSTEMAX INC.

Condensed Consolidated Statements of Operations – Unaudited (In thousands, except per share amounts)         Quarter Ended Nine Months Ended September 30* September 30* 2009 2008 2009 2008 Net sales $753,880 $739,479 $2,227,747 $2,220,251 Cost of sales 641,117 624,060 1,900,380 1,876,329 Gross profit 112,763 115,419 327,367 343,922 Gross margin 15.0% 15.6% 14.7% 15.5% Selling, general and administrative expenses 93,394 94,997 284,309 276,349 Operating income 19,369 20,422 43,058 67,573 Operating margin 2.6% 2.8% 1.9% 3.0% Interest and other (income) expense, net (952) 1,782 (589) (843) Income before income taxes 20,321 18,640 43,647 68,416 Provision for income taxes 7,723 7,367 15,860 25,541 Effective tax rate 38.0% 39.5% 36.3% 37.3% Net income $12,598 $11,273 $27,787 $42,875 Net margin 1.7% 1.5% 1.3% 1.9%   Net income per common share: Basic $.34 $0.30 $.76 $1.16 Diluted $.34 $0.30 $.74 $1.14   Weighted average common and

common equivalent shares:

Basic 36,703 37,079 36,669 36,972 Diluted 37,319 37,801 37,310 37,774  

SYSTEMAX INC.

Condensed Consolidated Balance Sheets (In thousands)   (Unaudited)

September 30*

 

December 31

2009 2008 Current assets: Cash and cash equivalents $102,117 $115,967 Accounts receivable, net 213,170 182,532 Inventories 315,977 290,594 Prepaid expenses and other current assets 28,574 22,225 Total current assets 659,838 611,318 Property, plant and equipment, net 63,046 48,465 Goodwill, intangibles and other assets 60,660 42,361 Total assets $783,544 $702,144   Current liabilities: Short-term debt $18,770 $773 Accounts payable and accrued expenses 384,222 357,453 Total current liabilities 402,992 358,226 Long-term debt 1,233 1,411 Other liabilities 7,986 8,552 Shareholders’ equity 371,333 333,955 Total liabilities and shareholders’ equity $783,544 $702,144  

* 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 nine month period and quarter ended on October 3, 2009. The third quarters of both 2009 and 2008 included 13 weeks and the nine month periods both included 39 weeks.