SYX Systemax Inc

Systemax Inc. (NYSE:SYX) today announced financial results for the first quarter ended March 31, 2010.

First Quarter 2010 Financial Highlights:

• Consolidated sales grew 22% to $915.2 million in U.S. dollars. On a constant currency basis and excluding WStore results, sales grew 12%.
• Diluted earnings per share (EPS) grew 35% to $0.31.
• Consumer channel sales grew 9% to $470.0 million in U.S. dollars. On a constant currency basis and excluding WStore results, sales grew 1%.
• Business to business channel sales grew 38% to $445.2 million in U.S. dollars. On a constant currency basis and excluding WStore results, sales grew 27%.
• “Same store” business to business channel sales grew 20% while consumer channel sales declined 1%. A moderate same store consumer channel sales increase in North America was offset by a decline in Europe.

Performance Summary

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

Highlights   Quarter Ended March 31,       2010       2009   Sales   $ 915.2     $ 752.3   Gross profit   $ 126.2     $ 107.6   Gross margin     13.8 %     14.3 % Operating income   $ 20.4     $ 15.0   Operating margin     2.2 %     2.0 % Diluted earnings per share   $ 0.31     $ 0.23      

“Systemax’s strong first quarter consolidated performance is a testament to the diversification we have built in our business, which is a key component of our long-term growth strategy, and the moderately improving economic climate. The 22 percent sales growth we reported this quarter was primarily driven by success in our business to business sales channels, specifically our European Technology Products Group and Industrial Products Group in North America. We also delivered a strong bottom line performance with operating income increasing 36 percent and diluted earnings per share up 35 percent, as we continue to benefit from our focus on cost controls. We remain confident in Systemax’s growth potential and in our ability to build value for our shareholders,” said Richard Leeds, Chairman and Chief Executive Officer.

Gilbert Fiorentino, Chief Executive of Systemax’s Technology Products Group said, “This quarter highlights the benefit of having a multi-channel strategy, with diversified revenue streams, strong brands, and expanded product categories. Our Technology Products Group delivered an outstanding quarter with sales growth of 22 percent in U.S. dollars. Our business to business operations were the highlight of the quarter with strong sales growth in both North America and Europe. In North America we focus our B2B efforts primarily on small business, and we were pleased with the growth in this market. In our consumer channels we had moderate sales growth in North America, which was offset by a decline in Europe. We believe our European consumer sales channels represent a significant growth opportunity as our experience, strong customer service and establish brands uniquely position us in this segment.”

Supplemental Channel Sales Summary

(in millions)

Channel   Quarter Ended March 31,   2010   2009 Consumer1   $ 470.0   $ 429.8 Business to business2   $ 445.2   $ 322.5 Consolidated sales   $ 915.2   $ 752.3

1Includes sales from retail stores, consumer websites, inbound call centers and television shopping

2Includes sales from managed business relationships, including outbound call centers and extranets, and the entire Industrial Products segment

Supplemental “Same Store” Channel Growth3 – Q1 2010 vs Q1 2009

Channel   Change Consumer   -1% Business to business   20% Consolidated sales   10%

3Comprised of revenue at retail stores, websites and call centers operating for at least 14 full months as of the beginning of the period and computed on a constant currency basis. 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.

Supplemental Product Category Sales Summary

(in millions)

Product Category   Quarter Ended March 31,   2010   2009 Computers   $ 227.6   $ 132.5 Consumer electronics   $ 205.7   $ 198.5 Computer components   $ 147.2   $ 145.8 Computer accessories & software   $ 256.8   $ 214.7 Industrial products   $ 54.5   $ 45.7 Other   $ 23.4   $ 15.1 Consolidated sales   $ 915.2   $ 752.3     Supplemental Business Unit Sales Summary

(in millions)

Business Unit   Quarter Ended March 31,   2010   2009 Technology Products – North America   $ 581.6   $ 502.4 Technology Products – Europe   $ 279.0   $ 203.9 Industrial Products   $ 54.5   $ 45.6 Software Solutions   $ 0.1   $ 0.4 Consolidated sales   $ 915.2   $ 752.3    

Working capital as of March 31, 2010 was $264.7 million, including cash and cash equivalents of $37.6 million. As of March 31, 2010, the Company had availability under its credit facility of approximately $105.0 million and total cash and available liquidity of over $140 million. Short term debt totaled approximately $16.6 million at March 31, 2010 and included approximately $13.4 million in revolving debt assumed as part of the WStore acquisition. The Company’s effective tax rate was 37.5%, compared to 39.5% last year. The lower rate in 2010 is the result of the Company having a higher percentage of its pretax income in countries with lower tax rates.

Earnings Conference Call Details

Systemax Inc. will host a teleconference to discuss its first quarter 2010 results today, May 11, 2010 at 5:00 p.m. Eastern Time. To access the teleconference, please dial 877-881-2609 (U.S. callers) or 970-315-0463 (Int’l callers) and reference passcode 72711364 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 May 18, 2010. It can be accessed by dialing 800-642-1687 (U.S. callers) or 706-645-9291 (Int’l callers), passcode 72711364. 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 components and 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 March 31*   2010       2009   Net sales $ 915,237 $ 752,268 Cost of sales   788,996     644,718   Gross profit 126,241 107,550 Gross margin 13.8 % 14.3 % Selling, general and administrative expenses   105,865     92,530   Operating income 20,376 15,020 Operating margin   2.2 %   2.0 % Interest and other expense   1,579     654   Income before income taxes 18,797 14,366 Provision for income taxes 7,046 5,668 Effective tax rate   37.5 %   39.5 % Net income $ 11,751   $ 8,698   Net margin 1.3 % 1.2 %   Net income per common share: Basic $ 0.32 $ 0.24 Diluted $ 0.31 $ 0.23 Basic 36,785 36,621 Diluted 37,471 37,273  

SYSTEMAX INC.

Condensed Consolidated Balance Sheets - Unaudited (In thousands)    

March 31*

December 31*

2010 2009 Current assets: Cash and cash equivalents $ 37,571 $ 58,309 Accounts receivable, net 241,398 241,860 Inventories 366,967 365,725 Prepaid expenses and other current assets   23,881   26,692 Total current assets 669,817 692,586 Property, plant and equipment, net 64,772 65,598 Goodwill, intangibles and other assets   55,668   58,717 Total assets $ 790,257 $ 816,901

 

Current liabilities: Short-term debt $ 16,637 $ 15,197 Accounts payable and accrued expenses   388,462   427,307 Total current liabilities 405,099 442,504 Capitalized lease obligations 991 1,194 Other liabilities 8,999 8,518 Shareholders’ equity   375,168   364,685 Total liabilities and shareholders’ equity $ 790,257 $ 816,901

* 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 first quarter ended on April 3, 2010. The first quarter of 2010 and 2009 included 13 weeks.