Systemax Reports First Quarter 2013 Financial Results

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Systemax Reports First Quarter 2013 Financial Results

PORT WASHINGTON, N.Y.--(BUSINESS WIRE)-- Systemax Inc. today announced financial results for the first quarter ended March 31, 2013.

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

Highlights Quarter Ended
March 31,
GAAP Results  2013   2012 
Sales $880.7  $913.2 
Gross profit $122.6  $130.7 
Gross margin  13.9%  14.3%
Operating income (loss) from continuing operations $(8.7) $10.8 
Operating margin from continuing operations  (1.0)%  1.2%
Net income (loss) $(6.3) $7.1 
Diluted net income (loss) per share $(0.17) $0.19 
Non-GAAP Results*    
Non-recurring and recurring adjustments, net $8.0  $3.2 
Adjusted operating income (loss) $(0.7) $14.0 
Adjusted operating margin  

(0.1

)%

  1.5%
Adjusted net income (loss) $(0.8) $9.3 
Adjusted diluted net income (loss) per share $(0.02) $0.25 
  

* Management believes that by excluding certain recurring and non-recurring adjustments above from comparable GAAP measures investors have an additional meaningful measurement of the Company's performance. See accompanying GAAP reconciliation tables.


First Quarter 2013 Financial Highlights:

  • Consolidated sales declined 3.6% to $880.7 million in U.S. dollars. On a constant currency basis, sales declined 3.4%.
  • Business to business channel sales grew 1.6% to $543.8 million in U.S. dollars. On a constant currency basis, sales grew 2.0%.
  • Consumer channel sales declined 10.9% to $336.9 million in U.S. dollars. On a constant currency basis, sales declined 10.9%.
  • "Same store" business to business sales grew 2.0% and same store consumer sales declined 10.7% on a constant currency basis.
  • GAAP operating income declined to a loss of $8.7 million compared to income of $10.8 million last year. Non-GAAP operating income was a loss of $0.7 million compared to income of $14.0 million last year.
  • GAAP diluted net income per share declined to a loss of $0.17. Non-GAAP diluted income per share declined to a loss of $0.02.

Richard Leeds, Chairman and Chief Executive Officer, said, "On an overall basis, I am pleased that we substantially improved the performance of the business from what we reported in the fourth quarter. However, an operating loss, no matter how small, is still unacceptable to us and we are working diligently to improve the business. Our balance sheet and cash position remain extremely strong and this provides us the resources to continue our operating improvement initiatives. Our Industrial Products Group once again delivered a solid performance with a revenue increase of 17%, driving topline growth in our B2B channel overall. Our B2B technology operations in Europe and North America were down modestly and our consumer operations continued to be soft, which are reflected in our consolidated performance. In our Technology segment we grew our computer sales while industry analysts reported broad declines in the overall market. However these gains were more than offset by declines in consumer electronics. On a sequential quarter basis, we improved the bottom line of our Industrial Products business and narrowed our operating loss in North American Technology as we have started to see some benefits of our ongoing performance initiatives."

"While the operating environment for our technology businesses remains challenging, we are seeing growth opportunities within our B2B businesses both in Europe and North America. We are focused on optimizing our operations and strengthening our management and sales teams to better position us to capitalize on our growth strategy. We are taking proactive actions to improve our financial performance, particularly in North American Technology where we are right sizing our cost structure, stabilizing our performance and managing the business with a different leadership team. We have a strong cash position and will continue to make investments to drive our long-term performance," Leeds concluded.

At the end of the first quarter of 2013, the Company had working capital of $351.6 million, cash and cash equivalents of $134.7 million, and availability under its credit facility of $104.6 million. Short and long-term debt totaled approximately $7.4 million at March 31, 2013.

Earnings Conference Call Details

Systemax Inc. will host a teleconference to comment on first quarter 2013 results today, April 30, 2013 at 5:00 p.m. Eastern Time. A live webcast of the teleconference will be available on the Company's website at www.systemax.com in the investor relations section. 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 websites, retail stores, relationship marketers and direct mail catalogs in North America and Europe. The primary brands are TigerDirect, Global Industrial, MISCO and Inmac Wstore.

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.

Supplemental Channel Sales, Product Category and Business Unit Summary

 
Supplemental Channel Sales Summary*

(in millions)

Channel Quarter Ended March 31,
  2013 % of Sales Change y/y  2012 % of Sales
Business to Business1 $543.8 61.7% 1.6% $535.0 58.6%
Consumer 2 $336.9 38.3% (10.9)% $378.2 41.4%
Consolidated Sales $880.7 100.0% (3.6)% $913.2 100.0%
    

* Certain prior year results have been reclassified to match current year presentation.
1 Includes sales from managed business relationships, including outbound call centers and extranets, and the entire Industrial Products and Corporate segments
2 Includes sales from retail stores, consumer websites, inbound call centers and television shopping

Supplemental "Same Store" Channel Growth1- Q1 2013 vs. Q1 2012
Channel Change
Business to Business 2.0%
Consumer (10.7)%
Consolidated Sales (3.3)%
 

1 Excludes revenue at retail stores, websites and call centers operating for less than 14 full months as of the beginning of the current comparison 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,
  2013 % of Sales Change y/y  2012 % of Sales
Computers $275.1 31.2% 5.2% $261.4 28.6%
Computer Accessories & Software $239.0 27.1% (7.9)% $259.4 28.4%
Consumer Electronics $135.4 15.4% (18.7)% $166.5 18.2%
Industrial Products $105.6 12.0% 16.8% $90.4 9.9%
Computer Components $103.0 11.7% (4.9)% $108.3 11.9%
Other $22.6 2.6% (16.9)% $27.2 3.0%
Consolidated Sales $880.7 100.0% (3.6)% $913.2 100.0%
    
Supplemental Business Unit Sales Summary

(in millions)

Business Unit Quarter Ended March 31,
  2013 % of Sales Change y/y  2012 % of Sales
Technology Products $773.5 87.8% (5.8)% $821.5 90.0%
Industrial Products $105.6 12.0% 16.8% $90.4 9.9%
Corporate and Other $1.6 0.2% 23.1% $1.3 0.1%
Consolidated Sales $880.7 100.0% (3.6)% $913.2 100.0%
    
Supplemental Business Unit GAAP Operating Income (Loss) Summary

(in millions)

Business Unit Quarter Ended March 31,
  2013  Margin  2012  Margin
Technology Products $(11.3) (1.5)% $8.8  1.1%
Industrial Products $8.5  8.0% $8.3  9.2%
Corporate and Other $(5.9) NM  $(6.3) NM 
Consolidated Operating Income (Loss) $(8.7) (1.0)% $10.8  1.2%
         
Non-GAAP Operating Income (Loss)*
Technology Products $(4.1) (0.5)% $11.1  1.4%
Industrial Products $8.9  8.4% $8.7  9.6%
Corporate and Other $(5.5) NM   ($5.8) NM 
Consolidated Operating Income (Loss) $(0.7) 

(0.1

)%

 $14.0  1.5%
   

* Management believes that by excluding certain recurring and non-recurring adjustments above from comparable GAAP measures investors have an additional meaningful measurement of the Company's performance. See accompanying GAAP reconciliation tables.
NM - not meaningful

SYSTEMAX INC.

Condensed Consolidated Statements of Operations - Unaudited
(In millions, except per share amounts)
 
Quarter Ended
March 31*
 2013   2012 
Net sales$880.7$913.2
Cost of sales 758.1  782.5 
Gross profit122.6130.7
Gross margin13.9%14.3%
Selling, general and administrative expenses125.2118.0
Special charges (gains), net 6.1  1.9 
Operating income (loss) from cont
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