Systemax Reports Fourth Quarter and Full Year 2012 Financial Results

Tue Mar 5, 2013 4:05pm EST

* Reuters is not responsible for the content in this press release.

http://pdf.reuters.com/htmlnews/8knews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20130305:nBw056673a

http://www.businesswire.com/news/home/20130305006673/en

PORT WASHINGTON, N.Y.--(Business Wire)--
Systemax Inc.(NYSE: SYX) today announced financial results for the fourth
quarter and full year ended December 31, 2012.

 Performance Summary                                                                                        
 (U.S. dollars in millions, except per share data)                                                          
 Highlights                                            Quarter Ended             Year Ended                 
                                                       December 31,              
                          
                                                                                 December 31,               
 GAAP Results                                          2012            2011      2012             2011      
 Sales                                                 $935.2          $978.4    $3,544.6         $3,680.6  
 Gross profit                                          $120.4          $139.9    $488.1           $530.5    
 Gross margin                                          12.9%           14.3%     13.8%            14.4%     
 Operating income (loss) from continuing operations    $(46.8)         $21.1     $(39.9)          $80.8     
 Operating margin from continuing operations           (5.0)%          2.2%      (1.1)%           2.2%      
 Net income (loss)                                     $(27.1)         $14.7     $(8.3)           $54.4     
 Diluted earnings (loss) per share                     $(0.73)         $0.40     $(0.22)          $1.47     
 Dividend declared                                     $0.25           -         $0.25            -         
 Non-GAAP Results*                                                                                          
 Non-recurring and recurring adjustments, net          $41.2           $1.7      $51.9            $(2.2)    
 Adjusted operating income (loss)                      $(5.6)          $22.8     $12.0            $78.6     
 Adjusted operating margin                             (0.6)%          2.3%      0.3%             2.1%      
 Adjusted net income (loss)                            $(2.4)          $15.8     $7.7             $53.0     
 Adjusted diluted earnings (loss) per share            $(0.06)         $0.43     $0.21            $1.43     


* 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. 

Fourth Quarter 2012 Financial Highlights:

* Consolidated sales declined 4.4% to $935.2 million in U.S. dollars. On a
constant currency basis, sales declined 3.7%. 
* Business to business channel sales grew 2.5% to $526.7 million in U.S.
dollars. On a constant currency basis, sales grew 3.5%. 
* Consumer channel sales declined 12.1% to $408.5 million in U.S. dollars. On a
constant currency basis, sales declined 11.5%. 
* "Same store" business to business sales grew 4.1% and same store consumer
sales declined 11.3% on a constant currency basis. 
* GAAP operating income declined to a loss of $(46.8) compared to income of
$21.1 million last year. The GAAP operating loss reflects the Company`s
previously announced consolidation of its United States consumer brands and
subsequent write off of the intangible assets of CompUSA and Circuit City of
approximately $35.3 million, and the Company`s exit from the computer
manufacturing business and subsequent write down of the carrying cost of the
Company`s computer manufacturing facilities, related equipment, and inventory of
approximately $4.6 million. Non-GAAP operating income was a loss of $5.6 million
compared to income of $22.8 million last year. 
* GAAP diluted earnings per share (EPS) declined to a loss of $(0.73). Non-GAAP
diluted earnings per share declined to $(0.06). 
* Dividend declared $0.25 per share.

Full Year 2012 Financial Highlights:

* Consolidated sales declined 3.7% to $3.5 billion in U.S. dollars. On a
constant currency basis, sales declined 1.9%. 
* Business to business channel sales grew 5.1% to $2.1 billion in U.S. dollars.
On a constant currency basis, sales grew 8.0%. 
* Consumer channel sales declined 14.0% to $1.5 billion in U.S. dollars. On a
constant currency basis, sales declined 13.7%. 
* GAAP operating income declined to a loss of $(39.9) million compared to income
of $80.8 million last year. The GAAP operating loss reflects the aforementioned
consolidation of its United States consumer brands and subsequent write off of
the intangible assets of CompUSA and Circuit City of approximately $35.3
million, and the Company`s exit from the computer manufacturing business and
subsequent write down of the carrying cost of the Company`s computer
manufacturing facilities, related equipment, and inventory of approximately $4.6
million. Non-GAAP operating income was $12.0 million compared to $78.6 million
last year. 
* GAAP diluted EPS declined to a loss of ($0.22). Non-GAAP diluted earnings per
share was $0.21. 
* Dividend declared $0.25 per share.

Richard Leeds, Chairman and Chief Executive Officer, said, "Our B2B operations
delivered solid performance in the fourth quarter and full year 2012. This
strength was demonstrated by our Industrial Products Group, which delivered its
third consecutive year of more than 25% organic revenue growth, and our European
business, which recorded 10% organic revenue growth on a constant currency
basis. In our consumer business, buying patterns remain challenged, in part due
to an eroding demand and pricing environment, which is reflected in our
consolidated performance. In addition, the fiscal cliff and ongoing U.S. budget
discussions have been an overhang on both businesses and consumers." 

"In 2012 we executed on a number of initiatives to strengthen our businesses and
drive our long-term performance. As previously announced, we consolidated our
U.S. consumer technology brands under TigerDirect, exited our PC manufacturing
business, opened a new distribution center for Industrial Products, realigned
our European operations and moved ahead with our new shared services center in
Hungary. These actions will strengthen our Company for the future and our work
is not yet complete. We are focused on optimizing our performance and
capitalizing on our growth opportunities and the review of our operations from a
strategic and execution standpoint is ongoing. In Industrial, we continue to
invest in our operations, building on our success and driving growth. We are
strengthening and streamlining our European business to better capitalize on the
opportunities we see in the region and to accelerate our performance. In our
North American Technology business, we are focused on addressing the challenges
in this market and are committed to improving our performance. Overall, we have
a business that is diversified by market, channel and customer, as well as a
strong balance sheet giving us a solid foundation to execute on our business
plan," Leeds concluded. 

In 2012 working capital increased $6.0 million to $360.8 million, and cash and
cash equivalents increased by $53.4 million to $150.7 million at December 31,
2012. The Company had availability under its credit facility of approximately
$104.6 million and total cash and available liquidity of approximately $255.3
million at December 31, 2012. Short and long-term debt totaled approximately
$8.1 million at December 31, 2012. The Company`s effective tax rate for the
fourth quarter of 2012 was a benefit of 42.2% compared to a 25.3% provision last
year. The effective tax rate for the year ended December 31, 2012 was a benefit
of 80.8% compared to a 30.9% provision last year. The tax benefit in 2012 is
primarily the result of reversals of valuation allowances in France and
operating losses in the U.S., including impacts of the asset impairment charges
recorded. 

Earnings Conference Call Details

Systemax Inc. will host a teleconference to discuss its fourth quarter and full
year 2012 results today, March 5, 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, MISCO, Global Industrial 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 December 31,                                    Year Ended December 31,                                         
                          2012         % of         Change       2011         % of      2012           % of         Change       2011           % of    
                                       Sales        y/y                       Sales                    Sales        y/y                         Sales   
 Business to Business1    $526.7       56.3%        2.5%         $513.8       52.5%     $2,085.8       58.8%        5.1%         $1,984.4       53.9%   
 Consumer 2               $408.5       43.7%        -12.1%       $464.6       47.5%     $1,458.8       41.2%        -14.0%       $1,696.2       46.1%   
 Consolidated Sales       $935.2       100%         -4.4%        $978.4       100%      $3,544.6       100%         -3.7%        $3,680.6       100%    


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 - Q4 2012 vs. Q4 2011 
 Channel               Change  
 Business to Business  4.1%    
 Consumer              -11.3%  
 Consolidated Sales    -3.2%   


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 December 31,                                      Year Ended December 31,                                          
                                       2012         %           Change       2011         % of         2012           %           Change       2011           % of      
                                                                y/y                       Sales                                   y/y                         Sales     
 Computers                             $296.0       31.7%       -3.3%        $306.2       31.3%        $1,048.3       29.6%       0.1%         $1,047.6       28.5%     
 Computer Accessories & Software       $239.8       25.6%       -6.3%        $255.9       26.1%        $970.8         27.4%       -5.3%        $1,025.0       27.8%     
 Consumer Electronics                  $172.4       18.4%       -15.1%       $203.1       20.8%        $619.7         17.5%       -17.0%       $746.5         20.3%     
 Computer Components                   $106.2       11.4%       0.9%         $105.3       10.8%        $407.6         11.5%       -10.2%       $453.8         12.3%     
 Industrial Products                   $98.3        10.5%       18.0%        $83.3        8.5%         $401.9         11.3%       25.6%        $319.9         8.7%      
 Other                                 $22.5        2.4%        -8.5%        $24.6        2.5%         $96.3          2.7%        9.7%         $87.8          2.4%      
 Consolidated Sales                    $935.2       100%        -4.4%        $978.4       100%         $3,544.6       100%        -3.7%        $3,680.6       100%      


 Supplemental Business Unit Sales Summary                                                                                                                   
 (in millions)                                                                                                                                              
 Business Unit            Quarter Ended December 31,                                      Year Ended December 31,                                           
                          2012         % of         Change       2011         % of        2012           % of         Change       2011           % of      
                                       Sales        y/y                       Sales                      Sales        y/y                         Sales     
 Technology Products      $835.5       89.3%        -6.6%        $894.1       91.4%       $3,137.6       88.5%        -6.5%        $3,357.4       91.2%     
 Industrial Products      $98.3        10.5%        17.9%        $83.4        8.5%        $401.9         11.3%        25.6%        $319.9         8.7%      
 Corporate and Other      $1.4         0.2%         55.6%        $0.9         0.1%        $5.1           0.2%         54.5%        $3.3           0.1%      
 Consolidated Sales       $935.2       100%         -4.4%        $978.4       100%        $3,544.6       100%         -3.7%        $3,680.6       100%      


 Supplemental Business Unit Operating Income (Loss) Summary                                                                                                 
 (in millions)                                                                                                                                              
 Business Unit                               Quarter Ended December 31,                               Year Ended December 31,                               
                                             2012           Margin        2011          Margin        2012           Margin        2011           Margin    
 Technology Products                         $(48.7)        (5.8)%        $17.8         2.0%          $(47.2)        (1.5)%        $68.0          2.0%      
 Industrial Products                         $6.9           7.0%          $8.6          10.3%         $29.9          7.4%          $35.1          11.0%     
 Corporate and Other                         $(5.0)         NM            $(5.3)        NM            $(22.6)        NM            $(22.3)        NM        
 Consolidated Operating Income (Loss)        $(46.8)        (5.0)%        $21.1         2.2%          $(39.9)        (1.1)%        $80.8          2.2%      
                                                                                                                                                            
 Non-GAAP Operating Income (Loss)*                                                                                                                          
 Technology Products                         $(8.1)         (1.0)%        $19.2         2.1%          $0.0           0.0%          $64.4          1.9%      
 Industrial Products                         $7.1           7.2%          $8.6          10.3%         $32.9          8.2%          $35.2          11.0%     
 Corporate and Other                         $(4.6)         NM            $(5.0)        NM            $(20.9)        NM            $(21.0)        NM        
 Consolidated Operating Income (Loss)        $(5.6)         (0.6)%        $22.8         2.3%          $12.0          0.3%          $78.6          2.1%      


* 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                            Year Ended                          
                                                                  December 31*                             December 31*                        
                                                                  2012                      2011           2012                      2011      
 Net sales                                                        $935.2                    $978.4         $3,544.6                  $3,680.6  
 Cost of sales                                                    814.8                     838.5          3,056.5                   3,150.1   
 Gross profit                                                     120.4                     139.9          488.1                     530.5     
 Gross margin                                                     12.9%                     14.3%          13.8%                     14.4%     
 Selling, general and administrative expenses                     127.0                     118.2          481.7                     455.3     
 Special charges (gains), net                                     40.2                      0.6            46.3                      (5.6)     
 Operating income (loss) from continuing operations               (46.8)                    21.1           (39.9)                    80.8      
 Operating margin                                                 (5.0)%                    2.2%           (1.1)%                    2.2%      
 Interest and other (income) expense, net                         (0.1)                     1.3            1.7                       1.8       
 Income (loss) from continuing                                    (46.7)                    19.8           (41.6)                    79.0      
 operations before income taxes                                                                                                                
 (Benefit from) provision for income taxes                        (19.7)                    5.0            (33.6)                    24.4      
 Effective tax rate                                               42.2%                     25.3%          80.8%                     30.9%     
 Income (loss) from continuing operations                         (27.0)                    14.8           (8.0)                     54.6      
 Discontinued operations                                          (0.1)                     (0.1)          (0.3)                     (0.2)     
 Net income (loss)                                                $(27.1)                   $14.7          $(8.3)                    $54.4     
 Net margin                                                       (2.9)%                    1.5%           (0.2)%                    1.5%      
                                                                                                                                               
 Net income per common share:                                                                                                                  
 Basic                                                            $(0.73)                   $0.40          $(0.22)                   $1.48     
 Diluted                                                          $(0.73)                   $0.40          $(0.22)                   $1.47     
                                                                                                                                               
 Weighted average common and                                                                                                                   
 common equivalent shares:                                                                                                                     
 Basic                                                            37.0                      36.7           36.9                      36.8      
 Diluted                                                          37.0                      36.9           36.9                      37.1      
 Dividend declared per share                                      $0.25                     -              $0.25                     -         
                                                                                                                                               
 SYSTEMAX INC.                                                                                                                                 
 Condensed Consolidated Balance Sheets - Unaudited                                                                                             
 (In millions)                                                                                                                                 
                                                                                                                                               
                                                                                            December 31*               December 31*            
                                                                                            2012                       2011                    
 Current assets:                                                                                                                               
 Cash and cash equivalents                                                                  $150.7                     $97.3                   
 Accounts receivable, net                                                                   297.4                      269.0                   
 Inventories                                                                                367.2                      372.2                   
 Assets available for sale                                                                  2.3                        -                       
 Prepaid expenses and other current assets                                                  37.3                       38.7                    
 Total current assets                                                                       854.9                      777.2                   
 Property, plant and equipment, net                                                         63.0                       70.7                    
 Goodwill, intangibles and other assets                                                     58.5                       66.6                    
 Total assets                                                                               $976.4                     $914.5                  
                                                                                                                                               
 Current liabilities:                                                                                                                          
 Short-term debt                                                                            $2.8                       $2.6                    
 Accounts payable and accrued expenses                                                      491.3                      419.8                   
 Total current liabilities                                                                  494.1                      422.4                   
 Long-term debt                                                                             5.3                        7.1                     
 Other liabilities                                                                          30.7                       30.7                    
 Shareholders` equity                                                                       446.3                      454.3                   
 Total liabilities and shareholders` equity                                                 $976.4                     $914.5                  


* 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 quarter ended on
December 29, 2012. The fourth quarters of both 2012 and 2011 included 13 weeks.
The full years of both 2012 and 2011 included 52 weeks.

 SYSTEMAX INC.                                                                                              
 Reconciliation of Segment GAAP Operating Income (loss) to Non-GAAP Operating Income (loss) - Unaudited     
 (In millions)                                                                                              
                                                                                                            
                                                       Quarter Ended             Twelve Months Ended        
                                                       December 31*              December 31*               
                                                       2012            2011      2012              2011     
 Technology Products                                   $(48.7)         $17.8     $(47.2)           $68.0    
 Industrial Products                                   $6.9            $8.6      $29.9             $35.1    
 Corporate And Other                                   $(5.0)          $(5.3)    $(22.6)           $(22.3)  
 GAAP Operating income (loss)                          $(46.8)         $21.1     $(39.9)           $80.8    
 Non-GAAP adjustments:                                                                                      
 Technology Products:                                                                                       
 Asset impairment charges (1)                          $39.9           -         $39.9             -        
 Severance and other reorganization related charges    $5.0            $(0.1)    $6.4              -        
 Litigation costs and settlements (2)                  $(4.8)          $0.7      $(3.9)            $(5.6)   
 Patent settlements with non-practicing entities       $0.1            -         $1.8              -        
 Stock based compensation                              $0.2            $0.3      $1.6              $0.4     
 Intangible asset amortization                         $0.2            $0.5      $1.4              $1.6     
 Total Non-GAAP Adj. Technology Products               $40.6           $1.4      $47.2             $(3.6)   
 Industrial Products:                                                                                       
 New Facility Startup Costs (3)                        -               -         $2.2              -        
 Stock based compensation                              $0.2            -         $0.8              $0.1     
 Total Non-GAAP Adj. Industrial Products               $0.2            $0.0      $3.0              $0.1     
 Corporate and Other:                                                                                       
 Stock based compensation                              $0.4            $0.3      $1.7              $1.3     
 Total Non-GAAP Adj. Technology Products               $0.4            $0.3      $1.7              $1.3     
                                                                                                            
 Technology Products                                   $(8.1)          $19.2     $-                $64.4    
 Industrial Products                                   $7.1            $8.6      $32.9             $35.2    
 Corporate And Other                                   $(4.6)          $(5.0)    $(20.9)           $(21.0)  
 Non-GAAP Operating income (loss)*                     $(5.6)          $22.8     $12.0             $78.6    
                                                                                                            


 * Management believes that by excluding the adjustments above from GAAP Operating Income, investors have an additional meaningful measurement of the Company`s operating results.                                                                                           
 (1) Includes the write off of the intangible assets of CompUSA and Circuit City of approximately$ 35.3 million and the write down of the carrying cost of the Company`s computer manufacturing facilities, related equipment, and inventory of approximately $4.6 million.  
 (2) Includes legal costs related to the investigations of and settlement with former officers and employees, net.                                                                                                                                                           
 (3) Includes the costs related to the closing and relocation of one of our smaller distribution centers to a new, significantly larger distribution center and call center.                                                                                                 


 SYSTEMAX INC.                                                                                              
 Reconciliation of GAAP Net Income (loss) to Non-GAAP Net Income (loss) - Unaudited                         
 (In millions)                                                                                              
                                                       Quarter Ended             Twelve Months Ended        
                                                       December 31*              December 31*               
                                                       2012            2011      2012              2011     
 Net income (loss)                                     $(27.1)         $14.7     $(8.3)            $54.4    
 Non-GAAP adjustments:                                                                                      
 Non- recurring                                                                                             
 Asset impairment charges (1)                          $39.9           -         $39.9             -        
 Severance and other reorganization related charges    $5.0            ($0.1)    $6.4              -        
 New facility start up costs (2)                       -               -         $2.2              -        
 Litigation costs and settlements (3)                  ($4.8)          $0.7      ($3.9)            ($5.6)   
 Patent settlements with non-practicing entities       $0.1            -         $1.8              -        
 Valuation allowance release (4)                       -               -         $(15.1)           -        
 Income tax effect (5)                                 $(16.1)         $(0.2)    $(18.6)           $2.2     
 Total non- recurring adjustments, net of tax          $24.1           $0.4      $12.7             $(3.4)   
 Recurring                                                                                                  
 Stock based compensation                              $0.8            $0.6      $4.1              $1.8     
 Intangible asset amortization                         $0.2            $0.5      $1.4              $1.6     
 Income tax effect                                     $(0.4)          ($0.4)    $(2.2)            $(1.4)   
 Total recurring adjustments                           $0.6            $0.7      $3.3              $2.0     
                                                                                                            
 Non-GAAP net income*                                  $(2.4)          $15.8     $7.7              $53.0    
                                                                                                            
 Diluted earnings per share                            $(0.73)         $0.40     $(0.22)           $1.47    
 Non-GAAP Diluted earnings per share*                  $(0.06)         $0.43     $0.21             $1.43    
                                                                                                            


 * Management believes that by excluding the adjustments above from GAAP net income investors have an additional meaningful measurement of the Company`s net income.                                                                                                          
 (1) Includes the write off of the intangible assets of CompUSA and Circuit City of approximately $35.3 million and the write down of the carrying cost of the Company`s computer manufacturing facility, and related equipment and inventory of approximately $4.6 million.  
 (2) Includes costs related to the closing and relocation of one of our smaller distribution centers to a new, significantly larger distribution and call center for our Industrial Products business.                                                                        
 (3) Includes legal costs related to the investigations of and settlements with former officers and employees, net.                                                                                                                                                           
 (4) Reversal of valuation allowances of approximately $15.1 million related to the deferred tax assets of the Company`s subsidiary in France.                                                                                                                                
 (5) Assumed tax rate of 40%                                                                                                                                                                                                                                                  


Investor/Media:
Mike Smargiassi / Nancy Zakhary
Brainerd Communicators, Inc.
212-986-6667
smarg@braincomm.com
nancy@braincomm.com



Copyright Business Wire 2013

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.