Systemax Reports Record Sales in First Quarter

  
    
  
  
    
      Systemax Inc. (NYSE:SYX) today announced results for the first 
      quarter of 2007.
    
    
      Net sales increased 18% to $676 million compared to $575 million in the 
      first quarter of 2006. Sales of technology products (computers, computer 
      supplies and consumer electronics) grew by 18% and sales of industrial 
      products grew by 16%. Sales transacted via the internet grew 19% to $238 
      million compared to $200 million in the first quarter of 2006. Gross 
      margin was 14.3% compared to 15.8% in the first quarter of 2006 and 
      increased 140 basis points compared to the fourth quarter of 2006. As in 
      the fourth quarter, gross margin was impacted by competitive pricing 
      pressures for technology products. Operating income was $21.5 million 
      compared to $20.9 million in the first quarter of 2006. Net income was 
      $13.9 million, or $.37 per diluted share, compared to $17.6 million, or 
      $.48 per diluted share, in the first quarter of 2006. Included in net 
      income in the first quarter of 2007 is a gain of approximately $1.5 
      million or $.04 per diluted share, after tax, related to a lawsuit 
      settled during the quarter. Included in net income in the first quarter 
      of 2006 is a gain of $4.3 million, or $.12 per diluted share, after tax, 
      from the sale of a warehouse facility.
    
    
      Richard Leeds, Chairman and Chief Executive Officer, said “I 
      am pleased with first quarter 2007 consolidated results, highlighted by 
      our 18% growth in sales, 19% growth in internet sales and 3% growth in 
      operating income. The strong results evidence the continuing success of 
      our business model and our ability to gain share in the markets in which 
      we participate. We continued to see some competitive pricing pressures 
      in our technology products business compared to last year; however, we 
      were pleased that our consolidated gross margin improved significantly 
      compared to last quarter. We also saw increased leverage in our cost 
      structure as we lowered selling, general and administrative expense as a 
      percentage of sales to 11.5% from 12.2% in 2006, excluding the 
      aforementioned lawsuit settlement.”
    
    
      Gilbert Fiorentino, Chief Executive Officer of TigerDirect.com and the 
      technology products segment, noted, “we again 
      experienced strong sales growth in both the North American and European 
      markets. North American technology product sales grew 12 % in the first 
      quarter, driven primarily by growth in internet sales and our private 
      label products. European sales grew 28% overall, 15% after taking into 
      account exchange rate effects, in the first quarter driven primarily by 
      growth in internet sales and public sector customers.”
    
    
      Richard Leeds, commenting on other operations, noted “in 
      the industrial products segment, sales grew 16% in the first quarter 
      compared to 2006, driven primarily by increased internet sales and 
      competitive advantages due to our worldwide sourcing and aggressive 
      pricing strategies. Industrial product sales transacted via the internet 
      grew 39% in the first quarter of 2007. Our ProfitCenter Software 
      subsidiary signed two new customer implementation and hosting contracts 
      during the quarter and also went live with two customers. As a hosted 
      software service, revenues from both hosting and implementation are 
      recognized over the contractual hosting period and for the first quarter 
      were not significant.
    
    
      Larry Reinhold, Chief Financial Officer, noted that the Company’s 
      overall financial condition remains solid as evidenced by its working 
      capital of $215 million, which included cash and equivalents of $106 
      million, and over $100 million in available borrowing capacity under its 
      credit facilities in place. Our financial strength allowed us to pay a 
      special dividend of $36.6 million on April 12, 2007. Operationally, days 
      sales outstanding were 25 days at March 31, 2007 and inventory turned at 
      an annual rate of over 10 times during the quarter. Our effective tax 
      rate increased by 1.4% in the first quarter of 2007, primarily due to 
      higher income in locations that have higher tax rates.”
    
    
      Systemax Inc. (www.systemax.com), 
      a Fortune 1000 company, utilizes an integrated system of branded 
      e-commerce web sites, direct mail catalogs and relationship marketers to 
      sell personal computers, computer supplies, consumer electronics and 
      industrial products in North America and Europe. It also manufactures 
      and sells personal computers under the Systemax and Ultra brands.
    
    
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          SYSTEMAX INC.
        
      
      
        
          Condensed Consolidated Statements of Income
        
      
      
        
          (In thousands, except per share amounts)
        
      
      
        
        
        
        
        
          (Unaudited)
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
          Quarter Ended
        
      
      
        
        
        
        
        
          March 31,
        
      
      
        
        
        
        
        
          2007 
        
        
        
        
          2006 
        
      
      
        
          Net sales
        
        
        
        
          $676,122 
        
        
        
        
          $574,908 
        
      
      
        
          Cost of sales
        
        
        
        
          579,448 
        
        
        
        
          484,145 
        
      
      
        
          Gross profit
        
        
        
        
          96,674 
        
        
        
        
          90,763 
        
      
      
        
          Gross margin
        
        
        
        
          14.3%
        
        
        
        
          15.8%
        
      
      
        
          Selling, general and administrative expenses
        
        
        
        
          75,137 
        
        
        
        
          69,885 
        
      
      
        
          Operating income
        
        
        
        
          21,537 
        
        
        
        
          20,878 
        
      
      
        
          Operating margin
        
        
        
        
          3.2%
        
        
        
        
          3.6%
        
      
      
        
          Other non-operating expense (income)
        
        
        
        
          70 
        
        
        
        
          (6,638)
        
      
      
        
          Interest (income) expense, net
        
        
        
        
          (812)
        
        
        
        
          15 
        
      
      
        
          Income before income taxes
        
        
        
        
          22,279 
        
        
        
        
          27,501 
        
      
      
        
          Provision for income taxes
        
        
        
        
          8,384 
        
        
        
        
          9,944 
        
      
      
        
          Net income
        
        
        
        
          $13,895 
        
        
        
        
          $17,557 
        
      
      
        
          Net margin
        
        
        
        
          2.1%
        
        
        
        
          3.1%
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net income per common share:
        
        
        
        
        
        
        
        
        
      
      
        
          Basic
        
        
        
        
          $.39 
        
        
        
        
          $.51 
        
      
      
        
          Diluted
        
        
        
        
          $.37 
        
        
        
        
          $.48 
        
      
      
        
          Weighted average shares outstanding
        
        
        
        
        
        
        
        
        
      
      
        
          Basic
        
        
        
        
          35,718 
        
        
        
        
          34,762 
        
      
      
        
          Diluted
        
        
        
        
          37,701 
        
        
        
        
          36,553 
        
      
    
    
      
        
          
          
        
        
        
        
        
      
      
        
          
            SYSTEMAX INC.
          
        
      
      
        
          Condensed Consolidated Balance Sheets
        
      
      
        
          (In thousands)
        
      
      
        
        
        
          (unaudited)
        
        
        
        
        
      
      
        
        
        
          
            March 31,
          
        
        
        
        
          
            December 31,
          
        
      
      
        
        
        
          2007 
        
        
        
        
          2006 
        
      
      
        
          Current assets:
        
        
        
        
        
        
        
      
      
        
          Cash and cash equivalents
        
        
          $105,946 
        
        
        
        
          $86,964 
        
      
      
        
          Accounts receivable, net
        
        
          182,075 
        
        
        
        
          164,615 
        
      
      
        
          Inventories
        
        
          247,007 
        
        
        
        
          233,136 
        
      
      
        
          Prepaid expenses and other current assets
        
        
          27,144 
        
        
        
        
          34,646 
        
      
      
        
          Total current assets
        
        
          562,172 
        
        
        
        
          519,361 
        
      
      
        
          Property, plant and equipment, net
        
        
          47,831 
        
        
        
        
          48,586 
        
      
      
        
          Deferred income taxes and other assets
        
        
          15,181 
        
        
        
        
          16,214 
        
      
      
        
          Total assets
        
        
          $625,184 
        
        
        
        
          $584,161 
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          Current liabilities:
        
        
        
        
        
        
        
      
      
        
          Short-term debt
        
        
          $12,086 
        
        
        
        
          $12,788 
        
      
      
        
          Accounts payable and accrued expenses
        
        
          335,195 
        
        
        
        
          277,174 
        
      
      
        
          Total current liabilities
        
        
          347,281 
        
        
        
        
          289,962 
        
      
      
        
          Long-term debt
        
        
          341 
        
        
        
        
          483 
        
      
      
        
          Other liabilities
        
        
          5,729 
        
        
        
        
          4,226 
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
          Shareholders’ equity
        
        
          271,833 
        
        
        
        
          289,490 
        
      
      
        
          Total liabilities and shareholders’ equity
        
        
          $625,184 
        
        
        
        
          $584,161 
        
      
    
    
      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.