Systemax (NYSE:SYX)
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Systemax Inc. (NYSE:SYX) today announced financial results for
the second quarter and six months ended June 30, 2008.
Net sales for the second quarter increased 16.8% to $756.0 million
compared to $647.1 million in the second quarter of 2007. Gross margin
for the second quarter was 15.3% unchanged compared to last year.
Operating income increased 4.9% to $21.1 million compared to $20.1
million in the second quarter of 2007. Operating margin declined
year-over-year to 2.8% from 3.1%. Second quarter 2008 net income
declined 1.6% to $13.5 million, or $0.36 per diluted share, compared to
$13.8 million, or $0.37 per diluted share, in the same period last year.
Net income and earnings per share was impacted in the quarter by an
aggregate $1.2 million of lower interest income and higher income tax
expense.
Net sales for the six-month period ended June 30, 2008 increased 11.9%
to $1.5 billion compared to $1.3 billion in the same period of 2007.
Gross margin for the first half of 2008 was 15.6% compared to 14.8% last
year, improving 80 basis points. Operating income increased 16.8% to
$48.6 million compared to $41.6 million last year. Operating margin
increased to 3.3% from 3.1% last year. Net income increased to $31.6
million, or $0.84 per diluted share, compared to $27.7 million, or $0.73
per diluted share, last year. Net income for the first six months of
2007 included an after tax gain of $1.5 million or $0.04 per diluted
share related to a favorable lawsuit settlement.
Richard Leeds, Chairman and Chief Executive Officer, said, “Our
second quarter results were solid as we delivered strong revenue growth
despite a challenging economic environment. Although the market has been
affected by continued pressure on consumer spending, Systemax has fared
well as a result of our strong brands, diversified products and sales
channels and geographic exposure. Second quarter operating margin was
negatively impacted as we invested in CompUSA personnel and operating
expenses. We anticipate both top and bottom line to improve as sales
across the CompUSA businesses continue to ramp and build scale.”
Commenting on other operations Mr. Leeds said, “Our
industrial product segment continues to benefit the business with double
digit revenue growth. While our hosted software segment ProfitCenter
Software remains a minimal contributor to revenue, we are continuing to
build out our sales force and make inroads in penetrating the market. We
currently have 12 external customers live or in user acceptance testing
and expect to bring several additional customers live in the coming
months.”
Gilbert Fiorentino, General Manager of Systemax’s
Technology Products segment, noted, “Technology
product revenue grew over 17% in the second quarter driven by stronger
demand in both our North American and European operations. Sales have
benefited from our ongoing initiatives to improve and enhance our
customers’ online shopping experience, an
expanded retail store footprint and new product and brand offerings. On
the CompUSA front, our newly acquired 16 stores and ecommerce site are
fully operational, but in their infancy in terms of sales and
profitability.”
Working capital as of June 30, 2008 was $240.8 million, including cash
and equivalents of $66.8 million. Cash flow from operations for the
first six months of 2008 was approximately $18.5 million. Inventories
increased 16.2% to $290.7 million, as compared to $250.2 million at
December 31, 2007. Capital expenditures aggregated $10.7 million, which
included $2.7 million for CompUSA. The Company’s
effective tax rate was 37.1% in the second quarter, up from 34.5% last
year.
The $1.00 per share special dividend declared by our board of directors
during March, aggregating $37.1 million, was paid during the first week
of the second quarter. Additionally, the Board of Directors approved a 2
million share buyback program in early May. No shares were repurchased
during the quarter.
Earnings Conference Call Details
Systemax Inc. will host a teleconference to discuss its second quarter
results on Thursday, August 7, 2008 at 5:00 p.m. Eastern Time. To access
the teleconference, please dial 800-344-6783 (U.S. callers) or
719-457-2083 (Int’l callers) and reference
passcode 2841289 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 Thursday, August
14, 2008. It can be accessed by dialing 888-203-1112 (U.S. callers) or
719-457-0820 (Int’l callers), passcode
2841289. The webcast will also be archived on www.systemax.com
for 30 days.
About Systemax Inc.
Systemax Inc. (www.systemax.com),
a Fortune 1000 company, sells personal computers, computer supplies and
accessories, consumer electronics and industrial products through a
system of branded e-commerce web sites, direct mail catalogs,
relationship marketers and retail stores in North America and Europe.
The primary brands are TigerDirect, CompUSA, Misco and Global
Industrial. It also manufactures and sells personal computers under the
Systemax and Ultra brands and develops and markets ProfitCenter
Software, a web-based, on-demand application for multichannel direct
marketing companies.
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
Six Months Ended
June 30*,
June 30*,
2008
2007
2008
2007
Net sales
$
756,035
$
647,102
$
1,480,772
$
1,323,224
Cost of sales
639,987
547,784
1,250,044
1,127,232
Gross profit
116,048
99,318
230,728
195,992
Gross margin
15.3
%
15.3
%
15.6
%
14.8
%
Selling, general and administrative expenses
94,992
79,249
182,139
154,386
Operating income
21,056
20,069
48,589
41,606
Operating margin
2.8
%
3.1
%
3.3
%
3.1
%
Interest and other (income) expense, net
(459
)
(956
)
(1,187
)
(1,698
)
Income before income taxes
21,515
21,025
49,776
43,304
Provision for income taxes
7,974
7,263
18,174
15,647
Effective tax rate
37.1
%
34.5
%
36.5
%
36.1
%
Net income
$
13,541
$
13,762
$
31,602
$
27,657
Net margin
1.8
%
2.1
%
2.1
%
2.1
%
Net income per common share:
Basic
$
.37
$
.38
$
.87
$
.77
Diluted
$
.36
$
.37
$
.84
$
.73
Weighted average common and common equivalent shares:
Basic
36,630
36,006
36,418
35,863
Diluted
37,590
37,686
37,452
37,644
SYSTEMAX INC.
Condensed Consolidated Balance Sheets
(In thousands)
June 30*,
December 31,
2008
2007
(Unaudited)
Current assets:
Cash and cash equivalents
$
66,775
$
128,021
Accounts receivable, net
216,589
206,940
Inventories
290,697
250,222
Prepaid expenses and other current assets
23,992
23,815
Total current assets
598,053
608,998
Property, plant and equipment, net
53,976
47,580
Goodwill, intangibles and other assets
47,850
19,802
Total assets
$
699,879
$
676,380
Current liabilities:
Short-term debt
$
1,634
$
4,302
Accounts payable and accrued expenses
355,645
330,343
Total current liabilities
357,279
334,645
Long-term debt
465
254
Other liabilities
5,739
5,646
Shareholders’ equity
336,396
335,835
Total liabilities and shareholders’ equity
$
699,879
$
676,380
* 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 six month period and quarter ended on June 29, 2008. The
second quarters of both 2008 and 2007 included 13 weeks and the six
month periods both included 26 weeks.