Systemax Inc. (NYSE: SYX) today announced
financial results for the third quarter and nine months ended
September 30, 2011.
Performance
Summary
(U.S. dollars in millions, except per share data)
Highlights Quarter Ended
Nine Months Ended September 30,
September 30, 2011
2010 2011 2010
Sales $ 901.2 $ 862.7
$ 2,703.3 $ 2,583.8 Gross profit
$ 131.3 $ 115.3 $ 390.8
$ 353.3 Gross margin 14.6
% 13.4 % 14.5 %
13.7 % Operating income $ 19.1 $ 12.1
$ 59.6 $ 48.6 Operating
margin 2.1 % 1.4 %
2.2 % 1.9 % Diluted earnings per share
$ 0.29 $ 0.23 $ 1.07
$ 0.79 Special (gains) charges, net
$ 0.4 $ 2.9 $ (6.2 )
$ 3.2 Special (gains) charges, net, per diluted
share, after tax $ 0.01 $ 0.05
$ (0.11 ) $ 0.05
Third Quarter 2011 Financial Highlights:
- Consolidated sales grew 4% to a record
$901.2 million in U.S. dollars. On a constant currency basis, sales
grew 2%.
- Business to business channel sales grew
17% to $508.2 million in U.S. dollars. On a constant currency
basis, sales grew 12%.
- Consumer channel sales declined 8% to
$393.0 million in U.S. dollars. On a constant currency basis, sales
declined 9%.
- “Same store” business to business sales
grew 9% and same store consumer sales declined 11% on a constant
currency basis.
- Special charges incurred were
approximately $0.4 million on a pre-tax basis, or $0.01 per diluted
share after tax, consisting of legal and professional fees, related
to the previously disclosed investigation and settlement with a
former officer and director.
- Operating income grew 58% to $19.1
million.
- Diluted earnings per share (EPS) grew
26% to $0.29.
Nine Months 2011 Financial Highlights:
- Consolidated sales grew 5% to a record
$2.7 billion in U.S. dollars. On a constant currency basis, sales
grew 2%.
- Business to business channel sales grew
13% to $1.5 billion in U.S. dollars. On a constant currency basis,
sales grew 10%.
- Consumer channel sales declined 4% to
$1.2 billion in U.S. dollars. On a constant currency basis, sales
declined 5%.
- The Company recorded special gains, net
of legal and professional fees, of $6.2 million on a pre-tax basis,
or approximately $0.11 per diluted share after tax, related to the
previously disclosed investigation and settlement with a former
officer and director.
- Operating income grew 23% to $59.6
million.
- Diluted EPS grew 35% to $1.07.
Richard Leeds, Chairman and Chief Executive Officer, said, “I am
pleased with our top line performance, which continues to be driven
by our business-to-business channels and specifically our
Industrial Products group, which posted a 28% revenue increase. Our
retail stores delivered another solid quarterly performance;
however, our consumer related sales remain challenging,
particularly on the web. During the quarter we effected decisions
to increase gross margins, which contributed to our 120 basis point
improvement in consolidated gross margin. We also remain focused on
improving our operating cost structure and are pleased with the
initial results of our initiatives, which are just starting to flow
through our results and contributed to our 70 basis point
improvement in consolidated operating margin. Our efforts in this
regard are ongoing and focused on driving inventory efficiencies,
the optimization of our distribution centers and information
technology investments.
“Our business is diversified by market, channel and geography,
and we remain well positioned as we enter the holiday sales period.
Overall we have a very sound business with a web-centric model that
allows us to drive efficiencies across our integrated multi-channel
platform. We are executing on our growth initiatives and prudently
managing our balance sheet to maximize our cash generation.”
Supplemental
Channel Sales
(in millions) Channel
Quarter EndedSeptember
30,
Nine Months EndedSeptember
30,
2011 %
2010 % 2011
% 2010 %
Business to business1
$ 508.2 56 % $ 435.2
50 % $ 1,471.2 54 %
$ 1,297.9 50 %
Consumer2
$ 393.0 44 % $ 427.5
50 % $ 1,232.1 46 %
$ 1,285.9 50 %
Consolidated
Sales $ 901.2 100 % $
862.7 100 % $ 2,703.3 100
% $ 2,583.8 100 %
1Includes sales from managed business relationships, including
outbound call centers and extranets, and the entire Industrial
Products and Corporate segments2 Includes sales from retail stores,
consumer websites, inbound call centers and television shopping
Supplemental “Same Store” Channel Growth1 –
Q3 2011 vs. Q3 2010 Channel Change
Business to business 9% Consumer -11%
Consolidated
Sales -1%
1Excludes 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 EndedSeptember
30,
Nine Months EndedSeptember
30,
2011 %
2010 % 2011
% 2010 %
Computers $ 280.7 31 % $
221.9 26 % $ 742.4 28 %
$ 650.8 25 % Computer accessories &
software $ 247.5 27 % $
237.9 27 % $ 769.1 28 %
$ 719.2 28 % Consumer electronics
$ 167.0 19 % $ 189.0
22 % $ 543.4 20 %
$ 573.7 22 % Computer components
$ 99.5 11 % $ 132.2 15 %
$ 348.5 13 % $ 402.6
16 % Industrial products $ 87.0
10 % $ 67.8 8 % $
236.6 9 % $ 184.6 7 %
Other $ 19.5 2 % $ 13.9
2 % $ 63.3 2 %
$ 52.9 2 %
Consolidated Sales
$ 901.2 100 %
$ 862.7 100
% $ 2,703.3
100 % $ 2,583.8
100 %
Supplemental
Business Unit Sales Summary
(in millions) Business Unit
Quarter EndedSeptember
30,
Nine Months EndedSeptember
30,
2011 %
2010 % 2011
% 2010 %
Technology Products $ 813.3 90 %
$ 794.2 92 % $ 2,464.3
91 % $ 2,397.4 93 % Industrial
Products $ 87.0 10 % $
67.8 8 % $ 236.6 9 %
$ 184.6 7 % Corporate and Other
$ 0.9 - % $ 0.7 -
% $ 2.4 - % $ 1.8
- %
Consolidated Sales $
901.2 100 %
$ 862.7 100 %
$ 2,703.3 100 %
$ 2,583.8 100
%
Working capital grew by $34.8 million to $335.7 million and cash
and cash equivalents grew by $34.3 million to $126.4 million at
September 30, 2011. The Company had availability under its credit
facility of approximately $106.6 million and total cash and
available liquidity of approximately $233.1 million at September
30, 2011. Short and long-term debt totaled approximately $8.5
million at September 30, 2011.
The Company’s effective tax rate for the third quarter was 38.0%
compared to 37.3% in the third quarter of 2010. The higher
effective tax rate for the quarter is due to a larger percentage of
pre-tax income in high tax jurisdictions in 2011. The effective tax
rate for the nine months ended September 2011 was 32.7% compared to
37.3% for the same period last year. The lower effective tax rate
for the first nine months of 2011 is primarily the result of the
company having a higher pretax income in France compared to the
same period in 2010. The pre-tax income in France is offset by the
use of net operating loss carryforwards which have a full valuation
allowance applied.
Earnings Conference Call Details
Systemax Inc. will host a teleconference to discuss its third
quarter 2011 results today, November 1, 2011 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, 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 Nine Months Ended September 30*
September 30* 2011 2010 2011
2010 Net sales $ 901,180 $ 862,705 $ 2,703,269 $ 2,583,817
Cost of sales 769,842 747,450
2,312,490 2,230,560 Gross profit 131,338
115,255 390,779 353,257 Gross margin 14.6 % 13.4 % 14.5 % 13.7 %
Selling, general and administrative expenses 111,783 100,304
337,417 301,458 Special (gains) charges, net 443
2,855 (6,203 ) 3,198 Operating
income 19,112 12,096 59,565 48,601 Operating margin 2.1 % 1.4 % 2.2
% 1.9 % Interest and other (income) expense, net 1,973
(1,650 ) 519 1,040 Income
before income taxes 17,139 13,746 59,046 47,561 Provision for
income taxes 6,510 5,124 19,292 17,738 Effective tax rate
38.0 % 37.3 % 32.7 % 37.3 % Net income $
10,629 $ 8,622 $ 39,754 $ 29,823 Net
margin 1.2 % 1.0 % 1.5 % 1.2 % Net income per common share:
Basic $ 0.29 $ 0.23 $ 1.08 $ 0.81 Diluted $ 0.29 $ 0.23 $ 1.07 $
0.79 Weighted average common and
common equivalent shares:
Basic 36,547 37,053 36,840 36,935 Diluted 36,720 37,586 37,169
37,577
SYSTEMAX INC.
Condensed Consolidated Balance Sheets (In thousands)
(Unaudited)
September 30* December 31*
2011 2010 Current assets: Cash and cash equivalents $
126,419 $ 92,077 Accounts receivable, net 254,700 276,344
Inventories 340,202 370,375 Prepaid expenses and other current
assets 28,356 26,441 Total current assets 749,677
765,237 Property, plant and equipment, net 70,877 73,765 Goodwill,
intangibles and other assets 53,576 55,098 Total
assets $ 874,130 $ 894,100
Current liabilities: Short-term debt $ 2,420 $ 2,655 Accounts
payable and accrued expenses 411,542 461,710 Total
current liabilities 413,962 464,365 Long-term debt 6,060 7,386
Other liabilities 14,123 13,081 Shareholders’ equity 439,985
409,268 Total liabilities and shareholders’ equity $ 874,130
$ 894,100
* 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 October 1, 2011.
The third quarters of both 2011 and 2010 included 13 weeks. The
first nine months of both 2011 and 2010 included 39 weeks.
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