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.
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