Current Report

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
______________________________
 
FORM 8-K
 
CURRENT REPORT
 
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Date of Report (date of earliest event reported): November 10, 2009
 
______________________________
 
SYSTEMAX INC.
(Exact name of registrant as specified in its charter)
 
Delaware
(State or other jurisdiction
of incorporation)
1-13792
(Commission
File Number)
11-3262067
(IRS Employer
Identification No.)
11 Harbor Park Drive
Port Washington, New York 11050
(Address of principal executive offices)
 
(516) 608-7000
 
(Registrant’s telephone number, including area code)
 
N/A
 
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
£ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
£ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
£ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
£ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 

 
 
 

 
Item 2.02
Results of Operations and Financial Condition
 
A press release regarding third quarter 2009 financial results was issued by the Company on November 10, 2009, a copy of which is filed as an exhibit.
 
Item 9.01
Financial Statements and Exhibits
 
(d) Exhibits
 
     99.1     Press Release of Systemax Inc., dated November 10, 2009, regarding financial results for the third quarter of 2009.
 
 

 
 
 

 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
                     SYSTEMAX INC.


                     By:  /s/ Curt Rush                        
                           Name:  Curt Rush
                           Title:    General Counsel and Secretary


Date:  November 10, 2009
 
 

 
 
 
 

 
Exhibit Index
 
99.1     Press Release of Systemax Inc., dated November 10, 2009, regarding financial results for the third quarter of 2009.
 
 

 
 
 
Exhibit 99.1
 


SYSTEMAX REPORTS THIRD QUARTER 2009 SALES UP 6% ON CONSTANT
CURRENCY BASIS; EPS UP 13%

PORT WASHINGTON, NY , November 10, 2009 – Systemax Inc. (NYSE:SYX) today announced financial results for the third quarter and nine months ended September 30, 2009.

Financial highlights for the quarter ended September 30, 2009:
·  
Consolidated sales grew 2% to $753.9 million in U.S. dollars. On a constant currency basis, sales grew 6%.
·  
Consumer sales grew 10% to $426.2 million in U.S. dollars.  On a constant currency basis, sales grew 12%.
·  
“Same store” consumer sales grew 6%.
·  
Business to business sales were $327.7 million in U.S. dollars, a 7% decline.  On a constant currency basis, sales declined 1%.
·  
One-time pre-tax charges were $1.0 million, or approximately $0.02 per diluted share after tax, for costs related to the WStore acquisition and exiting the Hosted Software business.
·  
Diluted earnings per share grew 13% to $0.34.

Performance Summary
(U.S dollars in millions, except per share data)
 
Highlights
 
Quarter Ended Sept 30,
   
Nine Months Ended Sept 30,
 
   
2009
   
2008
   
2009
   
2008
 
Sales
  $ 753.9     $ 739.5     $ 2,227.7     $ 2,220.3  
Gross profit
  $ 112.8     $ 115.4     $ 327.4     $ 343.9  
Gross margin
    15.0 %     15.6 %     14.7 %     15.5 %
Operating income
  $ 19.4     $ 20.4     $ 43.1     $ 67.6  
Operating margin
    2.6 %     2.8 %     1.9 %     3.0 %
Diluted earnings per share
  $ 0.34     $ 0.30     $ 0.74     $ 1.14  
One time charges, pre-tax
  $ 1.0       -     $ 7.3     $ 0.8  
One-time charges, after tax, per diluted share
  $ 0.02       -     $ 0.12     $ 0.01  

Richard Leeds, Chairman and Chief Executive Officer, said, “Systemax posted solid overall third quarter results, growing top line sales on a U.S. dollar basis as well as on a constant currency basis.  We did see some erosion in overall gross margin, resulting from the continued impact of discounted shipping and product mix changes; however gross margin for the quarter was up sequentially.  We carefully controlled our operating costs, despite headcount growth for new retail stores and one-time charges, which resulted in strong bottom line earnings growth.”

 
 
Channel sales for the three and nine months ended September 30, 2009:

 
Channel Sales Summary
(in millions)
 
Channel
Quarter Ended Sept 30,
Nine Months Ended Sept 30
 
2009
2008
2009
   
2008
 
Consumer 1
$ 426.2 $ 389.2 $ 1,310.3     $ 1,154.4  
Business to business 2
$ 327.7 $ 350.3 $ 917.4     $ 1,065.9  
Consolidated sales
$ 753.9 $ 739.5 $ 2,227.7     $ 2,220.3  

1 Includes sales from retail stores, consumer websites, printed catalogs and television shopping
       2 Includes sales from managed business relationships, including outbound call centers and extranets

 
 
Channel 3
Change
Consumer
 6.0%
Business to business
-4.0%

3 Comprised of revenue at retail stores, websites and call centers operating for at least 14 full months. The calculation
of the comparable store sales percentage change excludes the effect of fluctuations in foreign currency exchange rates.
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.


Richard Leeds continued, “Our consumer channels in North America reported our strongest results.  We are broadening our reach in the consumer electronics market, both through our retail stores and our e-Commerce websites.  CompUSA recently opened two new brick and mortar stores, with another planned to open later this month.  We have also signed leases for stores in several new markets that will open in the coming months, and we are continuing the conversion of our existing stores to our proprietary Retail 2.0 format.  Circuit City has successfully reactivated many of its former customers, and sales from CircuitCity.com contributed to our overall sales growth.  We remain very optimistic about the long-term possibilities for this valuable asset.  As in the past, TigerDirect continues to be a market leader in the online retailing of computer and consumer electronics.”

“Our business to business channel operations – including MISCO in Western Europe and Global Industrial in the U.S. – are still generally impacted by the worldwide economic slowdown; however, we are now cautiously optimistic that we have seen the bottom.  We continue making prudent investments to improve our positioning while carefully controlling our costs.  During the quarter we completed the acquisition of WStore Europe, a B2B supplier of IT products with operations in France and in the United
 
 
 
 
Kingdom, significantly strengthening our presence in those markets. In our Industrial business, we recently deployed an entirely new ecommerce website (www.globalindustrial.com) that we believe is generationally more advanced than the sites of any other company in the sector.”


Supplemental product category sales for the three and nine months ended September 30, 2009:

Product Category Sales Summary
(in millions)
 
Product Category
Quarter Ended Sept 30,
 
Nine Months Ended Sept 30,
 
2009
 
2008
 
2009
 
2008
 
Computers
$ 183.5   $ 141.5   $ 559.1   $ 369.6  
Consumer electronics
$ 172.6   $ 161.5   $ 521.2   $ 509.4  
Computer components
$ 130.1   $ 132.1   $ 363.7   $ 411.8  
Computer accessories & software
$ 200.2   $ 225.6   $ 431.1   $ 696.3  
Industrial products
$ 52.0   $ 63.2   $ 146.5   $ 182.2  
Other
$ 15.5   $ 15.6   $ 206.1   $ 51.0  
Consolidated sales
$ 753.9   $ 739.5   $ 2,227.7   $ 2,220.3  


Business unit sales for the three and nine months ended September 30, 2009:

Business Unit Sales Summary
(in millions)
 
Business Unit
Quarter Ended Sept. 30,
 
Nine Months Ended Sept. 30,
 
2009
 
2008
 
2009
 
2008
 
Technology Products – North America
$ 500.0   $ 448.9   $ 1,500.7   $ 1,314.1  
Technology Products – Europe
$ 201.8   $ 227.2   $ 579.3   $ 723.7  
Industrial Products
$ 52.0   $ 63.2   $ 146.5   $ 182.2  
Software Solutions
$ 0.1   $ 0.2   $ 1.2   $ 0.3  
Consolidated Sales
$ 753.9   $ 739.5   $ 2,227.7   $ 2,220.3  

Working capital as of September 30, 2009 was $256.8 million, including cash and cash equivalents of $102.1 million.  The Company has an undrawn credit facility of $120.0 million and total cash and available liquidity of approximately $199.0 million. Short term debt totaled approximately $18.8 million at September 30, 2009 and included approximately $17.1 million in revolving debt assumed as part of the WStore acquisition as well as capitalized lease obligations. Cash flow provided by operations for the first nine months of 2009 was approximately $14.2 million and capital expenditures were $13.7 million. The Company’s effective tax rate for the first nine months of 2009 was 36.3%, down from 37.3% last year.  Included in the 2009 rate is a reversal of tax reserves of approximately $1.0 million as the result of statute expirations. Excluding this reserve reversal, the Company’s effective tax rate in 2009 was 38.7%.  This higher effective tax
 
 
 
 
rate this year is primarily the result of a higher percentage of taxable income in the U.S. where corporate tax rates for the Company are typically highest.
 
Earnings Conference Call Details

Systemax Inc. will host a teleconference to discuss its third quarter and the first nine months of 2009 results today, Tuesday, November 10, 2009 at 5:00 p.m. Eastern Time. To access the teleconference, please dial 877-604-9673 (U.S. callers) or 719-325-4790 (Int’l callers) and reference passcode 7435037 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 Tuesday, November 17, 2009. It can be accessed by dialing 888-203-1112 (U.S. callers) or 719-457-0820 (Int’l callers), passcode 7435037. 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 supplies, consumer electronics and industrial products through a system of branded e-Commerce web sites, 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.

INVESTOR/ MEDIA CONTACTS:
Denise Roche / Bill Douglass
Brainerd Communicators, Inc.
212-986-6667
roche@braincomm.com
douglass@braincomm.com

- ### -

 
 
 

SYSTEMAX INC.
 
Condensed Consolidated Statements of Operations – Unaudited
 
(In thousands, except per share amounts)
 
                         
   
Quarter Ended
   
Nine Months Ended
 
   
September 30*
   
September 30*
 
   
2009
   
2008
   
2009
   
2008
 
Net sales
  $ 753,880     $ 739,479     $ 2,227,747     $ 2,220,251  
Cost of sales
    641,117       624,060       1,900,380       1,876,329  
Gross profit
    112,763       115,419       327,367       343,922  
Gross margin
    15.0 %     15.6 %     14.7 %     15.5 %
Selling, general and administrative expenses
    93,394       94,997       284,309       276,349  
Operating income
    19,369       20,422       43,058       67,573  
Operating margin
    2.6 %     2.8 %     1.9 %     3.0 %
Interest and other (income) expense, net
    (952 )     1,782       (589 )     (843 )
Income before income taxes
    20,321       18,640       43,647       68,416  
Provision for income taxes
    7,723       7,367       15,860       25,541  
Effective tax rate
    38.0 %     39.5 %     36.3 %     37.3 %
Net income
  $ 12,598     $ 11,273     $ 27,787     $ 42,875  
Net margin
    1.7 %     1.5 %     1.3 %     1.9 %
                                 
Net income per common share:
                               
Basic
  $ .34     $ 0.30     $ .76     $ 1.16  
Diluted
  $ .34     $ 0.30     $ .74     $ 1.14  
   
Weighted average common and
 common equivalent shares:
 
Basic
    36,703       37,079       36,669       36,972  
Diluted
    37,319       37,801       37,310       37,774  
                                 


 
 
 


SYSTEMAX INC.
 
Condensed Consolidated Balance Sheets
 
(In thousands)
 
   
(Unaudited)
       
   
September 30* December 31
 
   
2009
   
2008
 
Current assets:
           
  Cash and cash equivalents
  $ 102,117     $ 115,967  
  Accounts receivable, net
    213,170       182,532  
  Inventories
    315,977       290,594  
  Prepaid expenses and other current assets
    28,574       22,225  
Total current assets
    659,838       611,318  
Property, plant and equipment, net
    63,046       48,465  
Goodwill, intangibles and other assets
    60,660       42,361  
Total assets
  $ 783,544     $ 702,144  
                 
Current liabilities:
               
  Short-term debt
  $ 18,770     $ 773  
  Accounts payable and accrued expenses
    384,222       357,453  
Total current liabilities
    402,992       358,226  
Long-term debt
    1,233       1,411  
Other liabilities
    7,986       8,552  
Shareholders’ equity
    371,333       333,955  
Total liabilities and shareholders’ equity
  $ 783,544     $ 702,144  
                 
* 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 nine month period and quarter ended on October 3, 2009. The third quarters of both 2009 and 2008 included 13 weeks and the nine month periods both included 39 weeks.