News Details

PORT WASHINGTON, N.Y.--(BUSINESS WIRE)-- Systemax Inc. (NYSE:SYX) today announced financial results for the fourth quarter and full year ended December 31, 2008.

Financial highlights for the quarter ended December 31, 2008:

    --  Consolidated net sales grew 6% to a record $812.7 million in U.S.
        dollars. Excluding the effect of exchange rate changes, sales would have
        grown 11%.
    --  North American technology product sales grew 18% to a record $540.7
        million in U.S. dollars. Excluding the effect of exchange rate changes,
        sales would have grown over 19%.
    --  European technology product sales were $216.9 million in U.S. dollars, a
        14% decline. Excluding the effect of exchange rate changes, sales would
        have declined by only 2%.
    --  Gross profit reached a record $116.9 million and gross margin was 14.4%.
    --  Operating income was $15.8 million and operating margin was 1.9%.
    --  Net income was $10.0 million, or $0.27 per diluted share.
    --  Cash and cash equivalents grew over 58% to $116 million during the
        quarter; undrawn line of credit remains at $120 million; total debt
        outstanding is $2.2 million and represents capital leases.
    --  Common stock repurchases were 246,900 shares for $2.4 million or an
        average price of $9.67 per share.

Financial highlights for the year ended December 31, 2008:

    --  Net sales grew 9% to a record $3.0 billion, driven by growth in both
        technology products and industrial products. Excluding the effect of
        exchange rate changes, sales would have grown 8%.
    --  North American technology product sales grew 14% to a record $1.9
        billion in U.S. dollars. Excluding exchange rate changes, sales would
        have grown 14%.
    --  European technology product sales grew 1% to a record $940.6 million in
        U.S. dollars. Excluding exchange rate changes, sales would have been
        flat.
    --  Gross profit reached a record $464.1 million and gross margin was 15.3%.
    --  Operating income was $83.4 million and operating margin was 2.7%.
    --  Net income was $52.8 million, or $1.41 per diluted share.
    --  Common stock repurchases were 475,301 shares for $5.8 million or an
        average price of $12.25 per share.

Richard Leeds, Chairman and Chief Executive Officer, said, "Systemax reported solid financial results despite the challenging economic climate, which significantly impacted spending on information technology and industrial products, in both the business to business and consumer markets. Fourth quarter Technology Products revenues grew over 6%. We are particularly pleased with performance in North America, which delivered a very strong quarter with over 19% growth, excluding exchange rate changes, driven primarily by our successful CompUSA business. Our ability to move quickly and flexibly to capture value in the retail delivery chain and deliver it to consumers through our recognized businesses, including TigerDirect and CompUSA, helped drive this impressive top-line growth."

Gilbert Fiorentino, Chief Executive of Systemax's Technology Products business said, "During the quarter, we selectively lowered prices and offered special freight incentives to attract new customers, grow market share and position the Company for continued growth when the business environment improves. While this had a short-term impact on gross margins, we believe it will position us very well with a larger customer base when consumer spending returns."

"In addition to freight and margin concessions, we have been making aggressive investments in the retail side of our business as well as the web and technology infrastructure to capture market. While the addition of CompUSA's retail operations increased our spend in selling, general and administrative expenses, the enhancements we have made to our online and in-store operations continue to drive results, both in terms of revenue growth and positive customer feedback. We continue to roll-out our Retail 2.0 initiative, turning our brick and mortar locations into a destination for customers to test our products, research and compare prices and make educated buying decisions. By empowering consumers with information and self-service capability while offering superior value and selection, we believe we have a formula that will help us weather the economic slump while positioning us for long-term growth opportunities," said Mr. Fiorentino.

Commenting on other operations, Mr. Leeds concluded, "While fourth quarter Industrial Products revenues were down slightly, revenues for the full year increased 5%, driven by the addition of over 100,000 new customers and 17,000 products to our revamped website. We continue to reorganize and refocus our Software Solutions business, lowering our cost structure as we work to launch new customer sites with our ProfitCenter software."

Working capital as of December 31, 2008 was $250.6 million, including cash and cash equivalents of $116.0 million. The Company has an undrawn credit facility of $120.0 million and total cash and available liquidity of approximately $219.5 million. Cash flow from operations for the full year of 2008 was approximately $82.4 million. Inventories increased nearly 13% to $282.2 million, as compared to $250.2 million at December 31, 2007. Inventories were up over 2% from the third quarter of 2008. Capital expenditures for the full year 2008 aggregated $17.1 million and the Company expended $30.6 million for CompUSA. The Company paid a dividend of $37.1 million during the second quarter. The Company's effective tax rate was 36.9% for the full year, up from 30.5% last year, principally the result of higher taxable income in the United Kingdom in 2008.

As a part of the two million share stock buyback program announced in May 2008, during the fourth quarter the Company purchased 246,900 shares, for approximately $2.4 million or an average price $9.67 per share. In total, the Company repurchased 475,301 shares of common stock during 2008 for $5.8 million or an average price of $12.25 per share.

The fourth quarter of 2008 included 14 weeks versus 13 weeks in 2007. Average sales per day during the quarter were $8.3 million compared to $8.5 million in 2007. The full year 2008 included 53 weeks versus 52 weeks in 2007. Average sales per day during 2008 were $8.2 million compared to $7.7 million in 2007.

Board of Directors Appointment

The Company announced today that Larry Reinhold has been appointed to the Company's Board of Directors. Mr. Reinhold, 49, has served as the Company's Executive Vice President and Chief Financial Officer since January 2007. Prior to joining the Company, Mr. Reinhold served as Executive Vice President and Chief Financial Officer of Greatbatch, a NYSE medical technology company; as Executive Vice President and Chief Financial Officer of Critical Path, a NASDAQ software company; and as a partner with PricewaterhouseCoopers. He holds a BS in accounting and an MBA from San Diego State University.

Commenting on the appointment Richard Leeds said, "Larry has been a valuable addition to our senior management team at Systemax. We look forward to continuing to benefit from his extensive financial expertise and operational experience."

Earnings Conference Call Details

Systemax Inc. will host a teleconference to discuss its fourth quarter and full year 2008 results today, Tuesday, March 3, 2009 at 5:00 p.m. Eastern Time. To access the teleconference, please dial 877-741-4251 (U.S. callers) or 719-325-4773 (Int'l callers) and reference passcode 8193145 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, March 10, 2009. It can be accessed by dialing 888-203-1112 (U.S. callers) or 719-457-0820 (Int'l callers), passcode 8193145. 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 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 computers and accessories under the Systemax and Ultra brands and develops and markets ProfitCenter Software, a web-based 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             Year Ended

                         December 31,*             December 31,*

                           2008         2007         2008           2007

Net sales                $ 812,710    $ 769,334    $ 3,032,961    $ 2,779,875

Cost of sales              695,762      649,678      2,568,816      2,353,574

Gross profit               116,948      119,656      464,145        426,301

Gross margin               14.4    %    15.6    %    15.3      %    15.3      %

Selling, general and       101,154      92,150       380,778        332,359
administrative expenses

Operating income           15,794       27,506       83,367         93,942

Operating margin           1.9     %    3.6     %    2.7       %    3.4       %

Other (income) expense,    467          (2,294  )    (376      )    (6,081    )
net

Income before income       15, 327      29,800       83,743         100,023
taxes

Provision for income       5,359        5,620        30,900         30,542
taxes

Effective tax rate         35.0    %    18.9    %    36.9      %    30.5      %

Net income               $ 9,968      $ 24,180     $ 52,843       $ 69,481

Net margin                 1.2     %    3.1     %    1.7       %    2.5       %

Net income per common
share:

Basic                    $ .27        $ .67        $ 1.45         $ 1.93

Diluted                  $ .27        $ .64        $ 1.41         $ 1.84

Weighted average common and

common equivalent shares:

Basic                      36,393       36,089       36,450         35,968

Diluted                    37,191       37,753       37,411         37,688

SYSTEMAX INC.

Condensed Consolidated Balance Sheets

(In thousands)

                                            (Unaudited)

                                            December 31*,

                                              2008         2007

Current assets:

Cash and cash equivalents                   $ 115,967    $ 128,021

Accounts receivable, net                      190,909      207,460

Inventories                                   282,217      250,222

Prepaid expenses and other current assets     23,090       23,262

Total current assets                          612,183      608,965

Property, plant and equipment, net            48,465       47,580

Goodwill, intangibles and other assets        42,615       19,802

Total assets                                $ 703,263    $ 676,347

Current liabilities:

Short-term debt                             $ 773        $ 4,302

Accounts payable and accrued expenses         360,846      330,310

Total current liabilities                     361,619      334,612

Long-term debt                                1,411        254

Other liabilities                             6,278        5,646

Shareholders' equity                          333,955      335,835

Total liabilities and shareholders' equity  $ 703,263    $ 676,347

* 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. Certain reclassifications have been made to prior year amounts to conform with the current year presentation. The actual fiscal twelve month period and quarter ended on January 3, 2009. The fourth quarters of 2008 and 2007 included 14 and 13 weeks, respectively, and the full year 2008 and 2007 included 53 and 52 weeks, respectively.

    Source: Systemax Inc.