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PFSweb Reports Third Quarter 2013 Results

PFSweb Reports Third Quarter 2013 ResultsALLEN, Texas, Nov. 14, 2013 /PRNewswire/ --PFSweb, Inc. (Nasdaq: PFSW), an international provider of end-to-end eCommerce solutions, today announced its financial results for the quarter ended September 30, 2013.

"During the third quarter, we continued to make progress toward driving PFSweb to sustainable, profitable, long-term growth through new and expanded client relationships and our continued focus on driving operational efficiencies through the business," stated Mike Willoughby, Chief Executive Officer of PFSweb. "In September, we signed a contract to develop and deploy an end-to-end solution for the United States Mint. The contract win came on the heels of a number of successful program launches during the period, including TJ Maxx and two L'Oreal USA brands: Clarisonic and em michelle phan. We believe our recent success in winning new business and launching new programs demonstrates the quality of our eCommerce solutions and the traction we enjoy in the marketplace. Our current business pipeline remains strong at approximately $45 million in average annual contract value based on client projections, following the transition of the United States Mint into implementation status."

Mr. Willoughby continued, "Our financial results for the quarter ended September 2013 were impacted by previously announced client transitions, partially offset by growth in new and existing clients, including project work, and the impact of our ongoing cost control efforts. As previously mentioned, we expect to see sequential improvement in the fourth quarter as we realize further benefit from new and expanded client relationships and also experience higher volumes during the holiday season. Based on our projections, we are reiterating our 2013 Service Fee Equivalent Revenue guidance of $110 million to $115 million and our Adjusted EBITDA guidance of $9 million to $10.5 million, and currently expect to be toward the higher end of the range for both targets."

Summary of consolidated results for the third quarter ended September 30, 2013:

  • Service Fee revenue decreased 15% to $23.9 million, compared to $28.3 million for the same period in 2012; Service Fee Equivalent Revenue (as defined) decreased 17% to $25.2 million, compared to $30.2 million for the same period in 2012;
  • Total revenue decreased 17% to $53.6 million, compared to $64.8 million for the third quarter of 2012;
  • Adjusted EBITDA (as defined) decreased to $1.4 million, compared to $2.8 million for the same period in 2012;
  • Net loss was $2.0 million, or $0.12 per basic and diluted share, compared to net loss of $0.4 million, or $0.03 per basic and diluted share, for the third quarter of 2012;
  • Non-GAAP net loss (as defined) was $1.3 million, or $0.08 per basic and diluted share, compared to non-GAAP net loss of 62,000, or less than $0.01 per basic and diluted share, for the quarter ended September 30, 2012.

Summary of consolidated results for the nine months ended September 30, 2013:

  • Service Fee revenue decreased 7% to $78.7 million, compared to $85.0 million for the same period in 2012; Service Fee Equivalent Revenue (as defined) decreased 10% to $83.2 million, compared to $92.0 million for the same period in 2012;
  • Total revenue decreased 15% to $174.9 million, compared to $204.6 million for the first nine months of 2012;
  • Adjusted EBITDA (as defined) decreased to $6.8 million, compared to $8.2 for the same period in 2012;
  • Net loss was $5.5 million, or $0.38 per basic and diluted share, compared to net loss of $2.2 million, or $0.17 per basic and diluted share, for the same period in 2012;
  • Non-GAAP net loss (as defined) was $1.7 million, or $0.12 per basic and diluted share, compared to non-GAAP net income of $0.2 million, or $0.01 per basic and diluted share, for the 2012 period.

Mr. Willoughby continued, "Looking toward 2014, we expect to complete our recovery from the impact of the previously announced client transitions as we benefit from our 2013 restructuring activities and the onset of new client contracts, including the United States Mint. At this time, we are targeting 2014 Service Fee Equivalent Revenue to be in the range of $127 million to $133 million and Adjusted EBITDA to be in the range of $12 million to $14 million. With the anticipated launch of the United States Mint contract in the third quarter of 2014, we expect the new contract revenue to be substantially back-loaded during the year."

Conference Call Information

Management will host a conference call at 11:00 am Eastern Time (10:00 am Central Time) on Thursday, November 14, 2013, to discuss the latest corporate developments and results. To listen to the call, please dial (888) 562-3356 and enter pin number 93467776 at least five minutes before the scheduled start time. Investors can also access the call in a "listen only" mode via the Internet at the Company's website, www.pfsweb.com or www.kcsa.com. Please allow extra time prior to the call to visit the site and download any necessary audio software.

A digital replay of the conference call will be available through December 14, 2013 at (855) 859-2056, pin number 93467776. The replay also will be available at the Company's website for a limited time.

Non-GAAP Financial Measures

This news release may contain certain non-GAAP measures, including non-GAAP net income (loss), Earnings Before Interest, Income Taxes, Depreciation and Amortization ("EBITDA"), Adjusted EBITDA and Service Fee Equivalent Revenue.

Non-GAAP net income (loss) represents net income (loss) calculated in accordance with U.S. GAAP as adjusted for the impact of non-cash stock-based compensation expense, restructuring and other charges, lease termination costs and certain move related expenses.

EBITDA represents earnings (or losses) before interest, income taxes, depreciation, and amortization. Adjusted EBITDA further eliminates the effect of stock-based compensation, restructuring and other charges, lease termination costs and certain move related expenses.

Service Fee Equivalent Revenue represents service fee revenue plus the gross profit earned on product revenue.

Non-GAAP net income (loss), EBITDA, Adjusted EBITDA and Service Fee Equivalent Revenue are used by management, analysts, investors and other interested parties in evaluating our operating performance compared to that of other companies in our industry. The calculation of non-GAAP net income (loss) eliminates the effect of stock-based compensation, restructuring and other charges, lease termination costs and certain move related expenses and EBITDA and Adjusted EBITDA further eliminate the effect of financing, income taxes and the accounting effects of capital spending, which items may vary from different companies for reasons unrelated to overall operating performance. Service Fee Equivalent Revenue allows client contracts with similar operational support models but different financial models to be combined as if all contracts were being operated on a service fee revenue basis.

PFSweb believes these non-GAAP measures provide useful information to both management and investors by excluding certain expenses that may not be indicative of its core operating results. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. The non-GAAP measures included in this press release have been reconciled to the GAAP results in the attached tables.

About PFSweb, Inc.

PFSweb is engaged by iconic brands to enable and manage customized eCommerce and omni-channel commerce initiatives. PFSweb's iCommerce Hub(SM) technology ecosystem offers retailers a multi-channel order management system that allows partner/client data integration and international payment processing. PFSweb's iCommerce Professional Service(SM) provides interactive marketing services, eCommerce web site development and support services, IT development services, product content management, customer intelligence and relationship and account management services. PFSweb's iCommerce Centers of Excellence(SM) provides global fulfillment and logistics, high-touch customer care and client financial services.

Together, PFSweb's iCommerce Solutions allow for international reach and expertise in both direct-to-consumer and business-to-business initiatives. PFSweb supports organizations across multiple industries including Procter & Gamble, L'Oreal, LEGO, Columbia Sportswear, Sorel, Carter's, AAFES, Riverbed, Ricoh, Hawker Beechcraft Corp, Roots Canada Ltd., Diageo, BCBGMAXAZRIA, BCBGENERATION, HERVE LEGER BY MAX AZRIA, The TJX Companies, Inc., T.J. Maxx, and the United States Mint. PFSweb is headquartered in Allen, TX with additional locations in Tennessee, Mississippi, Canada, Belgium, and the Philippines.

To find out more about PFSweb (NASDAQ: PFSW), visit the company's website at http://www.PFSweb.com.

The matters discussed herein consist of forward-looking information under the Private Securities Litigation Reform Act of 1995 and is subject to and involves risks and uncertainties, which could cause actual results to differ materially from the forward-looking information. PFSweb's Annual Report on Form 10-K for the year ended December 31, 2012 and Quarterly Report on Form 10-Q for the three and six months ended June 30, 2013 identify certain factors that could cause actual results to differ materially from those projected in any forward looking statements made and investors are advised to review the Annual and Quarterly Reports of the Company and the Risk Factors described therein. PFSweb undertakes no obligation to update publicly any forward-looking statement for any reason, even if new information becomes available or other events occur in the future. There may be additional risks that we do not currently view as material or that are not presently known.

Contact:
Mike WilloughbyTodd Fromer / Garth Russell
Chief Executive Officer Investor Relations
or Thomas J. MaddenKCSA Strategic Communications
Chief Financial Officer (212) 896-1215 / (212) 896-1250
(972) 881-2900tfromer@kcsa.com / grussell@kcsa.com

PFSweb, Inc. and Subsidiaries

Preliminary Unaudited Condensed Consolidated Statements of Operations (A)

(In Thousands, Except Per Share Data)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2013

2012

2013

2012

REVENUES:

Product revenue, net

$ 21,495

$ 27,476

$ 69,660

$ 91,450

Service fee revenue

23,908

28,260

78,708

85,022

Pass-thru revenue

8,150

9,018

26,511

28,121

Total revenues

53,553

64,754

174,879

204,593

COSTS OF REVENUES:

Cost of product revenue

20,221

25,538

65,215

84,483

Cost of service fee revenue

16,196

20,777

53,265

63,130

Cost of pass-thru revenue

8,150

9,018

26,511

28,121

Total costs of revenues

44,567

55,333

144,991

175,734

Gross profit

8,986

9,421

29,888

28,859

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

10,656

9,401

34,395

29,807

Income (loss) from operations

(1,670)

20

(4,507)

(948)

INTEREST EXPENSE (INCOME), NET

162

236

564

758

Income (loss) before income taxes

(1,832)

(216)

(5,071)

(1,706)

INCOME TAX PROVISION (BENEFIT)

120

154

411

457

NET INCOME (LOSS)

$ (1,952)

$ (370)

$ (5,482)

$ (2,163)

NON-GAAP INCOME (LOSS)

$ (1,342)

$ (62)

$ (1,742)

$ 167

NET INCOME (LOSS) PER SHARE:

Basic

$ (0.12)

$ (0.03)

$ (0.38)

$ (0.17)

Diluted

$ (0.12)

$ (0.03)

$ (0.38)

$ (0.17)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:

Basic

16,121

12,783

14,490

12,777

Diluted

16,121

12,783

14,490

12,777

EBITDA

$ 767

$ 2,522

$ 3,026

$ 5,886

ADJUSTED EBITDA

$ 1,377

$ 2,830

$ 6,766

$ 8,216

(A) The financial data above should be read in conjunction with the audited consolidated financial statements ofPFSweb, Inc. included in its Form 10-K for the year ended December 31, 2012.

PFSweb, Inc. and Subsidiaries

Reconciliation of certain Non-GAAP Items to GAAP

(In Thousands, Except Per Share Data)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2013

2012

2013

2012

NET INCOME (LOSS)

$ (1,952)

$ (370)

$ (5,482)

$ (2,163)

Income tax expense

120

154

411

457

Interest expense, net

162

236

564

758

Depreciation and amortization

2,437

2,502

7,533

6,834

EBITDA

$ 767

$ 2,522

$ 3,026

$ 5,886

Stock-based compensation

610

308

1,195

1,014

Restructuring and other charges

-

-

2,545

-

Lease terminations costs

-

-

-

450

Move related expenses

-

-

-

866

ADJUSTED EBITDA

$ 1,377

$ 2,830

$ 6,766

$ 8,216

Three Months Ended

Nine Months Ended

September 30,

September 30,

2013

2012

2013

2012

NET INCOME (LOSS)

$ (1,952)

$ (370)

$ (5,482)

$ (2,163)

Stock-based compensation

610

308

1,195

1,014

Restructuring and other charges

-

-

2,545

-

Lease terminations costs

-

-

-

450

Move related expenses

-

-

-

866

NON-GAAP INCOME (LOSS)

$ (1,342)

$ (62)

$ (1,742)

$ 167

NET INCOME (LOSS) PER SHARE:

Basic

$ (0.12)

$ (0.03)

$ (0.38)

$ (0.17)

Diluted

$ (0.12)

$ (0.03)

$ (0.38)

$ (0.17)

NON-GAAP INCOME (LOSS) Per Share:

Basic

$ (0.08)

$ (0.00)

$ (0.12)

$ 0.01

Diluted

$ (0.08)

$ (0.00)

$ (0.12)

$ 0.01

Three Months Ended

Nine Months Ended

September 30,

September 30,

2013

2012

2013

2012

TOTAL REVENUES

$ 53,553

$ 64,754

$ 174,879

$ 204,593

Pass-thru revenue

(8,150)

(9,018)

(26,511)

(28,121)

Cost of product revenue

(20,221)

(25,538)

(65,215)

(84,483)

SERVICE FEE EQUIVALENT REVENUE

$ 25,182

$ 30,198

$ 83,153

$ 91,989

PFSweb, Inc. and Subsidiaries

Preliminary Unaudited Condensed Consolidated Balance Sheets

(In Thousands, Except Share Data)

September 30,

December 31,

2013

2012

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$ 21,293

$ 19,626

Restricted cash

466

283

Accounts receivable, net of allowance for doubtful accounts of $367 and
$450 at September 30, 2013 and December 31, 2012, respectively

37,715

45,684

Inventories, net of reserves of $1,688 and $1,789 atSeptember 30, 2013 and
December 31, 2012, respectively

17,326

24,654

Other receivables

7,645

7,675

Prepaid expenses and other current assets

4,590

4,346

Total current assets

89,035

102,268

PROPERTY AND EQUIPMENT, net

26,667

27,917

OTHER ASSETS

2,880

3,286

Total assets

118,582

133,471

LIABILITIES AND SHAREHOLDERS EQUITY

CURRENT LIABILITIES:

Current portion of long-term debt and capital lease
obligations

$ 8,820

$ 16,660

Trade accounts payable

26,153

40,493

Deferred revenue

9,166

6,648

Accrued expenses

21,299

23,097

Total current liabilities

65,438

86,898

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion

3,473

5,400

DEFERRED REVENUE

6,177

7,562

DEFERRED RENT

5,142

5,560

Total liabilities

80,230

105,420

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:

Preferred stock, $1.00 par value; 1,000,000 shares
authorized; none issued and outstanding

-

-

Common stock, $.001 par value; 35,000,000 shares authorized;
16,199,431 and 12,812,386 shares issued at September 30, 2013 and
December 31, 2012, respectively; and 16,165,964 and 12,778,919
shares outstanding as of September 30, 2013 and
December 31, 2012, respectively

16

13

Additional paid-in capital

121,663

106,018

Accumulated deficit

(84,891)

(79,409)

Accumulated other comprehensive income

1,689

1,554

Treasury stock at cost, 33,467 shares

(125)

(125)

Total shareholders' equity

38,352

28,051

Total liabilities and shareholders' equity

$ 118,582

$ 133,471

PFSweb, Inc. and Subsidiaries

Preliminary Unaudited Consolidating Statements of Operations

For the Three Months Ended September 30, 2013

(In Thousands)

Business &

PFSweb

Retail Connect

Eliminations

Consolidated

REVENUES:

Product revenue, net

$ -

$ 21,495

$ -

$ 21,495

Service fee revenue

22,123

1,785

-

23,908

Service fee revenue - affiliate

2,198

312

(2,510)

-

Pass-thru revenue

8,150

-

-

8,150

Total revenues

32,471

23,592

(2,510)

53,553

COSTS OF REVENUES:

Cost of product revenue

-

20,221

-

20,221

Cost of service fee revenue

16,634

1,862

(2,300)

16,196

Cost of pass-thru revenue

8,150

-

-

8,150

Total costs of revenues

24,784

22,083

(2,300)

44,567

Gross profit

7,687

1,509

(210)

8,986

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

9,510

1,356

(210)

10,656

Income (loss) from operations

(1,823)

153

-

(1,670)

INTEREST EXPENSE (INCOME), NET

11

151

-

162

Income (loss) before income taxes

(1,834)

2

-

(1,832)

INCOME TAX PROVISION (BENEFIT)

58

62

120

NET INCOME (LOSS)

$ (1,892)

$ (60)

$ -

$ (1,952)

NON-GAAP NET INCOME (LOSS)

$ (1,282)

$ (60)

$ -

$ (1,342)

EBITDA

$ 576

$ 191

$ -

$ 767

ADJUSTED EBITDA

$ 1,186

$ 191

$ -

$ 1,377

A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:

NET INCOME (LOSS)

$ (1,892)

$ (60)

$ -

(1,952)

Income tax expense (benefit)

58

62

-

120

Interest expense (income), net

11

151

-

162

Depreciation and amortization

2,399

38

-

2,437

EBITDA

$ 576

$ 191

$ -

$ 767

Stock-based compensation

610

-

-

610

Restructuring and other charges

-

-

-

-

ADJUSTED EBITDA

$ 1,186

$ 191

$ -

$ 1,377

A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:

NET INCOME (LOSS)

$ (1,892)

$ (60)

$ -

$ (1,952)

Stock-based compensation

610

-

-

610

Restructuring and other charges

-

-

-

-

NON-GAAP NET INCOME (LOSS)

$ (1,282)

$ (60)

$ -

$ (1,342)

Note: Business and Retail Connect includes our Supplies Distributors and PFSweb Retail Connect operations, which operate similar financial models on behalf of our client relationships.

PFSweb, Inc. and Subsidiaries

Preliminary Unaudited Consolidating Statements of Operations

For the Nine Months Ended September 30, 2013

(In Thousands)

Business &

PFSweb

Retail Connect

Eliminations

Consolidated

REVENUES:

Product revenue, net

$ -

$ 69,660

$ -

$ 69,660

Service fee revenue

73,868

4,840

-

78,708

Service fee revenue - affiliate

6,467

1,110

(7,577)

-

Pass-thru revenue

26,511

-

-

26,511

Total revenues

106,846

75,610

(7,577)

174,879

COSTS OF REVENUES:

Cost of product revenue

-

65,215

-

65,215

Cost of service fee revenue

54,815

5,161

(6,711)

53,265

Cost of pass-thru revenue

26,511

-

-

26,511

Total costs of revenues

81,326

70,376

(6,711)

144,991

Gross profit

25,520

5,234

(866)

29,888

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

30,673

4,588

(866)

34,395

Income (loss) from operations

(5,153)

646

-

(4,507)

INTEREST EXPENSE (INCOME), NET

113

451

-

564

Income (loss) before income taxes

(5,266)

195

-

(5,071)

INCOME TAX PROVISION (BENEFIT)

200

211

-

411

NET INCOME (LOSS)

$ (5,466)

$ (16)

$ -

$ (5,482)

NON-GAAP NET INCOME (LOSS)

$ (1,726)

$ (16)

$ -

$ (1,742)

EBITDA

$ 2,264

$ 762

$ -

$ 3,026

ADJUSTED EBITDA

$ 6,004

$ 762

$ -

$ 6,766

A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:

NET INCOME (LOSS)

$ (5,466)

$ (16)

$ -

(5,482)

Income tax expense (benefit)

200

211

-

411

Interest expense (income), net

113

451

-

564

Depreciation and amortization

7,417

116

-

7,533

EBITDA

$ 2,264

$ 762

$ -

$ 3,026

Stock-based compensation

1,195

-

-

1,195

Restructuring and other charges

2,545

-

-

2,545

ADJUSTED EBITDA

$ 6,004

$ 762

$ -

$ 6,766

A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:

NET INCOME (LOSS)

$ (5,466)

$ (16)

$ -

$ (5,482)

Stock-based compensation

1,195

-

-

1,195

Restructuring and other charges

2,545

-

-

2,545

NON-GAAP NET INCOME (LOSS)

$ (1,726)

$ (16)

$ -

$ (1,742)

Note: Business and Retail Connect includes our Supplies Distributors and PFSweb Retail Connect operations, which operate similar financial models on behalf of our client relationships.

PFSweb, Inc. and Subsidiaries

Unaudited Consolidating Statements of Operations

For the Three Months Ended September 30, 2012

(In Thousands)

Business &

PFSweb

Retail Connect

Eliminations

Consolidated

REVENUES:

Product revenue, net

$ -

$ 27,476

$ -

$ 27,476

Service fee revenue

28,260

-

-

28,260

Service fee revenue - affiliate

1,034

143

(1,177)

-

Pass-thru revenue

9,018

-

-

9,018

Total revenues

38,312

27,619

(1,177)

64,754

COSTS OF REVENUES:

Cost of product revenue

-

25,538

-

25,538

Cost of service fee revenue

21,336

143

(702)

20,777

Cost of pass-thru revenue

9,018

-

-

9,018

Total costs of revenues

30,354

25,681

(702)

55,333

Gross profit

7,958

1,938

(475)

9,421

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

8,526

1,350

(475)

9,401

Income (loss) from operations

(568)

588

-

20

INTEREST EXPENSE (INCOME), NET

49

187

-

236

Income (loss) before income taxes

(617)

401

-

(216)

INCOME TAX PROVISION (BENEFIT)

(23)

177

-

154

NET INCOME (LOSS)

$ (594)

$ 224

$ -

$ (370)

NON-GAAP NET INCOME (LOSS)

$ (286)

$ 224

$ -

$ (62)

EBITDA

$ 1,908

$ 614

$ -

$ 2,522

ADJUSTED EBITDA

$ 2,216

$ 614

$ -

$ 2,830

A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:

NET INCOME (LOSS)

$ (594)

$ 224

$ -

(370)

Income tax expense (benefit)

(23)

177

-

154

Interest expense (income), net

49

187

-

236

Depreciation and amortization

2,476

26

-

2,502

EBITDA

$ 1,908

$ 614

$ -

$ 2,522

Stock-based compensation

308

-

-

308

ADJUSTED EBITDA

$ 2,216

$ 614

$ -

$ 2,830

A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:

NET INCOME (LOSS)

$ (594)

$ 224

$ -

$ (370)

Stock-based compensation

308

-

-

308

NON-GAAP NET INCOME (LOSS)

$ (286)

$ 224

$ -

$ (62)

Note: Business and Retail Connect includes our Supplies Distributors and PFSweb Retail Connect operations, which operate similar financial models on behalf of our client relationships.

PFSweb, Inc. and Subsidiaries

Unaudited Consolidating Statements of Operations

For the Nine Months Ended September 30, 2012

(In Thousands)

Business &

PFSweb

Retail Connect

Eliminations

Consolidated

REVENUES:

Product revenue, net

$ -

$ 91,450

$ -

$ 91,450

Service fee revenue

85,022

-

-

85,022

Service fee revenue - affiliate

3,620

451

(4,071)

-

Pass-thru revenue

28,121

-

28,121

Total revenues

116,763

91,901

(4,071)

204,593

COSTS OF REVENUES:

Cost of product revenue

-

84,483

-

84,483

Cost of service fee revenue

64,879

451

(2,200)

63,130

Cost of pass-thru revenue

28,121

-

-

28,121

Total costs of revenues

93,000

84,934

(2,200)

175,734

Gross profit

23,763

6,967

(1,871)

28,859

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

26,659

5,019

(1,871)

29,807

Income (loss) from operations

(2,896)

1,948

-

(948)

INTEREST EXPENSE (INCOME), NET

140

618

-

758

Income (loss) before income taxes

(3,036)

1,330

-

(1,706)

INCOME TAX PROVISION (BENEFIT)

(92)

549

-

457

NET INCOME (LOSS)

$ (2,944)

$ 781

$ -

$ (2,163)

NON-GAAP NET INCOME (LOSS)

$ (614)

$ 781

$ -

$ 167

EBITDA

$ 3,872

$ 2,014

$ -

$ 5,886

ADJUSTED EBITDA

$ 6,202

$ 2,014

$ -

$ 8,216

A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:

NET INCOME (LOSS)

$ (2,944)

$ 781

$ -

(2,163)

Income tax expense (benefit)

(92)

549

-

457

Interest expense (income), net

140

618

-

758

Depreciation and amortization

6,768

66

-

6,834

EBITDA

$ 3,872

$ 2,014

$ -

$ 5,886

Stock-based compensation

1,014

-

-

1,014

Lease termination costs

450

-

-

450

Move related expenses

866

866

ADJUSTED EBITDA

$ 6,202

$ 2,014

$ -

$ 8,216

A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:

NET INCOME (LOSS)

$ (2,944)

$ 781

$ -

$ (2,163)

Stock-based compensation

1,014

-

-

1,014

Lease termination costs

450

-

-

450

Move related expenses

866

866

NON-GAAP NET INCOME (LOSS)

$ (614)

$ 781

$ -

$ 167

Note: Business and Retail Connect includes our Supplies Distributors and PFSweb Retail Connect operations, which operate similar financial models on behalf of our client relationships.

PFSweb, Inc. and Subsidiaries

Unaudited Condensed Consolidating Balance Sheets

as of September 30, 2013

(In Thousands)

Business &

PFSweb

Retail Connect

Eliminations

Consolidated

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$ 14,845

$ 6,448

$ -

$ 21,293

Restricted cash

-

466

-

466

Accounts receivable, net

26,840

11,600

(725)

37,715

Inventories, net

-

17,326

-

17,326

Other receivables

-

7,645

-

7,645

Prepaid expenses and other current assets

3,204

1,386

-

4,590

Total current assets

44,889

44,871

(725)

89,035

PROPERTY AND EQUIPMENT, net

26,406

261

-

26,667

RECEIVABLE/INVESTMENT IN AFFILIATES

13,992

-

(13,992)

OTHER ASSETS

2,787

93

-

2,880

Total assets

88,074

45,225

(14,717)

118,582

LIABILITIES AND SHAREHOLDERS EQUITY

CURRENT LIABILITIES:

Current portion of long-term debt and capital lease obligations

$ 4,094

$ 4,726

$ -

$ 8,820

Trade accounts payable

6,142

20,736

(725)

26,153

Deferred revenue

9,161

5

-

9,166

Accrued expenses

15,306

5,993

-

21,299

Total current liabilities

34,703

31,460

(725)

65,438

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion

3,473

-

-

3,473

PAYABLE TO AFFILIATES

-

23,045

(23,045)

DEFERRED REVENUE

6,177

-

-

6,177

DEFERRED RENT

5,142

-

-

5,142

Total liabilities

49,495

54,505

(23,770)

80,230

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:

Common stock

16

19

(19)

16

Capital contributions

-

1,000

(1,000)

Additional paid-in capital

121,663

28,060

(28,060)

121,663

Retained earnings (accumulated deficit)

(84,664)

(40,623)

40,396

(84,891)

Accumulated other comprehensive income

1,689

2,264

(2,264)

1,689

Treasury stock

(125)

-

-

(125)

Total shareholders' equity

38,579

(9,280)

9,053

38,352

Total liabilities and shareholders' equity

$ 88,074

$ 45,225

$ (14,717)

$ 118,582

PFSweb, Inc. and Subsidiaries

Unaudited Condensed Consolidating Balance Sheets

as of December 31, 2012

(In Thousands)

Business &

PFSweb

Retail Connect

Eliminations

Consolidated

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$ 13,079

$ 6,547

$ -

$ 19,626

Restricted cash

-

283

-

283

Accounts receivable, net

34,831

11,574

(721)

45,684

Inventories, net

-

24,654

-

24,654

Other receivables

-

7,675

-

7,675

Prepaid expenses and other current assets

2,817

1,529

-

4,346

Total current assets

50,727

52,262

(721)

102,268

PROPERTY AND EQUIPMENT, net

27,651

266

-

27,917

RECEIVABLE/INVESTMENT IN AFFILIATES

13,396

-

(13,396)

-

OTHER ASSETS

3,166

120

-

3,286

Total assets

94,940

52,648

(14,117)

133,471

LIABILITIES AND SHAREHOLDERS EQUITY

CURRENT LIABILITIES:

Current portion of long-term debt and capital lease obligations

$ 13,072

$ 3,588

$ -

$ 16,660

Trade accounts payable

12,109

29,105

(721)

40,493

Deferred revenue

6,573

75

-

6,648

Accrued expenses

16,743

6,354

-

23,097

Total current liabilities

48,497

39,122

(721)

86,898

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion

5,400

-

-

5,400

PAYABLE TO AFFILIATES

-

22,795

(22,795)

-

DEFERRED REVENUE

7,562

-

-

7,562

DEFERRED RENT

5,482

78

-

5,560

Total liabilities

66,941

61,995

(23,516)

105,420

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:

Common stock

13

19

(19)

13

Capital contributions

-

1,000

(1,000)

-

Additional paid-in capital

106,018

28,059

(28,059)

106,018

Retained earnings (accumulated deficit)

(79,461)

(40,606)

40,658

(79,409)

Accumulated other comprehensive income

1,554

2,181

(2,181)

1,554

Treasury stock

(125)

-

-

(125)

Total shareholders' equity

27,999

(9,347)

9,399

28,051

Total liabilities and shareholders' equity

$ 94,940

$ 52,648

$ (14,117)

$ 133,471

SOURCE PFSweb, Inc.

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