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

PFSweb, Inc.

(Exact name of registrant as specified in its charter)

Delaware (STATE OR OTHER JURISDICTION OF INCORPORATION)		000-28275 (COMMISSION FILE NUMBER)		75-2837058 (IRS EMPLOYER IDENTIFICATION NO.)

500 NORTH CENTRAL EXPRESSWAY
PLANO, TX 75074
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(972) 881-2900
(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE )

N/A
(FORMER NAME OR 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:

o Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

INFORMATION TO BE INCLUDED IN THE REPORT

ITEM 2.02. Results of Operations and Financial Condition

     On November 14, 2008, PFSweb, Inc. issued a press release announcing its financial results for the quarter ended September 30, 2008. Attached to this current report on Form 8-K is a copy of the related press release dated November 14, 2008. The information in this Report on Form 8-K, and the exhibit hereto, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section.

Exhibit No.		Description
99.1		Press Release Issued November 14, 2008

SIGNATURE

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.

		PFSweb, Inc.
Dated: November 17, 2008		By:	/s/ Thomas J. Madden
			Thomas J. Madden
			Executive Vice President, Chief Financial and Accounting Officer

Exhibit 99.1

FOR IMMEDIATE RELEASE

Contact:
Mark C. Layton		Todd Fromer / Garth Russell
Senior Partner and Chief Executive Officer		Investor Relations
Or Thomas J. Madden		KCSA Strategic Communications
Senior Partner and Chief Financial Officer		(212) 896-1215 / (212) 896-1250
(972) 881-2900		tfromer@kcsa.com / grussell@kcsa.com

PFSweb Reports Profitable Third Quarter 2008 Results

- - -

Service Fee Revenue Increases 24% to $23 million

PLANO, Texas, November 14, 2008 — PFSweb, Inc. (Nasdaq: PFSW), an international business process outsourcing provider of end-to-end web commerce solutions and an online discount retailer, today announced its financial results for the third quarter and nine months ended September 30, 2008.

Summary of consolidated results for the third quarter ended September 30, 2008:

	•		Total reported revenue was $109.9 million, compared to $112.0 million for the third quarter of 2007;
	•		Adjusted EBITDA (as defined) was $2.5 million versus $3.2 million for the same period last year;
	•		Net income was $43,000, or $0.00 per basic and diluted share, compared $162,000, or $0.02 per basic and diluted share, for the third quarter of 2007;
	•		Non-GAAP net income (as defined) was $0.4 million, or $0.04 per basic and diluted share, compared to non-GAAP net income of $0.5 million, or $0.05 per basic and diluted share, for the third quarter of 2007;
	•		Merchandise sales (as defined) totaled approximately $713 million for the third quarter of 2008 versus $751 million for the same period last year;
	•		Total cash, cash equivalents and restricted cash equaled $17.5 million as of September 30, 2008 compared to $16.3 million as of December 31, 2007.

Summary of consolidated results for the nine months ended September 30, 2008:

	•		Total reported revenue was $339.1 million, compared to $324.8 million for the nine months ended September 30, 2007;
	•		Adjusted EBITDA (as defined) was $7.7 million versus $7.3 million for the same period last year;
	•		Net income was $0.5 million, or $0.05 per basic and diluted share, compared to a net loss of $2.0 million, or $0.21 per basic and diluted share, for the nine months ended September 30, 2007;

	•		Non-GAAP net income (as defined) was $1.6 million, or $0.16 per basic and diluted share, compared to a non-GAAP net loss of $0.9 million, or $0.09 per basic and diluted share, for the same period last year;
	•		Merchandise sales (as defined) totaled nearly $2.1 billion in both the 2008 and 2007 nine month periods ended September 30.

Mark Layton, Chairman and Chief Executive Officer of PFSweb, stated, “We are pleased to announce that the third quarter of 2008 represents our sixth consecutive quarter of profitability, which was driven by another strong quarter of measurable growth in our Service Fee business. These positive results are especially significant when considering the economic challenges currently facing the global economy.”

All share data and per share data in this press release reflects the impact of the Company’s 1 for 4.7 reverse stock split effective June 2, 2008.

Summary of results by business:

Service Fee Business:

For the third quarter of 2008, Service Fee revenue increased 24% to $22.9 million, compared with $18.4 million for the same period in 2007. The Service Fee business reported Adjusted EBITDA of $1.5 million for the third quarter of 2008, compared to $2.0 million for the same period last year.

For the nine months ended September 30, 2008, Service Fee revenue increased 23% to $65.0 million, from $53.0 million for the same period in 2007. The Service Fee business reported Adjusted EBITDA of $4.2 million for the nine months ended September 30, 2008, compared to $4.3 million for the same period last year.

Mike Willoughby, President of PFSweb’s services division, commented, “Our Service Fee revenue growth for both the three and nine months ended September 30, 2008 is attributable to new contracts, temporary increased activity occurring from January 2008 and ending September 2008 for our U.S. government contract and incremental project activity.

We continue to sign new Service Fee clients and maintain a robust pipeline of potential new business, which is currently in excess of $30 million. In particular, as announced last week, we recently signed agreements with several luxury goods and fashion apparel companies, and plan to launch their programs throughout 2009. Further, our business remains competitive internationally, especially in Europe where we just launched a program for Comptoir des Cotonniers. We are excited about the success we are experiencing in engaging new clients and prospects with the end-to-end ecommerce offering we unveiled earlier this year. This new business is targeted to partially offset the impact of the non-renewal, effective early in 2009, of a large client engagement with an agency of the U.S. government. This nonrenewal, as well as the continuing economic downturn, will affect our service fee revenue and growth outlook for 2009, although our flexible business model should permit us to reduce some of our variable costs and redeploy a portion of our existing infrastructure to other client activities to partially offset the impact of these events.”

Supplies Distributors Business:

For the third quarter of 2008, Supplies Distributors revenue was $55.4 million, compared to $58.3 million for the same period last year. Adjusted EBITDA was $1.4 million for the third quarter of 2008, relatively consistent with $1.6 million for the same period last year.

For the nine months ended September 30, 2008, Supplies Distributors revenue was $177.8 million, compared to $174.7 million for the same period last year. Adjusted EBITDA was $5.1 million for the nine months ended September 30, 2008, a slight increase compared to $5.0 million for the same period last year.

Mr. Willoughby continued, “Our Supplies Distributors business continues to perform well and meet our Adjusted EBITDA expectations. Revenue for the 2008 nine month period reflects an increase year over year due to the negative impact of foreign currency fluctuations during the 2007 period that created alternative purchasing channels for certain customers, which did not occur in 2008.”

eCOST.com Business:

For the third quarter of 2008, eCOST.com revenue was $23.7 million, compared to $27.0 million for the same period in 2007. Adjusted EBITDA for eCOST.com in the quarter was a loss of $0.5 million, relatively consistent with the Adjusted EBITDA loss of $0.4 million for the same period last year.

For the nine months ended September 30, 2008, eCOST.com revenues were $74.7 million, compared to $75.7 million for the same period in 2007. Adjusted EBITDA for eCOST.com in the nine months ended September 30, 2008 was a loss of $1.7 million, compared to a loss of $1.9 million for the same period last year.

Mr. Layton continued, “While eCOST.com’s revenue declined $4 million for the quarter, we are pleased to report that our business-to-consumer (B2C) segment, which now represents 60% of eCOST.com’s revenue, increased 9% over the same period in the prior year. Because of the more attractive financial characteristics of this B2C segment, including a higher gross margin, we expect to continue to place increased focus on further improving product breath, daily deal offerings and overall service to this segment. This past week, eCOST.com unveiled a number of significant enhancements to its website. These enhancements include a feature packed new edition of our patented Bargain Countdown™ shopping section, 10,000 new products in the office equipment and supply category, and a new, rich shopping cart and checkout experience. Collectively, these improvements will provide shoppers at eCOST.com improved functionality, shopping speed and overall customer experience just in time for the holiday season.”

Financial Targets for Fiscal Year 2008

As announced on November 7, 2008, PFSweb’s consolidated financial targets for the year ended December 31, 2008 are total consolidated revenues for 2008 excluding pass-through revenues, of approximately $425 million to $440 million; Adjusted EBITDA of $10 – $12 million; and non-GAAP net income, which excludes the impact of stock-based compensation and amortization of identifiable intangible assets, of approximately $1 — $3 million for 2008.  Further weakening in worldwide economic conditions may cause the Company to fall toward the lower end of these targets.

Conference Call Information

Management will host a conference call at 9:30 a.m. Central Time (10:30 a.m. Eastern Time) on November 14, 2008 to discuss the latest corporate developments and results. To listen to the call, please dial (888) 562-3356 and enter the pin number (72555898) 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. 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, 2008 at (800) 642-1687, pin number (72555898). The replay also will be available at the Company’s website for a limited time.

Non-GAAP Financial Measures

This news release contains the non-GAAP measures non-GAAP net income (loss), Earnings Before Interest, Income Taxes, Depreciation and Amortization (“EBITDA”), and Adjusted EBITDA.

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 and amortization of identifiable intangible assets.

EBITDA represents earnings (or losses) before interest, income taxes, depreciation, and amortization. Adjusted EBITDA further eliminates the effect of stock-based compensation and merger integration related expenses.

Non-GAAP net income (loss), EBITDA and Adjusted EBITDA are used by management, analysts, investors and other interested parties in evaluating our operating performance compared to that of other companies in our industry, as the calculation of non-GAAP net income (loss) eliminates the effect of stock-based compensation and amortization of intangible assets and EBITDA and Adjusted EBITDA further eliminates the effect of financing, income taxes, the accounting effects of capital spending and certain other merger related expenses, which items may vary from different companies for reasons unrelated to overall operating performance.

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. These non-GAAP measures included in this press release have been reconciled to the GAAP results in the attached tables.

Merchandise Sales

Merchandise sales represent the estimated value of all fulfillment activity that flows through PFSweb including whether or not PFSweb is the seller of the merchandise or records the full amount of such sales on its financial statements, excluding service fee revenues that PFSweb might recognize for the underlying sales transactions. PFSweb uses merchandise sales as an operating metric to allow investors to gain a more thorough understanding of its business and business volume, in addition to GAAP net revenue.

About PFSweb, Inc.

PFSweb develops and deploys integrated business infrastructure solutions and fulfillment services for Fortune 1000, Global 2000 and brand name companies, including third party logistics, call center support and e-commerce services. The company serves a multitude of industries and company types, including such clients as LEGO, Discovery Commerce, Riverbed, Hewlett-Packard, International Business Machines, Hawker Beechcraft Corp., Rene Furterer USA, Roots Canada Ltd. and Xerox.

Through its wholly owned eCOST.com subsidiary, PFSweb also serves as a leading multi-category online discount retailer of high-quality new, “close-out” and manufacturer recertified brand-name merchandise for consumers and small to medium size business buyers. The eCOST.com brand markets approximately 200,000 different products from leading manufacturers such as Sony, Hewlett-Packard, Onkyo, Denon, JVC, Canon, Nikon, Panasonic, Toshiba, Microsoft, Dyson, Kitchen Aid, Braun, Black & Decker, Cuisinart, Coleman,  and Citizen primarily over the Internet and through direct marketing.

To find out more about PFSweb, Inc. (NASDAQ: PFSW), visit the company’s websites at http://www.pfsweb.com and http://www.ecost.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, 2007 and Quarterly Report on From 10-Q for the quarter ended September 30, 2008 identifies 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 Report and the Risk Factors described therein. These factors include: our ability to retain and expand relationships with existing clients and attract and implement new clients; our reliance on the fees generated by the transaction volume or product sales of our clients; our reliance on our clients’ projections or transaction volume or product sales; our dependence upon our agreements with IBM and Infoprint Solutions; our dependence upon our agreements with our major clients; our client mix, their business volumes and the seasonality of their business; our ability to finalize pending contracts; the impact of strategic alliances and acquisitions; trends in the e-commerce, outsourcing, government regulation both foreign and domestic and the market for our services; whether we can continue and manage growth; increased competition; our ability to generate more revenue and achieve sustainable profitability; effects of changes in profit margins; the customer and supplier concentration of our business; the unknown effects of possible system failures and rapid changes in technology; foreign currency risks and other risks of operating in foreign countries; potential litigation; the impact of our reverse stock split; our dependency on key personnel; the impact of new accounting standards and changes in existing accounting rules or the interpretations of those rules; our ability to renew or replace our credit facilities or find alternative financing; our ability to raise additional capital or obtain additional financing; our ability and the ability of our subsidiaries to borrow under current financing arrangements and maintain compliance with debt covenants; relationship with and our guarantees of certain of the liabilities and indebtedness of our subsidiaries; our ability to successfully achieve the anticipated benefits of the eCOST merger; eCOST’s potential indemnification obligations to its former parent; eCOST’s ability to maintain existing and build new relationships with manufacturers and vendors and the success of its advertising and marketing efforts; eCOST’s ability to increase its sales revenue and sales margin and improve operating efficiencies and eCOST’s ability to generate a profit and cash flows sufficient to cover the values of its intangible assets. 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.

(Tables Follow)

PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations (A)
(In Thousands, Except Per Share Data)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
REVENUES:
Product revenue, net		$	79,157			$	85,263			$	252,496			$	250,398
Service fee revenue			22,900				18,398				64,966				53,006
Pass-thru revenue			7,852				8,334				21,600				21,398
Total revenues			109,909				111,995				339,062				324,802
COSTS OF REVENUES:
Cost of product revenue			73,128				78,874				233,475				231,443
Cost of service fee revenue			15,588				12,912				44,537				38,211
Cost of pass-thru revenue			7,852				8,334				21,600				21,398
Total costs of revenues			96,568				100,120				299,612				291,052
Gross profit			13,341				11,875				39,450				33,750
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			12,454				10,678				36,397				32,493
MERGER INTEGRATION EXPENSE			—				—				—				150
AMORTIZATION OF IDENTIFIABLE INTANGIBLES			202				204				605				612
Total operating expenses			12,656				10,882				37,002				33,255
Income (loss) from operations			685				993				2,448				495
INTEREST EXPENSE, NET			426				615				1,123				1,857
Income (loss) before income taxes			259				378				1,325				(1,362	)
INCOME TAX PROVISION			216				216				806				683
NET INCOME (LOSS)		$	43			$	162			$	519			$	(2,045	)
NET INCOME (LOSS) PER SHARE (B)
Basic		$	0.00			$	0.02			$	0.05			$	(0.21	)
Diluted		$	0.00			$	0.02			$	0.05			$	(0.21	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (B):
Basic			9,913				9,889				9,902				9,889
Diluted			9,972				10,113				9,991				9,889
NON-GAAP NET INCOME (LOSS)		$	354			$	538			$	1,562			$	(863	)
EBITDA		$	2,361			$	3,014			$	7,267			$	6,603
ADJUSTED EBITDA		$	2,470			$	3,186			$	7,705			$	7,323

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,
		2008				2007				2008				2007
NET INCOME (LOSS)		$	43			$	162			$	519			$	(2,045	)
Income tax expense			216				216				806				683
Interest expense			426				615				1,123				1,857
Depreciation and amortization			1,676				2,021				4,819				6,108
EBITDA		$	2,361			$	3,014			$	7,267			$	6,603
Stock-based compensation			109				172				438				570
Merger integration related expenses			—				—				—				150
ADJUSTED EBITDA		$	2,470			$	3,186			$	7,705			$	7,323

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
NET INCOME (LOSS)		$	43			$	162			$	519			$	(2,045	)
Stock-based compensation			109				172				438				570
Amortization of identifiable intangible assets			202				204				605				612
NON-GAAP NET INCOME (LOSS)		$	354			$	538			$	1,562			$	(863	)
NET INCOME (LOSS) PER SHARE:
Basic		$	0.00			$	0.02			$	0.05			$	(0.21	)
Diluted		$	0.00			$	0.02			$	0.05			$	(0.21	)
NON-GAAP NET INCOME (LOSS) Per Share:
Basic		$	0.04			$	0.05			$	0.16			$	(0.09	)
Diluted		$	0.04			$	0.05			$	0.16			$	(0.09	)

PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(In Thousands, Except Share Data)

		September 30,				December 31,
		2008				2007
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	14,701			$	14,272
Restricted cash			2,780				2,021
Accounts receivable, net of allowance for doubtful accounts of $875 and $1,483 at September 30, 2008 and December 31, 2007, respectively			41,064				48,493
Inventories, net of reserves of $2,205 and $2,080 at September 30, 2008 and December 31, 2007, respectively			50,005				46,392
Other receivables			12,253				10,372
Prepaid expenses and other current assets			3,126				2,608
Total current assets			123,929				124,158
PROPERTY AND EQUIPMENT, net			12,422				11,918
IDENTIFIABLE INTANGIBLES			5,219				5,824
GOODWILL			15,362				15,362
OTHER ASSETS			990				911
Total assets			157,922				158,173
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations		$	20,802			$	22,238
Trade accounts payable			62,860				56,975
Accrued expenses			21,265				22,438
Total current liabilities			104,927				101,651
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion			2,535				6,378
OTHER LIABILITIES			991				1,302
Total liabilities			108,453				109,331
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; 75,000,000 shares authorized; 9,931,137 and 9,909,401 shares issued at September 30, 2008 and December 31, 2007, respectively; and 9,912,776 and 9,891,040 outstanding as of September 30, 2008 and December 31, 2007, respectively			10				10
Additional paid-in capital			92,610				92,121
Accumulated deficit			(45,219	)			(45,738	)
Accumulated other comprehensive income			2,153				2,534
Treasury stock at cost, 18,361 shares			(85	)			(85	)
Total shareholders’equity			49,469				48,842
Total liabilities and shareholders’ equity		$	157,922			$	158,173

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Three Months Ended September 30, 2008
(In Thousands)

						Supplies
		PFSweb				Distributors				eCOST				Eliminations				Consolidated
REVENUES:
Product revenue, net		$	—			$	55,448			$	23,709			$	—			$	79,157
Service fee revenue			22,900				—				—				—				22,900
Service fee revenue — affiliate			1,886				—				—				(1,886	)			—
Pass-thru revenue			7,859				—				—				(7	)			7,852
Total revenues			32,645				55,448				23,709				(1,893	)			109,909
COSTS OF REVENUES:
Cost of product revenue			—				51,604				21,524				—				73,128
Cost of service fee revenue			16,265				—				—				(677	)			15,588
Cost of pass-thru revenue			7,859				—				—				(7	)			7,852
Total costs of revenues			24,124				51,604				21,524				(684	)			96,568
Gross profit			8,521				3,844				2,185				(1,209	)			13,341
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			8,515				2,417				2,731				(1,209	)			12,454
AMORTIZATION OF IDENTIFIABLE INTANGIBLES			—				—				202				—				202
Total operating expenses			8,515				2,417				2,933				(1,209	)			12,656
Income (loss) from operations			6				1,427				(748	)			—				685
INTEREST EXPENSE (INCOME), NET			(50	)			466				10				—				426
Income (loss) before income taxes			56				961				(758	)			—				259
INCOME TAX PROVISION (BENEFIT)			(213	)			429				—				—				216
NET INCOME (LOSS)		$	269			$	532			$	(758	)		$	—			$	43
NON-GAAP NET INCOME (LOSS)		$	378			$	532			$	(556	)		$	—			$	354
EBITDA		$	1,432			$	1,429			$	(500	)		$	—			$	2,361
ADJUSTED EBITDA		$	1,541			$	1,429			$	(500	)		$	—			$	2,470
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
NET INCOME (LOSS)		$	269			$	532			$	(758	)		$	—			$	43
Income tax expense (benefit)			(213	)			429				—				—				216
Interest expense (income)			(50	)			466				10				—				426
Depreciation and amortization			1,426				2				248				—				1,676
EBITDA		$	1,432			$	1,429			$	(500	)		$	—			$	2,361
Stock-based compensation			109				—				—				—				109
ADJUSTED EBITDA		$	1,541			$	1,429			$	(500	)		$	—			$	2,470
A reconciliation of NET INCOME(LOSS) to NON-GAAP NET INCOME (LOSS) follows:
NET INCOME (LOSS)		$	269			$	532			$	(758	)		$	—			$	43
Stock-based compensation			109				—				—				—				109
Amortization of intangible assets			—				—				202				—				202
NON-GAAP NET INCOME (LOSS)		$	378			$	532			$	(556	)		$	—			$	354

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Nine Months Ended September 30, 2008
(In Thousands)

						Supplies
		PFSweb				Distributors				eCOST				Eliminations				Consolidated
REVENUES:
Product revenue, net		$	—			$	177,795			$	74,701			$	—			$	252,496
Service fee revenue			64,966				—				—				—				64,966
Service fee revenue — affiliate			6,106				—				—				(6,106	)			—
Pass-thru revenue			21,565				—				—				35				21,600
Total revenues			92,637				177,795				74,701				(6,071	)			339,062
COSTS OF REVENUES:
Cost of product revenue			—				165,103				68,372				—				233,475
Cost of service fee revenue			46,587				—				—				(2,050	)			44,537
Cost of pass-thru revenue			21,565				—				—				35				21,600
Total costs of revenues			68,152				165,103				68,372				(2,015	)			299,612
Gross profit			24,485				12,692				6,329				(4,056	)			39,450
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			24,774				7,556				8,123				(4,056	)			36,397
AMORTIZATION OF IDENTIFIABLE INTANGIBLES			—				—				605				—				605
Total operating expenses			24,774				7,556				8,728				(4,056	)			37,002
Income (loss) from operations			(289	)			5,136				(2,399	)			—				2,448
INTEREST EXPENSE (INCOME), NET			(110	)			1,216				17				—				1,123
Income (loss) before income taxes			(179	)			3,920				(2,416	)			—				1,325
INCOME TAX PROVISION (BENEFIT)			(658	)			1,464				—				—				806
NET INCOME (LOSS)		$	479			$	2,456			$	(2,416	)		$	—			$	519
NON-GAAP NET INCOME (LOSS)		$	917			$	2,456			$	(1,811	)		$	—			$	1,562
EBITDA		$	3,785			$	5,148			$	(1,666	)		$	—			$	7,267
ADJUSTED EBITDA		$	4,223			$	5,148			$	(1,666	)		$	—			$	7,705
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
NET INCOME (LOSS)		$	479			$	2,456			$	(2,416	)		$	—			$	519
Income tax expense (benefit)			(658	)			1,464				—				—				806
Interest expense (income)			(110	)			1,216				17				—				1,123
Depreciation and amortization			4,074				12				733				—				4,819
EBITDA		$	3,785			$	5,148			$	(1,666	)		$	—			$	7,267
Stock-based compensation			438				—				—				—				438
ADJUSTED EBITDA		$	4,223			$	5,148			$	(1,666	)		$	—			$	7,705
A reconciliation of NET INCOME(LOSS) to NON-GAAP NET INCOME (LOSS) follows:
NET INCOME (LOSS)		$	479			$	2,456			$	(2,416	)		$	—			$	519
Stock-based compensation			438				—				—				—				438
Amortization of intangible assets			—				—				605				—				605
NON-GAAP NET INCOME (LOSS)		$	917			$	2,456			$	(1,811	)		$	—			$	1,562

		PFSweb, Inc. and Subsidiaries
		Unaudited Condensed Consolidating Balance Sheets
		as of September 30, 2008
		(In Thousands)

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Three Months Ended September 30, 2007
(In Thousands)

						Supplies
		PFSweb				Distributors				eCOST				Eliminations				Consolidated
REVENUES:
Product revenue, net		$	—			$	58,313			$	26,950			$	—			$	85,263
Service fee revenue			18,398				—				—				—				18,398
Service fee revenue — affiliate			2,001				—				—				(2,001	)			—
Pass-thru revenue			8,415				—				—				(81	)			8,334
Total revenues			28,814				58,313				26,950				(2,082	)			111,995
COSTS OF REVENUES:
Cost of product revenue			—				54,295				24,581				(2	)			78,874
Cost of service fee revenue			13,585				—				—				(673	)			12,912
Cost of pass-thru revenue			8,415				—				—				(81	)			8,334
Total costs of revenues			22,000				54,295				24,581				(756	)			100,120
Gross profit			6,814				4,018				2,369				(1,326	)			11,875
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			6,699				2,448				2,857				(1,326	)			10,678
AMORTIZATION OF IDENTIFIABLE INTANGIBLES			—				—				204				—				204
Total operating expenses			6,699				2,448				3,061				(1,326	)			10,882
Income (loss) from operations			115				1,570				(692	)			—				993
INTEREST EXPENSE (INCOME), NET			48				582				(15	)			—				615
Income (loss) before income taxes			67				988				(677	)			—				378
INCOME TAX PROVISION (BENEFIT)			(142	)			358				—				—				216
NET INCOME (LOSS)		$	209			$	630			$	(677	)		$	—			$	162
NON-GAAP NET INCOME (LOSS)		$	381			$	630			$	(473	)		$	—			$	538
EBITDA		$	1,875			$	1,576			$	(437	)		$	—			$	3,014
ADJUSTED EBITDA		$	2,047			$	1,576			$	(437	)		$	—			$	3,186
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
NET INCOME (LOSS)		$	209			$	630			$	(677	)		$	—			$	162
Income tax expense (benefit)			(142	)			358				—				—				216
Interest expense (income)			48				582				(15	)			—				615
Depreciation and amortization			1,760				6				255				—				2,021
EBITDA		$	1,875			$	1,576			$	(437	)		$	—			$	3,014
Stock-based compensation			172				—				—				—				172
ADJUSTED EBITDA		$	2,047			$	1,576			$	(437	)		$	—			$	3,186
A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME(LOSS) follows:
NET INCOME (LOSS)		$	209			$	630			$	(677	)		$	—			$	162
Stock-based compensation			172				—				—				—				172
Amortization of intangible assets			—				—				204				—				204
NON-GAAP NET INCOME (LOSS)		$	381			$	630			$	(473	)		$	—			$	538

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Nine Months Ended September 30, 2007
(In Thousands)

						Supplies
		PFSweb				Distributors				eCOST				Eliminations				Consolidated
REVENUES:
Product revenue, net		$	—			$	174,718			$	75,680			$	—			$	250,398
Service fee revenue			53,006				—				—				—				53,006
Service fee revenue — affiliate			6,067				—				—				(6,067	)			—
Pass-thru revenue			21,656				—				—				(258	)			21,398
Total revenues			80,729				174,718				75,680				(6,325	)			324,802
COSTS OF REVENUES:
Cost of product revenue			—				162,146				69,303				(6	)			231,443
Cost of service fee revenue			40,184				—				—				(1,973	)			38,211
Cost of pass-thru revenue			21,656				—				—				(258	)			21,398
Total costs of revenues			61,840				162,146				69,303				(2,237	)			291,052
Gross profit			18,889				12,572				6,377				(4,088	)			33,750
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			20,547				7,574				8,460				(4,088	)			32,493
MERGER INTEGRATION EXPENSE			—				—				150				—				150
AMORTIZATION OF IDENTIFIABLE INTANGIBLES			—				—				612				—				612
Total operating expenses			20,547				7,574				9,222				(4,088	)			33,255
Income (loss) from operations			(1,658	)			4,998				(2,845	)			—				495
INTEREST EXPENSE (INCOME), NET			96				1,807				(46	)			—				1,857
Income (loss) before income taxes			(1,754	)			3,191				(2,799	)			—				(1,362	)
INCOME TAX PROVISION (BENEFIT)			(471	)			1,154				—				—				683
NET INCOME (LOSS)		$	(1,283	)		$	2,037			$	(2,799	)		$	—			$	(2,045	)
NON-GAAP NET INCOME (LOSS)		$	(713	)		$	2,037			$	(2,187	)		$	—			$	(863	)
EBITDA		$	3,684			$	5,013			$	(2,094	)		$	—			$	6,603
ADJUSTED EBITDA		$	4,254			$	5,013			$	(1,944	)		$	—			$	7,323
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
NET INCOME (LOSS)		$	(1,283	)		$	2,037			$	(2,799	)		$	—			$	(2,045	)
Income tax expense (benefit)			(471	)			1,154				—				—				683
Interest expense (income)			96				1,807				(46	)			—				1,857
Depreciation and amortization			5,342				15				751				—				6,108
EBITDA		$	3,684			$	5,013			$	(2,094	)		$	—			$	6,603
Stock-based compensation			570				—				—				—				570
Merger integration expense			—				—				150				—				150
ADJUSTED EBITDA		$	4,254			$	5,013			$	(1,944	)		$	—			$	7,323
A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:
NET INCOME (LOSS)		$	(1,283	)		$	2,037			$	(2,799	)		$	—			$	(2,045	)
Stock-based compensation			570				—				—				—				570
Amortization of intangible assets			—				—				612				—				612
NON-GAAP NET INCOME (LOSS)		$	(713	)		$	2,037			$	(2,187	)		$	—			$	(863	)