e8vk
 
 
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): March 25, 2010
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 March 25, 2010, PFSweb, Inc. issued a press release announcing its financial results for the quarter ended December 31, 2009. Attached to this current report on Form 8-K is a copy of the related press release dated March 25, 2010. 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 March 25, 2010

 


 

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: March 26, 2010  By:   /s/ Thomas J. Madden    
    Thomas J. Madden   
    Executive Vice President,
Chief Financial and
Accounting Officer 
 
 

 

exv99w1
Exhibit 99.1
(PFS LOGO)
     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 Fourth Quarter and Year-end 2009 Results
- - - -
New waves of growth seen in Fashion and Consumer Packaged Goods web markets
- - - -
PLANO, Texas, March 25, 2010 — PFSweb, Inc. (Nasdaq: PFSW), an international business process outsourcing services provider of end-to-end web commerce solutions and an online discount retailer, today announced its financial results for the fourth quarter and year ended December 31, 2009.
Summary of consolidated results for the quarter ended December 31, 2009:
PFSweb’s fourth quarter 2009 results were favorably impacted by new service fee client activities, increased seasonal volumes for certain clients and continued cost management across all business segments. However, revenue and Adjusted EBITDA results reflect a decrease as compared to the prior year primarily due to the global economic environment and changes to the company’s client mix, including the impact of the non-renewal of its agreement with its previously largest Service Fee business client earlier in 2009.
    Total revenue was $95.6 million compared to $112.8 million for the fourth quarter of 2008;
 
    Adjusted EBITDA (as defined) was $1.1 million versus $2.4 million for the fourth quarter of 2008;
 
    Net loss was $(0.9) million, or ($0.10) per basic and diluted share, compared to net loss of $(16.2) million, or $(1.63) per basic and diluted share, for the fourth quarter of 2008. The 2008 fourth quarter net loss results include a $16.3 million charge for goodwill and intangible asset impairment;
 
    Non-GAAP net loss (as defined) was $(0.8) million, or ($0.08) per basic and diluted share, compared to non-GAAP net income of $0.4 million or $0.04 per basic and diluted share, for the fourth quarter of 2008;
 
    Total cash, cash equivalents and restricted cash equaled $16.9 million as of December 31, 2009 compared to $18.1 million as of December 31, 2008.
Summary of consolidated results for the year ended December 31, 2009:
    Total revenue was $352.5 million, compared to $451.8 million for the year ended December 31, 2008;
 
    Adjusted EBITDA (as defined) was $4.2 million versus $10.1 million for the year ended December 31, 2008;

 


 

    Net loss was $(4.6) million, or $(0.46) per basic and diluted share, compared to net loss of $(15.7) million, or $(1.58) per basic and diluted share, for the year ended December 31, 2008;
 
    Non-GAAP net loss (as defined) was $(4.1) million, or $(0.41) per basic and diluted share, compared to non-GAAP net income of $1.9 million, or $0.20 per basic and diluted share, for the year ended December 31, 2008;
 
    Cash flow from operating activities was $8.1 million compared to $9.5 million for the year ended December 31, 2008; and
 
    Free cash flow (as defined) was $3.7 million, consistent with $3.7 million for the year ended December 31, 2008.
“Coming off a strong year of new business activity, we believe PFSweb is firmly established as an eCommerce services leader in a number of exciting product segments. This includes several rapidly evolving market segments, including the Fashion Apparel and Accessories, Beauty and Fragrance and Consumer Packaged Goods (CPG) market segments, where we continue to see substantial new business activity,” stated Mark C. Layton, Chief Executive Officer of PFSweb. “Our success in generating new business activities, combined with a solid financial performance highlight, what I believe to be outstanding overall 2009 results considering the difficult economic environment and the non-renewal of a large U.S. Government agency client. Our ability to generate positive free cash flow of $3.7 million in 2009, speaks directly to the flexibility of our business model to quickly adjust spending levels to meet lower demand, while at the same time increasing new business activity.
“We believe the momentum we are seeing in new business will provide the seeds for improving growth trends in the future. We are also encouraged by the continuing improvement in our eCOST.com business where the fourth quarter of 2009 was the first positive net income quarterly result for this division since its acquisition in 2006.
“I am also pleased to announce that we have completed renewals of our financing facilities with IBM Global Finance, Comerica and Fortis through March 2011. Along with our other credit facilities, we believe we have the financing in place to support our current business needs,” Mr. Layton continued.
Summary of results by business segment:
Service Fee Business:
For the fourth quarter of 2009, Service Fee revenue was $16.0 million, compared with $21.7 million for the same period in 2008. The Service Fee business reported Adjusted EBITDA of $0.1 million for the fourth quarter of 2009, compared to Adjusted EBITDA of $1.9 million for the same period last year.
For the year ended December 31, 2009, Service Fee revenue was $58.6 million, compared with $85.4 million for the same period in 2008. Adjusted EBITDA for the Service Fee business was a loss of $(0.4) million for the year ended December 31, 2009, compared to $6.1 million for the same period last year. The quarter and year to date declines in revenue and Adjusted EBITDA compared to the same periods of the prior year were primarily due to the non-renewal of a U.S. Government agency client relationship partially offset by increased service fees generated from new service contract relationships.
Mike Willoughby, President of PFSweb’s Services division, commented, “The Service Fee revenue and operating results for the December 31, 2009 quarter reflect an improvement compared to the

 


 

September 30, 2009 quarter. We have signed a number of new, exciting client agreements over the past several months, including the previously announced Procter & Gamble agreement. Based on current client projections, we believe these new client agreements should have a positive financial impact beginning in late 2010 and into 2011. As we have previously stated, our End2End eCommerce solution offering has been well received by the market, particularly in the Fashion Apparel and Accessories, Beauty and Fragrance and CPG market segments, resulting in a number of new client wins this year and a robust pipeline of potential new agreements.
“In February of 2010, we launched the beta site for the eStore with Procter & Gamble. The site features a wide range of P&G branded products and will serve as a learning laboratory for P&G brands to test and innovate concepts designed to grow the size of the web commerce market for Consumer Packaged Goods. The site is currently slated to go live in the U.S. later this spring.
“To support our new business efforts, we recently added an eCOST-based Retail Services capability to our End2End offering giving us the ability to function as the seller-of-record for our clients. This function allows us to be more competitive when selling our services where third party inventory ownership and retail sales management are critical client considerations. We see a strong and accelerating trend among major brand retailers and manufactures seeking a closer relationship with consumers through a direct web commerce presence. We believe the flexibility, economics and speed-to-market advantages of our End2End offering has the potential to firmly establish us into a dominant competitive position, particularly among companies who own multiple consumer brands,” continued Mr. Willoughby.
Supplies Distributors Business:
For the fourth quarter of 2009, Supplies Distributors revenue was $47.3 million, compared to $52.9 million for the same period last year. Adjusted EBITDA was $0.8 million for the fourth quarter of 2009, compared to $0.7 million for the same period last year.
For the year ended December 31, 2009, Supplies Distributors revenue was $183.0 million, compared to $230.7 million for the same period last year. Adjusted EBITDA was $5.4 million for the year-end period of 2009, compared to $5.9 million for the year-end period in 2008.
Mr. Willoughby concluded, “While the decline in activity for the Supplies Distributors business due to the overall global economic environment is disappointing, it continues to report solid bottom-line results. In addition, the Supplies Distributors business offers us increased scale, which benefits both the Service Fee business and eCOST.com.”
eCOST.com Business:
For the fourth quarter of 2009, eCOST.com revenue was $22.8 million, compared to $25.1 million for the same period in 2008. Adjusted EBITDA for eCOST.com in the quarter improved to $0.2 million, as compared to a loss of $(0.2) million for the same period last year. Net income for the 4th quarter of 2009 was $34,000 and represents the first quarter of positive net income performance since its acquisition in 2006.
For the year ended December 2009, eCOST.com revenue was $84.6 million, compared to $99.8 million for the same period in 2008. Adjusted EBITDA for eCOST.com in the year ended December 31, 2009 improved to a loss of $(0.8) million, as compared to a loss of $(1.8) million for the same period last year.

 


 

“I am pleased by the fourth quarter results of our eCOST.com business and by the improving trends that eCOST.com demonstrated throughout 2009. While revenues were down in 2009, primarily due to the economy, we continue to drive forward with initiatives orientated towards improving gross margins in the consumer segment of eCOST.com. These actions, along with further streamlining of the eCOST.com operations that resulted in lower cost levels, have allowed us to improve the overall financial results of the business on lower overall revenues. We believe this bodes well for the future for eCOST.com in that we are well poised to add new growth in the years to come on top of this streamlined business process that has great leverage capabilities, resulting in an ability to grow with minimal incremental SG&A requirements,” stated Mr. Layton.
“In late 2009 we established a new division within eCOST.com called eStore Retail Services that formalizes the linkage between our PFSweb services segment and eCOST.com. This division allows PFSweb Services to offer certain interactive marketing, product procurement, rich content merchandising, customer acquisition methodologies and other web retail services that eCOST.com has developed and will continue to pioneer, innovate and mature,” concluded Mr. Layton.
Conference Call Information
Management will host a conference call at 10:00 am Central Time (11:00 am Eastern Time) on Thursday, March 25, 2010, to discuss the latest corporate developments and results. To listen to the call, please dial (888) 562-3356 and enter the pin number (61525599) 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 April 25, 2010 at (800) 642-1687, pin number (61525599). 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 free cash flow, non-GAAP net income (loss), Earnings Before Interest, Income Taxes, Depreciation and Amortization (“EBITDA”) and Adjusted EBITDA.
Free cash flow is defined as net cash provided by operating activities less capital expenditures.
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, amortization of identifiable intangible assets and impairment of goodwill and 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 impairment of goodwill and identifiable intangible assets.
Free cash flow, 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. Free cash flow is used as a supplemental financial measure in our evaluation of liquidity and financial strength. The calculation of non-GAAP net income (loss) eliminates the effect of stock-based compensation, amortization of intangible assets

 


 

and impairment of goodwill and intangible assets and EBITDA and Adjusted EBITDA further eliminates 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.
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.
About PFSweb, Inc.
PFSweb develops and deploys comprehensive end-to-end eCommerce solutions for Fortune 1000, Global 2000 and brand name companies, including interactive marketing services, global fulfillment and logistics and high-touch customer care. The company serves a multitude of industries and company types, including such clients as P&G, LEGO, AAFES, Riverbed, InfoPrint Solutions Company (a joint venture company owned by Ricoh and International Business Machines), Hawker Beechcraft Corp., 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 300,000 different products from leading manufacturers such as Sony, Hewlett-Packard, 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, 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 reliance on third-party subcontracted services; 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; 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 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; taxation on the sale of our products; 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     Twelve Months Ended  
    December 31,     December 31,  
    2009     2008     2009     2008  
REVENUES:
                               
Product revenue, net
  $ 70,093     $ 78,036     $ 267,615     $ 330,532  
Service fee revenue
    16,015       21,691       58,619       85,406  
Pass-thru revenue
    9,517       13,054       26,265       35,905  
 
                       
Total revenues
    95,625       112,781       352,499       451,843  
 
                       
 
                               
COSTS OF REVENUES:
                               
Cost of product revenue
    64,526       71,615       245,272       305,090  
Cost of service fee revenue
    11,492       14,723       41,898       58,009  
Cost of pass-thru revenue
    9,517       13,054       26,265       35,905  
 
                       
Total costs of revenues
    85,535       99,392       313,435       399,004  
 
                       
Gross profit
    10,090       13,389       39,064       52,839  
 
                       
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    10,713       12,675       41,995       49,073  
AMORTIZATION OF IDENTIFIABLE INTANGIBLES
    26       202       105       806  
GOODWILL AND INTANGIBLE ASSET IMPAIRMENT
          16,250             16,250  
 
                       
Total operating expenses
    10,739       29,127       42,100       66,129  
 
                       
Income (loss) from operations
    (649 )     (15,738 )     (3,036 )     (13,290 )
INTEREST EXPENSE, NET
    237       437       1,205       1,560  
 
                       
Income (loss) before income taxes
    (886 )     (16,175 )     (4,241 )     (14,850 )
INCOME TAX PROVISION (BENEFIT)
    61       (1 )     329       805  
 
                       
NET INCOME (LOSS)
  $ (947 )   $ (16,174 )   $ (4,570 )   $ (15,655 )
 
                       
NON-GAAP NET INCOME (LOSS)
  $ (823 )   $ 387     $ (4,058 )   $ 1,948  
 
                       
 
                               
NET INCOME (LOSS) PER SHARE:
                               
Basic and Diluted
  $ (0.10 )   $ (1.63 )   $ (0.46 )   $ (1.58 )
 
                       
 
                               
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
                               
Basic and Diluted
    9,934       9,916       9,929       9,905  
 
                       
 
                               
EBITDA
  $ 1,012     $ (13,935 )   $ 3,816     $ (6,668 )
 
                       
ADJUSTED EBITDA
  $ 1,110     $ 2,424     $ 4,223     $ 10,129  
 
                       
 
(A)   The financial data above should be read in conjunction with the audited consolidated financial statements of PFSweb, Inc. included in its Form 10-K for the year ended December 31, 2008.

 


 

PFSweb, Inc. and Subsidiaries
Reconciliation of certain Non-GAAP Items to GAAP
(In Thousands, Except Per Share Data)
                                 
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,  
    2009     2008     2009     2008  
NET INCOME (LOSS)
  $ (947 )   $ (16,174 )   $ (4,570 )   $ (15,655 )
Income tax expense (benefit)
    61       (1 )     329       805  
Interest expense
    237       437       1,205       1,560  
Depreciation and amortization
    1,661       1,803       6,852       6,622  
 
                       
EBITDA
  $ 1,012     $ (13,935 )   $ 3,816     $ (6,668 )
Stock-based compensation
    98       109       407       547  
Goodwill and intangible asset impairment
          16,250             16,250  
 
                       
ADJUSTED EBITDA
  $ 1,110     $ 2,424     $ 4,223     $ 10,129  
 
                       
                                 
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,  
    2009     2008     2009     2008  
 
                               
NET INCOME (LOSS)
  $ (947 )   $ (16,174 )   $ (4,570 )   $ (15,655 )
Stock-based compensation
    98       109       407       547  
Amortization of identifiable intangible assets
    26       202       105       806  
Goodwill and intangible asset impairment
          16,250             16,250  
 
                       
NON-GAAP NET INCOME (LOSS)
  $ (823 )   $ 387     $ (4,058 )   $ 1,948  
 
                       
 
                               
NET INCOME (LOSS) PER SHARE:
                               
Basic and Diluted
  $ (0.10 )   $ (1.63 )   $ (0.46 )   $ (1.58 )
 
                       
 
                               
NON-GAAP NET INCOME (LOSS) Per Share:
                               
Basic and Diluted
  $ (0.08 )   $ 0.04     $ (0.41 )   $ 0.20  
 
                       
                 
    Twelve Months Ended  
    December 31,  
    2009     2008  
GAAP cash flow from operating activities
  $ 8,126     $ 9,451  
Capital expenditures
    (4,440 )     (5,754 )
 
           
FREE CASH FLOW
  $ 3,686     $ 3,697  
 
           

 


 

PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(In Thousands, Except Share Data)
                 
    December 31,     December 31,  
    2009     2008  
ASSETS
               
CURRENT ASSETS:
               
Cash and cash equivalents
  $ 14,812     $ 16,050  
Restricted cash
    2,096       2,008  
Accounts receivable, net of allowance for doubtful accounts of $973 and $980 at December 31, 2009 and December 31, 2008, respectively
    39,861       44,546  
Inventories, net of reserves of $2,016 and $2,124 at December 31, 2009 and December 31, 2008, respectively
    37,949       47,186  
Other receivables
    11,605       13,072  
Prepaid expenses and other current assets
    4,170       3,802  
 
           
Total current assets
    110,493       126,664  
 
           
 
               
PROPERTY AND EQUIPMENT, net
    10,314       12,106  
IDENTIFIABLE INTANGIBLES
    805       961  
GOODWILL
    3,602       3,602  
OTHER ASSETS
    2,555       1,188  
 
           
Total assets
    127,769       144,521  
 
           
 
               
LIABILITIES AND SHAREHOLDERS EQUITY
               
CURRENT LIABILITIES:
               
Current portion of long-term debt and capital lease obligations
  $ 19,179     $ 22,251  
Trade accounts payable
    53,642       61,988  
Deferred revenue
    5,164       3,640  
Accrued expenses
    13,180       17,414  
 
           
Total current liabilities
    91,165       105,293  
 
           
 
               
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion
    3,348       4,951  
OTHER LIABILITIES
    3,903       1,192  
 
           
Total liabilities
    98,416       111,436  
 
           
 
               
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; 9,952,164 and 9,935,095 shares issued at December 31, 2009 and December 31, 2008, respectively; and 9,933,803 and 9,916,734 outstanding as of December 31, 2009 and December 31, 2008, respectively
    10       10  
Additional paid-in capital
    93,152       92,728  
Accumulated deficit
    (65,963 )     (61,393 )
Accumulated other comprehensive income
    2,239       1,825  
Treasury stock at cost, 18,361 shares
    (85 )     (85 )
 
           
Total shareholders’ equity
    29,353       33,085  
 
           
Total liabilities and shareholders’ equity
  $ 127,769     $ 144,521  
 
           

 


 

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Three Months Ended December 30, 2009
(In Thousands)
                                         
            Supplies                    
    PFSweb     Distributors     eCOST     Eliminations     Consolidated  
REVENUES:
                                       
Product revenue, net
  $     $ 47,288     $ 22,805     $     $ 70,093  
Service fee revenue
    16,015                         16,015  
Service fee revenue — affiliate
    1,700                   (1,700 )      
Pass-thru revenue
    9,520                   (3 )     9,517  
 
                             
Total revenues
    27,235       47,288       22,805       (1,703 )     95,625  
 
                             
 
                                       
COSTS OF REVENUES:
                                       
Cost of product revenue
          44,048       20,478             64,526  
Cost of service fee revenue
    12,143                   (651 )     11,492  
Cost of pass-thru revenue
    9,520                   (3 )     9,517  
 
                             
Total costs of revenues
    21,663       44,048       20,478       (654 )     85,535  
 
                             
Gross profit
    5,572       3,240       2,327       (1,049 )     10,090  
 
                             
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    7,090       2,434       2,238       (1,049 )     10,713  
AMORTIZATION OF IDENTIFIABLE INTANGIBLES
                26             26  
 
                             
Total operating expenses
    7,090       2,434       2,264       (1,049 )     10,739  
 
                             
Income (loss) from operations
    (1,518 )     806       63             (649 )
INTEREST EXPENSE (INCOME), NET
    (68 )     301       4             237  
 
                             
Income (loss) before income taxes
    (1,450 )     505       59             (886 )
INCOME TAX PROVISION (BENEFIT)
    (146 )     182       25             61  
 
                             
NET INCOME (LOSS)
  $ (1,304 )   $ 323     $ 34     $     $ (947 )
 
                             
NON-GAAP NET INCOME (LOSS)
  $ (1,206 )   $ 323     $ 60     $     $ (823 )
 
                             
 
                                       
EBITDA
  $ 45     $ 815     $ 152     $     $ 1,012  
 
                             
ADJUSTED EBITDA
  $ 143     $ 815     $ 152     $     $ 1,110  
 
                             
 
                                       
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
                                       
 
                                       
NET INCOME (LOSS)
  $ (1,304 )   $ 323     $ 34     $     $ (947 )
Income tax expense (benefit)
    (146 )     182       25             61  
Interest expense (income)
    (68 )     301       4             237  
Depreciation and amortization
    1,563       9       89             1,661  
 
                             
EBITDA
  $ 45     $ 815     $ 152     $     $ 1,012  
Stock-based compensation
    98                         98  
 
                             
ADJUSTED EBITDA
  $ 143     $ 815     $ 152     $     $ 1,110  
 
                             
 
A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:
                                       
 
NET INCOME (LOSS)
  $ (1,304 )   $ 323     $ 34     $     $ (947 )
Stock-based compensation
    98                         98  
Amortization of intangible assets
                26             26  
 
                             
NON-GAAP NET INCOME (LOSS)
  $ (1,206 )   $ 323     $ 60     $     $ (823 )
 
                             

 


 

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Twelve Months Ended December 31, 2009
(In Thousands)
                                         
            Supplies                    
    PFSweb     Distributors     eCOST     Eliminations     Consolidated  
 
                                       
REVENUES:
                                       
Product revenue, net
  $     $ 183,008     $ 84,607     $     $ 267,615  
Service fee revenue
    58,619                         58,619  
Service fee revenue — affiliate
    7,093                   (7,093 )      
Pass-thru revenue
    26,335                   (70 )     26,265  
 
                             
Total revenues
    92,047       183,008       84,607       (7,163 )     352,499  
 
                             
 
                                       
COSTS OF REVENUES:
                                       
Cost of product revenue
          168,864       76,408             245,272  
Cost of service fee revenue
    44,453                   (2,555 )     41,898  
Cost of pass-thru revenue
    26,335                   (70 )     26,265  
 
                             
Total costs of revenues
    70,788       168,864       76,408       (2,625 )     313,435  
 
                             
Gross profit
    21,259       14,144       8,199       (4,538 )     39,064  
 
                             
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    28,536       8,779       9,218       (4,538 )     41,995  
AMORTIZATION OF IDENTIFIABLE INTANGIBLES
                105             105  
 
                             
Total operating expenses
    28,536       8,779       9,323       (4,538 )     42,100  
 
                             
Income (loss) from operations
    (7,277 )     5,365       (1,124 )           (3,036 )
INTEREST EXPENSE (INCOME), NET
    (202 )     1,388       19             1,205  
 
                             
Income (loss) before income taxes
    (7,075 )     3,977       (1,143 )           (4,241 )
INCOME TAX PROVISION (BENEFIT)
    (769 )     1,055       43             329  
 
                             
NET INCOME (LOSS)
  $ (6,306 )   $ 2,922     $ (1,186 )   $     $ (4,570 )
 
                             
NON-GAAP NET INCOME (LOSS)
  $ (5,899 )   $ 2,922     $ (1,081 )   $     $ (4,058 )
 
                             
 
                                       
EBITDA
  $ (804 )   $ 5,400     $ (780 )   $     $ 3,816  
 
                             
ADJUSTED EBITDA
  $ (397 )   $ 5,400     $ (780 )   $     $ 4,223  
 
                             
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
                                         
NET INCOME (LOSS)
  $ (6,306 )   $ 2,922     $ (1,186 )   $     $ (4,570 )
Income tax expense (benefit)
    (769 )     1,055       43             329  
Interest expense (income)
    (202 )     1,388       19             1,205  
Depreciation and amortization
    6,473       35       344             6,852  
 
                             
EBITDA
  $ (804 )   $ 5,400     $ (780 )   $     $ 3,816  
Stock-based compensation
    407                         407  
 
                             
ADJUSTED EBITDA
  $ (397 )   $ 5,400     $ (780 )   $     $ 4,223  
 
                             
A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:
                                         
NET INCOME (LOSS)
  $ (6,306 )   $ 2,922     $ (1,186 )   $     $ (4,570 )
Stock-based compensation
    407                         407  
Amortization of intangible assets
                105             105  
 
                             
NON-GAAP NET INCOME (LOSS)
  $ (5,899 )   $ 2,922     $ (1,081 )   $     $ (4,058 )
 
                             

 


 

PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidating Balance Sheets
as of December 31, 2009
(In Thousands)
                                         
            Supplies                    
    PFSweb     Distributors     eCOST     Eliminations     Consolidated  
ASSETS
                       
CURRENT ASSETS:
                                       
Cash and cash equivalents
  $ 9,698     $ 2,628     $ 2,486     $     $ 14,812  
Restricted cash
    732       1,137       227             2,096  
Accounts receivable, net
    19,499       18,764       1,719       (121 )     39,861  
Inventories, net
          33,577       4,372             37,949  
Other receivables
    49       11,556                   11,605  
Prepaid expenses and other current assets
    2,515       1,575       80             4,170  
 
                             
Total current assets
    32,493       69,237       8,884       (121 )     110,493  
 
                             
 
PROPERTY AND EQUIPMENT, net
    9,900       54       360             10,314  
NOTES RECEIVABLE FROM AFFILIATES
    20,845                   (20,845 )      
INVESTMENT IN AFFILIATES
    (149 )                 149        
IDENTIFIABLE INTANGIBLES
    383             422             805  
GOODWILL
                3,602             3,602  
OTHER ASSETS
    2,244             311             2,555  
 
                             
Total assets
    65,716       69,291       13,579       (20,817 )     127,769  
 
                             
 
                                       
LIABILITIES AND SHAREHOLDERS EQUITY
                                       
CURRENT LIABILITIES:
                                       
Current portion of long-term debt and capital lease obligations
  $ 8,770     $ 10,374     $ 35     $     $ 19,179  
Trade accounts payable
    8,396       38,753       6,614       (121 )     53,642  
Accrued expenses
    10,994       4,701       2,649             18,344  
 
                             
Total current liabilities
    28,160       53,828       9,298       (121 )     91,165  
 
                             
 
                                       
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion
    3,208             140             3,348  
NOTES PAYABLE TO AFFILIATES
          5,005       15,840       (20,845 )      
OTHER LIABILITIES
    3,880             23             3,903  
 
                             
Total liabilities
    35,248       58,833       25,301       (20,966 )     98,416  
 
                             
 
                                       
COMMITMENTS AND CONTINGENCIES
                                       
 
                                       
SHAREHOLDERS’ EQUITY:
                                       
Common stock
    10             19       (19 )     10  
Capital contributions
          1,000             (1,000 )      
Additional paid-in capital
    93,152             28,059       (28,059 )     93,152  
Retained earnings (accumulated deficit)
    (64,828 )     6,781       (39,805 )     31,889       (65,963 )
Accumulated other comprehensive income
    2,219       2,677       5       (2,662 )     2,239  
Treasury stock
    (85 )                       (85 )
 
                             
Total shareholders’ equity
    30,468       10,458       (11,722 )     149       29,353  
 
                             
Total liabilities and shareholders’ equity
  $ 65,716     $ 69,291     $ 13,579     $ (20,817 )   $ 127,769  
 
                             

 


 

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Three Months Ended December 31, 2008
(In Thousands)
                                         
            Supplies                    
    PFSweb     Distributors     eCOST     Eliminations     Consolidated  
 
                                       
REVENUES:
                                       
Product revenue, net
  $     $ 52,915     $ 25,121     $     $ 78,036  
Service fee revenue
    21,691                         21,691  
Service fee revenue — affiliate
    2,497                   (2,497 )      
Pass-thru revenue
    13,085                   (31 )     13,054  
 
                             
Total revenues
    37,273       52,915       25,121       (2,528 )     112,781  
 
                             
 
                                       
COSTS OF REVENUES:
                                       
Cost of product revenue
          48,974       22,641             71,615  
Cost of service fee revenue
    15,457                   (734 )     14,723  
Cost of pass-thru revenue
    13,085                   (31 )     13,054  
 
                             
Total costs of revenues
    28,542       48,974       22,641       (765 )     99,392  
 
                             
Gross profit
    8,731       3,941       2,480       (1,763 )     13,389  
 
                             
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    8,511       3,211       2,716       (1,763 )     12,675  
AMORTIZATION OF IDENTIFIABLE INTANGIBLES
                202             202  
GOODWILL AND INTANGIBLE ASSET IMPAIRMENT
                16,250             16,250  
 
                             
Total operating expenses
    8,511       3,211       19,168       (1,763 )     29,127  
 
                             
Income (loss) from operations
    220       730       (16,688 )           (15,738 )
INTEREST EXPENSE (INCOME), NET
    (7 )     434       10             437  
 
                             
Income (loss) before income taxes
    227       296       (16,698 )           (16,175 )
INCOME TAX PROVISION (BENEFIT)
    (399 )     398                   (1 )
 
                             
NET INCOME (LOSS)
  $ 626     $ (102 )   $ (16,698 )   $     $ (16,174 )
 
                             
NON-GAAP NET INCOME (LOSS)
  $ 735     $ (102 )   $ (246 )   $     $ 387  
 
                             
 
                                       
EBITDA
  $ 1,753     $ 738     $ (16,426 )   $     $ (13,935 )
 
                             
ADJUSTED EBITDA
  $ 1,862     $ 738     $ (176 )   $     $ 2,424  
 
                             
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
                                         
NET INCOME (LOSS)
  $ 626     $ (102 )   $ (16,698 )   $     $ (16,174 )
Income tax expense (benefit)
    (399 )     398                   (1 )
Interest expense (income)
    (7 )     434       10             437  
Depreciation and amortization
    1,533       8       262             1,803  
 
                             
EBITDA
  $ 1,753     $ 738     $ (16,426 )   $     $ (13,935 )
Stock-based compensation
    109                           109  
Goodwill and intangible asset impairment
                16,250             16,250  
 
                             
ADJUSTED EBITDA
  $ 1,862     $ 738     $ (176 )   $     $ 2,424  
 
                             
A reconciliation of NET INCOME(LOSS) to NON-GAAP NET INCOME (LOSS) follows:
                                         
NET INCOME (LOSS)
  $ 626     $ (102 )   $ (16,698 )   $     $ (16,174 )
Stock-based compensation
    109                         109  
Amortization of intangible assets
                202             202  
Goodwill and intangible asset impairment
                16,250             16,250  
 
                             
NON-GAAP NET INCOME (LOSS)
  $ 735     $ (102 )   $ (246 )   $     $ 387  
 
                             

 


 

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Twelve Months Ended December 31, 2008
(In Thousands)
                                         
            Supplies                    
    PFSweb     Distributors     eCOST     Eliminations     Consolidated  
REVENUES:
                                       
Product revenue, net
  $     $ 230,710     $ 99,822     $     $ 330,532  
Service fee revenue
    85,406                         85,406  
Service fee revenue — affiliate
    8,603                   (8,603 )      
Pass-thru revenue
    35,901                   4       35,905  
 
                             
Total revenues
    129,910       230,710       99,822       (8,599 )     451,843  
 
                             
 
                                       
COSTS OF REVENUES:
                                       
Cost of product revenue
          214,077       91,013             305,090  
Cost of service fee revenue
    60,793                   (2,784 )     58,009  
Cost of pass-thru revenue
    35,901                   4       35,905  
 
                             
Total costs of revenues
    96,694       214,077       91,013       (2,780 )     399,004  
 
                             
Gross profit
    33,216       16,633       8,809       (5,819 )     52,839  
 
                             
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    33,285       10,767       10,840       (5,819 )     49,073  
AMORTIZATION OF IDENTIFIABLE INTANGIBLES
                806             806  
GOODWILL AND INTANGIBLE ASSET IMPAIRMENT
                16,250             16,250  
 
                             
Total operating expenses
    33,285       10,767       27,896       (5,819 )     66,129  
 
                             
Income (loss) from operations
    (69 )     5,866       (19,087 )           (13,290 )
INTEREST EXPENSE (INCOME), NET
    (117 )     1,650       27             1,560  
 
                             
Income (loss) before income taxes
    48       4,216       (19,114 )           (14,850 )
INCOME TAX PROVISION (BENEFIT)
    (1,057 )     1,862                   805  
 
                             
NET INCOME (LOSS)
  $ 1,105     $ 2,354     $ (19,114 )   $     $ (15,655 )
 
                             
NON-GAAP NET INCOME (LOSS)
  $ 1,652     $ 2,354     $ (2,058 )   $     $ 1,948  
 
                             
 
                                       
EBITDA
  $ 5,538     $ 5,886     $ (18,092 )   $     $ (6,668 )
 
                             
ADJUSTED EBITDA
  $ 6,085     $ 5,886     $ (1,842 )   $     $ 10,129  
 
                             
 
                                       
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:                                
 
                                       
NET INCOME (LOSS)
  $ 1,105     $ 2,354     $ (19,114 )   $     $ (15,655 )
Income tax expense (benefit)
    (1,057 )     1,862                   805  
Interest expense (income)
    (117 )     1,650       27             1,560  
Depreciation and amortization
    5,607       20       995             6,622  
 
                             
EBITDA
  $ 5,538     $ 5,886     $ (18,092 )   $     $ (6,668 )
Stock-based compensation
    547                         547  
Goodwill and intangible asset impairment
                16,250             16,250  
 
                             
ADJUSTED EBITDA
  $ 6,085     $ 5,886     $ (1,842 )   $     $ 10,129  
 
                             
 
                                       
A reconciliation of NET INCOME(LOSS) to NON-GAAP NET INCOME (LOSS) follows:                                
 
                                       
NET INCOME (LOSS)
  $ 1,105     $ 2,354     $ (19,114 )   $     $ (15,655 )
Stock-based compensation
    547                         547  
Amortization of intangible assets
                806             806  
Goodwill and intangible asset impairment
                16,250             16,250  
 
                             
NON-GAAP NET INCOME (LOSS)
  $ 1,652     $ 2,354     $ (2,058 )   $     $ 1,948  
 
                             

 


 

PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidating Balance Sheets
as of December 31, 2008
(In Thousands)
                                         
            Supplies                    
    PFSweb     Distributors     eCOST     Eliminations     Consolidated  
ASSETS
                                       
CURRENT ASSETS:
                                       
Cash and cash equivalents
  $ 11,570     $ 3,870     $ 610     $     $ 16,050  
Restricted cash
    1,550       242       216             2,008  
Accounts receivable, net
    21,676       22,103       2,065       (1,298 )     44,546  
Inventories, net
          41,382       5,804             47,186  
Other receivables
          13,072                   13,072  
Prepaid expenses and other current assets
    2,222       1,526       54             3,802  
 
                             
Total current assets
    37,018       82,195       8,749       (1,298 )     126,664  
 
                             
 
                                       
PROPERTY AND EQUIPMENT, net
    11,544       85       477             12,106  
NOTES RECEIVABLE FROM AFFILIATES
    20,845                   (20,845 )      
INVESTMENT IN AFFILIATES
    37,541                   (37,541 )      
IDENTIFIABLE INTANGIBLES
    434             527             961  
GOODWILL
                3,602             3,602  
OTHER ASSETS
    1,054             134             1,188  
 
                             
Total assets
    108,436       82,280       13,489       (59,684 )     144,521  
 
                             
LIABILITIES AND SHAREHOLDERS EQUITY
                                       
CURRENT LIABILITIES:
                                       
Current portion of long-term debt and capital lease obligations
  $ 9,045     $ 13,206     $     $     $ 22,251  
Trade accounts payable
    9,063       48,640       5,583       (1,298 )     61,988  
Accrued expenses
    12,665       5,434       2,955             21,054  
 
                             
Total current liabilities
    30,773       67,280       8,538       (1,298 )     105,293  
 
                             
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion
    4,951                         4,951  
NOTES PAYABLE TO AFFILIATES
          5,505       15,340       (20,845 )      
OTHER LIABILITIES
    1,029             163             1,192  
 
                             
Total liabilities
    36,753       72,785       24,041       (22,143 )     111,436  
 
                             
 
                                       
COMMITMENTS AND CONTINGENCIES
                                       
 
                                       
SHAREHOLDERS’ EQUITY:
                                       
Common stock
    10             19       (19 )     10  
Capital contributions
            1,000               (1,000 )      
Additional paid-in capital
    92,728             28,059       (28,059 )     92,728  
Retained earnings (accumulated deficit)
    (22,825 )     6,002       (38,618 )     (5,952 )     (61,393 )
Accumulated other comprehensive income
    1,855       2,493       (12 )     (2,511 )     1,825  
Treasury stock
    (85 )                       (85 )
 
                             
Total shareholders’ equity
    71,683       9,495       (10,552 )     (37,541 )     33,085  
 
                             
Total liabilities and shareholders’ equity
  $ 108,436     $ 82,280     $ 13,489     $ (59,684 )   $ 144,521  
 
                             

 


 

eCOST.com, Inc.
Selected Operating Data
                 
    Three Months Ended  
    December 31,  
    2009     2008  
 
               
Total Customers (1)
    2,067,384       1,888,250  
Active Customers (2)
    230,091       192,846  
New Customers (3)
    60,695       48,426  
Number of Orders (4)
    112,224       108,999  
Average Order Value (5)
  $ 199     $ 223  
Advertising Expense (6)
  $ 269,483     $ 309,836  
Cost to Acquire a New Customer (7)
  $ 4.44     $ 4.74  
 
(1)   Total customers have been calculated as the cumulative number of customers for which orders have been taken from eCOST.com’s inception to the end of the reported period.
 
(2)   Active customers consist of the approximate number of customers who placed orders during the 12 months prior to the end of the reported period.
 
(3)   New Customers represent the number of persons that established a new account and placed an order during the reported period.
 
(4)   Number of orders represents the total number of orders shipped during the reported period (not reflecting returns).
 
(5)   Average order value has been calculated as gross sales divided by the total number of orders during the period presented. The impact of returns is not reflected in average order value.
 
(6)   Advertising expense includes the total dollars spent on advertising during the reported period, including internet, direct mail, print and e-mail advertising, as well as customer list enhancement services.
 
(7)   Catalog expense of $0 and $80,064 was not included in the 2009 and 2008 calculation, respectively, as it is used for retention and not acquisition.
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