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): August 11, 2011

PFSweb, Inc.

(Exact name of registrant as specified in its charter)

Delaware		000-28275		75-2837058
(STATE OR OTHER JURISDICTION		(COMMISSION FILE NUMBER)		(IRS EMPLOYER
OF INCORPORATION)				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 August 11, 2011, PFSweb, Inc. issued a press release announcing its financial results for the quarter ended June 30, 2011. Attached to this current report on Form 8-K is a copy of the related press release dated August 11, 2011. 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 August 11, 2011

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.

Exhibit 99.1

FOR IMMEDIATE RELEASE

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

PFSweb Reports 27% Service Fee growth in Second Quarter
- - -

PLANO, Texas, August 11, 2011 — PFSweb, Inc. (Nasdaq: PFSW), an international provider of end-to-end web commerce solutions, today announced its financial results for the second quarter and six months ended June 30, 2011.

“Our financial results for the second quarter were driven by growing momentum in our Service Fee business, as several new End2End eCommerce programs have ramped up,” stated Mark Layton, Chairman and Chief Executive Officer of PFSweb. “We are trending ahead of our previously targeted 20% service fee revenue growth for the year as we continue to see exciting new opportunities emerge from both new client agreements as well as existing programs. Most recently, we implemented a customized End2End solution for Starbucks’ new, state-of-the-art eCommerce site, which was launched the last week of July. We continue to have success in winning further new contracts and are currently in the process of implementing many new relationships that will launch either later in CY2011 or early 2012.”

Summary of consolidated results for the Second quarter ended June 30, 2011:

	•		Total revenue was $68.0 million for the second quarter of 2011 compared to $66.4 million for second quarter of 2010;
	•		Service Fee revenue increased 26.6% to $21.0 million, compared with $16.6 million for the same period in 2010;
	•		Adjusted EBITDA (as defined) was $1.1 million for both the second quarter of 2011 as well as 2010.
	•		Net loss was $1.2 million, or $0.10 per basic and diluted share, compared to net loss of $1.5 million, or $0.14 per basic and diluted share, for the second quarter of 2010. Net loss for the second quarter of 2011 included $14,000 of income from discontinued operations related to eCOST.com, compared to a $0.4 million net loss from discontinued operations related to eCOST.com for the same period last year;
	•		Non-GAAP net loss (as defined) was $0.8 million, or $0.07 per basic and diluted share, in both quarters ended June 30, 2011 and 2010;
	•		Total cash, cash equivalents and restricted cash was $20.2 million as of June 30, 2011 compared to $20.3 million as of December 31, 2010.

Summary of consolidated results for the six months ended June 30, 2011:

	•		Total reported revenue was $140.4 million compared to $134.6 million for the six months ended June 30, 2010;
	•		Service Fee revenue increased 22.5% to $39.9 million, compared with $32.5 million for the six months ended June 30, 2010;
	•		Adjusted EBITDA (as defined) was $1.5 million compared to $1.9 million for the six months ended June 30, 2010;
	•		Net loss was $3.5 million, or $0.28 per basic and diluted share, compared to net loss of $2.7 million or $0.26 per basic and diluted share, for the six months ended June 30, 2010. Net loss for the first six months of 2011 included a $0.6 million loss from discontinued operations related to eCOST.com compared to a $0.4 million loss from discontinued operations related to eCOST.com in the same period last year;
	•		Non-GAAP net loss was $2.2 million, or $0.18 per basic and diluted share, compared to a non-GAAP net loss of $1.9 million, or $0.18 per basic and diluted share, for the six months ended June 30, 2010.

“With the momentum we are experiencing in our service fee business, we have elected to make incremental investments in personnel, facilities, sales and marketing and technology in an effort to capture this exciting market opportunity. We are focused on striking a careful balance between investing to embrace growth and improving our overall financial performance. As such, while we expect to continue to make investments in our future, resulting in higher SG&A costs, we also continue to target adjusted EBITDA of between $6.0 million and $7.0 million for CY2011.

“Looking ahead, we remain excited by our potential to continue to build upon our successes as the overall eCommerce market is flush with opportunities, including both new client agreements as well as organic growth through existing programs. This is partially being driven by the ever evolving Manufacturer Direct to Consumer web commerce channel where we continue to see opportunities from well-known fashion and cosmetic brands as well as consumer packaged goods companies,” concluded Mr. Layton.

Conference Call Information

Management will host a conference call at 11:00 am Eastern Time (10:00 am Central Time) on Thursday, August 11, 2011, to discuss the latest corporate developments and results. To listen to the call, please dial (888) 562-3356 and enter the pin number 85084423 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 September 11, 2011 at (855) 859-2056, pin number 85084423. 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”) 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 income (loss) from discontinued operations.

EBITDA represents earnings (or losses) before income (loss) from discontinued operations, interest, income taxes, depreciation, and amortization. Adjusted EBITDA further eliminates the effect of stock-based compensation.

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. The calculation of non-GAAP net income (loss) eliminates the effect of stock-based compensation and income (loss) from discontinued operations 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.

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 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 Starbucks, P&G, LEGO, Carter’s, Lucky Brand Jeans, Juicy Couture, Kensie, kate spade new york, AAFES, Riverbed, InfoPrint Solutions Company, Hawker Beechcraft Corp., Roots Canada Ltd. and Xerox.

To find out more about PFSweb, Inc. (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, 2010 and Quarterly Report on Form 10-Q for the three months ended March 31, 2011 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 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.

(Tables Follow)

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

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
REVENUES:
Product revenue, net		$	38,799			$	43,654			$	84,082			$	89,276
Service fee revenue			20,970				16,567				39,870				32,546
Pass-thru revenue			8,239				6,186				16,445				12,820
Total revenues			68,008				66,407				140,397				134,642
COSTS OF REVENUES:
Cost of product revenue			35,411				40,623				77,877				82,985
Cost of service fee revenue			15,795				11,987				29,578				23,441
Cost of pass-thru revenue			8,239				6,186				16,445				12,820
Total costs of revenues			59,445				58,796				123,900				119,246
Gross profit			8,563				7,611				16,497				15,396
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			9,430				8,378				18,718				16,986
Loss from operations			(867	)			(767	)			(2,221	)			(1,590	)
INTEREST EXPENSE, NET			270				234				461				488
Loss before income taxes			(1,137	)			(1,001	)			(2,682	)			(2,078	)
INCOME TAX PROVISION			95				54				230				180
LOSS FROM CONTINUING OPERATIONS			(1,232	)			(1,055	)			(2,912	)			(2,258	)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX			14				(440	)			(589	)			(446	)
NET LOSS		$	(1,218	)		$	(1,495	)		$	(3,501	)		$	(2,704	)
NON-GAAP LOSS		$	(833	)		$	(793	)		$	(2,203	)		$	(1,900	)
NET LOSS PER SHARE:
Basic and Diluted		$	(0.10	)		$	(0.14	)		$	(0.28	)		$	(0.26	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic and Diluted			12,567				10,796				12,418				10,369
EBITDA		$	676			$	813			$	817			$	1,544
ADJUSTED EBITDA		$	1,075			$	1,075			$	1,526			$	1,902

PFSweb, Inc. and Subsidiaries
Reconciliation of certain Non-GAAP Items to GAAP
(In Thousands, Except Per Share Data)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
NET LOSS		$	(1,218	)		$	(1,495	)		$	(3,501	)		$	(2,704	)
(Income) loss from discontinued operations, net of tax			(14	)			440				589				446
Income tax expense			95				54				230				180
Interest expense			270				234				461				488
Depreciation and amortization			1,543				1,580				3,038				3,134
EBITDA		$	676			$	813			$	817			$	1,544
Stock-based compensation			399				262				709				358
ADJUSTED EBITDA		$	1,075			$	1,075			$	1,526			$	1,902

		Three Months Ended								Three Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
NET LOSS		$	(1,218	)		$	(1,495	)		$	(3,501	)		$	(2,704	)
(Income) loss from discontinued operations, net of tax			(14	)			440				589				446
Stock-based compensation			399				262				709				358
NON-GAAP LOSS		$	(833	)		$	(793	)		$	(2,203	)		$	(1,900	)
NET LOSS PER SHARE:
Basic and Diluted		$	(0.10	)		$	(0.14	)		$	(0.28	)		$	(0.26	)
NON-GAAP LOSS Per Share:
Basic and Diluted		$	(0.07	)		$	(0.07	)		$	(0.18	)		$	(0.18	)

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

		June 30,				December 31,
		2011				2010
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	18,959			$	18,430
Restricted cash			1,267				1,853
Accounts receivable, net of allowance for doubtful accounts of $718 and $754 at June 30, 2011 and December 31, 2010, respectively			37,225				41,438
Inventories, net of reserves of $1,582 and $1,561 at June 30, 2011 and December 31, 2010, respectively			38,985				35,161
Assets of discontinued operations			—				2,776
Other receivables			12,779				14,539
Prepaid expenses and other current assets			4,405				3,580
Total current assets			113,620				117,777
PROPERTY AND EQUIPMENT, net			10,775				9,124
ASSETS OF DISCONTINUED OPERATIONS			—				1,126
OTHER ASSETS			2,216				2,203
Total assets			126,611				130,230
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations		$	19,191			$	18,320
Trade accounts payable			49,134				55,692
Deferred revenue			5,470				5,254
Accrued expenses			18,690				15,870
Total current liabilities			92,485				95,136
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion			1,135				2,136
OTHER LIABILITIES			4,074				3,608
Total liabilities			97,694				100,880
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; 12,667,150 and 12,255,064 shares issued at June 30, 2011 and December 31, 2010, respectively; and 12,648,789 and 12,236,703 outstanding as of June 30, 2011 and December 31, 2010, respectively			13				12
Additional paid-in capital			103,511				101,229
Accumulated deficit			(76,833	)			(73,332	)
Accumulated other comprehensive income			2,311				1,526
Treasury stock at cost, 18,361 shares			(85	)			(85	)
Total shareholders’ equity			28,917				29,350
Total liabilities and shareholders’ equity		$	126,611			$	130,230

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Three Months Ended June 30, 2011
(In Thousands)

						Business &
		PFSweb				Retail Connect				eCOST				Eliminations				Consolidated
REVENUES:
Product revenue, net		$	—			$	38,799			$	—			$	—			$	38,799
Service fee revenue			20,970				—				—				—				20,970
Service fee revenue — affiliate			1,588				—				—				(1,588	)			—
Pass-thru revenue			8,240				—				—				(1	)			8,239
Total revenues			30,798				38,799				—				(1,589	)			68,008
COSTS OF REVENUES:
Cost of product revenue			—				35,411				—				—				35,411
Cost of service fee revenue			16,354				—				—				(559	)			15,795
Cost of pass-thru revenue			8,240				—				—				(1	)			8,239
Total costs of revenues			24,594				35,411				—				(560	)			59,445
Gross profit			6,204				3,388				—				(1,029	)			8,563
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			8,245				2,214				—				(1,029	)			9,430
Income (loss) from operations			(2,041	)			1,174				—				—				(867	)
INTEREST EXPENSE (INCOME), NET			(61	)			331				—				—				270
Income (loss) before income taxes			(1,980	)			843				—				—				(1,137	)
INCOME TAX PROVISION (BENEFIT)			(251	)			346				—				—				95
INCOME (LOSS) FROM CONTINUING OPERATIONS			(1,729	)			497				—				—				(1,232	)
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX			—				—				14								14
NET INCOME (LOSS)		$	(1,729	)		$	497			$	14			$	—			$	(1,218	)
NON-GAAP NET INCOME (LOSS)		$	(1,330	)		$	497			$	—			$	—			$	(833	)
EBITDA		$	(505	)		$	1,181			$	—			$	—			$	676
ADJUSTED EBITDA		$	(106	)		$	1,181			$	—			$	—			$	1,075
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
NET INCOME (LOSS)		$	(1,729	)		$	497			$	14			$	—				(1,218	)
Income from discontinued operations, net of tax			—				—				(14	)			—				(14	)
Income tax expense (benefit)			(251	)			346				—				—				95
Interest expense (income)			(61	)			331				—				—				270
Depreciation and amortization			1,536				7				—				—				1,543
EBITDA		$	(505	)		$	1,181			$	—			$	—			$	676
Stock-based compensation			399				—				—				—				399
ADJUSTED EBITDA		$	(106	)		$	1,181			$	—			$	—			$	1,075
A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:
NET INCOME (LOSS)		$	(1,729	)		$	497			$	14			$	—			$	(1,218	)
Income from discontinued operations, net of tax			—				—				(14	)			—				(14	)
Stock-based compensation			399				—				—				—				399
NON-GAAP NET INCOME (LOSS)		$	(1,330	)		$	497			$	—			$	—			$	(833	)

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 and PFSweb Retail Connect include certain ongoing activity formerly reported as eCOST.

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Six Months Ended June 30, 2011
(In Thousands)

						Business &
		PFSweb				Retail Connect				eCOST				Eliminations				Consolidated
REVENUES:
Product revenue, net		$	—			$	84,082			$	—			$	—			$	84,082
Service fee revenue			39,870				—				—				—				39,870
Service fee revenue — affiliate			3,252				—				—				(3,252	)			—
Pass-thru revenue			16,446				—				—				(1	)			16,445
Total revenues			59,568				84,082				—				(3,253	)			140,397
COSTS OF REVENUES:
Cost of product revenue			—				77,877				—				—				77,877
Cost of service fee revenue			30,702				—				—				(1,124	)			29,578
Cost of pass-thru revenue			16,446				—				—				(1	)			16,445
Total costs of revenues			47,148				77,877				—				(1,125	)			123,900
Gross profit			12,420				6,205				—				(2,128	)			16,497
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			16,460				4,386				—				(2,128	)			18,718
Income (loss) from operations			(4,040	)			1,819				—				—				(2,221	)
INTEREST EXPENSE (INCOME), NET			(116	)			577				—				—				461
Income (loss) before income taxes			(3,924	)			1,242				—				—				(2,682	)
INCOME TAX PROVISION (BENEFIT)			(276	)			506				—				—				230
INCOME (LOSS) FROM CONTINUING OPERATIONS			(3,648	)			736				—				—				(2,912	)
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX			—				—				(589	)							(589	)
NET INCOME (LOSS)		$	(3,648	)		$	736			$	(589	)		$	—			$	(3,501	)
NON-GAAP NET INCOME (LOSS)		$	(2,939	)		$	736			$	—			$	—			$	(2,203	)
EBITDA		$	(1,016	)		$	1,833			$	—			$	—			$	817
ADJUSTED EBITDA		$	(307	)		$	1,833			$	—			$	—			$	1,526
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
NET INCOME (LOSS)		$	(3,648	)		$	736			$	(589	)		$	—				(3,501	)
Loss from discontinued operations, net of tax			—				—				589				—				589
Income tax expense (benefit)			(276	)			506				—				—				230
Interest expense (income)			(116	)			577				—				—				461
Depreciation and amortization			3,024				14				—				—				3,038
EBITDA		$	(1,016	)		$	1,833			$	—			$	—			$	817
Stock-based compensation			709				—				—				—				709
ADJUSTED EBITDA		$	(307	)		$	1,833			$	—			$	—			$	1,526
A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:
NET INCOME (LOSS)		$	(3,648	)		$	736			$	(589	)		$	—			$	(3,501	)
Loss from discontinued operations, net of tax			—				—				589				—				589
Stock-based compensation			709				—				—				—				709
NON-GAAP NET INCOME (LOSS)		$	(2,939	)		$	736			$	—			$	—			$	(2,203	)

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 and PFSweb Retail Connect include certain ongoing activity formerly reported as eCOST.

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Three Months Ended June 30, 2010
(In Thousands)

						Business &
		PFSweb				Retail Connect				eCOST				Eliminations				Consolidated
REVENUES:
Product revenue, net		$	—			$	43,654			$	—			$	—			$	43,654
Service fee revenue			16,567				—				—				—				16,567
Service fee revenue — affiliate			1,738				—				—				(1,738	)			—
Pass-thru revenue			6,202				—				—				(16	)			6,186
Total revenues			24,507				43,654				—				(1,754	)			66,407
COSTS OF REVENUES:
Cost of product revenue			—				40,623				—				—				40,623
Cost of service fee revenue			12,572				—				—				(585	)			11,987
Cost of pass-thru revenue			6,202				—				—				(16	)			6,186
Total costs of revenues			18,774				40,623				—				(601	)			58,796
Gross profit			5,733				3,031				—				(1,153	)			7,611
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			7,310				2,221				—				(1,153	)			8,378
Income (loss) from operations			(1,577	)			810				—				—				(767	)
INTEREST EXPENSE (INCOME), NET			(59	)			293				—				—				234
Income (loss) before income taxes			(1,518	)			517				—				—				(1,001	)
INCOME TAX PROVISION (BENEFIT)			(142	)			196				—				—				54
INCOME (LOSS) FROM CONTINUING OPERATIONS			(1,376	)			321				—				—				(1,055	)
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX			—				—				(440	)							(440	)
NET INCOME (LOSS)		$	(1,376	)		$	321			$	(440	)		$	—			$	(1,495	)
NON-GAAP NET INCOME (LOSS)		$	(1,114	)		$	321			$	—			$	—			$	(793	)
EBITDA		$	(4	)		$	817			$	—			$	—			$	813
ADJUSTED EBITDA		$	258			$	817			$	—			$	—			$	1,075
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
NET INCOME (LOSS)		$	(1,376	)		$	321			$	(440	)		$	—				(1,495	)
Loss from discontinued operations, net of tax			—				—				440				—				440
Income tax expense (benefit)			(142	)			196				—				—				54
Interest expense (income)			(59	)			293				—				—				234
Depreciation and amortization			1,573				7				—				—				1,580
EBITDA		$	(4	)		$	817			$	—			$	—			$	813
Stock-based compensation			262				—				—				—				262
ADJUSTED EBITDA		$	258			$	817			$	—			$	—			$	1,075
A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:
NET INCOME (LOSS)		$	(1,376	)		$	321			$	(440	)		$	—			$	(1,495	)
Loss from discontinued operations, net of tax			—				—				440				—				440
Stock-based compensation			262				—				—				—				262
NON-GAAP NET INCOME (LOSS)		$	(1,114	)		$	321			$	—			$	—			$	(793	)

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Six Months Ended June 30, 2010
(In Thousands)

						Business &
		PFSweb				Retail Connect				eCOST				Eliminations				Consolidated
REVENUES:
Product revenue, net		$	—			$	89,276			$	—			$	—			$	89,276
Service fee revenue			32,546				—				—				—				32,546
Service fee revenue — affiliate			3,438				—				—				(3,438	)			—
Pass-thru revenue			12,838				—				—				(18	)			12,820
Total revenues			48,822				89,276				—				(3,456	)			134,642
COSTS OF REVENUES:
Cost of product revenue			—				82,985				—				—				82,985
Cost of service fee revenue			24,673				—				—				(1,232	)			23,441
Cost of pass-thru revenue			12,838				—				—				(18	)			12,820
Total costs of revenues			37,511				82,985				—				(1,250	)			119,246
Gross profit			11,311				6,291				—				(2,206	)			15,396
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			14,710				4,482				—				(2,206	)			16,986
Income (loss) from operations			(3,399	)			1,809				—				—				(1,590	)
INTEREST EXPENSE (INCOME), NET			(115	)			603				—				—				488
Income (loss) before income taxes			(3,284	)			1,206				—				—				(2,078	)
INCOME TAX PROVISION (BENEFIT)			(272	)			452				—				—				180
INCOME (LOSS) FROM CONTINUING OPERATIONS			(3,012	)			754				—				—				(2,258	)
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX			—				—				(446	)							(446	)
NET INCOME (LOSS)		$	(3,012	)		$	754			$	(446	)		$	—			$	(2,704	)
NON-GAAP NET INCOME (LOSS)		$	(2,654	)		$	754			$	—			$	—			$	(1,900	)
EBITDA		$	(280	)		$	1,824			$	—			$	—			$	1,544
ADJUSTED EBITDA		$	78			$	1,824			$	—			$	—			$	1,902
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
NET INCOME (LOSS)		$	(3,012	)		$	754			$	(446	)		$	—				(2,704	)
Loss from discontinued operations, net of tax			—				—				446				—				446
Income tax expense (benefit)			(272	)			452				—				—				180
Interest expense (income)			(115	)			603				—				—				488
Depreciation and amortization			3,119				15				—				—				3,134
EBITDA		$	(280	)		$	1,824			$	—			$	—			$	1,544
Stock-based compensation			358				—				—				—				358
ADJUSTED EBITDA		$	78			$	1,824			$	—			$	—			$	1,902
A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:
NET INCOME (LOSS)		$	(3,012	)		$	754			$	(446	)		$	—			$	(2,704	)
Loss from discontinued operations, net of tax			—				—				446				—				446
Stock-based compensation			358				—				—				—				358
NON-GAAP NET INCOME (LOSS)		$	(2,654	)		$	754			$	—			$	—			$	(1,900	)

PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidating Balance Sheets
as of June 30, 2011
(In Thousands)

						Business &
		PFSweb				Retail Connect				Eliminations				Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	14,987			$	3,972			$	—			$	18,959
Restricted cash			138				1,129				—				1,267
Accounts receivable, net			19,851				17,667				(293	)			37,225
Inventories, net			—				38,985				—				38,985
Assets of discontinued operations			—				—				—				—
Other receivables			—				12,779				—				12,779
Prepaid expenses and other current assets			2,769				1,636				—				4,405
Total current assets			37,745				76,168				(293	)			113,620
PROPERTY AND EQUIPMENT, net			10,671				104				—				10,775
RECEIVABLE/INVESTMENT IN AFFILIATES			15,729				—				(15,729	)			—
ASSETS OF DISCONTINUED OPERATIONS			—				—				—				—
OTHER ASSETS			1,999				217				—				2,216
Total assets			66,144				76,489				(16,022	)			126,611
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations		$	8,166			$	11,025			$	—			$	19,191
Trade accounts payable			5,594				43,833				(293	)			49,134
Accrued expenses			17,324				6,836				—				24,160
Total current liabilities			31,084				61,694				(293	)			92,485
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion			1,065				70				—				1,135
PAYABLE TO AFFILIATES			—				22,745				(22,745	)			—
OTHER LIABILITIES			4,074				—				—				4,074
Total liabilities			36,223				84,509				(23,038	)			97,694
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Common stock			13				19				(19	)			13
Capital contributions			—				1,000				(1,000	)			—
Additional paid-in capital			103,511				28,059				(28,059	)			103,511
Retained earnings (accumulated deficit)			(75,836	)			(39,807	)			38,810				(76,833	)
Accumulated other comprehensive income			2,318				2,709				(2,716	)			2,311
Treasury stock			(85	)			—				—				(85	)
Total shareholders’ equity			29,921				(8,020	)			7,016				28,917
Total liabilities and shareholders’ equity		$	66,144			$	76,489			$	(16,022	)		$	126,611