Systemax Inc. (NYSE:SYX) today announced its financial results
for the first quarter of fiscal 2008.
Net sales for the quarter increased 7.2% to $725 million compared to
$676 million in the first quarter of 2007. Sales of technology products
grew by 7% and sales of industrial products grew by 11%. Gross margin
for the quarter improved to 15.8% from 14.3% last year. Operating income
increased 28% to $27.5 million compared to $21.5 million last year.
Operating margin improved to 3.8% from 3.2% last year. Net income
increased 30% to $18.1 million, or $.48 per diluted share, compared to
$13.9 million, or $.37 per diluted share, last year. Included in net
income in the first quarter of 2007 is an after-tax gain of
approximately $1.5 million, or $.04 per diluted share, related to a
lawsuit settlement.
Richard Leeds, Chairman and Chief Executive Officer, said, “Our
first quarter 2008 results – highlighted by
our continued growth in sales, improved gross margin, growth in
operating income and the completion of the acquisition of certain
CompUSA assets – are impressive considering
the challenges we are facing in the current economic environment. We
focused much of our attention during the quarter on the CompUSA
acquisition, and we believe we have positioned this business for strong
growth in the future. Our operating income continues to grow at a faster
rate than revenues, demonstrating the leverage in our business model.
Our consolidated gross margin again improved in the first quarter as it
did consistently throughout 2007. Our selling, general and
administrative expenses, excluding start-up costs associated with the
CompUSA acquisition, have remained relatively stable as a percentage of
sales, despite significantly increased consulting and staffing costs
associated with the requirements of Section 404 of the Sarbanes-Oxley
Act.”
Gilbert Fiorentino, General Manager of Systemax’s
Technology Products segment, noted, “Sales
increases in both the North American and European markets continued in
the first quarter. North American and European technology product sales
each grew 7%. In North America, we completed the CompUSA acquisition in
the quarter; the new, improved CompUSA.com was acquired in early January
and has been operational and generating sales since mid January. We also
acquired, refurbished and restocked 16 former CompUSA retail stores
during March and April. Sales from these stores was not significant
during the quarter as most of the grand reopenings occurred in April.
Total sales from CompUSA were approximately $18 million during the
quarter. In Europe, the effect on sales of exchange rate changes was
approximately $18 million. We now operate under the three strong primary
brands – TigerDirect and CompUSA in North
America and Misco in Europe – and we are well
positioned in each of our multiple sales channels –
business to business, business to consumer, retail and television
shopping.”
Richard Leeds, commenting on other operations, noted that “in
the industrial products segment, sales grew 11% in the first quarter,
driven primarily by increased internet sales and continuing competitive
advantages due to our worldwide sourcing and aggressive pricing
strategies. In our hosted software segment, our ProfitCenter Software
business continued product development and has moved closer to bringing
several significant customers live.”
Larry Reinhold, Chief Financial Officer, noted that the Company’s
overall financial condition at March 31, 2008 remains solid after
completing the CompUSA acquisition. Working capital was $227 million,
including cash and equivalents of $98 million. The $1.00 per share
special dividend declared by our board of directors during March
aggregating $37.1 million was paid during the first week of the second
quarter. Cash flow from operations was approximately $9 million.
Included in this amount was an $18 million increase in inventory, most
of which was for the initial stocking of the CompUSA retail stores.
Capital expenditures aggregated $36 million, which included $30.4
million for CompUSA. Days sales outstanding were 26 days at March 31,
2008, and inventory turned at an annual rate of approximately 9.5 times
during the first quarter. Our effective tax rate was 36.1% in the first
quarter, down from 37.6% last year.
Systemax Inc. (www.systemax.com),
a Fortune 1000 company, sells personal computers, computer supplies and
accessories, consumer electronics and industrial products through a
system of branded e-commerce web sites, direct mail catalogs,
relationship marketers and retail stores in North America and Europe.
The primary brands are TigerDirect, CompUSA, Misco and Global
Industrial. It also manufactures and sells personal computers under the
Systemax and Ultra brands and develops and markets ProfitCenter
Software, a web-based, on-demand application for multichannel direct
marketing companies.
