SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-Q
For the quarterly period ended September 30, 2002
or
For the transition period from ____________ to _____________
COMMISSION FILE NUMBER 1-13792Systemax Inc.(Exact name of registrant as specified in its charter)
11 Harbor Park DrivePort Washington, New York 11050(Address of registrant's principal executive offices)(516) 608-7000(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
The number of shares outstanding of the registrant’s Common Stock as of November 8, 2002 was 34,104,290.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Systemax Inc.Condensed Consolidated Balance Sheets(In Thousands, except share data)
September 30, December 31, 2002 2001 ------------ ----------- (Unaudited) ASSETS - ------ CURRENT ASSETS: Cash and cash equivalents $ 41,540 $ 36,464 Accounts receivable, net 152,367 136,358 Inventories 93,458 92,170 Prepaid expenses and other current assets 38,652 28,534 Income taxes receivable 7,755 --------- ---------- Total current assets 326,017 301,281 PROPERTY, PLANT AND EQUIPMENT, net 73,551 82,623 GOODWILL, net 67,967 OTHER ASSETS 18,930 2,576 ---------- ---------- TOTAL $ 418,498 $ 454,447 ---------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Amounts due to banks $ 14,161 $ 2,829 Accounts payable and accrued expenses 187,790 195,113 ---------- ---------- Total current liabilities 201,951 197,942 ---------- ---------- Deferred tax liabilities 1,557 Long-term debt 17,612 SHAREHOLDERS' EQUITY: Preferred stock, par value $.01 per share, authorized 25 million shares, issued none Common stock, par value $.01 per share, authorized 150 million shares, issued 38,231,990 shares, outstanding 34,104,290 shares 382 382 Additional paid-in capital 176,743 176,743 Accumulated other comprehensive loss (4,111) (8,038) Retained earnings 74,410 134,350 ---------- ---------- 247,424 303,437 ---------- ---------- Less: Common stock in treasury at cost - 4,127,700 shares 48,489 48,489 ---------- ---------- Total shareholders' equity 198,935 254,948 ---------- ---------- TOTAL $ 418,498 $ 454,447 ---------- ----------
See notes to condensed consolidated financial statements.
Systemax Inc.Condensed Consolidated Statements of Operations (Unaudited)(In Thousands, except per share amounts)
Nine Months Ended Three Months Ended September 30, September 30, -------------------------- ------------------------ 2002 2001 2002 2001 ------------ ------------ ----------- ----------- Net sales $1,148,170 $1,140,040 $372,139 $370,636 Cost of sales 949,657 943,508 309,413 301,377 ------------ ------------ ----------- ----------- Gross profit 198,513 196,532 62,726 69,259 Selling, general & administrative expenses 210,286 197,883 61,142 68,582 ------------ ------------ ----------- ----------- Income (loss) from operations (11,773) (1,351) 1,584 677 Interest and other expense, net 921 1,482 681 208 ------------ ------------ ----------- ----------- Income (loss) before income taxes (12,694) (2,833) 903 469 Provision (benefit) for income taxes (3,725) (870) 1,630 212 ------------ ------------ ----------- ----------- Income (loss) before cumulative effect of accounting change (8,969) (1,963) (727) 257 Cumulative effect of accounting change (50,971) ------------ ------------ ----------- ----------- Net income (loss) ($59,940) ($1,963) ($727) $257 ============ ============ =========== =========== Net income (loss) per common share, basic and diluted: Before cumulative effect of accounting change ($.26) ($.06) ($.02) $.01 Cumulative effect of accounting change (1.50) ------------ ------------ ----------- ----------- Net income (loss) ($1.76) ($.06) ($.02) $.01 ============ ============ =========== =========== Weighted average common and common equivalent shares: Basic and diluted 34,104 34,104 34,104 34,104 ============ ============ =========== ===========
Systemax Inc.Condensed Consolidated Statement of Shareholders' Equity (Unaudited)(In Thousands)
Common Stock Accumulated ------------------- Other Additional Comprehensive Treasury Number of Paid-in Retained Income (Loss), Stock Comprehensive Shares Amount Capital Earnings Net of Tax At Cost Income (Loss) --------- ---------- ----------- ---------- --------------- ----------- --------------- Balances, December 31,2001 34,104 $382 $176,743 $134,350 ($8,038) ($48,489) Change in cumulative translation adjustment 3,927 $3,927 Net loss (59,940) (59,940) ------- ----- -------- --------- ------- -------- -------- Total comprehensive loss ($56,013) ======== Balances, September 30, 2002 34,104 $382 $176,743 $74,410 ($4,111) ($48,489) ======= ===== ======== ========= ======= ========
Systemax Inc. Condensed Statements of Consolidated Cash Flows (Unaudited) (In Thousands) Nine-month Periods Ended September 30, -------------------------------- 2002 2001 CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net loss ($59,940) ($1,963) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Cumulative effect of accounting change, net 50,971 Loss on dispositions 14,280 Depreciation and amortization, net 10,194 11,321 Provisions for returns and doubtful accounts 3,718 3,746 Changes in certain assets and liabilities: Accounts receivable (12,210) 30,343 Inventories 1,246 36,265 Prepaid expenses and other current assets (14,962) 3,602 Income taxes receivable 9,599 20,309 Accounts payable and accrued expenses (15,745) (44,977) --------------- --------------- Net cash provided by (used in) operating activities (12,849) 58,646 --------------- --------------- CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: Investments in property, plant and equipment (14,084) (21,505) Proceeds from disposals of property, plant and equipment 434 325 --------------- --------------- Net cash used in investing activities (13,650) (21,180) --------------- --------------- CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: Proceeds of mortgage borrowing 8,500 Proceeds (repayments) of borrowings from banks 19,044 (35,884) --------------- --------------- Net cash provided by (used in) financing activities 27,544 (35,884) --------------- --------------- EFFECTS OF EXCHANGE RATES ON CASH 4,031 4,876 --------------- --------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 5,076 6,458 CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 36,464 14,496 --------------- --------------- CASH AND CASH EQUIVALENTS - END OF PERIOD $41,540 $20,954 =============== ===============
Systemax Inc.Notes to Condensed Consolidated Financial Statements (unaudited)
Nine Month Periods Ended Three Month Periods Ended September 30, September 30, ------------------------ ------------------------- 2002 2001 2002 2001 ---- ---- ---- ---- Reported income (loss) before cumulative ($8,969) ($1,963) ($727) $257 effect of change in accounting principle Add: Goodwill amortization, net of tax ______ 979 ______ 334 Adjusted income (loss) before cumulative (8,969) (984) (727) 591 effect of change in accounting principle Cumulative effect of change in accounting (50,971) ______ ______ ______ principle Adjusted net income (loss) ($59,940) ($984) ($727) $591 Basic and diluted net income (loss) per share: Reported income (loss) before cumulative ($.26) ($.06) ($.02) $.01 effect of change in accounting principle Add: Goodwill amortization, net of tax _____ 03 _____ .01 Adjusted income (loss) before cumulative (.26) (.03) (.02) .02 effect of change in accounting principle Cumulative effect of change in accounting (1.50) _____ _____ _____ principle Adjusted net income (loss) ($1.76) ($.03) ($.02) $.02
Nine Month Periods Ended Three Month Periods Ended September 30, September 30, ------------------------ ------------------------- 2002 2001 2002 2001 ---- ---- ---- ---- Net Sales (in thousands): North America $712,728 $725,124 $228,124 $242,023 Europe 435,442 414,916 144,015 128,613 ------- ------- ------- ------- Consolidated $1,148,170 $1,140,040 $372,139 $370,636 ========== ========== ======== ========
Revenues are attributed to countries based on location of selling subsidiary.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
Item 4. Controls and Procedures
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Systemax Inc. v. Trigyn Technologies Inc. In June 2002 the Company filed a complaint in federal court against the software developers of a new customer order management software system that was being written for the Company's internal use, seeking restitution of all payments and other damages totaling approximately $19 million. The software developers have filed an answer and counterclaims, denying the Company's allegations and seeking approximately $9.4 million in damages. The Company believes that the claims of the software developers are without merit.
Item 6. Exhibits
SIGNATURES
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 thereunto duly authorized.
SYSTEMAX INC.
Dated: November 13, 2002
By: /s/ RICHARD LEEDSRichard Leeds, Chairman and Chief Executive Officer
By: /s/ STEVEN M. GOLDSCHEINSteven M. Goldschein, Senior Vice President and Chief Financial Officer
CERTIFICATIONS
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Richard Leeds, Chief Executive Officer of Systemax Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Systemax Inc. (the “registrant”);
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within these entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6. The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
/s/ RICHARD LEEDSRichard Leeds, Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Steven M. Goldschein, Chief Financial Officer of Systemax Inc., certify that:
/s/ STEVEN M. GOLDSCHEIN Steven M. Goldschein, Chief Financial Officer
CERTIFICATION UNDER SECTION 906 OF THESARBANES-OXLEY ACT OF 2002
The undersigned, the Chief Executive Officer of Systemax, Inc., hereby certify that to the best of his knowledge, Systemax Inc.‘s Form 10-Q for the Quarter Ended September 30, 2002 fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78 (o)(d) and that the information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operation of Systemax Inc.
The undersigned, the Chief Financial Officer of Systemax, Inc., hereby certify that to the best of his knowledge, Systemax Inc.‘s Form 10-Q for the Quarter Ended September 30, 2002 fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78 (o)(d) and that the information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operation of Systemax Inc.
Dated: November 13, 2002/s/ STEVEN M. GOLDSCHEIN Steven M. Goldchein, Chief Executive Officer