UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549
FORM 10-Q
For the quarterly period ended March 31, 2003
or
For the transition period from ____________ to _____________
COMMISSION FILE NUMBER 1-13792
Systemax 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.
[X] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [ ] No [X]
The number of shares outstanding of the registrant's Common Stock as of May 9, 2003 was 34,108,129.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Systemax Inc.Condensed Consolidated Balance Sheets(In Thousands, except share data)
March 31, December 31, 2003 2002 -------------- ---------------- (Unaudited) ASSETS - ------ CURRENT ASSETS: Cash and cash equivalents $ 42,572 $ 62,995 Accounts receivable, net 154,592 148,554 Inventories 113,978 98,401 Prepaid expenses and other current assets 38,354 31,343 Deferred income tax benefits 7,059 9,073 --------- ---------- Total current assets 356,555 350,366 PROPERTY, PLANT AND EQUIPMENT, net 69,813 71,133 DEFERRED INCOME TAX BENEFITS 14,131 15,100 OTHER ASSETS 980 1,305 --------- ---------- TOTAL $ 441,479 $ 437,904 ========= ========== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Amounts due to banks $ 9,530 $ 21,211 Accounts payable 143,033 131,510 Accrued expenses and other current liabilities 62,571 64,349 --------- ---------- Total current liabilities 215,134 217,070 --------- ---------- Long-term debt 17,042 17,519 Other liabilities 1,613 1,398 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 (1,392) (2,130) Retained earnings 80,446 75,411 --------- ---------- 256,179 250,406 --------- ---------- Less: Common stock in treasury at cost - 4,127,700 shares 48,489 48,489 --------- ---------- Total shareholders' equity 207,690 201,917 --------- ---------- TOTAL $ 441,479 $ 437,904 ========= ==========
See notes to condensed consolidated financial statements.
Systemax Inc.Condensed Consolidated Statements of Operations (Unaudited)(In Thousands, except per share amounts)
Three Months Ended March 31, --------- 2003 2002 ---- ---- Net sales $426,461 $412,260 Cost of sales 356,464 338,412 --------------- --------------- Gross profit 69,997 73,848 Selling, general and administrative expenses 61,320 72,730 Restructuring and other charges 112 133 --------------- --------------- Income from operations 8,565 985 Interest and other expense, net 214 13 --------------- --------------- Income before income taxes 8,351 972 Provision for income taxes 3,316 387 --------------- --------------- Income before cumulative effect of change in accounting principle, net of tax 5,035 585 Cumulative effect of change in accounting principle, net of tax (50,971) --------------- --------------- Net income (loss) $5,035 $(50,386) =============== =============== Net income (loss) per common share, basic and diluted: Income before cumulative effect of change in accounting principle, net of tax $.15 $.02 Cumulative effect of change in accounting principle, net of tax (1.50) --------------- --------------- Net income (loss) $.15 $(1.48) =============== =============== Common and common equivalent shares outstanding: Basic and diluted 34,109 34,109 =============== ===============
See notes to condensed consolidated financial statements
Systemax Inc.Condensed Consolidated Statement of Shareholders' Equity (Unaudited)(In Thousands)
Common Stock Accumulated ------------------------- Other Comprehensive Additional Income Treasury Number of Paid-in Retained (Loss), Net Stock Comprehensive Shares Amount Capital Earnings of Tax At Cost Income ---------- ------ ---------- -------- -------------- ---------- --------------- Balances, January 1, 2003 34,104 $382 $176,743 $75,411 $(2,130) $(48,489) Change in cumulative translation adjustment 738 $738 Net income 5,035 5,035 -------- ------ --------- ------- ------- --------- ------- Total comprehensive income $5,773 ====== Balances, March 31, 2003 34,104 $382 $176,743 $80,446 $(1,392) $(48,489) ====== ======== ======== ======= ========
Systemax Inc.Condensed Consolidated Statements of Cash Flows (Unaudited)(In Thousands)
Three Months Ended March 31, ------------------------------ 2003 2002 ---- ---- CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net income (loss) $5,035 $(50,386) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Cumulative effect of accounting change, net 50,971 Provision for deferred income taxes 2,052 2,061 Depreciation and amortization, net 3,463 3,520 Provisions for returns and doubtful accounts 1,242 1,321 Loss on dispositions 18 Changes in certain assets and liabilities: Accounts receivable (6,047) (22,391) Inventories (15,342) (9,034) Prepaid expenses and other current assets (7,364) (195) Accounts payable, accrued expenses and other current liabilities 7,642 6,269 ------------- --------------- Net cash used in operating activities (9,301) (17,864) ------------- --------------- CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: Investments in property, plant and equipment (2,552) (3,508) Proceeds from disposals of property, plant and equipment 61 124 ------------- --------------- Net cash used in investing activities (2,491) (3,384) ------------- --------------- CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: Proceeds (repayments) of borrowings from banks (11,439) 7,984 Repayments of long-term debt (311) ------------- --------------- Net cash provided by (used in) financing activities (11,750) 7,984 ------------- --------------- EFFECTS OF EXCHANGE RATES ON CASH 3,119 (965) ------------- --------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (20,423) (14,229) CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 62,995 36,464 ------------- --------------- CASH AND CASH EQUIVALENTS - END OF PERIOD $42,572 $22,235 ============= ===============
Systemax Inc.Notes to Condensed Consolidated Financial Statements (unaudited)
Three Months Ended March 31, 2003 2002 ---- ---- Net income (loss) - as reported $5,035 $(50,386) Stock-based employee compensation expense determined under fair value based method, net of related tax effects 135 178 ------ --------- Pro forma net income (loss) $4,900 $(50,564) ====== ========= Basic and diluted net income (loss) per common share: Net income (loss) - as reported $.15 $(1.48) ==== ======= Net income (loss) - pro forma $.14 $(1.48) ==== ======= The fair value of options granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: 2003 2002 ---- ---- Expected dividend yield 0% 0% Risk-free interest rate 5.0% 5.6% Expected volatility 68.0% 71.0% Expected life in years 2.41 2.52
Three Months Ended March 31, --------- 2003 2002 ---- ---- Net Sales (in thousands): North America $259,831 $257,952 Europe 166,630 154,308 ------- ------- Consolidated $426,461 $412,260 ======== ========
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.
Other factors that could contribute to or cause such differences include, but are not limited to, unanticipated developments in any one or more of the following areas: (i) the effect on the Company of volatility in the price of paper and periodic increases in postage rates, (ii) the operation of the Company's management information systems, (iii) significant changes in the computer products retail industry, especially relating to the distribution and sale of such products, (iv) the potential for expanded imposition of state sales taxes, use taxes, or other taxes on direct marketing and e-commerce companies, (v) timely availability of existing and new products, (vi) risks involved with e-commerce, including possible loss of business and customer dissatisfaction if outages or other computer-related problems should preclude customer access to the Company, (vii) risks associated with delivery of merchandise to customers by utilizing common delivery services such as the United States Postal Service and United Parcel Service, including possible strikes and contamination, (viii) borrowing costs or availability, (ix) changes in taxes due to changes in the mix of U.S. and non-U.S. revenue, (x) pending or threatened litigation and investigations and (xi) the availability of key personnel, as well as other risk factors which may be detailed from time to time in the Company's Securities and Exchange Commission filings.
Readers are cautioned not to place undue reliance on any forward looking statements contained in this report, which speak only as of the date of this report. The Company undertakes no obligation to publicly release the result of any revisions to these forward looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unexpected events.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
Item 4. Controls andProcedures
PART II - OTHER INFORMATION
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.
CERTIFICATION UNDER SECTION 302 OF THESARBANES-OXLEY ACT OF 2002
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.
Dated: May 14, 2003
/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. GOLDSCHEINSteven M. Goldschein, Chief Financial Officer