UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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 6, 2004 was 34,363,553.
PART I - FINANCIAL INFORMATIONItem 1. Financial Statements
Systemax Inc.Condensed Consolidated Balance Sheets (In Thousands, except share data) - --------------------------------------------------------------------------------------------------------------- March 31 December 31 2004 2003 -------- ----------- (Unaudited) ASSETS: CURRENT ASSETS: Cash and cash equivalents $39,634 $38,702 Accounts receivable, net 162,754 152,435 Inventories 154,592 133,905 Prepaid expenses and other current assets 24,426 26,849 Deferred income tax assets 8,709 10,132 ------- ------- Total current assets 390,115 362,023 PROPERTY, PLANT AND EQUIPMENT, net 67,173 68,647 DEFERRED INCOME TAX ASSETS 11,440 14,606 OTHER ASSETS 188 376 ------- ------- TOTAL ASSETS $468,916 $445,652 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT LIABILITIES: Short-term borrowings, including current portions of long-term debt $23,069 $20,814 Accounts payable 160,595 141,106 Accrued expenses and other current liabilities 49,639 51,037 ------ ------ Total current liabilities 233,303 212,957 ======== ======== LONG-TERM DEBT 18,149 18,353 OTHER LIABILITIES 1,702 1,768 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 34,354,896 (2004) and 34,288,068 shares (2003) 382 382 Additional paid-in capital 175,593 175,343 Accumulated other comprehensive income, net 1,900 2,157 Retained earnings 83,434 81,022 ------- ------- 261,309 258,904 ------- ------- Less: common stock in treasury at cost - 3,877,094 (2004) and 3,943,922 (2003) shares 45,547 46,330 ------- ------- Total shareholders' equity 215,762 212,574 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $468,916 $445,652 ======== ======== See notes to condensed consolidated financial statements.
Systemax Inc.Condensed Consolidated Statements of Income (Unaudited) (In Thousands, except per share amounts) - -------------------------------------------------------------------------------------------- Three Months Ended March 31, ---------- 2004 2003 ---- ---- Net sales $485,736 $426,461 Cost of sales 410,916 353,983 ------- ------- Gross profit 74,820 72,478 Selling, general and administrative expenses 65,575 63,801 Restructuring and other charges 4,042 112 ------- ------- Income from operations 5,203 8,565 Interest and other expense, net 647 214 ------- ------- Income before income taxes 4,556 8,351 Provision for income taxes 2,144 3,316 ------- ------- Net income $2,412 $5,035 ====== ====== Net income per common share: Basic $.07 $.15 ====== ====== Diluted $.07 $.15 ====== ====== Common and common equivalent shares outstanding: Basic 34,305 34,109 ====== ====== Diluted 35,218 34,109 ====== ====== See notes to condensed consolidated financial statements.
Systemax Inc.Condensed Consolidated Statement of Shareholders' Equity (Unaudited) (In Thousands) - ------------------------------------------------------------------------------------------------------------------------------- Common Stock Accumulated ----------------------- Other Additional Comprehensive Treasury Comprehensive Number of Paid-in Retained Income (Loss), Stock, Income (Loss), Shares Amount Capital Earnings Net of Tax At Cost Net of Tax --------------------------------------------------------------------------------------------- Balances, January 1, 2004 34,288 $382 $175,343 $81,022 $2,157 $(46,330) Exercise of stock options 67 (550) 783 Change in cumulative translation adjustment, net (257) $(257) Compensation expense related to stock option plans 800 Net Income 2,412 2,412 ------ ---- ------- ------ ------ -------- ------ Total comprehensive income $2,155 ====== Balances, March 31, 2004 34,355 $382 $175,593 $83,434 $1,900 $(45,547) ====== ==== ======== ======= ======= ======== See notes to condensed consolidated financial statements.
Systemax Inc.Condensed Consolidated Statements of Cash Flows (Unaudited) (In Thousands) - ------------------------------------------------------------------------------------------------------ Three Months Ended March 31, -------------------------- 2004 2003 ---- ---- CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net income $2,412 $5,035 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Deferred income taxes 4,555 2,052 Depreciation and amortization 2,995 3,463 Provisions for returns and doubtful accounts 819 1,242 Loss on dispositions 508 18 Compensation expense related to stock option plans 800 Changes in operating assets and liabilities: Accounts receivable (11,498) (6,047) Inventories (20,699) (15,342) Prepaid expenses and other current assets 5,725 (7,364) Accounts payable, accrued expenses and other current liabilities 14,705 7,642 ------- ------- Net cash provided by (used in) operating activities 322 (9,301) ------- ------- CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: Investments in property, plant and equipment (1,371) (2,552) Proceeds from disposals of property, plant and equipment 26 61 ------- ------- Net cash used in investing activities (1,345) (2,491) ------- ------- CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: Proceeds (repayments) of borrowings from banks 1,984 (11,439) Repayments of long-term debt and capital lease obligations (442) (311) Exercise of stock options 233 ------- ------- Net cash provided by (used in) financing activities 1,775 (11,750) ------- ------- EFFECTS OF EXCHANGE RATES ON CASH 180 3,119 ------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 932 (20,423) CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 38,702 62,995 ------- ------- CASH AND CASH EQUIVALENTS - END OF PERIOD $39,634 $42,572 ======= ======= See notes to condensed consolidated financial statements.
Three Months Ended March 31 2004 2003 ---- ---- Net income - as reported $2,412 $5,035 Stock-based employee compensation expense determined under fair value based method, net of related tax effects 6 135 ------ ------ Pro forma net income $2,406 $4,900 ====== ====== Net income per common share: Basic: Net income - as reported $.07 $.15 ==== ==== Net income - pro forma $.07 $.14 ==== ==== Diluted: Net income - as reported $.07 $.15 ==== ==== Net income - pro forma $.07 $.14 ==== ====
2004 2003 ---- ---- Expected dividend yield 0% 0% Risk-free interest rate 5.9% 5.0% Expected volatility 58.0% 68.0% Expected life in years 2.40 2.41
Severance and Asset Other Personnel Costs Write-downs Exit Costs Total --------------- ----------- ---------- ----- Charged to expense in 2004 $3,153 $483 $60 $3,696 Amounts utilized (1,281) (483) -- (1,764) ------ ---- --- ------ Accrued at March 31, 2004 $1,872 -- $60 $1,932 ====== ==== === ======
Severance and Asset Other Personnel Costs Write-downs Exit Costs Total --------------- ----------- ---------- ----- Accrued at December 31, 2003 $ 63 $233 $417 $713 Amounts utilized (63) (42) (131) (236) --- --- ---- ---- Accrued at March 31, 2004 - $191 $286 $477 === ==== ==== ====
Asset Other Write-downs Exit Costs Total ----------- ----------- ----- Accrued at December 31, 2003 $630 $1,682 $2,312 Amounts utilized (630) (420) (1,050) ---- ---- ------ Accrued at March 31, 2004 -- $1,262 $1,262 ==== ====== ======
Three Months Ended March 31, --------- 2004 2003 ---- ---- Net Sales (in thousands): North America $295,906 $259,831 Europe 189,830 166,630 ------- ------- Consolidated $485,736 $426,461 ======== ========
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
We are exposed to market risks, which include changes in U.S. and international interest rates as well as changes in currency exchange rates as measured against the U.S. dollar and each other.
We have limited involvement with derivative financial instruments and do not use them for trading purposes. Changes in currency exchange rates as measured against the U.S. dollar may positively or negatively affect sales, gross margins, operating expenses and retained earnings as expressed in U.S. dollars. We may enter into foreign currency options or forward exchange contracts aimed at limiting in part the impact of certain currency fluctuations, but as of March 31, 2004 we had no outstanding forward exchange contracts.
Our exposure to market risk for changes in interest rates relates primarily to our variable rate debt. In connection with our United Kingdom term loan agreement, effective April 30, 2002 we entered into an interest rate collar agreement to reduce our exposure to market rate fluctuations. At March 31, 2004 the notional amount of the interest rate collar was £5.6 million ($10.3 million at the March 31, 2004 exchange rate) with an interest rate cap of 6.0% and a floor of 4.5%. The interest rate collar expires on April 30, 2005.
Item 4. Controls and Procedures
The Company has carried out an evaluation under the supervision of management, including the Chairman and Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2004, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports filed or submitted by it under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is assembled and reported to the Company’s management, including the Chairman and Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
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.
Exhibit Index