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: July 24, 2001
(Date or earliest date reported)
Commission file number 0-25790
PC MALL, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-4518700
(State or other jurisdiction (I.R.S. Employer)
of incorporation or organization) Identification No.)
2555 West 190th Street
Torrance, California 90504
(Address of principal executive offices and zip code)
(310) 354-5600
(Registrant's telephone number, including area code)
1
Item 5. Other Events
(i) Reference is made to the press release issued to the public by the registrant on July 17, 2001, the
text of which is attached hereto as an exhibit, for a description of the events reported
pursuant to this Form 8-K.
Item 7. Financial Statements and Exhibits
(c) Exhibits
99.1 Text of Press Release dated July 17, 2001 announcing unaudited consolidated financial results for the
second quarter of 2001.
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.
PC MALL, INC.
Date: July 24, 2001 /s/ Ted Sanders
---------------------------------------
Ted Sanders
Chief Financial Officer
Index to Exhibits
Exhibits Description Page
- -------- ------------------------------------------ ----
99.1 Text of Press Release dated July 17, 2001 5
EXHIBIT 99.1
PC Mall Reports Consolidated Second Quarter Net Income of $0.6 Million or $0.06 Per Share, a $4.0 Million or
$0.38 per share Improvement Over Q2 2000.
Completes Full Year Focusing on Core Business, Reporting Trailing twelve months Consolidated earnings of
$3.5 million or $0.34 per share
Highlights:
o Core business second quarter net income of $0.7 million or $0.07 per share, a 93 percent increase over the
comparable period last year.
o Consolidated second quarter net income of $0.6 million, or $0.06 per share, a $4.0 million, or
$0.38 per share improvement from Q2 2000's loss of $3.4 million.
o Consolidated trailing twelve month earnings $3.5 million or $0.34 per share and EBITDA of $11.7
million or $1.12 per share.
o Consolidated Q2 2001 EBITDA $2.5 million. Credit facility balance of $0 at quarter end.
o eCOST.com reports first profitable quarter.
Torrance, California-- July 17, 2001 -- PC Mall, Inc. (Nasdaq:MALL) today reported consolidated net
income for the quarter ended June 30, 2001 of $0.6 million or $0.06 per share, a $4.0 million or $0.38 per
share improvement from the net loss of $3.4 million for the comparable quarter a year earlier. PC Mall's
Core business earnings for the quarter rose 93 percent to $0.7 million, or $0.07 per share from 2000's
second quarter earnings.
Frank Khulusi, Chairman, President and CEO of PC Mall, said, "This quarter completes a full year of
focus on our Core business, and we have accomplished a dramatic improvement in results despite challenging
economic conditions. Our consolidated results over the trailing twelve-month period have improved $19.2
million or $1.83 per share from the previous trailing twelve-month period." Khulusi continued, "Results of
all our business units have improved significantly over the prior year. Over the past twelve months our
Core business results have increased by $5.4 million to $6.0 million or $0.58 per share; eCOST.com improved
its results by $12.9 million and reported its first profitable quarter; and eLinux has improved its results
by $0.8 million. We are very proud of these results especially in the historically weakest sales quarter of
the year."
Outbound business-to-business sales increased five percent from the comparable quarter a year ago.
Consumer catalog sales declined 17 percent and eCOST.com sales declined 22 percent due to the shift in
strategy announced in Q2 last year focusing on outbound sales and profitability. As a result, consolidated
sales for the quarter declined 12 percent to $172 million from a year ago.
The Company's improved earnings for its Core business reflect the successful execution of its
strategy to increase outbound business sales and control overhead spending. During the quarter, the Company
continued to hire and train outbound account executives and emphasize its sales support capabilities to
expand business sales. Increased emphasis on networking, servers, storage and licensing product sales
contributed to an 88 percent increase in licensing sales and 58 percent increase in networking sales for Q2
2001 compared with Q2 2000.
Core business sales for the quarter were $147 million, compared to Q2 2000 Core business sales of
$166 million. The impact of the sales and related gross profit decline for the quarter from Q2 2000 was more
than offset by a 21 percent reduction in Core business SG&A from the comparable quarter a year ago.
During the quarter, PC Mall's eCOST.com subsidiary became one of the first significant Internet
based technology resellers to report a profit. For the quarter, eCOST.com earned $0.1 million, a $2.5
million improvement over last year and a $0.3 million improvement from the prior quarter. eCOST.com
continued to be cash flow positive as well, generating EBITDA of $0.3 million for the quarter, a $0.2
million EBITDA increase over Q1 2001 and a $2.7 million EBITDA increase over Q2 2000. eCOST.com sales for
the quarter were $22 million versus $28 million last year. Last year's sales reflected a strategy that
emphasized market share over profitability. Most of the earnings increase from the same quarter a year ago
resulted from a 90 percent improvement in margin percentage and a 53 percent reduction of SG&A spending.
eLinux, PC Mall's outbound sales unit focused on Linux-based solutions, produced sales for the
quarter of $2.6 million, a 37 percent sequential improvement and a 53 percent improvement over last year's
second quarter sales of $1.7 million. Results for the quarter were a loss of $0.2 million, a 15 percent
improvement over the previous quarter and an 81 percent improvement over Q2 2000. Contributing to the
improvement was a 75 percent reduction in SG&A from the same quarter a year ago.
PC Mall's cash position continued to strengthen during the quarter. EBITDA for the quarter was
$2.5 million, a $4.3 million improvement over last year's Q2. Cash flow from operations for the quarter was
$1.7 million, the fourth consecutive quarter of positive cash flow from operations. The Company has
generated $23.3 million of cash from operations over the last four quarters. Cash flow from operations for
Q2 2001 was favorably impacted by a reduction in accounts receivable and inventory. Cash at the end of the
quarter was $11.4 million, and no borrowings were outstanding on the Company's working capital credit
facility.
About PC Mall
PC Mall is a rapid response supplier of technology solutions for business, government and
educational institutions as well as consumers. More than 100,000 different products from companies such as
Compaq, Microsoft, Apple, IBM and Hewlett-Packard are marketed to business customers using relationship
based outbound telemarketing, catalogs and the Internet (http://www.pcmall.com, http://www.macmall.com,
http://www.ecost.com, http://www.elinux.com). Customer orders are rapidly filled by the Company's
distribution center strategically located near FedEx's main hub or by PC Mall's extensive network of
distributors, one of the largest networks in the industry.
Except for historical information, all of the statements, expectations and assumptions contained in
the foregoing are forward-looking statements. The realization of any or all of these expectations is
subject to a number of risks and uncertainties and it is possible that the assumptions made by management
may not materialize causing actual results to differ materially from the forward looking statements. In
that regard, there can be no assurance that the transition in the Company's business strategy to an
increasingly Outbound sales model will be successful, that productivity can be increased, that profitability
can be optimized or that PC Mall will be profitable in the third quarter of 2001 or for the 2001 fiscal
year. There can be no assurance that the focus on eLinux's profitability will succeed or result in bottom
line improvements, or that eLinux's sales and business models prove successful, or that eLinux will continue
to make progress towards achieving profitability. There also can be no assurance that the growth in
outbound sales will continue, that Core business sales will rebound to historic levels, or that cost
reductions, EBITDA or profitability for the Company's Core business and eCOST.com will continue or improve.
In addition to the factors set forth above, other important factors that could cause actual results to
differ materially from our expectations include: competition from companies either currently in the market
or entering the market; competition from other catalog and retail store resellers and price pressures
related thereto; uncertainties surrounding the supply of and demand for products manufactured by and
compatible with Linux or Apple Computer; our reliance on Apple Computer, IBM, Hewlett-Packard, Compaq and
other vendors; and risks due to shifts in market demand and/or price erosion of owned inventory. This list
of risk factors is not intended to be exhaustive. Reference should also be made to the risk factors set
forth from time to time in the Company's SEC reports, including but not limited to those set forth in the
section entitled "Certain Factors Affecting Future Results" in its Annual Report on Form 10-K for 2000.
Note to Editors: Linux is a registered trademark of Linus Torvalds.
###
-Financial Tables to Follow-
PC MALL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited, in thousands except per share data)
For the three months ended For the six months ended
June 30, June 30,
2001 2000 2001 2000
Net sales $ 171,980 $ 195,892 $ 370,330 $ 433,028
Cost of goods sold 153,705 174,695 330,131 388,934
Gross profit 18,275 21,197 40,199 44,094
Selling, general and
administrative expenses 17,164 24,359 36,929 54,226
Income (loss) from operations 1,111 (3,162) 3,270 (10,132)
Interest income (expense), net (183) (208) (386) (173)
Income (loss) before income taxes 928 (3,370) 2,884 (10,305)
Income tax provision 343 - 1,067 -
Income (loss) before effect of cumulative
change in accounting principle 585 (3,370) 1,817 (10,305)
Effect of cumulative change in
accounting principle - - - (536)
Net income (loss) $ 585 $ (3,370) $ 1,817 $ (10,841)
Earnings (loss) per share
Income (loss) before cumulative
effect of change in accounting principle $ 0.06 $ (0.32) $ 0.17 $ (0.99)
Cumulative change in accounting
principle - - - (0.05)
$ 0.06 $ (0.32) $ 0.17 $ (1.04)
Diluted earnings (loss) per share
Income (loss) before cumulative
effect of change in accounting
principle $ 0.06 $ (0.32) $ 0.17 $ (0.99)
Cumulative change in accounting
principle - - - (0.05)
$ 0.06 $ (0.32) $ 0.17 $ (1.04)
Basic weighted average number of
shares outstanding 10,434 10,411 10,434 10,409
Diluted weighted average number of
shares outstanding 10,448 10,411 10,441 10,409
PC MALL, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
June 30, 2001
(unaudited) December 31, 2000
Assets
Current Assets:
Cash and cash equivalents $ 11,369 $ 12,195
Accounts receivable, net of allowance for
doubtful accounts 42,072 54,970
Inventories 34,139 35,838
Prepaid expenses and other current assets 2,556 2,489
Deferred income taxes 2,047 2,047
Total current assets 92,183 107,539
Property and equipment, net 12,711 14,928
Goodwill, net 11,056 11,316
Deferred income taxes 2,671 3,738
Other assets 648 45
$ 119,269 $137,566
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 54,167 $ 59,294
Accrued expenses and other current liabilities 12,327 12,963
Deferred revenue 8,851 7,204
Line of credit - 17,315
Capital leases - current portion 505 573
Notes payable - current portion 1,000 6
Total current liabilities 76,850 97,355
Capital leases - long term 344 562
Notes payable - long term 750 141
Total liabilities 77,944 98,058
Stockholders' equity:
Preferred stock, $.001 par value; 5,000,000 shares
authorized; none issued and outstanding - -
Common stock, $.001 par value; 15,000,000 shares
authorized; 10,433,866 shares issued 11 11
Additional paid-in capital 74,403 74,403
Treasury stock, at cost: 15,000 shares (91) (91)
Retained earnings (accumulated deficit) (32,998) (34,815)
Total stockholders' equity 41,325 39,508
$ 119,269 $137,566
