EXHIBIT 99.1
Contact:
Joe Hayek, Executive Vice President
PC Mall, Inc.
(310) 354-5600
or
Matt Sellinger, Partner
Genesis Select Corporation
(303) 415-0200
PC MALL REPORTS SECOND QUARTER 2011 RESULTS
Second Quarter Highlights (second quarter of 2011 compared to the second quarter of 2010):
· Net sales increased 14% to $361.9 million, a second quarter record
· Gross profit increased 14% to $46.4 million, a second quarter record
· GAAP operating profit decreased 9% to $2.6 million and non-GAAP operating profit increased 38% to $4.2 million
· Adjusted EBITDA increased 26% to $7.0 million
· Diluted earnings per share (EPS) decreased to $0.08 from $0.11 and non-GAAP diluted EPS for Q2 2011 increased to $0.15 from $0.12 in Q2 2010
Torrance, California — August 9, 2011 — PC Mall, Inc. (NASDAQ:MALL), a leading IT solutions provider, today reported financial results for the second quarter of 2011. Consolidated net sales for Q2 2011 were $361.9 million, an increase of 14%, from $317.0 million in Q2 2010. Consolidated gross profit for Q2 2011 increased 14% to $46.4 million from $40.6 million in Q2 2010. Consolidated gross profit margin was 12.8% in Q2 2011 and Q2 2010. Consolidated operating profit for Q2 2011 decreased 9% to $2.6 million compared to $2.8 million for Q2 2010. Consolidated operating profit margin for Q2 2011 decreased by 20 basis points to 0.7% compared to 0.9% in Q2 2010. Non-GAAP operating profit (as defined below) was $4.2 million in Q2 2011 compared to $3.0 million in Q2 2010. Non-GAAP operating profit margin (as defined below) was 1.2% in Q2 2011 compared to 1.0% in Q2 2010. Consolidated net income for Q2 2011 decreased to $1.0 million compared to $1.4 million for Q2 2010. Diluted EPS for Q2 2011 was $0.08 compared to diluted EPS of $0.11 for Q2 2010. Non-GAAP diluted EPS, excluding the results of our OnSale segment and the special items discussed below, was $0.15 for Q2 2011 and $0.12 for Q2 2010. Adjusted EBITDA (as defined below) for Q2 2011 increased 26% to $7.0 million from $5.6 million in Q2 2010.
Commenting on the Company’s second quarter results, Frank Khulusi, Chairman, President and CEO of PC Mall, Inc. said, “Our entire team has continued to work hard with a focus on profitably growing our business and I would like to thank them for their ongoing efforts. We continue to see positive momentum in our business. The second quarter marks our 6th straight quarter of double digit growth in sales, reflecting what we believe is our continuing ability to grow share. While our gross margin for Q2 was stable relative to last year, we continue to invest in our service and solutions capabilities. We expect our margins to move higher when sales of these services and solutions represent a larger portion of our sales mix. Our Non-GAAP operating profit grew 38% year-over-year, more than twice as much as our revenue grew, demonstrating the operating leverage that is inherent to our business. As we continue to grow our business, we are also focused on reducing our SG&A spend as a percentage of revenues. These efforts are necessarily uneven, as we continue to invest in IT systems and tools, but we believe that in time they will provide us with significant benefits. For example, we are consolidating our systems to one common ERP platform, which we believe will provide us with significant operating leverage. As we have discussed in prior periods these investments and upgrades are taking place over an extended period of time, but we expect much of this work to be completed by the end of 2012.”
Khulusi continued, “In addition, as we announced today we are pleased that our OnSale subsidiary launched its expanded beta site in June in Chicago, Los Angeles and Seattle. We believe OnSale is developing unique and highly differentiated offerings in a very important and growing market. Our site traffic, new subscribers and orders have continued to grow significantly since our June launch, with very little marketing having been undertaken to date. Importantly, many of OnSale’s merchant partners have begun making OnSale an important part of their marketing spend, which will create additional opportunities for us to partner with them. We look forward to OnSale’s continued development and growth in the weeks and months to come.”
1
Segment Results
SMB
Q2 2011 net sales for our SMB segment were $131.3 million, an increase of $23.6 million, or 22%, from $107.7 million in Q2 2010 due to an increase in sales to promotional companies, increased productivity of our account executives and continuing growth in our new Chicago office.
SMB gross profit increased by $2.1 million, or 15%, to $16.8 million in Q2 2011 compared to $14.7 million in Q2 2010 resulting primarily from the increased SMB net sales discussed above and a $0.7 million increase in vendor consideration. SMB gross profit margin decreased to 12.8% in Q2 2011 compared to 13.6% in Q2 2010 primarily due to an increase in lower margin sales to promotional companies as a percentage of the overall mix.
SMB operating profit in Q2 2011 increased by $1.4 million, or 18%, to $9.0 million compared to $7.6 million in Q2 2010. The increase in SMB operating profit in Q2 2011 was primarily due to the increase in SMB gross profit discussed above, partially offset by a $0.4 million increase in SMB personnel costs, which was primarily due to an increase in variable compensation expenses related to the increased SMB gross profit, and a $0.2 million increase in credit card processing costs.
MME
Q2 2011 net sales for our MME segment were $128.6 million compared to $125.5 million in Q2 2010, an increase of $3.1 million, or 3%. This increase was primarily due to a 13% increase in services revenues in Q2 2011 compared to Q2 2010. Service revenues represented 18% of MME net sales in Q2 2011 compared to 17% of sales in Q2 2010. The service revenue increase was primarily due to the inclusion of service revenues of NSPI, which we acquired in June 2010, as well as a 7% increase in service sales performed under our Abreon brand, which is primarily focused on change management and eLearning consulting. These increases in service revenues were partially offset by a 1% decrease in MME’s Sarcom branded lifecycle services in Q2 2011 compared to Q2 2010.
MME gross profit increased by $1.3 million, or 7%, to $19.9 million in Q2 2011 compared to $18.6 million in Q2 2010, and MME gross profit margin increased to 15.4% in Q2 2011 compared to 14.9% in Q2 2010. The increase in MME gross profit and gross profit margin was primarily due to the increased MME net sales discussed above, which include a higher mix of service sales, as well as a $0.3 million, or a 14 basis point, increase in vendor consideration.
MME operating profit in Q2 2011 increased by $1.7 million, or 28%, to $7.7 million compared to $6.0 million in Q2 2010. The increase was primarily due to the increase in MME gross profit discussed above and $0.8 million of other income relating to a decrease in the estimated fair value of the contingent consideration liability related to the NSPI acquisition, partially offset by a $0.3 million increase in MME general and administrative costs primarily relating to the acquisition of NSPI.
Public Sector
Q2 2011 net sales for our Public Sector segment were $41.4 million compared to $41.1 million in Q2 2010, an increase of $0.3 million, or 1%. This increase in Public Sector net sales was due to a 28% increase in our state and local government and educational institution sales driven by stronger demand, partially offset by a 23% decrease in our federal government business resulting primarily from a weak demand environment in the federal government sector.
Public Sector gross profit increased by $0.8 million, or 30%, to $3.4 million in Q2 2011 compared to $2.6 million in Q2 2010. Public Sector gross profit margin increased to 8.1% in Q2 2011 compared to 6.3% in Q2 2010. The increase in Public Sector gross profit was due to the increased Public Sector net sales discussed above and a $0.3 million increase in vendor consideration. The increase in Public Sector gross profit margin was primarily due to an increase in solution sales, which are made at higher margins.
Public Sector operating loss decreased by $0.5 million, or 58%, to $0.3 million in Q2 2011 compared to $0.8 million in Q2 2010. The decrease in Public Sector operating loss was primarily due to the increase in Public Sector gross profit discussed above, partially offset by a $0.2 million increase in bad debt expense primarily related to an external fraudulent transaction.
2
MacMall
Q2 2011 net sales for our MacMall segment were $50.8 million compared to $42.0 million in Q2 2010, an increase of $8.8 million, or 21%. This increase was primarily due to significant sales of iPads during Q2 2011, and also reflects our ongoing efforts to focus on higher profit customer segments such as small businesses, creative professionals and high-end consumers.
MacMall gross profit increased by $0.6 million, or 14%, to $5.3 million in Q2 2011 compared to $4.7 million in Q2 2010. MacMall gross profit margin decreased to 10.5% in Q2 2011 compared to 11.1% in Q2 2010. The increase in MacMall gross profit was primarily due to the increased MacMall net sales discussed above and an increase in vendor consideration. The decrease in gross profit margin was primarily due to an increase in sales of iPads which is a lower margin product category and also contributed to a 14 basis point decrease in vendor consideration as a percentage of net sales.
MacMall operating profit increased by $0.1 million to $1.4 million in Q2 2011 compared to $1.3 million in Q2 2010. This increase in MacMall operating profit was primarily due to the increase in MacMall gross profit discussed above, partially offset by a $0.2 million increase in advertising expenditures and a $0.3 million increase in variable costs.
OnSale
Our OnSale segment currently includes sales made under our OnSale and eCost brand names primarily to consumers and small businesses via the Internet. During Q2 2011, as discussed above, OnSale launched its expanded platform in beta through its existing website at www.OnSale.com to include the marketing of daily deals in local markets through social commerce.
Q2 2011 net sales for our OnSale segment were $10.2 million compared to $0.7 million in Q2 2010, an increase of $9.5 million. This increase was primarily due to a $5.2 million increase in sales through our traditional OnSale business and $4.3 million of net sales resulting from our acquisition of eCost in February 2011.
OnSale gross profit increased to $1.0 million in Q2 2011 compared to $39,000 in Q2 2010. OnSale gross profit margin increased to 9.5% in Q2 2011 compared to 5.5% in Q2 2010. The increase in OnSale gross profit and gross profit margin was primarily due to the increased OnSale net sales discussed above and an improved product mix.
OnSale operating loss increased to $1.6 million in Q2 2011 compared to $43,000 in Q2 2010. This increase in OnSale operating loss was primarily due to significant investments related to the expansion of our OnSale business model discussed above. In addition, advertising expenditures supporting our traditional OnSale business increased by $0.5 million. Our OnSale results include those from both OnSale and eCost, the assets of which we acquired in February of this year. In Q2 2011, we paid $0.3 million to the seller of eCost’s assets pursuant to a transition services agreement. We migrated eCost.com to our own systems in late Q2, and as a result we do not believe the majority of those costs will recur in Q3 or beyond. Further, OnSale’s results include approximately $0.3 million of start-up legal fees associated with its expanded business model, much of which we do not expect to recur going forward.
Corporate & Other
Corporate & Other operating expenses includes corporate related expenses such as legal, accounting, information technology, product management and certain support services and other administrative costs that are not otherwise included in our reportable operating segments. Q2 2011 Corporate & Other operating expenses increased by $2.2 million, or 20%, to $13.5 million from $11.3 million in Q2 2010 and up $0.3 million sequentially from Q1 2011. The increase in Q2 2011 was primarily related to an increase in personnel costs of $2.0 million resulting primarily from additions of technical resources, as well as IT and distribution personnel, a $0.5 million increase in litigation costs defending what we believe is a meritless lawsuit, a $0.2 million increase in telecommunications costs and a $0.2 million increase in depreciation, partially offset by a $0.7 million decrease in variable fulfillment costs.
Consolidated Balance Sheet
Accounts receivable at June 30, 2011 of $179.0 million decreased by $4.9 million from December 31, 2010. Our inventory of $59.2 million at June 30, 2011 represents a decrease of $4.3 million from December 31, 2010. Accounts payable at June 30, 2011 of $103.1 million decreased by $21.8 million from December 31, 2010. Outstanding borrowings under our line of credit increased by $6.1 million to $56.4 million at June 30, 2011 compared to December 31, 2010. In June 2011, we secured a long-term mortgage for our property located in El Segundo and $7.2 million was outstanding under this note payable at June 30, 2011.
3
Selected Segment Information
Selected information for our reportable operating segments and a reconciliation of non-GAAP operating profit to operating profit are as follows (in thousands, except headcount data):
| | Three Months Ended
June 30, 2011 | | Three Months Ended
June 30, 2010 | |
| | Net Sales | | Gross Profit | | Operating
Profit | | Net Sales | | Gross Profit | | Operating
Profit | |
SMB | | $ | 131,270 | | $ | 16,837 | | $ | 9,005 | | $ | 107,709 | | $ | 14,678 | | $ | 7,648 | |
MME | | 128,624 | | 19,859 | | 7,697 | | 125,482 | | 18,639 | | 6,015 | |
Public Sector | | 41,404 | | 3,356 | | (344 | ) | 41,109 | | 2,586 | | (821 | ) |
MacMall | | 50,829 | | 5,328 | | 1,407 | | 41,988 | | 4,681 | | 1,317 | |
OnSale | | 10,242 | | 978 | | (1,640 | ) | 710 | | 39 | | (43 | ) |
Corporate & Other | | (459 | ) | 28 | | (13,544 | ) | (15 | ) | (68 | ) | (11,269 | ) |
Total | | $ | 361,910 | | $ | 46,386 | | $ | 2,581 | | $ | 316,983 | | $ | 40,555 | | $ | 2,847 | |
| | Six Months Ended
June 30, 2011 | | Six Months Ended
June 30, 2010 | |
| | Net Sales | | Gross Profit | | Operating
Profit | | Net Sales | | Gross Profit | | Operating
Profit | |
SMB | | $ | 270,008 | | $ | 33,755 | | $ | 18,189 | | $ | 215,703 | | $ | 28,075 | | $ | 14,032 | |
MME | | 239,133 | | 37,845 | | 12,856 | | 221,973 | | 35,120 | | 10,629 | |
Public Sector | | 73,081 | | 6,553 | | (303 | ) | 85,124 | | 6,215 | | (443 | ) |
MacMall | | 97,459 | | 10,221 | | 2,697 | | 81,560 | | 9,044 | | 1,949 | |
OnSale | | 18,887 | | 1,897 | | (2,152 | ) | 2,472 | | 137 | | (121 | ) |
Corporate & Other | | (720 | ) | (416 | ) | (26,791 | ) | 5 | | (7 | ) | (22,423 | ) |
Total | | $ | 697,848 | | $ | 89,855 | | $ | 4,496 | | $ | 606,837 | | $ | 78,584 | | $ | 3,623 | |
Average Account Executive | | Three Months Ended
June 30, | | | | | | | | | |
Headcount By Segment(1): | | 2011 | | 2010 | | | | | | | | | |
SMB | | 369 | | 363 | | | | | | | | | |
MME | | 110 | | 110 | | | | | | | | | |
Public Sector | | 113 | | 101 | | | | | | | | | |
MacMall | | 111 | | 96 | | | | | | | | | |
Total | | 703 | | 670 | | | | | | | | | |
(1) Excludes the OnSale segment. Headcount numbers are calculated based on an average of all sales executives and trainees employed during the period.
Non-GAAP Measures
We are presenting adjusted earnings before interest, taxes, depreciation and amortization expenses (EBITDA), non-GAAP operating profit and related margin and non-GAAP diluted EPS, which are financial measures that are not determined in accordance with accounting principles generally accepted in the United States of America, or GAAP. Adjusted EBITDA and non-GAAP diluted EPS eliminate the effect of non-cash stock-based compensation expenses, the results of our OnSale segment, and other uncommon, non-recurring or special items. Non-GAAP operating profit and related margin eliminate the effect of the results of our OnSale segment and other uncommon, non-recurring or special items. In Q2 2011 and YTD Q2 2011, adjusted EBITDA excludes a non-recurring, special pickup in Q2 2011 resulting from a change in fair value of the earnout obligation related to the acquisition of our NSPI business and also excludes a non-recurring, special charge related to bad debt expense associated with an external fraudulent transaction in our Public Sector segment. Also excluded in YTD Q2 2011 adjusted EBITDA is a non-recurring, special charge that occurred in Q1 2011 relating to an unreimbursed write-down of end-of-life first generation Apple iPads upon the release of the iPad 2. In all periods presented, adjusted EBITDA excludes litigation costs incurred to defend what we believe is an uncommon, meritless lawsuit. Adjusted EBITDA, non-GAAP operating profit and related margin and non-GAAP diluted EPS should be used in conjunction with other GAAP financial measures and are not presented as an alternative measure of operating results, as determined in accordance with GAAP. We believe that these non-GAAP financial measures allow a more meaningful comparison of our operating performance trends to both management and investors that is more indicative of our consolidated operating results across reporting periods. Depreciation and amortization expenses primarily represent an allocation to current expense of the cost of historical capital expenditures and for acquired intangible assets resulting from prior business acquisitions. Stock-based compensation is governed by the compensation committee of our Board of Directors and results in a non-cash operating expense for stock option grants that were made in prior operating periods. A reconciliation of the non-GAAP consolidated financial measures is included in a table below.
4
Conference Call
Management will hold a conference call, which will be webcast, on August 9, 2011 at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) to discuss second quarter results. To listen to PC Mall management’s discussion of its second quarter results live, access www.pcmall.com/investor.
The archived webcast can be accessed at www.pcmall.com/investor under “Calendar of Events.” A replay of the conference call by phone will be available from 7:30 p.m. ET on August 9, 2011 until August 16, 2011 and can be accessed by calling: (888) 286-8010 and inputting pass code 77362933.
About PC Mall, Inc.
PC Mall, Inc., through its wholly-owned subsidiaries, is a leading value added direct marketer of technology products, services and solutions to small and medium sized businesses, mid-market and enterprise customers, government and educational institutions and individual consumers. Our brands include: PC Mall, PC Mall Gov, Sarcom, MacMall, Abreon, NSPI, eCost and OnSale. In the twelve months ended June 30, 2011, we generated over $1.4 billion in revenue and have over 2,800 employees, over 64% of which are in sales or service positions. For more information please visit pcmall.com/investor or call (310) 354-5600.
Forward-looking Statements
This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements regarding our expectations, hopes or intentions regarding the future; including, but not limited to expectations or statements relating to expanded business models and opportunities and benefits of our investments in these business models and markets, relating to our services and solutions capabilities and sales and related impact on our margins, relating to inherent operating leverage in our business and the impact of our investments on such operating leverage and relating to our expanded OnSale business, our belief that we are developing unique and differentiated offerings in an important and growing market and our opportunities with our merchant partners. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause our actual results to differ materially include without limitation the following: uncertainties related to our expanded business models and related investments; risks relates to our IT infrastructure, uncertainties relating to the relationship between the number of our account executives and productivity; risks related to our ability to receive expected returns on strategic investments such as investments in new offices, decreased sales related to any of our segments, including but not limited to, potential decreases in sales resulting from the loss of or a reduction in purchases from significant customers; availability of key vendor incentives and other vendor assistance, increased competition, including, but not limited to, increased competition from direct sales by some of our largest vendors and increased pricing pressures which affect our pricing strategy in any given period; the effect of the our pricing strategy on our operating results; risks related to our ability to retain key personnel; risks and uncertainties relating to our ability to identify suitable acquisition targets, to complete acquisitions of identified targets (including the challenges and costs of closing the transaction), and our ability to integrate companies we may acquire and our ability to achieve synergies expected from such acquisitions (including our acquisition of NSPI); the impact of acquisitions on relationships with key customers and vendors; potential decreases in sales related to changes in our vendors products; risks of decreased sales related to the potential lack of availability of government funding applicable to our PC Mall Gov contracts; the impact of seasonality on our sales; availability of products from third party suppliers at reasonable prices; risks of business and other conditions in the Asia Pacific region and our limited experience operating in the Philippines, which could prevent us from realizing expected benefits from our Philippines operations; increased expenses, including, but not limited to, interest expense, foreign currency transaction gains/losses, and other expenses which may increase as a result of future inflationary pressures; our advertising, marketing and promotional efforts may be costly and may not achieve desired results; risks due to shifts in market demand or price erosion of owned inventory; risks related to our expanded OnSale business, including regulatory and litigation risks, market acceptance of the expanded business model, competition and emerging market risks; risks related to foreign currency fluctuations; risks related to data security; litigation by or against us; and availability of financing, including availability under our existing credit lines. Additional factors that could cause our actual results to differ are discussed under the heading “Risk Factors” in Item 1A, Part II of our Form 10-Q for the quarterly period ended March 31, 2011, on file with the Securities and Exchange Commission, and in our other reports filed from time to time with the SEC. All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statements.
-Financial Tables Follow-
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PC MALL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)
| | Three Months Ended
June 30, | | Six Months Ended
June 30, | |
| | 2011 | | 2010 | | 2011 | | 2010 | |
Net sales | | $ | 361,910 | | $ | 316,983 | | $ | 697,848 | | $ | 606,837 | |
Cost of goods sold | | 315,524 | | 276,428 | | 607,993 | | 528,253 | |
Gross profit | | 46,386 | | 40,555 | | 89,855 | | 78,584 | |
Selling, general and administrative expenses | | 43,805 | | 37,708 | | 85,359 | | 74,961 | |
Operating profit | | 2,581 | | 2,847 | | 4,496 | | 3,623 | |
Interest expense, net | | 835 | | 507 | | 1,558 | | 989 | |
Income before income taxes | | 1,746 | | 2,340 | | 2,938 | | 2,634 | |
Income tax expense | | 710 | | 977 | | 1,175 | | 1,098 | |
Net income | | $ | 1,036 | | $ | 1,363 | | $ | 1,763 | | $ | 1,536 | |
| | | | | | | | | |
Basic and Diluted Earnings Per Common Share | | | | | | | | | |
Basic | | $ | 0.08 | | $ | 0.11 | | $ | 0.14 | | $ | 0.13 | |
Diluted | | 0.08 | | 0.11 | | 0.14 | | 0.12 | |
| | | | | | | | | |
Weighted average number of common shares outstanding: | | | | | | | | | |
Basic | | 12,405 | | 12,270 | | 12,318 | | 12,280 | |
Diluted | | 12,750 | | 12,565 | | 12,679 | | 12,596 | |
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PC MALL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO CONSOLIDATED
OPERATING PROFIT, CONSOLIDATED NET INCOME AND DILUTED EARNINGS PER SHARE
(unaudited, in thousands, except per share amounts)
| | Three Months Ended
June 30, | | Six Months Ended
June 30, | |
| | 2011 | | 2010 | | 2011 | | 2010 | |
Net sales: | | | | | | | | | |
Consolidated net sales | | $ | 361,910 | | $ | 316,983 | | $ | 697,848 | | $ | 606,837 | |
Less: OnSale net sales | | (10,242 | ) | (710 | ) | (18,887 | ) | (2,472 | ) |
Adjusted net sales | | $ | 351,668 | | $ | 316,273 | | $ | 678,961 | | $ | 604,365 | |
| | | | | | | | | |
Operating Profit: | | | | | | | | | |
Consolidated operating profit | | $ | 2,581 | | $ | 2,847 | | $ | 4,496 | | $ | 3,623 | |
Add: OnSale operating loss | | 1,640 | | 43 | | 2,152 | | 121 | |
Litigation costs (a) | | 571 | | 130 | | 759 | | 328 | |
External fraudulent transaction (b) | | 173 | | — | | 173 | | — | |
Inventory write-down (c) | | — | | — | | 504 | | — | |
Less: Decrease in earnout liability (d) | | (800 | ) | — | | (800 | ) | — | |
Non-GAAP operating profit | | 4,165 | | 3,020 | | 7,284 | | 4,072 | |
Non-GAAP operating profit margin | | 1.2 | % | 1.0 | % | 1.1 | % | 0.7 | % |
| | | | | | | | | |
Consolidated operating profit margin | | 0.7 | % | 0.9 | % | 0.6 | % | 0.6 | % |
| | | | | | | | | |
Non-GAAP operating profit | | $ | 4,165 | | $ | 3,020 | | $ | 7,284 | | $ | 4,072 | |
Add: Consolidated depreciation expense | | 1,879 | | 1,466 | | 3,539 | | 2,881 | |
Consolidated amortization expense | | 575 | | 436 | | 1,080 | | 850 | |
Consolidated stock-based compensation expense | | 528 | | 663 | | 1,062 | | 1,167 | |
Less: OnSale depreciation expense | | (41 | ) | — | | (41 | ) | — | |
OnSale amortization expense | | (70 | ) | — | | (71 | ) | — | |
OnSale stock-based compensation expense | | (12 | ) | (2 | ) | (16 | ) | (2 | ) |
Adjusted EBITDA (e) | | $ | 7,024 | | $ | 5,583 | | $ | 12,837 | | $ | 8,968 | |
| | | | | | | | | |
Net income: | | | | | | | | | |
Consolidated income before income taxes | | $ | 1,746 | | $ | 2,340 | | $ | 2,938 | | $ | 2,634 | |
Less: Income tax expense | | (710 | ) | (977 | ) | (1,175 | ) | (1,098 | ) |
Consolidated net income | | $ | 1,036 | | $ | 1,363 | | $ | 1,763 | | $ | 1,536 | |
| | | | | | | | | |
Consolidated income before income taxes | | $ | 1,746 | | $ | 2,340 | | $ | 2,938 | | $ | 2,634 | |
Add: OnSale loss before income taxes | | 1,640 | | 43 | | 2,152 | | 121 | |
Litigation costs (a) | | 571 | | 130 | | 759 | | 328 | |
External fraudulent transaction (b) | | 173 | | — | | 173 | | — | |
Inventory write-down (c) | | — | | — | | 504 | | — | |
Less: Decrease in earnout liability (d) | | (800 | ) | — | | (800 | ) | — | |
Adjusted income before income taxes | | 3,330 | | 2,513 | | 5,726 | | 3,083 | |
Less: Adjusted income tax expense | | (1,354 | ) | (1,049 | ) | (2,290 | ) | (1,285 | ) |
Non-GAAP net income | | $ | 1,976 | | $ | 1,464 | | $ | 3,436 | | $ | 1,798 | |
| | | | | | | | | |
Diluted earnings per share: | | | | | | | | | |
GAAP diluted EPS | | $ | 0.08 | | $ | 0.11 | | $ | 0.14 | | $ | 0.12 | |
Non-GAAP diluted EPS | | 0.15 | | 0.12 | | 0.27 | | 0.14 | |
| | | | | | | | | |
Diluted weighted average number of common shares outstanding | | 12,750 | | 12,565 | | 12,679 | | 12,596 | |
(a) Relates to legal costs incurred in defending what we believe is a meritless case.
(b) Relates to an external fraudulent transaction in our Public Sector segment.
(c) Relates to a write down of first generation iPads in conjunction with the release of the iPad 2 in Q1 2011.
(d) Relates to a decrease in the estimated fair value of the contingent consideration liability in Q2 2011 related to the NSPI acquisition.
(e) EBITDA — earnings before interest, taxes, depreciation and amortization.
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PC MALL, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except per share amounts and share data)
| | June 30,
2011 | | December 31,
2010 | |
ASSETS | | | | | |
Current assets: | | | | | |
Cash and cash equivalents | | $ | 6,017 | | $ | 10,711 | |
Accounts receivable, net of allowances of $1,827 and $1,802 | | 179,027 | | 183,944 | |
Inventories, net | | 59,240 | | 63,583 | |
Prepaid expenses and other current assets | | 12,284 | | 10,022 | |
Deferred income taxes | | 3,879 | | 3,798 | |
Total current assets | | 260,447 | | 272,058 | |
Property and equipment, net | | 35,409 | | 21,851 | |
Deferred income taxes | | 597 | | 604 | |
Goodwill | | 25,510 | | 25,510 | |
Intangible assets, net | | 11,749 | | 11,749 | |
Other assets | | 2,710 | | 2,319 | |
Total assets | | $ | 336,422 | | $ | 334,091 | |
| | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | |
Current liabilities: | | | | | |
Accounts payable | | $ | 103,101 | | $ | 124,851 | |
Accrued expenses and other current liabilities | | 30,581 | | 31,279 | |
Deferred revenue | | 18,807 | | 12,206 | |
Line of credit | | 56,416 | | 50,301 | |
Notes payable — current | | 999 | | 783 | |
Total current liabilities | | 209,904 | | 219,420 | |
Notes payable and other long-term liabilities | | 12,170 | | 4,607 | |
Deferred income taxes | | 3,315 | | 2,771 | |
Total liabilities | | 225,389 | | 226,798 | |
Commitments and contingencies | | | | | |
Stockholders’ equity: | | | | | |
Preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued and outstanding | | — | | — | |
Common stock, $0.001 par value; 30,000,000 shares authorized; 14,345,745 and 14,089,672 shares issued; and 12,404,573 and 12,148,500 shares outstanding, respectively | | 14 | | 14 | |
Additional paid-in capital | | 106,623 | | 104,894 | |
Treasury stock, at cost: 1,941,172 shares | | (7,176 | ) | (7,176 | ) |
Accumulated other comprehensive income | | 2,713 | | 2,465 | |
Retained earnings | | 8,859 | | 7,096 | |
Total stockholders’ equity | | 111,033 | | 107,293 | |
Total liabilities and stockholders’ equity | | $ | 336,422 | | $ | 334,091 | |
8
PC MALL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
| | Six Months Ended
June 30, | |
| | 2011 | | 2010 | |
Cash Flows From Operating Activities | | | | | |
Net income | | $ | 1,763 | | $ | 1,536 | |
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | | | | | |
Depreciation and amortization | | 4,619 | | 3,731 | |
Provision for deferred income taxes | | 620 | | 421 | |
Net tax benefit related to stock option exercises | | 2 | | 43 | |
Excess tax benefit related to stock option exercises | | (660 | ) | (16 | ) |
Non-cash stock-based compensation | | 1,062 | | 1,167 | |
Decrease in earnout liability | | (800 | ) | — | |
Gain on sale of fixed assets | | (15 | ) | (11 | ) |
Change in operating assets and liabilities: | | | | | |
Accounts receivable | | 4,917 | | (7,579 | ) |
Inventories | | 5,337 | | 15,677 | |
Prepaid expenses and other current assets | | (1,956 | ) | (3,833 | ) |
Other assets | | 233 | | 115 | |
Accounts payable | | (29,497 | ) | (3,221 | ) |
Accrued expenses and other current liabilities | | (532 | ) | (2,997 | ) |
Deferred revenue | | 6,601 | | 4,130 | |
Total adjustments | | (10,069 | ) | 7,627 | |
Net cash (used in) provided by operating activities | | (8,306 | ) | 9,163 | |
Cash Flows From Investing Activities | | | | | |
Purchase of El Segundo building | | (9,565 | ) | — | |
Purchases of property and equipment | | (5,494 | ) | (4,425 | ) |
Acquisition of NSPI | | — | | (8,788 | ) |
Acquisition of eCost | | (2,327 | ) | — | |
Proceeds from sale of fixed assets | | 23 | | — | |
Net cash used in investing activities | | (17,363 | ) | (13,213 | ) |
Cash Flows From Financing Activities | | | | | |
Borrowings under note payable | | 7,198 | | — | |
Payments under notes payable | | (368 | ) | (550 | ) |
Net borrowings under line of credit | | 5,769 | | 11,715 | |
Change in book overdraft | | 7,660 | | (2,446 | ) |
Payments of obligations under capital lease | | (526 | ) | (313 | ) |
Proceeds from stock issued under stock option plans | | 665 | | 58 | |
Payment for deferred financing costs | | (25 | ) | — | |
Excess tax benefit related to stock option exercises | | 660 | | 16 | |
Common shares repurchased and held in treasury | | — | | (554 | ) |
Net cash provided by financing activities | | 21,033 | | 7,926 | |
Effect of foreign currency on cash flow | | (58 | ) | (103 | ) |
Net change in cash and cash equivalents | | (4,694 | ) | 3,773 | |
Cash and cash equivalents at beginning of the period | | 10,711 | | 9,215 | |
Cash and cash equivalents at end of the period | | $ | 6,017 | | $ | 12,988 | |
Supplemental Cash Flow Information | | | | | |
Interest paid | | $ | 1,346 | | $ | 908 | |
Income taxes paid | | 2,648 | | 386 | |
Supplemental Non-Cash Investing and Financing Activities | | | | | |
Purchase of infrastructure system | | $ | 2,070 | | $ | — | |
Deferred financing costs | | 49 | | — | |
NSPI acquisition related: | | | | | |
Fair value of assets, net of cash, acquired | | $ | — | | $ | 13,472 | |
Net cash paid | | — | | (8,788 | ) |
Liabilities assumed | | $ | — | | $ | 4,684 | |
9
