EXHIBIT 99.1 PRESS RELEASE DATED MAY 12, 2003
FOR IMMEDIATE RELEASE
Contact: MARK C. LAYTON PRESTON F. KIRK, APR
Senior Partner and Chief Executive Officer Michael A. Burns & Associates
or THOMAS J. MADDEN (830) 693-4447
Senior Partner and Chief Financial Officer kirk@281.com
(972) 881-2900
mlayton@pfsweb.com; tmadden@pfsweb.com
PFSWEB RESULTS EXCEED EXPECTATIONS
Reduced SG&A, New $7.5 Million Bank Facility and
Renewed $41 Million Senior Debt Facilities Highlight Quarter
PLANO, TEXAS (MAY 12, 2003) - PFSweb, Inc. (NASDAQ: PFSW), a leading provider of
business process outsourcing solutions, today reported its results for the
quarter ended March 31, 2003. The consolidated results, which include the
acquisition of Supplies Distributors completed on October 1, 2002, reflect
continued cost control, positive EBITDA and a solid cash position.
"PFSweb's consolidated results for the March 2003 quarter include total revenues
of $66.3 million, a positive EBITDA of $0.1 million, and a net loss of $1.8
million, or $0.10 per share," said Tom Madden, Senior Partner and Chief
Financial Officer of PFSweb. "Our consolidated balance sheet as of March 31,
2003 reflects $102.3 million in total assets, including $13.1 million in cash
(of which $4.3 million is restricted), and shareholders' equity of $25.0
million, or $1.36 per share."
"Our March 2003 results were better than expected in both revenue and bottom
line performance," said Mark C. Layton, Senior Partner and Chief Executive
Officer of PFSweb. "We continue to believe we are on a solid path towards
sustainable profitability. The quarterly results are highlighted by the
following items:
o REDUCED SG&A EXPENSES to $5.2 million for our PFSweb service fee
business segment this quarter, compared to $7.0 million during the
prior year quarter ended March 31, 2002, and $5.6 million during the
previous quarter ended December 31, 2002;
o IMPROVED BOTTOM LINE PERFORMANCE as evidenced by a $1.8 million net
loss this quarter compared to a $3.2 million net loss during the prior
year quarter ended March 31, 2002;
o IMPROVED CASH LEVELS, on a consolidated basis, of $0.6 million to $13.1
million at quarter-end;
o FINALIZATION OF $7.5 MILLION REVOLVING CREDIT FACILITY with Comerica's
Technology and Life Sciences Division; and
o RENEWAL OF OUR SENIOR DEBT FACILITIES with IBM Credit LLC, which
provide for an aggregate of approximately $41 million of available
borrowings to our subsidiary Supplies Distributors.
"We have significantly reduced our cash burn rate during the past two quarters,"
Layton said. "Our cash position remains solid. To supplement our current cash
balance, as we previously announced, we finalized a two-year revolving credit
facility with Comerica during the March quarter that we expect to use to fund
our working capital requirements from targeted future growth. As of March 31,
2003, we had no borrowings outstanding under this facility."
"The results of our subsidiary, Supplies Distributors, Inc. ("SD"), were also
better than expected," Madden continued. "This business segment recorded $59.7
million of product revenue, as compared to $57.5 million in the preceding
quarter ending December 31, 2002, and contributed $0.2 million to our bottom
line performance. As we previously communicated, SD provides clients an owned
inventory model alternative versus PFSweb's traditional client-owned inventory
model. As a result, and typical of a master distributor, SD's financial model
reflects high product revenues, low gross and net operating margins and
significant working capital assets. During March, we renewed our senior debt
facilities with IBM Credit LLC and IBM Belgium Financial Services to extend $41
million of our borrowing capacity through March 2004."
"In February, we announced our 2003 strategy of Quality, Growth and Profit in
2003, or GP in 2003," Layton added. "Quality continues to be an everyday focus
throughout PFSweb. As the brand behind our client's brand, our performance is
critical to our clients. Our lead and business proposal pipelines remain strong.
These pipelines currently include more than 25 outstanding proposals for new
business opportunities with both new and existing clients, having an estimated
potential value of more than $40 million per year in service fee revenue. But as
we have experienced for much of the past several years, lead times to close new
business continue to be longer than we would ultimately desire, and our win rate
is difficult to predict.
"Growth remains a key for us to reach our third goal, sustainable profitability.
Our new business wins for the March quarter were somewhat below our plan. We
remain optimistic that as macro-economic and socio-economic conditions improve,
we will see an increased flow of new business and shortened lead times to close
new business relationships. We continue to carefully monitor spending levels and
to seek ways to optimize our business that will drive greater productivity and
reduced costs of operations."
"While the March quarter is currently our seasonally lowest quarter for our
service fee business, the June quarter is our seasonal peak," Madden added. "As
such, we expect our financial results to reflect an upturn during the June 2003
quarter. These seasonal fluctuations are driven by the business characteristics
of our largest client."
Consistent with the prior quarter, the GAAP results reflect the consolidation of
the Supplies Distributors business since the October 1, 2002 acquisition. For
clarity and comparison purposes, Exhibit B provides consolidating financial
statements showing the historical PFSweb service fee business unit, the Supplies
Distributors business unit and the resulting elimination adjustments related to
services that PFSweb provides for SD.
PFSweb will hold a conference call Tuesday, May 13, 2003 at 10:00 a.m. Central
Time. To ensure attendance on the call, plan to dial in by 9:50 a.m. to
973-582-2741. Ask to be placed on the PFSweb Earnings Release Conference Call.
Two hours after the conference, a recorded playback can be heard for 14 days at
973-341-3080, using the confirmation number 3887577. Check www.pfsweb.com and
our May 12, 2003 investor conference call press release for more details on the
call.
ABOUT PFSWEB, INC.
When the world's brand names need proven, fast and secure business
infrastructure to enable traditional and e-commerce strategies, they choose
PFSweb for comprehensive outsourcing solutions. The PFSweb team of experts
designs diverse solutions for clients around a flexible core business
infrastructure. PFSweb provides solutions that include: professional consulting
services, order management, web-enabled customer contact centers, customer
relationship management, international distribution services, kitting and
assembly services, managed web hosting and site design, billing and collection
services and ERP information interfacing utilizing the Entente Suite (SM).
Our services are available for a multitude of industries and company types,
including such clients as International Business Machines (NYSE: IBM), Adaptec
(NASDAQ: ADPT), the U.S. Mint, Avaya Communication (NYSE: AV), Lancome, a
cosmetics division of L'Oreal International (ADR: LORLY), Xerox (NYSE: XRX),
Thomson multimedia (NYSE: TMS), Pharmacia/Upjohn (NYSE: PHA), Nokia (NYSE: NOK),
Hewlett-Packard (NYSE: HWP), Smithsonian Business Ventures and Roots Canada.
The matters discussed in this news release (except for historical information)
and, in particular, information regarding future revenue, earnings and business
plans and goals, consist of forward-looking information under the Private
Securities Litigation Reform Act of 1995 and are subject to and involve risks
and uncertainties, which could cause actual results to differ materially from
the forward-looking information. These forward-looking statements are not
guarantees of future performance and involve risks, uncertainties and
assumptions that are difficult to predict. These risks and uncertainties
include, but are not limited to, our ability to retain and expand relationships
with existing clients and attract new clients; our dependence upon our
agreements with IBM; our reliance on the fees generated by the transaction
volume or product sales of our clients; our reliance on our clients' projections
or transaction volume or product sales; our client mix and the seasonality of
their business; our ability to finalize pending contracts; the impact of
strategic alliances and acquisitions; trends in the market for our services;
trends in e-commerce; whether we can continue and manage growth; changes in the
trend toward outsourcing; increased competition; our ability to generate more
revenue and achieve sustainable profitability; effects of changes in profit
margins; the customer concentration of our business; the unknown effects of
possible system failures and rapid changes in technology; trends in government
regulation both foreign and domestic; foreign currency risks and other risks of
operating in foreign countries; potential litigation involving our e-commerce
intellectual property rights; our dependency on key personnel; our ability to
raise additional capital or obtain additional financing; our relationship with
and our guarantees of the working capital indebtedness of our subsidiary,
Supplies Distributors; our ability or the ability of our subsidiaries to borrow
under current financing arrangements and maintain compliance with debt
covenants; our relationship with and separation from Daisytek, our former parent
company; and the continued listing of our common stock on the NASDAQ SmallCap
Market. A description of these factors, as well as other factors, which could
affect the Company's business, is set forth in the Company's Prospectus dated
December 2, 1999 and Form 10-K for the year ended December 31, 2002.
In addition, some forward-looking statements are based upon assumptions as to
future events that may not prove to be accurate. Therefore, actual outcomes and
results may differ materially from what is expected or forecasted in such
forward-looking statements. We undertake no obligation to update publicly any
forward-looking statement for any reason, even if new information becomes
available or other events occur in the future. There may be additional risks
that we do not currently view as material or that are not presently known.
To find out more about PFSweb, Inc. (NASDAQ: PFSW), visit our website at
www.pfsweb.com. The PFSweb web site is not part of this release. PFSweb is a
registered trademark. Entente Suite is a service mark of PFSweb. All rights
reserved.
- FINANCIAL STATEMENTS FOLLOW -
EXHIBIT A
PFSWEB, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (A)
(In Thousands, Except Per Share Data)
<Table>
<Caption>
Three Months Ended
March 31,
------------------------------
2003 2002
------------ ------------
Revenues:
Product revenue .................................... $ 59,719 $ --
Gross service fee revenue .......................... 7,248 7,826
Gross service fee revenue, affiliate (B) ........... -- 1,565
------------ ------------
Total gross revenues ............................. 66,967 9,391
Less pass-through charges .......................... 640 1,073
------------ ------------
Net revenues ..................................... 66,327 8,318
------------ ------------
Costs of revenues:
Cost of product revenue ............................ 56,407 --
Cost of net service fee revenue .................... 4,913 5,304
------------ ------------
Total costs of revenues .......................... 61,320 5,304
------------ ------------
Gross profit ........................................... 5,007 3,014
Selling, general and administrative expenses ........... 6,112 7,018
------------ ------------
Loss from operations ................................... (1,105) (4,004)
Equity in earnings of affiliate ........................ -- 512
Interest expense ....................................... 638 83
Interest income ........................................ (30) (348)
------------ ------------
Loss before income taxes ............................... (1,713) (3,227)
Income tax expense ..................................... 61 --
------------ ------------
Net loss ............................................... $ (1,774) $ (3,227)
============ ============
Net loss per share:
Basic and diluted .................................. $ (0.10) $ (0.18)
============ ============
Weighted average number of shares outstanding:
Basic and diluted .................................. 18,416 18,149
============ ============
EBITDA (LBITDA) (C) .................................... $ 84 $ (2,356)
============ ============
</Table>
(A) The financial data above should be read in conjunction with the audited
consolidated financial statements of PFSweb, Inc. included in its Form
10-K for the year ended December 31, 2002.
(B) Service fee revenue, affiliate reflects revenue earned by PFSweb for
services provided to Supplies Distributors, in connection with the
sales, distribution and management services for IBM, and prior to the
consolidation of Supplies Distributors effective October 1, 2002.
PFSweb fees earned applicable to the IBM business were $1.5 million for
the three months ended March 31, 2002.
(C) "EBITDA (LBITDA)," or earnings (loss) before interest, taxes,
depreciation, and amortization, and excluding equity in earnings of
affiliate, is widely used by analysts, investors and other interested
parties. EBITDA (LBITDA) is not a financial measure determined by
generally accepted accounting principles and should not be considered
as an alternative to net income as a measure of operating results or to
cash flows as a measure of funds available for discretionary or other
liquidity purposes. EBITDA (LBITDA) may not be comparably calculated
from one company to another. A reconciliation of Loss from Operations
to EBITDA (LBITDA) is as follows:
<Table>
<Caption>
Three Months Ended
March 31,
------------------------------
2003 2002
------------ ------------
Loss from operations ...................... $ (1,105) $ (4,004)
Depreciation and amortization ......... 1,189 1,648
------------ ------------
EBITDA (LBITDA) ........................... $ 84 $ (2,356)
============ ============
</Table>
EXHIBIT A (CONTINUED)
PFSWEB, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
<Table>
<Caption>
March 31, December 31,
2003 2002
------------ ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................................................................. $ 8,858 $ 8,595
Restricted cash ............................................................................ 1,387 1,016
Accounts receivable, net of allowance for doubtful accounts of $531 and $411
at March 31, 2003 and December 31, 2002, respectively .................................. 32,158 29,961
Inventories, net ........................................................................... 39,531 46,291
Other receivables .......................................................................... 3,544 3,417
Prepaid expenses and other current assets .................................................. 2,776 2,888
------------ ------------
Total current assets ......................................................... 88,254 92,168
------------ ------------
PROPERTY AND EQUIPMENT, net .................................................................... 10,947 11,695
RESTRICTED CASH ................................................................................ 2,889 2,878
OTHER ASSETS ................................................................................... 211 285
------------ ------------
Total assets ................................................................. $ 102,301 $ 107,026
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations ............................ $ 58,706 $ 60,863
Trade accounts payable ..................................................................... 7,006 7,317
Accrued expenses ........................................................................... 7,570 7,862
------------ ------------
Total current liabilities .................................................... 73,282 76,042
------------ ------------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current
portion .................................................................................. 2,761 3,094
DEFERRED INCOME ................................................................................ 1,246 1,420
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $1.00 par value; 1,000,000 shares authorized; none issued and
outstanding ............................................................................. -- --
Common stock, $0.001 par value; 40,000,000 shares authorized;
18,503,377 and 18,397,983 shares issued at March 31, 2003 and December 31,
2002, respectively; and 18,417,077 and 18,311,683 outstanding at March 31,
2003 and December 31, 2002, respectively ................................................. 18 18
Additional paid-in capital ................................................................. 52,122 52,094
Accumulated deficit ........................................................................ (27,331) (25,557)
Accumulated other comprehensive income ..................................................... 288 --
Treasury stock at cost, 86,300 shares at March 31, 2003 and
December 31, 2002 ....................................................................... (85) (85)
------------ ------------
Total shareholders' equity ................................................... 25,012 26,470
------------ ------------
Total liabilities and shareholders' equity ................................... $ 102,301 $ 107,026
============ ============
</Table>
EXHIBIT B
PFSWEB, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 2003
(In Thousands)
<Table>
<Caption>
Business
Supplies
Distributors
PFSweb, Inc. Holdings, LLC Eliminations Consolidated
----------- ------------- ------------ ------------
REVENUES:
Gross product revenue .......................... $ -- $ 59,719 $ -- $ 59,719
Gross service fee revenue ...................... 7,248 -- -- 7,248
Gross service fee revenue, affiliate ........... 1,961 -- (1,961) --
---------- ---------- ---------- ----------
Total gross revenues ....................... 9,209 59,719 (1,961) 66,967
Less pass-through charges ...................... 681 -- (41) 640
---------- ---------- ---------- ----------
Net revenues ............................... 8,528 59,719 (1,920) 66,327
COSTS OF REVENUES:
Cost of product revenue ........................ -- 56,407 -- 56,407
Cost of service fee revenue .................... 5,500 -- (587) 4,913
---------- ---------- ---------- ----------
Total costs of revenues .................... 5,500 56,407 (587) 61,320
---------- ---------- ---------- ----------
Gross profit ............................... 3,028 3,312 (1,333) 5,007
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES ...................................... 5,228 2,224 (1,340) 6,112
---------- ---------- ---------- ----------
Income (loss) from operations .............. (2,200) 1,088 7 (1,105)
EQUITY IN EARNINGS OF AFFILIATE .................... 221 -- (221) --
INTEREST EXPENSE (INCOME), NET ..................... (133) 741 -- 608
---------- ---------- ---------- ----------
Income (loss) before income taxes ......... (1,846) 347 (214) (1,713)
INCOME TAX EXPENSE (BENEFIT) ....................... (65) 126 -- 61
---------- ---------- ---------- ----------
NET INCOME (LOSS) .................................. $ (1,781) $ 221 $ (214) $ (1,774)
========== ========== ========== ==========
Income (loss) from operations ...................... $ (2,200) $ 1,088 $ 7 $ (1,105)
Depreciation and amortization ................. 1,182 14 (7) 1,189
---------- ---------- ---------- ----------
EBITDA (LBITDA) .................................... $ (1,018) $ 1,102 $ -- $ 84
========== ========== ========== ==========
</Table>
EXHIBIT B (CONTINUED)
PFSWEB, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS AS OF MARCH 31, 2003
(In Thousands)
<Table>
<Caption>
Business
Supplies
Distributors
PFSweb, Inc. Holdings, LLC Eliminations Consolidated
------------ ------------- ------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................. $ 7,731 $ 1,127 $ -- $ 8,858
Restricted cash ........................................... -- 1,387 -- 1,387
Accounts and other receivables, net ....................... 5,052 30,992 (342) 35,702
Inventories, net .......................................... -- 39,531 -- 39,531
Prepaid expenses and other current assets ................. 1,460 1,316 -- 2,776
------------ ------------ ------------ ------------
Total current assets ............................... 14,243 74,353 (342) 88,254
------------ ------------ ------------ ------------
PROPERTY AND EQUIPMENT, net ................................... 10,947 -- -- 10,947
NOTE RECEIVABLE FROM AFFILIATE ................................ 8,005 -- (8,005) --
RESTRICTED CASH ............................................... 2,889 -- -- 2,889
INVESTMENT IN AFFILIATE ....................................... 3,320 -- (3,320) --
OTHER ASSETS .................................................. 183 58 (30) 211
------------ ------------ ------------ ------------
Total assets ....................................... $ 39,587 $ 74,411 $ (11,697) $ 102,301
============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease
obligations ............................................ $ 1,577 $ 57,129 $ -- $ 58,706
Trade accounts payable .................................... 3,109 4,239 (342) 7,006
Accrued expenses .......................................... 5,905 1,665 -- 7,570
------------ ------------ ------------ ------------
Total current liabilities .......................... 10,591 63,033 (342) 73,282
------------ ------------ ------------ ------------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less
current portion ........................................... 2,761 -- -- 2,761
NOTE PAYABLE TO AFFILIATE ..................................... -- 8,005 (8,005) --
DEFERRED INCOME ............................................... 1,246 -- -- 1,246
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock .............................................. 18 -- -- 18
Capital contributions ..................................... -- 1,000 (1,000) --
Additional paid-in capital ................................ 52,122 -- -- 52,122
Retained earnings (accumulated deficit) ................... (27,354) 1,514 (1,491) (27,331)
Accumulated other comprehensive income .................... 288 859 (859) 288
Treasury stock ............................................ (85) -- -- (85)
------------ ------------ ------------ ------------
Total shareholders' equity ......................... 24,989 3,373 (3,350) 25,012
------------ ------------ ------------ ------------
Total liabilities and shareholders' equity ......... $ 39,587 $ 74,411 $ (11,697) $ 102,301
============ ============ ============ ============
</Table>