EXHIBIT 99.1
PRESS RELEASE DATED AUGUST 13, 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 REPORTS RECORD RESULTS
Record Revenue and Positive Income Highlight Quarter
PLANO, TEXAS (AUGUST 13, 2003) - PFSweb, Inc. (NASDAQ: PFSW), a leading
provider of business process outsourcing solutions for traditional and
e-commerce strategies, today reported its results for the quarter ended
June 30, 2003. As a result of the quarter's strong, seasonally high
service fee revenue, PFSweb reported positive earnings, generated cash from
operations, and strengthened its overall financial position.
"PFSweb's consolidated results for the June 2003 quarter include total net
revenues of $73.6 million, EBITDA of $2.3 million, and a net profit of $0.5
million, or $0.03 per share," said Tom Madden, Senior Partner and Chief
Financial Officer of PFSweb. "Our consolidated balance sheet as of June 30,
2003 reflects $103.2 million in total assets, including $13.6 million in
cash (of which $3.7 million is restricted), and shareholders' equity of
$26.0 million, or $1.41 per share."
"I am very pleased to report that PFSweb recorded its best quarter of
overall financial performance from operations since its inception," said
Mark C. Layton, Senior Partner and Chief Executive Officer of PFSweb. "This
bottom line performance represents an improvement of $2.9 million as
compared to the net loss for the quarter ended June 2002.
"This quarter was a benchmark quarter for us. We believe that the
substantial increase in volume we experienced is a solid example that our
technology platform and overall operational infrastructure can be highly
leveraged across increased transaction volumes with minimal increases in
costs. We believe this quarter's results are a solid indicator that PFSweb
is making progress towards its goal of reaching sustainable profitability.
"Total net revenues eclipsed $73 million, of which product revenues were a
record high $63.1 million and net service fee revenues were $12.5 million
(before eliminating $2.0 million of service fees earned from our Supplies
Distributors subsidiary)," Layton added. "Product revenues for Supplies
Distributors grew 19%, compared to the same quarter of 2002. Net service
fee revenues (excluding service fees earned from Supplies Distributors)
grew more than 18%.
"As we have discussed previously, the June quarter is the seasonal peak of
our largest service fee client. PFSweb also experienced strong growth
year-over-year from a number of our existing clients. We attribute this
positive contribution to two factors: (1) our existing clients continue to
entrust us with additional new project opportunities that we believe
results from their confidence in our quality processes and capabilities,
and in our ability to design effective and cost beneficial business
solutions; and (2) a number of our clients experienced solid year-over-year
organic growth in terms of units shipped.
"One of the most promising signs that I take away from this quarter's
results is what I believe is solid evidence of the operating leverage
we can achieve if we can sustain higher service fee revenue levels,"
Layton continued. "As you compare the June 2003 quarter to the March
2003 quarter, you will see that we earned more than $3.8 million of
additional net service fees at a strong incremental gross profit while
minimizing the increase in SG&A expenses. I see this operating and
overhead expense leverage as one of the most exciting future potentials
for PFSweb's improved financial performance in the years to come,
provided we can sustain reasonable levels of growth.
"In February, we announced our 2003 strategy of Quality, Growth and
Profit in 2003, or QGP in 2003," Layton said. "Our focus on quality has
been solid throughout 2003. We will continue to make investments that
will allow us to further improve our overall quality statistics, as
well as system reliability. While our overall capital investments have
been and are projected to remain modest, we continue to invest in
specific capital and development projects that we believe are
significant to attaining our 2003 QGP objectives.
"Growth is another element of our 2003 strategy," Layton continued. "In
the past, we have generally had to rely on new business from new
clients to drive our growth. I am encouraged by this quarter's results
in terms of positive contributions from our existing clients. We
believe poor economic conditions have been the primary factor that has
limited growth from existing clients in the past, and we are hopeful
that the tide is finally turning. Growth from existing clients
generally does not present the same challenges of long selling cycles
and complex implementation periods that we often experience with new
clients. If it continues, existing client organic growth contributions
will be a welcome contributor to our overall growth objective.
"On the new business front, we continue to experience challenges. Our
new business closures for 2003 are behind our plan, but have been
somewhat offset by existing client growth as previously described. We
continue to generate solid new business lead opportunities, and we have
a strong book of proposed business solution opportunities aggregating
more than $30 million. While we believe that our lead generation and
business proposal goals for the year are generally on target,
prospective clients appear to be conservative in their business
planning and many are in a hold status on proposals that we have
presented. To address the new business concern, we are working to
identify specific new markets where we can apply our technology and
infrastructure solutions that may generate more vibrant new business
opportunities."
"PFSweb's solid financial position was enhanced by the strong financial
results in the June quarter," Madden added. "Our total cash of $13.6
million was $0.4 million higher than our March 31, 2003 balance. The
cash position was aided during the quarter by $2.9 million of
borrowings under our new Comerica facility, used to finance the growth
in our service fee accounts receivable. We believe our financial
condition remains solid. We believe our cash, available working capital
sources, improved financial performance and operating efficiency will
provide us the capital resources necessary to support our business for
the foreseeable future, even if growth continues to be lower than our
financial plans.
"As an update on PFSweb's stock listing status," Layton concluded, "we
announced on Tuesday, August 12, 2003, that the Nasdaq Listing
Qualifications Panel notified us that PFSweb, Inc. now complies with
all requirements necessary for continued listing on The Nasdaq SmallCap
Market. Accordingly, the Panel has determined to continue the listing
of our securities and has closed the delisting hearing file."
Consistent with the prior quarter, the GAAP results presented in
Exhibit A 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 Supplies
Distributors.
CONFERENCE CALL INFO:
PFSweb will hold a conference call Thursday, August 14, 2003 at 9:00
a.m. Central Time. To ensure attendance on the call, plan to dial in by
8:50 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 4080871. Check www.pfsweb.com and our August 6,
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:
HPQ), 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 web-site
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 Six Months Ended
June 30, June 30,
---------------------- ----------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Revenues:
Product revenue .............................. $ 63,137 $ -- $ 122,856 $ --
Gross service fee revenue .................... 11,279 9,880 18,527 17,706
Gross service fee revenue, affiliate (B) ..... -- 1,575 -- 3,140
--------- --------- --------- ---------
Total gross revenues ....................... 74,416 11,455 141,383 20,846
Less pass-through charges .................... 798 1,117 1,438 2,190
--------- --------- --------- ---------
Net revenues ............................... 73,618 10,338 139,945 18,656
--------- --------- --------- ---------
Costs of revenues:
Cost of product revenue ...................... 59,585 -- 115,992 --
Cost of net service fee revenue .............. 6,414 6,451 11,327 11,755
--------- --------- --------- ---------
Total costs of revenues .................... 65,999 6,451 127,319 11,755
--------- --------- --------- ---------
Gross profit ..................................... 7,619 3,887 12,626 6,901
Selling, general and administrative expenses ..... 6,443 6,949 12,555 13,967
--------- --------- --------- ---------
Income (loss) from operations .................... 1,176 (3,062) 71 (7,066)
Equity in earnings of affiliate ..................
-- 386 -- 898
Interest expense ................................. 558 67 1,196 150
Interest income .................................. (52) (335) (82) (683)
--------- --------- --------- ---------
Income (loss) before income taxes ................ 670 (2,408) (1,043) (5,635)
Income tax expense ............................... 203 -- 264 --
--------- --------- --------- ---------
Net income (loss) ................................ $ 467 $ (2,408) $ (1,307) $ (5,635)
========= ========= ========= =========
Net income (loss) per share:
Basic ........................................ $ 0.03 $ (0.13) $ (0.07) $ (0.31)
========= ========= ========= =========
Diluted ...................................... $ 0.03 $ (0.13) $ (0.07) $ (0.31)
========= ========= ========= =========
Weighted average number of shares outstanding:
Basic ........................................ 18,429 18,183 18,422 18,166
========= ========= ========= =========
Diluted ...................................... 18,605 18,183 18,422 18,166
========= ========= ========= =========
EBITDA (LBITDA) (C) .............................. $ 2,342 $ (1,612) $ 2,426 $ (3,968)
========= ========= ========= =========
</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 primarily IBM product, and prior
to the consolidation of Supplies Distributors effective October 1, 2002.
PFSweb fees earned applicable to the Supplies Distributors' business were
$1.5 million and $3.0 million for the three and six months ended June 30,
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
(loss) 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 net income (loss) to EBITDA (LBITDA) is as follows:
<Table>
<Caption>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- -----------------------
2003 2002 2003 2002
------- ------- ------- -------
Net income (loss) ...................... $ 467 $(2,408) $(1,307) $(5,635)
Income tax expense ................. 203 -- 264 --
Interest expense (income) .......... 506 (268) 1,114 (533)
Equity in earnings of affiliate .... -- (386) -- (898)
Depreciation and amortization ...... 1,166 1,450 2,355 3,098
------- ------- ------- -------
EBITDA (LBITDA) ........................ $ 2,342 $(1,612) $ 2,426 $(3,968)
======= ======= ======= =======
</Table>
EXHIBIT A (CONTINUED)
PFSWEB, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
<Table>
<Caption>
June 30, December 31,
2003 2002
----------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................................................ $ 9,880 $ 8,595
Restricted cash ...................................................................... 835 1,016
Accounts receivable, net of allowance for doubtful accounts of $731 and $411
at June 30, 2003 and December 31, 2002, respectively ............................. 34,929 29,961
Inventories, net ..................................................................... 37,181 46,291
Other receivables .................................................................... 4,012 3,417
Prepaid expenses and other current assets ............................................ 3,082 2,888
--------- ---------
Total current assets ................................................... 89,919 92,168
--------- ---------
PROPERTY AND EQUIPMENT, net .............................................................. 10,221 11,695
RESTRICTED CASH .......................................................................... 2,849 2,878
OTHER ASSETS ............................................................................. 170 285
--------- ---------
Total assets ........................................................... $ 103,159 $ 107,026
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations ...................... $ 58,154 $ 60,863
Trade accounts payable ............................................................... 8,120 7,317
Accrued expenses ..................................................................... 7,274 7,862
--------- ---------
Total current liabilities .............................................. 73,548 76,042
--------- ---------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current
portion ............................................................................ 2,418 3,094
DEFERRED INCOME .......................................................................... 1,190 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;
18,515,171 and 18,397,983 shares issued at June 30, 2003 and December 31,
2002, respectively; and 18,428,871 and 18,311,683 outstanding at June 30,
2003 and December 31, 2002, respectively ........................................... 19 18
Additional paid-in capital ........................................................... 52,125 52,094
Accumulated deficit .................................................................. (26,864) (25,557)
Accumulated other comprehensive income ............................................... 808 --
Treasury stock at cost, 86,300 shares at June 30, 2003 and
December 31, 2002 ................................................................. (85) (85)
Total shareholders' equity ............................................. 26,003 26,470
--------- ---------
Total liabilities and shareholders' equity ............................. $ 103,159 $ 107,026
========= =========
</Table>
EXHIBIT B
PFSWEB, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
JUNE 30, 2003
(In Thousands)
<Table>
<Caption>
Business
Supplies
Distributors
PFSweb, Inc. Holdings, LLC Eliminations Consolidated
------------ ------------- ------------ ------------
REVENUES:
Gross product revenue ........................ $ -- $ 63,137 $ -- $ 63,137
Gross service fee revenue .................... 11,279 -- -- 11,279
Gross service fee revenue, affiliate ......... 2,081 -- (2,081) --
----------- ----------- ----------- -----------
Total gross revenues ..................... 13,360 63,137 (2,081) 74,416
Less pass-through charges .................... 830 -- (32) 798
----------- ----------- ----------- -----------
Net revenues ............................. 12,530 63,137 (2,049) 73,618
COSTS OF REVENUES:
Cost of product revenue ...................... -- 59,585 -- 59,585
Cost of service fee revenue .................. 7,022 -- (608) 6,414
----------- ----------- ----------- -----------
Total costs of revenues .................. 7,022 59,585 (608) 65,999
----------- ----------- ----------- -----------
Gross profit ............................. 5,508 3,552 (1,441) 7,619
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES .................................... 5,739 2,152 (1,448) 6,443
----------- ----------- ----------- -----------
Income (loss) from operations ............ (231) 1,400 7 1,176
EQUITY IN EARNINGS OF AFFILIATE .................. 449 -- (449) --
INTEREST EXPENSE (INCOME), NET ................... (121) 627 -- 506
----------- ----------- ----------- -----------
Income (loss) before income taxes ....... 339 773 (442) 670
INCOME TAX EXPENSE (BENEFIT) ..................... (119) 322 -- 203
----------- ----------- ----------- -----------
NET INCOME (LOSS) ................................ $ 458 $ 451 $ (442) $ 467
=========== =========== =========== ===========
Net income (loss) ................................ $ 458 $ 451 $ (442) $ 467
Income tax expense (benefit) ................. (119) 322 -- 203
Interest expense (income) .................... (121) 627 -- 506
Equity in earnings of affiliate .............. (449) -- 449 --
Depreciation and amortization ............... 1,158 15 (7) 1,166
----------- ----------- ----------- -----------
EBITDA (LBITDA) .................................. $ 927 $ 1,415 $ -- $ 2,342
=========== =========== =========== ===========
</Table>
EXHIBIT B (CONTINUED)
PFSWEB, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS AS OF JUNE 30, 2003
(In Thousands)
<Table>
<Caption>
Business
Supplies
Distributors
PFSweb, Inc. Holdings, LLC Eliminations Consolidated
------------ ------------- ------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .............................. $ 8,168 $ 1,712 $ -- $ 9,880
Restricted cash ........................................ -- 835 -- 835
Accounts and other receivables, net .................... 7,336 31,904 (299) 38,941
Inventories, net ....................................... -- 37,181 -- 37,181
Prepaid expenses and other current assets .............. 1,602 1,480 -- 3,082
----------- ----------- ----------- -----------
Total current assets ............................ 17,106 73,112 (299) 89,919
----------- ----------- ----------- -----------
PROPERTY AND EQUIPMENT, net ................................ 10,221 -- -- 10,221
NOTE RECEIVABLE FROM AFFILIATE ............................. 8,005 -- (8,005) --
RESTRICTED CASH ............................................ 2,849 -- -- 2,849
INVESTMENT IN AFFILIATE .................................... 4,166 -- (4,166) --
OTHER ASSETS ............................................... 149 43 (22) 170
----------- ----------- ----------- -----------
Total assets .................................... $ 42,496 $ 73,155 $ (12,492) $ 103,159
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease
obligations ......................................... $ 4,409 $ 53,745 $ -- $ 58,154
Trade accounts payable ................................. 3,171 5,248 (299) 8,120
Accrued expenses ....................................... 5,336 1,938 -- 7,274
----------- ----------- ----------- -----------
Total current liabilities ....................... 12,916 60,931 (299) 73,548
----------- ----------- ----------- -----------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less
current portion ........................................ 2,418 -- -- 2,418
NOTE PAYABLE TO AFFILIATE .................................. -- 8,005 (8,005) --
DEFERRED INCOME ............................................ 1,190 -- -- 1,190
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock ........................................... 19 -- -- 19
Capital contributions .................................. -- 1,000 (1,000) --
Additional paid-in capital ............................. 52,125 -- -- 52,125
Retained earnings (accumulated deficit) ................ (26,896) 1,964 (1,932) (26,864)
Accumulated other comprehensive income ................. 809 1,255 (1,256) 808
Treasury stock ......................................... (85) -- -- (85)
----------- ----------- ----------- -----------
Total shareholders' equity ...................... 25,972 4,219 (4,188) 26,003
----------- ----------- ----------- -----------
Total liabilities and shareholders' equity ...... $ 42,496 $ 73,155 $ (12,492) $ 103,159
=========== =========== =========== ===========
</Table>