EXHIBIT 99.1
(PFS WEB LOGO)
FOR IMMEDIATE RELEASE
Contact: MARK C. LAYTON PRESTON F. KIRK, APR
Senior Partner and Chief Michael A. Burns
Executive Officer & Associates (830) 693-4447
or THOMAS J. MADDEN kirk@281.com
Senior Partner and Chief Financial Officer
(972) 881-2900
PFSWEB REPORTS THIRD QUARTER RESULTS
$3.4M Private Placement and Amended Credit Facility
Further Strengthen Financial Position
PLANO, TEXAS (NOVEMBER 10, 2003) - PFSweb, Inc. (NASDAQ: PFSW), a
leading provider of business process outsourcing solutions, today
reported its results for the quarter ended September 30, 2003.
"PFSweb's consolidated results for the September 2003 quarter include
total net revenues of $68.4 million, EBITDA of $0.5 million, and a net
loss of $1.1 million, or $0.06 per share," said Tom Madden, Senior
Partner and Chief Financial Officer of PFSweb. "Our consolidated
balance sheet as of September 30, 2003 reflects $100.3 million in total
assets, including $13.7 million in cash (of which $2.3 million is
restricted), and shareholders' equity of $25.5 million, or $1.34 per
share."
"As we have previously indicated, the June quarter is the seasonal peak
for our largest service fee client, while March is that client's lowest
quarter, said Mark C. Layton, Senior Partner and Chief Executive
Officer of PFSweb. "Our financial performance for the September 2003
quarter trended downward from the June 2003 quarter, as expected. While
we would have obviously liked to report a second consecutive quarter of
net profit, I believe that PFSweb continues on a solid path towards
sustainable profitability. Our net loss of $1.1 million represents an
improvement of $3.6 million compared to the net loss of $4.7 million
for the quarter ended September 2002, which included $2.2 million of
restructuring related charges. Significantly reduced SG&A levels in
2003 versus the previous year, combined with solid overall gross margin
performance, continue to be the primary factors in the overall
improvement in bottom line performance.
"One of the most promising signs that I take from our recent quarterly
results is what I believe is solid evidence of the operating leverage
PFSweb can obtain if we can generate and sustain higher service fee
revenue levels. During the first nine months of 2003, we have increased
our net service fee revenues, while minimizing the increase in SG&A
expenses and maintaining a solid overall gross profit percentage. This
'operating and overhead expense leverage' is one of the most exciting
future potentials for improved financial performance of PFSweb in the
years to come.
"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 and our performance this past quarter was
even stronger. 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 a key element of our 2003 strategy," Layton continued. "On
an overall basis, we experienced modest growth this quarter from our
existing clients. As we indicated in August, our new business closures
for 2003 are behind our plan, but have been somewhat offset by existing
client growth. We are pleased to have closed several new or expanded
client relationships in the past three months. Implementation of
certain of these new client relationships is underway, and we expect to
begin to see revenue contributions from these clients in early calendar
year 2004. We continue to generate solid new business lead
opportunities, and we have issued proposals for a strong book of
proposed business solution opportunities aggregating approximately $40
million. We have received non-binding acceptance of certain of these
proposals, including opportunities with both new and existing clients,
which are now in contracting stage. While I am not in a position to
boldly state that the economic recovery has begun, we are hopeful that
the tide is finally turning.
"Because we continue to see signs of economic recovery, as well as
positive results from our lead generation efforts, we are evaluating
increasing the investments in our marketing and lead generation engine
for calendar year 2004. Our confidence in the scalability of our
business-to-business lead generation engine, combined with improving
business conditions, lead us to believe that these additional
investments will help us generate additional opportunities next year."
"PFSweb's financial position remains solid," Madden stated. Our
operating results, excluding depreciation and amortization, for the
September quarter was approximately breakeven, allowing us to maintain
our strong cash position. We continue to be pleased with the
improvements in our financial results over historical levels but also
recognize that we require growth and cost containment to allow us to
reach sustainable profitability.
"In September, we amended our financing agreement with Comerica,"
Madden added. "Previously, this facility provided for financing of up
to $7.5 million of eligible accounts receivable. As amended, the
facility now provides for financing of up to $5.0 million of eligible
accounts receivable and financing of up to $2.5 million of eligible
equipment purchases. As a result of this amendment, we have re-financed
certain of our previous debt and lease agreements to remove the
associated letter of credit cash restrictions. Thus, while our total
cash of $13.7 million was consistent with our June 30, 2003 balance of
$13.6 million, the unrestricted cash position increased by $1.5
million. Our borrowings under the Comerica agreement amounted to $1.3
million as of September 30, 2003, compared to $2.9 million as of June
30, 2003.
"In addition, as announced earlier today, we are pleased to have
completed our private placement transaction with certain institutional
investors this past week, which generated approximately $3.2 million of
net incremental proceeds for the company. These proceeds further
strengthen the company's solid financial position. We believe our cash,
available working capital sources, improving financial performance and
operating efficiency will provide us the capital resources necessary to
support our business for the foreseeable future."
"As an update on our near-term outlook," Layton concluded, "while we
believe our new business activity is beginning to show signs of
sustained improvement, it will still be a few quarters before we
benefit
2
from the new revenue due to the lengthy contracting and implementation
periods. Near term, we currently believe that our operating results for
the December 2003 quarter will be generally similar to that of the
September 2003 quarter. In addition, the company may record certain
previously announced, non-payroll related restructuring charges which
are expected to be less than $0.4 million and would result in reduced
operating costs in the future."
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 Tuesday, November 11, 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 4288332. Check www.pfsweb.com and our November 3,
2003 investor conference call press release for more details on the
call.
3
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), 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; and our ability or the ability of
our subsidiaries to borrow under current financing arrangements and
maintain compliance with debt covenants; our ability to file an
effective registration statement for the private placement; and whether
warrants sold in the private placement will be exercised in the future.
A description of these factors, as well as other factors, which could
affect the Company's business, is set forth in the Company's 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 -
4
EXHIBIT A
PFSWEB, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (A)
(In Thousands, Except Per Share Data)
<Table>
<Caption>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Revenues:
Product revenue, net ............................. $ 60,300 $ -- $ 183,156 $ --
Gross service fee revenue ........................ 8,918 8,583 27,445 26,289
Gross service fee revenue, affiliate (B) ......... -- 1,722 -- 4,862
---------- ---------- ---------- ----------
Total gross revenues ........................... 69,218 10,305 210,601 31,151
Less pass-through charges ........................ 858 783 2,296 2,973
---------- ---------- ---------- ----------
Net revenues ................................... 68,360 9,522 208,305 28,178
---------- ---------- ---------- ----------
Costs of revenues:
Cost of product revenue .......................... 56,988 -- 172,980 --
Cost of net service fee revenue .................. 5,691 5,797 17,018 17,552
---------- ---------- ---------- ----------
Total costs of revenues ........................ 62,679 5,797 189,998 17,552
---------- ---------- ---------- ----------
Gross profit ..................................... 5,681 3,725 18,307 10,626
Selling, general and administrative expenses ......... 6,275 6,669 18,830 20,636
Severance and other termination costs ................ -- 1,248 -- 1,248
Asset impairment ..................................... -- 922 -- 922
---------- ---------- ---------- ----------
Loss from operations ............................. (594) (5,114) (523) (12,180)
Equity in earnings of affiliate ...................... -- 265 -- 1,163
Interest expense ..................................... 489 114 1,685 264
Interest income ...................................... (14) (269) (96) (952)
---------- ---------- ---------- ----------
Loss before income taxes ......................... (1,069) (4,694) (2,112) (10,329)
Income tax provision ................................. 72 -- 336 --
---------- ---------- ---------- ----------
Net loss ......................................... $ (1,141) $ (4,694) $ (2,448) $ (10,329)
========== ========== ========== ==========
Net loss per share, basic and diluted ................ $ (0.06) $ (0.26) $ (0.13) $ (0.57)
========== ========== ========== ==========
Weighted average number of shares outstanding, basic
and diluted ...................................... 18,761 18,268 18,537 18,201
========== ========== ========== ==========
Pro Forma EBITDA (LBITDA) (C) ........................ $ 548 $ (1,435) $ 2,974 $ (5,403)
========== ========== ========== ==========
</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
$1.7 million and $4.7 million for the three and nine months ended September
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 presented because we believe it is useful in evaluating our operating
performance compared to that of other companies in our industry, as the
calculation of EBITDA eliminates the effect of financing, income taxes in
the accounting effects of capital spending ,which items may vary from
different companies for reasons unrelated to overall operating performance.
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. Pro Forma EBITDA (LBITDA) shown excludes "Severance and other
termination costs" and "Asset impairments." A reconciliation of net income
(loss) to Pro Forma EBITDA (LBITDA) is as follows:
<Table>
<Caption>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net income (loss) .................................. $ (1,141) $ (4,694) $ (2,448) $ (10,329)
Income tax provision ........................... 72 -- 336 --
Interest expense (income) ...................... 475 (155) 1,589 (688)
Equity in earnings of affiliate ................ -- (265) -- (1,163)
Severance and other termination costs and
asset impairment ............................. -- 2,170 -- 2,170
Depreciation and amortization................... 1,142 1,509 3,497 4,607
---------- ---------- ---------- ----------
Pro Forma EBITDA (LBITDA).......................... $ 548 $ (1,435) $ 2,974 $ (5,403)
========== ========== ========== ==========
</Table>
5
EXHIBIT A (CONTINUED)
PFSWEB, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
<Table>
<Caption>
September 30, December 31,
2003 2002
------------- -------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................................................... $ 11,350 $ 8,595
Restricted cash .............................................................. 1,429 1,016
Accounts receivable, net of allowance for doubtful accounts of $633 and $411
at September 30, 2003 and December 31, 2002, respectively ................ 31,616 29,961
Inventories, net ............................................................. 37,877 46,291
Other receivables ............................................................ 4,048 3,417
Prepaid expenses and other current assets .................................... 3,163 2,888
------------- -------------
Total current assets ........................................... 89,483 92,168
------------- -------------
PROPERTY AND EQUIPMENT, net ...................................................... 9,732 11,695
RESTRICTED CASH .................................................................. 876 2,878
OTHER ASSETS ..................................................................... 171 285
------------- -------------
Total assets ................................................... $ 100,262 $ 107,026
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations .............. $ 51,305 $ 60,863
Trade accounts payable ....................................................... 11,968 7,317
Accrued expenses ............................................................. 7,799 7,862
------------- -------------
Total current liabilities ...................................... 71,072 76,042
------------- -------------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current
portion .................................................................... 2,544 3,094
DEFERRED INCOME .................................................................. 1,132 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;
19,178,459 and 18,397,983 shares issued at September 30, 2003 and December
31, 2002, respectively; and 19,092,159 and 18,311,683 outstanding at
September 30, 2003 and December 31, 2002, respectively ..................... 19 18
Additional paid-in capital ................................................... 52,673 52,094
Accumulated deficit .......................................................... (28,005) (25,557)
Accumulated other comprehensive income ....................................... 912 --
Treasury stock at cost, 86,300 shares at June 30, 2003 and
December 31, 2002 ......................................................... (85) (85)
------------- -------------
Total shareholders' equity ..................................... 25,514 26,470
------------- -------------
Total liabilities and shareholders' equity ..................... $ 100,262 $ 107,026
============= =============
</Table>
6
EXHIBIT B
PFSWEB, INC. AND
SUBSIDIARIES
UNAUDITED CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2003
(In Thousands)
<Table>
<Caption>
Business
Supplies
Distributors
PFSweb, Inc. Holdings, LLC Eliminations Consolidated
------------ ------------- ------------ ------------
REVENUES:
Gross product revenue .......................................... $ -- $ 60,300 $ -- $ 60,300
Gross service fee revenue ...................................... 8,918 -- -- 8,918
Gross service fee revenue, affiliate ........................... 2,062 -- (2,062) --
------------ ------------ ------------ ------------
Total gross revenues ....................................... 10,980 60,300 (2,062) 69,218
Less pass-through charges ...................................... 901 -- (43) 858
------------ ------------ ------------ ------------
Net revenues ............................................... 10,079 60,300 (2,019) 68,360
COSTS OF REVENUES:
Cost of product revenue ........................................ -- 56,988 -- 56,988
Cost of service fee revenue .................................... 6,282 -- (591) 5,691
------------ ------------ ------------ ------------
Total costs of revenues .................................... 6,282 56,988 (591) 62,679
------------ ------------ ------------ ------------
Gross profit ............................................... 3,797 3,312 (1,428) 5,681
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES ...................................................... 5,500 2,211 (1,436) 6,275
------------ ------------ ------------ ------------
Income (loss) from operations .............................. (1,703) 1,101 8 (594)
EQUITY IN EARNINGS OF AFFILIATE .................................... 350 -- (350) --
INTEREST EXPENSE (INCOME), NET ..................................... (115) 590 -- 475
------------ ------------ ------------ ------------
Income (loss) before income taxes ......................... (1,238) 511 (342) (1,069)
INCOME TAX PROVISION (BENEFIT) ..................................... (89) 161 -- 72
------------ ------------ ------------ ------------
NET INCOME (LOSS) .................................................. $ (1,149) $ 350 $ (342) $ (1,141)
============ ============ ============ ============
A reconciliation of Net income (loss) to EBITDA (LBITDA) follows:
Net income (loss) .................................................. $ (1,149) $ 350 $ (342) $ (1,141)
Income tax expense (benefit) ................................... (89) 161 -- 72
Interest expense (income) ...................................... (115) 590 -- 475
Equity in earnings of affiliate ................................ (350) -- 350 --
Depreciation and amortization .................................. 1,136 14 (8) 1,142
------------ ------------ ------------ ------------
EBITDA (LBITDA) .................................................... $ (567) $ 1,115 $ -- $ 548
============ ============ ============ ============
</Table>
7
EXHIBIT B (CONTINUED)
PFSWEB, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS AS OF SEPTEMBER 30, 2003
(In Thousands)
<Table>
<Caption>
Business
Supplies
Distributors
PFSweb, Inc. Holdings, LLC Eliminations Consolidated
------------ ------------- ------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ......................... $ 10,183 $ 1,167 $ -- $ 11,350
Restricted cash ................................... 325 1,104 -- 1,429
Accounts and other receivables, net ............... 6,335 29,812 (483) 35,664
Inventories, net .................................. -- 37,877 -- 37,877
Prepaid expenses and other current assets ......... 1,234 1,929 -- 3,163
------------ ------------ ------------ ------------
Total current assets ....................... 18,077 71,889 (483) 89,483
------------ ------------ ------------ ------------
PROPERTY AND EQUIPMENT, net ........................... 9,732 -- -- 9,732
NOTE RECEIVABLE FROM AFFILIATE ........................ 8,005 -- (8,005) --
RESTRICTED CASH ....................................... 876 -- -- 876
INVESTMENT IN AFFILIATE ............................... 3,978 -- (3,978) --
OTHER ASSETS .......................................... 157 29 (15) 171
------------ ------------ ------------ ------------
Total assets ............................... $ 40,825 $ 71,918 $ (12,481) $ 100,262
============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease
obligations .................................... $ 2,592 $ 48,713 $ -- $ 51,305
Trade accounts payable ............................ 3,887 8,564 (483) 11,968
Accrued expenses .................................. 5,195 2,604 -- 7,799
------------ ------------ ------------ ------------
Total current liabilities .................. 11,674 59,881 (483) 71,072
------------ ------------ ------------ ------------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less
current portion ................................... 2,544 -- -- 2,544
NOTE PAYABLE TO AFFILIATE ............................. -- 8,005 (8,005) --
DEFERRED INCOME ....................................... 1,132 -- -- 1,132
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock ...................................... 19 -- -- 19
Capital contributions ............................. -- 1,000 (1,000) --
Additional paid-in capital ........................ 52,673 -- -- 52,673
Retained earnings (accumulated deficit) ........... (28,044) 1,714 (1,675) (28,005)
Accumulated other comprehensive income ............ 912 1,318 (1,318) 912
Treasury stock .................................... (85) -- -- (85)
------------ ------------ ------------ ------------
Total shareholders' equity ................. 25,475 4,032 (3,993) 25,514
------------ ------------ ------------ ------------
Total liabilities and shareholders' equity . $ 40,825 $ 71,918 $ (12,481) $ 100,262
============ ============ ============ ============
</Table>
8