EXHIBIT 99.1
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
PFSWEB REPORTS RECORD REVENUE IN FOURTH QUARTER
New Business Wins, Strengthened Financial Position Provide Solid Foundation for
Future
PLANO, TEXAS (FEBRUARY 23, 2004) - PFSweb, Inc. (NASDAQ: PFSW), a global
provider of integrated business-process solutions, today reported its results
for the quarter and fiscal year ended December 31, 2003.
"PFSweb's consolidated results for the December 2003 quarter include total net
revenues of $74.1 million, EBITDA of $0.3 million and a net loss of $1.3
million, or $0.06 per share, after the impact of $0.3 million of certain asset
and lease impairments," said Tom Madden, Senior Partner and Chief Financial
Officer of PFSweb. "Our consolidated balance sheet as of December 31, 2003,
reflects $108.4 million in total assets, including $16.7 million in cash, of
which $2.0 million is restricted, and shareholders' equity of $28.4 million, or
$1.34 per share."
"Total net revenues increased 13% over the prior year, including record product
revenues of $66.1 million reported by our Supplies Distributors subsidiary,"
said Mark C. Layton, Senior Partner and Chief Executive Officer of PFSweb. "Our
net loss for the December quarter of $1.0 million, excluding the impact of
certain asset and lease impairments of $0.3 million, represents an improvement
of $0.3 million compared to our net loss of $1.3 million in 2002, excluding the
impact of severance and other termination costs of $0.04 million and an
extraordinary gain of $0.2 million.
"On a fiscal year basis, our 2003 net loss of $3.5 million, excluding the impact
of certain asset and lease impairments of $0.3 million, represents an
improvement of $6.0 million compared to our net loss of $9.5 million in 2002,
excluding the impact of severance and other termination costs of $1.2 million,
asset impairments of $0.9 million and an extraordinary gain of $0.2 million.
Increased revenue and 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 our overall improvement in bottom line performance.
"Growth remains a key element of our strategy," Layton continued. "As we have
previously indicated, we experienced solid growth from our existing clients
during 2003. While our new business closures this past year were lower than
targeted, we are pleased to report that over the past several months we have
extended and expanded three key existing client relationships and have added
five new clients to our already attractive brand-name-client list. These
additions enhance the breadth of industries we serve. They include a major
telecommunications firm, a new government client, a contemporary home
furnishings and decor cataloger, a high tech manufacturer and an
online-retailer of premium food products. Some of these new and expanded client
relationships are now contributing to our operations while the others are in
the start-up or implementation process and are expected to begin contributing
to our operations over the next several quarters.
"We estimate that these new and expanded client relationships will produce more
than $4 million of annual service fee revenues and approximately $20 million of
annual product revenues once fully implemented.
"We continue to generate solid new business lead opportunities. We currently
have approximately $30 million in our sales proposal pipeline, with both new and
existing clients. We also are pleased to announce that we have received
non-binding acceptance of certain of these proposals, which are now in the
contracting stage."
"PFSweb's financial position remains solid," Madden stated. "Our operating
results for the December quarter were approximately breakeven, excluding
depreciation and amortization and certain asset and lease impairments. During
the December quarter, we completed a private placement transaction of common
stock that generated approximately $3.2 million of net proceeds for the company.
The operating results, combined with the private placement proceeds, enabled us
to increase our strong cash position. Borrowings under our Comerica facility
increased to $2.2 million as of December 31, 2003, compared to $1.3 million as
of September 30, 2003, to finance certain working capital changes. 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.
"During the December quarter, we finalized the restructuring activities
originally announced in September 2002, by relocating our Canadian operations
within Toronto. This relocation allowed us to reduce some of our excess
infrastructure, without interrupting services to our existing clients or our
high quality performance. As such, PFSweb reported an impairment expense for an
operating lease and the write-down of certain assets of approximately $0.3
million during the quarter. While we do not anticipate further restructuring
related charges, we constantly review our operating expenses to ensure they
match our targeted growth levels."
"As an update on our near-term outlook," Layton concluded, "while we believe
our new business activity is showing positive signs of sustained improvement,
it will still be several quarters before we begin to realize all of the
benefits from the new revenue due to the required contracting and
implementation periods. Additionally, as we have previously communicated, the
March quarter is our seasonally lowest due to the seasonal nature of our
largest service fee client."
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, February 24, 2004 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 4489598. Check www.pfsweb.com and
our February 12, 2004 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 Adaptec (NASDAQ: ADPT), Avaya Communications (NYSE:
AV), Dupont Fluoroproducts, Hewlett-Packard (NYSE: HPQ), iGo/Mobility
Electronics, International Business Machines (NYSE: IBM), Lancome, a cosmetics
division of L'Oreal International (ADR: LORLY), Nokia (NYSE: NOK), Pfizer, Inc.
(NYSE: PFE), Roots, Inc., Shell Energy Services Company, the United States Mint,
Smithsonian Institution and Xerox (NYSE: XRX).
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; 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 -
EXHIBIT A
PFSWEB, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (A)
(In Thousands, Except Per Share Data)
<Table>
<Caption>
Three Months Ended Year Ended
December 31, December 31,
------------------------- -------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Revenues:
Product revenue, net ................................... $ 66,074 $ 57,492 $ 249,230 $ 57,492
Gross service fee revenue .............................. 9,133 8,366 36,578 34,655
Gross service fee revenue, affiliate (B) ............... -- -- -- 4,862
---------- ---------- ---------- ----------
Total gross revenues ................................. 75,207 65,858 285,808 97,009
Less pass-through charges .............................. 1,107 719 3,403 3,692
---------- ---------- ---------- ----------
Net revenues ......................................... 74,100 65,139 282,405 93,317
---------- ---------- ---------- ----------
Costs of revenues:
Cost of product revenue ................................ 62,337 54,343 235,317 54,343
Cost of net service fee revenue ........................ 5,826 5,108 22,844 22,660
---------- ---------- ---------- ----------
Total costs of revenues .............................. 68,163 59,451 258,161 77,003
---------- ---------- ---------- ----------
Gross profit ........................................... 5,937 5,688 24,244 16,314
Selling, general and administrative expenses ............... 6,331 6,376 25,161 27,012
Severance and other termination costs ...................... -- (35) -- 1,213
Asset and lease impairments ................................ 257 -- 257 922
---------- ---------- ---------- ----------
Loss from operations ................................... (651) (653) (1,174) (12,833)
Equity in earnings of affiliate ............................ -- -- -- 1,163
Interest expense ........................................... 439 552 2,124 816
Interest income ............................................ (28) (25) (124) (977)
---------- ---------- ---------- ----------
Loss before income taxes and extraordinary item ........ (1,062) (1,180) (3,174) (11,509)
Income tax provision ....................................... 236 94 572 94
---------- ---------- ---------- ----------
Loss before extraordinary item ......................... (1,298) (1,274) (3,746) (11,603)
Extraordinary item - gain on purchase of 51%
share of Supplies Distributors ......................... -- 203 -- 203
---------- ---------- ---------- ----------
Net loss ................................................... $ (1,298) $ (1,071) $ (3,746) $ (11,400)
========== ========== ========== ==========
Basic and diluted loss per share:
Loss before extraordinary item ......................... $ (0.06) $ (0.07) $ (0.20) $ (0.64)
Extraordinary item - gain on purchase of 51% share of
Supplies Distributors ................................ -- 0.01 -- 0.01
---------- ---------- ---------- ----------
Net loss ............................................... $ (0.06) $ (0.06) $ (0.20) $ (0.63)
========== ========== ========== ==========
Weighted average number of shares outstanding, basic and
diluted ................................................ 20,420 18,312 19,011 18,229
========== ========== ========== ==========
Pro Forma EBITDA (LBITDA) (C) (D) .......................... $ 606 $ 556 $ 3,580 $ (4,847)
========== ========== ========== ==========
</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
prior to the consolidation of Supplies Distributors effective October
1, 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. We present EBITDA (LBITDA) 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 and 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 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 loss to EBITDA (LBITDA) and Pro Forma EBITDA
(LBITDA) is as follows:
<Table>
<Caption>
Three Months Ended Year Ended
December 31, December 31,
------------------------- -------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net loss ................................................... $ (1,298) $ (1,071) $ (3,746) $ (11,400)
Extraordinary gain ..................................... -- (203) -- (203)
Income tax provision ................................... 236 94 572 94
Interest expense (income) .............................. 411 527 2,000 (161)
Equity in earnings of affiliate ........................ -- -- -- (1,163)
Depreciation and amortization .......................... 1,000 1,244 4,497 5,851
---------- ---------- ---------- ----------
EBITDA (LBITDA) ............................................ 349 591 3,323 (6,982)
Severance and other termination costs and asset
and lease impairments ...................................... 257 (35) 257 2,135
---------- ---------- ---------- ----------
Pro Forma EBITDA (LBITDA) (D) .............................. $ 606 $ 556 $ 3,580 $ (4,847)
========== ========== ========== ==========
</Table>
(D) We present Pro Forma EBITDA (LBITDA) and net loss excluding (1) the
impact of severance and other termination costs and asset and lease
impairments for each period presented and (2) the extraordinary item
for the three months and year ended December 31, 2002 because we
believe they are useful to provide more comparability when evaluating
our operating performance from period to period. Pro Forma EBITDA
(LBITDA) and net loss excluding certain items are not financial
measures determined by generally accepted accounting principles and
should not be considered as an alternative to net loss as a measure of
operating results or to cash flows as a measure of funds available for
discretionary or other liquidity purposes.
EXHIBIT A (CONTINUED)
PFSWEB, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
<Table>
<Caption>
December 31, December 31,
2003 2002
------------ ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ....................................................... $ 14,743 $ 8,595
Restricted cash ................................................................. 1,241 1,016
Accounts receivable, net of allowance for doubtful accounts of $339 and $411
at December 31, 2003 and 2002, respectively ................................. 31,658 29,961
Inventories, net ................................................................ 44,589 46,291
Other receivables ............................................................... 2,992 3,417
Prepaid expenses and other current assets ....................................... 2,516 2,807
---------- ----------
Total current assets .............................................. 97,739 92,087
---------- ----------
PROPERTY AND EQUIPMENT, net ......................................................... 9,589 11,695
RESTRICTED CASH ..................................................................... 750 2,878
OTHER ASSETS ........................................................................ 281 366
---------- ----------
Total assets ...................................................... $ 108,359 $ 107,026
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations ................. $ 57,085(A) $ 60,863
Trade accounts payable .......................................................... 11,996 7,317
Accrued expenses ................................................................ 7,101 7,862
---------- ----------
Total current liabilities ......................................... 76,182 76,042
---------- ----------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current
portion ....................................................................... 2,762 3,094
DEFERRED INCOME ..................................................................... 998 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;
21,247,941 and 18,397,983 shares issued at December 31, 2003 and December
31, 2002, respectively; and 21,161,641 and 18,311,683 outstanding at
December 31, 2003 and 2002, respectively ...................................... 21 18
Additional paid-in capital ...................................................... 56,156 52,094
Accumulated deficit ............................................................. (29,303) (25,557)
Accumulated other comprehensive income .......................................... 1,628 --
Treasury stock at cost, 86,300 shares at December 31, 2003 and 2002 ............ (85) (85)
---------- ----------
Total shareholders' equity ........................................ 28,417 26,470
---------- ----------
Total liabilities and shareholders' equity ........................ $ 108,359 $ 107,026
========== ==========
</Table>
(A) Current portion of long-term debt and capital lease obligations includes
balances due under Supplies Distributors' working capital agreements with IBM
Credit Corp. that expire March 29, 2004. The Company is currently working to
renew these facilities and is targeting completion prior to the expiration.
EXHIBIT B
PFSWEB, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
DECEMBER 31, 2003
(In Thousands)
<Table>
<Caption>
Business
Supplies
Distributors
PFSweb, Inc. Holdings, LLC Eliminations Consolidated
------------ ------------- ------------ ------------
REVENUES:
Gross product revenue ......................... $ -- $ 66,074 $ -- $ 66,074
Gross service fee revenue ..................... 9,133 -- -- 9,133
Gross service fee revenue, affiliate .......... 2,142 -- (2,142) --
----------- ----------- ----------- -----------
Total gross revenues ...................... 11,275 66,074 (2,142) 75,207
Less pass-through charges ..................... 1,146 -- (39) 1,107
----------- ----------- ----------- -----------
Net revenues .............................. 10,129 66,074 (2,103) 74,100
COSTS OF REVENUES:
Cost of product revenue ....................... -- 62,337 -- 62,337
Cost of service fee revenue ................... 6,418 -- (592) 5,826
----------- ----------- ----------- -----------
Total costs of revenues ................... 6,418 62,319 (592) 68,163
----------- ----------- ----------- -----------
Gross profit .............................. 3,711 3,737 (1,511) 5,937
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES ..................................... 5,637 2,212 (1,518) 6,331
ASSET AND LEASE IMPAIRMENTS ....................... 257 -- -- 257
----------- ----------- ----------- -----------
Income (loss) from operations ............. (2,183) 1,525 7 (651)
EQUITY IN EARNINGS OF AFFILIATE ................... 592 -- (592) --
INTEREST EXPENSE (INCOME), NET .................... (130) 541 -- 411
----------- ----------- ----------- -----------
Income (loss) before income taxes ........ (1,461) 984 (585) (1,062)
INCOME TAX PROVISION (BENEFIT) .................... (156) 392 -- 236
----------- ----------- ----------- -----------
NET INCOME (LOSS) ................................. $ (1,305) $ 592 $ (585) $ (1,298)
=========== =========== =========== ===========
A reconciliation of Net income (loss) to EBITDA (LBITDA) and Pro Forma EBITDA (LBITDA) follows:
Net income (loss) ................................. $ (1,305) $ 592 $ (585) $ (1,298)
Income tax expense (benefit) .................. (156) 392 -- 236
Interest expense (income) ..................... (130) 541 -- 411
Equity in earnings of affiliate ............... (592) -- 592 --
Depreciation and amortization ................. 992 15 (7) 1,000
----------- ----------- ----------- -----------
EBITDA (LBITDA) (C) ............................... (1,191) 1,540 -- 349
Asset and lease impairments ................... 257 -- -- 257
----------- ----------- ----------- -----------
Pro Forma EBITDA (LBITDA) (D) ..................... $ (934) $ 1,540 $ -- $ 606
=========== =========== =========== ===========
</Table>
See Exhibit A, (C) and (D), for description and discussion of EBITDA (LBITDA)
and Pro Forma EBITDA (LBITDA)
EXHIBIT B (CONTINUED)
PFSWEB, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS AS OF DECEMBER 31, 2003
(In Thousands)
<Table>
<Caption>
Business
Supplies
Distributors
PFSweb, Inc. Holdings, LLC Eliminations Consolidated
------------ ------------- ------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .............................. $ 12,811 $ 1,932 $ -- $ 14,743
Restricted cash ........................................ 410 831 -- 1,241
Accounts and other receivables, net .................... 6,081 28,654 (85) 34,650
Inventories, net ....................................... -- 44,589 -- 44,589
Prepaid expenses and other current assets .............. 658 1,858 -- 2,516
------------ ------------ ------------ ------------
Total current assets ............................ 19,960 77,864 (85) 97,739
------------ ------------ ------------ ------------
PROPERTY AND EQUIPMENT, net ................................ 9,589 -- -- 9,589
NOTE RECEIVABLE FROM AFFILIATE ............................. 8,005 -- (8,005) --
RESTRICTED CASH ............................................ 750 -- -- 750
INVESTMENT IN AFFILIATE .................................... 5,051 -- (5,051) --
OTHER ASSETS ............................................... 274 14 (7) 281
------------ ------------ ------------ ------------
Total assets .................................... $ 43,629 $ 77,878 $ (13,148) $ 108,359
============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease
obligations ......................................... $ 3,832 $ 53,253 $ -- $ 57,085
Trade accounts payable ................................. 2,896 9,185 (85) 11,996
Accrued expenses ....................................... 4,770 2,331 -- 7,101
------------ ------------ ------------ ------------
Total current liabilities ....................... 11,498 64,769 (85) 76,182
------------ ------------ ------------ ------------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less
current portion ........................................ 2,762 -- -- 2,762
NOTE PAYABLE TO AFFILIATE .................................. -- 8,005 (8,005) --
DEFERRED INCOME ............................................ 998 -- -- 998
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock ........................................... 21 -- -- 21
Capital contributions .................................. -- 1,000 (1,000) --
Additional paid-in capital ............................. 56,156 -- -- 56,156
Retained earnings (accumulated deficit) ................ (29,349) 2,306 (2,260) (29,303)
Accumulated other comprehensive income ................. 1,628 1,798 (1,798) 1,628
Treasury stock ......................................... (85) -- -- (85)
------------ ------------ ------------ ------------
Total shareholders' equity ...................... 28,371 5,104 (5,058) 28,417
------------ ------------ ------------ ------------
Total liabilities and shareholders' equity ...... $ 43,629 $ 77,878 $ (13,148) $ 108,359
============ ============ ============ ============
</Table>