EXHIBIT 99.1
PRESS RELEASE DATED NOVEMBER 8, 2004
FOR IMMEDIATE RELEASE
Contact: MARK C. LAYTON PRESTON F. KIRK, APR
Senior Partner and Chief Executive Officer Associates Michael A. Burns &
or THOMAS J. MADDEN (830) 693-4447
Senior Partner and Chief Financial Officer kirk@281.com
(972) 881-2900
PFSWEB REPORTS SECOND CONSECUTIVE QUARTER OF NET INCOME
Profit, Record Service Fee Revenue and Strong New Client Additions Highlight
Third Quarter
PLANO, TEXAS (NOVEMBER 8, 2004) - PFSweb, Inc. (NASDAQ: PFSW), a global provider
of integrated business process outsourcing (BPO) solutions, today reported its
results for the quarter ended September 30, 2004. "It is very gratifying to see
the results of years of hard work by the PFSweb team begin to come to fruition,"
said Mark C. Layton, Senior Partner and Chief Executive Officer of PFSweb.
PFSweb's consolidated results for the September 2004 quarter include total net
revenues of $73.2 million, net income before interest, taxes, depreciation and
amortization of $2.1 million, and net income of $420,000, or $0.02 per share.
The net income result was a substantial improvement from the $1.1 million loss
reported for the same period of the prior year. The consolidated balance sheet
as of September 30, 2004, reflects $114.9 million in total assets, including
$15.9 million in cash, of which $1 million is restricted, and shareholders'
equity of $27.7 million, or $1.29 per share.
"I am extremely pleased with our results this quarter," continued Layton.
"These results indicate significant milestones for our company, including:
- - Record net service fee revenues - Our service fee business segment reported
$13.5 million of fee revenues, the highest level in our Company's history.
This represents a 33% increase over the same quarter of the prior year.
- - Consecutive profitable quarters - This is the first time that we have
reported back-to-back profitable quarters. Additionally, three of the past
six quarters have been profitable. We believe sustainable profitability is
now in sight.
- - Continued strong new business activity - We have been very successful again
this past quarter in new contract signings. The projected annual service
fees from this year's new and expanded client signings are already at a
record pace. In addition, our lead and proposal pipeline remains robust,
including outstanding proposals for more than $30 million in annual service
fees."
"Our service fee business segment continues to perform well, both in terms
of revenues and costs," stated Tom Madden, Senior Partner and Chief Financial
Officer of PFSweb. "The service fee business segment benefited this quarter from
several incremental projects with both existing and new clients and also
includes service fees from certain new clients recently implemented. Our gross
margin percentage for this business segment improved slightly over the prior
year, but was down sequentially from the June 2004 quarter. This decline was
primarily due to implementation costs on new contracts and lower overall gross
margin percentage on certain incremental projects. We continue to target a gross
margin percentage performance on our service fee clients between 30-40%, but we
have and we may continue to accept lower than this targeted range on certain
larger contracts and projects depending on contract scope and other factors.
"SG&A levels were relatively consistent with the same period from the prior
year, yet lower than the June 2004 quarter. This decrease was primarily due to
timing of certain expenditures, including professional fees and sales and
marketing costs. We continue to review our operating expenses to ensure they
align with our targeted growth levels, and we plan to make further investments
in areas that will help continue to fuel and support our growth plans.
Additionally, we expect to experience growth in SG&A due to increased
professional fees applicable to the Sarbanes Oxley Act."
"In addition to the positive financial performance," Layton said, "PFSweb
continues to experience outstanding results in new client additions. During
2004, we have gained many new client relationships. These new relationships
include Raytheon Aircraft Company, FLAVIA(R) Beverage Systems, Rene Furterer
USA, and unnamed clients including a Fortune 500 consumer products firm, a major
nutraceutical company, a prepaid wireless provider, a healthcare payment
provider and other clients. Due to contractual agreements, we often are not
allowed to mention new clients by name.
"To meet the needs of this growth, we recently leased an additional facility
in Southaven, Miss., just a short distance from our distribution hub in Memphis,
Tenn. We expect this facility to become operational during the first quarter of
2005. We are continually evaluating the need for additional distribution
facilities.
"Due to the time estimated to fully implement our new contract
relationships, we do not expect to fully realize the majority of the financial
revenue and gross margin benefit of these new contracts until calendar year
2005. However, based on our current projections, we expect to post significant
year-on-year service fee revenue growth and overall financial improvement for
both the December 2004 and March 2005 quarters. However, the March quarter has
been and is expected to continue to be our weakest quarter due to seasonal
fluctuations of certain clients. Our current targets for the full calendar year
2005 call for positive cash flow from operating activities and accelerating
growth of our service fee revenue business segment.
"Along with our pursuit of leased distribution space to support our new
client relationships, we also will incur additional capital expenditures to
support the incremental business. Our new Southaven distribution center will
include approximately $4 million to $5 million in capital expenditures. We also
expect to incur further capital expenditures, estimated to be approximately $2
million, to support other recent client additions. To finance these
expenditures, we are seeking bank financing, state bond financing, or lease
financing.
"Combined with a continuing improvement in the U.S. economic environment,
PFSweb's many strengths are contributing to our recent new business successes.
Everything we offer is `world class,' which has allowed us to develop a
reputation as a high quality service provider. Our business solutions are custom
tailored to meet each client's specific needs. Our systems can easily converse
with virtually any IT platform. And most importantly, our people are experts in
their fields of discipline. From finance to technology to logistics to customer
retention, we offer our clients the world's leading solutions design talent,"
Layton emphasized.
CONFERENCE CALL INFO:
- ---------------------
PFSweb will hold a conference call Monday, November 8, 2004 at 3:30 p.m. Central
Time. To ensure attendance on the call, plan to dial in by 3:20 p.m. to (973)
582-2741. Ask to be placed on the PFSweb Earnings Release Conference Call. The
call also can be heard "live" by accessing the Company's website,
www.pfsweb.com, at the time of the call. Two hours after the conference, a
recorded playback can be heard for 14 days at (877) 519-4471, using the
confirmation number 5348274. Check www.pfsweb.com and our November 2, 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 provided to a multitude of industries and company types,
including such clients as Adaptec (NASDAQ: ADPT), Dupont Fluoroproducts,
FLAVIA(R)Beverage Systems, Hewlett-Packard (NYSE: HPQ), iGo/Mobility Electronics
(NASDAQ: MOBE), International Business Machines (NYSE: IBM), Nokia (NYSE: NOK),
Pfizer, Inc. (NYSE: PFE), Raytheon Aircraft Company, Rene Furterer USA, Roots,
Inc., Shell Energy Services Company, Smithsonian Institution and Xerox (NYSE:
XRX).
The matters discussed in this news release (except for historical information)
and, in particular, information regarding estimates, 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 outstanding warrants issued in a prior 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, 2003.
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 and
GlobalMerchant CommerceWareTM are registered trademarks of PFSweb, Inc. IBM is a
registered trademark of International Business Machines Corp. 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)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ----------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Revenues:
Product revenue, net ..................... $ 61,561 $ 60,300 $ 195,435 $ 183,156
Service fee revenue ...................... 15,456 9,100 39,087 27,908
--------- --------- --------- ---------
Total gross revenues .................. 77,017 69,400 234,522 211,064
Less pass-through charges ................ 3,856 880 9,327 2,325
--------- --------- --------- ---------
Net revenues .......................... 73,161 68,520 225,195 208,739
--------- --------- --------- ---------
Costs of revenues:
Cost of product revenue .................. 58,126 56,988 184,302 172,980
Cost of net service fee revenue .......... 7,648 5,790 19,610 17,253
--------- --------- --------- ---------
Total costs of revenues ............... 65,774 62,778 203,912 190,233
--------- --------- --------- ---------
Gross profit ............................. 7,387 5,742 21,283 18,506
Selling, general and administrative expenses . 6,451 6,336 20,493 19,029
--------- --------- --------- ---------
Income (loss) from operations ............ 936 (594) 790 (523)
Interest expense, net ........................ 373 475 1,125 1,589
--------- --------- --------- ---------
Income (loss) before income taxes ........ 563 (1,069) (335) (2,112)
Income tax provision ......................... 143 72 533 336
--------- --------- --------- ---------
Net income (loss) ............................ $ 420 $ (1,141) $ (868) $ (2,448)
========= ========= ========= =========
Net income (loss) per share:
Basic .................................... $ 0.02 $ (0.06) $ (0.04) $ (0.13)
========= ========= ========= =========
Diluted .................................. $ 0.02 $ (0.06) $ (0.04) $ (0.13)
========= ========= ========= =========
Weighted average number of shares outstanding:
Basic .................................... 21,386 18,761 21,270 18,537
========= ========= ========= =========
Diluted .................................. 23,071 18,761 21,270 18,537
========= ========= ========= =========
EBITDA (LBITDA)(B) ........................... $ 2,109 $ 548 $ 4,299 $ 2,974
========= ========= ========= =========
(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, 2003.
(B) "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 income (loss) to EBITDA (LBITDA) is as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- ------------------
2004 2003 2004 2003
------- ------- ------- -------
Net income (loss) ............... $ 420 $(1,141) $ (868) $(2,448)
Income tax provision ........ 143 72 533 336
Interest expense, net ....... 373 475 1,125 1,589
Depreciation and amortization 1,173 1,142 3,509 3,497
------- ------- ------- -------
EBITDA (LBITDA) ................. $ 2,109 $ 548 $ 4,299 $ 2,974
======= ======= ======= =======
EXHIBIT A (CONTINUED)
- ---------------------
PFSWEB, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
September 30, December 31,
2004 2003
--------- ---------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................................................... $ 14,941 $ 14,743
Restricted cash ......................................................................... 329 1,091
Accounts receivable, net of allowance for doubtful accounts of $436 and $339 at September
30, 2004 and December 31, 2003, respectively ........................................ 37,219 31,658
Inventories, net ........................................................................ 42,908 44,589
Other receivables ....................................................................... 4,679 3,091
Prepaid expenses and other current assets ............................................... 3,327 2,417
--------- ---------
Total current assets .................................................... 103,403 97,589
--------- ---------
PROPERTY AND EQUIPMENT, net .................................................................. 10,453 9,589
RESTRICTED CASH .............................................................................. 675 900
OTHER ASSETS ................................................................................. 339 281
--------- ---------
Total assets ............................................................ $ 114,870 $ 108,359
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations ......................... $ 54,972 $ 57,085
Trade accounts payable .................................................................. 19,767 11,996
Accrued expenses ........................................................................ 8,914 7,101
--------- ---------
Total current liabilities ............................................... 83,653 76,182
--------- ---------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current
portion ................................................................................ 2,781 2,762
OTHER LIABILITIES ............................................................................ 778 998
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;
21,486,146 and 21,247,941 shares issued at September 30, 2004 and December 31, 2003,
respectively; and 21,399,846 and 21,161,641 outstanding at September 30, 2004 and
December 31, 2003, respectively ....................................................... 21 21
Additional paid-in capital ............................................................... 56,473 56,156
Accumulated deficit ...................................................................... (30,171) (29,303)
Accumulated other comprehensive income ................................................... 1,420 1,628
Treasury stock at cost, 86,300 shares .................................................... (85) (85)
--------- ---------
Total shareholders' equity .............................................. 27,658 28,417
--------- ---------
Total liabilities and shareholders' equity .............................. $ 114,870 $ 108,359
========= =========
EXHIBIT B
- ---------
PFSWEB, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2004
(In Thousands)
Business
Supplies
Distributors
PFSweb, Inc. Holdings, LLC Eliminations Consolidated
------------ ------------- ------------ ------------
REVENUES:
Product revenue, net.................................. $ -- $ 61,561 $ -- $ 61,561
Service fee revenue................................... 15,456 -- -- 15,456
Service fee revenue, affiliate........................ 1,883 -- (1,883) --
-------- -------- -------- --------
Total gross revenues.............................. 17,339 61,561 (1,883) 77,017
Less pass-through charges............................. 3,887 -- (31) 3,856
-------- -------- -------- --------
Net revenues...................................... 13,452 61,561 (1,852) 73,161
COSTS OF REVENUES:
Cost of product revenue............................... -- 58,126 -- 58,126
Cost of service fee revenue........................... 8,198 -- (550) 7,648
-------- -------- -------- --------
Total costs of revenues........................... 8,198 58,126 (550) 65,774
-------- -------- -------- --------
Gross profit...................................... 5,254 3,435 (1,302) 7,387
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................................. 5,591 2,162 (1,302) 6,451
-------- -------- -------- --------
Income (loss) from operations..................... (337) 1,273 -- 936
EQUITY IN EARNINGS OF AFFILIATE........................... 527 -- (527) --
INTEREST EXPENSE (INCOME), NET............................ (97) 470 -- 373
-------- -------- -------- --------
Income (loss) before income taxes................ 287 803 (527) 563
INCOME TAX PROVISION (BENEFIT)............................ (133) 276 -- 143
-------- -------- -------- --------
NET INCOME (LOSS)......................................... $ 420 $ 527 $ (527) $ 420
A reconciliation of Net income (loss) to EBITDA (LBITDA) follows:
Net income (loss)......................................... $ 420 $ 527 $ (527) $ 420
Income tax expense (benefit).......................... (133) 276 -- 143
Interest expense (income)............................. (97) 470 -- 373
Equity in earnings of affiliate....................... (527) -- 527 --
Depreciation and amortization......................... 1,173 -- -- 1,173
-------- -------- -------- --------
EBITDA (B)................................................ $ 836 $ 1,273 $ -- $ 2,109
======== ======== ======== ========
(B) See Exhibit A for description and discussion of EBITDA (LBITDA)
EXHIBIT B (CONTINUED)
PFSWEB, INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS AS OF SEPTEMBER 30, 2004
(In Thousands)
<Table>
<Caption>
Business
Supplies
Distributors
PFSweb, Inc. Holdings, LLC Eliminations Consolidated
------------ ------------- ------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................. $ 12,826 $ 2,115 $ - $ 14,941
Restricted cash....................................... 225 104 - 329
Accounts and other receivables, net................... 10,002 27,413 (196) 37,219
Inventories, net...................................... - 42,908 - 42,908
Prepaid expenses and other current assets............. 1,391 6,615 - 8,006
------------ ------------ ------------ ------------
Total current assets........................... 24,444 79,155 (196) 103,403
------------ ------------ ------------ ------------
PROPERTY AND EQUIPMENT, net............................... 10,453 - - 10,453
NOTE RECEIVABLE FROM AFFILIATE............................ 7,005 - (7,005) -
RESTRICTED CASH 675 - - 675
INVESTMENT IN AFFILIATE................................... 6,125 - (6,125) -
OTHER ASSETS 339 - - 339
------------ ------------ ------------ ------------
Total assets................................... $ 49,041 $ 79,155 $ (13,326) $ 114,870
============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease
obligations........................................ $ 5,778 $ 49,194 $ - $ 54,972
Trade accounts payable................................ 6,190 13,773 (196) 19,767
Accrued expenses...................................... 5,910 3,004 - 8,914
------------ ------------ ------------ ------------
Total current liabilities...................... 17,878 65,971 (196) 83,653
------------ ------------ ------------ ------------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less
current portion....................................... 2,781 - - 2,781
NOTE PAYABLE TO AFFILIATE................................. - 7,005 (7,005) -
OTHER LIABILITIES 778 - - 778
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock 21 - - 21
Capital contributions................................. - 1,000 (1,000) -
Additional paid-in capital............................ 56,473 - - 56,473
Retained earnings (accumulated deficit)............... (30,225) 3,463 (3,409) (30,171)
Accumulated other comprehensive income................ 1,420 1,716 (1,716) 1,420
Treasury stock........................................ (85) - - (85)
------------ ------------ ------------ ------------
Total shareholders' equity..................... 27,604 6,179 (6,125) 27,658
------------ ------------ ------------ ------------
Total liabilities and shareholders' equity..... $ 49,041 $ 79,155 $ (13,326) $ 114,870
============ ============ ============ ============
</Table>