Systemax Inc. (NYSE: SYX) today announced financial results for the third quarter and nine months ended September 30, 2012.
|(U.S. dollars in millions, except per share data)|
|Highlights||Quarter Ended||Nine Months Ended|
|September 30,||September 30,|
|Special charges (gains), net||$2.0||$0.4||$6.1||$(6.1)|
|Operating income (loss) from continuing operations||$(1.9)||$19.3||$6.9||$59.8|
|Operating margin from continuing operations||(0.2)%||2.1%||0.3%||2.2%|
|Diluted earnings per share||$0.38||$0.29||$0.51||$1.07|
|Special charges (gains), net, per diluted share, after tax||$0.03*||$0.01||$0.13*||$(0.11)|
|* Excludes the tax impact of valuation allowance reversals.|
Richard Leeds, Chairman and Chief Executive Officer, commented, “Our third quarter results reflect a continuation of the trends we witnessed in the first two quarters of this year. As in the second quarter, we essentially broke even on a consolidated basis if you exclude special charges. Our B2B operations continue to grow nicely, as we notched our 10 th straight quarter of 25% or better growth in Industrial Products and in our European B2B business we recorded 11% growth on a constant currency basis, despite the challenging regional economic environment. As good as these results were, they were unfortunately more than offset by continued weakness in our North American consumer business. The weakness is largely driven by industry trends that include soft demand for PCs and a number of consumer electronics products. We are taking steps to improve our ability to navigate this environment by making significant operational improvements with a focus on driving our long-term top and bottom line results. Our business is supported by a very strong balance sheet with a healthy cash position, providing us with ample liquidity as we execute on our strategic plan.”
The Company is executing on a number of efforts to simplify its business and improve its focus on optimizing its performance and competitive position. This includes the following initiatives:
- United States Technology Brands: In early Q4, the Company conducted an evaluation of its multi-brand United States consumer strategy and the intangible assets used in that strategy and on October 31, 2012 its Board of Directors concluded that the Company’s future North American consumer business would be optimized by consolidating its United States consumer operations under TigerDirect, its leading and largest brand. Accordingly, the Company will record one-time, non-cash impairment charges related to the intangible assets of CompUSA and Circuit City of approximately $34 million, pre-tax, in the fourth quarter of 2012.
- PC Manufacturing Business: In early Q4, the Company conducted an evaluation of its PC manufacturing operations and on October 31, 2012 its Board of Directors concluded that the Company’s future North American technology results will be enhanced by exiting the computer manufacturing business. The Company will continue service and support for its previously sold PCs. As a result of exiting this business, the Company expects to incur aggregate one-time charges of approximately $6 to $8 million, pre tax, in the fourth quarter of 2012 and during 2013 for asset impairment, exit and severance expenses. The Company anticipates that the opportunity benefit of strengthening its strategic relationships with vendor partners within the desktop PC category should provide improved profitability of between $1 and $2 million, pre tax, on an annual basis.
- European Shared Services Center: To facilitate the continued growth of its European Technology business, the Company intends to open a shared services center in Eastern Europe in 2013. This new facility, approved by the Company’s Board of Directors on October 31, 2012, will provide certain administrative and back office services and will help drive operational efficiencies and better serve the Company’s pan-European operating strategy. The Company expects that one-time exit, severance and startup costs in order to implement the shared services center, as well as other cost reduction initiatives in Europe anticipated to occur in the fourth quarter of 2012 and the first quarter of 2013, will aggregate between $14 and $16 million, pre tax, during the fourth quarter of 2012 and during 2013 and that it will realize a reduction in its cost structure between $9 and $11 million, pre tax, on an annual basis after implementation of the shared services center.
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