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These opportunities and continued investment initiatives include: Wholesale business development: · Expand the global sourcing network; · Invest in lower cost manufacturing bases located outside of mainland China; · Focus on value and while continuing to increase our average selling prices; · Emphasis on product designs and implementing new technologies; and · Seek strategic acquisitions of international distributors that could enhance our global sales and distribution network Retail business development: · Build up LA GO GO to become a major Chinese middle to high end mass market women's wear brand; · Seek opportunities for long-term cooperation with reputable international brands; · Facilitate the entry of international brands into the PRC market; · Further expand our retail network; · Improve our store efficiency and increase same store sales; · Further strengthen brand marketing; and · Launch flagship stores in Tier-1 Cities and increase penetration and coverage in Tier-2 and Tier-3 Cities Despite the various risks and uncertainties associated with the current global economy, we believe our core strengths will continue to allow us to execute our strategy for long-term sustainable growth in revenue, net income and operating cash flow. |
Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: ¨ Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; ¨ Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and ¨ Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
Involvement in Certain Legal Proceedings Our directors, executive officers and control persons have not been involved in any of the following events during the past five years: 1. any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; 2. any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); 3. being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or 4. being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. |
In order to implement such compensation principles, we have developed the following objectives for our executive compensation program: · overall compensation levels must be sufficiently competitive to attract and retain talented leaders and motivate those leaders to achieve superior results; · a portion of total compensation should be contingent on, and variable with, achievement of objective corporate performance goals, and that portion should increase as an executive’s position and responsibility increases; · total compensation should be higher for individuals with greater responsibility and greater ability to influence our achievement of operating goals and strategic initiatives; · the number of elements of our compensation program should be kept to a minimum, and those elements should be readily understandable by and easily communicated to executives, shareholders, and others; and · executive compensation should be set at responsible levels to promote a sense of fairness and equity among all employees and appropriate stewardship of corporate resources among shareholders. |
Signature Title Date /s/ RICHARD LEEDS Executive Chairman and Director March 16, 2017 Richard Leeds /s/ BRUCE LEEDS Vice Chairman and Director March 16, 2017 Bruce Leeds /s/ ROBERT LEEDS Vice Chairman and Director March 16, 2017 Robert Leeds /s/ LAWRENCE REINHOLD President and Chief Executive Officer March 16, 2017 Lawrence Reinhold and Director (Principal Executive Officer) /s/ THOMAS CLARK Vice President and Chief Financial Officer March 16, 2017 Thomas Clark (Principal Financial Officer) /s/ THOMAS AXMACHER Vice President and Controller March 16, 2017 Thomas Axmacher (Principal Accounting Officer) /s/ ROBERT ROSENTHAL Director March 16, 2017 Robert Rosenthal /s/ STACY DICK Director March 16, 2017 Stacy Dick /s/ MARIE ADLER-KRAVECAS Director March 16, 2017 Marie Adler-Kravecas Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Systemax Inc. We have audited Systemax Inc. and subsidiaries (the “Company”) internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). |
Signature Title Date /s/ RICHARD LEEDS Executive Chairman and Director March 17, 2016 Richard Leeds /s/ BRUCE LEEDS Vice Chairman and Director March 17, 2016 Bruce Leeds /s/ ROBERT LEEDS Vice Chairman and Director March 17, 2016 Robert Leeds /s/ LAWRENCE REINHOLD President and Chief Executive Officer March 17, 2016 Lawrence Reinhold and Director (Principal Executive and Financial Officer) /s/ THOMAS AXMACHER Vice President and Controller March 17, 2016 Thomas Axmacher (Principal Accounting Officer) /s/ ROBERT ROSENTHAL Director March 17, 2016 Robert Rosenthal /s/ STACY DICK Director March 17, 2016 Stacy Dick /s/ MARIE ADLER-KRAVECAS Director March 17, 2016 Marie Adler-Kravecas Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Systemax Inc. We have audited Systemax Inc. and subsidiaries (the “Company”) internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). |
Financial Condition, Liquidity and Capital Resources Selected liquidity data (in millions): Our primary liquidity needs are to support working capital requirements in our business, including working capital for the closing of the previously announced purchase of the Plant Equipment Group in January 2015, integrating Plant Equipment Group with our business, exiting of the consumer and retail business and related workforce reductions in 2015, integrating SCC Services with our business (see Note 2 to the Consolidated Financial Statements), reorganizing our European operations including funding cash requirements of certain European businesses, European workforce reduction costs and transition costs, implementing new inventory and warehouse functions in Europe, funding capital expenditures, continuing investment in upgrading and expanding our technological capabilities and information technology infrastructure (including upgrading and transitioning of SCC Services and Plant Equipment Group’s technology infrastructure), repaying outstanding debt, and funding acquisitions. |
Signature Title Date /s/ RICHARD LEEDS Chairman and Chief Executive Officer March 12, 2015 Richard Leeds (Principal Executive Officer) /s/ BRUCE LEEDS Vice Chairman and Director March 12, 2015 Bruce Leeds /s/ ROBERT LEEDS Vice Chairman and Director March 12, 2015 Robert Leeds /s/ LAWRENCE REINHOLD Executive Vice President, Chief Financial Officer March 12, 2015 Lawrence Reinhold and Director (Principal Financial Officer) /s/ THOMAS AXMACHER Vice President and Controller March 12, 2015 Thomas Axmacher (Principal Accounting Officer) /s/ ROBERT ROSENTHAL Director March 12, 2015 Robert Rosenthal /s/ STACY DICK Director March 12, 2015 Stacy Dick /s/ MARIE ADLER-KRAVECAS Director March 12, 2015 Marie Adler-Kravecas Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Systemax Inc. We have audited the accompanying consolidated balance sheets of Systemax Inc. and subsidiaries (“the Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive (loss), shareholders' equity and cash flows for each of the three years in the period ended December 31, 2014. |
In the Cause Notice, the Company advised Mr. Fiorentino that the Audit Committee investigation had identified grounds to terminate him for Cause under his Employment Agreement, and set forth the following findings by the Audit Committee constituting such grounds: i) Mr. Fiorentino personally removed or caused to be removed from the Company’s Miami premises product inventory, and/or kept or caused others to receive at his direction such removed product inventory, without payment to the Company and for his own personal gain; ii) Mr. Fiorentino caused substantial amounts of Company inventory purchases to be effected through Company credit cards in order to accrue and/or use “reward points” for his personal benefit and which he improperly converted to his own use; iii) Mr. Fiorentino caused his mother to be identified as an employee of the Company in positions for which she had no bona fide job responsibility or function, and caused the Company to pay her a salary and employee benefits, including extended COBRA reimbursements; and iv) Mr. Fiorentino engaged in fraudulent “kickback” arrangements with certain of the Company’s vendors, to the detriment of the Company The Company stated in the Cause Notice that the foregoing activities were in violation of Company policy, the Company’s Corporate Ethics Policy, his fiduciary duties and applicable law. |
Signature Title Date /s/ RICHARD LEEDS Chairman and Chief Executive Officer March 11, 2014 Richard Leeds (Principal Executive Officer) /s/ BRUCE LEEDS Vice Chairman and Director March 11, 2014 Bruce Leeds /s/ ROBERT LEEDS Vice Chairman and Director March 11, 2014 Robert Leeds /s/ LAWRENCE REINHOLD Executive Vice President, Chief Financial Officer March 11, 2014 Lawrence Reinhold and Director (Principal Financial Officer) /s/ THOMAS AXMACHER Vice President and Controller March 11, 2014 Thomas Axmacher (Principal Accounting Officer) /s/ ROBERT ROSENTHAL Director March 11, 2014 Robert Rosenthal /s/ STACY DICK Director March 11, 2014 Stacy Dick /s/ MARIE ADLER-KRAVECAS Director March 11, 2014 Marie Adler-Kravecas Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Systemax Inc. We have audited the accompanying consolidated balance sheets of Systemax Inc. and subsidiaries (“the Company”) as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended December 31, 2013. |
These charges included approximately $5.5 million for lease termination costs (present value of contractual gross lease payments net of estimated sublease rental income, or settlement amount) and $2.0 million for fixed asset write offs related to the closing of underperforming retail stores, $5.9 million in workforce reductions and other exit costs related to the implementation of a shared services center for our European subsidiaries, $2.9 million of one-time impairment charges related to intangible assets of the CompUSA brand in Puerto Rico, $2.2 million of workforce reduction charges for senior management changes in our North American operations, $1.8 million related to start up costs of the European shared services center, $0.5 million in recruitment costs of the European shared services center, $1.0 million for reserve adjustments related to the facility closing and exit from the PC manufacturing business and $0.6 million of additional legal and professional fees related to the previously disclosed completed investigation and settlement with a former officer and director. |
In the Cause Notice, the Company advised Mr. Fiorentino that the Audit Committee investigation had identified grounds to terminate him for Cause under his Employment Agreement, and set forth the following findings by the Audit Committee constituting such grounds: i) Mr. Fiorentino personally removed or caused to be removed from the Company’s Miami premises product inventory, and/or kept or caused others to receive at his direction such removed product inventory, without payment to the Company and for his own personal gain; ii) Mr. Fiorentino caused substantial amounts of Company inventory purchases to be effected through Company credit cards in order to accrue and/or use “reward points” for his personal benefit and which he improperly converted to his own use; iii) Mr. Fiorentino caused his mother to be identified as an employee of the Company in positions for which she had no bona fide job responsibility or function, and caused the Company to pay her a salary and employee benefits, including extended COBRA reimbursements; and iv) Mr. Fiorentino engaged in fraudulent “kickback” arrangements with certain of the Company’s vendors, to the detriment of the Company The Company stated in the Cause Notice that the foregoing activities were in violation of Company policy, the Company’s Corporate Ethics Policy, his fiduciary duties and applicable law. |
In the Cause Notice, the Company advised Mr. Fiorentino that the Audit Committee investigation had identified grounds to terminate him for Cause under his Employment Agreement, and set forth the following findings by the Audit Committee constituting such grounds: i) Mr. Fiorentino personally removed or caused to be removed from the Company’s Miami premises product inventory, and/or kept or caused others to receive at his direction such removed product inventory, without payment to the Company and for his own personal gain; ii) Mr. Fiorentino caused substantial amounts of Company inventory purchases to be effected through Company credit cards in order to accrue and/or use “reward points” for his personal benefit and which he improperly converted to his own use; iii) Mr. Fiorentino caused his mother to be identified as an employee of the Company in positions for which she had no bona fide job responsibility or function, and caused the Company to pay her a salary and employee benefits, including extended COBRA reimbursements; and iv) Mr. Fiorentino engaged in fraudulent “kickback” arrangements with certain of the Company’s vendors, to the detriment of the Company The Company stated in the Cause Notice that the foregoing activities were in violation of Company policy, the Company’s Corporate Ethics Policy, his fiduciary duties and applicable law. |
In the Cause Notice, the Company advised Mr. Fiorentino that the Audit Committee investigation had identified grounds to terminate him for Cause under his Employment Agreement, and set forth the following findings by the Audit Committee constituting such grounds: i) Mr. Fiorentino personally removed or caused to be removed from the Company’s Miami premises product inventory, and/or kept or caused others to receive at his direction such removed product inventory, without payment to the Company and for his own personal gain; ii) Mr. Fiorentino caused substantial amounts of Company inventory purchases to be effected through Company credit cards in order to accrue and/or use “reward points” for his personal benefit and which he improperly converted to his own use; iii) Mr. Fiorentino caused his mother to be identified as an employee of the Company in positions for which she had no bona fide job responsibility or function, and caused the Company to pay her a salary and employee benefits, including extended COBRA reimbursements; and iv) Mr. Fiorentino engaged in fraudulent “kickback” arrangements with certain of the Company’s vendors, to the detriment of the Company The Company stated in the Cause Notice that the foregoing activities were in violation of Company policy, the Company’s Corporate Ethics Policy, his fiduciary duties and applicable law. |
In the Cause Notice, the Company advised Mr. Fiorentino that the Audit Committee investigation had identified grounds to terminate him for Cause under his Employment Agreement, and set forth the following findings by the Audit Committee constituting such grounds: i) Mr. Fiorentino personally removed or caused to be removed from the Company’s Miami premises product inventory, and/or kept or caused others to receive at his direction such removed product inventory, without payment to the Company and for his own personal gain; ii) Mr. Fiorentino caused substantial amounts of Company inventory purchases to be effected through Company credit cards in order to accrue and/or use “reward points” for his personal benefit and which he improperly converted to his own use; iii) Mr. Fiorentino caused his mother to be identified as an employee of the Company in positions for which she had no bona fide job responsibility or function, and caused the Company to pay her a salary and employee benefits, including extended COBRA reimbursements; and iv) Mr. Fiorentino engaged in fraudulent “kickback” arrangements with certain of the Company’s vendors, to the detriment of the Company The Company stated in the Cause Notice that the foregoing activities were in violation of Company policy, the Company’s Corporate Ethics Policy, his fiduciary duties and applicable law. |
Signature Title Date /s/ RICHARD LEEDS Chairman and Chief Executive Officer March 8, 2012 Richard Leeds (Principal Executive Officer) /s/ BRUCE LEEDS Vice Chairman and Director March 8, 2012 Bruce Leeds /s/ ROBERT LEEDS Vice Chairman and Director March 8, 2012 Robert Leeds /s/ LAWRENCE P. REINHOLD Executive Vice President, Chief Financial Officer March 8, 2012 Lawrence P. Reinhold and Director (Principal Financial Officer) /s/ THOMAS AXMACHER Vice President and Controller March 8, 2012 Thomas Axmacher (Principal Accounting Officer) /s/ ROBERT D. ROSENTHAL Director March 8, 2012 Robert D. Rosenthal /s/ STACY DICK Director March 8, 2012 Stacy Dick /s/ MARIE ADLER-KRAVECAS Director March 8, 2012 Marie Adler-Kravecas Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Systemax Inc. We have audited the accompanying consolidated balance sheets of Systemax Inc. (the “Company”) as of December 31, 2011 and 2010, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2011. |
In the Cause Notice, the Company advised Mr. Fiorentino that the Audit Committee investigation had identified grounds to terminate him for Cause under his Employment Agreement, and set forth the following findings by the Audit Committee constituting such grounds: i) Mr. Fiorentino personally removed or caused to be removed from the Company’s Miami premises product inventory, and/or kept or caused others to receive at his direction such removed product inventory, without payment to the Company and for his own personal gain; ii) Mr. Fiorentino caused substantial amounts of Company inventory purchases to be effected through Company credit cards in order to accrue and/or use “reward points” for his personal benefit and which he improperly converted to his own use; iii) Mr. Fiorentino caused his mother to be identified as an employee of the Company in positions for which she had no bona fide job responsibility or function, and caused the Company to pay her a salary and employee benefits, including extended COBRA reimbursements; and iv) Mr. Fiorentino engaged in fraudulent “kickback” arrangements with certain of the Company’s vendors, to the detriment of the Company The Company stated in the Cause Notice that the foregoing activities were in violation of Company policy, the Company’s Corporate Ethics Policy, his fiduciary duties and applicable law. |
33-92052) 10.10 First Amendment, dated as of February 1, 2006, to the Naperville Illinois Facility Lease between the Company and Ambassador Drive LLC (current landlord) (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2005) 10.11 Lease Agreement dated September 17, 1998 between Tiger Direct, Inc. and Keystone Miami Property Holding Corp. (Miami facility) (incorporated by reference to the Company’s quarterly report on Form 10-Q for the quarterly period ended September 30, 1998) 10.12 First Amendment, dated as of September 5, 2003, to the Lease Agreement between Tiger Direct, Inc. and Keystone Miami Property Holding Corp. (Miami facility) (filed herewith) 10.13 Second Amendment, dated March 22, 2007, to the Lease Agreement between Tiger Direct, Inc. and Keystone Miami Property Holding Corp. (Miami facility) (filed herewith) 10.14 Third Amendment, dated as of June 26, 2009, to the Lease Agreement between Tiger Direct, Inc. and Mota Associates Limited Partnership (successor in interest to landlord Keystone Miami Property Holding Corp.) (Miami facility) (filed herewith) 10.15 Lease agreement, dated December 8, 2005, between the Company and Hamilton Business Center, LLC (Buford, Georgia facility) (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2005) 10.16 First Amendment, dated as of June 12, 2006, to the Lease Agreement between the Company and Hamilton Business Center, LLC (Buford, Georgia facility) (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2005) 10.17 Employment Agreement entered into on October 12, 2004 but effective as of June 1, 2004 between the Company and Gilbert Fiorentino* (incorporated by reference to the Company’s report on Form 8-K dated October 12, 2004) 10.18 Amendment No. |
33-92052) 10.10 First Amendment, dated as of February 1, 2006, to the Naperville Illinois Facility Lease between the Company and Ambassador Drive LLC (current landlord) (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2005) 10.11 Lease Agreement dated September 17, 1998 between Tiger Direct, Inc. and Keystone Miami Property Holding Corp. (Miami facility) (incorporated by reference to the Company’s quarterly report on Form 10-Q for the quarterly period ended September 30, 1998) 10.12 First Amendment, dated as of September 5, 2003, to the Lease Agreement between Tiger Direct, Inc. and Keystone Miami Property Holding Corp. (Miami facility) (filed herewith) 10.13 Second Amendment, dated March 22, 2007, to the Lease Agreement between Tiger Direct, Inc. and Keystone Miami Property Holding Corp. (Miami facility) (filed herewith) 10.14 Third Amendment, dated as of June 26, 2009, to the Lease Agreement between Tiger Direct, Inc. and Mota Associates Limited Partnership (successor in interest to landlord Keystone Miami Property Holding Corp.) (Miami facility) (filed herewith) 10.15 Lease agreement, dated December 8, 2005, between the Company and Hamilton Business Center, LLC (Buford, Georgia facility) (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2005) 10.16 First Amendment, dated as of June 12, 2006, to the Lease Agreement between the Company and Hamilton Business Center, LLC (Buford, Georgia facility) (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2005) 10.17 Employment Agreement entered into on October 12, 2004 but effective as of June 1, 2004 between the Company and Gilbert Fiorentino* (incorporated by reference to the Company’s report on Form 8-K dated October 12, 2004) 10.18 Amendment No. |
Signature Title Date /s/ RICHARD LEEDS Chairman and Chief Executive Officer March 18, 2010 Richard Leeds (Principal Executive Officer) /s/ BRUCE LEEDS Vice Chairman and Director March 18, 2010 Bruce Leeds /s/ ROBERT LEEDS Vice Chairman and Director March 18, 2010 Robert Leeds /s/ LAWRENCE P. REINHOLD Executive Vice President, Chief Financial Officer March 18, 2010 Lawrence P. Reinhold and Director (Principal Financial Officer) /s/ THOMAS AXMACHER Vice President and Controller March 18, 2010 Thomas Axmacher (Principal Accounting Officer) /s/ GILBERT FIORENTINO Chief Executive, Technology Products Group March 18, 2010 Gilbert Fiorentino and Director /s/ ROBERT D. ROSENTHAL Director March 18, 2010 Robert D. Rosenthal /s/ STACY DICK Director March 18, 2010 Stacy Dick /s/ MARIE ADLER-KRAVECAS Director March 18, 2010 Marie Adler-Kravecas Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Systemax Inc. We have audited the accompanying consolidated balance sheets of Systemax Inc. as of December 31, 2009 and 2008, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2009. |
1, dated as of December 19, 2005, to the Amended and Restated JP Morgan Chase Loan Agreement (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2005) 10.14 Lease agreement, dated December 8, 2005, between the Company and Hamilton Business Center, LLC (Buford, Georgia facility) (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2005) 10.15 First Amendment, dated as of June 12, 2006, to the Lease Agreement between the Company and Hamilton Business Center, LLC (Buford, Georgia facility) (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2005) 10.16 First Amendment, dated as of February 1, 2006, to the Naperville Illinois Facility Lease between the Company and Ambassador Drive LLC (current landlord) (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2005) 10.17 Employment Agreement, dated as of January 17, 2007, between the Company and Lawrence P. Reinhold*(incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2006). |
Corporate Ethics Policy for Officers, Directors and Employees (revised as of March 30, 2005) (incorporated by reference to the Company’s report on Form 8-K dated March 30, 2005) Subsidiaries of the Registrant (filed herewith) Consent of Independent Registered Public Accounting Firm (filed herewith) 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.1 Charter of the Audit Committee of the Company’s Board of Directors, as revised February 23, 2009 (filed herewith) 99.2 Charter of the Compensation Committee of the Company’s Board of Directors, as revised February 23, 2009 (filed herewith) 99.3 Charter of the Nominating/Corporate Governance Committee of the Company’s Board of Directors, as revised February 23, 2009 (filed herewith) * Management contract or compensatory plan or arrangement SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. |
Signature Title Date /s/ RICHARD LEEDS Chairman and Chief Executive Officer March 18, 2009 Richard Leeds (Principal Executive Officer) /s/ BRUCE LEEDS Vice Chairman and Director March 18, 2009 Bruce Leeds /s/ ROBERT LEEDS Vice Chairman and Director March 18, 2009 Robert Leeds /s/ LAWRENCE P. REINHOLD Executive Vice President, Chief Financial Officer March 18, 2009 Lawrence P. Reinhold and Director (Principal Financial Officer) /s/ THOMAS AXMACHER Vice President and Controller March 18, 2009 Thomas Axmacher (Principal Accounting Officer) /s/ GILBERT FIORENTINO Chief Executive, Technology Products Group March 18, 2009 Gilbert Fiorentino and Director /s/ ROBERT D. ROSENTHAL Director March 18, 2009 Robert D. Rosenthal /s/ STACY DICK Director March 18, 2009 Stacy Dick /s/ ANN R. LEVEN Director March 18, 2009 Ann R. Leven Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Systemax Inc. We have audited the accompanying consolidated balance sheets of Systemax Inc. as of December 31, 2008 and 2007, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008. |
Other factors that may affect our future results of operations and financial condition include, but are not limited to, unanticipated developments in any one or more of the following areas, as well as other factors which may be detailed from time to time in our Securities and Exchange Commission filings: · the effect on us of volatility in the price of paper and periodic increases in postage rates · significant changes in the computer products retail industry, especially relating to the distribution and sale of such products · timely availability of existing and new products · risks involved with e-commerce, including possible loss of business and customer dissatisfaction if outages or other computer-related problems should preclude customer access to us · risks associated with delivery of merchandise to customers by utilizing common delivery services such as the United States Postal Service and United Parcel Service, including possible strikes and contamination · borrowing costs or availability · pending or threatened litigation and investigations · the availability of key personnel Readers are cautioned not to place undue reliance on any forward looking statements contained in this report, which speak only as of the date of this report. |
1, dated as of December 19, 2005, to the Amended and Restated JP Morgan Chase Loan Agreement (incorporated by reference to the Company’s annual report on Form 10K for the year ended December 31, 2005) 10.19 Lease agreement, dated December 8, 2005, between the Company and Hamilton Business Center, LLC (Buford, Georgia facility) (incorporated by reference to the Company’s annual report on Form 10K for the year ended December 31, 2005) 10.20 First Amendment, dated as of June 12, 2006, to the Lease Agreement between the Company and Hamilton Business Center, LLC (Buford, Georgia facility) (incorporated by reference to the Company’s annual report on Form 10K for the year ended December 31, 2005) 10.21 First Amendment, dated as of February 1, 2006, to the Naperville Illinois Facility Lease between the Company and Ambassador Drive LLC (current landlord) (incorporated by reference to the Company’s annual report on Form 10K for the year ended December 31, 2005) 10.22 Agreement of Purchase and Sale, dated December 9, 2005, between the Company (as Seller) and Hewlett Packard Company (as Buyer) (Suwanee, Georgia facility) (incorporated by reference to the Company’s annual report on Form 10K for the year ended December 31, 2005) 10.23 Amendment No. |
Corporate Ethics Policy for Officers, Directors and Employees (revised as of March 30, 2005) (incorporated by reference to the Company’s report on Form 8-K dated March 30, 2005) Subsidiaries of the Registrant Consent of experts and counsel: Consent of Independent Registered Public Accounting Firm 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.1 Charter of the Audit Committee of the Company’s Board of Directors, as revised August 29, 2006 (incorporated by reference to the Company’s report on Form 8-K dated August 29, 2006) 99.2 Charter of the Compensation Committee of the Company’s Board of Directors, as revised August 29, 2006 (incorporated by reference to the Company’s report on Form 8-K dated August 29, 2006) 99.3 Charter of the Nominating/Corporate Governance Committee of the Company’s Board of Directors, as revised August 29, 2006 (incorporated by reference to the Company’s report on Form 8-K dated August 29, 2006) * Management contract or compensatory plan or arrangement SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. |
Signature Title Date /s/ RICHARD LEEDS Chairman and Chief Executive Officer March 13, 2008 Richard Leeds (Principal Executive Officer) /s/ BRUCE LEEDS Vice Chairman March 13, 2008 Bruce Leeds /s/ ROBERT LEEDS Vice Chairman March 13, 2008 Robert Leeds /s/ LAWRENCE P. REINHOLD Executive Vice President and Chief Financial Officer March 13, 2008 Lawrence P. Reinhold (Principal Financial Officer) /s/ THOMAS AXMACHER Vice President and Controller March 13, 2008 Thomas Axmacher (Principal Accounting Officer) /s/ GILBERT FIORENTINO Director March 13, 2008 Gilbert Fiorentino /s/ ROBERT D. ROSENTHAL Director March 13, 2008 Robert D. Rosenthal /s/ STACY DICK Director March 13, 2008 Stacy Dick /s/ ANN R. LEVEN Director March 13, 2008 Ann R. Leven Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Systemax, Inc. We have audited the accompanying consolidated balance sheets of Systemax, Inc. as of December 31, 2007 and 2006, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2007. |
Other factors that may affect our future results of operations and financial condition include, but are not limited to, unanticipated developments in any one or more of the following areas, as well as other factors which may be detailed from time to time in our Securities and Exchange Commission filings: • the effect on us of volatility in the price of paper and periodic increases in postage rates • significant changes in the computer products retail industry, especially relating to the distribution and sale of such products • timely availability of existing and new products • risks involved with e-commerce, including possible loss of business and customer dissatisfaction if outages or other computer-related problems should preclude customer access to us • risks associated with delivery of merchandise to customers by utilizing common delivery services such as the United States Postal Service and United Parcel Service, including possible strikes and contamination • borrowing costs or availability • pending or threatened litigation and investigations • the availability of key personnel Readers are cautioned not to place undue reliance on any forward looking statements contained in this report, which speak only as of the date of this report. |
Our primary facilities, which are leased except where otherwise indicated, are as follows: Facility Location Approximate Square Feet Expiration of Lease Headquarters, Sales and Distribution Center (1) Port Washington, NY 86,000 Sales and Distribution Center Buford, GA 647,000 Sales and Distribution Center Naperville, IL 330,000 PC Assembly, Sales and Distribution Center Fletcher, OH 297,000 Owned Sales and Administrative Center Miami, FL 80,000 Distribution Center Las Vegas, NV 90,000 Sales Center Markham, Ontario 22,000 Sales and Distribution Center Verrieres le Buisson, France 48,000 Sales and Distribution Center Frankfurt, Germany 92,000 Sales and Distribution Center Madrid, Spain 38,000 (2) Sales and Distribution Center Milan, Italy 102,000 Sales and Distribution Center Greenock, Scotland 78,000 Owned European Headquarters and Sales Center Wellingborough, England 75,000 Owned Sales Center Amstelveen, Netherlands 21,000 Sales and Distribution Center Lidkoping, Sweden 20,000 (1) (2) For information about this facility, leased from related parties, see Item 13 - “Certain Relationships and Related Transactions” Terminable upon two months prior written notice. |
Years Ended December 31 ----------------------- (In millions, except per common share data and number of catalog titles) ------------------------------------------------------------- 2006 2005 2004* 2003* 2002* ------------------------------------------------------------- Statement of Operations Data: ---------------------------- Net sales $2,345.2 $2,115.5 $1,928.1 $1,655.7 $1,551.9 Gross profit $342.9 $307.3 $286.5 $264.9 $266.3 Selling, general & administrative expenses $281.0 $268.3 $260.1 $251.5 $256.1 Restructuring and other charges - $4.2 $7.4 $1.7 $17.3 Income (loss) from operations $61.9 $34.8 $19.0 $9.2 $(7.0) Provision (benefit) for income taxes $24.5 $21.4 $6.4 $4.4 $(0.8) Income (loss) before cumulative effect of change in accounting principle, net of tax $45.1 $11.4 $10.2 $3.2 $(7.4) Cumulative effect of change in accounting principle, net of tax - - - - $(51.0) Net income (loss) $45.1 $11.4 $10.2 $3.2 $(58.4) Per Share Amounts: ----------------- Income (loss) before cumulative effect of change in accounting principle, net of tax, basic $1.29 $.33 $.30 $.09 $(.21) Cumulative effect of change in accounting principle, net of tax, basic - - - - $(1.50) Net income (loss), basic $1.29 $.33 $.30 $.09 $(1.71) Income (loss) before cumulative effect of change in accounting principle, net of tax, diluted $1.22 $.31 $.29 $.09 $(.21) Cumulative effect of change in accounting principle, net of tax, diluted - - - - $(1.50) Net income (loss), diluted $1.22 $.31 $.29 $.09 $(1.71) Weighted average common shares outstanding: Basic 35.0 34.6 34.4 34.2 34.1 Diluted 36.9 36.5 35.5 34.9 34.1 Selected Operating Data: ----------------------- Orders entered 7.2 6.2 5.2 4.4 4.0 Number of catalogs distributed 59 66 88 97 106 Number of catalog titles 19 22 22 30 37 Balance Sheet Data: ------------------ Working capital $229.4 $169.8 $148.0 $144.1 $132.0 Total assets $584.1 $504.5 $483.2 $445.3 $436.6 Short-term debt $12.8 $26.8 $25.0 $20.8 $21.2 Long-term debt, excluding current portion $.5 $8.0 $8.6 $18.4 $17.5 Shareholders' equity $289.5 $232.8 $222.6 $208.6 $200.6 * As previously restated - see Note 2 to the consolidated financial statements. |
1, dated as of December 19, 2005, to the Amended and Restated JP Morgan Chase Loan Agreement* (incorporated by reference to the Company's annual report on Form 10K for the year ended December 31, 2005) 10.15 Lease agreement, dated December 8, 2005, between the Company and Hamilton Business Center, LLC (Buford, Georgia facility) *(incorporated by reference to the Company’s annual report on Form 10K for the year ended December 31, 2005) 10.16 First Amendment, dated as of June 12, 2006, to the Lease Agreement between the Company and Hamilton Business Center, LLC (Buford, Georgia facility) * (incorporated by reference to the Company’s annual report on Form 10K for the year ended December 31, 2005) 10.17 First Amendment, dated as of February 1, 2006, to the Naperville Illinois Facility Lease between the Company and Ambassador Drive LLC (current landlord) *(incorporated by reference to the Company’s annual report on Form 10K for the year ended December 31, 2005) 10.18 Agreement of Purchase and Sale, dated December 9, 2005, between the Company (as Seller) and Hewlett Packard Company (as Buyer) (Suwanee, Georgia facility) * (incorporated by reference to the Company’s annual report on Form 10K for the year ended December 31, 2005) 10.19 Amendment No. |
Corporate Ethics Policy for Officers, Directors and Employees (revised as of March 30, 2005) (incorporated by reference to the Company’s report on Form 8-K dated March 30, 2005) Subsidiaries of the Registrant (filed herewith) Consent of experts and counsel: Consent of Independent Registered Public Accountants (filed herewith) 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) 32.1 Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) 32.2 Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) 99.1 Charter of the Audit Committee of the Company’s Board of Directors, as revised August 29, 2006 (incorporated by reference to the Company’s report on Form 8-K dated August 29, 2006) 99.2 Charter of the Compensation Committee of the Company’s Board of Directors, as revised August 29, 2006 (incorporated by reference to the Company’s report on Form 8-K dated August 29, 2006) 99.3 Charter of the Nominating/Corporate Governance Committee of the Company’s Board of Directors, as revised August 29, 2006 (incorporated by reference to the Company’s report on Form 8-K dated August 29, 2006) * Management contract or compensatory plan or arrangement SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. |
Signature Title Date /s/ RICHARD LEEDS Chairman and Chief Executive Officer March 30, 2007 Richard Leeds (Principal Executive Officer) /s/ BRUCE LEEDS Vice Chairman March 30, 2007 Bruce Leeds /s/ ROBERT LEEDS Vice Chairman March 30, 2007 Robert Leeds /s/ LAWRENCE P. REINHOLD Executive Vice President and Chief Financial Officer March 30, 2007 Lawrence P. Reinhold /s/ THOMAS AXMACHER Vice President and Controller March 30, 2007 Thomas Axmacher (Principal Accounting Officer) /s/ GILBERT FIORENTINO Director March 30, 2007 Gilbert Fiorentino /s/ ROBERT D. ROSENTHAL Director March 30, 2007 Robert D. Rosenthal /s/ STACY DICK Director March 30, 2007 Stacy Dick /s/ ANN R. LEVEN Director March 30, 2007 Ann R. Leven REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Shareholders and Board of Directors of Systemax Inc.: We have audited the accompanying consolidated balance sheets of Systemax Inc. as of December 31, 2006 and 2005, and the related consolidated statements of operations, cash flows, and shareholders’ equity for each of the two years in the period ended December 31, 2006. |
DELOITTE & TOUCHE LLP New York, New York April 13, 2005 (November 17, 2005 as to the effects of the restatement discussed in Note 2) SYSTEMAX INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2006 AND 2005 (IN THOUSANDS, except for share data) 2006 2005 ---- ---- ASSETS: Current assets: Cash and cash equivalents $86,964 $63,291 Accounts receivable, net of allowances of $11,370 (2006) and $12,508 (2005) 164,615 150,635 Inventories, net 233,136 192,102 Prepaid expenses and other current assets 26,919 15,877 Deferred income tax assets, net 7,727 9,227 -------- ------- Total current assets 519,361 431,132 Property, plant and equipment, net 48,586 57,259 Deferred income tax assets, net 14,041 14,100 Other assets 2,173 2,053 -------- ------- Total assets $584,161 $504,544 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Short-term borrowings, including current portions of long-term debt $12,788 $26,773 Accounts payable 201,486 171,667 Accrued expenses and other current liabilities 75,688 62,888 -------- ------- Total current liabilities 289,962 261,328 -------- ------- Long-term debt 483 8,028 Other liabilities 4,226 2,346 Commitments and contingencies Shareholders' equity: Preferred stock, par value $.01 per share, authorized 25 million shares, issued none Common stock, par value $.01 per share, authorized 150 million shares, issued 38,331,990 shares; outstanding 35,341,377 (2006) issued 38,231,990 shares; outstanding 34,761,174 (2005) shares 383 382 Additional paid-in capital 172,983 177,574 Accumulated other comprehensive income, net of tax 7,181 893 Retained earnings 144,074 98,927 Common stock in treasury at cost - 2,990,613 (2006) and 3,470,816 (2005) (35,131) shares (40,772) Unearned restricted stock compensation (4,162) -------- ------- Total shareholders' equity 289,490 232,842 -------- ------- Total liabilities and shareholders' equity $584,161 $504,544 ======== ======= See notes to consolidated financial statements. |
SYSTEMAX INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (IN THOUSANDS, except per common share amounts) 2006 2005 2004* ---- ---- ---- Net sales $2,345,165 $2,115,518 $1,928,147 Cost of sales 2,002,246 1,808,231 1,641,681 ------------------ ----------------- -------------- Gross profit 342,919 307,287 286,466 Selling, general and administrative expenses 281,015 268,327 260,111 Restructuring and other charges - 4,151 7,356 ------------------ ----------------- -------------- Income from operations 61,904 34,809 18,999 Interest and other income, net (9,475) (735) (630) Interest expense 1,684 2,670 3,073 ------------------ ----------------- -------------- Income before income taxes 69,695 32,874 16,556 Provision for income taxes 24,548 21,433 6,368 ------------------ ----------------- -------------- Net income $45,147 $11,441 $10,188 ================== ================= ============== Net income per common share, basic: $1.29 $.33 $.30 Net income per common share, diluted: $1.22 $.31 $.29 Weighted average common and common equivalent shares: Basic 34,960 34,646 34,373 Diluted 36,881 36,488 35,489 * As previously restated - see Note 2. |
SYSTEMAX INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (IN THOUSANDS) Common Accumulated Number Other Unearned of Shares Additional Comprehensive Treasury Restricted Out- Stock Paid-in Retained Income (Loss), Stock, Stock Comprehensive Standing Amount Capital Earnings Net of Tax At Cost Compensation Income (Loss) ------------ ---------- ------------ ----------- --------------- ------------- ------------ -------------- Balances, January 1, 2004* $34,288 $382 $175,343 $77,298 $1,933 $(46,330) $- $- -------- ---- -------- ------- ------ --------- -------- ------ Change in cumulative translation adjustment 1,987 1,987 Exercise of stock options 145 (631) 1,700 Tax benefit of employee stock plans 188 Grant of restricted stock units 5,740 (5,740) Amortization of unearned restricted stock compensation 574 Net income* 10,188 10,188 -------- ---- -------- ------- ------ --------- -------- ------ Total comprehensive income* 12,175 Balances, December 31, 2004* 34,433 382 180,640 87,486 3,920 (44,630) (5,166) Change in cumulative translation (3,027) (3,027) adjustment Exercise of stock options 328 (3,078) 3,858 Tax benefit of employee stock plans 12 Amortization of unearned restricted stock compensation 1,004 Net income 11,441 11,441 -------- ---- -------- ------- ------ --------- -------- ------ Total comprehensive income $8,414 Balances, December 31, 2005 34,761 382 177,574 98,927 893 (40,772) (4,162) Reversal of unamortized unearned restricted stock compensation - Note 2 (4,162) 4,162 Stock-based compensation expense 2,330 Issuance of restricted 100 1 stock Exercise of stock options 480 (4,039) 5,641 Income tax benefit on stock-based compensation 1,280 Change in cumulative translation adjustment 6,288 6,288 Net income 45,147 45,147 -------- ---- -------- ------- ------ --------- -------- ------ Total comprehensive income $51,435 -------- Balances, December 31, 2006 35,341 $383 $172,983 $144,074 $7,181 ($35,131) $- ======== ==== ======== ======= ====== ========= ======== * As previously restated - see Note 2. |
SYSTEMAX INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (IN THOUSANDS) 2006 2005 2004* ---- ---- ---- CASH FLOWS PROVIDED BY OPERATING ACTIVITIES: Net income $45,147 $11,441 $10,188 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization, net 8,185 9,994 11,314 (Gain) loss on dispositions and abandonment (7,721) 1,279 1,444 Provision (benefit) for deferred income taxes 2,254 6,228 (2,377) Provision for returns and doubtful accounts 1,503 7,620 5,079 Compensation expense related to equity compensation plans 2,330 1,004 1,374 Tax benefit of employee stock plans - 12 188 Changes in operating assets and liabilities: Accounts receivable (3,917) (31,722) (1,982) Inventories (36,216) (3,457) (40,872) Prepaid expenses and other current assets (10,060) 3,989 5,300 Income taxes payable/receivable (4,234) 527 6,335 Accounts payable, accrued expenses and other current liabilities 37,055 20,430 16,767 ------------ ------------ ------------ Net cash provided by operating activities 34,326 27,345 12,758 ------------ ------------ ------------ CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: Investments in property, plant and equipment (6,701) (5,896) (8,583) Proceeds from disposals of property, plant and equipment 18,938 103 247 ------------ ------------ ------------ Net cash provided by (used in) investing activities 12,237 (5,793) (8,336) ------------ ------------ ------------ CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: (Repayments) proceeds of borrowings from banks (16,473) 13,889 (5,254) Repayments of long-term debt and capital lease obligations (8,305) (9,978) (1,768) Proceeds from issuance of common stock 1,602 780 269 Excess tax benefit from exercises of stock options 1,030 - - ------------ ------------ ------------ Net cash provided by (used in) financing activities (22,146) 4,691 (6,753) ------------ ------------ ------------ EFFECTS OF EXCHANGE RATES ON CASH (744) 791 (114) ------------ ------------- ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 23,673 27,034 (2,445) CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 63,291 36,257 38,702 ------------ ------------ ------------ CASH AND CASH EQUIVALENTS - END OF YEAR $86,964 $63,291 $36,257 ============ ============ ============ Supplemental disclosures: Interest paid $1,861 $2,498 $3,385 Income taxes paid $26,465 $15,522 $4,676 Supplemental disclosures of non-cash investing and financing activities: Acquisitions of equipment through capital leases $776 - - Deferred stock-based compensation related to restricted unit stock - granted - $5,740 * As previously restated - see Note 2. |
Stock options The following table presents the weighted-average fair value and the weighted-average assumptions used to estimate the fair value of options granted in 2006: ---- Fair value $5.64 Expected annual dividend yield 0% Risk-free interest rate 4.76% Expected volatility 78.2% Expected life in years 6.0 The following table summarizes information for the three years ended December 31, 2006 concerning outstanding and exercisable options: 2006 2005 2004 ---- ---- ---- Weighted-Average Weighted Average Weighted Average Shares Exercise Price Shares Exercise Price Shares Exercise Price ------ -------------- ------ -------------- ------ -------------- Outstanding at beginning of year 2,657,419 $3.93 3,241,251 $3.96 2,821,302 $3.70 Granted 479,334 $8.01 75,000 $6.25 780,267 $5.38 Exercised (480,203) $3.33 (328,374) $2.37 (144,168) $2.28 Cancelled (27,474) $12.84 (330,458) $6.35 (216,150) $6.82 ------- -------- -------- Outstanding at end of year 2,629,076 $ 4.69 2,657,419 $3.93 3,241,251 $3.96 ========= ========= ========= Options exercisable at year end 1,891,426 1,891,155 1,756,517 Weighted average fair value per option granted during the year $4.24 $4.21 $1.61 We received cash from option exercises for the years ended December 31, 2006, 2005 and 2004 of $1,602,000, $779,000 and $56,000, respectively. |
The following table summarizes information about options outstanding at December 31, 2006: Weighted Weighted Average Aggregate -------- ---------------- --------- Number Average Remaining Intrinsic ------- ------- --------- --------- Outstanding Exercise Contractual Life Value (in ----------- -------- ---------------- --------- Range of Exercise Prices At 12/31/06 Price thousands) ------------------------ ----------- ----- --------- $ 1.76 to $ 5.00 1,176,935 $2.10 5.56 18,063 $ 5.01 to $ 15.00 1,400,316 $6.45 7.26 15,441 $ 15.01 to $ 18.41 51,825 $15.72 7.81 60 ------ -- $ 1.76 to $ 18.41 2,629,076 $4.69 6.51 $33,564 ========= ======= The following table summarizes information about options vested and exercisable at December 31, 2006: Weighted Weighted Average Aggregate -------- ---------------- --------- Number Average Remaining Intrinsic ------- ------- --------- --------- Outstanding Exercise Contractual Life Value (in ----------- -------- ---------------- --------- Range of Exercise Prices At 12/31/06 Price thousands) ------------------------ ----------- ----- --------- $ 1.76 to $ 5.00 1,016,935 $2.15 5.47 15,557 $ 5.01 to $ 15.00 847,666 $6.36 6.37 9,435 $ 15.01 to $ 18.41 26,825 $16.36 5.97 ----- $ 1.76 to $ 18.41 1,891,426 $4.24 5.88 $24,992 ========= ======= The following table summarizes information about options vested and exercisable or nonvested that are expected to vest (nonvested outstanding less expected forfeitures) at December 31, 2006: Weighted Weighted Average Aggregate -------- ---------------- --------- Number Average Remaining Intrinsic ------ ------- --------- --------- Exercisable Exercise Contractual Life Value (in ----------- -------- ---------------- --------- Range of Exercise Prices At 12/31/06 Price thousands) ------------------------ ----------- ----- --------- $ 1.76 to $ 5.00 1,176,935 $2.10 5.56 $18,063 $ 5.01 to $ 15.00 1,383,616 $6.45 7.26 15,238 $ 15.01 to $ 18.41 51,825 $15.72 7.81 60 ------ -- $ 1.76 to $ 18.41 2,612,376 $4.69 6.51 $33,361 ========= ======= The aggregate intrinsic value in the tables above represents the total pretax intrinsic value (the difference between the closing stock price on the last day of trading in the year December 31, 2006 and the exercise price) that would have been received by the option holders had all options been exercised on December 31, 2006. |
The following table illustrates the effect on net income per share had compensation costs of the plans been determined under a fair value alternative method as stated in SFAS 123, “Accounting for Stock-Based Compensation” (in thousands, except per share data): 2005 2004 ---- ---- Net income - as reported $11,441 $10,188 Add: Stock-based employee compensation expense included in reported net income, net of related tax effects 647 886 Deduct: Stock-based employee compensation expense determined under fair value based method, net of related tax effects 915 1,295 --- ----- Pro forma net income $11,173 $9,779 ======= ====== Basic net income per common share: Net income - as reported $.33 $ .30 ==== ===== Net income - pro forma $.32 $ .28 ==== ===== Diluted net income per common share: Net income - as reported $.31 $ .29 ==== ===== Net income - pro forma $.31 $ .28 ==== ===== The fair value of options granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: 2005 2004 ---- ---- Expected dividend yield 0% 0% Risk-free interest rate 4.5% 5.5% Expected volatility 79.0% 46.0% Expected life in years 5.20 2.36 The weighted average remaining contractual life of the stock options outstanding was 6.7 years at December 31, 2005 and 7.4 years at December 31, 2004. |
A reconciliation of the difference between the income tax expense (benefit) and the computed income tax expense based on the Federal statutory corporate rate is as follows (in thousands): Years Ended December 31 2006 2005 2004 ----------------------- ---- ---- ---- Income tax at Federal statutory rate $24,407 $11,506 $5,795 State and local income taxes (benefits) and changes in valuation allowances, net of federal tax benefit 2,577 1,311 (172) Foreign taxes at rates different from the U.S. rate 1,199 1,703 2,375 Changes in valuation allowances for foreign deferred tax assets (2,260) 10,194 -- Tax credits (718) (197) (599) Adjustment for prior year taxes (760) (3,205) (588) Other items, net 103 121 (443) --- --- ---- $24,548 $21,433 $6,368 ======= ======= ====== The deferred tax assets (liabilities) are comprised of the following (in thousands): 2006 2005 ---- ---- Current: Deductible assets $ (876) $(1,197) Accrued expenses and other liabilities 8,063 9,875 Inventory 1,596 1,201 Other (318) (125) Valuation allowances (738) (527) ---- ---- Total current 7,727 9,227 ----- ----- Non-current: Net operating loss and credit carryforwards 15,881 14,543 Foreign currency translation adjustments - (511) Accelerated depreciation 3,520 3,059 Intangible and other assets 8,453 10,031 Other 3,328 1,757 Valuation allowances (17,141) (14,779) ------- ------- Total non-current 14,041 14,100 ------- ------- TOTAL $21,768 $23,327 ======= ======= The Company has not provided for federal income taxes applicable to the undistributed earnings of its foreign subsidiaries of approximately $21.8 million as of December 31, 2006, since these earnings are indefinitely reinvested. |
At December 31, 2006, the future minimum annual lease payments for capital leases and related and third-party operating leases were as follows (in thousands): Related Third Party Party Capital Operating Operating Leases Leases Lease Total ------- ----------- ---------- ----- 2007 $573 $11,083 $612 $12,268 2008 402 10,369 10,771 2009 81 9,871 9,952 2010 11 7,662 7,673 2011 10 6,473 6,483 2012-2016 24,635 24,635 2017-2021 18,808 18,808 Thereafter 8,807 8,807 ------ ------- ---- ------- Total minimum lease payments 1,077 97,708 612 99,397 Less: sublease rental income 2,605 2,605 ------ ------- ---- ------- Lease obligation net of subleases 1,077 $95,103 $612 $96,792 ======= ==== ======= Less amount representing interest 46 ------ Present value of minimum capital lease payments (including current portion of $548) $1,031 ====== Annual rent expense aggregated approximately $13,198,000, including $612,000 to related parties, for 2006, $10,272,000, including $612,000 to related parties, for 2005 and $7,887,000, including $612,000 to related parties, for 2004. |
Financial information relating to the Company’s operations by reportable segment was as follows (in thousands): Year Ended December 31, ---------------------- 2006 2005 2004* ---- ---- ---- Net Sales: --------- Technology Products $2,148,104 $1,940,902 $1,776,444 Industrial products 196,860 174,616 151,630 Hosted Software 201 - 73 --- -- Consolidated $2,345,165 $2,115,518 $1,928,147 ========== ========== ========== Depreciation Expense: -------------------- Technology Products $6,395 $7,341 $9,081 Industrial products 1,040 1,995 1,789 Hosted Software 683 403 178 Corporate 67 255 266 -- --- --- Consolidated $8,185 $9,994 $11,314 ====== ====== ======= Income (Loss) from Operations: ----------------------------- Technology Products $59,374 $41,521 $16,873 Industrial products 13,957 7,591 10,782 Hosted Software (9,600) (6,803) (4,954) Corporate and other expenses (1,827) (7,500) (3,702) ------ ------ ------ Consolidated $61,904 $34,809 $18,999 ======= ======= ======= Total Assets Technology Products $230,512 $172,534 Industrial products 59,239 51,031 Hosted Software 3,068 1,819 Corporate and other 291,342 279,160 ------- ------- Consolidated 584,161 $504,544 ======= ======== Financial information relating to the Company’s operations by geographic area was as follows (in thousands): Year Ended December 31, ---------------------- 2006 2005 2004* ---- ---- ---- Net Sales: United States: Industrial products $196,860 $174,616 $151,630 Technology Products 1,268,780 1,147,230 1,011,118 --------- --------- --------- United States total 1,465,640 1,321,846 1,162,748 Other North America 135,619 99,035 69,704 Europe 743,906 694,637 695,695 ------- ------- ------- Consolidated 2,345,165 $2,115,518 $1,928,147 ========= ========== ========== Dec 31, 2006 Dec 31, 2005 ------------ ------------ Long-lived Assets: North America - principally United States $21,347 $31,435 Europe 27,239 25,824 ------ ------ Consolidated $48,586 $57,259 ======= ======= Net sales are attributed to countries based on location of selling subsidiary. |
Other factors that may affect our future results of operations and financial condition include, but are not limited to, unanticipated developments in any one or more of the following areas, as well as other factors which may be detailed from time to time in our Securities and Exchange Commission filings: • • • • • • • • the effect on us of volatility in the price of paper and periodic increases in postage rates significant changes in the computer products retail industry, especially relating to the distribution and sale of such products timely availability of existing and new products risks involved with e-commerce, including possible loss of business and customer dissatisfaction if outages or other computer-related problems should preclude customer access to us risks associated with delivery of merchandise to customers by utilizing common delivery services such as the United States Postal Service and United Parcel Service, including possible strikes and contamination borrowing costs or availability pending or threatened litigation and investigations the availability of key personnel Readers are cautioned not to place undue reliance on any forward looking statements contained in this report, which speak only as of the date of this report. |
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values The following table sets forth certain information regarding option exercises and year-end option values for the Named Executive Officers: Name Shares Acquired on Exercise(#) Value Realized($) Number of Securities Underlying Unexercised Options at December 31, 2005 (#) Exercisable/ Unexercisable Value of Unexercised In-the-Money Options at December 31, 2005 Exercisable/ Unexercisable Richard Leeds - - -- -- Bruce Leeds - - - - Robert Leeds - - - - Gilbert Fiorentino - - 348,334/339,999 $1,133,000/$1,128,000 Steven M. Goldschein - - 141,667/13,333 $400,000/$60,000 Equity Compensation Plans The following table sets forth information as of December 31, 2005 regarding the Company’s existing compensation plans and individual compensation arrangements pursuant to which its equity securities are authorized for issuance to employees and non-employees (such as Directors, consultants, advisors, vendors, customers, suppliers or lenders) in exchange for consideration in the form of goods or services. |
333-1852) 10.11 Separation Agreement and General Release between the Company and Robert Dooley, dated March 5, 2004* (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2004) 10.12 Employment Agreement dated as of December 12, 1997 between the Company and Steven M. Goldschein* (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 1997) 10.13 Promissory Note of Systemax Suwanee LLC, dated as of April 18, 2002 payable to the order of New York Life Insurance Company in the original principal sum of $8,400,000 (incorporated by reference to the Company’s quarterly report on Form 10-Q for the quarterly period ended March 31, 2002) 10.14 Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement, dated as of April 18, 2002 from Systemax Suwanee LLC to New York Life Insurance Company (incorporated by reference to the Company’s quarterly report on Form 10-Q for the quarterly period ended March 31, 2002) 10.15 Employment Agreement entered into on October 12, 2004 but effective as of June 1, 2004 between the Company and Gilbert Fiorentino* (incorporated by reference to the Company’s report on Form 8-K dated October 12, 2004) 10.16 Restricted Stock Unit Agreement entered into on October 12, 2004 but effective as of June 1, 2004 between the Company and Gilbert Fiorentino* (incorporated by reference to the Company’s report on Form 8-K dated October 12, 2004) 10.17 Amended and Restated Credit Agreement, dated as of October 27, 2005, between JP Morgan Chase Bank, N.A. |
1, dated as of December 19, 2005, to the Amended and Restated JP Morgan Chase Loan Agreement 10.19 Lease agreement, dated December 8, 2005, between the Company and Hamilton Business Center, LLC (Buford, Georgia facility) 10.20 First Amendment, dated as of June 12, 2006, to the Lease Agreement between the Company and Hamilton Business Center, LLC (Buford, Georgia facility) 10.21 First Amendment, dated as of February 1, 2006, to the Naperville Illinois Facility Lease between the Company and Ambassador Drive LLC (current landlord) 10.22 Agreement of Purchase and Sale, dated December 9, 2005, between the Company (as Seller) and Hewlett Packard Company (as Buyer) (Suwanee, Georgia facility) Corporate Ethics Policy for Officers, Directors and Employees (revised as of March 30, 2005) (incorporated by reference to the Company’s report on Form 8-K dated March 30, 2005) Subsidiaries of the Registrant 23.1 Consent of experts and counsel: Consent of Deloitte & Touche LLP 23.2 Consent of experts and counsel: Consent of Ernst & Young LLP 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.1 Charter of the Audit Committee of the Company’s Board of Directors, as revised February 28, 2003 (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2002) 99.2 Charter of the Compensation Committee of the Company’s Board of Directors, as approved February 28, 2003 (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2002) 99.3 Charter of the Nominating/Corporate Governance Committee of the Company’s Board of Directors, as approved February 28, 2003 (incorporated by reference to the Company’s annual report on Form 10-K for the year ended December 31, 2002) * Management contract or compensatory plan or arrangement SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. |
Signature Title Date /s/ RICHARD LEEDS Chairman and Chief Executive Officer August 29, 2006 Richard Leeds (Principal Executive Officer) /s/ BRUCE LEEDS Vice Chairman August 29, 2006 Bruce Leeds /s/ ROBERT LEEDS Vice Chairman August 29, 2006 Robert Leeds /s/ STEVEN GOLDSCHEIN Senior Vice President and Chief Financial Officer August 29, 2006 Steven Goldschein (Principal Financial Officer) /s/ MICHAEL J. SPEILLER Vice President and Controller August 29, 2006 Michael J. Speiller (Principal Accounting Officer) /s/ GILBERT FIORENTINO Director August 29, 2006 Gilbert Fiorentino /s/ ROBERT D. ROSENTHAL Director August 29, 2006 Robert D. Rosenthal /s/ STACY DICK Director August 29, 2006 Stacy Dick /s/ ANN R. LEVEN Director August 29, 2006 Ann R. Leven REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Shareholders and Board of Directors of Systemax Inc.: We have audited the accompanying consolidated balance sheet of Systemax Inc. as of December 31, 2005, and the related consolidated statements of operations, cash flows, and shareholders’ equity for the year then ended. |
The following table illustrates the effect on net income and earnings per share had compensation costs of the plans been determined under a fair value alternative method as stated in SFAS 123, “Accounting for Stock-Based Compensation” (in thousands, except per share data): Net income - as reported $11,441 $10,188 $3,207 Add: Stock-based employee compensation expense included in reported net income, net of related tax effects Deduct: Stock-based employee compensation expense determined under fair value based method, net of related tax effects 1,295 Pro forma net income $11,173 $9,779 $2,663 Basic net income per common share: Net income - as reported $.33 $.30 $.09 Net income - pro forma $.32 $.28 $.08 Diluted net income per common share: Net income - as reported $.31 $.29 $.09 Net income - pro forma $.31 $.28 $.08 The fair value of options granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: Expected dividend yield 0% 0% 0% Risk-free interest rate 4.5% 5.5% 5.9% Expected volatility 79.0% 46.0% 76.0% Expected life in years 5.20 2.36 2.41 The weighted average remaining contractual life of the stock options outstanding was 6.7 years at December 31, 2005, 7.4 years at December 31, 2004 and 7.7 years at December 31, 2003. |
A summary of the significant effects of the restatement is as follows (in thousands, except per share data): As of December 31, 2004: As Previously Reported As Restated Accounts receivable, net $153,724 $137,706 Inventories, net 176,227 192,774 Prepaid expenses and other current assets 24,888 22,096 Deferred income tax assets, net 8,812 9,594 Total current assets 399,908 398,427 Deferred income tax assets - noncurrent, net 18,268 18,645 TOTAL ASSETS 484,300 483,196 Short-term borrowings, including current portions of long-term debt (16,560) (25,020) Accounts payable (161,864) (165,761) Accrued expense and other current liabilities (60,756) (59,639) Total current liabilities (239,180) (250,420) Long-term debt (17,099) (8,639) Additional paid in capital (180,530) (180,640) Accumulated other comprehensive income, net of tax (4,093) (3,920) Retained earnings (91,307) (87,486) Total shareholders' equity (226,516) (222,632) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (484,300) (483,196) The Company also previously restated its segment disclosures for the years ended December 31, 2004 and 2003 - see Note 12. |
and affiliates, General Electric Capital Corporation, and GMAC Commercial Finance LLC (as Lenders) with the Company and certain subsidiaries of the Company (as Borrowers) 10.19 Lease agreement, dated December 8, 2005, between the Company and Hamilton Business Center, LLC (Buford, Georgia facility) 10.20 First Amendment, dated as of June 12, 2006, to the Lease Agreement between the Company and Hamilton Business Center, LLC (Buford, Georgia facility) 10.21 First Amendment, dated as of February 1, 2006, to the Naperville Illinois Facility Lease between the Company and Ambassador Drive LLC (current landlord) 10.22 Agreement of Purchase and Sale, dated December 9, 2005, between the Company (as Seller) and Hewlett Packard Company (as Buyer) (Suwanee, Georgia facility) Subsidiaries of the Registrant 23.1 Consent of experts and counsel: Consent of Deloitte & Touche LLP 23.2 Consent of experts and counsel: Consent of Ernst & Young LLP 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
Our primary facilities, which are leased except where otherwise indicated, are as follows: Approximate Expiration Facility Location Square Feet of Lease -------- -------- ----------- -------- Headquarters, Sales and Distribution Center (1) Port Washington, NY 86,000 2007 Sales and Distribution Center Suwanee, GA 361,000 Owned Sales and Distribution Center Naperville, IL 241,000 2010 PC Assembly, Sales and Distribution Center Fletcher, OH 297,000 Owned Sales and Administrative Center Miami, FL 71,000 2010 Distribution Center Las Vegas, NV 90,000 2010 Sales and Distribution Center Markham, Ontario 22,000 2013 Sales and Distribution Center Verrieres le Buisson, France 48,000 2007 Sales and Distribution Center Frankfurt, Germany 92,000 2013 Sales and Distribution Center Madrid, Spain 38,000 (2) Sales and Distribution Center Milan, Italy 102,000 2009 Sales and Distribution Center Greenock, Scotland 78,000 Owned European Headquarters and Sales Center Wellingborough, England 75,000 Owned Sales Center Amstelveen, Netherlands 21,000 2007 Sales and Distribution Center Lidkoping, Sweden 20,000 2005 (1) For information about this facility, leased from related parties, see Item 13 --"Certain Relationships and Related Transactions" (2) Terminable upon two months prior written notice. |
Years Ended December 31 ----------------------- (In millions, except per common share data and number of catalog titles) -------------------------------------------------------------- 2004 2003 2002 2001 2000 -------------------------------------------------------------- Statement of Operations Data: ---------------------------- Net sales $1,927.8 $1,657.8 $1,551.5 $1,547.0 $1,686.1 Gross profit $290.4 $265.0 $265.6 $276.9 $209.9 Selling, general & administrative expenses $260.1 $251.5 $256.1 $271.6 $270.9 Restructuring and other charges $7.4 $1.7 $17.3 $2.8 Income (loss) from operations $22.9 $9.3 $(7.8) $2.5 $(61.0) Provision (benefit) for income taxes $7.9 $4.4 $(1.0) $.4 $(24.5) Income (loss) before cumulative effect of change in accounting principle, net of tax $12.6 $3.3 $(8.0) $.7 $(40.8) Cumulative effect of change in accounting principle, net of tax $(51.0) Net income (loss) $12.6 $3.3 $(58.9) $.7 $(40.8) Net income (loss) per common share, basic: Income (loss) before cumulative effect of change in accounting principle, net of tax $.37 $.10 $(.23) $.02 $(1.19) Cumulative effect of change in accounting principle, net of tax $(1.50) Net income (loss) per common share $.37 $.10 $(1.73) $.02 $(1.19) Net income (loss) per common share, diluted: Income (loss) before cumulative effect of change in accounting principle, net of tax $.35 $.10 $(.23) $.02 $(1.19) Cumulative effect of change in accounting principle, net of tax $(1.50) Net income (loss) per common share $.35 $.10 $(1.73) $.02 $(1.19) Weighted average common shares outstanding: Basic 34.4 34.2 34.1 34.1 34.3 Diluted 35.5 34.9 34.1 34.1 34.3 Selected Operating Data: ----------------------- Orders entered 5.2 4.4 4.0 4.0 3.9 Number of catalogs distributed 88 97 106 126 157 Number of catalog titles 22 30 37 38 37 Balance Sheet Data: ------------------ Working capital $160.7 $145.5 $133.3 $103.3 $106.7 Total assets $484.3 $446.7 $437.9 $454.4 $538.0 Short-term debt $16.6 $20.8 $21.2 $2.8 $48.6 Long-term debt, excluding current portion $17.1 $18.4 $17.5 Shareholders' equity $226.5 $210.1 $201.9 $254.9 $255.7 Item 7. |
Following is a summary of our contractual obligations for future principal payments on our debt, minimum rental payments on our non-cancelable operating leases and minimum payments on our other commitments at December 31, 2004 (in thousands): After 2005 2006 2007 2008 2009 2009 ---- ---- ---- ---- ---- ---- Contractual Obligations: Maturities of long-term debt $1,811 $1,817 $1,747 $1,587 $1,482 $10,466 Payments on non-cancelable operating leases, net of subleases 8,097 7,633 7,092 5,691 5,326 6,924 Purchase commitments 1,040 727 316 75 - - -------- ------- ------ ------ ----- ------ Total contractual obligations $10,948 $10,177 $9,155 $7,353 $6,808 $17,390 ======= ====== ====== ====== ====== ======= Other Commitments: Letters of credit $9,102 N/A N/A N/A N/A N/A ====== Our operating results have generated cash flow which, together with borrowings under our debt agreements, have provided sufficient capital resources to finance working capital and cash operating requirements, fund capital expenditures, and fund the payment of interest on outstanding debt. |
Other factors that could contribute to or cause such differences include, but are not limited to, unanticipated developments in any one or more of the following areas: (i) the effect on us of volatility in the price of paper and periodic increases in postage rates, (ii) the operation of our management information systems, (iii) significant changes in the computer products retail industry, especially relating to the distribution and sale of such products, (iv) timely availability of existing and new products, (v) risks involved with e-commerce, including possible loss of business and customer dissatisfaction if outages or other computer-related problems should preclude customer access to us, (vi) risks associated with delivery of merchandise to customers by utilizing common delivery services such as the United States Postal Service and United Parcel Service, including possible strikes and contamination, (vii) borrowing costs or availability, (viii) pending or threatened litigation and investigations and (ix) the availability of key personnel, as well as other risk factors which may be detailed from time to time in our Securities and Exchange Commission filings. |
Description ------- ----------- 3.1 Composite Certificate of Incorporation of Registrant, as amended 9 3.2 By-laws of Registrant 1 4.1 Stockholders Agreement 2 10.1 Form of 1995 Long-Term Stock Incentive Plan 3* 10.2 Form of 1999 Long-Term Stock Incentive Plan as amended 13* 10.3 Lease Agreement dated September 20, 1988 between the Company and Addwin Realty Associates (Port Washington facility)1 10.4 Amendment to Lease Agreement dated September 29, 1998 between the Company and Addwin Realty Associates (Port Washington facility)6 10.5 Lease Agreement dated as of July 17, 1997 between the Company and South Bay Industrials Company (Compton facility)4 10.6 Build-to-Suit Lease Agreement dated April, 1995 among the Company, American National Bank and Trust Company of Chicago and Walsh, Higgins & Company (Naperville facility)1 10.7 Lease Agreement dated September 17, 1998 between Tiger Direct, Inc. and Keystone Miami Property Holding Corp. (Miami facility)5 10.8 Royalty Agreement dated June 30, 1986 between the Company and Richard Leeds, Bruce Leeds and Robert Leeds, and Addendum thereto1 10.9 Form of 1995 Stock Plan for Non-Employee Directors 3* 10.10 Consulting Agreement dated as of January 1, 1996 between the Company and Gilbert Rothenberg 3* 10.11 Separation Agreement and General Release between the Company and Robert Dooley, dated March 5, 2004* 10.12 Employment Agreement dated as of December 12, 1997 between the Company and Steven M. Goldschein 4* 10.13 Loan and Security Agreement, dated June 13, 2001, between The Chase Manhattan Bank (as Lender and Agent) and TransAmerica Business Capital Corporation (as Lender and Co-Agent) with the Company and certain subsidiaries of the Company (as Borrowers), as amended, the “Chase Loan Agreement”) 7 10.14 Amendment No. |
11, dated as of March 8, 2005, to the Chase Loan Agreement 19 10.25 Promissory Note of Systemax Suwanee LLC, dated as of April 18, 2002 payable to the order of New York Life Insurance Company in the original principal sum of $8,400,000 10 10.26 Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement, dated as of April 18, 2002 from Systemax Suwanee LLC to New York Life Insurance Company 10 10.27 Employment Agreement entered into on October 12, 2004 but effective as of June 1, 2004 between the Company and Gilbert Fiorentino 17* 10.28 Restricted Stock Unit Agreement entered into on October 12, 2004 but effective as of June 1, 2004 between the Company and Gilbert Fiorentino 17* 14 Corporate Ethics Policy for Officers, Directors and Employees (revised as of March 30, 2005) 20 19 Specimen stock certificate of Registrant 9 21 Subsidiaries of the Registrant 23 Consent of experts and counsel: Consent of Independent Public Accountants 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.1 Charter of the Audit Committee of the Company's Board of Directors, as revised February 28, 200312 99.2 Charter of the Compensation Committee of the Company's Board of Directors, as approved February 28, 200312 99.3 Charter of the Nominating/Corporate Governance Committee of the Company's Board of Directors, as approved February 28, 200312 99.4 Annual CEO Certification to the New York Stock Exchange, dated March 26, 200414 * Management contract or compensatory plan or arrangement Incorporated herein by reference to the Company's registration statement on Form S-1 (Registration No. |
Signature Title Date --------- ----- ---- /s/ RICHARD LEEDS Chairman and Chief Executive Officer April 15, 2005 ----------------- (Principal Executive Officer) Richard Leeds /s/ BRUCE LEEDS Vice Chairman April 15, 2005 --------------- Bruce Leeds /s/ ROBERT LEEDS Vice Chairman April 15, 2005 ---------------- Robert Leeds /s/ STEVEN M. GOLDSCHEIN Senior Vice President and Chief April 15, 2005 ------------------------ Financial Officer Steven Goldschein (Principal Financial Officer) /s/ MICHAEL J. SPEILLER Vice President and Controller April 15, 2005 ----------------------- (Principal Accounting Officer) Michael J. Speiller /s/ GILBERT FIORENTINO Director April 15, 2005 ---------------------- Gilbert Fiorentino /s/ ROBERT D. ROSENTHAL Director April 15, 2005 ----------------------- Robert D. Rosenthal /s/ STACY DICK Director April 15, 2005 -------------- Stacy Dick /s/ ANN R. LEVEN Director April 15, 2005 ---------------- Ann R. Leven REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Shareholders and Board of Directors of SYSTEMAX INC.: We have audited the accompanying consolidated balance sheets of Systemax Inc. and subsidiaries (the “Company”) as of December 31, 2004 and 2003, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004. |
/s/ DELOITTE & TOUCHE LLP New York, New York April 13, 2005 SYSTEMAX INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2004 AND 2003 (IN THOUSANDS, except for share data) 2004 2003 ---- ---- ASSETS: CURRENT ASSETS: Cash and cash equivalents $36,257 $38,702 Accounts receivable, net of allowances of $11,318 (2004) and $10,000 (2003) 153,724 152,435 Inventories 176,227 133,905 Prepaid expenses and other current assets 24,888 26,849 Deferred income tax assets, net 8,812 10,132 -------- -------- Total current assets 399,908 362,023 PROPERTY, PLANT AND EQUIPMENT, net 65,563 68,647 DEFERRED INCOME TAX ASSETS, net 18,268 15,673 OTHER ASSETS 561 376 -------- -------- TOTAL $484,300 $446,719 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT LIABILITIES: Short-term borrowings, including current portions of long-term debt $16,560 $20,814 Accounts payable 161,864 144,662 Accrued expenses and other current liabilities 60,756 51,037 -------- -------- Total current liabilities 239,180 216,513 -------- -------- LONG-TERM DEBT 17,099 18,353 OTHER LIABILITIES 1,505 1,768 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Preferred stock, par value $.01 per share, authorized 25 million shares, issued none Common stock, par value $.01 per share, authorized 150 million shares, issued 38,231,990 shares; outstanding 34,432,799 (2004) and 34,288,068 (2003) shares 382 382 Additional paid-in capital 180,530 175,343 Accumulated other comprehensive income, net of tax 4,093 1,933 Retained earnings 91,307 78,757 Common stock in treasury at cost - 3,799,191 (2004) and 3,943,922 (2003) shares (44,630) (46,330) Unearned restricted stock compensation (5,166) - -------- -------- Total shareholders' equity 226,516 210,085 -------- -------- TOTAL $484,300 $446,719 ======== ======== See notes to consolidated financial statements. |
SYSTEMAX INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 (IN THOUSANDS, except per common share amounts) 2004 2003 2002 ---- ---- ---- Net sales $1,927,835 $1,657,778 $1,551,517 Cost of sales 1,637,452 1,392,745 1,285,929 --------------- --------------- --------------- Gross profit 290,383 265,033 265,588 Selling, general and administrative expenses 260,111 251,460 256,075 Restructuring and other charges 7,356 1,726 17,294 Goodwill impairment 2,560 --------------- --------------- --------------- Income (loss) from operations 22,916 9,287 (7,781) Interest and other income, net (630) (755) (427) Interest expense 3,073 2,344 1,653 --------------- --------------- --------------- Income (loss) before income taxes 20,473 7,698 (9,007) Provision (benefit) for income taxes 7,923 4,352 (1,039) --------------- --------------- --------------- Income (loss) before cumulative effect of change in accounting principle, net of tax 12,550 3,346 (7,968) Cumulative effect of change in accounting principle, net of tax (50,971) --------------- --------------- --------------- Net income (loss) $12,550 $3,346 $(58,939) =============== =============== =============== Net income (loss) per common share, basic: Income (loss) before cumulative effect of change in accounting principle, net of tax $.37 $.10 $(.23) Cumulative effect of change in accounting principle, net of tax (1.50) --------------- --------------- --------------- Net income (loss) $.37 $.10 $(1.73) =============== =============== =============== Net income (loss) per common share, diluted: Income (loss) before cumulative effect of change in accounting principle, net of tax $.35 $.10 $(.23) Cumulative effect of change in accounting principle, net of tax (1.50) --------------- --------------- --------------- Net income (loss) $.35 $.10 $(1.73) =============== =============== =============== Weighted average common and common equivalent shares: Basic 34,373 34,164 34,104 =============== =============== =============== Diluted 35,489 34,880 34,104 =============== =============== =============== See notes to consolidated financial statements. |
SYSTEMAX INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 (IN THOUSANDS) Common Stock --------------- Number Accumulated of Other Unearned Shares Additional Comprehensive Treasury Restricted Comprehensive Outstand Paid-in Retained Income (Loss), Stock, Stock Income (Loss), ing Amount Capital Earnings Net of Tax At Cost Compensation Net of Tax -------- ------ ---------- -------- -------------- -------- ------------ -------------- Balances, January 1, 2002 34,104 $382 $176,743 $134,350 $(8,038) $(48,489) Change in cumulative translation adjustment 5,908 $5,908 Net loss (58,939) (58,939) -------- ------ ---------- -------- -------------- -------- ------------ -------------- Total comprehensive loss $(53,031) ============== Balances, December 31, 2002 34,104 382 176,743 75,411 (2,130) (48,489) Change in cumulative translation adjustment 4,063 $4,063 Exercise of stock options 184 (1,740) 2,159 Tax benefit of employee stock plans 340 Net income 3,346 3,346 -------- ------ ---------- -------- -------------- -------- ------------ -------------- Total comprehensive income $7,409 ============== Balances, December 31, 2003 34,288 382 175,343 78,757 1,933 (46,330) Change in cumulative translation adjustment 2,160 $2,160 Exercise of stock options 145 (741) 1,700 Tax benefit of employee stock plans 188 Grant of restricted stock units 5,740 $(5,740) Amortization of unearned restricted stock compensation 574 Net income 12,550 12,550 -------- ------ ---------- -------- -------------- -------- ------------ -------------- Total comprehensive income $14,170 ============== Balances, December 31, 2004 34,433 $382 $180,530 $91,307 $4,093 $(44,630) $(5,166) ======== ====== ========== ======== ============== ======== ============ See notes to consolidated financial statements. |
SYSTEMAX INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 (IN THOUSANDS) 2004 2003 2002 ---- ---- ---- CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net income (loss) $12,550 $3,346 $(58,939) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Cumulative effect of change in accounting principle, net of tax 50,971 Goodwill impairment 2,560 Loss on dispositions and abandonment 1,444 595 14,843 Depreciation and amortization, net 11,314 13,938 13,652 Provision for deferred income taxes (3,585) (2,818) (3,475) Tax benefit of employee stock plans 188 340 Provision for returns and doubtful accounts 7,159 3,906 4,581 Compensation expense related to equity compensation plans 1,374 Changes in operating assets and liabilities: Accounts receivable (2,230) 6,182 (5,922) Inventories (39,936) (30,089) (2,644) Prepaid expenses and other current assets 2,507 7,972 (8,422) Income taxes payable/receivable 8,966 (3,915) 7,755 Accounts payable, accrued expenses and other current liabilities 12,873 (8,624) (7,532) ----------- ----------- ------------ Net cash provided by (used in) operating activities 12,624 (6,607) 4,868 ----------- ----------- ------------ CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: Investments in property, plant and equipment (8,583) (8,699) (15,367) Proceeds from disposals of property, plant and equipment 247 11 635 Purchase of minority interest (2,560) ----------- ----------- ------------ Net cash used in investing activities (8,336) (11,248) (14,732) ----------- ----------- ------------ CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: Issuance of long-term borrowings and capital lease obligations 1,534 18,879 Proceeds (repayments) of borrowings from banks (5,254) (2,951) 15,253 Repayments of long-term debt and capital lease obligations (1,768) (1,257) (348) Issuance of common stock 331 419 ----------- ----------- ------------ Net cash provided by (used in) financing activities (6,691) (2,255) 33,784 ----------- ----------- ------------ EFFECTS OF EXCHANGE RATES ON CASH (42) (4,183) 2,611 ----------- ----------- ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,445) (24,293) 26,531 CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 38,702 62,995 36,464 ----------- ----------- ------------ CASH AND CASH EQUIVALENTS - END OF YEAR $36,257 $38,702 $62,995 =========== =========== ============ Supplemental disclosures: Interest paid $3,385 $2,697 $1,375 =========== =========== ============ Income taxes paid $4,676 $13,840 $5,397 =========== =========== ============ Supplemental disclosures of non-cash investing and financing activities: Deferred stock-based compensation related to restricted unit stock granted $5,740 - - =========== =========== ============= See notes to consolidated financial statements SYSTEMAX INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 1. |
The following table illustrates the effect on net income (loss) and earnings (loss) per share had compensation costs of the plans been determined under a fair value alternative method as stated in SFAS 123, “Accounting for Stock-Based Compensation” (in thousands, except per share data): 2004 2003 2002 ---- ---- ---- Net income (loss) - as reported $12,550 $3,346 $(58,939) Stock-based employee compensation expense determined under fair value based method, net of related tax effects 409 544 713 ------ ----- ------ Pro forma net income (loss) $12,141 $2,802 $(59,652) ======= ====== ======== Basic net income (loss) per common share: Net income (loss) - as reported $.37 $ .10 $(1.73) ==== ===== ====== Net income (loss) - pro forma $.35 $ .08 $(1.75) ==== ===== ====== Diluted net income (loss) per common share: Net income (loss) - as reported $.35 $ .10 $(1.73) ==== ===== ====== Net income (loss) - pro forma $.34 $ .08 $(1.75) ==== ===== ====== The fair value of options granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: 2004 2003 2002 ---- ---- ---- Expected dividend yield 0% 0% 0% Risk-free interest rate 5.5% 5.9% 5.6% Expected volatility 46.0% 76.0% 71.0% Expected life in years 2.36 2.41 2.52 The weighted average contractual life of the stock options outstanding was 7.4 years at December 31, 2004, 7.7 years at December 31, 2003 and 7.8 years at December 31, 2002. |
The following table reflects the plan activity for the years ended December 31, 2004, 2003 and 2002: For Shares Option Prices ---------- ------------- Outstanding, January 1, 2002 1,675,491 $ 1.95 to $39.06 Granted 591,375 $ 3.05 to $ 3.39 Cancelled (175,551) $ 1.95 to $18.41 -------- ----------------- Outstanding, December 31, 2002 2,091,315 $ 1.95 to $39.06 Granted 1,072,700 $ 1.76 to $ 3.36 Exercised (184,341) $ 1.76 to $ 3.05 Cancelled (158,372) $ 1.76 to $39.06 -------- ----------------- Outstanding, December 31, 2003 2,821,302 $ 1.76 to $18.41 Granted 780,267 $ 5.30 to $ 6.34 Exercised (144,168) $ 1.76 to $ 3.05 Cancelled (216,150) $ 1.76 to $18.41 -------- ----------------- Outstanding, December 31, 2004 3,241,251 $ 1.76 to $18.41 ========= The following table summarizes information for the three years ended December 31, 2004 concerning currently outstanding and exercisable options: 2004 2003 2002 ------------------------ ------------------------ ------------------------ Weighted-Average Weighted Average Weighted Average Shares Exercise Price Shares Exercise Price Shares Exercise Price ------ -------------- ------ -------------- ------ -------------- Outstanding at beginning of year. |
2,821,302 $ 3.70 2,091,315 $ 5.01 1,675,491 $ 6.05 Granted.......................... 780,267 $ 5.38 1,072,700 $ 1.80 591,375 $ 3.05 Exercised........................ (144,168) $ 2.28 (184,341) $ 2.27 Cancelled........................ (216,150) $ 6.82 (158,372) $ 9.68 (175,551) $ 8.36 --------- -------- -------- Outstanding at end of year....... 3,241,251 $ 3.96 2,821,302 $ 3.70 2,091,315 $ 5.01 ========= ========= ========= Options exercisable at year end.. 1,756,517 1,483,287 1,093,294 Weighted average fair value per option granted during the year $1.61 $0.81 $0.67 As of December 31, 2004: Range of Weighted-Average Weighted-Average Weighted-Average Exercise Number Remaining Exercise Number Exercise Price Outstanding Contractual Life Price Exercisable Price -------- ----------- ---------------- ---------------- ----------- ---------------- $ 1.76 to $ 5.00 1,934,184 7.44 $ 2.14 1,159,633 $ 2.37 $ 5.01 to $ 15.00 1,248,967 7.68 $ 6.15 538,784 $ 7.17 $ 15.01 to $ 18.41 58,100 1.46 $ 17.63 58,100 $ 17.63 --------- --------- $ 1.76 to $ 18.41 3,241,251 7.42 $ 3.96 1,756,517 $ 4.35 ========= ========= During the year ended December 31, 2004, the Company granted 1,000,000 restricted stock units under the 1999 Plan to a key employee. |
A reconciliation of the difference between the income tax expense (benefit) and the computed income tax expense based on the Federal statutory corporate rate is as follows (in thousands): Years Ended December 31 2004 2003 2002 ----------------------- ---- ---- ---- Income tax (benefit) at Federal statutory rate $7,165 $2,694 $(3,152) State and local income taxes (benefits), net of federal tax benefit (67) (100) 100 Foreign taxes in excess of U.S. rate and foreign losses with no benefit recognized, net 2,392 384 2,620 Non-deductible goodwill impairment 900 Tax credits (599) (660) (906) Adjustment for prior year taxes (588) 1,311 Other items, net (380) (177) 299 ---- ---- --- $7,923 $4,352 $(1,039) ====== ====== ======= The deferred tax assets (liabilities) are comprised of the following (in thousands): 2004 2003 ---- ---- Current: Deductible assets $(699) $(640) Accrued expenses and other liabilities 9,143 11,069 Non-deductible assets 1,125 837 Other (358) (436) Valuation allowances (399) (698) ---- ---- Total current 8,812 10,132 ----- ------ Non-current: Net operating loss and credit carryforwards 17,176 18,170 Foreign currency translation adjustments (2,816) (1,635) Accelerated depreciation 1,622 (1,539) Intangible and other assets 12,042 13,630 Other 766 Valuation allowances (10,522) (12,953) ------- ------- Total non-current 18,268 15,673 ------ ------ TOTAL $27,080 $25,805 ======= ======= The Company has not provided for federal income taxes applicable to the undistributed earnings of its foreign subsidiaries of $11.1 million as of December 31, 2004, since these earnings are indefinitely reinvested. |
At December 31, 2004, the future minimum annual lease payments for related and third-party leases were as follows (in thousands): Third Party Related Party Capitalized Operating Operating Leases Leases Lease Total ------ ------ ----- ----- 2005 $403 $8,170 $612 $9,185 2006 388 7,597 612 8,597 2007 299 6,960 612 7,871 2008 125 5,691 5,816 2009 5,326 5,326 2010-2014 6,924 6,924 ------ ----- ----- ----- Total minimum lease payments 1,215 40,668 $1,836 43,719 Less: sublease rental income 1,741 ====== 1,741 ------ ------ Lease obligation net of subleases $38,927 $41,978 ======= ======= Less amount representing interest 30 ------ Present value of minimum capitalized lease payments (including current portion of $387) $1,185 ====== Assets recorded under capital leases are included in Property, Plant and Equipment as follows (in thousands): December 31, ------------ 2004 2003 ---- ---- Furniture and fixtures, office, computer and other equipment $1,680 $1,680 Accumulated amortization 503 123 ----- ----- $1,177 $1,557 ====== ====== Annual rent expense aggregated approximately $7,887,000, including $612,000 to related parties, for 2004, $7,693,000, including $612,000 to related parties, for 2003 and $8,164,000, including $1,071,000 to related parties, for 2002. |
A summary of the effects of the restatement is as follows (in thousands, except per share data): Three months ended: March 31, 2004 June 30, 2004 September 30, 2004 -------------- ------------- ------------------ As Previously As Previously As Previously Reported As Restated Reported As Restated Reported As Restated -------- ----------- -------- ----------- -------- ----------- Cost of sales $410,916 $411,597 $363,172 $363,854 $387,047 $387,786 Gross profit $74,820 $74,139 $67,818 $67,136 $73,224 $72,485 Income from operations $5,203 $4,522 $2,744 $2,062 $5,782 $5,043 Income before income taxes $4,556 $3,875 $2,318 $1,636 $5,067 $4,328 Provision for income taxes $2,144 $1,940 $1,647 $1,441 $2,375 $2,155 Net income $2,412 $1,935 $671 $195 $2,692 $2,173 Net income per common share: Basic $.07 $.06 $.02 $.01 $.08 $.06 Diluted $.07 $.05 $.02 $.01 $.08 $.06 Quarterly financial data is as follows (in thousands, except for per share amounts): First Quarter Second Quarter Third Quarter Fourth Quarter 2004: (As restated) (As restated) (As restated) Net Sales $485,736 $430,990 $460,271 $550,838 Gross profit $74,139 $67,136 $72,485 $76,623 Net income $1,935 $195 $2,173 $8,247 Net income per common share: Basic $.06 $.01 $.06 $.24 Diluted $.05 $.01 $.06 $.23 2003: Net Sales $426,461 $388,798 $405,011 $437,508 Gross profit $71,851 $62,919 $66,064 $64,199 Net income (loss) $4,597 $(2,288) $1,174 $(137) Net income (loss) per common share: Basic $.13 $(.07) $.03 $.-- Diluted $.13 $(.07) $.03 $.-- EXHIBIT INDEX Exhibit No. |
Our primary facilities, which are leased except where otherwise indicated, are as follows: Approximate Expiration Facility Location Square Feet of Lease -------- -------- ----------- -------- Headquarters, Sales and Distribution Center (1) Port Washington, NY 86,000 2007 Sales and Distribution Center (2) Suwanee, GA 361,000 Owned Sales and Distribution Center Compton, CA 140,000 2007 Sales and Distribution Center Naperville, IL 241,000 2010 PC Assembly, Sales and Distribution Center Fletcher, OH 297,000 Owned Sales Center Miami, FL 71,000 2010 Sales and Distribution Center Markham, Ontario 45,000 2005 Sales and Distribution Center Verrieres le Buisson, France 48,000 2007 Sales and Distribution Center Frankfurt, Germany 92,000 2013 Sales and Distribution Center Madrid, Spain 38,000 (3) Sales and Distribution Center Milan, Italy 102,000 2009 Sales and Distribution Center Greenock, Scotland 78,000 Owned European Headquarters and Sales Center Wellingborough, England 75,000 Owned Sales Center Amstelveen, Netherlands 21,000 2007 Sales and Distribution Center Lidkoping, Sweden 20,000 2005 (1) For information about this facility, leased from related parties, see "Item 13 - -Certain Relationships and Related Transactions" (2) Approximately 120,000 square feet is leased to a third party through March 2004. |
Years Ended December 31 ----------------------- (In millions, except per common share data and number of catalog titles) -------------------------------------------------------------- 2003 2002 2001 2000 1999 -------------------------------------------------------------- Statement of Operations Data: ---------------------------- Net sales $1,657.8 $1,551.5 $1,547.0 $1,686.1 $1,754.5 Gross profit $268.3 $265.6 $276.9 $209.9 $314.5 Selling, general & administrative expenses $251.5 $256.1 $271.6 $270.9 $254.7 Restructuring and other charges $1.7 $17.3 $2.8 Income (loss) from operations $12.5 $(7.8) $2.5 $(61.0) $59.8 Provision (benefit) for income taxes $5.3 $(1.0) $.4 $(24.5) $24.5 Income (loss) before cumulative effect of change in accounting principle, net of tax $5.6 $(8.0) $.7 $(40.8) $36.0 Cumulative effect of change in accounting principle, net of tax $(51.0) Net income (loss) $5.6 $(58.9) $.7 $(40.8) $36.0 Net income (loss) per common share, basic and diluted: Income (loss) before cumulative effect of change in accounting principle, net of tax $.16 $(.23) $.02 $(1.19) $1.01 Cumulative effect of change in accounting principle, net of tax $(1.50) Net income (loss) per common share, basic and diluted $.16 $(1.73) $.02 $(1.19) $1.01 Weighted average common shares outstanding: Basic 34.2 34.1 34.1 34.3 35.8 Diluted 34.9 34.1 34.1 34.3 35.8 Selected Operating Data: ----------------------- Orders entered 4.4 4.0 4.0 3.9 4.4 Number of catalogs distributed 97 106 126 157 171 Number of catalog titles 30 37 38 37 37 Balance Sheet Data: ------------------ Working capital $149.1 $133.3 $103.3 $106.7 $186.9 Total assets $445.7 $437.9 $454.4 $538.0 $551.8 Short-term debt $20.8 $21.2 $2.8 $48.6 $9.0 Long-term debt, excluding current portion $18.4 $17.5 $1.7 Shareholders' equity $212.6 $201.9 $254.9 $255.7 $310.2 Item 7. |
2003 March 31 June 30 September 30 December 31 ---- -------- ------- ------------ ----------- Net sales........................................ $426 $389 $405 $438 Percentage of year's net sales .................. 25.7% 23.5% 24.4% 26.4% Gross profit..................................... $72 $64 $67 $65 Income (loss) from operations.................... $9 $(1) $4 $1 2002 March 31 June 30 September 30 December 31 ---- -------- ------- ------------ ----------- Net sales........................................ $412 $364 $372 $403 Percentage of year's net sales .................. 26.6% 23.4% 24.0% 26.0% Gross profit..................................... $74 $62 $63 $67 Income (loss) from operations.................... $1 $(14) $2 $4 Financial Condition, Liquidity and Capital Resources Liquidity is the ability to generate sufficient cash flows to meet obligations and commitments from operating activities and the ability to obtain appropriate financing and to convert into cash those assets that are no longer required to meet existing strategic and financing objectives. |
Following is a summary of our contractual obligations for future principal payments on our debt, minimum rental payments on our non-cancelable operating leases and minimum payments on our other commitments at December 31, 2003 (in thousands): After 2004 2005 2006 2007 2008 2008 ---- ---- ---- ---- ---- ---- Contractual Obligations: Maturities of long-term debt $1,746 $1,740 $1,745 $1,675 $1,516 $11,677 Payments on non-cancelable 7,277 7,128 6,511 5,614 3,984 11,063 operating leases Purchase commitments 1,883 - - - - - ----- ----- ----- ----- ----- ----- Total contractual obligations $10,906 $8,868 $8,256 $7,289 $5,500 $22,740 ======= ====== ====== ====== ====== ======= Other Commitments: Letters of credit $8,000 N/A N/A N/A N/A N/A ====== Our operating results have generated cash flow which, together with borrowings under our debt agreements, have provided sufficient capital resources to finance working capital and cash operating requirements, fund capital expenditures, and fund the payment of interest on outstanding debt. |
Other factors that could contribute to or cause such differences include, but are not limited to, unanticipated developments in any one or more of the following areas: (i) the effect on us of volatility in the price of paper and periodic increases in postage rates, (ii) the operation of our management information systems, (iii) significant changes in the computer products retail industry, especially relating to the distribution and sale of such products, (iv) timely availability of existing and new products, (v) risks involved with e-commerce, including possible loss of business and customer dissatisfaction if outages or other computer-related problems should preclude customer access to us, (vi) risks associated with delivery of merchandise to customers by utilizing common delivery services such as the United States Postal Service and United Parcel Service, including possible strikes and contamination, (vii) borrowing costs or availability, (viii) pending or threatened litigation and investigations and (ix) the availability of key personnel, as well as other risk factors which may be detailed from time to time in our Securities and Exchange Commission filings. |
Description ------- ----------- 3.1 Composite Certificate of Incorporation of Registrant, as amended9 3.2 By-laws of Registrant1 4.1 Stockholders Agreement2 10.1 Form of 1995 Long-Term Stock Incentive Plan3* 10.2 Form of 1999 Long-Term Stock Incentive Plan as amended13* 10.3 Lease Agreement dated September 20, 1988 between the Company and Addwin Realty Associates (Port Washington facility)1 10.4 Amendment to Lease Agreement dated September 29, 1998 between the Company and Addwin Realty Associates (Port Washington facility)6 10.5 Lease Agreement dated as of July 17, 1997 between the Company and South Bay Industrials Company (Compton facility)4 10.6 Build-to-Suit Lease Agreement dated April, 1995 among the Company, American National Bank and Trust Company of Chicago and Walsh, Higgins & Company (Naperville facility)1 10.7 Lease Agreement dated September 17, 1998 between Tiger Direct, Inc. and Keystone Miami Property Holding Corp. (Miami facility)5 10.8 Royalty Agreement dated June 30, 1986 between the Company and Richard Leeds, Bruce Leeds and Robert Leeds, and Addendum thereto1 10.9 Form of 1995 Stock Plan for Non-Employee Directors3* 10.10 Consulting Agreement dated as of January 1, 1996 between the Company and Gilbert Rothenberg3* 10.11 Separation Agreement and General Release between the Company and Robert Dooley, dated March 5, 2004* 10.12 Employment Agreement dated as of December 12, 1997 between the Company and Steven M. Goldschein4* 10.13 Loan and Security Agreement, dated June 13, 2001, between The Chase Manhattan Bank (as Lender and Agent) and TransAmerica Business Capital Corporation (as Lender and Co-Agent) with the Company and certain subsidiaries of the Company (as Borrowers), as amended, the "Chase Loan Agreement")7 10.14 Amendment No. |
6, dated as of September 22, 2003, to the Chase Loan Agreement 10.20 Promissory Note of Systemax Suwanee LLC, dated as of April 18, 2002 payable to the order of New York Life Insurance Company in the original principal sum of $8,400,00010 10.21 Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement, dated as of April 18, 2002 from Systemax Suwanee LLC to New York Life Insurance Company10 14 Corporate Ethics Policy for Officers, Directors and Employees 19 Specimen stock certificate of Registrant9 21 Subsidiaries of the Registrant 23 Consent of experts and counsel: Consent of Independent Public Accountants 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.1 Charter of the Audit Committee of the Company's Board of Directors, as revised February 28, 200312 99.2 Charter of the Compensation Committee of the Company's Board of Directors, as approved February 28, 200312 99.3 Charter of the Nominating/Corporate Governance Committee of the Company's Board of Directors, as approved February 28, 200312 99.4 Annual CEO Certification to the New York Stock Exchange, dated March 26, 2004 (b) Reports on Form 8-K. A report on Form 8-K was filed by the Company on November 12, 2003 regarding the Company’s financial results for the quarterly period ended September 30, 2003. |
Signature Title Date --------- ----- ---- /s/ RICHARD LEEDS Chairman and Chief Executive Officer March 26, 2004 ------------------------------ (Principal Executive Officer) Richard Leeds /s/ BRUCE LEEDS Vice Chairman and President of International March 26, 2004 ------------------------------ Operations Bruce Leeds /s/ ROBERT LEEDS Vice Chairman and President of Domestic March 26, 2004 ------------------------------ Robert Leeds /s/ STEVEN GOLDSCHEIN Senior Vice President and Chief Financial Officer March 26, 2004 ------------------------------ (Principal Financial Officer) Steven Goldschein /s/ MICHAEL J. SPEILLER Vice President and Controller March 26, 2004 ------------------------------ (Principal Accounting Officer) Michael J. Speiller /s/ ROBERT D. ROSENTHAL Director March 26, 2004 ------------------------------ Robert D. Rosenthal /s/ STACY DICK Director March 26, 2004 ------------------------------ Stacy Dick /s/ ANN R. LEVEN Director March 26, 2004 ------------------------------ Ann R. Leven EXHIBIT INDEX Exhibit No. |
The following sets forth the Company's operations in its two geographic markets (in thousands): 2002 Europe North America TOTAL ---- -------------------- ---------------------- -------------- Net sales.......................... $587,712 $963,805 $1,551,517 Income (loss) from operations...... $7,823 $(15,604) $(7,781) Identifiable assets................ $130,651 $307,253 $437,904 2001 Europe North America TOTAL ---- -------------------- ---------------------- -------------- Net sales.......................... $564,360 $982,615 $1,546,975 Income (loss) from operations...... $18,229 $(15,699) $2,530 Identifiable assets................ $121,717 $332,730 $454,447 2000 Europe North America TOTAL ---- -------------------- ---------------------- -------------- Net sales.......................... $548,097 $1,138,006 $1,686,103 Income (loss) from operations...... $17,294 $(78,302) ($61,008) Identifiable assets................ $107,800 $430,218 $538,018 Available Information The Company maintains an internet web-site, www.systemax.com, through which is available access to the Company's annual reports on Form 10K, quarterly reports on Form 10Q and current reports on Form 8K, including all amendments to those reports. |
Ft. of Lease -------- -------- ------- -------- Headquarters, Sales and Distribution Center (1)...................Port Washington, NY 86,000 2007 Sales and Distribution Center (2)...........Suwanee, GA 360,675 owned Sales and Distribution Center...............Compton, CA 140,000 2007 Sales and Distribution Center...............Naperville, IL 241,000 2010 Sales Center................................Holmdel, NJ 13,000 2004 Sales and Distribution Center...............Markham, Ontario 45,000 2005 Sales and Distribution Center...............Verrieres le Buisson, France 45,000 2008 Sales and Distribution Center...............Frankfurt, Germany 92,000 2010 Sales and Distribution Center...............Madrid, Spain 35,000 (3) Sales and Distribution Center...............Milan, Italy 90,000 2003 Sales and Distribution Center...............Greenock, Scotland 78,000 owned European Headquarters and Sales Center..............................Wellingborough, England 75,000 owned Sales and Distribution Center................. London, England 64,000 2006 Sales Center................................Miami, FL 71,000 2010 Sales Center................................Amstelveen, Netherlands 21,000 2007 PC Assembly, Sales and Distribution Center...................Fletcher, Ohio 297,000 owned Sales and Distribution Center...............Lidkoping, Sweden 20,000 2005 Sales Center................................Stockholm, Sweden 3,000 2003 (1) For information about this facility, leased from related parties, see "Certain Relationships and Related Transactions--Agreements--Leases" (2) Approximately 120,000 sq. |
Year Ended December 31 ---------------------- (In millions, except per common share data and number of catalog titles) ---------------------------------------------------- 2002 2001 2000 1999 1998 ---------------------------------------------------- Income Statement Data: --------------------- Net sales $1,551.5 $1,547.0 $1,686.1 $1,754.5 $1,435.7 Gross profit $265.6 $276.9 $209.9 $314.5 $288.6 Selling, general & administrative expenses $256.1 $271.6 $270.9 $254.7 $224.2 Restructuring and other charges $17.3 $2.8 Income (loss) from operations $(7.8) $2.5 $(61.0) $59.8 $64.3 Provision (benefit) for income taxes $(1.0) $.4 $(24.5) $24.5 $25.8 Income (loss) before cumulative effect of change in accounting principle, net of tax $(8.0) $.7 $(40.8) $36.0 $41.3 Cumulative effect of change in accounting principle, net of tax $(51.0) Net income (loss) $(58.9) $.7 $(40.8) $36.0 $41.3 Net income (loss) per common share, basic and diluted: Income (loss) before cumulative effect of change in accounting principle, net of tax $(.23) $.02 $(1.19) $1.01 $1.11 Cumulative effect of change in accounting principle, net of tax $(1.50) Net income (loss) per common share, basic and diluted $(1.73) $.02 $(1.19) $1.01 $1.11 Weighted average common shares outstanding: Basic and diluted 34.1 34.1 34.3 35.8 37.3 Selected Operating Data: ----------------------- Orders entered 4.0 4.0 3.9 4.4 3.8 Number of catalogs distributed 106 126 157 171 179 Number of catalog titles 37 38 37 37 44 Balance Sheet Data: ------------------ Working capital $133.3 $103.3 $106.7 $186.9 $194.6 Total assets $437.9 $454.4 $538.0 $551.8 $454.4 Short-term debt $21.2 $2.8 $48.6 $9.0 Long-term debt, excluding current portion $17.5 $1.7 $2.5 Shareholders' equity $201.9 $254.9 $255.7 $310.2 $286.6 Item 7. |
Other factors that could contribute to or cause such differences include, but are not limited to, unanticipated developments in any one or more of the following areas: (i) the effect on the Company of volatility in the price of paper and periodic increases in postage rates, (ii) the operation of the Company's management information systems, (iii) significant changes in the computer products retail industry, especially relating to the distribution and sale of such products, (iv) the potential for expanded imposition of state sales taxes, use taxes, or other taxes on direct marketing and e-commerce companies, (v) timely availability of existing and new products, (vi) risks involved with e-commerce, including possible loss of business and customer dissatisfaction if outages or other computer-related problems should preclude customer access to the Company, (vii) risks associated with delivery of merchandise to customers by utilizing common delivery services such as the United States Postal Service and United Parcel Service, including possible strikes and contamination, (viii) borrowing costs or availability, (ix) changes in taxes due to changes in the mix of U.S. and non-U.S. revenue, (x) pending or threatened litigation and investigations and (xi) the availability of key personnel, as well as other risk factors which may be detailed from time to time in the Company's Securities and Exchange Commission filings. |
2002 March 31 June 30 September 30 December 31 ---- -------- ------- ------------ ----------- Net sales........................................ $412 $364 $372 $403 Percentage of year's net sales ................... 26.6% 23.4% 24.0% 26.0% Gross profit..................................... $74 $62 $63 $67 Income (loss) from operations.................... $1 $(14) $2 $4 2001 March 31 June 30 September 30 December 31 ---- -------- ------- ------------ ----------- Net sales........................................ $406 $364 $371 $407 Percentage of year's net sales ................... 26.2% 23.5% 24.0% 26.3% Gross profit..................................... $66 $61 $69 $80 Income (loss) from operations.................... $1 $(3) $1 $4 Financial Condition, Liquidity and Capital Resources Liquidity is the ability to generate sufficient cash flows to meet obligations and commitments from operating activities and the ability to obtain appropriate financing and to convert into cash those assets that are no longer required to meet existing strategic and financing objectives. |
Following is a summary of the Company's contractual obligations for future principal payments on its debt, minimum rental payments on its non-cancelable operating leases and minimum payments on its other commitments at December 31, 2002 (in thousands): After 2003 2004 2005 2006 2007 2007 ---- ---- ---- ---- ---- ---- Contractual Obligations: Maturities of long-term debt $1,250 $1,263 $1,250 $1,248 $1,261 $12,497 Payments on non-cancelable 5,948 5,583 5,569 5,278 4,569 8,454 operating leases Purchase commitments 478 175 - - - - ------ ------ ------ ------ ------ ------- Total contractual obligations $7,676 $7,021 $6,819 $6,526 $5,830 $20,951 ====== ====== ====== ====== ====== ======= Other Commitments: Standby letters of credit $6,075 N/A N/A N/A N/A N/A ====== The Company's operating results have generated cash flow which, together with borrowings under its debt agreements, have provided sufficient capital resources to finance working capital and cash operating requirements, fund capital expenditures, and fund the payment of interest on outstanding debt. |
Description 3.1 Composite Certificate of Incorporation of Registrant, as amended11 3.2 By-laws of Registrant1 4.1 Stockholders Agreement2 10.1 Form of 1995 Long-Term Stock Incentive Plan3* 10.2 Form of 1999 Long-Term Stock Incentive Plan8* 10.3 Lease Agreement dated September 20, 1988 between the Company and Addwin Realty Associates (Port Washington facility)1 10.4 Amendment to Lease Agreement dated September 29, 1998 between the Company and Addwin Realty Associates (Port Washington facility)7 10.5 Lease Agreement dated as of July 17, 1997 between the Company and South Bay Industrials Company (Compton facility)4 10.6 Build-to-Suit Lease Agreement dated April, 1995 among the Company, American National Bank and Trust Company of Chicago and Walsh, Higgins & Company (Naperville facility)1 10.7 Lease Agreement dated September 17, 1998 between Tiger Direct, Inc. and Keystone Miami Property Holding Corp. (Miami facility)5 10.8 Royalty Agreement dated June 30, 1986 between the Company and Richard Leeds, Bruce Leeds and Robert Leeds, and Addendum thereto1 10.9 Form of 1995 Stock Plan for Non-Employee Directors3* 10.10 Consulting Agreement dated as of January 1, 1996 between the Company and Gilbert Rothenberg3* 10.11 Asset Purchase Agreement dated September 12, 1997 among Infotel, Inc., Mark L. Runkle, Midwest Micro Corp. and the Company6 10.12 Employment Agreement dated as of December 12, 1997 between the Company and Steven M. Goldschein4* 10.13 Loan and Security Agreement, dated June 13, 2001, between The Chase Manhattan Bank (as Lender and Agent) and TransAmerica Business Capital Corporation (as Lender and Co-Agent) with the Company and certain subsidiaries of the Company (as Borrowers)9 10.14 Amendment No. |
Signature Title Date --------- ----- ---- /s/ RICHARD LEEDS Chairman and Chief Executive Officer March 27, 2003 ----------------- (Principal Executive Officer) Richard Leeds /s/ BRUCE LEEDS Vice Chairman and President of March 27, 2003 --------------- International Operations Bruce Leeds /s/ ROBERT LEEDS Vice Chairman and President of March 27, 2003 ---------------- Domestic Operations Robert Leeds /s/ ROBERT DOOLEY Director and Senior Vice President-- March 27, 2003 ----------------- Worldwide Computer Sales and Marketing Robert Dooley /s/ STEVEN GOLDSCHEIN Senior Vice President and Chief March 27, 2003 --------------------- Financial Officer Steven Goldschein (Principal Financial Officer) /s/ MICHAEL J. SPEILLER Vice President and Controller March 27, 2003 ----------------------- (Principal Accounting Officer) Michael J. Speiller /s/ ROBERT D. ROSENTHAL Director March 27, 2003 ----------------------- Robert D. Rosenthal /s/ STACY DICK Director March 27, 2003 -------------- Stacy Dick /s/ ANN R. LEVEN Director March 27, 2003 ---------------- Ann R. Leven CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION OF CHIEF EXECUTIVE OFFICER I, Richard Leeds, Chief Executive Officer of Systemax Inc., certify that: 1. |
/s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP New York, New York February 21, 2003 SYSTEMAX INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2002 AND 2001 (IN THOUSANDS, except for share data) 2002 2001 ---- ---- ASSETS ------ CURRENT ASSETS: Cash and cash equivalents $62,995 $36,464 Accounts receivable, net of allowances of $11,275 (2002) and $11,120 (2001) 148,554 136,358 Inventories 98,401 92,170 Prepaid expenses and other current assets 31,343 18,884 Income taxes receivable 7,755 Deferred income tax benefits 9,073 9,650 ------- --------- Total current assets 350,366 301,281 PROPERTY, PLANT AND EQUIPMENT, net 71,133 82,623 GOODWILL, net 67,967 DEFERRED INCOME TAX BENEFITS 15,100 OTHER ASSETS 1,305 2,576 ------- --------- TOTAL $437,904 $454,447 ======== ========= LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT LIABILITIES: Amounts due to banks $21,211 $2,829 Accounts payable 131,510 139,472 Accrued expenses and other current liabilities 64,349 55,641 -------- --------- Total current liabilities 217,070 197,942 -------- --------- LONG-TERM DEBT 17,519 DEFERRED TAX LIABILITIES 1,557 OTHER LIABILITIES 1,398 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Preferred stock, par value $.01 per share, authorized 25 million shares, issued none Common stock, par value $.01 per share, authorized 150 million shares, issued 38,231,990 shares; outstanding 34,104,290 shares 382 382 Additional paid-in capital 176,743 176,743 Accumulated other comprehensive loss (2,130) (8,038) Retained earnings 75,411 134,350 -------- --------- 250,406 303,437 -------- --------- Less: common stock in treasury at cost - 4,127,700 shares 48,489 48,489 -------- --------- Total shareholders' equity 201,917 254,948 -------- --------- TOTAL $437,904 $454,447 ======== ======== See notes to consolidated financial statements. |
SYSTEMAX INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000 (IN THOUSANDS, EXCEPT PER COMMON SHARE AMOUNTS) 2002 2001 2000 ---- ---- ---- Net sales $1,551,517 $1,546,975 $1,686,103 Cost of sales 1,285,929 1,270,051 1,476,248 ----------- ------------ ------------- Gross profit 265,588 276,924 209,855 Selling, general and administrative expenses 256,075 271,636 270,863 Restructuring and other charges 17,294 2,758 ----------- ------------ ------------- Income (loss) from operations (7,781) 2,530 (61,008) ----------- ------------ ------------- Interest and other income, net (427) (276) (106) Interest expense 1,653 1,764 4,352 ----------- ------------ ------------- Income (loss) before income taxes (9,007) 1,042 (65,254) Provision (benefit) for income taxes (1,039) 389 (24,483) ----------- ------------ ------------- Income (loss) before cumulative effect of change in accounting (7,968) 653 (40,771) principle, net of tax Cumulative effect of change in accounting principle, net of tax (50,971) ----------- ------------ ------------- Net income (loss) $(58,939) $653 $(40,771) =========== ============ ============= Net income (loss) per common share, basic and diluted: Income (loss) before cumulative effect of change in accounting principle, net of tax $(.23) $.02 $(1.19) Cumulative effect of change in accounting principle, net of tax (1.50) ----------- ------------ ------------- Net income (loss) $(1.73) $.02 $(1.19) =========== ============ ============= See notes to consolidated financial statements. |
SYSTEMAX INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000 (IN THOUSANDS) 2002 2001 2000 ---- ---- ---- CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net income (loss) $(58,939) $653 $(40,771) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Cumulative effect of accounting change, net 50,971 Loss on dispositions and abandonment 14,843 2,003 Depreciation and amortization, net 13,652 15,143 13,608 Provision for deferred income taxes (3,475) 7,940 230 Provision for returns and doubtful accounts 4,581 3,696 12,721 Changes in certain assets and liabilities: Accounts receivable (5,922) 40,124 (3,263) Inventories (2,644) 33,946 43,124 Prepaid expenses and other current assets (8,422) 9,037 (1,245) Income taxes receivable 7,755 19,445 (25,486) Accounts payable and accrued expenses (7,532) (36,381) 9,554 --------- -------- --------- Net cash provided by operating activities 4,868 95,606 8,472 --------- -------- --------- CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: Investments in property, plant and equipment (15,367) (24,682) (40,738) Proceeds from disposals of property, plant and equipment 635 856 Deferred payments on acquisitions (249) --------- -------- --------- Net cash used in investing activities (14,732) (23,826) (40,987) --------- -------- --------- CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: Proceeds of mortgage borrowings 18,879 Proceeds (repayments) of borrowings from banks 15,253 (45,762) 39,559 Repayments of long-term debt (348) (2,245) Purchase of treasury shares (9,830) --------- -------- -------- Net cash provided by (used in) financing activities 33,784 (45,762) 27,484 --------- -------- -------- EFFECTS OF EXCHANGE RATES ON CASH 2,611 (4,050) 2,057 --------- -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 26,531 21,968 (2,974) CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 36,464 14,496 17,470 --------- -------- -------- CASH AND CASH EQUIVALENTS - END OF YEAR $62,995 $36,464 $14,496 ========= ======== ======== SUPPLEMENTAL DISCLOSURES: Interest paid $1,375 $2,026 $4,176 ========= ======== ======== Income taxes paid $5,397 $3,819 $5,027 ========= ======== ======== See notes to consolidated financial statements. |
The following table illustrates the effect on net income (loss) and earnings (loss) per share had compensation costs of the plans been determined under a fair value alternative method as stated in SFAS 123, "Accounting for Stock-Based Compensation" (in thousands, except per share data): 2002 2001 2000 ---- ---- ---- Net income (loss) - as reported $(58,939) $653 $(40,771) Stock-based employee compensation expense determined under 713 780 1,788 --------- ----- -------- fair value based method, net of related tax effects Pro forma net loss $(59,652) $(127) $(42,559) ========= ====== ======== Basic and diluted net income (loss) per common share: Net income (loss) - as reported $(1.73) $.02 $(1.19) ======= ==== ======= Net loss - pro forma $(1.75) - $(1.24) ======= ==== ======= The Company arrived at the fair value of stock grant at the date of the grant by using the Black-Scholes pricing option model with the following assumptions used for grants: risk-free interest rate of 5.6% (2002), 6.1% (2001) and 6.0% (2000); expected dividend rate of 0% for 2002, 2001 and 2000; expected life of 2.52 years (2002), 3.17 years (2001) and 3.72 years (2000); and expected volatility of 71% (2002), 72% (2001) and 62% (2000). |
Actual results of operations for the year ended December 31, 2002 and pro forma results of operations for the years ended December 31, 2001 and 2000 had the Company applied the non-amortization provisions of SFAS 142 in those periods follows (in thousands, except per share amounts): 2002 2001 2000 ---- ---- ---- Reported income (loss) before cumulative effect of change $(7,968) $653 $(40,771) in accounting principle, net of tax Add: Goodwill amortization, net of tax 1,126 1,220 -------- -------- --------- Adjusted income (loss) before cumulative effect of change (7,968) 1,779 (39,551) in accounting principle, net of tax Cumulative effect of change in accounting principle, net of tax (50,971) -------- -------- --------- Adjusted net income (loss) $(58,939) $1,779 $(39,551) ========= ======== ========= Basic and diluted net income (loss) per common share: Reported income (loss) before cumulative effect of change $(.23) $.02 $(1.19) in accounting principle, net of tax Add: Goodwill amortization, net of tax .03 .04 -------- -------- --------- Adjusted income (loss) before cumulative effect of change (.23) .05 (1.15) in accounting principle, net of tax Cumulative effect of change in accounting principle, net of tax (1.50) -------- -------- --------- Adjusted net income (loss) $(1.73) $.05 $(1.15) ========= ======== ========= 3. |
The following table reflects the plan activity for the years ended December 31, 2002, 2001 and 2000: For Shares Option Prices ---------- ------------- Outstanding, January 1, 2000 2,426,384 $ 7.31 to $39.06 Granted 4,000 $ 7.19 Cancelled (303,752) $ 7.31 to $18.41 -------- ----------------- Outstanding, December 31, 2000 2,126,632 $ 7.19 to $39.06 Granted 849,917 $ 1.95 to $ 2.45 Cancelled (1,301,058) $ 1.95 to $26.88 ----------- ----------------- Outstanding, December 31, 2001 1,675,491 $ 1.95 to $39.06 Granted 591,375 $ 3.05 to $ 3.39 Cancelled (175,551) $ 1.95 to $18.41 --------- ----------------- Outstanding, December 31, 2002 2,091,315 $ 1.95 to $39.06 ========= The following table summarizes information for the three years ended December 31, 2002 concerning currently outstanding and exercisable options: 2002 2001 2000 ------------------------ --------------------------- ------------------------ Weighted-Average Weighted Average Weighted Average Shares Exercise Price Shares Exercise Price Shares Exercise Price ------------------------ --------------------------- ------------------------ Outstanding at beginning of year 1,675,491 $ 6.05 2,126,632 $14.70 2,426,384 $ 14.34 Granted ......................... 591,375 $ 3.05 849,917 $ 1.96 4,000 $ 7.19 Cancelled ....................... (175,551) $ 8.36 (1,301,058) $17.52 (303,752) $ 11.72 ---------- ---------- -------- Outstanding at end of year ...... 2,091,315 $ 5.01 1,675,491 $ 6.05 2,126,632 $ 14.70 ========= ========= ========= Options exercisable at year end.. 1,093,294 478,413 1,133,547 Weighted average fair value per option granted during the year $0.67 $0.89 $5.60 As of December 31, 2002: Range of Weighted-Average Weighted-Average Weighted-Average Exercise Number Remaining Exercise Number Exercise Price Outstanding Contractual Life Price Exercisable Price ------------ --------------- ----------------- -------------- ----------- ---------------- $ 1.95 to $ 5.00 1,332,365 8.70 $ 2.44 483,924 $ 2.63 $ 5.01 to $ 15.00 621,450 6.79 $ 7.46 478,401 $ 7.45 $ 15.01 to $ 20.00 115,500 3.55 $ 17.58 108,969 $ 17.59 $ 20.01 to $ 30.00 18,000 3.67 $ 22.67 18,000 $ 22.67 $ 30.01 to $ 39.06 4,000 3.33 $ 39.06 4,000 $ 39.06 ------------ --------- $ 1.95 to $ 39.06 2,091,315 7.80 $ 5.01 1,093,294 $ 6.69 ============ ========= 9. |
A reconciliation of the difference between the income tax expense (benefit) and the computed income tax expense based on the Federal statutory corporate rate is as follows (in thousands): Years Ended December 31 2002 2001 2000 ----------------------- -------- -------- -------- Income tax at Federal statutory rate $(3,152) $ 365 $ (22,839) State and local income taxes, net of federal tax benefit (111) 145 (766) Tax credits (906) Foreign operating losses with no benefit provided 542 575 Foreign income taxed at different rates 949 (481) Change in valuation allowances 288 (1,118) Prior year assessments 1,318 Other items, net 33 422 (397) ------- -------- ---------- $(1,039) $ 389 $ (24,483) ======== ======== ========== The deferred tax assets (liabilities) are comprised of the following (in thousands): 2002 2001 ------- -------- Current: Deductible assets............................................... $(855) $ (1,940) Accrued expenses and other liabilities.......................... 10,700 10,897 Non-deductible assets........................................... 615 688 Other........................................................... 183 5 Valuation allowances............................................ (1,570) ------- -------- Total current................................................. 9,073 9,650 ------- -------- Non-current: Net operating loss and credit carryforwards..................... 4,359 4,210 Foreign currency translation adjustments........................ 1,395 4,909 Accelerated depreciation........................................ (853) (6,213) Intangible and other assets..................................... 15,137 (2,658) Valuation allowances............................................ (4,938) (1,805) -------- ----------- Total non-current............................................. 15,100 (1,557) -------- ----------- Total...................................................... $24,173 $ 8,093 ========= =========== The Company has not provided for federal income taxes applicable to the undistributed earnings of its foreign subsidiaries since these earnings are indefinitely reinvested. |
QUARTERLY FINANCIAL DATA (UNAUDITED) Quarterly financial data is as follows (in thousands, except for per share amounts): First Second Third Fourth 2002 Quarter Quarter Quarter Quarter ---- ------- ------- ------- ------- Net sales........................ $ 412,260 $ 363,771 $ 372,139 $ 403,347 Gross profit..................... $ 73,848 $ 61,939 $ 62,726 $ 67,075 Net income (loss)................ $ (50,386) $ (8,827) $ (727) $ 1,001 Net income (loss) per common share: Basic and diluted.............. $( 1.48) $(.26) $ (.02) $ .03 First Second Third Fourth 2001 Quarter Quarter Quarter Quarter ---- ------- ------- ------- ------- Net sales......................... $ 405,898 $ 363,506 $ 370,636 $ 406,935 Gross profit...................... $ 66,111 $ 61,162 $ 69,259 $ 80,392 Net income (loss) ................ $ 363 $ (2,583) $ 257 $ 2,616* Net income (loss) per common share: Basic and diluted.............. $ .01 $ (.08) $.01 $ .08* * Includes income of $2.0 million, net of tax, ($.06 per diluted share) resulting from the elimination of a liability recorded in a prior year no longer required. |
Other factors that could contribute to or cause such differences include, but are not limited to, unanticipated developments in any one or more of the following areas: (i) the effect on the Company of volatility in the price of paper and periodic increases in postage rates, (ii) the operation of the Company's management information systems, (iii) significant changes in the computer products retail industry, especially relating to the distribution and sale of such products, (iv) the potential for expanded imposition of state sales taxes, use taxes, or other taxes on direct marketing and e-commerce companies, (v) timely availability of existing and new products, (vi) risks involved with e-commerce, including possible loss of business and customer dissatisfaction if outages or other computer-related problems should preclude customer access to the Company, (vii) risks associated with delivery of merchandise to customers by utilizing common delivery services such as the United States Postal Service and UPS, including possible strikes and contamination, (viii) borrowing costs, (ix) changes in taxes due to changes in the mix of U.S. and non-U.S. revenue, (x) pending or threatened litigation and investigations and (xi) the availability of key personnel, as well as other risk factors which may be detailed from time to time in the Company's Securities and Exchange Commission filings. |
DESCRIPTION ------- ----------- 3.1 Composite Certificate of Incorporation of Registrant, as amended 3.2 By-laws of Registrant1 4.1 Stockholders Agreement2 10.1 Form of 1995 Long-Term Stock Incentive Plan3* 10.2 Form of 1999 Long-Term Stock Incentive Plan8* 10.3 Lease Agreement dated October 14, 1992 between the Company and 2RB Associates Co. (Port Washington facility) 1 10.4 Lease Agreement dated September 20, 1988 between the Company and Addwin Realty Associates (Port Washington facility) 1 10.5 Amendment to Lease Agreement dated September 29, 1998 between the Company and Addwin Realty Associates (Port Washington facility) 7 10.6 Lease Agreement dated as of July 17, 1997 between the Company and South Bay Industrials Company (Compton facility) 4 10.7 Build-to-Suit Lease Agreement dated April, 1995 among the Company, American National Bank and Trust Company of Chicago and Walsh, Higgins & Company (Naperville facility) 1 10.8 Lease Agreement dated September 17, 1998 between Tiger Direct, Inc. and Keystone Miami Property Holding Corp. (Miami facility) 5 10.9 Royalty Agreement dated June 30, 1986 between the Company and Richard Leeds, Bruce Leeds and Robert Leeds, and Addendum thereto 1 10.10 Form of 1995 Stock Plan for Non-Employee Directors 3* 10.11 Consulting Agreement dated as of January 1, 1996 between the Company and Gilbert Rothenberg 3* 10.12 Asset Purchase Agreement dated September 12, 1997 among Infotel, Inc., Mark L. Runkle, Midwest Micro Corp. and the Company 6 10.13 Employment Agreement dated as of December 12, 1997 between the Company and Steven M. Goldschein 4* 10.14 Loan and Security Agreement, dated June 13, 2001, between The Chase Manhattan Bank (as Lender and Agent) and TransAmerica Business Capital Corporation (as Lender and Co-Agent) with the Company and certain subsidiaries of the Company (as Borrowers) 10 10.15 Amendment No. |
Domestic Operations Robert Leeds /s/ ROBERT DOOLEY Director and Senior Vice President-- March 27, 2002 ......................... Worldwide Computer Sales and Marketing Robert Dooley /s/ STEVEN GOLDSCHEIN Senior Vice President and March 27, 2002 ......................... Chief Financial Officer Steven Goldschein (Principal Financial Officer) /s/ MICHAEL J. SPEILLER Vice President and Controller March 27, 2002 ......................... (Principal Accounting Officer) Michael J. Speiller /s/ ROBERT D. ROSENTHAL Director March 27, 2002 ......................... Robert D. Rosenthal /s/ STACY DICK Director March 27, 2002 ......................... Stacy Dick /s/ ANN R. LEVEN Director March 27, 2002 ......................... Ann R. Leven INDEPENDENT AUDITORS' REPORT The Shareholders and Board of Directors of SYSTEMAX INC.: We have audited the accompanying consolidated balance sheets of Systemax Inc. and its subsidiaries, (the "Company"), as of December 31, 2001 and 2000 and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. |
/s/ DELOITTE & TOUCHE LLP New York, New York March 5, 2002 SYSTEMAX INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2001 AND 2000 (IN THOUSANDS, EXCEPT FOR SHARE DATA) 2001 2000 ---- ---- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 36,464 $ 14,496 Accounts receivable, net 136,358 183,493 Inventories 92,170 127,271 Prepaid expenses and other current assets 18,884 29,509 Income taxes receivable 7,755 25,486 Deferred income tax benefit 9,650 8,781 --------- ---------- Total current assets 301,281 389,036 PROPERTY, PLANT AND EQUIPMENT, net 82,623 74,749 GOODWILL, net 67,967 70,672 DEFERRED INCOME TAX BENEFIT 3,224 OTHER ASSETS 2,576 337 --------- ---------- TOTAL $ 454,447 $ 538,018 ========= ========== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Notes payable to banks $ 2,829 $ 48,559 Accounts payable 139,472 170,548 Accrued expenses and other current liabilities 55,641 63,240 --------- ---------- Total current liabilities 197,942 282,347 --------- ---------- Deferred tax liabilities 1,557 --------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Preferred stock, par value $.01 per share, authorized 25 million shares, issued none Common stock, par value $.01 per share, authorized 150 million shares, issued 38,231,990; outstanding 34,104,290 382 382 Additional paid-in capital 176,743 176,743 Accumulated other comprehensive loss (8,038) (6,662) Retained earnings 134,350 133,697 --------- ---------- 303,437 304,160 --------- ---------- Less: common stock in treasury at cost - 4,127,700 shares 48,489 48,489 --------- ---------- Total shareholders' equity 254,948 255,671 --------- ---------- TOTAL $ 454,447 $ 538,018 ========= ========== See notes to consolidated financial statements. |
SYSTEMAX INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (IN THOUSANDS, EXCEPT PER COMMON SHARE AMOUNTS) 2001 2000 1999 ---- ---- ---- NET SALES $ 1,546,975 $ 1,686,103 $ 1,754,472 COST OF SALES 1,270,051 1,476,248 1,439,947 ----------- ----------- ----------- GROSS PROFIT 276,924 209,855 314,525 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 274,394 270,863 254,690 ----------- ----------- ----------- INCOME (LOSS) FROM OPERATIONS 2,530 (61,008) 59,835 INTEREST AND OTHER INCOME (276) (106) (1,153) INTEREST EXPENSE 1,764 4,352 465 ----------- ----------- ----------- INCOME (LOSS) BEFORE INCOME TAXES 1,042 (65,254) 60,523 PROVISION (BENEFIT) FOR INCOME TAXES 389 (24,483) 24,511 ----------- ----------- ----------- NET INCOME (LOSS) $ 653 $ (40,771) $ 36,012 =========== =========== =========== NET INCOME (LOSS) PER COMMON SHARE: BASIC $ .02 $ (1.19) $ 1.01 =========== =========== =========== DILUTED $ .02 $ (1.19) $ 1.01 =========== =========== =========== See notes to consolidated financial statements. |
A reconciliation of the difference between the income tax expense (benefit) and the computed income tax expense based on the Federal statutory corporate rate is as follows (in thousands): Year Ended December 31 2001 2000 1999 ---------------------- -------- -------- -------- Income tax at Federal statutory rate $ 365 $(22,839) $ 21,183 State and local income taxes, net of federal tax benefit 145 (766) 2,461 Foreign operating losses with no benefit provided 575 932 Foreign income taxed at different rates (481) Change in valuation allowance (1,118) Nondeductible expenses 142 Other items, net 280 (397) (65) -------- -------- -------- $ 389 $(24,483) $ 24,511 ======== ======== ======== The deferred tax assets (liabilities) are comprised of the following (in thousands): 2001 2000 -------- -------- Current: Deductible assets.............................. $ (1,940) $ (5,030) Non-deductible accruals and reserves........... 10,897 12,416 Non-deductible assets.......................... 688 1,430 Other.......................................... 5 (35) -------- -------- Current...................................... 9,650 8,781 -------- -------- Non-current: Net operating loss carryforwards............... 4,210 4,280 Currency translation adjustments............... 4,909 3,569 Accelerated depreciation....................... (6,213) (1,035) Basis differences from acquisitions............ (2,658) (667) Valuation allowances........................... (1,805) (2,923) -------- -------- Non-current.................................. (1,557) 3,224 -------- -------- Total.................................. $ 8,093 $ 12,005 ======== ======== The foreign net operating loss carryforwards generally expire from 2002 through 2010 except for carryforwards in the Netherlands and Germany, which have no expiration. |
QUARTERLY FINANCIAL DATA (UNAUDITED) Quarterly financial data is as follows (in thousands, except for per share amounts): FIRST SECOND THIRD FOURTH 2001 QUARTER QUARTER QUARTER QUARTER ---- ------- ------- ------- ------- Net sales................... $ 405,898 $ 363,506 $ 370,636 $ 406,935 Gross profit................ $ 66,111 $ 61,162 $ 69,259 $ 80,392 Net income (loss)........... $ 363 $ (2,583) $ 257 $ 2,616* Net income (loss) per common share: Basic and diluted...... $ .01 $ (.08) $ .01 $ .08* First Second Third Fourth 2000 Quarter Quarter Quarter Quarter ---- ------- ------- ------- ------- Net sales................... $ 448,870 $ 405,972 $ 409,795 $ 421,466 Gross profit................ $ 68,169 $ 44,348 $ 47,777 $ 49,561 Net loss.................... $ (2,552) $ (14,531) $ (14,236) $ (9,452) Net loss per common share: Basic and diluted...... $ (.07) $ (.43) $ ($.42) $ ($ .28) * Includes income of $2.0 million, net of tax, ($.06 per diluted share) resulting from the elimination of a liability recorded in a prior year no longer required. |
Ft. of Lease -------- -------- ------- -------- Headquarters, Sales and Distribution Center, Catalog Operations (1)............................Port Washington, NY 178,000 2007 Sales and Distribution Center...............Suwanee, GA 360,675 owned Sales and Distribution Center...............Compton, CA 140,000 2007 Sales and Distribution Center...............Naperville, IL 241,000 2010 Sales Center................................Holmdel, NJ 51,000 2002 Sales and Distribution Center...............Markham, Ontario 45,000 2005 Sales and Distribution Center...............Verrieres le Buisson, France 10,000 2008 Sales and Distribution Center...............Frankfurt, Germany 92,000 2010 Sales and Distribution Center...............Madrid, Spain 35,000 (2) Sales and Distribution Center...............Milan, Italy 90,000 2003 Sales and Distribution Center...............Greenock, Scotland 78,000 owned Sales and Distribution Center...............Wellingborough, England 33,000 2013 Sales, Distribution and PC Assembly Center .......................... London, England 68,000 2007 Sales Center................................Miami, FL 71,000 2010 Sales Center................................Amstelveen, Netherlands 5,000 2003 PC Assembly, Sales and Distribution Center..Fletcher, Ohio 297,000 owned European Headquarters.......................Uxbridge, England 7,400 2005 Sales Office................................Uxbridge, England 3,600 2006 Sales and Distribution Center...............Lidkoping, Sweden 20,000 2006 Sales Center................................Stockholm, Sweden 3,000 2002 (1) For information about facilities leased from related parties, see "Certain Relationships and Related Transactions--Agreements--Leases and Related Guarantees." |
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