Systemax Reports Fourth Quarter 2017 Financial Results

PORT WASHINGTON, N.Y., Feb. 27, 2018 /PRNewswire/ -- Systemax Inc. (NYSE: SYX) today announced financial results for the fourth quarter ended December 31, 2017.

GAAP Fourth Quarter 2017 Financial Summary:

• Consolidated sales increased 11.8% to $330.6 million in U.S. dollars. On a constant currency basis, average daily sales increased 8.7%.
• Industrial Products Group ("IPG") sales grew 10.6% to $194.5 million in U.S. dollars. On a constant currency basis, average daily sales increased 10.4%.
• European Technology Products Group ("ETG"), comprising France and the divested German business, sales increased 14.4% to $136.1 million in U.S. dollars. On a constant currency basis, average daily sales increased 6.0%.
• Consolidated operating income grew 19.3% to $19.2 million.
• Net income per diluted share from continuing operations grew to $0.85. The net tax benefit from continuing operations for the quarter includes tax expense on pretax income, provisional repatriation tax under U.S. tax reform and tax expense related to the remeasurement of U.S. deferred tax assets resulting from the rate change under U.S. tax reform. These expenses were offset primarily by the utilization of net operating losses and the reversal in the U.S. of valuation allowances against the Company's federal and certain state deferred tax assets.

Non-GAAP Fourth Quarter 2017 Continuing Operations Financial Summary:

• Consolidated sales (comprising IPG and France) increased 12.1% to $330.6 million in U.S. dollars. On a constant currency basis, average daily sales increased 8.7%.
• IPG sales increased 10.6% to $194.5 million in U.S. dollars. On a constant currency basis, average daily sales increased 10.4%.
• France sales increased 14.4% to $136.1 million in U.S. dollars. On a constant currency basis, average daily sales increased 6.0%.
• Consolidated operating income grew 46.0% to $20.0 million.
• Net income per diluted share from continuing operations grew to $0.34.

GAAP Full Year 2017 Financial Summary:

• Consolidated sales increased 8.1% to $1,265.4 million in U.S. dollars. On a constant currency basis, average daily sales increased 8.2%.
• IPG sales increased 10.6% to $791.8 million in U.S. dollars. On a constant currency basis, average daily sales increased 11.0%.
• ETG sales increased 5.0% to $473.6 million in U.S. dollars. On a constant currency basis, average daily sales increased 3.8%.
• Consolidated operating income grew 157.4% to $71.3 million.
• Net income per diluted share from continuing operations grew to $2.02. The Company recorded tax benefits from continuing operations in the fourth quarter and full year of 2017 of $13.7 million and $5.3 million, respectively. The net tax benefit from continuing operations for the full year includes tax expense on pretax income of approximately $30.5 million, provisional repatriation tax under U.S. tax reform of $5.2 million and tax expense related to the remeasurement of U.S. deferred tax assets resulting from the rate change under U.S. tax reform of $10.3 million. These expenses were offset primarily by the utilization of net operating losses and the reversal in the U.S. of valuation allowances against the Company's federal and certain state deferred tax assets. These offsets totaled approximately $51.3 million.

Non-GAAP Full Year 2017 Continuing Operations Financial Summary:

• Consolidated sales (comprising IPG and France) increased 11.7% to $1,265.4 million in U.S. dollars. On a constant currency basis, average daily sales increased 11.4%.
• IPG sales increased 10.6% to $791.8 million in U.S. dollars. On a constant currency basis, average daily sales increased 11.0%.
• France sales increased 13.5% to $473.6 million in U.S. dollars. On a constant currency basis, average daily sales increased 12.2%.
• Consolidated operating income grew 109.2% to $75.1 million.
• Net income per diluted share from continuing operations grew to $1.30.

Larry Reinhold, Chief Executive Officer, said, "2017 was an exceptional year for Systemax as we streamlined our operations, executed on our growth and optimization initiatives, and delivered strong financial performance.  Our continuing operations generated more than $1.2 billion in combined revenue, representing organic growth of 12%, and more than doubled operating income to $75 million, on a Non-GAAP basis.  Industrial had a record year with almost $800 million in revenue, an increase of 11% on a constant currency average daily sales basis.  Industrial also made significant margin improvement as we delivered operating leverage across the business, which resulted in a 101% increase in operating income for the full year. Within the quarter, IPG also grew its revenue nearly 11% while improving operating margin 200 basis points compared to last year's fourth quarter.  In France, 2017 revenue increased 12% on a constant currency average daily sales basis, marking the fourth consecutive year of double digit organic top line improvement, and we continued to show strong profitability.  In the fourth quarter, France grew its revenue 6% on a constant currency average daily sales basis, and delivered its highest gross and operating margin performance of the year at 17% and nearly 6% respectively."

"As we enter the new year our Industrial and France businesses remain well positioned for top and bottom line growth.  Our efforts to broaden customer relationships, enhance the value we provide, and improve productivity are ongoing.  With a solid balance sheet and growing cash flow generation we continue to return capital to shareholders through dividend distributions, while maintaining a healthy cash position to explore strategic acquisitions that can enhance our organic growth."

At December 31, 2017, the Company had total working capital of $178.3 million, cash and cash equivalents of $184.5 million and excess availability under its credit facility of approximately $70.0 million.  The cash balance at year end does not reflect the payment of the $1.50 Special Dividend, declared in December 2017, but paid in January 2018.  The Company has significant flexibility to return capital to shareholders, execute on its business plans, invest in strategic M&A, and continue investing in growth opportunities. The Company recorded tax benefits from continuing operations in the  fourth quarter and full year of 2017 of $13.7 million and $5.3 million, respectively. The net tax benefit from continuing operations for the full year includes tax expense on pretax income of approximately $30.5 million, provisional repatriation tax under U.S. tax reform of $5.2 million and tax expense related to the remeasurement of U.S. deferred tax assets resulting from the rate change under U.S. tax reform of $10.3 million. These expenses were offset primarily by the utilization of net operating losses and the reversal in the U.S. of valuation allowances against the Company's federal and certain state deferred tax assets. These offsets totaled approximately $51.3 million.

The Company's board of directors has declared a cash dividend of $0.11 per share to common stock shareholders of record at the close of business on March 9, 2018, payable on March 16, 2018.  The Company anticipates continuing a regular quarterly dividend in the future.

Earnings Conference Call Details 
Systemax Inc. will provide pre-recorded remarks on its fourth quarter 2017 results today, February 27, 2018 at 5:00 p.m. Eastern Time. A live webcast of the remarks will be available on the Company's website at www.systemax.com in the investor relations section. The webcast will also be archived on www.systemax.com for approximately 90 days.

About Systemax Inc. 
Systemax Inc. (www.systemax.com), through its operating subsidiaries, is a provider of industrial products in North America and technology products in France, going to market through a system of branded e-Commerce websites and relationship marketers.  The primary brands are Global Industrial and Inmac Wstore.

Forward-Looking Statements 
This press release contains forward looking statements within the meaning of that term in the Private Securities Litigation Reform Act of 1995 (Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).  Additional written or oral forward looking statements may be made by the Company from time to time in filings with the Securities and Exchange Commission or otherwise.  Statements contained in this press release that are not historical facts are forward looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and are based on management's estimates, assumptions and projections and are not guarantees of future performance.  The Company assumes no obligation to update these statements. Forward looking statements may include, but are not limited to, projections or estimates of revenue, income or loss, exit costs, cash flow needs and capital expenditures, statements regarding future operations, expansion or restructuring plans, including our exit from and winding down of our NATG and European operations, financing needs, compliance with financial covenants in loan agreements, plans relating to products or services of the Company, assessments of materiality, predictions of future events and the effects of pending and possible litigation, as well as assumptions relating to the foregoing. In addition, when used in this release, the words "anticipates," "believes," "estimates," "expects," "intends," and "plans" and variations thereof and similar expressions are intended to identify forward looking statements.

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: 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 our products and services; the Company's management information systems and other technology platforms supporting our sales, procurement and other operations are critical to our operations and disruptions or delays have occurred and could occur in the future, and if not timely addressed would have a material adverse effect on us; we could suffer a data security breach due to our e-commerce and data storage systems being hacked by those seeking to steal Company information and customer personal information, or due to employee error, resulting in disruption to our operations, loss of information and privacy, legal claims and adverse material impact on our business; general economic conditions, will continue to impact our business; extreme weather conditions could disrupt our product supply chain and our ability to ship or receive products, which would adversely impact sales; our international operations are subject to risks such as fluctuations in currency rates, foreign regulatory requirements, and political uncertainty; and managing various inventory risks, such as being unable to profitably resell excess or obsolete inventory and/or the loss of product return rights and price protection from our vendors.

Investor/Media Contacts: 
Mike Smargiassi 
The Plunkett Group 
212-739-6740 
mike@theplunkettgroup.com

* Systemax manages its business and reports using a 52-53 week fiscal year that ends at midnight on the Saturday closest to December 31.  For clarity of presentation, fiscal years and quarters are described as if they ended on the last day of the respective calendar month.  The actual fiscal quarters ended on December 30, 2017 and December 31, 2016. The fourth quarters of 2017 and 2016 included 13 weeks and the twelve months of 2017 and 2016 included 52 weeks.

** On December 1, 2015 the Company closed on the sale of certain assets of its North American Technology Group ("NATG").  Pursuant to this transaction, the Company continues to wind down the remaining operations of NATG during 2017.   In the GAAP presentation, the retail operations which were discontinued by the Company prior to the transaction, along with allocations of common distribution and back office costs, are presented as part of the Company's continuing operations for all periods; other NATG operations that were sold (as well as the remaining retail operations that existed at the time of the transaction (and were subsequently discontinued by the Company) are presented as discontinued operations for all periods.  The non-GAAP results reflect the entire NATG segment as a discontinued operation for all periods presented as well as adjustments for non-recurring items, intangible amortization, equity compensation and a normalized effective tax rate in recurring operations.  On September 2, 2016, the Company closed on the sale of certain assets of its Misco Germany operation which has been reported as part of its European Technology Products Group. Prior and current year results of Germany have been eliminated in the non-GAAP presentation.  On December 31, 2016, the Company closed on the sale of its Afligo rebate processing business.  Prior and current year results of the rebate processing business have been eliminated in the non-GAAP presentation.    On March 24, 2017, the Company closed on the sale of its European Technology Group businesses, other than its operations in France.  The Company recorded tax benefits from continuing operations in the  fourth quarter and full year of 2017 of $13.7 million and $5.3 million, respectively. The net tax benefit from continuing operations for the full year includes tax expense on pretax income of approximately $30.5 million, provisional repatriation tax under U.S. tax reform of $5.2 million and tax expense related to the remeasurement of U.S. deferred tax assets resulting from the rate change under U.S. tax reform of $10.3 million. These expenses were offset primarily by the utilization of net operating losses and the reversal in the U.S. of valuation allowances against the Company's federal and certain state deferred tax assets. These offsets totaled approximately $51.3 million. Prior and current year results of these divested businesses, along with the associated loss on the sale, have been classified as discontinued operations in both the GAAP and non-GAAP presentation. The Company believes that the non-GAAP presentation conveys additional more meaningful information to investors. See accompanying GAAP reconciliation tables.

*** During Q2 2017, the Company decided to amend its presentation of certain costs associated with operating our Distribution Centers as well as costs associated with our Purchasing and Product Development Teams.  Historically these costs have been included as a component of costs of goods sold.   We are now including those costs as a component of Selling, Distribution, and Administrative Expenses.   This change is reflected in current and prior year periods and is not a restatement of any amounts, rather, an amendment to the presentation of these costs to better align with the Company's MRO-oriented peer group in North America.

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SOURCE Systemax Inc.