PFSweb Inc. Reports Operating Results (10-Q)

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May 17, 2010
PFSweb Inc. (PFSW, Financial) filed Quarterly Report for the period ended 2010-03-31.

Pfsweb Inc. has a market cap of $45.3 million; its shares were traded at around $4.5599 with and P/S ratio of 0.13. PFSW is in the portfolios of Jim Simons of Renaissance Technologies LLC, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Service Fee Revenue. Service fee revenue of $16.0 million decreased $1.1 million, or 6.7%, in the three months ended March 31, 2010 as compared to the same quarter of the prior year. The decrease in service fee revenue for the three months ended March 31, 2010 is primarily due to the non-renewal of certain service contract relationships, including the non-renewal of a U.S. government agency client relationship, which ended in early 2009, partially offset by increased service fees generated from new service contract relationships. The change in service fee revenue is shown below ($ millions):

Supplies Distributors cost of product revenue increased by $0.3 million, or 0.8%, to $42.3 million in the three months ended March 31, 2010 primarily as a result of increased product sales. The resulting gross profit margin was $3.2 million, or 7.7% of product revenue, for the three months ended March 31, 2010 and $3.4 million, or 7.5% of product revenue, for the comparable 2009 period. The three month periods ending March 31, 2010 and 2009 include the impact of certain incremental gross margin earned on product sales resulting from certain product price increases and the impact of certain incremental inventory cost reductions.

Operating Expenses. Operating expenses for the three months ended March 31, 2010 decreased $0.4 million to $10.3 million from $10.7 million in the same 2009 period. As a percentage of total net revenue, operating expenses were 11.7% in the three months ended March 31, 2010 and 12.0% in the prior year period.

Net cash provided by operating activities was $1.2 million for the three months ended March 31, 2010, and primarily resulted from a decrease in inventories of $2.8 million, a $1.9 million decrease in accounts receivable and cash income before working capital changes of $0.7 million partially offset by a $4.5 million decrease in accounts payable, accrued expenses and other liabilities.

Net cash provided by operating activities was $6.4 million for the three months ended March 31, 2009, and primarily resulted from cash income before working capital changes of $2.0 million and an $11.2 million decrease in accounts receivable, partially offset by a $6.9 million decrease in accounts payable, accrued expenses and other liabilities.

total liabilities to tangible net worth, as defined, and are secured by all of the assets of Supplies Distributors, as well as a collateralized guaranty of PFSweb. Additionally, we are required to maintain a subordinated loan to Supplies Distributors of no less than $4.3 million, not maintain restricted cash of more than $5.0 million, are restricted with regard to transactions with related parties, indebtedness and changes to capital stock ownership structure and a minimum shareholders equity of at least $18.0 million. Furthermore, we are obligated to repay any over-advance made to Supplies Distributors or its subsidiaries under these facilities if they are unable to do so. We have also provided a guarantee of the obligations of Supplies Distributors and its subsidiaries to IBM and IPS, excluding the trade payables that are financed by IBM credit.

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