Systemax Inc. Reports Operating Results (10-Q)

Systemax Inc. (NYSE:SYX) filed Quarterly Report for the period ended 2012-09-30.

Systemax, Inc. has a market cap of $405.5 million; its shares were traded at around $10.59 with a P/E ratio of 12.2 and P/S ratio of 0.1. Systemax, Inc. had an annual average earning growth of 17.9% over the past 10 years. GuruFocus rated Systemax, Inc. the business predictability rank of 2.5-star.

Highlight of Business Operations:

The Technology Products net sales decrease is attributable to continued weakness in the consumer channels: internet, retail and television shopping channel sales in North America. These declines are the result of industry trends that include soft consumer demand for personal computers and a number of consumer electronics products, as well as increased competition. The declines were partially offset by solid performance in the business to business channels. On a constant currency basis, Technology Products net sales would have decreased 6.5% and 4.2%, respectively, for the three and nine month periods ended September 30, 2012.

The increase in consolidated business to business channel sales was driven by the Industrial Products segment s additional products offered and new product categories on the Company s website and the addition of sales personnel. On a constant currency basis, worldwide business to business channel sales grew 8.8% for the third quarter and 9.6% for the nine month period ended September 30, 2012.

The decline in consolidated consumer-channel sales resulted from softness in television shopping, internet and retail stores, in North America. On a constant currency basis, worldwide consumer channel sales decreased 19.2% for the third quarter of 2012 and 14.5% for the nine month period ended September 30, 2012.

The decline in Technology Products operating margin was primarily due to the soft demand for personal computers and consumer electronics, a decline in vendor co-operative funding within the North America technology business, and lower sales and associated gross profit to cover fixed selling, general and administrative expenses, partially offset by continued strength in business to business operations. Operating loss for the nine months ended September 30, 2012 was positively impacted by approximately $2.6 million related to the favorable resolution of certain contingent liabilities recorded in the second quarter of 2012 and negatively impacted by $1.7 million of patent claim settlements with non practing entities..

The Company s effective tax rate for the third quarter was a 755.9% benefit compared to a 37.7% expense in the third quarter of 2011. The effective tax rate for the nine months ended September 30, 2012 was a 274.8% benefit compared to 32.5% expense for the same period last year. The unusual effective tax rate for both the three and nine month periods ended September 30, 2012, is primarily due to the reversal of approximately $15.1 million of valuation allowances against deferred tax assets of the Company s French subsidiary. Demonstrated and projected profitable results in the subsidiary s operations caused the valuation allowances to be deemed no longer necessary.

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