||Additionally, net loss for the period ended June 30, 2006 included the
amortization of identifiable intangible assets of $0.2 million applicable to
valuation of assets assigned in conjunction with the purchase of eCOST.com.
||Excluding the impact of the items identified above, EBITDA, net loss and
net loss per basic and diluted share for the period ended June 30,2006 would have
been $3 thousand, $2.3 million and $0.05, respectively.
||Merchandise sales totaled approximately $662 million during the June 2006 quarter.
||Cash and cash equivalents and restricted cash totaled $19.0 million as of June 30, 2006.
Mark Layton, Chief Executive Officer of PFSweb, said, We are pleased by the continued improved
profitability of our Service Fee and Supplies Distributors businesses. This improvement included
(1) improved gross margin performance, including the favorable impact of contracts that became
operational in calendar year 2005 and experienced incremental startup related expenses in that
year, and (2) reduced selling, general and administrative expenses, including the impact of ongoing
cost controls and favorable exchange rates. We continue to experience improved results in the
current year in winning new Service Fee business relationships, including the expansion of existing
client relationships. During 2006, we have signed new contracts with estimated ongoing annual
service fees of approximately $7 million, based on client projections, plus special projects of
approximately $1 million. Our solid pipeline of potential new business, including pending
proposals, remains a robust $40 million in annual service fees. We are targeting to maintain our
steady stream of new business activity and strengthen our existing client relationships going
Consolidated revenue for the six months ending June 30, 2006 totaled $220.0 million, compared to
$166.7 million for the same period last year, an increase of more than 30%. Service Fee revenue
rose 5.7% for the six months ended June 30, 2006 to $32.1 million from $30.4 million for the same
period in 2005. Supplies Distributors revenue increased 1.7% to $129.3 million in the six months
ended June 30, 2006, compared to $127.1 million for the same period last year. eCOST.com revenue,
including $12.9 million of revenue for the month of January 2006, prior to the merger, was $63.5
million in the first six months of 2006. eCOST.com reported
$96.1 million of revenue for the same period of 2005. On a pro
forma basis, total revenues including eCOST.com for the same period
last year was $262.8 million.
PFSwebs consolidated financials for the six months ending June 30, 2006 only reflect five months
of operations for eCOST.com, as the merger closed on February 1, 2006. For additional information
on PFSwebs consolidated results for the six months ending June 30, 2006, please refer to the
financial tables below.
continued, We have experienced challenges in achieving our plans to improve the service and
financial performance of the eCOST.com business segment since the merger. The time and effort
needed to meet certain quality and service targets for eCOST.com has been greater than we expected
and has also contributed to lower than targeted revenue and gross profit margins during the June
2006 quarter and this is expected to continue into the September 2006 quarter. In addition, we
experienced a significantly higher than normal level of fraudulent credit card activity in June and
July, 2006 due in part to problems experienced in the ERP systems conversion. We believe that these
system issues have now been resolved. We remain focused on the turnaround of eCOST.com, including
the integration of our operations and driving improved financial and service level performance in
the future. Profit, not revenue, will be our near term focus with an emphasis on stronger gross
profit performance, controlling costs and improving quality of our operations and customer
service. Once we achieve that goal, we can then turn our attention towards revenue growth and
increased scale and begin to focus on the many exciting opportunities in product and international
expansion we see for this business.
are making progress in the turnaround of eCOST.com and plan to complete our integration
in the fall of 2006, in time for the holiday season, Layton added. Over the past several months,
we have made significant improvements in eCOSTs infrastructure, which we believe will increase
operating efficiencies and enhance long-term performance. As previously discussed, we anticipate
our merger with eCOST.com to produce total cost savings of approximately $4 $5 million on an
annual basis once our integration efforts are fully implemented.