MAY 14, 2012 / 03:00PM GMT, PFSW - Q1 2012 PFSweb, Inc. Earnings Conference Call
Glenn Primack - PEAK6 Investments LP - Analyst
Okay, great. I commend you on going forward in terms of trying to put together additional parts to the model that would have a much
higher return on invested capital. That said, as you look into the rest of this year and 2013, I don’t know how much was in that cost of goods sold. There’s front-ending of expenses that are going to support a contract, but it seems like
just a lousy 1% increase in your service fee margins is a couple of pennies a share to earnings. Is that the right way to look at? I know that there’s revenue growth looking out over the next couple of years, but boy just a little bit on the
margin front seems to fall through to the bottom line.
Tom Madden - PFSweb, Inc. - CFO, Chief Accounting Officer
We understand that. Obviously, taking that 25% margin on our service fee business up by 1 point or 2 is $1 million or $2 million of
incremental profit that we can report. As we went through last year with some of the high-growth activity in the clients, we did make some additional investments. Those investments continued to occur this quarter to a certain extent as well.
We’ve got a mixed situation here where we’ve got some client activity that is coming on board that is at this higher-margin level, because of the value add that we’re providing. And then it’s offset somewhat by some of the more
commoditized type components that we have with the DC and call-center activities. So it is a continual focus for us. We’ve got all our operational team really looking to make sure that we’re building everything as properly as we can and
ensuring that we’re being as efficient as we can in the fulfillment of our client responsibilities. But it’s a good point.
Glenn Primack - PEAK6 Investments LP - Analyst
Great. Well, good luck and I hope to see you at that e-retail show in Chicago.
Operator
George Walsh, Gilford Securities.
George Walsh - Gilford Securities - Analyst
A Good morning,
gentlemen. Just quickly, the Carter’s transition, is that something that really starts to hit more in Q3 and Q4, or Q2 and Q3? Where it begins?
Mark Layton - PFSweb, Inc. - Chairman, CEO
Q3. That would be
the expectation right now.
George Walsh - Gilford Securities - Analyst
Okay, good. Just a quick balance sheet question, you may have covered this, but I want to clarify. The line item on liabilities, current portion of
long-term debt and capital lease obligations of 15.6 versus 23.9 at the end of the year. Could you just review that a bit?
Tom Madden - PFSweb, Inc. - CFO, Chief Accounting Officer
Sure. a big component of that reduction is related to some financing, asset based lending financing that we have in place with Comerica. As we had our seasonal spike in the December quarter, and our
receivable balance was quite a bit higher, we were funding some of those receivables through that debt instrument. As those receivables came back down, we were able to reduce that component.
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