PFSWEB INC - FORM 8-K - EX-99.1 - PRESS RELEASE ISSUED MARCH 22, 2012

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8-K - FORM 8-K - PFSWEB INC	d323858d8k.htm

Exhibit 99.1

LOGO

FOR IMMEDIATE RELEASE


Contact:
Mark C. Layton		Todd Fromer / Garth Russell
Chief Executive Officer		Investor Relations
or Thomas J. Madden		KCSA Strategic Communications
Chief Financial Officer		(212) 896-1215 / (212) 896-1250
(972) 881-2900		tfromer@kcsa.com / grussell@kcsa.com

PFSweb Reports Fourth Quarter and Year-End 2011 Results

Record Service Fee Revenue and Adjusted EBITDA for December Quarter

Service Fee revenue increases 50% in 4Q 2011 compared to prior year

PLANO, Texas, March 22, 2012 — PFSweb, Inc. (Nasdaq: PFSW), an international provider of end-to-end web commerce solutions, today announced its financial results for the fourth quarter and year ended December 31, 2011.

“We are pleased to report that our Service Fee business segment reported record revenue for the December 2011 quarter of $32.5 million, an increase of 50% compared to the prior year,” stated Mark Layton, Chairman and Chief Executive Officer of PFSweb. “On a year-to-date basis, service fee revenues were $95.3 million in 2011, an increase of 35% compared to the prior year. The strong increases for the 2011 fourth quarter and yearly results were attributable to organic growth of existing clients as well as new client programs launched during the year, and included the benefit of strong holiday season ecommerce activity of our clients.”

“Our Adjusted EBITDA for the December quarter was a record $3.9 million, resulting in Adjusted EBITDA of $6.1 million for calendar 2011, which was within our guidance for the year. Our gross margin and SG&A results were impacted both during the fourth quarter and during the full year by certain infrastructure investments and expenses to support our growth, including incremental costs related to promotional sales events on clients’ e-commerce sites,” continued Mr. Layton.

Summary of consolidated results for the fourth quarter ended December 31, 2011:

•

Total revenue increased 15% to $87.5 million for the fourth quarter of 2011, compared to $76.3 million for fourth quarter of 2010;

•

Service Fee revenue increased 50% to $32.5 million, compared to $21.7 million for the same period in 2010;

•

Adjusted EBITDA (as defined) was $3.9 million for the fourth quarter of 2011, compared to $2.6 million for the same period in 2010;

•

Net income was $0.8 million, or $0.06 per basic and diluted share, compared to a net loss of $2.7 million, or $0.22 per basic and diluted share, for the fourth quarter of 2010. Net income for the fourth quarter of 2011 included approximately $0.2 million of relocation related costs. Net income for the fourth quarter of 2011 also included a $0.3 million loss from discontinued operations related to eCOST.com, compared to a $3.2 million loss from discontinued operations related to eCOST.com for the same period last year;

•

Non-GAAP net income (as defined) was $1.4 million, or $0.11 per basic and diluted share, compared to Non-GAAP net income of $0.7 million, or $0.05 per basic and diluted share, for the quarter ended December 31, 2010;

•

Total cash, cash equivalents and restricted cash was $18.5 million as of December 31, 2011, compared to $20.3 million as of December 31, 2010.

Summary of consolidated results for the year ended December 31, 2011:

•

Total revenue increased 9% to $298.8 million, compared to $274.5 million for the year ended December 31, 2010;

•

Service Fee revenue increased 35% to $95.3 million, compared to $70.6 million for the year ended December 31, 2010;

•

Service Fee equivalent revenue (as defined) increased 29% to $107.1 million, compared to $82.8 million for the year ended December 31, 2010;

•

Adjusted EBITDA (as defined) was $6.1 million, compared to $5.5 million for the year ended December 31, 2010;

•

Net loss was $4.6 million, or $0.36 per basic and diluted share, compared to net loss of $7.4 million or $0.65 per basic and diluted share, for the year ended December 31, 2010. Net loss for 2011 included approximately $0.5 million of relocation related costs. Net loss for the year 2011 also included a $0.9 million loss from discontinued operations related to eCOST.com, compared to a $4.0 million loss from discontinued operations related to eCOST.com in the same period last year;

•

Non-GAAP net loss (as defined) was $2.3 million, or $0.18 per basic and diluted share, compared to a Non-GAAP net loss of $1.9 million, or $0.17 per basic and diluted share, for the year ended December 31, 2010.

“Our new business pipeline remains strong and we currently anticipate continued service fee revenue growth in 2012. We are currently targeting 10 to 15 new client programs to be implemented or signed during the year, the growth from which will be partially offset by approximately 3 to 6 client programs that we currently expect will conclude or significantly reduce operations during 2012. Also, we expect further reductions in product revenue due to the impact of a reorganization by our largest client relationship in this segment. On an overall basis, we are currently targeting a year-over-year increase in service fee equivalent revenue (as defined) of approximately 20% in 2012. While we continue to make investments to support our growth, we are targeting an improved consolidated Adjusted EBITDA performance for 2012 to approximately $8 million to $10 million,” Mr. Layton concluded.

Conference Call Information

Management will host a conference call at 11:00 am Eastern Time (10:00 am Central Time) on Thursday, March 22, 2012, to discuss the latest corporate developments and results. To listen to the call, please dial (888) 562-3356 and enter the pin number 55437082 at least five minutes before the scheduled start time. Investors can also access the call in a “listen only” mode via the Internet at the Company’s website, www.pfsweb.com. Please allow extra time prior to the call to visit the site and download any necessary audio software.

A digital replay of the conference call will be available through April 22, 2012 at (855) 859-2056, pin number 55437082. The replay also will be available at the Company’s website for a limited time.

Non-GAAP Financial Measures

This news release may contain certain non-GAAP measures, including non-GAAP net income (loss), Earnings Before Interest, Income Taxes, Depreciation and Amortization (“EBITDA”), Adjusted EBITDA and Service Fee Equivalent Revenue.

Non-GAAP net income (loss) represents net income (loss) calculated in accordance with U.S. GAAP as adjusted for the impact of non-cash stock-based compensation expense, income (loss) from discontinued operations and executive disability benefits.

EBITDA represents earnings (or losses) before income (loss) from discontinued operations, interest, income taxes, depreciation, and amortization. Adjusted EBITDA further eliminates the effect of stock-based compensation, executive disability benefits and certain relocation related costs.

Service Fee Equivalent Revenue represents service fee revenue plus the gross profit earned on product revenue.

Non-GAAP net income (loss), EBITDA, Adjusted EBITDA and Service Fee Equivalent Revenue are used by management, analysts, investors and other interested parties in evaluating our operating performance compared to that of other companies in our industry. The calculation of non-GAAP net income (loss) eliminates the effect of stock-based compensation, income (loss) from discontinued operations and executive disability benefits and EBITDA and Adjusted EBITDA further eliminate the effect of financing, income taxes, the accounting effects of capital spending and certain relocation related costs, which items may vary from different companies for reasons unrelated to overall operating performance. Service Fee Equivalent Revenue allows client contracts with similar operational support models but different financial models to be combined as if all contracts were being operated on a service fee revenue basis.

PFSweb believes these non-GAAP measures provide useful information to both management and investors by excluding certain expenses that may not be indicative of its core operating results. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. The non-GAAP measures included in this press release have been reconciled to the GAAP results in the attached tables.

About PFSweb, Inc.

Iconic brands engage PFSweb to enable their eCommerce initiatives. PFSweb’s End2End eCommerce^® solution includes interactive marketing services, robust eCommerce technology, global fulfillment and logistics, high-touch customer care, financial services, and order management. PFSweb’s eCommerce solutions provide international reach and expertise in both direct-to-consumer and business-to-business initiatives, supporting organizations across multiple industries including Procter & Gamble, L’Oreal, LEGO, Columbia Sportswear, Sorel, Carter’s, Lucky Brand Jeans, kate spade new york, Juicy Couture, AAFES, Riverbed, Ricoh, Hawker Beechcraft Corp, Roots Canada Ltd. and Xerox. PFSweb is headquartered in Plano, TX with additional locations in Tennessee, Mississippi, Canada, Belgium, and the Philippines.

To find out more about PFSweb, Inc. (NASDAQ: PFSW), visit the company’s website at http://www.pfsweb.com.

The matters discussed herein consist of forward-looking information under the Private Securities Litigation Reform Act of 1995 and is subject to and involves risks and uncertainties, which could cause actual results to differ materially from the forward-looking information. PFSweb’s Annual Report on Form 10-K for the year ended December 31, 2010 and Quarterly Report on Form 10-Q for the nine months ended September 30, 2011 identify certain factors that could cause actual results to differ materially from those projected in any forward looking statements made and investors are advised to review the Annual and Quarterly Reports and the Risk Factors described therein. PFSweb undertakes no obligation to update publicly any forward-looking statement for any reason, even if new information becomes available or other events occur in the future. There may be additional risks that we do not currently view as material or that are not presently known.

(Financial Tables Below)

PFSweb, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations (A)

(In Thousands, Except Per Share Data)


	Three Months Ended December 31,						Twelve Months Ended December 31,
	2011			2010			2011			2010
REVENUES:
Product revenue, net	$	40,442		$	46,021		$	162,447		$	174,613
Service fee revenue		32,526			21,688			95,345			70,636
Pass-thru revenue		14,530			8,605			40,974			29,267

Total revenues		87,498			76,314			298,766			274,516

COSTS OF REVENUES:
Cost of product revenue		37,557			43,108			150,738			162,485
Cost of service fee revenue		24,510			15,722			71,751			51,144
Cost of pass-thru revenue		14,530			8,605			40,974			29,267

Total costs of revenues		76,597			67,435			263,463			242,896

Gross profit		10,901			8,879			35,303			31,620
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		9,409			8,020			37,512			33,611

Loss from operations		1,492			859			(2,209	)		(1,991	)
INTEREST EXPENSE, NET		316			202			1,085			940

Income (loss) before income taxes		1,176			657			(3,294	)		(2,931	)
INCOME TAX PROVISION		93			210			380			463

INCOME (LOSS) FROM CONTINUING OPERATIONS		1,083			447			(3,674	)		(3,394	)
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX		(323	)		(3,192	)		(892	)		(3,975	)

NET INCOME (LOSS)	$	760		$	(2,745	)	$	(4,566	)	$	(7,369	)

NON-GAAP INCOME (LOSS)	$	1,430		$	673		$	(2,272	)	$	(1,935	)

NET INCOME (LOSS) PER SHARE:
Basic	$	0.06		$	(0.22	)	$	(0.36	)	$	(0.65	)

Diluted	$	0.06		$	(0.22	)	$	(0.36	)	$	(0.65	)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic		12,764			12,237			12,574			11,310

Diluted		12,909			12,237			12,574			11,310

EBITDA	$	3,261		$	2,326		$	4,135		$	4,069

ADJUSTED EBITDA	$	3,852		$	2,552		$	6,085		$	5,528

(A)	The financial data above should be read in conjunction with the audited consolidated financial statements of PFSweb, Inc. included in its Form 10-K for the year ended December 31, 2010.

PFSweb, Inc. and Subsidiaries

Reconciliation of certain Non-GAAP Items to GAAP

(In Thousands, Except Per Share Data)


	Three Months Ended December 31,						Twelve Months Ended December 31,
	2011			2010			2011			2010
NET INCOME (LOSS)	$	760		$	(2,745	)	$	(4,566	)	$	(7,369	)
Loss from discontinued operations, net of tax		323			3,192			892			3,975
Income tax expense		93			210			380			463
Interest expense		316			202			1,085			940
Depreciation and amortization		1,769			1,467			6,344			6,060

EBITDA	$	3,261		$	2,326		$	4,135		$	4,069
Stock-based compensation		347			226			1,402			809
Executive disability benefits		—			—			—			650
Relocation related costs		244			—			548			—

ADJUSTED EBITDA	$	3,852		$	2,552		$	6,085		$	5,528


	Three Months Ended December 31,						Twelve Months Ended December 31,
	2011			2010			2011			2010
NET INCOME (LOSS)	$	760		$	(2,745	)	$	(4,566	)	$	(7,369	)
Loss from discontinued operations, net of tax		323			3,192			892			3,975
Stock-based compensation		347			226			1,402			809
Executive disability benefits		—			—			—			650

NON-GAAP INCOME (LOSS)	$	1,430		$	673		$	(2,272	)	$	(1,935	)

NET INCOME (LOSS) PER SHARE:
Basic	$	0.06		$	(0.22	)	$	(0.36	)	$	(0.65	)

Diluted	$	0.06		$	(0.22	)	$	(0.36	)	$	(0.65	)

NON-GAAP INCOME (LOSS) Per Share:
Basic	$	0.11		$	0.05		$	(0.18	)	$	(0.17	)

Diluted	$	0.11		$	0.05		$	(0.18	)	$	(0.17	)


	Three Months Ended December 31,						Twelve Months Ended December 31,
	2011			2010			2011			2010
TOTAL REVENUES	$	87,498		$	76,314		$	298,766		$	274,516
Pass-thru revenue		(14,530	)		(8,605	)		(40,974	)		(29,267	)
Cost of product revenue		(37,557	)		(43,108	)		(150,738	)		(162,485	)

SERVICE FEE REVENUE EQUIVALENT	$	35,411		$	24,601		$	107,054		$	82,764

PFSweb, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(In Thousands, Except Share Data)


	December 31,			December 31,
	2011			2010
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	17,695		$	18,430
Restricted cash		827			1,853
Accounts receivable, net of allowance for doubtful accounts of $663 and $754 at December 31, 2011 and December 31, 2010, respectively		52,679			41,438
Inventories, net of reserves of $1,555 and $1,561 at December 31, 2011 and December 31, 2010, respectively		30,487			35,161
Assets of discontinued operations		—			2,776
Other receivables		11,915			14,539
Prepaid expenses and other current assets		4,697			3,580

Total current assets		118,300			117,777

PROPERTY AND EQUIPMENT, net		14,945			9,124
ASSETS OF DISCONTINUED OPERATIONS		—			1,126
OTHER ASSETS		3,127			2,203

Total assets		136,372			130,230

LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations	$	23,939		$	18,320
Trade accounts payable		48,544			55,692
Deferred revenue		6,766			5,254
Accrued expenses		18,657			15,870

Total current liabilities		97,906			95,136

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion		3,583			2,136
OTHER LIABILITIES		6,809			3,608

Total liabilities		108,298			100,880

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY:
Preferred stock, $1.00 par value; 1,000,000 shares authorized; none issued and outstanding		—			—
Common stock, $.001 par value; 35,000,000 shares authorized; 12,782,907 and 12,255,064 shares issued at December 31, 2011 and December 31, 2010, respectively; and 12,764,546 and 12,236,703 outstanding as of December 31, 2011 and December 31, 2010, respectively		13			12
Additional paid-in capital		104,645			101,229
Accumulated deficit		(77,898	)		(73,332	)
Accumulated other comprehensive income		1,399			1,526
Treasury stock at cost, 18,361 shares		(85	)		(85	)

Total shareholders’ equity		28,074			29,350

Total liabilities and shareholders’ equity	$	136,372		$	130,230

PFSweb, Inc. and Subsidiaries

Unaudited Consolidating Statements of Operations

For the Three Months Ended December 31, 2011

(In Thousands)


	PFSweb			Business & Retail Connect		eCOST			Eliminations			Consolidated
REVENUES:
Product revenue, net	$	—		$	40,442	$	—		$	—		$	40,442
Service fee revenue		32,526			—		—			—			32,526
Service fee revenue - affiliate		1,732			—		—			(1,732	)		—
Pass-thru revenue		14,530			—		—			—			14,530

Total revenues		48,788			40,442		—			(1,732	)		87,498

COSTS OF REVENUES:
Cost of product revenue		—			37,557		—			—			37,557
Cost of service fee revenue		25,463			—		—			(953	)		24,510
Cost of pass-thru revenue		14,530			—		—			—			14,530

Total costs of revenues		39,993			37,557		—			(953	)		76,597

Gross profit		8,795			2,885		—			(779	)		10,901
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		7,918			2,270		—			(779	)		9,409

Income from operations		877			615		—			—			1,492
INTEREST EXPENSE, NET		6			310		—			—			316

Income before income taxes		871			305		—			—			1,176
INCOME TAX PROVISION (BENEFIT)		(51	)		144		—			—			93

INCOME FROM CONTINUING OPERATIONS		922			161		—			—			1,083
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX		—			—		(323	)					(323	)

NET INCOME (LOSS)	$	922		$	161	$	(323	)	$	—		$	760

NON-GAAP NET INCOME	$	1,269		$	161	$	—		$	—		$	1,430

EBITDA	$	2,629		$	632	$	—		$	—		$	3,261

ADJUSTED EBITDA	$	3,220		$	632	$	—		$	—		$	3,852


A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:

NET INCOME (LOSS)	$	922		$	161	$	(323	)	$	—			760
Loss from discontinued operations, net of tax		—			—		323			—			323
Income tax expense (benefit)		(51	)		144		—			—			93
Interest expense , net		6			310		—			—			316
Depreciation and amortization		1,752			17		—			—			1,769

EBITDA	$	2,629		$	632	$	—		$	—		$	3,261
Stock-based compensation		347			—		—			—			347
Move related costs		244											244

ADJUSTED EBITDA	$	3,220		$	632	$	—		$	—		$	3,852


A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME follows:

NET INCOME (LOSS)	$	922		$	161	$	(323	)	$	—		$	760
Loss from discontinued operations, net of tax		—			—		323			—			323
Stock-based compensation		347			—		—			—			347

NON-GAAP NET INCOME	$	1,269		$	161	$	—		$	—		$	1,430

Note:

Business and Retail Connect includes our Supplies Distributors and PFSweb Retail Connect operations, which operate similar financial models on behalf of our client relationships. PFSweb and PFSweb Retail Connect include certain ongoing activity formerly reported as eCOST.

PFSweb, Inc. and Subsidiaries

Unaudited Consolidating Statements of Operations

For the Twelve Months Ended December 31, 2011

(In Thousands)


	PFSweb			Business & Retail Connect		eCOST			Eliminations			Consolidated
REVENUES:
Product revenue, net	$	—		$	162,447	$	—		$	—		$	162,447
Service fee revenue		95,345			—		—			—			95,345
Service fee revenue - affiliate		6,501			—		—			(6,501	)		—
Pass-thru revenue		40,976			—		—			(2	)		40,974

Total revenues		142,822			162,447		—			(6,503	)		298,766

COSTS OF REVENUES:
Cost of product revenue		—			150,738		—			—			150,738
Cost of service fee revenue		74,367			—		—			(2,616	)		71,751
Cost of pass-thru revenue		40,976			—		—			(2	)		40,974

Total costs of revenues		115,343			150,738		—			(2,618	)		263,463

Gross profit		27,479			11,709		—			(3,885	)		35,303
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		32,892			8,505		—			(3,885	)		37,512

Income (loss) from operations		(5,413	)		3,204		—			—			(2,209	)
INTEREST EXPENSE (INCOME), NET		(140	)		1,225		—			—			1,085

Income (loss) before income taxes		(5,273	)		1,979		—			—			(3,294	)
INCOME TAX PROVISION (BENEFIT)		(401	)		781		—			—			380

INCOME (LOSS) FROM CONTINUING OPERATIONS		(4,872	)		1,198		—			—			(3,674	)
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX		—			—		(892	)					(892	)

NET INCOME (LOSS)	$	(4,872	)	$	1,198	$	(892	)	$	—		$	(4,566	)

NON-GAAP NET INCOME (LOSS)	$	(3,470	)	$	1,198	$	—		$	—		$	(2,272	)

EBITDA	$	892		$	3,243	$	—		$	—		$	4,135

ADJUSTED EBITDA	$	2,842		$	3,243	$	—		$	—		$	6,085


A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:

NET INCOME (LOSS)	$	(4,872	)	$	1,198	$	(892	)	$	—			(4,566	)
Loss from discontinued operations, net of tax		—			—		892			—			892
Income tax expense (benefit)		(401	)		781		—			—			380
Interest expense (income)		(140	)		1,225		—			—			1,085
Depreciation and amortization		6,305			39		—			—			6,344

EBITDA	$	892		$	3,243	$	—		$	—		$	4,135
Stock-based compensation		1,402			—		—			—			1,402
Relocation related costs		548											548

ADJUSTED EBITDA	$	2,842		$	3,243	$	—		$	—		$	6,085


A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:

NET INCOME (LOSS)	$	(4,872	)	$	1,198	$	(892	)	$	—		$	(4,566	)
Loss from discontinued operations, net of tax		—			—		892			—			892
Stock-based compensation		1,402			—		—			—			1,402

NON-GAAP NET INCOME (LOSS)	$	(3,470	)	$	1,198	$	—		$	—		$	(2,272	)

Note:

PFSweb, Inc. and Subsidiaries

Unaudited Consolidating Statements of Operations

For the Three Months Ended December 31, 2010

(In Thousands)


	PFSweb			Business & Retail Connect		eCOST			Eliminations			Consolidated
REVENUES:
Product revenue, net	$	—		$	46,021	$	—		$	—		$	46,021
Service fee revenue		21,688			—		—			—			21,688
Service fee revenue - affiliate		1,701			—		—			(1,701	)		—
Pass-thru revenue		8,612			—		—			(7	)		8,605

Total revenues		32,001			46,021		—			(1,708	)		76,314

COSTS OF REVENUES:
Cost of product revenue		—			43,108		—			—			43,108
Cost of service fee revenue		16,328			—		—			(606	)		15,722
Cost of pass-thru revenue		8,612			—		—			(7	)		8,605

Total costs of revenues		24,940			43,108		—			(613	)		67,435

Gross profit		7,061			2,913		—			(1,095	)		8,879
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		6,893			2,222		—			(1,095	)		8,020

Income from operations		168			691		—			—			859
INTEREST EXPENSE (INCOME), NET		(79	)		281		—			—			202

Income before income taxes		247			410		—			—			657
INCOME TAX PROVISION		51			159		—			—			210

INCOME FROM CONTINUING OPERATIONS		196			251		—			—			447
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX		—			—		(3,192	)					(3,192	)

NET INCOME (LOSS)	$	196		$	251	$	(3,192	)	$	—		$	(2,745	)

NON-GAAP NET INCOME	$	422		$	251	$	—		$	—		$	673

EBITDA	$	1,628		$	698	$	—		$	—		$	2,326

ADJUSTED EBITDA	$	1,854		$	698	$	—		$	—		$	2,552


A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
NET INCOME (LOSS)	$	196		$	251	$	(3,192	)	$	—			(2,745	)
Loss from discontinued operations, net of tax		—			—		3,192			—			3,192
Income tax expense		51			159		—			—			210
Interest expense (income)		(79	)		281		—			—			202
Depreciation and amortization		1,460			7		—			—			1,467

EBITDA	$	1,628		$	698	$	—		$	—		$	2,326
Stock-based compensation		226			—		—			—			226

ADJUSTED EBITDA	$	1,854		$	698	$	—		$	—		$	2,552

A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME follows:

NET INCOME (LOSS)	$	196		$	251	$	(3,192	)	$	—		$	(2,745	)
Loss from discontinued operations, net of tax		—			—		3,192			—			3,192
Stock-based compensation		226			—		—			—			226

NON-GAAP NET INCOME	$	422		$	251	$	—		$	—		$	673

Note:

PFSweb, Inc. and Subsidiaries

Unaudited Consolidating Statements of Operations

For the Twelve Months Ended December 31, 2010

(In Thousands)


	PFSweb			Business & Retail Connect		eCOST			Eliminations			Consolidated
REVENUES:
Product revenue, net	$	—		$	174,613	$	—		$	—		$	174,613
Service fee revenue		70,636			—		—			—			70,636
Service fee revenue - affiliate		6,622			—		—			(6,622	)		—
Pass-thru revenue		29,294			—		—			(27	)		29,267

Total revenues		106,552			174,613		—			(6,649	)		274,516

COSTS OF REVENUES:
Cost of product revenue		—			162,485		—			—			162,485
Cost of service fee revenue		53,543			—		—			(2,399	)		51,144
Cost of pass-thru revenue		29,294			—		—			(27	)		29,267

Total costs of revenues		82,837			162,485		—			(2,426	)		242,896

Gross profit		23,715			12,128		—			(4,223	)		31,620
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		29,158			8,676		—			(4,223	)		33,611

Income (loss) from operations		(5,443	)		3,452		—			—			(1,991	)
INTEREST EXPENSE (INCOME), NET		(257	)		1,197		—			—			940

Income (loss) before income taxes		(5,186	)		2,255		—			—			(2,931	)
INCOME TAX PROVISION (BENEFIT)		(355	)		818		—			—			463

INCOME (LOSS) FROM CONTINUING OPERATIONS		(4,831	)		1,437		—			—			(3,394	)
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX		—			—		(3,975	)					(3,975	)

NET INCOME (LOSS)	$	(4,831	)	$	1,437	$	(3,975	)	$	—		$	(7,369	)

NON-GAAP NET INCOME (LOSS)	$	(3,372	)	$	1,437	$	—		$	—		$	(1,935	)

EBITDA	$	589		$	3,480	$	—		$	—		$	4,069

ADJUSTED EBITDA	$	2,048		$	3,480	$	—		$	—		$	5,528


A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:

NET INCOME (LOSS)	$	(4,831	)	$	1,437	$	(3,975	)	$	—			(7,369	)
Loss from discontinued operations, net of tax		—			—		3,975			—			3,975
Income tax expense (benefit)		(355	)		818		—			—			463
Interest expense (income)		(257	)		1,197		—			—			940
Depreciation and amortization		6,032			28		—			—			6,060

EBITDA	$	589		$	3,480	$	—		$	—		$	4,069
Stock-based compensation		809			—		—			—			809
Executive disability benefit		650											650

ADJUSTED EBITDA	$	2,048		$	3,480	$	—		$	—		$	5,528


A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:

NET INCOME (LOSS)	$	(4,831	)	$	1,437	$	(3,975	)	$	—		$	(7,369	)
Loss from discontinued operations, net of tax		—			—		3,975			—			3,975
Stock-based compensation		809			—		—			—			809
Executive disability benefit		650			—		—			—			650

NON-GAAP NET INCOME (LOSS)	$	(3,372	)	$	1,437	$	—		$	—		$	(1,935	)

Note:

PFSweb, Inc. and Subsidiaries

Unaudited Condensed Consolidating Balance Sheets

as of December 31, 2011

(In Thousands)


	PFSweb			Business & Retail Connect			Eliminations			Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	12,818		$	4,877		$	—		$	17,695
Restricted cash		138			689			—			827
Accounts receivable, net		35,881			17,133			(335	)		52,679
Inventories, net		—			30,487			—			30,487
Other receivables		—			11,915			—			11,915
Prepaid expenses and other current assets		3,273			1,424			—			4,697

Total current assets		52,110			66,525			(335	)		118,300

PROPERTY AND EQUIPMENT, net		14,884			61			—			14,945
RECEIVABLE/INVESTMENT IN AFFILIATES		13,130			—			(13,130	)		—
OTHER ASSETS		2,973			154			—			3,127

Total assets		83,097			66,740			(13,465	)		136,372

LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations	$	13,918		$	10,021		$	—		$	23,939
Trade accounts payable		12,089			36,790			(335	)		48,544
Accrued expenses		18,747			6,676			—			25,423

Total current liabilities		44,754			53,487			(335	)		97,906
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion		3,513			70			—			3,583
PAYABLE TO AFFILIATES		—			22,495			(22,495	)		—
OTHER LIABILITIES		6,809			—			—			6,809

Total liabilities		55,076			76,052			(22,830	)		108,298

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY:
Common stock		13			19			(19	)		13
Capital contributions		—			1,000			(1,000	)		—
Additional paid-in capital		104,645			28,059			(28,059	)		104,645
Retained earnings (accumulated deficit)		(77,950	)		(40,446	)		40,498			(77,898	)
Accumulated other comprehensive income		1,398			2,056			(2,055	)		1,399
Treasury stock		(85	)		—			—			(85	)

Total shareholders’ equity		28,021			(9,312	)		9,365			28,074

Total liabilities and shareholders’ equity	$	83,097		$	66,740		$	(13,465	)	$	136,372

PFSweb, Inc. and Subsidiaries

Unaudited Condensed Consolidating Balance Sheets

as of December 31, 2010

(In Thousands)


				Supplies
	PFSweb			Distributors		eCOST			Eliminations			Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	13,471		$	3,110	$	1,849		$	—		$	18,430
Restricted cash		777			884		192			—			1,853
Accounts receivable, net		21,234			19,524		987			(307	)		41,438
Inventories, net		—			35,161		—			—			35,161
Assets of discontinued operations		—			—		2,776			—			2,776
Other receivables		—			13,822		717			—			14,539
Prepaid expenses and other current assets		2,006			1,469		105			—			3,580

Total current assets		37,488			73,970		6,626			(307	)		117,777

PROPERTY AND EQUIPMENT, net		8,861			22		241			—			9,124
RECEIVABLE/INVESTMENT IN AFFILIATES		14,255			—		—			(14,255	)		—
ASSETS OF DISCONTINUED OPERATIONS		—			—		1,126			—			1,126
OTHER ASSETS		2,013			—		190			—			2,203

Total assets		62,617			73,992		8,183			(14,562	)		130,230

LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations	$	8,332		$	9,953	$	35		$	—		$	18,320
Trade accounts payable		6,356			44,896		4,747			(307	)		55,692
Accrued expenses		12,994			6,260		1,870			—			21,124

Total current liabilities		27,682			61,109		6,652			(307	)		95,136
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion		2,031			—		105			—			2,136
PAYABLE TO AFFILIATES		—			4,255		18,490			(22,745	)		—
OTHER LIABILITIES		3,608			—		—			—			3,608

Total liabilities		33,321			65,364		25,247			(23,052	)		100,880

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY:
Common stock		12			—		19			(19	)		12
Capital contributions		—			1,000		—			(1,000	)		—
Additional paid-in capital		101,229			—		28,059			(28,059	)		101,229
Retained earnings (accumulated deficit)		(73,387	)		5,410		(45,148	)		39,793			(73,332	)
Accumulated other comprehensive income		1,527			2,218		6			(2,225	)		1,526
Treasury stock		(85	)		—		—			—			(85	)

Total shareholders’ equity		29,296			8,628		(17,064	)		8,490			29,350

Total liabilities and shareholders’ equity	$	62,617		$	73,992	$	8,183		$	(14,562	)	$	130,230

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