PFSWEB INC - FORM 8-K - EX-99.1 - PRESS RELEASE ISSUED AUGUST 9, 2012

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8-K - FORM 8-K - PFSWEB INC	d394685d8k.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 35% Service Fee Revenue Growth in Second Quarter of 2012

Compared to Prior Year

- - -

Adjusted EBITDA increases 160% compared to prior year

PFSweb Increases Fiscal 2012 Adjusted EBITDA Guidance to $9-11 Million

Allen, Texas, August 9, 2012 — PFSweb, Inc. (Nasdaq: PFSW), an international provider of end-to-end web commerce solutions, today announced its financial results for the second quarter ended June 30, 2012.

“We believe PFSweb is now widely considered one of the leading experts in the eCommerce market and has become an integral part of the growth and success of some of the world’s leading consumer brands,” stated Mark Layton, Chairman and Chief Executive Officer of PFSweb. “Our growth proves our ability to both attract new clients and become a significant part of their eCommerce strategy. In addition to offering global reach and a scalable platform that is able to support our clients’ brands, we expect to enhance our positioning within the market even further through the rollout of an expanded multi-platform service offering. This expansion of our End2End eCommerce solution provides the opportunity for PFSweb to generate higher margin revenue streams as we enter a whole new level of services for our clients and expand our reach across all channels and customer touch points.”

“We increased Service Fee revenue for the second quarter of 2012 by 35% to $28.4 million as compared to same period in 2011,” continued Mr. Layton. “This growth was driven by increased activity among our approximately 65 eCommerce client programs including new and existing client brands. During the past several months, we launched and ramped up several new client End2End eCommerce solutions, for leading brands such as Gerber Childrenswear, Elizabeth Arden and Gore.”

Summary of consolidated results for the second quarter ended June 30, 2012:

•

Service Fee revenue increased 35% to $28.4 million, compared to $21.0 million for the same period in 2011; Service Fee Equivalent revenue (as defined) increased 25% to $30.5 million, compared to $24.4 million for the same period in 2011;

•

Total revenue increased to $68.8 million, compared to $68.0 million for the second quarter of 2011;

•

Adjusted EBITDA (as defined) increased 160% to $2.8 million, compared to $1.1 million for the same period in 2011;

•

Net loss was $0.5 million, or $0.04 per basic and diluted share, compared to a net loss of $1.2 million, or $0.10 per basic and diluted share, for the second quarter of 2011. Net loss for the second quarter of 2012 included approximately $0.3 million of relocation related costs, which were reflected in selling, general and administrative expenses;

•

Non-GAAP net income (as defined) was $0.2 million, or $0.01 per basic and diluted share, compared to a non-GAAP net loss of $0.8 million, or $0.07 per basic and diluted share, for the quarter ended June 30, 2011;

Summary of consolidated results for the six months ended June 30, 2012:

•

Service Fee revenue increased 42% to $56.8 million, compared with $39.9 million for the six months ended June 30, 2011. Service Fee Equivalent revenue (as defined) increased 34% to $61.8 million, compared to $46.1 million for the same period in 2011;

•

Total revenue was $143.3 million compared to $140.4 million for the six months ended June 30, 2011;

•

Adjusted EBITDA (as defined) was $5.4 million compared to $1.5 million for the six months ended June 30, 2011;

•

Net loss was $1.8 million, or $0.14 per basic and diluted share, compared to a net loss of $3.5 million or $0.28 per basic and diluted share, for the six months ended June 30, 2011. Net loss for the six months ended June 30, 2012 included approximately $0.9 million of relocation related costs, and $0.5 million of lease termination costs that were reflected in selling, general and administrative expenses. Net loss for the first six months of 2011 included a $0.6 million loss from discontinued operations related to eCOST.com;

•

Non-GAAP net income was $0.2 million, or $0.02 per basic and diluted share, compared to a non-GAAP net loss of $2.2 million, or $0.18 per basic and diluted share, for the six months ended June 30, 2011.

“The strong Service Fee revenue growth for the second quarter of 2012, combined with an ongoing focus on costs, resulted in a 160% increase in Adjusted EBITDA to $2.8 million,” Mr. Layton continued. “In addition, several of the client programs that we expected to conclude or significantly reduce operations in 2012, have extended their programs into late-2012 and 2013. As a result of these extensions and other client activity, we are increasing our 2012 guidance for consolidated Adjusted EBITDA to approximately $9 million to $11 million. While we are pleased with these extensions, we still expect that approximately $5 million of this quarter’s service fee revenue will not continue after this year. We continue to target growth from new clients and are focusing on operational efficiencies to mitigate this impact.”

Conference Call Information

Management will host a conference call at 11:00 am Eastern Time (10:00 am Central Time) on Thursday, August 9, 2012, to discuss the latest corporate developments and results. To listen to the call, please dial (888) 562-3356 and enter the pin number 11911131 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 or www.kcsa.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 September 9, 2012 at (855) 859-2056, pin number 11911131. 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, lease termination costs and certain move related expenses.

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, lease termination costs and certain move related expenses.

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, lease termination costs and certain move related expenses and EBITDA and Adjusted EBITDA further eliminate the effect of financing, income taxes and the accounting effects of capital spending, 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 Allen, 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, 2011 and 10-Q for the period ended March 31, 2012 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						Six Months Ended
	June 30,						June 30,
	2012			2011			2012			2011
REVENUES:
Product revenue, net	$	29,557		$	38,799		$	64,282		$	84,082
Service fee revenue		28,384			20,970			56,762			39,870
Pass-thru revenue		10,819			8,239			22,228			16,445

Total revenues		68,760			68,008			143,272			140,397

COSTS OF REVENUES:
Cost of product revenue		27,397			35,411			59,253			77,877
Cost of service fee revenue		20,340			15,795			41,599			29,578
Cost of pass-thru revenue		10,819			8,239			22,228			16,445

Total costs of revenues		58,556			59,445			123,080			123,900

Gross profit		10,204			8,563			20,192			16,497
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		10,260			9,430			21,160			18,718

Loss from operations		(56	)		(867	)		(968	)		(2,221	)
INTEREST EXPENSE, NET		258			270			522			461

Loss before income taxes		(314	)		(1,137	)		(1,490	)		(2,682	)
INCOME TAX PROVISION		194			95			303			230

LOSS FROM CONTINUING OPERATIONS		(508	)		(1,232	)		(1,793	)		(2,912	)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX		—			14			—			(589	)

NET LOSS	$	(508	)	$	(1,218	)	$	(1,793	)	$	(3,501	)

NON-GAAP INCOME (LOSS)	$	152		$	(833	)	$	229		$	(2,203	)

NET LOSS PER SHARE:
Basic	$	(0.04	)	$	(0.10	)	$	(0.14	)	$	(0.28	)

Diluted	$	(0.04	)	$	(0.10	)	$	(0.14	)	$	(0.28	)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic		12,783			12,567			12,774			12,418

Diluted		12,783			12,567			12,774			12,418

EBITDA	$	2,134		$	676		$	3,364		$	817

ADJUSTED EBITDA	$	2,794		$	1,075		$	5,386		$	1,526

(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, 2011.

PFSweb, Inc. and Subsidiaries

Reconciliation of certain Non-GAAP Items to GAAP

(In Thousands, Except Per Share Data)


	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
NET LOSS	$	(508	)	$	(1,218	)	$	(1,793	)	$	(3,501	)
Loss (income) from discontinued operations, net of tax		—			(14	)		—			589
Income tax expense		194			95			303			230
Interest expense		258			270			522			461
Depreciation and amortization		2,190			1,543			4,332			3,038

EBITDA	$	2,134		$	676		$	3,364		$	817
Stock-based compensation		366			399			706			709
Lease terminations costs		—			—			450			—
Move related expenses		294			—			866			—

ADJUSTED EBITDA	$	2,794		$	1,075		$	5,386		$	1,526


	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
NET LOSS	$	(508	)	$	(1,218	)	$	(1,793	)	$	(3,501	)
Loss (Income) from discontinued operations, net of tax		—			(14	)		—			589
Stock-based compensation		366			399			706			709
Lease terminations costs		—			—			450			—
Move related expenses		294			—			866			—

NON-GAAP INCOME (LOSS)	$	152		$	(833	)	$	229		$	(2,203	)

NET LOSS PER SHARE:
Basic	$	(0.04	)	$	(0.10	)	$	(0.14	)	$	(0.28	)

Diluted	$	(0.04	)	$	(0.10	)	$	(0.14	)	$	(0.28	)

NON-GAAP INCOME (LOSS) Per Share:
Basic	$	0.01		$	(0.07	)	$	0.02		$	(0.18	)

Diluted	$	0.01		$	(0.07	)	$	0.02		$	(0.18	)


	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
TOTAL REVENUES	$	68,760		$	68,008		$	143,272		$	140,397
Pass-thru revenue		(10,819	)		(8,239	)		(22,228	)		(16,445	)
Cost of product revenue		(27,397	)		(35,411	)		(59,253	)		(77,877	)

SERVICE FEE EQUIVALENT REVENUE	$	30,544		$	24,358		$	61,791		$	46,075

PFSweb, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(In Thousands, Except Share Data)


	June 30, 2012			December 31, 2011
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	17,107		$	17,695
Restricted cash		728			827
Accounts receivable, net of allowance for doubtful accounts of $656 and $663 at June 30, 2012 and December 31, 2011, respectively		39,172			52,679
Inventories, net of reserves of $1,677 and $1,555 at June 30, 2012 and December 31, 2011, respectively		27,060			30,487
Other receivables		7,983			11,915
Prepaid expenses and other current assets		4,335			4,697

Total current assets		96,385			118,300

PROPERTY AND EQUIPMENT, net		25,574			14,945
OTHER ASSETS		3,052			3,127

Total assets		125,011			136,372

LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations	$	19,196		$	23,939
Trade accounts payable		35,658			48,544
Deferred revenue		7,365			6,766
Accrued expenses		19,023			18,657

Total current liabilities		81,242			97,906

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion		6,284			3,583
DEFERRED REVENUE		5,112			5,908
DEFERRED RENT		5,571			901

Total liabilities		98,209			108,298

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; 12,812,386 and 12,782,907 shares issued at June 30, 2012 and December 31, 2011, respectively; and 12,789,325 and 12,764,546 shares outstanding as of June 30, 2012 and December 31, 2011, respectively		13			13
Additional paid-in capital		105,399			104,645
Accumulated deficit		(79,691	)		(77,898	)
Accumulated other comprehensive income		1,178			1,399
Treasury stock at cost, 23,061 and 18,361 shares as of June 30, 2012 and December 31, 2011, respectively		(97	)		(85	)

Total shareholders’ equity		26,802			28,074

Total liabilities and shareholders’ equity	$	125,011		$	136,372

PFSweb, Inc. and Subsidiaries

Unaudited Consolidating Statements of Operations

For the Three Months Ended June 30, 2012

(In Thousands)


				Business &
	PFSweb			Retail Connect		Eliminations			Consolidated
REVENUES:
Product revenue, net	$	—		$	29,557	$	—		$	29,557
Service fee revenue		28,384			—		—			28,384
Service fee revenue - affiliate		1,124			—		(1,124	)		—
Pass-thru revenue		10,819			—		—			10,819

Total revenues		40,327			29,557		(1,124	)		68,760

COSTS OF REVENUES:
Cost of product revenue		—			27,397		—			27,397
Cost of service fee revenue		21,049			—		(709	)		20,340
Cost of pass-thru revenue		10,819			—		—			10,819

Total costs of revenues		31,868			27,397		(709	)		58,556

Gross profit		8,459			2,160		(415	)		10,204
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		9,047			1,628		(415	)		10,260

Income from operations		(588	)		532		—			(56	)
INTEREST EXPENSE, NET		57			201		—			258

Income before income taxes		(645	)		331		—			(314	)
INCOME TAX PROVISION (BENEFIT)		55			139		—			194

NET INCOME (LOSS)	$	(700	)	$	192	$	—		$	(508	)

NON-GAAP NET INCOME	$	(40	)	$	192	$	—		$	152

EBITDA	$	1,578		$	556	$	—		$	2,134

ADJUSTED EBITDA	$	2,238		$	556	$	—		$	2,794

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

NET INCOME (LOSS)	$	(700	)	$	192	$	—			(508	)
Income tax expense (benefit)		55			139		—			194
Interest expense , net		57			201		—			258
Depreciation and amortization		2,166			24		—			2,190

EBITDA	$	1,578		$	556	$	—		$	2,134
Stock-based compensation		366			—		—			366
Move related costs		294			—		—			294

ADJUSTED EBITDA	$	2,238		$	556	$	—		$	2,794

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

NET INCOME (LOSS)	$	(700	)	$	192	$	—		$	(508	)
Stock-based compensation		366			—		—			366
Move related costs		294			—		—			294

NON-GAAP NET INCOME	$	(40	)	$	192	$	—		$	152

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, Inc. and Subsidiaries

Unaudited Consolidating Statements of Operations

For the Six Months Ended June 30, 2012

(In Thousands)


				Business &
	PFSweb			Retail Connect		Eliminations			Consolidated
REVENUES:
Product revenue, net	$	—		$	64,282	$	—		$	64,282
Service fee revenue		56,762			—		—			56,762
Service fee revenue - affiliate		2,586			—		(2,586	)		—
Pass-thru revenue		22,228			—		—			22,228

Total revenues		81,576			64,282		(2,586	)		143,272

COSTS OF REVENUES:
Cost of product revenue		—			59,253		—			59,253
Cost of service fee revenue		43,097			—		(1,498	)		41,599
Cost of pass-thru revenue		22,228			—		—			22,228

Total costs of revenues		65,325			59,253		(1,498	)		123,080

Gross profit		16,251			5,029		(1,088	)		20,192
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		18,579			3,669		(1,088	)		21,160

Income (loss) from operations		(2,328	)		1,360		—			(968	)
INTEREST EXPENSE (INCOME), NET		91			431		—			522

Income (loss) before income taxes		(2,419	)		929		—			(1,490	)
INCOME TAX PROVISION (BENEFIT)		(69	)		372		—			303

NET INCOME (LOSS)		(2,350	)		557		—			(1,793	)

NON-GAAP NET INCOME (LOSS)	$	(328	)	$	557	$	—		$	229

EBITDA	$	1,964		$	1,400	$	—		$	3,364

ADJUSTED EBITDA	$	3,986		$	1,400	$	—		$	5,386

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

NET INCOME (LOSS)	$	(2,350	)	$	557	$	—			(1,793	)
Income tax expense (benefit)		(69	)		372		—			303
Interest expense (income)		91			431		—			522
Depreciation and amortization		4,292			40		—			4,332

EBITDA	$	1,964		$	1,400	$	—		$	3,364
Stock-based compensation		706			—		—			706
Lease termination costs		450			—		—			450
Move related costs		866			—		—			866

ADJUSTED EBITDA	$	3,986		$	1,400	$	—		$	5,386

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

NET INCOME (LOSS)	$	(2,350	)	$	557	$	—		$	(1,793	)
Stock-based compensation		706			—		—			706
Lease termination costs		450			—		—			450
Move related costs		866			—		—			866

NON-GAAP NET INCOME (LOSS)	$	(328	)	$	557	$	—		$	229

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 Three Months Ended June 30, 2011

(In Thousands)


				Business &
	PFSweb			Retail Connect		eCOST			Eliminations			Consolidated
REVENUES:
Product revenue, net	$	—		$	38,799	$	—		$	—		$	38,799
Service fee revenue		20,970			—		—			—			20,970
Service fee revenue - affiliate		1,588			—		—			(1,588	)		—
Pass-thru revenue		8,240			—		—			(1	)		8,239

Total revenues		30,798			38,799		—			(1,589	)		68,008

COSTS OF REVENUES:
Cost of product revenue		—			35,411		—			—			35,411
Cost of service fee revenue		16,354			—		—			(559	)		15,795
Cost of pass-thru revenue		8,240			—		—			(1	)		8,239

Total costs of revenues		24,594			35,411		—			(560	)		59,445

Gross profit		6,204			3,388		—			(1,029	)		8,563
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		8,245			2,214		—			(1,029	)		9,430

Income (loss) from operations		(2,041	)		1,174		—			—			(867	)
INTEREST EXPENSE (INCOME), NET		(61	)		331		—			—			270

Income (loss) before income taxes		(1,980	)		843		—			—			(1,137	)
INCOME TAX PROVISION (BENEFIT)		(251	)		346		—			—			95

INCOME (LOSS) FROM CONTINUING OPERATIONS		(1,729	)		497		—			—			(1,232	)
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX		—			—		14						14

NET INCOME (LOSS)	$	(1,729	)	$	497	$	14		$	—		$	(1,218	)

NON-GAAP NET INCOME (LOSS)	$	(1,330	)	$	497	$	—		$	—		$	(833	)

EBITDA	$	(505	)	$	1,181	$	—		$	—		$	676

ADJUSTED EBITDA	$	(106	)	$	1,181	$	—		$	—		$	1,075

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

NET INCOME (LOSS)	$	(1,729	)	$	497	$	14		$	—			(1,218	)
Loss from discontinued operations, net of tax		—			—		(14	)		—			(14	)
Income tax expense (benefit)		(251	)		346		—			—			95
Interest expense (income)		(61	)		331		—			—			270
Depreciation and amortization		1,536			7		—			—			1,543

EBITDA	$	(505	)	$	1,181	$	—		$	—		$	676
Stock-based compensation		399			—		—			—			399

ADJUSTED EBITDA	$	(106	)	$	1,181	$	—		$	—		$	1,075

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

NET INCOME (LOSS)	$	(1,729	)	$	497	$	14		$	—		$	(1,218	)
Loss from discontinued operations, net of tax		—			—		(14	)		—			(14	)
Stock-based compensation		399			—		—			—			399

NON-GAAP NET INCOME (LOSS)	$	(1,330	)	$	497	$	—		$	—		$	(833	)

Note:

PFSweb, Inc. and Subsidiaries

Unaudited Consolidating Statements of Operations

For the Six Months Ended June 30, 2011

(In Thousands)


				Business &
	PFSweb			Retail Connect		eCOST			Eliminations			Consolidated
REVENUES:
Product revenue, net	$	—		$	84,082	$	—		$	—		$	84,082
Service fee revenue		39,870			—		—			—			39,870
Service fee revenue - affiliate		3,252			—		—			(3,252	)		—
Pass-thru revenue		16,446			—		—			(1	)		16,445

Total revenues		59,568			84,082		—			(3,253	)		140,397

COSTS OF REVENUES:
Cost of product revenue		—			77,877		—			—			77,877
Cost of service fee revenue		30,702			—		—			(1,124	)		29,578
Cost of pass-thru revenue		16,446			—		—			(1	)		16,445

Total costs of revenues		47,148			77,877		—			(1,125	)		123,900

Gross profit		12,420			6,205		—			(2,128	)		16,497
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		16,460			4,386		—			(2,128	)		18,718

Income (loss) from operations		(4,040	)		1,819		—			—			(2,221	)
INTEREST EXPENSE (INCOME), NET		(116	)		577		—			—			461

Income (loss) before income taxes		(3,924	)		1,242		—			—			(2,682	)
INCOME TAX PROVISION (BENEFIT)		(276	)		506		—			—			230

INCOME (LOSS) FROM CONTINUING OPERATIONS		(3,648	)		736		—			—			(2,912	)
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX		—			—		(589	)					(589	)

NET INCOME (LOSS)	$	(3,648	)	$	736	$	(589	)	$	—		$	(3,501	)

NON-GAAP NET INCOME (LOSS)	$	(2,939	)	$	736	$	—		$	—		$	(2,203	)

EBITDA	$	(1,016	)	$	1,833	$	—		$	—		$	817

ADJUSTED EBITDA	$	(307	)	$	1,833	$	—		$	—		$	1,526

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

NET INCOME (LOSS)	$	(3,648	)	$	736	$	(589	)	$	—			(3,501	)
Loss from discontinued operations, net of tax		—			—		589			—			589
Income tax expense (benefit)		(276	)		506		—			—			230
Interest expense (income)		(116	)		577		—			—			461
Depreciation and amortization		3,024			14		—			—			3,038

EBITDA	$	(1,016	)	$	1,833	$	—		$	—		$	817
Stock-based compensation		709			—		—			—			709

ADJUSTED EBITDA	$	(307	)	$	1,833	$	—		$	—		$	1,526

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

NET INCOME (LOSS)	$	(3,648	)	$	736	$	(589	)	$	—		$	(3,501	)
Loss from discontinued operations, net of tax		—			—		589			—			589
Stock-based compensation		709			—		—			—			709

NON-GAAP NET INCOME (LOSS)	$	(2,939	)	$	736	$	—		$	—		$	(2,203	)

Note:

PFSweb, Inc. and Subsidiaries

Unaudited Condensed Consolidating Balance Sheets

as of June 30, 2012

(In Thousands)


				Business &
	PFSweb			Retail Connect			Eliminations			Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	13,977		$	3,130		$	—		$	17,107
Restricted cash		—			728			—			728
Accounts receivable, net		26,180			13,073			(81	)		39,172
Inventories, net		—			27,060			—			27,060
Other receivables		—			7,983			—			7,983
Prepaid expenses and other current assets		2,853			1,482			—			4,335

Total current assets		43,010			53,456			(81	)		96,385

PROPERTY AND EQUIPMENT, net		25,448			126			—			25,574
RECEIVABLE/INVESTMENT IN AFFILIATES		12,857			—			(12,857	)		—
OTHER ASSETS		2,913			139			—			3,052

Total assets		84,228			53,721			(12,938	)		125,011

LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations	$	12,685		$	6,511		$	—		$	19,196
Trade accounts payable		8,024			27,715			(81	)		35,658
Deferred revenue		7,328			37			—			7,365
Accrued expenses		12,449			6,574			—			19,023

Total current liabilities		40,486			40,837			(81	)		81,242

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion		6,249			35			—			6,284
PAYABLE TO AFFILIATES		—			22,695			(22,695	)		—
DEFERRED REVENUE		5,112			—			—			5,112
DEFERRED RENT		5,539			32			—			5,571

Total liabilities		57,386			63,599			(22,776	)		98,209

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY:
Common stock		13			19			(19	)		13
Capital contributions		—			1,000			(1,000	)		—
Additional paid-in capital		105,399			28,059			(28,059	)		105,399
Retained earnings (accumulated deficit)		(79,643	)		(40,854	)		40,806			(79,691	)
Accumulated other comprehensive income		1,170			1,898			(1,890	)		1,178
Treasury stock		(97	)		—			—			(97	)

Total shareholders’ equity		26,842			(9,878	)		9,838			26,802

Total liabilities and shareholders’ equity	$	84,228		$	53,721		$	(12,938	)	$	125,011

PFSweb, Inc. and Subsidiaries

Unaudited Condensed Consolidating Balance Sheets

as of December 31, 2011

(In Thousands)


				Business &
	PFSweb			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
Deferred revenue		6,749			17			—			6,766
Accrued expenses		11,998			6,659			—			18,657

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	)		—
DEFERRED REVENUE		5,908			—			—			5,908
DEFERRED RENT		901			—			—			901

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

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