SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
or
[ ] TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
COMMISSION FILE NUMBER 1-13792
Systemax Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation or organization) |
11-3262067
(I.R.S. Employer
Identification No.) |
22 Harbor Park Drive
Port Washington, New York 11050
(Address of registrant's principal executive offices)
(516) 608-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
The number of shares outstanding of the registrant's Common
Stock as of May 10, 2002 was 34,104,290.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Systemax Inc.
Condensed Consolidated Balance Sheets
(In Thousands, except share data)
-------------------------------------------------------------------------------------------------------------------
March 31, December 31,
2002 2001
-------------- ----------------
(Unaudited)
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 22,235 $ 36,464
Accounts receivable, net 155,807 136,358
Inventories 100,659 92,170
Prepaid expenses and other current assets 27,850 28,534
Income taxes receivable 8,207 7,755
--------- ----------
Total current assets 314,758 301,281
PROPERTY, PLANT AND EQUIPMENT, net 82,091 82,623
GOODWILL, net 67,768 67,967
OTHER ASSETS 1,727 2,576
--------- ----------
TOTAL $ 466,344 $ 454,447
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable to banks $ 4,787 $ 2,829
Accounts payable and accrued expenses 201,470 195,113
--------- ----------
Total current liabilities 206,257 197,942
--------- ----------
Deferred tax liabilities 2,181 1,557
Long-term debt 3,193
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 per share, authorized 25 million shares,
issued none
Common stock, par value $.01 per share, authorized 150 million shares,
issued 38,231,990 shares, outstanding 34,104,290 shares 382 382
Additional paid-in capital 176,743 176,743
Accumulated other comprehensive loss (8,858) (8,038)
Retained earnings 134,935 134,350
--------- ----------
303,202 303,437
--------- ----------
Less: Common stock in treasury at cost - 4,127,700 shares 48,489 48,489
--------- ----------
Total stockholders' equity 254,713 254,948
--------- ----------
TOTAL $ 466,344 $ 454,447
========= ==========
See notes to condensed consolidated financial statements.
Systemax Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(In Thousands, except per share amounts)
-----------------------------------------------------------
Three Month
Periods Ended
March 31,
------------------------------
2002 2001
---- ----
NET SALES $ 412,260 $ 405,898
COST OF SALES 338,412 339,787
--------- ---------
GROSS PROFIT 73,848 66,111
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 72,863 64,784
--------- ---------
INCOME FROM OPERATIONS 985 1,327
INTEREST AND OTHER EXPENSE - Net 13 763
--------- ---------
INCOME BEFORE INCOME TAXES 972 564
PROVISION FOR INCOME TAXES 387 201
--------- ---------
NET INCOME $ 585 $ 363
========= =========
Net income per common share:
Basic $ .02 $ .01
========= =========
Diluted $ .02 $ .01
========= =========
Common and common equivalent shares outstanding:
Basic 34,104 34,104
========= =========
Diluted 34,219 34,104
========= =========
See notes to condensed consolidated financial statements
Systemax Inc.
Condensed Consolidated Statement of Stockholders' Equity (Unaudited)
(In Thousands)
--------------------------------------------------------------------
Accumulated
Other
Common Stock Additional Comprehensive Treasury
Number of Paid-in Retained Loss Stock Comprehensive
Shares Amount Capital Earnings Net of Tax at Cost Income (Loss)
---------- ---------- --------- -------- ------------ --------- -------------
Balances, December 31, 2001 34,104 $ 382 $ 176,743 $ 134,350 $ (8,038) $ (48,489)
Change in cumulative
translation adjustment (820) $ (820)
Net income 585 585
---------- ---------- --------- -------- ------------ --------- -------------
Total comprehensive loss $ (235)
-------------
Balances, March 31, 2002 34,104 $ 382 $ 176,743 $ 134,935 $ (8,858) $ (48,489)
========== ========== ========= ======== ============ =========
See notes to condensed consolidated financial statements.
Systemax Inc.
Condensed Statements of Consolidated Cash Flows (Unaudited)
(In Thousands)
------------------------------------------------------------
Three-Month Periods
Ended March 31,
2002 2001
----------------------------
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income $ 585 $ 363
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization, net 3,520 3,750
Provision for returns and doubtful accounts 1,321 1,616
Changes in certain assets and liabilities:
Accounts receivable (22,391) 6,732
Inventories (9,034) 18,726
Prepaid expenses and other current assets 1,866 8,831
Income taxes receivable (452) 24,907
Accounts payable and accrued expenses 6,721 (45,623)
-------- --------
Net cash provided by (used in) operating activities (17,864) 19,302
--------- -------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Investments in property, plant and equipment (3,508) (5,551)
Proceeds from disposals of property, plant and equipment 124
--------- --------
Net cash used in investing activities (3,384) (5,551)
-------- --------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds (repayments) of borrowings from banks 7,984 (28,656)
------- ---------
Net cash provided by (used in) financing activities 7,984 (28,656)
------ ----------
EFFECTS OF EXCHANGE RATES ON CASH (965) 2,893
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (14,229) (12,012)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 36,464 14,496
-------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 22,235 $ 2,484
======== =========
See notes to condensed consolidated financial statements.
Systemax Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
| 1. |
Description of Business |
| |
The accompanying condensed consolidated financial
statements include the accounts of Systemax Inc. and its wholly-owned
subsidiaries (collectively, the "Company" or "Systemax"). The Company is a
direct marketer of brand name and private label products, including personal
desktop computers (PCs), notebook computers, computer related products and
industrial products in North America and Europe. Systemax markets these products
through an integrated system of distinctively branded full-color direct mail
catalogs, proprietary "e-commerce" Internet sites and personalized "relationship
marketing" to business customers. |
| |
Net income per common share - basic was calculated
based upon the weighted average number of common shares outstanding during the
respective periods presented. Net income per common share – diluted was
calculated based upon the weighted average number of common shares outstanding
and included the equivalent shares for dilutive options outstanding during the
respective periods. |
|
All intercompany accounts and transactions have been eliminated in
consolidation. |
| |
Comprehensive income (loss) – Comprehensive
income (loss) consists of net income and foreign currency translation
adjustments and is included in the Condensed Consolidated Statement of
Stockholders' Equity. For the three month periods, comprehensive loss was
$235,000 in 2002 and $2,158,000 in 2001 net of tax effects on foreign currency
translation adjustments of $744,000 in 2002 and $1,093,000 in 2001. |
| |
The Company adopted Statement of Financial Accounting
Standards ("SFAS") 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" effective January 1, 2002. SFAS 144 requires that long-lived assets be
measured at the lower of carrying amount or fair value less cost to sell,
whether reported in continuing operations or in discontinued operations.
Therefore, discontinued operations will no longer be measured at net realizable
value or include amounts for operating losses that have not yet occurred. SFAS
144 also broadens the reporting of discontinued operations to include all
components of an entity with operations that can be distinguished from the rest
of the entity and that will be eliminated from the ongoing operations of the
entity in a disposal transaction. The adoption of SFAS 144 had no impact on the
Company's financial position or results of operations. |
| |
In the opinion of the Company, the accompanying
unaudited condensed consolidated financial statements contain all normal and
recurring adjustments necessary to present fairly the financial position of the
Company as of March 31, 2002 and the results of operations for the three month
periods ended March 31, 2002 and 2001, cash flows for the three months ended
March 31, 2002 and 2001 and changes in stockholders' equity for the three months
ended March 31, 2002. The December 31, 2001 condensed consolidated balance sheet
has been derived from the audited consolidated financial statements included in
the Company's Annual Report on Form 10-K for the year ended December 31,
2001. |
| |
These condensed consolidated financial statements
should be read in conjunction with the Company's audited consolidated financial
statements as of December 31, 2001 and for the period then ended. The results
for the three months ended March 31, 2002 are not necessarily indicative of the
results for an entire year. |
| |
The Company entered into an 11½ year term loan
agreement with Barclays Bank, which provides up to £5.4 million ($7.7
million at the March 31, 2002 exchange rate) to finance the construction of its
new United Kingdom facility. The borrowings will be secured by the land and
building and are repayable in 40 quarterly installments of £135,000
($192,000), assuming the full amount of the facility is drawn, beginning in
February 2003. The outstanding borrowings bear interest at rates ranging from
LIBOR plus 160 basis points to LIBOR plus 210 basis points. The agreement
contains certain financial and other covenants related to the Company's United
Kingdom's subsidiaries. At March 31, 2002 there were £2,300,000
($3,275,000) of borrowings outstanding. |
| |
In April 2002, the Company entered into a ten year,
$8.4 million mortgage loan on its Suwanee, Georgia distribution facility. The
mortgage has monthly principal and interest payments of $62,000 through May
2012, with a final additional principal payment of $6.4 million at maturity in
May 2012. The mortgage bears interest at 7.04% and is collateralized by the
underlying land and building. |
| 4. |
Business Combinations and Goodwill |
| |
In July 2001, the Financial Accounting Standards
Board ("FASB") issued SFAS 141, "Business Combinations," which requires all
business combinations initiated after June 30, 2001 to be accounted for
under the purchase method. SFAS 141 also sets forth guidelines for applying
the purchase method of accounting in the determination of intangible assets,
including goodwill acquired in a business combination, and expands financial
disclosures concerning business combinations consummated after June 30,
2001. The application of SFAS 141 did not affect any previously reported
amounts included in goodwill. |
| |
Effective January 1, 2002, the Company adopted
SFAS 142, "Goodwill and Other Intangible Assets," which establishes new
accounting and reporting requirements for goodwill and other intangible assets.
Under SFAS 142, all goodwill amortization ceased effective January 1,
2002. The Company is required to perform a transitional impairment analysis,
which it currently expects to complete by June 30, 2002. At this time, the
Company anticipates that it will take a substantial write-off as a result of
this analysis. The Company will also be required to perform an annual impairment
test. Under SFAS 142, any impairment adjustment recognized at adoption of
the new rules will be reflected as a cumulative effect of accounting change.
Impairment adjustments recognized after adoption, if any, generally are required
to be recognized as operating expenses. |
| |
Actual results of operations for the three-month
period ended March 31, 2002 and pro forma results of operations for the
three-month period ended March 31, 2001 had the Company applied the
non-amortization provisions of SFAS 142 in that period follows (in thousands,
except per share amounts): |
Three Month Periods Ended March 31,
-----------------------------------
2002 2001
---- ----
Reported net income $ 585 $ 363
Add: Goodwill amortization, net of tax 278
------- -------
Adjusted net income $ 585 $ 641
======= =======
Basic and diluted net income per share:
Reported net income $ .02 $ .01
Goodwill amortization .01
------- ------
Adjusted net income $ .02 $ .02
======= ======
| |
The Company is engaged in a single reportable
segment, the marketing and sales of various business products. Financial
information relating to the Company's operations by geographic area was as
follows: |
Three Month Periods Ended
March 31,
-------------------------
2002 2001
---- ----
Net Sales (in thousands):
North America $ 257,952 $ 248,239
Europe 154,308 157,659
---------- ---------
Consolidated $ 412,260 $ 405,898
========= =========
Revenues are attributed to countries based on location of selling subsidiary.
| 6. |
Recent Accounting Pronouncements |
| |
In August 2001, the FASB issued SFAS 143, "
Accounting for Asset Retirement Obligations". This standard requires entities to
record the fair value of a liability for an asset retirement obligation in the
period in which it is incurred. When the liability is initially recorded, the
entity capitalizes the cost associated with the asset retirement obligation by
increasing the carrying amount of the related long-lived asset. Over time, the
liability is adjusted to its present value each period, and the capitalized cost
is depreciated over the useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligation for its recorded amount or
incurs a gain or loss upon settlement. The standard is effective for fiscal
years beginning after June 15, 2002. The adoption of SFAS 143 is not expected to
have a material impact on the Company's financial position or results of
operations. |
| Item 2. |
Management's Discussion and Analysis of Financial Condition and
Results of Operations. |
|
Three Months Ended March 31, 2002 Compared to Three Months Ended
March 31, 2001 |
| |
Net sales for the three months ended March 31, 2002
increased 1.6% to $412 million compared to $406 million in the year-ago quarter.
North American sales increased 3.9% to $258.0 million from $248.2 million in the
prior year. The increase was primarily attributable to increased sales of PCs
and computer related products. European sales decreased 2.1% to $154.3 million
(representing 37% of worldwide sales) compared to $157.7 million in the year-ago
quarter. Movements in foreign exchange rates negatively impacted the European
sales comparison by approximately $5.4 million in 2002. Excluding the movements
in foreign exchange rates, European sales would have increased 1.2% over the
prior year. |
| |
Gross profit was $73.8 million, or 17.9% of net
sales, compared to $66.1 million, or 16.3% of net sales, in the year-ago
quarter, an increase of $7.7 million. The improvement in the gross profit
percentage was due to a favorable shift in product mix and continued cost
reductions and margin improvements in the Company's PC business. |
| |
Selling, general and administrative expenses for the
quarter increased by $8.1 million or 12.5% to $72.9 million compared to $64.8
million in the first quarter of 2001. This increase resulted from increased
advertising expenses related to sales of its PCs and costs associated with
implementation of new e-commerce and information system applications. As a
percentage of sales, selling, general and administrative expenses were 17.7%
compared to 16.0% in the year-ago quarter. |
| |
The Company had income from operations for the
current quarter of $1.0 million compared to $1.3 million in the year-ago
quarter. The Company incurred a loss from operations of $1.7 million in its
North American operations in the current quarter compared to a loss from
operations of $4.5 million last year. Income from operations in Europe was $2.7
million, compared to $5.8 million in the year-ago quarter. |
| |
Interest and other expense - net consists principally
of interest expense. Interest expense decreased in 2002 as a result of decreased
short-term borrowings and lower interest rates. |
|
Income taxes consist of foreign income taxes paid or payable reduced by an
income tax benefit for U. S. operating loss carrybacks. |
| |
As a result of the above, net income for the quarter
was $0.6 million, or $.02 per basic and diluted share, compared to net income of
$0.4 million, or $.01 per basic and diluted share, in the first quarter of
2001. |
|
Liquidity and Capital Resources |
| |
The Company's cash balance totaled approximately $22
million at March 31, 2002. The Company's working capital at March 31, 2002 was
$109 million, increased from $103 million at the end of 2001, due principally to
a $19 million increase in accounts receivable and an $8 million increase in
inventories, offset by a $14 million decrease in cash and a $6 million decrease
in accounts payable and accrued expenses. |
| |
For the three months ended March 31, 2002, the
Company used cash in operating activities of $17.9 million compared to $19.3
million generated in the year ago period. In 2001, the Company applied for and
received a tax refund of approximately $25 million from the Internal Revenue
Service, which was used to repay short-term bank borrowings. Cash was used in
investing activities in 2002 for the purchase of property, plant and equipment,
primarily for construction of a new United Kingdom facility. Cash of $8 million
was provided by financing activities in 2002 from bank borrowings. In 2001, $29
million of cash was used in financing activities to repay bank borrowings. For
the three months ended March 31, 2002, cash and cash equivalents decreased by
$14 million. |
| |
As a result of the net loss incurred in the United
States for the year ended December 31, 2001, the Company applied for a refund of
approximately $11 million from the Internal Revenue Service. The refund will be
used to reduce the Company's short-term bank borrowings. |
| |
Under the Company's $70,000,000 revolving credit
agreement, which expires in June 2004, as of March 31, 2002 availability was
$51,235,000, against which there were outstanding advances of $4,705,000 and
outstanding letters of credit of $4,022,000. Under the Company's
£15,000,000 ($21,365,000 at the March 31, 2002 exchange rate)
multi-currency United Kingdom credit facility, there were no borrowings
outstanding as of March 31, 2002. |
| |
The Company entered into an 11½ year term loan
agreement with Barclays Bank, which provides up to £5.4 million ($7.7
million) to finance the construction of its new United Kingdom facility. The
borrowings will be secured by the land and building and are repayable in 40
quarterly installments of £135,000 ($192,000), assuming the full amount of
the facility is drawn, beginning in February 2003. The outstanding borrowings
bear interest at rates ranging from LIBOR plus 160 basis points to LIBOR plus
210 basis points. The agreement contains certain financial and other covenants
related to the Company's United Kingdom's subsidiaries. At March 31, 2002 there
were £2,300,000 ($3,275,000) of borrowings outstanding. |
| |
In April 2002, the Company entered into a ten year,
$8.4 million mortgage loan on its Suwanee, Georgia distribution facility. The
mortgage has monthly principal and interest payments of $62,000 through May
2012, with a final additional principal payment of $6.4 million at maturity in
May 2012. The mortgage bears interest at 7.04% and is collateralized by the
underlying land and building. |
|
Forward Looking Statements - Factors That May Affect Future Results |
| |
This report contains forward looking statements
within the meaning of that term in the Private Securities Litigation Reform Act
of 1995 (Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934). Additional written or oral forward looking
statements may be made by the Company from time to time, in filings with the
Securities Exchange Commission or otherwise. Statements contained in this report
that are not historical facts are forward looking statements made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Forward looking statements may include, but are not limited to,
projections of revenue, income or loss and capital expenditures, statements
regarding future operations, financing needs, compliance with financial
covenants in loan agreements, plans for acquisition or sale of assets or
businesses and consolidation of operations of newly acquired businesses, and
plans relating to products or services of the Company, assessments of
materiality, predictions of future events and the effects of pending and
possible litigation, as well as assumptions relating to the foregoing. In
addition, when used in this discussion, the words "anticipates", "believes",
"estimates", "expects", "intends", "plans" and variations thereof and similar
expressions are intended to identify forward looking statements. |
| |
Forward looking statements are inherently subject to
risks and uncertainties, some of which cannot be predicted or quantified based
on current expectations. Consequently, future events and results could differ
materially from those set forth in, contemplated by, or underlying the forward
looking statements contained in this report. Statements in this report,
particularly in "Item 1. Business", "Item 3. Legal Proceedings", "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations", and the Notes to Consolidated Financial Statements describe certain
factors, among others, that could contribute to or cause such
differences. |
|
Some of the factors that may affect future results are discussed below. |
| |
The Company is subject to global economic and market
conditions, including the current conditions affecting the results of the
Company's customers. The Company's results have been and could continue to be
adversely affected depending on the length and severity of the current economic
downturn. The Company may experience a continued decline in sales as a result of
the current economic conditions and the lack of visibility relating to future
orders. In response to economic conditions, the Company from time to time
adjusts its cost structure to reduce spending where appropriate. A failure by
the Company to reduce costs in a timely manner could adversely affect the
Company's future operating results. In addition, notwithstanding such cost
control measures, a continuing decline in the economy that adversely affects the
Company's customers would likely adversely affect the Company as
well. |
| |
The Company's consolidated results of operations
depends upon, among other things, its ability to maintain and increase sales
volumes with existing customers; its ability to attract new customers and the
financial condition of its customers. The Company cannot predict with any
certainty whether it will be able to maintain or improve upon historical sales
volumes with existing customers, or whether it will be able to attract new
customers. |
| |
The Company may not be able to compete effectively
with current or future competitors. The market for the Company's products and
services is intensely competitive and subject to constant technological change.
The Company expects this competition to further intensify in the future. Some
competitors are large companies with greater financial, marketing and product
development resources than the Company's. In addition, new competitors may enter
the Company's key markets. This may place the Company at a disadvantage in
responding to competitors' pricing strategies, technological advances and other
initiatives. |
| |
In many cases the Company's products compete directly
with those offered by other manufacturers and distributors. If any of the
Company's competitors were to develop products or services that are more
cost-effective or technically superior, demand for the Company's product
offerings could decrease. |
| |
The Company purchases certain materials and
components for its products from various suppliers, some of which are located
outside of the U.S. Any loss of, or interruption of supply from key suppliers
may require the Company to find new suppliers. This could result in production
or development delays while new suppliers are located, which could substantially
impair operating results. |
| |
The Company's PC products contain electronic
components, subassemblies and software that in some cases are supplied through
sole or limited source third-party suppliers. Although the Company does not
anticipate any problems procuring supplies in the near-term, there can never be
any assurance that parts and supplies will be available in a timely manner and
at reasonable prices. If the availability of these or other components used in
the manufacture of our products was to decrease, or if the prices for these
components was to increase significantly, operating costs and expenses could be
adversely affected. |
| |
A significant portion of the Company's revenues are
derived from the sale of products manufactured using licensed patents, software
and/or technology. Failure to renew these licenses on favorable terms or at all
could force the Company to stop manufacturing and distributing these products
and the Company's financial condition could be adversely affected. |
| |
The Company's inventory is subject to risk due to
changes in market demand for particular products. The resulting excess and/or
obsolete inventory could have an adverse impact on the Company's results of
operations. |
| |
The Company currently has operations located in nine
countries outside the United States, and non-U.S. sales accounted for 39% of the
Company's revenue during the first quarter of 2002. The Company's future results
could be adversely affected by several factors, including changes in foreign
currency exchange rates, changes in a country's economic or political
conditions, unexpected changes in regulatory requirements and natural
disasters. |
| |
The Company's current domestic credit facility
expires on June 15, 2004. If the Company is unable to renew or replace this
credit facility, its liquidity and capital resources may be adversely
affected. |
| |
Other factors that could contribute to or cause such
differences include, but are not limited to, unanticipated developments in any
one or more of the following areas: (i) the effect on the Company of volatility
in the price of paper and periodic increases in postage rates, (ii) the
operation of the Company's management information systems, (iii) significant
changes in the computer products retail industry, especially relating to the
distribution and sale of such products, (iv) the potential for expanded
imposition of state sales taxes, use taxes, or other taxes on direct marketing
and e-commerce companies, (v) timely availability of existing and new products,
(vi) risks involved with e-commerce, including possible loss of business and
customer dissatisfaction if outages or other computer-related problems should
preclude customer access to the Company, (vii) risks associated with delivery of
merchandise to customers by utilizing common delivery services such as the
United States Postal Service and UPS, including possible strikes and
contamination, (viii) borrowing costs, (ix) changes in taxes due to changes in
the mix of U.S. and non-U.S. revenue, (x) pending or threatened litigation and
investigations and (xi) the availability of key personnel, as well as other risk
factors which may be detailed from time to time in the Company's Securities and
Exchange Commission filings. |
| |
Readers are cautioned not to place undue reliance on
any forward looking statements contained this report, which speak only as of the
date of this report. The Company undertakes no obligation to publicly release
the result of any revisions to these forward looking statements that may be made
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unexpected events. |
| Item 3. |
Quantitative and Qualitative Disclosure About Market Risk. |
|
The Company is exposed to market risks, which include changes in U.S. and
international interest rates as well as changes in currency exchange rates as
measured against the U.S. dollar and each other. |
| |
The Company has no involvement with derivative
financial instruments and does not use them for trading purposes. Changes in
currency exchange rates as measured against the U.S. dollar may positively or
negatively affect Systemax's sales, gross margins, operating expenses and
retained earnings as expressed in U.S. dollars. The Company may enter into
foreign currency options or forward exchange contracts aimed at limiting in part
the impact of certain currency fluctuations, but as of March 31, 2002 the
Company had no outstanding forward exchange contracts. |
| |
In connection with the term loan agreement entered
into with Barclays Bank, the Company has also entered into an interest rate
collar to reduce its exposure to market rate fluctuations. The collar becomes
effective on April 30, 2002 and covers a period of three years. The collar has a
cap of 6.0% and a floor of 4.5% on the outstanding loan balance. |
PART II - OTHER INFORMATION
| |
3.1 |
Composite Certificate of Incorporation of Registrant, as amended. (Incorporated
herein by reference to Exhibit 3.1 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2001.) |
| |
3.2 |
By-laws of Registrant. (Incorporated herein by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1, File No. 33-92052). |
| |
4.1 |
Stockholders Agreement. (Incorporated herein by reference to the Company's
quarterly report on Form 10-Q for the quarterly period ended June 30, 1995). |
| |
4.2 |
Specimen Stock Certificate. (Incorporated herein by reference to Exhibit 19.1 to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2001). |
| |
10.1 |
Promissory Note of Systemax Suwanee LLC, dated as of April 18, 2002,
payable to the order of New York Life Insurance Company in the original sum of
$8,400,000. |
| |
10.2 |
Deed to Secure Debt, Assignment of Leases and Rents and Security
Agreement, dated as of April 18, 2002, from Systemax Suwanee LLC to New York
Life Insurance Company. |
| |
10.3 |
Amendment No. 4, dated as of April 18, 2002, to the Loan and
Security Agreement, dated June 13, 2001, between The Chase Manhattan Bank (as
Lender and Agent) and TransAmerica Business Capital Corporation (as Lender and
Co-Agent) with the Company and certain subsidiaries of the Company (as Borrowers). |
| |
(b) |
Reports on Form 8-K.
(i) A report on Form
8-K was filed by the Company on March 5, 2002 regarding the Company's financial
results for the fourth quarter and year ended December 31, 2001. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
| Date: May 14, 2002 |
By: /s/ RICHARD LEEDS
Richard Leeds
Chairman and Chief Executive Officer
By: /s/ STEVEN GOLDSCHEIN
Steven Goldschein
Senior Vice President and Chief Financial Officer |
EXHIBIT INDEX
| 10.1 |
Promissory Note of Systemax Suwanee LLC, dated as of April 18, 2002, payable to
the order of New York Life Insurance Company in the original principal sum of
$8,400,000. |
| 10.2 |
Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement,
dated as of April 18, 2002, from Systemax Suwanee LLC to New York Life Insurance
Company. |
| 10.3 |
Amendment No. 4, dated as of April 18, 2002, to the Loan and Security Agreement,
dated June 13, 2001, between The Chase Manhattan Bank (as Lender and Agent) and
TransAmerica Business Capital Corporation (as Lender and Co-Agent) with the
Company and certain subsidiaries of the Company (as Borrowers). |
