Systemax(US:GIC)2020-05-05 19:58Financial Performance - Consolidated sales decreased 2.1% to $227.3 million for the three-month period ended March 31, 2020, compared to $232.2 million in 2019[70] - Consolidated operating income declined 12.9% to $11.5 million for the three-month period ended March 31, 2020, compared to $13.2 million in 2019[70] - Net income per diluted share from continuing operations decreased 19.2% to $0.21 for the three-month period ended March 31, 2020, compared to 2019[70] - Consolidated gross profit was $76.7 million for the three-month period ended March 31, 2020, down from $80.3 million in 2019, reflecting a 4.5% decline[71] - Consolidated gross margin decreased to 33.7% for the three-month period ended March 31, 2020, compared to 34.6% in 2019[71] - Net margin from continuing operations decreased to 3.7% for the three-month period ended March 31, 2020, compared to 4.3% in 2019[71] - Average daily sales declined by 2.1% from $3.63 million in Q1 2019 to $3.56 million in Q1 2020[78] - Operating income fell by 12.9% to $11.5 million, with an operating margin decrease of 60 basis points to 5.1%[86] - Gross margin declined by 90 basis points due to a shift in product mix towards lower-margin safety and PPE products[82] Costs and Expenses - Consolidated selling, distribution, and administrative (SD&A) costs were $65.2 million for the three-month period ended March 31, 2020, down from $67.1 million in 2019, a decrease of 2.8%[71] - The effective income tax rate increased to 26.5% for the three-month period ended March 31, 2020, compared to 24.2% in 2019[71] Cash Flow and Liquidity - Cash and cash equivalents decreased by $33.1 million to $64.1 million as of March 31, 2020[91] - Net cash provided by operating activities from continuing operations was $13.7 million, down from $23.8 million in Q1 2019[92] - Working capital decreased by $36.6 million, primarily due to reduced cash balances after a $43.3 million dividend payment[93] - The company maintains a $75.0 million secured revolving credit facility, with total availability of $73.0 million as of March 31, 2020[98] - As of March 31, 2020, the company had over $131 million in liquidity, which includes cash and undrawn lines of credit, sufficient to fund its U.S. operations and capital needs[104] - The company believes that its cash balances, future cash flows from operations, and availability under credit facilities will be sufficient to fund its working capital and other cash requirements for the next twelve months[103] Backlog and Supply Chain - The backlog of orders increased substantially due to constrained availability of COVID-19 response items, leading to low double-digit revenue declines during the closing weeks of the quarter[63] - The company anticipates being able to ship a portion of the backlog in the second quarter as visibility into the supply chain and product lead times has improved[63] - The company anticipates shipping a portion of its backlog in Q2 2020 as supply chain visibility improves, with a backlog increase due to COVID-19[78] Legal and Risk Management - The company does not expect that the outcome of ongoing legal proceedings will have a material adverse effect on its financial position or results of operations[116] - The company has established accruals for various lawsuits and claims based on estimates of the most likely outcomes as of March 31, 2020[116] - The company has limited involvement with derivative financial instruments and had no outstanding foreign currency options or forward exchange contracts as of March 31, 2020[107] Capital Expenditures - The company anticipates capital expenditures in the range of $3.0 to $5.0 million for 2020, although it is not contractually committed to these expenditures at this time[102] Interest Rate and Financial Reporting - The company has no outstanding balances under its variable rate credit facility as of March 31, 2020, indicating minimal exposure to interest rate risk[108] - The company has not created any off-balance sheet entities for raising capital or incurring debt, ensuring transparency in its financial reporting[105] - The company maintains its cash and cash equivalents in money market funds or equivalent with maturities of less than three months, minimizing interest rate risk exposure[104] - Cash balances held in foreign subsidiaries totaled approximately $3.8 million as of March 31, 2020, held in local country banks[104]