Systemax(US:GIC)2022-10-31 16:00Financial Performance - Consolidated sales increased 7.6% to $298.5 million for Q3 2022 compared to $277.4 million last year[59] - Consolidated gross margin declined to 35.7% for Q3 2022 compared to 36.8% last year[68] - Consolidated operating income from continuing operations decreased 10.1% to $27.5 million for Q3 2022 compared to $30.6 million last year[68] - Net income per diluted share from continuing operations decreased 13.1% to $0.53 for Q3 2022 compared to $0.61 last year[68] - Consolidated sales increased 13.0% to $905.6 million for the nine months ended September 30, 2022 compared to $801.1 million last year[68] - Consolidated gross margin increased to 36.2% for the nine months ended September 30, 2022 compared to 34.6% last year[68] - Consolidated operating income from continuing operations increased 41.4% to $87.5 million for the nine months ended September 30, 2022 compared to $61.9 million last year[68] - Net income per diluted share from continuing operations increased 29.0% to $1.69 for the nine months ended September 30, 2022 compared to $1.31 last year[68] Market Conditions - The demand environment softened as customers adopted a more guarded approach to buying decisions due to broader market uncertainty[59] Investments and Costs - Investments in the expansion of the Canada distribution network included approximately $0.8 million in ramp-up costs incurred in Q3 2022[59] - Selling, distribution, and administrative (SD&A) costs increased by 10.8% to $79.1 million for the third quarter, reflecting investments in the Canadian distribution network and e-commerce enhancements[78] Cash Flow and Liquidity - Cash and cash equivalents increased by $4.6 million to $20.0 million as of September 30, 2022, compared to $15.4 million at the end of 2021[86] - Working capital increased by $44.7 million to $166.2 million, primarily due to increased inventory and accounts receivable[88] - Net cash provided by operating activities from continuing operations was $23.5 million in 2022, down from $39.3 million in 2021, primarily due to a $48.6 million cash usage in working capital accounts compared to $14.7 million in 2021[90] - Cash generated from net income adjusted by other non-cash items was $72.1 million in 2022, an increase from $54.0 million in 2021, attributed to higher net income for the nine months ended September 30, 2022[90] - Net cash used in investing activities totaled $4.9 million in 2022, up from $3.4 million in 2021, mainly for warehouse machinery and equipment related to the new Canadian distribution center[91] - Net cash used in financing activities was $13.6 million in 2022, primarily due to a quarterly dividend of $0.18 per share totaling approximately $20.8 million, partially offset by $5.5 million from short-term borrowings[92] - The company maintains a $75.0 million secured revolving credit facility, with total outstanding borrowings of $10.0 million and total excess availability of $60.8 million as of September 30, 2022[93] - The company had approximately $76 million of liquidity (cash and undrawn line of credit) in the U.S. as of September 30, 2022[98] Obligations and Expenditures - Obligations under non-cancelable operating leases totaled approximately $101.5 million as of September 30, 2022, with remaining cash expenditures anticipated at $4.1 million for 2022[99] - The company had $1.5 million of standby letters of credit outstanding as of September 30, 2022[100] - Anticipated capital expenditures for 2022 are in the range of $6.0 to $7.0 million, with no contractual commitments at this time[96] Interest and Tax - Interest and other expense, net from continuing operations rose to $0.6 million for the third quarter of 2022, compared to $0.2 million in the same period of 2021[82] - The effective income tax rate increased to 24.5% for the third quarter of 2022, compared to 23.7% in the same period of 2021[74] - The company does not expect a material effect on financial position from a hypothetical one percentage point change in average interest rates, given $10.0 million outstanding under variable rate credit facilities[103]