Circuit City 2002 Annual Report Download

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SYSTEMAX INC
FORM 10-K
(Annual Report)
Filed 03/31/03 for the Period Ending 12/31/02
Address 11 HARBOR PARK DR
PORT WASHINGTON, NY 11050
Telephone 5166087000
CIK 0000945114
Symbol SYX
SIC Code 5961 - Catalog and Mail-Order Houses
Industry Retail (Catalog & Mail Order)
Sector Services
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2008, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    SYSTEMAX INC FORM 10-K (Annual Report) Filed 03/31/03 for the Period Ending 12/31/02 Address Telephone CIK Symbol SIC Code Industry Sector Fiscal Year 11 HARBOR PARK DR PORT WASHINGTON, NY 11050 5166087000 0000945114 SYX 5961 - Catalog and Mail-Order Houses Retail (Catalog & Mail Order) Services ...

  • Page 2
    ...New York (Address of principal executive offices) 11-3262067 (I.R.S. Employer Identification No.) 11050 (Zip Code) Registrant's telephone number, including area code: (516) 608-7000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on which registered New York Stock...

  • Page 3
    ... Statement of Systemax Inc. relating to the 2003 Annual Meeting of Stockholders is incorporated by reference in Part III hereof. TABLE OF CONTENTS Part I Item 1. Business...1 General...1 Recent Developments...1 Products...2 Sales and Marketing...2 Distribution Centers...4 Suppliers...5 Management...

  • Page 4
    ... order fulfillment and extensive customer service. Computers and computer related products accounted for 90% of the Company's net sales in 2002. Systemax markets its products through an integrated system of distinctively branded, full-color direct mail catalogs, proprietary "e-commerce" internet...

  • Page 5
    ... marketing" team services large and mid-sized business customers and educational organizations and government agencies. Their efforts are supported by frequent catalog mailings and e-mail campaigns in order to generate inbound telephone sales and the availability of interactive Company web sites...

  • Page 6
    ...'s locations. Systemax generally provides toll-free telephone number access to its customers. Certain of the Company's domestic call centers are linked to provide telephone backup in the event of a disruption in phone service. In addition to telephone orders, Systemax also receives orders by mail...

  • Page 7
    items, large furniture and large industrial items shipped directly by the vendor) within one or two business days of the order date. The Company provides extensive technical support to its Systemax brand PC customers. A database of commonly asked questions is maintained and is available to technical...

  • Page 8
    ... designed include PCs, servers, furniture, ergonomic monitor support arms, printer and monitor stands, wrist rests and other durable computer related products, storage racks and shelving systems, various stock and storage carts, work benches, plastic bins and shop furniture. The Company owns the...

  • Page 9
    ...no assurance that the Company will not be required to incur remediation or other costs in connection with environmental matters in the future. Financial Information About Foreign and Domestic Operations The Company conducts its business in North America (the United States and Canada) and Europe. The...

  • Page 10
    ...-------- Headquarters, Sales and Distribution Center (1)...Port Washington, NY Sales and Distribution Center (2)...Suwanee, GA Sales and Distribution Center...Compton, CA Sales and Distribution Center...Naperville, IL Sales Center...Holmdel, NJ Sales and Distribution Center...Markham, Ontario Sales...

  • Page 11
    PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. The Company's common stock is traded on the New York Stock Exchange under the symbol "SYX". The following table sets forth the high and low closing sales price of the Company's common stock as reported on the New ...

  • Page 12
    ... of change in accounting principle, net of tax Net income (loss) per common share, basic and diluted Weighted average common shares outstanding: Basic and diluted Selected Operating Data Orders entered Number of catalogs distributed Number of catalog titles Balance Sheet Data Working capital Total...

  • Page 13
    ... located in nine countries outside the United States, and non-U.S. sales accounted for 39% of the Company's revenue during 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...

  • Page 14
    ... 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...

  • Page 15
    ...the Company resold at sharply reduced prices, but at acceptable gross profit margins, and Systemax PCs. Sales in North America decreased 13.7% to $983 million in 2001 from $1.14 billion in 2000 primarily as a result of the economic slowdown in the United States. Decreased sales to business customers...

  • Page 16
    ... the second quarter of 2000, the Company sold its internet auction subsidiary, EZBid Inc., and closed a small software sales subsidiary, which together eliminated approximately $5 million in operating losses on an annualized basis. Operating income in Europe decreased to $7.8 million in 2002, from...

  • Page 17
    ... 1, 2002. Accordingly, the Company recorded a transitional impairment loss of $68 million ($51 million net of tax or a net loss per share of $1.50) as a cumulative effect of change in accounting principle in its statements of operations for the year ended December 31, 2002. NET INCOME (LOSS) As...

  • Page 18
    ... borrowings outstanding under this line with interest payable at a rate of 6.08%. In 2002 the Company entered into a £6.6 million ($10.6 million), 11½ year term loan agreement with a United Kingdom bank, to finance the construction of its new United Kingdom facility. The borrowings are secured by...

  • Page 19
    ... 1 to the consolidated financial statements. The policies below have been identified as critical to the Company's business operations and understanding the results of operations. Certain accounting policies require the application of significant judgment by management in selecting the appropriate...

  • Page 20
    ... allowances that might be required against the deferred tax assets. Since the Company conducts operations internationally, its effective tax rate has and will continue to depend upon the geographic distribution of its pre-tax income or losses among locations with varying tax rates. As the geographic...

  • Page 21
    ... of accounting for stock-based employee compensation and the effect of the method used on reported results. Finally, this Statement amends APB Opinion 28, "Interim Financial Reporting", to require disclosure about those effects in interim financial information. SFAS 148 is effective for fiscal years...

  • Page 22
    ...None. PART III Item 10. Directors and Executive Officers of the Registrant. The information required by Item 10 of Part III is hereby incorporated by reference from the Company's Proxy Statement for the 2003 Annual Meeting of Stockholders (the "Proxy Statement"). Item 11. Executive Compensation. The...

  • Page 23
    ...evaluation. PART IV Item 15. Exhibits, Financial Statements, Schedules and Reports on Form 8-K. (a) 1. The Consolidated Financial Statements of Systemax Inc. Independent Auditors' Report Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Shareholders' Equity...

  • Page 24
    ... dated as of April 18, 2002 from Systemax Suwanee LLC to New York Life Insurance Company 12 (b) 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...

  • Page 25
    ..., thereunto duly authorized in Port Washington, New York on the 27th day of March, 2003. SYSTEMAX INC. By: /s/ RICHARD LEEDS Richard Leeds Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following...

  • Page 26
    ... EXECUTIVE OFFICER I, Richard Leeds, Chief Executive Officer of Systemax Inc., certify that: 1. I have reviewed this annual report on Form 10-K of Systemax Inc. (the "registrant"); 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state...

  • Page 27
    ... generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and...

  • Page 28
    ... generally accepted in the United States of America. As discussed in Note 1 to the consolidated financial statements, the Company changed its method for accounting for goodwill and other intangible assets in 2002 to conform to Financial Accounting Standards Board Statement No. 142 ("Goodwill and...

  • Page 29
    ... SYSTEMAX INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000 (IN THOUSANDS) Accumulated Common Stock Other Additional Comprehensive Treasury Number of Paid-in Retained Income (Loss), Stock Comprehensive Shares Amount Capital Earnings Net of Tax...

  • Page 30
    ... statements. SYSTEMAX INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000 (IN THOUSANDS) 2002 2001 2000 ------- ---CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net income (loss)$(58,939) $653 $(40,771) Adjustments to reconcile net income (loss...

  • Page 31
    ... as debt securities available-for-sale and are stated at fair market value. Unrealized holding gains and losses are not significant for any of the years presented. Revenue Recognition #150; The Company recognizes sales of products, including shipping revenue, at the time of shipment. Allowances for...

  • Page 32
    ... over the fair market value of the asset is recognized. Net Income (Loss) Per Common Share - The Company calculates net income (loss) per share in accordance with SFAS 128, "Earnings Per Share". Net income (loss) per common share-basic was calculated based upon the weighted average number of common...

  • Page 33
    ... value alternative method as stated in SFAS 123, "Accounting for Stock-Based Compensation" (in thousands, except per share data): Net income (loss) - as reported Stock-based employee compensation expense determined under fair value based method, net of related tax effects Pro forma net loss 2002...

  • Page 34
    ... of accounting for stock-based employee compensation and the effect of the method used on reported results. Finally, this Statement amends APB Opinion 28, "Interim Financial Reporting", to require disclosure about those effects in interim financial information. SFAS 148 is effective for fiscal years...

  • Page 35
    ...a $70,000,000 revolving credit agreement with a group of financial institutions which provides for borrowings in the United States. The borrowings are secured by all of the domestic accounts receivable and inventories of the Company and the Company's shares of stock in its domestic subsidiaries. The

  • Page 36
    ... eligible accounts receivable and up to 25% of qualified inventories. The interest on outstanding advances is payable monthly, at the Company's option, at the agent bank's base rate (4.25% at December 31, 2002) plus 0.25% to 0.75% or the bank's daily LIBOR rate (3.13% at December 31, 2002) plus 2.25...

  • Page 37
    ... plan allows the Company to issue qualified, non-qualified and deferred compensation stock options, stock appreciation rights, restricted stock and restricted unit grants, performance unit grants and other stock based awards authorized by the Compensation Committee of the Board of Directors. Options...

  • Page 38
    ...a ten year term from grant date and are immediately exercisable. A maximum of 100,000 shares may be granted for awards under this plan. This plan will terminate the day following the tenth annual shareholders meeting. A total of 53,000 options were outstanding under this plan as of December 31, 2002...

  • Page 39
    ...) and the computed income tax expense based on the Federal statutory corporate rate is as follows (in thousands): Years Ended December 31 2002 2001 2000 Income tax at Federal statutory rate$(3,152 ) $ 365 $ (22,839) State and local income taxes, net of federal tax benefit (111) 145 Tax credits(906...

  • Page 40
    ... in New York from an entity owned by the Company's three principal shareholders and senior executive officers (see Note 4). At December 31, 2002 future minimum annual lease payments for related and third-party leases were as follows (in thousands): 2003...2004...2005...2006...2007...2008-2012...

  • Page 41
    ... integrated system of direct mail catalogs, a network of major account sales representatives and proprietary e-commerce Internet web-sites. Financial information relating to the Company's operations by geographic area was as follows (in thousands): Net Sales 2002 2001 North America$ Europe 587,712...

  • Page 42
    ... Accountants Revised Charter of the Audit Committee of the Company's Board of Directors Charter of the Compensation Committee of the Company's Board of Directors Charter of the Nominating/Corporate Governance Committee of the Company's Board of Directors Certification of the Chief Executive Officer...

  • Page 43
    ...'s change in method of accounting for goodwill and other intangible assets to conform to Financial Accounting Standards Board Statement No. 142, appearing in this Annual Report on Form 10-K of Systemax Inc. for the year ended December 31, 2002. /s/ Deloitte & Touche LLP New York, New York March 31...

  • Page 44
    ...in which the Company provides earnings guidance. As appropriate, obtain advice and assistance from outside legal, accounting or other advisors. Discuss policies with respect to risk assessment and risk management. While it is the job of the chief executive officer and senior management to assess and...

  • Page 45
    ...in the business judgment of the Board, "independent" under Section 10A(m)(3) of the Securities Exchange Act of 1934, the rules of the New York Stock Exchange and any other securities exchange on which the Company's securities are listed. Each member of the Committee shall be financially literate (or...

  • Page 46
    ... Officer's compensation, the Committee should consider, among other factors, the Company's performance and relative shareholder return, the value of similar incentive awards for chief executive officers at comparable companies and the awards given to the Chief Executive Officer in past years; Review...

  • Page 47
    ... Company's proxy statement, and otherwise report to the shareholders of the Company in accordance with the rules and regulations of the U.S. Securities and Exchange Commission; and Perform such other duties as the Board may assign to the Committee with respect to the Company's compensation policies...

  • Page 48
    ...; Develop and recommend to the Board a code of business conduct and ethics applicable to the Company, and to review the code at least once a year; Develop and recommend to the Board a set of corporate governance principles applicable to the Company, and to review those principles at least once...

  • Page 49
    ...of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78 (o)(d)) and that the information contained in such Form 10-K fairly presents, in all material respects, the financial condition and results of operation of Systemax Inc. Dated: March 27, 2003 /s/ Richard Leeds Richard Leeds, Chief Executive...