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Systemax: Shuttering our North America Tech Group may cost $55m
Exiting leases, closing exec ops, selling inventory
Systemax has gone public with the cost of dotting the Is and crossing the Ts in the closure of its remaining North America Technology Group (NATG), and it's going to be pricey. Very pricey.
The ailing reseller revealed last week that US dealer PCM has offered $14m to pick up certain assets, including the right to hire roughly 400 NATG B2B sales people, the biz customer list and certain contracts, some vendor agreements, trademarks, fixed assets and equipment, related websites and the TigerDirect brand.
The remaining part of the business, including three retail stores, management operations and the distribution centre are to be shuttered, and around 500 staff are to be laid off.
“The company anticipates that one time exit charges related to these actions will aggregate between $48m to $55m,” stated Systemax in a filing with the SEC last night.
Included in the eye watering one-time charges is between $4m to $5m of severance expenses, $20m to $23m in losses on inventory and receivables, $3m to $4m in transaction fees, $17m to $19m in lease costs and $4m for other charges that will largely be cash based.
The costs will hang around the firm's neck from the fourth quarter of 2015 right through to the end of 2017. Systemax expects its cash inflows, from accounts receivable and inventory sales along with the $14m from PCM, to be “more than sufficient to offset cash outflows”.
Under the terms of the deal, PCM will have the option to acquire the consumer customer list and related info for $500k.
The NATG has been the problem child for Systemax for a number of years, as the slowdown in consumer demand for traditional tech slowed. It started to consolidates retail operations some years back, closing down PC production and months ago exiting 31 stores.
In the nine months of calendar ’15 ended 30 September, NATG turned over $934m in sales, down 24.2 per cent year-on-year and reported operating losses of $68.2m, versus a loss of $15.4m.
The Tech Group in Europe, which trades as Misco, is challenged and a turnaround plan was put in place by new boss Simon Taylor after he was instated in the summer.
The Industrial Product Group across the pond is the one area of the corporation that is still growing well, but this covers products such as air-con units, office furniture, not tech. ®