PFSweb Reports 23% Service Fee Revenue Growth in Third Quarter of 2012 Compared to Prior Year

  PFSweb Reports 23% Service Fee Revenue Growth in Third Quarter of 2012
  Compared to Prior Year

            Adjusted EBITDA increases 300% compared to prior year

   PFSweb Increases Fiscal 2012 Adjusted EBITDA Guidance to $10-12 Million

Business Wire

ALLEN, Texas -- November 08, 2012

PFSweb, Inc. (Nasdaq: PFSW), an international provider of end-to-end web
commerce solutions, today announced its financial results for the third
quarter ended September 30, 2012.

Mark Layton, Chairman and Chief Executive Officer of PFSweb, stated, “Fueled
by new clients as well as increases in certain existing client activity, our
Service Fee Equivalent Revenue increased 18% to $30.2 million, as compared to
the third quarter of 2011. This growth, coupled with an ongoing focus on
operating costs and efficiencies, resulted in an improved Adjusted EBITDA for
the third quarter of 2012 to $2.8 million, a 300% increase over the same
period last year. With these improved third quarter results and our current
expectations of client volumes during this upcoming holiday season, we
continue to target an annual increase in our Service Fee Equivalent Revenue
for 2012 of 20%, and we are increasing our Adjusted EBITDA target to a range
of $10 million to $12 million for the year.”

“This past quarter we finalized two new client programs, bringing our new
client program count for 2012 to 10. In addition, we continue to have a robust
new business pipeline with more than $50 million in average annual contract
value based on client projections. To support new clients and our existing
clients’ activity anticipated for this upcoming holiday season, we continue to
make investments to bolster our overall capacity and reliability across all
phases of our business. These enhancements are designed to provide our
clients’ customers the outstanding shopping experience they desire,” added Mr.
Layton.

“We are continuing to develop new solutions to position PFSweb as a leader in
the eCommerce and omni-channel evolution through PFSweb’s Infinite Commerce
Initiative. Our goal is to act as the global facilitator for all types of
commerce for our clients across all channels and customer touch points. At
this stage, we are extending our order management and eCommerce technology
platforms to include cross-channel capabilities that fully integrate
brick-and-mortar stores, client and third-party fulfillment facilities. We are
also working on new mobile commerce capabilities, in-store customer support,
kiosks and ‘clienteling’ apps,” continued Mr. Layton.

Summary of consolidated results for the third quarter ended September 30,
2012:

  *Service Fee revenue increased 23% to $28.3 million, compared to $22.9
    million for the same period in 2011; Service Fee Equivalent Revenue (as
    defined) increased 18% to $30.2 million, compared to $25.6 million for the
    same period in 2011;
  *Total revenue decreased 6% to $66.5 million, compared to $70.9 million for
    the third quarter of 2011;
  *Adjusted EBITDA (as defined) increased 300% to $2.8 million, compared to
    $0.7 million for the same period in 2011;
  *Net loss was $0.4 million, or $0.03 per basic and diluted share, compared
    to a net loss of $1.8 million, or $0.14 per basic and diluted share, for
    the third quarter of 2011;
  *Non-GAAP net loss (as defined) was $62,000, or less than $0.01 per basic
    and diluted share, compared to a non-GAAP net loss of $1.5 million, or
    $0.12 per basic and diluted share, for the quarter ended September 30,
    2011;

Summary of consolidated results for the nine months ended September 30, 2012:

  *Service Fee revenue increased 35% to $85.0 million, compared with $62.8
    million for the nine months ended September 30, 2011; Service Fee
    Equivalent Revenue (as defined) increased 28% to $92.0 million, compared
    to $71.6 million for the same period in 2011;
  *Total revenue decreased 1% to $209.8 million compared to $211.3 million
    for the nine months ended September 30, 2011;
  *Adjusted EBITDA (as defined) was $8.2 million compared to $2.2 million for
    the nine months ended September 30, 2011;
  *Net loss was $2.2 million, or $0.17 per basic and diluted share, compared
    to a net loss of $5.3 million or $0.43 per basic and diluted share, for
    the nine months ended September 30, 2011. Net loss for the nine months
    ended September 30, 2012 included approximately $0.9 million of move
    related expenses, and $0.5 million of lease termination costs that were
    reflected in selling, general and administrative expenses. Net loss for
    the first nine months of 2011 included approximately $0.3 million of
    relocation related costs. Net loss for the first nine months of 2011 also
    included a $0.6 million net loss from discontinued operations related to
    eCOST.com;
  *Non-GAAP net income was $0.2 million, or $0.01 per basic and diluted
    share, compared to a non-GAAP net loss of $3.7 million, or $0.30 per basic
    and diluted share, for the nine months ended September 30, 2011.

“I am very pleased with our performance in 2012 and believe we have made the
appropriate investments to finish 2012 strong. The benefits of scale in our
business are clearly reflected in the improved Adjusted EBITDA results we have
produced this year. However, as previously discussed, we currently expect our
Service Fee Equivalent Revenue and profitability to be negatively impacted in
2013 by the conclusion or anticipated reduction of operations of several
client programs, projected declines in product revenue due to the impact of
restructuring efforts by our largest client relationship in our Business and
Retail Connect Segment, and further by the loss of certain scale and gross
margin mix benefits we achieved during 2012. While we continue to win new
client relationships and generate many new and exciting opportunities in our
sales pipeline, based on the client information and timing estimates we
currently have, we believe it is unlikely that projected new client revenue
will offset the impact of these expected reductions in 2013. We remain
optimistic about our growth potential as we look towards 2014 and beyond, but
our current focus on large client programs can result in large fluctuations in
client activity levels as existing clients choose to move operations in-house
or to other solutions and as new clients implementations begin. We expect to
provide 2013 projections in the first quarter of next year as we gather more
information from all our clients on their projected volumes,” concluded Mr.
Layton.

Conference Call Information

Management will host a conference call at 11:00 am Eastern Time (10:00 am
Central Time) on Thursday, November 8, 2012, to discuss the latest corporate
developments and results. To listen to the call, please dial (888) 562-3356
and enter the pin number 58992288 at least five minutes before the scheduled
start time. Investors can also access the call in a “listen only” mode via the
Internet at the Company’s website, www.pfsweb.com or www.kcsa.com. Please
allow extra time prior to the call to visit the site and download any
necessary audio software.

A digital replay of the conference call will be available through December 10,
2012 at (855) 859-2056, pin number 58992288. The replay also will be available
at the Company’s website for a limited time.

Non-GAAP Financial Measures

This news release may contain certain non-GAAP measures, including non-GAAP
net income (loss), Earnings Before Interest, Income Taxes, Depreciation and
Amortization (“EBITDA”), Adjusted EBITDA and Service Fee Equivalent Revenue.

Non-GAAP net income (loss) represents net income (loss) calculated in
accordance with U.S. GAAP as adjusted for the impact of non-cash stock-based
compensation expense, income (loss) from discontinued operations, lease
termination costs and certain move related expenses.

EBITDA represents earnings (or losses) before income (loss) from discontinued
operations, interest, income taxes, depreciation, and amortization. Adjusted
EBITDA further eliminates the effect of stock-based compensation, lease
termination costs, certain relocation related costs and certain move related
expenses.

Service Fee Equivalent Revenue represents service fee revenue plus the gross
profit earned on product revenue.

Non-GAAP net income (loss), EBITDA, Adjusted EBITDA and Service Fee Equivalent
Revenue are used by management, analysts, investors and other interested
parties in evaluating our operating performance compared to that of other
companies in our industry. The calculation of non-GAAP net income (loss)
eliminates the effect of stock-based compensation, income (loss) from
discontinued operations, lease termination costs and certain move related
expenses and EBITDA and Adjusted EBITDA further eliminate the effect of
financing, income taxes, the accounting effects of capital spending and
certain relocation related costs, which items may vary from different
companies for reasons unrelated to overall operating performance. Service Fee
Equivalent Revenue allows client contracts with similar operational support
models but different financial models to be combined as if all contracts were
being operated on a service fee revenue basis.

PFSweb believes these non-GAAP measures provide useful information to both
management and investors by excluding certain expenses that may not be
indicative of its core operating results. These measures should be considered
in addition to results prepared in accordance with GAAP, but should not be
considered a substitute for, or superior to, GAAP results. The non-GAAP
measures included in this press release have been reconciled to the GAAP
results in the attached tables.

About PFSweb, Inc.

Iconic brands engage PFSweb to enable their eCommerce initiatives. PFSweb’s
End2End eCommerce® solution includes interactive marketing services, robust
eCommerce technology, global fulfillment and logistics, high-touch customer
care, financial services, and order management. PFSweb’s eCommerce solutions
provide international reach and expertise in both direct-to-consumer and
business-to-business initiatives, supporting organizations across multiple
industries including Procter & Gamble, L’Oreal, LEGO, Columbia Sportswear,
Sorel, Carter’s, Lucky Brand Jeans, kate spade new york, Juicy Couture, AAFES,
Riverbed, Ricoh, Hawker Beechcraft Corp, Roots Canada Ltd. and Xerox. PFSweb
is headquartered in Allen, TX with additional locations in Tennessee,
Mississippi, Canada, Belgium, and the Philippines.

To find out more about PFSweb, Inc. (NASDAQ: PFSW), visit the company’s
website at http://www.PFSweb.com.

The matters discussed herein consist of forward-looking information under the
Private Securities Litigation Reform Act of 1995 and is subject to and
involves risks and uncertainties, which could cause actual results to differ
materially from the forward-looking information. PFSweb's Annual Report on
Form 10-K for the year ended December 31, 2011 and Quarterly Report on Form
10-Q for the three and six months ended June 30, 2012 identify certain factors
that could cause actual results to differ materially from those projected in
any forward looking statements made and investors are advised to review the
Annual and Quarterly Reports and the Risk Factors described therein. PFSweb
undertakes no obligation to update publicly any forward-looking statement for
any reason, even if new information becomes available or other events occur in
the future. There may be additional risks that we do not currently view as
material or that are not presently known.

                           (Financial Tables Below)

                         
PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations (A)
(In Thousands, Except Per Share Data)
                                                               
                           Three Months Ended        Nine Months Ended
                           September 30,             September 30,
                           2012         2011         2012          2011
REVENUES:
Product revenue, net       $ 27,619     $ 37,923     $ 91,901      $ 122,005
Service fee revenue          28,260       22,949       85,022        62,819
Pass-thru revenue           10,654     9,999      32,882      26,444  
Total revenues              66,533     70,871     209,805     211,268 
                                                                   
COSTS OF REVENUES:
Cost of product revenue      25,681       35,304       84,934        113,181
Cost of service fee          20,397       17,663       61,996        47,241
revenue
Cost of pass-thru           10,654     9,999      32,882      26,444  
revenue
Total costs of revenues     56,732     62,966     179,812     186,866 
Gross profit                 9,801        7,905        29,993        24,402
SELLING, GENERAL AND        9,781      9,385      30,941      28,103  
ADMINISTRATIVE EXPENSES
Income (loss) from           20           (1,480 )     (948    )     (3,701  )
operations
INTEREST EXPENSE, NET       236        308        758         769     
Income (loss) before         (216   )     (1,788 )     (1,706  )     (4,470  )
income taxes
INCOME TAX PROVISION        154        57         457         287     
INCOME (LOSS) FROM           (370   )     (1,845 )     (2,163  )     (4,757  )
CONTINUING OPERATIONS
INCOME (LOSS) FROM
DISCONTINUED OPERATIONS,    -          20         -           (569    )
NET OF TAX
NET INCOME (LOSS)          $ (370   )   $ (1,825 )   $ (2,163  )   $ (5,326  )
NON-GAAP INCOME (LOSS)     $ (62    )   $ (1,499 )   $ 167        $ (3,702  )
                                                                   
NET INCOME (LOSS) PER
SHARE:
Basic                      $ (0.03  )   $ (0.14  )   $ (0.17   )   $ (0.43   )
Diluted                    $ (0.03  )   $ (0.14  )   $ (0.17   )   $ (0.43   )
                                                                   
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING:
Basic                       12,783     12,688     12,777      12,509  
Diluted                     12,783     12,688     12,777      12,509  
                                                                   
EBITDA                     $ 2,522     $ 57        $ 5,886      $ 874     
ADJUSTED EBITDA            $ 2,830     $ 707       $ 8,216      $ 2,233   
                          

(A) The financial data above should be read in conjunction with the audited
consolidated financial statements of PFSweb, Inc. included in its Form 10-K
for the year ended December 31, 2011.

                    
PFSweb, Inc. and Subsidiaries
Reconciliation of certain Non-GAAP Items to GAAP
(In Thousands, Except Per Share Data)
                                                            
                      Three Months Ended          Nine Months Ended
                      September 30,               September 30,
                      2012          2011          2012          2011
NET INCOME (LOSS)     $ (370    )   $ (1,825  )   $ (2,163  )   $ (5,326   )
Loss (income) from
discontinued            -             (20     )     -             569
operations, net of
tax
Income tax expense      154           57            457           287
Interest expense        236           308           758           769
Depreciation and       2,502       1,537       6,834       4,575    
amortization
EBITDA                $ 2,522       $ 57          $ 5,886       $ 874
Stock-based             308           346           1,014         1,055
compensation
Lease terminations      -             -             450           -
costs
Relocation related      -             304           -             304
costs
Move related           -           -           866         -        
expenses
ADJUSTED EBITDA       $ 2,830      $ 707        $ 8,216      $ 2,233    
                                                                             
                                                                             
                      Three Months Ended          Nine Months Ended
                      September 30,               September 30,
                      2012          2011          2012          2011
                                                                             
NET INCOME (LOSS)     $ (370    )   $ (1,825  )   $ (2,163  )   $ (5,326   )
Loss (income) from
discontinued            -             (20     )     -             569
operations, net of
tax
Stock-based             308           346           1,014         1,055
compensation
Lease terminations      -             -             450           -
costs
Move related           -           -           866         -        
expenses
NON-GAAP INCOME       $ (62     )   $ (1,499  )   $ 167        $ (3,702   )
(LOSS)
                                                                             
NET INCOME (LOSS)
PER SHARE:
Basic                 $ (0.03   )   $ (0.14   )   $ (0.17   )   $ (0.43    )
Diluted               $ (0.03   )   $ (0.14   )   $ (0.17   )   $ (0.43    )
                                                                             
NON-GAAP INCOME
(LOSS) Per Share:
Basic                 $ (0.00   )   $ (0.12   )   $ 0.01       $ (0.30    )
Diluted               $ (0.00   )   $ (0.12   )   $ 0.01       $ (0.30    )
                                                                             
                                                                             
                                                                             
                      Three Months Ended          Nine Months Ended
                      September 30,               September 30,
                      2012          2011          2012          2011
                                                                             
TOTAL REVENUES        $ 66,533      $ 70,871      $ 209,805     $ 211,268
Pass-thru revenue       (10,654 )     (9,999  )     (32,882 )     (26,444  )
Cost of product        (25,681 )    (35,304 )    (84,934 )    (113,181 )
revenue
SERVICE FEE           $ 30,198     $ 25,568     $ 91,989     $ 71,643   
EQUIVALENT REVENUE
                                                                             

                                                
PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(In Thousands, Except Share Data)
                                                                
                                                                  
                                                  September 30,   December 31,
                                                  2012            2011
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                         $  17,793       $  17,695
Restricted cash                                      471             827
Accounts receivable, net of allowance for
doubtful accounts of $479 and
$663 at September 30, 2012 and December 31,          38,057          52,679
2011, respectively
Inventories, net of reserves of $1,696 and
$1,555 at September 30, 2012 and
December 31, 2011, respectively                      25,453          30,487
Other receivables                                    7,340           11,915
Prepaid expenses and other current assets           4,663         4,697   
Total current assets                                93,777        118,300 
                                                                  
PROPERTY AND EQUIPMENT, net                          25,539          14,945
OTHER ASSETS                                        3,928         3,127   
Total assets                                        123,244       136,372 
                                                                  
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital     $  19,073       $  23,939
lease obligations
Trade accounts payable                               33,437          48,544
Deferred revenue                                     6,808           6,766
Accrued expenses                                    19,353        18,657  
Total current liabilities                            78,671          97,906
                                                                  
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS,        5,771           3,583
less current portion
DEFERRED REVENUE                                     6,190           5,908
DEFERRED RENT                                       5,661         901     
Total liabilities                                   96,293        108,298 
                                                                  
                                                                  
COMMITMENTS AND CONTINGENCIES
                                                                  
SHAREHOLDERS' EQUITY:
Preferred stock, $1.00 par value; 1,000,000          -               -
shares authorized; none issued and outstanding
Common stock, $.001 par value; 35,000,000
shares authorized; 12,807,086 and 12,782,907
shares issued at September 30, 2012 and
December 31, 2011, respectively; and 12,780,225      13              13
and 12,764,546 shares outstanding as of
September 30, 2012 and December 31, 2011,
respectively
Additional paid-in capital                           105,707         104,645
Accumulated deficit                                  (80,061  )      (77,898 )
Accumulated other comprehensive income               1,413           1,399

Treasury stock at cost, 32,161 and 18,361
shares as of September 30, 2012 and December        (121     )     (85     )
31, 2011, respectively
Total shareholders' equity                          26,951        28,074  
Total liabilities and shareholders' equity        $  123,244     $  136,372 
                                                                             

                                                                             
PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Three Months Ended September 30, 2012
(In Thousands)
                                                           
                                    Business &
                    PFSweb          Retail       Eliminations   Consolidated
                                    Connect
REVENUES:
Product revenue,    $  -            $  27,619    $  -           $  27,619
net
Service fee            28,260          -            -              28,260
revenue
Service fee
revenue -              1,034           -            (1,034  )      -
affiliate
Pass-thru             10,654        -           -            10,654  
revenue
Total revenues        39,948        27,619      (1,034  )     66,533  
                                                                             
COSTS OF
REVENUES:
Cost of product        -               25,681       -              25,681
revenue
Cost of service        21,099          -            (702    )      20,397
fee revenue
Cost of
pass-thru             10,654        -           -            10,654  
revenue
Total costs of        31,753        25,681      (702    )     56,732  
revenues
Gross profit           8,195           1,938        (332    )      9,801
SELLING, GENERAL
AND                   8,763         1,350       (332    )     9,781   
ADMINISTRATIVE
EXPENSES
Income (loss)          (568    )       588          -              20
from operations
INTEREST              49            187         -            236     
EXPENSE, NET
Income (loss)
before income          (617    )       401          -              (216    )
taxes
INCOME TAX
PROVISION             (23     )      177         -            154     
(BENEFIT)
NET INCOME          $  (594    )    $  224       $  -          $  (370    )
(LOSS)
NON-GAAP NET        $  (286    )    $  224       $  -          $  (62     )
INCOME (LOSS)
                                                                             
EBITDA              $  1,908       $  614       $  -          $  2,522   
ADJUSTED EBITDA     $  2,216       $  614       $  -          $  2,830   
                                                                             
                                                                             
A reconciliation of NET INCOME
(LOSS) to EBITDA and ADJUSTED
EBITDA follows:
                                                                             
NET INCOME          $  (594    )    $  224       $  -              (370    )
(LOSS)
Income tax
expense                (23     )       177          -              154
(benefit)
Interest expense       49              187          -              236
, net
Depreciation and      2,476         26          -            2,502   
amortization
EBITDA              $  1,908        $  614       $  -           $  2,522
Stock-based           308           -           -            308     
compensation
ADJUSTED EBITDA     $  2,216       $  614       $  -          $  2,830   
                                                                             
A reconciliation of NET INCOME
(LOSS) to NON-GAAP NET INCOME
(LOSS) follows:
                                                                             
NET INCOME          $  (594    )    $  224       $  -           $  (370    )
(LOSS)
Stock-based           308           -           -            308     
compensation
NON-GAAP NET        $  (286    )    $  224       $  -          $  (62     )
INCOME (LOSS)
                                                                             

Note: Business and Retail Connect includes our Supplies Distributors and
PFSweb Retail Connect operations, which operate similar financial models on
behalf of our client relationships.

                                                                             
PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Nine Months Ended September 30, 2012
(In Thousands)
                                                           
                                     Business
                                     &
                    PFSweb           Retail      Eliminations   Consolidated
                                     Connect
REVENUES:
Product revenue,    $  -             $  91,901   $  -           $  91,901
net
Service fee            85,022           -           -              85,022
revenue
Service fee
revenue -              3,620            -           (3,620  )      -
affiliate
Pass-thru             32,882         -          -            32,882  
revenue
Total revenues        121,524        91,901     (3,620  )     209,805 
                                                                             
COSTS OF
REVENUES:
Cost of product        -                84,934      -              84,934
revenue
Cost of service        64,196           -           (2,200  )      61,996
fee revenue
Cost of
pass-thru             32,882         -          -            32,882  
revenue
Total costs of        97,078         84,934     (2,200  )     179,812 
revenues
Gross profit           24,446           6,967       (1,420  )      29,993
SELLING, GENERAL
AND                   27,342         5,019      (1,420  )     30,941  
ADMINISTRATIVE
EXPENSES
Income (loss)          (2,896   )       1,948       -              (948    )
from operations
INTEREST EXPENSE      140            618        -            758     
(INCOME), NET
Income (loss)
before income          (3,036   )       1,330       -              (1,706  )
taxes
INCOME TAX
PROVISION             (92      )      549        -            457     
(BENEFIT)
NET INCOME            (2,944   )      781        -            (2,163  )
(LOSS)
NON-GAAP NET        $  (614     )    $  781      $  -          $  167     
INCOME (LOSS)
                                                                             
EBITDA              $  3,872        $  2,014    $  -          $  5,886   
ADJUSTED EBITDA     $  6,202        $  2,014    $  -          $  8,216   
                                                                             
                                                                             
A reconciliation of NET INCOME
(LOSS) to EBITDA and ADJUSTED
EBITDA follows:
                                                                             
NET INCOME          $  (2,944   )    $  781      $  -              (2,163  )
(LOSS)
Income tax
expense                (92      )       549         -              457
(benefit)
Interest expense       140              618         -              758
(income)
Depreciation and      6,768          66         -            6,834   
amortization
EBITDA              $  3,872         $  2,014    $  -           $  5,886
Stock-based            1,014            -           -              1,014
compensation
Lease
termination            450              -           -              450
costs
Move related          866            -          -            866     
costs
ADJUSTED EBITDA     $  6,202        $  2,014    $  -          $  8,216   
                                                                             
A reconciliation of NET INCOME
(LOSS) to NON-GAAP NET INCOME
(LOSS) follows:
                                                                             
NET INCOME          $  (2,944   )    $  781      $  -           $  (2,163  )
(LOSS)
Stock-based            1,014            -           -              1,014
compensation
Lease
termination            450              -           -              450
costs
Move related          866            -          -            866     
costs
NON-GAAP NET        $  (614     )    $  781      $  -          $  167     
INCOME (LOSS)
                                                                             

Note: Business and Retail Connect includes our Supplies Distributors and
PFSweb Retail Connect operations, which operate similar financial models on
behalf of our client relationships. PFSweb and PFSweb Retail Connect include
certain ongoing activity formerly reported as eCOST.

                                                                               
PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Three Months Ended September 30, 2011
(In Thousands)
                                                            
                              Business
                              &
                 PFSweb       Retail     eCOST     Eliminations   Consolidated
                              Connect
REVENUES:
Product          $ -          $ 37,923   $ -       $  -           $  37,923
revenue, net
Service fee        22,949       -          -          -              22,949
revenue
Service fee
revenue -          1,518        -          -          (1,518  )      -
affiliate
Pass-thru         9,999      -         -        -            9,999   
revenue
Total revenues    34,466     37,923    -        (1,518  )     70,871  
                                                                               
COSTS OF
REVENUES:
Cost of
product            -            35,304     -          -              35,304
revenue
Cost of
service fee        18,204       -          -          (541    )      17,663
revenue
Cost of
pass-thru         9,999      -         -        -            9,999   
revenue
Total costs of    28,203     35,304    -        (541    )     62,966  
revenues
Gross profit       6,263        2,619      -          (977    )      7,905
SELLING,
GENERAL AND       8,398      1,964     -        (977    )     9,385   
ADMINISTRATIVE
EXPENSES
Income (loss)
from               (2,135 )     655        -          -              (1,480  )
operations
INTEREST
EXPENSE           (30    )    338       -        -            308     
(INCOME), NET
Income (loss)
before income      (2,105 )     317        -          -              (1,788  )
taxes
INCOME TAX
PROVISION         (74    )    131       -        -            57      
(BENEFIT)
INCOME (LOSS)
FROM               (2,031 )     186        -          -              (1,845  )
CONTINUING
OPERATIONS
INCOME FROM
DISCONTINUED      -          -         20                     20      
OPERATIONS,
NET OF TAX
NET INCOME       $ (2,031 )   $ 186      $ 20     $  -          $  (1,825  )
(LOSS)
NON-GAAP NET     $ (1,685 )   $ 186      $ -      $  -          $  (1,499  )
INCOME (LOSS)
                                                                               
EBITDA           $ (606   )   $ 663      $ -      $  -          $  57      
ADJUSTED         $ 44        $ 663      $ -      $  -          $  707     
EBITDA
                                                                               
                                                                               
A reconciliation of NET
INCOME (LOSS) to EBITDA and
ADJUSTED EBITDA follows:
                                                                               
NET INCOME       $ (2,031 )   $ 186      $ 20      $  -              (1,825  )
(LOSS)
Income from
discontinued       -            -          (20 )      -              (20     )
operations,
net of tax
Income tax
expense            (74    )     131        -          -              57
(benefit)
Interest
expense            (30    )     338        -          -              308
(income)
Depreciation
and               1,529      8         -        -            1,537   
amortization
EBITDA           $ (606   )   $ 663      $ -       $  -           $  57
Stock-based        346          -          -          -              346
compensation
Relocation        304                                          304     
related costs
ADJUSTED         $ 44        $ 663      $ -      $  -          $  707     
EBITDA
                                                                               
A reconciliation of NET
INCOME (LOSS) to NON-GAAP
NET INCOME (LOSS) follows:
                                                                               
NET INCOME       $ (2,031 )   $ 186      $ 20      $  -           $  (1,825  )
(LOSS)
Income from
discontinued       -            -          (20 )      -              (20     )
operations,
net of tax
Stock-based       346        -         -        -            346     
compensation
NON-GAAP NET     $ (1,685 )   $ 186      $ -      $  -          $  (1,499  )
INCOME (LOSS)


Note: Business and Retail Connect includes our Supplies Distributors and
PFSweb Retail Connect operations, which operate similar financial models on
behalf of our client relationships. PFSweb and PFSweb Retail Connect include
certain ongoing activity formerly reported as eCOST.

                                                                                 
PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Nine Months Ended September 30, 2011
(In Thousands)
                                                              
                              Business
                              &
                 PFSweb       Retail      eCOST      Eliminations   Consolidated
                              Connect
REVENUES:
Product          $ -          $ 122,005   $ -        $  -           $  122,005
revenue, net
Service fee        62,819       -           -           -              62,819
revenue
Service fee
revenue -          4,769        -           -           (4,769  )      -
affiliate
Pass-thru         26,446     -          -         (2      )     26,444  
revenue
Total revenues    94,034     122,005    -         (4,771  )     211,268 
                                                                                 
COSTS OF
REVENUES:
Cost of
product            -            113,181     -           -              113,181
revenue
Cost of
service fee        48,904       -           -           (1,663  )      47,241
revenue
Cost of
pass-thru         26,446     -          -         (2      )     26,444  
revenue
Total costs of    75,350     113,181    -         (1,665  )     186,866 
revenues
Gross profit       18,684       8,824       -           (3,106  )      24,402
SELLING,
GENERAL AND       24,974     6,235      -         (3,106  )     28,103  
ADMINISTRATIVE
EXPENSES
Income (loss)
from               (6,290 )     2,589       -           -              (3,701  )
operations
INTEREST
EXPENSE           (146   )    915        -         -            769     
(INCOME), NET
Income (loss)
before income      (6,144 )     1,674       -           -              (4,470  )
taxes
INCOME TAX
PROVISION         (350   )    637        -         -            287     
(BENEFIT)
INCOME (LOSS)
FROM               (5,794 )     1,037       -           -              (4,757  )
CONTINUING
OPERATIONS
LOSS FROM
DISCONTINUED      -          -          (569 )                   (569    )
OPERATIONS,
NET OF TAX
NET INCOME       $ (5,794 )   $ 1,037     $ (569 )   $  -          $  (5,326  )
(LOSS)
NON-GAAP NET     $ (4,739 )   $ 1,037     $ -       $  -          $  (3,702  )
INCOME (LOSS)
                                                                                 
EBITDA           $ (1,737 )   $ 2,611     $ -       $  -          $  874     
ADJUSTED         $ (378   )   $ 2,611     $ -       $  -          $  2,233   
EBITDA
                                                                                 
                                                                                 
A reconciliation of NET
INCOME (LOSS) to EBITDA and
ADJUSTED EBITDA follows:
                                                                                 
NET INCOME       $ (5,794 )   $ 1,037     $ (569 )   $  -              (5,326  )
(LOSS)
Loss from
discontinued       -            -           569         -              569
operations,
net of tax
Income tax
expense            (350   )     637         -           -              287
(benefit)
Interest
expense            (146   )     915         -           -              769
(income)
Depreciation
and               4,553      22         -         -            4,575   
amortization
EBITDA           $ (1,737 )   $ 2,611     $ -        $  -           $  874
Stock-based        1,055        -           -           -              1,055
compensation
Relocation        304                                            304     
related costs
ADJUSTED         $ (378   )   $ 2,611     $ -       $  -          $  2,233   
EBITDA
                                                                                 
A reconciliation of NET
INCOME (LOSS) to NON-GAAP
NET INCOME (LOSS) follows:
                                                                                 
NET INCOME       $ (5,794 )   $ 1,037     $ (569 )   $  -           $  (5,326  )
(LOSS)
Loss from
discontinued       -            -           569         -              569
operations,
net of tax
Stock-based       1,055      -          -         -            1,055   
compensation
NON-GAAP NET     $ (4,739 )   $ 1,037     $ -       $  -          $  (3,702  )
INCOME (LOSS)
                                                                                 

Note: Business and Retail Connect includes our Supplies Distributors and
PFSweb Retail Connect operations, which operate similar financial models on
behalf of our client relationships. PFSweb and PFSweb Retail Connect include
certain ongoing activity formerly reported as eCOST.

                                                                                
PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidating Balance Sheets
as of September 30, 2012
(In Thousands)
                                                              
                                                                                
                                      Business &
                        PFSweb        Retail        Eliminations   Consolidated
                                      Connect
ASSETS
CURRENT ASSETS:
Cash and cash           $ 13,983      $ 3,810       $  -           $  17,793
equivalents
Restricted cash           -             471            -              471
Accounts receivable,      25,465        12,909         (317    )      38,057
net
Inventories, net          -             25,453         -              25,453
Other receivables         -             7,340          -              7,340
Prepaid expenses and     3,182       1,481        -            4,663   
other current assets
Total current assets     42,630      51,464       (317    )     93,777  
                                                                                
PROPERTY AND              25,325        214            -              25,539
EQUIPMENT, net
RECEIVABLE/INVESTMENT     13,456        -              (13,456 )      -
IN AFFILIATES
OTHER ASSETS             3,799       129          -            3,928   
Total assets             85,210      51,807       (13,773 )     123,244 
                                                                                
LIABILITIES AND
SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of
long-term debt and      $ 12,003      $ 7,070       $  -           $  19,073
capital lease
obligations
Trade accounts            8,461         25,293         (317    )      33,437
payable
Deferred revenue          6,781         27             -              6,808
Accrued expenses         13,336      6,017        -            19,353  
Total current             40,581        38,407         (317    )      78,671
liabilities
                                                                                
LONG-TERM DEBT AND
CAPITAL LEASE             5,725         46             -              5,771
OBLIGATIONS, less
current portion
PAYABLE TO AFFILIATES     -             22,795         (22,795 )      -
DEFERRED REVENUE          6,190         -              -              6,190
DEFERRED RENT            5,629       32           -            5,661   
Total liabilities        58,125      61,280       (23,112 )     96,293  
                                                                                
COMMITMENTS AND
CONTINGENCIES
                                                                                
SHAREHOLDERS' EQUITY:
Common stock              13            19             (19     )      13
Capital contributions     -             1,000          (1,000  )      -
Additional paid-in        105,707       28,059         (28,059 )      105,707
capital
Retained earnings         (79,920 )     (40,630 )      40,489         (80,061 )
(accumulated deficit)
Accumulated other         1,406         2,079          (2,072  )      1,413
comprehensive income
Treasury stock           (121    )    -            -            (121    )
Total shareholders'      27,085      (9,473  )     9,339        26,951  
equity
Total liabilities and   $ 85,210     $ 51,807     $  (13,773 )   $  123,244 
shareholders' equity
                                                                                

                                                                                
PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidating Balance Sheets
as of December 31, 2011
(In Thousands)
                                                              
                                                                                
                                      Business &
                        PFSweb        Retail        Eliminations   Consolidated
                                      Connect
ASSETS
CURRENT ASSETS:
Cash and cash           $ 12,818      $ 4,877       $  -           $  17,695
equivalents
Restricted cash           138           689            -              827
Accounts receivable,      35,881        17,133         (335    )      52,679
net
Inventories, net          -             30,487         -              30,487
Other receivables         -             11,915         -              11,915
Prepaid expenses and     3,273       1,424        -            4,697   
other current assets
Total current assets     52,110      66,525       (335    )     118,300 
                                                                                
PROPERTY AND              14,884        61             -              14,945
EQUIPMENT, net
RECEIVABLE/INVESTMENT     13,130        -              (13,130 )      -
IN AFFILIATES
OTHER ASSETS             2,973       154          -            3,127   
Total assets             83,097      66,740       (13,465 )     136,372 
                                                                                
LIABILITIES AND
SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of
long-term debt and      $ 13,918      $ 10,021      $  -           $  23,939
capital lease
obligations
Trade accounts            12,089        36,790         (335    )      48,544
payable
Deferred revenue          6,749         17             -              6,766
Accrued expenses         11,998      6,659        -            18,657  
Total current             44,754        53,487         (335    )      97,906
liabilities
                                                                                
LONG-TERM DEBT AND
CAPITAL LEASE             3,513         70             -              3,583
OBLIGATIONS, less
current portion
PAYABLE TO AFFILIATES     -             22,495         (22,495 )      -
DEFERRED REVENUE          5,908         -              -              5,908
DEFERRED RENT            901         -            -            901     
Total liabilities        55,076      76,052       (22,830 )     108,298 
                                                                                
COMMITMENTS AND
CONTINGENCIES
                                                                                
SHAREHOLDERS' EQUITY:
Common stock              13            19             (19     )      13
Capital contributions     -             1,000          (1,000  )      -
Additional paid-in        104,645       28,059         (28,059 )      104,645
capital
Retained earnings         (77,950 )     (40,446 )      40,498         (77,898 )
(accumulated deficit)
Accumulated other         1,398         2,056          (2,055  )      1,399
comprehensive income
Treasury stock           (85     )    -            -            (85     )
Total shareholders'      28,021      (9,312  )     9,365        28,074  
equity
Total liabilities and   $ 83,097     $ 66,740     $  (13,465 )   $  136,372 
shareholders' equity
                                                                                

Contact:

PFSweb, Inc.
Chief Executive Officer
Mark C. Layton, 972-881-2900
or
Chief Financial Officer
Thomas J. Madden, 972-881-2900
or
Investor Relations
KCSA Strategic Communications
Todd Fromer, 212-896-1215
tfromer@kcsa.com
or
Garth Russell, 212-896-1250
grussell@kcsa.com
 
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