PFSweb, Inc.

PFSweb Reports Fourth Quarter and Year-End 2010 Results

Wednesday 23 March 2011

- - -

Fourth Quarter Service Fee Revenue Increases 35% Year-over-year

- - -

Fourth Quarter Adjusted EBITDA Increases 328% to $2.6 Million

PLANO, Texas, March 23, 2011 -- PFSweb, Inc. (Nasdaq: PFSW), an international business process outsourcing services provider of end-to-end web commerce solutions, today announced its financial results for the fourth quarter and year ended December 31, 2010.

Mark Layton, Chairman and Chief Executive Officer of PFSweb, stated, “Our results for the fourth quarter and year ended December 31, 2010 are a testament to the renewed strength of our business and our ability to capitalize on new opportunities in the expanding eCommerce industry. Our Service Fee revenue increased more than 35% during the fourth quarter of 2010 as compared to the prior year, and more than 20% for the full calendar year. This strong Service Fee revenue growth, combined with a continued focus on cost effective technology development and operational management, resulted in an increased Adjusted EBITDA performance of 328% in the fourth quarter of 2010, as compared to the prior year, and more than 55% for the full calendar year.

“We continue to see strong acceptance of our eCommerce services in the U.S. as well as in Europe, which has recently shown vast opportunity for our solutions. This led to us launching more than 10 new client programs during 2010, including Carter’s, Juicy Couture, Kensie, Monet, Volcom, Havaianas, and several brands under a master agreement with a leading fragrance and beauty company. Most of these new client arrangements include new custom branded eCommerce sites supported by our complete End2End solution, which is a packaged offering that generally includes the Demandware eCommerce platform, along with our logistics and fulfillment capabilities, high-touch customer care, financial services and various interactive marketing services.”

Summary of consolidated results for the fourth quarter ended December 31, 2010:

· Total revenue increased to $76.3 million for the fourth quarter of 2010 compared to $72.8 million for fourth quarter of 2009;

· Service Fee revenue increased more than 35% to $21.7 million, compared with $16.0 million for the same period in 2009;

· Adjusted EBITDA (as defined) was $2.6 million versus $0.6 million for the fourth quarter of 2009;

· Net loss was $2.7 million, or $0.22 per basic and diluted share, compared to net loss of $0.9 million, or $0.10 per basic and diluted share, for the fourth quarter of 2009. Net loss for the fourth quarter of 2010 included a $3.2 million loss from discontinued operations related to eCOST.com. Net loss for the fourth quarter of 2009 included $0.4 million income from discontinued operations related to eCOST.com;

· Non-GAAP net income (as defined) was $0.7 million, or $0.05 per basic and diluted share, compared to a non-GAAP net loss of $1.3 million, or $0.13 per basic and diluted share, for the fourth quarter of 2009;

· Total cash, cash equivalents and restricted cash was $20.3 million as of December 31, 2010 compared to $16.9 million as of December 31, 2009.

Summary of consolidated results for the year ended December 31, 2010:

· Total reported revenue was $274.5 million compared to $267.9 million for the year ended December 31, 2009;

· Service Fee revenue increased 20.5% to $70.6 million, compared with $58.6 million for the same period in 2009;

· Adjusted EBITDA (as defined) was $5.5 million compared to $3.5 million for the year ended December 31, 2009;

· Net loss was $7.4 million, or $0.65 per basic and diluted share, compared to net loss of $4.6 million, or $0.46 per basic and diluted share, for the year ended December 31, 2009. Net loss for 2010 included a $4.0 million loss from discontinued operations related to eCOST.com. Net loss for 2009 included $0.3 million income from discontinued operations applicable to eCOST.com;

· Non-GAAP net loss was $1.9 million, or $0.17 per basic and diluted share, compared to non-GAAP net loss of $4.5 million, or $0.45 per basic and diluted share, for the year ended December 31, 2009.

“We believe we are well positioned to maintain strong growth moving forward, as we expect demand for our services will continue to increase. Our pipeline for potential new Service Fee business currently totals more than $50 million, based on client projections, the largest in PFSweb’s history, with potential new clients in several expanding markets, including the fashion, cosmetics and consumer packaged goods markets. To support the ongoing growth of our business, we are in the process of expanding capacity at select warehouse and customer care facilities and making other strategic investments that will also allow us to offer new capabilities. Based on our expected Service Fee revenue growth of approximately 20% in calendar year 2011, combined with the incremental investments we are making to support our long-term initiatives, we are currently targeting to report Adjusted EBITDA between $6.0 million to $7.0 million for the year ended December 31, 2011,” continued Mr. Layton.

“In an effort to streamline our operations and improve our overall financial results, we made the strategic decision to divest the eCOST.com business. We believe this action will allow us take what we have learned at the frontline of the web commerce retail world and focus that knowledge more resourcefully on our growing Service Fee business. As a result of this divestiture, we reported certain financial results as ‘discontinued operations’ for the quarters and years ended December 31, 2010 and 2009. In addition, we recorded a non-cash goodwill impairment charge of approximately $2.8 million for the quarter and year ended December 31, 2010, which is included in the discontinued operations,” concluded Mr. Layton.

Conference Call Information

Management will host a conference call at 10:30 am Eastern Time (9:30 am Central Time) on Wednesday, March 23, 2011, to discuss the latest corporate developments and results. To listen to the call, please dial (888) 562-3356 and enter the pin number 49410379 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. 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 April 23, 2011 at (800) 642-1687, pin number 49410379. 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”) and Adjusted EBITDA.

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 and executive disability benefits.

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 and executive disability benefits.

Non-GAAP net income (loss), EBITDA and Adjusted EBITDA 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 and executive disability benefits and EBITDA and Adjusted EBITDA further eliminate the effect of financing, income taxes, and the accounting effects of capital spending, which items may vary from different companies for reasons unrelated to overall operating performance.

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.

PFSweb develops and deploys comprehensive end-to-end eCommerce solutions for Fortune 1000, Global 2000 and brand name companies, including interactive marketing services, global fulfillment and logistics and high-touch customer care. The company serves a multitude of industries and company types, including such clients as P&G, LEGO, Carter's, Lucky Brand Jeans, Juicy Couture, Kensie, Monet, kate spade new york, AAFES, Riverbed, InfoPrint Solutions Company, Hawker Beechcraft Corp., Roots Canada Ltd. and Xerox.

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, 2009 and Quarterly Report on Form 10-Q for the nine months ended September 30, 2010 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.

Contact:

Mark C. Layton Todd Fromer / Garth Russell

Chief Executive Officer Investor Relations

or Thomas J. Madden KCSA Strategic Communications

Chief Financial Officer (212) 896-1215 / (212) 896-1250

(972) 881-2900 tfromer@kcsa.com / grussell@kcsa.com

(Tables Follow)

PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations (A)
(In Thousands, Except Per Share Data)

			Three Months Ended						Twelve Months Ended
			December 31,						December 31,
				2010			2009			2010			2009
REVENUES:
	Product revenue, net		$	46,021		$	47,288		$	174,613		$	183,008
	Service fee revenue			21,688			16,015			70,636			58,619
	Pass-thru revenue			8,605			9,517			29,267			26,265
		Total revenues		76,314			72,820			274,516			267,892

COSTS OF REVENUES:
	Cost of product revenue			43,108			44,048			162,485			168,864
	Cost of service fee revenue			15,722			11,492			51,144			41,898
	Cost of pass-thru revenue			8,605			9,517			29,267			26,265
		Total costs of revenues		67,435			65,057			242,896			237,027
		Gross profit		8,879			7,763			31,620			30,865
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES				8,020			8,844			33,611			34,270
	Income (loss) from operations			859			(1,081	)		(1,991	)		(3,405	)
INTEREST EXPENSE, NET				202			233			940			1,186
	Income (loss) before income taxes			657			(1,314	)		(2,931	)		(4,591	)
INCOME TAX PROVISION (BENEFIT)				210			60			463			321
INCOME (LOSS) FROM CONTINUING OPERATIONS				447			(1,374	)		(3,394	)		(4,912	)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX				(3,192	)		427			(3,975	)		342
NET LOSS			$	(2,745	)	$	(947	)	$	(7,369	)	$	(4,570	)
NON-GAAP INCOME (LOSS)			$	673		$	(1,276	)	$	(1,935	)	$	(4,505	)

NET LOSS PER SHARE:
	Basic and Diluted		$	(0.22	)	$	(0.10	)	$	(0.65	)	$	(0.46	)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
	Basic and Diluted			12,237			9,934			11,310			9,929

EBITDA			$	2,326		$	497		$	4,069		$	3,139
ADJUSTED EBITDA			$	2,552		$	595		$	5,528		$	3,546

(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, 2009.

PFSweb, Inc. and Subsidiaries
Reconciliation of certain Non-GAAP Items to GAAP
(In Thousands, Except Per Share Data)

		Three Months Ended						Twelve Months Ended
		December 31,						December 31,
			2010			2009			2010			2009
NET LOSS		$	(2,745	)	$	(947	)	$	(7,369	)	$	(4,570	)
	(Income) loss from discontinued operations, net of tax		3,192			(427	)		3,975			(342	)
	Income tax expense (benefit)		210			60			463			321
	Interest expense		202			233			940			1,186
	Depreciation and amortization		1,467			1,578			6,060			6,544
EBITDA		$	2,326		$	497		$	4,069		$	3,139
	Stock-based compensation		226			98			809			407
	Executive disability benefits		-			-			650			-
ADJUSTED EBITDA		$	2,552		$	595		$	5,528		$	3,546


		Three Months Ended						Twelve Months Ended
		December 31,						December 31,
			2010			2009			2010			2009

NET LOSS		$	(2,745	)	$	(947	)	$	(7,369	)	$	(4,570	)
	(Income) loss from discontinued operations, net of tax		3,192			(427	)		3,975			(342	)
	Stock-based compensation		226			98			809			407
	Executive disability benefits		-			-			650			-
NON-GAAP INCOME (LOSS)		$	673		$	(1,276	)	$	(1,935	)	$	(4,505	)

NET LOSS PER SHARE:
	Basic and Diluted	$	(0.22	)	$	(0.10	)	$	(0.65	)	$	(0.46	)

NON-GAAP INCOME (LOSS) Per Share:
	Basic and Diluted	$	0.05		$	(0.13	)	$	(0.17	)	$	(0.45	)

PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(In Thousands, Except Share Data)


			December 31,			December 31,
				2010			2009
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents		$	18,430		$	14,812
	Restricted cash			1,853			2,096
	Accounts receivable, net of allowance for doubtful accounts of $754 and
	$973 at December 31, 2010 and December 31, 2009, respectively			41,438			39,861
	Inventories, net of reserves of $1,561 and $1,760 at December 31, 2010 and
	December 31, 2009, respectively			35,161			33,577
	Assets of discontinued operations			2,776			4,372
	Other receivables			14,539			11,605
	Prepaid expenses and other current assets			3,580			4,170
		Total current assets		117,777			110,493

PROPERTY AND EQUIPMENT, net				9,124			10,314
ASSETS OF DISCONTINUED OPERATIONS				1,126			4,024
OTHER ASSETS				2,203			2,938
		Total assets		130,230			127,769

LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
	Current portion of long-term debt and capital lease obligations		$	18,320		$	19,179
	Trade accounts payable			55,692			53,642
	Deferred revenue			5,254			5,164
	Accrued expenses			15,870			13,180
		Total current liabilities		95,136			91,165

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion				2,136			3,348
OTHER LIABILITIES				3,608			3,903
		Total liabilities		100,880			98,416


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;
	12,255,064 and 9,952,164 shares issued at December 31, 2010 and
	December 31, 2009, respectively; and 12,236,703 and 9,933,803
	outstanding as of December 31, 2010 and December 31, 2009, respectively			12			10
	Additional paid-in capital			101,229			93,152
	Accumulated deficit			(73,332	)		(65,963	)
	Accumulated other comprehensive income			1,526			2,239
	Treasury stock at cost, 18,361 shares			(85	)		(85	)
		Total shareholders' equity		29,350			29,353
		Total liabilities and shareholders' equity	$	130,230		$	127,769

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Three Months Ended March 31, 2010
(In Thousands)

						Business &
			PFSweb			Retail Connect		eCOST			Eliminations			Consolidated
REVENUES:
	Product revenue, net		$	-		$	45,622	$	-		$	-		$	45,622
	Service fee revenue			15,979			-		-			-			15,979
	Service fee revenue - affiliate			1,700			-		-			(1,700	)		-
	Pass-thru revenue			6,637			-		-			(3	)		6,634
		Total revenues		24,316			45,622		-			(1,703	)		68,235

COSTS OF REVENUES:
	Cost of product revenue			-			42,362		-			-			42,362
	Cost of service fee revenue			12,101			-		-			(647	)		11,454
	Cost of pass-thru revenue			6,637			-		-			(3	)		6,634
		Total costs of revenues		18,738			42,362		-			(650	)		60,450
		Gross profit		5,578			3,260		-			(1,053	)		7,785
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES				7,400			2,261		-			(1,053	)		8,608
	Income (loss) from operations			(1,822	)		999		-			-			(823	)
INTEREST EXPENSE (INCOME), NET				(56	)		310		-			-			254
	Income (loss) before income taxes			(1,766	)		689		-			-			(1,077	)
INCOME TAX PROVISION (BENEFIT)				(130	)		256		-			-			126
INCOME (LOSS) FROM CONTINUING OPERATIONS				(1,636	)		433		-			-			(1,203	)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX				-			-		(6	)					(6	)
NET INCOME (LOSS)			$	(1,636	)	$	433	$	(6	)	$	-		$	(1,209	)
NON-GAAP NET INCOME (LOSS)			$	(1,540	)	$	433	$	-		$	-		$	(1,107	)

EBITDA			$	(276	)	$	1,007	$	-		$	-		$	731
ADJUSTED EBITDA			$	(180	)	$	1,007	$	-		$	-		$	827


A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:

NET INCOME (LOSS)			$	(1,636	)	$	433	$	(6	)	$	-			(1,209	)
	(Income) loss from discontinued operations, net of tax			-			-		6			-			6
	Income tax expense (benefit)			(130	)		256		-			-			126
	Interest expense (income)			(56	)		310		-			-			254
	Depreciation and amortization			1,546			8		-			-			1,554
EBITDA			$	(276	)	$	1,007	$	-		$	-		$	731
	Stock-based compensation			96			-		-			-			96
ADJUSTED EBITDA			$	(180	)	$	1,007	$	-		$	-		$	827

A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:

NET INCOME (LOSS)			$	(1,636	)	$	433	$	(6	)	$	-		$	(1,209	)
	(Income) loss from discontinued operations, net of tax			-			-		6			-			6
	Stock-based compensation			96			-		-			-			96
NON-GAAP NET INCOME (LOSS)			$	(1,540	)	$	433	$	-		$	-		$	(1,107	)

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

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Three Months Ended June 30, 2010
(In Thousands)

						Business &
			PFSweb			Retail Connect		eCOST			Eliminations			Consolidated
REVENUES:
	Product revenue, net		$	-		$	43,654	$	-		$	-		$	43,654
	Service fee revenue			16,567			-		-			-			16,567
	Service fee revenue - affiliate			1,738			-		-			(1,738	)		-
	Pass-thru revenue			6,202			-		-			(16	)		6,186
		Total revenues		24,507			43,654		-			(1,754	)		66,407

COSTS OF REVENUES:
	Cost of product revenue			-			40,623		-			-			40,623
	Cost of service fee revenue			12,572			-		-			(585	)		11,987
	Cost of pass-thru revenue			6,202			-		-			(16	)		6,186
		Total costs of revenues		18,774			40,623		-			(601	)		58,796
		Gross profit		5,733			3,031		-			(1,153	)		7,611
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES				7,310			2,221		-			(1,153	)		8,378
	Income (loss) from operations			(1,577	)		810		-			-			(767	)
INTEREST EXPENSE (INCOME), NET				(59	)		293		-			-			234
	Income (loss) before income taxes			(1,518	)		517		-			-			(1,001	)
INCOME TAX PROVISION (BENEFIT)				(142	)		196		-			-			54
INCOME (LOSS) FROM CONTINUING OPERATIONS				(1,376	)		321		-			-			(1,055	)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX				-			-		(440	)					(440	)
NET INCOME (LOSS)			$	(1,376	)	$	321	$	(440	)	$	-		$	(1,495	)
NON-GAAP NET INCOME (LOSS)			$	(1,114	)	$	321	$	-		$	-		$	(793	)

EBITDA			$	(4	)	$	817	$	-		$	-		$	813
ADJUSTED EBITDA			$	258		$	817	$	-		$	-		$	1,075


A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:

NET INCOME (LOSS)			$	(1,376	)	$	321	$	(440	)	$	-			(1,495	)
	(Income) loss from discontinued operations, net of tax			-			-		440			-			440
	Income tax expense (benefit)			(142	)		196		-			-			54
	Interest expense (income)			(59	)		293		-			-			234
	Depreciation and amortization			1,573			7					-			1,580
EBITDA			$	(4	)	$	817	$	-		$	-		$	813
	Stock-based compensation			262			-		-			-			262
ADJUSTED EBITDA			$	258		$	817	$	-		$	-		$	1,075

A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:

NET INCOME (LOSS)			$	(1,376	)	$	321	$	(440	)	$	-		$	(1,495	)
	(Income) loss from discontinued operations, net of tax			-			-		440			-			440
	Stock-based compensation			262			-		-			-			262
NON-GAAP NET INCOME (LOSS)			$	(1,114	)	$	321	$	-		$	-		$	(793	)

Note: Business and Retail Connect includes our Supplies Distributors and PFS Retail Connect operations, which operate similar financial models on behalf of our client relationships. PFSweb and PFS 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, 2010
(In Thousands)

						Business &
			PFSweb			Retail Connect		eCOST			Eliminations			Consolidated
REVENUES:
	Product revenue, net		$	-		$	39,316	$	-		$	-		$	39,316
	Service fee revenue			16,402			-		-			-			16,402
	Service fee revenue - affiliate			1,484			-		-			(1,484	)		-
	Pass-thru revenue			7,843			-		-			(1	)		7,842
		Total revenues		25,729			39,316		-			(1,485	)		63,560

COSTS OF REVENUES:
	Cost of product revenue			-			36,392		-			-			36,392
	Cost of service fee revenue			12,543			-		-			(562	)		11,981
	Cost of pass-thru revenue			7,843			-		-			(1	)		7,842
		Total costs of revenues		20,386			36,392		-			(563	)		56,215
		Gross profit		5,343			2,924		-			(922	)		7,345
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES				7,556			1,971		-			(922	)		8,605
	Income (loss) from operations			(2,213	)		953		-			-			(1,260	)
INTEREST EXPENSE (INCOME), NET				(63	)		313		-			-			250
	Income (loss) before income taxes			(2,150	)		640		-			-			(1,510	)
INCOME TAX PROVISION (BENEFIT)				(134	)		207		-			-			73
INCOME (LOSS) FROM CONTINUING OPERATIONS				(2,016	)		433		-			-			(1,583	)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX				-			-		(337	)					(337	)
NET INCOME (LOSS)			$	(2,016	)	$	433	$	(337	)	$	-		$	(1,920	)
NON-GAAP NET INCOME (LOSS)			$	(1,141	)	$	433	$	-		$	-		$	(708	)

EBITDA			$	(761	)	$	960	$	-		$	-		$	199
ADJUSTED EBITDA			$	114		$	960	$	-		$	-		$	1,074


A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:

NET INCOME (LOSS)			$	(2,016	)	$	433	$	(337	)	$	-			(1,920	)
	(Income) loss from discontinued operations, net of tax			-			-		337			-			337
	Income tax expense (benefit)			(134	)		207		-			-			73
	Interest expense (income)			(63	)		313		-			-			250
	Depreciation and amortization			1,452			7					-			1,459
EBITDA			$	(761	)	$	960	$	-		$	-		$	199
	Stock-based compensation			225			-		-			-			225
	Executive disability benefit			650											650
ADJUSTED EBITDA			$	114		$	960	$	-		$	-		$	1,074

A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:

NET INCOME (LOSS)			$	(2,016	)	$	433	$	(337	)	$	-		$	(1,920	)
	(Income) loss from discontinued operations, net of tax			-			-		337			-			337
	Stock-based compensation			225			-		-			-			225
	Executive disability benefit			650											650
NON-GAAP NET INCOME (LOSS)			$	(1,141	)	$	433	$	-		$	-		$	(708	)

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

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Three Months Ended December 31, 2010
(In Thousands)

						Business &
			PFSweb			Retail Connect		eCOST			Eliminations			Consolidated
REVENUES:
	Product revenue, net		$	-		$	46,021	$	-		$	-		$	46,021
	Service fee revenue			21,688			-		-			-			21,688
	Service fee revenue - affiliate			1,701			-		-			(1,701	)		-
	Pass-thru revenue			8,612			-		-			(7	)		8,605
		Total revenues		32,001			46,021		-			(1,708	)		76,314

COSTS OF REVENUES:
	Cost of product revenue			-			43,108		-			-			43,108
	Cost of service fee revenue			16,328			-		-			(606	)		15,722
	Cost of pass-thru revenue			8,612			-		-			(7	)		8,605
		Total costs of revenues		24,940			43,108		-			(613	)		67,435
		Gross profit		7,061			2,913		-			(1,095	)		8,879
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES				6,893			2,222		-			(1,095	)		8,020
	Income (loss) from operations			168			691		-			-			859
INTEREST EXPENSE (INCOME), NET				(79	)		281		-			-			202
	Income (loss) before income taxes			247			410		-			-			657
INCOME TAX PROVISION (BENEFIT)				51			159		-			-			210
INCOME (LOSS) FROM CONTINUING OPERATIONS				196			251		-			-			447
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX				-			-		(3,192	)					(3,192	)
NET INCOME (LOSS)			$	196		$	251	$	(3,192	)	$	-		$	(2,745	)
NON-GAAP NET INCOME (LOSS)			$	422		$	251	$	-		$	-		$	673

EBITDA			$	1,628		$	698	$	-		$	-		$	2,326
ADJUSTED EBITDA			$	1,854		$	698	$	-		$	-		$	2,552


A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:

NET INCOME (LOSS)			$	196		$	251	$	(3,192	)	$	-			(2,745	)
	(Income) loss from discontinued operations, net of tax			-			-		3,192			-			3,192
	Income tax expense (benefit)			51			159		-			-			210
	Interest expense (income)			(79	)		281		-			-			202
	Depreciation and amortization			1,460			7					-			1,467
EBITDA			$	1,628		$	698	$	-		$	-		$	2,326
	Stock-based compensation			226			-		-			-			226
ADJUSTED EBITDA			$	1,854		$	698	$	-		$	-		$	2,552

A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:

NET INCOME (LOSS)			$	196		$	251	$	(3,192	)	$	-		$	(2,745	)
	(Income) loss from discontinued operations, net of tax			-			-		3,192			-			3,192
	Stock-based compensation			226			-		-			-			226
NON-GAAP NET INCOME (LOSS)			$	422		$	251	$	-		$	-		$	673

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

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Twelve Months Ended December 31, 2010
(In Thousands)

						Business &
			PFSweb			Retail Connect		eCOST			Eliminations			Consolidated
REVENUES:
	Product revenue, net		$	-		$	174,613	$	-		$	-		$	174,613
	Service fee revenue			70,636			-		-			-			70,636
	Service fee revenue - affiliate			6,622			-		-			(6,622	)		-
	Pass-thru revenue			29,294			-		-			(27	)		29,267
		Total revenues		106,552			174,613		-			(6,649	)		274,516

COSTS OF REVENUES:
	Cost of product revenue			-			162,485		-			-			162,485
	Cost of service fee revenue			53,543			-		-			(2,399	)		51,144
	Cost of pass-thru revenue			29,294			-		-			(27	)		29,267
		Total costs of revenues		82,837			162,485		-			(2,426	)		242,896
		Gross profit		23,715			12,128		-			(4,223	)		31,620
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES				29,158			8,676		-			(4,223	)		33,611
	Income (loss) from operations			(5,443	)		3,452		-			-			(1,991	)
INTEREST EXPENSE (INCOME), NET				(257	)		1,197		-			-			940
	Income (loss) before income taxes			(5,186	)		2,255		-			-			(2,931	)
INCOME TAX PROVISION (BENEFIT)				(355	)		818		-			-			463
INCOME (LOSS) FROM CONTINUING OPERATIONS				(4,831	)		1,437		-			-			(3,394	)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX				-			-		(3,975	)					(3,975	)
NET INCOME (LOSS)			$	(4,831	)	$	1,437	$	(3,975	)	$	-		$	(7,369	)
NON-GAAP NET INCOME (LOSS)			$	(3,372	)	$	1,437	$	-		$	-		$	(1,935	)

EBITDA			$	589		$	3,480	$	-		$	-		$	4,069
ADJUSTED EBITDA			$	2,048		$	3,480	$	-		$	-		$	5,528


A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:

NET INCOME (LOSS)			$	(4,831	)	$	1,437	$	(3,975	)	$	-		$	(7,369	)
	(Income) loss from discontinued operations, net of tax			-			-		3,975			-			3,975
	Income tax expense (benefit)			(355	)		818		-			-			463
	Interest expense (income)			(257	)		1,197		-			-			940
	Depreciation and amortization			6,032			28					-			6,060
EBITDA			$	589		$	3,480	$	-		$	-		$	4,069
	Stock-based compensation			809			-					-			809
	Executive disability benefits			650			-					-			650
ADJUSTED EBITDA			$	2,048		$	3,480	$	-		$	-		$	5,528

A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:

NET INCOME (LOSS)			$	(4,831	)	$	1,437	$	(3,975	)	$	-		$	(7,369	)
	(Income) loss from discontinued operations, net of tax			-			-		3,975			-			3,975
	Stock-based compensation			809			-		-			-			809
	Executive disability benefits			650			-		-			-			650
NON-GAAP NET INCOME (LOSS)			$	(3,372	)	$	1,437	$	-		$	-		$	(1,935	)

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

PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidating Balance Sheets
as of December 31, 2010
(In Thousands)


						Supplies
			PFSweb			Distributors		eCOST			Eliminations			Consolidated
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents		$	13,471		$	3,110	$	1,849		$	-		$	18,430
	Restricted cash			777			884		192			-			1,853
	Accounts receivable, net			21,234			19,524		987			(307	)		41,438
	Inventories, net			-			35,161		-			-			35,161
	Assets of discontinued operations			-			-		2,776			-			2,776
	Other receivables			-			13,822		717			-			14,539
	Prepaid expenses and other current assets			2,006			1,469		105			-			3,580
		Total current assets		37,488			73,970		6,626			(307	)		117,777

PROPERTY AND EQUIPMENT, net				8,861			22		95			-			8,978
RECEIVABLE/INVESTMENT IN AFFILIATES				14,255			-		-			(14,255	)		-
ASSETS OF DISCONTINUED OPERATIONS				-			-		1,272			-			1,272
OTHER ASSETS				2,013			-		190			-			2,203
		Total assets		62,617			73,992		8,183			(14,562	)		130,230

LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
	Current portion of long-term debt and capital lease obligations		$	8,332		$	9,953	$	35		$	-		$	18,320
	Trade accounts payable			6,356			44,896		4,747			(307	)		55,692
	Accrued expenses			12,994			6,260		1,870			-			21,124
		Total current liabilities		27,682			61,109		6,652			(307	)		95,136

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion				2,031			-		105			-			2,136
PAYABLE TO AFFILIATES				-			4,255		18,490			(22,745	)		-
OTHER LIABILITIES				3,608			-		-			-			3,608
		Total liabilities		33,321			65,364		25,247			(23,052	)		100,880

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
	Common stock			12			-		19			(19	)		12
	Capital contributions			-			1,000		-			(1,000	)		-
	Additional paid-in capital			101,229			-		28,059			(28,059	)		101,229
	Retained earnings (accumulated deficit)			(73,387	)		5,410		(45,148	)		39,793			(73,332	)
	Accumulated other comprehensive income			1,527			2,218		6			(2,225	)		1,526
	Treasury stock			(85	)		-		-			-			(85	)
		Total shareholders' equity		29,296			8,628		(17,064	)		8,490			29,350
		Total liabilities and shareholders' equity	$	62,617		$	73,992	$	8,183		$	(14,562	)	$	130,230

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Three Months Ended December 31, 2009
(In Thousands)

						Business &
			PFSweb			Retail Connect		eCOST			Eliminations			Consolidated
REVENUES:
	Product revenue, net		$	-		$	47,288	$	-		$	-		$	47,288
	Service fee revenue			16,015			-		-			-			16,015
	Service fee revenue - affiliate			1,700			-		-			(1,700	)		-
	Pass-thru revenue			9,520			-		-			(3	)		9,517
		Total revenues		27,235			47,288		-			(1,703	)		72,820

COSTS OF REVENUES:
	Cost of product revenue			-			44,048		-			-			44,048
	Cost of service fee revenue			12,143			-		-			(651	)		11,492
	Cost of pass-thru revenue			9,520			-		-			(3	)		9,517
		Total costs of revenues		21,663			44,048		-			(654	)		65,057
		Gross profit		5,572			3,240		-			(1,049	)		7,763
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES				7,459			2,434		-			(1,049	)		8,844
	Income (loss) from operations			(1,887	)		806		-			-			(1,081	)
INTEREST EXPENSE (INCOME), NET				(68	)		301		-			-			233
	Income (loss) before income taxes			(1,819	)		505		-			-			(1,314	)
INCOME TAX PROVISION (BENEFIT)				(122	)		182		-			-			60
INCOME (LOSS) FROM CONTINUING OPERATIONS				(1,697	)		323		-			-			(1,374	)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX				-			-		427						427
NET INCOME (LOSS)			$	(1,697	)	$	323	$	427		$	-		$	(947	)
NON-GAAP NET INCOME (LOSS)			$	(1,599	)	$	323	$	-		$	-		$	(1,276	)

EBITDA			$	(318	)	$	815	$	-		$	-		$	497
ADJUSTED EBITDA			$	(220	)	$	815	$	-		$	-		$	595


A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:

NET INCOME (LOSS)			$	(1,697	)	$	323	$	427		$	-		$	(947	)
	(Income) loss from discontinued operations, net of tax			-			-		(427	)		-			(427	)
	Income tax expense (benefit)			(122	)		182		-			-			60
	Interest expense (income)			(68	)		301		-			-			233
	Depreciation and amortization			1,569			9		-			-			1,578
EBITDA			$	(318	)	$	815	$	-		$	-		$	497
	Stock-based compensation			98			-		-			-			98
ADJUSTED EBITDA			$	(220	)	$	815	$	-		$	-		$	595

A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:

NET INCOME (LOSS)			$	(1,697	)	$	323	$	427		$	-		$	(947	)
	(Income) loss from discontinued operations, net of tax			-			-		(427	)		-			(427	)
	Stock-based compensation			98			-		-			-			98
NON-GAAP NET INCOME (LOSS)			$	(1,599	)	$	323	$	-		$	-		$	(1,276	)

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

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Twelve Months Ended December 31, 2009
(In Thousands)

						Business &
			PFSweb			Retail Connect		eCOST			Eliminations			Consolidated
REVENUES:
	Product revenue, net		$	-		$	183,008	$	-		$	-		$	183,008
	Service fee revenue			58,619			-		-			-			58,619
	Service fee revenue - affiliate			7,093			-		-			(7,093	)		-
	Pass-thru revenue			26,335			-		-			(70	)		26,265
		Total revenues		92,047			183,008		-			(7,163	)		267,892

COSTS OF REVENUES:
	Cost of product revenue			-			168,864		-			-			168,864
	Cost of service fee revenue			44,453			-		-			(2,555	)		41,898
	Cost of pass-thru revenue			26,335			-		-			(70	)		26,265
		Total costs of revenues		70,788			168,864		-			(2,625	)		237,027
		Gross profit		21,259			14,144		-			(4,538	)		30,865
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES				30,029			8,779		-			(4,538	)		34,270
	Income (loss) from operations			(8,770	)		5,365		-			-			(3,405	)
INTEREST EXPENSE (INCOME), NET				(202	)		1,388		-			-			1,186
	Income (loss) before income taxes			(8,568	)		3,977		-			-			(4,591	)
INCOME TAX PROVISION (BENEFIT)				(734	)		1,055		-			-			321
INCOME (LOSS) FROM CONTINUING OPERATIONS				(7,834	)		2,922		-			-			(4,912	)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX				-			-		342						342
NET INCOME (LOSS)			$	(7,834	)	$	2,922	$	342		$	-		$	(4,570	)
NON-GAAP NET INCOME (LOSS)			$	(7,427	)	$	2,922	$	-		$	-		$	(4,505	)

EBITDA			$	(2,261	)	$	5,400	$	-		$	-		$	3,139
ADJUSTED EBITDA			$	(1,854	)	$	5,400	$	-		$	-		$	3,546


A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:

NET INCOME (LOSS)			$	(7,834	)	$	2,922	$	342		$	-		$	(4,570	)
	(Income) loss from discontinued operations, net of tax			-			-		(342	)		-			(342	)
	Income tax expense (benefit)			(734	)		1,055		-			-			321
	Interest expense (income)			(202	)		1,388		-			-			1,186
	Depreciation and amortization			6,509			35		-			-			6,544
EBITDA			$	(2,261	)	$	5,400	$	-		$	-		$	3,139
	Stock-based compensation			407			-		-			-			407
ADJUSTED EBITDA			$	(1,854	)	$	5,400	$	-		$	-		$	3,546

A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:

NET INCOME (LOSS)			$	(7,834	)	$	2,922	$	342		$	-		$	(4,570	)
	(Income) loss from discontinued operations, net of tax			-			-		(342	)		-			(342	)
	Stock-based compensation			407			-		-			-			407
NON-GAAP NET INCOME (LOSS)			$	(7,427	)	$	2,922	$	-		$	-		$	(4,505	)

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

PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidating Balance Sheets
as of December 31, 2009
(In Thousands)


						Supplies
			PFSweb			Distributors		eCOST			Eliminations			Consolidated
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents		$	9,698		$	2,628	$	2,486		$	-		$	14,812
	Restricted cash			732			1,137		227			-			2,096
	Accounts receivable, net			19,499			18,764		1,719			(121	)		39,861
	Inventories, net			-			33,577		-			-			33,577
	Assets of discontinued operations			-			-		4,372			-			4,372
	Other receivables			49			11,556		-			-			11,605
	Prepaid expenses and other current assets			2,515			1,575		80			-			4,170
		Total current assets		32,493			69,237		8,884			(121	)		110,493

PROPERTY AND EQUIPMENT, net				9,900			54		31			-			9,985
RECEIVABLE/INVESTMENT IN AFFILIATES				20,696			-		-			(20,696	)		-
ASSETS OF DISCONTINUED OPERATIONS				-			-		4,353			-			4,353
OTHER ASSETS				2,627			-		311			-			2,938
		Total assets		65,716			69,291		13,579			(20,817	)		127,769

LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
	Current portion of long-term debt and capital lease obligations		$	8,770		$	10,374	$	35		$	-		$	19,179
	Trade accounts payable			8,396			38,753		6,614			(121	)		53,642
	Accrued expenses			10,994			4,701		2,649			-			18,344
		Total current liabilities		28,160			53,828		9,298			(121	)		91,165

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion				3,208			-		140			-			3,348
PAYABLE TO AFFILIATES				-			5,005		15,840			(20,845	)		-
OTHER LIABILITIES				3,880			-		23			-			3,903
		Total liabilities		35,248			58,833		25,301			(20,966	)		98,416

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
	Common stock			10			-		19			(19	)		10
	Capital contributions			-			1,000		-			(1,000	)		-
	Additional paid-in capital			93,152			-		28,059			(28,059	)		93,152
	Retained earnings (accumulated deficit)			(64,828	)		6,781		(39,805	)		31,889			(65,963	)
	Accumulated other comprehensive income			2,219			2,677		5			(2,662	)		2,239
	Treasury stock			(85	)		-		-			-			(85	)
		Total shareholders' equity		30,468			10,458		(11,722	)		149			29,353
		Total liabilities and shareholders' equity	$	65,716		$	69,291	$	13,579		$	(20,817	)	$	127,769

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