PC Connection, Inc. Reports Fourth Quarter and Full Year Results
Company Announces Record Quarterly and Annual Sales
FOURTH QUARTER SUMMARY: |
FULL YEAR SUMMARY: |
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Net sales for the year ended
"We executed well this quarter and took advantage of an improving
economy," said
As previously announced, the Company formed a new sales company, PC Connection Express, Inc., to focus on the specialized requirements of the consumer and small office/home office ("SOHO") markets. Prior to its formation, consumer and SOHO sales were generated by and reported within the Company's SMB segment. In order to facilitate comparison with current period results, 2009 revenue and gross margin for the SMB segment have been restated on a pro forma basis to exclude consumer and SOHO sales.
Quarterly Sales by Segment:
-
Net sales for the SMB business segment increased by 28.4% to a record
$245 .2 million compared to the fourth quarter pro forma sales of 2009. SMB sales also increased in 2010 on a sequential basis by 17.5% over the third quarter, reflecting a strong business demand environment over the last four quarters. -
Net sales for
MoreDirect, Inc. , the Company's Large Account segment, increased year over year by 36.0% to$168.0 million , topping its previous record for the largest quarterly sales performance. Large account/enterprise customers have increased their IT spending due to the release of pent-up IT demand and continued PC refresh activity. Sales increased from both new and existing customers. Average order size of large account customers also increased year over year for the fifth consecutive quarter, helping to drive the higher sales. -
Net sales to government and education customers (Public Sector
segment) decreased year over year by 1.2% to
$117.4 million . An increase in education sales was offset by a single-digit decrease in federal contract sales, as tighter stimulus funding mitigated revenues in the fourth quarter. Prior to this quarter, our Public Sector segment had experienced strong net sales growth for six straight quarters. -
Net sales to consumers and SOHO customers by PC Connection Express
were
$24 .9 million in the fourth quarter of 2010, decreasing from the$29 .8 million of comparable sales in the fourth quarter of 2009. This new company is continuing its efforts to increase its visibility in the marketplace.
Quarterly Sales by Product Mix:
- Notebook and PDA sales, the Company's largest product category, increased by 38% year over year and accounted for 18% of net sales in the fourth quarter of 2010 compared to 15% of net sales in the fourth quarter of 2009. A 25% increase in unit sales for the 2010 quarter as well as an 11% increase in average selling prices, or ASPs, drove the robust year-over-year growth.
- Desktop/server sales increased by 48% year over year, accounting for 17% of net sales in the fourth quarter of 2010 compared to 13% of net sales in the fourth quarter of 2009. Desktop sales grew year over year as a result of a 42% increase in unit sales and a 17% increase in ASPs. Server sales grew year over year as a result of a 35% increase in unit sales, as ASPs were largely unchanged.
- Software sales increased by 32% year over year, accounting for 15% of net sales in the fourth quarter of 2010 compared to 14% of net sales in the fourth quarter of 2009. Our three primary segments each grew software sales by better than 20% year over year, with virtualization, infrastructure, and business applications as key growth areas.
Overall gross profit dollars increased by
Overall annualized sales productivity increased by 18% in the fourth
quarter of 2010 compared to the fourth quarter of 2009. Sales
productivity in the Large Account, SMB, and Public Sector segments
increased by 45%, 22%, and 1%, respectively, in the fourth quarter of
2010 compared to the prior year period primarily due to the
year-over-year revenue increases. On a consolidated basis, the total
number of sales representatives was 615 at
Total selling, general and administrative expenses for the quarter
increased year over year by
Ms. Gallup concluded, "I am pleased with our consistent year-over-year
quarterly growth in sales and earnings.
About
pccc-g
"Safe Harbor" Statement Under the Private Securities Litigation Reform
Act of 1995: This release contains forward-looking statements that are
subject to risks and uncertainties, including, but not limited to, the
impact of changes in market demand and the overall level of economic
activity and environment, or in the level of business investment in
information technology products, competitive products and pricing,
product availability and market acceptance, new products, fluctuations
in operating results, and the ability of the Company to manage personnel
levels in response to fluctuations in revenue, and other risks that
could cause actual results to differ materially from those detailed
under the caption "Risk Factors" in the Company's Quarterly Report on
Form 10-Q filed with the
CONSOLIDATED SELECTED FINANCIAL INFORMATION | |||||||||||||||||
At or for the Three Months Ended December 31, | 2010 | 2009 | |||||||||||||||
(Dollars and shares in thousands, except operating data, | % of | % of | % | ||||||||||||||
price/earnings ratio, and per share data) | Net Sales | Net Sales | Change | ||||||||||||||
Operating Data: | |||||||||||||||||
Net sales | $ | 555,563 | $ | 463,121 | 20 | % | |||||||||||
Diluted earnings per share | $ | 0.26 | $ | 0.15 | 73 | % | |||||||||||
Gross margin |
11.4 | % | 11.3 | % | |||||||||||||
Operating margin | 2.1 | % | 1.4 | % | |||||||||||||
Return on equity (1) | 10.9 | % | 6.8 | % | |||||||||||||
Catalogs distributed | 2,057,000 | 2,701,000 | (24 | )% | |||||||||||||
Orders entered (2) | 345,800 | 348,400 | (1 | )% | |||||||||||||
Average order size (2) | $ | 1,810 | $ | 1,572 | 15 | % | |||||||||||
Inventory turns (1) | 23 | 24 | |||||||||||||||
Days sales outstanding | 44 | 47 | |||||||||||||||
Product Mix: | |||||||||||||||||
Notebook & PDA | $ | 97,266 | 18 | % | $ | 70,676 | 15 | % | 38 | % | |||||||
Desktop/Server | 91,870 | 17 | 62,035 | 13 | 48 | ||||||||||||
Software | 82,344 | 15 | 62,536 | 14 | 32 | ||||||||||||
Video, Imaging & Sound | 69,248 | 12 | 68,570 | 15 | 1 | ||||||||||||
Net/Com Product |
52,069 | 9 | 52,904 | 11 | (2 | ) | |||||||||||
Printer & Printer Supplies | 39,121 | 7 | 36,403 | 8 | 7 | ||||||||||||
Storage Device | 36,659 | 7 | 37,061 | 8 | (1 | ) | |||||||||||
Memory & System Enhancements | 23,406 | 4 | 22,326 | 5 | 5 | ||||||||||||
Accessory/Other | 63,580 | 11 | 50,610 | 11 | 26 | ||||||||||||
Total | $ | 555,563 | 100 | % | $ | 463,121 | 100 | % | 20 | % | |||||||
Net Sales of Enterprise Server and Networking Product (included in the above Product Mix): |
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$ | 201,850 | 36 | % | $ | 186,767 | 40 | % | 8 | % | ||||||||
Stock Performance Indicators: | |||||||||||||||||
Actual shares outstanding | 26,653 | 26,848 | |||||||||||||||
Total book value per share | $ | 9.67 | $ | 8.76 | |||||||||||||
Tangible book value per share | $ | 7.80 | $ | 6.93 | |||||||||||||
Closing price | $ | 8.86 | $ | 6.75 | |||||||||||||
Market capitalization | $ | 236,146 | $ | 181,224 | |||||||||||||
Pro forma trailing price/earnings ratio (3) | 10 | 27 | |||||||||||||||
(1) Annualized. | |||||||||||||||||
(2) Does not reflect cancellations or returns. | |||||||||||||||||
(3) Earnings calculation is based on the last four quarters and excludes special charges recognized in 2009. | |||||||||||||||||
REVENUE AND MARGIN INFORMATION | |||||||||||||||||
For the Three Months Ended December 31, | 2010 | 2009 | |||||||||||||||
Net | Gross | Net | Gross | ||||||||||||||
(Dollars in thousands) | Sales | Margin (%) | Sales | Margin (%) | |||||||||||||
PC Connection Sales Corporation (SMB) (1) | $ | 245,244 | 13.3 | % | $ | 191,044 | 13.3 | % | |||||||||
MoreDirect (Large Account) | 168,023 | 10.1 | 123,573 | 9.7 | |||||||||||||
GovConnection (Public Sector) | 117,377 | 10.6 | 118,749 | 10.6 | |||||||||||||
PC Connection Express (Consumer/SOHO) (1) | 24,919 | 5.7 | 29,755 | 8.1 | |||||||||||||
Total | $ | 555,563 | 11.4 | % | $ | 463,121 | 11.3 | % | |||||||||
(1) 2009 results are pro forma due to the launch in early 2010 of new Consumer/SOHO sales company. |
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
Three Months Ended December 31, | 2010 | 2009 | ||||||||||||||
(amounts in thousands, except per share data) | Amount | % of Net Sales | Amount | % of Net Sales | ||||||||||||
Net sales | $ | 555,563 | 100.0 | % | $ | 463,121 | 100.0 | % | ||||||||
Cost of sales | 492,267 | 88.6 | 410,622 | 88.7 | ||||||||||||
Gross profit | 63,296 | 11.4 | 52,499 | 11.3 | ||||||||||||
Selling, general and administrative expenses | 51,618 | 9.3 | 45,984 | 9.9 | ||||||||||||
Special charges | - | - | (129 | ) | 0.0 | |||||||||||
Income from operations | 11,678 | 2.1 | 6,644 | 1.4 | ||||||||||||
Interest expense | (185 | ) | - | (132 | ) | 0.0 | ||||||||||
Other, net | 54 | - | 72 | 0.0 | ||||||||||||
Income tax provision | (4,669 | ) | (0.9 | ) | (2,617 | ) | (0.5 | ) | ||||||||
Net income | $ | 6,878 | 1.2 | % | $ | 3,967 | 0.9 | % | ||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.26 | $ | 0.15 | ||||||||||||
Diluted | $ | 0.26 | $ | 0.15 | ||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 26,821 | 27,158 | ||||||||||||||
Diluted | 26,888 | 27,183 | ||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
Years Ended December 31, | 2010 | 2009 | ||||||||||||||
(amounts in thousands, except per share data) | Amount | % of Net Sales | Amount | % of Net Sales | ||||||||||||
Net sales | $ | 1,974,198 | 100.0 | % | $ | 1,569,656 | 100.0 | % | ||||||||
Cost of sales | 1,744,298 | 88.3 | 1,384,860 | 88.2 | ||||||||||||
Gross profit | 229,900 | 11.7 | 184,796 | 11.8 | ||||||||||||
Selling, general and administrative expenses | 191,233 | 9.7 | 172,654 | 11.0 | ||||||||||||
Special charges | - | - | 12,826 | 0.8 | ||||||||||||
Income (loss) from operations | 38,667 | 2.0 | (684 | ) | 0.0 | |||||||||||
Interest expense | (490 | ) | - | (517 | ) | 0.0 | ||||||||||
Other, net | 213 | - | 524 | 0.0 | ||||||||||||
Income tax provision | (15,429 | ) | (0.8 | ) | (545 | ) | (0.1 | ) | ||||||||
Net income (loss) | $ | 22,961 | 1.2 | % | $ | (1,222 | ) | (0.1 | %) | |||||||
Earnings (loss) per common share: | ||||||||||||||||
Basic | $ | 0.85 | $ | (0.05 | ) | |||||||||||
Diluted | $ | 0.85 | $ | (0.05 | ) | |||||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 27,007 | 26,833 | ||||||||||||||
Diluted | 27,053 | 26,833 | ||||||||||||||
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A RECONCILIATION BETWEEN GAAP AND PRO FORMA RESULTS |
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This information is being provided so as to allow for a comparison of our operating results without special charges. |
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December 31, |
Three Months Ended | Years Ended | ||||||||||||||
(amounts in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
GAAP net income (loss) | $ | 6,878 | $ | 3,967 | $ | 22,961 | ($1,222 | ) | ||||||||
Special charges (after tax): | ||||||||||||||||
Software development write-off and related charges | - | - | - | 7,378 | ||||||||||||
Management restructuring | - | (78 | ) | - | 693 | |||||||||||
Total special charges (after tax) | - | (78 | ) | - | 8,071 | |||||||||||
Pro forma net income | $ | 6,878 | $ | 3,889 | $ | 22,961 | $ | 6,849 |
CONSOLIDATED BALANCE SHEETS | December 31, | December 31, | ||||||||||||||||||||||
(amounts in thousands) | 2010 | 2009 | ||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Current Assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 35,374 | $ | 46,297 | ||||||||||||||||||||
Accounts receivable, net | 238,011 | 218,095 | ||||||||||||||||||||||
Inventories | 74,293 | 67,391 | ||||||||||||||||||||||
Deferred income taxes | 3,813 | 3,386 | ||||||||||||||||||||||
Income taxes receivable | 1,489 | 935 | ||||||||||||||||||||||
Prepaid expenses and other current assets | 4,210 | 2,750 | ||||||||||||||||||||||
Total current assets | 357,190 | 338,854 | ||||||||||||||||||||||
Property and equipment, net | 13,500 | 12,420 | ||||||||||||||||||||||
Goodwill | 48,060 | 48,060 | ||||||||||||||||||||||
Other intangibles, net | 1,786 | 1,279 | ||||||||||||||||||||||
Other assets | 405 | 482 | ||||||||||||||||||||||
Total Assets | $ | 420,941 | $ | 401,095 | ||||||||||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||||||
Current maturities of capital lease obligation to affiliate | $ | 870 | $ | 780 | ||||||||||||||||||||
Accounts payable | 114,632 | 125,120 | ||||||||||||||||||||||
Accrued expenses and other liabilities | 23,963 | 20,441 | ||||||||||||||||||||||
Accrued payroll | 12,652 | 8,843 | ||||||||||||||||||||||
Total current liabilities | 152,117 | 155,184 | ||||||||||||||||||||||
Deferred income taxes | 5,822 | 3,849 | ||||||||||||||||||||||
Capital lease obligation to affiliate, less current maturities | 1,960 | 2,830 | ||||||||||||||||||||||
Other liabilities | 3,403 | 3,966 | ||||||||||||||||||||||
Total Liabilities | 163,302 | 165,829 | ||||||||||||||||||||||
Stockholders' Equity: | ||||||||||||||||||||||||
Common stock | 275 | 274 | ||||||||||||||||||||||
Additional paid-in capital | 98,871 | 97,213 | ||||||||||||||||||||||
Retained earnings | 164,075 | 141,114 | ||||||||||||||||||||||
Treasury stock at cost | (5,582 | ) | (3,335 | ) | ||||||||||||||||||||
Total Stockholders' Equity | 257,639 | 235,266 | ||||||||||||||||||||||
Total Liabilities and Stockholders' Equity | $ | 420,941 | $ | 401,095 | ||||||||||||||||||||
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY | ||||||||||||||||||||||||
Year Ended December 31, 2010 (amounts in thousands) | ||||||||||||||||||||||||
Common Stock |
Additional | Retained |
Treasury Stock |
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Shares | Amount | Paid-In Capital | Earnings | Shares | Amount | Total | ||||||||||||||||||
Balance — December 31, 2009 | 27,375 | $ | 274 | $ | 97,213 | $ | 141,114 | (527 | ) | ($3,335 | ) | $ | 235,266 | |||||||||||
Stock-based compensation expense | - | - | 1,531 | - | - | - | 1,531 | |||||||||||||||||
Repurchase of common stock for treasury | - | - | - | - | (455 | ) | (3,067 | ) | (3,067 | ) | ||||||||||||||
Nonvested stock awards | - | - | (820 | ) | - | 128 | 820 | - | ||||||||||||||||
Issuance of common stock under Employee | ||||||||||||||||||||||||
Stock Purchase Plan | 42 | - | 294 | - | - | - | 294 | |||||||||||||||||
Issuance of common stock under stock incentive plans, | ||||||||||||||||||||||||
including income tax deficiencies | 90 | 1 | 653 | - | - | - | 654 | |||||||||||||||||
Net income and comprehensive income | - | - | - | 22,961 | - | - | 22,961 | |||||||||||||||||
Balance — December 31, 2010 | 27,507 | $ | 275 | $ | 98,871 | $ | 164,075 | (854 | ) | $ | (5,582 | ) | $ | 257,639 |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
Years Ended December 31, (amounts in thousands) | 2010 | 2009 | |||||||
Cash Flows from Operating Activities: | |||||||||
Net income (loss) | $ | 22,961 | $ | (1,222 | ) | ||||
Adjustments to reconcile net income (loss) to net cash (used for) provided by | |||||||||
operating activities: | |||||||||
Non-cash portion of special charges | - | 11,625 | |||||||
Depreciation and amortization | 5,430 | 6,796 | |||||||
Provision for doubtful accounts | 2,372 | 2,354 | |||||||
Deferred income taxes | 1,546 | (1,476 | ) | ||||||
Stock-based compensation expense | 1,531 | 1,420 | |||||||
Income tax deficiency from stock-based compensation | (16 | ) | (106 | ) | |||||
Loss on disposal of fixed assets | 2 | 16 | |||||||
Changes in assets and liabilities: | |||||||||
Accounts receivable | (22,288 | ) | (34,564 | ) | |||||
Inventories | (6,902 | ) | (6,578 | ) | |||||
Prepaid expenses and other current assets | (2,014 | ) | 1,389 | ||||||
Other non-current assets | 77 | (97 | ) | ||||||
Accounts payable | (10,329 | ) | 23,471 | ||||||
Accrued expenses and other liabilities | 6,768 | 2,682 | |||||||
Net cash (used for) provided by operating activities | (862 | ) | 5,710 | ||||||
Cash Flows from Investing Activities: | |||||||||
Purchases of property and equipment | (6,387 | ) | (5,569 | ) | |||||
Proceeds from sale of property and equipment | 9 | 2 | |||||||
Purchase of intangible asset | (800 | ) | - | ||||||
Net cash used for investing activities | (7,178 | ) | (5,567 | ) | |||||
Cash Flows from Financing Activities: | |||||||||
Proceeds from short-term borrowings | 9,485 | 22,401 | |||||||
Repayment of short-term borrowings | (9,485 | ) | (22,401 | ) | |||||
Purchase of treasury shares | (3,067 | ) | (425 | ) | |||||
Repayment of capital lease obligation | (780 | ) | (699 | ) | |||||
Exercise of stock options | 670 | - | |||||||
Issuance of stock under Employee Stock Purchase Plan | 294 | 275 | |||||||
Net cash used for financing activities | (2,883 | ) | (849 | ) | |||||
Decrease in cash and cash equivalents | (10,923 | ) | (706 | ) | |||||
Cash and cash equivalents, beginning of period | 46,297 | 47,003 | |||||||
Cash and cash equivalents, end of period | $ | 35,374 | $ | 46,297 |
pccc-g
Sr. Vice
President of Finance & Corporate Controller
Source:
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