PC Connection, Inc. Reports Fourth Quarter and Full Year Results
FOURTH QUARTER SUMMARY: |
FULL YEAR SUMMARY: |
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Net sales for the year ended
Quarterly Sales by Segment:
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Net sales for the SMB segment decreased in the quarter by 8.6% to
$224 .1 million, compared to net sales in the fourth quarter of 2010. Sales of desktops and notebooks related to the PC refresh continued to be strong in the quarter; however, overall sales decreased year over year due to lower sales of tablets and media players, as well as hard drive product constraints, in the fourth quarter of 2011. -
Net sales for the Large Account segment increased by 17.3% to
$197.0 million compared to sales in the fourth quarter of 2010. This segment includes the operating results for ValCom Technology ("ValCom"), a provider of infrastructure management and onsite managed services to medium-to-large corporations, which we acquired in the first quarter of 2011. Excluding ValCom's sales for the quarter, Large Account sales would have increased year over year by 10.5% due to strong demand for enterprise solutions. -
Net sales to government and education customers (Public Sector
segment) decreased year over year by 2.0% to
$115.0 million due primarily to budgetary constraints. Sales to state and local government and educational institutions decreased by 3.5% during the quarter, while sales to the federal government were only nominally lower than the prior year quarter. -
Net sales to consumers and SOHO customers by PC Connection Express
were
$17 .0 million in the fourth quarter of 2011, compared to$24 .9 million in the fourth quarter of 2010. Gross profit dollars, however, increased by 7.2% in the quarter as gross margin improvements continued to be the primary focus for this segment.
Quarterly Sales by Product Mix:
- Notebook and PDA sales, the Company's largest product category, decreased by 2% year over year and accounted for 17% of net sales in the fourth quarter of 2011 compared to 18% of net sales in the fourth quarter of 2010. Pricing pressures resulted in a 6% decrease in average selling prices, or ASPs, as unit sales increased by 5% year over year.
- Desktop/server sales decreased by 7% year over year, accounting for 16% of net sales in the fourth quarter of 2011 compared to 17% of net sales in the fourth quarter of 2010. Desktop sales decreased as a result of a 14% decrease in ASPs, however unit sales increased by 10%. Server sales decreased year over year as a result of a 10% decrease in unit sales, as ASPs were largely unchanged.
- Net/com products sales increased by 17% year over year, accounting for 11% of net sales in the fourth quarter of 2011 compared to 9% of net sales in the fourth quarter of 2011. Net/com sales were strong in both the SMB and Large Account segments with double digit growth from each segment contributing to the overall increase.
- Storage device sales increased by 11% year over year, accounting for 7% of net sales in the fourth quarter of 2011 and 2010. Increased demand for storage solutions and servers from both SMB and Large Account customers led to the growth in this category.
Overall gross profit dollars increased by
Total selling, general and administrative expenses for the quarter
increased year over year by
During the quarter, the Company paid a one-time special cash dividend of
"I am pleased with our overall performance in 2011.
About
"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 Annual Report on Form
10-K filed with the
CONSOLIDATED SELECTED FINANCIAL INFORMATION | |||||||||||||||||||||
At or for the Three Months Ended |
2011 |
2010 | |||||||||||||||||||
(Dollars and shares in thousands, except operating data, P/E ratio, and per share data) | % of | % of | % | ||||||||||||||||||
Net Sales | Net Sales | Change | |||||||||||||||||||
Operating Data: | |||||||||||||||||||||
Net sales | $ | 553,162 | $ | 555,563 | - | ||||||||||||||||
Diluted earnings per share | $ | 0.28 | $ | 0.26 | 8 | % | |||||||||||||||
Gross margin | 12.4 | % | 11.4 | % | |||||||||||||||||
Operating margin | 2.1 | % | 2.1 | % | |||||||||||||||||
Return on equity (1) | 10.9 | % | 10.9 | % | |||||||||||||||||
Orders entered (2) | 329,600 | 345,800 | (5 | %) | |||||||||||||||||
Average order size (2) | $ | 1,958 | $ | 1,810 | 8 | % | |||||||||||||||
Inventory turns (1) | 25 | 23 | |||||||||||||||||||
Days sales outstanding | 53 | 44 | |||||||||||||||||||
Product Mix: | |||||||||||||||||||||
Notebook & PDA | $ | 95,296 | 17 | % | $ | 97,266 | 18 | % | (2 | %) | |||||||||||
Desktop/Server | 85,464 | 16 | 91,870 | 17 | (7 | ) | |||||||||||||||
Software | 81,744 | 15 | 82,344 | 15 | (1 | ) | |||||||||||||||
Net/Com Product | 60,757 | 11 | 52,069 | 9 | 17 | ||||||||||||||||
Video, Imaging & Sound | 51,640 | 9 | 69,248 | 12 | (25 | ) | |||||||||||||||
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41,043 | 8 | 39,121 | 7 | 5 | ||||||||||||||||
Storage Device | 40,638 | 7 | 36,659 | 7 | 11 | ||||||||||||||||
Memory & System Enhancement | 22,582 | 4 | 23,406 | 4 | (4 | ) | |||||||||||||||
Accessory/Other | 73,998 | 13 | 63,580 | 11 | 16 | ||||||||||||||||
Total Net Sales | $ | 553,162 | 100 | % | $ | 555,563 | 100 | % | - | ||||||||||||
Net Sales of Enterprise Server and Networking Products (included in the above Product Mix): | |||||||||||||||||||||
$ | 215,695 | 39 | % | $ | 201,850 | 36 | % | 7 | % | ||||||||||||
Stock Performance Indicators: | |||||||||||||||||||||
Actual shares outstanding | 26,365 | 26,653 | |||||||||||||||||||
Total book value per share | $ | 10.37 | $ | 9.67 | |||||||||||||||||
Tangible book value per share | $ | 8.23 | $ | 7.80 | |||||||||||||||||
Closing price | $ | 11.09 | $ | 8.86 | |||||||||||||||||
Market capitalization | $ | 292,388 | $ | 236,146 | |||||||||||||||||
Trailing price/earnings ratio | 10 | 10 | |||||||||||||||||||
(1) Annualized | |||||||||||||||||||||
(2) Does not reflect cancellations or returns | |||||||||||||||||||||
REVENUE AND MARGIN INFORMATION | |||||||||||||||||||||
For the Three Months Ended |
2011 | 2010 | |||||||||||||||||||
Net | Gross | Net | Gross | ||||||||||||||||||
(Dollars in thousands) | Sales | Margin | Sales | Margin | |||||||||||||||||
SMB | $ | 224,121 | 14.4 | % | $ | 245,244 | 13.3 | % | |||||||||||||
Large Account | 197,049 | 10.8 | 168,023 | 10.1 | |||||||||||||||||
Public Sector | 114,978 | 11.9 | 117,377 | 10.6 | |||||||||||||||||
Consumer/SOHO | 17,014 | 8.9 | 24,919 | 5.7 | |||||||||||||||||
Total | $ | 553,162 | 12.4 | % | $ | 555,563 | 11.4 | % |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||
Three Months Ended |
2011 | 2010 | ||||||||||||||||
(amounts in thousands, except per share data) | Amount | % of Net Sales | Amount | % of Net Sales | ||||||||||||||
Net sales | $ | 553,162 | 100.0 | % | $ | 555,563 | 100.0 | % | ||||||||||
Cost of sales | 484,427 | 87.6 | 492,267 | 88.6 | ||||||||||||||
Gross profit | 68,735 | 12.4 | 63,296 | 11.4 | ||||||||||||||
Selling, general and administrative expenses | 56,952 | 10.3 | 51,618 | 9.3 | ||||||||||||||
Income from operations | 11,783 | 2.1 | 11,678 | 2.1 | ||||||||||||||
Interest expense | (148 | ) | - | (185 | ) | - | ||||||||||||
Other, net | 60 | - | 54 | - | ||||||||||||||
Income tax provision | (4,268 | ) | (0.8 | ) | (4,669 | ) | (0.9 | ) | ||||||||||
Net income | $ | 7,427 | 1.3 | % | $ | 6,878 | 1.2 | % | ||||||||||
Earnings per common share: | ||||||||||||||||||
Basic | $ | 0.28 | $ | 0.26 | ||||||||||||||
Diluted | $ | 0.28 | $ | 0.26 | ||||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||||
Basic | 26,451 | 26,821 | ||||||||||||||||
Diluted | 26,599 | 26,888 | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||
Years Ended |
2011 | 2010 | ||||||||||||||||
(amounts in thousands, except per share data) | Amount | % of Net Sales | Amount | % of Net Sales | ||||||||||||||
Net sales | $ | 2,103,295 | 100.0 | % | $ | 1,974,198 | 100.0 | % | ||||||||||
Cost of sales | 1,838,411 | 87.4 | 1,744,298 | 88.3 | ||||||||||||||
Gross profit | 264,884 | 12.6 | 229,900 | 11.7 | ||||||||||||||
Selling, general and administrative expenses | 217,273 | 10.3 | 191,233 | 9.7 | ||||||||||||||
Income from operations | 47,611 | 2.3 | 38,667 | 2.0 | ||||||||||||||
Interest expense | (369 | ) | - | (490 | ) | - | ||||||||||||
Other, net | 189 | - | 213 | - | ||||||||||||||
Income tax provision | (18,644 | ) | (0.9 | ) | (15,429 | ) | (0.8 | ) | ||||||||||
Net income | $ | 28,787 | 1.4 | % | $ | 22,961 | 1.2 | % | ||||||||||
Earnings per common share: | ||||||||||||||||||
Basic | $ | 1.08 | $ | 0.85 | ||||||||||||||
Diluted | $ | 1.07 | $ | 0.85 | ||||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||||
Basic | 26,703 | 27,007 | ||||||||||||||||
Diluted | 26,800 | 27,053 |
CONDENSED CONSOLIDATED BALANCE SHEETS |
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(amounts in thousands) | 2011 | 2010 | ||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||
Current Assets: | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 4,615 | $ | 35,374 | ||||||||||||||||||||||||||||
Accounts receivable, net | 295,188 | 238,011 | ||||||||||||||||||||||||||||||
Inventories | 77,437 | 74,293 | ||||||||||||||||||||||||||||||
Prepaid expenses and other current assets | 4,713 | 4,210 | ||||||||||||||||||||||||||||||
Deferred income taxes | 4,436 | 3,813 | ||||||||||||||||||||||||||||||
Income taxes receivable | 1,927 | 1,489 | ||||||||||||||||||||||||||||||
Total current assets | 388,316 | 357,190 | ||||||||||||||||||||||||||||||
Property and equipment, net | 22,570 | 13,500 | ||||||||||||||||||||||||||||||
Goodwill | 51,276 | 48,060 | ||||||||||||||||||||||||||||||
Other intangibles, net | 5,205 | 1,786 | ||||||||||||||||||||||||||||||
Other assets | 652 | 405 | ||||||||||||||||||||||||||||||
Total Assets | $ | 468,019 | $ | 420,941 | ||||||||||||||||||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||||||||||||||
Current maturities of capital lease obligation to affiliate | $ | 971 | $ | 870 | ||||||||||||||||||||||||||||
Note payable - bank | 5,267 | - | ||||||||||||||||||||||||||||||
Accounts payable | 130,900 | 114,632 | ||||||||||||||||||||||||||||||
Accrued expenses and other liabilities | 30,902 | 23,963 | ||||||||||||||||||||||||||||||
Accrued payroll | 12,964 | 12,652 | ||||||||||||||||||||||||||||||
Total current liabilities | 181,004 | 152,117 | ||||||||||||||||||||||||||||||
Deferred income taxes | 9,026 | 5,822 | ||||||||||||||||||||||||||||||
Other liabilities | 3,471 | 3,403 | ||||||||||||||||||||||||||||||
Capital lease obligation to affiliate, less current maturities | 989 | 1,960 | ||||||||||||||||||||||||||||||
Total Liabilities | 194,490 | 163,302 | ||||||||||||||||||||||||||||||
Stockholders' Equity: | ||||||||||||||||||||||||||||||||
Common stock | 276 | 275 | ||||||||||||||||||||||||||||||
Additional paid-in capital | 99,957 | 98,871 | ||||||||||||||||||||||||||||||
Retained earnings | 182,274 | 164,075 | ||||||||||||||||||||||||||||||
Treasury stock at cost | (8,978 | ) | (5,582 | ) | ||||||||||||||||||||||||||||
Total Stockholders' Equity | 273,529 | 257,639 | ||||||||||||||||||||||||||||||
Total Liabilities and Stockholders' Equity | $ | 468,019 | $ | 420,941 | ||||||||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY | ||||||||||||||||||||||||||||||||
Year Ended |
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Common Stock | Additional | Retained | Treasury Stock | |||||||||||||||||||||||||||||
Shares | Amount |
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Earnings | Shares | Amount | Total | ||||||||||||||||||||||||||
Balance—January 1, 2011 | 27,507 | $ | 275 | $ | 98,871 | $ | 164,075 | (854 | ) | $ | (5,582 | ) | $ | 257,639 | ||||||||||||||||||
Stock-based compensation expense | - | - | 824 | - | - | - | 824 | |||||||||||||||||||||||||
Issuance of common stock under stock incentive plans | 64 | 1 | 403 | - | - | - | 404 | |||||||||||||||||||||||||
Issuance of common stock under Employee Stock Purchase Plan | 42 | - | 380 | - | - | - | 380 | |||||||||||||||||||||||||
Nonvested stock awards | - | - | (633 | ) | - | 93 | 633 | - | ||||||||||||||||||||||||
Tax benefit from stock-based compensation | - | - | 112 | - | - | - | 112 | |||||||||||||||||||||||||
Repurchase of common stock for treasury | - | - | - | - | (487 | ) | (4,029 | ) | (4,029 | ) | ||||||||||||||||||||||
Dividend payment | - | - | - | (10,588 | ) | - | - | (10,588 | ) | |||||||||||||||||||||||
Net income and comprehensive income | - | - | - | 28,787 | - | - | 28,787 | |||||||||||||||||||||||||
Balance—December 31, 2011 | 27,613 | $ | 276 | $ | 99,957 | $ | 182,274 | (1,248 | ) | $ | (8,978 | ) | $ | 273,529 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||
Years Ended |
2011 | 2010 | |||||||||||||
Cash Flows from Operating Activities: | |||||||||||||||
Net income | $ | 28,787 | $ | 22,961 | |||||||||||
Adjustments to reconcile net income to net cash used for | |||||||||||||||
operating activities: | |||||||||||||||
Depreciation and amortization | 5,951 | 5,430 | |||||||||||||
Provision for doubtful accounts | 2,768 | 2,372 | |||||||||||||
Deferred income taxes | 2,581 | 1,546 | |||||||||||||
Stock-based compensation expense | 824 | 1,531 | |||||||||||||
Income tax benefit (deficiency) related to equity awards | 112 | (16 | ) | ||||||||||||
Loss on disposal of fixed assets | 16 | 2 | |||||||||||||
Excess tax benefit from exercise of stock options | (15 | ) | - | ||||||||||||
Fair value adjustment to contingent consideration | (80 | ) | - | ||||||||||||
Changes in assets and liabilities: | |||||||||||||||
Accounts receivable | (56,682 | ) | (22,288 | ) | |||||||||||
Inventories | (2,850 | ) | (6,902 | ) | |||||||||||
Prepaid expenses and other current assets | (673 | ) | (2,014 | ) | |||||||||||
Other non-current assets | (219 | ) | 77 | ||||||||||||
Accounts payable | 14,497 | (10,329 | ) | ||||||||||||
Accrued expenses and other liabilities | (309 | ) | 6,768 | ||||||||||||
Net cash used for operating activities | (5,292 | ) | (862 | ) | |||||||||||
Cash Flows from Investing Activities: | |||||||||||||||
Purchases of property and equipment | (10,855 | ) | (6,387 | ) | |||||||||||
Acquisition of ValCom Technology, net of cash acquired | (4,745 | ) | - | ||||||||||||
Purchase of intangible asset | (450 | ) | (800 | ) | |||||||||||
Proceeds from sale of property and equipment | 4 | 9 | |||||||||||||
Net cash used for investing activities | (16,046 | ) | (7,178 | ) | |||||||||||
Cash Flows from Financing Activities: | |||||||||||||||
Proceeds from short-term borrowings | 59,373 | 9,485 | |||||||||||||
Repayment of short-term borrowings | (54,106 | ) | (9,485 | ) | |||||||||||
Dividend payment | (10,588 | ) | - | ||||||||||||
Purchase of treasury shares | (4,029 | ) | (3,067 | ) | |||||||||||
Repayment of capital lease obligation to affiliate | (870 | ) | (780 | ) | |||||||||||
Exercise of stock options | 404 | 670 | |||||||||||||
Issuance of stock under Employee Stock Purchase Plan | 380 | 294 | |||||||||||||
Excess tax benefit from exercise of stock options | 15 | - | |||||||||||||
Net cash used for financing activities | (9,421 | ) | (2,883 | ) | |||||||||||
Decrease in cash and cash equivalents | (30,759 | ) | (10,923 | ) | |||||||||||
Cash and cash equivalents, beginning of period | 35,374 | 46,297 | |||||||||||||
Cash and cash equivalents, end of period | $ | 4,615 | $ | 35,374 | |||||||||||
Non-cash Investing and Financing Activities: | |||||||||||||||
Contingent consideration included in accrued expenses and other liabilities | $ | 1,960 | $ | - | |||||||||||
Accrued capital expenditures | 430 | 4 | |||||||||||||
Issuance of nonvested stock from treasury | 633 | 820 | |||||||||||||
pccc-g
Vice
President and Corporate Controller
Source:
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