PC Connection, Inc. (NASDAQ: PCCC), a provider of a full range of
information technology (IT) solutions to business, government, and
education markets, today announced results for the quarter ended
March 31, 2012. Net sales for the first quarter of 2012 were $498.8
million, an 8.0% increase compared to $461.9 million for the first
quarter of 2011. Net income for the quarter ended March 31, 2012 was
$5.5 million, or $0.21 per share, compared to net income of $4.5
million, or $0.17 per share, for the corresponding prior year quarter.
Included in the results for the quarter ended March 31, 2012 were
pre-tax charges of $1.1 million related to awards granted upon the
retirement of a former executive officer, as well as workforce
reductions. Excluding these special charges, pro forma net income for
the quarter ended March 31, 2012 would have been $6.2 million, or $0.23
per share, representing 35% growth over prior year. We did not record
any special charges for the first quarter of 2011. Earnings before
interest, taxes, depreciation and amortization, stock-based compensation
expense, and special charges ("Adjusted EBITDA") totaled $57.4 million
for the twelve months ended March 31, 2012, as compared to $48.9 million
for the twelve months ended March 31, 2011.
During the first quarter of 2012, we combined our consumer and small
office/home office ("SOHO") sales company with our small- and
medium-sized business (SMB) segment. In order to facilitate comparison
with current period results, 2011 revenues and gross margins for the SMB
segment have been restated on a pro forma basis to include consumer and
Quarterly Sales by Segment:
Quarterly Sales by Product Mix:
Overall gross profit dollars increased by $7.8 million, or 13%, to $66.6
million in the first quarter of 2012 compared to the prior year quarter.
Consolidated gross margin, as a percentage of net sales, increased to
13.4% in the first quarter of 2012 compared to 12.7% in the prior year
quarter with each segment contributing to the margin improvement.
Consolidated gross margin has improved year over year for seven straight
quarters due to strategies designed to increase sales of higher margin
products and services. We expect the gross margin rate will be below Q1
levels for each of the next three quarters due to an increased mix of
public sector sales.
Total selling, general and administrative expenses increased year over
year by $5.2 million to $56.5 million and increased as a percentage of
net sales to 11.3% for the first quarter of 2012, from 11.1% for the
first quarter of 2011. The dollar and percentage increases were
attributable to the acquisition of ValCom Technology and investments in
significant internal systems projects targeted to improve operational
efficiencies. In addition, variable compensation increased due to the
improvement in gross profits. We expect that total SG&A will be at least
$57.0 million for each of the next three quarters.
The Company generated significant positive cash flow in the quarter
ended March 31, 2012. Total cash was $49.8 million compared to $4.6
million at December 31, 2011. In addition, there were no amounts
outstanding on the Company's line of credit at March 31, 2012, compared
to $5.3 million outstanding at December 31, 2011. Days sales outstanding
were 43 days at March 31, 2012, and inventory was reduced to $62.5
million from $77.4 million at December 31, 2011.
"I am pleased with our results this quarter. Our team continues to
execute well. We generated solid sales growth and increased our pro
forma earnings per share by 35%. In addition, we strengthened our
balance sheet and generated significant positive cash flow," said
Timothy McGrath, President and Chief Executive Officer. "We believe the
strategies we have put in place will position us well to gain market
share and enhance long-term shareholder value."
Non-GAAP Financial Information
Adjusted EBITDA, pro forma net income, and pro forma earnings per share
are non-GAAP financial measures. This information is included to provide
information with respect to the Company's operating performance and
earnings. Reconciliations of Adjusted EBITDA, pro forma net income, and
pro forma earnings per share to GAAP net income are provided in tables
immediately following the Condensed Consolidated Statements of Income.
About PC Connection, Inc.
PC Connection, Inc., a Fortune 1000 company, has four sales companies:
PC Connection Sales Corporation, MoreDirect, Inc., GovConnection, Inc.,
and Professional Computer Center, Inc. d/b/a ValCom Technology,
headquartered in Merrimack, NH, Boca Raton, FL, Rockville, MD, and
Itasca, IL, respectively. All four companies can deliver
custom-configured computer systems overnight from our ISO 9001:2008
certified technical configuration lab at our distribution center in
Wilmington, OH. Investors and media can find more information about PC
Connection, Inc. at http://ir.pcconnection.com.
PC Connection Sales Corporation (800-800-5555), the original business of
PC Connection, Inc. serving primarily the small- and medium-sized
business sector, is a rapid-response provider of IT products and
services. It offers more than 300,000 brand-name products through its
staff of technically trained sales account managers and telesales
specialists, catalogs, publications, and its website at www.pcconnection.com.
This company also serves the consumer and small office users under its
PC Connection Express brand (888-800-0323) at www.pcconnectionexpress.com
and is, under its MacConnection brand (800-800-2222), one of Apple's
largest authorized online resellers at www.macconnection.com.
MoreDirect, Inc. (561-237-3300), www.moredirect.com,
provides corporate technology buyers with best-in-class IT solutions,
in-depth IT supply-chain expertise, and access to over 300,000 products
and 1,600 vendors through TRAXX™, a cloud-based eProcurement system.
Backed by over 500 technical certifications, MoreDirect's team of
engineers, software licensing specialists, and project managers help
reduce the cost and complexity of buying hardware, software, and
services throughout the entire IT lifecycle.
GovConnection, Inc. (800-800-0019) is a rapid-response provider of IT
products and services to federal, state, and local government agencies
and educational institutions through specialized account managers,
catalogs, and publications, and online at www.govconnection.com.
Professional Computer Center, Inc. d/b/a ValCom Technology
provides technology services to medium-to-large corporate organizations
utilizing its proprietary cloud-based IT service management software,
WebSPOC™. Through its experienced technical service personnel, ValCom
Technology provides network, server, storage, mission-critical onsite
support, installation, and hosting of lifecycle services.
"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 Securities and Exchange Commission for the year
ended December 31, 2011. More specifically, the statements in this
release concerning the Company's outlook for gross margin and selling,
general, and administrative expenses in 2012 and other statements of a
non-historical basis (including statements regarding the Company's
ability to grow revenues, improve gross margins, increase market share,
and increase earnings per share) are forward-looking statements that
involve certain risks and uncertainties. Such risks and uncertainties
include the ability to realize market demand for and competitive pricing
pressures on the products and services marketed by the Company, the
continued acceptance of the Company's distribution channel by vendors
and customers, continuation of key vendor and customer relationships and
support programs, the ability of the Company to integrate the operations
of ValCom Technology, the ability of the Company to gain or maintain
market share, and the ability of the Company to hire and retain
qualified sales representatives and other essential personnel. The
Company disclaims any obligation to update the information in this press
release or revise any forward-looking statements, whether as a result of
any new information, future events, or otherwise.
(1) Annualized(2) Does not reflect cancellations or returns(3)
Adjusted EBITDA is defined as EBITDA (earnings before interest, taxes,
depreciation and amortization) adjusted for stock-based compensation and
Three Months Ended March 31,
LTM Ended March 31, (1)
(1) LTM: Last twelve months
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