COMPANY PRESS RELEASE: PC Connection a leading direct marketer of information technology products and solutions, has announced results for the quarter and year ended December 31, 2001.
Net sales were $273.1 million for the three months ended December 31, 2001, compared to $345.1 million for the three months ended December 31, 2000. Net income for the quarter was $1.4 million, or $.06 per share, compared to $5.5 million, or $0.22 per share for the three months ended December 31, 2000.
Net sales for the year ended December 31, 2001 were $1.18 billion, compared to $1.45 billion for the year ended December 31, 2000. Net income for the year ended December 31, 2001 was $7.2 million, or $.29 per share, compared to $31.5 million, or $1.23 per share for the year ended December 31, 2000. For the year ended December 31, 2001, excluding the effects of restructuring costs and other special charges of $2.2 million (pre-tax), or $.05 per share, the Company reported net income of $8.5 million, or $.34 per share.
Ken Koppel, Chief Executive Officer of PC Connection, said, Federal government sales were again a highlight of the quarter, while weak demand from business and consumer markets led to disappointing results in the fourth quarter. Although we saw some slowing in the rate of sales decline for the commercial and consumer segments during the quarter, we anticipate that demand will continue to be soft, at least through the first quarter of 2002. We continue to invest in upgrading our fundamental sales, marketing, and Internet capabilities, while reducing operating costs wherever possible.
Wayne Wilson, President and Chief Operating Officer, commented, PC Connection’s balance sheet remains strong. We continue to efficiently manage our core business. The Company’s fourth quarter results showed: cash balances in excess of $35 million; inventories totaling $48.0 million at December 31, 2001 compared to $54.7 million at December 31, 2000; inventory turns for the fourth quarter of 2001 were 21 times per year, compared to 17 in the same quarter a year ago; accounts receivable were $117.5 million at the end of 2001, compared to $139.6 million at the end of 2000; and days sales outstanding in accounts receivable were 56 days at December 31, 2001, compared to 45 days at September 30, 2001. Wilson continued, However, excluding payments from the federal government, which were delayed due to mail disruptions, days sales outstanding in accounts receivable were 45 days at December 31, 2001.
Average order size for the three months ended December 31, 2001 was $1,061 compared to $1,102 in the corresponding period a year ago and $1,259 in the quarter ended September 30, 2001. As of December 31, 2001, the number of Outbound Sales Account Managers totaled 464, compared to 496 at September 30, 2001. The Company’s Managed Account Program accounted for 79% of total net sales for the three-month period ended December 31, 2001, compared to 76% for the corresponding period a year ago. Koppel commented, Our Outbound Managed Account Program is focused on improving the quality and productivity of our current account managers. We’re seeing signs of progress, which we believe will lead to improved results in the second half of 2002.
Notebook computer systems continued to be the Company’s largest product category, accounting for 20.5% of net sales in the fourth quarter of 2001 compared to 22.3% of net sales for the corresponding period a year ago. Desktop and server computer systems accounted for 11.8% of net sales in the fourth quarter of 2001, compared to 14.1% for the corresponding period a year ago. Computer systems average selling prices decreased 17% in the fourth quarter compared to the corresponding period a year ago and 6% compared to the third quarter of 2001.
Gross profit margin as a percentage of net sales was 10.9% in the fourth quarter of 2001, compared to 10.8% in the third quarter of 2001, and 11.9% in the corresponding period a year ago. The year-over-year margin decline resulted primarily from continuing intense competitive pricing and lower overall demand levels during the quarter. As stated in previous releases, the Company expects that its gross profit margin as a percentage of net sales may vary by quarter based upon vendor support programs, product mix, pricing strategies, market conditions and other factors.
Total selling, general and administrative expenses, as a percentage of sales, were 10.0% in the fourth quarter of 2001, compared to 9.0% in the corresponding period a year ago, due primarily to lower sales volumes. The Company expects that its SG&A as a percentage of net sales may vary by quarter depending on changes in sales volume, as well as the levels of continuing investments in key growth initiatives.
Patricia Gallup, Chairman of PC Connection, concluded, We continue to be intently focused on the needs of our customers, offering an ever-expanding array of IT products and solutions as well as award-winning service and support. The growth we are seeing in our government and education business is encouraging, and we are committed to developing new programs designed specifically to meet the needs of the public sector. We will continue to make strategic investments that we believe will result in the long-term success of the Company.