PC Connection Posts Fourth Quarter and Full Year 2013 Results [Professional Services Close - Up]
(Professional Services Close - Up Via Acquire Media NewsEdge) PC Connection, Inc., a national provider of a full range of information technology (IT) solutions to business, government, and education markets, announced results for the quarter ended December 31, 2013.
In a release on January 30, the Company noted that net sales for the fourth quarter of 2013 were $578.6 million, an increase of 4.0 percent compared to $556.2 million for the fourth quarter of 2012. Net income for the quarter ended December 31, 2013 was $9.8 million, or $0.37 per diluted share, compared to net income of $8.9 million, or $0.33 per diluted share, for the corresponding prior year quarter.
Net sales for the year ended December 31, 2013 were $2.22 billion, an increase of $62.8 million or 2.9 percent, compared to $2.16 billion for the year ended December 31, 2012. Net income for the year ended December 31, 2013 was $35.7 million, or $1.35 per diluted share, compared to net income of $33.1 million, or $1.24 per diluted share, for the corresponding prior year. Earnings before interest, taxes, depreciation and amortization, adjusted for stock- based compensation expense, and special charges ("Adjusted EBITDA") totaled $67.4 million for the year ended December 31, 2013, as compared to $63.3 million for the year ended December 31, 2012.
Quarterly Sales by Segment:
-Net sales for the SMB segment increased by 4.9 percent to $239.6 million in the fourth quarter of 2013, compared to $228.5 million in the fourth quarter of 2012. Storage, software, and net/com products had double-digit percentage growth during the quarter. This is the third straight quarter of double-digit growth in SMB software sales.
-Net sales for the Large Account segment totaled $218.0 million, an increase of 7.8 percent, compared to net sales in the fourth quarter of 2012. Net/com and software sales were notably strong in this segment during the quarter with an increase of 33.0 percent and 19.3 percent, respectively. Commercial sales, which consists of SMB and Large Account sales, increased by 6.2 percent from the prior year quarter.
-Net sales to government and education customers (Public Sector segment) decreased by 3.6 percent year over year to $120.9 million. Sales to state and local government and educational institutions increased by 17.4 percent compared to the prior year quarter. Sales to the federal government decreased by 23.0 percent as a result of the ongoing budgetary constraints. The federal government business is expected to continue to be under pressure for at least the first half of 2014.
Quarterly Sales by Product Mix:
-Notebook/tablet sales, the Company's largest product category, increased by 4 percent year over year and accounted for 19 percent of net sales in both the fourth quarter of 2013 and 2012. Our Public Sector segment experienced year-over-year growth, which more than offset slight declines in our SMB and Large Account notebook/tablet sales.
-Software sales, the Company's second largest product category, increased by 14 percent year over year and accounted for 17 percent of net sales in the fourth quarter of 2013, compared to 16 percent in the fourth quarter of 2012. We experienced growth in our SMB and Large Account segments due to increased demand for security, virtualization, office productivity, and operating system software.
-Net/com product sales increased by 9 percent year over year and accounted for 10 percent of net sales in the fourth quarter of 2013, compared to 9 percent in the fourth quarter of 2012. Both SMB and Large Account achieved double-digit increases compared to the prior year quarter due to our focus on solution selling, which has resulted in increased demand for both enterprise and client networking.
Overall gross profit dollars increased by $4.0 million, or 5.6 percent, in the fourth quarter of 2013, compared to the prior year quarter. Consolidated gross margin, as a percentage of net sales, increased to 13.1 percent in the fourth quarter of 2013, compared to 12.9 percent in the prior year quarter.
Total selling, general and administrative dollars increased in the fourth quarter of 2013 to $59.3 million from $57.1 million in the prior year quarter, but stayed flat as a percentage of net sales at 10.3 percent. As we noted in our previous releases, approximately $0.5 million of this increase in SG&A is due to depreciation related to the Customer Master Data Management software project that we recently placed into service. We continue to invest in solution sales capabilities, including our Cloud Connection team, and expect SG&A expenses to rise accordingly as the year progresses. However, we are highly focused on improving efficiencies and streamlining wherever possible.
The Company generated $13.1 million in positive cash flow during fiscal year 2013 prior to the $10.5 million special dividend payment in the fourth quarter of December 31, 2013. Total cash was $42.5 million at December 31, 2013, compared to $39.9 million at December 31, 2012. Our December 31, 2013 cash balance is lower than our September 30, 2013 balance due to the special dividend paid in the fourth quarter and seasonal working capital fluctuations. Days sales outstanding were 42 days at December 31, 2013, compared to 41 days at December 31, 2012, and inventory turns decreased from 27 turns in the fourth quarter of 2012 to 24 turns in the fourth quarter of 2013.
"We are pleased with PC Connection's results this quarter," said Timothy McGrath, President and Chief Executive Officer. "The Company increased revenue, gross margin, operating margin, and earnings per share in a challenging economic environment. As a National Solution Provider, we are continually working to enhance our capabilities to deliver high value technology solutions to help our customers solve their business challenges." McGrath concluded, "We believe the team and the strategies we have in place position PC Connection well to gain market share and increase long-term shareholder value."
PC Connection Sales Corp., 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.
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