PC Connection, Inc. (NASDAQ: PCCC), a holder of companies that provide a full range of information technology (IT) solutions from design through deployment to business, government, and education markets, today announced results for the quarter ended September 30, 2011. Net sales for the three months ended September 30, 2011 were $575.6 million, a year-over-year increase of $42.8 million or 8.0%. Net income for the quarter was $9.4 million, or $0.35 per share, compared to net income of $8.6 million, or $0.32 per share for the corresponding prior year quarter.

Net sales for the nine months ended September 30, 2011 were $1,550.1 million, an increase of $131.5 million or 9.3%, compared to $1,418.6 million for the nine months ended September 30, 2010. Net income for the nine months ended September 30, 2011 was $21.4 million, or $0.80 per share, compared to net income of $16.1 million, or $0.59 per share, for the nine months ended September 30, 2010.

Quarterly Sales by Segment:
  • Net sales for the SMB business segment increased by 1.7% to $212.2 compared to net sales in the third quarter of 2010. Sales of desktops and notebooks related to the PC refresh continued in the quarter, however, the year-over-year growth rate for the quarter was lower due to higher sales of tablets in the third quarter of 2010.
  • Net sales for the Large Account segment increased by 29.4% to $206.6 million compared to sales in the third 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 24.1% due to increased sales to both existing and new customers.
  • Net sales to government and education customers (Public Sector segment) were $144.6 million in the quarter, compared to $145.6 million in the third quarter of 2010. Increased sales to educational institutions during the quarter were offset by decreased sales to the federal government, which were impacted by constraints in the federal budget.
  • Net sales to consumers and SOHO customers by PC Connection Express were $12.2 million, compared to $18.8 million in the third quarter of 2010. Gross margin improvements continued to be the primary focus for this segment in 2011.

Quarterly Sales by Product Mix:
  • Desktop/server sales increased by 20% year over year, accounting for 17% of net sales in the third quarter of 2011 compared to 15% of net sales in the prior year quarter. Desktop sales grew primarily as a result of increased unit sales in our Large Account segment as ASPs were largely unchanged year over year.
  • Notebook and PDA sales increased by 6% year over year and accounted for 17% of net sales in the third quarter of 2011 and 2010. Higher unit sales offset a decrease in average selling prices, or ASPs, which prices were impacted by competitive pricing pressures.
  • Software sales decreased slightly by 1%, accounting for 14% of net sales in the third quarter of 2011, compared to 15% in the prior year quarter. Software sales increased in both the Large Account and SMB segments, but were offset by a year-over-year decrease in Public Sector sales, which reported an unusually large software sale in the third quarter of 2010.
  • Video, Imaging and Sound sales grew by 27% year over year and accounted for 11% of net sales in the third quarter of 2011 compared to 10% in the prior year quarter. Year-over-year growth was largely due to a successful 2011 product roll-out in the Large Account segment.

Overall gross profit dollars for the quarter increased by 14%, or $8.5 million, compared to the third quarter of 2010. Consolidated gross margin, as a percentage of net sales, increased year over year by 60 basis points to 12.2% in the third quarter of 2011. Improved invoice selling margins was the primary driver for the increase. SMB, Public Sector, and Consumer/SOHO increased their gross margin compared to the prior year quarter, while Large Account experienced a decrease due in part to lower sales of high-margin enterprise software.

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