Net income for the quarter was $1.4 million, or $0.06 per share, in line with the Company’s recently updated guidance. Net sales for the six months ended June 30, 2001 were $599.1 million compared to $699.9 million for the corresponding period a year ago. For the six months ended June 30, 2001, the Company reported net income of $3.9 million, or $0.16 per share, including a one-time charge recorded in the first quarter of 2001 of $851 thousand, or $0.02 per share, related to reductions in non-sales staffing designed to bring operating costs in line with demand levels.
Ken Koppel, Chief Executive Officer of PC Connection said, Our second quarter results were directly impacted by the continued weak demand and pricing pressure facing most of the information technology industry. We are pursuing a balanced approach of carefully managing all discretionary costs while at the same time investing in the areas we feel are important to the Company in the long-term. Although we expect the second half of the year to be as challenging as the first, we believe that the products and services PC Connection provides will continue to be in demand by our target markets – small- and medium-sized businesses, educational institutions, and government agencies.
As of June 30, 2001, the number of Account Managers totaled 552, compared to 475 at June 30, 2000, and compared to 605 at March 31, 2001. The Company’s Outbound Sales Managed Account Program accounted for 79% of total net sales for the three month period ended June 30, 2001, compared to 77% for the corresponding period a year ago. Average order size for the three months ended June 30, 2001 was $1,120 compared to $1,183 in the corresponding period a year ago and $1,040 in the three months ended March 31, 2001.
Wayne Wilson, President and Chief Operating Officer, commented, PC Connection’s balance sheet remains strong, with cash balances in excess of $40 million. Inventory levels have been driven down by more than $20 million to less than $45 million with inventory turns in excess of 19 times. Accounts receivable decreased during the quarter to $113 million, and delinquency rates have continued to improve.
Internet sales processed directly online during the second quarter of 2001 increased 2% to $26.1 million, or 9% of net sales, compared to $25.5 million, or 7% of net sales, in the corresponding period a year ago. Sequentially, unassisted Internet sales decreased 8% during the quarter, over the first quarter of 2001.
Notebook computer systems continued to be the Company’s largest product category, accounting for 19.8% of net sales in the second quarter of 2001 compared to 26.2% of net sales for the corresponding period a year ago. Desktop and server computer systems accounted for 12.7% of net sales in the second quarter of 2001, compared to 14.5% for the corresponding period a year ago. Computer systems average selling prices (ASPs) decreased 17% in the second quarter compared to the corresponding period a year ago and 6% compared to the first quarter of 2001.
Gross profit margin as a percentage of net sales decreased to 11.1% in the second quarter of 2001 from 12.3% in the corresponding period a year ago. The margin decline resulted primarily from 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 10.3% of net sales in the second quarter of 2001, compared to 8.4% in the corresponding period a year ago. 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 work with our manufacturer partners in new and different ways to allow us both to more successfully serve our customers. Our customers rely on us to provide them with the advanced technology solutions they need – solutions that help them run their operations more efficiently, enabling them to reduce costs and better service their own clientele. Our ability to offer valued services to both manufacturers and end-users gives us confidence that PC Connection will remain an industry leader.
