Financial Update: Ending ’06 with a Bang

For the large majority of the publicly traded business-to-business merchants tracked by Multichannel Merchant, 2006 ended on a high note, with solid fourth-quarter top-line and bottom-line gains.

Year-over-year sales rose for all but one of the 13 companies, Deluxe Corp., which saw its revenue slip by just 1%. Sellers of computer products in particular benefited from the continuing strong sales of notebook computers, says Stuart Rose, managing director for Wellesley, MA-based investment bank Tully & Holland.

Nearly as much good news was found on the bottom line. All but three companies — Black Box Corp., CDW Computer Centers, and Wayside Technology Group — reported year-over-year increases. And all but one of the companies, athletic equipment merchant Collegiate Pacific, ended the quarter in the black.

Sales up, income down for Black Box

Quarter ended: Dec. 30 The facts: Networking products and services provider Black Box saw revenue rise 45%, to $264.8 million. This was due largely to its April 2006 acquisition of services provider NextiraOne North America, which has annual sales of roughly $270 million. But Black Box’s net income fell 15%, from $12.5 million for the fourth quarter of 2005 to $10.5 million. The skinny: As of mid-March, the Lawrence, PA-based company faced delisting from the Nasdaq because of delayed filing of its 10-Q report. Until the Nasdaq panel makes a decision, Black Box will continue to be traded on the Nasdaq Global Select Market.

PC “connects” in the quarter

Quarter ended: Dec. 31 The facts: Merrimack, NH-based PC Connection set a quarterly revenue record of $431.9 million, which was an 8% rise over the previous fourth-quarter sales of $398.6 million. That growth was far outpaced by that on the other side of the ledger, however: Net income soared from a scant $11,000 for the fourth quarter of 2005 to $4.6 million. The skinny: An influx of large-account customers and increased sales from the public sector had much to do with PC Connection’s strong performance. The computer reseller also increased gross profits in all segments as it tightened up its procurement process and refocused its sales efforts in the software and service areas.

Wayside Technology straddles a seesaw

Quarter ended: Dec. 31 The facts: Fourth-quarter sales at Wayside Technology Group, a provider of software for engineers and other computer professionals, increased 35% to $56.8 million, up from $42.0 million. The rapid revenue growth of its Lifeboat Distribution wholesale division — 60% year over year — was the main driver, even as sales in the Programmer’s Paradise reseller division fell. But the bottom line took a hit, with net income tumbling 34%, to less than $1.1 million from $1.6 million the previous fourth quarter, due to the elimination of a deferred income tax valuation allowance in 2005. The skinny: Shrewsbury, NJ-based Wayside cut direct sales costs within the Programmer’s Paradise sector by 20%, but it reallocated the funds to Lifeboat and the newly formed TechXtend division, which provides software and hardware installation services. Wayside’s emphasis on wholesale distribution led to lower gross profit as a percentage of sales, since distribution margins are typically lower than reseller margins. (For more on Wayside’s recent initiatives, see “Paradise found” in the July 2006 of Multichannel Merchant or online at

12 months prior Current quarter Increase (decrease) 12 months prior Current quarter Increase (decrease)
(000) (000)
Black Box Corp. $182,135 $264,806 45% $12,511 $10,575 (15%)
CDW Computer Centers 1,606,964 1,823,929 14% 70,510 53,557 (24%)
Deluxe Corp. 432,000 427,000 (1%) 39,000 47,000 21%
Collegiate Pacific 46,401 49,384 6% (971) (871) NM
Henry Schein 1,343,141 1,498,936 12% 48,628 62,997 30%
MSC Industrial 295,906 402,012 36% 31,935 40,296 26%
PC Connection 398,612 431,866 8% 11 4,571 41,455%
PC Mall 261,649 295,308 13% 1,377 1,708 24%
Systemax 488,502 575,041 18% 3,875 12,451 221%
Tessco Technologies 94,812 134,717 42% 1,118 1,765 58%
Transcat 16,233 17,240 6% 289 1,207 318%
Wayside Technology 41,962 56,840 35% 1,564 1,037 (34%)
Zones 159,834 159,918 1,974 2,982 51%
Note: NM = not meaningful Source: Tully & Holland

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