Hardly a gangbuster quarter

Apr 01, 2005 10:30 PM  By

Half of the 14 publicly traded business-to-business and computer merchants tracked by Catalog Age ended 2004 with a stronger fourth-quarter bottom line than they’d had in 2003. That’s an improvement from the previous year, when only 38% boasted of year-over-year income growth.

By the same token, half of the companies tracked reported declining income or wider losses. And at least two of the merchants that enjoyed bottom-line growth — Renton, WA-based computer reseller Zones and Port Washington, NY-based computer and industrial products manufacturer/marketer Systemax — had reported one-time charges in 2003 that artificially deflated earnings, making their apparent growth this fourth quarter less impressive.

“The quarter wasn’t exactly gangbusters,” says Jim Adams, managing director of Wellesley, MA-based investment bank Tully & Holland, which tracks companies’ financial performance for Catalog Age. “The quarter mirrored the overall economy — more positive than negative, steady progress, but not overly wild and optimistic.”

One-time charges derail PC Mall

Quarter ended: Dec. 31 The facts: Torrance, CA-based PC Mall posted a net loss of $42,000 for the quarter because of $1.7 million in one-time charges. Charges associated with Sarbanes-Oxley compliance cost the computer reseller $1.2 million in consulting costs, plus it had to write off $560,000 of capitalized CRM application software. On the positive side, PC Mall grew its fourth-quarter sales 12%, to $325.4 million from $289.9 million in 2003. The skinny: PC Mall ended the quarter with $22.4 million in cash, compared with $7.8 million in 2003.

Profitable quarter for Transcat

Quarter ended: Dec. 25 The facts: Rochester, NY-based Transcat jumped out of the red and into the black. The test, measurement and calibration equipment manufacturer/marketer posted net income of $273,000 for the quarter, compared with a net loss of $220,000 a year prior. Net sales rose 4%, to $14.0 million. The skinny: Transcat has found success mailing catalog supplements to prospects in targeted market segments. The supplements highlight less-expensive, noncapital products.

Gov business sinks PC Connection

Quarter ended: Dec. 31 The facts: The public sector segment of Merrimack, NH-based PC Connection is still feeling from the effects of having its General Services Administration (GSA) contract terminated in November 2003. Although the company was awarded a GSA contract in August 2004, damage has been done. Year-over-year fourth-quarter sales to government buyers fell 58%; overall public sector sales (which include sales to universities) fell 35%. Total net sales for the quarter dropped 5%, to $339.6 million. The computer reseller nonetheless nearly tripled its net income, to $2.1 million from $730,000 the previous fourth quarter. Income for the fourth quarter of 2004 included a $400,000 gain from a reduction in the estimate for state income tax contingencies. The skinny: During the quarter PC Connection distributed 10.8 million catalogs and entered 332,000 orders. For the same quarter of 2003, it mailed 24% fewer catalogs and entered nearly 2% more orders.

Deluxe Banks on NEBS

Quarter ended: Dec. 31 The facts: Groton, MA-based New England Business Service (NEBS), acquired in June for $745 million, is already paying dividends for new owner Deluxe Corp. Buried under the “Small Business Services” section of Shoreview, MN-based Deluxe’s financial statements, NEBS had revenue of $191.7 million during the fourth quarter and contributed $18.4 million of operating income. With NEBS contributing to both the top and bottom line, Deluxe reported double-digit revenue and income gains. Total fourth-quarter sales — including revenue from Deluxe’s core check-printing, promotional products, and fraud-prevention products businesses — increased 59%, to $476.9 million. Fourth-quarter net income increased 19%, to $46.8 million. The skinny: It didn’t take long for Deluxe to begin wheeling and dealing again: It’s seeking a buyer for NEBS’ Premiumwear apparel business.

4Q REVENUE 4Q NET INCOME (LOSS)
Company 12 months prior Current quarter Increase (decrease) 12 months prior Current quarter Increase (decrease)
(000) (000)
Black Box Corp. $133,067 $126,896 (5%) $12,193 $9,249 (24%)
CDW Computer Centers 1,348,916 1,507,127 12% 44,554 62,699 41%
Deluxe Corp. 300,500 476,900 59% 39,400 46,800 19%
Henry Schein 946,924 1,194,320 26% 35,542 29,550 (17%)
MSC Industrial 222,761 263,328 18% 16,476 25,987 58%
PC Connection 358,376 339,599 (5%) 730 2,073 184%
PC Mall 289,932 325,352 12% 1,105 (42) NM
Programmer’s Paradise 19,965 31,022 55% 390 4,811 1134%
Sport Supply Group 14,726 14,369 (2%) 581 (1,795) NM
Tessco Technologies 93,132 135,825 46% (543) 1,707 NM
Transcat 13,551 14,041 4% (220) 273 NM
Zones 130,337 127,620 (2%) 2,205 1,308 (41%)
Notes: Price-to-earnings ratios are from various sources NM = not meaningful Source: Tully & Holland