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.

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