10/18/01

PC Connection, Inc. Reports Third Quarter Results

Kurt Peters , Executive Editor

MERRIMACK, N.H.--Oct. 18, 2001--PC Connection, Inc. (NASDAQ: PCCC), a leading direct marketer of information technology products and solutions, today announced results for the quarter ended September 30, 2001. Net sales for the three months ended September 30, 2001 were $308.7 million, compared to $404.9 million for the three months ended September 30, 2000. Net income for the quarter was $1.9 million, or $.08 per share, compared to $10.3 million, or $.40 per share for the three months ended September 30, 2000. Excluding the effects of restructuring costs and other special charges of $1.2 million, or $.03 per share, net income for the quarter ended September 30, 2001, was $2.66 million, or $.11 per share. The restructuring costs relate to certain staff reductions and costs associated with proposed acquisitions abandoned during the quarter.

Net sales for the nine months ended September 30, 2001 were $907.8 million, compared to $1.1 billion for the corresponding period a year ago. Net income for the nine months ended September 30, 2001 was $5.8 million, or $.23 per share, compared to $26.0 million, or $1.02 per share, for the nine months ended September 30, 2000. For the nine months ended September 30, 2001, excluding the effects of restructuring costs and other special charges of $2.1 million, or $.05 per share, the Company reported net income of $7.06 million, or $.28 per share.

Ken Koppel, Chief Executive Officer of PC Connection, Inc., said, "Our sales to government and education customers were bright spots this quarter, especially in the federal government sector, while we continued to see weak demand from both the commercial and consumer market segments. We anticipate that demand will continue to be soft, at least through the fourth quarter of 2001. Strategically, we continue to aggressively seek cost reductions wherever possible, while at the same time upgrading our fundamental sales, marketing and Internet capabilities important to long-term success."

As of September 30, 2001, the number of Outbound Sales Account Managers totaled 496, compared to 467 at September 30, 2000. The Company`s Managed Account Program accounted for 82% of total net sales for the three month period ended September 30, 2001, compared to 78% for the corresponding period a year ago. Average order size for the three months ended September 30, 2001 was $1,259 compared to $1,272 in the corresponding period a year ago and $1,120 in the quarter ended June 30, 2001.

Wayne Wilson, President and Chief Operating Officer, commented, "PC Connection`s balance sheet remains strong, with cash balances in excess of $50 million. Inventory levels have been driven down to $41 million with inventory turns of 23 times a year. Accounts receivable decreased during the quarter to $111 million, and delinquency rates have continued to improve. Days sales outstanding in accounts receivable were 45 days, compared to 48 days at June 30, 2001."

Notebook computer systems continued to be the Company`s largest product category, accounting for 22.5% of net sales in the third quarter of 2001 compared to 25.0% of net sales for the corresponding period a year ago. Desktop and server computer systems accounted for

· 12.0% of net sales in the third quarter of 2001, compared to 15.1% for the corresponding period a year ago. Computer systems average selling prices (ASPs) decreased 18% in the third quarter compared to the corresponding period a year ago and 6% compared to the second quarter of 2001. Gross profit margin as a percentage of net sales decreased to
· 10.8% in the third 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 9.4% of net sales in the third quarter of 2001, compared to 8.1% 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, Inc., concluded, "We strongly believe that customers in the markets we target will continue to depend on fast, competent service and support. Since PC Connection was founded in 1982, we`ve earned the reputation for being one of the most customer-centric, rapid-response providers of information technology products in the industry. We remain highly confident that our low-cost model of distributing information technology products and services to businesses, government agencies and educational institutions will be the winning distribution model."

PC Connection, Inc., a Fortune 1000 company, is a leading provider of information technology products and solutions. The Company offers more than 100,000 brand-name products through its staff of technically-trained outbound sales account managers and catalog telesales representatives, its comprehensive web sites at www.pcconnection.com, www.macconnection.com and www.comteq.com, and its catalogs PC Connection (1-800-800-5555) and MacConnection (1-800-800-2222). Through its full-service Distribution and Custom-Configuration Center, PC Connection can deliver custom-configured computer systems overnight.

A live Web cast of PC Connection Management`s discussion of the third quarter will be available on the Company`s Web site at www.pcconnection.com and on www.streetevents.com. The Web cast will begin today at 10:00 am EST.

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements that are subject to risks and uncertainties, including, but not limited to, the impact of changes in market demand and the overall level of economic activity, or in the level of business investment in information technology products, competitive products and pricing, product availability and market acceptance, new products, fluctuations in operating results and other risks detailed under the caption "Factors That May Affect Future Results and Financial Condition" in the Company`s 2000 Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2000. More specifically, the statements in this release concerning the Company`s gross margin percentage and selling and administrative costs and other statements of a non-historical basis (including statements regarding implementing strategies for future growth, the ability of the Company to sustain its model of profitable growth and the expected benefits of the Company`s electronic commerce strategy) are forward-looking statements that involve certain risks and uncertainties. Such risks and uncertainties include the market demand for and competitive pricing pressures on the products and services marketed by the Company, the continued acceptance of the Company`s distribution channel by vendors and customers, continuation of key vendor relationships and support programs and the ability of the Company to hire and retain qualified sales account managers and other essential personnel

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