PC Connection To Cut Workforce by 6%
In its preliminary fourth quarter earnings release on February 5, the company concluded that the goodwill held by its small- and medium-sized business segment was impaired, and accordingly the company recorded an impairment charge of $1.2 million, which represented the entire goodwill balance for its SMB segment.
As of that time, PC Connection had not finished its review of the goodwill attributed to its public sector and large account segments. The company has now completed that review and has recorded an additional goodwill impairment charge of $7.6 million, which represented the entire goodwill held by its public sector segment. Management has determined that the $48.0 million of goodwill held by its large account segment was not impaired.
Including the earlier charge reported for its SMB segment, PC Connection will report an aggregate non-cash goodwill charge of $8.8 million, or $5.4 million net of taxes, during the fourth quarter of 2008. This non-cash charge represents the entire goodwill held by its SMB and Public Sector segments.
As a result PC Connection will report a net loss of $2.7 million, or $0.10 per share, for the fourth quarter of 2008 and net income for the year ended December 31, 2008 of $10.4 million, or $0.39 per share. Had these non-cash and other previously reported third quarter special charges of $1.4 million not been incurred, pro forma net income would have been $2.7 million, or $.10 per share, for the fourth quarter of 2008 and $16.7 million, or $.62 per share, for the year ended December 31, 2008.
PC Connection said it experienced further declines in sales in January and February 2009, and management expects first quarter revenues to decline by at least 20% from the prior year quarter. The company implemented further cost reduction initiatives in this month, including a workforce reduction of approximately 6%. The actions being takes are expected to result in additional cost savings of up to $16 million in 2009, according to the company
The company will incur related severance charges of around $0.6 million in the first quarter of 2009 in connection with these initiatives.
Merrimack, New Hampshire-based PC Connection owns PC Connection Sales, MoreDirect and GovConnection, which are headquartered in Merrimack, Boca Raton, Florida, and Rockville, Maryland, respectively. All three offer custom-configured computer systems for overnight delivery.
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