PC CONNECTION
Acquisition of MoreDirect, Inc.
MoreDirect
TRANSACTION RATIONALE
o Opportunistic
o Addresses a gap in market coverage (Fortune 1000)
o Possible middle market synergies
o Attractive Internet-based e-procurement solution
o High quality sales organization
o Deal structure limits downside risk
o Immediately accretive to earnings and operating metrics
MoreDirect
"VALUE PROPOSITION"
o Provides efficient IT hardware procurement system for large customers,
saving them time and money
o Knowledgeable, high-level sales account managers
- Senior AM's average 10-20 years experience in IT hardware sales
- Adept at product sourcing and negotiations with manufacturers
o Supported by an easy to use Web-based system tailored for large
organizations
- Reduces time to research and source products
* Manufacturer and distributor pricing and availability on line by
location
* Visibility into manufacturer special pricing by customer
- Supports quotation, multiple vendor sourcing, order tracking, serial
number capture, asset tracking, customer reporting, etc.
- Can be integrated into corporate procurement systems, such as Ariba
MoreDirect
TERMS
Cash $22 million
Cash escrow (2 yrs.) $10 million
Contingent Consideration (3 yrs.) 41% to 65% of EBIT in excess of certain
amounts
Conversion feature Escrow and contingent consideration
convertible into PCC common stock to
aggregate of 1,394,000 shares
2001 PRO FORMA(1)
COMBINED INCOME STATEMENT
($ in thousands, except per share data)
Historical
---------- Pro Forma Pro Forma
PC Connection MoreDirect Adjustments Combined
------------- ---------- ----------- ---------
(3) (1)
Net Sales $1,180,951 $219,003 $1,339,954
Gross Profit 131,152 23,370 154,522
Operating Income/2/ 13,644 11,521 $(1,000) 24,165
Net Income/2/ 8,539 7,027 (1,123) 14,442
EPS $0.34 $0.28 $(0.05) $0.58
(1) The pro forma information assumes the acquisition of MoreDirect had taken
place January 1, 2001.
(2) Before restructuring costs and other charges.
(3) Based on preliminary estimates; subject to change.
COMPARATIVE PRODUCT MIX - Q1 2002
PC Connection MoreDirect
- ------------- ----------
15% Notebooks 12%
15% Desktops/Servers 24%
10% Storage Devices 12%
14% Software 4%
9% Networking Communications 7%
9% Printers 9%
10% Video & Monitors 13%
3% Memory 4%
15% Accessories & Other 15%
Q1 2002 PRO FORMA(1)
COMBINED OPERATING DATA
Transaction is accretive to earnings and operating metrics
Historical
---------- Pro Forma
PC Connection MoreDirect Combined
------------- ---------- ---------
Gross Profit Margin 10.60% 11.13% 10.68%
Operating Margin -1.40% 5.20% -0.03%
Average Order Size $894 $2,826 $1,002
Inventory Turns 19 -- 23
Days Sales Outstanding 58 53 57
Days Sales Outstanding
(Excluding Federal Govt.) 47 53 49
Number of Sales Representatives 516 61 567
Annualized Sales Productivity $1,831,000 $3,361,000 $1,992,000
(1) The pro forma information assumes the acquisition of MoreDirect had taken
place January 1, 2002.