AND RESULTS OF OPERATIONS
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q.
Quarterly Overview We are a global provider of information technology ("IT") hardware, software and services solutions to businesses and public sector institutions in
North America, Europe, the Middle East, Africa("EMEA") and Asia-Pacific("APAC"). Currently, our offerings in North Americaand select countries in EMEA include IT hardware, software and services. Our offerings in the remainder of our EMEA segment and in APAC are almost entirely software and select software-related services. Consolidated net sales decreased 3% to $1.15 billionin the three months ended September 30, 2013, a decrease of $30.4 millioncompared to the three months ended September 30, 2012. Third quarter sales results were primarily driven by a decline in hardware and software sales in our EMEA segment and a decline in hardware and services sales in our North Americasegment, as well as a decline in software and services sales in APAC. Consolidated gross profit increased 1% year over year to $168.7 million, with gross margin increasing approximately 50 basis points year over year to 14.7%. The gross margin increase was driven by our North Americabusiness, which optimized funding under programs with strategic partners, drove double digit growth in fees earned on software enterprise agreements and improved profitability through sales of higher margin services offerings year over year. Our North Americasegment's solid results in the third quarter were offset by the performance of our EMEA business, where we continued to see weakness in our mid-market hardware business and lower spending for software products by public sector clients. Although we have completed the roll out of our new IT system and expect productivity improvement over the coming quarters, our hardware business in the United Kingdomis significantly underperforming due to weak sales execution and systems integration challenges affecting productivity. Throughout the quarter, on a global basis we continued our focus on tight cost control, specifically on reducing our operating costs in EMEA. All of this resulted in a 14% decline in earnings from operations during the third quarter of 2013 compared to the third quarter of 2012. On a consolidated basis, we reported earnings from operations of $26.3 million, net earnings of $15.0 millionand diluted earnings per share of $0.35for the third quarter of 2013. This compares to earnings from operations of $30.7 million, net earnings of $19.4 millionand diluted earnings per share of $0.43for the third quarter of 2012.