PC Connection, Inc. Reports Fourth Quarter and Record Full Year 2014 Results
FOURTH QUARTER SUMMARY: |
FULL YEAR SUMMARY: |
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Net sales for the year ended
Quarterly Sales by Segment:
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Net sales for the SMB segment increased by 9.2% to
$261.7 million in the fourth quarter of 2014, compared to the prior year quarter. Sales of notebooks, the largest SMB category, increased by 23.4% compared to the prior year quarter. -
Net sales for the Large Account segment increased by 3.5% to
$225.6 million in the fourth quarter of 2014, compared to the prior year quarter. Storage and software sales were strong in this segment with an increase of 31.9% and 21.9%, respectively. Commercial sales, which consists of SMB and Large Account sales, increased by 6.5% from the prior year quarter. -
Net sales to the Public Sector segment increased by 18.7% to
$143.5 million in the fourth quarter of 2014, compared to the prior year quarter. Sales to state and local government and educational institutions increased by 18.4%, compared to the prior year quarter, while sales to the federal government increased by 19.1%. Net/Com product sales for the Public Sector were strong with 55% growth from the prior year quarter.
Quarterly Sales by Product Mix:
- Notebook/tablet sales, the Company's largest product category, increased by 15% year over year and accounted for 20% of net sales in the fourth quarter of 2014 compared to 19% of net sales in the prior year quarter. Continued corporate refresh activity and increased demand for Chromebooks resulted in strong year-over-year growth in this category in both SMB and Public Sector segments.
- Software sales increased by 13% year over year and accounted for 18% of net sales in the fourth quarter of 2014 compared to 17% of net sales in the prior year quarter. We experienced strong growth in security, office productivity, and operating system software, including cloud-based offerings.
- Net/Com product sales increased by 19% year over year and accounted for 10% of net sales in the fourth quarter of 2014 and 2013. We experienced significant sales growth in Public Sector segment in this product category.
- Storage sales increased by 11% year over year and accounted for 7% of net sales in the fourth quarter of 2014 and 2013. We experienced significant sales growth in our Large Account segment in this product category.
Overall gross profit dollars increased by
Total selling, general and administrative dollars increased in the
fourth quarter of 2014 to
The Company generated significant cash flow during the year ended
"We are encouraged with
Non-GAAP Financial Information
Adjusted EBITDA is a non-GAAP financial measure. This information is included to provide information with respect to the Company's operating performance and earnings.
About
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"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 and environment, 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 the ability of the Company to manage costs in
response to fluctuations in revenue, and other risks that could cause
actual results to differ materially from expectations, including those
detailed under the caption "Risk Factors" in the Company's Annual Report
on Form 10-K filed with the
CONSOLIDATED SELECTED FINANCIAL INFORMATION | |||||||||||||||||||||||||
At or for the Three Months Ended |
2014 | 2013 | |||||||||||||||||||||||
% of | % of | % | |||||||||||||||||||||||
(Amounts and shares in thousands, except operating data, P/E ratio, and per share data) | Net Sales |
Net Sales |
Change | ||||||||||||||||||||||
Operating Data: | |||||||||||||||||||||||||
Net sales | $ | 630,765 | $ | 578,572 | 9 | % | |||||||||||||||||||
Diluted earnings per share | $ | 0.45 | $ | 0.37 | 22 | % | |||||||||||||||||||
Gross margin | 13.2 | % | 13.1 | % | |||||||||||||||||||||
Operating margin | 3.2 | % | 2.8 | % | |||||||||||||||||||||
Return on equity (1) | 12.5 | % | 11.6 | % | |||||||||||||||||||||
Inventory turns | 26 | 24 | |||||||||||||||||||||||
Days sales outstanding | 40 | 42 | |||||||||||||||||||||||
Product Mix: | |||||||||||||||||||||||||
Notebook/Tablet | $ | 123,485 | 20 | % | $ | 107,051 | 19 | % | 15 | % | |||||||||||||||
Software | 113,129 | 18 | 100,543 | 17 | 13 | % | |||||||||||||||||||
Desktop/Server | 91,815 | 14 | 90,551 | 16 | 1 | % | |||||||||||||||||||
Net/Com Product | 66,571 | 10 | 56,034 | 10 | 19 | % | |||||||||||||||||||
Video, Imaging & Sound | 54,539 | 9 | 51,582 | 9 | 6 | % | |||||||||||||||||||
Storage | 42,850 | 7 | 38,730 | 7 | 11 | % | |||||||||||||||||||
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35,344 | 6 | 35,339 | 6 | - | ||||||||||||||||||||
Memory & System Enhancement | 19,240 | 3 | 20,613 | 3 | (7 | %) | |||||||||||||||||||
Accessory/Services/Other | 83,792 | 13 | 78,129 | 13 | 7 | % | |||||||||||||||||||
Total Net Sales | $ | 630,765 | 100 | % | $ | 578,572 | 100 | % | 9 | % | |||||||||||||||
Stock Performance Indicators: | |||||||||||||||||||||||||
Actual shares outstanding | 26,343 | 26,200 | |||||||||||||||||||||||
Total book value per share | $ | 13.44 | $ | 12.21 | |||||||||||||||||||||
Tangible book value per share | $ | 11.42 | $ | 10.14 | |||||||||||||||||||||
Closing price | $ | 24.55 | $ | 24.85 | |||||||||||||||||||||
Market capitalization | $ | 646,721 | $ | 651,070 | |||||||||||||||||||||
Trailing price/earnings ratio | 15.3 | 18.4 | |||||||||||||||||||||||
LTM Adjusted EBITDA (2) | $ | 80,475 | $ | 67,443 | |||||||||||||||||||||
Adjusted market capitalization/LTM Adjusted EBITDA (3) | 7.3 | 9.0 | |||||||||||||||||||||||
(1) Based on last twelve months' net income. |
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(2) Adjusted EBITDA is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) adjusted for stock-based compensation. | |||||||||||||||||||||||||
(3) Adjusted market capitalization is defined as gross market capitalization less cash balance. | |||||||||||||||||||||||||
REVENUE AND MARGIN INFORMATION | |||||||||||||||||||||||||
For the Three Months Ended |
2014 | 2013 | |||||||||||||||||||||||
Net | Gross | Net | Gross | ||||||||||||||||||||||
(amounts in thousands) | Sales | Margin | Sales | Margin | |||||||||||||||||||||
SMB | $ | 261,661 | 15.2 | % | $ | 239,628 | 15.3 | % | |||||||||||||||||
Large Account | 225,609 | 11.6 | 218,015 | 11.4 | |||||||||||||||||||||
Public Sector | 143,495 | 11.9 | 120,929 | 11.7 | |||||||||||||||||||||
Total | $ | 630,765 | 13.2 | % | $ | 578,572 | 13.1 | % | |||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||||
Three Months Ended |
2014 | 2013 | ||||||||||||||||||
(amounts in thousands, except per share data) | Amount | % of Net Sales | Amount | % of Net Sales | ||||||||||||||||
Net sales | $ | 630,765 | 100.0 | % | $ | 578,572 | 100.0 | % | ||||||||||||
Cost of sales | 547,641 | 86.8 | 502,879 | 86.9 | ||||||||||||||||
Gross profit | 83,124 | 13.2 | 75,693 | 13.1 | ||||||||||||||||
Selling, general and administrative expenses | 63,035 | 10.0 | 59,315 | 10.3 | ||||||||||||||||
Income from operations | 20,089 | 3.2 | 16,378 | 2.8 | ||||||||||||||||
Interest/other expense, net | (14 | ) | - | (14 | ) | - | ||||||||||||||
Income tax provision | (8,131 | ) | (1.3 | ) | (6,523 | ) | (1.1 | ) | ||||||||||||
Net income | $ | 11,944 | 1.9 | % | $ | 9,841 | 1.7 | % | ||||||||||||
Earnings per common share: | ||||||||||||||||||||
Basic | $ | 0.45 | $ | 0.38 | ||||||||||||||||
Diluted | $ | 0.45 | $ | 0.37 | ||||||||||||||||
Shares used in the computation of earnings per common share: | ||||||||||||||||||||
Basic | 26,311 | 26,181 | ||||||||||||||||||
Diluted | 26,554 | 26,453 | ||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||||
Years Ended |
2014 | 2013 | ||||||||||||||||||
(amounts in thousands, except per share data) | Amount | % of Net Sales | Amount | % of Net Sales | ||||||||||||||||
Net sales | $ | 2,463,339 | 100.0 | % | $ | 2,221,638 | 100.0 | % | ||||||||||||
Cost of sales | 2,139,950 | 86.9 | 1,928,638 | 86.8 | ||||||||||||||||
Gross profit |
323,389 | 13.1 | 293,000 | 13.2 | ||||||||||||||||
Selling, general and administrative expenses | 251,935 | 10.2 | 233,604 | 10.5 | ||||||||||||||||
Income from operations | 71,454 | 2.9 | 59,396 | 2.7 | ||||||||||||||||
Interest/other expense, net | (86 | ) | - | (149 | ) | - | ||||||||||||||
Income tax provision | (28,687 | ) | (1.2 | ) | (23,565 | ) | (1.1 | ) | ||||||||||||
Net income | $ | 42,681 | 1.7 | % | $ | 35,682 | 1.6 | % | ||||||||||||
Earnings per common share: | ||||||||||||||||||||
Basic | $ | 1.63 | $ | 1.37 | ||||||||||||||||
Diluted | $ | 1.61 | $ | 1.35 | ||||||||||||||||
Shares used in the computation of earnings per common share: | ||||||||||||||||||||
Basic | 26,246 | 26,120 | ||||||||||||||||||
Diluted | 26,512 | 26,387 | ||||||||||||||||||
EBITDA AND ADJUSTED EBITDA | ||||||||||||||||||||||||||
A reconciliation of EBITDA and Adjusted EBITDA is detailed below. Adjusted EBITDA is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) adjusted for stock-based compensation. Both EBITDA and Adjusted EBITDA are considered non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either includes or excludes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. We believe that EBITDA and Adjusted EBITDA provide helpful information with respect to our operating performance including our ability to fund our future capital expenditures and working capital requirements. Adjusted EBITDA also provides helpful information as it is the primary measure used in certain financial covenants contained in our credit agreements. | ||||||||||||||||||||||||||
(amounts in thousands) |
Three Months Ended |
Years Ended |
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2014 | 2013 | % Change | 2014 | 2013 | % Change | |||||||||||||||||||||
Net income | $ | 11,944 | $ | 9,841 | $ | 42,681 | $ | 35,682 | ||||||||||||||||||
Depreciation and amortization | 2,095 | 2,078 | 8,092 | 7,089 | ||||||||||||||||||||||
Income tax expense | 8,131 | 6,523 | 28,687 | 23,565 | ||||||||||||||||||||||
Interest/other expense, net | 14 | 14 | 86 | 149 | ||||||||||||||||||||||
EBITDA | 22,184 | 18,456 | 79,546 | 66,485 | ||||||||||||||||||||||
Stock-based compensation |
228 | 205 | 929 | 958 | ||||||||||||||||||||||
Adjusted EBITDA | $ | 22,412 | $ | 18,661 | 20 | % | $ | 80,475 | $ | 67,443 | 19 | % | ||||||||||||||
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CONDENSED CONSOLIDATED BALANCE SHEETS | 2014 | 2013 | |||||||||
(amounts in thousands) | |||||||||||
ASSETS | |||||||||||
Current Assets: | |||||||||||
Cash and cash equivalents | $ | 60,909 | $ | 42,547 | |||||||
Accounts receivable, net | 293,027 | 283,051 | |||||||||
Inventories | 90,917 | 79,141 | |||||||||
Deferred income taxes | 7,749 | 6,382 | |||||||||
Prepaid expenses and other current assets | 5,332 | 5,117 | |||||||||
Income taxes receivable | 212 | 2,256 | |||||||||
Total current assets | 458,146 | 418,494 | |||||||||
Property and equipment, net | 27,861 | 27,600 | |||||||||
Goodwill | 51,276 | 51,276 | |||||||||
Other intangibles, net | 1,953 | 2,854 | |||||||||
Other assets | 724 | 720 | |||||||||
Total Assets | $ | 539,960 | $ | 500,944 | |||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Current Liabilities: | |||||||||||
Accounts payable | $ | 124,893 | $ | 124,821 | |||||||
Accrued expenses and other liabilities | 22,011 | 22,362 | |||||||||
Accrued payroll | 17,793 | 14,935 | |||||||||
Total current liabilities | 164,697 | 162,118 | |||||||||
Deferred income taxes | 18,803 | 16,224 | |||||||||
Other liabilities | 2,452 | 2,773 | |||||||||
Total Liabilities | 185,952 | 181,115 | |||||||||
Stockholders' Equity: | |||||||||||
Common stock | 282 | 281 | |||||||||
Additional paid-in capital | 106,956 | 104,932 | |||||||||
Retained earnings | 262,632 | 230,478 | |||||||||
Treasury stock at cost | (15,862 | ) | (15,862 | ) | |||||||
Total Stockholders' Equity | 354,008 | 319,829 | |||||||||
Total Liabilities and Stockholders' Equity | $ | 539,960 | $ | 500,944 | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||
Years Ended |
2014 | 2013 | ||||||||||
(amounts in thousands) | ||||||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net income | $ | 42,681 | $ | 35,682 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 8,092 | 7,089 | ||||||||||
Provision for doubtful accounts | 1,383 | 1,078 | ||||||||||
Deferred income taxes | 1,212 | 4,578 | ||||||||||
Stock-based compensation expense | 929 | 958 | ||||||||||
Loss on disposal of fixed assets | 14 | 5 | ||||||||||
Excess tax benefit from exercise of equity awards | (556 | ) | (260 | ) | ||||||||
Changes in assets and liabilities: | ||||||||||||
Accounts receivable | (11,359 | ) | (16,819 | ) | ||||||||
Inventories | (11,776 | ) | (9,504 | ) | ||||||||
Prepaid expenses and other current assets | 1,829 | (3,005 | ) | |||||||||
Other non-current assets | (4 | ) | (6 | ) | ||||||||
Accounts payable | 202 | (1,371 | ) | |||||||||
Accrued expenses and other liabilities | 2,751 | 1,231 | ||||||||||
Net cash provided by operating activities | 35,398 | 19,656 | ||||||||||
Cash Flows from Investing Activities: | ||||||||||||
Purchases of equipment | (7,609 | ) | (7,607 | ) | ||||||||
Proceeds from sale of equipment | 13 | 2 | ||||||||||
Net cash used for investing activities | (7,596 | ) | (7,605 | ) | ||||||||
Cash Flows from Financing Activities: | ||||||||||||
Dividend payment | (10,527 | ) | (10,475 | ) | ||||||||
Issuance of stock under Employee Stock Purchase Plan | 753 | 591 | ||||||||||
Excess tax benefit from exercise of equity awards | 556 | 260 | ||||||||||
Exercise of stock options | 356 | 1,779 | ||||||||||
Payment of payroll taxes on stock-based compensation through shares withheld | (578 | ) | (577 | ) | ||||||||
Repayment of capital lease obligation to affiliate | - | (989 | ) | |||||||||
Net cash used for financing activities | (9,440 | ) | (9,411 | ) | ||||||||
Increase in cash and cash equivalents | 18,362 | 2,640 | ||||||||||
Cash and cash equivalents, beginning of period | 42,547 | 39,907 | ||||||||||
Cash and cash equivalents, end of period | $ | 60,909 | $ | 42,547 | ||||||||
Non-cash Investing Activities: | ||||||||||||
Accrued capital expenditures | $ | 205 | $ | 335 | ||||||||
Issuance of nonvested stock from treasury | - | $ | 403 | |||||||||
Supplemental Cash Flow Information: | ||||||||||||
Income taxes paid | $ | 24,219 | $ | 20,891 | ||||||||
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pccc-g
Senior Vice
President, Treasurer and Chief Financial Officer
Source:
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