PC Connection, Inc. Reports Record Second Quarter 2014 Results
SECOND QUARTER SUMMARY:
- Net income up 25%
-
Net sales:
$633.2 million , up 13.6% year over year -
Diluted EPS:
$0.43 , up 23% year over year
Net sales for the six months ended June 30, 2014 were
Quarterly Sales by Segment:
-
Net sales for the SMB segment increased by 10.7% to
$268.1 million in the second quarter of 2014, compared to the prior year quarter. Sales of software, desktop, and notebook products each grew at double-digit rates. -
Net sales for the Large Account segment increased by 13.3% to
$222.3 million in the second quarter of 2014, compared to the prior year quarter. Notebook and software sales were strong in this segment with an increase of 27.7% and 33.0%, respectively. Commercial sales, which consists of SMB and Large Account sales, increased by 11.9% from the prior year quarter. -
Net sales to the Public Sector segment (government and education
customers) increased by 20.2% to
$142.9 million in the second quarter of 2014, compared to the prior year quarter. Sales to state and local government and educational institutions increased by 19.0%, compared to the prior year quarter, while sales to the federal government increased by 24.9%.
Quarterly Sales by Product Mix:
- Notebook/tablet sales, the Company's largest product category, increased by 30% year over year and accounted for 22% of net sales in the second quarter of 2014 compared to 19% of net sales in the prior year quarter. The expiration of Windows XP and increased demand for Chromebooks resulted in strong year-over-year growth in this category in all three of our sales segments.
- Software, the Company's second largest product category, increased by 15% year over year and accounted for 16% of net sales in the second quarter of 2014 and 2013. We experienced strong growth in security, office productivity, and operating system software.
- Desktop/Server sales increased by 17% year over year and accounted for 16% of net sales in the second quarter of 2014 and 2013. We experienced significant sales growth in both our SMB and Public Sector segments in this product category.
- Net/com product sales increased by 10% year over year and accounted for 9% of net sales in the second quarter of 2014 and 2013. Our SMB and Public Sector segments achieved strong sales growth compared to the prior year quarter due to increased demand for integration of multiple types of mobile devices.
Overall gross profit dollars increased by
Total selling, general and administrative dollars increased in the
second quarter of 2014 to
The Company has generated significant cash flow during the six months
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
pccc-g
# # #
"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 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 | $ | 633,244 | $ | 557,287 | 14 | % | ||||||||||||||||
Diluted earnings per share | $ | 0.43 | $ | 0.35 | 23 | % | ||||||||||||||||
Gross margin | 13.2 | % | 13.3 | % | ||||||||||||||||||
Operating margin | 3.0 | % | 2.8 | % | ||||||||||||||||||
Return on equity (1) | 12.1 | % | 11.4 | % | ||||||||||||||||||
Inventory turns | 28 | 30 | ||||||||||||||||||||
Days sales outstanding | 40 | 39 | ||||||||||||||||||||
Product Mix: | ||||||||||||||||||||||
Notebook/Tablet | $ | 136,126 | 22 | % | $ | 104,415 | 19 | % | 30 | % | ||||||||||||
Software | 104,157 | 16 | 90,629 | 16 | 15 | % | ||||||||||||||||
Desktop/Server | 101,404 | 16 | 86,720 | 16 | 17 | % | ||||||||||||||||
Net/Com Product | 57,908 | 9 | 52,540 | 9 | 10 | % | ||||||||||||||||
Video, Imaging & Sound | 56,775 | 9 | 49,950 | 9 | 14 | % | ||||||||||||||||
Storage | 39,452 | 6 | 36,085 | 6 | 9 | % | ||||||||||||||||
|
37,175 | 6 | 36,826 | 7 | 1 | % | ||||||||||||||||
Memory & System Enhancement | 21,349 | 3 | 16,810 | 3 | 27 | % | ||||||||||||||||
Accessory/Services/Other | 78,898 | 13 | 83,312 | 15 | (5 | %) | ||||||||||||||||
Total Net Sales | $ | 633,244 | 100 | % | $ | 557,287 | 100 | % | 14 | % | ||||||||||||
Stock Performance Indicators: | ||||||||||||||||||||||
Actual shares outstanding | 26,224 | 26,112 | ||||||||||||||||||||
Total book value per share | $ | 12.94 | $ | 11.83 | ||||||||||||||||||
Tangible book value per share | $ | 10.89 | $ | 9.74 | ||||||||||||||||||
Closing price | $ | 20.68 | $ | 15.45 | ||||||||||||||||||
Market capitalization | $ | 542,312 | $ | 403,430 | ||||||||||||||||||
Trailing price/earnings ratio | 14.1 | 12.1 | ||||||||||||||||||||
LTM Adjusted EBITDA (2) | $ | 73,595 | $ | 64,073 | ||||||||||||||||||
Adjusted market capitalization/LTM Adjusted EBITDA (3) | 6.5 | 5.3 | ||||||||||||||||||||
(1) Based on last twelve months' net income. | ||||||||||||||||||||||
(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 | $ | 268,056 | 15.3 | % | $ | 242,194 | 15.8 | % | ||||||||||||||
Large Account | 222,276 | 12.3 | 196,152 | 11.2 | ||||||||||||||||||
Public Sector | 142,912 | 10.8 | 118,941 | 11.5 | ||||||||||||||||||
Total | $ | 633,244 | 13.2 | % | $ | 557,287 | 13.3 | % | ||||||||||||||
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 | $ | 633,244 | 100.0 | % | $ | 557,287 | 100.0 | % | ||||||||||
Cost of sales | 549,478 | 86.8 | 483,371 | 86.7 | ||||||||||||||
Gross profit | 83,766 | 13.2 | 73,916 | 13.3 | ||||||||||||||
Selling, general and administrative expenses | 64,564 | 10.2 | 58,533 | 10.5 | ||||||||||||||
Income from operations | 19,202 | 3.0 | 15,383 | 2.8 | ||||||||||||||
Interest/other expense, net | (26 | ) | - | (46 | ) | - | ||||||||||||
Income tax provision | (7,747 | ) | (1.2 | ) | (6,183 | ) | (1.2 | ) | ||||||||||
Net income | $ | 11,429 | 1.8 | % | $ | 9,154 | 1.6 | % | ||||||||||
Earnings per common share: | ||||||||||||||||||
Basic | $ | 0.44 | $ | 0.35 | ||||||||||||||
Diluted | $ | 0.43 | $ | 0.35 | ||||||||||||||
Shares used in the computation of earnings per common share: | ||||||||||||||||||
Basic | 26,206 | 26,127 | ||||||||||||||||
Diluted | 26,487 | 26,379 | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||
Six Months Ended |
2014 | 2013 | ||||||||||||||||
(amounts in thousands, except per share data) | Amount | % of Net Sales | Amount | % of Net Sales | ||||||||||||||
Net sales | $ | 1,193,004 | 100.0 | % | $ | 1,062,710 | 100.0 | % | ||||||||||
Cost of sales | 1,036,391 | 86.9 | 921,956 | 86.8 | ||||||||||||||
Gross profit | 156,613 | 13.1 | 140,754 | 13.2 | ||||||||||||||
Selling, general and administrative expenses | 125,665 | 10.5 | 115,246 | 10.8 | ||||||||||||||
Income from operations | 30,948 | 2.6 | 25,508 | 2.4 | ||||||||||||||
Interest/other expense, net | (36 | ) | - | (96 | ) | - | ||||||||||||
Income tax provision | (12,352 | ) | (1.0 | ) | (10,160 | ) | (1.0 | ) | ||||||||||
Net income | $ | 18,560 | 1.6 | % | $ | 15,252 | 1.4 | % | ||||||||||
Earnings per common share: | ||||||||||||||||||
Basic | $ | 0.71 | $ | 0.59 | ||||||||||||||
Diluted | $ | 0.70 | $ | 0.58 | ||||||||||||||
Shares used in the computation of earnings per common share: | ||||||||||||||||||
Basic | 26,204 | 26,063 | ||||||||||||||||
Diluted | 26,485 | 26,329 | ||||||||||||||||
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 |
LTM Ended |
||||||||||||||||||||||||
2014 | 2013 | % Change | 2014 | 2013 | % Change | |||||||||||||||||||||
Net income | $ | 11,429 | $ | 9,154 | $ | 38,990 | $ | 34,022 | ||||||||||||||||||
Depreciation and amortization | 1,786 | 1,709 | 7,616 | 7,050 | ||||||||||||||||||||||
Income tax expense | 7,747 | 6,183 | 25,757 | 22,250 | ||||||||||||||||||||||
Interest/other expense, net | 26 | 46 | 89 | 174 | ||||||||||||||||||||||
EBITDA | 20,988 | 17,092 | 72,452 | 63,496 | ||||||||||||||||||||||
Stock-based compensation | 327 | 153 | 1,143 | 577 | ||||||||||||||||||||||
Adjusted EBITDA | $ | 21,315 | $ | 17,245 | 24 | % | $ | 73,595 | $ | 64,073 | 15 | % | ||||||||||||||
(1) LTM: Last twelve months | ||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | 2014 | 2013 | ||||||||||||||||||||||||
(amounts in thousands) | ||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||
Current Assets: | ||||||||||||||||||||||||||
Cash and cash equivalents | $ | 60,289 | $ | 42,547 | ||||||||||||||||||||||
Accounts receivable, net | 295,327 | 283,051 | ||||||||||||||||||||||||
Inventories | 97,187 | 79,141 | ||||||||||||||||||||||||
Deferred income taxes | 6,382 | 6,382 | ||||||||||||||||||||||||
Prepaid expenses and other current assets | 4,533 | 5,117 | ||||||||||||||||||||||||
Income taxes receivable | 783 | 2,256 | ||||||||||||||||||||||||
Total current assets | 464,501 | 418,494 | ||||||||||||||||||||||||
Property and equipment, net | 27,679 | 27,600 | ||||||||||||||||||||||||
Goodwill | 51,276 | 51,276 | ||||||||||||||||||||||||
Other intangibles, net | 2,404 | 2,854 | ||||||||||||||||||||||||
Other assets | 698 | 720 | ||||||||||||||||||||||||
Total Assets | $ | 546,558 | $ | 500,944 | ||||||||||||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||||||||
Accounts payable | $ | 153,222 | $ | 124,821 | ||||||||||||||||||||||
Accrued expenses and other liabilities | 20,161 | 22,362 | ||||||||||||||||||||||||
Accrued payroll | 15,139 | 14,935 | ||||||||||||||||||||||||
Total current liabilities | 188,522 | 162,118 | ||||||||||||||||||||||||
Deferred income taxes | 16,281 | 16,224 | ||||||||||||||||||||||||
Other liabilities | 2,504 | 2,773 | ||||||||||||||||||||||||
Total Liabilities | 207,307 | 181,115 | ||||||||||||||||||||||||
Stockholders' Equity: | ||||||||||||||||||||||||||
Common stock | 281 | 281 | ||||||||||||||||||||||||
Additional paid-in capital | 105,794 | 104,932 | ||||||||||||||||||||||||
Retained earnings | 249,038 | 230,478 | ||||||||||||||||||||||||
Treasury stock at cost | (15,862 | ) | (15,862 | ) | ||||||||||||||||||||||
Total Stockholders' Equity | 339,251 | 319,829 | ||||||||||||||||||||||||
Total Liabilities and Stockholders' Equity | $ | 546,558 | $ | 500,944 | ||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
Six Months Ended |
2014 | 2013 | ||||||||
(amounts in thousands) | ||||||||||
Cash Flows from Operating Activities: | ||||||||||
Net income | $ | 18,560 | $ | 15,252 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
Depreciation and amortization | 3,863 | 3,337 | ||||||||
Provision for doubtful accounts | 365 | 564 | ||||||||
Deferred income taxes | 57 | (110 | ) | |||||||
Stock-based compensation expense | 486 | 301 | ||||||||
Excess tax benefit from exercise of equity awards | (34 | ) | (228 | ) | ||||||
Loss on disposal of fixed assets | - | 5 | ||||||||
Income tax benefit from stock-based compensation | - | 196 | ||||||||
Changes in assets and liabilities: | ||||||||||
Accounts receivable | (12,641 | ) | 10,613 | |||||||
Inventories | (18,046 | ) | (7,498 | ) | ||||||
Prepaid expenses and other current assets | 2,057 | (660 | ) | |||||||
Other non-current assets | 22 | 13 | ||||||||
Accounts payable | 28,392 | (1,400 | ) | |||||||
Accrued expenses and other liabilities | (2,232 | ) | 6,590 | |||||||
Net cash provided by operating activities | 20,849 | 26,975 | ||||||||
Cash Flows from Investing Activities: | ||||||||||
Purchases of equipment | (3,493 | ) | (4,257 | ) | ||||||
Proceeds from sale of equipment | 10 | - | ||||||||
Net cash used for investing activities | (3,483 | ) | (4,257 | ) | ||||||
Cash Flows from Financing Activities: | ||||||||||
Exercise of stock options | 16 | 1,586 | ||||||||
Issuance of stock under Employee Stock Purchase Plan | 360 | 307 | ||||||||
Excess tax benefit from exercise of equity awards | 34 | 228 | ||||||||
Payment of payroll taxes on stock-based compensation through shares withheld | (34 | ) | - | |||||||
Repayment of capital lease obligation to affiliate | - | (527 | ) | |||||||
Net cash provided by financing activities | 376 | 1,594 | ||||||||
Increase in cash and cash equivalents | 17,742 | 24,312 | ||||||||
Cash and cash equivalents, beginning of period | 42,547 | 39,907 | ||||||||
Cash and cash equivalents, end of period | $ | 60,289 | $ | 64,219 | ||||||
Non-cash Investing Activity: | ||||||||||
Accrued capital expenditures | $ | 343 | $ | 151 | ||||||
Supplemental Cash Flow Information: |
||||||||||
Income taxes paid |
$ |
10,933 |
$ |
10,936 |
||||||
pccc-g
Senior Vice
President, Treasurer and Chief Financial Officer
Source:
News Provided by Acquire Media