UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):   October 27, 2016

 
Registrant’s telephone number, including area code:   (603) 683-2000

⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.  Results of Operations and Financial Condition

On October 27, 2016, PC Connection, Inc. announced its financial results for the quarter ended September 30, 2016.  The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K.  

The information in this Form 8-K (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01.  Financial Statements and Exhibits

   (d)     Exhibits

   The following exhibit relating to Item 2.02 shall be deemed to be furnished, and not filed:

   99.1       Press Release issued by PC Connection, Inc. on October 27, 2016.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EXHIBIT INDEX

Exhibit 99.1

Connection Reports Third Quarter 2016 Results

THIRD QUARTER SUMMARY:

• Record net sales, up 4% y/y
• Record gross profit, up 9.5% y/y
• Gross margin 13.7%, an increase of 68 basis points y/y
• Diluted EPS: $0.51, up 4% y/y
• Adjusted EPS excluding special charges: $0.54, up 8% y/y
• Rebrands as “Connection” (NASDAQ: CNXN)

MERRIMACK, N.H.--(BUSINESS WIRE)--October 27, 2016--PC Connection, Inc. (dba Connection; NASDAQ: CNXN), an industry-leading National Technology Solutions Provider, today announced results for the quarter ended September 30, 2016. Net sales for the third quarter of 2016 increased by 4.1% to $708.5 million, compared to $680.8 million for the prior year quarter. Gross profit increased by 9.5% from $88.6 million to $97.0 million primarily due to an increase in gross margin from 13.0% to 13.7% in the third quarter of 2016. Net income for the quarter ended September 30, 2016 increased by 4.6% to $13.6 million, or $0.51 per diluted share, compared to net income of $13.0 million, or $0.49 per diluted share for the prior year quarter. Earnings per share, adjusted for acquisition costs, rebranding expenses, restructuring charges, and amortization of acquired intangibles, increased to $0.54 cents per share for the quarter ended September 30, 2016, compared to $0.50 cents per share for the prior year quarter.

“In September we launched our new brand name, Connection, and changed our ticker symbol to CNXN. The brand name reflects our mission to help connect people with technology in new and innovative ways,” said Timothy McGrath, President and Chief Executive Officer. “Connection will unite all of our subsidiaries together into one cohesive brand that reflects the successes of our past and the promise of our future.”

The third quarter 2016 results include $1.1 million of acquisition, rebranding, and restructuring costs. This charge includes professional fees related to the GlobalServe acquisition, expenses related to rebranding to the “Connection” name, severance related to internal restructuring activities, and duplicate costs incurred in relocating facilities. The Company will continue to evaluate additional restructuring in the fourth quarter. In addition, the Company presented separately amortization of acquired intangible assets in the income statement, which was approximately $0.3 million in the quarter.

Net sales for the nine months ended September 30, 2016 were $1,957.0 million, an increase of $67.4 million or 3.6%, compared to $1,889.7 million for the nine months ended September 30, 2015. Gross profit increased by 9.6% from $249.2 million to $273.0 million primarily due to increase in gross margin from 13.2% to 14.0% for the nine months ended September 30, 2016. Net income for the nine months ended September 30, 2016 increased by 5.7% to $35.1 million, or $1.32 per diluted share, compared to net income of $33.2 million, or $1.25 per diluted share, for the nine months ended September 30, 2015. Earnings before interest, taxes, acquisition, rebranding, and restructuring costs, depreciation and amortization, and stock-based compensation expense (“Adjusted EBITDA”) totaled $94.8 million for the twelve months ended September 30, 2016, compared to $86.1 million for the twelve months ended September 30, 2015.

Quarterly Performance by Segment:

• Net sales for the SMB segment increased by 12.5% to $302.4 million in the third quarter of 2016, compared to the prior year quarter. Softmart’s revenues for the third quarter, which were approximately $42 million, are included in SMB since most of their customer base falls into this segment. Gross margin increased by 29 basis points to 15.4% due to strong performance in advanced technology solution categories, which contributed to a 14.7% increase in gross profit.
• Net sales for the Large Account segment decreased by 3.7% to $233.8 million in the third quarter of 2016, compared to the prior year quarter. Gross margin improved by 143 basis points due to a strong performance in advance technology solution categories, which contributed to a 7.8% increase in gross profit.
• Net sales to the Public Sector segment increased by 1.8% to $172.3 million in the third quarter of 2016, compared to the prior year quarter. Gross margin was basically unchanged and resulted in a slight increase in gross profit. The Company’s Public Sector current order backlog is up over $30 million from a year ago. This segment has won several large deals in September and early October, driving the increase. Some of these deals are at lower than average margins due to the competitive nature of the bidding process.

Quarterly Sales by Product Mix:

• Notebook/mobility sales, the Company’s largest product category, increased slightly year over year and accounted for 24% of net sales in the third quarter of 2016 and 2015. Mobility continues to be a strategic focus area for customers in all segments.
• Software sales increased by 46% year over year and accounted for 21% of net sales in the third quarter of 2016 compared to 15% of net sales in the prior year quarter. We experienced growth in cloud-based offerings, security, and virtualization.

Overall gross profit increased by $8.4 million, or 9.5%, in the third quarter of 2016, compared to the prior year quarter. Consolidated gross margin, as a percentage of net sales, increased to 13.7% for the third quarter of 2016, compared to 13.0% for the prior year quarter.

Selling, general and administrative expenses, excluding acquisition costs, rebranding expenses, restructuring charges, and amortization of acquired intangibles, increased in the third quarter of 2016 to $73.2 million from $66.2 million in the prior year quarter, with variable cost increasing due to higher levels of gross profit. We also had three months of Softmart SG&A in the current quarter. We continue to invest in technical solution sales capabilities and expect SG&A expenses to rise accordingly. However, we are highly focused on improving efficiencies and streamlining wherever possible.

Total cash was $66.9 million at September 30, 2016, compared to $80.2 million at December 31, 2015. The Company has generated positive cash flow of approximately $32 million for the first nine months of 2016 before the Softmart acquisition of $34 million and the special dividend of $10.6 million. Days sales outstanding were 42 days at September 30, 2016, and inventory turns were 23 turns in the third quarter of 2016.

The Company acquired GlobalServe, Inc. on October 11, 2016. GlobalServe has developed a sophisticated network of over 500 resellers in 140 countries throughout the world. These resellers are connected to GlobalServe’s internally-developed portal which enables a customer to have all of their global IT needs met, with a consistent delivery of lead times, reporting, pricing, and logistics. The key benefit to us is the ability to offer our existing and new customers this global capability. Virtually all of our large customers have international needs and now we own an industry leading tool which will simplify our customer’s global IT procurement and reduce costs. We believe that this acquisition gives us a true competitive advantage in the marketplace, and we expect this will be an important component of our future growth strategy.

“The Company achieved record sales and increased earnings per share this quarter despite an overall soft IT spending environment. The main driver of profitability was an increase in gross margin percentage, as the Company continues to focus on selling advanced solutions. The recent acquisitions of Softmart and GlobalServe have expanded our capabilities and added significantly to our customer count, sales headcount, and technical personnel. We believe our team and the strategies we have in place position us well to gain market share and increase long-term shareholder value,” concluded Mr. McGrath.

Non-GAAP Financial Information

Adjusted EBITDA and Adjusted EPS are non-GAAP financial measures. This information is included to provide information with respect to the Company’s operating performance and earnings.

About Connection

Connection (www.connection.com; NASDAQ: CNXN), is the combined corporate brand name for PC Connection, Inc., a Fortune 1000 company, along with its subsidiaries: PC Connection Sales, GovConnection, MoreDirect, and Softmart, reflecting the Company’s mission to connect people with technology that enhances growth, elevates productivity, and empowers innovation. Headquartered in Merrimack, NH with offices throughout the United States, the Company continues to deliver custom-configured computer systems overnight from our ISO 9001:2008 certified technical configuration lab at our distribution center in Wilmington, OH. Connection also services international customers through a global alliance with Bechtle AG, an IT provider based in Europe. In addition, the company has over 2,500 technical certifications to ensure that we can solve the most complex issues of our customers. Investors and media can find more information about Connection at http://ir.connection.com.

Connection – Business Solutions (800-800-5555), (the original business of PC Connection,) operating through our PC Connection Sales Corp. subsidiary, is a rapid-response provider of IT products and services serving primarily the small- and medium-sized business sector. It offers more than 300,000 brand-name products through its staff of technically trained sales account managers, publications, and its website at www.connection.com.

Connection – Public Sector Solutions (800-800-0019), our GovConnection, Inc. subsidiary, is a rapid-response provider of IT products and services to federal, state, and local government agencies and educational institutions through specialized account managers, publications, and online at www.connection.com/publicsector.

Connection – Enterprise Solutions (561-237-3300), www.connection.com/enterprise, our MoreDirect, Inc. subsidiary, provides corporate technology buyers with best-in-class IT solutions, in-depth IT supply-chain expertise, and access to over 300,000 products and 1,600 vendors through TRAXX™, a proprietary cloud-based eProcurement system. The team’s engineers, software licensing specialists, and project managers help reduce the cost and complexity of buying hardware, software, and services throughout the entire IT lifecycle.

Connection – Global Solutions (800-800-1319), www.connection.com/global, our recent Softmart acquisition, is a global supplier of technology, tools, and service solutions with more than 34 years of expertise in helping customers simplify software purchasing. As a Microsoft Licensing Solution Provider (LSP), the team offers industry-leading volume software license programs and affiliated license support.

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“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements that are based on currently available information, operating plans, and projections about future events and trends. Terms such as "believe," "expect," "intend," “plan,” "estimate," "anticipate," “may,” "will," or similar statements or variations of such terms are intended to identify forward-looking statements, although not all forward-looking statements include such terms. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in such forward-looking statements. Such risks and uncertainties, include, but are 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, market acceptance of the Company’s new branding, fluctuations in operating results, the ability of the Company to manage personnel levels in response to fluctuations in revenue, and other risks detailed in the Company’s filings with the Securities and Exchange Commission, including under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2015. More specifically, the statements in this release concerning the Company’s outlook for selling, general, and administrative expenses, the Company’s efforts in improving efficiencies and streamlining its business and other statements of a non-historical basis (including statements regarding the Company’s ability to increase market share and enhance long-term shareholder value and the Company’s continuing investments in technical solution sales capabilities) are forward-looking statements that involve certain risks and uncertainties. Such risks and uncertainties include the ability to realize market demand for and competitive pricing pressures on the products and services marketed by the Company, the continued acceptance of the Company's distribution channel by vendors and customers, continuation of key vendor and customer relationships and support programs, the ability of the Company to gain or maintain market share, and the ability of the Company to hire and retain qualified sales representatives and other essential personnel. The Company assumes no obligation to update the information in this press release or revise any forward-looking statements, whether as a result of any new information, future events, or otherwise, except as required by law.

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CONTACT:
PC Connection, Inc.
William Schulze, 603-683-2262
Vice President and Interim Chief Financial Officer