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):   February 1, 2017

 
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 February 1, 2017, PC Connection, Inc. announced its financial results for the quarter and year ended December 31, 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

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 Fourth Quarter and Full Year 2016 Results

FOURTH QUARTER SUMMARY:

• Record net sales: $735.5 million, up 7.5% y/y
• Record gross profit: $98.1 million, up 6.8% y/y
• Diluted EPS: $0.49, compared to $0.51
• Adjusted EPS excluding special charges: $0.53, compared to $0.52

FULL YEAR SUMMARY:

• Record net sales: $2.7 billion, up 4.6% y/y
• Record gross profit: $371.2 million, up 8.8% y/y
• Diluted EPS: $1.80, compared to $1.76
• Adjusted EPS excluding special charges $1.90, compared to $1.78

MERRIMACK, N.H.--(BUSINESS WIRE)--February 1, 2017--PC Connection, Inc. (dba Connection; NASDAQ: CNXN), an industry-leading Global Technology Solutions Provider, today announced results for the quarter ended December 31, 2016. Net sales for the fourth quarter of 2016 increased by 7.5% to $735.5 million, compared to $684.3 million for the prior year quarter. Gross profit increased by 6.8% from $91.9 million to $98.1 million in the fourth quarter of 2016 as compared to the fourth quarter of 2015. Net income for the quarter ended December 31, 2016 decreased by 4.5% to $13.0 million, or $0.49 per diluted share, compared to net income of $13.6 million, or $0.51 per diluted share for the prior year quarter. Earnings per share, adjusted for acquisition costs, restructuring charges, and amortization of acquired intangibles, increased to $0.53 cents per share for the quarter ended December 31, 2016, compared to $0.52 cents per share for the prior year quarter.

The fourth quarter 2016 results include $1.5 million of acquisition and restructuring costs. This charge includes professional fees related to the GlobalServe acquisition and severance related to internal restructuring activities. In addition, the Company has presented separately amortization of acquired intangible assets in the income statement, which was approximately $0.5 million in the quarter.

Net sales for the year ended December 31, 2016 were $2.7 billion, an increase of $118.6 million or 4.6%, compared to $2.6 billion for the year ended December 31, 2015. Gross profit increased by 8.8% from $341.0 million to $371.2 million due to higher net sales and a 54 basis-point increase in gross margin for the year ended December 31, 2016. Net income for the year ended December 31, 2016 increased by 2.7% to $48.1 million, or $1.80 per diluted share, compared to net income of $46.8 million, or $1.76 per diluted share, for the year ended December 31, 2015. Earnings per share, adjusted for acquisition costs, restructuring charges, and amortization of acquired intangibles, increased to $1.90 cents per share for the year ended December 31, 2016, compared to $1.78 cents per share for the prior year. Earnings before interest, taxes, acquisition, rebranding, and restructuring costs, depreciation and amortization, and stock-based compensation expense (“Adjusted EBITDA”) totaled $95.5 million for December 31, 2016, compared to $89.5 million for December 31, 2015.

Quarterly Performance by Segment:

• Net sales for the SMB segment increased by 5.2% to $276.4 million in the fourth quarter of 2016, compared to the prior year quarter. Strong performance in advanced technology solution categories contributed to a 3.9% increase in gross profit.
• Net sales for the Large Account segment increased by 4.3% to $288.8 million in the fourth quarter of 2016, compared to the prior year quarter. Gross margin improved by 51 basis points due to a strong performance in software, which contributed to an 8.9% increase in gross profit.
• Net sales to the Public Sector segment increased by 17.7% to $170.4 million in the fourth quarter of 2016, compared to the prior year quarter. Sales to the federal government increased by 46.1%, compared to the prior year, while sales to state and local government and educational institutions decreased by 3.8%. Notebooks/mobility sales were strong in this segment with a 31.4% increase, and contributed to a 10.0% increase in gross profit. The Company’s Public Sector current order backlog is up over $30 million from a year ago. This segment won several large deals in the fourth quarter, 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 by 14% year over year and accounted for 22% of net sales in the fourth quarter of 2016 compared to 20% of net sales in the prior year quarter. Mobility continues to be a strategic focus area for customers in all segments.
• Software sales increased by 14% year over year and accounted for 21% of net sales in the fourth quarter of 2016 compared to 20% of net sales in the prior year quarter. We experienced growth in cloud-based offerings, security, and virtualization.

Overall gross profit increased by $6.3 million, or 6.8%, in the fourth quarter of 2016, compared to the prior year quarter. Consolidated gross margin, as a percentage of net sales, decreased slightly to 13.3% for the fourth quarter of 2016, compared to 13.4% for the prior year quarter.

Selling, general and administrative expenses increased in the fourth quarter of 2016 to $76.2 million from $69.0 million in the prior year quarter. Excluding acquisition costs, restructuring charges, and amortization of acquired intangibles, SG&A expenses were $74.2 million in the fourth quarter of 2016, 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 $49.2 million at December 31, 2016, compared to $80.2 million at December 31, 2015. In January 2017, we paid a 34 cent per share special dividend to shareholders, which totaled $9.0 million. The Company generated positive cash flow of approximately $23 million for 2016 before the Softmart acquisition of $32 million, the GlobalServe acquisition of $11 million, and the special dividend of $10.6 million. Days sales outstanding were 48 days at December 31, 2016, and inventory turns were 22 turns in the fourth quarter of 2016.

As announced last quarter, the Company acquired GlobalServe, Inc. on October 11, 2016. GlobalServe has developed a portal designed to meet its customers’ global IT needs with consistent delivery, reporting, pricing, and logistics. We are excited to be able to offer our customers this global capability. This industry leading tool simplifies our customers’ global IT procurement and reduces their costs. We believe that this acquisition gives us a competitive advantage in the market place and expect this to be an important component of our future growth strategy.

“The Company achieved record sales and gross profit this quarter in an overall muted IT spending environment,” said Timothy McGrath, President and Chief Executive Officer. “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, Adjusted EPS and Adjusted S,G & A 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, and MoreDirect,, 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. In addition, the company has over 2,500 technical certifications to ensure that we can solve the most complex issues of our customers. Connections also services international customers through its GlobalServe subsidiary, a global IT procurement and service management company. 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.

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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 integrate its two acquisitions in an effective manner, 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, Interim Chief Financial Officer