Press Release Details

MERRIMACK, N.H.--(BUSINESS WIRE)--

PC Connection, Inc. (NASDAQ: PCCC):

FOURTH QUARTER SUMMARY:					FULL YEAR SUMMARY:
Net income up 14% y/y Net sales: $684.3 million, up 8.5% y/y Diluted EPS: $0.51, up 13% y/y					Net income up 10% y/y Net sales: $2.57 billion, up 4.5% y/y Diluted EPS: $1.76, up 9% y/y

PC Connection, Inc. (NASDAQ: PCCC), a national provider of a full range of information technology (IT) solutions to business, government, healthcare, and education markets, today announced record results for the quarter ended December 31, 2015. Net sales for the fourth quarter of 2015 increased by 8.5% to $684.3 million, compared to $630.8 million for the prior year quarter. Net income for the quarter ended December 31, 2015 increased by 14.0% to $13.6 million, or $0.51 per diluted share, compared to net income of $11.9 million, or $0.45 per diluted share for the prior year quarter.

Net sales for the year ended December 31, 2015 were $2.57 billion, an increase of $110.6 million or 4.5%, compared to $2.46 billion for the year ended December 31, 2014. Net income for the year ended December 31, 2015 increased by 9.7% to $46.8 million, or $1.76 per diluted share, compared to net income of $42.7 million, or $1.61 per diluted share, for the year ended December 31, 2014. Earnings before interest, taxes, depreciation and amortization, adjusted for stock-based compensation expense ("Adjusted EBITDA") totaled $88.5 million for 2015, compared to $80.5 million for 2014.

Quarterly Performance by Segment:

• Net sales for the SMB segment increased by 0.4% to $262.6 million in the fourth quarter of 2015, compared to the prior year quarter. Gross margin increased by 70 basis points to 15.9% due to strong performance in advanced technology solution categories including software, networking, and services.
• Net sales for the Large Account segment increased by 22.8% to $277.0 million in the fourth quarter of 2015, compared to the prior year quarter. The increase was due to strong demand for solution-based projects from enterprise customers across a number of industries and vertical markets, including significant growth in the Healthcare market. This represented the highest quarterly revenue ever achieved by the Large Account segment.
• Net sales to the Public Sector segment increased by 0.8% to $144.7 million in the fourth quarter of 2015, compared to the prior year quarter. Gross margin improved 40 basis points due to double-digit sales increases in software and networking.

Quarterly Sales by Product Mix:

• Notebook/mobility sales, the Company's largest product category, increased by 14% year over year and accounted for 20% of net sales in the fourth quarter of 2015 and 2014. Mobility continues to be a strategic focus area for customers in each of our three segments.
• Software sales increased by 19% year over year and accounted for 20% of net sales in the fourth quarter of 2015 compared to 18% of net sales in the prior year quarter. We experienced growth in cloud-based offerings, security, and virtualization.

Overall gross profit increased by $8.7 million, or 10.5%, in the fourth quarter of 2015, compared to the prior year quarter. Consolidated gross margin, as a percentage of net sales, increased to 13.4% in the fourth quarter of 2015, compared to 13.2% for the prior year quarter.

Selling, general and administrative dollars increased in the fourth quarter of 2015 to $69.0 million from $63.0 million in the prior year quarter and slightly increased as a percentage of net sales to 10.1% from 10.0%. Included in these totals were $0.3 million of start-up and transition costs related to our new advanced configuration and distribution center, which was operational at the end of the third 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.

The Company generated significant cash flow during the year ended December 31, 2015. Total cash was $80.2 million at December 31, 2015, compared to $60.9 million at December 31, 2014. In January 2016, we paid a 40 cent per share special dividend to shareholders, which totaled $10.6 million. Days sales outstanding were 44 days at December 31, 2015, and inventory turns were 22 turns in the fourth quarter of 2015.

"The Company had record performance in both net sales and net income this quarter and for the year ended December 31, 2015. We were able to increase sales and earnings, while continuing to make investments to strengthen our capabilities as a leading National Solutions Provider," said Timothy McGrath, President and Chief Executive Officer. "Also, for the fifth consecutive year, we paid a special dividend to shareholders. We believe our team and the strategies we have in place position us well to gain market share and increase long-term shareholder value."

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 PC Connection, Inc.

PC Connection, Inc., a Fortune 1000 company, has three wholly owned sales subsidiaries: PC Connection Sales Corporation, MoreDirect, Inc., and GovConnection, Inc., headquartered in Merrimack, NH; Boca Raton, FL; and Rockville, MD; respectively. All three companies can 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. Investors and media can find more information about PC Connection, Inc. at http://ir.pcconnection.com.

PC Connection Sales Corporation (800-800-5555), the original business of PC Connection, Inc. serving primarily the small- and medium-sized business sector, is a rapid-response provider of IT products and services. It offers more than 300,000 brand-name products through its staff of technically trained sales account managers, catalogs, publications, and its website at www.pcconnection.com. This company also serves consumer and small office users and is, under its MacConnection brand (800-800-2222), one of Apple's largest authorized online resellers at www.macconnection.com.

MoreDirect, Inc. (561-237-3300), www.moredirect.com, 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™, our proprietary cloud-based eProcurement system. MoreDirect's team of engineers, software licensing specialists, and project managers help reduce the cost and complexity of buying hardware, software, and services throughout the entire IT lifecycle.

GovConnection, Inc. (800-800-0019) is a rapid-response provider of IT products and services to federal, state, and local government agencies and educational institutions through specialized account managers, catalogs, publications, and online at www.govconnection.com.

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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 Securities and Exchange Commission for the year ended December 31, 2014. 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 disclaims any 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.

CONSOLIDATED SELECTED FINANCIAL INFORMATION
At or for the Three Months Ended December 31,					2015								2014
																					%
(Amounts and shares in thousands, except operating data, P/E ratio, and per share data)																					Change
Operating Data:
Net sales					$	684,323							$	630,765							8	%
Diluted earnings per share					$	0.51							$	0.45							13	%
Gross margin						13.4	%							13.2	%
Operating margin						3.3	%							3.2	%
Return on equity (1)						12.5	%							12.5	%
Inventory turns						22								26
Days sales outstanding						44								40
					% of								% of
Product Mix:					Net Sales								Net Sales
Notebooks/Mobility						20	%							20	%
Software						20								18
Servers/Storage						12								14
Net/Com Products						10								10
Other Hardware/Services						38								38
Total Net Sales						100	%							100	%
Stock Performance Indicators:
Actual shares outstanding						26,498								26,343
Total book value per share					$	14.81							$	13.44
Tangible book value per share					$	12.81							$	11.42
Closing price					$	22.64							$	24.55
Market capitalization					$	599,915							$	646,721
Trailing price/earnings ratio						12.9								15.3
LTM Adjusted EBITDA (2)					$	88,509							$	80,475
Adjusted market capitalization/LTM Adjusted EBITDA (3)						5.9								7.3
(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 December 31,					2015								2014
					Net				Gross				Net				Gross
(amounts in thousands)					Sales				Margin				Sales				Margin
SMB					$	262,646			15.9	%			$	261,661			15.2	%
Large Account						276,980			11.6					225,609			11.6
Public Sector						144,697			12.3					143,495			11.9
Total					$	684,323			13.4	%			$	630,765			13.2	%

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended December 31,					2015								2014
(amounts in thousands, except per share data)					Amount				% of Net Sales				Amount				% of Net Sales
Net sales					$	684,323			100.0	%			$	630,765			100.0	%
Cost of sales						592,472			86.6					547,641			86.8
Gross profit						91,851			13.4					83,124			13.2
Start-up costs - new distribution center						296			-					-			-
Selling, general and administrative expenses, other						68,664			10.1					63,035			10.0
Income from operations						22,891			3.3					20,089			3.2
Interest/other expense, net						(20	)		-					(14	)		-
Income tax provision						(9,258	)		(1.3	)				(8,131	)		(1.3	)
Net income					$	13,613			2.0	%			$	11,944			1.9	%
Earnings per common share:
Basic					$	0.51							$	0.45
Diluted					$	0.51							$	0.45
Shares used in the computation of earnings per common share:
Basic						26,459								26,311
Diluted						26,632								26,554
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,					2015								2014
(amounts in thousands, except per share data)					Amount				% of Net Sales				Amount				% of Net Sales
Net sales					$	2,573,973			100.0	%			$	2,463,339			100.0	%
Cost of sales						2,232,954			86.8					2,139,950			86.9
Gross profit						341,019			13.2					323,389			13.1
Start-up costs - new distribution center						1,026			-					-			-
Selling, general and administrative expenses, other						261,439			10.2					251,935			10.2
Income from operations						78,554			3.0					71,454			2.9
Interest/other expense, net						(87	)		-					(86	)		-
Income tax provision						(31,640	)		(1.2	)				(28,687	)		(1.2	)
Net income					$	46,827			1.8	%			$	42,681			1.7	%
Earnings per common share:
Basic					$	1.77							$	1.63
Diluted					$	1.76							$	1.61
Shares used in the computation of earnings per common share:
Basic						26,398								26,246
Diluted						26,616								26,512

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 December 31,										Years Ended December 31,
					2015			2014			% Change				2015				2014				% Change
Net income					$	13,613		$	11,944						$	46,827			$	42,681
Depreciation and amortization						2,364			2,095							8,961				8,092
Income tax expense						9,258			8,131							31,640				28,687
Interest/other expense, net						20			14							87				86
EBITDA						25,255			22,184							87,515				79,546
Stock-based compensation						274			228							994				929
Adjusted EBITDA					$	25,529		$	22,412		14	%			$	88,509			$	80,475			10	%
															December 31,				December 31,
CONDENSED CONSOLIDATED BALANCE SHEETS															2015				2014
(amounts in thousands)
ASSETS
Current Assets:
Cash and cash equivalents															$	80,188			$	60,909
Accounts receivable, net																356,145				293,027
Inventories																102,780				90,917
Deferred income taxes																7,909				7,749
Prepaid expenses and other current assets																4,254				5,332
Income taxes receivable																1,575				212
Total current assets																552,851				458,146
Property and equipment, net																32,227				27,861
Goodwill																51,276				51,276
Other intangibles, net																1,668				1,953
Other assets																1,052				724
Total Assets															$	639,074			$	539,960
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable															$	166,516			$	124,893
Accrued expenses and other liabilities																36,207				22,011
Accrued payroll																19,280				17,793
Total current liabilities																222,003				164,697
Deferred income taxes																21,615				18,803
Other liabilities																3,005				2,452
Total Liabilities																246,623				185,952
Stockholders' Equity:
Common stock																284				282
Additional paid-in capital																109,161				106,956
Retained earnings																298,868				262,632
Treasury stock at cost																(15,862	)			(15,862	)
Total Stockholders' Equity																392,451				354,008
Total Liabilities and Stockholders' Equity															$	639,074			$	539,960

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,						2015					2014
(amounts in thousands)
Cash Flows from Operating Activities:
Net income					$	46,827				$	42,681
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization						8,961					8,092
Provision for doubtful accounts						1,097					1,383
Stock-based compensation expense						994					929
Deferred income taxes						2,652					1,212
Loss on disposal of fixed assets						44					14
Excess tax benefit from exercise of equity awards						(552	)				(556	)
Changes in assets and liabilities:
Accounts receivable						(64,215	)				(11,359	)
Inventories						(11,863	)				(11,776	)
Prepaid expenses and other current assets						(285	)				1,829
Other non-current assets						(328	)				(4	)
Accounts payable						41,324					202
Accrued expenses and other liabilities						6,206					2,751
Net cash provided by operating activities						30,862					35,398
Cash Flows from Investing Activities:
Purchases of equipment						(12,337	)				(7,609	)
Purchase of intangible asset						(450	)				-
Proceeds from sale of equipment						-					13
Net cash used for investing activities						(12,787	)				(7,596	)
Cash Flows from Financing Activities:
Dividend payment						-					(10,527	)
Issuance of stock under Employee Stock Purchase Plan						875					753
Excess tax benefit from exercise of equity awards						552					556
Exercise of stock options						437					356
Payment of payroll taxes on stock-based compensation through shares withheld						(660	)				(578	)
Net cash provided by (used for) financing activities						1,204					(9,440	)
Increase in cash and cash equivalents						19,279					18,362
Cash and cash equivalents, beginning of period						60,909					42,547
Cash and cash equivalents, end of period					$	80,188				$	60,909
Non-cash Investing Activities:
Dividend declaration					$	10,591				$	-
Accrued capital expenditures					$	504				$	205
Supplemental Cash Flow Information:
Income taxes paid					$	30,371				$	24,219

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View source version on businesswire.com: http://www.businesswire.com/news/home/20160128005912/en/

PC Connection, Inc.
Joseph Driscoll, 603-683-2505
Senior Vice President, Treasurer and Chief Financial Officer

Source: PC Connection, Inc.

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