UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________________ TO _______________
COMMISSION FILE NUMBER 0-23827
PC CONNECTION, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 02-0497006
--------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
528 ROUTE 13,
MILFORD, NEW HAMPSHIRE 03055
--------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (603) 423-2000
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Indicate by check mark (u) whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the issuer's Common Stock, $.01 par value,
as of July 31, 1998 was 15,442,543.
PC CONNECTION, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION PAGE
--------------------- ----
Item 1 Financial Statements:
Balance Sheets - June 30, 1998
and December 31, 1997.......................................1
Statements of Income -
Three months ended June 30, 1998 and 1997;
Six Months Ended June 30, 1998 and 1997.....................2
Statement of Changes in Stockholders' Equity - Six
Months Ended June 30, 1998..................................3
Statements of Cash Flows - Six
Months Ended June 30, 1998 and 1997 ........................4
Notes to Financial Statements.................................5
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................8
Item 3 Qualitative and Quantitative Disclosures About Market Risk...16
PART II OTHER INFORMATION
-----------------
Item 1 Legal Proceedings............................................17
Item 2 Changes in Securities and Use of Proceeds....................17
Item 3 Defaults Upon Senior Securities..............................17
Item 4 Submission of Matters to a Vote of Security Holders..........17
Item 5 Other Information............................................17
Item 6 Exhibits and Reports on Form 8-K.............................17
SIGNATURES...................................................18
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PC CONNECTION, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
- --------------------------------------------------------------------------------
JUNE 30, December 31,
1998 1997
- --------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 22,998 $ 758
Accounts receivable, net 34,497 29,921
Inventories/merchandise 58,885 63,720
Deferred income taxes 3,982 375
Prepaid expenses and other current assets 3,323 2,205
-------- --------
TOTAL CURRENT ASSETS 123,685 96,979
Property and equipment, net 11,325 8,463
Deferred income taxes 445 -
-------- --------
TOTAL ASSETS $135,455 $105,442
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings $ - $ 28,318
Current maturities of long-term debt - 1,250
Amounts payable to stockholders - 1,185
Accounts payable 65,149 38,174
Accrued expenses and other liabilities 11,016 9,145
-------- --------
TOTAL CURRENT LIABILITIES 76,165 78,072
-------- --------
Term loan, less current maturities - 3,250
-------- --------
TOTAL LIABILITIES 76,165 81,322
-------- --------
Stockholders' Equity:
Preferred Stock, $.01 par value, 7,500,000
shares authorized, none issued and
outstanding
Common Stock, $.01 par value, 30,000,000
shares authorized, 15,427,543 and 11,798,793
shares issued and outstanding at
June 30, 1998 and December 31, 1997,
respectively 154 118
Additional paid-in capital 54,579 4,097
Retained earnings 4,557 19,905
-------- --------
TOTAL STOCKHOLDERS' EQUITY 59,290 24,120
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $135,455 $105,442
See notes to financial statements.
-1-
PC CONNECTION, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
STATEMENTS OF INCOME
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
- -----------------------------------------------------------------------------
Net sales $174,349 $121,500 $342,992 $244,324
Cost of sales 151,768 104,723 298,462 210,168
------- ------- -------- -------
GROSS PROFIT 22,581 16,777 44,530 34,156
Selling, general and
administrative expenses 16,042 12,791 32,900 26,428
Additional stockholder/
officer compensation - 2,980 2,354 5,430
------- ------- -------- -------
INCOME FROM OPERATIONS 6,539 1,006 9,276 2,298
Interest expense (51) (299) (257) (664)
Other, net 213 (11) 299 (8)
Income tax benefit (provision) (2,613) (134) 1,175 (264)
------- ------- -------- -------
NET INCOME $4,088 $ 562 $ 10,493 $ 1,362
======= ======= ======== =======
Weighted average shares
outstanding:
Basic 15,414
=======
Diluted 15,938
=======
Earnings per share:
Basic $ .27
=======
Diluted $ .26
=======
PRO FORMA DATA:
--------------
Historical income before
income taxes $ 696 $ 9,318 $1,626
Pro forma adjustment -
stockholder/officer
compensation in excess of
aggregate base salaries 2,950 2,354 5,370
Pro forma income before
income taxes 3,646 11,672 6,996
Pro forma income taxes 1,422 4,552 2,728
Pro forma net income $ 2,224 $ 7,120 $4,268
======= ======= =======
Pro forma weighted average shares
outstanding:
Basic 13,861 14,829 13,861
======= ======= =======
Diluted 14,124 15,371 14,089
======= ======= =======
Pro forma earnings per share:
Basic $ .16 $ .48 $ .31
======= ======= =======
Diluted $ .16 $ .46 $ .30
======= ======= =======
See notes to financial statements.
-2-
PC CONNECTION, INC.
Part I - Financial Information
Item 1 - Financial Statements
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(Amounts in thousands)
- --------------------------------------------------------------------------------
Common Stock Additional Retained
Shares Amount Paid In Capital Earnings Total
- --------------------------------------------------------------------------------
Balance, December 31, 1997 11,799 $ 118 $4,097 $19,905 $24,120
Net proceeds from initial
public offering 3,594 36 57,217 - 57,253
Dividend - - (7,196) (25,841) (33,037)
Exercise of nonstatutory
stock options, including
income tax benefits 35 - 262 - 262
Compensation under non-
statutory stock option
agreements - - 1,172 - 1,172
Recognition of deferred taxes
on nonstatutory stock option
agreements - - (973) - (973)
Net income - - - 10,493 10,493
------ ----- ------- ------- -------
BALANCE, JUNE 30, 1998 15,428 $ 154 $54,579 $ 4,557 $59,290
======= ====== ======= ======== =======
See notes to financial statements.
-3-
PC CONNECTION, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
- -------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30,
1998 1997
- -------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $10,493 $1,362
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,361 1,781
Deferred income taxes (5,025) -
Compensation under nonstatutory stock
option agreements 1,172 144
Provision for doubtful accounts 1,403 940
Loss on disposal of fixed assets 74 9
Changes in assets and liabilities:
Accounts receivable (5,979) (2,802)
Inventories 4,835 4,039
Prepaid expenses and other current assets (1,118) 186
Accounts payable 26,975 1,389
Amounts payable to stockholders (1,185) (1,044)
Accrued expenses and other liabilities 1,506 1,107
------ -------
Net cash provided by operating activities 34,512 7,111
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (3,637) (2,351)
------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings 20,796 66,741
Repayment of short-term borrowings (49,174) (71,548)
Repayment of term loan (4,500) -
Issuance of stock upon exercise of
nonstatutory stock options 27 -
Net proceeds from initial public offering 57,253 -
Payment of dividend (33,037) -
------- -------
Net cash used for financing activities (8,635)
(4,807)
------ ------
Increase (decrease) in cash and cash equivalents 22,240 (47)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 758 162
-------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 22,998 $ 115
======== =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 392 $694
Income taxes paid 2,679 175
NON-CASH TRANSACTIONS:
Computer equipment in the amount of $660 was
acquired in April 1998
and financed by means of a capital lease
See notes to financial statements
-4-
PC CONNECTION, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1 - BASIS OF PRESENTATION
- --------------------------------------------------------------------------------
The accompanying financial statements of PC Connection, Inc. ("PCC" or the
"Company") have been prepared in accordance with generally accepted accounting
principles. Such principles were applied on a basis consistent with those of the
financial statements contained in the Company's Registration Statement on Form
S-1 (the "Registration Statement") filed with the Securities and Exchange
Commission ("SEC") in connection with its initial public offering ("the
Offering") (File No. 333-41171). The accompanying financial statements should be
read in conjunction with the financial statements contained in the Company's
Registration Statement. In the opinion of management, the accompanying unaudited
financial statements contain all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation. The operating results
for the three and six month periods ended June 30, 1998 may not be indicative of
the results expected for any succeeding quarter or the entire year ending
December 31, 1998.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements. Actual results may
differ from those estimates.
Certain amounts in the prior year financial statements have been reclassified to
conform to the current year presentation.
- --------------------------------------------------------------------------------
NOTE 2 - CASH AND CASH EQUIVALENTS
- --------------------------------------------------------------------------------
The Company considers all highly liquid short-term investments with original
maturities of 90 days or less to be cash equivalents.
- --------------------------------------------------------------------------------
NOTE 3 - RECAPITALIZATION AND STOCK SPLIT
- --------------------------------------------------------------------------------
On February 4, 1998, the Company amended its Articles of Incorporation to
increase the authorized shares of the Company's Series A Non-Voting Common
Stock, $.01 par value per share (the "Series A Non-Voting Common Stock"), and
Series B Voting Common Stock, $.01 par value per share (the "Series B Voting
Common Stock"), to 22,500,000 and 7,500,000 shares, respectively. The Company
also, through a 1.310977-for-one stock split, increased the total number of
Series A Non-Voting Common Stock and Series B Voting Common Stock issued and
outstanding to 8,849,095 shares and 2,949,698 shares, respectively. The effect
of this recapitalization and stock split has been reflected in the Company's
financial statements and related notes thereto for all periods presented.
- ------------------------------------------------------------------------------
NOTE 4 - REINCORPORATION OF THE COMPANY
- ------------------------------------------------------------------------------
On February 27, 1998, the Company changed its state of incorporation from New
Hampshire to Delaware (the "Reincorporation"). Pursuant to the Reincorporation,
the Company converted all of the issued and outstanding shares of Series A Non-
Voting Common Stock, and Series B Voting Common Stock of the New Hampshire
corporation into 11,798,793 shares of Common Stock, $.01 par value of the
"Common Stock", of the Delaware corporation on a one-for-one basis.
- -------------------------------------------------------------------------------
NOTE 5 - INITIAL PUBLIC OFFERING
- -------------------------------------------------------------------------------
On March 6, 1998, the Company completed its offering of 3,593,750 shares of
Common Stock (including 468,750 shares issued upon the exercise of an
underwriters' overallotment option) at a price of $17.50 per share, raising
$57.3 million in net proceeds. The Company used the net proceeds from the
Offering for repayment of bank indebtedness ($12.9 million) and to pay a
dividend to stockholders of record as of February 27, 1998 ($33.0 million) equal
to substantially all previously taxed, but undistributed, S Corporation earnings
of the Company. The remaining net proceeds ($11.4 million) have been invested in
short-term investment securities and will be used for general corporate
purposes.
-5-
PC CONNECTION, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 6 - TERMINATION OF S CORPORATION ELECTION
- --------------------------------------------------------------------------------
For periods prior to March 6, 1998, the Company elected to be treated as an S
Corporation under Subchapter S of the Internal Revenue Code ("the Code"), and
applicable state laws. Effective with the consummation of the Offering, the
Company's S Corporation election was automatically terminated and the Company
became subject to federal and state income taxes as a C Corporation from that
date forward.
Effective with the termination of the Company's S-Corporation election, the
Company recorded a tax benefit of approximately $4.2 million relating to the
establishment of additional net deferred tax assets for future tax deductions
resulting from such termination.
- -----------------------------------------------------------------------------
NOTE 7 - COMPENSATION UNDER NON-STATUTORY STOCK OPTION AGREEMENTS
- -----------------------------------------------------------------------------
Effective upon the consummation of the Offering, certain restrictions as to the
exercise of options granted under the Company's 1993 Incentive and Non-Statutory
Stock Option Plan expired. Prior to the consummation of the Offering, the
Company recorded compensation expense for certain options granted at prices less
than their fair market value ratably over seven years from the dates granted,
because such options were not exercisable except upon the occurrence of certain
events, including a public offering of the Company's Common Stock. Effective
upon the consummation of the Offering, the Company recorded a one-time charge
for stock-option compensation expense of approximately $870,000, relating to the
acceleration of the vesting period of certain of the Company's stock options
from seven years to four years.
- ------------------------------------------------------------------------------
NOTE 8 - PRO FORMA INCOME STATEMENT DATA
- ------------------------------------------------------------------------------
The following pro forma adjustments have been made to the historical results of
operations to make the pro forma presentation
comparable to what would have been reported had the Company operated as a C
Corporation for the periods prior to the quarter ended June 30, 1998:
1.Elimination of stockholder/officer compensation in excess of aggregate
established 1998 base salaries ($150,000) for all periods prior to the
quarter ended June 30, 1998. These amounts generally represented Company-
related S-Corporation tax obligations payable by the stockholder/officers for
periods prior to March 6, 1998. Effective upon the closing of the Offering,
these stockholder/officers are being paid annual base salaries aggregating
$600,000.
2. Elimination of the historical income tax benefit/provision for all periods
prior to the quarter ended June 30, 1998 (including elimination of the $4.2
million income tax benefit related to the establishment of additional
deferred tax assets for future tax deductions resulting from the termination
of the Company's Subchapter S Corporation status) and establishment of a
provision for federal and state income taxes that would have been payable by
the Company if taxed under Subchapter C of the Code, assuming an effective
tax rate of 39% after an adjustment for stockholder/officer compensation
described in Paragraph 1 above.
- -------------------------------------------------------------------------------
NOTE 9 - EARNINGS PER SHARE
- -------------------------------------------------------------------------------
NET INCOME PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share". SFAS No. 128
replaced the calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Basic earnings per common share is
computed using the weighted average number of shares outstanding. Diluted
earnings per common share is computed using the weighted average number of
shares outstanding adjusted for the incremental shares attributed to outstanding
options to purchase common stock. All earnings per share amounts for all periods
have been presented in accordance with SFAS No. 128 requirements.
-6-
PC CONNECTION, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 9 - PRO FORMA EARNINGS PER SHARE - CONT'D.
- --------------------------------------------------------------------------------
The denominator used to determine pro forma basic earnings per share for all
periods prior to the quarter ended June 30, 1998 includes the weighted average
shares required to pay the S Corporation dividend (assuming a price per share of
$17.50 for the six months ended June 30, 1998, and $16.00 for all 1997 periods).
The following table sets forth the computation of basic and diluted earnings per
share:
- --------------------------------------------------------------------------------
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, (AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE 1998 1997 1998 1997
DATA)
- ------------------------------------------ ------- ------- ------- ------
(Pro (Pro (Pro
forma) forma) forma)
Numerator:
Net income $ 4,088 $ 2,224 $ 7,120 $ 4,268
Denominator:
Denominator for basic earnings
per share:
Weighted average shares 15,414 11,799 14,193 11,799
Weighted average shares required
to pay stockholder dividend - 2,062 636 2,062
------- ------- ------ ------
15,414 13,861 14,829 13,861
Denominator for basic earnings
per share:
Effect of dilutive securities
Employee stock options 524 263 542 226
------- ------- ------ ------
Denominator for diluted
earnings per share $15,938 $14,124 $15,371 $14,089
======= ======= ======= =======
Earnings per share:
Basic $ .27 $ .16 $ .48 $ .31
======= ======= ======= =======
Diluted $ .26 $ .16 $ .46 $ .30
======= ======= ======= =======
The following stock options to purchase Common Stock were excluded from the
computation of diluted earnings per share for the three and six months ended
June 30, 1998 and 1997 because the effect of the options on the calculation
would have been anti-dilutive:
- --------------------------------------------------------------------------------
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30,
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE 1998 1997 1998 1997
DATA)
- --------------------------------------------------------------------------------
Anti-dilutive stock options 506 - 3 92
- --------------------------------------------------------------------------------
NOTE 10 - CAPITAL LEASE
- --------------------------------------------------------------------------------
In November 1997, the Company entered into a fifteen year-lease for a new
corporate headquarters with an affiliated entity related to the Company through
common ownership. The Company expects to occupy the facility in the fall of 1998
upon the anticipated completion of construction, and the lease payments will
commence upon the date of occupancy. Annual lease payments under the terms of
the lease, as amended on December 29, 1997, will be approximately $903,000 for
the first five years of the lease, increasing to $1,016,000 for years six
through ten and $1,129,000 for years eleven through fifteen. The lease requires
the Company to pay its proportionate share of real estate taxes and common area
maintenance charges as additional rent and also to pay insurance premiums for
the leased property. The Company has the option to renew the lease for two
additional terms of five years each.
-7-
PC CONNECTION, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 10 - CAPITAL LEASE - CONT'D.
- --------------------------------------------------------------------------------
Upon commencement of the lease, the Company expects to record the lease as a
capital lease. The recorded value of the asset (lease property under capital
lease) and the related liability (obligation under capital lease) is estimated
to be approximately $6.8 million.
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NOTE 11 - REPORTING COMPREHENSIVE INCOME
- -------------------------------------------------------------------------------
The Company has adopted the provisions of SFAS No. 130, "Reporting Comprehensive
Income". SFAS No. 130 requires the reporting of comprehensive income in addition
to net income. Comprehensive income is a more inclusive financial reporting
methodology that includes disclosure of certain financial information that
historically has not been recognized in the calculation of net income. Based on
the current financial structure and operations of the Company, the Company had
no other components to be included in comprehensive income. Therefore,
comprehensive income is the same as net income reported for the three and six
months ended June 30, 1998 and 1997.
- ------------------------------------------------------------------------------
NOTE 12 - RECENT PRONOUNCEMENTS OF THE FINANCIAL ACCOUNTING STANDARDS BOARD
- ------------------------------------------------------------------------------
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information," which will be effective for the Company for the year ending
December 31, 1998, establishes standards for reporting information about
operating segments in the annual financial statements, selected information
about operating segments in interim financial reports and disclosures about
products and services, geographic areas and major customers. This new standard
will require the Company to report financial information on the basis that is
used internally for evaluating segment performance and deciding how to allocate
resources to segments, which may result in more detailed information in the
notes to the Company's financial statements than is currently required and
provided. The Company has not yet determined the effects, if any, of
implementing SFAS No. 131 on its reporting of financial information.
-8-
PC CONNECTION, INC.
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
OVERVIEW
- --------------------------------------------------------------------------------
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements based on management's
current expectations, estimates and projections about the Company's industry,
management's beliefs and certain assumptions made by management. All statements,
trends, analyses and other information contained in this report relative to
trends in net sales, gross margin and anticipated expense levels, as well as
other statements, including words such as "anticipate", "believe," "plan,"
"estimate," "expect" and "intend" and other similar expressions, constitute
forward-looking statements. These forward-looking statements involve risks and
uncertainties, and actual results may differ materially from those anticipated
or expressed in such statements. Potential risks and uncertainties include,
among others, those set forth under the caption "Risk Factors" in the Company's
Registration Statement filed with the SEC in connection with its Initial Public
Offering (File No. 333-41171). Particular attention should be paid to the
cautionary statements involving the industry's rapid technological change and
exposure to inventory obsolescence, availability and allocation of goods,
reliance on vendor support and relationships, continued sales of Mac products,
competitive risks, pricing risks, and economic risks. Except as required by law,
the Company undertakes no obligation to update any forward-looking statement,
whether as a result of new information, future events or otherwise. Readers,
however, should carefully review the factors set forth in other reports or
documents that the Company files from time to time with the SEC.
- ------------------------------------------------------------------------------
GENERAL
- ------------------------------------------------------------------------------
The Company was founded in 1982 as a mail-order business offering a broad range
of software and accessories for IBM and IBM-compatible personal computers
("PCs"). The founders' goal was to provide consumers with superior service and
high quality branded products at competitive prices. The Company initially
sought customers through advertising in magazines and the use of inbound toll
free telemarketing. Currently, the Company seeks to generate sales through (i)
outbound telemarketing by account managers focused on the business, education
and government markets and (ii) inbound calls from customers responding to the
Company's catalogs and other advertising. The Company also advertises in
selected computer industry publications and in 1997 commenced selling products
through its internet web site.
The Company offers both PC compatible products and Mac personal computer
compatible products. Reliance on Mac product sales has decreased over the last
two years, from 26.7% of net sales in the year ended December 31, 1995 to 19.4%
of net sales in the quarter ended June 30, 1998. In late 1997, Apple announced
that it will sell built-to-order computers directly to customers over the
Internet. While Apple also indicated that it is not abandoning traditional
retail and direct marketing outlets, the Company cannot predict whether direct
sales by Apple will affect the future supply of Mac products to the Company.
Although net sales attributable to Mac products in absolute dollar amounts
increased in the quarter ended June 30, 1998, as compared to the comparable
period in 1997, such sales decreased as a percentage of net sales and the
Company believes that such sales will continue to decrease as a percentage of
net sales and may decline in absolute dollar amounts in future periods.
All of the Company's product categories experienced strong growth in the quarter
ended June 30, 1998 over the comparable period in 1997, with sales of computer
systems representing one of the fastest growing categories. Sales of computer
systems result in a relatively high dollar sales order, as reflected in the
increase in the Company's average order size from $506 in the quarter ended June
30, 1997 to $600 in the quarter ended June 30, 1998. Computer system sales
generally provide the largest gross profit dollar contribution per order of all
of the Company's products, although they usually yield the lowest gross margin
percentage. Partially as a result of higher system sales, the Company's gross
margin has declined over the last two years while the operating income margin
has increased due to the leveraging of selling, general and administrative
expenses over a larger sales base.
The Company's profit margins are also influenced by, among other things,
industry pricing and the relative mix of inbound and outbound sales. Generally,
pricing in the computer and related products market is very aggressive and the
Company intends to maintain prices at competitive levels. Since outbound sales
are typically to corporate accounts that purchase at volume discounts, the gross
margin on such sales is generally lower than inbound sales, although the gross
profit dollar contribution per order is generally higher as average order sizes
to corporate accounts are usually larger. The Company believes that outbound
sales will continue to represent a larger portion of its business mix in future
periods.
-9-
PC CONNECTION, INC.
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED
- -------------------------------------------------------------------------------
GENERAL - CONT'D.
- -------------------------------------------------------------------------------
The direct marketing of personal computers and related products is highly
competitive. In addition to other direct marketers and manufacturers who sell
direct, such as Dell Computer Corporation and Gateway 2000, Inc., manufacturers
of PCs sold by the Company, such as Compaq and IBM, have also announced varying
plans to sell PCs directly to end users. However, both Compaq and IBM have
announced plans to increase their reliance on reseller arrangements with direct
marketers such as the Company as part of their own marketing programs designed
to compete more effectively with Dell and Gateway. The Company currently
believes that direct sales by Compaq and IBM will not have a significant adverse
effect upon the Company's net sales.
Most product manufacturers provide the Company with cooperative advertising
support in exchange for product coverage in the Company's catalogs. Although the
level of cooperative advertising support available to the Company from certain
manufacturers has declined, and may decline further in the future, the overall
level of cooperative advertising revenues has continued to increase consistent
with the Company's increased levels of spending for catalog and other
advertising programs. The Company believes that the overall levels of
cooperative advertising revenues available over the next twelve months will be
consistent with the Company's planned advertising programs.
In connection with the planned relocation of its headquarters facility in the
fall of 1998, the Company will incur certain one-time moving and other costs,
not expected to exceed $500,000, which will be charged to operating costs. In
connection with the Offering of the Company's Common Stock that closed in March
1998, the Company reported certain non-recurring, non-cash items in the six
months ended June 30, 1998. See "Initial Public Offering" and "Pro Forma and
Other Adjustments" below.
INITIAL PUBLIC OFFERING
On March 6, 1998, the Company closed on its Offering of 3,593,750 shares
(including 468,750 shares issued upon the exercise of an underwriters'
overallotment option) of Common Stock at an offering price of $17.50 per share.
Net proceeds to the Company after deducting expenses of the Offering were
approximately $57.3 million. See "Liquidity and Capital Resources".
PRO FORMA AND OTHER ADJUSTMENTS
The pro forma income statements presented below have been determined by applying
the following pro forma and other adjustments to the Company's historical income
statements for all periods prior to the quarter ended June 30, 1998:
Pro Forma Adjustments
- ---------------------
1. Elimination of stockholder/officer compensation in excess of aggregate
established 1998 base salaries ($150,000) for all periods prior to the
quarter ended June 30, 1998. These amounts generally represented Company-
related S-Corporation tax obligations payable by the stockholder/officers
for periods prior to March 6, 1998. Effective upon the closing of the
Offering,these stockholder/officers are being paid annual base salaries
aggregating $600,000.
2. Elimination of the historical income tax benefit/provision for all periods
prior to the quarter ended June 30, 1998 (including elimination of the $4.2
million income tax benefit related to the establishment of additional
deferred tax assets for future tax deductions resulting from the termination
of the Company's Subchapter S Corporation status) and establishment of a
provision for federal and state income taxes that would have been payable by
the Company if taxed under Subchapter C of the Code, assuming an effective
tax rate of 39% after an adjustment for stockholder/officer compensation
described in Paragraph 1 above.
Other Adjustments
- -----------------
1. Elimination for the six months ended June 30, 1998 of an $870,000 one-time
charge for stock option compensation expense relating to the acceleration in
the vesting period of certain of the Company's stock options from seven years
to four years in connection with the Offering.
-10-
PC CONNECTION, INC.
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED
- --------------------------------------------------------------------------------
GENERAL - CONT'D.
- --------------------------------------------------------------------------------
INCOME STATEMENTS, AS ADJUSTED THREE MONTHS ENDED JUNE 30,
(Amounts in thousands, % OF % OF
except per share data) 1998 NET SALES 1997 NET SALES
(PRO FORMA)
Net sales $ 174,349 100.00% $121,500 100.00%
Cost of sales 151,768 87.05 104,723 86.19
-------- ------ -------- -------
GROSS PROFIT 22,581 12.95 16,777 13.81
Selling, general and
administrative expenses 16,042 9.20 12,791 10.53
Additional stockholder/
officer compensation - - 30 .02
-------- ------- ------- ------
Income from operations 6,539 3.75 3,956 3.26
Interest expense (51) (.03) (299) (.25)
Other, net 213 .12 (11) (.01)
Income taxes (2,613) (1.50) (1,422) (1.17)
-------- ------- -------- ------
NET INCOME $4,088 2.34% $ 2,224 1.83%
======= ====== ======= ======
Weighted average shares outstanding:
Basic 15,414 13,861
======= =======
Diluted 15,938 14,124
======= =======
Earnings per share:
Basic $ .27 $ .16
======= =======
Diluted $ .26 $ .16
======= =======
INCOME STATEMENTS, AS ADJUSTED SIX MONTHS ENDED JUNE 30,
(Amounts in thousands, % OF % OF
except per share data) 1998 NET SALES 1997 NET SALES
(PRO FORMA) (PRO FORMA)
Net sales $ 342,992 100.00% $244,324 100.00%
Cost of sales 298,462 87.02 210,168 86.02
-------- ----- ------- ------
GROSS PROFIT 44,530 12.98 34,156 13.98
Selling, general and
administrative expenses 32,030 9.34 26,428 10.82
Additional stockholder/
officer compensation - - 60 .02
------- ------ ------- -------
Income from operations 12,500 3.64 7,668 3.14
Interest expense (257) (.07) (664) (.27)
Other, net 299 .09 (8) -
Income taxes (4,891) (1.43) (2,728) (1.12)
-------- ------ ------- ------
NET INCOME $ 7,651 2.23% $ 4,268 1.75%
======== ====== ======= ======
Weighted average shares outstanding:
Basic 14,829 13,861
======= =======
Diluted 15,371 14,089
======= =======
Earnings per share:
Basic $ .52 $ .31
======== =======
Diluted $ .50 $ .30
======== =======
-11-
PC CONNECTION, INC.
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH THE THREE MONTHS
AND SIX MONTHS ENDED JUNE 30, 1997
The following table sets forth the Company's percentage of net sales (in
dollars) of computer systems/memory, peripherals, software, and networking and
communications products during the three month and six month periods ended June
30, 1998 and 1997:
- -------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1998 1997 1998 1997
- -------------------------------------------------------------------------------
Computer Systems/Memory 42.4% 39.3% 41.8% 39.3%
Peripherals 34.0 35.9 34.7 35.4
Software 14.6 17.0 14.9 17.4
Networking and Communications 9.0 7.8 8.6 7.9
----- ----- ----- -----
Total 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
NET SALES increased $52.8 million, or 43.5%, to $174.3 million for the quarter
ended June 30, 1998 from $121.5 million for the comparable period in 1997.
Similarly, net sales for the six months ended June 30, 1998 increased $98.7
million, or 40.4%, to $343.0 million from $244.3 million for the comparable six
month period in 1997. Growth in net sales was primarily attributable to the
continued expansion and increased productivity of the Company's outbound
telemarketing group, continued growth in average order size, an increase in the
number of catalog mailings and growth in the Company's internet sales. Outbound
sales increased $41.8 million, or 76.6%, to $96.4 million in the three months
ended June 30, 1998 from $54.6 million for the three months ended June 30, 1997.
Inbound and on-line internet sales increased $11.0 million, or 16.4%, to $77.9
million in the three months ended June 30, 1998 from $66.9 million for the three
months ended June 30, 1997. Outbound sales for the six months ended June 30,
1998 increased $74.7 million, or 69.8%, to $181.7 million from $107.0 million
for the comparable period in 1997, and inbound and online internet sales for the
six months ended June 30, 1998 increased $24.0 million, or 17.5%, to $161.3
million from $137.3 million in the comparable period in 1997. System/memory
sales increased to 42.4% and 41.8% of net sales for the three months and six
months ended June 30, 1998, respectively, from 39.3% and 39.3% for the
respective comparable periods in 1997.
GROSS PROFIT increased $5.8 million, or 34.5%, to $22.6 million for the quarter
ended June 30, 1998 from $16.8 million for the comparable quarter in 1997. Gross
profit increased for the six months ended June 30, 1998 by $10.3 million, or
30.1% to $44.5 million from $34.2 million in the comparable period in 1997. The
increase in gross profit dollars was primarily attributable to the increase in
net sales described above. Gross profit margin decreased from 13.8% and 14.0% in
the three months and six months ended June 30, 1997, respectively, to 13.0% each
for the three months and six months ended June 30, 1998 due primarily to growth
in lower margin system sales, and growth in outbound telemarketing sales, which
generally carry lower margins. Declines in average selling prices ("ASPs") in
computer systems moderated in the second quarter as newer products increased as
a percentage of units sold, and end of life cycle products declined in
significance. The Company's gross profit margin as a percentage of net sales may
vary on a quarterly basis based upon vendor support programs, product mix,
pricing strategies, market conditions and other factors.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES increased $3.2 million, or 25.0%,
to $16.0 million for the quarter ended June 30, 1998 from $12.8 million for the
comparable quarter in 1997, but decreased as a percentage of sales from 10.5%
for the three months ended June 30, 1997 to 9.2% for the three months ended June
30, 1998. Such expenses for the six months ended June 30, 1998 increased by $6.5
million, or 24.6%, to $32.9 million from $26.4 million in the six months ended
June 30, 1997, but decreased as a percentage of sales from 10.8% for the six
months ended June 30, 1997 period to 9.6% in the comparable period in 1998. The
increase in expenses was primarily attributable to a $870,000 one-time charge
for stock option compensation expense relating to the acceleration in the
vesting period of certain of the Company's stock options from seven to four
years in connection with the Offering and increases in volume-sensitive costs
such as sales personnel and credit card fees. The decrease as a percentage of
net sales was primarily attributable to improved expense control and the
leveraging of selling, general and administrative expenses over a larger sales
base.
-12-
PC CONNECTION, INC.
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS - GENERAL - CONT'D.
- --------------------------------------------------------------------------------
Selling, general and administrative expenses, excluding the one-time charge for
stock option compensation expense, increased $5.6 million, or 21.2%, to $32.0
million for the six months ended June 30, 1998 from $26.4 million for the
comparable period in 1997, but decreased as a percentage of sales from 10.8% for
the six months ended June 30, 1997 to 9.3% for the comparable period in 1998.
ADDITIONAL STOCKHOLDER/OFFICER COMPENSATION was $0.0 million and $3.0 million
for the three months and six months ended June 30, 1998, respectively, compared
to $2.4 million and $5.4 million for the respective comparable periods in 1997.
These amounts generally represented Company-related federal income tax
obligations payable by the stockholder/officers for periods prior to March 6,
1998. Effective upon closing of the Offering, these stockholder/officers are
being paid annual base salaries aggregating $600,000.
INCOME FROM OPERATIONS increased $5.5 million, or 550.0%, to $6.5 million for
the quarter ended June 30, 1998, from $1.0 million for the quarter ended June
30, 1997. Income from operations as a percentage of sales increased from 0.8% in
the three months ended June 30, 1997 to 3.8% in the comparable period in 1998
for the reasons discussed above. Similarly, income from operations for the six
months ended June 30, 1998 increased $7.0 million, or 304.3%, to $9.3 million
from $2.3 million in the comparable 1997 period, and income from operations as a
percentage of sale increased from 0.9% for the six months ended June 30, 1997 to
2.7% for the comparable period in 1998.
Income from operations, excluding both the one-time charge for stock option
compensation expense ($870,000) and the additional stockholder/officer
compensation ($2.4 million, $3.0 million and $5.4 million for the six months
ended June 30, 1998, and the three months and six months ended June 30, 1997,
respectively) increased by $2.5 million, or 62.5%, to $6.5 million for the
quarter ended June 30, 1998, from $4.0 million the quarter ended June 30, 1997,
and increased by $4.8 million, or 62.3%, to $12.5 million for the six months
ended June 30, 1998 from $7.7 million for the comparable period in 1997. Such
income from operations as a percentage of net sales increased from 3.3% and 3.1%
for the respective three-month and six-month periods ended June 30, 1997 to 3.8%
and 3.6% for the respective comparable periods in 1998.
INTEREST EXPENSE decreased $248,000, or 82.9%, to $51,000 for the quarter ended
June 30, 1998 from $299,000 for the comparable quarter in 1997. Similarly,
interest expense for the six months ended June 30, 1998, decreased $407,000, or
61.3%, to $257,000 from $664,000 for the comparable period in 1997. This
decrease in interest expense was due primarily to lower average outstanding
borrowings generally in the six months ended June 30, 1998, compared to the
comparable period in 1997, and particularly, to the full payment of all
outstanding bank borrowings at the close of the Offering.
INCOME TAXES for three months ended June 30, 1998 was a provision of $2.6
million compared to a provision of $134,000 for the comparable quarter in 1997.
Income taxes for the six months ended June 30, 1998 was a benefit of $1.2
million, compared to a provision of $264,000 for the comparable period in 1997.
Effective with the consummation of the Offering, the Company's S Corporation
election was automatically terminated and the Company recorded a tax benefit of
approximately $4.2 million relating to the establishment of additional net
deferred tax assets for future tax deductions resulting from the termination of
the S Corporation election. In addition, for the period subsequent to March 6,
1998, the Company recorded income tax expense at the Company's effective tax
rate (39%). For periods prior to the termination of the S Corporation election,
the Company was only required to pay New Hampshire Business Profits Tax.
NET INCOME for the quarter ended June 30, 1998 increased $3.5 million, or
627.4%, to $4.1 million from $562,000 for the comparable quarter in 1997,
principally as a result of the increases in operating income as described above.
Net income for the six months ended June 30, 1998 increased $9.1 million, or
650.0%, to $10.5 million from $1.4 million for the comparable period in 1997,
principally as a result of the $4.2 million income tax benefit and increase in
operating income as described above.
-13-
PC CONNECTION, INC.
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS - GENERAL - CONT'D.
- --------------------------------------------------------------------------------
PRO FORMA NET INCOME, calculated for periods prior to the quarter ended June 30,
1998, is determined by (i) eliminating stockholder/officer compensation in
excess of quarterly base salaries ($150,000) and (ii) by eliminating the actual
income tax provision/benefit and adding a provision for federal and state income
taxes that would have been payable by the Company under Subchapter C of the
Internal Revenue Code ("Code"). Net income for the quarter ended June 30, 1998
was $4.1 million, or $.26 per share, compared to pro forma net income for the
quarter ended June 30, 1997 of $2.2 million, or $.16 per share. Pro forma net
income for the six months ended June 30, 1998 was $7.1 million, or $.46 per
share, compared to $4.3 million, or $.30 per share for the comparable period in
1997.
Excluding a one-time charge for the acceleration of certain stock option
compensation expense (described above), the Company would have reported pro
forma net income of $7.7 million, or $.50 per share, for the six months ended
June 30, 1998, compared to pro forma net income of $4.3 million, or $.30 per
share, for the comparable period in 1997, an increase of $.20 per share, or 67%.
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------------------------------------------------------
The Company has historically financed its operations and capital expenditures
through cash flow from operations and bank borrowings. In March 1998, the
Company completed an initial public offering and used the net proceeds of the
Offering, aggregating $57.3 million, to repay all outstanding bank indebtedness
of $12.9 million and to pay a dividend of $33.0 million to its stockholders of
record as of February 27, 1998, equal to substantially all previously taxed, but
undistributed, S Corporation earnings of the Company. The remaining net proceeds
of $11.4 million have been invested in short-term investment securities and are
being used for general corporate purposes. The Company believes that funds
generated from operations, together with the net proceeds from the Offering and
available credit under its bank line of credit, will be sufficient to finance
its working capital and capital expenditure requirements at least through 1998.
Net cash provided by operating activities was $34.5 million in the six months
ended June 30, 1998, as compared to $7.1 million provided in the comparable
period in 1997. The primary factors historically affecting cash flows from
operations are the Company's net income and changes in the levels of accounts
receivable, inventories and accounts payable. Historically, inventories and
accounts payable have increased as a result of the sales growth of the Company.
Accounts receivable have increased primarily due to an increase in open account
purchases by commercial customers resulting from the Company's continued efforts
to increase its sales to such customers, offset in part by a higher rate of
increase in accounts receivable allowances for sales returns and doubtful
accounts related to the growth in sales and the disproportionately higher level
and complexity of settling claims with vendors.
Capital expenditures were $3.6 million in the six months ended June 30, 1998, as
compared to $2.4 million in the comparable period in 1997. The majority of the
capital expenditures for the first half of 1998 and 1997 relate to computer
hardware and software for the Company's management information systems. The
Company has been in the process over the last year of upgrading its order
management and fulfillment systems to new hardware and software. The conversion
is expected to be completed during the third quarter of 1998. Total additional
expenditures related to the management information systems for the year ending
December 31, 1998 are estimated at $1.0 million.
In addition, in connection with the planned relocation of its headquarters
facility in the fall of 1998, the Company expects to spend approximately $2.5
million in total for leasehold improvements and for furniture and equipment.
-14-
PC CONNECTION, INC.
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-CONTINUED
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES - CONT'D.
- --------------------------------------------------------------------------------
As of June 30, 1998, the Company had a credit agreement with a bank providing
for short-term borrowings equal to the lesser of $45 million or an amount
determined by a formula based on accounts receivable and inventory balances.
Such borrowings are collateralized by the Company's accounts receivable and
inventories (other than inventories pledged to secure trade credit arrangements)
and bear interest at the prime rate (8.5% at June 30, 1998). The credit
agreement includes various customary financial and operating covenants,
including restrictions on the payment of dividends, except for dividends to
stockholders in respect of income taxes, none of which the Company believes
significantly restricts its operations. No borrowings were outstanding at June
30, 1998. The Company had $65.1 million in outstanding accounts payable at June
30, 1998, including $10.5 million for in-transit inventory from vendors not yet
received by the Company but for which title passed to the Company upon shipment.
Such accounts are generally paid within 30 days of incurrence and will be
financed by cash flows from operations or short-term borrowings under the line
of credit.
- --------------------------------------------------------------------------------
INFLATION
- --------------------------------------------------------------------------------
The Company has historically offset any inflation in operating costs by a
combination of increased productivity and price increases, where appropriate.
The Company does not expect inflation to have a significant impact on its
business in the future.
- --------------------------------------------------------------------------------
YEAR 2000 COMPLIANT INFORMATION SYSTEMS
- --------------------------------------------------------------------------------
The change in date from 1999 to 2000 poses potential problems for many computer
and electro-mechanical systems around the world. Some of the Company's systems
could be affected by this problem which could have a material adverse effect on
the Company's business, financial condition and results of operations.
In order to minimize any potential disruption to the Company's business, the
Company has an active, on-going program to evaluate its systems and take
corrective action prior to the millennium change. A full-time senior manager is
responsible for managing the Year 2000 Project, which is comprised of five
phases: Awareness, Assessment, Renovation, Validation and Implementation. For
each system that is determined to be non-compliant, the Company will take one of
the following three courses of action to achieve date compliance: (i) renovate
(convert) the current system; (ii) replace the current system with a new date
compliant system; or (iii) retire the current system because it no longer
serves a valid business need.
The Company is investigating the extent to which its systems may be affected and
communicating to all of its system vendors concerning timely and completed
remedies for those systems requiring modification. The Company currently
believes it will be able to modify or replace any affected systems in time to
minimize any detrimental effect on operations. While it is currently not
possible to give an accurate estimate of the cost of this work, the Company
expects that such costs will not be material to the Company's results of
operations. System maintenance or software modification costs will be expensed
as incurred, while the costs of new software (such as the new order management
and fulfillment software) will be capitalized and amortized over the software's
expected useful life.
The Company is also communicating with all third-parties on which it relies to
assess their progress in evaluating their systems and implementing appropriate
corrective measures. Furthermore, the Company is actively encouraging its
customers to undertake their own Year 2000 Compliance projects in order to
insure the continued viability of the Company's commercial business pursuits.
The Company has been taking, and will continue to pursue, all reasonably
necessary steps to protect its operations, assets and the interests of its
customers, shareholders, employees and community partners.
-15-
PC CONNECTION, INC.
PART I - FINANCIAL INFORMATION
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable for the Company until fiscal year ending December 31, 1998.
-16-
PC CONNECTION, INC.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
Not applicable
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5 - OTHER INFORMATION
Not applicable
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
--------
Exhibit
Number Description
------ -----------
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
-------------------
(i) None
-17-
PC CONNECTION, INC.
JUNE 30, 1998
SIGNATURES
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 thereunto duly authorized.
PC CONNECTION, INC.
August 7, 1998 By: /s/
-----------------------------------
Wayne L. Wilson
President and Chief Operating Officer
August 7, 1998 By: /s/
--------------------------------------
Mark A. Gavin
Vice President of Finance
and Chief Financial Officer
-18-
5
1,000
6-MOS
DEC-31-1998
JAN-01-1998
JUN-30-1998
22,998
0
40,834
6,337
58,885
123,685
30,262
18,937
135,455
76,165
0
0
0
154
59,136
135,455
174,349
174,349
151,768
151,768
(213)
523
51
6,701
2,613
4,088
0
0
0
4,088
.27
.26
