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): December 10, 2003
PC CONNECTION, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
| 0-23827 (Commission File Number) |
02-0513618 (IRS Employer Identification No.) |
| Rt. 101A, 730 Milford Road, Merrimack, New Hampshire (Address of Principal Executive Offices) |
03054 (Zip Code) |
(603) 423-2000
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
| Item 5. | Other Events and Required FD Disclosure. |
On December 11, 2003, PC Connection, Inc., a Delaware corporation (“PCC”), is planning to participate in the Raymond James IT Supply Chain Conference, and will be discussing various aspects of its business. During the course of those discussions, certain limited financial information and other limited facts of its business will be presented to investors. This information is included in Item 7(c) below as an Exhibit.
| Item 7. | Financial Statements, Pro Forma Financial Information and Exhibits. |
| (c) | Exhibits. |
| 99.1 | Information for Investor Meetings. |
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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.
| Date: December 10, 2003 |
REGISTRANT
PC CONNECTION, INC. | |||||
| By: | /s/ Mark A. Gavin | |||||
| Mark A. Gavin Senior Vice President of Finance and Chief Financial Officer | ||||||
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EXHIBIT INDEX
| Exhibit Number |
Description | |
| 99.1 | Information for Investor Meetings. | |
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Exhibit 99.1
Exhibit 99.1
RAYMOND JAMES IT SUPPLY CHAIN CONFERENCE
December 11, 2003 Patricia Gallup, Chief Executive Officer Mark Gavin, Senior VP of Finance and CFO
2003 and the statements administrative costs Such risks and of the Company to hire and SAFE HARBOR STATEMENT This presentation 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, 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 other risks detailed under the caption “Factors That May Affect Future Results and Financial Condition” in the Company’s 2003 Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission for the quarter ended September 30, 2003. More specifically, the statements in this release concerning the Company’s outlook for the balance of concerning the Company’s gross margin percentage and selling and and other statements of a non-historical basis (including statements regarding implementing strategies for future growth, the ability of the Company to regain its model of profitable growth and the expected benefits of the Company’s electronic commerce strategy) are forward-looking statements that involve certain risks and uncertainties. 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 relationships and support programs and the ability retain qualified sales representatives and other essential personnel.
• Million Million Million Billion • 1982 1,400 NASDAQ PCCC 24.8 7.4 $217 $1.19 $6.30 $4.80 $8.75 INC. Share Share Per Per Value 11/30/03 Value –1000 Outstanding Capitalization : Book Price • CONNECTION, Sales Book • Fortune Founded Employees Exchange Symbol Shares Float Market 2002 Total Tangible Closing • PC ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
Business Overview Patricia Gallup, Chief Executive Officer
• products information solutions subsidiaries 580 brand-name of and sales with provider products three model relationships 100,000 • OVERVIEW than • response (IT) through representatives vendor more rapid technology Operates Relationship-based A sales Multiple Offering • BUSINESS _ _ _ _
• Inc. Medium-to-Large Sales MoreDirect, Organization Support Government & Sales State/Local Education • ¦ • & • Inc. • Inc. Government • STRUCTURE Company) GovConnection, Federal • Connection,Holding Services) • (Parent Services Services Services PC CorporationConnection Service Resources Development Management SEGMENTS Merrimack PC Distribution Customer Human Information Finance Marketing Administrative Business Product Advertising eCommerce • (dba ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ • ) • ® Medium-Sized Connection Sales • ConnectionCorporation and • ORGANIZATIONAL BUSINESS PC • PC (dba Small- Business • Sales ¦
• Award Year Torch Class the Computer of of list World Boston Management Bureau list Companies” PC Week companies the by Entrepreneur Business Ethics Service Magazine’s of Technology Excellence: Inc. growing Company Group Better Business 100 of Online by Winner National Principle-Centered the Business on Top Circle Best • 500-fastest Best User of for of for #7 • Ranked of Nine-Time Named Society Winner Award Holder Award Ranked “World’s BizRate Nation’s • Recognition · · · · · · & Awards
BUILDING ADDITIONAL BRANDS:
• Segment) information catalog solutions (SMB of medium-sized and marketer and telemarketing, marketing Corporation products small- (SMBs) direct on outbound website • Sales • Leading technology Focused businesses Utilize and • PC _ _
• service 390 superior –million 2003) $703 providing representatives 30, -by customers sales sales to value of September annual of Differentiated and Number (as 2002 • _
• into • Sector) separated telemarketing, • Ed • are 12 • – • (Public sectors: K Higher outbound Inc. customers market Local sales, website sector and field and • distinct Federal State • GovConnection, Public four Utilize catalog • _
• account in logistics) procurement sales experience wholesale or field leading hardware years of warehousing 20 no IT –customers high-level manufacturers – • Inc. 10 • efficient large with inventories and for hardware inventory MoreDirect, Provides system Knowledgeable, managers IT Aggregates distributors (virtual • _
• 79 million number customers – $249 -serial into sales 2003) tracking, directly representatives 30, annual asset data systems sales forma of September invoice pro of Provides and back-end Number (as 2002 • _
OFFERING CHOICE AND SUPERIOR SERVICE IS OUR COMPETITIVE ADVANTAGE
• BRANDS” • Hand Others) • “YOUR On • Data, • Manufacturers Partnerships Inventory Tech 1,400 of (Ingram, Over $50M Distribution • PRODUCTS _ _
• WAY” “YOUR –SUPPORT • Configuration Loading Tagging Management Services Custom Image Asset Rollout Custom • HARDWARE _ _ _ _
• DAY” facility a.m. “NEXT Airborne feet 3:00 – on square through Rate 200,000+ Shipping Fill Warehouse 99.5% • LOGISTICS _ _ _
Company Market Share 0.88% 0.61% 0.29% 0.58% (2) $703 294 249 $1,246 Pro Forma Net Sales 2002 (1) $80,000 48,000 85,000 $213,000 Market Opportunity PURSUING LARGE MARKET OPPORTUNITIES ($ in millions) and Medium-Sized IDC and PC Connection estimates The pro forma net sales assumes the acquisition of MoreDirect had taken place January 1, 2002 Company Segments Small- Businesses Government & Education Large Corporate Accounts (1) (2)
Strategies for Growth Patricia Gallup, Chief Executive Officer
• Technology and OVERVIEW Representatives Server Sales Internet of Margins of Enterprise STRATEGIES Productivity Number Power on Opportunities Sales the Product the Focus Improve Increase Improve Leverage Heighten Networking • GROWTH _ _ _ _
• Alliances OVERVIEW Offerings and Service High-Growth Acquisitions STRATEGIES and onSegments Product Focus Strategic Expand SharpenCustomer Pursue • GROWTH _ _
Target $3,000 3,500 4,000 $3,200 (1) $2,063 2,969 3,452 $2,434 Average Productivity Annual 2002 Sales Reps Annual 341 99 72 512 (1) 703,505 293,938 248,564 Net Sales 2002 $1,246,007 Pro Forma $ IMPROVE SALES PRODUCTIVITY and Medium-Sized Total/Average The pro forma information assumes the acquisition of MoreDirect had taken place
January 1, 2002 ($ in thousands) Company Segments Small- Businesses Government & Education Large Corporate Accounts (1)
IMPROVE TRAINING IN KEY AREAS
• desk vendors FOR employee’s key areas with the key at training in training training partnerships • CONCENTRATION skills • PROGRAMS Manager Certifications sales training OF interactive Continuing Account Technical Online Ongoing • AREAS TRAINING _ _ _ _
Q3 03 390 111 79 580 Q2 03 355 114 77 546 Q1 03 330 101 74 505 Q4 02 341 99 72 512 INCREASE THE NUMBER OF SALES REPRESENTATIVES SMB Public Sector Large Account Total
Sep- 03 Jun- 03 Mar- 03 Dec- 02 Sep- 02 Public Sector Account Managers Jun- 02 Mar- 02 Dec- 01 Sep- 01 SMB Account Managers Jun- 01 Mar- 01 ACCOUNT MANAGER TENURE (In Months) 45 40 35 30 25 20 15 10 Months # of
• as Connection offerings accessories products PC for with service MARGINS sales sales enterprise-class sales penetration add-on net value-added solution PRODUCT of of total on consumables sales of account third-party focus percent Enhancement and Increase a Increase and Greater • IMPROVE _ _ _
• (IBAs) Control Costs Pricing Customer Productivity Purchasing Systems Rate with Transaction Sales Purchasing Return Discounting 7 x Centralized Procurement ACCOUNTS 24 Account-Specific Integration Reduced Increased Lower Less • ? ? ? ? ? ? • BUSINESS INTERNET
Q3 03 Q2 03 Q1 03 % of Public Sector Sales Q4 02 New Web Site Rolled Out Q3 02 % of SMB Sales Q2 02 Q1 02 INTERNET BUSINESS ACCOUNT PROGRAM (Excluding MoreDirect) 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
• Cycle Enterprise to ENTERPRISE Sales Certifications Desktop ON Solution Services from Staff Center FOCUS Lifecycle Briefing Shifting Enterprise Technical IT Mix on Customer NETWORKING Focus Increase Complete Product • HEIGHTEN _ _ _ _ &
Account Profiling Assessment Solution Design Demand Generation Services ENTERPRISE SOLUTION SALES CYCLE Support & Maintenance Proposal Delivery
• training Clustering • & TCP certification & Linux+ NTP in Availability CERTIFICATIONS man-hours High Connectivity, 2003) Server+, Architect, Unix (May CCSE Network+, Technology 1,950 for MCPS CNA & NBX Core STAFF SAN Network Availability Protection & CCDA & Core, & ASE CSA CCSA CSE PSE invested NCP High Data MCSE A+ & Switching CNE • Master StorageWorks STAR CCNA, Solaris MetaFrame CSA, PSS FY02 HP HP HP: Veritas Veritas Microsoft Cisco Sun Checkpoint Citrix CompTIA: 3Com IBM: Nortel: Novell: TECHNICAL Connnection during ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ PC
• services Analysis business and Installation Support Owned Programs Migration • & (wiring) vs. solve Security LAN Architecture Consulting Management Compliance Management & SERVICES products Design Assessment Augmentation Plant License Deployed Licensing SAN Network Wireless IT LAN/WAN Storage Staff Cable Asset ¦ Site Image Installation customers Networking ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ Software ¦ ¦ ¦ ¦ technology ¦ ¦ helping of • LIFECYCLE on application Protection Contracts Disposition Refresh IT Support Virus Upgrades Asset focused the Rollouts Management Management Loading Protection is Management Installation Maintenance Augmentation through Configuration System Asset Logistics Desktop Image Managed Warranty Damage Leasing Obsolete Technology Staff • Connection Hardware ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ • COMPLETE PC problems
• PCC Reps Visits by Speaker
Experiences Paid Keynote Vendor Engineer and CENTER Customer Expenses as PCC for—Exec Demonstrations Vendor with • Events HQ • Used to Vendor Solution and PCC Sessions and for BRIEFING Customer Analyst from Planning • Environment PCC Studies • of Customers/Prospects Environment Recovery Lab Industry Lab Case Account Mgt • Training Top • Invite Feature Utilize Provide Initiate Storage Security Disaster SAN Messaging • CUSTOMER Working and Cornerstone Solutions • _
Enterprise/Networking 2002 Notebook & Desktop Systems 27% 31% 42% Other Enterprise/Networking Notebook & Desktop Systems 5% 1996 24% PRODUCT MIX SHIFTING FROM DESKTOP TO ENTERPRISE 71% Other
Acquire New Customers Strengthen Product Offerings Add Management Talent Immediately Accretive to Earnings and Operating Metrics Culture & Fit are Crucial Consolidating Industry Creates Opportunities Strategy Built on Experience & Discipline ? ? ? ? ? PURSUE STRATEGIC ACQUISITIONS ¦ ¦
Financial Summary Mark A. Gavin, Sr. VP of Finance and CFO
Large Account Public Sector SMB 2003 Q3 2002 2003 Q2 2002 2003 Q1 2002 NET SALES BY SEGMENT ($ in thousands) $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0
November 16.5% 8.9% 17.4% 12.6% (11.8)% 8.7% 2003 % Change Over Prior Year Month October 23.4% 28.4% 28.1% 28.3% 0.2% 19.5% Total Q4 2003 SALES TRENDS SMB Public Sector: Federal Sled Large Account Consolidated
2002 2003 563 ANNUALIZED 544 3rd Qtr 526 532 2nd Qtr 509 1st Qtr 514 SALES PRODUCTIVITY – ($ in thousands) $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 White boxes represent average reps
Q3 Q2 2003 Q1 Q4 Q3 2002 Q2 Q1 ACTIVE CUSTOMERS 490,000 480,000 470,000 460,000 450,000 440,000 430,000 420,000
% Change 26.5% 7.5% (1.6)% (30.4)% 6.3% 5.9% 11.3% 9.2% (9.7)% 2.5% 2002 % of Net Sales 16.9% 13.6% 9.3% 15.8% 7.7% 11.0% 10.8% 5.3% 9.6% 100.0% 2003 vs. 2002 2003 % of Net Sales 20.9% 14.2% 8.9% 10.7% 8.0% 11.4% 11.7% 5.7% 8.5% 100.0% Q3 PRODUCT MIX – Notebooks & PDAs Desktops/Servers Storage Devices Software Net/Com Products Printers & Printer Supplies Video, Imaging & Sound Memory & System Enhancements Accessories/Other
Q2 2003 10.74% 7.89% 11.68% 10.25% Q3 2003 11.24% 7.96% 11.31% 10.28% GROSS MARGINS AS A % OF SALES SMB Public Sector Large Account Consolidated
2002 2003 Q3 Q2 Q1 S,G&A AS A % OF NET SALES 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Excludes special charges
2002 2003 Q3 Q2 Q1 OPERATING MARGINS AS A % OF NET SALES 1.50% 1.00% 0.50% 0.00% -0.50% -1.00% -1.50%
2002 2003 Q3 Q2 Q1 DILUTED EARNINGS PER SHARE $0.10 $0.08 $0.06 $0.04 $0.02 $0.00 -$0.02 -$0.04 -$0.06 -$0.08 -$0.10
Q3 2002 50 24 Q3 2003 48 19 ASSET UTILIZATION DSO Inventory Turns
11.5% 9.0% 2.5% 28X 43 Days TARGET RANGES 15% + 30% + 8.5%—2.0%—25 –TWO-YEAR 11.0 – 40 –.5% 2002—(57.0)% 10.8% 10.2% 22X 49 2001 (18.0)% (75.0)% 11.1% 9.9% 1.0% 18X 53 2000 33.0% 30.0% 12.2% 8.6% 3.6% 18X 50 1999 44.0% 44.0% 12.0% 8.5% 3.5% 14X 58 1998 33.0% 29.0% 12.4% 9.1% 3.0% 10X 53 FINANCIAL MODEL REVENUE GROWTH GROSS PROFIT MARGIN (1) Excluded restructuring costs and other special charges EPS GROWTH SG&A OPERATING MARGIN INVENTORY TURNS DAYS SALES OUTSTANDING (DSO) (1)
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