UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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) March 8, 2005
PC Connection, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
0-23827 | 02-0513618 | |
(Commission File Number) | (IRS Employer Identification No.) |
Rt. 101A, 730 Milford Road Merrimack, NH | 03054 | |
(Address of Principal Executive Offices) | (Zip Code) |
(603) 683-2000
(Registrants Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ | 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)) |
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Item 8.01 | Other Events and Required FD Disclosure |
On March 8, 2005, PC Connection, Inc., a Delaware corporation, is planning to participate in the Raymond James Annual Institutional Investors 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 below as an Exhibit.
Item 9.01 | Financial Statements and Exhibits |
(c) | Exhibits |
99.1 | Presentation for Raymond James Annual Institutional Investors Conference. |
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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: March 8, 2005 | REGISTRANT | |||||||
PC CONNECTION, INC. | ||||||||
By: |
/s/ JACK FERGUSON | |||||||
Jack Ferguson Treasurer and Interim Chief Financial Officer |
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EXHIBIT INDEX
Exhibit |
Description | |
99.1 | Presentation for Raymond James Annual Institutional Investors Conference. |
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Exhibit 99.1
RAYMOND JAMES
INSTITUTIONAL INVESTORS CONFERENCE
MARCH 8, 2005
Patricia Gallup, Chief Executive Officer
Stephen Baldridge, VP of Finance & Corporate Controller
SAFE HARBOR STATEMENT
Under the Private Securities Litigation Reform Act of 1955: 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 Companys 2004 Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission for the quarter ended September 30, 2004. More specifically, the statements in this release concerning the Companys outlook for 2005 and the statements concerning the Companys gross margin percentage, productivity, selling and administrative costs, and other statements of a non-historical basis (including statements regarding implementing strategies for future growth, the ability of the Company to improve sales productivity and increase its market share) 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 Companys distribution channel by vendors and customers, continuation of key vendor relationships and support programs and the ability of the Company to hire and retain qualified sales representatives and other essential personnel.
PC CONNECTION, INC.
Fortune 1000
Founded 1982
Employees 1,400
Exchange NASDAQ
Symbol PCCC
Shares Outstanding 25.1 Million
Float 8.0 Million
Market Capitalization $239 Million
2004 Sales $1.35 Billion
Total Book Value Per Share $6.62
Tangible Book Value Per Share $4.44
Closing Price 12/31/04 $9.52
BUSINESS OVERVIEW
A rapid response provider of information technology (IT) products and solutions
Operates through three sales subsidiaries
Relationship-based model with 591 sales representatives
Offering more than 100,000 brand-name products
Multiple vendor relationships
PC Connection,
A Widely Recognized Brand Name
Building Brand Awareness
Broad Product Selection
Major Vendor Partners
Organizational Structure & Business Segments
PC Connection, Inc.
(Parent Holding Company)
PC Connection Sales Corporation
(dba PC Connection®)
Small- and Medium-Sized Business Sales
Merrimack Services Corporation
(dba PC Connection Services)
Distribution
Sales Support & Services
Human Resources
Information Services
Finance Marketing
Administrative Services
Business Development
Product Management
Advertising
eCommerce
GovConnection, Inc.
Federal Government
State/Local Government
Education Sales & Support
MoreDirect, Inc.
Medium-to-Large Organization Sales
PC Connection Sales Corporation (SMB)
Focused on small- and medium-sized businesses (SMBs: 20-500 seats)
Utilize outbound telemarketing (415 reps), catalog, and Web site marketing
Differentiated by providing superior service and value to customers
2004 annual sales $802 million
GovConnection, Inc. (Public Sector)
Focused on Public Sector: Four distinct markets
Federal State and Local
K-12 Higher Ed
Utilize field sales, outbound telemarketing (107 reps), teaming, catalog, and Web site
Awarded new GSA Schedule
2004 annual sales $253 million
MoreDirect, Inc. (Large Account)
Focused on large customer segment (>500 seats)
Knowledgeable, high-level field sales account managers (69 reps) with 10-20 years experience in IT hardware
Aggregates inventories of leading wholesale distributors and manufacturers (virtual inventoryno warehousing or logistics) through e-procurement system
2004 annual sales $298 million
Pursuing Market Opportunities
Company Market Share (2)
Company Segments
Market (1) Opportunity
Small- and Medium-Sized Businesses $75 Billion 1.1%
Government & Education 40 Billion 0.6%
Large Corporate Accounts 85 Billion 0.4%
Total $200 Billion 0.7%
(1) IDC and PC Connection estimate
(2) PC Connection estimate
Growth Strategies Overview
Improve Sales Productivity
Increase Number of Sales Representatives
Continue Margin Rate Improvement
Expand Product and Service Offerings
Voice Over Internet Protocol (VOIP)
ServiceConnection
Pursue Strategic Initiatives
Improve Sales Productivity
($ amounts in thousands)
Average Productivity
12/31/04 Sales Reps Annual
Company Segments
Annual 2004
Target
Small- and Medium-Sized Businesses 415 $2,049 $2,500
Government & Education 107 2,365 3,200
Large Corporate Account 69 4,033 4,500
Total/Average 591 $2,365 $2,900
Annualized Sales Rep Productivity
(Amounts in thousands)
$4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0
0%
SMB
+12.4%
SLED
+28.1%
Large Account
(56.6%)
Federal
2003 2004
Increase Number of Sales Representatives
Enhance recruitment efforts at current call centers
Consider additional call centers
Expand the number of field reps in our Large Account and Public Sector segments
Investigate Virtual Call Centers for SMB segment
Strategic Initiatives
Internal
Monadnock
K2
Rapid Response Sales Support
External
ServiceConnection
Acquisition Opportunities
Financial Summary
Stephen Baldridge,
VP of Finance & Corporate Controller
Operating ResultsConsolidated
(Amounts in thousands except EPS) Q4 2004 Q4 2003 2004 2003
Net Sales $339,599 $358,376 $1,353,834 $1,312,891
Gross Profit 41,346 36,321 150,839 137,679
% of Net Sales 12.2% 10.1% 11.1% 10.5%
SG&A Expenses 36,576 33,108 131,514 124,824
% of Net Sales 10.8% 9.2% 9.7% 9.5%
Special Charges 1,649 1,532 5,232 1,929
Operating Income 3,121 1,681 14,093 10,926
% of Net Sales 0.9% 0.5% 1.0% 0.8%
Net Income $2,073 $730 $8,304 $5,888
% of Net Sales 0.6% 0.2% 0.6% 0.4%
EPS (GAAP) $0.08 $0.03 $0.33 $0.23
Product Mix 2004 vs. 2003
2004 % of Net Sales 2003 % of Net Sales
Notebooks & PDAs 20.4% 19.9%
Desktops/Servers 14.2% 14.7%
Storage Devices 8.2% 8.9%
Software 12.0% 11.0%
Net/Com Products 7.3% 7.9%
Printers & Printer Supplies 11.0% 11.4%
Video, Imaging, & Sound 12.2% 11.8%
Memory & System Enhancements 5.3% 5.7%
Accessories/Other 9.4% 8.7%
100.0% 100.0%
Net Sales by Segment
($ amounts in thousands)
Public Sector
Large Account
SMB
$400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 $52,632 $52,255 $178,640 $53,852 $66,359 $207,424
2003 2004
Q1 $75,023 $59,969 $186,576 $63,355 $77,942 $194,058
2003 2004
Q2 $103,596 $66,259 $179,565 $77,864 $77,458 $195,943
2003 2004
Q3 $89,371 $69,390 $199,615 $58,022 $76,699 $204,878
2003 2004
Q4
Gross Margin % of Sales
2004 (1) 2003
SMB 12.1% 11.2%
Public Sector 9.4% 8.2%
Large Account 10.2% 11.3%
Consolidated 11.1% 10.5%
(1) Includes increase of EITF Reclass: SMB +.44%, Public +.09%, & Consolidated +.27%
SG&A % of Sales
11.0% 10.0% 9.0% 8.0%
10.2%
FY 2002
9.5%
FY 2003
9.7%
FY 2004
(Includes EITF)
Note: SG&A rates exclude special charges; 2004 includes a .31% increase from the EITF reclassification
Operating Margin % of Sales
1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0%
1.0%
0.7%
2003 2004
Q1
0.8%
1.2%
2003 2004
Q2
1.1%
1.4%
2003 2004
Q3
0.5%
0.9%
2003 2004
Q4
Diluted Earnings Per Share
$0.18 $0.16 $0.14 $0.12 $0.10 $0.08 $0.06 $0.04 $0.02 $0.00 $0.06 $0.06 $0.07 $0.05
2003 2004
Q1 $0.07 $0.06 $0.11 $0.09
2003 2004
Q2 $0.09 $0.09 $0.16 $0.11
2003 2004
Q3 $0.07 $0.03 $0.12 $0.08
2003 2004
Q4
Additional Pro Forma (1) GAAP
(1) Pro forma EPS exclude special charges
A Reconciliation Between GAAP and Pro Forma Results
This information is being furnished so as to allow for a comparison of our operating results without special charges.
($ in thousands, except EPS) Q4 Total 2004 2003 2004 2003
GAAP Net Income: $2,073 $730 $8,304 $5,888
Special Charges (after tax):
GSA and Other 850 913 2,711 920
Workforce Reduction 172 7 533 247
Subtotal 1,022 920 3,244 1,167
Pro Forma Net Income $3,095 $1,650 $11,548 $7,055
GAAP Earnings Per Share: $0.08 $0.03 $0.33 $0.23
Special charges (after tax): 0.04 0.04 0.13 0.05
Pro Forma Earnings Per Share: $0.12 $0.07 $0.46 $0.28
Working Capital Metrics
2004 2003
Days Sales Outstanding 42 47
Inventory Turns 15 15
Cash Flow from Operations $13,318 $3,301
Debt/Capital Ratio 6.8% 7.4%
Financial Model
Two-Year Target Ranges
2001 2002 2003 2004
REVENUE GROWTH (17.6)% 0.4% 10.2% 3.1% 15% + (annual)
EPS GROWTH (75.4)% (56.7)% 76.9 % 43.5% 30% + (annual)
GROSS PROFIT MARGIN 11.1% 10.8% 10.5% 11.1% 11.3-11.8%
SG&A (1) 9.9% 10.2% 9.5% 9.7% 8.8%-9.3%
OPERATING MARGIN 1.0% 0.5% 0.8% 1.0% 2.0%-2.5%
INVENTORY TURNS 18X 22X 15X 15X 20-24X
DAYS SALES OUTSTANDING 53 49 47 42 36-40 Days
(1) Excludes special charges
we solve IT