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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): May 1, 2008

PC Connection, Inc.

(Exact name of registrant as specified in charter)

Delaware

0-23827

02-0513618

(State or other juris-

diction of incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)



Rt. 101A, 730 Milford Road

Merrimack, NH

03054

(Address of principal executive offices)

(Zip Code)

 
Registrant’s telephone number, including area code: (603) 683-2000

N/A

(Former name or former address, if changed since last report)


⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.     Results of Operations and Financial Condition

On May 1, 2008, PC Connection, Inc. announced its financial results for the quarter ended March 31, 2008. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

The information in this Form 8-K (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.



Item 9.01.     Financial Statements and Exhibits

  (d) Exhibits
 
The following exhibit relating to Item 2.02 shall be deemed to be furnished, and not filed:
 
99.1 Press Release issued by PC Connection, Inc. on May 1, 2008.

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:

May 1, 2008

PC CONNECTION, INC.

 

 

 

By:

/s/ Jack Ferguson

Jack Ferguson

Executive Vice President, Treasurer, and

Chief Financial Officer

EXHIBIT INDEX

Exhibit No.

Description

 
99.1

Press release issued by PC Connection, Inc. on May 1, 2008.

Exhibit 99.1

PC Connection, Inc. Reports First Quarter Results

Company Announces Record Revenue and Continued Growth in Earnings

FIRST QUARTER HIGHLIGHTS:

MERRIMACK, N.H.--(BUSINESS WIRE)--PC Connection, Inc. (NASDAQ: PCCC), a leading direct marketer of information technology (IT) products and services, today announced results for the quarter ended March 31, 2008. Net sales for the three months ended March 31, 2008 increased by $25.5 million, or 6.4%, to $423.7 million from $398.2 million for the three months ended March 31, 2007. Net income for the quarter increased by $1.4 million to $4.8 million, or $.18 per share, compared to $3.4 million, or $.13 per share, for the corresponding prior year quarter.

“We are pleased with the Company’s overall performance during the first quarter of 2008, especially in light of this challenging market,” said Patricia Gallup, Chairman and Chief Executive Officer. “The PC Connection team delivered another quarter of record sales, and achieved significant increases in both operating income and earnings per share, largely due to our sales growth and our success in managing overall operating costs.”

Quarterly Sales Growth By Business Segment:

Quarterly Sales Growth by Product Mix:

Gross profit dollars increased by $2.8 million, or 5.7%, in the first quarter of 2008 from the corresponding period a year ago primarily due to larger revenues in 2008. Gross profit margin, as a percentage of net sales, was down 10 basis-points to 12.4% in the first quarter of 2008 compared to the first quarter of 2007, primarily due to lower agency fee revenues in 2008 which are recorded on a net basis.

Overall annualized sales productivity increased 5% in the first quarter of 2008 compared to the first quarter of 2007. Sales productivity in our Large Account segment increased 16% in the first quarter of 2008 compared to the first quarter of 2007. Sales productivity in our Public Sector segment increased 17% year over year primarily due to increased Federal contract sales in 2008. For our SMB segment, productivity was level year over year. On a consolidated basis, the total number of sales representatives was 698 at March 31, 2008, compared to 675 at March 31, 2007 and 692 at December 31, 2007.

Total selling, general and administrative expenses (“SG&A”) for the quarter increased year over year by $1.2 million, or 2.7%, but decreased as a percentage of net sales to 10.7% for the first quarter of 2008 from 11.1% for the first quarter of 2007. The year-over-year dollar increase was primarily attributable to the incremental variable compensation associated with higher revenues and gross profits. Improved leverage of our cost structure decreased our SG&A expenses as a percentage of net sales in Q1 2008 compared to Q1 2007.

Ms. Gallup concluded, "The investments we are making to increase sales and improve efficiencies are producing positive results. Our first quarter performance reflects a solid team effort to run our business more effectively while continuing to offer the best customer service in our marketplace. We believe we have the right strategies, resources, and talent in place to continue to improve our operating performance and enhance long-term shareholder value."

About PC Connection, Inc.

PC Connection, Inc., a Fortune 1000 company, has three 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. Investors and media can find more information about PC Connection, Inc. at http://ir.pcconnection.com.

PC Connection Sales Corporation (1-800-800-5555), the original business of PC Connection, Inc. serving the small- and medium-sized business sector (SMB), is a rapid-response provider of information technology (IT) products and services. It offers more than 150,000 brand-name products through its staff of technically trained sales account managers and catalog telesales representatives, catalogs, and publications, and its website at www.pcconnection.com. The subsidiary serves the Apple/Macintosh community through its MacConnection division (1-800-800-2222), which also publishes specialized catalogs and is online at www.macconnection.com.

MoreDirect, Inc. (561-237-3300), www.moredirect.com, provides corporate technology buyers with a comprehensive web-based e-procurement solution and in-depth IT supply-chain expertise, serving as a one-stop source by aggregating more than 300,000 products from the inventories of leading IT wholesale distributors and manufacturers. MoreDirect’s TRAXX™ system is a seamless end-to-end interface that empowers clients to electronically source, evaluate, compare prices, and track related technology product purchases in real-time.

GovConnection, Inc. (1-800-800-0019) is a provider of IT products and services to federal, state, and local government agencies and educational institutions through specialized account managers, catalogs, and publications, and online at www.govconnection.com.

pccc-g

“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, 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 hire and retain essential personnel, and other risks that could cause actual results to differ materially from these 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, 2007. More specifically, the statements in this release concerning the Company’s outlook for 2008 and the statements concerning the Company’s gross margin percentage, productivity, and selling and administrative costs and other statements of a non-historical basis (including statements regarding implementing strategies for future growth and the ability of the Company to improve sales productivity) 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 and the ability of the Company to hire and retain qualified sales representatives and other essential personnel. The Company assumes no obligation to update the information in this press release or revise any forward-looking statements, whether as a result of any new information, future events, or otherwise.

CONSOLIDATED SELECTED FINANCIAL HIGHLIGHTS

At or for the Three Months Ended March 31,     2008       2007  
(Dollars and shares in thousands, except operating data, price/earnings ratio, and per share data)    

 

 

 

 

       

% of Net Sales

   

% of Net Sales

%
Change

 
Operating Data:
Net sales $ 423,724 $ 398,180 6 %
Diluted earnings per share $ .18 $ .13 38 %
 
Gross profit margin 12.4 % 12.5 %
Operating margin 1.7 1.4
Return on equity (1) 8.5 6.8
 
Catalogs distributed 3,059,000 3,638,000 (16 %)
Orders entered (2) 377,500 384,000 (2 %)
Average order size (2) $ 1,267 $ 1,190 6 %
 
Inventory turns (1) 21 21
Days sales outstanding 44 42
 
 
Product Mix:
Notebooks & PDAs $ 64,101 15 % $ 73,643 19 % (13 %)
Desktops/Servers 58,409 14 57,528 14 2
Storage Devices 42,562 10 34,808 9 22
Software 56,146 13 48,286 12 16
Net/Com Products 35,794 8 29,819 7 20
Printers & Printer Supplies 40,839 10 41,653 11 (2 )
Video, Imaging & Sound 62,291 15 48,101 12 30
Memory & System Enhancements 15,094 4 19,949 5 (24 )
Accessories/Other   48,488   11     44,393   11   9
$ 423,724   100 % $ 398,180   100 % 6 %
 
 
Net Sales of Enterprise Server and Networking Products (included in the above Product Mix):
 
$ 143,344   34 % $ 122,832   31 % 17 %
 
 
Stock Performance Indicators:
Actual shares outstanding 26,803 26,802
Total book value per share $ 8.52 $ 7.59
Tangible book value per share $ 6.29 $ 5.31
Closing price $ 7.92 $ 14.30
Market capitalization $ 212,280 $ 383,269
Trailing price/earnings ratio (3) 9 24
 
(1) Annualized
(2) Does not reflect cancellations or returns
(3) Earnings is based on the last four quarters

SELECTED SEGMENT INFORMATION
For the Three Months Ended March 31,       2008       2007  
      Net     Gross Net     Gross
(Dollars in thousands)       Sales     Margin (%) Sales     Margin (%)
 
PC Connection Sales Corporation (SMB) $ 240,149 13.9 % $ 233,933 13.5 %
MoreDirect (Large Account) 117,208 10.8 110,315 10.8
GovConnection (Public Sector)   66,367 10.2     53,932 11.8  
Total $ 423,724 12.4 % $ 398,180 12.5 %
CONSOLIDATED INCOME STATEMENTS
Three Months Ended March 31,   2008   2007
(Amounts in thousands, except per share data)   Amount   % of Net Sales   Amount   % of Net Sales
     
Net sales $ 423,724 100.0 % $ 398,180 100.0 %
Cost of sales   370,980   87.6     348,265   87.5  
Gross Profit 52,744 12.4 49,915 12.5
 
Selling, general and administrative expenses   45,393   10.7     44,193   11.1  
Income From Operations 7,351 1.7 5,722 1.4
 
Interest expense (162 ) - (208 ) (0.1 )
Other, net 159 - 201 0.1
Income tax provision   (2,574 ) (0.6 )   (2,330 ) (0.5 )
Net Income $ 4,774   1.1 % $ 3,385   0.9 %
 
 
Weighted average common shares outstanding:
Basic   26,860     26,680  
Diluted   26,974     27,005  
Earnings per common share:
Basic $ 0.18   $ 0.13  
Diluted $ 0.18   $ 0.13  

CONSOLIDATED BALANCE SHEETS   March 31,       December 31,
(Amounts in thousands)     2008           2007  
 
ASSETS
 
Current Assets:
Cash and cash equivalents $ 20,488 $ 13,741
Accounts receivable, net 178,473 202,216
Inventories–merchandise 65,670 76,090
Deferred income taxes 2,880 2,858
Income taxes receivable 2,010 345
Prepaid expenses and other current assets   3,735     4,322  
Total current assets 273,256 299,572
Property and equipment, net 22,807 20,831
Goodwill 56,867 56,867
Other intangibles, net 3,024 3,291
Other assets   308     318  
Total Assets $ 356,262   $ 380,879  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current Liabilities:
Current maturities of capital lease obligation to affiliate $ 571 $ 527
Accounts payable 86,413 111,140
Accrued expenses and other liabilities 19,428 20,557
Accrued payroll   6,959     10,816  
Total current liabilities 113,371 143,040
Capital lease obligation to affiliate, less current maturities 4,141 4,309
Deferred income taxes 6,883 5,436
Other liabilities   3,486     3,784  
Total Liabilities   127,881     156,569  
Stockholders’ Equity:
Common stock 273 273
Additional paid-in capital 94,368 94,132
Retained earnings 136,744 131,970
Treasury stock at cost   (3,004 )   (2,065 )
Total Stockholders’ Equity   228,381     224,310  
Total Liabilities and Stockholders’ Equity $ 356,262   $ 380,879  
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
Three months ended March 31, 2008 (Amounts in thousands)
 

Common Stock

 

Additional
Paid-In
Capital

 

Retained
Earnings

 

Treasury Shares

 
    Shares   Amount       Shares   Amount   Total
   
Balance – December 31, 2007 27,252 $273 $94,132 $131,970 (327) ($2,065) $224,310
 
Stock compensation expense - - 207 - - - 207
 

Exercise of stock options, including
 income tax benefits

3 - 29 - - - 29
 
Repurchase of common stock for Treasury - - - - (92) (939) (939)
 
Net income - - - 4,774 - - 4,774
 
Balance – March 31, 2008

27,255

$273

$94,368

$136,744

(419) ($3,004) $228,381

CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, (Amounts in thousands)     2008           2007  
       
Cash Flows from Operating Activities:
 
Net income $ 4,774 $ 3,385

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 1,670 1,888
Provision for doubtful accounts 399 337
Deferred income taxes 1,425 (168 )
Stock compensation expense 207 (68 )
Income tax benefits from exercise of stock options 4 887
Excess tax benefit from exercise of stock options (1 ) (343 )
Loss on disposal of fixed assets - 6
 
Changes in assets and liabilities:
Accounts receivable 23,344 23,551
Inventories 10,420 2,000
Prepaid expenses and other current assets (1,078 ) (1,454 )
Other non-current assets 10 8
Accounts payable (25,180 ) (21,910 )
Accrued expenses and other liabilities   (5,284 )   (2,179 )
Net cash provided by operating activities   10,710     5,940  
 
 
Cash Flows from Investing Activities:
 
Purchases of property and equipment   (2,926 )   (1,474 )
Net cash used for investing activities   (2,926 )   (1,474 )
 
 
Cash Flows from Financing Activities:
 
Proceeds from short-term borrowings 28,815 -
Repayment of short-term borrowings (28,815 ) -
Repayment of capital lease obligations (124 ) (217 )
Purchase of treasury shares (939 ) -
Exercise of stock options 25 2,494
Excess tax benefit from exercise of stock options   1     343  
Net cash (used for) provided by financing activities   (1,037 )   2,620  
Increase in cash and cash equivalents 6,747 7,086
Cash and cash equivalents, beginning of period   13,741     17,582  
Cash and cash equivalents, end of period $ 20,488   $ 24,668  

CONTACT:
PC Connection, Inc.
Stephen Baldridge, 603-683-2322
Sr. Vice President of Finance & Corporate Controller