SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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)
(State or other juris-
diction of incorporation)
Rt. 101A, 730 Milford Road
(Address of principal executive offices)
Registrant’s telephone number, including area code: (603) 683-2000
|(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
|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.|
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.
May 1, 2008
PC CONNECTION, INC.
/s/ Jack Ferguson
Executive Vice President, Treasurer, and
Chief Financial Officer
Press release issued by PC Connection, Inc. on May 1, 2008.
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.
“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
|Diluted earnings per share||$||.18||$||.13||38||%|
|Gross profit margin||12.4||%||12.5||%|
|Return on equity (1)||8.5||6.8|
|Orders entered (2)||377,500||384,000||(2||%)|
|Average order size (2)||$||1,267||$||1,190||6||%|
|Inventory turns (1)||21||21|
|Days sales outstanding||44||42|
|Notebooks & PDAs||$||64,101||15||%||$||73,643||19||%||(13||%)|
|Printers & Printer Supplies||40,839||10||41,653||11||(2||)|
|Video, Imaging & Sound||62,291||15||48,101||12||30|
|Memory & System Enhancements||15,094||4||19,949||5||(24||)|
|Net Sales of Enterprise Server and Networking Products (included in the above Product Mix):|
|Stock Performance Indicators:|
|Actual shares outstanding||26,803||26,802|
|Total book value per share||$||8.52||$||7.59|
|Tangible book value per share||$||6.29||$||5.31|
|Trailing price/earnings ratio (3)||9||24|
|(2) Does not reflect cancellations or returns|
|(3) Earnings is based on the last four quarters|
|SELECTED SEGMENT INFORMATION|
|For the Three Months Ended March 31,||2008||2007|
|(Dollars in thousands)||Sales||Margin (%)||Sales||Margin (%)|
|PC Connection Sales Corporation (SMB)||$||240,149||13.9||%||$||233,933||13.5||%|
|MoreDirect (Large Account)||117,208||10.8||110,315||10.8|
|GovConnection (Public Sector)||66,367||10.2||53,932||11.8|
|CONSOLIDATED INCOME STATEMENTS|
|Three Months Ended March 31,||2008||2007|
|(Amounts in thousands, except per share data)||Amount||% of Net Sales||Amount||% of Net Sales|
|Cost of sales||370,980||87.6||348,265||87.5|
|Selling, general and administrative expenses||45,393||10.7||44,193||11.1|
|Income From Operations||7,351||1.7||5,722||1.4|
|Income tax provision||(2,574||)||(0.6||)||(2,330||)||(0.5||)|
|Weighted average common shares outstanding:|
|Earnings per common share:|
|CONSOLIDATED BALANCE SHEETS||March 31,||December 31,|
|(Amounts in thousands)||2008||2007|
|Cash and cash equivalents||$||20,488||$||13,741|
|Accounts receivable, net||178,473||202,216|
|Deferred income taxes||2,880||2,858|
|Income taxes receivable||2,010||345|
|Prepaid expenses and other current assets||3,735||4,322|
|Total current assets||273,256||299,572|
|Property and equipment, net||22,807||20,831|
|Other intangibles, net||3,024||3,291|
|LIABILITIES AND STOCKHOLDERS’ EQUITY|
|Current maturities of capital lease obligation to affiliate||$||571||$||527|
|Accrued expenses and other liabilities||19,428||20,557|
|Total current liabilities||113,371||143,040|
|Capital lease obligation to affiliate, less current maturities||4,141||4,309|
|Deferred income taxes||6,883||5,436|
|Additional paid-in capital||94,368||94,132|
|Treasury stock at cost||(3,004||)||(2,065||)|
|Total Stockholders’ Equity||228,381||224,310|
|Total Liabilities and Stockholders’ Equity||$||356,262||$||380,879|
|CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY|
|Three months ended March 31, 2008 (Amounts in thousands)|
|Balance – December 31, 2007||27,252||$273||$94,132||$131,970||(327)||($2,065)||$224,310|
|Stock compensation expense||-||-||207||-||-||-||207|
Exercise of stock options, including
|Repurchase of common stock for Treasury||-||-||-||-||(92)||(939)||(939)|
|Balance – March 31, 2008||
|CONSOLIDATED STATEMENTS OF CASH FLOWS|
|Three Months Ended March 31, (Amounts in thousands)||2008||2007|
|Cash Flows from Operating Activities:|
Adjustments to reconcile net income to net cash provided by operating activities:
|Depreciation and amortization||1,670||1,888|
|Provision for doubtful accounts||399||337|
|Deferred income taxes||1,425||(168||)|
|Stock compensation expense||207||(68||)|
|Income tax benefits from exercise of stock options||4||887|
|Excess tax benefit from exercise of stock options||(1||)||(343||)|
|Loss on disposal of fixed assets||-||6|
|Changes in assets and liabilities:|
|Prepaid expenses and other current assets||(1,078||)||(1,454||)|
|Other non-current assets||10||8|
|Accrued expenses and other liabilities||(5,284||)||(2,179||)|
|Net cash provided by operating activities||10,710||5,940|
|Cash Flows from Investing Activities:|
|Purchases of property and equipment||(2,926||)||(1,474||)|
|Net cash used for investing activities||(2,926||)||(1,474||)|
|Cash Flows from Financing Activities:|
|Proceeds from short-term borrowings||28,815||-|
|Repayment of short-term borrowings||(28,815||)||-|
|Repayment of capital lease obligations||(124||)||(217||)|
|Purchase of treasury shares||(939||)||-|
|Exercise of stock options||25||2,494|
|Excess tax benefit from exercise of stock options||1||343|
|Net cash (used for) provided by financing activities||(1,037||)||2,620|
|Increase in cash and cash equivalents||6,747||7,086|
|Cash and cash equivalents, beginning of period||13,741||17,582|
|Cash and cash equivalents, end of period||$||20,488||$||24,668|
PC Connection, Inc.
Stephen Baldridge, 603-683-2322
Sr. Vice President of Finance & Corporate Controller