Connection
Investors & Media Relations
Print page  E-mail page
 

Home > News & Events > Press Releases

PC Connection, Inc. Reports Fourth Quarter and Full Year Results

Company Announces Record Quarterly and Annual Sales

MERRIMACK, N.H., Jan 31, 2008 (BUSINESS WIRE) -- PC Connection, Inc. (NASDAQ: PCCC)

  FOURTH QUARTER HIGHLIGHTS:          FULL YEAR HIGHLIGHTS:
---------------------------------   ----------------------------------

-- Net sales: $490 million; up      -- Net sales: $1,785 million; up
 13% y/y                             9% y/y
---------------------------------   ----------------------------------
-- Net income: $6.2 million; up     -- Net income: $23.0 million; up
 35% y/y                             67% y/y
---------------------------------   ----------------------------------
-- Diluted earnings per share:      -- Diluted earnings per share:
 $.23; up from $.17 last year        $.85; up from $.54 last year
---------------------------------   ----------------------------------

PC Connection, Inc. (NASDAQ: PCCC), a leading direct marketer of information technology (IT) products and services, today announced results for the quarter and year ended December 31, 2007. Net sales for the three months ended December 31, 2007 increased by $57.7 million, or 13.4%, to $489.6 million from $431.9 million for the three months ended December 31, 2006. Net income for the quarter was $6.2 million, or $.23 per share, compared to $4.6 million, or $.17 per share, for the corresponding prior year quarter.

The quarter ended December 31, 2007 included special charges related to management restructuring that reduced earnings and earnings per share. Had these charges not been incurred, pro forma net income for the quarter ended December 31, 2007 would have been $6.5 million, or $.24 per share, compared to $4.6 million, or $.17 per share, for the quarter ended December 31, 2006. We did not record any special charges for the quarter ended December 31, 2006. A reconciliation between net income on a GAAP basis and pro forma net income is provided in a table immediately following the Consolidated Income Statements.

"We are pleased to report record quarterly and annual sales," said Patricia Gallup, Chairman and Chief Executive Officer of PC Connection, Inc. "The fourth quarter was our eleventh consecutive quarter of year-over-year revenue growth. We also achieved a 29% increase in operating income and a 35% increase in earnings per share over the fourth quarter of 2006."

Net sales for the year ended December 31, 2007 increased by $149.7 million, or 9.2%, to $1,785.4 million from $1,635.7 million for the year ended December 31, 2006. Net income for the year ended December 31, 2007 was $23.0 million, or $.85 per share, compared to $13.8 million, or $.54 per share, for the year ended December 31, 2006. The years ended December 31, 2007 and 2006 included special charges that reduced earnings and earnings per share. Had these charges not been incurred, pro forma net income for the year ended December 31, 2007 would have been $23.3 million, or $.86 per share, compared to $15.2 million, or $.59 per share, for the year ended December 31, 2006.

Quarterly Sales Growth by Business Segment:

-- Net sales for the small- and medium-sized business (SMB) segment increased by 14.0% to $263.8 million compared to the fourth quarter of 2006. Corporate outbound sales within the segment grew 24.9% year over year, reflecting our focus on business customers. Several large Video product orders from three customers drove the majority of this increase.

-- Net sales for MoreDirect, Inc., our Large Account segment, increased by 6.3% to $140.8 million compared to the fourth quarter of 2006. MoreDirect continues to obtain new customers and a greater share of existing customers' business.

-- Net sales for GovConnection, Inc., our Public Sector segment, increased by 25.1% to $85.0 million compared to the fourth quarter of 2006. Increased federal sales, obtained under recent government contracts, drove this double-digit growth.

Quarterly Sales Growth by Product Mix:

-- Video, Imaging and Sound sales increased 52.5% year over year, accounting for 17.7% of net sales in the fourth quarter compared to 13.2% for the corresponding prior year quarter. Several large Video product orders from three SMB customers drove the majority of this revenue increase.

-- Notebooks and PDAs accounted for 14.9% of net sales in the fourth quarter of 2007 compared to 16.9% for the corresponding prior year quarter, reflecting our emphasis on driving sales in other product lines with higher margins.

-- Software sales increased 20.5% year over year, accounting for 13.0% of net sales in the fourth quarter of 2007 compared to 12.2% for the corresponding prior year quarter. We experienced strong year over year growth with several software vendors.

-- Sales of storage devices increased 22.0% year over year, accounting for 9.3% of net sales in the fourth quarter of 2007 compared to 8.6% for the corresponding prior year quarter.

Gross profit was $57.5 million for the fourth quarter of 2007 compared to $51.9 million for the fourth quarter of 2006. Gross profit margin, as a percentage of net sales, was 11.7% in the fourth quarter of 2007 compared to 12.0% in the fourth quarter of 2006. The large Video product orders shipped in the fourth quarter decreased our gross margin rates by approximately 70 basis points. Higher agency fee revenues and additional vendor consideration in the fourth quarter of 2007 partially offset these lower-margin SMB sales.

Annualized sales representative productivity increased 19% on a consolidated basis in the fourth quarter of 2007 compared to the fourth quarter of 2006. Sales productivity in our Large Account segment increased 21% in the fourth quarter of 2007 compared to the fourth quarter of 2006. Sales productivity in our SMB and Public Sector segments increased quarter over quarter by 20% and 19%, respectively. On a consolidated basis, the total number of sales representatives was 692 as of December 31, 2007, compared to 654 at September 30, 2007, and 702 at December 31, 2006.

Selling, general and administrative expenses ("SG&A") totaled $46.9 million for the fourth quarter of 2007 compared to $44.1 million for the fourth quarter of 2006. SG&A improved as a percentage of net sales to 9.5% for the fourth quarter of 2007 compared to 10.2% for the fourth quarter of 2006, reflecting our continuing efforts to leverage our cost structure.

Ms. Gallup continued, "Again, we are pleased with PC Connection's accomplishments in 2007. Our performance-improvement initiatives and our efforts to enhance the effectiveness of our sales organizations are producing positive results. In 2007, our GovConnection subsidiary was awarded both SEWP IV and First Source. These contracts allow us to more effectively reach new customers and better provide IT solutions to all of the largest agencies in the federal marketplace. PC Connection again placed on Fortune's list of the 1000 largest U.S. companies, and was ranked as one of the top business technology innovators on the InformationWeek 500."

Gallup concluded, "PC Connection is a recognized leader in our industry. We believe we are well-positioned to continue in a leadership role, and to grow sales and earnings to build long-term shareholder value."

About PC Connection, Inc.

PC Connection, Inc., a Fortune 1000 company, owns three sales companies: 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(R) 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. Additional risk factors that could cause actual results to differ materially from those in our forward-looking statements are disclosed in our most recent quarterly report on Form 10-Q for the quarter ended September 30, 2007 and annual report on Form 10-K for the year ended December 31, 2006. We encourage you to read those disclosures. 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, the ability of the Company to improve sales productivity and increase its active customers) 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.

PC Connection, Inc. -- Fourth Quarter Earnings -- 01/31/08
----------------------------------------------------------------------

----------------------------------------------------------------------
CONSOLIDATED SELECTED FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------
At or for the Three
 Months Ended December
 31,                      2007                 2006
-----------------------------------------   --------------------------
(Dollars and shares in
 thousands, except
 operating data,
 price/earnings ratio,
 and per share data)                % of                 % of    %
                                    Net                  Net   Change
                                    Sales                Sales
-----------------------------------------   --------------------------

Operating Data:
  Net sales            $  489,607           $  431,866          13.4%
  Diluted earnings per
   share               $      .23           $      .17          35.3%

  Gross profit margin        11.7%                12.0%
  Operating margin            2.1                  1.8
  Return on equity (1)       11.2                  9.7

  Catalogs distributed  3,563,000            4,440,000         (19.8)%
  Orders entered (2)      367,100              403,700          (9.1)%
  Average order size
   (2)                 $    1,515           $    1,208          25.4%

  Inventory turns (1)          21                   20
  Days sales
   outstanding                 43                   45


Product Mix:
  Notebooks & PDAs     $   72,962   14.9%   $   73,160   16.9%  (0.3)%
  Desktops/Servers         64,984   13.3        60,474   14.0    7.5
  Storage Devices          45,383    9.3        37,211    8.6   22.0
  Software                 63,511   13.0        52,714   12.2   20.5
  Net/Com Products         41,281    8.4        40,458    9.4    2.0
  Printers & Printer
   Supplies                44,118    9.0        40,430    9.4    9.1
  Video, Imaging &
   Sound                   86,657   17.7        56,817   13.2   52.5
  Memory & System
   Enhancements            20,525    4.2        23,013    5.3  (10.8)
  Accessories/Other        50,186   10.2        47,589   11.0    5.5
                       ----------- ------   ----------- ------
                       $  489,607  100.0%   $  431,866  100.0%  13.4%
                       =========== ======   =========== ======


Net Sales of Enterprise Server and Networking Products (included in
 the above Product Mix):

                       $  164,922   33.7%   $  138,123   32.0%  19.4%
                       ===========          ===========


Stock Performance
 Indicators:
  Actual shares
   outstanding             26,892               26,500
  Total book value per
   share               $     8.34           $     7.43
  Tangible book value
   per share           $     6.10           $     5.12
  Closing price        $    11.35           $    14.83
  Market
   capitalization      $  305,224           $  392,995
  Trailing
   price/earnings
   ratio (3)                   13                   28

(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 December
 31,                                      2007              2006
----------------------------------------------------   ---------------
                                        Net   Gross       Net   Gross
                                      Sales   Margin    Sales   Margin
(Dollars in thousands)                          (%)               (%)
----------------------------------------------------   ---------------

PC Connection Sales Corporation
 (SMB)                               $263,785  12.6%   $231,481  12.9%
MoreDirect (Large Account)            140,826  11.0     132,465  10.7
GovConnection (Public Sector)          84,996  10.3      67,920  11.9
                                     -------- ------   -------- ------
  Total                              $489,607  11.7%   $431,866  12.0%
                                     ======== ======   ======== ======


----------------------------------------------------------------------
CONSOLIDATED INCOME STATEMENTS
----------------------------------------------------------------------
Three Months Ended December
 31,                                2007                  2006
----------------------------------------------------------------------
(Amounts in thousands,                   % of
 except per share data)                   Net                 % of Net
                              Amount     Sales      Amount     Sales
-----------------------------------------------   --------------------

  Net sales                 $  489,607   100.0%   $  431,866    100.0%
  Cost of sales                432,122    88.3       379,919     88.0
                            -----------  ------   -----------  -------
    Gross Profit                57,485    11.7        51,947     12.0

  Selling, general and
   administrative expenses      46,870     9.5        44,147     10.2
  Special charges                  541     0.1             -      0.0
                            -----------  ------   -----------  -------
    Income From Operations      10,074     2.1         7,800      1.8

  Interest expense                (264)      -          (353)    (0.1)
  Other, net                       111       -            87        -
  Income tax provision          (3,749)   (0.8)       (2,963)    (0.6)
                            -----------  ------   -----------  -------
    Net Income              $    6,172     1.3%   $    4,571      1.1%
                            ===========  ======   ===========  =======


  Weighted average common
   shares outstanding:
    Basic                       26,844                26,067
                            ===========           ===========
    Diluted                     27,052                26,507
                            ===========           ===========
  Earnings per common
   share:
    Basic                   $     0.23            $     0.18
                            ===========           ===========
    Diluted                 $     0.23            $     0.17
                            ===========           ===========

----------------------------------------------------------------------


----------------------------------------------------------------------
CONSOLIDATED INCOME STATEMENTS
----------------------------------------------------------------------
Years Ended December 31,            2007             2006
----------------------------------------------------------------------
(Amounts in thousands,                   % of
 except per share data)                   Net                 % of Net
                              Amount     Sales      Amount     Sales
-----------------------------------------------   --------------------

  Net sales                 $1,785,379   100.0%   $1,635,651    100.0%
  Cost of sales              1,566,409    87.7     1,435,400     87.8
                            -----------  ------   -----------  -------
    Gross Profit               218,970    12.3       200,251     12.2

  Selling, general and
   administrative expenses     181,640    10.2       173,927     10.6
  Special charges                  541       -         2,391      0.1
                            -----------  ------   -----------  -------
    Income From Operations      36,789     2.1        23,933      1.5

  Interest expense                (932)      -        (1,828)    (0.1)
  Other, net                       764       -           121        -
  Income tax provision         (13,626)   (0.8)       (8,450)    (0.6)
                            -----------  ------   -----------  -------
    Net Income              $   22,995     1.3%   $   13,776      0.8%
                            ===========  ======   ===========  =======


  Weighted average common
   shares outstanding:
    Basic                       26,785                25,516
                            ===========           ===========
    Diluted                     27,024                25,731
                            ===========           ===========
  Earnings per common
   share:
    Basic                   $     0.86            $     0.54
                            ===========           ===========
    Diluted                 $     0.85            $     0.54
                            ===========           ===========

----------------------------------------------------------------------



----------------------------------------------------------------------
A RECONCILIATION BETWEEN GAAP AND PRO FORMA NET INCOME
----------------------------------------------------------------------
This information is being provided so as to allow for a comparison of
 our operating results without special charges.
----------------------------------------------------------------------

----------------------------------------------------------------------
December 31,                Three Months Ended    Twelve Months Ended
===========================-------------------------------------------
(Amounts in thousands)         2007      2006        2007      2006
----------------------------------------------------------------------

  GAAP net income           $    6,172  $4,571    $   22,995  $13,776
  Special charges (after
   tax):
    Management
     restructuring                 336       -           336      535
    GSA settlement                   -       -             -      900
                            ----------- -------   ----------- --------
Total special charges
 (after tax)                       336       -           336    1,435
                            ----------- -------   ----------- --------

  Pro forma net income      $    6,508  $4,571    $   23,331  $15,211
                            =========== =======   =========== ========



----------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS                      December    December
                                                    31,         31,
----------------------------------------------   ----------  ---------
(amounts in thousands)                             2007        2006
----------------------------------------------   ----------  ---------

  ASSETS
  Current Assets:
  Cash and cash equivalents                      $ 13,741    $ 17,582
  Accounts receivable, net                        202,216     170,222
  Inventories-merchandise                          76,090      69,407
  Deferred income taxes                             2,858       3,837
  Income taxes receivable                             345         627
  Prepaid expenses and other current assets         4,322       3,882
                                                 ---------   ---------
    Total current assets                          299,572     265,557
  Property and equipment, net                      20,831      19,542
  Goodwill                                         56,867      56,867
  Other intangibles, net                            3,291       4,363
  Other assets                                        318         355
                                                 ---------   ---------
    Total Assets                                 $380,879    $346,684
                                                 =========   =========

LIABILITIES AND STOCKHOLDERS' EQUITY

  Current Liabilities:
    Current maturities of capital lease
     obligations:
      To affiliate                               $    527    $    464
      To third party                                    -         395
  Accounts payable                                111,140     110,977
  Accrued expenses and other liabilities           20,557      17,389
  Accrued payroll                                  10,816       9,367
                                                 ---------   ---------
    Total current liabilities                     143,040     138,592
  Capital lease obligations, less current
   maturities:
    To affiliate                                    4,309       4,836
  Other liabilities                                 3,784           -
  Deferred income taxes                             5,436       6,352
                                                 ---------   ---------
    Total Liabilities                             156,569     149,780
                                                 ---------   ---------
  Stockholders' Equity:
    Common stock                                      273         269
    Additional paid-in capital                     94,132      89,537
    Retained earnings                             131,970     109,321
    Treasury stock at cost                         (2,065)     (2,223)
                                                 ---------   ---------
      Total Stockholders' Equity                  224,310     196,904
                                                 ---------   ---------
      Total Liabilities and Stockholders'
       Equity                                    $380,879    $346,684
                                                 =========   =========

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
----------------------------------------------------------------------
Year ended December 31, 2007 (amounts in thousands)
----------------------------------------------------------------------
          Common Stock  Additional Retained  Treasury Shares
          -------------                      ---------------
                         Paid-In
          Shares Amount   Capital  Earnings  Shares  Amount    Total
----------------------------------------------------------------------

Balance -
 January
 01, 2007 26,862   $269 $89,537    $109,321  (352)  ($2,223) $196,904

Cumula-
 tive
 effect
 of
 change
 in
 account-
 ing
 prin-
 ciple         -      -       -        (346)    -         -      (346)

Stock
 compen-
 sation
 expense       -      -     579           -     -         -       579

Exercise
 of stock
 options,
 includ-
 ing
income
 tax
 benefits    364      4   3,876           -     -         -     3,880

Release
 of non-
 vested
 stock
 awards        -              3                                     3

Issuance
 of stock
 under
 Employee
 Stock
 Purchase
 Plan         26      -     295           -     -         -       295

Issuance
 of non-
 vested
 stock
 awards                    (158)               25       158         -

Net
 income        -      -       -      22,995     -         -    22,995
          ------ ------ ---------- --------- ------ -------- ---------

Balance -
 December
 31, 2007 27,252   $273 $94,132    $131,970  (327)  ($2,065) $224,310
          ====== ====== ========== ========= ====== ======== =========



----------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
----------------------------------------------------------------------
Years Ended December 31, (Amounts in thousands)     2007       2006
----------------------------------------------------------------------

  Cash Flows from Operating Activities:

  Net income                                      $ 22,995  $  13,776
  Adjustments to reconcile net income to net
   cash provided by operating activities:

    Depreciation and amortization                    6,781      7,049
    Provision for doubtful accounts                  1,587      2,885
    Deferred income taxes                               63      2,179
    Loss on disposal of fixed assets                    68         86
    Stock compensation expense                         579        418
    Excess tax benefit from exercise of stock
     options                                          (447)      (240)
    Income tax benefits related to employee
     equity awards                                     974      1,338

  Changes in assets and liabilities:
    Accounts receivable                            (33,581)   (10,582)
    Inventories                                     (6,683)     5,967
    Prepaid expenses and other current assets         (158)     1,452
    Other non-current assets                            37          4
    Accounts payable                                   163     (3,436)
    Accrued expenses and other liabilities           8,055      5,466
                                                  --------- ----------
  Net cash provided by operating activities            433     26,362
                                                  --------- ----------


  Cash Flows from Investing Activities:

  Purchases of property and equipment               (7,066)    (7,981)
  Proceeds from sale of property and equipment           -         21
                                                  --------- ----------
  Net cash used for investing activities            (7,066)    (7,960)
                                                  --------- ----------


  Cash Flows from Financing Activities:

  Proceeds from short-term borrowings               53,280    402,039
  Repayment of short-term borrowings               (53,280)  (422,014)
  Repayment of capital lease obligations              (859)      (828)
  Exercise of stock options                          2,910      9,740
  Excess tax benefit from exercise of stock
   options                                             447        240
  Issuance of stock under Employee Stock
   Purchase Plan                                       294        233
                                                  --------- ----------
  Net cash provided by (used for) financing
   activities                                        2,792    (10,590)
                                                  --------- ----------
  (Decrease) increase in cash and cash
   equivalents                                      (3,841)     7,812
  Cash and cash equivalents, beginning of period    17,582      9,770
                                                  --------- ----------
  Cash and cash equivalents, end of period        $ 13,741  $  17,582
                                                  ========= ==========

----------------------------------------------------------------------


pccc-g

SOURCE: PC Connection, Inc.

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

Copyright Business Wire 2008

News Provided by COMTEX




Stock Information
CNXN (NASDAQ)
$28.30 - 0.14
3/28/17 4:00 PM ET

Delayed at least 20 mins.
Data provided by eSignal.


Shareholder Tools


Search Investor
and Media Center



© 2017 Connection