Connection
Investors & Media Relations
Print page  E-mail page
 

Home > News & Events > Press Releases

PC Connection, Inc. Reports Fourth Quarter and Full Year 2015 Results

MERRIMACK, N.H.--(BUSINESS WIRE)--

PC Connection, Inc. (NASDAQ: PCCC):

       

FOURTH QUARTER SUMMARY:

FULL YEAR SUMMARY:

 
  • Net income up 14% y/y
  • Net sales: $684.3 million, up 8.5% y/y
  • Diluted EPS: $0.51, up 13% y/y
  • Net income up 10% y/y
  • Net sales: $2.57 billion, up 4.5% y/y
  • Diluted EPS: $1.76, up 9% y/y
 

PC Connection, Inc. (NASDAQ: PCCC), a national provider of a full range of information technology (IT) solutions to business, government, healthcare, and education markets, today announced record results for the quarter ended December 31, 2015. Net sales for the fourth quarter of 2015 increased by 8.5% to $684.3 million, compared to $630.8 million for the prior year quarter. Net income for the quarter ended December 31, 2015 increased by 14.0% to $13.6 million, or $0.51 per diluted share, compared to net income of $11.9 million, or $0.45 per diluted share for the prior year quarter.

Net sales for the year ended December 31, 2015 were $2.57 billion, an increase of $110.6 million or 4.5%, compared to $2.46 billion for the year ended December 31, 2014. Net income for the year ended December 31, 2015 increased by 9.7% to $46.8 million, or $1.76 per diluted share, compared to net income of $42.7 million, or $1.61 per diluted share, for the year ended December 31, 2014. Earnings before interest, taxes, depreciation and amortization, adjusted for stock-based compensation expense ("Adjusted EBITDA") totaled $88.5 million for 2015, compared to $80.5 million for 2014.

Quarterly Performance by Segment:

  • Net sales for the SMB segment increased by 0.4% to $262.6 million in the fourth quarter of 2015, compared to the prior year quarter. Gross margin increased by 70 basis points to 15.9% due to strong performance in advanced technology solution categories including software, networking, and services.
  • Net sales for the Large Account segment increased by 22.8% to $277.0 million in the fourth quarter of 2015, compared to the prior year quarter. The increase was due to strong demand for solution-based projects from enterprise customers across a number of industries and vertical markets, including significant growth in the Healthcare market. This represented the highest quarterly revenue ever achieved by the Large Account segment.
  • Net sales to the Public Sector segment increased by 0.8% to $144.7 million in the fourth quarter of 2015, compared to the prior year quarter. Gross margin improved 40 basis points due to double-digit sales increases in software and networking.

Quarterly Sales by Product Mix:

  • Notebook/mobility sales, the Company's largest product category, increased by 14% year over year and accounted for 20% of net sales in the fourth quarter of 2015 and 2014. Mobility continues to be a strategic focus area for customers in each of our three segments.
  • Software sales increased by 19% year over year and accounted for 20% of net sales in the fourth quarter of 2015 compared to 18% of net sales in the prior year quarter. We experienced growth in cloud-based offerings, security, and virtualization.

Overall gross profit increased by $8.7 million, or 10.5%, in the fourth quarter of 2015, compared to the prior year quarter. Consolidated gross margin, as a percentage of net sales, increased to 13.4% in the fourth quarter of 2015, compared to 13.2% for the prior year quarter.

Selling, general and administrative dollars increased in the fourth quarter of 2015 to $69.0 million from $63.0 million in the prior year quarter and slightly increased as a percentage of net sales to 10.1% from 10.0%. Included in these totals were $0.3 million of start-up and transition costs related to our new advanced configuration and distribution center, which was operational at the end of the third quarter. We continue to invest in technical solution sales capabilities and expect SG&A expenses to rise accordingly. However, we are highly focused on improving efficiencies and streamlining wherever possible.

The Company generated significant cash flow during the year ended December 31, 2015. Total cash was $80.2 million at December 31, 2015, compared to $60.9 million at December 31, 2014. In January 2016, we paid a 40 cent per share special dividend to shareholders, which totaled $10.6 million. Days sales outstanding were 44 days at December 31, 2015, and inventory turns were 22 turns in the fourth quarter of 2015.

"The Company had record performance in both net sales and net income this quarter and for the year ended December 31, 2015. We were able to increase sales and earnings, while continuing to make investments to strengthen our capabilities as a leading National Solutions Provider," said Timothy McGrath, President and Chief Executive Officer. "Also, for the fifth consecutive year, we paid a special dividend to shareholders. We believe our team and the strategies we have in place position us well to gain market share and increase long-term shareholder value."

Non-GAAP Financial Information

Adjusted EBITDA is a non-GAAP financial measure. This information is included to provide information with respect to the Company's operating performance and earnings.

About PC Connection, Inc.

PC Connection, Inc., a Fortune 1000 company, has three wholly owned 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 from our ISO 9001:2008 certified technical configuration lab at our distribution center in Wilmington, OH. In addition, the company has over 2,500 technical certifications to ensure that we can solve the most complex issues of our customers. Investors and media can find more information about PC Connection, Inc. at http://ir.pcconnection.com.

PC Connection Sales Corporation (800-800-5555), the original business of PC Connection, Inc. serving primarily the small- and medium-sized business sector, is a rapid-response provider of IT products and services. It offers more than 300,000 brand-name products through its staff of technically trained sales account managers, catalogs, publications, and its website at www.pcconnection.com. This company also serves consumer and small office users and is, under its MacConnection brand (800-800-2222), one of Apple's largest authorized online resellers at www.macconnection.com.

MoreDirect, Inc. (561-237-3300), www.moredirect.com, provides corporate technology buyers with best-in-class IT solutions, in-depth IT supply-chain expertise, and access to over 300,000 products and 1,600 vendors through TRAXX™, our proprietary cloud-based eProcurement system. MoreDirect's team of engineers, software licensing specialists, and project managers help reduce the cost and complexity of buying hardware, software, and services throughout the entire IT lifecycle.

GovConnection, Inc. (800-800-0019) is a rapid-response provider of IT products and services to federal, state, and local government agencies and educational institutions through specialized account managers, catalogs, 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 and environment, 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 manage costs in response to fluctuations in revenue, and other risks that could cause actual results to differ materially from expectations, including those 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, 2014. More specifically, the statements in this release concerning the Company's outlook for selling, general, and administrative expenses, the Company's efforts in improving efficiencies and streamlining its business and other statements of a non-historical basis (including statements regarding the Company's ability to increase market share and enhance long-term shareholder value and the Company's continuing investments in technical solution sales capabilities) 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, the ability of the Company to gain or maintain market share, and the ability of the Company to hire and retain qualified sales representatives and other essential personnel. The Company disclaims any 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 INFORMATION                    
At or for the Three Months Ended December 31,         2015 2014  
%
(Amounts and shares in thousands, except operating data, P/E ratio, and per share data)                     Change
 
Operating Data:
Net sales $ 684,323 $ 630,765 8 %
Diluted earnings per share $ 0.51 $ 0.45 13 %
 
Gross margin 13.4 % 13.2 %
Operating margin 3.3 % 3.2 %
Return on equity (1) 12.5 % 12.5 %
 
Inventory turns 22 26
Days sales outstanding 44 40
 
% of % of
Product Mix: Net Sales Net Sales
Notebooks/Mobility 20 % 20 %
Software 20 18
Servers/Storage 12 14
Net/Com Products 10 10
Other Hardware/Services   38     38  
Total Net Sales   100 %   100 %
 
 
Stock Performance Indicators:
Actual shares outstanding 26,498 26,343
Total book value per share $ 14.81 $ 13.44
Tangible book value per share $ 12.81 $ 11.42
Closing price $ 22.64 $ 24.55
Market capitalization $ 599,915 $ 646,721
Trailing price/earnings ratio 12.9 15.3
LTM Adjusted EBITDA (2) $ 88,509 $ 80,475
Adjusted market capitalization/LTM Adjusted EBITDA (3) 5.9 7.3
 
(1) Based on last twelve months' net income.
(2) Adjusted EBITDA is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) adjusted for stock-based compensation.
(3) Adjusted market capitalization is defined as gross market capitalization less cash balance.
 
 
REVENUE AND MARGIN INFORMATION
For the Three Months Ended December 31,         2015 2014
Net Gross Net Gross
(amounts in thousands) Sales   Margin Sales   Margin
 
SMB $ 262,646 15.9 % $ 261,661 15.2 %
Large Account 276,980 11.6 225,609 11.6
Public Sector   144,697   12.3   143,495   11.9
Total $ 684,323   13.4 % $ 630,765   13.2 %
 

                         
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended December 31,         2015     2014
(amounts in thousands, except per share data)         Amount   % of Net Sales     Amount   % of Net Sales
 
Net sales $ 684,323 100.0 % $ 630,765 100.0 %
Cost of sales   592,472   86.6     547,641   86.8  
Gross profit 91,851 13.4 83,124 13.2
 
Start-up costs - new distribution center 296 - - -
Selling, general and administrative expenses, other   68,664   10.1     63,035   10.0  
Income from operations 22,891 3.3 20,089 3.2
 
Interest/other expense, net (20 ) - (14 ) -
Income tax provision   (9,258 ) (1.3 )   (8,131 ) (1.3 )
Net income $ 13,613   2.0 % $ 11,944   1.9 %
 
Earnings per common share:
Basic $ 0.51   $ 0.45  
Diluted $ 0.51   $ 0.45  
 
Shares used in the computation of earnings per common share:
Basic   26,459     26,311  
Diluted   26,632     26,554  
 
 
                         
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,         2015     2014
(amounts in thousands, except per share data) Amount % of Net Sales Amount % of Net Sales
 
Net sales $ 2,573,973 100.0 % $ 2,463,339 100.0 %
Cost of sales   2,232,954   86.8     2,139,950   86.9  
Gross profit 341,019 13.2 323,389 13.1
 
Start-up costs - new distribution center 1,026 - - -
Selling, general and administrative expenses, other   261,439   10.2     251,935   10.2  
Income from operations 78,554 3.0 71,454 2.9
 
Interest/other expense, net (87 ) - (86 ) -
Income tax provision   (31,640 ) (1.2 )   (28,687 ) (1.2 )
Net income $ 46,827   1.8 % $ 42,681   1.7 %
 
Earnings per common share:
Basic $ 1.77   $ 1.63  
Diluted $ 1.76   $ 1.61  
 
Shares used in the computation of earnings per common share:
Basic   26,398     26,246  
Diluted   26,616     26,512  
 

                                 
EBITDA AND ADJUSTED EBITDA
                   
A reconciliation of EBITDA and Adjusted EBITDA is detailed below. Adjusted EBITDA is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) adjusted for stock-based compensation. Both EBITDA and Adjusted EBITDA are considered non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either includes or excludes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. We believe that EBITDA and Adjusted EBITDA provide helpful information with respect to our operating performance including our ability to fund our future capital expenditures and working capital requirements. Adjusted EBITDA also provides helpful information as it is the primary measure used in certain financial covenants contained in our credit agreements.
 
(amounts in thousands) Three Months Ended December 31, Years Ended December 31,
2015 2014 % Change 2015 2014   % Change
Net income $ 13,613 $ 11,944 $ 46,827 $ 42,681
Depreciation and amortization 2,364 2,095 8,961 8,092
Income tax expense 9,258 8,131 31,640 28,687
Interest/other expense, net   20   14   87     86  
EBITDA 25,255 22,184 87,515 79,546
Stock-based compensation   274   228     994     929    
Adjusted EBITDA $ 25,529 $ 22,412 14 % $ 88,509   $ 80,475   10 %
 
 
                             
December 31, December 31,
CONDENSED CONSOLIDATED BALANCE SHEETS     2015   2014
(amounts in thousands)
 
ASSETS
Current Assets:
Cash and cash equivalents $ 80,188 $ 60,909
Accounts receivable, net 356,145 293,027
Inventories 102,780 90,917
Deferred income taxes 7,909 7,749
Prepaid expenses and other current assets 4,254 5,332
Income taxes receivable   1,575     212  
Total current assets 552,851 458,146
Property and equipment, net 32,227 27,861
Goodwill 51,276 51,276
Other intangibles, net 1,668 1,953
Other assets   1,052     724  
Total Assets $ 639,074   $ 539,960  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 166,516 $ 124,893
Accrued expenses and other liabilities 36,207 22,011
Accrued payroll   19,280     17,793  
Total current liabilities 222,003 164,697
Deferred income taxes 21,615 18,803
Other liabilities   3,005     2,452  
Total Liabilities   246,623     185,952  
Stockholders' Equity:
Common stock 284 282
Additional paid-in capital 109,161 106,956
Retained earnings 298,868 262,632
Treasury stock at cost   (15,862 )   (15,862 )
Total Stockholders' Equity   392,451     354,008  
Total Liabilities and Stockholders' Equity $ 639,074   $ 539,960  
 

 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,           2015         2014  
(amounts in thousands)            
Cash Flows from Operating Activities:
Net income $ 46,827 $ 42,681
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 8,961 8,092
Provision for doubtful accounts 1,097 1,383
Stock-based compensation expense 994 929
Deferred income taxes 2,652 1,212
Loss on disposal of fixed assets 44 14
Excess tax benefit from exercise of equity awards (552 ) (556 )
 
Changes in assets and liabilities:
Accounts receivable (64,215 ) (11,359 )
Inventories (11,863 ) (11,776 )
Prepaid expenses and other current assets (285 ) 1,829
Other non-current assets (328 ) (4 )
Accounts payable 41,324 202
Accrued expenses and other liabilities   6,206     2,751  
Net cash provided by operating activities   30,862     35,398  
 
Cash Flows from Investing Activities:
Purchases of equipment (12,337 ) (7,609 )
Purchase of intangible asset (450 ) -
Proceeds from sale of equipment   -     13  
Net cash used for investing activities   (12,787 )   (7,596 )
 
Cash Flows from Financing Activities:
Dividend payment - (10,527 )
Issuance of stock under Employee Stock Purchase Plan 875 753
Excess tax benefit from exercise of equity awards 552 556
Exercise of stock options 437 356
Payment of payroll taxes on stock-based compensation through shares withheld   (660 )   (578 )
Net cash provided by (used for) financing activities   1,204     (9,440 )
Increase in cash and cash equivalents 19,279 18,362
Cash and cash equivalents, beginning of period   60,909     42,547  
Cash and cash equivalents, end of period $ 80,188   $ 60,909  
 
Non-cash Investing Activities:
Dividend declaration $ 10,591 $ -
Accrued capital expenditures $ 504 $ 205
 
Supplemental Cash Flow Information:
Income taxes paid $ 30,371 $ 24,219
 

pccc-g

PC Connection, Inc.
Joseph Driscoll, 603-683-2505
Senior Vice President, Treasurer and Chief Financial Officer

Source: PC Connection, Inc.

News Provided by Acquire Media




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