PC Connection (CNXN) 10-Q 8 May 15 2015 Q1 Quarterly report Financial data

Document_and_Entity_Informatio

Document and Entity Information	3 Months Ended
	Mar. 31, 2015	1-May-15
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	FALSE
Document Period End Date	31-Mar-15
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1
Trading Symbol	PCCC
Entity Registrant Name	PC CONNECTION INC
Entity Central Index Key	1050377
Current Fiscal Year End Date	-19
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		26,350,582

CONDENSED_CONSOLIDATED_BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Mar. 31, 2015	Dec. 31, 2014
In Thousands, unless otherwise specified
Current Assets:
Cash and cash equivalents	$79,882	$60,909
Accounts receivable, net	284,851	293,027
Inventories	71,274	90,917
Deferred income taxes	7,749	7,749
Prepaid expenses and other current assets	6,153	5,332
Income taxes receivable	2,348	212
Total current assets	452,257	458,146
Property and equipment, net	28,102	27,861
Goodwill	51,276	51,276
Other intangibles, net	1,743	1,953
Other assets	673	724
Total Assets	534,051	539,960
Current Liabilities:
Accounts payable	116,211	124,893
Accrued expenses and other liabilities	18,871	22,011
Accrued payroll	14,931	17,793
Total current liabilities	150,013	164,697
Deferred income taxes	18,870	18,803
Other liabilities	2,296	2,452
Total Liabilities	171,179	185,952
Stockholders' Equity:
Common stock	282	282
Additional paid-in capital	107,236	106,956
Retained earnings	271,216	262,632
Treasury stock, at cost	-15,862	-15,862
Total Stockholders' Equity	362,872	354,008
Total Liabilities and Stockholders' Equity	$534,051	$539,960

CONDENSED_CONSOLIDATED_STATEME

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $)	3 Months Ended
In Thousands, except Per Share data, unless otherwise specified	Mar. 31, 2015	Mar. 31, 2014
Net sales	$581,259	$559,760
Cost of sales	503,646	486,913
Gross profit	77,613	72,847
Selling, general and administrative expenses	63,434	61,101
Income from operations	14,179	11,746
Interest/other income (expense), net	1	-10
Income before taxes	14,180	11,736
Income tax provision	-5,596	-4,605
Net income	$8,584	$7,131
Earnings per common share:
Basic	$0.33	$0.27
Diluted	$0.32	$0.27
Shares used in computation of earnings per common share:
Basic	26,346	26,202
Diluted	26,593	26,485

CONDENSED_CONSOLIDATED_STATEME1

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	3 Months Ended
In Thousands, unless otherwise specified	Mar. 31, 2015	Mar. 31, 2014
Cash Flows from Operating Activities:
Net income	$8,584	$7,131
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,192	2,077
Provision for doubtful accounts	733	128
Stock-based compensation expense	238	159
Deferred income taxes	67	64
Excess tax benefit from exercise of equity awards	-59	-34
Changes in assets and liabilities:
Accounts receivable	7,443	22,070
Inventories	19,643	7,722
Prepaid expenses and other current assets	-2,957	2,317
Other non-current assets	51	28
Accounts payable	-8,627	-15,205
Accrued expenses and other liabilities	-6,093	-2,682
Net cash provided by operating activities	21,215	23,775
Cash Flows from Investing Activities:
Purchases of property and equipment	-2,278	-1,466
Proceeds from sale of equipment		9
Net cash used for investing activities	-2,278	-1,457
Cash Flows from Financing Activities:
Excess tax benefit from exercise of equity awards	59	34
Exercise of stock options	20	16
Payment of payroll taxes on stock-based compensation through shares withheld	-43	-34
Net cash provided by financing activities	36	16
Increase in cash and cash equivalents	18,973	22,334
Cash and cash equivalents, beginning of period	60,909	42,547
Cash and cash equivalents, end of period	79,882	64,881
Non-cash Investing Activities:
Accrued capital expenditures	149	358
Non-cash Investing Activities:
Income taxes paid	$8,818	$1,063

Basis_of_Presentation

Basis of Presentation	3 Months Ended
	Mar. 31, 2015
Basis of Presentation	Note 1–Basis of Presentation
	The accompanying condensed consolidated financial statements of PC Connection, Inc. and its subsidiaries (the “Company,” “we,” “us,” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America. Such principles were applied on a basis consistent with the accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission (the “SEC”). The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements contained in our Annual Report on Form 10-K.
	In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods reported and of the Company’s financial condition as of the date of the interim balance sheet. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated through the date of issuance of these financial statements. The operating results for the three months ended March 31, 2015 may not be indicative of the results expected for any succeeding quarter or the entire year ending December 31, 2015.
	Use of Estimates in the Preparation of Financial Statements
	The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the amounts reported in the accompanying condensed consolidated financial statements. Actual results could differ from those estimates.
	Comprehensive Income
	We had no items of comprehensive income, other than our net income for each of the periods presented.
	Recently Issued Financial Accounting Standard
	On May 28, 2014, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), its final standard on revenue from contracts with customers. ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the revenue model to contracts within its scope, an entity identifies the contract(s) with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to the performance obligations in the contract, and recognizes revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 applies to all contracts with customers that are within the scope of other topics in the FASB Accounting Standards Codification. ASU 2014-09 also requires significantly expanded disclosures about revenue recognition. This guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. In April 2015, the FASB proposed a one-year delay in the effective date of the standard to January 1, 2018. The Company is currently assessing the potential impact of the adoption of ASU 2014-09 on its consolidated financial statements.

Earnings_Per_Share

Earnings Per Share	3 Months Ended
	Mar. 31, 2015
Earnings Per Share	Note 2–Earnings Per Share
	Basic earnings per common share is computed using the weighted average number of shares outstanding. Diluted earnings per share is computed using the weighted average number of shares outstanding adjusted for the incremental shares attributable to nonvested stock units and stock options outstanding, if dilutive.
	The following table sets forth the computation of basic and diluted earnings per share:
		Three Months Ended
	March 31,	2015		2014
	Numerator:
	Net income	$	8,584	$	7,131
	Denominator:
	Denominator for basic earnings per share		26,346		26,202
	Dilutive effect of employee stock awards		247		283
	Denominator for diluted earnings per share		26,593		26,485
	Earnings per share:
	Basic	$	0.33	$	0.27
	Diluted	$	0.32	$	0.27
	For the three months ended March 31, 2015 and 2014, we had no outstanding nonvested stock units or stock options that were excluded from the computation of diluted earnings per share because including them would have had an anti-dilutive effect.

Segment_and_Related_Disclosure

Segment and Related Disclosures	3 Months Ended
	Mar. 31, 2015
Segment and Related Disclosures	Note 3–Segment and Related Disclosures
	The internal reporting structure used by our chief operating decision maker (“CODM”) to assess performance and allocate resources determines the basis for our reportable operating segments. Our CODM is our Chairman of the Board of Directors, and she evaluates operations and allocates resources based on a measure of operating income.
	Our operations are organized under three reporting segments—the SMB segment, which serves primarily small- and medium-sized businesses; the Large Account segment, which serves primarily medium-to-large corporations; and the Public Sector segment, which serves primarily federal, state, and local governmental and educational institutions. In addition, the Headquarters/Other group provides services in areas such as finance, human resources, information technology, marketing, and product management. Most of the operating costs associated with the Headquarters/Other group functions are charged to the operating segments based on their estimated usage of the underlying functions. We report these charges to the operating segments as “Allocations.” Certain headquarters costs relating to executive oversight and other fiduciary functions that are not allocated to the operating segments are included under the heading of Headquarters/Other in the tables below.
	Net sales presented below exclude inter-segment product revenues. Segment information applicable to our reportable operating segments for the three months ended March 31, 2015 and 2014 is shown below:
		Three Months Ended
		March 31,
		2015			2014
	Net sales:
	SMB	$	249,874		$	253,471
	Large Account		209,459			200,932
	Public Sector		121,926			105,357
	Total net sales	$	581,259		$	559,760
	Operating income (loss):
	SMB	$	9,331		$	7,807
	Large Account		8,475			7,776
	Public Sector		(595	)		(1,885	)
	Headquarters/Other		(3,032	)		(1,952	)
	Total operating income	$	14,179		$	11,746
	Interest/other expense, net		1			(10	)
	Income before taxes	$	14,180		$	11,736
	Selected Operating Expense:
	Depreciation and amortization:
	SMB	$	5		$	1
	Large Account		329			334
	Public Sector		40			44
	Headquarters/Other		1,818			1,698
	Total depreciation and amortization	$	2,192		$	2,077
	Assets at March 31, 2015:
	SMB	$	192,307
	Large Account		264,536
	Public Sector		53,859
	Headquarters/Other		23,349
	Total assets	$	534,051
	The assets of our three operating segments presented above consist primarily of accounts receivable, intercompany receivable, goodwill, and other intangibles. Assets reported under the Headquarters/Other group are managed by corporate headquarters, including cash, inventory, and property and equipment. Total assets for the Headquarters/Other group are presented net of intercompany balance eliminations of $27,350 as of March 31, 2015. Our capital expenditures consist largely of IT hardware and software purchased to maintain or upgrade our management information systems. These systems serve all of our subsidiaries, to varying degrees, and accordingly, our CODM does not evaluate capital expenditures on a segment basis.

Commitments_and_Contingencies

Commitments and Contingencies	3 Months Ended
	Mar. 31, 2015
Commitments and Contingencies	Note 4–Commitments and Contingencies
	We are subject to various legal proceedings and claims, including patent infringement claims, which have arisen during the ordinary course of business. In the opinion of management, the outcome of such matters is not expected to have a material effect on our financial position, results of operations, and cash flows.
	We are subject to audits by states on sales and income taxes, unclaimed property, employment matters, and other assessments. A comprehensive multi-state unclaimed property audit continues to be in progress. While management believes that known and estimated unclaimed property liabilities have been adequately provided for, it is too early to determine the ultimate outcome of such audits, as not all formal assessments have been finalized. Additional liabilities for this and other audits could be assessed, and such outcomes could have a material, negative impact on our financial position, results of operations, and cash flows.

Bank_Borrowing_and_Trade_Credi

Bank Borrowing and Trade Credit Arrangements	3 Months Ended
	Mar. 31, 2015
Bank Borrowing and Trade Credit Arrangements	Note 5–Bank Borrowing and Trade Credit Arrangements
	We have a $50,000 credit facility collateralized by our receivables that expires February 24, 2017. This facility can be increased, at our option, to $80,000 for approved acquisitions or other uses authorized by the lender on substantially the same terms. Amounts outstanding under this facility bear interest at the one-month London Interbank Offered Rate, or LIBOR, plus a spread based on our funded debt ratio, or in the absence of LIBOR, the prime rate (3.25% at March 31, 2015). The one-month LIBOR rate at March 31, 2015 was 0.18%. The credit facility includes various customary financial ratios and operating covenants, including minimum net worth and maximum funded debt ratio requirements, and default acceleration provisions. Funded debt ratio is the ratio of average outstanding advances under the credit facility to Adjusted EBITDA (Earnings Before Interest Expense, Taxes, Depreciation, Amortization, and Special Charges). The maximum allowable funded debt ratio under the agreement is 2.0 to 1.0. Decreases in our consolidated Adjusted EBITDA could limit our potential borrowings under the credit facility. We had no outstanding bank borrowings at March 31, 2015 or December 31, 2014, and accordingly, the entire $50,000 facility was available for borrowings under the credit facility.
	At March 31, 2015 and December 31, 2014, we had security agreements with two financial institutions to facilitate the purchase of inventory from various suppliers under certain terms and conditions. The agreements allow a collateralized first position in certain branded products in our inventory financed by the financial institutions up to an aggregated amount of $65,000. The cost of such financing under these agreements is borne by the suppliers by discounting their invoices to the financial institutions. We do not pay any interest or discount fees on such inventory. At March 31, 2015 and December 31, 2014, accounts payable included $26,563 and $17,638, respectively, owed to these financial institutions.

Earnings_Per_Share_Tables

Earnings Per Share (Tables)	3 Months Ended
	Mar. 31, 2015
Computation of Basic and Diluted Earnings Per Share	The following table sets forth the computation of basic and diluted earnings per share:
		Three Months Ended
	March 31,	2015		2014
	Numerator:
	Net income	$	8,584	$	7,131
	Denominator:
	Denominator for basic earnings per share		26,346		26,202
	Dilutive effect of employee stock awards		247		283
	Denominator for diluted earnings per share		26,593		26,485
	Earnings per share:
	Basic	$	0.33	$	0.27
	Diluted	$	0.32	$	0.27

Segment_and_Related_Disclosure1

Segment and Related Disclosures (Tables)	3 Months Ended
	Mar. 31, 2015
Segment Information Applicable to Reportable Operating Segments	Net sales presented below exclude inter-segment product revenues. Segment information applicable to our reportable operating segments for the three months ended March 31, 2015 and 2014 is shown below:
		Three Months Ended
		March 31,
		2015			2014
	Net sales:
	SMB	$	249,874		$	253,471
	Large Account		209,459			200,932
	Public Sector		121,926			105,357
	Total net sales	$	581,259		$	559,760
	Operating income (loss):
	SMB	$	9,331		$	7,807
	Large Account		8,475			7,776
	Public Sector		(595	)		(1,885	)
	Headquarters/Other		(3,032	)		(1,952	)
	Total operating income	$	14,179		$	11,746
	Interest/other expense, net		1			(10	)
	Income before taxes	$	14,180		$	11,736
	Selected Operating Expense:
	Depreciation and amortization:
	SMB	$	5		$	1
	Large Account		329			334
	Public Sector		40			44
	Headquarters/Other		1,818			1,698
	Total depreciation and amortization	$	2,192		$	2,077
	Assets at March 31, 2015:
	SMB	$	192,307
	Large Account		264,536
	Public Sector		53,859
	Headquarters/Other		23,349
	Total assets	$	534,051

Basis_of_Presentation_Addition

Basis of Presentation - Additional Information (Detail) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Significant Accounting Policies [Line Items]
Comprehensive income	$0	$0

Computation_of_Basic_and_Dilut

Computation of Basic and Diluted Earnings Per Share (Detail) (USD $)	3 Months Ended
In Thousands, except Per Share data, unless otherwise specified	Mar. 31, 2015	Mar. 31, 2014
Numerator:
Net income	$8,584	$7,131
Denominator:
Denominator for basic earnings per share	26,346	26,202
Dilutive effect of employee stock awards	247	283
Denominator for diluted earnings per share	26,593	26,485
Earnings per share:
Basic	$0.33	$0.27
Diluted	$0.32	$0.27

Earnings_Per_Share_Additional_

Earnings Per Share - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Employee stock awards	0	0

Segment_and_Related_Disclosure2

Segment and Related Disclosures - Additional Information (Detail) (USD $)	3 Months Ended
In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
	Segment
Segment Reporting Information [Line Items]
Number of reporting segments	3
Total assets	$534,051	$539,960
Intersegment Elimination
Segment Reporting Information [Line Items]
Total assets	($27,350)

Segment_Information_Applicable

Segment Information Applicable to Reportable Operating Segment (Detail) (USD $)	3 Months Ended
In Thousands, unless otherwise specified	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Net sales:
Net sales	$581,259	$559,760
Operating income (loss):
Operating income (loss)	14,179	11,746
Interest/other expense, net	1	-10
Income before taxes	14,180	11,736
Depreciation and amortization:
Depreciation and amortization	2,192	2,077
Total assets:
Total assets	534,051		539,960
Small and Medium Sized Businesses segment
Net sales:
Net sales	249,874	253,471
Operating income (loss):
Operating income (loss)	9,331	7,807
Depreciation and amortization:
Depreciation and amortization	5	1
Total assets:
Total assets	192,307
Large Account Segment
Net sales:
Net sales	209,459	200,932
Operating income (loss):
Operating income (loss)	8,475	7,776
Depreciation and amortization:
Depreciation and amortization	329	334
Total assets:
Total assets	264,536
Public Sector
Net sales:
Net sales	121,926	105,357
Operating income (loss):
Operating income (loss)	-595	-1,885
Depreciation and amortization:
Depreciation and amortization	40	44
Total assets:
Total assets	53,859
Headquarters and Other
Operating income (loss):
Operating income (loss)	-3,032	-1,952
Depreciation and amortization:
Depreciation and amortization	1,818	1,698
Total assets:
Total assets	$23,349

Bank_Borrowings_and_Trade_Cred

Bank Borrowings and Trade Credit Arrangements - Additional information (Detail) (USD $)	3 Months Ended
In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Subordinated Borrowing [Line Items]
Line of credit, borrowing capacity	$50,000
Credit facility, expiration date	24-Feb-17
Line of credit, maximum borrowing capacity	80,000
Debt instrument, description of variable rate basis	One-month LIBOR
Debt ratio	2
Line of credit, outstanding borrowing	0	0
Line of credit, available for borrowing	50,000	50,000
Maximum
Subordinated Borrowing [Line Items]
Amount owed to financial institution for inventory financing	65,000	65,000
Accounts Payable
Subordinated Borrowing [Line Items]
Amount owed to financial institution for inventory financing	$26,563	$17,638
Prime Rate
Subordinated Borrowing [Line Items]
Debt instrument, interest rate	3.25%
One-month LIBOR rate
Subordinated Borrowing [Line Items]
Debt instrument, interest rate	0.18%