Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Nov. 02, 2015 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | PCCC | |
Entity Registrant Name | PC CONNECTION INC | |
Entity Central Index Key | 1,050,377 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 26,444,470 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Current Assets: | ||
Cash and cash equivalents | $ 76,867 | $ 60,909 |
Accounts receivable, net | 331,186 | 293,027 |
Inventories | 102,573 | 90,917 |
Deferred income taxes | 7,749 | 7,749 |
Prepaid expenses and other current assets | 4,632 | 5,332 |
Income taxes receivable | 833 | 212 |
Total current assets | 523,840 | 458,146 |
Property and equipment, net | 32,400 | 27,861 |
Goodwill | 51,276 | 51,276 |
Other intangibles, net | 1,393 | 1,953 |
Other assets | 1,173 | 724 |
Total Assets | 610,082 | 539,960 |
Current Liabilities: | ||
Accounts payable | 161,054 | 124,893 |
Accrued expenses and other liabilities | 22,871 | 22,011 |
Accrued payroll | 15,909 | 17,793 |
Total current liabilities | 199,834 | 164,697 |
Deferred income taxes | 18,859 | 18,803 |
Other liabilities | 2,723 | 2,452 |
Total Liabilities | 221,416 | 185,952 |
Stockholders' Equity: | ||
Common stock | 283 | 282 |
Additional paid-in capital | 108,399 | 106,956 |
Retained earnings | 295,846 | 262,632 |
Treasury stock, at cost | (15,862) | (15,862) |
Total Stockholders' Equity | 388,666 | 354,008 |
Total Liabilities and Stockholders' Equity | $ 610,082 | $ 539,960 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Net sales | $ 680,769 | $ 639,570 | $ 1,889,650 | $ 1,832,574 |
Cost of sales | 592,201 | 555,918 | 1,640,482 | 1,592,309 |
Gross profit | 88,568 | 83,652 | 249,168 | 240,265 |
Selling, general and administrative expenses | 66,707 | 63,235 | 193,505 | 188,900 |
Income from operations | 21,861 | 20,417 | 55,663 | 51,365 |
Interest/other expense, net | (29) | (36) | (67) | (72) |
Income before taxes | 21,832 | 20,381 | 55,596 | 51,293 |
Income tax provision | (8,831) | (8,204) | (22,382) | (20,556) |
Net income | $ 13,001 | $ 12,177 | $ 33,214 | $ 30,737 |
Earnings per common share: | ||||
Basic | $ 0.49 | $ 0.46 | $ 1.26 | $ 1.17 |
Diluted | $ 0.49 | $ 0.46 | $ 1.25 | $ 1.16 |
Shares used in computation of earnings per common share: | ||||
Basic | 26,423 | 26,266 | 26,281 | 26,225 |
Diluted | 26,622 | 26,524 | 26,514 | 26,498 |
CONDENSED CONSOLIDATED STATEME4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash Flows from Operating Activities: | ||
Net income | $ 33,214 | $ 30,737 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 6,597 | 5,998 |
Provision for doubtful accounts | 1,103 | 826 |
Stock-based compensation expense | 720 | 702 |
Deferred income taxes | 56 | 50 |
Excess tax benefit from exercise of equity awards | (472) | (503) |
Changes in assets and liabilities: | ||
Accounts receivable | (39,262) | 8,287 |
Inventories | (11,656) | (3,400) |
Prepaid expenses and other current assets | 79 | (2,102) |
Other non-current assets | (449) | (31) |
Accounts payable | 35,654 | (15,430) |
Accrued expenses and other liabilities | (279) | 3,749 |
Net cash provided by operating activities | 25,305 | 28,883 |
Cash Flows from Investing Activities: | ||
Purchases of property and equipment | (10,069) | (5,522) |
Proceeds from sale of equipment | 10 | |
Net cash used for investing activities | (10,069) | (5,512) |
Cash Flows from Financing Activities: | ||
Excess tax benefit from exercise of equity awards | 472 | 503 |
Issuance of stock under Employee Stock Purchase Plan | 435 | 360 |
Exercise of stock options | 379 | 186 |
Payment of payroll taxes on stock-based compensation through shares withheld | (564) | (533) |
Net cash provided by financing activities | 722 | 516 |
Increase in cash and cash equivalents | 15,958 | 23,887 |
Cash and cash equivalents, beginning of period | 60,909 | 42,547 |
Cash and cash equivalents, end of period | 76,867 | 66,434 |
Non-cash Investing Activities: | ||
Accrued capital expenditures | 711 | 290 |
Supplemental Cash Flow Information: | ||
Income taxes paid | $ 23,360 | $ 22,092 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 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 and nine months ended September 30, 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 Standards On May 28, 2014, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 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 Nine Months Ended September 30, 2015 2014 2015 2014 Numerator: Net income $ 13,001 $ 12,177 $ 33,214 $ 30,737 Denominator: Denominator for basic earnings per share 26,423 26,266 26,281 26,225 Dilutive effect of employee stock awards 199 258 233 273 Denominator for diluted earnings per share 26,622 26,524 26,514 26,498 Earnings per share: Basic $ 0.49 $ 0.46 $ 1.26 $ 1.17 Diluted $ 0.49 $ 0.46 $ 1.25 $ 1.16 For the three and nine months ended September 30, 2015 and 2014, we had no outstanding nonvested stock units or stock options that were excluded from the computation of diluted earnings per share. |
Segment and Related Disclosures
Segment and Related Disclosures | 9 Months Ended |
Sep. 30, 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 and nine months ended September 30, 2015 and 2014 is shown below: Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, Net sales: SMB $ 268,720 $ 254,432 $ 777,940 $ 775,959 Large Account 242,771 201,979 684,033 625,187 Public Sector 169,278 183,159 427,677 431,428 Total net sales $ 680,769 $ 639,570 $ 1,889,650 $ 1,832,574 Operating income (loss): SMB 10,462 7,133 30,604 24,510 Large Account 11,007 10,879 30,916 28,981 Public Sector 3,568 4,743 3,552 4,552 Headquarters/Other (3,176 ) (2,338 ) (9,409 ) (6,678 ) Total operating income $ 21,861 $ 20,417 $ 55,663 $ 51,365 Interest/other expense, net (29 ) (36 ) (67 ) (72 ) Income before taxes $ 21,832 $ 20,381 $ 55,596 $ 51,293 Selected Operating Expense: Depreciation and amortization: SMB 5 1 16 3 Large Account 319 348 972 1,023 Public Sector 39 23 118 91 Headquarters/Other 1,863 1,761 5,491 4,881 Total depreciation and amortization $ 2,226 $ 2,133 $ 6,597 $ 5,998 Assets at September 30, 2015: SMB $ 201,833 Large Account 284,575 Public Sector 64,140 Headquarters/Other 59,534 Total assets $ 610,082 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 $25,571 as of September 30, 2015. Our capital expenditures consist largely of IT hardware and software purchased to maintain or upgrade our management information systems and equipment related to our new distribution center in 2015. These information systems and the distribution center 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 | 9 Months Ended |
Sep. 30, 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 |
Bank Borrowing and Trade Credit
Bank Borrowing and Trade Credit Arrangements | 9 Months Ended |
Sep. 30, 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 accounts 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 September 30, 2015). The one-month LIBOR rate at September 30, 2015 was 0.20%. 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 September 30, 2015 or December 31, 2014, and accordingly, the entire $50,000 facility was available for borrowings under the credit facility. At September 30, 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 September 30, 2015 and December 31, 2014, accounts payable included $32,554 and $17,638, respectively, owed to these financial institutions. |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 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 Nine Months Ended September 30, 2015 2014 2015 2014 Numerator: Net income $ 13,001 $ 12,177 $ 33,214 $ 30,737 Denominator: Denominator for basic earnings per share 26,423 26,266 26,281 26,225 Dilutive effect of employee stock awards 199 258 233 273 Denominator for diluted earnings per share 26,622 26,524 26,514 26,498 Earnings per share: Basic $ 0.49 $ 0.46 $ 1.26 $ 1.17 Diluted $ 0.49 $ 0.46 $ 1.25 $ 1.16 |
Segment and Related Disclosur11
Segment and Related Disclosures (Tables) | 9 Months Ended |
Sep. 30, 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 and nine months ended September 30, 2015 and 2014 is shown below: Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, Net sales: SMB $ 268,720 $ 254,432 $ 777,940 $ 775,959 Large Account 242,771 201,979 684,033 625,187 Public Sector 169,278 183,159 427,677 431,428 Total net sales $ 680,769 $ 639,570 $ 1,889,650 $ 1,832,574 Operating income (loss): SMB 10,462 7,133 30,604 24,510 Large Account 11,007 10,879 30,916 28,981 Public Sector 3,568 4,743 3,552 4,552 Headquarters/Other (3,176 ) (2,338 ) (9,409 ) (6,678 ) Total operating income $ 21,861 $ 20,417 $ 55,663 $ 51,365 Interest/other expense, net (29 ) (36 ) (67 ) (72 ) Income before taxes $ 21,832 $ 20,381 $ 55,596 $ 51,293 Selected Operating Expense: Depreciation and amortization: SMB 5 1 16 3 Large Account 319 348 972 1,023 Public Sector 39 23 118 91 Headquarters/Other 1,863 1,761 5,491 4,881 Total depreciation and amortization $ 2,226 $ 2,133 $ 6,597 $ 5,998 Assets at September 30, 2015: SMB $ 201,833 Large Account 284,575 Public Sector 64,140 Headquarters/Other 59,534 Total assets $ 610,082 |
Basis of Presentation - Additio
Basis of Presentation - Additional Information (Detail) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Significant Accounting Policies [Line Items] | ||
Comprehensive income | $ 0 | $ 0 |
Computation of Basic and Dilute
Computation of Basic and Diluted Earnings Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Numerator: | ||||
Net income | $ 13,001 | $ 12,177 | $ 33,214 | $ 30,737 |
Denominator: | ||||
Denominator for basic earnings per share | 26,423 | 26,266 | 26,281 | 26,225 |
Dilutive effect of employee stock awards | 199 | 258 | 233 | 273 |
Denominator for diluted earnings per share | 26,622 | 26,524 | 26,514 | 26,498 |
Earnings per share: | ||||
Basic | $ 0.49 | $ 0.46 | $ 1.26 | $ 1.17 |
Diluted | $ 0.49 | $ 0.46 | $ 1.25 | $ 1.16 |
Segment and Related Disclosur14
Segment and Related Disclosures - Additional Information (Detail) $ in Thousands | 9 Months Ended | |
Sep. 30, 2015USD ($)Segment | Dec. 31, 2014USD ($) | |
Segment Reporting Information [Line Items] | ||
Number of reporting segments | Segment | 3 | |
Total assets | $ 610,082 | $ 539,960 |
Intersegment Elimination | ||
Segment Reporting Information [Line Items] | ||
Total assets | $ (25,571) |
Segment Information Applicable
Segment Information Applicable to Reportable Operating Segment (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Net sales: | |||||
Net sales | $ 680,769 | $ 639,570 | $ 1,889,650 | $ 1,832,574 | |
Operating income (loss): | |||||
Operating income (loss) | 21,861 | 20,417 | 55,663 | 51,365 | |
Interest/other expense, net | (29) | (36) | (67) | (72) | |
Income before taxes | 21,832 | 20,381 | 55,596 | 51,293 | |
Depreciation and amortization: | |||||
Depreciation and amortization | 2,226 | 2,133 | 6,597 | 5,998 | |
Total assets: | |||||
Total assets | 610,082 | 610,082 | $ 539,960 | ||
Small and Medium Sized Businesses segment | |||||
Net sales: | |||||
Net sales | 268,720 | 254,432 | 777,940 | 775,959 | |
Operating income (loss): | |||||
Operating income (loss) | 10,462 | 7,133 | 30,604 | 24,510 | |
Depreciation and amortization: | |||||
Depreciation and amortization | 5 | 1 | 16 | 3 | |
Total assets: | |||||
Total assets | 201,833 | 201,833 | |||
Large Account Segment | |||||
Net sales: | |||||
Net sales | 242,771 | 201,979 | 684,033 | 625,187 | |
Operating income (loss): | |||||
Operating income (loss) | 11,007 | 10,879 | 30,916 | 28,981 | |
Depreciation and amortization: | |||||
Depreciation and amortization | 319 | 348 | 972 | 1,023 | |
Total assets: | |||||
Total assets | 284,575 | 284,575 | |||
Public Sector | |||||
Net sales: | |||||
Net sales | 169,278 | 183,159 | 427,677 | 431,428 | |
Operating income (loss): | |||||
Operating income (loss) | 3,568 | 4,743 | 3,552 | 4,552 | |
Depreciation and amortization: | |||||
Depreciation and amortization | 39 | 23 | 118 | 91 | |
Total assets: | |||||
Total assets | 64,140 | 64,140 | |||
Headquarters and Other | |||||
Operating income (loss): | |||||
Operating income (loss) | (3,176) | (2,338) | (9,409) | (6,678) | |
Depreciation and amortization: | |||||
Depreciation and amortization | 1,863 | $ 1,761 | 5,491 | $ 4,881 | |
Total assets: | |||||
Total assets | $ 59,534 | $ 59,534 |
Bank Borrowings and Trade Credi
Bank Borrowings and Trade Credit Arrangements - Additional information (Detail) | 9 Months Ended | |
Sep. 30, 2015USD ($) | Dec. 31, 2014USD ($) | |
Subordinated Borrowing [Line Items] | ||
Line of credit, borrowing capacity | $ 50,000,000 | |
Credit facility, expiration date | Feb. 24, 2017 | |
Line of credit, maximum borrowing capacity | $ 80,000,000 | |
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 | 50,000,000 | 50,000,000 |
Maximum | ||
Subordinated Borrowing [Line Items] | ||
Amount owed to financial institution for inventory financing | 65,000,000 | 65,000,000 |
Accounts Payable | ||
Subordinated Borrowing [Line Items] | ||
Amount owed to financial institution for inventory financing | $ 32,554,000 | $ 17,638,000 |
Prime Rate | ||
Subordinated Borrowing [Line Items] | ||
Debt instrument, interest rate | 3.25% | |
One-month LIBOR rate | ||
Subordinated Borrowing [Line Items] | ||
Debt instrument, interest rate | 0.20% |