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PCM Reports Record Third Quarter Results

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Reports Record Third Quarter EPS of $0.43; Record Third Quarter Adjusted EPS of $0.52
Company Increases Full-Year Earnings Guidance, Expects $1.81 to $1.89 Adjusted EPS

EL SEGUNDO, Calif., Oct. 26, 2016 (GLOBE NEWSWIRE) -- PCM, Inc. (NASDAQ: PCMI), a leading technology solutions provider, today reported record financial results for the third quarter of 2016. Third Quarter 2016 Highlights (Compared to Third Quarter 2015) Record net sales of $584.9 million, up 44%Record third quarter gross profit of $82.7 million, up 37%Record third quarter operating profit of $10.7 million, up $9.7 millionRecord third quarter adjusted EBITDA of $15.2 million, up 145%Record third quarter diluted EPS of $0.43 compared to $(0.04)Record third quarter adjusted EPS from continuing operations of $0.52 compared to $0.12 Frank Khulusi, Chairman and CEO of PCM, Inc., commented, "This was a quarter of tremendous execution. We smashed the high end of our sales guidance by approximately $25 million, and exceeded the sales of the second quarter which was expected to be our seasonally strongest. We also exceeded our stated gross margin target range of 13.5% to 14%. As a result, we crushed the high end of our EPS guidance, exceeding it by $0.15, or 40%, and delivering $0.52 in adjusted EPS. In summary, this was a phenomenal quarter, delivering strong organic growth as a result of the aggressive investments we've made over the past few years, and leveraging our 2015 acquisitions. We continued to gain momentum as evidenced by the substantial increase in our Q3 2016 year over year growth rate of 44% compared to our Q2 2016 year over year growth rate of 21% with no additional acquisitions consummated in either of the 2016 periods, and my confidence in the business continues to rise. The third quarter results further validate our strategic position as a larger, more profitable, and increasingly sophisticated IT solutions powerhouse. It's a great time to be at PCM, and we are better positioned than ever for the future." Jay Miley, President of PCM, Inc., said, "I continue to be encouraged by the performance of our sales teams. Our field sales team, which primarily serves commercial, mid-market and enterprise customers, organically delivered 21% revenue growth year on year, far outpacing industry norms. Additionally, our public sector business grew their top line by 31% and their operating income by 27% year on year, driven by improved performance in our SLED business. I'm also encouraged that the investments we have made in our advanced solutions business are paying off. This business represented 43% of our gross billed revenues in the third quarter, an increase from the 41% mix in the prior year, despite the acquisition of Tiger Direct in December 2015, which primarily sells categories outside of advanced solutions." Miley continued, "As we previously indicated, we are also making significant investments in our new Rio Rancho sales office. As of today we have 74 sales reps in Rio Rancho. Despite the investments we have made in Rio Rancho and the advanced solutions I just mentioned, our cost structure significantly improved year over year by 232 basis points, primarily driven by disciplined cost management, the realization of acquisition synergies and improved productivity." Khulusi continued, "Given the recent significant increase in our stock price, we have determined that it is best to measure our financial performance and report our adjusted results without the impact of stock-based compensation, which has a greater impact for additional grants at higher stock price levels. This exclusion is also consistent with how certain of our peer group measure and report their performance. For 2016, our stock-based compensation expense was approximately $0.5 million per quarter, or between $0.02 and $0.03 per share, and $0.02 per share in Q3 2016. Our previous guidance of $1.51 to $1.64 in adjusted EPS for the 2016 fiscal year, adjusted for this change, would have been $1.61 to $1.74." Commenting on PCM's outlook, Khulusi concluded, "Due to our phenomenal Q3 and year-to-date  results and our continued focus on delivering strong performance, we are increasing our full year adjusted EPS guidance to a range of $1.81 to $1.89 per share on sales in the range of $2.23 billion to $2.24 billion. For the fourth quarter, this translates to adjusted EPS expected in the range of $0.40 to $0.48 per share on revenues of $565 million to $580 million, with two less selling days in Q4 compared to Q3 and assumes a slightly higher level of sales reported on a net basis." Results of Operations Net Sales The following table presents our net sales by segment for the periods presented (dollars in thousands):   Three Months Ended September 30,       2016 2015       Net Sales Percentage of Total Net Sales Net Sales Percentage of Total Net Sales Dollar Change Percent Change Commercial $459,558 79%$336,372 83%$123,186 37%Public Sector 89,688 15 68,572 17 21,116 31 Canada 35,724  6 — — 35,724 NM (1)Corporate & Other (33)— (11)— (22)NM (1)Consolidated $584,937 100%$404,933 100%$180,004 44% (1)  Not meaningful. Consolidated net sales were $584.9 million in the three months ended September 30, 2016 compared to $404.9 million in the three months ended September 30, 2015, an increase of $180.0 million, or 44%. This increase was primarily due to the addition of sales from our fourth quarter 2015 acquisitions and strong organic growth predominantly in our field sales organization, as well as growth in our state, local and educational business within the public sector segment. Consolidated sales of services were $37.2 million in the three months ended September 30, 2016 compared to $31.9 million in the three months ended September 30, 2015, an increase of $5.3 million, or 17%, and represented 6% and 8% of net sales in each of the three months ended September 30, 2016 and 2015, respectively. Commercial net sales were $459.6 million in the three months ended September 30, 2016 compared to $336.4 million in the three months ended September 30, 2015, an increase of $123.2 million or 37%. The increase in Commercial net sales was primarily due to the addition of sales from our Tiger Direct acquisition and strong organic growth predominantly in our field sales organization. Public Sector net sales were $89.7 million in the three months ended September 30, 2016 compared to $68.6 million in the three months ended September 30, 2015, an increase of $21.1 million, or 31%. The increase in Public Sector net sales was primarily due to an increase in sales for our state and local government and educational institution ("SLED") business including the addition of sales from our Tiger Direct acquisition, partially offset by a small decrease in our federal business. Canada net sales were $35.7 million in the three months ended September 30, 2016, representing the sales from our Acrodex acquisition and the Canadian unit of the Tiger Direct assets acquired in December 2015. Gross Profit and Gross Profit Margin Consolidated gross profit was $82.7 million in the three months ended September 30, 2016 compared to $60.1 million in the three months ended September 30, 2015, an increase of $22.6 million, or 37%. Consolidated gross profit margin decreased to 14.1% in the three months ended September 30, 2016 from 14.9% in the same period last year. The increase in consolidated gross profit was primarily due to the increase in sales discussed above. The decrease in consolidated gross profit margin was primarily due to a change in sales mix, including a lower mix of sales reported on a net basis, and a 19 basis point decrease in vendor consideration as a percent of net sales. Selling, General & Administrative Expenses Consolidated SG&A expenses were $72.0 million in the three months ended September 30, 2016 compared to $59.2 million in the three months ended September 30, 2015, an increase of $12.8 million, or 22%. Consolidated SG&A expenses as a percentage of net sales decreased to 12.3% in the three months ended September 30, 2016 from 14.6% in the same period last year. The increase in consolidated SG&A expenses was primarily related to our fourth quarter 2015 acquisitions, including a $7.7 million increase in personnel costs primarily related to the acquisitions, a $1.0 million increase in amortization expense related to purchased intangibles and a $1.2 million increase in credit card related fees, partially offset by a $1.1 million decrease in M&A related fees. Operating Profit (Loss) The following table presents our operating profit (loss) and operating profit margin by segment for the periods presented (dollars in thousands):   Three Months Ended September 30,     Change in   2016 2015 Change in Operating   Operating Operating Profit Operating Operating Profit Operating Profit (Loss) Profit Margin   Profit (Loss) Margin(1) Profit (Loss) Margin(1) $ % % Commercial $20,779 4.5%$16,301 4.8%$4,478 27%(0.3)%Public Sector 4,779 5.3 3,772 5.5 1,007 27 (0.2)Canada 780 2.2 — — 780 NM (2)2.2 Corporate & Other (15,638)(2.7)(1)(19,117)(4.7)(1)3,479 (18)2.0 Consolidated  $10,700 1.8%$956 0.2%$9,744 1,019%1.6% (1) Operating profit margin for Corporate & Other is computed based on consolidated net sales. Operating profit margin for each of the other segments is computed based on the respective segment's net sales. (2) Not meaningful. Consolidated operating profit was $10.7 million in the three months ended September 30, 2016 compared to $1.0 million in the three months ended September 30, 2015, an increase of $9.7 million. Commercial operating profit was $20.8 million in the three months ended September 30, 2016 compared to $16.3 million in the three months ended September 30, 2015, an increase of $4.5 million, or 27%. The increase in Commercial operating profit was primarily due to a $14.9 million increase in Commercial gross profit, partially offset by increases in personnel costs related to the Tiger Direct acquisition, investments in advanced technologies and software specialists and variable compensation on increased gross profit.  Public Sector operating profit was $4.8 million in the three months ended September 30, 2016 compared to $3.8 million in the three months ended September 30, 2015, an increase of $1.0 million, or 27%. The increase in Public Sector operating profit was primarily due to an increase in Public Sector gross profit, partially offset by a $0.5 million increase in personnel costs and $0.2 million of amortization costs primarily resulting from the Tiger Direct acquisition. Canada operating profit was $0.8 million in the three months ended September 30, 2016, representing the operating profit from our Acrodex acquisition and the Canadian unit of the Tiger Direct assets acquired in the fourth quarter of 2015. Corporate & Other operating expenses include corporate related expenses such as legal, accounting, information technology, product management and certain other administrative costs that are not otherwise included in our reportable operating segments. Corporate & Other operating expenses were $15.6 million in the three months ended September 30, 2016 compared to $19.1 million in the three months ended September 30, 2015, a decrease of $3.5 million, or 18%. The decrease in our Corporate & Other operating expenses was primarily due to a $1.1 million decrease in M&A related expenses, a $0.5 million decrease in depreciation expense and a $0.4 million gain resulting from a favorably negotiated lease termination. Income (Loss) From Continuing Operations Income from continuing operations (after tax) was $5.3 million, or $0.43 per diluted share, in the three months ended September 30, 2016 compared to loss from continuing operation of $0.5 million, or $(0.04) per diluted share, in the same period last year. Adjusted EBITDA and Adjusted EPS Adjusted EBITDA (as defined below) for the three months ended September 30, 2016 was $15.2 million compared to $6.2 million for the three months ended September 30, 2015. Non-GAAP EPS (Adjusted EPS) from continuing operations was $0.52 for the three months ended September 30, 2016 compared to $0.12 in the three months ended September 30, 2015. The increase in adjusted EBITDA and adjusted EPS was primarily driven by the increase in operating profit discussed above, but excludes the impact of a $1.1 million reduction in M&A related fees, and a $0.5 million reduction in severance and restructuring related costs. Consolidated Balance Sheet and Cash Flow We generated cash flow from operations for the nine months ended September 30, 2016 of $73.1 million, compared to cash used in operations of $6.3 million in the nine months ended September 30, 2015. Accounts receivable at September 30, 2016 was $377.8 million, an increase of $36.7 million from December 31, 2015. Inventory at September 30, 2016 was $79.0 million, an increase of $23.6 million from December 31, 2015. Accounts payable at September 30, 2016 was $280.9 million, an increase of $79.3 million from December 31, 2015. Cash flow used in investing activities during the nine months ended September 30, 2016 totaled $5.6 million compared to $37.0 million during the nine months ended September 30, 2015. Investing activities for the nine months ended September 30, 2016 were primarily related to $5.1 million of capital expenditures and $0.5 million of incremental acquisition-related investments. Investing activities for the nine months ended September 30, 2015 was primarily related to a $17.3 million payment for our acquisition of the assets of En Pointe, the purchase of real property in Irvine, California for $5.8 million and the purchase of real property in Lewis Center, Ohio for $6.0 million, as well as expenditures relating to investments in our IT infrastructure and the creation of enhanced electronic tools for our account executives and sales support staff. Total notes payable, including the $4.7 million of note payable related to asset held for sale in connection with our Irvine property, decreased by $3.2 million to $36.0 million at September 30, 2016 compared to December 31, 2015. Outstanding borrowings under our line of credit decreased by $40.8 million to $121.7 million at September 30, 2016 compared to December 31, 2015. Account Executive Headcount The following table presents our average account executive headcount, by segment, for our continuing operations for the periods presented: Average Account Executive Headcount By Segment: Three Months Ended September  30,  2016 2015 Commercial 834 646 Public Sector 166 127 Canada 81 — Total 1,081 773  Product Sales Mix The following table sets forth our net billed sales by major categories as a percentage of total net billed sales for the periods presented, determined based upon our internal product code classifications.   Three Months Ended September 30, Y/Y Sales Product Sales Mix: 2016 2015 Growth Software(1) 26%29%23%Notebooks and Tablets 19 18 49 Networking 9 8 58 Manufacturer service and warranties(1) 7 8 21 Delivered services 6 8 17 Desktops 6 7 14 Display 4 4 40 Printers 3 1 160 Accessories 3 3 42 Storage 3 4 31 Servers 2 3 15 Other(2) 12 7 71 Total 100%100%   (1)  Software, including software licenses, maintenance and enterprise agreements, and manufacturer service and warranties are shown, for purposes of this table, on a gross sales billed to customers basis, net of returns and do not reflect the net down impact related to revenue recognition for sales of such products.(2)  Other includes power, input devices, supplies, consumer electronics, memory, iPod/MP3 and miscellaneous other items. Non-GAAP Measure We are presenting earnings before interest, taxes, depreciation and amortization expenses (EBITDA), adjusted EBITDA and non-GAAP EPS (adjusted EPS), which are financial measures that are not determined in accordance with accounting principles generally accepted in the United States of America, or GAAP. Adjusted EBITDA and adjusted EPS remove the effect of severance and restructuring related expenses related to our cost reduction initiatives and stock-based compensation, as well as uncommon, non-recurring or special items. Adjusted EPS also removes the effect of amortization of intangibles acquired in acquisitions. Depreciation and amortization expenses primarily represent an allocation to current expense of the cost of historical capital expenditures and for acquired intangible assets resulting from prior business acquisitions. EBITDA, adjusted EBITDA and adjusted EPS should be used in conjunction with other GAAP financial measures and are not presented as an alternative measure of operating results, as determined in accordance with GAAP. We believe that these non-GAAP financial measures allow a more meaningful comparison of our operating performance trends to both management and investors that is more indicative of our consolidated operating results across reporting periods. We believe that adjusted EBITDA and adjusted EPS provide a better understanding of our company's operating performance and cash flows. A reconciliation of the non-GAAP consolidated financial measures is included in a table below. Conference Call Management will hold a conference call, which will be webcast, on October 26, 2016 at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) to discuss its third quarter results. To listen to PCM management's discussion of its third quarter results live, access http://investor.pcm.com/events.cfm. The archived webcast can be accessed at www.investor.pcm.com under "Events & Presentations." A replay of the conference call by phone will be available from 7:30 p.m. ET on October 26, 2016 until November 2, 2016 and can be accessed by calling (855) 859-2056 (International (404) 537-3406) and inputting code 97759833.    About PCM, Inc. PCM, Inc., through its wholly-owned subsidiaries, is a leading technology solutions provider to small and medium sized businesses, mid-market and enterprise customers, government and educational institutions and individual consumers across the United States and Canada. We generated net sales of nearly $2.1 billion in the twelve months ended September 30, 2016. For more information, please visit investor.pcm.com or call (310) 354-5600. Forward-looking Statements This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements regarding our expectations, hopes or intentions regarding the future, including but not limited to, statements related to our strategic positioning; our positioning for future growth; our confidence in the business; expectation of 2016 financial performance, opportunities, expectations or intentions for growth in top or bottom line operating results; expectations of earnings per share and statements regarding our investments paying off. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause our actual results to differ materially include without limitation risks and uncertainties related to the following: our ability to attract and retain key employees; our ability to receive expected returns on changes in our sales and services organizations or strategic investments, including without limit, investments in advanced technology solutions and services; risks associated with our ability to integrate our En Pointe, Acrodex and TigerDirect acquisitions; availability of key vendor incentives and other vendor assistance; our IT infrastructure; the relationship between the number of our account executives and productivity; decreased sales related to any of our segments, including but not limited to, potential decreases in sales resulting from the loss of or a reduction in purchases from significant customers; possible discontinuance of IT licenses used to operate our business which are provided by vendors; increased competition, including, but not limited to, increased competition from direct sales by some of our largest vendors and increased pricing pressures which affect our pricing strategy in any given period; the effect of our pricing strategy on our operating results; potential decreases in sales related to changes in our vendors products; the potential lack of availability of government funding applicable to our Public Sector business; the impact of seasonality on our sales; availability of products from third party suppliers at reasonable prices; business and other conditions in Canada and the Asia Pacific region and the related effects on our newly acquired Canadian and our Asia-Pacific operations, including without limitation our executive management's lack of experience operating in the Canadian market; increased expenses, including, but not limited to, interest expense, foreign currency transaction gains/losses and other expenses which may increase as a result of future inflationary pressures; our advertising, marketing and promotional efforts may be costly and may not achieve desired results; shifts in market demand or price erosion of owned inventory; other risks related to foreign currency fluctuations; warranties and indemnities we may be required to provide to third parties through our commercial contracts; data security; litigation by or against us; and availability of financing, including availability under our existing credit lines. Additional factors that could cause our actual results to differ are discussed under the heading "Risk Factors" in Item 1A, Part II of our Form 10-Q for the period ended September 30, 2016, on file with the Securities and Exchange Commission, and in our other reports filed from time to time with the SEC. All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statements. -Financial Tables Follow-                                        PCM, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in thousands, except per share amounts)     Three Months Ended September 30, Nine Months Ended September 30,   2016 2015 2016 2015 Net sales $584,937 $404,933 $1,663,960 $1,179,763 Cost of goods sold 502,282 344,790 1,427,999 1,018,549 Gross profit 82,655 60,143 235,961 161,214 Selling, general and administrative expenses 71,955 59,187 210,377 164,615 Operating profit (loss) 10,700 956 25,584 (3,401)Interest expense, net 1,598 1,018 4,533 2,661 Income (loss) from continuing operations before income taxes 9,102 (62)21,051 (6,062)Income tax expense (benefit) 3,781 421 8,168 (2,230)Income (loss) from continuing operations  5,321  (483) 12,883  (3,832)Loss from discontinued operations, net of taxes — (302)— (259)Net income (loss) $5,321 $(785)$12,883 $(4,091)          Basic and Diluted Earnings (Loss) Per Common Share         Basic EPS:             Income (loss) from continuing operations $0.45 $(0.04)$1.09 $(0.32)Loss from discontinued operations, net of taxes — (0.03)— (0.02)Net income (loss) $0.45 $ (0.07)$1.09 $ (0.34)          Diluted EPS:         Income (loss) from continuing operations $0.43 $(0.04)$1.04 $(0.32)Loss from discontinued operations, net of taxes — (0.03)— (0.02)Net income (loss) $ 0.43 $ (0.07)$ 1.04 $ (0.34)          Weighted average number of common shares outstanding:         Basic 11,722 11,976 11,807 12,101 Diluted 12,503 11,976 12,398 12,101    PCM, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES  (unaudited, in thousands)     Three Months EndedSeptember 30, Nine Months EndedSeptember 30,   2016 2015 2016 2015 EBITDA(a):           Consolidated operating profit (loss) $10,700 $956 $25,584 $(3,401)Add: Consolidated depreciation expense 2,430 2,749  7,522  8,161 Consolidated amortization expense 1,445 421  4,400  924 EBITDA $14,575 $4,126 $37,506 $5,684             EBITDA Adjustments:           Stock-based compensation $453 $355 $1,457 $1,220 M&A related fees(b) 146 1,199  907  1,210 Severance & restructuring related costs(c) 39 582  2,273  3,729 Foreign exchange (gain) loss  18 (33) (262) (15)Write-off of CRM(d) — —  37  3,327 Legal settlement gain(e) — —  (1,333) — Total EBITDA adjustments $656 $2,103 $3,079 $9,471             Adjusted EBITDA           EBITDA $14,575 $4,126 $37,506 $5,684 Add: EBITDA Adjustments 656 2,103  3,079  9,471 Adjusted EBITDA $15,231 $6,229 $40,585 $15,155             Consolidated income (loss) from continuing operations:           Consolidated income (loss) from continuing operations before income taxes $9,102 $(62)$21,051 $(6,062)Less: Income tax expense (benefit)  3,781 421  8,168  (2,230)Consolidated income (loss) from continuing operations $5,321 $(483)$12,883 $(3,832)            Consolidated income (loss) from continuing operations before income taxes $9,102 $(62)$21,051 $(6,062)Add: EBITDA Adjustments 656 2,103  3,079  9,471 Amortization of purchased intangibles(f) 1,441 418  4,389  907 Adjusted income from continuing operations before income taxes 11,199 2,459  28,519  4,316 Less: Adjusted income tax expense 4,652 905  11,065  1,588 Non-GAAP consolidated income from continuing operations $6,547 $1,554 $17,454 $2,728             Diluted earnings per share:           GAAP diluted EPS           Consolidated income (loss) from continuing operations $0.43 $(0.04)$1.04 $(0.32)Non-GAAP diluted EPS           Non-GAAP consolidated income from continuing operations $0.52 $0.12 $1.41 $0.22             GAAP diluted weighted average number of common shares outstanding 12,503 11,976  12,398  12,101 Non-GAAP diluted weighted average number of common shares outstanding 12,503 12,476(g) 12,398  12,673(g)             (a) EBITDA — earnings from continuing operations before interest, taxes, depreciation and amortization.(b) Relates to costs incurred resulting from our 2015 acquisitions.(c) Includes employee severance related costs related to our cost reduction initiative and lease vacancy costs.(d) Relates to the write-off of internally developed software work in process related to our upcoming CRM system, which was one component of our overall ERP system conversion, in favor of a similar CRM system already configured and in production at En Pointe.(e) Relates to gain resulting from a class action settlement related to the DRAM Indirect Antitrust Litigation. (f) Includes amortization expense for acquisition-related intangible assets, which include trademarks, trade names, non-compete agreements and customer relationships. (g) Includes approximately 500,000 and 572,000 dilutive shares for the three and nine months ended September 30, 2015, respectively, for computation of non-GAAP diluted EPS.         PCM, INC. CONSOLIDATED BALANCE SHEETS (unaudited, in thousands, except per share amounts and share data)         September 30, December 31,   2016 2015 ASSETS     Current assets:     Cash and cash equivalents $9,940 $11,176 Accounts receivable, net of allowances of $1,018 and $558 377,764 341,018 Inventories 79,014 55,386 Prepaid expenses and other current assets 23,804 17,880 Deferred income taxes 3,559 4,425 Asset held for sale 5,812 5,812 Total current assets 499,893 435,697 Property and equipment, net 55,101 56,774 Goodwill 81,434 80,552 Intangible assets, net 16,571 20,807 Deferred income taxes 805 939 Other assets 4,744 5,404 Total assets $658,548 $600,173       LIABILITIES AND STOCKHOLDERS' EQUITY     Current liabilities:     Accounts payable $280,864 $201,524 Accrued expenses and other current liabilities 67,172 51,580 Deferred revenue 16,043 11,455 Line of credit 121,689 162,439 Notes payable — current 3,975 12,912 Note payable related to asset held for sale 4,651 4,799 Current liabilities of discontinued operations. 149 153 Total current liabilities. 494,543 444,862 Notes payable 27,325 21,454 Other long-term liabilities 10,175 20,289 Deferred income taxes 4,123 4,053 Total liabilities 536,166 490,658 Commitments and contingencies     Stockholders' equity:     Preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued and outstanding. — — Common stock, $0.001 par value; 30,000,000 shares authorized; 16,311,374 and 16,007,613 shares issued; 11,813,009 and 11,914,946 shares outstanding 16 16 Additional paid-in capital 126,081 122,932 Treasury stock, at cost: 4,498,365 and 4,092,667 shares (26,934)(23,326)Accumulated other comprehensive loss (322)(765)Retained earnings 23,541 10,658 Total stockholders' equity 122,382 109,515 Total liabilities and stockholders' equity $658,548 $600,173    PCM, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited, in thousands)   Nine Months Ended September 30,   2016  2015 Cash Flows From Operating Activities     Net income (loss) $12,883 $(4,091)Adjustments to reconcile net income to net cash provided by (used in) operating activities:     Depreciation and amortization 11,922  9,085 Write-off of software work in process —  3,327 Provision for deferred income taxes 1,034  (365)Excess tax benefit related to stock option exercises (392) (207)Non-cash stock-based compensation 1,457  1,220 Change in operating assets and liabilities:     Accounts receivable (36,824) (99,627)Inventories  (23,699) 8,154 Prepaid expenses and other current assets  (5,807) (7,401)Other assets 1,225  1,211 Accounts payable  90,517  67,602 Accrued expenses and other current liabilities  16,215  9,668 Deferred revenue 4,588  5,119 Total adjustments  60,236  (2,214)Net cash provided by (used in) operating activities  73,119  (6,305)Cash Flows From Investing Activities     Acquisition of assets of En Pointe —  (17,295)Acquisition of assets of Systemax (400)— Acquisition of Acrodex (93)— Purchases of property and equipment  (5,057) (19,666)Net cash used in investing activities (5,550) (36,961)Cash Flows From Financing Activities     Net borrowings (payments) under line of credit (40,750) 30,055 Borrowings under notes payable 525  17,695 Payments under notes payable (3,739) (3,451)Change in book overdraft  (11,180) 12,721 Payments of obligations under capital leases (1,832) (1,803)Payments of earn-out liability  (9,820) (5,443)Net proceeds from stock issued under stock option plans  1,662  596 Payments for deferred financing costs (655) (653)Common shares repurchased and held in treasury  (3,608) (5,555)Excess tax benefit related to stock option exercises 392  207 Net cash provided by (used in) financing activities . (69,005) 44,369 Effect of foreign currency on cash flow 200  (1,044)Net change in cash and cash equivalents  (1,236) 59 Cash and cash equivalents at beginning of the period  11,176  8,892 Cash and cash equivalents at end of the period $9,940 $8,951 Supplemental Cash Flow Information     Interest paid  $3,925 $2,557 Income taxes paid (refund), net 3,497  (2,922)Supplemental Non-Cash Investing and Financing Activities      Earn-out liability $   — $  32,500 Financed purchase of property and equipment  795  1,035 

Investor Relations: Brett Maas Hayden IR (646) 536-7331 brett@haydenir.com

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