EXHIBIT 99.1

 

Investor Relations:

Kim Rogers

Hayden IR

(385) 831-7337

kim@haydenir.com

 

PCM REPORTS RECORD FIRST QUARTER 2018 RESULTS

 

Net Sales Grew 4% to a First Quarter Record $542.8 Million

Gross Profit Margin Improves 40 Basis Points to a Record 15.4%

Sales of Services Increased 22% to $45 Million

 

El Segundo, California — April 25, 2018 — PCM, Inc. (NASDAQ: PCMI), a leading technology solutions provider, today reported financial results for the first quarter of 2018.

 

First Quarter Consolidated Financial Summary

 

		Three Months Ended March 31,
(in millions, except per share data)		2018				2017				% Change
Net Sales		$	542.8			$	522.8				4
Gross Profit			83.6				78.5				6
Gross Profit Margin			15.4	%			15.0	%			40	bp
Consolidated SG&A		$	77.4			$	73.8				5
Operating Profit			6.2				4.7				32
Net Income			2.8				4.2				(33	)
Non-GAAP Net Income			4.2				3.6				15
EBITDA			10.0				8.4				20
Adjusted EBITDA			11.0				9.7				14
Diluted Earnings per Share			0.23				0.31				(26	)
Adjusted Diluted Earnings per Share			0.34				0.27				26

 

Frank Khulusi, Chairman and CEO of PCM, Inc., stated, “This is a strong start to the year, with record first quarter revenues, gross margin and operating profit achieved through increased performance in the areas of our business where we have made significant investments and aligned our resources. The success of our strategy is evidenced by the 22% increase in services sales, improving our services mix to over 8% of net sales, which helped drive the gross margin gains in the quarter. Our new UK business also delivered strong performance and achieved near break-even results less than one year after its launch. All of these accomplishments, combined with restrained spending drove significant improvement in our operating profit. We continue to execute on our strategies to increase contributions from our higher value-added services and solutions and expand our international presence.”

 

 

Commenting on PCM’s outlook, Mr. Khulusi concluded, “We are tracking to a record year in sales, gross profit and adjusted EPS for 2018, as we begin reaping the benefits of our 2017 investments in security, cloud, hybrid data center and managed services. We are reiterating our 2018 guidance for non-GAAP earnings per share to be in a range of $2.00 - $2.10 per share, including the results of our UK segment, which we anticipate being profitable for the full year of 2018. Giving effect to the new revenue standard, which is being reflected in our guidance for the first time, and that some of our highest growing areas of the business such as security are now reported on a net basis, we expect our full year 2018 growth will be approximately 4%. We are also raising our gross margin guidance from approximately 15% to a range of 15.0% - 15.5% for the full year. Further, given the seasonality of our state, local and educational component of our public sector business, and given the historic strength of netted down revenue in the second quarter, among other factors, we expect revenue growth in the third and fourth quarter to exceed that of the second quarter.”

 

New Accounting Standard

 

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which, along with amendments issued in 2015 and 2016, replaced most existing revenue recognition guidance under GAAP and eliminate industry specific guidance. The core principle of the new guidance is that an entity should recognize revenue for the transfer of goods and services equal to an amount it expects to be entitled to receive for those goods and services. We adopted the guidance on January 1, 2018 using the full retrospective method, which resulted in adjustments to our consolidated statement of operations and consolidated statement of cash flows for the three months ended March 31, 2017 presented herein.

 

First Quarter Segment Sales Summary

 

		Three Months Ended March 31,
		2018								2017
(in thousands)		Net Sales				Percentage of Total Net Sales				Net Sales				Percentage of Total Net Sales				Dollar Change				Percent Change
Commercial		$	414,731				76	%		$	407,520				78	%		$	7,211				2	%
Public Sector			56,062				10				66,606				13				(10,544	)			(16	)
Canada			54,120				10				48,660				9				5,460				11
United Kingdom			18,073				3				—				—				18,073				NM	(1)
Corporate & Other			(154	)			—				(26	)			—				(128	)			NM	(1)
Consolidated		$	542,832				100	%(2)		$	522,760				100	%		$	20,072				4	%

(1)	Not meaningful.
(2)	Does not foot due to rounding.

 

Results of Operations

 

Net Sales

 

Consolidated net sales were $542.8 million in the three months ended March 31, 2018 compared to $522.8 million in the three months ended March 31, 2017, an increase of $20.0 million or 4%. Consolidated sales of services were $45.0 million in the three months ended March 31, 2018 compared to $36.8 million in the three months ended March 31, 2017, an increase of $8.2 million, or 22%, and represented 8% and 7% of consolidated net sales in the three months ended March 31, 2018 and 2017, respectively. Consolidated net sales growth primarily resulted from an $18.1 million increase in sales made in our new United Kingdom segment, but was negatively impacted by an $18.0 million increase in sales reported on a net basis.

 

Commercial net sales were $414.7 million in the three months ended March 31, 2018 compared to $407.5 million in the three months ended March 31, 2017, an increase of $7.2 million or 2%. Sales of services in our Commercial segment were $33.0 million in the three months ended March 31, 2018 compared to $27.2 million in the three months ended March 31, 2017, an increase of $5.8 million or 21%, and represented 8% and 7% of Commercial net sales in the three months ended March 31, 2018 and 2017, respectively. Net sales growth in our Commercial segment was impacted by a $6.1 million increase in sales reported on a net basis.

 

 

Public Sector net sales were $56.1 million in the three months ended March 31, 2018 compared to $66.6 million in the three months ended March 31, 2017, a decrease of $10.5 million or 16%, primarily due to a $9.8 million increase in sales reported on a net basis. Our federal sales decreased by 20%, while our state and local government and educational institution (“SLED”) sales decreased by 15%. Sales of services in our Public Sector segment were $3.1 million in the three months ended March 31, 2018 compared to $2.2 million in the three months ended March 31, 2017, an increase of $0.9 million or 45%, and represented 6% and 3% of Public Sector net sales in the three months ended March 31, 2018 and 2017, respectively. Our federal business net sales were negatively impacted in the quarter by the loss of a Federal contract, which we were unwilling to rebid at a loss as we stated last quarter. Our SLED business was negatively impacted by a $9.3 million increase in sales reported on a net basis, partially offset by a $1.4 million increase in sales of services.

 

Canada net sales were $54.1 million in the three months ended March 31, 2018 compared to $48.7 million in the three months ended March 31, 2017, an increase of $5.4 million, or 11%, despite a $1.4 million increase in sales reported on a net basis. Sales of services in our Canadian segment were $7.5 million in each of the three months ended March 31, 2018 and 2017, and represented 14% and 15% of Canada net sales in the three months ended March 31, 2018 and 2017, respectively.

 

Our United Kingdom segment, which officially launched in the second quarter of 2017, generated net sales of $18.1 million in the three months ended March 31, 2018.

 

Gross Profit and Gross Profit Margin

 

Consolidated gross profit was $83.6 million in the three months ended March 31, 2018 compared to $78.5 million in the three months ended March 31, 2017, an increase of $5.1 million, or 6%. Consolidated gross profit margin increased to 15.4% in the three months ended March 31, 2018 from 15.0% in the same period last year. The increase in consolidated gross profit was primarily due to the increase in net sales, partially offset by a $2.5 million decrease in vendor consideration. The increase in consolidated gross profit margin was primarily due to an $18.0 million increase in sales reported on a net basis and an increase in selling margins driven by a higher mix of services and solutions, partially offset by a reduction in vendor consideration received as a percentage of net sales.

 

Selling, General & Administrative Expenses

 

Consolidated SG&A expenses were $77.4 million in the three months ended March 31, 2018 compared to $73.8 million in the three months ended March 31, 2017, an increase of $3.6 million or 5%. Consolidated SG&A expenses as a percentage of net sales increased slightly to 14.3% in the three months ended March 31, 2018 from 14.1% in the same period last year. The increase in consolidated SG&A expenses was primarily related to a $4.6 million increase in personnel costs, of which $3.1 million related to our new United Kingdom segment, which was launched in the second quarter of 2017. The increase in consolidated SG&A expenses was also impacted by a $0.6 million increase in lease expenses partially offset by a $1.6 million decrease in outside service costs primarily related to the termination of the Pakistani BPO service contract and a $0.6 million decrease in travel and entertainment expenses.

 

Operating Profit

 

Consolidated operating profit increased 32% to $6.2 million compared to $4.7 million in the prior year, for the reasons discussed above.

 

Income Taxes

 

Income tax expense was $1.1 million in the three months ended March 31, 2018 compared to income tax benefit of $1.0 million in the three months ended March 31, 2017. Our effective tax rate was 28.9% compared to (36.1)% in the prior year. Income taxes in the three months ended March 31, 2018 reflected the new lower Federal income tax rate and other factors within tax reform, compared to income taxes in the three months ended March 31, 2017 benefiting from a credit to income tax expense of $2.3 million related to the excess tax benefits associated with the exercise of stock options.

 

 

Net Income

 

Net income for the three months ended March 31, 2018 was $2.8 million compared to $4.2 million for the three months ended March 31, 2017. Diluted earnings per share was $0.23 compared to $0.31 in the prior year.

 

Adjusted EPS

 

Non-GAAP EPS (adjusted EPS) was $0.34 for the three months ended March 31, 2018 compared to $0.27 in the three months ended March 31, 2017.

 

Consolidated Balance Sheet and Cash Flow

 

We had cash and cash equivalents of $12.2 million at March 31, 2018 compared to $9.1 million at December 31, 2017. We had $39.5 million of net cash provided by operating activities during the three months ended March 31, 2018 compared to $13.5 million of net cash used in operating activities in the three months ended March 31, 2017.

 

Accounts receivable at March 31, 2018 was $440.7 million, an increase of $1.0 million from December 31, 2017. Inventory at March 31, 2018 was $75.5 million, a decrease of $28.0 million from December 31, 2017, primarily related to certain purchases made in the fourth quarter of 2017 which have largely been sold in the first quarter of 2018.

 

Accounts payable at March 31, 2018 was $288.2 million, a decrease of $1.0 million from December 31, 2017.

 

Cash used in investing activities during the three months ended March 31, 2018 totaled $1.5 million compared to $6.0 million during the three months ended March 31, 2017. Investing activities for the three months ended March 31, 2018 were primarily related to expenditures relating to investments in our IT infrastructure. Investing activities for the three months ended March 31, 2017 were primarily related to a purchase of real property in Woodridge, Illinois for $3.1 million, expenditures relating to investments in our IT infrastructure, and leasehold improvements.

 

Within cash flows from financing activities, we paid earnout payments of $1.7 million in the three months ended March 31, 2018, compared to $2.8 million in the three months ended March 31, 2017. The earnout payment in 2018 relates to December 2017, and any remaining required earnout payments are scheduled to be paid in the second quarter of 2018.

 

Our outstanding borrowings under our line of credit was $184.7 million at March 31, 2018, a $29.1 million decline compared to $213.8 million at December 31, 2017.

 

 

Sales Mix

 

The  following table sets forth our gross billed sales (net of returns) by major categories as a percentage of total gross billed sales (net of returns) for the periods presented, determined based upon our internal product code classification:

 

		Three Months Ended March 31,								Y/Y Sales
		2018				2017				Growth
Software (1)			25	%			24	%			14	%
Notebooks and tablets			17				21				(12	)
Networking			9				8				23
Desktops			9				8				13
Delivered services			8				7				22
Display			5				5				11
Manufacturer service and warranties (1)			5				6				(14	)
Servers			3				2				15
Accessories			3				3				4
Storage			3				4				(5	)
Printers			2				3				(8	)
Other (2)			11				9				12
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.

 

Adjustments Relating to the New Revenue Recognition Standard

 

The adoption of ASU 2014-09 impacts our financial results as follows for the periods presented below (some items may not foot across due to rounding, in thousands, except per share amounts):

 

		Three Months Ended March 31, 2017												Three Months Ended June 30, 2017												Three Months Ended September 30, 2017												Three Months Ended December 31, 2017
		As Reported				New Revenue Recognition Standard Adjustment				As Adjusted				As Reported				New Revenue Recognition Standard Adjustment				As Adjusted				As Reported				New Revenue Recognition Standard Adjustment				As Adjusted				As Reported				New Revenue Recognition Standard Adjustment				As Adjusted
Net sales		$	524,399			$	(1,639	)		$	522,760			$	560,110			$	(4,028	)		$	556,082			$	545,479			$	(2,204	)		$	543,275			$	563,448			$	(18,678	)		$	544,770
Gross profit			78,205				293				78,498				85,371				(226	)			85,145				81,294				163				81,457				80,852				(1,224	)			79,628
Gross profit margin			14.9	%			10 bps				15.0	%			15.2	%			7 bps				15.3	%			14.9	%			9 bps				15.0	%			14.3	%			27 bps				14.6	%
Operating profit (loss)			4,473				238				4,711				5,624				(220	)			5,404				1,385				121				1,506				(41	)			(952	)			(993	)
Income tax expense (benefit)			(1,069	)			93				(976	)			1,273				(86	)			1,187				427				47				474				353				(371	)			(18	)
Net income (loss)			4,027				145				4,172				2,500				(134	)			2,366				(841	)			74				(767	)			(2,595	)			(581	)			(3,176	)
Earnings (Loss) Per Share:
Basic			0.33				0.01				0.34				0.20				(0.01	)			0.19				(0.07	)			0.01				(0.06	)			(0.22	)			(0.05	)			(0.27	)
Diluted			0.30				0.01				0.31				0.19				(0.01	)			0.18				(0.07	)			0.01				(0.06	)			(0.22	)			(0.05	)			(0.27	)

 

		At March 31, 2017												At June 30, 2017												At September 30, 2017
		As Reported				New Revenue Recognition Standard Adjustment				As Adjusted				As Reported				New Revenue Recognition Standard Adjustment				As Adjusted				As Reported				New Revenue Recognition Standard Adjustment				As Adjusted
Accounts receivable		$	354,301			$	12,618			$	366,919			$	442,460			$	12,269			$	454,729			$	412,733			$	14,497			$	427,230
Inventory			66,417				(11,331	)			55,086				77,439				(11,208	)			66,231				74,871				(13,273	)			61,598
Total current assets			446,602				1,287				447,889				541,735				1,061				542,796				506,011				1,224				507,235
Total assets			611,045				1,287				612,332				710,041				1,061				711,102				678,537				1,224				679,761
Accounts payable			241,470				236				241,706				355,834				229				356,063				271,841				271				272,112
Total current liabilities			447,006				236				447,242				536,910				229				537,139				506,050				271				506,321
Deferred income tax liability			1,556				410				1,966				3,758				324				4,082				3,819				371				4,190
Total liabilities			473,698				646				474,344				569,386				554				569,940				548,548				643				549,191
Retained Earnings			32,184				641				32,825				34,778				507				35,285				33,843				581				34,424
Total stockholders’ equity			137,347				641				137,988				140,655				507				141,162				129,989				581				130,570
Total liabilities and stockholders’ equity			611,045				1,287				612,332				710,041				1,061				711,102				678,537				1,224				679,761

 

 

		Year Ended December 31, 2017												Year Ended December 31, 2016
		As Reported				New Revenue Recognition Standard Adjustment				As Adjusted				As Reported				New Revenue Recognition Standard Adjustment				As Adjusted
Net sales		$	2,193,436			$	(26,549	)		$	2,166,887			$	2,250,587			$	(11,030	)		$	2,239,557
Gross profit			325,722				(994	)			324,728				318,801				126				318,927
Gross profit margin			14.8	%			14 bps				15.0	%			14.2	%			8 bps				14.2	%
Operating profit			11,441				(813	)			10,628				34,791				110				34,901
Income tax expense			984				(317	)			667				11,115				43				11,158
Net income			3,091				(496	)			2,595				17,593				67				17,660
Earnings Per Share:
Basic			0.25				(0.04	)			0.21				1.49				0.01				1.49
Diluted			0.24				(0.04	)			0.20				1.40				0.01				1.41

 

		At December 31, 2017												At December 31, 2016
		As Reported				New Revenue Recognition Standard Adjustment				As Adjusted				As Reported				New Revenue Recognition Standard Adjustment				As Adjusted
Accounts receivable		$	439,658			$	-			$	439,658			$	358,949			$	9,647			$	368,596
Inventory			103,471				-				103,471				80,872				(8,653	)			72,219
Total current assets			561,575				-				561,575				469,055				994				470,049
Total assets			740,252				-				740,252				629,810				994				630,804
Accounts payable			289,201				-				289,201				276,524				180				276,704
Total current liabilities			569,294				-				569,294				474,052				180				474,232
Deferred income tax liability			3,102				-				3,102				1,498				317				1,815
Total liabilities			612,626				-				612,626				501,339				498				501,837
Retained Earnings			31,248				-				31,248				28,251				496				28,747
Total stockholders’ equity			127,626				-				127,626				128,471				496				128,967
Total liabilities and stockholders’ equity			740,252				-				740,252				629,810				994				630,804

 

Non-GAAP Measures

 

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 April 25, 2018 at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) to discuss its first quarter results. To listen to PCM management’s discussion of its first quarter results live, access http://investor.pcm.com/events-presentations.

 

The archived webcast can be accessed at http://investor.pcm.com under “Events & Presentations.” A replay of the conference call by phone will be available from 7:30 p.m. ET on April 25, 2018 until May 2, 2018 and can be accessed by calling (855) 859-2056 (International (404) 537-3406) and inputting code 8757936.

 

 

About PCM, Inc.

 

PCM, Inc., through its wholly-owned subsidiaries, is a leading multi-vendor provider of technology solutions, including hardware, software and services to small, medium and enterprise businesses, state, local and federal governments and educational institutions across the United States, Canada and the UK. We generated net sales of $2.2 billion in the twelve months ended March 31, 2018. 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; expectation of financial performance, opportunities, expectations or intentions for growth in top or bottom line operating results; expectations for gross margins; expectations of reaping the benefits of our 2017 investments in security, cloud, hybrid data center and managed services; expectations for profitability for the full year of 2018; expectations for the full year 2018 growth; expectations for revenue growth in the third and fourth quarter to exceed that of the second quarter; expectations of earnings per share. 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, our call centers and our international expansion; risks associated with our ability to integrate our acquisitions; availability of key vendor incentives and other vendor assistance; our IT infrastructure; risks associated with cyber and data security including compliance with related regulatory requirements such as the European Union General Data Protection Regulation, which will apply to our operations beginning in May of 2018; 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; the effect of any failure by us to continue to successfully transition outsourced BPO services historically provided to our En Pointe business under a service agreement we acquired in connection with our En Pointe acquisition; 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 misappropriation or unauthorized use of our proprietary or confidential information by competitors or others; our loss of personnel to competitors; 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, the UK and Europe and the Asia Pacific region and the related effects on our Canadian, UK and our Asia-Pacific operations, including without limitation our executive management’s lack of experience operating in some of these markets; 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; litigation by or against us, including without limitation the litigation and other actions related to our En Pointe acquisition; 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 I of our Form 10-K for the year ended December 31, 2017, 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 March 31,
		2018				2017
Net sales		$	542,832			$	522,760
Cost of goods sold			459,236				444,262
Gross profit			83,596				78,498
Selling, general and administrative expenses			77,354				73,787
Operating profit			6,242				4,711
Interest expense, net			2,462				1,653
Equity income from unconsolidated affiliate			175				138
Income before income taxes			3,955				3,196
Income tax expense (benefit)			1,144				(976	)
Net income		$	2,811			$	4,172
Basic and Diluted Earnings Per Common Share
Basic		$	0.24			$	0.34
Diluted			0.23				0.31
Weighted average number of common shares outstanding:
Basic			11,846				12,356
Diluted			12,153				13,452

 

 

PCM, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(unaudited, in thousands, except per share amounts)

 

		Three Months Ended March 31,
		2018				2017
EBITDA(a):
Consolidated operating profit		$	6,242			$	4,711
Add: Consolidated depreciation expense			2,713				2,440
Consolidated amortization expense			892				1,082
Equity income from unconsolidated affiliate(b)			175				138
EBITDA		$	10,022			$	8,371
EBITDA Adjustments:
Stock-based compensation		$	672			$	515
M&A and related litigation costs and fees (c)			240				170
Severance & restructuring related costs (d)			312				615
Foreign exchange (gain) loss			(230	)			25
Total EBITDA adjustments		$	994			$	1,325
Adjusted EBITDA:
EBITDA		$	10,022			$	8,371
Add: EBITDA Adjustments			994				1,325
Adjusted EBITDA		$	11,016			$	9,696
Net income:
Income before income taxes		$	3,955			$	3,196
Less: Income tax expense (benefit)			1,144				(976	)
Net income		$	2,811			$	4,172
Income before income taxes		$	3,955			$	3,196
Add: EBITDA Adjustments			994				1,325
Amortization of purchased intangibles (e)			888				1,078
Adjusted income before income taxes			5,837				5,599
Less: Adjusted income tax expense (f)			1,687				1,993
Non-GAAP net income		$	4,150			$	3,606
Diluted earnings per share:
GAAP diluted EPS		$	0.23			$	0.31
Non-GAAP diluted EPS			0.34				0.27
Diluted weighted average number of common shares outstanding			12,153				13,452

 

	(a)	EBITDA — earnings from continuing operations before interest, taxes, depreciation and amortization.
	(b)	Represents our equity income resulting from our 49% ownership interest in the NCE.
	(c)	Includes costs and fees, including litigation, related to our acquisitions.
	(d)	Includes employee severance related costs related to our cost reduction initiatives, lease vacancy costs and other restructuring related costs.
	(e)	Includes amortization expense for acquisition-related intangible assets, which include trademarks, trade names, non-compete agreements and customer relationships.
	(f)	The 2018 tax expense is based on our first quarter effective tax rate of 28.9%, which approximates our estimated effective tax rate for the full year of 2018. The 2017 tax expense assumes an estimated annual effective tax rate of 35.6%. Our actual effective tax rate for the three months ended March 31, 2017 was (36.1)% due to the effect of discrete tax benefits in the quarter.

 

 

PCM, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except per share amounts and share data)

 

		March 31,				December 31,
		2018				2017
ASSETS
Current assets:
Cash and cash equivalents		$	12,225			$	9,113
Accounts receivable, net of allowances of $1,449 and $2,181			440,683				439,658
Inventories			75,469				103,471
Prepaid expenses and other current assets			8,488				9,333
Total current assets			536,865				561,575
Property and equipment, net			70,733				71,551
Goodwill			87,823				87,768
Intangible assets, net			10,158				11,090
Deferred income taxes			1,702				1,759
Investment and other assets			4,960				6,509
Total assets		$	712,241			$	740,252
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	288,164			$	289,201
Accrued expenses and other current liabilities			55,465				55,040
Deferred revenue			6,625				7,913
Line of credit			184,693				213,778
Notes payable — current			3,462				3,362
Note payable related to asset held for sale			—				—
Total current liabilities			538,409				569,294
Notes payable			31,984				32,892
Other long-term liabilities			7,495				7,338
Deferred income taxes			3,279				3,102
Total liabilities			581,167				612,626
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; 17,220,896 and 17,170,273 shares issued; 11,830,244 and 11,779,621 shares outstanding			17				17
Additional paid-in capital			135,539				134,646
Treasury stock, at cost: 5,390,652 shares			(38,536	)			(38,536	)
Accumulated other comprehensive income			(5	)			251
Retained earnings			34,059				31,248
Total stockholders’ equity			131,074				127,626
Total liabilities and stockholders’ equity		$	712,241			$	740,252

 

 

PCM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

 

		Three Months ended March 31,
		2018				2017
Cash Flows From Operating Activities
Net income		$	2,811			$	4,172
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization			3,605				3,522
Equity income from unconsolidated affiliate			(175	)			(138	)
Distribution from equity method investee			78				—
Provision for deferred income taxes			226				(294	)
Non-cash stock-based compensation			672				515
Change in operating assets and liabilities:
Accounts receivable			(1,025	)			1,677
Inventories			28,002				17,133
Prepaid expenses and other current assets			845				3,967
Other assets			1,718				(367	)
Accounts payable			1,881				(38,648	)
Accrued expenses and other current liabilities			2,121				783
Deferred revenue			(1,288	)			(5,846	)
Total adjustments			36,660				(17,696	)
Net cash provided by (used in) operating activities			39,471				(13,524	)
Cash Flows From Investing Activities
Purchases of property and equipment			(1,479	)			(6,033	)
Net cash used in investing activities			(1,479	)			(6,033	)
Cash Flows From Financing Activities
Net borrowings (payments) under line of credit			(29,085	)			13,238
Borrowing under note payable			—				3,139
Payments under notes payable			(819	)			(1,261	)
Change in book overdraft			(2,974	)			3,648
Payments of earn-out liability			(1,736	)			(2,813	)
Payments of obligations under capital lease			(221	)			(521	)
Proceeds from capital lease obligations			—				587
Proceeds from stock issued under stock option plans			251				4,428
Payment for deferred financing costs			(27	)			(597	)
Payment of taxes related to net-settled stock awards			(28	)			(81	)
Net cash provided by (used in) financing activities			(34,639	)			19,767
Effect of foreign currency on cash flow			(241	)			389
Net change in cash and cash equivalents			3,112				599
Cash and cash equivalents at beginning of the period			9,113				7,172
Cash and cash equivalents at end of the period		$	12,225			$	7,771
Supplemental Cash Flow Information
Interest paid		$	2,285			$	1,341
Income taxes paid, net			1,134				2,346
Supplemental Non-Cash Investing and Financing Activities
Financed and accrued purchases of property and equipment			421				44