UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 20162017

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from____ to ____ .

Commission file number: 1-34167

ePlus inc.

(Exact name of registrant as specified in its charter)

Delaware
 
54-1817218
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

13595 Dulles Technology Drive, Herndon, VA 20171-3413
(Address, including zip code, of principal executive offices)

Registrant’s telephone number, including area code: (703) 984-8400

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☒   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitionsdefinition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.Act (Check one):

Large accelerated filer ☐
Accelerated filer ☒
Non-accelerated filer ☐  (Do☐(do not check if a smaller reporting company)
Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐  No ☒
 
The number of shares of common stock outstanding as of January 31, 20172018 was 7,080,46713,948,590.
 
TABLE OF CONTENTS

ePlus inc. AND SUBSIDIARIES

Part I. Financial Information: 
   
Item 1.
Financial Statements
 
   
 
Unaudited Condensed Consolidated Balance Sheets as of December 31, 20162017 and March 31, 20162017
5
   
 
Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months endedEnded December 31, 20162017 and 20152016
6
   
 
Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months endedEnded December 31, 20162017 and 20152016
7
   
 
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months endedEnded December 31, 20162017 and 20152016
8
   
 
Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Nine Months endedEnded December 31, 20162017
10
   
 
Notes to Unaudited Condensed Consolidated Financial Statements
11
   
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
26
   
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
4241
   
Item 4.
Controls and Procedures
4342
   
Part II. Other Information: 
   
Item 1.
Legal Proceedings
43
   
Item 1A.
Risk Factors
4443
   
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
44
   
Item 3.
Defaults Upon Senior Securities
45
   
Item 4.
Mine Safety Disclosures
45
   
Item 5.
Other Information
45
   
Item 6.
Exhibits
45
   
Signatures & Certifications
46
 
2
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain statements that are, or may be deemed to be, “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, or “Exchange Act,” and are made in reliance upon the protections provided by such acts for forward-looking statements. Such statements are not based on historical fact, but are based upon numerous assumptions about future conditions that may not occur. Forward-looking statements are generally identifiable by use of forward-looking words such as “may,” “should,” “would,” “intend,” “estimate,” “will,” “potential,” “possible,” “could,” “believe,” “expect,” “intend,” “plan,” “anticipate,” “project,” and similar expressions. Readers are cautioned not to place undue reliance on any forward-looking statements made by us or on our behalf. Forward-looking statements are made based upon information that is currently available or management’s current expectations and beliefs concerning future developments and their potential effects upon us, speak only as of the date hereof, and are subject to certain risks and uncertainties. We do not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur, or of which we hereafter become aware. Actual events, transactions and results may materially differ from the anticipated events, transactions or results described in such statements. Our ability to consummate such transactions and achieve such events or results is subject to certain risks and uncertainties. Such risks and uncertainties include, but are not limited to, the matters set forth below:

·national and international political instability fostering uncertainty and volatility in the global economy including exposure to fluctuation in foreign currency rates, and downward pressure on prices;
·significant adverse changes in, reductions in, or loss of our largest volume customer or one or more of our large volume customers, or vendors;
·exposure to changes in, interpretations of, or enforcement trends in legislation and regulatory matters;
·the creditworthiness of our customers and our ability to reserve adequately for credit losses;
·reduction of vendor incentives provided to us;
·we offer a comprehensive set of solutions — integrating information technology (IT) product sales, third-party software assurance and maintenance, our advanced professional and managed services, our proprietary software, and financing, and encounter the following challenges, risks, difficulties and uncertainties:
omanaging a diverse product set of solutions in highly competitive markets with a number of key vendors;
oincreasing the total number of customers utilizing integrated solutions by up-selling within our customer base and gaining new customers;
oadapting to meet changes in markets and competitive developments;
omaintaining and increasing advanced professional services by retaining highly skilled, competent, personnel and vendor certifications;
oincreasing the total number of customers who utilize our managed services and professional services and continuing to enhance our managed services offerings to remain competitive in the marketplace;
operforming professional and managed services competently;
omaintaining our proprietary software and updating our technology infrastructure to remain competitive in the marketplace; and
oreliance on third parties to perform some of our service obligations;obligations to our customers;
·changes in the IT industry and/or rapid changes in product offerings, including the proliferation of the cloud, infrastructure as a service and software as a service;
·our dependency on continued innovations in hardware, software, and services offerings by our vendors and our ability to partner with them;
·future growth rates in our core businesses;
·failure to comply with public sector contracts or applicable laws;
·changes to or loss of members of our senior management team and/or failure to successfully implement succession plans;
·our dependence on key personnel to maintain certain customer relationships, and our ability to hire, train, and retain sufficient qualified personnel;
·our ability to implement comprehensive plans for the integration of sales forces, cost containment, asset rationalization, systems integration and other key strategies;
·a possible decrease in the capital spending budgets of our customers or a decrease in purchases from us;
·our contracts may not be adequate to protect us, and we are subject to audit in which we may not pass, and our professional and liability insurance policies coverage may be insufficient to cover a claim;
·disruptions or a security breach in our IT systems and data and audio communication networks;
 
3
·our ability to secure our customers’ electronic and other confidential information, and remain secure during a cyber-security attack;
·
our ability to raise capital, maintain or increase as needed our lines of credit with vendors or floor planning facility, or obtain debt for our financing transactions or the effect of those changes on our common stock or its holders;
·our ability to realize our investment in leased equipment;
·our ability to successfully perform due diligence and integrate acquired businesses;
·the possibility of goodwill impairment charges in the future;
·our ability to protect our intellectual property rights and successfully defend any challenges to the validity of our patents or allegations that we are infringing upon any third party patents, and the costs associated with those actions, and, when appropriate, license required technology; and
·significant changes in accounting standards including changes to the financial reporting of leases which could impact the demand for our leasing services, or misclassification of products and services we sell resulting in the misapplication of revenue recognition policies.policies or inaccurate costs and completion dates for our services which could affect our estimates.

We cannot be certain that our business strategy will be successful or that we will successfully address these and other challenges, risks and uncertainties. For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see Item 1A, “Risk Factors” and Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections contained elsewhere in this report, as well as other reports that we file with the Securities and Exchange Commission (“SEC”).
 
4
PART I. FINANCIAL INFORMATION

Item 1.
Financial Statements

ePlus inc. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 
As of
December 31, 2016
  
As of
March 31, 2016
  
As of
December 31, 2017
  
As of
March 31, 2017
 
ASSETS (in thousands, except per share data)  (in thousands, except per share data) 
            
Current assets:            
Cash and cash equivalents $69,677  $94,766  $76,105  $109,760 
Accounts receivable—trade, net  297,460   234,628   285,820   266,029 
Accounts receivable—other, net  34,183   41,771   30,690   24,987 
Inventories—net  111,076   33,343 
Inventories  51,295   93,557 
Financing receivables—net, current  65,945   56,448   74,598   51,656 
Deferred costs  6,418   6,371   24,740   7,971 
Other current assets  4,035   10,649   25,970   43,364 
Total current assets  588,794   477,976   569,218   597,324 
                
Financing receivables and operating leases—net  74,490   75,906   72,575   71,883 
Deferred tax assets—net  1,268   - 
Property, equipment and other assets  11,704   8,644   17,632   11,956 
Goodwill and other intangible assets—net  61,690   54,154 
Goodwill  76,546   48,397 
Other intangible assets—net  27,414   12,160 
TOTAL ASSETS $736,678  $616,680  $764,653  $741,720 
                
LIABILITIES AND STOCKHOLDERS' EQUITY                
                
LIABILITIES                
                
Current liabilities:                
Accounts payable $121,562  $76,780  $125,850  $113,518 
Accounts payable—floor plan  120,854   121,893   107,761   132,612 
Salaries and commissions payable  17,412   14,981   20,568   18,878 
Deferred revenue  63,665   18,344   50,739   65,312 
Recourse notes payable—current  1,605   2,288   -   908 
Non-recourse notes payable—current  41,785   26,042   27,649   26,085 
Other current liabilities  15,842   13,118   26,116   19,179 
Total current liabilities  382,725   273,446   358,683   376,492 
                
Recourse notes payable—long term  -   1,054 
Non-recourse notes payable—long term  10,608   18,038   3,840   10,431 
Deferred tax liability—net  3,075   3,001   -   1,799 
Other liabilities  6,475   2,263   18,518   7,080 
TOTAL LIABILITIES  402,883   297,802   381,041   395,802 
                
COMMITMENTS AND CONTINGENCIES (Note 8)                
                
STOCKHOLDERS' EQUITY                
                
Preferred stock, $.01 per share par value; 2,000 shares authorized; none issued or outstanding  -   - 
Common stock, $.01 per share par value; 25,000 shares authorized;13,310 issued and 7,080 outstanding at December 31, 2016 and 13,237 issued and 7,365 outstanding at March 31, 2016  133   132 
Preferred stock, $.01 per share par value; 2,000 shares authorized; none outstanding  -   - 
Common stock, $.01 per share par value; 25,000 shares authorized;14,046 outstanding at December 31, 2017 and 14,161 outstanding at March 31, 2017
  142   142 
Additional paid-in capital  122,031   117,511   128,392   123,536 
Treasury stock, at cost, 6,230 and 5,872 shares at December 31, 2016 and March 31, 2016, respectively  (158,948)  (129,518)
Treasury stock, at cost  (14,165)  - 
Retained earnings  371,290   331,224   269,048   222,823 
Accumulated other comprehensive income—foreign currency translation adjustment  (711)  (471)  195   (583)
Total Stockholders' Equity  333,795   318,878   383,612   345,918 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $736,678  $616,680  $764,653  $741,720 

See Notes to Unaudited Condensed Consolidated Financial Statements.
 
5
Table of Contents
ePlus inc. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 
Three Months Ended
December 31,
  
Nine Months Ended December 31,
December 31,
  
Three Months Ended
December 31,
  
Nine Months Ended
December 31,
 
 2016  2015  2016  2015  2017  2016  2017  2016 
                        
 (in thousands, except per share data)  (in thousands, except per share data) 
                        
Net sales $326,657  $298,644  $996,622  $904,796  $342,569  $326,657  $1,080,571  $996,622 
Cost of sales  252,871   234,584   773,239   709,685   265,881   252,871   838,719   773,239 
Gross profit  73,786   64,060   223,383   195,111   76,688   73,786   241,852   223,383 
                                
Professional and other fees  1,397   1,882   4,918   4,913 
Salaries and benefits  42,385   37,372   124,479   108,326 
General and administrative expenses  6,378   5,434   20,424   17,390 
Selling, general, and administrative expenses  57,134   50,160   168,138   149,821 
Depreciation and amortization  1,910   1,331   5,408   3,739   2,894   1,910   7,086   5,408 
Interest and financing costs  409   396   1,158   1,371   270   409   903   1,158 
Operating expenses  52,479   46,415   156,387   135,739   60,298   52,479   176,127   156,387 
                                
Operating income  21,307   17,645   66,996   59,372   16,390   21,307   65,725   66,996 
                                
Other income  -   -   380   - 
Other income (expense)  (131)  -   (1)  380 
                                
Earnings before tax  21,307   17,645   67,376   59,372   16,259   21,307   65,724   67,376 
                                
Provision for income taxes  8,687   7,348   27,310 �� 24,582   678   8,687   19,499   27,310 
                                
Net earnings $12,620  $10,297  $40,066  $34,790  $15,581  $12,620  $46,225  $40,066 
                                
Net earnings per common share—basic $1.83  $1.41  $5.77  $4.79  $1.12  $0.92  $3.34  $2.88 
Net earnings per common share—diluted $1.81  $1.40  $5.71  $4.74  $1.11  $0.91  $3.30  $2.86 
                                
Weighted average common shares outstanding—basic  6,896   7,280   6,946   7,260   13,851   13,791   13,845   13,891 
Weighted average common shares outstanding—diluted  6,960   7,329   7,013   7,336   13,990   13,920   14,022   14,026 

See Notes to Unaudited Condensed Consolidated Financial Statements.
 
6
Table of Contents
ePlus inc. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 
Three Months Ended
December 31,
  
Nine Months Ended
December 31,
  
Three Months Ended
December 31,
  
Nine Months Ended
December 31,
 
 2016  2015  2016  2015  2017  2016  2017  2016 
 (amounts in thousands)  (amounts in thousands) 
                        
NET EARNINGS $12,620  $10,297  $40,066  $34,790  $15,581  $12,620  $46,225  $40,066 
                                
OTHER COMPREHENSIVE INCOME, NET OF TAX:                                
                                
Foreign currency translation adjustments  (145)  (139)  (240)  (273)  75   (145)  778   (240)
                                
Other comprehensive income (loss)  (145)  (139)  (240)  (273)  75   (145)  778   (240)
                                
TOTAL COMPREHENSIVE INCOME $12,475  $10,158  $39,826  $34,517  $15,656  $12,475  $47,003  $39,826 

See Notes to Unaudited Condensed Consolidated Financial Statements.
 
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ePlus inc. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 Nine Months Ended December 31,  Nine Months Ended December 31, 
 2016  2015  2017  2016 
 (in thousands)  (in thousands) 
Cash Flows From Operating Activities:            
Net earnings $40,066  $34,790  $46,225  $40,066 
                
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:                
Depreciation and amortization  8,758   13,020   11,324   8,758 
Reserve for credit losses, inventory obsolescence and sales returns  926   (91)  286   926 
Share-based compensation expense  4,520   4,210   4,856   4,520 
Deferred taxes  89   -   (3,058)  - 
Payments from lessees directly to lenders—operating leases
  (1,831)  (3,587)  (1,325)  (1,831)
Gain on disposal of property, equipment and operating lease equipment  (3,742)  (2,621)  (7,555)  (3,742)
Gain on sale of financing receivables  (3,968)  (5,439)  (4,625)  (3,968)
Other  227   224   1   316 
Changes in:                
Accounts receivable—trade  (57,732)  (31,692)  (8,295)  (57,732)
Accounts receivable—other  (4,232)  (1,176)  (1,976)  (4,232)
Inventories  (77,422)  (5,643)  43,332   (77,422)
Financing receivables—net  17,797   (10,670)  (13,045)  17,797 
Deferred costs, other intangible assets and other assets  1,838   5,888   (26,188)  1,838 
Accounts payable  53,208   (5,912)  18,406   53,208 
Salaries and commissions payable, deferred revenue and other liabilities  51,200   (9,018)  (9,539)  51,200 
Net provided by (cash used) in operating activities $29,702  $(17,717)
Net cash provided by operating activities $48,824  $29,702 
                
Cash Flows From Investing Activities:                
Proceeds from sale of property, equipment and operating lease equipment  6,380   5,349   9,967   6,380 
Purchases of property, equipment and operating lease equipment  (7,300)  (17,008)
Purchases of property, equipment, software, and operating lease equipment  (6,298)  (7,300)
Purchases of assets to be leased or financed  (5,897)  (10,828)  (5,716)  (5,897)
Issuance of financing receivables  (114,671)  (102,612)  (138,160)  (114,671)
Repayments of financing receivables  44,091   49,230   59,029   44,091 
Proceeds from sale of financing receivables  39,857   48,174   64,103   39,857 
Cash used in acquisitions, net of cash acquired  (9,500)  (16,649)  (37,718)  (9,500)
Net cash used in investing activities $(47,040) $(44,344) $(54,793) $(47,040)
 
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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - continued

 Nine Months Ended December 31,  Nine Months Ended December 31, 
 2016  2015  2017  2016 
 (in thousands)  (in thousands) 
Cash Flows From Financing Activities:            
Borrowings of non-recourse and recourse notes payable  34,020  $27,865  $39,365  $34,020 
Repayments of non-recourse and recourse notes payable  (5,412)  (254)  (27,269)  (5,412)
Repurchase of common stock  (30,493)  (2,475)  (13,399)  (30,493)
Dividends paid  -   (80)
Payments of contingent consideration  (718)  (1,158)
Payment of contingent consideration  -   (718)
Repayments of financing of acquisitions  (1,604)  - 
Net borrowings (repayments) on floor plan facility  (5,602)  28,581   (24,851)  (5,602)
Net cash provided by (used in) financing activities  (8,205)  52,479 
Net cash used in financing activities  (27,758)  (8,205)
                
Effect of exchange rate changes on cash  454   (26)  72   454 
                
Net Decrease in Cash and Cash Equivalents  (25,089)  (9,608)  (33,655)  (25,089)
                
Cash and Cash Equivalents, Beginning of Period  94,766   76,175   109,760   94,766 
                
Cash and Cash Equivalents, End of Period $69,677  $66,567  $76,105  $69,677 
                
Supplemental Disclosures of Cash Flow Information:                
Cash paid for interest $38  $65  $421  $38 
Cash paid for income taxes $23,381  $26,463  $29,987  $23,381 
                
Schedule of Non-Cash Investing and Financing Activities:                
Investing Activities        
Proceeds from sale of property, equipment, and operating lease equipment $429  $7,993  $3,463  $429 
Purchase of property, equipment, and operating lease equipment $(2,442) $(11,985)
Purchases of property, equipment, software, and operating lease equipment $(751)  $(2,442)
Purchase of assets to be leased or financed $(12,700) $(8,554) $(7,225) $(12,700)
Issuance of financing receivables $(110,120) $(91,022) $(74,907) $(110,120)
Repayment of financing receivables $16,454  $12,357  $9,572  $16,454 
Proceeds from sale of financing receivables $104,430  $75,584  $83,954  $104,430 
        
Financing Activities        
Financing of acquisitions $(12,050) $- 
Borrowing of non-recourse and recourse notes payable $33,651  $42,840  $8,904  $33,651 
Repayments of non-recourse and recourse notes payable $(20,438) $(22,292) $(14,465) $(20,438)
Vesting of share-based compensation $7,982  $7,743  $12,010  $7,982 
Repurchase of common stock included in accounts payable $(766) $- 

See Notes to Unaudited Condensed Consolidated Financial Statements.
 
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ePlus inc. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

 Common Stock  
Additional
Paid-In
  Treasury  Retained  
Accumulated
Other
Comprehensive
     Common Stock  
Additional
Paid-In
  Treasury  Retained  
Accumulated
Other
Comprehensive
    
 Shares  Par Value  Capital  Stock  Earnings  Income  Total  Shares  Par Value  Capital  Stock  Earnings  Income  Total 
                        
Balance, April 1, 2016  7,365  $132  $117,511  $(129,518) $331,224  $(471) $318,878 
Balance, April 1, 2017  14,161  $142  $123,536  $-  $222,823  $(583) $345,918 
Issuance of restricted stock awards  73   1   -   -   -   -   1   68   -   -   -   -   -   - 
Share-based compensation  -   -   4,520   -   -   -   4,520   -   -   4,856   -   -   -   4,856 
Repurchase of common stock  (358)  -   -   (29,430)  -   -   (29,430)  (183)  -   -   (14,165)  -   -   (14,165)
Net earnings  -   -   -   -   40,066   -   40,066   -   -   -   -   46,225   -   46,225 
Foreign currency translation adjustment  -   -   -   -   -   (240)  (240)  -   -   -   -   -   778   778 
Balance, December 31, 2016  7,080  $133  $122,031  $(158,948) $371,290  $(711) $333,795 
                            
Balance, December 31, 2017  14,046  $142  $128,392  $(14,165) $269,048  $195  $383,612 

See Notes to Unaudited Condensed Consolidated Financial Statements.
 
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ePlus inc. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS — Our company was founded in 1990 and is a Delaware corporation. ePlusePlus inc. is sometimes referred to in this Quarterly Report on Form 10-Q as "we," "our," "us," "ourselves," or "ePlus."ePlus." ePlusePlus inc. is a holding company that through its subsidiaries provides information technology solutions which enable organizations to optimize their IT environment and supply chain processes. We also provide consulting, professional and managed services and complete lifecycle management services including flexible financing solutions. We focus on middle market and large enterprises in North America and the United Kingdom.

BASIS OF PRESENTATION — The unaudited condensed consolidated financial statements include the accounts of ePlusePlus inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The accounts of businesses acquired are included in the unaudited condensed consolidated financial statements from the dates of acquisition.

INTERIM FINANCIAL STATEMENTS — The unaudited condensed consolidated financial statements for the three and nine months ended December 31, 20162017 and 20152016 were prepared by us, without audit, and include all normal and recurring adjustments that, in the opinion of management, are necessary for a fair presentation of our financial position, results of operations, changes in comprehensive income and cash flows for such periods. Operating results for the three and nine months ended December 31, 20162017 and 20152016 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending March 31, 20172018 or any other future period. These unaudited condensed consolidated financial statements do not include all disclosures required by the accounting principles generally accepted in the United States (“U.S. GAAP”) for annual financial statements. Our audited consolidated financial statements are contained in our annual report on Form 10-K for the year ended March 31, 20162017 (“2016 Financial Statements”2017 Annual Report”), which should be read in conjunction with these interim condensed consolidated financial statements.

USE OF ESTIMATES — The preparation of financial statements in conformity with U. S.U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Estimates are used when accounting for items and matters including, but not limited to, revenue recognition, residual values, vendor consideration, lease classification, goodwill and intangible assets, reserves for credit losses, inventory obsolescence, and the recognition and measurement of income tax assets and other provisions and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates.

The notes to the consolidated financial statements contained in the 2016 Financial Statements2017 Annual Report include additional discussion of the significant accounting policies and estimates used in the preparation of our consolidated financial statements. There have been no material changes to our significant accounting policies and estimates during the nine months ended December 31, 2016.2017.

DEFERRED COSTS AND DEFERRED REVENUESSTOCK SPLIT — Deferred costs include internal and third party costs associated with deferred revenue arrangements. Deferred revenue includes payments received from customers in advance of delivering equipment and software or performing professional, managed and hosting services and amounts deferred when any of the other revenue recognition criteria have not been met. At December 31, 2016, total deferred costs and revenues were $9.4 million and $67.3 million, respectively, compared to $8.2 million and $20.2 million, respectively, as ofOn March 31, 2016. The increase in deferred revenue is primarily due to prepayments by2017, we completed a customer for equipment that we expect to delivertwo-for-one stock split in the next threeform of a stock dividend. References made to six months.outstanding shares or per share amounts in the accompanying financial statements and disclosures have been retroactively adjusted for this stock split. The number of authorized shares reflected on the consolidated balance sheets was not affected by the stock split.

CONCENTRATIONS OF RISK — A substantial portion of our sales of product and services are from sales of Cisco Systems, Hewlett Packard Enterprise (“HPE”) and HP, Inc. (collectively “Hewlett Packard companies”), and NetApp products, which represented approximately 39%, 5% and 7%, and 45%, 7%, and 5%, respectively, for the three and nine months ended December 31, 2017. Sales of Cisco Systems, Hewlett Packard companies, and NetApp represented approximately 45%, 6% and 6%, and 49%, 6% and 5%, respectively, for the three and nine months ended December 31, 2016. Sales of Cisco Systems, Hewlett Packard (“HP”), and NetApp products represented approximately 48%, 6%, and 7%, and 49%, 8%, and 5%, respectively, for the three and nine months ended December 31, 2015. Any changes in our vendors’ ability to provide products or incentive programs could have a material adverse effect on our business, results of operations and financial condition.
 
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2.RECENT ACCOUNTING PRONOUNCEMENTS

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS — In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Stock Compensation. This update simplifies several aspects of the accounting for share-based payment transactions. As permitted, we elected to early adopt this update during the quarter ended June 30, 2016. The amendments requiring recognition of excess tax benefits and deficiencies in the income statement have been applied prospectively resulting in a benefit in the nine months ended December 31, 2016 of $0.5 million, or $0.07 per share. We elected to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using a retrospective transition method, and as a result, $1.2 million of excess tax benefits related to share-based awards which were previously classified as cash flows from financing activities in the nine months ended December 31, 2015 have been reclassified as cash flows from operating activities. As part of adopting this update, we additionally elected as an accounting policy to account for forfeitures of share-based awards when they occur. As we had previously estimated the forfeiture rate to be zero, there is no cumulative-effect adjustment to retained earnings as a result of our election.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED — 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, will supersede all current U.S.replace most existing revenue recognition guidance under GAAP on this topic. The FASB subsequently issued ASU 2016-08, Principal versus Agent Considerations, ASU 2016-10, Identifying Performance Obligations and Licensing, ASU 2016-12, Narrow-Scope Improvements and Practical Expedients, and ASU 2016-20, Technical Corrections and Improvements to Topic 606, in March 2016, April 2016, May 2016, and December 2016 respectively, to amend the guidance in ASU 2014-09.eliminate industry specific guidance. The core principle of ASU 2014-09the new guidance is that an entity should recognize revenue to depictfor the transfer of promised goods orand services equal to customers in an amount that reflects the consideration to which entityit expects to be entitled in exchangeto receive for those goods orand services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, to defer the effective date of ASU 2014-09 by one year. Including the one-year deferral, these updates become effective for us in our quarter ending June 30, 2018,2018. The new guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method).

We have established a cross-functional implementation team and early adoption is permitted for usutilized a bottom-up approach to analyze the impact of the standard on our arrangements by reviewing the current accounting policies and practices to identify potential differences that would result from applying the requirements of the new standard to our revenue contracts. Based on our analysis to date, we have reached the following tentative conclusions regarding the new standard and how we expect it to affect our consolidated financial statements and related disclosures:

·We will adopt the guidance in our quarter ending June 30, 2018. We currently prefer to adopt the standard using the full retrospective method; however, our ability to do so is dependent on many factors, including the completion of our analysis of information necessary to recast prior period financial statements. Based on these and other factors, we may decide to use the modified retrospective method.
·Substantially all of our revenue within our technology segment is contractual and is within the scope of ASU No. 2014-09, as amended. The majority of our revenues within our financing segment are scoped out of this update.
·
The majority of our revenues within our technology segment are derived from sales of third-party products, third-party software, third-party services, such as maintenance and software assurance, and sales of ePlus professional and managed services.
oWe recognize revenue on sales of third party product and third-party software on a gross basis upon delivery and we are still assessing whether we are acting as a principal or an agent in these transactions under the update.
o
We recognize sales of third party maintenance and software assurance on a net basis at the date of sale and sales of ePlus professional and managed services on a gross basis as the services are performed. We do not anticipate a material impact to our revenue recognition for these transactions under the update.
·We expect that our disclosures in our notes to our consolidated financial statements related to revenue recognition will be significantly expanded under the new standard.

Our analysis and evaluation of the new standard will continue through its effective date in our quarter ending June 30, 2017. The update can2018. A substantial amount of work remains to be applied either retrospectivelycompleted due to each period presented or as a cumulative-effect adjustment asthe complexity of the datenew standard, the application of adoption. We are currently evaluatingjudgment and the impactrequirement for the use of this update onestimates in applying the new standard, as well as the volume of our financial statementscustomer portfolio and have not yet selectedthe related terms and conditions of our planned transition approach.contracts that must be reviewed.

In FebruaryNovember 2016, the FASB issued ASU 2016-02, Leases, which will supersede the current U.S. GAAP on this topic. The core principle of this update is that a lessee should recognize the assets and liabilities that arise from leases. This update requires adoption under the modified retrospective approach and becomes effective for us in our quarter ending June 30, 2019. Early adoption is permitted. We are currently evaluating the impact of this update on our financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this update replace the incurred loss impairment methodology in current US GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This update requires adoption under a modified retrospective approach and becomes effective for us in our quarter ending June 30, 2020. Early adoption is permitted beginning in our quarter ending June 30, 2019. We are currently evaluating the impact of this update on our financial statements.

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3.FINANCING RECEIVABLES AND OPERATING LEASES

Our financing receivables and operating leases consist of assets that we finance for our customers, which we manage as a portfolio of investments. Equipment financed for our customers is accounted for as investments in direct financing, sales-type or operating leases in accordance with Accounting Standards Codification (“ASC”) Topic 840, Leases. We also finance third-party software, maintenance, and services for our customers, which are classified as notes receivables. Our notes receivables are interest bearing and are often due over a period of time that corresponds with the terms of the leased products.
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FINANCING RECEIVABLES—NET

Our financing receivables, net consist of the following (in thousands):

December 31, 2016 
Notes
Receivables
  
Lease-Related
Receivables
  
Total Financing
Receivables
 
December 31, 2017
 
Notes
Receivables
  
Lease-Related
Receivables
  
Total Financing
Receivables
 
Minimum payments $53,167  $71,343  $124,510  $59,444  $73,022  $132,466 
Estimated unguaranteed residual value (1)  -   18,069   18,069   -   13,358   13,358 
Initial direct costs, net of amortization (2)  465   518   983   369   321   690 
Unearned income  -   (7,017)  (7,017)  -   (6,034)  (6,034)
Reserve for credit losses (3)  (3,508)  (778)  (4,286)  (451)  (621)  (1,072)
Total, net $50,124  $82,135  $132,259  $59,362  $80,046  $139,408 
Reported as:                        
Current $32,269  $33,676  $65,945  $33,109  $41,489  $74,598 
Long-term  17,855   48,459   66,314   26,253   38,557   64,810 
Total, net $50,124  $82,135  $132,259  $59,362  $80,046  $139,408 

(1)Includes estimated unguaranteed residual values of $11,932$7,753 thousand for direct financing leases, which have been sold and accounted for as sales.
(2)Initial direct costs are shown net of amortization of $665$334 thousand.
(3)
For details on reserve for credit losses, refer to Note 5, “Reserves“Reserves for Credit Losses.Losses.”

March 31, 2016 
Notes
Receivables
  
Lease-Related
Receivables
  
Total Financing
Receivables
 
March 31, 2017
 
Notes
Receivables
  
Lease-Related
Receivables
  
Total Financing
Receivables
 
Minimum payments $44,442  $66,303  $110,745  $48,524  $57,872  $106,396 
Estimated unguaranteed residual value (1)  -   12,693   12,693   -   18,273   18,273 
Initial direct costs, net of amortization (2)  312   475   787   279   341   620 
Unearned income  -   (5,543)  (5,543)  -   (5,913)  (5,913)
Reserve for credit losses (3)  (3,381)  (685)  (4,066)  (3,434)  (679)  (4,113)
Total, net $41,373  $73,243  $114,616  $45,369  $69,894  $115,263 
Reported as:                        
Current $24,962  $31,486  $56,448  $23,780  $27,876  $51,656 
Long-term  16,411   41,757   58,168   21,589   42,018   63,607 
Total, net $41,373  $73,243  $114,616  $45,369  $69,894  $115,263 

(1)Includes estimated unguaranteed residual values of $6,722$12,677 thousand for direct financing leases which have been sold and accounted for as sales.
(2)Initial direct costs are shown net of amortization of $612$510 thousand.
(3)
For details on reserve for credit losses, refer to Note 5, “Reserves“Reserves for Credit Losses.Losses.”

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OPERATING LEASES—NET

Operating leases—net represents leases that do not qualify as direct financing leases. The components of the operating leases—net are as follows (in thousands):

 
December 31,
2016
  
March 31,
2016
  
December 31,
2017
  
March 31,
2017
 
Cost of equipment under operating leases $17,062  $36,635  $16,804  $16,725 
Accumulated depreciation  (8,886)  (18,897)  (9,039)  (8,449)
Investment in operating lease equipment—net (1) $8,176  $17,738  $7,765  $8,276 

(1)These totals include estimated unguaranteed residual values of $928$2,077 thousand and $3,417$1,117 thousand as of December 31, 20162017 and March 31, 2016,2017, respectively.

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TRANSFERS OF FINANCIAL ASSETS

We enter into arrangements to transfer the contractual payments due under financing receivables and operating lease agreements, which are accounted for as sales or secured borrowings in accordance with CodificationASC Topic 860, Transfers and Servicing. For transfers accounted for as a secured borrowing, the corresponding investments serve as collateral for non-recourse notes payable. As of December 31, 20162017 and March 31, 20162017, we had financing receivables of $54.9$37.2 million and $36.1$33.1 million, respectively, and operating leases of $6.7$5.9 million and $13.9$6.6 million, respectively, which were collateral for non-recourse notes payable. See Note 7, "Notes"Notes Payable and Credit Facility.Facility."

For transfers accounted for as sales, we derecognize the carrying value of the asset transferred and recognize a net gain or loss on the sale, which are presented within net sales in the consolidated statement of operations. During the three months ended December 31, 20162017 and 2015,2016, we recognized net gains of $0.9$1.2 million and $1.4$0.9 million, respectively, and total proceeds from these sales were $55.8$32.8 million and $54.1$55.8 million, respectively. During the nine months ended December 31, 20162017 and 2015,2016, we recognized net gains of $4.6 million and $4.1 million, respectively, and $5.4 million, respectively. The total proceeds from these sales were $185.4$166.9 million and $162.7$185.4 million, for the nine months ended December 31, 2016 and 2015, respectively.

For certain assignments of financial assets, we retain a servicing obligation. For assignments accounted for as sales, we allocate a portion of the proceeds to deferred revenues, which is recognized as we perform the services. As of both December 31, 2017 and March 31, 2017, we had deferred revenue of $0.5 million for servicing. In a limited number of such sales, we indemnified the assignee in the event that the lessee elected to early terminate the lease. As of December 31, 2016,2017, our maximum potential future payments related to such guarantees is $1.2$0.6 million. We believe the possibility of making any payments to be remote.

4.GOODWILL AND OTHER INTANGIBLE ASSETS

OurGOODWILL

The following table summarizes the changes in the carrying amount of goodwill for the nine months ended December 31, 2017 and other intangible assets consist of the following2016, (in thousands):

  December 31, 2016  March 31, 2016 
  
Gross
Carrying
Amount
  
Accumulated
Amortization
/ Impairment
Loss
  
Net
Carrying
Amount
  
Gross
Carrying
Amount
  
Accumulated
Amortization
/ Impairment
Loss
  
Net
Carrying
Amount
 
                   
Goodwill $58,145  $(8,673) $49,472  $50,824  $(8,673) $42,151 
Customer relationships & other intangibles  22,818   (11,640)  11,178   20,401   (9,193)  11,208 
Capitalized software development  3,247   (2,207)  1,040   2,709   (1,914)  795 
Total $84,210  $(22,520) $61,690  $73,934  $(19,780) $54,154 

GOODWILL
  Nine Months Ended December 31, 2017  Nine Months Ended December 31, 2016 
  Goodwill  
Accumulated
Amortization
/ Impairment
Loss
  
Net
Carrying
Amount
  Goodwill  
Accumulated
Amortization
/ Impairment
Loss
  
Net
Carrying
Amount
 
                   
Balance as of March 31 $57,070  $(8,673) $48,397  $50,824  $(8,673) $42,151 
Acquisitions  27,996   -   27,996   7,636   -   7,636 
Foreign currency translations  153   -   153   (315)  -   (315)
Balance as of December 31 $85,219  $(8,673) $76,546  $58,145  $(8,673) $49,472 

Goodwill represents the premium paid over the fair value of the net tangible and intangible assets that are individually identified and separately recognized in business combinations. All of our goodwill as of December 31, 20162017 and March 31, 2016 is related2017 was assigned to our technology reportable segment, which weis also determined to be onea single reporting unit.

Goodwill increased by $7.3 million from March 31, 2016 to December 31, 2016 due to the addition of $7.6 million from our acquisition of certain assets and assumption of certain liabilities of the IT Services equipment and integration business of Consolidated Communications Holdings, Inc. (“Consolidated IT Services”) in December, 2016, partially offset by $0.3 million due to foreign currency translation. See Note 15, “Business Combinations”"Business Combinations" for additional information.information regarding our acquisitions.

We performed our annual test for goodwill impairment for fiscal year 2018 as of October 1, 2017. We performed a qualitative assessment of goodwill and concluded that the fair value of our technology reporting unit, more likely than not, exceeded its respective carrying value as of October 1, 2017.

We performed our annual test for goodwill impairment for fiscal year 2017 as of October 1, 2016. We elected to bypass the qualitative assessment of goodwill and estimate the fair value of our reporting units. The fair value of our technology reporting unit substantially exceeded its carrying value as of October 1, 2016. Our conclusions would not be impacted by a ten percent change in our estimate of the fair value of the reporting unit.

We performed our annual test for impairment for fiscal year 2016 as of October 1, 2015. We performed a qualitative assessment for goodwill and concluded that the fair value of our  reporting units, more likely than not, exceeded their respective carrying values as of October 1, 2015.
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OTHER INTANGIBLE ASSETS

Our other intangible assets consist of the following at December 31, 2017 and March 31, 2017 (in thousands):
  December 31, 2017  March 31, 2017 
  
Gross
Carrying
Amount
  
Accumulated
Amortization
  
Net
Carrying
Amount
  
Gross
Carrying
Amount
  
Accumulated
Amortization
  
Net
Carrying
Amount
 
                   
Customer relationships & other intangibles $41,777  $(16,792) $24,985  $23,373  $(12,553) $10,820 
Capitalized software development  4,908   (2,479)  2,429   3,649   (2,310)  1,339 
Total $46,685  $(19,271) $27,414  $27,022  $(14,863) $12,159 

Customer relationships and capitalized software development costs are amortized over an estimated useful life, which is generally between 3 to 78 years. Trade names and trademarks are amortized over an estimated useful life of 10 years.

Customer relationships and other intangibles increased for the nine months ended December 31, 2017 due to business acquisitions by $18.4 million, of which $2.4 million is internally developed processes, $15.7 million is customer relationships, $0.2 million is due to foreign exchange translation, and $0.1 million in capitalized software development costs. Total amortization expense for other intangible assets was $1.1$1.9 million and $0.8$1.1 million for the three months and $3.4$4.2 million and $2.1$3.4 million for the nine months ended December 31, 2017 and 2016, and 2015, respectively.

See Note 15, “Business Combinations” for additional information regarding acquired intangibles.

5.
RESERVES FOR CREDIT LOSSES

Activity in our reserves for credit losses for the nine months ended December 31, 20162017 and 20152016 were as follows (in thousands):

 
Accounts
Receivable
  
Notes
Receivable
  
Lease-Related
Receivables
  Total  
Accounts
Receivable
  
Notes
Receivable
  
Lease-Related
Receivables
  Total 
Balance April 1, 2016 $1,127  $3,381  $685  $5,193 
Balance April 1, 2017 $1,279  $3,434  $679  $5,392 
Provision for credit losses  229   139   93   461   165   37   106   308 
Write-offs and other  (32)  (12)  -   (44)  -   (3,020)  (164)  (3,184)
Balance December 31, 2016 $1,324  $3,508  $778  $5,610 
                
 
Accounts
Receivable
  
Notes
Receivable
  
Lease-Related
Receivables
  Total 
Balance April 1, 2015 $1,169  $3,573  $881  $5,623 
Provision for credit losses  12   7   (50)  (31)
Write-offs and other  (119)  -   -   (119)
Balance December 31, 2015 $1,062  $3,580  $831  $5,473 
Balance December 31, 2017 $1,444  $451  $621  $2,516 

  
Accounts
Receivable
  
Notes
Receivable
  
Lease-Related
Receivables
  Total 
Balance April 1, 2016 $1,127  $3,381  $685  $5,193 
Provision for credit losses  229   139   93   461 
Write-offs and other  (32)  (12)  -   (44)
Balance December 31, 2016 $1,324  $3,508  $778  $5,610 
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Our reserves for credit losses and minimum payments associated with our notes receivables and lease-related receivables disaggregated on the basis of our impairment method were as follows (in thousands):

 December 31, 2016  March 31, 2016  December 31, 2017  March 31, 2017 
 
Notes
Receivable
  
Lease-
Related
Receivables
  
Notes
Receivable
  
Lease-
Related
Receivables
  
Notes
Receivable
  
Lease-
Related
Receivables
  
Notes
Receivable
  
Lease-
Related
Receivables
 
Reserves for credit losses:                        
Ending balance: collectively evaluated for impairment $406  $655  $279  $562  $389  $621  $348  $556 
Ending balance: individually evaluated for impairment  3,102   123   3,102   123   62   -   3,086   123 
Ending balance $3,508  $778  $3,381  $685  $451  $621  $3,434  $679 
                                
Minimum payments:                                
Ending balance: collectively evaluated for impairment $50,016  $71,201  $41,340  $66,161  $59,382  $73,022  $45,438  $57,730 
Ending balance: individually evaluated for impairment  3,151   142   3,102   142   62   -   3,086   142 
Ending balance $53,167  $71,343  $44,442  $66,303  $59,444  $73,022  $48,524  $57,872 

As of December 31, 2016 and March 31, 2016 we had a balance outstanding of $3.2 million for a customer in bankruptcy which is in a non-accrual status. We place receivables on non-accrual status when events, such as a customer’s declaring bankruptcy, occur that indicate a receivable will not be collectable. We charge off uncollectable financing receivables when we stop pursuing collection. As of March 31, 2017 we had a balance outstanding as of $3.2 million for a customer in bankruptcy which was fully reserved and on a non-accrual status. We wrote off this balance against the reserve for credit losses during the nine months ended December 31, 2017, after the bankruptcy case was substantially complete.
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The age of the recorded minimum lease payments and net credit exposure associated with our investment in direct financing and sales-type leases that are past due disaggregated based on our internally assigned credit quality rating (“CQR”) were as follows as of December 31, 20162017 and March 31, 20162017 (in thousands):

 
31-60
Days
Past
Due
  
61-90
Days
Past
Due
  
Greater
than 90
Days
Past
 Due
  
Total
Past
Due
  Current  
Unbilled
 Minimum
 Lease
Payments
  
Total
Minimum
Lease
Payments
  
Unearned
Income
  
Non-
Recourse
Notes
 Payable
  
Net
Credit
 Exposure
  
31-60
Days
Past
Due
  
61-90
Days
Past
Due
  
Greater
than 90
Days
Past
Due
  
Total
Past
 Due
  Current  
Unbilled
Minimum
Lease
Payments
  
Total
Minimum
Lease
Payments
  
Unearned
Income
  
Non-
Recourse
Notes
Payable
  
Net
Credit
Exposure
 
                                                            
December 31, 2016                            
December 31, 2017December 31, 2017                            
                                                            
High CQR $163  $49  $98  $310  $137  $45,570  $46,017  $(3,466) $(21,532) $21,019  $188  $90  $907  $1,185  $18,238  $30,496  $49,919  $(3,027) $(14,420) $32,472 
Average CQR  44   25   96   165   43   24,976   25,184   (1,667)  (12,684)  10,833   30   36   216   282   124   22,697   23,103   (1,385)  (11,413)  10,305 
Low CQR  -   -   142   142   -   -   142   (19)  -   123   -   -   -   -   -   -   -   -   -   - 
Total $207  $74  $336  $617  $180  $70,546  $71,343  $(5,152) $(34,216) $31,975  $218  $126  $1,123  $1,467  $18,362  $53,193  $73,022  $(4,412) $(25,833) $42,777 
                                                                                
March 31, 2016                                     
March 31, 2017March 31, 2017                                     
                                                                                
High CQR��$575  $52  $94  $721  $984  $46,157  $47,862  $(2,705) $(22,914) $22,243  $379  $224  $230  $833  $406  $32,532  $33,771  $(2,362) $(12,924) $18,485 
Average CQR  15   17   78   110   159   18,030   18,299   (1,387)  (8,714)  8,198   113   20   113   246   91   23,622   23,959   (1,556)  (13,353)  9,050 
Low CQR  -   -   142   142   -   -   142   (19)  -   123   -   -   142   142   -   -   142   (19)  -   123 
Total $590  $69  $314  $973  $1,143  $64,187  $66,303  $(4,111) $(31,628) $30,564  $492  $244  $485  $1,221  $497  $56,154  $57,872  $(3,937) $(26,277) $27,658 

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The age of the recorded notes receivable balance disaggregated based on our internally assigned CQR were as follows as December 31, 20162017 and March 31, 20162017 (in thousands):

 
31-60
Days
Past
 Due
  
61-90
 Days
 Past
 Due
  
Greater
than 90
 Days
 Past Due
  
Total
 Past
Due
  Current  
Unbilled
Notes
 Receivable
  
Total
Notes
Receivable
  
Non-
Recourse
Notes
 Payable
  
Net
 Credit
Exposure
  
31-60
Days
Past
Due
  
61-90
Days
Past
Due
  
Greater
than 90
Days
Past Due
  
Total
Past
Due
  Current  
Unbilled
Notes
 Receivable
  
Total
Notes
Receivable
  
Non-
Recourse
Notes
Payable
  
Net
Credit
Exposure
 
                                                      
December 31, 2016                         
December 31, 2017                           
                                                      
High CQR $1,369  $312  $827  $2,508  $1,244  $28,206  $31,958  $(15,330) $16,628  $4  $-  $833  $837  $2,071  $35,001  $37,909  $(21,971) $15,938 
Average CQR  157   10   -   167   920   16,971   18,058   (12,640)  5,418   1,086   4   599   1,689   8   19,776   21,473   (15,555)  5,918 
Low CQR  -   -   3,151   3,151   -   -   3,151   -   3,151   -   -   62   62   -   -   62   -   62 
Total $1,526  $322  $3,978  $5,826  $2,164  $45,177  $53,167  $(27,970) $25,197  $1,090  $4  $1,494  $2,588  $2,079  $54,777  $59,444  $(37,526) $21,918 
                                                                        
March 31, 2016                                 
March 31, 2017March 31, 2017                                 
                                                                        
High CQR $399  $305  $2,168  $2,872  $301  $24,092  $27,265  $(11,644) $15,621  $183  $663  $755  $1,601  $1,165  $23,359  $26,125  $(12,003) $14,122 
Average CQR  -   -   -   -   202   13,873   14,075   (9,942)  4,133   28   5   -   33   555   18,725   19,313   (13,732)  5,581 
Low CQR  -   -   3,102   3,102   -   -   3,102   -   3,102   -   -   3,086   3,086   -   -   3,086   -   3,086 
Total $399  $305  $5,270  $5,974  $503  $37,965  $44,442  $(21,586) $22,856  $211  $668  $3,841  $4,720  $1,720  $42,084  $48,524  $(25,735) $22,789 
                                    

We estimate losses on our net credit exposure to be between 0% - 5% for customers with highest CQR, as these customers are investment grade or the equivalent of investment grade. We estimate losses on our net credit exposure to be between 2% - 15% for customers with average CQR, and between 15% - 100% for customers with low CQR, which includes customers in bankruptcy.
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6.PROPERTY, EQUIPMENT, OTHER ASSETS AND LIABILITIES

Our property, equipment, other assets and liabilities consist of the following (in thousands):

 
December 31,
2016
  
March 31,
2016
  
December 31,
2017
  
March 31,
2017
 
Other current assets:
            
Deposits & funds held in escrow $485  $3,116  $14,819  $39,161 
Prepaid assets  2,773   6,683   10,429   3,388 
Other  777   850   722   815 
Total other current assets $4,035  $10,649  $25,970  $43,364 
                
Other assets:
        
Property, equipment and other assets
        
Property and equipment, net $8,013  $6,690 
Deferred costs $2,979  $1,831   7,326   3,536 
Property and equipment, net  6,945   6,266 
Other  1,780   547   2,293   1,730 
Total other assets - long term $11,704  $8,644  $17,632  $11,956 
        
  
December 31,
2016
   
March 31,
2016
 
Other current liabilities:
        
Accrued expenses $6,969  $7,109 
Accrued income taxes payable  1,093   - 
Other  7,780   6,009 
Total other current liabilities $15,842  $13,118 
        
Other liabilities:
        
Deferred revenue $3,599  $1,866 
Other  2,876   397 
Total other liabilities - long term $6,475  $2,263 

  
December 31,
2017
  
March 31,
2017
 
Other current liabilities:
      
Accrued expenses $7,907  $7,450 
Accrued income taxes payable  170   1,761 
Contingent consideration  5,360   554 
Other  12,679   9,414 
Total other current liabilities $26,116  $19,179 
         
Other liabilities:
        
Deferred revenue $10,064  $4,704 
Contingent consideration long-term  7,765   1,500 
Other  689   876 
Total other liabilities - long term $18,518  $7,080 
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As of December 31, 2017 we had current and long-term contingent consideration liability balance of $5.4 and $7.8 million, respectively, of which $10.0 million relates to a recent acquisition. For details on the contingent consideration liability, refer to Note 15, “Business Combinations.”

As of December 31, 2017 and March 31, 2017 we had customer deposits and funds held in escrow of $14.8 million and $39.2 million, respectively. These balances relate to financial assets that were sold to third-party banks. In conjunction with those sales, a portion of the proceeds were placed in escrow and will be released to us upon payment of outstanding invoices related to the underlying financing arrangements that were sold.

7.
NOTES PAYABLE AND CREDIT FACILITY

Non-recourse and recourse obligations consist of the following (in thousands):

 
December 31,
2016
  
March 31,
2016
  
December 31,
2017
  
March 31,
2017
 
Recourse notes payable with interest rates ranging from 3.20% to 4.13% as of March 31, 2017.      
Current $-  $908 
              
Recourse notes payable with interest rates ranging from 2.75% and 4.13% at December 31, 2016 and ranging from 2.70% and 4.13%at March 31, 2016.      
Current $1,605  $2,288 
Long-term  -   1,054 
Total recourse notes payable $1,605  $3,342 
        
Non-recourse notes payable secured by financing receivables and investments in operating leases with interest rates ranging from 2.0% to 7.50% at December 31, 2016 and ranging from 1.70% to 8.50% as of March 31, 2016.        
Non-recourse notes payable secured by financing receivables and investment in operating leases with interest rates ranging from 2.00% to 8.45% December 31, 2017, and ranging from 2.00% to 7.75% as of March 31, 2017.        
Current $41,785  $26,042  $27,649  $26,085 
Long-term  10,608   18,038   3,840   10,431 
Total non-recourse notes payable $52,393  $44,080  $31,489  $36,516 

Principal and interest payments on non-recourse notes payable are generally due monthly in amounts that are approximately equal to the total payments due from the customer under the leases or notes receivable that collateralize the notes payable. The weighted average interest rate for our non-recourse notes payable was 3.38% and 3.13%3.73%, as of both December 31, 20162017 and March 31, 2016, respectively.2017. The weighted average interest rate for our recourse notes payable was 3.24%3.45%, as of December 31, 2016 and March 31, 2016.2017. Under recourse financing, in the event of a default by a customer, the lender has recourse to the customer, the assets serving as collateral, and us. Under non-recourse financing, in the event of a default by a customer, the lender generally only has recourse against the customer, and the assets serving as collateral, but not against us.
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Our technology segment, through our subsidiary ePlus Technology, inc., finances its operations with funds generated from operations, and with a credit facility with Wells Fargo Commercial Distribution Finance, LLC or (“WFCDF”). This facility provides short-term capital for our technology segment. There are two components of the WFCDF credit facility: (1) a floor plan component, and (2) an accounts receivable component. Under the floor plan component, we had outstanding balances of $120.9$107.8 million and $121.9$132.6 million as of December 31, 20162017 and March 31, 2016,2017, respectively. Under the accounts receivable component, we had no outstanding balances as of December 31, 20162017 and March 31, 2016.2017.

On July 27, 2017, we executed an amendment to the WFCDF credit facility which temporarily increases the aggregate limit of the two components from $250.0 million to $325.0 million from the date of the agreement through October 31, 2017, and provides us an election beginning July 1 in each subsequent year to similarly temporarily increase the aggregate limit of the two components to $325.0 million ending the earlier of 90 days following the date of election or October 31 of that same year.

As of December 31, 2016,2017, the facility agreement had an aggregate limit of the two components of $250 million, and the accounts receivable component had a sub-limit of $30 million, which bears interest assessed at a rate of the One Month LIBOR plus two and one half percent.

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The credit facility has full recourse to ePlus Technology, inc. and is secured by a blanket lien against all its assets, such as receivables and inventory. Availability under the facility may be limited by the asset value of equipment we purchase or accounts receivable, and may be further limited by certain covenants and terms and conditions of the facility. These covenants include but are not limited to a minimum excess availability of the facility and minimum earnings before interest, taxes, depreciation and amortization (“EBITDA”) of ePlus Technology, inc. We were in compliance with these covenants as of December 31, 2016.2017. In addition, the facility restricts the ability of ePlus Technology, inc. to transfer funds to its affiliates in the form of dividends, loans or advances with certain exceptions for dividends to ePlus inc. The facility also requires that financial statements of ePlusePlus Technology, inc. be provided within 45 days of each quarter and 90 days of each fiscal year end and also includes that other operational reports be provided on a regular basis. Either party may terminate with 90 days’ advance notice. We are not, and do not believe that we are reasonably likely to be, in breach of the WFCDF credit facility. In addition, we do not believe that the covenants of the WFCDF credit facility materially limit our ability to undertake financing. In this regard, the covenants apply only to our subsidiary, ePlus Technology, inc. This credit facility is secured by the assets of only ePlus Technology, inc. and the guaranty as described below.

The facility provided by WFCDF requires a guaranty of $10.5 million by ePlus inc. The guaranty requires ePlus inc. to deliver its annual audited financial statements by certain dates. We have delivered the annual audited financial statements for the year ended March 31, 2016,2017, as required. The loss of the WFCDF credit facility could have a material adverse effect on our future results as we currently rely on this facility and its components for daily working capital and liquidity for our technology segment and as an operational function of our accounts payable process.

Fair Value

As of December 31, 20162017 and March 31, 2016,2017, the fair value of our long-term recourse and non-recourse notes payable approximated their carrying value.

8.COMMITMENTS AND CONTINGENCIES

Legal Proceedings

We are not currently a party to any legal proceedings with loss contingencies that are expected to be material. From time to time, we may be or have been a plaintiff, or may be or have been named as a defendant, insubject to legal actions arising from our normal business activities, none of which has had a material effect on our business, results of operations or financial condition. Legal proceedings which maythat arise in the ordinary course of business including preference payment claimsbusiness. In the opinion of management, there was not at least a reasonable possibility that the Company may have incurred a material loss, or a material loss in excess of a recorded accrual, with respect to loss contingencies for asserted in customer bankruptcy proceedings, tax audits, claims of alleged infringement of patents, trademarks, copyrightslegal and other intellectual property rights, claimsclaims. However, the outcome of alleged non-compliance with contract provisions, employment-related claims, claims by competitors, vendors or customers, claims related to alleged violations of laws and regulations,legal proceedings and claims relatingbrought against us is subject to alleged securitysignificant uncertainty. Therefore, although management considers the likelihood of such an outcome to be remote, if one or privacy breaches. We attempt to ameliorate the effect of potential litigation through insurance coverage and contractual protections such as rights to indemnifications and limitations of liability. We do not expect that the outcome in anymore of these legal matters individually or collectively, will havewere resolved against the Company in a material adverse effect on ourreporting period for amounts in excess of management’s expectations, the Company’s consolidated financial condition or results of operations, however, litigation is inherently unpredictable. Therefore, judgmentsstatements for that reporting period could be rendered or settlements entered that couldmaterially adversely affect our results of operations or cash flows in a particular period. We provide for costs related to contingencies when a loss is probable and the amount is reasonably determinable.
18affected.
During the nine months ended December 31, 2016, we received $380 thousand related to the dynamic random access memory (“DRAM”) class action lawsuit, which claimed that manufacturers fixed the price for DRAM, which was included within other income on our unaudited consolidated statement of operations.

Contingencies Related to Third-Party Review

From time to time, we are subject to potential claims and assessments from third parties. We are also subject to various governmental, customer and partner audits. We continually assess whether or not such claims have merit and warrant accrual. Where appropriate, we accrue estimates of anticipated liabilities in our consolidated financial statements. Such estimates are subject to change and may affect our results of operations and our cash flows.

9.EARNINGS PER SHARE

Basic earnings per share is calculated by dividing net earnings available to common shareholders by the basic weighted average number of shares of common stock outstanding during each period. Diluted earnings per share is calculated by dividing net earnings available to common shareholders by the basic weighted average number of shares of common stock outstanding plus common stock equivalents during each period.

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The following table provides a reconciliation of the numerators and denominators used to calculate basic and diluted net income per common share as disclosed on our consolidated statements of operations for the three and nine months ended December 31, 20162017 and 20152016 (in thousands, except per share data):.

 
Three Months Ended
December 31,
  
Nine Months Ended
December 31,
  
Three Months Ended
December 31,
  
Nine Months Ended
December 31,
 
 2016  2015  2016  2015  2017  2016  2017  2016 
                        
Net earnings attributable to common shareholders - basic and diluted $12,620  $10,297  $40,066  $34,790  $15,581  $12,620  $46,225  $40,066 
                                
Basic and diluted common shares outstanding:
                                
Weighted average common shares outstanding — basic  6,896   7,280   6,946   7,260   13,851   13,791   13,845   13,891 
Effect of dilutive shares  64   49   67   76   139   129   177   135 
Weighted average shares common outstanding — diluted  6,960   7,329   7,013   7,336   13,990   13,920   14,022   14,026 
                                
                
Earnings per common share - basic $1.83  $1.41  $5.77  $4.79  $1.12  $0.92  $3.34  $2.88 
                                
Earnings per common share - diluted $1.81  $1.40  $5.71  $4.74  $1.11  $0.91  $3.30  $2.86 

Stock Split

On February 2, 2017, our Board of Directors declared a two-for-one stock split effected in the form of a stock dividend. The share distribution will occur March 31, 2017. All references made to share or per share amounts in the accompanying unaudited condensed consolidated financial statements and applicable disclosures are presented on a pre-split basis. As a result of the stock split, all historical per share data and number of shares outstanding presented in future financial statements will be retroactively adjusted.

The following table provides pro forma earnings per share, giving retroactive effect to the stock split (in thousands, except per share data):

  Three Months Ended  Nine Months Ended 
  2016  2015  2016  2015 
             
Earnings per common share:            
Basic — pro forma $0.92  $0.71  $2.88  $2.40 
Diluted — pro forma $0.91  $0.70  $2.86  $2.37 
                 
Weighted average common shares outstanding:                
Basic — pro forma  13,791   14,561   13,891   14,519 
Diluted — pro forma  13,920   14,659   14,026   14,672 
10.
STOCKHOLDERS’ EQUITY

Share Repurchase Plan

On August 18, 2016,15, 2017, our board of directors authorized the Company to repurchase up to 500,000 shares of itsour outstanding common stock over a 12-month period beginning on August 19, 20162017 through August 18, 2017.2018. The plan authorized purchases to be made from time to time in the open market, or in privately negotiated transactions, subject to availability. Any repurchased shares will have the status of treasury shares and may be used, when needed, for general corporate purposes.The former repurchase plan expired on August 18, 2017.

During the nine months ended December 31, 2017, we purchased 125,605 shares of our outstanding common stock at an average cost of $77.88 per share for a total purchase price of $9.8 million under the share repurchase plan. We also acquired 57,725 shares of common stock at a value of $4.4 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

During the nine months ended December 31, 2016, we purchased 328,481656,962 shares of our outstanding common stock at an average cost of $81.62$40.81 per share for a total purchase price of $26.8 million under the share repurchase plan. We also purchased 29,73659,472 shares of common stock at a value of $2.6 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

During the nine months ended December 31, 2015, we did not purchase any shares of our outstanding common stock under the share repurchase plan; however, we did purchase 30,447 shares of common stock at a value of $2.5 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.
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Since the inception of our initial repurchase program on September 20, 2001 to December 31, 2016, we have repurchased approximately 6.0 million shares of our outstanding common stock at an average cost of $24.44 per share for a total purchase price of $147.3 million.

11.SHARE-BASED COMPENSATION

Share-Based Plans

As of December 31, 2016,2017, we had share-based awards outstanding under the following plans: (1) the 2008 Non-Employee Director Long-Term Incentive Plan (“2008 Director LTIP”), (2) the 2017 Non-Employee Director Long-Term Incentive Plan (“2017 Director LTIP”) and (2)(3) the 2012 Employee Long-Term Incentive Plan ("2012 Employee LTIP"). Both of theThe share-based plans define fair market value as the previous trading day's closing price when the grant date falls on a date the stock was not traded.

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Restricted Stock Activity

For the nine months ended December 31, 2016,2017, we granted 5,692535 restricted shares under the 2008 Director LTIP, 5,310 restricted shares under the 2017 Director LTIP, and 67,26966,530 restricted shares under the 2012 Employee LTIP. For the nine months ended December 31, 2015,2016, we granted 6,38311,384 restricted shares under the 2008 Director LTIP, and 118,974134,538 restricted shares under the 2012 Employee LTIP. A summary of the restricted shares is as follows:

 
Number of
Shares
  
Weighted
Average Grant-
date Fair Value
  Number of Shares  
Weighted Average
Grant-date Fair Value
 
            
Nonvested April 1, 2016  203,828  $72.33 
Nonvested April 1, 2017  371,689  $40.45 
Granted  72,961  $86.24   72,375  $80.25 
Vested  (90,356) $65.99   (156,240) $38.52 
Forfeited  (349) $76.87   (4,108) $39.37 
Nonvested December 31, 2016  186,084  $80.86 
Nonvested December 31, 2017  283,716  $51.68 

Upon each vesting period of the restricted stock awards, employees are subject to minimum tax withholding obligations. Under the 2012 Employee LTIP, we may purchase a sufficient number of shares due to the participant to satisfy their minimum tax withholding on employee stock awards. For the nine months ended December 31, 2016,2017, the Company had withheld 29,736acquired 57,725 shares of common stock at a value of $2.6$4.4 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock, which was included in treasury stock.

Compensation Expense

We recognize compensation cost for awards of restricted stock with graded vesting on a straight line basis over the requisite service period. There are no additional conditions for vesting other than service conditions. During each of the three months ended December 31, 20162017 and 2015,2016, we recognized $1.7 million and $1.5 million, respectively, of total share-based compensation expense. During the nine months ended December 31, 20162017 and 2015,2016, we recognized $4.5$4.9 million and $4.2$4.5 million, respectively, of total share-based compensation expense. Unrecognized compensation expense related to non-vested restricted stock was $11.8$11.1 million as of December 31, 2016,2017, which will be fully recognized over the next forty-two (42)thirty (30) months.

We also provide our employees with a contributory 401(k) profit sharing plan. Employer contribution percentagesWe may make contributions to the plan. These contributions are determined by usnot required and are discretionary each year. Thewhether or not we choose to make them is entirely within our discretion. Our employer contributions vest pro-ratably over a four-year service period byto the employees, after whichplan are fully vested at all employer contributions will be fully vested. times. For the three months ended December 31, 20162017 and 20152016, our estimated contribution expense for the plan werewas $0.5 million and $0.4$0.5 million, respectively. For the nine months ended December 31, 20162017 and 2015,2016, our estimated contribution expense for the plan was $1.6 million and $1.2 million, respectively.

12.INCOME TAXES

Income Taxes – Provision

Our provision for income tax expense was $0.7 million and $1.1$19.5 million for the three and nine months ended December 31, 2017, as compared to $8.7 million and $27.3 million for the same periods in the prior year. Our effective income tax rate for the three and nine months ended December 31, 2017, was 4.2% and 29.7%, respectively, compared to 40.8% and 40.5% for the three and nine months ended December 31, 2016, respectively. In the third quarter, the Company revised its estimated annual effective tax rate to reflect a change in the federal statutory rate from 35% to 21%, resulting from legislation that was enacted on December 22, 2017. The rate change is administratively effective at the beginning of our current fiscal year, using a blended rate for the annual period. As a result, the blended statutory tax rate for our current year is 31.5%. In addition, we recognized an estimated tax benefit in our tax provision for the period related to adjusting our deferred tax balance to reflect the new corporate tax rate. As a result, income tax expense reported for the first nine months was adjusted to reflect the effects of the change in the tax law and resulted in a decrease in income tax expense of $2.6 million during the third quarter. In addition we estimated the tax effect of originating items occurring in the fourth quarter that are expected to reverse at a rate of 21%. This resulted in an additional tax benefit of $0.8 million.
 
The accounting for the effects of the rate change on deferred tax balances is provisional and we will finalize these estimates during our fourth quarter of fiscal year 2018. We re-measured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. However, we are still analyzing certain aspects of the new tax law and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts.
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12.INCOME TAXES
Income Taxes – Uncertain Tax Positions

We account for our tax positions in accordance with CodificationASC Topic 740, Income Taxes. Under the guidance, we evaluate uncertain tax positions based on the two-step approach. The first step is to evaluate each uncertain tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained in an audit, including resolution of related appeals or litigation processes, if any. For tax positions that are not likely of being sustained upon audit, the second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50 percent likely of being realized upon ultimate settlement.

We recognizeOur total gross unrecognized tax benefits recorded for uncertain income tax, and interest and penalties for uncertain tax positions. Asthereon, were negligible as of December 31, 20162017, and December 31, 2016. We had no additions or reductions to our gross liability related to uncertain tax positions was $72 thousand. At December 31, 2016 if the unrecognized tax benefits of $72 thousand were to be recognized, includingduring the effect of interest, penaltiesthree and federal tax benefit, the impact would be $106 thousand.

nine months ended December 31, 2017. We also recognize accrued interest and penalties related to unrecognized tax benefits as a component ofin income tax expense. We did not recognize any additional penalties in the three and nine month periods ended December 31, 2016. We had $51 thousand and $47 thousand accrued for the payment of interest at December 31, 2016 and 2015, respectively.

As permitted by the recently issued ASU 2016-09, Stock Compensation, we elected to early adopt this update during the quarter ended June 30, 2016. The amendments requiring recognition of excess tax benefits and deficiencies in the income statement have been applied prospectively resulting in a benefit in the nine months ended December 31, 2016 of $0.5 million.

13.FAIR VALUE OF FINANCIAL INSTRUMENTS

We account for the fair values of our assets and liabilities in accordance with ASC Topic 820, Fair Value Measurement and Disclosure. The following table summarizes the fair value hierarchy of our financial instruments as of December 31, 20162017 and March 31, 20162017 (in thousands):

    Fair Value Measurement Using     Fair Value Measurement Using 
 
Recorded
Amount
  
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
  
Significant
Other
Observable
Inputs (Level 2)
  
Significant
Unobservable
Inputs
(Level 3)
  
Recorded
Amount
  
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
  
Significant
Other
Observable
Inputs (Level 2)
  
Significant
Unobservable
Inputs
(Level 3)
 
                        
December 31.2016
            
December 31, 2017
            
Assets:                        
Money market funds $29,851  $29,851  $-  $-  $21,596  $21,596  $-  $- 
                                
Liabilities:                                
Contingent consideration $554  $-  $-  $554  $13,125  $-  $-  $13,125 
                                
March 31, 2016
                
March 31, 2017
                
Assets:                                
Money market funds $39,509  $39,509  $-  $-  $50,866  $50,866  $-  $- 
                
Liabilities:                                
Contingent consideration $1,041  $-  $-  $1,041  $554  $-  $-  $554 

We recorded no adjustments that increased the fair value of our liability for contingent consideration forFor the three and nine months ended December 31, 2016. For the nine months December 31, 2016,2017, we recorded adjustments that increased the fair value of our liability for contingent consideration by $232 thousand;$0.7 million, and such adjustments were presented within general and administrative expenses in our unaudited condensed consolidated statement of operations. During$12.6 million due to business acquisitions. For the three months and nine months ended December 31, 2016,2017, we paid $0.7made $0.6 million in payments to satisfy the current obligations of the contingent consideration arrangement.arrangement from our earlier acquisition of Consolidated IT Services.

For the three and nine months ended December 31, 2015, we recorded adjustments that increased the fair value of our liability for contingent consideration by $3 thousand and $318 thousand, respectively. During the three months and nine months ended December 31, 2015, we paid $1.2 million to satisfy the current obligations of the contingent consideration arrangement.
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14.SEGMENT REPORTING

Our operations are conducted through two operating segments that are also both reportable segments. Our technology segment includes sales of information technology products, third-party software, third-party maintenance, advanced professional and managed services and our proprietary software to commercial enterprises, state and local governments, and government contractors. Our financing segment consists of the financing of IT equipment, software and related services to commercial enterprises, state and local governments, and government contractors. We measure the performance of the segments based on operating income. Our reportable segment information was as follows (in thousands):
 
  Three Months Ended 
  December 31, 2016  December 31, 2015 
  Technology  Financing  Total  Technology  Financing  Total 
                   
Sales of product and services $317,391  $-  $317,391  $287,859  $-  $287,859 
Financing revenue  -   8,190   8,190   -   9,289   9,289 
Fee and other income  915   161   1,076   1,506   (10)  1,496 
Net sales  318,306   8,351   326,657   289,365   9,279   298,644 
                         
Cost of sales, product and services  251,729   -   251,729   231,503   -   231,503 
Direct lease costs  -   1,142   1,142   -   3,081   3,081 
Cost of sales  251,729   1,142   252,871   231,503   3,081   234,584 
                         
Professional and other fees  1,216   181   1,397   1,608   274   1,882 
Salaries and benefits  40,155   2,230   42,385   35,043   2,329   37,372 
General and administrative expenses  6,409   (31)  6,378   5,203   231   5,434 
Depreciation and amortization  1,908   2   1,910   1,327   4   1,331 
Interest and financing costs  -   409   409   10   386   396 
Operating expenses  49,688   2,791   52,479   43,191   3,224   46,415 
                         
Operating income $16,889  $4,418  $21,307  $14,671  $2,974  $17,645 
                         
                         
Selected Financial Data - Statement of Cash Flow           
         
Depreciation and amortization $1,941  $985  $2,926  $1,365  $3,152  $4,517 
Purchases of property, equipment and operating lease equipment $849  $3,282  $4,131  $506  $884  $1,390 
                         
                         
Selected Financial Data - Balance Sheet           
         
Total assets $546,728  $189,950  $736,678  $401,422  $229,012  $630,434 
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Table of Contents

  Nine Months Ended 
  December 31, 2016  December 31, 2015 
Statement of Operations
 Technology  Financing  Total  Technology  Financing  Total 
                   
Sales of product and services $968,799  $-  $968,799  $871,814  $-  $871,814 
Financing revenue  -   23,899   23,899   -   27,914   27,914 
Fee and other income  3,679   245   3,924   5,038   30   5,068 
Net sales  972,478   24,144   996,622   876,852   27,944   904,796 
                         
Cost of sales, product and services  769,780   -   769,780   700,429   -   700,429 
Direct lease costs  -   3,459   3,459   -   9,256   9,256 
Cost of sales  769,780   3,459   773,239   700,429   9,256   709,685 
                         
Professional and other fees  4,138   780   4,918   4,175   738   4,913 
Salaries and benefits  117,822   6,657   124,479   101,471   6,855   108,326 
General and administrative expenses  19,335   1,089   20,424   16,653   737   17,390 
Depreciation and amortization  5,400   8   5,408   3,728   11   3,739 
Interest and financing costs  -   1,158   1,158   51   1,320   1,371 
Operating expenses  146,695   9,692   156,387   126,078   9,661   135,739 
                         
Operating income $56,003  $10,993  $66,996  $50,345  $9,027  $59,372 
                         
                         
Selected Financial Data - Statement of Cash Flow           
         
Depreciation and amortization $5,494  $3,264  $8,758  $3,831  $9,189  $13,020 
Purchases of property, equipment and operating lease equipment $2,413  $4,887  $7,300  $1,700  $15,308  $17,008 
                         
                         
Selected Financial Data - Balance Sheet        
             
Total assets $546,728  $189,950  $736,678  $401,422  $229,012  $630,434 
The total of theOur reportable segments’ measure of profit or loss excludes other income of $380 thousand for the nine months ended December 31, 2016, which is included in the consolidated earnings before tax but is not allocated to the segments.segment information was as follows (in thousands):

  Three Months Ended 
  December 31, 2017  December 31, 2016 
  Technology  Financing  Total  Technology  Financing  Total 
                   
Sales of product and services $330,953  $-  $330,953  $317,391  $-  $317,391 
Financing revenue  -   9,592   9,592   -   8,190   8,190 
Fee and other income  1,678   346   2,024   915   161   1,076 
Net sales  332,631   9,938   342,569   318,306   8,351   326,657 
                         
Cost of sales, product and services  264,487   -   264,487   251,729   -   251,729 
Direct lease costs  -   1,394   1,394   -   1,142   1,142 
Cost of sales  264,487   1,394   265,881   251,729   1,142   252,871 
                         
Selling, general, and administrative expenses  53,836   3,298   57,134   47,780   2,380   50,160 
Depreciation and amortization  2,893   1   2,894   1,908   2   1,910 
Interest and financing costs  -   270   270   -   409   409 
Operating expenses  56,729   3,569   60,298   49,688   2,791   52,479 
                         
Operating income $11,415  $4,975  $16,390  $16,889  $4,418  $21,307 
                         
Selected Financial Data - Statement of Cash Flow
                     
Depreciation and amortization $3,157  $1,422  $4,579  $1,941  $985  $2,926 
Purchases of property, equipment and operating lease equipment $2,018  $844  $2,862  $849  $3,282  $4,131 
                         
Selected Financial Data - Balance Sheet
                     
Total assets $595,584  $169,069  $764,653  $546,728  $189,950  $736,678 
On July 25, 2016, the Company announced its appointment of a new Chief Executive Officer and President effective August 1, 2016. We are currently evaluating the impact of this change to the determination of our reportable segments.
  Nine Months Ended 
  December 31, 2017  December 31, 2016 
  Technology  Financing  Total  Technology  Financing  Total 
                   
Sales of product and services $1,045,792  $-  $1,045,792  $968,799  $-  $968,799 
Financing revenue  -   30,698   30,698   -   23,899   23,899 
Fee and other income  3,707   374   4,081   3,679   245   3,924 
Net sales  1,049,499   31,072   1,080,571   972,478   24,144   996,622 
                         
Cost of sales, product and services  834,873   -   834,873   769,780   -   769,780 
Direct lease costs  -   3,846   3,846   -   3,459   3,459 
Cost of sales  834,873   3,846   838,719   769,780   3,459   773,239 
                         
Selling, general, and administrative expenses  158,838   9,300   168,138   141,295   8,526   149,821 
Depreciation and amortization  7,084   2   7,086   5,400   8   5,408 
Interest and financing costs  -   903   903   -   1,158   1,158 
Operating expenses  165,922   10,205   176,127   146,695   9,692   156,387 
                         
Operating income $48,704  $17,021  $65,725  $56,003  $10,993  $66,996 
                         
Selected Financial Data - Statement of Cash Flow
                        
Depreciation and amortization $7,413  $3,911  $11,324  $5,494  $3,264  $8,758 
Purchases of property, equipment and operating lease equipment $4,064  $2,234  $6,298  $2,413  $4,887  $7,300 
                         
Selected Financial Data - Balance Sheet
                     
Total assets $595,584  $169,069  $764,653  $546,728  $189,950  $736,678 
 
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15.
BUSINESS COMBINATIONS

Consolidated IT ServicesIntegrated Data Storage, LLC acquisition

On December 6, 2016,September 15, 2017, our subsidiary ePlusePlus Technology, inc., acquired certain assets and assumed certain liabilities of Consolidated IT Services. Consolidated IT Services business providesIntegrated Data Storage, LLC (“IDS”) though an asset purchase agreement. Headquartered in Oak Brook, IL and with offices in downtown Chicago and Indianapolis, IDS is an advanced data center unified communications, networking,solutions provider focused on cloud enablement and security solutionsmanaged services, including its proprietary IDS Cloud, which features enterprise-class technology infrastructure coupled with consulting services to a diverse set of domesticsupport private, hybrid, and international customers including commercial, enterprise, and state, local, and education (SLED) organizationspublic cloud deployments. The acquisition expands ePlus’ footprint in the upper Midwest. The primary reasons for this acquisition are that Consolidated IT Services expands our reach to the upper Midwest and enhances its sales and engineering capabilities in cloud services, disaster recovery and backup as a new geography for ePlus,service, storage, data center, and enables us to market our advanced technology solutions to their long-standing client base.professional services.

TheOur preliminary sum of total purchase priceconsideration transferred is $13.1$38.4 million, including $9.5consisting of $29.8 million paid in cash at closing, and $4.0less $1.4 million that will be paid in cash in equal quarterly installments over 2 years, less $0.4 million that we believe isreceivables due back to us as parta working capital adjustment, plus an additional $10.0 million equal to the preliminary fair value of consideration, contingent on the acquiree’s business operations future gross profit. The contingent consideration was calculated using the Monte Carlo simulation model based on our projections of future gross profits. The maximum payout of the final working capital adjustment. contingent consideration is $15.0 million paid over 3 years. Our preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):

  
Acquisition
Date Amount
 
Accounts receivable and other assets $14,353 
Property and equipment  1,620 
Identified intangible assets  13,650 
Accounts payable and other current liabilities  (12,313)
Total identifiable net assets  17,310 
Goodwill  21,088 
Total purchase consideration $38,398 
 
  
Acquisition
Date Amount
 
    
Accounts receivable and other current assets $7,501 
Property and equipment  1,045 
Identified intangible assets  3,340 
Accounts payable and other current liabilities  (6,411)
Total identifiable net assets  5,475 
Goodwill  7,614 
     
Total purchase consideration $13,089 

As stated above,Our sum for consideration transferred and our allocation of the purchase consideration is preliminary and subject to revision as additional information related to the fair value of assets and liabilities becomes available.

The identified intangible assets of $3.3$13.7 million consist entirely of customer relationships with an estimated useful life of 78 years. The fair value of acquired receivables equals the gross contractual amounts receivable. We expect to collect all acquired receivables.

We recognized goodwill related to this transaction of $7.6$21.1 million, which was assigned to our technology reporting unit. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce and expected synergies, none of which qualify for recognition as a separate intangible asset. The total amount of goodwill is expected to be deductible for tax purposes. The amount of revenues and earnings of the acquiree since the acquisition date are not material. Likewise, the impact to the revenue and earnings of the combined entity for the current reporting period through the acquisition date had the acquisition date been April 1, 2016,2017, is not material.

IGXOneCloud Consulting Inc. acquisition

On December 4, 2015,May 17, 2017, our subsidiary ePlusePlus Technology, inc., acquired certain assets100% of the stock of OneCloud Consulting, Inc. (“OneCloud”). Based in Milpitas, CA, OneCloud is a versatile team of highly trained technology consultants, architects, developers and assumed certain liabilities of IGX Acquisition Global, LLC (“IGX Acquisition”),instructors. OneCloud enables its customers’ cloud and IGX Support, LLC, including IGX Acquisition’s wholly-owned subsidiary, IGXGlobal UK Limited (collectively, “IGX”), which provide advanced security solutions, secured networking products and relatedapplication strategy via professional services, technical education and software development. The acquisition provides us with additional ability to a diverse setaddress customers’ needs in cloud-based solutions and infrastructure, including DevOps, OpenStack, and other emerging technologies, to our broad customer base.

Our sum of domestictotal consideration we transferred was $10.0 million consisting of $7.9 million paid in cash at closing, net of cash acquired, and international customers including commercial, enterprise, and state and local government and education (“SLED”) organizations. IGX$2.1 million equal to the fair value of contingent consideration, calculated using the Monte Carlo simulation model. The maximum payout of the contingent consideration is headquartered near Hartford, CT and has a sales presence in New York and Boston as well as an operating branch in London that serves its United Kingdom (“UK”) and global customers. IGXGlobal UK Limited is a private limited company, registered in England and Wales.$4.5 million paid over 3 years.
 
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The total purchase price, net of cash acquired, was $16.6 million paid in cash. TheOur allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):

 
Acquisition
 Date Amount
  
Acquisition
Date Amount
 
Accounts receivable—trade, net $8,457 
Property and equipment  81 
   
Accounts receivable and other assets $488 
Identified intangible assets  8,710   4,130 
Accounts payable and other current liabilities  (8,641)  (1,822)
Deferred tax liability  (89)
Total identifiable net assets  8,518   2,796 
Goodwill  8,131   7,189 
Total purchase consideration $16,649  $9,985 

The identified intangible assets of $4.1 million consist of the following:customer relationships of $1.7 million with an estimated useful life of 8 years, and internally developed processes of $2.4 million with an estimated useful life of 5 years.

  
Estimated
Useful Lives
(in years)
  
Acquisition
Date Amount
 
Intangible assets—customer relationships  7  $7,680 
Intangible assets—trade names  10   520 
Intangible assets—backlog  1   510 
Total identified intangible assets     $8,710 

We recognized goodwill related to this transaction of $8.1$7.2 million, which was assigned to our technology reporting unit. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce an entry into the UK and European markets and expected synergies, none of which qualify for recognition as a separate intangible asset. The total amount of goodwill that is expected to be deductible for tax purposes is $5.8 million.purposes. The amount of revenues and earnings of the acquiree since the acquisition date are not material. Likewise, the impact to the revenue and earnings of the combined entity for the current reporting period through the acquisition date had the acquisition date been April 1, 2017, is not material.

Consolidated IT Services acquisition

On December 6, 2016, our subsidiary ePlus Technology, inc., acquired certain assets and assumed certain liabilities of Consolidated IT Services. Consolidated IT Services’ business provides data center, unified communications, networking, and security solutions to a diverse set of domestic and international customers including commercial, enterprise, and state, local, and education (SLED) organizations in the upper Midwest. Acquiring Consolidated IT Services expanded our reach to the upper Midwest, a new geography for ePlus, and enables us to market our advanced technology solutions to their long-standing customer base.

The total purchase price is $13.1 million including $9.5 million paid in cash at closing and $4.0 million that will be paid in cash in equal quarterly installments over 2 years, less $0.4 million paid back to us as part of the final working capital adjustment. Our allocation of the purchase consideration to the assets acquired and liabilities is presented below (in thousands):

  
Acquisition
Date Amount
 
Accounts receivable and other current assets $7,491 
Property and equipment  1,045 
Identified intangible assets  4,090 
Accounts payable and other current liabilities  (5,786)
Total identifiable net assets  6,840 
Goodwill  6,227 
Total purchase consideration $13,067 
In the nine months ended December 31, 2017, we increased identified intangible assets and decreased goodwill by $280 thousand from the provisional amounts recorded as of March 31, 2017.

The identified intangible assets of $4.1 million consist entirely of customer relationships with an estimated useful life of 7 years.

We recognized goodwill related to this transaction of $6.2 million, which was assigned to our technology reporting unit. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce and expected synergies, none of which qualify for recognition as a separate intangible asset. The total amount of goodwill is expected to be deductible for tax purposes. The amount of revenues and net earnings from thisof the acquiree since the acquisition date are not material. Likewise, the impact to the revenue and earnings of the combined entity for the prior reporting period through the acquisition date had the acquisition date been April 1, 2016 is not material.
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion is intended to further the reader’s understanding of our consolidated financial condition and results of operations. It should be read in conjunction with the financial statements included in this quarterly report on Form 10-Q and our annual report on Form 10-K for the fiscal year ended March 31, 20162017 (“20162017 Annual Report”). These historical financial statements may not be indicative of our future performance. This Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described in Part I, Item 1A, “Risk Factors,” in our 20162017 Annual Report.

EXECUTIVE OVERVIEW

Business Description

We are a leading solutions provider ofthat delivers actionable outcomes for organizations by utilizing information technology (IT) and consulting solutions which enable organizations to optimize their IT environmentdrive business agility and supply chain processes. Weinnovation. Leveraging world-class engineering talent, we assess, plan, deliver, and integrate world-class IT productssecure solutions comprised of leading technologies and software from top vendors,consumption models aligned with customers’ needs. Our expertise and provideexperience enables ePlus to craft optimized solutions that take advantage of the cost, scale and efficiency of private, public and hybrid and public cloud solutions to meet customers’in an evolving needs.market. We also provide consulting, professional, and managed services and complete lifecycle management services including flexible financing solutions. We have been in the business of selling, leasing, financing, and managing information technology and other assets for more than 2627 years.

Our primary focus is to deliver secure, integrated technology solutions forthat address our customers’ data center, network, security, maintenance,Cloud, Security and collaborationDigital Infrastructure needs, including hosted,for both on-premise and hybrid cloud infrastructures. These solutions may encompassin the fullcloud. Our Hybrid IT framework is a lifecycle of IT and includeapproach that includes consulting, assessments,assessment, architecture, design, testing, implementation, and ongoing managed services, maintenance and periodic consultative business reviews. We offerIn addition to cloud, our portfolio of expertise includes software defined, security, storage, cloud,IoT, data and analytics, mobility, hyper-converged infrastructure, and other advanced technologies. We design, implement and providemanage an array of IT solutions from multiple leading IT vendors. We are an authorized reseller from over 1,000 vendors, but primarily from approximately 100 vendors, including Artista Networks, Check Point, Cisco Systems, Citrix, Commvault, Dell EMC, F5 Networks, Gigamon, HP Inc., HPE, Juniper Networks, Lenovo, NetApp, Nimble Storage, Oracle, Palo Alto Networks, Pure Storage, Quantum, Splunk, and VMware, among many others. We possess top-level engineering certifications with a broad range of leading IT vendors that enable us to offer multi-vendor IT solutions that are optimized for each of our customers’ specific requirements. Our hosted, proprietary software solutions are focused on giving our customers more control over their IT supply chain, by automating and optimizing the procurement and management of their owned, leased, and consumption-based assets.

Our sizescale and strong financial resultsresources have enabled us to investcontinue investing in the engineering and technology resources required toand stay current with emerging technology trends and delivertrends. By delivering leading edge Hybrid IT solutions. We believe we aresolutions, ePlus has become a trusted IT advisor to our customers, delivering turn-key ITcustomers. Our integrated technology solutions that incorporate hardware, software, security and both managed and professional services. In addition, we offer a wide range of consumption options including leasing and financing options for technology and other capital assets. We believe our lifecycle approach offering of integrated IT products,solutions, services, financing, and our proprietary supply chain software, is unique in the industry. It allowsThis broad portfolio enables us to offerdeliver a unique customer service strategyexperience that spans the continuum from fast delivery of competitively priced products, services, subsequent management and upkeep, through to end-of-life disposal services. This selling approach also permits us to grow withaccommodate our customerscustomers’ business requirements and solidifydeliver ever-more-sophisticated hybrid IT solutions, thus solidifying our relationships through hands-on engagement and understanding of their needs.value.

We focus exclusivelyOur go-to-market strategy focuses primarily on diverse end-markets for middle market andto large enterprises. For the trailing twelve months ended December 31, 2016,2017, the percentage of revenue by customer end market within our technology segment includes:includes technology industry 22%25%, state and local government, and educational institutions 21%17%, telecommunications, media and entertainment 16%14%, financial services 12%16%, and healthcare 11%13%. The majority of our sales were generated within the United States,States; however, we have the ability to support our customers nationally and internationally and in December 2015 we acquired our first international subsidiary which is locatedincluding a presence in the UK.United Kingdom (“U.K.”), India and Singapore. Our technology segment accountsaccounted for 98%97% of our net sales, and 84%70% of our operating income, while our financing segment accountsaccounted for 2%3% of our net sales, and 16%30% of our operating income for the nine months ended December 31, 2016.

Since the June 23, 2016 UK referendum (“Brexit”) on whether to remain in, or leave, the European Union, the United Kingdom has faced a remarkable range of political, monetary, economic and even constitutional challenges. For some companies, Brexit could impact revenue items, cost items, tax, goodwill impairments and liquidity, among others. The most obvious immediate impact is the effect of foreign exchange fluctuations on revenue and cost items. We have determined that our foreign currency exposure for our United Kingdom operations is insignificant in relation to total consolidated operations and we believe those potential fluctuations in currency exchange rates and other Brexit related economic and operational risks will not have a material effect on our results of operations and financial position.2017.
 
We evaluate Brexit-related developments on a regular basis to determine if such developments are anticipated to have a material impact on the Company’s results on operations and financial position.

Key Business Metrics

Our management monitors a number of financial and non-financial measures and ratios on a regular basis in order to track the progress of our business. We usebelieve that the most important of these measures and ratios along withinclude gross margin, gross margin on product and services, operating income margin, net earnings, net earnings per common share, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted gross billings of product and services, and non-GAAP net earnings per share. We use a variety of operating and other information to evaluate the operating performance of our business, develop financial forecasts, make strategic decisions, and prepare and approve annual budgets.

These key indicators include financial information that is prepared in accordance with U.S. GAAP and presented in our unaudited condensed consolidated financial statements as well as non-GAAP performance measurement tools. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance ofor financial position that either excludes or includes amounts that are not normally included in the most directly comparable measure calculated and presented in accordance with U.S GAAP. Non-GAAP measures used by management may differ from similar measures used by other companies, even when similar terms are used to identify such measures.

Our key business metrics and results from those metrics are as follows, (dollars in thousands):

 
Three Months Ended
December 31,
  
Nine Months Ended
December 31,
  
Three Months Ended
December 31,
  
Nine Months Ended
December 31,
 
 2016  2015  2016  2015  2017  2016  2017  2016 
                        
Sales of products and services $317,391  $287,859  $968,799  $871,814  $330,953  $317,391  $1,045,792  $968,799 
                                
Adjusted gross billings of product and services (1) $432,407  $393,922  $1,317,188  $1,157,327  $464,105  $432,407  $1,449,371  $1,317,188 
                                
Gross margin  22.6%  21.5%  22.4%  21.6%  22.4%  22.6%  22.4%  22.4%
Gross margin, product and services  20.7%  19.6%  20.5%  19.7%  20.1%  20.7%  20.2%  20.5%
Operating income margin  6.5%  5.9%  6.7%  6.6%  4.8%  6.5%  6.1%  6.7%
                                
Net earnings $12,620  $10,297  $40,066  $34,790  $15,581  $12,620  $46,225  $40,066 
Net earnings margin  4.5%  3.9%  4.3%  4.0%
Net earnings per common share - diluted $1.81  $1.40  $5.71  $4.74  $1.11  $0.91  $3.30  $2.86 
                                
Non-GAAP: Net earnings (2) $13,294  $10,694  $41,383  $35,840  $13,574  $15,621  $44,013  $43,710 
Non-GAAP: Net earnings per common share - diluted (2) $1.91  $1.46  $5.90  $4.89  $0.97  $1.12  $3.14  $3.12 
                                
Adjusted EBITDA (3) $23,217  $18,976  $72,404  $63,111  $19,284  $23,217  $72,811  $72,404 
Adjusted EBITDA margin (3)  7.1%  6.4%  7.3%  7.0%  5.6%  7.1%  6.7%  7.3%
                                
Purchases of property and equipment used internally $849  $506  $2,413  $1,700  $2,018  $849  $4,064  $2,413 
Purchases of equipment under operating leases  3,282   884   4,887   15,308   844   3,282   2,234   4,887 
Total capital expenditures $4,131  $1,390  $7,300  $17,008  $2,862  $4,131  $3,436  $7,300 
 
(1)We define Adjusted gross billings of product and services as our sales of product and services calculated in accordance with U.S. GAAP, adjusted to exclude the costs incurred related to sales of third party software assurance, subscription licenses, maintenance and services. We have provided below a reconciliation of Adjusted gross billings of product and services to Sales of product and services, which is the most directly comparable financial measure to this non-GAAP financial measure.
We use Adjusted gross billings of product and services as a supplemental measure of our performance to gain insight into the volume of business generated by our technology segment, and to analyze the changes to our accounts receivable and accounts payable. Our use of Adjusted gross billings of product and services as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under U.S. GAAP. In addition, other companies, including companies in our industry, might calculate Adjusted gross billings of product and services or similarly titled measures differently, which may reduce their usefulness as comparative measures.
  
Three Months Ended
December 31,
  
Nine Months Ended
December 31,
 
  2017  2016  2017  2016 
Sales of products and services $330,953  $317,391  $1,045,792  $968,799 
Costs incurred related to sales of third party software assurance, maintenance and services  133,152   115,016   403,579   348,389 
                 
Adjusted gross billings of product and services $464,105  $432,407  $1,449,371  $1,317,188 

  Three Months Ended December 31,  Nine Months Ended December 31, 
  2016  2015  2016  2015 
Sales of products and services $317,391  $287,859  $968,799  $871,814 
Costs incurred related to sales of third party services  115,016   106,063   348,389   285,513 
Adjusted gross billings of product and services $432,407  $393,922  $1,317,188  $1,157,327 
(2)Non-GAAP net earnings per common share are based on net earnings calculated in accordance with U.S. GAAP, adjusted to exclude other income and acquisition related amortization expense, and related effects on income tax. Non-GAAP provision fortax, the tax (benefit) expense recognized due to the vesting of shared based compensation,  the tax benefit associated with the re-measurement of deferred tax assets and liabilities at the new tax rates, as well as an adjustment to our tax expense in the prior year assuming a 31.5% effective annual income taxes is calculated based on the effective tax rate for the non-GAAP adjustments for the three and nine months ended December 31, 2016. For comparative purposes, the non-GAAP provision for incomeU.S. operations due to changes in U.S. tax for the nine months ended December 31, 2016, excludes the tax benefit of the $0.5 million associated with the adoption in the quarter ended June 30, 2016 of the stock compensation accounting standard. There was no adjustment for this tax benefit in the quarter ended December 31, 2016.rates. We use Non-GAAP net earnings per common share as a supplemental measure of our performance to gain insight into our operating performance. We believe that the exclusion of other income and acquisition related amortization expensethese items in calculating Non-GAAP net earnings per common share provides management and investors a useful measure for period-to-period comparisons of our core business and operating results by excluding items that management believes are not comparable across reporting periods.reflective of our underlying operating performance. Accordingly, we believe that non-GAAP net earnings per common share provide useful information to investors and others in understanding and evaluating our operating results. However, our use of Non-GAAP net earnings per common share as an analytical tooltools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under U.S. GAAP. In addition, other companies, including companies in our industry, might calculate Non-GAAP net earnings per common share or similarly titled measures differently, which may reduce their usefulness as comparative measures.

 
Three Months Ended
December 31,
  
Nine Months Ended
December 31,
  
Three Months Ended
December 31,
  
Nine Months Ended
December 31,
 
 2016  2015  2016  2015  2017  2016  2017  2016 
GAAP: Earnings before tax $21,307  $17,645  $67,376  $59,372  $16,259  $21,307  $65,724  $67,376 
Less: Other income  -   -   (380)  - 
Plus: Acquisition related amortization expense  1,035   680   3,098   1,793 
Acquisition related amortization expense  1,871   1,035   4,178   3,098 
Other (income) expense  131   -   1   (380)
Non-GAAP: Earnings before provision for income taxes  18,261   22,342   69,903   70,094 
                                
Non-GAAP: Earnings before provision for income taxes  22,342   18,325   70,094   61,165 
GAAP: Provision for income taxes  678   8,687   19,499   27,310 
Acquisition related amortization expense  547   267   1,421   956 
Other (income) expense  55   13   -   (144)
Remeasurement of deferred taxes  3,407   -   3,407   - 
Adjustment to FY17 US Federal tax rate to 31.5%  -   (2,252)  -   (2,252)
Tax benefit on restricted stock  -   6   1,563   514 
Non-GAAP: Provision for income taxes  9,048   7,631   28,711   25,325   4,687   6,721   25,890   26,384 
                
Non-GAAP: Net earnings $13,294  $10,694  $41,383  $35,840  $13,574  $15,621  $44,013  $43,710 
                                
GAAP: Net earnings per common share - diluted $1.81  $1.40  $5.71  $4.74  $1.11  $0.91  $3.30  $2.86 
Non-GAAP: Net earnings per common share - diluted $1.91  $1.46  $5.90  $4.89  $0.97  $1.12  $3.14  $3.12 
              
(3)We define Adjusted EBITDA as net earnings calculated in accordance with U.S GAAP, adjusted for the following: interest expense, depreciation and amortization, provision for income taxes, and other income. Segment Adjusted EBITDA is defined as operating income calculated in accordance with GAAP, adjusted for interest expense, and depreciation and amortization. We consider the interest on notes payable from our financing segment and depreciation expense presented within cost of sales, which includes depreciation on assets financed as operating leases, to be operating expenses. As such, they are not included in the amounts added back to net earnings in the Adjusted EBITDA calculation. We provide below a reconciliation of Adjusted EBITDA to net earnings, which is the most directly comparable financial measure to this non-GAAP financial measure. Adjusted EBITDA margin is our calculation of Adjusted EBITDA divided by net sales.

We use Adjusted EBITDA as a supplemental measure of our performance to gain insight into our operating performance. We believe that the exclusion of other income in calculating Adjusted EBITDA and Adjusted EBITDA margin provides management and investors a useful measure for period-to-period comparisons of our business and operating results by excluding items that management believes are not comparable across reporting periods. Adjusted EBITDA margin is equal to Adjusted EBITDA divided by Net sales.reflective of our underlying operating performance. Accordingly, we believe that Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors and others in understanding and evaluating our operating results. However, our use of Adjusted EBITDA and Adjusted EBITDA margin as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under U.S. GAAP. In addition, other companies, including companies in our industry, might calculate Adjusted EBITDA and Adjusted EBITDA margin or similarly titled measures differently, which may reduce their usefulness as comparative measures.

 
Three Months Ended
December 31,
  
Nine Months Ended
December 31,
  
Three Months Ended
December 31,
  
Nine Months Ended
December 31,
 
Consolidated
 2016  2015  2016  2015  2017  2016  2017  2016 
Net earnings $12,620  $10,297  $40,066  $34,790  $15,581  $12,620  $46,225  $40,066 
Provision for income taxes  8,687   7,348   27,310   24,582   678   8,687   19,499   27,310 
Depreciation and amortization  1,910   1,331   5,408   3,739   2,894   1,910   7,086   5,408 
Less: Other income  -   -   (380)  - 
Other (income) expense  131   -   1   (380)
Adjusted EBITDA $23,217  $18,976  $72,404  $63,111  $19,284  $23,217  $72,811  $72,404 
                
                                
Technology Segment
                                
Operating income $16,889  $14,671  $56,003  $50,345  $11,415  $16,889  $48,704  $56,003 
Plus: Depreciation and amortization  1,908   1,327   5,400   3,728 
Depreciation and amortization  2,893   1,908   7,084   5,400 
Adjusted EBITDA $18,797  $15,998  $61,403  $54,073  $14,308  $18,797  $55,788  $61,403 
                
                                
Financing Segment
                                
Operating income $4,418  $2,974  $10,993  $9,027  $4,975  $4,418  $17,021  $10,993 
Plus: Depreciation and amortization  2   4   8   11 
Depreciation and amortization  1   2   2   8 
Adjusted EBITDA $4,420  $2,978  $11,001  $9,038  $4,976  $4,420  $17,023  $11,001 
Consolidated Results of Operations

During the three months ended December 31, 2016,2017, net sales increased 9.4%4.9%, or $28.0$15.9 million to $326.7$342.6 million, compared to $298.6$326.7 million for the same period in the prior fiscal year. For the nine months ended December 31, 2016,2017, net sales increased 10.1%8.4%, or $91.8$83.9 million to $996.6$1,080.6 million, compared to $904.8$996.6 million for the same period in the prior fiscal year.

Net sales of product and services increased 10.3% or $29.5 million to $317.4 million, from $287.9 million for three months ended December 31, 2015. For the nine months ended December 31, 2016, net sales of product and services increased 11.1% or $97.0 million to $968.8 million, from $871.8 million in the prior year. The increase in net sales of product and services revenues for both the three months ended December 31, 2016 was a result of higher demand from the telecom, media & entertainment industry, and state and local government and education (“SLED”) organizations. For the nine months ended December 31, 2016, the increase in net sales of product and services revenues was a result of higher demand from the telecom, media & entertainment industry, state and local government and education (“SLED”) organizations, and technology customers.

Adjusted gross billings of product and services increased 9.8%7.3%, or $38.5$31.7 million to $432.4$464.1 million, for the three months ended December 31, 20162017 from $393.9$432.4 million for the same period in the prior fiscal year. For the nine months ended December 31, 2016, Adjusted2017, adjusted gross billings of product and services increased 13.8%10.0%, or $159.9$132.2 million to $1,317.2$1,449.4 million, from $1,157.3$1,317.2 million for the same period in the prior fiscal year. The greater percentageBoth the three month and nine month increase in Adjusted gross billings of productdemand was from commercial customers primarily in the technology, financial services and services over the percentage increase in net sales for both the threehealth care industries, partially offset by SLED and nine months ended December 31, 2016 was due to a shift in product and services mix, as we sold a higher proportion of third party software assurance, maintenance and services, which are presented on a net basis.other industries.

Consolidated gross profit rose 15.2%3.9% to $73.8$76.7 million, compared with $64.1$73.8 million for the three months ended December 31, 2015.2016. Consolidated gross margins were 22.6%22.4% for the three months ended December 31, 2016 an increase2017 a decrease of 11020 basis points compared to 21.5% for the three months ended December 31, 2015. Our gross margin for product and services was 20.7% during the three months ended December 31, 2016 compared to 19.6% during the three months ended December 31, 2015. Contributing to our margins for the three month period was a shift in product sales mix, as we sold a higher proportion of third party software assurance, maintenance and services. Also contributing to the higher gross margin was an increase in vendor incentives earned as a percentage of sales of product and services of 10 basis points for the three months ended December 31, 2016, as compared to the same period in the prior year.

For the nine months ended December 31, 2016, consolidated gross profit rose 14.5% to $223.4 million, compared with $195.1 million22.6% for the same period in the prior fiscal year. year, due lower product margins, including a decrease in vendor incentives earned, which was offset by an increase in service revenues.

Consolidated gross margins were 22.4%profit rose 8.3% to $241.9 million, compared with $223.4 million for the nine months ended December 31, 2016, an increase of 80 basis points, compared to 21.6%2016. Consolidated gross margins were 22.4% for both the nine months ended December 31, 2015. Our2017 and 2016. Consolidated gross margin formargins were impacted by lower product margins, including a decrease in vendor incentives earned, which was offset by higher service and services was 20.5% during the nine months ended December 31, 2016 compared to 19.7% during the nine months ended December 31, 2015.financing revenues.

Our operating expenses increased 13.1%14.9% to $52.5$60.3 million, representing 16.1%or 78.6% of net salesgross profits for the three months ended December 31, 20162017 as compared to $46.4$52.5 million, representing 15.5%71.1% of net salesgross profits in the same period for the prior year. For the nine months ended December 31, 20162017, our operating expenses increased 15.2%12.6% to $176.6 million, or 72.5% of gross profits as compared to $156.4 million, representing 15.7%70.0% of net sales, as compared to $135.7 million, representing 15.0% of net salesgross profits in the same prior year.year period. The majority of this increase reflects increased salary expense due to an increase in headcount, as well as variable compensation as a result of the increase in gross profit, as well as additional employees.and an increase in employee healthcare costs. Our headcount increased by 104120 employees or 9.8%10.3% to 1,1641,284 from 1,0601,164 a year ago, 98 of which 48 relatewere from the acquisitions of IDS and OneCloud. The net additions in personnel compared to the acquisition of Consolidated IT Services. The personnel additions included 95prior year include 105 sales and engineering positions, with the remaining additions being administrative, IT, and finance positions.

Operating income for the three months ended December 31, 2016 increased 20.8%2017 decreased 23.1% to $21.3$16.4 million, as compared to $17.6$21.3 million for the three months ended December 31, 2015.same period in the prior year. For the three months ended December 31, 2016,2017, the operating income margin increased 60decreased 170 basis points to 4.8% from 6.5% from 5.9%for the same period in the prior year. Operating income for the nine months ended December 31, 2017 decreased 1.9% to $65.7million, as compared to $67.0 million for the same period in the prior year. For the nine months ended December 31, 2016, operating income increased 12.8% to $67.0 million, as compared to $59.4 million for the prior year period. For the nine months ended December 31, 2016,2017, the operating income margin increased 10decreased 60 basis points to 6.7%6.1% from 6.6%6.7% for the same period in the prior year.
During the nine months ended December 31, 2016, we received $380 thousand related to the dynamic random access memory (DRAM) class action lawsuit, which claimed that manufacturers fixed the price for DRAM, a common component in consumer electronics, which is included within other income in our unaudited consolidated statement of operations.

Consolidated net earnings for the three months ended December 31, 20162017 were $12.6$15.6 million, an increase of 22.6%23.5%, or $2.3$3.0 million, overcompared to the prior year’s results of $10.3$12.6 million. For the nine months ended December 31, 20162017, consolidated net earnings were $40.1$46.2 million, an increase of 15.2%15.4%, or $5.3$6.2 million, overcompared to the prior year’s results of $34.8$40.1 million. The increase in consolidated net earnings for the nine months ended December 31, 2016, over the prior year period, is inclusive of non-operating income of $380 thousand relating to our claim in the class action lawsuit mentioned above.

Adjusted EBITDA increased $4.2decreased $3.9 million, or 22.3%,16.9% to $23.2$19.3 million and Adjusted EBITDA margin increased 70decreased 150 basis points to 7.1%5.6% for the three months ended December 31, 2016,2017, as compared to the prior period of 6.4%7.1%. For the nine months ended December 31, 20162017, Adjusted EBITDA increased $9.3$0.4 million, or 14.7%,0.6% to $72.4$72.8 million and Adjusted EBITDA margin increased 30decreased 60 basis points to 7.3%6.7% for the nine months ended December 31, 2017, as compared to the prior period of 7.0%7.3%.

Diluted earnings per share increased 29.3%22.0%, or $0.41$0.20 to $1.81$1.11 per share for the three months ended December 31, 2016,2017, as compared to $1.40$0.91 per share for the three months ended December 31, 2015.2016. Our effective tax rate for the three months ended December 31, 20162017 was 40.8%.4.2%, which includes a tax benefit $3.4 million from the re-measurement of deferred tax assets and liabilities due to the change in the U.S. statutory rate. Non-GAAP diluted earnings per share increased 30.8%decreased 13.4% to $1.91$0.97 for the three months ended December 31, 2016,2017, as compared to $1.46$1.12 for the three months ended December 31, 2015. This non-GAAP metric excludes acquisition-related amortization expenses, other income and the related effects on income taxes.2016.

For the nine months ended December 31, 2016,2017, diluted earnings per share increased 20.5%15.4%, or $0.97$0.44 to $5.71$3.30 per share, as compared to $4.74$2.86 per share for the same nine months for the prior year.ended December 31, 2016. Our effective tax rate for the nine months ended December 31, 20162017 was 40.5%29.7%, which includes a tax benefit of $0.5$1.6 million or $0.07 per diluted share, related to the adoptionvesting of the new share based compensation accounting standard.and a tax benefit $3.4 million from the re-measurement of deferred tax assets and liabilities due to the change in the U.S. statutory rate. Non-GAAP diluted earnings per share increased 20.7%0.6% to $5.90$3.14 for the nine months ended December 31, 2016,2017, as compared to $4.89$3.12 for the nine months ended December 31, 2015.2016.

Cash and cash equivalents decreased $25.1$33.7 million or 26.5%30.7% to $69.7$76.1 million at December 31, 20162017 compared with $94.8$109.8 million as of March 31, 2016.2017. The decrease is primarily the result of investments in our financing portfolio, working capital required for the growth in our technology segment an increase, $29.8 million paid in inventory of $77.7 million committed to customer orders, and the repurchase of 328,481 sharescash at closing of our common stock for $26.8 million under our stock repurchase authorization in the nine months ended December 31, 2016, acquisition of IDS and $9.5$7.9 million paid in cash at closing for our acquisition of Consolidated IT Services.OneCloud. Our cash on hand, funds generated from operations, amounts available under our credit facility and the possible monetization of our investment portfolio provide sufficient liquidity for our business.

Segment Overview

Our operations are conducted through two segments: technology and financing.

Technology Segment

The technology segment sells IT equipment and software and related services primarily to corporate customers, state and local governments, and higher education institutions on a nationwide basis, with geographic concentrations relating to our physical locations. The technology segment also provides Internet-based business-to-business supply chain management solutions for information technology products.
Our technology segment derives revenue from the sales of new equipment and service engagements. Included in the sales of product and services are revenues derived from performing advanced IT professional and managed services that may be sold together with and integral to third-party products and software. Our service engagements are generally governed by statements of work, and are primarily fixed price (with allowance for changes); however, some service agreements are based on time and materials.

Customers who purchase IT equipment and services from us may have customer master agreements, or CMAs, with our company, which stipulate the terms and conditions of the relationship. Some CMAs contain pricing arrangements, and most contain mutual voluntary termination clauses. Our other customers place orders using purchase orders without a CMA in place or with other documentation customary for the business. Often, our work with state and local governments is based on public bids and our written bid responses. Our service engagements are generally governed by statements of work, and are primarily fixed price (with allowance for changes); however, some service agreements are based on time and materials.responses

We endeavor to minimize our cost of sales through incentive programs provided by vendors and distributors. The programs we qualify for are generally set by our reseller authorization level with the vendor. The authorization level we achieve and maintain governs the types of products we can resell as well as such items as pricing received, funds provided for the marketing of these products and other special promotions. These authorization levels are achieved by us through purchase volume, certifications held by sales executives or engineers and/or contractual commitments by us. The authorization levels are costly to maintain and these programs continually change and, therefore, there is no guarantee of future reductions of costs provided by these vendor consideration programs.

Financing Segment

Our financing segment offers financing solutions to corporations, governmental entities, and educational institutions nationwide and also in the United Kingdom, Canada and Iceland. The financing segment derives revenue from leasing IT and medical equipment and the disposition of that equipment at the end of the lease. The financing segment also derives revenues from the financing of third-party software licenses, software assurance, maintenance and other services.

Financing revenue generally falls into the following three categories:

·Portfolio income: Interest income from financing receivables and rents due under operating leases;
·Transactional gains: Net gains or losses on the sale of financial assets; and
·Post-contract earnings: Month-to-month rents; early termination, prepayment, make-whole, or buyout fees; and net gains on the sale of off-lease (used) equipment.

Our financing segment sells the equipment underlying a lease to the lessee or a third-party other than the lessee. These sales occur at the end of the lease term and revenues from the sales of such equipment are recognized at the date of sale. We also recognize revenue from events that occur after the initial sale of a financial asset and remarketing fees from certain residual value investments.

Fluctuations in Revenues

Our results of operations are susceptible to fluctuations for a number of reasons, including, without limitation, customer demand for our products and services, supplier costs, changes in vendor incentive programs, interest rate fluctuations, general economic conditions, and differences between estimated residual values and actual amounts realized related to the equipment we lease. Operating results could also fluctuate as a result of a sale prior to the expiration of the lease term to the lessee or to a third-party or from post-term events.

We expect to continue to expand by opening new sales locations and hiring additional staff for specific targeted market areas in the near future whenever we can find both experienced personnel and desirable geographic areas. These investments may reduce our results from operations in the short term.
 
CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with U.S. GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, or different assumptions were made, it is possible that alternative accounting policies would have been applied, resulting in a change in financial results. On an ongoing basis, we reevaluate our estimates, including those related to revenue recognition, residual values, vendor incentives, lease classification, goodwill and intangibles, reserves for credit losses and income taxes specifically relating to uncertain tax positions. We base estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. For all such estimates, we caution that future events rarely develop exactly as forecasted, and therefore, these estimates may require adjustment.

Our critical accounting estimates have not changed from those reported in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2016 Financial Statements.2017 annual Report.

SEGMENT RESULTS OF OPERATIONS

The three and nine months ended December 31, 20162017 compared to the three and nine months ended December 31, 20152016

Technology Segment

The results of operations for our technology segment for the three and nine months ended December 31, 20162017 and 20152016 were as follows (dollars in thousands):

 Three Months Ended December 31,  Nine Months Ended December 31,  
Three Months Ended
December 31,
        
Nine Months Ended
December 31,
       
 2016  2015  Change  2016  2015  Change  2017  2016  Change  2017  2016  Change 
Sales of product and services $317,391  $287,859  $29,532   10.3% $968,799  $871,814  $96,985   11.1% $330,953  $317,391  $13,562   4.3% $1,045,792  $968,799  $76,993   7.9%
Fee and other income  915   1,506   (591)  (39.2%)  3,679   5,038   (1,359)  (27.0%)  1,678   915   763   83.4%  3,707   3,679   28   0.8%
Net sales  318,306   289,365   28,941   10.0%  972,478   876,852   95,626   10.9%  332,631   318,306   14,325   4.5%  1,049,499   972,478   77,021   7.9%
Cost of sales, product and services  251,729   231,503   20,226   8.7%  769,780   700,429   69,351   9.9%  264,487   251,729   12,758   5.1%  834,873   769,780   65,093   8.5%
Gross profit  66,577   57,862   8,715   15.1%  202,698   176,423   26,275   14.9%  68,144   66,577   1,567   2.4%  214,626   202,698   11,928   5.9%
                                                                
Professional and other fees  1,216   1,608   (392)  (24.4%)  4,138   4,175   (37)  (0.9%)
Salaries and benefits  40,155   35,043   5,112   14.6%  117,822   101,471   16,351   16.1%
General and administrative  6,409   5,203   1,206   23.2%  19,335   16,653   2,682   16.1%
Selling, general, and administrative expenses  53,836   47,780   6,056   12.7%  158,838   141,295   17,543   12.4%
Depreciation and amortization  1,908   1,327   581   43.8%  5,400   3,728   1,672   44.8%  2,893   1,908   985   51.6%  7,084   5,400   1,684   31.2%
Interest and financing costs  -   10   (10)  (100.0%)  -   51   (51)  (100.0%)
Operating expenses  49,688   43,191   6,497   15.0%  146,695   126,078   20,617   16.4%  56,729   49,688   7,041   14.2%  165,922   146,695   19,227   13.1%
                                                                
Operating income $16,889  $14,671  $2,218   15.1% $56,003  $50,345  $5,658   11.2% $11,415  $16,889  $(5,474)  (32.4%) $48,704  $56,003  $(7,299)  (13.0%)
                                
Key business metrics
                                
Adjusted gross billings of product and services $464,105  $432,407  $31,698   7.3% $1,449,371  $1,317,188  $132,183   10.0%
                                
Adjusted EBITDA $18,797  $15,998  $2,799   17.5% $61,403  $54,073  $7,330   13.6% $14,308  $18,797  $(4,489)  (23.9%) $55,788  $61,403  $(5,615)  (9.1%)

Net sales: Net sales for the three months ended December 31, 20162017 were $318.3$332.6 million compared to $289.4$318.3 million during the three months ended December 31, 2015,2016, an increase of 10.0%4.5%, or $28.9$14.3 million. The increase in net sales of product and services revenues was a result of an increase in demand for products and services from the telecom, media and entertainment industry and healthcare customers for the three months ended December 31, 2016. For the nine months ended December 31, 2016,2017, net sales were $972.5$1,049.5 million compared to $876.9$972.5 million during the same period in the prior year, an increase of 10.9%7.9%, or $95.6 million over the same period for the prior year. The increase in demand for products and services was related to the telecom, media and entertainment industry, healthcare, technology, and SLED customers for the nine months ended December 31, 2016 over the prior year period.$77.0 million.
 
Adjusted gross billings of product and services for the three months ended December 31, 20162017 were $432.4$464.1 million compared to $393.9$432.4 million during the three months ended December 31, 2015,2016, an increase of 9.8%7.3%, or $38.5$31.7 million. ForSales of product and services for the ninethree months ended December 31, 2016, Adjusted gross billings of product and services increased 13.8%, or $159.92017 were $331.0 million compared to $1,317.2$317.4 million from $1,157.3 million forduring the same period in the prior fiscal year. year, an increase of 4.3%, or $13.6 million.

The increasesincrease in the three and nine months ended December 31, 2016 over the prior year periods were due to higher customer demand for ePlus’ IT solution offerings as well as the acquisitions of IGX.
Salesnet sales of product and services during the three months ended December 31, 2016 were $317.4 million compared2017 was also due, in part, to $287.9 million duringan increase in demand for products and services from customers in the threetechnology, financial services and healthcare industries, partially offset by reductions in sales to state and local government and educational customers (“SLED”), technology, and telecom, media and entertainment customers, and other industries.

For the nine months ended December 31, 2015,2017, adjusted gross billings of product and services were $1,449.4 million compared to $1,317.2 million during the nine months ended December 31, 2016, an increase of 10.3%10.0%, or $29.5$132.2 million. For the nine months ended December 31, 2016,2017, sales of product and services increased 11.1%, or $97.0were $1,045.8 million compared to $968.8$968.8 million from $871.8 million forduring the same period in the prior fiscal year.year, an increase of 7.9%, or $77.0 million. The smaller increase in net sales of product and services comparedduring the nine month period was due to Adjusted gross billings of productan increase in demand for products and services reflects a higher proportion offrom customers in the financial services industries, technology, and health care industries, which include sales from third party maintenance, software assurance, and services, which are presented on a net basis.relating to several large projects for large customers.

Summarized below are the sequential and year-over-year changes in net sales of product and services:

Quarter Ended Sequential  Year over Year 
December 31, 2017  (7.5%)  4.3%
September 30, 2017  0.2%  (1.0%)
June 30, 2017  11.1%  23.1%
March 31, 2017  1.3%  10.3%
December 31, 2016  (12.1%)  10.3%
Quarter Ended  Sequential  Year over Year 
December 31, 2016   (12.1%)  10.3%
September 30, 2016   24.5%  11.4%
June 30, 2016   (0.5%)  11.7%
March 31, 2016   1.3%  13.3%
December 31, 2015   (11.2%)  (2.6%)
September 30, 2015   24.9%  13.1%

We rely on our vendors to fulfill a large majority of shipments to our customers. As of December 31, 2017, we had open orders of $170.0 million and deferred revenue of $59.6 million. As of December 31, 2016, we had open orders of $238.5 million and deferred revenue of $66.3 million. As of December 31, 2015, we had open orders of $87.9 million and deferred revenues of $26.366.3 million. The increase in open orders of $150.6 million is due to demand for products and services from our largest corporate customers. The increase in deferred revenue of $40.0 million is primarily due to prepayments by a customer for equipment that we expect to deliver in the next three to six months.

We analyze sales of products and services by customer end market and by manufacturer, as opposed to discrete product and service categories. The percentage of sales of product and services by industry and vendor are summarized below:

 Twelve Months Ended December 31,     Twelve Months Ended December 31,    
 2016  2015  Change  2017  2016  Change 
Revenue by customer end market:
                  
Technology  25%  22%  3%
SLED  21%  23%  (2%)  17%  21%  (4%)
Technology  22%  23%  (1%)
Telecom, Media & Entertainment  16%  14%  2%  14%  16%  (2%)
Financial Services  16%  12%  4%
Healthcare  11%  10%  1%  13%  11%  2%
Financial Services  12%  12%  - 
Other  18%  18%  -   15%  18%  (3%)
Total  100%  100%      100%  100%    
                        
Revenue by vendor:
                        
Cisco Systems  49%  49%  -   44%  49%  (5%)
HP Inc. & HPE  6%  7%  (1%)  7%  6%  1%
NetApp  5%  6%  (1%)  4%  5%  (1%)
Sub-total  60%  62%  (2%)  55%  60%  (5%)
Other  40%  38%  2%  45%  40%  5%
Total  100%  100%      100%  100%    

Our revenues by customer end market have remained consistent over the year with approximatelyover 80% of our revenues generated from customers within the five end markets identified above. During the trailing twelve months ended December 31, 20162017 we had an increase in the percentage total revenues from customers in the telecom, mediatechnology, financial services, and entertainment industry, and healthcarehealth care industries, which were partially offset by decreases in the percentage of total revenues from SLED and technology customers overcompared to the prior year period. These changes were driven by changes in customer buying cycles and specific IT related initiatives, rather than the acquisition or loss of a customer or set of customers.
 
The majority of our revenues by vendor are derived from Cisco Systems, a combined HP Inc. and HPE, and NetApp, which, in total,collectively, declined to 60%55% for the trailing twelve months ended December 31, 20162017 from approximately 62%60% in the prior year trailing twelve month period, with the greatest decline in the proportional percentage of total revenues in HP Inc.Cisco product sales. The decrease in the percentage of revenues from the top three vendors is due in part to substantial competition and rapid developments in the IT industry. None of the vendors included within the “other” category exceeded 4% of total revenues.

Gross profit:Cost of sales, product and services: Our gross margin for Cost of sales, product and services expanded by 110 basis points to 20.7% duringincreased 5.1% for the three months ended December 31, 20162017 as compared to 19.6% during the three months ended December 31, 2015.prior year period, due to the 4.3% increase in sales of product and services. For the nine months ended December 31, 2016, gross margin for2017, cost of sales, product and services was 20.5%, anincreased 8.5% due to the increase in sales of 80product and services. Our gross margin on the sales of product and services decreased 60 basis points over 19.7%to 20.1% for the three months ended December 31, 2017, from 20.7% in the same period in the prior year. The expansion in

For the nine months ended December 31, 2017, our gross margins wasmargin on the sales of product and services decreased 30 basis points to 20.2%, from 20.5%, due to lower product margins from a large competitively bid project which partially shipped during the strategy of shifting toward products with higher margins, an increase in gross profit from services, and a higher proportion of third party software assurance, maintenance and services, which are presented on a net basis. Contributing to our margins was an increasenine month period as well as reduction in vendor incentives earned as a percentage of sales of product andservices. Vendor incentives earned as a percentage of sales of product services for the three months and the nine months ended December 31, 2016 of 10 basis points2017 decreased 50 and 30 basis points respectively, fromas compared to same periods in the prior year.

ProfessionalSelling, general, and other feesadministrative expenses: Selling, general, and administrative expenses were $1.2$53.8 million for the three months ended December 31, 2016,2017, an increase of $6.0 million, or 12.7% compared to $1.6$47.8 million for the three months ended December 31, 2015,prior year period. Salaries and benefits increased $4.3 million, or 10.8% to $44.5 million, compared to $40.2 million during the prior year. Most of the increase was due primarily to legal,higher salaries and outside consulting fees. Professionalbenefits expenses related to the increase in the number of employees from both acquisitions and other feesinternal growth.

Selling, general, and administrative expenses were $4.1$158.8 million for the nine months ended December 31, 2016,2017, an increase of $17.5 million, or 12.4% compared to $4.2$141.3 million for the same periodprior year period. Salaries and benefits increased $12.8 million, or 10.8% to $130.6 million, compared to $117.8 million during the prior year. Approximately 20.8% of this increase was due to higher variable compensation due to the increase in gross profit, 18.6% of the increase was due to higher employee benefits, and the remaining increase was primarily due salary expense related to an increase in the priornumber of employees. Our technology segment had 1,236 employees as of December 31, 2017, an increase of 123, or 11.1%, from 1,113 at December 31, 2016. The acquisitions of OneCloud and IDS accounted for 98 of the added positions. There were 107 positions added in the past year due primarilyrelated to legal, auditing,sales, marketing, and outside consulting fees.professional services personnel.

SalariesGeneral and benefitsadministrative expenses increased $5.1$1.5 million, or 14.6%,23.9% to $40.2$7.9 million during the three months ended December 31, 2016,2017 compared to $35.0$6.4 million the prior year, due to an adjustment of $0.7 million to the fair value of contingent consideration for acquisitions, higher advertising and marketing expense, and travel expenses, including travel expense related to acquisitions. For the nine months ended December 31, 2017, general and administrative expenses increased $3.9 million, or 20.3% to $23.3 million compared to $19.3 million the prior year, due to the incremental adjustment of $0.8 million to the fair value of contingent consideration for acquisitions, and higher travel expense, including travel expense related to acquisitions. Professional and other fees increased $0.9 million, or 20.7% to $5.0 million primarily due to legal fees related to the IDS and OneCloud acquisitions.

Depreciation and amortization expense increased $1.0 million, or 51.6% to $2.9 million during the three months ended December 31, 2015. For the nine months ended December 31, 2016, salaries and benefits increased to $117.8 million, a 16.1% increase over $101.5 million reported in the prior year. The increase in salaries and benefits is due to higher variable compensation as a result of the increase in gross profit, as well as higher salaries due to increases in personnel. Our technology segment had 1,113 employees as of December 31, 2016, an increase of 107 or 10.6% from 1,006, as of December 31, 2015, of which 48 relate to the acquisition of Consolidated IT Services. The position additions included 95 sales and engineering positions with the remaining additions being administrative positions.

General and administrative expenses increased $1.2 million, or 23.2% to $6.4 million during the three months ended December 31, 2016 over the same period for the prior year. General and administrative expenses increased $2.7 million, or 16.1% to $19.3 million during the nine months ended December 31, 2016 over the same period for the prior year. The increase in general and administrative expenses for the three and nine months ended December 31, 2016 was primarily due to higher software license and maintenance expense, foreign currency transaction losses, and sales and marketing activity related expenses.

Depreciation and amortization expense increased $0.6 million, or 43.8%, to $1.9 million during the three months ended December 31, 20162017 compared to $1.3$1.9 million in the prior year. For the nine months ended December 31, 2016,2017, depreciation and amortization expense increased $1.7 million, or 44.8%,31.2% to $5.4$7.1 million compared to $3.7$5.4 million in the prior year period.year. The increase in depreciation and amortization expense is related to the acquisitionacquisitions of IGX in December, 2015 and Consolidated IT Services in December 2016.2016, OneCloud in May 2017, and IDS in September 2017.

Segment operating income: As a result of the foregoing, operating income was $16.9$11.4 million, an increasea decrease of $2.2$5.5 million, or 15.1%32.4% for the three months ended December 31, 2016 over $14.72017 compared to $16.9 million in the prior year period. Operating income was $56.0 million, an increase of $5.7 million, or 11.2% for the nine months ended December 31, 2016 over $50.3 million in the prior year period.

For the three months ended December 31, 2016,2017, Adjusted EBITDA was $14.3 million, a decrease of $4.5 million, or 23.9% compared to $18.8 million an increasein the prior year period. For the nine months ended December 31, 2017, operating income was $48.7 million, a decrease of $2.8$7.3 million, or 17.5% over $16.013.0% compared to $56.0 million in the prior year period. Adjusted EBITDA was $61.4 million for the nine months ended December 31, 2016, an increase2017, was $55.8 million, a decrease of $7.3$5.6 million, or 13.6% over $54.19.1% compared to $61.4 million in the same period in the prior year.year period.
 
Financing Segment

The results of operations for our financing segment for the three and nine months ended December 31, 20162017 and 20152016 were as follows (dollars in thousands):

 Three Months Ended December 31,  Nine Months Ended December 31,        
Three Months Ended
December 31,
        
Nine Months Ended
December 31,
       
 2016  2015  Change  2016  2015  Change  2017  2016  Change  2017  2016  Change 
Financing revenue $8,190  $9,289  $(1,099)  (11.8%) $23,899  $27,914  $(4,015)  (14.4%) $9,592  $8,190  $1,402   17.1% $30,698  $23,899  $6,799   28.4%
Fee and other income  161   (10)  171   1710.0%  245   30   215   716.7%  346   161   185   114.9%  374   245   129   52.7%
Net sales  8,351   9,279   (928)  (10.0%)  24,144   27,944   (3,800)  (13.6%)  9,938   8,351   1,587   19.0%  31,072   24,144   6,928   28.7%
Direct lease costs  1,142   3,081   (1,939)  (62.9%)  3,459   9,256   (5,797)  (62.6%)  1,394   1,142   252   22.1%  3,846   3,459   387   11.2%
Gross profit  7,209   6,198   1,011   16.3%  20,685   18,688   1,997   10.7%  8,544   7,209   1,335   18.5%  27,226   20,685   6,541   31.6%
                                                                
Professional and other fees  181   274   (93)  (33.9%)  780   738   42   5.7%
Salaries and benefits  2,230   2,329   (99)  (4.3%)  6,657   6,855   (198)  (2.9%)
General and administrative  (31)  231   (262)  (113.4%)  1,089   737   352   47.8%
Selling, general, and administrative expenses  3,298   2,380   918   38.6%  9,300   8,526   774   9.1%
Depreciation and amortization  2   4   (2)  (50.0%)  8   11   (3)  (27.3%)  1   2   (1)  (50.0%)  2   8   (6)  (75.0%)
Interest and financing costs  409   386   23   6.0%  1,158   1,320   (162)  (12.3%)  270   409   (139)  (34.0%)  903   1,158   (255)  (22.0%)
Operating expenses  2,791   3,224   (433)  (13.4%)  9,692   9,661   31   0.3%  3,569   2,791   778   27.9%  10,205   9,692   513   5.3%
                                                                
Operating income $4,418  $2,974  $1,444   48.6% $10,993  $9,027  $1,966   21.8% $4,975  $4,418  $557   12.6% $17,021  $10,993  $6,028   54.8%
                                
Key business metrics
                                
Adjusted EBITDA $4,420  $2,978  $1,442   48.4% $11,001  $9,038  $1,963   21.7% $4,976  $4,420  $556   12.6% $17,023  $11,001  $6,022   54.7%


Net sales: Net sales decreasedincreased by $0.9$1.6 million, or 10.0%,19.0% to $8.4$9.9 million for the three months ended December 31, 2016,2017, as compared to $9.3$8.4 million for the three months ended December 31, 2015prior year results due to lower portfoliohigher post-contract earnings and transactional gains, partially offset by increases in post-contract earnings.other financing revenues. During the quarters ended December 31, 20162017 and 2015,2016, we recognized net gains on sales of financial assets of $0.9$1.2 million and $1.4$0.9 million, respectively, and the fair value of assets received from these sales were $32.8 million and $55.8 million, and $54.1 million, respectively. Portfolio earnings declined by $2.1 million to $2.3 million from $4.4 million recognized in the three months ended December 31, 2015, while postPost contract earnings increased $1.2$1.4 million due to $4.5the gain on sale of equipmentn associated with early lease terminations, and other financing revenues decreased $0.3 million from $3.3 million for the three months ended December 31, 2016 over the prior year, mainly due to a large expired lease contract converting to a month-to-month basis.earnings on consumption based financing arrangements.

For the nine months ended December 31, 2016,2017, net sales decreasedincreased by $3.8$6.9 million, or 13.6%,28.7% to $24.1$31.1 million as compared to $27.9$24.1 million for the nine months ended December 31, 2015prior year results due to lower portfolio earnings.higher transactional gains and other financing revenues. During the nine months ended December 31, 20162017 and 2015,2016, we recognized net gains on sales of financial assets of $4.6 million and $4.1 million, respectively, and $5.4 million, respectively, the fair value of assets received from these sales were $166.9 million and $185.4 million, and $162.7 million, respectively. Portfolio earnings declined by $6.7 million to $6.8 million from $13.5 million, while postPost contract earnings increased $3.3$4.9 million due to $12.1the gain on sale of equipment associated with early lease terminations, and other financing revenues increased $1.0 million from $8.7 million recognized in the nine months ended December 31, 2015.mainly due to earnings on consumption based financing arrangements.

At December 31, 2016,2017, we had $140.4$147.2 million in financing receivables and operating leases, compared to $156.9$140.4 million as of December 31, 2015, a decrease2016, an increase of $16.5$6.8 million or 10.5%4.8%.

Gross profit:Profit: Gross profit increased by $1.0$1.3 million, or 16.3%18.5% to $7.2$8.5 million for the three months ended December 31, 2016, over2017, compared to the same period in the prior year. For the nine months ended December 31, 2017, gross profit increased $6.5 million, or 31.6% to $27.2 million compared to the same period of the prior year, as a result of lower directhigher revenues. Direct lease costs which declined 62.9% fromincreased $0.3 million and $0.4 million for the same quarter in the prior year. For thethree and nine months ended December 31, 2016, gross profit increased by $2.0 million, or 10.7% to $20.7 million as compared to the same period in the prior year due to a decline in direct lease costs2017, respectively, which primarily consists of 62.6% or $5.8 million. The significant decline in direct lease costs was driven by lower depreciation expense relating to ourfrom operating lease investments.leases.
OperatingSelling, general, and administrative expenses: For the three months ended December 31, 2016 operating expenses decreased by $0.4 million or 13.4%, which was due primarily to a reduction in our reserves for credit losses, salaries2017 selling, general, and benefits, and lower outside legal and consulting expense compared to the prior year period. For the nine months ended December 31, 2016 operatingadministrative expenses increased by only $31 thousand$0.9 million or 0.3%38.6%, which was due primarily to an increase in our reserves for credit losses,salaries and software licensebenefits expense of $0.7 million resulting from an increase in variable compensation related to the increase in gross profit. Selling, general, and maintenanceadministrative expenses increased by $0.8 million or 9.1%, due to an increase in our salaries and benefits expense of $1.1 million resulting from an increase in variable compensation related to the increase in gross profit, partially offset by lower salary expenseprofessional fees and lower interest and financing costs.credit loss expenses for the nine months ended December 31, 2017. Our financing segment had 48 employees as of December 31, 2017, compared to 51 employees as of December 31, 2016, compared to 54 employees as of December 31, 2015.2016.

Interest and financing costs remained constant at $0.4decreased $0.1 million to $0.3 million for the three months ended December 31, 2016,2017, compared to the prior year. For the nine months ended December 31, 2016, interest and financing costs decreased by $0.2 millionyear, due to a decrease in the average total notes payable outstanding and lower average interest rates overcompared to the three months ended December 31, 2017. For the nine months ended December 31, 2016.2017, interest and financing costs decreased by $0.3 million to $0.9 million, or 22.0%. Total notes payable were $31.5 million as of December 31, 2017, a decrease of $22.5 million or 41.7% compared to $54.0 million as of December 31, 2016, an increase of $4.4 million or 8.9% compared to $49.6 million as of December 31, 2015.2016. Our weighted average interest rate for non-recourse notes payable was 3.38%3.73% and 3.09%3.38%, as of December 31, 20162017 and December 31, 2015,2016, respectively.

Segment operating income: As a result of the foregoing, both operating income and Adjusted EBITDA both increased $1.4$0.6 million or 48.6% and 48.4%, respectively,12.6% to $5.0 million for both the three months ended December 31, 2016 over the prior year period.2017 and 2016. For the nine months ended December 31, 2016,2017, operating income and Adjusted EBITDA botheach increased $2.0$6.0 million or 21.8%54.8% and 21.7%, respectively, over the prior year period.54.7% to $17.0 million, respectively.

Consolidated

Other income: Other income and expense during the three months ended December 31, 2017 was a net expense of $0.1 million, which consists of interest income on cash and cash equivalents, more than offset by foreign currency transaction losses.

Income taxes: Our provision for income tax expense was $8.7$0.7 million and $27.3$19.5 million for the three and nine months ended December 31, 2016, respectively,2017, as compared to $7.3$8.7 million and $24.6$27.3 million for the same periods lastin the prior year. Our effective income tax ratesrate for the three and nine months ended December 31, 2016 were2017 was 4.2% and 29.7%, compared to 40.8% and 40.5%, respectively. Our effective income tax rates for the three and nine months ended December 31, 2015 were 41.6% and 41.4%, respectively.2016. The favorable change in our effective income tax rate was due primarily to a tax benefit of $3.4 million from the re-measurement of deferred tax assets and liabilities due to the change in the U.S. statutory rate for the three and nine months ended December 31, 2017, and a tax benefit of $1.6 million on the vesting of restricted stock in the nine months ended December 31, 2017, compared to a tax benefit of $0.5 million associated with adoption of ASU 2016-09 Stock Compensation.in the nine months ended December 31, 2016.

Net earnings: The foregoing resulted in net earnings of $12.6$15.6 million and $40.1$46.2 million for the three and nine months ended December 31, 2016, respectively,2017, an increase of 22.6%23.5% and 15.2%15.4%, as compared to $10.3$12.6 million and $34.8$40.1 million during the three and nine months ended December 31, 2015,2016, respectively.

Basic and fully diluted earnings per common share were $1.83$1.12 and $1.81,$1.11 for the three months ended December 31, 2016,2017, an increase of 29.8%21.7% and 29.3%22.0% as compared to $1.41$0.92 and $1.40,$0.91, respectively, for the three months ended December 31, 2015. Basic2016. For the nine months ended December 31, 2017, basic and fully diluted earnings per common share were $5.77$3.34 and $5.71, for the nine months ended December 31, 2016,$3.30, an increase of 20.5%16.0% and 15.4% as compared to $4.79$2.88 and $4.74,$2.86, respectively, for the nine months ended December 31, 2015.same period in the prior year.

Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share for the three and nine months ended December 31, 2016,2017 was 6.913.9 million and 7.014.0 million, respectively. Weighted average common shares outstanding used in the calculation of the basic and diluted earnings per common share for the three months ended December 31, 2016 was 13.8 million and 13.9 million, respectively.

Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share for the nine months ended December 31, 2015,2017 was 7.3 million.13.8 million and 14.0 million, respectively. Weighted average common shares outstanding used in the calculation of the basic and diluted earnings per common share for the nine months ended December 31, 2016 was 13.9 million and 14.0 million, respectively.
 
LIQUIDITY AND CAPITAL RESOURCES

Liquidity Overview

Our primary sources of liquidity have historically been cash and cash equivalents, internally generated funds from operations, and borrowings, both non-recourse and recourse. We have used those funds to meet our capital requirements, which have historically consisted primarily of working capital for operational needs, capital expenditures, purchases of equipment for lease, payments of principal and interest on indebtedness outstanding, acquisitions and the repurchase of shares of our common stock.

Our subsidiary ePlus Technology, inc., part of our technology segment, finances its operations with funds generated from operations, and with a credit facility with Wells Fargo Commercial Distribution Finance, LLC or (“WFCDF”). (f/k/a GE Commercial Distribution Finance LLC). ePlus Technology, inc’sinc.’s agreement with WFCDF has an aggregate credit limit of $250 million as of December 31, 2016. 2017.

On July 27, 2017, we executed an amendment to the WFCDF credit facility which temporarily increases the aggregate limit of the two components from $250.0 million to $325.0 million from the date of the agreement through October 31, 2017, and provides us an election beginning July 1 in each subsequent year to similarly temporarily increase the aggregate limit of the two components to $325.0 million ending the earlier of 90 days following the date of election or October 31 of that same year.

There are two components of this facility: (1) a floor plan component; and (2) an accounts receivable component. After a customer places a purchase order with us and we have completed our credit check, we place an order for the equipment with one of our vendors. Generally, most purchase orders from us to our vendors are first financed under the floor plan component and reflected in “accounts payable—floor plan” in our consolidated balance sheets. Payments on the floor plan component are due on three specified dates each month, generally 30-60 days from the invoice date. On the due date of the invoices financed by the floor plan component, the invoices are paid by the accounts receivable component of the credit facility. The balance of the accounts receivable component is then reduced by payments from our available cash. The outstanding balance under the accounts receivable component is recorded as recourse notes payable on our consolidated balance sheets. There was no outstanding balance at December 31, 2016 or2017or March 31, 2016,2017, while the maximum credit limit was $30.0 million for both periods. The borrowings and repayments under the floor plan component are reflected as “net borrowings on floor plan facility” in the cash flows from financing activities section of our consolidated statements of cash flows.

Most customer payments in our technology segment are remitted to our lockboxes. Once payments are cleared, the monies in the lockbox accounts are automatically transferred to our operating account on a daily basis. On the due dates of the floor plan component, we make cash payments to WFCDF. These payments from the accounts receivable component to the floor plan component and repayments from our cash are reflected as “net borrowings on floor plan facility” in the cash flows from financing activities section of our consolidated statements of cash flows. We engage in this payment structure in order to minimize our interest expense and bank fees in connection with financing the operations of our technology segment.

We believe that cash on hand, and funds generated from operations, together with available credit under our credit facility, will be sufficient to finance our working capital, capital expenditures and other requirements for at least the next twelve calendar months.

Our ability to continue to fund our planned growth, both internally and externally, is dependent upon our ability to generate sufficient cash flow from operations or to obtain additional funds through equity or debt financing, or from other sources of financing, as may be required. While at this time we do not anticipate requiring any additional sources of financing to fund operations, if demand for IT products declines, our cash flows from operations may be substantially affected.

Cash Flows

The following table summarizes our sources and uses of cash over the periods indicated (in thousands):

 Nine Months Ended December 31,  Nine Months Ended December 31, 
 2016  2015  2017  2016 
Net provided by (cash used) in operating activities $29,702  $(17,717)
Net cash provided by operating activities $48,824  $29,702 
Net cash used in investing activities  (47,040)  (44,344)  (54,793)  (47,040)
Net cash provided by (used in) financing activities  (8,205)  52,479 
Net cash used in financing activities  (27,758)  (8,205)
Effect of exchange rate changes on cash  454   (26)  72   454 
                
Net decrease in cash and cash equivalents $(25,089) $(9,608) $(33,655) $(25,089)
Cash flows from operating activities. Cash provided by operating activities totaled $48.8 million during the nine months ended December 31, 2017. Net earnings adjusted for the impact of non-cash items was $46.1million. Net changes in assets and liabilities resulted in a increase of cash and cash equivalents of $2.7 million, primarily due to net reductions in inventories of $43.3 million and increased in accounts payable of $18.4 million, mostly offset by additions to deferred costs, other intangible assets and other assets of $26.2 financing receivables of $13.0, accounts receivables of $10.3 million, and salaries and commissions payable and deferred revenues and other liabilities of $9.5 million.

Cash provided by operating activities totaled $29.7 million during the nine months ended December 31, 2016. Net earnings adjusted for the impact of non-cash items was $45.0 million. Net changes in assets and liabilities resulted in a decrease of cash and cash equivalents of $15.3 million, primarily due to net additions to accounts receivables of $62.0 million, inventories of $77.4 million, partially offset by increasesincreased in accounts payable of $53.2 million, and salaries and commissions payable, deferred revenues and other liabilities of $51.2 million.

Cash used in operating activities totaled $17.7 million during the nine months ended December 31, 2015. Net earnings adjusted for the impact of non-cash items was $40.5 million. Net changes in assets and liabilities resulted in a decrease of cash and cash equivalents of $58.2 million, primarily due to additions to accounts receivables of $32.9 million, financing receivables—net of $10.7 million, and reductions in salaries and commissions payable, deferred revenues and other liabilities of $9.0 million.

In order to manage our working capital, we monitor our cash conversion cycle for our Technology segment, which is defined as days sales outstanding (“DSO”) in accounts receivable plus days of supply in inventory (“DIO”) minus days of purchases outstanding in accounts payable (“DPO”). The following table presents the components of the cash conversion cycle for our Technology segment:

  As of December 31, 
  2016  2015 
       
Days sales outstanding (1)  52   56 
Days inventory outstanding (2)  23   6 
Days payable outstanding (3)  (48)  (42)
Cash conversion cycle  27   20 
  As of December 31, 
  2017  2016 
       
(DSO) Days sales outstanding (1)  52   52 
(DIO) Days inventory outstanding (2)  12   23 
(DPO) Days payable outstanding (3)  (40)  (48)
Cash conversion cycle  24   27 

(1)Represents the rolling three-month average of the balance of trade accounts receivable-trade, net for our Technology segment at the end of the period divided by Adjusted gross billings of product and services for the same three-month period.
(2)Represents the rolling three-month average of the balance of inventory, net for our Technology segment at the end of the period divided by Cost of adjusted gross billings of product and services for the same three-month period.
(3)Represents the rolling three-month average of the combined balance of accounts payable-trade and accounts payable-floor plan for our Technology segment at the end of the period divided by Cost of adjusted gross billings of product and services for the same three-month period.

Our standard payment term for customers is between 30-60 days; however, certain customers are approved for extended payment terms. Invoices processed through our credit facility, or the accounts payable—floor plan balance, are typically paid within 45-60 days from the invoice date, while accounts payable—trade invoices are typically paid within 30 days from the invoice date. Our cash conversion cycle wasdecreased to 24 days at December 31, 2017, compared to 27 days as ofat December 31, 2016, and 20primarily driven by a decrease in DPO of 8 days asdue to DPO timing of December 31, 2015. Historically over the last three years our cash conversion cycle has fluctuated seasonally and has a normal range of 12 to 19 days.payments. The increase in thehigher cash conversion cycle for December 31, 2016 over the prior year iswas due mainly to a significant increase in our inventories due to a large projectprojects for oneseveral of our major customers.customers in the prior year’s quarter.

Cash flows related to investing activities. Cash used in investing activities was $54.8 million during the nine months ended December 31, 2017. Cash used in investing activities during the nine months ended December 31, 2017 was primarily driven by acquisitions of $37.7 million, net issuance and repayment of financing receivables of $79.1 million, purchases of assets to be leased or financed of $5.7 million, and purchases of property, equipment, software, and operating lease equipment of $6.3 million, which was partially offset by the sale of financing receivables of $64.1 million, and proceeds from sale of property, equipment and operating leases of $10.0 million.
Cash used in investing activities was $47.0 million during the nine months ended December 31, 2016. Cash used in investing activities during the nine months ended December 31, 2016 was primarily driven by issuance of financing receivables of $114.7 million, cash used in acquisitions of $9.5 million, purchases of property, equipment and operating lease equipment of $7.3 million, and purchases of assets to be leased or financed of $5.9 million, which was partially offset by cash proceeds from the repayment financing receivable of $44.1 million, the sale of financing receivables of $39.9 million, and proceeds from the sale of property, equipment and operating lease equipment of $6.4 million.

Cash flows from financing activities. Cash used in investingfinancing activities was $44.3$27.8 million during the nine months ended December 31, 2015, compared2017, which was primarily due to net repayment on floor plan facility of $24.9 million, cash used in investing activitiesfor the repurchase of $31.7common stock of $13.4 million, during the same period last year. Cash used in investing activities during the nine months ended December 31, 2015 was primarily driven by issuanceand repayment of financing receivables of $102.6acquisitions of $1.6 million, the acquisition of the business of IGX of $16.6 million and purchases of property, equipment, and operating lease equipment of $17.0 million, purchase of assets yet to be leased of $10.8 million, which was partially offset by cash proceeds from the repayment financing receivablenet borrowings of $49.2non-recourse and recourse notes payable of $12.1 million proceeds from the sale of financing receivables of $48.2 million, and proceeds from the sale of property, equipment and operating lease equipment of $5.3 million.
Cash flows from financing activities. Cash used in financing activities was $8.2 million during the nine months ended December 31, 2016, which was primarily due to $30.5 million in cash used for the repurchase of common stock, and net repayment on the floor plan facility of $5.6 million, partially offset by to net borrowings of non-recourse and recourse notes payable of $28.6 million.Cash provided by financing activities was $52.5 million during the nine months ended December 31, 2015, which was primarily due to net borrowings on the floor plan facility of $28.6 million and borrowings net of repayments of non-recourse and recourse notes payable of $27.6 million, which was partially offset by $2.5 million in cash used for the repurchase of common stock.

Non-Cash Activities

We assign contractual payments due under lease and financing agreements to third-party financial institutions, which are accounted for as non-recourse notes payable. As a condition to the assignment agreement, certain financial institutions may request that the customer remit their contractual payments to a trust; rather than to us, and the trust pays the financial institution. Alternatively, if the structure of the agreement does not require a trustee, the customer will continue to make payments to us, and we will remit the payment to the financial institution. The economic impact to us under either assignment structure is similar, in that the assigned contractual payments are paid by the customer and remitted to the lender to pay down the corresponding non-recourse notes payable. However, these assignment structures are classified differently within our consolidated statements of cash flows. More specifically, we are required to exclude non-cash transactions from our consolidated statement of cash flows, so certain contractual payments made by the customer to the trust are excluded from our operating cash receipts and the corresponding repayment of the non-recourse notes payable from the trust to the third-party financial institution are excluded from our cash flows from financing activities. Contractual payments received by the trust and paid to the lender on our behalf are disclosed as a non-cash financing activity.

Liquidity and Capital Resources

We may utilize non-recourse notes payable to finance approximately 80% to 100% of the purchase price of the assets being leased or financed by our customers. Any balance of the purchase price remaining after non-recourse funding and any upfront payments received from the customer (our equity investment in the equipment) must generally be financed by cash flows from our operations, the sale of the equipment leased to third parties, or other internal means. Although we expect that the credit quality of our financing arrangements and our residual return history will continue to allow us to obtain such financing, such financing may not be available on acceptable terms, or at all.

The financing necessary to support our lease and financing activities has been provided by our cash and non-recourse borrowings. We monitor our exposure closely. We are able to obtain financing through our traditional lending sources which is primarily non-recourse borrowings from third party banks and finance companies. Non-recourse financings are loans whose repayment is the responsibility of a specific customer, although we may make representations and warranties to the lender regarding the specific contract or have ongoing loan servicing obligations. Under a non-recourse loan, we borrow from a lender an amount based on the present value of the contractually committed payments at a fixed rate of interest, and the lender secures a lien on the financed assets. When the lender is fully repaid, the lien is released and all further proceeds are ours. We are not liable for the repayment of non-recourse loans unless we breach our representations and warranties in the loan agreements. The lender assumes the credit risk, and the lender’s only recourse, upon default, is against the customer and the specific equipment.

At December 31, 2016,2017, our non-recourse notes payable increased 18.9%decreased 13.8% to $52.4$31.5 million, as compared to $44.1$36.5 million at March 31, 2016.2017. Recourse notes payable decreased 52.0% to $1.6 millionwas zero as of December 31, 20162017 compared to $3.3$0.9 million as of March 31, 2016.2017.

Whenever desirable, we arrange for equity investment financing, which includes selling lease payments, including the residual portions, to third parties and financing the equity investment on a non-recourse basis. We generally retain customer control and operational services, and have minimal residual risk. We usually reserve the right to share in remarketing proceeds of the equipment on a subordinated basis after the investor has received an agreed-to return on its investment.

Credit Facility — Technology

Our subsidiary, ePlus Technology, inc., has a financing facility from WFCDF to finance its working capital requirements for inventories and accounts receivable. There are two components of this facility: (1) a floor plan component; and (2) an accounts receivable component. This facility has full recourse to ePlus Technology, inc. and is secured by a blanket lien against all its assets, such as chattel paper, receivables and inventory. As of December 31, 2016,2017, the facility had an aggregate limit of the two components of $250.0 million with an accounts receivable sub-limit of $30.0 million.

40On July 27, 2017, we executed an amendment to the WFCDF credit facility which temporarily increased the aggregate limit of the two components from $250.0 million to $325.0 million from the date of the agreement through October 31, 2017, and provides us an election beginning July 1 in each subsequent year to similarly temporarily increase the aggregate limit of the two components to $325.0 million ending the earlier of 90 days following the date of election and October 31 of that same year.

Availability under the facility may be limited by the asset value of equipment we purchase or accounts receivable, and may be further limited by certain covenants and terms and conditions of the facility. These covenants include but are not limited to a minimum excess availability of the facility and minimum earnings before interest, taxes, depreciation and amortization of ePlus Technology, inc. We were in compliance with these covenants as of December 31, 2016.2017. Interest on the facility is assessed at a rate of the One Month LIBOR plus two and one half percent if the payments are not made on the three specified dates each month. The facility also requires that financial statements of ePlus Technology, inc. be provided within 45 days of each quarter and 90 days of each fiscal year end and also requires other operational reports be provided on a regular basis. Either party may terminate the facility with 90 days advance written notice.

We are not, and do not believe that we are reasonably likely to be, in breach of the WFCDF credit facility. In addition, we do not believe that the covenants of the WFCDF credit facility materially limit our ability to undertake financing. In this regard, the covenants apply only to our subsidiary, ePlus Technology, inc. This credit facility is secured by the assets of only ePlus Technology, inc. and the guaranty as described below.

The facility provided by WFCDF requires a guaranty of $10.5 million by ePlus inc. The guaranty requires ePlus inc. to deliver its annual audited financial statements by a certain date. We have delivered the annual audited financial statements for the year ended March 31, 2016,2017, as required. The loss of the WFCDF credit facility could have a material adverse effect on our future results as we currently rely on this facility and its components for daily working capital and liquidity for our technology segment and as an operational function of our accounts payable process.

Floor Plan Component

Purchases by ePlus Technology, inc. including computer technology products, software, maintenance and services, are in part financed through a floor plan component in which interest expense for the first thirty to sixtyninety days, in general, is not charged. The floor plan liabilities are recorded as accounts payable—floor plan on our consolidated balance sheets, as they are normally repaid within the fifteen to sixty-dayninety-day time frame and represent assigned accounts payable originally generated with the manufacturer/distributor. In some cases we are able to pay invoices early and receive a discount, but if the fifteen to sixty-dayninety-day obligation is not paid timely, interest is then assessed at stated contractual rates.

The respective floor plan component credit limits and actual outstanding balance payables for the dates indicated were as follows (in thousands):

Maximum Credit Limit
at December 31, 2016
  
Balance as of
December 30, 2016
  
Maximum Credit Limit
at March 31, 2016
  
Balance as of
March 31, 2016
 
Maximum Credit Limit
at December 31, 2017
Maximum Credit Limit
at December 31, 2017
  
Balance as of
December 31, 2017
  
Maximum Credit Limit
at March 31, 2017
  
Balance as of
March 31, 2017
 
$250,000  $120,854  $250,000  $121,893 250,000  $107,761  $250,000  $132,612 

Accounts Receivable Component

Included within the credit facility, ePlusePlus Technology, inc. has an accounts receivable component from WFCDF, which has a revolving line of credit. On the due date of the invoices financed by the floor plan component, the invoices are paid by the accounts receivable component of the credit facility. The balance of the accounts receivable component is then reduced by payments from our available cash. The outstanding balance under the accounts receivable component is recorded as recourse notes payable on our consolidated balance sheets. There was no balance outstanding for the accounts receivable component at December 31, 2016 or2017or March 31, 2016,2017, while the maximum credit limit was $30.0 million for both periods.

Performance Guarantees

In the normal course of business, we may provide certain customers with performance guarantees, which are generally backed by surety bonds. In general, we would only be liable for the amount of these guarantees in the event of default in the performance of our obligations. We are in compliance with the performance obligations under all service contracts for which there is a performance guarantee, and we believe that any liability incurred in connection with these guarantees would not have a material adverse effect on our consolidated statements of operations.

Off-Balance Sheet Arrangements

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K or other contractually narrow or limited purposes. As of December 31, 2016,2017, we were not involved in any unconsolidated special purpose entity transactions.

Adequacy of Capital Resources

The continued implementation of our business strategy will require a significant investment in both resources and managerial focus. In addition, we may selectively acquire other companies that have attractive customer relationships and skilled sales and/or engineering forces. We may also start offices in new geographic areas, which may require a significant investment of cash. We may also acquire technology companies to expand and enhance the platform of bundled solutions to provide additional functionality and value-added services. We may continue to use our internally generated funds to finance investments in leased assets or investments in notes receivables due from our customers. These actions may result in increased working capital needs as the business expands. As a result, we may require additional financing to fund our strategy, implementation, and potential future acquisitions, and working capital needs which may include additional debt and equity financing.

Inflation

For the periods presented herein, inflation has been relatively low and we believe that inflation has not had a material effect on our results of operations.

Potential Fluctuations in Quarterly Operating Results

Our future quarterly operating results and the market price of our common stock may fluctuate. In the event our revenues or earnings for any quarter are less than the level expected by securities analysts or the market in general, such shortfall could have an immediate and significant adverse impact on the market price of our common stock. Any such adverse impact could be greater if any such shortfall occurs near the time of any material decrease in any widely followed stock index or in the market price of the stock of one or more public equipment leasing and financing companies, IT resellers, software competitors, major customers or vendors of ours.

Our quarterly results of operations are susceptible to fluctuations for a number of reasons, including, but not limited to currency fluctuations, reduction in IT spending, any reduction of expected residual values related to the equipment under our leases, the timing and mix of specific transactions, the reduction of manufacturer incentive programs, and other factors. Quarterly operating results could also fluctuate as a result of our sale of equipment in our lease portfolio at the expiration of a lease term or prior to such expiration, to a lessee or to a third party and the transfer of financial assets. Sales of equipment and transfers of financial assets may have the effect of increasing revenues and net income during the quarter in which the sale occurs, and reducing revenues and net income otherwise expected in subsequent quarters. See Part I, Item 1A, “Risk Factors,” in our 20162017 Annual Report.

We believe that comparisons of quarterly results of our operations are not necessarily meaningful and that results for one quarter should not be relied upon as an indication of future performance.

Item 3.
Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our quantitative and qualitative disclosures about market risk during the nine months ended December 31, 2017 from our 2017 Annual Report. For a discussion of the Company's exposure to market risk, reference is made to disclosures set forth in Part II, Item 7A of our above-mentioned 2017 Annual Report.

Although a substantial portion of our liabilities are non-recourse, fixed-interest-rate instruments, we utilize our lines of credit and other financing facilities which are subject to fluctuations in short-term interest rates. These instruments, which are denominated in U.S. dollars, were entered into for other than trading purposes and, with the exception of amounts drawn under the WFCDF facility, bear interest at a fixed rate. Because the interest rate on these instruments is fixed, changes in interest rates will not directly impact our cash flows. Borrowings under the WFCDF facility bear interest at a market-based variable rate. As of December 31, 2016,2017, the aggregate fair value of our recourse and non-recourse borrowings approximated their carrying value.

We have transactions in foreign currencies, primarily in British Pounds and operated in the United Kingdom with a functional currency of British Pounds. The company also transacts in Euros and U. S. Dollars.Euros. There is a potential for exposure to fluctuations in foreign currency rates resulting primarily from the transactiontranslation exposure associated with the preparation of our consolidated financial statements. In addition, we have foreign currency exposure when transactions are not denominated in the subsidiary’s functional currency. To date, our United Kingdomforeign operations are insignificant in relation to total consolidated operations and we believe that potential fluctuations in currency exchange rates will not have a material effect on our financial position.

42The UK referendum (“Brexit”) to leave, the European Union could impact revenue items, cost items, tax, goodwill impairments and liquidity, among others. The most obvious immediate impact is the effect of foreign exchange fluctuations on revenue and cost items. We have determined that our foreign currency exposure for our United Kingdom operations is insignificant in relation to total consolidated operations and we believe those potential fluctuations in currency exchange rates and other Brexit related economic and operational risks will not have a material effect on our results of operations and financial position.

We evaluate Brexit-related developments on a regular basis to determine if such developments are anticipated to have a material impact on the Company’s results on operations and financial position.

We have operationsassets in Canada and Iceland. As such,a lessor, we have entered into lease contracts and non-recourse, fixed-interest-rate financing denominated in Canadian dollars and in Icelandic krona. In our fiscal year beginning April 1, 2016, we began entering in financing transactions and non-recourse, fixed-interest-rate financing denominated in British Pounds in the United Kingdom. To date, our foreign operations have been insignificant and we believe that potential fluctuations in currency exchange rates will not have a material effect on our financial position.

Item 4.
Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures, or “disclosure controls,” as defined in the Exchange Act Rule 13a-15(e). Disclosure controls are controls and procedures designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this quarterly report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Our disclosure controls include some, but not all, components of our internal control over financial reporting. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2016.2017.

Changes in Internal Controls

There have not been any changes in our internal control over financial reporting during the quarter ended December 31, 2016,2017, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

Our management, including our CEO and CFO, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system cannot provide absolute assurance due to its inherent limitations; it is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. A control system also can be circumvented by collusion or improper management override. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of such limitations, disclosure controls and internal control over financial reporting cannot prevent or detect all misstatements, whether unintentional errors or fraud. However, these inherent limitations are known features of the financial reporting process; therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

PART II. OTHER INFORMATION

Item 1.
Legal Proceedings

We are not currently a party to any legal proceedings with loss contingencies that are expected to be material. From time to time, we may be or have been a plaintiff, or may be or have been named as a defendant,subject to legal proceedings that arise in legal actions arising from our normal business activities, nonethe ordinary course of which has had a material effect on our business, results of operations or financial condition.business. Legal proceedings which may arise in the ordinary course of business includinginclude preference payment claims asserted in customer bankruptcy proceedings, tax audits, claims of alleged infringement of patents, trademarks, copyrights and other intellectual property rights, claims of alleged non-compliance with contract provisions, employment-related claims, claims by competitors, vendors or customers, claims related to alleged violations of laws and regulations, and claims relating to alleged security or privacy breaches. We attempt to ameliorate the effect of potential litigation through insurance coverage and contractual protections such as rights to indemnifications and limitations of liability. We do not expect that the outcome in any of these matters, individually or collectively, will have a material adverse effect on our financial condition or results of operations, however, litigation is inherently unpredictable. Therefore, judgments could be rendered or settlements entered that could adversely affect our results of operations or cash flows in a particular period.

We provide for costs relatedrelating to contingencies when a loss is probable and the amount is reasonably determinable. In the opinion of management, there was not at least a reasonable possibility that the Company may have incurred a material loss, or a material loss in excess of a recorded accrual, with respect to loss contingencies for asserted legal and other claims. However, the outcome of legal proceedings and claims brought against us is subject to significant uncertainty. Therefore, although management considers the likelihood of such an outcome to be remote, if one or more of these legal matters were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s consolidated financial statements for that reporting period could be materially adversely affected.

Item 1A.
Risk Factors

There has not been any material change in the risk factors previously disclosed in Part I, Item 1A of our 20162017 Annual Report.

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information regarding our purchases of ePlus inc. common stock during the nine months ended December 31, 2016.2017.

Period 
Total
number of
shares
purchased
(1)
  
Average
price paid
per share
  
Total number of
shares
purchased as
part of publicly
announced plans
or programs
  
Maximum number (or
approximate dollar
value) of shares that
may yet be purchased
under the plans or
programs
 
April 1, 2016 through April 30, 2016  113,035  $80.70   113,035   270,663   (2)
May 1, 2016 through May 31, 2016  78,659  $81.59   78,659   192,004   (3)
June 1, 2016 through June 30, 2016  64,834  $84.78   35,098   156,906   (4)
July 1, 2016 through July 31, 2016  83,510  $82.47   83,510   73,396   (5)
August 1, 2016 through August 16, 2016  18,179  $82.88   18,179   55,217   (6)
August 19, 2016 through August 31, 2016  -  $-   -   500,000   (7)
September 1, 2016 through September 30, 2016  -  $-   -   500,000   (8)
October 1, 2016 through October 31, 2016  -  $-   -   500,000   (9)
November 1, 2016 through November 30, 2016  -  $-   -   500,000   (10)
December 1, 2016 through December 31, 2016  -  $-   -   500,000   (11)
Period Total number of shares purchased (1)  Average price paid per share  Total number of shares purchased as part of publicly announced plans or programs  Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs 
April 1, 2017 through April 30, 2017  -  $-   -   1,000,000(2)
May 1, 2017 through May 31, 2017  -  $-   -   1,000,000(3)
June 1, 2017 through June 30, 2017  54,546  $75.72   -   1,000,000(4)
July 1, 2017 through July 31, 2017  3,179  $79.50   -   1,000,000(5)
August 1, 2017 through August 18, 2017  -  $-   -   1,000,000(6)
August 19, 2017 through August 31, 2017  -  $-   -   500,000(7)
September 1, 2017 through September 30, 2017  -  $-   -   500,000(8)
October 1, 2017 through October 31, 2017  -  $-   -   500,000(9)
November 1, 2017 through November 30, 2017  56,707  $78.21   -   443,293(10)
December 1, 2017 through December 31, 2017  68,898  $77.61   -   374,395(11)

(1)AllAny shares acquired were in open-market purchases, except for 29,73654,546 shares, which were repurchased in June 20162017, and 3,179 shares which were repurchased in July 2017, to satisfy tax withholding obligations that arose due to the vesting of shares of restricted stock.
(2)The share purchase authorization in place for the month ended April 30, 20162017 had purchase limitations on the number of shares of up to 500,0001,000,000 shares. As of April 30, 2016,2017, the remaining authorized shares to be purchased were 270,663.1,000,000.
(3)The share purchase authorization in place for the month ended May 31, 20162017 had purchase limitations on the number of shares of up to 500,0001,000,000 shares. As of May 31, 2016,2017, the remaining authorized shares to be purchased were 192,004.1,000,000.
(4)The share purchase authorization in place for the month ended June 30, 20162017 had purchase limitations on the number of shares of up to 500,0001,000,000 shares. As of June 30, 2016,2017, the remaining authorized shares to be purchased were 156,906.1,000,000.
(5)The share purchase authorization in place for the month ended July 31, 20162017 had purchase limitations on the number of shares of up to 500,0001,000,000 shares. As of July 31, 2016,2017, the remaining authorized shares to be purchased were 73,396.1,000,000.
(6)As of August 16, 201618, 2017 the authorization under the then existing share purchase plan expired.
(7)On August 9, 2016,15, 2017, the board of directors authorized the company to repurchase up to 500,000 shares of itsour outstanding common stock commencing on August 19, 20162017 through August 18, 2017.2018. As of August 31, 2016,2017, the remaining authorized shares to be purchased were 500,000.
(8)The share purchase authorization in place for the month ended September 30, 20162017 had purchase limitations on the number of shares of up to 500,000 shares. As of September 30, 2016,2017, the remaining authorized shares to be purchased were 500,000.
(9)The share purchase authorization in place for the month ended October 31, 20162017 had purchase limitations on the number of shares of up to 500,000 shares. As of October 31, 2016,2017, the remaining authorized shares to be purchased were 500,000.
(10)The share purchase authorization in place for the month ended November 30, 20162017 had purchase limitations on the number of shares of up to 500,000 shares. As of November 30, 2016,2017, the remaining authorized shares to be purchased were 500,000.443,293.
(11)The share purchase authorization in place for the month ended December 31, 20162017 had purchase limitations on the number of shares of up to 500,000 shares. As of December 31, 2016,2017, the remaining authorized shares to be purchased were 500,000.374,395.

The timing and expiration date of the current stock repurchase authorizations are included in Note 10, “Stockholders’ Equity”“Stockholders’ Equity” to our unaudited condensed consolidated financial statements included elsewhere in this report.
 
Item 3.
Defaults Upon Senior Securities

Not Applicable.

Item 4.
Mine Safety Disclosures

Not Applicable.

Item 5.
Other Information

None.

Item 6.
Exhibits

10.1
Amended and Restated Employment Agreement effective September 6, 2017, by and between ePlus inc. and Mark P. Marron.
10.2
Amended and Restated Employment Agreement effective December 12, 2017, by and between ePlus inc. and Phillip G. Norton.
10.3
Amended and Restated Employment Agreement effective September 6, 2017, by and between ePlus inc. and Elaine D. Marion.
31.1
Certification of the Chief Executive Officer of ePlus inc. pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a).
  
31.2
Certification of the Chief Financial Officer of ePlus inc. pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a).
  
32
Certification of the Chief Executive Officer and Chief Financial Officer of ePlus inc. pursuant to 18 U.S.C. § 1350.
  
101.INSXBRL Instance Document
  
101.SCHXBRL Taxonomy Extension Schema Document
  
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
  
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
  
101.LABXBRL Taxonomy Extension Label Linkbase Document
  
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
ePlus inc.
 
   
Date: February 2, 20177, 2018/s/ MARK P. MARRON 
 By: Mark P. Marron,
 
Chief Executive Officer and
President
 
 (Principal Executive Officer) 
   
Date: February 2, 20177, 2018/s/ ELAINE D. MARION 
 By: Elaine D. Marion 
 Chief Financial Officer 
 (Principal Financial Officer)
 
 
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