Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Feb. 04, 2019 | Jun. 29, 2018 | |
Document And Entity Information | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2018 | ||
Document Fiscal Year Focus | 2,018 | ||
Document Fiscal Period Focus | FY | ||
Trading Symbol | PCCC | ||
Entity Registrant Name | PC CONNECTION INC | ||
Entity Central Index Key | 1,050,377 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
Entity Common Stock, Shares Outstanding | 26,395,683 | ||
Entity Public Float | $ 380,230,570 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Current Assets: | ||
Cash and cash equivalents | $ 91,703 | $ 49,990 |
Accounts receivable, net | 447,698 | 449,682 |
Inventories, net | 119,195 | 106,753 |
Income taxes receivable | 922 | 3,933 |
Prepaid expenses and other current assets | 9,661 | 5,737 |
Total current assets | 669,179 | 616,095 |
Property and equipment, net | 51,799 | 41,491 |
Goodwill | 73,602 | 73,602 |
Intangibles assets, net | 9,564 | 11,025 |
Other assets | 1,211 | 5,638 |
Total Assets | 805,355 | 747,851 |
Current Liabilities: | ||
Accounts payable | 201,640 | 194,257 |
Accrued payroll | 24,319 | 22,662 |
Accrued expenses and other liabilities | 33,840 | 31,096 |
Total current liabilities | 259,799 | 248,015 |
Deferred income taxes | 17,184 | 15,696 |
Other liabilities | 2,469 | 1,888 |
Total Liabilities | 279,452 | 265,599 |
Stockholders' Equity: | ||
Common Stock, $.01 par value, 100,000 shares authorized, 28,787 and 28,709 issued, 26,396 and 26,853 outstanding at December 31, 2018 and 2017, respectively | 288 | 287 |
Additional paid-in capital | 115,842 | 114,154 |
Retained earnings | 441,010 | 383,673 |
Treasury stock, at cost, 2,391 and 1,856 shares at December 31, 2018 and 2017 | (31,237) | (15,862) |
Total Stockholders' Equity | 525,903 | 482,252 |
Total Liabilities and Stockholders' Equity | $ 805,355 | $ 747,851 |
CONSOLIDATED BALANCE SHEETS (PA
CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) - $ / shares shares in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Consolidated Balance Sheets | ||
Common Stock, par value | $ 0.01 | $ 0.01 |
Common Stock, shares authorized | 100,000 | 100,000 |
Common Stock, shares issued | 28,787 | 28,709 |
Common Stock, shares outstanding | 26,396 | 26,853 |
Treasury stock, shares | 2,391 | 1,856 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Consolidated Statements of Income | |||||||||||
Net sales | $ 709,520 | $ 658,504 | $ 706,570 | $ 624,895 | $ 762,267 | $ 729,230 | $ 749,792 | $ 670,594 | $ 2,699,489 | $ 2,911,883 | $ 2,692,592 |
Cost of sales | 602,718 | 558,060 | 599,102 | 528,523 | 662,737 | 633,087 | 650,122 | 583,861 | 2,288,403 | 2,529,807 | 2,321,435 |
Gross profit | 106,802 | 100,444 | 107,468 | 96,372 | 99,530 | 96,143 | 99,670 | 86,733 | 411,086 | 382,076 | 371,157 |
Selling, general and administrative expenses | 79,518 | 81,494 | 82,521 | 80,900 | 74,939 | 74,404 | 76,289 | 75,281 | 324,433 | 300,913 | 287,231 |
Restructuring and other charges | 967 | 2,695 | 941 | 967 | 3,636 | 3,406 | |||||
Income from operations | 26,317 | 18,950 | 24,947 | 15,472 | 21,896 | 21,739 | 22,440 | 11,452 | 85,686 | 77,527 | 80,520 |
Other income (expense), net | 2,566 | 114 | 182 | 116 | 78 | (8) | 9 | 19 | 2,978 | 98 | (67) |
Income before taxes | 28,883 | 19,064 | 25,129 | 15,588 | 21,974 | 21,731 | 22,449 | 11,471 | 88,664 | 77,625 | 80,453 |
Income tax provision | (7,583) | (5,298) | (6,903) | (4,288) | (1,251) | (8,614) | (8,864) | (4,039) | (24,072) | (22,768) | (32,342) |
Net income | $ 21,300 | $ 13,766 | $ 18,226 | $ 11,300 | $ 20,723 | $ 13,117 | $ 13,585 | $ 7,432 | $ 64,592 | $ 54,857 | $ 48,111 |
Earnings per common share: | |||||||||||
Basic | $ 0.80 | $ 0.52 | $ 0.68 | $ 0.42 | $ 0.77 | $ 0.49 | $ 0.51 | $ 0.28 | $ 2.42 | $ 2.05 | $ 1.81 |
Diluted | $ 0.80 | $ 0.51 | $ 0.68 | $ 0.42 | $ 0.77 | $ 0.49 | $ 0.51 | $ 0.28 | $ 2.41 | $ 2.04 | $ 1.80 |
Shares used in computation of earnings per common share: | |||||||||||
Basic | 26,632 | 26,716 | 26,685 | 26,835 | 26,822 | 26,802 | 26,761 | 26,697 | 26,717 | 26,771 | 26,528 |
Diluted | 26,766 | 26,902 | 26,820 | 26,916 | 26,907 | 26,899 | 26,893 | 26,866 | 26,854 | 26,891 | 26,719 |
CONSOLIDATED STATEMENT OF CHANG
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Shares | Total |
Balance at Dec. 31, 2015 | $ 284 | $ 109,161 | $ 298,868 | $ (15,862) | $ 392,451 |
Balance (in shares) at Dec. 31, 2015 | 28,353 | (1,856) | |||
Stock options exercised | 135 | 135 | |||
Stock options exercised (in shares) | 11 | ||||
Issuance of common stock under Employee Stock Purchase Plan | 961 | 961 | |||
Issuance of common stock under Employee Stock Purchase Plan (in shares) | 39 | ||||
Stock-based compensation expense | 1,049 | 1,049 | |||
Restricted stock units vested | $ 1 | (1) | |||
Restricted stock units vested (in shares) | 62 | ||||
Shares withheld for taxes paid on stock awards | (737) | (737) | |||
Tax benefit from stock-based compensation | 513 | 513 | |||
Dividend declaration | (9,041) | (9,041) | |||
Net income | 48,111 | 48,111 | |||
Balance at Dec. 31, 2016 | $ 285 | 111,081 | 337,938 | $ (15,862) | 433,442 |
Balance (in shares) at Dec. 31, 2016 | 28,465 | (1,856) | |||
Stock options exercised | $ 2 | 1,748 | 1,750 | ||
Stock options exercised (in shares) | 157 | ||||
Issuance of common stock under Employee Stock Purchase Plan | 1,197 | 1,197 | |||
Issuance of common stock under Employee Stock Purchase Plan (in shares) | 47 | ||||
Stock-based compensation expense | 741 | 741 | |||
Restricted stock units vested (in shares) | 40 | ||||
Shares withheld for taxes paid on stock awards | (613) | (613) | |||
Dividend declaration | (9,122) | (9,122) | |||
Net income | 54,857 | 54,857 | |||
Balance at Dec. 31, 2017 | $ 287 | 114,154 | 383,673 | $ (15,862) | $ 482,252 |
Balance (in shares) at Dec. 31, 2017 | 28,709 | (1,856) | 28,709 | ||
Issuance of common stock under Employee Stock Purchase Plan | $ 1 | 1,246 | $ 1,247 | ||
Issuance of common stock under Employee Stock Purchase Plan (in shares) | 41 | ||||
Stock-based compensation expense | 1,080 | 1,080 | |||
Restricted stock units vested (in shares) | 37 | ||||
Shares withheld for taxes paid on stock awards | (638) | (638) | |||
Repurchases of treasury shares | $ (15,375) | (15,375) | |||
Repurchase of treasury shares (in shares) | (535) | ||||
Dividend declaration | (8,452) | (8,452) | |||
Net income | 64,592 | 64,592 | |||
Balance at Dec. 31, 2018 | $ 288 | $ 115,842 | 441,010 | $ (31,237) | $ 525,903 |
Balance (in shares) at Dec. 31, 2018 | 28,787 | (2,391) | 28,787 | ||
Cumulative effect of adoption of ASC 606 | $ 1,197 | $ 1,197 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Cash Flows provided by Operating Activities: | |||
Net income | $ 64,592 | $ 54,857 | $ 48,111 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||
Depreciation and amortization | 14,063 | 11,839 | 10,453 |
Provision for doubtful accounts | 1,680 | 1,658 | 360 |
Stock-based compensation expense | 1,080 | 741 | 1,049 |
Deferred income taxes | 1,488 | (3,906) | 3,506 |
Loss on disposal of fixed assets | 51 | 24 | 92 |
Excess tax benefit from exercise of equity awards | (513) | ||
Changes in assets and liabilities: | |||
Accounts receivable | 14,872 | (39,457) | (33,835) |
Inventories | (23,311) | (16,218) | 12,401 |
Prepaid expenses, income tax receivables and other current assets | (1,045) | (2,097) | (1,274) |
Other non-current assets | 2,403 | (4,265) | (321) |
Accounts payable | 5,722 | 15,807 | (3,012) |
Accrued expenses and other liabilities | 5,244 | 337 | (3,431) |
Net cash provided by operating activities | 86,839 | 19,320 | 33,586 |
Cash Flows used in Investing Activities: | |||
Purchases of equipment and capitalized software | (21,238) | (11,803) | (11,885) |
Cash paid for acquisitions | (42,990) | ||
Net cash used in investing activities | (21,238) | (11,803) | (54,875) |
Cash Flows (used in) provided by Financing Activities: | |||
Proceeds from short-term borrowings | 859 | ||
Repayment of short-term borrowings | (859) | ||
Purchase of treasury shares | (15,375) | ||
Dividend payment | (9,122) | (9,041) | (10,591) |
Exercise of stock options | 1,750 | 135 | |
Issuance of stock under Employee Stock Purchase Plan | 1,247 | 1,197 | 961 |
Excess tax benefit from exercise of equity awards | 513 | ||
Payment of payroll taxes on stock-based compensation through shares withheld | (638) | (613) | (737) |
Net cash used in financing activities | (23,888) | (6,707) | (9,719) |
Increase (decrease) in cash and cash equivalents | 41,713 | 810 | (31,008) |
Cash and cash equivalents, beginning of year | 49,990 | 49,180 | 80,188 |
Cash and cash equivalents, end of year | 91,703 | 49,990 | 49,180 |
Non-cash Investing and Financing Activities: | |||
Accrued capital expenditures | 2,422 | 699 | 109 |
Dividend declaration | 8,452 | 9,122 | 9,041 |
Supplemental Cash Flow Information: | |||
Income taxes paid | $ 19,945 | $ 28,927 | $ 29,740 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2018 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES We are a leading solutions provider of a wide range of information technology, or IT, solutions. We help our customers design, enable, manage, and service their IT environments. We provide IT products, including computer systems, software and peripheral equipment, networking communications, and other products and accessories that we purchase from manufacturers, distributors, and other suppliers. We also offer services involving design, configuration, and implementation of IT solutions. These services are performed by our personnel and by first-party service providers. We operate through three sales segments: (a) the Business Solutions segment, which serves small- to medium-sized businesses, through our PC Connection Sales subsidiary, (b) the Enterprise Solutions segment, which serves large enterprise customers, through our MoreDirect subsidiary, and (c) the Public Sector segment, which serves federal, state, and local governmental and educational institutions, through our GovConnection subsidiary. The following is a summary of our significant accounting policies: Principles of Consolidation The consolidated financial statements include the accounts of PC Connection, Inc. and its subsidiaries, all of which are wholly-owned. Intercompany transactions and balances are eliminated in consolidation. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts and disclosures of assets and liabilities and the reported amounts and disclosures of revenue and expenses during the period. By nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ from those estimates and assumptions. Reclassification of Prior Year Presentation Certain prior year amounts have been reclassified for consistency with current year presentation. Restructuring and other charges have been separated from selling, general, and administrative expenses on the Consolidated Statements of Income. These charges amount to $967, $3,636, and $3,406 for the years ending December 31, 2018, 2017, and 2016, respectively. This change in classification does not affect previously reported net income or earnings per share figures in the Consolidated Statements of Income. Revenue Recognition On January 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”), which replaced existing revenue recognition rules with a comprehensive revenue measurement and recognition standard and expanded disclosure requirements. See Adoption of Recently Issued Accounting Standards within this footnote for additional information. Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. In most instances, when several performance obligations are aggregated into one single transaction, these performance obligations are fulfilled at the same point in time. We account for an arrangement when it has approval and commitment from both parties, the rights are identified, the contract has commercial substance, and collectability of consideration is probable. We generally obtain oral or written purchase authorizations from our customers for a specified amount of product at a specified price, which constitutes an arrangement. Revenue is recognized at the amount expected to be collected, net of any taxes collected from customers, which are subsequently remitted to governmental authorities. We generally invoice for our products at the time of shipping, and accordingly there is not a significant financing component included in our arrangements. Prior to the adoption of ASC 606, revenue on product sales was recognized at the point in time when persuasive evidence of an arrangement existed, the price was fixed or determinable, delivery had occurred, and there was a reasonable assurance of collection of the sales proceeds. Service revenue was recognized over time as the services were performed. We evaluated such engagements to determine whether we or the third party assumed the general risk and reward of ownership in these transactions. This evaluation was the basis by which we determined that revenue from these transactions would be recognized on a gross or a net basis. In multiple-element revenue arrangements, each service performed and product delivered was considered a separate deliverable and qualified as a separate unit of accounting. For material multiple element arrangements, we allocated revenue based on vendor-specific objective evidence of fair value of the underlying services and products. In the absence of vendor-specific objective evidence, we would utilize third-party evidence to allocate the selling price. If neither vendor-specific objective evidence nor third-party evidence was available, we would estimate the selling price based on market price and company specific factors. Cost of Sales and Certain Other Costs Cost of sales includes the invoice cost of the product, direct employee and third party cost of services, direct costs of packaging, inbound and outbound freight, and provisions for inventory obsolescence, adjusted for discounts, rebates, and other vendor allowances. Cash and Cash Equivalents We consider all highly liquid short-term investments with original maturities of 90 days or less to be cash equivalents. The carrying value of our cash equivalents approximates fair value. The majority of payments due from credit card processors and banks for third-party credit card and debit card transactions process within one to five business days. All credit card and debit card transactions that process in less than seven days are classified as cash and cash equivalents. Amounts due from banks for credit card transactions classified as cash equivalents totaled $2,651 and $6,776 at December 31, 2018 and 2017, respectively. Accounts Receivable We perform ongoing credit evaluations of our customers and adjust credit limits based on payment history and customer creditworthiness. We maintain an allowance for estimated doubtful accounts based on our historical experience and the customer credit issues identified. Our customers do not post collateral for open accounts receivable. We monitor collections regularly and adjust the allowance for doubtful accounts as necessary to recognize any changes in credit exposure. Trade receivables are written off in the period in which they are deemed uncollectible. Recoveries of trade receivables previously charged are recorded when received. Inventories Inventories (all finished goods) consisting of software packages, computer systems, and peripheral equipment, are stated at cost (determined under a weighted-average cost method which approximates the first-in, first-out method) or net realizable value, whichever is lower. Inventory quantities on hand are reviewed regularly, and allowances are maintained for obsolete, slow moving, and nonsalable inventory. Vendor Consideration We receive funding from merchandise vendors for price protections, discounts, product rebates, and other programs. These allowances are treated as a reduction of the vendor’s prices and are recorded as adjustments to cost of sales or inventory, as applicable. Allowances for product rebates that require certain volumes of product sales or purchases are recorded as the related milestones are probable of being met. Advertising Costs and Vendor Consideration Costs of producing and distributing catalogs are charged to expense in the period in which the catalogs are first circulated. Other advertising costs are expensed as incurred. Vendors have the ability to place advertisements in our catalogs or fund other advertising activities for which we receive advertising consideration. This vendor consideration, to the extent that it represents specific reimbursements of incremental and identifiable costs, is offset against SG&A expenses. Advertising consideration that cannot be associated with a specific program or that exceeds the fair value of advertising expense associated with that program is classified as an offset to cost of sales. Our vendor partners generally consolidate their funding of advertising and other marketing programs, and accordingly, we classify substantially all vendor consideration as a reduction of cost of sales rather than a reduction of advertising expense. Advertising expense, which is classified as a component of SG&A expenses, totaled $16,244, $14,437, and $16,083, for the years ended December 31, 2018, 2017, and 2016, respectively. Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization is provided for financial reporting purposes over the estimated useful lives of the assets ranging from three to seven years. Computer software, including licenses and internally developed software, is capitalized and amortized over lives generally ranging from three to seven years. Depreciation is recorded using the straight-line method. Leasehold improvements and facilities under capital leases are amortized over the terms of the related leases or their useful lives, whichever is shorter, whereas for income tax reporting purposes, they are amortized over the applicable tax lives. Costs incurred to develop internal-use software during the application development stage are recorded in property and equipment at cost. External direct costs of materials and services consumed in developing or obtaining internal-use computer software and payroll-related costs for employees developing internal-use computer software projects, to the extent of their time spent directly on the project and specific to application development, are capitalized. When events or circumstances indicate a potential impairment, we evaluate the carrying value of property and equipment based upon current and anticipated undiscounted cash flows. We recognize impairment when it is probable that such estimated future cash flows will be less than the asset carrying value. Goodwill and Other Intangible Assets Our intangible assets consist of (1) goodwill, which is not subject to amortization; (2) an internet domain name, which is an indefinite-lived intangible not subject to amortization; and (3) amortizing intangibles, which consist of customer lists, trade names, and customer relationships, which are being amortized over their useful lives. Note 4 describes the annual impairment methodology that we employ each year in calculating the recoverability of goodwill and non-amortizing intangibles. This same impairment test is performed at other times during the course of a year should an event occur or circumstance change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Recoverability of amortizing intangible assets is assessed only when events have occurred that may give rise to impairment. When a potential impairment has been identified, forecasted undiscounted net cash flows of the operations to which the asset relates are compared to the current carrying value of the long-lived assets present in that operation. If such cash flows are less than such carrying amounts, long-lived assets including such intangibles, are written down to their respective fair values. Concentrations Concentrations of credit risk with respect to trade account receivables are limited due to the large number of customers comprising our customer base. No single customer accounted for more than 3% of total net sales in 2018, 2017, and 2016. While no single agency of the federal government comprised more than 3% of total sales, aggregate sales to the federal government as a percentage of total net sales were 5.4%, 7.8%, and 7.5% in 2018, 2017, and 2016, respectively. Product purchases from Ingram Micro, Inc. (“Ingram”), our largest supplier, accounted for approximately 22% of our total product purchases in both 2018 and 2017 and 21% in 2016. Purchases from Synnex Corporation (“Synnex”) comprised 12%, 12%, and 13%, of our total product purchases in 2018, 2017, and 2016, respectively. Purchases from Tech Data comprised of 10%, 11% and 8% in 2018, 2017, and 2016, respectively. Purchases from Hewlett-Packard Company, or HP, accounted for approximately 7% of our total product purchases in 2018, 11% in 2017, and 9% in 2016. No other vendor supplied more than 10% of our total product purchases in 2018, 2017, or 2016. We believe that, while we may experience some short-term disruption if products from Ingram, Synnex, HP and/or Tech Data become unavailable to us, alternative sources for products obtained directly from Ingram, Synnex, HP and Tech Data are available to us. Products manufactured by HP represented approximately 18% of our net sales in 2018 and approximately 20% in both 2017 and 2016. We believe that in the event we experience either a short-term or permanent disruption of supply of HP products, such disruption would likely have a material adverse effect on our results of operations and cash flows. Restructuring and other charges During 2018, we began presenting restructuring and other charges separately from SG&A expenses. Costs incurred were as follows: Year Ended December 31, 2018 2017 2016 Employee separations $ 967 $ 640 $ 1,766 Acquisition costs — — 570 Relocation expenses — 84 291 Re-branding costs — — 596 Employee compensation — 2,800 — Other — 112 183 Total restructuring and other charges $ 967 $ 3,636 $ 3,406 The net restructuring charges recorded in 2018 were related to a reduction in workforce at our Business Solutions, Public Sector Solutions, and Headquarter segments and included cash severance payments and other related benefits. The net restructuring and other charges recorded in 2017 were primarily driven by a reduction in workforce at our Headquarters segment, along with costs related to the Softmart business, which was acquired in 2016, including expenses to retain certain key personnel brought over in the acquisition. Also in 2017, we incurred additional expense of $2,700 related to a one-time cash bonus paid to all non-executive employees at the end of the year. The net restructuring and other charges recorded in 2016 were primarily driven by a reduction in workforce after the Softmart acquisition and other employee severance expenses incurred throughout the business. We also incurred costs associated with the acquisitions and IT transitions of Softmart and GlobalServe, along with other costs associated with a company-wide rebranding campaign. Overall, restructuring and other charges consist primarily of employee termination benefits, which are accrued in the period incurred and paid within a year of termination. Included in accrued expenses at December 31, 2018, 2017, and 2016 were $784, $2, and $417, respectively, related to unpaid employee termination benefits. The amount accrued as of December 31, 2018 is expected to be paid in 2019. Other restructuring-related charges such as acquisition costs, relocation expenses and significant marketing campaigns are expensed and paid as incurred. All planned restructuring and other charges were incurred as of December 31, 2018 and we have no ongoing restructuring plans. Earnings Per Share Basic earnings per common share is computed using the weighted average number of shares outstanding. Diluted earnings per share is computed using the weighted average number of shares outstanding adjusted for the incremental shares attributable to nonvested stock units and stock options outstanding, if dilutive. The following table sets forth the computation of basic and diluted earnings per share: 2018 2017 2016 Numerator: Net income $ 64,592 $ 54,857 $ 48,111 Denominator: Denominator for basic earnings per share 26,717 26,771 26,528 Dilutive effect of employee stock awards 137 120 191 Denominator for diluted earnings per share 26,854 26,891 26,719 Earnings per share: Basic $ 2.42 $ 2.05 $ 1.81 Diluted $ 2.41 $ 2.04 $ 1.80 For the years ended December 31, 2018, 2017, and 2016, we did not exclude any outstanding nonvested stock units or stock options from the computation of diluted earnings per share because including them would have had an anti-dilutive effect. Other Income (Expense), Net Other income, net for the year ended December 31, 2018 consisted of $2,255 related to a gain, net of costs incurred of $745, that was realized upon execution of a favorable $3,000 cash resolution of a contract dispute that arose in 2017. We included the $3,000 owed to us in other assets as of December 31, 2018. Also included in other income, net for the year ended December 31, 2018 was interest income of $868, offset partially by interest expense of $145. Other income, net for the year ended December 31, 2017 consisted of interest income of $224, which was partially offset by interest expense of $126. Other expense, net for the year ended December 31, 2016 consisted of interest expense of $107, which was partially offset by interest income of $40. Comprehensive Income We had no items of comprehensive income, other than our net income for each of the periods presented. Adoption of Recently Issued Financial Accounting Standards On May 28, 2014, the Financial Accounting Standards Board, or the FASB, issued ASC 606, which amended the accounting standards for revenue recognition and expanded our disclosure requirements. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. On January 1, 2018 we adopted ASC 606 using the modified retrospective transition method, which resulted in an adjustment at January 1, 2018 to retained earnings for the cumulative effect of applying the standard to all contracts not completed as of the adoption date. Upon adoption we recorded $1,197 as an increase to retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The adoption resulted in an acceleration of the timing of revenue recognized for certain transactions where product that remained in our possession has been recognized as of the transaction date when all revenue recognition criteria have been met. The following table presents the effect of the adoption of ASC 606 on our consolidated balance sheets as of January 1, 2018: Adjustments Balance at due to Balance at December 31, 2017 ASC 606 January 1, 2018 Balance Sheet Assets Accounts receivable, net $ 449,682 $ 14,568 $ 464,250 Inventories 106,753 (10,869) 95,884 Prepaid expenses and other current assets 5,737 (132) 5,605 Long-term accounts receivable — 1,890 1,890 Other assets 5,638 (3,914) 1,724 Liabilities Accounts payable 194,257 (62) 194,195 Accrued expenses and other liabilities 31,096 (312) 30,784 Accrued payroll 22,662 291 22,953 Deferred income taxes 15,696 429 16,125 Stockholders' Equity Retained earnings $ 383,673 $ 1,197 $ 384,870 In addition to the timing of revenue recognition impacted by the above-described transactions, upon adoption of ASC 606, the amount of revenue to be recognized prospectively was affected by the presentation of revenue transactions as an agent instead of principal in certain transactions. Specifically, revenue related to the sale of cloud products, as well as certain security software, is now being recognized net of costs as we determined that we act as an agent in these transactions. These sales are recorded on a net basis at a point in time when our vendor and the customer accept the terms and conditions in the sales arrangement. In addition, we sell third-party software maintenance that is delivered over time either separately or bundled with the software license. We have determined that software maintenance is a distinct performance obligation that we do not control, and accordingly, we act as an agent in these transactions and recognized the related revenue on a net basis under ASC 606. We previously recognized revenue for cloud products, security software, and software maintenance on a gross basis (i.e., acting as a principal). This change reduced both net sales and cost of sales with no impact on reported gross profit as compared to our prior accounting policies. The following tables present the effect of the adoption of ASC 606 on our consolidated income statement and balance sheet for the year ended December 31, 2018 and as of December 31, 2018, respectively: Year Ended December 31, 2018 Balances without As Adoption of Reported Adjustments ASC 606 Income statement Revenues Net sales $ 2,699,489 $ 404,690 $ 3,104,179 Costs and expenses Cost of sales 2,288,403 403,737 2,692,140 Income from operations 85,686 750 86,436 Income before taxes 88,664 750 89,414 Net income 64,592 526 65,118 December 31, 2018 Balances without As Adoption of Reported Adjustments ASC 606 Balance Sheet Assets Accounts receivable, net $ 447,698 $ (6,949) $ 440,749 Inventories 119,195 4,798 123,993 Prepaid expenses and other current assets 9,661 148 9,809 Other assets 1,211 3,914 5,125 Liabilities Accrued expenses and other liabilities $ 33,840 $ 2,904 $ 36,744 Accrued payroll 24,319 (116) 24,203 Deferred income taxes 17,184 (219) 16,965 Stockholders' Equity Retained earnings $ 441,010 $ (657) $ 440,353 We have elected the use of certain practical expedients in our adoption of the new standard, which includes continuing to record revenue reported net of applicable taxes imposed on the related transaction and the application of the new standard to all arrangements not completed as of the adoption date. We have also elected to use the practical expedient to not account for the shipping and handling as separate performance obligations. Adoptions of the standard related to revenue recognition had no net impact on our consolidated statement of cash flows. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting . The Company adopted this standard on January 1, 2017. The new standard simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. Under this guidance, a company recognizes all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement. This change eliminates the notion of the additional paid-in capital pool and reduces the complexity in accounting for excess tax benefits and tax deficiencies. The primary impact of our adoption was the recognition of excess tax benefits related to equity compensation in our provision for income taxes rather than paid-in capital, which is a change required to be applied on a prospective basis in accordance with the new guidance. There were no unrecognized excess tax benefits at implementation. Accordingly, we recorded discrete income tax benefits in the consolidated statements of income of $1,054 in the year ended December 31, 2017, for excess tax benefits related to equity compensation. The corresponding cash flows were reflected in cash provided by operating activities instead of financing activities, as was previously required. We adopted the cash flow presentation that requires presentation of excess tax benefits within operating activities on a prospective basis. Additionally, under ASU 2016-09, we have elected to continue to estimate equity award forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period. Additional amendments to the accounting for income taxes and minimum statutory withholding tax requirements had no impact on our results of operations. The presentation requirements for cash flows related to employee taxes paid for withheld shares also had no impact to any of the periods presented in our consolidated statements of cash flows since such cash flows have historically been presented as a financing activity. Recently Issued Financial Accounting Standards In February 2016, the FASB issued ASU 2016-02, Leases . The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018 and will be adopted using a modified retrospective transition approach on January 1, 2019. The Company has reviewed the requirements of the new standard and expects that it will have a material impact on our consolidated financial statements, as all long-term leases will be capitalized on the consolidated balance sheet. The Company has identified the population of leases and lease assets, has selected a software repository to track all of its lease agreements and to assist in the reporting and disclosures required by the new standard, and is still in the process of testing the data and calculations performed by the software. The Company is also in the process of implementing changes to our procedures and controls in conjunction with both the review of existing lease agreements and any future agreements that will be accounted for under this new standard. The future lease payments that will be subject to the new accounting standard are disclosed in Note 12 to the financial statements. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment , which simplifies the accounting for goodwill impairments by eliminating step two from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. ASU 2017-04 also clarifies the requirements for excluding and allocating foreign currency translation adjustments to reporting units related to an entity's testing of reporting units for goodwill impairment and clarifies that an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. ASU 2017-04 is effective for us beginning January 1, 2020 for both interim and annual reporting periods. We are currently assessing the potential impact of the adoption of ASC 2017-04 on our consolidated financial statements. |
REVENUE
REVENUE | 12 Months Ended |
Dec. 31, 2018 | |
Revenue | |
Revenue | 2. REVENUE Nature of Products and Services Information technology (“IT”) products typically represent a distinct performance obligation, and revenue is recognized at the point in time when control is transferred to the customer which is generally upon delivery to the customer. We recognize revenue as the principal in the transaction with the customer (i.e., on a gross basis), as we control the product prior to delivery to the customer and derive the economic benefits from the sales transaction given our control over customer pricing. We do not recognize revenue for goods that remain in our physical possession before the customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from the products, the goods are ready for physical transfer to and identified as belonging to the customer, and when we have no ability to use the product or to direct it to another customer. Licenses for on-premise software provide the customer with a right to take possession of the software. Customers may purchase perpetual licenses or enter into subscriptions to the licensed software. We are the principal in these transactions and recognize revenue for the on-premise license at the point in time when the software is made available to the customer and the commencement of the term of the software license or when the renewal term begins, as applicable. For certain on-premise licenses for security software, the customer derives substantially all of the benefit from these arrangements through the third-party delivered software maintenance, which provides software updates and other support services. We do not have control over the delivery of these performance obligations, and accordingly we are the agent in these transactions. We recognize revenue for security software net of the related costs of sales at the point in time when our vendor and customer accept the terms and conditions in the sales arrangement. Cloud products allow customers to use hosted software over the contractual period without taking possession of the software and are provided on a subscription basis. We do not exercise control over these products or services and therefore are an agent in these transactions. We recognize revenue for cloud products net of the related costs of sales at the point in time when our vendor and customer accept the terms and conditions in the sales arrangements. Certain software sales include on-premise licenses that are combined with software maintenance. Software maintenance conveys rights to updates, bug fixes and help desk support, and other support services transferred over the underlying contract period. On-premise licenses are considered distinct performance obligations when sold with the software maintenance, as we sell these items separately. We recognize revenue related to the software maintenance as the agent in these transactions because we do not have control over the on-going software maintenance service. Revenue allocated to software maintenance is recognized at the point in time when our vendor and customer accept the terms and conditions in the sales arrangements. Certain of our larger customers are offered the opportunity by vendors to purchase software licenses and maintenance under enterprise agreements (“EAs”). Under EAs, customers are considered to be compliant with applicable license requirements for the ensuing year, regardless of changes to their employee base. Customers are charged an annual true-up fee for changes in the number of users over the year. With most EAs, our vendors will transfer the license and bill the customer directly, paying resellers, such as us, an agency fee or commission on these sales. We record these agency fees as a component of net sales as earned and there is no corresponding cost of sales amount. In certain instances, we invoice the customer directly under an EA and account for the individual items sold based on the nature of each item. Our vendors typically dictate how the EA will be sold to the customer. We also offer extended service plans (“ESP”) on IT products, both as part of the initial arrangement and separately from the IT products. We recognize revenue related to ESP as the agent in the transaction because we do not have control over the on-going ESP service and do not provide any service after the sale. Revenue allocated to ESP is recognized at the point in time when our vendor and customer accept the terms and conditions in the sales arrangement. We use our own engineering personnel to assist in projects involving the design and installation of systems and networks, and we also engage third-party service providers to perform warranty maintenance, implementations, asset disposal, and other services. Service revenue is recognized in general over time as we perform the underlying services and satisfy our performance obligations. We evaluate such engagements to determine whether we are the principal or the agent in each transaction. For those transactions in which we do not control the service, we act as an agent and recognize the transaction revenue on a net basis at a point in time when the vendor and customer accept the terms and conditions in the sales arrangement. All amounts billed to a customer in a sales transaction related to shipping and handling, if any, represent revenues earned for the goods provided, and these amounts have been included in net sales. Costs related to shipping and handling billing are classified as cost of sales. Sales are reported net of sales, use, or other transaction taxes that are collected from customers and remitted to taxing authorities. Significant Judgments Our contracts with customers often include promises to transfer multiple products or services to a customer. Determining whether we are the agent or the principal and whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. We estimate the standalone selling price (“SSP”) for each distinct performance obligation when a single arrangement contains multiple performance obligations and the fulfillment occurs at different points of times. We maximize the use of observable inputs in the determination of the estimate for SSP for the items that we do not sell separately, including on-premise licenses sold with software maintenance, and IT products sold with ESP. In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we determine the SSP using information that may include market conditions and other observable inputs. We provide our customers with a limited thirty-day right of return which is generally limited to defective merchandise. Revenue is recognized at delivery and a reserve for sales returns is recorded. We make estimates of product returns based on significant historical experience and record our sales return reserves as a reduction of revenues and either as reduction of accounts receivable or, for customers who have already paid, as accrued expenses. Description of Revenue We disaggregate revenue from our arrangements with customers by type of products and services, as we believe this method best depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The following tables represent a disaggregation of revenue from arrangements with customers for the twelve months ended December 31, 2018 and 2017, along with the reportable segment for each category. Twelve Months Ended December 31, 2018 (1) Business Enterprise Public Sector Total Notebooks/Mobility $ 299,247 $ 272,589 138,818 $ 710,654 Accessories 95,342 214,102 43,696 353,140 Software 134,071 135,420 45,365 314,856 Desktops 108,096 126,643 53,569 288,308 Servers/Storage 111,559 102,209 59,653 273,421 Displays and sound 89,779 109,497 52,760 252,036 Net/Com products 109,702 62,060 52,287 224,049 Other hardware/services 80,122 142,622 60,281 283,025 Total net sales $ 1,027,918 $ 1,165,142 $ 506,429 $ 2,699,489 (1) The Company adopted ASC 606 in 2018 using the modified retrospective approach, which primarily resulted in certain software sales being reported on a net basis where they would have otherwise been reported on a gross basis under the previous revenue recognition guidance. As a result, certain revenue figures reported in the current year may not be comparable with prior-year disclosures. Twelve Months Ended December 31, 2017 (1) Business Enterprise Public Sector Total Notebooks/Mobility $ 299,029 213,352 123,908 $ 636,289 Accessories 86,339 166,898 50,058 303,295 Software 271,805 284,003 103,680 659,488 Desktops 116,931 106,779 98,160 321,870 Servers/Storage 116,770 84,612 56,322 257,704 Displays and sound 90,868 86,398 57,099 234,365 Net/Com products 95,043 63,741 59,359 218,143 Other hardware/services 81,854 126,040 72,835 280,729 Total net sales $ 1,158,639 $ 1,131,823 $ 621,421 $ 2,911,883 (1) Product categories were separated into additional categories in 2018. Certain prior-year balances have been reclassified to conform to 2018 presentation. Contract Balances The following table provides information about contract liability from arrangements with customers as of December 31, 2018 and January 1, 2018: December 31, 2018 January 1, 2018 Contract liability, which are included in "Accrued expenses and other liabilities" $ 2,679 $ 2,914 Significant changes in the contract liability balances during the year ended December 31, 2018 are as follows (in thousands): Year Ended December 31, Balances at January 1, 2018 $ 2,914 Cash received in advance and not recognized as revenue 16,279 Amounts recognized as revenue as performance obligations satisfied (16,514) Balances at December 31, 2018 $ 2,679 |
ACQUISITIONS
ACQUISITIONS | 12 Months Ended |
Dec. 31, 2018 | |
Acquisitions | |
Acquisitions | 3. ACQUISITIONS Softmart Acquisition On May 27, 2016, we acquired substantially all of the assets of Softmart Inc. (“Softmart”), a global supplier of information technology and software services solutions. The purchase of Softmart is consistent with our strategy to expand our software services capabilities. Under the terms of the asset purchase agreement, we paid $31,899, net of cash acquired, and allocated the total purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition. The excess of the purchase price over the net assets acquired represents potential synergies from Softmart’s customer base and its assembled workforce of sales representatives and software service specialists that we acquired in the transaction. This excess of purchase price over the aggregate fair values was recorded as goodwill. We incurred $357 of transaction costs in 2016 related to the acquisition which we have reported in selling, general and administrative expenses in our consolidated statement of income for the year ended December 31, 2016. The operating results of Softmart have been included in the SMB and Large Accounts segments since the acquisition date. The revenues and income from operations were not material to our consolidated results, and accordingly, we have not presented Softmart’s revenues or operating results on a pro forma basis. The following table reflects components of the net assets acquired and liabilities assumed at fair value as of the closing date. Purchase Price Allocation Current assets $ 22,812 Fixed assets 343 Goodwill 14,314 Customer relationships 11,300 Total assets acquired 48,769 Acquired liabilities (16,252) Net assets acquired 32,517 Less cash acquired (628) Purchase price at closing, net of cash acquired $ 31,889 We recorded goodwill of $7,366 and $6,948 in our SMB and Large Account segments, respectively, and the aggregate is expected to be fully deductible for tax purposes. GlobalServe Acquisition On October 11, 2016, we acquired the outstanding common shares of GlobalServe, Inc. (“GlobalServe”), which has developed an Internet portal tool that simplifies customers’ global IT procurement. Under the terms of the stock purchase agreement, we paid $11,101, net of cash acquired. The purchase of GlobalServe allows us to service our customers’ global IT needs through this OneSource Internet portal with consistent delivery, reporting, pricing, and logistics. We allocated the total purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition and recorded the excess of purchase price over the aggregate fair values as goodwill. In 2016 we incurred $118 of transaction costs related to the acquisition which we have reported in selling, general and administrative expenses in our consolidated statement of income for the year ended December 31, 2016. We have included the operating results of GlobalServe in the Large Account segment since the acquisition date. The revenues and income from operations were not material to our consolidated results, and accordingly, we have not presented GlobalServe’s revenues or operating results on a pro forma basis. The following table reflects components of the net assets acquired and liabilities assumed at fair value as of the closing date. Purchase Price Allocation Current assets $ 1,486 Fixed assets 4,609 Goodwill 8,012 Customer relationships 900 Total assets acquired 15,007 Acquired liabilities (734) Deferred taxes and unrecognized tax benefits (2,390) Net assets acquired 11,883 Less cash acquired (782) Purchase price at closing, net of cash acquired $ 11,101 We recorded $8,012 of goodwill as a result of our acquisition of GlobalServe in our Large Account segment. None of the goodwill related to this acquisition will be deductible for tax purposes. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure | |
Goodwill and Other Intangible Assets | 4. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill Goodwill and intangible assets with indefinite lives are subject to an annual impairment test and tested more frequently if events or circumstances occur that would indicate a potential decline in fair value. For goodwill, a two-step quantitative test is performed at a reporting unit level which requires, under the first step, that the fair value of a reporting unit is determined and compared to the reporting unit’s carrying value, including goodwill. To assess the fair value of a reporting unit, both income and market valuation approaches are used. If the fair value is determined to be less than the carrying value, the second step is performed to measure the amount, if any, of the impairment. Historically, we have performed our annual impairment test of an indefinite-lived domain name and goodwill as of the first day of the calendar year. Beginning in 2018, we performed the test as of November 30. We assessed the potential impact this change might have on the outcome of the impairment analysis and on the overall consolidated results and determined that the impact, if any, would be immaterial. We made this conclusion based on the following factors: 1) the old and new testing dates are close in proximity, 2) based on historical impairment analyses performed, the goodwill and intangible assets measured do not present a significant risk of impairment, and 3) we do not expect that changing the dates would produce different impairment results. Goodwill is held by our Large Account and SMB reporting units. The fair value of the domain name and the two reporting units each substantially exceeded the respective carrying value, and accordingly, an impairment was not identified in the annual test. We also did not identify any events or circumstances that would indicate that it is more likely than not that the carrying values of the reporting units or the domain name were in excess of the respective fair values during the year ended December 31, 2018. To determine the fair value of our reporting units, we considered operating results and future projections, as well as changes in the Company’s overall market capitalization. The significant assumptions used in our discounted cash flow analysis include: projected cash flows and profitability, the discount rate used to present value future cash flows, working capital requirements, and terminal growth rates. Cash flows and profitability assumptions include sales growth, gross margin, and SG&A growth assumptions which are generally based on historical trends. The discount rate used is a "market participant" weighted average cost of capital ("WACC"). For our computation of fair value as of November 30, 2018, we used a WACC rate of 12.5%, and estimated terminal growth rate at 3.0% and working capital requirements at 9.5% of revenues. The carrying amount of goodwill for the periods presented is detailed below: Balance at December 31, 2017 SMB Large Account Public Sector Total Goodwill, gross $ 8,539 $ 66,236 $ 7,634 $ 82,409 Accumulated impairment losses (1,173) ─ (7,634) (8,807) Net balance $ 7,366 $ 66,236 $ — $ 73,602 Balance at December 31, 2018 SMB Large Account Public Sector Total Goodwill, gross $ 8,539 $ 66,236 $ 7,634 $ 82,409 Accumulated impairment losses (1,173) ─ (7,634) (8,807) Net balance $ 7,366 $ 66,236 $ — $ 73,602 Intangible Assets At December 31, 2018, our intangible assets included a domain name for $450, which has an indefinite life and is not subject to amortization. In addition, we acquired in 2016 customer relationships from our Softmart and GlobalServe acquisitions, which will be amortized on a straight-line basis over their estimated useful lives of 10 years. Our remaining intangible assets are amortized in proportion to the estimates of the future cash flows underlying the valuation of the assets. Intangible assets and related accumulated amortization are detailed below: December 31, 2018 December 31, 2017 Estimated Gross Accumulated Net Gross Accumulated Net Useful Lives Amount Amortization Amount Amount Amortization Amount Customer list 8 $ 3,400 $ 3,364 $ 36 $ 3,400 $ 3,143 $ 257 Tradename 5 1,190 1,190 — 1,190 1,190 — Customer relationships 10 12,200 3,122 9,078 12,200 1,882 10,318 Total intangible assets $ 16,790 $ 7,676 $ 9,114 $ 16,790 $ 6,215 $ 10,575 In 2018, 2017, and 2016, we recorded amortization expense of $1,461, $1,561, and $1,281, respectively. The estimated amortization expense relating to intangible assets in each of the five succeeding years and thereafter is as follows: For the Years Ended December 31, 2019 $ 1,256 2020 1,220 2021 1,220 2022 1,220 2023 1,220 2024 and thereafter 2,978 $ 9,114 |
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE | 12 Months Ended |
Dec. 31, 2018 | |
Accounts Receivable | |
Accounts Receivable | 5. ACCOUNTS RECEIVABLE Accounts receivable consisted of the following: December 31, 2018 2017 Trade $ 401,530 $ 398,524 Vendor consideration, returns and other 52,560 57,043 Due from employees 107 149 Total gross accounts receivable 454,197 455,716 Allowances for: Sales returns (3,397) (3,308) Doubtful accounts (3,102) (2,726) Accounts receivable, net $ 447,698 $ 449,682 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2018 | |
Property and Equipment | |
Property and Equipment | 6. PROPERTY AND EQUIPMENT Property and equipment consisted of the following: December 31, 2018 2017 Computer software, including licenses and internally-developed software $ 75,528 $ 58,320 Furniture and equipment 36,147 33,176 Leasehold improvements 8,102 7,787 Total 119,777 99,283 Accumulated depreciation and amortization (67,978) (57,792) Property and equipment, net $ 51,799 $ 41,491 We recorded depreciation and amortization expense for property and equipment of $12,602, $10,278, and $9,172 in 2018, 2017, and 2016, respectively. |
ACCRUED EXPENSES AND OTHER LIAB
ACCRUED EXPENSES AND OTHER LIABILITIES | 12 Months Ended |
Dec. 31, 2018 | |
Accrued Expenses and Other Liabilities | |
Accrued Expenses and Other Liabilities | 7. ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities consisted of the following: December 31, 2018 2017 Customer and vendor deposits $ 8,880 $ 7,763 Dividends payable 8,453 9,122 Sales taxes 7,632 5,905 Other 8,875 8,306 Accrued expenses and other liabilities $ 33,840 $ 31,096 |
BANK BORROWINGS
BANK BORROWINGS | 12 Months Ended |
Dec. 31, 2018 | |
Bank Borrowings | |
Bank Borrowings | 8. BANK BORROWINGS We have a $50,000 credit facility collateralized by our account receivables that expires February 10, 2022. This facility can be increased, at our option, to $80,000 for permitted acquisitions or other uses authorized by the lender on substantially the same terms. Amounts outstanding under this facility bear interest at the one-month London Interbank Offered Rate (“LIBOR”) (2.51% at December 31, 2018) , plus a spread based on our funded debt ratio, or in the absence of LIBOR, the prime rate (5.50% at December 31, 2018). The credit facility includes various customary financial ratios and operating covenants, including minimum net worth and maximum funded debt ratio requirements, and default acceleration provisions. The credit facility does not include restrictions on future dividend payments. Funded debt ratio is the ratio of average outstanding advances under the credit facility to Adjusted EBITDA (Earnings Before Interest Expense, Taxes, Depreciation, Amortization, and Special Charges). The maximum allowable funded debt ratio under the agreement is 2.0 to 1.0. Decreases in our consolidated Adjusted EBITDA could limit our potential borrowing capacity under the credit facility. We had no outstanding bank borrowings at December 31, 2018 or 2017, and accordingly, the entire $50,000 facility was available for borrowings under the credit facility. |
STOCKHOLDERS' EQUITY AND SHARE-
STOCKHOLDERS' EQUITY AND SHARE-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2018 | |
Stockholders' Equity and Share-Based Compensation | |
Stockholders' Equity and Share-Based Compensation | 9. STOCKHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION Preferred Stock Our Amended and Restated Certificate of Incorporation (the “Restated Certificate”) authorizes the issuance of up to 10,000 shares of preferred stock, $.01 par value per share (the “Preferred Stock”). Under the terms of the Restated Certificate, the Board is authorized, subject to any limitations prescribed by law, without stockholder approval, to issue by a unanimous vote such shares of Preferred Stock in one or more series. Each such series of Preferred Stock shall have such rights, preferences, privileges, and restrictions, including voting rights, dividend rights, redemption privileges, and liquidation preferences, as shall be determined by the Board. There were no preferred shares outstanding at December 31, 2018 or 2017. Share Repurchase Authorization In 2001, our Board of Directors authorized the spending of up to $15,000 to repurchase shares of our common stock. In 2014, our Board approved a new share repurchase program authorizing up to an additional $15,000 in share repurchases, for a total authorized repurchase amount of $30,000. We consider block repurchases directly from larger stockholders, as well as open market purchases, in carrying out our ongoing stock repurchase program. In 2018, we repurchased 535 shares for $15,374 under the Board-approved repurchase programs. As of December 31, 2018, we have repurchased an aggregate of 2,217 shares for $27,608 under our Board-approved repurchase programs. On December 17, 2018, our Board approved a new share repurchase program authorizing up to $25,000 in additional share repurchases. There is no fixed termination date for this repurchase program. Purchases may be made in open-market transactions, block transactions on or off an exchange, or in privately negotiated transactions. We intend to complete the remaining 2001 and 2014 repurchase programs before repurchasing shares under the new program. The timing and amount of any share repurchases will be based on market conditions and other factors. At December 31, 2018, the maximum approximate dollar value of shares that may yet be purchased under Board-authorized programs is $27,392. Dividend Payments The following table summarizes our special cash dividends declared in the three years ended December 31, 2018: 2018 2017 2016 Dividend per share $ 0.32 $ 0.34 $ 0.34 Stockholder record date 12/28/2018 12/29/2017 12/30/2016 Total dividend $ 8,452 $ 9,122 $ 9,041 Payment date 1/11/2019 1/12/2018 1/12/2017 The dividends paid in January 2019, 2018 and 2017 were included in accrued expenses and other liabilities at December 31, 2018, 2017 and 2016. We have no current plans to pay additional cash dividends on our common stock in the foreseeable future, and declaration of any future cash dividends will depend upon our financial position, strategic plans, and general business conditions. Equity Compensation Plan Descriptions In 2007, the Board adopted and our stockholders approved the 2007 Stock Incentive Plan. In 2010, the Board adopted and our stockholders approved the Amended and Restated 2007 Stock Incentive Plan (the “2007 Plan”), which, among other things, extended the term of the 2007 Plan to 2020. In May 2016, our stockholders approved an amendment to the 2007 Plan, which authorized the issuance of 1,700 shares of common stock. Under the terms of the 2007 Plan, we are authorized, for a ten-year period, to grant options, stock appreciation rights, nonvested stock, nonvested stock units, and other stock-based awards to employees, officers, directors, and consultants. As of December 31, 2018, there were 8 shares eligible for future grants under the 2007 Plan. 1997 Employee Stock Purchase Plan In November 1997, the Board adopted and our stockholders approved the 1997 Employee Stock Purchase Plan (the “Purchase Plan”). The Purchase Plan authorizes the issuance of common stock to participating employees. Under the Purchase Plan, as amended, our employees are eligible to purchase company stock at 95% of the purchase price as of the last business day of each six-month offering period. An aggregate of 1,162 shares of common stock has been reserved for issuance under the Purchase Plan, of which 1,155 shares have been purchased. Accounting for Share-Based Compensation We measure the grant date fair value of equity awards given to employees and recognize that cost, adjusted for forfeitures, over the period that services are performed. We value grants with multiple vesting periods as a single award, estimate expected forfeitures based upon historical patterns of employee turnover, and record share-based compensation as a component of SG&A expenses. In 2016 and in 2018, we granted nonvested stock units. No equity awards were granted in 2017. The following table summarizes the components of share-based compensation recorded as expense for the three years ended December 31, 2018: 2018 2017 2016 Pre-tax expense for nonvested units $ 1,080 $ 741 $ 1,049 Tax benefit (293) (297) (420) Net effect on net income $ 787 $ 444 $ 629 In 2016 and in 2018, we issued nonvested stock units that settle in stock and vest over periods up to ten years. No awards were issued in 2017. Recipients of nonvested stock units do not possess stockholder rights. The fair value of nonvested stock units is based on the end of day market value of our common stock on the grant date. The following table summarizes our nonvested stock unit activity in 2018: Nonvested Stock Units Weighted-Average Grant Date Shares Fair Value Nonvested at January 1, 2018 288 $ 21.01 Granted 190 24.90 Vested (55) 17.94 Nonvested at December 31, 2018 423 23.16 The weighted-average grant-date fair value of nonvested stock units granted in 2018 and 2016 was $24.90 and $24.72, respectively. No awards were granted in 2017. The total fair value of nonvested stock units that vested in 2018, 2017, and 2016 was $1,635, $1,638, and $2,348, respectively. Unearned compensation cost related to the nonvested portion of outstanding nonvested stock units was $8,736 as of December 31, 2018, and is expected to be recognized over a weighted-average period of approximately 7.0 years. The aggregate intrinsic value of the nonvested stock units at December 31, 2018, which is calculated based on the positive difference between the fair value of the Company’s stock on December 31, 2018 and the grant price of the underlying awards, was $12,561. Stock Equivalent Units We have also issued stock equivalent units, (“SEUs”), which settle in cash and vest ratably over four years, to non-executive employees. The fair value of these liability awards is based on the closing market price of our common stock, and is remeasured at the end of each reporting period until the SEUs vest. We report the compensation as a component of SG&A expense and the related liability as accrued payroll on the consolidated balance sheets. 2018 2017 2016 Units issued — 100 23 Compensation expense $ 1,871 $ 1,429 $ 1,973 |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2018 | |
Income Taxes | |
Income Taxes | 10. INCOME TAXES The provision for income taxes consisted of the following: Years Ended December 31, 2018 2017 2016 Current: Federal $ 16,643 $ 21,813 $ 23,923 State 6,370 4,861 4,913 Total current 23,013 26,674 28,836 Deferred: Federal 1,087 (5,132) 2,920 State (28) 1,226 586 Total deferred 1,059 (3,906) 3,506 Net provision $ 24,072 $ 22,768 $ 32,342 The components of the deferred taxes at December 31, 2018 and 2017 are as follows: 2018 2017 Deferred tax assets: Provisions for doubtful accounts $ 825 $ 724 Inventory costs capitalized for tax purposes 112 127 Inventory valuation reserves 280 275 Sales return reserves 132 129 Deductible expenses, primarily employee-benefit related 319 357 Accrued compensation 2,014 981 Revenue deferral — 409 Other 1,254 875 Compensation under non-statutory stock option agreements 82 34 State tax loss carryforwards 958 877 Federal benefit for uncertain state tax positions 177 177 Total gross deferred tax assets 6,153 4,965 Less: Valuation allowance (839) (745) Net deferred tax assets 5,314 4,220 Deferred tax liabilities: Goodwill and other intangibles (12,850) (12,516) Property and equipment (9,548) (7,218) Prepaid expenses (100) (182) Total gross deferred tax liabilities (22,498) (19,916) Net deferred tax liability $ (17,184) $ (15,696) Current deferred tax assets $ — $ — Noncurrent deferred tax liability (17,184) (15,696) Net deferred tax liability $ (17,184) $ (15,696) We have deferred tax assets from state net operating loss carryforwards aggregating $1,213 at December 31, 2018 representing state tax benefits, net of federal taxes, of approximately $958. These loss carryforwards are subject to between five, fifteen, and twenty-year carryforward periods, with $8 expiring after 2019, $6 expiring after 2020, $3 expiring after 2021, $3 expiring after 2022, $3 expiring after 2023, $1,171 expiring beyond 2023, and $19 with no expiration. We have provided valuation allowances of $839 and $745 at December 31, 2018 and 2017, respectively, against the state tax loss carryforwards, representing the portion of carryforward losses that we believe are not likely to be realized. The net change in the total valuation allowance reflects a $94, $260, and $102 increase in 2018, 2017, and 2016, respectively. The valuation allowance was increased in 2018, 2017, and 2016 to offset the corresponding increase to the deferred tax asset associated with state net operating loss carryforwards. A reconciliation of our 2018, 2017, and 2016 income tax provision to total income taxes at the statutory federal tax rate is as follows: 2018 2017 2016 Federal income taxes, at statutory tax rate $ 18,619 $ 27,169 $ 28,159 State income taxes, net of federal benefit 5,157 3,843 3,947 Nondeductible expenses 454 (113) 602 Remeasurement of net deferred tax balances — (7,815) — Other–net (158) (316) (366) Tax provision $ 24,072 $ 22,768 $ 32,342 On December 22, 2017, the U.S. government enacted comprehensive tax legislation (the “Tax Act”), which significantly revises the ongoing U.S. corporate income tax law by lowering the U.S. federal corporate income tax rate from 35.0% to 21.0%, and setting limitations on deductibility of certain costs. This rate reduction, which took effect on January 1, 2018, required the revaluation of our net deferred tax liability. The revaluation resulted in the recording of an income tax benefit of $7.7 million for the fourth quarter of 2017. We file one consolidated U.S. Federal income tax return that includes all of our subsidiaries as well as several consolidated, combined, and separate company returns in many U.S. state tax jurisdictions. The tax years 2014-2017 remain open to examination by the major state taxing jurisdictions in which we file. The tax years 2015-2017 remain open to examination by the Internal Revenue Service. A reconciliation of unrecognized tax benefits for 2018, 2017, and 2016, is as follows: 2018 2017 2016 Balance at January 1, $ 368 $ 684 $ 869 Additions on tax positions of prior years — — — Lapses of applicable statute of limitations — (159) (185) Settlements — (157) — Balance at December 31, $ 368 $ 368 $ 684 We recognize interest and penalties related to unrecognized income tax benefits as a component of income tax expense, and the corresponding accrual is included as a component of our liability for unrecognized income tax benefits. During the years ended December 31, 2018, 2017, and 2016, we recognized interest and penalties totaling $0, $0, and $62, respectively. At December 31, 2018 and 2017, accrued interest aggregated $481 and accrued penalties aggregated $93. As of December 31, 2018 and 2017, all unrecognized tax benefits and the related interest and penalties, if recognized, would favorably affect our effective tax rate. We do not anticipate that total unrecognized tax benefits will change significantly due to the settlement of audits, expiration of statutes of limitations, or other reasons in the next twelve months. |
EMPLOYEE BENEFIT PLAN
EMPLOYEE BENEFIT PLAN | 12 Months Ended |
Dec. 31, 2018 | |
Employee Benefit Plan | |
Employee Benefit Plan | 11. EMPLOYEE BENEFIT PLAN We have a contributory profit-sharing and employee savings plan covering all qualified employees. No contributions to the profit-sharing element of the plan were made by us in 2018, 2017, or 2016. We made matching contributions to the employee savings element of such plan of $2,538, $2,396, and $2,320 in 2018, 2017, and 2016, respectively. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies | |
Commitments And Contingencies | 12. COMMITMENTS AND CONTINGENCIES Operating Leases We lease our corporate headquarters and an adjacent office facility from an entity controlled by our principal stockholders. The five-year operating lease for our corporate headquarters ended in November 2018 and the Company is currently in the process of negotiating an amendment to extend the lease term. The operating lease for the adjacent facility ended in July 2018 and the Company is currently in the process of negotiating an amendment to extend the lease term. We also lease several other buildings from our principal stockholders on a month-to-month basis. In addition, we lease offices from unrelated parties with remaining terms of one to ten years. Future aggregate minimum annual lease payments under these leases at December 31, 2018 are as follows: Year Ended December 31, Related Parties Others Total 2019 $ 1,516 $ 3,519 $ 5,035 2020 1,407 3,386 4,793 2021 1,253 2,466 3,719 2022 1,253 1,490 2,743 2023 1,149 820 1,969 2024 and thereafter — 1,395 1,395 Total rent expense aggregated $5,428, $5,225, and $4,753 for the years ended December 31, 2018, 2017, and 2016, respectively, under the terms of the operating leases described above. Such amounts included $1,651, $1,647, and $1,640 in 2018, 2017, and 2016, respectively, paid to related parties. Contingencies We are subject to various legal proceedings and claims, including patent infringement claims, which have arisen during the ordinary course of business. In the opinion of management, the outcome of such matters is not expected to have a material effect on our business, financial position, results of operations, or cash flows. We record a liability when we believe that a loss is both probable and reasonably estimable. On a quarterly basis, we review each of these legal proceedings to determine whether it is probable, reasonably possible, or remote that a liability has been incurred and, if it is at least reasonably possible, whether a range of loss can be reasonably estimated. Significant judgment is required to determine both the likelihood of there being a loss and the estimated amount of such loss. Until the final resolution of such matters, there may be an exposure to loss in excess of the amount recorded, and such amounts could be material. We expense legal fees in the period in which they are incurred. We are subject to audits by states on sales and income taxes, employment matters, and other assessments. Additional liabilities for these and other audits could be assessed, and such outcomes could have a material negative impact on our financial position, results of operations, and cash flows. |
SEGMENT AND RELATED DISCLOSURES
SEGMENT AND RELATED DISCLOSURES | 12 Months Ended |
Dec. 31, 2018 | |
Segment and Related Disclosures | |
Segment and Related Disclosures | 13. SEGMENT AND RELATED DISCLOSURES The internal reporting structure used by our chief operating decision maker (“CODM”) to assess performance and allocate resources determines the basis for our reportable operating segments. Our CODM is our Chief Executive Officer, and he evaluates operations and allocates resources based on a measure of operating income. Our operations are organized under three reporting segments—the Business Solutions segment, which serves primarily small- and medium-sized businesses; the Enterprise Solutions segment, which serves primarily medium-to-large corporations; and the Public Sector Solutions segment, which serves primarily federal, state, and local government and educational institutions. In addition, the Headquarters/Other group provides services in areas such as finance, human resources, information technology, marketing, and product management. Most of the operating costs associated with the Headquarters/Other group functions are charged to the operating segments based on their estimated usage of the underlying functions. We report these charges to the operating segments as “Allocations.” Certain headquarters costs relating to executive oversight and other fiduciary functions that are not allocated to the operating segments are included under the heading of Headquarters/Other in the tables below. In May 2016, we acquired Softmart. We have included the operating results for Softmart in our Business Solutions and Enterprise Solutions segments beginning on May 27, 2016, the closing date of the acquisition. In October 2016, we acquired GlobalServe. We have included the operating results for GlobalServe in our Enterprise Solutions segment beginning on October 11, 2016, the closing date of the acquisition. Net sales presented below exclude inter-segment product revenues. Segment information applicable to our reportable operating segments for the years ended December 31, 2018, 2017, and 2016 is shown below: Years Ended December 31, 2018 2017 2016 Net sales: Business Solutions $ 1,027,918 $ 1,158,639 $ 1,091,182 Enterprise Solutions 1,165,142 1,131,823 1,011,990 Public Sector Solutions 506,429 621,421 589,420 Total net sales $ 2,699,489 $ 2,911,883 $ 2,692,592 Operating income (loss): Business Solutions $ 40,188 $ 40,425 $ 41,596 Enterprise Solutions 61,663 50,163 42,504 Public Sector Solutions (2,260) 953 8,561 Headquarters/Other (13,905) (14,014) (12,141) Total operating income 85,686 77,527 80,520 Other income (expense), net 2,978 98 (67) Income before taxes $ 88,664 $ 77,625 $ 80,453 Selected operating expense: Depreciation and amortization: Business Solutions $ 632 $ 592 $ 425 Enterprise Solutions 2,318 2,163 1,784 Public Sector Solutions 112 159 160 Headquarters/Other 11,001 8,925 8,084 Total depreciation and amortization $ 14,063 $ 11,839 $ 10,453 Total assets: Business Solutions $ 274,202 $ 249,064 Enterprise Solutions 477,296 413,921 Public Sector Solutions 66,000 75,531 Headquarters/Other (12,143) 9,335 Total assets $ 805,355 $ 747,851 The assets of our operating segments presented above consist primarily of accounts receivable, net intercompany receivable, goodwill, and other intangibles. Goodwill of $66,236 and $7,366 is held by our Enterprise Solutions and Business Solutions segments, respectively, as of December 31, 2018. Assets reported under the Headquarters/Other group are managed by corporate headquarters, including cash, inventory, property and equipment and intercompany balance, net. Total assets for the Headquarters/Other group are presented net of intercompany balances eliminations of $19,019 and $29,731 for the years ended December 31, 2018 and 2017, respectively. Our capital expenditures consist largely of IT hardware and software purchased to maintain or upgrade our management information systems. These systems serve all of our subsidiaries, to varying degrees, and as a result, our CODM does not evaluate capital expenditures on a segment basis. Substantially, all of our sales in 2018, 2017, and 2016 were made to customers located in the United States. Shipments to customers located in foreign countries were not more than 1% of total net sales in 2018, 2017, and 2016. All of our assets at December 31, 2018 and 2017 were located in the United States. Our primary target customers are SMBs, medium-to-large corporate accounts, and federal, state, and local government agencies, educational institutions, and medium-to-large corporate accounts. No single customer accounted for more than 3% of total net sales in 2018, 2017, or 2016. While no single agency of the federal government comprised more than 3% of total sales, aggregate sales to the federal government were 5.4%, 7.8%, and 7.5% in 2018, 2017, and 2016, respectively. |
QUARTERLY FINANCIAL RESULTS (UN
QUARTERLY FINANCIAL RESULTS (UNAUDITED) | 12 Months Ended |
Dec. 31, 2018 | |
Quarterly Financial Results (Unaudited) | |
Quarterly Financial Results (Unaudited) | 14. QUARTERLY FINANCIAL RESULTS (UNAUDITED) The following table sets forth certain unaudited quarterly data of the Company for each of the calendar quarters in 2018 and 2017. This information has been prepared on the same basis as the annual financial statements, and all necessary adjustments, consisting only of normal recurring adjustments, have been included in the amounts stated below to present fairly the selected quarterly information when read in conjunction with the annual financial statements and the notes thereto included elsewhere in this document. The quarterly operating results are not necessarily indicative of future results of operations. Quarters Ended March 31, June 30, September 30, December 31, 2018 2018 2018 2018 Net sales $ 624,895 $ 706,570 $ 658,504 $ 709,520 Cost of sales 528,523 599,102 558,060 602,718 Gross profit 96,372 107,468 100,444 106,802 Selling, general and administrative expenses 80,900 82,521 81,494 79,518 Restructuring and other charges — — — 967 Income from operations 15,472 24,947 18,950 26,317 Other income, net 116 182 114 2,566 Income before taxes 15,588 25,129 19,064 28,883 Income tax provision (4,288) (6,903) (5,298) (7,583) Net income $ 11,300 $ 18,226 $ 13,766 $ 21,300 Earnings per common share: Basic $ 0.42 $ 0.68 $ 0.52 $ 0.80 Diluted $ 0.42 $ 0.68 $ 0.51 $ 0.80 Weighted average common shares outstanding: Basic 26,835 26,685 26,716 26,632 Diluted 26,916 26,820 26,902 26,766 Quarters Ended March 31, June 30, September 30, December 31, 2017 2017 (1) 2017 2017 (1) Net sales $ 670,594 $ 749,792 $ 729,230 $ 762,267 Cost of sales 583,861 650,122 633,087 662,737 Gross profit 86,733 99,670 96,143 99,530 Selling, general and administrative expenses 75,281 76,289 74,404 74,939 Restructuring and other charges — 941 — 2,695 Income from operations 11,452 22,440 21,739 21,896 Interest income (expense), net 19 9 (8) 78 Income before taxes 11,471 22,449 21,731 21,974 Income tax provision (4,039) (8,864) (8,614) (1,251) Net income $ 7,432 $ 13,585 $ 13,117 $ 20,723 Earnings per common share: Basic $ 0.28 $ 0.51 $ 0.49 $ 0.77 Diluted $ 0.28 $ 0.51 $ 0.49 $ 0.77 Weighted average common shares outstanding: Basic 26,697 26,761 26,802 26,822 Diluted 26,866 26,893 26,899 26,907 (1) Certain prior year amounts have been reclassified to conform to 2018 presentation. These changes had no impact on previously reported results of operations or shareholders’ equity. |
SCHEDULE II - VALUATION AND QUA
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | 12 Months Ended |
Dec. 31, 2018 | |
Schedule II - Valuation and Qualifying Accounts | |
Schedule II-Valuation And Qualifying Accounts | SCHEDULE I (amounts in thousands) Balance at Charged to Balance at Beginning Costs and Deductions/ End of of Period Expenses Write-Offs Period Description Allowance for Sales Returns Year Ended December 31, 2016 $ 3,235 32,909 (32,435) $ 3,709 Year Ended December 31, 2017 $ 3,709 32,399 (32,800) $ 3,308 Year Ended December 31, 2018 $ 3,308 28,504 (28,415) $ 3,397 Allowance for Doubtful Accounts Year Ended December 31, 2016 $ 2,219 360 (269) $ 2,310 Year Ended December 31, 2017 $ 2,310 1,658 (1,242) $ 2,726 Year Ended December 31, 2018 $ 2,726 1,680 (1,304) $ 3,102 |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Summary of Significant Accounting Policies | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of PC Connection, Inc. and its subsidiaries, all of which are wholly-owned. Intercompany transactions and balances are eliminated in consolidation. |
Use of Estimates in the Preparation of Financial Statements | Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts and disclosures of assets and liabilities and the reported amounts and disclosures of revenue and expenses during the period. By nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ from those estimates and assumptions. |
Reclassification of Prior Year Presentation | Reclassification of Prior Year Presentation Certain prior year amounts have been reclassified for consistency with current year presentation. Restructuring and other charges have been separated from selling, general, and administrative expenses on the Consolidated Statements of Income. These charges amount to $967, $3,636, and $3,406 for the years ending December 31, 2018, 2017, and 2016, respectively. This change in classification does not affect previously reported net income or earnings per share figures in the Consolidated Statements of Income. |
Revenue Recognition | Revenue Recognition On January 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”), which replaced existing revenue recognition rules with a comprehensive revenue measurement and recognition standard and expanded disclosure requirements. See Adoption of Recently Issued Accounting Standards within this footnote for additional information. Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. In most instances, when several performance obligations are aggregated into one single transaction, these performance obligations are fulfilled at the same point in time. We account for an arrangement when it has approval and commitment from both parties, the rights are identified, the contract has commercial substance, and collectability of consideration is probable. We generally obtain oral or written purchase authorizations from our customers for a specified amount of product at a specified price, which constitutes an arrangement. Revenue is recognized at the amount expected to be collected, net of any taxes collected from customers, which are subsequently remitted to governmental authorities. We generally invoice for our products at the time of shipping, and accordingly there is not a significant financing component included in our arrangements. Prior to the adoption of ASC 606, revenue on product sales was recognized at the point in time when persuasive evidence of an arrangement existed, the price was fixed or determinable, delivery had occurred, and there was a reasonable assurance of collection of the sales proceeds. Service revenue was recognized over time as the services were performed. We evaluated such engagements to determine whether we or the third party assumed the general risk and reward of ownership in these transactions. This evaluation was the basis by which we determined that revenue from these transactions would be recognized on a gross or a net basis. In multiple-element revenue arrangements, each service performed and product delivered was considered a separate deliverable and qualified as a separate unit of accounting. For material multiple element arrangements, we allocated revenue based on vendor-specific objective evidence of fair value of the underlying services and products. In the absence of vendor-specific objective evidence, we would utilize third-party evidence to allocate the selling price. If neither vendor-specific objective evidence nor third-party evidence was available, we would estimate the selling price based on market price and company specific factors. |
Cost of Sales and Certain Other Costs | Cost of Sales and Certain Other Costs Cost of sales includes the invoice cost of the product, direct employee and third party cost of services, direct costs of packaging, inbound and outbound freight, and provisions for inventory obsolescence, adjusted for discounts, rebates, and other vendor allowances. |
Cash and Cash Equivalents | Cash and Cash Equivalents We consider all highly liquid short-term investments with original maturities of 90 days or less to be cash equivalents. The carrying value of our cash equivalents approximates fair value. The majority of payments due from credit card processors and banks for third-party credit card and debit card transactions process within one to five business days. All credit card and debit card transactions that process in less than seven days are classified as cash and cash equivalents. Amounts due from banks for credit card transactions classified as cash equivalents totaled $2,651 and $6,776 at December 31, 2018 and 2017, respectively. |
Accounts Receivable | Accounts Receivable We perform ongoing credit evaluations of our customers and adjust credit limits based on payment history and customer creditworthiness. We maintain an allowance for estimated doubtful accounts based on our historical experience and the customer credit issues identified. Our customers do not post collateral for open accounts receivable. We monitor collections regularly and adjust the allowance for doubtful accounts as necessary to recognize any changes in credit exposure. Trade receivables are written off in the period in which they are deemed uncollectible. Recoveries of trade receivables previously charged are recorded when received. |
Inventories | Inventories Inventories (all finished goods) consisting of software packages, computer systems, and peripheral equipment, are stated at cost (determined under a weighted-average cost method which approximates the first-in, first-out method) or net realizable value, whichever is lower. Inventory quantities on hand are reviewed regularly, and allowances are maintained for obsolete, slow moving, and nonsalable inventory. |
Vendor Consideration | Vendor Consideration We receive funding from merchandise vendors for price protections, discounts, product rebates, and other programs. These allowances are treated as a reduction of the vendor’s prices and are recorded as adjustments to cost of sales or inventory, as applicable. Allowances for product rebates that require certain volumes of product sales or purchases are recorded as the related milestones are probable of being met. |
Advertising Costs and Vendor consideration | Advertising Costs and Vendor Consideration Costs of producing and distributing catalogs are charged to expense in the period in which the catalogs are first circulated. Other advertising costs are expensed as incurred. Vendors have the ability to place advertisements in our catalogs or fund other advertising activities for which we receive advertising consideration. This vendor consideration, to the extent that it represents specific reimbursements of incremental and identifiable costs, is offset against SG&A expenses. Advertising consideration that cannot be associated with a specific program or that exceeds the fair value of advertising expense associated with that program is classified as an offset to cost of sales. Our vendor partners generally consolidate their funding of advertising and other marketing programs, and accordingly, we classify substantially all vendor consideration as a reduction of cost of sales rather than a reduction of advertising expense. Advertising expense, which is classified as a component of SG&A expenses, totaled $16,244, $14,437, and $16,083, for the years ended December 31, 2018, 2017, and 2016, respectively. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization is provided for financial reporting purposes over the estimated useful lives of the assets ranging from three to seven years. Computer software, including licenses and internally developed software, is capitalized and amortized over lives generally ranging from three to seven years. Depreciation is recorded using the straight-line method. Leasehold improvements and facilities under capital leases are amortized over the terms of the related leases or their useful lives, whichever is shorter, whereas for income tax reporting purposes, they are amortized over the applicable tax lives. Costs incurred to develop internal-use software during the application development stage are recorded in property and equipment at cost. External direct costs of materials and services consumed in developing or obtaining internal-use computer software and payroll-related costs for employees developing internal-use computer software projects, to the extent of their time spent directly on the project and specific to application development, are capitalized. When events or circumstances indicate a potential impairment, we evaluate the carrying value of property and equipment based upon current and anticipated undiscounted cash flows. We recognize impairment when it is probable that such estimated future cash flows will be less than the asset carrying value. |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets Our intangible assets consist of (1) goodwill, which is not subject to amortization; (2) an internet domain name, which is an indefinite-lived intangible not subject to amortization; and (3) amortizing intangibles, which consist of customer lists, trade names, and customer relationships, which are being amortized over their useful lives. Note 4 describes the annual impairment methodology that we employ each year in calculating the recoverability of goodwill and non-amortizing intangibles. This same impairment test is performed at other times during the course of a year should an event occur or circumstance change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Recoverability of amortizing intangible assets is assessed only when events have occurred that may give rise to impairment. When a potential impairment has been identified, forecasted undiscounted net cash flows of the operations to which the asset relates are compared to the current carrying value of the long-lived assets present in that operation. If such cash flows are less than such carrying amounts, long-lived assets including such intangibles, are written down to their respective fair values. |
Concentrations | Concentrations Concentrations of credit risk with respect to trade account receivables are limited due to the large number of customers comprising our customer base. No single customer accounted for more than 3% of total net sales in 2018, 2017, and 2016. While no single agency of the federal government comprised more than 3% of total sales, aggregate sales to the federal government as a percentage of total net sales were 5.4%, 7.8%, and 7.5% in 2018, 2017, and 2016, respectively. Product purchases from Ingram Micro, Inc. (“Ingram”), our largest supplier, accounted for approximately 22% of our total product purchases in both 2018 and 2017 and 21% in 2016. Purchases from Synnex Corporation (“Synnex”) comprised 12%, 12%, and 13%, of our total product purchases in 2018, 2017, and 2016, respectively. Purchases from Tech Data comprised of 10%, 11% and 8% in 2018, 2017, and 2016, respectively. Purchases from Hewlett-Packard Company, or HP, accounted for approximately 7% of our total product purchases in 2018, 11% in 2017, and 9% in 2016. No other vendor supplied more than 10% of our total product purchases in 2018, 2017, or 2016. We believe that, while we may experience some short-term disruption if products from Ingram, Synnex, HP and/or Tech Data become unavailable to us, alternative sources for products obtained directly from Ingram, Synnex, HP and Tech Data are available to us. Products manufactured by HP represented approximately 18% of our net sales in 2018 and approximately 20% in both 2017 and 2016. We believe that in the event we experience either a short-term or permanent disruption of supply of HP products, such disruption would likely have a material adverse effect on our results of operations and cash flows. |
Restructuring and other charges | Restructuring and other charges During 2018, we began presenting restructuring and other charges separately from SG&A expenses. Costs incurred were as follows: Year Ended December 31, 2018 2017 2016 Employee separations $ 967 $ 640 $ 1,766 Acquisition costs — — 570 Relocation expenses — 84 291 Re-branding costs — — 596 Employee compensation — 2,800 — Other — 112 183 Total restructuring and other charges $ 967 $ 3,636 $ 3,406 The net restructuring charges recorded in 2018 were related to a reduction in workforce at our Business Solutions, Public Sector Solutions, and Headquarter segments and included cash severance payments and other related benefits. The net restructuring and other charges recorded in 2017 were primarily driven by a reduction in workforce at our Headquarters segment, along with costs related to the Softmart business, which was acquired in 2016, including expenses to retain certain key personnel brought over in the acquisition. Also in 2017, we incurred additional expense of $2,700 related to a one-time cash bonus paid to all non-executive employees at the end of the year. The net restructuring and other charges recorded in 2016 were primarily driven by a reduction in workforce after the Softmart acquisition and other employee severance expenses incurred throughout the business. We also incurred costs associated with the acquisitions and IT transitions of Softmart and GlobalServe, along with other costs associated with a company-wide rebranding campaign. Overall, restructuring and other charges consist primarily of employee termination benefits, which are accrued in the period incurred and paid within a year of termination. Included in accrued expenses at December 31, 2018, 2017, and 2016 were $784, $2, and $417, respectively, related to unpaid employee termination benefits. The amount accrued as of December 31, 2018 is expected to be paid in 2019. Other restructuring-related charges such as acquisition costs, relocation expenses and significant marketing campaigns are expensed and paid as incurred. All planned restructuring and other charges were incurred as of December 31, 2018 and we have no ongoing restructuring plans. |
Earnings Per Share | Earnings Per Share Basic earnings per common share is computed using the weighted average number of shares outstanding. Diluted earnings per share is computed using the weighted average number of shares outstanding adjusted for the incremental shares attributable to nonvested stock units and stock options outstanding, if dilutive. The following table sets forth the computation of basic and diluted earnings per share: 2018 2017 2016 Numerator: Net income $ 64,592 $ 54,857 $ 48,111 Denominator: Denominator for basic earnings per share 26,717 26,771 26,528 Dilutive effect of employee stock awards 137 120 191 Denominator for diluted earnings per share 26,854 26,891 26,719 Earnings per share: Basic $ 2.42 $ 2.05 $ 1.81 Diluted $ 2.41 $ 2.04 $ 1.80 For the years ended December 31, 2018, 2017, and 2016, we did not exclude any outstanding nonvested stock units or stock options from the computation of diluted earnings per share because including them would have had an anti-dilutive effect. |
Other Income (Expense), Net | Other Income (Expense), Net Other income, net for the year ended December 31, 2018 consisted of $2,255 related to a gain, net of costs incurred of $745, that was realized upon execution of a favorable $3,000 cash resolution of a contract dispute that arose in 2017. We included the $3,000 owed to us in other assets as of December 31, 2018. Also included in other income, net for the year ended December 31, 2018 was interest income of $868, offset partially by interest expense of $145. Other income, net for the year ended December 31, 2017 consisted of interest income of $224, which was partially offset by interest expense of $126. Other expense, net for the year ended December 31, 2016 consisted of interest expense of $107, which was partially offset by interest income of $40. |
Comprehensive Income | Comprehensive Income We had no items of comprehensive income, other than our net income for each of the periods presented. |
Recently Issued Financial Accounting Standards | Adoption of Recently Issued Financial Accounting Standards On May 28, 2014, the Financial Accounting Standards Board, or the FASB, issued ASC 606, which amended the accounting standards for revenue recognition and expanded our disclosure requirements. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. On January 1, 2018 we adopted ASC 606 using the modified retrospective transition method, which resulted in an adjustment at January 1, 2018 to retained earnings for the cumulative effect of applying the standard to all contracts not completed as of the adoption date. Upon adoption we recorded $1,197 as an increase to retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The adoption resulted in an acceleration of the timing of revenue recognized for certain transactions where product that remained in our possession has been recognized as of the transaction date when all revenue recognition criteria have been met. The following table presents the effect of the adoption of ASC 606 on our consolidated balance sheets as of January 1, 2018: Adjustments Balance at due to Balance at December 31, 2017 ASC 606 January 1, 2018 Balance Sheet Assets Accounts receivable, net $ 449,682 $ 14,568 $ 464,250 Inventories 106,753 (10,869) 95,884 Prepaid expenses and other current assets 5,737 (132) 5,605 Long-term accounts receivable — 1,890 1,890 Other assets 5,638 (3,914) 1,724 Liabilities Accounts payable 194,257 (62) 194,195 Accrued expenses and other liabilities 31,096 (312) 30,784 Accrued payroll 22,662 291 22,953 Deferred income taxes 15,696 429 16,125 Stockholders' Equity Retained earnings $ 383,673 $ 1,197 $ 384,870 In addition to the timing of revenue recognition impacted by the above-described transactions, upon adoption of ASC 606, the amount of revenue to be recognized prospectively was affected by the presentation of revenue transactions as an agent instead of principal in certain transactions. Specifically, revenue related to the sale of cloud products, as well as certain security software, is now being recognized net of costs as we determined that we act as an agent in these transactions. These sales are recorded on a net basis at a point in time when our vendor and the customer accept the terms and conditions in the sales arrangement. In addition, we sell third-party software maintenance that is delivered over time either separately or bundled with the software license. We have determined that software maintenance is a distinct performance obligation that we do not control, and accordingly, we act as an agent in these transactions and recognized the related revenue on a net basis under ASC 606. We previously recognized revenue for cloud products, security software, and software maintenance on a gross basis (i.e., acting as a principal). This change reduced both net sales and cost of sales with no impact on reported gross profit as compared to our prior accounting policies. The following tables present the effect of the adoption of ASC 606 on our consolidated income statement and balance sheet for the year ended December 31, 2018 and as of December 31, 2018, respectively: Year Ended December 31, 2018 Balances without As Adoption of Reported Adjustments ASC 606 Income statement Revenues Net sales $ 2,699,489 $ 404,690 $ 3,104,179 Costs and expenses Cost of sales 2,288,403 403,737 2,692,140 Income from operations 85,686 750 86,436 Income before taxes 88,664 750 89,414 Net income 64,592 526 65,118 December 31, 2018 Balances without As Adoption of Reported Adjustments ASC 606 Balance Sheet Assets Accounts receivable, net $ 447,698 $ (6,949) $ 440,749 Inventories 119,195 4,798 123,993 Prepaid expenses and other current assets 9,661 148 9,809 Other assets 1,211 3,914 5,125 Liabilities Accrued expenses and other liabilities $ 33,840 $ 2,904 $ 36,744 Accrued payroll 24,319 (116) 24,203 Deferred income taxes 17,184 (219) 16,965 Stockholders' Equity Retained earnings $ 441,010 $ (657) $ 440,353 We have elected the use of certain practical expedients in our adoption of the new standard, which includes continuing to record revenue reported net of applicable taxes imposed on the related transaction and the application of the new standard to all arrangements not completed as of the adoption date. We have also elected to use the practical expedient to not account for the shipping and handling as separate performance obligations. Adoptions of the standard related to revenue recognition had no net impact on our consolidated statement of cash flows. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting . The Company adopted this standard on January 1, 2017. The new standard simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. Under this guidance, a company recognizes all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement. This change eliminates the notion of the additional paid-in capital pool and reduces the complexity in accounting for excess tax benefits and tax deficiencies. The primary impact of our adoption was the recognition of excess tax benefits related to equity compensation in our provision for income taxes rather than paid-in capital, which is a change required to be applied on a prospective basis in accordance with the new guidance. There were no unrecognized excess tax benefits at implementation. Accordingly, we recorded discrete income tax benefits in the consolidated statements of income of $1,054 in the year ended December 31, 2017, for excess tax benefits related to equity compensation. The corresponding cash flows were reflected in cash provided by operating activities instead of financing activities, as was previously required. We adopted the cash flow presentation that requires presentation of excess tax benefits within operating activities on a prospective basis. Additionally, under ASU 2016-09, we have elected to continue to estimate equity award forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period. Additional amendments to the accounting for income taxes and minimum statutory withholding tax requirements had no impact on our results of operations. The presentation requirements for cash flows related to employee taxes paid for withheld shares also had no impact to any of the periods presented in our consolidated statements of cash flows since such cash flows have historically been presented as a financing activity. Recently Issued Financial Accounting Standards In February 2016, the FASB issued ASU 2016-02, Leases . The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018 and will be adopted using a modified retrospective transition approach on January 1, 2019. The Company has reviewed the requirements of the new standard and expects that it will have a material impact on our consolidated financial statements, as all long-term leases will be capitalized on the consolidated balance sheet. The Company has identified the population of leases and lease assets, has selected a software repository to track all of its lease agreements and to assist in the reporting and disclosures required by the new standard, and is still in the process of testing the data and calculations performed by the software. The Company is also in the process of implementing changes to our procedures and controls in conjunction with both the review of existing lease agreements and any future agreements that will be accounted for under this new standard. The future lease payments that will be subject to the new accounting standard are disclosed in Note 12 to the financial statements. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment , which simplifies the accounting for goodwill impairments by eliminating step two from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. ASU 2017-04 also clarifies the requirements for excluding and allocating foreign currency translation adjustments to reporting units related to an entity's testing of reporting units for goodwill impairment and clarifies that an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. ASU 2017-04 is effective for us beginning January 1, 2020 for both interim and annual reporting periods. We are currently assessing the potential impact of the adoption of ASC 2017-04 on our consolidated financial statements |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Schedule of restructuring and other charges | Year Ended December 31, 2018 2017 2016 Employee separations $ 967 $ 640 $ 1,766 Acquisition costs — — 570 Relocation expenses — 84 291 Re-branding costs — — 596 Employee compensation — 2,800 — Other — 112 183 Total restructuring and other charges $ 967 $ 3,636 $ 3,406 |
Computation of basic and diluted earnings per share | 2018 2017 2016 Numerator: Net income $ 64,592 $ 54,857 $ 48,111 Denominator: Denominator for basic earnings per share 26,717 26,771 26,528 Dilutive effect of employee stock awards 137 120 191 Denominator for diluted earnings per share 26,854 26,891 26,719 Earnings per share: Basic $ 2.42 $ 2.05 $ 1.81 Diluted $ 2.41 $ 2.04 $ 1.80 |
ASU 2014-09 | |
Schedule of the effect of the adoption of ASU 2014-09 | The following table presents the effect of the adoption of ASC 606 on our consolidated balance sheets as of January 1, 2018: Adjustments Balance at due to Balance at December 31, 2017 ASC 606 January 1, 2018 Balance Sheet Assets Accounts receivable, net $ 449,682 $ 14,568 $ 464,250 Inventories 106,753 (10,869) 95,884 Prepaid expenses and other current assets 5,737 (132) 5,605 Long-term accounts receivable — 1,890 1,890 Other assets 5,638 (3,914) 1,724 Liabilities Accounts payable 194,257 (62) 194,195 Accrued expenses and other liabilities 31,096 (312) 30,784 Accrued payroll 22,662 291 22,953 Deferred income taxes 15,696 429 16,125 Stockholders' Equity Retained earnings $ 383,673 $ 1,197 $ 384,870 The following tables present the effect of the adoption of ASC 606 on our condensed consolidated income statement and balance sheet for the twelve months ended December 31, 2018 and as of December 31, 208, respectively: Year Ended December 31, 2018 Balances without As Adoption of Reported Adjustments ASC 606 Income statement Revenues Net sales $ 2,699,489 $ 404,690 $ 3,104,179 Costs and expenses Cost of sales 2,288,403 403,737 2,692,140 Income from operations 85,686 750 86,436 Income before taxes 88,664 750 89,414 Net income 64,592 526 65,118 December 31, 2018 Balances without As Adoption of Reported Adjustments ASC 606 Balance Sheet Assets Accounts receivable, net $ 447,698 $ (6,949) $ 440,749 Inventories 119,195 4,798 123,993 Prepaid expenses and other current assets 9,661 148 9,809 Other assets 1,211 3,914 5,125 Liabilities Accrued expenses and other liabilities $ 33,840 $ 2,904 $ 36,744 Accrued payroll 24,319 (116) 24,203 Deferred income taxes 17,184 (219) 16,965 Stockholders' Equity Retained earnings $ 441,010 $ (657) $ 440,353 |
REVENUE (Tables)
REVENUE (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Revenue | |
Schedule of disaggregation of revenue from contracts with customers | Twelve Months Ended December 31, 2018 (1) Business Enterprise Public Sector Total Notebooks/Mobility $ 299,247 $ 272,589 138,818 $ 710,654 Accessories 95,342 214,102 43,696 353,140 Software 134,071 135,420 45,365 314,856 Desktops 108,096 126,643 53,569 288,308 Servers/Storage 111,559 102,209 59,653 273,421 Displays and sound 89,779 109,497 52,760 252,036 Net/Com products 109,702 62,060 52,287 224,049 Other hardware/services 80,122 142,622 60,281 283,025 Total net sales $ 1,027,918 $ 1,165,142 $ 506,429 $ 2,699,489 (1) The Company adopted ASC 606 in 2018 using the modified retrospective approach, which primarily resulted in certain software sales being reported on a net basis where they would have otherwise been reported on a gross basis under the previous revenue recognition guidance. As a result, certain revenue figures reported in the current year may not be comparable with prior-year disclosures. Twelve Months Ended December 31, 2017 (1) Business Enterprise Public Sector Total Notebooks/Mobility $ 299,029 213,352 123,908 $ 636,289 Accessories 86,339 166,898 50,058 303,295 Software 271,805 284,003 103,680 659,488 Desktops 116,931 106,779 98,160 321,870 Servers/Storage 116,770 84,612 56,322 257,704 Displays and sound 90,868 86,398 57,099 234,365 Net/Com products 95,043 63,741 59,359 218,143 Other hardware/services 81,854 126,040 72,835 280,729 Total net sales $ 1,158,639 $ 1,131,823 $ 621,421 $ 2,911,883 Product categories were separated into additional categories in 2018. Certain prior-year balances have been reclassified to conform to 2018 presentation. |
Schedule of information on contract liability | The following table provides information about contract liability from arrangements with customers as of December 31, 2018 and January 1, 2018: December 31, 2018 January 1, 2018 Contract liability, which are included in "Accrued expenses and other liabilities" $ 2,679 $ 2,914 Significant changes in the contract liability balances during the year ended December 31, 2018 are as follows (in thousands): Year Ended December 31, Balances at January 1, 2018 $ 2,914 Cash received in advance and not recognized as revenue 16,279 Amounts recognized as revenue as performance obligations satisfied (16,514) Balances at December 31, 2018 $ 2,679 |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Softmart | |
Acquisitions | |
Components of the net assets acquired and liabilities assumed at fair value | Purchase Price Allocation Current assets $ 22,812 Fixed assets 343 Goodwill 14,314 Customer relationships 11,300 Total assets acquired 48,769 Acquired liabilities (16,252) Net assets acquired 32,517 Less cash acquired (628) Purchase price at closing, net of cash acquired $ 31,889 |
GlobalServe | |
Acquisitions | |
Components of the net assets acquired and liabilities assumed at fair value | Purchase Price Allocation Current assets $ 1,486 Fixed assets 4,609 Goodwill 8,012 Customer relationships 900 Total assets acquired 15,007 Acquired liabilities (734) Deferred taxes and unrecognized tax benefits (2,390) Net assets acquired 11,883 Less cash acquired (782) Purchase price at closing, net of cash acquired $ 11,101 |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure | |
Carrying Amount of Goodwill | Balance at December 31, 2017 SMB Large Account Public Sector Total Goodwill, gross $ 8,539 $ 66,236 $ 7,634 $ 82,409 Accumulated impairment losses (1,173) ─ (7,634) (8,807) Net balance $ 7,366 $ 66,236 $ — $ 73,602 Balance at December 31, 2018 SMB Large Account Public Sector Total Goodwill, gross $ 8,539 $ 66,236 $ 7,634 $ 82,409 Accumulated impairment losses (1,173) ─ (7,634) (8,807) Net balance $ 7,366 $ 66,236 $ — $ 73,602 |
Intangible Assets and Related Accumulated Amortization | December 31, 2018 December 31, 2017 Estimated Gross Accumulated Net Gross Accumulated Net Useful Lives Amount Amortization Amount Amount Amortization Amount Customer list 8 $ 3,400 $ 3,364 $ 36 $ 3,400 $ 3,143 $ 257 Tradename 5 1,190 1,190 — 1,190 1,190 — Customer relationships 10 12,200 3,122 9,078 12,200 1,882 10,318 Total intangible assets $ 16,790 $ 7,676 $ 9,114 $ 16,790 $ 6,215 $ 10,575 |
Estimated Amortization Expense | For the Years Ended December 31, 2019 $ 1,256 2020 1,220 2021 1,220 2022 1,220 2023 1,220 2024 and thereafter 2,978 $ 9,114 |
ACCOUNTS RECEIVABLE (Tables)
ACCOUNTS RECEIVABLE (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounts Receivable | |
Accounts Receivable | December 31, 2018 2017 Trade $ 401,530 $ 398,524 Vendor consideration, returns and other 52,560 57,043 Due from employees 107 149 Total gross accounts receivable 454,197 455,716 Allowances for: Sales returns (3,397) (3,308) Doubtful accounts (3,102) (2,726) Accounts receivable, net $ 447,698 $ 449,682 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property and Equipment | |
Property and Equipment | December 31, 2018 2017 Computer software, including licenses and internally-developed software $ 75,528 $ 58,320 Furniture and equipment 36,147 33,176 Leasehold improvements 8,102 7,787 Total 119,777 99,283 Accumulated depreciation and amortization (67,978) (57,792) Property and equipment, net $ 51,799 $ 41,491 |
ACCRUED EXPENSES AND OTHER LI_2
ACCRUED EXPENSES AND OTHER LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accrued Expenses and Other Liabilities | |
Schedule of Accrued Expenses and Other Liabilities | December 31, 2018 2017 Customer and vendor deposits $ 8,880 $ 7,763 Dividends payable 8,453 9,122 Sales taxes 7,632 5,905 Other 8,875 8,306 Accrued expenses and other liabilities $ 33,840 $ 31,096 |
STOCKHOLDERS' EQUITY AND SHAR_2
STOCKHOLDERS' EQUITY AND SHARE-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Dividend declared | 2018 2017 2016 Dividend per share $ 0.32 $ 0.34 $ 0.34 Stockholder record date 12/28/2018 12/29/2017 12/30/2016 Total dividend $ 8,452 $ 9,122 $ 9,041 Payment date 1/11/2019 1/12/2018 1/12/2017 |
Components of Share-Based Compensation Recorded as Expense | 2018 2017 2016 Pre-tax expense for nonvested units $ 1,080 $ 741 $ 1,049 Tax benefit (293) (297) (420) Net effect on net income $ 787 $ 444 $ 629 |
Nonvested Stock Unit Activity | Nonvested Stock Units Weighted-Average Grant Date Shares Fair Value Nonvested at January 1, 2018 288 $ 21.01 Granted 190 24.90 Vested (55) 17.94 Nonvested at December 31, 2018 423 23.16 |
Stock Equivalent Units (SEUs) | |
Stock Equivalent Units | 2018 2017 2016 Units issued — 100 23 Compensation expense $ 1,871 $ 1,429 $ 1,973 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Taxes | |
Provision for Income Taxes | Years Ended December 31, 2018 2017 2016 Current: Federal $ 16,643 $ 21,813 $ 23,923 State 6,370 4,861 4,913 Total current 23,013 26,674 28,836 Deferred: Federal 1,087 (5,132) 2,920 State (28) 1,226 586 Total deferred 1,059 (3,906) 3,506 Net provision $ 24,072 $ 22,768 $ 32,342 |
Components of Deferred Taxes | 2018 2017 Deferred tax assets: Provisions for doubtful accounts $ 825 $ 724 Inventory costs capitalized for tax purposes 112 127 Inventory valuation reserves 280 275 Sales return reserves 132 129 Deductible expenses, primarily employee-benefit related 319 357 Accrued compensation 2,014 981 Revenue deferral — 409 Other 1,254 875 Compensation under non-statutory stock option agreements 82 34 State tax loss carryforwards 958 877 Federal benefit for uncertain state tax positions 177 177 Total gross deferred tax assets 6,153 4,965 Less: Valuation allowance (839) (745) Net deferred tax assets 5,314 4,220 Deferred tax liabilities: Goodwill and other intangibles (12,850) (12,516) Property and equipment (9,548) (7,218) Prepaid expenses (100) (182) Total gross deferred tax liabilities (22,498) (19,916) Net deferred tax liability $ (17,184) $ (15,696) Current deferred tax assets $ — $ — Noncurrent deferred tax liability (17,184) (15,696) Net deferred tax liability $ (17,184) $ (15,696) |
Reconciliation of Income Tax Provision to Total Income Taxes at Statutory Federal Tax Rate | 2018 2017 2016 Federal income taxes, at statutory tax rate $ 18,619 $ 27,169 $ 28,159 State income taxes, net of federal benefit 5,157 3,843 3,947 Nondeductible expenses 454 (113) 602 Remeasurement of net deferred tax balances — (7,815) — Other–net (158) (316) (366) Tax provision $ 24,072 $ 22,768 $ 32,342 |
Reconciliation of Unrecognized Tax Benefits | 2018 2017 2016 Balance at January 1, $ 368 $ 684 $ 869 Additions on tax positions of prior years — — — Lapses of applicable statute of limitations — (159) (185) Settlements — (157) — Balance at December 31, $ 368 $ 368 $ 684 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies | |
Future Aggregate Minimum Annual Lease Payments Under Operating Leases | Future aggregate minimum annual lease payments under these leases at December 31, 2018 are as follows: Year Ended December 31, Related Parties Others Total 2019 $ 1,516 $ 3,519 $ 5,035 2020 1,407 3,386 4,793 2021 1,253 2,466 3,719 2022 1,253 1,490 2,743 2023 1,149 820 1,969 2024 and thereafter — 1,395 1,395 |
SEGMENT AND RELATED DISCLOSUR_2
SEGMENT AND RELATED DISCLOSURES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Segment and Related Disclosures | |
Segment Information Applicable to Reportable Operating Segments | Years Ended December 31, 2018 2017 2016 Net sales: Business Solutions $ 1,027,918 $ 1,158,639 $ 1,091,182 Enterprise Solutions 1,165,142 1,131,823 1,011,990 Public Sector Solutions 506,429 621,421 589,420 Total net sales $ 2,699,489 $ 2,911,883 $ 2,692,592 Operating income (loss): Business Solutions $ 40,188 $ 40,425 $ 41,596 Enterprise Solutions 61,663 50,163 42,504 Public Sector Solutions (2,260) 953 8,561 Headquarters/Other (13,905) (14,014) (12,141) Total operating income 85,686 77,527 80,520 Other income (expense), net 2,978 98 (67) Income before taxes $ 88,664 $ 77,625 $ 80,453 Selected operating expense: Depreciation and amortization: Business Solutions $ 632 $ 592 $ 425 Enterprise Solutions 2,318 2,163 1,784 Public Sector Solutions 112 159 160 Headquarters/Other 11,001 8,925 8,084 Total depreciation and amortization $ 14,063 $ 11,839 $ 10,453 Total assets: Business Solutions $ 274,202 $ 249,064 Enterprise Solutions 477,296 413,921 Public Sector Solutions 66,000 75,531 Headquarters/Other (12,143) 9,335 Total assets $ 805,355 $ 747,851 |
QUARTERLY FINANCIAL RESULTS (_2
QUARTERLY FINANCIAL RESULTS (UNAUDITED) (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Quarterly Financial Results (Unaudited) | |
Quarterly Operating Results (Unaudited) | Quarters Ended March 31, June 30, September 30, December 31, 2018 2018 2018 2018 Net sales $ 624,895 $ 706,570 $ 658,504 $ 709,520 Cost of sales 528,523 599,102 558,060 602,718 Gross profit 96,372 107,468 100,444 106,802 Selling, general and administrative expenses 80,900 82,521 81,494 79,518 Restructuring and other charges — — — 967 Income from operations 15,472 24,947 18,950 26,317 Other income, net 116 182 114 2,566 Income before taxes 15,588 25,129 19,064 28,883 Income tax provision (4,288) (6,903) (5,298) (7,583) Net income $ 11,300 $ 18,226 $ 13,766 $ 21,300 Earnings per common share: Basic $ 0.42 $ 0.68 $ 0.52 $ 0.80 Diluted $ 0.42 $ 0.68 $ 0.51 $ 0.80 Weighted average common shares outstanding: Basic 26,835 26,685 26,716 26,632 Diluted 26,916 26,820 26,902 26,766 Quarters Ended March 31, June 30, September 30, December 31, 2017 2017 (1) 2017 2017 (1) Net sales $ 670,594 $ 749,792 $ 729,230 $ 762,267 Cost of sales 583,861 650,122 633,087 662,737 Gross profit 86,733 99,670 96,143 99,530 Selling, general and administrative expenses 75,281 76,289 74,404 74,939 Restructuring and other charges — 941 — 2,695 Income from operations 11,452 22,440 21,739 21,896 Interest income (expense), net 19 9 (8) 78 Income before taxes 11,471 22,449 21,731 21,974 Income tax provision (4,039) (8,864) (8,614) (1,251) Net income $ 7,432 $ 13,585 $ 13,117 $ 20,723 Earnings per common share: Basic $ 0.28 $ 0.51 $ 0.49 $ 0.77 Diluted $ 0.28 $ 0.51 $ 0.49 $ 0.77 Weighted average common shares outstanding: Basic 26,697 26,761 26,802 26,822 Diluted 26,866 26,893 26,899 26,907 (1) Certain prior year amounts have been reclassified to conform to 2018 presentation. These changes had no impact on previously reported results of operations or shareholders’ equity. |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | ||||
Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Jun. 30, 2017USD ($) | Dec. 31, 2018USD ($)segment | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | |
Number of sales segments | segment | 3 | |||||
Restructuring and other charges | $ 967 | $ 2,695 | $ 941 | $ 967 | $ 3,636 | $ 3,406 |
Amounts due from banks for credit card transactions, classified as cash equivalents | 2,651 | 6,776 | $ 2,651 | 6,776 | ||
Minimum | ||||||
Property and equipment, estimated useful lives | 3 years | |||||
Maximum | ||||||
Property and equipment, estimated useful lives | 7 years | |||||
Computer Software | Minimum | ||||||
Estimated useful lives | 3 years | |||||
Computer Software | Maximum | ||||||
Estimated useful lives | 7 years | |||||
Selling, General and Administrative Expenses | ||||||
Advertising expense | $ 16,244 | 14,437 | $ 16,083 | |||
Accounts receivable, net | ||||||
Sale reserves | $ 3,397 | $ 3,308 | $ 3,397 | $ 3,308 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Concentration Risk (Details) - Net Sales | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Customer | Single Customer | Maximum | |||
Concentration risk | |||
Percentage of total net sales | 3.00% | 3.00% | 3.00% |
Customer | Federal Government Agencies | |||
Concentration risk | |||
Percentage of total net sales | 5.40% | 7.80% | 7.50% |
Customer | Single Federal Government Agency | Maximum | |||
Concentration risk | |||
Percentage of total net sales | 3.00% | 3.00% | 3.00% |
Supplier | Ingram Micro Inc Class | |||
Concentration risk | |||
Percentage of product purchases | 22.00% | 22.00% | 21.00% |
Supplier | Synnex Corporation | |||
Concentration risk | |||
Percentage of product purchases | 12.00% | 12.00% | 13.00% |
Supplier | Tech Data Corporation | |||
Concentration risk | |||
Percentage of product purchases | 10.00% | 11.00% | 8.00% |
Supplier | Hewlett Packard Company | |||
Concentration risk | |||
Percentage of product purchases | 7.00% | 11.00% | 9.00% |
Products manufactured by HP as a percentage of net sales | 18.00% | 20.00% | 20.00% |
Supplier | Other vendor suppliers | Maximum | |||
Concentration risk | |||
Percentage of product purchases | 10.00% | 10.00% | 10.00% |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Restructuring and Other Charges (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||||
Dec. 31, 2018 | Dec. 31, 2017 | Jun. 30, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Restructuring and other charges | ||||||
Restructuring and other charges | $ 967 | $ 2,695 | $ 941 | $ 967 | $ 3,636 | $ 3,406 |
Accrued employee termination benefits | $ 784 | $ 2 | 784 | 2 | 417 | |
Employee separations | ||||||
Restructuring and other charges | ||||||
Restructuring and other charges | $ 967 | 640 | 1,766 | |||
Acquisition costs | ||||||
Restructuring and other charges | ||||||
Restructuring and other charges | 570 | |||||
Relocation expenses | ||||||
Restructuring and other charges | ||||||
Restructuring and other charges | 84 | 291 | ||||
Rebranding costs | ||||||
Restructuring and other charges | ||||||
Restructuring and other charges | 596 | |||||
Employee compensation | ||||||
Restructuring and other charges | ||||||
Restructuring and other charges | 2,800 | |||||
Employee compensation | Non-executive employees | ||||||
Restructuring and other charges | ||||||
One-time cash bonus paid | 2,700 | |||||
Other | ||||||
Restructuring and other charges | ||||||
Restructuring and other charges | $ 112 | $ 183 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Numerator: | |||||||||||
Net income | $ 21,300 | $ 13,766 | $ 18,226 | $ 11,300 | $ 20,723 | $ 13,117 | $ 13,585 | $ 7,432 | $ 64,592 | $ 54,857 | $ 48,111 |
Denominator: | |||||||||||
Denominator for basic earnings per share | 26,632 | 26,716 | 26,685 | 26,835 | 26,822 | 26,802 | 26,761 | 26,697 | 26,717 | 26,771 | 26,528 |
Dilutive effect of employee stock awards | 137 | 120 | 191 | ||||||||
Denominator for diluted earnings per share | 26,766 | 26,902 | 26,820 | 26,916 | 26,907 | 26,899 | 26,893 | 26,866 | 26,854 | 26,891 | 26,719 |
Earnings per share: | |||||||||||
Basic | $ 0.80 | $ 0.52 | $ 0.68 | $ 0.42 | $ 0.77 | $ 0.49 | $ 0.51 | $ 0.28 | $ 2.42 | $ 2.05 | $ 1.81 |
Diluted | $ 0.80 | $ 0.51 | $ 0.68 | $ 0.42 | $ 0.77 | $ 0.49 | $ 0.51 | $ 0.28 | $ 2.41 | $ 2.04 | $ 1.80 |
Additional Disclosure | |||||||||||
Employee stock awards excluded from computation of diluted earnings per share | $ 0 | $ 0 | $ 0 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Other Income (Expense) (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Other income (expense), net | |||
Gain on contract dispute resolution, net of costs | $ 2,255 | ||
Resolution costs | 745 | ||
Interest income | 868 | $ 224 | $ 40 |
Interest expense | 145 | $ 126 | $ 107 |
Other Assets | |||
Other income (expense), net | |||
Cash resolution of contract dispute | $ 3,000 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Effect of Adoption of ASU 2014-09 (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||||||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Jan. 02, 2018 | Jan. 01, 2018 | Jan. 01, 2017 | |
REVENUES | ||||||||||||||
Net sales | $ 709,520 | $ 658,504 | $ 706,570 | $ 624,895 | $ 762,267 | $ 729,230 | $ 749,792 | $ 670,594 | $ 2,699,489 | $ 2,911,883 | $ 2,692,592 | |||
Costs and expenses | ||||||||||||||
Cost of sales | 602,718 | 558,060 | 599,102 | 528,523 | 662,737 | 633,087 | 650,122 | 583,861 | 2,288,403 | 2,529,807 | 2,321,435 | |||
Income from operations | 26,317 | 18,950 | 24,947 | 15,472 | 21,896 | 21,739 | 22,440 | 11,452 | 85,686 | 77,527 | 80,520 | |||
Income before taxes | 28,883 | 19,064 | 25,129 | 15,588 | 21,974 | 21,731 | 22,449 | 11,471 | 88,664 | 77,625 | 80,453 | |||
Net income | 21,300 | 13,766 | 18,226 | 11,300 | 20,723 | 13,117 | 13,585 | 7,432 | 64,592 | 54,857 | 48,111 | |||
ASSETS | ||||||||||||||
Accounts receivable, net | 447,698 | 449,682 | 447,698 | 449,682 | $ 464,250 | |||||||||
Inventories, net | 119,195 | 106,753 | 119,195 | 106,753 | 95,884 | |||||||||
Prepaid expenses and other current assets | 9,661 | 5,737 | 9,661 | 5,737 | 5,605 | |||||||||
Long-term accounts receivable | 1,890 | |||||||||||||
Other assets | 1,211 | 5,638 | 1,211 | 5,638 | 1,724 | |||||||||
LIABILITIES | ||||||||||||||
Accounts payable | 201,640 | 194,257 | 201,640 | 194,257 | 194,195 | |||||||||
Accrued expenses and other liabilities | 33,840 | 31,096 | 33,840 | 31,096 | 30,784 | |||||||||
Accrued payroll | 24,319 | 22,662 | 24,319 | 22,662 | 22,953 | |||||||||
Deferred income taxes | 17,184 | 15,696 | 17,184 | 15,696 | 16,125 | |||||||||
STOCKHOLDERS' EQUITY | ||||||||||||||
Retained earnings | 441,010 | 383,673 | 441,010 | 383,673 | $ 384,870 | |||||||||
Unrecognized excess tax benefits related to equity compensation | $ 0 | |||||||||||||
Income tax benefits | (7,583) | $ (5,298) | $ (6,903) | $ (4,288) | $ (1,251) | $ (8,614) | $ (8,864) | $ (4,039) | (24,072) | (22,768) | $ (32,342) | |||
ASU 2016-09 | ||||||||||||||
STOCKHOLDERS' EQUITY | ||||||||||||||
Income tax benefits | 1,054 | |||||||||||||
Difference between Revenue Guidance in Effect before and after Topic 606 | ASU 2014-09 | ||||||||||||||
REVENUES | ||||||||||||||
Net sales | 404,690 | |||||||||||||
Costs and expenses | ||||||||||||||
Cost of sales | 403,737 | |||||||||||||
Income from operations | 750 | |||||||||||||
Income before taxes | 750 | |||||||||||||
Net income | 526 | |||||||||||||
ASSETS | ||||||||||||||
Accounts receivable, net | (6,949) | (6,949) | $ 14,568 | |||||||||||
Inventories, net | 4,798 | 4,798 | (10,869) | |||||||||||
Prepaid expenses and other current assets | 148 | 148 | (132) | |||||||||||
Long-term accounts receivable | 1,890 | |||||||||||||
Other assets | 3,914 | 3,914 | (3,914) | |||||||||||
LIABILITIES | ||||||||||||||
Accounts payable | (62) | |||||||||||||
Accrued expenses and other liabilities | 2,904 | 2,904 | (312) | |||||||||||
Accrued payroll | (116) | (116) | 291 | |||||||||||
Deferred income taxes | (219) | (219) | 429 | |||||||||||
STOCKHOLDERS' EQUITY | ||||||||||||||
Retained earnings | (657) | (657) | $ 1,197 | |||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | ||||||||||||||
REVENUES | ||||||||||||||
Net sales | 3,104,179 | $ 2,911,883 | ||||||||||||
Costs and expenses | ||||||||||||||
Cost of sales | 2,692,140 | |||||||||||||
Income from operations | 86,436 | |||||||||||||
Income before taxes | 89,414 | |||||||||||||
Net income | 65,118 | |||||||||||||
ASSETS | ||||||||||||||
Accounts receivable, net | 440,749 | 440,749 | ||||||||||||
Inventories, net | 123,993 | 123,993 | ||||||||||||
Prepaid expenses and other current assets | 9,809 | 9,809 | ||||||||||||
Other assets | 5,125 | 5,125 | ||||||||||||
LIABILITIES | ||||||||||||||
Accrued expenses and other liabilities | 36,744 | 36,744 | ||||||||||||
Accrued payroll | 24,203 | 24,203 | ||||||||||||
Deferred income taxes | 16,965 | 16,965 | ||||||||||||
STOCKHOLDERS' EQUITY | ||||||||||||||
Retained earnings | $ 440,353 | $ 440,353 |
REVENUE - Disaggregation of Rev
REVENUE - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Disaggregation of revenue | |||||||||||
Net sales | $ 709,520 | $ 658,504 | $ 706,570 | $ 624,895 | $ 762,267 | $ 729,230 | $ 749,792 | $ 670,594 | $ 2,699,489 | $ 2,911,883 | $ 2,692,592 |
Notebooks/Mobility | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 710,654 | ||||||||||
Accessories | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 353,140 | ||||||||||
Software | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 314,856 | ||||||||||
Desktops | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 288,308 | ||||||||||
Servers/Storage | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 273,421 | ||||||||||
Displays and sound | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 252,036 | ||||||||||
Net/Com products | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 224,049 | ||||||||||
Other hardware/services | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 283,025 | ||||||||||
Business Solutions | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 1,027,918 | ||||||||||
Business Solutions | Notebooks/Mobility | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 299,247 | ||||||||||
Business Solutions | Accessories | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 95,342 | ||||||||||
Business Solutions | Software | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 134,071 | ||||||||||
Business Solutions | Desktops | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 108,096 | ||||||||||
Business Solutions | Servers/Storage | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 111,559 | ||||||||||
Business Solutions | Displays and sound | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 89,779 | ||||||||||
Business Solutions | Net/Com products | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 109,702 | ||||||||||
Business Solutions | Other hardware/services | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 80,122 | ||||||||||
Enterprise Solutions | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 1,165,142 | ||||||||||
Enterprise Solutions | Notebooks/Mobility | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 272,589 | ||||||||||
Enterprise Solutions | Accessories | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 214,102 | ||||||||||
Enterprise Solutions | Software | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 135,420 | ||||||||||
Enterprise Solutions | Desktops | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 126,643 | ||||||||||
Enterprise Solutions | Servers/Storage | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 102,209 | ||||||||||
Enterprise Solutions | Displays and sound | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 109,497 | ||||||||||
Enterprise Solutions | Net/Com products | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 62,060 | ||||||||||
Enterprise Solutions | Other hardware/services | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 142,622 | ||||||||||
Public Sector Solutions | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 506,429 | ||||||||||
Public Sector Solutions | Notebooks/Mobility | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 138,818 | ||||||||||
Public Sector Solutions | Accessories | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 43,696 | ||||||||||
Public Sector Solutions | Software | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 45,365 | ||||||||||
Public Sector Solutions | Desktops | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 53,569 | ||||||||||
Public Sector Solutions | Servers/Storage | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 59,653 | ||||||||||
Public Sector Solutions | Displays and sound | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 52,760 | ||||||||||
Public Sector Solutions | Net/Com products | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 52,287 | ||||||||||
Public Sector Solutions | Other hardware/services | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 60,281 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | $ 3,104,179 | 2,911,883 | |||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Notebooks/Mobility | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 636,289 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Accessories | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 303,295 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Software | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 659,488 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Desktops | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 321,870 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Servers/Storage | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 257,704 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Displays and sound | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 234,365 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Net/Com products | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 218,143 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Other hardware/services | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 280,729 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Business Solutions | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 1,158,639 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Business Solutions | Notebooks/Mobility | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 299,029 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Business Solutions | Accessories | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 86,339 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Business Solutions | Software | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 271,805 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Business Solutions | Desktops | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 116,931 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Business Solutions | Servers/Storage | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 116,770 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Business Solutions | Displays and sound | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 90,868 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Business Solutions | Net/Com products | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 95,043 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Business Solutions | Other hardware/services | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 81,854 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Enterprise Solutions | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 1,131,823 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Enterprise Solutions | Notebooks/Mobility | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 213,352 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Enterprise Solutions | Accessories | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 166,898 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Enterprise Solutions | Software | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 284,003 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Enterprise Solutions | Desktops | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 106,779 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Enterprise Solutions | Servers/Storage | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 84,612 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Enterprise Solutions | Displays and sound | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 86,398 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Enterprise Solutions | Net/Com products | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 63,741 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Enterprise Solutions | Other hardware/services | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 126,040 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Public Sector Solutions | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 621,421 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Public Sector Solutions | Notebooks/Mobility | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 123,908 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Public Sector Solutions | Accessories | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 50,058 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Public Sector Solutions | Software | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 103,680 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Public Sector Solutions | Desktops | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 98,160 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Public Sector Solutions | Servers/Storage | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 56,322 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Public Sector Solutions | Displays and sound | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 57,099 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Public Sector Solutions | Net/Com products | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | 59,359 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Public Sector Solutions | Other hardware/services | |||||||||||
Disaggregation of revenue | |||||||||||
Net sales | $ 72,835 |
REVENUE - Contract Balances (De
REVENUE - Contract Balances (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Jan. 02, 2018 | |
Change in contract liability | ||
Beginning balance - Contract liability | $ 2,914 | |
Cash received in advance and not recognized as revenue | 16,279 | |
Amounts recognized as revenue as performance obligations satisfied | (16,514) | |
Ending balance - Contract liability | 2,679 | |
Accrued expenses and other liabilities | ||
Contract liabilities | ||
Contract liability | $ 2,679 | $ 2,914 |
ACQUISITIONS - (Details)
ACQUISITIONS - (Details) - USD ($) $ in Thousands | Oct. 11, 2016 | May 27, 2016 | Dec. 31, 2016 | Dec. 31, 2018 | Dec. 31, 2017 |
Components of purchase price: | |||||
Goodwill | $ 73,602 | $ 73,602 | |||
Purchase price at closing, net of cash acquired | $ 42,990 | ||||
Softmart | |||||
Components of purchase price: | |||||
Current assets | $ 22,812 | ||||
Fixed assets | 343 | ||||
Goodwill | 14,314 | ||||
Total assets acquired | 48,769 | ||||
Acquired liabilities | (16,252) | ||||
Net assets acquired | 32,517 | ||||
Less cash acquired | (628) | ||||
Purchase price at closing, net of cash acquired | 31,889 | ||||
Softmart | Customer relationships | |||||
Components of purchase price: | |||||
Intangible asset | 11,300 | ||||
GlobalServe | |||||
Components of purchase price: | |||||
Current assets | $ 1,486 | ||||
Fixed assets | 4,609 | ||||
Goodwill | 8,012 | ||||
Total assets acquired | 15,007 | ||||
Acquired liabilities | (734) | ||||
Deferred taxes and unrecognized tax benefits | (2,390) | ||||
Net assets acquired | 11,883 | ||||
Less cash acquired | (782) | ||||
Purchase price at closing, net of cash acquired | 11,101 | ||||
GlobalServe | Customer relationships | |||||
Components of purchase price: | |||||
Intangible asset | 900 | ||||
Selling, General and Administrative Expenses | Softmart | |||||
Acquisition | |||||
Transaction costs related to acquisition | 357 | ||||
Selling, General and Administrative Expenses | GlobalServe | |||||
Acquisition | |||||
Transaction costs related to acquisition | $ 118 | ||||
Business Solutions | |||||
Components of purchase price: | |||||
Goodwill | 7,366 | 7,366 | |||
Business Solutions | Softmart | |||||
Components of purchase price: | |||||
Goodwill | 7,366 | ||||
Enterprise Solutions | |||||
Components of purchase price: | |||||
Goodwill | $ 66,236 | $ 66,236 | |||
Enterprise Solutions | Softmart | |||||
Components of purchase price: | |||||
Goodwill | $ 6,948 | ||||
Enterprise Solutions | GlobalServe | |||||
Components of purchase price: | |||||
Goodwill | 8,012 | ||||
Goodwill related to acquisition deductible for tax purposes | $ 0 |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS - Goodwill (Details) - segment | 1 Months Ended | 12 Months Ended |
Nov. 30, 2018 | Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure | ||
Number of reporting units | 2 | |
Weighted average cost of capital rate | 12.50% | |
Estimated terminal growth rate | 3.00% | |
Working capital requirements | 9.50% |
GOODWILL AND OTHER INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS - Carrying Amount of Goodwill (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Goodwill | ||
Goodwill, gross | $ 82,409 | $ 82,409 |
Accumulated impairment losses | (8,807) | (8,807) |
Net balance | 73,602 | 73,602 |
Business Solutions | ||
Goodwill | ||
Goodwill, gross | 8,539 | 8,539 |
Accumulated impairment losses | (1,173) | (1,173) |
Net balance | 7,366 | 7,366 |
Enterprise Solutions | ||
Goodwill | ||
Goodwill, gross | 66,236 | 66,236 |
Net balance | 66,236 | 66,236 |
Public Sector Segment | ||
Goodwill | ||
Goodwill, gross | 7,634 | 7,634 |
Accumulated impairment losses | $ (7,634) | $ (7,634) |
GOODWILL AND OTHER INTANGIBLE_5
GOODWILL AND OTHER INTANGIBLE ASSETS - Amortizable Intangible Assets and Related Accumulated Amortization (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Intangible Assets | |||
Indefinite-lived intangible assets | $ 450 | ||
Gross Amount | 16,790 | $ 16,790 | |
Accumulated Amortization | 7,676 | 6,215 | |
Net Amount | 9,114 | 10,575 | |
Amortization expense | $ 1,461 | 1,561 | $ 1,281 |
Customer list | |||
Intangible Assets | |||
Estimated useful lives | 8 years | ||
Gross Amount | $ 3,400 | 3,400 | |
Accumulated Amortization | 3,364 | 3,143 | |
Net Amount | $ 36 | 257 | |
Tradename | |||
Intangible Assets | |||
Estimated useful lives | 5 years | ||
Gross Amount | $ 1,190 | 1,190 | |
Accumulated Amortization | $ 1,190 | 1,190 | |
Customer relationships | |||
Intangible Assets | |||
Acquired estimated useful lives | 10 years | ||
Estimated useful lives | 10 years | ||
Gross Amount | $ 12,200 | 12,200 | |
Accumulated Amortization | 3,122 | 1,882 | |
Net Amount | $ 9,078 | $ 10,318 |
GOODWILL AND OTHER INTANGIBLE_6
GOODWILL AND OTHER INTANGIBLE ASSETS - Estimated Amortization Expenses (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Goodwill and Intangible Assets Disclosure | ||
2,019 | $ 1,256 | |
2,020 | 1,220 | |
2,021 | 1,220 | |
2,022 | 1,220 | |
2,023 | 1,220 | |
2024 and thereafter | 2,978 | |
Net Amount | $ 9,114 | $ 10,575 |
ACCOUNTS RECEIVABLE (Details)
ACCOUNTS RECEIVABLE (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Jan. 02, 2018 | Dec. 31, 2017 |
Accounts receivable | |||
Trade | $ 401,530 | $ 398,524 | |
Vendor consideration, returns and other | 52,560 | 57,043 | |
Due from employees | 107 | 149 | |
Total gross accounts receivable | 454,197 | 455,716 | |
Doubtful accounts | (3,102) | (2,726) | |
Accounts receivable, net | 447,698 | $ 464,250 | 449,682 |
Accounts receivable, net | |||
Accounts receivable | |||
Sales returns | $ (3,397) | $ (3,308) |
PROPERTY AND EQUIPMENT - Summar
PROPERTY AND EQUIPMENT - Summary (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Property and Equipment | ||
Computer software, including licenses and internally-developed software | $ 75,528 | $ 58,320 |
Furniture and equipment | 36,147 | 33,176 |
Leasehold improvements | 8,102 | 7,787 |
Total | 119,777 | 99,283 |
Accumulated depreciation and amortization | (67,978) | (57,792) |
Property and equipment, net | $ 51,799 | $ 41,491 |
PROPERTY AND EQUIPMENT - Deprec
PROPERTY AND EQUIPMENT - Depreciation and Amortization Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Property and Equipment | |||
Depreciation and amortization | $ 12,602 | $ 10,278 | $ 9,172 |
ACCRUED EXPENSES AND OTHER LI_3
ACCRUED EXPENSES AND OTHER LIABILITIES (Detail) - USD ($) $ in Thousands | Dec. 31, 2018 | Jan. 02, 2018 | Dec. 31, 2017 |
Accrued Expenses and Other Liabilities | |||
Customer and vendor deposits | $ 8,880 | $ 7,763 | |
Dividends payable | 8,453 | 9,122 | |
Sales taxes | 7,632 | 5,905 | |
Other | 8,875 | 8,306 | |
Accrued expenses and other liabilities | $ 33,840 | $ 30,784 | $ 31,096 |
BANK BORROWINGS (Detail)
BANK BORROWINGS (Detail) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Subordinated Borrowing | ||
Line of credit, borrowing capacity | $ 50,000 | |
Credit facility, expiration date | Feb. 10, 2022 | |
Line of credit, maximum borrowing capacity | $ 80,000 | |
Debt instrument, description of variable rate basis | one-month LIBOR | |
Line of credit, outstanding borrowing | $ 0 | $ 0 |
Line of credit, available for borrowing | $ 50,000 | $ 50,000 |
Maximum | ||
Subordinated Borrowing | ||
Debt ratio | 2 | |
Prime Rate | ||
Subordinated Borrowing | ||
Debt instrument, interest rate | 5.50% | |
One-month LIBOR rate | ||
Subordinated Borrowing | ||
Debt instrument, interest rate | 2.51% |
STOCKHOLDERS' EQUITY AND SHAR_3
STOCKHOLDERS' EQUITY AND SHARE-BASED COMPENSATION - Narrative (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | ||||||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 17, 2018 | May 31, 2016 | Dec. 31, 2014 | Dec. 31, 2001 | |
Stockholders' equity and share-based compensation | |||||||
Preferred Stock, shares authorized | 10,000 | 10,000 | |||||
Preferred Stock, par value | $ 0.01 | $ 0.01 | |||||
Preferred Stock, shares outstanding | 0 | 0 | |||||
Shares repurchased, value | $ 15,375 | ||||||
Aggregate shares repurchased | 2,391 | 1,856 | |||||
Shares Granted | 0 | ||||||
Stock Incentive Plan 2007 | |||||||
Stockholders' equity and share-based compensation | |||||||
Term of approved stock-based compensation plan | 10 years | ||||||
Shares authorized for issuance under stock incentive plan | 1,700 | ||||||
Shares available for future grant | 8 | ||||||
1997 Employee Stock Purchase Plan | |||||||
Stockholders' equity and share-based compensation | |||||||
Purchase price under employee stock purchase plan as a percentage of price as of the last day of each six month offering period | 95.00% | ||||||
Common stock reserved for issuance | 1,162 | ||||||
Share purchased under employee stock purchase plan | 1,155 | ||||||
Nonvested Stock Units | |||||||
Stockholders' equity and share-based compensation | |||||||
Granted | 190 | 0 | |||||
Weighted-average grant-date fair values of nonvested stock awards granted | $ 24.90 | $ 24.72 | |||||
Total fair values of nonvested stock awards that vested | $ 1,635 | $ 1,638 | $ 2,348 | ||||
Unearned compensation cost | $ 8,736 | ||||||
Unrecognized compensation costs, weighted average period of recognition | 7 years | ||||||
Aggregate intrinsic value | $ 12,561 | ||||||
Stock Equivalent Units (SEUs) | |||||||
Stockholders' equity and share-based compensation | |||||||
Granted | 100 | 23 | |||||
Vesting period | 4 years | ||||||
Share repurchase programs, aggregate | |||||||
Stockholders' equity and share-based compensation | |||||||
Number of share repurchased | 535 | ||||||
Shares repurchased, value | $ 15,374 | ||||||
Aggregate shares repurchased | 2,217 | ||||||
Aggregate number of shares repurchased | $ 27,608 | ||||||
Maximum | Nonvested Stock Units | |||||||
Stockholders' equity and share-based compensation | |||||||
Vesting period | 10 years | 10 years | |||||
Maximum | Share repurchase programs, aggregate | |||||||
Stockholders' equity and share-based compensation | |||||||
Repurchase of common stock, authorized amount | $ 30,000 | ||||||
Approximate dollar value of shares that may yet be purchased | $ 27,392 | ||||||
Maximum | Share repurchase program 2001 | |||||||
Stockholders' equity and share-based compensation | |||||||
Repurchase of common stock, authorized amount | $ 15,000 | ||||||
Maximum | Share repurchase program 2014 | |||||||
Stockholders' equity and share-based compensation | |||||||
Repurchase of common stock, authorized amount | $ 15,000 | ||||||
Maximum | Share repurchase program 2018 | |||||||
Stockholders' equity and share-based compensation | |||||||
Repurchase of common stock, authorized amount | $ 25,000 |
STOCKHOLDERS' EQUITY AND SHAR_4
STOCKHOLDERS' EQUITY AND SHARE-BASED COMPENSATION - Dividend Payments (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Earnings Per Share | |||
Dividend per share | $ 0.32 | $ 0.34 | $ 0.34 |
Stockholder record date | Dec. 28, 2018 | Dec. 29, 2017 | Dec. 30, 2016 |
Total dividend | $ 8,452 | $ 9,122 | $ 9,041 |
Payment date | Jan. 11, 2019 | Jan. 12, 2018 | Jan. 12, 2017 |
STOCKHOLDERS' EQUITY AND SHAR_5
STOCKHOLDERS' EQUITY AND SHARE-BASED COMPENSATION - Components of Share-Based Compensation Recorded as Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Stockholders' equity and share-based compensation | |||
Tax benefit | $ (293) | $ (297) | $ (420) |
Net effect on net income | 787 | 444 | 629 |
Nonvested units | |||
Stockholders' equity and share-based compensation | |||
Pre-tax expense for nonvested units | $ 1,080 | $ 741 | $ 1,049 |
STOCKHOLDERS' EQUITY AND SHAR_6
STOCKHOLDERS' EQUITY AND SHARE-BASED COMPENSATION - Nonvested Stock Award and Unit Activity (Details) - Nonvested Stock Units - $ / shares shares in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Shares | |||
Nonvested shares beginning balance | 288 | ||
Granted | 190 | 0 | |
Vested | (55) | ||
Nonvested shares ending balance | 423 | 288 | |
Weighted-Average Grant Date Fair Value | |||
Nonvested shares beginning balance | $ 21.01 | ||
Granted | 24.90 | $ 24.72 | |
Vested | 17.94 | ||
Nonvested shares ending balance | $ 23.16 | $ 21.01 |
STOCKHOLDERS' EQUITY AND SHAR_7
STOCKHOLDERS' EQUITY AND SHARE-BASED COMPENSATION - Stock Equivalent Units (Details) - Stock Equivalent Units (SEUs) - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2018 | |
Stockholders' equity and share-based compensation | |||
Units issued | 100 | 23 | |
Compensation expense | $ 1,429 | $ 1,973 | $ 1,871 |
INCOME TAXES - Provision for In
INCOME TAXES - Provision for Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Current: | |||||||||||
Federal | $ 16,643 | $ 21,813 | $ 23,923 | ||||||||
State | 6,370 | 4,861 | 4,913 | ||||||||
Total current | 23,013 | 26,674 | 28,836 | ||||||||
Deferred: | |||||||||||
Federal | 1,087 | (5,132) | 2,920 | ||||||||
State | (28) | 1,226 | 586 | ||||||||
Total deferred | 1,059 | (3,906) | 3,506 | ||||||||
Net provision | $ 7,583 | $ 5,298 | $ 6,903 | $ 4,288 | $ 1,251 | $ 8,614 | $ 8,864 | $ 4,039 | $ 24,072 | $ 22,768 | $ 32,342 |
INCOME TAXES - Components of De
INCOME TAXES - Components of Deferred Taxes (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Deferred tax assets: | ||
Provisions for doubtful accounts | $ 825 | $ 724 |
Inventory costs capitalized for tax purposes | 112 | 127 |
Inventory valuation reserves | 280 | 275 |
Sales return reserves | 132 | 129 |
Deductible expenses, primarily employee-benefit related | 319 | 357 |
Accrued compensation | 2,014 | 981 |
Revenue deferral | 409 | |
Other | 1,254 | 875 |
Compensation under non-statutory stock option agreements | 82 | 34 |
State tax loss carryforwards | 958 | 877 |
Federal benefit for uncertain state tax positions | 177 | 177 |
Total gross deferred tax assets | 6,153 | 4,965 |
Less: Valuation allowance | (839) | (745) |
Net deferred tax assets | 5,314 | 4,220 |
Deferred tax liabilities: | ||
Goodwill and other intangibles | (12,850) | (12,516) |
Property and equipment | (9,548) | (7,218) |
Prepaid expenses | (100) | (182) |
Total gross deferred tax liabilities. | (22,498) | (19,916) |
Net deferred tax liability | (17,184) | (15,696) |
Noncurrent deferred tax liability | (17,184) | (15,696) |
Net deferred tax liability | $ (17,184) | $ (15,696) |
INCOME TAXES - Additional Infor
INCOME TAXES - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Examination | ||||
State net operating loss carryforwards | $ 1,213 | |||
Operating loss carryforwards, state tax benefits net of federal taxes | $ 877 | 958 | $ 877 | |
State tax credit and state tax loss carryforwards, valuation allowance | 745 | 839 | 745 | |
Net change in the valuation allowance related to utilization and expiration of tax carryforwards | $ 94 | $ 260 | $ 102 | |
Statutory federal income tax rate (as a percent) | 21.00% | 35.00% | ||
Estimated tax benefit related to remeasurement of net deferred tax | 7,700 | |||
Unrecognized income tax benefits, interest and penalties recognized | $ 0 | $ 0 | $ 62 | |
Unrecognized income tax benefits, accrued interest | 481 | 481 | 481 | |
Unrecognized income tax benefits, accrued penalties | $ 93 | $ 93 | $ 93 | |
State Jurisdiction | ||||
Income Tax Examination | ||||
Tax years remain open to examination | 2014 2015 2016 2017 | |||
Internal Revenue Service (IRS) | ||||
Income Tax Examination | ||||
Tax years remain open to examination | 2015 2016 2017 | |||
Expiring After 2019 | ||||
Income Tax Examination | ||||
State net operating loss carryforwards | $ 8 | |||
Expiring After 2020 | ||||
Income Tax Examination | ||||
State net operating loss carryforwards | 6 | |||
Expiring After 2021 | ||||
Income Tax Examination | ||||
State net operating loss carryforwards | 3 | |||
Expiring After 2022 | ||||
Income Tax Examination | ||||
State net operating loss carryforwards | 3 | |||
Expiring After 2023 | ||||
Income Tax Examination | ||||
State net operating loss carryforwards | 3 | |||
Expiring Beyond 2023 | ||||
Income Tax Examination | ||||
State net operating loss carryforwards | 1,171 | |||
No Expiration | ||||
Income Tax Examination | ||||
State net operating loss carryforwards | $ 19 | |||
Period 1 | ||||
Income Tax Examination | ||||
State net operating loss carryforwards, expiration period | 5 years | |||
Period 2 | ||||
Income Tax Examination | ||||
State net operating loss carryforwards, expiration period | 15 years | |||
Period 3 | ||||
Income Tax Examination | ||||
State net operating loss carryforwards, expiration period | 20 years |
INCOME TAXES - Reconciliation o
INCOME TAXES - Reconciliation of Income Tax Provision To Total Income Taxes At Statutory Federal Tax Rate (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Income Taxes | |||||||||||
Federal income taxes, at statutory tax rate | $ 18,619 | $ 27,169 | $ 28,159 | ||||||||
State income taxes, net of federal benefit | 5,157 | 3,843 | 3,947 | ||||||||
Nondeductible expenses | 454 | (113) | 602 | ||||||||
Remeasurement of net deferred tax balances | (7,815) | ||||||||||
Other-net | (158) | (316) | (366) | ||||||||
Net provision | $ 7,583 | $ 5,298 | $ 6,903 | $ 4,288 | $ 1,251 | $ 8,614 | $ 8,864 | $ 4,039 | $ 24,072 | $ 22,768 | $ 32,342 |
INCOME TAXES - Reconciliation_2
INCOME TAXES - Reconciliation Of Unrecognized Tax Benefits (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Income Taxes | |||
Beginning balance | $ 368 | $ 684 | $ 869 |
Lapses of applicable statute of limitations | (159) | (185) | |
Settlements | (157) | ||
Ending balance | $ 368 | $ 368 | $ 684 |
EMPLOYEE BENEFIT PLAN (Details)
EMPLOYEE BENEFIT PLAN (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Compensation and Retirement | |||
Employer matching contributions to employee savings | $ 2,538 | $ 2,396 | $ 2,320 |
Employer matching contributions to employee profit sharing plan | $ 0 | $ 0 | $ 0 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Operating Lease Information (Details) - USD ($) $ in Thousands | Nov. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Operating leases | ||||
Property leased from unrelated parties with remaining terms, minimum | 1 year | |||
Property leased from unrelated parties with remaining terms, maximum | 10 years | |||
Total rent expense | $ 5,428 | $ 5,225 | $ 4,753 | |
Corporate headquarters | ||||
Operating leases | ||||
Operating lease term | 5 years | |||
Related Party | ||||
Operating leases | ||||
Total rent expense | $ 1,651 | $ 1,647 | $ 1,640 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES - Future Aggregate Minimum Annual Lease Payments Under Operating Leases (Details) $ in Thousands | Dec. 31, 2018USD ($) |
Operating leases | |
2,019 | $ 5,035 |
2,020 | 4,793 |
2,021 | 3,719 |
2,022 | 2,743 |
2,023 | 1,969 |
2024 and thereafter | 1,395 |
Related Parties | |
Operating leases | |
2,019 | 1,516 |
2,020 | 1,407 |
2,021 | 1,253 |
2,022 | 1,253 |
2,023 | 1,149 |
Others | |
Operating leases | |
2,019 | 3,519 |
2,020 | 3,386 |
2,021 | 2,466 |
2,022 | 1,490 |
2,023 | 820 |
2024 and thereafter | $ 1,395 |
SEGMENT AND RELATED DISCLOSUR_3
SEGMENT AND RELATED DISCLOSURES - Segment Information Applicable to Reportable Operating Segments (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018USD ($) | Sep. 30, 2018USD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Sep. 30, 2017USD ($) | Jun. 30, 2017USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2018USD ($)segment | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | |
Segment Reporting Information | |||||||||||
Number of reportable segments | segment | 3 | ||||||||||
Net sales: | |||||||||||
Net sales | $ 709,520 | $ 658,504 | $ 706,570 | $ 624,895 | $ 762,267 | $ 729,230 | $ 749,792 | $ 670,594 | $ 2,699,489 | $ 2,911,883 | $ 2,692,592 |
Operating income (loss): | |||||||||||
Operating income (loss) | 26,317 | 18,950 | 24,947 | 15,472 | 21,896 | 21,739 | 22,440 | 11,452 | 85,686 | 77,527 | 80,520 |
Other income (expense), net | 2,566 | 114 | 182 | 116 | 78 | (8) | 9 | 19 | 2,978 | 98 | (67) |
Income before taxes | 28,883 | $ 19,064 | $ 25,129 | $ 15,588 | 21,974 | $ 21,731 | $ 22,449 | $ 11,471 | 88,664 | 77,625 | 80,453 |
Depreciation and amortization: | |||||||||||
Depreciation and amortization | 14,063 | 11,839 | 10,453 | ||||||||
Total assets: | |||||||||||
Total assets | 805,355 | 747,851 | 805,355 | 747,851 | |||||||
Goodwill | 73,602 | 73,602 | 73,602 | 73,602 | |||||||
Business Solutions | |||||||||||
Net sales: | |||||||||||
Net sales | 1,027,918 | ||||||||||
Total assets: | |||||||||||
Goodwill | 7,366 | 7,366 | 7,366 | 7,366 | |||||||
Enterprise Solutions | |||||||||||
Net sales: | |||||||||||
Net sales | 1,165,142 | ||||||||||
Total assets: | |||||||||||
Goodwill | 66,236 | 66,236 | 66,236 | 66,236 | |||||||
Public Sector Solutions | |||||||||||
Net sales: | |||||||||||
Net sales | 506,429 | ||||||||||
Operating Segments | Business Solutions | |||||||||||
Net sales: | |||||||||||
Net sales | 1,027,918 | 1,158,639 | 1,091,182 | ||||||||
Operating income (loss): | |||||||||||
Operating income (loss) | 40,188 | 40,425 | 41,596 | ||||||||
Depreciation and amortization: | |||||||||||
Depreciation and amortization | 632 | 592 | 425 | ||||||||
Total assets: | |||||||||||
Total assets | 274,202 | 249,064 | 274,202 | 249,064 | |||||||
Goodwill | 7,366 | 7,366 | |||||||||
Operating Segments | Enterprise Solutions | |||||||||||
Net sales: | |||||||||||
Net sales | 1,165,142 | 1,131,823 | 1,011,990 | ||||||||
Operating income (loss): | |||||||||||
Operating income (loss) | 61,663 | 50,163 | 42,504 | ||||||||
Depreciation and amortization: | |||||||||||
Depreciation and amortization | 2,318 | 2,163 | 1,784 | ||||||||
Total assets: | |||||||||||
Total assets | 477,296 | 413,921 | 477,296 | 413,921 | |||||||
Goodwill | 66,236 | 66,236 | |||||||||
Operating Segments | Public Sector Solutions | |||||||||||
Net sales: | |||||||||||
Net sales | 506,429 | 621,421 | 589,420 | ||||||||
Operating income (loss): | |||||||||||
Operating income (loss) | (2,260) | 953 | 8,561 | ||||||||
Depreciation and amortization: | |||||||||||
Depreciation and amortization | 112 | 159 | 160 | ||||||||
Total assets: | |||||||||||
Total assets | 66,000 | 75,531 | 66,000 | 75,531 | |||||||
Headquarters/Other | |||||||||||
Operating income (loss): | |||||||||||
Operating income (loss) | (13,905) | (14,014) | (12,141) | ||||||||
Depreciation and amortization: | |||||||||||
Depreciation and amortization | 11,001 | 8,925 | $ 8,084 | ||||||||
Total assets: | |||||||||||
Assets net of intercompany balance eliminations | (12,143) | 9,335 | (12,143) | 9,335 | |||||||
Intersegment Elimination | |||||||||||
Total assets: | |||||||||||
Total assets | $ (19,019) | $ (29,731) | (19,019) | (29,731) | |||||||
Calculated under Revenue Guidance in Effect before Topic 606 | |||||||||||
Net sales: | |||||||||||
Net sales | 3,104,179 | 2,911,883 | |||||||||
Operating income (loss): | |||||||||||
Operating income (loss) | 86,436 | ||||||||||
Income before taxes | $ 89,414 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Business Solutions | |||||||||||
Net sales: | |||||||||||
Net sales | 1,158,639 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Enterprise Solutions | |||||||||||
Net sales: | |||||||||||
Net sales | 1,131,823 | ||||||||||
Calculated under Revenue Guidance in Effect before Topic 606 | Public Sector Solutions | |||||||||||
Net sales: | |||||||||||
Net sales | $ 621,421 |
SEGMENT AND RELATED DISCLOSUR_4
SEGMENT AND RELATED DISCLOSURES - Concentration Risk (Details) - Net Sales | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Geographic Concentration Risk | Foreign | Maximum | |||
Segment Reporting Information | |||
Percentage of sales by segment | 1.00% | 1.00% | 1.00% |
Customer | Single Customer | Maximum | |||
Segment Reporting Information | |||
Percentage of sales by segment | 3.00% | 3.00% | 3.00% |
Customer | Federal Government Agencies | |||
Segment Reporting Information | |||
Percentage of sales by segment | 5.40% | 7.80% | 7.50% |
Customer | Single Federal Government Agency | Maximum | |||
Segment Reporting Information | |||
Percentage of sales by segment | 3.00% | 3.00% | 3.00% |
QUARTERLY FINANCIAL RESULTS (_3
QUARTERLY FINANCIAL RESULTS (UNAUDITED) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Quarterly Financial Results (Unaudited). | |||||||||||
Net sales | $ 709,520 | $ 658,504 | $ 706,570 | $ 624,895 | $ 762,267 | $ 729,230 | $ 749,792 | $ 670,594 | $ 2,699,489 | $ 2,911,883 | $ 2,692,592 |
Cost of sales | 602,718 | 558,060 | 599,102 | 528,523 | 662,737 | 633,087 | 650,122 | 583,861 | 2,288,403 | 2,529,807 | 2,321,435 |
Gross profit | 106,802 | 100,444 | 107,468 | 96,372 | 99,530 | 96,143 | 99,670 | 86,733 | 411,086 | 382,076 | 371,157 |
Selling, general and administrative expenses | 79,518 | 81,494 | 82,521 | 80,900 | 74,939 | 74,404 | 76,289 | 75,281 | 324,433 | 300,913 | 287,231 |
Restructuring and other charges | 967 | 2,695 | 941 | 967 | 3,636 | 3,406 | |||||
Income from operations | 26,317 | 18,950 | 24,947 | 15,472 | 21,896 | 21,739 | 22,440 | 11,452 | 85,686 | 77,527 | 80,520 |
Other income (expense), net | 2,566 | 114 | 182 | 116 | 78 | (8) | 9 | 19 | 2,978 | 98 | (67) |
Income before taxes | 28,883 | 19,064 | 25,129 | 15,588 | 21,974 | 21,731 | 22,449 | 11,471 | 88,664 | 77,625 | 80,453 |
Income tax provision | (7,583) | (5,298) | (6,903) | (4,288) | (1,251) | (8,614) | (8,864) | (4,039) | (24,072) | (22,768) | (32,342) |
Net income | $ 21,300 | $ 13,766 | $ 18,226 | $ 11,300 | $ 20,723 | $ 13,117 | $ 13,585 | $ 7,432 | $ 64,592 | $ 54,857 | $ 48,111 |
Earnings per common share: | |||||||||||
Basic | $ 0.80 | $ 0.52 | $ 0.68 | $ 0.42 | $ 0.77 | $ 0.49 | $ 0.51 | $ 0.28 | $ 2.42 | $ 2.05 | $ 1.81 |
Diluted | $ 0.80 | $ 0.51 | $ 0.68 | $ 0.42 | $ 0.77 | $ 0.49 | $ 0.51 | $ 0.28 | $ 2.41 | $ 2.04 | $ 1.80 |
Denominator: | |||||||||||
Basic | 26,632 | 26,716 | 26,685 | 26,835 | 26,822 | 26,802 | 26,761 | 26,697 | 26,717 | 26,771 | 26,528 |
Diluted | 26,766 | 26,902 | 26,820 | 26,916 | 26,907 | 26,899 | 26,893 | 26,866 | 26,854 | 26,891 | 26,719 |
SCHEDULE II - VALUATION AND Q_2
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Allowance for Sales Returns | |||
Valuation and Qualifying Accounts | |||
Beginning Balance | $ 3,308 | $ 3,709 | $ 3,235 |
Charged to Costs and Expenses | 28,504 | 32,399 | 32,909 |
Deductions/Write-Offs | (28,415) | (32,800) | (32,435) |
Ending Balance | 3,397 | 3,308 | 3,709 |
Allowance for Doubtful Accounts | |||
Valuation and Qualifying Accounts | |||
Beginning Balance | 2,726 | 2,310 | 2,219 |
Charged to Costs and Expenses | 1,680 | 1,658 | 360 |
Deductions/Write-Offs | (1,304) | (1,242) | (269) |
Ending Balance | $ 3,102 | $ 2,726 | $ 2,310 |