Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | Apr. 27, 2020 | |
Document And Entity Information | ||
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2020 | |
Entity Registrant Name | PC CONNECTION INC | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 26,107,451 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0001050377 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Current Assets: | ||
Cash and cash equivalents | $ 111,323 | $ 90,060 |
Accounts receivable, net | 485,316 | 549,626 |
Inventories, net | 136,985 | 124,666 |
Income taxes receivable | 1,388 | 1,388 |
Prepaid expenses and other current assets | 13,971 | 10,671 |
Total current assets | 748,983 | 776,411 |
Property and equipment, net | 65,754 | 64,226 |
Right-of-use assets | 15,776 | 13,842 |
Goodwill | 73,602 | 73,602 |
Intangible assets, net | 8,002 | 8,307 |
Other assets | 1,075 | 947 |
Total Assets | 913,192 | 937,335 |
Current Liabilities: | ||
Accounts payable | 219,917 | 235,641 |
Accrued payroll | 20,479 | 28,050 |
Accrued expenses and other liabilities | 36,913 | 45,232 |
Total current liabilities | 277,309 | 308,923 |
Deferred income taxes | 20,170 | 20,170 |
Noncurrent operating lease liabilities | 12,551 | 10,330 |
Other liabilities | 600 | 600 |
Total Liabilities | 310,630 | 340,023 |
Stockholders' Equity: | ||
Common stock | 289 | 288 |
Additional paid-in capital | 118,620 | 118,045 |
Retained earnings | 529,590 | 514,694 |
Treasury stock, at cost | (45,937) | (35,715) |
Total Stockholders' Equity | 602,562 | 597,312 |
Total Liabilities and Stockholders' Equity | $ 913,192 | $ 937,335 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Condensed Consolidated Statements of Income | ||
Net sales | $ 711,850 | $ 632,921 |
Cost of sales | 598,732 | 533,574 |
Gross profit | 113,118 | 99,347 |
Selling, general and administrative expenses | 92,468 | 81,235 |
Restructuring and other charges | 703 | |
Income from operations | 20,650 | 17,409 |
Interest income, net | 92 | 198 |
Income before taxes | 20,742 | 17,607 |
Income tax provision | (5,846) | (4,880) |
Net income | $ 14,896 | $ 12,727 |
Earnings per common share: | ||
Basic | $ 0.57 | $ 0.48 |
Diluted | $ 0.56 | $ 0.48 |
Shares used in computation of earnings per common share: | ||
Basic | 26,236 | 26,359 |
Diluted | 26,421 | 26,525 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Total |
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) | |||
Stock-based compensation expense | 269 | 269 | |||
Restricted stock units vested (in shares) | 3 | ||||
Issuance of common stock under Employee Stock Purchase Plan | (13) | (13) | |||
Repurchase of common stock for treasury | $ (1,294) | (1,294) | |||
Repurchase of common stock for treasury (in shares) | (43) | ||||
Net income | 12,727 | 12,727 | |||
Balance at Mar. 31, 2019 | $ 288 | 116,098 | 453,737 | $ (32,531) | 537,592 |
Balance (in shares) at Mar. 31, 2019 | 28,790 | (2,434) | |||
Balance at Dec. 31, 2019 | $ 288 | 118,045 | 514,694 | $ (35,715) | 597,312 |
Balance (in shares) at Dec. 31, 2019 | 28,870 | (2,526) | |||
Stock-based compensation expense | 624 | 624 | |||
Restricted stock units vested | $ 1 | 1 | |||
Restricted stock units vested (in shares) | 4 | ||||
Shares withheld for taxes paid on stock awards | (49) | (49) | |||
Repurchase of common stock for treasury | $ (10,222) | (10,222) | |||
Repurchase of common stock for treasury (in shares) | (247) | ||||
Net income | 14,896 | 14,896 | |||
Balance at Mar. 31, 2020 | $ 289 | $ 118,620 | $ 529,590 | $ (45,937) | $ 602,562 |
Balance (in shares) at Mar. 31, 2020 | 28,874 | (2,773) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash Flows provided by Operating Activities: | ||
Net income | $ 14,896 | $ 12,727 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 3,147 | 3,709 |
Provision for doubtful accounts | 2,833 | 256 |
Stock-based compensation expense | 624 | 269 |
Changes in assets and liabilities: | ||
Accounts receivable | 61,477 | 13,494 |
Inventories | (12,319) | (18,470) |
Prepaid expenses, income tax receivables and other current assets | (3,300) | 3,322 |
Other non-current assets | (98) | 119 |
Accounts payable | (15,499) | 2,121 |
Accrued expenses and other liabilities | (7,205) | 551 |
Net cash provided by operating activities | 44,556 | 18,098 |
Cash Flows used in Investing Activities: | ||
Purchases of equipment | (4,595) | (6,572) |
Net cash used in investing activities | (4,595) | (6,572) |
Cash Flows used in Financing Activities: | ||
Purchase of treasury shares | (10,222) | (1,294) |
Dividend payment | (8,427) | (8,452) |
Issuance of stock under Employee Stock Purchase Plan | (13) | |
Payment of payroll taxes on stock-based compensation through shares withheld | (49) | |
Net cash used in financing activities | (18,698) | (9,759) |
Increase in cash and cash equivalents | 21,263 | 1,767 |
Cash and cash equivalents, beginning of period | 90,060 | 91,703 |
Cash and cash equivalents, end of period | 111,323 | 93,470 |
Non-cash Investing and Financing Activities: | ||
Accrued capital expenditures | 1,237 | 1,987 |
Supplemental Cash Flow Information: | ||
Income taxes paid | $ 369 | $ 291 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2020 | |
Basis of Presentation | |
Basis of Presentation | Note 1–Basis of Presentation The accompanying unaudited condensed consolidated financial statements of PC Connection, Inc. and its subsidiaries (the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting and in accordance with accounting principles generally accepted in the United States of America. Such principles were applied on a basis consistent with the accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission (the “SEC”). The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements contained in the Company’s Annual Report on Form 10-K. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods reported and of the Company’s financial condition as of the date of the interim balance sheet. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated through the date of issuance of these financial statements. The operating results for the three months ended March 31, 2020 may not be indicative of the results expected for any succeeding quarter or the entire year ending December 31, 2020. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the amounts reported in the accompanying condensed consolidated financial statements. Actual results could differ from those estimates. Adoption of Recently Issued Financial Accounting Standards 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. The Company has adopted this standard beginning January 1, 2020 for both interim and annual reporting periods. The Company performs an annual goodwill impairment assessment in the fourth quarter of each calendar year, and more frequently if events or circumstances occur that would indicate a potential decline in fair value. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses , which adds an impairment model for financial instruments, including trade receivables, that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of lifetime expected losses, which is expected to result in more timely recognition of such losses. The Company adopted this new standard beginning January 1, 2020 for both interim and annual reporting periods. The impact of the adoption of this standard was limited to the Company’s trade receivables as it does not currently have any other financial instruments that would be affected by this standard. Customers are evaluated for their credit worthiness at the time of contract inception. Based on the results of the credit assessments, the Company will extend credit under its standard payment terms or may request alternative early payment actions. In addition, the Company analyzes its aged receivables for collectability at least quarterly, and if necessary, records a reserve against those receivable it determines may not be collectable. As such, the adoption of this ASU did not have a material impact on the Company’s consolidated financial statements. Recently Issued Financial Accounting Standards In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . This guidance provides temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. This ASU is applied prospectively and is effective immediately through December 31, 2022. The Company’s secured credit facility agreement references LIBOR, which is expected to be discontinued as a result of reference rate reform. The Company expects to adopt the guidance during the allowable time period but does not believe the adoption will have a material effect on its consolidated financial statements. |
REVENUE
REVENUE | 3 Months Ended |
Mar. 31, 2020 | |
Revenue | |
Revenue | Note 2–Revenue The Company disaggregates revenue from its arrangements with customers by type of products and services, as it believes 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 three months ended March 31, 2020 and 2019, along with the reportable segment for each category. Three Months Ended March 31, 2020 Business Enterprise Public Sector Total Notebooks/Mobility $ 91,613 $ 79,316 $ 28,966 $ 199,895 Desktops 33,294 34,209 10,472 77,975 Software 36,398 26,182 7,295 69,875 Servers/Storage 25,830 16,234 11,746 53,810 Net/Com Products 21,012 24,946 9,810 55,768 Displays and Sound 23,946 23,568 11,443 58,957 Accessories 28,021 90,974 8,809 127,804 Other Hardware/Services 18,671 37,989 11,106 67,766 Total net sales $ 278,785 $ 333,418 $ 99,647 $ 711,850 Three Months Ended March 31, 2019 Business Enterprise Public Sector Total Notebooks/Mobility $ 80,935 $ 66,565 $ 27,375 $ 174,875 Desktops 26,784 35,969 10,887 73,640 Software 34,688 27,776 9,272 71,736 Servers/Storage 25,717 17,425 12,416 55,558 Net/Com Products 22,239 14,628 10,144 47,011 Displays and Sound 20,332 26,935 9,879 57,146 Accessories 22,053 56,515 9,645 88,213 Other Hardware/Services 20,184 29,822 14,736 64,742 Total net sales $ 252,932 $ 275,635 $ 104,354 $ 632,921 Contract Balances The following table provides information about contract liabilities from arrangements with customers as of March 31, 2020 and December 31, 2019. March 31, 2020 December 31, 2019 Contract liabilities, which are included in "Accrued expenses and other liabilities" $ 2,532 $ 5,942 Changes in the contract liability balances during the three months ended March 31, 2020 are as follows (in thousands): 2020 Balances at December 31, 2019 $ 5,942 Cash received in advance and not recognized as revenue 4,852 Amounts recognized as revenue as performance obligations satisfied (8,262) Balances at March 31, 2020 $ 2,532 |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share | |
Earnings Per Share | Note 3–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 non-vested stock units and stock options outstanding, if dilutive. The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended March 31 , 2020 2019 Numerator: Net income $ 14,896 $ 12,727 Denominator: Denominator for basic earnings per share 26,236 26,359 Dilutive effect of unvested employee stock awards 185 166 Denominator for diluted earnings per share 26,421 26,525 Earnings per share: Basic $ 0.57 $ 0.48 Diluted $ 0.56 $ 0.48 For the three months ended March 31, 2020 and 2019, we had no outstanding non-vested stock units that were excluded from the computation of diluted earnings per share because including them would have had an anti-dilutive effect. |
LEASES
LEASES | 3 Months Ended |
Mar. 31, 2020 | |
Leases | |
Leases | Note 4—Leases The Company leases certain facilities from a related party, which is a company affiliated with us through common ownership. Included in the right-of-use asset as of March 31, 2020 was $4,353 and a corresponding lease liability of $4,353 associated with related party leases. As of March 31, 2020, there were no additional operating leases that have not yet commenced. Refer to the following table for quantitative information related to the Company’s leases: Three months ended March 31, 2020 Three months ended March 31, 2019 Related Parties Others Total Related Parties Others Total Lease Cost Capitalized operating lease cost $ 379 $ 784 $ 1,163 $ 379 $ 831 $ 1,210 Short-term lease cost 41 2 43 41 2 43 Total lease cost $ 420 $ 786 $ 1,206 $ 420 $ 833 $ 1,253 Other Information Cash paid for amounts included in the measurement of lease liabilities and capitalized operating leases: Operating cash flows $ 379 $ 781 $ 1,160 $ 379 $ 884 $ 1,263 Weighted-average remaining lease term (in years): Capitalized operating leases 3.65 6.29 5.60 4.59 10.55 8.64 Weighted-average discount rate: Capitalized operating leases As of March 31, 2020, future lease payments over the remaining term of capitalized operating leases were as follows: For the Years Ended December 31, Related Parties Others Total 2020, excluding the three months ended March 31, 2020 $ 1,006 $ 2,489 $ 3,495 2021 1,253 3,091 4,344 2022 1,253 2,111 3,364 2023 1,149 1,675 2,824 2024 — 1,699 1,699 2025 — 1,594 1,594 Thereafter — 888 888 $ 4,661 $ 13,547 $ 18,208 Imputed interest (1,595) Lease liability balance at March 31, 2020 $ 16,613 As of March 31, 2020, the ROU asset had a balance of $15,776. The long-term lease liability was $12,551 and the short-term lease liability, which is included in accrued expenses and other liabilities in the consolidated balance sheets, was $4,062 . |
SEGMENT INFORMATION
SEGMENT INFORMATION | 3 Months Ended |
Mar. 31, 2020 | |
Segment Information | |
Segment Information | Note 5–Segment Information 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 reportable 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 governmental and educational institutions. In addition, the Headquarters/Other group provides services in areas such as finance, human resources, information technology, marketing, and product management. Most of the operating costs associated with the Headquarters/Other group functions are charged to the operating segments based on their estimated usage of the underlying functions. We report these charges to the operating segments as “Allocations.” Certain headquarters costs relating to executive oversight and other fiduciary functions that are not allocated to the operating segments are included under the heading of Headquarters/Other in the tables below. Segment information applicable to our reportable operating segments for the three months ended March 31, 2020 and 2019 is shown below: Three Months Ended March 31 , 2020 2019 Net sales: Business Solutions $ 278,785 $ 252,932 Enterprise Solutions 333,418 275,635 Public Sector Solutions 99,647 104,354 Total net sales $ 711,850 $ 632,921 Operating income (loss): Business Solutions $ 11,301 $ 8,765 Enterprise Solutions 16,722 15,473 Public Sector Solutions (3,322) (3,066) Headquarters/Other (4,051) (3,763) Total operating income 20,650 17,409 Interest income, net 92 198 Income before taxes $ 20,742 $ 17,607 Selected operating expense: Depreciation and amortization: Business Solutions $ 159 $ 150 Enterprise Solutions 681 639 Public Sector Solutions 15 21 Headquarters/Other 2,292 2,899 Total depreciation and amortization $ 3,147 $ 3,709 Total assets: Business Solutions $ 319,909 $ 280,889 Enterprise Solutions 536,672 484,497 Public Sector Solutions 52,285 55,536 Headquarters/Other 4,326 7,527 Total assets $ 913,192 $ 828,449 The assets of our three operating segments presented above consist primarily of accounts receivable, net intercompany receivable, goodwill, and other intangibles. Assets reported under the Headquarters/Other group are managed by corporate headquarters, including cash, inventory, property and equipment, right-of-use assets, and intercompany balance, net. As of March 31, 2020 and 2019, total assets for the Headquarters/Other group are presented net of intercompany balance eliminations of $7,024 and $11,201, respectively. Our capital expenditures consist largely of IT hardware and software purchased to maintain or upgrade our management information systems. These information systems serve all of our segments, to varying degrees, and accordingly, our CODM does not evaluate capital expenditures on a segment-by-segment basis. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies | |
Commitments and Contingencies | Note 6–Commitments and Contingencies We are subject to various legal proceedings and claims, including patent infringement claims, which have arisen during the ordinary course of business. In the opinion of management, the outcome of such matters is not expected to have a material, adverse effect on our financial position, results of operations, and/or cash flows. 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, adverse impact on our financial position, results of operations, and/or cash flows. |
BANK BORROWINGS
BANK BORROWINGS | 3 Months Ended |
Mar. 31, 2020 | |
Bank Borrowings | |
Bank Borrowings | Note 7–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”) (0.99% at March 31, 2020), plus a spread based on our funded debt ratio, or in the absence of LIBOR, the prime rate (3.25% at March, 31 2020). 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 trailing twelve months 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 trailing twelve months Adjusted EBITDA could limit our potential borrowing capacity under the credit facility. We had no outstanding bank borrowings at March 31, 2020 or 2019, and accordingly, the entire $50,000 facility was available for borrowings under the credit facility. |
BASIS OF PRESENTATION (Policies
BASIS OF PRESENTATION (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Basis of Presentation | |
Principles of Consolidation | The accompanying unaudited condensed consolidated financial statements of PC Connection, Inc. and its subsidiaries (the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting and in accordance with accounting principles generally accepted in the United States of America. Such principles were applied on a basis consistent with the accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission (the “SEC”). The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements contained in the Company’s Annual Report on Form 10-K. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods reported and of the Company’s financial condition as of the date of the interim balance sheet. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated through the date of issuance of these financial statements. The operating results for the three months ended March 31, 2020 may not be indicative of the results expected for any succeeding quarter or the entire year ending December 31, 2020. |
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 amounts reported in the accompanying condensed consolidated financial statements. Actual results could differ from those estimates. |
Adoption of Recently Issued Financial Accounting Standards and Recently Issued Financial Accounting Standards | Adoption of Recently Issued Financial Accounting Standards 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. The Company has adopted this standard beginning January 1, 2020 for both interim and annual reporting periods. The Company performs an annual goodwill impairment assessment in the fourth quarter of each calendar year, and more frequently if events or circumstances occur that would indicate a potential decline in fair value. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses , which adds an impairment model for financial instruments, including trade receivables, that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of lifetime expected losses, which is expected to result in more timely recognition of such losses. The Company adopted this new standard beginning January 1, 2020 for both interim and annual reporting periods. The impact of the adoption of this standard was limited to the Company’s trade receivables as it does not currently have any other financial instruments that would be affected by this standard. Customers are evaluated for their credit worthiness at the time of contract inception. Based on the results of the credit assessments, the Company will extend credit under its standard payment terms or may request alternative early payment actions. In addition, the Company analyzes its aged receivables for collectability at least quarterly, and if necessary, records a reserve against those receivable it determines may not be collectable. As such, the adoption of this ASU did not have a material impact on the Company’s consolidated financial statements. Recently Issued Financial Accounting Standards In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . This guidance provides temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. This ASU is applied prospectively and is effective immediately through December 31, 2022. The Company’s secured credit facility agreement references LIBOR, which is expected to be discontinued as a result of reference rate reform. The Company expects to adopt the guidance during the allowable time period but does not believe the adoption will have a material effect on its consolidated financial statements. |
REVENUE (Tables)
REVENUE (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Revenue | |
Schedule of disaggregation of revenue from contracts with customers | Three Months Ended March 31, 2020 Business Enterprise Public Sector Total Notebooks/Mobility $ 91,613 $ 79,316 $ 28,966 $ 199,895 Desktops 33,294 34,209 10,472 77,975 Software 36,398 26,182 7,295 69,875 Servers/Storage 25,830 16,234 11,746 53,810 Net/Com Products 21,012 24,946 9,810 55,768 Displays and Sound 23,946 23,568 11,443 58,957 Accessories 28,021 90,974 8,809 127,804 Other Hardware/Services 18,671 37,989 11,106 67,766 Total net sales $ 278,785 $ 333,418 $ 99,647 $ 711,850 Three Months Ended March 31, 2019 Business Enterprise Public Sector Total Notebooks/Mobility $ 80,935 $ 66,565 $ 27,375 $ 174,875 Desktops 26,784 35,969 10,887 73,640 Software 34,688 27,776 9,272 71,736 Servers/Storage 25,717 17,425 12,416 55,558 Net/Com Products 22,239 14,628 10,144 47,011 Displays and Sound 20,332 26,935 9,879 57,146 Accessories 22,053 56,515 9,645 88,213 Other Hardware/Services 20,184 29,822 14,736 64,742 Total net sales $ 252,932 $ 275,635 $ 104,354 $ 632,921 |
Schedule of information on contract liability | March 31, 2020 December 31, 2019 Contract liabilities, which are included in "Accrued expenses and other liabilities" $ 2,532 $ 5,942 Changes in the contract liability balances during the three months ended March 31, 2020 are as follows (in thousands): 2020 Balances at December 31, 2019 $ 5,942 Cash received in advance and not recognized as revenue 4,852 Amounts recognized as revenue as performance obligations satisfied (8,262) Balances at March 31, 2020 $ 2,532 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share | |
Computation of basic and diluted earnings per share | The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended March 31 , 2020 2019 Numerator: Net income $ 14,896 $ 12,727 Denominator: Denominator for basic earnings per share 26,236 26,359 Dilutive effect of unvested employee stock awards 185 166 Denominator for diluted earnings per share 26,421 26,525 Earnings per share: Basic $ 0.57 $ 0.48 Diluted $ 0.56 $ 0.48 |
LEASES (Tables)
LEASES (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Leases | |
Schedule of lease cost | Three months ended March 31, 2020 Three months ended March 31, 2019 Related Parties Others Total Related Parties Others Total Lease Cost Capitalized operating lease cost $ 379 $ 784 $ 1,163 $ 379 $ 831 $ 1,210 Short-term lease cost 41 2 43 41 2 43 Total lease cost $ 420 $ 786 $ 1,206 $ 420 $ 833 $ 1,253 Other Information Cash paid for amounts included in the measurement of lease liabilities and capitalized operating leases: Operating cash flows $ 379 $ 781 $ 1,160 $ 379 $ 884 $ 1,263 Weighted-average remaining lease term (in years): Capitalized operating leases 3.65 6.29 5.60 4.59 10.55 8.64 Weighted-average discount rate: Capitalized operating leases |
Schedule of future lease payments on capitalized operating leases | As of March 31, 2020, future lease payments over the remaining term of capitalized operating leases were as follows: For the Years Ended December 31, Related Parties Others Total 2020, excluding the three months ended March 31, 2020 $ 1,006 $ 2,489 $ 3,495 2021 1,253 3,091 4,344 2022 1,253 2,111 3,364 2023 1,149 1,675 2,824 2024 — 1,699 1,699 2025 — 1,594 1,594 Thereafter — 888 888 $ 4,661 $ 13,547 $ 18,208 Imputed interest (1,595) Lease liability balance at March 31, 2020 $ 16,613 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Segment Information | |
Segment information applicable to reportable operating segments | Segment information applicable to our reportable operating segments for the three months ended March 31, 2020 and 2019 is shown below: Three Months Ended March 31 , 2020 2019 Net sales: Business Solutions $ 278,785 $ 252,932 Enterprise Solutions 333,418 275,635 Public Sector Solutions 99,647 104,354 Total net sales $ 711,850 $ 632,921 Operating income (loss): Business Solutions $ 11,301 $ 8,765 Enterprise Solutions 16,722 15,473 Public Sector Solutions (3,322) (3,066) Headquarters/Other (4,051) (3,763) Total operating income 20,650 17,409 Interest income, net 92 198 Income before taxes $ 20,742 $ 17,607 Selected operating expense: Depreciation and amortization: Business Solutions $ 159 $ 150 Enterprise Solutions 681 639 Public Sector Solutions 15 21 Headquarters/Other 2,292 2,899 Total depreciation and amortization $ 3,147 $ 3,709 Total assets: Business Solutions $ 319,909 $ 280,889 Enterprise Solutions 536,672 484,497 Public Sector Solutions 52,285 55,536 Headquarters/Other 4,326 7,527 Total assets $ 913,192 $ 828,449 |
REVENUE - Disaggregation of Rev
REVENUE - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Disaggregation of revenue | ||
Net sales | $ 711,850 | $ 632,921 |
Notebooks/Mobility | ||
Disaggregation of revenue | ||
Net sales | 199,895 | 174,875 |
Desktops | ||
Disaggregation of revenue | ||
Net sales | 77,975 | 73,640 |
Software | ||
Disaggregation of revenue | ||
Net sales | 69,875 | 71,736 |
Servers/Storage | ||
Disaggregation of revenue | ||
Net sales | 53,810 | 55,558 |
Net/Com Products | ||
Disaggregation of revenue | ||
Net sales | 55,768 | 47,011 |
Displays and Sound | ||
Disaggregation of revenue | ||
Net sales | 58,957 | 57,146 |
Accessories | ||
Disaggregation of revenue | ||
Net sales | 127,804 | 88,213 |
Other Hardware/Services | ||
Disaggregation of revenue | ||
Net sales | 67,766 | 64,742 |
Business Solutions | ||
Disaggregation of revenue | ||
Net sales | 278,785 | 252,932 |
Business Solutions | Notebooks/Mobility | ||
Disaggregation of revenue | ||
Net sales | 91,613 | 80,935 |
Business Solutions | Desktops | ||
Disaggregation of revenue | ||
Net sales | 33,294 | 26,784 |
Business Solutions | Software | ||
Disaggregation of revenue | ||
Net sales | 36,398 | 34,688 |
Business Solutions | Servers/Storage | ||
Disaggregation of revenue | ||
Net sales | 25,830 | 25,717 |
Business Solutions | Net/Com Products | ||
Disaggregation of revenue | ||
Net sales | 21,012 | 22,239 |
Business Solutions | Displays and Sound | ||
Disaggregation of revenue | ||
Net sales | 23,946 | 20,332 |
Business Solutions | Accessories | ||
Disaggregation of revenue | ||
Net sales | 28,021 | 22,053 |
Business Solutions | Other Hardware/Services | ||
Disaggregation of revenue | ||
Net sales | 18,671 | 20,184 |
Enterprise Solutions | ||
Disaggregation of revenue | ||
Net sales | 333,418 | 275,635 |
Enterprise Solutions | Notebooks/Mobility | ||
Disaggregation of revenue | ||
Net sales | 79,316 | 66,565 |
Enterprise Solutions | Desktops | ||
Disaggregation of revenue | ||
Net sales | 34,209 | 35,969 |
Enterprise Solutions | Software | ||
Disaggregation of revenue | ||
Net sales | 26,182 | 27,776 |
Enterprise Solutions | Servers/Storage | ||
Disaggregation of revenue | ||
Net sales | 16,234 | 17,425 |
Enterprise Solutions | Net/Com Products | ||
Disaggregation of revenue | ||
Net sales | 24,946 | 14,628 |
Enterprise Solutions | Displays and Sound | ||
Disaggregation of revenue | ||
Net sales | 23,568 | 26,935 |
Enterprise Solutions | Accessories | ||
Disaggregation of revenue | ||
Net sales | 90,974 | 56,515 |
Enterprise Solutions | Other Hardware/Services | ||
Disaggregation of revenue | ||
Net sales | 37,989 | 29,822 |
Public Sector Solutions | ||
Disaggregation of revenue | ||
Net sales | 99,647 | 104,354 |
Public Sector Solutions | Notebooks/Mobility | ||
Disaggregation of revenue | ||
Net sales | 28,966 | 27,375 |
Public Sector Solutions | Desktops | ||
Disaggregation of revenue | ||
Net sales | 10,472 | 10,887 |
Public Sector Solutions | Software | ||
Disaggregation of revenue | ||
Net sales | 7,295 | 9,272 |
Public Sector Solutions | Servers/Storage | ||
Disaggregation of revenue | ||
Net sales | 11,746 | 12,416 |
Public Sector Solutions | Net/Com Products | ||
Disaggregation of revenue | ||
Net sales | 9,810 | 10,144 |
Public Sector Solutions | Displays and Sound | ||
Disaggregation of revenue | ||
Net sales | 11,443 | 9,879 |
Public Sector Solutions | Accessories | ||
Disaggregation of revenue | ||
Net sales | 8,809 | 9,645 |
Public Sector Solutions | Other Hardware/Services | ||
Disaggregation of revenue | ||
Net sales | $ 11,106 | $ 14,736 |
REVENUE - Contract Balances (De
REVENUE - Contract Balances (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | |
Change in contract liability | ||
Beginning balance - Contract liability | $ 5,942 | |
Cash received in advance and not recognized as revenue | 4,852 | |
Amounts recognized as revenue as performance obligations satisfied | (8,262) | |
Ending balance - Contract liability | 2,532 | |
Accrued expenses and other liabilities | ||
Contract liabilities | ||
Contract liabilities | $ 2,532 | $ 5,942 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Numerator: | ||
Net income | $ 14,896 | $ 12,727 |
Denominator: | ||
Denominator for basic earnings per share | 26,236 | 26,359 |
Dilutive effect of unvested employee stock awards | 185 | 166 |
Denominator for diluted earnings per share | 26,421 | 26,525 |
Earnings per share: | ||
Basic | $ 0.57 | $ 0.48 |
Diluted | $ 0.56 | $ 0.48 |
Additional Disclosure | ||
Employee stock awards excluded from computation of diluted earnings per share | 0 | 0 |
LEASES - Lease Cost and Other I
LEASES - Lease Cost and Other Information (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020USD ($)lease | Mar. 31, 2019USD ($) | Dec. 31, 2019USD ($) | |
Leases | |||
Right-of-use assets | $ 15,776 | $ 13,842 | |
Lease liability | $ 16,613 | ||
Number of additional operating or financing leases not yet commenced | lease | 0 | ||
Lease Cost | |||
Capitalized operating lease cost | $ 1,163 | $ 1,210 | |
Short-term lease cost | 43 | 43 | |
Total lease cost | 1,206 | 1,253 | |
Cash paid for amounts included in the measurement of lease liabilities and capitalized operating leases: | |||
Operating cash flows | $ 1,160 | $ 1,263 | |
Weighted-average remaining lease term - Capitalized operating leases | 5 years 7 months 6 days | 8 years 7 months 21 days | |
Weighted-average discount rate - Capitalized operating leases | 3.92% | 3.92% | |
Related Parties | |||
Leases | |||
Right-of-use assets | $ 4,353 | ||
Lease liability | 4,353 | ||
Lease Cost | |||
Capitalized operating lease cost | 379 | $ 379 | |
Short-term lease cost | 41 | 41 | |
Total lease cost | 420 | 420 | |
Cash paid for amounts included in the measurement of lease liabilities and capitalized operating leases: | |||
Operating cash flows | $ 379 | $ 379 | |
Weighted-average remaining lease term - Capitalized operating leases | 3 years 7 months 24 days | 4 years 7 months 2 days | |
Weighted-average discount rate - Capitalized operating leases | 3.92% | 3.92% | |
Others | |||
Lease Cost | |||
Capitalized operating lease cost | $ 784 | $ 831 | |
Short-term lease cost | 2 | 2 | |
Total lease cost | 786 | 833 | |
Cash paid for amounts included in the measurement of lease liabilities and capitalized operating leases: | |||
Operating cash flows | $ 781 | $ 884 | |
Weighted-average remaining lease term - Capitalized operating leases | 6 years 3 months 15 days | 10 years 6 months 18 days | |
Weighted-average discount rate - Capitalized operating leases | 3.92% | 3.92% |
LEASES - Future Lease Payments
LEASES - Future Lease Payments (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Future lease payments over the remaining term of capitalized operating leases | ||
2020, excluding the three months ended March 31, 2020 | $ 3,495 | |
2021 | 4,344 | |
2022 | 3,364 | |
2023 | 2,824 | |
2024 | 1,699 | |
2025 | 1,594 | |
Thereafter | 888 | |
Total | 18,208 | |
Imputed interest | (1,595) | |
Lease liability balance | 16,613 | |
Right-of-use assets | 15,776 | $ 13,842 |
Long-term lease liability | 12,551 | $ 10,330 |
Short-term lease liability | $ 4,062 | |
Current operating lease liability, Statement of Financial Position | us-gaap:AccruedLiabilitiesAndOtherLiabilities | |
Related Parties | ||
Future lease payments over the remaining term of capitalized operating leases | ||
2020, excluding the three months ended March 31, 2020 | $ 1,006 | |
2021 | 1,253 | |
2022 | 1,253 | |
2023 | 1,149 | |
Total | 4,661 | |
Lease liability balance | 4,353 | |
Right-of-use assets | 4,353 | |
Others | ||
Future lease payments over the remaining term of capitalized operating leases | ||
2020, excluding the three months ended March 31, 2020 | 2,489 | |
2021 | 3,091 | |
2022 | 2,111 | |
2023 | 1,675 | |
2024 | 1,699 | |
2025 | 1,594 | |
Thereafter | 888 | |
Total | $ 13,547 |
SEGMENT INFORMATION - Segment I
SEGMENT INFORMATION - Segment Information Applicable to Reportable Operating Segments (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020USD ($)segment | Mar. 31, 2019USD ($) | Dec. 31, 2019USD ($) | |
Segment Reporting Information | |||
Number of reportable segments | segment | 3 | ||
Number of operating segments | segment | 3 | ||
Net sales: | |||
Net sales | $ 711,850 | $ 632,921 | |
Operating income (loss): | |||
Operating income (loss) | 20,650 | 17,409 | |
Interest income, net | 92 | 198 | |
Income before taxes | 20,742 | 17,607 | |
Depreciation and amortization: | |||
Depreciation and amortization | 3,147 | 3,709 | |
Total assets: | |||
Total assets | 913,192 | 828,449 | $ 937,335 |
Goodwill | 73,602 | $ 73,602 | |
Business Solutions | |||
Net sales: | |||
Net sales | 278,785 | 252,932 | |
Enterprise Solutions | |||
Net sales: | |||
Net sales | 333,418 | 275,635 | |
Public Sector Solutions | |||
Net sales: | |||
Net sales | 99,647 | 104,354 | |
Operating Segments | Business Solutions | |||
Net sales: | |||
Net sales | 278,785 | 252,932 | |
Operating income (loss): | |||
Operating income (loss) | 11,301 | 8,765 | |
Depreciation and amortization: | |||
Depreciation and amortization | 159 | 150 | |
Total assets: | |||
Total assets | 319,909 | 280,889 | |
Operating Segments | Enterprise Solutions | |||
Net sales: | |||
Net sales | 333,418 | 275,635 | |
Operating income (loss): | |||
Operating income (loss) | 16,722 | 15,473 | |
Depreciation and amortization: | |||
Depreciation and amortization | 681 | 639 | |
Total assets: | |||
Total assets | 536,672 | 484,497 | |
Operating Segments | Public Sector Solutions | |||
Net sales: | |||
Net sales | 99,647 | 104,354 | |
Operating income (loss): | |||
Operating income (loss) | (3,322) | (3,066) | |
Depreciation and amortization: | |||
Depreciation and amortization | 15 | 21 | |
Total assets: | |||
Total assets | 52,285 | 55,536 | |
Headquarters/Other | |||
Operating income (loss): | |||
Operating income (loss) | (4,051) | (3,763) | |
Depreciation and amortization: | |||
Depreciation and amortization | 2,292 | 2,899 | |
Total assets: | |||
Assets net of intercompany balance eliminations | 4,326 | 7,527 | |
Intersegment Elimination | |||
Total assets: | |||
Total assets | $ (7,024) | $ (11,201) |
BANK BORROWINGS (Details)
BANK BORROWINGS (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
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 | 3.25% | |
One-month LIBOR rate | ||
Subordinated Borrowing | ||
Debt instrument, interest rate | 0.99% |