b
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
Commission file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of | (I.R.S. Employer Identification No.) |
incorporation or organization) |
(Address of principal executive offices) | (Zip Code) |
( | ||
(Registrant's telephone number, including area code) |
Former name, former address and former fiscal year, if changed since last report: N/A
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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Large accelerated filer ☐ | |||
Non-accelerated filer ☐ | Smaller reporting company | ||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
The number of shares outstanding of the issuer’s common stock as of July 29, 2022 was
PC CONNECTION, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1FINANCIAL STATEMENTS
PC CONNECTION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(amounts in thousands)
June 30, | December 31, | ||||||
| 2022 |
| 2021 |
| |||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | | $ | | |||
Accounts receivable, net |
| |
| | |||
Inventories, net |
| |
| | |||
Prepaid expenses and other current assets |
| |
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Total current assets |
| |
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Property and equipment, net |
| |
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Right-of-use assets | | | |||||
Goodwill |
| |
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Intangibles, net |
| |
| | |||
Other assets |
| |
| | |||
Total Assets | $ | | $ | | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current Liabilities: | |||||||
Accounts payable | $ | | $ | | |||
Accrued payroll |
| |
| | |||
Accrued expenses and other liabilities |
| |
| | |||
Total current liabilities |
| |
| | |||
Deferred income taxes |
| |
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Noncurrent operating lease liabilities | | | |||||
Other liabilities |
| |
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Total Liabilities |
| |
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Stockholders’ Equity: | |||||||
Common Stock |
| |
| | |||
Additional paid-in capital |
| |
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Retained earnings |
| |
| | |||
Treasury stock, at cost | ( | ( | |||||
Total Stockholders’ Equity |
| |
| | |||
Total Liabilities and Stockholders’ Equity | $ | | $ | | |||
See notes to unaudited condensed consolidated financial statements.
1
PC CONNECTION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(amounts in thousands, except per share data)
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| |||||
Net sales | $ | | $ | | $ | | $ | | |||||
Cost of sales |
| |
| |
| |
| | |||||
Gross profit |
| |
| |
| |
| | |||||
Selling, general and administrative expenses |
| |
| |
| |
| | |||||
Income from operations |
| |
| |
| |
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Other income, net |
| |
| |
| |
| | |||||
Income before taxes |
| |
| |
| |
| | |||||
Income tax provision |
| ( |
| ( |
| ( |
| ( | |||||
Net income | $ | | $ | | $ | | $ | | |||||
Earnings per common share: | |||||||||||||
Basic | $ | | $ | | $ | | $ | | |||||
Diluted | $ | | $ | | $ | | $ | | |||||
Shares used in computation of earnings per common share: | |||||||||||||
Basic |
| |
| |
| |
| | |||||
Diluted |
| |
| |
| |
| |
See notes to unaudited condensed consolidated financial statements.
2
PC CONNECTION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(amounts in thousands)
Three Months Ended June 30, 2022 | ||||||||||||||||||||
Common Stock | Additional | Retained | Treasury Shares |
| ||||||||||||||||
| Shares |
| Amount |
| Paid-In Capital |
| Earnings |
| Shares |
| Amount |
| Total |
| ||||||
Balance - March 31, 2022 |
| | $ | | $ | | $ | |
| ( | $ | ( | $ | | ||||||
Stock-based compensation expense |
| — |
| — |
| |
| — |
| — |
| — |
| | ||||||
Restricted stock units vested |
| |
| — |
| — |
| — |
| — |
| — |
| — | ||||||
Shares withheld for taxes paid on stock awards |
| — |
| — |
| ( |
| — |
| — |
| — |
| ( | ||||||
Net income |
| — |
| — |
| — |
| |
| — |
| — |
| | ||||||
Balance - June 30, 2022 |
| | $ | | $ | | $ | |
| ( | $ | ( | $ | | ||||||
Six Months Ended June 30, 2022 | ||||||||||||||||||||
Common Stock | Additional | Retained | Treasury Shares |
| ||||||||||||||||
| Shares |
| Amount |
| Paid-In Capital |
| Earnings |
| Shares |
| Amount |
| Total |
| ||||||
Balance - December 31, 2021 |
| | $ | | $ | | $ | |
| ( | $ | ( | $ | | ||||||
Stock-based compensation expense |
| — |
| — |
| |
| — |
| — |
| — |
| | ||||||
Restricted stock units vested |
| |
| — |
| — |
| — |
| — |
| — |
| — | ||||||
Shares withheld for taxes paid on stock awards |
| — |
| — |
| ( |
| — |
| — |
| — |
| ( | ||||||
Net income |
| — |
| — |
| — |
| |
| — |
| — |
| | ||||||
Balance - June 30, 2022 |
| | $ | | $ | | $ | |
| ( | $ | ( | $ | |
See notes to unaudited condensed consolidated financial statements.
3
Three Months Ended June 30, 2021 | |||||||||||||||||||
Common Stock | Additional | Retained | Treasury Shares | ||||||||||||||||
| Shares |
| Amount |
| Paid-In Capital |
| Earnings |
| Shares |
| Amount |
| Total | ||||||
Balance - March 31, 2021 |
| | $ | | $ | | $ | |
| ( | $ | ( | $ | | |||||
Stock-based compensation expense | — | — | | — | — | — | | ||||||||||||
Restricted stock units vested |
| | — | — | — | — | — |
| — | ||||||||||
Shares withheld for taxes paid on stock awards |
| — | — | ( | — | — | — |
| ( | ||||||||||
Net income |
| — |
| — |
| — |
| |
| — |
| — |
| | |||||
Balance - June 30, 2021 |
| | $ | | $ | | $ | |
| ( | $ | ( | $ | | |||||
Six Months Ended June 30, 2021 | |||||||||||||||||||
Common Stock | Additional | Retained | Treasury Shares | ||||||||||||||||
| Shares |
| Amount |
| Paid-In Capital |
| Earnings |
| Shares |
| Amount |
| Total | ||||||
Balance - December 31, 2020 |
| | $ | | $ | | $ | | ( | $ | ( | $ | | ||||||
Stock-based compensation expense | — | — | | — | — | — | | ||||||||||||
Restricted stock units vested |
| | — | — | — | — | — |
| — | ||||||||||
Shares withheld for taxes paid on stock awards |
| — | — | ( | — | — | — |
| ( | ||||||||||
Net income |
| — |
| — |
| — |
| |
| — |
| — |
| | |||||
Balance - June 30, 2021 |
| | $ | | $ | | $ | |
| ( | $ | ( | $ | |
See notes to unaudited condensed consolidated financial statements.
4
PC CONNECTION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(amounts in thousands)
Six Months Ended | |||||||
June 30, | |||||||
| 2022 |
| 2021 |
| |||
Cash Flows (used in) provided by Operating Activities: | |||||||
Net income | $ | | $ | | |||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | |||||||
Depreciation and amortization |
| |
| | |||
Adjustments to credit losses reserve |
| |
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Stock-based compensation expense |
| |
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Loss on disposal of fixed assets |
| |
| — | |||
Changes in assets and liabilities: | |||||||
Accounts receivable |
| ( |
| | |||
Inventories |
| ( |
| ( | |||
Prepaid expenses and other current assets |
| ( |
| ( | |||
Other non-current assets |
| |
| | |||
Accounts payable |
| ( |
| ( | |||
Accrued expenses and other liabilities |
| ( |
| | |||
Net cash (used in) provided by operating activities |
| ( |
| | |||
Cash Flows used in Investing Activities: | |||||||
Purchases of equipment and capitalized software | ( | ( | |||||
Proceeds from life insurance | — | | |||||
Net cash used in investing activities |
| ( |
| ( | |||
Cash Flows used in Financing Activities: | |||||||
Proceeds from short-term borrowings |
| |
| — | |||
Repayment of short-term borrowings | ( | — | |||||
Dividend payments |
| — |
| ( | |||
Payment of payroll taxes on stock-based compensation through shares withheld |
| ( |
| ( | |||
Net cash used in financing activities |
| ( |
| ( | |||
(Decrease) increase in cash and cash equivalents |
| ( |
| | |||
Cash and cash equivalents, beginning of year |
| |
| | |||
Cash and cash equivalents, end of period | $ | | $ | | |||
Non-cash Investing and Financing Activities: | |||||||
Accrued capital expenditures | $ | | $ | | |||
Supplemental Cash Flow Information: | |||||||
Income taxes paid | $ | | $ | | |||
Interest paid | $ | | $ | — | |||
See notes to unaudited condensed consolidated financial statements.
5
PC CONNECTION, INC. AND SUBSIDIARIES
PART I―FINANCIAL INFORMATION
Item 1―Financial Statements
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
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 (the “SEC”) regarding interim financial reporting and in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). 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, 2021, filed with 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 for the year ended December 31, 2021.
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 and six months ended June 30, 2022 may not be indicative of the results expected for any succeeding quarter or the entire year ending December 31, 2022.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with U.S. GAAP 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. Management bases its estimates and judgments on the information available at the time and various other assumptions believed to be reasonable under the circumstances. By nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ from those estimates and assumptions.
Recently Issued Financial Accounting Standards
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 becomes effective immediately upon the transition from LIBOR. The Company’s secured credit facility agreement references LIBOR, which is expected to be discontinued as a result of reference rate reform. The optional amendments are effective as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the effect of the adoption of this standard on the Company, but does not believe the adoption will have a material effect on its consolidated financial statements.
6
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 June 30, 2022 and 2021, along with the reportable segment for each category.
Three Months Ended June 30, 2022 | ||||||||||||
| Business |
| Enterprise |
| Public Sector |
| Total | |||||
Notebooks/Mobility | $ | | $ | | $ | | $ | | ||||
Desktops | | | | | ||||||||
Software | | | | | ||||||||
Servers/Storage | | | | | ||||||||
Net/Com Products | | | | | ||||||||
Displays and Sound |
| |
| |
| |
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Accessories |
| |
| |
| |
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Other Hardware/Services |
| |
| |
| |
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Total net sales | $ | | $ | | $ | | $ | |
Three Months Ended June 30, 2021 | ||||||||||||
| Business |
| Enterprise |
| Public Sector |
| Total | |||||
Notebooks/Mobility | $ | | $ | | $ | | $ | | ||||
Desktops | | | | | ||||||||
Software | | | | | ||||||||
Servers/Storage | | | | | ||||||||
Net/Com Products | | | | | ||||||||
Displays and Sound |
| |
| |
| |
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Accessories |
| |
| |
| |
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Other Hardware/Services |
| |
| |
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Total net sales | $ | | $ | | $ | | $ | |
The following table represents a disaggregation of revenue from arrangements with customers for the six months ended June 30, 2022 and 2021, along with the reportable segment for each category.
Six Months Ended June 30, 2022 |
| |||||||||||||
| Business |
| Enterprise |
| Public Sector |
| Total |
| ||||||
Notebooks/Mobility | $ | | $ | | $ | | $ | | ||||||
Desktops | | | | | ||||||||||
Software | | | | | ||||||||||
Servers/Storage | | | | | ||||||||||
Net/Com Products |
| | | |
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Displays and Sound | |
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| | | ||||||||
Accessories |
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Other Hardware/Services |
| |
| |
| |
| | ||||||
Total net sales | $ | | $ | | $ | | $ | |
7
Six Months Ended June 30, 2021 | ||||||||||||||
| Business |
| Enterprise |
| Public Sector |
| Total | |||||||
Notebooks/Mobility | $ | | $ | | $ | | $ | | ||||||
Desktops | | | | | ||||||||||
Software | | | | | ||||||||||
Servers/Storage |
| | | |
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Net/Com Products |
| | | |
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Displays and Sound | |
| |
| | | ||||||||
Accessories | |
| |
| | | ||||||||
Other Hardware/Services |
| |
| |
| |
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Total net sales | $ | | $ | | $ | | $ | | ||||||
Contract Balances
The following table provides information about contract liabilities from arrangements with customers as of June 30, 2022 and December 31, 2021.
| June 30, 2022 |
| December 31, 2021 | |||
Contract liabilities, which are included in "Accrued expenses and other liabilities" | $ | | $ | |
Changes in the contract liability balances during the six months ended June 30, 2022 and 2021 are as follows:
| 2022 | ||
Balance at December 31, 2021 | $ | | |
Cash received in advance and not recognized as revenue |
| | |
Amounts recognized as revenue as performance obligations satisfied |
| ( | |
Balance at June 30, 2022 | $ | | |
2021 | |||
Balance at December 31, 2020 | $ | | |
Cash received in advance and not recognized as revenue |
| | |
Amounts recognized as revenue as performance obligations satisfied |
| ( | |
Balance at June 30, 2021 | $ | |
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 June 30, | Six Months Ended June 30, | ||||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| |||||
Numerator: | |||||||||||||
Net income | $ | | $ | | $ | | $ | | |||||
Denominator: | |||||||||||||
Denominator for basic earnings per share |
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Dilutive effect of employee stock awards |
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Denominator for diluted earnings per share |
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Earnings per share: | |||||||||||||
Basic | $ | | $ | | $ | | $ | | |||||
Diluted | $ | | $ | | $ | | $ | |
8
For the three and six months ended June 30, 2022 and 2021, the Company had
k
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 (“ROU asset”) as of June 30, 2022 was $
As of June 30, 2022, there were
Three Months Ended June 30, 2022 |
| Six Months Ended June 30, 2022 |
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Related Parties | Others | Total |
| Related Parties | Others | Total |
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Lease Cost |
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Capitalized operating lease cost | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Short-term lease cost |
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Total lease cost | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Other Information |
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