What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2021-11-04 · 61 added, 121 removed, 205 unchanged (47% of the section changed)

4 unchanged sentences

(amounts in thousands)

September 30,

Current Assets:

6 unchanged sentences

Right-of-use assets

Intangibles assets, net

Intangibles, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

20 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Cost of sales

Selling, general and administrative expenses

Restructuring and other charges

Income from operations

Other (expenses) income, net

Other expenses, net

Income before taxes

7 unchanged sentences

(amounts in thousands)

Three Months Ended September 30, 2021

Treasury Shares

Paid-In Capital

Balance - June 30, 2021

Stock-based compensation expense

Restricted stock units vested

Shares withheld for taxes paid on stock awards

Balance - September 30, 2021

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Treasury Shares

4 unchanged sentences

Shares withheld for taxes paid on stock awards

Balance - September 30, 2021

See notes to unaudited condensed consolidated financial statements.

Three Months Ended September 30, 2020

Treasury Shares

Paid-In Capital

Balance - June 30, 2020

Stock-based compensation expense

Restricted stock units vested

Shares withheld for taxes paid on stock awards

Balance - September 30, 2020

Nine Months Ended September 30, 2020

Balance - March 31, 2022

Three Months Ended March 31, 2021

Treasury Shares

3 unchanged sentences

Restricted stock units vested

Issuance of common stock under Employee Stock Purchase Plan

Shares withheld for taxes paid on stock awards

Repurchase of common stock for treasury

Balance - September 30, 2020

Balance - March 31, 2021

See notes to unaudited condensed consolidated financial statements.

3 unchanged sentences

(amounts in thousands)

Nine Months Ended

September 30,

Cash Flows provided by Operating Activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Three Months Ended

Cash Flows (used in) provided by Operating Activities:

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Depreciation and amortization

8 unchanged sentences

Accrued expenses and other liabilities

Net cash provided by operating activities

Net cash (used in) provided by operating activities

Cash Flows used in Investing Activities:

3 unchanged sentences

Cash Flows used in Financing Activities:

Purchase of treasury shares

Proceeds from short-term borrowings

Repayment of short-term borrowings

Dividend payments

Issuance of stock under Employee Stock Purchase Plan

Payment of payroll taxes on stock-based compensation through shares withheld

Net cash used in financing activities

(Decrease) increase in cash and cash equivalents

Decrease in cash and cash equivalents

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of period

Cash and cash equivalents, end of year

Non-cash Investing and Financing Activities:

11 unchanged sentences

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.

3 unchanged sentences

Subsequent events have been evaluated through the date of issuance of these financial statements.

The operating results for the three and nine months ended September 30, 2021 may not be indicative of the results expected for any succeeding quarter or the entire year ending December 31, 2021.

The operating results for the three months ended March 31, 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.

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, including uncertainty in the current economic environment due to the coronavirus pandemic (“COVID-19 pandemic”).

Actual results could differ from those estimates and assumptions, including the impact of the COVID-19 pandemic.

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

9 unchanged sentences

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 September 30, 2021 and 2020, along with the reportable segment for each category.

Three Months Ended September 30, 2021

Public Sector

Notebooks/Mobility

Servers/Storage

Net/Com Products

Displays and Sound

Other Hardware/Services

Total net sales

Three Months Ended September 30, 2020

Public Sector

Notebooks/Mobility

Servers/Storage

Net/Com Products

Displays and Sound

Other Hardware/Services

Total net sales

The following table represents a disaggregation of revenue from arrangements with customers for the nine months ended September 30, 2021 and 2020, along with the reportable segment for each category.

Nine Months Ended September 30, 2021

The following tables represent a disaggregation of revenue from arrangements with customers for the three months ended March 31, 2022 and 2021, along with the reportable segment for each category.

Three Months Ended March 31, 2022

Public Sector

5 unchanged sentences

Total net sales

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Public Sector

6 unchanged sentences

Contract Balances

The following table provides information about contract liabilities from arrangements with customers as of September 30, 2021 and December 31, 2020.

September 30, 2021

The following table provides information about contract liabilities from arrangements with customers as of March 31, 2022 and December 31, 2021.

March 31, 2022

December 31, 2021

Contract liabilities, which are included in "Accrued expenses and other liabilities"

Changes in the contract liability balances during the nine months ended September 30, 2021 and 2020 are as follows:

Balances at December 31, 2020

Changes in the contract liability balances during the three months ended March 31, 2022 and 2021 are as follows:

Balance at December 31, 2021

Cash received in advance and not recognized as revenue

Amounts recognized as revenue as performance obligations satisfied

Balances at September 30, 2021

Balances at December 31, 2019

Balance at March 31, 2022

Balance at December 31, 2020

Cash received in advance and not recognized as revenue

Amounts recognized as revenue as performance obligations satisfied

Balances at September 30, 2020

Balance at March 31, 2021

Note 3-Earnings Per Share

2 unchanged sentences

The following table sets forth the computation of basic and diluted earnings per share:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31 ,

Denominator for basic earnings per share

2 unchanged sentences

Earnings per share:

For the three months and nine months ended September 30, 2021, the Company 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.

For the three months ended March 31, 2022 and 2021, the Company 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.

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 September 30, 2021 was $ 2,608 and a corresponding lease liability of $ 2,608 associated with related party leases.

As of September 30, 2021, 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 for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended September 30, 2021

Nine Months Ended September 30, 2021

Related Parties

Capitalized operating lease cost

Short-term lease cost

Total lease cost

Other Information

Cash paid for amounts included in the measurement of lease liabilities and capitalized operating leases:

Operating cash flows

Weighted-average remaining lease term (in years):

Capitalized operating leases

Weighted-average discount rate:

Capitalized operating leases

Three Months Ended September 30, 2020

Nine Months Ended September 30, 2020

Included in the right-of-use asset (“ROU asset”) as of March 31, 2022 was $ 2,025 and a corresponding lease liability of $ 2,025 associated with related party leases.

As of March 31, 2022, 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 for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31, 2022

Three Months Ended March 31, 2021

Related Parties

10 unchanged sentences

Capitalized operating leases

As of September 30, 2021, future lease payments over the remaining term of capitalized operating leases were as follows:

As of March 31, 2022, future lease payments over the remaining term of capitalized operating leases were as follows:

For the Years Ended December 31,

Related Parties

2021, excluding the nine months ended September 30, 2021

2022, excluding the three months ended March 31, 2022

Imputed interest

Lease liability balance at September 30, 2021

As of September 30, 2021, the ROU asset had a balance of $ 10,218 .

Lease liability balance at March 31, 2022

As of March 31, 2022, the ROU asset had a balance of $ 9,201 .

The long-term lease liability was $ 6,077 and the short-term lease liability, which is included in accrued expenses and other liabilities in the consolidated balance sheets, was $ 3,777 .

As of September 30, 2020, the ROU asset had a balance of $ 13,768 .

As of March 31, 2021, the ROU asset had a balance of $ 11,857 .

The long-term lease liability was $ 8,792 and the short-term lease liability, which is included in accrued expenses and other liabilities in the consolidated balance sheets, was $ 3,812 .

Note 5–Segment Information

The internal reporting structure used by the Company’s chief operating decision maker (“CODM”) to assess performance and allocate resources determines the basis for our reportable operating segments.

The internal reporting structure used by the Company’s chief operating decision maker (“CODM”) to assess performance and allocate resources determines the basis for the Company’s reportable operating segments.

The Company’s CODM is its Chief Executive Officer, and he evaluates operations and allocates resources based on a measure of operating income.

5 unchanged sentences

The Company reports 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 and nine months ended September 30, 2021 and 2020 is shown below:

Segment information applicable to the Company’s reportable operating segments for the three months ended March 31, 2022 and 2021 is shown below:

Three Months Ended

Nine Months Ended

September 30,

Business Solutions

8 unchanged sentences

Total operating income

Other (expenses) income, net

Other expenses, net

Income before taxes

11 unchanged sentences

Headquarters/Other

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 September 30, 2021 and 2020, total assets for the Headquarters/Other group were presented net of intercompany balance eliminations of $ 39,209 and $ 60,802 , 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.

The assets of the Company’s 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, ROU assets, and intercompany balance, net.

As of March 31, 2022 and 2021, total assets for the Headquarters/Other group were presented net of intercompany balance eliminations of $ 50,234 , and $ 48,026 , respectively.

The Company’s capital expenditures consist largely of IT hardware and software purchased to maintain or upgrade our management information systems.

These information systems serve all of the Company’s segments, to varying degrees, and accordingly, the CODM does not evaluate capital expenditures on a segment-by-segment basis.

Note 6–Commitments and Contingencies

The Company is subject to various legal proceedings and claims, including patent infringement claims, which have arisen during the ordinary course of business.

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.

The outcome of such matters is not expected to have a material, adverse effect on the Company’s financial position, results of operations, and/or cash flows.

The Company is 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, but such outcomes are not expected to have a material, adverse impact on our financial position, results of operations, and/or cash flows.

Additional liabilities for these and other audits could be assessed, but such outcomes are not expected to have a material, adverse impact on the Company’s financial position, results of operations, and/or cash flows.

Note 7–Bank Borrowings

The Company has 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 LIBOR ( 0.08 % at September 30, 2021), plus a spread based on our funded debt ratio, or in the absence of LIBOR, the prime rate ( 3.25 % at September 30, 2021).

The Company has a $ 50,000 credit facility collateralized by its account receivables that expires March 31, 2025 .

This facility can be increased, at the Company’s 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 greatest of (i) the prime rate ( 3.50 % on March 31, 2022), (ii) the federal funds effective rate plus 0.50 % per annum and (iii) the one-month London Interbank Offered Rate, plus 1.00 % per annum, provided that the Alternate Base Rate shall at no time be less than 0 % per annum.

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 for a given quarter to our consolidated trailing twelve months Adjusted EBITDA (Earnings Before Interest Expense, Taxes, Depreciation, Amortization, and Special Charges).

Funded debt ratio is the ratio of average outstanding advances under the credit facility for a given quarter to consolidated trailing twelve months Adjusted Earnings Before Interest Expense, Taxes, Depreciation, Amortization, and Special Charges (Adjusted EBITDA).

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.

The Company had no outstanding bank borrowings at September 30, 2021 or 2020, and accordingly, the entire $ 50,000 facility was available for borrowings under the credit facility.

As of September 30, 2021, the Company was in compliance with all financial covenants contained in the agreement governing the credit facility.

Decreases in the Company’s consolidated trailing twelve months Adjusted EBITDA could limit its potential borrowing capacity under the credit facility.

As of March 31, 2022, the Company was in compliance with all financial covenants contained in the agreement governing the credit facility.

On February 3, 2022, the Company borrowed $ 1,385 under the credit facility, which was fully repaid on February 4, 2022.

The Company had no outstanding bank borrowings for the quarter ended March 31, 2022 or 2021, and accordingly, the entire $ 50,000 facility was available for borrowings under the credit facility on such date.

PC CONNECTION, INC.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements