What changed in this filing

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Item 1. Financial Statements

2023-05-04 compared with 2022-11-04 · 69 added, 111 removed, 212 unchanged (46% of the section changed)

4 unchanged sentences

(amounts in thousands)

September 30,

Current Assets:

29 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 income, net

Other income (expense), net

Income before taxes

7 unchanged sentences

(amounts in thousands)

Three Months Ended September 30, 2022

Treasury Shares

Paid-In Capital

Balance - June 30, 2022

Stock-based compensation expense

Restricted stock units vested

Shares withheld for taxes paid on stock awards

Balance - September 30, 2022

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Treasury Shares

4 unchanged sentences

Shares withheld for taxes paid on stock awards

Balance - September 30, 2022

See notes to unaudited condensed consolidated financial statements.

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

Repurchase of common stock for treasury

Dividend declaration ($ 0.08 per share)

Balance - March 31, 2023

Three Months Ended March 31, 2022

Treasury Shares

4 unchanged sentences

Shares withheld for taxes paid on stock awards

Balance - September 30, 2021

Balance - March 31, 2022

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 provided by (used in) Operating Activities:

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

Depreciation and amortization

8 unchanged sentences

Accrued expenses and other liabilities

Net cash provided by operating activities

Net cash provided by (used in) operating activities

Cash Flows used in Investing Activities:

Purchases of equipment and capitalized software

Proceeds from life insurance

Net cash used in investing activities

2 unchanged sentences

Repayment of short-term borrowings

Purchase of common stock for treasury shares

Dividend payments

18 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.

and its subsidiaries, or the Company, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial reporting and in accordance with accounting principles generally accepted in the United States of America, or U.S.

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, 2022, 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, 2022 may not be indicative of the results expected for any succeeding quarter or the entire year ending December 31, 2022.

The operating results for the three months ended March 31, 2023 may not be indicative of the results expected for any succeeding quarter or the entire year ending December 31, 2023.

Use of Estimates in the Preparation of Financial Statements

5 unchanged sentences

Actual results could differ from those estimates and assumptions.

Restructuring and Other Charges

The restructuring and other charges recorded in the first quarter of 2023 were primarily related to an involuntary reduction in our headquarter workforce and included cash severance and other related termination benefits.

These costs will be paid within a year of termination and any unpaid balances are included in accrued expenses as of March 31, 2023.

Restructuring and other charges are presented separately from selling, general and administrative expenses.

Costs incurred were as follows (in thousands):

Three Months Ended March 31,

Employee separations

Other charges

Total restructuring and other charges

Included in accrued expenses and other liabilities as of March 31, 2023 was $ 308 related to unpaid termination benefits.

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):

In March 2020, the Financial Accounting Standards Board 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.

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, or 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 amendments are effective as of March 12, 2020 through December 31, 2022;

however, ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 has extended the effective date through December 31, 2024.

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.

1 unchanged sentence

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, 2022 and 2021, along with the reportable segment for each category.

Three Months Ended September 30, 2022

Public Sector

Notebooks/Mobility

Servers/Storage

Net/Com Products

Displays and Sound

Other Hardware/Services

Total net sales

Three Months Ended September 30, 2021

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, 2022 and 2021, along with the reportable segment for each category.

Nine Months Ended September 30, 2022

The following tables represent a disaggregation of revenue from arrangements with customers for the three months ended March 31, 2023 and 2022, along with the segment for each category (in thousands).

Three Months Ended March 31, 2023

Public Sector

5 unchanged sentences

Total net sales

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Public Sector

6 unchanged sentences

Contract Balances

The following table provides information about contract liabilities from arrangements with customers as of September 30, 2022 and December 31, 2021.

September 30, 2022

The following table provides information about contract liabilities from arrangements with customers as of March 31, 2023 and December 31, 2022 (in thousands).

March 31, 2023

December 31, 2022

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

Changes in the contract liability balances during the nine months ended September 30, 2022 and 2021 are as follows:

Changes in the contract liability balances during the three months ended March 31, 2023 and 2022 are as follows (in thousands):

Balance at December 31, 2022

1 unchanged sentence

Amounts recognized as revenue as performance obligations satisfied

Balance at September 30, 2022

Balance at March 31, 2023

Balance at December 31, 2021

1 unchanged sentence

Amounts recognized as revenue as performance obligations satisfied

Balance at September 30, 2021

Balance at March 31, 2022

Note 3–Earnings Per Share

1 unchanged sentence

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 September 30,

Nine Months Ended September 30,

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

Three Months Ended March 31,

Denominator for basic earnings per share

2 unchanged sentences

Earnings per share:

For the three and nine months ended September 30, 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.

For the three months ended March 31, 2023 and 2022, 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, 2022 was $ 1,432 and a corresponding lease liability of $ 1,432 associated with related party leases.

As of September 30, 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 and nine months ended September 30, 2022 and 2021:

Three Months Ended September 30, 2022

Nine Months Ended September 30, 2022

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, 2021

Nine Months Ended September 30, 2021

Included in the right-of-use, or ROU, asset as of March 31, 2023 was $ 826 and a corresponding lease liability of $ 826 associated with related party leases.

As of March 31, 2023, 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, 2023 and 2022 (dollars in thousands):

Three Months Ended March 31, 2023

Three Months Ended March 31, 2022

Related Parties

10 unchanged sentences

Capitalized operating leases

As of September 30, 2022, future lease payments over the remaining term of capitalized operating leases were as follows:

As of March 31, 2023, future lease payments over the remaining term of capitalized operating leases were as follows (in thousands):

For the Years Ended December 31,

Related Parties

2022, excluding the nine months ended September 30, 2022

2023, excluding the three months ended March 31, 2023

Imputed interest

Lease liability balance at September 30, 2022

As of September 30, 2022, the ROU asset had a balance of $ 8,495 .

Lease liability balance at March 31, 2023

As of March 31, 2023, the ROU asset had a balance of $ 6,611 .

The long-term lease liability was $ 4,623 and the short-term lease liability, which is included in accrued expenses and other liabilities in the consolidated balance sheets, was $ 2,660 .

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

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 .

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 the Company’s reportable operating segments.

The internal reporting structure used by the Company’s chief operating decision maker, or CODM, to assess performance and allocate resources determines the basis for the Company’s 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.

The Company’s operations are organized under three reportable segments—the Business Solutions segment, which serves primarily small- and medium-sized businesses;

The Company’s operations are organized under three segments—the Business Solutions segment, which serves primarily small- to 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.

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, or IT, 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.

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 the Company’s reportable operating segments for the three and nine months ended September 30, 2022 and 2021 is shown below:

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.

Net sales presented below exclude inter-segment product revenues.

Segment information applicable to the Company’s operating segments for the three months ended March 31, 2023 and 2022 is shown below (in thousands):

Three Months Ended

Nine Months Ended

September 30,

Business Solutions

8 unchanged sentences

Total operating income

Other expenses, net

Other income (expense), net

Income before taxes

13 unchanged sentences

Assets reported under the Headquarters/Other group are managed by corporate headquarters, including cash and cash equivalents, inventories, property and equipment, ROU assets, and intercompany balance, net.

As of September 30, 2022 and 2021, total assets for the Headquarters/Other group were presented net of intercompany balance eliminations of $ 62,154 , and $ 39,209 , respectively.

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

As of March 31, 2023 and 2022, total assets for the Headquarters/Other group were presented net of intercompany balance eliminations of $ 60,176 and $ 50,234 , respectively.

The Company’s capital expenditures consist largely of IT hardware and software purchased to maintain or upgrade its 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.

6 unchanged sentences

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 the one-month LIBOR, plus a spread based on our funded debt ratio, or in the absence of LIBOR, the prime rate ( 6.25 % at September 30, 2022).

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 the one-month LIBOR, plus a spread based on the Company’s funded debt ratio, or in the absence of LIBOR, the prime rate ( 8.00 % at March 31, 2023).

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

As of September 30, 2022, the Company was in compliance with all financial covenants contained in the agreement governing the credit facility.

During the nine months ended September 30, 2022, the Company borrowed $ 36,463 under the credit facility, which was fully repaid prior to September 30, 2022.

The Company had no outstanding borrowings under the credit facility as of September 30, 2022 or 2021, and accordingly, the entire $ 50,000 credit facility was available for borrowings on such date.

As of March 31, 2023, the Company was in compliance with all financial covenants contained in the agreement governing the credit facility.

During the three months ended March 31, 2023, the Company borrowed $ 59,310 under the credit facility, which was fully repaid prior to March 31, 2023.

The Company had no outstanding borrowings under the credit facility as of March 31, 2023 or 2022, and accordingly, the entire $ 50,000 credit facility was available for borrowings on such date.

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