What changed in this filing

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Item 1. Financial Statements

2023-11-01 compared with 2023-08-02 · 133 added, 66 removed, 282 unchanged (41% of the section changed)

4 unchanged sentences

(amounts in thousands)

September 30,

Current Assets:

Cash and cash equivalents

Short-term investments

Accounts receivable, net

19 unchanged sentences

Retained earnings

Accumulated other comprehensive income

Treasury stock, at cost

7 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cost of sales

10 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME

(amounts in thousands)

Three Months Ended

Nine Months Ended

September 30,

Other comprehensive income:

Unrealized gains on available-for-sale investments, net of tax of $( 41 )

Comprehensive income

See notes to unaudited condensed consolidated financial statements.

PC CONNECTION, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(amounts in thousands)

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Accumulated Other

Treasury Shares

Paid-In Capital

Balance - March 31, 2023

Comprehensive Income

Balance - June 30, 2023

Stock-based compensation expense

1 unchanged sentence

Shares withheld for taxes paid on stock awards

Repurchase of common stock for treasury

Excise tax on stock repurchases

Issuance of common stock under Employee Stock Purchase Plan

Dividend declaration ($ 0.08 per share)

Balance - June 30, 2023

Six Months Ended June 30, 2023

Other comprehensive income, net of tax

Balance - September 30, 2023

Nine Months Ended September 30, 2023

Accumulated Other

Treasury Shares

Paid-In Capital

Comprehensive Income

Balance - December 31, 2022

3 unchanged sentences

Repurchase of common stock for treasury

Excise tax on stock repurchases

Issuance of common stock under Employee Stock Purchase Plan

Dividend declaration ($ 0.08 per share)

Balance - June 30, 2023

Three Months Ended June 30, 2022

Other comprehensive income, net of tax

Balance - September 30, 2023

Three Months Ended September 30, 2022

Treasury Shares

Paid-In Capital

Balance - March 31, 2022

Balance - June 30, 2022

Stock-based compensation expense

1 unchanged sentence

Shares withheld for taxes paid on stock awards

Balance - June 30, 2022

Six Months Ended June 30, 2022

Balance - September 30, 2022

Nine Months Ended September 30, 2022

Treasury Shares

4 unchanged sentences

Shares withheld for taxes paid on stock awards

Balance - June 30, 2022

Balance - September 30, 2022

See notes to unaudited condensed consolidated financial statements.

3 unchanged sentences

(amounts in thousands)

Six Months Ended

Cash Flows provided by (used in) Operating Activities:

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

Nine Months Ended

September 30,

Cash Flows provided by Operating Activities:

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

Depreciation and amortization

8 unchanged sentences

Accrued expenses and other liabilities

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Cash Flows used in Investing Activities:

Purchases of short-term investments

Purchases of property and equipment

8 unchanged sentences

Net cash used in financing activities

Increase (decrease) in cash and cash equivalents

Increase in cash and cash equivalents

Cash and cash equivalents, beginning of year

17 unchanged sentences

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.

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, 2022.

The accompanying unaudited 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, 2022.

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.

1 unchanged sentence

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, 2023 may not be indicative of the results expected for any succeeding quarter or the entire year ending December 31, 2023.

The operating results for the three and nine months ended September 30, 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.

Cash and Cash Equivalents

The Company considers all highly liquid short-term investments with original maturities of 90 days or less to be cash equivalents.

The carrying value of the Company’s cash equivalents approximates fair value.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

At the time of purchase, the Company determines the appropriate classification of investments based upon its intent with regard to such investments.

All of the Company’s investments are classified as available-for-sale.

The Company classifies investments as short-term when their remaining contractual maturities are one year or less from the balance sheet date, and as long-term when the investment has a remaining contractual maturity of more than one year from the balance sheet date.

The Company records investments at fair value with unrealized gains and losses recorded as a component of accumulated other comprehensive income.

Treasury Stock, at Cost

The total repurchases for the six months ended June 30, 2023 were recorded as treasury stock of $ 5,446 .

The total repurchases for the nine months ended September 30, 2023 were recorded as treasury stock of $ 5,446 .

Such cost reflects the applicable one percent excise tax imposed by the Inflation Reduction Act of 2022 on the net value of certain stock repurchases made after December 31, 2022.

Restructuring and Other Charges

The restructuring and other charges recorded for the three and six months ended June 30, 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 June 30, 2023.

The Company is currently evaluating additional restructuring activities for the third quarter of 2023 and beyond.

The restructuring and other charges recorded for the three and nine months ended September 30, 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 and other liabilities in the consolidated balance sheets as of September 30, 2023.

The Company is currently evaluating additional restructuring activities for the fourth quarter of 2023 and beyond.

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

Costs incurred were as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Employee separations

1 unchanged sentence

Total restructuring and other charges

Included in accrued expenses and other liabilities as of June 30, 2023 was $ 1,381 related to unpaid termination benefits.

Included in accrued expenses and other liabilities as of September 30, 2023 was $ 772 related to unpaid termination benefits.

Recently Issued Financial Accounting Standards

8 unchanged sentences

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

The Company adopted this standard in the current quarter.

The adoption of this ASU along with the related expedients did not have an impact to the Company’s condensed consolidated financial statements.

The Company adopted this standard in the second quarter of 2023.

The adoption of this ASU along with the related expedients did not have a material impact on the Company’s condensed consolidated financial statements.

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, 2023 and 2022, along with the segment for each category (in thousands).

Three Months Ended June 30, 2023

The following tables represent a disaggregation of revenue from arrangements with customers for the three months ended September 30, 2023 and 2022, along with the segment for each category (in thousands).

Three Months Ended September 30, 2023

Public Sector

5 unchanged sentences

Total net sales

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Public Sector

5 unchanged sentences

Total net sales

The following tables represent a disaggregation of revenue from arrangements with customers for the six months ended June 30, 2023 and 2022, along with the segment for each category (in thousands).

Six Months Ended June 30, 2023

The following tables represent a disaggregation of revenue from arrangements with customers for the nine months ended September 30, 2023 and 2022, along with the segment for each category (in thousands).

Nine Months Ended September 30, 2023

Public Sector

5 unchanged sentences

Total net sales

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Public Sector

6 unchanged sentences

Contract Balances

The following table provides information about contract liabilities from arrangements with customers as of June 30, 2023 and December 31, 2022 (in thousands).

June 30, 2023

The following table provides information about contract liabilities from arrangements with customers as of September 30, 2023 and December 31, 2022 (in thousands).

September 30, 2023

December 31, 2022

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

Changes in the contract liability balances during the six months ended June 30, 2023 and 2022 are as follows (in thousands):

Changes in the contract liability balances during the nine months ended September 30, 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 June 30, 2023

Balance at September 30, 2023

Balance at December 31, 2021

1 unchanged sentence

Amounts recognized as revenue as performance obligations satisfied

Balance at June 30, 2022

Balance at September 30, 2022

Note 3–Fair Value Measurements

Cash equivalents and short-term investments consist of the following (in thousands):

September 30, 2023

Amortized Cost

Unrealized Gains

Unrealized Losses

Cash and cash equivalents:

Money market funds

Government treasury securities

Short-term investments:

Government treasury securities

December 31, 2022

Amortized Cost

Unrealized Gains

Unrealized Losses

Cash and cash equivalents:

Money market funds

Investments with maturities of 90 days or less from the date of purchase are classified as cash equivalents;

investments with maturities of greater than 90 days from the date of purchase but less than one year are generally classified as short-term investments;

and investments with maturities of one year or greater from the date of purchase are generally classified as long-term investments.

All short-term investments had stated maturity dates of less than one year.

The Company has recorded the securities at fair value in its condensed consolidated balance sheets and unrealized gains and losses are reported as a component of accumulated other comprehensive income.

The amount of realized gains and losses reclassified into earnings and the related adjustments to deferred taxes are based on the specific identification of the securities sold or securities that reached maturity date.

The Company measures certain financial assets at fair value.

Fair value is determined based upon the exit price that would be received to sell an asset in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market.

Inputs used in the valuation techniques are classified based on a three-level hierarchy, as follows:

● Level 1 inputs:

Quoted prices for identical assets or liabilities in active markets;

● Level 2 inputs:

Observable inputs other than those described as Level 1;

● Level 3 inputs:

Unobservable inputs that are supported by little or no market activities and are based on significant assumptions and estimates.

As of September 30, 2023 and December 31, 2022, the fair value of the Company’s investments were all measured using level 1 inputs.

Note 4–Earnings Per Share

2 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Denominator for basic earnings per share

2 unchanged sentences

Earnings per share:

For the three and six months ended June 30, 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.

For the three and nine months ended September 30, 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 5 – 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, or ROU, asset as of June 30, 2023 was $ 519 and a corresponding lease liability of $ 519 associated with related party leases.

As of June 30, 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 and six months ended June 30, 2023 and 2022 (dollars in thousands):

Three Months Ended June 30, 2023

Six Months Ended June 30, 2023

Included in the right-of-use, or ROU, asset as of September 30, 2023 was $ 209 and a corresponding lease liability of $ 209 associated with related party leases.

As of September 30, 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 and nine months ended September 30, 2023 and 2022 (dollars in thousands):

Three Months Ended September 30, 2023

Nine Months Ended September 30, 2023

Related Parties

10 unchanged sentences

Capitalized operating leases

Three Months Ended June 30, 2022

Six Months Ended June 30, 2022

Three Months Ended September 30, 2022

Nine Months Ended September 30, 2022

Related Parties

10 unchanged sentences

Capitalized operating leases

As of June 30, 2023, future lease payments over the remaining term of capitalized operating leases were as follows (in thousands):

As of September 30, 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

2023, excluding the six months ended June 30, 2023

2023, excluding the nine months ended September 30, 2023

Imputed interest

Lease liability balance at June 30, 2023

As of June 30, 2023, the ROU asset had a balance of $ 5,775 .

Lease liability balance at September 30, 2023

As of September 30, 2023, the ROU asset had a balance of $ 4,934 .

The long-term lease liability was $ 3,638 and the short-term lease liability, which is included in accrued expenses and other liabilities in the consolidated balance sheets, was $ 1,912 .

As of June 30, 2022, the ROU asset had a balance of $ 8,267 .

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

The long-term lease liability was $ 5,620 and the short-term lease liability, which is included in accrued expenses and other liabilities in the consolidated balance sheets, was $ 3,471 .

10 unchanged sentences

Net sales presented below exclude inter-segment product revenues.

Segment information applicable to the Company’s operating segments for the three and six months ended June 30, 2023 and 2022 is shown below (in thousands):

Segment information applicable to the Company’s operating segments for the three and nine months ended September 30, 2023 and 2022 is shown below (in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Business Solutions

24 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 June 30, 2023 and 2022, total assets for the Headquarters/Other group were presented net of intercompany balance eliminations of $ 55,432 and $ 41,439 , respectively.

As of September 30, 2023 and 2022, total assets for the Headquarters/Other group were presented net of intercompany balance eliminations of $ 58,864 and $ 62,154 , respectively.

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

7 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 daily Bloomberg Short-Term Bank Yield Index, or BSBY Rate, plus a spread based on the Company’s funded debt ratio, or in the absence of BSBY Rate, the prime rate ( 8.25 % at June 30, 2023).

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.

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.

3 unchanged sentences

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

As of June 30, 2023, the Company was in compliance with all financial covenants contained in the agreement governing the credit facility.

As of September 30, 2023, the Company was in compliance with all financial covenants contained in the agreement governing the credit facility.

Cash receipts are automatically applied against any outstanding borrowings.

During the six months ended June 30, 2023, the Company borrowed incremental amounts that were each repaid in full.

These borrowings for the six months ended June 30, 2023 totaled $ 67,895 ;

During the nine months ended September 30, 2023, the Company borrowed incremental amounts that were each repaid in full.

These borrowings for the nine months ended September 30, 2023 totaled $ 70,877 ;

however, at no time were the outstanding borrowings greater than the $ 50,000 limit under the credit facility.

The Company had no outstanding borrowings under the credit facility as of June 30, 2023 or 2022, and accordingly, the entire $ 50,000 credit facility was available for borrowings on such date.

The Company had no outstanding borrowings under the credit facility as of September 30, 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