Company Quick10K Filing
PC Connection
Price36.90 EPS3
Shares26 P/E12
MCap978 P/FCF24
Net Debt-98 EBIT115
TEV879 TEV/EBIT8
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-08-10
10-Q 2020-03-31 Filed 2020-04-30
10-K 2019-12-31 Filed 2020-02-06
10-Q 2019-09-30 Filed 2019-10-30
10-Q 2019-06-30 Filed 2019-08-01
10-Q 2019-03-31 Filed 2019-05-02
10-K 2018-12-31 Filed 2019-02-07
10-Q 2018-09-30 Filed 2018-11-01
10-Q 2018-06-30 Filed 2018-08-02
10-Q 2018-03-31 Filed 2018-05-09
10-K 2017-12-31 Filed 2018-03-09
10-Q 2017-09-30 Filed 2017-11-09
10-Q 2017-06-30 Filed 2017-08-04
10-Q 2017-03-31 Filed 2017-05-08
10-K 2016-12-31 Filed 2017-03-03
10-Q 2016-09-30 Filed 2016-11-04
10-Q 2016-06-30 Filed 2016-08-05
10-Q 2016-03-31 Filed 2016-05-06
10-K 2015-12-31 Filed 2016-03-03
10-Q 2015-09-30 Filed 2015-11-06
10-Q 2015-06-30 Filed 2015-08-07
10-Q 2015-03-31 Filed 2015-05-08
10-K 2014-12-31 Filed 2015-03-06
10-Q 2014-09-30 Filed 2014-10-31
10-Q 2014-06-30 Filed 2014-08-05
10-Q 2014-03-31 Filed 2014-05-09
10-K 2013-12-31 Filed 2014-03-10
10-Q 2013-09-30 Filed 2013-11-04
10-Q 2013-06-30 Filed 2013-08-02
10-K 2012-12-31 Filed 2013-03-04
10-Q 2012-09-30 Filed 2012-11-07
10-Q 2012-06-30 Filed 2012-08-08
10-Q 2012-03-31 Filed 2012-05-07
10-K 2011-12-31 Filed 2012-02-28
10-Q 2011-09-30 Filed 2011-11-08
10-Q 2011-06-30 Filed 2011-08-11
10-Q 2011-03-31 Filed 2011-05-12
10-K 2010-12-31 Filed 2011-03-11
10-Q 2010-09-30 Filed 2010-11-10
10-Q 2010-06-30 Filed 2010-08-06
10-Q 2010-03-31 Filed 2010-05-11
10-K 2009-12-31 Filed 2010-03-15
8-K 2020-08-10 Earnings, Exhibits
8-K 2020-05-27
8-K 2020-04-29
8-K 2020-02-04
8-K 2019-12-17
8-K 2019-10-30
8-K 2019-08-01
8-K 2019-05-22
8-K 2019-05-02
8-K 2019-02-28
8-K 2019-02-07
8-K 2018-12-17
8-K 2018-11-01
8-K 2018-10-18
8-K 2018-09-27
8-K 2018-08-02
8-K 2018-05-30
8-K 2018-05-03
8-K 2018-03-26
8-K 2018-02-15

CNXN 10Q Quarterly Report

Part I. Financial Information
Item 1Financial Statements
Part I―Financial Information
Item 1―Financial Statements
Note 1 - Basis of Presentation
Note 2 - Revenue
Note 3 - Earnings per Share
Note 4 - Leases
Note 5 - Segment Information
Note 6 - Commitments and Contingencies
Note 7 - Bank Borrowings
Part I―Financial Information
Item 2 - Management'S Discussion and Analysis of Financial Condition
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
Part I―Financial Information
Item 4 - Controls and Procedures
Part II - Other Information
Item 1A - Risk Factors
Item 6 - Exhibits
EX-31.1 cnxn-20200630xex31d1.htm
EX-31.2 cnxn-20200630xex31d2.htm
EX-32.1 cnxn-20200630xex32d1.htm
EX-32.2 cnxn-20200630xex32d2.htm

PC Connection Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
1.00.80.60.40.20.02012201420172020
Assets, Equity
0.80.60.50.30.20.02012201420172020
Rev, G Profit, Net Income
0.10.10.0-0.0-0.1-0.12012201420172020
Ops, Inv, Fin

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934*

For the quarterly period ended June 30, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                    

Commission file number 0-23827

PC CONNECTION, INC.

(Exact name of registrant as specified in its charter)

Delaware

02-0513618

(State or other jurisdiction of

(I.R.S. Employer Identification No.)

incorporation or organization)

730 Milford Road

Merrimack, New Hampshire

03054

(Address of principal executive offices)

(Zip Code)

(603) 683-2000

(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:

C

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

CNXN

Nasdaq Global Select Market

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.

Yes      No  

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).

Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

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      No  

The number of shares outstanding of the issuer’s common stock as of August 7, 2020 was 26,125,678.

Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

Page

ITEM 1.

Unaudited Condensed Consolidated Financial Statements:

Condensed Consolidated Balance Sheets–June 30, 2020 and December 31, 2019

1

Condensed Consolidated Statements of Income–Three and Six Months Ended June 30, 2020 and 2019

2

Condensed Consolidated Statements of Stockholders’ Equity–Three and Six Months Ended June 30, 2020 and 2019

3

Condensed Consolidated Statements of Cash Flows–Six Months Ended June 30, 2020 and 2019

5

Notes to Unaudited Condensed Consolidated Financial Statements

6

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

14

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

26

ITEM 4.

Controls and Procedures

27

PART II OTHER INFORMATION

ITEM 1A.

Risk Factors

28

ITEM 6.

Exhibits

29

SIGNATURES

30

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, 

    

2020

    

2019

ASSETS

Current Assets:

Cash and cash equivalents

$

165,943

$

90,060

Accounts receivable, net

 

446,716

 

549,626

Inventories, net

 

165,632

 

124,666

Income taxes receivable

 

 

1,388

Prepaid expenses and other current assets

 

13,450

 

10,671

Total current assets

 

791,741

 

776,411

Property and equipment, net

 

65,387

 

64,226

Right-of-use assets

14,755

13,842

Goodwill

 

73,602

 

73,602

Intangible assets, net

 

7,698

 

8,307

Other assets

 

1,157

 

947

Total Assets

$

954,340

$

937,335

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Accounts payable

$

247,005

$

235,641

Accrued payroll

 

20,409

 

28,050

Accrued expenses and other liabilities

 

40,793

 

45,232

Total current liabilities

 

308,207

 

308,923

Deferred income taxes

 

20,170

 

20,170

Noncurrent operating lease liabilities

11,566

10,330

Other liabilities

 

3,184

 

600

Total Liabilities

 

343,127

 

340,023

Stockholders’ Equity:

Common stock

289

288

Additional paid-in capital

 

119,628

 

118,045

Retained earnings

 

537,233

 

514,694

Treasury stock, at cost

(45,937)

(35,715)

Total Stockholders’ Equity

 

611,213

 

597,312

Total Liabilities and Stockholders’ Equity

$

954,340

$

937,335

See notes to unaudited condensed consolidated financial statements.

1

Table of Contents

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, 

    

2020

    

2019

    

2020

    

2019

 

Net sales

$

550,002

$

741,076

$

1,261,852

$

1,373,997

Cost of sales

 

461,002

 

624,089

 

1,059,734

 

1,157,663

Gross profit

 

89,000

 

116,987

 

202,118

 

216,334

Selling, general and administrative expenses

 

77,420

 

84,664

 

169,887

 

165,899

Restructuring and other charges

992

992

703

Income from operations

 

10,588

 

32,323

 

31,239

 

49,732

Interest income, net

 

5

 

184

 

96

 

382

Income before taxes

 

10,593

 

32,507

 

31,335

 

50,114

Income tax provision

 

(2,950)

 

(8,839)

 

(8,796)

 

(13,719)

Net income

$

7,643

$

23,668

$

22,539

$

36,395

Earnings per common share:

Basic

$

0.29

$

0.90

$

0.86

$

1.38

Diluted

$

0.29

$

0.89

$

0.86

$

1.37

Shares used in computation of earnings per common share:

Basic

 

26,107

 

26,337

 

26,172

 

26,348

Diluted

 

26,279

 

26,494

 

26,350

 

26,506

See notes to unaudited condensed consolidated financial statements.

2

Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(amounts in thousands)

Three months ended June 30, 2020

Total

Common Stock

Additional

Retained

Treasury Stock

Stockholders'

    

Shares

    

Amount

    

Paid-In Capital

    

Earnings

    

Shares

    

Amount

    

Equity

Balance at March 31, 2020

28,874

$

289

$

118,620

$

529,590

 

(2,773)

$

(45,937)

$

602,562

Stock-based compensation expense

624

624

Restricted stock units vested

6

Issuance of common stock under Employee Stock Purchase Plan

12

536

536

Shares withheld for taxes paid on stock awards

(152)

(152)

Net income

7,643

7,643

Balance at June 30, 2020

 

28,892

$

289

$

119,628

$

537,233

 

(2,773)

$

(45,937)

$

611,213

Six months ended June 30, 2020

Total

Common Stock

Additional

Retained

Treasury Stock

Stockholders'

    

Shares

    

Amount

    

Paid-In Capital

    

Earnings

    

Shares

    

Amount

    

Equity

Balance at December 31, 2019

28,870

$

288

$

118,045

$

514,694

(2,526)

$

(35,715)

$

597,312

Stock-based compensation expense

1,248

1,248

Restricted stock units vested

10

1

1

Issuance of common stock under Employee Stock Purchase Plan

12

 

 

536

 

 

 

 

536

Shares withheld for taxes paid on stock awards

(201)

(201)

Repurchase of common stock for treasury

(247)

(10,222)

(10,222)

Net income

22,539

22,539

Balance at June 30, 2020

28,892

$

289

$

119,628

$

537,233

 

(2,773)

$

(45,937)

$

611,213

See notes to unaudited condensed consolidated financial statements.

3

Table of Contents

Three months ended June 30, 2019

Total

Common Stock

Additional

Retained

Treasury Stock

Stockholders'

    

Shares

    

Amount

    

Paid-In Capital

    

Earnings

    

Shares

    

Amount

    

Equity

Balance at March 31, 2019

28,790

$

288

$

116,098

$

453,737

 

(2,434)

$

(32,531)

$

537,592

Stock-based compensation expense

564

564

Restricted stock units vested

 

9

 

 

 

 

 

 

Issuance of common stock under Employee Stock Purchase Plan

19

622

622

Shares withheld for taxes paid on stock awards

 

 

 

(72)

 

 

 

 

(72)

Repurchase of common stock for treasury

(66)

(2,207)

(2,207)

Net income

23,668

23,668

Balance at June 30, 2019

28,818

$

288

$

117,212

$

477,405

 

(2,500)

$

(34,738)

$

560,167

Six months ended June 30, 2019

Total

Common Stock

Additional

Retained

Treasury Stock

Stockholders'

    

Shares

    

Amount

    

Paid-In Capital

    

Earnings

    

Shares

    

Amount

    

Equity

Balance at December 31, 2018

28,787

$

288

$

115,842

$

441,010

(2,391)

$

(31,237)

$

525,903

Stock-based compensation expense

833

833

Restricted stock units vested

12

 

 

 

 

 

 

Issuance of common stock under Employee Stock Purchase Plan

19

609

609

Shares withheld for taxes paid on stock awards

(72)

(72)

Repurchase of common stock for treasury

(109)

(3,501)

(3,501)

Net income

36,395

36,395

Balance at June 30, 2019

28,818

$

288

$

117,212

$

477,405

 

(2,500)

$

(34,738)

$

560,167

See notes to unaudited condensed consolidated financial statements.

4

Table of Contents

PC CONNECTION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(amounts in thousands)

Six Months Ended

June 30, 

 

2020

    

2019

 

Cash Flows provided by Operating Activities:

Net income

$

22,539

$

36,395

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

Depreciation and amortization

 

6,502

 

7,077

Provision for doubtful accounts

 

3,627

 

(346)

Stock-based compensation expense

 

1,248

 

833

Deferred income taxes

 

 

10

Loss on disposal of fixed assets

 

13

 

118

Changes in assets and liabilities:

Accounts receivable

 

99,283

 

(52,868)

Inventories

 

(40,966)

 

(56,709)

Prepaid expenses, income tax receivables and other current assets

 

(1,391)

 

3,473

Other non-current assets

 

(180)

 

231

Accounts payable

 

12,500

 

58,181

Accrued expenses and other liabilities

 

(764)

 

6,934

Net cash provided by operating activities

 

102,411

 

3,329

Cash Flows used in Investing Activities:

Purchases of equipment

(8,214)

(13,877)

Net cash used in investing activities

 

(8,214)

 

(13,877)

Cash Flows used in Financing Activities:

Purchase of treasury shares

 

(10,222)

 

(3,501)

Dividend payments

 

(8,427)

 

(8,452)

Issuance of stock under Employee Stock Purchase Plan

536

609

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

 

(201)

 

(72)

Net cash used in financing activities

 

(18,314)

 

(11,416)

Increase (decrease) in cash and cash equivalents

 

75,883

 

(21,964)

Cash and cash equivalents, beginning of period

 

90,060

 

91,703

Cash and cash equivalents, end of period

$

165,943

$

69,739

Non-cash Investing and Financing Activities:

Accrued capital expenditures

$

327

$

2,081

Supplemental Cash Flow Information:

Income taxes paid

$

1,082

$

11,962

See notes to unaudited condensed consolidated financial statements.

5

Table of Contents

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 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 and six months ended June 30, 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.

The Company’s operations and financial performance in certain areas of its business were negatively impacted by the coronavirus pandemic (“COVID-19”) in the six months ended June 30, 2020. The extent to which the COVID-19 pandemic impacts the Company’s financial results and operations for the remainder of 2020 and beyond will depend on future developments that are highly uncertain and cannot be predicted at this time. The Company updated its estimates and judgements in response to the economic uncertainty associated with COVID-19, which were reflected in the amounts reported in the accompanying condensed consolidated financial statements. The Company has experienced, and may continue to experience, delays in collecting amounts owed to it, and in some cases, may experience inabilities to collect altogether. As a result, the Company increased its customer allowance for doubtful accounts by $3,250 in the six months ended June 30, 2020 compared with the same period a year ago. The Company has also evaluated the potential impact of the pandemic on the carrying values of its goodwill and intangible assets, and based on the assessment, did not identify any indications to suggest that an impairment may exist. These estimates may change as new events occur and actual results could differ materially from these estimates.

Restructuring and other charges

The restructuring and other charges recorded in the second quarter of 2020 were related to an involuntary reduction in workforce across our business segments 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 at June 30, 2020. All currently planned restructuring and other charges were incurred as of June 30, 2020, and as of the date of this report, the Company has no ongoing restructuring plans.

The restructuring and other charges recorded in 2019 were related to a reduction in workforce in the Company’s Headquarters/Other group and included cash severance payments and other related benefits. Also included were exit costs incurred associated with the closing of one of our office facilities, which were expensed as incurred.

6

Table of Contents

Restructuring and other charges are presented separately from SG&A expenses. Costs incurred were as follows:

Three Months Ended June 30, 

Six Months Ended June 30,

2020

2019

2020

    

2019

Employee separations

$

992

$

$

992

$

553

Lease termination costs

 

 

 

 

150

Total restructuring and other charges

$

992

$

$

992

$

703

Included in accrued expenses as of June 30, 2020 and 2019 were $549 and $373, respectively, related to unpaid termination benefits.

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. As a result of the adoption, and in accordance with the new guidance, the Company would not perform a step two analysis in the event an impairment loss is identified.

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. At adoption, this ASU did not have a material impact on the Company’s consolidated financial statements. 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.

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.

7

Table of Contents

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, 2020 and 2019, along with the reportable segment for each category.

Three Months Ended June 30, 2020

    

Business
Solutions

    

Enterprise
Solutions

    

Public Sector
Solutions

    

Total

Notebooks/Mobility

$

62,652

$

79,730

$

50,308

$

192,690

Desktops

14,500

27,014

9,107

50,621

Software

24,251

24,876

8,347

57,474

Servers/Storage

23,646

 

22,976

 

8,020

54,642

Net/Com Products

 

14,764

19,285

7,444

 

41,493

Displays and Sound

19,231

 

18,524

 

9,686

47,441

Accessories

 

19,486

 

32,673

 

12,622

 

64,781

Other Hardware/Services

 

12,559

21,681

6,620

 

40,860

Total net sales

$

191,089

$

246,759

$

112,154

$

550,002

Three Months Ended June 30, 2019

    

Business
Solutions

    

Enterprise
Solutions

    

Public Sector
Solutions

    

Total

Notebooks/Mobility

$

80,422

$

96,842

$

34,691

$

211,955

Desktops

34,787

39,277

18,688

92,752

Software

39,259

35,739

20,885