Pc Connection Inc 10-Q for FY2021 Q2

Pc Connection Inc (CNXN)

10-Q 2021-08-05 For: 2021-06-30

Added on April 09, 2026

About this 10-Q

Pc Connection Inc filed this 10-Q on August 5, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).

Headline figures

Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $704.16M; up 28.0% from $550M a year earlier
Net income: $17.29M; up 126.2% from net income of $7.64M a year earlier
Diluted EPS: $0.66; up 127.6% from $0.29 a year earlier

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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)

C
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	CNXN	Nasdaq Global Select Market


	Large accelerated filer ☐		Accelerated filer ☑
	Non-accelerated filer ☐		Smaller reporting company ☐
			Emerging growth company ☐


	PART I FINANCIAL INFORMATION

		Page
ITEM 1.	Unaudited Condensed Consolidated Financial Statements:

	Condensed Consolidated Balance Sheets–June 30, 2021 and December 31, 2020	1

	Condensed Consolidated Statements of Income–Three and Six Months Ended June 30, 2021 and 2020	2

	Condensed Consolidated Statements of Stockholders’ Equity–Three and Six Months Ended June 30, 2021 and 2020	3

	Condensed Consolidated Statements of Cash Flows–Six Months Ended June 30, 2021 and 2020	5

	Notes to Unaudited Condensed Consolidated Financial Statements	6

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	13

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	25

ITEM 4.	Controls and Procedures	26




	PART II OTHER INFORMATION

ITEM 1	Legal Proceedings	27

ITEM 1A	Risk Factors	27

ITEM 6.	Exhibits	28

SIGNATURES		29


	(603) 683-2000
	(Registrant's telephone number, including area code)


	June 30,		December 31,
	2021		2020
ASSETS
Current Assets:
Cash and cash equivalents	$	115,665	$	95,655
Accounts receivable, net		581,656		611,021
Inventories, net		167,079		140,867
Prepaid expenses and other current assets		13,588		11,437
Total current assets		877,988		858,980
Property and equipment, net		61,002		61,537
Right-of-use assets		11,174		12,821
Goodwill		73,602		73,602
Intangibles assets, net		6,478		7,088
Other assets		1,028		1,345
Total Assets	$	1,031,272	$	1,015,373
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	258,163	$	266,846
Accrued payroll		26,119		17,828
Accrued expenses and other liabilities		46,212		57,586
Total current liabilities		330,494		342,260
Deferred income taxes		18,525		18,525
Noncurrent operating lease liabilities		8,124		9,631
Other liabilities		8,558		8,630
Total Liabilities		365,701		379,046
Stockholders’ Equity:
Common Stock		289		289
Additional paid-in capital		121,659		119,891
Retained earnings		589,560		562,084
Treasury stock, at cost		(45,937)		(45,937)
Total Stockholders’ Equity		665,571		636,327
Total Liabilities and Stockholders’ Equity	$	1,031,272	$	1,015,373


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Net sales	$	704,161	$	550,002	$	1,341,053	$	1,261,852
Cost of sales		587,834		461,002		1,124,206		1,059,734
Gross profit		116,327		89,000		216,847		202,118
Selling, general and administrative expenses		92,563		77,420		178,963		169,887
Restructuring and other charges		—		992		—		992
Income from operations		23,764		10,588		37,884		31,239
Other income, net		14		5		7		96
Income before taxes		23,778		10,593		37,891		31,335
Income tax provision		(6,486)		(2,950)		(10,415)		(8,796)
Net income	$	17,292	$	7,643	$	27,476	$	22,539

Earnings per common share:
Basic	$	0.66	$	0.29	$	1.05	$	0.86
Diluted	$	0.66	$	0.29	$	1.04	$	0.86

Shares used in computation of earnings per common share:
Basic		26,187		26,107		26,180		26,172
Diluted		26,359		26,279		26,361		26,350


	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	28,948	$	289	$	120,875	$	572,268	(2,773)	$	(45,937)	$	647,495
Stock-based compensation expense	—		—		1,026		—	—		—		1,026
Restricted stock units vested	12		—		—		—	—		—		—
Shares withheld for taxes paid on stock awards	—		—		(242)		—	—		—		(242)
Net income	—		—		—		17,292	—		—		17,292
Balance - June 30, 2021	28,960	$	289	$	121,659	$	589,560	(2,773)	$	(45,937)	$	665,571

	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	28,943	$	289	$	119,891	$	562,084	(2,773)	$	(45,937)	$	636,327
Stock-based compensation expense	—		—		2,092		—	—		—		2,092
Restricted stock units vested	17		—		—		—	—		—		—
Shares withheld for taxes paid on stock awards	—		—		(324)		—	—		—		(324)
Net income	—		—		—		27,476	—		—		27,476
Balance - June 30, 2021	28,960	$	289	$	121,659	$	589,560	(2,773)	$	(45,937)	$	665,571


	Three months ended June 30, 2020
	Common Stock			Additional		Retained		Treasury Shares
	Shares	Amount		Paid-In Capital		Earnings		Shares	Amount		Total
Balance - 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 - June 30, 2020	28,892	$	289	$	119,628	$	537,233	(2,773)	$	(45,937)	$	611,213

	Six months ended June 30, 2020
	Common Stock			Additional		Retained		Treasury Shares
	Shares	Amount		Paid-In Capital		Earnings		Shares	Amount		Total
Balance - 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 - June 30, 2020	28,892	$	289	$	119,628	$	537,233	(2,773)	$	(45,937)	$	611,213


	Three Months Ended June 30, 2021
	Business Solutions		Enterprise Solutions		Public Sector Solutions		Total
Notebooks/Mobility	$	97,401	$	94,472	$	62,501	$	254,374
Desktops		20,607		38,916		8,527		68,050
Software		33,102		26,162		11,858		71,122
Servers/Storage		21,086		27,106		7,635		55,827
Net/Com Products		22,360		20,691		7,211		50,262
Displays and Sound		25,825		29,343		12,743		67,911
Accessories		27,480		44,311		9,109		80,900
Other Hardware/Services		19,397		26,160		10,158		55,715
Total net sales	$	267,258	$	307,161	$	129,742	$	704,161


	June 30, 2021		December 31, 2020
Contract liabilities, which are included in "Accrued expenses and other liabilities"	$	4,912	$	3,509


	2021
Balances at December 31, 2020	$	3,509
Cash received in advance and not recognized as revenue		6,969
Amounts recognized as revenue as performance obligations satisfied		(5,566)
Balances at June 30, 2021	$	4,912

	2020
Balances at December 31, 2019	$	5,942
Cash received in advance and not recognized as revenue		6,297
Amounts recognized as revenue as performance obligations satisfied		(10,049)
Balances at June 30, 2020	$	2,190


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Numerator:
Net income	$	17,292	$	7,643	$	27,476	$	22,539
Denominator:
Denominator for basic earnings per share		26,187		26,107		26,180		26,172
Dilutive effect of employee stock awards		172		172		181		178
Denominator for diluted earnings per share		26,359		26,279		26,361		26,350
Earnings per share:
Basic	$	0.66	$	0.29	$	1.05	$	0.86
Diluted	$	0.66	$	0.29	$	1.04	$	0.86


	Three months ended June 30, 2021						Six months ended June 30, 2021
	Related Parties		Others		Total		Related Parties		Others		Total
Lease Cost
Capitalized operating lease cost	$	313	$	775	$	1,088	$	627	$	1,552	$	2,179
Short-term lease cost		107		21		128		213		42		255
Total lease cost	$	420	$	796	$	1,216	$	840	$	1,594	$	2,434

Other Information
Cash paid for amounts included in the measurement of lease liabilities and capitalized operating leases:
Operating cash flows	$	313	$	830	$	1,143	$	627	$	1,599	$	2,226

Weighted-average remaining lease term (in years):
Capitalized operating leases								2.42		4.90		4.30

Weighted-average discount rate:
Capitalized operating leases								3.92%		3.92%		3.92%


	Three months ended June 30, 2020						Six months ended June 30, 2020
	Related Parties		Others		Total		Related Parties		Others		Total
Lease Cost
Capitalized operating lease cost	$	379	$	798	$	1,177	$	758	$	1,581	$	2,339
Short-term lease cost		41		2		43		82		4		86
Total lease cost	$	420	$	800	$	1,220	$	840	$	1,585	$	2,425

Other Information
Cash paid for amounts included in the measurement of lease liabilities and capitalized operating leases:
Operating cash flows	$	379	$	827	$	1,206	$	758	$	1,608	$	2,366

Weighted-average remaining lease term (in years):
Capitalized operating leases								3.42		6.05		5.37

Weighted-average discount rate:
Capitalized operating leases								3.92%		3.92%		3.92%


	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


	Six Months Ended June 30, 2021
	Business Solutions		Enterprise Solutions		Public Sector Solutions		Total
Notebooks/Mobility	$	191,836	$	176,663	$	119,475	$	487,974
Desktops		41,766		69,267		16,377		127,410
Software		60,264		48,667		19,067		127,998
Servers/Storage		41,659		44,262		14,282		100,203
Net/Com Products		40,764		40,517		17,572		98,853
Displays and Sound		45,599		52,748		26,736		125,083
Accessories		53,327		88,187		19,930		161,444
Other Hardware/Services		38,377		52,135		21,576		112,088
Total net sales	$	513,592	$	572,446	$	255,015	$	1,341,053


	Six Months Ended June 30, 2020
	Business Solutions		Enterprise Solutions		Public Sector Solutions		Total
Notebooks/Mobility	$	154,265	$	159,046	$	79,274	$	392,585
Desktops		47,794		61,223		19,579		128,596
Software		60,649		51,058		15,642		127,349
Servers/Storage		49,476		39,210		19,766		108,452
Net/Com Products		35,776		44,231		17,254		97,261
Displays and Sound		43,177		42,092		21,129		106,398
Accessories		47,507		123,647		21,431		192,585
Other Hardware/Services		31,230		59,670		17,726		108,626
Total net sales	$	469,874	$	580,177	$	211,801	$	1,261,852


For the Years Ended December 31,		Related Parties		Others		Total
2021, excluding the six months ended June 30, 2021	$	627	$	1,581	$	2,208
2022		1,253		2,268		3,521
2023		1,149		1,727		2,876
2024		—		1,699		1,699
2025		—		1,594		1,594
Thereafter		—		888		888
	$	3,029	$	9,757	$	12,786

Imputed interest						(920)
Lease liability balance at June 30, 2021					$	11,866


	Three Months Ended June 30,						Six Months Ended June 30,
($ in millions)	2021			2020			2021			2020
Personnel costs	$	70.3		$	56.9		$	135.1		$	126.4
Advertising		3.2			2.7			6.6			7.4
Facilities operations		2.1			2.3			4.3			4.4
Service contracts/subscriptions		4.1			3.2			8.8			6.9
Professional fees		4.5			4.0			9.2			6.6
Credit card fees		1.6			1.3			3.1			2.9
Depreciation and amortization		3.1			3.4			6.2			6.5
Other		3.7			3.6			5.7			8.8
Total SG&A expense	$	92.6		$	77.4		$	179.0		$	169.9
As a percentage of net sales		13.1	%		14.1	%		13.3	%		13.5	%



(in days)	June 30,
	2021		2020
Days of sales outstanding (DSO)⁽¹⁾		70		68
Days of supply in inventory (DIO)⁽²⁾		26		33
Days of purchases outstanding (DPO)⁽³⁾		(40)		(49)
Cash conversion cycle		56		52


Exhibit Number		Description

3.1		Amended and Restated Certificate of Incorporation of PC Connection, Inc., as amended (incorporated by reference from the exhibits filed with the company’s registration statement (333-63272) on Form-4 filed under the security act of 1933)

3.2		Amended and Restated Bylaws of PC Connection, Inc. (incorporated by reference from exhibits filed with the Company’s current report on Form 8-K, filed on January 9, 2008).

31.1	*	Certification of the Company’s President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	*	Certification of the Company’s Senior Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	*	Certification of the Company’s President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	*	Certification of the Company’s Senior Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS	**	Inline XBRL Instance Document* - The Instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH	**	Inline XBRL Taxonomy Extension Schema Document.

101.CAL	**	Inline XBRL Taxonomy Calculation Linkbase Document.

101.DEF	**	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	**	Inline XBRL Taxonomy Label Linkbase Document.

101.PRE	**	Inline XBRL Taxonomy Presentation Linkbase Document.

104	*	Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101).


Date:	August 5, 2021	By:	/s/ TIMOTHY J. MCGRATH
			Timothy J. McGrath
			President and Chief Executive Officer (Duly Authorized Officer)

Date:	August 5, 2021	By:	/s/ THOMAS C. BAKER
			Thomas C. Baker
			Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

6
Date: August 5, 2021		/s/ TIMOTHY J. MCGRATH
		Timothy J. McGrath
		President and Chief Executive Officer