PC Connection (CNXN) 10-Q4 Nov 222022 Q3 Quarterly reportFinancial data

Company Profile

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2022	Oct. 28, 2022
Document And Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2022
Entity File Number	0-23827
Entity Registrant Name	PC CONNECTION, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	02-0513618
Entity Address, Address Line One	730 Milford Road
Entity Address, City or Town	Merrimack
Entity Address, State or Province	NH
Entity Address, Postal Zip Code	03054
City Area Code	603
Local Phone Number	683-2000
Title of 12(b) Security	Common Stock, $0.01 par value
Trading Symbol	CNXN
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		26,288,356
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001050377
Amendment Flag	false

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Current Assets:
Cash and cash equivalents	$ 116,190	$ 108,310
Accounts receivable, net	646,656	607,532
Inventories, net	213,316	206,555
Prepaid expenses and other current assets	10,095	10,016
Total current assets	986,257	932,413
Property and equipment, net	59,913	61,011
Right-of-use assets	8,495	9,579
Goodwill	73,602	73,602
Intangible, net	4,953	5,868
Other assets	905	910
Total Assets	1,134,125	1,083,383
Current Liabilities:
Accounts payable	258,596	281,836
Accrued payroll	31,478	30,966
Accrued expenses and other liabilities	62,846	61,830
Total current liabilities	352,920	374,632
Deferred income taxes	19,278	19,278
Noncurrent operating lease liabilities	5,620	6,789
Other liabilities	200	211
Total Liabilities	378,018	400,910
Stockholders' Equity:
Common stock	291	290
Additional paid-in capital	125,591	122,354
Retained earnings	676,162	605,766
Treasury stock, at cost	(45,937)	(45,937)
Total Stockholders' Equity	756,107	682,473
Total Liabilities and Stockholders' Equity	$ 1,134,125	$ 1,083,383

CONSOLIDATED STATEMENTS OF INCO

CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Consolidated Statements of Income
Net sales	$ 775,692	$ 751,368	$ 2,392,545	$ 2,092,421
Cost of sales	639,066	630,671	1,990,712	1,754,877
Gross profit	136,626	120,697	401,833	337,544
Selling, general and administrative expenses	104,887	93,369	305,189	272,332
Income from operations	31,739	27,328	96,644	65,212
Other income, net	308		319	7
Income before taxes	32,047	27,328	96,963	65,219
Income tax provision	(8,841)	(7,283)	(26,567)	(17,698)
Net income	$ 23,206	$ 20,045	$ 70,396	$ 47,521
Earnings per common share:
Basic	$ 0.88	$ 0.77	$ 2.68	$ 1.81
Diluted	$ 0.88	$ 0.76	$ 2.66	$ 1.80
Shares used in computation of earnings per common share:
Basic	26,279	26,197	26,267	26,186
Diluted	26,455	26,368	26,432	26,362

CONSOLIDATED STATEMENTS OF STOC

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Common Stock	Additional Paid-In Capital	Retained Earnings	Treasury Shares	Total
Balance at Dec. 31, 2020	$ 289	$ 119,891	$ 562,084	$ (45,937)	$ 636,327
Balance (in shares) at Dec. 31, 2020	28,943			(2,773)
Stock-based compensation expense		3,118			3,118
Restricted stock units vested	$ 1	(1)
Restricted stock units vested (in shares)	35
Shares withheld for taxes paid on stock awards		(794)			(794)
Net income			47,521		47,521
Balance at Sep. 30, 2021	$ 290	122,214	609,605	$ (45,937)	686,172
Balance (in shares) at Sep. 30, 2021	28,978			(2,773)
Balance at Jun. 30, 2021	$ 289	121,659	589,560	$ (45,937)	665,571
Balance (in shares) at Jun. 30, 2021	28,960			(2,773)
Stock-based compensation expense		1,026			1,026
Restricted stock units vested	$ 1	(1)
Restricted stock units vested (in shares)	18
Shares withheld for taxes paid on stock awards		(470)			(470)
Net income			20,045		20,045
Balance at Sep. 30, 2021	$ 290	122,214	609,605	$ (45,937)	686,172
Balance (in shares) at Sep. 30, 2021	28,978			(2,773)
Balance at Dec. 31, 2021	$ 290	122,354	605,766	$ (45,937)	682,473
Balance (in shares) at Dec. 31, 2021	29,025			(2,773)
Stock-based compensation expense		4,072			4,072
Restricted stock units vested	$ 1	(1)
Restricted stock units vested (in shares)	36
Shares withheld for taxes paid on stock awards		(834)			(834)
Net income			70,396		70,396
Balance at Sep. 30, 2022	$ 291	125,591	676,162	$ (45,937)	756,107
Balance (in shares) at Sep. 30, 2022	29,061			(2,773)
Balance at Jun. 30, 2022	$ 290	124,690	652,956	$ (45,937)	731,999
Balance (in shares) at Jun. 30, 2022	29,045			(2,773)
Stock-based compensation expense		1,282			1,282
Restricted stock units vested	$ 1	(1)
Restricted stock units vested (in shares)	16
Shares withheld for taxes paid on stock awards		(380)			(380)
Net income			23,206		23,206
Balance at Sep. 30, 2022	$ 291	$ 125,591	$ 676,162	$ (45,937)	$ 756,107
Balance (in shares) at Sep. 30, 2022	29,061			(2,773)

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Cash Flows provided by Operating Activities:
Net income	$ 70,396	$ 47,521
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	9,000	9,165
Adjustments to credit losses reserve	2,658	1,704
Stock-based compensation expense	4,072	3,118
Loss on disposal of fixed assets	16	2
Changes in assets and liabilities:
Accounts receivable	(41,782)	22,437
Inventories	(6,761)	(34,507)
Prepaid expenses and other current assets	(79)	(360)
Other non-current assets	5	314
Accounts payable	(23,268)	(49,997)
Accrued expenses and other liabilities	1,432	9,437
Net cash provided by operating activities	15,689	8,834
Cash Flows used in Investing Activities:
Purchases of equipment and capitalized software	(6,975)	(7,092)
Proceeds from life insurance		1,500
Net cash used in investing activities	(6,975)	(5,592)
Cash Flows used in Financing Activities:
Proceeds from short-term borrowings	36,463
Repayment of short-term borrowings	(36,463)
Dividend payments		(8,375)
Payments of payroll taxes on stock-based compensation through shares withheld	(834)	(794)
Net cash used in financing activities	(834)	(9,169)
Increase (decrease) in cash and cash equivalents	7,880	(5,927)
Cash and cash equivalents, beginning of year	108,310	95,655
Cash and cash equivalents, end of period	116,190	89,728
Non-cash Investing and Financing Activities:
Accrued capital expenditures	362	394
Supplemental Cash Flow Information:
Income taxes paid	30,759	$ 20,600
Interest paid	$ 4

BASIS OF PRESENTATION

BASIS OF PRESENTATION	9 Months Ended
BASIS OF PRESENTATION	Sep. 30, 2022
Basis of Presentation
Basis of Presentation	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 (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. 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, 2021. 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 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. 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. 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. Actual results could differ from those estimates and assumptions. 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): Facilitation of the Effects of Reference Rate Reform on Financial Reporting

REVENUE

REVENUE	9 Months Ended
REVENUE	Sep. 30, 2022
Revenue
Revenue	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 September 30, 2022 and 2021, along with the reportable segment for each category. Three Months Ended September 30, 2022 Business Solutions Enterprise Solutions Public Sector Solutions Total Notebooks/Mobility $ 120,689 $ 95,017 $ 60,960 $ 276,666 Desktops 21,151 37,045 13,113 71,309 Software 36,965 36,996 12,186 86,147 Servers/Storage 27,016 15,857 12,213 55,086 Net/Com Products 27,732 19,625 8,189 55,546 Displays and Sound 28,377 30,011 20,633 79,021 Accessories 33,007 46,051 17,808 96,866 Other Hardware/Services 20,879 24,908 9,264 55,051 Total net sales $ 315,816 $ 305,510 $ 154,366 $ 775,692 Three Months Ended September 30, 2021 Business Solutions Enterprise Solutions Public Sector Solutions Total Notebooks/Mobility $ 109,910 $ 117,017 $ 77,192 $ 304,119 Desktops 22,329 34,473 11,319 68,121 Software 28,761 22,829 9,678 61,268 Servers/Storage 25,775 12,560 13,407 51,742 Net/Com Products 21,091 23,887 8,259 53,237 Displays and Sound 26,321 33,490 15,287 75,098 Accessories 28,865 43,207 14,320 86,392 Other Hardware/Services 18,373 22,259 10,759 51,391 Total net sales $ 281,425 $ 309,722 $ 160,221 $ 751,368 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 Business Solutions Enterprise Solutions Public Sector Solutions Total Notebooks/Mobility $ 374,298 $ 333,764 $ 185,021 $ 893,083 Desktops 68,459 134,541 44,368 247,368 Software 111,440 79,578 27,963 218,981 Servers/Storage 78,878 43,085 31,441 153,404 Net/Com Products 74,789 66,060 22,856 163,705 Displays and Sound 92,170 104,822 53,263 250,255 Accessories 100,904 151,786 46,423 299,113 Other Hardware/Services 63,672 76,225 26,739 166,636 Total net sales $ 964,610 $ 989,861 $ 438,074 $ 2,392,545 Nine Months Ended September 30, 2021 Business Solutions Enterprise Solutions Public Sector Solutions Total Notebooks/Mobility $ 301,746 $ 293,680 $ 196,667 $ 792,093 Desktops 64,095 103,740 27,696 195,531 Software 89,025 71,496 28,745 189,266 Servers/Storage 67,434 56,822 27,689 151,945 Net/Com Products 61,855 64,404 25,831 152,090 Displays and Sound 71,920 86,238 42,023 200,181 Accessories 82,192 131,394 34,250 247,836 Other Hardware/Services 56,750 74,394 32,335 163,479 Total net sales $ 795,017 $ 882,168 $ 415,236 $ 2,092,421 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 December 31, 2021 Contract liabilities, which are included in "Accrued expenses and other liabilities" $ 5,027 $ 8,628 Changes in the contract liability balances during the nine months ended September 30, 2022 and 2021 are as follows: 2022 Balance at December 31, 2021 $ 8,628 Cash received in advance and not recognized as revenue 18,943 Amounts recognized as revenue as performance obligations satisfied (22,544) Balance at September 30, 2022 $ 5,027 2021 Balance at December 31, 2020 $ 3,509 Cash received in advance and not recognized as revenue 19,838 Amounts recognized as revenue as performance obligations satisfied (15,524) Balance at September 30, 2021 $ 7,823

EARNINGS PER SHARE

EARNINGS PER SHARE	9 Months Ended
EARNINGS PER SHARE	Sep. 30, 2022
Earnings Per Share
Earnings Per Share	Note 3–Earnings Per Share Basic earnings per common share is computed using the weighted average number of shares outstanding. 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, 2022 2021 2022 2021 Numerator: Net income $ 23,206 $ 20,045 $ 70,396 $ 47,521 Denominator: Denominator for basic earnings per share 26,279 26,197 26,267 26,186 Dilutive effect of employee stock awards 176 171 165 176 Denominator for diluted earnings per share 26,455 26,368 26,432 26,362 Earnings per share: Basic $ 0.88 $ 0.77 $ 2.68 $ 1.81 Diluted $ 0.88 $ 0.76 $ 2.66 $ 1.80 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.

LEASES

LEASES	9 Months Ended
LEASES	Sep. 30, 2022
Leases
Leases	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 Others Total Related Parties Others Total Lease Cost Capitalized operating lease cost $ 313 $ 693 $ 1,006 $ 940 $ 2,112 $ 3,052 Short-term lease cost 107 58 165 321 100 421 Total lease cost $ 420 $ 751 $ 1,171 $ 1,261 $ 2,212 $ 3,473 Other Information Cash paid for amounts included in the measurement of lease liabilities and capitalized operating leases: Operating cash flows $ 313 $ 713 $ 1,026 $ 940 $ 2,147 $ 3,087 Weighted-average remaining lease term (in years): Capitalized operating leases 1.17 4.26 3.78 Weighted-average discount rate: Capitalized operating leases 3.92% 4.03% 4.02% Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021 Related Parties Others Total Related Parties Others Total Lease Cost Capitalized operating lease cost $ 313 $ 753 $ 1,066 $ 940 $ 2,304 $ 3,244 Short-term lease cost 107 21 128 320 63 383 Total lease cost $ 420 $ 774 $ 1,194 $ 1,260 $ 2,367 $ 3,627 Other Information Cash paid for amounts included in the measurement of lease liabilities and capitalized operating leases: Operating cash flows $ 313 $ 807 $ 1,120 $ 940 $ 2,404 $ 3,344 Weighted-average remaining lease term (in years): Capitalized operating leases 2.17 4.66 4.06 Weighted-average discount rate: Capitalized operating leases 3.92% 3.92% 3.92% As of September 30, 2022, For the Years Ended December 31, Related Parties Others Total 2022, excluding the nine months ended September 30, 2022 $ 313 $ 699 $ 1,012 2023 1,149 2,260 3,409 2024 — 1,860 1,860 2025 — 1,798 1,798 2026 — 1,115 1,115 Thereafter — 575 575 $ 1,462 $ 8,307 $ 9,769 Imputed interest (678) Lease liability balance at September 30, 2022 $ 9,091 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. As of September 30, 2021, the ROU asset had a balance of $10,218. The long-term lease liability was $7,353 and the short-term lease liability, which is included in accrued expenses and other liabilities in the consolidated balance sheets, was $3,502.

SEGMENT INFORMATION

SEGMENT INFORMATION	9 Months Ended
SEGMENT INFORMATION	Sep. 30, 2022
Segment Information
Segment Information	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 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 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. 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: Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2022 2021 2022 2021 Net sales: Business Solutions $ 315,816 $ 281,425 $ 964,610 $ 795,017 Enterprise Solutions 305,510 309,722 989,861 882,168 Public Sector Solutions 154,366 160,221 438,074 415,236 Total net sales $ 775,692 $ 751,368 $ 2,392,545 $ 2,092,421 Operating income (loss): Business Solutions $ 19,278 $ 12,774 $ 62,230 $ 29,559 Enterprise Solutions 12,401 19,151 42,103 52,203 Public Sector Solutions 4,211 619 4,156 (4,250) Headquarters/Other (4,151) (5,216) (11,845) (12,300) Total operating income 31,739 27,328 96,644 65,212 Other expenses, net 308 — 319 7 Income before taxes $ 32,047 $ 27,328 $ 96,963 $ 65,219 Selected operating expense: Depreciation and amortization: Business Solutions $ 167 $ 169 $ 502 $ 487 Enterprise Solutions 482 560 1,517 1,888 Public Sector Solutions 20 19 59 43 Headquarters/Other 2,351 2,199 6,922 6,747 Total depreciation and amortization $ 3,020 $ 2,947 $ 9,000 $ 9,165 Total assets: Business Solutions $ 451,872 $ 375,557 Enterprise Solutions 647,592 603,173 Public Sector Solutions 113,820 91,227 Headquarters/Other (79,159) (56,031) Total assets $ 1,134,125 $ 1,013,926 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 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. 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.

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES	9 Months Ended
COMMITMENTS AND CONTINGENCIES	Sep. 30, 2022
Commitments and Contingencies
Commitments and Contingencies	Note 6–Commitments and Contingencies The Company is subject to various legal proceedings and 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 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 the Company’s financial position, results of operations, and/or cash flows.

BANK BORROWINGS

BANK BORROWINGS	9 Months Ended
BANK BORROWINGS	Sep. 30, 2022
Bank Borrowings
Bank Borrowings	Note 7–Bank Borrowings 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). 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.

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	9 Months Ended
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	Sep. 30, 2022
Basis of Presentation
Principles of Consolidation	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. 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, 2021. 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 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.
Use of Estimates in the Preparation of Financial Statements	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. 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. Actual results could differ from those estimates and assumptions.
Recently Issued Financial Accounting Standards	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): Facilitation of the Effects of Reference Rate Reform on Financial Reporting

REVENUE (Tables)

REVENUE (Tables)	9 Months Ended
REVENUE (Tables)	Sep. 30, 2022
Revenue
Schedule of disaggregation of revenue from contracts with customers	Three Months Ended September 30, 2022 Business Solutions Enterprise Solutions Public Sector Solutions Total Notebooks/Mobility $ 120,689 $ 95,017 $ 60,960 $ 276,666 Desktops 21,151 37,045 13,113 71,309 Software 36,965 36,996 12,186 86,147 Servers/Storage 27,016 15,857 12,213 55,086 Net/Com Products 27,732 19,625 8,189 55,546 Displays and Sound 28,377 30,011 20,633 79,021 Accessories 33,007 46,051 17,808 96,866 Other Hardware/Services 20,879 24,908 9,264 55,051 Total net sales $ 315,816 $ 305,510 $ 154,366 $ 775,692 Three Months Ended September 30, 2021 Business Solutions Enterprise Solutions Public Sector Solutions Total Notebooks/Mobility $ 109,910 $ 117,017 $ 77,192 $ 304,119 Desktops 22,329 34,473 11,319 68,121 Software 28,761 22,829 9,678 61,268 Servers/Storage 25,775 12,560 13,407 51,742 Net/Com Products 21,091 23,887 8,259 53,237 Displays and Sound 26,321 33,490 15,287 75,098 Accessories 28,865 43,207 14,320 86,392 Other Hardware/Services 18,373 22,259 10,759 51,391 Total net sales $ 281,425 $ 309,722 $ 160,221 $ 751,368 Nine Months Ended September 30, 2022 Business Solutions Enterprise Solutions Public Sector Solutions Total Notebooks/Mobility $ 374,298 $ 333,764 $ 185,021 $ 893,083 Desktops 68,459 134,541 44,368 247,368 Software 111,440 79,578 27,963 218,981 Servers/Storage 78,878 43,085 31,441 153,404 Net/Com Products 74,789 66,060 22,856 163,705 Displays and Sound 92,170 104,822 53,263 250,255 Accessories 100,904 151,786 46,423 299,113 Other Hardware/Services 63,672 76,225 26,739 166,636 Total net sales $ 964,610 $ 989,861 $ 438,074 $ 2,392,545 Nine Months Ended September 30, 2021 Business Solutions Enterprise Solutions Public Sector Solutions Total Notebooks/Mobility $ 301,746 $ 293,680 $ 196,667 $ 792,093 Desktops 64,095 103,740 27,696 195,531 Software 89,025 71,496 28,745 189,266 Servers/Storage 67,434 56,822 27,689 151,945 Net/Com Products 61,855 64,404 25,831 152,090 Displays and Sound 71,920 86,238 42,023 200,181 Accessories 82,192 131,394 34,250 247,836 Other Hardware/Services 56,750 74,394 32,335 163,479 Total net sales $ 795,017 $ 882,168 $ 415,236 $ 2,092,421
Schedule of changes in contract liability balances	September 30, 2022 December 31, 2021 Contract liabilities, which are included in "Accrued expenses and other liabilities" $ 5,027 $ 8,628 Changes in the contract liability balances during the nine months ended September 30, 2022 and 2021 are as follows: 2022 Balance at December 31, 2021 $ 8,628 Cash received in advance and not recognized as revenue 18,943 Amounts recognized as revenue as performance obligations satisfied (22,544) Balance at September 30, 2022 $ 5,027 2021 Balance at December 31, 2020 $ 3,509 Cash received in advance and not recognized as revenue 19,838 Amounts recognized as revenue as performance obligations satisfied (15,524) Balance at September 30, 2021 $ 7,823

EARNINGS PER SHARE (Tables)

EARNINGS PER SHARE (Tables)	9 Months Ended
EARNINGS PER SHARE (Tables)	Sep. 30, 2022
Earnings Per Share
Computation of basic and diluted earnings per share	Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Numerator: Net income $ 23,206 $ 20,045 $ 70,396 $ 47,521 Denominator: Denominator for basic earnings per share 26,279 26,197 26,267 26,186 Dilutive effect of employee stock awards 176 171 165 176 Denominator for diluted earnings per share 26,455 26,368 26,432 26,362 Earnings per share: Basic $ 0.88 $ 0.77 $ 2.68 $ 1.81 Diluted $ 0.88 $ 0.76 $ 2.66 $ 1.80

LEASES (Tables)

LEASES (Tables)	9 Months Ended
LEASES (Tables)	Sep. 30, 2022
Leases
Schedule of lease cost	Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022 Related Parties Others Total Related Parties Others Total Lease Cost Capitalized operating lease cost $ 313 $ 693 $ 1,006 $ 940 $ 2,112 $ 3,052 Short-term lease cost 107 58 165 321 100 421 Total lease cost $ 420 $ 751 $ 1,171 $ 1,261 $ 2,212 $ 3,473 Other Information Cash paid for amounts included in the measurement of lease liabilities and capitalized operating leases: Operating cash flows $ 313 $ 713 $ 1,026 $ 940 $ 2,147 $ 3,087 Weighted-average remaining lease term (in years): Capitalized operating leases 1.17 4.26 3.78 Weighted-average discount rate: Capitalized operating leases 3.92% 4.03% 4.02% Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021 Related Parties Others Total Related Parties Others Total Lease Cost Capitalized operating lease cost $ 313 $ 753 $ 1,066 $ 940 $ 2,304 $ 3,244 Short-term lease cost 107 21 128 320 63 383 Total lease cost $ 420 $ 774 $ 1,194 $ 1,260 $ 2,367 $ 3,627 Other Information Cash paid for amounts included in the measurement of lease liabilities and capitalized operating leases: Operating cash flows $ 313 $ 807 $ 1,120 $ 940 $ 2,404 $ 3,344 Weighted-average remaining lease term (in years): Capitalized operating leases 2.17 4.66 4.06 Weighted-average discount rate: Capitalized operating leases 3.92% 3.92% 3.92%
Schedule of future lease payments on capitalized operating leases	For the Years Ended December 31, Related Parties Others Total 2022, excluding the nine months ended September 30, 2022 $ 313 $ 699 $ 1,012 2023 1,149 2,260 3,409 2024 — 1,860 1,860 2025 — 1,798 1,798 2026 — 1,115 1,115 Thereafter — 575 575 $ 1,462 $ 8,307 $ 9,769 Imputed interest (678) Lease liability balance at September 30, 2022 $ 9,091

SEGMENT INFORMATION (Tables)

SEGMENT INFORMATION (Tables)	9 Months Ended
SEGMENT INFORMATION (Tables)	Sep. 30, 2022
Segment Information
Segment information applicable to reportable operating segments	Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2022 2021 2022 2021 Net sales: Business Solutions $ 315,816 $ 281,425 $ 964,610 $ 795,017 Enterprise Solutions 305,510 309,722 989,861 882,168 Public Sector Solutions 154,366 160,221 438,074 415,236 Total net sales $ 775,692 $ 751,368 $ 2,392,545 $ 2,092,421 Operating income (loss): Business Solutions $ 19,278 $ 12,774 $ 62,230 $ 29,559 Enterprise Solutions 12,401 19,151 42,103 52,203 Public Sector Solutions 4,211 619 4,156 (4,250) Headquarters/Other (4,151) (5,216) (11,845) (12,300) Total operating income 31,739 27,328 96,644 65,212 Other expenses, net 308 — 319 7 Income before taxes $ 32,047 $ 27,328 $ 96,963 $ 65,219 Selected operating expense: Depreciation and amortization: Business Solutions $ 167 $ 169 $ 502 $ 487 Enterprise Solutions 482 560 1,517 1,888 Public Sector Solutions 20 19 59 43 Headquarters/Other 2,351 2,199 6,922 6,747 Total depreciation and amortization $ 3,020 $ 2,947 $ 9,000 $ 9,165 Total assets: Business Solutions $ 451,872 $ 375,557 Enterprise Solutions 647,592 603,173 Public Sector Solutions 113,820 91,227 Headquarters/Other (79,159) (56,031) Total assets $ 1,134,125 $ 1,013,926

REVENUE - Disaggregation of Rev

REVENUE - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Disaggregation of revenue
Net sales	$ 775,692	$ 751,368	$ 2,392,545	$ 2,092,421
Notebooks/Mobility
Disaggregation of revenue
Net sales	276,666	304,119	893,083	792,093
Desktops
Disaggregation of revenue
Net sales	71,309	68,121	247,368	195,531
Software
Disaggregation of revenue
Net sales	86,147	61,268	218,981	189,266
Servers/Storage
Disaggregation of revenue
Net sales	55,086	51,742	153,404	151,945
Net/Com Products
Disaggregation of revenue
Net sales	55,546	53,237	163,705	152,090
Displays and Sound
Disaggregation of revenue
Net sales	79,021	75,098	250,255	200,181
Accessories
Disaggregation of revenue
Net sales	96,866	86,392	299,113	247,836
Other Hardware/Services
Disaggregation of revenue
Net sales	55,051	51,391	166,636	163,479
Business Solutions
Disaggregation of revenue
Net sales	315,816	281,425	964,610	795,017
Business Solutions \| Notebooks/Mobility
Disaggregation of revenue
Net sales	120,689	109,910	374,298	301,746
Business Solutions \| Desktops
Disaggregation of revenue
Net sales	21,151	22,329	68,459	64,095
Business Solutions \| Software
Disaggregation of revenue
Net sales	36,965	28,761	111,440	89,025
Business Solutions \| Servers/Storage
Disaggregation of revenue
Net sales	27,016	25,775	78,878	67,434
Business Solutions \| Net/Com Products
Disaggregation of revenue
Net sales	27,732	21,091	74,789	61,855
Business Solutions \| Displays and Sound
Disaggregation of revenue
Net sales	28,377	26,321	92,170	71,920
Business Solutions \| Accessories
Disaggregation of revenue
Net sales	33,007	28,865	100,904	82,192
Business Solutions \| Other Hardware/Services
Disaggregation of revenue
Net sales	20,879	18,373	63,672	56,750
Enterprise Solutions
Disaggregation of revenue
Net sales	305,510	309,722	989,861	882,168
Enterprise Solutions \| Notebooks/Mobility
Disaggregation of revenue
Net sales	95,017	117,017	333,764	293,680
Enterprise Solutions \| Desktops
Disaggregation of revenue
Net sales	37,045	34,473	134,541	103,740
Enterprise Solutions \| Software
Disaggregation of revenue
Net sales	36,996	22,829	79,578	71,496
Enterprise Solutions \| Servers/Storage
Disaggregation of revenue
Net sales	15,857	12,560	43,085	56,822
Enterprise Solutions \| Net/Com Products
Disaggregation of revenue
Net sales	19,625	23,887	66,060	64,404
Enterprise Solutions \| Displays and Sound
Disaggregation of revenue
Net sales	30,011	33,490	104,822	86,238
Enterprise Solutions \| Accessories
Disaggregation of revenue
Net sales	46,051	43,207	151,786	131,394
Enterprise Solutions \| Other Hardware/Services
Disaggregation of revenue
Net sales	24,908	22,259	76,225	74,394
Public Sector Solutions
Disaggregation of revenue
Net sales	154,366	160,221	438,074	415,236
Public Sector Solutions \| Notebooks/Mobility
Disaggregation of revenue
Net sales	60,960	77,192	185,021	196,667
Public Sector Solutions \| Desktops
Disaggregation of revenue
Net sales	13,113	11,319	44,368	27,696
Public Sector Solutions \| Software
Disaggregation of revenue
Net sales	12,186	9,678	27,963	28,745
Public Sector Solutions \| Servers/Storage
Disaggregation of revenue
Net sales	12,213	13,407	31,441	27,689
Public Sector Solutions \| Net/Com Products
Disaggregation of revenue
Net sales	8,189	8,259	22,856	25,831
Public Sector Solutions \| Displays and Sound
Disaggregation of revenue
Net sales	20,633	15,287	53,263	42,023
Public Sector Solutions \| Accessories
Disaggregation of revenue
Net sales	17,808	14,320	46,423	34,250
Public Sector Solutions \| Other Hardware/Services
Disaggregation of revenue
Net sales	$ 9,264	$ 10,759	$ 26,739	$ 32,335

REVENUE - Contract Balances (De

REVENUE - Contract Balances (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Change in contract liability
Beginning balance - Contract liability	$ 8,628	$ 3,509
Cash received in advance and not recognized as revenue	18,943	19,838
Amounts recognized as revenue as performance obligations satisfied	(22,544)	(15,524)
Ending balance - Contract liability	5,027	$ 7,823
Accrued expenses and other liabilities
Contract liabilities
Contract liabilities	$ 5,027		$ 8,628

EARNINGS PER SHARE (Details)

EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Numerator:
Net income	$ 23,206	$ 20,045	$ 70,396	$ 47,521
Denominator:
Denominator for basic earnings per share	26,279	26,197	26,267	26,186
Dilutive effect of unvested employee stock awards	176	171	165	176
Denominator for diluted earnings per share	26,455	26,368	26,432	26,362
Earnings per share:
Basic	$ 0.88	$ 0.77	$ 2.68	$ 1.81
Diluted	$ 0.88	$ 0.76	$ 2.66	$ 1.80
Additional Disclosure
Employee stock awards excluded from computation of diluted earnings per share	0	0	0	0

LEASES - Lease Cost and Other I

LEASES - Lease Cost and Other Information (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2022 USD ($) lease	Sep. 30, 2021 USD ($)	Dec. 31, 2021 USD ($)
Leases
Right-of-use assets	$ 8,495	$ 10,218	$ 8,495	$ 10,218	$ 9,579
Lease liability	9,091		$ 9,091
Number of additional operating or financing leases not yet commenced \| lease			0
Lease Cost
Capitalized operating lease cost	1,006	1,066	$ 3,052	3,244
Short-term lease cost	165	128	421	383
Total lease cost	1,171	1,194	3,473	3,627
Cash paid for amounts included in the measurement of lease liabilities and capitalized operating leases:
Operating cash flows	$ 1,026	$ 1,120	$ 3,087	$ 3,344
Weighted-average remaining lease term - Capitalized operating leases (in years)	3 years 9 months 10 days	4 years 21 days	3 years 9 months 10 days	4 years 21 days
Weighted-average discount rate - Capitalized operating leases	4.02%	3.92%	4.02%	3.92%
Related Parties
Leases
Right-of-use assets	$ 1,432		$ 1,432
Lease liability	1,432		1,432
Lease Cost
Capitalized operating lease cost	313	$ 313	940	$ 940
Short-term lease cost	107	107	321	320
Total lease cost	420	420	1,261	1,260
Cash paid for amounts included in the measurement of lease liabilities and capitalized operating leases:
Operating cash flows	$ 313	$ 313	$ 940	$ 940
Weighted-average remaining lease term - Capitalized operating leases (in years)	1 year 2 months 1 day	2 years 2 months 1 day	1 year 2 months 1 day	2 years 2 months 1 day
Weighted-average discount rate - Capitalized operating leases	3.92%	3.92%	3.92%	3.92%
Others
Lease Cost
Capitalized operating lease cost	$ 693	$ 753	$ 2,112	$ 2,304
Short-term lease cost	58	21	100	63
Total lease cost	751	774	2,212	2,367
Cash paid for amounts included in the measurement of lease liabilities and capitalized operating leases:
Operating cash flows	$ 713	$ 807	$ 2,147	$ 2,404
Weighted-average remaining lease term - Capitalized operating leases (in years)	4 years 3 months 3 days	4 years 7 months 28 days	4 years 3 months 3 days	4 years 7 months 28 days
Weighted-average discount rate - Capitalized operating leases	4.03%	3.92%	4.03%	3.92%

LEASES - Future Lease Payments

LEASES - Future Lease Payments (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021	Sep. 30, 2021
Future lease payments over the remaining term of capitalized operating leases
2022, excluding the nine months ended September 30, 2022	$ 1,012
2023	3,409
2024	1,860
2025	1,798
2026	1,115
Thereafter	575
Total	9,769
Imputed interest	(678)
Lease liability balance	9,091
Right-of-use assets	8,495	$ 9,579	$ 10,218
Long-term lease liability	5,620	$ 6,789	7,353
Short-term lease liability	$ 3,471		$ 3,502
Current operating lease liability, Statement of Financial Position	Accrued expenses and other liabilities		Accrued expenses and other liabilities
Related Parties
Future lease payments over the remaining term of capitalized operating leases
2022, excluding the nine months ended September 30, 2022	$ 313
2023	1,149
Total	1,462
Lease liability balance	1,432
Right-of-use assets	1,432
Others
Future lease payments over the remaining term of capitalized operating leases
2022, excluding the nine months ended September 30, 2022	699
2023	2,260
2024	1,860
2025	1,798
2026	1,115
Thereafter	575
Total	$ 8,307

SEGMENT INFORMATION - Segment I

SEGMENT INFORMATION - Segment Information Applicable to Reportable Operating Segments (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022 USD ($) segment	Sep. 30, 2021 USD ($) segment	Sep. 30, 2022 USD ($) segment	Sep. 30, 2021 USD ($) segment	Dec. 31, 2021 USD ($)
Segment Reporting Information
Number of reportable segments \| segment	3	3	3	3
Number of operating segments \| segment	3	3	3	3
Net sales:
Net sales	$ 775,692	$ 751,368	$ 2,392,545	$ 2,092,421
Operating income (loss):
Operating income (loss)	31,739	27,328	96,644	65,212
Other expenses, net	308		319	7
Income before taxes	32,047	27,328	96,963	65,219
Depreciation and amortization:
Depreciation and amortization	3,020	2,947	9,000	9,165
Total assets:
Total assets	1,134,125	1,013,926	1,134,125	1,013,926	$ 1,083,383
Business Solutions
Net sales:
Net sales	315,816	281,425	964,610	795,017
Enterprise Solutions
Net sales:
Net sales	305,510	309,722	989,861	882,168
Public Sector Solutions
Net sales:
Net sales	154,366	160,221	438,074	415,236
Operating Segments \| Business Solutions
Net sales:
Net sales	315,816	281,425	964,610	795,017
Operating income (loss):
Operating income (loss)	19,278	12,774	62,230	29,559
Depreciation and amortization:
Depreciation and amortization	167	169	502	487
Total assets:
Total assets	451,872	375,557	451,872	375,557
Operating Segments \| Enterprise Solutions
Net sales:
Net sales	305,510	309,722	989,861	882,168
Operating income (loss):
Operating income (loss)	12,401	19,151	42,103	52,203
Depreciation and amortization:
Depreciation and amortization	482	560	1,517	1,888
Total assets:
Total assets	647,592	603,173	647,592	603,173
Operating Segments \| Public Sector Solutions
Net sales:
Net sales	154,366	160,221	438,074	415,236
Operating income (loss):
Operating income (loss)	4,211	619	4,156	(4,250)
Depreciation and amortization:
Depreciation and amortization	20	19	59	43
Total assets:
Total assets	113,820	91,227	113,820	91,227
Headquarters/Other
Operating income (loss):
Operating income (loss)	(4,151)	(5,216)	(11,845)	(12,300)
Depreciation and amortization:
Depreciation and amortization	2,351	2,199	6,922	6,747
Total assets:
Assets net of intercompany balance eliminations	(79,159)	(56,031)	(79,159)	(56,031)
Intersegment Elimination
Total assets:
Total assets	$ (62,154)	$ (39,209)	$ (62,154)	$ (39,209)

BANK BORROWINGS (Details)

BANK BORROWINGS (Details) - USD ($) $ in Thousands	9 Months Ended
BANK BORROWINGS (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Sep. 30, 2021
Subordinated Borrowing
Line of credit, borrowing capacity	$ 50,000
Credit facility, expiration date	Mar. 31, 2025
Line of credit, maximum borrowing capacity	$ 80,000
Proceeds from short-term borrowings	36,463
Line of credit, outstanding borrowing	0	$ 0
Line of credit, available for borrowing	$ 50,000	$ 50,000
Maximum
Subordinated Borrowing
Debt ratio	2
Prime Rate
Subordinated Borrowing
Debt instrument, interest rate	6.25%