PC Connection (CNXN) 10-Q 4 Aug 17 2017 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Jul. 31, 2017
Document And Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2017
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q2
Trading Symbol	PCCC
Entity Registrant Name	PC CONNECTION INC
Entity Central Index Key	1,050,377
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		26,784,512

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Current Assets:
Cash and cash equivalents	$ 28,131	$ 49,180
Accounts receivable, net	426,439	411,883
Inventories	118,226	90,535
Prepaid expenses and other current assets	5,517	5,453
Income taxes receivable	4,604	2,120
Total current assets	582,917	559,171
Property and equipment, net	39,601	39,402
Goodwill	73,602	73,602
Other intangibles, net	11,759	12,586
Other assets	5,450	1,373
Total Assets	713,329	686,134
Current Liabilities:
Accounts payable	187,343	177,862
Accrued expenses and other liabilities	27,358	31,047
Accrued payroll	19,669	21,345
Total current liabilities	234,370	230,254
Deferred income taxes	19,766	19,602
Other liabilities	2,068	2,836
Total Liabilities	256,204	252,692
Stockholders' Equity:
Common stock	286	285
Additional paid-in capital	113,746	111,081
Retained earnings	358,955	337,938
Treasury stock, at cost	(15,862)	(15,862)
Total Stockholders' Equity	457,125	433,442
Total Liabilities and Stockholders' Equity	$ 713,329	$ 686,134

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Condensed Consolidated Statements of Income
Net sales	$ 749,792	$ 676,165	$ 1,420,386	$ 1,248,559
Cost of sales	650,122	582,291	1,233,983	1,072,492
Gross profit	99,670	93,874	186,403	176,067
Selling, general and administrative expenses	77,230	72,864	152,511	139,893
Income from operations	22,440	21,010	33,892	36,174
Interest income (expense)	9	(12)	28	(26)
Income before taxes	22,449	20,998	33,920	36,148
Income tax provision	(8,864)	(8,540)	(12,903)	(14,627)
Net income	$ 13,585	$ 12,458	$ 21,017	$ 21,521
Earnings per common share:
Basic	$ 0.51	$ 0.47	$ 0.79	$ 0.81
Diluted	$ 0.51	$ 0.47	$ 0.78	$ 0.81
Shares used in computation of earnings per common share:
Basic	26,761	26,501	26,729	26,500
Diluted	26,893	26,691	26,879	26,681

CONDENSED CONSOLIDATED STATEME4

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Cash Flows from Operating Activities:
Net income	$ 21,017	$ 21,521
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Depreciation and amortization	5,710	4,803
Provision for doubtful accounts	385	645
Stock-based compensation expense	613	131
Deferred income taxes	164	27
Excess tax benefit from exercise of equity awards		(32)
Changes in assets and liabilities:
Accounts receivable	(15,169)	(10,370)
Inventories	(27,691)	(9,558)
Prepaid expenses and other current assets	(2,548)	(1,192)
Other non-current assets	(4,077)	(26)
Accounts payable	8,930	10,457
Accrued expenses and other liabilities	2,908	596
Net cash (used for) provided by operating activities	(9,758)	17,002
Cash Flows from Investing Activities:
Purchases of equipment	(4,531)	(5,782)
Cash paid for Softmart		(33,983)
Net cash used for investing activities	(4,531)	(39,765)
Cash Flows from Financing Activities:
Dividend payment	(9,041)	(10,591)
Exercise of stock options	1,678
Issuance of stock under Employee Stock Purchase Plan	603	473
Excess tax benefit from exercise of equity awards		32
Payment of payroll taxes on stock-based compensation through shares withheld		(40)
Net cash used for financing activities	(6,760)	(10,126)
Decrease in cash and cash equivalents	(21,049)	(32,889)
Cash and cash equivalents, beginning of period	49,180	80,188
Cash and cash equivalents, end of period	28,131	47,299
Non-cash Investing and Financing Activities:
Accrued capital expenditures	662	338
Supplemental Cash Flow Information:
Income taxes paid	$ 15,705	$ 15,658

BASIS OF PRESENTATION

BASIS OF PRESENTATION	6 Months Ended
	Jun. 30, 2017
Basis of Presentation
Basis of Presentation	Note 1–Basis of Presentation The accompanying condensed consolidated financial statements of PC Connection, Inc. and its subsidiaries (the “Company,” “we,” “us,” or “our”) have been prepared 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 our Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission (the “SEC”). The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements contained in our 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, 2017 may not be indicative of the results expected for any succeeding quarter or the entire year ending December 31, 2017. 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. Actual results could differ from those estimates. Comprehensive Income We had no items of comprehensive income, other than our net income for each of the periods presented. Recently Issued Financial Accounting Standards On May 28, 2014, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” which amends the existing accounting standards for revenue recognition. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In July 2015, the FASB voted to amend ASU 2014-09 by approving a one-year deferral of the mandatory effective date as well as providing the option to early adopt the standard on the original effective date. Accordingly, the Company will adopt the standard in its first quarter of 2018. An entity may choose to adopt the new standard either retrospectively or through a cumulative effect adjustment as of the start of the second period for which it applies the new standard. We are in the process of determining the effect that the adoption will have on our consolidated financial statements. Based on our analysis to date, we have reached the following tentative conclusions regarding the new standard and how we expect it to affect our consolidated financial statements and related disclosures: · We expect to adopt the standard in the first quarter of 2018 and will not early adopt. · We expect to use the full retrospective method. Such method provides that upon applying the new standard, prior periods will be retrospectively adjusted and the cumulative effect of the change recognized in the opening retained earnings as of January 1, 2016. · We believe that since substantially all of our revenue is contractual, substantially all of our revenue falls within the scope of ASU No. 2014-09, as amended. · Our hardware revenue is generally recognized on a gross basis upon delivery. Upon adoption of the new standard, we do expect to recognize revenue at an earlier point in time than we are recognizing under current accounting standards for contracts where shipping term are FOB shipping point. However, we are continuing to analyze each of our software and other revenue streams to determine any changes that may be required under the new standard. · We hold inventories not available for sale related to certain product sales transactions in which we are warehousing the product and will be deploying the product to our clients’ designated locations subsequent to period-end. We are currently evaluating the effect of the new standard on our inventories not available for sale to identify the differing performance obligations within the underlying contracts and to determine if a portion of revenue under the contracts should be recognized at an earlier point in time than we are recognizing under current accounting standards. · We expect that our disclosures in our notes to our consolidated financial statements related to revenue recognition will be significantly expanded under the new standard. Our analysis and evaluation of the new standard will continue through its effective date in the first quarter of 2018. A substantial amount of work remains to be completed due to the complexity of the new standard, the application of judgment, and the requirement for the use of estimates in applying the new standard, as well as the volume of our client portfolio and the related terms and conditions of our contracts that must be reviewed. In February 2016, the FASB issued ASU 2016-02, Leases . The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are currently assessing the potential impact of the adoption of ASU 2016-02 on our consolidated financial statements. 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. ASU 2017-04 is effective for us beginning January 1, 2020 for both interim and annual reporting periods. We are currently assessing the potential impact of the adoption of ASC 2017-04 on our consolidated financial statements. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory , which modifies existing requirements regarding measuring inventory at the lower of cost or market. Under prior standards, the market amount required consideration of replacement cost, net realizable value (NRV), and NRV less an approximately normal profit margin. The new ASU replaces market with NRV, defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This eliminates the need to determine and consider replacement cost or NRV less an approximately normal profit margin when measuring inventory. We adopted the standard in the first quarter of 2017 and applied the provisions prospectively. The adoption of ASU 2015-11 did not have a material impact on our consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting . The new standard simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. Under this guidance, a company recognizes all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement. This change eliminates the notion of the additional paid-in capital pool and reduces the complexity in accounting for excess tax benefits and tax deficiencies. The primary impact of our adoption was the recognition of excess tax benefits related to equity compensation in our provision for income taxes rather than paid-in capital, which is a change required to be applied on a prospective basis in accordance with the new guidance. Accordingly, we recorded discrete income tax benefits in the consolidated statements of income of $656 during the six months ended June 30, 2017, for excess tax benefits related to equity compensation. The corresponding cash flows are reflected in cash provided by operating activities instead of financing activities, as was previously required. We adopted the cash flow presentation that requires presentation of excess tax benefits within operating activities on a prospective basis. Additionally, under ASU 2016-09, we have elected to continue to estimate equity award forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period. Additional amendments to the accounting for income taxes and minimum statutory withholding tax requirements had no impact on our results of operations. The presentation requirements for cash flows related to employee taxes paid for withheld shares also had no impact to any of the periods presented in our condensed consolidated statements of cash flows since such cash flows have historically been presented as a financing activity.

EARNINGS PER SHARE

EARNINGS PER SHARE	6 Months Ended
	Jun. 30, 2017
Earnings Per Share
Earnings Per Share	Note 2–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 nonvested 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 Six Months Ended June 30, 2017 2016 2017 2016 Numerator: Net income $ 13,585 $ 12,458 $ 21,017 $ 21,521 Denominator: Denominator for basic earnings per share 26,761 26,501 26,729 26,500 Dilutive effect of employee stock awards 132 190 150 181 Denominator for diluted earnings per share 26,893 26,691 26,879 26,681 Earnings per share: Basic $ 0.51 $ 0.47 $ 0.79 $ 0.81 Diluted $ 0.51 $ 0.47 $ 0.78 $ 0.81 For the three and six months ended June 30, 2017 and 2016, the following outstanding nonvested stock units were excluded from the computation of diluted earnings per share because including them would have had an anti-dilutive effect: Three Months Ended Six Months Ended June 30, 2017 2016 2017 2016 Employee stock based awards $ — $ 80 $ — $ 92

ACQUISITIONS

ACQUISITIONS	6 Months Ended
	Jun. 30, 2017
Acquisitions
Acquisitions	Note 3–Acquisitions Softmart Acquisition On May 27, 2016, we acquired substantially all of the assets of Softmart Inc. (“Softmart”), a global supplier of information technology and software services solutions. The purchase of Softmart is consistent with our strategy to expand our software services capabilities. Under the terms of the asset purchase agreement, we paid $31,889, net of cash acquired, and allocated the total purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition. The excess of the purchase price over the net assets acquired represents potential synergies from Softmart’s customer base and its assembled workforce of sales representatives and software service specialists that we acquired in the transaction. This excess of purchase price over the aggregate fair values was recorded as goodwill. We incurred $357 of transaction costs in 2016 related to the acquisition which we reported in selling, general and administrative expenses in our consolidated statement of income for the year ended December 31, 2016. The operating results of Softmart have been included in the SMB and Large Accounts segments. Softmart’s revenues and income from operations were not material to our consolidated results, and accordingly, we have not presented Softmart’s revenues or operating results on a pro forma basis. The following table reflects components of the net assets acquired and liabilities assumed at fair value as of the closing date. Purchase Price Allocation Current assets $ 22,812 Fixed assets 343 Goodwill 14,314 Customer relationships 11,300 Total assets acquired 48,769 Acquired liabilities (16,252) Net assets acquired 32,517 Less cash acquired (628) Purchase price at closing, net of cash acquired $ 31,889 We recorded goodwill of $7,366 and $6,948 in our SMB and Large Account segments, respectively, and the aggregate is expected to be fully deductible for tax purposes. GlobalServe Acquisition On October 11, 2016, we acquired the outstanding common shares of GlobalServe, Inc. (“GlobalServe”), which has developed an internet portal tool that simplifies customers’ global IT procurement. Under the terms of the stock purchase agreement, we paid $11,101, net of cash acquired. The purchase of GlobalServe allows us to service our customers’ global IT needs through their OneSource internet portal with consistent delivery, reporting, pricing, and logistics. We allocated the total purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition and recorded the excess of purchase price over the aggregate fair values as goodwill. In 2016 we incurred $118 of transaction costs related to the acquisition which we reported in selling, general and administrative expenses in our consolidated statement of income for the year ended December 31, 2016. We have included the operating results of GlobalServe in the Large Account segment since the acquisition date. GlobalServe’s revenues and income from operations were not material to our consolidated results, and accordingly, we have not presented GlobalServe’s revenues or operating results on a pro forma basis. The following table reflects components of the net assets acquired and liabilities assumed at fair value as of the closing date. Purchase Price Allocation Current assets $ 1,486 Fixed assets 4,609 Goodwill 8,012 Customer relationships 900 Total assets acquired 15,007 Acquired liabilities (734) Deferred taxes, unrecognized tax benefits (2,390) Net assets acquired 11,883 Less cash acquired (782) Purchase price at closing, net of cash acquired $ 11,101 We recorded $8,012 of goodwill as a result of our acquisition of GlobalServe in our Large Account segment. None of the goodwill related to this acquisition will be deductible for tax purposes.

SEGMENT AND RELATED DISCLOSURES

SEGMENT AND RELATED DISCLOSURES	6 Months Ended
	Jun. 30, 2017
Segment and Related Disclosures
Segment and Related Disclosures	Note 4–Segment and Related Disclosures The internal reporting structure used by our chief operating decision maker (“CODM”) to assess performance and allocate resources determines the basis for our reportable operating segments. Our CODM is our Chief Executive Officer, and he evaluates operations and allocates resources based on a measure of operating income. Our operations are organized under three reportable segments—the SMB segment, which serves primarily small- and medium-sized businesses; the Large Account segment, which serves primarily medium-to-large corporations; and the Public Sector 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. We report 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. In May 2016, we acquired Softmart, a global supplier of information technology and software services solutions. The second quarter 2016 results for the SMB and Large Account have been revised to reflect the segment methodology used in our 2016 10-K. Under this revise reporting, Softmart’s operating results that were formerly included in the SMB segment are now allocated between the SMB and Large Account segments. We have included the operating results of Softmart in our SMB and Large Account segments. In October 2016, we acquired GlobalServe, which has developed an industry-leading tool that simplifies customers’ global IT procurement. We have included the operating results for GlobalServe in our Large Account segment. The external sales and operating results of GlobalServe were immaterial to our consolidated results. Segment information applicable to our reportable operating segments for the three and six months ended June 30, 2017 and 2016 is shown below: Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2017 2016 2017 2016 Net sales: SMB $ 296,420 $ 270,962 $ 570,053 $ 532,208 Large Account 302,077 269,482 554,995 469,591 Public Sector 151,295 135,721 295,338 246,760 Total net sales $ 749,792 $ 676,165 $ 1,420,386 $ 1,248,559 Operating income (loss): SMB $ 11,280 $ 10,794 $ 19,887 $ 22,115 Large Account 14,331 12,166 23,388 19,356 Public Sector (11) 1,112 (2,624) 962 Headquarters/Other (3,160) (3,062) (6,759) (6,259) Total operating income 22,440 21,010 33,892 36,174 Interest income (expense) 9 (12) 28 (26) Income before taxes $ 22,449 $ 20,998 $ 33,920 $ 36,148 Selected operating expense: Depreciation and amortization: SMB $ 149 $ 59 $ 303 $ 68 Large Account 548 366 1,142 672 Public Sector 42 41 81 81 Headquarters/Other 2,116 1,922 4,184 3,982 Total depreciation and amortization $ 2,855 $ 2,388 $ 5,710 $ 4,803 Total assets: SMB $ 243,312 Large Account 377,992 Public Sector 70,938 Headquarters/Other 21,087 Total assets $ 713,329 The assets of our three operating segments presented above consist primarily of accounts receivable, intercompany receivable, goodwill, and other intangibles. Assets reported under the Headquarters/Other group are managed by corporate headquarters, including cash, inventory, and property and equipment. Total assets for the Headquarters/Other group are presented net of intercompany balance eliminations of $25,756 as of June 30, 2017. Our capital expenditures consist largely of IT hardware and software purchased to maintain or upgrade our management information systems. These information systems serve all of our segments, to varying degrees, and accordingly, our CODM does not evaluate capital expenditures on a segment basis.

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES	6 Months Ended
	Jun. 30, 2017
Commitments and Contingencies
Commitments And Contingencies	Note 5–Commitments and Contingencies We are subject to various legal proceedings and claims which have arisen during the ordinary course of business. In the opinion of management, the outcome of such matters is not expected to have a material effect on our financial position, results of operations, and cash flows. We are subject to audits by states on sales and income taxes, unclaimed property, employment matters, and other assessments. A comprehensive multi‑state unclaimed property audit continues to be in progress. While management believes that known and estimated unclaimed property liabilities have been adequately provided for, it is too early to determine the ultimate outcome of such audits, as not all formal assessments have been finalized. Additional liabilities for this and other audits could be assessed, and such outcomes could have a material, negative impact on our financial position, results of operations, and cash flows.

BANK BORROWING AND TRADE CREDIT

BANK BORROWING AND TRADE CREDIT ARRANGEMENTS	6 Months Ended
	Jun. 30, 2017
Bank Borrowings and Trade Credit Arrangements
Bank Borrowing and Trade Credit Arrangements	Note 6–Bank Borrowing and Trade Credit Arrangements We have a $50,000 credit facility collateralized by our accounts receivable that expires February 10, 2022. This facility can be increased, at our option, to $80,000 for approved acquisitions or other uses authorized by the lender on substantially the same terms. Amounts outstanding under this facility bear interest at the one-month London Interbank Offered Rate, or LIBOR, plus a spread based on our funded debt ratio, or in the absence of LIBOR, the prime rate (4.25% at June 30, 2017). The one-month LIBOR rate at June 30, 2017 was 1.22%. 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. Our bank line of credit does not include restrictions on future dividend payments. Funded debt ratio is the ratio of average outstanding advances under the credit facility to Adjusted EBITDA (Earnings Before Interest Expense, Taxes, Depreciation, Amortization, and Special Charges). The maximum allowable funded debt ratio under the agreement is 2.0 to 1.0. Decreases in our consolidated Adjusted EBITDA could limit our potential borrowings under the credit facility. We had no outstanding bank borrowings at June 30, 2017 or December 31, 2016, and accordingly, the entire $50,000 facility was available for borrowings under the credit facility. At June 30, 2017 and December 31, 2016, we had security agreements with two financial institutions to facilitate the purchase of inventory from various suppliers under certain terms and conditions. The agreements allow a collateralized first position in certain branded products in our inventory financed by the financial institutions up to an aggregated amount of $75,000. The cost of such financing under these agreements is borne by the suppliers by discounting their invoices to the financial institutions. We do not pay any interest or discount fees on such inventory. At June 30, 2017 and December 31, 2016, accounts payable included $27,916 and $33,061, respectively, owed to these financial institutions.

EARNINGS PER SHARE (Tables)

EARNINGS PER SHARE (Tables)	6 Months Ended
	Jun. 30, 2017
Earnings Per Share
Computation of Basic and Diluted Earnings Per Share	The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended Six Months Ended June 30, 2017 2016 2017 2016 Numerator: Net income $ 13,585 $ 12,458 $ 21,017 $ 21,521 Denominator: Denominator for basic earnings per share 26,761 26,501 26,729 26,500 Dilutive effect of employee stock awards 132 190 150 181 Denominator for diluted earnings per share 26,893 26,691 26,879 26,681 Earnings per share: Basic $ 0.51 $ 0.47 $ 0.79 $ 0.81 Diluted $ 0.51 $ 0.47 $ 0.78 $ 0.81
Schedule of outstanding nonvested stock units excluded from computation of diluted earnings per share	Three Months Ended Six Months Ended June 30, 2017 2016 2017 2016 Employee stock based awards $ — $ 80 $ — $ 92

ACQUISITIONS (Tables)

ACQUISITIONS (Tables)	6 Months Ended
	Jun. 30, 2017
Softmart
Acquisitions
Components of the net assets acquired and liabilities assumed at fair value	Purchase Price Allocation Current assets $ 22,812 Fixed assets 343 Goodwill 14,314 Customer relationships 11,300 Total assets acquired 48,769 Acquired liabilities (16,252) Net assets acquired 32,517 Less cash acquired (628) Purchase price at closing, net of cash acquired $ 31,889
GlobalServe
Acquisitions
Components of the net assets acquired and liabilities assumed at fair value	Purchase Price Allocation Current assets $ 1,486 Fixed assets 4,609 Goodwill 8,012 Customer relationships 900 Total assets acquired 15,007 Acquired liabilities (734) Deferred taxes, unrecognized tax benefits (2,390) Net assets acquired 11,883 Less cash acquired (782) Purchase price at closing, net of cash acquired $ 11,101

SEGMENT AND RELATED DISCLOSUR13

SEGMENT AND RELATED DISCLOSURES (Tables)	6 Months Ended
	Jun. 30, 2017
Segment and Related Disclosures
Segment Information Applicable to Reportable Operating Segments	Segment information applicable to our reportable operating segments for the three and six months ended June 30, 2017 and 2016 is shown below: Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2017 2016 2017 2016 Net sales: SMB $ 296,420 $ 270,962 $ 570,053 $ 532,208 Large Account 302,077 269,482 554,995 469,591 Public Sector 151,295 135,721 295,338 246,760 Total net sales $ 749,792 $ 676,165 $ 1,420,386 $ 1,248,559 Operating income (loss): SMB $ 11,280 $ 10,794 $ 19,887 $ 22,115 Large Account 14,331 12,166 23,388 19,356 Public Sector (11) 1,112 (2,624) 962 Headquarters/Other (3,160) (3,062) (6,759) (6,259) Total operating income 22,440 21,010 33,892 36,174 Interest income (expense) 9 (12) 28 (26) Income before taxes $ 22,449 $ 20,998 $ 33,920 $ 36,148 Selected operating expense: Depreciation and amortization: SMB $ 149 $ 59 $ 303 $ 68 Large Account 548 366 1,142 672 Public Sector 42 41 81 81 Headquarters/Other 2,116 1,922 4,184 3,982 Total depreciation and amortization $ 2,855 $ 2,388 $ 5,710 $ 4,803 Total assets: SMB $ 243,312 Large Account 377,992 Public Sector 70,938 Headquarters/Other 21,087 Total assets $ 713,329

BASIS OF PRESENTATION (Details)

BASIS OF PRESENTATION (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
New accounting pronouncements
Income tax benefits	$ (8,864)	$ (8,540)	$ (12,903)	$ (14,627)
ASU 2016-09
New accounting pronouncements
Income tax benefits			$ 656

EARNINGS PER SHARE (Details)

EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Numerator:
Net income	$ 13,585	$ 12,458	$ 21,017	$ 21,521
Denominator:
Denominator for basic earnings per share	26,761	26,501	26,729	26,500
Dilutive effect of employee stock awards	132	190	150	181
Denominator for diluted earnings per share	26,893	26,691	26,879	26,681
Earnings per share:
Basic	$ 0.51	$ 0.47	$ 0.79	$ 0.81
Diluted	$ 0.51	$ 0.47	$ 0.78	$ 0.81
Additional Disclosure
Employee stock awards excluded from computation		$ 80		$ 92

ACQUISITIONS - (Details)

ACQUISITIONS - (Details) - USD ($) $ in Thousands	Oct. 11, 2016	May 27, 2016	Jun. 30, 2016	Jun. 30, 2017	Dec. 31, 2016
Components of purchase price:
Goodwill				$ 73,602	$ 73,602
Purchase price at closing, net of cash acquired			$ 33,983
Softmart
Components of purchase price:
Current assets		$ 22,812
Fixed assets		343
Goodwill		14,314
Total assets acquired		48,769
Acquired liabilities		(16,252)
Net assets acquired		32,517
Less cash acquired		(628)
Purchase price at closing, net of cash acquired		31,889
Softmart | Customer relationships
Components of purchase price:
Intangible asset		11,300
GlobalServe
Components of purchase price:
Current assets	$ 1,486
Fixed assets	4,609
Goodwill	8,012
Total assets acquired	15,007
Acquired liabilities	(734)
Deferred taxes, unrecognized tax benefits	(2,390)
Net assets acquired	11,883
Less cash acquired	(782)
Purchase price at closing, net of cash acquired	11,101
GlobalServe | Customer relationships
Components of purchase price:
Intangible asset	900
Selling, General and Administrative Expenses | Softmart
Acquisition
Transaction costs related to acquisition					357
Selling, General and Administrative Expenses | GlobalServe
Acquisition
Transaction costs related to acquisition					$ 118
Small and Medium Sized Businesses (SMB) | Softmart
Components of purchase price:
Goodwill related to acquisition deductible for tax purposes		7,366
Large Account | Softmart
Components of purchase price:
Goodwill related to acquisition deductible for tax purposes		$ 6,948
Large Account | GlobalServe
Components of purchase price:
Goodwill	8,012
Goodwill related to acquisition deductible for tax purposes	$ 0

SEGMENT AND RELATED DISCLOSUR17

SEGMENT AND RELATED DISCLOSURES - Segment Information Applicable to Reportable Operating Segments (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017USD ($)	Jun. 30, 2016USD ($)	Jun. 30, 2017USD ($)segment	Jun. 30, 2016USD ($)	Dec. 31, 2016USD ($)
Segment Reporting Information
Number of reportable segments | segment			3
Number of operating segments | segment			3
Net sales:
Net sales	$ 749,792	$ 676,165	$ 1,420,386	$ 1,248,559
Operating income (loss):
Operating income (loss)	22,440	21,010	33,892	36,174
Interest income (expense)	9	(12)	28	(26)
Income before taxes	22,449	20,998	33,920	36,148
Depreciation and amortization:
Depreciation and amortization	2,855	2,388	5,710	4,803
Total assets:
Total assets	713,329		713,329		$ 686,134
Operating Segments | Small and Medium Sized Businesses (SMB)
Net sales:
Net sales	296,420	270,962	570,053	532,208
Operating income (loss):
Operating income (loss)	11,280	10,794	19,887	22,115
Depreciation and amortization:
Depreciation and amortization	149	59	303	68
Total assets:
Total assets	243,312		243,312
Operating Segments | Large Account
Net sales:
Net sales	302,077	269,482	554,995	469,591
Operating income (loss):
Operating income (loss)	14,331	12,166	23,388	19,356
Depreciation and amortization:
Depreciation and amortization	548	366	1,142	672
Total assets:
Total assets	377,992		377,992
Operating Segments | Public Sector
Net sales:
Net sales	151,295	135,721	295,338	246,760
Operating income (loss):
Operating income (loss)	(11)	1,112	(2,624)	962
Depreciation and amortization:
Depreciation and amortization	42	41	81	81
Total assets:
Total assets	70,938		70,938
Headquarters/Other
Operating income (loss):
Operating income (loss)	(3,160)	(3,062)	(6,759)	(6,259)
Depreciation and amortization:
Depreciation and amortization	2,116	$ 1,922	4,184	$ 3,982
Total assets:
Assets net of intercompany balance eliminations	21,087		21,087
Intersegment Elimination
Total assets:
Total assets	$ (25,756)		$ (25,756)

BANK BORROWINGS AND TRADE CREDI

BANK BORROWINGS AND TRADE CREDIT ARRANGEMENTS (Detail) $ in Thousands	6 Months Ended
	Jun. 30, 2017USD ($)Institution	Dec. 31, 2016USD ($)Institution
Subordinated Borrowing
Line of credit, borrowing capacity	$ 50,000
Credit facility, expiration date	Feb. 10, 2022
Line of credit, maximum borrowing capacity	$ 80,000
Debt instrument, description of variable rate basis	one-month LIBOR
Debt ratio	2
Line of credit, outstanding borrowing	$ 0	$ 0
Line of credit, available for borrowing	$ 50,000	$ 50,000
Trade credit agreements
Number of financial institutions facilitating purchase of inventory | Institution	2	2
Prime Rate
Subordinated Borrowing
Debt instrument, interest rate	4.25%
One-month LIBOR rate
Subordinated Borrowing
Debt instrument, interest rate	1.22%
Accounts Payable
Trade credit agreements
Amount owed to financial institution for inventory financing	$ 27,916	$ 33,061
Maximum
Trade credit agreements
Amount owed to financial institution for inventory financing	$ 75,000	$ 75,000