PC Connection (CNXN) 10-Q 9 Nov 17 2017 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 03, 2017
Document And Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2017
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q3
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		26,815,634

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Current Assets:
Cash and cash equivalents	$ 62,338	$ 49,180
Accounts receivable, net	382,666	411,883
Inventories	106,724	90,535
Prepaid expenses and other current assets	5,185	5,453
Income taxes receivable	4,579	2,120
Total current assets	561,492	559,171
Property and equipment, net	40,077	39,402
Goodwill	73,602	73,602
Other intangibles, net	11,393	12,586
Other assets	5,318	1,373
Total Assets	691,882	686,134
Current Liabilities:
Accounts payable	164,883	177,862
Accrued expenses and other liabilities	18,294	31,047
Accrued payroll	16,938	21,345
Total current liabilities	200,115	230,254
Deferred income taxes	19,766	19,602
Other liabilities	2,083	2,836
Total Liabilities	221,964	252,692
Stockholders' Equity:
Common stock	287	285
Additional paid-in capital	113,421	111,081
Retained earnings	372,072	337,938
Treasury stock, at cost	(15,862)	(15,862)
Total Stockholders' Equity	469,918	433,442
Total Liabilities and Stockholders' Equity	$ 691,882	$ 686,134

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Condensed Consolidated Statements of Income
Net sales	$ 729,230	$ 708,485	$ 2,149,616	$ 1,957,044
Cost of sales	633,087	611,518	1,867,070	1,684,010
Gross profit	96,143	96,967	282,546	273,034
Selling, general and administrative expenses	74,404	74,522	226,915	214,415
Income from operations	21,739	22,445	55,631	58,619
Interest income (expense)	(8)	(27)	20	(53)
Income before taxes	21,731	22,418	55,651	58,566
Income tax provision	(8,614)	(8,825)	(21,517)	(23,452)
Net income	$ 13,117	$ 13,593	$ 34,134	$ 35,114
Earnings per common share:
Basic	$ 0.49	$ 0.51	$ 1.28	$ 1.32
Diluted	$ 0.49	$ 0.51	$ 1.27	$ 1.32
Shares used in computation of earnings per common share:
Basic	26,802	26,542	26,754	26,514
Diluted	26,899	26,736	26,886	26,699

CONDENSED CONSOLIDATED STATEME4

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Cash Flows from Operating Activities:
Net income	$ 34,134	$ 35,114
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	8,645	7,504
Provision for doubtful accounts	560	975
Stock-based compensation expense	1,116	239
Deferred income taxes	164	165
Excess tax benefit from exercise of equity awards		(385)
Changes in assets and liabilities:
Accounts receivable	28,101	19,530
Inventories	(16,189)	954
Prepaid expenses and other current assets	(2,191)	506
Other non-current assets	(3,945)	(141)
Accounts payable	(13,162)	(20,922)
Accrued expenses and other liabilities	(8,872)	(3,757)
Net cash (used for) provided by operating activities	28,361	39,782
Cash Flows from Investing Activities:
Purchases of equipment	(7,944)	(8,746)
Cash paid for Softmart		(33,983)
Net cash used for investing activities	(7,944)	(42,729)
Cash Flows from Financing Activities:
Dividend payment	(9,041)	(10,591)
Exercise of stock options	1,679
Issuance of stock under Employee Stock Purchase Plan	603	473
Excess tax benefit from exercise of equity awards		385
Payment of payroll taxes on stock-based compensation through shares withheld	(500)	(625)
Net cash used for financing activities	(7,259)	(10,358)
Increase (decrease) in cash and cash equivalents	13,158	(13,305)
Cash and cash equivalents, beginning of period	49,180	80,188
Cash and cash equivalents, end of period	62,338	66,883
Non-cash Investing and Financing Activities:
Accrued capital expenditures	294	160
Supplemental Cash Flow Information:
Income taxes paid	$ 24,293	$ 23,953

BASIS OF PRESENTATION

BASIS OF PRESENTATION	9 Months Ended
	Sep. 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 nine months ended September 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 through a full retrospective method with application to all periods presented or on a modified retrospective method through a cumulative effect adjustment as of the start of the first 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 and other accounts 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 terms are FOB shipping point. However, we are continuing to analyze each of our other revenue streams, including software 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. There were no unrecognized excess tax benefits at implementation. Accordingly, we recorded discrete income tax benefits in the consolidated statements of income of $995 during the nine months ended September 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	9 Months Ended
	Sep. 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 Nine Months Ended September 30, 2017 2016 2017 2016 Numerator: Net income $ 13,117 $ 13,593 $ 34,134 $ 35,114 Denominator: Denominator for basic earnings per share 26,802 26,542 26,754 26,514 Dilutive effect of employee stock awards 97 194 132 185 Denominator for diluted earnings per share 26,899 26,736 26,886 26,699 Earnings per share: Basic $ 0.49 $ 0.51 $ 1.28 $ 1.32 Diluted $ 0.49 $ 0.51 $ 1.27 $ 1.32 For the three and nine months ended September 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 Nine Months Ended September 30, 2017 2016 2017 2016 Employee stock based awards $ — $ — $ — $ 80

ACQUISITIONS

ACQUISITIONS	9 Months Ended
	Sep. 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, or SG&A, 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. The revenues and income from operations of Softmart 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 SG&A 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. The revenues and income from operations of GlobalServe 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 and 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	9 Months Ended
	Sep. 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. As initially reported in our third quarter results for 2016, the operating results of Softmart were included in the SMB segment. This segment allocation was revised in our results for the year as reported in our 2016 10-K. Under this revised reporting, the operating results of Softmart that were initially included in the SMB segment are now allocated between the SMB and Large Account segments and continue to be allocated between these two segments. In October 2016, we acquired GlobalServe. 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 nine months ended September 30, 2017 and 2016 is shown below: Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2017 2016 2017 2016 Net sales: SMB $ 290,569 $ 281,915 $ 860,622 $ 814,123 Large Account 268,022 254,273 823,017 723,864 Public Sector 170,639 172,297 465,977 419,057 Total net sales $ 729,230 $ 708,485 $ 2,149,616 $ 1,957,044 Operating income (loss): SMB $ 9,543 $ 9,989 $ 29,430 $ 32,104 Large Account 12,389 11,832 35,777 31,188 Public Sector 2,793 3,593 169 4,555 Headquarters/Other (2,986) (2,969) (9,745) (9,228) Total operating income 21,739 22,445 55,631 58,619 Interest income (expense) (8) (27) 20 (53) Income before taxes $ 21,731 $ 22,418 $ 55,651 $ 58,566 Selected operating expense: Depreciation and amortization: SMB $ 145 $ 184 $ 448 $ 252 Large Account 519 466 1,661 1,138 Public Sector 45 40 126 121 Headquarters/Other 2,226 2,011 6,410 5,993 Total depreciation and amortization $ 2,935 $ 2,701 $ 8,645 $ 7,504 Total assets: SMB $ 241,030 Large Account 376,001 Public Sector 69,162 Headquarters/Other 5,689 Total assets $ 691,882 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 $16,728 as of September 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	9 Months Ended
	Sep. 30, 2017
Commitments and Contingencies
Commitments And Contingencies	Note 5–Commitments and Contingencies We are subject to various legal proceedings and claims, including patent infringement 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, employment matters, and other assessments. Additional liabilities for these 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

BANK BORROWING	9 Months Ended
	Sep. 30, 2017
Bank Borrowings
Bank Borrowings	Note 6–Bank Borrowing 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 September 30, 2017). The one-month LIBOR rate at September 30, 2017 was 1.23%. 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 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 September 30, 2017 or December 31, 2016, and accordingly, the entire $50,000 facility was available for borrowings under the credit facility.

EARNINGS PER SHARE (Tables)

EARNINGS PER SHARE (Tables)	9 Months Ended
	Sep. 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 Nine Months Ended September 30, 2017 2016 2017 2016 Numerator: Net income $ 13,117 $ 13,593 $ 34,134 $ 35,114 Denominator: Denominator for basic earnings per share 26,802 26,542 26,754 26,514 Dilutive effect of employee stock awards 97 194 132 185 Denominator for diluted earnings per share 26,899 26,736 26,886 26,699 Earnings per share: Basic $ 0.49 $ 0.51 $ 1.28 $ 1.32 Diluted $ 0.49 $ 0.51 $ 1.27 $ 1.32
Schedule of outstanding nonvested stock units excluded from computation of diluted earnings per share	Three Months Ended Nine Months Ended September 30, 2017 2016 2017 2016 Employee stock based awards $ — $ — $ — $ 80

ACQUISITIONS (Tables)

ACQUISITIONS (Tables)	9 Months Ended
	Sep. 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 and 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)	9 Months Ended
	Sep. 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 nine months ended September 30, 2017 and 2016 is shown below: Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2017 2016 2017 2016 Net sales: SMB $ 290,569 $ 281,915 $ 860,622 $ 814,123 Large Account 268,022 254,273 823,017 723,864 Public Sector 170,639 172,297 465,977 419,057 Total net sales $ 729,230 $ 708,485 $ 2,149,616 $ 1,957,044 Operating income (loss): SMB $ 9,543 $ 9,989 $ 29,430 $ 32,104 Large Account 12,389 11,832 35,777 31,188 Public Sector 2,793 3,593 169 4,555 Headquarters/Other (2,986) (2,969) (9,745) (9,228) Total operating income 21,739 22,445 55,631 58,619 Interest income (expense) (8) (27) 20 (53) Income before taxes $ 21,731 $ 22,418 $ 55,651 $ 58,566 Selected operating expense: Depreciation and amortization: SMB $ 145 $ 184 $ 448 $ 252 Large Account 519 466 1,661 1,138 Public Sector 45 40 126 121 Headquarters/Other 2,226 2,011 6,410 5,993 Total depreciation and amortization $ 2,935 $ 2,701 $ 8,645 $ 7,504 Total assets: SMB $ 241,030 Large Account 376,001 Public Sector 69,162 Headquarters/Other 5,689 Total assets $ 691,882

BASIS OF PRESENTATION (Details)

BASIS OF PRESENTATION (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
New accounting pronouncements
Unrecognized excess tax benefits related to equity compensation					$ 0
Income tax benefits	$ (8,614)	$ (8,825)	$ (21,517)	$ (23,452)
ASU 2016-09
New accounting pronouncements
Income tax benefits			$ 995

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, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Numerator:
Net income	$ 13,117	$ 13,593	$ 34,134	$ 35,114
Denominator:
Denominator for basic earnings per share	26,802	26,542	26,754	26,514
Dilutive effect of employee stock awards	97	194	132	185
Denominator for diluted earnings per share	26,899	26,736	26,886	26,699
Earnings per share:
Basic	$ 0.49	$ 0.51	$ 1.28	$ 1.32
Diluted	$ 0.49	$ 0.51	$ 1.27	$ 1.32
Additional Disclosure
Employee stock awards excluded from computation				$ 80

ACQUISITIONS - (Details)

ACQUISITIONS - (Details) - USD ($) $ in Thousands	Oct. 11, 2016	May 27, 2016	Sep. 30, 2016	Sep. 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 and 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		9 Months Ended
	Sep. 30, 2017USD ($)	Sep. 30, 2016USD ($)	Sep. 30, 2017USD ($)segment	Sep. 30, 2016USD ($)	Dec. 31, 2016USD ($)
Segment Reporting Information
Number of reportable segments | segment			3
Number of operating segments | segment			3
Net sales:
Net sales	$ 729,230	$ 708,485	$ 2,149,616	$ 1,957,044
Operating income (loss):
Operating income (loss)	21,739	22,445	55,631	58,619
Interest income (expense)	(8)	(27)	20	(53)
Income before taxes	21,731	22,418	55,651	58,566
Depreciation and amortization:
Depreciation and amortization	2,935	2,701	8,645	7,504
Total assets:
Total assets	691,882		691,882		$ 686,134
Operating Segments | Small and Medium Sized Businesses (SMB)
Net sales:
Net sales	290,569	281,915	860,622	814,123
Operating income (loss):
Operating income (loss)	9,543	9,989	29,430	32,104
Depreciation and amortization:
Depreciation and amortization	145	184	448	252
Total assets:
Total assets	241,030		241,030
Operating Segments | Large Account
Net sales:
Net sales	268,022	254,273	823,017	723,864
Operating income (loss):
Operating income (loss)	12,389	11,832	35,777	31,188
Depreciation and amortization:
Depreciation and amortization	519	466	1,661	1,138
Total assets:
Total assets	376,001		376,001
Operating Segments | Public Sector
Net sales:
Net sales	170,639	172,297	465,977	419,057
Operating income (loss):
Operating income (loss)	2,793	3,593	169	4,555
Depreciation and amortization:
Depreciation and amortization	45	40	126	121
Total assets:
Total assets	69,162		69,162
Headquarters/Other
Operating income (loss):
Operating income (loss)	(2,986)	(2,969)	(9,745)	(9,228)
Depreciation and amortization:
Depreciation and amortization	2,226	$ 2,011	6,410	$ 5,993
Total assets:
Assets net of intercompany balance eliminations	5,689		5,689
Intersegment Elimination
Total assets:
Total assets	$ (16,728)		$ (16,728)

BANK BORROWINGS (Detail)

BANK BORROWINGS (Detail) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
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
Prime Rate
Subordinated Borrowing
Debt instrument, interest rate	4.25%
One-month LIBOR rate
Subordinated Borrowing
Debt instrument, interest rate	1.23%