PC Connection (CNXN) 10-Q 30 Apr 20 2020 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2020	Apr. 27, 2020
Document And Entity Information
Document Type	10-Q
Document Period End Date	Mar. 31, 2020
Entity Registrant Name	PC CONNECTION INC
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		26,107,451
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
Entity Central Index Key	0001050377
Amendment Flag	false

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Current Assets:
Cash and cash equivalents	$ 111,323	$ 90,060
Accounts receivable, net	485,316	549,626
Inventories, net	136,985	124,666
Income taxes receivable	1,388	1,388
Prepaid expenses and other current assets	13,971	10,671
Total current assets	748,983	776,411
Property and equipment, net	65,754	64,226
Right-of-use assets	15,776	13,842
Goodwill	73,602	73,602
Intangible assets, net	8,002	8,307
Other assets	1,075	947
Total Assets	913,192	937,335
Current Liabilities:
Accounts payable	219,917	235,641
Accrued payroll	20,479	28,050
Accrued expenses and other liabilities	36,913	45,232
Total current liabilities	277,309	308,923
Deferred income taxes	20,170	20,170
Noncurrent operating lease liabilities	12,551	10,330
Other liabilities	600	600
Total Liabilities	310,630	340,023
Stockholders' Equity:
Common stock	289	288
Additional paid-in capital	118,620	118,045
Retained earnings	529,590	514,694
Treasury stock, at cost	(45,937)	(35,715)
Total Stockholders' Equity	602,562	597,312
Total Liabilities and Stockholders' Equity	$ 913,192	$ 937,335

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Condensed Consolidated Statements of Income
Net sales	$ 711,850	$ 632,921
Cost of sales	598,732	533,574
Gross profit	113,118	99,347
Selling, general and administrative expenses	92,468	81,235
Restructuring and other charges		703
Income from operations	20,650	17,409
Interest income, net	92	198
Income before taxes	20,742	17,607
Income tax provision	(5,846)	(4,880)
Net income	$ 14,896	$ 12,727
Earnings per common share:
Basic	$ 0.57	$ 0.48
Diluted	$ 0.56	$ 0.48
Shares used in computation of earnings per common share:
Basic	26,236	26,359
Diluted	26,421	26,525

CONDENSED CONSOLIDATED STATEM_2

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Common Stock	Additional Paid-In Capital	Retained Earnings	Treasury Stock	Total
Balance at Dec. 31, 2018	$ 288	$ 115,842	$ 441,010	$ (31,237)	$ 525,903
Balance (in shares) at Dec. 31, 2018	28,787			(2,391)
Stock-based compensation expense		269			269
Restricted stock units vested (in shares)	3
Issuance of common stock under Employee Stock Purchase Plan		(13)			(13)
Repurchase of common stock for treasury				$ (1,294)	(1,294)
Repurchase of common stock for treasury (in shares)				(43)
Net income			12,727		12,727
Balance at Mar. 31, 2019	$ 288	116,098	453,737	$ (32,531)	537,592
Balance (in shares) at Mar. 31, 2019	28,790			(2,434)
Balance at Dec. 31, 2019	$ 288	118,045	514,694	$ (35,715)	597,312
Balance (in shares) at Dec. 31, 2019	28,870			(2,526)
Stock-based compensation expense		624			624
Restricted stock units vested	$ 1				1
Restricted stock units vested (in shares)	4
Shares withheld for taxes paid on stock awards		(49)			(49)
Repurchase of common stock for treasury				$ (10,222)	(10,222)
Repurchase of common stock for treasury (in shares)				(247)
Net income			14,896		14,896
Balance at Mar. 31, 2020	$ 289	$ 118,620	$ 529,590	$ (45,937)	$ 602,562
Balance (in shares) at Mar. 31, 2020	28,874			(2,773)

CONDENSED CONSOLIDATED STATEM_3

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash Flows provided by Operating Activities:
Net income	$ 14,896	$ 12,727
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,147	3,709
Provision for doubtful accounts	2,833	256
Stock-based compensation expense	624	269
Changes in assets and liabilities:
Accounts receivable	61,477	13,494
Inventories	(12,319)	(18,470)
Prepaid expenses, income tax receivables and other current assets	(3,300)	3,322
Other non-current assets	(98)	119
Accounts payable	(15,499)	2,121
Accrued expenses and other liabilities	(7,205)	551
Net cash provided by operating activities	44,556	18,098
Cash Flows used in Investing Activities:
Purchases of equipment	(4,595)	(6,572)
Net cash used in investing activities	(4,595)	(6,572)
Cash Flows used in Financing Activities:
Purchase of treasury shares	(10,222)	(1,294)
Dividend payment	(8,427)	(8,452)
Issuance of stock under Employee Stock Purchase Plan		(13)
Payment of payroll taxes on stock-based compensation through shares withheld	(49)
Net cash used in financing activities	(18,698)	(9,759)
Increase in cash and cash equivalents	21,263	1,767
Cash and cash equivalents, beginning of period	90,060	91,703
Cash and cash equivalents, end of period	111,323	93,470
Non-cash Investing and Financing Activities:
Accrued capital expenditures	1,237	1,987
Supplemental Cash Flow Information:
Income taxes paid	$ 369	$ 291

BASIS OF PRESENTATION

BASIS OF PRESENTATION	3 Months Ended
	Mar. 31, 2020
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 regarding interim financial reporting and in accordance with accounting principles generally accepted in the United States of America. Such principles were applied on a basis consistent with the accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission (the “SEC”). The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements contained in the Company’s Annual Report on Form 10-K. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods reported and of the Company’s financial condition as of the date of the interim balance sheet. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated through the date of issuance of these financial statements. The operating results for the three months ended March 31, 2020 may not be indicative of the results expected for any succeeding quarter or the entire year ending December 31, 2020. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the amounts reported in the accompanying condensed consolidated financial statements. Actual results could differ from those estimates. Adoption of Recently Issued Financial Accounting Standards In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment , which simplifies the accounting for goodwill impairments by eliminating step two from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. ASU 2017-04 also clarifies the requirements for excluding and allocating foreign currency translation adjustments to reporting units related to an entity's testing of reporting units for goodwill impairment and clarifies that an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The Company has adopted this standard beginning January 1, 2020 for both interim and annual reporting periods. The Company performs an annual goodwill impairment assessment in the fourth quarter of each calendar year, and more frequently if events or circumstances occur that would indicate a potential decline in fair value. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses , which adds an impairment model for financial instruments, including trade receivables, that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of lifetime expected losses, which is expected to result in more timely recognition of such losses. The Company adopted this new standard beginning January 1, 2020 for both interim and annual reporting periods. The impact of the adoption of this standard was limited to the Company’s trade receivables as it does not currently have any other financial instruments that would be affected by this standard. Customers are evaluated for their credit worthiness at the time of contract inception. Based on the results of the credit assessments, the Company will extend credit under its standard payment terms or may request alternative early payment actions. In addition, the Company analyzes its aged receivables for collectability at least quarterly, and if necessary, records a reserve against those receivable it determines may not be collectable. As such, the adoption of this ASU did not have a material impact on the Company’s consolidated financial statements. Recently Issued Financial Accounting Standards In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . This guidance provides temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. This ASU is applied prospectively and is effective immediately through December 31, 2022. The Company’s secured credit facility agreement references LIBOR, which is expected to be discontinued as a result of reference rate reform. The Company expects to adopt the guidance during the allowable time period but does not believe the adoption will have a material effect on its consolidated financial statements.

REVENUE

REVENUE	3 Months Ended
	Mar. 31, 2020
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 March 31, 2020 and 2019, along with the reportable segment for each category. Three Months Ended March 31, 2020 Business Enterprise Public Sector Total Notebooks/Mobility $ 91,613 $ 79,316 $ 28,966 $ 199,895 Desktops 33,294 34,209 10,472 77,975 Software 36,398 26,182 7,295 69,875 Servers/Storage 25,830 16,234 11,746 53,810 Net/Com Products 21,012 24,946 9,810 55,768 Displays and Sound 23,946 23,568 11,443 58,957 Accessories 28,021 90,974 8,809 127,804 Other Hardware/Services 18,671 37,989 11,106 67,766 Total net sales $ 278,785 $ 333,418 $ 99,647 $ 711,850 Three Months Ended March 31, 2019 Business Enterprise Public Sector Total Notebooks/Mobility $ 80,935 $ 66,565 $ 27,375 $ 174,875 Desktops 26,784 35,969 10,887 73,640 Software 34,688 27,776 9,272 71,736 Servers/Storage 25,717 17,425 12,416 55,558 Net/Com Products 22,239 14,628 10,144 47,011 Displays and Sound 20,332 26,935 9,879 57,146 Accessories 22,053 56,515 9,645 88,213 Other Hardware/Services 20,184 29,822 14,736 64,742 Total net sales $ 252,932 $ 275,635 $ 104,354 $ 632,921 Contract Balances The following table provides information about contract liabilities from arrangements with customers as of March 31, 2020 and December 31, 2019. March 31, 2020 December 31, 2019 Contract liabilities, which are included in "Accrued expenses and other liabilities" $ 2,532 $ 5,942 Changes in the contract liability balances during the three months ended March 31, 2020 are as follows (in thousands): 2020 Balances at December 31, 2019 $ 5,942 Cash received in advance and not recognized as revenue 4,852 Amounts recognized as revenue as performance obligations satisfied (8,262) Balances at March 31, 2020 $ 2,532

EARNINGS PER SHARE

EARNINGS PER SHARE	3 Months Ended
	Mar. 31, 2020
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 March 31 , 2020 2019 Numerator: Net income $ 14,896 $ 12,727 Denominator: Denominator for basic earnings per share 26,236 26,359 Dilutive effect of unvested employee stock awards 185 166 Denominator for diluted earnings per share 26,421 26,525 Earnings per share: Basic $ 0.57 $ 0.48 Diluted $ 0.56 $ 0.48 For the three months ended March 31, 2020 and 2019, we 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	3 Months Ended
	Mar. 31, 2020
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 as of March 31, 2020 was $4,353 and a corresponding lease liability of $4,353 associated with related party leases. As of March 31, 2020, 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: Three months ended March 31, 2020 Three months ended March 31, 2019 Related Parties Others Total Related Parties Others Total Lease Cost Capitalized operating lease cost $ 379 $ 784 $ 1,163 $ 379 $ 831 $ 1,210 Short-term lease cost 41 2 43 41 2 43 Total lease cost $ 420 $ 786 $ 1,206 $ 420 $ 833 $ 1,253 Other Information Cash paid for amounts included in the measurement of lease liabilities and capitalized operating leases: Operating cash flows $ 379 $ 781 $ 1,160 $ 379 $ 884 $ 1,263 Weighted-average remaining lease term (in years): Capitalized operating leases 3.65 6.29 5.60 4.59 10.55 8.64 Weighted-average discount rate: Capitalized operating leases As of March 31, 2020, future lease payments over the remaining term of capitalized operating leases were as follows: For the Years Ended December 31, Related Parties Others Total 2020, excluding the three months ended March 31, 2020 $ 1,006 $ 2,489 $ 3,495 2021 1,253 3,091 4,344 2022 1,253 2,111 3,364 2023 1,149 1,675 2,824 2024 — 1,699 1,699 2025 — 1,594 1,594 Thereafter — 888 888 $ 4,661 $ 13,547 $ 18,208 Imputed interest (1,595) Lease liability balance at March 31, 2020 $ 16,613 As of March 31, 2020, the ROU asset had a balance of $15,776. The long-term lease liability was $12,551 and the short-term lease liability, which is included in accrued expenses and other liabilities in the consolidated balance sheets, was $4,062 .

SEGMENT INFORMATION

SEGMENT INFORMATION	3 Months Ended
	Mar. 31, 2020
Segment Information
Segment Information	Note 5–Segment Information 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 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. 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. Segment information applicable to our reportable operating segments for the three months ended March 31, 2020 and 2019 is shown below: Three Months Ended March 31 , 2020 2019 Net sales: Business Solutions $ 278,785 $ 252,932 Enterprise Solutions 333,418 275,635 Public Sector Solutions 99,647 104,354 Total net sales $ 711,850 $ 632,921 Operating income (loss): Business Solutions $ 11,301 $ 8,765 Enterprise Solutions 16,722 15,473 Public Sector Solutions (3,322) (3,066) Headquarters/Other (4,051) (3,763) Total operating income 20,650 17,409 Interest income, net 92 198 Income before taxes $ 20,742 $ 17,607 Selected operating expense: Depreciation and amortization: Business Solutions $ 159 $ 150 Enterprise Solutions 681 639 Public Sector Solutions 15 21 Headquarters/Other 2,292 2,899 Total depreciation and amortization $ 3,147 $ 3,709 Total assets: Business Solutions $ 319,909 $ 280,889 Enterprise Solutions 536,672 484,497 Public Sector Solutions 52,285 55,536 Headquarters/Other 4,326 7,527 Total assets $ 913,192 $ 828,449 The assets of our 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, inventory, property and equipment, right-of-use assets, and intercompany balance, net. As of March 31, 2020 and 2019, total assets for the Headquarters/Other group are presented net of intercompany balance eliminations of $7,024 and $11,201, respectively. 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-by-segment basis.

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES	3 Months Ended
	Mar. 31, 2020
Commitments and Contingencies
Commitments and Contingencies	Note 6–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, adverse effect on our financial position, results of operations, and/or 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, adverse impact on our financial position, results of operations, and/or cash flows.

BANK BORROWINGS

BANK BORROWINGS	3 Months Ended
	Mar. 31, 2020
Bank Borrowings
Bank Borrowings	Note 7–Bank Borrowings We have a $50,000 credit facility collateralized by our account receivables that expires February 10, 2022. This facility can be increased, at our 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 London Interbank Offered Rate (“LIBOR”) (0.99% at March 31, 2020), plus a spread based on our funded debt ratio, or in the absence of LIBOR, the prime rate (3.25% at March, 31 2020). 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 trailing twelve months 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 trailing twelve months Adjusted EBITDA could limit our potential borrowing capacity under the credit facility. We had no outstanding bank borrowings at March 31, 2020 or 2019, and accordingly, the entire $50,000 facility was available for borrowings under the credit facility.

BASIS OF PRESENTATION (Policies

BASIS OF PRESENTATION (Policies)	3 Months Ended
	Mar. 31, 2020
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 regarding interim financial reporting and in accordance with accounting principles generally accepted in the United States of America. Such principles were applied on a basis consistent with the accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission (the “SEC”). The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements contained in the Company’s Annual Report on Form 10-K. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods reported and of the Company’s financial condition as of the date of the interim balance sheet. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated through the date of issuance of these financial statements. The operating results for the three months ended March 31, 2020 may not be indicative of the results expected for any succeeding quarter or the entire year ending December 31, 2020.
Use of Estimates in the Preparation of Financial Statements	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.
Adoption of Recently Issued Financial Accounting Standards and Recently Issued Financial Accounting Standards	Adoption of Recently Issued Financial Accounting Standards In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment , which simplifies the accounting for goodwill impairments by eliminating step two from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. ASU 2017-04 also clarifies the requirements for excluding and allocating foreign currency translation adjustments to reporting units related to an entity's testing of reporting units for goodwill impairment and clarifies that an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The Company has adopted this standard beginning January 1, 2020 for both interim and annual reporting periods. The Company performs an annual goodwill impairment assessment in the fourth quarter of each calendar year, and more frequently if events or circumstances occur that would indicate a potential decline in fair value. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses , which adds an impairment model for financial instruments, including trade receivables, that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of lifetime expected losses, which is expected to result in more timely recognition of such losses. The Company adopted this new standard beginning January 1, 2020 for both interim and annual reporting periods. The impact of the adoption of this standard was limited to the Company’s trade receivables as it does not currently have any other financial instruments that would be affected by this standard. Customers are evaluated for their credit worthiness at the time of contract inception. Based on the results of the credit assessments, the Company will extend credit under its standard payment terms or may request alternative early payment actions. In addition, the Company analyzes its aged receivables for collectability at least quarterly, and if necessary, records a reserve against those receivable it determines may not be collectable. As such, the adoption of this ASU did not have a material impact on the Company’s consolidated financial statements. Recently Issued Financial Accounting Standards In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . This guidance provides temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. This ASU is applied prospectively and is effective immediately through December 31, 2022. The Company’s secured credit facility agreement references LIBOR, which is expected to be discontinued as a result of reference rate reform. The Company expects to adopt the guidance during the allowable time period but does not believe the adoption will have a material effect on its consolidated financial statements.

REVENUE (Tables)

REVENUE (Tables)	3 Months Ended
	Mar. 31, 2020
Revenue
Schedule of disaggregation of revenue from contracts with customers	Three Months Ended March 31, 2020 Business Enterprise Public Sector Total Notebooks/Mobility $ 91,613 $ 79,316 $ 28,966 $ 199,895 Desktops 33,294 34,209 10,472 77,975 Software 36,398 26,182 7,295 69,875 Servers/Storage 25,830 16,234 11,746 53,810 Net/Com Products 21,012 24,946 9,810 55,768 Displays and Sound 23,946 23,568 11,443 58,957 Accessories 28,021 90,974 8,809 127,804 Other Hardware/Services 18,671 37,989 11,106 67,766 Total net sales $ 278,785 $ 333,418 $ 99,647 $ 711,850 Three Months Ended March 31, 2019 Business Enterprise Public Sector Total Notebooks/Mobility $ 80,935 $ 66,565 $ 27,375 $ 174,875 Desktops 26,784 35,969 10,887 73,640 Software 34,688 27,776 9,272 71,736 Servers/Storage 25,717 17,425 12,416 55,558 Net/Com Products 22,239 14,628 10,144 47,011 Displays and Sound 20,332 26,935 9,879 57,146 Accessories 22,053 56,515 9,645 88,213 Other Hardware/Services 20,184 29,822 14,736 64,742 Total net sales $ 252,932 $ 275,635 $ 104,354 $ 632,921
Schedule of information on contract liability	March 31, 2020 December 31, 2019 Contract liabilities, which are included in "Accrued expenses and other liabilities" $ 2,532 $ 5,942 Changes in the contract liability balances during the three months ended March 31, 2020 are as follows (in thousands): 2020 Balances at December 31, 2019 $ 5,942 Cash received in advance and not recognized as revenue 4,852 Amounts recognized as revenue as performance obligations satisfied (8,262) Balances at March 31, 2020 $ 2,532

EARNINGS PER SHARE (Tables)

EARNINGS PER SHARE (Tables)	3 Months Ended
	Mar. 31, 2020
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 March 31 , 2020 2019 Numerator: Net income $ 14,896 $ 12,727 Denominator: Denominator for basic earnings per share 26,236 26,359 Dilutive effect of unvested employee stock awards 185 166 Denominator for diluted earnings per share 26,421 26,525 Earnings per share: Basic $ 0.57 $ 0.48 Diluted $ 0.56 $ 0.48

LEASES (Tables)

LEASES (Tables)	3 Months Ended
	Mar. 31, 2020
Leases
Schedule of lease cost	Three months ended March 31, 2020 Three months ended March 31, 2019 Related Parties Others Total Related Parties Others Total Lease Cost Capitalized operating lease cost $ 379 $ 784 $ 1,163 $ 379 $ 831 $ 1,210 Short-term lease cost 41 2 43 41 2 43 Total lease cost $ 420 $ 786 $ 1,206 $ 420 $ 833 $ 1,253 Other Information Cash paid for amounts included in the measurement of lease liabilities and capitalized operating leases: Operating cash flows $ 379 $ 781 $ 1,160 $ 379 $ 884 $ 1,263 Weighted-average remaining lease term (in years): Capitalized operating leases 3.65 6.29 5.60 4.59 10.55 8.64 Weighted-average discount rate: Capitalized operating leases
Schedule of future lease payments on capitalized operating leases	As of March 31, 2020, future lease payments over the remaining term of capitalized operating leases were as follows: For the Years Ended December 31, Related Parties Others Total 2020, excluding the three months ended March 31, 2020 $ 1,006 $ 2,489 $ 3,495 2021 1,253 3,091 4,344 2022 1,253 2,111 3,364 2023 1,149 1,675 2,824 2024 — 1,699 1,699 2025 — 1,594 1,594 Thereafter — 888 888 $ 4,661 $ 13,547 $ 18,208 Imputed interest (1,595) Lease liability balance at March 31, 2020 $ 16,613

SEGMENT INFORMATION (Tables)

SEGMENT INFORMATION (Tables)	3 Months Ended
	Mar. 31, 2020
Segment Information
Segment information applicable to reportable operating segments	Segment information applicable to our reportable operating segments for the three months ended March 31, 2020 and 2019 is shown below: Three Months Ended March 31 , 2020 2019 Net sales: Business Solutions $ 278,785 $ 252,932 Enterprise Solutions 333,418 275,635 Public Sector Solutions 99,647 104,354 Total net sales $ 711,850 $ 632,921 Operating income (loss): Business Solutions $ 11,301 $ 8,765 Enterprise Solutions 16,722 15,473 Public Sector Solutions (3,322) (3,066) Headquarters/Other (4,051) (3,763) Total operating income 20,650 17,409 Interest income, net 92 198 Income before taxes $ 20,742 $ 17,607 Selected operating expense: Depreciation and amortization: Business Solutions $ 159 $ 150 Enterprise Solutions 681 639 Public Sector Solutions 15 21 Headquarters/Other 2,292 2,899 Total depreciation and amortization $ 3,147 $ 3,709 Total assets: Business Solutions $ 319,909 $ 280,889 Enterprise Solutions 536,672 484,497 Public Sector Solutions 52,285 55,536 Headquarters/Other 4,326 7,527 Total assets $ 913,192 $ 828,449

REVENUE - Disaggregation of Rev

REVENUE - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Disaggregation of revenue
Net sales	$ 711,850	$ 632,921
Notebooks/Mobility
Disaggregation of revenue
Net sales	199,895	174,875
Desktops
Disaggregation of revenue
Net sales	77,975	73,640
Software
Disaggregation of revenue
Net sales	69,875	71,736
Servers/Storage
Disaggregation of revenue
Net sales	53,810	55,558
Net/Com Products
Disaggregation of revenue
Net sales	55,768	47,011
Displays and Sound
Disaggregation of revenue
Net sales	58,957	57,146
Accessories
Disaggregation of revenue
Net sales	127,804	88,213
Other Hardware/Services
Disaggregation of revenue
Net sales	67,766	64,742
Business Solutions
Disaggregation of revenue
Net sales	278,785	252,932
Business Solutions | Notebooks/Mobility
Disaggregation of revenue
Net sales	91,613	80,935
Business Solutions | Desktops
Disaggregation of revenue
Net sales	33,294	26,784
Business Solutions | Software
Disaggregation of revenue
Net sales	36,398	34,688
Business Solutions | Servers/Storage
Disaggregation of revenue
Net sales	25,830	25,717
Business Solutions | Net/Com Products
Disaggregation of revenue
Net sales	21,012	22,239
Business Solutions | Displays and Sound
Disaggregation of revenue
Net sales	23,946	20,332
Business Solutions | Accessories
Disaggregation of revenue
Net sales	28,021	22,053
Business Solutions | Other Hardware/Services
Disaggregation of revenue
Net sales	18,671	20,184
Enterprise Solutions
Disaggregation of revenue
Net sales	333,418	275,635
Enterprise Solutions | Notebooks/Mobility
Disaggregation of revenue
Net sales	79,316	66,565
Enterprise Solutions | Desktops
Disaggregation of revenue
Net sales	34,209	35,969
Enterprise Solutions | Software
Disaggregation of revenue
Net sales	26,182	27,776
Enterprise Solutions | Servers/Storage
Disaggregation of revenue
Net sales	16,234	17,425
Enterprise Solutions | Net/Com Products
Disaggregation of revenue
Net sales	24,946	14,628
Enterprise Solutions | Displays and Sound
Disaggregation of revenue
Net sales	23,568	26,935
Enterprise Solutions | Accessories
Disaggregation of revenue
Net sales	90,974	56,515
Enterprise Solutions | Other Hardware/Services
Disaggregation of revenue
Net sales	37,989	29,822
Public Sector Solutions
Disaggregation of revenue
Net sales	99,647	104,354
Public Sector Solutions | Notebooks/Mobility
Disaggregation of revenue
Net sales	28,966	27,375
Public Sector Solutions | Desktops
Disaggregation of revenue
Net sales	10,472	10,887
Public Sector Solutions | Software
Disaggregation of revenue
Net sales	7,295	9,272
Public Sector Solutions | Servers/Storage
Disaggregation of revenue
Net sales	11,746	12,416
Public Sector Solutions | Net/Com Products
Disaggregation of revenue
Net sales	9,810	10,144
Public Sector Solutions | Displays and Sound
Disaggregation of revenue
Net sales	11,443	9,879
Public Sector Solutions | Accessories
Disaggregation of revenue
Net sales	8,809	9,645
Public Sector Solutions | Other Hardware/Services
Disaggregation of revenue
Net sales	$ 11,106	$ 14,736

REVENUE - Contract Balances (De

REVENUE - Contract Balances (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Change in contract liability
Beginning balance - Contract liability	$ 5,942
Cash received in advance and not recognized as revenue	4,852
Amounts recognized as revenue as performance obligations satisfied	(8,262)
Ending balance - Contract liability	2,532
Accrued expenses and other liabilities
Contract liabilities
Contract liabilities	$ 2,532	$ 5,942

EARNINGS PER SHARE (Details)

EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Numerator:
Net income	$ 14,896	$ 12,727
Denominator:
Denominator for basic earnings per share	26,236	26,359
Dilutive effect of unvested employee stock awards	185	166
Denominator for diluted earnings per share	26,421	26,525
Earnings per share:
Basic	$ 0.57	$ 0.48
Diluted	$ 0.56	$ 0.48
Additional Disclosure
Employee stock awards excluded from computation of diluted earnings per share	0	0

LEASES - Lease Cost and Other I

LEASES - Lease Cost and Other Information (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2020USD ($)lease	Mar. 31, 2019USD ($)	Dec. 31, 2019USD ($)
Leases
Right-of-use assets	$ 15,776		$ 13,842
Lease liability	$ 16,613
Number of additional operating or financing leases not yet commenced | lease	0
Lease Cost
Capitalized operating lease cost	$ 1,163	$ 1,210
Short-term lease cost	43	43
Total lease cost	1,206	1,253
Cash paid for amounts included in the measurement of lease liabilities and capitalized operating leases:
Operating cash flows	$ 1,160	$ 1,263
Weighted-average remaining lease term - Capitalized operating leases	5 years 7 months 6 days	8 years 7 months 21 days
Weighted-average discount rate - Capitalized operating leases	3.92%	3.92%
Related Parties
Leases
Right-of-use assets	$ 4,353
Lease liability	4,353
Lease Cost
Capitalized operating lease cost	379	$ 379
Short-term lease cost	41	41
Total lease cost	420	420
Cash paid for amounts included in the measurement of lease liabilities and capitalized operating leases:
Operating cash flows	$ 379	$ 379
Weighted-average remaining lease term - Capitalized operating leases	3 years 7 months 24 days	4 years 7 months 2 days
Weighted-average discount rate - Capitalized operating leases	3.92%	3.92%
Others
Lease Cost
Capitalized operating lease cost	$ 784	$ 831
Short-term lease cost	2	2
Total lease cost	786	833
Cash paid for amounts included in the measurement of lease liabilities and capitalized operating leases:
Operating cash flows	$ 781	$ 884
Weighted-average remaining lease term - Capitalized operating leases	6 years 3 months 15 days	10 years 6 months 18 days
Weighted-average discount rate - Capitalized operating leases	3.92%	3.92%

LEASES - Future Lease Payments

LEASES - Future Lease Payments (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Future lease payments over the remaining term of capitalized operating leases
2020, excluding the three months ended March 31, 2020	$ 3,495
2021	4,344
2022	3,364
2023	2,824
2024	1,699
2025	1,594
Thereafter	888
Total	18,208
Imputed interest	(1,595)
Lease liability balance	16,613
Right-of-use assets	15,776	$ 13,842
Long-term lease liability	12,551	$ 10,330
Short-term lease liability	$ 4,062
Current operating lease liability, Statement of Financial Position	us-gaap:AccruedLiabilitiesAndOtherLiabilities
Related Parties
Future lease payments over the remaining term of capitalized operating leases
2020, excluding the three months ended March 31, 2020	$ 1,006
2021	1,253
2022	1,253
2023	1,149
Total	4,661
Lease liability balance	4,353
Right-of-use assets	4,353
Others
Future lease payments over the remaining term of capitalized operating leases
2020, excluding the three months ended March 31, 2020	2,489
2021	3,091
2022	2,111
2023	1,675
2024	1,699
2025	1,594
Thereafter	888
Total	$ 13,547

SEGMENT INFORMATION - Segment I

SEGMENT INFORMATION - Segment Information Applicable to Reportable Operating Segments (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2020USD ($)segment	Mar. 31, 2019USD ($)	Dec. 31, 2019USD ($)
Segment Reporting Information
Number of reportable segments | segment	3
Number of operating segments | segment	3
Net sales:
Net sales	$ 711,850	$ 632,921
Operating income (loss):
Operating income (loss)	20,650	17,409
Interest income, net	92	198
Income before taxes	20,742	17,607
Depreciation and amortization:
Depreciation and amortization	3,147	3,709
Total assets:
Total assets	913,192	828,449	$ 937,335
Goodwill	73,602		$ 73,602
Business Solutions
Net sales:
Net sales	278,785	252,932
Enterprise Solutions
Net sales:
Net sales	333,418	275,635
Public Sector Solutions
Net sales:
Net sales	99,647	104,354
Operating Segments | Business Solutions
Net sales:
Net sales	278,785	252,932
Operating income (loss):
Operating income (loss)	11,301	8,765
Depreciation and amortization:
Depreciation and amortization	159	150
Total assets:
Total assets	319,909	280,889
Operating Segments | Enterprise Solutions
Net sales:
Net sales	333,418	275,635
Operating income (loss):
Operating income (loss)	16,722	15,473
Depreciation and amortization:
Depreciation and amortization	681	639
Total assets:
Total assets	536,672	484,497
Operating Segments | Public Sector Solutions
Net sales:
Net sales	99,647	104,354
Operating income (loss):
Operating income (loss)	(3,322)	(3,066)
Depreciation and amortization:
Depreciation and amortization	15	21
Total assets:
Total assets	52,285	55,536
Headquarters/Other
Operating income (loss):
Operating income (loss)	(4,051)	(3,763)
Depreciation and amortization:
Depreciation and amortization	2,292	2,899
Total assets:
Assets net of intercompany balance eliminations	4,326	7,527
Intersegment Elimination
Total assets:
Total assets	$ (7,024)	$ (11,201)

BANK BORROWINGS (Details)

BANK BORROWINGS (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
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
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	3.25%
One-month LIBOR rate
Subordinated Borrowing
Debt instrument, interest rate	0.99%