Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 01, 2016 | |
Document and Entity Information | ||
Entity Registrant Name | Wayside Technology Group, Inc. | |
Entity Central Index Key | 945,983 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 4,618,940 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Current assets | ||
Cash and cash equivalents | $ 20,958 | $ 23,823 |
Accounts receivable, net of allowances of $2,151 and $1,668 in 2016 and 2015, respectively | 62,160 | 58,965 |
Inventory, net | 1,903 | 1,954 |
Prepaid expenses and other current assets | 1,197 | 989 |
Deferred income taxes | 253 | 260 |
Total current assets | 86,471 | 85,991 |
Equipment and leasehold improvements, net | 1,793 | 362 |
Accounts receivable-long-term | 6,797 | 7,386 |
Other assets | 125 | 82 |
Deferred income taxes | 236 | 261 |
Total assets | 95,422 | 94,082 |
Current liabilities | ||
Accounts payable and accrued expenses | 57,643 | 55,423 |
Total current liabilities | 57,643 | 55,423 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Common Stock, $.01 par value; 10,000,000 shares authorized; 5,284,500 shares issued; 4,658,320 and 4,700,812 shares outstanding in 2016 and 2015, respectively | 53 | 53 |
Additional paid-in capital | 32,666 | 32,540 |
Treasury stock, at cost, 626,180 and 583,688 shares in 2016 and 2015, respectively | (12,751) | (10,296) |
Retained earnings | 19,322 | 17,813 |
Accumulated other comprehensive loss | (1,511) | (1,451) |
Total stockholders' equity | 37,779 | 38,659 |
Total liabilities and stockholders' equity | $ 95,422 | $ 94,082 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Condensed Consolidated Balance Sheets | ||
Accounts receivable, allowances (in dollars) | $ 2,151 | $ 1,668 |
Common Stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common Stock, shares authorized | 10,000,000 | 10,000,000 |
Common Stock, shares issued | 5,284,500 | 5,284,500 |
Common Stock, shares outstanding | 4,658,320 | 4,700,812 |
Treasury stock, shares | 626,180 | 583,688 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Earnings - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Condensed Consolidated Statements of Earnings | ||||
Net sales | $ 99,586 | $ 97,653 | $ 298,167 | $ 282,314 |
Cost of sales | 93,214 | 90,773 | 278,842 | 262,652 |
Gross profit | 6,372 | 6,880 | 19,325 | 19,662 |
Selling, general and administrative expenses | 4,351 | 4,618 | 13,570 | 13,533 |
Income from operations | 2,021 | 2,262 | 5,755 | 6,129 |
Other income: | ||||
Interest, net | 58 | 100 | 183 | 297 |
Foreign currency transaction (loss) gain | 3 | (4) | (1) | (9) |
Income before provision for income taxes | 2,082 | 2,358 | 5,937 | 6,417 |
Provision for income taxes | 704 | 805 | 2,008 | 2,199 |
Net income | $ 1,378 | $ 1,553 | $ 3,929 | $ 4,218 |
Income per common share-Basic (in dollars per share) | $ 0.31 | $ 0.34 | $ 0.87 | $ 0.91 |
Income per common share-Diluted (in dollars per share) | $ 0.31 | $ 0.33 | $ 0.86 | $ 0.90 |
Weighted average common shares outstanding-Basic (in shares) | 4,507 | 4,624 | 4,537 | 4,652 |
Weighted average common shares outstanding-Diluted (in shares) | 4,518 | 4,643 | 4,548 | 4,673 |
Dividends paid per common share (in dollars per share) | $ 0.17 | $ 0.17 | $ 0.51 | $ 0.51 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Condensed Consolidated Statements of Comprehensive Income | ||||
Net income | $ 1,378 | $ 1,553 | $ 3,929 | $ 4,218 |
Other comprehensive loss, net of tax: | ||||
Foreign currency translation adjustment | (130) | (428) | (60) | (890) |
Other comprehensive loss | (130) | (428) | (60) | (890) |
Comprehensive income | $ 1,248 | $ 1,125 | $ 3,869 | $ 3,328 |
Condensed Consolidated Stateme6
Condensed Consolidated Statement of Stockholders' Equity - 9 months ended Sep. 30, 2016 - USD ($) $ in Thousands | Common Stock | Additional Paid-In Capital | Treasury | Retained Earnings | Accumulated Other Comprehensive (Loss) Income | Total |
Balance at Dec. 31, 2015 | $ 53 | $ 32,540 | $ (10,296) | $ 17,813 | $ (1,451) | $ 38,659 |
Balance (in shares) at Dec. 31, 2015 | 5,284,500 | 5,284,500 | ||||
Balance (in shares) at Dec. 31, 2015 | 583,688 | 583,688 | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 3,929 | $ 3,929 | ||||
Translation adjustment | (60) | (60) | ||||
Dividends paid | (2,420) | (2,420) | ||||
Share-based compensation expense | 1,168 | 1,168 | ||||
Restricted stock grants (net of forfeitures) | (1,157) | $ 1,157 | ||||
Restricted stock grants (in shares) | (164,385) | |||||
Tax benefit from share-based compensation | 115 | 115 | ||||
Treasury stock repurchased | $ (3,612) | (3,612) | ||||
Treasury stock repurchased (in shares) | 206,877 | |||||
Balance at Sep. 30, 2016 | $ 53 | $ 32,666 | $ (12,751) | $ 19,322 | $ (1,511) | $ 37,779 |
Balance (in shares) at Sep. 30, 2016 | 5,284,500 | 5,284,500 | ||||
Balance (in shares) at Sep. 30, 2016 | 626,180 | 626,180 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash flows from operating activities | ||
Net income | $ 3,929 | $ 4,218 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization expense | 192 | 188 |
Provision (recovery) for doubtful accounts receivable | (57) | 67 |
Deferred income tax expense | 32 | 6 |
Share-based compensation expense | 1,168 | 797 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (2,271) | 4,686 |
Inventory | 62 | (531) |
Prepaid expenses and other current assets | (204) | (176) |
Accounts payable and accrued expenses | 1,312 | (6,642) |
Other assets | (45) | 55 |
Net cash provided by operating activities | 4,118 | 2,668 |
Cash flows used in investing activities | ||
Purchase of equipment and leasehold improvements | (779) | (164) |
Net cash used in investing activities | (779) | (164) |
Cash flows used in financing activities | ||
Purchase of treasury stock | (3,612) | (3,916) |
Proceeds from stock option exercises | 574 | |
Tax benefit from share-based compensation | 115 | 172 |
Dividends paid | (2,420) | (2,446) |
Net cash used in financing activities | (5,917) | (5,616) |
Effect of foreign exchange rate on cash | (287) | (405) |
Net increase in cash and cash equivalents | (2,865) | (3,517) |
Cash and cash equivalents at beginning of period | 23,823 | 23,124 |
Cash and cash equivalents at end of period | 20,958 | 19,607 |
Supplementary disclosure of cash flow information: | ||
Income taxes paid | 1,915 | $ 2,347 |
Leasehold improvements funded by a tenant allowance | $ 840 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2016 | |
Basis of Presentation | |
Basis of Presentation | 1. The accompanying unaudited condensed consolidated financial statements of Wayside Technology Group, Inc. and its subsidiaries (collectively, the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by U.S. GAAP for complete audited financial statements. The preparation of these condensed consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to product returns, bad debts, inventories, intangible assets, income taxes, stock-based compensation, and contingencies and litigation. The Company bases its estimates on its historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. In the opinion of the Company’s management, all adjustments that are of a normal recurring nature, considered necessary for fair presentation, have been included in the accompanying financial statements. The Company’s actual results may differ from these estimates under different assumptions or conditions. The unaudited condensed consolidated statements of earnings for the interim periods are not necessarily indicative of results for the full year. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K filed with the Securities Exchange Commission for the year ended December 31, 2015. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2016 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance for revenue recognition for contracts, superseding the previous revenue recognition requirements, along with most existing industry-specific guidance. The guidance requires an entity to review contracts in five steps: 1) identify the contract, 2) identify performance obligations, 3) determine the transaction price, 4) allocate the transaction price, and 5) recognize revenue. The new standard will result in enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue arising from contracts with customers. In August 2015, the FASB issued Accounting Standards Update ASU 2015-14 (“ASU 2015-14”) which deferred the effective date of the new standard by one year. Along with the deferral of the effective date, ASU No. 2015-14 allows early application as of the original effective date. Entities are allowed to transition to the new standard by either recasting prior periods or recognizing the cumulative effect as of the beginning of the period of adoption. The standard and related amendments will be effective for the Company for its annual reporting period beginning January 1, 2018, including interim periods within that reporting period. The Company is currently evaluating the newly issued guidance, including which transition approach will be applied and the estimated impact it will have on our consolidated financial statements. In July 2015, the FASB issued Accounting Standards Update No. 2015-11, "Simplifying the Measurement of Inventory (Topic 330)", ("ASU 2015-11"). Topic 330, Inventory, currently requires an entity to measure inventory at the lower of cost or market, with market value represented by replacement cost, net realizable value or net realizable value less a normal profit margin. The amendments in ASU 2015-11 require an entity to measure inventory at the lower of cost or net realizable value. ASU 2015-11 is effective for reporting periods beginning after December 15, 2016. We do not expect the adoption of this new accounting pronouncement, will have a significant impact on our consolidated financial statements. In November 2015, the FASB issued Accounting Standards Update 2015-17 (“ASU 2015-17”) to simplify the presentation of deferred taxes. This amendment requires that all deferred tax assets and liabilities, along with any related valuation allowances, be classified as noncurrent on the balance sheet. Adoption of this standard is required for annual periods beginning after December 15, 2016. We do not expect the adoption of ASU 2015-17 will have a significant impact on our consolidated financial statements and related disclosures. In March 2016, the FASB issued Accounting Standards Update ("ASU") 2016-09, Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. The Company is currently assessing the potential impact of adopting ASU 2016-09 on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases ("ASU 2016-02"). ASU 2016-02 supersedes the lease guidance under FASB Accounting Standards Codification ("ASC") Topic 840, Leases, resulting in the creation of FASB ASC Topic 842, Leases. ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for both finance and operating leases. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently assessing the potential impact of adopting ASU 2016-02 on its consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (“ASU 2016-15”) ASU 2016-15 which reduces diversity in practice in how certain transactions are classified in the statement of cash flows. The new standard will become effective for the Company beginning with the first quarter of 2018, with early adoption permitted. The adoption of this guidance will not have a material impact on the Company’s consolidated financial statements |
Foreign Currency Translation
Foreign Currency Translation | 9 Months Ended |
Sep. 30, 2016 | |
Foreign Currency Translation | |
Foreign Currency Translation | 3. Assets and liabilities of the Company’s foreign subsidiaries have been translated at current exchange rates, and related sales and expenses have been translated at average rates of exchange in effect during the period. The sales from our Canadian operations in the first nine months of 2016 were $21.0 million as compared to $16.5 million for the first nine months of 2015. The sales from our Canadian operations for the third quarter of 2016 were $7.6 million as compared to $5.5 million for the third quarter of 2015 . |
Comprehensive Income
Comprehensive Income | 9 Months Ended |
Sep. 30, 2016 | |
Comprehensive Income | |
Comprehensive Income | 4. Cumulative translation adjustments have been classified within accumulated other comprehensive income, which is a separate component of stockholders’ equity in accordance with FASB ASC Topic 220, “Comprehensive Income.” |
Revenue Recognition
Revenue Recognition | 9 Months Ended |
Sep. 30, 2016 | |
Revenue Recognition | |
Revenue Recognition | 5. Revenue on product (software and hardware) and maintenance agreement sales are recognized once four criteria are met: (1) persuasive evidence of an arrangement exists, (2) the price is fixed and determinable, (3) delivery (software and hardware) or fulfillment (maintenance) has occurred, and (4) there is reasonable assurance of collection of the sales proceeds. Revenues from the sales of hardware products, software products and licenses and maintenance agreements are recognized on a gross basis with the selling price to the customer recorded as sales and the acquisition cost of the product recorded as cost of sales. Product delivery to customers occur in a variety of ways, including (i) as physical product shipped from the Company’s warehouse, (ii) via drop-shipment by the vendor, or (iii) via electronic delivery for software licenses. The Company leverages drop-ship arrangements with many of its vendors and suppliers to deliver products to customers without having to physically hold the inventory at its warehouse, thereby increasing efficiency and reducing costs. The Company recognizes revenue for drop-ship arrangements on a gross basis. Furthermore, in such drop-ship arrangements, the Company negotiates price with the customer, pays the supplier directly for the product shipped and bears credit risk of collecting payment from its customers. The Company serves as the principal with the customer and, therefore, recognizes the sale and cost of sale of the product upon receiving notification from the supplier that the product has shipped. Maintenance agreements allow customers to obtain technical support directly from the software publisher and to upgrade, at no additional cost, to the latest technology if new applications are introduced by the software publisher during the period that the maintenance agreement is in effect. Sales are recorded net of discounts, rebates, and returns. Vendor rebates and price protection are recorded when earned as a reduction to cost of sales or merchandise inventory, as applicable. Cooperative reimbursements from vendors, which are earned and available, are recorded in the period the related advertising expenditure is incurred. Cooperative reimbursements are recorded as a reduction of cost of sales in accordance with FASB ASC Topic 605-50 “Accounting by a Customer (including reseller) for Certain Consideration Received from a Vendor.” Provisions for returns are estimated based on historical sales returns and credit memo analysis which are adjusted to actual on a periodic basis. Accounts receivable-long-term result from product sales with extended payment terms that are discounted to their present values at the prevailing market rates. In subsequent periods, the accounts receivable are increased to the amounts due and payable by the customers through the accretion of interest income on the unpaid accounts receivable due in future years. The amounts due under these long-term accounts receivable due within one year are reclassified to the current portion of accounts receivable. |
Fair Value
Fair Value | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value | |
Fair Value | 6. The carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable and accounts payable approximated fair value at September 30, 2016 and December 31, 2015 because of the relative short maturity of these instruments. The Company’s accounts receivable long-term is discounted to their present value at prevailing market rates so the balances approximate fair value. |
Balance Sheet Detail
Balance Sheet Detail | 9 Months Ended |
Sep. 30, 2016 | |
Balance Sheet Detail | |
Balance Sheet Detail | 7. Balance Sheet Detail: Equipment and leasehold improvements consist of the following: September 30, December 31, 2016 2015 Equipment $ $ Leasehold improvements Less accumulated depreciation and amortization $ $ Accounts payable and accrued expenses consist of the following: September 30, December 31, 2016 2015 Trade accounts payable $ $ Accrued expenses $ $ Accumulated other comprehensive loss consists of the following: September 30, December 31, 2016 2015 Foreign currency translation adjustments $ $ $ $ |
Credit Facility
Credit Facility | 9 Months Ended |
Sep. 30, 2016 | |
Credit Facility. | |
Credit Facility | 8. The Company entered into a $10,000,000 revolving credit facility (the “Credit Facility”) with Citibank, N.A. (“Citibank”) pursuant to a Business Loan Agreement (the “Loan Agreement”), Promissory Note (the “Note”), Commercial Security Agreements (the “Security Agreements”) and Commercial Pledge Agreement (the “Pledge Agreement”). The Credit Facility matures on January 31, 2019, at which time the Company must pay this loan in one payment of any outstanding principal plus all accrued unpaid interest. The interest rate for any borrowings under the Credit Facility is subject to change from time to time based on the changes in an independent index which is the LIBOR Rate (the “Index”). If the Index becomes unavailable during the term of this loan, Citibank may designate a substitute index after notifying the Company. Interest on the unpaid principal balance of the Note will be calculated using a rate of 1.500 percentage points over the Index. The Credit Facility is secured by the assets of the Company. Among other affirmative covenants set forth in the Loan Agreement, the Company must maintain (i) a ratio of Total Liabilities to Tangible Net Worth (each as defined in the Loan Agreement) of not greater than 2.50 to 1.00, to be tested quarterly and (ii) a minimum Debt Service Coverage Ratio (as defined in the Loan Agreement) of 2.00 to 1.00. Additionally, the Loan Agreement contains negative covenants related to, among other items, prohibitions against the creation of certain liens, engaging in any business activities substantially different than those currently engaged in by the Company, and paying dividends on the Company’s stock other than (i) dividends payable in its stock and (ii) cash dividends in amounts and frequency consistent with past practice, without first securing the written consent of Citibank. The Company is in compliance with all covenants at September 30, 2016. At September 30, 2016, the Company had no borrowings outstanding under the Credit Facility. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share | |
Earnings Per Share | 9. Basic Earnings Per Share (“EPS”) is calculated by dividing net income attributable to common stockholders by the weighted average number of shares of Common Stock outstanding during the period. Diluted EPS is calculated by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding, adjusted for potentially dilutive securities including unexercised stock option grants and nonvested shares of restricted stock. A reconciliation of the numerators and denominators of the basic and diluted per share computations follows: Nine months ended Three months ended September 30, September 30, 2016 2015 2016 2015 Numerator: Net income $ $ $ $ Denominator: Weighted average shares (Basic) Dilutive effect of outstanding options and nonvested shares of restricted stock Weighted average shares including assumed conversions (Diluted) Basic net income per share $ $ $ $ Diluted net income per share $ $ $ $ |
Major Customers and Vendors
Major Customers and Vendors | 9 Months Ended |
Sep. 30, 2016 | |
Major Customers and Vendors | |
Major Customers and Vendors | 10. The Company had two major vendors that accounted for 23.8% and 10.2%, respectively, of its total purchases during the nine months ended September 30, 2016, and 23.6%, and 10.5% of total purchases for the three months ended September 30, 2016. The Company had one major vendor that accounted for 24.3% and 26.2% of total purchases during the nine months and three months, respectively, that ended September 30, 2015. The Company had two major customers that accounted for 19.8% and 17.8%, respectively, of its total net sales during the nine months ended September 30, 2016, and 21.4%, and 17.5% of total net sales for the three months ended September 30, 2016. These same customers accounted for 11.6% and 20.4%, respectively, of total net accounts receivable as of September 30, 2016. The Company had two major customers that accounted for 18.8% and 17.9%, respectively, of its total net sales during the nine months ended September 30, 2015, and 20.5%, and 18.1% of total net sales for the three months ended September 30, 2015. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2016 | |
Income Taxes | |
Income Taxes | 11. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions. The Company has identified its federal consolidated tax return and its state tax return in New Jersey and its Canadian tax return as major tax jurisdictions. As of September 30, 2016, the Company’s 2013 through 2015 Federal tax returns remain open for examination, as the Company recently concluded an Internal Revenue Service examination for the 2011 and 2012 tax years. This examination resulted in no change to the previously filed Federal corporate tax returns. The Company’s New Jersey and Canadian tax returns are open for examination for the years 2013 through 2015. The Company’s policy is to recognize interest related to unrecognized tax benefits as interest expense and penalties as operating expenses. The Company believes that it has appropriate support for the income tax positions it takes and expects to take on its tax returns, and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter. The effective tax rate for each of the nine and three months ended September 30, 2016 was 33.8% compared to 34.3% and 34.1%, respectively, for the same period last year. |
Stockholders' Equity and Stock
Stockholders' Equity and Stock Based Compensation | 9 Months Ended |
Sep. 30, 2016 | |
Stockholders' Equity and Stock Based Compensation | |
Stockholders' Equity and Stock Based Compensation | 12. The 2012 Stock-Based Compensation Plan (the “2012 Plan”) authorizes the grant of Stock Options, Stock Units, Stock Appreciation Rights, Restricted Stock, Deferred Stock, Stock Bonuses and other equity-based awards. The total number of shares of Common Stock initially available for award under the 2012 Plan was 600,000. As of September 30, 2016, the number of shares of Common stock available for future award grants to employees and directors under the 2012 Plan is 305,463. During 2012, the Company granted a total of 92,000 shares of Restricted Stock to officers, directors, and employees. These shares of Restricted Stock vest over 20 equal quarterly installments. A total of 3,525 shares of Restricted Stock were forfeited as a result of employees terminating employment with the Company. During 2013, the Company granted a total of 56,500 shares of Restricted Stock to officers and employees. Included in these grants were 40,000 Restricted Shares granted to the Company’s CEO in accordance with the satisfaction of certain performance criteria included in his compensation plan. These 40,000 Restricted Shares vest over 16 equal quarterly installments. The remaining grants of Restricted Stock vest over 20 equal quarterly installments. A total of 775 shares of Restricted Stock were forfeited as a result of employees terminating employment with the Company. During 2014, the Company granted a total of 98,689 shares of Restricted Stock to officers, directors and employees. These shares of Restricted Stock vest between one and twenty equal quarterly installments. A total of 34,487 shares of Restricted Stock were forfeited as a result of officers and employees terminating employment with the Company. During 2015, the Company granted a total of 44,000 shares of Restricted Stock to officers. These shares of Restricted Stock vest over sixteen equal quarterly installments. In 2015, a total of 4,465 shares of Restricted Stock were forfeited as a result of officers and employees terminating employment with the Company. During 2016, the Company granted a total of 171,252 shares of Restricted Stock to officers, directors, and employees. These shares of Restricted Stock vest between one and twenty equal quarterly installments. A total of 6,867 shares of Restricted Stock were forfeited as a result of officers and employees terminating employment with the Company. A summary of nonvested shares of Restricted Stock awards outstanding under the Company’s the 2012 Plan an as of September 30, 2016, and changes during the nine months then ended is as follows: Weighted Average Grant Date Shares Fair Value Nonvested shares at January 1, 2016 $ Granted in 2016 Vested in 2016 Forfeited in 2016 Nonvested shares at September 30, 2016 $ As of September 30, 2016, there is approximately $3.2 million of total unrecognized compensation costs related to nonvested share-based compensation arrangements. The unrecognized compensation cost is expected to be recognized over a weighted-average period of 3.4 years. For the nine months ended September 30, 2016 and 2015, the Company recognized share-based compensation cost of $1.2 million and $0.8 million respectively, which is included in the Company’s general and administrative expense. |
Industry, Segment and Geographi
Industry, Segment and Geographic Information | 9 Months Ended |
Sep. 30, 2016 | |
Industry, Segment and Geographic Information | |
Industry, Segment and Geographic Information | 13. FASB ASC Topic 280, “Segment Reporting,” requires that public companies report profits and losses and certain other information on their “reportable operating segments” in their annual and interim financial statements. The internal organization used by the public company’s Chief Operating Decision Maker (CODM) to assess performance and allocate resources determines the basis for reportable operating segments. The Company’s CODM is the Chief Executive Officer. The Company is organized into two reportable operating segments. The “Lifeboat Distribution” segment distributes technical software to corporate resellers, value added resellers (VARs), consultants and systems integrators worldwide. The “TechXtend” segment is a value-added reseller of software, hardware and services for corporations, government organizations and academic institutions in the United States and Canada. As permitted by FASB ASC Topic 280, the Company has utilized the aggregation criteria in combining its operations in Canada with the domestic segments as the Canadian operations provide the same products and services to similar clients and are considered together when the Company’s CODM decides how to allocate resources. Segment income is based on segment revenue less the respective segment’s cost of revenues as well as segment direct costs (including such items as payroll costs and payroll related costs, such as profit sharing, incentive awards and insurance) and excluding general and administrative expenses not attributed to an individual segment business unit. The Company only identifies accounts receivable and inventory by segment as shown below as “Selected Assets” by segment; it does not allocate its other assets, including capital expenditures by segment. The following segment reporting information of the Company is provided: Nine months ended Three months ended September 30, September 30, 2016 2015 2016 2015 Revenue: Lifeboat Distribution $ $ $ $ TechXtend Gross Profit: Lifeboat Distribution $ $ $ $ TechXtend Direct Costs: Lifeboat Distribution $ $ $ $ TechXtend Segment Income Before Taxes: Lifeboat Distribution $ $ $ $ TechXtend Segment Income Before Taxes General and administrative $ $ $ Interest income Foreign currency translation Income before taxes $ $ $ $ As of As of September 30, December 31, Selected Assets By Segment: 2016 2015 Lifeboat Distribution $ $ TechXtend Segment Select Assets Corporate Assets Total Assets $ $ |
Summary of Significant Accoun21
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
New Accounting Pronouncements | |
New Accounting Pronouncements | In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance for revenue recognition for contracts, superseding the previous revenue recognition requirements, along with most existing industry-specific guidance. The guidance requires an entity to review contracts in five steps: 1) identify the contract, 2) identify performance obligations, 3) determine the transaction price, 4) allocate the transaction price, and 5) recognize revenue. The new standard will result in enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue arising from contracts with customers. In August 2015, the FASB issued Accounting Standards Update ASU 2015-14 (“ASU 2015-14”) which deferred the effective date of the new standard by one year. Along with the deferral of the effective date, ASU No. 2015-14 allows early application as of the original effective date. Entities are allowed to transition to the new standard by either recasting prior periods or recognizing the cumulative effect as of the beginning of the period of adoption. The standard and related amendments will be effective for the Company for its annual reporting period beginning January 1, 2018, including interim periods within that reporting period. The Company is currently evaluating the newly issued guidance, including which transition approach will be applied and the estimated impact it will have on our consolidated financial statements. In July 2015, the FASB issued Accounting Standards Update No. 2015-11, "Simplifying the Measurement of Inventory (Topic 330)", ("ASU 2015-11"). Topic 330, Inventory, currently requires an entity to measure inventory at the lower of cost or market, with market value represented by replacement cost, net realizable value or net realizable value less a normal profit margin. The amendments in ASU 2015-11 require an entity to measure inventory at the lower of cost or net realizable value. ASU 2015-11 is effective for reporting periods beginning after December 15, 2016. We do not expect the adoption of this new accounting pronouncement, will have a significant impact on our consolidated financial statements. In November 2015, the FASB issued Accounting Standards Update 2015-17 (“ASU 2015-17”) to simplify the presentation of deferred taxes. This amendment requires that all deferred tax assets and liabilities, along with any related valuation allowances, be classified as noncurrent on the balance sheet. Adoption of this standard is required for annual periods beginning after December 15, 2016. We do not expect the adoption of ASU 2015-17 will have a significant impact on our consolidated financial statements and related disclosures. In March 2016, the FASB issued Accounting Standards Update ("ASU") 2016-09, Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. The Company is currently assessing the potential impact of adopting ASU 2016-09 on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases ("ASU 2016-02"). ASU 2016-02 supersedes the lease guidance under FASB Accounting Standards Codification ("ASC") Topic 840, Leases, resulting in the creation of FASB ASC Topic 842, Leases. ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for both finance and operating leases. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently assessing the potential impact of adopting ASU 2016-02 on its consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (“ASU 2016-15”) ASU 2016-15 which reduces diversity in practice in how certain transactions are classified in the statement of cash flows. The new standard will become effective for the Company beginning with the first quarter of 2018, with early adoption permitted. The adoption of this guidance will not have a material impact on the Company’s consolidated financial statements |
Balance Sheet Detail (Tables)
Balance Sheet Detail (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Balance Sheet Detail | |
Schedule of equipment and leasehold improvements, net | September 30, December 31, 2016 2015 Equipment $ $ Leasehold improvements Less accumulated depreciation and amortization $ $ |
Schedule of accounts payable and accrued expenses | September 30, December 31, 2016 2015 Trade accounts payable $ $ Accrued expenses $ $ |
Schedule of accumulated other comprehensive loss | September 30, December 31, 2016 2015 Foreign currency translation adjustments $ $ $ $ |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share | |
Schedule of reconciliation of the numerators and denominators for computations of the basic and diluted per share | Nine months ended Three months ended September 30, September 30, 2016 2015 2016 2015 Numerator: Net income $ $ $ $ Denominator: Weighted average shares (Basic) Dilutive effect of outstanding options and nonvested shares of restricted stock Weighted average shares including assumed conversions (Diluted) Basic net income per share $ $ $ $ Diluted net income per share $ $ $ $ |
Stockholders' Equity and Stoc24
Stockholders' Equity and Stock Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Stockholders' Equity and Stock Based Compensation | |
Schedule of changes in options outstanding under the combined plans | Weighted Average Grant Date Shares Fair Value Nonvested shares at January 1, 2016 $ Granted in 2016 Vested in 2016 Forfeited in 2016 Nonvested shares at September 30, 2016 $ |
Industry, Segment and Geograp25
Industry, Segment and Geographic Information (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Industry, Segment and Geographic Information | |
Schedule of segment reporting information | Nine months ended Three months ended September 30, September 30, 2016 2015 2016 2015 Revenue: Lifeboat Distribution $ $ $ $ TechXtend Gross Profit: Lifeboat Distribution $ $ $ $ TechXtend Direct Costs: Lifeboat Distribution $ $ $ $ TechXtend Segment Income Before Taxes: Lifeboat Distribution $ $ $ $ TechXtend Segment Income Before Taxes General and administrative $ $ $ Interest income Foreign currency translation Income before taxes $ $ $ $ As of As of September 30, December 31, Selected Assets By Segment: 2016 2015 Lifeboat Distribution $ $ TechXtend Segment Select Assets Corporate Assets Total Assets $ $ |
Foreign Currency Translation (D
Foreign Currency Translation (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Revenue from external customers | ||||
Net sales | $ 99,586 | $ 97,653 | $ 298,167 | $ 282,314 |
Canadian operations | ||||
Revenue from external customers | ||||
Net sales | $ 7,600 | $ 5,500 | $ 21,000 | $ 16,500 |
Revenue Recognition (Details)
Revenue Recognition (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2016USD ($)item | |
Revenue Recognition | |
Number of criteria | item | 4 |
Additional cost to obtain technical support directly from the software publisher and upgrade to latest technology | $ | $ 0 |
Balance Sheet Detail_ (Details)
Balance Sheet Detail: (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Equipment and leasehold improvements | ||
Gross | $ 5,115 | $ 3,496 |
Less accumulated depreciation and amortization | (3,322) | (3,134) |
Net | 1,793 | 362 |
Accumulated Other Comprehensive Income | ||
Accumulated other comprehensive loss | (1,511) | (1,451) |
Accounts payable and accrued expenses | ||
Trade accounts payable | 53,593 | 52,808 |
Accrued expenses | 4,050 | 2,615 |
Accounts payable and accrued expenses | 57,643 | 55,423 |
Accumulated Foreign Currency Translation Adjustments | ||
Accumulated Other Comprehensive Income | ||
Accumulated other comprehensive loss | (1,511) | (1,451) |
Equipment | ||
Equipment and leasehold improvements | ||
Gross | 3,310 | 2,924 |
Leasehold improvements | ||
Equipment and leasehold improvements | ||
Gross | $ 1,805 | $ 572 |
Credit Facility (Details)
Credit Facility (Details) - Credit Facility | 9 Months Ended |
Sep. 30, 2016USD ($)item | |
Credit Facility | |
Maximum borrowing capacity | $ 10,000,000 |
Number of payments | item | 1 |
Total liabilities to tangible net worth ratio, maximum | 2.50 |
Interest coverage ratio, minimum | 2 |
Borrowings outstanding | $ 0 |
Index | |
Credit Facility | |
Interest rate margin (as a percent) | 1.50% |
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, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Numerator: | ||||
Net income | $ 1,378 | $ 1,553 | $ 3,929 | $ 4,218 |
Denominator: | ||||
Weighted average shares (Basic) | 4,507 | 4,624 | 4,537 | 4,652 |
Dilutive effect of outstanding options and non-vested shares of restricted stock (in shares) | 11 | 19 | 11 | 21 |
Weighted average shares including assumed conversions (Diluted) | 4,518 | 4,643 | 4,548 | 4,673 |
Basic income per share (in dollars per share) | $ 0.31 | $ 0.34 | $ 0.87 | $ 0.91 |
Diluted income per share (in dollars per share) | $ 0.31 | $ 0.33 | $ 0.86 | $ 0.90 |
Major Customers and Vendors (De
Major Customers and Vendors (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016entitycustomer | Sep. 30, 2015entitycustomer | Sep. 30, 2016entitycustomer | Sep. 30, 2015entitycustomer | |
Purchases | Vendor concentration risk | ||||
Significant Customers and Vendors | ||||
Number of vendors | entity | 2 | 1 | 2 | 1 |
Purchases | Vendor concentration risk | Major vendor one | ||||
Significant Customers and Vendors | ||||
Percentage of concentration risk | 23.60% | 26.20% | 23.80% | 24.30% |
Purchases | Vendor concentration risk | Major vendor two | ||||
Significant Customers and Vendors | ||||
Percentage of concentration risk | 10.50% | 10.20% | ||
Net sales | Customer concentration risk | ||||
Significant Customers and Vendors | ||||
Number of customers | 2 | 2 | 2 | 2 |
Net sales | Customer one | Customer concentration risk | ||||
Significant Customers and Vendors | ||||
Percentage of concentration risk | 21.40% | 20.50% | 19.80% | 18.80% |
Net sales | Customer two | Customer concentration risk | ||||
Significant Customers and Vendors | ||||
Percentage of concentration risk | 17.50% | 18.10% | 17.80% | 17.90% |
Net accounts receivable | Customer concentration risk | ||||
Significant Customers and Vendors | ||||
Number of customers | 2 | |||
Net accounts receivable | Customer one | Customer concentration risk | ||||
Significant Customers and Vendors | ||||
Percentage of concentration risk | 11.60% | |||
Net accounts receivable | Customer two | Customer concentration risk | ||||
Significant Customers and Vendors | ||||
Percentage of concentration risk | 20.40% |
Income Taxes (Details)
Income Taxes (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Income Taxes | ||||
Effective tax rate (as a percent) | 33.80% | 34.10% | 33.80% | 34.30% |
Stockholders' Equity and Stoc33
Stockholders' Equity and Stock Based Compensation - Vesting (Details) | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2016installmentshares | Dec. 31, 2015installmentshares | Dec. 31, 2014installmentshares | Dec. 31, 2013installmentshares | Dec. 31, 2012installmentshares | |
Stock-based compensation | |||||
Number of shares of common stock initially available for award | 600,000 | ||||
Options reserved for future issuance (in shares) | 305,463 | ||||
Restricted stock | |||||
Stock-based compensation | |||||
Granted (in shares) | 171,252 | 44,000 | 98,689 | 56,500 | 92,000 |
Number of equal quarterly installments for vesting of awards | installment | 16 | 20 | 20 | ||
Forfeited (in shares) | 6,867 | 4,465 | 34,487 | 775 | 3,525 |
Restricted stock | Minimum | |||||
Stock-based compensation | |||||
Number of equal quarterly installments for vesting of awards | installment | 1 | 1 | |||
Restricted stock | Maximum | |||||
Stock-based compensation | |||||
Number of equal quarterly installments for vesting of awards | installment | 20 | 20 | |||
Restricted stock | CEO | |||||
Stock-based compensation | |||||
Granted (in shares) | 40,000 | ||||
Number of equal quarterly installments for vesting of awards | installment | 16 |
Stockholders' Equity and Stoc34
Stockholders' Equity and Stock Based Compensation - Nonvested (Details) - Restricted stock - USD ($) $ / shares in Units, $ in Millions | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Shares | ||||||
Nonvested shares at the beginning of the period | 123,329 | |||||
Granted (in shares) | 171,252 | 44,000 | 98,689 | 56,500 | 92,000 | |
Vested (in shares) | (79,718) | |||||
Forfeited (in shares) | (6,867) | (4,465) | (34,487) | (775) | (3,525) | |
Nonvested shares at the end of the period | 207,996 | 123,329 | ||||
Weighted Average Grant Date Fair Value | ||||||
Nonvested shares at the beginning of period (in dollars per share) | $ 16.34 | |||||
Granted (in dollars per share) | 17.03 | |||||
Vested (in dollars per share) | 14.57 | |||||
Forfeited (in dollars per share) | 16.12 | |||||
Nonvested shares at the end of period (in dollars per share) | $ 15.44 | $ 16.34 | ||||
Unrecognized compensation cost (in dollars) | $ 3.2 | |||||
Weighted average period for recognition of unrecognized compensation cost | 3 years 4 months 24 days | |||||
General and Administrative Expense | ||||||
Weighted Average Grant Date Fair Value | ||||||
Share-based compensation cost (in dollars) | $ 1.2 | $ 0.8 |
Industry, Segment and Geograp35
Industry, Segment and Geographic Information (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016USD ($) | Sep. 30, 2015USD ($) | Sep. 30, 2016USD ($)item | Sep. 30, 2015USD ($) | Dec. 31, 2015USD ($) | |
Segment reporting information | |||||
Number of reportable operating segments | item | 2 | ||||
Revenue | $ 99,586 | $ 97,653 | $ 298,167 | $ 282,314 | |
Gross Profit | 6,372 | 6,880 | 19,325 | 19,662 | |
Direct Costs | 2,336 | 2,572 | 6,995 | 7,484 | |
Segment Income | 4,036 | 4,308 | 12,330 | 12,178 | |
General and administrative | 2,015 | 2,046 | 6,575 | 6,049 | |
Interest, net | 58 | 100 | 183 | 297 | |
Foreign currency translation (loss) | 3 | (4) | (1) | (9) | |
Income before provision for income taxes | 2,082 | 2,358 | 5,937 | 6,417 | |
Total Assets | 95,422 | 95,422 | $ 94,082 | ||
Segment Total | |||||
Segment reporting information | |||||
Total Assets | 70,861 | 70,861 | 68,305 | ||
Corporate Assets | |||||
Segment reporting information | |||||
Total Assets | 24,561 | 24,561 | 25,777 | ||
Lifeboat Distribution | |||||
Segment reporting information | |||||
Revenue | 91,114 | 86,082 | 267,113 | 250,287 | |
Gross Profit | 5,440 | 5,493 | 16,139 | 15,837 | |
Direct Costs | 1,846 | 2,051 | 5,442 | 5,759 | |
Segment Income | 3,594 | 3,442 | 10,697 | 10,078 | |
Total Assets | 46,020 | 46,020 | 45,300 | ||
TechXtend | |||||
Segment reporting information | |||||
Revenue | 8,472 | 11,571 | 31,054 | 32,027 | |
Gross Profit | 932 | 1,387 | 3,186 | 3,825 | |
Direct Costs | 490 | 521 | 1,553 | 1,725 | |
Segment Income | 442 | $ 866 | 1,633 | $ 2,100 | |
Total Assets | $ 24,841 | $ 24,841 | $ 23,005 |