PC CONNECTION, INC. AND RESULTS OF OPERATIONS
Statements contained or incorporated by reference in this Quarterly Report on Form 10Q that are not based on historical fact are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. These forward-looking statements regarding future events and our future results are based on current expectations, estimates, forecasts, and projections and the beliefs and assumptions of management including, without limitation, our expectations with regard to the industry's rapid technological change and exposure to inventory obsolescence, availability and allocations of goods, reliance on vendor support and relationships, competitive risks, pricing risks, and the overall level of economic activity and the level of business investment in information technology products. Forward-looking statements may be identified by the use of forward-looking terminology such as "may," "could," "expect," "believe," "estimate," "anticipate," "continue," "seek," "plan," "intend," or similar terms, variations of such terms, or the negative of those terms.
We cannot assure investors that our assumptions and expectations will prove to have been correct. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. These statements involve known and unknown risks, uncertainties and other factors, including the effects of the novel coronavirus (COVID-19) on our business, financial condition, and results of operations, that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. We therefore caution you against undue reliance on any of these forward-looking statements. Important factors that could cause our actual results to differ materially from those indicated or implied by forward-looking statements include those discussed in Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Quarterly Report on Form 10-Q and in Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2019 . Any forward-looking statement made by us in this Quarterly Report on Form 10-Q speaks only as of the date on which this Quarterly Report on Form 10-Q was first filed. We undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required by law. OVERVIEW We are a leading solutions provider of a wide range of information technology, or IT, solutions. We help our customers design, enable, manage, and service their IT environments. We provide IT products, including computer systems, software and peripheral equipment, networking communications, and other products and accessories that we purchase from manufacturers, distributors, and other suppliers. We also offer services involving design, configuration, and implementation of IT solutions. These services are performed by our personnel and by third-party service providers. We operate through three sales segments: (a) the Business Solutions segment, which serves small- to medium-sized businesses, through ourPC Connection Sales subsidiary, (b) the Enterprise Solutions segment, which serves large enterprise customers, through ourMoreDirect subsidiary, and (c) the Public Sector segment, which serves federal, state, and local governmental and educational institutions, through ourGovConnection subsidiary. We generate sales through (i) outbound telemarketing and field sales contacts by sales representatives focused on the business, educational, healthcare, and government markets, (ii) our websites, and (iii) direct responses from customers responding to our advertising media. We seek to recruit, retain, and increase the productivity of our sales personnel through training, mentoring, financial incentives based on performance, and updating and streamlining our information systems to make our operations more efficient. As a value-added reseller in the IT supply chain, we do not manufacture IT hardware or software. We are dependent on our suppliers-manufacturers and distributors that historically have sold only to resellers rather than directly to end users. However, certain manufacturers have, on multiple occasions, attempted to sell directly to our customers, and in some cases, have restricted our ability to sell their products directly to certain customers, thereby attempting to eliminate our role. We believe that the success of these direct sales efforts by suppliers will depend on their ability to meet our customers' ongoing demands and provide objective, unbiased solutions to meet their needs. We believe more of our 11 Table of Contents customers are seeking comprehensive IT solutions, rather than simply the acquisition of specific IT products. Our advantage is our ability to be product-neutral and provide a broader combination of products, services, and advice tailored to customer needs. By providing customers with customized solutions from a variety of manufacturers, we believe we can mitigate the negative impact of continued direct sales initiatives from individual manufacturers. Through the formation of ourTechnical Solutions Group , we are able to provide customers complete IT solutions, from identifying their needs, to designing, developing, and managing the integration of products and services to implement their IT projects. Such service offerings carry higher margins than traditional product sales. Additionally, the technical certifications of our service engineers permit us to offer higher-end, more complex products that generally carry higher gross margins. We expect these service offerings and technical certifications to continue to play a role in sales generation and improve gross margins in this competitive environment. The primary challenges we continue to face in effectively managing our business are (1) increasing our revenues while at the same time improving our gross margin in all three segments, (2) recruiting, retaining, and improving the productivity of our sales and technical support personnel, and (3) effectively controlling our selling, general, and administrative, or SG&A, expenses while making major investments in our IT systems and solution selling personnel, especially in relation to changing revenue levels. To support future growth, we are expanding our IT solutions business, which requires the addition of highly-skilled service engineers. Although we expect to realize the ultimate benefit of higher-margin service revenues under this multi-year initiative, we believe that our cost of services will increase as we add service engineers. If our service revenues do not grow enough to offset the cost of these headcount additions, our operating results may be negatively impacted. Market conditions and technology advances significantly affect the demand for our products and services. Virtual delivery of software products and advanced Internet technology providing customers enhanced functionality have substantially increased customer expectations, requiring us to invest on an ongoing basis in our own IT development to meet these new demands.
Our investments in IT infrastructure are designed to enable us to operate more efficiently and provide our customers enhanced functionality.
EFFECTS OF COVID-19 InDecember 2019 , a novel coronavirus disease ("COVID-19") was reported, and inJanuary 2020 , theWorld Health Organization ("WHO") declared it a Public Health Emergency of International Concern. OnFebruary 28, 2020 , the WHO raised its assessment of the COVID-19 threat from high to very high at a global level due to the continued increase in the number of cases and affected countries. OnMarch 11, 2020 , the WHO characterized COVID-19 as a global pandemic. National, state and local governments have responded to the COVID-19 pandemic in a variety of ways, including declaring states of emergency, restricting people from gathering in groups or interacting within a certain physical distance (i.e., social distancing), and in certain cases, ordering businesses to close or limiting operations and instructing people to stay at home. Our company was deemed an essential business by local government authorities as we have worked diligently to supply technology solutions to federal and state government agencies, along with hospitals and other healthcare facilities across the country. We implemented remote work arrangements and restricted business travel in mid-March, but to date, these arrangements have not materially affected our ability to maintain our business operations, including the operation of financial reporting systems, internal controls over financial reporting, and disclosure controls and procedures. We have also evaluated the potential impact of the pandemic on the carrying values of our goodwill and intangible assets, and based on our assessment, did not identify any indications to suggest that an impairment may exist.
The COVID-19 pandemic has resulted in material adverse economic conditions that
are impacting, and may continue to impact, our business and the businesses of
our suppliers and customers. Although the extent and duration of the impact of
the COVID-19 pandemic on our business and operations and the business and
operations of our customers remains uncertain, the continued spread of COVID-19
and the imposition of related public health measures and restrictions may
materially adversely impact our business, financial condition, results of
operations and cash flows.
12
Table of Contents
The COVID-19 pandemic has caused certain disruptions to our business and
operations and could cause material disruptions to our business and operations
in the future as a result of, among other things, quarantines, worker illness,
worker absenteeism due to illness or other factors, social distancing measures
and other travel, health-related, business or other restrictions. For similar
reasons, the COVID-19 pandemic has also adversely impacted, and may continue to
adversely impact, our suppliers and their manufacturers. Depending on the extent
and duration of the previously-described effects on our business and the
operations of our suppliers, our costs to obtain certain products could
increase, our ability to obtain products or services from suppliers may be
adversely impacted, our ability to service certain customers could be adversely
impacted and, as a result, our business, financial condition and results of
operations could be materially adversely affected.
In addition, the COVID-19 pandemic has caused, and may continue to cause,
disruptions to the business and operations of our customers. Certain of our
customers have been, and may in the future be, required to close down or operate
at a lower capacity, which may adversely impact our business, financial
condition and results of operations. In our opinion, customers who operate
within the hospitality, airline, and retail industries, and in particular those
within our Business Solutions Segment, are likely to be most adversely affected.
It is possible we could experience a decrease in orders as a result of the
pandemic and there can be no assurances that any decrease in sales resulting
from the COVID-19 pandemic will be offset by increased sales in the future. We
may also experience delays in collecting amounts owed to us, and in some cases,
may experience inabilities to collect altogether. As a result, we have increased
our reserve against uncollectable amounts, which resulted in a significant
increase in our operating expenses in the first quarter.
See the important information in Item 1A. Risk Factors below, under the caption
"The continued spread of COVID-19 and the imposition of related health measures
and restrictions may materially adversely impact our business, financial
condition, results of operations and cash flows."
RESULTS OF OPERATIONS
The following table sets forth information derived from our statements of income expressed as a percentage of net sales for the periods indicated:
Three Months Ended
March 31,
2020 2019
Net sales (in millions) $ 711.9 $ 632.9
Gross margin 15.9 % 15.7 %
Selling, general and administrative expenses 13.0 % 12.8 %
Income from operations 2.9 % 2.8 %
Net sales of $711.9 million for the first quarter of 2020 reflected an increase
of $79.0 million compared to the first quarter of 2019, which was driven by
growth in our Enterprise Solutions and Business Solutions segments. Our ability
to meet the continued demand for the personal computer refresh, and to supply
customers with the necessary technology to implement work-from-home strategies
and assist on the front lines of the COVID-19 pandemic fight led to increased
sales of mobility, desktop, and net/com products. We also saw significant
increases in accessory products, which were driven by large project rollouts in
the current period. Gross profit dollars increased year-over-year by $13.9
million due to higher invoice selling margins realized on advanced solution
sales, increased sales of both hardware and software products, and changes in
customer mix. SG&A expenses increased by $11.2 million , mostly due to higher
personnel costs, and increased as a percentage of net sales. Operating income in
the first quarter of 2020 increased year-over-year both in dollars and as a
percentage of net sales by $3.2 million and 15 basis points, respectively,
primarily as a result of increased gross profit margins, which grew by 19 basis
points over the period.
13
Table of Contents
Net Sales Distribution
The following table sets forth our percentage of net sales by segment and
product mix:
Three Months Ended
March 31,
2020 2019
Sales Segment
Enterprise Solutions 47 % 44 %
Business Solutions 39 40
Public Sector Solutions 14 16
Total 100 % 100 %
Product Mix
Notebooks/Mobility 28 % 28 %
Desktops 11 12
Software 10 11
Servers/Storage 8 9
Net/Com Products 8 7
Displays and Sound 8 9
Accessories 18 14
Other Hardware/Services 9 10
Total 100 % 100 %
Gross Profit Margin
The following table summarizes our gross margin, as a percentage of net sales,
over the periods indicated:
Three Months Ended
March 31,
2020 2019
Sales Segment
Enterprise Solutions 13.9 % 14.9 %
Business Solutions 18.8 17.8
Public Sector Solutions 14.5 12.6
Total 15.9 % 15.7 %
Operating Expenses
The following table reflects our SG&A expenses for the periods indicated:
Three Months Ended
March 31,
($ in millions) 2020 2019
Personnel costs $ 69.4 $ 61.0
Advertising 4.6 4.6
Facilities operations 5.1 4.8
Professional fees 2.6 2.5
Credit card fees 1.7 1.5
Depreciation and amortization 3.1 3.7
Other 6.0 3.1
Total SG&A expense $ 92.5 $ 81.2
Percentage of net sales 13.0 % 12.8 %
14
Table of Contents
Year-Over-Year Comparisons
Three Months Ended
Changes in net sales and gross profit by segment are shown in the following
table:
Three Months Ended March 31,
2020 2019
% of % of %
($ in millions) Amount Net Sales Amount Net Sales Change
Net Sales :
Enterprise Solutions $ 333.4 46.8 % $ 275.6 43.5 % 21.0 %
Business Solutions 278.8 39.2 252.9 40.0 10.2
Public Sector Solutions 99.7 14.0 104.4 16.5 (4.5)
Total $ 711.9 100.0 % $ 632.9 100.0 % 12.5 %
Gross Profit:
Enterprise Solutions $ 46.2 13.9 % $ 41.2 14.9 % 12.1 %
Business Solutions 52.5 18.8 45.0 17.8 16.7
Public Sector Solutions 14.4 14.5 13.1 12.6 9.9
Total $ 113.1 15.9 % $ 99.3 15.7 % 13.9 %
Net sales increased in the first quarter of 2020 compared to the first quarter of 2019, as explained below:
· Net sales of
increase of
by orders associated with large project rollouts, increased by
compared with the prior period. Notebooks/mobility products grew by
million resulting from the tail end of the personal computer refresh due to the
anticipated end-of-life support for Windows 7, and increased sales near the end
of the quarter driven by workforces and consumers preparing to function
remotely and increased demand from customers in the healthcare industry. We
also experienced increases in net/com products of $10.3 million .
· Net sales of
increase of
products, desktop products, and other accessories increased by
due to increased demand from customers at the end of the quarter for systems
and accessories to support their workforces shifting to remote working
capabilities and from customers in the healthcare industry, along with the
remaining benefits from the personal computer refresh. Net sales of software
products also grew by
impacted by a higher percentage of our software sales recognized on a net basis
in the current period in transactions where we are considered to be the agent.
· Net sales of
decreases year-over-year in other hardware and services of
primarily as a result of some larger projects with the Federal government in
the first quarter of the prior year that did not repeat in the current year
quarter. Net sales of software products also decreased by
with the prior year and was negatively impacted by a higher percentage of our
software sales recognized on a net basis in the current period in transactions
where we are considered to be the agent. These decreases in net sales were
partially offset by increased sales of notebooks/mobility products of
million and displays and sound products of $1.6 million .
Gross profit for the first quarter of 2020 increased year-over-year in dollars and as a percentage of net sales (gross margin), as explained below:
· Gross profit for the Enterprise Solutions segment increased primarily due to
the 21.0% increase in net sales year-over-year, driven primarily by increases
in net sales of net/com, accessory, and notebooks/mobility products, which grew
by 70.5%, 61.0%, and 19.2%, respectively. The change in gross margin in the
quarter was driven by fluctuations in customer and hardware product mix.
15
Table of Contents
· Gross profit for the Business Solutions segment increased due to increased
sales and higher invoice selling margins. Invoice selling margins increased by
106 basis points primarily due to the increase in revenues reported on a net
basis in the current year.
· Gross profit for the Public Sector Solutions segment increased as a result of
changes in customer mix and higher invoice selling margins of 181 basis points,
driven primarily by improved hardware margins and an increase in software sales
reported on a net basis.
Selling, general and administrative expenses increased in both dollars and as a
percentage of net sales in the first quarter of 2020 compared to the prior year
quarter. SG&A expenses attributable to our three segments and the remaining
unallocated Headquarters/Other group expenses are summarized in the table below:
Three Months Ended March 31,
2020 2019
% of % of
Segment Net Segment Net %
($ in millions) Amount Sales Amount Sales Change
Enterprise Solutions $ 29.5 8.8 % $ 25.7 9.3 % 14.8 %
Business Solutions 41.2 14.8 36.2 14.3 13.8
Public Sector Solutions 17.7 17.8 16.2 15.5 9.3
Headquarters/Other, unallocated 4.1 3.1 32.3
Total $ 92.5 13.0 % $ 81.2 12.8 % 13.9 %
· SG&A expenses for the Enterprise Solutions segment increased in dollars, but
decreased as a percentage of net sales. The year-over-year change in SG&A
dollars was attributable to increased personnel costs of
by merit increases and variable compensation associated with higher gross
profit. Bad debt expense increased by
compared with the prior year, primarily as a result of anticipated collection
challenges from customers who have been significantly impacted by the COVID-19
pandemic. The year-over-year increase in SG&A expense also resulted from a
million increase in the use of Headquarter services in the current period. SG&A
expenses as a percentage of net sales was 8.8% for the Enterprise Solutions
segment in the first quarter of 2020, which reflects a decrease of 48 basis
points and is a result of net sales growing at a higher rate than operating
expenses when compared with the same period a year ago.
· SG&A expenses for the Business Solutions segment increased in both dollars and
as a percentage of net sales. The year-over-year increase in SG&A dollars was
primarily driven by a
higher expected credit losses from customers who have been significantly
impacted by the COVID-19 pandemic. Personnel costs, including merit increases
and variable compensation associated with higher gross profit, also increased
by
million. SG&A expenses as a percentage of net sales was 14.8% for the Business
Solutions segment in the first quarter of 2020 compared to 14.3% in the first
quarter of 2019, which reflects an increase of 46 basis points year-over-year,
resulting from spending that outpaced net sales growth compared with the same
period a year ago.
· SG&A expenses for the Public Sector Solutions segment increased in both dollars
and as a percentage of net sales. Personnel costs, including merit increases
and variable compensation associated with higher gross profit, increased by
Public Sector Solutions segment in the first quarter of 2020, which reflects an
increase of 225 basis points. This increase year-over-year is primarily
attributable to spending that outpaced net sales growth compared with the same
period a year ago.
· SG&A expenses for the Headquarters/Other group increased primarily due to a
headcount, increased payroll expense, and increased variable compensation
associated with higher profits. These increases were partially offset by a
decrease in unallocated executive oversight costs of
Headquarters/Other group provides services to the three segments in areas such
as finance, human resources, IT, marketing, and product management. Most of the
16
Table of Contents
operating costs associated with such corporate Headquarters services are charged
to the segments based on their estimated usage of the underlying services. The
amounts shown in the table above represent the remaining unallocated costs.
Income from operations for the first quarter of 2020 increased to $20.7 million ,
compared to $17.4 million for the first quarter of 2019, primarily due to the
increase in net sales and gross profit year-over-year. Income from operations as
a percentage of net sales was 2.9% for the first quarter of 2020, compared to
2.8% of net sales for the prior year quarter, primarily as a result of the
growth rate in gross profit slightly exceeding the growth rate in SG&A expenses.
Our effective tax rate was 28.2% for the first quarter of 2020, compared to 27.7% for the first quarter of 2019. We expect our corporate income tax rate for 2020 to range from 26% to 28%.
Net income for the first quarter of 2020 increased to$14.9 million , compared to$12.7 million for the first quarter of 2019, primarily due to higher gross profit and an increase in gross margin which outpaced the growth in operating expenses in the first quarter of 2020, as compared to the first quarter of 2019.
Liquidity and Capital Resources
Our primary sources of liquidity have historically been internally generated funds from operations and borrowings under our bank line of credit. We have used those funds to meet our capital requirements, which consist primarily of working capital for operational needs, capital expenditures for computer equipment and software used in our business, special dividend payments, repurchases of common stock for treasury, and as opportunities arise, acquisitions of businesses. Market conditions impact and help determine our strategic use of funds. We believe that funds generated from operations, together with available credit under our bank line of credit, will be sufficient to finance our working capital, capital expenditures, and other requirements for at least the next twelve calendar months. Our investments in IT systems and infrastructure are designed to enable us to operate more efficiently and to provide our customers enhanced functionality.
We expect to meet our cash requirements for the next twelve months through a combination of cash on hand, cash generated from operations, and borrowings under our bank line of credit, as follows:
· Cash on Hand. At
equivalents.
· Cash Generated from Operations. We expect to generate cash flows from
operations in excess of operating cash needs by generating earnings and
managing net changes in inventories and receivables with changes in payables to
generate a positive cash flow.
· Credit Facilities. As of
million bank line of credit, which is available until
line of credit can be increased, at our option, to
acquisitions or other uses authorized by the bank. Borrowings are, however,
limited by certain minimum collateral and earnings requirements, as described
more fully below.
The COVID-19 global pandemic has created some uncertainty in financial liquidity. A number of customers across affected industries have requested various concessions from us. We have worked closely with our partners to mitigate the impact these concessions might have on us, but we expect that these situations will continue to arise as we navigate through this crisis.
Our ability to continue funding our planned growth, both internally and externally, is dependent upon our ability to generate sufficient cash flow from operations or to obtain additional funds through equity or debt financing, or from other sources of financing, as may be required. While we do not anticipate needing any additional sources of financing to fund our operations at this time, if demand for IT products declines, or our customers continue to be materially adversely affected by the COVID-19 pandemic, our cash flows from operations may be substantially affected. See also related risks listed below under "Item
1A.
"Risk Factors."
17
Table of Contents
Summary of Sources and Uses of Cash
The following table summarizes our sources and uses of cash over the periods
indicated:
Three Months Ended
($ in millions) 2020 2019
Net cash provided by operating activities $ 44.6 $ 18.1
Net cash used in investing activities (4.6) (6.6)
Net cash used in financing activities (18.7) (9.7)
Increase in cash and cash equivalents $ 21.3 $ 1.8 Cash provided by operating activities was$44.6 million in the three months endedMarch 31, 2020 . Cash flow provided by operations in the three months endedMarch 31, 2020 resulted primarily from net income before depreciation and amortization and a decrease in accounts receivable, which was reduced by$61.5 million year-over-year and was driven by strong collection efforts and the timing of product shipments. These factors that contributed to the positive inflow of cash from operating activities were partially offset by decreases in accounts payable of$15.5 million , increases in inventory of$12.3 million , and decreases in accrued expenses of$7.2 million compared with the prior year-end balance. Our days sales outstanding increased to 58 days atMarch 31, 2020 , compared to 55 days atMarch 31, 2019 . Inventory increased from the prior year-end balance due to higher levels of inventory on-hand related to future backlog and an increase in shipments in transit but not received by our customers as ofMarch 31, 2020 compared toDecember 31, 2019 . Inventory turns, which measures the number of times inventory was sold and replaced during the period, increased to 21 for the first quarter of 2020 compared to 17 turns for the prior year quarter. Operating cash flow in the three months endedMarch 31, 2019 resulted primarily from net income before depreciation and amortization, a decrease in accounts receivable, an increase in accounts payable, and a decrease in prepaid expenses, offset partially by an increase in inventory.
Cash used in investing activities in the three months ended
Cash used in financing activities in the three months endedMarch 31, 2020 consisted primarily of$10.2 million for the repurchase treasury shares and an$8.4 million payment of a special$0.32 per share dividend. In the prior year period, financing activities primarily represented an$8.5 million payment of a special$0.32 per share dividend and$1.3 million for the purchase of treasury shares.
Debt Instruments, Contractual Agreements, and Related Covenants
Below is a summary of certain provisions of our credit facilities and other contractual obligations. For more information about the restrictive covenants in our debt instruments and inventory financing agreements, see "Factors Affecting Sources of Liquidity" below. For more information about our obligations, commitments, and contingencies, see our condensed consolidated financial statements and the accompanying notes included in this Quarterly Report.Bank Line of Credit. Our bank line of credit extends untilFebruary 2022 and is collateralized by our accounts receivable. Our borrowing capacity is up to$50.0 million . Amounts outstanding under the 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 (3.25% atMarch 31, 2020 ). The one-month LIBOR rate atMarch 31, 2020 was 0.99%. In addition, we have the option to increase the facility by an additional$30.0 million to meet additional borrowing requirements. Our credit facility is subject to certain covenant requirements which are described below under "Factors Affecting Sources of Liquidity." AtMarch 31, 2020 ,$50.0 million was available for borrowing under the facility.
Off-Balance Sheet Arrangements. We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues and expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.
Contractual Obligations. The disclosures relating to our contractual obligations in our Annual Report on Form 10-K for the year endedDecember 31, 2019 have not materially changed since the report was filed. 18 Table of Contents
Factors Affecting Sources of Liquidity
Internally Generated Funds. The key factors affecting our internally generated funds are our ability to minimize costs and fully achieve our operating efficiencies, timely collection of our customer receivables, and management of our inventory levels. These factors may also be adversely impacted by the COVID-19 pandemic. Credit Facility. Our credit facility contains certain financial ratios and operational covenants and other restrictions (including restrictions on additional debt, guarantees, and other distributions, investments, and liens) with which we and all of our subsidiaries must comply. Our credit facility does not include restrictions on future dividend payments. Any failure to comply with the covenants and other restrictions would constitute a default and could prevent us from borrowing funds under this line of credit. This credit facility contains two financial covenants:
· Our funded debt ratio (defined as the average outstanding advances under the
line for the quarter, divided by our consolidated trailing twelve months
Adjusted EBITDA-earnings before interest expense, taxes, depreciation,
amortization, and special charges-for the trailing four quarters) must not be
more than 2.0 to 1.0. Our outstanding borrowings under the credit facility
during the three months ended
funded debt ratio did not limit potential borrowings as of
Future decreases in our consolidated trailing twelve months Adjusted EBITDA,
could limit our potential borrowings under the credit facility.
· Our minimum consolidated net worth (defined as our consolidated total assets
less our consolidated total liabilities) must be at least
50% of consolidated net income for each quarter, beginning with the quarter
ended
as
equity at that date was
Capital Markets. Our ability to raise additional funds in the capital market depends upon, among other things, general economic conditions, the condition of the information technology industry, our financial performance and stock price, and the state of the capital markets.
APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our critical accounting policies have not materially changed from those
discussed in our Annual Report on Form 10-K for the year ended
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
Recently issued financial accounting standards are detailed in Note 1, "Summary
of Significant Accounting Policies," in the Notes to the Unaudited Condensed
Consolidated Financial Statements included in Item 1 of this Quarterly Report on
Form 10-Q.
19
Table of Contents
PC CONNECTION, INC. AND SUBSIDIARIES
PART I-FINANCIAL INFORMATION© Edgar Online, source
