UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
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Wayside Technology Group, Inc. and Subsidiaries
Table of Contents
2
PART I — FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Wayside Technology Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in thousands, except share and per share amounts)
September 30, | December 31, | ||||||
| 2021 |
| 2020 |
| |||
(unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | | $ | | |||
Accounts receivable, net of allowances of $ | |
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Inventory, net | |
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Vendor prepayments and advances | | | |||||
Prepaid expenses and other current assets | |
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Total current assets | |
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Equipment and leasehold improvements, net | |
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Goodwill | | | |||||
Other intangibles, net | | | |||||
Right-of-use assets, net | | | |||||
Accounts receivable-long-term, net | |
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Other assets | |
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Deferred income tax assets | |
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Total assets | $ | | $ | | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and accrued expenses | $ | | $ | | |||
Lease liability, current portion | | | |||||
Total current liabilities | |
| | ||||
Lease liability, net of current portion | | | |||||
Deferred income tax liabilities | | | |||||
Total liabilities | | | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Common stock, $ | |
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Additional paid-in capital | |
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Treasury stock, at cost, | ( |
| ( | ||||
Retained earnings | |
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Accumulated other comprehensive loss | ( |
| ( | ||||
Total stockholders’ equity | |
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Total liabilities and stockholders' equity | $ | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Wayside Technology Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings
(Unaudited)
(Amounts in thousands, except per share data)
Nine months ended | Three months ended | ||||||||||||
September 30, | September 30, | ||||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| |||||
Net sales | $ | | $ | | $ | | $ | | |||||
Cost of sales |
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Gross profit |
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Selling, general, and administrative expenses |
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Legal and financial advisory expenses, net - unsolicited bid and related matters | — | | — | ( | |||||||||
Acquisition related costs | — | | — | | |||||||||
Amortization and depreciation expense | | | | | |||||||||
Income from operations |
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Other income: | |||||||||||||
Interest, net |
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Foreign currency transaction (loss) gain | ( | | ( | ( | |||||||||
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Income before provision for income taxes |
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Provision for income taxes |
| |
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Net income | $ | | $ | | $ | | $ | | |||||
Income per common share-Basic | $ | | $ | | $ | | $ | | |||||
Income per common share-Diluted | $ | | $ | | $ | | $ | | |||||
Weighted average common shares outstanding — Basic |
| |
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Weighted average common shares outstanding — Diluted |
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Dividends paid per common share | $ | | $ | | $ | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Wayside Technology Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(Amounts in thousands)
Nine months ended | Three months ended | ||||||||||||
September 30, | September 30, | ||||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| |||||
Net income | $ | $ | $ | | $ | | |||||||
Other comprehensive income: | |||||||||||||
Foreign currency translation adjustments |
| |
| ( |
| ( |
| | |||||
Other comprehensive income (loss) |
| |
| ( |
| ( |
| | |||||
Comprehensive income | $ | | $ | | $ | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Wayside Technology Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(Amounts in thousands, except share amounts)
Accumulated | ||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||
Common Stock | Paid-In | Treasury | Retained | Comprehensive | ||||||||||||||||||
| Shares |
| Amount |
| Capital |
| Shares |
| Amount |
| Earnings |
| Income (Loss) |
| Total | |||||||
Balance at January 1, 2021 |
| | $ | | $ | |
| | $ | ( | $ | | $ | ( | $ | | ||||||
Net income | — | — | — | — | — | | — | | ||||||||||||||
Translation adjustment | — | — | — | — | — | — | | | ||||||||||||||
Dividends paid | — | — | — | — | — | ( | — | ( | ||||||||||||||
Share-based compensation expense | — | — | | — | — | — | — | | ||||||||||||||
Restricted stock grants (net of forfeitures) | — | — | ( | ( |
| | — | — | — | |||||||||||||
Treasury shares repurchased | — | — | — | | ( | — | — | ( | ||||||||||||||
Balance at March 31, 2021 |
| | $ | | $ | |
| | $ | ( | $ | | $ | | $ | | ||||||
Net income | — | — | — | — | — | | — | | ||||||||||||||
Translation adjustment | — | — | — | — | — | — | | | ||||||||||||||
Dividends paid | — | — | — | — | — | ( | — | ( | ||||||||||||||
Share-based compensation expense | — | — | | — | — | — | — | | ||||||||||||||
Restricted stock grants (net of forfeitures) | — | — | | |
| ( | — | — | — | |||||||||||||
Treasury shares repurchased | — | — | — | | ( | — | — | ( | ||||||||||||||
Balance at June 30, 2021 |
| | | |
| | ( | | | | ||||||||||||
Net income | — | — | — | — | — | | — | | ||||||||||||||
Translation adjustment | — | — | — | — | — | — | ( | ( | ||||||||||||||
Dividends paid | — | — | — | — | — | ( | — | ( | ||||||||||||||
Share-based compensation expense | — | — | | — | — | — | — | | ||||||||||||||
Restricted stock grants (net of forfeitures) | — | — | ( | ( |
| | — | — | — | |||||||||||||
Treasury shares repurchased | — | — | — | | ( | — | — | ( | ||||||||||||||
Balance at September 30, 2021 |
| | $ | | $ | |
| | $ | ( | $ | | $ | ( | $ | | ||||||
Accumulated | ||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||
Common Stock | Paid-In | Treasury | Retained | Comprehensive | ||||||||||||||||||
| Shares |
| Amount |
| Capital |
| Shares |
| Amount |
| Earnings |
| Income (Loss) |
| Total | |||||||
Balance at January 1, 2020 |
| | | |
| | ( | | ( | $ | | |||||||||||
Net income | — | — | — | — | — | | — | | ||||||||||||||
Translation adjustment | — | — | — | — | — | — | ( | ( | ||||||||||||||
Dividends paid | — | — | — | — | — | ( | — | ( | ||||||||||||||
Share-based compensation expense | — | — | | — | — | — | — | | ||||||||||||||
Restricted stock grants (net of forfeitures) | — | — | ( | ( |
| | — | — | ( | |||||||||||||
Treasury shares repurchased | — | — | — | | ( | — | — | ( | ||||||||||||||
Balance at March 31, 2020 |
| | $ | | $ | |
| | $ | ( | $ | | $ | ( | $ | | ||||||
Net income | — | — | — | — | — | | — | | ||||||||||||||
Translation adjustment | — | — | — | — | — | — | | | ||||||||||||||
Dividends paid | — | — | — | — | — | ( | — | ( | ||||||||||||||
Share-based compensation expense | — | — | | — | — | — | — | | ||||||||||||||
Restricted stock grants (net of forfeitures) | — | — | ( | ( |
| | — | — | — | |||||||||||||
Treasury shares repurchased | — | — | — | | ( | — | — | ( | ||||||||||||||
Balance at June 30, 2020 |
| | | |
| | ( | | ( | | ||||||||||||
Net income | — | — | — | — | — | | — | | ||||||||||||||
Translation adjustment | — | — | — | — | — | — | | | ||||||||||||||
Dividends paid | — | — | — | — | — | ( | — | ( | ||||||||||||||
Share-based compensation expense | — | — | | — | — | — | — | | ||||||||||||||
Restricted stock grants (net of forfeitures) | — | — | ( | ( |
| | — | — | — | |||||||||||||
Treasury shares repurchased | — | — | — | | ( | — | — | ( | ||||||||||||||
Balance at September 30, 2020 |
| | $ | | $ | |
| | $ | ( | $ | | $ | ( | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Wayside Technology Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
Nine months ended | |||||||
September 30, | |||||||
| 2021 |
| 2020 |
| |||
Cash flows from operating activities | |||||||
Net income | $ | | $ | | |||
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities: |
| ||||||
Depreciation and amortization expense |
| |
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Provision for doubtful accounts |
| |
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Deferred income tax expense |
| |
| ( | |||
Share-based compensation expense | | | |||||
Amortization of discount on accounts receivable | ( | ( | |||||
Amortization of right-of-use assets | | | |||||
Change in fair value of contingent earn-out consideration | — | | |||||
Changes in operating assets and liabilities, net of acquisitions: |
|
| |||||
Accounts receivable |
| ( |
| | |||
Inventory |
| |
| ( | |||
Prepaid expenses and other current assets |
| ( |
| ( | |||
Vendor prepayments | | ( | |||||
Accounts payable and accrued expenses |
| |
| ( | |||
Lease liability, net | ( | ( | |||||
Other assets and liabilities |
| ( |
| ( | |||
Net cash and cash equivalents provided by operating activities |
| |
| | |||
Cash flows from investing activities | |||||||
Purchase of equipment and leasehold improvements |
| ( |
| ( | |||
Vendor advances | ( | — | |||||
Payment for acquisitions, net of cash acquired | — | ( | |||||
Net cash and cash equivalents used in investing activities |
| ( |
| ( | |||
Cash flows from financing activities | |||||||
Purchase of treasury stock |
| ( |
| ( | |||
Borrowings under revolving credit facility | — | | |||||
Repayments of borrowings under revolving credit facility | — | ( | |||||
Dividends paid |
| ( |
| ( | |||
Contingent consideration | ( | — | |||||
Payments of deferred financing costs | — | ( | |||||
Net cash and cash equivalents used in financing activities |
| ( |
| ( | |||
Effect of foreign exchange rate on cash and cash equivalents |
| ( |
| ( | |||
Net increase in cash and cash equivalents |
| |
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Cash and cash equivalents at beginning of period |
| |
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Cash and cash equivalents at end of period | $ | | $ | | |||
Supplementary disclosure of cash flow information: | |||||||
Income taxes paid | $ | | $ | | |||
Interest paid | $ | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
Wayside Technology Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 30, 2021
(Unaudited)
(Amounts in tables in thousands, except share and per share amounts)
1. Basis of Presentation:
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, as permitted by the rules and regulation of the Securities and Exchange Commission, 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 and 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, evaluation of performance obligations and allocation of revenue to distinct items, 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 of the results for the periods presented, have been included in the accompanying condensed consolidated 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, 2020.
The consolidated financial statements include the accounts of Wayside Technology Group, Inc. and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.
Immaterial Revision of an Error for Estimated Foreign Tax Liability
During the third quarter, management identified that the UK had finalized The Finance Act 2021 that went into effect June 10, 2021 and therefore should have been accounted for during the second quarter of 2021. While the Company did not account for the UK tax law change regarding tax rate changes, management believes that the impact is not material to the financial statements as of and for the three and six months ended June 30, 2021 and the financial statements as of and for the nine months ended September 30, 2021 as presented herein are correct as it relates to this matter. The effect of this error on the financial statements as of June 30, 2021 and for three and six-month period ended June 30, 2021 was as follows:
As of June 30, 2021 | |||||||||
As Previously | As | ||||||||
Reported | Revision | Corrected | |||||||
Condensed Consolidated Balance Sheet | |||||||||
Deferred income tax liabilities | $ | | $ | | $ | | |||
Total liabilities | $ | | $ | | $ | | |||
Retained earnings | $ | | $ | ( | $ | | |||
Total liabilities and stockholders' equity | $ | | $ | — | $ | |
8