2012 ANNUAL REPORT
EASY ACCESS
EASY ACCESS
RIGHT
to theRIGHT
IT PRODUCTS
IT PRODUCTS
2
1
0
2
$5.5 million.
Our growth
t o o u r s h a r e h o l d e r s
To the Shareholders of Wayside Technology Group Inc.:
Building on a very successful 2011, we again increased sales
significantly with excellent 39% growth in our TechXtend
reseller segment and solid 13% growth in our Lifeboat
distribution segment. Consolidated revenue increased by
19% to $297.1 million in 2012, while net income was
essentially flat as compared to 2011 at a very respectable
As we continue to explore, define & build our competitive
advantages, we made additional investments as part of our
process of further building the Company. We strengthened
our position in the software distribution market and
we continue to sign on new vendors. We also maintained
our focus on cost, which allowed us to deliver a solid
resellers, and resellers from distributors. Many distributors
compete primarily on price and look to generate profits by
charging vendors numerous fees. We are different. We
believe in adding value and specialization. We do not
want or aim to become the largest IT provider — nor the
cheapest. Our mission is to become the most trusted and
respected IT provider in our industry. We see significant
demand from vendors for superior sales and technical
support service in their distribution channel. Customers,
resellers, and vendors all want to work with knowledgeable
and dependable professionals and are frustrated with
companies that over-promise and under-deliver. Integrity
is very important to us. We specialize, focus on customer
service, and ask a fair price for our services.
earnings performance. We have the tools in place to add
In conclusion
more software publishers, have a great team and a great
We would like to thank our customers, vendor suppliers
IT infrastructure.
Why does this company exist?
Simply stated — “To provide easy access to the right
IT products.” We distribute software to resellers on a
worldwide basis, and resell software and hardware directly
to end customers in North America. In our space, customer
service, value pricing, and consolidation of technology
purchases are primary reasons why end customers buy from
and employees. To our
longstanding shareholders,
we thank you for your continued support. To our new
shareholders, we look forward to a long and fruitful
relationship. We also look forward to reporting our
progress on building our business during 2013.
Simon F. Nynens
Chairman of the Board
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10#K
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 2012
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from ______________ to _______________
Commission file number: 000#26408
WAYSIDE TECHNOLOGY GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
13+3136104
(IRS Employer Identification Number)
1157 Shrewsbury Avenue, Shrewsbury, New Jersey
(Address of principal executive offices)
07702
(Zip Code)
Registrant’s telephone number, including area code:
(732) 389+8950
Securities registered pursuant to section 12(b) of the Act:
Title of Each Class
Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share
Securities registered pursuant to section 12(g) of the Act: None
The NASDAQ Global Market
Indicate by check mark if the registrant is a well#known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes No x
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S#T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S#K is not contained herein, and will
not be contained, to the best of Registrant's knowledge, in definitive proxy or other information statements incorporated by
reference in Part III of this Form 10#K or any amendment to this Form 10#K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non#accelerated filer or a smaller
reporting company (as defined in Rule 12b#2 of the Exchange Act). Large accelerated filer Accelerated filer Non#
accelerated filer Smaller Reporting Company X
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b#2 of the Act). Yes No X
The aggregate market value of the Common Stock held by non#affiliates of the Registrant computed by reference to the closing sale
price for the Registrant's Common Stock as of June 29, 2012, which was the last business day of the Registrant’s most recently
completed second fiscal quarter, as reported on The NASDAQ Global Market, was approximately $45,412,747 (In determining the
market value of the Common Stock held by any non#affiliates, shares of Common Stock of the Registrant beneficially owned by
directors, officers and holders of more than 10% of the outstanding shares of Common Stock of the Registrant have been excluded.
This determination of affiliate status is not necessarily a conclusive determination for other purposes).
The number of shares outstanding of the Registrant’s Common Stock as of February 07, 2013 was 4,753,558 shares.
Documents Incorporated by Reference: Portions of the Registrant’s definitive Proxy Statement for its 2013 Annual Meeting of
Stockholders to be filed on or before April 30, 2013 are incorporated by reference into Part III of this Report.
PART I
Item 1 Business
General
Wayside Technology Group, Inc. and Subsidiaries (the “Company,” “us,” “we,” or “our”) is an
information technology (“IT”) channel company. We resell computer software and hardware developed by
others and provide technical services directly to customers in the United States and Canada. We also
distribute software through resellers indirectly to customers worldwide. We offer an extensive line of
products from leading publishers of software and tools for virtualization, networking, software
development, database modeling, security, and other technically sophisticated domains.
Wayside Technology Group, Inc. was incorporated in Delaware in 1982. Our Common Stock is
listed on The NASDAQ Global Market under the symbol “WSTG”. Our main web site address is
www.waysidetechnology.com, and
include
www.lifeboatdistribution.com, and www.techxtend.com. Reference to these “uniform resource locators” or
“URLs” is made as an inactive textual reference for informational purposes only. Information on our web
sites should not be considered filed with the Securities and Exchange Commission, and is not, and should
not be deemed to be, a part of this report.
the other web sites maintained by our business
The Company operates through two reportable operating segments. The “Lifeboat Distribution”
segment distributes technical software to corporate resellers, value added resellers (VARs), consultants and
systems integrators primarily in the United States and Canada. 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. For each of our segments, sales from unaffiliated customers,
income and total assets, among other financial information, is presented in Note 10 in the Notes to our
Consolidated Financial Statements.
Competition
The software market is highly competitive. Pricing is very aggressive in both software distribution
and reselling. The Company expects pricing pressure to continue. The Company faces competition from a
wide variety of sources. In the Lifeboat Distribution segment, we compete against much larger broad#line
distributors, as well as specialty distributors and, in some cases, the direct sales teams of the vendors we
represent also sell directly to the end#customers. In the TechXtend segment, we also compete against
vendors who sell directly to customers, as well as software resellers, superstores, e#commerce vendors, and
other direct marketers of software products. In both segments, some of our competitors are significantly
larger and have substantially greater resources than the Company. Many of our competitors compete
principally on the basis of price, product availability, customer service and technical support.
There can be no assurance that the Company can compete effectively against existing competitors
or new competitors that may enter the market or that it can generate profit margins which represent a fair
return to the Company. In addition, price is an important competitive factor in the personal computer
software market and there can be no assurance that the Company will not be subject to increased price
competition. An increase in the amount of competition faced by the Company, or its failure to compete
effectively against its competitors, could have a material adverse effect on the Company’s business,
financial condition and results of operations.
The Company competes to attract prospective buyers and in sourcing new products from software
developers and publishers, as well as in marketing its current product line to its customers. The Company
believes that its ability to offer software developers and IT professionals a wide selection of products at
Page 2 of 29
reasonable prices with prompt delivery and high customer service levels, along with its good relationships
with vendors and suppliers, allows it to compete effectively in acquiring prospective buyers and marketing
its current product line to its customers. The Company competes to gain distribution rights for new products
primarily on the basis of its reputation and its relationships with software publishers.
The market for developer and infrastructure software products is characterized by rapid changes in
technology, user requirements, and customer specifications. The manner in which software products are
distributed and sold is changing, and new methods of distribution and sale may emerge or expand. Software
developers and publishers have sold, and may intensify their efforts to sell, their products directly to end#
users. The continuing evolution of the Internet as a platform in which to conduct e#commerce business
transactions has both lowered the barriers for competition and broadened customer access to products and
information, increasing competition and reducing prices. From time to time, certain software developers
and publishers have instituted programs for the direct sale of large order quantities of software to certain
major corporate accounts. These types of programs may continue to be developed and used by various
developers and publishers. While Microsoft and other vendors currently sell new releases or upgrades
directly to end users, they have not, however, attempted to completely bypass the reseller channel. There
can be no assurances, that software developers and publishers will continue using resellers to the same
extent they currently do. Future efforts by software developers and publishers to bypass third# party sales
channels could materially and adversely affect the Company’s business operations and financial conditions.
In addition, resellers and publishers may attempt to increase the volume of software products
distributed electronically through ESD (Electronic Software Distribution) technology, through subscription
services, and through on#line shopping services. Any of these competitive programs, if successful, could
have a material adverse effect on the Company’s business, results of operations and financial condition. For
a description of additional risks relating to competition in our industry, please refer to “Item 1.A. Risk
Factors”: “We rely on our suppliers for product availability, marketing funds, purchasing incentives and
competitive products to sell”, and “The IT products and services industry is intensely competitive and
actions of competitors, including manufacturers of products we sell, can negatively affect our business”.
Products
The Company offers a wide variety of products from a broad range of publishers and
manufacturers, such as Acronis, CA Technologies, DataCore, Datawatch, Dell, Flexera Software, GFI,
Hewlett Packard, Infragistics, Intel Software, Lenovo, Microsoft, Mindjet, Quest Software, SolarWinds,
Sophos, StorageCraft Technology, TechSmith, Veeam, Vision Solutions and VMware. On a continuous
basis, we screen new products for inclusion in our catalogs and web sites based on their features, quality,
price, profit margins and warranties, as well as on current sales trends. Since the Company predominantly
sells software, sales of hardware and peripherals represented only 4% of our overall net sales in each of
2012, 2011 and 2010.
Marketing and Distribution
We market products through creative marketing communications, including our web sites, local and
on#line seminars, print and electronic catalogs. We also use direct e#mail and printed material to introduce
new products and upgrades, to cross#sell products to current customers, and to educate and inform existing
and potential customers. We believe that our blend of electronic and traditional marketing and selling
programs are important marketing vehicles for software publishers and manufacturers. These programs
provide a cost#effective and service#oriented means to market and sell and fulfill software products and
meet the needs of users.
The Company had three customers that accounted for more than 10% of total sales for 2012. For
the year ended December 31, 2012, Software House International, CDW Corporation, and Insight
accounted for 13.4%, 12.4% and 11.1%, respectively, of consolidated net sales and, as of December 31,
2012, 12.0%, 9.6%, and 8.3%, respectively, of total net accounts receivable. For the year ended December
31, 2011, CDW Corporation, Insight and Software House International accounted for 14.0%, 11.0% and
10.5%, respectively, of consolidated net sales. For the year ended December 31, 2010, CDW Corporation
Page 3 of 29
accounted for 15.8% of consolidated net sales. Our top five customers accounted for 44%, 42%, and 44% of
consolidated net sales in 2012, 2011 and 2010, respectively. The Company generally ships products within
48 hours of confirming a customer’s order. This allows for minimum backlog in the business.
Sales in Canada represented 7% of our consolidated revenues in each of 2012, 2011 and 2010. For
geographic financial information, please refer to Note 10 in the Notes to our Consolidated Financial
Statements.
Customer Support
We believe that providing a high level of customer service is necessary to compete effectively and
is essential to continued sales and revenue growth. Our account representatives assist our customers with all
aspects of purchasing decisions, process products ordered and respond to customer inquiries on order status,
product pricing and availability. The account representatives are trained to answer all basic questions about
the features and functionality of products. To deal with technical issues, we maintain an in#house technical
support staff.
Purchasing and Fulfillment
The Company’s success is dependent, in part, upon the ability of its suppliers to develop and
market products that meet the changing requirements of the marketplace. The Company believes it enjoys
good relationships with its vendors. The Company and its principal vendors have cooperated frequently in
product introductions and in other marketing programs. As is customary in the industry, the Company has
no long#term supply contracts with any of its suppliers. Substantially all of the Company's contracts with its
vendors are terminable upon 30 days’ notice or less. Moreover, the manner in which software products are
distributed and sold is changing, and new methods of distribution and sale may emerge or expand. Software
publishers have sold, and may intensify their efforts to sell, their products directly to end#users. The
Company’s business and results of operations may be adversely affected if the terms and conditions of the
Company’s authorizations with its vendors were to be significantly modified or if certain products become
unavailable to the Company.
We believe that effective purchasing from a diverse vendor base is a key element of our business
strategy. For the year ended December 31, 2012, Dell/Quest Software was the only individual vendor from
whom our purchases exceeded 10% of our total purchases and accounted for 13.4% of our total purchases.
For the year ended December 31, 2011, Veeam and Quest accounted for 12.6% and 11.2%, respectively, of
our total purchases. For the year ended December 31, 2010, Quest was the only individual vendor from
whom our purchases exceeded 10% of our total purchases and represented 11.2% of our total purchases.
The loss of a key vendor or group of vendors could disrupt our product availability and otherwise have an
adverse effect on the Company.
In 2012, the Company purchased approximately 91% of its products directly from manufacturers
and publishers and the balance from multiple distributors, as compared to 90% in 2011 and 2010. Most
suppliers or distributors will “drop ship” products directly to the customers, which reduces physical
handling by the Company. Inventory management techniques, such as “drop shipping” allow the Company
to offer a greater range of products without increased inventory requirements or associated risk.
Inventory levels may vary from period to period, due in part to increases or decreases in sales
levels, the Company’s practice of making large#volume purchases when it deems the terms of such
purchases to be attractive, and the addition of new suppliers and products. Moreover, the Company's order
fulfillment and inventory control systems allow the Company to order certain products just in time for next
day shipping. The Company promotes the use of electronic data interchange (“EDI”) with its suppliers,
which helps reduce overhead and the use of paper in the ordering process. Although brand names and
individual products are important to our business, we believe that competitive sources of supply are
available for substantially all of the product categories we carry.
The Company operates distribution facilities in Shrewsbury, New Jersey and Mississauga, Canada.
Page 4 of 29
Management Information Systems
The Company operates management information systems on Windows 2003 and Windows 2008
platforms that allow for centralized management of key functions, including inventory, accounts receivable,
purchasing, sales and distribution. We are dependent on the accuracy and proper utilization of our
information technology systems, including our telephone, web sites, e#mail and fax systems.
The management information systems allow the Company to monitor sales trends, provide real#
time product availability and order status information, track direct marketing campaign performance and to
make marketing event driven purchasing decisions. In addition to the main system, the Company has
systems of networked personal computers, as well as microcomputer#based desktop publishing systems,
which facilitate data sharing and provide an automated office environment.
The Company recognizes the need to continually upgrade its management information systems to
most effectively manage its operations and customer database. In that regard, the Company anticipates that
it will, from time to time, require software and hardware upgrades for its present management information
systems.
Trademarks
The Company conducts its business under the various trademarks and service marks of
Programmer’s Paradise, the “Island Man” cartoon character logo, TechXtend, and Lifeboat Distribution.
The Company protects these trademarks and service marks and believes that they have significant value to
us and are important factors in our marketing programs.
Employees
As of December 31, 2012, Wayside Technology Group, Inc. and its subsidiaries had 118 full#time
employees and 2 part#time employees. The Company is not a party to any collective bargaining agreements
with its employees, has experienced no work stoppages and considers its relationships with its employees to
be satisfactory.
Executive Officers of the Company
Set forth below are the name, age, present title, principal occupation and certain biographical
information for our executive officers as of February 1, 2013, all of whom have been appointed by and
serve at the discretion of the Board of Directors of the Company (the “Board of Directors”).
Name
Simon F. Nynens
Thomas J. Flaherty
Vito Legrottaglie
Daniel T. Jamieson
Richard J. Bevis
Shawn J. Giordano
Age
41
45
48
55
63
43
Position
Chairman, President and Chief Executive Officer
Vice President and Chief Financial Officer
VP of Operations and Information Systems
VP and General Manager – Lifeboat Distribution
Vice President of Marketing
Vice President of Sales#TechXtend
Simon F. Nynens was appointed President and Chief Executive Officer in January 2006. Mr.
Nynens also serves on the Board of Directors and was named Chairman in June 2006. He previously held
the position of Executive Vice President and Chief Financial Officer (June 2004 # January 2006) and Vice
President and Chief Financial Officer (January 2002 # June 2004). Prior to January 2002, Mr. Nynens
served as the Vice President and Chief Operating Officer of the Company’s European operations.
Page 5 of 29
Thomas J. Flaherty was appointed as Vice President and Chief Financial Officer in August 2012.
He most recently served as Vice President of Finance of StemCyte, Inc. from 2008 to 2012. Before that,
from 2004 to 2008, Mr. Flaherty served as Corporate Controller & US Division Controller at
VPIsystems, Inc., an international enterprise class software company. Prior to joining VPIsystems, Inc.,
from 1997 to 2004, he served as Chief Financial Officer and founder of Bike#Time, LLC and GeeWhiz
Toys, LLC. Mr. Flaherty also was employed by Centennial Communications Corp. and Ernst & Young,
LLP. In addition, Mr. Flaherty is a Certified Public Accountant.
Vito Legrottaglie was appointed to the position of Vice President of Operations and Information
Systems in April 2007. He previously held the position of Vice President of Information Systems since June
2003. Mr. Legrottaglie had previously served as Vice President of Information Systems from 1999 to 2000
and had been with the Company since 1996. Mr. Legrottaglie has also held the positions of Chief
Technology Officer at Swell Commerce Incorporated, Vice President of Operations for The Wine
Enthusiast Companies and Director of Information Systems at Barnes & Noble.
Daniel T. Jamieson was appointed Vice President and General Manager of Lifeboat Distribution in
April 2003. Prior to that, and since 1992, Mr. Jamieson held various sales and marketing management
positions within the Company.
Richard J. Bevis was appointed Vice President Marketing in July 2007. Prior to joining Wayside
Technology Group, Inc., Mr. Bevis worked for Covance Inc., a drug development service company, as
Senior Director Marketing Communication from 2003 to 2007. He also held the position of Vice President
of Corporate Communications for Eyretel, PLC. from 2002 to 2003.
Shawn J. Giordano was appointed Vice President of Sales # TechXtend in August 2008. Mr.
Giordano joined Wayside Technology Group, Inc. in November 2007 as Senior Director of Sales for
Programmer’s Paradise and TechXtend. Prior to joining Wayside Technology Group, Inc., he worked for
CA, Inc. (Computer Associates), a business consulting and software development company, from 2000 to
2007, most recently as Director of Channel Sales. Mr. Giordano began his career at Microwarehouse, Inc.,
and in over eight years with that company, progressed through positions of increasing responsibility in
sales, marketing, and management.
Available Information
Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is
required to file annual, quarterly and current reports, proxy and information statements and other
information with the SEC. You may read and copy any document we file with the SEC at the SEC’s public
reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1#800#SEC#0330 for
further information about the public reference room. The SEC maintains a web site at http://www.sec.gov
that contains reports, proxy and information statements, and other information regarding issuers that file
electronically with the SEC. The Company files electronically with the SEC. The Company makes
available, free of charge, through its internet web site, its reports on Forms 10#K, 10#Q and 8#K, and
amendments to those reports, as soon as reasonably practicable after they are filed with the SEC. The
following address for the Company’s web site includes a hyperlink to those reports under “Financials/SEC
Filings”: http://www.waysidetechnology.com.
In January 2004, we adopted a Code of Ethical Conduct. The full text of the Code of Ethical
Conduct, which applies to all employees, officers and directors of the Company, including our Chief
Executive Officer, Chief Financial Officer and Controller,
is available at our web site,
http://www.waysidetechnology.com, under “Corporate Governance.” The Company intends to disclose any
Page 6 of 29
amendment to, or waiver from, a provision of the Code of Ethical Conduct that applies to its Chief
Executive Officer, Chief Financial Officer or Controller on its web site under “Investor Information.”
Reference to the “uniform resource locators” or “URLs” contained in this section is made as an
inactive textual reference for informational purposes only. Information on our web sites should not be
considered filed with the Securities and Exchange Commission, and is not, and should not be deemed to be
part of this report.
Item 1A. Risk Factors
Investors should carefully consider the risk factors set forth below as well as the other information
contained in this report. Any of the following risks could materially and adversely affect our business,
financial condition or results of operations. Additional risks and uncertainties not currently known to us or
those currently viewed by us to be immaterial may also materially and adversely affect our business,
financial condition or results of operations.
Changes in the information technology industry and/or economic environment may reduce
demand for the products and services we sell. Our results of operations are influenced by a variety of
factors, including the condition of the IT industry, general economic conditions, shifts in demand for, or
availability of, computer products and software and IT services and industry introductions of new products,
upgrades or methods of distribution. The information technology products industry is characterized by
abrupt changes in technology, rapid changes in customer preferences, short product life cycles and evolving
industry standards. Net sales can be dependent on demand for specific product categories, and any change
in demand for or supply of such products could have a material adverse effect on our net sales, and/or cause
us to record write#downs of obsolete inventory, if we fail to react in a timely manner to such changes.
We rely on our suppliers for product availability, marketing funds, purchasing incentives and
competitive products to sell. We acquire products for resale both directly from manufacturers and indirectly
from distributors. The loss of a supplier could cause a disruption in the availability of products.
Additionally, there is no assurance that as manufacturers continue to or increasingly sell directly to end
users and through the distribution channel, that they will not limit or curtail the availability of their products
to resellers like us. For example, resellers and publishers may attempt to increase the volume of software
products distributed electronically through ESD (Electronic Software Distribution) technology, through
subscription services, and through on#line shopping services, and correspondingly, decrease the volume of
products sold through us. Our inability to obtain a sufficient quantity of products, or an allocation of
products from a manufacturer in a way that favors one of our competitors, or competing distribution
channels, relative to us, could cause us to be unable to fill clients’ orders in a timely manner, or at all, which
could have a material adverse effect on our business, results of operations and financial condition. We also
rely on our suppliers to provide funds for us to market their products, including through our catalogs and
on#line marketing efforts, and to provide purchasing incentives to us. If any of the suppliers that have
historically provided these benefits to us decides to reduce such benefits, our expenses would increase,
adversely affecting our results of operations.
General economic weakness may reduce our revenues and profits. The ongoing effects of the
general economic downturn continues to cause some of our current and potential customers to delay or
reduce technology purchases, resulting in longer sales cycles, slower adoption of new technologies and
increased price competition. We may, therefore, experience a greater decline in demand for the products we
sell, resulting in increased competition and pressure to reduce the cost of operations. Any benefits from cost
reductions may take longer to realize and may not fully mitigate the impact of the reduced demand. In
addition, weak financial and credit markets heighten the risk of customer bankruptcies and create a
corresponding delay in collecting receivables from those customers and may also affect our vendors’ ability
Page 7 of 29
to supply products, which could disrupt our operations. The realization of any or all of these risks could
have a material adverse effect on our business, results of operations and financial condition.
We Depend on Having Creditworthy Customers to Avoid an Adverse Impact to Our Operating
Results and Financial Condition. We require sufficient amounts of debt and equity capital to fund our
transactions as we provide larger extended payment terms to certain of our customers. If the credit quality
of our customer base materially decreases, or if we experience a material increase in our credit losses, we
may find it difficult to continue to obtain the required capital for our business, and our operating results and
financial condition may be harmed. In addition to the impact on our ability to attract capital, a material
increase in our delinquency and default experience would itself have a material adverse effect on our
business, operating results and financial condition. Furthermore, if any of our customers to whom we
provide larger extended payment terms go elsewhere for financing, such loss of financing revenue could
have a material adverse effect on our business, operating results and financial condition.
The IT products and services industry is intensely competitive and actions of competitors,
including manufacturers of products we sell, can negatively affect our business. Competition has been
based primarily on price, product availability, speed of delivery, credit availability and quality and breadth
of product lines and, increasingly, also is based on the ability to tailor specific solutions to client needs. We
compete with manufacturers, including manufacturers of products we sell, as well as a large number and
wide variety of marketers and resellers of IT products and services. In addition, manufacturers are
increasing the volume of software products they distribute electronically directly to end#users and in the
future will likely pay lower referral fees for sales of certain software licensing agreements sold by us.
Generally, pricing is very aggressive in the industry, and we expect pricing pressures to continue. There can
be no assurance that we will be able to negotiate prices as favorable as those negotiated by our competitors
or that we will be able to offset the effects of price reductions with an increase in the number of clients,
higher net sales, cost reductions, or greater sales of services, which service sales typically at higher gross
margins, or otherwise. Price reductions by our competitors that we either cannot or choose not to match
could result in an erosion of our market share and/or reduced sales or, to the extent we match such
reductions, could result in reduced operating margins, any of which could have a material adverse effect on
our business, results of operations and financial condition.
Disruptions in our information technology and voice and data networks could affect our ability
to service our clients and cause us to incur additional expenses. We believe that our success to date has
been, and future results of operations likely will be, dependent in large part upon our ability to provide
prompt and efficient service to clients. Our ability to provide such services is dependent largely on the
accuracy, quality and utilization of the information generated by our IT systems, which affect our ability to
manage our sales, client service, distribution, inventories and accounting systems and the reliability of our
voice and data networks.
Failure to adequately maintain the security of our electronic and other confidential information
could materially adversely affect our financial condition and results of operations. We are dependent
upon automated information technology processes. Privacy, security, and compliance concerns have
continued to increase as technology has evolved to facilitate commerce and as cross#border commerce
increases. As part of our normal business activities, we collect and store certain confidential information,
including personal information of employees and information about partners and clients which may be
entitled to protection under a number of regulatory regimes. In the course of normal and customary business
practice, we may share some of this information with vendors who assist us with certain aspects of our
business. Moreover, the success of our operations depends upon the secure transmission of confidential and
personal data over public networks, including the use of cashless payments. Any failure on the part of us or
our vendors to maintain the security of data we are required to protect, including via the penetration of our
network security and the misappropriation of confidential and personal information, could result in business
disruption, damage to our reputation, financial obligations to third parties, fines, penalties, regulatory
Page 8 of 29
proceedings and private litigation with potentially large costs, and also result in deterioration in our
employees’, partners’ and clients’ confidence in us and other competitive disadvantages, and thus could
have a material adverse impact on our business, financial condition and results of operations.
We depend on certain key personnel. Our future success will be largely dependent on the efforts of
key management personnel. We also believe that our future success will be largely dependent on our
continued ability to attract and retain highly qualified management, sales, service and technical personnel.
We cannot assure you that we will be able to attract and retain such personnel. Further, we make a
significant investment in the training of our sales account executives. Our inability to retain such personnel
or to train them either rapidly enough to meet our expanding needs or in an effective manner for quickly
changing market conditions could cause a decrease in the overall quality and efficiency of our sales staff,
which could have a material adverse effect on our business, results of operations and financial condition.
Risks Related to Our Common Stock. The exercise of outstanding options or any other issuance of
shares by us may dilute your ownership of our Common Stock. Our Common Stock is thinly traded. As a
result of the thin trading market for our stock, its market price may fluctuate significantly more than the
stock market as a whole or of the stock prices of similar companies. Without a larger float, our common
stock will be less liquid than the stock of companies with broader public ownership, and, as a result, the
trading prices for our Common Stock may be more volatile. Among other things, trading of a relatively
small volume of our Common Stock may have a greater impact on the trading price of our stock than would
be the case if our public float were larger.
Our common stock is listed on The NASDAQ Global Market, and we therefore are subject to
continued listing requirements, including requirements with respect to the market value and number of
publicly#held shares, number of stockholders, minimum bid price, number of market makers and either (i)
stockholders’ equity or (ii) total market value of stock, total assets and total revenues. If we fail to satisfy
one or more of the requirements, we may be delisted from The NASDAQ Global Market. If we do not
qualify for listing on The NASDAQ Capital Market, and if we are not able to list our common stock on
another exchange, our common stock could be quoted on the OTC Bulletin Board or on the “pink sheets”.
As a result, we could face significant adverse consequences including, among others, a limited availability
of market quotations for our securities and a decreased ability to issue additional securities or obtain
additional financing in the future.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
The Company leases 18,000 square feet of space in Shrewsbury, New Jersey for its corporate
headquarters and warehouse under a lease expiring in February 2016. Total annual rent expense for these
premises is approximately $225,000. Additionally, the Company leases approximately 3,700 square feet of
office and warehouse space in Mississauga, Canada, under a lease which expires November 30, 2013. Total
annual rent expense for these premises is approximately $30,000. The Company also leases office space in
Almere, Netherlands under a lease which expires October 31, 2013, at an annual rent of approximately
$12,000. We believe that each of the properties is in good operating condition and such properties are
adequate for the operation of the Company’s business as currently conducted.
Item 3. Legal Proceedings
There are no material legal proceedings to which the Company or any of its subsidiaries is a party
or of which any of their property is the subject.
Page 9 of 29
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Shares of our Common Stock, par value $0.01, trade on The NASDAQ Global Market under the
symbol “WSTG”. Following is the range of low and high sales prices for our Common Stock as reported
on The NASDAQ Global Market.
2012:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2011:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
Low
$14.40
$17.00
$12.97
$12.90
$15.35
$15.30
$13.88
$12.55
$11.70
$12.05
$12.15
$10.81
$11.27
$13.06
$10.00
$ 9.51
In each of 2012 and 2011, we declared quarterly dividends totaling $0.64 per share, respectively, on
our Common Stock. There can be no assurance that we will continue to pay comparable cash dividends in
the future.
During 2012, the Company granted a total of 92,000 shares of restricted stock to employees and a
member of the Board of Directors. These shares vest over 20 equal quarterly installments. A total of 3,525
shares of restricted common stock were forfeited as a result of employees terminating employment with the
Company.
During 2011, the Company granted a total of 15,000 shares of restricted stock to employees. These
shares vest over 20 equal quarterly installments. A total of 8,375 shares of restricted common stock were
forfeited as a result of employees terminating employment with the Company.
The share issuances in all of the above transactions were not registered under the Securities Act of
1933, as amended (the “Securities Act”). The issuances were exempt from registration pursuant to Section
4(2) of the Securities Act and/or Regulation D thereunder, as they were transactions by the issuer that did
not involve public offerings of securities and/or involved issuances to accredited investors.
As of February 06, 2013 there were approximately 31 record holders of our Common Stock. This
figure does not include an estimate of the number of beneficial holders whose shares are held of record
by brokerage firms and clearing agencies.
Page 10 of 29
During the fourth quarter of 2012, we repurchased shares of our Common Stock as follows:
Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs
Average
Price
Paid Per
Share
(3)
Maximum
Number of
Shares That
May Yet Be
Purchased
Under the Plans
or Programs
(4) (5)
Total Number
of Shares
Purchased
Average
Price
Paid Per
Share
(2)
Period
October 1# October 31, 2012
#
#
#
#
374,719
November 1# November 30, 2012
17,617(1)
$12.45
8,937
$12.30
365,782
December 1 # December 31, 2012
Total
23,304
40,921
$11.16
$11.72
23,304
32,241
$11.16
$11.48
342,478
342,478
(1) Includes 8,680 shares surrendered to the Company by employees to satisfy individual tax withholding
obligations upon vesting of previously issued shares of Restricted Stock. These shares are not included in
the Common Stock repurchase program referred to in footnote (4) below.
(2) Average price paid per share reflects the closing price of the Company’s Common Stock on the business
date the shares were surrendered by the employee stockholder to satisfy individual tax withholding
obligations upon vesting of Restricted Stock or the price of the Common Stock paid on the open market
purchase, as applicable.
(3) Average price paid per share reflects the price of the Company’s Common Stock purchased on the open
market.
(4) On July 31, 2008, the Company approved the increase of its Common Stock repurchase program by
500,000 shares. The Company expects to purchase shares of its Common Stock from time to time in the
market or otherwise subject to market conditions. The Common Stock repurchase program does not have an
expiration date.
(5) On October 23, 2012, the Board of Directors approved, and on October 29, 2012, the Company entered
into a written purchase plan intended to comply with the requirements of Rule 10b5#1 under the Exchange
Act, as amended (the “Plan”). Purchases involving shares of the Company’s Common Stock under the Plan
commenced October 29, 2012, and the Plan is intended to be in effect until October 29, 2014. Pursuant to
the Plan, the Company’s broker shall effect purchases of up to an aggregate of 350,000 shares of Common
Stock.
Page 11 of 29
STOCK PRICE PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in the cumulative total
shareholder return on the Company’s Common Stock with the cumulative total return of the S&P Midcap 400
Index and the S&P 500 Computer and Electronics Retail Index for the period commencing December 31,
2007 and ending December 31, 2012, assuming $100 was invested on December 31, 2007 and the
reinvestment of dividends.
Base
Period
Dec07
100
100
INDEXED RETURNS
Years Ending
Dec08 Dec09 Dec10 Dec11 Dec12
168.96
155.34
128.51
110.94
176.59
109.02
102.89
87.61
83.58
63.77
100
49.24
66.58
61.17
46.22
32.61
Company / Index
Wayside Technology Group, Inc.
S&P MidCap 400 Index
S&P 500 Computer & Electronics
Retail Index
Item 6. Selected Financial Data
The following tables set forth, for the periods indicated, selected consolidated financial and other
data for Wayside Technology Group, Inc. and its Subsidiaries. You should read the selected consolidated
financial and other data below in conjunction with our consolidated financial statements and the related
notes and with “Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations” included elsewhere in this Form 10#K.
Page 12 of 29
Year Ended December 31,
(Amounts in thousands, except per share data)
2010
2012
2011
2009
2008
Consolidated Statement of Operations Data:
Net sales
Cost of sales
Gross profit
Selling, general and
administrative expenses
Income from operations
Other income, net
Income before income taxes
Income tax provision
Net income
Net income per common share:
Basic
Diluted
Weighted average common
shares outstanding:
Basic
Diluted
$297,057
273,165
23,892
$250,169 $206,730
186,720
226,928
20,010
23,241
$146,384
130,791
15,593
$174,025
157,228
16,797
15,377
8,515
574
9,089
3,600
$5,489
14,623
8,618
369
8,987
3,448
$5,539
13,207
6,803
407
7,210
2,789
$4,421
$1.23
$1.19
$1.26
$1.20
$1.01
$0.98
11,319
4,274
521
4,795
1,928
$2,867
$0.65
$0.65
12,207
4,590
744
5,334
2,168
$3,166
$0.72
$0.71
4,476
4,628
4,412
4,606
4,386
4,500
4,399
4,427
4,414
4,461
Balance Sheet Data:
Cash and cash equivalents
Marketable securities
Working capital
Total assets
Total stockholders’ equity
December 31,
2012
2011
2010
2009
2008
$9,835
4,411
19,592
91,445
32,125
$9,202
5,375
19,337
74,861
28,934
$10,955
4,528
19,033
68,683
26,679
$8,560
7,571
16,583
53,667
24,359
$9,349
9,367
14,806
47,485
23,884
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following management’s discussion and analysis of the Company’s financial condition and
results of operations should be read in conjunction with the Company’s Consolidated Financial Statements
and the Notes thereto. This discussion and analysis contains, in addition to historical information,
forward#looking statements that involve risks and uncertainties. Our actual results may differ materially
from those anticipated in these forward#looking statements as a result of certain risks and uncertainties,
including those set forth under the heading “Risk Factors” and elsewhere in this report.
Overview
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 primarily in the United States and Canada. 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.
We offer an extensive line of products from leading publishers of software and tools for
virtualization, networking, software development, database modeling, security, and other technically
sophisticated domains as well as computer hardware. We market these products through direct sales, our
Page 13 of 29
catalogs, direct mail programs, advertisements in trade magazines, as well as through Internet and e#mail
promotions.
Forward+looking Statements
This report includes “forward#looking statements” within the meaning of Section 21E of the
Exchange Act. Statements in this report regarding future events or conditions, including but not limited to
statements regarding industry prospects and the Company’s expected financial position, business and
financing plans, are forward#looking statements.
Although the Company believes that the expectations reflected in such forward#looking statements
are reasonable, it can give no assurance that such expectations will prove to have been correct. We strongly
urge current and prospective investors to carefully consider the cautionary statements and risks contained in
this report, particularly the risks described under “Item 1A. Risk Factors” above. Such risks include, but
are not limited to, the continued acceptance of the Company’s distribution channel by vendors and
customers, the timely availability and acceptance of new products, contribution of key vendor relationships
and support programs, as well as factors that affect the software industry generally.
The Company operates in a rapidly changing business, and new risk factors emerge from time to
time. Management cannot predict every risk factor, nor can it assess the impact, if any, of all such risk
factors on the Company’s business or the extent to which any factor, or combination of factors, may cause
actual results to differ materially from those projected in any forward#looking statements.
Accordingly, forward#looking statements should not be relied upon as a prediction of actual results
and readers are cautioned not to place undue reliance on these forward#looking statements, which speak
only as of their dates. The Company undertakes no obligation to publicly update or revise any forward#
looking statements, whether as a result of new information, future events or otherwise.
The statements concerning future sales, future gross profit margin and future selling and
administrative expenses are forward looking statements involving certain risks and uncertainties such as
availability of products, product mix, pricing pressures, market conditions and other factors, which could
result in a fluctuation of sales below recent experience.
Stock Volatility. The technology sector of the United States stock markets has experienced
substantial volatility in recent periods. Numerous conditions which impact the technology sector or the
stock market in general or the Company in particular, whether or not such events relate to or reflect upon
the Company's operating performance, could adversely affect the market price of the Company’s Common
Stock. Furthermore, fluctuations in the Company’s operating results, announcements regarding litigation,
the loss of a significant vendor, increased competition, reduced vendor incentives and trade credit, higher
postage and operating expenses, and other developments, could have a significant impact on the market
price of the Company’s Common Stock.
Financial Overview
Net sales totaled $297.1 million in 2012 as compared to $250.2 million in 2011, representing a 19%
increase. Gross profit increased by $0.7 million in 2012 as compared to 2011. Selling, general and
administrative (“SG&A”) expenses increased by $0.8 million in 2012 as compared to 2011. Income from
operations amounted to $8.5 million in 2012 as compared to $8.6 million in 2011, representing a decrease
of $0.1 million as compared to 2011. This decrease resulted primarily from the increase in sales, offset in
part by competitive pricing pressure and lower rebate attainment which lowered gross profit margin
percentage and increased SG&A expenses. Our income before income taxes increased by $0.1 million to
Page 14 of 29
$9.1 million in 2012 compared to $9.0 million in 2011. We reported a net income of $5.5 million for each
of 2012 and 2011.
The Company’s sales, gross profit and results of operations have fluctuated and are expected to
continue to fluctuate on a quarterly basis as a result of a number of factors, including but not limited to: the
condition of the software industry in general, shifts in demand for software products, pricing, industry
shipments of new software products or upgrades, the timing of new merchandise and catalog offerings,
fluctuations in response rates, fluctuations in merchandise returns, adverse weather conditions that affect
response, distribution or shipping, shifts in the timing of holidays and changes in the Company's product
offerings. The Company’s operating expenditures are based on sales forecasts. If sales do not meet
expectations in any given quarter, operating results may be materially adversely affected.
Results of Operations
The following table sets forth for the years indicated the percentage of net sales represented by
selected items reflected in the Company’s Consolidated Statements of Earnings. The year#to#year
comparison of financial results is not necessarily indicative of future results:
Years ended December 31,
2012
2011
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Income from operations
Other income
Income before income taxes
Income tax provision
Net income
100.0%
92.0
8.0
5.1
2.9
0.2
3.1
1.2
1.9%
100.0%
90.7
9.3
5.9
3.4
0.2
3.6
1.4
2.2%
2010
100.0%
90.3
9.7
6.4
3.3
0.2
3.5
1.4
2.1%%
Year Ended December 31, 2012 Compared to Year Ended December 31, 2011
Net Sales
Net sales for 2012 increased 19%, or $46.9 million to $297.1 million in 2012 compared to $250.2
million in 2011. Total sales for our Lifeboat Distribution segment in 2012 were $217.3 million compared to
$192.7 million in 2011, representing a 13% increase. Total sales for the TechXtend segment in 2012
amounted to $79.7 million, compared to $57.4 million in 2011, representing a 39% increase.
The increase in net sales for our Lifeboat Distribution segment was mainly a result of the
strengthening of our account penetration, our continued focus on the expanding virtual infrastructure#
centric business and the addition of several key product lines. The 39% increase in sales in the TechXtend
division was primarily due to an increase in larger extended payment term transactions, solution focus
selling and higher average order sizes in 2012.
Gross Profit
Gross Profit for 2012 was $23.9 million compared to $23.2 million in 2011, a 3% increase. Total
gross profit for our Lifeboat Distribution segment was $15.8 million compared to $16.8 million in 2011,
representing a 6% decrease. The decrease in gross profit for the Lifeboat Distribution segment was due to
lower vendor rebate attainment and competitive pricing pressure within this segment. Total gross profit for
our TechXtend segment was $8.1 million compared to $6.4 million in 2011, representing a 25% increase.
The increase in gross profit for the TechXtend segment was the result of increased sales volume offset in
Page 15 of 29
part by a lower gross margin in 2012 as compared to 2011 and lower vendor rebates. Vendor rebates and
discounts for 2012 amounted to $1.8 million compared to $2.9 million for 2011. Vendor rebates are
dependent on reaching certain targets set by our vendors. Vendors have been periodically substantially
increasing their target revenues for rebate eligibility. Therefore, despite our increasing revenue, vendor
rebates have declined.
Gross profit margin (gross profit as a percentage of net sales) for 2012 was 8.0% compared to 9.3%
in 2011. Gross profit margin for our Lifeboat Distribution segment in 2012 was 7.3% compared to 8.7% in
2011. Gross profit margin for our TechXtend segment in 2012 was 10.1% compared to 11.2% in 2011.
The increase in gross profit dollars and the decrease in gross profit margins were primarily caused
by the sales growth within our Lifeboat Distribution and TechXtend segments, offset in part, by continued
pressure on discounts and rebates earned and competitive pricing pressure in both segments, and, in part, by
our having won several large bids, including transactions on extended payment terms, based on aggressive
pricing which we plan to continue.
The Company monitors gross profits and gross profit margins carefully. Price competition in our
market intensified further in 2012, with competitors lowering their prices significantly and the Company
responding immediately. Although our sales volume increased substantially as a result, gross margins, as
well as the rebates and discounts that are material elements of the Company’s overall profitability, were
negatively impacted during the year ended December 31, 2012. We anticipate that margins, as well as
discounts and rebates, will continue to be affected by this current trend.
Selling, General and Administrative Expenses
Total selling, general and administrative (“SG&A”) expenses for 2012 were $15.4 million
compared to $14.6 million in 2011, representing an increase of $0.8 million. This increase is primarily the
result of an increase in sales commissions for our TechXtend segment due to our growth in this segment,
the addition of employees in sales, finance and operations to support business growth and higher
professional fees. As a result of the increase in net sales, SG&A expenses declined as a percentage of net
sales to 5.2% in 2012, compared to 5.9% in 2011.
Direct selling costs (a component of SG&A) for 2012 were $8.1 million compared to $7.8 million
in 2011. Total direct selling costs for our Lifeboat Distribution segment for 2012 were $4.5 million
compared to $4.7 million in 2011, mainly due to lower commission and bonus expense compared to the
prior year. Total direct selling costs for our TechXtend segment for 2012 were $3.6 million compared to
$3.1 million in 2011. The increase in the TechXtend segment was due to higher commission, salaries and
bonus expense resulting from growth in the segment.
The Company expects that its SG&A expenses, as a percentage of net sales, may vary depending
on changes in sales volume, as well as the levels of continuing investments in key growth initiatives. We
plan to continue to expand our investment in information technology and marketing, while monitoring our
sales and remaining general and administrative expenses closely.
Income Taxes
For the year ended December 31, 2012, the Company recorded a provision for income taxes of $3.6
million which consists of a provision of $2.8 million for U.S. federal income taxes, as well as a $0.5 million
provision for state and local taxes, a $0.2 million provision for foreign taxes, and a deferred tax expense of
$0.1 million.
As of December 31, 2012, the Company had a U.S. deferred tax asset of approximately $0.5
million.
For the year ended December 31, 2011, the Company recorded a provision for income taxes of $3.4
million which consists of a provision of $2.4 million for U.S. federal income taxes, as well as a $0.5 million
Page 16 of 29
provision for state and local taxes, a $0.3 million provision for foreign taxes, and a deferred tax expense of
$0.3 million.
As of December 31, 2011, the Company had a U.S. deferred tax asset of approximately $0.6
million.
Year Ended December 31, 2011 Compared to Year Ended December 31, 2010
Net Sales
Net sales for 2011 increased 21%, or $43.4 million to $250.1 million compared to $206.7 million in
2010. Total sales for our Lifeboat Distribution segment in 2011 were $192.7 million compared to $149.1
million in 2010, representing a 29% increase. Total sales for the TechXtend segment in 2011 amounted to
$57.4 million, compared to $57.6 million in 2010.
The increase in net sales for our Lifeboat Distribution segment was mainly a result of our continued
focus on the expanding virtual infrastructure#centric business, the addition of several key product lines, and
the strengthening of our account penetration.
Gross Profit
Gross Profit for 2011 was $23.2 million compared to $20.0 million in 2010, a 16% increase. Total
gross profit for our Lifeboat Distribution segment was $16.8 million compared to $13.7 million in 2010,
representing a 23% increase. Total gross profit for our TechXtend segment was $6.4 million compared to
$6.3 million in 2010, representing a 2% increase. Vendor rebates and discounts for 2011 amounted to $2.9
million compared to $2.7 million for 2010. Vendor rebates are dependent on reaching certain targets set by
our vendors.
Gross profit margin (gross profit as a percentage of net sales) for 2011 was 9.3% compared to 9.7%
in 2010. Gross profit margin for our Lifeboat Distribution segment in 2011 was 8.7% compared to 9.2% in
2010. Gross profit margin for our TechXtend segment in 2011 was 11.2% compared to 11.0% in 2010.
The increase in gross profit dollars and the decrease in gross profit margin was primarily caused by
the aggressive sales growth within our Lifeboat Distribution segment, offset in part, by continued pressure
on discounts and rebates earned and competitive pricing pressure in both segments, and, in part, by our
having won several large bids based on aggressive pricing, which we plan to continue to do.
Selling, General and Administrative Expenses
Total SG&A expenses for 2011 were $14.6 million compared to $13.2 million in 2010. As a
percentage of net sales, SG&A expenses for 2011 and 2010 were 5.9% and 6.4%, respectively. This dollar
increase was primarily the result of higher employee and employee#related costs (salaries, commissions,
bonus accruals, benefits and travel and entertainment) of $1.1 million and increased credit card processing
fees of $0.2 million due to increased sales volume.
Direct selling costs (a component of SG&A) for 2011 were $7.8 million compared to $6.9 million
in 2010. Total direct selling costs for our Lifeboat Distribution segment for 2011 were $4.7 million
compared to $3.9 million in the same period in 2010, mainly due to increased employee related costs to
manage and reward our growth in this segment. Total direct selling costs for our TechXtend segment for
2011 were $3.0 million compared to $2.9 million in the same period in 2010.
The Company expects that its SG&A expenses, as a percentage of net sales, may vary depending
on changes in sales volume, as well as the levels of continuing investments in key growth initiatives. We
plan to continue to expand our investment in information technology and marketing, while monitoring our
sales and remaining general and administrative expenses closely.
Page 17 of 29
Income Taxes
For the year ended December 31, 2011, the Company recorded a provision for income taxes of $3.4
million which consists of a provision of $2.4 million for U.S. federal income taxes, as well as a $0.5 million
provision for state and local taxes, a $0.3 million provision for foreign taxes, and a deferred tax expense of
$0.3 million.
As of December 31, 2011, the Company had a U.S. deferred tax asset of approximately $0.6
million.
For the year ended December 31, 2010, the Company recorded a provision for income taxes of $2.8
million which consists of a provision of $1.8 million for U.S. federal income taxes, as well as a $0.5 million
provision for state and local taxes, a $0.2 million provision for Canadian taxes, and a deferred tax expense
of $0.3 million.
As of December 31, 2010, the Company had a U.S. deferred tax asset of approximately $0.9
million.
The effective tax rate for the year ended December 31, 2010, was impacted by a benefit of $78
thousand related to the reversal of the Company’s liability related to uncertain tax positions.
Recently Adopted Accounting Pronouncements
In June 2011, the Financial Accounting Standards Board, “FASB” issued ASU 2011#05,
“Presentation of Comprehensive Income”, an amendment to FASB ASC Topic 220, “Comprehensive
Income”. The update gives companies the option to present the total of comprehensive income, the
components of net income, and the components of other comprehensive income either in a single
continuous statement of comprehensive income or in two separate but consecutive statements. The
amendments in the update do not change the items that must be reported in other comprehensive income or
when an item of other comprehensive income must be reclassified to net income. The ASU is effective for
the Company for fiscal years, and interim periods within those years, beginning after December 15, 2011.
In December 2011, the FASB issued ASU 2011#12 “Deferral of the Effective Date for Amendments to the
Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income in Accounting
Standards Update No. 2011#05.” This update stated that the specific requirement to present items that are
reclassified from other comprehensive income to net income alongside their respective components of net
income and other comprehensive income will be deferred. In February 2013, the FASB issued ASU 2013#
02 “Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income”. This update
requires companies to present the effects on the line items of net income of significant reclassifications out
of accumulated other comprehensive income if the amount being reclassified is required under U.S.
generally accepted accounting principles (“GAAP”) to be reclassified in its entirety to net income in the
same reporting period. ASU 2013#02 is effective prospectively for the Company for fiscal years, and
interim periods within those years, beginning after December 15, 2012. The Company does not expect the
adoption of the amended guidance to have a significant impact on its consolidated financial statements.
Liquidity and Capital Resources
Our cash and cash equivalents increased by $0.6 million to $9.8 million at December 31, 2012 from
$9.2 million at December 31, 2011. Net cash provided by operating activities amounted to $3.4 million, net
cash provided by investing activities amounted to $0.8 million, and net cash used in financing activities
amounted to $3.5 million.
Page 18 of 29
Net cash provided by operating activities in 2012 was $3.4 million. In 2012, cash was mainly
provided by $7.2 million from net income net of non#cash charges, a $13.4 million increase in accounts
payable and accrued expenses, and a $0.7 million decrease in prepaid expenses and other current assets,
offset in part by a $17.5 million increase in accounts receivable, and an increase in inventory of $0.5
million. The increase in accounts receivable relates primarily to our increased sales during the month of
December 2012 and the year ended December 31, 2012, as well as an increase in larger extended payment
term transactions during 2012, compared to the comparable periods in 2011. The increase in accounts
payable is primarily due to our increased net sales during the month of December 2012 and the year ended
December 31, 2012, as compared to the comparable periods in 2011 and our normal cycle of payments.
In 2012, cash provided by investing activities was $0.8 million. This resulted primarily from net
sales of $1.0 million in marketable securities. These securities are highly rated and highly liquid. These
securities are classified as available#for#sale securities in accordance with ASC Topic 320 “Investments in
Debt and Equity Securities”, and as a result, unrealized gains and losses are reported as part of accumulated
other comprehensive income. This was partially offset by $0.2 million for the purchase of equipment and
leasehold improvements.
Net cash used in financing activities in 2012 of $3.5 million consisted of $3.0 million of dividend
payments on our Common Stock and $1.1 million for the purchases of treasury shares of our Common
Stock offset by the tax benefit from share based compensation of $0.2 million and the exercise of stock
options of $0.4 million.
In 2008, the Board of Directors authorized the purchase of 500,000 shares of our Common Stock.
In 2002, the Board of Directors authorized the purchase of 1,490,000 shares of our Common Stock. In
October 1999, the Company was authorized by the Board of Directors to buy back 521,013 shares of our
Common Stock in both open market and private transactions, as conditions warrant. A total of 2,168,535
shares of the Company’s stock had been bought back as of December 31, 2012 leaving a balance of 342,478
shares of Common Stock that the Company is authorized to buy back in the future.
On October 23, 2012, the Board of Directors approved, and on October 29, 2012, the Company
entered into a written purchase plan intended to comply with the requirements of Rule 10b5#1 under the
Exchange Act, as amended (the “Plan”). Purchases involving shares of the Company’s Common Stock
under the Plan commenced October 29, 2012, and the Plan is intended to be in effect until October 29,
2014. Pursuant to the Plan, the Company’s broker shall effect purchases of up to an aggregate of 350,000
shares of Common Stock.
We intend to hold the repurchased shares in treasury for general corporate purposes, including
issuances under various stock plans. As of December 31, 2012, we held 543,627 shares of our Common
Stock in treasury at an average cost of $9.88 per share. As of December 31, 2011, we held 604,622 shares
of our Common Stock in treasury at an average cost of $8.25 per share.
The Company’s current and anticipated use of its cash and cash equivalents is, and will continue to
be, to fund working capital, operational expenditures, the stock repurchase program and dividends, if any,
declared by the Board of Directors.
The Company believes that the cash flows from operations and funds held in cash and cash equivalents will
be sufficient to fund the Company’s working capital and cash requirements for at least the next 12 months.
In addition, subsequent to December 31, 2012, on January 4, 2013, the Company has entered into a
$10,000,000 revolving credit facility (the “Credit Facility”) with Citibank, N.A. pursuant to a Business
Loan Agreement, Promissory Note, Commercial Security Agreements and Commercial Pledge Agreement.
The Credit Facility, which will be used for business and working capital purposes, including financing of
larger extended payment terms sales transactions which are becoming a more significant portion of the
Company’s net sales. The Credit Facility matures on January 4, 2016. (see Note 12 Subsequent Events in
the Notes to our Consolidated Financial Statements).
Page 19 of 29
Contractual Obligations as of December 31, 2012
(Amounts in thousands)
Payment due by Period
Long#term debt obligations
Capital Lease obligations
Operating Leases obligations (1)
Purchase Obligations
Other Long term Obligations
reflected on the Company’s
Balance Sheet under GAAP
Total Contractual Obligations
Total Less than 1 year 1+3 years
#
#
$481
#
#
$56
$736
#
#
$56
$255
#
#
#
#
#
4+5 years After 5 years
#
#
$792
#
$311
#
$481
#
+
#
#
#
+
(1) Operating leases relate primarily to the lease of the space used for our operations in Shrewsbury, New
Jersey, Mississauga, Canada and Almere, Netherlands. The commitments for operating leases include the
minimum rent payments.
As of December 31, 2012, the Company is not committed by lines of credit or standby letters of
credit, and has no standby repurchase obligations or other commercial commitments (see Note 12
Subsequent Events in the Notes to our Consolidated Financial Statements).
Foreign Exchange
The Company’s Canadian business is subject to changes in demand or pricing resulting from
fluctuations in currency exchange rates or other factors. We are subject to fluctuations primarily in the
Canadian Dollar#to#U.S. Dollar exchange rate.
Off+Balance Sheet Arrangements
As of December 31, 2012, we did not have any off#balance sheet arrangements, as defined in Item
303 (a)(4)(ii) of SEC Regulation S#K.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of the Company’s financial condition and results of
operations are based upon the Company’s consolidated financial statements that have been prepared in
accordance with accounting principles generally accepted in the United States of America. The preparation
of these 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. The Company recognizes revenue from the sale of software and hardware for microcomputers,
servers and networks upon shipment or upon electronic delivery of the product. The Company expenses the
advertising costs associated with producing its catalogs. The costs of these catalogs are expensed in the
same month the catalogs are mailed.
On an on#going basis, the Company evaluates its estimates, including those related to product
returns, bad debts, inventories, investments, intangible assets, income taxes, stock#based compensation,
contingencies and litigation.
The Company bases its estimates on 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.
Actual results may differ from these estimates.
Page 20 of 29
The Company believes the following critical accounting policies used in the preparation of its
consolidated financial statements affect its more significant judgments and estimates.
The Company maintains allowances for doubtful accounts for estimated losses resulting from the
inability of its customers to make required payments. If the financial condition of the Company’s customers
were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may
be required.
The Company writes down its inventory for estimated obsolescence or unmarketable inventory
equal to the difference between the cost of inventory and the estimated market value based upon
assumptions about future demand and market conditions. If actual market conditions are less favorable than
those projected by management, additional inventory write#offs may be required.
The Company has considered future taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for the valuation allowance related to deferred tax assets. In the event the
Company were to determine that it would not be able to realize all or part of its net deferred tax assets in the
future, an adjustment to the deferred tax assets would be charged to income in the period such
determination was made.
Under the fair value recognition provision, stock#based compensation cost is measured at the grant
date based on the fair value of the award and is recognized as expense on a straight#line basis over the
requisite service period, which is the vesting period. We make certain assumptions in order to value and
expense our various share#based payment awards. In connection with valuing stock options, we use the
Black#Scholes model, which requires us to estimate certain subjective assumptions. The key assumptions
we make are: the expected volatility of our stock; the expected term of the award; and the expected
forfeiture rate. In connection with our restricted stock programs we make assumptions principally related to
the forfeiture rate. We review our valuation assumptions periodically and, as a result, we may change our
valuation assumptions used to value stock based awards granted in future periods. Such changes may lead
to a significant change in the expense we recognize in connection with share#based payments.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
In addition to its activities in the United States, 7% of the Company’s 2012 sales were generated in
Canada. We are subject to general risks attendant to the conduct of business in Canada, including economic
uncertainties and foreign government regulations. In addition, the Company’s Canadian business is subject
to changes in demand or pricing resulting from fluctuations in currency exchange rates or other factors.
The Company’s $4.4 million investments in marketable securities at December 31, 2012 are
invested in insured certificates of deposit at banks located in the United States of America.
Item 8. Financial Statements and Supplementary Data
See Index to Consolidated Financial Statements at Item 15(a).
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. As required by Rule 13a#15(b) under the
Exchange Act, our management carried out an evaluation of the effectiveness of the design and operation of
the Company’s “disclosure controls and procedures”, as such term is defined in Rules 13a#15(e) and 15d#
15(e) under the Exchange Act, as of the end of the period covered by this report. This evaluation was
Page 21 of 29
carried out under the supervision and with the participation of our management, including our Company’s
President, Chairman of the Board and Chief Executive Officer (principal executive officer) and Vice
President and Chief Financial Officer (principal financial officer). Based upon that evaluation, the
Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure
controls and procedures were effective, as of the end of the period covered by this report, to ensure that
information required to be disclosed by the Company in the reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules
and forms and is accumulated and communicated to the Company’s management, including the Company’s
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure.
Management Report on Internal Control Over Financial Reporting. Our management is
responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rules 13a#15(f) and 15d#15(f) of the Exchange Act. Internal control over financial reporting is a process
designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and
effected by the Board of Directors, management and other personnel, to provide reasonable assurance
regarding the reliability of our financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP. Internal control over financial reporting includes maintaining records
in reasonable detail that accurately and fairly reflect our transactions and disposition of assets; providing
reasonable assurance that transactions are recorded as necessary for preparation of our financial statements
in accordance with GAAP; providing reasonable assurance that receipts and expenditures of the Company,
are made in accordance of with authorizations of management and directors of the Company; and
providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that
could have a material effect on our financial statements would be prevented or detected on a timely basis.
Because of its inherent limitations, internal control over financial reporting is not intended to provide
absolute assurance that a misstatement of our financial statements would be prevented or detected. In
addition, projections of any evaluation of effectiveness to future periods are subject to the risk that, owing
to changes in conditions, controls may become inadequate, or that the degree of compliance with policies or
procedures may deteriorate.
Management, with the participation of our Chief Executive Officer and Chief Financial Officer,
conducted an evaluation of the effectiveness of our internal control over financial reporting based on the
framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this evaluation, management concluded that the
Company’s internal control over financial reporting was effective as of December 31, 2012. There were no
changes in our internal control over financial reporting during the quarter ended December 31, 2012 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
This annual report does not include an attestation report of the Company’s registered public
accounting firm regarding internal control over financial reporting. Management’s report was not subject to
attestation by the Company’s registered public accounting firm.
Item 9B. Other Information
None.
Item 10. Directors and Executive Officers of the Registrant
PART III
The information required hereunder, with the exception of the information relating to the executive
officers of the Registrant that is presented in Part I under the heading “Executive Officers of the Company,”
and the information relating to the Company’s Code of Ethical Conduct that is presented in Part I under the
heading “Available Information,” is incorporated by reference herein from our Definitive Proxy Statement
Page 22 of 29
for the 2013 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A not later than April
30, 2013 (the “Definitive Proxy Statement”) under the sections captioned “Election of Directors,”
“Corporate Governance” and “Section 16 (a) Beneficial Ownership Reporting Compliance.”
Item 11. Executive Compensation
The information required hereunder is incorporated by reference herein from the Definitive Proxy
Statement under the sections captioned “Executive Compensation” and “Corporate Governance.”
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
The information required hereunder is incorporated by reference herein from the Definitive Proxy
Statement under the sections captioned “Executive Compensation – Securities Authorized for Issuance
under Equity Compensation Plans” and “Security Ownership of Certain Beneficial Owners and
Management”.
Item 13. Certain Relationships and Related Party Transactions, and Director Independence
The information required hereunder is incorporated by reference herein from the Definitive Proxy
Statement under the sections captioned “Executive Compensation,” “Corporate Governance” and
“Transactions with Related Persons.”
Item 14. Principal Accounting Fees and Services
The information required hereunder is incorporated by reference herein from the Definitive Proxy
Statement under the section captioned “Appointment of Independent Registered Public Accounting Firm”.
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a)
The following documents are filed as part of this Report:
1.
2.
Consolidated Financial Statements (See Index to Consolidated Financial Statements on
page F#1 of this report);
Financial Statement Schedule:
Schedule II Valuation and Qualifying Accounts
All other schedules are omitted since the required information is not present or is not present in
amounts sufficient to require submission of the schedule, or because the information required is
included in the consolidated financial statements or notes thereto.
3.
Exhibits Required by Regulation S+K, Item 601:
Exhibit No.
Description of Exhibit
3.1
Form of Amended and Restated Certificate of Incorporation of the Company. (1)
3.1(a)
Certificate of Amendment of Restated Certificate of Incorporation of the Company. (2)
3.2
4.1
Form of Amended and Restated By#Laws of the Company.(1)
Specimen of Common Stock Certificate.(1)
Page 23 of 29
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Business Loan Agreement, dated January 4, 2013, between Wayside Technology Group,
Inc., Lifeboat Distribution, Inc., TechXtend, Inc., Programmer’s Paradise, Inc., as
borrowers, and Citibank, N.A., as lender. (15)
Promissory Note, dated January 4, 2013, between Wayside Technology Group, Inc.,
Lifeboat Distribution, Inc., Techxtend, Inc., Programmer’s Paradise, Inc., as borrowers, and
Citibank, N.A., as lender. (15)
Commercial Pledge Agreement, dated January 4, 2013, among Wayside Technology
Group, Inc., as grantor, Wayside Technology Group, Inc., Lifeboat Distribution, Inc.,
Techxtend, Inc., Programmer’s Paradise, Inc., as borrowers, and Citibank, N.A., as lender.
(15)
Commercial Security Agreement, dated January 4, 2013, among Wayside Technology
Group, Inc., as grantor, Wayside Technology Group, Inc., Lifeboat Distribution, Inc.,
Techxtend, Inc., Programmer’s Paradise, Inc., as borrowers, and Citibank, N.A., as lender.
(15)
Commercial Security Agreement, dated January 4, 2013, among Lifeboat Distribution, Inc.,
as grantor, Wayside Technology Group, Inc., Lifeboat Distribution, Inc., Techxtend, Inc.,
Programmer’s Paradise, Inc., as borrowers, and Citibank, N.A., as lender. (15)
Commercial Security Agreement, dated January 4, 2013, among Programmer’s
Paradise, Inc., as grantor, Wayside Technology Group, Inc., Lifeboat Distribution, Inc.,
Techxtend, Inc., Programmer’s Paradise, Inc., as borrowers, and Citibank, N.A., as lender.
(15)
Commercial Security Agreement, dated January 4, 2013, among Techxtend, Inc., as
grantor, Wayside Technology Group, Inc., Lifeboat Distribution, Inc., Techxtend, Inc.,
Programmer’s Paradise, Inc., as borrowers, and Citibank, N.A., as lender. (15)
1995 Stock Plan, as amended. (3)
1995 Non#Employee Director Plan, as amended. (3)
10.9(a)
2006 Stock#Based Compensation Plan. (4)
10.9(b)
First Amendment to 2006 Stock#Based Compensation Plan. (5)
10.9(c)
Second Amendment to 2006 Stock#Based Compensation Plan. (5)
10.10
10.11
10.12
10.12(a)
10.13
Form of Officer and Director Indemnification Agreement. (1)
2012 Stock#Based Compensation Plan (14)
Lease dated as of May 14, 1997 between Robert C. Baker, et al as Landlord and the
Company. (6)
Modification of Lease, dated as of July 27, 2006, between SBC Holdings, L.P. (successor in
interest to Robert C. Baker, et al.) and the Company. (2)
Employment Agreement, dated January 12, 2006, between the Company and Simon F.
Nynens. (7)
10.14
Offer Letter, dated January 6, 2003, from the Company to Vito Legrottaglie.(8)
Page 24 of 29
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
Resignation Letter, dated May 16, 2007, from Wayside Technology Group, Inc. to Jeffrey
Largiader. (9)
General Release, dated May 18, 2007, between Jeffrey Largiader and Wayside Technology
Group, Inc. (5)
Restricted Stock Letter, dated August 15, 2006, between Vito Legrottaglie and Wayside
Technology Group, Inc (f/k/a Programmer’s Paradise Inc.). (5)
Restricted Stock Letter, dated August 15, 2006, between Jeffrey Largiader and Wayside
Technology Group, Inc (f/k/a Programmer’s Paradise Inc.). (5)
Restricted Stock Letter, dated August 15, 2006, between Daniel Jamieson and Wayside
Technology Group, Inc (f/k/a Programmer’s Paradise Inc.). (5)
Restricted Stock Letter, dated August 15, 2006, between Allan Weingarten and Wayside
Technology Group, Inc (f/k/a Programmer’s Paradise Inc.). (5)
Restricted Stock Letter, dated August 15, 2006, between Edwin Morgens and Wayside
Technology Group, Inc (f/k/a Programmer’s Paradise Inc.). (5)
Restricted Stock Letter, dated August 15, 2006, between Duff Meyercord and Wayside
Technology Group, Inc (f/k/a Programmer’s Paradise Inc.). (5)
Restricted Stock Letter, dated August 15, 2006, between Simon F. Nynens and Wayside
Technology Group, Inc (f/k/a Programmer’s Paradise Inc.). (5)
Restricted Stock Letter, dated August 15, 2006, between Simon F. Nynens and Wayside
Technology Group, Inc (f/k/a Programmer’s Paradise Inc.). (5)
Restricted Stock Letter, dated August 15, 2006, between Kevin Scull and Wayside
Technology Group, Inc (f/k/a Programmer’s Paradise Inc.). (5)
Restricted Stock Letter, dated January 31, 2007, between William Willett and Wayside
Technology Group, Inc (f/k/a Programmer’s Paradise Inc.). (5)
Restricted Stock Letter, dated November 19, 2007, between Richard Bevis and Wayside
Technology Group, Inc (f/k/a Programmer’s Paradise Inc.). (5)
Form of Non#Qualified Stock Option Agreement. (5)
Restricted Stock Letter, dated February 5, 2008, between Kevin Scull and Wayside
Technology Group, Inc. (10)
Restricted Stock Letter, dated February 5, 2008, between Richard Bevis and Wayside
Technology Group, Inc. (10)
Restricted Stock Letter, dated February 5, 2008, between Simon Nynens and Wayside
Technology Group, Inc. (10)
Restricted Stock Letter, dated February 5, 2008, between Vito Legrottaglie and Wayside
Technology Group, Inc. (10)
Restricted Stock Letter, dated February 5, 2008, between Daniel Jamieson and Wayside
Technology Group, Inc. (10)
Page 25 of 29
10.34
10.35
10.36
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
10.46
10.47
10.48
10.49
10.50
10.51
10.52
Restricted Stock Letter, dated February 5, 2008, between Edwin Morgens and Wayside
Technology Group, Inc. (10)
Restricted Stock Letter, dated February 5, 2008, between William Willett and Wayside
Technology Group, Inc. (10)
Restricted Stock Letter, dated February 5, 2008, between Allan Weingarten and Wayside
Technology Group, Inc. (10)
Restricted Stock Letter, dated February 5, 2008, between Mark Boyer and Wayside
Technology Group, Inc. (10)
Restricted Stock Letter, dated February 5, 2008, between Duff Meyercord and Wayside
Technology Group, Inc. (10)
Restricted Stock Letter, dated May 5, 2009, between Simon Nynens and Wayside
Technology Group, Inc. (11)
Restricted Stock Letter, dated May 5, 2009, between Kevin Scull and Wayside Technology
Group, Inc. (11)
Restricted Stock Letter, dated May 5, 2009, between Richard Bevis and Wayside
Technology Group, Inc. (11)
Restricted Stock Letter, dated May 5, 2009, between Shawn Giordano and Wayside
Technology Group, Inc. (11)
Restricted Stock Letter, dated May 5, 2009, between Daniel Jamieson and Wayside
Technology Group, Inc. (11)
Restricted Stock Letter, dated May 5, 2009, between Vito Legrottaglie and Wayside
Technology Group, Inc. (11)
Restricted Stock Letter, dated February 9, 2010, between Kevin Scull and Wayside
Technology Group, Inc. (12)
Restricted Stock Letter, dated February 9, 2010, between Richard Bevis and Wayside
Technology Group, Inc. (12)
Restricted Stock Letter, dated February 9, 2010, between Simon Nynens and Wayside
Technology Group, Inc. (12)
Restricted Stock Letter, dated February 9, 2010, between Vito Legrottaglie and Wayside
Technology Group, Inc. (12)
Restricted Stock Letter, dated February 9, 2010, between Daniel Jamieson and Wayside
Technology Group, Inc. (12)
Restricted Stock Letter, dated February 9, 2010, between Shawn Giordano and Wayside
Technology Group, Inc. (12)
Restricted Stock Letter, dated February 9, 2010, between Edwin Morgens and Wayside
Technology Group, Inc. (12)
Restricted Stock Letter, dated February 9, 2010, between William Willett and Wayside
Technology Group, Inc. (12)
Page 26 of 29
10.53
10.54
10.55
10.56
10.57
10.58
10.59
10.60
21.1
23.1
31.1
31.2
32.1
32.2
Restricted Stock Letter, dated February 9, 2010, between Allan Weingarten and Wayside
Technology Group, Inc. (12)
Restricted Stock Letter, dated February 9, 2010, between Mark Boyer and Wayside
Technology Group, Inc. (12)
Restricted Stock Letter, dated February 9, 2010, between Duff Meyercord and Wayside
Technology Group, Inc. (12)
Restricted Stock Letter, dated June 6, 2012, between Mike Faith and Wayside Technology
Group, Inc.
Restricted Stock Letter, dated May 8, 2012, between Dan Jamieson and Wayside Technology
Group, Inc.
Restricted Stock Letter, dated May 8, 2012, between Shawn Giordano and Wayside
Technology Group, Inc.
Restricted Stock Letter, dated May 8, 2012, between Vito Legrottaglie and Wayside
Technology Group, Inc.
Restricted Stock Letter, dated December 10, 2012, between Thomas Flaherty and Wayside
Technology Group, Inc.
Subsidiaries of the Registrant
Consent of EisnerAmper LLP
Certification pursuant to Rule 13a#14(a) or Rule 15d#14(a) of the Securities Exchange Act of
1934, of Simon F. Nynens, the Chief Executive Officer of the Company.
Certification pursuant to Rule 13a#14(a) or Rule 15d#14(a) of the Securities Exchange Act of
1934, of Thomas J. Flaherty, the Chief Financial Officer of the Company.
Certification pursuant to Rule 13a#14(b) of the Securities Exchange Act of 1934 and 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes#Oxley Act of 2002,
of Simon F. Nynens, the Chief Executive Officer of the Company.
Certification pursuant to Rule 13a#14(b) of the Securities Exchange Act of 1934 and 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes#Oxley Act of 2002,
of Thomas J. Flaherty, the Chief Financial Officer of the Company.
101
The following financial information from Wayside Technology Group, Inc.’s Annual
Report on Form 10#K for the year ended December 31, 2012, filed with the SEC on
February 15, 2013, formatted in XBRL (Extensible Business Reporting Language)
includes: (1) Consolidated Balance Sheets, (2) Consolidated Statements of Earnings, (3)
Consolidated Statements of Comprehensive Income, (4) Consolidated Statements of
Stockholders’ Equity, (5) Consolidated Statements of Cash Flows, and (6) the Notes to the
Consolidated Financial Statements, tagged as blocks of text. (13)
Page 27 of 29
(1)
Incorporated by reference to the Exhibits of the same number to the Registrant’s Registration
Statement on Form S#1 or amendments thereto (File No. 333#92810).
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Incorporated by reference to the Exhibits of the same number to the Registrant’s Quarterly Report
on Form 10#Q for the quarter ended September 30, 2006 filed on November 3, 2006.
Incorporated by reference to Exhibit A and Exhibit B, respectively, to the Registrant’s Definitive
Annual Meeting Proxy Statement filed on April 30, 1998.
Incorporated by reference to Exhibit A of the Registrant’s Definitive Annual Meeting Proxy
Statement filed on April 28, 2006.
Incorporated by reference to exhibits of the same number filed with the Registrant’s Annual Report
on Form 10#K for the year ended December 31, 2007 filed on March 13, 2008.
Incorporated by reference to Exhibit 10.42 of the Registrant’s Annual Report on Form 10#K for the
year ended December 31, 1998 filed on March 31, 1999.
Incorporated by reference to Exhibit 10.43 to the Registrant’s Quarterly Report on Form 10#Q for
the quarter ended March 31, 2006 filed on May 12, 2006.
Incorporated by reference to exhibits of the same number filed with the Registrant’s Quarterly
Report on Form 10#Q for the quarter ended March 31, 2007 filed on May 15, 2007.
Incorporated by reference to exhibits of the same number filed with the Registrant’s Current Report
on Form 8#K filed on May 21, 2007.
(10)
Incorporated by reference to exhibits of the same number filed with the Registrant’s Quarterly
Report on Form 10#Q for the Period Ended March 31, 2008 filed May 12, 2008.
(11) Incorporated by reference to exhibits of the same number filed with the Registrant’s Quarterly
Report on Form 10#Q for the Period Ended June 30, 2009 filed August 11, 2009.
(12) Incorporated by reference to exhibits of the same number filed with the Registrant’s Quarterly
Report on Form 10#Q for the Period Ended March 31, 2010 filed May 10, 2010.
(13) Users of this data are advised pursuant to Rule 406T of Regulation S#T that this interactive data file
is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or
12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities
Exchange Act of 1934, and otherwise is not subject to liability under these sections.
(14)
Incorporated by reference to Exhibit A of the Registrant’s Definitive Annual Meeting Proxy
Statement filed on April 24, 2012.
(15)
Incorporated by reference to the Registrant’s Form 8#K filed on January 7, 2013.
(b) The exhibits required by Item 601 of Regulation S#K are reflected above in Section (a) 3.of this Item.
(c) The financial statement schedule is included as reflected in Section (a) 2.of this Item.
Page 28 of 29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized, in Shrewsbury, New Jersey, on February 15, 2013.
WAYSIDE TECHNOLOGY GROUP, INC.
By: /s/ Simon F. Nynens
Simon F. Nynens, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the Registrant in the capacities and on the dates indicated:
Signature
Title
/s/ Simon F. Nynens_
Simon F. Nynens
President, Chief Executive Officer and
Chairman of the Board of Directors
(Principal Executive Officer)
Date
February 15, 2013
/s/ Thomas J. Flaherty
Thomas J. Flaherty (Principal Financial and Accounting Officer)
Vice President and Chief Financial Officer
February 15, 2013
/s/ William H. Willett
William H. Willett
Director
/s/ Mark T. Boyer
Mark. T. Boyer
Director
/s/ Duffield Meyercord_
Duffield Meyercord
Director
/s/Edwin H. Morgens
Edwin H. Morgens
Director
/s/ Allan D. Weingarten__
Allan D. Weingarten
Director
/s/ Mike Faith
Mike Faith
Director
Page 29 of 29
February 15, 2013
February 15, 2013
February 15, 2013
February 15, 2013
February 15, 2013
February 15, 2013
Items 8 and 15(a)
Wayside Technology Group, Inc. and Subsidiaries
Index to Consolidated Financial Statements and Schedule
Report of Independent Registered Public Accounting Firms
Consolidated Balance Sheets
Consolidated Statements of Earnings
Consolidated Statements of Comprehensive Income
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Schedule II – Valuation and Qualifying Accounts
Page
F#2
F#3
F#4
F#5
F#6
F#7
F#8
F#26
F#1
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Wayside Technology Group, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Wayside Technology Group, Inc. and
Subsidiaries as of December 31, 2012 and 2011, and the related consolidated statements of earnings,
comprehensive income, stockholders’ equity, and cash flows for each of the years in the three#year period
ended December 31, 2012. These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audit included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Wayside Technology Group, Inc. and Subsidiaries as of
December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the years
in the three#year period ended December 31, 2012, in conformity with accounting principles generally
accepted in the United States of America.
In connection with our audits of the consolidated financial statements referred to above, we also audited the
consolidated financial statement schedule, Schedule II – Valuation and Qualifying Accounts, for each of the
years in the three#year period ended December 31, 2012. In our opinion, this financial schedule, when
considered in relation to the consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information stated therein.
/s/ EisnerAmper LLP
Edison, New Jersey
February 15, 2013
F#2
Wayside Technology Group, Inc. and Subsidiaries
Consolidated Balance Sheets
(Amounts in thousands, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents
Marketable securities
Accounts receivable, net of allowances of $1,586 and
$1,513 in 2012 and 2011, respectively
Inventory, net
Prepaid expenses and other current assets
Deferred income taxes
Total current assets
Equipment and leasehold improvements, net
Accounts receivable#long#term
Other assets
Deferred income taxes
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
Current portion # capital lease obligation
Total current liabilities
Long# term portion# capital lease obligation
Total liabilities
Commitments and Contingencies
Stockholders’ equity:
December 31,
2012
2011
$ 9,835
4,411
$ 9,202
5,375
61,388
1,717
1,281
280
78,912
375
11,851
71
236
$ 91,445
47,066
1,240
1,997
329
65,209
458
8,889
54
251
$ 74,861
$ 59,265
55
59,320
$ 45,796
76
45,872
#
59,320
55
45,927
Common Stock, $.01 par value; 10,000,000 shares authorized; 5,284,500
shares issued; and 4,740,873 and 4,679,878 shares outstanding in 2012
and 2011, respectively
Additional paid#in capital
Treasury stock, at cost, 543,627 and 604,622 shares in 2012 and 2011,
respectively
Retained earnings
Accumulated other comprehensive income
Total stockholders’ equity
53
27,712
53
26,725
(5,373)
9,316
417
32,125
$ 91,445
(4,991)
6,818
329
28,934
$ 74,861
The accompanying notes are an integral part of the consolidated financial statements.
F#3
Wayside Technology Group, Inc. and Subsidiaries
Consolidated Statements of Earnings
(Amounts in thousands, except per share amounts)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Income from operations
Other income:
Interest income
Foreign currency transaction gain
Income before provision for income taxes
Provision for income taxes
Years ended December 31,
2011
2012
2010
$297,057
$250,169
$206,730
273,165
23,892
15,377
8,515
557
17
9,089
3,600
226,928
23,241
14,623
8,618
368
1
8,987
3,448
186,720
20,010
13,207
6,803
405
2
7,210
2,789
Net income
$5,489
$5,539
$4,421
Income per common share#Basic
Income per common share#Diluted
Weighted average common shares outstanding#Basic
Weighted average common shares outstanding#Diluted
$1.23
$1.19
4,476
4,628
$1.26
$1.20
4,412
4,606
$1.01
$0.98
4,386
4,500
The accompanying notes are an integral part of the consolidated financial statements.
F#4
Wayside Technology Group, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(Amounts in thousands)
Years ended December 31,
2011
2010
2012
Net income
$5,489
$5,539
$4,421
Other comprehensive income, net of tax:
Foreign currency translation adjustment
Unrealized gain (loss) on available#for#sale
marketable securities
Other comprehensive income (loss)
80
8
88
(112)
(15)
(127)
142
6
148
Comprehensive income
$5,577
$5,412
$4,569
The accompanying notes are an integral part of the consolidated financial statements.
F#5
Wayside Technology Group, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
(Amounts in thousands, except share amounts)
Common Stock
Shares Amount
Additional
Paid+In
Capital
Treasury
Shares
Retained
Amount Earnings
Accumulated
Other
Comprehensive
Income
Balance at January 1, 2010
Net income
Translation adjustment
Unrealized gain on available#
for sale securities
Dividends paid
Share#based compensation
expense
Tax benefit from share#based
compensation
Restricted stock grants (net of
forfeitures)
Treasury shares repurchased
Balance at December 31, 2010
Net income
Translation adjustment
Unrealized loss on available#
for sale securities
Dividends paid
Stock options exercised
Share#based compensation
Expense
Tax benefit from share#based
compensation
Restricted stock grants (net of
forfeitures)
Treasury shares repurchased
Balance at December 31, 2011
Net income
Translation adjustment
Unrealized gain on available#
for sale securities
Dividends paid
Stock options exercised
Share#based compensation
expense
Tax benefit from share#based
compensation
Restricted stock grants (net of
forfeitures)
Treasury shares repurchased
Balance at December 31, 2012
5,284,500
$53
$24,826
595,656
$(3,555)
1,187
53
(593)
5,284,500
53
25,473
(144,625)
63,228
514,259
593
(608)
(3,570)
(11) (18,750)
82
1,059
237
(33)
5,284,500
53
26,725
(6,625)
115,738
604,622
33
(1,536)
(4,991)
$2,727
4,421
(2,881)
$308
142
6
4,267
5,539
(2,988)
456
(112)
(15)
6,818
5,489
(2,991)
329
80
8
124
(63,500)
306
1,071
224
(432)
5,284,500
$53
$27,712
(88,475)
90,980
543,627
432
(1,120)
$(5,373)
$9,316
$417
The accompanying notes are an integral part of the consolidated financial statements
F#6
Total
$24,359
4,421
142
6
(2,881)
1,187
53
#
(608)
26,679
5,539
(112)
(15)
(2,988)
71
1,059
237
#
(1,536)
28,934
5,489
80
8
(2,991)
430
1,071
224
#
(1,120)
$32,125
Wayside Technology Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Amounts in thousands, except share amounts)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization expense
Provision for doubtful accounts receivable
Deferred income tax expense
Share#based compensation expense
Reversal of uncertain tax position liability
Gain on disposal of fixed assets
Changes in operating assets and liabilities:
Accounts receivable
Inventory
Prepaid expenses and other current assets
Accounts payable and accrued expenses
Net change in other operating assets and liabilities
Net cash provided by operating activities
Cash flows provided by (used in) investing activities
Purchase of equipment and leasehold improvements
Purchase of available#for#sale securities
Redemptions of available#for#sale securities
Net cash provided by (used in) investing activities
Cash flows used in financing activities
Purchase of treasury stock
Proceeds from stock option exercises
Tax benefit from share#based compensation
Dividends paid
Repayment of capital lease obligations
Net cash used in financing activities
Effect of foreign exchange rate on cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Year ended December 31,
2012
2011
2010
$ 5,489
$ 5,539
$ 4,421
302
272
64
1,071
#
#
(17,463)
(477)
719
13,419
(21)
3,375
(215)
(7,295)
8,268
758
(1,120)
430
224
(2,991)
(76)
(3,533)
33
633
9,202
$ 9,835
325
161
272
1,059
#
(12)
(6,876)
(76)
(738)
4,069
(22)
3,701
(234)
(5,623)
4,760
(1,097)
(1,536)
71
237
(2,988)
(83)
(4,299)
(58)
(1,753)
10,955
$ 9,202
317
141
273
1,187
(78)
#
(15,436)
(197)
(249)
12,542
(4)
2,917
(176)
(6,206)
9,255
2,873
(608)
#
53
(2,881)
(34)
(3,470)
75
2,395
8,560
$ 10,955
Supplementary disclosure of cash flow information:
Income taxes paid
Equipment financed with capital lease
$ 3,339
$ #
$ 2,762
$ #
$ 2,142
$ 247
The accompanying notes are an integral part of the consolidated financial statements.
F#7
Wayside Technology Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Amounts in tables in thousands, except share and per share amounts)
Note 1. Description of Business
Wayside Technology Group, Inc. and Subsidiaries (the “Company”), resells computer software and
hardware developed by others and provide technical services directly to customers in the United States and
Canada. We also operate a sales branch in Europe to serve our customers in this region of the world. 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 primarily in the United States and Canada. 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.
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation and Operations
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.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make extensive use of certain estimates
and assumptions which affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. The significant areas of estimation include but are not limited to
accounting for allowance for uncollectible accounts, sales returns, inventory valuation and obsolescence,
income taxes, depreciation, contingencies and stock#based compensation. Actual results could differ from
those estimates.
Net Income Per Common Share
The Company calculates earnings per share in accordance with Financial Accounting Standards Board
“FASB”ASC Topic 260, “Earnings Per Share”. Basic earnings per share 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 earnings per share 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.
F#8
Wayside Technology Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Amounts in tables in thousands, except share and per share amounts)
A reconciliation of the numerators and denominators of the basic and diluted per share computations
follows:
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
Cash Equivalents
Year ended December 31,
2012
2011
2010
$5,489
$5,539
$4,421
4,476
4,412
4,386
152
194
114
4,628
4,606
4,500
$1.23
$1.19
$1.26
$1.20
$1.01
$0.98
The Company considers all liquid short#term investments with original maturities of 90 days or less to be
cash equivalents.
Accounts Receivable
Accounts receivable principally represents amounts collectible from our customers. The Company performs
ongoing credit evaluations of its customers but generally does not require collateral to support any
outstanding obligation. Allowances for potential uncollectible amounts are estimated and deducted from
total accounts receivable.
Allowance for Doubtful Accounts Receivable
We provide allowances for doubtful accounts related to accounts receivable for estimated losses resulting
from the inability of our customers to make required payments. We take into consideration the overall
quality and aging of the receivable portfolio along with specifically identified customer risks. If actual
customer payment performance were to deteriorate to an extent not expected, additional allowances may be
required.
Foreign Currency Translation
Assets and liabilities of the Company’s foreign subsidiaries have been translated at current exchange rates,
and related revenues and expenses have been translated at average rates of exchange in effect during the
year. Cumulative translation adjustments have been classified within accumulated other comprehensive
income, which is a separate component of stockholders’ equity in accordance FASB ASC Topic No. 220,
“Comprehensive Income”.
F#9
Wayside Technology Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Amounts in tables in thousands, except share and per share amounts)
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations in credit risk consist of cash,
cash equivalents, and marketable securities. At December 31, 2012, the Company’s $4.4 million of
marketable securities are comprised of insured certificates of deposit at banking institutions in the United
States of America.
The Company’s cash and cash equivalents, at times, may exceed federally insured limits. The Company has
not experienced any losses in such accounts. The Company believes it is not exposed to any significant
credit risk on cash and cash equivalents.
Marketable Securities
The Company accounts for marketable securities pursuant to the FASB ASC Topic No. 320, “Investments
in Debt and Equity Securities.” Under this statement, the Company’s securities with a readily determinable
fair value have been classified as available#for#sale and are carried at fair value with an offsetting
adjustment to accumulated other comprehensive income in Stockholders’ Equity.
Financial Instruments
The carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable
and accounts payable approximated fair value as of December 31, 2012 and 2011, because of the relative
short maturity of these instruments.
Inventory
Inventory, consisting primarily of finished products held for resale, is stated at the lower of cost (weighted
average) or market.
Equipment and Leasehold Improvements
Equipment and leasehold improvements are stated at cost. Equipment depreciation is calculated using the
straight#line method over three to five years. Leasehold improvements are amortized using the straight line
method over the estimated useful lives of the assets or the related lease terms, whichever is shorter.
Accounts receivable+long+term
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 under these long#term accounts receivable due
within one year are reclassified to the current portion of accounts receivable.
F#10
Wayside Technology Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Amounts in tables in thousands, except share and per share amounts)
Comprehensive Income
Comprehensive income consists of net income for the period, the impact of unrealized foreign currency
translation adjustments and unrealized gains or losses on investments. The foreign currency translation
adjustments are not currently adjusted for income taxes as they relate to permanent investments in
international subsidiaries.
Revenue Recognition
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.
Stock+Based Compensation
The Company has stockholder#approved stock incentive plans for employees and directors. Stock# based
compensation is recognized based on the grant date fair value and is recognized as expense on a straight#
line basis over the requisite service period, which is generally the vesting period.
F#11
Wayside Technology Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Amounts in tables in thousands, except share and per share amounts)
Income Taxes
The Company utilizes the asset and liability method of accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on differences between financial reporting and tax
basis of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when
the differences are expected to reverse. This method also requires a valuation allowance against the net
deferred tax asset if, based on the weighted available evidence, it is more likely than not that some or all of
the deferred tax assets will not be realized.
Recently Adopted Accounting Pronouncements
In June 2011, the Financial Accounting Standards Board, “FASB” issued ASU 2011#05, “Presentation of
Comprehensive Income”, an amendment to FASB ASC Topic 220, “Comprehensive Income”. The update
gives companies the option to present the total of comprehensive income, the components of net income,
and the components of other comprehensive income either in a single continuous statement of
comprehensive income or in two separate but consecutive statements. The amendments in the update do not
change the items that must be reported in other comprehensive income or when an item of other
comprehensive income must be reclassified to net income. The ASU is effective for the Company for fiscal
years, and interim periods within those years, beginning after December 15, 2011. In December 2011, the
FASB issued ASU 2011#12 “Deferral of the Effective Date for Amendments to the Presentation of
Reclassifications of Items out of Accumulated Other Comprehensive Income in Accounting Standards
Update No. 2011#05.” This update stated that the specific requirement to present items that are reclassified
from other comprehensive income to net income alongside their respective components of net income and
other comprehensive income will be deferred. In February 2013, the FASB issued ASU 2013#02
“Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income”. This update
requires companies to present the effects on the line items of net income of significant reclassifications out
of accumulated other comprehensive income if the amount being reclassified is required under U.S.
generally accepted accounting principles (“GAAP”) to be reclassified in its entirety to net income in the
same reporting period. ASU 2013#02 is effective prospectively for the Company for fiscal years, and
interim periods within those years, beginning after December 15, 2012. The Company does not expect the
adoption of the amended guidance to have a significant impact on its consolidated financial statements.
3. Marketable securities
Investments in available#for#sale securities at December 31, 2012 were:
Certificates of deposit
Total Marketable securities
Cost
$4,422
$ 4,422
Market value
$ 4,411
$ 4,411
Unrealized (loss)
$ (11)
$ (11)
The cost and market value of our investments at December 31, 2012 by contractual maturity were:
Cost
Estimated
Fair Value
Due in one year or less
$4,422
$4,411
F#12
Wayside Technology Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Amounts in tables in thousands, except share and per share amounts)
Investments in certificates of deposit are in brokered certificates of deposit at numerous banking institutions
in the United States of America to take advantage of the FDIC insurance limits.
Investments in available#for#sale securities at December 31, 2011 were:
Market value
$ 5,375
$ 5,375
Certificates of deposit
Total Marketable securities
Cost
$ 5,394
$ 5,394
Unrealized (loss)
$ (19)
$ (19)
The cost and market value of our investments at December 31, 2011 by contractual maturity were:
Due in one year or less
4. Fair Value Measurements
Cost
$5,394
Estimated
Fair Value
$5,375
The Company accounts for the fair value measurements in accordance with FASB ASC Topic 820 “Fair
Value Measurement and Disclosure”, which establishes a framework for measuring fair value under
generally accepted accounting principles and expands disclosures about fair value measurements. The
Company uses the following methods for determining fair value in accordance with FASB ASC Topic 820.
For assets and liabilities that are measured using quoted prices in active markets for the identical asset or
liability, the total fair value is the published market price per unit multiplied by the number of units held
without consideration of transaction costs (Level 1). Assets and liabilities that are measured using
significant other observable inputs are valued by reference to similar assets or liabilities, such as quoted
prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are
observable or can be corroborated by observable market data (Level 2). For all remaining assets and
liabilities for which there are no significant observable inputs, fair value is derived using an assessment of
various discount rates, default risk, credit quality and the overall capital market liquidity (Level 3).
The following table summarizes the basis used to measure certain financial assets and liabilities at fair value
on a recurring basis in the consolidated balance sheet:
Fair Value Measurements at December 31, 2012 Using
Significant
Other
Observable
Inputs
(Level 2)
Quoted Prices
in Active
Markets for
Identical Items
(Level 1)
Significant
Unobservable
Inputs
(Level 3)
Balance at
December 31,
2012
$
4,411
#
$
4,411
#
Fair Value Measurements at December 31, 2011 Using
Significant
Other
Observable
Inputs
(Level 2)
Quoted Prices
in Active
Markets for
Identical Items
(Level 1)
Significant
Unobservable
Inputs
(Level 3)
Balance at
December 31,
2011
$
5,375
#
$
5,375
#
Description
Certificates of deposit
Description
Certificates of deposit
Certificates of deposit # The fair value of certificates of deposit is estimated using third#party quotations for
similar assets. These deposits are categorized in Level 2 of the fair value hierarchy.
F#13
Wayside Technology Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Amounts in tables in thousands, except share and per share amounts)
5. Balance Sheet Detail
Equipment and leasehold improvements consist of the following as of December 31:
Equipment
Leasehold improvements
Less accumulated depreciation and amortization
2012
2011
$
$
2,913 $
561
3,474
(3,099)
375 $
2,696
560
3,256
(2,798)
458
Accounts payable and accrued expenses consist of the following as of December 31:
Trade accounts payable
Accrued expenses
2012
2011
$ 55,734 $ 42,417
3,379
$ 59,265 $ 45,796
3,531
Accumulated other comprehensive income consists of the following as of December 31:
Foreign currency translation adjustments
Unrealized loss on marketable securities
6. Income Taxes
2012
2011
$ 428
(11)
$ 348
(19)
$ 417 $ 329
Deferred tax attributes resulting from differences between financial and accounting amounts and tax basis
of assets and liabilities at December 31, 2012 and 2011 are as follows:
Current assets
Accruals and reserves
Net current deferred tax assets
Non+current assets
Accruals and reserves
Depreciation
Net non+current deferred tax assets
Total deferred tax assets
F#14
2012
2011
$ 280
$ 280
$ 329
$ 329
2012
2011
$ 224
$ 224
12
$ 236
$ 516
27
$ 251
$ 580
Wayside Technology Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Amounts in tables in thousands, except share and per share amounts)
The provision for income taxes is as follows:
Year ended December 31,
2011
2010
2012
Current:
Federal
State
Foreign
Deferred:
Federal
State
Effective Tax Rate
$ 2,799
536
201
3,536
$ 2,452
460
264
3,176
$ 1,800
546
170
2,516
54
10
64
3,600
39.6%
$
172
100
272
3,448
38.4%
$
211
62
273
2,789
38.7%
$
The effective tax rate for year ended December 31, 2010 was impacted by a benefit of $78 thousand related
to the reversal of the Company’s liability related to uncertain tax positions.
The reasons for the difference between total tax expense and the amount computed by applying the U.S.
statutory federal income tax rate to income before income taxes are as follows:
Year ended December 31,
2011
2010
2012
Statutory rate applied to pretax income
State income taxes, net of
federal income tax benefit
Foreign income taxes under U.S.
statutory rate
Other items
$ 3,090
$ 3,056
$ 2,456
334
(21)
197
325
(4)
71
399
(5)
(61)
Income tax expense
$ 3,600
$ 3,448
$ 2,789
The Company receives a tax deduction from the gains realized by employees on the exercise of certain non#
qualified stock options for which the tax effect of the difference between the book and tax deduction is
recognized as a component of stockholders’ equity.
The Company accounts for uncertainties in accordance with FASB ASC 740 “Income Taxes”. This
standard clarified the accounting for uncertainties in income taxes. The standard prescribes criteria for
recognition and measurement of tax positions. It also provides guidance on derecognition, classification,
interest and penalties, and disclosures related to income taxes associated with uncertain tax positions.
F#15
Wayside Technology Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Amounts in tables in thousands, except share and per share amounts)
The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to
file income tax returns, as well as all open tax years in these 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. The only periods subject to examination for the Company’s federal return are the 2009,
2010 and 2011 tax years. The current periods subject to examination for the Company’s state returns in
New Jersey are years 2009, 2010 and 2011. The current periods subject to examination for the Company’s
Canadian tax returns are the years 2009 through 2011. The Company’s policy is to recognize interest and
penalties related to uncertain tax positions in income tax expense when assessed. No liability was recorded
for interest or penalties related to uncertain tax positions at December 31, 2012 and 2011.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Balance at January 1, 2010
Decrease based on tax positions related to prior years
Net Unrecognized Tax Benefit at December 31, 2010
Federal, State
and Foreign Tax
$ 78
(78)
$ 0
The most recent IRS examination was of the Company’s 2006#2007 tax returns which were completed by
the Internal Revenue Service (“IRS”) as of March 1, 2010, with no adjustments proposed by the IRS.
Management believes that all uncertain tax positions related to those years were resolved at that time.
For financial reporting purposes, income before income taxes includes the following components:
Year ended December 31
2011
2012
2010
United States
Canada
$8,451
638
$9,089
$8,229
758
$8,987
$6,696
514
$7,210
7. Stockholders’ Equity and Stock Based Compensation
On April 21, 1995, the Board of Directors adopted the Company’s 1995 Employee Stock Plan (“1995
Plan”). The 1995 Plan, as amended on May 7, 1998, provides for the grant of options to purchase up to
1,137,500 shares of the Company’s Common Stock to officers, directors, employees and consultants of the
Company. The 1995 Plan requires that each option shall expire on the date specified by the Compensation
Committee, but not more than ten years from its date of grant in the case of Incentive Stock Options
(“ISO’s”) and Non#Qualified Options. Options granted under the plan are exercisable at an exercise price
equal to but not less than the fair market value of the Common Stock on the grant date. ISO’s shall either be
fully exercisable on the date of grant or shall become exercisable thereafter in such installments as the
committee may specify.
On April 21, 1995, the Board of Directors adopted the Company’s 1995 Non#Employee Director Plan
(“1995 Director Plan”). The 1995 Director Plan, as amended on May 7, 1998, provides for the grant of
options to purchase up to 187,500 shares of the Company’s Common Stock to persons who are members of
the Company’s Board of Directors and not employees or officers of the Company. The 1995 Director Plan
requires that options granted thereunder will expire ten years from the date of grant. Each option granted
under the 1995 Director Plan becomes exercisable over a five year period, and vests in an installment of
20% of the total option grant upon the expiration of one year from the date of the option grant, and
thereafter vests in equal quarterly installments of 5%.
F#16
Wayside Technology Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Amounts in tables in thousands, except share and per share amounts)
In February 2002, the Board of Directors approved a plan permitting all option holders under the 1995 Plan
and 1995 Director Plan to surrender all or any portion of their options on or before March 1, 2002. By
March 1, 2002, a total of 303,550 options to purchase the Company’s Common Stock under the 1995 Plan
and 1995 Director Plan were surrendered. All of the options surrendered were exercisable in excess of the
market price of the underlying Common Stock as of the dates of surrender.
At the annual stockholder’s meeting held on June 14, 2006, the Company’s stockholders approved the 2006
Stock#Based Compensation Plan (the “2006 Plan”). The 2006 Plan authorizes the grant of Stock Options,
Stock Units, Stock Appreciation Rights, Restricted Stock, Deferred Stock, Stock Bonuses, and other equity#
based awards. The number of shares of Common Stock initially available under the 2006 Plan is 800,000.
As of December 31, 2012, the number of shares of common stock available for future award grants to
employees and directors under this plan is 33,775.
At the annual stockholder’s meeting held on June 6, 2012, the Company’s stockholders approved the 2012
Stock#Based Compensation Plan (the “2012 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 December 31, 2012, the number of shares of Common stock available for future
award grants to employees and directors under the 2012 Plan is 600,000.
In August of 2006, the Company granted a total of 315,000 shares of Restricted Stock to officers, directors
and employees. Included in this grant were 200,000 Restricted Shares granted to the Company’s CEO in
accordance with his employment agreement. These 200,000 Restricted Shares vest over 40 equal quarterly
installments. The remaining grants of Restricted Stock vest over 20 equal quarterly installments.
During 2007, the Company granted a total of 30,000 shares of Restricted Stock to officers, directors and
employees. These shares of Restricted Stock vest over 20 equal quarterly installments. A total of 12,500
shares of restricted common stock were forfeited as a result of employees and officers terminating
employment with the Company.
During 2008, the Company granted a total of 57,500 shares of Restricted Stock to officers, directors and
employees. These shares of Restricted Stock vest over 20 equal quarterly installments. A total of 3,500
shares of Restricted Stock were forfeited as a result of employees and officers terminating employment with
the Company.
During 2009, the Company granted a total of 140,000 shares of Restricted Stock to officers and employees.
These shares of Restricted Stock vest over 20 equal quarterly installments.
During 2010, the Company granted a total of 150,500 shares of Restricted Stock to officers and employees.
These shares of Restricted Stock vest over 20 equal quarterly installments. A total of 5,875 shares of
Restricted Stock were forfeited as a result of employees and officers terminating employment with the
Company.
During 2011, the Company granted a total of 15,000 shares of Restricted Stock to employees. These shares
of Restricted Stock vest over 20 equal quarterly installments. A total of 8,375 shares of Restricted Stock
were forfeited as a result of employees terminating employment with the Company.
F#17
Wayside Technology Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Amounts in tables in thousands, except share and per share amounts)
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.
Changes during 2010, 2011 and 2012 in options outstanding under the Company’s combined plans (i.e. the
2012 Plan, the 2006 Plan, the 1995 Non#Employee Director Plan and the 1995 Stock Plan) were as follows:
Outstanding at January 1, 2010
Granted in 2010
Canceled in 2010
Exercised in 2010
Outstanding at December 31, 2010
Granted in 2011
Canceled in 2011
Exercised in 2011
Outstanding at December 31, 2011
Granted in 2012
Canceled in 2012
Exercised in 2012
Outstanding at December 31, 2012
Exercisable at December 31, 2012
Number
of
Options
392,890
#
#
#
392,890
#
#
18,750
374,140
#
#
63,500
310,640
310,640
Weighted
Average
Exercise
Price
8.12
#
#
#
8.12
#
#
3.85
8.33
#
#
6.78
8.65
$8.65
The options exercisable at December 31, 2012 and 2011 were 310,640 and 374,140, respectively.
The aggregate intrinsic value of options outstanding and options exercisable as of December 31, 2012 was
$0.9 million. The intrinsic value is calculated as the difference between the market value as of
December 31, 2012 and the exercise price of the shares. The market value as of December 31, 2012 was
$11.09 as reported by The NASDAQ Global Market.
Stock options outstanding at December 31, 2012 are summarized as follows:
Range of Exercise
Prices
$2.00 – $2.99
3.00 – 6.99
7.00 – 9.99
10.00–12.99
Outstanding
Options as of
December 31,
2012
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise
Price
Options
Exercisable
as of
December 31,
2012
5,000
10,000
240,000
55,640
310,640
0.0
0.0
1.4
2.3
1.5
$2.13
3.50
8.03
12.85
$8.65
5,000
10,000
240,000
55,640
310,640
Weighted
Average
Exercise
Price
$2.13
3.50
8.03
12.85
$8.65
Under the various plans, options that are cancelled can be reissued. At December 31, 2012 no options were
reserved for future issuance.
F#18
Wayside Technology Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Amounts in tables in thousands, except share and per share amounts)
A summary of nonvested shares of Restricted Stock awards outstanding under the Company’s 2006 Plan
and 2012 Plan as of December 31, 2012 and changes during the year then ended is as follows:
Nonvested shares at January 1, 2010
Granted in 2010
Vested in 2010
Forfeited in 2010
Nonvested shares at December 31, 2010
Granted in 2011
Vested in 2011
Forfeited in 2011
Nonvested shares at December 31, 2011
Granted in 2012
Vested in 2012
Forfeited in 2012
Nonvested shares at December 31, 2012
Weighted
Average Grant
Date
Fair Value
$11.03
8.57
10.49
9.21
$10.18
14.35
10.28
8.45
$10.44
12.32
10.10
11.79
$11.24
Shares
327,250
150,500
(113,225)
(5,875)
358,650
15,000
(103,000)
(8,375)
262,275
92,000
(99,600)
(3,525)
251,150
As of December 31, 2012, there was approximately $2.8 million of total unrecognized compensation cost
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 years ended December 31, 2012, 2011 and 2010, we recognized share#based compensation cost of
approximately $1.1 million, $1.1 million and $1.2 million, respectively, which is included in selling,
general and administrative expenses. The Company does not capitalize any share#based compensation cost.
8. Defined Contribution Plan
The Company maintains a defined contribution plan covering substantially all domestic employees.
Participating employees may make contributions to the plan, through payroll deductions. Matching
contributions are made by the Company equal to 50% of the employee’s contribution to the extent such
employee contribution did not exceed 6% of their compensation. During the years ended December 31,
2012, 2011 and 2010, the Company expensed approximately $166 thousand, $147 thousand and $131
thousand, respectively, related to this plan.
F#19
Wayside Technology Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Amounts in tables in thousands, except share and per share amounts)
9. Commitments and Contingencies
Leases
Operating leases primarily relate to the lease of the space used for our operations in Shrewsbury, New
Jersey, Mississauga, Canada and Almere, Netherlands. Future minimum rental commitments under non#
cancellable operating leases are as follows:
2013
2014
2015
2016
2017
$ 255
237
225
19
#
$ 736
Rent expense for the years ended December 31, 2012, 2011 and 2010 was approximately $229 thousand,
$332 thousand and $387 thousand, respectively.
Employment Agreements
In the event that Simon Nynens, President and Chief Executive officer, employment is terminated without
cause or by the rendering of a non#renewal notification, he is entitled to receive severance payments equal
to twelve months salary, immediate vesting of all outstanding equity awards, and to purchase the car used
by him at the “buy#out” price of any lease or fair market value, as applicable. Additionally, in the event that
a change of control of the Company occurs (as described in the employment agreement), Mr. Nynens’
outstanding equity awards become immediately vested and he is entitled to receive a lump#sum payment
equal to 2.9 times his then annual salary and actual incentive bonus earned in the year prior to such change
in control.
The Company has entered into letter agreements with its Vice President of Operations, Chief Financial
Officer, and Vice President of Accounting and Reporting, under which each are entitled to severance
payments for six months at the then applicable annual base salary if the Company terminates their
respective employment for any reason other than for cause.
Other
As of December 31, 2012, the Company is not committed by lines of credit, standby letters of credit, has no
standby repurchase obligations or other commercial commitments. Other than employment arrangements
and other management compensation arrangements, the Company is not engaged in any transactions with
related parties. (See Note 12 Subsequent Events)
10. Industry, Segment and Geographic Information
The Company resells computer software and hardware developed by others and provides technical services
directly to customers in the United States and Canada. We also operate a sales branch in Europe to serve
our customers in this region of the world.
Geographic revenue and identifiable assets related to operations as of and for the years ended December 31,
2012, 2011 and 2010 were as follows. Revenue is allocated to a geographic area based on the location of
F#20
Wayside Technology Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Amounts in tables in thousands, except share and per share amounts)
the sale, which is generally the customer’s country of domicile. No one country other than the United Sates
represents more than 10% of net sales for 2012, 2011 or 2010.
Net sales to Unaffiliated Customers:
United States
Canada
Other
Total
Identifiable Assets by Geographic Areas at December 31,
United States
Canada
Total
2012
2011
2010
$ 251,991 $ 209,946 $ 174,180
15,048
22,245 18,672
22,821 21,551
17,502
$297,057 $250,169 $206,730
2012
$ 85,503
5,942
2011
$ 69,309
5,552
2010
$ 64,237
4,446
$91,445
$74,861
$68,683
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 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 primarily in the United States and Canada. 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 they provide the same products and services to similar
clients and are considered together when the 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 a
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.
F#21
Wayside Technology Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Amounts in tables in thousands, except share and per share amounts)
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 gains
Income before taxes
Selected Assets By Segment:
Lifeboat Distribution
TechXtend
Segment Select Assets
Corporate Assets
Total Assets
2010
$149,151
57,579
206,730
$13,703
6,307
20,010
$3,934
2,932
6,866
$9,769
3,375
13,144
6,341
405
2
$7,210
Year ended
December 31,
2011
2012
$217,342 $192,720
57,449
79,715
250,169
297,057
$15,818
8,074
23,892
$16,804
6,437
23,241
$4,512
3,567
8,079
$4,715
3,058
7,773
$11,306
4,507
15,813
$12,089
3,379
15,468
7,298
557
17
$9,089
6,850
368
1
$8,987
$30,258
44,698
74,956
16,489
$91,445
$29,314
27,881
57,195
17,666
$74,861
The Company had three customers that accounted for more than 10% of total sales for 2012. For the year
ended December 31, 2012, Software House International, CDW Corporation, and Insight accounted for
13.4%, 12.4% and 11.1%, respectively, of consolidated net sales and, as of December 31, 2012, 12.0%,
9.6%, and 8.3%, respectively, of total net accounts receivable. For the year ended December 31, 2011,
CDW Corporation, Insight and Software House International accounted for 14.0%, 11.0% and 10.5%,
respectively. For the year ended December 31, 2010, CDW Corporation accounted for 15.8% of
consolidated net sales. Our top five customers accounted for 44%, 42%, and 44% of consolidated net sales
in 2012, 2011 and 2010, respectively.
F#22
Wayside Technology Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Amounts in tables in thousands, except share and per share amounts)
11. Quarterly Results of Operations (Unaudited)
The following table presents summarized quarterly results for 2012:
First
Second
Third
Fourth
Net sales
Gross profit
Net income
$66,907
5,567
1,029
$69,169
5,590
1,304
$75,534
5,698
1,352
$85,447
7,037
1,804
Basic net income per
common share
Diluted net income
per common share
$0.23
$0.29
$0.30
$0.40
$0.22
$0.28
$0.29
$0.39
The following table presents summarized quarterly results for 2011:
First
Second
Third
Fourth
Net sales
Gross profit
Net income
$51,549
4,825
843
$60,661
5,601
1,228
$63,741
5,757
1,494
$74,218
7,058
1,974
Basic net income per
common share
Diluted net income
per common share
12. Subsequent Events
$0.19
$0.28
$0.34
$0.45
$0.18
$0.26
$0.33
$0.43
On January 4, 2013, Wayside Technology Group, Inc. (“Wayside”), and certain of its wholly#owned
subsidiaries (collectively, 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, which
will be used for business and working capital purposes, including financing of larger extended payment
terms sales transactions which are becoming a more significant portion of the Company’s net sales, matures
on January 4, 2016, at which time the Company must pay this loan in one payment of any outstanding
principal plus all accrued unpaid interest. In addition, the Company will pay regular monthly payments of
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.
F#23
Wayside Technology Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Amounts in tables in thousands, except share and per share amounts)
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 Wayside’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.
F#24
Wayside Technology Group, Inc. and Subsidiaries
Schedule II##Valuation and Qualifying Accounts
(Amounts in thousands)
Description
Beginning
Balance
Charged to
Cost and
Expense
Deductions
Ending
Balance
Year ended December 31, 2010
Allowances for accounts receivable
Reserve for inventory obsolescence
Year ended December 31, 2011
Allowances for accounts receivable
Reserve for inventory obsolescence
Year ended December 31, 2012
Allowances for accounts receivable
Reserve for inventory obsolescence
$1,097
$20
$1,473
$18
$1,513
$35
$480
$#
$161
$31
$272
$24
$104
$2
$121
$14
$199
$32
$1,473
$18
$1,513
$35
$1,586
$27
F#25
Subsidiaries
Exhibit 21.1
Name
Jurisdiction of Organization
Lifeboat Distribution, Inc.
Programmer’s Paradise, Inc.
Wayside Technology Group (Canada), Inc.
TechXtend, Inc.
ISP International Software Partners, Inc.
Delaware
Delaware
Canada
Delaware
Delaware
F#26
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements of Wayside Technology Group, Inc. (the
“Company”) on Form S#8 (No. 333#184573), pertaining to the Company’s 2012 Stock# Based Compensation Plan,
Form S#8 (No. 333#136211), pertaining to the Company’s 2006 Stock# Based Compensation Plan, and on Form S#8
(333#72249) pertaining to the Company’s 1986 Stock Option Plan, the Company’s 1995 Stock Plan and the
Company’s 1995 Non#Employee Director Plan, of our report dated February 15, 2013, on our audits of the
consolidated financial statements and financial statement schedule as of December 31, 2012 and 2011 and for each of
the years in the three#year period ended December 31, 2012, which report was included in the Annual Report on
Form 10K# filed on February 15, 2013.
/s/ EisnerAmper LLP
Edison, New Jersey
February 15, 2013
c o r p o ra t e i n f o r m a t i o n
EXECUTIVE OFFICERS
SHAREHOLDER INFORMATION
COMMON STOCK
AND FORM 10-K
NASDAQ Global Market
Wayside Technology Group, Inc. Annual
Symbol: WSTG
SHAREHOLDERS’ MEETING
June 5, 2013–10:00 AM ET
Morgens, Waterfall, Vintiadis
& Company, Inc.
600 Fifth Avenue
27th Floor
New York, NY 10020
CORPORATE OFFICES
Wayside Technology Group, Inc.
1157 Shrewsbury Avenue
Shrewsbury, NJ 07702
Telephone: 732-389-0932
www.waysidetechnology.com
Report on Form 10-K for the fiscal year
ended December 31, 2012 as filed with the
Securities and Exchange Commission is avail-
able to shareholders and interested parties
upon written request to:
Thomas J. Flaherty
Vice President and
Chief Financial Officer
Wayside Technology Group, Inc.
1157 Shrewsbury Avenue
Shrewsbury, NJ 07702
GENERAL COUNSEL
David Sorin, Esq.
SorinRand LLP
Two Tower Center Boulevard, 24th Floor
East Brunswick, NJ 08816
INDEPENDENT AUDITORS
EisnerAmper LLP
2015 Lincoln Highway
Edison, NJ 08818
REGISTRAR AND TRANSFER AGENT
American Stock Transfer
& Trust Company
40 Wall Street
New York, NY 10005
Simon F. Nynens
Chairman of the Board,
President, and
Chief Executive Officer
Thomas J. Flaherty
Vice President and
Chief Financial Officer
Daniel T. Jamieson
Vice President & General
Manager – Lifeboat Distribution
Shawn Giordano
Vice President of Sales
TechXtend
Richard Bevis
Vice President – Marketing
Vito Legrottaglie
Vice President of Operations
and Information Systems
DIRECTORS
Simon F. Nynens
Chairman of the Board
Allan Weingarten (1)(3)
F. Duffield Meyercord (1)(2)
Edwin Morgens (2)
William H. Willett (1)
Mark T. Boyer (3)
Mike Faith (3)
(1) Member of Audit Committee
(2) Member of Compensation Committee
(3) Nominating and Corporate Governance
Committee