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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Tech Data Corporation    TECD

TECH DATA CORPORATION

(TECD)
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TECH DATA : Management's Discussion and Analysis of Financial Condition and Results of Operations. FORWARD-LOOKING STATEMENTS (form 10-K)

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03/25/2020 | 03:50pm EDT
This Annual Report on Form 10-K, including this Management's Discussion and
Analysis of Financial Condition and Results of Operations ("MD&A"), contains
forward-looking statements, as described in the "safe harbor" provision of the
Private Securities Litigation Reform Act of 1995. These statements involve a
number of risks and uncertainties and actual results could differ materially
from those projected. These forward-looking statements regarding future events
and the future results of Tech Data Corporation ("Tech Data," "we," "our," "us"
or the "Company") are based on current expectations, estimates, forecasts, and
projections about the industries in which we operate and the beliefs and
assumptions of our management. Words such as "expects," "anticipates,"
"targets," "goals," "projects," "intends," "plans," "believes," "seeks,"
"estimates," variations of such words, and similar expressions are intended to
identify such forward-looking statements. In addition, any statements that refer
to our future financial performance, our anticipated growth and trends in our
businesses, and other characterizations of future events or circumstances, are
forward-looking statements. Readers are cautioned that these forward-looking
statements are only predictions and are subject to risks, uncertainties, and
assumptions. Therefore, actual results may differ materially and adversely from
those expressed in any forward-looking statements. Readers are referred to the
cautionary statements and important factors discussed in Item 1A, "Risk Factors"
in this Annual Report on Form 10-K for the year ended January 31, 2020 for
further information with respect to important risks and other factors that could
cause actual results to differ materially from those in the forward-looking
statements. We undertake no obligation to revise or update publicly any
forward-looking statements for any reason.
OVERVIEW


We are one of the world's largest IT distribution and solutions companies. We
serve a critical role in the center of the IT ecosystem, bringing products from
the world's leading technology vendors to market, as well as helping our
customers create solutions best suited to maximize business outcomes for their
end-user customers. We distribute and market products from many of the world's
leading technology hardware manufacturers and software publishers, as well as
suppliers of next-generation technologies and delivery models such as converged
and hyperconverged infrastructure, the cloud, security, analytics/Internet of
things ("IoT"), and services. Our customers include value-added resellers,
direct marketers, retailers, corporate resellers and managed service providers
who support the diverse technology needs of end users.
On February 27, 2017, we acquired Avnet, Inc's. ("Avnet") Technology Solutions
business ("TS"). TS delivered data center hardware and software solutions and
services and the TS acquisition strengthened our end-to-end solutions and
deepened our value added capabilities in the data center and next-generation
technologies. We acquired TS for an aggregate purchase price of approximately
$2.8 billion, comprised of approximately $2.5 billion in cash and 2,785,402
shares of the Company's common stock.
On November 25, 2019, we completed the acquisition of DLT Solutions ("DLT"), a
premier software and cloud solutions aggregator focused on the U.S. public
sector. We acquired all of the outstanding shares of DLT for a preliminary
purchase price of approximately $210 million in cash, subject to certain working
capital and other adjustments. The DLT acquisition enables us to proactively
develop opportunities, accelerate growth and simplify complexity for our channel
partners that are serving the U.S. public sector space.
Planned Acquisition
On November 12, 2019, we entered into an Agreement and Plan of Merger, as
subsequently amended on November 27, 2019 (the ''Merger Agreement''), with the
affiliates of certain funds (the "Apollo Funds"), managed by affiliates of
Apollo Global Management, LLC ("Apollo"), a leading global alternative
investment manager. Pursuant to the Merger Agreement, the affiliates of the
Apollo Funds will acquire all the outstanding shares of the Company's common
stock (other than shares held by us as treasury stock or held by certain
affiliates of the Apollo Funds) for $145 per share in cash (the "Merger"). On
February 12, 2020, we held a special meeting of shareholders. At such meeting,
the Merger Agreement was approved and adopted by a majority of the outstanding
shares of the Company's common stock entitled to vote thereon. The waiting
period with respect to the premerger notification and report form filed by the
parties under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, has expired. The completion of the Merger remains subject to other
customary closing conditions and to certain foreign regulatory approvals.  All
applications for foreign regulatory approvals have been filed, and some have
been granted while others are still pending.


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NON-GAAP FINANCIAL INFORMATION




In addition to disclosing financial results that are determined in accordance
with generally accepted accounting principles in the U.S. ("GAAP"), the Company
also discloses certain non-GAAP financial information. Certain of these measures
are presented as adjusted for the impact of changes in foreign currencies
(referred to as "impact of changes in foreign currencies"). Removing the impact
of the changes in foreign currencies provides a framework for assessing our
financial performance as compared to prior periods. The impact of changes in
foreign currencies is calculated by using the exchange rates from the prior year
comparable period applied to the results of operations for the current period.
The non-GAAP financial measures presented in this document include:

•      Net sales, as adjusted, which is defined as net sales adjusted for the
       impact of changes in foreign currencies;


• Gross profit, as adjusted, which is defined as gross profit as adjusted

       for the impact of changes in foreign currencies;


• Selling, general and administrative expenses ("SG&A"), as adjusted, which

       is defined as SG&A as adjusted for the impact of changes in foreign
       currencies;



•      Non-GAAP operating income, which is defined as operating income as

adjusted to exclude acquisition, integration and restructuring expenses;

goodwill impairment; legal settlements and other, net; gain on disposal of

       subsidiary; value added tax assessments; tax indemnifications; and
       acquisition-related intangible assets amortization expense;


• Non-GAAP net income, which is defined as net income as adjusted to exclude

acquisition, integration and restructuring expenses; goodwill impairment;

legal settlements and other, net; gain on disposal of subsidiary; value

added tax assessments and related interest expense; acquisition-related

intangible assets amortization expense; acquisition-related financing

expenses; tax indemnifications; the income tax effects of these

adjustments; change in deferred tax valuation allowances and the impact of

       U.S. Tax Reform;



•      Non-GAAP earnings per share-diluted, which is defined as earnings per

share-diluted as adjusted to exclude the per share impact of acquisition,

       integration and restructuring expenses; goodwill impairment; legal
       settlements and other, net; gain on disposal of subsidiary; value added
       tax assessments and related interest expense; acquisition-related

intangible assets amortization expense; acquisition-related financing

expenses; tax indemnifications; the income tax effects of these

adjustments; change in deferred tax valuation allowances and the impact of

U.S. Tax Reform.



Management believes that providing this additional information is useful to the
reader to assess and understand our financial performance as compared with
results from previous periods. Management also uses these non-GAAP measures to
evaluate performance against certain operational goals. However, analysis of
results on a non-GAAP basis should be used as a complement to, and in
conjunction with, data presented in accordance with GAAP. Additionally, because
these non-GAAP measures are not calculated in accordance with GAAP, they may not
necessarily be comparable to similarly titled measures reported by other
companies.

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RESULTS OF OPERATIONS


The following table sets forth our Consolidated Statement of Income as a
percentage of net sales.
Year ended January 31:                                2020        2019         2018
Net sales                                           100.00 %   100.00   %   100.00   %
Cost of products sold                                93.79      93.94        93.70
Gross profit                                          6.21       6.06         6.30
Operating expenses:
Selling, general and administrative expenses          4.57       4.43       

4.79

Acquisition, integration and restructuring expenses 0.07 0.23

0.41

Goodwill impairment                                      -       0.13       

-

Legal settlements and other, net                         -      (0.04 )      (0.12 )
Gain on disposal of subsidiary                           -      (0.02 )          -
                                                      4.64       4.73         5.08
Operating income                                      1.57       1.33         1.22
Interest expense                                      0.23       0.29         0.33
Other expense (income), net                           0.03       0.04            -
Income before income taxes                            1.31       1.00         0.89
Provision for income taxes                            0.30       0.09         0.54
Net income                                            1.01 %     0.91   %     0.35   %





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NET SALES

The following tables summarize our net sales and change in net sales by geographic region for the fiscal years ended January 31, 2020, 2019 and 2018 (in billions):

[[Image Removed: chart-39b655e62f6f52cba8f.jpg]][[Image Removed: chart-339a194d758e52c8a4d.jpg]] Year ended January 31:

                      2020        2019       $ Change     % Change
(in millions)
Consolidated net sales, as reported       $ 36,998$ 37,239$    (241 )    (0.6)%
Impact of changes in foreign currencies        986           -          986

Consolidated net sales, as adjusted $ 37,984$ 37,239$ 745

2.0%


Americas net sales, as reported           $ 16,600$ 16,041$     559

3.5%

Impact of changes in foreign currencies         60           -           60
Americas net sales, as adjusted           $ 16,660$ 16,041$     619

3.9%


Europe net sales, as reported             $ 19,132$ 20,026$    (894 )    (4.5)%
Impact of changes in foreign currencies        907           -          907
Europe net sales, as adjusted             $ 20,039$ 20,026$      13

0.1%

Asia-Pacific net sales, as reported $ 1,266$ 1,172$ 94

8.0%

Impact of changes in foreign currencies         19           -           19

Asia-Pacific net sales, as adjusted $ 1,285$ 1,172$ 113

9.6%

2020 - 2019 NET SALES COMMENTARY

AMERICAS

• The increase in Americas net sales, as adjusted, of approximately $619

million is primarily due to growth in personal computer systems and software,

including the impact of the acquisition of DLT in November 2019.

EUROPE

• The increase in Europe net sales, as adjusted, of approximately $13 million

is primarily due to growth in software. The impact of changes in foreign

currencies is primarily due to the weakening of the euro against the U.S.

    dollar.


ASIA-PACIFIC

• The increase in Asia-Pacific net sales, as adjusted, of $113 million is

    primarily due to growth in data center products.




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Year ended January 31:                       2019        2018       $ Change    % Change
(in millions)
Consolidated net sales, as reported       $ 37,239$ 33,598$  3,641

10.8%

Impact of changes in foreign currencies (238 ) - (238 ) Consolidated net sales, as adjusted $ 37,001$ 33,598$ 3,403

10.1%


Americas net sales, as reported           $ 16,041$ 14,419$  1,622

11.2%

Impact of changes in foreign currencies         45            -          45
Americas net sales, as adjusted           $ 16,086$ 14,419$  1,667

11.6%


Europe net sales, as reported             $ 20,026$ 18,148$  1,878

10.3%

Impact of changes in foreign currencies (314 ) - (314 ) Europe net sales, as adjusted

             $ 19,712$ 18,148$  1,564

8.6%

Asia-Pacific net sales, as reported $ 1,172$ 1,031$ 141

13.7%

Impact of changes in foreign currencies         31            -          31

Asia-Pacific net sales, as adjusted $ 1,203$ 1,031$ 172

16.7%

2019 - 2018 NET SALES COMMENTARY

AMERICAS

•      The increase in Americas net sales, as adjusted, of approximately $1.7
       billion is primarily due to growth in data center products, software
       products and personal computer systems, including the impact of an

additional month of TS operations due to the timing of the completion of

the acquisition in the prior year.



EUROPE
•      The increase in Europe net sales, as adjusted, of approximately $1.6

billion is primarily due to growth in data center, software and mobility

products, including the impact of an additional month of TS operations due

to the timing of the completion of the acquisition in the prior year. The

       impact of changes in foreign currencies is primarily due to the
       strengthening of the euro against the U.S. dollar.


ASIA-PACIFIC

• The increase in Asia-Pacific net sales, as adjusted, of $172 million is

primarily due to growth in data center products and the impact of an

additional month of TS operations due to the timing of the completion of

       the acquisition in the prior year.



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GROSS PROFIT



The following tables provide a comparison of our gross profit and gross profit
as a percentage of net sales for the fiscal years ended January 31, 2020, 2019
and 2018:
[[Image Removed: chart-f4d78e0a755b5bbdb3d.jpg]][[Image Removed: chart-3d375b995a4053df810.jpg]]

Year ended
January 31:                               2020       2019      $ Change   % Change
(in millions)
Gross profit, as reported               $ 2,298$ 2,256$       42    1.9%
Impact of changes in foreign currencies      57          -            57
Gross profit, as adjusted               $ 2,355$ 2,256$       99    4.4%




Year ended
January 31:                               2019        2018      $ Change  % Change
(in millions)
Gross profit, as reported               $ 2,256$ 2,116$    140     6.6%
Impact of changes in foreign currencies     (10 )         -         (10 )
Gross profit, as adjusted               $ 2,246$ 2,116$    130     6.1%




COMMENTARY



2020 - 2019

• The increase in gross profit, as adjusted, of $99 million is primarily due to

an increase in net sales volume and the mix of products sold. The increase in

our year-over-year gross profit as a percentage of net sales is primarily due

    to the mix of products sold.




2019 - 2018

• The increase in gross profit, as adjusted, of $130 million is primarily

attributable to increased sales volume and the impact of an additional month

of TS operations due to the timing of the completion of the acquisition in

the prior year. The decrease in our year-over-year gross profit as a

percentage of net sales is primarily due to the mix of products sold and the

    impact of a competitive environment.





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OPERATING EXPENSES


SELLING, GENERAL AND ADMINISTRATIVE EXPENSES


The following tables provide a comparison of our selling, general and
administrative expenses:
Year ended January 31:                 2020            2019           $ Change        % Change
(in millions)
SG&A, as reported                  $     1,691$     1,649     $          42        2.5%
Impact of changes in foreign
currencies                                  46               -                46
SG&A, as adjusted                  $     1,737$     1,649     $          88        5.3%

SG&A as a percentage of net
sales, as reported                        4.57 %          4.43 %                       14 bps



The increase in SG&A, as adjusted, of approximately $88 million and SG&A as a
percentage of net sales, as reported, of 14 basis points is primarily due to
increased investments in our strategic priorities and a benefit in the prior
year of approximately $25 million related to the collection of an accounts
receivable balance previously considered uncollectible, partially offset by
savings from our Global Business Optimization Program.
Year ended January 31:                 2019            2018           $ Change        % Change
(in millions)
SG&A, as reported                  $     1,649$     1,611     $         38         2.4%
Impact of changes in foreign
currencies                                 (11 )             -              (11 )
SG&A, as adjusted                  $     1,638$     1,611     $         27         1.7%

SG&A as a percentage of net
sales, as reported                        4.43 %          4.79 %                      (36) bps



The increase in SG&A, as adjusted, of $27 million is primarily due to an
additional month of TS operations due to the timing of the completion of the
acquisition in the prior year, partially offset by a benefit of approximately
$25 million related to the collection of an accounts receivable balance
previously considered uncollectible. The decrease in SG&A as a percentage of net
sales, as reported, of 36 basis points is primarily due to greater operating
leverage from our increased sales and a benefit of approximately $25 million
related to the collection of an accounts receivable balance previously
considered uncollectible.


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ACQUISITION, INTEGRATION AND RESTRUCTURING EXPENSES


Acquisition, integration and restructuring expenses are primarily comprised of
costs related to the fiscal 2018 acquisition of TS, restructuring costs related
to the Global Business Optimization Program which was initiated in fiscal 2019,
the fiscal 2020 acquisition of DLT and the proposed Merger.

Acquisition of TS


Acquisition, integration and restructuring expenses related to the acquisition
of TS are primarily comprised of restructuring costs, IT related costs,
professional services, transaction related costs and other costs. Restructuring
costs are comprised of severance and facility exit costs. IT related costs
consist primarily of data center and non-ERP application migration and
integration costs, as well as, IT related professional services. Professional
services are primarily comprised of integration related activities, including
professional fees for project management, accounting, tax and other consulting
services. Transaction related costs primarily consist of investment banking
fees, legal expenses and due diligence costs incurred in connection with the
completion of the transaction. Other costs includes payroll related costs
including retention, stock compensation, relocation and travel expenses incurred
as part of the integration of TS. For the fiscal year ended January 31, 2019,
other costs are partially offset by a gain of $9.6 million related to the final
working capital adjustment for the acquisition of TS as part of a settlement
agreement with Avnet.

We incurred no acquisition, integration and restructuring expenses related to
the acquisition of TS during the year ended January 31, 2020 and do not expect
to incur any additional costs in future periods. Acquisition, integration and
restructuring expenses for fiscal 2019 and 2018 related to the acquisition of TS
are comprised of the following:
Year ended January 31:     2019       2018
(in millions)
Restructuring costs       $ 19.8$  35.1
IT related costs            13.2       18.3
Professional services        6.0       42.6
Transaction related costs    1.7       20.2
Other costs                  4.7       20.1
Total                     $ 45.4$ 136.3


Pending Merger and DLT Acquisition
Additionally, we incurred $8.6 million of professional services and other
transaction related costs during the year ended January 31, 2020 related to the
proposed Merger and the acquisition of DLT.
Global Business Optimization Program
In fiscal 2019, our Board of Directors approved the Global Business Optimization
Program (the "GBO Program") to increase investment in our strategic priorities
and implement operational initiatives to drive productivity and enhance
profitability. Under the GBO Program, we expect to incur cumulative cash charges
through fiscal 2021 of approximately $70 million to $80 million, primarily
comprised of $40 million to $45 million of charges in Europe and $30 million to
$35 million of charges in the Americas. The cash charges primarily consist of
severance costs, and also include professional services and other costs. The GBO
Program is expected to result in annual cost savings of $70 million to $80
million by the end of fiscal 2021, of which approximately half is expected to be
reinvested to accelerate our strategic priorities.
Restructuring expenses related to the GBO Program are comprised of the
following:

                                                                              Cumulative Amounts
Year ended January 31:                      2020               2019            Incurred to Date
(in millions)
Severance costs                       $         12.0     $         26.4     $               38.4
Professional services and other costs            5.4               16.1                     21.5
Total                                 $         17.4     $         42.5     $               59.9



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Restructuring expenses related to the GBO Program by segment are as follows:
Year ended January 31:    2020      2019
(in millions)
Americas                 $  7.9$ 12.1
Europe                      8.4      29.0
Asia-Pacific                1.1       1.4
Total                    $ 17.4$ 42.5



GOODWILL IMPAIRMENT
During the fourth quarter of fiscal 2019, we recorded goodwill impairment
expense of $47.4 million related to our Asia-Pacific reporting unit (see Note 4
of Notes to Consolidated Financial Statements for further discussion).

LEGAL SETTLEMENTS AND OTHER, NET
We have been a claimant in proceedings seeking damages primarily from certain
manufacturers of LCD flat panel and cathode ray tube displays, as well as
reimbursement from insurance providers of certain costs associated with the
restatement of our consolidated financial statements and other financial
information from fiscal 2009 to 2013. We have reached settlement agreements
during the periods presented and have recorded these amounts net of attorney
fees and other expenses, in "legal settlements and other, net" in the
Consolidated Statement of Income.

GAIN ON DISPOSAL OF SUBSIDIARY
During fiscal 2019, we executed an agreement to sell certain of our operations
in Ireland for a total sales price of approximately $15.3 million. We recorded a
gain on sale of $6.7 million during the year ended January 31, 2019, which
includes the reclassification of $5.1 million from accumulated other
comprehensive income for cumulative translation adjustments associated with our
investment in this foreign entity. We recorded an additional gain on the sale of
this entity of $1.4 million during the year ended January 31, 2020. The
operating results of this entity during the years ended January 31, 2019 and
2018 were insignificant relative to the consolidated financial results.

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OPERATING INCOME


The following tables provide a comparison of GAAP operating income and non-GAAP
operating income on a consolidated and regional basis as well as a
reconciliation of GAAP operating income to non-GAAP operating income on a
consolidated and regional basis for the fiscal years ended January 31, 2020,
2019 and 2018:
[[Image Removed: chart-2db315918f5458838bd.jpg]][[Image Removed: chart-0b08d036f9312bf3754.jpg]]
2020 - 2019 COMMENTARY
•   The increase in GAAP operating income of $88.5 million as compared to the

prior fiscal year is primarily due to a decrease of $61.9 million in

acquisition, integration and restructuring costs, a prior year goodwill

impairment expense of $47.4 million, favorable changes is product mix and an

increase in net sales volume, excluding the impact of changes in foreign

currencies. This was partially offset by an increase in SG&A costs, including

a prior year benefit of $25 million related to the collection of an accounts

receivable balance previously considered uncollectible, and lower gains on

legal settlements.

• The decrease in non-GAAP operating income of $13.5 million as compared to the

prior fiscal year is primarily due to an increase in SG&A costs, including a

prior year benefit of $25 million related to the collection of an accounts

receivable balance previously considered uncollectible. This was partially

offset by favorable changes in product mix and an increase in net sales

volume, excluding the impact of changes in foreign currencies.

2019 - 2018 COMMENTARY • The increase in GAAP operating income of $83.7 million as compared to the

prior fiscal year is primarily due to an increase in net sales volume, a

decrease in acquisition, integration and restructuring expenses and a benefit

of approximately $25 million related to the collection of an accounts

receivable balance previously considered uncollectible, partially offset by

goodwill impairment expense of $47.4 million related to our Asia-Pacific

reporting unit and lower gains on legal settlements.

• The increase in non-GAAP operating income of $105.2 million as compared to

the prior fiscal year is primarily due to an increase in net sales volume and

a benefit of approximately $25 million related to the collection of an

accounts receivable balance previously considered uncollectible.

• The GAAP and non-GAAP results are also impacted by an additional month of TS

operations due to the timing of the completion of the acquisition in the

prior year.

CONSOLIDATED GAAP TO NON-GAAP RECONCILIATION OF OPERATING INCOME


Year ended January 31:                            2020           2019           2018
(in millions)
Operating income                              $    582.3$    493.8$    410.1
Acquisition, integration and restructuring
expenses                                            26.0           87.9     

136.3

Goodwill impairment                                    -           47.4     

-

Legal settlements and other, net                    (0.6 )        (15.4 )        (41.3 )
Gain on disposal of subsidiary                      (1.4 )         (6.7 )            -
Value added tax assessments                            -              -            1.7
Tax indemnifications                                 1.2            9.6            6.5
Acquisition-related intangible assets
amortization expense                                86.9           91.3           89.4
Non-GAAP operating income                     $    694.4$    707.9$    602.7



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AMERICAS



[[Image Removed: chart-efa270f0d4b255a9b84.jpg]][[Image Removed: chart-3ae3925b6a085e35933.jpg]]
2020 - 2019 COMMENTARY
•   The decrease in GAAP operating income of $33.4 million as compared to the

prior fiscal year is primarily due to a prior year benefit of $25 million

related to the collection of an accounts receivable balance previously

considered uncollectible, increased investments in our strategic priorities

and lower gains from legal settlements. This was partially offset by an

increase in net sales volume, favorable changes in product mix and a decrease

in acquisition, integration and restructuring costs.

• The decrease in non-GAAP operating income of $26.2 million as compared to the

prior fiscal year is primarily due to a prior year benefit of $25 million

related to the collection of an accounts receivable balance previously

considered uncollectible and increased investments in our strategic

priorities. This was partially offset by an increase in net sales volume and

favorable changes in product mix.

2019 - 2018 COMMENTARY • The increase in GAAP operating income of $118.2 million as compared to the

prior fiscal year is primarily due to an increase in net sales volume, a

decrease in acquisition, integration and restructuring expense and a benefit

of approximately $25 million related to the collection of an accounts

receivable balance previously considered uncollectible, partially offset by

lower gains from legal settlements.

• The increase in non-GAAP operating income of $97.6 million as compared to the

prior fiscal year is primarily due to an increase in net sales volume and a

benefit of approximately $25 million related to the collection of an accounts

receivable balance previously considered uncollectible.

• The GAAP and non-GAAP results are also impacted by an additional month of TS

operations due to the timing of the completion of the acquisition in the

prior year.

AMERICAS GAAP TO NON-GAAP RECONCILIATION OF OPERATING INCOME


Year ended January 31:                              2020           2019           2018
(in millions)
Operating income - Americas                     $    333.2$    366.6$    248.4
Acquisition, integration and restructuring
expenses                                              16.1           25.2   

75.5

Legal settlements and other, net                      (0.6 )        (15.4 )        (42.6 )
Value added tax assessments                              -              -   

0.5

Tax indemnifications                                     -            0.7              -
Acquisition-related intangible assets
amortization expense                                  56.4           54.2   

51.9

Non-GAAP operating income - Americas            $    405.1$    431.3$    333.7



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EUROPE


[[Image Removed: chart-e94ac1f9e218562a807.jpg]][[Image Removed: chart-c2c7aa7a89aa55ebb4c.jpg]]
2020 - 2019 COMMENTARY
•   The increase in GAAP operating income of $77.1 million, as compared to the

prior fiscal year, is primarily due to a reduction in acquisition,

integration and restructuring costs and favorable changes in product mix.

• The increase in non-GAAP operating income of $18.5 million, as compared to

the prior fiscal year, is primarily due to favorable changes in product mix.

2019 - 2018 COMMENTARY • The increase in GAAP operating income and non-GAAP operating income of $21.8

million and $16.3 million, respectively, as compared to the prior fiscal

year, is primarily due to an increase in net sales volume, partially offset

by an increase in SG&A expenses.

• The GAAP and non-GAAP results are also impacted by an additional month of TS

operations due to the timing of the completion of the acquisition in the

    prior year.



EUROPE GAAP TO NON-GAAP RECONCILIATION OF OPERATING INCOME


Year ended January 31:                              2020           2019           2018
(in millions)
Operating income - Europe                       $    272.5$    195.4$    173.6
Acquisition, integration and restructuring
expenses                                               8.4           57.7   

56.2

Legal settlements and other, net                         -              -   

1.3

Gain on disposal of subsidiary                        (1.4 )         (6.7 )            -
Value added tax assessments                              -              -            1.2
Tax indemnifications                                   1.3            9.5            6.5
Acquisition-related intangible assets
amortization expense                                  25.3           31.7   

32.5

Non-GAAP operating income - Europe              $    306.1$    287.6$    271.3




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ASIA-PACIFIC



Year ended January 31:                       2020                             2019                              2018
                                                    as a % of                      as a % of net                        as a % of
                                  $ in millions     net sales     $ in millions        sales         $ in millions      net sales
Operating income (loss) -
Asia-Pacific                     $         8.8       0.69 %      $       (36.7 )    (3.13 )%       $          17.5       1.70 %
Acquisition, integration and
restructuring expenses                     1.1                             2.4                                 0.8
Goodwill impairment                          -                            47.4                                   -
Tax indemnifications                      (0.1 )                          (0.6 )                                 -
Acquisition-related intangible
assets amortization expense                5.2                             5.4                                 5.0
Non-GAAP operating income -
Asia-Pacific                     $        15.0       1.18 %      $        17.9       1.53  %       $          23.3       2.26 %


2020 - 2019 COMMENTARY • GAAP operating income increased by $45.5 million when compared to the prior

year primarily due to the prior year goodwill impairment expense of $47.4

million and an increase in net sales volume, partially offset by an increase

in SG&A expenses.

• The decrease in non-GAAP operating income of $2.9 million when compared to

    the prior fiscal year is primarily due to an increase in SG&A expenses,
    partially offset by an increase in net sales volume.


2019 - 2018 COMMENTARY • GAAP operating income decreased by $54.2 million when compared to the prior

year primarily due to goodwill impairment expense of $47.4 million and an

increase in SG&A expenses, partially offset by an increase in net sales

volume.

• The decrease in non-GAAP operating income of $5.4 million when compared to

the prior fiscal year is primarily due to an increase in SG&A expenses,

partially offset by an increase in net sales volume.

• The GAAP and non-GAAP results are also impacted by an additional month of TS

operations due to the timing of the completion of the acquisition in the

    prior year.



OPERATING INCOME BY REGION



We do not consider stock-based compensation expenses in assessing the
performance of our operating segments, and therefore we report stock-based
compensation expenses separately. The following table summarizes our operating
income (loss) by geographic region.
Year ended January 31:             2020        2019        2018
(in millions)
Americas                         $ 333.2$ 366.6$ 248.4
Europe                             272.5       195.4       173.6
Asia-Pacific                         8.8       (36.7 )      17.5
Stock-based compensation expense   (32.2 )     (31.5 )     (29.4 )
Operating income                 $ 582.3$ 493.8$ 410.1




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INTEREST EXPENSE


                                                                       % Change:

Year ended January 31: 2020 2019 2018 2020 to 2019

   2019 to 2018
(in millions)
Interest expense          $ 86.0$ 106.7$ 112.2         (19.4 )%         (4.9 )%
Percentage of net sales     0.23 %      0.29 %      0.33 %



The decrease in interest expense in fiscal 2020 compared to fiscal 2019 of $20.7
million is primarily due to a benefit of $10.2 million related to our net
investment hedges (see further discussion in Note 12 of Notes to Consolidated
Financial Statements) and lower interest rates and average balances outstanding
on term loan credit agreements.

The decrease in interest expense in fiscal 2019 compared to fiscal 2018 of $5.5
million is primarily due to $8.3 million of prior year interest expense on $350
million of Senior Notes that matured in September 2017, $4.6 million of costs
incurred in the prior year related to a commitment for a bridge loan facility
obtained in conjunction with the acquisition of TS, and lower amounts
outstanding on term loan credit agreements, partially offset by higher average
borrowings and interest rates on other credit facilities during the period.

OTHER EXPENSE (INCOME), NET

Year ended January 31: 2020 2019 2018 (in millions) Other expense (income), net $ 11.8$ 13.8$ (1.2 ) Percentage of net sales 0.03 % 0.04 % - %




Other expense (income), net, consists primarily of gains and losses on the
investments contained within life insurance policies used to fund our
nonqualified deferred compensation plan, interest income, discounts on the sale
of accounts receivable and net foreign currency exchange gains and losses on
certain financing transactions and the related derivative instruments used to
hedge such financing transactions.

The change in other expense (income), net, in fiscal 2020 compared to fiscal
2019 is primarily attributable to higher gains on the investments contained
within life insurance policies, partially offset by lower interest income and
higher discount fees on of the sale of accounts receivable. The gains on
investments are substantially offset in our payroll costs which are reflected in
SG&A as part of operating income.

The change in other expense (income), net, during fiscal 2019 compared to fiscal
2018 is primarily attributable to lower gains on the investments contained
within life insurance policies of $9.0 million and higher discount fees on the
sale of accounts receivable of $5.9 million.


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PROVISION FOR INCOME TAXES

[[Image Removed: chart-18ef069ac11953b2adb.jpg]][[Image Removed: chart-95bb602d4e4a51508a9.jpg]] 2020 - 2019 COMMENTARY


The increase in both the effective tax rate and the provision for income taxes
in fiscal 2020 as compared to fiscal 2019 is primarily due to the impact of the
following:

•         In fiscal 2019, we finalized our analysis of the impact of the
          enactment of U.S. Tax Reform and decreased our estimate of the one-time
          transition tax by $49.2 million.


• In fiscal 2019, we recorded income tax benefits of $13.0 million in

relation to the settlement agreement reached with Avnet (see Note 5 of

Notes to Consolidated Financial Statements for further discussion).



•         In fiscal 2019, we recorded income tax benefits of $9.6 million due to
          the resolution of certain pre-acquisition tax matters related to TS.



•         In fiscal 2019, we recorded income tax benefits of $6.0 million related
          to changes in deferred tax valuation allowances.



Additionally, the increase in the absolute dollar value of the provision for
income taxes as compared to the prior year is due to an increase in taxable
earnings. The change in the effective tax rate was also impacted by goodwill
impairment expense in fiscal 2019 which was not deductible for tax purposes and
the relative mix of earnings and losses within the taxing jurisdictions in which
we operate.

2019 - 2018 COMMENTARY

The decrease in both the effective tax rate and the provision for income taxes
in fiscal 2019 as compared to fiscal 2018 is primarily due to the impact of the
following:

•         In fiscal 2018, we recorded income tax expense of $95.4 million related
          to our provisional estimate of the impact of the enactment of U.S. Tax
          Reform



•         In fiscal 2019, we finalized our analysis of the impact of the
          enactment of U.S. Tax Reform and decreased our estimate of the one-time
          transition tax by $49.2 million.


• In fiscal 2019, we recorded income tax benefits of $13.0 million in

          relation to the settlement agreement reached with Avnet.


• In fiscal 2019, we recorded income tax benefits of $6.0 million related

          to changes in deferred tax valuation allowances.


• The decrease in the U.S. federal income tax rate partially offset by

          Global Intangible Low-Taxed Income provisions due to U.S. Tax Reform.


Additionally, the change in the effective tax rate was impacted by the relative mix of earnings and losses within the taxing jurisdictions in which we operate.

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U.S. Tax Reform


On December 22, 2017, the U.S. federal government enacted the U.S. Tax Cuts and
Jobs Act ("U.S. Tax Reform") which significantly revised U.S. corporate income
tax law by, among other things, reducing the U.S. federal corporate income tax
rate from 35% to 21% and implementing a modified territorial tax system that
includes a one-time transition tax on deemed repatriated earnings of foreign
subsidiaries. The SEC provided accounting and reporting guidance that allowed us
to report provisional amounts within a measurement period up to one year due to
the complexities inherent in adopting the changes. In the fourth quarter of
fiscal 2018, we recorded income tax expense of $95.4 million, which represented
our reasonable estimate of the impact of the enactment of U.S. Tax Reform. The
amounts recorded include income tax expense of $101.1 million for the one-time
transition tax and a net income tax benefit of $5.7 million related to the
remeasurement of net deferred tax liabilities as a result of the change in the
U.S. federal corporate income tax rate. During fiscal 2019, we finalized our
analysis of the impact of the enactment of U.S. Tax Reform and decreased our
estimate of the one-time transition tax by $49.2 million, primarily due to
further analysis of earnings and profits of our foreign subsidiaries and the
utilization of foreign tax credits (see Note 9 of Notes to Consolidated
Financial Statements for further discussion).

Tax Indemnifications


In connection with the acquisition of TS, pursuant to the interest purchase
agreement, the Company and Avnet agreed to indemnify each other in relation to
certain tax matters. As a result, we have recorded certain indemnification
assets and liabilities for expected amounts to be received from and paid to
Avnet. During the years ended January 31, 2020, 2019 and 2018, due to the
resolution of certain pre-acquisition tax matters and the expiration of certain
statutes of limitation, we recorded benefits in income tax expense of $1.2
million, $9.6 million and $6.5 million, respectively. As a result, we recorded
expenses of $1.2 million, $9.6 million and $6.5 million during the years ended
January 31, 2020, 2019 and 2018, respectively, which are included in "selling,
general and administrative expenses" in the Consolidated Statement of Income,
related to changes in the corresponding indemnification assets and liabilities
recorded. The net impact of these items had no impact on our net income.


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NET INCOME AND EARNINGS PER SHARE - DILUTED



The following table provides a comparison of GAAP net income and earnings per
share-diluted and non-GAAP net income and earnings per share-diluted as well as
a reconciliation of results recorded in accordance with GAAP and non-GAAP
financial measures for the fiscal years ended January 31, 2020, 2019 and 2018 ($
in millions, except per share data):
[[Image Removed: chart-4f2eeeead7ab57b3b90.jpg]][[Image Removed: chart-0bb9b8f65a525c3d829.jpg]]
GAAP TO NON-GAAP RECONCILIATION OF NET INCOME AND EARNINGS PER SHARE-DILUTED


                                                Net Income                    Earnings per Share-Diluted
Year ended January 31:                 2020        2019        2018          2020          2019        2018
(in millions)
GAAP Results                         $ 374.5$ 340.6$ 116.6$   10.27$  8.89$ 3.05
Acquisition, integration and
restructuring expenses                  26.0        87.9       136.3          0.71          2.29       3.57
Goodwill impairment                        -        47.4           -             -          1.24          -
Legal settlements and other, net        (0.6 )     (15.4 )     (41.0 )       (0.02 )       (0.40 )    (1.07 )
Gain on disposal of subsidiary          (1.4 )      (6.7 )         -         (0.04 )       (0.18 )        -
Value added tax assessments and
related interest expense                   -        (0.9 )       2.6             -         (0.02 )     0.06
Acquisition-related intangible
assets amortization expense             86.9        91.3        89.4          2.38          2.38       2.34
Acquisition-related financing
expenses                                   -           -         8.8             -             -       0.23
Tax indemnifications                     1.2         9.6         6.5          0.03          0.25       0.17
Income tax effect of tax
indemnifications                        (1.2 )      (9.6 )      (6.5 )       (0.03 )       (0.25 )    (0.17 )
Income tax effect of other
adjustments above                      (27.9 )     (40.1 )     (61.0 )       (0.76 )       (1.04 )    (1.60 )
Income tax benefit from acquisition
settlement                                 -       (13.0 )         -             -         (0.34 )        -
Change in deferred tax valuation
allowances                               1.3        (6.0 )       1.2          0.04         (0.16 )     0.03
Impact of U.S. Tax Reform                  -       (49.2 )      95.4             -         (1.28 )     2.50
Non-GAAP results                     $ 458.8$ 435.9$ 348.3$   12.58$ 11.38$ 9.11



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LIQUIDITY AND CAPITAL RESOURCES

Our discussion of liquidity and capital resources includes an analysis of our cash flows and capital structure for all periods presented.

CASH CONVERSION CYCLE

                [[Image Removed: chart-696d283ec2cf598188d.jpg]]



As a distribution company, our business requires significant investment in
working capital, particularly accounts receivable and inventory, partially
financed through our accounts payable to vendors. An important driver of our
operating cash flows is our cash conversion cycle (also referred to as "net cash
days"). Our net cash days are defined as days of sales outstanding in accounts
receivable plus days of supply on hand in inventory, less days of purchases
outstanding in accounts payable. The following tables present the components of
our cash conversion cycle, in days, as of January 31, 2020, 2019 and 2018.


              [[Image Removed: chart-7c3fddcd86b38589ff9a03.jpg]]

[[Image Removed: chart-09c5e413573b592bb30.jpg]][[Image Removed: chart-c6183bd67a90555d9df.jpg]]

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CASH FLOWS

The following table summarizes our Consolidated Statement of Cash Flows: Year ended January 31:

                                           2020         2019          2018
(in millions)
Net cash provided by (used in):
Operating activities                                           $ 593.1$  380.1$  1,094.5
Investing activities                                            (290.3 )     (171.7 )     (2,479.2 )
Financing activities                                            (243.5 )     (332.2 )        119.9
Effect of exchange rate changes on cash and cash equivalents     (17.1 )      (32.7 )         94.8
Net increase (decrease) in cash and cash equivalents           $  42.2$ (156.5 )$ (1,170.0 )



OPERATING ACTIVITIES
The increase in cash resulting from operating activities in fiscal 2020 compared
to fiscal 2019 is primarily due to the favorable impact of changes in working
capital and higher earnings.
The decrease in cash resulting from operating activities in fiscal 2019 compared
to fiscal 2018 is primarily due to favorable changes in working capital in
fiscal 2018, including the impacts of changes in payment terms with certain
vendors and the acquisition of TS.
The significant components of our investing and financing cash flow activities
are listed below.

INVESTING ACTIVITIES
2020
•      $210 million cash paid for the acquisition of DLT (see Note 5 of Notes to

Consolidated Financial Statements for further discussion)

$84.8 million of capital expenditures



2019
•      $120 million in cash paid for the acquisition of TS pertaining to a
       settlement agreement with Avnet (see Note 5 of Notes to Consolidated
       Financial Statements for further discussion)

$61.4 million of capital expenditures

2018

$2.25 billion in cash paid for the acquisition of TS, net of cash acquired

$156 million paid to purchase certain logistics centers and office
       facilities upon termination of a synthetic lease arrangement




FINANCING ACTIVITIES
2020
•      $170.2 million paid to repurchase common stock under our share repurchase

program

• Repayment of $31.3 million of debt in connection with the acquisition of DLT

2019

• Repayment of $200.0 million on the term loan credit agreements

$107.0 million paid to repurchase common stock under our share repurchase

       program



2018

• Net borrowings under the term loan credit agreements of $500.0 million

• Repayment of $350.0 million 3.75% Senior Notes upon maturity







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CAPITAL RESOURCES AND DEBT COMPLIANCE


Our debt to total capital ratio was 32% at January 31, 2020. As part of our
capital structure and to provide us with significant liquidity, we have a
diverse range of financing facilities across our geographic regions with various
financial institutions. Also providing us liquidity are our cash and cash
equivalents balances across our regions which are deposited and/or invested with
various financial institutions. We are exposed to risk of loss on funds
deposited with these financial institutions; however, we monitor our financing
and depository financial institution partners regularly for credit quality. We
believe that our existing sources of liquidity, including our financing
facilities and cash resources, as well as cash expected to be provided by
operating activities will be sufficient to meet our working capital needs and
cash requirements for at least the next 12 months.

At January 31, 2020, we had approximately $841.4 million in cash and cash
equivalents, of which approximately $749.6 million was held in our foreign
subsidiaries. As discussed above, we currently have sufficient resources, cash
flows and liquidity within the U.S. to fund current and expected future working
capital requirements. As of January 31, 2019, we completed our accounting for
the tax effects of U.S. Tax Reform including finalizing the accounting related
to our indefinite reinvestment assertion. As a result of the transition tax
incurred pursuant to U.S. Tax Reform, we were able to repatriate foreign cash,
along with the majority of our remaining foreign earnings which have been
previously taxed, with minimal additional tax consequences. We plan to continue
reinvesting future foreign earnings indefinitely outside the U.S. Any future
remittances of foreign cash could be subject to additional foreign withholding
tax, U.S. state taxes and certain tax impacts relating to foreign currency
exchange effects.

The following is a discussion of our various financing facilities:


Senior notes
In January 2017, we issued $500.0 million aggregate principal amount of 3.70%
Senior Notes due February 15, 2022 (the "3.70% Senior Notes") and $500.0 million
aggregate principal amount of 4.95% Senior Notes due February 15, 2027 (the
"4.95% Senior Notes") (collectively the "2017 Senior Notes"). We pay interest on
the 2017 Senior Notes semi-annually in arrears on February 15 and August 15 of
each year. The interest rate payable on the 2017 Senior Notes will be subject to
adjustment from time to time if the credit rating assigned to such series of
notes changes. At no point will the interest rate be reduced below the interest
rate payable on the notes on the date of the initial issuance or increase more
than 2.00% above the interest rate payable on the notes of the series on the
date of their initial issuance. The 2017 Senior Notes are senior unsecured
obligations of the Company and will rank equally with all other unsecured and
unsubordinated indebtedness from time to time outstanding.

We, at our option, may redeem the 3.70% Senior Notes at any time prior to
January 15, 2022 and the 4.95% Senior Notes at any time prior to November 15,
2026, in each case in whole or in part, at a redemption price equal to the
greater of (i) 100% of the principal amount of the 2017 Senior Notes to be
redeemed or (ii) the sum of the present values of the remaining scheduled
payments of principal and interest on the 2017 Senior Notes to be redeemed,
discounted to the date of redemption on a semi-annual basis at a rate equal to
the sum of the applicable Treasury Rate plus 30 basis points for the 3.70%
Senior Notes and 40 basis points for the 4.95% Senior Notes, plus the accrued
and unpaid interest on the principal amount being redeemed up to the date of
redemption. We may also redeem the 2017 Senior Notes, at any time in whole or
from time to time in part, on or after January 15, 2022 for the 3.70% Senior
Notes and November 15, 2026 for the 4.95% Senior Notes, in each case, at a
redemption price equal to 100% of the principal amount of the 2017 Senior Notes
to be redeemed.

On March 10, 2020, Tiger Merger Sub Co., an affiliate of certain investment
funds managed by affiliates of Apollo, launched an offer to purchase for cash
any and all of our outstanding 3.70% Senior Notes and any and all of our
outstanding 4.95% Senior Notes and a consent solicitation to amend the indenture
and global securities establishing the 3.70% Senior Notes and the 4.95% Senior
Notes to (i) eliminate the requirement to make a "change of control" offer in
connection with the proposed merger of Tiger Merger Sub Co. into the Company
pursuant to the Merger Agreement and (ii) make certain other customary changes
for a privately-held company to the "change of control" provisions (the
"Proposed Amendments"). Concurrently with, but separate from, the aforementioned
offer to purchase and consent solicitation, Tiger Merger Sub. Co. launched a
consent solicitation for the Proposed Amendments for holders of the 4.95% Senior
Notes. On March 24, 2020, Tiger Merger Sub Co. announced that the requisite more
than 50% of consents were received to adopt the Proposed Amendments. On March
24, 2020, we entered into a Supplemental Indenture with respect to the Indenture
and Global Security for the 3.70% Senior Notes and a Supplemental Indenture with
respect to the Indenture and Global Security for the 4.95% Senior Notes
effecting the Proposed Amendments.

Other credit facilities
We have a $1.5 billion revolving credit facility with a syndicate of banks (the
"Credit Agreement") which, among other things, provides for (i) a maturity date
of May 15, 2024, (ii) an interest rate on borrowings, facility fees and letter
of credit fees based on our debt rating, (iii) the ability to increase the
facility to a maximum of $1.75 billion, subject to certain conditions and (iv)
certain of our subsidiaries to be designated as borrowers. The applicable
borrower will pay interest on advances under the Credit Agreement based on LIBOR
(or similar interbank offered rates depending on currency draw) plus a
predetermined margin that is based on our debt rating. Our borrowings under the
Credit Agreement vary within the period primarily based on changes in our
working capital. There were no amounts outstanding under the Credit Agreement at
January 31, 2020 and 2019.

We entered into a term loan credit agreement in November 2016 with a syndicate of banks (the "2016 Term Loan Credit Agreement") which provided for the borrowing of senior unsecured term loans in an original aggregate principal amount of up to $1.0

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billion. We paid interest on advances under the 2016 Term Loan Credit Agreement
at a variable rate based on LIBOR plus a predetermined margin based on our debt
rating. We had $300 million outstanding under the 2016 Term Loan Credit
Agreement at January 31, 2019. On August 2, 2019, we entered into a new term
loan credit agreement (the "2019 Term Loan Credit Agreement"), the proceeds of
which were used to repay in full the amounts outstanding under the 2016 Term
Loan Credit Agreement. The 2019 Term Loan Credit Agreement, among other things,
(i) provides for a $300 million term loan credit facility with a maturity date
of August 2, 2021, (ii) provides for an interest rate on the outstanding
principal amount of the loan that is based on LIBOR plus a predetermined margin,
and (iii) may be increased up to a total of $500 million, subject to certain
conditions. We had $300.0 million outstanding under the 2019 Term Loan Credit
Agreement at January 31, 2020.

We also have an agreement with a syndicate of banks (the "Receivables
Securitization Program") that allows us to transfer an undivided interest in a
designated pool of U.S. accounts receivable, on an ongoing basis, to provide
collateral for borrowings up to a maximum of $1.0 billion. The scheduled
termination date of the agreement is April 16, 2021. Under this program, we
transfer certain U.S. trade receivables into a wholly-owned bankruptcy remote
special purpose entity. Such receivables, which are recorded in the Consolidated
Balance Sheet, totaled approximately $1.6 billion and $1.7 billion,
respectively, at January 31, 2020 and 2019. As collections reduce accounts
receivable balances included in the collateral pool, we may transfer interests
in new receivables to bring the amount available to be borrowed up to the
maximum. We pay interest on advances under the Receivables Securitization
Program at designated commercial paper or LIBOR-based rates plus an agreed-upon
margin. Our borrowings under the Receivables Securitization Agreement vary
within the period primarily based on changes in our working capital. There were
no amounts outstanding under the Receivables Securitization Program at January
31, 2020 and 2019.

In addition to the facilities described above, we have various other committed
and uncommitted lines of credit, short-term loans and overdraft facilities
totaling approximately $374.8 million at January 31, 2020 to support our
operations. Most of these facilities are provided on an unsecured, short-term
basis and are reviewed periodically for renewal. Our borrowings under these
facilities vary within the period primarily based on changes in our working
capital. There was $108.4 million outstanding on these facilities at January 31,
2020, at a weighted average interest rate of 6.79%, and there was $102.3 million
outstanding at January 31, 2019, at a weighted average interest rate of 8.05%.

At January 31, 2020, we had also issued standby letters of credit of $38.2
million. These letters of credit typically act as a guarantee of payment to
certain third parties in accordance with specified terms and conditions. The
issuance of certain of these letters of credit reduces the Company's borrowing
availability under certain of the above-mentioned credit facilities.

Certain of our credit facilities contain limitations on the amounts of annual
dividends and repurchases of common stock and require compliance with other
obligations, warranties and covenants. The financial ratio covenants within
these credit facilities include a maximum total leverage ratio and a minimum
interest coverage ratio. At January 31, 2020, we were in compliance with all
such financial covenants.

Accounts receivable purchase agreements
We have uncommitted accounts receivable purchase agreements under which certain
accounts receivable may be sold, without recourse, to third-party financial
institutions. Under these programs, we may sell certain accounts receivable in
exchange for cash less a discount, as defined in the agreements. Available
capacity under these programs, which we use as a source of working capital
funding, is dependent on the level of accounts receivable eligible to be sold
into these programs and the financial institutions' willingness to purchase such
receivables. In addition, certain of these agreements also require that we
continue to service, administer and collect the sold accounts receivable. At
January 31, 2020 and 2019, we had a total of $739 million and $1.1 billion,
respectively, of accounts receivable sold to and held by financial institutions
under these agreements. During the fiscal years ended January 31, 2020, 2019 and
2018, discount fees recorded under these facilities were $15.9 million, $14.9
million and $9.0 million, respectively, which are included as a component of
"other expense (income), net" in the Consolidated Statement of Income.

Share Repurchase Program
In October 2018, our Board of Directors authorized a share repurchase program
for up to $200.0 million of our common stock. In February 2019, the Board of
Directors approved a $100.0 million increase to the program. In August 2019, our
Board of Directors authorized the repurchase of up to an additional $200.0
million of our common stock, resulting in a total share repurchase authorization
of $500.0 million. In conjunction with our share repurchase program, a 10b5-1
plan was executed that instructs the broker selected by the Company to
repurchase shares on our behalf. The amount of common stock repurchased in
accordance with the 10b5-1 plan on any given trading day is determined by a
formula in the plan, which is based on the market price of our common stock.
Shares we repurchase are held in treasury for general corporate purposes,
including issuances under equity incentive and benefit plans.

We repurchased 1,723,081 shares of our common stock at a cost of $170.2 million
during the year ended January 31, 2020 and 1,429,154 shares of our common stock
at a cost of $107.0 million during the year ended January 31, 2019. Pursuant to
the terms of the Merger Agreement with the affiliates of Apollo Funds, we
suspended our share repurchase program as of November 13, 2019.

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CONTRACTUAL OBLIGATIONS


As of January 31, 2020, future payments due under contractual obligations are as
follows:

                                                                           U.S. Tax
(in millions)                    Operating leases        Debt (1)         Reform (2)          Total
Fiscal year:
2021                           $             70.3     $      164.2     $             -     $      234.5
2022                                         51.8            381.3                   -            433.1
2023                                         42.4            547.2                 4.9            594.5
2024                                         32.7             25.4                10.3             68.4
2025                                         21.7             24.8                12.8             59.3
Thereafter                                   56.7            561.9                   -            618.6
Total payments                              275.6          1,704.8                28.0          2,008.4
Less amounts representing
interest                                        -           (247.8 )                 -           (247.8 )
Total principal payments       $            275.6     $    1,457.0     $    

28.0 $ 1,760.6

(1) Amounts include fixed rate interest on the Senior Notes as well as the

estimated interest on the outstanding balance of the 2019 Term Loan Credit

Agreement based on the applicable interest rate as of January 31, 2020.

Amounts exclude estimated interest on other committed and uncommitted

revolving credit facilities as these facilities are at variable rates of

interest.

(2) Represents our remaining obligation under U.S. Tax Reform to pay the

    transition tax on certain non-U.S. earnings (see Note 9 of Notes to
    Consolidated Financial Statements for further discussion).



Purchase orders for the purchase of inventory and other goods and services are
not included in the table above. We are not able to determine the aggregate
amount of such purchase orders that represent contractual obligations, as
purchase orders typically represent authorizations to purchase rather than
binding agreements. For the purposes of this table, contractual obligations for
purchase of goods or services are defined as agreements that are enforceable and
legally binding on us and that specify all significant terms, including: fixed
or minimum quantities to be purchased; fixed, minimum or variable price
provisions; and the approximate timing of the transaction. Our purchase orders
are based on our current demand expectations and are fulfilled by our vendors
within short time horizons. We do not have significant non-cancelable agreements
for the purchase of inventory or other goods specifying minimum quantities or
set prices that exceed our expected requirements for the next three months. We
also enter into contracts for outsourced services; however, the obligations
under these contracts were not significant and the contracts generally contain
clauses allowing for cancellation without significant penalty.

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OFF-BALANCE SHEET ARRANGEMENTS

Guarantees

As is customary in the technology industry, to encourage certain customers to
purchase product from us, we have arrangements with certain finance companies
that provide inventory financing facilities for our customers. In conjunction
with certain of these arrangements, we have agreements with the finance
companies that would require us to repurchase certain inventory, which might be
repossessed from the customers by the finance companies. Due to various reasons,
including among other items, the lack of information regarding the amount of
saleable inventory purchased from us still on hand with the customer at any
point in time, our repurchase obligations relating to inventory cannot be
reasonably estimated. Repurchases of inventory by us under these arrangements
have been insignificant to date.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES


The information included within MD&A is based upon our consolidated financial
statements, which have been prepared in accordance with GAAP. The preparation of
these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses, and
the related disclosures. On an ongoing basis, we evaluate these estimates,
including those related to accounts receivable, inventory, vendor programs,
goodwill and intangible assets, deferred taxes, and contingencies. Our estimates
and judgments are based on currently available information, historical results,
and other assumptions we believe are reasonable. Actual results could differ
materially from these estimates. We believe the critical accounting policies
discussed below affect the more significant judgments and estimates used in the
preparation of our consolidated financial statements.
Accounts Receivable
We maintain allowances for doubtful accounts receivable for estimated losses
resulting from the inability or unwillingness of our customers to make required
payments. In estimating the required allowance, we take into consideration the
overall quality and aging of the receivable portfolio, the existence of credit
insurance and specifically identified customer risks. Also influencing our
estimates are the following: (i) the large number of customers and their
dispersion across wide geographic areas; (ii) the fact that no single customer
accounts for more than 10% of our net sales; (iii) the value and adequacy of
collateral received from customers, if any; (iv) our historical write-off
experience; and (v) the current economic environment. If actual customer
performance were to deteriorate to an extent not expected by us, additional
allowances may be required which could have an adverse effect on our
consolidated financial results. Conversely, if actual customer performance were
to improve to an extent not expected by us, a reduction in allowances may be
required which could have a favorable effect on our consolidated financial
results.
Inventory
We value our inventory at the lower of its cost or net realizable value, cost
being determined on a moving average cost basis. We write down our inventory for
estimated obsolescence equal to the difference between the cost of inventory and
the net realizable value based upon an aging analysis of the inventory on hand,
specifically known inventory-related risks (such as technological obsolescence
and the nature of vendor terms surrounding price protection and product
returns), foreign currency fluctuations for foreign-sourced products, and
assumptions about future demand. Market conditions or changes in terms and
conditions by our vendors that are less favorable than those projected by
management may require additional inventory write-downs, which could have an
adverse effect on our consolidated financial results.
Vendor Programs
We participate in various vendor programs under which the vendor may provide
certain incentives such as cooperative advertising allowances, infrastructure
funding, more favorable payment terms, early pay discounts and rebate
agreements. These programs are generally under quarterly, semi-annual or annual
agreements with the vendors; however, some of these programs are negotiated on
an ad-hoc basis mutually developed with the vendor. Volume rebates and early
payment discounts received from vendors are recorded when they are earned as a
reduction of inventory and as a reduction of cost of products sold as the
related inventory is sold. Vendor incentives for specifically identified
cooperative advertising programs and infrastructure funding are recorded when
earned as adjustments to cost of products sold or selling, general and
administrative expenses, depending on the nature of the program.
We also provide reserves for receivables on vendor programs for estimated losses
resulting from vendors' inability to pay or rejections by vendors of claims.
Should amounts recorded as outstanding receivables from vendors be deemed
uncollectible, additional allowances may be required which could have an adverse
effect on our consolidated financial results. Conversely, if actual vendor
performance were to improve to an extent not expected by us, a reduction in
allowances may be required which could have a favorable effect on our
consolidated financial results.
Goodwill, Intangible Assets and Other Long-Lived Assets
We perform an annual review for the potential impairment of the carrying value
of goodwill, or more frequently if current events and circumstances indicate a
possible impairment. For purposes of our goodwill analysis, we have three
reporting units, which are also our operating segments. We evaluate the
appropriateness of performing a qualitative assessment, on a reporting unit
level, based on current circumstances. If the results of the qualitative
assessment indicate that it is more likely than not that the fair value of a

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reporting unit is greater than its carrying amount, the quantitative impairment
test will not be performed. The factors that are considered in the qualitative
analysis include macroeconomic conditions, industry and market considerations,
cost factors such as increases in product cost, labor, or other costs that would
have a negative effect on earnings and cash flows and other relevant
entity-specific events and information.
If we conclude that it is more likely than not that the fair value of a
reporting unit is less than its carrying amount, then the quantitative
impairment test is performed. The quantitative impairment test compares the fair
value of our reporting units with their carrying amounts, including goodwill.
The fair values of the reporting units are estimated using market and discounted
cash flow approaches. The assumptions used in the market approach are based on
the value of a business through an analysis of multiples of guideline companies
and recent sales or offerings of a comparable entity. The assumptions used in
the discounted cash flow approach are based on historical and forecasted
revenue, operating costs, working capital requirements, economic conditions and
other relevant factors. If the carrying amount of a reporting unit exceeds its
fair value, an impairment charge is recognized for the amount by which the
carrying amount exceeds the reporting unit's fair value, only to the extent of
the carrying value of goodwill allocated to that reporting unit.
We also examine the carrying value of our intangible assets with finite lives,
which includes capitalized software and development costs, purchased intangibles
and other long-lived assets as current events and circumstances warrant
determining whether there are any impairment losses. Factors that may cause an
intangible asset or other long-lived asset impairment include negative industry
or economic trends and significant under-performance relative to historical or
projected future operating results.
Income Taxes
We record valuation allowances to reduce our deferred tax assets to the amount
expected to be realized. We consider all positive and negative evidence
available in determining the potential of realizing deferred tax assets,
including the scheduled reversal of temporary differences, recent cumulative
losses, recent and projected future taxable income, and prudent and feasible tax
planning strategies. In making this determination, we place greater emphasis on
recent cumulative losses and recent taxable income due to the inherent lack of
subjectivity associated with these factors. If we determine it is more likely
than not that we will be able to use a deferred tax asset in the future in
excess of its net carrying value, an adjustment to the deferred tax asset
valuation allowance would be made to reduce income tax expense, thereby
increasing net income in the period such determination is made. Should we
determine that we are not likely to realize all or part of our net deferred tax
assets in the future, an adjustment to the deferred tax asset valuation
allowance would be made to increase income tax expense, thereby reducing net
income in the period such determination is made.
Contingencies
We accrue for contingent obligations, including estimated legal costs, when the
obligation is probable and the amount is reasonably estimable. As facts
concerning contingencies become known, we reassess our position and make
appropriate adjustments to the financial statements. Estimates that are
particularly sensitive to future changes include those related to tax, legal and
other regulatory matters such as imports and exports, the imposition of
international governmental controls, changes in the interpretation and
enforcement of international laws (in particular related to items such as duty
and taxation), and the impact of local economic conditions and practices, which
are all subject to change as events evolve and as additional information becomes
available during the administrative and litigation process.
RECENT ACCOUNTING PRONOUNCEMENTS


See Note 1 of Notes to Consolidated Financial Statements for the discussion on recent accounting pronouncements.

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