Company Quick10K Filing
Quick10K
Tech Data
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$103.10 37 $3,800
10-Q 2019-04-30 Quarter: 2019-04-30
10-K 2019-01-31 Annual: 2019-01-31
10-Q 2018-10-31 Quarter: 2018-10-31
10-Q 2018-07-31 Quarter: 2018-07-31
10-Q 2018-04-30 Quarter: 2018-04-30
10-K 2018-01-31 Annual: 2018-01-31
10-Q 2017-10-31 Quarter: 2017-10-31
10-Q 2017-07-31 Quarter: 2017-07-31
10-Q 2017-04-30 Quarter: 2017-04-30
10-K 2017-01-31 Annual: 2017-01-31
10-Q 2016-10-31 Quarter: 2016-10-31
10-Q 2016-07-31 Quarter: 2016-07-31
10-Q 2016-04-30 Quarter: 2016-04-30
10-K 2016-01-31 Annual: 2016-01-31
10-Q 2015-10-31 Quarter: 2015-10-31
10-Q 2015-07-31 Quarter: 2015-07-31
10-Q 2015-04-30 Quarter: 2015-04-30
10-K 2015-01-31 Annual: 2015-01-31
10-Q 2014-10-31 Quarter: 2014-10-31
10-Q 2014-07-31 Quarter: 2014-07-31
10-Q 2014-04-30 Quarter: 2014-04-30
10-K 2014-01-31 Annual: 2014-01-31
10-Q 2013-07-31 Quarter: 2013-07-31
10-Q 2013-07-31 Quarter: 2013-07-31
10-Q 2013-04-30 Quarter: 2013-04-30
10-K 2013-01-31 Annual: 2013-01-31
8-K 2019-05-30 Earnings, Exhibits
8-K 2019-05-15 Enter Agreement, Leave Agreement, Off-BS Arrangement, Exhibits
8-K 2019-04-16 Enter Agreement
8-K 2018-11-29 Earnings, Exhibits
8-K 2018-08-29 Earnings, Exit Costs, Exhibits
8-K 2018-05-31 Earnings, Exhibits
8-K 2018-04-16 Officers, Exhibits
8-K 2018-03-08 Earnings, Exhibits
8-K 2018-01-31 Enter Agreement
8-K 2018-01-25 Officers, Exhibits
GGG Graco 8,470
LFUS Littelfuse 4,420
EVLO Evelo Biosciences 269
TCRD THL Credit 220
GECC Great Elm Capital 90
INFI Infinity Pharmaceuticals 84
SAEX Saexploration Holdings 13
KLXI KLX 0
LVLT Level 3 Communications 0
ITKG Integral Technologies 0
TECD 2019-04-30
Part I. Financial Information
Item 1. Financial Statements
Note 1 - Business and Summary of Significant Accounting Policies
Note 2 - Earnings per Share ("Eps")
Note 3 - Acquisition, Integration and Restructuring Expenses
Note 4 - Debt
Note 5 - Stock-Based Compensation
Note 6 - Fair Value Measurements
Note 7 - Derivative Instruments
Note 8 - Shareholders' Equity
Note 9 - Leases
Note 10 - Commitments & Contingencies
Note 11 - Segment Information
Note 12 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-10.1 ex101amendmentno1taa10q.htm
EX-31.A exhibit31-aq1fy20.htm
EX-31.B exhibit31-bq1fy20.htm
EX-32.A exhibit32-aq1fy20.htm
EX-32.B exhibit32-bq1fy20.htm

Tech Data Earnings 2019-04-30

TECD 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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Table of Contents

            
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 

(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2019
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 0-14625  

td_logoa04.jpg
TECH DATA CORPORATION
(Exact name of Registrant as specified in its charter)
 
Florida
No. 59-1578329
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
5350 Tech Data Drive Clearwater, Florida
33760
(Address of principal executive offices)
(Zip Code)
(Registrant’s Telephone Number, including Area Code): (727) 539-7429
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading symbol
 
Name of each exchange which registered
Common stock, par value $.0015 per share
 
TECD
 
NASDAQ Stock Exchange
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 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 every Interactive Data File required to be submitted 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 such files).    Yes x    No   ¨ 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “accelerated filer”, “large accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):  
Large accelerated Filer
x
Accelerated Filer
¨
 
 
 
 
Non-accelerated Filer
¨ 
Smaller Reporting Company Filer
¨
 
 
 
 
 
 
Emerging Growth Company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes   ¨ No  x
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
Class
Outstanding at May 30, 2019
Common stock, par value $.0015 per share
36,485,564
 
    

1

Table of Contents

TECH DATA CORPORATION AND SUBSIDIARIES
Form 10-Q for the Three Months Ended April 30, 2019
INDEX

 
 
PAGE
PART I.
 
ITEM 1.
 
 
 
 
 
 
ITEM 2.
ITEM 3.
ITEM 4.
PART II.
ITEM 1.
ITEM 1A.
ITEM 2
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.
 

2

Table of Contents


PART I. FINANCIAL INFORMATION

ITEM 1.
Financial Statements

TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except par value and share amounts)
 
 
April 30, 2019
 
January 31, 2019
ASSETS
(Unaudited)
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
797,500

 
$
799,123

Accounts receivable, net
5,423,370

 
6,241,740

Inventories
3,260,840

 
3,297,385

Prepaid expenses and other assets
367,858

 
354,601

Total current assets
9,849,568

 
10,692,849

Property and equipment, net
271,906

 
274,917

Goodwill
887,175

 
892,990

Intangible assets, net
924,338

 
950,858

Other assets, net
378,762

 
174,938

Total assets
$
12,311,749

 
$
12,986,552

 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
6,715,555

 
$
7,496,466

Accrued expenses and other liabilities
984,366

 
1,000,126

Revolving credit loans and current maturities of long-term debt, net
123,092

 
110,368

Total current liabilities
7,823,013

 
8,606,960

Long-term debt, less current maturities
1,297,943

 
1,300,554

Other long-term liabilities
274,887

 
142,315

Total liabilities
9,395,843

 
10,049,829

Commitments and contingencies (Note 10)

 

Shareholders’ equity:
 
 
 
Common stock, par value $.0015; 200,000,000 shares authorized; 59,245,585 shares issued at April 30, 2019 and January 31, 2019
89

 
89

Additional paid-in capital
836,508

 
844,206

Treasury stock, at cost (22,483,529 and 22,305,464 shares at April 30, 2019 and January 31, 2019)
(1,065,657
)
 
(1,037,872
)
Retained earnings
3,141,914

 
3,086,514

Accumulated other comprehensive income
3,052

 
43,786

Total shareholders' equity
2,915,906

 
2,936,723

Total liabilities and shareholders' equity
$
12,311,749

 
$
12,986,552

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

3

Table of Contents

TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share amounts)
(Unaudited)
 
 
Three months ended April 30,
 
2019
 
2018
Net sales
$
8,406,424

 
$
8,548,319

Cost of products sold
7,897,045

 
8,025,202

Gross profit
509,379

 
523,117

Operating expenses:
 
 
 
Selling, general and administrative expenses
405,816

 
422,361

Acquisition, integration and restructuring expenses
6,221

 
33,225

Legal settlements and other, net
(282
)
 
(2,965
)
 
411,755

 
452,621

Operating income
97,624

 
70,496

Interest expense
26,257

 
25,922

Other (income) expense, net
(693
)
 
1,917

Income before income taxes
72,060

 
42,657

Provision for income taxes
16,660

 
8,958

Net income
$
55,400

 
$
33,699

Earnings per share:
 
 
 
Basic
$
1.50

 
$
0.88

Diluted
$
1.49

 
$
0.87

Weighted average common shares outstanding:
 
 
 
Basic
37,011

 
38,281

Diluted
37,247

 
38,561


The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
 

4

Table of Contents

TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 
 
Three months ended April 30,
 
2019
 
2018
Net income
$
55,400

 
$
33,699

Other comprehensive loss:
 
 
 
          Foreign currency translation adjustment, net of tax
(40,523
)
 
(88,252
)
Unrealized loss on cash flow hedges, net of tax
(211
)
 

Other comprehensive loss
(40,734
)
 
(88,252
)
Total comprehensive income (loss)
$
14,666

 
$
(54,553
)


The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
 

5

Table of Contents

TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands)
(Unaudited)

 
Common Stock
 
Additional
paid-in
capital
 
Treasury
stock
 
Retained
earnings
 
Accumulated  other comprehensive income
 
Total
shareholders' equity
 
Shares  
 
Amount  
 
Balance at January 31, 2019
59,246

 
$
89

 
$
844,206

 
$
(1,037,872
)
 
$
3,086,514

 
$
43,786

 
$
2,936,723

Repurchases of common stock

 

 

 
(35,681
)
 

 

 
(35,681
)
Issuance of treasury stock for benefit plan and equity-based awards exercised

 

 
(16,003
)
 
7,896

 

 

 
(8,107
)
Stock-based compensation expense

 

 
8,305

 

 

 

 
8,305

Total other comprehensive loss

 

 

 

 

 
(40,734
)
 
(40,734
)
Net income

 

 

 

 
55,400

 

 
55,400

Balance at April 30, 2019
59,246

 
$
89

 
$
836,508

 
$
(1,065,657
)
 
$
3,141,914

 
$
3,052

 
$
2,915,906


 
Common Stock
 
Additional
paid-in
capital
 
Treasury
stock
 
Retained
earnings
 
Accumulated  other comprehensive income
 
Total
shareholders' equity
 
Shares  
 
Amount  
 
Balance at January 31, 2018
59,246

 
$
89

 
$
827,301

 
$
(940,124
)
 
$
2,745,934

 
$
288,292

 
$
2,921,492

Issuance of treasury stock for benefit plan and equity-based awards exercised

 

 
(12,771
)
 
6,957

 

 

 
(5,814
)
Stock-based compensation expense

 

 
7,587

 

 

 

 
7,587

Total other comprehensive loss

 

 

 

 

 
(88,252
)
 
(88,252
)
Net income

 

 

 

 
33,699

 

 
33,699

Balance at April 30, 2018
59,246

 
$
89

 
$
822,117

 
$
(933,167
)
 
$
2,779,633

 
$
200,040

 
$
2,868,712





6

Table of Contents

TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
 
Three months ended April 30,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Cash received from customers
$
11,913,347

 
$
11,514,374

Cash paid to vendors and employees
(11,800,318
)
 
(12,038,399
)
Interest paid, net
(35,101
)
 
(33,763
)
Income taxes paid
(14,739
)
 
(8,830
)
Net cash provided by (used in) operating activities
63,189

 
(566,618
)
Cash flows from investing activities:

 
 
Expenditures for property and equipment
(7,745
)
 
(4,894
)
Software and software development costs
(7,534
)
 
(3,561
)
Other
(548
)
 
(267
)
Net cash used in investing activities
(15,827
)
 
(8,722
)
Cash flows from financing activities:
 
 
 
Principal payments on long-term debt
(5,224
)
 
(2,899
)
Cash paid for debt issuance costs
(1,028
)
 

Net borrowings (repayments) on revolving credit loans
14,227

 
(13,291
)
Payments for employee tax withholdings on equity awards
(8,602
)
 
(6,255
)
Proceeds from the reissuance of treasury stock
495

 
442

Repurchases of common stock
(35,681
)
 

Net cash used in financing activities
(35,813
)
 
(22,003
)
Effect of exchange rate changes on cash and cash equivalents
(13,172
)
 
(12,708
)
Net decrease in cash and cash equivalents
(1,623
)
 
(610,051
)
Cash and cash equivalents at beginning of year
799,123

 
955,628

Cash and cash equivalents at end of period
$
797,500

 
$
345,577

Reconciliation of net income to net cash provided by operating activities:
 
 
 
Net income
$
55,400

 
$
33,699

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
37,257

 
40,481

Provision for losses on accounts receivable
1,765

 
924

Stock-based compensation expense
8,305

 
7,587

Accretion of debt discount and debt issuance costs
378

 
378

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
751,836

 
670,528

Inventories
2,450

 
(7,387
)
Prepaid expenses and other assets
2,245

 
(30,344
)
Accounts payable
(706,381
)
 
(1,132,019
)
Accrued expenses and other liabilities
(90,066
)
 
(150,465
)
Total adjustments
7,789

 
(600,317
)
Net cash provided by (used in) operating activities
$
63,189

 
$
(566,618
)
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

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TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Tech Data Corporation (“Tech Data” or the “Company”) is one of the world’s largest IT distribution and solutions companies. Tech Data serves 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 customers create solutions best suited to maximize business outcomes for their end-user customers. Tech Data’s customers include value-added resellers, direct marketers, retailers, corporate resellers and managed service providers who support the diverse technology needs of end users. The Company manages its operations in three geographic segments: the Americas, Europe and Asia-Pacific.
Principles of Consolidation
The consolidated financial statements include the accounts of Tech Data and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company operates on a fiscal year that ends on January 31.
Basis of Presentation
The consolidated financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the United States ("U.S.") Securities and Exchange Commission (“SEC”). The Company prepares its financial statements in conformity with generally accepted accounting principles in the U.S. (“GAAP”). These principles require management to make estimates and assumptions that 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 period. Actual results could differ from those estimates. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the consolidated financial position of the Company as of April 30, 2019, and its consolidated statements of income, comprehensive income (loss), shareholders' equity and cash flows for the three months ended April 30, 2019 and 2018.
Seasonality
The Company’s quarterly operating results have fluctuated significantly in the past and will likely continue to do so in the future as a result of currency fluctuations and seasonal variations in the demand for the products and services we sell. Narrow operating margins may magnify the impact of these factors on the Company's quarterly operating results. Historical seasonal variations have included an increase in European demand during the Company’s fiscal fourth quarter and decreased demand in other fiscal quarters. The seasonal trend in Europe typically results in greater operating leverage, and therefore, lower selling, general and administrative expenses as a percentage of net sales in the region and on a consolidated basis during the second half of the Company's fiscal year, particularly in the Company's fourth quarter. Therefore, the results of operations for the three months ended April 30, 2019 and 2018 are not necessarily indicative of the results that can be expected for the entire fiscal year ended January 31, 2020.
Revenue Recognition
The Company’s revenues primarily result from the sale of various technology products and services. The Company recognizes revenue as control of products is transferred to customers, which generally happens at the point of shipment. Products sold by the Company are delivered via shipment from the Company’s facilities, dropshipment directly from the vendor, or by electronic delivery of keys for software products. In relation to product support, supply chain management and other services performed by the Company, revenue is recognized over time as the services are performed. Service revenues and related contract liabilities were not material for the periods presented.
The Company has contracts with certain customers where the Company’s performance obligation is to arrange for the products or services to be provided by another party. In these arrangements, as the Company assumes an agency relationship in the transaction, revenue is recognized in the amount of the net fee associated with serving as an agent. These arrangements primarily relate to certain fulfillment contracts, as well as sales of software services and extended warranty services.
The Company allows its customers to return product for exchange or credit subject to certain limitations. A liability is recorded at the time of sale for estimated product returns based upon historical experience and an asset is recognized for the amount expected to be recorded in inventory upon product return. The Company also provides volume rebates and other discounts to certain customers which are considered variable consideration. A provision for customer rebates and other discounts is recorded as a reduction of revenue at the time of sale based on an evaluation of the contract terms and historical experience.

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The Company considers shipping & handling activities as costs to fulfill the sales of products. Shipping revenue is included in net sales when control of the product is transferred to the customer, and the related shipping and handling costs are included in cost of products sold. Taxes imposed by governmental authorities on the Company’s revenue producing activities with customers, such as sales taxes and value added taxes, are excluded from net sales.
The Company disaggregates its operating segment revenue by geography, which the Company believes provides a meaningful depiction of the nature of its revenue. Net sales shown in Note 11 – Segment Information includes service revenues, which are not a significant component of total revenue, and are aggregated within the respective geographies.
The following table provides a comparison of sales generated from products purchased from vendors that exceeded 10% of the Company's consolidated net sales for three months ended April 30, 2019 and 2018 (as a percent of consolidated net sales):
 
Three months ended April 30,
 
2019
 
2018
Apple, Inc.
13%
 
14%
Cisco Systems, Inc.
11%
 
11%
HP Inc.
10%
 
12%

Legal settlements and other, net
The Company has been a claimant in proceedings seeking damages from certain manufacturers of LCD flat panel and cathode ray tube displays, as well as reimbursement from insurance providers of certain costs incurred by the Company associated with the restatement of certain of the Company’s consolidated financial statements and other financial information from fiscal 2009 to 2013. The Company reached settlement agreements during the periods presented and has recorded these amounts, net of attorney fees and expenses, in “legal settlements and other, net” in the Consolidated Statement of Income.
Accounts Receivable Purchase Agreements
The Company has uncommitted accounts receivable purchase agreements under which certain accounts receivable may be sold, without recourse, to third-party financial institutions. Under these programs, the Company may sell certain accounts receivable in exchange for cash less a discount, as defined in the agreements. Available capacity under these programs, which the Company uses 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 the Company continue to service, administer and collect the sold accounts receivable. At April 30, 2019 and January 31, 2019, the Company had a total of $0.8 billion and $1.1 billion, respectively, of outstanding accounts receivable sold to and held by financial institutions under these agreements. During the three months ended April 30, 2019 and 2018, discount fees recorded under these facilities were $3.7 million and $2.7 million, respectively. These discount fees are included as a component of "other (income) expense, net" in the Consolidated Statement of Income.
Recently Adopted Accounting Standards
In February 2016, the FASB issued an accounting standard which requires the recognition of assets and liabilities arising from lease transactions on the balance sheet and the disclosure of additional information about leasing arrangements. Under the new guidance, for all leases, interest expense and amortization of the right-of-use asset are recorded for leases determined to be finance leases and straight-line lease expense is recorded for leases determined to be operating leases. Lessees are required to initially recognize assets for the right to use the leased assets and liabilities for the obligations created by those leases. In July 2018, the FASB issued additional updates to the new accounting standard which provided entities with a transition option to initially account for the impact of the adoption with a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company adopted the standard and elected this transition option during the quarter ending April 30, 2019. The Company also elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical accounting relating to lease identification and classification for existing leases at the time of adoption. The adoption of this standard resulted in the Company recognizing right-of-use assets of $206.8 million and corresponding lease liabilities of $205.8 million as of April 30, 2019. The adoption of this standard had no impact on the Company's Consolidated Statements of Income and Cash Flows. See Note 9 – Leases for additional information.
In August 2017, the FASB issued a new accounting standard that amends and simplifies guidance related to hedge accounting to more accurately portray the economics of an entity’s risk management activities in its financial statements. The Company adopted this standard during the quarter ended April 30, 2019. The adoption of this standard had no material impact on the Company's consolidated financial statements.

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In August 2018, the FASB issued a new accounting standard which aligns the capitalization requirements for implementation costs incurred in a cloud computing hosting arrangement that is a service contract with the existing capitalization requirements for implementation costs incurred to develop or obtain internal-use software. The Company early adopted this standard on a prospective basis during the quarter ended April 30, 2019. The adoption of this standard will not have a material impact on the Company's consolidated financial statements.
Recently Issued Accounting Standards
In June 2016, the FASB issued an accounting standard which revises the methodology for measuring credit losses on financial instruments and the timing of the recognition of those losses. Under the new standard, financial assets measured at an amortized cost basis are to be presented net of the amount not expected to be collected via an allowance for credit losses. Estimated credit losses are to be based on historical information adjusted for management's expectation that current conditions and supportable forecasts differ from historical experience. The accounting standard is effective for the Company beginning with the quarter ending April 30, 2020, with early adoption permitted. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

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NOTE 2 — EARNINGS PER SHARE ("EPS")
The Company presents the computation of earnings per share on a basic and diluted basis. Basic EPS is computed by dividing net income by the weighted average number of shares outstanding during the reported period. Diluted EPS reflects the potential dilution related to equity-based incentives (see Note 5 – Stock-Based Compensation for further discussion) using the treasury stock method. The composition of basic and diluted EPS is as follows:
 
Three months ended April 30,
 
2019
 
2018
(in thousands, except per share data)
 
 
 
Net income
$
55,400

 
$
33,699

 
 
 
 
Weighted average common shares - basic
37,011

 
38,281

Effect of dilutive securities:
 
 
 
Equity based awards
236

 
280

Weighted average common shares - diluted
37,247

 
38,561

 
 
 
 
Earnings per share:
 
 
 
Basic
$
1.50

 
$
0.88

Diluted
$
1.49

 
$
0.87


For the three months ended April 30, 2019 and 2018, there were 322 and 8,439 shares, respectively, excluded from the computation of diluted earnings per share because their effect would have been antidilutive.
NOTE 3 — ACQUISITION, INTEGRATION AND RESTRUCTURING EXPENSES
Acquisition, integration and restructuring expenses are comprised of costs related to the fiscal 2018 acquisition of Avnet, Inc.'s ("Avnet") Technology Solutions business ("TS"), as well as restructuring costs related to the Global Business Optimization Program which was initiated in fiscal 2019.
Acquisition of TS
On February 27, 2017, Tech Data acquired all of the outstanding shares of 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. 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.
The Company incurred no acquisition, integration and restructuring expenses related to the acquisition of TS during the three months ended April 30, 2019 and does not expect to incur any additional costs in future periods. Acquisition, integration and restructuring expenses for the three months ended April 30, 2018 related to the acquisition of TS are comprised of the following:
 
Three months ended April 30,
 
2018
(in thousands)
 
Restructuring costs
$
10,872

IT related costs
7,330

Professional services
3,567

Transaction related costs
878

Other costs
4,970

Total
$
27,617


 
 
 
 
 
 
 
 

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During the three months ended April 30, 2018, the Company recorded restructuring costs related to the acquisition of TS of $3.4 million in the Americas and $7.5 million in Europe.
 
 
 

Global Business Optimization Program
In fiscal 2019, the Company's Board of Directors approved the Global Business Optimization Program (the "GBO Program") to increase investment in the Company’s strategic priorities and implement operational initiatives to drive productivity and enhance profitability. Under the GBO Program, the Company expects to incur cash charges 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. It is anticipated that the majority of these charges will be incurred prior to the end of the current fiscal year. The cash charges primarily consist of severance costs, and also include professional services and other costs.

Restructuring expenses related to the GBO Program are comprised of the following:
 
Three months ended April 30,
 
Cumulative Amounts Incurred to Date
 
2019
 
2018
 
(in thousands)
 
 
 
 
 
Severance costs
$
4,147

 
$
3,269

 
$
30,574

Professional services and other costs
2,074

 
2,339

 
18,188

Total
$
6,221

 
$
5,608

 
$
48,762


During the three months ended April 30, 2019, the Company recorded restructuring costs related to the GBO Program in the Americas of $2.9 million, in Europe of $3.0 million and in Asia-Pacific of $0.3 million. During the three months ended April 30, 2018, the Company recorded restructuring costs related to the GBO Program in the Americas of $0.9 million and in Europe of $4.7 million. The accrued restructuring charges are included in “accrued expenses and other liabilities” in the Consolidated Balance Sheet.
Restructuring activity during the three months ended April 30, 2019 related to the GBO Program is as follows:
 
 
Three months ended April 30, 2019
 
 
Severance
 
Professional services and other costs
 
Total
(in thousands)
 
 
 
 
 
 
Balance at January 31, 2019
 
$
14,798

 
$
631

 
$
15,429

Fiscal 2020 restructuring expenses
 
4,147

 
2,074

 
6,221

Cash payments
 
(5,188
)
 
(1,725
)
 
(6,913
)
Foreign currency translation
 
(242
)
 
(16
)
 
(258
)
Balance at April 30, 2019
 
$
13,515

 
$
964

 
$
14,479




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NOTE 4 — DEBT
The carrying value of the Company's outstanding debt consists of the following (in thousands):
As of:
April 30, 2019
 
January 31, 2019
Senior Notes, interest at 3.70% payable semi-annually, due February 15, 2022
$
500,000

 
$
500,000

Senior Notes, interest at 4.95% payable semi-annually, due February 15, 2027
500,000

 
500,000

Less—unamortized debt discount and debt issuance costs
(6,788
)
 
(7,166
)
Senior Notes, net
993,212

 
992,834

Term Loans, interest rate of 4.00% and 3.99% at April 30, 2019 and January 31, 2019, respectively
300,000

 
300,000

Other committed and uncommitted revolving credit facilities, average interest rate of 8.11% and 8.05% at April 30, 2019 and January 31, 2019, respectively
117,312

 
102,271

Other long-term debt
10,511

 
15,817

 
1,421,035

 
1,410,922

Less—current maturities (included as “revolving credit loans and current maturities of long-term debt, net”)
(123,092
)
 
(110,368
)
Total long-term debt
$
1,297,943

 
$
1,300,554


Senior Notes
In January 2017, the Company 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"). The Company pays 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.
The Company, at its 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. The Company 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.
Other Credit Facilities
As of April 30, 2019, the Company had a $1.25 billion revolving credit facility with a syndicate of banks (the “Credit Agreement”), which among other things, provides for (i) a maturity date of November 2, 2021 and (ii) an interest rate on borrowings, facility fees and letter of credit fees based on the Company’s debt rating. The Company pays interest on advances under the Credit Agreement at LIBOR (or similar interbank offered rates depending on currency draw) plus a predetermined margin that is based on the Company’s debt rating. There were no amounts outstanding under the Credit Agreement at April 30, 2019 and January 31, 2019. The Credit Agreement was amended on May 15, 2019 (see further discussion in Note 12 – Subsequent Events).
The Company entered into a term loan credit agreement on November 2, 2016 with a syndicate of banks (the "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 billion. The Company pays interest on advances under the Term Loan Credit Agreement at a variable rate based on LIBOR plus a predetermined margin that is based on the Company's debt rating. The Company had $300 million outstanding under the Term Loan Credit Agreement at both April 30, 2019 and January 31, 2019. The outstanding balance under the Term Loan Credit Agreement is due on February 27, 2022. The Company may repay amounts at any time, in whole or in part, without penalty or premium prior to the maturity date.
The Company also has an agreement with a syndicate of banks (the “Receivables Securitization Program”) that allows the Company to transfer an undivided interest in a designated pool of U.S. accounts receivable, on an ongoing basis, to provide collateral for borrowings. On April 16, 2019, the Company modified its Receivables Securitization Program. This amendment, among other things, extended the scheduled termination date of the agreement from August 8, 2019 to April 16, 2021 and provided for an increase in the maximum borrowings from $750 million to $1.0 billion. Under this program, the Company transfers certain U.S. trade receivables into a wholly-owned bankruptcy remote special purpose entity. Such receivables, which are recorded in the Consolidated Balance Sheet,

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totaled approximately $1.7 billion at both April 30, 2019 and January 31, 2019. As collections reduce accounts receivable balances included in the collateral pool, the Company may transfer interests in new receivables to bring the amount available to be borrowed up to the maximum. Interest is to be paid on advances under the Receivables Securitization Program at the applicable commercial paper or LIBOR rate plus an agreed-upon margin. There were no amounts outstanding under the Receivables Securitization Program at April 30, 2019 and January 31, 2019.
In addition to the facilities described above, the Company has various other committed and uncommitted lines of credit and overdraft facilities totaling approximately $400.8 million at April 30, 2019 to support its operations. Most of these facilities are provided on an unsecured, short-term basis and are reviewed periodically for renewal. There was $117.3 million outstanding on these facilities at April 30, 2019, at a weighted average interest rate of 8.11%, and there was $102.3 million outstanding at January 31, 2019, at a weighted average interest rate of 8.05%.
At April 30, 2019, the Company had also issued standby letters of credit of $25.6 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 these letters of credit reduces the Company's borrowing availability under certain of the above-mentioned credit facilities.
Certain of the Company’s 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 under these credit facilities include a maximum total leverage ratio and a minimum interest coverage ratio. At April 30, 2019, the Company was in compliance with all such financial covenants.

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NOTE 5 — STOCK-BASED COMPENSATION
For the three months ended April 30, 2019 and 2018, the Company recorded $8.3 million and $7.6 million, respectively, of stock-based compensation expense.
The 2018 Equity Incentive Plan was approved by the Company’s shareholders in June 2018 and includes 2.0 million shares available for grant, of which approximately 1.7 million shares remain available for future grant at April 30, 2019. The Company is authorized to award officers, employees, and non-employee members of the Board of Directors restricted stock, options to purchase common stock, stock appreciation rights and performance awards that are dependent upon achievement of specified performance goals. Equity-based compensation awards have a maximum term of 10 years, unless a shorter period is specified by the Compensation Committee of the Board of Directors ("Compensation Committee") or is required under local law. Awards under the plan are priced as determined by the Compensation Committee and are required to be priced at, or above, the fair market value of the Company’s common stock on the date of grant. Awards generally vest between one year and three years from the date of grant. The Company’s policy is to utilize shares of its treasury stock, to the extent available, to satisfy its obligation to issue shares upon the exercise of awards.
Restricted stock units
A summary of the Company’s restricted stock activity for the three months ended April 30, 2019 is as follows:
 
Shares  
Nonvested at January 31, 2019
649,122

Granted
209,700

Vested
(229,536
)
Canceled
(10,278
)
Nonvested at April 30, 2019
619,008


Performance based restricted stock units
The Company's performance based restricted stock unit awards are subject to vesting conditions, including meeting specified cumulative performance objectives over a period of three years. Each performance based award recipient could vest in 0% to 150% of the target shares granted, contingent on the achievement of the Company's financial performance metrics. A summary of the Company’s performance based restricted stock activity, assuming maximum achievement for nonvested awards, for the three months ended April 30, 2019 is as follows:
 
Shares  
Nonvested at January 31, 2019
293,216

Granted
108,771

Vested
(16,996
)
Canceled
(5,039
)
Nonvested at April 30, 2019
379,952



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NOTE 6 — FAIR VALUE MEASUREMENTS
The Company’s assets and liabilities carried or disclosed at fair value are classified in one of the following three categories: Level 1 – quoted market prices in active markets for identical assets and liabilities; Level 2 – inputs other than quoted market prices included in Level 1 above that are observable for the asset or liability, either directly or indirectly; and Level 3 – unobservable inputs for the asset or liability. The classification of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The following table summarizes the valuation of the Company's assets and liabilities that are measured at fair value on a recurring basis:
 
 
 
 
April 30, 2019
 
January 31, 2019
 
 
 
 
Fair value measurement category
 
Fair value measurement category
 
 
Balance sheet location
 
Level 1
 
Level 2
 
Level 3
 
Level 1
 
Level 2
 
Level 3
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net investment hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency forward contracts
 
Prepaid expenses and other assets
 
 
 
$
92

 
 
 
 
 
$

 
 
Foreign currency forward contracts
 
Other assets, net
 
 
 
2,720

 
 
 
 
 

 
 
Cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cross-currency swap
 
Prepaid expenses and other assets
 
 
 
120

 
 
 
 
 

 
 
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency forward contracts
 
Prepaid expenses and other assets
 
 
 
4,767

 
 
 
 
 
3,830

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cross-currency swap
 
Accrued expenses and other liabilities
 
 
 
$
695

 
 
 
 
 
$

 
 
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency forward contracts
 
Accrued expenses and other liabilities
 
 
 
5,066

 
 
 
 
 
6,641

 
 

The Company's derivative instruments are measured on a recurring basis based on foreign currency spot rates and forward rates quoted by banks or foreign currency dealers (Level 2 criteria) and are marked-to-market each period (see Note 7 – Derivative Instruments for further discussion).
The Company utilizes life insurance policies to fund the Company’s nonqualified deferred compensation plan. The life insurance asset recorded by the Company is the amount that would be realized upon the assumed surrender of the policy. This amount is based on the underlying fair value of the invested assets contained within the life insurance policies. The gains and losses are recorded in the Company’s Consolidated Statement of Income within "other (income) expense, net." The related deferred compensation liability is also marked-to-market each period based upon the returns of the various investments selected by the plan participants and the gains and losses are recorded in the Company’s Consolidated Statement of Income within "selling, general and administrative expenses." The net realizable value of the Company's life insurance investments and related deferred compensation liability was $42.6 million and $42.2 million, respectively, at April 30, 2019 and $39.2 million and $39.1 million, respectively, at January 31, 2019.
The carrying value of the 2017 Senior Notes discussed in Note 4 – Debt represents cost less unamortized debt discount and debt issuance costs. The estimated fair value of the 2017 Senior Notes is based upon quoted market information (Level 1). The estimated fair value of the 2017 Senior Notes was $1.01 billion and $988 million, respectively, at April 30, 2019 and January 31, 2019 and the carrying value was $993.2 million and $992.8 million, respectively, at April 30, 2019 and January 31, 2019. The carrying amounts of accounts receivable, accounts payable and accrued expenses approximate fair value because of the short maturity of these items. The carrying amounts of debt outstanding pursuant to revolving credit facilities and under the Term Loan Credit Agreement approximate fair value as the majority of these instruments have variable interest rates which approximate current market rates (Level 2 criteria).

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NOTE 7 — DERIVATIVE INSTRUMENTS
In the ordinary course of business, the Company is exposed to movements in foreign currency exchange rates. The Company's foreign currency risk management objective is to protect earnings and cash flows from the impact of exchange rate changes primarily through the use of foreign currency forward contracts and a cross-currency swap.
Net Investment Hedges
In April 2019, the Company entered into foreign currency forward contracts to hedge a portion of its net investment in euro denominated foreign operations which are designated as net investment hedges. The Company entered into the net investment hedges to offset the risk of change in the U.S. dollar value of the Company's investment in a euro functional subsidiary due to fluctuating foreign exchange rates. Gains and losses on net investment hedges are recorded in other comprehensive income (loss) until the sale or substantially complete liquidation of the underlying assets of the Company's investment. The initial fair value of hedge components excluded from the assessment of effectiveness is recognized in the Consolidated Statement of Income under a systematic and rational method over the life of the hedging instrument.

The aggregate notional values of the Company's outstanding net investment hedge contracts by year of maturity are as follows:
Fiscal Year:
 
Notional Value
(in millions)
 
 
2020
 
$
4.6

2021
 
9.3

2022
 
9.3

2023
 
254.6

Total
 
$
277.8



The following table presents the effects of the Company's net investment hedges on accumulated other comprehensive income ("AOCI") and earnings:
 
 
Three months ended April 30, 2019
Derivatives designated as net investment hedges:
 
Amount of gain (loss) recognized in other comprehensive income (loss)
 
Amount of gain (loss) reclassified from AOCI into income
 
Location of gain (loss) recognized in income (amount excluded from effectiveness testing)
 
Amount of gain (loss) recognized in income (amount excluded from effectiveness testing)
(in thousands)
 
 
 
 
 
 
 
 
Foreign currency forward contracts
 
$
2,496

 
$

 
Interest expense
 
$
316


Cash Flow Hedges
During the three months ended April 30, 2019, the Company entered into a cross-currency swap to hedge its cash flows related to certain foreign-currency denominated debt which is designated as a cash flow hedge. The notional value of this swap was $4.5 million at April 30, 2019 and the swap has a maturity date of February 2020. The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is initially reported as a component of other comprehensive income (loss). These gains and losses are subsequently reclassified into earnings in the same period during which the hedged transaction affects earnings and are presented in the same income statement line item as the earnings effect of the hedged item.

The following table presents the effects of the Company's cash flow hedges on AOCI and earnings:
 
 
Three months ended April 30, 2019
Derivatives designated as cash flow hedges:
 
Amount of gain (loss) recognized in other comprehensive income (loss)
 
Location of gain (loss) reclassified from AOCI into income
 
Amount of gain (loss) reclassified from AOCI into income
(in thousands)
 
 
 
 
 
 
Cross-currency swap
 
$
(575
)
 
Interest expense
 
$
120

 
 
 
 
Other (income) expense, net
 
(484
)
Total
 
$
(575
)
 
 
 
$
(364
)


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Derivatives Not Designated as Hedges
The Company additionally utilizes forward contracts that are not designated as hedging instruments to hedge intercompany loans, accounts receivable and accounts payable. The Company’s foreign currency exposure relates primarily to international transactions where the currency collected from customers can be different from the currency used to purchase the product. The Company’s transactions in its foreign operations are denominated primarily in the following currencies: Australian dollar, British pound, Canadian dollar, Czech koruna, Danish krone, euro, Indian rupee, Indonesian rupiah, Mexican peso, Norwegian krone, Polish zloty, Singapore dollar, Swedish krona, Swiss franc and U.S. dollar.
The Company considers inventory as an economic hedge against foreign currency exposure in accounts payable in certain circumstances. This practice offsets such inventory against corresponding accounts payable denominated in currencies other than the functional currency of the subsidiary buying the inventory when determining the net exposure to be hedged using traditional forward contracts. Under this strategy, the Company would expect to increase or decrease selling prices for products purchased in foreign currencies based on fluctuations in foreign currency exchange rates affecting the underlying accounts payable. To the extent the Company incurs a foreign currency exchange loss (gain) on the underlying accounts payable denominated in the foreign currency, a corresponding increase (decrease) in gross profit would be expected as the related inventory is sold. This strategy can result in a certain degree of quarterly earnings volatility as the underlying accounts payable is remeasured using the foreign currency exchange rate prevailing at the end of each period, or settlement date if earlier, whereas the corresponding increase (decrease) in gross profit is not realized until the related inventory is sold.
The Company recognizes foreign currency exchange gains and losses on its derivative instruments not designated as hedges that are used to manage its exposures to foreign currency denominated accounts receivable and accounts payable as a component of “cost of products sold” which is consistent with the classification of the change in fair value upon remeasurement of the underlying hedged accounts receivable or accounts payable. The Company recognizes foreign currency exchange gains and losses on its derivative instruments not designated as hedges that are used to manage its exposures to foreign currency denominated financing transactions as a component of “other (income) expense, net,” which is consistent with the classification of the change in fair value upon remeasurement of the underlying hedged loans. The gains and losses on the Company's foreign currency forward contracts are largely offset by the change in the fair value of the underlying hedged assets or liabilities.
The total amount of gains (losses) recognized in earnings on the Company's derivatives not designated as hedges for the three months ended April 30, 2019 and 2018 are as follows:
 
 
 
 
Gains (losses) recognized in earnings
for the three months ended April 30:
 
 
 
 
Derivatives not designated as hedges
 
Income statement location
 
2019
 
2018
(in millions)
 
 
 
 
 
 
Foreign currency forward contracts
 
Cost of products sold
 
$
0.9

 
$
6.6

Foreign currency forward contracts
 
Other (income) expense, net
 
(0.3
)
 
(7.3
)
Total
 
 
 
$
0.6

 
$
(0.7
)

The Company's average notional amounts of derivatives not designated as hedges outstanding during the three months ended April 30, 2019 and 2018 were approximately $1.3 billion and $1.4 billion, respectively, with average maturities of 24 days and 30 days, respectively. As discussed above, under the Company's hedging policies, gains and losses on these derivative financial instruments are largely offset by the gains and losses on the underlying assets or liabilities being hedged.
The Company’s derivatives are also discussed in Note 6 – Fair Value Measurements.

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NOTE 8 — SHAREHOLDERS' EQUITY
Share Repurchase Program
In October 2018, the Company's Board of Directors authorized a share repurchase program for up to $200.0 million of the Company's common stock. In February 2019, the Board of Directors approved a $100.0 million increase to the program resulting in a total share repurchase authorization of $300.0 million. In conjunction with the Company’s share repurchase program, a 10b5-1 plan was executed that instructs the broker selected by the Company to repurchase shares on behalf of the Company. 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 the Company’s common stock. Shares repurchased by the Company are held in treasury for general corporate purposes, including issuances under equity incentive and benefit plans. The reissuance of shares from treasury stock is based on the weighted average purchase price of the shares.
The Company’s common share issuance activity for the three months ended April 30, 2019 is summarized as follows:  
 
Shares 
 
Weighted-average
price per share 
Treasury stock balance at January 31, 2019
22,305,464

 
$
46.53

Shares of treasury stock repurchased under share repurchase program
345,927

 
103.15

Shares of treasury stock reissued for equity incentive plans
(167,862
)
 
 
Treasury stock balance at April 30, 2019
22,483,529

 
$
47.40



Accumulated Other Comprehensive Income
The following tables summarize the change in the components of AOCI for the three months ended April 30, 2019 and 2018:
 
 
Foreign currency translation adjustment, net of taxes
 
Unrealized gains (losses) on cash flow hedges, net of taxes
 
Total
Balance at January 31, 2019
 
$
43,786

 
$

 
$
43,786

Other comprehensive income (loss) before reclassification
 
(40,523
)
 
(575
)
 
(41,098
)
Reclassification of (gain) loss from AOCI into income
 

 
364

 
364

Balance at April 30, 2019
 
$
3,263

 
$
(211
)
 
$
3,052



 
 
Foreign currency translation adjustment, net of taxes
 
Unrealized gains (losses) on cash flow hedges, net of taxes
 
Total
Balance at January 31, 2018
 
$
288,292

 
$

 
$
288,292

Other comprehensive income (loss) before reclassification
 
(88,252
)
 

 
(88,252
)
Reclassification of (gain) loss from AOCI into income
 

 

 

Balance at April 30, 2018
 
$
200,040

 
$

 
$
200,040





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NOTE 9 — LEASES
At contract inception, the Company determines if an arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. The Company has operating leases for certain logistics centers, office facilities, vehicles and equipment. The Company’s finance leases are not material. Short-term operating leases, which have an initial term of 12 months or less, are not recorded on the balance sheet. Certain of the Company’s operating leases contain options to extend the lease, which are included in the lease term when it is reasonably certain that the option will be exercised. Certain of the Company's operating leases contain options to terminate the lease; periods after the date of the termination option are included in the lease term when it is reasonably certain that the Company will not exercise the option to terminate the lease. The Company has elected to not separately recognize the lease and non-lease components of a contract for all operating leases.
Operating leases are included in “other assets, net”, “accrued expenses and other liabilities” (for the current portion of lease liabilities) and “other long-term liabilities” on the Consolidated Balance Sheet. These assets and liabilities are recognized at the lease commencement date based on the present value of remaining lease payments over the lease term using the Company's incremental borrowing rate. Lease expense for operating leases is recognized on a straight-line basis over the lease term and is recognized in “selling, general and administrative expenses” on the Consolidated Statement of Income. Variable lease costs are recognized as incurred.
The following table presents the contractual maturities of the Company's operating lease liabilities as of April 30, 2019:
Fiscal year:
 
 
(in thousands)
 
 
2020 (remaining 9 months)
 
$
49,173

2021
 
58,975

2022
 
39,114

2023
 
28,405

2024
 
21,325

Thereafter
 
35,172

Total payments
 
$
232,164

Less amount of lease payments representing interest
 
(26,395
)
Total present value of lease payments
 
$
205,769


Rental expense for all operating leases totaled $21.6 million during the three months ended April 30, 2019. These costs primarily relate to fixed costs for long-term operating leases, but also include immaterial amounts for variable lease costs and short-term operating leases.
The following amounts were recorded in the Company's Consolidated Balance Sheet as of April 30, 2019:
Operating leases
 
Balance sheet location
 
April 30, 2019
(in thousands)
 
 
 
 
Operating lease right-of-use assets
 
Other assets, net
 
$
206,773

Current operating lease liabilities
 
Accrued expenses and other liabilities
 
63,411

Non-current operating lease liabilities
 
Other long-term liabilities
 
142,358


Supplemental cash flow information related to the Company's operating leases is as follows:
Cash flow information
 
Three months ended April 30, 2019
(in thousands)
 
 
Cash paid for amounts included in the measurement of lease liabilities:
 
$
17,515

Non-cash right-of-use assets obtained in exchange for lease liabilities:
 
6,183


The weighted-average remaining lease term and discount rate were as follows as of April 30, 2019:
Operating lease term and discount rate
 
Operating Leases
Weighted-average remaining lease term
 
4.9 years

Weighted-average discount rate
 
4.8
%


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NOTE 10 — COMMITMENTS & CONTINGENCIES
Guarantees
The Company has arrangements with certain finance companies that provide inventory financing facilities to the Company’s customers. In conjunction with certain of these arrangements, the Company would be required to purchase certain inventory in the event the inventory is repossessed from the customers by the finance companies. As the Company does not have access to information regarding the amount of inventory purchased from the Company still on hand with the customer at any point in time, the Company’s repurchase obligations relating to inventory cannot be reasonably estimated. Repurchases of inventory by the Company under these arrangements have been insignificant to date. The Company believes that, based on historical experience, the likelihood of a material loss pursuant to these inventory repurchase obligations is remote.
Contingencies
In December 2010, in a non-unanimous decision, a Brazilian appellate court overturned a 2003 trial court which had previously ruled in favor of the Company’s Brazilian subsidiary related to the imposition of certain taxes on payments abroad related to the licensing of commercial software products, commonly referred to as “CIDE tax.” The Company estimates the total exposure related to the CIDE tax, including interest, was approximately $19.4 million at April 30, 2019. The Brazilian subsidiary has appealed the unfavorable ruling to the Supreme Court and Superior Court, Brazil's two highest appellate courts. Based on the legal opinion of outside counsel, the Company believes that the chances of success on appeal of this matter are favorable and the Brazilian subsidiary intends to vigorously defend its position that the CIDE tax is not due. Accordingly, the Company has not recorded an accrual for the total estimated CIDE tax exposure. However, due to the lack of predictability of the Brazilian court system, the Company has concluded that it is reasonably possible that the Brazilian subsidiary may incur a loss up to the total exposure described above. The Company believes the resolution of this litigation will not be material to the Company’s consolidated net assets or liquidity. 
In June 2013, the Company was the subject of a document seizure by the French Autorité de la Concurrence (Competition Authority), following allegations of anticompetitive distribution practices in the French market for the products of one of the Company's suppliers. In October 2018, the Competition Authority delivered a notification des griefs (statement of objections) to the Company, stating that the Competition Authority is pursuing charges against the Company in this matter. The Competition Authority has taken similar action against the Company's supplier and another of its distributors. At this time, the Company cannot determine the likelihood of loss or reasonably estimate the range of any loss arising from this proceeding.
The Company is subject to various other legal proceedings and claims arising in the ordinary course of business. The Company’s management does not expect that the outcome in any of these other legal proceedings, individually or collectively, will have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

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NOTE 11 — SEGMENT INFORMATION
The Company operates predominantly in a single industry segment as a distributor of technology products, logistics management, and other value-added services. While the Company operates primarily in one industry, it is managed based on three geographic segments: the Americas, Europe and Asia-Pacific. The Company does not consider stock-based compensation expense in assessing the performance of its operating segments, and therefore the Company excludes stock-based compensation expense from segment information. The accounting policies of the segments are the same as those described in Note 1 – Business and Summary of Significant Accounting Policies.
Financial information by geographic segment is as follows (in thousands):
 
Three months ended April 30,
 
2019
 
2018
Net sales:
 
 
 
Americas (1)
$
3,789,198

 
$
3,618,206

Europe
4,309,500

 
4,661,702

Asia-Pacific
307,726

 
268,411

Total
$
8,406,424

 
$
8,548,319

 
 
 
 
Operating income (loss):
 
 
 
Americas (2)
$
68,633

 
$
61,342

Europe (3)
36,420

 
17,318

Asia-Pacific
876

 
(577
)
Stock-based compensation expense
(8,305
)
 
(7,587
)
Total
$
97,624

 
$
70,496

 
 
 
 
Depreciation and amortization:
 
 
 
Americas
$
23,649

 
$
23,259

Europe
11,510

 
14,991

Asia-Pacific
2,098

 
2,231

Total
$
37,257

 
$
40,481

 
 
 
 
Capital expenditures:
 
 
 
Americas
$
8,272

 
$
4,379

Europe
6,127

 
3,717

Asia-Pacific
880

 
359

Total
$
15,279

 
$
8,455



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As of:
April 30, 2019
 
January 31, 2019
Identifiable assets:
 
 
 
Americas
$
5,517,978

 
$
5,402,316

Europe
6,194,424

 
6,970,822

Asia-Pacific
599,347

 
613,414

Total
$
12,311,749

 
$
12,986,552

 
 
 
 
Long-lived assets:
 
 
 
Americas (1)
$
215,504

 
$
217,863

Europe
51,481

 
52,162

Asia-Pacific
4,921

 
4,892

Total
$
271,906

 
$
274,917

 
 
 
 
Goodwill & acquisition-related intangible assets, net:
 
 
 
Americas
$
1,070,187

 
$
1,083,699

Europe
560,214

 
575,776

Asia-Pacific
58,582

 
60,154

Total
$
1,688,983

 
$
1,719,629

(1)
Net sales in the United States represented 88% and 87%, respectively, of the total Americas' net sales for the three months ended April 30, 2019 and 2018. Total long-lived assets in the United States represented 96% of the Americas' total long-lived assets at both April 30, 2019 and January 31, 2019.
(2)
Operating income in the Americas for the three months ended April 30, 2019 and 2018 includes acquisition, integration and restructuring expenses of $2.9 million and $13.9 million, respectively (see further discussion in Note 3 – Acquisition, Integration and Restructuring Expenses). Operating income in the Americas includes a gain related to legal settlements and other, net, of $0.3 million and $3.0 million for the three months ended April 30, 2019 and 2018 (see further discussion in Note 1 - Business and Summary of Significant Accounting Policies).
(3)
Operating income in Europe for the three months ended April 30, 2019 and 2018 includes acquisition, integration and restructuring expenses of $3.0 million and $18.0 million, respectively.

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NOTE 12 - SUBSEQUENT EVENTS
On May 15, 2019, the Credit Agreement was amended to, among other things, (i) increase the borrowing capacity under the revolving credit facility to $1.5 billion, (ii) extend the maturity date to May 15, 2024, (iii) provide the ability to increase the facility to a maximum of $1.75 billion, subject to certain conditions and (iv) provide for certain subsidiaries of the Company 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 the Company’s debt rating.


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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD-LOOKING STATEMENTS
 
This Quarterly Report on Form 10-Q, 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 Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended January 31, 2019 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.
Some of our key financial objectives are the following:
Growing faster than the industry in select markets by gaining profitable market share in key geographies within select product categories with leading vendors.
Improving operating income by growing gross profit faster than operating costs.
Delivering a return on invested capital above our weighted average cost of capital.
To strengthen our role at the center of the IT ecosystem well into the future and achieve our financial objectives, we are moving to higher value, focused on the following strategic priorities:
Invest in next-generation technologies and delivery models such as the cloud, security, analytics/IoT, and services.
Strengthen our end-to-end portfolio of products, services and solutions.
Transform our company digitally through greater automation, which we believe will enhance the customer experience, improve productivity and reduce costs.
Optimize our global footprint by enhancing the operational efficiency and effectiveness of our businesses around the world.


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Table of Contents

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, legal settlements and other, net, acquisition-related intangible assets amortization expense and tax indemnifications;

Non-GAAP net income, which is defined as net income as adjusted to exclude acquisition, integration and restructuring expenses, legal settlements and other, net, acquisition-related intangible assets amortization expense, value added tax assessments and related interest expense, tax indemnifications, the income tax effects of these adjustments and the reversal of deferred tax valuation allowances;

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, legal settlements and other, net, acquisition-related intangible assets amortization expense, value added tax assessments and related interest expense, tax indemnifications, the income tax effects of these adjustments and the reversal of deferred tax valuation allowances.

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 and under certain of our performance-based compensation plans. 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:
 
Three months ended April 30,
 
2019
 
2018
Net sales
100.00

%
 
100.00

%
Cost of products sold
93.94

 
 
93.88

 
Gross profit
6.06

 
 
6.12

 
Operating expenses:
 
 
 
 
 
Selling, general and administrative expenses
4.83

 
 
4.94

 
Acquisition, integration and restructuring expenses
0.07

 
 
0.39

 
Legal settlements and other, net

 
 
(0.03
)
 
 
4.90

 
 
5.30