Company Quick10K Filing
Quick10K
Tech Data
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$109.31 37 $4,030
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 2019-04-16 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
UFCS United Fire Group 1,070
EPZM Epizyme 1,050
FFC 1st Franklin Financial 854
CPAC Cementos Pacasmayo Saa 853
ACBI Atlantic Capital Bancshares 447
IIIN Insteel Industries 431
MMLP Martin Midstream Partners 403
AMID American Midstream Partners 281
TIPT Tiptree 219
HYRE Hyrecar 59
TECD 2019-01-31
Part I
Item 1. Business.
Item 1A. Risk Factors.
Item 1B. Unresolved Staff Comments.
Item 2. Properties.
Item 3. Legal Proceedings.
Item 4. Mine Safety Disclosures.
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Item 6. Selected Financial Data.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Item 8. Financial Statements and Supplementary Data.
Note 1 - Business and Summary of Significant Accounting Policies
Note 2 - Earnings per Share ("Eps")
Note 3 - Property and Equipment, Net
Note 4 - Goodwill and Intangible Assets
Note 5 - Acquisitions
Note 6 - Acquisition, Integration and Restructuring Expenses
Note 7 - Gain on Disposal of Subsidiary
Note 8 - Debt
Note 9 - Income Taxes
Note 10 - Employee Benefit Plans
Note 11 - Shareholders' Equity
Note 12 - Fair Value Measurements
Note 13 - Derivative Instruments
Note 14 - Commitments and Contingencies
Note 15 - Segment Information
Note 16 - Interim Financial Information (Unaudited)
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Item 9A. Controls and Procedures.
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Item 14. Principal Accounting Fees and Services.
Part IV
Item 15. Exhibits, Financial Statement Schedules.
Item 16. Form 10-K Summary.
EX-10.32 techdataamendmentno2term.htm
EX-10.33 techdataamendmentno2revo.htm
EX-10.34 executiveseveranceplan20.htm
EX-10.35 rsugrantagreementfy1910-k.htm
EX-10.36 prsugrantagreementfy1910-k.htm
EX-21.1 listofsubsidiaries-10xk2019.htm
EX-23.1 ey-consent.htm
EX-31.A exhibit31-afy19.htm
EX-31.B exhibit31-bfy19.htm
EX-32.A exhibit32-afy19.htm
EX-32.B exhibit32-bfy19.htm

Tech Data Earnings 2019-01-31

TECD 10K Annual Report

Balance SheetIncome StatementCash Flow

10-K 1 fy1910kdocument.htm 10-K Document


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

(Mark One)
 
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 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
 

techdatargba19.jpg
TECH DATA CORPORATION
(Exact name of Registrant as specified in its charter)
 
Florida
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:
Common stock, par value $.0015 per share
Securities registered pursuant to Section 12 (g) of the Act: None
 
 
Indicate by a check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x   No   ¨
Indicate by a check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes   ¨   No   x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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
¨
 
 
 
 
 
 
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
Aggregate market value of the voting stock held by non-affiliates was $3,167,323,009 based on the reported last sale price of common stock on July 31, 2018 which is the last business day of the registrant’s most recently completed second fiscal quarter.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
 
Class
March 14, 2019
Common stock, par value $.0015 per share
36,900,698
 
DOCUMENTS INCORPORATED BY REFERENCE
The registrant’s Proxy Statement for use at the Annual Meeting of Shareholders to be held on June 5, 2019, is incorporated by reference in Part III of this Form 10-K to the extent stated herein.
 

1


TABLE OF CONTENTS

 
 
 
 
 
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
 
 
 
 
 
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
 
 
 
 
 
 
 
ITEM 10
ITEM 11
ITEM 12
ITEM 13
ITEM 14.
 
 
 
 
 
ITEM 15.
ITEM 16.
 
 
 
 
 

2



PART I
ITEM 1.    Business.

In this report, we use the terms "Tech Data,” "we," "our," "us" or the “Company” to refer to Tech Data Corporation and its consolidated subsidiaries.
OVERVIEW
 
 
 
 
Tech Data Corporation is 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 customers create solutions best suited to maximize business outcomes for their end-user customers. Our customers include value-added resellers (“VARs”), direct marketers, retailers, corporate resellers and managed service providers ("MSPs") who support the diverse technology needs of end users.
Tech Data was incorporated in 1974 to market data processing supplies to end users of mini and mainframe computers. With the advent of microcomputer dealers, we made the transition to a wholesale technology distributor in 1983 by broadening our product line to include personal computer products and withdrawing entirely from end-user sales. We went public with the initial public offering of Tech Data’s stock in 1986 on the NASDAQ Stock Exchange.
From fiscal 1989 through fiscal 2008, we expanded geographically through the acquisition of several distribution companies in the Americas and Europe, strengthening our position in certain product and customer segments. From fiscal 2008 to fiscal 2017, we continued to expand geographically, and to further diversify our products and solutions portfolio through organic investments and acquisitions, primarily focused on the data center, mobility, and software product categories.
On February 27, 2017, we acquired all the outstanding shares of Avnet, Inc.'s ("Avnet") Technology Solutions business ("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 Tech Data common stock. TS delivered data center hardware and software solutions and services and the TS acquisition strengthened our end-to-end solutions portfolio and deepened our value added capabilities in the data center and next-generation technologies. The total cash consideration payable to Avnet was subject to certain working capital and other adjustments, as determined through the process established in the interest purchase agreement. In August 2018, we executed a settlement agreement with Avnet, resulting in a final working capital adjustment of $120 million, which was paid to Avnet during the fiscal year ended January 31, 2019 (see further discussion in Note 5 of Notes to Consolidated Financial Statements).
VENDORS AND CUSTOMERS
 
 
Our value proposition to our vendors:
Access to highly fragmented markets - We provide our vendors access to large and highly fragmented markets such as the small- and medium-sized business (“SMB”) sector, which relies on VARs, our primary customer base, to gain access to and support for new technology.
Variable-cost route to market - We serve as a variable, cost effective route to market for our vendors by providing them with access to resellers throughout the Americas, Europe and Asia Pacific.
Logistics management - Our world class logistics capabilities enable us to efficiently bring technology products to market through one of our 22 strategically located logistics centers, by direct shipment from vendors to customers, or virtually through our Tech Data cloud marketplace.
Services - We provide a comprehensive portfolio of services to our vendors, including integration services, supply chain management services, and field, depot and support services, such as field engineering, equipment installation, maintenance, repair and many others.
We distribute and market hundreds of thousands of products from over 1,000 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 hyper-converged infrastructure, the cloud, security, analytics/Internet of things ("IoT"), and services. These products are typically purchased directly from the vendor on a non-exclusive basis. Conversely, our vendor agreements do not restrict us from selling similar products manufactured by competitors, nor do they require us to sell a specified quantity of product. As a result, we have the flexibility to terminate or curtail sales of one product line in favor of another due to technological change, pricing considerations, product availability, and customer demand or vendor distribution policies. Overall, we believe that our diversified and evolving product and solutions portfolio provides a solid platform for continued growth.

3


The following table provides a comparison of sales generated from products purchased from vendors that exceeded 10% of our consolidated net sales for fiscal 2019, 2018 and 2017 (as a percent of consolidated net sales):
 
2019
2018
2017
Apple, Inc.
16%
17%
21%
HP Inc.
11%
11%
14%
Cisco Systems, Inc.
11%
11%
10%
Our value proposition to our customers:
End-to-end solutions - We help our customers create comprehensive, multi-vendor solutions from the world's leading technology vendors in order to maximize business outcomes for their end-user customers.
Logistics management - Our robust order and logistics management systems enable us to fulfill customer orders quickly and efficiently through one of our 22 strategically located logistics centers, by direct shipment from the vendor, or virtually through our Tech Data cloud marketplace.
Financing and inventory management - We provide our customers with access to flexible financing programs and inventory management for the technology products, services and solutions they acquire.
Training and technical support - We provide our reseller customers a high level of training and technical support.
Services - We provide our customers with complete customer management solutions, including customer acquisition, enablement and revenue-growth services, such as contract renewals and software license compliance, as well as product configuration/integration services. In addition, we provide our resellers access to a number of special promotions and marketing services on behalf of our vendors.
We serve one of the largest bases of resellers throughout the Americas, Europe and Asia-Pacific. Our products are purchased directly from vendors in significant quantities and are marketed to an active reseller base of over 125,000 VARs, direct marketers, retailers, corporate resellers and MSPs. Our VAR customers, in many cases, rely on Tech Data as their principal source of technology products and the related financing for the products. VARs typically prefer not to invest the resources to establish a large number of direct purchasing relationships with vendors or stock significant product inventories. Direct marketers, retailers and corporate resellers may establish direct relationships with vendors for their highest volume products, but utilize distributors as the primary source for other product requirements and an alternative source for products acquired directly. Our customers rely on our expertise and resources to gain vital insights into emerging technologies and to help them capture growth opportunities in a rapidly changing technology landscape. No single customer accounted for more than 10% of our net sales during fiscal 2019, 2018 and 2017.

4


OUR STRATEGY
 
 
 
 
We believe technology is changing faster today than at any other point in our company’s history. Digital transformation is reshaping our industry, not only enabling businesses and consumers to engage in more ways than ever before, but changing the way technology is acquired and deployed. Because of this, hybrid models of IT delivery and consumption are emerging, as workloads shift across technology platforms and hardware and software-based solutions become increasingly combined. End-users are demanding solutions that drive business outcomes, and these solutions are end-to-end containing multiple products and software solutions from multiple vendors. As a result, customers are seeking greater integration of products, services and solutions that tie technologies together. Therefore, we believe an IT distribution and solutions company must be end-to-end, with deep capabilities across the computing continuum to manage the increasingly complex IT ecosystem and deliver the solutions and business outcomes the market desires. Our vision for the future is to be the vital link in the IT ecosystem that enables channel partners to bring to market the technology solutions the world needs to connect, learn and advance.
To achieve our vision, we have identified five key elements that we believe define an IT distribution and solutions company:
Global Footprint with Local Execution - Global footprint that ensures we can support our channel partners around the world, with the local knowledge it takes to be successful.
End-to-End Portfolio - An end-to-end portfolio of products, services and solutions to enable channel partners to create the best business outcomes for their customers.
Specialized Skills - Extensive solutions-oriented technical capabilities and deep domain knowledge that span the IT continuum, with the ability to deploy them within specific customer verticals.
World-Class IT Systems - A common IT platform that ensures consistent global execution and delivers efficiency and speed for a superior customer experience.
Financial Strength - Financial strength and flexibility to invest in next-generation technologies.
These five key elements are the building blocks to Tech Data’s future and our strategic priorities are directly aligned with each of them. To strengthen our role at the center of the IT ecosystem well into the future, 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.
We believe our focus on these priorities will enable us to achieve our financial objectives of:
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.
PRODUCTS AND SERVICES
 
To enable a specialized approach to the market while maintaining the exceptional service levels that channel partners expect from us, we group our offerings into two primary solutions portfolios:
Endpoint Solutions Portfolio:
Our Endpoint Solutions portfolio primarily includes PC systems, mobile phones and accessories, printers, peripherals, supplies, endpoint technology software and consumer electronics.
Advanced Solutions Portfolio:
Our Advanced Solutions portfolio primarily includes data center technologies such as storage, networking, servers, advanced technology software and converged and hyper-converged infrastructure. Our Advanced Solutions portfolio also includes our specialized solution businesses.
Our next-generation technology solutions, along with our services offerings, span our Endpoint and Advanced Solutions portfolios.


5


SALES AND ELECTRONIC COMMERCE
Our sales team consists of field sales and inside sales representatives. Our sales representatives receive comprehensive training on our policies, procedures and the technical specifications of products, and attend additional training offered by our vendors. Field sales representatives are typically located in major metropolitan areas in their respective geographies and are supported by inside telemarketing sales teams covering a designated territory. Our team concept provides a strong personal relationship between us and our customers, who typically call our inside sales teams on dedicated telephone numbers or contact us through various electronic methods to place orders. If the product is in stock and the customer has available credit, customer orders are generally shipped the same day from the logistics center nearest the customer or the intended end user.
Customers often utilize our electronic ordering and information systems. Through our e-commerce website, customers can gain remote access to our information systems to place orders, or check order status, inventory availability and pricing. Certain larger customers have electronic data interchange ("EDI") services available whereby orders, order acknowledgments, invoices, inventory status reports, customized pricing information and other industry standard EDI transactions are generated online, which improves efficiency and timeliness for us and our customers.
We realize improved productivity, cost savings, and enhanced customer experience through automation and digitization, and we will continue to invest in and improve our digital ordering and information systems.
COMPETITION
 
 
 
 
We operate in a market characterized by intense competition, based on such factors as product availability, credit terms and availability, price, speed of delivery, effectiveness of information systems and e-commerce tools, ability to tailor solutions to customers' needs, quality and depth of product lines and training, as well as service and support provided by the distributor to the customer. We believe we are well equipped to compete effectively with other distributors in all of these areas.
We compete against several distributors in the Americas market, including Ingram Micro Inc. ("Ingram Micro"), Synnex Corp. ("Synnex"), and Arrow Electronics, Inc. (“Arrow”), along with some regional and local distributors. The competitive environment in Europe is more fragmented, with market share spread among several regional and local competitors such as ALSO Holding and Esprinet, as well as international distributors such as Ingram Micro, Westcon Group, Inc., and Arrow.
We also face competition from companies entering or expanding into the logistics and product fulfillment and e-commerce supply chain services market. Additionally, certain direct sales relationships between manufacturers, resellers and end-users continue to introduce change into the competitive landscape of our industry. As we expand our business into new areas, we may face increased competition from other distributors as well as vendors. However, we believe vendors will continue to sell their products through distributors such as Tech Data, due to our ability to provide them with access to our broad customer base and serve them in a highly cost-effective and efficient manner. Our logistics management capabilities, as well as our sales and marketing, credit and product management expertise, allow our vendors to expand their market coverage while lowering their selling, inventory and fulfillment costs.
EMPLOYEES
 
 
 
 
On January 31, 2019, we had over 14,000 employees (as measured on a full-time equivalent basis) in more than forty countries on five continents. Certain of our employees in various countries outside of the United States are subject to laws providing representation rights to employees through workers' councils. Our success depends on the talent and dedication of our employees and we strive to attract, hire, develop and retain outstanding employees. We believe significant benefits are realized from having a strong and seasoned management team with many years of experience in technology distribution and related industries. We consider relations with our employees to be good.
FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
We sell to customers in more than 100 countries throughout North America, South America, Europe, the Middle East, Africa and the Asia-Pacific region. Over the past several years, we have expanded our presence in certain existing markets and exited certain markets based upon our assessment of, among other factors, our earnings potential and the risk exposure in those markets, including foreign currency exchange, regulatory and political risks. To the extent we decide to close any of our operations, we may incur charges and operating losses related to such closures and recognize a portion of our accumulated other comprehensive income in connection with such a disposition. For information on our net sales, operating income and identifiable assets by geographic region, see Note 15 of Notes to Consolidated Financial Statements.

6


SEASONALITY

Our 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 our quarterly operating results. Historical seasonal variations have included an increase in European demand during our fiscal fourth quarter and decreased demand in other fiscal quarters. The seasonal trend in Europe typically results in greater operating leverage, and therefore, lower SG&A as a percentage of net sales in the region and on a consolidated basis during the second half of our fiscal year, particularly in our fourth quarter.
ASSET MANAGEMENT
We manage our inventories in a manner that allows us to maintain sufficient quantities to achieve high order fill rates while attempting to stock only those products in high demand that have a rapid turnover rate. Our business, like that of other distributors, is subject to the risk that the value of inventory will be impacted adversely by suppliers’ price reductions or by technological changes affecting the usefulness or desirability of the products comprising the inventory. Our contracts with many of our vendors provide price protection and stock rotation privileges to reduce the risk of loss due to manufacturer price reductions and slow moving or obsolete inventory. In the event of a vendor price reduction, we generally receive a credit for the impact on products in inventory and we have the right to rotate a certain percentage of purchases, subject to certain limitations. Historically, price protection and stock rotation privileges, as well as our inventory management procedures, have helped reduce the risk of loss of inventory value.
We attempt to control losses on credit sales by closely monitoring customers’ creditworthiness through our IT systems, which contain detailed information on each customer’s payment history and other relevant information. In certain countries, we have obtained credit insurance that insures a percentage of the credit extended by us to certain customers against possible loss. The Company also has arrangements with certain finance companies that provide inventory financing facilities to our customers as an additional approach to mitigate credit risk. Certain of our vendors subsidize these financing arrangements for the benefit of our customers. We also sell products on a prepayment, credit card and cash-on-delivery basis.


7


ADDITIONAL INFORMATION AVAILABLE
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended. We therefore file our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements, and other documents with the Securities and Exchange Commission (the “SEC”). The SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements and other information.
Our principal Internet address is www.techdata.com. We make available free of charge, through our website, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports, as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information on Tech Data’s website is not incorporated into this Form 10-K or the Company’s other securities filings and is not a part of them.
EXECUTIVE OFFICERS
The following table sets forth the name, age and title of each of the persons who were serving as executive officers of Tech Data as of March 20, 2019:
Name 
 
Age 
 
Title
Richard T. Hume
 
59
 
Chief Executive Officer
Charles V. Dannewitz
 
64
 
Executive Vice President, Chief Financial Officer
Beth E. Simonetti
 
53
 
Executive Vice President, Chief Human Resources Officer
John A. Tonnison
 
50
 
Executive Vice President, Chief Information Officer
David R. Vetter
 
59
 
Executive Vice President, Chief Legal Officer
Joseph H. Quaglia
 
54
 
President, Americas
Patrick Zammit
 
52
 
President, Europe
Michael Rabinovitch
 
49
 
Senior Vice President, Chief Accounting Officer and Controller

Richard T. Hume, Chief Executive Officer, joined the Company in March 2016 as Executive Vice President, Chief Operating Officer. In June 2018, the Company's Board of Directors (the “Board”) appointed Mr. Hume as Chief Executive Officer. Prior to joining the Company, Mr. Hume was employed for more than thirty years at IBM. Most recently, from January 2015 to February 2016, Mr. Hume served as General Manager and Chief Operating Officer of Infrastructure and Outsourcing. Prior to that position, from January 2012 to January 2015, Mr. Hume served as General Manager, Europe where he led IBM’s multi-brand European organization. From 2008 to 2011, Mr. Hume served as General Manager, Global Business Partners, directing the growth and channel development initiatives for IBM’s Business Partner Channel. Mr. Hume holds a Bachelor of Science degree in Accounting from Pennsylvania State University.
Charles V. Dannewitz, Executive Vice President, Chief Financial Officer, joined the Company in February 1995 as Vice President of Taxes. He was promoted to Senior Vice President of Taxes in March 2000, and assumed responsibility for worldwide treasury operations in July 2003. In February 2014, he was appointed Senior Vice President, Chief Financial Officer, Americas. In June 2015, he was promoted to Executive Vice President, Chief Financial Officer. Prior to joining the Company, Mr. Dannewitz was employed by Price Waterhouse from 1981 to 1995, most recently as a tax partner. Mr. Dannewitz is a Certified Public Accountant and holds a Bachelor of Science degree in Accounting from Illinois Wesleyan University.
Beth E. Simonetti, Executive Vice President, Chief Human Resources Officer, joined the company in September 2015 as Senior Vice President, Chief Human Resources Officer and was promoted to Executive Vice President in January 2017. Prior to joining Tech Data, Ms. Simonetti served as Senior Vice President, Human Resources at Baker & Taylor, Inc. since 2010. Previously, she was an executive search consultant and was with Cardinal Health for 12 years in various HR leadership positions. Ms. Simonetti holds a Bachelor of Science degree from Miami University in Ohio and a Masters of Hospital and Health Services Administration from Ohio State University.
John A. Tonnison, Executive Vice President, Chief Information Officer, joined the Company in March 2001 as Vice President, Worldwide E-Business and was promoted to Senior Vice President of IT Americas in December 2006. In February 2010, he was appointed Executive Vice President, Chief Information Officer. Prior to joining the Company, Mr. Tonnison held executive management positions in the U.S., United Kingdom and Germany with Computer 2000, Technology Solutions Network and Mancos Computers. Mr. Tonnison was educated in the United Kingdom and became a U.S. citizen in 2006.
David R. Vetter, Executive Vice President, Chief Legal Officer, joined the Company in June 1993 as Vice President, General Counsel and was promoted to Corporate Vice President, General Counsel in April 2000. In March 2003, he was promoted to Senior Vice President, and effective July 2003, was appointed Secretary. In January 2017, Mr. Vetter was promoted to Executive Vice President, Chief Legal Officer. Prior to joining the Company, Mr. Vetter was employed by the law firm of Robbins, Gaynor & Bronstein, P.A. from 1984 to 1993, most recently as a partner. Mr. Vetter is a member of the Florida Bar Association and holds Bachelor of Arts degrees in English and Economics from Bucknell University and a Juris Doctorate Degree from the University of Florida.
Joseph H. Quaglia, President, Americas, joined the Company in May 2006 as Vice President, East and Government Sales and was promoted to Senior Vice President of U.S. Marketing in November 2007. In February 2012, he was appointed to the additional role of

8


President, TDMobility and he was promoted to President, Americas in November 2013. Prior to joining the Company, Mr. Quaglia held senior management positions with CA Technologies, StorageNetworks Inc. and network software provider Atabok. Mr. Quaglia holds a Bachelor of Science degree in Computer Science from Indiana State University and an M.B.A. from Butler University.
Patrick Zammit, President, Europe, joined the Company in February 2017 through Tech Data's acquisition of Avnet’s Technology Solutions business as President, Europe. Prior to his appointment at the Company, Mr. Zammit was employed for more than twenty years at Avnet, Inc. Most recently, from January 2015 to January 2017, Mr. Zammit served as Global President of Avnet Technology Solutions. Prior to that position, from October 2006 until January 2015, Mr. Zammit served as President of Avnet Electronics Marketing EMEA. From 1993 to 2006, Mr. Zammit served in management positions of increasing responsibilities. Prior to joining Avnet, Mr. Zammit was employed by Arthur Andersen from 1989 to 1993. Mr. Zammit holds a Masters in Business Administration equivalent from Paris Business School ESLSCA.
Michael Rabinovitch, Senior Vice President, Chief Accounting Officer and Controller, joined the Company in March 2018 as Senior Vice President, Chief Accounting Officer and Controller. Prior to joining Tech Data, Mr. Rabinovitch was employed at Office Depot, Inc. from January 2015 to February 2018, where he served as Senior Vice President, Finance and Chief Accounting Officer beginning in March 2017 and Vice President of Finance, North America from January 2015 to March 2017. Prior to joining Office Depot, Inc., Mr. Rabinovitch was the Executive Vice President and Chief Financial Officer of Birks Group, a North American manufacturer and retailer of fine jewelry and luxury timepieces, from 2005 through 2014. Prior to joining Birks Group, Mr. Rabinovitch was Vice President of Finance of Claire’s Stores, Inc., a specialty retailer of fashion jewelry and accessories, from 1999 to 2005. Prior to joining Claire’s Stores, Inc., Mr. Rabinovitch was Vice President of Accounting and Corporate Controller at an equipment leasing company and spent five years with Price Waterhouse. Mr. Rabinovitch is a licensed Certified Public Accountant (inactive) and holds Bachelor of Science degrees in Accounting and Finance from Florida State University.

9


ITEM 1A. Risk Factors.
The following are certain risk factors that could affect our business, financial position and results of operations. These risk factors should be considered in connection with evaluating the forward-looking statements contained in this Annual Report on Form 10-K because these factors could cause the actual results and conditions to differ materially from those projected in the forward-looking statements. Before you buy our common stock or other securities, you should know that making such an investment involves risks, including the risks described below. The risks that have been highlighted below are not the only risks of our business. If any of the risks actually occur, our business, financial condition or results of operations could be negatively affected. In that case, the trading price of our common stock or other securities could decline, and you may lose all or part of your investment. Risk factors that could cause actual results to differ materially from our forward-looking statements are as follows:
Our ability to earn profit is more challenging when sales slow from a down economy as a result of gross profit declining faster than cost reduction efforts taking effect.
Adverse economic conditions may result in lower demand for the products and services we sell. When we experience a rapid decline in demand for products we experience more difficulty in achieving the gross profit and operating profit we desire due to the lower sales and increased pricing pressure. The economic environment may also result in changes in vendor terms and conditions, such as rebates, cash discounts and cooperative marketing efforts, which may also result in downward pressure on our gross profit. As a result, there is pressure to reduce the cost of operations in order to maximize operating profits. To the extent we cannot reduce costs to offset such decline in gross profits, our operating profits typically deteriorate. The benefits from cost reductions may also take longer to fully realize and may not fully mitigate the impact of the reduced demand or changes in vendor terms and conditions. Should we experience a decline in operating profits or not achieve the planned level of growth in operations of previously acquired companies, the valuations we develop for purposes of our goodwill impairment test may be adversely affected, potentially resulting in impairment charges. Deterioration in the financial and credit markets heightens the risk of customer bankruptcies and delays in payment. Future deterioration in the credit markets could result in reduced availability of credit insurance to cover customer accounts. This, in turn, may result in our reducing the credit lines we provide to customers, thereby having a negative impact on our net sales, gross profits and net income.
Our competitors can take more market share by reducing prices on vendor products that contribute the most to our profitability.
The technology distribution industry is characterized by intense competition, based primarily on product availability, credit terms and availability, price, effectiveness of information systems and e-commerce tools, speed of delivery, ability to tailor specific solutions to customer needs, quality and depth of product lines and training, service and support. Our customers are not required to purchase any specific volume of products from us and may move business if pricing is reduced by competitors, resulting in lower sales. As a result, we must be extremely flexible in determining when to reduce prices to maintain market share and sales volumes and when to allow our sales volumes to decline to maintain the quality of our profitability. We compete with a variety of regional, national and international wholesale distributors, some of which may have greater financial resources than us.

We are dependent on internal information and telecommunications systems, and any failure of these systems, including system security breaches, data protection breaches or other cybersecurity attacks, may negatively impact our business and results of operations.
Cyber-attacks and other tactics designed to gain access to and exploit sensitive information by breaching mission critical systems of large organizations are constantly evolving and have been increasing in sophistication in recent years. High profile security breaches leading to unauthorized release of sensitive information have occurred with increasing frequency at a number of major U.S. companies, despite widespread recognition of the cyber-attack threat and improved data protection methods. In addition, regulations related to data protection, including the European Union’s General Data Protection Regulation (“GDPR”) which took effect in May 2018, create a range of new compliance obligations for the Company. While to date we have not experienced a significant data loss, significant compromise or any material financial losses related to cybersecurity attacks, our systems, those of our customers, and those of our third-party service providers are under constant threat. Cybercrime, including phishing, social engineering, attempts to overload our servers with denial-of-service attacks, or similar disruptions from unauthorized access to our systems, could cause us critical data loss or the disclosure or use of personal or other confidential information. Outside parties may attempt to fraudulently induce employees to disclose personally identifiable information or other confidential information which could expose us to a risk of loss or misuse of this information.

We are dependent on internal information and telecommunications systems, and we are vulnerable to failure of these systems, including through system security breaches, data protection breaches or other cybersecurity attacks. If these events occur, the unauthorized disclosure, loss or unavailability of data and disruption to our business may have a material adverse effect on our reputation and harm our relationships with vendors and customers. Additionally, these events may lead to financial losses from remedial actions, or potential liability from fines, including in relation to noncompliance with the GDPR, as well as possible litigation and punitive damages. Failures of our internal information or telecommunications systems may prevent us from taking customer orders, shipping products and billing customers. Sales may also be impacted if our customers are unable to access our pricing and product availability information. The occurrence of any of these events could have a material adverse impact on our business and results of operations.



10


We may not be able to ship products if our third party shipping companies cease operations temporarily or permanently.
We rely on arrangements with independent shipping companies for the delivery of our products from vendors and to customers. The failure or inability of these shipping companies to deliver products or the unavailability of their shipping services, even temporarily, may have an adverse effect on our business and our operating results.
Natural disasters may negatively impact our business and results of operations.
Certain of our facilities, including our corporate headquarters in Clearwater, Florida, are located in geographic areas that heighten our exposure to hurricanes, tropical storms and other severe weather events. Future weather events could cause severe damage to our property and technology and could cause major disruptions to our operations. We carry property damage and business interruption insurance; however, there can be no assurance that such insurance would be adequate to cover any losses we may incur. As such, a hurricane, tropical storm or severe weather event may have an adverse effect on our business, financial condition or results of operations. 
If our vendors do not continue to provide price protection for inventory we purchase from them, our profit from the sale of that inventory may decline.
It is very typical in our industry that the value of inventory will decline as a result of price reductions by vendors or technological obsolescence. It is the policy of many of our vendors to protect distributors from the loss in value of inventory due to technological change or the vendors' price reductions. Some vendors, however, may be unwilling or unable to pay us for price protection claims or products returned to them under purchase agreements. Moreover, industry practices are sometimes not embodied in written agreements and do not protect us in all cases from declines in inventory value. No assurance can be given that such practices to protect distributors will continue, that unforeseen new product developments will not adversely affect us or that we will be able to successfully manage our existing and future inventories.
Failure to obtain adequate product supplies from our largest vendors, or terminations of a supply or services agreement, or a significant change in vendor terms or conditions of sale by our largest vendors may negatively affect our financial condition or results of operations.
A significant percentage of our revenues are from products we purchase from certain vendors, such as Apple, Inc., HP Inc. and Cisco Systems, Inc. These vendors have significant negotiating power over us and rapid, significant or adverse changes in sales terms and conditions, such as reducing the amount of price protection and return rights as well as reducing the level of purchase discounts and rebates they make available to us, may reduce the profit we can earn on these vendors' products and result in loss of revenue and profitability. Our gross profit could be negatively impacted if we are unable to pass through the impact of these changes to our customers or cannot develop systems to manage ongoing vendor programs. Additionally, changes in vendor payment terms could negatively impact our financial condition. Our standard vendor distribution agreement permits termination without cause by either party upon 30 days notice. The loss of a relationship with any of our key vendors, a change in their strategy (such as increasing direct sales), the merger or reorganization of significant vendors or significant changes in terms on their products may adversely affect our business.
We conduct business in countries outside of the U.S., which exposes us to fluctuations in foreign currency exchange rates that result in losses in certain periods.
Approximately 61%, 62% and 65% of our net sales in fiscal 2019, 2018 and 2017 were generated in countries outside of the U.S., which exposes us to fluctuations in foreign currency exchange rates. We may enter into short-term forward exchange or option contracts to hedge this risk. Nevertheless, volatile foreign currency exchange rates increase our risk of loss related to products purchased in a currency other than the currency in which those products are sold. While we maintain policies to protect against fluctuations in currency exchange rates, extreme fluctuations have resulted in our incurring losses in some countries. Furthermore, our local competitors in certain markets may have different purchasing models that provide them reduced foreign currency exposure compared to us. This may result in market pricing that we cannot meet without significantly lower profit on sales. In addition, we may be exposed to foreign exchange risk that may occur as a result of the United Kingdom's (“U.K.”) potential withdrawal from the European Union, commonly referred to as "Brexit". Brexit may adversely affect global economic and market conditions and could contribute to volatility in the foreign exchange markets, which we may be unable to effectively manage through our foreign exchange risk management program.

The translation of the financial statements of foreign operations into U.S. dollars is also impacted by fluctuations in foreign currency exchange rates, which may positively or negatively impact our results of operations. In addition, the value of our equity investment in foreign countries may fluctuate based upon changes in foreign currency exchange rates. These fluctuations, which are recorded in a cumulative translation adjustment account, may result in losses in the event a foreign subsidiary is sold or closed at a time when the foreign currency is weaker than when we made investments in the country. The realization of any or all of these risks could have a significant adverse effect on our financial results.



11


We have international operations which expose us to risks associated with conducting business in multiple jurisdictions.
Our international operations are subject to other risks such as the imposition of governmental controls, export license requirements, restrictions on the export of certain technology, political instability, trade restrictions, tariff changes, uncertainty surrounding the implementation and effects of Brexit, difficulties in staffing and managing international operations, changes in the interpretation and enforcement of laws (in particular related to items such as duty and taxation), difficulties in collecting accounts receivable, longer collection periods, the impact of local economic conditions and practices, uncertainties arising from local business practices and cultural considerations, and enforcement of the Foreign Corrupt Practices Act, or similar laws of other jurisdictions. Recently, the U.S. government imposed tariffs on certain products imported into the U.S. and the Chinese government imposed tariffs on certain products imported into China, which have increased the prices of many of the products that the company purchases from its suppliers. The new tariffs, along with any additional tariffs or trade restrictions that may be implemented by the U.S. or other countries, could result in further increased prices. While the company intends to pass price increases on to our customers, the effect of tariffs on prices may impact sales and results of operations. There can be no assurance that these and other factors will not have an adverse effect on our business.  
Changes in tax laws or tax rulings in the jurisdictions in which we operate may materially impact our financial position and results of operations. The Organization for Economic Cooperation and Development has been working on the Base Erosion and Profit Sharing Project, and has issued and will continue to issue, guidelines and proposals that may change various aspects of the existing framework under which our tax obligations are determined in many of the countries in which we do business. Certain countries are evaluating their tax policies and regulations, which could affect international business and may have an adverse effect on our overall tax rate, along with increasing the complexity, burden and cost of tax compliance. For example, 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 (see Note 9 of Notes to Consolidated Financial Statements for further discussion). Additional changes in the U.S. tax regime or in how U.S. multinational corporations are taxed on foreign earnings, including changes in how existing tax laws are interpreted or enforced, could adversely affect our business, financial condition or results of operations.
In addition, while our labor force in the U.S. is currently non-union, employees of certain other subsidiaries are subject to collective bargaining or similar arrangements. We do business in certain foreign countries where labor disruption is more common than is experienced in the U.S. and some of the freight carriers we use are unionized. A labor strike by a group of our employees, one of our freight carriers, one of our vendors, a general strike by civil service employees or a governmental shutdown could have an adverse effect on our business. Many of the products we sell are manufactured in countries other than the countries in which our logistics centers are located. The inability to receive products into the logistics centers because of government action or labor disputes at critical ports of entry may have an adverse effect on our business.

12


We have incurred substantial indebtedness that may impact our financial position and subject us to financial and operating restrictions, decrease our access to capital, and / or increase our borrowing costs, which may adversely affect our operations and financial results.
Our business requires substantial capital to operate and to finance accounts receivable and product inventory that are not financed by trade creditors. We have historically relied upon cash generated from operations, bank credit lines, trade credit from vendors, accounts receivable purchase agreements, proceeds from public offerings of our common stock and proceeds from debt offerings to satisfy our capital needs and to finance growth. The incurrence of debt under our Senior Notes and other credit facilities subject us to financial and operating covenants, which may limit our ability to borrow and our flexibility in responding to our business needs.
As of January 31, 2019, we had approximately $1.4 billion of total debt. If we are not able to maintain compliance with stated financial covenants or if we breach other covenants in any debt agreement, we could be in default under such agreement. Such a default may allow our creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross acceleration or cross-default provision applies. Our overall leverage and terms of our financing could, among other things:

limit our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or for general corporate purposes;
make it more difficult to satisfy our obligations under the terms of our debt;
limit our ability to refinance our debt on terms acceptable to us or at all;
make it more difficult to obtain trade credit from vendors;
limit our flexibility to plan for and adjust to changing business and market conditions and repurchase shares of our common stock; and
increase our vulnerability to general adverse economic and industry conditions.
Changes in our credit rating or other market factors may increase our interest expense or other costs of capital.
Certain of our financing instruments involve variable rate debt, thus exposing us to the risk of fluctuations in interest rates. In addition, the interest rate payable on the 3.70% Senior Notes and the 4.95% Senior Notes (each as defined herein) and certain other credit facilities would be subject to adjustment from time to time if our credit rating is downgraded. The U. K.’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. The U.S. Federal Reserve has begun publishing a Secured Overnight Funding Rate (“SOFR”), which is intended to replace U.S. dollar LIBOR. Plans for alternative reference rates for other currencies have also been announced. At this time, we cannot predict how markets will respond to these proposed alternative rates or the effect of any changes to LIBOR or the discontinuation of LIBOR. If LIBOR is no longer available or if our lenders have increased costs due to changes in LIBOR, we may experience potential increases in interest rates on our variable rate debt, which could adversely impact our interest expense, results of operations and cash flows.
We cannot predict what losses we might incur in litigation matters, regulatory enforcement actions and contingencies that we may be involved with from time to time.
We cannot predict what losses we might incur from litigation matters, regulatory enforcement actions and contingencies that we may be involved with from time to time. There are various other claims, lawsuits and pending actions against us. We do not expect that the ultimate resolution of these matters will have a material adverse effect on our consolidated financial position. However, the resolution of certain of these matters could be material to our operating results for any particular period, depending on the level of income for such period. We can make no assurances that we will ultimately be successful in our defense of any of these matters.

13


ITEM 1B. Unresolved Staff Comments.
Not applicable.

ITEM 2. Properties.

Our executive offices are located in Clearwater, Florida. As of January 31, 2019, we operated a total of 22 logistics centers and a number of smaller stocking locations to provide our customers timely delivery of products. These logistic centers are located in the following principal markets:  The Americas - 10, Europe - 10, and Asia-Pacific - 2.
As of January 31, 2019, we leased or owned approximately 9.0 million square feet of space. We own approximately 2.6 million square feet of our facilities in the Americas and lease the majority of our facilities and office space in other regions. Our facilities are well maintained and are adequate to conduct our current business. We do not anticipate significant difficulty in renewing our leases as they expire or securing replacement facilities.

ITEM 3. Legal Proceedings.

Prior to fiscal 2004, one of our subsidiaries, located in Spain, was audited in relation to various value added tax (“VAT”) matters and received notices of assessment related to fiscal years 1994 through 2001 that alleged the subsidiary did not properly collect and remit VAT. The Spanish subsidiary appealed these assessments beginning in March 2010. The matters related to fiscal years 1996 through 2001 were resolved during fiscal 2016. During fiscal 2017, the Spanish National Appellate Court issued an opinion upholding the assessments for fiscal years 1994 and 1995. We appealed this opinion to the Spanish Supreme Court, however, certain of the amounts assessed were not eligible to be appealed to the Spanish Supreme Court. As a result, we increased our accrual for costs associated with this matter by $2.6 million during fiscal 2017, including $1.5 million recorded in "value added tax assessments" and $1.1 million recorded in "interest expense" in the Consolidated Statement of Income.
During fiscal 2018, the Spanish Supreme Court issued a decision upholding the assessment for fiscal years 1994 and 1995. As a result, we increased our accrual for costs associated with this matter by $2.1 million, including $1.2 million recorded in "value added tax assessments" and $0.9 million recorded in "interest expense" in the Consolidated Statement of Income. As of January 31, 2018, we had recorded a liability of approximately $10.7 million for the entire amount of the remaining assessments, including various penalties and interest. During fiscal 2019, we paid the assessed amounts and recorded a benefit in interest expense of $0.9 million to adjust our accrual for estimated interest costs to the final assessed amount.
In December 2010, in a non-unanimous decision, a Brazilian appellate court overturned a 2003 trial court which had previously ruled in favor of our 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”. We estimate the total exposure related to CIDE tax, including interest, was approximately $20.4 million at January 31, 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, we believe 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, we have not recorded an accrual for the total estimated CIDE tax exposure. However, due to the lack of predictability of the Brazilian court system, we have concluded that it is reasonably possible that the Brazilian subsidiary may incur a loss up to the total exposure described above. We believe the resolution of this litigation will not be material to our consolidated net assets or liquidity.
In June 2013, we were 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 our 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 our supplier and another of its distributors. At this time, we cannot determine the likelihood of loss or reasonably estimate the range of any loss arising from this proceeding.
We are subject to various other legal proceedings and claims arising in the ordinary course of business. Our management does not expect that the outcome in any of these other legal proceedings, individually or collectively, will have a material adverse effect on our financial condition, results of operations, or cash flows.

ITEM 4. Mine Safety Disclosures.
Not applicable.  


14



PART II

ITEM 5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock is traded on the NASDAQ Stock Market, Inc. (“NASDAQ”) under the symbol “TECD.” We have not paid cash dividends since fiscal 1983 and the Board of Directors has no current plans to institute a cash dividend payment policy in the foreseeable future. As of March 14, 2019, there were 193 holders of record.


STOCK PERFORMANCE CHART
The five-year stock performance chart below assumes an initial investment of $100 on February 1, 2014 and compares the cumulative total return for Tech Data, the NASDAQ Stock Market (U.S.) Index, and the Standard Industrial Classification, or SIC, Code 5045 – Computer and Peripheral Equipment and Software. The comparisons in the table are provided in accordance with SEC requirements and are not intended to forecast or be indicative of possible future performance of our common stock.  

Comparison of Cumulative Total Return
Assumes Initial Investment of $100 on February 1, 2014
Among Tech Data Corporation,
NASDAQ Stock Market (U.S.) Index and SIC Code 5045

stockgraphfy21.jpg
 
2014
 
2015
 
2016
 
2017
 
2018
 
2019
Tech Data Corporation
100
 
106
 
116
 
159
 
186
 
177
NASDAQ Stock Market (U.S.) Index
100
 
115
 
117
 
144
 
159
 
159
SIC Code 5045 – Computer and Peripheral Equipment and Software
100
 
112
 
122
 
167
 
181
 
173
Securities Authorized for Issuance under Equity Compensation Plans 

Information regarding the Securities Authorized for Issuance under Equity Compensation Plans can be found under Item 12 of this Report.
Unregistered Sales of Equity Securities
None.

15


Issuer Purchases of Equity Securities
On October 2, 2018, the Company's Board of Directors authorized a share repurchase program for up to $200.0 million of the
Company's common stock. During the year ended January 31, 2019, there were 1,429,154 shares repurchased by the Company at an average price of $74.89 per share, for a total cost, including expenses, of approximately $107.0 million under the program. As of January 31, 2019, the Company had approximately $93.0 million available for future repurchases of its common stock under the authorized share repurchase program.

The following table presents information with respect to purchases of common stock by the Company under the share repurchase program during the quarter ended January 31, 2019:

 
 
Issuer Purchases of Equity Securities
Period
 
Total number of shares purchased
 
Average price paid per share
 
Total number of shares purchased as part of a publicly announced plan or program
 
Maximum dollar value of shares that may yet be purchased under the plan or programs
November 1 - November 30, 2018
 
421,833

 
$
73.97

 
421,833

 
$
125,000,053

December 1 - December 31, 2018
 
297,368

 
82.47

 
297,368

 
100,475,560

January 1 - January 31, 2019
 
88,513

 
84.74

 
88,513

 
92,975,378

Total
 
807,714

 
$
78.28

 
807,714

 


Subsequent to January 31, 2019, the Company’s Board of Directors authorized the repurchase of up to an additional $100.0 million of the Company's common stock.

16


ITEM 6. Selected Financial Data.
The following table sets forth certain selected consolidated financial data. This information should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and notes thereto appearing elsewhere in this Annual Report.
FIVE-YEAR FINANCIAL SUMMARY
Year ended January 31:
2019
 
2018 (1)
 
2017
 
2016
 
2015
(in thousands, except per share data)
 
 
(As Adjusted) (2)
 
(As Adjusted) (2)
 
 
 
 
Income statement data: 
 
 
 
 
 
 
 
 
 
Net sales
$
37,238,950

 
$
33,597,841

 
$
24,193,697

 
$
26,379,783

 
$
27,670,632

Gross profit
2,255,899

 
2,115,621

 
1,301,927

 
1,286,661

 
1,393,954

Operating income (3) (4) (5) (6)
493,802

 
410,079

 
291,902

 
401,428

 
267,635

Net income (7)
$
340,580

 
$
116,641

 
$
195,095

 
$
265,736

 
$
175,172

Earnings per share—basic
$
8.94

 
$
3.07

 
$
5.54

 
$
7.40

 
$
4.59

Earnings per share—diluted
$
8.89

 
$
3.05

 
$
5.51

 
$
7.36

 
$
4.57

Dividends per common share

 

 

 

 

Balance sheet data:
 
 
 
 
 
 
 
 
 
Working capital (8)
$
2,085,889

 
$
2,095,573

 
$
2,701,472

 
$
1,889,415

 
$
1,834,997

Total assets
12,986,552

 
12,920,359

 
8,118,934

 
6,358,288

 
6,136,725

Revolving credit loans and current maturities of long-term debt, net
110,368

 
132,661

 
373,123

 
18,063

 
13,303

Long-term debt, less current maturities
1,300,554

 
1,505,248

 
989,924

 
348,608

 
351,576

Total shareholders' equity
2,936,723

 
2,921,492

 
2,169,888

 
2,005,755

 
1,960,143

(1)
During fiscal 2018, we completed the acquisition of TS (see Note 5 of Notes to Consolidated Financial Statements for further discussion).
(2)
We adopted Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” during fiscal 2019 using the full retrospective transition method and adjusted results from fiscal 2017 and 2018 (see Note 1 of Notes to Consolidated Financial Statements for further discussion). Results from periods prior to fiscal 2017 have not been recast for the adoption of this standard.
(3)
During fiscal 2019, 2018 and 2017, we recorded acquisition, integration and restructuring expenses of $45.4 million, $136.3 million and $29.0 million, respectively, associated with the acquisition of TS. During fiscal 2019, we also recorded restructuring expenses of $42.5 million associated with the Global Business Optimization Program (see Note 6 of Notes to Consolidated Financial Statements for further discussion).
(4)
During 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).
(5)
During fiscal 2019, 2018, 2017, 2016 and 2015, we recorded gains of $15.4 million, $41.3 million, $4.1 million, $98.4 million and $5.1 million, respectively, associated with legal settlements, net of attorney fees and expenses (see Note 1 of Notes to Consolidated Financial Statements for further discussion).
(6)
During fiscal 2015, we recorded restatement and remediation related expenses of $22.0 million related to the restatement of certain of our consolidated financial statements and other financial information from fiscal 2009 to fiscal 2013.
(7)
During fiscal 2019 and 2018, we recorded income tax benefits/(expenses) of $49.2 million and ($95.4) million related to the impact of the enactment of U.S. Tax Reform. During fiscal 2019, 2018, 2017 and 2015, we also recorded income tax benefits/(expenses) of $6.0 million, $(1.2) million, $12.5 million and $19.2 million, respectively, related to changes in deferred tax valuation allowances (see Note 9 of Notes to Consolidated Financial Statements for further discussion).
(8)
Working capital represents total current assets less total current liabilities in the Consolidated Balance Sheet.


17


ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
FORWARD-LOOKING STATEMENTS
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, 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
 
 
 
 
Tech Data 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 our customers create solutions best suited to maximize business outcomes for their end-user customers. 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. In August 2018, we entered into a settlement agreement with Avnet to finalize the TS purchase price (see Note 5 of Notes to Consolidated Financial Statements for further discussion), which resulted in the recognition of a gain of $9.6 million during the year ended January 31, 2019. Additionally, as part of the settlement agreement, we reached agreement with Avnet on the final geographic allocation of the purchase price for tax reporting purposes which resulted in the recognition of a deferred tax asset in the United States ("U.S.") for future tax deductions related to the amortization of goodwill for tax purposes. The recognition of the deferred tax asset in the U.S. resulted in an income tax benefit of $13.0 million for the fiscal year ended January 31, 2019.
Due to the timing of the completion of the TS acquisition, the results of operations for the fiscal year ended January 31, 2019 include an additional month of TS operations, as compared to the fiscal year ended January 31, 2018, which impacts comparability between periods.
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. In fiscal 2018, we recorded income tax expenses 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 expenses 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 the fiscal year ended January 31, 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).

RECENT ACCOUNTING PRONOUNCEMENTS
Effective February 1, 2018, we adopted the requirements of Accounting Standards Update 2014-09, "Revenue from Contracts with Customers." See Note 1 of Notes to Consolidated Financial Statements for the discussion on recent accounting pronouncements, including the impacts of the adoption of the new revenue recognition accounting standard.


18


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; tax indemnifications; value added tax assessments and related interest expense; acquisition-related intangible assets amortization expense; acquisition-related financing expenses; 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; tax indemnifications; acquisition-related intangible assets amortization expense; acquisition-related financing expenses; 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.

19


RESULTS OF OPERATIONS
The following table sets forth our Consolidated Statement of Income as a percentage of net sales. 
Year ended January 31:
2019
 
2018
 
2017
Net sales
100.00

%
 
100.00

%
 
100.00

%
Cost of products sold
93.94

 
 
93.70

 
 
94.62

 
Gross profit
6.06

 
 
6.30

 
 
5.38

 
Operating expenses:
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
4.43

 
 
4.79

 
 
4.07

 
Acquisition, integration and restructuring expenses
0.23

 
 
0.41

 
 
0.12

 
Goodwill impairment
0.13

 
 

 
 

 
Legal settlements and other, net
(0.04
)
 
 
(0.12
)
 
 
(0.02
)
 
     Value added tax assessments

 
 

 
 

 
Gain on disposal of subsidiary
(0.02
)
 
 

 
 

 
 
4.73

 
 
5.08

 
 
4.17

 
Operating income
1.33

 
 
1.22

 
 
1.21

 
Interest expense
0.29

 
 
0.33

 
 
0.15

 
Other expense (income), net
0.04

 
 

 
 

 
Income before income taxes
1.00

 
 
0.89

 
 
1.06

 
Provision for income taxes
0.09

 
 
0.54

 
 
0.25

 
Net income
0.91

%
 
0.35

%
 
0.81

%



20


NET SALES
 
 
 
 

The following tables summarize our net sales and change in net sales by geographic region for the fiscal years ended January 31, 2019, 2018 and 2017 (in billions):

chart-d2985a441b6878e83b9a01.jpgdocumentfy16_chart-14681a05.jpg
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.

21



Year ended January 31:
 
2018
 
2017
 
$ Change
 
% Change
(in millions)
 
 
 
 
 
 
 
 
Consolidated net sales, as reported
 
$
33,598

 
$
24,194

 
$
9,404

 
38.9%
Impact of changes in foreign currencies
 
(542
)
 

 
(542
)
 
 
Consolidated net sales, as adjusted
 
$
33,056

 
$
24,194

 
$
8,862

 
36.6%
 
 
 
 
 
 
 
 
 
Americas net sales, as reported
 
$
14,419

 
$
9,526

 
$
4,893

 
51.4%
Impact of changes in foreign currencies
 
(27
)
 

 
(27
)
 
 
Americas net sales, as adjusted
 
$
14,392

 
$
9,526

 
$
4,866

 
51.1%
 
 
 
 
 
 
 
 
 
Europe net sales, as reported
 
$
18,148

 
$
14,668

 
$
3,480

 
23.7%
Impact of changes in foreign currencies
 
(506
)
 

 
(506
)
 
 
Europe net sales, as adjusted
 
$
17,642

 
$
14,668

 
$
2,974

 
20.3%
 
 
 
 
 
 
 
 
 
Asia-Pacific net sales, as reported
 
$
1,031

 
$

 
$
1,031

 
N/A
Impact of changes in foreign currencies
 
(9
)
 

 
(9
)
 
 
Asia-Pacific net sales, as adjusted
 
$
1,022

 
$

 
$
1,022

 
N/A

2018 - 2017 NET SALES COMMENTARY
AMERICAS
The increase in Americas net sales, as adjusted, of $4.9 billion is primarily due to growth in data center and software products, primarily due to the impact of the acquisition of TS.

EUROPE
The increase in Europe net sales, as adjusted, of $3.0 billion is primarily due to growth in data center and software products, primarily due to the impact of the acquisition of TS, as well as growth in mobility products. 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 $1.0 billion is due to the acquisition of TS, with net sales primarily in data center and software products.


22


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, 2019, 2018 and 2017:
documentfy16_chart-15887a05.jpga10kfy17docu_chart-27758a02.jpg

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%


Year ended
January 31:
2018
 
2017
 
$ Change
% Change
(in millions)
 
 
 
 
 
 
Gross profit, as reported
$
2,116

 
$
1,302

 
$
814

62.5%
Impact of changes in foreign currencies
(34
)
 

 
(34
)
 
Gross profit, as adjusted
$
2,082

 
$
1,302

 
$
780

59.9%
 

COMMENTARY

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.


2018 - 2017

The increase in gross profit, as adjusted, of $780 million and the increase in our year-over-year gross profit as a percentage of net sales is primarily attributable to increased sales volume and changes in product mix, both of which were significantly driven by the acquisition of TS.
 


23


OPERATING EXPENSES

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

The following tables provide a comparison of our selling, general and administrative expenses:
Year ended January 31:
 
2019
 
2018
 
$ Change
 
% Change
(in millions)
 
 
 
 
 
 
 
 
SG&A, as reported
 
$
1,649

 
$
1,609

 
$
40

 
2.5%
Impact of changes in foreign currencies
 
(11
)
 

 
(11
)
 
 
SG&A, as adjusted
 
$
1,638

 
$
1,609

 
$
29

 
1.8%
 
 
 
 
 
 
 
 
 
SG&A as a percentage of net sales, as reported
 
4.43
%
 
4.79
%
 
 
 
(36) bps

The increase in SG&A, as adjusted, of approximately $29 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.

Year ended January 31:
 
2018
 
2017
 
$ Change
 
% Change
(in millions)
 
 
 
 
 
 
 
 
SG&A, as reported
 
$
1,609

 
$
984

 
$
625

 
63.5%
Impact of changes in foreign currencies
 
(23
)
 

 
(23
)
 
 
SG&A, as adjusted
 
$
1,586

 
$
984

 
$
602

 
61.2%
 
 
 
 
 
 
 
 
 
SG&A as a percentage of net sales, as reported
 
4.79
%
 
4.07
%
 
 
 
72 bps

The increase in SG&A, as adjusted, of $602 million is primarily due to increased costs as a result of the acquisition of TS. The increase in SG&A as a percentage of net sales as compared to the prior fiscal year is also primarily due to the acquisition of TS including higher costs incurred to support the more complex, higher margin data center business.


24


ACQUISITION, INTEGRATION AND RESTRUCTURING EXPENSES

Acquisition, integration and restructuring expenses are comprised of costs related to the fiscal 2018 acquisition of TS as well as restructuring costs related to the Global Business Optimization Program which was initiated in fiscal 2019.

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 the gain recorded related to the settlement agreement with Avnet (see Note 5 of Notes to Consolidated Financial Statements for further discussion). We do not expect to incur additional acquisition, integration and restructuring expenses related to the acquisition of TS.

Acquisition, integration and restructuring expenses for fiscal 2019, 2018 and 2017 related to the acquisition of TS are comprised of the following:
Year ended January 31:
2019
 
2018
 
2017
(in millions)
 
 
 
 
 
Restructuring costs
$
19.8

 
$
35.1

 
$

IT related costs
13.2

 
18.3

 

Professional services
6.0

 
42.6

 
14.3

Transaction related costs
1.7

 
20.2

 
12.1

Other costs
4.7

 
20.1

 
2.6

Total
$
45.4

 
$
136.3

 
$
29.0


Global Business Optimization Program

On August 29, 2018, 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 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 fiscal 2020. The charges primarily consist of severance costs, and also include professional services and facility exit costs. The GBO Program is expected to result in annual cost savings of $70 million to $80 million over the next two years, of which approximately half is expected to be reinvested to accelerate our strategic priorities.

Restructuring expenses for fiscal 2019 related to the GBO Program are comprised of the following:
 
 
Year ended January 31:
2019
(in thousands)
 
Severance costs
$
26.4

Professional services and facility exit costs
16.1

Total
$
42.5


During fiscal 2019, we recorded restructuring costs related to the GBO Program of $12.1 million in the Americas, $29.0 million in Europe and $1.4 million in Asia-Pacific.

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).

25




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, 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. The operating results of this entity were insignificant relative to the consolidated financial results for all periods presented.

VALUE ADDED TAX ASSESSMENTS
Prior to fiscal 2004, one of our subsidiaries, located in Spain, was audited in relation to various value added tax (“VAT”) matters and received notices of assessment for several fiscal years that allege the subsidiary did not properly collect and remit VAT. During fiscal 2017, the Spanish National Appellate Court issued an opinion upholding the assessments for fiscal years 1994 and 1995. We appealed this opinion to the Spanish Supreme Court; however, certain of the amounts assessed for fiscal years 1994 and 1995 were not eligible to be appealed to the Spanish Supreme Court. As a result, during the year ended January 31, 2017, we increased our accrual for the assessments and penalties associated with this matter by $1.5 million. During fiscal 2018, the Spanish Supreme Court issued a decision upholding the assessment for fiscal years 1994 and 1995. As a result, during the year ended January 31, 2018, we increased our accrual for costs related to the assessments and penalties associated with this matter by $1.2 million. During fiscal 2019, we paid the assessed amounts (see Note 14 of Notes to Consolidated Financial Statements for further discussion).


26


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, 2019, 2018 and 2017:

documentfy16_chart-17778a05.jpgdocumentfy16_chart-18943a05.jpg
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.

2018 - 2017 COMMENTARY
The increase in GAAP operating income of $118.2 million as compared to the prior fiscal year is due to an increase in net sales and favorable changes in product mix, primarily due to the acquisition of TS, and an increase in gains related to settlement agreements with certain manufacturers of LCD flat panel and cathode ray tube displays. This increase was partially offset by higher acquisition, integration and restructuring expenses and an increase in SG&A due to the acquisition of TS, including an increase in acquisition-related intangible assets amortization expense.
The increase in non-GAAP operating income of $263.8 million as compared to the prior fiscal year is due to an increase in net sales and favorable changes in product mix partially offset by higher SG&A expenses, primarily as a result of the TS acquisition.
CONSOLIDATED GAAP TO NON-GAAP RECONCILIATION OF OPERATING INCOME
Year ended January 31:
2019
 
2018
 
2017
(in millions)
 
 
 
 
 
Operating income
$
493.8

 
$
410.1

 
$
291.9

Acquisition, integration and restructuring expenses
87.9

 
136.3

 
29.0

Goodwill impairment
47.4

 

 

Legal settlements and other, net
(15.4
)
 
(41.3
)
 
(4.1
)
Gain on disposal of subsidiary
(6.7
)
 

 

Value added tax assessments

 
1.7

 
1.0

Tax indemnifications
9.6

 
6.5

 

Acquisition-related intangible assets amortization expense
91.3

 
89.4

 
21.1

Non-GAAP operating income
$
707.9

 
$
602.7

 
$
338.9


27


AMERICAS
 
 
 
 

documentfy16_chart-20001a05.jpgdocumentfy16_chart-21055a05.jpg
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.
2018 - 2017 COMMENTARY
The increase in GAAP operating income of $104.2 million as compared to the prior fiscal year is due to an increase in net sales and favorable changes in product mix, primarily due to the acquisition of TS, and an increase in gains related to settlement agreements with certain manufacturers of LCD flat panel and cathode ray tube displays. This increase was partially offset by higher acquisition, integration and restructuring expenses and an increase in SG&A due to the acquisition of TS, including an increase in acquisition-related intangible assets amortization expense.
The increase in non-GAAP operating income of $173.7 million as compared to the prior fiscal year is due to an increase in net sales and favorable changes in product mix partially offset by higher SG&A expenses, primarily as a result of the TS acquisition.
AMERICAS GAAP TO NON-GAAP RECONCILIATION OF OPERATING INCOME
Year ended January 31:
2019
 
2018
 
2017
(in millions)
 
 
 
 
 
Operating income - Americas
$
366.6

 
$
248.4

 
$
144.2

Acquisition, integration and restructuring expenses
25.2

 
75.5

 
18.0

Legal settlements and other, net
(15.4
)
 
(42.6
)
 
(4.1
)
Value added tax assessments

 
0.5

 
(0.4
)
Tax indemnifications
0.7

 

 

Acquisition-related intangible assets amortization expense
54.2

 
51.9

 
2.3

Non-GAAP operating income - Americas
$
431.3

 
$
333.7

 
$
160.0


28


EUROPE
 
 
 
 
documentfy16_chart-22128a05.jpgdocumentfy16_chart-23148a05.jpg
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.

2018 - 2017 COMMENTARY
GAAP operating income increased by $12.0 million when compared to the prior year due to an increase in net sales and favorable changes in product mix primarily due to the acquisition of TS. The increase was partially offset by an increase in acquisition, integration and restructuring expenses and an increase in SG&A, including an increase in acquisition-related intangible assets amortization expense.
The increase in non-GAAP operating income of $78.5 million when compared to the prior fiscal year is due to an increase in net sales and favorable changes in product mix partially offset by an increase in SG&A expenses, primarily due to the acquisition of TS.

EUROPE GAAP TO NON-GAAP RECONCILIATION OF OPERATING INCOME
Year ended January 31:
2019
 
2018
 
2017
(in millions)
 
 
 
 
 
Operating income - Europe
$
195.4

 
$
173.6

 
$
161.6

Acquisition, integration and restructuring expenses
57.7

 
56.2

 
11.0

Legal settlements and other, net

 
1.3

 

Gain on disposal of subsidiary
(6.7
)
 

 

Value added tax assessments

 
1.2

 
1.4

Tax indemnifications
9.5

 
6.5

 

Acquisition-related intangible assets amortization expense
31.7

 
32.5

 
18.8

Non-GAAP operating income - Europe
$
287.6

 
$
271.3

 
$
192.8



29


ASIA-PACIFIC
 
 
 
 
 
 
 
 
Year ended January 31:
2019
 
as a % of net sales
 
2018
 
as a % of net sales
(in millions)
 
 
 
 
 
 
 
Operating (loss) income - Asia-Pacific
$
(36.7
)
 
(3.13
)%
 
$
17.5

 
1.70
%
Acquisition, integration and restructuring expenses
2.4

 
 
 
0.8

 
 
Goodwill impairment
47.4

 
 
 

 
 
Tax indemnifications
(0.6
)
 
 
 

 
 
Acquisition-related intangible assets amortization expense
5.4

 
 
 
5.0

 
 
Non-GAAP operating income - Asia-Pacific
$
17.9

 
1.53
 %
 
$
23.3

 
2.26
%

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 the Company excludes stock-based compensation expense from the segment information. The following table summarizes our operating income (loss) by geographic region.
Year ended January 31:
2019
 
2018
 
2017
(in millions)
 
 
 
 
 
Americas
$
366.6

 
$
248.4

 
$
144.2

Europe
195.4

 
173.6

 
161.6

Asia-Pacific
(36.7
)
 
17.5

 

Stock-based compensation expense
(31.5
)
 
(29.4
)
 
(13.9
)
Operating income
$
493.8

 
$
410.1

 
$
291.9



30


INTEREST EXPENSE
 
 
 
 
% Change:
Year ended January 31:
 
2019
 
2018
 
2017
 
2019 to 2018
 
2018 to 2017
(in millions)
 
 
 
 
 
 
 
 
 
 
Interest expense
 
$
106.7

 
$
112.2

 
$
36.8

 
(4.9
)%
 
204.8
%
Percentage of net sales
 
0.29
%
 
0.33
%
 
0.15
%
 
 
 
 

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 the Term Loan Credit Agreement, partially offset by higher average borrowings and interest rates on other credit facilities during the period.

The increase in interest expense in fiscal 2018 compared to fiscal 2017 of $75.4 million is primarily due to higher interest expense on the Senior Notes of approximately $41 million due to the issuance of $1.0 billion of Senior Notes on January 31, 2017, partially offset by the maturity of $350 million of Senior Notes in September 2017. Additionally, interest expense increased due to approximately $24 million of expenses related to the Term Loan Credit Agreement and higher average borrowings on other credit facilities. These amounts were partially offset by a decrease of approximately $7 million in costs related to a commitment for a bridge loan facility obtained in September 2016. The commitment for the bridge loan facility was terminated on February 27, 2017 in conjunction with the acquisition of TS.

OTHER EXPENSE (INCOME), NET
 
 
 
Year ended January 31:
 
2019
 
2018
 
2017
(in millions)
 
 
 
 
 
 
Other expense (income), net
 
$
13.8

 
$
(1.2
)
 
$
(1.7
)
Percentage of net sales
 
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 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 discounts on the sale of accounts receivable of $5.9 million. 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 2018 compared to fiscal 2017 is primarily attributable to higher gains on the investments contained within life insurance policies of $3.1 million, partially offset by higher discounts on the sale of accounts receivable of $2.9 million.


31


PROVISION FOR INCOME TAXES
documentfy16_chart-24102a05.jpgdocumentfy16_chart-24969a05.jpg
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 (see Note 5 of Notes to Consolidated Financial Statements for further discussion).

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.

2018 - 2017 COMMENTARY

The increase in the effective tax rate of approximately 37 percentage points in fiscal 2018 as compared to fiscal 2017 is primarily due to the impact of the following:

In fiscal 2018, we recorded income tax expenses of $95.4 million related to the impact of the enactment of U.S. Tax Reform.

In fiscal 2017, we recorded income tax benefits of $12.5 million related to the reversal of valuation allowances in specific jurisdictions in Europe, which had been recorded in prior fiscal years.

In fiscal 2018, we recorded a benefit in income tax expense of $6.5 million related to the reduction of certain liabilities for unrecognized tax benefits recorded for TS at the date of acquisition.

The effective tax rates for both fiscal 2018 and fiscal 2017 were impacted by the relative mix of earnings and losses within the taxing jurisdictions in which we operate.

The increase in the absolute dollar amount of the provision for income taxes in fiscal 2018 as compared to fiscal 2017 is primarily due to the impact of U.S. Tax Reform, the reversal of certain valuation allowances in fiscal 2017 and an increase in taxable earnings, partially offset by the reduction of certain liabilities for unrecognized tax benefits recorded for TS at the date of acquisition.


32


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, 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 $9.6 million and $6.5 million, respectively. As a result, we recorded expenses of $9.6 million and $6.5 million during the years ended January 31, 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.


33


NET INCOME AND EARNINGS PER SHARE - DILUTED
The following tables provide 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, 2019, 2018 and 2017 ($ in millions, except per share data):
documentfy16_chart-25831a05.jpgdocumentfy16_chart-26871a05.jpg
GAAP TO NON-GAAP RECONCILIATION OF NET INCOME AND EARNINGS PER SHARE-DILUTED
 
Net Income
 
Earnings per Share-Diluted
Year ended January 31:
2019
 
2018
 
2017
 
2019
 
2018
 
2017
(in millions)
 
 
 
 
 
 
 
 
 
 
 
GAAP Results
$
340.6

 
$
116.6

 
$
195.1

 
$
8.89

 
$
3.05

 
$
5.51

Acquisition, integration and restructuring expenses
87.9

 
136.3

 
29.0

 
2.29

 
3.57

 
0.82

Goodwill impairment
47.4

 

 

 
1.24

 

 

Legal settlements and other, net
(15.4
)
 
(41.0
)
 
(4.1
)
 
(0.40
)
 
(1.07
)
 
(0.12
)
Gain on disposal of subsidiary
(6.7
)
 

 

 
(0.18
)
 

 

Value added tax assessments and related interest expense
(0.9
)
 
2.6

 
1.4

 
(0.02
)
 
0.06

 
0.04

Acquisition-related intangible assets amortization expense
91.3

 
89.4

 
21.1

 
2.38

 
2.34

 
0.60

Acquisition-related financing expenses

 
8.8

 
11.9

 

 
0.23

 
0.33

Tax indemnifications
9.6

 
6.5

 

 
0.25

 
0.17

 

Income tax effect of tax indemnifications
(9.6
)
 
(6.5
)
 

 
(0.25
)
 
(0.17
)
 

Income tax effect of other adjustments above
(40.1
)
 
(61.0
)
 
(16.7
)
 
(1.04
)
 
(1.60
)
 
(0.47
)
Income tax benefit from acquisition settlement
(13.0
)
 

 

 
(0.34
)
 

 

Change in deferred tax valuation allowances
(6.0
)
 
1.2

 
(12.5
)
 
(0.16
)
 
0.03

 
(0.35
)
Impact of U.S. Tax Reform
(49.2
)
 
95.4

 

 
(1.28
)
 
2.50

 

Non-GAAP results
$
435.9

 
$
348.3

 
$
225.2

 
$
11.38

 
$
9.11

 
$
6.36













34


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
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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, 2019, 2018 and 2017.


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35


CASH FLOWS

The following table summarizes our Consolidated Statement of Cash Flows:
Year ended January 31:
 
2019
 
2018
 
2017
(in millions)
 
 
 
 
 
 
Net cash provided by (used in):
 
 
 
 
 
 
Operating activities
 
$
380.1

 
$
1,094.5

 
$
657.1

Investing activities
 
(171.7
)
 
(2,479.2
)
 
(42.5
)
Financing activities
 
(332.2
)
 
119.9

 
976.5

Effect of exchange rate changes on cash and cash equivalents
 
(32.7
)
 
94.8

 
3.3

Net (decrease) increase in cash and cash equivalents
 
$
(156.5
)
 
$
(1,170.0
)
 
$
1,594.4


OPERATING ACTIVITIES
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 increase in cash resulting from operating activities in fiscal 2018 compared to fiscal 2017 is primarily due to changes in payment terms with certain vendors, an increase in amounts sold under accounts receivable purchase agreements and the impacts of the acquisition of TS, including changes in working capital as compared to the date of acquisition.
The significant components of our investing and financing cash flow activities are listed below.

INVESTING ACTIVITIES
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

2017
$39.3 million of capital expenditures



 

FINANCING ACTIVITIES
2019
Repayment of $200.0 million on the 2022 Term Loans
$107 million paid to repurchase common stock under our share repurchase program

2018
Net borrowings under the Term Loan Credit Agreement of $500.0 million
Repayment of $350.0 million 3.75% Senior Notes upon maturity

2017
$992.2 million of net cash proceeds from the issuance of Senior Notes
$15.3 million of acquisition-related financing costs





36


CAPITAL RESOURCES AND DEBT COMPLIANCE

Our debt to total capital ratio was 32% at January 31, 2019. 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 and our ability to issue debt or equity, if necessary, will be sufficient to meet our working capital needs and cash requirements for at least the next 12 months.

At January 31, 2019, we had approximately $799.1 million in cash and cash equivalents, of which approximately $726.0 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 have 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 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"). The net proceeds from the issuance of the 2017 Senior Notes were used to fund a portion of the purchase price of the acquisition of TS. 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 outstanding from time to time.

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.

Other credit facilities

We have 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 our non-credit enhanced senior unsecured debt rating as determined by Standard & Poor’s Rating Service and Moody’s Investor Service. We pay interest on advances under the Credit Agreement at the applicable LIBOR rate (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, 2019 and 2018.

We entered into a term loan credit agreement on November 2, 2016 with a syndicate of banks (the "Term Loan Credit Agreement") which provides for the borrowing of (i) a tranche of senior unsecured term loans in an original aggregate principal amount of $250.0 million and maturing three years after the funding date and (ii) a tranche of senior unsecured term loans in an original aggregate principal amount of $750.0 million and maturing five years after the funding date. We pay interest on advances under the Term Loan Credit Agreement at a variable rate based on LIBOR (or similar interbank offered rates depending on currency draw) plus a predetermined margin that is based on our debt rating. In connection with the acquisition of TS on February 27, 2017, we borrowed $1.0 billion under our Term Loan Credit Agreement in order to fund a portion of the cash consideration paid to Avnet. The borrowings were comprised of a $250.0 million tranche of three-year senior unsecured term loans (the “2020 Term Loans”) and a $750.0 million tranche of five-year senior unsecured term loans (the “2022 Term Loans”). The 2020 Term Loans were repaid in full during fiscal 2018.

The outstanding principal amount of the 2022 Term Loans is payable in equal quarterly installments of (i) for the first three years after the funding date, 5.0% per annum of the initial principal amount and (ii) for the fourth and fifth years after the funding date,

37


10.0% per annum of the initial principal amount, with the remaining balance payable on February 27, 2022. We may repay the 2022 Term Loans, at any time in whole or in part, without penalty or premium prior to the maturity date. Quarterly installment payments due under the 2022 Term Loans are reduced by the amount of any prepayments made by us. We made principal payments of $200.0 million and $250.0 million on the 2022 Term Loans during fiscal years 2019 and 2018, respectively. At January 31, 2019, there was $300.0 million outstanding on the 2022 Term Loans at an interest rate of 3.99% and at January 31, 2018 there was $500.0 million outstanding on the 2022 Term Loans at an interest rate of 3.07%.
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 $750.0 million. 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 $1.7 billion and $1.5 billion, respectively, at January 31, 2019 and 2018. 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. The Receivables Securitization Program has a maturity date of August 8, 2019, and we pay interest on advances at the applicable commercial paper or LIBOR rate 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, 2019 and 2018.

In addition to the facilities described above, we have various other committed and uncommitted lines of credit and overdraft facilities totaling approximately $399.5 million at January 31, 2019 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 $102.3 million outstanding on these facilities at January 31, 2019, at a weighted average interest rate of 8.05%, and there was $119.8 million outstanding at January 31, 2018, at a weighted average interest rate of 6.07%.

At January 31, 2019, we had also issued standby letters of credit of $30.3 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 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, 2019, 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, 2019 and 2018, we had a total of $1.1 billion and $0.7 billion, respectively, of outstanding accounts receivable sold to and held by financial institutions under these agreements. During the fiscal years ended January 31, 2019, 2018 and 2017, discount fees recorded under these facilities were $14.9 million, $9.0 million and $6.1 million, respectively, which are included as a component of "other expense (income), net" in the Consolidated Statement of Income.


38



CONTRACTUAL OBLIGATIONS
As of January 31, 2019, future payments due under contractual obligations are as follows:
 
(in millions)
 
Operating leases
 
Debt (1)
 
U.S. Tax Reform (2)
 
Total  
Fiscal year:
 
 
 
 
 
 
 
 
2020
 
$
66.5

 
$
166.3

 
$

 
$
232.8

2021
 
58.4

 
62.3

 

 
120.7

2022
 
38.8

 
56.2

 

 
95.0

2023
 
28.6

 
826.4

 
4.9

 
859.9

2024
 
22.0

 
24.8

 
10.3

 
57.1

Thereafter
 
37.4

 
575.2

 
12.8

 
625.4

Total payments
 
251.7

 
1,711.2

 
28.0

 
1,990.9

Less amounts representing interest
 

 
(293.1
)
 

 
(293.1
)
Total principal payments
 
$
251.7

 
$
1,418.1

 
$
28.0

 
$
1,697.8


(1)
Amounts include fixed rate interest on the Senior Notes as well as the estimated interest on the outstanding balance of the Term Loan Credit Agreement based on the applicable interest rate as of January 31, 2019. 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).

Fair value renewal and escalation clauses exist for a substantial portion of the operating leases included above. 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.



39


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

40


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 performed our annual goodwill impairment test as of November 1, 2018, which indicated that the carrying value of our Asia-Pacific reporting unit exceeded its estimated fair value. As a result, goodwill impairment expense of $47.4 million was recorded during our fourth quarter, representing the amount by which the carrying value of the Asia-Pacific reporting unit exceeded its fair value (see Note 4 of Notes to Consolidated Financial Statements for further discussion).
The remaining goodwill allocated to our Asia-Pacific reporting unit as of January 31, 2019 was approximately $23 million. If actual results in our Asia-Pacific reporting unit are lower than the projections used in our valuation methodology, economic conditions decline in the countries in which we operate, market discount rates increase or our market capitalization decreases, our future valuations could be adversely affected, potentially resulting in a future impairment of goodwill.
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.


41


ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.
As a large global organization, we face exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices evolve and could have a material impact on our financial results in the future. In the normal course of business, we employ established policies and procedures to manage our exposure to fluctuations in the value of foreign currencies. It is our policy to utilize financial instruments to reduce risks where internal netting cannot be effectively employed. Additionally, we do not enter into derivative instruments for speculative or trading purposes. With respect to our internal netting practices, we will consider 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 our net exposure to be hedged using traditional forward contracts. Under this strategy, we would expect to increase or decrease our selling prices for products purchased in foreign currencies based on fluctuations in foreign currency exchange rates affecting the underlying accounts payable. To the extent we incur a foreign currency exchange loss (gain) on the underlying accounts payable denominated in the foreign currency, we would expect to see a corresponding increase (decrease) in gross profit 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.
Our 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. Our transactions in foreign currencies 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 translation of the financial statements of foreign operations into U.S. dollars is also impacted by fluctuations in foreign currency exchange rates, which may positively or negatively impact our results of operations. A 10% decrease in average foreign exchange rates against the U.S. dollar, as compared to actual average foreign exchange rates for fiscal 2019, would have decreased fiscal 2019 net sales by approximately $2.25 billion and operating income by approximately $22 million.
Our foreign currency risk management objective is to protect our earnings and cash flows from the adverse impact of exchange rate changes through the use of foreign currency forward and swap contracts to primarily hedge intercompany loans, accounts receivable and accounts payable. In order to provide an assessment of our foreign currency exchange rate risk, we performed a sensitivity analysis using a value-at-risk (“VaR”) model. The VaR model uses a Monte Carlo simulation to generate 1,000 random market price paths. The VaR model determines the potential impact of the fluctuation in foreign exchange rates assuming a one-day holding period, normal market conditions and a 95% confidence level. The model is not intended to represent actual losses but is used as a risk estimation and management tool. Firm commitments, assets and liabilities denominated in foreign currencies were excluded from the model. The estimated maximum potential one-day loss in fair value, calculated using the VaR model, would be approximately $1.0 million and $2.7 million at January 31, 2019 and 2018, respectively. We believe that the hypothetical loss in fair value of our foreign exchange derivatives would be offset by the gains in the value of the underlying transactions being hedged. Actual future gains and losses associated with our derivative positions may differ materially from the analyses performed as of January 31, 2019, due to the inherent limitations associated with predicting the changes in foreign currency exchange rates and our actual exposures and positions.  
We are also exposed to changes in interest rates primarily as a result of our debt used to maintain liquidity and to finance working capital, capital expenditures and acquisitions. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to minimize overall borrowing costs. To achieve our objective, we use a combination of fixed and variable rate debt. The nature and amount of our long-term and short-term debt can be expected to vary as a result of future business requirements, market conditions and other factors. Approximately 70% and 61%, respectively, of our outstanding debt had fixed interest rates at January 31, 2019 and 2018. To the extent that there are changes in interest rates, the interest expense on our variable rate debt may fluctuate. A one percentage point change in average interest rates would have an impact on interest expense of $4.2 million based on the Company's outstanding variable rate debt at January 31, 2019.



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ITEM 8. Financial Statements and Supplementary Data.                     
Index to Financial Statements
 
 
Page  
Financial Statements
 
 
 
Report of Independent Registered Public Accounting Firm
 
 
Consolidated Balance Sheet
 
 
Consolidated Statement of Income
 
 
Consolidated Statement of Comprehensive Income
 
 
Consolidated Statement of Shareholders’ Equity
 
 
Consolidated Statement of Cash Flows
 
 
Notes to Consolidated Financial Statements
 
 
Financial Statement Schedule
 
 
 
Schedule II — Valuation and Qualifying Accounts
All schedules and exhibits not included are not applicable, not required or would contain information which is shown in the financial statements or notes thereto.

43



Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Tech Data Corporation

Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Tech Data Corporation and subsidiaries (the Company) as of January 31, 2019 and 2018, the related consolidated statements of income, comprehensive income, shareholders‘ equity, and cash flows, for each of the three fiscal years in the period ended January 31, 2019, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements“). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three fiscal years in the period ended January 31, 2019, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 20, 2019 expressed an unqualified opinion thereon.
Adoption of New Accounting Standard
As discussed in Note 1 to the consolidated financial statements, the Company changed its method for recognizing revenue as a result of the adoption of Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), and the amendments in ASUs 2015-14, 2016-08, 2016-10 and 2016-12 effective February 1, 2018, using the full retrospective method.
Basis for Opinion
These financial statements are the responsibility of the Company‘s management. Our responsibility is to express an opinion on the Company‘s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP


We have served as the Company‘s auditor since 2000.
Tampa, Florida
March 20, 2019



44


TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except share amounts)

As of January 31:
2019
 
2018
ASSETS
 
 
(As Adjusted)
Current assets:
 
 
 
Cash and cash equivalents
$
799,123

 
$
955,628

Accounts receivable, less allowances of $73,270 and $83,772
6,241,740

 
6,035,716

Inventories
3,297,385

 
2,965,521

Prepaid expenses and other assets
354,601

 
403,548

Total current assets
10,692,849

 
10,360,413

Property and equipment, net
274,917

 
279,091

Goodwill
892,990

 
969,168

Intangible assets, net
950,858

 
1,086,772

Other assets, net
174,938

 
224,915

Total assets
$
12,986,552

 
$
12,920,359

 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
7,496,466