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Item 7. Management’s Discussion and Analysis

2021-08-24 compared with 2020-08-31 · 144 added, 329 removed, 388 unchanged (55% of the section changed)

2 unchanged sentences

We provide technology solutions and services from leading suppliers of mobility and barcode, point-of-sale (POS), payments, physical security, unified communications and collaboration, telecom and cloud services to our customers.

We serve approximately 30,000 customers located in the United States, Canada, Brazil, the UK and Europe and provide solutions and services from approximately 500 technology suppliers.

We serve approximately 30,000 customers located in the United States, Canada, Brazil, and the UK and provide solutions and services from approximately 500 technology suppliers.

We operate our business under a management structure that enhances our technology market focus and growth strategy.

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We also have drop-shipment arrangements with some of our suppliers, which allow us to offer products to customers without taking physical delivery at our facilities.

Our key suppliers include 8x8, ACC Business, AT&T, Aruba/HPE, Axis, AudioCodes, Avaya, Barco, Bematech, CenturyLink, Cisco, Comcast Business, Datalogic, Dell, Dialogic, Elo, Epson, Extreme, Fortinet, Hanwha, Honeywell, HID, Ingenico, Jabra, March Networks, Masergy, Microsoft, Mitel, NCR, NICE inContact, Oracle, Panasonic, Poly, RingCentral, Samsung, Sony, Spectralink, Spectrum, Toshiba Global Commerce Solutions, TPx, Ubiquiti, Verifone, Verizon, Windstream, Zebra Technologies and Zoom.

We also offer customers significant choices in cloud services through our Intelisys business, including offerings in contact center, infrastructure and unified communications.

Our key suppliers include 8x8, ACC Business, AT&T, Aruba/HPE, AudioCodes, Avaya, Axis, Barco, Bematech, Cisco, Comcast Business, Datalogic, Dell, Elo, Epson, Equinix, Extreme, F5, Five9, Fortinet, Genesys, Hanwha, Honeywell, HID, Ingenico, Intrado, Jabra, LogMeIn, Lumen, March Networks, Masergy, Microsoft, Mitel, NCR, NICE inContact, Oracle, Palo Alto, Panasonic, Poly, RingCentral, Samsung, Sony, Spectralink, Spectrum, Toshiba Global Commerce Solutions, Ubiquiti, Verifone, Verizon, Windstream, Zebra Technologies and Zoom.

We also offer customers significant choices in cloud services through our Intelisys business, including "as a service" offerings in contact center, infrastructure and unified communications.

Recent Developments

Impact of COVID-19 on our Business Environment

In early March 2020, the World Health Organization characterized COVID-19 as a pandemic.

The rapid spread of COVID-19 since December 2019 has resulted in the implementation of numerous measures to contain the virus worldwide, such as travel bans and restrictions, quarantines, shelter-in-place orders and business shutdowns.

The pandemic and these containment measures have had, and are expected to continue to have, a substantial impact on businesses around the world and on global, regional and national economies.

During the COVID-19 pandemic, our top priority is protecting the health and safety of our employees.

We moved quickly to transition our employees, where possible, to a fully remote working environment.

We have taken a number of measures to ensure our teams feel secure in their jobs and have the flexibility and resources they need to stay safe and healthy.

We have activated our contingency plans.

We have deployed teams to monitor the rapidly evolving situation and recommend risk mitigation actions;

we have implemented travel restrictions;

and we are following social distancing guidelines.

We are following global guidance from authorities and health officials including, but not limited to, checking the temperature of associates when entering our facilities, requiring associates to wear masks and other protective clothing as appropriate, and implementing additional cleaning and sanitation routines.

In addition, nearly all office-based employees around the world are working remotely.

We saw a significant impact from COVID-19 pandemic during the fourth quarter of our fiscal year, with a 21.6% decline year-over-year for quarterly GAAP net sales and a 19.3% decline year-over-year for quarterly non-GAAP net sales, excluding the negative impact of foreign currency translation.

The spread of COVID-19 since December 2019 has resulted in the implementation of numerous measures to contain the virus worldwide, such as travel bans and restrictions, quarantines, shelter-in-place orders, business shutdowns, and limitations of in-person gatherings.

The pandemic and these containment measures have had a substantial impact on businesses around the world and on global, regional and national economies.

Our top priority is protecting the health and safety of our employees.

We have transitioned our employees, where possible, to a fully remote working environment and have taken a number of measures to ensure our teams feel secure in their jobs with the flexibility and resources they need to stay safe and healthy.

We have teams monitoring the evolving situation and recommending risk mitigation actions;

We are following global guidance from authorities and health officials including travel restrictions and physical distancing guidelines.

All of our distribution facilities remain open and operational.

Our employees are committed to providing the high level of customer service our partners have grown to expect from us in order to achieve positive results.

In July 2020, we announced actions to address the business impacts of the COVID-19 pandemic and prepare for the next phase of growth.

These actions include an approximate $30 million annualized expense reduction plan, partially offset by approximately $8 to $9 million in severance and employee benefits for those employees who left the Company.

These actions

Index to Financial Statements

are designed to better align the cost structure for our wholesale distribution business with lower sales volumes as a result of the COVID-19 pandemic.

As part of the plan, we will continue to invest in our higher growth agency business, Intelisys.

These actions included a $30 million annualized expense reduction plan.

During the fiscal year ended June 30, 2021, we recognized approximately $9.3 million for restructuring and other charges, largely for severance and employee benefits for employees who left the Company as part of this plan.

These actions were designed to better align the cost structure for our wholesale distribution business with lower sales volumes as a result of the COVID-19 pandemic.

As part of the plan, we are continuing to invest in our higher growth agency business, Intelisys.

Strong growth for the Intelisys business has continued, even with the COVID-19 pandemic.

See "Risk Factors" for information on additional impacts of COVID-19 as well as other matters that could have a material adverse effect on our results of operations and financial condition.

Closure of the Canpango Professional Services Business

In July 2020, we initiated actions to close Canpango, our salesforce implementation and consulting business.

In August 2018, we acquired Canpango to help partners build out their customer relationship management capabilities as part of a CCaaS solution.

There has been limited adoption by our partner community.

As a result of closing the Canpango business we recorded a pre-tax non-cash charge of approximately $2 million at June 30, 2020.

We expect to complete existing contracts over the next few months.

An agreement was signed on July 23, 2020, subsequent to our fiscal year end, to sell our product distribution business located in Mexico, Colombia, Chile, Peru and our Miami-based export operations to Intcomex.

We expect to finalize the sale of Latin America divestitures, outside of Brazil, on or around September 30, 2020.

The Company is actively working on sales opportunities for our divestitures in Europe and the UK and expects to finalize a sale within twelve months from the current reporting period.

Index to Financial Statements

We finalized the sale of our Latin American businesses, outside of Brazil, on October 30, 2020.

We also finalized the sale of our Europe and UK products distribution businesses on November 12, 2020.

We rely on a channel sales model offering hardware, software, services and connectivity from leading technology suppliers to sales partners that solve end-customers' challenges.

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While we do not manufacture products, we provide technology solutions and services from leading technology suppliers.

Our solutions may include a combination of offerings from multiple suppliers or give our sales partners access to additional services, such as custom configuration, key injection, integration support, custom development and other services, to deliver solutions.

We also offer the flexibility of on-premise, cloud and hybrid solutions.

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As part of our strategic plan, we consider strategic acquisitions and alliances to enhance our technology offerings and service capabilities.

Profitability

Our operating income is driven by gross profits and by control of operating expenses.

Our operations feature scalable information systems, streamlined management and centralized distribution, enabling us to achieve the economies of scale necessary for cost-effective solution selling.

In order to continue to grow in our markets, we have continued to invest in new technologies and increased marketing efforts to recruit new customers.

Results of Operations from Continuing Operations

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Totals may not sum due to rounding.

Index to Financial Statements

Fiscal Year Ended June 30,

2020 2019 2018

Statement of income data:

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Intangible amortization expense 0.6 0.7

Restructuring and other charges 0.3 0.0

Impairment charges 0.0 4.0

Change in fair value of contingent consideration 0.0 0.2

Operating (loss) income (2.1) 2.9 2.2

Operating income (loss) 2.0 (2.1)

Interest expense 0.2 0.4

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Other (income) expense, net 0.0 0.0

(Loss) Income from continuing operations before income taxes (2.4) 2.6 2.0

Income (loss) from continuing operations before income taxes 1.8 (2.4)

Provision for income taxes 0.4 0.2

Net (loss) income from continuing operations (2.6) 2.0 1.1

Net income (loss) from continuing operations 1.4 (2.6)

Net (loss) from discontinued operations (1.1) (3.7)

Net (loss) income (6.3) % 1.8 % 1.0 %

Net income (loss) 0.3 % (6.3) %

Index to Financial Statements

Comparison of Fiscal Years Ended June 30, 2021, and 2020

Below is a discussion of fiscal years ended June 30, 2020, 2019 and 2018 for our continuing operations.

Fiscal year 2020 compared to fiscal year 2019

Below is a discussion of fiscal years ended June 30, 2021 and 2020.

Please refer to our Form 10-K for the fiscal year ended June 30, 2020 for a discussion of fiscal year ended June 30, 2019.

We have two reportable segments, which are based on the technologies provided to customers.

The following table summarizes our net sales results by business segment and by geographic location for the comparable fiscal years ending June 30, 2020, 2019 and 2018 .

Index to Financial Statements

The following table summarizes our net sales results by business segment and by geographic location for the comparable fiscal years ended June 30, 2021 and 2020.

2021 2020 $ Change % Change % Change Constant Currency, Excluding Divestitures and Acquisitions (a)

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The Worldwide Barcode, Networking & Security segment consists of sales to technology customers in North America and Brazil.

During fiscal year 2020, net sales for this segment decreased $48.7 million, or 2.3%, compared to fiscal year 2019.

Excluding the foreign exchange negative impact of $10.4 million, adjusted net sales for fiscal year 2020 decreased $38.3 million, or 1.8%, compared to the prior year.

The decrease in net sales and adjusted net sales is primarily due to lower sales volume across North America and Brazil, with the exception of our payments business which grew year-over-year.

Lower sales volume are largely a result of the negative impacts of the COVID-19 pandemic.

Worldwide Communications & Services

The Worldwide Communications & Services segment consists of sales to technology customers in North America, Brazil, Europe and the UK.

During fiscal year 2020, net sales for this segment decreased $153.4 million or 13.8% compared to fiscal year 2019 largely as a result of the negative impacts of the COVID-19 pandemic.

Excluding the foreign exchange negative impact of $29.8 million and sales from fiscal 2020 and 2019 acquisitions, adjusted net sales decreased $131.7 million, or 11.9%, compared to the prior year.

The decrease in adjusted net sales is primarily due to lower sales volumes in the premise-based communications business in North America and the negative impacts of the COVID-19 pandemic.

This impact was partially offset by sales growth in local currency in Brazil and increases in net sales for our master agency business, Intelisys.

Fiscal year 2019 compared to fiscal year 2018

Index to Financial Statements

2019 2018 $ Change % Change % Change Constant Currency, Excluding Divestitures and Acquisitions (a)

(in thousands)

Sales by Segment:

Worldwide Barcode, Networking & Security $ 2,141,896 $ 2,143,135 $ (1,239) (0.1) % 0.3 %

Communications & Services 1,107,903 1,021,574 86,329 8.5 % 11.6 %

Total net sales $ 3,249,799 $ 3,164,709 $ 85,090 2.7 % 4.0 %

Sales by Geography Category:

United States $ 2,917,780 $ 2,847,196 $ 70,584 2.5 % 1.9 %

International 332,019 317,513 14,506 4.6 % 22.0 %

Total net sales $ 3,249,799 $ 3,164,709 $ 85,090 2.7 % 4.0 %

(a) A reconciliation of non-GAAP net sales in constant currency, excluding acquisitions is presented at the end of Results of Operations , under Non-GAAP Financial Information .

Worldwide Barcode, Networking & Security

During fiscal year 2019, net sales for this segment decreased $1.2 million, or 0.1%, compared to fiscal year 2018 due to the negative impact of foreign exchange.

Excluding the foreign exchange negative impact of $16.2 million and sales from the POS Portal acquisition for the first quarter of fiscal years 2019 and 2018, adjusted net sales for fiscal year 2019 increased $6.0 million, or 0.3%, compared to the prior year.

The increase in adjusted net sales is primarily due to increased sales volume in our diversified technologies in North America.

Worldwide Communications & Services

During fiscal year 2021, net sales for this segment increased $81.9 million, or 3.9%, compared to fiscal year 2020.

Excluding the foreign exchange negative impact of $39.3 million and sales from fiscal 2019 acquisitions, adjusted net sales for fiscal year 2019 increased $118.6 million, or 11.6%, compared to the prior year.

The increase in net sales and adjusted net sales is primarily due to sales growth in our Brazil and our North America communications business.

Fiscal year 2020 compared to fiscal year 2019

The following table summarizes our gross profit for the fiscal years ended June 30, 2020 and 2019:

2020 2019 $ Change % Change 2020 2019

(in thousands)

Worldwide Barcode, Networking & Security $ 180,582 $ 209,243 $ (28,661) (13.7) % 8.6 % 9.8 %

Excluding the foreign exchange negative impact of $19.3 million, adjusted net sales for fiscal year 2021 increased $101.2 million, or 4.8%, compared to the prior year.

The increase in net sales and in adjusted net sales is primarily due to higher sales volume across our technologies in North America and Brazil.

Worldwide Communications & Services

Total gross profit $ 355,570 $ 392,803 $ (37,233) (9.5) % 11.7 % 12.1 %

During the 2020 fiscal year, we undertook a conversion to a new inventory management system in our Southaven, Mississippi distribution center.

That software did not perform up to expectations, and during the third quarter, we incurred a $4.5 million expense for inventory charges.

That charge increased our cost of goods sold, which lowered gross profit for the quarter ended March 31, 2020.

We implemented an inventory action plan to address the warehouse inventory discrepancies and were back to typical warehouse operations during the fourth quarter.

The Worldwide Communications & Services segment consists of sales to technology customers in North America, Brazil, Europe and the UK.

During fiscal year 2021, net sales for this segment increased $21.1 million or 2.2% compared to fiscal year 2020 primarily due to sales growth in our North America business.

Excluding the foreign exchange negative impact of $46.5 million, adjusted net sales increased $67.6 million, or 7.1%, compared to the prior year, with growth across our technologies in North America and Brazil.

In addition, net sales for our master agency business, Intelisys, increased 13% year-over-year.

For our Intelisys business, net sales reflect the net commissions received from suppliers after paying sales partner commissions.

For fiscal year 2021, Intelisys net billings, which are amounts billed by suppliers to end users and represent annual recurring revenue (ARR), totaled approximately $2.0 billion.

The fiscal year 2021 Intelisys net billings resulted in Intelisys net sales of approximately $64.9 million.

Index to Financial Statements

Worldwide Barcode, Networking & Security

For the Worldwide Barcode, Networking & Security segment, gross profit dollars decreased $28.7 million and gross profit margin decreased to 8.6% for fiscal year 2020 compared to the prior year.

The decrease is primarily due to lower sales volume, higher vendor program recognition in the prior year, and higher inventory charges during the third quarter following the conversion to a new inventory management system.

Worldwide Communications & Services

For the Worldwide Communications & Services segment, gross profit dollars decreased $8.6 million due to lower sales volume.

Gross profit margin increased to 18.3% for fiscal year 2020 compared to 16.6% in the prior year primarily due to a more favorable sales mix, including results contributed by our Intelisys recurring revenue business and the addition of the intY SaaS business.

Fiscal year 2019 compared to fiscal year 2018

The following table summarizes our gross profit for the fiscal years ended June 30, 2021 and 2020:

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Worldwide Barcode, Networking & Security

For the Worldwide Barcode, Networking & Security segment, gross profit dollars increased $10.5 million and gross profit margin increased to 9.8% for fiscal year 2019 compared to the prior year primarily due to higher vendor program recognition.

For the Worldwide Barcode, Networking & Security segment, gross profit dollars decreased $2.4 million, and gross profit margin decreased to 8.2% for fiscal year 2021 compared to 8.6% in the prior year.

The decrease is due to a less favorable sales mix and lower vendor program recognition compared to the prior year.

Worldwide Communications & Services

For the Worldwide Communications & Services segment, gross profit dollars increased $13.0 million due to increased sales volume.

Gross profit margin decreased slightly to 16.6% for fiscal year 2019 compared to the prior year primarily due to a less favorable sales mix.

Operating expenses

Fiscal year 2020 compared to fiscal year 2019

The following table summarizes our operating expenses for the periods ended June 30, 2020 and 2019:

Index to Financial Statements

2020 2019 $ Change % Change 2020 2019

(in thousands)

Selling, general and administrative expenses $ 260,139 $ 252,948 $ 7,191 2.8 % 8.5 % 7.8 %

Depreciation expense 13,033 12,028 1,005 8.4 % 0.4 % 0.4 %

Intangible amortization expense 19,953 17,893 2,060 11.5 % 0.7 % 0.6 %

Impairment charges 120,470 — 120,470 100.0 % 4.0 % — %

Change in fair value of contingent consideration 6,941 15,200 (8,259) (54.3) % 0.2 % 0.5 %

For the Worldwide Communications & Services segment, gross profit dollars decreased $2.4 million, and gross profit margin decreased to 17.7% for fiscal year 2021 compared to 18.3% in the prior year.

The decrease is primarily due to a less favorable sales mix, partially offset by results contributed by our Intelisys recurring revenue business.

Operating expenses

Selling, general and administrative expenses ("SG&A") increased $7.2 million for the fiscal year ending June 30, 2020 compared to the prior year.

The increase in SG&A expenses is primarily due to increased employee-related expenses in North America, partially offset by a tax recovery in Brazil.

In July 2020, we announced an expense reduction plan designed to better align the cost structure for our wholesale distribution business with lower sales volumes as a result of the COVID-19 pandemic.

Depreciation expense increased $1.0 million for the fiscal year ending June 30, 2020 primarily due to additional expense on capitalized IT investments.

Intangible amortization expense increased $2.1 million for the fiscal year ending June 30, 2020 largely due to intangible amortization expense for assets acquired in the intY acquisition.

Impairment charges include $119.0 million in goodwill impairment charges for our Worldwide Barcode, Networking and Security segment and $1.4 million in intangible asset impairment charges for our Canpango business.

The Company has initiated actions to close the Canpango business.

We have elected to present changes in fair value of the contingent consideration owed to former shareholders of businesses we acquire separately from other SG&A expenses.

In fiscal 2020, we have recorded a $6.9 million expense from change in fair value of contingent consideration, all of which related to Intelisys.

The expense is largely from recurring amortization of the unrecognized fair value discount and a reduction in the discount rate for the Intelisys liability.

Fiscal year 2019 compared to fiscal year 2018

The following table summarizes our operating expenses for the periods ended June 30, 2021 and 2020:

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Intangible amortization expense 19,488 19,953 (465) (2.3) % 0.6 % 0.7 %

Restructuring and other charges 9,258 604 8,654 *nm 0.3 % — %

Impairment charges — 120,470 (120,470) *nm — % 4.0 %

Change in fair value of contingent consideration 516 6,941 (6,425) (92.6) % — % 0.2 %

Operating expenses 289,233 420,536 (131,303) (31.2) % 9.2 % 13.8 %

Selling, general and administrative expenses ("SG&A") increased $20.7 million for the fiscal year ending June 30, 2019 compared to the prior year primarily due to increased employee-related expenses in North America.

Depreciation expense and intangible amortization expense decreased $0.3 million and $0.8 million, respectively, for the fiscal year ending June 30, 2019.

The decrease in intangible amortization expense is due to trade names and non-compete agreements

*nm - percentages are not meaningful

Selling, general and administrative expenses ("SG&A") decreased $12.1 million for the fiscal year ended June 30, 2021 compared to the prior year.

The decrease in SG&A expenses is primarily due to the expense reduction plan we announced in July 2020, partially offset by a Brazilian tax recovery in the prior year that did not recur.

Intangible amortization expense decreased $0.5 million for the fiscal year ended June 30, 2021 largely due to Canpango intangible write-offs at the end of the prior fiscal year.

Index to Financial Statements

that became fully amortized during the current year, partially offset by additional expense related to assets acquired through fiscal year 2019 acquisitions.

Restructuring and other charges incurred of $9.3 million during the fiscal year ended June 30, 2021 primarily related to employee severance and benefit costs in connection with our expense reduction plan implemented at the end of July 2020.

No impairment charges were recorded in the fiscal year ended June 30, 2021.

Impairment charges during the fiscal year ended June 30, 2020 include $119.0 million in goodwill impairment charges for our Worldwide Barcode, Networking and Security segment and $1.4 million in intangible asset impairment charges for our Canpango business.

We have elected to present changes in fair value of the contingent consideration owed to former shareholders of businesses we acquire separately from other SG&A expenses.

In fiscal 2019, we have recorded a $15.2 million expense from change in fair value of contingent consideration, largely from recurring amortization of the unrecognized fair value discount for the Intelisys liability and agreed upon adjustments in the final earnout payment to Network1.

In fiscal 2021, we recorded a $0.5 million expense from change in fair value of contingent consideration, all of which is related to Intelisys.

The expense is due to the recurring amortization of the unrecognized fair value discount and a reduction in the discount rate for the Intelisys liability.

Operating Income

Fiscal year 2020 compared to fiscal year 2019

The following table summarizes our operating income for the periods ended June 30, 2021 and 2020:

4 unchanged sentences

Corporate (11,634) (4,000) (7,634) (190.9) % — % — %

Total operating (loss) income $ (64,967) $ 94,734 $ (159,701) (168.6) % (2.1) % 2.9 %

Worldwide Barcode, Networking & Security

For the Worldwide Barcode, Networking & Security segment, the operating income decrease reflects the goodwill impairment charges.

Excluding goodwill impairment charges of $119.0 million, adjusted operating income decreased $21.5 million compared to the prior year and adjusted operating margin decreased to 1.7% for the fiscal year June 30, 2020.

The decrease in adjusted operating margin is largely due to the lower gross profits.

Worldwide Communications & Services

For the Worldwide Communications & Services segment, operating income decreased $16.4 million compared to the prior year, and the operating margin decreased to 2.4% for the fiscal year ended June 30, 2020.

The decrease is largely due to lower gross profits from lower sales volume and increased employee-related expenses, which includes additional expenses from the fiscal year 2020 intY acquisition.

Corporate incurred $4.0 million in acquisition and divestiture costs for fiscal year ended June 30, 2020, compared to $1.2 million in acquisition costs for the years ended June 30, 2019.

Fiscal year 2019 compared to fiscal year 2018

2019 2018 $ Change % Change 2019 2018

(in thousands)

Worldwide Barcode, Networking & Security $ 57,019 $ 49,313 $ 7,706 15.6 % 2.7 % 2.3 %

Worldwide Communications & Services 38,933 19,865 19,068 96.0 % 3.5 % 1.9 %

Corporate (1,218) (172) (1,046) 608.1 % — % — %

Total operating income $ 94,734 $ 69,006 $ 25,728 37.3 % 2.9 % 2.2 %

Index to Financial Statements

Total operating income (loss) $ 61,483 $ (64,967) $ 126,450 194.6 % 2.0 % (2.1) %

Worldwide Barcode, Networking & Security

For the Worldwide Barcode, Networking & Security segment, operating income increased $111.9 million, and operating margin increased to 1.3% for the fiscal year ended June 30, 2021 compared to the prior year.

The increase in operating income and operating margin is primarily attributable to higher gross margins, partially offset by increased employee-related expenses.

The increase in operating income and margin for the fiscal year is due to goodwill impairment charges in fiscal year 2020.

Excluding goodwill impairment charges of $119.0 million in fiscal year 2020, adjusted operating income for the fiscal year ended June 30, 2021 decreased $7.1 million compared to the prior year.

The decrease in adjusted operating income is due to lower gross profits and a Brazilian tax recovery in the prior year that did not recur.

Worldwide Communications & Services

For the Worldwide Communications & Services segment, operating income increased $19.1 million and operating margin increased to 3.5% for the fiscal year ended June 30, 2019 compared to the prior year.

Operating margin in the prior year was impacted by significant expense related to the change in fair value of contingent consideration for Network1.

Excluding change in fair value of contingent consideration for each comparable year, adjusted operating income decreased $2.7 million and adjusted operating margin decreased to 4.9% compared to 5.6% in the prior-year, largely due to increased employee-related expenses, partially offset by increased sales volume.

Corporate incurred $1.2 million and $0.2 million in acquisition costs for the years ended June 30, 2019 and 2018, respectively.

For the Worldwide Communications & Services segment, operating income increased $22.2 million compared to the prior year, and the operating margin increased to 4.6% for the fiscal year ended June 30, 2021.

The increase in operating income and margin is largely due to lower employee-related expenses and lower expense from change in fair value of the Intelisys contingent consideration.

Corporate incurred $11.6 million in divestiture and restructuring costs for fiscal year ended June 30, 2021, compared to $4.0 million in acquisition and divestiture costs for the year ended June 30, 2020.

Total Other (Income) Expense

Fiscal year 2020 compared to fiscal year 2019

The following table summarizes our total other (income) expense for the fiscal years ended June 30, 2021 and 2020:

Index to Financial Statements

2021 2020 $ Change % Change 2021 2020

8 unchanged sentences

Interest income for the year ended June 30, 2021 and 2020 was generated on interest-bearing customer receivables and interest earned on cash and cash equivalents, principally in Brazil.

In fiscal year 2020, we recognized interest income of $2.7 million related to a tax recovery in Brazil.

Net foreign exchange gains and losses consist of foreign currency transactional and functional currency re-measurements, offset by net foreign currency exchange contract gains and losses.

4 unchanged sentences

We partially offset foreign currency exposure with the use of foreign exchange forward contracts to hedge against these exposures.

The costs associated with foreign exchange forward contracts are included in the net foreign exchange loss.

Foreign exchange losses decreased during fiscal year 2020 compared to the prior year from the lower cost of hedging.

Fiscal year 2019 compared to fiscal year 2018

Index to Financial Statements

2019 2018 $ Change % Change 2020 2019

(in thousands)

Interest expense $ 13,162 $ 9,121 $ 4,041 44.3 % 0.4 % 0.3 %

Interest income (1,818) (3,710) 1,892 (51.0) % (0.1) % (0.1) %

Net foreign exchange losses (gains) 635 1,178 (543) (46.1) % — % — %

Other, net (882) (632) (250) 39.6 % — % — %

Total other (income) expense $ 11,097 $ 5,957 $ 5,140 86.3 % 0.3 % 0.2 %

Interest expense reflects interest incurred on borrowings, non-utilization fees from our revolving credit facility and amortization of debt issuance costs.

Interest expense increased in fiscal 2019 as compared to 2018 principally from additional borrowings on our multi-currency revolving credit facility.

Interest income for the year ended June 30, 2019 was generated on interest-bearing customer receivables and interest earned on cash and cash equivalents, principally in Brazil.

In fiscal year 2018 we recognized accrued interest income related to a legal tax settlement in Brazil of $0.7 million that did not recur in the current year.

Net foreign exchange losses decreased during fiscal year 2019 compared to the prior year, primarily from hedging costs.

The costs associated with foreign exchange forward contracts are included in the net foreign exchange losses.

Provision for Income Taxes

Income tax expense for continuing operations was $7.5 million, $18.8 million and $27.6 million for the fiscal years ended June 30, 2020, 2019, and 2018, respectively, reflecting an effective tax rate of (10.4)%, 22.5% and 43.8%, respectively.

The decrease in the effective tax rate for fiscal year 2020 compared to fiscal year 2019 is primarily the result of impairment charges, most of which are not deductible for tax purposes.

The decrease in the effective tax rate for fiscal year 2019 as compared to fiscal year 2018 is primarily due to significant discrete tax items recognized in the prior year associated with U.S.

tax reform that did not recur in the current year.

Income tax expense for continuing operations was $12.1 million and $7.5 million for the fiscal years ended June 30, 2021 and 2020, respectively, reflecting effective tax rates of 21.1% and (10.4)%, respectively.

The increase in the effective tax rate for fiscal year 2021 compared to fiscal year 2020 is primarily the result of impairment charges, most of which are not deductible for tax purposes.

We expect the fiscal year 2022 effective tax rate from continuing operations to be approximately 25.0% to 26.0%.

12 unchanged sentences

Change in fair value of contingent consideration — — — 516 674 618 3,176 2,472

Net (loss) income from continuing operations (108,859) 5,715 11,626 12,291 $ 15,996 $ 13,455 $ 19,758 $ 15,649

Net (loss) income from discontinued operations (108,403) (4,003) (260) (761) (4,418) (1,740) 224 (1,327)

Net (loss) income $ (217,262) 1,712 11,366 11,530 $ 11,578 $ 11,715 $ 19,982 $ 14,322

Net (loss) income from continuing operations per common share, basic (4.29) 0.23 0.46 0.48 0.62 0.53 0.77 0.61

Net (loss) income from discontinued operations per common share, basic (4.28) (0.16) (0.01) (0.03) (0.17) (0.07) 0.01 (0.05)

Net (loss) income per common share, basic $ (8.57) $ 0.07 $ 0.45 $ 0.45 $ 0.45 $ 0.46 $ 0.78 $ 0.56

Net income (loss) from continuing operations 20,657 13,786 11,061 (115) (108,859) 5,715 11,626 12,291

Net income (loss) from discontinued operations 3,053 (688) (25,255) (11,704) (108,403) (4,003) (260) (761)

Net income (loss) $ 23,710 13,098 (14,194) (11,819) $ (217,262) $ 1,712 $ 11,366 $ 11,530

Net income (loss) from continuing operations per common share, basic $ 0.81 $ 0.54 $ 0.44 $ (0.01) $ (4.29) $ 0.23 $ 0.46 $ 0.48

Net income (loss) from discontinued operations per common share, basic 0.12 (0.03) (0.99) (0.46) (4.28) (0.16) (0.01) (0.03)

Net income (loss) per common share, basic $ 0.93 $ 0.51 $ (0.56) $ (0.47) $ (8.57) $ 0.07 $ 0.45 $ 0.45

Weighted-average shares outstanding, basic 25,482 25,455 25,395 25,361 25,353 25,346 25,274 25,539

Net (loss) income from continuing operations per common share, diluted (4.29) 0.23 0.46 0.48 0.62 0.52 0.77 0.61

Net (loss) income from discontinued operations per common share, diluted (4.28) (0.16) (0.01) (0.03) (0.17) (0.07) 0.01 (0.05)

Net (loss) income per common share, diluted $ (8.57) $ 0.07 $ 0.45 $ 0.45 $ 0.45 $ 0.45 $ 0.78 $ 0.56

Net income (loss) from continuing operations per common share, diluted $ 0.80 $ 0.54 $ 0.43 $ (0.01) $ (4.29) $ 0.23 $ 0.46 $ 0.48

Net income (loss) from discontinued operations per common share, diluted 0.12 (0.03) (0.99) (0.46) (4.28) (0.16) (0.01) (0.03)

Net income (loss) per common share, diluted $ 0.92 $ 0.51 $ (0.56) $ (0.47) $ (8.57) $ 0.07 $ 0.45 $ 0.45

Weighted-average shares outstanding, diluted 25,664 25,572 25,475 25,361 25,353 25,363 25,358 25,617

22 unchanged sentences

Reconciliation of net income to EBITDA:

Net (loss) income from continuing operations (GAAP) $ (79,227) $ 64,859

Net income (loss) from continuing operations (GAAP) $ 45,389 $ (79,227)

Interest expense 6,929 12,224

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Impairment charges — 120,470

Tax recovery, net (10,744) —

Tax recovery — (10,744)

Adjusted EBITDA (numerator for ROIC) (non-GAAP) $ 109,910 $ 97,047

5 unchanged sentences

Equity – end of the year 731,191 678,246

Change in fair value of contingent consideration, net of tax 5,247 11,294

Change in fair value of contingent consideration, net 390 5,247

Acquisition and divestiture costs (a)

Restructuring, net of tax 449 —

Impairment charges, net of tax 114,398 —

Restructuring, net 6,840 449

Impairment charges, net — 114,398

Tax recovery, net — (8,001)

Impact of discontinued operations, net of tax 98,794 (16,557)

Impact of discontinued operations, net 34,594 113,427

Average equity 726,799 910,948

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Invested capital (denominator for ROIC) (non-GAAP) $ 929,668 $ 1,301,657

(a) Includes acquisition and divestitures costs for the year ended June 30, 2020 and acquisition costs for the fiscal year ended June 30, 2019.

(a) Includes acquisition and divestitures costs for the year ended June 30, 2021 and 2020.

Acquisition and divestiture costs are generally non-deductible for tax purposes.

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dollars using the comparable average foreign exchange rates from the prior year period.

We also exclude the impact of acquisitions prior to the first full year of operations from the acquisition date and the impact of Divestitures in order to show net sales results on an organic basis.

We also exclude the impact of acquisitions prior to the first full year of operations from the acquisition date in order to show net sales results on an organic basis.

This information is provided to analyze underlying trends without the translation impact of fluctuations in foreign currency rates and the impact of acquisitions.

Below we show organic growth by providing a non-GAAP reconciliation of net sales in constant currency, excluding acquisition:

Index to Financial Statements

Net Sales by Segment:

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(in thousands)

Non-GAAP net sales, including Divestitures $ 2,511,666 $ 2,589,837 $ (78,171) (3.0) %

Divestitures (418,449) (447,941)

Net sales, reported $ 2,175,141 $ 2,093,217 $ 81,924 3.9 %

Foreign exchange impact (a)

Non-GAAP net sales, constant currency excluding Divestitures and acquisitions $ 2,103,612 $ 2,141,896 $ (38,284) (1.8) %

Worldwide Communications & Services:

Non-GAAP net sales, including Divestitures $ 1,097,564 $ 1,283,274 $ (185,710) (14.5) %

Divestitures (143,047) (175,371)

Net sales, reported 954,517 1,107,903 (153,386) (13.8) %

Foreign exchange impact (a)

Acquisitions (9,122) (1,026)

Non-GAAP net sales, constant currency excluding Divestitures and acquisitions $ 975,224 $ 1,106,877 $ (131,653) (11.9) %

Consolidated:

Non-GAAP net sales, including Divestitures $ 3,609,230 $ 3,873,111 $ (263,881) (6.8) %

Divestitures (561,496) (623,312)

Net sales, reported 3,047,734 3,249,799 (202,065) (6.2) %

Foreign exchange impact (a)

Acquisitions (9,122) (1,026)

Non-GAAP net sales, constant currency excluding Divestitures and acquisitions $ 3,078,836 $ 3,248,773 $ (169,937) (5.2) %

(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates.

Calculated by translating the net sales for the year ended June 30, 2020 into U.S.

dollars using the average foreign exchange rates for the year ended June 30, 2019.

Index to Financial Statements

Net sales by segment

Fiscal Year Ended June 30,

2019 2018 $ Change % Change

Worldwide Barcode, Networking & Security:

Non-GAAP net sales, including Divestitures $ 2,589,837 $ 2,628,988 $ (39,151) (1.5) %

Divestitures (447,941) (485,853)

Net sales, reported 2,141,896 2,143,135 (1,239) (0.1) %

Foreign exchange impact (a)

Acquisitions (23,465) (14,553)

Non-GAAP net sales, constant currency excluding Divestitures and acquisitions $ 2,134,627 $ 2,128,582 $ 6,045 0.3 %

Non-GAAP net sales, constant currency $ 2,194,452 $ 2,093,217 $ 101,235 4.8 %

Worldwide Communications & Services:

Non-GAAP net sales, including Divestitures $ 1,283,274 $ 1,217,272 $ 66,002 5.4 %

Divestitures (175,371) (195,698)

Net sales, reported $ 975,665 $ 954,517 $ 21,148 2.2 %

Foreign exchange impact (a)

Acquisitions (7,052) —

Non-GAAP net sales, constant currency excluding Divestitures and acquisitions $ 1,140,125 $ 1,021,574 $ 118,551 11.6 %

Non-GAAP net sales, constant currency $ 1,022,135 $ 954,517 $ 67,618 7.1 %

Consolidated:

Non-GAAP net sales, including Divestitures $ 3,873,111 $ 3,846,260 $ 26,851 0.7 %

Divestitures (623,312) (681,551)

Net sales, reported $ 3,150,806 $ 3,047,734 $ 103,072 3.4 %

Foreign exchange impact (a)

Acquisitions (30,517) (14,553)

Non-GAAP net sales, constant currency excluding Divestitures and acquisitions $ 3,274,752 $ 3,150,156 $ 124,596 4.0 %

Non-GAAP net sales, constant currency $ 3,216,587 $ 3,047,734 $ 168,853 5.5 %

(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates.

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Net sales, as reported $ 2,840,731 $ 2,755,134 $ 85,597 3.1 %

Acquisitions (3,542) (1,062)

Net sales, excluding acquisitions $ 2,751,592 $ 2,916,718 $ (165,126) (5.7) %

International:

Non-GAAP net sales, including Divestitures $ 854,096 $ 955,331 $ (101,235) (10.6) %

Divestitures (561,496) (623,312)

Net sales, reported $ 310,075 $ 292,600 $ 17,475 6.0 %

Foreign exchange impact (a)

Acquisitions (5,580) 36

Net sales, constant currency excluding Divestitures and acquisitions (non-GAAP) $ 327,244 $ 332,055 $ (4,811) (1.4) %

Consolidated:

Non-GAAP net sales, including Divestitures $ 3,609,230 $ 3,873,111 $ (263,881) (6.8) %

Divestitures (561,496) (623,312)

Net sales, reported 3,047,734 3,249,799 (202,065) (6.2) %

Foreign exchange impact (a)

Acquisitions (9,122) (1,026)

Net sales, constant currency excluding Divestitures and acquisitions (non-GAAP) $ 3,078,836 $ 3,248,773 $ (169,937) (5.2) %

(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates.

Calculated by translating the net sales for the year ended June 30, 2020 into U.S.

dollars using the average foreign exchange rates for the year ended June 30, 2019.

Index to Financial Statements

Net Sales by Geography:

Fiscal Year Ended June 30,

2019 2018 $ Change % Change

United States and Canada:

Net sales, as reported $ 2,917,780 $ 2,847,197 $ 70,583 2.5 %

Acquisitions (30,517) (14,553)

Net sales, excluding acquisitions $ 2,887,263 $ 2,832,644 $ 54,619 1.9 %

International:

Non-GAAP net sales, including Divestitures $ 955,331 $ 999,063 $ (43,732) (4.4) %

Divestitures (623,312) (681,551)

Net sales, reported 332,019 317,512 14,507 4.6 %

Foreign exchange impact (a)

Acquisitions — —

Net sales, constant currency excluding Divestitures and acquisitions (non-GAAP) $ 387,478 $ 317,512 $ 69,966 22.0 %

Non-GAAP net sales, constant currency $ 375,856 $ 292,600 $ 83,256 28.5 %

Consolidated:

Non-GAAP net sales, including Divestitures $ 3,873,111 $ 3,846,260 $ 26,851 0.7 %

Divestitures (623,312) (681,551)

Net sales, reported $ 3,150,806 $ 3,047,734 103,072 3.4 %

Foreign exchange impact (a)

Acquisitions (30,517) (14,553)

Net sales, constant currency excluding Divestitures and acquisitions (non-GAAP) $ 3,274,752 $ 3,150,156 $ 124,596 4.0 %

Non-GAAP net sales, constant currency $ 3,216,587 $ 3,047,734 $ 168,853 5.5 %

(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates.

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To evaluate current period performance on a more consistent basis with prior periods, we disclose non-GAAP net sales, non-GAAP gross profit, non-GAAP operating income, non-GAAP net other expense, non-GAAP pre-tax income, non-GAAP net income and non-GAAP diluted earnings per share.

Non-GAAP results exclude amortization of intangible assets related to acquisitions, changes in fair value of contingent consideration, acquisition and divestiture costs, restructuring costs, impact of Divestitures and other non-GAAP adjustments.

These metrics are useful in assessing and understanding our operating performance, especially when comparing results with previous periods or forecasting performance for future periods.

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Worldwide Barcode, Networking & Security:

GAAP operating (loss) income (83,515) 57,019 (140,534) (246.5) % (4.0) % 2.7 %

GAAP operating income (loss) $ 28,402 $ (83,515) $ 111,917 (134.0) % 1.3 % (4.0) %

Amortization of intangible assets 7,871 7,871 —

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Acquisition and divestiture costs 2,376 4,000 (1,624)

Restructuring costs 9,258 — 9,258

Non-GAAP operating income $ — $ — $ — nm* nm* nm*

Consolidated:

GAAP operating (loss) income (64,967) 94,734 (159,701) (168.6) % (2.1) % 2.9 %

GAAP operating income (loss) $ 61,483 $ (64,967) $ 126,450 (194.6) % 2.0 % (2.1) %

Amortization of intangible assets 19,488 19,953 (465)

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Gross profit 350,716 — — — — — 350,716

Operating (loss) income (64,967) 19,953 6,941 4,604 (8,063) 120,470 78,938

Operating income 61,483 19,488 516 11,634 — — 93,121

Other expense, net 3,948 — — — — — 3,948

Pre-tax (loss) income (71,776) 19,953 6,941 4,604 (10,744) 120,470 69,448

Net (loss) income from continuing operations (79,227) 15,091 5,247 4,449 (8,001) 114,398 51,957

Pre-tax income 57,535 19,488 516 11,634 — — 89,173

Net income from continuing operations 45,389 14,753 390 9,336 — — 69,868

Diluted EPS from continuing operations $ 1.78 $ 0.58 $ 0.02 $ 0.36 $ — $ — $ 2.74

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Gross profit 355,569 — — — — — 355,569

Operating income 94,734 17,893 15,200 1,218 — — 129,045

Operating (loss) income (64,967) 19,953 6,941 4,604 (8,063) 120,470 78,938

Other expense, net 6,809 — — — 2,681 — 9,490

Pre-tax income 83,637 17,893 15,200 1,218 — — 117,948

Net income from continuing operations 64,859 13,484 11,294 1,218 (3,110) — 87,745

Pre-tax (loss) income (71,776) 19,953 6,941 4,604 (10,744) 120,470 69,448

Net (loss) income from continuing operations (79,227) 15,091 5,247 4,449 (8,001) 114,398 51,957

Diluted EPS from continuing operations $ (3.12) $ 0.59 $ 0.21 $ 0.18 $ (0.32) $ 4.51 $ 2.05

(a) Acquisition and divestiture costs totaled $4.0 million for the fiscal year ended June 30, 2020 and are generally nondeductible for tax purposes.

Restructuring costs totaled $0.6 million for the fiscal year ended June 30, 2020.

Index to Financial Statements

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The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

On an ongoing basis management evaluates its estimates, including those related to the allowance for uncollectible accounts receivable, inventory reserves to reduce inventories to the lower of cost or net realizable value and supplier incentives.

Management bases its estimates on historical experience and on various other assumptions that management believes to be reasonable under the circumstances, the results of which form a basis for making judgments about the carrying value of assets and liabilities that are not readily available from other sources.

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Allowances for Trade and Notes Receivable

We maintain an allowance for uncollectible accounts receivable for estimated losses resulting from customers’ failure to make payments on accounts receivable due to the Company.

Management determines the estimate of the allowance for uncollectible accounts receivable by considering a number of factors, including:

(1) historical experience, (2) aging of the accounts receivable, (3) specific information obtained by the Company on the financial condition and the current creditworthiness of its customers and (4) the current economic and country specific environment.

If the financial condition of our customers were to deteriorate and reduce the ability of our customers to make payments on their accounts, we may be required to increase our allowance by recording additional bad debt expense.

Likewise, should the financial condition of our customers improve and result in payments or settlements of previously reserved amounts, we may be required to record a reduction in bad debt expense to reverse the recorded allowance.

We adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326) effective July 1, 2020.

The adoption did not have a material impact on our consolidated financial statements.

Our policy for estimating allowances for doubtful accounts receivable is described below.

We maintain an allowance for uncollectible accounts receivable for estimated future expected credit losses resulting from customers’ failure to make payments on accounts receivable due us.

Management determines the estimate of the allowance for doubtful accounts receivable by considering a number of factors, including:

(i) historical experience, (ii) aging of the accounts receivable, (iii) specific information obtained by us on the financial condition and the current creditworthiness of its customers, (iv) the current economic and country specific environment and (v) reasonable and supportable forecasts about collectability.

Expected credit losses are estimated on a pool basis when similar risk characteristics exist using an age-based reserve model.

Receivables that do not share risk characteristics are evaluated on an individual basis.

Estimates of expected credit losses on trade receivables are recorded at inception and adjusted over the contractual life.

Inventory Reserves

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In addition, we may receive early payment discounts from certain suppliers.

We record early payment discounts received as a reduction of inventory, thereby resulting in a reduction of cost of goods sold when the related inventory is sold.

ASC 606 requires management to make certain estimates of the amounts of supplier consideration that will be received.

Estimates are

We record early payment discounts received as a

Index to Financial Statements

based on the terms of the incentive program and historical experiences.

reduction of inventory, thereby resulting in a reduction of cost of goods sold when the related inventory is sold.

ASC 606 requires management to make certain estimates of the amounts of supplier consideration that will be received.

Estimates are based on the terms of the incentive program and historical experiences.

Actual recognition of the supplier consideration may vary from management estimates.

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Historical financial information, internal plans and projections and industry information are used in making such estimates.

Under Accounting Standards Update ("ASU") 2017-04 if fair value of goodwill fair value is determined to be less than carrying value, an impairment loss is recognized for the amount of the carrying value that exceeds the amount of the reporting units' fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

Under ASC 350, if fair value of goodwill fair value is determined to be less than carrying value, an impairment loss is recognized for the amount of the carrying value that exceeds the amount of the reporting units' fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

Additionally, we would consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.

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Key assumptions used in determining fair value include projected growth and operating margin, working capital requirements and discount rates.

During fiscal year 2020, we completed our annual impairment test as of April 30th and determined that goodwill for our Worldwide Barcode, Networking and Security reporting unit was impaired and we recorded an impairment charge of $119.0 million accordingly.

It became apparent to management during the fourth quarter of the current fiscal year that the negative impacts of the COVID-19 pandemic would drive year-over-year revenue losses for the current quarter and next fiscal year.

Such losses resulted in reduced cash flow projections for this reporting unit that were not expected during the previous quarter as COVID-19 was just beginning to impact the United States.

In addition, we saw an unanticipated and sustained reduction in our stock price compared to historical values as we progressed further through the fourth quarter.

The fair value of our Worldwide Communications & Services reporting unit exceeds its carrying value of assets by approximately 12%.

During fiscal year 2021, we completed our annual impairment test as of April 30th and determined that our goodwill was not impaired.

During fiscal year 2020, we determined that goodwill for our Worldwide Barcode, Networking and Security reporting unit was impaired and recorded an impairment charge of $119.0 million.

See Note 8 - Goodwill and Other Identifiable Intangible Assets in the Notes to Consolidated Financial Statements for further discussion on our goodwill impairment testing and results.

Liability for Contingent Consideration

In addition to the initial cash consideration paid to former shareholders of Intelisys, Network1 and POS Portal, we agreed to make additional earnout payments based on future results through a specified date based on a multiple of the subsidiary’s pro forma earnings as defined in the respective purchase agreements.

We paid annual earnout payments to the former shareholders of Intelisys in fiscal years 2018, 2019 and 2020.

We paid the final earnout payment to the former shareholders of Network1

Index to Financial Statements

during fiscal year 2019.

We also made a single earnout payment to the former shareholders of POS Portal during fiscal year 2018 in accordance with the share purchase agreement.

Intelisys has one remaining earnout payment to be paid in fiscal year 2021.

In addition to the initial cash consideration paid to former shareholders of Intelisys and Network1, we agreed to make additional earnout payments based on future results through a specified date based on a multiple of the subsidiary’s pro forma earnings as defined in the respective purchase agreements.

We paid the final earnout payments to the former shareholders of Intelisys in fiscal year 2021.

We paid the final earnout payment to the former shareholders of Network1 during fiscal year 2019.

In accordance with ASC Topic 805, Business Combinations , we determine the fair value of this liability for contingent consideration at each reporting date throughout the term of the earnout using a form of a probability weighted discounted cash flow model.

Each period we reflect the contingent consideration liability at fair value with changes recorded in the change in fair value of contingent consideration line item on the Consolidated Income Statement.

Each period we reflect the contingent consideration liability at fair value with changes recorded in the change in

Index to Financial Statements

fair value of contingent consideration line item on the Consolidated Income Statement.

Current and noncurrent portions of the liability are presented in the current portion of contingent consideration and long-term portion of contingent consideration line items on the Consolidated Balance Sheets.

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Conversely, when sales volumes decrease, our net investment in working capital typically decreases, which typically results in increased cash flow from operating activities.

Cash and cash equivalents totaled $29.5 million, $19.3 million and $23.5 million at June 30, 2020, 2019 and 2018, respectively, of which $23.6 million, $14.1 million and $18.3 million was held outside of the United States as of June 30, 2020, 2019 and 2018 respectively.

Checks released but not yet cleared from these accounts in the amounts of $15.4 million, $7.4 million and $5.6 million are classified as accounts payable as of June 30, 2020, 2019 and 2018 respectively.

Cash and cash equivalents totaled $62.7 million and $29.5 million at June 30, 2021 and 2020, respectively, of which $52.1 million and $23.6 million was held outside of the United States as of June 30, 2021 and 2020, respectively.

Checks released but not yet cleared from these accounts in the amounts of $14.3 million and $17.1 million are classified as accounts payable as of June 30, 2021 and 2020, respectively.

We conduct business in many locations throughout the world where we generate and use cash.

We provide for United States income taxes for the earnings of our Canadian subsidiary, but earnings from Brazil will continue to be considered retained indefinitely for reinvestment and all other foreign geographies are immaterial.

It has been our practice to reinvest those earnings in the businesses outside the United States.

Due to recent tax legislation in the United States, we were required to estimate a one-time transition tax on repatriation of foreign earnings during the fiscal year ended June 30, 2018.

We provide for United States income taxes for the earnings of our Canadian subsidiary and, starting in the fourth quarter of fiscal year 2021, in Brazil.

See Note 14 - Income Taxes in the Notes to the Consolidated Financial Statements for further discussion.

Our net investment in working capital decreased $150.0 million to $431.3 million at June 30, 2020 from $581.2 million at June 30, 2019, primarily from decreases in accounts receivable and inventory, partially offset by decreases in accounts payable.

Our net investment in working capital totaled $490.9 million at June 30, 2018.

Decreases in accounts receivable, inventory, and accounts payable in the current year are due to lower sales volumes as a result of the COVID-19 pandemic.

Our net investment in working capital increased $55.5 million to $486.7 million at June 30, 2021 from $431.3 million at June 30, 2020, primarily from increases in accounts receivable and decreases in contingent consideration, partially offset by increases in accounts payable.

Increases in accounts receivable and accounts payable in the current year are due to higher sales volumes as a result of general economic recovery following the initial impact of the COVID-19 pandemic.

Our net investment in working capital is affected by several factors such as fluctuations in sales volume, net income, timing of collections from customers, increases and decreases to inventory levels, payments to suppliers, as well as cash generated or used by other financing and investing activities.

Index to Financial Statements

Cash provided by (used in):

June 30, 2020 June 30, 2019 June 30, 2018

June 30, 2021 June 30, 2020

(in thousands)

2 unchanged sentences

Financing activities of continuing operations (118,824) (152,686)

Net cash provided by operating activities was $182.0 million for the year ended June 30, 2020, compared to $16.0 million and $31.4 million provided by operating activities for the years ended June 30, 2019 and 2018.

Net cash provided by operating activities was $116.8 million for the year ended June 30, 2021, compared to $182.0 million provided by operating activities for the year ended June 30, 2020.

Operating cash flows for the year ended June 30, 2021 is primarily attributable to earnings from operations adjusted for non-cash item and increased accounts payable, partially offset by increased accounts receivable.

Operating cash flows for the year ended June 30, 2020 is primarily attributable to reduced inventory and accounts receivable balances and earnings from operations adjusted for non-cash items.

Operating cash flows for the year ended June 30, 2019 is primarily attributable to earnings from operations adjusted for non-cash items, partially offset by increased inventory.

Operating cash flows for the year ended June 30, 2018 is primarily attributable to earnings from operations adjusted for non-cash items, partially offset by overall increases in cash used for working capital needs.

Excluding the master agency business, the number of days sales outstanding ("DSO") was 63 at June 30, 2020, compared to 58 at June 30, 2019 and 56 at June 30, 2018.

Index to Financial Statements

Excluding the master agency business, the number of days sales outstanding ("DSO") was 60 at June 30, 2021, compared to 63 at June 30, 2020.

The increase in DSO is primarily a result of changes in the aging portfolio of North America.

Throughout the current fiscal year, DSO ranged from 60 to 63.

Inventory turnover was 4.5 times during the fourth quarter of the current fiscal year, compared to 4.9 and 6.4 times in the fourth quarter of fiscal years 2019 and 2018, respectively.

Inventory turnover was 6.5 times during the fourth quarter of the current fiscal year, compared to 4.5 times in the fourth quarter of fiscal year 2020.

Throughout the current fiscal year, inventory turnover ranged from 5.8 to 6.9 times.

Cash used in investing activities was $55.3 million, $38.0 million and $150.8 million for the years ended June 30, 2020, 2019, and 2018, respectively.

Cash used in investing activities is primarily attributable to cash used to purchase IntY in fiscal year 2020, RPM and Canpango in fiscal year 2019, and POS Portal in fiscal year 2018.

Cash used in financing activities for the year ended June 30, 2020 totaled to $152.7 million, compared to cash provided by financing activities of $31.3 million and $100.9 million in fiscal years 2019 and 2018, respectively.

For fiscal year 2020, cash used in financing activities is primarily attributable to net debt repayments and contingent consideration payments.

For both fiscal years 2019 and 2018, cash provided by financing activities is primarily attributable to net debt borrowings, partially offset by contingent consideration payments.

Cash provided by investing activities was $32.0 million in fiscal year June 30, 2021.

Cash used in investing activities was $55.3 million for the year ended June 30, 2020.

Cash provided by investing activities is primarily attributable to cash received for the disposal of our Latin American and Europe entities.

In fiscal year 2020, cash used in investing activities is primarily attributable to cash used to purchase intY.

Cash used in financing activities totaled to $118.8 million and $152.7 million for the fiscal years ended June 30, 2021 and 2020, respectively.

For fiscal years 2021 and 2020, cash used in financing activities is primarily attributable to net debt repayments and contingent consideration payments.

Share Repurchase Program

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Since the inception of the program, we repurchased 1.1 million shares totaling $35.9 million, of which 0.2 million totaling $5.4 million were repurchased during the year ended June 30, 2020.

In August 2021, our Board of Directors authorized a $100 million share repurchase program.

The authorization does not have any time limit.

Credit Facility

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The Amended Credit Agreement contains customary yield protection provisions.

Index to Financial Statements

Additionally, the Company is assessed commitment fees ranging from 0.15% to 0.30%, depending upon the Leverage Ratio, on non-utilized borrowing availability, excluding swingline loans.

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We were in compliance with all covenants under the credit facility as of June 30, 2021.

Including borrowings for both continuing and discontinued operations, there was $92.4 million, $200.8 million, and $244.0 million outstanding on the revolving credit facility at June 30, 2020, 2019 and 2018 respectively.

Including borrowings for both continuing and discontinued operations, the average daily balance on the revolving credit facility, excluding the term loan facility, was $235.4 million, $296.4 million and $269.5 million for the years ended June 30, 2020, 2019 and 2018, respectively.

Including borrowings for both continuing and discontinued operations, there was $0.0 million and $92.4 million outstanding on the revolving credit facility at June 30, 2021 and 2020, respectively.

Index to Financial Statements

Including borrowings for both continuing and discontinued operations, the average daily balance on the revolving credit facility, excluding the term loan facility, was $54.6 million and $235.4 million for the years ended June 30, 2021 and 2020, respectively.

There were no letters of credit issued as of June 30, 2021.

There were letters of credit issued under the multi-currency revolving credit facility for the discontinued operations of $0.3 million as of June 30, 2020.

There were no letters of credit issued as of June 30, 2019 and June 30, 2018.

Taking into consideration outstanding borrowings on the multi-currency revolving credit facility for both continuing and discontinued operations, there was $350.0 million and $257.3 million available for additional borrowings as of June 30, 2021 and 2020, respectively.

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Earnout Payments

As of June 30, 2020, we are obligated to pay one final earnout payment to the former shareholders of Intelisys related to their acquisition on August 29, 2016.

In fiscal year 2021, we paid the final earnout payment to the former shareholders of Intelisys related to their acquisition on August 29, 2016.

See Note 11 - Fair Value of Financial Instruments for a discussion on the liabilities recorded.

We paid the final earnout payment to the former shareholders of Network1 in fiscal year 2019.

We made a single earnout payment to the former shareholders of POS Portal in fiscal year 2018.

The future earnout payment for Intelisys is expected to be funded by cash from operations and our existing revolving credit facility.

We believe that our existing sources of liquidity, including cash resources and cash provided by operating activities, supplemented as necessary with funds under our credit agreements, will provide sufficient resources to meet our present and future working capital and cash requirements for at least the next twelve months.

At June 30, 2020, we had contractual obligations in the form of non-cancelable operating leases, a capital lease (including interest payments), debt (including interest payments) and the contingent consideration for the earnout pertaining to the Intelisys acquisition.

At June 30, 2021, we had contractual obligations in the form of non-cancelable operating leases, a capital lease (including interest payments), and debt (including interest payments).

See Notes 9 and 15 of the Notes to the Consolidated Financial Statements.

The following table summarizes our future contractual obligations:

Index to Financial Statements

Payments Due by Period

6 unchanged sentences

Principal debt payments 143,174 7,843 131,950 718 2,663

Revolving credit facility (2)

67,714 — — 67,714 —

Contingent consideration (3)

46,334 46,334 — — —

Total obligations $ 165,464 $ 14,111 $ 141,017 $ 6,695 $ 3,642

1 unchanged sentence

Such amounts were not material in the current fiscal year.

(2) The Company has $24.7 million outstanding under the revolving credit facility classified as long term liabilities held for sale in the Consolidated Balance Sheets for our discontinued operations that is not included in the chart above.

(3) Amounts disclosed regarding future Intelisys earnout payments are presented at their discounted fair value.

Estimated future, undiscounted earnout payments for Intelisys could range as high as $46.9 million as of June 30, 2020.

(4) Amounts totaling $27.2 million of deferred compensation, which are included in accrued expenses and other current liabilities and other long-term liabilities in our Consolidated Balance Sheets as of June 30, 2020, have been excluded from the table above due to the uncertainty of the timing of the payment of these obligations, which are generally at the discretion of the individual employees or upon death of the former employee, respectively.

Index to Financial Statements

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis