☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Title of | Trading | Name of Each Exchange on | ||||||||||||
Common | SCSC | NASDAQ Global Select Market |
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||||||||||
(Do not check if a smaller reporting company) | ☐ | ☐ | ||||||||||||
Emerging growth company | ☐ |
Class | Outstanding at August 11, 2023 | |||||
Common Stock, no par value per share |
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Location | Approximate Square Footage | Type of Interest | Description of Use | ||||||||
United States | |||||||||||
Greenville, SC | 174,000 | Owned | Headquarters - Principal Executive and Sales Offices | ||||||||
Greenville, SC | 7,600 | Leased | Sales and Administration Offices | ||||||||
Southaven, MS | 741,000 | Leased | Warehouse | ||||||||
Sacramento, CA | 53,000 | Leased | Sales and Administration Offices and Warehouse | ||||||||
Louisville, KY | 22,000 | Leased | Warehouse | ||||||||
Brazil | |||||||||||
São José does Pinhais, Paraná, Brazil | 24,000 | Leased | Sales Office and Warehouse | ||||||||
Serra, Espírito Santo, Brazil | 31,000 | Leased | Sales Office and Warehouse | ||||||||
Itajai, Santa Catarina, Brazil | 164,000 | Leased | Sales Office and Warehouse | ||||||||
2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||||||||||||||||||||||
ScanSource, Inc. | $ | 100 | $ | 81 | $ | 60 | $ | 70 | $ | 77 | $ | 73 | |||||||||||||||||||||||
NASDAQ Composite | $ | 100 | $ | 108 | $ | 137 | $ | 199 | $ | 152 | $ | 192 | |||||||||||||||||||||||
SIC Code 5045 – Computers & Peripheral Equipment | $ | 100 | $ | 103 | $ | 76 | $ | 127 | $ | 116 | $ | 140 |
Period | Total number of shares purchased (1) | Average price paid per share | Total number of shares purchased as part of the publicly announced plan or program | Approximate dollar value of shares that may yet be purchased under the plan or program | ||||||||||
April 1, 2023 through April 30, 2023 | 107,639 | $28.79 | 107,639 | $67,802,877 | ||||||||||
May 1, 2023 through May 31, 2023 | 60,000 | $27.43 | 60,000 | $66,157,077 | ||||||||||
June 1, 2023 through June 30, 2023 | 992 | $30.14 | — | $66,157,077 | ||||||||||
Total | 168,631 | 167,639 |
Fiscal Year Ended June 30, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
Statement of income data: | |||||||||||||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||
Cost of goods sold | 88.1 | 87.9 | 88.9 | ||||||||||||||
Gross profit | 11.9 | 12.1 | 11.1 | ||||||||||||||
Selling, general and administrative expenses | 7.5 | 7.8 | 7.9 | ||||||||||||||
Depreciation expense | 0.3 | 0.3 | 0.4 | ||||||||||||||
Intangible amortization expense | 0.4 | 0.5 | 0.6 | ||||||||||||||
Restructuring and other charges | 0.0 | 0.0 | 0.3 | ||||||||||||||
Operating income | 3.6 | 3.5 | 2.0 | ||||||||||||||
Interest expense | 0.5 | 0.2 | 0.2 | ||||||||||||||
Interest income | (0.2) | (0.1) | (0.1) | ||||||||||||||
Other (income) expense, net | 0.0 | 0.0 | 0.0 | ||||||||||||||
Income from continuing operations before income taxes | 3.2 | 3.4 | 1.8 | ||||||||||||||
Provision for income taxes | 0.9 | 0.8 | 0.4 | ||||||||||||||
Net income from continuing operations | 2.3 | 2.5 | 1.4 | ||||||||||||||
Net income (loss) from discontinued operations | 0.0 | 0.0 | (1.1) | ||||||||||||||
Net income | 2.4 | % | 2.5 | % | 0.3 | % |
2023 | 2022 | $ Change | % Change | % Change Constant Currency, Excluding Divestitures and Acquisitions (a) | |||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||
Sales by Segment: | |||||||||||||||||||||||||||||
Specialty Technology Solutions | $ | 2,331,030 | $ | 2,082,321 | $ | 248,709 | 11.9 | % | 11.9 | % | |||||||||||||||||||
Modern Communications & Cloud | 1,456,691 | 1,447,614 | 9,077 | 0.6 | % | 0.4 | % | ||||||||||||||||||||||
Total net sales | $ | 3,787,721 | $ | 3,529,935 | $ | 257,786 | 7.3 | % | 7.2 | % | |||||||||||||||||||
Sales by Geography Category: | |||||||||||||||||||||||||||||
United States | $ | 3,432,074 | $ | 3,173,694 | $ | 258,380 | 8.1 | % | 8.1 | % | |||||||||||||||||||
International | 355,647 | 356,241 | (594) | (0.2) | % | (1.4) | % | ||||||||||||||||||||||
Total net sales | $ | 3,787,721 | $ | 3,529,935 | $ | 257,786 | 7.3 | % | 7.2 | % | |||||||||||||||||||
(a) A reconciliation of non-GAAP net sales in constant currency, excluding divestitures and acquisitions is presented at the end of Results of Operations, under Non-GAAP Financial Information. |
PART III
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Board of Directors of the Registrant
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Executive Officers of the Registrant
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Code of Conduct
Our Code of Conduct applies to all of our executive officers, including our Chief Executive Officer (“CEO”), our Chief Financial Officer (“CFO”), directors and employees. We have posted the Code of Conduct on the “Investors” page of our website, www.scansource.com, under the “Governance” tab. We will provide a copy of the Code of Conduct upon request to any person without charge. Such requests may be transmitted by regular mail in the care of the Corporate Secretary.
We will post on our website, www.scansource.com, under the “Corporate Governance” tab, or will disclose on a Form 8-K filed with the SEC, any amendments to, or waivers from, any provision of the Code of Conduct that applies to our CEO and our CFO, or persons performing similar functions, and that relate to (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, (ii) full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in other public communications made by us, (iii) compliance with applicable governmental laws, rules and regulations, (iv) the prompt internal reporting of violations of the Code of Conduct to an appropriate person or persons identified in the Code of Conduct, or (v) accountability for adherence to the Code of Conduct. Any waiver granted to an executive officer or a director may only be granted by the Board and will be disclosed, along with the reasons therefor, on a Form 8-K filed with the SEC. No waivers were sought or granted in fiscal 2022.
Audit Committee and Audit Committee Financial Expert
The Board has a standing Audit Committee. The Audit Committee currently is composed of Chair Mathis and directors Browning, Emory, Grainger, Ramoneda, Rodek, Temple and Whitchurch. The functions of the Audit Committee include selecting the independent auditor, reviewing the scope of the annual audit undertaken by our independent auditor and the progress and results of its work, reviewing our financial statements and our internal accounting and auditing procedures and overseeing our internal audit function. The Audit Committee met four times during the 2022 fiscal year. Each member of the Audit Committee meets the definition of independence for audit committee members as set forth in the NASDAQ listing standards and Exchange Act. The Board has determined that Chair Mathis and directors Browning, Grainger, Rodek, Temple and Whitchurch meet the requirements of an “audit committee financial expert” as defined in SEC rules and regulations.
Procedures for Shareholder Recommendations of Nominees to the Board of Directors
The procedures described in our Proxy Statement relating to the 2022 Annual Meeting of Shareholders (the “2022 Annual Meeting”) by which shareholders may recommend nominees to our Board of Directors remain in place. However, the universal proxy rules set forth in Rule 14a-19 of the Exchange Act went into effect during fiscal 2022. The notice and procedural requirements set forth in Rule 14a-19 will also now be applicable to shareholder nominees, in addition to the advance notice requirements set forth in our Bylaws. Further information will be provided in our Proxy Statement for the 2023 Annual Meeting of Shareholders.
Delinquent Section 16(a) Reports
To our knowledge, based solely on a review of the copies of Section 16 reports furnished to us and written representations that no other reports were required, during the fiscal year ended June 30, 2022, all Section 16(a) filing requirements applicable to directors, executive officers and greater than ten percent beneficial owners were complied with by such persons.
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COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis outlines our executive compensation program for our named executive officers (NEOs) listed below. The CD&A provides information about our compensation objectives and practices for our NEOs and explains how the Compensation Committee of the Board of Directors arrived at the compensation decisions for fiscal 2022.
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Executive Summary
2022 Business Highlights
Our talented team of sales, marketing, services and development professionals have continued to make progress on our strategic plan of offering hybrid distribution solutions that allow our channel partners to meet the technology demands of end-user customers. We are enabling our sales partners to accelerate their transformation to the digital world of opportunity. Our hybrid distribution strategy of devices and digital delivered strong results in fiscal year 2022 as a result of increased sales volumes and operating leverage on expenses. For fiscal year 2022, net sales increased 12% to $3.5 billion, or a 11.8% year over year increase on an organic basis. For fiscal year 2022, operating income increased to $122.2 million from $61.5 million in the prior year. Fiscal year 2022 non-GAAP operating income increased to $140.1 million for a 4.0% non-GAAP operating margin, up from $93.1 million and a 3.0% non-GAAP operating margin for the prior year. On a GAAP basis, net income for fiscal year 2022 totaled $88.7 million, or $3.44 per diluted share. Non-GAAP net income totaled $102.1 million, or $3.97 per diluted share. For more information on our non-GAAP measures and reconciliations to GAAP measures, see “Non-GAAP Financial Information” beginning on page 30 of our Annual Report on Form 10-K filed on August 23, 2022.
Fiscal 2022 Pay Mix
The Compensation Committee strives to provide our NEOs with a compensation package that balances short-term and long-term compensation. We believe that our current executive compensation program, consisting of a mix of base salary, retirement contributions, annual performance-based cash incentive awards and both performance-based and service-based grants of equity, (i) provides a predictable and transparent structure for executive compensation, (ii) provides a significant percentage of a NEO’s compensation through variable performance-based vehicles and (iii) attracts, retains and motivates our NEOs.
Our executive compensation program emphasizes performance-based pay. The elements of compensation and the general mix of compensation among the various elements remained largely unchanged from the previous year, except, for fiscal 2022, the Compensation Committee reintroduced performance-based restricted stock to replace stock options in the pay mix (a 50/50 split of time-vested restricted stock units (RSUs) and performance-based RSUs). These performance-based restricted stock awards included the following changes from the performance-based awards granted in previous years: (i) elimination of a single performance metric, as performance metrics will include non-GAAP earnings per share metric and adjusted ROIC as compared to WACC, (ii) introduce a modifier based on relative total shareholder return, (iii) provide for a three-year performance period and (iv) minimize overlapping performance conditions with our short-term incentives. In addition, for fiscal 2022 awards, the Compensation Committee determined to change the vesting period for time-based restricted stock awards from three years to four years. These changes were designed to more accurately reflect the overall health of the Company and more closely associate executive pay with Company performance.
Our financial performance during fiscal 2022 is reflected in the compensation of each of our NEOs for fiscal 2022, particularly with respect to payouts pursuant to our annual cash incentive program. Our cash incentive opportunity is designed so that, if our financial results, as measured by certain consolidated adjusted EBITDA and revenue numbers, reflect an increase in the financial performance of the Company, then our executives should realize a greater cash incentive. Awards are also capped at 200% of each executive’s target bonus regardless of our financial performance.
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For fiscal year 2022, the cash incentives paid to our CEO increased from fiscal 2021 and fiscal 2020 based on (i) our financial performance and (ii) the Compensation Committee’s pre-established Management Incentive Plan (“MIP”) operating targets for the cash incentive opportunity. The value of the equity awarded to our CEO decreased in fiscal 2022, primarily due to the absence of the one-time stock option grant awarded to our CEO in fiscal 2021 in light of his extraordinary efforts during our transformation and period of economic uncertainty. We believe this result is appropriately aligned with the Company’s fiscal 2022 financial performance and the Company’s long-term compensation program.
In addition, the total compensation of our CEO generally has increased or decreased during the past five fiscal years as our non-GAAP operating results have increased or decreased. We believe this correlation between the Company’s performance and pay appropriately motivates and rewards our CEO and is beneficial to our shareholders.
In addition, we believe that it is important to link each of our NEO’s compensation and personal financial interests with long-term shareholder value creation. Accordingly, 38% of our CEO’s total compensation, 44% of Mr. Eldh’s total compensation, 43% of Mr. Jones’ total compensation, and 40% of Ms. Hayden’s total compensation for fiscal 2022 was in the form of long-term equity incentives. For fiscal 2022, variable performance-based compensation in the form of cash and long-term equity incentives constituted 73% of our CEO’s total compensation, 82% of Mr. Eldh’s total compensation, 76% of Mr. Jones’ total compensation, and 69% of Ms. Hayden’s total compensation (each as reported in the Summary Compensation Table).
Greater detail regarding the compensation of our NEOs can be found within the 2022 Summary Compensation Table.
Consideration of Results of Shareholder Advisory Votes in Executive Compensation
The Compensation Committee monitors the results of the “Say-on-Pay” vote and considers those results along with the objectives listed below in determining compensation policies. A substantial majority (92.6%) of our shareholders voting at the 2022 Annual Meeting approved the compensation described in our 2021 proxy statement. The Compensation Committee interpreted this vote result as a strong indication of support for our fiscal 2022 compensation program.We have conducted a variety of shareholder engagement activities this year, including investor conferences and direct meetings with many of our top shareholders. These engagements have focused on deepening the dialogue with our current shareholder base about our business strategy and performance, culture, governance, executive compensation practices, and ESG efforts. Our Lead Independent Director has participated in several of these dialogues, demonstrating accountability with our shareholders and our commitment to strong governance practices.
2021 Omnibus Incentive Compensation Plan
On November 12, 2021, upon the recommendation of the Compensation Committee, our Board unanimously adopted, and our shareholders subsequently approved, the ScanSource, Inc. 2021 Omnibus Incentive Compensation Plan (the “2021 Plan”). The 2021 Plan replaced the 2013 Plan, and no further awards will be granted under the 2013 Plan as of the effective date of the 2021 Plan. The terms and conditions of awards granted previously under the 2013 Plan will not be affected by the adoption and approval of the 2021 Plan.
In assessing the appropriate terms of the 2021 Plan, the Nominating and Corporate Governance Committee considered, among other items, the existing terms of the 2013 Plan, our compensation philosophy and practices, as well as feedback from our shareholders and other stakeholders. The Board believes that awards tied to our common stock and Company performance promote the long-term success of the Company and views the 2021 Plan as an essential element of the Company’s overall compensation program.
The Board believes that the 2021 Plan:
assists the Company in attracting, retaining and motivating our employees, officers, directors and consultants;
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provides equitable and competitive compensation opportunities;
recognizes individual contributions; and
rewards goal achievement and aligns the interests of the participants with those of our shareholders.
Objectives of the Compensation Program
Our executive compensation program is designed to attract, retain and motivate executives through achieving the following three objectives:
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Align Interests of Executives with Shareholders
Retain Talented Leadership
Pay-for-Performance
The guiding principle of our compensation philosophy is that pay should be linked to performance and that the interests of executives and shareholders should be aligned. Our compensation program is designed to provide significant performance-based compensation through our cash incentive plan, and a large portion of the compensation is in the form of equity awards. As a result, a significant portion of our NEOs’ compensation is directly contingent on our operating results and/or aligned with shareholder interests.
Align Interests of Named Executive Officers and Shareholders
The following compensation policies and practices are designed to align the interests of our NEOs and our shareholders:
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Retain Talented Leadership
We operate in a marketplace characterized by significant competition for talented executives. Our executive compensation program is designed to enable us to attract, motivate, reward and retain the management talent necessary to achieve both long-term and short-term corporate objectives and enhance shareholder value. We also aim to establish executive compensation levels that correlate directly to the NEO’s level of responsibility, with the compensation of our NEOs being tied both to our performance as a whole and to individual performance. To do this effectively, our philosophy is that our compensation program must provide our NEOs with a total compensation package that is reasonable in relation to our performance, and sufficiently competitive with the packages offered by similarly sized companies within or outside our industry.
Material Elements of Our Compensation Programs
In determining the compensation of our NEOs, the Compensation Committee uses the following specific compensation elements, which it believes support our compensation objectives.
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% of Sales June 30, | |||||||||||||||||||||||||||||||||||
2023 | 2022 | $ Change | % Change | 2023 | 2022 | ||||||||||||||||||||||||||||||
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Specialty Technology Solutions | $ | 224,239 | $ | 205,757 | $ | 18,482 | 9.0 | % | 9.6 | % | 9.9 | % | |||||||||||||||||||||||
Modern Communications & Cloud | 225,000 | 220,767 | 4,233 | 1.9 | % | 15.4 | % | 15.3 | % | ||||||||||||||||||||||||||
Total gross profit | $ | 449,239 | $ | 426,524 | $ | 22,715 | 5.3 | % | 11.9 | % | 12.1 | % |
% of Sales June 30, | |||||||||||||||||||||||||||||||||||
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Selling, general and administrative expenses | $ | 285,695 | $ | 275,442 | $ | 10,253 | 3.7 | % | 7.5 | % | 7.8 | % | |||||||||||||||||||||||
Depreciation expense | 10,912 | 11,062 | (150) | (1.4) | % | 0.3 | % | 0.3 | % | ||||||||||||||||||||||||||
Intangible amortization expense | 16,746 | 17,853 | (1,107) | (6.2) | % | 0.4 | % | 0.5 | % | ||||||||||||||||||||||||||
Operating expenses | $ | 313,353 | $ | 304,357 | $ | 8,996 | 3.0 | % | 8.3 | % | 8.6 | % |
% of Sales June 30, | |||||||||||||||||||||||||||||||||||
2023 | 2022 | $ Change | % Change | 2023 | 2022 | ||||||||||||||||||||||||||||||
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Specialty Technology Solutions | $ | 75,688 | $ | 66,686 | $ | 9,002 | 13.5 | % | 3.2 | % | 3.2 | % | |||||||||||||||||||||||
Modern Communications & Cloud | 61,658 | 55,511 | 6,147 | 11.1 | % | 4.2 | % | 3.8 | % | ||||||||||||||||||||||||||
Corporate | (1,460) | (30) | (1,430) | *nm | — | % | — | % | |||||||||||||||||||||||||||
Total operating income | $ | 135,886 | $ | 122,167 | $ | 13,719 | 11.2 | % | 3.6 | % | 3.5 | % |
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Interest expense | $ | 19,786 | $ | 6,523 | $ | 13,263 | 203.3 | % | 0.5 | % | 0.2 | % | |||||||||||||||||||||||
Interest income | (7,414) | (4,333) | (3,081) | 71.1 | % | (0.2) | % | (0.1) | % | ||||||||||||||||||||||||||
Net foreign exchange losses | 2,168 | 2,078 | 90 | 4.3 | % | 0.1 | % | 0.1 | % | ||||||||||||||||||||||||||
Other, net | (504) | (724) | 220 | (30.4) | % | — | % | — | % | ||||||||||||||||||||||||||
Total other (income) expense | $ | 14,036 | $ | 3,544 | $ | 10,492 | 296.0 | % | 0.4 | % | 0.1 | % |
The Compensation Committee views the components of compensation as related, but distinct, and therefore regularly reevaluates the appropriate mix of elements, including the appropriate targets for incentive awards. The Compensation Committee also relies on the independent expertise compiledBrazilian subsidiaries temporary relief from the general knowledge, experience and good judgment of its members, both with regard to competitive compensation levels and the relative success that our Company has achieved. The Compensation Committee also retains, and relies on information provided by, compensation consultants.
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Base Salary
Base salary generally providesfinal foreign tax credit regulations. As a fixed base level of compensation for our executivesresult, we anticipate recognizing a $1.5 million tax benefit for the services they render during the year. The purpose of base salary is to compensate our NEOs in light of their respective roles and responsibilities over time. Base salary is essential to allow us to compete2023 fiscal year as a discrete item in the employment marketplacefirst quarter of the 2024 fiscal year.
Annual Variable Performance-Based Cash Incentive Awards
Annual variable performance-based cash incentive awards are designed to encourage the achievement of various pre-determined Company financial and operating performance goals. In fiscal 2022, the performance metrics included consolidated adjusted EBITDA and Intelisys revenue as the primary measurements of performance for cash incentive awards, because of our belief that each such measurement has a strong correlation with shareholder value. Our management emphasizes these measures in evaluating and monitoring the Company’s financial condition and operating performance. These metrics assist
Annual Performance-Based2022.
2023 | 2022 | ||||||||||
Adjusted return on invested capital ratio | 14.6 | % | 17.0 | % |
The Compensation Committee annually grants equityreconciliation to our NEOs, since it believes this elementfinancial statements are shown, as follows:
Fiscal Year Ended June 30, | |||||||||||
2023 | 2022 | ||||||||||
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Reconciliation of net income to adjusted EBITDA: | |||||||||||
Net income from continuing operations (GAAP) | $ | 88,092 | $ | 88,698 | |||||||
Plus: Interest expense | 19,786 | 6,523 | |||||||||
Plus: Income taxes | 33,758 | 29,925 | |||||||||
Plus: Depreciation and amortization | 28,614 | 29,884 | |||||||||
EBITDA (non-GAAP) | 170,250 | 155,030 | |||||||||
Plus: Share-based compensation | 11,219 | 11,663 | |||||||||
Plus: Tax recovery | (2,986) | — | |||||||||
Plus: Cyberattack restoration costs | 1,460 | — | |||||||||
Plus: Divestiture costs(a) | — | 30 | |||||||||
Adjusted EBITDA (numerator for adjusted ROIC) (non-GAAP) | 179,943 | 166,723 |
Fiscal Year Ended June 30, | |||||||||||
2023 | 2022 | ||||||||||
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Invested capital calculations: | |||||||||||
Equity – beginning of the year | $ | 806,528 | $ | 731,191 | |||||||
Equity – end of the year | 905,298 | 806,528 | |||||||||
Plus: Share-based compensation, net | 8,326 | 8,709 | |||||||||
Plus: Divestiture costs(a) | — | 30 | |||||||||
Plus: Cyberattack restoration costs, net | 1,092 | — | |||||||||
Plus: Tax recovery, net | (3,985) | — | |||||||||
Plus: Impact of discontinued operations, net | (1,717) | (100) | |||||||||
Average equity | 857,771 | 773,179 | |||||||||
Average funded debt(b) | 372,235 | 209,114 | |||||||||
Invested capital (denominator for adjusted ROIC) (non-GAAP) | $ | 1,230,006 | $ | 982,293 | |||||||
In approving long-term equity incentives, the Compensation Committee focuses on our overall performance, the value of the proposed award, the amount and value of awards granted in prior years, and the overall compensation package of the NEO with the ultimate goal of aligning the interests of the executives with our shareholders’ interests and motivating and retaining critical leadership through the use of equity. The Compensation Committee also believes that linking the personal financial interests of our NEOs to our long-term performance discourages excessive risk taking and supports sustainable shareholder value creation.
We have historically granted annual equity awards to the NEOs at the November meeting of the Compensation Committee to align the timing more closely to the annual performance evaluations of those officers. In fiscal 2022, the annual performance of our officers was completed in August and the annual equity award grant date was also moved to that time. The equity award policy provides that the grant date will be the third trading date following the meeting at which the awards are approved, provided that the Company is in an open trading window, and otherwise on the first trading day of the next open window. Equity awards may also be madecalculated by the Compensation Committeetranslating current period results from time to time to incentivize and reward certain performance and to provide additional retention value. See the “Long-Term Equity Incentives” section of this Compensation Discussion and Analysis for more information.
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The Compensation Committee’s policy is to set the exercise price of stock option awards by using the closing price of our stock on the date of the grant. The Compensation Committee also determines the number of shares of a value-based restricted stock unit award by using the closing price of our stock on the grant date.
Process for Determining Named Executive Officer Compensation
Role of the Compensation Committee
The Compensation Committee is responsible for reviewing, approving, and monitoring compensation policies and programs that are consistent with our business strategy and aligned with shareholders’ interests. Specifically, the Compensation Committee is responsible for:
reviewing and approving the corporate goals and objectives relevant to the compensation of the CEO and other NEOs;
negotiating the employment agreement of the CEO;
reviewing and approving any employment letters or contracts and severance plans of all other NEOs;
reviewing and approving annual incentive awards to NEOs; and
reviewing and approving equity-based compensation plans and grants of equity awards under such plans and the Board-approved policies or guidelines applicable to them.
The Compensation Committee meets several times each year to review and approve executive compensation programs and performance and, if necessary, recommend approval to the Board.
Role of Management
The Compensation Committee regularly meets with the CEO to receive reports and recommendations regarding the compensation of our NEOscurrencies other than the CEO. In particular,U.S. dollar into U.S. dollars using the CEO recommends to the Compensation Committee annual base salaries, annual incentive awards and long-term or performance equity grants for the NEOs other than himself. The Compensation Committee then evaluates each NEO, including the CEO, sets performance criteria for annual cash incentive awards, and makes long-term equity grants, if any. At the beginning of each fiscal year and as necessary throughout the year, Management Incentive Plan (“MIP”) targets for certain financial measures are established following consultation with management with consideration for adjustments for one-time expenses or longer-term investments that are planned. As part of its evaluation process, the Compensation Committee considers our performance and consistency, the NEO’s individual performance overcomparable average foreign exchange rates from the prior year changes in responsibilities and future potential as well as data available from compensation surveys and compensation consultants. Althoughperiod. We also exclude the Compensation Committee considers the CEO’s recommendations, the final decisions regarding base salary, annual incentive awards and equity awardsimpact of the NEOs are made by the Compensation Committee.
Role of Compensation Consultant
The Compensation Committee has the authority to retain independent compensation consultants to provide counsel and advice. For fiscal 2022, the Compensation Committee retained Pearl Meyer. The Compensation Committee reviewed all factors relevantacquisitions prior to the independencefirst full year of Pearl Meyer, including:
The provision of services tooperations from the Company by the consultant other than those requested by the Compensation Committee;
The amount of fees received by the consultant as a percentage of its total revenue;
The policies and procedures adopted by the consultant that are designed to prevent conflicts of interest;
Any business or personal relationship between a consultant and a member of the Compensation Committee;
Any stock of the Company owned by a consultant; and
Any business or personal relationship between a consultant and an executive officer of the Company.
As a result of such evaluation, and a certification from Pearl Meyer regarding its consultant’s independence, the Compensation Committee determined that Pearl Meyer is independent.
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The Compensation Committee regularly reviews benchmarking and market surveysacquisition date in order to ensure that our compensationshow net sales results on an organic basis. This information is competitive with thatprovided to analyze underlying trends without the translation impact of our peers. The Compensation Committee also considers analysis and benchmarking by third parties, such as ISS and Equilar,fluctuations in foreign currency rates and the different peer groups each firm uses for comparative purposesimpact of acquisitions. Below we show organic growth by providing a non-GAAP reconciliation of net sales in order to gain a better understanding of compensation practices and trends in the market.
Our compensation consultants provide the Compensation Committee with general market surveys and other information related to the general market for executive compensation, including best practices and emerging trends. In addition, in fiscal 2022 Pearl Meyer provided information derived from proxy statements from peer companies and from surveys that include publicly traded and privately held technology distributors and other technology industry companies with similar revenues. The peer companies referred to for evaluation of fiscal 2022 compensation included the following:
Net Sales by Segment: | |||||||||||||||||||||||
Fiscal Year Ended June 30, | |||||||||||||||||||||||
2023 | 2022 | $ Change | % Change | ||||||||||||||||||||
Specialty Technology Solutions: | (in thousands) | ||||||||||||||||||||||
Net sales, reported | $ | 2,331,030 | $ | 2,082,321 | $ | 248,709 | 11.9 | % | |||||||||||||||
Foreign exchange impact(a) | (923) | — | |||||||||||||||||||||
Non-GAAP net sales, constant currency | $ | 2,330,107 | $ | 2,082,321 | $ | 247,786 | 11.9 | % | |||||||||||||||
Modern Communications & Cloud: | |||||||||||||||||||||||
Net sales, reported | $ | 1,456,691 | $ | 1,447,614 | $ | 9,077 | 0.6 | % | |||||||||||||||
Foreign exchange impact(a) | (3,492) | — | |||||||||||||||||||||
Non-GAAP net sales, constant currency | $ | 1,453,199 | $ | 1,447,614 | $ | 5,585 | 0.4 | % | |||||||||||||||
Consolidated: | |||||||||||||||||||||||
Net sales, reported | $ | 3,787,721 | $ | 3,529,935 | $ | 257,786 | 7.3 | % | |||||||||||||||
Foreign exchange impact(a) | (4,415) | — | |||||||||||||||||||||
Non-GAAP net sales, constant currency | $ | 3,783,306 | $ | 3,529,935 | $ | 253,371 | 7.2 | % | |||||||||||||||
(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, 2023 into U.S. dollars using the average foreign exchange rates for the year ended June 30, 2022. |
The Compensation Committee reviewed compensation information from this peer group by comparable executive position and level to better understand the market for other participants in the market for all aspects of compensation. In a review of the applicable data, the Compensation Committee sought to ensure that the overall compensation to our NEOs was competitive and within norms for the industry and other companies of similar characteristics based on the executive’s position, level and job performance.
The Compensation Committee took this evaluation into account in determining all elements of NEO compensation for fiscal 2022, including the fiscal 2022 MIP design and equity awards.
Named Executive Officer Compensation in Fiscal 2022
Base Salary
The initial base salary for each NEO was established in the NEO’s employment agreement or employment letter. All NEO employment arrangements require an annual review of base salary by the Compensation Committee, and annual upward adjustments may be made by the Compensation Committee on a discretionary basis. In deciding whether to increase a NEO’s compensation, the Compensation Committee considers company performance, the consistency of the NEO’s individual performance over the prior year, changes in the NEO’s responsibilities and the NEO’s future potential. The Compensation Committee also considers data available from benchmarking studies obtained from a range of industry and general market sources, as well as information that may be provided by its compensation consultants, including comparisons of peer companies comprised of other participants in the industry and other similar companies based on size and other objective factors.
The Compensation Committee met in August of 2021 to determine Mr. Baur’s, Mr. Eldh’s, Mr. Jones’, Ms. Hayden’s, and Mr. Dean’s base salaries for fiscal 2022. The Compensation Committee did not award any base salary increases for these NEO’s for fiscal 2022. Mr. Eldh’s base salary was increased from $500,000 to $625,000 in connection with his appointment as President of the Company in February 2022.
Base salaries for Mr. Baur, Mr. Eldh, Mr. Jones, Ms. Hayden, and Mr. Dean for fiscal 2022 as of July 1, 2021 were as follows:
Named Executive Officer | Base Salary (standard) | |||
Mr. Baur | $ | 875,000 | ||
Mr. Eldh | $ | 500,000 | (1) | |
Mr. Jones | $ | 400,000 | ||
Ms. Hayden | $ | 350,000 | ||
Mr. Dean | $ | 450,000 | ||
(1) Mr. Eldh’s base salary was increased to $625,000 on February 3, 2022. |
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Annual Performance-Based Cash Incentives
The principal objective of our performance-based cash incentives is to motivate and reward our NEOs for performance in achieving our business objectives based upon annual attainment of certain financial measures. The Compensation Committee first created a cash incentive design for the NEOs in fiscal 2013, which we refer to as the Management Incentive Plan (“MIP”). Annual performance-based cash incentives were set based on an analysis of market data and assessing the experience of the respective individual and his or her respective role. The design provides that each NEO’s cash incentive opportunity will be expressed as a percentage of his or her base salary and earned based on non-GAAP operating results as compared to pre-established threshold and stretch goals. For fiscal 2022, Mr. Baur’s and Mr. Eldh’s cash incentive opportunity was 150% of their base salary, Mr. Jones’ cash incentive opportunity was 100% of his base salary, and Ms. Hayden’s and Mr. Dean’s cash incentive opportunity was 60% of his or her base salary. The cash incentive opportunities for our NEOs remained at the same level as fiscal 2021. Each NEO has a variable factor by role or position applied as a percentage against his or her respective base salary.
For fiscal year 2022, the Compensation Committee set MIP targets for consolidated adjusted EBITDA (“Adjusted EBITDA”) and Intelysis revenue (“Agency Revenue”). The performance metrics were established by the Compensation Committee in August 2021. Each performance metric is adopted with certain adjustments to align management’s performance on focused strategic objectives. The maximum incentive award for any NEO is 200% of his or her target bonus.
For fiscal 2022, the Compensation Committee established MIP performance targets as set forth below. The payouts of the awards depend on our results in comparison to these targets, weighted as follows: Adjusted EBITDA, 60% and Agency Revenue, 40%. If performance of any measure does not meet the applicable threshold for that measure, no award will be earned for that measure. If the performance of a measure reaches the applicable threshold, the award earned for that measure will be 50% of the target. The award earned for results between the threshold and the maximum of 200% of the target is calculated using straight-line interpolation.
Fiscal 2022 MIP Performance Targets | ||||||||||||
Standard | Adjusted EBITDA | Agency Revenue | Funding % of Target | |||||||||
Threshold | $ | 125.0 | $ | 71.0 | 50 | % | ||||||
Target | $ | 136.5 | $ | 73.6 | 100 | % | ||||||
Maximum | $ | 155.0 | $ | 77.3 | 200 | % | ||||||
Actual Results | $ | 166.7 | $ | 73.8 | 162 | % | ||||||
Weights | 60% | 40% | 100 | % |
For fiscal 2022, the Compensation Committee elected not to make any discretionary modifications to the awards payable under the MIP. As a result of the Adjusted EBITDA and Agency Revenue results for fiscal 2022, the cash incentive award earned by the NEOs under the MIP in fiscal 2022 was 161.8% of the target, as compared to 154.9% in fiscal 2021 and 12.91% in fiscal 2020.
The specific calculations, targets and cash awards for each NEO under the MIP for fiscal 2022 are detailed below.
Named Executive Officer | Base Pay | Variable Factor | Bonus Target | Bonus Maximum | % of Bonus Target | Amount of Cash Incentive | ||||||||||||||||||
Mr. Baur | $ | 875,000 | 150 | % | $ | 1,312,500 | $ | 2,625,000 | 161.8 | % | $ | 2,123,625 | ||||||||||||
Mr. Eldh | $ | 625,000 | 150 | % | $ | 827,917 | $ | 1,655,834 | 161.8 | % | $ | 1,339,569 | ||||||||||||
Mr. Jones | $ | 400,000 | 100 | % | $ | 400,000 | $ | 800,000 | 161.8 | % | $ | 647,200 | ||||||||||||
Ms. Hayden | $ | 350,000 | 60 | % | $ | 210,000 | $ | 420,000 | 161.8 | % | $ | 339,780 | ||||||||||||
Mr. Dean | $ | 450,000 | 60 | % | $ | 270,000 | $ | 540,000 | 161.8 | % | $ | 436,860 |
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Ms. Hayden’s employment arrangement provided that she would be paid a hiring bonus of $200,000 to offset the bonus she left behind at her previous employment. $100,000 of this bonus was paid in July 2021 and the other $100,000 was paid in September 2021.
Long-Term Equity Incentives
General Overview
Equity awards are a significant component of our NEO compensation. We grant equity awards, typically in the form of restricted stock awards and/or restricted stock units and performance-based restricted stock units or awards. In fiscal 2022, the Compensation Committee determined to resume awarding performance-based restricted stock and eliminate stock options. We maintain a formal Equity Award Grant Policy, whereby equity awards to employees are made by, or with the oversight of, the Compensation Committee or the Board. Under the policy, the Compensation Committee must approve any equity awards to the NEOs. Under the policy, our Principal Accounting Officer and human resources management oversee the documentation of, and accounting for, equity award grants.
The Compensation Committee grants annual service-based equity awards to employees based on merit, which vest over a four-year period in the majority of instances, provided that the grantee remains employed with the Company through each vesting date. In fiscal 2022, the Compensation Committee determined to update the forms of time-based restricted stock unit awards to provide for a four-year vesting period as opposed to the prior three-year vesting period. The grant date for annual equity awards provides that the grant date will be the third trading date following the meeting at which the awards are approved, provided that the Company is in an open trading window, and otherwise on the first trading day of the next open window. In addition, vesting of such awards accelerates on a change in control followed by termination in certain instances or upon death, disability or termination due to retirement. In certain circumstances, the vesting term may be reduced due to termination of employment, death or disability of a participant.
In addition to the annual service-based equity awards discussed above, the Compensation Committee also historically granted to certain employees, including our NEOs, performance-based restricted stock awards and/or restricted stock units that contain both performance and service vesting conditions over a multi-year period. For fiscal 2021, the performance-based restricted stock units were replaced with stock options. In fiscal 2022, the Compensation Committee determined that it was appropriate to reintroduce performance-based restricted stock.
The Compensation Committee may also make special grants of equity awards during the year in the case of the hiring or promotion of certain eligible persons, or in other situations not involving annual grants. The grant date for non-annual grants approved by the Compensation Committee on or before the 15th day of the second month of the quarter will be the first day of the third month of such quarter. For non-annual grants approved after the 15th day of the second month of the quarter, the grant date will be the first day of the third month of the following quarter. In any event, all equity awards must be made during an open trading window.
The number of shares subject to equity awards granted by the Compensation Committee to NEOs in a given year is based on, among other things, overall Company performance, the number of shares available for awards under the 2021 Plan or successor plan, the value of the proposed award, the amount and realizable value of equity awards awarded in prior years, total compensation and consideration of the competitive market practice for the respective position level and experience, with the ultimate objective of motivating, rewarding and retaining NEOs while maintaining efficient use of equity and preserving shareholder value.
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Fiscal 2022 Equity Awards
The annual grant of long-term equity incentives was awarded to our NEOs in August 2021, as provided below. The time-based restricted stock unit awards below generally vest and become exercisable in one-fourth increments on the anniversary of the grant date over four years, subject to the continued employment of the NEO on the applicable vesting date. The performance-based restricted stock unit awards below generally vest and become exercisable in one-third increments on the anniversary of the grant date over three years, subject to the continued employment of the NEO on the applicable vesting date.
The long-term equity incentives awarded to our NEOs in fiscal 2022 are set forth below:
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Other Important Compensation
Net Sales by Geography: | |||||||||||||||||||||||
Fiscal Year Ended June 30, | |||||||||||||||||||||||
2023 | 2022 | $ Change | % Change | ||||||||||||||||||||
United States and Canada: | (in thousands) | ||||||||||||||||||||||
Net sales, as reported | $ | 3,432,074 | $ | 3,173,694 | $ | 258,380 | 8.1 | % | |||||||||||||||
International: | |||||||||||||||||||||||
Net sales, reported | $ | 355,647 | $ | 356,241 | $ | (594) | (0.2) | % | |||||||||||||||
Foreign exchange impact(a) | (4,415) | — | |||||||||||||||||||||
Non-GAAP net sales, constant currency | $ | 351,232 | $ | 356,241 | $ | (5,009) | (1.4) | % | |||||||||||||||
Consolidated: | |||||||||||||||||||||||
Net sales, reported | $ | 3,787,721 | $ | 3,529,935 | $ | 257,786 | 7.3 | % | |||||||||||||||
Foreign exchange impact(a) | (4,415) | — | |||||||||||||||||||||
Non-GAAP net sales, constant currency | $ | 3,783,306 | $ | 3,529,935 | $ | 253,371 | 7.2 | % | |||||||||||||||
(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, 2023 into U.S. dollars using the average foreign exchange rates for the year ended June 30, 2022. |
Operating Income by Segment: | |||||||||||||||||||||||||||||||||||
Fiscal year ended June 30, | % of Net Sales June 30, | ||||||||||||||||||||||||||||||||||
2023 | 2022 | $ Change | % Change | 2023 | 2022 | ||||||||||||||||||||||||||||||
Specialty Technology Solutions: | (in thousands) | ||||||||||||||||||||||||||||||||||
GAAP operating income | $ | 75,688 | $ | 66,686 | $ | 9,002 | 13.5 | % | 3.2 | % | 3.2 | % | |||||||||||||||||||||||
Adjustments: | |||||||||||||||||||||||||||||||||||
Amortization of intangible assets | 5,136 | 6,005 | (869) | ||||||||||||||||||||||||||||||||
Non-GAAP operating income | $ | 80,824 | $ | 72,691 | $ | 8,133 | 11.2 | % | 3.5 | % | 3.5 | % | |||||||||||||||||||||||
Modern Communications & Cloud: | |||||||||||||||||||||||||||||||||||
GAAP operating income | $ | 61,658 | $ | 55,511 | $ | 6,147 | 11.1 | % | 4.2 | % | 3.8 | % | |||||||||||||||||||||||
Adjustments: | |||||||||||||||||||||||||||||||||||
Amortization of intangible assets | 11,610 | 11,848 | (238) | ||||||||||||||||||||||||||||||||
Tax recovery | (2,986) | — | (2,986) | ||||||||||||||||||||||||||||||||
Non-GAAP operating income | $ | 70,282 | $ | 67,359 | $ | 2,923 | 4.3 | % | 4.8 | % | 4.7 | % | |||||||||||||||||||||||
Corporate: | |||||||||||||||||||||||||||||||||||
GAAP operating loss | $ | (1,460) | $ | (30) | $ | (1,430) | nm* | nm* | nm* | ||||||||||||||||||||||||||
Adjustments: | |||||||||||||||||||||||||||||||||||
Divestiture costs | — | 30 | (30) | ||||||||||||||||||||||||||||||||
Cyberattack restoration costs | 1,460 | — | 1,460 | ||||||||||||||||||||||||||||||||
Non-GAAP operating income | $ | — | $ | — | $ | — | nm* | nm* | nm* | ||||||||||||||||||||||||||
Consolidated: | |||||||||||||||||||||||||||||||||||
GAAP operating income | $ | 135,886 | $ | 122,167 | $ | 13,719 | 11.2 | % | 3.6 | % | 3.5 | % | |||||||||||||||||||||||
Adjustments: | |||||||||||||||||||||||||||||||||||
Amortization of intangible assets | 16,746 | 17,853 | (1,107) | ||||||||||||||||||||||||||||||||
Cyberattack restoration costs | 1,460 | — | 1,460 | ||||||||||||||||||||||||||||||||
Divestiture costs | — | 30 | (30) | ||||||||||||||||||||||||||||||||
Tax recovery | (2,986) | — | (2,986) | ||||||||||||||||||||||||||||||||
Non-GAAP operating income | $ | 151,106 | $ | 140,050 | $ | 11,056 | 7.9 | % | 4.0 | % | 4.0 | % |
Year ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
GAAP Measure | Intangible amortization expense | Tax recovery | Divestiture costs | Cyberattack restoration costs | Non-GAAP measure | ||||||||||||||||||||||||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||||||||||||||||||||||||||
SG&A expenses | $ | 285,695 | $ | — | $ | 2,986 | $ | — | $ | (1,460) | $ | 287,221 | |||||||||||||||||||||||||||||||||||
Operating income | 135,886 | 16,746 | (2,986) | — | 1,460 | 151,106 | |||||||||||||||||||||||||||||||||||||||||
Pre-tax income | 121,850 | 16,746 | (2,986) | — | 1,460 | 137,070 | |||||||||||||||||||||||||||||||||||||||||
Net income | 88,092 | 12,489 | (3,985) | — | 1,092 | 97,688 | |||||||||||||||||||||||||||||||||||||||||
Diluted EPS | $ | 3.47 | $ | 0.49 | $ | (0.16) | $ | — | $ | 0.04 | $ | 3.85 | |||||||||||||||||||||||||||||||||||
Year ended June 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
GAAP Measure | Intangible amortization expense | Tax recovery | Divestiture costs | Cyberattack restoration costs | Non-GAAP measure | ||||||||||||||||||||||||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||||||||||||||||||||||||||
SG&A expenses | $ | 275,442 | $ | — | $ | — | $ | (30) | $ | — | $ | 275,412 | |||||||||||||||||||||||||||||||||||
Operating income | 122,167 | 17,853 | — | 30 | — | 140,050 | |||||||||||||||||||||||||||||||||||||||||
Pre-tax income | 118,623 | 17,853 | — | 30 | — | 136,506 | |||||||||||||||||||||||||||||||||||||||||
Net income | 88,698 | 13,412 | — | 30 | — | 102,140 | |||||||||||||||||||||||||||||||||||||||||
Diluted EPS | $ | 3.44 | $ | 0.52 | $ | — | $ | — | $ | — | $ | 3.97 | |||||||||||||||||||||||||||||||||||
and Estimates
If a NEO receives an award under our equity or cash incentive plansManagement’s discussion and analysis of financial condition and results of operations are based on our consolidated financial statements, which have been prepared in conformity with US GAAP. The preparation of financial statements requires management to make estimates and assumptions that subsequentlyaffect 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, supplier incentives and goodwill. 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 restatednot readily available from other sources. Actual results may differ materially from these estimates under different assumptions or conditions. For further discussion of our significant accounting policies, refer to Note 1 - Business and Summary of Significant Accounting Policies.
Stock Ownership Requirements
The Compensation Committee has adopted minimum ownership requirements for Company stock for the CEO, as well as for the independent directors of the Board. The ownership target for the CEO has been established as three times his annual base compensation. Our CEO is expected to utilize grants under equity compensation plans to maintain the levels of ownership required by the policy. The policy also incorporates an equity retention requirement by requiring him to retain 50% of the net shares resulting from the vesting or exercise of certain awards to obtain the required ownership under the policy. The independent directorsfair value of our Board have an ownership target of five times their $85,000 annual boardreporting units primarily based on the income approach utilizing the discounted cash retainer in Company securities.
flow method. As of June 30, 2022,2023, the Specialty Technology and Modern Communications & Cloud reporting units' goodwill balances are $16.4 million and $200.3 million, respectively. The fair value of the reporting units exceeded its carrying value by 2% and 13%, respectively, as of the annual goodwill impairment testing date. We also utilized fair value estimates derived from the market approach utilizing the public company market multiple method to validate the results of the discounted cash flow method, which required us to make assumptions about the applicability of those multiples to our CEOreporting units. The discounted cash flow method requires us to estimate future cash flows and all other membersdiscount those amounts to present value. The key assumptions utilized in determining fair value included:
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Anti-Hedging and Anti-Pledging Policy
Our NEOs and directorsassumptions are prohibited from holding Company securities in margin accounts or pledging Company securities as collateral for a loan. All NEOs and directors are in compliance with this policy. Our NEOs and directors also are prohibited from hedging transactions.
Perquisites
We provide only limited perquisites to our NEOs, including the availability of a voluntary comprehensive physical examination once every fiscal year. The physical examinations help ensure our NEOs’ continued health and ability to render services to the Company. The physicals are provided to encourage senior leaders of the Company to set the example for living positively and active healthy living. We do not provide any other material perquisites to our NEOs.
Health and Insurance Plans
Our NEOs are entitled to participate in our health, vision, dental, paid time off, life, disability and employee stock purchase plans to the same degree that our other employees are entitled to participate. In addition, our NEOs participate in a supplemental long-term disability plan and each receives term life insurance in the amount of $1,000,000 (subject to underwriting) and $500,000 (subject to limited underwriting).
Deferred Compensation Plan
We maintain a deferred compensation plan pursuant to which NEOs may defer a portion of their annual compensation. These deferrals are matched to the extent specified in each NEO’s employment agreement or letter, and such contributions vest over a five-year period. Participants invest their deferrals and Company matching contributions among various funds designated by the plan administrator (and currently may not be invested in our common stock). Participants become fully-vested in any employer contributions as long asappropriate, they are continuously employed until their death, total disability, reaching the datesubject to uncertainty and by nature include judgments and estimates regarding future events, including projected growth rates, margin percentages and operating efficiencies. Key assumptions used in which the sumdetermining fair value include projected growth and operating margin, working capital requirements and discount rates. During fiscal years 2023 and 2022, we completed our annual impairment test as of ageApril 30th and years of service equals or exceeds 65, or the occurrence of a change in control. We maintain the deferred compensation plan to provide a competitive benefit and to facilitate adequate savings for retirement on a tax efficient basis for our NEOs.
Retirement Benefits
The NEOs are eligible to participate in our 401(k) Plan, which is a Company-wide, tax-qualified retirement plan. The intent of this plan is to provide all employees with a tax-advantaged savings opportunity for retirement. We sponsor this plan to help employees at all levels save and accumulate assets for use during their retirement. Eligible pay under this plan is capped at Internal Revenue Code annual limits. We provide a 50% matching contribution on the first 6% that an employee contributes. These Company contributions vest over a five-year period.
Employee Stock Purchase Plan
Eligible employees may participate in our Employee Stock Purchase Plan (“ESPP”), which is a Company-wide employee stock purchase plan. The intent of the ESPP is to assist our employees in acquiring a stock ownership interest in the Company.
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Employment Agreements and Employment Letters
We have determined that our Company’sgoodwill was not impaired.
Year ended | |||||||||||||||||
Cash (used in) provided by: | June 30, 2023 | June 30, 2022 | |||||||||||||||
(in thousands) | |||||||||||||||||
Operating activities of continuing operations | $ | (35,769) | $ | (124,354) | |||||||||||||
Investing activities of continuing operations | (8,262) | (3,724) | |||||||||||||||
Financing activities of continuing operations | 39,531 | 108,106 | |||||||||||||||
On June 15, 2017, we entered into a three-year employment agreement, effective July 1, 2017, with Mr. Baur. Mr. Baur’s employment agreement provides for:
a base salary of $875,000 per year;
an annual target variable compensation opportunity of 150% of his base salary (with a maximum opportunity of 200% of target) based upon performance and the attainment of performance goals set by the Compensation Committee;
consideration for inclusion in our annual equity grant program at a grant level opportunity of $2,250,000;
the opportunity to participate in our Nonqualified Deferred Compensation Plan by deferringborrowings up to 50% of base salary and/or up to 100% of annual variable compensation, with a match of 50% of deferred amounts to be made by the Company, up to a maximum of $200,000 per year; and
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In addition, we will makean additional payments to Mr. Baur’s deferred compensation account to cover the cost of future premiums for “access only” continuation coverage under our medical and dental plan following termination of employment until Mr. Baur attains age 65 and to cover the cost of coverage for years after age 65 assuming Mr. Baur is enrolled in Medicare Parts A, B and D, obtains a Medicare supplemental policy until age 80, and pays the full cost for such coverage.
Under Mr. Baur’s employment agreement, variable cash incentive opportunities will continue to be based upon the performance and attainment of performance goals to be established annually by the Compensation Committee,$250 million, subject to maximum amounts that may be earned. Mr. Baur’s annual equity award opportunity is subject toobtaining additional credit commitments from the Compensation Committee’s discretion and the terms of our equity plan and related equity award agreements.
Mr. Baur’s employment agreement also provides for severance payments to Mr. Baur upon certain events, as further described in the “Severance Plan” section below.
On September 27, 2019, we entered into an employment letter with Mr. Eldh in connection with his appointment as our Senior Executive Vice President and Chief Revenue Officer, effective October 1, 2019. Under the employment letter, Mr. Eldh will be paid an annual base salary and be eligible to participate in the variable cash compensation incentive program. He also will receive other benefits, including relocation benefits, change-in-control payments as a participant in a Severance Plan described below, and is eligible for participation in our other long-term incentive programs and our Nonqualified Deferred Compensation Plan.
On November 16, 2020, we entered into an employment letter with Mr. Jones in connection with his appointment as our Senior Executive Vice President and Chief Financial Officer, effective December 14, 2020. Under the employment letter, Mr. Jones will be paid an annual base salary and be eligible to participate in the variable cash compensation incentive program. He also will receive other benefits, including relocation benefits, change-in-control payments as a participant in the Severance Plan described below, and is eligible for participation in our other long-term incentive programs and our Nonqualified Deferred Compensation Plan.
On May 6, 2021, we entered into an employment letter with Ms. Hayden in connection with her appointment as our Senior Executive Vice President and Chief Information Officer, effective June 7, 2021. Under
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the employment letter, Ms. Hayden will be paid an annual base salary and be eligible to participate in the variable cash compensation incentive program. She also will receive other benefits, including relocation benefits, change-in-control payments as a participant in a Severance Plan described below, and is eligible for participation in our other long-term incentive programs and our Nonqualified Deferred Compensation Plan.
On January 11, 2018, we entered into an employment letter with Mr. Dean that was in connection with his appointment as our Vice President and General Counsel, effective January 12, 2018. Under the employment letter, Mr. Dean was paid an annual base salary and eligible to participate in the variable cash compensation incentive program. He also received other benefits, including relocation benefits and change-in-control payments as a participant in the Severance Plan described below, and was eligible for participation in our other long-term incentive programs and our Nonqualified Deferred Compensation Plan.
See the “Employment Arrangements and Potential Payments upon Certain Events” section for more information on Mr. Baur’s, Mr. Eldh’s, Mr. Jones’, Ms. Hayden’s and Mr. Dean’s employment arrangements that were in effect during fiscal 2022.
Severance Plan
We have established a severance plan to provide severance and other benefits to certain executives selected by the Compensation Committee to participate in the severance plan. The Company’s severance plan is uniform for the current executives selected by the Compensation Committee to participate at their respective levels, excepting Mr. Eldh, who has several provisions that are individually tailored, as described below. We refer to the Company severance plan and Mr. Eldh’s severance plan collectively as the “Severance Plan.”
The employment arrangements with our NEOs and the Severance Plan provide that, if the employment of any participant in the Severance Plan is terminated by the Company without cause, or if the Executive resigns for good reason, we will be required to pay or provide the executive’s base salary earned through the date of termination. In addition, we will also be required to pay to the executive in such instances any other amounts or benefits the executive is eligible to receive under any Company plan, program, policy, practice, contract or agreement in accordance with their terms. In such instances, we will also be required to provide severance benefits to the executive, subject to the executive’s execution of a release, consisting of compensation equal to the average annual base salary and variable compensation earned by the executive, including any amounts earned but deferred, in the last three fiscal years completed prior to the termination (the “Average Compensation Amount”), multiplied by a severance multiple, less withholdings. In the case of Mr. Baur, the severance multiple is equal to 2.5, in the case of Mr. Eldh, Mr. Jones, Ms. Hayden and Mr. Dean the severance multiple is 1.5, and in the case of any other executivelenders participating in the Severance Plan,increase. The Amended Credit Agreement allows for the severance multiple will be set forth in a participation agreement between the Company and such executive (a “Participation Agreement”), but such multiple may not exceed 2.5. In the event the termination occurs within 12 months after or prior to and in contemplation of certain change in control events, Mr. Baur will receive three times his Average Compensation Amount, Mr. Eldh, Mr. Jones, Ms. Hayden and Mr. Dean will receive two times their respective Average Compensation Amountand, in the case of any other executive participating in the Severance Plan, such executive will receive his or her Average Compensation Amount multiplied by his or her change in control multiple, as set forth in a Participation Agreement. In addition, in the event that the executive’s employment is terminated by us without cause, or if the executive resigns for good reason, the executive will be entitled to receive a bonus equal to the pro-rata portion of the then current fiscal year annual variable compensation that otherwise would be payable to the executive based on actual performance. For a periodissuance of up to twenty-four months (or in$50 million for letters of credit. Borrowings under the caseAmended Credit Agreement are guaranteed by substantially all of Mr. Eldh, for up to eighteen months) following the date of such a termination (or in the case of Mr. Baur, until he attains 65 years of age), the executives shall be entitled to participate in our medicaldomestic assets and dental plans, with the executive paying the full premium charged for such coverage subject toour domestic subsidiaries. Under the terms of the employment agreement,revolving credit facility, the employment letter, and/orpayment of cash dividends is restricted. We incurred debt issuance costs of $1.4 million in connection with the Severance Plan, as applicable.
If the executive’s employment is terminated for cause or if the executive voluntarily terminates his or her employment during the termamendment and restatement of the agreement,Amended Credit Agreement. These costs were capitalized to other non-current assets on the Condensed Consolidated Balance Sheets and added to the unamortized debt issuance costs from the previous credit facility.
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amounts payable on the executive’s annual base salary or any other amounts not previously paid, but earned, by the executive as of the date of termination,swingline loans, bear interest at a bonusrate per annum equal to, at our option, (i) the pro-rata portionadjusted term SOFR or adjusted daily simple SOFR plus an additional margin ranging from 1.00% to 1.75% depending upon our ratio of the then current fiscal year annual variable compensation that would otherwise be payable(A) total consolidated debt less up to the executive based on actual performance, and benefits under other plans in accordance with their terms.
If we do not renew the employment agreement, or enter into a new employment agreement with the same or similar terms after$30 million of unrestricted domestic cash ("Credit Facility Net Debt") to (B) trailing four-quarter consolidated EBITDA measured as of the end of the employment period,most recent year or quarter, as applicable (Credit Facility EBITDA"), for which financial statements have been delivered to the Lenders (the “leverage ratio”); or (ii) the alternate base rate plus an additional margin ranging from 0% to 0.75%, depending upon our leverage ratio, plus, if applicable, certain mandatory costs. All swingline loans denominated in U.S. dollars bear interest based upon the adjusted daily simple SOFR plus an additional margin ranging from 1.00% to 1.75% depending upon our leverage ratio, or such other rate as agreed upon with the applicable swingline lender. The adjusted term SOFR and Mr. Baur remains an employeeadjusted daily simple SOFR include a fixed credit adjustment of 0.10% over the Companyapplicable SOFR reference rate. Loans denominated in any capacity, Mr. Baur’s employment will be on an at-will basis, and Mr. Baur generally will be eligibleforeign currencies bear interest at a rate per annum equal to receive the same severance benefitsapplicable benchmark rate set forth in the employment agreement.
Amended Credit Agreement plus an additional margin ranging from 1.00% to 1.75%, depending upon our leverage ratio plus, if applicable, certain mandatory costs.
Upon his departure from the Company in July 2022, under the terms of the Severance Plan, Mr. Dean was entitled to receive compensation from the Company as determined under the provisions therein.
Post-Termination Restrictions and Compensation
The Compensation Committee believes that our NEOs should be provided with reasonable severance benefits in the event a NEO is terminated under certain circumstances. Severance benefits for NEOs reflect the fact that the NEO may not be able to find reasonably comparable employment within a reasonable period of time following a termination. In addition, the Compensation Committee believes that certain post-termination benefits such as change in control payments will allow the NEOs to focus their time on potential transactions that may be beneficial to the Company, rather than have concern for their own employment prospects following a change in control. Severance benefits are provided under our employment agreements, employment letters and/or the Severance Plan, as applicable.
Non-Compete and Non-Solicitation Agreements
Our NEOs are obligated pursuant to their employment agreements, employment letters, and/or the Severance Plan, as applicable, not to compete with the Company for a period of two years (or in the case of Mr. Eldh, for a period of 18 months) following their termination of employment with the Company. These agreements also restrict the NEOs’ disclosure and use of confidential information to which they were exposed during their employment. In addition, the agreements provide for restrictions on the solicitation of suppliers, customers and employees of the Company for a period of twenty-four months (or in the case of Mr. Eldh, for a period of eighteen months) following termination of employment.
Severance and Change in Control Benefits
fiscal quarter. In the event of a terminationdefault, customary remedies are available to the lenders, including acceleration and increased interest rates. We were in compliance with all covenants under the Amended Credit Agreement as of employment byJune 30, 2023.
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Our NEOs’ employment agreements, employment letters, and/or the Severance Plan, as applicable, provide for severancecontained in the eventCredit Facility as of certain terminationJune 30, 2023, and currently expect to continue to maintain such compliance, should we encounter difficulties, our historical relationship with our Credit Facility lending group has been strong and we anticipate their continued support of our long-term business.
Additional Compensation Matters
Risk Assessment of Compensation Policies and Practices
We have assessed our compensation programs for all employees and have concluded that our compensation policies and practices do not create risks that are reasonably likely toterm loan facility have a material adverse effectmaturity date
Based on this review, the Compensation Committee believesnext twelve months. We also believe that our compensation programs do not encourage excessive risk but instead encourage behaviors that support sustainable value creation. The following featureslonger-term working capital, planned expenditures and other general funding requirements will be satisfied through cash flows from operations and, to the extent necessary, from our borrowing facilities.
Our performance goals and objectives generally reflect a mixnormal course of corporate and other performance measures designed to promote progress towards both our annual and longer-term goals.
A significant component of each of our NEOs’ total direct compensation consists of long-term, equity-based incentive awards that are designed to encourage these NEOs to focus on sustained stock price appreciation.
Equity awards typically have vesting schedules of three or four years and, in some cases, have performance-based vesting components as well; thus, NEOs typically will always have unvested awards that could decrease significantly in value if our business is not well-managed for the long term.
Equity incentive awards are granted periodically, typically annually, during open window periods and under an established equity grant program.
The Compensation Committee believes that our overall compensationa result of our NEOs is at reasonableselective use of bank debt and sustainable levels,transacting business in foreign currencies in connection with our foreign operations.
The Compensation Committee retains discretion to reduce compensation based on corporate and individual performancea result of future business requirements, market conditions and other factors.
Equity awards are subject to annual limitations A hypothetical 100 basis point increase or decrease in interest rates on the numbertotal borrowings on our revolving credit facility and variable rate long-term debt, net of shares that may be awarded during any year. The typical Company compensation structure has a threshold and maximum for cash bonuses.
The target levels under our annual cash bonus program are designed to be set at a level where achieving the target incentive compensation levels is not guaranteed and the achievement of such levels is rewarding to both the NEO and the shareholders.
NEO base salaries are consistent with the NEOs’ responsibilities so that they are not motivated to take excessive risks to achieve a reasonable level of financial security.
Our internal reporting system ensures a consistent and ongoing assessment of financial results used to determine payouts.
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Our stock ownership policy sets out a minimum level of Company share ownership for our CEO so that he has personal wealth tied to the long-term success of Company and is therefore aligned with shareholders and imposes an equity retention requirement to facilitate attaining such levels of ownership.
We maintain a “claw-back policy,” which requires the reimbursement to the Company of any incentive compensation to executive and certain other officers, the payment of which was predicated upon the achievement of financial results that were subsequently the subject of a restatement caused by the recipient’s fraud or misconduct, or otherwise is required under applicable laws, rules, and regulations.
NEOs must obtain permission from the Legal Department before the purchase or sale of any shares, even during an open trading period.
Based on a combination of the above, we believe that (i) our NEOs and other employees are encouraged to manage the Company in a prudent manner because our compensation programs are aligned with our business strategy and risk profile, and (ii) our incentive programs are not designed to encourage our NEOs or other employees to take excessive risks or risks that are inconsistent with the Company’s and shareholders’ best interests. In addition, we have in place various controls and management processes that help mitigate the potential for incentive compensation plans to have a material adverse effect on the Company.
Impact of Accounting and Tax Treatment of Compensation
Section 162(m) of the Code generally sets a limit of $1 million on the amount of compensation that we may deduct for federal income tax purposes in any given year with respect to the compensation of each of our NEOs. For years beginning prior to January 1, 2018, the $1 million limitation did not apply to qualified performance-based compensation that satisfied certain requirements, including, among others, approval of the material terms of the plan by our shareholders. Effective for the years beginning on or after January 1, 2018, there is no exception for qualified performance-based compensation from the Section 162(m) limitation, although a transition rule applies in some circumstances for outstanding awards. We consider the impact of the deduction limit under Section 162(m) when developinginterest rate swap, would have resulted in approximately a $2.5 million and implementing our executive compensation programs. We intend to design our executive compensation arrangements to be consistent with the interests of our shareholders. We believe that it is important to preserve flexibility$1.1 million increase or decrease in administering compensation programs to promote various corporate goals. Accordingly, we have not adopted a policy that all compensation must qualify as deductible under Section 162(m) of the Internal Revenue Code. Some amounts paid under our compensation programs may not be deductible as the result of Section 162(m).
EXECUTIVE COMPENSATION
Compensation Tables
2022 Summary Compensation Table
The following table summarizes compensation paid to or accrued on behalf of the NEOspre-tax income for the fiscal year ended June 30, 2022:
Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total ($) | ||||||||||||||||||||||||
Michael L. Baur | 2022 | 875,000 | — | 1,125,012 | 1,206,308 | 2,123,625 | 755,239 | 6,085,184 | ||||||||||||||||||||||||
Chairman and Chief Executive Officer | 2021 | 765,625 | — | 1,262,036 | 2,428,626 | 2,033,063 | 148,463 | 6,637,813 | ||||||||||||||||||||||||
2020 | 875,000 | — | 2,248,093 | — | 169,444 | 149,914 | 3,442,451 | |||||||||||||||||||||||||
John Eldh | 2022 | 548,077 | — | 749,984 | 804,221 | 1,339,569 | 70,197 | 3,512,048 | ||||||||||||||||||||||||
President and Chief Revenue Officer(4) | 2021 | 475,000 | — | 841,366 | 817,676 | 1,161,750 | 91,105 | 3,386,897 |
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Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total ($) | ||||||||||||||||||||||||
Stephen T. Jones | 2022 | 400,000 | — | 400,011 | 428,916 | 647,200 | 59,890 | 1,936,017 | ||||||||||||||||||||||||
Senior Executive Vice President, Chief Financial Officer (5) | 2021 | 218,462 | — | 800,001 | — | 360,500 | 87,300 | 1,466,263 | ||||||||||||||||||||||||
Rachel Hayden | 2022 | 350,000 | 200,000 | 286,525 | 187,672 | 339,780 | 22,050 | 1,386,027 | ||||||||||||||||||||||||
Senior Executive Vice President, Chief Information Officer(6) | 2021 | 20,192 | — | — | — | 27,107 | 100,000 | 147,299 | ||||||||||||||||||||||||
Matthew S. Dean | 2022 | 450,000 | — | 212,515 | 227,874 | 436,860 | 42,616 | 1,369,865 | ||||||||||||||||||||||||
Former Chief Legal Officer(7) | 2021 | 427,500 | — | 238,384 | 472,094 | 418,230 | 41,141 | 1,597,349 | ||||||||||||||||||||||||
2020 | 450,000 | 170,000 | 424,648 | — | 34,857 | 38,891 | 1,118,369 |
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Financial Statements | |||||
/s/ Grant Thornton LLP |
/s/ Grant Thornton, LLP |
June 30, 2023 | June 30, 2022 | ||||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 36,178 | $ | 37,987 | |||||||
Accounts receivable, less allowance of $15,480 at June 30, 2023 and $16,806 at June 30, 2022 | 753,236 | 729,442 | |||||||||
Inventories | 757,574 | 614,814 | |||||||||
Prepaid expenses and other current assets | 110,087 | 141,562 | |||||||||
Total current assets | 1,657,075 | 1,523,805 | |||||||||
Property and equipment, net | 37,379 | 37,477 | |||||||||
Goodwill | 216,706 | 214,435 | |||||||||
Identifiable intangible assets, net | 68,495 | 84,427 | |||||||||
Deferred income taxes | 17,764 | 15,668 | |||||||||
Other non-current assets | 70,750 | 61,616 | |||||||||
Total assets | $ | 2,068,169 | $ | 1,937,428 | |||||||
Liabilities and Shareholders’ Equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 691,119 | $ | 714,177 | |||||||
Accrued expenses and other current liabilities | 78,892 | 88,455 | |||||||||
Income taxes payable | 9,875 | 34 | |||||||||
Current portion of long-term debt | 6,915 | 11,598 | |||||||||
Total current liabilities | 786,801 | 814,264 | |||||||||
Deferred income taxes | 3,816 | 3,144 | |||||||||
Long-term debt, net of current portion | 144,006 | 123,733 | |||||||||
Borrowings under revolving credit facility | 178,980 | 135,839 | |||||||||
Other long-term liabilities | 49,268 | 53,920 | |||||||||
Total liabilities | 1,162,871 | 1,130,900 | |||||||||
Commitments and contingencies | |||||||||||
Shareholders’ equity: | |||||||||||
Preferred stock, no par value; 3,000,000 shares authorized, none issued | — | — | |||||||||
Common stock, no par value; 45,000,000 shares authorized, 24,844,203 and 25,187,351 shares issued and outstanding at June 30, 2023 and June 30, 2022, respectively | 58,241 | 64,297 | |||||||||
Retained earnings | 936,678 | 846,869 | |||||||||
Accumulated other comprehensive loss | (89,621) | (104,638) | |||||||||
Total shareholders’ equity | 905,298 | 806,528 | |||||||||
Total liabilities and shareholders’ equity | $ | 2,068,169 | $ | 1,937,428 | |||||||
2023 | 2022 | 2021 | |||||||||||||||
Net sales | $ | 3,787,721 | $ | 3,529,935 | $ | 3,150,806 | |||||||||||
Cost of goods sold | 3,338,482 | 3,103,411 | 2,800,090 | ||||||||||||||
Gross profit | 449,239 | 426,524 | 350,716 | ||||||||||||||
Selling, general and administrative expenses | 285,695 | 275,442 | 247,438 | ||||||||||||||
Depreciation expense | 10,912 | 11,062 | 12,533 | ||||||||||||||
Intangible amortization expense | 16,746 | 17,853 | 19,488 | ||||||||||||||
Restructuring and other charges | — | — | 9,258 | ||||||||||||||
Change in fair value of contingent consideration | — | — | 516 | ||||||||||||||
Operating income | 135,886 | 122,167 | 61,483 | ||||||||||||||
Interest expense | 19,786 | 6,523 | 6,929 | ||||||||||||||
Interest income | (7,414) | (4,333) | (3,097) | ||||||||||||||
Other expense, net | 1,664 | 1,354 | 116 | ||||||||||||||
Income before income taxes | 121,850 | 118,623 | 57,535 | ||||||||||||||
Provision for income taxes | 33,758 | 29,925 | 12,146 | ||||||||||||||
Net income from continuing operations | 88,092 | 88,698 | 45,389 | ||||||||||||||
Net income (loss) from discontinued operations | 1,717 | 100 | (34,594) | ||||||||||||||
Net income | $ | 89,809 | $ | 88,798 | $ | 10,795 | |||||||||||
Per share data: | |||||||||||||||||
Net income from continuing operations per common share, basic | $ | 3.50 | $ | 3.48 | $ | 1.79 | |||||||||||
Net income (loss) from discontinued operations per common share, basic | 0.07 | — | (1.36) | ||||||||||||||
Net income per common share, basic | $ | 3.57 | $ | 3.48 | $ | 0.42 | |||||||||||
Weighted-average shares outstanding, basic | 25,142 | 25,504 | 25,423 | ||||||||||||||
Net income from continuing operations per common share, diluted | $ | 3.47 | $ | 3.44 | $ | 1.78 | |||||||||||
Net income (loss) from discontinued operations per common share, diluted | 0.07 | — | (1.36) | ||||||||||||||
Net income per common share, diluted | $ | 3.54 | $ | 3.45 | $ | 0.42 | |||||||||||
Weighted-average shares outstanding, diluted | 25,362 | 25,758 | 25,518 |
2023 | 2022 | 2021 | |||||||||||||||
Net income | $ | 89,809 | $ | 88,798 | $ | 10,795 | |||||||||||
Unrealized gain on hedged transaction, net of tax | 2,254 | 5,833 | 2,249 | ||||||||||||||
Foreign currency translation adjustment | 12,763 | (12,338) | 20,778 | ||||||||||||||
Realized foreign currency loss from discontinued operations | — | — | 11,635 | ||||||||||||||
Comprehensive income | $ | 104,826 | $ | 82,293 | $ | 45,457 | |||||||||||
See accompanying notes to these consolidated financial statements. | |||||||||||||||||
Common Stock (Shares) | Common Stock (Amount) | Retained Earnings | Accumulated Other Comprehensive Loss | Total | |||||||||||||||||||||||||
Balance at June 30, 2020 | 25,361,298 | $ | 63,765 | $ | 747,276 | $ | (132,795) | $ | 678,246 | ||||||||||||||||||||
Net income | — | — | 10,795 | — | 10,795 | ||||||||||||||||||||||||
Unrealized gain on hedged transaction, net of tax | — | — | — | 2,249 | 2,249 | ||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | 20,778 | 20,778 | ||||||||||||||||||||||||
Realized foreign currency loss from discontinued operations | — | — | — | 11,635 | 11,635 | ||||||||||||||||||||||||
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes | 138,167 | (585) | — | — | (585) | ||||||||||||||||||||||||
Share-based compensation | — | 8,073 | — | — | 8,073 | ||||||||||||||||||||||||
Balance at June 30, 2021 | 25,499,465 | 71,253 | 758,071 | (98,133) | 731,191 | ||||||||||||||||||||||||
Net income | — | — | 88,798 | — | 88,798 | ||||||||||||||||||||||||
Unrealized gain on hedged transaction, net of tax | — | — | — | 5,833 | 5,833 | ||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | (12,338) | (12,338) | ||||||||||||||||||||||||
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes | 238,080 | (450) | — | — | (450) | ||||||||||||||||||||||||
Common stock repurchased | (550,194) | (18,203) | — | — | (18,203) | ||||||||||||||||||||||||
Share-based compensation | — | 11,697 | — | — | 11,697 | ||||||||||||||||||||||||
Balance at June 30, 2022 | 25,187,351 | 64,297 | 846,869 | (104,638) | 806,528 | ||||||||||||||||||||||||
Net income | — | — | 89,809 | — | 89,809 | ||||||||||||||||||||||||
Unrealized gain on hedged transaction, net of tax | — | — | — | 2,254 | 2,254 | ||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | 12,763 | 12,763 | ||||||||||||||||||||||||
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes | 180,960 | (1,553) | — | — | (1,553) | ||||||||||||||||||||||||
Common stock repurchased | (524,108) | (15,753) | — | — | (15,753) | ||||||||||||||||||||||||
Share-based compensation | — | 11,250 | — | — | 11,250 | ||||||||||||||||||||||||
Balance at June 30, 2023 | 24,844,203 | $ | 58,241 | $ | 936,678 | $ | (89,621) | $ | 905,298 | ||||||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
Cash flows from operating activities: | |||||||||||||||||
Net income | $ | 89,809 | $ | 88,798 | $ | 10,795 | |||||||||||
Net income (loss) from discontinued operations | 1,717 | 100 | (34,594) | ||||||||||||||
Net income from continuing operations | 88,092 | 88,698 | 45,389 | ||||||||||||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities of continuing operations: | |||||||||||||||||
Depreciation and amortization | 28,614 | 29,884 | 33,507 | ||||||||||||||
Amortization of debt issue costs | 577 | 417 | 417 | ||||||||||||||
Provision for doubtful accounts | 2,785 | 1,514 | 338 | ||||||||||||||
Share-based compensation | 11,219 | 11,663 | 8,039 | ||||||||||||||
Deferred income taxes | (1,496) | 5,737 | 2,916 | ||||||||||||||
Change in fair value of contingent consideration | — | — | 516 | ||||||||||||||
Contingent consideration payments excess | — | — | (5,457) | ||||||||||||||
Finance lease interest | 44 | 34 | 119 | ||||||||||||||
Changes in operating assets and liabilities, net of acquisitions: | |||||||||||||||||
Accounts receivable | (17,368) | (165,939) | (118,859) | ||||||||||||||
Inventories | (138,313) | (145,962) | (12,301) | ||||||||||||||
Prepaid expenses and other assets | 32,653 | (27,371) | (18,753) | ||||||||||||||
Other non-current assets | (7,582) | 1,123 | 9,948 | ||||||||||||||
Accounts payable | (30,656) | 82,969 | 175,120 | ||||||||||||||
Accrued expenses and other liabilities | (14,195) | (4,869) | (493) | ||||||||||||||
Income taxes payable | 9,857 | (2,252) | (3,679) | ||||||||||||||
Net cash (used in) provided by operating activities of continuing operations | (35,769) | (124,354) | 116,767 | ||||||||||||||
Cash flows from investing activities of continuing operations: | |||||||||||||||||
Capital expenditures | (9,979) | (6,849) | (2,363) | ||||||||||||||
Cash received for business disposal | 1,717 | 3,125 | 34,356 | ||||||||||||||
Net cash (used in) provided by investing activities of continuing operations | (8,262) | (3,724) | 31,993 | ||||||||||||||
Cash flows from financing activities of continuing operations: | |||||||||||||||||
Borrowings on revolving credit, net of expenses | 2,499,166 | 2,166,409 | 1,881,679 | ||||||||||||||
Repayments on revolving credit, net of expenses | (2,456,025) | (2,030,569) | (1,949,392) | ||||||||||||||
Debt issuance costs | (1,407) | — | — | ||||||||||||||
Borrowings (repayments) on long-term debt, net | 15,590 | (7,843) | (7,839) | ||||||||||||||
Repayments of finance lease obligations | (589) | (1,238) | (1,294) | ||||||||||||||
Contingent consideration payments | — | — | (41,393) | ||||||||||||||
Exercise of stock options | 910 | 2,304 | 451 | ||||||||||||||
Taxes paid on settlement of equity awards | (2,463) | (2,754) | (1,036) | ||||||||||||||
Repurchase of common stock | (15,651) | (18,203) | — | ||||||||||||||
Net cash provided by (used in) financing activities of continuing operations | 39,531 | 108,106 | (118,824) | ||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(continued) | |||||||||||||||||
Cash flows from discontinued operations: | |||||||||||||||||
Net cash flows provided by operating activities of discontinued operations | — | — | 24,173 | ||||||||||||||
Net cash flows used in investing activities of discontinued operations | — | — | (58) | ||||||||||||||
Net cash flows used in financing activities of discontinued operations | — | — | (29,494) | ||||||||||||||
Net cash flows used in by discontinued operations | — | — | (5,379) | ||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | 2,691 | (4,759) | 3,706 | ||||||||||||||
(Decrease) increase in cash and cash equivalents | (1,809) | (24,731) | 28,263 | ||||||||||||||
Cash and cash equivalents at beginning of period | 37,987 | 62,718 | 34,455 | ||||||||||||||
Cash and cash equivalents at end of period | 36,178 | 37,987 | 62,718 | ||||||||||||||
Cash and cash equivalents of discontinued operations | — | — | — | ||||||||||||||
Cash and cash equivalents of continuing operations | $ | 36,178 | $ | 37,987 | $ | 62,718 |
Supplemental disclosure of consolidated cash flow information: | |||||||||||||||||
Interest paid during the year | $ | 18,789 | $ | 6,066 | $ | 6,412 | |||||||||||
Income taxes paid during the year | $ | 28,547 | $ | 29,418 | $ | 12,002 |
Description | Balance at Beginning of Period | Amounts Charged to Expense | Write-offs | Other (1) | Balance at End of Period | ||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||
Allowance for doubtful accounts: | |||||||||||||||||||||||||||||
Year ended June 30, 2021 | $ | 21,906 | 338 | (4,556) | 1,653 | $ | 19,341 | ||||||||||||||||||||||
Year ended June 30, 2022 | $ | 19,341 | 1,514 | (1,751) | (2,298) | $ | 16,806 | ||||||||||||||||||||||
Year ended June 30, 2023 | $ | 16,806 | 2,785 | (2,062) | (2,049) | $ | 15,480 | ||||||||||||||||||||||
Fiscal year ended June 30, 2023 | ||||||||||||||||||||||||||||||||
Specialty Technology Solutions | Modern Communications & Cloud | Total | ||||||||||||||||||||||||||||||
Revenue by product/service type: | (in thousands) | |||||||||||||||||||||||||||||||
Hardware, software and cloud (excluding Intelisys) | $ | 2,331,030 | $ | 1,377,185 | $ | 3,708,215 | ||||||||||||||||||||||||||
Intelisys connectivity and cloud | — | 79,506 | 79,506 | |||||||||||||||||||||||||||||
$ | 2,331,030 | $ | 1,456,691 | $ | 3,787,721 | |||||||||||||||||||||||||||
Fiscal year ended June 30, 2022 | ||||||||||||||||||||||||||||||||
Specialty Technology Solutions | Modern Communications & Cloud | Total | ||||||||||||||||||||||||||||||
Revenue by product/service type: | (in thousands) | |||||||||||||||||||||||||||||||
Hardware, software and cloud (excluding Intelisys) | $ | 2,082,321 | $ | 1,373,342 | $ | 3,455,663 | ||||||||||||||||||||||||||
Intelisys connectivity and cloud | — | 74,272 | 74,272 | |||||||||||||||||||||||||||||
$ | 2,082,321 | $ | 1,447,614 | $ | 3,529,935 | |||||||||||||||||||||||||||
Fiscal year ended June 30, 2021 | ||||||||||||||||||||||||||||||||
Specialty Technology Solutions | Modern Communications & Cloud | Total | ||||||||||||||||||||||||||||||
Revenue by product/service type: | (in thousands) | |||||||||||||||||||||||||||||||
Hardware, software and cloud (excluding Intelisys) | $ | 1,815,933 | $ | 1,269,930 | $ | 3,085,863 | ||||||||||||||||||||||||||
Intelisys connectivity and cloud | — | 64,943 | 64,943 | |||||||||||||||||||||||||||||
$ | 1,815,933 | $ | 1,334,873 | $ | 3,150,806 | |||||||||||||||||||||||||||
Fiscal year ended June 30, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(in thousands, except per share data) | |||||||||||||||||
Numerator: | |||||||||||||||||
Net income from continuing operations | $ | 88,092 | $ | 88,698 | $ | 45,389 | |||||||||||
Net income (loss) from discontinued operations | 1,717 | 100 | (34,594) | ||||||||||||||
Net income | $ | 89,809 | $ | 88,798 | $ | 10,795 | |||||||||||
Denominator: | |||||||||||||||||
Weighted-average shares, basic | 25,142 | 25,504 | 25,423 | ||||||||||||||
Dilutive effect of share-based payments | 220 | 254 | 95 | ||||||||||||||
Weighted-average shares, diluted | 25,362 | 25,758 | 25,518 | ||||||||||||||
Net income from continuing operations per common share, basic | $ | 3.50 | $ | 3.48 | $ | 1.79 | |||||||||||
Net income (loss) from discontinued operations per common share, basic | 0.07 | — | (1.36) | ||||||||||||||
Net income per common share, basic | $ | 3.57 | $ | 3.48 | $ | 0.42 | |||||||||||
Net income from continuing operations per common share, diluted | $ | 3.47 | $ | 3.44 | $ | 1.78 | |||||||||||
Net income (loss) from discontinued operations per common share, diluted | 0.07 | — | (1.36) | ||||||||||||||
Net income per common share, diluted | $ | 3.54 | $ | 3.45 | $ | 0.42 | |||||||||||
June 30, | |||||||||||
2023 | 2022 | ||||||||||
(in thousands) | |||||||||||
Land | $ | 2,143 | $ | 2,999 | |||||||
Buildings and leasehold improvements | 20,326 | 19,838 | |||||||||
Computer software and equipment | 77,673 | 72,289 | |||||||||
Furniture, fixtures and equipment | 17,895 | 15,223 | |||||||||
Construction in progress | 919 | 209 | |||||||||
Rental equipment | 10,734 | 9,539 | |||||||||
129,690 | 120,097 | ||||||||||
Less accumulated depreciation | (92,311) | (82,620) | |||||||||
$ | 37,379 | $ | 37,477 |
June 30, | |||||||||||
2023 | 2022 | ||||||||||
(in thousands) | |||||||||||
Other receivables | $ | 72,539 | $ | 70,105 | |||||||
Prepaid expense | 14,547 | 51,013 | |||||||||
Other taxes receivable | 7,500 | 5,177 | |||||||||
Other current assets | 15,501 | 15,267 | |||||||||
$ | 110,087 | $ | 141,562 |
June 30, | |||||||||||
2023 | 2022 | ||||||||||
(in thousands) | |||||||||||
Deferred warranty revenue | $ | 8,640 | $ | 9,640 | |||||||
Accrued compensation | 24,403 | 25,180 | |||||||||
Other taxes payable | 5,848 | 10,852 | |||||||||
Accrued marketing expense | 7,878 | 7,697 | |||||||||
Accrued freight | 3,428 | 3,421 | |||||||||
Short-term operating lease liability | 4,355 | 4,499 | |||||||||
Other accrued liabilities | 24,341 | 27,166 | |||||||||
$ | 78,893 | $ | 88,455 |
Specialty Technology Solutions | Modern Communications & Cloud | Total | |||||||||||||||
(in thousands) | |||||||||||||||||
Balance at June 30, 2021 | $ | 16,370 | $ | 202,507 | $ | 218,877 | |||||||||||
Unrealized loss on foreign currency translation | — | (4,442) | (4,442) | ||||||||||||||
Balance at June 30, 2022 | $ | 16,370 | $ | 198,065 | $ | 214,435 | |||||||||||
Unrealized gain on foreign currency translation | — | 2,271 | 2,271 | ||||||||||||||
Balance at June 30, 2023 | $ | 16,370 | $ | 200,336 | $ | 216,706 |
June 30, 2023 | June 30, 2022 | ||||||||||||||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Book Value | Gross Carrying Amount | Accumulated Amortization | Net Book Value | ||||||||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||||||
Amortized intangible assets: | |||||||||||||||||||||||||||||||||||
Customer relationships | $ | 138,574 | $ | 90,650 | $ | 47,924 | $ | 137,366 | $ | 79,147 | $ | 58,219 | |||||||||||||||||||||||
Trade names | 19,562 | 14,109 | 5,453 | 19,480 | 12,469 | 7,011 | |||||||||||||||||||||||||||||
Non-compete agreements | 2,410 | 2,410 | — | 2,410 | 2,396 | 14 | |||||||||||||||||||||||||||||
Supplier partner program | 4,085 | 2,481 | 1,604 | 4,085 | 2,051 | 2,034 | |||||||||||||||||||||||||||||
Encryption key library | 19,900 | 14,718 | 5,182 | 19,900 | 12,230 | 7,670 | |||||||||||||||||||||||||||||
Developed technology | 14,262 | 5,930 | 8,332 | 13,865 | 4,386 | 9,479 | |||||||||||||||||||||||||||||
Total intangibles | $ | 198,793 | $ | 130,298 | $ | 68,495 | $ | 197,106 | $ | 112,679 | $ | 84,427 |
Amortization Expense | |||||
(in thousands) | |||||
Year Ended June 30, | |||||
2024 | $ | 16,783 | |||
2025 | 16,783 | ||||
2026 | 12,882 | ||||
2027 | 6,674 | ||||
2028 | 5,317 | ||||
Thereafter | 10,056 | ||||
Total | $ | 68,495 |
June 30, | |||||||||||
2023 | 2022 | ||||||||||
(in thousands) | |||||||||||
Current portion of long-term debt | $ | 6,915 | $ | 11,598 | |||||||
Mississippi revenue bond, net of current portion | 3,381 | 3,733 | |||||||||
Senior secured term loan facility, net of current portion | 140,625 | 120,000 | |||||||||
Borrowings under revolving credit facility | 178,980 | 135,839 | |||||||||
Total debt | $ | 329,901 | $ | 271,170 | |||||||
Revolving Credit Facility | Term Loan Facility | Mississippi Bond | |||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Fiscal year: | |||||||||||||||||||||||
2024 | $ | — | $ | 6,563 | $ | 352 | |||||||||||||||||
2025 | — | 7,500 | 357 | ||||||||||||||||||||
2026 | — | 7,500 | 361 | ||||||||||||||||||||
2027 | — | 10,313 | 366 | ||||||||||||||||||||
2028 | 178,980 | 115,312 | 371 | ||||||||||||||||||||
Thereafter | — | — | 1,926 | ||||||||||||||||||||
Total principal payments | $ | 178,980 | $ | 147,188 | $ | 3,733 |
Fiscal year ended June 30, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(in thousands) | |||||||||||||||||
Net foreign exchange derivative contract losses (gains) | $ | 3,928 | $ | (304) | $ | 3,462 | |||||||||||
Net foreign currency transactional and re-measurement (gains) losses | (1,760) | 2,382 | (2,617) | ||||||||||||||
Net foreign currency losses | $ | 2,168 | $ | 2,078 | $ | 845 |
Fiscal Year Ended June 30, | |||||||||||
2023 | 2022 | 2021 | |||||||||
(in thousands) | |||||||||||
Net interest (income) expense recognized as a result of interest rate swap | $ | (1,553) | $ | 2,088 | $ | 2,250 | |||||
Unrealized gain in fair value of interest swap rates | 4,554 | 5,748 | 731 | ||||||||
Net increase in accumulated other comprehensive income (loss) | 3,001 | 7,836 | 2,981 | ||||||||
Income tax effect | 747 | 2,003 | 732 | ||||||||
Net increase in accumulated other comprehensive income, net of tax | $ | 2,254 | $ | 5,833 | $ | 2,249 |
June 30, 2023 | |||||||||||||||||
Balance Sheet Location | Fair Value of Derivatives Designated as Hedge Instruments | Fair Value of Derivatives Not Designated as Hedge Instruments | |||||||||||||||
(in thousands) | |||||||||||||||||
Derivative assets: | |||||||||||||||||
Foreign exchange contracts | Prepaid expenses and other current assets | $ | — | $ | 1 | ||||||||||||
Interest rate swap agreement | Other current assets | $ | 4,687 | $ | — | ||||||||||||
Foreign currency hedge | Other current assets | $ | 100 | $ | — | ||||||||||||
June 30, 2022 | |||||||||||||||||
Balance Sheet Location | Fair Value of Derivatives Designated as Hedge Instruments | Fair Value of Derivatives Not Designated as Hedge Instruments | |||||||||||||||
(in thousands) | |||||||||||||||||
Derivative assets: | |||||||||||||||||
Interest rate swap agreement | Other current assets | $ | 1,686 | $ | — | ||||||||||||
Derivative liabilities: | |||||||||||||||||
Foreign exchange contracts | Accrued expenses and other current liabilities | $ | — | $ | 5 | ||||||||||||
Foreign currency hedge | Other current liabilities | $ | 93 | $ | — | ||||||||||||
Total | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | |||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Assets: | |||||||||||||||||||||||
Deferred compensation plan investments, current and non-current portion | $ | 28,209 | $ | 28,209 | $ | — | |||||||||||||||||
Forward foreign currency exchange contracts | 1 | — | 1 | ||||||||||||||||||||
Interest rate swap agreement | 4,687 | — | 4,687 | ||||||||||||||||||||
Foreign currency hedge | 100 | — | 100 | ||||||||||||||||||||
Total assets at fair value | $ | 32,997 | $ | 28,209 | $ | 4,788 | |||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Deferred compensation plan investments, current and non-current portion | $ | 28,229 | $ | 28,229 | $ | — | |||||||||||||||||
Total liabilities at fair value | $ | 28,229 | $ | 28,229 | $ | — |
Total | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | |||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Assets: | |||||||||||||||||||||||
Deferred compensation plan investments, current and non-current portion | $ | 25,178 | $ | 25,178 | $ | — | |||||||||||||||||
Interest rate swap agreement | 1,686 | — | 1,686 | ||||||||||||||||||||
Total assets at fair value | $ | 26,864 | $ | 25,178 | $ | 1,686 | |||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Deferred compensation plan investments, current and non-current portion | $ | 25,178 | $ | 25,178 | $ | — | |||||||||||||||||
Forward foreign currency exchange contracts | 5 | — | 5 | ||||||||||||||||||||
Foreign currency hedge | 93 | — | 93 | ||||||||||||||||||||
Total liabilities at fair value | $ | 25,276 | $ | 25,178 | $ | 98 |
Fiscal Year Ended June 30, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(in thousands) | |||||||||||||||||
Share-based compensation related to: | |||||||||||||||||
Equity classified stock options | $ | 1,426 | $ | 1,848 | $ | 1,332 | |||||||||||
Equity classified restricted stock | 9,793 | 9,815 | 6,707 | ||||||||||||||
Total share-based compensation | $ | 11,219 | $ | 11,663 | $ | 8,039 |
Fiscal Year Ended June 30, | |||||||||||
2021 | |||||||||||
Expected term | 5 years | ||||||||||
Expected volatility | 42.78% | ||||||||||
Risk-free interest rate | 0.36% | ||||||||||
Dividend yield | 0.00% | ||||||||||
Weighted-average fair value |
|
|
|
|
|
|
26
Fiscal Year Ended June 30, 2023 | |||||||||||||||||||||||
Options | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life | Aggregate Intrinsic Value | ||||||||||||||||||||
Outstanding, beginning of year | 1,123,099 | $ | 32.23 | ||||||||||||||||||||
Granted during the period | — | — | |||||||||||||||||||||
Exercised during the period | (36,435) | 25.00 | |||||||||||||||||||||
Canceled, forfeited, or expired during the period | (59,993) | 27.70 | |||||||||||||||||||||
Outstanding, end of year | 1,026,671 | 32.76 | 4.57 | $ | 2,113,985 | ||||||||||||||||||
Vested and expected to vest at June 30, 2023 | 1,026,460 | 32.76 | 4.57 | $ | 2,112,871 | ||||||||||||||||||
Exercisable, end of year | 855,834 | $ | 34.28 | 4.01 | $ | — |
Fiscal Year Ended June 30, 2023 | |||||||||||||||||
Options | Weighted Average Exercise Price | Weighted Average Grant Date Fair Value | |||||||||||||||
Unvested, beginning of year | 384,638 | $ | 25.16 | $ | 9.08 | ||||||||||||
Granted | — | — | — | ||||||||||||||
Vested | (171,926) | 25.11 | 9.06 | ||||||||||||||
Canceled or forfeited | (41,875) | 25.51 | 9.30 | ||||||||||||||
Unvested, end of year | 170,837 | $ | 25.12 | $ | 9.06 |
and 2021 is $1.6 million, $1.9 million and $0.3 million, respectively. The following supplemental table summarizes information about stock options outstanding and exercisable as of June 30, 2023:
Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||||||
Range of Exercise Prices | Shares Outstanding | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | |||||||||||||||||||||||||||
$22.27 - $26.38 | 363,233 | 7.38 | 24.53 | 231,673 | 24.55 | |||||||||||||||||||||||||||
$26.38 - $30.49 | 119,021 | 7.40 | 27.14 | 79,744 | 27.14 | |||||||||||||||||||||||||||
$30.49 - $34.60 | 57,799 | 4.44 | 34.35 | 57,799 | 34.35 | |||||||||||||||||||||||||||
$34.60 - $38.71 | 207,169 | 2.83 | 37.71 | 207,169 | 37.71 | |||||||||||||||||||||||||||
$38.71 - $42.82 | 279,449 | 1.02 | 41.83 | 279,449 | 41.83 | |||||||||||||||||||||||||||
1,026,671 | 4.57 | $ | 32.76 | 855,834 | $ | 34.28 |
Fiscal Year Ended June 30, 2023 | |||||||||||||||||||||||
Shares granted | Date granted | Grant date fair value | Vesting period | ||||||||||||||||||||
Employees | |||||||||||||||||||||||
Certain employees based on performance | 346,059 | August 26, 2022 | $ | 28.66 | Annually over 4 years | ||||||||||||||||||
Certain employees based on performance | 58,323 | August 26, 2022 | $ | 28.66 | Annually over 3 years | ||||||||||||||||||
Certain employees based on performance | 58,323 | August 26, 2022 | $ | 27.92 | Annually over 3 years | ||||||||||||||||||
Certain employees based on performance | 815 | December 1, 2022 | $ | 30.70 | Annually over 4 years | ||||||||||||||||||
Certain employees based on hire | 13,067 | June 1, 2023 | $ | 28.70 | Annually over 4 years | ||||||||||||||||||
Non-Employee Directors | |||||||||||||||||||||||
Certain Directors | 42,400 | August 26, 2022 | $ | 28.66 | 12 months | ||||||||||||||||||
Fiscal Year Ended June 30, 2023 | |||||||||||
Shares | Weighted-Average Grant Date Fair Value | ||||||||||
Outstanding, beginning of year | 639,342 | $ | 32.04 | ||||||||
Granted during the period | 518,987 | 28.58 | |||||||||
Vested during the period | (224,062) | 30.56 | |||||||||
Cancelled, forfeited, or expired during the period | (44,357) | 31.29 | |||||||||
Outstanding, end of year | 889,910 | $ | 30.43 |
Fiscal Year Ended June 30, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(in thousands) | |||||||||||||||||
Matching contributions | $ | 3,270 | $ | 2,929 | $ | 1,262 | |||||||||||
Fiscal Year Ended June 30, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(in thousands) | |||||||||||||||||
Current: | |||||||||||||||||
Federal | $ | 25,034 | $ | 16,895 | $ | 9,132 | |||||||||||
State | 6,455 | 5,238 | 1,261 | ||||||||||||||
Foreign | 4,507 | 3,896 | 874 | ||||||||||||||
Total current | 35,996 | 26,029 | 11,267 | ||||||||||||||
Deferred: | |||||||||||||||||
Federal | (2,991) | 3,429 | 207 | ||||||||||||||
State | (541) | 129 | (1,297) | ||||||||||||||
Foreign | 1,294 | 338 | 1,969 | ||||||||||||||
Total deferred | (2,238) | 3,896 | 879 | ||||||||||||||
Provision for income taxes | $ | 33,758 | $ | 29,925 | $ | 12,146 |
Fiscal Year Ended June 30, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(in thousands) | |||||||||||||||||
U.S. statutory rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
U.S. Federal income tax at statutory rate | $ | 25,588 | $ | 24,911 | $ | 12,082 | |||||||||||
Increase (decrease) in income taxes due to: | |||||||||||||||||
State and local income taxes, net of Federal benefit | 4,559 | 4,265 | 996 | ||||||||||||||
Tax credits | (909) | (796) | (170) | ||||||||||||||
Valuation allowance | 1,087 | (200) | 3,472 | ||||||||||||||
Effect of varying statutory rates in foreign operations, net | 2,751 | 1,145 | 1,051 | ||||||||||||||
Stock compensation | 37 | (121) | 1,094 | ||||||||||||||
Disallowed interest | — | — | 86 | ||||||||||||||
Earnings from foreign subsidiaries | 957 | 928 | 124 | ||||||||||||||
Losses on dispositions | — | — | (2,897) | ||||||||||||||
Global intangible low taxed income tax | 1,551 | 630 | (45) | ||||||||||||||
Nontaxable income | (3,189) | (2,050) | (1,628) | ||||||||||||||
Notional interest deduction on net equity | (733) | (780) | (568) | ||||||||||||||
Other | 2,059 | 1,993 | (1,451) | ||||||||||||||
Provision for income taxes | $ | 33,758 | $ | 29,925 | $ | 12,146 |
June 30, | |||||||||||
2023 | 2022 | ||||||||||
(in thousands) | |||||||||||
Deferred tax assets derived from: | |||||||||||
Allowance for accounts receivable | $ | 5,811 | $ | 3,630 | |||||||
Inventories | 3,326 | 3,510 | |||||||||
Nondeductible accrued expenses | 7,561 | 7,859 | |||||||||
Net operating loss carryforwards | 596 | 705 | |||||||||
Tax credits | 8,430 | 6,410 | |||||||||
Deferred compensation | 7,173 | 6,548 | |||||||||
Stock compensation | 4,718 | 4,001 | |||||||||
Capital loss carryforwards | 7,348 | 7,831 | |||||||||
Timing of amortization deduction from intangible assets | 6,170 | 5,676 | |||||||||
Total deferred tax assets | 51,133 | 46,170 | |||||||||
Valuation allowance | (14,397) | (13,181) | |||||||||
Total deferred tax assets, net of allowance | 36,736 | 32,989 | |||||||||
Deferred tax liabilities derived from: | |||||||||||
Timing of depreciation and other deductions from building and equipment | (1,533) | (3,035) | |||||||||
Timing of amortization deduction from goodwill | (10,886) | (5,693) | |||||||||
Timing of amortization deduction from intangible assets | (10,369) | (11,737) | |||||||||
Total deferred tax liabilities | (22,788) | (20,465) | |||||||||
Net deferred tax assets | $ | 13,948 | $ | 12,524 |
Fiscal Year Ended June 30, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(in thousands) | |||||||||||||||||
Domestic | $ | 94,994 | $ | 93,586 | $ | 39,511 | |||||||||||
Foreign | 26,856 | 25,037 | 18,024 | ||||||||||||||
Worldwide pretax earnings | $ | 121,850 | $ | 118,623 | $ | 57,535 |
June 30, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(in thousands) | |||||||||||||||||
Beginning Balance | $ | 1,065 | $ | 1,121 | $ | 1,156 | |||||||||||
Additions based on tax positions related to the current year | 123 | 139 | 68 | ||||||||||||||
Reduction for tax positions of prior years | (16) | (195) | (103) | ||||||||||||||
Ending Balance | $ | 1,172 | $ | 1,065 | $ | 1,121 |
Name | Fiscal Year | Perquisites ($)(1) | Company Contributions to Nonqualified Deferred Compensation Plan ($) | Company Paid Disability Benefit ($)(2) | Company Contributions to Deferred Contribution Plans (401(k)) ($) | Other ($)(3) | Total ($) | |||||||||||||||||||||
Michael L. Baur | 2022 | 6,573 | 200,000 | (4) | 515,100 | 9,950 | 23,616 | 755,239 | ||||||||||||||||||||
| 2021 | 4,085 | 42,361 | (4) | 77,601 | 800 | 23,616 | 148,463 | ||||||||||||||||||||
2020 | 5,536 | 42,361 | (4) | 77,601 | 800 | 23,616 | 149,914 | |||||||||||||||||||||
John Eldh | 2022 | 2,500 | 22,500 | (4) | 29,943 | 9,742 | 5,512 | 70,197 | ||||||||||||||||||||
2021 | — | 22,500 | — | 800 | 67,805 | 91,105 | ||||||||||||||||||||||
Stephen T. Jones | 2022 | — | 34,223 | (4) | 11,632 | 5,900 | 8,136 | 59,890 | ||||||||||||||||||||
2021 | 1,500 | 9,000 | — | 800 | 76,000 | 87,300 | ||||||||||||||||||||||
Rachel Hayden | 2022 | — | 7,875 | (4) | 5,719 | 4,576 | 3,880 | 22,050 | ||||||||||||||||||||
2021 | — | — | — | — | 100,000 | 100,000 | ||||||||||||||||||||||
Matthew S. Dean | 2022 | 1,500 | 8,250 | (4) | 10,152 | 7,025 | 15,689 | 42,616 | ||||||||||||||||||||
2021 | 2,500 | 12,000 | 10,152 | 800 | 15,689 | 41,141 | ||||||||||||||||||||||
2020 | 1,000 | 11,250 | 10,152 | 800 | 15,689 | 38,891 |
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27
2022 Grantsrelevant terms of Plan Based Awards Tableeach lease and geographical economic factors. Certain operating lease agreements contain options to extend or terminate the lease. The lease term used is adjusted for these options when the Company is reasonably certain it will exercise the option. Operating lease expense is recognized on a straight-line basis over the lease term. Variable lease payments not based on a rate or index, such as costs for common area maintenance, are expensed as incurred. Further, the Company has elected the practical expedient to recognize all lease and non-lease components as a single lease component, where applicable.
Operating leases | Balance Sheet location | June 30, 2023 | June 30, 2022 | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
Operating lease right-of-use assets | Other non-current assets | $ | 12,539 | $ | 16,217 | |||||||||||||||||||||
Current operating lease liabilities | Accrued expenses and other current liabilities | 4,355 | 4,499 | |||||||||||||||||||||||
Long-term operating lease liabilities | Other long-term liabilities | 9,329 | 13,085 |
Fiscal year ended June 30, | ||||||||||||||||||||
2023 | 2022 | 2021 | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Operating lease cost | $ | 5,224 | $ | 5,239 | $ | 5,256 | ||||||||||||||
Variable lease cost | 1,460 | 1,208 | 1,068 | |||||||||||||||||
$ | 6,684 | $ | 6,447 | $ | 6,324 |
Fiscal year ended June 30, | ||||||||||||||||||||
2023 | 2022 | 2021 | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Cash paid for amounts in the measurement of lease liabilities | $ | 5,463 | $ | 5,182 | $ | 5,456 | ||||||||||||||
Right-of-use assets obtained in exchange for lease obligations | 897 | 2,313 | — |
June 30, 2023 | June 30, 2022 | |||||||||||||
Weighted-average remaining lease term | 3.62 | 4.37 | ||||||||||||
Weighted-average discount rate | 4.30 | % | 3.98 | % |
Operating leases | ||||||||
(in thousands) | ||||||||
2024 | $ | 4,836 | ||||||
2025 | 3,577 | |||||||
2026 | 3,038 | |||||||
2027 | 2,678 | |||||||
2028 | 632 | |||||||
Thereafter | — | |||||||
Total future payments | 14,761 | |||||||
Less: amounts representing interest | 1,077 | |||||||
Present value of lease payments | $ | 13,684 |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | Exercise or Base Price of Option Awards ($ / Sh) | Grant Date Fair Value of Stock and Option Awards ($)(1)(2) | ||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||
Michael L. Baur | 8/18/2021 | 656,250 | 1,312,500 | 2,625,000 | ||||||||||||||||||||||||||||||||||||
| 8/27/2021 | 31,207 | 36.05 | 1,125,012 | ||||||||||||||||||||||||||||||||||||
8/27/2021 | 7,802 | 15,604 | 31,208 | 15,604 | 41.26 | 643,821 | ||||||||||||||||||||||||||||||||||
8/27/2021 | 7,802 | 15,603 | 31,206 | 15,603 | 36.05 | 562,488 | ||||||||||||||||||||||||||||||||||
John Eldh | 2/3/2022 | 625,000 | 827,917 | 2,500,000 | ||||||||||||||||||||||||||||||||||||
8/27/2021 | 20,804 | 36.05 | 749,984 | |||||||||||||||||||||||||||||||||||||
8/27/2021 | 5,202 | 10,403 | 20,806 | 10,403 | 41.26 | 429,228 | ||||||||||||||||||||||||||||||||||
8/27/2021 | 5,201 | 10,402 | 20,804 | 10,402 | 36.05 | 374,992 | ||||||||||||||||||||||||||||||||||
Stephen T. Jones | 8/18/2021 | 200,000 | 400,000 | 800,000 | ||||||||||||||||||||||||||||||||||||
8/27/2021 | 11,096 | 36.05 | 400,011 | |||||||||||||||||||||||||||||||||||||
8/27/2021 | 2,774 | 5,548 | 11,096 | 5,548 | 41.26 | 228,910 | ||||||||||||||||||||||||||||||||||
8/27/2021 | 2,774 | 5,548 | 11,096 | 5,548 | 36.05 | 200,005 | ||||||||||||||||||||||||||||||||||
Rachel Hayden | 8/18/2021 | 105,000 | 210,000 | 420,000 | ||||||||||||||||||||||||||||||||||||
8/27/2021 | 7,948 | 36.05 | 286,525 | |||||||||||||||||||||||||||||||||||||
8/27/2021 | 1,214 | 2,428 | 4,856 | 2,428 | 41.26 | 100,179 | ||||||||||||||||||||||||||||||||||
8/27/2021 | 1,214 | 2,427 | 4,854 | 2,427 | 36.05 | 87,493 | ||||||||||||||||||||||||||||||||||
Matthew S. Dean | 8/18/2021 | 85,000 | 270,000 | 540,000 | ||||||||||||||||||||||||||||||||||||
8/27/2021 | 5,895 | 36.05 | 212,515 | |||||||||||||||||||||||||||||||||||||
8/27/2021 | 1,474 | 2,948 | 5,896 | 2,948 | 41.26 | 121,634 | ||||||||||||||||||||||||||||||||||
8/27/2021 | 1,474 | 2,947 | 5,894 | 2,947 | 36.05 | 106,239 |
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28
2022 Outstanding Equity Awards at Fiscal Year End Table
The following table summarizes outstanding equity awards held by each of the NEOs as of June 30, 2022:
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#)(1) | Option Exercise Price ($) | Option Expiration Date | Grant Date | Number of Shares or Units of Stock | Market Value of Shares or Units of Stock that Have Not Vested ($) | Equity Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) | Equity Payout Have Not | ||||||||||||||||||||||||||
Michael L. Baur | ||||||||||||||||||||||||||||||||||||
12/6/2013 | 115,356 | — | 42.82 | 12/6/2023 | ||||||||||||||||||||||||||||||||
12/5/2014 | 164,093 | — | 41.13 | 12/5/2024 | ||||||||||||||||||||||||||||||||
12/4/2015 | 125,000 | — | 38.19 | 12/4/2025 | ||||||||||||||||||||||||||||||||
12/2/2016 | 77,339 | — | 37.00 | 12/2/2026 | ||||||||||||||||||||||||||||||||
12/8/2017 | 53,079 | — | 34.35 | 12/8/2027 | ||||||||||||||||||||||||||||||||
11/15/2019 | 10,532 | 327,966 | — | — | ||||||||||||||||||||||||||||||||
11/19/2020 | 45,525 | 88,374 | 24.68 | 11/19/2030 | ||||||||||||||||||||||||||||||||
11/19/2020 | 33,750 | 1,050,975 | — | — | ||||||||||||||||||||||||||||||||
11/24/2020 | 40,467 | 78,554 | 27.14 | 11/24/2030 | ||||||||||||||||||||||||||||||||
8/27/2021 | 31,207 | 971,786 | 31,207 | 971,786 | ||||||||||||||||||||||||||||||||
John Eldh | ||||||||||||||||||||||||||||||||||||
11/15/2019 | 9,362 | 291,533 | — | — | ||||||||||||||||||||||||||||||||
12/2/2019 | 4,695 | 146,202 | — | — | ||||||||||||||||||||||||||||||||
11/19/2020 | 30,350 | 58,916 | 24.68 | 11/19/2030 | ||||||||||||||||||||||||||||||||
11/29/2020 | 22,501 | 700,681 | — | — | ||||||||||||||||||||||||||||||||
8/27/2021 | 20,804 | 647,837 | 20,805 | 647,868 | ||||||||||||||||||||||||||||||||
Stephen T. Jones | ||||||||||||||||||||||||||||||||||||
3/1/2021 | 18,139 | 564,848 | — | — | ||||||||||||||||||||||||||||||||
8/27/2021 | 11,096 | 345,529 | 11,096 | 345,529 | ||||||||||||||||||||||||||||||||
Rachel Hayden | 8/27/2021 | 4,854 | 151,154 | — | — | |||||||||||||||||||||||||||||||
9/1/2021 | 5,961 | 185,626 | — | — | ||||||||||||||||||||||||||||||||
8/27/2021 | — | — | 4,855 | 151,185 | ||||||||||||||||||||||||||||||||
Matthew S. Dean | ||||||||||||||||||||||||||||||||||||
2/9/2018 | 10,000 | — | 32.25 | �� | 2/9/2028 | |||||||||||||||||||||||||||||||
11/15/2019 | 1,990 | 61,969 | ||||||||||||||||||||||||||||||||||
11/19/2020 | 8,599 | 16,693 | 24.68 | 11/19/2030 | ||||||||||||||||||||||||||||||||
11/19/2020 | 6,375 | 198,518 | ||||||||||||||||||||||||||||||||||
11/24/2020 | 8,093 | 15,711 | 27.14 | 11/24/2030 | ||||||||||||||||||||||||||||||||
8/27/2021 | 5,895 | 183,570 | 5,895 | 183,570 |
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29
2022 Option Exercises and Stock Vested Table
The following table summarizes the exercise of options and the vesting of stock awards by each of our NEOsescrow account during the fiscal year ended June 30, 2022:
Name | Option Awards | Restricted Awards | ||||||||||||||
Number of Shares on (#) | Value ($) | Number Shares | Value on Vesting ($) | |||||||||||||
Michael L. Baur | 26,586 | 87,827 | 37,353 | 1,317,466 | ||||||||||||
John Eldh | — | — | 25,646 | 916,949 | ||||||||||||
Stephen T. Jones | — | — | 9,343 | 294,398 | ||||||||||||
Rachel Hayden | — | — | 1,987 | 78,228 | ||||||||||||
Matthew S. Dean | — | — | 6,218 | 220,353 |
2022. The amount available after the impact of foreign currency translation, as of June 30, 2023 and 2022, Nonqualified Deferred Compensation Tablefor future pre-acquisition contingency settlements or to be released to the sellers was $3.4 million and $4.1 million, respectively.
June 30, 2023 | June 30, 2022 | ||||||||||
(in thousands) | |||||||||||
Assets | |||||||||||
Prepaid expenses and other assets (current) | $ | 16 | $ | 15 | |||||||
Other assets (noncurrent) | $ | 4,150 | $ | 3,818 | |||||||
Liabilities | |||||||||||
Other current liabilities | $ | 16 | $ | 15 | |||||||
Other long-term liabilities | $ | 4,150 | $ | 3,818 |
Fiscal Year Ended June 30, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(in thousands) | |||||||||||||||||
Sales: | |||||||||||||||||
Specialty Technology Solutions | $ | 2,331,030 | $ | 2,082,321 | $ | 1,815,933 | |||||||||||
Modern Communications & Cloud | 1,456,691 | 1,447,614 | 1,334,873 | ||||||||||||||
$ | 3,787,721 | $ | 3,529,935 | $ | 3,150,806 | ||||||||||||
Depreciation and amortization: | |||||||||||||||||
Specialty Technology Solutions | $ | 10,838 | $ | 11,754 | $ | 13,193 | |||||||||||
Modern Communications & Cloud | 14,901 | 15,110 | 17,287 | ||||||||||||||
Corporate | 2,875 | 3,020 | 3,027 | ||||||||||||||
$ | 28,614 | $ | 29,884 | $ | 33,507 | ||||||||||||
Change in fair value of contingent consideration: | |||||||||||||||||
Specialty Technology Solutions | $ | — | $ | — | $ | — | |||||||||||
Modern Communications & Cloud | — | — | 516 | ||||||||||||||
$ | — | $ | — | $ | 516 | ||||||||||||
Operating income: | |||||||||||||||||
Specialty Technology Solutions | $ | 75,688 | $ | 66,686 | $ | 29,566 | |||||||||||
Modern Communications & Cloud | 61,658 | 55,511 | 43,551 | ||||||||||||||
Corporate(1) | (1,460) | (30) | (11,634) | ||||||||||||||
$ | 135,886 | $ | 122,167 | $ | 61,483 | ||||||||||||
Capital expenditures: | |||||||||||||||||
Specialty Technology Solutions | $ | (3,966) | $ | (1,667) | $ | (1,282) | |||||||||||
Modern Communications & Cloud | (6,013) | (5,182) | (1,067) | ||||||||||||||
Corporate | — | — | (14) | ||||||||||||||
$ | (9,979) | $ | (6,849) | $ | (2,363) | ||||||||||||
Sales by Geography Category: | |||||||||||||||||
United States | $ | 3,443,561 | $ | 3,178,829 | $ | 2,854,179 | |||||||||||
International | 355,647 | 356,241 | 310,075 | ||||||||||||||
Less intercompany sales | (11,487) | (5,135) | (13,448) | ||||||||||||||
$ | 3,787,721 | $ | 3,529,935 | $ | 3,150,806 | ||||||||||||
June 30, 2023 | June 30, 2022 | ||||||||||
(in thousands) | |||||||||||
Assets: | |||||||||||
Specialty Technology Solutions | $ | 1,104,103 | $ | 1,030,538 | |||||||
Modern Communications & Cloud | 964,066 | 906,890 | |||||||||
Corporate | — | — | |||||||||
$ | 2,068,169 | $ | 1,937,428 | ||||||||
Property and equipment, net by Geography Category: | |||||||||||
United States | $ | 27,323 | $ | 32,715 | |||||||
International | 10,056 | 4,762 | |||||||||
$ | 37,379 | $ | 37,477 |
Fiscal Years Ended June 30, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(in thousands) | |||||||||||||||||
Currency translation adjustment | $ | (93,136) | $ | (105,899) | $ | (93,561) | |||||||||||
Unrealized loss on fair value of interest rate swap, net of tax | 3,515 | 1,261 | (4,572) | ||||||||||||||
Accumulated other comprehensive loss | $ | (89,621) | $ | (104,638) | $ | (98,133) |
Fiscal years ended June 30, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(in thousands) | |||||||||||||||||
Tax expense | $ | 737 | $ | 1,741 | $ | 2,084 | |||||||||||
Name | Executive Fiscal Year | Registrant Fiscal Year | Aggregate in Last | Aggregate Withdrawals/ Distributions ($)(4) | Aggregate Balance at Last Fiscal Year-End ($) | |||||||||||||||
Michael L. Baur | 400,000 | 200,000 | (1,531,338 | ) | — | 11,228,060 | ||||||||||||||
John Eldh | 75,000 | 22,500 | (37,566 | ) | — | 165,209 | ||||||||||||||
Stephen T. Jones | 114,075 | 34,223 | (30,444 | ) | — | 158,384 | ||||||||||||||
Rachel Hayden | 26,250 | 7,875 | (3,692 | ) | — | 30,433 | ||||||||||||||
Matthew S. Dean | 27,500 | 8,250 | (21,606 | ) | — | 148,568 |
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Our Nonqualified Deferred Compensation Plan permits our NEOs2021.
30
Deferred amounts are credited to each participant’s account, which are invested in one or more investment alternatives chosen by each participant from a range of mutual fund offerings and other investments available under the plan. Each participant’s account is adjusted to reflect the investment performance of the selected investments. Benefits under the plan are payable in cash and generally will be paid in either a lump sum or in annual installments over a certain term upon retirement, death or other termination of employment, or upon a change in control of the Company, as elected in advance by the participant. A participant may also elect to receive some or all of the deferred amounts and related earnings pursuant to an in-service distribution, subject to a minimum five-year deferral.
Employment Arrangements and Potential Payments Upon Certain Events
We have entered into an employment agreement with Mr. Baur that was effective July 1, 2017 and employment letters with Mr. Eldh, Mr. Jones, and Ms. Hayden effective October 1, 2019, December 14, 2020, and June 7, 2021, respectively. Mr. Baur, Mr. Eldh, Mr. Jones, and Ms. Hayden also participate in the Severance Plan. Notwithstanding these employment arrangements, each of Mr. Baur, Mr. Eldh, Mr. Jones, and Ms. Hayden has the right to voluntarily terminate his or her employment at any time. The employment arrangements set forth the general terms and conditions of Mr. Baur’s, Mr. Eldh’s, Mr. Jones’, and Ms. Hayden’s employment and provide for certain severance benefits upon the occurrence of certain events.
We had an employment letter with Mr. Dean effective January 11, 2018 and Mr. Dean participated in the Severance Plan prior to his departure from the Company in July 2022. As a result of his departure, Mr. Dean will receive benefits under the Severance Plan as determined under the provisions therein.
The material elements of compensation of each NEO as contained in their employment arrangements are described in the “Compensation Discussion and Analysis” section herein. The following sets forth in tabular format the incremental compensation that would be payable to such NEO in the event of his termination of employment under various scenarios, which we refer to as termination events. In accordance with SEC rules, the following discussion assumes:
That the termination event in question occurred on June 30, 2022, the last day of fiscal 2022; and
With respect to calculations based on our stock price, the reported closing price of our common stock on June 30, 2022, $31.14, was used.
The tables contained in this section do not include payments made to a NEO with respect to contracts, agreements, plans or arrangements to the extent they do not discriminate in scope, terms or operation, in favor of our executive officers and that are available generally to all salaried employees, such as our 401(k) plan. The actual amounts that would be paid upon a termination event can only be determined at the time of such executive officer’s termination. Due to the number of factors that affect the nature and amount of any compensation or benefits provided upon the termination events, any actual amounts paid or distributed may be higher or lower than reported below. Factors that could affect these amounts include the timing during the year of any such event and our stock price at such time.
Mr. Baur
General
Pursuant to the terms of Mr. Baur’s employment agreement, he was entitled to receive an annual base salary of $875,000 in fiscal 2022. Under his agreement, Mr. Baur is eligible to receive annual incentive cash and equity awards under our equity plans as described in the “Compensation Discussion and Analysis” section herein. Subject to the provisions of his employment agreement, Mr. Baur is obligated to comply with certain provisions relating to non-competition (for two years post termination), confidentiality and non-solicitation of customers and employees (for two years post termination) if his employment is terminated.
31
Benefits upon the Occurrence of Certain Termination Events
In addition to the amounts listed below, Mr. Baur is entitled to all accrued compensation, unreimbursed expenses and other benefits through the date of termination in the event of his termination.
Before for Good ($) | After Termination w/o Cause or for Good ($) | Termination ($) | Termination Due to Retirement ($) | Termination Due to Disability ($) | Voluntary Termination ($) | |||||||||||||||||||
Severance | 5,701,464 | 6,841,757 | — | — | — | — | ||||||||||||||||||
Pro Rata Variable Compensation(1) | 2,123,625 | 2,123,625 | 2,123,625 | 2,123,625 | 2,123,625 | 2,123,625 | ||||||||||||||||||
Equity Acceleration(2) | — | 2,350,727 | 2,350,727 | 2,350,727 | 2,350,727 | — | ||||||||||||||||||
Performance-Based Equity Acceleration(3) | — | 971,786 | 971,786 | 971,786 | 971,786 | — | ||||||||||||||||||
Medical Coverage(4) | 349,320 | 349,320 | 349,320 | 349,320 | 349,320 | — | ||||||||||||||||||
Deferred Compensation | — | — | — | — | — | — | ||||||||||||||||||
Disability(5) | — | — | — | — | 437,500 | — | ||||||||||||||||||
TOTAL(6) | 8,174,409 | 12,637,215 | 5,795,458 | 5,795,458 | 6,232,958 | 2,123,625 |
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Mr. Eldh
General
Mr. Eldh serves as our President and Chief Revenue Officer. At June 30, 2022, Mr. Eldh received an annual base salary of $625,000. Mr. Eldh is eligible to receive both annual incentive cash compensation and equity awards under the 2021 Plan. Subject to the provisions of his employment arrangements, Mr. Eldh is obligated to comply with certain provisions relating to non-competition (for 18 months post termination), confidentiality and non-solicitation of customers and employees (for 18 months post termination) if his employment is terminated.
Benefits upon the Occurrence of Certain Termination Events
In addition to the amounts listed below, Mr. Eldh is entitled to all accrued compensation, unreimbursed expenses and other benefits through the date of termination in the event of his termination.
32
Before ($) | After ($) | Termination ($) | Termination Due to Retirement ($) | Termination Disability ($) | Voluntary Termination ($) | |||||||||||||||||||
Severance | 2,643,297 | 3,524,396 | — | — | — | — | ||||||||||||||||||
Pro Rata Variable Compensation(1) | 1,339,569 | 1,339,569 | 1,339,569 | 1,339,569 | 1,339,569 | 1,339,569 | ||||||||||||||||||
Equity Acceleration(2) | — | 1,786,253 | 1,786,253 | 1,786,253 | 1,786,253 | — | ||||||||||||||||||
Performance-Based Equity Acceleration(3) | — | 647,868 | 647,868 | 647,868 | 647,868 | — | ||||||||||||||||||
Medical Coverage(4) | 20,724 | 20,724 | 20,724 | 20,724 | 20,724 | — | ||||||||||||||||||
Deferred Compensation | — | — | — | — | — | — | ||||||||||||||||||
Disability(5) | — | — | — | — | 274,038 | — | ||||||||||||||||||
TOTAL(6) | 4,003,590 | 7,318,809 | 3,794,413 | 3,794,413 | 4,068,452 | 1,339,569 |
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Mr. Jones
General
Mr. Jones serves as our Senior Executive Vice President and Chief Financial Officer. At June 30, 2022, Mr. Jones received an annual base salary of $400,000. Mr. Jones is eligible to receive both annual incentive cash compensation and equity awards under the 2021 Plan. Subject to the provisions of his employment arrangements, Mr. Jones is obligated to comply with certain provisions relating to non-competition (for two years post termination), confidentiality and non-solicitation of customers and employees (for two years post termination) if his employment is terminated.
Benefits upon the Occurrence of Certain Termination Events
In addition to the amounts listed below, Mr. Jones is entitled to all accrued compensation, unreimbursed expenses and other benefits through the date of termination in the event of his termination.
33
Before Change in Control Termination w/o Cause or for Good Reason ($) | After Change in Control Termination w/o Cause or for Good Reason ($) | Termination Due to Death ($) | Termination Due to Retirement ($) | Termination Due to Disability ($) | Voluntary Termination ($) | |||||||||||||||||||
Severance | 1,219,622 | 1,626,162 | — | — | — | — | ||||||||||||||||||
Pro Rata Variable Compensation(1) | 647,200 | 647,200 | 647,200 | 647,200 | 647,200 | 647,200 | ||||||||||||||||||
Equity Acceleration(2) | — | 910,378 | 910,378 | 910,378 | 910,378 | — | ||||||||||||||||||
Performance-Based Equity Acceleration(3) | — | 345,529 | 345,529 | 345,529 | 345,529 | — | ||||||||||||||||||
Medical Coverage(4) | 27,632 | 27,632 | 27,632 | 27,632 | 27,632 | — | ||||||||||||||||||
Deferred Compensation | — | — | — | — | — | — | ||||||||||||||||||
Disability(5) | — | — | — | — | 200,000 | — | ||||||||||||||||||
TOTAL(6) | 1,894,454 | 3,556,901 | 1,930,739 | 1,930,739 | 2,130,739 | 647,200 |
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Ms. Hayden
General
Ms. Hayden serves as our Senior Executive Vice President and Chief Information Officer. At June 30, 2022, Ms. Hayden’s annual base salary was set at $350,000. Ms. Hayden is eligible to receive both annual incentive cash compensation and equity awards under the 2021 Plan. Subject to the provisions of her employment arrangements, Ms. Hayden is obligated to comply with certain provisions relating to non-competition (for two years post termination), confidentiality and non-solicitation of customers and employees (for two years post termination) if her employment is terminated.
Benefits upon the Occurrence of Certain Termination Events
In addition to the amounts listed below, Ms. Hayden is entitled to all accrued compensation, unreimbursed expenses and other benefits through the date of termination in the event of her termination.
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Before Change in Control Termination w/o Cause or for Good Reason ($) | After Change in Control Termination w/o Cause or for Good Reason ($) | Termination Due to Death ($) | Termination Due to Retirement ($) | Termination Due to Disability ($) | Voluntary Termination ($) | |||||||||||||||||||
Severance | 552,809 | 737,079 | — | — | — | — | ||||||||||||||||||
Pro Rata Variable Compensation(1) | 339,780 | 339,780 | 339,780 | 339,780 | 339,780 | 339,780 | ||||||||||||||||||
Equity Acceleration(2) | — | 336,779 | 336,779 | 336,779 | 336,779 | — | ||||||||||||||||||
Performance-Based Equity Acceleration(3) | — | 151,185 | 151,185 | 151,185 | 151,185 | — | ||||||||||||||||||
Medical Coverage(4) | 40,777 | 40,777 | 40,777 | 40,777 | 40,777 | — | ||||||||||||||||||
Deferred Compensation | — | — | — | — | — | — | ||||||||||||||||||
Disability(5) | — | — | — | — | 175,000 | — | ||||||||||||||||||
TOTAL(6) | 933,367 | 1,605,600 | 868,521 | 868,521 | 1,043,521 | 339,780 |
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Pay Ratio Disclosure
Pursuant to Item 402(u) of Regulation S-K promulgated under the Exchange Act, we are required to disclose the median annual total compensation of all the Company’s employees, the total compensation of our CEO and the ratio of those two amounts. The pay ratio set forth below is a reasonable estimate and has been calculated in a manner consistent with SEC rules and based on the methodology described below. The SEC rules for identifying median employees allow companies to use a variety of methodologies. As a result, the pay ratio reported by others may not be comparable to our reported pay ratio. For the year ended June 30, 2022:
the total compensation for our median employee was $59,309.71;
the annual total compensation of Mr. Baur was $6,085,184; and
based on the information above, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees is 102.6 to 1.
During the year ended June 30, 2022, there were no changes in our employee population or employee compensation arrangements that we reasonably believe would result in a significant change to our pay ratio disclosure. Therefore, to calculate the pay ratio for the year ended June 30, 2022, we used the same median employee identified as of June 30, 2021. The methodology that we used and the material assumptions, adjustments and estimates that we used to identify the median and determine annual total compensation were as follows:
Employee population. As of June 30, 2021, the date we selected to identify our median employee, our employee population consisted of approximately 2,184 individuals, with 765 employees representing 35% of our total employee population located outside the United States and 1,419 employees representing 65% of our total employee population located in the United States.
35
Identification of Median. To identify the median of the annual total compensation of all of our employees, we reviewed the total cash earnings of all employees for the twelve-month period ending on June 30, 2021 (the “reported compensation”). In making this calculation, we annualized the reported compensation of all of our employees who were hired during the period. While we did not make any cost of living adjustments to the reported compensation in identifying the median employee, we did convert the reported compensation of our non-United States employees to United States dollars using the applicable conversion rate as of June 30, 2021. Using this methodology, we determined that our median employee was a full-time, salaried employee located in the United States.
COMPENSATION OF DIRECTORS
2022 Director Compensation Table
The following table provides information regarding the compensation paid to each of our non-employee directors for the fiscal year ended June 30, 2022.
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1)(4) | Total ($) | |||||||||
Peter C. Browning | 165,833 | 133,385 | 299,218 | |||||||||
Frank E. Emory, Jr. | 85,000 | 133,385 | 218,385 | |||||||||
Michael J. Grainger | 85,833 | 133,385 | 219,218 | |||||||||
Charles A. Mathis(2) | 77,917 | 133,385 | 211,302 | |||||||||
Dorothy F. Ramoneda | 85,000 | 133,385 | 218,385 | |||||||||
John P. Reilly(3) | 43,333 | 133,385 | 176,718 | |||||||||
Jeffrey R. Rodek | 85,000 | 133,385 | 218,385 | |||||||||
Elizabeth O. Temple | 98,333 | 133,385 | 231,718 | |||||||||
Charles R. Whitchurch | 110,000 | 133,385 | 243,385 |
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Cash Retainers for Fiscal 2022
Directors who are not our employees are paid an annual retainer of $85,000. An additional annual retainer of $70,000 is paid, as applicable, to a non-executive Chairman or Lead Independent Director of the Board. An additional annual retainer of $25,000 is paid to the chair of the Audit Committee, and an additional annual retainer of $15,000 is paid to the chair of the Compensation Committee. An additional annual retainer of $5,000was paid to the chairs of the Nominating Committee and Governance Committee serving at such time. Annual service for this purpose relates to the approximate 12-month periods between annual meetings of our shareholders. All directors are reimbursed for expenses incurred in connection with the performance of their services as directors as well as the cost of any director education. As of January 1, 2019, directors may elect to receive any portion of their cash fees in shares. In August 2021, given the combination of the Nominating Committee and the Governance Committee, the director compensation plan was revised to provide for an annual retainer of $10,000 for the chair of the Nominating and Corporate Governance Committee.
Equity Retainers for Fiscal 2022
Our non-employee directors receive an annual equity retainer under the 2021 Plan. In addition, non-employee directors also may be eligible to receive other awards under our 2021 Plan. As of January 1, 2019, each non-employee director can elect to receive the award in restricted stock awards or restricted stock units and can elect to defer his or her equity award under the deferred compensation plan.
36
The number of shares subject to a director’s annual equity award was determined by dividing $130,000by the equity award value per share on the grant date. For fiscal 2023, the equity award value is increased from $130,000 to $150,000. The equity award value means the closing price of the common stock on the grant date. The date of grant of the annual equity awards for our non-employee directors takes place at the same time as the annual equity awards for our employees.
A person who first becomes a non-employee director on a date other than a regularly scheduled annual meeting of shareholders will receive a restricted stock award for a pro-rated number of shares of common stock. Restricted stock may not be transferred or sold until it has vested.
Restricted stock granted to directors under the 2021 Plan will vest in full on the day that is twelve months after the date of grant, or if earlier, the next annual shareholders’ meeting, provided the director is still in service as a director of the Company on the vesting date and has been in service since the Grant Date; or upon the earlier occurrence of (i) the director’s termination of service as a director by reason of death, disability or retirement or (ii) a change in control of the Company. If a director terminates service for any other reason, he or she will forfeit all of his or her right, title and interest in and to the unvested restricted stock as of the date of termination, unless the Board or the Compensation Committee determines otherwise.
Stock Ownership and Retention Policy
Under the equity ownership policy, directors are expected to hold five times their annual Board cash retainer in Company securities. The policy also incorporates a retention requirement by requiring such persons to retain 50% of the net shares resulting from the vesting of certain awards until the required ownership under the policy is met. As of the end of the 2022 fiscal year, all directors were in compliance with this policy.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Annual Report on Form 10-K for the year ended June 30, 2022 with management. Based upon such review, the related discussions and such other matters deemed relevant and appropriate to the Compensation Committee, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in our Annual Report on Form 10-K for the year ended June 30, 2022 and in the Proxy Statement for the 2023 Annual Meeting of Shareholders.
Submitted by the Compensation Committee:
Elizabeth O. Temple, Chair
Peter C. Browning
Frank E. Emory, Jr.
Michael J. Grainger
Charles A. Mathis
Dorothy F. Ramoneda
Jeffrey R. Rodek
Charles R. Whitchurch
The Compensation Committee report does not constitute soliciting material and shall not be deemed to be filed or incorporated by reference into any other filing under the Securities Act of 1933, or the Securities Exchange Act of 1934, except to the extent that we specifically incorporate the Compensation Committee report by reference therein.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 2022, directors Browning, Emory, Grainger, Mathis, Ramoneda, Rodek, Templethe Company received a second payment of $3.1 million for its businesses in Latin America, outside of Brazil, related to working capital adjustments and Whitchurch servedin accordance with the Share Purchase Agreement between Intcomex and the Company. The receipt of payment resulted in a gain on disposal group of $0.1 million.
Fiscal Year Ended June 30, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(in thousands) | |||||||||||||||||
Net sales | $ | — | $ | — | $ | 213,373 | |||||||||||
Cost of goods sold | — | — | 198,512 | ||||||||||||||
Gross profit | — | — | 14,861 | ||||||||||||||
Selling, general and administrative expenses | — | — | 17,291 | ||||||||||||||
Operating loss | — | — | (2,430) | ||||||||||||||
Interest expense, net | — | — | 394 | ||||||||||||||
(Gain) loss on held for sale classification | (1,717) | (100) | 34,597 | ||||||||||||||
Other expense, net | — | — | 310 | ||||||||||||||
Income (loss) from discontinued operations before taxes | 1,717 | 100 | (37,731) | ||||||||||||||
Income tax (benefit) expense | — | — | (3,137) | ||||||||||||||
Net income (loss) from discontinued operations | $ | 1,717 | $ | 100 | $ | (34,594) |
Fiscal Year Ended June 30, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(in thousands) | |||||||||||||||||
Loss on held for sale classification | $ | — | $ | — | $ | 34,597 | |||||||||||
Capital expenditures | — | — | (58) |
Fiscal year ended June 30, 2021 | ||||||||||||||
(in thousands) | ||||||||||||||
Severance and benefit costs | $ | 8,824 | ||||||||||||
Other | 434 | |||||||||||||
Total restructuring and other charges | $ | 9,258 |
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Equity Compensation Plan Information
The following table provides informationany disclosure controls and procedures also is based in part upon certain assumptions about the common stocklikelihood of future events, and there can be no assurance that may be issued upon the exercise of options, warrants and rightsany design will succeed in achieving its stated goals under all potential future conditions. Our disclosure controls and procedures are designed to provide reasonable assurance that the controls and procedures will meet their objectives.
Plan Category | (a) Number of Securities to be Issued Upon | (b) Weighted and Rights(3) | (c) Number of Securities | |||||||||
Equity Compensation Plans Approved by Shareholders | ||||||||||||
2021 Omnibus Incentive Compensation Plan | 6,578 | (1) | — | 1,602,786 | ||||||||
2013 Long-Term Incentive Plan | 1,755,777 | (2) | $ | 20.62 | — | |||||||
Equity Compensation Plans Not Approved by Shareholders | — | — | — | |||||||||
TOTAL: | 1,762,355 | $ | 20.54 | 1,602,786 |
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Stock Ownership Information
Principal Shareholders2023, were effective in providing reasonable assurance that the objectives of the disclosure controls and Beneficial Ownership
The following table sets forth certain information regardingprocedures are met.
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Name | Number of Shares Beneficially Owned | Percentage(1) | ||||||
BlackRock, Inc.(2) | 4,898,510 | 19.41% | ||||||
The Vanguard Group, Inc.(3) | 2,888,385 | 11.44% | ||||||
Victory Capital Management Inc. (4) | 2,129,549 | 8.44% | ||||||
Dimensional Fund Advisors LP(5) | 1,845,416 | 7.31% | ||||||
Pzena Investment Management, LLC(6) | 1,592,462 | 6.31% | ||||||
Michael L. Baur(7) | 736,380 | 2.92% | ||||||
Peter C. Browning | 34,990 | * | ||||||
Matthew S. Dean(8) | 24,379 | * | ||||||
John Eldh(9) | 111,603 | * | ||||||
Frank E. Emory, Jr. | 15,600 | * | ||||||
Michael J. Grainger | 39,200 | * | ||||||
Rachel Hayden(10) | 2,208 | * | ||||||
Stephen T. Jones(11) | 8,220 | * | ||||||
Charles A. Mathis | 10,200 | * | ||||||
Dorothy F. Ramoneda | 18,700 | * | ||||||
Jeffrey R. Rodek | 18,400 | * | ||||||
Elizabeth O. Temple | 24,300 | * | ||||||
Charles R. Whitchurch | 22,800 | * | ||||||
All directors and executive officers as a group | 1,042,601 | 4.13% |
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and Director Independence.
We are not aware of any related-party transaction since the beginning of fiscal 2022information required to be reported underincluded by Item 13 of Form 10-K will be included in our policy or applicable SEC rules for whichPart III Filing and such information is incorporated by reference herein.
There are no family relationships among the executive officers and directors, and there are no arrangements or understandings between any independent director or any other person pursuant to which that independent director was selected asFinancial Statement Schedules.
Director Independence
In accordance with the listing standards of The NASDAQ Stock Market (“NASDAQ”) and our Corporate Governance Guidelines (the “Guidelines”), our Board consists of a majority of independent directors. The Board has determined that all memberslist of the Board, other than Mr. Baur, meet the requirements for being “independent” as defined in the U.S. Securities and Exchange Commission (“SEC”) rules and regulations and NASDAQ listing standards.
The Board maintains three committees as follows: (1) an Audit Committee, (2) a Compensation Committee, and (3) a Nominating and Corporate Governance Committee. Each committee of the Board is comprised only of independent directors.
In addition, under our Corporate Governance Guidelines, executive officers are prohibited from serving as a director of another company that concurrently employs a director of the Company.
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Fees
As reflected in the table below, we incurred fees in fiscal 2022 and 2021 for services performed by Grant Thornton related to such periods.
Year Ended June 30, 2022 | Year Ended June 30, 2021 | |||||||
Audit Fees | $ | 1,670,906 | $ | 1,722,195 | ||||
Tax Fees | 458,500 | 182,690 | ||||||
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Total Fees | $ | 2,129,406 | $ | 1,904,885 | ||||
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In the above table, in accordance with applicable SEC rules:
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40
“Tax Fees” are fees for professional services related to foreign tax compliance, tax advice and tax planning.
Audit Committee’s Pre-Approval Policies and Procedures
It is the policy of the Audit Committee to pre-approve all audit and permitted non-audit services proposed to be performed by our independent auditor. All audit and permitted non-audit services performed in fiscal 2022 were pre-approved by the Audit Committee. The process for such pre-approval is typically as follows: Audit Committee pre-approval is sought at one of the Audit Committee’s regularly scheduled meetings following the presentation of information at such meeting detailing the particular services proposed to be performed. The authority to pre-approve non-audit services may be delegated by the Audit Committee, pursuant to guidelines approved by the Audit Committee, to one or more members of the Audit Committee. None of the services described above were approved by the Audit Committee pursuant to the exception provided by the Exchange Act rules.
The Audit Committee has reviewed the non-audit services provided by Grant Thornton and has determined that the provision of such services is compatible with maintaining Grant Thornton’s independence for the period of time during which it has served as our independent auditor.
PART IV
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(a)(1) and (a)(2): No financial statements or schedules are filed withincluded in this reportAnnual Report on Form 10-K, see "Index to Financial Statements" included herein.
Financial Statement Schedules. See Schedule II – "Valuation and Qualifying Accounts," which appears below.
41
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10.55+ | Amendment No. 11 to Cisco Nonexclusive Value Added Distributor Agreement | 10-K | 10.44 | 8/22/2019 | ||||||||
10.56 | Amendment No. 12 to Cisco Nonexclusive Value Added Distributor Agreement | 10-K | 10.45 | 8/22/2019 | ||||||||
10.57 | Amendment No. 13 to Cisco Nonexclusive Value Added Distributor Agreement | 10-K | 10.46 | 8/22/2019 | ||||||||
10.58 | Amendment No. 14 to Cisco Nonexclusive Value Added Distributor Agreement | 10-K | 10.47 | 8/22/2019 | ||||||||
10.59 | Amendment No. 16 to Cisco Nonexclusive Value Added Distributor Agreement | 10-Q | 10.1 | 5/10/2021 |
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Our SEC file number for documents filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended, is 000-26926.
46
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
October 26, 2022
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Date: | August 22, 2023 | By: | /s/ MICHAEL L. | ||||||||
Michael L. Baur | |||||||||||
Chairman and Chief Executive Officer (Principal Executive Officer) |
Signature | Title | Date | ||||||||||||
/s/ MICHAEL L. BAUR | Chairman and Chief Executive Officer | August 22, 2023 | ||||||||||||
Michael L. Baur | (Principal Executive Officer) | |||||||||||||
/s/ STEVE JONES | Senior Executive Vice President and Chief Financial Officer | August 22, 2023 | ||||||||||||
Steve Jones | (Principal Financial Officer) | |||||||||||||
/s/ BRANDY FORD | Senior Vice President and Chief Accounting Officer | August 22, 2023 | ||||||||||||
Brandy Ford | (Principal Accounting Officer) | |||||||||||||
/s/ PETER C. BROWNING | Lead Independent Director | August 22, 2023 | ||||||||||||
Peter C. Browning | ||||||||||||||
/s/ FRANK E. EMORY, JR. | Director | August 22, 2023 | ||||||||||||
Frank E. Emory, Jr. | ||||||||||||||
/s/ CHARLES A. MATHIS | Director | August 22, 2023 | ||||||||||||
Charles A. Mathis | ||||||||||||||
/s/ DOROTHY F. RAMONEDA | Director | August 22, 2023 | ||||||||||||
Dorothy F. Ramoneda | ||||||||||||||
/s/ JEFFREY R. RODEK | Director | August 22, 2023 | ||||||||||||
Jeffrey R. Rodek | ||||||||||||||
/s/ ELIZABETH O. TEMPLE | Director | August 22, 2023 | ||||||||||||
Elizabeth O. Temple | ||||||||||||||
/s/ CHARLES R. WHITCHURCH | Director | August 22, 2023 | ||||||||||||
Charles R. Whitchurch | ||||||||||||||
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Exhibit Number | Description | Filed herewith | Form | Exhibit | Filing Date | |||||||||||||||||||||||||||||||||
2.1 | 8-K | 10.1 | 8/15/2014 | |||||||||||||||||||||||||||||||||||
2.2 | 10-Q | 2.1 | 2/3/2015 | |||||||||||||||||||||||||||||||||||
2.3 | + | 8-K | 2.1 | 11/13/2020 | ||||||||||||||||||||||||||||||||||
3.1 | 8-K | 3.1 | 1/27/2022 | |||||||||||||||||||||||||||||||||||
3.2 | 8-K | 3.2 | 1/27/2022 | |||||||||||||||||||||||||||||||||||
4.1 | Form of Common Stock Certificate | SB-2 | 4.1 | 2/7/1994 | ||||||||||||||||||||||||||||||||||
4.2 | 10-K | 4.2 | 8/22/2019 | |||||||||||||||||||||||||||||||||||
Executive Compensation Plans and Arrangements | ||||||||||||||||||||||||||||||||||||||
10.1 | 10-Q | 10.3 | 5/10/2021 | |||||||||||||||||||||||||||||||||||
10.2 | S-8 | 99 | 12/5/2013 | |||||||||||||||||||||||||||||||||||
10.3 | X | |||||||||||||||||||||||||||||||||||||
10.4 | S-8 | 99 | 12/5/2013 | |||||||||||||||||||||||||||||||||||
10.5 | 10-Q | 10.2 | 5/6/2011 | |||||||||||||||||||||||||||||||||||
10.6 | 8-K | 10.3 | 6/21/2017 | |||||||||||||||||||||||||||||||||||
10.7 | X | |||||||||||||||||||||||||||||||||||||
10.8 | 10-Q | 10.1 | 2/6/2014 | |||||||||||||||||||||||||||||||||||
10.9 | 10-Q | 10.2 | 2/6/2014 | |||||||||||||||||||||||||||||||||||
10.10 | 10-Q | 10.3 | 2/6/2014 | |||||||||||||||||||||||||||||||||||
10.11 | 10-Q | 10.4 | 2/6/2014 | |||||||||||||||||||||||||||||||||||
10.12 | 10-K | 10.33 | 8/28/2014 | |||||||||||||||||||||||||||||||||||
10.13 | 10-K | 10.34 | 8/28/2014 | |||||||||||||||||||||||||||||||||||
10.14 | 8-K | 10.1 | 12/8/2017 | |||||||||||||||||||||||||||||||||||
10.15 | 8-K | 10.2 | 12/8/2017 |
Exhibit Number | Description | Filed herewith | Form | Exhibit | Filing Date | |||||||||||||||||||||||||||||||||
10.16 | 8-K | 10.3 | 12/8/2017 | |||||||||||||||||||||||||||||||||||
10.17 | 8-K | 10.4 | 12/8/2017 | |||||||||||||||||||||||||||||||||||
10.18 | 8-K | 10.1 | 6/21/2017 | |||||||||||||||||||||||||||||||||||
10.19 | 10-K | 10.26 | 8/24/2021 | |||||||||||||||||||||||||||||||||||
10.20 | 10-K | 10.27 | 8/24/2021 | |||||||||||||||||||||||||||||||||||
10.21 | 10-Q | 10.1 | 2/2/2021 | |||||||||||||||||||||||||||||||||||
10.22 | 10-K | 10.29 | 8/24/2021 | |||||||||||||||||||||||||||||||||||
10.23 | 10-K | 10.28 | 8/23/2022 | |||||||||||||||||||||||||||||||||||
10.24 | 8-K | 10.1 | 11/30/2018 | |||||||||||||||||||||||||||||||||||
10.25 | 8-K | 10.2 | 11/30/2018 | |||||||||||||||||||||||||||||||||||
10.26 | 8-K | 10.3 | 11/30/2018 | |||||||||||||||||||||||||||||||||||
10.27 | 8-K | 10.4 | 11/30/2018 | |||||||||||||||||||||||||||||||||||
10.28 | 8-K | 10.5 | 11/30/2018 | |||||||||||||||||||||||||||||||||||
10.29 | 8-K | 10.1 | 1/30/2020 | |||||||||||||||||||||||||||||||||||
10.30 | 10-K/A | 10.37 | 10/26/2021 | |||||||||||||||||||||||||||||||||||
10.31 | 10-K | 10.38 | 8/24/2021 | |||||||||||||||||||||||||||||||||||
10.32 | 8-K | 10.2 | 1/27/2022 | |||||||||||||||||||||||||||||||||||
10.33 | 8-K | 10.3 | 1/27/2022 | |||||||||||||||||||||||||||||||||||
10.34 | 8-K | 10.4 | 1/27/2022 | |||||||||||||||||||||||||||||||||||
10.35 | 8-K | 10.5 | 1/27/2022 | |||||||||||||||||||||||||||||||||||
10.36 | 8-K | 10.6 | 1/27/2022 | |||||||||||||||||||||||||||||||||||
10.37 | 8-K | 10.7 | 1/27/2022 |
Exhibit Number | Description | Filed herewith | Form | Exhibit | Filing Date | |||||||||||||||||||||||||||||||||
10.38 | 8-K | 10.8 | 1/27/2022 | |||||||||||||||||||||||||||||||||||
10.39 | 8-K | 10.9 | 1/27/2022 | |||||||||||||||||||||||||||||||||||
Bank Agreements | ||||||||||||||||||||||||||||||||||||||
10.40 | 8-K | 10.1 | 9/29/2022 | |||||||||||||||||||||||||||||||||||
Other Agreements | ||||||||||||||||||||||||||||||||||||||
10.41 | + | 10-K | 10.40 | 8/24/2021 | ||||||||||||||||||||||||||||||||||
10.42 | + | 10-K | 10.41 | 8/24/2021 | ||||||||||||||||||||||||||||||||||
10.43 | 10-Q | 10.1 | 5/9/2019 | |||||||||||||||||||||||||||||||||||
10.44 | + | 10-K | 10.38 | 8/22/2019 | ||||||||||||||||||||||||||||||||||
10.45 | + | 10-K | 10.39 | 8/22/2019 | ||||||||||||||||||||||||||||||||||
10.46 | + | 10-K | 10.40 | 8/22/2019 | ||||||||||||||||||||||||||||||||||
10.47 | + | 10-K | 10.41 | 8/22/2019 | ||||||||||||||||||||||||||||||||||
10.48 | + | 10-K | 10.42 | 8/22/2019 | ||||||||||||||||||||||||||||||||||
10.49 | 10-K | 10.43 | 8/22/2019 | |||||||||||||||||||||||||||||||||||
10.50 | + | 10-K | 10.44 | 8/22/2019 | ||||||||||||||||||||||||||||||||||
10.51 | 10-K | 10.45 | 8/22/2019 | |||||||||||||||||||||||||||||||||||
10.52 | 10-K | 10.46 | 8/22/2019 | |||||||||||||||||||||||||||||||||||
10.53 | 10-K | 10.47 | 8/22/2019 | |||||||||||||||||||||||||||||||||||
10.54 | 10-Q | 10.1 | 5/10/2021 | |||||||||||||||||||||||||||||||||||
10.55 | 10-Q | 10.2 | 5/10/2021 | |||||||||||||||||||||||||||||||||||
10.56 | 10-Q | 10.1 | 5/09/2023 | |||||||||||||||||||||||||||||||||||
10.57 | 10-Q | 10.2 | 5/09/2023 | |||||||||||||||||||||||||||||||||||
10.58 | X | |||||||||||||||||||||||||||||||||||||
10.59 | X | |||||||||||||||||||||||||||||||||||||
10.60 | + | 10-K | 10.48 | 8/22/2019 | ||||||||||||||||||||||||||||||||||
10.61 | + | 10-K | 10.49 | 8/22/2019 | ||||||||||||||||||||||||||||||||||
10.62 | + | 10-K | 10.50 | 8/22/2019 | ||||||||||||||||||||||||||||||||||
10.63 | + | 10-K | 10.58 | 8/24/2021 | ||||||||||||||||||||||||||||||||||
10.64 | + | 10-K | 10.59 | 8/24/2021 |
Exhibit Number | Description | Filed herewith | Form | Exhibit | Filing Date | |||||||||||||||||||||||||||||||||
10.65 | 10-K | 10.51 | 8/29/2016 | |||||||||||||||||||||||||||||||||||
10.66 | + | 10-K | 10.61 | 8/24/2021 | ||||||||||||||||||||||||||||||||||
10.67 | + | 10-Q | 10.2 | 5/9/2019 | ||||||||||||||||||||||||||||||||||
10.68 | 10-K | 10.55 | 8/31/2020 | |||||||||||||||||||||||||||||||||||
10.69 | 10-K | 10.64 | 8/24/2021 | |||||||||||||||||||||||||||||||||||
21.1 | X | |||||||||||||||||||||||||||||||||||||
23.1 | X | |||||||||||||||||||||||||||||||||||||
31.1 | X | |||||||||||||||||||||||||||||||||||||
31.2 | X | |||||||||||||||||||||||||||||||||||||
32.1 | X | |||||||||||||||||||||||||||||||||||||
32.2 | X | |||||||||||||||||||||||||||||||||||||
101 | The following materials from our Annual Report on Form 10-K for the year ended June 30, 2023, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets as of June 30, 2023 and June 30, 2022, (ii) the Consolidated Income Statements for the years ended June 30, 2023, June 30, 2022 and June 30, 2021, (iii) the Consolidated Statements of Shareholders' Equity for the years ended June 30, 2023, June 30, 2022 and June 30, 2021, (iv) the Consolidated Statements of Cash Flows for the years ended June 30, 2023, June 30, 2022 and June 30, 2021, and (v) the Notes to the Consolidated Financial Statements, tagged as blocks of text. The instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. | X | ||||||||||||||||||||||||||||||||||||
104 | Cover page Inline XBRL File (Included in Exhibit 101) | X | ||||||||||||||||||||||||||||||||||||
+ | Portions of this exhibit have been omitted pursuant to Item 601(b) of Regulation S-K. | |||||||||||||||||||||||||||||||||||||
Our SEC file number for documents filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended, is 000-26926. |