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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
[October 30, 2014]

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION


(Edgar Glimpses Via Acquire Media NewsEdge) AND RESULTS OF OPERATIONS Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q.

Quarterly Overview We are a technology provider of hardware, software and service solutions to business and government clients in North America, Europe, the Middle East, Africa ("EMEA") and Asia-Pacific ("APAC"). Our offerings in North America and select countries in EMEA include hardware, software and services. Our offerings in the remainder of our EMEA segment and in APAC are almost entirely software and select software-related services.



Consolidated net sales increased 8% to $1.24 billion in the three months ended September 30, 2014, an increase of $86.6 million compared to the three months ended September 30, 2013. Third quarter results included increases in net sales year over year in all three of our operating segments, most notably in our EMEA segment, where we continued to see improved operating trends and financial results, including double digit growth in all three product categories: hardware, software and services. Our APAC segment also reported double digit sales growth. Our North America segment reported top line growth of 4% and grew in all three product categories. Consolidated gross profit increased 2% year over year to $171.8 million, with gross margin decreasing approximately 80 basis points year to year to 13.9%, driven by decreases in vendor funding in the hardware category and the negative effect of program changes from our largest software partner. Our consolidated results of operations for the third quarter of 2014 also include severance expense, net of adjustments, totaling $308,000, $195,000 net of tax, compared to $2.4 million, $1.7 million net of tax, recorded during the third quarter of 2013. All of this resulted in an 8% year over year increase in earnings from operations. On a consolidated basis, we reported earnings from operations of $28.4 million, net earnings of $17.4 million and diluted earnings per share of $0.42 for the third quarter of 2014. This compares to earnings from operations of $26.3 million, net earnings of $15.0 million and diluted earnings per share of $0.35 for the third quarter of 2013.

Net of tax amounts referenced above were computed using the statutory tax rate for the taxing jurisdictions in the operating segment in which the related expenses were recorded, adjusted for the effects of valuation allowances on net operating losses in certain jurisdictions.


Details about segment results of operations can be found in Note 12 to the Consolidated Financial Statements in Part I, Item 1 of this report.

As previously disclosed, our largest software partner made changes to its channel incentive program beginning in October 2013. The changes vary in substance and timing across this partner's offerings. Some of the changes became effective in the fourth quarter of 2013, and some become effective as client contracts renew under their stated terms over the next few years. We are executing well globally against our plans to mitigate the adverse effect of these partner program changes in the software category. Results of operations to date in 2014 are consistent with our expectations relative to the anticipated decrease in incentives from this partner in the full year 2014 compared to 2013.

Our discussion and analysis of financial condition and results of operations is intended to assist in the understanding of our consolidated financial statements, the changes in certain key items in those consolidated financial statements from period to period and the primary factors that contributed to those changes, as well as how certain critical accounting estimates affect our consolidated financial statements.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("GAAP"). For a summary of significant accounting policies, see Note 1 to the Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2013. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results, however, may differ from estimates we have made. Members of our senior management have discussed the critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.

There have been no changes to the items disclosed as critical accounting estimates in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2013.

Results of Operations The following table sets forth for the periods presented certain financial data as a percentage of net sales for the three and nine months ended September 30, 2014 and 2013: Three Months Ended Nine Months Ended September 30, September 30, 2014 2013 2014 2013 Net sales 100.0 % 100.0 % 100.0 % 100.0 % Costs of goods sold 86.1 85.3 86.3 86.2 Gross profit 13.9 14.7 13.7 13.8 Selling and administrative expenses 11.6 12.2 11.2 11.3 Severance and restructuring expenses 0.0 0.2 0.0 0.2 Earnings from operations 2.3 2.3 2.5 2.3 Non-operating expense, net 0.2 0.2 0.2 0.2 Earnings before income taxes 2.1 2.1 2.3 2.1 Income tax expense 0.7 0.8 0.8 0.8 Net earnings 1.4 % 1.3 % 1.5 % 1.3 % We experience certain seasonal trends in our sales of information technology hardware, software and services. Software sales are typically higher in our second and fourth quarters, particularly the second quarter; business clients, particularly larger enterprise businesses in the U.S., tend to spend more in our fourth quarter, as they utilize their remaining capital budget authorizations, and less in the first quarter; sales to the federal government in the U.S. are often stronger in our third quarter, while sales in the state and local government and education markets are stronger in our second quarter; and sales to public sector clients in the United Kingdom are often stronger in our first quarter. These trends create overall seasonality in our consolidated results such that sales and profitability are expected to be higher in the second and fourth quarters of the year.

Throughout this "Results of Operations" section of "Management's Discussion and Analysis of Financial Condition and Results of Operations," we refer to changes in net sales, gross profit and selling and administrative expenses in EMEA and APAC excluding the effects of foreign currency movements. In computing these change amounts and percentages, we compare the current period amount as translated into U.S. dollars under the applicable accounting standards to the prior period amount in local currency translated into U.S. dollars utilizing the weighted average translation rate for the current period.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Net Sales. Net sales for the three months ended September 30, 2014 increased 8% compared to the three months ended September 30, 2013 to $1.24 billion. Net sales for the nine months ended September 30, 2014 increased 3% compared to the nine months ended September 30, 2013. Our net sales by operating segment were as follows (dollars in thousands): Three Months Ended Nine Months Ended September 30, % September 30, % 2014 2013 Change 2014 2013 Change North America $ 891,345 $ 857,935 4 % $ 2,561,279 $ 2,528,002 1 % EMEA 313,644 263,551 19 % 1,148,444 1,071,578 7 % APAC 32,679 29,534 11 % 160,372 149,609 7 % Consolidated $ 1,237,668 $ 1,151,020 8 % $ 3,870,095 $ 3,749,189 3 % Net sales in North America increased 4%, or $33.4 million, for the three months ended September 30, 2014 compared to the three months ended September 30, 2013.

Net sales of hardware, software and services increased 3%, 5% and 6%, respectively, year over year. Net sales in the hardware category were up due to higher sales of notebooks, desktops and accessories in the third quarter of 2014. Net software sales comparisons reflect higher sales to federal government clients year over year. The increase in services sales was driven by more consulting services engagements, multisite deployments and new projects in our integration labs in the third quarter of 2014.

Net sales in North America increased 1%, or $33.3 million, for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013.

On a year to date basis, net sales of hardware and software increased 2% and 1%, respectively, year over year, while net sales of services declined 5% year to year.

Net sales in EMEA increased 19%, or $50.1 million, for the three months ended September 30, 2014 compared to the three months ended September 30, 2013.

Excluding the effects of foreign currency movements, net sales increased 15% compared to the third quarter of last year. Net sales of hardware, software and services increased 17%, 21% and 17%, respectively, compared to the third quarter of 2013, all in U.S. dollars. Excluding the effects of foreign currency movements, hardware, software and services net sales increased 10%, 19% and 14%, respectively, year over year. The increase in hardware net sales was due primarily to higher volume across all client groups, with year over year growth most notably in the United Kingdom. The increase in software net sales was due primarily to strong growth across all client groups: large enterprise, public sector and mid-market clients across the region.

Net sales in EMEA increased 7%, or $76.9 million, for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013.

Excluding the effects of foreign currency movements, net sales increased 2% compared to the nine months ended September 30, 2013. On a year to date basis, net sales of hardware, software and services increased 17%, 2% and 3%, respectively, year over year, all in U.S. dollars. Excluding the effects of foreign currency movements, hardware net sales increased 9%, while net sales of software and services declined 2% and 3%, respectively.

Net sales in APAC increased 11%, or $3.1 million, for the three months ended September 30, 2014 compared to the three months ended September 30, 2013.

Excluding the effects of foreign currency movements, net sales increased 10% compared to the third quarter of last year. The increase primarily resulted from increased sales to public sector and mid-market clients across the region during the three months ended September 30, 2014 compared to the three months ended September 30, 2013.

Our APAC segment recognized net sales of $160.4 million for the nine months ended September 30, 2014, an increase of 7% compared to the nine months ended September 30, 2013 in U.S. dollars, 12% excluding the effects of foreign currency movements. The increase primarily resulted from lower software maintenance sales, which are recorded net of related costs within the net sales line item of our financial statements, during the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 as well as higher volume with mid-market clients.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) The percentage of net sales by category for North America, EMEA and APAC were as follows for the three months ended September 30, 2014 and 2013: North America EMEA APAC Three Months Ended Three Months Ended Three Months Ended September 30, September 30, September 30, Sales Mix 2014 2013 2014 2013 2014 2013 Hardware 63 % 64 % 45 % 46 % 10 % 4 % Software 31 % 30 % 52 % 51 % 86 % 91 % Services 6 % 6 % 3 % 3 % 4 % 5 % 100 % 100 % 100 % 100 % 100 % 100 % The percentage of net sales by category for North America, EMEA and APAC were as follows for the nine months ended September 30, 2014 and 2013: North America EMEA APAC Nine Months Ended Nine Months Ended Nine Months Ended September 30, September 30, September 30, Sales Mix 2014 2013 2014 2013 2014 2013 Hardware 62 % 61 % 38 % 35 % 5 % 3 % Software 32 % 32 % 60 % 63 % 91 % 94 % Services 6 % 7 % 2 % 2 % 4 % 3 % 100 % 100 % 100 % 100 % 100 % 100 % Gross Profit. Gross profit for the three months ended September 30, 2014 increased 2% compared to the three months ended September 30, 2013, with gross margin decreasing approximately 80 basis points to 13.9% for the three months ended September 30, 2014 compared to 14.7% for the three months ended September 30, 2013. For the nine months ended September 30, 2014, gross profit increased 2% compared to the nine months ended September 30, 2013, with gross margin decreasing approximately 10 basis points to 13.7% for the nine months ended September 30, 2014 compared to 13.8% for the nine months ended September 30, 2013. Our gross profit and gross profit as a percentage of net sales by operating segment were as follows (dollars in thousands): Three Months Ended September 30, Nine Months Ended September 30, % of % of % of % of 2014 Net Sales 2013 Net Sales 2014 Net Sales 2013 Net Sales North America $ 120,214 13.5 % $ 122,944 14.3 % $ 352,665 13.8 % $ 350,135 13.9 % EMEA 44,895 14.3 % 39,343 14.9 % 150,302 13.1 % 142,191 13.3 % APAC 6,711 20.5 % 6,381 21.6 % 27,197 17.0 % 25,406 17.0 % Consolidated $ 171,820 13.9 % $ 168,668 14.7 % $ 530,164 13.7 % $ 517,732 13.8 % North America's gross profit for the three months ended September 30, 2014 decreased 2% compared to the three months ended September 30, 2013. As a percentage of net sales, gross margin decreased approximately 80 basis points to 13.5% for the third quarter of 2014 from 14.3% in the third quarter of 2013. The decrease was primarily attributable to the combination of a decrease in margin of 68 basis points related to agency fees for enterprise software agreements, due to lower volume with new and existing clients, and a 22 basis point decrease in product margin, which includes vendor funding and freight, partially offset by an improvement in margin generated by services of 14 basis points year over year. The decrease in product margin resulted from a decline in vendor funding due to lower volume of data center product sales in the three months ended September 30, 2014 and the effect of partner program changes year over year.

This decrease in vendor funding was partially offset by increases in software product margins year over year and the derecognition of certain previously reserved sales tax amounts upon the legal release of the related liability during the three months ended September 30, 2014.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) North America's gross profit for the nine months ended September 30, 2014 increased 1% compared to the nine months ended September 30, 2013. As a percentage of net sales, gross margin decreased approximately 10 basis points to 13.8% from 13.9%, year to year, reflecting a decrease in margin of 39 basis points related to agency fees for enterprise software agreements, partially offset by a 24 basis point improvement in year to date product margin, which includes vendor funding and freight.

EMEA's gross profit increased 14% in U.S. dollars for the three months ended September 30, 2014 compared to the three months ended September 30, 2013.

Excluding the effects of foreign currency movements, gross profit increased 11% compared to the third quarter of last year. Gross margin declined approximately 60 basis points to 14.3% for the third quarter of 2014 from 14.9% in the third quarter of 2013. The decrease in gross margin was primarily due to a net decrease in product margin, which includes vendor funding and freight, of 80 basis points and a decrease in margin of 18 basis points related to agency fees for enterprise software agreements, partially offset by a 37 basis point increase in margin generated by services, which are typically transacted at higher margins. The decrease in product margin was driven by a decrease in vendor funding resulting from software partner program changes year to year and a decrease in software product margin due to the relative mix of software deals transacted during the three months ended September 30, 2014 compared to the three months ended September 30, 2013. These decreases in product margin were partially offset by an improvement in hardware product margin as hardware sales are transacted at higher margins than software sales in our EMEA business.

EMEA's gross profit increased 6% in U.S. dollars for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013.

Excluding the effects of foreign currency movements, gross profit remained flat compared to the first nine months of last year. As a percentage of net sales, gross margin for the nine month periods declined approximately 20 basis points to 13.1% from 13.3% year to year, reflecting a 15 basis point decrease in year to date product margin, which includes vendor funding and freight, and a decrease in margin of 8 basis points related to agency fees for enterprise software agreements. Year over year increases in hardware product margin during the nine months ended September 30, 2014 compared to the first nine months of 2013 were more than offset by decreases in vendor funding resulting from software partner program changes year to year.

APAC's gross profit increased 5% for the three months ended September 30, 2014 compared to the three months ended September 30, 2013, with gross margin decreasing to 20.5% for the three months ended September 30, 2014, compared to 21.6% for the three months ended September 30, 2013. Excluding the effects of foreign currency movements, gross profit increased 4% compared to the third quarter of last year. The decline in gross margin in the third quarter of 2014 compared to the third quarter of 2013 was due primarily to an increase in sales to public sector and mid-market clients year to year, which are typically transacted at lower margins, partially offset by increases in vendor funding and higher margin services net sales year over year.

APAC's gross profit increased 7% for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013. Excluding the effects of foreign currency movements, gross profit increased 11% compared to the first nine months of last year. As a percentage of net sales, gross margin remained flat at 17.0%, as increases in product and services margin were offset by lower fees from enterprise software agreements in the nine months ended September 30, 2014 compared to the first nine months of 2013.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Operating Expenses.

Selling and Administrative Expenses. Selling and administrative expenses increased $3.2 million, or 2%, for the three months ended September 30, 2014 compared to the three months ended September 30, 2013. For the nine months ended September 30, 2014, selling and administrative expenses increased $9.3 million, or 2%, compared to the nine months ended September 30, 2013. Our selling and administrative expenses as a percent of net sales by operating segment were as follows (dollars in thousands): Three Months Ended September 30, Nine Months Ended September 30, % of % of % of % of 2014 Net Sales 2013 Net Sales 2014 Net Sales 2013 Net Sales North America $ 94,382 10.6 % $ 93,082 10.8 % $ 278,121 10.9 % $ 272,573 10.8 % EMEA 42,684 13.6 % 41,232 15.6 % 135,819 11.8 % 133,297 12.4 % APAC 6,068 18.6 % 5,651 19.1 % 19,433 12.1 % 18,241 12.2 % Consolidated $ 143,134 11.6 % $ 139,965 12.2 % $ 433,373 11.2 % $ 424,111 11.3 % North America's selling and administrative expenses increased 1%, or $1.3 million, for the three months ended September 30, 2014 compared to the three months ended September 30, 2013 but decreased approximately 20 basis points year to year as a percentage of net sales to 10.6%. Salaries and wages and contract labor increased $1.9 million year over year due to investments in sales and services personnel, and teammate-related expenses increased $1.5 million year over year due primarily to higher healthcare costs. These increases were offset partially by reduced spending in other expense categories, such as professional services, which declined $1.7 million during the three months ended September 30, 2014 compared to the three months ended September 30, 2013.

North America's selling and administrative expenses increased 2%, or $5.5 million, for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013. As discussed in Note 6 to the Consolidated Financial Statements in Part I, Item 1 of this report, our results for the nine months ended September 30, 2014 include non-cash charges of $5.2 million, including an impairment loss of $4.6 million and accelerated depreciation of $620,000, to reduce the carrying amount of our owned real estate in Bloomingdale, Illinois that is currently held for sale to its estimated fair value less costs to sell. Additionally, teammate benefit expenses increased approximately $3.3 million year over year due to higher healthcare costs in the nine months ended September 30, 2014. These increases in selling and administrative expenses were partially offset by reduced spending in other expense categories, such as professional services, which declined $3.0 million during the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013.

EMEA's selling and administrative expenses increased 4%, or $1.5 million, for the three months ended September 30, 2014 compared to the three months ended September 30, 2013 and decreased approximately 200 basis points year to year as a percentage of net sales to 13.6%. Excluding the effects of foreign currency movements, selling and administrative expenses were flat compared to the third quarter of last year. Higher variable compensation expense on increased gross profit was offset by a decrease in support salaries and wages due to restructuring actions in prior periods.

EMEA's selling and administrative expenses increased 2%, or $2.5 million, for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013. Excluding the effects of foreign currency movements, selling and administrative expenses declined 3% compared to the first nine months of last year. Higher variable compensation expense on increased gross profit was more than offset by a decrease in support salaries and wages due to restructuring actions in prior periods.

APAC's selling and administrative expenses increased 7%, or $417,000, for the three months ended September 30, 2014 compared to the three months ended September 30, 2013, but decreased as a percentage of net sales by approximately 50 basis points year to year to 18.6%. Excluding the effects of foreign currency movements, selling and administrative expenses also increased 7% compared to the third quarter of last year. The increase was primarily driven by higher salaries and wages from investments in headcount and expenses resulting from our investments in the new IT system in the region.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) APAC's selling and administrative expenses increased 7%, or $1.2 million, for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013. Excluding the effects of foreign currency movements, selling and administrative expenses increased 12% compared to the first nine months of last year due to increases in variable compensation and expenses resulting from our investments in the new IT system in the region.

Severance and Restructuring Expenses. During the three months ended September 30, 2014, North America and EMEA recorded severance expense, net of adjustments, of approximately $102,000 and $209,000, respectively. APAC recorded a minor reduction of severance expense of $3,000 for a change in estimate of the previous accrual as cash payment were made during the quarter ended September 30, 2014. During the nine months ended September 30, 2014, North America, EMEA and APAC recorded severance expense, net of adjustments, totaling $165,000, $684,000 and $106,000, respectively. The charges were related to the elimination of certain positions as part of a re-alignment of roles and responsibilities. Comparatively, during the three months ended September 30, 2013, North America and EMEA recorded severance expense of approximately $530,000 and $1.9 million, respectively, and during the nine months ended September 30, 2013, North America and EMEA recorded severance expense, net of adjustments, totaling $2.6 million and $5.8 million, respectively.

Non-Operating (Income) Expense.

Interest Income. Interest income for the three and nine months ended September 30, 2014 and 2013 was generated from interest earned on cash and cash equivalent bank balances. The decrease in interest income year to year was primarily due to lower average interest-bearing cash and cash equivalent balances and lower interest rates earned on such balances during the three and nine months ended September 30, 2014.

Interest Expense. Interest expense for the three and nine months ended September 30, 2014 and 2013 primarily relates to borrowings under our financing facilities and imputed interest under our inventory financing facility. Interest expense for the three and nine months ended September 30, 2014 decreased 1%, or $9,000, and 5%, or $224,000, respectively, compared to the three and nine months ended September 30, 2013. These decreases were due primarily to lower average daily balances on our debt facilities in the 2014 periods. Imputed interest under our inventory financing facility was $654,000 and $1.8 million for the three and nine months ended September 30, 2014, respectively, compared to $591,000 and $1.8 million for the three and nine months ended September 30, 2013, respectively. For a description of our various financing facilities, see Note 3 to our Consolidated Financial Statements in Part I, Item 1 of this report.

Net Foreign Currency Exchange Gains/Losses. These gains/losses result from foreign currency transactions, including gains/losses on foreign currency derivative contracts and intercompany balances that are not considered long-term in nature. The change in net foreign currency exchange gains/losses is due primarily to the underlying changes in the applicable exchange rates, mitigated by our use of foreign exchange forward contracts to hedge certain non-functional currency assets and liabilities against changes in exchange rate movements.

Other Expense, Net. Other expense, net, consists primarily of bank fees associated with our cash management activities.

Income Tax Expense. Our effective tax rate for the three months ended September 30, 2014 was 34.1% compared to 37.8% for the three months ended September 30, 2013. Our effective tax rate for the nine months ended September 30, 2014 was 37.4% compared to 37.2% for the nine months ended September 30, 2013. The decrease in our effective tax rate for the three months ended September 30, 2014 compared to the three months ended September 30, 2013 was due primarily to the recognition of certain tax benefits related to the release of reserves for specific uncertain tax positions during the quarter. The increase in our effective tax rate for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 was due primarily to the relative effect of the benefits recognized from the release of specific uncertain tax positions in each period.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Liquidity and Capital Resources The following table sets forth certain consolidated cash flow information for the nine months ended September 30, 2014 and 2013 (in thousands): Nine Months Ended September 30, 2014 2013 Net cash provided by operating activities $ 47,796 $ 66,576 Net cash used in investing activities (7,983 ) (14,145 ) Net cash used in financing activities (33,406 ) (64,556 ) Foreign currency exchange effect on cash balances (6,122 ) (4,962 ) Increase (decrease) in cash and cash equivalents 285 (17,087 ) Cash and cash equivalents at beginning of period 126,817 152,119 Cash and cash equivalents at end of period $ 127,102 $ 135,032 Cash and Cash Flow Our primary uses of cash during the nine months ended September 30, 2014 were to fund working capital requirements, to repurchase shares of our common stock, to pay down our debt balances, and for capital expenditures. Operating activities provided $47.8 million in cash for the nine months ended September 30, 2014, a 28% decrease from the nine months ended September 30, 2013. We repurchased $29.7 million of our common stock in open market transactions. We had combined net repayments on our long-term debt facilities of $14.5 million during the nine months ended September 30, 2014. Capital expenditures were $8.0 million in the nine months ended September 30, 2014, a 44% decrease from the prior year period, reflecting lower IT investments year over year. Cash balances in the nine months ended September 30, 2014 were negatively affected by $6.1 million as a result of foreign currency exchange rates, compared to a negative effect of $5.0 million in the prior year period.

Net cash provided by operating activities. Cash flows from operations for the nine months ended September 30, 2014 and 2013 reflect our net earnings, adjusted for non-cash items such as depreciation, amortization, stock-based compensation expense and write-offs and write-downs of assets, as well as changes in asset and liability balances. For both periods, we anticipated decreases in accounts receivable and accounts payable due to the seasonal decrease in net sales from the fourth quarter to the third quarter, which result in lower accounts receivable and accounts payable balances as of September 30, compared to December 31. The decrease in both balances was greater in the nine months ended September 30, 2013 because the accounts receivable and accounts payable balances at December 31, 2012 reflected a single significant sale transacted with a public sector client in North America late in December 2012, which increased the December 31, 2012 accounts receivable and accounts payable balances. For both periods, the increase in inventories is primarily attributable to an increase in inventory levels at September 30, to support specific client engagements and to hardware sale transactions in transit to clients as of September 30, such that delivery was not deemed to have occurred until the product was received by the client in early October. The increase in the 2014 period is higher due to multisite deployments in process as of September 30, 2014. The decrease in accrued expenses and other liabilities is primarily attributable to decreases in accrued VAT and sales taxes as of September 30, compared to December 31, due to the relative timing of related payments and to the reclassification of certain long-term liabilities to accounts payable as of September 30, 2014, as amounts became payable to partners under their contractual terms.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Our consolidated cash flow operating metrics for the quarters ended September 30, 2014 and 2013 were as follows: 2014 2013 Days sales outstanding in ending accounts receivable ("DSOs") (a) 77 79 Days inventory outstanding ("DIOs") (b) 11 11 Days purchases outstanding in ending accounts payable ("DPOs")(c) (58 ) (59 ) Cash conversion cycle (days) (d) 30 31 (a) Calculated as the balance of accounts receivable, net at the end of the period divided by daily net sales. Daily net sales is calculated as net sales for the quarter divided by 92 days.

(b) Calculated as average inventories divided by daily costs of goods sold.

Average inventories is calculated as the sum of the balances of inventories at the beginning of the quarter plus inventories at the end of the quarter divided by two. Daily costs of goods sold is calculated as costs of goods sold for the quarter divided by 92 days.

(c) Calculated as the balances of accounts payable, which includes the inventory financing facility, at the end of the period divided by daily costs of goods sold. Daily costs of goods sold is calculated as costs of goods sold for the quarter divided by 92 days.

(d) Calculated as DSOs plus DIOs, less DPOs.

Our cash conversion cycle was 30 days in the quarter ended September 30, 2014 compared to 31 days in the quarter ended September 30, 2013. The year over year decrease in our cash conversion cycle was driven by a two day decrease in DSOs period to period due to improved collection results, offset by a one day decrease in DPOs period to period due to the timing of supplier payments during the respective quarters.

We expect that cash flow from operations will be used, at least partially, to fund working capital as we typically pay our partners on average terms that are shorter than the average terms we grant to our clients in order to take advantage of supplier discounts. We intend to use cash generated in the remainder of 2014 in excess of working capital needs to pay down our outstanding debt balances and support our capital expenditures for the year. We also may use cash to fund potential small acquisitions to add select capabilities and to repurchase shares of our common stock.

Net cash used in investing activities. Capital expenditures of $8.0 million and $14.1 million for the nine months ended September 30, 2014 and 2013, respectively, were primarily related to investments in our IT systems. We expect capital expenditures for the full year 2014 to be between $10.0 million and $15.0 million, primarily for our IT systems upgrade projects and other facility and technology related upgrade projects.

Net cash used in financing activities. During the nine months ended September 30, 2014 and 2013, we repurchased $29.7 million and $50.0 million, respectively, of our common stock in open market transactions. These repurchases were part of programs approved by our Board of Directors in October 2013 and February 2013, respectively. All shares repurchased were immediately retired.

During the nine months ended September 30, 2014, we had net combined repayments on our long-term debt under our revolving facility and our ABS facility that decreased our outstanding debt balance by $14.5 million, and we had net borrowings of $10.4 million under our inventory financing facility during the period. During the nine months ended September 30, 2013, we had net combined borrowings on our long-term debt under our revolving facility and our ABS facility that increased our outstanding debt balance by $8.0 million, and we had net repayments of $19.9 million under our inventory financing facility during the period.

Our consolidated debt balance that can be outstanding at the end of any fiscal quarter under our revolving facility and our ABS facility is limited by certain financial covenants, particularly a maximum leverage ratio. The maximum leverage ratio is calculated as aggregate debt outstanding divided by the sum of the Company's trailing twelve month net earnings (loss) plus (i) interest expense, excluding non-cash imputed interest on our inventory financing facility, (ii) income tax expense (benefit), (iii) depreciation and amortization and (iv) non-cash stock-based compensation ("adjusted earnings"). The maximum leverage ratio permitted under the agreements is 2.75 times trailing twelve-month adjusted earnings. We anticipate that we will be in compliance with our maximum leverage ratio requirements over the next four quarters. However, a significant drop in the Company's adjusted earnings would limit the amount of indebtedness that could be outstanding at the end of any fiscal quarter to a level that would be below the Company's combined facility maximum amount. Based on the maximum leverage ratio as of September 30, 2014, the Company's combined debt balance that could have been outstanding under our revolving facility and our ABS facility was reduced from the maximum borrowing capacity of $550.0 million to $495.5 million, of which $52.0 million was outstanding at September 30, 2014. Our debt balance as of September 30, 2014 was $54.5 million, including our capital lease obligation for certain IT equipment and other financing agreements with financial intermediaries to facilitate the purchase of products from certain vendors. As of September 30, 2014, the current portion of our long-term debt relates solely to our capital lease and other financing obligations.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Cash and cash equivalents held by foreign subsidiaries are generally subject to U.S. income taxation upon repatriation to the U.S. We do not provide for U.S.

income taxes on the undistributed earnings of those of our foreign subsidiaries where earnings are reinvested and, in the opinion of management, will continue to be reinvested indefinitely outside of the U.S. As of September 30, 2014, we had approximately $108.0 million in cash and cash equivalents in certain of our foreign subsidiaries where we consider undistributed earnings of these foreign subsidiaries to be indefinitely reinvested. As of September 30, 2014, the majority of our foreign cash resides in the Netherlands, Canada, and Australia.

Certain of these cash balances will be remitted to the U.S. by paying down intercompany payables generated in the ordinary course of business. This repayment would not change our policy to indefinitely reinvest earnings of our foreign subsidiaries. We intend to use undistributed earnings for general business purposes in the foreign jurisdictions as well as to fund our IT systems, potential small acquisitions and various facility upgrades.

We anticipate that cash flows from operations, together with the funds available under our financing facilities, will be adequate to support our presently anticipated cash and working capital requirements for operations as well as other strategic investments over the next 12 months. We currently do not intend, nor foresee a need, to repatriate any foreign undistributed earnings. We expect existing domestic cash and cash flows from operations to continue to be sufficient to fund our domestic operating cash activities and cash commitments for investing and financing activities, such as capital expenditures and debt repayments, for at least the next 12 months.

Off-Balance Sheet Arrangements We have entered into off-balance sheet arrangements, which include indemnifications. The indemnifications are discussed in Note 11 to the Consolidated Financial Statements in Part I, Item 1 of this report and that discussion is incorporated by reference herein. We believe that none of our off-balance sheet arrangements have, or are reasonably likely to have, a material current or future effect on our financial condition, sales or expenses, results of operations, liquidity, capital expenditures or capital resources.

Recently Issued Accounting Pronouncements The information contained in Note 1 to the Consolidated Financial Statements in Part I, Item 1 of this report concerning a description of recently issued accounting pronouncements which affect or may affect our financial statements, including our expected dates of adopting and the estimated effects on our results of operations and financial condition, is incorporated by reference herein.

Contractual Obligations There have been no material changes in our reported contractual obligations, as described under "Contractual Obligations" in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2013.

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