FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended July 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-14625
TECH DATA CORPORATION
(Exact name of registrant as specified in its charter)
Florida No. 59-1578329
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5350 Tech Data Drive, Clearwater, Florida 34620
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(813) 539-7429
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
CLASS August 31, 1996
Commmon stock, par value $.0015 per share 43,033,880
<PAGE>
TECH DATA CORPORATION AND SUBSIDIARIES
Form 10-Q For The Quarter Ended July 31, 1996
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheet as of
July 31, 1996 (unaudited) and
January 31, 1996 3
Consolidated Statement of Income
(unaudited) for the three and six
months ended July 31, 1996 and 1995 4
Consolidated Statement of Cash Flows
(unaudited) for the six months
ended July 31, 1996 and 1995 5
Notes to Consolidated Financial Statements
(unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-9
PART II. OTHER INFORMATION 10
Signatures 11
2
<PAGE>
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except share amounts)
<TABLE>
<CAPTION>
July 31, January 31,
1996 1996
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 797 $ 1,154
Accounts receivable, less allowance for
doubtful accounts of $24,163 and $22,669 508,599 445,202
Inventories 440,390 465,422
Prepaid and other assets 36,457 39,010
---------- ----------
Total current assets 986,243 950,788
Property and equipment, net 60,282 61,610
Excess of cost over acquired net assets, net 6,149 6,376
Other assets, net 24,910 25,105
---------- ----------
$1,077,584 $1,043,879
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Revolving credit loans $ 235,971 $ 283,100
Current portion of long-term debt 359 519
Accounts payable 405,331 433,374
Accrued expenses 30,996 32,091
---------- ----------
Total current liabilities 672,657 749,084
Long-term debt 8,998 9,097
---------- ----------
681,655 758,181
---------- ----------
Commitments and contingencies
Shareholders' equity:
Preferred stock, par value $.02; 226,500 shares
authorized and issued; liquidation
preference $.20 per share 5 5
Common stock, par value $.0015; 100,000,000
shares authorized; 42,888,436 and
37,930,655 issued and outstanding 64 57
Additional paid-in capital 218,614 130,045
Retained earnings 175,754 153,310
Cumulative translation adjustment 1,492 2,281
---------- ----------
Total shareholders' equity 395,929 285,698
---------- ----------
$1,077,584 $1,043,879
========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial
Statements are an integral part of these
financial statements.
3
<PAGE>
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended Six months ended
July 31, July 31,
---------------------- ------------------------
1996 1995 1996 1995
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $1,063,228 $708,836 $2,048,802 $1,342,296
---------- -------- ---------- ----------
Cost and expenses:
Cost of products sold 988,926 658,723 1,905,488 1,245,967
Selling, general and
administrative expenses 49,324 39,457 95,609 77,518
---------- -------- ---------- ----------
1,038,250 698,180 2,001,097 1,323,485
---------- -------- ----------- ----------
Operating profit 24,978 10,656 47,705 18,811
Interest expense 5,279 4,947 10,802 10,004
---------- -------- ----------- ----------
Income before income taxes 19,699 5,709 36,903 8,807
Provision for income taxes 7,683 2,261 14,459 3,510
---------- -------- ----------- ----------
Net income $ 12,016 $ 3,448 $ 22,444 $ 5,297
========== ======== ========== ==========
Net income per common share $ .30 $ .09 $ .57 $ .14
========== ======== ========== ==========
Weighted average common
shares outstanding 39,865 37,968 39,231 38,015
========== ======== ========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial
Statements are an integral part of these
financial statements.
4
<PAGE>
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Six months ended
July 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $1,975,983 $1,293,940
Cash paid to suppliers and employees (1,983,984) (1,246,781)
Interest paid (10,788) (10,080)
Income taxes paid (17,064) (1,386)
---------- ----------
Net cash (used in) provided by operating activities (35,853) 35,693
----------- ----------
Cash flows from investing activities:
Capital expenditures (5,692) (11,744)
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock 88,576 1,090
Net repayments under revolving credit loans (47,129) (24,316)
Principal payments on long-term debt (259) (319)
----------- ----------
Net cash provided by (used in) financing activities 41,188 (23,545)
---------- ----------
Net (decrease) increase in cash and cash equivalents (357) 404
Cash and cash equivalents at beginning of period 1,154 496
---------- ----------
Cash and cash equivalents at end of period $ 797 $ 900
========== ==========
Reconciliation of net income to net cash (used in)
provided by operating activities:
Net income $ 22,444 $ 5,297
---------- ----------
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 9,515 7,998
Provision for losses on accounts receivable 9,422 8,576
(Increase) decrease in assets:
Accounts receivable (72,819) (48,356)
Inventories 25,032 44,231
Prepaid expenses 2,553 4,020
Other assets (2,862) 1,434
Increase (decrease) in liabilities:
Accounts payable (28,043) 11,122
Accrued expenses (1,095) 1,371
---------- ----------
Total adjustments (58,297) 30,396
---------- ----------
Net cash (used in) provided by operating activities $ (35,853) $ 35,693
=========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial
Statements are an integral part of these
financial statements.
5
<PAGE>
TECH DATA CORPORATION AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Basis of presentation
- ---------------------
The consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. In the opinion of management, the
accompanying unaudited consolidated financial statements contain all
adjustments, consisting of only normal recurring adjustments, necessary to
present fairly the financial position of Tech Data Corporation and subsidiaries
(the "Company") as of July 31, 1996, and the results of their operations and
cash flows for the three and six months ended July 31, 1996 and 1995. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The results of operations for the six months ended July 31, 1996
are not necessarily indicative of the results that can be expected for the
entire fiscal year ending January 31, 1997.
Capital Stock
- -------------
In July 1996, the Company completed a public offering of 4.6 million
shares of its Common Stock resulting in net proceeds of approximately $83.4
million.
Net income per common share
- ---------------------------
Net income per share of common stock is based on the weighted average
number of shares of common stock and common stock equivalents outstanding during
each period.
6
<PAGE>
TECH DATA CORPORATION AND SUBSIDIARIES
--------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Results of Operations
- ---------------------
Three Months Ended July 31, 1996 and 1995
- -----------------------------------------
Net sales increased 50% to $1.06 billion in the second quarter of
fiscal 1997 compared to $708.8 million in the second quarter a year ago. This
increase is attributable to the addition of new product lines and the expansion
of existing product lines combined with an increase in the Company's domestic
market share. The rate of growth in second quarter fiscal 1997 sales includes
the positive effect of a lower growth rate in the second quarter of fiscal 1996
as the Company was continuing to recover from the effects of the business
interruptions caused by the computer system conversion in December 1994. Second
quarter fiscal 1997 U.S and international sales grew 53% and 33%, respectively,
compared to the prior year second quarter. International sales represented
approximately 12% of fiscal 1997 second quarter net sales compared to 14% for
the second quarter of fiscal 1996.
The cost of products sold as a percentage of net sales increased to
93.0% in the second quarter of fiscal 1997 from 92.9% in the prior year. This
increase is the result of competitive market prices and the Company's strategy
of lowering selling prices in order to gain market share and to pass on the
benefit of operating efficiencies to its customers.
Selling, general and administrative expenses increased 25% to $49.3
million in the second quarter of fiscal 1997 compared to $39.5 million last
year, decreasing as a percentage of net sales from 5.6% in the second quarter of
last year to 4.6% in the current quarter. Selling, general and administrative
expenses were a greater percentage of net sales during the second quarter of
fiscal 1996 primarily as a result of increased hiring in anticipation of sales
growth which was lower than expected due to the effects of the business
interruptions caused by the computer system conversion, in addition to expenses
related to this conversion. The dollar value increase is primarily the result of
expanded employment and increases in other administrative expenses needed to
support the increased volume of business.
As a result of the factors described above, operating profit increased
134.4% to $25.0 million, or 2.3% of net sales, in the second quarter of fiscal
1997 compared to $10.7 million, or 1.5% of net sales for the second quarter last
year.
Interest expense increased in the second quarter of fiscal 1997 due to
an increase in the Company's average outstanding indebtedness, partially offset
by decreases in short-term interest rates on the Company's floating rate
indebtedness.
7
<PAGE>
As a result of the factors described above, net income increased 248.5%
to $12.0 million, or $.30 per share, in the second quarter of fiscal 1997
compared to $3.4 million, or $.09 per share, in the prior year comparable
quarter.
Six Months Ended July 31, 1996 and 1995
- ---------------------------------------
Net sales increased 52.6% to $2.05 billion in the first six months of
fiscal 1997 compared to $1.34 billion in the same period last year. Net income
increased 323.7% to $22.4 million, or $.57 per share, in the first six months of
fiscal 1996 compared to $5.3 million, or $.14 per share, in the comparable prior
year period.
(The underlying reasons for the fluctuations in the results of
operations for the six months ended July 31, 1996 are substantially the same as
in the comparative quarterly discussion above and, therefore, will not be
repeated here).
Liquidity and Capital Resources
- -------------------------------
Net cash used in operating activities of $35.9 million during the
first six months of fiscal 1997 was primarily attributable to growth in sales
and the resulting increase in accounts receivable.
Net cash used in investing activities of $5.7 million during the first
six months of fiscal 1997 was a result of the Company continuing to invest in
its management information systems and its distribution center facilities. The
Company expects to make capital expenditures of approximately $25 million during
fiscal 1997 for computer systems development and to further expand its office
facilities and distribution centers.
Net cash provided by financing activities of $41.2 million during the
first six months of fiscal 1997 reflects the net proceeds of $83.4 million from
the Company's secondary offering of 4.6 million shares of Common Stock, net of
repayments made to reduce borrowings under the Company's revolving credit loans.
The Company currently maintains domestic and foreign revolving credit
agreements which provide maximum short-term borrowings of approximately $550
million, of which $236 million was outstanding at July 31, 1996. The Company
believes that cash from operations, available and obtainable bank credit lines
and trade credit from its vendors will be sufficient to satisfy its working
capital and capital expenditure needs through fiscal 1997.
Asset Management
- ----------------
The Company manages its inventories by maintaining sufficient
quantities to achieve high order fill rates while attempting to stock only those
products in high demand with a rapid turnover rate. Inventory balances fluctuate
as the Company adds new product lines and when appropriate, makes large
purchases including cash purchases from manufacturers and publishers when the
terms of such purchases are considered advantageous.The Company's contracts with
most of its vendors provide
8
<PAGE>
price protection and stock rotation privileges to reduce the risk of loss due to
manufacturer price reductions and slow moving or obsolete inventory. In the
event of a vendor price reduction, the Company generally receives a credit for
the impact on products in inventory. In addition, the Company has the right to
rotate a certain percentage of purchases, subject to certain limitations.
Historically, price protection and stock rotation privileges, as well as the
Company's inventory management procedures, have helped to reduce the risk of
loss of carrying inventory.
The Company attempts to control losses on credit sales by closely
monitoring customers' creditworthiness through its computer system which
contains detailed information on customer payment history and other relevant
information. In addition, the Company participates in a national credit
association which exchanges credit information on mutual customers. The Company
has recently obtained credit insurance which insures a percentage of the credit
extended by the Company to certain of its larger domestic and international
customers against possible loss. Customers who qualify for credit terms are
typically granted net 30 day payment terms. The Company also sells product on a
prepay, credit card or cash on delivery basis.
Comments on Forward-Looking Information
- ---------------------------------------
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company filed a Form 8-K with the
Securities Exchange Commission (the "Commission") on March 26, 1996 outlining
cautionary statements and identifying important factors that could cause the
Company's actual results to differ materially from those projected in
forward-looking statements made by, or on behalf of, the Company. Such
forward-looking statements, as made within this Form 10-Q, should be considered
in conjunction with the information included within the Form 8-K.
9
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders
At the 1996 Annual Meeting of Shareholders held June 25, 1996,
the shareholders approved the following items:
1. The election of two directors, Donald F. Dunn and A. Timothy
Godwin, to serve three-year terms expiring in 1999. Donald F.
Dunn received 35,916,299 votes cast in favor and 164,557 votes
withheld. A. Timothy Godwin received 35,917,396 votes cast in
favor and 163,460 votes withheld.
2. A proposal to ratify the appointment of Price Waterhouse LLP as
independent auditors for the fiscal year ending January 31, 1997.
The vote upon such proposal was 35,933,745 in favor, 44,751
against and 102,360 abstentions and 2,114,689 broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the Company during
the quarter ended July 31, 1996.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TECH DATA CORPORATION
(Registrant)
Signature Title Date
- --------- ----- ----
/s/ Steven A. Raymund Chairman of the Board of September 12, 1996
- --------------------- Directors and Chief
Steven A. Raymund Executive Officer
/s/ Jeffery P. Howells Senior Vice President of Finance September 12, 1996
- ---------------------- and Chief Financial Officer
Jeffery P. Howells (principal financial officer)
/s/ Joseph B. Trepani Vice President and Worldwide September 12, 1996
- --------------------- Controller (principal accounting
Joseph B. Trepani officer)
11
<PAGE>
INDEX TO EXHIBITS
-----------------
EXHIBIT
NO. DESCRIPTION
- ------- -----------
27 Financial Data Schedule for the Period Ended
7/31/96 (for SEC use only)
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Tech Data Corporation for the period ended July 31,
1996 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> JUL-31-1996
<CASH> 797
<SECURITIES> 0
<RECEIVABLES> 532,762
<ALLOWANCES> 24,163
<INVENTORY> 440,390
<CURRENT-ASSETS> 968,243
<PP&E> 60,282
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,077,584
<CURRENT-LIABILITIES> 672,657
<BONDS> 0
0
5
<COMMON> 64
<OTHER-SE> 395,860
<TOTAL-LIABILITY-AND-EQUITY> 1,077,584
<SALES> 2,048,802
<TOTAL-REVENUES> 2,048,802
<CGS> 1,905,488
<TOTAL-COSTS> 2,001,097
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,802
<INCOME-PRETAX> 36,903
<INCOME-TAX> 14,459
<INCOME-CONTINUING> 22,444
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,444
<EPS-PRIMARY> .57
<EPS-DILUTED> .57
</TABLE>
