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 October 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 November 29, 1996
- ---------------------------------------- ------------------
Common stock, par value $.0015 per share 43,238,422
<PAGE>
TECH DATA CORPORATION AND SUBSIDIARIES
--------------------------------------
Form 10-Q For The Quarter Ended October 31, 1996
------------------------------------------------
INDEX
-----
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheet as of
October 31, 1996 (unaudited) and
January 31, 1996 3
Consolidated Statement of Income
(unaudited) for the three and nine
months ended October 31, 1996 and 1995 4
Consolidated Statement of Cash Flows
(unaudited) for the nine months
ended October 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
All items required in Part II have been previously filed, have
been included in Part I of this report or are not applicable for
the quarter ended October 31, 1996.
SIGNATURES 10
2
<PAGE>
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except share amounts)
<TABLE>
<CAPTION>
October 31, January 31,
1996 1996
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,826 $ 1,154
Accounts receivable, less allowance for
doubtful accounts of $24,580 and $22,669 590,152 445,202
Inventories 641,203 465,422
Prepaid and other assets 56,112 39,010
------------ -----------
Total current assets 1,291,293 950,788
Property and equipment, net 62,997 61,610
Excess of cost over acquired net assets, net 6,119 6,376
Other assets, net 24,016 25,105
------------ -----------
$1,384,425 $1,043,879
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Revolving credit loans $ 339,585 $ 283,100
Current portion of long-term debt 231 519
Accounts payable 579,484 433,374
Accrued expenses 37,230 32,091
------------ -----------
Total current liabilities 956,530 749,084
Long-term debt 8,947 9,097
------------ -----------
965,477 758,181
------------ -----------
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; 43,200,360
and 37,930,655 issued and outstanding 65 57
Additional paid-in capital 224,798 130,045
Retained earnings 192,502 153,310
Cumulative translation adjustment 1,578 2,281
------------ -----------
Total shareholders' equity 418,948 285,698
------------ -----------
$1,384,425 $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 Nine months ended
October 31, October 31,
------------------------------- ------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $1,236,650 $843,286 $3,285,452 $2,185,582
------------ ------------ ------------ ------------
Cost and expenses:
Cost of products sold 1,150,695 784,601 3,056,183 2,030,568
Selling, general and
administrative expenses 54,023 42,179 149,632 119,697
------------ ------------ ------------ ------------
1,204,718 826,780 3,205,815 2,150,265
------------ ------------ ------------ ------------
Operating profit 31,932 16,506 79,637 35,317
Interest expense 4,409 4,825 15,211 14,829
------------ ------------ ------------ ------------
Income before income taxes 27,523 11,681 64,426 20,488
Provision for income taxes 10,775 4,639 25,234 8,149
------------ -----------
Net income $ 16,748 $ 7,042 $ 39,192 $ 12,339
============ ============ ============ ============
Net income per common share $ .38 $ .18 $ .95 $ .32
============ ============ ============ ============
Weighted average common shares
outstanding 44,641 38,171 41,046 38,068
============ ============ ============ =============
</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>
Nine months ended
October 31,
-------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $3,125,968 $2,066,067
Cash paid to suppliers and employees (3,215,839) (1,989,032)
Interest paid (15,197) (14,957)
Income taxes paid (29,521) (4,080)
------------ -----------
Net cash (used in) provided by
operating activities (134,589) 57,998
------------ -----------
Cash flows from investing activities:
Capital expenditures (13,547) (21,047)
------------ -----------
Cash flows from financing activities:
Proceeds from issuance of common stock 94,761 1,304
Net borrowings (repayments) under
revolving credit loan 56,485 (37,413)
Principal payments on long-term debt (438) (464)
------------ -----------
Net cash provided by (used in)
financing activities 150,808 (36,573)
------------ -----------
Net increase in cash and cash equivalents 2,672 378
Cash and cash equivalents at
beginning of period 1,154 496
------------ -----------
Cash and cash equivalents at end of period $ 3,826 $ 874
============ ===========
Reconciliation of net income to net cash
provided by (used in) operating
activities:
Net income $ 39,192 $ 12,339
------------ -----------
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 14,451 12,467
Provision for losses on accounts receivable 14,534 12,979
(Increase) decrease in assets:
Accounts receivable (159,484) (119,515)
Inventories (175,781) (14,438)
Prepaid and other assets (18,750) (2,558)
Increase (decrease) in liabilities:
Accounts payable 146,110 150,533
Accrued expenses 5,139 6,191
------------ -----------
Total adjustments (173,781) 45,659
------------ -----------
Net cash (used in) provided by
operating activities $ (134,589) $ 57,998
============ ===========
</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 October 31, 1996, and the results of their operations and
cash flows for the three and nine months ended October 31, 1996 and 1995. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The results of operations for the nine months ended October 31,
1996 are not necessarily indicative of the results that can be expected for the
entire fiscal year ending January 31, 1997.
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 October 31, 1996 and 1995
- --------------------------------------------
Net sales increased 46.6% to $1.24 billion in the third quarter of
fiscal 1997 compared to $843.3 million in the third quarter last year. 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. Adjusting for the effect of sales attributable to the launch of
Microsoft Windows 95 in the third quarter of last year, year-over-year sales
growth was 52.3%. The Company's domestic sales increased 50% while international
business advanced 25% in the third quarter of fiscal 1997 compared to the prior
year third quarter and adjusting for the effect of the Windows 95 sales, these
growth rates were 54% and 36%, respectively.
The cost of products sold as a percentage of net sales was 93.0% in the
third quarter of fiscal 1997, consistent with the prior year. This stability is
the result of moderation in competitive market conditions combined with the
Company's efforts to control other product costs such as freight.
Selling, general and administrative expenses increased 28.1% to $54.0
million in the third quarter of fiscal 1997 compared to $42.2 million last year
and as a percentage of net sales declined to 4.37%, compared to 5.0% in the
third quarter last year. The dollar value increase is primarily the result of
expanded employment and increases in other operating expenses needed to support
the increased volume of business.
As a result of the factors described above, operating profit increased
93.5% to $31.9 million, or 2.6% of net sales, in the third quarter of fiscal
1997, compared to $16.5 million, or 2.0% of net sales for the third quarter last
year.
Interest expense decreased in the third quarter of fiscal 1997 due to a
decrease in the average interest rate charged on the Company's floating interest
rate indebtedness, partially offset by an increase in the average outstanding
amount of such indebtedness.
As a result of the factors described above, net income increased 137.8%
to $16.7 million, or $.38 per share, in the third quarter of fiscal 1997
compared to $7.0 million, or $.18 per share, in the prior year comparable
quarter.
7
<PAGE>
Nine Months Ended October 31, 1996 and 1995
- -------------------------------------------
Net sales increased 50.3% to $3.29 billion in the first nine months of
fiscal 1997 compared to $2.19 billion in the same period last year. Net income
for the nine month period this year was $39.2 million, or $.95 per share, up
218% from the $12.3 million, or $.32 per share, in the same period last year.
(The underlying reasons for the fluctuations in the results of
operations for the nine months ended October 31, 1997 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 $134.6 million during the
first nine months of fiscal 1997 was primarily attributable growth in sales and
the resulting increase in accounts receivable.
Net cash used in investing activities of $13.5 million during the first
nine months of fiscal 1997 was a result of the Company making capital
expenditures to expand its management information systems, office facilities and
distribution centers. 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 $150.8 million during the
first nine months of fiscal 1997 reflects the net proceeds of $83.4 million from
the Company's July 1996 offering of 4.6 million shares of common stock combined
with additional borrowings under the Company's revolving loans of $56.5 million
and proceeds from stock option exercises of $11.4 million.
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 1998.
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 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.
8
<PAGE>
The Company attempts to control losses on credit sales by closely
monitoring customers' creditworthiness through its computer system which
contains detailed information on each customer's 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
also maintains 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 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
Items 1 and 7 of this Form 10-Q, should be considered in conjunction with the
information included within the Form 8-K.
9
<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 December 12, 1996
- --------------------- Directors and Chief
Steven A. Raymund Executive Officer
/s/ Jeffery P. Howells Senior Vice President of Finance December 12, 1996
- ---------------------- and Chief Financial Officer
Jeffery P. Howells (principal financial officer)
/s/ Joseph B. Trepani Vice President and Worldwide December 12, 1996
- --------------------- Controller (principal accounting
Joseph B. Trepani officer)
10
<PAGE>
INDEX TO EXHIBITS
-----------------
EXHIBIT
NO. DESCRIPTION
- ------- -----------------
27 Financial Data Schedule for the Period Ended
10/31/96 (for SEC Use Only)
<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
October 31, 1996 and is qualified in its entirety by reference to such
financial statements
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 3,826
<SECURITIES> 0
<RECEIVABLES> 614,732
<ALLOWANCES> 24,580
<INVENTORY> 641,203
<CURRENT-ASSETS> 1,291,293
<PP&E> 62,997
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,384,425
<CURRENT-LIABILITIES> 956,530
<BONDS> 0
0
5
<COMMON> 65
<OTHER-SE> 418,878
<TOTAL-LIABILITY-AND-EQUITY> 1,384,425
<SALES> 3,285,452
<TOTAL-REVENUES> 3,285,452
<CGS> 3,056,183
<TOTAL-COSTS> 3,205,815
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,211
<INCOME-PRETAX> 64,426
<INCOME-TAX> 25,234
<INCOME-CONTINUING> 39,192
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,192
<EPS-PRIMARY> .95
<EPS-DILUTED> .95
</TABLE>
