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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
---------------------------
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED EFFECTIVE OCTOBER 7, 1996)
FOR THE FISCAL YEAR ENDED JANUARY 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-14625
TECH DATA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------------------
FLORIDA
(State or other jurisdiction NO. 59-1578329
of incorporation or organization) (I.R.S. Employer Identification Number)
5350 TECH DATA DRIVE, CLEARWATER, FL 34620
(Address of principal executive offices) (Zip Code)
------------------------------------
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (813) 539-7429
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common stock, par value $.0015 per share.
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 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 by check mark if disclosure of delinquent filers pursuant to Item
405 of regulation S-K is not contained herein, and will not be contained to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference to Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 31, 1997: $938,276,000
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT MARCH 31, 1997
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<S> <C>
Common stock, par value $.0015 per share 43,335,078
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's Proxy Statement for use at the Annual Meeting of
Shareholders on June 10, 1997 is incorporated by reference in Part III of this
Form 10-K to the extent stated herein.
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PART I
ITEM 1. BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS
Tech Data Corporation (the "Company" or "Tech Data") was incorporated in
1974 to market data processing supplies such as tape, disk packs, and custom
and stock tab forms for mini and mainframe computers directly to end users. In
1984, the Company began marketing certain of its products to the newly emerging
market of microcomputer dealers and had withdrawn entirely from end-user sales,
broadened its product line to include hardware products, and completed its
transition to a wholesale distributor. The Company has since continually
expanded its product lines, customer base and geographical presence.
On May 31, 1989, the Company entered the Canadian market through the
acquisition of a distributor subsequently named Tech Data Canada Inc. ("Tech
Data Canada"). Tech Data Canada serves customers in all Canadian provinces and
carries many of the same products offered by the Company.
On March 24, 1994, the Company completed the non-cash exchange of
1,144,000 shares of its common stock for all of the outstanding capital stock
of Softmart International, S.A. (subsequently named Tech Data France, SNC)
("Tech Data France"), a privately-held distributor of personal computer
products based in Paris, France. Tech Data France is the largest French
wholesale distributor of microcomputer products, representing leading
manufacturers and publishers such as Compaq, Hewlett-Packard, IBM, Lotus and
Microsoft. The acquisition was accounted for as a pooling-of-interests
effective February 1, 1994; however, due to the immaterial size of the
acquisition in relation to the consolidated financial statements, prior period
financial statements were not restated.
To complement its Miami-based Latin American export business, the Company
opened a 33,000 square-foot distribution center near Sao Paulo, Brazil in
February 1997.
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company operates in only one business segment.
(C) NARRATIVE DESCRIPTION OF BUSINESS
GENERAL
The Company is a leading distributor of microcomputer-related hardware and
software products to value-added resellers ("VARs"), corporate resellers and
retailers (collectively with VARs, "resellers") throughout the United States,
France, Canada, Latin America and the Caribbean. The Company purchases its
products directly from more than 900 manufacturers of microcomputer hardware
and publishers of software in large quantities, maintains a stocking inventory
of more than 45,000 products and sells to an active base of over 55,000
customers. The Company provides a cost-effective link between this large
number of vendors and customers.
The Company provides its customers with leading products in systems,
peripherals, networking, and software, which accounted for 25%, 39% 19% and
17%, respectively, of sales in fiscal 1997. The Company offers products from
manufacturers and publishers such as Apple, Bay Networks, Canon, Compaq, Cisco,
Corel, Digital Equipment, Epson, Hewlett-Packard, IBM, Intel, Intuit, Lotus,
Kingston, Microsoft, NEC Technologies, Novell, Okidata, Seagate, Symantec,
3Com, Toshiba, U.S. Robotics and Western Digital.
In addition to products, the Company provides its customers with a
high-level of service including pre- and post-sale technical support through a
staff of technical advisers who assist customers by telephone either for free
or on a user-fee basis. The Company offers educational and promotional
seminars on the products sold by the Company in various cities around the
United States, France, Canada, and Latin America. The Company also provides
on-line ordering, credit and advertising and other marketing assistance to its
customers using funds and materials provided by manufacturers and publishers.
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INDUSTRY
Wholesale distribution has proven to be well-suited for manufacturers and
publishers of microcomputer products. The large number and diversity of
resellers makes it cost efficient for manufacturers and publishers to rely on
wholesale distributors to assume responsibility for at least some portion of
their distribution, credit, marketing and support requirements. Similarly, due
to the large number of microcomputer product manufacturers and publishers, VARs
(which integrate proprietary software with products provided by manufacturers
and distributors), computer resellers and retailers often cannot establish
direct purchasing relationships. Instead they rely on wholesale distributors,
such as Tech Data, to satisfy a significant portion of their product,
financing, marketing and technical support needs.
The rates of growth of the wholesale distribution segment of the
microcomputer industry and the Company continue to outpace that of the
microcomputer industry as a whole for four principal reasons. First, as a
result of the use of open systems and off-the-shelf components, hardware and
software products are increasingly viewed as commodities. The resulting price
competition, coupled with rising selling costs and shorter product life cycles,
make it difficult for manufacturers and publishers to efficiently sell directly
to resellers and has prompted them to rely on more cost-efficient methods of
distribution. Second, customers are increasingly relying on wholesale
distributors such as Tech Data for inventory management and flexible customer
financing, rather than stocking large inventories themselves and maintaining
credit lines to finance working capital needs. Third, restrictions by certain
major manufacturers on sales through wholesale distributors were gradually
eased commencing in 1991. Since the beginning of 1995, the Company has been
able to sell certain of those manufacturers' products under more competitive
terms and conditions ("open-sourcing"). This has substantially reduced the
advantage that aggregators had over distributors such as the Company.
Open-sourcing has also contributed to price competition and margin decline in
the industry. Fourth, consolidation in the wholesale distribution industry
continues as access to financial resources and economies of scale become more
critical.
These factors have benefited distributors like Tech Data, which offer
vendors an efficient mechanism for marketing, distributing and supporting their
products. The Company has a competitive advantage over certain other
distributors which do not have the low cost structure to compete on the basis
of price and service, have not invested in sophisticated management information
systems and do not have adequate access to capital to finance their growth.
BUSINESS STRATEGY
To maintain its leadership position in wholesale distribution, the
Company's business strategy includes the following main elements:
CUSTOMER FOCUS. Tech Data has historically focused its marketing on
VARs. The VAR market is considered particularly attractive by the
Company because it sources product almost exclusively from distributors
and is expected to be one of the fastest growing segments of the
microcomputer industry. Management believes this will remain one of the
fastest growing segments as businesses of all sizes increasingly rely on
VARs. The Company also has sought to increase its market share with fast
growing retailers and computer superstores (such as CompUSA), as
well as corporate resellers (such as CompuCom Systems) and franchisees
and other affiliates of aggregators (such as MicroAge). VARs currently
represent approximately 61% of the Company's total sales with franchisees
and corporate resellers accounting for 25% and retailers accounting for
14%.
In order to differentiate itself and foster customer loyalty, the
Company provides additional customer services such as flexible customer
financing, product specifications, electronic catalogues, electronic
order entry, pre-and post-sale technical support, configuration of
products, private label delivery, low cost delivery, generally in
one-to-two days, flexible product return policies and customer education
programs. The Company believes its strategy of not competing with its
customer base also fosters customer loyalty.
OPERATING EFFICIENCIES AND ECONOMIES OF SCALE. The Company has
pursued a strategy of profitable revenue growth by achieving operating
efficiencies through centralized management and control, stringent cost
controls, automation, and economies of scale. The Company strictly
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controls selling, general and administrative expenses; utilizes its
highly automated order placement and processing systems to efficiently
manage inventory and shipments and to reduce transaction costs; and
realizes economies of scale in product purchasing, financing and working
capital management.
MANAGEMENT INFORMATION SYSTEMS. In order to further improve its
operating efficiencies and services to its customers, the Company
invested approximately $29 million in a scalable, state-of-the-art
computer information system which was implemented in December 1994. This
system, which currently supports the Company's U.S., Canadian and Latin
American export operations, allows the Company to improve operating
efficiencies as described above and to offer additional services such as
expanding its electronic commerce capabilities, including electronic data
interchange and Tech Data On-Line electronic ordering and information
systems. The Company plans to make its ordering system available on its
World Wide Web site in the near future. This system will also assist the
Company in assuming more of the "back office" functions for both its
vendors and customers. The Company believes that growth in its
electronic commerce capabilities will provide incremental economies of
scale and further reduce transaction costs.
BROAD PRODUCT MIX. The Company offers its customers a broad
assortment of leading technology products. Currently the Company offers
more than 45,000 products from more than 900 manufacturers and
publishers. By offering a broad product assortment, the Company can
benefit from its customers' increasing desire to more efficiently procure
product by reducing the number of their direct vendor relationships. The
Company is continually broadening its product assortment and has recently
expanded its offerings of communication products as a result of the
convergence of the computing and telecommunication markets. The Company
maintains a balanced product line of systems, peripherals, networking
products and software to minimize the effects of fluctuation in supply
and demand
MARKET SHARE AND GEOGRAPHIC GROWTH. The Company's plan is to
utilize its strong financial and industry positions to continue to expand
its business internally and through possible acquisitions, by adding new
product lines, increasing market share through competitive pricing,
providing additional value added services and expanding internationally.
In addition, such resources allow the Company to expand complementary
business opportunities such as customer education and the outsourcing of
technical support.
VENDOR RELATIONS
Due to the proliferation of relatively small VARs and computer dealers
which purchase a limited volume of products from any single manufacturer, it is
more cost efficient for most manufacturers to rely upon distributors, such as
Tech Data, rather than to maintain their own sales forces to market, distribute
and support products. The Company's strong financial and industry positions
have enabled it to obtain contracts with most leading manufacturers and
publishers. In addition, the advent of open-sourcing has enabled the Company
to cost effectively sell the products of certain major manufacturers to
customers which it had previously been restricted from servicing.
The Company purchases products directly from more than 900 manufacturers
and publishers generally on a nonexclusive basis. The Company's vendor
agreements are believed to be in the form customarily used by each manufacturer
and typically contain provisions which allow termination by either party upon
60 days notice. Such agreements generally contain stock rotation and price
protection provisions which reduce, in part, the Company's risk of loss due to
slow-moving inventory, vendor price reductions, product updates or
obsolescence. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Asset Management." Virtually none of the Company's
supplier agreements require it to sell a specified quantity of products or
restrict the Company from selling similar products manufactured by competitors.
Consequently, the Company has the flexibility to terminate or curtail sales of
one product line in favor of another product line as a result of technological
change, pricing considerations, product availability, customer demand and
vendor distribution policies. No single vendor accounted for more than 10% of
the Company's net sales during fiscal 1997, 1996 or 1995, except sales of
Compaq Computer Corporation products which accounted for 12% of net sales in
fiscal 1997.
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In addition to providing manufacturers and publishers with one of the
largest bases of VARs in the United States, France, Canada, Latin America and
the Caribbean, the Company also offers manufacturers and publishers the
opportunity to participate in a number of special promotions, training programs
and marketing services targeted to the needs of its customers.
From time to time, the demand for certain products sold by the Company
exceeds the supply available from the manufacturer or publisher. The Company
then receives an allocation of the products available. Management believes
that the Company's ability to compete is not adversely affected by these
periodic shortages and the resulting allocations.
PRODUCTS, SERVICES AND CUSTOMERS
The Company sells more than 45,000 microcomputer products in systems,
peripherals, networking and software purchased directly from manufacturers and
publishers in large quantities for sale to an active customer base of more than
55,000 VARs, corporate resellers and retailers. The Company pursues a strategy
of expanding its product line to offer its customers a broad assortment of
products. Based upon the convergence of computing and communication
technologies, the Company has expanded its offering of communication products.
The Company's VAR customers typically do not have the resources to
establish a large number of direct purchasing relationships or stock
significant product inventories. These resellers generally rely on
distributors as their principal source of computer products and financing.
Corporate resellers and retailers, on the other hand, often establish direct
relationships with manufacturers and publishers for their more popular
products, but utilize distributors for slower-moving products from numerous
smaller manufacturers and publishers and for fill-in orders of fast moving
products. The Company's backlog of orders is not considered material to an
understanding of its business. No single customer accounted for more than 4%
of the Company's net sales during fiscal 1997, 1996 or 1995.
The Company delivers products throughout the United States, France,
Canada, Latin America and the Caribbean from its eleven distribution centers in
Miami, Florida; Atlanta, Georgia; Paulsboro, New Jersey; Ft. Worth, Texas;
South Bend, Indiana; Ontario, California; Union City, California; Mississauga,
Ontario (Canada); Richmond, British Columbia (Canada); Bobigny (Paris), France
and Sao Paulo, Brazil. Locating distribution centers near its customers
enables the Company to deliver products on a timely basis, thereby reducing
customers' need to invest in inventory.
SALES AND MARKETING
Currently, the Company's sales force consists of approximately 50 field
sales representatives and 845 inside telemarketing sales representatives.
Field sales representatives are located in major metropolitan areas. Each
field representative is supported by a team of inside telemarketing sales
representatives covering a designated territory. Territories with no field
representation are serviced exclusively by the inside telemarketing sales
representatives. Customers rely upon the Company's electronic ordering and
information systems, product catalogs and frequent mailings as sources for
product information, including prices.
Customers typically call their inside sales representative toll-free to
place orders for same-day or next-day shipment. The Company's on-line computer
system allows the inside sales representatives to check for current stocking
levels in each of the seven United States distribution centers. Likewise,
inside sales representatives in Canada and France can check on stocking levels
in the two Canadian and one French distribution center, respectively. Through
"Tech Data On-Line", the Company's proprietary electronic on-line system,
domestic customers can gain remote access to the Company's data processing
system to check product availability and pricing and to place an order.
Certain of the Company's larger customers have available electronic data
interchange ("EDI") services whereby orders, order acknowledgments, invoices,
inventory status reports, customized pricing information and other industry
standard EDI transactions are consummated on-line which improves efficiency and
timeliness for both the Company and the customers. If the product is in stock
and the customer has available credit, customer orders received by 5:00 p.m.
local time are generally shipped the same day from the distribution facility
nearest the customer. The Company's centralized processing capability
generally permits a customer located within 250 miles of a distribution center
to receive products by inexpensive ground delivery service the next day.
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The Company provides comprehensive training to its field and inside sales
representatives regarding technical characteristics of products and the
Company's policies and procedures. Each new sales representative attends a
six-week course provided in-house by the Company. In addition, the Company's
ongoing training program is supplemented by product seminars offered by
manufacturers and publishers.
COMPETITION
The Company operates in a market characterized by intense competition.
Competition within the industry is based on product availability, price, credit
availability, delivery and various services and support provided by the
distributor to the reseller. The Company believes that it is equipped to
compete effectively with other distributors in these areas. Major competitors
include Ingram Micro, Inc., Merisel, Inc. and a variety of others. Some of the
Company's competitors are larger and have greater resources than the Company.
The Company also faces competition from manufacturers and publishers who
can offer customers lower prices than the Company. The Company nevertheless
believes that in the majority of cases, manufacturers and publishers choose to
sell products though distributors rather than directly because of the
relatively small volume and high selling costs associated with numerous small
orders. Management also believes that the Company's prompt delivery of
products and efficient handling of returns provide an important competitive
advantage over manufacturers' and publishers' efforts to market their products
directly.
EMPLOYEES
On January 31, 1997, the Company had approximately 3,400 full-time
employees. The Company enjoys excellent relations with its employees, all of
whom are non-union.
(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
The geographic areas in which the Company operates are the United States
(including exports to Latin America and the Caribbean) France, Canada and
Brazil. See Note 10 of Notes to Consolidated Financial Statements regarding
the geographical distribution of the Company's net sales, operating income and
identifiable assets.
EXECUTIVE OFFICERS
STEVEN A. RAYMUND, CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE
OFFICER, age 41, has been employed by the Company since 1981, serving as Chief
Executive Officer since January 1986 and as Chairman of the Board of Directors
since April 1991. He has a B.S. Degree in Economics from the University of
Oregon and a Masters Degree from the Georgetown University School of Foreign
Service.
ANTHONY A. IBARGUEN, PRESIDENT AND CHIEF OPERATING OFFICER, age 37, joined
the Company in September 1996 as President of the Americas and was appointed
President and Chief Operating Officer in March 1997. Prior to joining the
Company, he was employed by ENTEX Information Services, Inc. from August 1993 to
August 1996 as Executive Vice President of Sales and Marketing. From June 1990
to August 1993, he was employed by JWP, Inc. most recently as a Vice President.
Mr. Ibarguen holds a B.S. Degree in Marketing from Boston College and a Masters
in Business Administration Degree from Harvard University.
JEFFERY P. HOWELLS, EXECUTIVE VICE PRESIDENT OF FINANCE AND CHIEF
FINANCIAL OFFICER, age 40, joined the Company in October 1991 as Vice President
of Finance and assumed the responsibilities of Chief Financial Officer in March
1992. In March 1993, he was promoted to Senior Vice President of Finance and
Chief Financial Officer and was promoted to Executive Vice President of Finance
and Chief Financial Officer in March 1997. From June 1991 through September
1991 he was employed as Vice President of Finance of Inex Vision Systems. From
1979 to May 1991 he was employed by Price Waterhouse, most recently as a Senior
Audit Manager. Mr. Howells is a Certified Public Accountant and holds a B.B.A.
Degree in Accounting from Stetson University.
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JAMES T. POLLARD, EXECUTIVE VICE PRESIDENT OF OPERATIONS AND CHIEF
INFORMATION OFFICER, age 50, joined the Company in October 1993 as Senior Vice
President and Chief Information Officer. In March 1997 he was promoted to
Executive Vice President of Operations and Chief Information Officer. Prior to
joining the Company, he was employed by Florida Power Corporation from
September 1990 through September 1993, most recently as Director - Information
Services. From November 1984 to September 1990 he was employed by Southern
California Gas Company as Senior Vice President. Mr. Pollard holds a B.S.
Degree in Business Finance from the University of Utah and a Masters in
Business Administration Degree from the University of South Florida.
PEGGY K. CALDWELL, SENIOR VICE PRESIDENT OF MARKETING, age 51, joined the
Company in May 1992. Prior to joining the Company, she was employed by
International Business Machines Corporation for 25 years, most recently serving
in a variety of senior management positions in the National Distribution
Division. Ms. Caldwell holds a B.S. Degree in Mathematics and Physics from
Bucknell University.
TIMOTHY J. CURRAN, SENIOR VICE PRESIDENT OF SALES, age 45, joined the
Company in April 1997. Prior to joining the Company, he was employed by
Panasonic Communications and Systems Company (including various other Panasonic
affiliates) from 1983 to 1997 serving in a variety of senior management
positions. Mr. Curran holds a B.A. Degree in History from the University of
Notre Dame and a Ph.D. in International Relations from Columbia University.
LAWRENCE W. HAMILTON, SENIOR VICE PRESIDENT OF HUMAN RESOURCES, age 39,
joined the Company in August 1993 as Vice President of Human Resources and was
promoted to Senior Vice President in March 1996. Prior to joining the Company,
he was employed by Bristol-Myers Squibb Company from 1985 to August 1993, most
recently as Vice President - Human Resources and Administration of Linvatec
Corporation (a division of Bristol-Myers Squibb Company). Mr. Hamilton holds a
B.A. Degree in Political Science from Fisk University and a Masters of Public
Administration, Labor Policy from the University of Alabama.
YUDA SAYDUN, SENIOR VICE PRESIDENT AND GENERAL MANAGER - LATIN AMERICA,
age 43, joined the Company in May 1993 as Vice President and General Manager -
Latin America. In March 1997 he was promoted to Senior Vice President and
General Manager - Latin America. Prior to joining the Company, he was employed
by American Express Travel Related Services Company, Inc. from 1982 to May
1993, most recently as Division Vice President, Cardmember Marketing. Mr.
Saydun holds a B.S. Degree in Political and Diplomatic Sciences from Universite
Libre de Bruxelles and a Masters of Business Administration Degree,
Finance/Marketing from U.C.L.A.
THEODORE F. AUGUSTINE, VICE PRESIDENT OF DISTRIBUTION AND LOGISTICS, age
50, joined the Company in July 1996. Prior to joining the Company he served as
President of M-Group Logistics, Inc. from June 1995 to July 1996. From 1989 to
June 1995 he was employed by The Eli Witt Company as Executive Vice President
and Chief Operations Officer. Mr. Augustine holds a Masters of Business
Administration Degree from Loyola College.
PATRICK O. CONNELLY, VICE PRESIDENT OF WORLDWIDE CREDIT SERVICES, age 51,
joined the Company in August 1994. Prior to joining the Company, he was
employed by Unisys Corporation for nine years as Worldwide Director of Credit.
Mr. Connelly holds a B.A. Degree in History and French from the University of
Texas at Austin.
CHARLES V. DANNEWITZ, VICE PRESIDENT OF TAXES, age 42, joined the Company
in February 1995. Prior to joining the Company, he was employed by Price
Waterhouse for 13 years, most recently as a Tax Partner. Mr. Dannewitz is a
Certified Public Accountant and holds a B.S. Degree in Accounting from Illinois
Wesleyan University.
BRUCE D. EDEN, VICE PRESIDENT OF MIS AND CHIEF TECHNOLOGY OFFICER, age 54,
joined the Company in January 1994 as Director of Information Technology. In
February 1995, he was promoted to Vice President of MIS. Prior to joining the
Company, Mr. Eden was engaged as an independent consultant from February 1993 to
December 1993. From March 1987 to February 1993 Mr. Eden was employed by
Pacific Enterprises as Director of Information Systems. Mr. Eden holds a B.A.
Degree in Economics from CUNY.
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ARTHUR W. SINGLETON, VICE PRESIDENT, TREASURER AND SECRETARY, age 36,
joined the Company in January 1990 as Director of Finance and was appointed
Treasurer and Secretary in April 1991. In February 1995, he was promoted to
Vice President, Treasurer and Secretary. Prior to joining the Company, Mr.
Singleton was employed by Price Waterhouse from 1982 to December 1989, most
recently as an Audit Manager. Mr. Singleton is a Certified Public Accountant
and holds a B.S. Degree in Accounting from Florida State University.
JOSEPH B. TREPANI, VICE PRESIDENT AND WORLDWIDE CONTROLLER, age 36, joined
the Company in March 1990 as Controller and held the position of Director of
Operations from October 1991 through January 1995. In February 1995, he was
promoted to Vice President and Worldwide Controller. Prior to joining the
Company, Mr. Trepani was Vice President of Finance for Action Staffing, Inc.
from July 1989 to February 1990. From 1982 to June 1989, he was employed by
Price Waterhouse. Mr. Trepani is a Certified Public Accountant and holds a
B.S. Degree in Accounting from Florida State University.
DAVID R. VETTER, VICE PRESIDENT AND GENERAL COUNSEL, age 38, joined the
Company in June 1993. Prior to joining the Company, he was employed by the law
firm of Robbins, Gaynor & Bronstein, P.A. from 1984 to June 1993, most recently
as a partner. Mr. Vetter is a member of the Florida Bar and holds a B.A.
Degree in English and Economics from Bucknell University and a J.D. Degree from
the University of Florida.
ITEM 2. PROPERTIES
Tech Data's executive offices, located in Clearwater, Florida, are owned
by the Company. In addition, the Company leases distribution centers in Miami,
Florida; Atlanta, Georgia; Paulsboro, New Jersey; Ft. Worth, Texas; South Bend,
Indiana; Ontario, California; Union City, California; Mississauga, Ontario
(Canada); Richmond, British Columbia (Canada); Bobigny (Paris), France; and Sao
Paulo, Brazil. The Company also operates training centers in nine cities in
the U.S. and Canada.
In December 1996, the Company opened a new 254,000-square-foot
distribution center in Ft. Worth, Texas, replacing its former
50,000-square-foot facility. During fiscal 1997, the Company began a program
to significantly expand three of its other U.S. distribution centers in
Southern California, Southern New Jersey and Atlanta, Georgia. Upon completion
of this expansion program, the Company will have total square footage at its
distribution centers of approximately 1,900,000-square-feet. The facilities of
the Company are substantially utilized, well-maintained and are adequate to
conduct the Company's current business.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There have been no matters submitted to a vote of security holders during
the last quarter of the fiscal year ended January 31, 1997.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
The Company's common stock is traded on the Nasdaq National Market tier of
The Nasdaq Stock Market under the symbol TECD. The Company has not paid cash
dividends since fiscal 1983. The Board of Directors does not intend to
institute a cash dividend payment policy in the foreseeable future. The table
below presents the quarterly high and low sales prices for the Company's common
stock as reported by The Nasdaq Stock Market. The approximate number of
shareholders as of January 31, 1997 was 15,000.
<TABLE>
<CAPTION>
Sales Price
-------------------
FISCAL YEAR 1997 High Low
- ---------------- -------- ---------
<S> <C> <C>
Fourth quarter..................................... $36 3/8 $21 5/8
Third quarter...................................... 30 3/8 22 1/8
Second quarter..................................... 24 3/4 18 1/4
First quarter...................................... 19 1/2 13
FISCAL YEAR 1996
- ----------------
Fourth quarter..................................... $17 7/8 $11 1/4
Third quarter...................................... 14 3/4 11 1/8
Second quarter..................................... 15 1/4 8 1/4
First quarter...................................... 14 1/4 9 5/8
</TABLE>
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ITEM 6. SELECTED FINANCIAL DATA
FIVE YEAR FINANCIAL SUMMARY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
1997 1996 1995 1994 1993
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales $4,598,941 $3,086,620 $2,418,410 $1,532,352 $ 978,862
---------- ---------- ---------- ---------- ----------
Cost and expenses:
Cost of products sold 4,277,160 2,867,226 2,219,122 1,397,967 885,292
Selling, general and
administrative expenses 206,770 163,790 127,951 79,390 57,556
---------- ---------- ---------- ---------- ----------
4,483,930 3,031,016 2,347,073 1,477,357 942,848
---------- ---------- ---------- ---------- ----------
Operating profit 115,011 55,604 71,337 54,995 36,014
Interest expense 21,522 20,086 13,761 5,008 3,973
---------- ---------- ---------- ---------- ----------
Income before income taxes 93,489 35,518 57,576 49,987 32,041
Provision for income taxes 36,516 13,977 22,664 19,774 12,259
---------- ---------- ---------- ---------- ----------
Net income $ 56,973 $ 21,541 $ 34,912 $ 30,213 $ 19,782
========== ========== ========== ========== ==========
Net income per common share* $ 1.35 $ .56 $ .91 $ .83 $ .63
========== ========== ========== ========== ==========
Dividends per common share -- -- -- -- --
========== ========== ========== ========== ==========
Weighted average common
shares outstanding* 42,125 38,138 38,258 36,590 31,402
========== ========== ========== ========== ==========
BALANCE SHEET DATA:
Working capital $ 351,993 $ 201,704 $ 182,802 $ 165,366 $ 89,344
Total assets 1,545,294 1,043,879 784,429 506,760 326,885
Revolving credit loans 396,391 283,100 304,784 153,105 89,198
Long-term debt 8,896 9,097 9,682 9,467 9,638
Shareholders' equity 438,381 285,698 260,826 213,326 115,047
</TABLE>
* Amounts have been adjusted to reflect the two-for-one stock split declared
on March 21, 1994.
10
<PAGE> 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth the percentage of cost and expenses to net
sales derived from the Company's Consolidated Statement of Income for each of
the three preceding fiscal years.
<TABLE>
<CAPTION>
Percentage of net sales
-----------------------
Year Ended January 31,
------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Net sales...................................... 100.0% 100.0% 100.0%
----- ----- -----
Cost and expenses:
Cost of products sold.......................... 93.0 92.9 91.7
Selling, general and administrative expenses... 4.5 5.3 5.3
----- ----- -----
97.5 98.2 97.0
----- ----- -----
Operating profit............................... 2.5 1.8 3.0
Interest expense............................... .5 .6 .6
----- ----- -----
Income before income taxes..................... 2.0 1.2 2.4
Provision for income taxes..................... .8 .5 .9
----- ----- -----
Net income..................................... 1.2% .7% 1.5%
===== ===== =====
</TABLE>
FISCAL YEARS ENDED JANUARY 31, 1997 AND 1996
Net sales increased 49.0% to $4.6 billion in fiscal 1997 compared to $3.1
billion in the prior 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 market share. The rate of growth in fiscal year 1997
was also positively impacted by a lower growth rate in the prior comparable
period as the Company was recovering from the effects of the business
interruptions caused by the conversion to a new computer system in December
1994. The Company's U.S. and international sales grew 51% and 36%
respectively, in fiscal 1997 compared to the prior year. The Company's
international sales in fiscal 1997 were approximately 13% of consolidated net
sales.
The cost of products sold as a percentage of net sales increased from
92.9% in fiscal 1996 to 93.0% in fiscal 1997. This increase is a 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 by 26.2% from
$163.8 million in fiscal 1996 to $206.8 million in fiscal 1997, and as a
percentage of net sales decreased to 4.5% in fiscal 1997 from 5.3% in the prior
year. This decline in selling, general and administrative expenses as a
percentage of net sales is attributable to greater economies of scale the
Company realized during fiscal 1997 in addition to improved operating
efficiencies. The dollar value increase in selling, general and administrative
expenses is primarily a 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 in fiscal
1997 increased 106.8% to $115.0 million, or 2.5% of net sales, compared to
$55.6 million, or 1.8% of net sales, in fiscal 1996.
Interest expense increased 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. Interest expense was
further moderated in fiscal 1997 by the receipt of net proceeds of
approximately $83.3 million from the Company's July 1996 common stock offering,
which proceeds were used to reduce indebtedness.
Net income in fiscal 1997 increased 164.5% to $57.0 million, or $1.35 per
share, compared to $21.5 million, or $.56 per share, in the prior year.
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"), which is effective for the
11
<PAGE> 12
Company's fiscal year ending January 31, 1997. FAS 123 encourages, but does
not require, companies to recognize compensation expense based on the fair
value of grants of stock, stock options and other equity investments to
employees. Although expense recognition for employee stock-based compensation
is not mandatory, FAS 123 requires that companies not adopting must disclose
the pro forma effect on net income and earnings per share. The Company will
continue to apply prior accounting rules and make pro forma disclosures as
required. See Note 6 of Notes to Consolidated Financial Statements for the pro
forma effect on net income and earnings per share.
FISCAL YEARS ENDED JANUARY 31, 1996 AND 1995
Net sales increased 27.6% to $3.1 billion in fiscal 1996 compared to $2.4
billion in the prior year. This increase is attributable to the addition of
new product lines and the expansion of existing product lines combined with
increases in the Company's market share. The rate of growth in fiscal year
1996 is lower than the rate of growth in the prior year as the Company
continued to recover from the effects of the business interruptions caused by
the computer system conversion in December 1994. The Company's international
sales in fiscal 1996 were approximately 14% of consolidated net sales compared
to 13% in fiscal 1995.
The cost of products sold as a percentage of net sales increased from
91.7% in fiscal 1995 to 92.9% in fiscal 1996. This increase is a result of
competitive market prices, 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, as well as certain freight concessions made with customers in
order to ensure timely delivery of product during the first and second quarters
of fiscal 1996.
Selling, general and administrative expenses increased from $128.0 million
in fiscal 1995 to $163.8 million in fiscal 1996, and as a percentage of net
sales were 5.3% in fiscal 1996 and fiscal 1995. The dollar value increase in
selling, general and administrative expenses is primarily a result of expanded
employment and increases in other administrative expenses needed to support the
increased volume of business, as well as expenses associated with the new
computer system.
As a result of the factors discussed above, operating profit in fiscal
1996 decreased 22.1% to $55.6 million, or 1.8% of net sales, compared to $71.3
million, or 3.0% of net sales, in fiscal 1995.
Interest expense increased due to an increase in the Company's average
outstanding indebtedness, combined with increases in short-term interest rates
on the Company's floating rate indebtedness.
Net income in fiscal 1996 decreased 38.3% to $21.5 million, or $.56 per
share, compared to $34.9 million, or $.91 per share, in the prior year.
IMPACT OF INFLATION
The Company has not been adversely affected by inflation as technological
advances and competition within the microcomputer industry have generally
caused prices of the products sold by the Company to decline. Management
believes that any price increases could be passed on to its customers, as
prices charged by the Company are not set by long-term contracts.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities of $188.6 million in fiscal 1997 was
primarily attributable to growth in sales and the resulting increases in
accounts receivable and inventories.
Net cash used in investing activities of $21.3 million in fiscal 1997 was
a result of the Company making capital expenditures to expand its management
information system capability, office facilities and distribution centers. The
Company expects to make capital expenditures of approximately $50 million
during fiscal 1998 to further expand its management information system
capability, office facilities and distribution centers.
12
<PAGE> 13
Net cash provided by financing activities of $209.3 million in fiscal 1997
was provided by additional borrowings of $113.3 million under the Company's
revolving credit loans in addition to net proceeds of approximately $83.3
million from the July 1996 common stock offering.
In May 1996, the Company entered into a new $290 million, three-year,
multi-currency revolving credit facility. In January 1997, the Company
increased its accounts receivable securitization program from $250 million to
$300 million (which was further increased to $325 million in February 1997).
As of January 31, 1997, the Company had total available credit lines of
approximately $600 million ($625 million as of February 28, 1997), of which
$396 million was outstanding.
The Company has historically relied upon cash generated from operations,
bank credit lines, trade credit from its vendors and proceeds from public
offerings of its common stock to satisfy its capital needs and finance its
growth. Management 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 for the
year ending January 31, 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.
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 has 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 products on
a prepay, credit card, cash on delivery and floorplan 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
and 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-K, should be considered in conjunction with the
information included within the Form 8-K.
13
<PAGE> 14
ITEM 8. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Tech Data Corporation:
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of income, of changes in shareholders' equity
and of cash flows present fairly, in all material respects, the financial
position of Tech Data Corporation and its subsidiaries at January 31, 1997 and
1996, and the results of their operations and their cash flows for each of the
three years in the period ended January 31, 1997, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Tampa, Florida
March 18, 1997
REPORT OF MANAGEMENT
To Our Shareholders:
The management of Tech Data Corporation is responsible for the
preparation, integrity and objectivity of the consolidated financial statements
and related financial information contained in this Annual Report. The
financial statements have been prepared by the Company in accordance with
generally accepted accounting principles and, in the judgment of management,
present fairly and consistently the Company's financial position and results of
operations. The financial statements and other financial information in this
report include amounts that are based on management's best estimates and
judgments and give due consideration to materiality.
The Company maintains a system of internal accounting controls to provide
reasonable assurance that assets are safeguarded and that transactions are
executed in accordance with management's authorization and recorded properly to
permit the preparation of financial statements in accordance with generally
accepted accounting principles. The design, monitoring and revisions of the
system of internal accounting controls involves, among other things,
management's judgment with respect to the relative cost and expected benefits
of specific control measures.
The Audit Committee of the Board of Directors is responsible for
recommending to the Board, subject to shareholder approval, the independent
certified public accounting firm to be retained each year. The Audit committee
meets periodically with the independent accountants and management to review
their performance and confirm that they are properly discharging their
responsibilities. The independent accountants have direct access to the Audit
Committee to discuss the scope and results of their work, the adequacy of
internal accounting controls and the quality of financial reporting.
Steven A. Raymund Jeffery P. Howells
Chairman of the Board Directors Executive Vice President of Finance
and Chief Executive Officer and Chief Financial Officer
March 18, 1997
14
<PAGE> 15
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
January 31,
--------------------------
1997 1996
----------- ----------
<C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 661 $ 1,154
Accounts receivable, less allowance
of $23,922 and $22,669 633,579 445,202
Inventories 759,974 465,422
Prepaid and other assets 55,796 39,010
---------- ----------
Total current assets 1,450,010 950,788
Property and equipment, net 65,597 61,610
Excess of cost over acquired net assets, net 5,922 6,376
Other assets, net 23,765 25,105
---------- ----------
$1,545,294 $1,043,879
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Revolving credit loans $ 396,391 $ 283,100
Current portion of long-term debt 201 519
Accounts payable 658,732 433,374
Accrued expenses 42,693 32,091
---------- ----------
Total current liabilities 1,098,017 749,084
Long-term debt 8,896 9,097
---------- ----------
1,106,913 758,181
---------- ----------
Commitments and contingencies (Note 8)
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; 43,291,423
and 37,930,655 issued and outstanding 65 57
Additional paid-in capital 226,577 130,045
Retained earnings 210,283 153,310
Cumulative translation adjustment 1,451 2,281
---------- ----------
Total shareholders' equity 438,381 285,698
---------- ----------
$1,545,294 $1,043,879
========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these financial statements.
15
<PAGE> 16
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Year ended January 31,
--------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net sales $4,598,941 $3,086,620 $2,418,410
---------- ---------- ----------
Cost and expenses:
Cost of products sold 4,277,160 2,867,226 2,219,122
Selling, general and administrative expenses 206,770 163,790 127,951
---------- ---------- ----------
4,483,930 3,031,016 2,347,073
---------- ---------- ----------
Operating profit 115,011 55,604 71,337
Interest expense 21,522 20,086 13,761
---------- ---------- ----------
Income before income taxes 93,489 35,518 57,576
Provision for income taxes 36,516 13,977 22,664
---------- ---------- ----------
Net income $ 56,973 $ 21,541 $ 34,912
========== ========== ==========
Net income per common share $ 1.35 $ .56 $ .91
========== ========== ==========
Weighted average common shares outstanding 42,125 38,138 38,258
========== ========== ==========
</TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL CUMULATIVE TOTAL
--------------- ------------- PAID-IN RETAINED TRANSLATION SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT EQUITY
------ ------ ------ ------ ------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance -- January 31, 1994 227 $5 36,547 $54 $126,091 $ 87,176 $ -- $213,326
Issuance of common stock
in business combination 1,144 3 9,681 9,684
Issuance of common stock
for stock options
exercised and related tax
benefit 117 1,856 1,856
Net income 34,912 34,912
Translation adjustments 1,048 1,048
--- --- ------ --- -------- -------- ------ --------
Balance -- January 31, 1995 227 5 37,808 57 127,947 131,769 1,048 260,826
Issuance of common stock
for stock options
exercised and related tax
benefit 123 2,098 2,098
Net income 21,541 21,541
Translation adjustments 1,233 1,233
--- --- ------ --- -------- -------- ------ --------
Balance -- January 31, 1996 227 5 37,931 57 130,045 153,310 2,281 285,698
Issuance of common stock
for stock options
exercised and related tax
benefit 760 1 13,223 13,224
Issuance of common stock
net of offering costs 4,600 7 83,309 83,316
Net income 56,973 56,973
Translation adjustments (830) (830)
--- --- ------ --- -------- -------- ------ --------
Balance -- January 31, 1997 227 $5 43,291 $65 $226,577 $210,283 $1,451 $438,381
=== === ====== === ======== ======== ====== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
16
<PAGE> 17
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year ended January 31,
------------------------------------------
1997 1996 1995
---------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $4,390,916 $ 2,933,831 $ 2,326,613
Cash paid to suppliers and employees (4,513,309) (2,854,653) (2,382,799)
Interest paid (21,122) (20,276) (13,584)
Income taxes paid (45,037) (11,628) (27,974)
---------- ----------- -----------
Net cash (used in) provided by operating activities (188,552) 47,274 (97,744)
---------- ----------- -----------
Cash flows from investing activities:
Expenditures for property and equipment (19,229) (23,596) (21,351)
Software development costs (2,024) (2,826) (18,696)
---------- ----------- -----------
Net cash used in investing activities (21,253) (26,422) (40,047)
---------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock 96,540 2,098 1,859
Net borrowings (repayments) from revolving credit loans 113,291 (21,684) 136,019
Principal payments on long-term debt (519) (608) (1,058)
Proceeds from long-term debt 789
---------- ----------- -----------
Net cash provided by (used in) financing activities 209,312 (20,194) 137,609
---------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (493) 658 (182)
Cash and cash equivalents at beginning of year 1,154 496 678
---------- ----------- -----------
Cash and cash equivalents at end of year $ 661 $ 1,154 $ 496
========== =========== ===========
Reconciliation of net income to net cash (used in) provided by
operating activities:
Net income $ 56,973 $ 21,541 $ 34,912
---------- ----------- -----------
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization 20,011 17,364 9,110
Provision for losses on accounts receivable 19,648 17,433 17,768
Loss on disposal of fixed assets 446 603 1,237
Deferred income taxes (5,051) (5,603) (1,739)
Changes in assets and liabilities:
(Increase) in accounts receivable (208,025) (152,789) (90,600)
(Increase) in inventories (294,552) (100,891) (132,940)
(Increase) decrease in prepaid and other assets (13,962) (7,254) 2,645
Increase in accounts payable 225,358 239,161 62,132
Increase (decrease) in accrued expenses 10,602 17,709 (269)
---------- ----------- -----------
Total adjustments (245,525) 25,733 (132,656)
---------- ----------- -----------
Net cash (used in) provided by operating activities $ (188,552) $ 47,274 $ (97,744)
=========== =========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these financial statements.
17
<PAGE> 18
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Tech Data
Corporation and its subsidiaries (the "Company"), all of which are
wholly-owned. All significant intercompany accounts and transactions have been
eliminated in consolidation.
METHOD OF ACCOUNTING
The Company prepares its financial statements in conformity with generally
accepted accounting principles. These principles require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Sales are recorded upon shipment. The Company allows its customers to
return product for exchange or credit subject to certain limitations. Provision
for estimated losses on such returns are recorded at the time of sale (see
product warranty below). Funds received from vendors for marketing programs
and product rebates are accounted for as a reduction of selling, general and
administrative expenses or product cost according to the nature of the program.
INVENTORIES
Inventories (consisting of computer related hardware and software
products) are stated at the lower of cost or market, cost being determined on
the first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed over
the estimated economic lives using the following methods:
<TABLE>
<CAPTION>
METHOD YEARS
--------------- ---------
<S> <C> <C>
Buildings and improvements Straight-line 31.5 - 39
Furniture, fixtures and equipment Accelerated and
straight-line 3 - 7
</TABLE>
Expenditures for renewals and improvements that significantly add to
productive capacity or extend the useful life of an asset are capitalized.
Expenditures for maintenance and repairs are charged to operations when
incurred. When assets are sold or retired, the cost of the asset and the
related accumulated depreciation are eliminated from the accounts and any gain
or loss is recognized at such time.
18
<PAGE> 19
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
EXCESS OF COST OVER ACQUIRED NET ASSETS
The excess of cost over acquired net assets is being amortized on a
straight-line basis over 15 years. Amortization expense was $602,000, $646,000
and $682,000 in 1997, 1996 and 1995, respectively. The accumulated
amortization of goodwill is approximately $2,264,000 and $1,727,000 at January
31, 1997 and 1996, respectively. In fiscal year 1996, the Company settled a
liability related to a previous acquisition and therefore recorded a $3,000,000
reduction in goodwill. The Company evaluates, on a regular basis, whether
events and circumstances have occurred that indicate the carrying amount of
goodwill may warrant revision or may not be recoverable. At January 31, 1997,
the net unamortized balance of goodwill is not considered to be impaired.
CAPITALIZED DEFERRED SOFTWARE COSTS
Deferred software costs are included in other assets and represent
internal development costs and payments to vendors for the design, purchase and
implementation of the computer software for the Company's operating and
financial systems. Such deferred costs are being amortized over three to seven
years with amortization expense of $4,611,000, $4,253,000 and $329,000 in 1997,
1996 and 1995, respectively. The accumulated amortization of such costs was
$9,193,000 and $4,582,000 at January 31, 1997 and 1996, respectively.
PRODUCT WARRANTY
The Company does not offer warranty coverage. However, to maintain
customer goodwill, the Company facilitates vendor warranty policies by
accepting for exchange (with the Company's prior approval) defective products
within 60 days of invoicing. Defective products received by the Company are
subsequently returned to the vendor for credit or replacement.
INCOME TAXES
Income taxes are accounted for under the liability method. Deferred taxes
reflect the tax consequences on future years of differences between the tax
bases of assets and liabilities and their financial reporting amounts.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of foreign operations are translated at the
exchange rates in effect at the balance sheet date, with the related
translation gains or losses reported as a separate component of shareholders'
equity. The results of foreign operations are translated at the weighted
average exchange rates for the year. Gains or losses resulting from foreign
currency transactions are included in the statement of income.
CONCENTRATION OF CREDIT RISK
The Company sells its products to a large base of value-added resellers
("VARs"), corporate resellers and retailers throughout the United States,
France, Canada, Latin America and the Caribbean. The Company performs ongoing
credit evaluations of its customers and generally does not require collateral.
The Company makes provisions for estimated credit losses at the time of sale.
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments that are subject to fair value disclosure
requirements are carried in the consolidated financial statements at amounts
that approximate fair value.
19
<PAGE> 20
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NET INCOME PER COMMON SHARE
Net income per common share is based on the weighted average number of
shares of common stock and common stock equivalents outstanding during each
period. Fully diluted and primary earnings per share are the same amounts for
each of the periods presented.
CASH MANAGEMENT SYSTEM
Under the Company's cash management system, disbursements cleared by the
bank are reimbursed on a daily basis from the revolving credit loans. As a
result, checks issued but not yet presented to the bank are not considered
reductions of cash or accounts payable. Included in accounts payable are
$111,826,000 and $69,789,000 at January 31, 1997 and 1996, respectively, for
which checks are outstanding.
STATEMENT OF CASH FLOWS
Short-term investments which have an original maturity of ninety days or
less are considered cash equivalents in the statement of cash flows. The
effect of changes in foreign exchange rates on cash balances is not material.
See Note 9 of Notes to Consolidated Financial Statements regarding the non-cash
exchange of common stock in connection with a business combination.
FISCAL YEAR
The Company and its subsidiaries operate on a fiscal year that ends on
January 31, except for the Company's French subsidiary which operates on a
fiscal year that ends on December 31.
NOTE 2 - PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
January 31,
------------------------
1997 1996
---- ----
<S> <C> <C>
(In thousands)
Land $ 3,898 $ 3,898
Buildings and improvements 29,155 27,802
Furniture, fixtures and equipment 75,982 58,721
Construction in progress 629 1,778
-------- --------
109,664 92,199
Less-accumulated depreciation (44,067) (30,589)
-------- --------
$ 65,597 $ 61,610
======== ========
</TABLE>
NOTE 3 - REVOLVING CREDIT LOANS:
The Company has an agreement (the "Receivables Securitization Program")
with a financial institution that allows the Company to transfer an undivided
interest in a designated pool of accounts receivable on an ongoing basis to
provide borrowings up to a maximum of $300,000,000 (increased from $250,000,000
in January 1997 and subsequently increased to $325,000,000 in February 1997).
As collections reduce accounts receivable balances included in the pool, the
Company may transfer interests in new receivables to bring the amount available
to be borrowed up to the $300,000,000 maximum. The Company pays interest on
advances under the Receivables Securitization Program at a designated
commercial paper rate, plus an agreed-upon spread. At January 31, 1997, the
Company had a $215,000,000 outstanding balance under this program which is
included in the balance sheet caption "Revolving Credit Loans". This agreement
expires December 31, 1997.
In May 1996, the Company entered into a new three-year unsecured $290
million multi-currency revolving credit facility replacing its former domestic,
French and Canadian credit agreements. The Company and its wholly-owned
subsidiaries are able to borrow funds in sixteen major foreign currencies under
this agreement.
20
<PAGE> 21
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
As of January 31, 1997, the Company maintained domestic and foreign
revolving credit loan agreements (including the Receivables Securitization
Program) with a total of twelve financial institutions which provide for
maximum short-term borrowings of approximately $600,000,000 ($625,000,000 as of
February 28, 1997). At January 31, 1997, the weighted average interest rate on
all short-term borrowings was 5.37%. The Company can fix the interest rate for
periods of 30 to 180 days under various interest rate options. The credit
agreements contain warranties and covenants that must be complied with on a
continuing basis, including the maintenance of certain financial ratios. At
January 31, 1997, the Company was in compliance with all such covenants.
NOTE 4 - LONG-TERM DEBT:
<TABLE>
<CAPTION>
January 31,
---------------------
1997 1996
------ ------
<S> <C> <C>
(In thousands)
Mortgage note payable, interest at 10.25%, principal
and interest of $85,130 payable monthly, balloon
payment due 2005 $8,902 $9,005
Mortgage note payable funded through Industrial Revenue
Bond, interest at 7.3%, principal and interest payable
quarterly, through 1999 195 282
Other note payable 329
------ ------
9,097 9,616
Less - current maturities (201) (519)
------ ------
$8,896 $9,097
====== ======
</TABLE>
Principal maturities of long-term debt at January 31, 1997 for the
succeeding five fiscal years are as follows: 1998 - $201,000; 1999 - $213,000;
2000 - $162,000; 2001 - $155,000; 2002 - $172,000.
Mortgage notes payable are secured by property and equipment with an
original cost of approximately $12,000,000. The Industrial Revenue Bond
contains covenants which require the Company to maintain certain financial
ratios with which the Company was in compliance at January 31, 1997.
NOTE 5 - INCOME TAXES (IN THOUSANDS):
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
January 31,
------------------
Deferred tax liabilities: 1997 1996
------- -------
<S> <C> <C>
Accelerated depreciation $ 6,863 $ 4,046
Deferred revenue 2,811 3,164
Other - net 3,525 1,378
------- -------
Total deferred tax liabilities 13,199 8,588
------- -------
Deferred tax assets:
Accruals not currently deductible 5,092 2,947
Reserves not currently deductible 21,340 14,774
Capitalized inventory costs 2,220 1,144
Other - net 213 338
------- -------
Total deferred tax assets 28,865 19,203
------- -------
Net deferred tax assets (included in prepaid and other assets) $15,666 $10,615
======= =======
</TABLE>
21
<PAGE> 22
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
January 31,
---------------------------------------
Current: 1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Federal $ 32,485 $ 15,107 $ 19,670
State 5,897 2,932 3,748
Foreign 3,185 1,541 985
---------- ---------- ----------
Total current 41,567 19,580 24,403
---------- ---------- ----------
Deferred:
Federal (3,490) (4,656) (1,677)
State (451) (625) (62)
Foreign (1,110) (322)
---------- ---------- ----------
Total deferred (5,051) (5,603) (1,739)
---------- ---------- ----------
$ 36,516 $ 13,977 $ 22,664
========== ========== ==========
</TABLE>
The reconciliation of income tax attributable to continuing operations
computed at the U.S. federal statutory tax rates to income tax expense is as
follows:
<TABLE>
<CAPTION>
January 31,
--------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Tax at U.S. statutory rates 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit 3.8 4.2 4.2
Other - net .3 .2 .2
---- ---- ----
39.1% 39.4% 39.4%
==== ==== ====
</TABLE>
The components of pretax earnings are as follows:
<TABLE>
<CAPTION>
January 31,
--------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
United States $ 88,536 $ 33,164 $ 55,155
Foreign 4,953 2,354 2,421
---------- ---------- ----------
$ 93,489 $ 35,518 $ 57,576
========== ========== ==========
</TABLE>
NOTE 6 - EMPLOYEE BENEFIT PLANS:
STOCK COMPENSATION PLANS
At January 31, 1997, the Company had four stock-based compensation plans,
an employee stock ownership plan and a retirement savings plan, which are
described below. The Company applies APB Opinion 25 and related
Interpretations in accounting for its plans. Accordingly, no compensation cost
has been recognized for its fixed stock option plans and its stock purchase
plan.
FIXED STOCK OPTION PLANS
In August 1985, the Board of Directors adopted the 1985 Incentive Stock
Option Plan (the "1985 Plan"), which covers an aggregate of 1,050,000 shares of
common stock. The options were granted to certain officers and key employees
at or above fair market value; accordingly, no compensation expense has been
recorded with respect to these options. Options are exercisable beginning two
years from the date of grant only if the grantee is an employee of the Company
at that time. No options may be granted under the 1985 Plan after July 31,
1995.
22
<PAGE> 23
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In June 1990, the shareholders approved the 1990 Incentive and
Non-Statutory Stock Option Plan (the "1990 Plan") which covers an aggregate of
5,000,000 shares (as amended in June 1994) of common stock. The 1990 Plan
provides for the granting of incentive and non-statutory stock options, stock
appreciation rights ("SARs") and limited stock appreciation rights ("Limited
SARs") at prices determined by the stock option committee, except for incentive
stock options which are granted at the fair market value of the stock on the
date of grant. Incentive options granted under the 1990 Plan become
exercisable over a five year period while the date of exercise of non-statutory
options is determined by the stock option committee. As of January 31, 1997,
no SARs or Limited SARs had been granted under the 1990 Plan. Options granted
under the 1985 Plan and the 1990 Plan expire 10 years from the date of grant,
unless a shorter period is specified by the stock option committee.
In June 1995, the shareholders approved the 1995 Non-Employee Director's
Non-Statutory Stock Option Plan. Under this plan, the Company grants
non-employee members of its Board of Directors stock options upon their initial
appointment to the board and then annually each year thereafter. Stock options
granted to members upon their initial appointment vest and become exercisable
at a rate of 20% per year. Annual awards vest and become exercisable one year
from the date of grant. The number of shares subject to options under this
plan cannot exceed 100,000 and the options expire 10 years from the date of
grant.
A summary of the status of the Company's stock option plans is as follows:
<TABLE>
<CAPTION>
January 31, January 31, January 31,
1997 1996 1995
---------------------- -------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------------ -------- --------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 3,081,110 $13.31 2,644,056 $15.62 1,515,956 $11.02
Granted 1,112,000 16.27 1,683,450 12.91 1,372,500 19.94
Exercised (675,492) 13.11 (79,800) 8.53 (116,900) 5.83
Canceled (231,800) 13.72 (1,166,596) 18.45 (127,500) 15.02
--------- --------- ---------
Outstanding at year end 3,285,818 14.31 3,081,110 13.31 2,644,056 15.62
========= ========= =========
Options exercisable at year end 576,862 494,460 180,660
Available for grant at year end 905,000 1,785,000 2,351,000
</TABLE>
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------- ---------------------------------
Weighted-Average
Remaining Number
Range of Number Contractual Weighted-Average Exercisable Weighted-Average
Exercise Outstanding Life Exercise at Exercise
Prices at 1/31/97 (years) Price 1/31/97 Price
- ---------------- ---------- ------- ---------------- ------- ----------------
<S> <C> <C> <C> <C> <C>
$ 1.50 - $10.00 139,500 4.9 $ 7.38 84,700 $ 6.31
11.00 - 15.00 2,644,150 8.3 13.23 406,800 13.30
16.00 - 30.00 502,168 8.2 21.83 85,362 20.19
--------- -------
3,285,818 8.2 14.31 576,862 13.29
========= =======
</TABLE>
23
<PAGE> 24
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
EMPLOYEE STOCK PURCHASE PLAN
Under the 1995 Employee Stock Purchase Plan, approved in June 1995, the
Company is authorized to issue up to 1,000,000 shares of common stock to
eligible employees. Under the terms of the plan, employees can choose to have
a fixed dollar amount deducted from their compensation to purchase the
Company's common stock and/or elect to purchase shares once per calendar
quarter. The purchase price of the stock is 85% of the market value on the
exercise date and employees are limited to a maximum purchase of $25,000 fair
market value each calendar year. Since plan inception, the Company has sold
88,253 shares. All shares purchased under this plan must be retained for a
period of one year.
PRO FORMA EFFECT OF STOCK COMPENSATION PLANS
Had the compensation cost for the Company's stock option plans and
employee stock purchase plan been determined based on the fair value at the
grant dates for awards under the plans consistent with the method prescribed by
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", the Company's net income and net income per common
share on a pro forma basis would have been (in thousands, except per share
data):
<TABLE>
<CAPTION>
January 31,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Net income $55,059 $19,937
Net income per common share $ 1.31 $ .52
</TABLE>
The preceding pro forma results were calculated with the use of the Black
Scholes option-pricing model. The following assumptions were used for the
years ended January 31, 1997 and 1996, respectively: (1) risk-free interest
rates of 6.08% and 6.96%; (2) dividend yield of 0.0% and 0.0%; (3) expected
lives of 5.08 and 5.08 years; and (4) volatility of 56% and 39%. Results may
vary depending on the assumptions applied within the model.
STOCK OWNERSHIP AND RETIREMENT SAVINGS PLANS
In February 1984, the Company established an employee stock ownership plan
(the "ESOP") covering substantially all U.S. employees. The ESOP provides for
distribution of vested percentages of the Company's common stock to
participants. Such benefit becomes fully vested after seven years of qualified
service. The Company also offers its U.S. employees a retirement savings plan
pursuant to section 401(k) of the Internal Revenue Code which provides for the
Company to match 50% of the first $1,000 of each participant's deferrals
annually. Contributions to these plans are made in amounts approved annually
by the Board of Directors. Aggregate contributions made by the Company to
these plans were $2,090,000, $1,659,000 and $1,268,000 for 1997, 1996 and 1995,
respectively.
NOTE 7 - CAPITAL STOCK:
Each outstanding share of preferred stock is entitled to one vote on all
matters submitted to a vote of shareholders, except for matters involving
mergers, the sale of all Company assets, amendments to the Company's charter
and exchanges of Company stock for stock of another company which require
approval by a majority of each class of capital stock. In such matters, the
preferred and common shareholders will each vote as a separate class.
In July 1996, the Company completed a public offering of 4,600,000 shares
of common stock resulting in net proceeds to the Company of approximately
$83,316,000.
24
<PAGE> 25
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 8 - COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES
The Company leases distribution facilities and certain equipment under
noncancelable operating leases which expire at various dates through 2005.
Future minimum lease payments under all such leases for the succeeding five
fiscal years are as follows: 1998 - $9,036,000; 1999 - $9,502,000; 2000 -
$8,824,000; 2001 - $8,364,000; 2002 - $3,795,000 and $4,596,000 thereafter.
Rental expense for all operating leases amounted to $10,160,000, $7,547,000 and
$6,500,000 in 1997, 1996 and 1995, respectively.
NOTE 9 - ACQUISITIONS:
On March 24, 1994 the Company completed the non-cash exchange of 1,144,000
shares of its common stock for all of the outstanding capital stock of Softmart
International, S.A. (subsequently named Tech Data France, SNC), a
privately-held distributor of microcomputer products based in Paris, France.
The acquisition was accounted for as a pooling-of-interests effective February
1, 1994, however, due to the immaterial size of the acquisition in relation to
the consolidated financial statements, prior period financial statements were
not restated. In connection with the issuance of the 1,144,000 shares of
common stock, the Company recorded an adjustment of $9,681,000 to beginning
retained earnings.
NOTE 10 - SEGMENT INFORMATION:
The Company is engaged in one business segment, the wholesale distribution
of microcomputer hardware and software products. The geographic areas in which
the Company operates are the United States (United States including exports to
Latin America and the Caribbean) and International (France and Canada). The
geographical distribution of net sales, operating income and identifiable
assets are as follows (in thousands):
<TABLE>
<CAPTION>
United States International Eliminations Consolidated
------------- ------------- ------------ ------------
FISCAL YEAR 1997
- ----------------
<S> <C> <C> <C> <C>
Net sales to unaffiliated customers $4,009,924 $589,017 $ - $4,598,941
========== ======== ======= ==========
Operating income $ 105,330 $ 9,681 $ - $ 115,011
========== ======== ======= ==========
Identifiable assets $1,327,156 $218,138 $ - $1,545,294
========== ======== ======= ==========
FISCAL YEAR 1996
- ----------------
Net sales to unaffiliated customers $2,654,750 $431,870 $ - $3,086,620
========== ======== ======= ==========
Operating income $ 48,419 $ 7,185 $ - $ 55,604
========== ======== ======= ==========
Identifiable assets $ 868,910 $174,969 $ - $1,043,879
========== ======== ======= ==========
FISCAL YEAR 1995
- ----------------
Net sales to unaffiliated customers $2,104,637 $313,773 $ - $2,418,410
========== ======== ======= ==========
Operating income $ 65,349 $ 5,988 $ - $ 71,337
========== ======== ======= ==========
Identifiable assets $ 677,910 $109,703 $(3,184) $ 784,429
========== ======== ======= ==========
</TABLE>
25
<PAGE> 26
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 11 - UNAUDITED INTERIM FINANCIAL INFORMATION:
<TABLE>
<CAPTION>
Quarter ended
-----------------------------------------------------------------------------
FISCAL YEAR 1997 April 30 July 31 October 31 January 31
- ---------------- -------- -------- ---------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales $985,574 $1,063,228 $1,236,650 $1,313,489
Gross profit 69,012 74,302 85,955 92,512
Net income 10,428 12,016 16,748 17,781
Net income per common share .27 .30 .38 .40
<CAPTION>
Quarter ended
-----------------------------------------------------------------------------
FISCAL YEAR 1996 April 30 July 31 October 31 January 31
- ---------------- -------- -------- ---------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales $633,460 $708,836 $843,286 $901,038
Gross profit 46,216 50,113 58,685 64,380
Net income 1,849 3,448 7,042 9,202
Net income per common share .05 .09 .18 .24
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
26
<PAGE> 27
PART III
ITEMS 10, 11, 12 AND 13.
The information required by Item 10 relating to executive officers of the
registrant is included under the caption "Executive Officers" of Item 1 of this
Form 10-K. The information required by Item 10 relating to Directors of the
registrant and the information required by Items 11, 12 and 13 is incorporated
herein by reference to the registrant's definitive proxy statement for the 1997
Annual Meeting of Shareholders. However, the information included in such
definitive proxy statement under the subcaption entitled "Grant Date Present
Value" in the table entitled "Option Grants in Last Fiscal Year", the
information included under the caption entitled "Compensation Committee Report
on Executive Compensation", and the information included in the "Stock Price
Performance Graph" shall not be deemed incorporated by reference in this Form
10-K and shall not otherwise be deemed filed under the Securities Act of 1933,
as amended, or under the Securities Exchange Act of 1934, as amended. The
definitive proxy statement for the 1997 Annual Meeting of Shareholders will be
filed with the Commission prior to May 31, 1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(a) Listed below are the financial statements and the schedule filed as
part of this report:
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS PAGE
----
<S> <C>
Report of Independent Certified Public Accountants .................................. 14
Consolidated Balance Sheet at January 31, 1997 and 1996 ............................. 15
Consolidated Statement of Income for the three years ended January 31, 1997 ......... 16
Consolidated Statement of Changes in Shareholders' Equity for the
three years ended January 31, 1997 ................................................. 16
Consolidated Statement of Cash Flows for the three years ended January 31, 1997 ..... 17
Notes to Consolidated Financial Statements .......................................... 18
FINANCIAL STATEMENT SCHEDULE
Report of Independent Certified Public Accountants on Financial Statement Schedule .. 30
Consent of Independent Certified Public Accountants ................................. 30
Schedule II. -- Valuation and qualifying accounts ................................... 31
</TABLE>
All schedules and exhibits not included are not applicable, not required
or would contain information which is shown in the financial statements or
notes thereto.
(b) The Company filed a report on Form 8-K with the Securities and
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.
(c) the exhibit numbers on the following list correspond to the numbers
in the exhibit table required pursuant to Item 601 of Regulation S-K.
3-A(1) -- Articles of Incorporation of the Company as amended to April 23,
1986.
3-B(2) -- Articles of Amendment to Articles of Incorporation of the
Company filed on August 27, 1987.
3-C(13) -- By-Laws of the Company as amended to November 28, 1995.
27
<PAGE> 28
3-F(9) -- Articles of Amendment to Articles of Incorporation of the
Company filed on July 15, 1993.
10-F(4) -- Incentive Stock Option Plan, as amended, and form of option
agreement.
10-G(10) -- Employee Stock Ownership Plan as amended December 16, 1994.
10-V(5) -- Employment Agreement between the Company and Edward C. Raymund
dated as of January 31, 1991.
10-W(5) -- Irrevocable Proxy and Escrow Agreement dated April 5, 1991.
10-X(6) -- First Amendment to the Employment Agreement between the
Company and Edward C. Raymund dated November 13, 1992.
10-Y(6) -- First Amendment in the nature of a Complete Substitution to
the Irrevocable Proxy and Escrow Agreement dated
November 13, 1992.
10-Z(7) -- 1990 Incentive and Non-Statutory Stock Option Plan.
10-AA(7) -- Non-Statutory Stock Option Grant Form.
10-BB(7) -- Incentive Stock Option Grant Form.
10-CC(8) -- Employment Agreement between the Company and
Steven A. Raymund dated February 1, 1992.
10-EE(10) -- Retirement Savings Plan as amended January 26, 1994.
10-FF(9) -- Revolving Credit and Reimbursement Agreement dated
December 22, 1993.
10-GG(9) -- Transfer and Administration Agreement dated December 22, 1993.
10-HH(10) -- Amendments (Nos. 1-4) to the Transfer and Administration
Agreement.
10-II(10) -- Amended and Restated Revolving Credit and Reimbursement
Agreement dated July 28, 1994, as amended.
10-JJ(10) -- Revolving Foreign Currency Agreement dated August 4, 1994,
as amended.
10-KK(13) -- Amendments (Nos. 5,6) to the Transfer and Administration
Agreement
10-LL(13) -- Amendments (Nos. 3-5) to the Amended and Restated Revolving
Credit and Reimbursement Agreement dated July 28, 1994,
as amended.
10-MM(13) -- Amendments (Nos. 3-5) to the Revolving Foreign Currency
Agreement dated August 4, 1994, as amended.
10-NN(12) -- Non-Employee Directors' 1995 Non-Statutory Stock Option Plan.
10-OO(12) -- 1995 Employee Stock Purchase Plan.
10-PP(13) -- Employment Agreement between the Company and A. Timothy Godwin
dated as of December 5, 1995.
27(3) -- Financial Data Schedule (for SEC use only).
99-A(11) -- Cautionary Statement For Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act
of 1995.
- --------------
(1) Incorporated by reference to the Exhibits included in the Company's
Registration Statement on Form S-1, File No. 33-4135.
(2) Incorporated by reference to the Exhibits included in the Company's
Registration Statement on Form S-1, File No. 33-21997.
(3) Filed herewith.
(4) Incorporated by reference to the Exhibits included in the Company's
Registration Statement on Form S-8, File No. 33-21879.
(5) Incorporated by reference to the Exhibits included in the Company's Form
10-Q for the quarter ended July 31, 1991, File No. 0-14625.
(6) Incorporated by reference to the Exhibits included in the Company's Form
10-Q for the quarter ended October 31, 1992, File No. 0-14625.
(7) Incorporated by reference to the Exhibits included in the Company's
Registration Statement on Form S-8, File No. 33-41074.
28
<PAGE> 29
(8) Incorporated by reference to the Exhibits included in the Company's Form
10-K for the year ended January 31, 1993, File No. 0-14625.
(9) Incorporated by reference to the Exhibits included in the Company's Form
10-K for the year ended January 31, 1994, File No. 0-14625.
(10) Incorporated by reference to the Exhibits included in the Company's Form
10-K for the year ended January 31, 1995, File No. 0-14625.
(11) Incorporated by reference to the Exhibits included in the Company's Form
8-K filed on March 26, 1996, File No. 0-14625.
(12) Incorporated by reference to the Exhibits included in the Company's
Definitive Proxy Statement for the 1995 Annual Meeting of Shareholders,
File No. 0-14625.
(13) Incorporated by reference to the Exhibits included in the Company's Form
10-K for the year ended January 31, 1996, File No. 0-14625.
29
<PAGE> 30
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders
of Tech Data Corporation
Our audits of the consolidated financial statements referred to in our
report dated March 18, 1997 appearing on page 14 of this Form 10-K of Tech Data
Corporation also included an audit of the Financial Statement Schedule listed
in Item 14 of this Form 10-K. In our opinion, this Financial Statement
Schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
Price Waterhouse LLP
Tampa, Florida
March 18, 1997
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Form S-8 (Nos. 33-21879 and
33-41074) and Form S-3 (No. 33-75788) of Tech Data Corporation of our report
dated March 18, 1997 appearing on page 14 of this Form 10-K. We also consent
to the incorporation by reference of our report on the Financial Statement
Schedule appearing above.
Price Waterhouse LLP
Tampa, Florida
April 9, 1997
30
<PAGE> 31
SCHEDULE II
TECH DATA CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
----------------------- BALANCE
BALANCE AT CHARGED TO AT END
BEGINNING COST AND OF
DESCRIPTION OF PERIOD EXPENSES OTHER(1) DEDUCTIONS PERIOD
- ----------- ---------- ----------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
receivable and sales returns:
January 31,
1997 $22,669 $19,648 $4,290 $(22,685) $23,922
1996 16,580 17,433 4,538 (15,882) 22,669
1995 8,580 18,965 920 (11,885) 16,580
</TABLE>
- -----------
(1) Represents bad debt recoveries.
31
<PAGE> 32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on the 9th day of
April 1997.
TECH DATA CORPORATION
By /s/ STEVEN A. RAYMUND
-----------------------------------
Steven A. Raymund,
Chairman of the Board of Directors;
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature to this Annual Report on Form 10-K appears
below hereby appoints Jeffery P. Howells and Arthur W. Singleton, or either of
them, as his attorney-in-fact to sign on his behalf individually and in the
capacity stated below and to file all amendments and post-effective amendments
to this Annual Report on Form 10-K, and any and all instruments or documents
filed as a part of or in connection with this Annual Report on Form 10-K or the
amendments thereto, and the attorney-in-fact, or either of them, may make such
changes and additions to this Annual Report on Form 10-K as the
attorney-in-fact, or either of them, may deem necessary or appropriate.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ STEVEN A. RAYMUND Chairman of the Board of Directors; April 9, 1997
- ------------------------ Chief Executive Officer
Steven A. Raymund
/s/ JEFFERY P. HOWELLS Executive Vice President of Finance; April 9, 1997
- ------------------------ Chief Financial Officer;
Jeffery P. Howells (principal financial officer)
/s/ JOSEPH B. TREPANI Vice President and Worldwide Controller; April 9, 1997
- ------------------------ (principal accounting officer)
Joseph B. Trepani
/s/ CHARLES E. ADAIR Director April 9, 1997
- ------------------------
Charles E. Adair
/s/ DANIEL M. DOYLE Director April 9, 1997
- ------------------------
Daniel M. Doyle
/s/ DONALD F. DUNN Director April 9, 1997
- ------------------------
Donald F. Dunn
/s/ LEWIS J. DUNN Director April 9, 1997
- ------------------------
Lewis J. Dunn
/s/ EDWARD C. RAYMUND Director; Chairman Emeritus April 9, 1997
- ------------------------
Edward C. Raymund
/s/ JOHN Y. WILLIAMS Director April 9, 1997
- ------------------------
John Y. Williams
</TABLE>
32
<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 JANUARY 31,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 661
<SECURITIES> 0
<RECEIVABLES> 657,501
<ALLOWANCES> 23,922
<INVENTORY> 759,974
<CURRENT-ASSETS> 1,450,010
<PP&E> 109,664
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0
5
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</TABLE>
