<PAGE> 1
Filed Pursuant to Rule 424(b)(4)
Registration No: 333-36999
3,500,000 SHARES
[TECH DATA LOGO]
COMMON STOCK
(PAR VALUE $.0015 PER SHARE)
---------------------
Of the 3,500,000 shares of Common Stock offered, 2,800,000 shares are being
offered hereby in the United States and 700,000 shares are being offered in a
concurrent international offering outside the United States. The initial public
offering price and the aggregate underwriting discount per share will be
identical for both offerings. See "Underwriting."
The last reported sale price of the Common Stock, which is quoted under the
symbol "TECD," on The Nasdaq National Market on November 10, 1997 was $43 3/8
per share. See "Price Range of Common Stock."
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS
IN EVALUATING AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY, SEE "RISK
FACTORS" BEGINNING ON PAGE 5.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
-------------- ------------ -----------
<S> <C> <C> <C>
Per Share............................................... $42.00 $1.57 $40.43
Total(3)................................................ $147,000,000 $5,495,000 $141,505,000
</TABLE>
- ---------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting estimated expenses of $175,000 payable by the Company.
(3) The Company has granted the Underwriters options for 30 days to purchase up
to an additional 525,000 shares at the initial public offering price per
share, less the underwriting discount, solely to cover over-allotments. If
such options are exercised in full, the total initial public offering price,
underwriting discount and proceeds to Company will be $169,050,000,
$6,319,250 and $162,730,750, respectively. See "Underwriting."
--------------------------
The shares offered hereby are offered severally by the U.S. Underwriters,
as specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York, on
or about November 14, 1997.
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
THE ROBINSON-HUMPHREY COMPANY
NATIONSBANC MONTGOMERY SECURITIES, INC.
---------------------
The date of this Prospectus is November 10, 1997.
<PAGE> 2
[GRAPHIC SHOWING APPROXIMATE NUMBER OF THE COMPANY'S SUPPLIERS AND
CUSTOMERS.]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID IN CONNECTION WITH THE OFFERING.
IN ADDITION, CERTAIN UNDERWRITERS (AND SELLING GROUP MEMBERS, IF ANY) ALSO MAY
ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ
NATIONAL MARKET, IN ACCORDANCE WITH RULE 103 UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 3
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data appearing
elsewhere, or incorporated by reference, in this Prospectus. Unless otherwise
noted, the information and data in this Prospectus does not give effect to the
exercise of the Underwriters' over-allotment options. This Prospectus contains
certain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed herein under "Risk Factors."
THE COMPANY
Tech Data Corporation ("Tech Data" or the "Company") is the world's second
largest distributor of microcomputer hardware and software products to
value-added resellers ("VARs"), corporate resellers, retailers and direct
marketers (collectively with VARs, "resellers"). Tech Data distributes products
throughout the United States, Canada, Latin America, Germany, France,
Switzerland and Austria. 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 70,000 customers. The Company believes its
broad assortment of vendors and products meets its customers' need for a cost
effective link to such products through a single source.
The Company provides its customers with systems, peripherals, networking
products and software, which accounted for 25%, 40%, 19% and 16%, respectively,
of net sales in the first six months of fiscal 1998. The Company offers products
from manufacturers and publishers such as Apple, Bay Networks, Cisco, Compaq,
Corel, Creative Labs, Digital Equipment, Epson, Hewlett-Packard, IBM, Intel,
Microsoft, Novell, Okidata, Seagate, Symantec, 3Com, Toshiba, Viewsonic and
Western Digital. The Company ships products from regionally located distribution
centers generally the same day the orders are received. The customers are
provided with a high level of service through flexible financing and credit
programs, the Company's pre- and post-sale technical support, electronic
commerce tools (including on-line order entry, access to product specifications
and electronic data interchange ("EDI") services), product configuration
services, customized shipping documents, flexible product return policies and
customer education programs.
The U.S. microcomputer distribution market grew from $17 billion in 1992 to
$33 billion in 1996. This growth represents a compound annual rate of 18%, while
the overall U.S. microcomputer industry grew at a compound annual rate of 13%
during the same period. The Company's U.S. sales grew during this period at a
compound annual rate of 45%. The increase in sales was primarily the result of
the expansion of the Company's product lines, customer base and market share in
North America. In addition, the Company entered the European market in fiscal
1995 through the acquisition of the largest microcomputer distributor in France.
In July 1997, Tech Data further enhanced its market position in Europe with the
acquisition of Macrotron AG, Germany's third largest microcomputer distributor
with operations in Germany, Austria and Switzerland. The Company has also
established export sales into Latin America from its U.S. operations and
recently established a subsidiary in Brazil to serve that market. The Company
increased operating income from $36.0 million in fiscal 1993 to $115.0 million
in fiscal 1997 despite intense competition by focusing on achieving operating
efficiencies through centralized management, stringent cost controls, efficient
handling of product shipments, use of automation and by achieving economies of
scale. Net income increased from $19.8 million to $57.0 million over the same
period.
Management believes that Tech Data's recent increases in sales, operating
income and net income are directly attributable to its strategy of making
significant capital investments to increase efficiency and maintaining operating
cost control. The Company intends to continue to pursue this strategy to take
advantage of future growth and consolidation opportunities in the industry.
3
<PAGE> 4
THE OFFERINGS
The 2,800,000 shares of Common Stock initially being offered in the United
States (the "U.S. Offering") and the 700,000 shares of Common Stock concurrently
being offered outside the United States (the "International Offering"),
collectively are referred to in this Prospectus as the "Offerings."
Common Stock to be offered by the Company................3,500,000 shares
Common Stock to be outstanding after the Offerings.......47,942,000 shares
Use of Proceeds..........................................To reduce indebtedness
under revolving credit
loans and to finance
continued growth. See
"Use of Proceeds."
Nasdaq National Market Symbol............................TECD
SUMMARY CONSOLIDATED FINANCIAL DATA
The following financial data should be read in conjunction with the
Company's consolidated financial statements, including the notes thereto. The
results of operations for the six months ended July 31, 1997 are not necessarily
indicative of results of operations to be expected for the full year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JANUARY 31, JULY 31,
------------------------------------------------------------ -----------------------
1993 1994 1995 1996 1997 1996 1997
-------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales....................... $978,862 $1,532,352 $2,418,410 $3,086,620 $4,598,941 $2,048,802 $2,921,966
Operating profit................ 36,014 54,995 71,337 55,604 115,011 47,705 76,511
Net income...................... 19,782 30,213 34,912 21,541 56,973 22,444 39,686
Net income per common share(1).. .63 .83 .91 .56 1.35 .57 .88
</TABLE>
<TABLE>
<CAPTION>
JULY 31, 1997
------------------------
AS
ACTUAL ADJUSTED(2)
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 296,115 $ 437,445
Total assets................................................ 1,655,232 1,655,232
Revolving credit loans...................................... 416,428 275,098
Long-term debt.............................................. 8,791 8,791
Shareholders' equity........................................ 490,161 631,491
</TABLE>
- ---------------
(1) Amounts have been adjusted to reflect the two-for-one stock split declared
on March 21, 1994.
(2) Adjusted to reflect the sale by the Company of the 3,500,000 shares of
Common Stock offered hereby at the offering price of $42.00 per share (after
deduction of the underwriting discount and the Company's estimated offering
expenses) and the application of the proceeds thereof. See "Use of
Proceeds."
RECENT DEVELOPMENTS
The Company estimates that its net sales increased 61% to approximately $2
billion for the three months ended October 31, 1997, compared to $1.24 billion
in the same period of 1996. As a result of the sales growth, the Company
estimates that net income for the quarter ended October 31, 1997 was
approximately $23 million, or $.50 per share, compared with prior year third
quarter net income of $16.7 million, or $.38 per share. The Company attributes
the growth in its sales to market share gains in its core U.S. distribution
business, which grew approximately 40% year-over-year in the third quarter,
combined with growth in its international business. In addition, the third
quarter results include a full quarter of results for the Company's German
subsidiary, Macrotron AG, in which the Company acquired a controlling interest
in July 1997.
4
<PAGE> 5
RISK FACTORS
In evaluating the Company's business, prospective investors should
carefully consider the following factors in addition to the information
contained elsewhere in this Prospectus or incorporated by reference herein.
COMPETITION
The Company operates in a highly competitive environment, both in the
United States and internationally. The computer wholesale distribution industry
is characterized by intense competition, based primarily on product
availability, credit availability, price, speed of delivery, ability to tailor
specific solutions to customer needs, quality and depth of product lines and
pre-sale and post-sale training, service and support. The Company competes with
a variety of regional, national and international wholesale distributors, some
of which have greater financial resources than the Company. In addition, the
Company faces competition from direct sales by vendors which may be able to
offer resellers lower prices than the Company.
NARROW PROFIT MARGINS
As a result of intense price competition in the industry, the Company has
narrow gross profit and operating profit margins. These narrow margins magnify
the impact on operating results of variations in sales and operating costs. The
Company has partially offset the effects of its low gross profit margins by
increasing sales and reducing operating expenses as a percentage of sales;
however, there can be no assurance that the Company will maintain or increase
sales or further reduce operating expenses as a percentage of sales in the
future. Future gross profit margins may be adversely affected by changes in
product mix, vendor pricing actions and competitive and economic pressures.
RISK OF DECLINES IN INVENTORY VALUE
The Company is subject to the risk that the value of its inventory will
decline as a result of price reductions by vendors or technological
obsolescence. It is the policy of most vendors of microcomputer products to
protect distributors, such as the Company, which purchase directly from such
vendors, from the loss in value of inventory due to technological change or the
vendors' price reductions. Some vendors, however, may be unwilling or unable to
pay the Company for products returned to them under purchase agreements.
Moreover, industry practices are sometimes not embodied in written agreements
and do not protect the Company in all cases from declines in inventory value. No
assurance can be given that such practices will continue, that unforeseen new
product developments will not adversely affect the Company, or that the Company
will be able to successfully manage its existing and future inventories.
Some major systems vendors are developing programs which will allow the
Company to assemble systems from components provided by the vendors. While the
Company has developed the ability to configure computer products, the process of
assembling large volumes of systems from components will require new business
practices by the Company. It is also uncertain how the vendors will apply
policies related to price protection, stock rotation and other protections
against the decline in inventory value to components.
DEPENDENCE ON INFORMATION SYSTEMS
The Company is highly dependent upon its internal computer and
telecommunication systems to operate its business. There can be no assurance
that the Company's information systems will not fail, that the Company will be
able to attract and retain qualified personnel necessary for the operation of
such systems, that the Company will be able to expand and improve its
information systems, or that the information systems of acquired companies will
be sufficient to meet the Company's standards or can be successfully converted
into an acceptable information system on a timely and cost-effective basis. Any
of such problems could have an adverse effect on the Company's business.
5
<PAGE> 6
CUSTOMER CREDIT EXPOSURE
The Company sells its products to an active customer base of more than
70,000 value-added resellers, corporate resellers, retailers and direct
marketers. A significant portion of such sales is financed by the Company. As a
result, the Company's business could be adversely affected in the event of the
deterioration of the financial condition of its customers, resulting in the
customers' inability to repay the Company. This risk would be increased in the
event of a general economic downturn affecting a large number of the Company's
customers.
MANAGEMENT OF EXPANSION
The rapid expansion of the Company's business has required the Company to
make significant recent additions in personnel and has significantly increased
the Company's working capital requirements. Although the Company has experienced
rapid expansion in recent years, such expansion should not be considered
indicative of future expansion. Such expansion has resulted in new and increased
responsibilities for management personnel and has placed and continues to place
a strain upon the Company's management, operating and financial systems and
other resources. There can be no assurance that the strain placed upon the
Company's management, operating and financial systems and other resources will
not have an adverse effect on the Company's business, nor can there be any
assurance that the Company will be able to attract or retain sufficient
personnel to continue the expansion of its operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business requires substantial capital to finance accounts
receivable and product inventory that are not financed by trade creditors. 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 growth. In order to
continue its expansion, the Company will need additional financing, including
debt financing. The inability to obtain such sources of capital could have an
adverse effect on the Company's business.
ACQUISITIONS
As part of its growth strategy, the Company pursues the acquisition of
companies that either complement or expand its existing business. As a result,
the Company regularly evaluates potential acquisition opportunities, which may
be material in size and scope. Acquisitions involve a number of risks and
uncertainties, including expansion into new geographic markets and business
areas, the requirement to understand local business practices, the diversion of
management's attention to the assimilation of the operations and personnel of
the acquired companies, the possible requirement to upgrade the acquired
companies' management information systems to the Company's standards, potential
adverse short-term effects on the Company's operating results and the
amortization of any acquired intangible assets.
FOREIGN CURRENCY EXCHANGE RISKS; EXPOSURE TO FOREIGN MARKETS
The Company conducts business in countries outside of the United States
which exposes the Company to fluctuations in foreign currency exchange rates.
The Company may enter into short-term forward exchange contracts to hedge this
risk according to its outlook on future exchange rates; nevertheless,
fluctuations in foreign currency exchange rates could have an adverse effect on
the Company's business.
The Company's international operations are subject to other risks such as
the imposition of governmental controls, export license requirements,
restrictions on the export of certain technology, political instability, trade
restrictions, tariff changes, difficulties in staffing and managing
international operations, difficulties in collecting accounts receivable and
longer collection periods and the impact of local economic conditions and
practices. As the Company continues to expand its international business, its
success will be dependent, in part, on its ability to anticipate and effectively
manage these and other
6
<PAGE> 7
risks. There can be no assurance that these and other factors will not have an
adverse effect on the Company's business.
PRODUCT SUPPLY SHORTAGES
The Company is dependent upon the supply of products available from its
vendors. The industry is characterized by periods of severe product shortages
due to vendors' difficulty in projecting demand for certain products distributed
by the Company. When such product shortages occur, the Company typically
receives an allocation of product from the vendor. There can be no assurance
that vendors will be able to maintain an adequate supply of products to fulfill
all of the Company's customer orders on a timely basis. Failure to obtain
adequate product supplies, if available to competitors, could have an adverse
effect on the Company's business.
VENDOR RELATIONS
The loss of certain key vendors could have an adverse effect on the
Company's business. In addition, the Company relies on various rebate and
cooperative marketing programs offered by its vendors to defray expenses
associated with distributing and marketing the vendors' products. A reduction by
the Company's vendors in these programs could have an adverse effect on the
Company's business.
GENERAL ECONOMIC CONDITIONS
From time to time the markets in which the Company sells its products
experience weak economic conditions that may negatively affect the Company's
sales. Although the Company does not consider its business to be highly
seasonal, it has experienced seasonally higher sales and earnings in the third
and fourth quarters. To the extent that general economic conditions affect the
demand for products sold by the Company, such conditions could have an adverse
effect on the Company's business.
EXPOSURE TO NATURAL DISASTERS
The Company's headquarters facilities, certain of its distribution centers
as well as certain vendors and customers are located in areas prone to natural
disasters such as floods, hurricanes, tornadoes, earthquakes and other adverse
weather conditions. The Company's business could be adversely affected should
its ability to distribute products be impacted by such an event.
LABOR STRIKES
The Company's labor force is currently non-union. The Company, however,
does business in certain foreign countries where labor disruption is more common
than is experienced in the United States. The majority of the freight carriers
used by the Company are unionized. A labor strike by one of the Company's
freight carriers, one of its vendors, a general strike by civil service
employees, or a governmental shutdown could have an adverse effect on the
Company's business.
VOLATILITY OF COMMON STOCK
Because of the foregoing factors, as well as other variables affecting the
Company's operating results, past financial performance should not be considered
a reliable indicator of future performance, and investors should not use
historical trends to anticipate results or trends in future periods. In
addition, the Company's participation in a highly dynamic industry often results
in significant volatility of the Common Stock price.
7
<PAGE> 8
USE OF PROCEEDS
Based upon the sale by the Company of the 3,500,000 shares of Common Stock
at the offering price of $42.00 per share, less the Company's estimated offering
expenses and the underwriting discount, the net proceeds are expected to be
approximately $141.3 million. The net proceeds of the Offerings will be used to
reduce indebtedness under the Company's revolving credit loans (which includes
the $400 million accounts receivable securitization program). As of October 31,
1997, the Company had approximately $593 million outstanding under the available
revolving credit loans at a weighted average interest rate of 4.89%. The Company
currently maintains total committed revolving credit loans of approximately $980
million, of which $530 million is available in 17 different currencies. See Note
12 of Notes to Consolidated Financial Statements.
The receipt of the proceeds of the Offerings will strengthen the Company's
balance sheet further and will provide funding for domestic and international
growth and possible acquisitions. While the Company regularly reviews
acquisition opportunities, no acquisitions are currently pending other than as
disclosed elsewhere in this Prospectus with respect to the acquisition of
Macrotron AG.
8
<PAGE> 9
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on The Nasdaq National Market under
the symbol "TECD." The following table sets forth the quarterly high and low
sale prices for the Common Stock as reported by The Nasdaq National Market.
<TABLE>
<CAPTION>
RANGE OF
SALES PRICES
------------------
HIGH LOW
------- -------
<S> <C> <C> <C> <C>
FISCAL YEAR 1996
First quarter............................................... $14 1/4 $ 9 5/8
Second quarter.............................................. 15 1/4 8 1/4
Third quarter............................................... 14 3/4 11 1/8
Fourth quarter.............................................. 17 7/8 11 1/4
FISCAL YEAR 1997
First quarter............................................... 19 1/2 13
Second quarter.............................................. 24 3/4 18 1/4
Third quarter............................................... 30 3/8 22 1/8
Fourth quarter.............................................. 36 3/8 21 5/8
FISCAL YEAR 1998
First quarter............................................... 27 1/2 19 3/4
Second quarter.............................................. 39 15/16 22 7/8
Third quarter............................................... 51 3/4 36 1/4
Fourth quarter (through November 10, 1997).................. 46 1/4 42 1/2
</TABLE>
On November 10, 1997, the last reported sale price for the Common Stock was
$43 3/8 per share. The Company estimates there are approximately 15,000
beneficial holders of the Company's Common Stock.
DIVIDEND POLICY
The Company has not paid cash dividends since fiscal 1983. The Board of
Directors of the Company does not intend to institute a cash dividend payment
policy in the foreseeable future. It is the policy of the Board of Directors to
retain earnings to support the growth and expansion of the Company's business.
The future payment of dividends, if any, on Common Stock will depend upon the
Company's earnings, financial condition and capital requirements. In addition,
the payment of dividends is restricted under the terms of the revolving credit
loans.
9
<PAGE> 10
CAPITALIZATION
The following table sets forth the capitalization of the Company at July
31, 1997 and as adjusted as of such date to give effect to the sale by the
Company of the Common Stock. The application of the total net proceeds of
approximately $141.3 million thereof will be used to reduce indebtedness under
revolving credit loans. See "Use of Proceeds." This table should be read in
conjunction with the Company's consolidated financial statements, including the
notes thereto.
<TABLE>
<CAPTION>
JULY 31, 1997
-------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
SHORT-TERM DEBT:
Revolving credit loans(2)................................... $416,428 $275,098
Current portion of long-term debt........................... 207 207
-------- --------
Total short-term debt............................. 416,635 275,305
-------- --------
LONG-TERM DEBT:
Mortgage note, interest at 10.25%, monthly installments of
$85, balloon payment due 2005............................. 8,726 8,726
Other long-term debt........................................ 65 65
-------- --------
Total long-term debt.............................. 8,791 8,791
-------- --------
SHAREHOLDERS' EQUITY:
Preferred stock; par value $.02; 226,500 shares authorized
and outstanding........................................... 5 5
Common stock; par value $.0015; 200,000,000 shares
authorized; 43,947,402 issued and outstanding; 47,447,402
issued and outstanding as adjusted(3)..................... 66 71
Additional paid-in capital.................................. 241,025 382,350
Retained earnings........................................... 249,969 249,969
Cumulative translation adjustment........................... (904) (904)
-------- --------
Total shareholders' equity........................ 490,161 631,491
-------- --------
Total capitalization.............................. $915,587 $915,587
======== ========
</TABLE>
- ---------------
(1) As adjusted to give effect to the sale by the Company of the Common Stock at
the offering price of $42.00 per share and the application of the proceeds
thereof.
(2) On October 31, 1997, indebtedness outstanding under the revolving credit
loans was approximately $593 million.
(3) Does not include 4,383,000 shares subject to stock options outstanding as of
July 31, 1997.
10
<PAGE> 11
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below for each of the
five years ended January 31, 1997 are derived from the Company's audited
financial statements. The audited financial statements at January 31, 1996 and
1997 and for each of the three years in the period ended January 31, 1997 are
included elsewhere in this Prospectus. The data for the six months ended July
31, 1996 and 1997 have been derived from unaudited consolidated financial
statements also appearing herein and which, in the opinion of management,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the unaudited interim periods.
The operating results for the six months ended July 31, 1997 are not necessarily
indicative of the operating results for a full fiscal year. This information
should be read in conjunction with the Company's consolidated financial
statements, including the notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31,
------------------------------------------------------------ -----------------------
1993 1994 1995 1996 1997 1996 1997
-------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................. $978,862 $1,532,352 $2,418,410 $3,086,620 $4,598,941 $2,048,802 $2,921,966
-------- ---------- ---------- ---------- ---------- ---------- ----------
Cost and expenses:
Cost of products sold... 885,292 1,397,967 2,219,122 2,867,226 4,277,160 1,905,488 2,722,811
Selling, general and
administrative
expenses.............. 57,556 79,390 127,951 163,790 206,770 95,609 122,644
-------- ---------- ---------- ---------- ---------- ---------- ----------
942,848 1,477,357 2,347,073 3,031,016 4,483,930 2,001,097 2,845,455
-------- ---------- ---------- ---------- ---------- ---------- ----------
Operating profit.......... 36,014 54,995 71,337 55,604 115,011 47,705 76,511
Interest expense.......... 3,973 5,008 13,761 20,086 21,522 10,802 12,653
-------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes................... 32,041 49,987 57,576 35,518 93,489 36,903 63,858
Provision for income
taxes................... 12,259 19,774 22,664 13,977 36,516 14,459 24,172
-------- ---------- ---------- ---------- ---------- ---------- ----------
Net income................ $ 19,782 $ 30,213 $ 34,912 $ 21,541 $ 56,973 $ 22,444 $ 39,686
======== ========== ========== ========== ========== ========== ==========
Net income per common
share(1)................ $ .63 $ .83 $ .91 $ .56 $ 1.35 $ .57 $ .88
======== ========== ========== ========== ========== ========== ==========
Weighted average common
shares outstanding(1)... 31,402 36,590 38,258 38,138 42,125 39,231 45,122
======== ========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
JANUARY 31,
------------------------------------------------------------ JULY 31,
1993 1994 1995 1996 1997 1997
-------- ---------- ---------- ---------- ---------- ------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........... $ 89,344 $ 165,366 $ 182,802 $ 201,704 $ 351,993 $ 296,115
Total assets.............. 326,885 506,760 784,429 1,043,879 1,545,294 1,655,232
Revolving credit loans.... 89,198 153,105 304,784 283,100 396,391 416,428
Long-term debt............ 9,638 9,467 9,682 9,097 8,896 8,791
Shareholders' equity ..... 115,047 213,326 260,826 285,698 438,381 490,161
</TABLE>
- ---------------
(1) Amounts have been adjusted to reflect the two-for-one stock split declared
on March 21, 1994.
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Tech Data is the second largest distributor of microcomputer products in
the world. The Company's net sales have increased from $979 million in fiscal
1993 to $4.6 billion in fiscal 1997. The increase in sales is the result of the
expansion of the Company's product lines, customer base and market share in
North America, as well as the establishment of export sales into Latin America
and the acquisition of the largest microcomputer distributor in France in fiscal
1995. The Company has been able to increase operating income during this period
despite intense competition by focusing on achieving operating efficiencies
through centralized management, stringent cost controls, efficient handling of
product shipments, use of automation and by achieving economies of scale. Net
income has increased from $19.8 million in fiscal 1993 to $57.0 million in
fiscal 1997. Management believes that Tech Data's recent increases in sales and
profitability are directly attributable to its significant capital investments
and its focus on operating efficiencies.
For the periods indicated, the following table sets forth the percentage of
certain income statement items to net sales derived from the Company's
consolidated statement of income.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
-------------------------------------------
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31,
----------------------- ----------------
1995 1996 1997 1996 1997
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Net sales..................................... 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Cost and expenses:
Cost of products sold....................... 91.7 92.9 93.0 93.0 93.2
Selling, general and administrative
expenses................................. 5.3 5.3 4.5 4.7 4.2
----- ----- ----- ----- -----
97.0 98.2 97.5 97.7 97.4
----- ----- ----- ----- -----
Operating profit.............................. 3.0 1.8 2.5 2.3 2.6
Interest expense.............................. .6 .6 .5 .5 .4
----- ----- ----- ----- -----
Income before income taxes.................... 2.4 1.2 2.0 1.8 2.2
Provision for income taxes.................... .9 .5 .8 .7 .8
----- ----- ----- ----- -----
Net income.................................... 1.5% .7% 1.2% 1.1% 1.4%
===== ===== ===== ===== =====
</TABLE>
SIX MONTHS ENDED JULY 31, 1996 AND 1997
Net sales increased 42.6% to $2.92 billion in the first six months of
fiscal 1998 compared to $2.05 billion in the same period of 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. In the first half of fiscal 1998, U.S. and international sales grew 44.1%
and 32.3%, respectively, compared to the prior year comparable period.
International sales represented approximately 12% of fiscal 1998 first half net
sales compared to 13% for the first half of fiscal 1997.
The cost of products sold as a percentage of net sales increased to 93.2%
in the first half of fiscal 1998 from 93.0% in the prior year. This increase is
the result of competitive market prices and the Company's strategy of lowering
selling prices in order to gain market share and to pass on the benefit of
operating efficiencies to its customers.
Selling, general and administrative expenses increased 28.3% to $122.6
million in the first half of fiscal 1998 compared to $95.6 million last year,
but decreased as a percentage of net sales from 4.7% in the first half of last
year to 4.2% in the current year. The decline in selling, general and
administrative expenses as a percentage of net sales in the first half of fiscal
1998 is attributable to greater economies of scale realized by the Company in
addition to improved operating efficiencies. The dollar value increase
12
<PAGE> 13
in selling, general and administrative expenses is primarily the result of an
expansion in the number of employees and increases in other administrative
expenses needed to support the increased volume of business.
As a result of the factors described above, operating profit increased
60.4% to $76.5 million, or 2.6% of net sales, in the first half of fiscal 1998
compared to $47.7 million, or 2.3% of net sales, for the prior year comparable
period.
Interest expense increased in the first six months of fiscal 1998 due to an
increase in the Company's average outstanding indebtedness.
As a result of the factors described above, net income increased 76.8% to
$39.7 million, or $.88 per share, in the first six months of fiscal 1998
compared to $22.4 million, or $.57 per share, in the prior year comparable
period.
FISCAL YEARS ENDED JANUARY 31, 1996 AND 1997
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 affected by a lower growth rate in the prior year as the
Company was recovering from the effects of the business interruptions caused by
its 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 the greater economies of scale that 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 an expansion in the number of employees 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.
FISCAL YEARS ENDED JANUARY 31, 1995 AND 1996
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
was 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 its computer
system conversion in December 1994. The Company's
13
<PAGE> 14
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 was 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 products 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 was primarily a result of an
expansion in the number of employees and increases in other administrative
expenses needed to support the increased volume of business, as well as expenses
associated with the Company's 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.
14
<PAGE> 15
QUARTERLY FINANCIAL DATA
The following table sets forth certain unaudited data regarding the
Company's results of operations for the preceding eight fiscal quarterly
periods. Such data is derived from the unaudited interim consolidated financial
statements of the Company and, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the information contained therein.
Any trends that may be reflected in the following table are not necessarily
indicative of the Company's future operations.
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------------------------
OCTOBER 31, JANUARY 31, APRIL 30, JULY 31, OCTOBER 31, JANUARY 31, APRIL 30, JULY 31,
1995 1996 1996 1996 1996 1997 1997 1997
----------- ----------- --------- ---------- ----------- ----------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Net sales............ $843,286 $901,038 $985,574 $1,063,228 $1,236,650 $1,313,489 $1,370,146 $1,551,820
Cost and expenses:
Cost of products
sold............. 784,601 836,658 916,562 988,926 1,150,695 1,220,977 1,274,969 1,447,842
Selling, general
and
administrative
expenses......... 42,179 44,093 46,285 49,324 54,023 57,138 59,484 63,160
Operating profit..... 16,506 20,287 22,727 24,978 31,932 35,374 35,693 40,818
Net income........... 7,042 9,202 10,428 12,016 16,748 17,781 18,222 21,464
Net income per common
share.............. .18 .24 .27 .30 .38 .40 .41 .47
PERCENTAGE OF NET
SALES:
Net sales............ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost and expenses:
Cost of products
sold............. 93.0 92.9 93.0 93.0 93.0 93.0 93.1 93.3
Selling, general
and
administrative
expenses......... 5.0 4.9 4.7 4.6 4.4 4.4 4.3 4.1
Operating profit..... 2.0 2.2 2.3 2.3 2.6 2.7 2.6 2.6
Net income........... 0.8 1.0 1.1 1.1 1.4 1.4 1.3 1.4
NET SALES GROWTH:
Year-over-year....... 28.1% 36.5% 55.6% 50.0% 46.6% 45.8% 39.0% 46.0%
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities of $85.7 million during the first
six months of fiscal 1998 was primarily attributable to income from operations
of $39.7 million combined with a decrease in inventories and an increase in
accounts payable.
Net cash used in investing activities of $49.5 million during the first six
months of fiscal 1998 was attributable to the payment of $35.4 million related
to the acquisition of the common and preferred stock of Macrotron AG (see Note
12 of Notes to Consolidated Financial Statements) combined with the Company's
continuing investment of $14.1 million in its management information systems,
office facilities and its distribution center facilities. The Company expects to
make capital expenditures of approximately $50 million during fiscal 1998 to
further expand its management information systems capability, office facilities
and distribution centers.
Net cash used in financing activities of $34.8 million during the first six
months of fiscal 1998 reflects a loan of $60.0 million to Macrotron AG, net of
borrowings under its revolving credit loans of $20.0 million and proceeds of
$5.3 million from issuance of Common Stock.
15
<PAGE> 16
In July 1997, the Company increased its accounts receivable securitization
program from $325 million to $400 million and in August 1997 entered into a new
$550 million three-year multi-currency revolving credit loan agreement with 20
banks. The Company currently maintains domestic and foreign revolving credit
agreements which provide maximum short-term borrowings of approximately $980
million (including local country credit lines), of which $416 million was
outstanding at July 31, 1997. The Company believes that the proceeds from the
Offerings, along with cash from operations, available and obtainable bank credit
lines and trade credit from its vendors will be sufficient to satisfy its
working capital and capital expenditure needs through fiscal 1998.
ASSET MANAGEMENT
The Company manages its inventories by maintaining sufficient quantities to
achieve high order fill rates while attempting to stock only those products in
high demand with a rapid turnover rate. Inventory balances fluctuate as the
Company adds new product lines and, when appropriate, makes large purchases
including cash purchases from manufacturers and publishers when the terms of
such purchases are considered advantageous. The Company's contracts with most of
its vendors provide price protection and stock rotation privileges to reduce the
risk of loss due to manufacturer price reductions and slow moving or obsolete
inventory. In the event of a vendor price reduction, the Company generally
receives a credit for the impact on products in inventory. In addition, the
Company has the right to rotate a certain percentage of purchases, subject to
certain limitations. Historically, price protection and stock rotation
privileges, as well as the Company's inventory management procedures, have
helped to reduce the risk of loss of carrying inventory.
The Company attempts to control losses on credit sales by closely
monitoring customers' creditworthiness through evaluating detailed information
on customer payment history and other relevant information. In addition, the
Company participates in a national credit association which exchanges credit
information on mutual customers. The Company has credit insurance which insures
a percentage of the credit extended by the Company to certain of its larger
domestic and international customers against possible loss. Customers who
qualify for credit terms are typically granted net 30 day payment terms. The
Company also sells product on a prepay or credit card basis or through
commercial finance companies.
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 purchased 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.
RECENT ACCOUNTING PRONOUNCEMENTS
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 Company's fiscal year
ended 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.
16
<PAGE> 17
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128")
which is effective for financial statements issued for periods ending after
December 15, 1997. SFAS 128 simplifies the previous standards for computing
earnings per share and requires the disclosure of basic and diluted earnings per
share. For the year ended January 31, 1997 and for the subsequent interim
periods reported, the amount reported as net income per common share is not
materially different than that which would have been reported for basic and
diluted earnings per share in accordance with SFAS 128.
17
<PAGE> 18
BUSINESS
Tech Data is the world's second largest distributor of microcomputer
hardware and software products to value-added resellers, corporate resellers,
retailers and direct marketers. Tech Data distributes products throughout the
United States, Canada, Latin America, Germany, France, Switzerland and Austria.
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 70,000 customers. The Company believes its broad assortment of vendors and
products meets its customers' need for a cost effective link to such products
through a single source.
The Company provides its customers with systems, peripherals, networking
products and software, which accounted for 25%, 40%, 19% and 16%, respectively,
of net sales in the first six months of fiscal 1998. The Company offers products
from manufacturers and publishers such as Apple, Bay Networks, Cisco, Compaq,
Corel, Creative Labs, Digital Equipment, Epson, Hewlett-Packard, IBM, Intel,
Microsoft, Novell, Okidata, Seagate, Symantec, 3Com, Toshiba, Viewsonic and
Western Digital. The Company ships products from regionally located distribution
centers generally the same day the orders are received. The customers are
provided with a high level of service through flexible financing and credit
programs, the Company's pre- and post-sale technical support, electronic
commerce tools (including on-line order entry, access to product specifications
and electronic data interchange services), product configuration services,
customized shipping documents, flexible product return policies and customer
education programs.
INDUSTRY
The wholesale distribution model, like that of the Company, has proven to
be well-suited for both manufacturers and publishers of microcomputer products
("vendors") and resellers of those products. The large number and diversity of
resellers makes it cost efficient for vendors to rely on wholesale distributors,
which can leverage distribution costs across multiple vendors, to outsource a
portion of their distribution, credit, marketing and support services.
Similarly, due to the large number of vendors and products, resellers often
cannot or choose not to establish direct purchasing relationships with vendors.
Instead they rely on wholesale distributors, which can leverage purchasing costs
across multiple resellers, to satisfy a significant portion of their product
procurement and delivery, financing, marketing and technical support needs.
The U.S. microcomputer distribution market grew from $17 billion in 1992 to
$33 billion in 1996. This growth represents a compound annual rate of 18%, while
the overall U.S. microcomputer industry grew at a compound annual rate of 13%
during the same period. The Company's U.S. sales grew during this period at a
compound annual rate of 45%. The Company believes that the rates of growth of
the Company and the wholesale distribution segment of the microcomputer industry
have outpaced that of the microcomputer industry as a whole for three principal
reasons. First, as a result of the use of open systems and off-the-shelf
components, hardware and software products are 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, resellers have increasingly
relied on wholesale distributors such as Tech Data for product availability and
flexible financing alternatives 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 have eased gradually. 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"). Historically, these
previously restricted product lines were sold by master resellers, or
aggregators (whose business model was similar to wholesale distributors, but
focused on relatively few product lines), to a network of franchise dealers.
Open-sourcing has virtually eliminated any advantage that these aggregators
enjoyed as a result of their exclusive sourcing arrangements.
18
<PAGE> 19
A recent trend in wholesale distribution is the expansion of electronic
commerce. The increasing utilization of electronic ordering and information
delivery systems, including the ability to transact business over the World Wide
Web, has had, and is expected to continue to have, a significant impact on the
cost efficiency of the wholesale distribution industry. Distributors, such as
Tech Data, with the financial and technical resources to develop, implement and
operate state-of-the-art management information systems have been able to reduce
both their customers' and their own transaction costs through more efficient
purchasing and lower selling costs.
In addition, a trend has emerged whereby the final assembly of certain
products is performed by distributors. In order to compete more effectively and
lower their costs, major computer systems manufacturers that rely on the
wholesale distribution model have announced their intention to reduce their own
inventories and the inventories of their distributors and resellers by
implementing a build-to-order manufacturing process. These major manufacturers
have also begun to develop programs whereby final assembly will be performed at
the distribution level ("channel assembly") as compared to the current
build-to-forecast methodology employed by these manufacturers. Tech Data has
been selected by Compaq, Hewlett-Packard and IBM to participate in their
respective channel assembly programs.
The wholesale distribution industry is undergoing significant consolidation
as economies of scale and access to financial resources become more critical.
Large distributors, like the Company, that have been able to utilize economies
of scale to lower costs and pass on the savings to their customers in the form
of reduced prices have continued to take market share.
BUSINESS STRATEGY
Tech Data, as the world's second largest distributor of microcomputer
products, believes that its infrastructure and the size of its operations
position it to gain share in its current markets as well as to continue to
expand into new geographic markets. The Company provides a broad array of
products and services for its customers, which allows them to satisfy their
needs from a single source. The Company's size and performance have allowed it
to make significant investments in personnel, management information systems,
distribution centers and other capital resources.
To maintain and enhance its leadership position in wholesale distribution,
the Company's business strategy includes the following main elements:
MAINTAIN LOW COST AND EFFICIENT OPERATIONS. The Company has pursued a
strategy of profitable revenue growth by providing its customers with the
benefit of operating efficiencies achieved through centralized management
and operations, stringent cost controls and automation. The Company
strictly regulates 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. The Company has been successful in reducing selling,
general and administrative expenses as a percentage of net sales from 5.9%
in fiscal 1993 to 4.5% in fiscal 1997 and 4.2% for the first six months of
fiscal 1998.
LEVERAGE MANAGEMENT INFORMATION SYSTEMS. In order to further improve
its operating efficiencies and services to its customers, the Company
invested approximately $30 million in a scalable, state-of-the-art computer
information system which commenced operations in December 1994. This
system, which currently supports the Company's U.S. and Canadian operations
and Latin American export operations, allows the Company to improve
operating efficiencies and to offer additional services such as expanded
electronic commerce capabilities, including electronic data interchange and
Tech Data On-Line electronic ordering and information systems. The
Company's ordering system will be available on its World Wide Web site in
the near future. The Company believes that growth in its electronic
commerce capabilities will provide incremental economies of scale and
further reduce transaction costs.
19
<PAGE> 20
OFFER A BROAD AND BALANCED 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 enables
its customers to procure product more efficiently 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
telecommunications 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.
FOSTER CUSTOMER LOYALTY THROUGH SUPERIOR CUSTOMER SERVICE. Tech
Data's sales force provides superior customer service through a dedicated
team approach in order to differentiate itself from its competitors and
foster customer loyalty. The Company believes its strategy of not competing
with its customer base, unlike many of its competitors, also promotes
customer loyalty.
BROADEN GEOGRAPHIC COVERAGE THROUGH INTERNATIONAL EXPANSION. The
Company plans to take advantage of its strong financial position, vendor
relationships and distribution expertise to continue to expand its business
in the markets it currently serves and additional strategic geographic
markets. The Company's expansion strategy focuses on identifying companies
with significant market positions and quality management teams in markets
where there is developed or emerging demand for microcomputer products.
Following expansion into a new market, Tech Data enhances its market share
by providing capital, adding new product lines, delivering value-added
services and providing operational expertise. The Company's operations have
expanded from its North American focus to include Europe with the
acquisition in fiscal 1995 of France's largest wholesale microcomputer
distributor and the acquisition in July 1997 of a majority interest in
Macrotron AG, Germany's third largest wholesale microcomputer distributor.
During the current fiscal year, the Company also continued its
international expansion through the development of an in-country subsidiary
in Brazil, which stocks and distributes products locally.
VENDOR RELATIONS
The Company's strong financial and industry positions have enabled it to
obtain contracts with most leading manufacturers and publishers. 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.
Generally, the Company's vendor agreements do not 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. Vendor
agreements generally contain stock rotation and price protection provisions
which, along with the Company's inventory management policies and practices,
reduce the Company's risk of loss due to slow-moving inventory, vendor price
reductions, product updates or obsolescence. Under the terms of most of the
Company's distribution agreements, vendors will credit the Company for declines
in inventory value resulting from the vendors' price reductions if the Company
complies with certain conditions. In addition, under most vendor agreements, the
Company has the right to return for credit or exchange for other products a
portion of those inventory items purchased, within a designated period of time.
A vendor who elects to terminate a distribution agreement generally will
repurchase from the Company the vendor's products carried in the Company's
inventory. While the industry practices discussed above are sometimes not
embodied in written agreements and do not protect the Company in all cases from
declines in inventory value, management believes that these practices provide a
significant level of protection from such declines. See "Risk Factors -- Risk of
Declines in Inventory Value."
20
<PAGE> 21
Major computer systems manufacturers have begun to re-engineer their
manufacturing processes whereby final assembly will also be performed by the
Company as compared to the current "build-to-forecast" methodology employed by
these manufacturers. Tech Data has been selected by Compaq, Hewlett-Packard and
IBM to participate in their respective channel assembly programs. The Company
currently performs configuration services at its South Bend, Indiana
distribution center which has been ISO 9002 certified and plans to expand its
configuration and final assembly service capabilities into its new Fontana,
California and Swedesboro, New Jersey distribution centers later this year.
In addition to providing manufacturers and publishers with one of the
largest bases of resellers in the United States, Canada, Latin America, Germany,
France, Switzerland and Austria, 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.
No single vendor accounted for more than 10% of the Company's net sales
during fiscal 1997, 1996 or 1995, except sales of Compaq products which
accounted for 12% of net sales in fiscal 1997. For the first six months of
fiscal 1998, only Compaq and Hewlett-Packard accounted for more than 10% of net
sales, representing 14% and 11% of net sales, respectively.
CUSTOMERS, PRODUCTS AND SERVICES
The Company sells more than 45,000 microcomputer products including
systems, peripherals, networking and software purchased directly from
manufacturers and publishers in large quantities for sale to an active customer
base of more than 70,000 VARs, corporate resellers, retailers and direct
marketers.
VARs typically do not have the resources to establish a large number of
direct purchasing relationships or stock significant product inventories. This
market segment is attractive because VARs, which currently constitute
approximately 60% of Tech Data's net sales, generally rely on distributors as
their principal source of computer products and financing. Corporate resellers,
retailers and direct marketers may establish direct relationships with
manufacturers and publishers for their more popular products, but utilize
distributors as the primary source for other product requirements and the
alternative source for products acquired direct.
The Company has established the Tech Data Elect Program, which includes
cost-plus pricing on certain high volume products, primarily computer systems
and printers, and other special terms to target corporate resellers and other
resellers that prior to open-sourcing, purchased products from aggregators.
Corporate resellers currently constitute approximately 23% of the Company's net
sales. Tech Data also has developed special programs to meet the unique needs of
retail and direct marketers, which customers currently constitute approximately
17% of the Company's net sales. No single customer accounted for more than 5% of
the Company's net sales during fiscal 1997, 1996 or 1995 nor for the first six
months of fiscal 1998.
The Company pursues a strategy of expanding its product line to offer its
customers a broad assortment of products. If demand for certain products sold by
the Company exceeds the supply available from the vendors, the Company generally
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.
Tech Data provides customers a high-level of service through flexible
customer financing and credit programs, the Company's pre-and post-sale
technical support, electronic commerce tools (including on-line order entry,
access to product specifications and EDI services), customized shipping
documents, product configuration services, flexible product return policies and
customer education programs.
21
<PAGE> 22
The Company believes that providing its customers with the proper level of
credit is essential to sales growth. Tech Data devotes significant resources to
proactively review customer credit balances, provide a variety of credit
programs and monitor customer credit status.
The Company delivers products throughout the United States, Canada, Latin
America, Germany, France, Switzerland and Austria from its fourteen 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); Sao Paulo,
Brazil; Munich, Germany; Bobigny (Paris), France; Hunenberg, Switzerland and
Vienna, Austria. Locating distribution centers near its customers enables the
Company to efficiently deliver products on a timely basis, thereby reducing
customers' need to invest in inventory.
The Company recently completed the expansion of three of its seven U.S.
distribution centers and is in the process of expanding two others. The Company
will have a total of 1.8 million square feet of distribution space later this
year as compared to the previous capacity of 700,000 square feet. Four of the
new U.S. distribution center locations include adjacent land which provide
enough space to double the capacity of each of these locations to meet future
growth requirements.
SALES AND ELECTRONIC COMMERCE
Currently, the Company's sales force consists of approximately 60 field
sales representatives and 1,065 inside telemarketing sales representatives.
Field sales representatives are located in major metropolitan areas. Each field
representative is supported by inside telemarketing sales teams covering a
designated territory. The Company's team concept provides a stronger personal
relationship between representatives of the customers and Tech Data. Territories
with no field representation are serviced exclusively by the inside
telemarketing sales teams. Customers typically call their inside sales teams on
dedicated toll-free numbers to place orders. 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.
Customers rely upon the Company's electronic ordering and information
systems, World Wide Web site, product catalogs and frequent mailings as sources
for product information, including prices. The Company's on-line computer system
allows the inside sales teams to check for current stocking levels in each of
the seven United States distribution centers. Likewise, inside sales teams in
Canada, Brazil, Germany, France, Switzerland and Austria can check on stocking
levels in their respective distribution centers. Through "Tech Data On-Line,"
the Company's proprietary electronic on-line system, U.S. 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 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. Customers
currently can check product availability and pricing via the Company's World
Wide Web site. The Company's ordering system will be available on the World Wide
Web site in the near future. During the first six months of fiscal 1998, the
Company received orders accounting for approximately 20% of its U.S. net sales
and approximately 50% of its total order lines through its electronic ordering
systems.
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 domestic sales representative
attends a four to six-week course provided in-house by the Company. In addition,
the Company's ongoing training program is supplemented by product seminars
offered daily by vendors.
COMPETITION
The Company operates in a market characterized by intense competition.
Competition within the industry is based on product availability, credit
availability, price, delivery and various services and support provided by the
distributor to the customer. The Company believes that it is positioned to
22
<PAGE> 23
compete effectively with other distributors in these areas. Major competitors
include Ingram Micro, Inc. and Merisel, Inc. in North America; Computer 2000 and
CHS Electronics, Inc. in Europe; and a variety of local and regional
distributors in all geographic markets in which the Company operates. The only
competitor larger than the Company, based on worldwide sales, is Ingram Micro,
Inc.
The Company also competes with manufacturers and publishers who sell
directly to resellers and end-users. 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 July 31, 1997, the Company had approximately 4,580 full-time employees,
which includes approximately 800 employees of Macrotron AG. The Company enjoys
excellent relations with its employees, all of whom are non-union.
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 and Canada. On
July 1, 1997, the Company entered into Germany, Austria and Switzerland through
the acquisition of a majority interest of the voting stock in Macrotron AG. See
Note 10 and Note 12 of Notes to Consolidated Financial Statements regarding the
geographical distribution of the Company's net sales, operating income and
identifiable assets and the recent acquisition of Macrotron AG.
MANAGEMENT
The executive officers of the Company, their ages, and their present
positions with the Company as of October 1, 1997 are as follows:
<TABLE>
<S> <C> <C>
Steven A. Raymund...................... 41 Chairman of the Board of Directors and
Chief Executive Officer
Anthony A. Ibarguen.................... 38 President and Chief Operating Officer
Jeffery P. Howells..................... 40 Executive Vice President of Finance and
Chief Financial Officer
Peggy K. Caldwell...................... 52 Senior Vice President of Marketing
Timothy J. Curran...................... 45 Senior Vice President of Sales
Lawrence W. Hamilton................... 40 Senior Vice President of Human
Resources
Yuda Saydun............................ 44 Senior Vice President and General
Manager -- Latin America
Theodore F. Augustine.................. 50 Vice President of Distribution and
Logistics
Patrick O. Connelly.................... 51 Vice President of Worldwide Credit
Services
Charles V. Dannewitz................... 42 Vice President of Taxes
Arthur W. Singleton.................... 36 Vice President, Treasurer and Secretary
Joseph B. Trepani...................... 37 Vice President and Worldwide Controller
David R. Vetter........................ 38 Vice President and General Counsel
</TABLE>
23
<PAGE> 24
EXECUTIVE OFFICERS
STEVEN A. RAYMUND, CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE
OFFICER, 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, 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, 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.
PEGGY K. CALDWELL, SENIOR VICE PRESIDENT OF MARKETING, 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, 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, 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,
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 University 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, 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, joined
the Company in August 1994. Prior to joining the Company, he was employed by
Unisys Corporation for nine years as
24
<PAGE> 25
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, 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.
ARTHUR W. SINGLETON, VICE PRESIDENT, TREASURER AND SECRETARY, 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, 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, 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.
CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Common
Stock by a person that, for United States federal income tax purposes, is a
non-resident alien individual, a foreign corporation, a foreign partnership or
an estate or trust, in each case not subject to United States federal income tax
on a net income basis in respect of income or gain from Common Stock (a
"non-U.S. holder"). This discussion does not consider the specific facts and
circumstances that may be relevant to particular holders and does not address
the treatment of non-U.S. holders of Common Stock under the laws of any state,
local or foreign taxing jurisdiction. Further, the discussion is based on
provisions of the United States Internal Revenue Code of 1986, as amended (the
"Code"), Treasury regulations thereunder, and administrative and judicial
interpretations thereof, all as in effect on the date hereof and all of which
are subject to change on a possibly retroactive basis. Each prospective holder
is urged to consult a tax advisor with respect to the United States federal tax
consequences of acquiring, holding and disposing of Common Stock, as well as any
tax consequences that may arise under the laws of any state, local or foreign
taxing jurisdiction.
DIVIDENDS
Dividends paid to a non-U.S. holder of Common Stock will be subject to
withholding of United States federal income tax at a 30% rate or such lower rate
as may be specified by an applicable income tax treaty, unless the dividends are
effectively connected with the conduct of a trade or business within the United
States (and are attributable to a United States permanent establishment of such
holder, if an applicable income tax treaty so requires as a condition for the
non-U.S. holder to be subject to United States income tax on a net income basis
in respect of such dividends). Such "effectively connected" dividends are
subject to tax at rates applicable to United States citizens, resident aliens
and domestic United States corporations, and are not generally subject to
withholding. Any such effectively connected dividends received by a non-United
States corporation may also, under certain circumstances, be subject
25
<PAGE> 26
to an additional "branch profits tax" at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.
Under current United States Treasury regulations, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country (unless the payor has knowledge to the contrary) for purposes of the
withholding discussed above and, under the current interpretation of United
States Treasury regulations, for purposes of determining the applicability of
tax treaty rate. Under proposed United States Treasury regulations (the
"Proposed Regulations"), however, a non-U.S. holder of Common Stock who wishes
to claim the benefit of an applicable treaty rate would be required to satisfy
applicable certification requirements. In addition, under the Proposed
Regulations, in the case of Common Stock held by a foreign partnership, (x) the
certification requirement would generally be applied to the partners of the
partnership and (y) the partnership would be required to provide certain
information, including a United States taxpayer identification number. The
Proposed Regulations also provide look-through rules for tiered partnerships. It
is not certain whether, or in what form, the Proposed Regulations will be
adopted as final regulations.
A non-U.S. holder of Common Stock that is eligible for a reduced rate of
United States withholding tax pursuant to a tax treaty may obtain a refund of
any excess amounts currently withheld by filing an appropriate claim for refund
with the United States Internal Revenue Service.
GAIN ON DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be subject to United States federal
income tax in respect of gain recognized on disposition of Common Stock except
in the following circumstances: (i) the gain is effectively connected with a
trade or business conducted by the non-U.S. holder in the United States (and is
attributable to a permanent establishment maintained in the United States by
such non-U.S. holder if an applicable income tax treaty so requires as a
condition for such non-U.S. holder to be subject to United States taxation on a
net income basis in respect of gain from the sale or other disposition of the
Common Stock); (ii) in the case of a non-U.S. holder who is an individual and
holds the Common Stock as a capital asset, such holder is present in the United
States for 183 or more days in the taxable year of the sale and certain other
conditions exist; or (iii) the Company is or has been a "United States real
property holding corporation" for federal income tax purposes and the non-U.S.
holder held, directly or indirectly at any time during the five-year period
ending on the date of disposition, more than 5% of the Common Stock (and is not
eligible for any treaty exemption). Effectively connected gains realized by a
corporate non-U.S. Holder may also, under certain circumstances, be subject to
an additional "branch profits tax" at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.
The Company has not been, is not, and does not anticipate becoming a
"United States real property holding corporation" for federal income tax
purposes.
FEDERAL ESTATE TAXES
Common Stock held by a non-U.S. holder at the time of death will be
included in such holder's gross estate for United States federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Under current law, United States information reporting requirements (other
than reporting of dividend payments for purposes of the withholding tax noted
above) and backup withholding tax generally will not apply to dividends paid to
non-U.S. holders that are either subject to the 30% withholding discussed above
or that are not so subject because an applicable tax treaty reduces such
withholding. Otherwise, backup withholding of United States federal income tax
at a rate of 31% may apply to dividends paid with respect to Common Stock to
holders that are not "exempt recipients" and that fail to provide certain
information (including the holder's United States taxpayer identification
number). Generally, unless the payor of dividends has definite knowledge that
the payee is a United
26
<PAGE> 27
States person, the payor may treat dividend payments to a payee with a foreign
address as exempt from information reporting and backup withholding, However,
under the Proposed Regulations, dividend payments generally will be subject to
information reporting and backup withholding unless applicable certification
requirements are satisfied. See the discussion above with respect to the rules
applicable to foreign partnerships under the Proposed Regulations.
In general, United States information reporting and backup withholding
requirements also will not apply to a payment made outside the United States of
the proceeds of a sale of Common Stock through an office outside the United
States of a non-United States broker. However, United States information
reporting (but not backup withholding) requirements will apply to a payment made
outside the United States of the proceeds of a sale of Common Stock through an
office outside the United States of a broker that is a United States person,
that derives 50% or more of its gross income for certain periods from the
conduct of a trade or business in the United States, or that is a "controlled
foreign corporation" as to the United States, unless the broker has documentary
evidence in its records that the holder or beneficial owner is a non-United
States person or the holder or beneficial owner otherwise establishes an
exemption. Payment of the proceeds of the sale of Common Stock to or through a
United States office of a broker is currently subject to both United States
backup withholding and information reporting unless the holder certifies its
non-United States status under penalties of perjury or otherwise establishes an
exemption.
A non-United States holder generally may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing the appropriate
claim for refund with the United States Internal Revenue Service.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"), all
of which may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices at 7 World Trade Center,
Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material also can be obtained at
prescribed rates by writing to the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549. Reports, proxy and information
statements and other information concerning the Company can also be inspected at
The Nasdaq National Market at 1735 K Street, N.W., Washington, D.C. 20006 or
from the Commission's World Wide Web site at http://www.sec.gov.
This Prospectus constitutes part of a Registration Statement filed by the
Company with the Commission under the Securities Act. This Prospectus omits
certain of the information contained in the Registration Statement in accordance
with the rules and regulations of the Commission. Reference is hereby made to
the Registration Statement and related exhibits for further information with
respect to the Company and the Common Stock. Statements contained herein
concerning the provisions of any document are not necessarily complete and, in
each instance, where a copy of such document has been filed as an exhibit to the
Registration Statement or otherwise has been filed with the Commission,
reference is made to the copy so filed. Each such statement is qualified in its
entirety by such reference.
27
<PAGE> 28
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
pursuant to the Exchange Act, File No. 0-14625, and are incorporated herein by
reference:
1. Annual Report on Form 10-K for the fiscal year ended January 31, 1997.
2. Quarterly Report on Form 10-Q for the quarter ended April 30, 1997.
3. Quarterly Report on Form 10-Q for the quarter ended July 31, 1997.
4. Proxy Statement for the Annual Meeting of Shareholders held on June 10,
1997.
5. The Registration Statement on Form 8-A under the Exchange Act as filed
with the Commission on May 14, 1986.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Common Stock hereby shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any and all of the documents
incorporated herein by reference (not including the exhibits to such documents,
unless such exhibits are specifically incorporated by reference into such
documents). Requests for such copies should be directed to Mr. Arthur W.
Singleton, Vice President, Treasurer and Secretary of the Company, at Tech Data
Corporation, 5350 Tech Data Drive, Clearwater, Florida 37760.
VALIDITY OF THE SHARES
The validity of the shares offered hereby will be passed upon for the
Company by Schifino & Fleischer, P.A., Tampa, Florida, and for the Underwriters
by Sullivan & Cromwell, New York, New York.
EXPERTS
The financial statements as of January 31, 1997 and 1996 and for each of
the three years in the period ended January 31, 1997 included in this Prospectus
have been so included in reliance on the report of Price Waterhouse LLP,
independent certified public accountants, given on the authority of said firm as
experts in auditing and accounting.
28
<PAGE> 29
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants.......... F-2
Consolidated Balance Sheet.................................. F-3
Consolidated Statement of Income............................ F-4
Consolidated Statement of Changes in Shareholders' Equity... F-5
Consolidated Statement of Cash Flows........................ F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 30
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
F-2
<PAGE> 31
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JANUARY 31,
------------------------ JULY 31,
1996 1997 1997
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $ 1,154 $ 661 $ 2,125
Accounts receivable, less allowance of $22,669,
$23,922 and $28,079........................... 445,202 633,579 700,806
Inventories...................................... 465,422 759,974 705,636
Prepaid and other assets......................... 39,010 55,796 43,828
---------- ---------- ----------
Total current assets..................... 950,788 1,450,010 1,452,395
Property and equipment, net........................ 61,610 65,597 69,999
Investment in and advances to Macrotron AG......... 104,567
Excess of cost over acquired net assets, net....... 6,376 5,922 5,696
Other assets, net.................................. 25,105 23,765 22,575
---------- ---------- ----------
$1,043,879 $1,545,294 $1,655,232
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Revolving credit loans........................... $ 283,100 $ 396,391 $ 416,428
Current portion of long-term debt................ 519 201 207
Accounts payable................................. 433,374 658,732 696,297
Accrued expenses................................. 32,091 42,693 43,348
---------- ---------- ----------
Total current liabilities................ 749,084 1,098,017 1,156,280
Long-term debt..................................... 9,097 8,896 8,791
---------- ---------- ----------
758,181 1,106,913 1,165,071
---------- ---------- ----------
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 5
Common stock, par value $.0015; 100,000,000,
100,000,000 and 200,000,000 shares authorized;
37,930,655, 43,291,423 and 43,947,402 issued
and outstanding............................... 57 65 66
Additional paid-in capital....................... 130,045 226,577 241,025
Retained earnings................................ 153,310 210,283 249,969
Cumulative translation adjustment................ 2,281 1,451 (904)
---------- ---------- ----------
Total shareholders' equity............... 285,698 438,381 490,161
---------- ---------- ----------
$1,043,879 $1,545,294 $1,655,232
========== ========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
F-3
<PAGE> 32
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31,
------------------------------------ -----------------------
1995 1996 1997 1996 1997
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales...................... $2,418,410 $3,086,620 $4,598,941 $2,048,802 $2,921,966
---------- ---------- ---------- ---------- ----------
Cost and expenses:
Cost of products sold........ 2,219,122 2,867,226 4,277,160 1,905,488 2,722,811
Selling, general and
administrative expenses... 127,951 163,790 206,770 95,609 122,644
---------- ---------- ---------- ---------- ----------
2,347,073 3,031,016 4,483,930 2,001,097 2,845,455
---------- ---------- ---------- ---------- ----------
Operating profit............... 71,337 55,604 115,011 47,705 76,511
Interest expense............... 13,761 20,086 21,522 10,802 12,653
---------- ---------- ---------- ---------- ----------
Income before income taxes..... 57,576 35,518 93,489 36,903 63,858
Provision for income taxes..... 22,664 13,977 36,516 14,459 24,172
---------- ---------- ---------- ---------- ----------
Net income..................... $ 34,912 $ 21,541 $ 56,973 $ 22,444 $ 39,686
========== ========== ========== ========== ==========
Net income per common share.... $ .91 $ .56 $ 1.35 $ .57 $ .88
========== ========== ========== ========== ==========
Weighted average common shares
outstanding.................. 38,258 38,138 42,125 39,231 45,122
========== ========== ========== ========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
F-4
<PAGE> 33
TECH DATA CORPORATION AND SUBSIDIARIES
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
Issuance of common stock in
business acquisition
(unaudited)................ 407 1 9,198 9,199
Issuance of common stock for
stock options exercised and
related tax benefit
(unaudited)................ 249 5,250 5,250
Net income (unaudited)....... 39,686 39,686
Translation adjustments
(unaudited)................ (2,355) (2,355)
--- -- ------ --- -------- -------- ------- --------
Balance -- July 31, 1997
(unaudited).................. 227 $5 43,947 $66 $241,025 $249,969 $ (904) $490,161
=== == ====== === ======== ======== ======= ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
F-5
<PAGE> 34
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31,
--------------------------------------- -------------------------
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers.................. $ 2,326,613 $ 2,933,831 $ 4,390,916 $ 1,975,983 $ 2,844,302
Cash paid to suppliers and employees.......... (2,382,799) (2,854,653) (4,513,309) (1,983,984) (2,713,420)
Interest paid................................. (13,584) (20,276) (21,122) (10,788) (12,967)
Income taxes paid............................. (27,974) (11,628) (45,037) (17,064) (32,184)
----------- ----------- ----------- ----------- -----------
Net cash (used in) provided by operating
activities............................ (97,744) 47,274 (188,552) (35,853) 85,731
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Acquisition of business, net of cash
acquired.................................... (35,368)
Expenditures for property and equipment....... (21,351) (23,596) (19,229) (4,663) (12,847)
Software development costs.................... (18,696) (2,826) (2,024) (1,029) (1,240)
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities... (40,047) (26,422) (21,253) (5,692) (49,455)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock........ 1,859 2,098 96,540 88,576 5,250
Net borrowings (repayments) from revolving
credit loans................................ 136,019 (21,684) 113,291 (47,129) 20,037
Loans to Macrotron AG......................... (60,000)
Principal payments on long-term debt.......... (1,058) (608) (519) (259) (99)
Proceeds from long-term debt.................. 789
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) financing
activities............................ 137,609 (20,194) 209,312 41,188 (34,812)
----------- ----------- ----------- ----------- -----------
Net (decrease) increase in cash and cash
equivalents........................... (182) 658 (493) (357) 1,464
Cash and cash equivalents at beginning of
year.......................................... 678 496 1,154 1,154 661
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of year........ $ 496 $ 1,154 $ 661 $ 797 $ 2,125
=========== =========== =========== =========== ===========
Reconciliation of net income to net cash (used
in) provided by operating activities:
Net income.................................. $ 34,912 $ 21,541 $ 56,973 $ 22,444 $ 39,686
----------- ----------- ----------- ----------- -----------
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization................. 9,110 17,364 20,011 9,515 11,101
Provision for losses on accounts receivable... 17,768 17,433 19,648 9,422 10,437
Loss on disposal of fixed assets.............. 1,237 603 446
Deferred income taxes......................... (1,739) (5,603) (5,051)
Changes in assets and liabilities:
(Increase) in accounts receivable........... (90,600) (152,789) (208,025) (72,819) (77,664)
(Increase) decrease in inventories.......... (132,940) (100,891) (294,552) 25,032 54,338
Decrease (increase) in prepaid and other
assets.................................... 2,645 (7,254) (13,962) (309) 9,613
Increase (decrease) in accounts payable..... 62,132 239,161 225,358 (28,043) 37,565
(Decrease) increase in accrued expenses..... (269) 17,709 10,602 (1,095) 655
----------- ----------- ----------- ----------- -----------
Total adjustments......................... (132,656) 25,733 (245,525) (58,297) 46,045
----------- ----------- ----------- ----------- -----------
Net cash (used in) provided by operating
activities.............................. $ (97,744) $ 47,274 $ (188,552) $ (35,853) $ 85,731
=========== =========== =========== =========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
F-6
<PAGE> 35
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 3-7
straight-line
</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.
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
F-7
<PAGE> 36
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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.
F-8
<PAGE> 37
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
INTERIM FINANCIAL DATA
The interim financial data at July 31, 1997 and for the six months ended
July 31, 1996 and 1997 are unaudited; however, in the opinion of management,
such interim data includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results of the interim
periods.
NOTE 2 -- PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
JANUARY 31,
-------------------
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 3,898 $ 3,898
Buildings and improvements.................................. 27,802 29,155
Furniture, fixtures and equipment........................... 58,721 75,982
Construction in progress.................................... 1,778 629
-------- --------
92,199 109,664
Less -- accumulated depreciation............................ (30,589) (44,067)
-------- --------
$ 61,610 $ 65,597
======== ========
</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.
F-9
<PAGE> 38
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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. See
Note 12 of Notes to Consolidated Financial Statements.
NOTE 4 -- LONG-TERM DEBT:
<TABLE>
<CAPTION>
JANUARY 31,
---------------
1996 1997
------ ------
(IN THOUSANDS)
<S> <C> <C>
Mortgage note payable, interest at 10.25%, principal and
interest of $85,130 payable monthly, balloon payment due
2005...................................................... $9,005 $8,902
Mortgage note payable funded through Industrial Revenue
Bond, interest at 7.3%, principal and interest payable
quarterly, through 1999................................... 282 195
Other note payable.......................................... 329
------ ------
9,616 9,097
Less -- current maturities.................................. (519) (201)
------ ------
$9,097 $8,896
====== ======
</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.
F-10
<PAGE> 39
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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,
-----------------
1996 1997
------- -------
<S> <C> <C>
Deferred tax liabilities:
Accelerated depreciation.................................. $ 4,046 $ 6,863
Deferred revenue.......................................... 3,164 2,811
Other -- net.............................................. 1,378 3,525
------- -------
Total deferred tax liabilities..................... 8,588 13,199
------- -------
Deferred tax assets:
Accruals not currently deductible......................... 2,947 5,092
Reserves not currently deductible......................... 14,774 21,340
Capitalized inventory costs............................... 1,144 2,220
Other -- net.............................................. 338 213
------- -------
Total deferred tax assets.......................... 19,203 28,865
------- -------
Net deferred tax assets (included in prepaid and other
assets)................................................... $10,615 $15,666
======= =======
</TABLE>
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
---------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Current:
Federal................................................... $19,670 $15,107 $32,485
State..................................................... 3,748 2,932 5,897
Foreign................................................... 985 1,541 3,185
------- ------- -------
Total current...................................... 24,403 19,580 41,567
------- ------- -------
Deferred:
Federal................................................... (1,677) (4,656) (3,490)
State..................................................... (62) (625) (451)
Foreign................................................... (322) (1,110)
------- ------- -------
Total deferred..................................... (1,739) (5,603) (5,051)
------- ------- -------
$22,664 $13,977 $36,516
======= ======= =======
</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>
YEAR ENDED JANUARY 31,
-----------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Tax at U.S. statutory rates................................. 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit.............. 4.2 4.2 3.8
Other -- net................................................ .2 .2 .3
---- ---- ----
39.4% 39.4% 39.1%
==== ==== ====
</TABLE>
F-11
<PAGE> 40
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of pretax earnings are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
---------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
United States........................................... $55,155 $33,164 $88,536
Foreign................................................. 2,421 2,354 4,953
------- ------- -------
$57,576 $35,518 $93,489
======= ======= =======
</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.
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.
F-12
<PAGE> 41
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the status of the Company's stock option plans is as follows:
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31, JANUARY 31,
1995 1996 1997
-------------------- --------------------- --------------------
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... 1,515,956 $11.02 2,644,056 $15.62 3,081,110 $13.31
Granted............... 1,372,500 19.94 1,683,450 12.91 1,112,000 16.27
Exercised............. (116,900) 5.83 (79,800) 8.53 (675,492) 13.11
Canceled.............. (127,500) 15.02 (1,166,596) 18.45 (231,800) 13.72
--------- ---------- ---------
Outstanding at year
end................. 2,644,056 15.62 3,081,110 13.31 3,285,818 14.31
========= ========== =========
Options exercisable at
year end............ 180,660 494,460 576,862
Available for grant at
year end............ 2,351,000 1,785,000 905,000
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------- ----------------------------
WEIGHTED AVERAGE
NUMBER REMAINING WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING CONTRACTUAL LIFE AVERAGE EXERCISABLE AVERAGE
EXERCISE PRICES AT 1/31/97 (YEARS) EXERCISE PRICE AT 1/31/97 EXERCISE 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>
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>
YEAR ENDED JANUARY 31,
----------------------
1996 1997
--------- ---------
<S> <C> <C>
Net income.................................................. $19,937 $55,059
Net income per common share................................. $ .52 $ 1.31
</TABLE>
F-13
<PAGE> 42
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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
F-14
<PAGE> 43
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
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
========== ======== ======= ==========
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 1997
- -------------------
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
========== ======== ======= ==========
</TABLE>
NOTE 11 -- UNAUDITED INTERIM FINANCIAL INFORMATION:
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------
APRIL 30 JULY 31 OCTOBER 31 JANUARY 31
-------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
FISCAL YEAR 1996
- -------------------
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>
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------
APRIL 30 JULY 31 OCTOBER 31 JANUARY 31
-------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
FISCAL YEAR 1997
- -------------------
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
</TABLE>
NOTE 12 -- UNAUDITED SUBSEQUENT EVENTS:
ACQUISITION
On July 1, 1997 the Company acquired approximately 77% of the voting common
stock and 7% of the non-voting preferred stock of Macrotron AG ("Mactroton"), a
leading publicly held distributor of personal computer products based in Munich,
Germany. The initial acquisition was completed through an exchange of
approximately $26,000,000 in cash and 406,586 shares of the Company's common
stock,
F-15
<PAGE> 44
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
for a combined total value of $35,000,000. On July 10, 1997, the Company
commenced a tender offer for the remaining shares of Macrotron common and
preferred stock at a price per share of DM730 and DM600, respectively. As of
July 31, 1997, the Company owned or had under option approximately 94% and 18%
of Macrotron's common and preferred stock, respectively. The tender offer period
ended on September 5, 1997. The cash portion of the initial acquisition and the
related tender offer were funded from the Company's revolving credit loan
agreements.
The acquisition of Macrotron will be accounted for under the purchase
method. Consistent with the Company's accounting policy for foreign
subsidiaries, Macrotron's operations will be consolidated into the Company's
consolidated financial statements on a calendar year basis. Consequently, the
Company's fiscal quarter ending October 31, 1997 will include Macrotron's
operations for the three month period beginning July 1, 1997 and ending
September 30, 1997.
The following pro forma unaudited results of operations reflects the effect
on the Company's operations, as if the above described acquisition had occurred
at the beginning of each of the periods presented below:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JULY 31,
-------------------------
1996 1997
----------- -----------
<S> <C> <C>
Net sales................................................... $2,465,276 $3,489,199
Net income.................................................. $ 22,926 $ 40,759
Net income per common share................................. $ .58 $ .90
</TABLE>
The unaudited pro forma information is presented for informational purposes
only and is not necessarily indicative of the operating results that would have
occurred had the Macrotron acquisition been consummated as of the beginning of
the periods above, nor are they necessarily indicative of future operating
results.
REVOLVING CREDIT LOANS
In July 1997, the Company increased its accounts receivable securitization
program from $325,000,000 to $400,000,000 and on August 28, 1997 entered into a
new $550,000,000 three-year multi-currency revolving credit loan agreement with
twenty banks. The Company currently maintains domestic and foreign revolving
credit agreements which provide maximum short-term borrowings of approximately
$980,000,000 (including local country credit lines), of which $416,000,000 was
outstanding at July 31, 1997.
CAPITAL STOCK
At the June 10, 1997 Annual Meeting of Shareholders, a proposal to increase
the Company's authorized common stock from 100,000,000 shares to 200,000,000 was
approved.
F-16
<PAGE> 45
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the U.S. Underwriters named below, and
each of such U.S. Underwriters, for whom Goldman, Sachs & Co., Bear, Stearns &
Co. Inc., The Robinson-Humphrey Company, LLC and NationsBanc Montgomery
Securities, Inc. are acting as representatives, has severally agreed to purchase
from the Company, the respective number of shares of Common Stock set forth
opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
----------- ------------
<S> <C>
Goldman, Sachs & Co......................................... 475,000
Bear, Stearns & Co. Inc..................................... 475,000
The Robinson-Humphrey Company, LLC.......................... 475,000
NationsBanc Montgomery Securities, Inc...................... 475,000
Deutsche Morgan Grenfell Inc................................ 87,500
Donaldson, Lufkin & Jenrette Securities Corporation......... 87,500
Hambrecht & Quist........................................... 87,500
Lazard Freres & Co. LLC..................................... 87,500
PaineWebber Incorporated.................................... 87,500
Robert W. Baird & Co. Incorporated.......................... 87,500
J.C. Bradford & Co.......................................... 55,000
Credit Lyonnais Securities (USA) Inc........................ 55,000
Raymond James & Associates, Inc............................. 55,000
SoundView Financial Group, Inc.............................. 55,000
First Chicago Capital Markets, Inc.......................... 55,000
Blackford Securities Corp................................... 25,000
Cleary Gull Reiland & McDevitt Inc.......................... 25,000
C.L. King & Associates, Inc................................. 25,000
Southeast Research Partners, Inc............................ 25,000
---------
Total............................................. 2,800,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $0.90 per share. The U.S. Underwriters may allow, and
such dealers may reallow, a concession in excess of $0.10 to certain brokers and
dealers. After the shares of Common Stock are released for sale to the public,
the offering price and other selling terms may from time to time be varied by
the representatives.
The Company has entered into an underwriting agreement (the "International
Underwriting Agreement") with the underwriters of the international offering
(the "International Underwriters") providing for the concurrent offer and sale
of 700,000 shares of Common Stock in an international offering outside the
United States. The offering price and aggregate underwriting discounts and
commissions per share for the two offerings are identical. The closing of the
offering made hereby is a condition to the closing of the international
offering, and vice versa. The representatives of the International Underwriters
are Goldman Sachs International, Bear, Stearns International Limited, The
Robinson-Humphrey Company, LLC and NationsBanc Montgomery Securities, Inc.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution of
the shares offered hereby and subject to certain exceptions, it will offer, sell
or deliver the shares of Common Stock, directly or indirectly, only in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") and to U.S. persons, which term shall mean, for
U-1
<PAGE> 46
purposes of this paragraph: (a) any individual who is a resident of the United
States or (b) any corporation, partnership or other entity organized in or under
the laws of the United States or any political subdivision thereof and whose
office most directly involved with the purchase is located in the United States.
Each of the International Underwriters has agreed pursuant to the Agreement
Between that, as a part of the distribution of the shares offered as a part of
the international offering, and subject to certain exceptions, it will (i) not,
directly or indirectly, offer, sell or deliver shares of Common Stock (a) in the
United States or to any U.S. persons or (b) to any person who it believes
intends to reoffer, resell or deliver the shares in the United States or to any
U.S. persons, and (ii) cause any dealer to whom it may sell such shares at any
concession to agree to observe a similar restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
The Company has granted the U.S. Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of 420,000
additional shares of Common Stock solely to cover over-allotments, if any. If
the U.S. Underwriters exercise their over-allotment option, the U.S.
Underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof that the number of shares to be
purchased by each of them, as shown in the foregoing table, bears to the
2,800,000 shares of Common Stock offered. The Company has granted the
International Underwriters a similar option to purchase up to an aggregate of
105,000 additional shares of Common Stock.
The Company has agreed that, during the period beginning from the date of
this Prospectus and continuing to and including the date 90 days after the date
of this Prospectus, it will not offer, sell, contract to sell or otherwise
dispose of any securities of the Company (other than pursuant to employee stock
option plans existing, or on the conversion or exchange of convertible or
exchangeable securities outstanding, on the date of this Prospectus) which are
substantially similar to the shares of the Common Stock or which are convertible
or exchangeable into securities which are substantially similar to the shares of
the Common Stock without the prior written consent of the representatives,
except for the shares of Common Stock offered in connection with the concurrent
U.S. and international offerings and the shares of Common Stock issuable upon
conversion of any convertible notes issued after the date hereof with the
consent of the representatives.
In connection with the Offerings, the Underwriters may purchase and sell
the Common Stock in the open market. These transactions may include
over-allotment and stabilizing transactions, "passive" market making (see below)
and purchases to cover syndicate short positions created by the Underwriters in
connection with the Offerings. Stabilizing transactions consist of certain bids
or purchases for the purpose of preventing or retarding a decline in the market
price of the Common Stock; and syndicate short positions involve the sale by the
Underwriters of a greater number of shares of Common Stock than they are
required to purchase from the Company in the Offerings. The Underwriters also
may impose a penalty bid, whereby selling concessions allowed to syndicate
members or other broker-dealers in respect of the Common Stock sold in the
Offerings for their account may be reclaimed by the syndicate if such Common
Stock are repurchased by the syndicate if such Common Stock are repurchased by
the syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Common Stock,
which may be higher than the price that might otherwise prevail in the open
market; and these activities, if commenced, may be discontinued at any time.
These transactions may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise.
As permitted by Rule 103 under the Exchange Act, certain Underwriters (and
selling group members, if any) that are market makers ("passive market makers")
in the Common Stock may make bids for or purchases of the Common Stock in the
Nasdaq National Market until such time, if any, when a stabilizing bid for such
securities has been made. Rule 103 generally provides that (1) a passive market
U-2
<PAGE> 47
maker's net daily purchases of the Common Stock may not exceed 30% of its
average daily trading volume in such securities for the two full consecutive
calendar months (or any 60 consecutive days ending within the 10 days)
immediately preceding the filing date of the registration statement of which
this Prospectus forms a part, (2) a passive market maker may not effect
transactions or display bids for the Common Stock at a price that exceeds the
highest independent bid for the Common Stock by persons who are not passive
market makers and (3) bids made by passive market makers must be identified as
such.
An affiliate of NationsBanc Montgomery Securities, Inc. provides certain
commercial banking services to the Company.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933. In
addition, the Underwriters have agreed to reimburse the Company for certain
expenses associated with the Offerings.
U-3
<PAGE> 48
==========================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................... 3
Risk Factors............................. 5
Use of Proceeds.......................... 8
Price Range of Common Stock.............. 9
Dividend Policy.......................... 9
Capitalization........................... 10
Selected Consolidated Financial Data..... 11
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 12
Business................................. 18
Management............................... 23
Certain United States Tax Consequences to
Non-U.S. Holders of Common Stock....... 25
Available Information.................... 27
Incorporation of Certain Documents by
Reference.............................. 28
Validity of the Shares................... 28
Experts.................................. 28
Index to Consolidated Financial
Statements............................. F-1
Underwriting............................. U-1
</TABLE>
==========================================================
==========================================================
3,500,000 SHARES
[TECH DATA LOGO]
COMMON STOCK
(PAR VALUE $.0015 PER SHARE)
------------------
PROSPECTUS
------------------
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
THE ROBINSON-HUMPHREY COMPANY
NATIONSBANC MONTGOMERY
SECURITIES, INC.
REPRESENTATIVES OF THE UNDERWRITERS
==========================================================
