<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 2, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TECH DATA CORPORATION
(Exact name of registrant as specified in its charter)
5350 TECH DATA DRIVE
CLEARWATER, FL 33760
(813) 539-7429
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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<TABLE>
<S> <C>
FLORIDA NO. 59-1578329
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
</TABLE>
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JEFFERY P. HOWELLS
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
TECH DATA CORPORATION
5350 TECH DATA DRIVE, CLEARWATER, FLORIDA 33760
(813) 539-7429
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
<TABLE>
<S> <C>
FRANK N. FLEISCHER, ESQ. ROBERT H. CRAFT, JR.
SCHIFINO & FLEISCHER, P.A. SULLIVAN & CROMWELL
ONE TAMPA CITY CENTER SUITE 2700 1701 PENNSYLVANIA AVENUE, N.W.
TAMPA, FLORIDA 33602 WASHINGTON, D.C. 20006
(813) 223-1535 (202) 956-7530
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALES TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [ ]
------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement for the same offering.
[ ]
------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective regulation statement
for the same offering. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
========================================================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(2)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Convertible Subordinated Notes........ $201,250,000 $1,000 $201,250,000 $60,925
- ------------------------------------------------------------------------------------------------------------------------
Common Stock.......................... (2) N/A N/A N/A
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Such indeterminate number of shares as may be issued from time to time upon
conversion of the Convertible Subordinated Notes.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES
AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO
BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 2, 1997
$175,000,000
[TECH DATA LOGO]
% CONVERTIBLE SUBORDINATED NOTES DUE , 2002
The Notes will be convertible at any time prior to maturity, unless
previously redeemed or repurchased, into shares of Common Stock of Tech Data
Corporation at a conversion rate of shares per each $1,000 principal amount
of Notes (equivalent to a conversion price of approximately $ per
share), subject to adjustment in certain circumstances. On September 30, 1997,
the last reported sale price of the Common Stock, which is quoted under the
symbol "TECD" on The Nasdaq National Market, was $46.00 per share.
Interest on the Notes is payable on and of each
year, commencing , 1998. The Notes are redeemable in whole or in
part at the option of the Company at any time on or after , 2000 at
the redemption prices set forth herein, plus accrued interest to the date of
redemption. See "Description of Notes -- Optional Redemption." The Notes are not
entitled to a sinking fund. The Notes will mature on , 2002.
In the event of a Change of Control (as defined herein), each holder of
Notes may require the Company to repurchase its Notes, in whole or in part, for
cash or, at the Company's option, Common Stock (valued at 95% of the average
closing prices for the five trading days ending on and including the third
trading day prior to the repurchase date) at a repurchase price of 100% of the
principal amount of Notes to be repurchased, plus accrued interest to the
repurchase date. See "Description of Notes -- Repurchase at Option of Holders
Upon a Change of Control."
The Notes are unsecured obligations subordinated in right of payment to all
existing and future Senior Indebtedness (as defined herein) of the Company and
will be effectively subordinated in right of payment to all Indebtedness and
other liabilities of the Company's subsidiaries. As of August 31, 1997, the
Company had $485 million of Senior Indebtedness outstanding. After giving effect
to the offering of the Notes and the application of net proceeds thereof, the
Company, as of August 31, 1997, would have had $315 million of Senior
Indebtedness outstanding on such date. The Indenture will not restrict the
Company or its subsidiaries from incurring Senior Indebtedness or other
indebtedness.
Concurrently with the Notes Offering, the Company is offering 3,500,000
shares of its Common Stock by separate prospectuses. The consummation of the
Notes Offering and the Common Stock Offerings are not conditioned upon each
other.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS
IN EVALUATING AN INVESTMENT IN THE CONVERTIBLE SUBORDINATED NOTES OFFERED
HEREBY, SEE "RISK FACTORS" BEGINNING ON PAGE 7.
---------------------
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 (1) DISCOUNT(2) COMPANY(1)(3)
------------------ ------------ -------------
<S> <C> <C> <C>
Per Note................................ % % %
Total(4)................................ $ $ $
</TABLE>
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(1) Plus accrued interest, if any, from , 1997.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses of $475,000 payable by the Company.
(4) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional $26,250,000 aggregate principal amount of Notes at the
initial public offering price shown above, less the underwriting discount,
solely to cover over-allotments, if any. If such option is exercised in
full, the total initial public offering price, underwriting discount and
proceeds to the Company will be $ , $ and $ ,
respectively. See "Underwriting."
---------------------
The Notes offered hereby are offered by the 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 the Notes will be
ready for delivery in book-entry form only through the facilities of DTC in New
York, New York, on or about , 1997.
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
THE ROBINSON-HUMPHREY COMPANY
NATIONSBANC MONTGOMERY SECURITIES, INC.
---------------------
The date of this Prospectus is , 1997.
<PAGE> 3
[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 CONVERTIBLE NOTES
OR 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> 4
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> 5
THE OFFERING
SECURITIES OFFERED......... $175,000,000 aggregate principal amount of %
Convertible Subordinated Notes due ,
2002 (the "Notes" and the offering of such Notes,
"The Notes Offering"). The Company has granted the
Underwriters an option for 30 days to purchase up
to $26,250,000 additional aggregate principal
amount of Notes, solely to cover over-allotments.
INTEREST PAYMENT DATES..... Interest on the Notes is payable at the rate set
forth on the cover page hereof, semi-annually on
each and , commencing ,
1998.
CONVERSION RIGHT........... The Notes are convertible at any time prior to
maturity, unless previously redeemed or
repurchased, into shares of Common Stock at a
conversion rate of shares per $1,000
principal amount of Notes (equivalent to a
conversion price of approximately $ per
share), subject to adjustment in certain
circumstances as described herein. See "Description
of Notes -- Conversion Rights."
SUBORDINATION.............. The Notes are subordinated in right of payment to
all existing and future Senior Indebtedness (as
defined herein) of the Company and will be
effectively subordinated to all indebtedness and
other liabilities of the Company's subsidiaries. As
of August 31, 1997, the Company had $485 million
aggregate principal amount of Senior Indebtedness
outstanding, approximately $170 million of which
will be repaid with the net proceeds from this
offering. The indenture will not restrict the
Company or its subsidiaries from incurring
additional Senior Indebtedness or other
indebtedness. See "Capitalization," "Management's
Discussion and Analysis of Financial Condition and
Results of Operations" and "Description of
Notes -- Subordination."
OPTIONAL REDEMPTION........ The Notes will be redeemable at the Company's
option, in whole or in part, at any time on or
after , 2000 at the redemption prices
set forth herein plus accrued interest to the date
of redemption. See "Description of
Notes -- Optional Redemption."
REPURCHASE AT OPTION OF
HOLDERS UPON A CHANGE
OF CONTROL............... In the event of a Change of Control, each holder of
Notes may require the Company to repurchase its
Notes, in whole or in part, for cash or, at the
Company's option, Common Stock (valued at 95% of
the average closing prices for the five trading
days immediately preceding and including the third
trading day prior to the repurchase date) at a
repurchase price of 100% of the principal amount of
Notes to be repurchased, plus accrued interest to
the repurchase date. See "Description of
Notes -- Repurchase at Option of Holders Upon a
Change of Control."
USE OF PROCEEDS............ The Company intends to use the net proceeds to
repay outstanding borrowings under its revolving
credit facility. See "Use of Proceeds."
LISTING.................... The Notes will not be listed on any securities
exchange or quoted on The Nasdaq Stock Market. The
Underwriters have advised the Company that they
intend to make a market in the Notes. The
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<PAGE> 6
Underwriters are not obligated, however, to make a
market in the Notes, and any such market making may
be discontinued at any time at the sole discretion
of the Underwriters without notice. See
"Underwriting."
COMMON STOCK............... The Common Stock is quoted on The Nasdaq National
Market under the symbol "TECD."
RISK FACTORS
See "Risk Factors" for certain considerations relevant to an investment in
the securities offered hereby.
CONCURRENT COMMON STOCK OFFERINGS
Concurrent with the Notes Offering, the Company is offering 3,500,000
shares of its Common Stock (the "Common Stock Offerings"). The consummation of
the Notes Offering and the Common Stock Offerings are not conditioned upon each
other.
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<PAGE> 7
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
OTHER DATA:
Ratio of earnings to fixed
charges(2).................. 7.30 8.68 4.61 2.57 4.75 3.98 5.32
</TABLE>
<TABLE>
<CAPTION>
JULY 31, 1997
--------------------------------------
AS AS
ACTUAL ADJUSTED(3) ADJUSTED(4)
---------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 296,115 $ 466,480 $ 621,202
Total assets................................................ 1,655,232 1,659,867 1,659,867
Revolving credit loans...................................... 416,428 246,063 91,341
Long-term debt.............................................. 8,791 8,791 8,791
% Convertible subordinated notes due ,
2002...................................................... -- 175,000 175,000
Shareholders' Equity........................................ 490,161 490,161 644,883
</TABLE>
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(1) Amounts have been adjusted to reflect the two-for-one stock split declared
on March 21, 1994.
(2) The ratio of earnings to fixed charges is computed by dividing earnings
before taxes and fixed charges by fixed charges. Fixed charges consist of
interest expense and the estimated interest component of rent expense.
(3) Adjusted to reflect the sale by the Company of the $175,000,000 aggregate
principal amount of the Notes offered hereby, (after deduction of the
estimated underwriting discount and the Company's estimated offering
expenses) and the application of the proceeds thereof. See "Use of
Proceeds."
(4) Adjusted to reflect the sale by the Company of the $175,000,000 aggregate
principal amount of Notes offered hereby and the 3,500,000 shares of Common
Stock at an assumed offering price of $46.00 per share, (after deduction of
the estimated underwriting discounts and the Company's estimated offering
expenses) and the application of the proceeds thereof. See "Use of Proceeds"
and "Concurrent Common Stock Offerings."
6
<PAGE> 8
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.
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<PAGE> 9
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
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<PAGE> 10
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.
SUBORDINATION
The Notes will be unsecured and subordinated in right of payment in full to
all existing and future Senior Indebtedness of the Company. As a result of such
subordination, in the event of the Company's liquidation or insolvency, payment
default with respect to Senior Indebtedness, a covenant default with respect to
Senior Indebtedness, or upon acceleration of the Notes due to an event of
default, the assets
9
<PAGE> 11
of the Company will be available to pay obligations on the Notes only after all
Senior Indebtedness has been paid in full, and there may not be sufficient
assets remaining to pay amounts due on any or all of the Notes then outstanding.
The Company may from time to time incur indebtedness constituting Senior
Indebtedness. The Notes are also effectively subordinated in right of payment to
all indebtedness and other liabilities, including trade payables, of the
Company's subsidiaries. The Indenture does not prohibit or limit the incurrence
of Senior Indebtedness or other indebtedness and other liabilities by the
Company or its subsidiaries. The incurrence of additional indebtedness and other
liabilities by the Company or its subsidiaries could adversely affect the
Company's ability to pay its obligations on the Notes. In addition, the cash
flow and ability of the Company to service debt, including the Notes, may in the
future become dependent in part upon the earnings from the business conducted by
the Company through subsidiaries and distribution of those earnings, or upon
loans or other payments of funds by those subsidiaries to the Company. As of
August 31, 1997, after giving effect to the offering of the Notes and the
application of the net proceeds thereof, the Company would have had $315 million
of Senior Indebtedness outstanding. See "Description of Notes -- Subordination."
LIMITATIONS ON REPURCHASE OF NOTES
Upon a Change of Control, each holder of Notes will have the right, at the
holder's option, to require the Company to repurchase all or a portion of such
holder's Notes. If a Change of Control were to occur, there can be no assurance
that the Company would have sufficient funds to pay the repurchase price for all
Notes tendered by the holders thereof. The Company may elect, subject to certain
conditions, to make such payment using shares of Common Stock. In addition, the
Company's repurchase of Notes as a result of the occurrence of a Change of
Control may be prohibited or limited by, or create an event of default under,
the terms of agreements related to borrowings which the Company may enter into
from time to time, including agreements relating to Senior Indebtedness. See
"Description of Notes -- Repurchase at Option of Holders Upon a Change of
Control."
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Notes will be a new issue of securities with no established trading
market. Although the Underwriters have advised the Company that they intend to
make a market in the Notes, they are not obligated to do so, and any such market
making may be discontinued at any time at the sole discretion of any such
Underwriter without notice. There can be no assurance that an active market for
the Notes will develop and continue upon completion of the Notes Offering or
that the market price of the Notes will not decline. Various factors could cause
the market price of the Notes to fluctuate significantly, including changes in
prevailing interest rates or changes in perceptions of the Company's
creditworthiness. The trading price of the Notes also could be significantly
affected by the market price of the Common Stock, which could be subject to wide
fluctuations in response to a variety of factors, including quarterly variations
in operating results and general economic and market conditions. The Notes will
not be listed on any securities exchange or quoted on The Nasdaq Stock Market
and will only be traded on the over-the-counter market. See "Underwriting."
10
<PAGE> 12
USE OF PROCEEDS
The net proceeds from the Notes Offering (after deducting the estimated
offering expenses and the estimated underwriting discount) are expected to be
approximately $170 million, which will be used to reduce indebtedness under the
Company's revolving credit loans (which includes the $400 million accounts
receivable securitization program). As of August 31, 1997, the Company had
approximately $476 million outstanding under the available revolving credit
loans at a weighted average interest rate of 5.07%. 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
Notes Offering will strengthen the Company's balance sheet further.
CONCURRENT COMMON STOCK OFFERINGS
Concurrent with the Notes Offering, the Company is offering 3,500,000
shares of Common Stock by separate prospectuses. The consummation of the Notes
Offering and the Common Stock Offerings are not conditioned upon each other. The
net proceeds to the Company from the Common Stock Offerings (after deduction of
the estimated underwriting discount and the Company's estimated offering
expenses) are estimated to be $155 million. If such Common Stock Offerings are
consummated, the Company will use such proceeds to reduce indebtedness under
revolving credit loans and to finance continued growth.
11
<PAGE> 13
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 (through September 30, 1997).................. 51 3/4 36 1/4
</TABLE>
On September 30, 1997, the last reported sale price for the Common Stock
was $46.00 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.
12
<PAGE> 14
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: (i) the sale by the
Company of the Notes and (ii) the sale by the Company of the Notes and the
issuance and sale of the Common Stock pursuant to the concurrent Common Stock
Offerings, see "Concurrent Common Stock Offerings." The application of the total
net proceeds of approximately $325 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) AS ADJUSTED(2)
-------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
SHORT-TERM DEBT:
Revolving credit loans(3)............................. $416,428 $246,063 $ 91,341
Current portion of long-term debt..................... 207 207 207
-------- -------- --------
Total short-term debt....................... 416,635 246,270 91,548
-------- -------- --------
LONG-TERM DEBT:
Mortgage note, interest at 10.25%, monthly
installments of $85, balloon payment due 2005....... 8,726 8,726 8,726
Other long-term debt.................................. 65 65 65
% Convertible Subordinated Notes due ,
2002................................................ 175,000 175,000
-------- -------- --------
Total long-term debt........................ 8,791 183,791 183,791
-------- -------- --------
SHAREHOLDERS' EQUITY:
Preferred stock; par value $.02; 226,500 shares
authorized and outstanding.......................... 5 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(4).... 66 66 71
Additional paid-in capital............................ 241,025 241,025 395,742
Retained earnings..................................... 249,969 249,969 249,969
Cumulative translation adjustment..................... (904) (904) (904)
-------- -------- --------
Total shareholders' equity.................. 490,161 490,161 644,883
-------- -------- --------
Total capitalization........................ $915,587 $920,222 $920,222
======== ======== ========
</TABLE>
- ---------------
(1) As adjusted to give effect to the sale by the Company of the Notes and the
application of the proceeds thereof.
(2) As adjusted to give effect of the sale by the Company of the Notes and the
assumed sale of the Common Stock at an assumed offering price of $46.00 per
share pursuant to the concurrent Common Stock Offerings and the application
of the proceeds thereof.
(3) On August 31, 1997, indebtedness outstanding under the revolving credit
loans was approximately $476 million.
(4) Does not include 4,383,000 shares subject to stock options outstanding as of
July 31, 1997.
13
<PAGE> 15
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.
14
<PAGE> 16
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
15
<PAGE> 17
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
16
<PAGE> 18
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.
17
<PAGE> 19
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.
18
<PAGE> 20
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
Common Stock Offerings and the Notes Offering, if consummated, 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.
19
<PAGE> 21
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.
20
<PAGE> 22
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.
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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.
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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."
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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.
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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
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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>
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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
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<PAGE> 29
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.
DESCRIPTION OF CAPITAL STOCK
PREFERRED STOCK
The Company has authorized and outstanding 226,500 shares of Preferred
Stock, par value $.02. The Preferred Stock pays no dividends, has no pre-emptive
rights, and no redemption, sinking fund, or conversion provisions. It does have
a liquidation preference over the Company's Common Stock to the extent of all
distributions in the event of liquidation, not to exceed $.20 per share. Each
outstanding share of Preferred Stock is entitled to one vote on all matters
submitted to a vote of shareholders. Shares of Preferred Stock have equal voting
rights with the shares of Common Stock in certain specified events. See "Class
Voting and Classified Board of Directors."
COMMON STOCK
The Company has authorized 200,000,000 shares of Common Stock, par value
$.0015. Holders of the common stock have no pre-emptive rights. Each outstanding
share of Common Stock is entitled to one vote on all matters submitted to a vote
of the Company's shareholders. Holders of Common Stock are entitled to receive
such dividends as may be declared by the Board of Directors out of funds legally
available therefor. The holders of Common Stock are entitled to share
proportionately in any liquidating distribution to shareholders after provisions
for payment of creditors and after the payment of the liquidation preference on
any shares of Preferred Stock then outstanding. All outstanding shares of Common
Stock are, and the shares to be sold hereunder by the Company will be when
issued, fully paid and nonassessable. The transfer agent and registrar for the
Company's Common Stock is Chase Mellon Shareholder Services, LLC.
CLASS VOTING AND CLASSIFIED BOARD OF DIRECTORS
The Company's Restated and Amended Articles of Incorporation require that
certain mergers, sale of substantially all the assets of the Company, amendments
to the Company's Restated and Amended
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Articles of Incorporation and exchanges of Company stock for stock of another
corporation pursuant to a vote of shareholders be approved by a majority of each
class of capital stock entitled to vote. Thus, any person that controls at least
one-half of any class of stock can block an attempt to merge or sell
substantially all the assets of the Company or defeat the approval of certain
other transactions. Edward C. Raymund, a director of the Company, beneficially
owns 113,260 shares of Preferred Stock (which, with the 113,240 shares owned by
Annette L. Raymund, is all of the Preferred Stock outstanding), equal share of
which is entitled to one vote. In connection with the terms of an Employment
Agreement dated as of January 31, 1991, between Edward C. Raymund and the
Company, providing for Mr. Raymund's employment from February 1, 1991 through
January 31, 2001, Mr. Raymund entered into an irrevocable proxy and escrow
agreement (the "Irrevocable Proxy"). (In connection with an amendment to the
employment agreement dated November 13, 1992, Annette L. Raymund also entered
into the Irrevocable Proxy.) Under the terms of the Irrevocable Proxy, directors
of the Company, Charles E. Adair, Daniel M. Doyle, John Y. Williams and Donald
F. Dunn (in their capacity as "outside" directors of the Company), have been
granted full power and authority to vote the 226,500 shares of Preferred Stock.
The Irrevocable Proxy has a three-year term in accordance with Section 607.0722
of the Florida Business Corporation Act. For the Employment Agreement to remain
in effect, successive three-year Irrevocable Proxies must be executed by Mr.
Raymund through January 31, 2001.
The Company's Amended and Restated Articles of Incorporation also divide
the Board of Directors into three classes serving staggered three-way terms.
These provisions may discourage attempts to acquire control of the Company.
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DESCRIPTION OF NOTES
The Notes will be issued under an Indenture, to be dated as of
, 1997 (the "Indenture"), between the Company and , as Trustee (the
"Trustee"), a copy of which is filed as an exhibit to the Registration
Statement. Wherever particular defined terms of the Indenture (including the
Notes) are referred to, such defined terms are incorporated herein by reference
(the Notes being referred to in the Indenture as "Securities"). The following
summaries of certain provisions of the Indenture do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, the
detailed provisions of the Notes and the Indenture, including the definitions
therein of certain terms.
GENERAL
The Notes will be general unsecured subordinated obligations of the
Company, will be limited to $201,250,000 aggregate principal amount and will
mature on , 2002. Payment in full of the principal amount of the
Notes will be due on , 2002 at a price of 100% of the principal
amount thereof.
The Notes will bear interest at the rate per annum set forth on the front
cover of this Prospectus from , 1997 or from the most recent
Interest Payment Date to which interest has been paid or provided for, payable
semi-annually on and of each year, commencing , 1998 until
the principal thereof is paid or made available for payment, to the Person in
whose name the Note is registered at the close of business on the preceding
or , as the case may be. Interest on the Notes at such rate will
be computed on the basis of a 360-day year, comprised of twelve 30-day months.
The Notes will be convertible into shares of Common Stock initially at the
conversion rate stated on the front cover of this Prospectus, subject to
adjustment upon the occurrence of certain events described under "-- Conversion
Rights," at any time prior to the close of business on , 2002,
unless previously redeemed or repurchased.
The Notes are redeemable at the option of the Company, at any time on or
after , 2000, in whole or in part, at the redemption prices set
forth below under "-- Optional Redemption," plus accrued interest to the
redemption date. The Notes also are subject to repurchase by the Company at the
option of the Holders, as described below under "-- Repurchase at Option of
Holders Upon a Change of Control."
The principal of, premium, if any, and interest on the Notes will be
payable, and the Notes may be surrendered for registration of transfer, exchange
and conversion, at the office or agency of the Trustee in The Borough of
Manhattan, The City of New York. In addition, payment of interest may, at the
option of the Company, be made by check mailed to the address of the Person
entitled thereto as it appears in the Security Register. See "-- Payment and
Conversion." Payments, transfers, exchanges and conversions relating to
beneficial interests in Notes issued in book-entry form will be subject to the
procedures applicable to Global Notes described below.
The Company initially will appoint the Trustee at its Corporate Trust
Office as paying agent, transfer agent, registrar and conversion agent for the
Notes. In such capacities, the Trustee will be responsible for, among other
things, (i) maintaining a record of the aggregate holdings of Notes represented
by the Global Note (as defined below) and accepting Notes for exchange and
registration of transfer, (ii) ensuring that payments of principal, premium, if
any, and interest received by the Company from the Trustee in respect of the
Notes are duly paid to DTC or its nominees, (iii) transmitting to the Company
any notices from Holders of the Notes, (iv) accepting conversion notices and
related documents and transmitting the relevant items to the Company and (v)
delivering certificates for Common Stock issued upon conversion of the Notes.
The Company will cause the transfer agent to act as a registrar and will
cause to be kept at the office of such transfer agent a register in which,
subject to such reasonable regulations as it may prescribe, the Company will
provide for registration of transfers of the Notes. The Company may vary or
terminate the appointment of any paying agent, transfer agent or conversion
agent, or appoint additional or other such agents or approve any change in the
office through which any such agent acts, provided that there shall
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<PAGE> 32
at all times be maintained by the Company, a paying agent, a transfer agent and
a conversion agent in the Borough of Manhattan, The City of New York. The
Company will cause notice of any resignation, termination or appointment of the
Trustee or any paying agent, transfer agent or conversion agent, and of any
change in the office through which any such agent will act, to be provided to
Holders of the Notes.
No service charge will be made for any registration of transfer or exchange
of Notes, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
FORM, DENOMINATION, TRANSFER, EXCHANGE AND BOOK-ENTRY PROCEDURES
Notes will be issued only in fully registered form, without interest
coupons, in minimum denominations of $1,000 and integral multiples in excess
thereof. Notes sold in the Offering will be issued only against payment therefor
in immediately available funds.
The Notes initially will be represented by one or more Notes in registered,
global form without interest coupons (collectively, the "Global Notes" or
"Global Note"). The Global Notes will be deposited upon issuance with the
Trustee as custodian for DTC, in New York, New York, and registered in the name
of DTC or its nominee, in each case for credit to an account of a direct or
indirect participant in DTC as described below.
Transfers of beneficial interests in the Global Notes will be subject to
the applicable rules and procedures of DTC and its direct or indirect
participants, which may change from time to time.
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for Notes
in certificated form except in the limited circumstances described below under
"-- Exchanges of Book-Entry Notes for Certificated Notes."
EXCHANGES OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES. A beneficial
interest in a Global Note may not be exchanged for a Note in certificated form
unless (i) DTC (x) notifies the Company that it is unwilling or unable to
continue as Depositary for the Global Note or (y) has ceased to be a clearing
agency registered under the Exchange Act and in either case the Company
thereupon fails to appoint a successor Depositary, (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance of
the Notes in certificated form or (iii) there shall have occurred and be
continuing an Event of Default or any event which after notice or lapse of time
or both would be an Event of Default with respect to the Notes. In all cases,
certificated Notes delivered in exchange for any Global Note or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the Depositary (in accordance with
its customary procedures).
CERTAIN BOOK-ENTRY PROCEDURES FOR GLOBAL NOTES. The descriptions of the
operations and procedures of DTC, that follow are provided solely as a matter of
convenience. These operations and procedures are solely within the control of
DTC and are subject to changes by them from time to time. The Company takes no
responsibility for these operations and procedures and urges investors to
contact DTC or its participants directly to discuss these matters.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants ("participants") and facilitate the clearance
and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical transfer and delivery of certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system is available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
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<PAGE> 33
DTC has advised the Company that its current practice, upon the issuance of
a Global Note, is to credit, on its internal system, the respective principal
amount of the individual beneficial interests represented by such Global Note to
the accounts with DTC of the participants through which such interests are to be
held. Ownership of beneficial interests in the Global Note will be shown on, and
the transfer of that ownership will be affected only through, records maintained
by DTC or its nominees (with respect to interests of participants) and the
records of participants and indirect participants (with respect to interests of
persons other than participants).
AS LONG AS DTC, OR ITS NOMINEE, IS THE REGISTERED HOLDER OF A GLOBAL NOTE,
DTC OR SUCH NOMINEE, AS THE CASE MAY BE, WILL BE CONSIDERED THE SOLE OWNER AND
HOLDER OF THE NOTES REPRESENTED BY SUCH GLOBAL NOTE FOR ALL PURPOSES UNDER THE
INDENTURE AND THE NOTES. Except in the limited circumstances described above
under "-- Exchanges of Book-Entry Notes for Certificated Notes," owners of
beneficial interests in a Global Note will not be entitled to have any portions
of such Global Note registered in their names, will not receive or be entitled
to receive physical delivery of Notes in definitive form and will not be
considered the owners or Holders of the Global Note (or any Notes represented
thereby) under the Indenture or the Notes.
Investors may hold their interests in the Global Note directly through DTC,
if they are participants in such system, or indirectly through organizations
that are participants in such system. All interests in a Global Note will be
subject to the procedures and requirements of DTC.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Note to such persons may be limited to
that extent. Because DTC can act only on behalf of its participants, which in
turn act on behalf of indirect participants and certain banks, the ability of a
person having beneficial interests in a Global Note to pledge such interest to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interests, may be affected by the lack of a physical
certificate evidencing such interests.
Payments of the principal of, premium, if any, and interest on the Note
will be made to DTC or its nominee, as the case may be, as the registered owner
of the Global Note. Neither the Company, the Trustee nor any of their respective
agents will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in a
Global Note or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note representing any Notes held by
it or its nominee, will immediately credit participants' accounts with payments
in amounts proportionate to their respective beneficial interests in the
principal amount of such Global Note for such Notes as shown on the records of
DTC or its nominee. The Company also expects that payments by participants to
owners of beneficial interests in such Global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in "street name." Such payments will be the responsibility of such participants.
Interests in the Global Note will trade in DTC's Same-Day Funds Settlement
System, and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its participants. Transfers between participants in DTC
will be effected in accordance with DTC's procedures, and will be settled in
same-day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below and the conversion of Notes) only at the direction of one or
more participants to whose account with DTC interests in the Global Notes are
credited and only in respect of such portion of the aggregate principal amount
of the Notes as to which such participant or participants has or have given such
direction. However, if there is an Event of Default (as defined below) under the
Notes, DTC reserves the right to exchange the Global Notes for Notes in
certificated form, and to distribute such Notes to its participants.
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<PAGE> 34
None of the Company, the Trustee nor any of their respective agents will
have any responsibility for the performance by DTC, its participants or indirect
participants of its respective obligations under the rules and procedures
governing its operations, including maintaining, supervising or reviewing the
records relating to, or payments made on account of, beneficial ownership
interests in Global Notes.
PAYMENT AND CONVERSION
The principal of the Notes will be payable in U.S. dollars, against
surrender thereof at the office or agency of the Company designated by it for
such purpose in the Borough of Manhattan, The City of New York, and at any other
office or agency of the Company maintained for such purpose, in U.S. currency by
dollar check or by transfer to a dollar account (such a transfer to be made only
to a Holder of an aggregate principal amount of Notes in excess of $5,000,000
and only if such Holder shall have furnished wire instructions to the Trustee in
writing no later than 15 days prior to the relevant payment date) maintained by
the Holder with a bank in the United States. Payment of interest on a Note may
be made by dollar check mailed to the address of the person entitled thereto as
such address shall appear in the Security Register, or, upon written application
by the Holder to the Security Registrar setting forth instructions not later
than the relevant Record Date, by transfer to a dollar account (such a transfer
to be made only to a Holder of an aggregate principal amount of Notes in excess
of $5,000,000 and only if such Holder shall have furnished wire instructions in
writing to the Trustee no later than 15 days prior to the relevant payment date)
maintained by the Holder with a bank in the United States.
Any payment on a Note due on any day that is not a Business Day need not be
made on such day, but may be made on the next succeeding Business Day with the
same force and effect as if made on such due date. and no interest shall accrue
on such payment for the period from and after such date. "Business Day," when
used with respect to any place of payment, place of conversion or any other
place, as the case may be, means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in such place of payment,
place of conversion or other place, as the case may be, are authorized or
obligated by law or executive order to close.
Notes may be surrendered for conversion at the office or agency of the
Trustee in the Borough of Manhattan, The City of New York, at any other office
or agency of the Trustee maintained for such purpose and at the office or agency
of any additional conversion agent appointed by the Company. In the case of
Global Notes, conversion will be effected by DTC upon notice from the holder of
a beneficial interest in a Global Note in accordance with its rules and
procedures. Notes surrendered for conversion must be accompanied by a conversion
notice and any payments in respect of interest, as applicable, as described
below under "-- Conversion Rights."
CONVERSION RIGHTS
The Holder of any Note will have the right, at the Holder's option, to
convert any portion of the principal amount of a Note that is an integral
multiple of $1,000 into shares of Common Stock, unless previously redeemed or
repurchased, at a conversion rate of the number of shares per $1,000 principal
amount of Notes shown on the front cover of this Prospectus (the "Conversion
Rate"), subject to adjustment as described below. The right to convert a Note
called for redemption or delivered for repurchase will terminate at the close of
business on the Redemption Date or Repurchase Date for such Note, unless the
Company defaults in making the payment due upon redemption or repurchase, as the
case may be.
The right of conversion attaching to any Note may be exercised by the
Holder by delivering the Note at the office or agency of the Company in The
Borough of Manhattan, The City of New York, at any other office or agency of the
Company maintained for such purpose and at the office or agency of any
additional conversion agent appointed by the Company, accompanied by a duly
signed and completed notice of conversion, a copy of which may be obtained from
the Trustee and any conversion agent. The conversion date will be the date on
which the Note and the duly signed and completed notice of conversion are so
delivered. As promptly as practicable on or after the conversion date, the
Company will
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<PAGE> 35
issue and deliver to the Trustee a certificate or certificates for the number of
full shares of Common Stock issuable upon conversion, together with payment in
lieu of any fraction of a share or, at the Company's option, rounded up to the
next whole number of shares; such certificate will be sent by the Trustee to the
Conversion Agent for delivery to the Holder. Such shares of Common Stock
issuable upon conversion of the Notes, in accordance with the provisions of the
Indenture, will be fully paid and nonassessable and will also rank pari passu
with the other shares of the Common Stock outstanding from time to time.
Holders that surrender Notes for conversion on a date that is not an
Interest Payment Date are not entitled to receive any interest for the period
from the next preceding Interest Payment Date to the date of conversion, except
as described below. However, Holders of Notes on a Regular Record Date,
including Notes surrendered for conversion after the Regular Record Date, will
receive the interest payable on such Notes on the next succeeding Interest
Payment Date. Accordingly, any Note surrendered for conversion during the period
from the close of business on a Regular Record Date to the opening of business
on the next succeeding Interest Payment Date must be accompanied by payment of
an amount equal to the interest payable on such Interest Payment Date on the
principal amount of Notes being surrendered for conversion; provided, however,
that no such payment will be required upon the conversion of any Note (or
portion thereof) that has been called for redemption or that is eligible to be
delivered for repurchase if, as a result, the right to convert such Note would
terminate during the period between such Regular Record Date and the next
succeeding Interest Payment Date.
No other payment or adjustment for interest, or for any dividends in
respect of Common Stock, will be made upon conversion. Holders of Common Stock
issued upon conversion will not be entitled to receive any dividends payable to
holders of Common Stock as of any record date before the close of business on
the conversion date. No fractional shares will be issued upon conversion but, in
lieu thereof, the Company will calculate an appropriate amount to be paid in
cash on the basis set forth in the Indenture or, at its option, round up to the
next whole number of shares.
A Holder delivering a Note for conversion will not be required to pay any
taxes or duties in respect of the issue or delivery of Common Stock on
conversion. However, the Company shall not be required to pay any tax or duty
that may be payable in respect of any transfer involved in the issue or delivery
of the Common Stock in a name other than that of the Holder of the Note.
Certificates representing shares of Common Stock will not be issued or delivered
unless the person requesting such issue has paid to the Company the amount of
any such tax or duty or has established to the satisfaction of the Company that
such tax or duty has been paid.
The Conversion Rate is subject to adjustment in certain events, including
(a) dividends (and other distributions) payable in Common Stock on shares of
capital stock of the Company, (b) the issuance to all holders of Common Stock of
certain rights, options or warrants entitling them to subscribe for or purchase
Common Stock at less than the then current market price (determined as provided
in the Indenture) of Common Stock as of the record date for holders entitled to
receive such rights, options or warrants, (c) subdivisions, combinations and
reclassifications of Common Stock, (d) distributions to all holders of Common
Stock of evidences of indebtedness of the Company, shares of capital stock or
other property (including securities, but excluding those dividends, rights,
options, warrants and distributions referred to in clauses (a) and (b) above,
dividends and distributions paid exclusively in cash and distributions upon
mergers or consolidations to which the next succeeding paragraph applies), (e)
distributions consisting exclusively of cash (excluding any cash portion of
distributions referred to in (d) above, or cash distributed upon a merger or
consolidation to which the next succeeding paragraph applies) to all holders of
Common Stock in an aggregate amount that, combined together with (i) other such
all-cash distributions made within the preceding 12 months in respect of which
no adjustment has been made and (ii) any cash and the fair market value of other
consideration payable in respect of any tender offer by the Company or any of
its Subsidiaries for Common Stock, to the extent that the cash and value of any
other consideration included in such payment per share of Common Stock exceeds
the current market price per share of Common Stock on the trading day next
succeeding the date of payment (the "Current Market Price"), concluded within
the preceding 12 months in respect of which no adjustment has been made, exceeds
10% of the Company's market capitalization (being the
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<PAGE> 36
product of the then current market price of the Common Stock and the number of
shares of Common Stock then outstanding) on the record date for such
distribution and the successful completion of a tender offer made by the Company
or any of its subsidiaries for Common Stock, to the extent that the cash and
value of any other consideration included in such payment per share of Common
Stock exceeds the Current Market Price at such time, the aggregate amount of
which, together with (i) any cash and other consideration in excess of the then
current market price paid in a tender offer by the Company or any of its
Subsidiaries for Common Stock expiring within the 12 months preceding the
expiration of such tender offer in respect of which no adjustment has been made
and (ii) the aggregate amount of any such all-cash distributions referred to in
(a) above to all holders of Common Stock within the 12 months preceding the
expiration of such tender offer in respect of which no adjustments have been
made, exceeds 10% of the Company's market capitalization on the expiration of
such tender offer. The Company reserves the right to make such increases in the
conversion rate in addition to those required in the foregoing provisions as it
considers to be advisable in order that any event treated for income tax
purposes as a dividend or distribution of stock or issuance of rights or
warrants to purchase or subscribe for stock will not be taxable to the
recipients. No adjustment of the conversion rate will be required to be made
until the cumulative adjustments amount to 1.0% or more of the conversion rate.
The Company shall compute any adjustments to the conversion price pursuant to
this paragraph and will give notice to the Holders of any such adjustments.
In case of any consolidation or merger of the Company with or into another
Person or any merger of another Person into the Company (other than a merger
which does not result in any reclassification, conversion, exchange or
cancellation of the Common Stock), or in the case of any conveyance, sale,
transfer or lease of all or substantially all of the properties and assets of
the Company, each Note then outstanding will, without the consent of the Holder
of any Note, become convertible only into the kind and amount of securities,
cash and other property receivable upon such consolidation, merger, sale,
conveyance, lease or other transfer by a holder of the number of shares of
Common Stock into which such Note was convertible immediately prior thereto
(assuming such holder of Common Stock failed to exercise any rights of election
and that such Note was then convertible).
The Company from time to time may increase the Conversion Rate by any
amount for any period of at least 20 days, in which case the Company shall give
at least 15 days' notice of such increase, if the Board of Directors has made a
determination that such increase would be in the best interests of the Company,
which determination shall be conclusive. No such increase shall be taken into
account for purposes of determining whether the closing price of the Common
Stock exceeds the Conversion Price (as defined below) by 105% in connection with
an event which otherwise would be a Change of Control.
If at any time the Company makes a distribution of property to its
shareholders that would be taxable to such shareholders as a dividend for
federal income tax purposes (e.g., distributions of evidences of indebtedness or
assets of the Company, but generally not stock dividends on Common Stock or
rights to subscribe for Common Stock) and, pursuant to the anti-dilution
provisions of the Indenture, the number of shares into which Notes are
convertible is increased, such increase may be deemed for federal income tax
purposes to be the payment of a taxable dividend to Holders of Notes. See
"Certain United States Federal Tax Considerations -- United States Holders."
SUBORDINATION
The payment of the principal of, premium, if any, and interest on the Notes
(including amounts payable on any redemption or repurchase) will be subordinated
in right of payment to the extent set forth in the Indenture to the prior full
and final payment of all Senior Debt of the Company. "Senior Debt" or "Senior
Indebtedness" means the principal of (and premium, if any) and interest
(including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) on, and all fees and
other amounts (including collection expenses, attorney's fees and late charges)
owing with respect to, the following, whether direct or indirect, absolute or
contingent, secured or unsecured, due or to become due, outstanding at the date
of execution of the Indenture or thereafter incurred, created or assumed:
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<PAGE> 37
(a) indebtedness of the Company for money borrowed or evidenced by bonds,
debentures, notes or similar instruments, (b) reimbursement obligations of the
Company with respect to letters of credit, bankers' acceptances and similar
facilities issued for the account of the Company, (c) every obligation of the
Company issued or assumed as the deferred purchase price of property or services
purchased by the Company, excluding any trade payables and other accrued current
liabilities incurred in the ordinary course of business, (d) obligations of the
Company as lessee under leases required to be capitalized on the balance sheet
of the lessee under United States generally accepted accounting principles, (e)
obligations of the Company under interest rate and currency swaps, caps, floors,
collars or similar arrangements intended to protect the Company against
fluctuations in interest or currency exchange rates, (f) indebtedness of others
of the kinds described in the preceding clauses (a) through (e) that the Company
has assumed, guaranteed or otherwise assured the payment thereof, directly or
indirectly, and/or (g) deferrals, renewals, extensions and refundings of, or
amendments, modifications or supplements to, any indebtedness or obligation
described in the preceding clauses (a) through (e) whether or not there is any
notice to or consent of the Holders of Notes; provided, however, that the
following shall not constitute Senior Debt: (i) any particular indebtedness or
obligation that is owed by the Company to any of its direct and indirect
Subsidiaries and (ii) any particular indebtedness, deferral, renewal, extension
or refunding if it is expressly stated in the governing terms or in the
assumption thereof that the indebtedness involved is not senior in right of
payment to the Notes or that such indebtedness is pari passu with or junior to
the Notes.
No payment on account of principal of or premium, if any, or interest on
the Notes may be made if (a) there shall have occurred and be continuing (i) a
default in the payment of any Senior Debt or (ii) any other default with respect
to any Senior Debt permitting the holders thereof to accelerate the maturity
thereof, provided that, in the case of this clause (ii), such default shall not
have been cured or waived or ceased to exist after written notice of such
default shall have been given to the Company and the Trustee by any holder of
Senior Debt, or (b) in the event any judicial proceeding shall be pending with
respect to any such default in payment or event of default. Upon any
acceleration of the principal due on the Notes or payment or distribution of
assets of the Company to creditors upon any dissolution, winding up, liquidation
or reorganization, whether voluntary or involuntary, or in bankruptcy,
insolvency, receivership or other proceedings, all amounts due on all Senior
Debt must be paid in full before the Holders of the Notes are entitled to
receive any payment. By reason of such subordination, in the event of insolvency
of the Company, creditors of the Company who are holders of Senior Debt may
recover more, ratably, than the Holders of the Notes, and such subordination may
result in a reduction or elimination of payments to the Holders of the Notes. As
of August 31, 1997 the Company had approximately $485 million of Senior Debt
outstanding.
In addition, the Notes will be effectively subordinated to all indebtedness
and other liabilities (including trade payables and lease obligations) of the
Company's subsidiaries.
The Indenture does not limit the ability of the Company or any of its
subsidiaries to incur indebtedness, including Senior Debt.
OPTIONAL REDEMPTION
The Notes may not be redeemed prior to the close of business on
, 2000. Thereafter, the Notes may be redeemed, in whole or in part, at the
option of the Company, upon not less than 30 nor more than 60 days' prior notice
as provided under "-- Notices" below, at the redemption prices set forth below.
Such redemption prices (expressed as a percentage of principal amount) are as
follows for the 12-month period beginning on of the following years:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2000........................................................ %
2001........................................................
</TABLE>
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<PAGE> 38
and thereafter at a redemption price equal to 100% of the principal amount, in
each case together with accrued interest to the redemption date.
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE OF CONTROL
If a Change of Control (as defined below) occurs, each Holder of Notes
shall have the right, at the Holder's option, to require the Company to
repurchase all of such Holder's Notes, or any portion of the principal amount
thereof that is equal to $1,000 or an integral multiple of $1,000 in excess
thereof, on the date (the "Repurchase Date") that is 45 days after the date of
the Company Notice (as defined below), at a price in cash equal to 100% of the
principal amount of the Notes to be repurchased, together with interest accrued
to the Repurchase Date (the "Repurchase Price").
The Company may, at its option, in lieu of paying the Repurchase Price in
cash, pay the Repurchase Price by issuing shares of Common Stock. The number of
shares of Common Stock tendered in payment shall be determined by dividing the
Repurchase Price by the value of the Common Stock, which for this purpose shall
be equal to 95% of the average of the closing sale prices of the Common Stock
for the five consecutive Trading Days ending on and including the third Trading
Day preceding the Repurchase Date. Such payment may not be made in Common Stock
unless the Company satisfies certain conditions with respect thereto prior to
the Repurchase Date as provided in the Indenture.
On or before the 30th day after the occurrence of a Change of Control, the
Company is obligated to give to all Holders of the Notes notice, as provided in
the Indenture (the "Company Notice"), of the occurrence of such Change of
Control and of the repurchase right arising as a result thereof. To exercise the
repurchase right, a Holder of Notes must deliver on or before the fifth day
prior to the Repurchase Date irrevocable written notice to the Trustee of the
Holder's exercise of such right, together with the Notes with respect to which
the right is being exercised.
A Change of Control shall be deemed to have occurred at such time after the
original issuance of the Notes as there shall occur:
(i) the acquisition by any Person of beneficial ownership, directly or
indirectly, through a purchase, merger or other acquisition transaction or
series of transactions, of shares of capital stock of the Company entitling
such Person to exercise 50% or more of the total voting power of all shares
of capital stock of the Company entitled to vote generally in elections of
directors, other than any such acquisition by the Company or any employee
benefit plan of the Company; or
(ii) any consolidation or merger of the Company with or into any other
Person, any merger of another Person into the Company, or any conveyance,
transfer, sale, lease or other disposition of all or substantially all of
the properties and assets of the Company to another Person (other than (a)
any such transaction (x) that does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock
and (y) pursuant to which holders of Common Stock immediately prior to such
transaction have the entitlement to exercise, directly or indirectly, 50%
or more of the total voting power of all shares of capital stock entitled
to vote generally in the election of directors of the continuing or
surviving person immediately after such transaction and (b) any merger that
is effected solely to change the jurisdiction of incorporation of the
Company and results in a reclassification, conversion or exchange of
outstanding shares of Common Stock solely into shares of common stock of
the surviving entity);
provided, however, that a Change of Control shall not be deemed to have occurred
if the closing sale price per share of the Common Stock for any five Trading
Days within the period of 10 consecutive Trading Days ending immediately after
the later of the date of the Change of Control or the date of the public
announcement of the Change of Control (in the case of a Change of Control under
clause (i) above) or ending immediately before the Change of Control (in the
case of a Change of Control under clause (ii) above) shall equal or exceed 105%
of the Conversion Price of the Notes in effect on each such Trading Day, The
"Conversion Price" is equal to $1,000 divided by the Conversion Rate.
"Beneficial owner" shall be determined in accordance with Rule 13d-3 promulgated
by the Commission
37
<PAGE> 39
under the Exchange Act. "Person" includes any syndicate or group which would be
deemed to be a "person" under Section 13(d)(3) of the Exchange Act.
The Company may, to the extent permitted by applicable law, at any time
purchase Notes in the open market or by tender at any price or by private
agreement. Subject to certain limitations imposed by the Underwriting Agreement
with the Underwriters, any Note so purchased by the Company may be reissued or
resold or may, at the Company's option, be surrendered to the Trustee for
cancellation. Any Notes surrendered as aforesaid may not be reissued or resold
and will be canceled promptly.
The foregoing provisions would not necessarily afford Holders of the Notes
protection in the event of highly leveraged or other transactions involving the
Company that may adversely effect Holders.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company shall not consolidate with or merge into any other Person or,
directly or indirectly, convey, transfer, sell or lease all or substantially all
of its properties and assets to any Person, and the Company shall not permit any
Person to consolidate with or merge into the Company or convey, transfer, sell
or lease all or substantially all of its properties and assets to the Company,
unless (a) the Person formed by such consolidation or into or with which the
Company is merged or the Person to which the properties and assets of the
Company are so conveyed, transferred, sold or leased, is a corporation, limited
liability company, partnership or trust organized and existing under the laws of
the United States, any State thereof or the District of Columbia and shall
expressly assume the due and punctual payment of the principal and of, premium,
if any, and interest on the Notes and the performance of the other covenants of
the Company under the Indenture and shall have provided for conversion rights as
described above under "-- Conversion Rights", (b) immediately after giving
effect to such transaction, no Event of Default, and no event which, after
notice or lapse of time or both, would become an Event of Default, shall have
occurred and be continuing and (c) the Company shall have provided to the
Trustee an Officer's Certificate and Opinion of Counsel as provided in the
Indenture.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure to
pay principal of or premium, if any, on any Note when due, whether or not such
payment is prohibited by the subordination provisions of the Indenture, (b)
failure to pay any interest on any Note when due, continuing for 30 days,
whether or not such payment is prohibited by the subordination provisions of the
Indenture; (c) default in the Company's obligation to provide notice of a Change
of Control; (d) failure to perform any other material covenant or warranty of
the Company in the Indenture, continuing for 60 days after written notice to the
Company by the Trustee or the Holders of at least 25% in aggregate principal
amount of Outstanding Notes; (e) failure to pay when due the principal of, or
acceleration of, any indebtedness for money borrowed by the Company in excess of
$25 million if such indebtedness is not discharged, or such acceleration is not
annulled, within 30 days after written notice to the Company by the Trustee or
the Holders of at least 25% in aggregate principal amount of Outstanding Notes;
and (f) certain events of bankruptcy, insolvency or reorganization of the
Company. Subject to the provisions of the Indenture relating to the duties of
the Trustee in case an Event of Default shall occur and be continuing, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the Holders, unless
such Holders shall have offered to the Trustee reasonable indemnity. Subject to
such provisions for the indemnification of the Trustee, the Holders of a
majority in aggregate principal amount of the Outstanding Notes will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee.
If an Event of Default (other than an Event of Default specified in clause
(f) above) occurs and is continuing, either the Trustee or the Holders of not
less than 25% in aggregate principal amount of the Outstanding Notes may
accelerate the maturity of all Notes. If an Event of Default specified in clause
(f) occurs and is continuing, the principal of and any accrued interest on all
of the Notes then
38
<PAGE> 40
Outstanding shall ipso facto become due and payable immediately without any
declaration or other act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration has been made but before a
judgment or decree based on acceleration has been issued, the Holders of a
majority in aggregate principal amount of Outstanding Notes may, under certain
circumstances as set forth in the Indenture, rescind and annul such acceleration
if all Events of Default, other than the nonpayment of accelerated principal and
interest, have been cured or waived as provided in the Indenture. For
information as to waiver of defaults, See "-- Modification and Waiver."
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless also the Holders of at least 25% in aggregate principal
amount of the Outstanding Notes shall have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as trustee,
and the Trustee shall not have received from the Holders of a majority in
aggregate principal amount of the Outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. However, such limitations do not apply to a suit instituted by a Holder of
a Note for the enforcement of payment of the principal of or premium, if any, or
interest on such Note on or after the respective due dates expressed in such
Note or of the right to convert such Note in accordance with the Indenture.
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
MODIFICATION AND WAIVER
The Indenture will contain provisions permitting the Company and the
Trustee to enter into a supplemental indenture for certain limited purposes
without the consent of the Holders. Generally, modifications and amendments of
the Indenture can only be made with the written consent of the Holders of not
less than a majority in principal amount of the Notes at the time Outstanding.
However, no such modification or amendment may, without the consent of the
Holder of each Outstanding Note affected thereby, (a) change the Stated Maturity
of the principal of, or any installment of interest on, any Note, (b) reduce the
principal amount of, or the premium, if any, or rate of interest on, any Note,
(c) modify the provisions with respect to the repurchase right of the Holders in
a manner adverse to the Holders, (d) change the place or currency of payment of
principal of, premium, if any, or interest on any Note, (e) impair the right to
institute suit for the enforcement of any payment on or with respect to, or the
right to convert, any Note, (f) except as otherwise permitted or contemplated by
provisions concerning consolidation, merger, conveyance, transfer, sale or lease
of all or substantially all of the property and assets of the Company, adversely
effect the right to convert Notes, (g) modify the subordination provisions in a
manner adverse to the Holders of the Notes or (h) reduce the above-stated
percentage of aggregate principal amount of Outstanding Notes necessary for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults.
The Holders of a majority in aggregate principal amount of Outstanding
Notes may waive compliance by the Company with certain restrictive provisions of
the Indenture. The Holders of a majority in aggregate principal amount of the
Outstanding Notes may waive any past default by the Company under the Indenture,
except a default in the payment of principal, premium, if any, or interest or a
default in any covenant or provision that under the Indenture cannot be modified
or amended without the consent of each Holder of Outstanding Notes.
NOTICES
Notice to Holders of the Notes will be given by mail to the addresses of
such Holders as they appear in the Security Register. Such notices will be
deemed to have been given on the date of mailing of the notice.
39
<PAGE> 41
Notice of a redemption of Notes will be given at least once not less than
30 nor more than 60 days prior to the Redemption Date (which notice shall be
irrevocable) and will specify the Redemption Date and the Redemption Price.
PAYMENT OF STAMP AND OTHER TAXES
The Company shall pay all stamp and other duties, if any, that may be
imposed by the United States or any political subdivision thereof or taxing
authority thereof or therein with respect to the issuance of the Notes. The
Company will not be required to make any payment with respect to any other tax,
assessment or governmental charge imposed by any government or any political
subdivision thereof or taxing authority therein.
GOVERNING LAW
The Indenture and the Notes will be governed by and construed in accordance
with the laws of the State of New York.
THE TRUSTEE
The Trustee for the holders of Notes issued under the Indenture will
be .
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain material United States federal income
tax considerations relating to the purchase, ownership and disposition of the
Notes and of Common Stock into which Notes may be converted, but does not
purport to be a complete analysis of all the potential tax considerations
relating thereto. This summary is based on laws, regulations, rulings and
decisions now in effect, all of which are subject to change, possibly on a
retroactive basis. This summary deals only with holders that will hold Notes and
Common Stock into which Notes may be converted as "capital assets" (within the
meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the
"Code"), and does not address tax considerations applicable to investors that
may be subject to special tax rules, such as banks, tax-exempt organizations,
insurance companies, broker-dealers, traders in securities that elect to mark to
market, persons that will hold Notes as a position in a hedging transaction,
"straddle" or "conversion transaction" for tax purposes or persons who have a
"functional currency" other than the U.S. dollar. As used herein, the term
"United States Holder" means (1) a citizen or resident of the United States, (2)
a corporation organized under the laws of the United States or any State, (3) an
estate the income of which is subject to the United States federal income
taxation regardless of its source or (4) a trust if (i) a court within the
United States is able to exercise primary supervision over the trust's
administration and (ii) one or more U.S. persons have the authority to control
all of the trust's substantial decisions. This summary discusses the tax
considerations applicable to an initial purchaser of the Notes who purchases the
Notes at their "issue price" as defined in Section 1273 of the Code and does not
discuss the tax considerations applicable to subsequent purchasers of the Notes.
The Company has not sought any ruling from the Internal Revenue Service (the
"IRS") with respect to the statements made and the conclusions reached in the
following summary, and there can be no assurance that the IRS will agree with
such statements and conclusions.
INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX
LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING
UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY
APPLICABLE TAX TREATY.
40
<PAGE> 42
PAYMENT OF INTEREST
Interest on a Note generally will be includable in the income of a United
States Holder as ordinary income at the time such interest is received or
accrued, in accordance with such holder's method of accounting for United States
federal income tax purposes.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
Upon the sale, exchange or redemptions of a Note (excluding conversion), a
United States Holder generally will recognize capital gain or loss equal to the
difference between (i) the amount of cash proceeds and the fair market value of
any property received on the sale, exchange or redemption (except to the extent
such amount is attributable to accrued interest income not previously included
in income which is taxable as ordinary income) and (ii) such holder's adjusted
tax basis in the Note. A United States Holder's adjusted tax basis in a Note
generally will equal the cost of the Note to such holder. Generally, such gain
or loss will be capital gain or loss and will be long-term capital gain or loss
if the United States Holder's holding period in the Note is more than one year
at the time of sale, exchange or redemption. Long-term capital gain of a
non-corporate United States Holder is generally subject to a minimum tax rate of
28% in respect of property held for more than one year and to a maximum tax rate
of 20% in respect of property held in excess of 18 months.
CONVERSION OF THE NOTES
A United States Holder generally will not recognize any income, gain or
loss upon conversion of a Note into Common Stock except with respect to cash
received in lieu of a fractional share of Common Stock. A holder's tax basis in
the Common Stock received on conversion of a Note will be the same as such
holder's adjusted tax basis in the Note at the time of conversion (reduced by
any basis allocable to a fractional share interest), and the holding period for
the Common Stock received on conversion will generally include the holding
period of the Note converted.
Cash received in lieu of a fractional share of Common Stock upon conversion
will be treated as a payment in exchange for the fractional share of Common
Stock. Accordingly, the receipt of cash in lieu of a fractional share of Common
Stock generally will result in capital gain or loss (measured by the difference
between the cash received for the fractional share and the United States
Holder's adjusted tax basis in the fractional share).
CONSTRUCTIVE DISTRIBUTIONS
If at any time (i) the Company makes a distribution of cash or property to
its stockholders (including distributions of evidences of indebtedness or
assets, but generally not stock dividends or rights to subscribe for Common
Stock) or purchases Common Stock and such distribution or purchase would be
taxable to such stockholders as a dividend for United States federal income tax
purposes and, pursuant to the antidilution provisions of the Indenture, the
conversion price of the Notes is decreased or (ii) the conversion price of the
Notes is decreased at the discretion of the Company, such decrease in conversion
price may be deemed to be the payment of a taxable dividend to Holders of Notes
(pursuant to Section 305 of the Code). Holders of Notes might therefore be
required to recognize taxable income as a result of an event pursuant to which
they received no cash or property.
DIVIDENDS
Dividends paid on the Common Stock generally will be includable in the
income of a United States Holder as ordinary income to the extent of the
Company's current or accumulated earnings and profits. Subject to certain
limitations, a corporate taxpayer holding Common Stock that receives dividends
thereon generally will be eligible for a dividends-received deduction equal to
50% of the dividends received.
41
<PAGE> 43
SALE OF COMMON STOCK
Upon the sale or exchange of Common Stock, a United States Holder generally
will recognize capital gain or loss equal to the difference between (i) the
amount of cash and the fair market value of any property received upon the sale
or exchange and (ii) such holder's adjusted tax basis in the Common Stock. Such
capital gain or loss will be subject to the rules discussed above under "Sale,
Exchange or Redemption of the Notes". A United States Holder's basis and holding
period in Common Stock received upon conversion of a Note are determined as
discussed above under "Conversion of the Notes."
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on a Note, payments of dividends on
Common Stock, payments of the proceeds of the sale of a Note and payments of the
proceeds of the sale of Common Stock to certain noncorporate United States
Holders, and a 31% backup withholding tax may apply to such payments if the
United States Holder (i) fails to furnish or certify his correct taxpayer
identification number to the payor in the manner required, (ii) is notified by
the IRS that he has failed to report payments of interest and dividends
properly, or (iii) does not otherwise establish his entitlement to an exemption.
Any amounts withheld under the backup withholding rules from a payment to a
United States Holder will be allowed as a credit against such holders's United
States federal income tax and may entitle the United States Holder to a refund,
provided that the required information s furnished to the IRS.
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.
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.
42
<PAGE> 44
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 SECURITIES
The validity of the Notes offered hereby and of the shares of Common Stock
issuable upon conversion thereof 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.
43
<PAGE> 45
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> 46
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> 47
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> 48
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> 49
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> 50
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> 51
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> 52
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> 53
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> 54
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> 55
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> 56
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> 57
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> 58
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> 59
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 ("Macrotron"), 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> 60
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> 61
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of such Underwriters named
below, and each of the Underwriters has severally agreed to purchase, the
principal amount of the Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
CONVERTIBLE
UNDERWRITER NOTES
----------- ------------
<S> <C>
Goldman, Sachs & Co. .....................................
Bear, Stearns & Co. Inc. .................................
The Robinson-Humphrey Company, LLC .......................
NationsBanc Montgomery Securities, Inc....................
------------
Total........................................... $175,000,000
============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Notes, if any are
taken.
The Underwriters propose to offer the Notes 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 % of the principal amount of the Notes. The Underwriters may
allow, and such dealers may reallow, a concession not to exceed % of the
principal amount of the Notes to certain brokers and dealers. After the Notes
are released for sale to the public, the offering price and other selling terms
may from time to time be varied by the Underwriters.
The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of $26,250,000
principal amount of Notes solely to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the principal amount of the Notes to be purchased
by each of them, as shown in the foregoing table, bears to the $175,000,000
principal amount of Notes offered. The consummation of the Notes Offering and
the Common Stock Offerings are not conditioned upon each other.
The Company has agree 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 Underwriters, except
for the shares of Common Stock offered in connection with the concurrent U.S.
and international Common Stock Offerings, and the shares of Common Stock
issuable upon conversion of the Notes offered hereby.
In connection with the Notes Offering and the Common Stock Offerings, the
Underwriters may purchase and sell the Notes and 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 short
positions created by the Underwriters in connection with the Notes Offering or
by the syndicate in the Common Stock Offerings. Stabilizing transactions consist
of certain bids or purchases for the purpose of preventing or retarding a
decline in the market price of the Notes or the Common Stock, and short
positions involve the sale by the Underwriters or the syndicate, as the case may
be, of a greater number of Notes or shares of Common Stock than they are
required to purchase from the Company in the Notes Offering or the Common Stock
Offerings, respectively. The Underwriters also may impose a penalty bid, whereby
selling concessions allowed to syndicate members or other broker-dealers in
respect of the Notes or Common Stock sold in the Notes Offering and the Common
Stock Offerings, respectively, may be reclaimed by the syndicate or the
Underwriters if such Notes or Common Stock are repurchased by
U-1
<PAGE> 62
the Underwriters or syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Notes or 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
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.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that they intend to make a
market in the Notes but are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for the Notes.
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. In
addition, the Underwriters have agreed to reimburse the Company for certain
expenses associated with the Notes Offering and the Common Stock Offerings.
U-2
<PAGE> 63
==========================================================
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............................. 7
Use of Proceeds.......................... 11
Concurrent Common Stock Offerings........ 11
Price Range of Common Stock.............. 12
Dividend Policy.......................... 12
Capitalization........................... 13
Selected Consolidated Financial Data..... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 15
Business................................. 21
Management............................... 26
Description of Capital Stock............. 28
Description of Notes..................... 30
Certain Federal Income Tax
Considerations......................... 40
Available Information.................... 42
Incorporation of Certain Documents by
Reference.............................. 42
Validity of the Securities............... 43
Experts.................................. 43
Index to Consolidated Financial
Statements............................. F-1
Underwriting............................. U-1
</TABLE>
==========================================================
==========================================================
$175,000,000
[TECH DATA LOGO]
% CONVERTIBLE
SUBORDINATED NOTES
DUE , 2002
-----------------------
PROSPECTUS
-----------------------
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
THE ROBINSON-HUMPHREY COMPANY
NATIONSBANC MONTGOMERY
SECURITIES, INC.
==========================================================
<PAGE> 64
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 60,985
NASD Filing Fee............................................. 20,625
Printing and Engraving...................................... 75,000
Fees of Trustee............................................. 10,000
Accountants Fees and Expenses............................... 15,000
Legal Fees and Expenses of Registrant's Counsel............. 30,000
Rating Agencies............................................. 175,000
Blue Sky Fees and Expenses.................................. 6,000
Miscellaneous............................................... 82,390
--------
Total............................................. $475,000
</TABLE>
Except for SEC registration fee and NASD filing fee, the foregoing fees are
estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's By-Laws include the following provisions:
ARTICLE NINE
INDEMNIFICATION
"9.1 Under the circumstances prescribed in Section 9.3 and 9.4, the
Corporation shall indemnify and hold harmless any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the Corporation) by reason of the fact that he is or was a Director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (include
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere
or its equivalent, shall not, of itself, create a presumption that the
person did not act in a manner which he reasonably believed to be in or not
opposed to the best interest of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that this
conduct was unlawful.
9.2 Under the circumstances prescribed in Section 9.3 and 9.4, the
Corporation shall indemnify and hold harmless any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a Director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a Director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action
if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation; except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be
II-1
<PAGE> 65
liable for negligence or misconduct in the performance of his duty to the
Corporation, unless and only to the extent that the court in which such
action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the
case, such person if fairly and reasonably entitled to indemnity for such
expenses that the court shall deem proper.
9.3 To the extent that a Director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Sections 9.1 and 9.2, or in
defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
9.4 Except as provided in Section 9.3 and except as may be ordered by
a court, any indemnification under Sections 9.1 and 9.2 shall be made by
the Corporation only as authorized in the specific case upon a
determination that indemnification of the Director, officer, employee or
agent is proper in the circumstances because he has met the applicable
standard of conduct set forth in Sections 9.1 and 9.2. Such a determination
shall be made (1) by the Board of Directors by a majority vote of a quorum
consisting of Directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested Directors so directs, by independent
legal counsel in a written opinion, or (3) by the affirmative vote of a
majority of the shares entitled to vote thereon owned by persons who were
not parties to such action, suit or proceeding.
9.5 Expenses, including attorneys' fees, incurred in defending a
civil or criminal action, suit, or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit, or
proceeding upon a preliminary determination following one of the procedures
set forth in Section 9.4 that the Director, officer, employee or agent met
the applicable standard of conduct set forth in Section 9.1 or Section 9.2
or as authorized by the Board of Directors in the specific case and, in
either event, upon receipt of an undertaking by or on behalf of the
Director, officer, employee, or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this Section.
9.6 The Corporation shall have the power to make any other or further
indemnification of any of its Directors, officers employees, or agents,
under any By-Law, agreement, vote of shareholders or disinterested
Directors, or otherwise, both as to action in his official capacity and as
to action in another capacity while holding such office, except an
indemnification against gross negligence or willful misconduct.
9.7 The indemnification provided by this Article Nine shall continue
as to a person who has ceased to be a Director, employee or agent and shall
inure to the benefit of the heirs, executors or administrators of such a
person.
9.8 The Corporation may purchase and maintain insurance on behalf of
any person who is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against any liability asserted
against himself and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article
Nine.
9.9 If any expenses or other amounts are paid by way of
indemnification, otherwise than by court order or action by the shareholder
or by an insurance carrier pursuant to insurance maintained by the
Corporation, the Corporation shall, no later than the next annual meeting
of shareholders unless such a meeting is held within three months from the
date of such payment, and, in any event, within 15 months from the date of
such payment, deliver personally or send by first class mail to its
shareholders of record at the time entitled to vote for the election of
Directors a statement specifying the persons paid, the amounts paid, and
the nature and status at the time of such payment of the litigation or
threatened litigation."
II-2
<PAGE> 66
Chapter 607 of the General Statutes of the State of Florida permits a
corporation to indemnify its officers and directors against certain liabilities
and provides for the conditions thereof.
Reference is made to the Underwriting Agreement filed as part of Exhibit 1
to this Registration Statement, which contains provisions pursuant to which each
Underwriter agrees to indemnify the Company, each person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act of 1933, as
amended, each director of the Company and each officer of the Company who signs
this Registration Statement against losses, liabilities, and reasonable
expenses, including attorneys' fees, arising out of claims under the Securities
Act of 1933 based upon material misstatements or omissions of material facts in
any Preliminary Prospectus, the Prospectus, or this Registration Statement, but
only to the extent that such misstatement or omission was made in any
Preliminary Prospectus, the Prospectus, or this Registration Statement in
reliance upon and in conformity with written information furnished to the
Company by the Underwriters expressly for use therein.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company, the Company has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Company undertakes, unless in the opinion of
its counsel the matter has been settled by controlling precedent, to submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and agrees to be governed by
the final adjudication of such issue.
ITEM 16. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES
(a) The exhibit numbers on the following list correspond to the numbers in
the exhibit table required pursuant to Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -----------
<S> <C> <C>
1* -- Form of Underwriting Agreement.
4-A(1) -- Articles of Incorporation of the Company as amended to April
23, 1986.
4-B(2) -- Articles of Amendment to Articles of Incorporation of the
Company filed on August 27, 1987.
4-C(3) -- By-laws of the Company as amended to November 28, 1995.
4-D(4) -- Articles of Amendment to Articles of Incorporation of the
Company filed on July 15, 1993.
4-E(5) -- Articles of Amendment to Articles of Incorporation of the
Company filed on June 25, 1997.
4-F** -- Trust Indenture relating to the % Convertible Subordinated
Notes.
5** -- Opinion of Schifino & Fleischer, P.A.
10-TT(5) -- Amendment Number 2 to Amended and Restated Transfer and
Administration Agreement dated July 29, 1997.
10-UU(5) -- Revolving Credit and Reimbursement Agreement dated August
28, 1997.
23-A** -- Consent of Schifino & Fleischer, P.A., as (Included in
Exhibit 5).
23-B* -- Consent of Price Waterhouse LLP.
24 -- Power of Attorney is included on the Signature Page, page
II-6.
25** -- Statement of eligibility of trustee.
</TABLE>
II-3
<PAGE> 67
- ---------------
* Filed herewith.
** To be filed by amendment.
(1) Incorporated by reference to the Exhibits included in the Company's
Registration Statement on Form S-1, File No. 33-4135.
(2) Incorporated by reference to the Exhibits included in the Company's
Registration Statement on Form S-1, File No. 33-21997.
(3) Incorporated by reference to the Exhibits included in the Company's Form
10-K for the year ended January 31, 1996, File No. 0-14625.
(4) Incorporated by reference to the Exhibits included in the Company's Form
10-K for the year ended January 31, 1994, File No. 0-14625.
(5) Incorporated by reference to the Exhibits included in the Company's
Registration Statement on Form S-3, filed concurrently with this
Registration Statement, File No. 333- .
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
II-4
<PAGE> 68
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to provide the Underwriters at
the closing specified in the underwriting documents, certificates in such
denominations and registered in such names are required by the Underwriters to
permit prompt delivery to each purchaser.
II-5
<PAGE> 69
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Clearwater, State of Florida, on October 1st, 1997.
TECH DATA CORPORATION
By: /s/ STEVEN A. RAYMUND
------------------------------------
Steven A. Raymund,
Chairman of the Board of Directors;
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature to this Registration Statement appears below
hereby appoints Jeffery P. Howells and Arthur W. Singleton, or either of them,
as his attorney-in-fact to sign on his behalf individually and in the capacity
stated below and to file all amendments and post-effective amendments to this
Registration Statement, and any and all instruments or documents filed as a part
of or in connection with this Registration Statement or the amendments thereto,
and the attorney-in-fact, or either of them, may make such charges and additions
to this Registration Statement as the attorney-in-fact, or either of them, may
deem necessary or appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ STEVEN A. RAYMUND Chairman of the Board of October 1, 1997
- ----------------------------------------------------- Directors; Chief Executive
Steven A. Raymund Officer
/s/ JEFFERY P. HOWELLS Executive Vice President of October 1, 1997
- ----------------------------------------------------- Finance and Chief Financial
Jeffery P. Howells Officer; (principal
financial officer)
/s/ JOSEPH B. TREPANI Vice President and Worldwide October 1, 1997
- ----------------------------------------------------- Controller; (principal
Joseph B. Trepani accounting officer)
/s/ CHARLES E. ADAIR Director October 1, 1997
- -----------------------------------------------------
Charles E. Adair
/s/ DANIEL M. DOYLE Director October 1, 1997
- -----------------------------------------------------
Daniel M. Doyle
/s/ DONALD F. DUNN Director October 1, 1997
- -----------------------------------------------------
Donald F. Dunn
</TABLE>
II-6
<PAGE> 70
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Director; Chairman Emeritus October 1, 1997
/s/ EDWARD C. RAYMUND
- -----------------------------------------------------
Edward C. Raymund
/s/ JOHN Y. WILLIAMS Director October 1, 1997
- -----------------------------------------------------
John Y. Williams
</TABLE>
II-7
<PAGE> 1
EXHIBIT 1
TECH DATA CORPORATION
% CONVERTIBLE SUBORDINATED NOTES DUE __________, 2002
_____________
UNDERWRITING AGREEMENT
.........................., 1997
Goldman, Sachs & Co.,
Bear, Stearns & Co. Inc.
The Robinson-Humphrey Company, LLC
NationsBanc Montgomery Securities, Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Tech Data Corporation, a Florida corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
$175,000,000 principal amount of the Convertible Subordinated Notes,
convertible into common stock, par value $.0015 per share ("Stock"), of the
Company, specified above (the "Firm Securities") and, at the election of the
Underwriters, up to an aggregate of $26,250,000 additional aggregate principal
amount (the "Optional Securities") (the Firm Securities and the Optional
Securities which the Underwriters elect to purchase pursuant to Section 2
hereof are herein collectively called the "Securities").
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-3 (File No. 333-....) (the
"Initial Registration Statement") in respect of the Securities and
shares of the Stock issuable upon conversion thereof has been filed
with the Securities and Exchange Commission (the "Commission"); the
Initial Registration Statement and any post-effective amendment
thereto, each in the form heretofore delivered to you, and, excluding
exhibits thereto but including all documents incorporated by
<PAGE> 2
reference in the prospectus contained therein, to you for each of the
other Underwriters, have been declared effective by the Commission in
such form; other than a registrationstatement, if any, increasing the
size of the offering (a "Rule 462(b) Registration Statement"), filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended
(the "Act"), which became effective upon filing; no other document
with respect to the Initial Registration Statement or document
incorporated by reference therein has heretofore been filed with the
Commission; and no stop order suspending the effectiveness of the
Initial Registration Statement, any post-effective amendment thereto
or the Rule 462(b) Registration Statement, if any, has been issued and
no proceeding for that purpose has been initiated or threatened by the
Commission (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule
424(a) of the rules and regulations of the Commission under the Act is
hereinafter called a "Preliminary Prospectus"; the various parts of
the Initial Registration Statement and the Rule 462(b) Registration
Statement, if any, including all exhibits thereto but excluding Form
T-1 and including (i) the information contained in the form of final
prospectus filed with the Commission pursuant to Rule 424(b) under the
Act in accordance with Section 5(a) hereof and deemed by virtue of
Rule 430A under the Act to be part of the Initial Registration
Statement at the time it was declared effective, and (ii) the
documents incorporated by reference in the prospectus contained in the
registration statement at the time such part of the registration
statement became effective, each as amended at the time such part of
the registration statement became effective or such part of the Rule
462(b) Registration Statement, if any, became or hereafter becomes
effective, are hereinafter collectively called the "Registration
Statement"; such final prospectus, in the form first filed pursuant to
Rule 424(b) under the Act, is hereinafter called the "Prospectus"; and
any reference herein to any Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the Act, as of
the date of such Preliminary Prospectus or Prospectus, as the case may
be; any reference to any amendment or supplement to any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include
any documents filed after the date of such Preliminary Prospectus or
Prospectus, as the case may be, under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and incorporated by reference
in such Preliminary Prospectus or Prospectus, as the case may be; and
any reference to any amendment to the Registration Statement shall be
deemed to refer to and include any annual report of the Company filed
pursuant to Section 13(a) or 15(d) of the Exchange Act after the
effective date of the Initial Registration Statement that is
incorporated by reference in the Registration Statement;
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), and the rules and
regulations of the Commission thereunder, and did not contain an
untrue statement of a material fact or omit to state a material fact
required to be
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<PAGE> 3
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
(c) The documents incorporated by reference in the Prospectus,
when they became effective or were filed with the Commission, as the
case may be, conformed in all material respects to the requirements of
the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder, and none of such documents
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and any further documents so filed
and incorporated by reference in the Prospectus or any further
amendment or supplement thereto, when such documents become effective
or are filed with the Commission, as the case may be, will conform in
all material respects to the requirements of the Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission
thereunder and will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter
through Goldman, Sachs & Co. expressly for use therein;
(d) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or
the Prospectus will conform, in all material respects to the
requirements of the Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder and do not and will not, as
of the applicable effective date as to the Registration Statement and
any amendment thereto and as of the applicable filing date as to the
Prospectus and any amendment or supplement thereto, contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company
by an Underwriter through Goldman, Sachs & Co. expressly for use
therein;
(e) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute (other than the strike by employees of United Parcel Service
in August 1997) or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus; and,
since the respective dates as of
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<PAGE> 4
which information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock,
short-term (other than changes not in excess of $________ in the
aggregate) or long-term debt of the Company or any of its subsidiaries
or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general
affairs, management, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries, otherwise
than as set forth or contemplated in the Prospectus;
(f) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title
to all personal property owned by them, in each case free and clear of
all liens, encumbrances and defects except such as are described in
the Prospectus or such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be
made of such property by the Company and its subsidiaries; and any
real property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries;
(g) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Florida, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus,
and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification, or is subject to no
material liability or disability by reason of the failure to be so
qualified in any such jurisdiction; and each subsidiary of the Company
has been duly incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of incorporation;
(h) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are fully
paid and non-assessable; the shares of Stock initially issuable upon
conversion of the Securities have been duly and validly authorized and
reserved for issuance and, when issued and delivered in accordance
with the provisions of the Securities and the Indenture referred to
below, will be duly and validly issued, fully paid and non-assessable
and will conform to the description of the Stock contained or
incorporated by reference in the Prospectus; and all of the issued
shares of capital stock of each subsidiary of the Company have been
duly and validly authorized and issued, are fully paid and
non-assessable and (except for directors' qualifying shares) are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims;
(i) The Securities have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed,
authenticated, issued
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<PAGE> 5
and delivered and will constitute valid and legally binding
obligations of the Company entitled to the benefits provided by the
indenture to be dated as of ................, 1997 (the "Indenture")
between the Company and............, as Trustee (the "Trustee"), under
which they are to be issued, which will be substantially in the form
filed as an exhibit to the Registration Statement; the Indenture has
been duly authorized and duly qualified under the Trust Indenture Act
and, when executed and delivered by the Company and the Trustee, will
constitute a valid and legally binding instrument, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles; and the Securities and the Indenture will conform to the
descriptions thereof in the Prospectus;
(j) The issue and sale of the Securities and the compliance by the
Company with all of the provisions of the Securities, the Indenture
and this Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such action
result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the
Securities or the consummation by the Company of the transactions
contemplated by this Agreement or the Indenture, except the
registration under the Act of the Securities and the shares of Stock
issuable upon conversion thereof, such as have been obtained under the
Trust Indenture Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Underwriters;
(k) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in default
in the performance or observance of any material obligation, covenant
or condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound;
(l) The statements set forth in the Prospectus under the caption
"Description of Notes", insofar as they purport to constitute a
summary of the terms of the Securities, and under the caption
"Underwriting", insofar as they purport to describe the provisions of
this Agreement referred to therein, are accurate, complete and fair
summaries of such document;
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<PAGE> 6
(m) Other than as set forth in the Prospectus, there are no legal
or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any
of its subsidiaries is the subject which, if determined adversely to
the Company or any of its subsidiaries, would individually or in the
aggregate have a material adverse effect on the current or future
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries; and, to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(n) The Company is not and, after giving effect to the offering
and sale of the Securities, will not be an "investment company" or an
entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(o) Neither the Company nor any of its affiliates does business
with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statutes; and
(p) To the best of the Company's knowledge, Price Waterhouse, who
have certified certain financial statements of the Company and
its subsidiaries, are independent public accountants as required by
the Act and the rules and regulations of the Commission thereunder.
2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company,
at a purchase price of 95% of the principal amount thereof, plus accrued
interest, if any, from ...................., 1997 to the Time of Delivery
hereunder, the principal amount of Securities set forth opposite the name of
such Underwriter in Schedule I hereto, and (b) in the event and to the extent
that the Underwriters shall exercise the election to purchase Optional
Securities as provided below, the Company agrees to issue and sell to each of
the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, at the same purchase price set forth in
clause (a) of this Section 2, that portion of the aggregate principal amount of
the Optional Securities as to which such election shall have been exercised (to
be adjusted by you so as to eliminate fractions of $..............,) determined
by multiplying such aggregate principal amount of Optional Securities by a
fraction, the numerator of which is the maximum aggregate principal amount of
Optional Securities which such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto and the denominator
of which is the maximum aggregate principal amount of Optional Securities which
all of the Underwriters are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to $26,250,000 aggregate principal amount of Optional
Securities, at the purchase price set forth in clause (a) of the first
paragraph of this Section 2, for the sole purpose of covering overallotments in
the sale of Firm Securities. Any such election to purchase Optional Securities
may be exercised by written notice from you to the Company, given within a
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<PAGE> 7
period of 30 calendar days after the date of this Agreement, setting forth the
aggregate principal amount of Optional Securities to be purchased and the date
on which such Optional Securities are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined in Section (4)
hereof) or, unless you and the Company otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Securities,
the several Underwriters propose to offer the Firm Securities for sale upon the
terms and conditions set forth in the Prospectus.
4. (a) The Securities to be purchased by each Underwriter hereunder will
be represented by one or more definitive global Securities in book-entry form
which will be deposited by or on behalf of the Company with The Depository
Trust Company ("DTC") or its designated custodian. The Company will deliver
the Securities to Goldman, Sachs & Co., for the account of each Underwriter,
against payment by or on behalf of such Underwriter of the purchase price
therefor by certified or official bank check or checks, payable to the order of
the Company in Federal (same day) funds, by causing DTC to credit the Securities
to the account of Goldman, Sachs & Co. at DTC. The Company will cause the
certificates representing the Securities to be made available to Goldman, Sachs
& Co. for checking at least twenty-four hours prior to the Time of Delivery
(as defined below) at the office of DTC or its designated custodian (the
"Designated Office"). The time and date of such delivery and payment shall be,
with respect to the Firm Securities, 9:30 a.m., New York City time, on
................, 1997 or such other time and date as Goldman, Sachs & Co. and
the Company may agree upon in writing, and, with respect to the Optional
Securities, 9:30 a.m., New York City time, on the date specified by Goldman,
Sachs & Co. in the written notice given by Goldman, Sachs & Co. of the
Underwriters' election to purchase such Optional Securities, or such other time
and date as Goldman, Sachs & Co. and the Company may agree upon in writing.
Such time and date for delivery of the Firm Securities is herein called the
"First Time of Delivery", such time and date for delivery of the Optional
Securities, if not the First Time of Delivery, is herein called the "Second
Time of Delivery", and each such time and date for delivery is herein called a
"Time of Delivery".
(b) The documents to be delivered at the Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Securities and any additional documents requested by the
Underwriters pursuant to Section 7(j) hereof, will be delivered at the offices
of Sullivan & Cromwell, 1701 Pennsylvania Avenue, N.W., Washington, D.C. 20006
(the "Closing Location"), and the Securities will be delivered at the
Designated Office, all at the Time of Delivery. A meeting will be held at the
Closing Location at 2:00 p.m., New York City time, on the New York Business Day
next preceding the Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Section 4, "New
York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York City are
generally authorized or obligated by law or executive order to close.
-7-
<PAGE> 8
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Act; to make no further amendment or any supplement to the
Registration Statement or Prospectus prior to such Time of Delivery
which shall be disapproved by you promptly after reasonable notice
thereof; to advise you, promptly after it receives notice thereof, of
the time when any amendment to the Registration Statement has been
filed or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish you with copies
thereof; to file promptly all reports and any definitive proxy or
information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus and for so long
as the delivery of a prospectus is required in connection with the
offering or sale of the Securities; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Securities or the shares of Stock issuable upon
conversion of the Securities for offering or sale in any jurisdiction,
of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such
qualification, to promptly use its reasonabale best efforts to obtain
the withdrawal of such order;
(b) Promptly from time to time to take such action as you
may reasonably request to qualify the Securities and the shares of
Stock issuable upon conversion of the Securities for offering and sale
under the securities laws of such jurisdictions as you may request and
to comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary
to complete the distribution of the Securities, provided that in
connection therewith the Company shall not be required to qualify as a
foreign corporation or to file a general consent to service of process
in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New
York Business Day next succeeding the date of this Agreement and from
time to time, to furnish the Underwriters with copies of the
Prospectus in New York City in such quantities as you may reasonably
request, and, if the delivery of a prospectus is required at any time
prior to the expiration of nine months after the time of issue of the
Prospectus in connection with the offering or sale of the Securities
and the shares of Stock issuable upon conversion of the Securities and
if at such time any event shall have occurred as a result of which the
Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made when such Prospectus is
delivered, not misleading, or, if for any other reason it shall be
necessary during such same period to
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<PAGE> 9
amend or supplement the Prospectus or to file under the Exchange Act
any document incorporated by reference in the Prospectus in order to
comply with the Act, the Exchange Act or the Trust Indenture Act, to
notify you and upon your request to file such document and to prepare
and furnish without charge to each Underwriter and to any dealer in
securities as many copies as you may from time to time reasonably
request of an amended Prospectus or a supplement to the Prospectus
which will correct such statement or omission or effect such
compliance; and in case any Underwriter is required to deliver a
prospectus in connection with sales of any of the Securities and the
shares of Stock issuable upon conversion of the Securities at any time
nine months or more after the time of issue of the Prospectus, upon
your request but at the expense of such Underwriter, to prepare and
deliver to such Underwriter as many copies as you may request of an
amended or supplemented Prospectus complying with Section 10(a)(3) of
the Act;
(d) To make generally available to its securityholders as
soon as practicable, but in any event not later than eighteen months
after the effective date of the Registration Statement (as defined in
Rule 158(c)), an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a)
of the Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the date 90 days after the date of the
Prospectus, not to offer, sell, contract to sell or otherwise dispose
of, except as provided hereunder any securities of the Company that
are substantially similar to the Securities or the Stock, including
but not limited to any securities that are convertible into or
exchangeable for, or that represent the right to receive, Stock or any
such substantially similar securities (other than pursuant to employee
stock option plans existing on, or upon the conversion or exchange of
convertible or exchangeable securities outstanding as of, the date of
this Agreement), without your prior written consent;
(f) To furnish to the holders of the Securities as soon
as practicable after the end of each fiscal year an annual report
(including a balance sheet and statements of income, stockholders'
equity and cash flows of the Company and its consolidated subsidiaries
certified by independent public accountants) and, as soon as
practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the
effective date of the Registration Statement), consolidated summary
financial information of the Company and its subsidiaries for such
quarter in reasonable detail;
(g) During a period of five years from the effective date
of the Registration Statement, to furnish to you copies of all reports
or other communications (financial or other) furnished to
stockholders, and to deliver to you (i) as soon as they are available,
copies of any reports and financial statements furnished to or filed
with the Commission or any national securities exchange on which the
Securities or any class of securities of the Company is listed; and
(ii) such additional information concerning the business and financial
condition of the Company as you may from time to time reasonably
request (such financial statements to be on a consolidated basis to
the extent the accounts of the Company and its subsidiaries are
consolidated in reports furnished to its stockholders generally or to
the Commission);
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<PAGE> 10
(h) To use the net proceeds received by it from the sale
of the Securities pursuant to this Agreement in the manner specified
in the Prospectus under the caption "Use of Proceeds";
(i) To reserve and keep available at all times, free of
preemptive rights, shares of Stock for the purpose of enabling the
Company to satisfy any obligations to issue shares of its Stock upon
conversion of the Securities;
(j) To use its reasonable best efforts to designate for
inclusion, subject to notice of issuance, the shares of Stock issuable
upon conversion of the Securities on The Nasdaq National Market or the
New York Stock Exchange (collectively, the "Exchange"); and
(k) If the Company elects to rely upon Rule 462(b), the
Company shall file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) by 10:00 P.M., Washington,
D.C. time, on the date of this Agreement, and the Company shall at the
time of filing either pay to the Commission the filing fee for the
Rule 462(b) Registration Statement or give irrevocable instructions
for the payment of such fee pursuant to Rule 111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters
that the Company will pay or cause to be paid the following: (i) the
fees, disbursements and expenses of the Company's counsel and
accountants in connection with the registration of the Securities and
the shares of Stock issuable upon conversion of the Securities under
the Act and all other expenses in connection with the preparation,
printing and filing of the Registration Statement, any Preliminary
Prospectus and the Prospectus and amendments and supplements thereto
and the mailing and delivering of copies thereof to the Underwriters
and dealers; (ii) the cost of printing or producing any Agreement
among Underwriters, this Agreement, the Indenture, the Blue Sky and
Legal Investment Memoranda, closing documents (including any
compilations thereof) and any other documents in connection with the
offering, purchase, sale and delivery of the Securities; (iii) all
expenses in connection with the qualification of the Securities and
the shares of Stock issuable upon conversion of the Securities for
offering and sale under state securities laws as provided in Section
5(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection
with the Blue Sky and legal investment surveys; (iv) any fees charged
by securities rating services for rating the Securities; (v) the
filing fees incident to, and the fees and disbursements of counsel for
the Underwriters in connection with, any required review by the
National Association of Securities Dealers, Inc. of the terms of the
sale of the Securities; (vi) the cost of preparing the Securities;
(vii) the fees and expenses of the Trustee and any agent of the
Trustee and the fees and disbursements of counsel for the Trustee in
connection with the Indenture and the Securities; and (viii) all other
costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this
Section. It is understood, however, that, except as provided in this
Section, and Sections 8 and 11 hereof, the Underwriters will pay all
of their own costs and expenses, including the fees of their counsel,
transfer taxes on resale of any of the Securities by them, and any
advertising expenses connected with any offers they may make.
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<PAGE> 11
7. The obligations of the Underwriters hereunder shall be
subject, in their discretion, to the condition that all
representations and warranties and other statements of the Company
herein are, at and as of such Time of Delivery, true and correct, the
condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional
conditions:
(a) The Prospectus shall have been filed with the
Commission pursuant to Rule 424(b) within the applicable time period
prescribed for such filing by the rules and regulations under the Act
and in accordance with Section 5(a) hereof; if the Company has elected
to rely upon Rule 462(b), the Rule 462(b) Registration Statement shall
have become effective by 10:00 P.M., Washington, D.C. time, on the
date of this Agreement; no stop order suspending the effectiveness of
the Registration Statement or any part thereof shall have been issued
and no proceeding for that purpose shall have been initiated or
threatened by the Commission; and all requests for additional
information on the part of the Commission shall have been complied
with to your reasonable satisfaction;
(b) Sullivan & Cromwell, counsel for the Underwriters,
shall have furnished to you such opinion or opinions (each in the form
attached hereto as Annex II(a)), dated such Time of Delivery, with
respect to the incorporation of the Company, the validity of the
Indenture, the Securities, the shares of Stock issuable upon
conversion of the Securities, the Registration Statement and the
Prospectus and such other related matters as you may reasonably
request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass
upon such matters;
(c) Schifino & Fleischer, P.A., counsel for the Company,
shall have furnished to you their written opinion (in the form
attached hereto as Annex II(b)), dated such Time of Delivery,
(d) [ ], German counsel for the Company shall
have furnished to you their written opinion (in the form attached
hereto as Annex II (c), dated such a Time of Delivery.
(e) [ ], French counsel for the Company, shall
have furnished to you their written opinion (in the form attached
hereto as Annex II(d)), dated such time of Delivery.
(f) [ ], Canadian counsel for the Company, shall
have furnished to your their written opinion (in the form attached
hereto as Annex II (e)), dated such Time of Delivery.
(g) [ ], California counsel to me Company, shall
have furnished to your their written opinion (in the form attached
hereto as Annex II(f)), dated such Time of Delivery.
(h) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the
effective date of any post-effective amendment to the Registration
Statement filed subsequent to the date of this Agreement and also at
each Time of Delivery, Price Waterhouse shall have furnished to you a
letter or letters, dated the respective dates of delivery thereof, in
form and substance satisfactory to you, to the effect set forth in
Annex I hereto (the executed copy of the letter delivered prior to the
execution of this Agreement is attached as Annex I(a) hereto and a
draft of the form of letter to be delivered on the effective date of
any post-effective amendment to the Registration Statement and as of
each Time of Delivery is attached as Annex I(b) hereto);
(i) (i) Neither the Company nor any of its subsidiaries
shall have sustained since the date of the latest audited
financial statements included or incorporated by reference in the
Prospectus any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute (other than the strike by
employees of United Parcel Service in August 1997) or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus, and (ii) since the respective dates as
of which information is given in the Prospectus there shall not have
been any change in the capital stock, short-term debt (other than
changes not in excess of $_____ in the aggregate) or
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<PAGE> 12
long-term debt of the Company or any of its subsidiaries or any
change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in Clause
(i) or (ii), is in the judgment of the representatives so material and
adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Securities being issued at such
Time of Delivery on the terms and in the manner contemplated in the
Prospectus;
(j) On or after the date hereof (i) no downgrading shall
have occurred in the rating accorded the Company's debt securities by
any "nationally recognized statistical rating organization", as that
term is defined by the Commission for purposes of Rule 436(g)(2) under
the Act, and (ii) no such organization shall have publicly announced
that it has under surveillance or review, with possible negative
implications, its rating of any of the Company's debt securities;
(k) On or after the date hereof there shall not have
occurred any of the following: (i) a suspension or material limitation
in trading in securities generally on the New York Stock Exchange; or
on NASDAQ; (ii) a suspension or material limitation in trading in the
Company's securities on NASDAQ; (iii) a general moratorium on
commercial banking activities declared by either Federal or New York
State authorities; or (iv) the outbreak or escalation of hostilities
involving the United States or the declaration by the United States of
a national emergency or war, if the effect of any such event specified
in this Clause (iv) in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or
the delivery of the Securities being issued at such Time of Delivery
on the terms and in the manner contemplated in the Prospectus; or (v)
the occurrence of any material adverse change in the existing
financial, political or economic conditions in the United States or
elsewhere which, in the judgment of the Representatives, would
materially and adversely affect the financial markets or the markets
for the Securities and other debt securities or the market for any
equity securities.
(l) The shares of Stock issuable upon conversion of the
Securities shall have been designated for inclusion, subject to notice
of issuance, on the Exchange; and
(m) The Securities shall have been duly listed, subject
to notice of issuance, on the Exchange; and
(j) The Company shall have furnished or caused to be
furnished to you at such Time of Delivery certificates of officers of
the Company reasonably satisfactory to you as to the accuracy of the
representations and warranties of the Company herein at and as of such
Time of Delivery, as to the performance by the Company of all of its
obligations hereunder to be performed at or prior to such Time of
Delivery, as to the matters set forth in subsections (a) and (e) of
this Section and as to such other matters as you may reasonably
request.
(k) The Company shall have complied with the provisions
of Section 5(c) hereof with respect to the furnishing of prospectuses
on the New York Business Day next succeeding the date of this
Agreement.
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<PAGE> 13
8. (a) The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint
or several, to which such Underwriter may become subject, under the
Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or
defending any such action or claim as such expenses are incurred;
provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the
Company against any losses, claims, damages or liabilities to which
the Company may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or
alleged omission was made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through Goldman, Sachs &
Co. expressly for use therein; and will reimburse the Company for any
legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such action or claim as
such expenses are incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party under such subsection,
notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party shall not relieve
it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall
be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party), and, after
notice from the indemnifying party to such indemnified party of its
election so to
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<PAGE> 14
assume the defense thereof, the indemnifying party shall not be liable
to such indemnified party under such subsection for any legal expenses
of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying
party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any
judgment with respect to, any pending or threatened action or claim in
respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement,
compromise or judgment (i) includes an unconditional release of the
indemnified party from all liability arising out of such action or
claim and (ii) does not include a statement as to or an admission of
fault, culpability or a failure to act, by or on behalf of any
indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from
the offering of the Securities. If, however, the allocation provided
by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in
such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company on the one hand
and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by
the Company on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page
of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company
on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as
a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this
subsection (d), no Underwriter shall
-14-
<PAGE> 15
be required to contribute any amount in excess of the amount by which
the total price at which the Securities underwritten by it and
distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement
or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Underwriters' obligations
in this subsection (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(e) The obligations of the Company under this Section 8
shall be in addition to any liability which the Company may otherwise
have and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Underwriter within the meaning of the
Act; and the obligations of the Underwriters under this Section 8
shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each officer and director of the Company and to
each person, if any, who controls the Company within the meaning of
the Act.
9. (a) If any Underwriter shall default in its obligation to
purchase the Securities which it has agreed to purchase hereunder, you
may in your discretion arrange for you or another party or other
parties to purchase such Securities on the terms contained herein at a
Time of Delivery. If within thirty-six hours after such default by
any Underwriter you do not arrange for the purchase of such
Securities, then the Company shall be entitled to a further period of
thirty-six hours within which to procure another party or other
parties satisfactory to you to purchase such Securities on such terms.
In the event that, within the respective prescribed periods, you
notify the Company that you have so arranged for the purchase of such
Securities, or the Company notifies you that it has so arranged for
the purchase of such Securities, you or the Company shall have the
right to postpone such Time of Delivery for a period of not more than
seven days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any
other documents or arrangements, and the Company agrees to file
promptly any amendments to the Registration Statement or the
Prospectus which in your opinion may thereby be made necessary. The
term "Underwriter" as used in this Agreement shall include any person
substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such
Securities.
(b) If, after giving effect to any arrangements for the
purchase of the Securities of a defaulting Underwriter or Underwriters
by you and the Company as provided in subsection (a) above, the
aggregate principal amount of such Securities which remains
unpurchased does not exceed one-eleventh of the aggregate principal
amount of all the Securities to be purchased at such Time of Delivery,
then the Company shall have the right to require each non-defaulting
Underwriter to purchase the principal amount of Securities which such
Underwriter agreed to purchase hereunder at such Time of Delivery and,
in addition, to require each non-defaulting Underwriter to purchase
its pro rata share (based on the principal amount of Securities which
such Underwriter agreed to purchase hereunder) of the Securities of
such defaulting Underwriter or Underwriters for which such
arrangements
-15-
<PAGE> 16
have not been made; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Securities of a defaulting Underwriter or Underwriters
by you and the Company as provided in subsection (a) above, the
aggregate principal amount of Securities which remains unpurchased
exceeds one-eleventh of the aggregate principal amount of all the
Securities to be purchased at such Time of Delivery, or if the Company
shall not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase Securities of a
defaulting Underwriter or Underwriters, then this Agreement (or, with
respect to the Second Time of Delivery, the obligation of the
Underwriters to purchase and of the Company to sell the Optional
Securities) shall thereupon terminate, without liability on the part
of any non-defaulting Underwriter or the Company, except for the
expenses to be borne by the Company and the Underwriters as provided
in Section 6 hereof and the indemnity and contribution agreements in
Section 8 hereof; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
10. The respective indemnities, agreements,
representations, warranties and other statements of the Company and
the several Underwriters, as set forth in this Agreement or made by or
on behalf of them, respectively, pursuant to this Agreement, shall
remain in full force and effect, regardless of any investigation (or
any statement as to the results thereof) made by or on behalf of any
Underwriter or any controlling person of any Underwriter, or the
Company, or any officer or director or controlling person of the
Company, and shall survive delivery of and payment for the Securities.
11. If this Agreement shall be terminated pursuant to
Section 9 hereof, the Company shall not then be under any liability to
any Underwriter except as provided in Sections 6 and 8 hereof; but, if
for any other reason, any Securities are not delivered by or on behalf
of the Company as provided herein, the Company will reimburse the
Underwriters through you for all out-of-pocket expenses approved in
writing by you, including fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of the Securities, but the Company shall
then be under no further liability to any Underwriter except as
provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of
each of the Underwriters, and the parties hereto shall be entitled to
act and rely upon any statement, request, notice or agreement on
behalf of any Underwriter made or given by you jointly or by Goldman,
Sachs & Co. on behalf of you as the representatives.
All statements, requests, notices and agreements hereunder shall
be in writing, and if to the Underwriters shall be delivered or sent
by mail, telex or facsimile transmission to you as the representatives
in care of Goldman, Sachs & Co., 85 Broad Street, New York, New York
10004, Attention: Registration Department; and if to the Company shall
be delivered or sent by mail, telex or facsimile transmission to the
address of the Company set forth in the Registration Statement,
Attention: Secretary; provided, however, that any notice to an
Underwriter pursuant to Section 8(c) hereof shall be delivered or sent
by mail, telex or facsimile transmission to such Underwriter at its
address set forth in its Underwriters'
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<PAGE> 17
Questionnaire, or telex constituting such Questionnaire, which address
will be supplied to the Company by you upon request. Any such
statements, requests, notices or agreements shall take effect upon
receipt thereof.
13. This Agreement shall be binding upon, and inure
solely to the benefit of, the Underwriters, the Company and, to the
extent provided in Sections 8 and 10 hereof, the officers and
directors of the Company and each person who controls the Company or
any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No
purchaser of any of the Securities from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As
used herein, the term "business day" shall mean any day when the
Commission's office in Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of
the parties hereto in any number of counterparts, each of which shall
be deemed to be an original, but all such respective counterparts
shall together constitute one and the same instrument.
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<PAGE> 18
If the foregoing is in accordance with your understanding, please
sign and return to us [seven] counterparts hereof, and upon the
acceptance hereof by you, on behalf of each of the Underwriters, this
letter and such acceptance hereof shall constitute a binding agreement
between each of the Underwriters and the Company. It is understood
that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters, the form of which shall be submitted to
the Company for examination upon request, but without warranty on your
part as to the authority of the signers thereof.
Very truly yours,
Tech Data Corporation
By:
..............................
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
Bear, Stearns & Co. Inc.
The Robinson-Humphrey Company, LLC
NationsBanc Montgomery Securities, Inc.
By: ...................................
(Goldman, Sachs & Co.)
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<PAGE> 19
SCHEDULE I
<TABLE>
<CAPTION>
PRINCIPAL
PRINCIPAL AMOUNT OF
AMOUNT OF OPTIONAL SECURITIES
FIRM SECURITIES TO BE PURCHASED
TO BE IF MAXIMUM OPTION
UNDERWRITER PURCHASED EXERCISED
----------- --------------- -------------------
<S> <C> <C>
Goldman, Sachs & Co. . . . . . . . . . . . . . . . $ $
Bear, Stearns & Co. Inc.
The Robinson-Humphrey Company, LLC
NationsBanc Montgomery Securities, Inc.
</TABLE>
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<PAGE> 20
ANNEX I
Pursuant to Section 7(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
prospective financial statements and/or pro forma financial
information) examined by them and included or incorporated by
reference in the Registration Statement or the Prospectus comply as to
form in all material respects with the applicable accounting
requirements of the Act or the Exchange Act, as applicable, and the
related published rules and regulations thereunder; and, if
applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the consolidated interim financial statements);
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statement of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus and/or included in the Company's quarterly
report on Form 10-Q incorporated by reference into the Prospectus as
indicated in their reports thereon copies of which have been
separately furnished to the Representatives (other than the
consolidated balance sheets for the first fiscal quarter of 1997 and
1996, respectively); and on the basis of specified procedures
including inquiries of officials of the Company who have
responsibility for financial and accounting matters regarding whether
the unaudited condensed consolidated financial statements referred to
in paragraph (vi)(A)(i) below comply as to form in the related in all
material respects with the applicable accounting requirements of the
Act and the Exchange Act and the related published rules and
regulations, nothing came to their attention that caused them to
believe that the unaudited condensed consolidated financial statements
do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and the
related published rules and regulations;
(iv) The unaudited selected financial information with respect
to the consolidated results of operations and financial position of
the Company for the five most recent fiscal years included in the
Prospectus and included or incorporated by
A-1
<PAGE> 21
reference in Item 6 of the Company's Annual Report on Form 10-K for
the most recent fiscal year agrees with the corresponding amounts
(after restatement where applicable) in the audited consolidated
financial statements for such five fiscal years which were included or
incorporated by reference in the Company's Annual Reports on Form 10-K
for such fiscal years;
(v) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and
other information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus, inquiries of officials of
the Company and its subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused
them to believe that:
(A) (i) the unaudited condensed consolidated statements
of income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus and/or
included or incorporated by reference in the Company's Quarterly
Reports on Form 10-Q incorporated by reference in the Prospectus
do not comply as to form in all material respects with the
applicable accounting requirements of the Exchange Act and the
related published rules and regulations, or (ii) any material
modifications should be made to the unaudited consolidated
statements of income, consolidated balance sheets and
consolidated statements of cash flows included or incorporated
by reference in the Company's Quarterly Reports on Form 10-Q
incorporated by reference in the Prospectus, for them to be in
conformity with generally accepted accounting principles;
(B) any other unaudited income statement data and
balance sheet items included in the Prospectus do not agree with
the corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any
such unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements
included or incorporated by reference in the Company's Annual
Report on Form 10-K for the most recent fiscal year;
A-2
<PAGE> 22
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived the
unaudited condensed financial statements referred to in Clause
(A) and any unaudited income statement data and balance sheet
items included in the Prospectus and referred to in Clause (B)
were not determined on a basis substantially consistent with the
basis for the audited financial statements included or
incorporated by reference in the Company's Annual Report on Form
10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed
financial statements included or incorporated by reference in
the Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days
prior to the date of such letter, there have been any changes in
the consolidated capital stock (other than issuances of capital
stock upon exercise of options and stock appreciation rights,
upon earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on
the date of the latest balance sheet included or incorporated by
reference in the Prospectus) or any increase in the consolidated
long-term debt of the Company and its subsidiaries, or any
decreases in consolidated net current assets or stockholders'
equity or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each
case as compared with amounts shown in the latest balance sheet
included or incorporated by reference in the Prospectus, except
in each case for changes, increases or decreases which the
Prospectus discloses have occurred or may occur or which are
described in such letter; and
(F) for the period from the date of the latest
financial statements included or incorporated by reference in
the Prospectus to the specified date referred to in Clause (E)
there were any decreases in net revenues or operating profit or
the total or per share amounts of net income or other items
specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with
the comparable period of the preceding year specified by the
Representatives, except in each case for increases or decreases
which the Prospectus discloses have occurred or may occur or
which are described in such letter; and
(vii) In addition to the examination referred to in their
report(s) included or incorporated by reference in the Prospectus and
the limited procedures, inspection of minute books, inquiries and
other procedures referred to in paragraphs (iii) and (vi) above, they
have carried out certain specified procedures, not constituting an
examination in accordance with generally
A-3
<PAGE> 23
accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Representatives
which are derived from the general accounting records of the Company
and its subsidiaries, which appear in the Prospectus (excluding
documents incorporated by reference) or in Part II of, or in exhibits
and schedules to, the Registration Statement specified by the
Representatives or in documents incorporated by reference in the
Prospectus specified by the Representatives, and have compared certain
of such amounts, percentages and financial information with the
accounting records of the Company and its subsidiaries and have found
them to be in agreement.
A-4
<PAGE> 1
EXHIBIT 23(B)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-3 of our report dated March 18, 1997, relating
to the consolidated financial statements of Tech Data Corporation and its
subsidiaries, which appears in such Prospectus. We also consent to the
incorporation by reference in the Prospectus constituting part of this
Registration Statement on Form S-3 of our report dated March 18, 1997, appearing
on page 14 of Tech Data Corporation's Annual Report on Form 10-K for the year
ended January 31, 1997, and our report relating to the Financial Statement
Schedule included under Item 14 of such Form 10-K. We also consent to the
references to us under the heading "Experts" in such Prospectus.
Price Waterhouse LLP
Tampa, Florida
October 1, 1997
