<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended October 31, 2000
----------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-14625
---------
TECH DATA CORPORATION
----------------------------------------
(Exact name of registrant as specified in its charter)
Florida No. 59-1578329
-------------------------------------- ---------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5350 Tech Data Drive, Clearwater, Florida 33760
----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (727) 539-7429
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No___
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
CLASS December 5, 2000
---------------------------------------- ----------------
Common stock, par value $.0015 per share 53,749,076
<PAGE>
TECH DATA CORPORATION AND SUBSIDIARIES
Form 10-Q for the Quarter Ended October 31, 2000
------------------------------------------------
INDEX
-----
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE(S)
-------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheet as of
October 31, 2000 (Unaudited) and
January 31, 2000 ...................................................... 3
Consolidated Statement of Income
(Unaudited) for the three and nine
months ended October 31, 2000 and 1999................................. 4
Consolidated Statement of Cash Flows
(Unaudited) for the nine months
ended October 31, 2000 and 1999........................................ 5
Notes to Consolidated Financial Statements
(Unaudited)............................................................ 6-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................... 10-15
Item 3. Quantitative and Qualitative Disclosures About
Market Risk............................................................ 16
PART II. OTHER INFORMATION
Items 1-5 required in Part II have been previously filed, have
been included in Part I of this report, or are not
applicable for the quarter ended October 31, 2000.
Item 6. Exhibits and Reports on Form 8-K............................................ 16
SIGNATURES...................................................................................... 17
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except share amounts)
<TABLE>
<CAPTION>
October 31, January 31,
2000 2000
---------------- --------------
<S> <C> <C>
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 97,162 $ 31,786
Accounts receivable, less allowance for
doubtful accounts of $66,749 and $61,617 2,113,312 1,906,315
Inventories 1,818,799 1,540,030
Prepaid and other assets 105,613 109,674
---------------- --------------
Total current assets 4,134,886 3,587,805
Property and equipment, net 148,655 154,008
Excess of cost over acquired net assets, net 276,415 302,531
Other assets, net 97,922 79,474
---------------- --------------
$ 4,657,878 $ 4,123,818
================ ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Revolving credit loans $ 1,254,277 $ 1,006,809
Accounts payable 1,703,298 1,524,330
Accrued expenses 287,698 261,077
---------------- --------------
Total current liabilities 3,245,273 2,792,216
Long-term debt 319,800 316,840
---------------- --------------
Total liabilities 3,565,073 3,109,056
---------------- --------------
Minority interest 1,233 1,067
---------------- --------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, par value $.02; 226,500 shares
authorized and issued; liquidation
preference $.20 per share 5 5
Common stock, par value $.0015; 200,000,000
shares authorized; 53,736,985
and 52,231,581 issued and outstanding 80 78
Additional paid-in capital 573,449 530,238
Retained earnings 681,495 556,248
Accumulated other comprehensive loss (163,457) (72,874)
---------------- --------------
Total shareholders' equity 1,091,572 1,013,695
---------------- --------------
$ 4,657,878 $ 4,123,818
================ ==============
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
3
<PAGE>
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended Nine months ended
October 31, October 31,
--------------------------------- ----------------------------------------
2000 1999 2000 1999
--------------- --------------- ------------------- ------------------
<S> <C> <C> <C> <C>
Net sales $ 5,189,186 $ 4,310,072 $ 15,110,675 $ 12,212,195
--------------- --------------- ------------------- ------------------
Cost and expenses:
Cost of products sold 4,908,509 4,078,719 14,306,906 11,533,116
Selling, general and
administrative expenses 181,965 163,040 545,231 481,623
--------------- --------------- ------------------- ------------------
5,090,474 4,241,759 14,852,137 12,014,739
--------------- --------------- ------------------- ------------------
Operating income 98,712 68,313 258,538 197,456
Interest expense 24,345 17,024 64,864 49,564
Net foreign currency exchange
loss (gain) 1,514 (418) 476 4,745
--------------- --------------- ------------------- ------------------
Income before income taxes 72,853 51,707 193,198 143,147
Provision for income taxes 25,499 18,614 67,628 52,396
--------------- --------------- ------------------- ------------------
Income before minority interest 47,354 33,093 125,570 90,751
Minority interest 108 89 323 307
--------------- --------------- ------------------- ------------------
Net income $ 47,246 $ 33,004 $ 125,247 $ 90,444
=============== =============== =================== ==================
Net income per common share:
Basic $ .88 $ .63 $ 2.36 $ 1.75
=============== =============== =================== ==================
Diluted $ .82 $ .60 $ 2.22 $ 1.67
=============== =============== =================== ==================
Weighted average common shares outstanding:
Basic 53,681 52,048 53,060 51,537
=============== =============== =================== ==================
Diluted 60,591 58,977 59,704 58,466
=============== =============== =================== ==================
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
4
<PAGE>
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Nine months ended
October 31,
--------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 14,740,983 $ 12,151,157
Cash paid to suppliers and employees (14,841,611) (11,875,721)
Interest paid (64,900) (50,073)
Income taxes paid (68,559) (42,112)
------------ ------------
Net cash (used in) provided by operating activities (234,087) 183,251
------------ ------------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired (18,332) (42,927)
Capital expenditures (41,265) (49,894)
------------ ------------
Net cash used in investing activities (59,597) (92,821)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock 43,213 23,104
Net borrowing (repayment) under revolving credit loan 325,395 (117,814)
Repayments on long-term debt (414) (125)
------------ ------------
Net cash provided by (used in) financing activities 368,194 (94,835)
------------ ------------
Effect of exchange rate changes on cash (9,134) -
------------ ------------
Net increase (decrease) in cash and cash equivalents 65,376 (4,405)
Cash and cash equivalents at beginning of period 31,786 8,615
------------ ------------
Cash and cash equivalents at end of period $ 97,162 $ 4,210
============ ============
Reconciliation of net income to net cash (used in)
provided by operating activities:
Net income $ 125,247 $ 90,444
------------ ------------
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 46,733 42,736
Provision for losses on accounts receivable 32,725 30,898
Foreign currency transaction loss 476 4,745
Increase in assets:
Accounts receivable (369,695) (61,038)
Inventories (362,191) (50,932)
Prepaid and other assets (18,976) (76,582)
Increase in liabilities:
Accounts payable 257,566 132,412
Accrued expenses 54,028 70,568
------------ ------------
Total adjustments (359,334) 92,807
------------ ------------
Net cash (used in) provided by operating activities $ (234,087) $ 183,251
============ ============
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
5
<PAGE>
TECH DATA CORPORATION AND SUBSIDIARIES
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
NOTE 1 - BASIS OF PRESENTATION:
The consolidated financial statements and related notes included herein
have been prepared by Tech Data Corporation (the "Company" or "Tech Data"),
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments, consisting of only
normal recurring adjustments, necessary to present fairly the financial position
of Tech Data Corporation and subsidiaries as of October 31, 2000 and the results
of their operations for the three and nine months ended October 31, 2000 and
1999 and their cash flows for the nine months ended October 31, 2000 and 1999.
All significant intercompany accounts and transactions have been eliminated in
consolidation. The results of operations for the nine months ended October 31,
2000 are not necessarily indicative of the results that can be expected for the
entire fiscal year ending January 31, 2001.
NOTE 2 - NET INCOME PER COMMON SHARE:
Basic net income per common share excludes from the calculation of net
income per common share the potential for dilution of earnings by certain common
stock equivalents and is computed by dividing net income by the weighted average
number of common shares outstanding during the reported period. Diluted net
income per common share reflects the potential dilution that could occur
assuming conversion of certain common stock equivalents such as the Company's
convertible subordinated notes, as well as exercise of stock options using the
if-converted and treasury stock methods, respectively. The composition of basic
and diluted net income per common share is as follows:
<TABLE>
<CAPTION>
Three months ended October 31,
-----------------------------------------------------------------------
2000 1999
---------------------------------- --------------------------------
Weighted Per Weighted Per
Net Average Share Net Average Share
Income Shares Amount Income Shares Amount
--------- ---------- ----------- ----------- ----------- ---------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Net income per common
share - basic $ 47,246 53,681 $ .88 $ 33,004 52,048 $ .63
======== =======
Effect of dilutive securities:
Stock options - 1,577 - 1,596
5% convertible subordinated notes 2,438 5,333 2,363 5,333
--------- -------- --------- --------
Net income per common
share - diluted $ 49,684 60,591 $ .82 $ 35,367 58,977 $ .60
========= ======== ======== ========= ======== =======
</TABLE>
6
<PAGE>
NOTE 2- NET INCOME PER COMMON SHARE (continued):
<TABLE>
<CAPTION>
Nine months ended October 31,
--------------------------------------------------------------------------
2000 1999
---------------------------------- ----------------------------------
Weighted Per Weighted Per
Net Average Share Net Average Share
Income Shares Amount Income Shares Amount
---------- ----------- --------- ---------- ----------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Net income per common
share - basic $ 125,247 53,060 $ 2.36 $ 90,444 51,537 $ 1.75
======== ========
Effect of dilutive securities:
Stock options - 1,311 - 1,596
5% convertible subordinated notes 7,313 5,333 7,088 5,333
----------- ----------- --------- ---------
Net income per common
share - diluted $ 132,560 59,704 $ 2.22 $ 97,532 58,466 $ 1.67
=========== =========== ======== ========= ========= ========
</TABLE>
The Company has excluded 144,000 shares from its calculation of net
income per common share for the three and nine months ended October 31, 2000 and
has excluded 1,737,000 shares from its calculation of diluted net income per
common share for the three and nine months ended October 31, 1999 because their
effect would have been anti-dilutive.
NOTE 3 - COMPREHENSIVE INCOME:
Comprehensive income is defined as the change in equity (net assets) of
a business enterprise during a period from transactions and other events and
circumstances from non-owner sources. The Company's balance of other
comprehensive income is comprised exclusively of the foreign currency
translation adjustment. The Company's comprehensive (loss) income for the three
months ended October 31, 2000 and 1999 was $(7.0) million and $52.4 million,
respectively, and $34.7 million for each of the nine months ended October 31,
2000 and 1999.
NOTE 4 - SEGMENT INFORMATION:
The Company operates predominantly in a single industry segment as a
wholesale distributor of computer-based technology products and logistics
services. Financial and descriptive information is disclosed for segments whose
operating results are reviewed by the chief operating officer for decisions on
resource allocation. Based on geographic location, the Company has three
principal segments. These geographical segments are 1) the United States, 2)
Europe (including the Middle East) and 3) Other International areas (Canada,
Brazil, Argentina, Chile, Peru, Uruguay, and export sales to Latin America and
the Caribbean from the U.S.). The measure of segment profit is income from
operations.
7
<PAGE>
NOTE 4 - SEGMENT INFORMATION (continued):
Financial information by geographic segment is as follows (in
thousands):
<TABLE>
<CAPTION>
Other
United States Europe International Total
------------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
Three months ended October 31, 2000
-----------------------------------
Net sales to unaffiliated customers $ 3,026,461 $ 1,828,618 $ 334,107 $ 5,189,186
============ =========== =========== ============
Operating income $ 69,021 $ 24,393 $ 5,298 $ 98,712
============ =========== =========== ===========
Identifiable assets $ 2,231,867 $ 2,083,924 $ 342,087 $ 4,657,878
============ =========== =========== ===========
Three months ended October 31, 1999
-----------------------------------
Net sales to unaffiliated customers $ 2,317,315 $ 1,703,179 $ 289,578 $ 4,310,072
============ =========== =========== ===========
Operating income $ 48,709 $ 16,222 $ 3,382 $ 68,313
============ =========== =========== ===========
Identifiable assets $ 1,926,160 $ 1,842,100 $ 277,336 $ 4,045,596
============ =========== =========== ===========
Nine months ended October 31, 2000
----------------------------------
Net sales to unaffiliated customers $ 8,579,881 $ 5,539,809 $ 990,985 $15,110,675
============ =========== ========== ===========
Operating income $ 181,708 $ 64,575 $ 12,255 $ 258,538
============ =========== ========== ===========
Identifiable assets $ 2,231,867 $ 2,083,924 $ 342,087 $ 4,657,878
============ =========== ========== ===========
Nine months ended October 31, 1999
----------------------------------
Net sales to unaffiliated customers $ 6,146,174 $ 5,331,535 $ 734,486 $12,212,195
============ =========== ========== ===========
Operating income $ 122,144 $ 69,095 $ 6,217 $ 197,456
============ =========== ========== ===========
Identifiable assets $ 1,926,160 $ 1,842,100 $ 277,336 $ 4,045,596
============ =========== ========== ===========
</TABLE>
NOTE 5 - REVOLVING CREDIT LOANS:
The Company maintains a $460 million Revolving Credit Facility (which
was increased from the original facility of $415 million) with a
syndicate of banks which expires in May 2003. The Company pays interest under
this Revolving Credit Facility at the applicable Eurocurrency rate plus a margin
based on the Company's credit rating. Additionally, the Company maintains an
$800 million Receivables Securitization Program (which was increased from the
original Receivables Securitization Program of $700 million) with a syndicate of
banks which expires in May 2001. The Company pays interest on the Receivables
Securitization Program at designated commercial paper rates plus an agreed-upon
margin. In addition to these credit facilities, the Company maintains additional
lines of credit and overdraft facilities totaling approximately $500 million.
The aforementioned credit facilities include covenants which must be complied
with on a continuous basis, including the maintenance of certain financial
ratios and restrictions on payment of dividends. The Company is in compliance
with all such covenants.
NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION:
The Company entered into non-cash transactions representing capital
lease obligations of approximately $5.4 million during the first nine months of
fiscal 2001. The effect of exchange rate changes on cash in the prior year
period was not material.
8
<PAGE>
NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS:
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). This statement
establishes requirements for accounting and reporting of derivative instruments
and hedging activities. SFAS 133 was updated by the issuance of SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FAS No. 133" and SFAS No. 138 "Accounting for Certain
Derivative Instruments and Certain Hedging Activities - an amendment of FASB
Statement No. 133". As amended, SFAS 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives), and for
hedging activities. SFAS 133, as amended, is effective for fiscal years
beginning after June 15, 2000. The future impact of this statement on the
Company's results of operations is not expected to be material.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements". This was followed by Staff Accounting Bulletin No. 101A,
"Implementation Issues Related to SAB 101", in March 2000 and by Staff
Accounting Bulletin No. 101B, "Second Amendment: Revenue Recognition in
Financial Statements" ("SAB 101B"), in June 2000. These bulletins summarize
certain of the SEC's views about applying generally accepted accounting
principles to revenue recognition in financial statements. The impact of SAB
101B on the Company was to delay the implementation date of SAB 101 until the
fourth quarter of fiscal year 2001. The future impact of these bulletins on the
Company's results of operations is not expected to be material.
In September 2000, the FASB issued SFAS No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities -
a replacement of FASB Statement No. 125" ("SFAS 140"). SFAS 140 revises the
standards for accounting for securitizations and other transfers of financial
assets and collateral. The accounting standards of SFAS 140 are effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after March 31, 2001. The future impact of this statement on the
Company's results of operations is not expected to be material.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
---------------------
Certain statements within this Quarterly Report on Form 10-Q are
"forward-looking statements" as described in the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. These statements involve a
number of risks and uncertainties and actual results could differ materially
from those projected. Please refer to the cautionary statements and important
factors discussed in Exhibit 99A to the Company's Annual Report on Form 10-K for
the year ended January 31, 2000 for further information.
The following table sets forth the percentage of cost and expenses to
net sales derived from the Company's Consolidated Statement of Income for the
three and nine months ended October 31, 2000 and 1999 as follows:
<TABLE>
<CAPTION>
Percentage of
net sales
-------------------------------------------------
Three months ended Nine months ended
October 31, October 31,
----------------------- ----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales 100.00% 100.00% 100.00% 100.00%
------- ------- -------- --------
Cost and expenses:
Cost of products sold 94.59 94.63 94.68 94.44
Selling, general and administrative expenses 3.51 3.78 3.61 3.94
------- ------- ------- -------
98.10 98.41 98.29 98.38
------- ------- ------- -------
Operating income 1.90 1.59 1.71 1.62
Interest expense .47 .40 .43 .41
Net foreign currency exchange loss (gain) .03 (.01) - .04
------- ------- ------- -------
Income before income taxes 1.40 1.20 1.28 1.17
Provision for income taxes .49 .43 .45 .43
------- ------ -------- --------
Income before minority interest .91 .77 .83 .74
Minority interest - - - -
------- ------ ------- -------
Net income .91% .77% .83% .74%
======= ====== ======= =======
</TABLE>
Three Months Ended October 31, 2000 and 1999
--------------------------------------------
Net sales increased 20.4% to $5.2 billion in the third quarter of
fiscal 2001 compared to $4.3 billion in the third quarter of last year. This
increase is primarily attributable to growth in the Company's U.S. and other
international business through the addition of new customers and gains in market
share, as well as the addition of new product lines and the expansion of
existing product lines in all geographies. The Company's third quarter U.S.,
Europe and other international sales grew 31%, 7% and 15%, respectively,
compared to the third quarter of last year. Prior to January 2000 the Company's
European operations were reported on a calendar year basis. Effective January
2000 the Company changed the fiscal year of its European subsidiaries to January
31. The operating results for the month of January 2000 were reflected as an
adjustment to retained earnings. On a
10
<PAGE>
Three Months Ended October 31, 2000 and 1999 - continued
--------------------------------------------------------
comparable reporting period, during the third quarter for fiscal 2001, European
sales grew 23% over the prior year on a local currency basis (29% when compared
to Europe's prior year results on a calendar year reporting basis.) Total
international sales in the third quarter of fiscal 2001 represented
approximately 42% of consolidated net sales compared with 46% in the prior year.
The cost of products sold as a percentage of net sales was 94.59% in the
current period compared to 94.63% in the third quarter of fiscal 2000. The
decrease in cost of products sold as a percentage of net sales is a result of
less pricing pressure, the positive effects resulting from the implementation of
activity-based management tools in the Company's U.S. business and the effect of
a change in the Company's sales mix resulting from a decrease in the sales of
lower margin computer systems as a percentage of total sales.
Selling, general and administrative expenses increased 11.6% from $163.0
million in the third quarter of fiscal 2000 to $182.0 million in fiscal 2001,
and as a percentage of net sales decreased to 3.5% from 3.8% in the comparable
prior year period. The decline in selling, general and administrative expenses
as a percentage of net sales is attributable to the realization of greater
economies of scale as well as improved operating efficiencies. The dollar value
increase in selling, general and administrative expenses is attributable to
increases in operating expenses needed to support the increased volume of
business.
As a result of the factors described above, operating income in the third
quarter of fiscal 2001 increased 44.5% to $98.7 million, or 1.9% of net sales,
compared to $68.3 million, or 1.6% of net sales in the third quarter of fiscal
2000.
Interest expense increased from $17.0 million in the third quarter of
fiscal 2000 to $24.3 million in the current quarter due to an increase in the
Company's average outstanding indebtedness related to funding for continued
growth and capital expenditures combined with an increase in short-term interest
rates on the Company's floating rate indebtedness.
The Company reported a net foreign currency exchange loss of $1.5 million
in the third quarter of fiscal 2001, as compared to a net foreign currency
exchange gain of $.4 million in the comparable quarter last year. This change
is related to fluctuations in the foreign currencies of the various countries in
which the Company operates.
The provision for income taxes increased 37.0% to $25.5 million in the
third quarter of fiscal 2001 compared to $18.6 million last year. The increase
is attributable to an increase in the Company's income before income taxes. The
Company's estimated effective tax rate decreased from 36.0% in the third quarter
of fiscal 2000 to 35.0% in the current year due to fluctuations in the amount of
federal, state and foreign taxable income reported in each period. The Company's
effective tax rate for fiscal year 2000 was 36.3%.
As a result of the factors described above, net income increased 43.2% to
$47.2 million, or $.82 per diluted share, compared to $33.0 million, or $.60 per
diluted share, in the prior year comparable period.
11
<PAGE>
Nine months ended October 31, 2000 and 1999
-------------------------------------------
Net sales increased 23.7% to $15.1 billion in the first nine months of
fiscal 2001 compared to $12.2 billion in the same period last year. Net income
increased 38.5% to $125.2 million, or $2.22 per diluted share, in the first nine
months of fiscal 2001, compared to $90.4 million or $1.67 per diluted share.
(The underlying reasons for the fluctuations in the results of operations
for the nine months ended October 31, 2000 are substantially the same as in the
comparative quarterly discussion above and therefore, will not be repeated
here.)
Quarterly Data - Seasonality
----------------------------
The Company's quarterly operating results have fluctuated significantly in
the past and will likely continue to do so in the future as a result of seasonal
variations in the demand for the products and services offered by the Company.
The Company's narrow operating margins may magnify the impact of these factors
on the Company's operating results. Specific historical seasonal variations in
the Company's operating results have included a reduction of demand in Europe
during the summer months, increased Canadian government purchasing in the first
quarter, and worldwide pre-holiday stocking in the retail channel during the
September-to-November period. In addition, the product cycle of major products
may materially impact the Company's business, financial condition, or results of
operations.
Liquidity and Capital Resources
-------------------------------
Net cash used in operating activities of $234.1 million during the first
nine months of fiscal 2001 was primarily attributable to net income from
operations of $125.2 million, plus the effect of changes in accounts receivable,
inventories, prepaid and other assets, accounts payable and accrued expenses.
Net cash used in investing activities of $59.6 million during the first
nine months of fiscal 2001 was attributable to the continuing investment of
$41.3 million related to the expansion of the Company's management information
systems, office facilities and equipment for its distribution centers combined
with the payment of $15.9 million related to the resolution of additional
contingent purchase price payments associated with the purchase of Computer 2000
in the first quarter of fiscal 2001 and $2.4 million related to other
miscellaneous acquisitions. The Company expects to make capital expenditures of
approximately $100 million during fiscal 2001 to further expand its management
information systems, office facilities and purchase equipment for distribution
centers.
Net cash provided by financing activities of $368.2 million during the
first nine months of fiscal 2001 reflects the net borrowings on the Company's
revolving credit loans of $325.4 million, repayments on long-term debt of $.4
million and the proceeds from stock option exercises (including the related
income tax benefit) of $43.2 million.
12
<PAGE>
Liquidity and Capital Resources - continued
-------------------------------------------
The Company maintains a $460 million Revolving Credit Facility (which was
increased from the original facility of $415 million) with a syndicate of banks
which expires in May 2003. The Company pays interest under this Revolving Credit
Facility at the applicable Eurocurrency rate plus a margin based on the
Company's credit rating. Additionally, the Company maintains an $800 million
Receivables Securitization Program (which was increased from the original
Receivables Securitization Program of $700 million) with a syndicate of banks
expiring in May 2001. The Company pays interest on the Receivables
Securitization Program at designated commercial paper rates plus an agreed-upon
margin. In addition to these credit facilities, the Company maintains additional
lines of credit and overdraft facilities totaling approximately $500 million.
The aforementioned credit facilities include covenants which must be complied
with on a continuous basis, including the maintenance of certain financial
ratios and restrictions on payment of dividends. The Company is in compliance
with all such covenants. The Company believes that cash from operations,
available and obtainable bank credit lines, and trade credit from its vendors
will be sufficient to satisfy its working capital and capital expenditure
requirements through fiscal 2002.
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 of the price reduction on inventory
subject to certain limitations. Historically, price protection and stock
rotation privileges, as well as the Company's inventory management procedures
have helped to reduce the risk of loss of carrying inventory.
The Company attempts to control losses on credit sales by closely
monitoring customers' creditworthiness through its computer system, which
contains detailed information on each customer's payment history and other
relevant information. The Company has obtained credit insurance which insures a
percentage of the credit extended by the Company to certain of its larger
domestic and international customers against possible loss. Customers who
qualify for credit terms are typically granted net 30 day payment terms. The
Company also sells product on a prepay, credit card, cash on delivery and floor-
plan basis.
13
<PAGE>
Year 2000
---------
The Company's Year 2000 ("Y2K") compliance project determined the
readiness of the Company's business for the Year 2000. The Company defined Y2K
"compliance" to mean that the computer code will process all defined future
dates properly and give accurate results. The Company has experienced no
problems with its computer systems since the beginning of 2000 but will continue
to monitor the systems to assess whether any problems develop. In addition,
during fiscal 2000 the Company incurred approximately $11.2 million in expenses
related to assessing and remedying any Y2K problems and upgrading computer
systems, but does not expect to incur any additional material expenses related
to Y2K issues going forward.
Euro Conversion
---------------
On January 1, 1999, eleven of the fifteen member countries of the European
Union commenced a conversion from their existing sovereign currencies to a new,
single currency called the Euro. Fixed conversion rates between the existing
currencies, the legacy currencies, and the Euro were established and the Euro
became the common legal currency of the participating countries and the legacy
currencies will remain legal tender as denominations of Euro until January 1,
2002. At that time, countries will issue new Euro-denominated bills for use in
cash transactions. All legacy currency will be withdrawn prior to July 1, 2002,
thus completing the Euro conversion on this date. As of January 1, 1999, the
participating countries no longer control their own monetary policies by
directing independent interest rates for the legacy currencies, and instead, the
authority to direct monetary policy, including money supply and official
interest rates for the Euro, is exercised by the new European Central Bank.
The Company has implemented plans to address the issues raised by the Euro
conversion. These issues include, but are not limited to: the competitive impact
created by cross-border price transparency; the need for the Company and its
business partners to adapt IT and non-IT systems to accommodate Euro-denominated
transactions; and the need to analyze the legal and contractual implications on
the Company's contracts. The Company currently anticipates that the required
modifications to its systems, equipment and processes will be made on a timely
basis and does not expect that the costs of such modifications will have a
material effect on the Company's financial position or results of operations.
Since the implementation of the Euro on January 1, 1999, the Company has
experienced improved efficiencies in its cash management program in Europe and
has been able to reduce certain hedging activities as a direct result of the
conversion. The Company has not experienced any material adverse effects on its
financial position or results of operations in connection with the initial
rollout of the Euro.
14
<PAGE>
Recent Accounting Pronouncements
--------------------------------
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). This statement
establishes requirements for accounting and reporting of derivative instruments
and hedging activities. SFAS 133 was updated by the issuance of SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FAS No. 133" and SFAS No. 138 "Accounting for Certain
Derivative Instruments and Certain Hedging Activities - an amendment of FASB
Statement No. 133". As amended, SFAS 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives), and for
hedging activities. SFAS 133, as amended, is effective for fiscal years
beginning after June 15, 2000. The future impact of this statement on the
Company's results of operations is not expected to be material.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements". This was followed by Staff Accounting Bulletin No. 101A,
"Implementation Issues Related to SAB 101", in March 2000 and by Staff
Accounting Bulletin No. 101B, "Second Amendment: Revenue Recognition in
Financial Statements" ("SAB 101B"), in June 2000. These bulletins summarize
certain of the SEC's views about applying generally accepted accounting
principles to revenue recognition in financial statements. The impact of SAB
101B on the Company was to delay the implementation date of SAB 101 until the
fourth quarter of fiscal year 2001. The future impact of these bulletins on the
Company's results of operations is not expected to be material.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities - a
replacement of FASB Statement No. 125" ("SFAS 140"). SFAS 140 revises the
standards for accounting for securitizations and other transfers of financial
assets and collateral. The accounting standards of SFAS 140 are effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after March 31, 2001. The future impact of this statement on the
Company's results of operations is not expected to be material.
Comments on Forward-Looking Information
---------------------------------------
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company, in Exhibit 99A to its Annual Report
on Form 10-K for the year ended January 31, 2000, outlined cautionary statements
and identified important factors that could cause the Company's actual results
to differ materially from those projected in forward-looking statements made by,
or on behalf of, the Company. Such forward-looking statements, as made within
this Form 10-Q, should be considered in conjunction with the information
included within the aforementioned Exhibit 99A.
15
<PAGE>
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
No material changes have occurred in the quantitative and qualitative
market risk disclosure of the Company as presented in the Company's Annual
Report on Form 10-K for the year ended January 31, 2000.
PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
No. Description
--- -----------
27 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
None
16
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TECH DATA CORPORATION
---------------------
(Registrant)
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Steven A. Raymund Chairman of the Board of December 15, 2000
--------------------- Directors and Chief
Steven A. Raymund Executive Officer
/s/ Jeffery P. Howells Executive Vice President December 15, 2000
---------------------- and Chief Financial Officer
Jeffery P. Howells (principal financial officer);
Director
/s/ Joseph B. Trepani Senior Vice President and December 15, 2000
--------------------- Corporate Controller (principal
Joseph B. Trepani accounting officer)
/s/ Arthur W. Singleton Corporate Vice President, December 15, 2000
----------------------- Treasurer and Secretary
Arthur W. Singleton
</TABLE>
