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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 July 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-14625
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TECH DATA CORPORATION
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(Exact name of registrant as specified in its charter)
Florida No. 59-1578329
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5350 Tech Data Drive, Clearwater, Florida 34620
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 539-7429
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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
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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 August 31, 1995
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Common stock, par value $.0015 per share 37,847,095
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TECH DATA CORPORATION AND SUBSIDIARIES
Form 10-Q For The Quarter Ended July 31, 1995
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheet as of
July 31, 1995 (unaudited) and
January 31, 1995 3
Consolidated Statement of Income
(unaudited) for the three and six
months ended July 31, 1995 and 1994 4
Consolidated Statement of Cash Flows
(unaudited) for the six months
ended July 31, 1995 and 1994 5
Notes to Consolidated Financial Statements
(unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-9
PART II. OTHER INFORMATION 10
Signatures 11
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TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except share amounts)
July 31, January 31,
1995 1995
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ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 900 $ 496
Accounts receivable, less allowance for
doubtful accounts of $22,175 and $16,580 349,626 309,846
Inventories 320,300 364,531
Prepaid and other assets 17,830 21,850
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Total current assets 688,656 696,723
Property and equipment, net 57,149 51,042
Excess of cost over acquired net assets, net 9,719 10,061
Other assets 24,383 26,603
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$779,907 $784,429
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Revolving credit loans $280,468 $304,784
Current portion of long-term debt 547 542
Accounts payable 205,335 194,213
Accrued expenses 15,753 14,382
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Total current liabilities 502,103 513,921
Long-term debt 9,358 9,682
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511,461 523,603
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Commitments and contingencies
Shareholders' equity:
Preferred stock, par value $.02; 226,500 shares
authorized and issued; liquidation
preference $.20 per share 5 5
Common stock, par value $.0015; 100,000,000
shares authorized; 37,847,095 and
37,807,794 issued and outstanding 57 57
Additional paid-in capital 129,037 127,947
Retained earnings 137,066 131,769
Cumulative translation adjustment 2,281 1,048
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Total shareholders' equity 268,446 260,826
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$779,907 $784,429
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The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
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TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(In thousands, except per share amounts)
July 31, July 31,
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1995 1994 1995 1994
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Net sales $708,836 $569,655 $1,342,296 $1,100,124
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Cost and expenses:
Cost of products sold 658,723 521,877 1,245,967 1,007,189
Selling, general and
administrative expenses 39,457 29,244 77,518 56,696
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698,180 551,121 1,323,485 1,063,885
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Operating profit 10,656 18,534 18,811 36,239
Interest expense 4,947 2,710 10,004 5,199
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Income before income taxes 5,709 15,824 8,807 31,040
Provision for income taxes 2,261 6,221 3,510 12,212
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Net income $ 3,448 $ 9,603 $ 5,297 $ 18,828
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Net income per common share $ .09 $ .25 $ .14 $ .49
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Weighted average common
shares outstanding 37,968 38,201 38,015 38,260
======== ======== ========== =========
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
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TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(In thousands)
Six months ended
July 31,
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1995 1994
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Cash flows from operating activities:
Cash received from customers $1,293,940 $1,052,858
Cash paid to suppliers and employees (1,246,781) (1,074,217)
Interest paid (10,080) (4,935)
Income taxes paid (1,386) (16,680)
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Net cash provided by (used in) operating
activities 35,693 (42,974)
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Cash flows from investing activities:
Capital expenditures (11,744) (19,184)
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Cash flows from financing activities:
Proceeds from issuance of common stock 1,090 1,380
Net (repayments) borrowings under revolving
credit loans (24,316) 61,876
Principal payments on long-term debt (319) (940)
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Net cash (used in) provided by financing activities (23,545) 62,316
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Net increase in cash and cash equivalents 404 158
Cash and cash equivalents at beginning of period 496 678
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Cash and cash equivalents at end of period $ 900 $ 836
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Reconciliation of net income to net cash provided by
(used in) operating activities:
Net income $ 5,297 $ 18,828
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Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 7,998 3,833
Provision for losses on accounts receivable 8,576 8,216
(Increase) decrease in assets:
Accounts receivable (48,356) (46,069)
Inventories 44,231 (54,788)
Prepaid expenses 4,020 (5,019)
Other assets 1,434 252
Increase (decrease) in liabilities:
Accounts payable 11,122 38,003
Accrued expenses 1,371 (6,230)
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Total adjustments 30,396 (61,802)
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Net cash provided by (used in)
operating activities $ 35,693 $ (42,974)
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The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
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TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Basis of presentation
The consolidated financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, the
accompanying unaudited consolidated financial statements contain all
adjustments, consisting of only normal recurring adjustments, necessary to
present fairly the financial position of Tech Data Corporation and
subsidiaries (the "Company") as of July 31, 1995, and the results of their
operations and cash flows for the three and six months ended July 31, 1995 and
1994. All significant intercompany accounts and transactions have been
eliminated in consolidation. The results of operations for the six months
ended July 31, 1995 are not necessarily indicative of the results that can be
expected for the entire fiscal year ending January 31, 1996.
Net income per common share
Net income per share of common stock is based on the weighted average
number of shares of common stock and common stock equivalents outstanding
during each period.
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TECH DATA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended July 31, 1995 and 1994
Net sales increased 24.4% to $708.8 million in the second quarter of fiscal
1996 compared to $569.7 million in the second quarter a year ago. 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 customer base. The rate of growth in second quarter fiscal 1996
sales is lower than the rate of growth in the prior year, although an
improvement over first quarter fiscal 1996 sales growth of 19.4%, as the
Company continues to recover from the effects of the business interruptions
caused by the conversion to a new computer system in December 1994. The
Company's international sales grew 31% in the second quarter of fiscal 1996
compared to the prior year second quarter and were approximately 14% of
fiscal 1996 second quarter consolidated net sales.
The cost of products sold as a percentage of net sales increased to 92.9% in
the second quarter of fiscal 1996 from 91.6% in the prior year. This
increase is the result of the Company's strategy of lowering selling prices
in order to maintain market share. In addition, the increase is also
attributable to certain freight concessions made with customers during the
second quarter of fiscal 1996 (though to a lesser extent than freight
concessions made in the first quarter of fiscal 1996) in order to ensure
timely delivery of product.
Selling, general and administrative expenses increased 34.9% to $39.5
million in the second quarter of fiscal 1996 compared to $29.2 million last
year and increased as a percentage of net sales to 5.6%, compared to 5.1% in
the second quarter last year. The increase is primarily the result of
expanded employment and increases in other administrative expenses,
including expenses associated with the new computer system. Additionally,
the increase in selling, general and administrative expenses as a
percentage of sales in the second quarter of fiscal 1996 is attributable to
the reduced rate of sales growth resulting from business interruptions
caused by the December 1994 computer system conversion.
As a result of the factors described above, operating profit decreased 42.5%
to $10.7 million, or 1.5% of net sales, in the second quarter of fiscal
1996, compared to $18.5 million, or 3.3% of net sales for the second quarter
last year.
Interest expense increased in the second quarter of fiscal 1996 due to an
increase in the Company's average outstanding indebtedness over the prior
year comparable period and, to a lesser extent, a higher average interest
rate charged on such indebtedness.
As a result of the factors described above, net income decreased 64.1% to
$3.4 million, or $.09 per share, in the second quarter of fiscal 1996
compared to $9.6 million, or $.25 per share, in the prior year comparable
quarter.
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Six Months Ended July 31, 1995 and 1994
Net sales increased 22.0% to $1.34 billion in the first six months of fiscal
1996 compared to $1.1 billion in the same period last year. Net income
decreased 71.9% to $5.3 million, or $.14 per share, in the first six months
of fiscal 1996 compared to $18.8 million, or $.49 per share, in the
comparable prior year period.
(The underlying reasons for the fluctuations in the results of operations
for the six months ended July 31, 1995 are substantially the same as in the
comparative quarterly discussion above and, therefore, will not be repeated
here).
Liquidity and Capital Resources
Net cash provided by operating activities of $35.7 million during the first
six months of fiscal 1996 was primarily attributable to the Company's
efforts to reduce inventory levels consistent with the lower rate of sales
growth.
Net cash used in investing activities of $11.7 million during the first six
months of fiscal 1996 was a result of the Company making capital
expenditures for computer systems development, expansion of the Company's
headquarters facilities and the acquisition of equipment for distribution
centers. The Company expects to make capital expenditures of approximately
$25 million during fiscal 1996 for computer systems development and to
further expand its office facilities and distribution centers.
Net cash used in financing activities of $23.5 million during the first six
months of fiscal 1996 reflects the use of cash generated from operating
activities (net of capital expenditures) to reduce borrowings under the
Company's revolving credit loans.
The Company currently maintains domestic and foreign revolving credit
agreements which provide maximum short-term borrowings of approximately $400
million, of which $280 million was outstanding at July 31, 1995. The
Company believes that cash from operations, available and obtainable bank
credit lines and trade credit from its vendors will be sufficient to satisfy
its working capital and capital expenditure needs during fiscal 1996.
Asset Management
The Company manages its inventories by maintaining sufficient quantities to
achieve high order fill rates while at the same time attempting to stock
only those products in high demand with a rapid turnover rate. Inventory
balances will fluctuate as the Company adds new product lines and when
appropriate, makes large purchases from manufacturers when the terms of such
purchases are considered advantageous. The Company's contracts with most of
its vendors provide price protection and stock return privileges to reduce
the risk of loss to the Company 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 products in
inventory. In addition, the Company has the right to return a certain
percentage of purchases, subject to certain limitations. Historically,
price protection and stock return privileges, as well as the Company's
inventory management procedures, have helped to reduce the risk of loss of
carrying inventory.
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The Company attempts to control losses on credit sales by closely monitoring
customers' creditworthiness through its on-line computer system which
contains detailed information on the customer's payment history and other
relevant information. In addition, the Company participates in a national
credit association which exchanges credit rating information on mutual
customers. Customers who qualify for credit terms are typically granted net
20 or 30 day payment terms. The Company also sells product on a prepay,
credit card or cash on delivery basis.
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PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the 1995 Annual Meeting of Shareholders held June 20, 1995,
the shareholders approved the following items:
1. The election of one director (Daniel M. Doyle) to serve a two-year
term expiring in 1997 and three directors (Charles E. Adair,
Edward C. Raymund and John Y. Williams) to serve three-year terms
expiring in 1998. Daniel M. Doyle received 32,543,622 votes cast in
favor and 231,140 votes withheld. Charles E. Adair, Edward C.
Raymund and John Y. Williams received 32,546,842, 32,547,240 and
32,544,540 votes cast in favor of such director and 227,920, 227,522
and 230,222 votes withheld, respectively.
2. A proposal to amend the Company's 1990 Incentive and Non-Statutory
Stock Option Plan to provide that the Stock Option Committee be
considered "Disinterested Administration" and be comprised of
outside directors, as well as to establish a limitation on the total
number of shares of Common Stock that may be granted to any single
employee.
The vote upon such proposal was 29,275,997 in favor, 3,005,308
against, 146,064 abstentions and 5,388,425 broker non-votes.
3. A proposal to approve the Non-Employee Directors' 1995 Non-Statutory
Stock Option Plan.
The vote upon such proposal was 31,091,509 in favor, 892,402
against, 200,557 abstentions and 5,631,326 broker non-votes.
4. A proposal to approve the 1995 Employee Stock Purchase Plan.
The vote upon such proposal was 30,601,719 in favor, 1,432,388
against, 150,361 abstentions and 5,631,326 broker non-votes.
5. A proposal to ratify the appointment of Price Waterhouse as
independent auditors for the fiscal year ending January 31, 1996.
The vote upon such proposal was 32,543,912 in favor, 106,274 against
and 124,576 abstentions and 5,041,032 broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the Company
during the quarter ended July 31, 1995.
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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
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(Registrant)
Signature Title Date
/s/ Steven A. Raymund Chairman of the Board of September 12, 1995
--------------------- Directors and Chief
Steven A. Raymund Executive Officer
/s/ Jeffery P. Howells Senior Vice President of Finance September 12, 1995
---------------------- and Chief Financial Officer
Jeffery P. Howells (principal financial officer)
/s/ Joseph B. Trepani Vice President and Worldwide September 12, 1995
--------------------- Controller (principal accounting
Joseph B. Trepani officer)
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INDEX TO EXHIBITS
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EXHIBIT
NO. DESCRIPTION
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27 Financial Data Schedule
(for SEC use only)
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