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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended January 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 0-14625
TECH DATA CORPORATION
(Exact name of registrant as specified in its charter)
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Florida No. 59-1578329
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(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
5350 Tech Data Drive, Clearwater, FL 34620
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number including area code: (813) 539-7429
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $.0015 per share.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of regulation S-K is not contained herein, and will not be contained
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference to Part III of this Form 10-K or any
amendment to this Form 10-K. [__]
Aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 31,
1996: $558,900,000.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at March 31, 1996
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Common stock, par value $.0015 per share 37,944,785
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's Proxy Statement for use at the Annual Meeting of
Shareholders on June 25, 1996 is incorporated by reference in Part III
of this Form 10-K to the extent stated herein.
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PART I
ITEM 1. Business
(a) General development of business
Tech Data Corporation (the "Company" or "Tech Data") was
incorporated in 1974 to market data processing supplies such as tape,
disk packs, and custom and stock tab forms for mini and mainframe
computers directly to end users. In the middle of fiscal 1984, the
Company began marketing certain of its products to the newly emerging
market of microcomputer dealers. By the end of fiscal 1984, the Company
had withdrawn entirely from end-user sales, broadened its product line
to include hardware products, and completed its transition to a
wholesale distributor. The Company has since continually expanded its
product lines and customer base.
On May 31, 1989, the Company entered the Canadian market through
the acquisition of a distributor subsequently named Tech Data Canada
Inc. ("Tech Data Canada"). Tech Data Canada serves customers in all
Canadian provinces and carries many of the same products offered by the
Company.
On March 24, 1994, the Company completed the non-cash exchange of
1,144,000 shares of its common stock for all of the outstanding capital
stock of Softmart International, S.A. (subsequently named
Tech Data France, SNC)("Tech Data France"), a privately-held distributor
of personal computer products based in Paris, France. Tech Data France is
the largest French wholesale distributor of microcomputer products,
representing leading manufacturers and publishers such as Apple, Compaq,
Hewlett-Packard, Lotus and Microsoft. The acquisition was accounted for
as a pooling-of-interests effective February 1, 1994; however, due to the
immaterial size of the acquisition in relation to the consolidated
financial statements, prior period financial statements were not
restated.
(b) Financial information about industry segments
The Company operates in only one business segment.
(c) Narrative description of business
General
The Company is a leading distributor of microcomputer-related
hardware and software products to value-added resellers ("VARs"),
corporate resellers and retailers throughout the United States,
France, Canada, Latin America and the Caribbean. The Company
purchases its products directly from manufacturers and publishers
in large quantities, maintains a stocking inventory of more than
25,000 products and sells to an active base of over 50,000
customers. The Company offers manufacturers of microcomputer hardware
and publishers of software the ability to reach customers on a cost-
efficient basis.
The Company provides its customers with leading products in
systems, networking, mass storage, peripherals and software from more
than 600 manufacturers and publishers such as Apple, Bay Networks,
Canon, Compaq, Computer Associates, Cisco, Corel, Digital Equipment,
Epson, Hewlett-Packard, IBM, Intel, Kingston, Lotus, Microsoft, NEC
Technologies, Novell, Okidata, Quarterdeck, Seagate, SCO, Symantec,
3Com, Toshiba and U.S. Robotics.
The Company delivers products throughout the United States, France,
Canada, Latin America and the Caribbean from its ten 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); and Bobigny (Paris), France. Locating distribution centers
near its customers enables the Company to deliver products on a timely
basis, thereby reducing customers' need to invest in inventory.
2
To complement its distribution activities, the Company maintains a
staff of technical advisers who assist customers by telephone either for
free or on a user-fee basis. The Company offers educational and
promotional seminars on the products sold by the Company in various
cities around the United States, France, Canada, and Latin America. The
Company also provides advertising and other marketing assistance to its
customers using funds and materials provided by manufacturers and
publishers.
Industry
The microcomputer products industry has proven to be well-suited
for wholesale distribution. The large number and diversity of resellers
makes it cost efficient for manufacturers and publishers to rely on
wholesale distributors to assume responsibility for at least some
portion of their distribution, credit, marketing and support
requirements. Similarly, due to the large number of microcomputer
product manufacturers and publishers, VARs, computer resellers and
retailers often cannot efficiently establish direct purchasing
relationships and instead rely on wholesale distributors, such as Tech
Data, to satisfy a significant portion of their product, financing,
marketing and technical support needs.
As a result of the use of open systems and off-the-shelf
components, hardware and software products are increasingly viewed as
commodities. The resulting price competition has prompted
manufacturers and publishers to rely on more cost-efficient methods of
distribution. This, coupled with shorter product life cycles, has
benefited distributors like Tech Data, which offer vendors an efficient
mechanism for marketing, distributing and supporting their products.
The Company has a competitive advantage over certain other distributors
who do not have the low cost structure to compete on the basis of
price and service and who do not have adequate access to capital to
finance their growth.
The rates of growth of the wholesale distribution segment of the
microcomputer industry and the Company continue to outpace that of the
microcomputer industry as a whole for three principal reasons.
First, more manufacturers and publishers are using the wholesale
distribution channel as declining product prices, coupled with rising
selling costs, make it difficult for manufacturers and publishers to
efficiently deal directly with VARs, corporate resellers and retailers.
Second, the Company believes that customers are increasingly relying on
wholesale distributors such as Tech Data for inventory management and
credit rather than stocking large inventories themselves and maintaining
credit lines to finance working capital needs. Third, consolidation in
the wholesale distribution industry continues as access to financial
resources and economies of scale become more critical and as certain
manufacturers and publishers limit the number of authorized distributors
for their respective products.
Business Strategy
To maintain its leadership position in wholesale distribution, the
Company's business strategy includes the following main elements:
Customer focus. The Company has historically focused its
marketing on VARs, who integrate proprietary software with products
provided by manufacturers and distributors. VARs currently represent
approximately 70% of the Company's total sales with franchisees,
corporate resellers and retailers accounting for the balance.
Management expects total industry sales to VARs to remain one of the
fastest growing segments of the microcomputer industry as businesses
of all sizes increasingly rely on VARs. Accordingly, management expects
more manufacturers and publishers to utilize Tech Data to supply
products to the VAR market. Recently, Tech Data also has sought to
increase its market share with retailers and computer
superstores (such as CompUSA and Computer City), corporate resellers
(such as CompuCom Systems and InaCom) and franchisees and other
affiliates of companies such as Intelligent Electronics and MicroAge.
Operating efficiencies and economies of scale. The Company's
operations are structured to realize operating efficiencies both for
itself and its customers, to benefit from economies of scale in product
purchasing, financing and working capital management, and to provide an
efficient distribution system focusing on ease of order placement, speed
of delivery, facilitation of product returns and reduction of freight
costs.
3
Products. The Company's objective is to offer its customers a
broad assortment of leading technology products. Management believes
that the Company provides manufacturers and publishers an efficient
channel through which to access VARs, corporate resellers and retailers,
thereby eliminating direct selling expenses and direct credit
risk. Currently the Company offers more than 25,000 products from more
than 600 manufacturers and publishers. By offering a broad product
assortment, customers are able to more efficiently procure
product from a single source and aggregate their purchases.
Vendor Relations
Due to the proliferation of relatively small VARs and computer
dealers which purchase a limited volume of products from any single
manufacturer, it is more cost efficient for most manufacturers to rely
upon distributors, such as Tech Data, rather than to maintain their own
sales forces to market, distribute and support products. The Company's
market presence and financial condition have enabled it to obtain
vendor contracts with leading manufacturers and publishers to purchase
large quantities of products that the Company sells at competitive
prices.
The Company sells products for manufacturers and publishers
generally on a nonexclusive basis. The Company's supplier agreements
are believed to be in the form customarily used by each manufacturer
and typically contain provisions which allow termination by either party
upon 60 days notice. Such agreements generally contain stock rotation
and price protection provisions which reduce, in part, the Company's
risk of loss due to slow-moving inventory, vendor price reductions,
product updates or obsolescence. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Asset
Management." Virtually none of the Company's supplier agreements
requires it to sell a specified quantity of products or restricts 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, customer demand and
vendor distribution policies. No single vendor accounted for more than
10% of the Company's net sales during fiscal 1996, 1995 or 1994.
In addition to providing manufacturers and publishers with one of
the largest bases of VARs in the United States, France, Canada, Latin
America and the Caribbean, the Company also offers manufacturers
and publishers the opportunity to participate in a number of special
promotions, training programs and marketing services targeted to the
needs of its customers.
From time to time, the demand for certain products sold by the
Company exceeds the supply available from the manufacturer or publisher.
The Company then receives an allocation of the products available.
Management believes that the Company's ability to compete is not
adversely affected by these periodic shortages and the resulting
allocations.
Products and Customers
The Company sells computer-related hardware and software products
such as networks, disk drives, microcomputers, printers, terminals,
operating systems and application software purchased directly from
manufacturers and publishers in large quantities for sale to an active
customer base of more than 50,000 VARs, corporate resellers and
retailers. The Company pursues a strategy of expanding its product line
to offer its customers a broad assortment of products.
The Company's VAR customers typically do not have the resources to
establish a large number of direct purchasing relationships or stock
significant product inventories. These resellers generally have annual
revenues of less than $5 million and rely on distributors as their
principal source of computer products and financing. Corporate
resellers and retailers, on the other hand, often establish direct
relationships with manufacturers and publishers for their more popular
products, but utilize distributors for slower-moving products from
numerous smaller manufacturers and publishers and for fill-in orders of
fast moving products. The Company's backlog of orders is not considered
material to an understanding of its business. No single customer
accounted for more than 4% of the Company's net sales during fiscal
1996, 1995 or 1994.
4
Sales and Marketing
Currently, the Company's sales force consists of approximately 40
field sales representatives and 650 inside telemarketing sales
representatives. Field sales representatives are located in major
metropolitan areas. Each field representative is supported by a team of
inside telemarketing sales representatives covering a designated
territory. Territories with no field representation are serviced
exclusively by the inside telemarketing sales representatives.
Customers rely upon the Company's product catalogs and frequent mailings
as sources for product information, including prices.
Customers typically call their inside sales representative toll-
free to place orders for same-day or next-day shipment. The Company's
on-line computer system allows the inside sales representative to
check for current stocking levels in each of the seven United States
distribution centers. Likewise, inside sales representatives in Canada
and France can check on stocking levels in the two Canadian and one
French distribution center, respectively. Through "Tech Data On-Line",
the Company's proprietary electronic on-line system, customers can gain
remote access to the Company's data processing system to check product
availability and pricing and to place an order. Certain of the
Company's larger customers have available electronic data interchange
("EDI") services whereby orders, order acknowledgments, invoices,
inventory status reports, price catalogs and other industry standard EDI
transactions are consummated on-line which improves efficiency and timeliness
for both the Company and the customer. Assuming adequate stock and available
customer credit, customer orders received by 5:00 p.m. local time will
generally be shipped that same day from the distribution facility
nearest the customer. The Company's centralized, processing capability
generally permits a customer located within 250 miles of a distribution
center to receive goods by inexpensive UPS ground service the next day.
The Company provides comprehensive training to its field and inside
sales representatives regarding technical characteristics of products
and the Company's policies and procedures. Each new sales
representative attends a six-week course given by the Company. In
addition, the Company's ongoing training program is supplemented by
product seminars offered by manufacturers and publishers.
Competition
The Company operates in a market characterized by intense
competition. Competition within the industry is based on product
availability, price, delivery and various types of support provided by
the distributor to the reseller. The Company believes that it is
equipped to compete effectively with other distributors in these areas.
Major competitors include Ingram Micro, Inc., Merisel, Inc. and a
variety of other competitors. Some of the Company's competitors are
larger and have greater resources than the Company.
The Company also faces competition from manufacturers and
publishers who can offer customers lower prices than the Company. The
Company, nevertheless, believes that in the majority of cases,
manufacturers and publishers choose to sell products though distributors
rather than directly because of the relatively small volume and high
selling costs associated with numerous small orders. Management
also believes that the Company's prompt delivery of products and
efficient handling of returns provide an important competitive advantage
over manufacturers' and publishers' efforts to market their products
directly.
Employees
On January 31, 1996, the Company had approximately 2,625 full-time
employees. The Company enjoys excellent relations with its employees,
all of whom are non-union.
(d) Financial information about foreign and domestic operations
and export sales
The geographic areas in which the Company operates are the United
States (United States including exports to Latin America and the
Caribbean) and International (France and Canada). See Note 10 of Notes
to Consolidated Financial Statements regarding the geographical
distribution of the Company's net sales, operating income and
identifiable assets.
5
Executive Officers
Steven A. Raymund, Chief Executive Officer and Chairman of the
Board of Directors, age 40, 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.
A. Timothy Godwin, Vice Chairman, President, Chief Operating Officer
and Director, age 46, joined the Company in July 1989 as Senior Vice
President of Finance and assumed the responsibilities of Chief
Financial Officer in November 1989. He was appointed to the Board of
Directors in March 1991 and was promoted to the position of President
and Chief Operating Officer in November 1991. In September 1995,
Mr. Godwin was appointed Vice Chairman. Prior to joining the Company,
Mr. Godwin was employed by Price Waterhouse from 1974 to June 1989, most
recently as audit partner from July 1987 to June 1989. Mr. Godwin is a
Certified Public Accountant and holds a B.S. Degree in Accounting from
the University of West Florida.
Peggy K. Caldwell, Senior Vice President of Sales and Marketing,
age 50, joined the Company in May 1992 as Senior Vice President of
Marketing and in February 1996 was appointed to the position of Senior
Vice President of Sales and Marketing. 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.
Lawrence W. Hamilton, Senior Vice President of Human Resources, age
38, 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.
Jeffery P. Howells, Senior Vice President of Finance and Chief
Financial Officer, age 39, 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. 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.
James T. Pollard, Senior Vice President of Logistics and Chief
Information Officer, age 49, joined the Company in October 1993. Prior
to joining the Company, he was employed by Florida Power Corporation
from September 1990 through September 1993, most recently as
Director - Information Services. From November 1984 to September 1990
he was employed by Southern California Gas Company as Senior Vice
President. Mr. Pollard holds a B.S. Degree in Business Finance from the
University of Utah and a Masters in Business Administration Degree from
the University of South Florida.
Patrick O. Connelly, Vice President of Worldwide Credit Services,
age 50, joined the Company in August 1994. Prior to joining the
Company, he was employed by Unisys Corporation for nine years as
Worldwide Director of Credit. Mr. Connelly holds a B.A. Degree
in History and French from the University of Texas at Austin.
Charles V. Dannewitz, Vice President of Taxes, age 41, 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.
6
Bruce D. Eden, Vice President of MIS, age 53, joined the Company in
January 1994 as Director of Information Technology. In February 1995,
he was promoted to Vice President of MIS. Prior to joining the Company,
Mr. Eden was engaged as an independent consultant from February 1993 to
December 1993. From March 1987 to February 1993 Mr. Eden was employed
by Pacific Enterprises as Director of Information Systems. Mr. Eden
holds a B.A. Degree in Economics from CUNY.
Yuda Saydun, Vice President and General Manager - Latin America,
age 43, joined the Company in May 1993. Prior to joining the Company,
he was employed by American Express Travel Related Services Company,
Inc. from 1982 to May 1993, most recently as Division Vice President,
Cardmember Marketing. Mr. Saydun holds a B.S. Degree in Political and
Diplomatic Sciences from Universite Libre de Bruxelles and a Masters of
Business Administration Degree, Finance/Marketing from U.C.L.A.
Arthur W. Singleton, Vice President, Treasurer and Secretary, age
35, joined the Company in January 1990 as Director of Finance and was
appointed Treasurer and Secretary in April 1991. In February 1995, he
was promoted to Vice President, Treasurer and Secretary. Prior to
joining the Company, Mr. Singleton was employed by Price Waterhouse from
1982 to December 1989, most recently as an Audit Manager. Mr. Singleton
is a Certified Public Accountant and holds a B.S. Degree in Accounting
from Florida State University.
Joseph B. Trepani, Vice President and Worldwide Controller, age 35,
joined the Company in March 1990 as Controller and held the position of
Director of Operations from October 1991 through January 1995. In
February 1995, he was promoted to Vice President and Worldwide
Controller. Prior to joining the Company, Mr. Trepani was Vice
President of Finance for Action Staffing, Inc. from July 1989 to
February 1990. From 1982 to June 1989, he was employed by Price
Waterhouse. Mr. Trepani is a Certified Public Accountant and holds a
B.S. Degree in Accounting from Florida State University.
David R. Vetter, Vice President and General Counsel, age 37, joined
the Company in June 1993. Prior to joining the Company, he was employed
by the law firm of Robbins, Gaynor & Bronstein, P.A. from 1984 to June
1993, most recently as a partner. Mr. Vetter is a member of the Florida
Bar and holds a B.A. Degree in English and Economics from Bucknell
University and a J.D. Degree from the University of Florida.
ITEM 2. Properties
Tech Data's executive offices, located in Clearwater, Florida, is
owned by the Company. In addition, the Company leases distribution centers in
Miami, Florida; Atlanta, Georgia; Paulsboro, New Jersey; Ft.
Worth, Texas; South Bend, Indiana; Ontario, California; Union City,
California; Mississauga, Ontario (Canada); Richmond, British Columbia
(Canada); and Bobigny (Paris), France. The Company also operates training
centers in eleven cities in the U.S. and Canada.
During fiscal 1996, the Company completed a 75,000 square foot
administration building on its main Clearwater campus and expanded its
South Bend, Miami, Paulsboro, Mississauga, Richmond and Atlanta
distribution centers. The facilities of the Company are substantially
utilized, well-maintained and are adequate to conduct the Company's
current business.
ITEM 3. Legal Proceedings
There are no material legal proceedings pending against the
Company.
ITEM 4. Submission of Matters to a Vote of Security Holders
There have been no matters submitted to a vote of security holders
during the last quarter of the fiscal year ended January 31, 1996.
7
PART II
ITEM 5. Market for the Registrant's Common Stock and Related
Shareholder Matters
The Company's common stock is traded on the Nasdaq National Market
tier of The Nasdaq Stock Market under the symbol TECD. The Company has
not paid cash dividends since fiscal 1983. The Board of Directors does
not intend to institute a cash dividend payment policy in the
foreseeable future. The table below presents the quarterly high and low
sales prices for the Company's common stock as reported by the Nasdaq
Stock Market. The approximate number of shareholders as of
January 31, 1996 was 15,000.
Sales Price
----------------
High Low
Fiscal year 1996 ------- -------
- ----------------
Fourth quarter $17 7/8 $11 1/4
Third quarter 14 3/4 11 1/8
Second quarter 15 1/4 8 1/4
First quarter 14 1/4 9 5/8
Fiscal year 1995
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Fourth quarter $20 $11 3/8
Third quarter 20 15
Second quarter 19 1/4 14
First quarter 22 1/8 16 1/4
8
ITEM 6. Selected Financial Data
FIVE YEAR FINANCIAL SUMMARY
(In thousands, except per share data)
Year ended January 31,
------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- -------- --------
Income statement data:
Net sales $3,086,620 $2,418,410 $1,532,352 $978,862 $646,961
Cost and expenses: ---------- ---------- ---------- -------- --------
Cost of products sold 2,867,226 2,219,122 1,397,967 885,292 579,766
Selling, general and
administrative expenses 163,790 127,951 79,390 57,556 44,089
--------- --------- --------- -------- -------
3,031,016 2,347,073 1,477,357 942,848 623,855
--------- --------- --------- -------- -------
Operating profit 55,604 71,337 54,995 36,014 23,106
Interest expense 20,086 13,761 5,008 3,973 4,078
--------- --------- --------- -------- -------
Income before income taxes 35,518 57,576 49,987 32,041 19,028
Provision for income taxes 13,977 22,664 19,774 12,259 7,141
--------- --------- --------- -------- -------
Net income $ 21,541 $ 34,912 $ 30,213 $ 19,782 $ 11,887
========== ========== ========== ======== ========
Net income per common share* $ .56 $ .91 $ .83 $ .63 $ .44
========== ========== ========== ======== ========
Dividends per common share -- -- -- -- --
========== ========== ========== ======== ========
Weighted average common
shares outstanding* 38,138 38,258 39,590 31,402 26,966
========== ========== ========== ======== ========
Balance sheet data:
Working capital $ 201,704 $ 182,802 $ 165,366 $ 89,344 $ 78,445
Total assets 1,043,879 784,429 506,760 326,885 200,476
Revolving credit loans 283,100 304,784 153,105 89,198 36,708
Long-term debt 9,097 9,682 9,467 9,638 9,818
Shareholders' equity 285,698 260,826 213,326 115,047 94,565
_________
* Amounts have been adjusted to reflect the two-for-one stock split
declared on March 21, 1994.
9
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following table sets forth the percentage of cost and expenses to net
sales derived from the Company's Consolidated Statement of Income for each of
the three preceding fiscal years.
Percentage of net sales
Year Ended January 31,
------------------------
Net sales 100.0% 100.0% 100.0%
Cost and expenses: ----- ----- -----
Cost of products sold 92.9 91.7 91.2
Selling, general and administrative expenses 5.3 5.3 5.2
----- ----- -----
98.2 97.0 96.4
----- ----- -----
Operating profit 1.8 3.0 3.6
Interest expense .6 .6 .3
----- ----- -----
Income before income taxes 1.2 2.4 3.3
Provision for income taxes .5 .9 1.3
----- ----- -----
Net income .7% 1.5% 2.0%
===== ===== =====
Fiscal Years Ended January 31, 1996 and 1995
Net sales increased 27.6% to $3.09 billion in fiscal 1996 compared
to $2.42 billion in the prior year. This increase is attributable to
the addition of new product lines and the expansion of existing product
lines combined with increases in the Company's market share. The rate
of growth in fiscal year 1996 is lower than the rate of growth in the
prior year as the Company continued to recover from the effects of the
business interruptions caused by the conversion to a new computer system
in December 1994. The Company's international sales in fiscal 1996 were
approximately 14% of consolidated net sales.
The cost of products sold as a percentage of net sales increased
from 91.7% in fiscal 1995 to 92.9% in fiscal 1996. This increase is a
result of competitive market prices, the Company's strategy of lowering
selling prices in order to gain market share and to pass on the benefit
of operating efficiencies to its customers, as well as certain freight
concessions made with customers in order to ensure timely delivery
of product during the first and second quarters of fiscal 1996.
Selling, general and administrative expenses increased from $128.0
million in fiscal 1995 to $163.8 million in fiscal 1996, and as a
percentage of net sales were 5.3% in fiscal 1996 and fiscal 1995. The
dollar value increase in selling, general and administrative expenses is
primarily a result of expanded employment and increases in other
administrative expenses needed to support the increased volume of
business, as well as expenses associated with the new computer system.
As a result of the factors described 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.
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 ending January 31, 1997. FAS 123 encourages, but does not require,
companies to recognize compensation expense based on the fair value of
grants of stock, stock options and other equity investments to
employees. Although expense recognition for employee stock-based
10
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 in fiscal 1997.
Fiscal Years Ended January 31, 1995 and 1994
Net sales increased 57.8% to $2.42 billion in fiscal 1995 compared
to $1.53 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 customer base. This
increase is partially offset by lower than anticipated sales growth in
the fourth quarter of fiscal 1995 due to business interruptions caused
by the December 1994 computer system conversion. Fiscal 1995 also
includes the results for the two companies that were acquired at the
beginning of the year (U.S. Software Resource, Inc. and Softmart
International, S.A.). The Company's international sales in fiscal 1995
were approximately 13% of consolidated net sales.
The cost of products sold as a percentage of net sales increased
from 91.2% in fiscal 1994 to 91.7% in fiscal 1995. This increase is a
result of 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 from $79.4
million in fiscal 1994 to $128.0 million in fiscal 1995, and increased
as a percentage of net sales to 5.3% in fiscal 1995 compared to 5.2%
in the prior year. The increase in selling, general and administrative
expenses is primarily a result of expanded employment and increases in
other administrative expenses needed to support the increased volume of
business. Additionally, the increase in selling, general and
administrative expenses as a percentage of sales in fiscal 1995 is
attributable to the lower than anticipated fourth quarter sales growth
due to business interruptions caused by the computer system conversion.
Operating profit in fiscal 1995 increased 29.7% to $71.3 million,
or 3.0% of net sales, compared to $55.0 million, or 3.6% of net sales,
in fiscal 1994. The decline in operating profit as a percentage of
sales in fiscal 1995 is attributable to the Company's strategy of
targeting return on shareholders' equity as opposed to a stated
operating profit margin. Additionally, the decline in the operating
profit margin was impacted by the lower than anticipated sales growth in
the fourth quarter of fiscal 1995 caused by the computer system
conversion.
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 1995 increased 15.6% to $34.9 million, or $.91
per share, compared to $30.2 million, or $.83 per share, in the prior
year.
Impact of Inflation
The Company has not been adversely affected by inflation as
technological advances and competition within the microcomputer industry
have generally caused prices of the products sold by the Company to
decline. Management believes that any price increases could be passed
on to its customers, as prices charged by the Company are not set by
long-term contracts.
Liquidity and Capital Resources
Net cash provided by operating activities of $47.3 million in
fiscal 1996 was primarily attributable to the Company's effort to
increase its use of trade indebtedness to finance increases in
inventories and accounts receivable.
Net cash used in investing activities of $26.4 million in fiscal
1996 was a result of the Company making capital expenditures for
computer system development and expansion of the capacity of its office
facilities and distribution centers. The Company expects to make
capital expenditures of approximately $25 million during fiscal 1997 to
further expand its office facilities and distribution centers.
11
Net cash used in financing activities of $20.2 million in fiscal
1996 reflects the use of cash generated from operating activities to
reduce borrowings under the Company's revolving credit loans.
In October 1995, the Company increased the amount that may be
borrowed under its Receivables Securitization Program from $200 million
to $250 million. The Company currently maintains domestic and
foreign revolving credit loan agreements (including the Receivables
Securitization Program) with a total of nine financial institutions
providing for maximum short-term borrowings of approximately
$450 million, of which $283.1 million was outstanding.
The Company has historically relied upon cash generated from
operations, bank credit lines, trade credit from its vendors and
proceeds from public offerings of its common stock to satisfy its
capital needs and finance its growth. Management believes that cash
from operations, available and obtainable bank credit lines and trade
credit from its vendors will be sufficient to satisfy its working
capital and capital expenditure needs for the year ending January 31,
1997.
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 and 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 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.
The Company attempts to control losses on credit sales by closely
monitoring customers' creditworthiness through its computer system which
contains detailed information on each customer's payment history and
other relevant information. In addition, the Company participates in a
national credit association which exchanges credit rating information on
mutual customers. Customers who qualify for credit terms are typically
granted net 30-day payment terms. The Company also sells products on a
prepay, credit card, cash on delivery and floorplan basis.
Comments on Forward-Looking Information
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company filed a Form 8-K
with the Securities Exchange Commission on March 26, 1996 outlining
cautionary statements identifying important factors that could cause the
Company's actual results to differ materially from those projected in
forward-looking statements made by, or on behalf of, the Company. Such
forward-looking statements, as made within Items 1 and 7 of this Form 10-K,
should be considered in conjunction with the information included within
the Form 8-K.
12
ITEM 8. Financial Statements
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Tech Data Corporation:
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of income, of changes in shareholders'
equity and of cash flows present fairly, in all material respects, the
financial position of Tech Data Corporation and its subsidiaries at
January 31, 1996 and 1995, and the results of their operations and their
cash flows for each of the three years in the period ended January 31,
1996, 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 15, 1996
REPORT OF MANAGEMENT
To Our Shareholders:
The management of Tech Data Corporation is responsible for the
preparation, integrity and objectivity of the consolidated financial
statements and related financial information contained in this Annual
Report. The financial statements have been prepared by the Company in
accordance with generally accepted accounting principles and, in the
judgment of management, present fairly and consistently the Company's
financial position and results of operations. The financial
statements and other financial information in this report include
amounts that are based on management's best estimates and judgments
and give due consideration to materiality.
The Company maintains a system of internal accounting controls to
provide reasonable assurance that assets are safeguarded and that
transactions are executed in accordance with management's authorization
and recorded properly to permit the preparation of financial statements
in accordance with generally accepted accounting principles. The
design, monitoring and revisions of the system of internal accounting
controls involves, among other things, management's judgment with
respect to the relative cost and expected benefits of specific control
measures.
The Audit Committee of the Board of Directors is responsible for
recommending to the Board, subject to shareholder approval, the
independent certified public accounting firm to be retained each year.
The Audit committee meets periodically with the independent accountants
and management to review their performance and confirm that they are
properly discharging their responsibilities. The independent
accountants have direct access to the Audit Committee to discuss the
scope and results of their work, the adequacy of internal accounting
controls and the quality of financial reporting.
Steven A. Raymund Jeffery P. Howells
Chairman of the Board Directors Senior Vice President of Finance
and Chief Executive Officer and Chief Financial Officer
March 15, 1996
13
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except share amounts)
January 31,
--------------------------
1996 1995
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 1,154 $ 496
Accounts receivable, less allowance
of $22,669 and $16,580 445,202 309,846
Inventories 465,422 364,531
Prepaid and other assets 39,010 21,850
---------- --------
Total current assets 950,788 696,723
Property and equipment, net 61,610 51,042
Excess of cost over acquired net assets, net 6,376 10,061
Other assets, net 25,105 26,603
---------- --------
$1,043,879 $784,429
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Revolving credit loans $ 283,100 $304,784
Current portion of long-term debt 519 542
Accounts payable 433,374 194,213
Accrued expenses 32,091 14,382
-------- --------
Total current liabilities 749,084 513,921
Long-term debt 9,097 9,682
-------- --------
758,181 523,603
-------- --------
Commitments and contingencies (Note 8)
Shareholders' equity:
Preferred stock, par value $.02; 226,500 shares
authorized and issued; liquidation
preference $.20 per share 5 5
Common stock, par value $.0015; 100,000,000
shares authorized; 37,930,655
and 37,807,794 issued and outstanding 57 57
Additional paid-in capital 130,045 127,947
Retained earnings 153,310 131,769
Cumulative translation adjustment 2,281 1,048
---------- --------
Total shareholders' equity 285,698 260,826
---------- --------
$1,043,879 $784,429
========== ========
The accompanying Notes to Consolidated Financial Statements are an
integral part of these financial statements.
14
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share amounts)
Year ended January 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
Net sales $3,086,620 $2,418,410 $1,532,352
Cost and expenses: ---------- ---------- ----------
Cost of products sold 2,867,226 2,219,122 1,397,967
Selling, general and administrative expenses 163,790 127,951 79,390
---------- ---------- ----------
3,031,016 2,347,073 1,477,357
---------- ---------- ----------
Operating profit 55,604 71,337 54,995
Interest expense 20,086 13,761 5,008
---------- ---------- ----------
Income before income taxes 35,518 57,576 49,987
Provision for income taxes 13,977 22,664 19,774
---------- ---------- ---------
Net income $ 21,541 $ 34,912 $ 30,213
========== ========== ==========
Net income per common share $ .56 $ .91 $ .83
========== ========== ==========
Weighted average common shares outstanding 38,138 38,258 36,590
========== ========== ==========
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands)
Additional Cumulative Total
Preferred Stock Common Stock Paid-In Retained Translation Shareholders'
Shares Amount Shares Amount Capital Earnings Adjustment Equity
------- ------- ------- ------- -------- -------- ---------- ------------
Balance-January 31, 1993 227 $5 31,120 $46 $ 58,033 $ 56,963 $ - $115,047
Issuance of common stock
for stock options exercised
and related tax benefit 227 1,701 1,701
Issuance of common stock net
of offering costs 5,200 8 66,357 66,365
Net income 30,213 30,213
--- -- ------ --- --------- -------- --------- --------
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
=== == ====== === ======== ======== ====== ========
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
15
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
Year ended January 31,
----------------------------------
1996 1995 1994
---------- ---------- -----------
Cash flows from operating activities:
Cash received from customers $2,933,831 $2,326,613 $1,437,239
Cash paid to suppliers and employees (2,854,653) (2,382,799) (1,515,940)
Interest paid (20,276) (13,584) (5,128)
Income taxes paid (11,628) (27,974) (18,835)
---------- ---------- ----------
Net cash provided by (used in) operating activities 47,274 (97,744) (102,664)
---------- ---------- ----------
Cash flows from investing activities:
Acquisition of business, net of cash acquired (9,360)
Expenditures for property and equipment (23,596) (21,351) (12,224)
Software development costs (2,826) (18,696) (7,274)
---------- ---------- ----------
Net cash used in investing activities (26,422) (40,047) (28,858)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock 2,098 1,859 68,066
Net (repayments) borrowings from revolving credit loans (21,684) 136,019 63,907
Principal payments on long-term debt (608) (1,058) (164)
Proceeds from long-term debt 789
---------- ---------- ----------
Net cash (used in) provided by financing activities (20,194) 137,609 131,809
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 658 (182) 287
Cash and cash equivalents at beginning of year 496 678 391
---------- ---------- ----------
Cash and cash equivalents at end of year $ 1,154 $ 496 $ 678
---------- ---------- ----------
Reconciliation of net income to net cash provided by
(used in) operating activities:
Net income $ 21,541 $ 34,912 $ 30,213
---------- ---------- ----------
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 17,364 9,110 5,557
Provision for losses on accounts receivable 17,433 17,768 11,346
Loss on disposal of fixed assets 603 1,237 842
Deferred income taxes (5,603) (1,739) (752)
Changes in assets and liabilities:
(Increase) in accounts receivable (152,789) (90,600) (95,113)
(Increase) in inventories (100,891) (132,940) (66,979)
(Increase) decrease in prepaid and other assets (7,254) 2,645 (5,631)
Increase in accounts payable 239,161 62,132 10,483
Increase (decrease) in accrued expenses 17,709 (269) 7,370
---------- ---------- ----------
Total adjustments 25,733 (132,656) (132,877)
---------- ---------- ----------
Net cash provided by (used in) operating activities $ 47,274 $ (97,744) $ (102,664)
=========== ========== ==========
The accompanying Notes to Consolidated Financial Statements are an
integral part of these financial statements.
16
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:
Method Years
------------- ---------
Buildings and improvements Straight-line 31.5 - 39
Furniture, fixtures and equipment Accelerated and
straight-line 3 - 7
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.
17
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Excess of cost over acquired net assets
The excess of cost over acquired net assets is being amortized on a
straight-line basis over 15 years. Amortization expense was $654,000,
$682,000, and $31,000 in 1996, 1995 and 1994, respectively. The accumulated
amortization of goodwill is approximately $1,481,000 and $827,000 at
January 31, 1996 and 1995, respectively. In fiscal 1996, the Company
settled a liability related to a previous acquisition and therefore recorded
a $3,000,000 reduction in goodwill. The Company evaluates, on a regular
basis, whether events and circumstances have occurred that indicate the
carrying amount of goodwill may warrant revision or may not be recoverable.
At January 31, 1996, 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 seven years
with amortization expense of $4,253,000 and $329,000 in 1996 and 1995,
respectively. The accumulated amortization of such costs was $4,582,000
and $329,000 at January 31, 1996 and 1995, 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.
18
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Net income per common share
Net income per common share is based on the weighted average number
of shares of common stock and common stock equivalents outstanding during
each period.
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 $69,789,000 and $23,127,000 at January 31, 1996 and 1995, respectively,
for which checks are outstanding.
Statement of cash flows
Short-term investments which have an original maturity of ninety
days or less are considered cash equivalents in the statement of cash flows.
The effect of changes in foreign exchange rates on cash balances is not
material. See Note 9 of Notes to Consolidated Financial Statements regarding
the non-cash exchange of common stock in connection with a business
combination.
Fiscal year
The Company and its subsidiaries operate on a fiscal year that ends on
January 31, except for the Company's French subsidiary which operates on a
fiscal year that ends on December 31.
NOTE 2 - PROPERTY AND EQUIPMENT:
January 31,
-----------------
1996 1995
------- --------
(In thousands)
Land $ 3,898 $ 3,629
Buildings and improvements 27,802 21,296
Furniture, fixtures and equipment 58,721 44,669
Construction in progress 1,778 1,755
------- --------
92,199 71,349
Less-accumulated depreciation (30,589) (20,307)
------- --------
$61,610 $51,042
======= =======
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 $250,000,000 (increased from
$200,000,000 in October 1995). 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
$250,000,000 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, 1996, the Company had a $250,000,000
outstanding balance under this program which is included in the balance sheet
caption "Revolving Credit Loans". This agreement expires December 31, 1996.
19
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company currently maintains domestic and foreign revolving
credit loan agreements (including the Receivables Securitization Program)
witha total of nine financial institutions which provide for maximum
short-term borrowings of approximately $450,000,000. At January 31, 1996 the
weighted average interest rate on all short-term borrowings was 5.8%. 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, 1996, the Company was in compliance
with all such covenants.
NOTE 4 - LONG-TERM DEBT:
January 31,
-----------------
1996 1995
------- --------
(In thousands)
Mortgage note payable, interest at 10.25%,
principal and interest of $85,130 payable
monthly, balloon payment due 2005. $9,005 $9,099
Mortgage note payable funded through Industrial
Revenue Bond, interest at 7.5%, principal
and interest payable quarterly, through 1999. 282 368
Other note payable 329 757
------ ------
9,616 10,224
Less - current maturities (519) (542)
------ ------
$9,097 $9,682
====== ======
Principal maturities of long-term debt at January 31, 1996 for the
succeeding five fiscal years are as follows: 1997 - $519,000;
1998 - $201,000; 1999 - $213,000; 2000 - $162,000; 2001 - $155,000.
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, 1996.
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:
January 31,
-----------------
1996 1995
-------- --------
Deferred tax liabilities:
Accelerated depreciation $ 4,046 $ 2,158
Deferred revenue 3,164 5,324
Other - net 1,378 486
-------- --------
Total deferred tax liabilities 8,588 7,968
-------- --------
Deferred tax assets:
Accruals not currently deductible 2,947 2,472
Reserves not currently deductible 14,447 9,741
Capitalized inventory cost 1,144 760
Other - net 338 7
-------- --------
Total deferred tax assets 19,203 12,980
-------- --------
Net deferred tax assets (included in $10,615 $ 5,012
prepaid and other assets) ======= ========
20
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Significant components of the provision for income taxes are as
follows:
January 31,
-----------------------------
1996 1995 1994
------- ------- -------
Current:
Federal $15,107 $19,670 $17,179
State 2,932 3,748 3,347
Foreign 1,541 985
------- ------- -------
Total current 19,580 24,403 20,526
Deferred: ------- ------- -------
Federal (4,656) (1,677) (627)
State (625) (62) (125)
Foreign (322)
------- ------- -------
Total deferred (5,603) (1,739) (752)
------- ------- -------
$13,977 $22,664 $19,774
======= ======= =======
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:
January 31,
-----------------------------
1996 1995 1994
------- ------- -------
Tax at U.S. statutory rates 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit 4.2 4.2 4.2
Other - net .2 .2 .4
---- ---- ----
39.4% 39.4% 39.6%
==== ==== ====
The components of pretax earnings are as follows:
January 31,
----------------------------
1996 1995 1994
------- ------- -------
United States $33,164 $55,155 $49,987
Foreign 2,354 2,421 -
------- ------- -------
$35,518 $57,576 $49,987
======= ======= =======
21
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 6 - EMPLOYEE BENEFIT PLANS:
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, 1996, no SARs or Limited SARs had been granted under the 1990
Plan. Options granted under the 1985 Plan and the 1990 Plan expire 10 years
from the date of grant, unless a shorter period is specified by the stock
option committee.
In June 1995, the shareholders approved the 1995 Non-Employee
Director's Non-Statutory Stock Option Plan. Under this plan, the Company
grants non-employee members of its Board of Directors stock options upon
their initial appointment to the board and then annually each year
thereafter. Stock options granted to members upon their initial appointment
vest and become exercisable at a rate of 20% per year. Annual awards vest and
become exercisable one year from the date of grant. The number of shares
subject to options under this plan cannot exceed 100,000 and the options
expire 10 years from the date of grant.
A summary of the status of the Company's stock option plans is as
follows:
January 31, January 31, January 31,
1996 1995 1994
------------------- ------------------ ------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
Price Price Price
------------------- ------------------- -------------------
Outstanding at beginning of year 2,644,056 $15.62 1,515,956 $11.02 842,360 $ 6.13
Granted 1,683,450 12.91 1,372,500 19.94 979,000 13.21
Exercised (79,800) 8.53 (116,900) 5.83 (226,804) 2.76
Canceled (1,166,596) 18.45 (127,500) 15.02 (78,600) 9.86
---------- ------ --------- ------ -------- -------
Outstanding at year end 3,081,110 13.31 2,644,056 15.62 1,515,956 11.02
========== ====== ========= ====== ========= =======
Options exercisable at year end 494,460 180,660 127,960
Available for grant at year end 1,785,000 2,351,000 1,596,000
22
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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
ending January 31, 1997. FAS 123 encourages, but does not require, companies
to recognize compensation expense based on the fair value of grants of stock,
stock options and other equity investments to employees. Although expense
recognition for employee stock-based compensation is not mandatory, FAS 123
requires that companies not adopting must disclose pro forma net income and
earnings per share. The Company will continue to apply the prior accounting
rules and make pro forma disclosures in 1997.
Stock Ownership and Retirement Savings Plan
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 $1,659,000, $1,268,000 and $829,000 for
1996, 1995 and 1994, respectively.
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 43,061 shares. All shares purchased under this plan must be retained
for a period of one year.
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.
23
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 8 - COMMITMENTS AND CONTINGENCIES:
Operating leases
The Company leases distribution facilities and certain equipment
under noncancelable operating leases which expire at various dates through
2005. Future minimum lease payments under all such leases
for the succeeding five fiscal years are as follows: 1997 - $7,921,000;
1998 - $6,892,000; 1999 - $4,080,000; 2000 - $3,671,000; 2001 - $3,252,000
and $7,296,000 thereafter. Rental expense for all operating leases amounted
to $7,547,000, $6,500,000 and $4,490,000 in 1996, 1995 and 1994,
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, SNC), a
privately-held distributor of microcomputer products based in Paris, France.
The acquisition was accounted for as a pooling-of-interests effective
February 1, 1994, however, due to the immaterial size of the acquisition
in relation to the consolidated financial statements, prior period financial
statements were not restated. In connection with the issuance of the
1,144,000 shares of common stock, the Company recorded an adjustment of
$9,681,000 to beginning retained earnings.
NOTE 10 - SEGMENT INFORMATION:
The Company is engaged in one business segment, the wholesale
distribution of microcomputer hardware and software products. The
geographic areas in which the Company operates are the United States
(United States including exports to Latin America and the Caribbean) and
International (France and Canada). The geographical distribution of net
sales, operating income and identifiable assets are as follows
(in thousands):
United States International Eliminations Consolidated
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
========== ======== =========== ==========
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
========== ======== =========== ==========
24
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 11 - UNAUDITED INTERIM FINANCIAL INFORMATION:
Quarter ended
------------------------------------------------------
April 30 July 31 October 31 January 31
----------- --------- ------------- ------------
Fiscal year 1996 (In thousands, except per share amounts)
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
Quarter ended
------------------------------------------------------
April 30 July 31 October 31 January 31
----------- --------- ------------- ------------
Fiscal year 1995 (In thousands, except per share amounts)
Net sales $530,469 $569,655 $658,341 $659,945
Gross profit 45,157 47,778 53,815 52,538
Net income 9,225 9,603 10,295 5,789
Net income per common share .24 .25 .27 .15
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
25
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The information required by Item 10 relating to executive officers
of the registrant is included under the caption "Executive Officers" of
Item 1 of this Form 10-K. The information required by Item 10 relating to
Directors of the registrant is incorporated herein by reference to the
registrant's definitive proxy statement for the 1996 Annual Meeting of
Shareholders. However, the information included in such definitive proxy
statement under the subcaption entitled "Grant Date Present Value" in
the table entitled "Option Grants in Last Fiscal Year", the information
included under the caption entitled "Compensation Committee Report on
Executive Compensation", and the information included in the "Stock
Price Performance Graph" shall not be deemed incorporated by reference
in this Form 10-K and shall not otherwise be deemed filed under the
Securities Act of 1933, as amended, or under the Securities Exchange Act
of 1934, as amended. The definitive proxy statement for the 1996 Annual
Meeting of Shareholders will be filed with the Commission prior to
May 31, 1996.
ITEMS 11, 12 and 13.
The information required by Items 11, 12 and 13 is incorporated herein
by reference to the registrant's definitive proxy statement for the 1996
Annual Meeting of Shareholders. However, the information included in such
definitive proxy statement under the subcaption entitled "Grant Date Present
Value" in the table entitled "Option Grants in Last Fiscal Year", the
information included under the caption entitled "Compensation Committee
Report on Executive Compensation", and the information included in the
"Stock Price Performance Graph" shall not be deemed incorporated by
reference in this Form 10-K and shall not otherwise be deemed filed
under the Securities Act of 1933, as amended, or under the Securities
Exchange Act of 1934, as amended. The definitive proxy statement for the
1996 Annual Meeting of Shareholders will be filed with the Commission prior
to May 31, 1996.
PART IV
ITEM 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
(a) Listed below are the financial statements and the schedule
filed as part of this report:
Financial Statements Page
Report of Independent Certified Public Accountants 13
Consolidated Balance Sheet at January 31, 1996 and 1995 14
Consolidated Statement of Income for the three years
ended January 31, 1996 15
Consolidated Statement of Changes in Shareholders' Equity
for the three years ended January 31, 1996 15
Consolidated Statement of Cash Flows for the three years ended
January 31, 1996 16
Notes to Consolidated Financial Statements 17
Financial Statement Schedule
Report of Independent Certified Public Accountants on Financial
Statement Schedule 29
Schedule II. -- Valuation and qualifying accounts 30
All schedules and exhibits not included are not applicable, not
required or would contain information which is shown in the financial
statements or notes thereto.
(b) The Company was not required to file a report on Form 8-K
during the fiscal year ended January 31, 1996.
26
(c) the exhibit numbers on the following list correspond to the
numbers in the exhibit table required
pursuant to Item 601 of Regulation S-K.
3-A(1) -- Articles of Incorporation of the Company as amended
to April 23, 1986.
3-B(2) -- Articles of Amendment to Articles of Incorporation
of the Company filed on August 27, 1987.
3-C(3) -- By-Laws of the Company as amended to November 28, 1995.
3-F(9) -- Articles of Amendment to Articles of Incorporation of the
Company filed on July 15, 1993.
10-F(4) -- Incentive Stock Option Plan, as amended, and form of
option agreement.
10-G(10) -- Employee Stock Ownership Plan as amended December 16, 1994.
10-V(5) -- Employment Agreement between the Company and Edward C.
Raymund dated as of January 31, 1991.
10-W(5) -- Irrevocable Proxy and Escrow Agreement dated April 5, 1991.
10-X(6) -- First Amendment to the Employment Agreement between the
Company and Edward C. Raymund dated November 13, 1992.
10-Y(6) -- First Amendment in the nature of a Complete Substitution
to the Irrevocable Proxy and Escrow Agreement dated
November 13, 1992.
10-Z(7) -- 1990 Incentive and Non-Statutory Stock Option Plan.
10-AA(7) -- Non-Statutory Stock Option Grant Form.
10-BB(7) -- Incentive Stock Option Grant Form.
10-CC(8) -- Employment Agreement between the Company and Steven A.
Raymund dated February 1, 1992.
10-EE(10) -- Retirement Savings Plan as amended January 26, 1994.
10-FF(9) -- Revolving Credit and Reimbursement Agreement dated
December 22, 1993.
10-GG(9) -- Transfer and Administration Agreement dated
December 22, 1993.
10-HH(10) -- Amendments (Nos. 1-4) to the Transfer and Administration
Agreement.
10-II(10) -- Amended and Restated Revolving Credit and Reimbursement
Agreement dated July 28, 1994, as amended.
10-JJ(10) -- Revolving Foreign Currency Agreement dated August 4, 1994,
as amended.
10-KK(3) -- Amendments (Nos. 5,6) to the Transfer and Administration
Agreement.
10-LL(3) -- Amendments (Nos. 3-5) to the Amended and Restated Revolving
Credit and Reimbursement Agreement dated July 28, 1994,
as amended.
10-MM(3) -- Amendments (Nos. 3-5) to the Revolving Foreign Currency
Agreement dated August 4, 1994, as amended.
10-NN(12) -- Non-Employee Directors' 1995 Non-Statutory Stock Option Plan
10-OO(12) -- 1995 Employee Stock Purchase Plan
10-PP(3) -- Employment Agreement between the Company and A. Timothy Godwin
dated as of December 5, 1995.
21(3) -- Subsidiaries of Registrant.
99-A(11) -- Cautionary Statement For Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act
of 1995.
- --------------
27
(1) Incorporated by reference to the Exhibits included in the Company's
Registration Statement on Form S-1, File No. 33-4135.
(2) Incorporated by reference to the Exhibits included in the Company's
Registration Statement on Form S-1, File No. 33-21997.
(3) Filed herewith.
(4) Incorporated by reference to the Exhibits included in the
Company's Registration Statement on Form S-8, File No. 33-21879.
(5) Incorporated by reference to the Exhibits included in the
Company's Form 10-Q for the quarter ended July 31, 1991,
File No. 0-14625.
(6) Incorporated by reference to the Exhibits included in the Company's
Form 10-Q for the quarter ended October 31, 1992, File No. 0-14625.
(7) Incorporated by reference to the Exhibits included in the
Company's Registration Statement on Form S-8, File No. 33-41074.
(8) Incorporated by reference to the Exhibits included in the
Company's Form 10-K for the year ended January 31, 1993, File
No. 0-14625.
(9) Incorporated by reference to the Exhibits included in the Company's
Form 10-K for the year ended January 31, 1994, File No. 0-14625.
(10) Incorporated by reference to the Exhibits included in the
Company's Form 10-K for the year ended January 31, 1995, File
No. 0-14625.
(11) Incorporated by reference to the Exhibits included in the
Company's Form 8-K filed on March 26, 1996, File No. 0-14625.
(12) Incorporated by reference to the Exhibits included in the Company's
Definitive Proxy Statement for the 1995 Annual Meeting of Shareholders.
28
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Tech Data Corporation
Our audits of the consolidated financial statements referred to in
our report dated March 15, 1996 appearing on page 13 of this Form 10-K of
Tech Data Corporation also included an audit of the Financial
Statement Schedule listed in Item 14 of this Form 10-K. In our opinion,
this Financial Statement Schedule presents fairly, in all material respects,
the information set forth therein when read in conjunction with the related
consolidated financial statements.
PRICE WATERHOUSE LLP
Tampa, Florida
March 15, 1996
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectus constituting part of the Registration Statements on Form S-8
(Nos. 33-21879 and 33-41074) and Form S-3 (No. 33-75788) of Tech Data
Corporation of our report dated March 15, 1996 appearing on page 13 of this
Form 10-K. We also consent to the incorporation by reference of our report
on the Financial Statement Schedule appearing above.
PRICE WATERHOUSE LLP
Tampa, Florida
April 16, 1996
29
TECH DATA CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Additions Balance
Balance at Charged to at end
beginning cost and of
Description of period expenses Other(1) Deductions period
- ----------- --------- ---------- ------- ---------- ------
Allowance for doubtful accounts
receivable and sales returns:
January 31,
1996 $16,580 $17,433 $4,538 $(15,882) $22,669
1995 8,580 18,965 920 (11,885) 16,580
1994 5,791 11,346 441 (8,998) 8,580
__________
(1) Represents bad debt recoveries.
30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized on the 16th day of April 1996.
TECH DATA CORPORATION
By /s/ STEVEN A. RAYMUND
-------------------------
Steven A. Raymund,
Chairman of the Board of Directors;
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature to this Annual Report on Form 10-K
appears below hereby appoints Jeffery P. Howells and Arthur W. Singleton, or
either of them, as his attorney-in-fact to sign on his behalf individually
and in the capacity stated below and to file all amendments and
post-effective amendments to this Annual Report on Form 10-K, and any and all
instruments or documents filed as a part of or in connection with this Annual
Report on Form 10-K or the amendments thereto, and the attorney-in-fact, or
either of them, may make such changes and additions to this Annual Report on
Form 10-K as the attorney-in-fact, or either of them, may deem necessary or
appropriate.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
------------- ------------- --------
/s/ STEVEN A. RAYMUND Chairman of the Board of April 16, 1996
- ------------------------ Directors; Chief Executiver
Steven A. Raymund Officer
/s/ A. TIMOTHY GODWIN Vice Chairman; President; April 16, 1996
- ------------------------ Chief Operating Officer;
A. Timothy Godwin Director
/s/ JEFFERY P. HOWELLS Senior Vice President of April 16, 1996
- ------------------------ Finance; Chief Financial
Jeffery P. Howells Officer; (principal financial
officer)
/s/ JOSEPH B. TREPANI Vice President and Worldwide April 16, 1996
- ----------------------- Controller; (principal
Joseph B. Trepani accounting officer)
/s/ CHARLES E. ADAIR Director April 16, 1996
- ----------------------
Charles E. Adair
/s/ DANIEL M. DOYLE Director April 16, 1996
- ---------------------
Daniel M. Doyle
/s/ DONALD F. DUNN Director April 16, 1996
- --------------------
Donald F. Dunn
/s/ LEWIS J. DUNN Director April 16, 1996
- --------------------
Lewis J. Dunn
/s/ EDWARD C. RAYMUND Director; Chairman Emeritus April 16, 1996
- ---------------------
Edward C. Raymund
/s/ JOHN Y. WILLIAMS Director April 16, 1996
- ---------------------
John Y. Williams
31