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 April 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-14625
TECH DATA CORPORATION
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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
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
CLASS May 31, 1996
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Common stock, par value $.0015 per share 38,274,871
TECH DATA CORPORATION AND SUBSIDIARIES
Form 10-Q For The Quarter Ended April 30, 1996
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheet as of
April 30, 1996 (unaudited) and
January 31, 1996 3
Consolidated Statement of Income
(unaudited) for the three months ended
April 30, 1996 and 1995 4
Consolidated Statement of Cash Flows
(unaudited) for the three months
ended April 30, 1996 and 1995 5
Notes to Consolidated Financial Statements
(unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-8
PART II. OTHER INFORMATION
All items required in Part II have been previously filed, have been
included in Part I of this report or are not applicable for the
quarter ended April 30, 1996.
SIGNATURES 9
2
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except share amounts)
April 30, January 31,
1996 1996
------------- -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 919 $ 1,154
Accounts receivable, less allowance for
doubtful accounts of $24,008 and $22,669 486,297 445,202
Inventories 430,695 465,422
Prepaid and other assets 34,379 39,010
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Total current assets 952,290 950,788
Property and equipment, net 60,366 61,610
Excess of cost over acquired net assets, net 6,263 6,376
Other assets 24,375 25,105
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$1,043,294 $1,043,879
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Revolving credit loans $ 300,327 $ 283,100
Current portion of long-term debt 423 519
Accounts payable 400,227 433,374
Accrued expenses 33,159 32,091
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Total current liabilities 734,136 749,084
Long-term debt 9,048 9,097
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743,184 758,181
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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; 38,238,799 and 37,930,655
issued and outstanding 57 57
Additional paid-in capital 134,407 130,045
Retained earnings 163,738 153,310
Cumulative translation adjustment 1,903 2,281
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Total shareholders' equity 300,110 285,698
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$1,043,294 $1,043,879
=========== ===========
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
3
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(In thousands, except per share amounts)
Three months ended
April 30,
--------------------------
1996 1995
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Net sales $985,574 $633,460
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Cost and expenses:
Cost of products sold 916,562 587,244
Selling, general and
administrative expenses 46,285 38,061
-------- --------
962,847 625,305
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Operating profit 22,727 8,155
Interest expense 5,523 5,057
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Income before income taxes 17,204 3,098
Provision for income taxes 6,776 1,249
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Net income $ 10,428 $ 1,849
======== ========
Net income per common share $ .27 $ .05
======== ========
Weighted average common
shares outstanding 38,589 38,063
======== ========
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
4
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(In thousands)
Three months ended
April 30,
----------------------------
1996 1995
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Cash flows from operating activities:
Cash received from customers $939,927 $615,340
Cash paid to suppliers and employees (947,485) (585,490)
Interest paid (5,358) (5,112)
Income tax refunds received (taxes paid) (6,550) 591
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Net cash provided by (used in) operating activities (19,466) 25,329
-------- --------
Cash flows from investing activities:
Capital expenditures (2,213) (4,726)
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Cash flows from financing activities:
Proceeds from issuance of common stock 4,362 773
Net (repayments) borrowings under revolving credit loans 17,227 (21,134)
Principal payments on long-term debt (145) (176)
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Net cash provided by (used in) financing activities 21,444 (20,537)
-------- --------
Net (decrease) increase in cash and cash equivalents (235) 66
Cash and cash equivalents at beginning of period 1,154 496
-------- --------
Cash and cash equivalents at end of period $ 919 $ 562
======== ========
Reconciliation of net income to net cash provided by
(used in) operating activities:
Net income $ 10,428 $ 1,849
-------- --------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,696 3,954
Provision for losses on accounts receivable 4,552 4,042
(Increase) decrease in assets
Accounts receivable (45,647) (18,120)
Inventories 34,727 28,737
Prepaid and other assets 3,857 (14,898)
Increase (decrease) in liabilities:
Accounts payable (33,147) 17,695
Accrued expenses 1,068 2,070
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Total adjustments (29,894) 23,480
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Net cash (used in) provided by operating activities $(19,466) $ 25,329
======== ========
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
5
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 April
30, 1996 and the results of their operations and cash flows for the three months
ended April 30, 1996 and 1995. All significant intercompany accounts and
transactions have been eliminated in consolidation. The results of operations
for the three months ended April 30, 1996 are not necessarily indicative of the
results that can be expected for the entire fiscal year ending January 31, 1997.
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. Fully diluted and primary earnings per share are the same amounts for
each of the periods presented.
6
TECH DATA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
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Three Months Ended April 30, 1996 and 1995
- ------------------------------------------
Net sales increased 55.6% to $985.6 million in the first quarter of fiscal 1997
compared to $633.5 million in the first quarter last year. This increase is
attributable to the addition of new product lines and the expansion of existing
product lines combined with an increase in the Company's market share. The
growth rate in the first quarter of fiscal 1997 was also positively impacted by
a lower growth rate in the prior comparable period as the Company was recovering
from the effects of business interruptions caused by the conversion to a new
computer system in December 1994. The Company's U.S. and international sales
grew 58% and 43%, respectively, in the first quarter of fiscal 1997 compared to
the prior year first quarter. International sales were approximately 14% of
fiscal 1997 first quarter net sales compared to 15% for the first quarter of
fiscal 1996.
The cost of products sold as a percentage of net sales increased to 93.0% in the
first quarter of fiscal 1997 from 92.7% in the prior year. This increase is a
result of competitive market prices and the Company's strategy of lowering
selling prices in order to gain market share and to pass on the benefit of
operating efficiencies to its customers.
Selling, general and administrative expenses increased by 21.6% to $46.3 million
in the first quarter of fiscal 1997 compared to $38.1 million in the prior year
and decreased as a percentage of net sales to 4.7% in the first quarter of
fiscal 1997 compared to 6.0% in the first quarter last year. Selling, general
and administrative expenses were a greater percentage of net sales during the
first quarter of fiscal 1996 primarily as a result of increased hiring in
anticipation of sales growth which was lower than expected due to the effects of
the business interruptions caused by the computer system conversion, in addition
to expenses related to this conversion. The dollar value increase is primarily
the result of expanded employment and increases in other administrative expenses
needed to support the increased volume of business.
As a result of the factors discussed above, operating profit increased 178.7% to
$22.7 million, or 2.3% of net sales, in the first quarter of fiscal 1997
compared to $8.2 million, or 1.3% of net sales for the first quarter last year.
Interest expense increased in the first quarter of fiscal 1997 due to an
increase in the Company's average outstanding indebtedness, partially offset by
decreases in short-term interest rates on the Company's floating rate
indebtedness.
As a result of the factors discussed above, net income increased 464.0% to $10.4
million, or $.27 per share, in the first quarter of fiscal 1997 compared to $1.8
million, or $.05 per share, in the prior year comparable quarter.
7
Liquidity and Capital Resources
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Net cash used in operating activities of $19.5 million during the first quarter
of fiscal 1997 was primarily attributable to growth in sales and the resulting
increase in accounts receivable.
Net cash used in investing activities of $2.2 million during the first quarter
of fiscal 1997 was a result of the Company making capital expenditures to expand
its management information system capability, office facilities and distribution
centers. The Company expects to make capital expenditures of approximately $25
million during fiscal 1997 to further expand its management information system
capability, office facilities and distribution centers.
Net cash provided by financing activities of $21.4 million during the first
quarter of fiscal 1997 was primarily provided by additional borrowings under the
Company's revolving credit loans.
In May 1996, the Company entered into a new $290 million, three-year,
multi-currency revolving credit facility. As of May 31, 1996, the Company had
total available credit lines of approximately $550 million (including the $250
million Receivables Securitization Program), of which approximately $325 million
was outstanding. 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 1997.
The Company has historically relied upon cash generated from operations, bank
credit lines, trade credit from its vendors and proceeds from prior public
offerings of common stock to satisfy capital needs and finance growth. Although
management believes the Company's liquidity at April 30, 1996 is sufficient to
fund the current level of operations through fiscal 1997, completion of the
Company's proposed July 1996 offering of 6 million shares of common stock is
expected to provide additional capital of approximately $135 million which, will
further assist the Company to strengthen its financial position and allow it to
accelerate its growth.
Asset Management
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The Company manages its inventories by maintaining sufficient quantities to
achieve high order fill rates while attempting to stock only those products in
high demand with a rapid turnover rate. Inventory balances fluctuate as the
Company adds new product lines and when appropriate, makes large purchases,
including cash purchases from manufacturers and publishers when the terms of
such purchases are considered advantageous. The Company's contracts with most of
its vendors provide price protection and stock rotation privileges to reduce the
risk of loss due to manufacturer price reductions and slow moving or obsolete
inventory. In the event of a vendor price reduction, the Company generally
receives a credit for the impact on products in inventory. In addition, the
Company has the right to rotate a certain percentage of purchases, subject to
certain limitations. Historically, price protection and stock rotation
privileges as well as the Company's inventory management procedures have helped
to reduce the risk of loss of carrying inventory.
The Company attempts to control losses on credit sales by closely monitoring
customers' creditworthiness through 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 information on mutual customers. The Company has recently
obtained domestic credit insurance which insures a percentage of the credit
extended by the Company to certain of its larger customers against possible
loss. 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.
8
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 this
Form 10-Q, should be considered in conjunction with the information included
within the Form 8-K.
9
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
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/s/ Steven A. Raymund Chairman of the Board of June 13, 1996
- ----------------------- Directors; Chief
Steven A. Raymund Executive Officer
/s/ Jeffery P. Howells Senior Vice President of Finance June 13, 1996
- ---------------------- and Chief Financial Officer;
Jeffery P. Howells (principal financial officer)
/s/ Joseph B. Trepani Vice President and Worldwide June 13, 1996
- --------------------- Controller; (principal accounting
Joseph B. Trepani officer)
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
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10-QQ Revolving Credit and Reimbursement Agreement
dated May 23, 1996
27 Financial Data Schedule for Quarterly Report on Form 10Q
for the Quarter ended April 30, 1996