May 26, 2016

Tech Data Corporation Reports First Quarter Fiscal Year 2017 Results

15 Percent Growth in Non-GAAP Operating Income; 31 Percent Growth in Non-GAAP EPS

CLEARWATER, Fla., May 26, 2016 (GLOBE NEWSWIRE) -- Tech Data Corporation (NASDAQ:TECD) (the "Company") today announced its financial results for the first quarter ended April 30, 2016.


  Three months ended April 30,
($ in millions,
except per share amounts)
 2016  2015 
Net Sales$5,963.4 $5,887.2 
   
Operating income (GAAP)$52.6 $81.9 
Operating margin (GAAP) 0.88% 1.39%
   
Operating income (Non-GAAP)  $57.6 $50.2 
Operating margin (Non-GAAP) 0.97% 0.85%
   
Net income (GAAP)$33.4 $51.3 
Net income (Non-GAAP)$37.0 $29.6 
   
EPS - diluted (GAAP)$0.94 $1.38 
EPS - diluted (Non-GAAP)$1.05 $0.80 


A reconciliation of GAAP to non-GAAP financial measures is presented in the financial tables of this press release.
This information is also available on the Investor Relations section of Tech Data's website at www.techdata.com/investor

Financial Highlights for the First Quarter Ended April 30, 2016:

  • Net sales were $6.0 billion, an increase of 1 percent compared to the prior-year quarter. On a constant currency basis, and excluding from the prior period net sales generated in Chile, Peru and Uruguay ("exited operations") due to the Company's previously announced exit from those countries, net sales increased 2 percent.
    • The Americas: Net sales were $2.4 billion (40 percent of worldwide net sales), an increase of 2 percent compared to the prior-year quarter. On a constant currency basis, and excluding from the prior period net sales generated in the exited operations, net sales grew approximately 4 percent.
    • Europe: Net sales were $3.6 billion (60 percent of worldwide net sales), an increase of 1 percent compared to the prior-year quarter. On a constant currency basis, net sales grew 1 percent year-over-year.
  • Gross profit was $298.6 million, an increase of $6.7 million, or 2 percent, compared to the prior-year quarter. As a percentage of net sales, gross profit was 5.01 percent, an improvement of 5 basis points.
  • Selling, general and administrative expenses ("SG&A") were $246.5 million, or 4.13 percent of net sales, compared to $248.5 million, or 4.22 percent of net sales in the prior-year quarter. Non-GAAP SG&A was $241.1 million, a decrease of $0.7 million, compared to the prior-year quarter. As a percentage of net sales, non-GAAP SG&A was 4.04 percent, an improvement of 7 basis points.
     
  • Worldwide operating income was $52.6 million, or 0.88 percent of net sales compared to $81.9 million or 1.39 percent of net sales in the prior-year quarter. Operating income for the prior-year quarter included $38.5 million of gains related to LCD settlement agreements, net of attorney fees and expenses. Non-GAAP operating income was $57.6 million, an increase of $7.4 million, or 15 percent, compared to the prior-year quarter. As a percentage of net sales, non-GAAP operating income was 0.97 percent, an improvement of 12 basis points.
    • The Americas: Operating income was $31.3 million, or 1.31 percent of net sales, compared to $62.4 million, or 2.67 percent of net sales in the prior-year quarter. Operating income for the prior-year quarter included the aforementioned LCD settlement gains. Non-GAAP operating income was $31.4 million, an increase of $7.0 million, or 29 percent, compared to the prior-year quarter. As a percentage of net sales, non-GAAP operating income was 1.32 percent, an improvement of 28 basis points.
    • Europe: Operating income was $24.9 million, or 0.70 percent of net sales, compared to $23.4 million, or 0.66 percent of net sales in the prior-year quarter. Non-GAAP operating income was $29.8 million, an increase of $0.2 million or approximately 1 percent, compared to the prior-year quarter. As a percentage of net sales, non-GAAP operating income was 0.83 percent, essentially flat compared to the prior-year quarter.
    • Stock-based compensation expense was $3.7 million, compared to $3.8 million in the prior-year quarter. These expenses are excluded from the regional non-GAAP operating results and presented as a separate line item in the company's segment reporting (see the GAAP to non-GAAP reconciliation in the financial tables of this press release).

  • Net income was $33.4 million, compared to $51.3 million in the prior-year quarter. Earnings per share on a diluted basis ("EPS") were $0.94, compared to $1.38 in the prior year quarter. Net income and EPS for the prior-year quarter included the aforementioned LCD settlement gains, net of taxes. Non-GAAP net income was $37.0 million, an increase of $7.5 million, or 25 percent, compared to the prior-year quarter. Non-GAAP EPS was $1.05, an increase of $0.25, or 31 percent, compared to $0.80 in the prior-year quarter.
     
  • Net cash generated by operations during the quarter was $276 million.
     
  • Return on invested capital on a non-GAAP basis for the trailing twelve months was 14 percent compared to 11 percent in the prior year.

"We are pleased to report a strong start to fiscal year 2017," said Robert M. Dutkowsky, chief executive officer. "In Q1, our teams capitalized on pockets of demand and delivered above-market sales growth. Higher sales, coupled with strong margin and expense management, resulted in double-digit growth in non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per share. In addition, we generated $276 million in cash from operations and earned a return on invested capital of 14 percent — a 300 basis point improvement over the prior year period. Tech Data's Q1 results are a testament to the strength of our geographic, vendor, product and customer portfolios and to the flexibility of our business model. Our diverse, end-to-end portfolio of IT Solutions enables us to capture opportunities in the evolving IT marketplace, deliver differentiated value to our customers and vendor partners, and produce strong results for our shareholders." 

Business Outlook

  • For the quarter ending July 31, 2016, the Company anticipates worldwide net sales to be in the range of $6.55 billion to $6.75 billion. This guidance assumes year-over-year constant currency net sales growth of flat to low-single-digits in both regions, and an average U.S. dollar to euro exchange rate of $1.12 to €1.00. 
     
  • For the quarter ending July 31, 2016, the Company anticipates non-GAAP EPS to be in the range of $1.39 to $1.49.
     
  • This guidance assumes weighted average diluted shares outstanding of 35.4 million and an effective tax rate in the range of 28 percent to 30 percent.

Webcast Details

Tech Data will hold a conference call today at 9:00 a.m. (ET) to discuss its financial results for the first quarter ended April 30, 2016. A webcast of the call, including supplemental schedules, will be available to all interested parties and can be obtained at www.techdata.com/investor. The webcast will be available for replay for three months.

Non-GAAP Financial Information

The non-GAAP financial information contained in this release is included with the intention of providing investors a more complete understanding of the Company's operational results and trends, but should only be used in conjunction with results reported in accordance with Generally Accepted Accounting Principles ("GAAP"). Certain non-GAAP measures presented in this release or other releases, presentations and similar documents issued by the Company include sales, income or expense items as adjusted for the impact of changes in foreign currencies (referred to as "constant currency") and the impact of the exit of certain country operations. Certain non-GAAP measures also exclude acquisition-related intangible assets amortization expense, benefits associated with legal settlements, value-added tax assessment matters, a loss on disposal of subsidiaries, and restatement and remediation related expenses. A detailed reconciliation of the adjustments between results calculated using GAAP and non-GAAP in this release is contained in the attached financial schedules. This information can also be obtained from the Company's Investor Relations website at www.techdata.com/investor.

Forward-Looking Statements 

This press release includes "forward-looking statements" within the meaning of the federal securities laws and regulations, including those regarding the Company's business outlook. These statements are subject to risks and uncertainties, including the risks identified in the Company's most recent Annual Report on Form 10-K filed March 24, 2016. A number of important factors could cause actual events and results to differ materially from those contained in or implied by the forward-looking statements. Forward-looking statements reflect management's analysis as of the filing date of this press release. The Company does not undertake to update or revise these statements to reflect subsequent developments.

About Tech Data

Tech Data Corporation is one of the world's largest wholesale distributors of technology products, services and solutions. Its advanced logistics capabilities and value added services enable 105,000 resellers to efficiently and cost effectively support the diverse technology needs of end users in more than 100 countries. Tech Data generated $26.4 billion in net sales for the fiscal year ended January 31, 2016. It is ranked No. 107 on the Fortune 500® and one of Fortune's "World's Most Admired Companies." To learn more, visit www.techdata.com, or follow us on Facebook and Twitter.

 
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
  Three months ended
 April 30,
   2016   2015 
     
Net sales $ 5,963,362  $ 5,887,229 
Cost of products sold    5,664,751     5,595,340 
Gross profit    298,611     291,889 
Operating expenses:    
Selling, general and administrative expenses    246,496     248,462 
LCD settlements, net    (443)    (38,511)
     246,053     209,951 
Operating income     52,558     81,938 
Interest expense     5,601     5,722 
Other (income) expense, net     (1,034)    161 
Income before income taxes    47,991     76,055 
Provision for income taxes    14,618     24,778 
Net income $  33,373  $  51,277 
     
Earnings per share:    
Basic $  0.95  $  1.39 
Diluted $  0.94  $  1.38 
Weighted average common shares outstanding:    
Basic  35,127   36,822 
Diluted  35,370   37,036 
     


TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except par value and share amounts)
 
  April 30, January 31,
   2016   2016 
ASSETS (unaudited)  
Current assets:    
Cash and cash equivalents $  825,734  $  531,169 
Accounts receivable, less allowances of $45,851 and $45,875    2,580,799     2,995,114 
Inventories    2,092,742     2,117,384 
Prepaid expenses and other assets    135,917     178,394 
Total current assets    5,635,192     5,822,061 
Property and equipment, net    71,179     66,028 
Goodwill    212,882     204,114 
Intangible assets, net    158,518     159,386 
Other assets, net    113,125     106,699 
Total assets $  6,190,896  $  6,358,288 
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current liabilities:    
Accounts payable $  3,157,646  $  3,427,580 
Accrued expenses and other liabilities    455,231     487,003 
Revolving credit loans and current maturities of long-term debt, net    17,939     18,063 
Total current liabilities    3,630,816     3,932,646 
Long-term debt, less current maturities    348,816     348,608 
Other long-term liabilities    76,382     71,279 
Total liabilities $  4,056,014  $  4,352,533 
Shareholders' equity:    
Common stock, par value $0.0015; 200,000,000 shares authorized; 59,245,585 shares issued at April 30, 2016 and January 31, 2016 $  89  $  89 
Additional paid-in capital    676,886     682,227 
Treasury stock, at cost (24,048,956 and 24,163,402 shares at April 30, 2016 and January 31, 2016)    (1,072,331)    (1,077,434)
Retained earnings    2,467,571     2,434,198 
Accumulated other comprehensive income (loss)     62,667     (33,325)
Total shareholders' equity    2,134,882     2,005,755 
Total liabilities and shareholders' equity $  6,190,896  $  6,358,288 
     


TECH DATA CORPORATION AND SUBSIDIARIES 
GAAP TO NON-GAAP RECONCILIATION 
(In thousands) 
           
  Q1 FY17 - Three months ended April 30, 2016 
   Americas⁽¹⁾   Europe⁽¹⁾    Stock
Compensation
Expense
 
  Consolidated  
Net Sales $   2,388,004   $  3,575,358      $   5,963,362   
GAAP operating income⁽¹⁾ $  31,275  $  24,940   $  (3,657) $  52,558  
LCD settlements, net    (443)    -         (443) 
Acquisition-related amortization of intangibles    580     4,865        5,445  
Total non-GAAP operating income adjustments $  137  $  4,865     $  5,002  
Non-GAAP operating income $   31,412   $   29,805    $   (3,657) $   57,560   
GAAP operating margin  1.31%  0.70%     0.88% 
Non-GAAP operating margin  1.32%  0.83%     0.97% 
  
⁽¹⁾  GAAP operating income does not include stock compensation expense at the regional level. 
           


  Q1 FY16 - Three months ended April 30, 2015 
   Americas⁽¹⁾   Europe⁽¹⁾    Stock
Compensation
Expense
 
  Consolidated  
Net Sales $   2,339,260   $  3,547,969      $   5,887,229   
GAAP operating income⁽¹⁾ $  62,359  $  23,397   $  (3,818) $  81,938  
Restatement and remediation related expenses    38     580        618  
LCD settlements, net    (38,511)    -         (38,511) 
Loss on disposal of subsidiaries    363     -         363  
Acquisition-related amortization of intangibles    170     5,610        5,780  
Total non-GAAP operating income adjustments $  (37,940) $  6,190     $  (31,750) 
Non-GAAP operating income $   24,419   $   29,587    $   (3,818) $   50,188   
GAAP operating margin  2.67%  0.66%     1.39% 
Non-GAAP operating margin  1.04%  0.83%     0.85% 
  
⁽¹⁾  GAAP operating income does not include stock compensation expense at the regional level. 


  
TECH DATA CORPORATION AND SUBSIDIARIES 
GAAP TO NON-GAAP RECONCILIATION 
(In thousands, except per share amounts) 
  
Selling, general and administrative expenses ("SG&A") Three months ended April 30, 
   2016   2015  
Net Sales $   5,963,362   $   5,887,229   
GAAP SG&A    246,496     248,462  
Acquisition-related amortization of intangibles    (5,445)    (5,780) 
Restatement and remediation related expenses    -      (618) 
Loss on disposal of subsidiaries    -      (363) 
Non-GAAP SG&A $   241,051   $   241,701   
      
GAAP SG&A percentage of net sales  4.13%  4.22% 
Non-GAAP SG&A percentage of net sales  4.04%  4.11% 
      


  Three months ended April 30,  
   2016   2015  
   Net Income  Diluted EPS   Net Income  Diluted EPS  
GAAP Results $33,373 $0.94  $51,277 $1.38  
LCD settlements, net  (443) (0.01)  (38,511) (1.04) 
Restatement and remediation related expenses  -  -   618  0.02  
Loss on disposal of subsidiaries  -  -   363  0.01  
Acquisition-related intangible assets amortization expense  5,445  0.15   5,780  0.16  
Income tax effect of the above adjustments  (1,333) (0.03)  10,052  0.27  
Non-GAAP results $37,042 $1.05  $29,579 $0.80  
        

 

Return on Invested Capital (ROIC) 
  
  Twelve months ended 
  April 30, 2016 
TTM Non-GAAP Net Operating Profit After Tax (NOPAT)*:   
Non-GAAP Operating Income $  326,441  
Non-GAAP effective tax rate  28.1% 
Non-GAAP NOPAT (Non-GAAP operating income x (1 - non-GAAP effective tax rate)) $  234,834  
    
Average Invested Capital:   
Short-term debt (5-qtr average) $  17,467  
Long-term debt (5-qtr average)    349,842  
Non-GAAP Shareholders' Equity (5-qtr average)    1,976,247  
Total average capital    2,343,556  
Less: Cash (5-qtr average)    (654,263) 
Average invested capital less average cash $  1,689,293  
ROIC   14% 
    
* Trailing Twelve Months is abbreviated as TTM.
 
    
Contacts:

Charles V. Dannewitz, Executive Vice President and Chief Financial Officer
727-532-8028 (chuck.dannewitz@techdata.com); or

Arleen Quinones, Vice President, Investor Relations and Corporate Communications
727-532-8866 (arleen.quinones@techdata.com)


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