Thu Aug 31, 2017 3:10pm EST
Company to Host Investor Day in New York City on Tuesday, October 10, 2017
 (PRNewsfoto/Tech Data Corporation)
(PRNewsfoto/Tech Data Corporation)

CLEARWATER, Fla., Aug. 31, 2017 /PRNewswire/ -- Tech Data (NASDAQ: TECD) (the "Company") today announced its financial results for the second quarter ended July 31, 2017.


 Second quarter ended July 31,

Six months ended July 31,

($ in millions,
except per share amounts)

2017

2016

Y/Y
Change

2017

2016

Y/Y
Change

Net Sales

$8,882.7

$6,353.7

40%

$16,546.8

$12,317.1

34%








Operating income (GAAP)

$103.5

$73.4

41%

$178.6

$125.9

42%

Operating margin (GAAP)

1.17%

1.15%

2 bps

1.08%

1.02%

6 bps








Operating income (Non-GAAP)

$127.8

$78.1

64%

$251.1

$135.7

85%

Operating margin (Non-GAAP)

1.44%

1.23%

21 bps

1.52%

1.10%

42 bps








Net income (GAAP)

$47.5

$46.4

2%

$78.1

$79.8

-2%

Net income (Non-GAAP)

$66.7

$50.3

33%

$136.8

$87.3

57%








EPS - diluted (GAAP)

$1.24

$1.31

-5%

$2.06

$2.26

-9%

EPS - diluted (Non-GAAP)

$1.74

$1.42

23%

$3.61

$2.47

46%


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 Second Quarter Ended July 31, 2017:

  • Net sales were $8.9 billion, an increase of 40 percent compared to the prior-year quarter. The increase in net sales is primarily due to the addition of the Technology Solutions business acquired from Avnet, Inc. on February 27, 2017 ("Technology Solutions"). On a constant currency basis, net sales increased 41 percent.   
    • Americas: Net sales were $4.2 billion (47 percent of worldwide net sales), an increase of 57 percent compared to the prior-year quarter. The increase in net sales is primarily attributed to the addition of Technology Solutions.
    • Europe: Net sales were $4.4 billion (50 percent of worldwide net sales), an increase of 20 percent compared to the prior-year quarter. The increase in net sales is primarily attributed to the addition of Technology Solutions. On a constant currency basis, net sales increased 21 percent.
    • Asia Pacific: Net sales were $0.3 billion (3 percent of worldwide net sales). Asia Pacific net sales are attributed to the addition of Technology Solutions.
  • Gross profit was $515.6 million, an increase of $199.1 million, or 63 percent compared to the prior-year quarter. As a percentage of net sales, gross profit was 5.80 percent compared to 4.98 percent in the prior-year quarter. The increase in gross profit and gross margin percentage is primarily attributable to the addition of Technology Solutions.  
  • Selling, general and administrative expenses ("SG&A") were $410.6 million, or 4.62 percent of net sales, compared to $243.8 million, or 3.84 percent of net sales in the prior-year quarter. Non-GAAP SG&A was $387.7 million, an increase of $149.4 million, or 63 percent, compared to the prior-year quarter. As a percentage of net sales, non-GAAP SG&A was 4.37 percent, compared to 3.75 percent in the prior-year quarter. The increase in both dollars and percentage of net sales, on a GAAP and non-GAAP basis, is primarily attributable to the addition of Technology Solutions.
  • Worldwide operating income was $103.5 million, or 1.17 percent of net sales compared to $73.4 million or 1.15 percent of net sales in the prior-year quarter. Non-GAAP operating income was $127.8 million, an increase of $49.8 million, or 64 percent, compared to the prior-year quarter. As a percentage of net sales, non-GAAP operating income was 1.44 percent, an improvement of 21 basis points over the prior-year quarter.
    • Americas: Operating income was $88.0 million, or 2.10 percent of net sales, compared to $41.2 million, or 1.54 percent of net sales in the prior-year quarter. Non-GAAP operating income was $84.7 million, an increase of $45.9 million, or 118 percent, compared to the prior-year quarter. As a percentage of net sales, non-GAAP operating income was 2.02 percent, an improvement of 57 basis points over the prior-year quarter.
    • Europe: Operating income was $18.5 million, or 0.42 percent of net sales, compared to $35.9 million, or 0.98 percent of net sales in the prior-year quarter. Non-GAAP operating income was $43.4 million, an increase of $0.3 million, or 1 percent, compared to the prior-year quarter. As a percentage of net sales, non-GAAP operating income was 0.99 percent compared to 1.17 percent in the prior-year quarter.
    • Asia Pacific: Operating income was $5.1 million, or 1.76 percent of net sales. Non-GAAP operating income was $6.7 million, or 2.32 percent of net sales.
    • Stock-based compensation expense was $8.0 million, an increase of $4.2 million, compared to the prior-year quarter. This includes $1.0 million of acquisition and integration-related stock compensation expense. These expenses are excluded from the regional 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 $47.5 million, compared to $46.4 million in the prior-year quarter. Non-GAAP net income was $66.7 million, an increase of $16.4 million, or 33 percent, compared to the prior-year quarter.
  • Earnings per share on a diluted basis ("EPS") were $1.24, compared to $1.31 in the prior year quarter. Non-GAAP EPS was $1.74, an increase of $0.32, or 23 percent compared to the prior-year quarter.
  • Net cash generated by operations during the quarter was $146 million.
  • Return on invested capital for the trailing twelve months was 10 percent, compared to 14 percent in the prior year period. The adjusted return on invested capital for the trailing twelve months was 12 percent, compared to 14 percent in the prior year period.

"Our fiscal 2018 first-half results clearly show the enhanced earnings and cash-generating power of the new Tech Data. In Q2, worldwide sales exceeded plan and our teams maintained disciplined cost controls; however, we did not deliver the earnings we expected in the quarter," said Robert M. Dutkowsky, chairman and chief executive officer. "Tech Data is a stronger company today than it was a year ago. With the addition of Technology Solutions, we now have a richer portfolio of advanced technology vendors and customers, along with deeper skills to serve them. At the same time, we continue to accelerate the expansion of our capabilities in next-generation technologies. Our integration is progressing as planned and we are on track to deliver our synergy and debt reduction targets."

Business Outlook  

  • For the quarter ending October 31, 2017, the Company anticipates worldwide net sales to be in the range of $9.0 billion to $9.35 billion.
  • For the quarter ending October 31, 2017, the Company anticipates EPS to be in the range of $0.80 to $1.00 and non-GAAP EPS to be in the range of $1.84 to $2.04.
  • This guidance assumes weighted average diluted shares outstanding of 38.5 million and an effective tax rate in the range of 30 percent to 32 percent.
  • This guidance also assumes an average U.S. dollar to euro exchange rate of $1.16 to €1.00. 

Webcast Details

Tech Data will hold a conference call today at 5:00 p.m. (ET) to discuss its financial results for the second quarter ended July 31, 2017. 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.

Investor Day Event

The Company also announced it will host an Investor Day in New York City beginning at 8:30 a.m. on Tuesday, October 10, 2017. Chairman and CEO Bob Dutkowsky, COO Rich Hume, and CFO Chuck Dannewitz, along with other members of the management team, will review the company's strategy, highlight its performance and outline the company's financial goals. A live webcast of the investor day event, including slides and 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"), non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP earnings per diluted share and Adjusted Return on Invested Capital. Certain non-GAAP measures also exclude acquisition-related intangible assets amortization expense, benefits associated with legal settlements, acquisition, integration and restructuring  expenses, value-added tax assessments and acquisition-related financing 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 

Certain statements in this communication may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements, including statements regarding Tech Data's plans, objectives, expectations and intentions, which may relate to the Technology Solutions business, Tech Data's financial results and estimates and/or business prospects, involve a number of risks and uncertainties and actual results could differ materially from those projected. These forward looking statements are based on current expectations, estimates, forecasts, and projections about the operating environment, economies and markets in which Tech Data operates and the beliefs and assumptions of our management. Words such as "expects," "anticipates," "targets," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," variations of such words, and similar expressions are intended to identify such forward looking statements. In addition, any statements that refer to projections of Tech Data's future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances, are forward looking statements. These forward looking statements are only predictions and are subject to risks, uncertainties, and assumptions. Therefore, actual results may differ materially and adversely from those expressed in any forward looking statements.

For additional information with respect to risks and other factors which could occur, see Tech Data's Annual Report on Form 10-K for the year ended January 31, 2017, including Part I, Item 1A, "Risk Factors" therein, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other securities filings with the Securities and Exchange Commission (the "SEC") that are available at the SEC's website at www.sec.gov and other securities regulators. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Many of these factors are beyond Tech Data's control. Unless otherwise required by applicable securities laws, Tech Data disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Tech Data undertakes no duty to update any forward looking statements contained herein to reflect actual results or changes in Tech Data's expectations.

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 115,000 resellers to efficiently and cost effectively support the diverse technology needs of end users in more than 100 countries. Tech Data generated $26.2 billion in net sales for the fiscal year ended January 31, 2017. 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

Contacts:

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

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

 

TECH DATA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)










Three months ended


Six months ended

July 31,


July 31,


2017


2016


2017


2016









Net sales

$8,882,691


$6,353,739


$16,546,754


$12,317,101

Cost of products sold

8,367,100


6,037,289


15,574,075


11,702,040

Gross profit

515,591


316,450


972,679


615,061

Operating expenses:








Selling, general and administrative expenses

410,598


243,763


763,230


490,259

Acquisition, integration and restructuring expenses

30,117


1,982


72,183


1,982

LCD settlements and other, net

(28,655)


(3,699)


(41,343)


(4,142)

Value added tax assessments

-


1,049


-


1,049


412,060


243,095


794,070


489,148

Operating income 

103,531


73,355


178,609


125,913

Interest expense 

28,272


6,288


59,280


11,889

Other expense (income), net 

284


(1,230)


(131)


(2,264)

Income before income taxes

74,975


68,297


119,460


116,288

Provision for income taxes

27,516


21,903


41,347


36,521

Net income

$     47,459


$     46,394


$       78,113


$       79,767









Earnings per share:








Basic

$         1.24


$         1.32


$           2.07


$           2.27

Diluted

$         1.24


$         1.31


$           2.06


$           2.26

Weighted average common shares outstanding:








Basic

38,174


35,207


37,720


35,167

Diluted

38,388


35,378


37,935


35,373

 

 

TECH DATA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(In thousands, except par value and share amounts)






July 31,

January 31,


2017


2017

ASSETS

(unaudited)



Current assets:




Cash and cash equivalents

$      1,033,267


$      2,125,591

Accounts receivable, net

4,981,866


3,047,927

Inventories

2,703,763


2,118,902

Prepaid expenses and other assets

247,504


119,906

Total current assets

8,966,400


7,412,326

Property and equipment, net

136,577


74,239

Goodwill

853,767


199,021

Intangible assets, net

1,149,530


130,676

Other assets, net

267,651


115,604

Total assets

$    11,373,925


$      7,931,866





LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable

$      5,465,428


$      3,844,532

Accrued expenses and other liabilities

742,815


493,199

Revolving credit loans and current maturities of long-term debt, net

465,407


373,123

Total current liabilities

6,673,650


4,710,854

Long-term debt, less current maturities

1,802,618


989,924

Other long-term liabilities

165,425


61,200

Total liabilities

$      8,641,693


$      5,761,978

Shareholders' equity:




Common stock, par value $0.0015; 200,000,000 shares authorized; 59,245,585
shares issued at July 31, 2017 and January 31, 2017

$                  89


$                  89

Additional paid-in capital

811,046


686,042

Treasury stock, at cost (21,100,662 and 24,018,983 shares at  July 31, 2017
and January 31, 2017)

(940,868)


(1,070,994)

Retained earnings

2,707,406


2,629,293

Accumulated other comprehensive income (loss)

154,559


(74,542)

Total shareholders' equity

2,732,232


2,169,888

Total liabilities and shareholders' equity

$    11,373,925


$      7,931,866

 

 

TECH DATA CORPORATION AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION

 (In thousands)






 Three months ended July 31, 2017


 Americas⁽¹⁾


 Europe⁽¹⁾


 APAC⁽¹⁾


 Stock Compensation Expense


 Consolidated

Net Sales

$   4,192,475


$ 4,402,054


$    288,162




$     8,882,691

GAAP operating income⁽¹⁾

$        87,975


$      18,464


$        5,066


$            (7,974)


$        103,531

LCD settlements and other, net

(29,971)


1,316


-




(28,655)

Acquisition, integration and
restructuring expenses

14,242


14,685


145


1,045


30,117

Acquisition-related intangible
assets amortization expense

12,413


8,965


1,477




22,855

Total non-GAAP operating income
adjustments

$        (3,316)


$      24,966


$        1,622


$              1,045


$          24,317

Non-GAAP operating income

$        84,659


$      43,430


$        6,688


$            (6,929)


$        127,848

GAAP operating margin

2.10%


0.42%


1.76%




1.17%

Non-GAAP operating margin

2.02%


0.99%


2.32%




1.44%

⁽¹⁾   GAAP operating income does not include stock compensation expense at the regional level.

 

 


Three months ended July 31, 2016


 Americas⁽¹⁾


 Europe⁽¹⁾



 Stock
Compensation
Expense


 Consolidated

Net Sales

$   2,674,886


$ 3,678,853





$     6,353,739

GAAP operating income⁽¹⁾

$        41,241


$      35,927



$            (3,813)


$          73,355

Value added tax assessments

(407)


1,456





1,049

Acquisition, integration and restructuring expenses

1,046


936





1,982

Acquisition-related intangible assets amortization expense

580


4,828





5,408

LCD settlements and other, net

(3,699)


-





(3,699)

Total non-GAAP operating income adjustments

$        (2,480)


$        7,220





$            4,740

Non-GAAP operating income

$        38,761


$      43,147



$            (3,813)


$          78,095

GAAP operating margin

1.54%


0.98%





1.15%

Non-GAAP operating margin

1.45%


1.17%





1.23%

⁽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)




Six months ended July 31, 2017


 Americas⁽¹⁾


 Europe⁽¹⁾


 APAC⁽¹⁾


 Stock
Compensation
Expense


 Consolidated

Net Sales

$   7,661,312


$ 8,408,974


$    476,468




$   16,546,754

GAAP operating income⁽¹⁾

$      138,875


$      43,263


$        9,363


$          (12,892)


$        178,609

LCD settlements and other, net

(42,659)


1,316


-




(41,343)

Acquisition, integration and
restructuring expenses

44,424


26,257


145


1,357


72,183

Acquisition-related intangible
assets amortization expense

22,514


16,713


2,377




41,604

Total non-GAAP operating income
adjustments

$        24,279


$      44,286


$        2,522


$              1,357


$          72,444

Non-GAAP operating income

$      163,154


$      87,549


$      11,885


$          (11,535)


$        251,053

GAAP operating margin

1.81%


0.51%


1.97%




1.08%

Non-GAAP operating margin

2.13%


1.04%


2.49%




1.52%

⁽¹⁾   GAAP operating income does not include stock compensation expense at the regional level.

 

 


Six months ended July 31, 2016


 Americas⁽¹⁾


 Europe⁽¹⁾



 Stock
Compensation
Expense


 Consolidated

Net Sales

$   5,062,890


$ 7,254,211





$   12,317,101

GAAP operating income⁽¹⁾

$        72,516


$      60,867



$            (7,470)


$        125,913

Value added tax assessments

(407)


1,456





1,049

Acquisition, integration and restructuring
expenses

1,046


936





1,982

Acquisition-related intangible assets
amortization expense

1,160


9,693





10,853

LCD settlements and other, net

(4,142)


-





(4,142)

Total non-GAAP operating income adjustments

$        (2,343)


$      12,085





$            9,742

Non-GAAP operating income

$        70,173


$      72,952



$            (7,470)


$        135,655

GAAP operating margin

1.43%


0.84%





1.02%

Non-GAAP operating margin

1.39%


1.01%





1.10%

⁽¹⁾   GAAP operating income does not include stock compensation expense at the regional level.

 

  

Selling, general and administrative expenses ("SG&A")

Three months ended July 31,

2017


2016

Net Sales

$           8,882,691


$           6,353,739

GAAP SG&A

410,598


243,763

Acquisition-related intangible assets amortization expense

(22,855)


(5,408)

Non-GAAP SG&A

$              387,743


$              238,355





GAAP SG&A percentage of net sales

4.62%


3.84%

Non- GAAP SG&A percentage of net sales

4.37%


3.75%










Six months ended July 31,


2017


2016

Net Sales

$        16,546,754


$        12,317,101

GAAP SG&A

763,230


490,259

Acquisition-related intangible assets amortization expense

(41,604)


(10,853)

Non-GAAP SG&A

$              721,626


$              479,406





GAAP SG&A percentage of net sales

4.61%


3.98%

Non- GAAP SG&A percentage of net sales

4.36%


3.89%

 

 


Three months ended July 31,


2017


2016


Net Income

Diluted EPS


Net Income

Diluted EPS

GAAP Results

$47,459

$1.24


$46,394

$1.31

LCD settlements and other, net

(28,332)

(0.74)


(3,699)

(0.10)

Value added tax assessments

-

-


1,386

0.04

Acquisition, integration and restructuring
expenses

30,117

0.78


1,982

0.05

Acquisition-related intangible assets
amortization expense

22,855

0.60


5,408

0.15

Income tax effect of the above adjustments

(5,367)

(0.14)


(1,178)

(0.03)

Non-GAAP results

$66,732

$1.74


$50,293

$1.42








Six months ended July 31,


2017


2016


Net Income

Diluted EPS


Net Income

Diluted EPS

GAAP Results

$78,113

$2.06


$79,767

$2.26

LCD settlements and other, net

(41,020)

(1.08)


(4,142)

(0.12)

Value added tax assessments

-

-


1,386

0.04

Acquisition, integration and restructuring expenses

72,183

1.90


1,982

0.05

Acquisition-related intangible assets amortization expense

41,604

1.10


10,853

0.31

Acquisition-related financing expenses

8,807

0.23


-

-

Income tax effect of the above adjustments

(22,896)

(0.60)


(2,511)

(0.07)

Non-GAAP results

$136,791

$3.61


$87,335

$2.47

 

 

Return on Invested Capital (ROIC)




Twelve months ended July 31,


2017


2016

TTM Net Operating Profit After Tax (NOPAT)*:




Operating income

$                 344,598


$              339,168

Income taxes on operating income⁽¹⁾

(88,150)


(103,254)

NOPAT 

$                 256,448


$              235,914





Average Invested Capital:




Short-term debt (5-qtr average)

$                 340,608


$                16,796

Long-term debt (5-qtr average)

988,243


349,316

Shareholders' Equity (5-qtr average)

2,316,790


2,036,086

Total average capital

3,645,641


2,402,198

Less: Cash (5-qtr average)

(1,081,802)


(669,836)

Average invested capital less average cash

$              2,563,839


$          1,732,362

ROIC 

10%


14%





* Trailing Twelve Months is abbreviated as TTM.




⁽¹⁾ Income taxes on operating income was calculated using the trailing 12 months effective tax rate during the respective periods. 

 

 

Adjusted Return on Invested Capital (ROIC)




Twelve months ended July 31,


2017


2016

TTM Net Operating Profit After Tax (NOPAT), as adjusted *:




Non-GAAP operating income⁽¹⁾

$                 454,332


$              323,366

Income taxes on non-GAAP operating income⁽²⁾

(134,878)


(91,519)

NOPAT, as adjusted

$                 319,454


$              231,847





Average Invested Capital, as adjusted:




Short-term debt (5-qtr average)

$                 340,608


$                16,796

Long-term debt (5-qtr average)

988,243


349,316

Shareholders' Equity (5-qtr average)

2,316,790


2,036,086

Tax effected impact of non-GAAP adjustments⁽³⁾

31,842


(27,154)

Total average capital, as adjusted

3,677,483


2,375,044

Less: Cash (5-qtr average)

(1,081,802)


(669,836)

Average invested capital less average cash

$              2,595,681


$          1,705,208

Adjusted ROIC 

12%


14%





* Trailing Twelve Months is abbreviated as TTM.




⁽¹⁾ Represents operating income as adjusted to exclude acquisition, integration and restructuring expenses, LCD settlements and other, net, value added tax assessments and acquisition-related intangible assets amortization expense.

⁽²⁾ Income taxes on non-GAAP operating income was calculated using the trailing 12 months effective tax rate adjusted for the impact of non-GAAP adjustments during the respective periods. 

⁽³⁾ Represents the 5 quarter average of the year-to-date impact of non-GAAP adjustments.

 

 

Guidance Reconciliation




Three months ended October 31, 2017


Low end of
guidance range


High end of
guidance range

Earnings per share - diluted 

$0.80


$1.00

Acquisition, integration and restructuring expenses

0.85


0.85

Acquisition-related intangible assets amortization expense

0.62


0.62

Income tax effect of the above adjustments

(0.43)


(0.43)

Non-GAAP earnings per share - diluted 

$1.84


$2.04

 

 

 

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SOURCE Tech Data Corporation


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