RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

On March 21, 2013, the Company announced that it would restate previously issued quarterly and audited annual financial statements to correct accounting improprieties involving vendor accounting within the Company's primary operating subsidiary in the UK. The Company further stated that financial statements as of and for the fiscal years ended 2011, 2012, and 2013 and each of the fiscal quarters in 2011, 2012 and 2013 should no longer be relied upon. Thereafter, the Audit Committee initiated an independent investigation by outside counsel, to review certain of the Company’s accounting practices throughout Europe. Concurrently, the Company engaged significant internal and external resources to perform supplemental procedures to assist in reviewing its financial statements and accounting practices (the "Supplemental Procedures"). The Audit Committee has completed its investigation and has identified certain accounting irregularities in the UK subsidiary and certain other European subsidiaries. As disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended January, 31, 2013, filed with the SEC on February 5, 2014, the Company has restated its financial statements as of January 31, 2012, for the fiscal years ended January 31, 2011 and 2012 and as of and for the fiscal 2013 quarters ended April 30, 2012, July 31, 2012 and October 31, 2012.

The restatement reflects two primary categories of adjustments:


•	Adjustments relating to the inadequate control environment identified within the Company’s primary operating subsidiary in the UK and two other European subsidiaries. These adjustments are necessary primarily to correct errors arising as a result of the following:


•	Improper accounting for transactions with the Company’s product suppliers (also referred to as “vendor accounting”), including the recognition of vendor incentives, product discounts/price variances, promotions and other vendor credits. These errors primarily affected inventory, accounts payable and cost of goods sold.


•	Improper manual journal entries and the override of key balance sheet reconciliation controls by local management. These errors affected multiple accounts within the Company’s balance sheet and income statement.


•	Improper recognition of net foreign currency exchange losses, which resulted in an overstatement of cost of goods sold during fiscal 2013. Multiple accounts on the balance sheet were affected during this period.


•	Improper accounting for accounts receivable, including improper cash application and recording of value added taxes. These errors primarily affected accounts receivable, accrued expenses and net sales.


•	Improper cutoff of certain inventory transactions at period end, which resulted in a net understatement of inventory and understatement of accounts payable or cost of goods sold.


•	Improper cutoff of certain cash receipts at period end, which resulted in an overstatement of cash and understatement of accounts receivable.


•	Adjustments identified within subsidiaries in addition to the UK subsidiary and two other European subsidiaries noted above, including the following:


•	Adjustments for errors primarily related to the timing of recognition and classification of various vendor accounting transactions.


•	Certain adjustments previously identified and considered immaterial, including:


•	Reclassification of gains (losses) on investments related to the Company’s nonqualified deferred compensation plan, which had no impact on previously reported pre-tax or net income. This reclassification impacted selling, general and administrative expenses and other (income) expense, net.


•	Adjustments to accounts receivable, inventory, sales and cost of goods sold to record the impact of estimated sales returns for which the Company had previously only recorded the net impact on gross profit.


•	Other immaterial adjustments to correct errors in sales or inventory cutoff and accrued expenses. These adjustments primarily affected accounts receivable, inventory, accrued expenses, and the Consolidated Statement of Income.

Income taxes, retained earnings and other comprehensive income have been adjusted primarily to consider the net impacts of the adjustments discussed above.

Restatement expenses primarily include legal and accounting fees associated with the investigation, as well as third party consulting fees to support the Supplemental Procedures and other activities in connection with the restatement. During the first quarter of fiscal 2014, the Company has incurred approximately $3.0 million of restatement expenses which are recorded in "restatement expenses" in the accompanying Consolidated Statement of Income. The Company will incur a total of approximately $54 million to $56 million of restatement expenses during the entire fiscal year ended January 31, 2014.

The following tables present the impact of the restatement on the Company’s previously issued consolidated financial statements.




Consolidated Statement of Income

	Three months ended April 30, 2012
	As Previously Reported			Adjustments				As Restated
	(In thousands, except per share amounts)

Net sales	$	5,895,561		$	14,502		⁽¹⁾	$	5,910,063
Cost of products sold	5,575,344			11,311			⁽¹⁾	5,586,655
Gross profit	320,217			3,191			⁽²⁾	323,408
Selling, general and administrative expenses	239,324			1,626			⁽³⁾	240,950
Operating income	80,893			1,565				82,458
Interest expense	3,069			0				3,069
Other expense (income), net	1,344			(1,109		)	⁽⁴⁾	235
Income before income taxes	76,480			2,674				79,154
Provision for income taxes	22,954			188			⁽⁵⁾	23,142
Consolidated net income	53,526			2,486				56,012
Net income attributable to noncontrolling interest	(1,834		)	0				(1,834		)
Net income attributable to shareholders of Tech Data Corporation	$	51,692		$	2,486			$	54,178

Net income per share attributable to shareholders of Tech Data Corporation:
Basic	$	1.26		$	0.06			$	1.32
Diluted	$	1.24		$	0.06			$	1.30

(1) Net sales and cost of products sold adjustments primarily reflect the impact of sales cutoff errors that were not appropriately recorded based on the delivery terms.

(2) Gross profit adjustments primarily reflect the impact of both vendor accounting errors in the Company's primary operating subsidiary in the UK and two other European subsidiaries of $3.7 million, and the reversal of an improper deferral of net foreign currency exchange losses in a European subsidiary of $0.4 million, partially offset by various other immaterial errors.

(3) Selling, general and administrative expenses include an adjustment to reclassify investment income of $1.1 million related to the Company’s deferred compensation plan assets from selling, general and administrative expenses where it was recorded as a reduction of the corresponding payroll expense related to the plan to other expense (income), net and various other adjustments to correct immaterial errors.

(4) Other expense (income), net has been adjusted to reclassify investment income of $1.1 million related to the Company’s deferred compensation plan assets from selling, general and administrative expenses where it was recorded as a reduction of the corresponding payroll expense related to the plan.

(5) The provision for income taxes has been adjusted primarily to increase tax expense as a result of the increase in profit resulting from the restatement adjustments described herein.



Consolidated Statement of Comprehensive Income
	Three months ended April 30, 2012
	As Previously Reported			Adjustments			As Restated
	(In thousands)

Consolidated net income	$	53,526		$	2,486		$	56,012
Other comprehensive income:
Foreign currency translation adjustment	27,996			(825		)	27,171
Total comprehensive income	81,522			1,661			83,183
Comprehensive income attributable to noncontrolling interest	(2,184		)	0			(2,184		)
Comprehensive income attributable to shareholders of Tech Data Corporation	$	79,338		$	1,661		$	80,999



Consolidated Statement of Cash Flows
	Three Months Ended April 30, 2012
	As Previously Reported			Adjustments			As Restated
	(In thousands)
Cash flows from operating activities:
Cash received from customers	$	6,148,879		$	274,770		$	6,423,649
Cash paid to vendors and employees	(6,104,721		)	(290,191		)	(6,394,912		)
Interest paid	(2,970		)	0			(2,970		)
Income taxes paid	(33,118		)	0			(33,118		)
Net cash used provided by (used in) operating activities	8,070			(15,421		)	(7,351		)
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired	(8,782		)	0			(8,782		)
Expenditures for property and equipment	(4,295		)	(847		)	(5,142		)
Software development costs	(7,842		)	(1,274		)	(9,116		)
Net cash used in investing activities	(20,919		)	(2,121		)	(23,040		)
Cash flows from financing activities:
Proceeds from the reissuance of treasury stock	2,714			0			2,714
Cash paid for purchase of treasury stock	(37,553		)	0			(37,553		)
Return of capital to joint venture partner	(4,646		)	0			(4,646		)
Net repayments on revolving credit loans	(17,369		)	0			(17,369		)
Principal payments on long-term debt	(127		)	0			(127		)
Excess tax benefit from stock-based compensation	4,497			0			4,497
Net cash used in financing activities	(52,484		)	0			(52,484		)
Effect of exchange rate changes on cash and cash equivalents	7,193			(1,051		)	6,142
Net decrease in cash and cash equivalents	(58,140		)	(18,593		)	(76,733		)
Cash and cash equivalents at beginning of year	505,178			(18,916		)	486,262
Cash and cash equivalents at end of year	$	447,038		$	(37,509	)	$	409,529
Reconciliation of net income to net cash provided by (used in) operating activities:
Net income attributable to shareholders of Tech Data Corporation	$	51,692		$	2,486		$	54,178
Net income attributable to noncontrolling interest	1,834			0			1,834
Consolidated net income	53,526			2,486			56,012
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	13,397			0			13,397
Provision for losses on accounts receivable	356			50			406
Stock-based compensation expense	2,780			161			2,941
Excess tax benefit from stock-based compensation	(4,497		)	0			(4,497		)
Changes in operating assets and liabilities:
Accounts receivable	251,247			(32,498		)	218,749
Inventories	(129,323		)	11,463			(117,860		)
Prepaid expenses and other assets	34,257			(2,430		)	31,827
Accounts payable	(125,626		)	(2,727		)	(128,353		)
Accrued expenses and other liabilities	(88,047		)	8,074			(79,973		)
Total adjustments	(45,456		)	(17,907		)	(63,363		)
Net cash used provided by (used in) operating activities	$	8,070		$	(15,421	)	$	(7,351	)