false727--01-31Q220200000790703falsefalse539-74290.00300.0040000.960.910.00150.00152000000002000000003000000000.03990.066700000
0000790703
2019-02-01
2019-07-31
0000790703
tecd:GlobalBusinessOptimizationProgramMember
2019-02-01
2019-07-31
0000790703
tecd:TSMember
2019-02-01
2019-07-31
0000790703
2019-08-29
0000790703
2019-07-31
0000790703
2019-01-31
0000790703
2018-02-01
2018-07-31
0000790703
2019-05-01
2019-07-31
0000790703
2018-05-01
2018-07-31
0000790703
us-gaap:TreasuryStockMember
2019-01-31
0000790703
us-gaap:TreasuryStockMember
2019-02-01
2019-04-30
0000790703
us-gaap:AdditionalPaidInCapitalMember
2019-02-01
2019-04-30
0000790703
us-gaap:AdditionalPaidInCapitalMember
2019-05-01
2019-07-31
0000790703
us-gaap:CommonStockMember
2019-02-01
2019-04-30
0000790703
2019-02-01
2019-04-30
0000790703
us-gaap:AdditionalPaidInCapitalMember
2019-07-31
0000790703
us-gaap:CommonStockMember
2019-07-31
0000790703
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2019-01-31
0000790703
us-gaap:RetainedEarningsMember
2019-05-01
2019-07-31
0000790703
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2019-05-01
2019-07-31
0000790703
us-gaap:CommonStockMember
2019-05-01
2019-07-31
0000790703
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2019-02-01
2019-04-30
0000790703
us-gaap:AdditionalPaidInCapitalMember
2019-01-31
0000790703
2019-04-30
0000790703
us-gaap:RetainedEarningsMember
2019-02-01
2019-04-30
0000790703
us-gaap:AdditionalPaidInCapitalMember
2019-04-30
0000790703
us-gaap:TreasuryStockMember
2019-05-01
2019-07-31
0000790703
us-gaap:CommonStockMember
2019-04-30
0000790703
us-gaap:CommonStockMember
2019-01-31
0000790703
us-gaap:RetainedEarningsMember
2019-07-31
0000790703
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2019-04-30
0000790703
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2019-07-31
0000790703
us-gaap:TreasuryStockMember
2019-07-31
0000790703
us-gaap:TreasuryStockMember
2019-04-30
0000790703
us-gaap:RetainedEarningsMember
2019-01-31
0000790703
us-gaap:RetainedEarningsMember
2019-04-30
0000790703
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2018-02-01
2018-04-30
0000790703
us-gaap:CommonStockMember
2018-02-01
2018-04-30
0000790703
2018-02-01
2018-04-30
0000790703
us-gaap:RetainedEarningsMember
2018-02-01
2018-04-30
0000790703
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2018-01-31
0000790703
2018-04-30
0000790703
us-gaap:AdditionalPaidInCapitalMember
2018-02-01
2018-04-30
0000790703
us-gaap:TreasuryStockMember
2018-02-01
2018-04-30
0000790703
us-gaap:TreasuryStockMember
2018-05-01
2018-07-31
0000790703
us-gaap:AdditionalPaidInCapitalMember
2018-05-01
2018-07-31
0000790703
us-gaap:RetainedEarningsMember
2018-05-01
2018-07-31
0000790703
us-gaap:AdditionalPaidInCapitalMember
2018-01-31
0000790703
us-gaap:CommonStockMember
2018-05-01
2018-07-31
0000790703
us-gaap:CommonStockMember
2018-07-31
0000790703
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2018-05-01
2018-07-31
0000790703
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2018-04-30
0000790703
2018-07-31
0000790703
2018-01-31
0000790703
us-gaap:TreasuryStockMember
2018-04-30
0000790703
us-gaap:CommonStockMember
2018-01-31
0000790703
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2018-07-31
0000790703
us-gaap:RetainedEarningsMember
2018-07-31
0000790703
us-gaap:AdditionalPaidInCapitalMember
2018-04-30
0000790703
us-gaap:RetainedEarningsMember
2018-04-30
0000790703
us-gaap:RetainedEarningsMember
2018-01-31
0000790703
us-gaap:TreasuryStockMember
2018-01-31
0000790703
us-gaap:TreasuryStockMember
2018-07-31
0000790703
us-gaap:CommonStockMember
2018-04-30
0000790703
us-gaap:AdditionalPaidInCapitalMember
2018-07-31
0000790703
tecd:HPIncMember
2018-02-01
2018-07-31
0000790703
tecd:CiscoSystemsInc.Member
2019-05-01
2019-07-31
0000790703
tecd:CiscoSystemsInc.Member
2018-05-01
2018-07-31
0000790703
tecd:HPIncMember
2019-05-01
2019-07-31
0000790703
tecd:HPIncMember
2018-05-01
2018-07-31
0000790703
tecd:HPIncMember
2019-02-01
2019-07-31
0000790703
tecd:CiscoSystemsInc.Member
2018-02-01
2018-07-31
0000790703
tecd:AppleMember
2019-05-01
2019-07-31
0000790703
tecd:CiscoSystemsInc.Member
2019-02-01
2019-07-31
0000790703
tecd:AppleMember
2018-02-01
2018-07-31
0000790703
tecd:AppleMember
2019-02-01
2019-07-31
0000790703
tecd:AppleMember
2018-05-01
2018-07-31
0000790703
tecd:TSMember
us-gaap:OtherExpenseMember
2018-05-01
2018-07-31
0000790703
tecd:TSMember
us-gaap:RestructuringChargesMember
2018-05-01
2018-07-31
0000790703
tecd:TSMember
2018-02-01
2018-07-31
0000790703
tecd:TSMember
us-gaap:OtherExpenseMember
2018-02-01
2018-07-31
0000790703
tecd:TSMember
us-gaap:RestructuringChargesMember
2018-02-01
2018-07-31
0000790703
tecd:TSMember
tecd:ProfessionalServicesMember
2018-02-01
2018-07-31
0000790703
tecd:TSMember
tecd:ProfessionalServicesMember
2018-05-01
2018-07-31
0000790703
tecd:TSMember
tecd:ITRelatedCostsMember
2018-02-01
2018-07-31
0000790703
tecd:TSMember
tecd:TransactionRelatedCostsMember
2018-05-01
2018-07-31
0000790703
tecd:TSMember
tecd:ITRelatedCostsMember
2018-05-01
2018-07-31
0000790703
tecd:TSMember
tecd:TransactionRelatedCostsMember
2018-02-01
2018-07-31
0000790703
tecd:TSMember
2018-05-01
2018-07-31
0000790703
us-gaap:RestructuringChargesMember
tecd:GlobalBusinessOptimizationProgramMember
2019-07-31
0000790703
us-gaap:EmployeeSeveranceMember
tecd:GlobalBusinessOptimizationProgramMember
2019-02-01
2019-07-31
0000790703
tecd:ProfessionalServicesMember
tecd:GlobalBusinessOptimizationProgramMember
2019-02-01
2019-07-31
0000790703
us-gaap:EmployeeSeveranceMember
tecd:GlobalBusinessOptimizationProgramMember
2019-01-31
0000790703
us-gaap:RestructuringChargesMember
tecd:GlobalBusinessOptimizationProgramMember
2019-02-01
2019-07-31
0000790703
tecd:ProfessionalServicesMember
tecd:GlobalBusinessOptimizationProgramMember
2019-01-31
0000790703
tecd:ProfessionalServicesMember
tecd:GlobalBusinessOptimizationProgramMember
2019-07-31
0000790703
us-gaap:EmployeeSeveranceMember
tecd:GlobalBusinessOptimizationProgramMember
2019-07-31
0000790703
us-gaap:RestructuringChargesMember
tecd:GlobalBusinessOptimizationProgramMember
2019-01-31
0000790703
tecd:GlobalBusinessOptimizationProgramMember
srt:AmericasMember
2018-02-01
2018-07-31
0000790703
tecd:GlobalBusinessOptimizationProgramMember
srt:AmericasMember
2018-05-01
2018-07-31
0000790703
tecd:GlobalBusinessOptimizationProgramMember
srt:EuropeMember
2018-05-01
2018-07-31
0000790703
tecd:GlobalBusinessOptimizationProgramMember
2018-02-01
2018-07-31
0000790703
srt:EuropeMember
2019-05-01
2019-07-31
0000790703
srt:AmericasMember
2019-05-01
2019-07-31
0000790703
tecd:GlobalBusinessOptimizationProgramMember
2019-05-01
2019-07-31
0000790703
tecd:GlobalBusinessOptimizationProgramMember
srt:AsiaPacificMember
2019-05-01
2019-07-31
0000790703
tecd:GlobalBusinessOptimizationProgramMember
srt:AsiaPacificMember
2019-02-01
2019-07-31
0000790703
tecd:GlobalBusinessOptimizationProgramMember
srt:AsiaPacificMember
2018-05-01
2018-07-31
0000790703
srt:AmericasMember
2019-02-01
2019-07-31
0000790703
tecd:GlobalBusinessOptimizationProgramMember
srt:AsiaPacificMember
2018-02-01
2018-07-31
0000790703
tecd:GlobalBusinessOptimizationProgramMember
2018-05-01
2018-07-31
0000790703
tecd:GlobalBusinessOptimizationProgramMember
srt:EuropeMember
2018-02-01
2018-07-31
0000790703
srt:EuropeMember
2019-02-01
2019-07-31
0000790703
tecd:ProfessionalServicesMember
tecd:GlobalBusinessOptimizationProgramMember
2019-05-01
2019-07-31
0000790703
tecd:GlobalBusinessOptimizationProgramMember
2019-07-31
0000790703
us-gaap:EmployeeSeveranceMember
tecd:GlobalBusinessOptimizationProgramMember
2019-05-01
2019-07-31
0000790703
tecd:ProfessionalServicesMember
tecd:GlobalBusinessOptimizationProgramMember
2018-05-01
2018-07-31
0000790703
us-gaap:EmployeeSeveranceMember
tecd:GlobalBusinessOptimizationProgramMember
2018-05-01
2018-07-31
0000790703
us-gaap:EmployeeSeveranceMember
tecd:GlobalBusinessOptimizationProgramMember
2018-02-01
2018-07-31
0000790703
tecd:ProfessionalServicesMember
tecd:GlobalBusinessOptimizationProgramMember
2018-02-01
2018-07-31
0000790703
tecd:TSMember
2017-02-01
2017-02-28
0000790703
srt:MaximumMember
tecd:GlobalBusinessOptimizationProgramMember
2019-07-31
0000790703
us-gaap:RestructuringChargesMember
srt:AmericasMember
2018-05-01
2018-07-31
0000790703
srt:MaximumMember
tecd:GlobalBusinessOptimizationProgramMember
srt:EuropeMember
2019-07-31
0000790703
us-gaap:RestructuringChargesMember
srt:EuropeMember
2018-05-01
2018-07-31
0000790703
srt:MinimumMember
tecd:GlobalBusinessOptimizationProgramMember
srt:AmericasMember
2019-07-31
0000790703
srt:MinimumMember
tecd:GlobalBusinessOptimizationProgramMember
2019-07-31
0000790703
us-gaap:RestructuringChargesMember
srt:EuropeMember
2018-02-01
2018-07-31
0000790703
us-gaap:RestructuringChargesMember
srt:AmericasMember
2018-02-01
2018-07-31
0000790703
srt:MaximumMember
tecd:GlobalBusinessOptimizationProgramMember
srt:AmericasMember
2019-07-31
0000790703
tecd:TSMember
tecd:WorkingCapitalAdjustmentGainLossDomain
2018-02-01
2018-07-31
0000790703
srt:MinimumMember
tecd:GlobalBusinessOptimizationProgramMember
srt:EuropeMember
2019-07-31
0000790703
2017-02-01
2017-02-28
0000790703
tecd:TermLoanMember
2019-07-31
0000790703
tecd:TermLoanMember
2019-01-31
0000790703
us-gaap:SeniorNotesMember
2019-01-31
0000790703
tecd:A3.70SeniorNotesMember
us-gaap:SeniorNotesMember
2019-01-31
0000790703
tecd:A4.95SeniorNotesMember
us-gaap:SeniorNotesMember
2019-01-31
0000790703
tecd:A4.95SeniorNotesMember
us-gaap:SeniorNotesMember
2019-07-31
0000790703
us-gaap:SeniorNotesMember
2019-07-31
0000790703
tecd:OtherCommittedAndUncommittedRevolvingCreditFacilitiesMember
2019-07-31
0000790703
tecd:A3.70SeniorNotesMember
us-gaap:SeniorNotesMember
2019-07-31
0000790703
tecd:OtherCommittedAndUncommittedRevolvingCreditFacilitiesMember
2019-01-31
0000790703
tecd:CreditAgreementMember
2019-07-31
0000790703
tecd:A3.70SeniorNotesMember
us-gaap:SeniorNotesMember
2017-01-31
0000790703
tecd:ReceivablesSecuritizationProgramMember
2019-07-31
0000790703
tecd:TermloancreditagreementMember
2016-11-02
0000790703
tecd:A4.95SeniorNotesMember
us-gaap:SeniorNotesMember
2017-01-31
0000790703
tecd:A2019TermloancreditagreementMember
tecd:A2yearmaturityMember
us-gaap:SubsequentEventMember
2019-08-02
0000790703
tecd:A2016TermloancreditagreementMember
tecd:A5yearmaturityMember
2019-07-31
0000790703
tecd:ReceivablesSecuritizationProgramMember
2019-01-31
0000790703
tecd:TermloancreditagreementMember
tecd:A5yearmaturityMember
2019-01-31
0000790703
tecd:A2016TermloancreditagreementMember
tecd:A5yearmaturityMember
2019-01-31
0000790703
tecd:TermloancreditagreementMember
tecd:A5yearmaturityMember
2019-07-31
0000790703
tecd:CreditAgreementMember
2019-01-31
0000790703
us-gaap:RestrictedStockUnitsRSUMember
2019-02-01
2019-07-31
0000790703
us-gaap:RestrictedStockUnitsRSUMember
2019-01-31
0000790703
us-gaap:RestrictedStockUnitsRSUMember
2019-07-31
0000790703
srt:MaximumMember
2019-02-01
2019-07-31
0000790703
srt:MinimumMember
2019-02-01
2019-07-31
0000790703
us-gaap:PerformanceSharesMember
2019-02-01
2019-07-31
0000790703
us-gaap:PerformanceSharesMember
2019-07-31
0000790703
us-gaap:PerformanceSharesMember
2019-01-31
0000790703
us-gaap:FairValueInputsLevel1Member
us-gaap:SeniorNotesMember
2019-01-31
0000790703
us-gaap:FairValueInputsLevel1Member
us-gaap:SeniorNotesMember
2019-07-31
0000790703
us-gaap:OtherNoncurrentAssetsMember
us-gaap:FairValueInputsLevel2Member
us-gaap:FairValueMeasurementsRecurringMember
2019-01-31
0000790703
us-gaap:OtherCurrentLiabilitiesMember
us-gaap:FairValueInputsLevel2Member
us-gaap:FairValueMeasurementsRecurringMember
2019-07-31
0000790703
us-gaap:OtherCurrentAssetsMember
us-gaap:FairValueInputsLevel2Member
us-gaap:FairValueMeasurementsRecurringMember
2019-07-31
0000790703
us-gaap:OtherCurrentAssetsMember
us-gaap:FairValueInputsLevel2Member
us-gaap:FairValueMeasurementsRecurringMember
2019-01-31
0000790703
us-gaap:FairValueInputsLevel2Member
us-gaap:FairValueMeasurementsRecurringMember
2019-07-31
0000790703
us-gaap:OtherNoncurrentAssetsMember
us-gaap:FairValueInputsLevel2Member
us-gaap:FairValueMeasurementsRecurringMember
2019-07-31
0000790703
us-gaap:FairValueInputsLevel2Member
us-gaap:FairValueMeasurementsRecurringMember
2019-01-31
0000790703
us-gaap:OtherCurrentLiabilitiesMember
us-gaap:FairValueInputsLevel2Member
us-gaap:FairValueMeasurementsRecurringMember
2019-01-31
0000790703
us-gaap:OtherNonoperatingIncomeExpenseMember
2019-02-01
2019-07-31
0000790703
us-gaap:InterestExpenseMember
2019-02-01
2019-07-31
0000790703
us-gaap:CostOfSalesMember
2019-05-01
2019-07-31
0000790703
us-gaap:NonoperatingIncomeExpenseMember
2018-05-01
2018-07-31
0000790703
us-gaap:CostOfSalesMember
2018-05-01
2018-07-31
0000790703
us-gaap:NonoperatingIncomeExpenseMember
2019-05-01
2019-07-31
0000790703
us-gaap:NonoperatingIncomeExpenseMember
2019-02-01
2019-07-31
0000790703
us-gaap:NonoperatingIncomeExpenseMember
2018-02-01
2018-07-31
0000790703
us-gaap:CostOfSalesMember
2018-02-01
2018-07-31
0000790703
us-gaap:CostOfSalesMember
2019-02-01
2019-07-31
0000790703
us-gaap:InterestExpenseMember
2019-05-01
2019-07-31
0000790703
us-gaap:OtherNonoperatingIncomeExpenseMember
2019-05-01
2019-07-31
0000790703
us-gaap:NetInvestmentHedgingMember
2019-07-31
0000790703
tecd:MaturityYearTwoMember
2019-07-31
0000790703
tecd:MaturityYearFourMember
2019-07-31
0000790703
tecd:MaturityAfterYearFiveMember
2019-07-31
0000790703
tecd:MaturityYearFiveMember
2019-07-31
0000790703
tecd:MaturityYearOneMember
2019-07-31
0000790703
tecd:MaturityYearThreeMember
2019-07-31
0000790703
us-gaap:NetInvestmentHedgingMember
2018-07-31
0000790703
us-gaap:CashFlowHedgingMember
2019-07-31
0000790703
us-gaap:CashFlowHedgingMember
2018-07-31
0000790703
2018-10-02
0000790703
2019-02-26
0000790703
us-gaap:SubsequentEventMember
2019-08-29
0000790703
us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember
2019-04-30
0000790703
us-gaap:AccumulatedNetGainLossFromCashFlowHedgesIncludingPortionAttributableToNoncontrollingInterestMember
2019-07-31
0000790703
us-gaap:AccumulatedNetGainLossFromCashFlowHedgesIncludingPortionAttributableToNoncontrollingInterestMember
2019-05-01
2019-07-31
0000790703
us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember
2019-05-01
2019-07-31
0000790703
us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember
2019-07-31
0000790703
us-gaap:AccumulatedNetGainLossFromCashFlowHedgesIncludingPortionAttributableToNoncontrollingInterestMember
2019-04-30
0000790703
us-gaap:AccumulatedNetGainLossFromCashFlowHedgesIncludingPortionAttributableToNoncontrollingInterestMember
2019-02-01
2019-07-31
0000790703
us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember
2019-02-01
2019-07-31
0000790703
us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember
2019-01-31
0000790703
us-gaap:AccumulatedNetGainLossFromCashFlowHedgesIncludingPortionAttributableToNoncontrollingInterestMember
2019-01-31
0000790703
us-gaap:AccumulatedNetGainLossFromCashFlowHedgesIncludingPortionAttributableToNoncontrollingInterestMember
2018-01-31
0000790703
us-gaap:AccumulatedNetGainLossFromCashFlowHedgesIncludingPortionAttributableToNoncontrollingInterestMember
2018-02-01
2018-07-31
0000790703
us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember
2018-02-01
2018-07-31
0000790703
us-gaap:AccumulatedNetGainLossFromCashFlowHedgesIncludingPortionAttributableToNoncontrollingInterestMember
2018-07-31
0000790703
us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember
2018-07-31
0000790703
us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember
2018-01-31
0000790703
us-gaap:AccumulatedNetGainLossFromCashFlowHedgesIncludingPortionAttributableToNoncontrollingInterestMember
2018-05-01
2018-07-31
0000790703
us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember
2018-04-30
0000790703
us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember
2018-05-01
2018-07-31
0000790703
us-gaap:AccumulatedNetGainLossFromCashFlowHedgesIncludingPortionAttributableToNoncontrollingInterestMember
2018-04-30
0000790703
tecd:EquityIncentivePlansMember
2019-02-01
2019-07-31
0000790703
country:BR
2019-07-31
0000790703
srt:AsiaPacificMember
2019-05-01
2019-07-31
0000790703
srt:EuropeMember
2018-02-01
2018-07-31
0000790703
srt:AsiaPacificMember
2019-02-01
2019-07-31
0000790703
srt:AsiaPacificMember
2018-02-01
2018-07-31
0000790703
srt:AmericasMember
2018-02-01
2018-07-31
0000790703
srt:AsiaPacificMember
2018-05-01
2018-07-31
0000790703
srt:AmericasMember
2018-05-01
2018-07-31
0000790703
srt:EuropeMember
2018-05-01
2018-07-31
0000790703
srt:EuropeMember
2019-01-31
0000790703
srt:AmericasMember
2019-01-31
0000790703
srt:AsiaPacificMember
2019-07-31
0000790703
srt:AmericasMember
2019-07-31
0000790703
srt:EuropeMember
2019-07-31
0000790703
srt:AsiaPacificMember
2019-01-31
xbrli:shares
iso4217:USD
iso4217:USD
xbrli:shares
utreg:Rate
xbrli:pure
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2019
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
(Exact name of Registrant as specified in its charter)
Florida
(State or other jurisdiction of
incorporation or organization)
5350 Tech Data Drive Clearwater, Florida
(Address of principal executive offices)
No. 59-1578329
(I.R.S. Employer
Identification Number)
33760
(Zip Code)
(Registrant’s Telephone Number, including Area Code): (727) 539-7429
Securities registered pursuant to Section 12(b) of the Act: |
| | | | |
Title of each class | | Trading symbol | | Name of each exchange which registered |
Common stock, par value $.0015 per share | | TECD | | NASDAQ |
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “accelerated filer”, “large accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
|
| | | |
Large Accelerated Filer | ☒ | Accelerated Filer | ☐ |
| | | |
Non-accelerated Filer | ☐ | Smaller Reporting Company Filer | ☐ |
| | | |
| | Emerging Growth Company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. |
| |
Class | Outstanding at August 29, 2019 |
Common stock, par value $.0015 per share | 35,601,760 |
TECH DATA CORPORATION AND SUBSIDIARIES
Form 10-Q for the Three and Six Months Ended July 31, 2019
INDEX
|
| | |
| | PAGE |
PART I. | | |
ITEM 1. | | |
| | |
| | |
| | |
| | |
| | |
| | |
ITEM 2. | | |
ITEM 3. | | |
ITEM 4. | | |
PART II. | | |
ITEM 1. | | |
ITEM 1A. | | |
ITEM 2. | | |
ITEM 3. | | |
ITEM 4. | | |
ITEM 5. | | |
ITEM 6. | | |
| |
PART I. FINANCIAL INFORMATION
| |
ITEM 1. | Financial Statements |
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except par value and share amounts)
|
| | | | | | | |
| July 31, 2019 | | January 31, 2019 |
ASSETS | (Unaudited) | | |
Current assets: | | | |
Cash and cash equivalents | $ | 738,265 |
| | $ | 799,123 |
|
Accounts receivable, net | 5,390,102 |
| | 6,241,740 |
|
Inventories | 3,115,899 |
| | 3,297,385 |
|
Prepaid expenses and other assets | 360,027 |
| | 354,601 |
|
Total current assets | 9,604,293 |
| | 10,692,849 |
|
Property and equipment, net | 273,128 |
| | 274,917 |
|
Goodwill | 880,657 |
| | 892,990 |
|
Intangible assets, net | 899,076 |
| | 950,858 |
|
Other assets, net | 397,901 |
| | 174,938 |
|
Total assets | $ | 12,055,055 |
| | $ | 12,986,552 |
|
| | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | |
Current liabilities: | | | |
Accounts payable | $ | 6,459,858 |
| | $ | 7,496,466 |
|
Accrued expenses and other liabilities | 987,418 |
| | 1,000,126 |
|
Revolving credit loans and current maturities of long-term debt, net | 128,453 |
| | 110,368 |
|
Total current liabilities | 7,575,729 |
| | 8,606,960 |
|
Long-term debt, less current maturities | 1,297,212 |
| | 1,300,554 |
|
Other long-term liabilities | 292,492 |
| | 142,315 |
|
Total liabilities | 9,165,433 |
| | 10,049,829 |
|
Commitments and contingencies (Note 12) |
| |
|
Shareholders’ equity: | | | |
Common stock, par value $.0015; 200,000,000 shares authorized; 59,245,585 shares issued at July 31, 2019 and January 31, 2019 | 89 |
| | 89 |
|
Additional paid-in capital | 843,159 |
| | 844,206 |
|
Treasury stock, at cost (23,288,420 and 22,305,464 shares at July 31, 2019 and January 31, 2019) | (1,146,289 | ) | | (1,037,872 | ) |
Retained earnings | 3,221,164 |
| | 3,086,514 |
|
Accumulated other comprehensive (loss) income | (28,501 | ) | | 43,786 |
|
Total shareholders' equity | 2,889,622 |
| | 2,936,723 |
|
Total liabilities and shareholders' equity | $ | 12,055,055 |
| | $ | 12,986,552 |
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share amounts)
(Unaudited)
|
| | | | | | | | | | | | | | | |
| Three months ended July 31, | | Six months ended July 31, |
| 2019 | | 2018 | | 2019 | | 2018 |
Net sales | $ | 9,092,244 |
| | $ | 8,886,101 |
| | $ | 17,498,668 |
| | $ | 17,434,420 |
|
Cost of products sold | 8,530,594 |
| | 8,359,071 |
| | 16,427,639 |
| | 16,384,273 |
|
Gross profit | 561,650 |
| | 527,030 |
| | 1,071,029 |
| | 1,050,147 |
|
Operating expenses: | | | | | | | |
Selling, general and administrative expenses | 431,694 |
| | 415,319 |
| | 837,510 |
| | 837,680 |
|
Acquisition, integration and restructuring expenses | 5,209 |
| | 13,297 |
| | 11,430 |
| | 46,522 |
|
Legal settlements and other, net | — |
| | (5,234 | ) | | (282 | ) | | (8,199 | ) |
Gain on disposal of subsidiary | — |
| | (6,717 | ) | | — |
| | (6,717 | ) |
| 436,903 |
| | 416,665 |
| | 848,658 |
| | 869,286 |
|
Operating income | 124,747 |
| | 110,365 |
| | 222,371 |
| | 180,861 |
|
Interest expense | 20,986 |
| | 28,053 |
| | 47,243 |
| | 53,975 |
|
Other expense, net | 2,896 |
| | 901 |
| | 2,203 |
| | 2,818 |
|
Income before income taxes | 100,865 |
| | 81,411 |
| | 172,925 |
| | 124,068 |
|
Provision for income taxes | 21,615 |
| | 5,545 |
| | 38,275 |
| | 14,503 |
|
Net income | $ | 79,250 |
| | $ | 75,866 |
| | $ | 134,650 |
| | $ | 109,565 |
|
Earnings per share: | | | | | | | |
Basic | $ | 2.17 |
| | $ | 1.97 |
| | $ | 3.67 |
| | $ | 2.86 |
|
Diluted | $ | 2.16 |
| | $ | 1.97 |
| | $ | 3.64 |
| | $ | 2.84 |
|
Weighted average common shares outstanding: | | | | | | | |
Basic | 36,476 |
| | 38,428 |
| | 36,739 |
| | 38,356 |
|
Diluted | 36,661 |
| | 38,566 |
| | 36,964 |
| | 38,565 |
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
|
| | | | | | | | | | | | | | | |
| Three months ended July 31, | | Six months ended July 31, |
| 2019 | | 2018 | | 2019 | | 2018 |
Net income | $ | 79,250 |
| | $ | 75,866 |
| | $ | 134,650 |
| | $ | 109,565 |
|
Other comprehensive (loss) income: | | | | | | | |
Foreign currency translation adjustment, net of tax | (31,822 | ) | | (102,055 | ) | | (72,345 | ) | | (190,307 | ) |
Unrealized gain on cash flow hedges, net of tax | 269 |
| | — |
| | 58 |
| | — |
|
Other comprehensive loss | (31,553 | ) | | (102,055 | ) | | (72,287 | ) | | (190,307 | ) |
Total comprehensive income (loss) | $ | 47,697 |
| | $ | (26,189 | ) | | $ | 62,363 |
| | $ | (80,742 | ) |
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands)
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional paid-in capital | | Treasury stock | | Retained earnings | | Accumulated other comprehensive (loss) income | | Total shareholders' equity |
| Shares | | Amount | |
Balance at January 31, 2019 | 59,246 |
| | $ | 89 |
| | $ | 844,206 |
| | $ | (1,037,872 | ) | | $ | 3,086,514 |
| | $ | 43,786 |
| | $ | 2,936,723 |
|
Repurchases of common stock | — |
| | — |
| | — |
| | (35,681 | ) | | — |
| | — |
| | (35,681 | ) |
Issuance of treasury stock for benefit plan and equity-based awards exercised | — |
| | — |
| | (16,003 | ) | | 7,896 |
| | — |
| | — |
| | (8,107 | ) |
Stock-based compensation expense | — |
| | — |
| | 8,305 |
| | — |
| | — |
| | — |
| | 8,305 |
|
Total other comprehensive loss | — |
| | — |
| | — |
| | — |
| | — |
| | (40,734 | ) | | (40,734 | ) |
Net income | — |
| | — |
| | — |
| | — |
| | 55,400 |
| | — |
| | 55,400 |
|
Balance at April 30, 2019 | 59,246 |
| | 89 |
| | 836,508 |
| | (1,065,657 | ) | | 3,141,914 |
| | 3,052 |
| | 2,915,906 |
|
Repurchases of common stock | — |
| | — |
| | — |
| | (82,011 | ) | | — |
| | — |
| | (82,011 | ) |
Issuance of treasury stock for benefit plan and equity-based awards exercised | — |
| | — |
| | (1,404 | ) | | 1,379 |
| | — |
| | — |
| | (25 | ) |
Stock-based compensation expense | — |
| | — |
| | 8,055 |
| | — |
| | — |
| | — |
| | 8,055 |
|
Total other comprehensive loss | — |
| | — |
| | — |
| | — |
| | — |
| | (31,553 | ) | | (31,553 | ) |
Net income | — |
| | — |
| | — |
| | — |
| | 79,250 |
| | — |
| | 79,250 |
|
Balance at July 31, 2019 | 59,246 |
| | $ | 89 |
| | $ | 843,159 |
| | $ | (1,146,289 | ) | | $ | 3,221,164 |
| | $ | (28,501 | ) | | $ | 2,889,622 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional paid-in capital | | Treasury stock | | Retained earnings | | Accumulated other comprehensive income | | Total shareholders' equity |
| Shares | | Amount | |
Balance at January 31, 2018 | 59,246 |
| | $ | 89 |
| | $ | 827,301 |
| | $ | (940,124 | ) | | $ | 2,745,934 |
| | $ | 288,292 |
| | $ | 2,921,492 |
|
Issuance of treasury stock for benefit plan and equity-based awards exercised | — |
| | — |
| | (12,771 | ) | | 6,957 |
| | — |
| | — |
| | (5,814 | ) |
Stock-based compensation expense | — |
| | — |
| | 7,587 |
| | — |
| | — |
| | — |
| | 7,587 |
|
Total other comprehensive loss | — |
| | — |
| | — |
| | — |
| | — |
| | (88,252 | ) | | (88,252 | ) |
Net income | — |
| | — |
| | — |
| | — |
| | 33,699 |
| | — |
| | 33,699 |
|
Balance at April 30, 2018 | 59,246 |
| | 89 |
| | 822,117 |
| | (933,167 | ) | | 2,779,633 |
| | 200,040 |
| | 2,868,712 |
|
Issuance of treasury stock for benefit plan and equity-based awards exercised | — |
| | — |
| | (1,083 | ) | | 1,303 |
| | — |
| | — |
| | 220 |
|
Stock-based compensation expense | — |
| | — |
| | 7,968 |
| | — |
| | — |
| | — |
| | 7,968 |
|
Total other comprehensive loss | — |
| | — |
| | — |
| | — |
| | — |
| | (102,055 | ) | | (102,055 | ) |
Net income | — |
| | — |
| | — |
| | — |
| | 75,866 |
| | — |
| | 75,866 |
|
Balance at July 31, 2018 | 59,246 |
| | $ | 89 |
| | $ | 829,002 |
| | $ | (931,864 | ) | | $ | 2,855,499 |
| | $ | 97,985 |
| | $ | 2,850,711 |
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited) |
| | | | | | | |
| Six months ended July 31, |
| 2019 | | 2018 |
Cash flows from operating activities: | | | |
Cash received from customers | $ | 23,717,345 |
| | $ | 22,873,693 |
|
Cash paid to vendors and employees | (23,530,536 | ) | | (22,793,148 | ) |
Interest paid, net | (46,204 | ) | | (48,829 | ) |
Income taxes paid | (37,767 | ) | | (37,179 | ) |
Net cash provided by (used in) operating activities | 102,838 |
| | (5,463 | ) |
Cash flows from investing activities: |
| | |
Proceeds from sale of business, net of cash divested | — |
| | 8,985 |
|
Acquisition of businesses, net of cash acquired | — |
| | (2,818 | ) |
Expenditures for property and equipment | (18,806 | ) | | (14,131 | ) |
Software and software development costs | (14,704 | ) | | (8,592 | ) |
Other | 117 |
| | 1,096 |
|
Net cash used in investing activities | (33,393 | ) | | (15,460 | ) |
Cash flows from financing activities: | | | |
Principal payments on long-term debt | (7,368 | ) | | (105,845 | ) |
Cash paid for debt issuance costs | (3,909 | ) | | — |
|
Net borrowings (repayments) on revolving credit loans | 19,786 |
| | (8,700 | ) |
Payments for employee tax withholdings on equity awards | (9,134 | ) | | (6,702 | ) |
Proceeds from the reissuance of treasury stock | 1,002 |
| | 920 |
|
Repurchases of common stock | (117,692 | ) | | — |
|
Net cash used in financing activities | (117,315 | ) | | (120,327 | ) |
Effect of exchange rate changes on cash and cash equivalents | (12,988 | ) | | (21,519 | ) |
Net decrease in cash and cash equivalents | (60,858 | ) | | (162,769 | ) |
Cash and cash equivalents at beginning of year | 799,123 |
| | 955,628 |
|
Cash and cash equivalents at end of period | $ | 738,265 |
| | $ | 792,859 |
|
Reconciliation of net income to net cash provided by (used in) operating activities: | | | |
Net income | $ | 134,650 |
| | $ | 109,565 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | |
Gain on disposal of subsidiary | — |
| | (6,717 | ) |
Depreciation and amortization | 74,759 |
| | 80,399 |
|
Provision for losses on accounts receivable | 14,432 |
| | 6,270 |
|
Stock-based compensation expense | 16,360 |
| | 15,555 |
|
Accretion of debt discount and debt issuance costs | 1,700 |
| | 1,805 |
|
Deferred income taxes | (1,879 | ) | | (11,396 | ) |
Changes in operating assets and liabilities, net of acquisitions and disposition: | | | |
Accounts receivable | 737,724 |
| | 602,579 |
|
Inventories | 139,997 |
| | (166,800 | ) |
Prepaid expenses and other assets | (10,535 | ) | | (40,180 | ) |
Accounts payable | (923,917 | ) | | (486,900 | ) |
Accrued expenses and other liabilities | (80,453 | ) | | (109,643 | ) |
Total adjustments | (31,812 | ) | | (115,028 | ) |
Net cash provided by (used in) operating activities | $ | 102,838 |
| | $ | (5,463 | ) |
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Tech Data Corporation (“Tech Data” or the “Company”) is one of the world’s largest IT distribution and solutions companies. Tech Data serves a critical role in the center of the IT ecosystem, bringing products from the world’s leading technology vendors to market, as well as helping customers create solutions best suited to maximize business outcomes for their end-user customers. Tech Data’s customers include value-added resellers, direct marketers, retailers, corporate resellers and managed service providers who support the diverse technology needs of end users. The Company manages its operations in three geographic segments: the Americas, Europe and Asia-Pacific.
Principles of Consolidation
The consolidated financial statements include the accounts of Tech Data and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company operates on a fiscal year that ends on January 31.
Basis of Presentation
The consolidated financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the United States ("U.S.") Securities and Exchange Commission (“SEC”). The Company prepares its financial statements in conformity with generally accepted accounting principles in the U.S. (“GAAP”). 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. 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 consolidated financial position of the Company as of July 31, 2019, its consolidated statements of income, comprehensive income (loss), and shareholders' equity for the three and six months ended July 31, 2019 and 2018, and its consolidated cash flows for the six months ended July 31, 2019 and 2018.
Seasonality
The Company’s quarterly operating results have fluctuated significantly in the past and will likely continue to do so in the future as a result of currency fluctuations and seasonal variations in the demand for the products and services we sell. Narrow operating margins may magnify the impact of these factors on the Company's quarterly operating results. Historical seasonal variations have included an increase in European demand during the Company’s fiscal fourth quarter and decreased demand in other fiscal quarters. The seasonal trend in Europe typically results in greater operating leverage, and therefore, lower selling, general and administrative expenses as a percentage of net sales in the region and on a consolidated basis during the second half of the Company's fiscal year, particularly in the Company's fourth quarter. Therefore, the results of operations for the three and six months ended July 31, 2019 and 2018 are not necessarily indicative of the results that can be expected for the entire fiscal year ended January 31, 2020.
Revenue Recognition
The Company’s revenues primarily result from the sale of various technology products and services. The Company recognizes revenue as control of products is transferred to customers, which generally happens at the point of shipment. Products sold by the Company are delivered via shipment from the Company’s facilities, dropshipment directly from the vendor, or by electronic delivery of keys for software products. In relation to product support, supply chain management and other services performed by the Company, revenue is recognized over time as the services are performed. Service revenues and related contract liabilities were not material for the periods presented.
The Company has contracts with certain customers where the Company’s performance obligation is to arrange for the products or services to be provided by another party. In these arrangements, as the Company assumes an agency relationship in the transaction, revenue is recognized in the amount of the net fee associated with serving as an agent. These arrangements primarily relate to certain fulfillment contracts, as well as sales of software services and extended warranty services.
The Company allows its customers to return product for exchange or credit subject to certain limitations. A liability is recorded at the time of sale for estimated product returns based upon historical experience and an asset is recognized for the amount expected to be recorded in inventory upon product return. The Company also provides volume rebates and other discounts to certain customers which are considered variable consideration. A provision for customer rebates and other discounts is recorded as a reduction of revenue at the time of sale based on an evaluation of the contract terms and historical experience.
The Company considers shipping & handling activities as costs to fulfill the sales of products. Shipping revenue is included in net sales when control of the product is transferred to the customer, and the related shipping and handling costs are included in cost of products sold. Taxes imposed by governmental authorities on the Company’s revenue producing activities with customers, such as sales taxes and value added taxes, are excluded from net sales.
The Company disaggregates its operating segment revenue by geography, which the Company believes provides a meaningful depiction of the nature of its revenue. Net sales shown in Note 13 – Segment Information includes service revenues, which are not a significant component of total revenue, and are aggregated within the respective geographies.
The following table provides a comparison of sales generated from products purchased from vendors that exceeded 10% of the Company's consolidated net sales for the three and six months ended July 31, 2019 and 2018 (as a percent of consolidated net sales):
|
| | | | | | | |
| Three months ended July 31, | | Six months ended July 31, |
| 2019 | | 2018 | | 2019 | | 2018 |
Apple, Inc. | 14% | | 14% | | 13% | | 14% |
Cisco Systems, Inc. | 12% | | 11% | | 11% | | 11% |
HP Inc. | 11% | | 12% | | 11% | | 12% |
Legal settlements and other, net
The Company has been a claimant in proceedings seeking damages from certain manufacturers of LCD flat panel and cathode ray tube displays, as well as reimbursement from insurance providers of certain costs incurred by the Company associated with the restatement of certain of the Company’s consolidated financial statements and other financial information from fiscal 2009 to 2013. The Company reached settlement agreements during the periods presented and has recorded these amounts, net of attorney fees and expenses, in “legal settlements and other, net” in the Consolidated Statement of Income.
Accounts Receivable Purchase Agreements
The Company has uncommitted accounts receivable purchase agreements under which certain accounts receivable may be sold, without recourse, to third-party financial institutions. Under these programs, the Company may sell certain accounts receivable in exchange for cash less a discount, as defined in the agreements. Available capacity under these programs, which the Company uses as a source of working capital funding, is dependent on the level of accounts receivable eligible to be sold into these programs and the financial institutions' willingness to purchase such receivables. In addition, certain of these agreements also require that the Company continue to service, administer and collect the sold accounts receivable. At July 31, 2019 and January 31, 2019, the Company had a total of $938 million and $1.1 billion, respectively, of outstanding accounts receivable sold to and held by financial institutions under these agreements. During the three months ended July 31, 2019 and 2018, discount fees recorded under these facilities were $4.0 million and $3.7 million, respectively, and during the six months ended July 31, 2019 and 2018, discount fees recorded under these facilities were $7.7 million and $6.3 million, respectively. These discount fees are included as a component of "other expense, net" in the Consolidated Statement of Income.
Recently Adopted Accounting Standards
In February 2016, the FASB issued an accounting standard which requires the recognition of assets and liabilities arising from lease transactions on the balance sheet and the disclosure of additional information about leasing arrangements. Under the new guidance, for all leases, interest expense and amortization of the right-of-use asset are recorded for leases determined to be finance leases and straight-line lease expense is recorded for leases determined to be operating leases. Lessees are required to initially recognize assets for the right to use the leased assets and liabilities for the obligations created by those leases. In July 2018, the FASB issued additional updates to the new accounting standard which provided entities with a transition option to initially account for the impact of the adoption with a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company adopted the standard and elected this transition option during the quarter ending April 30, 2019. The Company also elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical accounting relating to lease identification and classification for existing leases at the time of adoption. The adoption of this standard resulted in the Company recognizing initial right-of-use assets of $206.8 million and corresponding lease liabilities of $205.8 million as of April 30, 2019. The adoption of this standard had no impact on the Company's Consolidated Statements of Income and Cash Flows. See Note 11 – Leases for additional information.
In August 2017, the FASB issued a new accounting standard that amends and simplifies guidance related to hedge accounting to more accurately portray the economics of an entity’s risk management activities in its financial statements. The Company adopted this standard during the quarter ended April 30, 2019. The adoption of this standard had no material impact on the Company's consolidated financial statements.
In August 2018, the FASB issued a new accounting standard which aligns the capitalization requirements for implementation costs incurred in a cloud computing hosting arrangement that is a service contract with the existing capitalization requirements for implementation costs incurred to develop or obtain internal-use software. The Company early adopted this standard on a prospective basis during the quarter ended April 30, 2019. The adoption of this standard had no material impact on the Company's consolidated financial statements.
Recently Issued Accounting Standards
In June 2016, the FASB issued an accounting standard which revises the methodology for measuring credit losses on financial instruments and the timing of the recognition of those losses. Under the new standard, financial assets measured at an amortized cost basis are to be presented net of the amount not expected to be collected via an allowance for credit losses. Estimated credit losses are to be based on historical information adjusted for management's expectation that current conditions and supportable forecasts differ from historical experience. The accounting standard is effective for the Company beginning with the quarter ending April 30, 2020, with early adoption permitted. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.
Reclassifications
Certain reclassifications have been made to the prior period amounts to conform to the current period presentation. These reclassifications did not have a material impact on previously reported amounts.
NOTE 2 — EARNINGS PER SHARE ("EPS")
The Company presents the computation of earnings per share on a basic and diluted basis. Basic EPS is computed by dividing net income by the weighted average number of shares outstanding during the reported period. Diluted EPS reflects the potential dilution related to equity-based incentives (see Note 7 – Stock-Based Compensation for further discussion) using the treasury stock method. The composition of basic and diluted EPS is as follows:
|
| | | | | | | | | | | | | | | |
| Three months ended July 31, | | Six months ended July 31, |
| 2019 | | 2018 | | 2019 | | 2018 |
(in thousands, except per share data) | | | | | | | |
Net income | $ | 79,250 |
| | $ | 75,866 |
| | $ | 134,650 |
| | $ | 109,565 |
|
| | | | | | | |
Weighted average common shares - basic | 36,476 |
| | 38,428 |
| | 36,739 |
| | 38,356 |
|
Effect of dilutive securities: | | | | | | | |
Equity based awards | 185 |
| | 138 |
| | 225 |
| | 209 |
|
Weighted average common shares - diluted | 36,661 |
| | 38,566 |
| | 36,964 |
| | 38,565 |
|
| | | | | | | |
Earnings per share: | | | | | | | |
Basic | $ | 2.17 |
| | $ | 1.97 |
| | $ | 3.67 |
| | $ | 2.86 |
|
Diluted | $ | 2.16 |
| | $ | 1.97 |
| | $ | 3.64 |
| | $ | 2.84 |
|
For the three months ended July 31, 2019 and 2018, there were 692 and 46,727 shares, respectively, excluded from the computation of diluted earnings per share because their effect would have been antidilutive. For the six months ended July 31, 2019 and 2018, there were 692 and 46,212 shares, respectively, excluded from the computation of diluted earnings per share because their effect would have been antidilutive.
NOTE 3 — ACQUISITION, INTEGRATION AND RESTRUCTURING EXPENSES
Acquisition, integration and restructuring expenses are comprised of costs related to the fiscal 2018 acquisition of Avnet, Inc.'s ("Avnet") Technology Solutions business ("TS"), as well as restructuring costs related to the Global Business Optimization Program which was initiated in fiscal 2019.
Acquisition of TS
On February 27, 2017, Tech Data acquired all of the outstanding shares of TS for an aggregate purchase price of approximately $2.8 billion, comprised of approximately $2.5 billion in cash and 2,785,402 shares of the Company's common stock. Acquisition, integration and restructuring expenses related to the acquisition of TS are primarily comprised of restructuring costs, IT related costs, professional services, transaction related costs and other (income) costs. Restructuring costs are comprised of severance and facility exit costs. IT related costs consist primarily of data center and non-ERP application migration and integration costs, as well as, IT related professional services. Professional services are primarily comprised of integration related activities, including professional fees for project management, accounting, tax and other consulting services. Transaction related costs primarily consist of investment banking fees, legal expenses and due diligence costs incurred in connection with the completion of the transaction. Other (income) costs includes a gain of $9.6 million related to the final working capital adjustment for the acquisition of TS as part of a settlement agreement with Avnet, as well as payroll related costs including retention, stock compensation, relocation and travel expenses, incurred as part of the integration of TS.
The Company incurred no acquisition, integration and restructuring expenses related to the acquisition of TS during the three and six months ended July 31, 2019 and does not expect to incur any additional costs in future periods. Acquisition, integration and restructuring expenses for the three and six months ended July 31, 2018 related to the acquisition of TS are comprised of the following: |
| | | | | | | |
| Three months ended July 31, | | Six months ended July 31, |
| 2018 | | 2018 |
(in thousands) | | | |
Restructuring costs | $ | 3,777 |
| | $ | 14,649 |
|
IT related costs | 1,156 |
| | 8,486 |
|
Professional services | 839 |
| | 4,406 |
|
Transaction related costs | 315 |
| | 1,193 |
|
Other (income) costs | (5,525 | ) | | (555 | ) |
Total | $ | 562 |
| | $ | 28,179 |
|
During the three months ended July 31, 2018, the Company recorded restructuring costs related to the acquisition of TS of $0.1 million in the Americas and $3.7 million in Europe. During the six months ended July 31, 2018, the Company recorded restructuring costs related to the acquisition of TS of $3.5 million in the Americas and $11.1 million in Europe.
Global Business Optimization Program
In fiscal 2019, the Company's Board of Directors approved the Global Business Optimization Program (the "GBO Program") to increase investment in the Company’s strategic priorities and implement operational initiatives to drive productivity and enhance profitability. Under the GBO Program, the Company expects to incur cash charges of approximately $70 million to $80 million, primarily comprised of $40 million to $45 million of charges in Europe and $30 million to $35 million of charges in the Americas. It is anticipated that the majority of these charges will be incurred prior to the end of the current fiscal year. The cash charges primarily consist of severance costs, and also include professional services and other costs.
Restructuring expenses related to the GBO Program are comprised of the following: |
| | | | | | | | | | | | | | | | | | | |
| Three months ended July 31, | | Six months ended July 31, | | Cumulative Amounts Incurred to Date |
| 2019 | | 2018 | | 2019 | | 2018 | |
(in thousands) | | | | | | | | | |
Severance costs | $ | 3,187 |
| | $ | 5,605 |
| | $ | 7,334 |
| | $ | 8,874 |
| | $ | 33,761 |
|
Professional services and other costs | 2,022 |
| | 7,130 |
| | 4,096 |
| | 9,469 |
| | 20,210 |
|
Total | $ | 5,209 |
| | $ | 12,735 |
| | $ | 11,430 |
| | $ | 18,343 |
| | $ | 53,971 |
|
Restructuring costs related to the GBO Program by segment are as follows: |
| | | | | | | | | | | | | | | |
| Three months ended July 31, | | Six months ended July 31, |
| 2019 | | 2018 | | 2019 | | 2018 |
(in thousands) | | | | | | | |
Americas | $ | 1,341 |
| | $ | 6,485 |
| | $ | 4,252 |
| | $ | 7,336 |
|
Europe | 3,229 |
| | 6,125 |
| | 6,253 |
| | 10,882 |
|
Asia-Pacific | 639 |
| | 125 |
| | 925 |
| | 125 |
|
Total | $ | 5,209 |
| | $ | 12,735 |
| | $ | 11,430 |
| | $ | 18,343 |
|
Restructuring activity during the six months ended July 31, 2019 related to the GBO Program is as follows:
|
| | | | | | | | | | | | |
| | Six months ended July 31, 2019 |
| | Severance | | Professional services and other costs | | Total |
(in thousands) | | | | | | |
Balance at January 31, 2019 | | $ | 14,798 |
| | $ | 631 |
| | $ | 15,429 |
|
Fiscal 2020 restructuring expenses | | 7,334 |
| | 4,096 |
| | 11,430 |
|
Cash payments | | (10,297 | ) | | (3,825 | ) | | (14,122 | ) |
Foreign currency translation | | (220 | ) | | (15 | ) | | (235 | ) |
Balance at July 31, 2019 | | $ | 11,615 |
| | $ | 887 |
| | $ | 12,502 |
|
NOTE 4 — GAIN ON DISPOSAL OF SUBSIDIARY
During the second quarter of fiscal 2019, the Company executed an agreement to sell certain of its operations in Ireland for a total sales price of approximately $15.3 million. The Company recorded a gain on sale of $6.7 million during the three and six months ended July 31, 2018, which includes the reclassification of $5.1 million from accumulated other comprehensive income for cumulative translation adjustments associated with the Company’s investment in this foreign entity. The operating results of this entity during the three and six months ended July 31, 2018 were insignificant relative to the Company's consolidated financial results.
NOTE 5 — DEBT
The carrying value of the Company's outstanding debt consists of the following (in thousands): |
| | | | | | | |
As of: | July 31, 2019 | | January 31, 2019 |
Senior Notes, interest at 3.70% payable semi-annually, due February 15, 2022 | $ | 500,000 |
| | $ | 500,000 |
|
Senior Notes, interest at 4.95% payable semi-annually, due February 15, 2027 | 500,000 |
| | 500,000 |
|
Less—unamortized debt discount and debt issuance costs | (6,410 | ) | | (7,166 | ) |
Senior Notes, net | 993,590 |
| | 992,834 |
|
Term Loans, interest rate of 6.00% and 3.99% at July 31, 2019 and January 31, 2019, respectively | 300,000 |
| | 300,000 |
|
Other committed and uncommitted revolving credit facilities, average interest rate of 8.08% and 8.05% at July 31, 2019 and January 31, 2019, respectively | 123,759 |
| | 102,271 |
|
Other long-term debt | 8,316 |
| | 15,817 |
|
| 1,425,665 |
| | 1,410,922 |
|
Less—current maturities (included as “revolving credit loans and current maturities of long-term debt, net”) | (128,453 | ) | | (110,368 | ) |
Total long-term debt | $ | 1,297,212 |
| | $ | 1,300,554 |
|
Senior Notes
In January 2017, the Company issued $500.0 million aggregate principal amount of 3.70% Senior Notes due February 15, 2022 (the "3.70% Senior Notes") and $500.0 million aggregate principal amount of 4.95% Senior Notes due February 15, 2027 (the "4.95% Senior Notes") (collectively the "2017 Senior Notes"). The Company pays interest on the 2017 Senior Notes semi-annually in arrears on February 15 and August 15 of each year. The interest rate payable on the 2017 Senior Notes will be subject to adjustment from time to time if the credit rating assigned to such series of notes changes. At no point will the interest rate be reduced below the interest rate payable on the notes on the date of the initial issuance or increase more than 2.00% above the interest rate payable on the notes of the series on the date of their initial issuance. The 2017 Senior Notes are senior unsecured obligations of the Company and will rank equally with all other unsecured and unsubordinated indebtedness from time to time outstanding.
The Company, at its option, may redeem the 3.70% Senior Notes at any time prior to January 15, 2022 and the 4.95% Senior Notes at any time prior to November 15, 2026, in each case in whole or in part, at a redemption price equal to the greater of (i) 100% of the principal amount of the 2017 Senior Notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the 2017 Senior Notes to be redeemed, discounted to the date of redemption on a semi-annual basis at a rate equal to the sum of the applicable Treasury Rate plus 30 basis points for the 3.70% Senior Notes and 40 basis points for the 4.95% Senior Notes, plus the accrued and unpaid interest on the principal amount being redeemed up to the date of redemption. The Company may also redeem the 2017 Senior Notes, at any time in whole or from time to time in part, on or after January 15, 2022 for the 3.70% Senior Notes and November 15, 2026 for the 4.95% Senior Notes, in each case, at a redemption price equal to 100% of the principal amount of the 2017 Senior Notes to be redeemed.
Other Credit Facilities
The Company has a $1.5 billion revolving credit facility with a syndicate of banks (the “Credit Agreement”) which, among other things, provides for (i) a maturity date of May 15, 2024, (ii) an interest rate on borrowings, facility fees and letter of credit fees based on the Company’s debt rating, (iii) the ability to increase the facility to a maximum of $1.75 billion, subject to certain conditions and (iv) certain subsidiaries of the Company to be designated as borrowers. The applicable borrower will pay interest on advances under the Credit Agreement based on LIBOR (or similar interbank offered rates depending on currency draw) plus a predetermined margin that is based on the Company’s debt rating. There were no amounts outstanding under the Credit Agreement at July 31, 2019 and January 31, 2019.
The Company entered into a term loan credit agreement in November 2016 with a syndicate of banks (the "2016 Term Loan Credit Agreement") which provided for the borrowing of senior unsecured term loans in an original aggregate principal amount of up to $1.0 billion. The Company paid interest on advances under the 2016 Term Loan Credit Agreement at a variable rate based on LIBOR plus a predetermined margin based on the Company's debt rating. The Company had $300 million outstanding under the 2016 Term Loan Credit Agreement at both July 31, 2019 and January 31, 2019. On August 2, 2019, the Company entered into a new term loan credit agreement (the “2019 Term Loan Credit Agreement”), the proceeds of which were used to repay in full the amounts outstanding under the 2016 Term Loan Credit Agreement. The 2019 Term Loan Credit Agreement, among other things, (i) provides for a $300 million term loan credit facility with a maturity date of August 2, 2021, (ii) provides for an interest rate on the outstanding principal amount of the loan that is based on LIBOR plus a predetermined margin, and (iii) may be increased up to a total of $500 million, subject to certain conditions.
The Company also has an agreement with a syndicate of banks (the “Receivables Securitization Program”) that allows the Company to transfer an undivided interest in a designated pool of U.S. accounts receivable, on an ongoing basis, to provide collateral for borrowings up to a maximum of $1.0 billion. The scheduled termination date of the agreement is April 16, 2021. Under this program, the Company
transfers certain U.S. trade receivables into a wholly-owned bankruptcy remote special purpose entity. Such receivables, which are recorded in the Consolidated Balance Sheet, totaled approximately $1.6 billion and $1.7 billion at July 31, 2019 and January 31, 2019, respectively. As collections reduce accounts receivable balances included in the collateral pool, the Company may transfer interests in new receivables to bring the amount available to be borrowed up to the maximum. Interest is to be paid on advances under the Receivables Securitization Program at the applicable commercial paper or LIBOR rate plus an agreed-upon margin. There were no amounts outstanding under the Receivables Securitization Program at July 31, 2019 and January 31, 2019.
In addition to the facilities described above, the Company has various other committed and uncommitted lines of credit, short-term loans and overdraft facilities totaling approximately $433.2 million at July 31, 2019 to support its operations. Most of these facilities are provided on an unsecured, short-term basis and are reviewed periodically for renewal. There was $123.8 million outstanding on these facilities at July 31, 2019, at a weighted average interest rate of 8.08%, and there was $102.3 million outstanding at January 31, 2019, at a weighted average interest rate of 8.05%.
At July 31, 2019, the Company had also issued standby letters of credit of $23.7 million. These letters of credit typically act as a guarantee of payment to certain third parties in accordance with specified terms and conditions. The issuance of certain of these letters of credit reduces the Company's borrowing availability under certain of the above-mentioned credit facilities.
Certain of the Company’s credit facilities contain limitations on the amounts of annual dividends and repurchases of common stock and require compliance with other obligations, warranties and covenants. The financial ratio covenants under these credit facilities include a maximum total leverage ratio and a minimum interest coverage ratio. At July 31, 2019, the Company was in compliance with all such financial covenants.
NOTE 6 — INCOME TAXES
The Company's effective tax rate was 21.4% and 6.8% for the three months ended July 31, 2019 and 2018, respectively, and 22.1% and 11.7% for the six months ended July 31, 2019 and 2018, respectively. On an absolute dollar basis, the provision for income taxes increased to $21.6 million for the second quarter of fiscal 2020 compared to $5.5 million for the second quarter of fiscal 2019 and increased to $38.3 million for the first semester of fiscal 2020 compared to $14.5 million for the first semester of fiscal 2019.
The increase in both the effective tax rate and the provision for income taxes for the three and six months ended July 31, 2019, as compared to the prior year is primarily due to a $12.8 million income tax benefit that was recognized during the three and six months ended July 31, 2018. The income tax benefit was due to the Company's finalization of the geographic allocation of the purchase price for the acquisition of TS for tax reporting purposes as part of a settlement agreement with Avnet, which resulted in the recognition of a deferred tax asset in the U.S. for future tax deductions related to the amortization of goodwill for tax purposes. Additionally, the increase in the absolute dollar value of the provision for income taxes for both the three and six months ended July 31, 2019 as compared to the prior year is due to an increase in taxable earnings.
NOTE 7 — STOCK-BASED COMPENSATION
For the six months ended July 31, 2019 and 2018, the Company recorded $16.4 million and $15.6 million, respectively, of stock-based compensation expense.
The 2018 Equity Incentive Plan was approved by the Company’s shareholders in June 2018 and includes 2.0 million shares available for grant, of which approximately 1.7 million shares remain available for future grant at July 31, 2019. The Company is authorized to award officers, employees, and non-employee members of the Board of Directors restricted stock, options to purchase common stock, stock appreciation rights and performance awards that are dependent upon achievement of specified performance goals. Equity-based compensation awards have a maximum term of 10 years, unless a shorter period is specified by the Compensation Committee of the Board of Directors ("Compensation Committee") or is required under local law. Awards under the plan are priced as determined by the Compensation Committee and are required to be priced at, or above, the fair market value of the Company’s common stock on the date of grant. Awards generally vest between one year and three years from the date of grant. The Company’s policy is to utilize shares of its treasury stock, to the extent available, to satisfy its obligation to issue shares upon the exercise of awards.
Restricted stock units
A summary of the Company’s restricted stock activity for the six months ended July 31, 2019 is as follows: |
| | |
| Shares |
Nonvested at January 31, 2019 | 649,122 |
|
Granted | 227,543 |
|
Vested | (257,325 | ) |
Canceled | (23,628 | ) |
Nonvested at July 31, 2019 | 595,712 |
|
Performance based restricted stock units
The Company's performance based restricted stock unit awards are subject to vesting conditions, including meeting specified cumulative performance objectives over a period of three years. Each performance based award recipient could vest in 0% to 150% of the target shares granted, contingent on the achievement of the Company's financial performance metrics. A summary of the Company’s performance based restricted stock activity, assuming maximum achievement for nonvested awards, for the six months ended July 31, 2019 is as follows: |
| | |
| Shares |
Nonvested at January 31, 2019 | 293,216 |
|
Granted | 108,771 |
|
Vested | (16,996 | ) |
Canceled | (15,606 | ) |
Nonvested at July 31, 2019 | 369,385 |
|
NOTE 8 — FAIR VALUE MEASUREMENTS
The Company’s assets and liabilities carried or disclosed at fair value are classified in one of the following three categories: Level 1 – quoted market prices in active markets for identical assets and liabilities; Level 2 – inputs other than quoted market prices included in Level 1 above that are observable for the asset or liability, either directly or indirectly; and Level 3 – unobservable inputs for the asset or liability. The classification of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The following table summarizes the valuation of the Company's assets and liabilities that are measured at fair value on a recurring basis:
|
| | | | | | | | | | | | | | | | | | |
| | | | July 31, 2019 | | January 31, 2019 |
| | | | Fair value measurement category | | Fair value measurement category |
| | Balance sheet location | | Level 1 | | Level 2 | | Level 3 | | Level 1 | | Level 2 | | Level 3 |
(in thousands) | | | | | | | | | | | | | | |
ASSETS | | | | | | | | | | | | | | |
Net investment hedges: | | | | | | | | | | | | | | |
Foreign currency forward contracts | | Prepaid expenses and other assets | | | | $ | 254 |
| | | | | | $ | — |
| | |
Foreign currency forward contracts | | Other assets, net | | | | 5,628 |
| | | | | | — |
| | |
Cash flow hedges: | | | | | | | | | | | | | | |
Cross-currency swap | | Prepaid expenses and other assets | | | | 137 |
| | | | | | — |
| | |
Derivatives not designated as hedging instruments: | | | | | | | | | | | | | | |
Foreign currency forward contracts | | Prepaid expenses and other assets | | | | 5,214 |
| | | | | | 3,830 |
| | |
| | | | | | | | | | | | | | |
LIABILITIES | | | | | | | | | | | | | | |
Net investment hedges: | | | | | | | | | | | | | | |
Foreign currency forward contracts | | Other long-term liabilities | | | | $ | 5,919 |
| | | | | | $ | — |
| | |
Cash flow hedges: | | | | | | | | | | | | | | |
Cross-currency swap | | Accrued expenses and other liabilities | | | | 143 |
| | | | | | — |
| | |
Derivatives not designated as hedging instruments: | | | | | | | | | | | | | | |
Foreign currency forward contracts | | Accrued expenses and other liabilities | | | | 3,237 |
| | | | | | 6,641 |
| | |
The Company's derivative instruments are measured on a recurring basis based on foreign currency spot rates and forward rates quoted by banks or foreign currency dealers (Level 2 criteria) and are marked-to-market each period (see Note 9 – Derivative Instruments for further discussion).
The Company utilizes life insurance policies to fund the Company’s nonqualified deferred compensation plan. The life insurance asset recorded by the Company is the amount that would be realized upon the assumed surrender of the policy. This amount is based on the underlying fair value of the invested assets contained within the life insurance policies. The gains and losses are recorded in the Company’s Consolidated Statement of Income within "other expense, net." The related deferred compensation liability is also marked-to-market each period based upon the returns of the various investments selected by the plan participants and the gains and losses are recorded in the Company’s Consolidated Statement of Income within "selling, general and administrative expenses." The net realizable value of the Company's life insurance investments and related deferred compensation liability was $42.7 million and $42.6 million, respectively, at July 31, 2019 and $39.2 million and $39.1 million, respectively, at January 31, 2019.
The carrying value of the 2017 Senior Notes discussed in Note 5 – Debt represents cost less unamortized debt discount and debt issuance costs. The estimated fair value of the 2017 Senior Notes is based upon quoted market information (Level 1). The estimated fair value of the 2017 Senior Notes was $1.03 billion and $988 million, respectively, at July 31, 2019 and January 31, 2019 and the carrying value was $993.6 million and $992.8 million, respectively, at July 31, 2019 and January 31, 2019. The carrying amounts of accounts receivable, accounts payable and accrued expenses approximate fair value because of the short maturity of these items. The carrying amounts of debt outstanding pursuant to revolving credit facilities and under the 2016 Term Loan Credit Agreement approximate fair value as the majority of these instruments have variable interest rates which approximate current market rates (Level 2 criteria).
NOTE 9 — DERIVATIVE INSTRUMENTS
In the ordinary course of business, the Company is exposed to movements in foreign currency exchange rates. The Company's foreign currency risk management objective is to protect earnings and cash flows from the impact of exchange rate changes primarily through the use of foreign currency forward contracts and a cross-currency swap.
Net Investment Hedges
The Company has entered into foreign currency forward contracts to hedge a portion of its net investment in euro denominated foreign operations which are designated as net investment hedges. The Company entered into the net investment hedges to offset the risk of change in the U.S. dollar value of the Company's investment in a euro functional subsidiary due to fluctuating foreign exchange rates. Gains and losses on net investment hedges are recorded in other comprehensive income (loss) until the sale or substantially complete liquidation of the underlying assets of the Company's investment. The initial fair value of hedge components excluded from the assessment of effectiveness is recognized in the Consolidated Statement of Income under a systematic and rational method over the life of the hedging instrument.
The aggregate notional values of the Company's outstanding net investment hedge contracts by year of maturity as of July 31, 2019 are as follows:
|
| | | | |
Fiscal Year: | | Notional Value |
(in millions) | | |
2020 | | $ | 10.8 |
|
2021 | | 21.6 |
|
2022 | | 21.6 |
|
2023 | | 267.0 |
|
2024 | | 12.4 |
|
Thereafter | | 293.4 |
|
Total | | $ | 626.8 |
|
The following tables present the effects of the Company's net investment hedges on accumulated other comprehensive income ("AOCI") and earnings for the three and six months ended July 31, 2019:
|
| | | | | | | | | | | | | | |
| | Three months ended July 31, 2019 | | |
Derivatives designated as net investment hedges: | | Amount of gain (loss) recognized in other comprehensive income (loss) | | Amount of gain (loss) reclassified from AOCI into income | | Amount of gain (loss) recognized in income (amount excluded from effectiveness testing) | | Location of gain (loss) recognized in income (amount excluded from effectiveness testing) |
(in thousands) | | | | | | | | |
Foreign currency forward contracts | | $ | (5,938 | ) | | $ | — |
| | $ | 3,089 |
| | Interest expense |
|
| | | | | | | | | | | | | | |
| | Six months ended July 31, 2019 | | |
Derivatives designated as net investment hedges: | | Amount of gain (loss) recognized in other comprehensive income (loss) | | Amount of gain (loss) reclassified from AOCI into income | | Amount of gain (loss) recognized in income (amount excluded from effectiveness testing) | | Location of gain (loss) recognized in income (amount excluded from effectiveness testing) |
(in thousands) | | | | | | | | |
Foreign currency forward contracts | | $ | (3,442 | ) | | $ | — |
| | $ | 3,405 |
| | Interest expense |
The Company had no net investment hedges outstanding during the three and six months ended July 31, 2018.
Cash Flow Hedges
The Company has entered into a cross-currency swap to hedge its cash flows related to certain foreign-currency denominated debt which is designated as a cash flow hedge. The notional value of this swap was $4.5 million at July 31, 2019 and the swap has a maturity date of February 2020. The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is initially reported as a component of other comprehensive income (loss). These gains and losses are subsequently reclassified into earnings in the same period during which the hedged transaction affects earnings and are presented in the same income statement line item as the earnings effect of the hedged item.
The following tables present the effects of the Company's cash flow hedges on AOCI and earnings for the three and six months ended July 31, 2019:
|
| | | | | | | | | | |
| | Three months ended July 31, 2019 | | |
Derivatives designated as cash flow hedges: | | Amount of gain (loss) recognized in other comprehensive income (loss) | | Amount of gain (loss) reclassified from AOCI into income | | Location of gain (loss) reclassified from AOCI into income |
(in thousands) | | | | | | |
Cross-currency swap | | $ | 720 |
| | $ | 168 |
| | Interest expense |
| | | | 283 |
| | Other expense, net |
Total | | $ | 720 |
| | $ | 451 |
| | |
|
| | | | | | | | | | |
| | Six months ended July 31, 2019 | | |
Derivatives designated as cash flow hedges: | | Amount of gain (loss) recognized in other comprehensive income (loss) | | Amount of gain (loss) reclassified from AOCI into income | | Location of gain (loss) reclassified from AOCI into income |
(in thousands) | | | | | | |
Cross-currency swap | | $ | 145 |
| | $ | 288 |
| | Interest expense |
| | | | (201 | ) | | Other expense, net |
Total | | $ | 145 |
| | $ | 87 |
| | |
The Company had no cash flow hedges outstanding during the three and six months ended July 31, 2018.
Derivatives Not Designated as Hedges
The Company additionally utilizes forward contracts that are not designated as hedging instruments to hedge intercompany loans, accounts receivable and accounts payable. The Company’s foreign currency exposure relates primarily to international transactions where the currency collected from customers can be different from the currency used to purchase the product. The Company’s transactions in its foreign operations are denominated primarily in the following currencies: Australian dollar, British pound, Canadian dollar, Czech koruna, Danish krone, euro, Indian rupee, Indonesian rupiah, Mexican peso, Norwegian krone, Polish zloty, Singapore dollar, Swedish krona, Swiss franc and U.S. dollar.
The Company considers inventory as an economic hedge against foreign currency exposure in accounts payable in certain circumstances. This practice offsets such inventory against corresponding accounts payable denominated in currencies other than the functional currency of the subsidiary buying the inventory when determining the net exposure to be hedged using traditional forward contracts. Under this strategy, the Company would expect to increase or decrease selling prices for products purchased in foreign currencies based on fluctuations in foreign currency exchange rates affecting the underlying accounts payable. To the extent the Company incurs a foreign currency exchange loss (gain) on the underlying accounts payable denominated in the foreign currency, a corresponding increase (decrease) in gross profit would be expected as the related inventory is sold. This strategy can result in a certain degree of quarterly earnings volatility as the underlying accounts payable is remeasured using the foreign currency exchange rate prevailing at the end of each period, or settlement date if earlier, whereas the corresponding increase (decrease) in gross profit is not realized until the related inventory is sold.
The Company recognizes foreign currency exchange gains and losses on its derivative instruments not designated as hedges that are used to manage its exposures to foreign currency denominated accounts receivable and accounts payable as a component of “cost of products sold” which is consistent with the classification of the change in fair value upon remeasurement of the underlying hedged accounts receivable or accounts payable. The Company recognizes foreign currency exchange gains and losses on its derivative instruments not designated as hedges that are used to manage its exposures to foreign currency denominated financing transactions as a component of “other expense, net,” which is consistent with the classification of the change in fair value upon remeasurement of the underlying hedged loans. The gains and losses on the Company's foreign currency forward contracts are largely offset by the change in the fair value of the underlying hedged assets or liabilities.
The total amount of gains (losses) recognized in earnings on the Company's derivatives not designated as hedges for the three and six months ended July 31, 2019 and 2018 are as follows:
|
| | | | | | | | | | | | | | | | | | |
| | | | Gains (losses) recognized in earnings |
| | | | Three months ended July 31, | | Six months ended July 31, |
Derivatives not designated as hedges | | Income statement location | | 2019 | | 2018 | | 2019 | | 2018 |
(in millions) | | | | | | | | | | |
Foreign currency forward contracts | | Cost of products sold | | $ | 2.1 |
| | $ | 5.4 |
| | $ | 3.0 |
| | $ | 12.0 |
|
Foreign currency forward contracts | | Other expense, net | | (3.1 | ) | | (4.1 | ) | | (3.3 | ) | | (11.4 | ) |
Total | | | | $ | (1.0 | ) | | $ | 1.3 |
| | $ | (0.3 | ) | | $ | 0.6 |
|
The Company's average notional amounts of derivatives not designated as hedges outstanding during the three months ended July 31, 2019 and 2018 were approximately $1.2 billion and $1.3 billion, respectively, with average maturities of 26 days and 28 days, respectively. The Company's average notional amounts of derivatives not designated as hedges outstanding during the six months ended July 31, 2019 and 2018 were approximately $1.2 billion and $1.4 billion, respectively, with average maturities of 25 days and 29 days, respectively. As discussed above, under the Company's hedging policies, gains and losses on these derivative financial instruments are largely offset by the gains and losses on the underlying assets or liabilities being hedged.
The Company’s derivatives are also discussed in Note 8 – Fair Value Measurements.
NOTE 10 — SHAREHOLDERS' EQUITY
Share Repurchase Program
In October 2018, the Company's Board of Directors authorized a share repurchase program for up to $200.0 million of the Company's common stock. In February 2019, the Board of Directors approved a $100.0 million increase to the program resulting in a total share repurchase authorization of $300.0 million. In conjunction with the Company’s share repurchase program, a 10b5-1 plan was executed that instructs the broker selected by the Company to repurchase shares on behalf of the Company. The amount of common stock repurchased in accordance with the 10b5-1 plan on any given trading day is determined by a formula in the plan, which is based on the market price of the Company’s common stock. Shares repurchased by the Company are held in treasury for general corporate purposes, including issuances under equity incentive and benefit plans. The reissuance of shares from treasury stock is based on the weighted average purchase price of the shares.
The Company’s common share issuance activity for the six months ended July 31, 2019 is summarized as follows:
|
| | | | | | |
| Shares | | Weighted-average price per share |
Treasury stock balance at January 31, 2019 | 22,305,464 |
| | $ | 46.53 |
|
Shares of treasury stock repurchased under share repurchase program | 1,179,176 |
| | 99.81 |
|
Shares of treasury stock reissued for equity incentive plans | (196,220 | ) | | |
Treasury stock balance at July 31, 2019 | 23,288,420 |
| | $ | 49.22 |
|
As of July 31, 2019, the Company had $75.3 million available for future repurchases of its common stock under the authorized share repurchase program. In August 2019, the Company's Board of Directors authorized the repurchase of up to an additional $200.0 million of the Company's common stock.
Accumulated Other Comprehensive Income
The following tables summarize the change in the components of AOCI for the three and six months ended July 31, 2019 and 2018:
|
| | | | | | | | | | | | |
| | Foreign currency translation adjustment, net of taxes | | Unrealized gains (losses) on cash flow hedges, net of taxes | | Total |
(in thousands) | | | | | | |
Balance at April 30, 2019 | | $ | 3,263 |
| | $ | (211 | ) | | $ | 3,052 |
|
Other comprehensive income (loss) before reclassification | | (31,822 | ) | | 720 |
| | (31,102 | ) |
Reclassification of (gain) loss from AOCI into income | | — |
| | (451 | ) | | (451 | ) |
Balance at July 31, 2019 | | $ | (28,559 | ) | | $ | 58 |
| | $ | (28,501 | ) |
|
| | | | | | | | | | | | |
| | Foreign currency translation adjustment, net of taxes | | Unrealized gains (losses) on cash flow hedges, net of taxes | | Total |
(in thousands) | | | | | | |
Balance at April 30, 2018 | | $ | 200,040 |
| | $ | — |
| | $ | 200,040 |
|
Other comprehensive income (loss) before reclassification | | (96,982 | ) | | — |
| | (96,982 | ) |
Reclassification of (gain) loss from AOCI into income | | (5,073 | ) | | — |
| | (5,073 | ) |
Balance at July 31, 2018 | | $ | 97,985 |
| | $ | — |
| | $ | 97,985 |
|
|
| | | | | | | | | | | | |
| | Foreign currency translation adjustment, net of taxes | | Unrealized gains (losses) on cash flow hedges, net of taxes | | Total |
(in thousands) | | | | | | |
Balance at January 31, 2019 | | $ | 43,786 |
| | $ | — |
| | $ | 43,786 |
|
Other comprehensive income (loss) before reclassification | | (72,345 | ) | | 145 |
| | (72,200 | ) |
Reclassification of (gain) loss from AOCI into income | | — |
| | (87 | ) | | (87 | ) |
Balance at July 31, 2019 | | $ | (28,559 | ) | | $ | 58 |
| | $ | (28,501 | ) |
|
| | | | | | | | | | | | |
| | Foreign currency translation adjustment, net of taxes | | Unrealized gains (losses) on cash flow hedges, net of taxes | | Total |
(in thousands) | | | | | | |
Balance at January 31, 2018 | | $ | 288,292 |
| | $ | — |
| | $ | 288,292 |
|
Other comprehensive income (loss) before reclassification | | (185,234 | ) | | — |
| | (185,234 | ) |
Reclassification of (gain) loss from AOCI into income | | (5,073 | ) | | — |
| | (5,073 | ) |
Balance at July 31, 2018 | | $ | 97,985 |
| | $ | — |
| | $ | 97,985 |
|
NOTE 11 — LEASES
At contract inception, the Company determines if an arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. The Company has operating leases for certain logistics centers, office facilities, vehicles and equipment. The Company’s finance leases are not material. Short-term operating leases, which have an initial term of 12 months or less, are not recorded on the balance sheet. Certain of the Company’s operating leases contain options to extend the lease, which are included in the lease term when it is reasonably certain that the option will be exercised. Certain of the Company's operating leases contain options to terminate the lease; periods after the date of the termination option are included in the lease term when it is reasonably certain that the Company will not exercise the option to terminate the lease. The Company has elected to not separately recognize the lease and non-lease components of a contract for all operating leases.
Operating leases are included in “other assets, net”, “accrued expenses and other liabilities” (for the current portion of lease liabilities) and “other long-term liabilities” on the Consolidated Balance Sheet. These assets and liabilities are recognized at the lease commencement date based on the present value of remaining lease payments over the lease term using the Company's incremental borrowing rate. Lease expense for operating leases is recognized on a straight-line basis over the lease term and is recognized in “selling, general and administrative expenses” on the Consolidated Statement of Income. Variable lease costs are recognized as incurred.
The following table presents the contractual maturities of the Company's operating lease liabilities as of July 31, 2019: |
| | | | |
Fiscal year: | | |
(in thousands) | | |
2020 (remaining 6 months) | | $ | 33,408 |
|
2021 | | 63,070 |
|
2022 | | 41,811 |
|
2023 | | 30,247 |
|
2024 | | 22,390 |
|
Thereafter | | 35,788 |
|
Total payments | | $ | 226,714 |
|
Less amount of lease payments representing interest | | (25,834 | ) |
Total present value of lease payments | | $ | 200,880 |
|
Rental expense for all operating leases totaled $21.8 million and $43.4 million during the three and six months ended July 31, 2019. These costs primarily relate to fixed costs for long-term operating leases, but also include immaterial amounts for variable lease costs and short-term operating leases.
The following amounts were recorded in the Company's Consolidated Balance Sheet as of July 31, 2019: |
| | | | | | |
Operating leases | | Balance sheet location | | July 31, 2019 |
(in thousands) | | | | |
Operating lease right-of-use assets | | Other assets, net | | $ | 201,782 |
|
Current operating lease liabilities | | Accrued expenses and other liabilities | | 64,361 |
|
Non-current operating lease liabilities | | Other long-term liabilities | | 136,519 |
|
Supplemental cash flow information related to the Company's operating leases is as follows: |
| | | | |
Cash flow information | | Six months ended July 31, 2019 |
(in thousands) | | |
Cash paid for amounts included in the measurement of lease liabilities: | | $ | 35,067 |
|
Non-cash right-of-use assets obtained in exchange for lease liabilities: | | 18,036 |
|
The weighted-average remaining lease term and discount rate were as follows as of July 31, 2019: |
| | | |
Operating lease term and discount rate | | Operating Leases |
Weighted-average remaining lease term | | 4.7 years |
|
Weighted-average discount rate | | 4.8 | % |
NOTE 12 — COMMITMENTS AND CONTINGENCIES
Guarantees
The Company has arrangements with certain finance companies that provide inventory financing facilities to the Company’s customers. In conjunction with certain of these arrangements, the Company would be required to purchase certain inventory in the event the inventory is repossessed from the customers by the finance companies. As the Company does not have access to information regarding the amount of inventory purchased from the Company still on hand with the customer at any point in time, the Company’s repurchase obligations relating to inventory cannot be reasonably estimated. Repurchases of inventory by the Company under these arrangements have been insignificant to date. The Company believes that, based on historical experience, the likelihood of a material loss pursuant to these inventory repurchase obligations is remote.
Contingencies
In December 2010, in a non-unanimous decision, a Brazilian appellate court overturned a 2003 trial court which had previously ruled in favor of the Company’s Brazilian subsidiary related to the imposition of certain taxes on payments abroad related to the licensing of commercial software products, commonly referred to as “CIDE tax.” The Company estimates the total exposure related to the CIDE tax, including interest, was approximately $20.2 million at July 31, 2019. The Brazilian subsidiary has appealed the unfavorable ruling to the Supreme Court and Superior Court, Brazil's two highest appellate courts. Based on the legal opinion of outside counsel, the Company believes that the chances of success on appeal of this matter are favorable and the Brazilian subsidiary intends to vigorously defend its position that the CIDE tax is not due. Accordingly, the Company has not recorded an accrual for the total estimated CIDE tax exposure. However, due to the lack of predictability of the Brazilian court system, the Company has concluded that it is reasonably possible that the Brazilian subsidiary may incur a loss up to the total exposure described above. The Company believes the resolution of this litigation will not be material to the Company’s consolidated net assets or liquidity.
In June 2013, the Company was subject to a document seizure by the French Autorité de la Concurrence ("Competition Authority") following allegations of anticompetitive distribution practices in the French market for the products of one of the Company's suppliers. In October 2018, the Competition Authority delivered a notification des griefs (statement of objections) to the Company, stating that the Competition Authority is pursuing charges against the Company in this matter. In July 2019, the Competition Authority delivered a rapport (report), which is a further step towards proposing charges in this matter. The Competition Authority has taken similar action against the Company's supplier and another of its distributors. The administrative proceedings could result in the imposition of a fine against the Company, which could be material in amount. If a fine is imposed, the Company would be entitled to appeal the administrative determination to the French courts, although the Company would be required to pay the fine before doing so. At this time, the Company cannot assess the likelihood that these proceedings will be finally resolved against Tech Data, and the Company cannot reasonably estimate the amount of fine that may be imposed.
The Company is subject to various other legal proceedings and claims arising in the ordinary course of business. The Company’s management does not expect that the outcome in any of these other legal proceedings, individually or collectively, will have a material adverse effect on the Company’s financial condition, results of operations or cash flows.
NOTE 13 — SEGMENT INFORMATION
The Company operates predominantly in a single industry segment as a distributor of technology products, logistics management, and other value-added services. While the Company operates primarily in one industry, it is managed based on three geographic segments: the Americas, Europe and Asia-Pacific. The Company does not consider stock-based compensation expense in assessing the performance of its operating segments, and therefore the Company excludes stock-based compensation expense from segment information. The accounting policies of the segments are the same as those described in Note 1 – Business and Summary of Significant Accounting Policies.
Financial information by geographic segment is as follows (in thousands): |
| | | | | | | | | | | | | | | |
| Three months ended July 31, | | Six months ended July 31, |
| 2019 | | 2018 | | 2019 | | 2018 |
Net sales: | | | | | | | |
Americas (1) | $ | 4,316,731 |
| | $ | 4,043,331 |
| | $ | 8,105,929 |
| | $ | 7,661,537 |
|
Europe | 4,439,627 |
| | 4,549,127 |
| | 8,749,127 |
| | 9,210,829 |
|
Asia-Pacific | 335,886 |
| | 293,643 |
| | 643,612 |
| | 562,054 |
|
Total | $ | 9,092,244 |
| | $ | 8,886,101 |
| | $ | 17,498,668 |
| | $ | 17,434,420 |
|
| | | | | | | |
Operating income: | | | | | | | |
Americas (2), (3) | $ | 93,085 |
| | $ | 87,930 |
| | $ | 161,718 |
| | $ | 149,272 |
|
Europe (4), (5) | 37,649 |
| | 29,085 |
| | 74,069 |
| | 46,403 |
|
Asia-Pacific | 2,068 |
| | 1,318 |
| | 2,944 |
| | 741 |
|
Stock-based compensation expense | (8,055 | ) | | (7,968 | ) | | (16,360 | ) | | (15,555 | ) |
Total | $ | 124,747 |
| | $ | 110,365 |
| | $ | 222,371 |
| | $ | 180,861 |
|
| | | | | | | |
Depreciation and amortization: | | | | | | | |
Americas | $ | 23,790 |
| | $ | 23,591 |
| | $ | 47,439 |
| | $ | 46,850 |
|
Europe | 12,021 |
| | 14,016 |
| | 23,531 |
| | 29,007 |
|
Asia-Pacific | 1,691 |
| | 2,311 |
| | 3,789 |
| | 4,542 |
|
Total | $ | 37,502 |
| | $ | 39,918 |
| | $ | 74,759 |
| | $ | 80,399 |
|
| | | | | | | |
Capital expenditures: | | | | | | | |
Americas | $ | 10,526 |
| | $ | 8,233 |
| | $ | 18,798 |
| | $ | 12,612 |
|
Europe | 6,658 |
| | 5,362 |
| | 12,785 |
| | 9,079 |
|
Asia-Pacific | 1,047 |
| | 673 |
| | 1,927 |
| | 1,032 |
|
Total | $ | 18,231 |
| | $ | 14,268 |
| | $ | 33,510 |
| | $ | 22,723 |
|
|
| | | | | | | |
As of: | July 31, 2019 | | January 31, 2019 |
Identifiable assets: | | | |
Americas | $ | 5,569,530 |
| | $ | 5,402,316 |
|
Europe | 5,870,713 |
| | 6,970,822 |
|
Asia-Pacific | 614,812 |
| | 613,414 |
|
Total | $ | 12,055,055 |
| | $ | 12,986,552 |
|
| | | |
Long-lived assets: | | | |
Americas (1) | $ | 216,638 |
| | $ | 217,863 |
|
Europe | 51,310 |
| | 52,162 |
|
Asia-Pacific | 5,180 |
| | 4,892 |
|
Total | $ | 273,128 |
| | $ | 274,917 |
|
| | | |
Goodwill & acquisition-related intangible assets, net: | | | |
Americas | $ | 1,057,818 |
| | $ | 1,083,699 |
|
Europe | 542,938 |
| | 575,776 |
|
Asia-Pacific | 57,014 |
| | 60,154 |
|
Total | $ | 1,657,770 |
| | $ | 1,719,629 |
|
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
| |
FORWARD-LOOKING STATEMENTS | |
This Quarterly Report on Form 10-Q, including this Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), contains forward-looking statements, as described in the “safe harbor” provision of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks and uncertainties and actual results could differ materially from those projected. These forward-looking statements regarding future events and the future results of Tech Data Corporation (“Tech Data”, “we”, “our”, “us” or the “Company”) are based on current expectations, estimates, forecasts, and projections about the industries in which we operate 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 our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances, are forward-looking statements. Readers are cautioned that 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. Readers are referred to the cautionary statements and important factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended January 31, 2019 for further information with respect to important risks and other factors that could cause actual results to differ materially from those in the forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
We are one of the world’s largest IT distribution and solutions companies. We serve a critical role in the center of the IT ecosystem, bringing products from the world’s leading technology vendors to market, as well as helping our customers create solutions best suited to maximize business outcomes for their end-user customers. We distribute and market products from many of the world’s leading technology hardware manufacturers and software publishers, as well as suppliers of next-generation technologies and delivery models such as converged and hyperconverged infrastructure, the cloud, security, analytics/Internet of things ("IoT"), and services. Our customers include value-added resellers, direct marketers, retailers, corporate resellers and managed service providers who support the diverse technology needs of end users.
Some of our key financial objectives are the following:
| |
• | Growing faster than the industry in select markets by gaining profitable market share in key geographies within select product categories with leading vendors. |
| |
• | Improving operating income by growing gross profit faster than operating costs. |
| |
• | Delivering a return on invested capital above our weighted average cost of capital. |
To strengthen our role at the center of the IT ecosystem well into the future and achieve our financial objectives, we are moving to higher value, focused on the following strategic priorities:
| |
• | Invest in next-generation technologies and delivery models such as the cloud, security, analytics/IoT, and services. |
| |
• | Strengthen our end-to-end portfolio of products, services and solutions. |
| |
• | Transform our company digitally through greater automation, which we believe will enhance the customer experience, improve productivity and reduce costs. |
| |
• | Optimize our global footprint by enhancing the operational efficiency and effectiveness of our businesses around the world. |
|
| |
NON-GAAP FINANCIAL INFORMATION | |
In addition to disclosing financial results that are determined in accordance with generally accepted accounting principles in the U.S. (“GAAP”), the Company also discloses certain non-GAAP financial information. Certain of these measures are presented as adjusted for the impact of changes in foreign currencies (referred to as “impact of changes in foreign currencies”). Removing the impact of the changes in foreign currencies provides a framework for assessing our financial performance as compared to prior periods. The impact of changes in foreign currencies is calculated by using the exchange rates from the prior year comparable period applied to the results of operations for the current period. The non-GAAP financial measures presented in this document include:
| |
• | Net sales, as adjusted, which is defined as net sales adjusted for the impact of changes in foreign currencies; |
| |
• | Gross profit, as adjusted, which is defined as gross profit as adjusted for the impact of changes in foreign currencies; |
| |
• | Selling, general and administrative expenses (“SG&A”), as adjusted, which is defined as SG&A as adjusted for the impact of changes in foreign currencies; |
| |
• | Non-GAAP operating income, which is defined as operating income as adjusted to exclude acquisition, integration and restructuring expenses, legal settlements and other, net, acquisition-related intangible assets amortization expense, gain on disposal of subsidiary and tax indemnifications; |
| |
• | Non-GAAP net income, which is defined as net income as adjusted to exclude acquisition, integration and restructuring expenses, legal settlements and other, net, acquisition-related intangible assets amortization expense, gain on disposal of subsidiary, tax indemnifications, value added tax assessments and related interest expense, the income tax effects of these adjustments and the reversal of deferred tax valuation allowances; |
| |
• | Non-GAAP earnings per share-diluted, which is defined as earnings per share-diluted as adjusted to exclude the per share impact of acquisition, integration and restructuring expenses, legal settlements and other, net, acquisition-related intangible assets amortization expense, gain on disposal of subsidiary, tax indemnifications, value added tax assessments and related interest expense, the income tax effects of these adjustments and the reversal of deferred tax valuation allowances. |
Management believes that providing this additional information is useful to the reader to assess and understand our financial performance as compared with results from previous periods. Management also uses these non-GAAP measures to evaluate performance against certain operational goals and under certain of our performance-based compensation plans. However, analysis of results on a non-GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with GAAP. Additionally, because these non-GAAP measures are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures reported by other companies.
The following table sets forth our Consolidated Statement of Income as a percentage of net sales:
|
| | | | | | | | | | | | | |
| Three months ended July 31, | | Six months ended July 31, |
| 2019 | | 2018 | | 2019 | | 2018 |
Net sales | 100.00 | % | | 100.00 |
| % | | 100.00 | % | | 100.00 |
| % |
Cost of products sold | 93.82 | | | 94.07 |
| | | 93.88 | | | 93.98 |
| |
Gross profit | 6.18 | | | 5.93 |
| | | 6.12 | | | 6.02 |
| |
Operating expenses: | | | | | | | | | | | |
Selling, general and administrative expenses | 4.75 | | | 4.67 |
| | | 4.79 | | | 4.80 |
| |
Acquisition, integration and restructuring expenses | 0.06 | | | 0.15 |
| | | 0.06 | | | 0.27 |
| |
Legal settlements and other, net | — | | | (0.06 | ) | | | — | | | (0.05 | ) | |
Gain on disposal of subsidiary | — | | | (0.07 | ) | | | — | | | (0.04 | ) | |
| 4.81 | | | 4.69 |
| | | 4.85 | | | 4.98 |
| |
Operating income | 1.37 | | | 1.24 |
| | | 1.27 | | | 1.04 |
| |
Interest expense | 0.23 | | | 0.31 |
| | | 0.27 | | | 0.31 |
| |
Other expense, net | 0.03 | | | 0.01 |
| | | 0.01 | | | 0.02 |
| |
Income before income taxes | 1.11 | | | 0.92 |
| | | 0.99 | | | 0.71 |
| |
Provision for income taxes | 0.24 | | | 0.07 |
| | | 0.22 | | | 0.08 |
| |
Net income | 0.87 | % | | 0.85 |
| % | | 0.77 | % | | 0.63 |
| % |
QUARTERLY RESULTS
The following table summarizes our net sales and change in net sales by geographic region for the three months ended July 31, 2019 and 2018:
|
| | | | | | | | | | | | | | |
| Three months ended July 31, | | Change |
| 2019 | | 2018 | | $ | | % |
(in millions) | | | | | | | |
Consolidated net sales, as reported | $ | 9,092 |
| | $ | 8,886 |
| | $ | 206 |
| | 2.3 | % |
Impact of changes in foreign currencies | 220 |
| | — |
| | 220 |
| | |
Consolidated net sales, as adjusted | $ | 9,312 |
| | $ | 8,886 |
| | $ | 426 |
| | 4.8 | % |
| | | | | | | |
Americas net sales, as reported | $ | 4,317 |
| | $ | 4,043 |
| | $ | 274 |
| | 6.8 | % |
Impact of changes in foreign currencies | 13 |
| | — |
| | 13 |
| | |
Americas net sales, as adjusted | $ | 4,330 |
| | $ | 4,043 |
| | $ | 287 |
| | 7.1 | % |
| | | | | | | |
Europe net sales, as reported | $ | 4,439 |
| | $ | 4,549 |
| | $ | (110 | ) | | (2.4 | )% |
Impact of changes in foreign currencies | 200 |
| | — |
| | 200 |
| | |
Europe net sales, as adjusted | $ | 4,639 |
| | $ | 4,549 |
| | $ | 90 |
| | 2.0 | % |
| | | | | | | |
Asia-Pacific net sales, as reported | $ | 336 |
| | $ | 294 |
| | $ | 42 |
| | 14.3 | % |
Impact of changes in foreign currencies | 7 |
| | — |
| | 7 |
| | |
Asia-Pacific net sales, as adjusted | $ | 343 |
| | $ | 294 |
| | $ | 49 |
| | 16.7 | % |
QUARTERLY COMMENTARY
AMERICAS
| |
• | The increase in Americas net sales, as adjusted, of $287 million is primarily due to growth in software, data center products and personal computer systems. |
EUROPE
| |
• | The increase in Europe net sales, as adjusted, of $90 million is primarily due to growth in software, data center products and personal computer systems. The impact of changes in foreign currencies is primarily due to the weakening of the euro against the U.S. dollar. |
ASIA-PACIFIC
| |
• | The increase in Asia-Pacific net sales, as adjusted, of $49 million is primarily due to growth in data center products and software. |
YEAR TO DATE RESULTS
The following table summarizes our net sales and change in net sales by geographic region for the six months ended July 31, 2019 and 2018:
|
| | | | | | | | | | | | | | |
| Six months ended July 31, | | Change |
| 2019 | | 2018 | | $ | | % |
(in millions) | | | | | | | |
Consolidated net sales, as reported | $ | 17,499 |
| | $ | 17,434 |
| | $ | 65 |
| | 0.4 | % |
Impact of changes in foreign currencies | 636 |
| | — |
| | 636 |
| | |
Consolidated net sales, as adjusted | $ | 18,135 |
| | $ | 17,434 |
| | $ | 701 |
| | 4.0 | % |
| | | | | | | |
Americas net sales, as reported | $ | 8,106 |
| | $ | 7,661 |
| | $ | 445 |
| | 5.8 | % |
Impact of changes in foreign currencies | 41 |
| | — |
| | 41 |
| | |
Americas net sales, as adjusted | $ | 8,147 |
| | $ | 7,661 |
| | $ | 486 |
| | 6.3 | % |
| | | | | | | |
Europe net sales, as reported | $ | 8,749 |
| | $ | 9,211 |
| | $ | (462 | ) | | (5.0 | )% |
Impact of changes in foreign currencies | 576 |
| | — |
| | 576 |
| | |
Europe net sales, as adjusted | $ | 9,325 |
| | $ | 9,211 |
| | $ | 114 |
| | 1.2 | % |
| | | | | | | |
Asia-Pacific net sales, as reported | $ | 644 |
| | $ | 562 |
| | $ | 82 |
| | 14.6 | % |
Impact of changes in foreign currencies | 19 |
| | — |
| | 19 |
| | |
Asia-Pacific net sales, as adjusted | $ | 663 |
| | $ | 562 |
| | $ | 101 |
| | 18.0 | % |
| | | | | | | |
YEAR TO DATE COMMENTARY
AMERICAS
| |
• | The increase in Americas net sales, as adjusted, of $486 million is primarily due to growth in software, data center products and personal computer systems. |
EUROPE
| |
• | The increase in Europe net sales, as adjusted, of $114 million is primarily due to growth in software, data center and mobility products. The impact of changes in foreign currencies is primarily due to the weakening of the euro against the U.S. dollar. |
ASIA-PACIFIC
| |
• | The increase in Asia-Pacific net sales, as adjusted, of $101 million is primarily due to growth in data center products and software. |
MAJOR VENDORS
The following table provides a comparison of net sales generated from products purchased from vendors that exceeded 10% of our consolidated net sales for the three and six months ended July 31, 2019 and 2018 (as a percent of consolidated net sales):
|
| | | | | | | |
| Three months ended July 31, | | Six months ended July 31, |
| 2019 | | 2018 | | 2019 | | 2018 |
Apple, Inc. | 14% | | 14% | | 13% | | 14% |
Cisco Systems, Inc. | 12% | | 11% | | 11% | | 11% |
HP Inc. | 11% | | 12% | | 11% | | 12% |
There were no customers that exceeded 10% of our consolidated net sales for the three and six months ended July 31, 2019 and 2018.
The following tables provide a comparison of our gross profit and gross profit as a percentage of net sales for the three and six months ended July 31, 2019 and 2018:
|
| | | | | | | | | | | | | | |
| Three months ended July 31, | | Change |
| 2019 | | 2018 | | $ | | % |
(in millions) | | | | | | | |
Gross profit, as reported | $ | 561.7 |
| | $ | 527.0 |
| | $ | 34.7 |
| | 6.6 | % |
Impact of changes in foreign currencies | 13.0 |
| | — |
| | 13.0 |
| | |
Gross profit, as adjusted | $ | 574.7 |
| | $ | 527.0 |
| | $ | 47.7 |
| | 9.1 | % |
|
| | | | | | | | | | | | | | |
| Six months ended July 31, | | Change |
| 2019 | | 2018 | | $ | | % |
(in millions) | | | | | | | |
Gross profit, as reported | $ | 1,071.0 |
| | $ | 1,050.1 |
| | $ | 20.9 |
| | 2.0 | % |
Impact of changes in foreign currencies | 37.3 |
| | — |
| | 37.3 |
| | |
Gross profit, as adjusted | $ | 1,108.3 |
| | $ | 1,050.1 |
| | $ | 58.2 |
| | 5.5 | % |
| | | | | | | |
The quarter and year to date increase in gross profit, as adjusted, of $47.7 million and $58.2 million, respectively, is primarily due to an increase in net sales volume. The quarter and year to date increase in gross profit as a percentage of net sales, as reported, of 25 basis points and 10 basis points, respectively, is primarily due to the mix of products sold.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The following tables provide a comparison of our selling, general and administrative expenses for the three and six months ended July 31, 2019 and 2018:
|
| | | | | | | | | | | | | | |
| Three months ended July 31, | | Change |
| 2019 | | 2018 | | $ | | % |
(in millions) | | | | | | | |
SG&A, as reported | $ | 431.7 |
| | $ | 415.3 |
| | $ | 16.4 |
| | 3.9 | % |
Impact of changes in foreign currencies | 11.2 |
| | — |
| | 11.2 |
| | |
SG&A, as adjusted | $ | 442.9 |
| | $ | 415.3 |
| | $ | 27.6 |
| | 6.6 | % |
| | | | | | | |
SG&A as a percentage of net sales, as reported | 4.75 | % | | 4.67 | % | | | | 8 bps |
|
|
| | | | | | | | | | | | | | |
| Six months ended July 31, | | Change |
| 2019 | | 2018 | | $ | | % |
(in millions) | | | | | | | |
SG&A, as reported | $ | 837.5 |
| | $ | 837.7 |
| | $ | (0.2 | ) | | — | % |
Impact of changes in foreign currencies | 31.7 |
| | — |
| | 31.7 |
| | |
SG&A, as adjusted | $ | 869.2 |
| | $ | 837.7 |
| | $ | 31.5 |
| | 3.8 | % |
| | | | | | | |
SG&A as a percentage of net sales, as reported | 4.79 | % | | 4.80 | % | | | | (1) bps |
|
The quarter and year to date increase in SG&A, as adjusted of $27.6 million and $31.5 million, respectively, is primarily due to increased investments in our strategic priorities and increased credit costs, partially offset by savings from our Global Business Optimization Program. The quarter to date increase in SG&A as a percentage of net sales of 8 basis points is primarily due to increased investments in our strategic priorities and increased credit costs, partially offset by greater operating leverage from our increased sales and savings from our Global Business Optimization Program.
ACQUISITION, INTEGRATION AND RESTRUCTURING EXPENSES
Acquisition, integration and restructuring expenses are comprised of costs related to the fiscal 2018 acquisition of Avnet, Inc.'s ("Avnet") Technology Solutions business ("TS"), as well as restructuring costs related to the Global Business Optimization Program which was initiated in fiscal 2019.
On February 27, 2017, we acquired all of the outstanding shares of TS for an aggregate purchase price of approximately $2.8 billion, comprised of approximately $2.5 billion in cash and 2,785,402 shares of our common stock. Acquisition, integration and restructuring expenses related to the acquisition of TS are primarily comprised of restructuring costs, Information Technology ("IT") related costs, professional services, transaction related costs and other (income) costs. Restructuring costs are comprised of severance and facility exit costs. IT related costs consist primarily of data center and non-ERP application migration and integration costs, as well as, IT related professional services. Professional services are primarily comprised of integration related activities, including professional fees for project management, accounting, tax and other consulting services. Transaction related costs primarily consist of investment banking fees, legal expenses and due diligence costs incurred in connection with the completion of the transaction. Other (income) costs includes a gain of $9.6 million related to the final working capital adjustment for the acquisition of TS as part of a settlement agreement with Avnet, as well as payroll related costs including retention, stock compensation, relocation and travel expenses, incurred as part of the integration of TS.
We incurred no acquisition, integration and restructuring expenses related to the acquisition of TS during the three and six months ended July 31, 2019 and do not expect to incur any additional costs in future periods. Acquisition, integration and restructuring expenses for the three and six months ended July 31, 2018 related to the acquisition of TS are comprised of the following:
|
| | | | | | | |
| Three months ended July 31, | | Six months ended July 31, |
| 2018 | | 2018 |
(in millions) | | | |
Restructuring costs | $ | 3.8 |
| | $ | 14.6 |
|
IT related costs | 1.2 |
| | 8.5 |
|
Professional services | 0.8 |
| | 4.4 |
|
Transaction related costs | 0.3 |
| | 1.2 |
|
Other (income) costs | (5.5 | ) | | (0.5 | ) |
Total | $ | 0.6 |
| | $ | 28.2 |
|
Global Business Optimization Program
In fiscal 2019, our Board of Directors approved the Global Business Optimization Program (the “GBO Program”) to increase investment in our strategic priorities and implement operational initiatives to drive productivity and enhance profitability. Under the GBO Program, we expect to incur cash charges of approximately $70 million to $80 million, primarily comprised of $40 million to $45 million of charges in Europe and $30 million to $35 million of charges in the Americas. It is anticipated that the majority of these charges will be incurred prior to the end of the current fiscal year. The cash charges primarily consist of severance costs, and also include professional services and other costs. The GBO Program is expected to result in annual cost savings of $70 million to $80 million by the end of fiscal 2021, of which approximately half is expected to be reinvested to accelerate our strategic priorities.
Restructuring expenses related to the GBO Program are comprised of the following:
|
| | | | | | | | | | | | | | | | | | | |
| Three months ended July 31, | | Six months ended July 31, | | Cumulative Amounts Incurred to Date |
| 2019 | | 2018 | | 2019 | | 2018 | |
(in thousands) | | | | | | | | | |
Severance costs | $ | 3.2 |
| | $ | 5.6 |
| | $ | 7.3 |
| | $ | 8.9 |
| | $ | 33.8 |
|
Professional services and other costs | 2.0 |
| | 7.1 |
| | 4.1 |
| | 9.4 |
| | 20.2 |
|
Total | $ | 5.2 |
| | $ | 12.7 |
| | $ | 11.4 |
| | $ | 18.3 |
| | $ | 54.0 |
|
Restructuring expenses related to the GBO Program by segment are as follows: |
| | | | | | | | | | | | | | | |
| Three months ended July 31, | | Six months ended July 31, |
| 2019 | | 2018 | | 2019 | | 2018 |
(in thousands) | | | | | | | |
Americas | $ | 1.3 |
| | $ | 6.5 |
| | $ | 4.2 |
| | $ | 7.3 |
|
Europe | 3.3 |
| | 6.1 |
| | 6.3 |
| | 10.9 |
|
Asia-Pacific | 0.6 |
| | 0.1 |
| | 0.9 |
| | 0.1 |
|
Total | $ | 5.2 |
| | $ | 12.7 |
| | $ | 11.4 |
| | $ | 18.3 |
|
LEGAL SETTLEMENTS AND OTHER, NET
We have been a claimant in proceedings seeking damages from certain manufacturers of LCD flat panel and cathode ray tube displays, as well as reimbursement from insurance providers of certain costs associated with the restatement of our consolidated financial statements and other financial information from fiscal 2009 to 2013. We reached settlement agreements during the periods presented and have recorded these amounts, net of attorney fees and expenses, in “legal settlements and other, net” in the Consolidated Statement of Income.
GAIN ON DISPOSAL OF SUBSIDIARY
During the second quarter of fiscal 2019, we executed an agreement to sell certain of our operations in Ireland for a total sales price of approximately $15.3 million. We recorded a gain on sale of $6.7 million, which includes the reclassification of $5.1 million from accumulated other comprehensive income for cumulative translation adjustments associated with our investment in this foreign entity. The operating results of this entity during the three and six months ended July 31, 2018 were insignificant relative to the consolidated financial results.
CONSOLIDATED RESULTS
The following tables provide an analysis of GAAP operating income and non-GAAP operating income on a consolidated and regional basis as well as a reconciliation of GAAP operating income to non-GAAP operating income on a consolidated and regional basis for the three and six months ended July 31, 2019 and 2018:
|
| | | | |
QUARTERLY RESULTS ($ in millions) |
| | | | |
|
| | | | |
YEAR TO DATE RESULTS ($ in millions) |
| | | | |
|
| | | | | | | | | | | | | | | |
| Three months ended July 31, | | Six months ended July 31, |
| 2019 | | 2018 | | 2019 | | 2018 |
(in millions) | | | | | | | |
Operating income | $ | 124.7 |
| | $ | 110.4 |
| | $ | 222.4 |
| | $ | 180.9 |
|
Acquisition, integration and restructuring expenses | 5.2 |
| | 13.3 |
| | 11.4 |
| | 46.5 |
|
Legal settlements and other, net | — |
| | (5.2 | ) | | (0.3 | ) | | (8.2 | ) |
Acquisition-related intangible assets amortization expense | 21.2 |
| | 22.7 |
| | 42.1 |
| | 46.0 |
|
Gain on disposal of subsidiary | — |
| | (6.7 | ) | | — |
| | (6.7 | ) |
Tax indemnifications | 0.3 |
| | 0.5 |
| | 0.6 |
| | 0.5 |
|
Non-GAAP operating income | $ | 151.4 |
| | $ | 135.0 |
| | $ | 276.2 |
| | $ | 259.0 |
|
CONSOLIDATED COMMENTARY
| |
• | The quarter to date increases in GAAP operating income of $14.3 million and non-GAAP operating income of $16.4 million are primarily due to an increase in net sales volume coupled with an improvement in gross margin, partially offset by increased investments in our strategic priorities and increased credit costs. |
| |
• | The year to date increase in GAAP operating income of $41.5 million is primarily due to a reduction in acquisition, integration and restructuring expenses and an increase in net sales volume, excluding the impact of changes in foreign currencies, partially offset by increased investments in our strategic priorities, increased credit costs and the net unfavorable impact of changes in foreign currencies. |
| |
• | The year to date increase in non-GAAP operating income of $17.2 million is primarily due to an increase in net sales volume, excluding the impact of changes in foreign currencies, partially offset by increased investments in our strategic priorities, increased credit costs and the net unfavorable impact of changes in foreign currencies. |
|
| | | | |
QUARTERLY RESULTS ($ in millions) |
| | | | |
|
| | | | |
YEAR TO DATE RESULTS ($ in millions) |
| | | | |
|
| | | | | | | | | | | | | | | |
| Three months ended July 31, | | Six months ended July 31, |
| 2019 | | 2018 | | 2019 | | 2018 |
(in millions) | | | | | | | |
Operating income - Americas | $ | 93.1 |
| | $ | 87.9 |
| | $ | 161.7 |
| | $ | 149.3 |
|
Acquisition, integration and restructuring expenses | 1.3 |
| | (0.9 | ) | | 4.2 |
| | 13.1 |
|
Legal settlements and other, net | — |
| | (5.2 | ) | | (0.3 | ) | | (8.2 | ) |
Acquisition-related intangible assets amortization expense | 13.5 |
| | 13.6 |
| | 27.0 |
| | 27.2 |
|
Non-GAAP operating income - Americas | $ | 107.9 |
| | $ | 95.4 |
| | $ | 192.6 |
| | $ | 181.4 |
|
AMERICAS COMMENTARY
| |
• | The quarter to date increase in GAAP operating income of $5.2 million is primarily due to an increase in net sales volume, partially offset by lower gains from legal settlements and increased investments in our strategic priorities. |
| |
• | The year to date increase in GAAP operating income of $12.4 million is primarily due to an increase in net sales volume and a reduction in acquisition, integration and restructuring expenses, partially offset by lower gains from legal settlements and increased investments in our strategic priorities. |
| |
• | The quarter and year to date increase in non-GAAP operating income of $12.5 million and $11.2 million, respectively, is primarily due to an increase in net sales volume, partially offset by increased investments in our strategic priorities. |
|
| | | | |
QUARTERLY RESULTS ($ in millions) |
| | | | |
|
| | | | |
YEAR TO DATE RESULTS ($ in millions) |
| | | | |
|
| | | | | | | | | | | | | | | |
| Three months ended July 31, | | Six months ended July 31, |
| 2019 | | 2018 | | 2019 | | 2018 |
(in millions) | | | | | | | |
Operating income - Europe | $ | 37.6 |
| | $ | 29.1 |
| | $ | 74.1 |
| | $ | 46.4 |
|
Acquisition, integration and restructuring expenses | 3.3 |
| | 13.3 |
| | 6.3 |
| | 31.3 |
|
Acquisition-related intangible assets amortization expense | 6.4 |
| | 7.7 |
| | 12.5 |
| | 16.1 |
|
Gain on disposal of subsidiary | — |
| | (6.7 | ) | | — |
| | (6.7 | ) |
Tax indemnifications | — |
| | 0.9 |
| | — |
| | 0.9 |
|
Non-GAAP operating income - Europe | $ | 47.3 |
| | $ | 44.3 |
| | $ | 92.9 |
| | $ | 88.0 |
|
EUROPE COMMENTARY
| |
• | The quarter to date increase in GAAP operating income of $8.5 million is primarily due to a reduction in acquisition, integration and restructuring expenses and an increase in net sales volume, excluding the impact of changes in foreign currencies, partially offset by a prior year gain on disposal of a subsidiary and increased credit costs. |
| |
• | The year to date increase in GAAP operating income of $27.7 million is primarily due to a reduction in acquisition, integration and restructuring expenses and an increase in net sales volume, excluding the impact of changes in foreign currencies, partially offset by a prior year gain on disposal of a subsidiary and the net unfavorable impact of changes in foreign currencies. |
| |
• | The quarter to date increase in non-GAAP operating income of $3.0 million is primarily due to an increase in net sales volume, excluding the impact of changes in foreign currencies, partially offset by increased credit costs. The year to date increase in non-GAAP operating income of $4.9 million is primarily due to an increase in net sales volume, excluding the impact of changes in foreign currencies, partially offset by the net unfavorable impact of changes in foreign currencies. |
|
| | | | | | | | | | | | | | |
| | Three months ended July 31, |
| | 2019 | | 2018 |
| | $ in millions | | as a % of net sales | | $ in millions | | as a % of net sales |
Operating income - Asia-Pacific | | $ | 2.1 |
| | 0.62 | % | | $ | 1.4 |
| | 0.45 | % |
Acquisition, integration and restructuring expenses | | 0.6 |
| | | | 0.1 |
| | |
Acquisition-related intangible assets amortization expense | | 1.3 |
| | | | 1.4 |
| | |
Tax indemnifications | | 0.3 |
| | | | (0.4 | ) | | |
Non-GAAP operating income - Asia-Pacific | | $ | 4.3 |
| | 1.28 | % | | $ | 2.5 |
| | 0.86 | % |
|
| | | | | | | | | | | | | | |
| | Six months ended July 31, |
| | 2019 | | 2018 |
| | $ in millions | | as a % of net sales | | $ in millions | | as a % of net sales |
Operating income - Asia-Pacific | | $ | 2.9 |
| | 0.46 | % | | $ | 0.8 |
| | 0.13 | % |
Acquisition, integration and restructuring expenses | | 0.9 |
| | | | 0.5 |
| | |
Acquisition-related intangible assets amortization expense | | 2.7 |
| | | | 2.7 |
| | |
Tax indemnifications | | 0.6 |
| | | | (0.4 | ) | | |
Non-GAAP operating income - Asia-Pacific | | $ | 7.1 |
| | 1.10 | % | | $ | 3.6 |
| | 0.64 | % |
ASIA-PACIFIC COMMENTARY
| |
• | The quarter and year to date increases in both GAAP operating income and non-GAAP operating income are primarily due to an increase in net sales volume. |
|
| |
OPERATING INCOME BY REGION | |
We do not consider stock-based compensation expenses in assessing the performance of our operating segments, and therefore we report stock-based compensation expenses separately. The following table reconciles our operating income by geographic region to our consolidated operating income:
|
| | | | | | | | | | | | | | | |
| Three months ended July 31, | | Six months ended July 31, |
| 2019 | | 2018 | | 2019 | | 2018 |
(in millions) | | | | | | | |
Americas | $ | 93.1 |
| | $ | 87.9 |
| | $ | 161.7 |
| | $ | 149.3 |
|
Europe | 37.6 |
| | 29.1 |
| | 74.1 |
| | 46.4 |
|
Asia-Pacific | 2.1 |
| | 1.4 |
| | 2.9 |
| | 0.8 |
|
Stock-based compensation expense | (8.1 | ) | | (8.0 | ) | | (16.3 | ) | | (15.6 | ) |
Operating income | $ | 124.7 |
| | $ | 110.4 |
| | $ | 222.4 |
| | $ | 180.9 |
|
Interest expense decreased by $7.1 million to $21.0 million in the second quarter of fiscal 2020 compared to $28.1 million in the second quarter of fiscal 2019. On a year to date basis, interest expense decreased by $6.8 million to $47.2 million in the first semester of fiscal 2020 compared to $54.0 million in the first semester of fiscal 2019. The decrease on both a quarter and year to date basis is primarily due to a benefit in interest expense of approximately $3 million related to our net investment hedges (see further discussion in Note 9 of Notes to Consolidated Financial Statements), a benefit of approximately $2 million for the recovery of letter of credit fees and lower amounts outstanding on the 2016 Term Loan Credit Agreement.
Other expense, net, consists primarily of gains and losses on the investments contained within life insurance policies used to fund our nonqualified deferred compensation plan, interest income, discounts on the sale of accounts receivable and net foreign currency exchange gains and losses on certain financing transactions and the related derivative instruments used to hedge such financing transactions. Other expense, net, increased to $2.9 million in the second quarter of fiscal 2020 compared to $0.9 million in the second quarter of the prior year, primarily due to lower gains on the investments contained within life insurance policies of $1.2 million. On a year to date basis, other expense, net decreased to $2.2 million in the first six months of fiscal 2020 compared to $2.8 million in the same period of the prior fiscal year. The year to date decrease in other expense, net, is primarily due to higher gains on the investments contained within life insurance policies of $3.3 million, partially offset by higher discounts on the sale of accounts receivables of $1.4 million. The gains on investments are substantially offset in our payroll costs, which are reflected in SG&A as part of operating income.
|
| |
PROVISION FOR INCOME TAXES | |
The following table provides a comparison of our provision for income taxes and our effective tax rate for the three and six months ended July 31, 2019 and 2018:
|
| | | | | | | |
| Three months ended July 31, | | Six months ended July 31, |
| 2019 | | 2018 | | 2019 | | 2018 |
Effective tax rate | 21.4% | | 6.8% | | 22.1% | | 11.7% |
The increase in both the effective tax rate and the provision for income taxes for the three and six months ended July 31, 2019, as compared to the prior year, is primarily due to a $12.8 million income tax benefit that was recognized during the three and six months ended July 31, 2018. The income tax benefit was due to our finalization of the geographic allocation of the purchase price for the acquisition of TS for tax reporting purposes as part of a settlement agreement with Avnet, which resulted in the recognition of a deferred tax asset in the U.S. for future tax deductions related to the amortization of goodwill for tax purposes. Additionally, the increase in the absolute dollar value of the provision for income taxes for both the three and six months ended July 31, 2019 as compared to the prior year is due to an increase in taxable earnings.
|
| |
NET INCOME AND EARNINGS PER SHARE-DILUTED |
The following table provides an analysis of GAAP and non-GAAP net income and earnings per share-diluted as well as a reconciliation of results recorded in accordance with GAAP and non-GAAP financial measures for the three months ended July 31, 2019 and 2018 ($ in millions, except per share data):
![chart-8f4b8273cf6259e698e.jpg](chart-8f4b8273cf6259e698e.jpg)
![chart-38f0498bee195bb082d.jpg](chart-38f0498bee195bb082d.jpg)
|
| | | | | | | | | | | | | | | |
CONSOLIDATED GAAP TO NON-GAAP RECONCILIATION | | | | |
| Net Income | | Earnings per Share-Diluted |
Three months ended July 31: | 2019 | | 2018 | | 2019 | | 2018 |
(in millions, except per share data) | | | | | | | |
GAAP results | $ | 79.3 |
| | $ | 75.9 |
| | $ | 2.16 |
| | $ | 1.97 |
|
Acquisition, integration and restructuring expenses | 5.2 |
| | 13.3 |
| | 0.14 |
| | 0.34 |
|
Legal settlements and other, net | — |
| | (5.2 | ) | | — |
| | (0.13 | ) |
Acquisition-related intangible assets amortization expense | 21.2 |
| | 22.7 |
| | 0.58 |
| | 0.59 |
|
Gain on disposal of subsidiary | — |
| | (6.7 | ) | | — |
| | (0.17 | ) |
Tax indemnifications | 0.3 |
| | 0.5 |
| | 0.01 |
| | 0.01 |
|
Income tax effect of tax indemnifications | (0.3 | ) | | (0.5 | ) | | (0.01 | ) | | (0.01 | ) |
Income tax effect of other adjustments above | (7.1 | ) | | (9.5 | ) | | (0.19 | ) | | (0.25 | ) |
Income tax benefit from acquisition settlement | — |
| | (12.8 | ) | | — |
| | (0.34 | ) |
Non-GAAP results | $ | 98.6 |
| | $ | 77.7 |
| | $ | 2.69 |
| | $ | 2.01 |
|
The following table provides an analysis of GAAP and non-GAAP net income and earnings per share-diluted as well as a reconciliation of results recorded in accordance with GAAP and non-GAAP financial measures for the six months ended July 31, 2019 and 2018 ($ in millions, except per share data):
![chart-8fbfafe2de5029fae8ea02.jpg](chart-8fbfafe2de5029fae8ea02.jpg)
![chart-093156e099467e520a6a02.jpg](chart-093156e099467e520a6a02.jpg)
|
| | | | | | | | | | | | | | | |
CONSOLIDATED GAAP TO NON-GAAP RECONCILIATION | | | | |
| Net Income | | Earnings per Share-Diluted |
Six months ended July 31: | 2019 | | 2018 | | 2019 | | 2018 |
(in millions, except per share data) | | | | | | | |
GAAP results | $ | 134.7 |
| | $ | 109.6 |
| | $ | 3.64 |
| | $ | 2.84 |
|
Acquisition, integration and restructuring expenses | 11.4 |
| | 46.5 |
| | 0.31 |
| | 1.21 |
|
Legal settlements and other, net | (0.3 | ) | | (8.2 | ) | | (0.01 | ) | | (0.21 | ) |
Acquisition-related intangible assets amortization expense | 42.1 |
| | 46.0 |
| | 1.14 |
| | 1.19 |
|
Gain on disposal of subsidiary | — |
| | (6.7 | ) | | — |
| | (0.17 | ) |
Tax indemnifications | 0.6 |
| | 0.5 |
| | 0.02 |
| | 0.01 |
|
Value added tax assessment and related interest expense | — |
| | (0.9 | ) | | — |
| | (0.02 | ) |
Income tax effect of tax indemnifications | (0.6 | ) | | (0.5 | ) | | (0.02 | ) | | (0.01 | ) |
Income tax effect of other adjustments above | (13.4 | ) | | (22.4 | ) | | (0.36 | ) | | (0.58 | ) |
Income tax benefit from acquisition settlement | — |
| | (12.8 | ) | | — |
| | (0.34 | ) |
Reversal of deferred tax valuation allowances | — |
| | (2.6 | ) | | — |
| | (0.07 | ) |
Non-GAAP results | $ | 174.5 |
| | $ | 148.5 |
| | $ | 4.72 |
| | $ | 3.85 |
|
| | | | | | | |
|
| |
LIQUIDITY AND CAPITAL RESOURCES | |
Our discussion of liquidity and capital resources includes an analysis of our cash flows and capital structure for all periods presented.
CASH FLOWS
The following table summarizes our Consolidated Statement of Cash Flows:
|
| | | | | | | |
Six months ended July 31: | 2019 | | 2018 |
(in millions) | | | |
Net cash provided by (used in): | | | |
Operating activities | $ | 102.8 |
| | $ | (5.5 | ) |
Investing activities | (33.4 | ) | | (15.5 | ) |
Financing activities | (117.3 | ) | | (120.3 | ) |
Effect of exchange rate changes on cash and cash equivalents | (13.0 | ) | | (21.5 | ) |
Net decrease in cash and cash equivalents | $ | (60.9 | ) | | $ | (162.8 | ) |
As a distribution company, our business requires significant investment in working capital, particularly accounts receivable and inventory, partially financed through our accounts payable to vendors. An important driver of our operating cash flows is our cash conversion cycle (also referred to as “net cash days”). Our net cash days are defined as days of sales outstanding in accounts receivable ("DSO") plus days of supply on hand in inventory ("DOS"), less days of purchases outstanding in accounts payable ("DPO"). The following tables present the components of our cash conversion cycle, in days, as of July 31, 2019 and 2018, and January 31, 2019 and 2018:
![chart-7b1e7018f435587fb76.jpg](chart-7b1e7018f435587fb76.jpg)
|
| | | | | | | | | | | | | | |
As of: | | July 31, 2019 | | January 31, 2019 | | As of: | | July 31, 2018 | | January 31, 2018 |
DSO | | 54 |
| | 54 |
| | DSO | | 53 |
| | 55 |
|
DOS | | 33 |
| | 31 |
| | DOS | | 33 |
| | 29 |
|
DPO | | (69 | ) | | (70 | ) | | DPO | | (68 | ) | | (68 | ) |
Net cash days | | 18 |
| | 15 |
| | Net cash days | | 18 |
| | 16 |
|
The net increase in cash provided by operating activities of $108.3 million is primarily due to the impact of changes in working capital and higher earnings.
The increase in cash used in investing activities of $17.9 million is primarily due to increased capital expenditures of $10.8 million and$9.0 million of net proceeds received in the prior year from the sale of certain operations in Ireland. The decrease in cash used in financing activities of $3.0 million is primarily due to the prior year repayment of $100 million of borrowings under the 2016 Term Loan Credit Agreement and an increase in borrowings on revolving credit loans of $28.5 million, partially offset by $117.7 million paid to repurchase common stock under our share repurchase program.
CAPITAL RESOURCES AND DEBT COMPLIANCE
Our debt to total capital ratio was 33% at July 31, 2019. As part of our capital structure and to provide us with significant liquidity, we have a diverse range of financing facilities across our geographic regions with various financial institutions. Also providing us liquidity are our cash and cash equivalents balances across our regions which are deposited and/or invested with various financial institutions. We are exposed to risk of loss on funds deposited with these financial institutions; however, we monitor our financing and depository financial institution partners regularly for credit quality. We believe that our existing sources of liquidity, including our financing facilities and cash resources, as well as cash expected to be provided by operating activities and our ability to issue debt or equity, if necessary, will be sufficient to meet our working capital needs and cash requirements for at least the next 12 months.
At July 31, 2019, we had approximately $738.3 million in cash and cash equivalents, of which approximately $530.2 million was held in our foreign subsidiaries. As discussed above, the Company currently has sufficient resources, cash flows and liquidity within the U.S. to fund current and expected future working capital requirements. We plan to continue reinvesting future foreign earnings indefinitely outside the U.S. Any future remittances of foreign cash could be subject to additional foreign withholding tax, U.S. state taxes and certain tax impacts relating to foreign currency exchange effects.
The following is a discussion of our various financing facilities:
Senior notes
In January 2017, we issued $500.0 million aggregate principal amount of 3.70% Senior Notes due February 15, 2022 (the "3.70% Senior Notes") and $500.0 million aggregate principal amount of 4.95% Senior Notes due February 15, 2027 (the "4.95% Senior Notes") (collectively the "2017 Senior Notes"). We pay interest on the 2017 Senior Notes semi-annually in arrears on February 15 and August 15 of each year. The interest rate payable on the 2017 Senior Notes will be subject to adjustment from time to time if the credit rating assigned to such series of notes changes. At no point will the interest rate be reduced below the interest rate payable on the notes on the date of the initial issuance or increase more than 2.00% above the interest rate payable on the notes of the series on the date of their initial issuance. The 2017 Senior Notes are our senior unsecured obligations and will rank equally with all of our other unsecured and unsubordinated indebtedness outstanding from time to time.
We, at our option, may redeem the 3.70% Senior Notes at any time prior to January 15, 2022 and the 4.95% Senior Notes at any time prior to November 15, 2026, in each case in whole or in part, at a redemption price equal to the greater of (i) 100% of the principal amount of the 2017 Senior Notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the 2017 Senior Notes to be redeemed, discounted to the date of redemption on a semi-annual basis at a rate equal to the sum of the applicable Treasury Rate plus 30 basis points for the 3.70% Senior Notes and 40 basis points for the 4.95% Senior Notes, plus the accrued and unpaid interest on the principal amount being redeemed up to the date of redemption. We may also redeem the 2017 Senior Notes, at any time in whole or from time to time in part, on or after January 15, 2022 for the 3.70% Senior Notes and November 15, 2026 for the 4.95% Senior Notes, in each case, at a redemption price equal to 100% of the principal amount of the 2017 Senior Notes to be redeemed.
Other credit facilities
We have a $1.5 billion revolving credit facility with a syndicate of banks (the “Credit Agreement”) which, among other things, provides for (i) a maturity date of May 15, 2024, (ii) an interest rate on borrowings, facility fees and letter of credit fees based on the Company’s debt rating, (iii) the ability to increase the facility to a maximum of $1.75 billion, subject to certain conditions and (iv) certain subsidiaries of the Company to be designated as borrowers. The applicable borrower will pay interest on advances under the Credit Agreement at the applicable LIBOR rate (or similar interbank offered rates depending on currency draw) plus a predetermined margin that is based on our debt rating. Our borrowings under the Credit Agreement vary within the period primarily based on changes in our working capital. There were no amounts outstanding under the Credit Agreement at July 31, 2019 and January 31, 2019.
We entered into a term loan credit agreement in November 2016 with a syndicate of banks (the "2016 Term Loan Credit Agreement") which provided for the borrowing of senior unsecured term loans in an original aggregate principal amount of up to $1.0 billion. We paid interest on advances under the 2016 Term Loan Credit Agreement at a variable rate based on LIBOR plus a predetermined margin based on our debt rating. We had $300 million outstanding under the 2016 Term Loan Credit Agreement at both July 31, 2019 and January 31, 2019. On August 2, 2019, we entered into a term loan credit agreement (the “2019 Term Loan Credit Agreement”), the proceeds of which were used to repay in full the amounts outstanding under our 2016 Term Loan Credit Agreement. The 2019 Term Loan Credit Agreement, among other things, (i) provides for a $300 million term loan credit facility with a maturity date of August 2, 2021, (ii) provides for an interest rate on the outstanding principal amount of the loan that is based on LIBOR plus a predetermined margin, and (iii) may be increased up to a total of $500 million, subject to certain conditions.
We also have an agreement with a syndicate of banks (the "Receivables Securitization Program") that allows us to transfer an undivided interest in a designated pool of U.S. accounts receivable, on an ongoing basis, to provide collateral for borrowings up to a maximum of $1.0 billion. The scheduled termination date of the agreement is April 16, 2021. Under this program, we transfer certain U.S. trade receivables into a wholly-owned bankruptcy remote special purpose entity. Such receivables, which are recorded in the Consolidated Balance Sheet, totaled approximately $1.6 billion and $1.7 billion at July 31, 2019 and January 31, 2019, respectively. As collections reduce accounts receivable balances included in the collateral pool, we may transfer interests in new receivables to bring
the amount available to be borrowed up to the maximum. We pay interest on advances under the Receivables Securitization Program at designated commercial paper or LIBOR-based rates plus an agreed-upon margin. Our borrowings under the Receivables Securitization Agreement vary within the period primarily based on changes in our working capital. There were no amounts outstanding under the Receivables Securitization Program at July 31, 2019 and January 31, 2019.
In addition to the facilities described above, we have various other committed and uncommitted lines of credit, short-term loans and overdraft facilities totaling approximately $433.2 million at July 31, 2019 to support our operations. Most of these facilities are provided on an unsecured, short-term basis and are reviewed periodically for renewal. Our borrowings under these facilities vary within the period primarily based on changes in our working capital. There was $123.8 million outstanding on these facilities at July 31, 2019, at a weighted average interest rate of 8.08%, and there was $102.3 million outstanding at January 31, 2019, at a weighted average interest rate of 8.05%.
At July 31, 2019, we had also issued standby letters of credit of $23.7 million. These letters of credit typically act as a guarantee of payment to certain third parties in accordance with specified terms and conditions. The issuance of certain of these letters of credit reduces the Company's borrowing availability under certain of the above-mentioned credit facilities.
Certain of our credit facilities contain limitations on the amounts of annual dividends and repurchases of common stock and require compliance with other obligations, warranties and covenants. The financial ratio covenants within these credit facilities include a maximum total leverage ratio and a minimum interest coverage ratio. At July 31, 2019, we were in compliance with all such financial covenants.
Accounts receivable purchase agreements
We have uncommitted accounts receivable purchase agreements under which certain accounts receivable may be sold, without recourse, to third-party financial institutions. Under these programs, we may sell certain accounts receivable in exchange for cash less a discount, as defined in the agreements. Available capacity under these programs, which we use as a source of working capital funding, is dependent on the level of accounts receivable eligible to be sold into these programs and the financial institutions' willingness to purchase such receivables. In addition, certain of these agreements also require that we continue to service, administer and collect the sold accounts receivable. At July 31, 2019 and January 31, 2019, we had a total of $938 million and $1.1 billion, respectively, of outstanding accounts receivable sold to and held by financial institutions under these agreements. During the three months ended July 31, 2019 and 2018, discount fees recorded under these facilities were $4.0 million and $3.7 million, respectively, and during the six months ended July 31, 2019 and 2018, discount fees recorded under these facilities were $7.7 million and $6.3 million, respectively. These discount fees are included as a component of "other expense, net" in our Consolidated Statement of Income.
Share Repurchase Program
In October 2018, our Board of Directors authorized a share repurchase program for up to $200.0 million of our common stock. In February 2019, the Board of Directors approved a $100.0 million increase to the program resulting in a total share repurchase authorization of $300.0 million. In conjunction with our share repurchase program, a 10b5-1 plan was executed that instructs the broker selected by the Company to repurchase shares on our behalf. The amount of common stock repurchased in accordance with the 10b5-1 plan on any given trading day is determined by a formula in the plan, which is based on the market price of our common stock. Shares repurchased by the Company are held in treasury for general corporate purposes, including issuances under equity incentive and benefit plans.
We repurchased 1,179,176 shares of our common stock at a cost of $117.7 million during the six months ended July 31, 2019. As of July 31, 2019, we had $75.3 million available for future repurchases of our common stock under the authorized share repurchase program. In August 2019, our Board of Directors authorized the repurchase of up to an additional $200.0 million of our common stock.
|
| |
CRITICAL ACCOUNTING POLICIES AND ESTIMATES | |
There have been no material changes to the critical accounting policies and estimates disclosed in our Annual Report on Form 10-K for the year ended January 31, 2019.
|
| |
RECENT ACCOUNTING PRONOUNCEMENTS | |
See Note 1 of Notes to Consolidated Financial Statements for the discussion on recent accounting pronouncements.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
For a description of the Company’s market risks, see Part II, Item 7A. "Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended January 31, 2019.
No material changes have occurred in our market risks since January 31, 2019.
ITEM 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the specified time period. Tech Data’s management, with the participation of the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of July 31, 2019. Based on that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of July 31, 2019.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with management’s evaluation during our second quarter of fiscal 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II
ITEM 1. Legal Proceedings.
In December 2010, in a non-unanimous decision, a Brazilian appellate court overturned a 2003 trial court which had previously ruled in favor of our Brazilian subsidiary related to the imposition of certain taxes on payments abroad related to the licensing of commercial software products, commonly referred to as “CIDE tax.” We estimate the total exposure related to the CIDE tax, including interest, was approximately $20.2 million at July 31, 2019. The Brazilian subsidiary has appealed the unfavorable ruling to the Supreme Court and Superior Court, Brazil's two highest appellate courts. Based on the legal opinion of outside counsel, we believe that the chances of success on appeal of this matter are favorable and the Brazilian subsidiary intends to vigorously defend its position that the CIDE tax is not due. However, due to the lack of predictability of the Brazilian court system, we have concluded that it is reasonably possible that the Brazilian subsidiary may incur a loss up to the total exposure described above. We believe the resolution of this litigation will not be material to the Company’s consolidated net assets or liquidity.
In June 2013, we were subject to a document seizure by the French Autorité de la Concurrence (“Competition Authority”) following allegations of anticompetitive distribution practices in the French market for the products of one of our suppliers. In October 2018, the Competition Authority delivered a notification des griefs (statement of objections) to the Company, stating that the Competition Authority is pursuing charges against the Company in this matter. In July 2019, the Competition Authority delivered a rapport (report), which is a further step towards proposing charges in this matter. The Competition Authority has taken similar action against our supplier and another of its distributors. The administrative proceedings could result in the imposition of a fine against us, which could be material in amount. If a fine is imposed, we would be entitled to appeal the administrative determination to the French courts, although we would be required to pay the fine before doing so. At this time, we cannot assess the likelihood that these proceedings will be finally resolved against us, and we cannot reasonably estimate the amount of fine that may be imposed.
We are subject to various other legal proceedings and claims arising in the ordinary course of business. Our management does not expect that the outcome in any of these other legal proceedings, individually or collectively, will have a material adverse effect on our financial condition, results of operations, or cash flows.
ITEM 1A. Risk Factors.
In addition to other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended January 31, 2019, which could materially affect our business, financial position and results of operations. Risk factors which could cause actual results to differ materially from those suggested by forward-looking statements include but are not limited to those discussed or identified in this document, in our public filings with the SEC, and those incorporated by reference in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended January 31, 2019. Except as presented below, there have been no material changes to those risk factors previously disclosed in our Annual Report on Form 10-K for the year ended January 31, 2019.
We have inventory that could lose value due to risks and uncertainties associated with the impact of trade discussions between the United States and China, and related U.S. security risks and export controls
We are subject to risks and uncertainties associated with the impact of trade discussions between the United States and China and related U.S. security risks and export controls. On May 15, 2019, the President of the United States issued an Executive Order that authorized export controls on Chinese entities determined to be a U.S. security threat. At the same time, the U.S. Commerce Dept. placed certain Chinese companies and their subsidiaries on the U.S. Entity List requiring U.S. companies to obtain export licensing approval before providing certain technology. We hold inventory of products impacted by the recent government action and there is uncertainty relating to the disposition of this inventory due to restrictions that would prevent purchasers from updating software on the products in the future. As of July 31, 2019, these products represent approximately 2% of our worldwide inventory. While we continue to take steps to mitigate our exposure to this developing situation, if the sale of these products is delayed or we are unable to return or dispose of our inventory on favorable economic terms, we may incur additional carrying costs for the inventory or otherwise record losses associated with the inventory.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The following table presents information with respect to purchases of common stock by the Company under the share repurchase program during the quarter ended July 31, 2019:
|
| | | | | | | | | | | | | | |
| | Issuer Purchases of Equity Securities |
Period | | Total number of shares purchased | | Average price paid per share | | Total number of shares purchased as part of a publicly announced plan or program | | Maximum dollar value of shares that may yet be purchased under the plan or programs |
May 1 - May 31, 2019 | | 299,555 |
| | $ | 97.42 |
| | 299,555 |
| | $ | 128,111,756 |
|
June 1 - June 30, 2019 | | 294,409 |
| | 97.46 |
| | 294,409 |
| | 99,419,120 |
|
July 1 - July 31, 2019 | | 239,285 |
| | 100.87 |
| | 239,285 |
| | 75,282,699 |
|
Total | | 833,249 |
| | $ | 98.42 |
| | 833,249 |
| |
|
| | | | | | | | |
In August 2019, the Company's Board of Directors authorized the repurchase of up to an additional $200.0 million of the Company's common stock.
ITEM 3. Defaults Upon Senior Securities.
Not applicable.
ITEM 4. Mine Safety Disclosures.
Not applicable.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits.
|
| |
| Amended and Restated Articles of Incorporation of Tech Data Corporation filed on June 4, 2014 with the Secretary of the State of Florida |
| |
| Bylaws of Tech Data Corporation as adopted by the Board of Directors and approved by the Shareholders on June 4, 2014 |
| |
| Tech Data Corporation Change in Control Severance Policy as adopted by the Board of Directors on June 5, 2019 |
| |
| Certification of Chief Executive Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
| Certification of Chief Financial Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
| Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| |
| Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| |
101(3),(4) | Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheet as of July 31, 2019 and January 31, 2019; (ii) Consolidated Statement of Income for the three and six months ended July 31, 2019 and 2018; (iii) Consolidated Statement of Comprehensive Income (Loss) for the three and six months ended July 31, 2019 and 2018; (iv) Consolidated Statement of Shareholders' Equity for the three and six months ended July 31, 2019 and 2018 (v) Consolidated Statement of Cash Flows for the six months ended July 31, 2019 and 2018; and (vi) Notes to Consolidated Financial Statements, detail tagged. |
| |
104(3) | The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 2019, formatted in Inline XBRL (included in Exhibit 101). |
| |
(2) | Incorporated by reference to the Exhibits included in the Company’s Form 10-Q for the quarter ended April 30, 2014, File No. 0-14625. |
| |
(3) | XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections. |
| |
(4) | The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. |
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
(Registrant)
|
| | | | |
| | | | |
Signature | | Title | | Date |
| | |
/s/ RICHARD T. HUME | | Chief Executive Officer, Director (principal executive officer) | | September 5, 2019 |
Richard T. Hume | | | | |
| | |
/s/ CHARLES V. DANNEWITZ | | Executive Vice President, Chief Financial Officer (principal financial officer) | | September 5, 2019 |
Charles V. Dannewitz | | | | |