EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

LOGO    NEWS                          
     5350 Tech Data Drive
     Clearwater, FL 33760
     (727) 539-7429            

 

FOR IMMEDIATE RELEASE    SYMBOL: TECD        
Thursday, August 25, 2005    TRADED: NASDAQ/NMS        

 

Tech Data Reports Fiscal 2006 Second-Quarter Results

 

Records $19.3 million of restructuring charges and a

$56.0 million charge to increase the deferred tax assets valuation allowance

 

CLEARWATER, FL. — Tech Data Corporation, a leading distributor of IT products, today announced results for the second quarter ended July 31, 2005.

 

Second-Quarter Results At A Glance

 

 

    

Three months ended

July 31, 2005


GAAP Basis:

      

•      Net Sales

   $ 4.8 billion

•      Operating Income

   $ 13.8 million

•      Net Loss

   $ (59.4) million

•      Net Loss Per Diluted Share

   $ (1.02) per share
Non-GAAP Basis(1):       

•      Operating Income

   $ 35.2 million

•      Net Income

   $ 16.1 million

•      Net Income Per Diluted Share

   $ .27 per share

(1) Please refer to the Reconciliation of GAAP to Non-GAAP Measures that is contained in the attached financial summary.

This information is also available on the Investor Relations section of Tech Data’s website at www.techdata.com.

 

Net sales for the second quarter ended July 31, 2005, were $4.8 billion, an increase of 5.5 percent from $4.6 billion in the second quarter of fiscal 2005 and a decrease of 4.9 percent from the first quarter of the current fiscal year. Operating income, based upon Generally Accepted Accounting Principles (“GAAP”), for the second quarter was $13.8 million, or .29 percent of net sales, a decrease from $49.9 million, or 1.09 percent of net sales, in the second quarter of fiscal 2005. Results for the second quarter of fiscal 2006 include $19.3 million of charges related to the company’s EMEA restructuring program announced in May 2005 and $2.1 million of consulting costs incurred in the EMEA region (Europe, Middle East and export sales to Africa). Excluding the restructuring charges and consulting costs, operating income, on a non-GAAP basis, was $35.2 million, or .73 percent of net sales. As reported earlier this month, the company’s second-quarter operating performance was affected by a lower-than-expected gross margin, primarily in the EMEA region.


Tech Data Reports Second-Quarter Results    
August 25, 2005    

 

The company reported a net loss, on a GAAP basis, of $(59.4) million, or $(1.02) per diluted share for the second quarter of fiscal 2006, compared to net income of $30.7 million, or $.52 per diluted share, for the prior year period. In addition to the restructuring charges and consulting costs noted above, results for the second quarter of fiscal 2006 included a $56.0 million non-cash charge to increase the valuation allowance against certain deferred tax assets related to the EMEA operations. Excluding the noted charges and costs, net income, on a non-GAAP basis, for the second quarter of fiscal 2006 totaled $16.1 million, or $.27 per diluted share.

 

“We generated industry-leading sales growth and operating results in the Americas for the second quarter while implementing our restructuring program to improve our performance in EMEA,” commented Steven A. Raymund, Tech Data’s chairman and chief executive officer. “Although the challenges within our EMEA operation have impacted our overall financial results, we are confident that our restructuring program will deliver cost savings, efficiencies and operational improvements.”

 

Financial Summary

 

  Net sales in the Americas during the second quarter were $2.3 billion, or 48 percent of worldwide net sales, while net sales in EMEA totaled $2.5 billion, or 52 percent of worldwide net sales. The Americas’ net sales increased 13.2 percent while net sales in EMEA decreased 0.9 percent (2.0 percent on a local currency basis) over the second quarter of fiscal 2005. Compared to the first quarter of the current fiscal year, net sales in the Americas increased 3.4 percent and in EMEA decreased 11.6 percent (6.2 percent on a local currency basis).

 

  Gross margin for the second quarter was 5.22 percent of net sales, a decrease from 5.84 percent of net sales in the second quarter of fiscal 2005. The year-over-year decline in gross margin was primarily attributable to continued challenges in the company’s EMEA operations and to a much lesser extent, changes in customer and product mix in the Americas.

 

  Second-quarter selling, general and administrative expenses (SG&A) were $218.9 million, or 4.53 percent of net sales compared to $217.7 million, or 4.75 percent of net sales in the second quarter of fiscal 2005. Excluding the $2.1 million of consulting costs incurred in the EMEA region, SG&A totaled $216.8 million, or 4.49 percent of net sales in the second quarter of fiscal 2006. The decline in SG&A as a percent of net sales was the result of continued cost-saving initiatives and productivity improvements.

 

  Second-quarter operating income in the Americas was 1.60 percent of net sales compared to 1.62 percent of net sales in the second quarter of fiscal 2005. In EMEA, the company reported an operating loss of (.95) percent of net sales compared to operating income of .66 percent of net sales in the second quarter of fiscal 2005. On a non-GAAP basis, excluding restructuring charges and consulting costs, the company had an operating loss of (.09) percent of net sales in EMEA. The decline reflects the lower-than-expected gross margin.

 

  Total debt to total capital was 16 percent at July 31, 2005, compared to 18 percent at July 31, 2004.

 

  During the second quarter, the company purchased 978 thousand shares of common stock at a cost of $35.2 million under its $100 million stock repurchase program. Year-to-date, the company has purchased a total of 1.2 million shares under the program at a cost of $45.2 million.


Tech Data Reports Second-Quarter Results    
August 25, 2005    

 

EMEA Restructuring Program

 

The company recorded $19.3 million of charges during the second quarter of fiscal 2006 related to its EMEA restructuring program which were comprised of $10.6 million related to workforce reductions and $8.7 million for facility consolidations and the write-off of fixed assets. These actions are expected to result in annualized savings of approximately the same amount. The program and related actions are designed to better align the EMEA operating cost structure with the current business environment. Excluding any consulting costs, the company expects to incur total charges in the range of $40 million to $50 million related to the EMEA restructuring program. Efforts related to the restructuring are anticipated to generate annualized savings in the same range.

 

Six-month Results

 

Net sales for the six-month period ended July 31, 2005, were $9.9 billion, an increase of 5.4 percent from $9.4 billion in the six-month period ended July 31, 2004. On a regional basis, net sales in the Americas represented 46 percent of net sales, and increased 11.7 percent to $4.6 billion from $4.1 billion in the prior-year period. EMEA represented 54 percent of net sales, and increased 0.4 percent (decreased 3.2 percent on a local currency basis) to $5.31 billion from $5.28 billion for the six-month period ended July 31, 2004.

 

Gross margin for the six-month period was 5.34 percent, down from 5.77 percent in the prior-year comparable period. As noted above, the year-over-year decline in gross margin was primarily attributable to the EMEA operations and to a much lesser extent, changes in customer and product mix in the Americas.

 

Operating income, on a GAAP basis, for the six-month period ended July 31, 2005, was $67.8 million, or .68 percent of net sales, compared with $103.6 million, or 1.10 percent of net sales, in the prior year. On a non-GAAP basis, excluding restructuring charges and consulting costs recorded during the second quarter of fiscal 2006, operating income for the six-month period ended July 31, 2005 totaled $89.2 million, or .90 percent of net sales.

 

For the six-month period ended July 31, 2005, the company incurred a net loss of $(25.9) million, or $(0.44) per diluted share, on a GAAP basis, compared with net income of $65.3 million, or $1.11 per diluted share, in the prior year. On a non-GAAP basis, excluding the restructuring program charges, consulting costs and the $56.0 million charge to increase the valuation allowance against certain deferred tax assets, net income was $49.7 million, or $.84 per diluted share for the six-month period ended July 31, 2005.

 

Business Outlook

 

The following statements are based on current expectations and the company’s internal plan. These statements are forward-looking and, as outlined in the company’s periodic filings with the Securities and Exchange Commission, actual results may differ materially.


Tech Data Reports Second-Quarter Results    
August 25, 2005    

 

The outlook for the third quarter ending October 31, 2005, excluding any restructuring charges and consulting costs related to the EMEA region which are estimated to be $10 to $11 million, or other charges, is as follows:

 

    Net sales are expected to be in the range of $4.85 billion to $5.0 billion.

 

    Net income is expected to be in the range of $25.0 million to $28.0 million.

 

    Net income per diluted share is expected to be in the range of $.43 to $.49.

 

Non-GAAP Financial Information

 

The non-GAAP data contained in this release is included with the intention of providing investors a more complete understanding of our operational results and trends, but should only be used in conjunction with results reported in accordance with Generally Accepted Accounting Principles (“GAAP”). Our management also uses this information internally for forecasting, budgeting and other analytical purposes. The non-GAAP financial measures enable investors to analyze the core financial and operating performance of the company and to facilitate period-to-period comparisons and analysis of operating trends. Non-GAAP measures presented in this release or other releases, presentations and similar documents issued by the company, excludes restructuring charges, certain consulting costs, impairment charges, changes in valuation allowances for certain deferred tax assets, extraordinary gains or losses and other infrequent or unusual items. A detailed reconciliation of the adjustments between results calculated using GAAP and non-GAAP in this release is contained in the attached financial summary. This information is also available for review on the Investor Relations section of Tech Data’s website at www.techdata.com.

 

Forward-Looking Statements

 

Certain matters discussed in this news release are forward-looking statements, based on the company’s current expectations that involve a number of risks and uncertainties. Factors that could cause actual results to differ materially include the following: intense competition both domestically and internationally; narrow profit margins; risk of declines in inventory value; dependence on information systems; credit exposure due to the deterioration in the financial condition of our customers; the inability to obtain required capital; fluctuations in interest rates; potential adverse effects of acquisitions; foreign currency exchange risks and exposure to foreign markets; potential asset impairments resulting from declines in operating performance; the impact of changes in income tax and other regulatory legislation; changes in accounting rules; product supply and availability; dependence on independent shipping companies; changes in vendor terms and conditions; exposure to natural disasters, war and terrorism; potential impact of labor strikes; and the volatility of common stock. Additional discussion of these and other factors affecting the company’s business and prospects is contained in the company’s periodic filings with the Securities and Exchange Commission, copies of which can be obtained at the company’s investor relations website at www.techdata.com. All information in this release is as of August 25, 2005. The company undertakes no duty to update any forward-looking statements herein to actual results or changes in the company’s expectations.

 

Webcast Details

 

Tech Data will be discussing its second-quarter results along with its outlook for the third-quarter on a conference call today at 10:00 a.m. (EDT). A webcast of the call, including supplemental schedules, will be available to all interested parties and can be accessed at www.techdata.com. The webcast will be available for replay until 5:00 p.m. (EDT) on Thursday, September 1, 2005.


Tech Data Reports Second-Quarter Results    
August 25, 2005    

 

About Tech Data

 

Founded in 1974, Tech Data Corporation (NASDAQ/NMS: TECD) is a leading distributor of IT products, with more than 90,000 customers in over 100 countries. The company’s business model enables technology solution providers, manufacturers and publishers to cost-effectively sell to and support end users ranging from small-to-midsize businesses (SMB) to large enterprises. Ranked 110th on the FORTUNE 500®, Tech Data generated $19.8 billion in net sales for its fiscal year ended January 31, 2005. For more information, visit www.techdata.com.

 

FOR MORE INFORMATION CONTACT:

 

Jeffery P. Howells, Executive Vice President and Chief Financial Officer

727-538-7825 (Jeff.Howells@techdata.com)

 

or

 

Danyle Anderson, Director, Investor Relations and Shareholder Services

727-538-7866 (Danyle.Anderson@techdata.com)


TECH DATA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

(In thousands, except per share amounts)

 

    

Three months ended

July 31,


  

Six months ended

July 31,


 
     2005

    2004

   2005

    2004

 

Net sales

   $ 4,828,588     $ 4,578,835    $ 9,908,422     $ 9,401,127  

Cost of products sold

     4,576,598       4,311,210      9,379,313       8,858,310  
    


 

  


 


Gross profit

     251,990       267,625      529,109       542,817  

Selling, general and administrative expenses

     218,863       217,739      442,035       439,253  

Restructuring charges

     19,289       —        19,289       —    
    


 

  


 


Operating income

     13,838       49,886      67,785       103,564  

Interest expense, net

     6,670       5,268      12,150       10,906  

Net foreign currency exchange loss (gain)

     812       797      1,392       (682 )
    


 

  


 


Income before income taxes

     6,356       43,821      54,243       93,340  

Provision for income taxes

     65,770       13,147      80,134       28,002  
    


 

  


 


Net (loss) income

   $ (59,414 )   $ 30,674    $ (25,891 )   $ 65,338  
    


 

  


 


Net (loss) income per common share:

                               

Basic

   $ (1.02 )   $ .53    $ (0.44 )   $ 1.13  
    


 

  


 


Diluted

   $ (1.02 )   $ .52    $ (0.44 )   $ 1.11  
    


 

  


 


Weighted average common shares outstanding:

                               

Basic

     58,313       58,062      58,617       57,939  

Diluted

     58,313       59,003      58,617       58,984  


Tech Data Reports Second-Quarter Results

August 25, 2005

 

TECH DATA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (UNAUDITED)

(In thousands)

 

    

July 31,

2005


  

January 31,

2005


ASSETS

             

Current assets:

             

Cash and cash equivalents

   $ 232,690    $ 195,056

Accounts receivable, net

     1,897,118      2,217,474

Inventories

     1,408,143      1,492,479

Prepaid expenses and other assets

     168,455      151,480
    

  

Total current assets

     3,706,406      4,056,489

Property and equipment, net

     144,134      146,144

Goodwill

     137,304      149,719

Other assets, net

     141,870      205,384
    

  

Total assets

   $ 4,129,714    $ 4,557,736
    

  

LIABILITIES AND SHAREHOLDERS’ EQUITY

             

Current liabilities:

             

Revolving credit loans

   $ 17,897    $ 68,343

Accounts payable

     1,550,275      1,757,838

Current portion of long-term debt

     291,554      291,625

Accrued expenses and other liabilities

     454,044      450,066
    

  

Total current liabilities

     2,313,770      2,567,872

Long-term debt

     15,091      17,215

Other long-term liabilities

     44,093      45,178
    

  

Total liabilities

     2,372,954      2,630,265
    

  

Total shareholders’ equity

     1,756,760      1,927,471
    

  

Total liabilities and shareholders’ equity

   $ 4,129,714    $ 4,557,736
    

  


Tech Data Reports Second-Quarter Results

August 25, 2005

 

TECH DATA CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES (UNAUDITED)

(In thousands, except per share amounts)

 

    

Three months ended

July 31,


  

Six months ended

July 31,


     2005

    2004

   2005

    2004

GAAP operating income

   $ 13,838     $ 49,886    $ 67,785     $ 103,564

Restructuring charges

     19,289       —        19,289       —  

Other charges (1)

     2,091       —        2,091       —  
    


 

  


 

Non-GAAP operating income

   $ 35,218     $ 49,886    $ 89,165     $ 103,564
    


 

  


 

GAAP net (loss) income

   $ (59,414 )   $ 30,674    $ (25,891 )   $ 65,338

Restructuring charges

     19,289       —        19,289       —  

Other costs (1)

     2,091       —        2,091       —  

Tax effect on restructuring charges and other costs

     (1,866 )     —        (1,866 )     —  

Deferred tax assets valuation allowance

     56,039       —        56,039       —  
    


 

  


 

Non-GAAP net income

   $ 16,139     $ 30,674    $ 49,662     $ 65,338
    


 

  


 

GAAP (loss) income per diluted share

   $ (1.02 )   $ .52    $ (0.44 )   $ 1.11

Restructuring charges

     .33       —        .33       —  

Other costs (1)

     .04       —        .04       —  

Tax effect on restructuring charges and other costs

     (.03 )     —        (.03 )     —  

Deferred tax assets valuation allowance

     .95       —        .94       —  
    


 

  


 

Non-GAAP income per diluted share

   $ .27     $ .52    $ .84     $ 1.11
    


 

  


 

GAAP weighted average common shares outstanding

                             

Basic

     58,313       58,062      58,617       57,939

Diluted

     58,313       59,003      58,617       58,984

Non-GAAP weighted average common shares outstanding

                             

Basic

     58,313       58,062      58,617       57,939

Diluted

     58,923       59,003      59,332       58,984

(1) Other costs represent consulting costs related to the company’s EMEA Restructuring Program.