OREANDA-NEWS. Tech Data Corporation (NASDAQ:TECD) (the “Company”) today announced its financial results for the second quarter ended July 31, 2016.

   Second quarter ended July 31, Six months ended July 31,
($ in millions,
except per share amounts)		   2016     2015     2016     2015  
Net Sales $ 6,353.7   $ 6,580.4   $ 12,317.1   $ 12,467.6  
         
Operating income (GAAP) $ 73.4   $ 106.2   $ 125.9   $ 188.2  
Operating margin (GAAP)   1.15 %   1.61 %   1.02 %   1.51 %
         
Operating income (Non-GAAP)   $ 78.1   $ 81.2   $ 135.7   $ 131.4  
Operating margin (Non-GAAP)   1.23 %   1.23 %   1.10 %   1.05 %
         
Net income (GAAP) $ 46.4   $ 76.4   $ 79.8   $ 127.7  
Net income (Non-GAAP) $ 50.3   $ 52.5   $ 87.3   $ 82.1  
         
EPS - diluted (GAAP) $ 1.31   $ 2.09   $ 2.26   $ 3.47  
EPS - diluted (Non-GAAP) $ 1.42   $ 1.43   $ 2.47   $ 2.23  

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

Financial Highlights for the Second Quarter Ended July 31, 2016:

  • Net sales were $6.4 billion, a decrease of 3 percent compared to the prior-year quarter. On a constant currency basis, net sales declined 2 percent.
    • The Americas: Net sales were $2.7 billion (42 percent of worldwide net sales), a decline of 3 percent compared to the prior-year quarter. On a constant currency basis, net sales declined 2 percent.
    • Europe: Net sales were $3.7 billion (58 percent of worldwide net sales), a decrease of 4 percent compared to the prior-year quarter. On a constant currency basis, net sales declined 2 percent.
       
  • Gross profit was $316.5 million, a decrease of $8.8 million, or 3 percent, compared to the prior-year quarter. As a percentage of net sales, gross profit was 4.98 percent, an improvement of 4 basis points.
     
  • Selling, general and administrative expenses (“SG&A”) were $243.8 million, or 3.84 percent of net sales, compared to $250.1 million, or 3.80 percent of net sales in the prior-year quarter. Non-GAAP SG&A was $238.4 million, a decrease of $5.8 million, or 2 percent, compared to the prior-year quarter. As a percentage of net sales, non-GAAP SG&A was 3.75 percent, compared to 3.71 percent in the prior-year quarter.
     
  • Worldwide operating income was $73.4 million, or 1.15 percent of net sales compared to $106.2 million or 1.61 percent of net sales in the prior-year quarter. Operating income for the prior-year quarter included $21.5 million of gains related to LCD settlement agreements, net of attorney fees and expenses. Non-GAAP operating income was $78.1 million, a decrease of $3.1 million, or 4 percent, compared to the prior-year quarter. As a percentage of net sales, non-GAAP operating income was 1.23 percent, consistent with the prior-year quarter.
    • The Americas: Operating income was $41.2 million, or 1.54 percent of net sales, compared to $60.8 million, or 2.21 percent of net sales in the prior-year quarter. Operating income for the prior-year quarter included the aforementioned LCD settlement gains. Non-GAAP operating income was $38.8 million, a decrease of $1.2 million, or 3 percent, compared to the prior-year quarter. As a percentage of net sales, non-GAAP operating income was 1.45 percent, compared to 1.46 percent in the prior-year quarter.
    • Europe: Operating income was $35.9 million, or 0.98 percent of net sales, compared to $49.4 million, or 1.29 percent of net sales in the prior-year quarter. Non-GAAP operating income was $43.1 million, a  decrease of $2.0 million or approximately 4 percent, compared to the prior-year quarter. As a percentage of net sales, non-GAAP operating income was 1.17 percent, compared to 1.18 percent in the prior-year quarter.
    • Stock-based compensation expense was $3.8 million, compared to $4.0 million in the prior-year quarter. These expenses are excluded from the regional non-GAAP operating results and presented as a separate line item in the company’s segment reporting (see the GAAP to non-GAAP reconciliation in the financial tables of this press release).
       
  • Net income was $46.4 million, compared to $76.4 million in the prior-year quarter. Net income for the prior-year quarter included the aforementioned LCD settlement gains, net of taxes. Non-GAAP net income was $50.3 million, a decrease of $2.2 million, or 4 percent, compared to the prior-year quarter.
     
  • Earnings per share on a diluted basis (“EPS”) were $1.31, compared to $2.09 in the prior year quarter. Earnings per share for the prior-year quarter included the aforementioned LCD settlement gains, net of taxes. Non-GAAP EPS was $1.42, compared to $1.43 in the prior-year quarter.
     
  • Net cash used by operations during the quarter was $91 million.
     
  • Return on invested capital on a non-GAAP basis for the trailing twelve months was 14 percent compared to 12 percent in the prior year.

“Our teams executed well in Q2, capitalizing on pockets of demand and gaining market share in both North America and Europe despite facing a weaker-than-expected IT spending environment,” said Robert M. Dutkowsky, chief executive officer. “Although sales came in below our expectations, our focus on profitable revenue, excellent vendor management, and disciplined cost controls, enabled us to deliver solid non-GAAP earnings per share. Through the first half of our fiscal year, we grew non-GAAP earnings per share by 11 percent, generated $185 million in cash flow from operations and earned a return on invested capital of 14 percent - a 150 basis points improvement over the prior year. Our first half performance highlights the diversity of our end-to-end portfolio of IT solutions, the flexibility of our model to adapt to the realities of the market, and our focus on gaining profitable market share -  all of which enable Tech Data to deliver differentiated value to our customers, vendor partners and shareholders.”  

Business Outlook

  • For the quarter ending October 31, 2016, the Company anticipates worldwide net sales to be in the range of $6.25 billion to $6.45 billion. This guidance assumes year-over-year constant currency net sales growth of flat to low-single-digits in both regions, and an average U.S. dollar to euro exchange rate of $1.10 to €1.00. 
     
  • For the quarter ending October 31, 2016, the Company anticipates non-GAAP EPS to be in the range of $1.20 to $1.30.
     
  • This guidance assumes weighted average diluted shares outstanding of 35.5 million and an effective tax rate in the range of 29 percent to 31 percent.

Webcast Details

Tech Data will hold a conference call today at 9:00 a.m. (ET) to discuss its financial results for the second quarter ended July 31, 2016. A webcast of the call, including supplemental schedules, will be available to all interested parties and can be obtained at www.techdata.com/investor. The webcast will be available for replay for three months.

Non-GAAP Financial Information

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

Forward-Looking Statements 

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

About Tech Data

Tech Data Corporation is one of the world’s largest wholesale distributors of technology products, services and solutions. Its advanced logistics capabilities and value added services enable 105,000 resellers to efficiently and cost effectively support the diverse technology needs of end users in more than 100 countries. Tech Data generated $26.4 billion in net sales for the fiscal year ended January 31, 2016. It is ranked No. 108 on the Fortune 500® and one of Fortune’s “World’s Most Admired Companies.” 

 

TECH DATA CORPORATION AND SUBSIDIARIES 
CONSOLIDATED STATEMENT OF OPERATIONS 
(In thousands, except per share amounts)
(Unaudited)

           
    Three months ended   Six months ended  
    July 31,   July 31,  
      2016       2015       2016       2015    
                   
Net sales   $ 6,353,739     $ 6,580,393     $ 12,317,101     $ 12,467,622    
Cost of products sold     6,037,289       6,255,114       11,702,040       11,850,454    
Gross profit     316,450       325,279       615,061       617,168    
Operating expenses:                  
Selling, general and administrative expenses     243,763       250,134       490,259       498,596    
LCD settlements and other, net     (1,717 )     (21,527 )     (2,160 )     (60,038 )  
Value added tax assessments     1,049       (9,563 )     1,049       (9,563 )  
      243,095       219,044       489,148       428,995    
Operating income     73,355       106,235       125,913       188,173    
Interest expense     6,288       (3,320 )     11,889       2,402    
Other (income) expense , net     (1,230 )     51       (2,264 )     212    
Income before income taxes     68,297       109,504       116,288       185,559    
Provision for income taxes     21,903       33,092       36,521       57,870    
Net income   $ 46,394     $ 76,412     $ 79,767     $ 127,689    
                   
Earnings per share:                  
Basic   $ 1.32     $ 2.09     $ 2.27     $ 3.48    
Diluted   $ 1.31     $ 2.09     $ 2.26     $ 3.47    
Weighted average common shares outstanding:                  
Basic     35,207       36,506       35,167       36,661    
Diluted     35,378       36,615       35,373       36,829    
                   

TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except par value and share amounts)

         
    July 31,   January 31,
      2016       2016  
ASSETS   (unaudited)    
Current assets:        
Cash and cash equivalents   $ 697,047     $ 531,169  
Accounts receivable, less allowances of $43,550 and $45,875     2,706,079       2,995,114  
Inventories     2,145,070       2,117,384  
Prepaid expenses and other assets     116,454       178,394  
Total current assets     5,664,650       5,822,061  
Property and equipment, net     72,138       66,028  
Goodwill     206,040       204,114  
Intangible assets, net     147,277       159,386  
Other assets, net     113,353       106,699  
Total assets   $ 6,203,458     $ 6,358,288  
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current liabilities:        
Accounts payable   $ 3,240,578     $ 3,427,580  
Accrued expenses and other liabilities     415,177       487,003  
Revolving credit loans and current maturities of long-term debt, net     12,939       18,063  
Total current liabilities     3,668,694       3,932,646  
Long-term debt, less current maturities     349,025       348,608  
Other long-term liabilities     77,593       71,279  
Total liabilities   $ 4,095,312     $ 4,352,533  
Shareholders' equity:        
Common stock, par value $0.0015; 200,000,000 shares authorized; 59,245,585 shares issued at July 31, 2016 and January 31, 2016   $ 89     $ 89  
Additional paid-in capital     679,976       682,227  
Treasury stock, at cost (24,031,690 and 24,163,402 shares at July 31, 2016 and January 31, 2016)     (1,071,561 )     (1,077,434 )
Retained earnings     2,513,965       2,434,198  
Accumulated other comprehensive loss     (14,323 )     (33,325 )
Total shareholders' equity     2,108,146       2,005,755  
Total liabilities and shareholders' equity   $ 6,203,458     $ 6,358,288  
         

TECH DATA CORPORATION AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(In thousands)

   
    Q2 FY17 - Three months ended July 31, 2016  
     Americas???     Europe???       Stock
Compensation
Expense 		    Consolidated   
Net Sales   $    2,674,886     $   3,678,853           $    6,353,739    
GAAP operating income???   $ 41,241     $ 35,927       $ (3,813 )   $ 73,355    
Value added tax assessments     (407 )     1,456             1,049    
Acquisition-related amortization of intangibles     580       4,828             5,408    
LCD settlements and other, net     (2,653 )     936             (1,717 )  
Total non-GAAP operating income adjustments   $ (2,480 )   $ 7,220           $ 4,740    
Non-GAAP operating income   $    38,761     $    43,147       $    (3,813 )   $    78,095    
GAAP operating margin     1.54 %     0.98 %           1.15 %  
Non-GAAP operating margin     1.45 %     1.17 %           1.23 %  
   
???  GAAP operating income does not include stock compensation expense at the regional level.  
                     
    Q2 FY16 - Three months ended July 31, 2015  
     Americas???     Europe???       Stock
Compensation
Expense 		    Consolidated   
Net Sales   $    2,745,429     $   3,834,964           $    6,580,393    
GAAP operating income???   $ 60,752     $ 49,443       $ (3,960 )   $ 106,235    
Restatement and remediation related expenses     146       18             164    
Value added tax assessments     -       (9,563 )           (9,563 )  
Loss on disposal of subsidiaries     154       -             154    
Acquisition-related amortization of intangibles     445       5,262             5,707    
LCD settlements and other, net     (21,527 )     -             (21,527 )  
Total non-GAAP operating income adjustments   $ (20,782 )   $ (4,283 )         $ (25,065 )  
Non-GAAP operating income   $    39,970     $    45,160       $    (3,960 )   $    81,170    
GAAP operating margin     2.21 %     1.29 %           1.61 %  
Non-GAAP operating margin     1.46 %     1.18 %           1.23 %  
   
???  GAAP operating income does not include stock compensation expense at the regional level.  
                     

TECH DATA CORPORATION AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(In thousands)

   
    Q2 FY17 - Six months ended July 31, 2016  
     Americas???     Europe???       Stock
Compensation
Expense 		    Consolidated   
Net Sales   $    5,062,890     $   7,254,211           $    12,317,101    
GAAP operating income???   $ 72,516     $ 60,867       $ (7,470 )   $ 125,913    
Value added tax assessments     (407 )     1,456             1,049    
Acquisition-related amortization of intangibles     1,160       9,693             10,853    
LCD settlements and other, net     (3,096 )     936             (2,160 )  
Total non-GAAP operating income adjustments   $ (2,343 )   $ 12,085           $ 9,742    
Non-GAAP operating income   $    70,173     $    72,952       $    (7,470 )   $    135,655    
GAAP operating margin     1.43 %     0.84 %           1.02 %  
Non-GAAP operating margin     1.39 %     1.01 %           1.10 %  
   
???  GAAP operating income does not include stock compensation expense at the regional level.  
                     
    Q2 FY16 - Six months ended July 31, 2015  
     Americas???     Europe???       Stock
Compensation
Expense 		    Consolidated   
Net Sales   $    5,084,689     $   7,382,933           $    12,467,622    
GAAP operating income???   $ 123,111     $ 72,840       $ (7,778 )   $ 188,173    
Restatement and remediation related expenses     184       598             782    
Value added tax assessments     -       (9,563 )           (9,563 )  
Loss on disposal of subsidiaries     517       -             517    
Acquisition-related amortization of intangibles     615       10,872             11,487    
LCD settlements and other, net     (60,038 )     -             (60,038 )  
Total non-GAAP operating income adjustments   $ (58,722 )   $ 1,907           $ (56,815 )  
Non-GAAP operating income   $    64,389     $    74,747       $    (7,778 )   $    131,358    
GAAP operating margin     2.42 %     0.99 %           1.51 %  
Non-GAAP operating margin     1.27 %     1.01 %           1.05 %  
   
???  GAAP operating income does not include stock compensation expense at the regional level.  
                     

TECH DATA CORPORATION AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(In thousands, except per share amounts)

             
Selling, general and administrative expenses ("SG&A")   Three months ended July 31,    
      2016       2015      
Net Sales   $    6,353,739     $    6,580,393      
GAAP SG&A     243,763       250,134      
Acquisition-related amortization of intangibles     (5,408 )     (5,707 )    
Restatement and remediation related expenses     -       (164 )    
Loss on disposal of subsidiaries     -       (154 )    
Non-GAAP SG&A   $    238,355     $    244,109      
             
GAAP SG&A percentage of net sales     3.84 %     3.80 %    
Non- GAAP SG&A percentage of net sales     3.75 %     3.71 %    
             
             
    Six months ended July 31,    
      2016       2015      
Net Sales   $    12,317,101     $    12,467,622      
GAAP SG&A     490,259       498,596      
Acquisition-related amortization of intangibles     (10,853 )     (11,487 )    
Restatement and remediation related expenses     -       (782 )    
Loss on disposal of subsidiaries     -       (517 )    
Non-GAAP SG&A   $    479,406     $    485,810      
             
GAAP SG&A percentage of net sales     3.98 %     4.00 %    
Non- GAAP SG&A percentage of net sales     3.89 %     3.90 %    
             
    Three months ended July 31,   
      2016       2015    
     Net Income   Diluted EPS     Net Income   Diluted EPS   
GAAP Results   $ 46,394   $ 1.31     $ 76,412   $ 2.09    
LCD settlements and other, net     (1,717 )   (0.05 )     (21,527 )   (0.59 )  
Value-added tax assessments     1,386     0.04       (18,559 )   (0.51 )  
Restatement and remediation related expenses     -     -       164     -    
Loss on disposal of subsidiaries     -     -       154     -    
Acquisition-related intangible assets amortization expense     5,408     0.15       5,707     0.16    
Income tax effect of the above adjustments     (1,178 )   (0.03 )     10,144     0.28    
Non-GAAP results   $ 50,293   $ 1.42     $ 52,495   $ 1.43    
               
    Six months ended July 31,   
      2016       2015    
    Net Income Diluted EPS   Net Income Diluted EPS  
GAAP Results   $ 79,767   $ 2.26     $ 127,689   $ 3.47    
LCD settlements and other, net     (2,160 )   (0.06 )     (60,038 )   (1.63 )  
Value-added tax assessments     1,386     0.04       (18,559 )   (0.50 )  
Restatement and remediation related expenses     -     -       782     0.02    
Loss on disposal of subsidiaries     -     -       517     0.01    
Acquisition-related intangible assets amortization expense     10,853     0.30       11,487     0.31    
Income tax effect of the above adjustments     (2,511 )   (0.07 )     20,196     0.55    
Non-GAAP results   $ 87,335   $ 2.47     $ 82,074   $ 2.23