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Tech Data Corporation Reports Third Quarter Fiscal Year 2016 Results

CLEARWATER, Fla., Nov. 24, 2015 (GLOBE NEWSWIRE) -- Tech Data Corporation (NASDAQ:TECD) (the "Company") today announced its financial results for the third quarter ended October 31, 2015.

Third quarter ended October 31, Nine months ended October 31,
($ in millions,
except per share amounts)
2015 2014 2015 2014
Net Sales $6,428.5 $6,761.2 $18,896.2 $20,331.1
Operating income (GAAP) $68.1 $66.7 $256.2 $166.0
Operating margin (GAAP) 1.06% 0.99% 1.36% 0.82%
Operating income (Non-GAAP) $70.9 $70.8 $202.3 $196.3
Operating margin (Non-GAAP) 1.10% 1.05% 1.07% 0.97%
Net income (GAAP) $41.9 $41.7 $169.6 $94.5
Net income (Non-GAAP) $45.2 $45.3 $127.3 $115.8
EPS - diluted (GAAP) $1.18 $1.09 $4.66 $2.46
EPS - diluted (Non-GAAP) $1.28 $1.18 $3.50 $3.02

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 Third Quarter Ended October 31, 2015:

  • Net Sales were $6.4 billion, a decrease of 5 percent from $6.8 billion in the prior-year quarter. On a constant currency basis, and excluding from the prior period net sales generated in Chile, Peru and Uruguay due to the Company's previously announced exit from those countries, consolidated net sales increased approximately 5 percent.
    • The Americas: Net sales were $2.6 billion (40 percent of worldwide net sales), a decrease of 3 percent from the prior-year quarter. On a constant currency basis, and excluding from the prior period net sales generated in Chile, Peru and Uruguay due to the Company's previously announced exit from those countries, net sales grew approximately 2 percent.
    • Europe: Net sales were $3.9 billion (60 percent of worldwide net sales), a decrease of 6 percent from the prior-year quarter. On a constant currency basis, net sales grew approximately 6 percent.
  • Gross profit was $314.8 million, or 4.90 percent of net sales, compared to $335.0 million, or 4.95 percent of net sales in the prior-year quarter. On a constant currency basis, gross profit improved approximately $9 million, or 3 percent year-over-year.
  • Non-GAAP SG&A was $243.9 million, or 3.79 percent of net sales, compared to $264.2 million, or 3.91 percent of net sales in the prior-year quarter. On a constant currency basis, non-GAAP SG&A increased approximately $3 million, or 1 percent year-over-year.
  • Non-GAAP operating income was $70.9 million, or 1.10 percent of net sales, compared to $70.8 million, or 1.05 percent of net sales in the prior-year quarter. On a constant currency basis, non-GAAP operating income increased approximately $6 million, or 9 percent year-over-year.
    • The Americas: Non-GAAP operating income was $36.6 million, or 1.42 percent of net sales, compared to $38.2 million, or 1.44 percent of net sales in the prior-year quarter.
    • Europe: Non-GAAP operating income was $37.9 million, or 0.98 percent of net sales, compared to $36.5 million, or 0.89 percent of net sales in the prior-year quarter. On a constant currency basis, non-GAAP operating income grew approximately $7 million, or 19 percent year-over-year.
    • Stock-based compensation expense was $3.6 million, compared to $3.9 million in the prior-year quarter. These expenses are 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).
  • Non-GAAP net income was $45.2 million, or $1.28 per diluted share, compared to $45.3 million or $1.18 per diluted share in the prior-year quarter. On a constant currency basis, non-GAAP net income improved approximately $4 million (approximately 9 percent), or $0.22 per diluted share (approximately 19 percent).
  • Net cash used by operations during the third quarter was $82 million. For the nine months of fiscal year 2016, net cash provided by operations was $221 million.
  • Return on invested capital on a non-GAAP basis for the trailing twelve months was 12 percent.

"Continuing our positive first half momentum, I am pleased to report that Tech Data delivered another solid quarter in Q3 of fiscal 2016, said Robert M. Dutkowsky, chief executive officer. "On a constant currency basis, we posted good top line growth, improved non-GAAP operating income by nearly twice the rate of sales growth, and grew non-GAAP earnings per share by 19 percent to a record Q3 level. Additionally, for the first nine months of the fiscal year, we grew non-GAAP earnings per share by 31 percent on a constant currency basis, generated $221 million of cash from operations, and completed $147 million of share repurchases. Tech Data's performance through the first nine months of the fiscal year is a testament to our company's strengths, namely, our diversified customer and product portfolios, strong vendor relationships, state-of-the-art global IT platform, and our teams' ability to effectively respond to the demands of the ever-changing IT market. Collectively, these strengths enable Tech Data to create value for our customers, vendor partners and shareholders."

Business Outlook

For the fourth quarter ending January 31, 2016, the Company anticipates net sales to be in the range of $7.05 billion to $7.25 billion. This assumes year-over-year constant currency sales growth of mid-single digits in both regions. This outlook excludes approximately $78 million of sales from the previous year's fourth quarter, due to the Company's exit from Chile, Peru and Uruguay. The Company also expects the gross margin percentage to be in line with recent levels, a non-GAAP effective tax rate of 25 to 27 percent and the average U.S. dollar to euro currency exchange rate to be $1.07 to €1.00.

Webcast Details

Tech Data will hold a conference call today at 9:00 a.m. (ET) to discuss its financial results for the third quarter ended October 31, 2015. 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. This information can also be obtained from the Company's Investor Relations website at www.techdata.com/investor.

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 26, 2015. 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 115,000 resellers to efficiently and cost effectively support the diverse technology needs of end users in more than 100 countries. Tech Data generated $27.7 billion in net sales for the fiscal year ended January 31, 2015. It is ranked No. 107 on the Fortune 500® and one of Fortune's "World's Most Admired Companies." To learn more, visit www.techdata.com, or follow us on Facebook and Twitter.

TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three months ended Nine months ended
October 31, October 31,
2015 2014 2015 2014
Net sales $6,428,540 $6,761,181 $18,896,162 $20,331,141
Cost of products sold 6,113,696 6,426,196 17,964,150 19,309,456
Gross profit 314,844 334,985 932,012 1,021,685
Operating expenses:
Selling, general and administrative expenses 249,611 271,235 746,908 847,344
LCD settlements, net (3,049) (5,059) (63,087) (5,059)
Value-added tax assessment -- -- (9,563) (6,229)
Restatement and remediation related expenses 47 2,064 829 19,678
Loss on disposal of subsidiaries 182 -- 699 --
246,791 268,240 675,786 855,734
Operating income 68,053 66,745 256,226 165,951
Interest expense 5,619 6,491 8,021 20,639
Other expense (income), net 898 (225) 1,110 842
Income before income taxes 61,536 60,479 247,095 144,470
Provision for income taxes 19,636 18,779 77,506 49,975
Net income $ 41,900 $ 41,700 $ 169,589 $ 94,495
Net income per share:
Basic $ 1.19 $ 1.09 $ 4.69 $ 2.47
Diluted $ 1.18 $ 1.09 $ 4.66 $ 2.46
Weighted average common shares outstanding:
Basic 35,214 38,253 36,174 38,212
Diluted 35,397 38,433 36,354 38,376
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except par value and share amounts)
October 31, January 31,
2015 2015
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 585,960 $ 542,995
Accounts receivable, less allowances of $47,968 and $50,143 2,926,554 2,811,963
Inventories 2,111,649 1,959,627
Prepaid expenses and other assets 178,271 161,832
Assets held for sale -- 101,706
Total current assets 5,802,434 5,578,123
Property and equipment, net 63,964 63,104
Other assets, net 498,669 495,498
Total assets $ 6,365,067 $ 6,136,725
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,480,101 $ 3,119,618
Accrued expenses and other liabilities 470,271 538,758
Revolving credit loans and current maturities of long-term debt, net 16,744 13,303
Liabilities held for sale -- 71,447
Total current liabilities 3,967,116 3,743,126
Long-term debt, less current maturities 348,399 351,576
Other long-term liabilities 81,794 81,880
Total liabilities $ 4,397,309 $ 4,176,582
Shareholders' equity:
Common stock, par value $0.0015; 200,000,000 shares authorized; 59,245,585 shares issued at October 31, 2015 and January 31, 2015 $ 89 $ 89
Additional paid-in capital 678,970 679,973
Treasury Stock, at cost (24,173,534 and 21,866,069 shares at October 31, 2015 and January 31, 2015) (1,077,886) (939,143)
Retained earnings 2,338,051 2,168,462
Accumulated other comprehensive income 28,534 50,762
Total shareholders' equity 1,967,758 1,960,143
Total liabilities and shareholders' equity $ 6,365,067 $ 6,136,725
TECH DATA CORPORATION AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(In thousands)
Q3 FY16 - Three months ended October 31, 2015
Americas(1) Europe(1) Stock
Compensation
Expense
Consolidated
Net Sales $ 2,572,751 $ 3,855,789 $ 6,428,540
GAAP operating income(1) $ 38,857 $ 32,817 $ (3,621) $ 68,053
Restatement and remediation related expenses 34 13 47
Loss on disposal of subsidiaries 182 -- 182
Acquisition-related amortization of intangibles 583 5,088 5,671
LCD settlements, net (3,049) -- (3,049)
Total non-GAAP operating income adjustments $ (2,250) $ 5,101 $ 2,851
Non-GAAP operating income $ 36,607 $ 37,918 $ (3,621) $ 70,904
GAAP operating margin 1.51% 0.85% 1.06%
Non-GAAP operating margin 1.42% 0.98% 1.10%
Q3 FY15 - Three months ended October 31, 2014
Americas(1) Europe(1) Stock
Compensation
Expense
Consolidated
Net Sales $ 2,644,085 $ 4,117,096 $ 6,761,181
GAAP operating income(1) $ 42,194 $ 28,407 $ (3,856) $ 66,745
Restatement and remediation-related expenses 877 1,187 2,064
Acquisition-related amortization of intangibles 170 6,883 7,053
LCD settlements, net (5,059) -- (5,059)
Total non-GAAP operating income adjustments $ (4,012) $ 8,070 $ 4,058
Non-GAAP operating income $ 38,182 $ 36,477 $ (3,856) $ 70,803
GAAP operating margin 1.60% 0.69% 0.99%
Non-GAAP operating margin 1.44% 0.89% 1.05%
(1) GAAP operating income does not include stock compensation expense at the regional level.
TECH DATA CORPORATION AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(In thousands, except per share amounts)
Q3 FY16 - Nine months ended October 31, 2015
Americas(1) Europe(1) Stock
Compensation
Expense
Consolidated
Net Sales $ 7,657,440 $ 11,238,722 $ 18,896,162
GAAP operating income(1) $ 161,968 $ 105,657 $ (11,399) $ 256,226
Restatement and remediation related expenses 218 611 829
Value added tax assessment -- (9,563) (9,563)
Loss on disposal of subsidiaries 699 -- 699
Acquisition-related amortization of intangibles 1,198 15,960 17,158
LCD settlements, net (63,087) -- (63,087)
Total non-GAAP operating income adjustments $ (60,972) $ 7,008 $ (53,964)
Non-GAAP operating income $ 100,996 $ 112,665 $ (11,399) $ 202,262
GAAP operating margin 2.12% 0.94% 1.36%
Non-GAAP operating margin 1.32% 1.00% 1.07%
Q3 FY15 - Nine months ended October 31, 2014
Americas(1) Europe(1) Stock
Compensation
Expense
Consolidated
Net Sales $ 7,842,547 $ 12,488,594 $ 20,331,141
GAAP operating income(1) $ 107,331 $ 68,318 $ (9,698) $ 165,951
Restatement and remediation-related expenses 3,937 15,741 19,678
Value added tax assessment -- (6,229) (6,229)
Acquisition-related amortization of intangibles 510 21,401 21,911
LCD settlements, net (5,059) -- (5,059)
Total non-GAAP operating income adjustments $ (612) $ 30,913 $ 30,301
Non-GAAP operating income $ 106,719 $ 99,231 $ (9,698) $ 196,252
GAAP operating margin 1.37% 0.55% 0.82%
Non-GAAP operating margin 1.36% 0.79% 0.97%
(1) GAAP operating income does not include stock compensation expense at the regional level.
TECH DATA CORPORATION AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(In thousands, except per share amounts)
Selling, general and administrative expenses ("SG&A") Three months ended October 31,
2015 2014
Net Sales $ 6,428,540 $ 6,761,181
GAAP SG&A 249,611 271,235
Acquisition-related amortization of intangibles (5,671) (7,053)
Non-GAAP SG&A $ 243,940 $ 264,182
GAAP SG&A percentage of net sales 3.88% 4.01%
Non- GAAP SG&A percentage of net sales 3.79% 3.91%
Three months ended October 31,
2015 2014
Operating
Income
Net Income Diluted
EPS
Operating
Income
Net
Income
Diluted
EPS
GAAP results $ 68,053 $ 41,900 $ 1.18 $ 66,745 $ 41,700 $ 1.09
Restatement and remediation-related expenses 47 31 0.00 2,064 1,585 0.04
Loss on disposal of subsidiaries 182 114 0.01 -- -- --
LCD settlements, net (3,049) (1,001) (0.03) (5,059) (3,162) (0.08)
Acquisition-related amortization of intangibles 5,671 4,150 0.12 7,053 5,181 0.13
Non-GAAP results $ 70,904 $ 45,194 $ 1.28 $ 70,803 $ 45,304 $ 1.18
Nine months ended October 31,
2015 2014
Operating Income Net Income Diluted EPS Operating Income Net Income Diluted EPS
GAAP results $ 256,226 $ 169,589 $ 4.66 $ 165,951 $ 94,495 $ 2.46
Restatement and remediation-related expenses 829 610 0.02 19,678 14,672 0.38
Value added tax assessment (9,563) (15,011) (0.41) (6,229) (6,229) (0.16)
Loss on disposal of subsidiaries 699 573 0.02 -- -- --
LCD settlements, net (63,087) (41,125) (1.13) (5,059) (3,162) (0.08)
Acquisition-related amortization of intangibles 17,158 12,632 0.34 21,911 16,064 0.42
Non-GAAP results $ 202,262 $ 127,268 $ 3.50 $ 196,252 $ 115,840 $ 3.02
Return on Invested Capital (ROIC)
(In thousands)
Twelve months ended
October 31, 2015
TTM Non-GAAP Net Operating Profit After Tax (NOPAT)*:
Non-GAAP Operating Income $ 313,996
Non-GAAP effective tax rate 30.0%
Non-GAAP NOPAT (Non-GAAP operating income x (1 - non-GAAP effective tax rate)) $ 219,750
Average Invested Capital:
Short-term debt (5-qtr average) $ 22,219
Long-term debt (5-qtr average) 351,050
Non-GAAP Shareholders' Equity (5-qtr average) 1,975,455
Total average capital 2,348,724
Less: Cash (5-qtr average) (584,629)
Average invested capital less average cash $ 1,764,095
ROIC 12%
* Trailing Twelve Months is abbreviated as TTM.

CONTACT: Charles V. Dannewitz, Executive Vice President and Chief Financial Officer 727-532-8028 (chuck.dannewitz@techdata.com); or Arleen Quinones, Vice President, Investor Relations and Corporate Communications 727-532-8866 (arleen.quinones@techdata.com)

Source:Tech Data Corporation