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Tech DaTa corporaTion 2009 AnnuAl report
Year Ended January 31, 2009
IT depends on us.Diversify
w
naSDaQ:
TECD
Tech Data Corporation is one of the world's largest distributors of technology products
from leading IT hardware and software producers. Tech Data serves more than 125,000 IT
solution providers in over 100 countries. Every day, these value-added resellers depend on
Tech Data to cost-effectively support the technology needs of end users, including small and
medium businesses (SMB), large enterprises and government agencies. Ranked 102nd* on
the FORTUNE 500®, Tech Data generated $24.1 billion in net sales for its fiscal year ended
January 31, 2009.
*Published April 2009.
Tech DaTa corporaTion 2009 AnnuAl report
It depends on us.
Financial Highlights
For the years ended January 31, ($s in millions, except per-share data)
2009
2008
2007
Sales
GAAP operating income (loss)
Non-GAAP operating income (1)
GAAP net income (loss) per diluted share
Non-GAAP net income per diluted share (1)
Cash conversion cycle (days)
Cash and cash equivalents
Total debt
Net cash (debt)
(1) Refer to Appendix A for a GAAP to non-GAAP reconciliation.
$ 24,080
242
$
$
242
$ 2.40
$ 2.40
27
528
420
108
$
$
$
$ 23,423
188
$
$
219
$ 1.96
$ 2.51
28
447
383
64
$
$
$
$ 21,440
(4)
$
164
$
$
(1.76)
$ 1.40
30
265
443
(178)
$
$
$
D
e
a
r
IT depends on us.
Today, this tenet is more important than ever. as a
We generated $280 million of cash from operations
strategic link in the Information Technology ecosystem,
during the year, ending the fiscal year with a NeT CaSH
more than 125,000 customers depend on Tech Data
position of $108 million. Our strong balance sheet is
to deliver IT solutions from leading hardware, software
a differentiating asset for Tech Data, particularly in a
and services providers around the world. and in fiscal
difficult macro-economic environment. While cash
year 2009, we did just that—selling on average over
conservation is an important component of our finan-
$90 million of IT products a day. Our performance
cial strategy, we are also making wise investments in
underscores the importance of Tech Data as a critical
strategic, tuck-in acquisitions that leverage Tech Data’s
component in the ever evolving IT ecosystem and also
existing infrastructure, like our seamless acquisition of
validates our strategy of execution, innovation and
the assets of Scribona Nordics aB during the second
diversification.
quarter of fiscal 2009. We also completed a $100 million
Our strength in execution delivered record
net sales of $24.1 billion in fiscal 2009. We performed
well in an IT spending environment that continued to
stock repurchase program during the year, bringing
our total repurchases to $400 million over the past
four years.
decline as the fiscal year came to a close. We gained
Improving the way we do business through the deploy-
share in select markets, particularly europe, and
ment of new technologies strengthens our competi-
improved our gross margin through solid inventory,
tiveness and creates stronger customer retention. During
pricing and freight management practices. The optimi-
zation of our foreign currency hedging practices also
benefited our gross margin performance for the year
fiscal 2009, we completed several initiatives to support
our innovation strategy including the imple-
mentation of our SaP Warehouse Management System
as we quickly executed to recover foreign currency
(WMS) platform across our eight North american
exchange losses in the second half of the year. These
logistics centers. Our well-executed deployment of SaP
efforts, combined with focused cost management
WMS has reduced new employee training time, elimi-
initiatives to balance our infrastructure with projected
nated steps and paperwork in the parcel pick process,
demand, drove our highest operating income margin
and improved overall order accuracy. We also believe
performance in four years. For fiscal 2009, we generated
our implementation of Tech Data’s pan-european SaP
operating income of $242.2 million, or 1.01 percent of
system completed in 2006 continues to provide a com-
net sales compared to $188.4 million, or .80 percent
petitive advantage in the marketplace. This powerful
of net sales in fiscal 2008 (on a non-GaaP basis, fiscal
system provides our team with real-time information
2008 operating income was $219.0 million, or .93
that enables them to make more efficient and informed
percent of net sales).
decisions regarding inventory levels, pricing, customer
buying patterns and order shipping status from any of
Shareholders,Fellow T e c h d a T a c o r p o r a T I o n 2 0 0 9 a N N U a L r e P O r T
our european locations. Our improving performance
model becomes an even more compelling value-
in europe validates the value we’re receiving from this
proposition to our vendor partners when the economy
strategic investment. Other initiatives like our recent
and IT spending contracts. The distribution channel
enhancements to Tech Data’s MyLeadTracker applica-
offers the easiest, most cost-effective way for vendor
tion are driving new sales in North america by alerting
partners to capitalize on demand in the market place
resellers of potential hardware, software and services
and our actions in fiscal 2009 prove that Tech Data
upgrade opportunities. This internally developed applica-
and the world’s leading vendors are working together
tion is a perfect example of our constant effort to attract
to capitalize on the opportunity.
and retain customers through the use of IT systems.
Finally, our efforts focused on diversification
are delivering results and strengthening our position
Fiscal 2010 will undoubtedly be challenging, but we
believe our forward-looking strategies and our con-
servative, sound financial management practices are
as a leading technology distribution company. Our
strengthening our company while at the same time
Brightstar europe joint venture continued to gain
better positioning Tech Data for long-term success.
traction in our selected markets—the UK and Spain—
We have low customer concentration and excellent
and in February 2009 we entered the German mobile
geographic and industry vertical diversification. We
handset market with the opening of a new Brightstar
took prudent cost reduction actions throughout fiscal
europe office. What started as a greenfield operation
2009 and continue to improve our sales, inventory and
with a single mobile vendor partner on our european
pricing management disciplines. Our long-term customer
line-card, is now a formidable mobile distribution
and vendor partner relationships, coupled with our
operation with increasing market share. In February
veteran management team, are poised to serve us well.
2009, we shipped our one millionth handset. Brightstar
europe’s product portfolio continues to grow and
The entire team at Tech Data deserves praise for their
includes leading handset and netbook manufacturers
dedication and execution in fiscal 2009, particularly
like Samsung, LG Mobile, Sony ericsson, HP and asus.
amid the turbulent environment—one that required
prudent, and at times, difficult decisions. and to our
We continue to explore new opportunities that will
shareholders, I am grateful for your commitment and
diversify our product offering and provide new and
support. Our thirty-five years of serving the IT supply
existing customers with industry leading IT alternatives.
chain have provided Tech Data with the tools and
recent vendor additions in the americas demonstrate
know-how to be successful during both prosperous
our strength and position in the marketplace. We added
and challenging cycles. In summary, it is my belief that
leading software virtualization player VMware to our
great companies are made even stronger during tough
advanced Infrastructure Systems (aIS) portfolio during
times. In every decision we make, we are committed
fiscal 2009 and in the months following year end we
to responsibly managing our business, strengthening
announced an expanded agreement with Sharp to dis-
our position in the marketplace and improving share-
tribute LCD TVs, a growing product area for Tech Data
holder returns.
both in the americas and europe. In March 2009 we
also added a line of Dell laptop and desktop systems
Now more than ever, IT depends on Tech Data.
to our U.S. product portfolio when Dell announced
they were going to expand their use of the IT distribu-
tion channel to reach the small and medium business
(SMB) space—one of Tech Data’s customer sweetspots.
Partner ships like these validate our strategy and the
importance of Tech Data’s value-proposition in the IT
ecosystem. Our variable cost route-to-market coverage
Bob Dutkowsky
Chief executive Officer
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foRM 10-k YEAR ENDED JANUARY 31, 2009
This page inTenTionally lefT blank
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
⌧ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended January 31, 2009
OR
(cid:133) 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)
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:
Common stock, par value $.0015 per share
Securities registered pursuant to Section 12 (g) of the Act: None
Indicate by a check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ⌧ No (cid:133)
Indicate by a check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:133) No ⌧
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 (cid:133)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. ⌧
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer ⌧
Accelerated Filer
(cid:133)
Non-accelerated Filer (cid:133)
Smaller Reporting Company Filer
(cid:133)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:133) No ⌧
Aggregate market value of the voting stock held by non-affiliates was $1,687,828,232 based on the reported last sale price of common stock
on July 31, 2008, which is the last business day of the registrant’s most recently completed second fiscal quarter.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
Class
Common stock, par value $.0015 per share
Outstanding at February 27, 2009
50,105,163
The registrant’s Proxy Statement for use at the Annual Meeting of Shareholders on June 10, 2009, is incorporated by reference in Part III of
this Form 10-K to the extent stated herein.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
Business
PART I
ITEM 1.
ITEM 1A. Risk Factors
ITEM 1B. Unresolved Staff Comments
ITEM 2.
ITEM 3.
ITEM 4.
Properties
Legal Proceedings
Submission of Matters to a Vote of Security Holders
Selected Financial Data
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
ITEM 6.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 7A. Qualitative and Quantitative Disclosures about Market Risk
ITEM 8.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
ITEM 9.
ITEM 9A. Controls and Procedures
ITEM 9B. Other Information
PART III
ITEM 10. Directors and Executive Officers and Corporate Governance
ITEM 11. Executive Compensation
ITEM 12.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
ITEM 14.
Principal Accounting Fees and Services
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
PART IV
ITEM 15. Exhibits and Financial Statement Schedules
GAAP to Non-GAAP Reconciliation
3
8
11
12
12
12
12
15
16
29
30
57
57
59
60
60
60
60
60
61
Appendix A
PART I
Business
ITEM 1.
Overview
Tech Data Corporation (“Tech Data,” “we,” “our,” “us,” or the “Company”), ranked 105th on the FORTUNE 500(R), is a leading
distributor of information technology (“IT”) products, logistics management and other value-added services worldwide. We serve
more than 125,000 value-added resellers (“VARs”), direct marketers, retailers and corporate resellers in more than 100 countries
throughout North America, Latin America and Europe. Throughout this document we will make reference to the two primary
geographic markets we serve as the Americas (including North America and Latin America) and Europe. For a discussion of our
geographic reporting segments, see “Item 8. Financial Statements and Supplemental Data.”
We offer a variety of products from manufacturers and publishers such as Acer, Adobe, American Power, Apple, Asus Computer,
Autodesk, Canon, Cisco Systems, Epson, Fujitsu-Siemens, Hewlett-Packard, IBM, Intel, Lexmark, Lenovo, Logitech, McAfee,
Microsoft, Nortel Networks, Samsung, Sony, Symantec, Toshiba, Western Digital and Xerox. Products are generally shipped from
regionally located logistics centers the same day the orders are received.
Customers are provided with a high level of customer service through the Company’s technical support, electronic commerce tools
(including on-line order entry and electronic data interchange (“EDI”) services), product integration services, customized shipping
documents and flexible financing programs. While we strive to provide our customers with a full array of services, revenues generated
from the direct sale of services contributed less than 10% to Tech Data’s overall net sales.
History
Tech Data was incorporated in 1974 to market data processing supplies such as tapes, disk packs, and custom and stock tab forms for
mini and mainframe computers directly to end users. With the advent of microcomputer dealers, we made the transition to a wholesale
distributor in 1984 by broadening our product line to include hardware products and withdrawing entirely from end-user sales. From
1989 to 1994, we expanded internationally through the acquisition of privately-held distribution companies in Canada and France.
In fiscal 1999, we substantially enhanced our European presence with the acquisition of 83% of the voting common stock of Europe’s
leading technology products distributor, Computer 2000 AG (“Computer 2000”). In 2003, the remaining minority interests of
Computer 2000 were acquired.
From fiscal 2000 through fiscal 2007, we made several acquisitions to leverage our infrastructure in certain geographies and to
strengthen our position in certain technology and customer segments, including the networking and small- and medium-business
markets, respectively. In fiscal 2007, in order to provide greater focus and resources on core growth opportunities, we sold our
European training business (the “Training Business”) to a third-party.
In fiscal 2008, we executed a joint venture agreement with Brightstar Corporation, one of the world’s largest wireless distributor and
supply chain solutions providers. The joint venture distributes mobile phones and other wireless devices to a variety of customers
including mobile operators, dealers, agents, retailers and e-tailers in certain European markets. Each of the joint venture partners has a
50% ownership in the entity. In addition, in order to further enhance our long-term profitability and return on capital employed in
Europe, during fiscal 2008, we ceased our operations in the United Arab Emirates, sold our operations in Israel and acquired certain
assets and the customer base of Actebis Switerzland AG.
In fiscal 2009, we acquired certain assets of Scribona, AB, a publicly-traded IT distribution company in the Nordic region of Europe,
with operations in Sweden, Finland and Norway (“Scribona”). The acquisition expands our presence and leverages our infrastructure
in the Nordic region of Europe.
Our strategy focused on execution, diversification and innovation will continue to drive our financial results. However, the decline in
the current macroeconomic environment and related softening demand in IT spending within the markets in which we conduct
business may hinder our ability to improve our operating margins, both in Europe and the Americas. As a result, we are rigorously
managing the factors that we can control, including our management of costs, working capital and capital spending and we will
continue to manage our net sales, profitability and market share. We will also continue to make targeted investments across our
worldwide operations in IT enhancements, sales programs and new business units.
Industry
The wholesale distribution model has proven to be well suited for both manufacturers and publishers of IT products (also referred to
throughout this document as “vendors”) and resellers of those products. The large number of resellers makes it cost efficient for
vendors to rely on wholesale distributors to serve this diverse customer base.
3
Similarly, due to the large number of vendors and products, resellers often cannot or choose not to establish direct purchasing
relationships with vendors. As a result, they frequently rely on wholesale distributors, such as Tech Data, who can leverage purchasing
costs across multiple vendors to satisfy a significant portion of their product procurement, logistics, financing, marketing and technical
support needs.
Through collaborative supply chain management initiatives, we continue to advance the efficiency of our distribution model. By
leveraging our infrastructure and logistics expertise, vendors benefit from a cost-effective alternative to selling directly to resellers.
Our ability to provide a “virtual warehouse” of products for resellers means they no longer need to hold inventory, which reduces their
costs and risks associated with handling products. In addition to enabling reseller access to a comprehensive hardware and software
offering, we frequently ship products directly to end-users on behalf of our customers, thereby reducing the resellers’ costs of storing,
maintaining, and shipping the products themselves. We facilitate this approach by personalizing shipping labels and packing
documents with the resellers’ brand identities (e.g., logos), marketing messages and other specialized content.
In summary, the IT distribution industry continues to address a broad spectrum of reseller and vendor requirements despite certain
vendors continuing with direct sales of certain products to end-users and/or resellers. New products and market opportunities have
helped to offset the impact of vendor direct sales on IT distributors. Further, vendors continue to seek the logistics expertise of
distributors to penetrate key markets like the small- and medium-sized business (“SMB”) sector, which rely on VARs—our primary
customer base—to gain access to and support for new technology. The economies of scale and global reach of large industry-leading
distributors are expected to continue to be significant competitive advantages in this marketplace.
Products and Vendors
We sell more than 125,000 products from the world’s leading peripheral, system and networking manufacturers and software
publishers. These products are typically purchased directly from the manufacturer or software publisher on a non-exclusive basis.
Conversely, our vendor agreements do not restrict us from selling similar products manufactured by competitors, nor do they require
us to sell a specified quantity of product. As a result, we have the flexibility to terminate or curtail sales of one product line in favor of
another due to technological change, pricing considerations, product availability, customer demand, or vendor distribution policies.
We continually strengthen our product line in order to provide our customers with access to the latest technology products. However,
from time to time, the demand for certain products that we sell exceeds the supply available from the manufacturer or publisher. In
such cases, we generally receive an allocation of the available products. We believe that our ability to compete is not adversely
affected by these periodic shortages and the resulting allocations.
We believe that our vendor agreements are in the form customarily used by manufacturers and distributors. Agreements typically
contain provisions that allow termination by either party upon a short notice period. In most instances, a vendor who elects to
terminate a distribution agreement will repurchase from the distributor the vendor’s products carried in the distributor’s inventory.
Most of our vendor agreements also allow for stock rotation and price protection provisions. Stock rotation rights give us the ability,
subject to certain limitations, to return for credit or exchange a portion of those inventory items purchased from the vendor. Price
protection situations occur when a vendor credits us for declines in inventory value resulting from the vendor’s price reductions.
Along with our inventory management policies and practices, these provisions reduce our risk of loss due to slow-moving inventory,
vendor price reductions, product updates or obsolescence.
Sometimes the industry practices discussed above are not embodied in agreements and do not protect us in all cases from declines in
inventory value. However, we believe that these practices provide a significant level of protection from such declines, although no
assurance can be given that such practices will continue or that they will adequately protect us against declines in inventory value.
While we sell products in various countries throughout the world, and product categories may vary from region to region, during fiscal
2009, sales within our consolidated product categories approximated the following:
Peripherals ......................................................................................................................................................................................
Systems ...........................................................................................................................................................................................
Networking .....................................................................................................................................................................................
Software ..........................................................................................................................................................................................
40%
30%
15%
15%
We generated approximately 29% of our consolidated net sales in fiscal 2009 and 28% of our consolidated net sales in both 2008 and
2007 from products purchased from Hewlett Packard. There were no other vendors that accounted for 10% or more of our
consolidated net sales in fiscal 2009, 2008 or 2007.
4
Customers and Services
We purchase products directly from manufacturers and publishers in large quantities for sale to an active reseller base of more than
125,000 VARs, direct marketers, retailers and corporate resellers. While we sell products in various countries throughout the world,
and customer channels may vary from region to region, during fiscal 2009, sales within our consolidated customer channels
approximated the following:
VARs ..............................................................................................................................................................................................
Direct marketers and retailers .........................................................................................................................................................
Corporate resellers ..........................................................................................................................................................................
50%
30%
20%
No single customer accounted for more than 10% percent of our net sales during fiscal 2009, 2008 or 2007.
The market for VARs is attractive because VARs generally rely on distributors as their principal source of computer products and
financing. This reliance is due to VARs typically lacking the resources to establish a large number of direct purchasing relationships
or stock significant product inventories. Direct marketers, retailers and corporate resellers may establish direct relationships with
manufacturers and publishers for their more popular products, but utilize distributors as the primary source for other product
requirements and the alternative source for products acquired directly. We have also developed special programs to meet the unique
needs of direct marketers and retailers.
In addition to a strong product offering, we provide resellers a high level of customer service through our training and technical
support, suite of electronic commerce tools (including internet order entry and EDI services), customized shipping documents, product
configuration/integration services and access to flexible financing programs. We also provide services to our vendors by giving them
the opportunity to participate in a number of special promotions, and marketing services targeted to the needs of our resellers. While
we believe that services such as these help to set us apart from our competition, they contribute less than 10% to our overall revenues.
We provide our vendors with one of the largest bases of resellers throughout the Americas and Europe, delivering products to
customers from our 24 regionally located logistics centers. We have located our logistics centers near our customers which enables us
to deliver products on a timely basis, thereby reducing the customers’ need to invest in inventory (see also “Item 2—Properties” for
further discussion of our locations and logistics centers).
Sales and Electronic Commerce
Our sales force consists of field and inside telemarketing sales representatives. Our sales force is provided comprehensive training
regarding our policies and procedures and technical characteristics of our products. These training programs are supplemented by
product seminars offered by manufacturers and publishers. Field sales representatives are located in major metropolitan areas. Each
field sales representative is supported by inside telemarketing sales teams covering a designated territory. Our team concept provides a
strong personal relationship between our customers’ representatives and Tech Data. Territories with no field representation are
serviced exclusively by the inside telemarketing sales teams. Customers typically call our inside sales teams on dedicated toll-free
numbers or contact us through various electronic methods to place orders. If the product is in stock and the customer has available
credit, customer orders are generally shipped the same day from the logistics center nearest the customer or the intended end-user.
Customers often utilize our electronic ordering and information systems. Through our website, most customers can gain remote access
to our information systems to place orders, or check order status, stock availability and pricing. Certain of our larger customers have
EDI services available whereby orders, order acknowledgments, invoices, inventory status reports, customized pricing information
and other industry standard EDI transactions are consummated on-line, which improves efficiency and timeliness for ourselves and
our customers. During fiscal 2009, approximately $10.8 billion (45%) of our consolidated net sales originated from orders received
electronically, compared to approximately $10.9 billion (47%) of our consolidated net sales in fiscal 2008 and approximately $9.5
billion (44%) in fiscal 2007.
Competition
We operate in a market characterized by intense competition, based upon such factors as product availability, credit availability, price,
delivery and various services and support provided by the distributor to the customer. We believe that we are well equipped to
compete effectively with other distributors in all of these areas.
We compete against several distributors in the Americas market, including Ingram Micro Inc., Synnex Corp., and several regional and
local distributors. The competitive environment within Europe is highly fragmented, with market share spread among many regional
and local competitors such as Actebis and international distributors such as Ingram Micro Inc. and Westcon/Comstor.
5
We also compete, in some cases, with manufacturers and publishers who sell directly to resellers and end-users. However, we usually
are also a business partner to these companies by providing supply chain or other services tailored to the IT market. We believe
manufacturers and publishers will continue to sell their products through distributors, such as Tech Data, due to our ability to provide
vendors with access to our broad customer base in a highly efficient manner. Our network of logistics centers and our sales and
product management expertise worldwide allow our vendors to benefit by lowering their selling and inventory costs.
Employees
On January 31, 2009, we had approximately 8,000 employees (as measured on a full-time equivalent basis). Certain of our employees
in various countries outside of the United States are subject to laws providing representation rights to employees on workers councils.
We consider relations with our employees to be good.
Foreign and Domestic Operations and Export Sales
We operate predominately in a single industry segment as a distributor of IT products, logistics management, and other value-added
services. While we operate primarily in one industry, because of our global presence, we manage our business based on our
geographic segments. Our geographic segments include the Americas (including North America and Latin America) and Europe.
Over the past several years, we have entered new markets, expanded our presence in existing markets and exited certain markets based
upon our assessment of, among other factors, risk and earnings potential. We continue to evaluate our risk exposure (e.g., risks
surrounding currency rates, regulatory environments, political instability, etc.) and earnings potential around the world. To the extent
we decide to close additional operations, we may incur charges and operating losses related to such closures or recognize a portion of
our accumulated other comprehensive (loss) income in connection with such a disposition (see Note 7 and Note 15 of Notes to
Consolidated Financial Statements for further information regarding losses on the disposal of subsidiaries and the geographical
distribution of our net sales, operating (loss) income, depreciation and amortization, capital expenditures, identifiable assets and
goodwill).
Asset Management
We manage our inventories in an effort to maintain sufficient quantities to achieve high order fill rates while attempting to stock only
those products in high demand with a rapid turnover rate. Inventory balances fluctuate as we add new product lines and when
appropriate, we make large purchases, including cash purchases from manufacturers and publishers when the terms of such purchases
are considered advantageous. Our contracts with most of our vendors provide price protection and stock rotation privileges to reduce
the risk of loss due to manufacturer price reductions and slow moving or obsolete inventory. In the event of a vendor price reduction,
we generally receive a credit for the impact on products in inventory and we have the right to rotate a certain percentage of purchases,
subject to certain limitations. Historically, price protection and stock rotation privileges, as well as our inventory management
procedures, have helped to reduce the risk of loss of inventory value.
We attempt to control losses on credit sales by closely monitoring customers’ creditworthiness through our IT systems, which contain
detailed information on each customer’s payment history and other relevant information. In certain countries, we have obtained credit
insurance that insures a percentage of the credit extended by us to certain customers against possible loss. Customers who qualify for
credit terms are typically granted net 30-day payment terms in the Americas. While credit terms in Europe vary by country, the vast
majority of customers are granted credit terms ranging from 30-60 days. We also sell products on a prepay, credit card and cash on
delivery basis. In addition, certain of the Company’s vendors subsidize floorplan financing arrangements for the benefit of our
customers.
Additional Information Available
Our principal Internet address is www.techdata.com. We provide our annual and quarterly reports free of charge on
www.techdata.com, as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and
Exchange Commission (“SEC”). We provide a link to all SEC filings where current reports on Form 8-K and any amendments to
previously filed reports may be accessed, free of charge.
6
Executive Officers
The following table sets forth the name, age and title of each of the persons who were serving as executive officers of Tech Data as of
March 20, 2009:
Name
Robert M. Dutkowsky ................
Jeffery P. Howells ......................
Néstor Cano ................................
Kenneth Lamneck ......................
Joseph A. Osbourn .....................
Charles V. Dannewitz ................
Joseph B. Trepani .......................
David R. Vetter ..........................
Age
54
51
45
54
61
54
48
49
Title
Chief Executive Officer
Executive Vice President and Chief Financial Officer
President, Europe
President, the Americas
Executive Vice President and Chief Information Officer
Senior Vice President, Taxes and Treasurer
Senior Vice President and Corporate Controller
Senior Vice President, General Counsel and Secretary
Robert M. Dutkowsky, Chief Executive Officer, joined Tech Data as chief executive officer and was appointed to the board of
directors in October 2006. He has nearly 30 years of experience in the IT industry including senior management positions in sales,
marketing and channel distribution with leading manufacturers and software publishers IBM, EMC and J.D. Edwards. His IT career
began in 1977 with IBM. During his 20 years with IBM, he served in several senior management positions, including executive
assistant to former IBM CEO Lou Gerstner, and Vice President, Distribution – IBM Asia/Pacific. Prior to joining Tech Data,
Mr. Dutkowsky was chairman, president and CEO of GenRad, Inc., J.D. Edwards, Inc. and most recently Egenera, Inc. He earned a
bachelor’s degree in labor and industrial relations from Cornell University.
Jeffery P. Howells, Executive Vice President and Chief Financial Officer, joined the Company in October 1991 as Vice President
of Finance and assumed the responsibilities of Chief Financial Officer in March 1992. In March 1993, he was promoted to Senior
Vice President and Chief Financial Officer and was promoted to Executive Vice President and Chief Financial Officer in March 1997.
In 1998, Mr. Howells was appointed to the Company’s Board of Directors. From 1979 to 1991, he was employed by Price
Waterhouse. Mr. Howells is a Certified Public Accountant and holds a Bachelor of Business Administration Degree in Accounting
from Stetson University.
Néstor Cano, President, Europe, joined the Company (via the Computer 2000 acquisition) in July 1989 as a Software Product
Manager and served in various management positions within the Company’s operations in Spain and Portugal from 1990 to 1995,
after which time he was promoted to Regional Managing Director. In March 1999 he was appointed Executive Vice President of U.S.
Sales and Marketing, and in January 2000 he was promoted to President of the Americas. He was promoted to President, Worldwide
Operations in August 2000 and was appointed to the position of President, Europe in June 2007. Mr. Cano holds a PDG (similar to an
Executive MBA) from IESE Business School in Barcelona and an Engineering Degree from Barcelona University.
Kenneth Lamneck, President, the Americas, joined the Company in March 2004. Prior to joining Tech Data, he served in various
management positions at Arrow Electronics Distribution Division and most recently served as President of the Arrow Richey
Electronics division since 1999. Mr. Lamneck holds a Bachelors Degree in Engineering from the United States Military Academy at
West Point and a Masters Degree in Business Administration from the University of Texas at El Paso.
Joseph A. Osbourn, Executive Vice President and Chief Information Officer, joined the Company in October 2000. Prior to
joining the Company, he was Senior Vice President and Chief Information Officer at Kmart Corporation from September 1999 to
September 2000, Vice President of Information Services at Walt Disney World Company from September 1989 to September 1999,
and with Price Waterhouse for ten years, most recently as a partner in Management Consulting Services. Mr. Osbourn holds a
Bachelors Degree in Physics from the University of Louisville and a Masters Degree in Business Administration from Memphis State
University.
Charles V. Dannewitz, Senior Vice President, Taxes and Treasurer, joined the Company in February 1995 as Vice President of
Taxes. He was promoted to Senior Vice President of Taxes in March 2000, and assumed responsibility for worldwide treasury in July
2003. Prior to joining the Company, he was employed by Price Waterhouse for 13 years, most recently as a Tax Partner.
Mr. Dannewitz is a Certified Public Accountant and holds a Bachelor of Science Degree in Accounting from Illinois Wesleyan
University.
7
Joseph B. Trepani, Senior Vice President and Corporate Controller, joined the Company in March 1990 as Controller and held
the position of Director of Operations from October 1991 through January 1995. In February 1995, he was promoted to Vice President
and Worldwide Controller and to Senior Vice President and Corporate Controller in March 1998. Prior to joining the Company,
Mr. Trepani was Vice President of Finance for Action Staffing, Inc. from July 1989 to February 1990. From 1982 to 1989, he was
employed by Price Waterhouse. Mr. Trepani is a Certified Public Accountant and holds a Bachelor of Science Degree in Accounting
from Florida State University.
David R. Vetter, Senior Vice President, General Counsel and Secretary, joined the Company in June 1993 as Vice President and
General Counsel and was promoted to Corporate Vice President and General Counsel in April 2000. In March 2003, he was promoted
to his current position of Senior Vice President, and effective July 2003, was appointed Corporate Secretary. Prior to joining the
Company, he was employed by the law firm of Robbins, Gaynor & Bronstein, P.A. from 1984 to 1993, most recently as a partner.
Mr. Vetter is a member of the Florida Bar Association and holds Bachelor of Arts Degrees in English and Economics from Bucknell
University and a Juris Doctorate Degree from the University of Florida.
ITEM 1A. Risk Factors
The following are certain risk factors that could affect our business, financial position and results of operations. These risk factors
should be considered in connection with evaluating the forward-looking statements contained in this Annual Report on Form 10-K
because these factors could cause the actual results and conditions to differ materially from those projected in the forward-looking
statements. Before you buy our common stock or other securities, you should know that making such an investment involves risks,
including the risks described below. The risks that have been highlighted below are not the only risks of our business. If any of the
risks actually occur, our business, financial condition or results of operations could be negatively affected. In that case, the trading
price of our common stock or other securities could decline, and you may lose all or part of your investment. Certain risk factors that
could cause actual results to differ materially from our forward-looking statements include the following:
Global Economic Downturn
The current global economic downturn creates several risks relating to our financial results, operations and prospects. We may
experience a rapid decline in demand for the products we sell resulting in a more competitive environment and pressure to reduce the
cost of operations. The benefits from cost reductions may take longer to fully realize and may not fully mitigate the impact of the
reduced demand. The current global economic downturn may also result in changes in vendor terms and conditions, such as rebates,
cash discounts and cooperative marketing efforts, which may result in further downward pressure on our gross margins. Deterioration
in the financial and credit markets heightens the risk of customer bankruptcies and delay in payment. Deterioration in the credit
markets in Europe has resulted in reduced availability of credit insurance to cover customer accounts. This may result in our reducing
the credit lines we provide to customers, thereby having a negative impact on our net sales. In addition, in this environment, there is a
greater possibility of increased interest rates on our borrowings and greater uncertainty in the capital markets related to our cost of or
access to capital to finance our business, including the ability of financial institutions to fund their commitments to us. Also, volatile
foreign currency exchange rates increase our risk related to products purchased in a currency other than the currency in which those
products are sold. While we maintain policies to protect against fluctuation in currency exchange rates, extreme fluctuations have
resulted in our occurrence of losses in some countries. The realization of any or all of these risks could have a significant adverse
effect on our financial results.
Competition
The Company operates in a highly competitive environment. The computer wholesale distribution industry is characterized by intense
competition, based primarily on product availability, credit availability, price, speed of delivery, ability to tailor specific solutions to
customer needs, quality and depth of product lines and training, service and support. Weakness in demand in the market intensifies the
competitive environment in which the Company operates. The Company competes with a variety of regional, national and
international wholesale distributors, some of which have greater financial resources than the Company. The Company also faces
competition from companies entering or expanding into the logistics and product fulfillment and e-commerce supply chain services
market.
Narrow Margins
As a result of intense price competition in the industry, the Company has narrow gross and operating margins. These narrow margins
magnify the impact on operating results attributed to variations in sales and operating costs. Future gross and operating margins may
be adversely affected by changes in product mix, vendor pricing actions and competitive and economic pressures. In addition, failure
to attract new sources of business from expansion of products or services or entry into new markets may adversely affect future gross
and operating margins.
8
Dependence on Information Systems
The Company is highly dependent upon its internal computer and telecommunication systems to operate its business. There can be no
assurance that the Company’s information systems will not fail or experience disruptions, that the Company will be able to attract and
retain qualified personnel necessary for the operation of such systems, that the Company will be able to expand and improve its
information systems, that the Company will be able to convert to new systems efficiently, or that the Company will be able to
integrate new programs effectively with its existing programs. Any of such problems could have an adverse effect on the Company’s
business.
Acquisitions and Dispositions
As part of its growth strategy, the Company pursues the acquisition of companies that either complement or expand its existing
business. As a result, the Company regularly evaluates potential acquisition opportunities, which may be material in size and scope.
Acquisitions involve a number of risks and uncertainties, including expansion into new geographic markets and business areas, the
requirement to understand local business practices, the diversion of management’s attention to the assimilation of the operations and
personnel of the acquired companies, the possible requirement to upgrade the acquired companies’ management information systems
to the Company’s standards, potential adverse short-term effects on the Company’s operating results and the amortization or
impairment of any acquired intangible assets. The Company also regularly evaluates the divestiture of business units that may not
meet the Company’s strategic, financial and/or risk tolerance objectives. No assurance can be given that the Company will be able to
dispose of business units on favorable terms or on particular timelines.
Exposure to Natural Disasters, War, and Terrorism
The Company’s headquarters facilities and some of its logistics centers, as well as certain vendors and customers, are located in areas
prone to natural disasters such as floods, hurricanes, tornadoes, or earthquakes. In addition, demand for the Company’s services is
concentrated in major metropolitan areas. Adverse weather conditions, major electrical failures or other natural disasters in these
major metropolitan areas may disrupt the Company’s business should its ability to distribute products be impacted by such an event.
The Company operates in multiple geographic markets, several of which may be susceptible to acts of war and terrorism. The
Company’s business could be adversely affected should its ability to distribute products be impacted by such events.
The Company and many of its vendors receive parts and products from Asia and operate in many parts of the world that may be
susceptible to disease or epidemic that may disrupt the Company’s ability to receive or deliver products or result in other disruptions
in operations.
Dependence on Independent Shipping Companies
The Company relies on arrangements with independent shipping companies, such as Federal Express and United Parcel Service, for
the delivery of its products from vendors and to customers. The failure or inability of these shipping companies to deliver products, or
the unavailability of their shipping services, even temporarily, could have a material adverse effect on the Company’s business. The
Company may also be adversely affected by an increase in freight surcharges due to rising fuel costs and added security. There can be
no assurance that Tech Data will be able to pass along the full effect of an increase in these surcharges to its customers.
Impact of Policy Changes
The Company may implement or modify policies designed to offset certain costs, such as our policies concerning freight and handling
fees to customers. These policies are designed to help offset specific costs that have significantly increased or that can no longer be
included in the overall price of the products the Company sells. Given the competitive nature of the markets in which the Company
operates, these policies may result in customers seeking alternative sources for their IT products, and therefore, could have an adverse
effect on the Company’s business.
Labor Strikes
The Company’s labor force is currently non-union with the exception of employees of certain European and Latin American
subsidiaries, which are subject to collective bargaining or similar arrangements. The Company does business in certain foreign
countries where labor disruption is more common than is experienced in the United States and some of the freight carriers used by the
Company are unionized. A labor strike by a group of the Company’s employees, one of the Company’s freight carriers, one of its
vendors, a general strike by civil service employees, or a governmental shutdown could have an adverse effect on the Company’s
business. Many of the products the Company sells are manufactured in countries other than the countries in which the Company’s
logistics centers are located. The inability to receive products into the logistics centers because of government action or labor disputes
at critical ports of entry may have a material adverse effect on the Company’s business.
9
Risk of Declines in Inventory Value
The Company is subject to the risk that the value of its inventory will decline as a result of price reductions by vendors or
technological obsolescence. It is the policy of most of the Company’s vendors to protect distributors from the loss in value of
inventory due to technological change or the vendors’ price reductions. Some vendors, however, may be unwilling or unable to pay
the Company for price protection claims or products returned to them under purchase agreements. Moreover, industry practices are
sometimes not embodied in written agreements and do not protect the Company in all cases from declines in inventory value. No
assurance can be given that such practices to protect distributors will continue, that unforeseen new product developments will not
adversely affect the Company, or that the Company will be able to successfully manage its existing and future inventories.
Product Availability
The Company is dependent upon the supply of products available from its vendors. The industry is characterized by periods of severe
product shortages due to vendors’ difficulties in projecting demand for certain products distributed by the Company. When such
product shortages occur, the Company typically receives an allocation of product from the vendor. There can be no assurance that
vendors will be able to maintain an adequate supply of products to fulfill all of the Company’s customer orders on a timely basis.
Failure to obtain adequate product supplies could have an adverse effect on the Company’s business.
Vendor Terms and Conditions
The Company relies on various rebates, cash discounts, and cooperative marketing programs offered by its vendors to support
expenses associated with distributing and marketing the vendors’ products. Currently, the rebates and purchase discounts offered by
vendors are influenced by sales volumes and are subject to changes. Additionally, certain of the Company’s vendors subsidize
floorplan financing arrangements for the benefit of our customers. Terminations of a supply or services agreement or a significant
change in vendor terms or conditions of sale could negatively affect our operating margins, revenue or the level of capital required to
fund our operations.
The Company receives a significant percentage of revenues from products it purchases from relatively few manufacturers. A
manufacturer may make rapid, significant and adverse changes in its sales terms and conditions, such as reducing the amount of price
protection and return rights as well as reducing the level of purchase discounts and rebates they make available to us, or may merge
with or acquire other significant manufacturers. The Company’s gross margins could be negatively impacted if the Company is unable
to pass through the impact of these changes to the Company’s customers or cannot develop systems to manage ongoing vendor
programs. In addition, the Company’s standard vendor distribution agreement permits termination without cause by either party upon
30 days notice. The loss of a relationship with any of the Company’s key vendors, a change in their strategy (such as increasing direct
sales); the merging of significant manufacturers, or significant changes in terms on their products may adversely effect the Company’s
business.
Loss of Significant Customers
Customers do not have an obligation to make purchases from the Company. In some cases, the Company has made adjustments to its
systems, vendor offerings, and processes, and made staffing decisions, in order to accommodate the needs of an important significant
customer. In the event a significant customer decides to make its purchases from another distributor, experiences a significant change
in demand from its own customer base, becomes financially unstable, or is acquired by another company, the Company’s revenues
may be negatively impacted, resulting in an adverse effect on the Company’s business.
Customer Credit Exposure
The Company sells its products to a large customer base of value-added resellers, direct marketers, retailers and corporate resellers.
The Company finances a significant portion of such sales through trade credit. As a result, the Company’s business could be adversely
affected in the event of a deterioration of the financial condition of its customers, resulting in the customers’ inability to repay the
Company. This risk may increase during a general economic downturn affecting a large number of the Company’s customers and in
the event the Company’s customers do not adequately manage their business or properly disclose their financial condition.
The Company also offers our customers financing alternatives provided by financing companies, such as leasing and credit lines
provided by a finance company. In the event these financing companies no longer offer these programs or significantly change the
terms, our customers may move their business to another distributor or reduce their purchases from the Company, which may
adversely affect the Company’s business.
10
Need for Liquidity and Capital Resources; Fluctuations in Interest Rates
The Company’s business requires substantial capital to operate and to finance accounts receivable and product inventory that are not
financed by trade creditors. The Company has historically relied upon cash generated from operations, bank credit lines, trade credit
from its vendors, proceeds from public offerings of its common stock and proceeds from debt offerings to satisfy its capital needs and
finance growth. The Company utilizes various financing instruments such as receivables securitization, leases, revolving credit
facilities and trade receivable purchase facilities. As the financial markets change and new regulations come into effect, the cost of
acquiring financing and the methods of financing may change. Changes in our credit rating or other market factors may increase our
interest expense or other costs of capital or capital may not be available to us on acceptable terms to fund our working capital needs.
The inability to obtain such sources of capital could have an adverse effect on the Company’s business. The Company’s credit
facilities contain various financial and other covenants that may limit the Company’s ability to borrow or limit the Company’s
flexibility in responding to business conditions. These financing instruments involve variable rate debt, thus exposing the Company to
risk of fluctuations in interest rates. Such fluctuations in interest rates could have an adverse effect on the Company’s business.
Foreign Currency Exchange Risks; Exposure to Foreign Markets
The Company conducts business in countries outside of the United States, which exposes the Company to fluctuations in foreign
currency exchange rates. The Company may enter into short-term forward exchange or option contracts to hedge this risk;
nevertheless, fluctuations in foreign currency exchange rates could have an adverse effect on the Company’s business. In particular,
the value of the Company’s equity investment in foreign countries may fluctuate based upon changes in foreign currency exchange
rates. These fluctuations, which are recorded in a cumulative translation adjustment account, may result in losses in the event a foreign
subsidiary is sold or closed at a time when the foreign currency is weaker than when the Company initially invested in the country.
The Company’s international operations are subject to other risks such as the imposition of governmental controls, export license
requirements, restrictions on the export of certain technology, political instability, trade restrictions, tariff changes, difficulties in
staffing and managing international operations, changes in the interpretation and enforcement of laws (in particular related to items
such as duty and taxation), difficulties in collecting accounts receivable, longer collection periods and the impact of local economic
conditions and practices. There can be no assurance that these and other factors will not have an adverse effect on the Company’s
business.
Changes in Income Tax and Other Regulatory Legislation
The Company operates in compliance with applicable laws and regulations. When new legislation is enacted with minimal advance
notice, or when new interpretations or applications of existing laws are made, the Company may need to implement changes in its
policies or structure.
The Company makes plans for its structure and operations based upon existing laws and anticipated future changes in the law. The
Company is susceptible to unanticipated changes in legislation, especially relating to income and other taxes, import/export laws,
hazardous materials and electronic waste recovery legislation, and other laws related to trade, accounting, and business activities. Such
changes in legislation, both domestic and international, may have a significant adverse effect on the Company’s business.
Changes in Accounting Rules
The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States.
These accounting principles are subject to interpretation by the Financial Accounting Standards Board, the Public Company
Accounting Oversight Board, the Securities and Exchange Commission, the American Institute of Certified Public Accountants and
various other bodies formed to interpret and create appropriate accounting policies. A change in these policies or a new interpretation
of an existing policy could have a significant effect on our reported results and may affect our reporting of transactions before a
change is adopted.
Volatility of Common Stock Price
Because of the foregoing factors, as well as other variables affecting the Company’s operating results, past financial performance
should not be considered a reliable indicator of future performance, and investors should not use historical trends to anticipate results
or trends in future periods. In addition, the Company’s participation in a highly dynamic industry often results in significant volatility
of the common stock price. Some of the factors that may affect the market price of the common stock, in addition to those discussed
above, are changes in investment recommendations by securities analysts, changes in market valuations of competitors and key
vendors, and fluctuations in the overall stock market, but particularly in the technology sector.
ITEM 1B. Unresolved Staff Comments
Not applicable.
11
ITEM 2.
Properties
Our worldwide executive offices are located in Clearwater, Florida. As of January 31, 2009, we operated a total of 24 logistics centers
to provide our customers timely delivery of products. These logistics centers are located in the following principal markets: Americas
– 14, and Europe – 10.
As of January 31, 2009, we leased or owned approximately 7.3 million square feet of space worldwide. The majority of our office
facilities and logistics centers are leased. Our facilities are well maintained and are adequate to conduct our current business. We do
not anticipate significant difficulty in renewing our leases as they expire or securing replacement facilities.
ITEM 3.
Legal Proceedings
Prior to fiscal 2004, one of our European subsidiaries was audited in relation to various value-added tax (“VAT”) matters. As a result
of those audits, the subsidiary received notices of assessment that allege the subsidiary did not properly collect and remit VAT. It is
our opinion, based upon the opinion of outside legal counsel, that we have valid defenses related to a substantial portion of these
assessments. Although we are vigorously pursuing administrative and judicial action to challenge the assessments, no assurance can
be given as to the ultimate outcome. The resolution of such assessments could be material to our operating results for any particular
period, depending upon the level of income for such period. We are also subject to various other legal proceedings and claims arising
in the ordinary course of business. We do 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.
Submission of Matters to a Vote of Security Holders
ITEM 4.
There have been no matters submitted to a vote of shareholders during the last quarter of the fiscal year ended January 31, 2009.
PART II
ITEM 5. Market for Registrant’s Common Stock, Related Shareholder Matters and Issuer Purchases of Equity Securities
Our common stock is traded on the NASDAQ Stock Market, Inc. (“NASDAQ”) under the symbol “TECD”. We have not paid cash
dividends since fiscal 1983 and the Board of Directors has no current plans to institute a cash dividend payment policy in the
foreseeable future. The table below presents the quarterly high and low sale prices for our common stock as reported by the
NASDAQ. As of February 27, 2009, there were 324 holders of record and we believe that there are approximately 16,500 beneficial
holders.
Sales Price
High
Low
Fiscal year 2009
Fourth quarter ............................................................................................................................ $
Third quarter ..............................................................................................................................
Second quarter ...........................................................................................................................
First quarter ................................................................................................................................
22.62 $
36.38
37.80
35.23
14.14
19.13
32.90
30.91
Fiscal year 2008
Fourth quarter ............................................................................................................................ $
Third quarter ..............................................................................................................................
Second quarter ...........................................................................................................................
First quarter ................................................................................................................................
39.36 $
41.40
39.47
38.80
31.36
33.01
34.90
34.86
High
Low
12
Stock Performance Chart
The five-year stock performance chart below assumes an initial investment of $100 on February 1, 2004 and compares the cumulative
total return for Tech Data, the NASDAQ Stock Market (U.S.) Index, and the Standard Industrial Classification, or SIC, Code 5045 –
Computer and Peripheral Equipment and Software. The comparisons in the table are required by the SEC and are not intended to
forecast or be indicative of possible future performance of our common stock.
Comparison of Cumulative Total Return
Assumes Initial Investment of $100 on February 1, 2004
Among Tech Data Corporation,
NASDAQ Stock Market (U.S.) Index and SIC Code 5045
Tech Data Corporation .....................................................................................................
100
NASDAQ Stock Market (U.S.) Index..............................................................................
100
SIC Code 5045 – Computer and Peripheral Equipment and Software ............................
100
2004
2005
101
100
104
2006
99
113
108
2007
2008
2009
90
121
112
83
116
88
44
58
60
13
Equity Compensation and Stock Purchase Plan Information
The number of shares issuable upon exercise of outstanding share-based equity incentives granted to employees and non-employee
directors, as well as the number of shares remaining available for future issuance, under our equity compensation and stock purchase
plans as of January 31, 2009 are summarized in the following table:
Plan category
Equity compensation plans approved by shareholders for:
Employee equity compensation (2) ..................................
Employee stock purchase ...............................................
Non-employee directors’ equity compensation ..............
Total ...............................................................................
Employee equity compensation plan not approved by
shareholders ........................................................................
Total ...............................................................................
Number of
shares to
be issued upon
exercise of outstanding
share-based incentives
Weighted average exercise
price of outstanding
share-based incentives(1)
Number of shares
remaining available for
future issuance
under equity
compensation plans
5,067,885
—
69,000
5,136,885
674,887
5,811,772
$31.59
—
34.98
31.64
39.57
32.56
3,390,297
563,620
—
3,953,917
—
3,953,917
(1)
(2)
The calculation of the weighted average exercise price includes restricted stock awards that do not have an exercise price. Excluding the restricted stock awards,
the weighted average exercise price of outstanding options and stock appreciation rights would be $36.00 for equity compensation plans approved by security
holders, $39.57 for equity compensation plans not approved by shareholders and $36.46 for all equity compensation plans.
The share-based incentives outstanding include 2,049,748 maximum value stock-settled stock appreciation rights (“MV Stock-settled SARs”) have an average
exercise price of $36.78. Assuming the maximum cap of $20 is reached, the maximum number of shares that would be issued from the exercise of MV Stock-
settled SARs would be approximately 722,000 shares. The total of share-based incentives outstanding also includes 56,470 shares outstanding for non-employee
directors.
None.
None.
Unregistered Sales of Equity Securities
Issuer Purchases of Equity Securities
14
ITEM 6.
Selected Financial Data
The following table sets forth certain selected consolidated financial data. In the first quarter of fiscal 2007, management sold the
European training business (the “Training Business”). The results of operations of the Training Business have been reclassified and
presented as “discontinued operations, net of tax”, for all periods presented below. The balance sheet data has not been reclassified as
the net assets of the Training Business are less than 0.5% of the total net assets of the Company at January 31, 2007. This information
should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and our
consolidated financial statements and notes thereto appearing elsewhere in this Annual Report.
FIVE-YEAR FINANCIAL SUMMARY
(In thousands, except per share data)
2009
2008
2007
2006
2005
Year ended January 31,
Income statement data: (1)
Net sales ............................................................. $ 24,080,484 $ 23,423,078 $ 21,440,445 $ 20,482,851 $ 19,730,917
Cost of products sold .........................................
18,667,184
Gross profit ........................................................
1,063,733
Operating expenses:
20,433,674
1,006,771
22,288,670
1,134,408
19,460,332
1,022,519
22,867,488
1,212,996
970,837
—
—
—
970,837
242,159
1,872
21,465
31,001
54,338
915,434
—
14,471
16,149
946,054
188,354
7,219
15,256
(3,994)
18,481
851,097
136,093
—
23,764
1,010,954
(4,183)
12,509
28,742
(15)
41,236
828,278
—
—
30,946
859,224
163,295
5,503
23,996
1,816
31,315
187,821
66,017
169,873
65,163
(45,419)
55,508
131,980
109,013
121,804
1,822
123,626
—
123,626 $
104,710
3,559
108,269
—
108,269 $
(100,927)
—
(100,927)
3,946
(96,981) $
22,967
—
22,967
3,619
26,586 $
2.41 $
—
1.97 $
—
(1.83) $
0.07
0.40 $
0.06
Selling, general and administrative
expenses ..............................................
Goodwill impairment (2) ............................
Loss on disposal of subsidiaries (5) ............
Restructuring charges(3) ............................
Operating income (loss) .....................................
Other expense (income):
Discount on sale of accounts receivable ...
Interest expense, net .................................
Net foreign currency exchange loss
(gain) ...................................................
Income (loss) income from continuing
operations before income taxes and
minority interest ............................................
Provision for income taxes(4) ..............................
Income (loss) from continuing operations
before minority interest .................................
Minority interest in net loss of joint venture ......
Income (loss) from continuing operations .........
Discontinued operations, net of tax ...................
Net income (loss) ............................................... $
Income (loss) per common share—basic:
Continuing operations .............................. $
Discontinued operations ...........................
Net income (loss) per common share—
Income (loss) income per common share—
diluted:
Continuing operations .............................. $
Discontinued operations ...........................
Net income (loss) per common share—
basic ..................................................... $
2.41 $
1.97 $
(1.76) $
0.46 $
2.40 $
—
1.96 $
—
(1.83) $
0.07
0.39 $
0.06
(1.76) $
0.45 $
diluted .................................................. $
2.40 $
1.96 $
15
832,178
—
—
—
832,178
231,555
—
22,867
(2,959)
19,908
211,647
52,025
159,622
—
159,622
2,838
162,460
2.74
0.05
2.79
2.69
0.05
2.74
Weighted average common shares outstanding:
Basic ....................................................................
Diluted .................................................................
Dividends per common share ........................................
2009
2008
2007
2006
2005
Year ended January 31,
51,276
51,498
—
54,904
55,287
—
55,129
55,129
—
57,749
58,414
—
58,176
59,193
—
Balance sheet data:
Working capital ............................................................. $ 1,891,897 $ 2,044,418 $ 1,816,564 $ 1,392,108 $ 1,488,617
4,557,736
Total assets ....................................................................
68,343
Revolving credit loans ..................................................
17,215
Long-term debt .............................................................
45,178
Other long-term liabilities .............................................
1,927,471
Shareholders’ equity .....................................................
5,023,754
57,906
360,785
63,639
1,719,430
5,220,935
18,315
363,639
58,011
1,920,721
4,703,864
77,195
363,604
46,252
1,702,720
4,404,634
235,088
14,378
38,598
1,760,307
(1)
(2)
(3)
(4)
(5)
See Note 6 of Notes to Consolidated Financial Statements for discussion of the acquisition of certain assets of Scribona, AB, a publicly-traded IT distribution
company in the Nordic region of Europe in fiscal 2009.
See Note 5 of Notes to Consolidated Financial Statements for discussion of the goodwill impairment recorded in fiscal 2007.
See Note 8 of Notes to Consolidated Financial Statements for discussion of restructuring costs incurred in fiscal 2008 and 2007, respectively.
See Note 11 of Notes to Consolidated Financial Statements for discussion of the net amount of $8.7 million reversal in income tax reserves recorded in fiscal
2009, a $7.5 million decrease in the deferred tax asset valuation allowance recorded in fiscal 2008 and an $8.4 million increase in the deferred tax asset valuation
allowance recorded in fiscal 2007.
See Note 7 of Notes to Consolidated Financial Statements for discussion of the $14.5 million loss on disposal of subsidiaries recorded in fiscal 2008.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Annual Report on Form 10-K, 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 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 projections of 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 Item 1A. Risk Factors in this Annual Report on Form 10-K for the year ended
January 31, 2009 for further information. We undertake no obligation to revise or update publicly any forward-looking statements for
any reason.
Factors that could cause actual results to differ materially include the following:
•
•
•
•
•
•
•
•
•
•
•
global economic downturn
competition
narrow margins
dependence on information systems
acquisitions and dispositions
exposure to natural disasters, war and terrorism
dependence on independent shipping companies
impact of policy changes
labor strikes
risk of declines in inventory value
product availability
16
•
•
•
•
•
•
•
•
vendor terms and conditions
loss of significant customers
customer credit exposure
need for liquidity and capital resources; fluctuations in interest rates
foreign currency exchange rates; exposure to foreign markets
changes in income tax and other regulatory legislation
changes in accounting rules
volatility of common stock price
Overview
Tech Data is a leading distributor of information technology (“IT”) products, logistics management and other value-added services.
We distribute microcomputer hardware and software products to value-added resellers, direct marketers, retailers and corporate
resellers. Our offering of value-added customer services includes training and technical support, external financing options,
configuration services, outbound telemarketing, marketing services and a suite of electronic commerce solutions. We manage our
business in two geographic segments: the Americas (including North America and Latin America) and Europe.
A key tenet of our strategy is our ability to leverage our efficient cost structure combined with our multiple service offerings to
generate demand and cost efficiencies for our vendors and customers. The IT distribution industry in which we operate is
characterized by narrow gross profit as a percentage of sales (“gross margin”) and narrow income from operations as a percentage of
sales (“operating margin”). Historically, our gross and operating margins have been impacted by intense price competition, as well as
changes in terms and conditions with our vendors, including those terms related to rebates, price protection, product returns and other
incentives. We expect these conditions to continue in the foreseeable future and, therefore, we will continue to proactively evaluate
our pricing policies and inventory management practices in response to potential changes in our vendor terms and conditions and the
general market environment.
In addition to focusing on superior execution, we continue to drive diversification and the realignment of our customer and vendor
portfolio to help drive long-term profitability throughout all of our operations. For example, our joint venture with Brightstar
Corporation, one of the world’s largest wireless distributor and supply chain solutions providers, distributes mobile phones and other
wireless devices to a variety of customers including mobile operators, dealers, agents, retailers and e-tailers in certain European
markets. The joint venture also allows us to sell our core IT products to a new customer base serving the mobility market. In addition,
we continue to strengthen our position with the small- and medium-business customer segment in several countries we operate, both
organically and through acquisition. As we continue to diversify, we continuously monitor the extension of credit and other terms and
conditions offered to our customers to prudently balance risk, profitability and return on invested capital.
From a balance sheet perspective, we require working capital primarily to finance accounts receivable and inventory. We have
historically relied upon debt, trade credit from our vendors, and accounts receivable financing programs for our working capital needs.
At January 31, 2009, we had a debt to capital ratio (calculated as total debt divided by the aggregate of total debt and total
shareholders’ equity) of 20%.
The current economic environment has presented a number of challenges. The rapid decline in IT demand in several markets has
required payroll and other cost reductions to mitigate the impact of the decline in sales and gross profit. In addition, the downturn has
resulted in vendor rebate goals being more difficult to achieve in those markets where IT demand has declined. This has put even
greater pressure on our gross margin, as we may not be able to completely offset the reduced vendor rebates by increasing our prices
to our customers or reducing our costs. Finally, the downturn has resulted in a global tightening of credit. This has recently extended
to those institutions insuring us against credit risks in several markets, primarily in Europe. This recent trend could impact the credit
lines we offer to our customers. On the other hand, this trend could have a positive effect on our results to the extent that our vendors
rely more on distributors with the financial strength of Tech Data to distribute their products. In addition, these constraints could
impact the financing available to our customers through financial institutions and as a result, we may experience a higher level of
customer defaults than we have seen in recent years. All of these trends are expected to continue throughout fiscal 2010. As we
manage through these challenges and evaluate our pricing, credit management and purchasing policies and make adjustments, if any,
within our customer or vendor portfolio or our cost structure, we may experience sales declines in many of the markets we operate,
negatively impacting our financial results. The extent of the negative impact on our operating results will depend upon the length and
severity of the global economic downturn.
17
In spite of the recent global challenges, throughout fiscal 2009, we made measurable progress towards improving the profitability of
our European operations. However, our business was challenged during both our third and fourth quarters as a result of the weakness
in the global economy and the rapid devaluation of most foreign currencies against the U.S. dollar, particularly in the month of
October. During the third quarter of fiscal 2009, we incurred a foreign currency exchange loss of approximately $23.5 million, with
approximately 73% of this loss occurring in the European region. During the fourth quarter of fiscal 2009, the Company continued to
experience foreign currency volatility and recorded a $5.5 million foreign currency exchange loss, with approximately 89% of this
loss occurring in the European region. The primary factor contributing to the foreign currency exchange loss in both the third and
fourth quarters was the use of certain portions of inventory as an economic hedge against foreign currency exposure in accounts
payable. In such situations, we normally expect our product selling prices to customers to fluctuate with changes in the foreign
currency exchange rates when such product is purchased in a currency other than the currency in which the inventory is sold. We were
able to recover a significant portion of this foreign currency exchange loss through increased gross margin in both the third and fourth
quarters of fiscal 2009. This is a strong example of our disciplined pricing and inventory management practices in action. However, to
the extent that foreign currencies remain volatile and the market conditions remain competitive, we may incur significant foreign
currency exchange losses in the future and there can be no assurance as to the amount of additional gross margin we will be able to
realize to offset such losses.
Considering the various challenges faced during fiscal 2009, including an uncertain macroeconomic environment, volatile currencies,
deteriorating financial markets and an overall decline in demand for technology products and services globally, we were pleased with
the Company’s fiscal 2009 financial performance. We achieved year-over-year sales growth in Europe (on a euro basis) when several
of our competitors experienced a decline in sales in the region. We believe our improved performance allowed us to improve our
market share position during fiscal 2009. We continue to make investments in the region to leverage our pan-European infrastructure
and to diversify our product portfolio. In the Americas, we continued to experience heightened competitive pricing conditions and felt
pressure from economic softness in the region. Within our Canadian and Latin American operations, we also experienced foreign
currency volatility against the U.S. dollar, although the impact on the overall Americas business was not as significant as the European
region. As a result, our fiscal 2009 net sales growth and operating margins in the Americas fell short of prior year levels achieved in
the region. While the Americas results may not be at the level of recent years, considering the economic environment, we believe the
region continues to provide solid profitability and returns on invested capital. In fiscal 2009, we continued to make strategic
investments in the Americas, through the enhancement of our customer-facing tools and general IT infrastructure related to logistics,
finance and other functions in the region.
In May 2008, we completed the acquisition of certain assets of Scribona, AB, a publicly–traded IT distributor in the Nordic region of
Europe, with operations in Sweden, Finland and Norway (“Scribona”). The acquisition expands the Company’s presence in the
Nordics. In connection with the acquisition, we paid approximately $78.3 million in cash for the net value of the acquired assets
including inventory and certain other assets and the assumption of certain liabilities. The asset purchase agreement also provides for
an additional earn-out payment of up to up to 1.5 million euros ($1.9 million at January 31, 2009), if certain performance objectives
are met. We believe the acquisition is an important step in our strategy to drive growth and leverage our infrastructure in the European
region.
We believe our strategy focused on execution, diversification and innovation will provide further improvements to our financial
results. However, the current macroeconomic environment and related softening demand in IT spending within the markets in which
we conduct business may hinder our ability to maintain or improve our operating margins, both in Europe and the Americas. As a
result, we are constantly monitoring the factors that we can control, including our management of costs, working capital and capital
spending and we will continue to work to manage our net sales, profitability and market share. We will also continue to make targeted
strategic investments across our operations in IT enhancements and new business opportunities.
Critical Accounting Policies and Estimates
The information included within MD&A is based upon our consolidated financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. On an
on-going basis, we evaluate these estimates, including those related to bad debts, inventory, vendor incentives, goodwill and intangible
assets, deferred taxes, and contingencies. Our estimates and judgments are based on currently available information, historical results,
and other assumptions we believe are reasonable. Actual results could differ materially from these estimates. We believe the critical
accounting policies discussed below affect the more significant judgments and estimates used in the preparation of our consolidated
financial statements.
18
Accounts Receivable
We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required
payments. In estimating the required allowance, we take into consideration the overall quality and aging of the receivable portfolio,
the existence of credit insurance and specifically identified customer risks. Also influencing our estimates are the following: (1) the
large number of customers and their dispersion across wide geographic areas; (2) the fact that no single customer accounts for more
than 10% of our net sales; (3) the value and adequacy of collateral received from customers, if any; 4) our historical loss experience
and 5) the current economic environment. If actual customer performance were to deteriorate to an extent not expected by us,
additional allowances may be required which could have an adverse effect on our consolidated financial results. Conversely, if actual
customer performance were to improve to an extent not expected by us, a reduction in allowances may be required which could have a
favorable effect on our consolidated financial results.
Inventory
We value our inventory at the lower of its cost or market value, with cost being determined on the first-in, first-out method. We write
down our inventory for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value
based upon an aging analysis of the inventory on hand, specifically known inventory-related risks (such as technological obsolescence
and the nature of vendor terms surrounding price protection and product returns), foreign currency fluctuations for foreign-sourced
product, and assumptions about future demand. Market conditions or changes in terms and conditions by our vendors that are less
favorable than those projected by management may require additional inventory write-downs, which could have an adverse effect on
our consolidated financial results.
Vendor Incentives
We receive incentives from vendors related to cooperative advertising allowances, infrastructure funding, volume rebates and other
incentive agreements. These incentives are generally under quarterly, semi-annual or annual agreements with the vendors; however,
some of these incentives are negotiated on an ad-hoc basis to support specific programs mutually developed with the vendor.
Unrestricted volume rebates and early payment discounts received from vendors are recorded when they are earned as a reduction of
inventory and as a reduction of cost of products sold as the related inventory is sold. Vendor incentives earned for specifically
identified cooperative advertising programs and infrastructure funding are recorded as adjustments to product costs or selling, general
and administrative expenses, depending on the nature of the programs.
We also provide reserves for receivables on vendor programs for estimated losses resulting from vendors’ inability to pay or rejections
by vendors of claims. Should amounts recorded as outstanding receivables from vendors be deemed uncollectible, additional
allowances may be required which could have an adverse effect on our consolidated financial results.
Goodwill, Intangible Assets and Other Long-Lived Assets
The carrying value of goodwill is reviewed at least annually for impairment and may also be reviewed more frequently if current
events and circumstances indicate a possible impairment. An impairment loss is charged to expense in the period identified. We also
examine the carrying value of our intangible assets with finite lives, which includes capitalized software and development costs,
purchased intangibles, and other long-lived assets as current events and circumstances warrant determining whether there are any
impairment losses. If indicators of impairment are present and future cash flows are not expected to be sufficient to recover the assets’
carrying amount, an impairment loss is charged to expense in the period identified. Factors that may cause a goodwill, intangible asset
or other long-lived asset impairment include negative industry or economic trends and significant underperformance relative to
historical or projected future operating results. Our valuation methodologies include, but are not limited to, a discounted cash flow
model, which estimates the net present value of the projected cash flows of our reporting units and a market approach, which evaluates
comparative market multiples applied to our reporting units’ businesses to yield a second assumed value of each reporting unit. If
actual results are substantially lower than our projections underlying these assumptions, or if market discount rates substantially
increase, our future valuations could be adversely affected, potentially resulting in future impairment charges.
Income Taxes
We record valuation allowances to reduce our deferred tax assets to the amount expected to be realized. In assessing the adequacy of a
recorded valuation allowance, we consider all positive and negative evidence and a variety of factors including the scheduled reversal
of deferred tax liabilities, historical and projected future taxable income, and prudent and feasible tax planning strategies. If we
determine we would be able to use a deferred tax asset in the future in excess of its net carrying value, an adjustment to the deferred
tax asset valuation allowance would be made to reduce income tax expense, thereby increasing net income in the period such
determination was made. Should we determine that we are unable to realize all or part of our net deferred tax assets in the future, an
adjustment to the deferred tax asset valuation allowance would be made to income tax expense, thereby reducing net income in the
period such determination was made.
19
Contingencies
We accrue for contingent obligations, including estimated legal costs, when the obligation is probable and the amount is reasonably
estimable. As facts concerning contingencies become known, we reassess our position and make appropriate adjustments to the
financial statements. Estimates that are particularly sensitive to future changes include those related to tax, legal, and other regulatory
matters such as imports and exports, the imposition of international governmental controls, changes in the interpretation and
enforcement of international laws (in particular related to items such as duty and taxation), and the impact of local economic
conditions and practices, which are all subject to change as events evolve and as additional information becomes available during the
administrative and litigation process.
Recent Accounting Pronouncements and Legislation
See Note 1 of Notes to Consolidated Financial Statements for the discussion on recent accounting pronouncements.
Results of Operations
We do not consider stock-based compensation expense recognized under SFAS No. 123 (revised 2004), “Share-Based Payments”
(“SFAS No. 123R”) in assessing the performance of our operating segments; therefore the Company is reporting this as a separate
amount. The following table summarizes our net sales, change in net sales and operating income, by geographic region, for the fiscal
years ended January 31, 2009, 2008 and 2007:
2009
% of
net sales
2008
% of
net sales
2007
% of
net sales
Net sales by geographic region ($ in
thousands):
Americas .......................................... $ 10,609,001
Europe ..............................................
13,471,483
Worldwide ........................................ $ 24,080,484
44.1% $ 11,003,893
55.9
12,419,185
100.0% $ 23,423,078
47.0% $
9,965,074
53.0
11,475,371
100.0% $ 21,440,445
46.5%
53.5
100.0%
Year-over-year increase (decrease) in net
sales (%):
Americas (US$) ...............................
Europe (US$) ...................................
Europe (Euro) ...................................
Worldwide (US$) .............................
(3.6)%
8.5 %
4.0 %
2.8 %
10.4 %
8.2 %
(1.4)%
9.2 %
5.3%
4.1%
1.5%
4.7%
2009
% of
net sales
2008
% of
net sales
2007
% of
net sales
Operating income (loss) ($ in thousands):
Americas .......................................................... $ 157,177
Europe ..............................................................
96,972
Stock-based compensation expense
1.48 % $ 170,685
27,956
0.72 %
1.55 % $ 160,720
(156,930)
0.23 %
1.61 %
(1.37)%
recognized under SFAS No. 123R ..............
(11,990)
(0.05)%
(10,287)
(0.04)%
(7,973)
(0.04)%
Worldwide ........................................................ $ 242,159
1.01 % $ 188,354
0.80 % $
(4,183)
(0.02)%
We sell many products purchased from the world’s leading peripheral, system and networking manufacturers and software publishers.
Products purchased from Hewlett Packard generated 29%, 28% and 28% of our net sales in fiscal 2009, 2008 and 2007, respectively.
There were no other manufacturers or publishers that accounted for 10% or more of our net sales in the past three years.
20
The following table sets forth our Consolidated Statement of Operations as a percentage of net sales for each of the three most recent
fiscal years:
Net sales ........................................................................................................................................
Cost of products sold ....................................................................................................................
Gross profit ...................................................................................................................................
Operating expenses:
Selling, general and administrative expenses ......................................................................
Goodwill impairment ..........................................................................................................
Loss on disposal of subsidiaries ..........................................................................................
Restructuring charges ..........................................................................................................
Operating income (loss) ................................................................................................................
Other expense (income):
Interest expense ...................................................................................................................
Discount on sale of accounts receivable ..............................................................................
Interest income ....................................................................................................................
Net foreign currency exchange loss (gain) ..........................................................................
Income (loss) from continuing operations before income taxes and minority interest .................
Provision for income taxes ...........................................................................................................
Income (loss) from continuing operations before minority interest ..............................................
Minority interest in net loss of joint venture .................................................................................
Income (loss) from continuing operations ....................................................................................
Discontinued operations, net of tax ..............................................................................................
Net income (loss) ..........................................................................................................................
2009
2007
2008
100.00% 100.00% 100.00%
95.16
4.84
94.96
5.04
95.30
4.70
4.03
—
—
—
4.03
1.01
0.13
0.01
(0.04)
0.13
0.23
0.78
0.27
0.51
0.00
0.51
—
3.91
—
0.06
0.07
4.04
0.80
0.12
0.03
(0.06)
(0.02)
0.07
0.73
0.28
0.45
0.01
0.46
—
0.51%
0.46%
3.98
0.63
—
0.11
4.72
(0.02)
0.18
0.06
(0.05)
—
0.19
(0.21)
0.26
(0.47)
—
(0.47)
0.02
(0.45)%
Net Sales
Our consolidated net sales were $24.1 billion in fiscal 2009, an increase of 2.8% when compared to fiscal 2008. On a regional basis,
during fiscal 2009, net sales in the Americas declined by 3.6% compared to fiscal 2008 and increased by 8.5% in Europe (an increase
of 4.0% on a euro basis). Our fiscal 2009 sales performance in the Americas is the result of softer demand throughout the region,
especially during the second semester, and an increase in competitive pricing conditions compared to the prior year. Our sales growth
on a euro basis in Europe is primarily the result of the May 2008 acquisition of Scribona, AB, and growth in our German operations
offset by lower IT demand within most of the other European countries in which we operate, as well as our continuous efforts to remix
our customer portfolio in Europe. We are pleased with our improved performance in Europe in fiscal 2009 and we believe it is a
reflection of our improved stability and stronger execution in the majority of our European operations. Declining average selling
prices for the majority of the products we sell continued to have a negative impact on our sales results within both the Americas and
Europe.
Our consolidated net sales were $23.4 billion in fiscal 2008, an increase of 9.2% when compared to fiscal 2007. On a regional basis,
during fiscal 2008, net sales in the Americas increased by 10.4% over fiscal 2007 and increased by 8.2% in Europe (a decrease of
1.4% on a euro basis). Our fiscal 2008 sales performance in the Americas is primarily the result of stronger execution and increased
sales and product management resources compared to the same period of the prior year. These actions delivered strong growth across
the Americas, most notably in the direct marketer and small- and medium-sized business space. The year-over-year sales decline in
euros can largely be attributed to our conscious efforts to remix our customer portfolio across Europe to those markets providing more
acceptable operating margins and/or requiring less working capital to serve. These efforts are consistent with our focus on increasing
our overall return on capital employed in the European region. Declining average selling prices for the majority of the products we sell
continued to have a negative impact on our sales results within both the Americas and Europe.
Gross Profit
Gross profit as a percentage of net sales (“gross margin”) during fiscal 2009 was 5.04%, a 20 basis point increase from 4.84% in fiscal
2008. The increase in gross margin is primarily attributable to improvements in our inventory, pricing and freight management
practices, continued changes in the customer and product mix worldwide and a recovery of foreign currency exchange losses, as
further discussed below. These results were partially offset by competitive pricing conditions, particularly in the Americas.
21
Gross margin during fiscal 2008 was 4.84%, a 14 basis point increase from 4.70% in fiscal 2007. The increase in gross margin is
primarily attributable to continued improvements in our inventory and pricing management practices in Europe as well as continued
changes in the customer and product mix worldwide, partially offset by the competitive pricing conditions in the Americas.
The competitive environment and declines in current economic conditions within the markets in which we conduct business may
hinder our ability to maintain and/or continue to improve gross margin from its current level.
Operating Expenses
Selling, general and administrative expenses (“SG&A”)
SG&A as a percentage of net sales increased to 4.03% in fiscal 2009, compared to 3.91% in fiscal 2008. The increase in SG&A as a
percentage of sales in fiscal 2009 is primarily due to a lower level of net sales on a year-over-year basis in the Americas, our
investments to support our sales growth in Europe, as well as our acquisition of certain assets from Nordic-based Scribona, AB and
the related consulting and integration costs of $7.6 million in fiscal 2009.
In absolute dollars, worldwide SG&A increased by $55.4 million in fiscal 2009 compared to fiscal 2008. The year-over-year increase
in worldwide SG&A is primarily attributable to the stronger euro versus the U.S. dollar and the factors discussed above.
SG&A as a percentage of net sales decreased to 3.91% in fiscal 2008, compared to 3.98% in fiscal 2007. The decrease in SG&A as a
percentage of net sales in fiscal 2008 is primarily the result of improvements in credit performance, productivity improvements and
the leveraging of our fixed costs in Europe, offset by strategic investments made in personnel and information systems to support our
long-term growth and productivity initiatives.
In absolute dollars, worldwide SG&A increased by $64.3 million in fiscal 2008 compared to fiscal 2007. The year-over-year increase
in SG&A is primarily attributable to the stronger euro versus the U.S. dollar, an increase in labor costs to support our longer-term
growth initiatives, start-up and other operating expenses related to the Brightstar joint venture (which is consolidated for financial
statement reporting purposes) and an additional $2.3 million of stock compensation expense related to SFAS No. 123R. These
increases were partially offset by a reduction in credit costs, as discussed above, and cost decreases of $8.6 million of external
consulting costs related to the European restructuring program incurred during fiscal 2007 that did not recur in fiscal 2008.
Goodwill Impairment
In conjunction with the Company’s policy, the Company’s $14.6 million of goodwill was tested for impairment at January 31, 2009.
In accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”, the impairment
testing included a determination of the fair value of the Company’s reporting units, which are also the Company’s operating segments,
using market multiples and discounted cash flows modeling. The results of the testing, which reflected the improvement in the
Company’s European operations, indicated that the fair value of the Company’s reporting units was greater than the carrying value of
the Company’s reporting units, including goodwill. As a result, no goodwill impairment was recorded at January 31, 2009.
In fiscal 2007, due to certain indicators of impairment within our European reporting unit, the Company performed an impairment test
for goodwill as of July 31, 2006. This testing included the determination of the European reporting unit’s fair value using market
multiples and discounted cash flows modeling. The Company’s reduced earnings and cash flow forecast for our European region
resulted in the Company determining that a goodwill impairment charge was necessary. As of July 31, 2006, the Company recorded a
$136.1 million non-cash charge for the goodwill impairment in Europe.
Loss on Disposal of Subsidiaries
We incurred losses on the disposal of subsidiaries of $14.5 million during fiscal 2008, comprised of $10.8 million of losses related to
the closure of our UAE operations and a $3.7 million loss related to the sale of our Israel operations. The loss related to the closure of
our UAE operations includes a $9.8 million impairment on our investment in the UAE due to a foreign currency exchange loss
(previously recorded in shareholders’ equity as a component of other comprehensive income) and $1.0 million in severance costs and
certain asset write-offs related to the exit. The $3.7 million loss related to the sale of our Israel operations includes a $2.7 million
impairment on our investment in Israel due to a foreign currency exchange loss (previously recorded in shareholders’ equity as a
component of other comprehensive income) and $1.0 million in selling costs (see further discussion in Note 7 of Notes to
Consolidated Financial Statements).
22
Restructuring Charges
No restructuring charges were incurred during fiscal 2009. Restructuring charges were $16.1 million and $23.8 million during fiscal
2008 and 2007, respectively. As further discussed below, these restructuring charges include the charges related to the closure of the
German logistics center, announced in the second quarter of fiscal 2008, and charges related to the European restructuring program
completed in October 2006.
Closure of European Logistics Center
On May 1, 2007, our Board of Directors approved the exit from our logistics center in Germany (the “Moers logistics center”).
The decision to exit this logistics center was made to enable the Company to capitalize on the long-term synergies of having one
logistics center serving Germany, Austria and the Czech Republic and to reduce the Company’s expenses. In connection with
the Moers logistics center exit, Tech Data is expanding its logistics center located in Bor, Czech Republic. The Company
expects the net result of these transactions to be a reduction in our future operating expenses.
During the year ended January 31, 2008, the Company completed its exit of the Moers logistics facility and recorded $18.1
million in restructuring charges related to the closure, comprised of $8.7 million of workforce reductions and $9.4 million for
facility costs and other fixed asset write-offs.
European Restructuring Program
In May 2005, we announced a formal restructuring program to better align the European operating cost structure with the
business environment prevailing at the time. As of October 31, 2006, the initiatives related to the European restructuring
program had been completed.
During fiscal 2008, we recorded credits of $2.0 million related to changes in estimates of previously recorded restructuring
accruals, comprised of a $1.6 million credit for facility costs and a $0.4 million credit for workforce reductions. During fiscal
2007, we incurred $23.8 million related to the restructuring program, comprised of $20.0 million for workforce reductions and
$3.8 million for facility costs. In total, from inception through completion of the program, we incurred $54.7 million related to
the restructuring program, comprised of $38.9 million for workforce reductions and $15.8 million for facility costs.
Interest Expense, Discount on Sale of Accounts Receivable, Interest Income
Interest expense increased 7.7% to $31.0 million in fiscal 2009 compared to $28.8 million in the prior year. The increase in interest
expense in fiscal 2009 is primarily attributable to an increase in the average outstanding debt balances, partially offset by a decrease in
interest rates on revolving credit loans in certain jurisdictions.
Interest expense decreased 25.3% to $28.8 million in fiscal 2008 compared to $38.5 million in the prior year. The decrease in interest
expense in fiscal 2008 is primarily attributable to two factors. First, we issued $350.0 million of convertible senior debentures in the
fourth quarter of fiscal 2007, which bear interest at 2.75%. Second, we improved our daily management of our cash conversion cycle,
which resulted in lower average outstanding debt balances. The interest expense reduction resulting from these two factors was
partially offset by higher interest rates on revolving credit loans during fiscal 2008 compared to the prior year.
Discount on the sale of accounts receivable totaled $1.9 million, $7.2 million and $12.5 million, respectively, in fiscal 2009, 2008 and
2007. The decrease in the discount on sale of accounts receivables in fiscal 2009 was due to the decrease in the accounts receivable
sold and a decrease in the discount rate related to the sale of the accounts receivable. The decrease in the discount on sale of accounts
receivable for fiscal 2008 compared to fiscal 2007 is primarily related to a decrease in the average period outstanding of the accounts
receivable sold from fiscal 2007 through fiscal 2008.
Interest income decreased 29.7% to $9.5 million in fiscal 2009 compared to $13.5 million in fiscal 2008. The decrease in interest
income during fiscal 2009 is primarily attributable to a decrease in the average cash balances invested and a decrease in interest rates
during fiscal 2009 compared to the same period of the prior year. Interest income increased 38.2% to $13.5 million in fiscal 2008
compared to $9.8 million in fiscal 2007. The increase in interest income during fiscal 2008 is primarily attributable to higher average
cash balances available for investment and higher interest rates earned on short-term cash investments compared to the prior year.
Foreign Currency Exchange Loss (Gain)
We realized a net foreign currency exchange loss of $31.0 million during fiscal 2009, with approximately 73% of this loss occurring
in the European region, compared to a net foreign currency exchange gain of $4.0 million in fiscal 2008 and a foreign currency
exchange gain of $0.1 million in fiscal 2007.
23
As a result of subsidiaries outside of the U.S. purchasing certain inventory in currencies other than the currency in which the inventory
is sold, we recognize net foreign currency exchange gains and losses primarily due to the fluctuation in the value of the U.S. dollar
versus the euro, and to a lesser extent, the euro and the U.S. dollar versus other currencies. It is our policy to minimize foreign
currency exchange gains and losses through an effective hedging program. Under this program, we will typically enter into forward
contracts to hedge a portion of our net monetary exposure. In certain cases where we expect our product selling prices to fluctuate
with changes in foreign currency exchange rates, we consider the value of such inventory on hand as a hedge against the related
foreign currency denominated accounts payable. Under this strategy, to the extent we incur a foreign currency exchange loss (gain) on
the underlying accounts payable denominated in the foreign currency as a result of changes in foreign currency exchange rates, we
would typically expect to see a corresponding increase (decrease) in selling prices upon the sale of the respective inventory.
The $31.0 million net foreign currency exchange loss in fiscal 2009 can be primarily attributed to the use of certain portions of
inventory as an economic hedge against foreign currency exposure in accounts payable. We were able to recover a significant portion
of this foreign currency exchange loss through increased gross margin in the third and fourth quarters of fiscal 2009. However, to the
extent that foreign currencies remain volatile and the market conditions remain competitive, we may incur significant foreign currency
exchange losses in the future and there can be no assurance as to the amount of additional gross margin we will be able to realize to
offset such losses. We will continue to use inventory as an economic hedge to offset related foreign currency exposure in accounts
payable where we believe there is product selling price elasticity related to changes in underlying foreign currency exchange rates.
Our hedging policy continues to prohibit speculative foreign currency exchange transactions.
Provision for Income Taxes
Our effective tax rate for continuing operations was 35.1% in fiscal 2009 and 38.4% in fiscal 2008. The change in the effective tax
rate during fiscal 2009 compared to fiscal 2008 is primarily due to the relative mix of earnings and losses within the taxing
jurisdictions in which we operate and changes in the amounts of income tax reserves and valuation allowances. In fiscal 2009, we
reversed a net amount of $8.7 million of income tax reserves primarily due to statute expirations and resolution of income tax
examinations. In fiscal 2008, a $7.5 million deferred tax valuation allowance for Brazil was reversed and was recorded as an income
tax benefit.
On an absolute dollar basis, the provision for income taxes increased 1.3% to $66.0 million in fiscal 2009 compared to $65.2 million
in fiscal 2008. The change in the provision for income taxes is primarily due to an increase in earnings in certain countries in which
we operate and the adjustments to income tax reserves and valuation allowances discussed above.
Our effective tax rate for continuing operations was 38.4% in fiscal 2008 and (122.2) % in fiscal 2007. The change in the effective tax
rate during fiscal 2008 compared to fiscal 2007 is primarily the result of the fiscal 2007 goodwill impairment in Europe of $136.1
million, which is non-deductible for tax purposes, and an increase in net operating losses in certain tax jurisdictions for which no tax
benefit was recognized. The change in the effective tax rate between fiscal 2008 and fiscal 2007 was also impacted by the reversal of a
$7.5 million deferred tax valuation allowance for Brazil in fiscal 2008, which was recorded as an income tax benefit. In addition, in
fiscal 2007, we recorded an $8.4 million increase in the deferred tax valuation allowance related to net operating losses recorded in
previous years in certain jurisdictions in Europe.
On an absolute dollar basis, the provision for income taxes increased 17.4% to $65.2 million in fiscal 2008 compared to $55.5 million
in fiscal 2007. The increase in the provision for income taxes is primarily the result of increased income within both the Americas and
Europe in fiscal 2008 compared to fiscal 2007, the $7.5 million reversal of the Brazilian valuation allowance on deferred tax assets in
fiscal 2008, and the effect of the $8.4 million increase in the deferred tax valuation allowance related to certain jurisdictions in Europe
in fiscal 2007.
To the extent we generate future consistent taxable income within those operations currently requiring the valuation allowance, the
valuation allowance on the related deferred tax assets will be reduced, thereby reducing tax expense and increasing net income in the
same period. The underlying net operating loss carryforwards remain available to offset future taxable income in the specific
jurisdictions requiring the valuation allowance, subject to applicable tax laws and regulations.
The effective tax rate differed from the U.S. federal statutory rate of 35% during fiscal 2009, 2008 and 2007, due to the relative mix of
earnings or losses within the tax jurisdictions in which we operate such as: a) losses in tax jurisdictions where we are not able to
record a tax benefit; b) earnings in tax jurisdictions where we have previously recorded a valuation allowance on deferred tax assets;
and c) earnings in lower-tax jurisdictions for which no U.S. taxes have been provided because such earnings are planned to be
reinvested indefinitely outside the United States. The effective tax rate was also affected by the reversal of income tax reserves during
the fiscal years discussed above.
24
The overall effective tax rate will continue to be dependent upon the geographic distribution of our earnings or losses and changes in
tax laws or interpretations of these laws in these operating jurisdictions. We monitor the assumptions used in estimating the annual
effective tax rate and make adjustments, if required, throughout the year. If actual results differ from the assumptions used in
estimating our annual income tax rates, future income tax expense could be materially affected.
Our future effective tax rates could be adversely affected by lower earnings than anticipated in countries with lower statutory rates,
changes in the relative mix of taxable income and taxable loss jurisdictions, changes in the valuation of our deferred tax assets or
liabilities or changes in tax laws or interpretations thereof. In addition, our income tax returns are subject to continuous examination
by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes from these
examinations to determine the adequacy of our provision for income taxes. To the extent we prevail in matters for which accruals have
been established or are required to pay amounts in excess of such accruals, our effective tax rate could be materially affected.
Minority Interest in Net Loss of Joint Venture
Minority interest in net loss of joint venture was $1.8 million in fiscal 2009 and $3.6 million in fiscal 2008 and reflects the loss of our
European joint venture attributable to Brightstar Corporation’s ownership share in the joint venture, as the joint venture is a
consolidated subsidiary in our financial statements. The joint venture commenced sales in the third quarter of fiscal 2008, and to date
the joint venture’s results of operations have not been significant.
Discontinued Operations, Net of Tax
The results of operations and the gain on sale of the Training Business have been reclassified and presented as “discontinued
operations, net of tax”, within the Consolidated Statement of Operations for all periods presented. In fiscal 2007, we realized income
from discontinued operations, net of tax, of $3.9 million, comprised of a $3.8 million gain, net of tax, on the sale of the Training
Business and $0.1 million of income from operations of the Training Business prior to the sale in March 2006.
Impact of Inflation
During the fiscal years ended January 31, 2009, 2008 and 2007, we do not believe that inflation had a material impact on our
consolidated operations or on our financial position.
Quarterly Data—Seasonality
Our 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 offer. Narrow operating margins may
magnify the impact of these factors on our operating results. Recent historical seasonal variations have included an increase in
European demand during our fiscal fourth quarter and decreased demand in other fiscal quarters, particularly quarters that include
summer months. Given that a significant portion of our net sales are derived from Europe, the worldwide results closely follow the
seasonality trends in Europe. Additionally, the life cycles of major products, as well as the impact of future acquisitions and
dispositions, may also materially impact our business, financial condition, or results of operations. See Note 17 of Notes to
Consolidated Financial Statements for further information regarding our quarterly results.
Liquidity and Capital Resources
Our discussion of liquidity and capital resources includes an analysis of our cash flows and capital structure, which includes both
continuing and discontinued operations for all periods presented. The absence of cash flows from discontinued operations is not
expected to affect the Company’s future liquidity.
The following table summarizes Tech Data’s Consolidated Statement of Cash Flows for the fiscal years ended January 31, 2009, 2008
and 2007:
Years ended January 31,
2009
2008
2007
(In thousands)
Net cash provided by (used in):
Operating activities....................................................................................................... $ 279,810 $ 357,422 $
Investing activities ........................................................................................................
Financing activities.......................................................................................................
Effect of exchange rate changes on cash and cash equivalents ....................................
(13,988)
(110,813)
(23,666)
(52,701)
(46,612)
121,753
(136,933)
(41,702)
24,242
14,546
80,683 $ 182,334 $ 108,341
Net increase in cash and cash equivalents .............................................................................. $
25
Net cash provided by operating activities was $279.8 million in fiscal 2009 compared to $357.4 million in fiscal 2008. The $279.8
million cash provided by operations in fiscal 2009 was due primarily to our earnings and the timing of both cash receipts from our
customers and payments to our vendors. We continue to focus on working capital management by monitoring several key metrics,
including our cash conversion cycle (also referred to as “net cash days”) and owned inventory levels, that we use to manage our
working capital. 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”). Owned inventory is calculated as the
difference between our inventory and accounts payable balances divided into the inventory balance. Our net cash days improved
slightly to 27 days at the end of fiscal 2009 compared to 28 days at the end of fiscal 2008. Our owned inventory level (the percentage
of inventory not financed by our vendor partners) was a negative 35% at the end of fiscal 2009, meaning our accounts payable
balances exceeded our inventory balances by 35%. This compares to negative owned inventory of 39% at the end fiscal 2008.
The following table presents the components of Tech Data’s cash conversion cycle, in days, for the quarter ended January 31, 2009,
2008 and 2007:
Days of sales outstanding ..................................................................................................................................
Days of supply in inventory ..............................................................................................................................
Days of purchases outstanding ..........................................................................................................................
Cash conversion cycle (days) ..................................................................................................................
As of January 31,
2009
37
29
(39)
27
2008
37
24
(33)
28
2007
37
24
(31)
30
Net cash used in investing activities of $110.8 million during fiscal 2009 was the result of $78.3 million of cash payments made
related to the acquisition of certain assets of Scribona and $32.5 million of expenditures for the continuing expansion and upgrading of
our IT systems, office facilities and equipment for our logistics centers. We expect to make total capital expenditures of approximately
$25.0 million during fiscal 2010 for equipment and machinery in our logistics centers, office facilities and IT systems.
Net cash used in investing activities of $52.7 million during fiscal 2008 was primarily the result of our purchase of certain assets from
Actebis Switzerland AG for $21.5 million and capital expenditures of $38.4 million for the continuing expansion and upgrading of our
IT systems, office facilities and equipment for our logistics centers, offset by $7.2 million of proceeds received from the sale of our
Israel operations.
Net cash used in financing activities of $46.6 million during fiscal 2009 reflects $100.0 million of cash used in the repurchase of
2,912,517 shares of our common stock, offset by $50.9 million of net borrowings made on our revolving credit lines and long-term
debt, $1.5 million in proceeds received for the reissuance of treasury stock related to exercises of equity-based incentive awards and
purchases made through our Employee Stock Purchase Plan (“ESPP”) and $1.0 million of capital contributions from our partner in the
European joint venture discussed above.
Net cash used in financing activities of $136.9 million during fiscal 2008 primarily reflects $56.3 million of net repayments on our
revolving credit lines and long-term debt and $100.0 million used in the repurchase of 2,698,654 shares of our common stock, offset
by $12.5 million in proceeds received for the reissuance of treasury stock related to the exercises of equity-based incentives and
purchases made through our ESPP and $9.0 million of capital contributions from our partner in the European joint venture discussed
above.
As of January 31, 2009 we maintained a Receivables Securitization Program with a syndicate of banks, expiring in October 2009,
which allows us to transfer an undivided interest in a designated pool of U.S. accounts receivable, on an ongoing basis, to provide
security or collateral for borrowings up to $300.0 million. We pay interest on our committed Receivables Securitization Program at
designated commercial paper rates plus an agreed-upon margin (rate of 2.25% at January 31, 2009). Additionally, we maintained a
$250.0 million Multi-currency Revolving Credit Facility with a syndicate of banks, amended in March 2007, which expires in March
2012. We pay interest under this facility at the applicable LIBOR rate plus a margin based on our credit ratings (rate of 1.05% at
January 31, 2009). In addition to these credit facilities, we maintained uncommitted lines of credit and overdraft facilities totaling
approximately $451.4 million at January 31, 2009 (average interest rate on the borrowing was 4.33% at January 31, 2009).
The total capacity of the aforementioned credit facilities was approximately $1.0 billion, of which $57.9 million was outstanding at
January 31, 2009. Our credit agreements contain limitations on the amounts of annual dividends and repurchases of common stock.
Additionally, the credit agreements require compliance with certain warranties and covenants. The financial ratio covenants contained
within the credit agreements include a debt to capitalization ratio, an interest to EBITDA (as defined in the credit agreements) ratio,
and a tangible net worth requirement. At January 31, 2009, we were in compliance with all such covenants. The ability to draw funds
under these credit facilities is dependent upon sufficient collateral (in the case of the Receivables Securitization Program) and meeting
the aforementioned financial covenants, which may limit our ability to draw the full amount of these facilities. As of January 31, 2009,
the maximum amount that could be borrowed under these facilities, in consideration of the availability of collateral and the financial
covenants, was approximately $827.4 million.
26
At January 31, 2009, we had issued standby letters of credit of $29.9 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 these letters of credit reduces our
available capacity under the above-mentioned facilities by the same amount.
In December 2006, we issued $350.0 million of convertible senior debentures due 2026. The debentures bear interest at 2.75% per
year. We pay interest on the debentures on June 15 and December 15 of each year. In addition, beginning with the period commencing
on December 20, 2011 and ending on June 15, 2012 and for each six-month period thereafter, we will pay contingent interest on the
interest payment date for the applicable interest period, if the market price of the debentures exceeds specified levels. The convertible
senior debentures are convertible into our common stock and cash anytime after June 15, 2026, or i) if the market price of the common
stock, as defined, exceeds 135% of the conversion price per share of common stock, or ii) if the Company calls the debentures for
redemption, or iii) upon the occurrence of certain corporate transactions, as defined. Holders have the right to convert the debentures
into 18.4310 shares per $1,000 principal amount of debentures, equivalent to a conversion price of approximately $54.26 per share.
Upon conversion, we will deliver cash equal to the lesser of the aggregate principal amount of the debentures to be converted and our
total conversion obligation and shares of our common stock in respect of the remainder, if any, of our conversion obligation. Holders
have the option to require us to repurchase the debentures in cash on any of the fifth, tenth or fifteenth anniversary dates from the issue
date at 100% of the principal amount plus accrued interest to the repurchase date. The debentures are redeemable in whole or in part
for cash at our option at any time on or after December 20, 2011. Additionally, the debentures are senior, unsecured obligations and
rank equally in right of payment with all of our other unsecured and unsubordinated indebtedness. The debentures are effectively
subordinated to all of our existing and future secured debt and are structurally subordinated to the indebtedness and other liabilities of
our subsidiaries. The proceeds from the offering were used to repay short-term debt and for other general corporate purposes.
In June 2008, our Board of Directors authorized a share repurchase program of up to $100.0 million of our common stock. During the
second and third quarters of fiscal 2009, we repurchased 2,912,517 shares at an average of $34.33 per share, for a total cost, including
expenses, of $100.0 million in connection with this repurchase program.
In September 2007, our Board of Directors authorized a share repurchase program of up to $100.0 million of our common stock. As of
January 31, 2008, the share repurchase program authorized in September 2007 was complete. During fiscal 2008, we repurchased
2,698,654 shares comprised of 2,698,126 shares purchased in connection with the our share repurchase program and 528 shares
purchased outside of the stock repurchase program, at an average of $37.06 per share, for a total cost, including expenses, of $100.0
million.
For our share repurchase programs, the number of shares purchased and the timing of the purchases was based on working capital
requirements, general business conditions and other factors, including alternative investment opportunities. Shares we repurchase are
held in treasury for general corporate purposes, including issuances under employee equity incentive plans.
Our debt to capital ratio was 20% at January 31, 2009. We believe that our existing sources of liquidity, including cash resources and
cash provided by operating activities, supplemented as necessary with funds available under our credit arrangements, will provide
sufficient resources to meet our present and future working capital and cash requirements for at least the next 12 months. Changes in
our credit rating or other market factors may increase our interest expense or other costs of capital or capital may not be available to us
on acceptable terms to fund our working capital needs. The Company will continue to need additional financing, including debt
financing. The inability to obtain such sources of capital could have an adverse effect on the Company’s business. The Company’s
credit facilities contain various financial and other covenants that may limit the Company’s ability to borrow or limit the Company’s
flexibility in responding to business conditions.
Contractual Obligations
As of January 31, 2009, future payments of long-term debt and amounts due under future minimum lease payments, including
minimum commitments under IT outsourcing agreements, are as follows (in thousands):
Operating
leases
Capital
leases
Long-term
debt
Total
Fiscal year:
61,446
2010 ..................................................................................................................... $
51,894
2011 .....................................................................................................................
2012 .....................................................................................................................
383,144
2013 .....................................................................................................................
29,118
2014 .....................................................................................................................
23,514
47,925
Thereafter ............................................................................................................
597,041
Total payments ....................................................................................................
Less amounts representing interest ......................................................................
(2,129)
Total principal payments ..................................................................................... $ 233,145 $ 11,767 $ 350,000 $ 594,912
59,728 $
50,176
31,426
27,400
22,072
42,343
233,145
—
— $
—
350,000
—
—
—
350,000
—
1,718 $
1,718
1,718
1,718
1,442
5,582
13,896
(2,129)
27
Fair value renewal and purchase options and escalation clauses exist for a substantial portion of the operating leases included above.
Purchase orders for the purchase of inventory and other goods and services are not included in the table above. We are not able to
determine the aggregate amount of such purchase orders that represent contractual obligations, as purchase orders typically represent
authorizations to purchase rather than binding agreements. For the purposes of this table, contractual obligations for purchase of goods
or services are defined as agreements that are enforceable and legally binding on Tech Data and that specify all significant terms,
including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of
the transaction. Our purchase orders are based on our current demand expectations and are fulfilled by our vendors within short time
horizons. We do not have significant non-cancelable agreements for the purchase of inventory or other goods specifying minimum
quantities or set prices that exceed our expected requirements for the next three months. We also enter into contracts for outsourced
services; however, the obligations under these contracts were not significant and the contracts generally contain clauses allowing for
cancellation without significant penalty.
At January 31, 2009, we have $4.0 million recorded as a current liability for uncertain tax positions under the provisions of FASB
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of SFAS No. 109” (“FIN No. 48”). FIN 48.
We are not able to reasonably estimate the timing of long-term payments, or the amount by which our liability will increase or
decrease over time; therefore, the long-term portion of our FIN No. 48 liability of $1.1 million has not been included in the contractual
obligations table above (see Note 11 of Notes to Consolidated Financial Statements).
Off-Balance Sheet Arrangements
Synthetic Lease Facility
We have a synthetic lease facility (the “Synthetic Lease”) with a group of financial institutions under which we lease certain logistics
centers and office facilities from a third-party lessor. During the second quarter of fiscal 2009, we renewed our existing Synthetic
Lease with a new lease agreement that expires in June 2013. Properties leased under the Synthetic Lease are located in Clearwater and
Miami, Florida; Fort Worth, Texas; Fontana, California; Suwanee, Georgia; Swedesboro, New Jersey; and South Bend, Indiana. The
Synthetic Lease has been accounted for as an operating lease and rental payments are calculated at the applicable LIBOR rate plus a
margin based on our credit ratings.
During the first four years of the lease term, we may, at our option, purchase any combination of the seven properties, at an amount
equal to each of the property’s cost, as long as the lease balance does not decrease below a defined amount. During the last year of the
lease term, until 180 days prior to the lease expiration, we may, at our option, i) purchase a minimum of two of the seven properties, at
an amount equal to each of the property’s cost, ii) exercise the option to renew the lease for a minimum of two of the seven properties
or iii) exercise the option to remarket a minimum of two of the seven properties and cause a sale of the properties. If we elect to
remarket the properties, we have guaranteed the lessor a percentage of the cost of each property, in the aggregate amount of
approximately $107.4 million (the “residual value”). We have also provided a residual value guarantee related to the Synthetic Lease,
which has been recorded at the estimated fair value of the residual guarantee.
The sum of future minimum lease payments under the Synthetic Lease is approximately $17.8 million at January 31, 2009 and such
amounts are included in the future minimum lease payments presented above. The Synthetic Lease contains covenants that must be
complied with, similar to the covenants described in certain of the credit facilities. As of January 31, 2009, we were in compliance
with all such covenants.
Guarantees
As is customary in the IT industry, to encourage certain customers to purchase product from us, we have arrangements with certain
finance companies that provide inventory-financing facilities for our customers. In conjunction with certain of these arrangements, we
have agreements with the finance companies that would require us to repurchase certain inventory, which might be repossessed from
the customers by the finance companies. Due to various reasons, including among other items, the lack of information regarding the
amount of saleable inventory purchased from us still on hand with the customer at any point in time, our repurchase obligations
relating to inventory cannot be reasonably estimated. Repurchases of inventory by us under these arrangements have been
insignificant to date. We also provide additional financial guarantees to finance companies on behalf of certain customers. The
majority of these guarantees are for an indefinite period of time, where we would be required to perform if the customer is in default
with the finance company related to purchases made from the Company. The Company reviews the underlying credit for these
guarantees on at least an annual basis. As of January 31, 2009 and 2008, the aggregate amount of guarantees under these arrangements
totaled approximately $31.9 million and $19.4 million, respectively, of which approximately $23.1 million and $14.7 million,
respectively, was outstanding. We believe that, based on historical experience, the likelihood of a material loss pursuant to the above
guarantees is remote.
28
ITEM 7A. Qualitative and Quantitative Disclosures About Market Risk
As a large global organization, we face exposure to adverse movements in foreign currency exchange rates. These exposures may
change over time as business practices evolve and could have a material impact on our financial results in the future. In the normal
course of business, we employ established policies and procedures to manage our exposure to fluctuations in the value of foreign
currencies. It is our policy to utilize financial instruments to reduce risks where internal netting cannot be effectively employed.
Additionally, we do not enter into derivative instruments for speculative or trading purposes. With respect to our internal netting
practices, we will consider inventory as an economic hedge against foreign currency exposure in accounts payable in certain
circumstances. This practice offsets such inventory against corresponding accounts payables denominated in currencies other than the
functional currency of the subsidiary buying the inventory, when determining our net exposure to be hedged using traditional forward
contracts. Under this strategy, we would expect to increase or decrease our selling prices for product purchased in foreign currencies
based on fluctuations in foreign currency exchange rates affecting the underlying accounts payable. To the extent we incur a foreign
currency exchange loss (gain) on the underlying accounts payable denominated in the foreign currency, we would expect to see a
corresponding increase (decrease) in gross profit 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.
Our foreign currency exposure relates to our international transactions in Europe, Canada and Latin America, where the currency
collected from customers can be different from the currency used to purchase the product. During fiscal 2009 and 2008, the underlying
exposures are denominated primarily in the following currencies: U.S. dollar, British pound, Canadian dollar, Czech koruna, Danish
krone, euros, Norwegian krone, Polish zloty, Swedish krona and Swiss franc. Our foreign currency risk management objective is to
protect our earnings and cash flows from the adverse impact of exchange rate changes through the use of foreign currency forward,
option and swap contracts to hedge both intercompany and third party loans, accounts receivable and accounts payable.
We are also exposed to changes in interest rates primarily as a result of our short-term and long-term debt used to maintain liquidity
and to finance working capital, capital expenditures and business expansion. Interest rate risk is also present in the forward foreign
currency contracts hedging intercompany and third-party loans. Our interest rate risk management objective is to limit the impact of
interest rate changes on earnings and cash flows and to minimize overall borrowing costs. To achieve our objective, we use a
combination of fixed and variable rate debt. The nature and amount of our long-term and short-term debt can be expected to vary as a
result of future business requirements, market conditions and other factors. As of January 31, 2009 and 2008, approximately 86% and
95%, respectively, of our outstanding debt had fixed interest rates. We utilize various financing instruments, such as receivables
securitization, leases, revolving credit facilities, convertible senior debentures and trade receivable purchase facilities, to finance
working capital needs. To the extent that there are changes in interest rates, the fair value of the Company’s fixed rate debt may
fluctuate.
In order to provide an assessment of the Company’s foreign currency exchange rate and interest rate risk, the Company performed a
sensitivity analysis using a value-at-risk (“VaR”) model. The VaR model consisted of using a Monte Carlo simulation to generate
1,000 random market price paths. The VaR model determines the potential impact of the fluctuation in foreign exchange rates and
interest rates assuming a one-day holding period, normal market conditions and a 95% confidence level. The VaR is the maximum
expected loss in fair value for a given confidence interval to the Company’s foreign exchange and debt portfolio due to adverse
movements in the rates. The model is not intended to represent actual losses but is used as a risk estimation and management tool.
Firm commitments, assets and liabilities denominated in foreign currencies were excluded from the model.
The following table represents the estimated maximum potential one-day loss in fair value, calculated using the VaR model at
January 31, 2009 and 2008. We believe that the hypothetical loss in fair value of our foreign exchange derivatives would be offset by
the gains in the value of the underlying transactions being hedged.
Currency rate sensitive financial instruments ................................................................................ $
Interest rate sensitive financial instruments ...................................................................................
Combined portfolio ........................................................................................................................ $
(in thousands)
(5,004) $
(657)
(5,661) $
(2,143)
(408)
(2,551)
Actual future gains and losses associated with the Company’s derivative positions may differ materially from the analyses performed
as of January 31, 2009 due to the inherent limitations associated with predicting the changes in the timing and amount of interest rates,
foreign currency exchanges rates, and the Company’s actual exposures and positions.
VaR as of
January 31, 2009
January 31, 2008
29
ITEM 8.
Index to Financial Statements
Financial Statements and Supplementary Data
Financial Statements
Report of Independent Registered Certified Public Accounting Firm ............................................................................................
Consolidated Balance Sheet ............................................................................................................................................................
Consolidated Statement of Operations ............................................................................................................................................
Consolidated Statement of Shareholders’ Equity ............................................................................................................................
Consolidated Statement of Cash Flows...........................................................................................................................................
Notes to Consolidated Financial Statements ...................................................................................................................................
Financial Statement Schedule
Page
31
32
33
34
35
36
Schedule II—Valuation and Qualifying Accounts .........................................................................................................................
64
All schedules and exhibits not included are not applicable, not required or would contain information which is shown in the financial
statements or notes thereto.
30
Report of Independent Registered Certified Public Accounting Firm
The Board of Directors and Shareholders of
Tech Data Corporation
We have audited the accompanying consolidated balance sheets of Tech Data Corporation and subsidiaries as of January 31, 2009 and
2008, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the
period ended January 31, 2009. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These
financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of
Tech Data Corporation and subsidiaries at January 31, 2009 and 2008, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended January 31, 2009, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the information set forth therein.
As discussed in Note 11 to the consolidated financial statements, effective February 1, 2007, the Company adopted the provisions of
Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Tech
Data Corporation’s internal control over financial reporting as of January 31, 2009, based on criteria established in Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
March 23, 2009, expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Tampa, Florida
March 23, 2009
31
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except share amounts)
Current assets:
ASSETS
Cash and cash equivalents .................................................................................................................. $
Accounts receivable, less allowance for doubtful accounts of $55,598 and $64,146 ........................
Inventories .........................................................................................................................................
Prepaid expenses and other assets ......................................................................................................
Total current assets ...................................................................................................................
Property and equipment, net ........................................................................................................................
Other assets, net ...........................................................................................................................................
January 31,
2009
2008
528,023 $
2,346,185
1,728,916
168,673
4,771,797
102,937
149,020
447,340
2,659,446
1,642,317
173,879
4,922,982
129,139
168,814
Total assets ............................................................................................................................... $ 5,023,754 $ 5,220,935
Current liabilities:
LIABILITIES AND SHAREHOLDERS’ EQUITY
Revolving credit loans ....................................................................................................................... $
Accounts payable ...............................................................................................................................
Accrued expenses and other liabilities ...............................................................................................
Total current liabilities .............................................................................................................
Long-term debt ............................................................................................................................................
Other long-term liabilities ...........................................................................................................................
57,906 $
2,325,702
496,292
2,879,900
360,785
63,639
18,315
2,288,740
571,509
2,878,564
363,639
58,011
Total liabilities ..........................................................................................................................
3,304,324
3,300,214
Commitments and contingencies (Note 14)
Shareholders’ equity:
Common stock, par value $.0015; 200,000,000 shares authorized; 59,239,085 shares issued at
January 31, 2009 and 2008 ............................................................................................................
Additional paid-in capital ...................................................................................................................
Treasury stock, at cost (9,214,889 and 6,446,603 shares at January 31, 2009 and 2008) ..................
Retained earnings ...............................................................................................................................
Accumulated other comprehensive income .......................................................................................
89
744,242
(331,692)
1,072,222
234,569
89
737,759
(236,960)
948,596
471,237
Total shareholders’ equity ........................................................................................................
1,719,430
1,920,721
Total liabilities and shareholders’ equity .................................................................................. $ 5,023,754 $ 5,220,935
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
32
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
Year ended January 31,
2009
2008
2007
Net sales .................................................................................................................... $ 24,080,484 $ 23,423,078 $ 21,440,445
20,433,674
Cost of products sold ................................................................................................
22,288,670
Gross profit ...............................................................................................................
Operating expenses:
Selling, general and administrative expenses ..................................................
Goodwill impairment ......................................................................................
Loss on disposal of subsidiaries ......................................................................
Restructuring charges ......................................................................................
Operating income (loss) ............................................................................................
Other expense (income):
Interest expense ...............................................................................................
Discount on sale of accounts receivable ..........................................................
Interest income ................................................................................................
Net foreign currency exchange loss (gain) ......................................................
Income (loss) from continuing operations before income taxes and minority
interest ..................................................................................................................
Provision for income taxes ........................................................................................
Income (loss) from continuing operations before minority interest ..........................
Minority interest in net loss of joint venture .............................................................
Income (loss) from continuing operations ................................................................
Discontinued operations, net of tax ...........................................................................
Net income (loss) ...................................................................................................... $
Income (loss) per common share – basic:
Continuing operations ..................................................................................... $
Discontinued operations ..................................................................................
Net income (loss) ............................................................................................ $
Income (loss) per common share – diluted:
Continuing operations ..................................................................................... $
Discontinued operations ..................................................................................
Net income (loss) ............................................................................................ $
22,867,488
1,212,996
970,837
—
—
—
970,837
242,159
30,956
1,872
(9,491)
31,001
54,338
187,821
66,017
121,804
1,822
123,626
—
123,626 $
2.41 $
—
2.41 $
2.40 $
—
2.40 $
1,134,408
1,006,771
915,434
—
14,471
16,149
946,054
188,354
28,751
7,219
(13,495)
(3,994)
18,481
169,873
65,163
104,710
3,559
108,269
—
851,097
136,093
—
23,764
1,010,954
(4,183)
38,506
12,509
(9,764)
(15)
41,236
(45,419)
55,508
(100,927)
—
(100,927)
3,946
108,269 $
(96,981)
1.97 $
—
1.97 $
1.96 $
—
1.96 $
(1.83)
0.07
(1.76)
(1.83)
0.07
(1.76)
55,129
55,129
Weighted average common shares outstanding:
Basic ................................................................................................................
Diluted .............................................................................................................
51,276
51,498
54,904
55,287
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
33
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(In thousands)
Balance—January 31, 2006 ................
Purchase of treasury stock, at cost ......
Issuance of treasury stock for benefit
plans and equity-based awards
exercised, including related tax
benefit of $2,680 ............................
Contribution of treasury stock to
401(k) savings plan ........................
Stock-based compensation expense ....
Comprehensive (loss) income .............
Balance—January 31, 2007 ................
Purchase of treasury stock, at cost ......
Issuance of treasury stock for benefit
plans and equity-based awards
exercised, including related tax
benefit of $1,078 ............................
Contribution of treasury stock to
401(k) savings plan ........................
Stock-based compensation expense ....
Adjustment for the cumulative effect
of prior years of the adoption of
FIN No. 48 .....................................
Comprehensive income .......................
Balance—January 31, 2008 ................
Purchase of treasury stock, at cost ......
Issuance of treasury stock for benefit
plans and equity-based awards
exercised, including related tax
benefit of $569 ...............................
Stock-based compensation expense ....
Comprehensive income (loss) .............
Balance—January 31, 2009 ................
Common Stock
Additional
paid-in
capital
Shares
59,239 $
—
Amount
Treasury
stock
89 $ 729,455 $ (112,601) $ 938,383 $
—
(80,093)
Retained
earnings
—
—
Accumulated other
comprehensive
income (1)
204,981
—
Total
shareholders’
equity
$ 1,760,307
(80,093)
—
—
(5,123)
32,986
—
—
27,863
—
—
—
59,239
—
—
—
—
89
—
73
7,973
—
732,378
—
2,080
—
—
(157,628)
(100,019)
—
—
(96,981)
841,402
—
—
—
81,498
286,479
—
2,153
7,973
(15,483)
1,702,720
(100,019)
—
—
(4,970)
18,590
—
—
—
—
64
10,287
2,097
—
—
—
—
—
—
—
13,620
2,161
10,287
—
—
59,239
—
—
—
89
—
—
—
737,759
—
—
—
(236,960)
(100,000)
(1,075)
108,269
948,596
—
—
184,758
471,237
—
(1,075)
293,027
1,920,721
(100,000)
—
—
—
59,239 $
—
—
—
(5,507)
11,990
—
—
—
123,626
89 $ 744,242 $ (331,692) $ 1,072,222 $
5,268
—
—
—
—
(236,668)
234,569
(239)
11,990
(113,042)
$ 1,719,430
(1)
The Company’s accumulated other comprehensive income (loss) is comprised exclusively of changes in the Company’s cumulative foreign currency translation
adjustment account.
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
34
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
Cash flows from operating activities:
Cash received from customers .......................................................................... $
Cash paid to vendors and employees .................................................................
Interest paid, net ................................................................................................
Income taxes paid ..............................................................................................
Net cash provided by (used in) operating activities .................................
23,989,567 $
(23,636,388)
(20,382)
(52,987)
279,810
23,473,295 $
(23,053,048)
(14,273)
(48,552)
357,422
21,185,902
(21,091,764)
(26,910)
(81,216)
(13,988)
Year ended January 31,
2009
2008
2007
Cash flows from investing activities:
Acquisition of business, net of cash acquired ....................................................
Proceeds from sale of business ..........................................................................
Proceeds from sale of property and equipment .................................................
Expenditures for property and equipment .........................................................
Software and software development costs .........................................................
Net cash used in investing activities ........................................................
Cash flows from financing activities:
Proceeds from the issuance of common stock and reissuance of treasury
stock .............................................................................................................
Cash paid for purchase of treasury stock ...........................................................
Capital contributions from joint venture partner ...............................................
Proceeds from issuance of convertible debentures, net of expenses ..................
Net borrowings (repayments) on revolving credit loans ...................................
Principal payments on long-term debt ...............................................................
Excess tax benefit from stock-based compensation ..........................................
Net cash (used in) provided by financing activities .................................
Effect of exchange rate changes on cash and cash equivalents ...................................
Net increase in cash and cash equivalents ...............................................
Cash and cash equivalents at beginning of year ..........................................................
Cash and cash equivalents at end of year .................................................................... $
Reconciliation of net income (loss) to net cash provided by (used in) operating
activities:
Net income (loss) ........................................................................................................ $
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
(78,266)
—
—
(17,272)
(15,275)
(110,813)
1,530
(100,000)
1,000
—
52,644
(1,786)
—
(46,612)
(41,702)
80,683
447,340
528,023 $
(21,503)
7,161
—
(21,474)
(16,885)
(52,701)
12,542
(100,019)
9,000
—
(56,297)
(2,371)
212
(136,933)
14,546
182,334
265,006
447,340 $
—
16,500
3,563
(31,667)
(12,062)
(23,666)
25,183
(80,093)
—
342,554
(164,824)
(1,611)
544
121,753
24,242
108,341
156,665
265,006
123,626 $
108,269 $
(96,981)
Goodwill impairment ........................................................................................ $
Loss on disposal of subsidiaries ........................................................................
Gain on sale of discontinued operations, net of tax ...........................................
Gain on sale of land ...........................................................................................
Depreciation and amortization ..........................................................................
Provision for losses on accounts receivable ......................................................
Stock-based compensation expense ..................................................................
Deferred income taxes .......................................................................................
Excess tax benefit from stock-based compensation ..........................................
Minority interest ................................................................................................
Changes in operating assets and liabilities: .......................................................
Accounts receivable ................................................................................
Inventories ...............................................................................................
Prepaid expenses and other assets ...........................................................
Accounts payable ....................................................................................
Accrued expenses and other liabilities ....................................................
Total adjustments ..........................................................................
Net cash provided by (used in) operating activities ................................. $
— $
—
—
—
51,234
15,000
11,990
21,921
—
(1,822)
(86,423)
(261,974)
(18,531)
374,696
50,093
156,184
279,810 $
— $
14,471
—
—
53,881
11,200
10,287
6,537
(212)
(3,559)
57,419
57,904
(40,721)
83,845
(1,899)
249,153
357,422 $
136,093
—
(3,834)
(3,563)
53,280
27,655
7,973
4,296
(544)
—
(242,305)
25,806
5,636
21,985
50,515
82,993
(13,988)
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
35
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Tech Data Corporation (“Tech Data” or the “Company”) is a leading provider of information technology (“IT”) products, logistics
management and other value-added services. The Company distributes microcomputer hardware and software products to value-added
resellers, direct marketers, retailers and corporate resellers. The Company is managed in two geographic segments: the Americas
(including North America and Latin America) and Europe.
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. Minority interest is recognized for the portion of a consolidated joint venture
not owned by the Company. The Company operates on a fiscal year that ends on January 31.
Basis of Presentation
In accordance with Statement of Financial Accounting Standards (“SFAS” or “Statement”) No. 144, “Accounting for the Impairment
or Disposal of Long-lived Assets”, the Company has accounted for the European training business (the “Training Business”) as a
discontinued operation. The results of operations of the Training Business have been reclassified and presented as “discontinued
operations, net of tax”, in the fiscal year ended January 31, 2007, through the date of the sale during the fiscal year. The cash flows of
the Training Business have not been reported separately within the Company’s Consolidated Statement of Cash Flows as the net cash
flows of the Training Business are not material and the absence of cash flows from discontinued operations has not affected the
Company’s liquidity subsequent to the sale of the Training Business. The transaction is further discussed in Note 3—Discontinued
Operations.
Method of Accounting
The Company prepares its financial statements in conformity with generally accepted accounting principles in the United States.
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.
Revenue Recognition
Revenue is recognized once four criteria are met: (1) the Company must have persuasive evidence that an arrangement exists;
(2) delivery must occur, which generally happens at the point of shipment (this includes the transfer of both title and risk of loss,
provided that no significant obligations remain); (3) the price must be fixed or determinable; and (4) collectibility must be reasonably
assured. Shipping revenue is included in net sales while the related costs, including shipping and handling costs, are included in the
cost of products sold. The Company allows its customers to return product for exchange or credit subject to certain limitations. A
provision for such returns is recorded at the time of sale based upon historical experience. 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.
Service revenue associated with configuration, training and other services is recognized when the work is complete and the four
criteria discussed above have been met. Service revenues have represented less than 10% of total net sales for fiscal years 2009, 2008
and 2007.
The Company generated approximately 29% of net sales in fiscal 2009 and 28% of our consolidated net sales in both 2008 and 2007
from products purchased from Hewlett Packard. There were no other vendors that accounted for 10% or more of the Company’s
consolidated net sales in fiscal 2009, 2008 or 2007.
Accounts Receivable
The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make
required payments. In estimating the required allowance, the Company takes into consideration the overall quality and aging of the
receivable portfolio, the existence of credit insurance, specifically identified customer risks, and historical writeoff experience. If
actual customer performance were to deteriorate to an extent not expected by the Company, additional allowances may be required
which could have an adverse effect on the Company’s financial results. Conversely, if actual customer performance were to improve
to an extent not expected by us, a reduction in the allowance may be required which could have a favorable effect on the Company’s
consolidated financial results.
36
Inventories
Inventories, consisting entirely of finished goods, are stated at the lower of cost or market, cost being determined on the first-in, first-
out (“FIFO”) method. Inventory is written down for estimated obsolescence equal to the difference between the cost of inventory and
the estimated market value, based upon an aging analysis of the inventory on hand, specifically known inventory-related risks (such as
technological obsolescence and the nature of vendor terms surrounding price protection and product returns), foreign currency
fluctuations for foreign-sourced product and assumptions about future demand. Market conditions or changes in terms and conditions
by the Company’s vendors that are less favorable than those projected by management may require additional inventory write-downs,
which could have an adverse effect on the Company’s consolidated financial results.
Vendor Incentives
The Company receives incentives from vendors related to cooperative advertising allowances, infrastructure funding, volume rebates
and other incentive agreements. These incentives are generally under quarterly, semi-annual or annual agreements with the vendors;
however, some of these incentives are negotiated on an ad-hoc basis to support specific programs mutually developed with the vendor.
Unrestricted volume rebates and early payment discounts received from vendors are recorded when they are earned as a reduction of
inventory and as a reduction of cost of products sold as the related inventory is sold. Vendor incentives earned for specifically
identified cooperative advertising programs and infrastructure funding are recorded as adjustments to product costs or selling, general
and administrative expenses, depending on the nature of the program.
Reserves for receivables on vendor programs are recorded for estimated losses resulting from vendors’ inability to pay or rejections by
vendors of claims. Should amounts recorded as outstanding receivables from vendors be deemed uncollectible, additional allowances
may be required which could have an adverse effect on the Company’s consolidated financial results. Conversely, if amounts recorded
as outstanding receivables from vendor were to improve to an extent not expected by us, a reduction in the allowance may be required
which could have a favorable effect on the Company’s consolidated financial results.
Property and Equipment
Property and equipment are stated at cost and property and equipment under capital leases are stated at the present value of the future
minimum lease payments determined at the inception of the lease. Depreciation expense includes depreciation of purchased property
and equipment and assets recorded under capital leases. Depreciation expense is computed over the shorter of the estimated economic
lives or lease periods using the straight-line method as follows:
Years
Buildings and improvements .......................................................................................................................................................
Leasehold improvements .............................................................................................................................................................
Furniture, fixtures and equipment ................................................................................................................................................
15-39
3-10
3-10
Expenditures for renewals and improvements that significantly add to productive capacity or extend the useful life of an asset are
capitalized. Expenditures for maintenance and repairs are charged to operations when incurred. When assets are sold or retired, the
cost of the asset and the related accumulated depreciation are eliminated and any gain or loss is recognized at such time.
Long-Lived Assets
Long-lived assets are reviewed for potential impairment at such time when events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. An impairment loss is evaluated when the sum of the expected, undiscounted
future net cash flows is less than the carrying amount of the asset. Any impairment loss is measured by comparing the fair value of the
asset to its carrying value.
Goodwill
The Company accounts for goodwill and other intangible assets in accordance SFAS No. 142, “Goodwill and Other Intangible Assets”
(“SFAS No. 142”). SFAS No. 142 requires an annual review for impairment, or more frequently if impairment indicators arise. This
testing includes the determination of each reporting unit’s fair value using market multiples and discounted cash flow modeling. The
Company performs its annual review for goodwill impairment on January 31st of each fiscal year.
Intangible Assets
Included within other assets at both January 31, 2009 and 2008 are certain intangible assets including capitalized software costs and
customer relationships and trademarks acquired in connection with various business acquisitions. Such capitalized costs and
intangibles are being amortized over a period of three to ten years.
37
The Company capitalizes computer software costs that meet both the definition of internal-use software and defined criteria for
capitalization in accordance with the American Institute of Certified Public Accountants’ Statement of Position No. 98-1, “Accounting
for the Cost of Computer Software Developed or Obtained for Internal Use”.
The Company’s accounting policy is to amortize capitalized software costs on a straight-line basis over periods ranging from three to
ten years, depending upon the nature of the software, the stability of the hardware platform on which the software is installed, its fit in
the Company’s overall strategy, and our experience with similar software. It is the Company’s policy to amortize personal computer-
related software, such as spreadsheet and word processing applications, over three years, which reflects the rapid changes in personal
computer software. Mainframe software licenses are amortized over five years, which is in line with the longer economic life of
mainframe systems compared to personal computer systems. Finally, strategic applications such as customer relationship management
and enterprise-wide systems are amortized over seven to ten years based on their strategic fit and the Company’s historical experience
with such applications.
Product Warranty
The Company’s vendors generally warrant the products distributed by the Company and allow the Company to return defective
products, including those that have been returned to the Company by its customers. The Company does not independently warrant the
products it distributes. However, in several countries where the Company operates, the Company is responsible for defective product
as a matter of law. The time period required by law in certain countries exceeds the warranty period provided by the manufacturer.
The Company is obligated to provide warranty protection for sales of certain IT products within the European Union (“EU”) for up to
two years as required under the EU directive where vendors have not affirmatively agreed to provide pass-through protection. To date,
the Company has not incurred any significant costs for defective products under these legal requirements. The Company does warrant
services with regard to products integrated for its customers. A provision for estimated warranty costs is recorded at the time of sale
and periodically adjusted to reflect actual experience. To date, the Company has not incurred any significant service warranty costs.
Fees charged for products configured by the Company represented less than 10% of net sales for fiscal years 2009, 2008 and 2007.
Income Taxes
Income taxes are accounted for under the liability method. Deferred taxes reflect the tax consequences on future years of differences
between the tax basis of assets and liabilities and their financial reporting amounts. Deferred taxes have not been provided on the
cumulative undistributed earnings of foreign subsidiaries or the cumulative translation adjustment related to those investments because
such amounts are expected to be reinvested indefinitely.
The Company’s future effective tax rates could be adversely affected by earnings being lower than anticipated in countries with lower
statutory rates, changes in the valuation of its deferred tax assets or liabilities or changes in tax laws or interpretations thereof. In
addition, the Company is subject to the continuous examination of its income tax returns by the Internal Revenue Service and other tax
authorities. The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the
adequacy of its provision for income taxes. To the extent the Company were to prevail in matters for which accruals have been
established or be required to pay amounts in excess of such accruals, the Company’s effective tax rate in a given financial statement
period could be materially affected.
Concentration of Credit Risk
The Company sells its products to a large base of value-added resellers, direct marketers, retailers and corporate resellers throughout
North America, Latin America and Europe. The Company performs ongoing credit evaluations of its customers and generally does not
require collateral. The Company has obtained credit insurance, which insures a percentage of credit extended by the Company to
certain of its customers against possible loss. The Company makes provisions for estimated credit losses at the time of sale. No single
customer accounted for more than 10% of the Company’s net sales during fiscal years 2009, 2008 and 2007.
Foreign Currency Translation
Income and expense accounts of foreign operations are translated at weighted average exchange rates during the year. Assets and
liabilities of foreign operations that operate in a local functional currency environment are translated to U.S. dollars at the exchange
rates in effect at the balance sheet date, with the related translation gains or losses reported as components of accumulated other
comprehensive income in shareholders’ equity.
38
Derivative Financial Instruments
The Company faces exposure to changes in foreign currency exchange rates and interest rates. The Company reduces its exposure by
creating offsetting positions through the use of derivative financial instruments in situations where there are not offsetting balances
that create an economic hedge. The majority of these instruments have terms of 90 days or less. It is the Company’s policy to utilize
financial instruments to reduce risk where appropriate and prohibit entering into derivative financial instruments for speculative or
trading purposes.
Derivative financial instruments are marked-to-market each period with gains and losses on these contracts recorded in the Company’s
Consolidated Statement of Operations within “net foreign currency exchange loss (gain)” in the period in which their value changes,
with the offsetting entry for unsettled positions being recorded to either other current assets or other current liabilities.
The notional amount of forward exchange contracts is the amount of foreign currency to be bought or sold at maturity. Notional
amounts are indicative of the extent of the Company’s involvement in the various types and uses of derivative financial instruments
and are not a measure of the Company’s exposure to credit or market risks through its use of derivatives. The estimated fair value of
derivative financial instruments represents the amount required to enter into similar offsetting contracts with similar remaining
maturities based on quoted market prices.
The Company’s derivative financial instruments outstanding at January 31, 2009 and 2008 are as follows:
January 31, 2009
January 31, 2008
Notional
amounts
Estimated
fair value
asset (liability)
Notional
amounts
Estimated
fair value
asset (liability)
(In thousands)
(In thousands)
Foreign exchange forward contracts ................................................... $ 1,291,121 $
6,466 $ 1,114,349 $
(4,935)
Fair Value of Financial Instruments
The Company adopted SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”) on February 1, 2008. SFAS No. 157 defines
fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands
disclosures about fair value measurements. In February 2008, the Financial Accounting Standards Board issued Staff Position Nos.
157-1 and 157-2 which partially deferred the effective date of SFAS No. 157 for one year for certain nonfinancial assets and liabilities
and removed certain leasing transactions from the scope of SFAS No. 157. The adoption of the provisions of SFAS No. 157 did not
have a material impact on the Company’s consolidated financial position, results of operations or cash flows, but requires expanded
disclosures regarding the Company’s fair value measurements. The additional disclosures required by SFAS No. 157 are included in
Note 16 – Fair Value of Financial Instruments.
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial
Assets and Liabilities” (“SFAS No. 159”). SFAS No. 159 permits companies to make an election to carry certain eligible financial
assets and liabilities at fair value, even if fair value measurement has not historically been required for such assets and liabilities under
U.S. GAAP. The provisions of SFAS No. 159 became effective for the Company’s fiscal year beginning February 1, 2008. The
adoption of the provisions of SFAS No. 159 did not have an impact on the Company’s consolidated financial position, results of
operations or cash flows as the Company elected not to record eligible instruments in the financial statements at their respective fair
value.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the change in equity (net assets) of a business enterprise during a period from transactions
and other events and circumstances from non-owner sources, and is comprised of “net income (loss)” and “other comprehensive
income (loss).” The Company’s other comprehensive (loss) income is comprised exclusively of changes in the Company’s currency
translation adjustment account (“CTA account”), including income taxes attributable to those changes.
39
Other comprehensive income decreased significantly during the fiscal year ended January 31, 2009, as most local currencies in which
the Company operates weakened during the fiscal year compared to the U.S. dollar. The increase in other comprehensive income
during the fiscal year ended January 31, 2008, is primarily the result of the strengthening of the euro compared to the U.S. dollar
throughout the fiscal year. Comprehensive income (loss), net of taxes, is as follows:
Comprehensive income (loss):
Net income (loss) ........................................................................................................... $ 123,626 $ 108,269 $
Change in CTA(1) ............................................................................................................
Total ...................................................................................................................... $
Year ended January 31,
2009
2008
2007
(In thousands)
(236,668)
(113,042) $ 293,027 $
184,758
(96,981)
81,498
(15,483)
(1) Net of income tax benefit of $5.6 million for the year ended January 31, 2008. There was no income tax effect in fiscal years 2009 or 2007.
Accumulated comprehensive (loss) income includes $23.0 million of income taxes at both January 31, 2009 and 2008 and $28.6
million of income taxes at January 31, 2007.
Stock-Based Compensation
The Company accounts for stock-based payments in accordance with the provisions of SFAS No. 123 (revised 2004), “Share-Based
Payments” (“SFAS No. 123R”). SFAS No. 123R requires all stock-based payments to employees and non-employee members of the
board of directors, including grants of all employee equity incentives, to be recognized in the Company’s Consolidated Statement of
Operations based on their fair values. In accordance with SFAS No. 123R, the Company recognizes compensation expense, reduced
for estimated forfeitures, on a straight-line basis over the requisite service period of the award, which is generally the vesting term of
the outstanding stock awards. The Company estimated the forfeiture rates for the fiscal years ended January 31, 2009, 2008 and 2007
based on its historical experience during the preceding five fiscal years. Stock based compensation expense for awards granted prior to
February 1, 2006, is based on the date of grant, as previously determined under Statement of Financial Accounting Standards No. 123,
“Share Based Payments”. For the fiscal years ended January 31, 2009, 2008 and 2007, the Company recorded $12.0 million, $10.3
million and $8.0 million, respectively, of stock-based compensation expense, which is included in “selling, general and administrative
expenses” in the Consolidated Statement of Operations. Cash received from equity-based incentives exercised during the fiscal years
ended January 31, 2009, 2008 and 2007 was $1.0 million, $12.5 million and $25.2 million, respectively, and the actual benefit
received from the tax deduction from the exercise of equity-based incentives was $0.6 million, $1.1 million and $2.7 million,
respectively, for the fiscal years ended January 31, 2009, 2008 and 2007.
Treasury Stock
Treasury stock is accounted for at cost. The reissuance of shares from treasury stock for exercises of stock-based awards or other
corporate purposes is based on the weighted average purchase price of the shares.
Cash and Cash Equivalents
Short-term investments which are highly liquid and have an original maturity of ninety days or less are considered cash equivalents.
Book overdrafts of $125.2 million and $136.6 million as of January 31, 2009 and 2008, respectively, represent checks issued that have
not been presented for payment to the banks and are classified in accounts payable in the Consolidated Balance Sheet. The Company
typically funds these overdrafts through transfers from separate bank accounts and under the terms of the Company’s agreements with
its banks, the funding of these overdrafts is at the direction of the Company.
Contingencies
The Company accrues for contingent obligations, including estimated legal costs, when the obligation is probable and the amount is
reasonably estimable. As facts concerning contingencies become known, the Company reassesses its position and makes appropriate
adjustments to the financial statements. Estimates that are particularly sensitive to future changes include those related to tax, legal
and other regulatory matters such as imports and exports, the imposition of international governmental controls, changes in the
interpretation and enforcement of international laws (particularly related to items such as duty and taxation), and the impact of local
economic conditions and practices, which are all subject to change as events evolve and as additional information becomes available
during the administrative and litigation process.
40
Recent Accounting Pronouncements
In May 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position APB 14-1, “Accounting for
Convertible Debt Instruments that May be Settled in Cash Upon Conversion (Including Partial Cash Settlement)” (“FSP 14-1”). FSP
14-1 changes the accounting treatment for convertible debt instruments that require or permit partial cash settlement upon conversion.
The accounting changes require issuers to separate convertible debt instruments into two components: a non-convertible bond and a
conversion option. The separation of the conversion option creates an original issue discount in the bond component which is to be
accreted as interest expense over the term of the instrument using the interest method, resulting in an increase to interest expense and a
decrease in net income and earnings per share. The provisions of FSP 14-1 are effective for the Company’s fiscal year beginning
February 1, 2009 and require retrospective application of all periods presented. The Company has concluded that that FSP 14-1 will be
applicable to the Company’s $350.0 million convertible senior debentures issued in December 2006. The Company has estimated that
the impact of the adoption of FSP 14-1 will be an increase in non-cash interest expense of approximately $10.0 million, partially offset
by the related tax benefit of approximately $4.0 million, resulting in a decrease in net income of approximately $6.0 million on an
annual basis during the period the debentures are outstanding through the Company’s assumed redemption date of December 20,
2011. The adoption of FSP 14-1 will have no impact on the Company’s consolidated cash flows.
In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments
and Hedging Activities, an amendment of FASB Statement No. 133” (“SFAS No. 161”). SFAS No. 161 requires entities to provide
greater transparency about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged
items are accounted for under FASB Statement No. 133 and its related interpretations, and (c) how derivative instruments and related
hedged items affect an entity’s financial position, results of operations and cash flows. The provisions of this statement are effective
for periods beginning after November 15, 2008, and both early application and comparative disclosures are encouraged. The Company
will implement the disclosure provisions of SFAS No. 161 for all derivative activities beginning with the first interim period in the
Company’s fiscal year ending January 31, 2010.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R), “Business Combinations” (“SFAS
No. 141R”). SFAS No. 141R supersedes Statement of Financial Accounting Standards No. 141, “Business Combinations,” and
establishes principles and requirements as to how an acquirer in a business combination recognizes and measures in its financial
statements: the identifiable assets acquired, the liabilities assumed and any noncontrolling interest; goodwill acquired in the business
combination; or a gain from a bargain purchase. SFAS No. 141R requires the acquirer to record contingent consideration at the
estimated fair value at the time of purchase and establishes principles for treating subsequent changes in such estimates which could
affect earnings in those periods. SFAS No. 141R also requires additional disclosure designed to enable users of the financial
statements to evaluate the nature and financial effects of the business combination and disallows the capitalization of acquisition costs.
SFAS No. 141R is to be applied prospectively by the Company to business combinations beginning February 1, 2009 and early
adoption is prohibited. The Company will implement the provisions of SFAS No. 141R for any acquisitions made by the Company
subsequent to January 31, 2009.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated
Financial Statements — an amendment of ARB No. 51” (“SFAS No. 160”). SFAS No. 160 establishes new accounting and reporting
standards for the noncontrolling interest in a subsidiary and the accounting for the deconsolidation of a subsidiary. SFAS No. 160 also
clarifies that changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the
parent retains its controlling financial interest and requires that a parent recognize a gain or loss in net income when a subsidiary is
deconsolidated. The gain or loss will be measured using the fair value of the noncontrolling equity investment on the deconsolidation
date. SFAS No. 160 also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling
interest. SFAS No. 160 is effective for the Company beginning February 1, 2009. Early adoption is prohibited, but upon adoption
SFAS No. 160 requires retrospective presentation and disclosure related to existing minority interests. The Company does not expect
the impact of the adoption of SFAS No. 160 to be material.
Reclassifications
Certain reclassifications have been made to the January 31, 2008 and 2007 financial statements to conform to the January 31, 2009
financial statement presentation. These reclassifications did not change previously reported total assets, liabilities, shareholders’ equity
or net income.
41
NOTE 2 — EARNINGS PER SHARE (“EPS”)
Basic EPS is computed by dividing net income by the weighted average number of shares outstanding during the reported period. For
the years ended January 31, 2009, 2008 and 2007, diluted EPS reflects the potential dilution of the Company’s outstanding stock-
based equity incentives and convertible senior debentures (as further discussed below) using the treasury stock or if-converted method,
as applicable. The composition of basic and diluted EPS is as follows:
Year ended January 31, 2009
Year ended January 31, 2008
Year ended January 31, 2007
Net
income
Weighted
average
shares
Per
share
amount
Net
income
Weighted
average
shares
Per
share
amount
Net
loss
Weighted
average
shares
Per
share
amount
(In thousands, except per share data)
Net income (loss)
per common
share-basic .......... $ 123,626
51,276 $
2.41 $ 108,269
54,904 $
1.97 $
(96,981)
55,129 $
(1.76)
Effect of dilutive
securities:
Equity-based
compensat
ion awards .
—
222
—
383
—
—
Net income (loss)
per common
share-diluted ....... $ 123,626
51,498 $
2.40 $ 108,269
55,287 $
1.96 $
(96,981)
55,129 $
(1.76)
At January 31, 2009, 2008 and 2007 there were 5,589,592, 6,017,838 and 6,912,122 shares, respectively, excluded from the
computation of diluted earnings per share because their effect would have been antidilutive.
In December 2006, the Company issued $350.0 million of convertible senior debentures due 2026. The dilutive impact of the $350.0
million convertible senior debentures does not impact earnings per share at January 31, 2009, 2008 or 2007, as the conditions for the
contingent conversion feature have not been met (see further discussion in Note 10—Long Term Debt).
NOTE 3 — DISCONTINUED OPERATIONS
In fiscal 2006, in order to dedicate strategic efforts and resources to core growth opportunities, the Company made the decision to sell
the European training business (the “Training Business”). In fiscal 2007, the Company closed the sale of the Training Business to a
third-party (the “Purchaser”) for total cash consideration of $16.5 million, resulting in an after-tax gain of $3.8 million. Net assets and
other related costs included in the sale of the Training Business totaled $11.5 million, including $1.4 million of allocated goodwill.
The Company provided IT services for a transitional period of approximately six months, but had no other significant continuing
involvement in the operations of the Training Business subsequent to the closing of the sale. In addition, the Company has realized no
continuing cash flows from the Training Business subsequent to the closing of the sale.
In accordance with SFAS No. 144, the sale of the Training Business qualifies as a discontinued operation. Accordingly, the results of
operations and the gain on sale of the Training Business have been reclassified and included in “discontinued operations, net of tax”,
within the Consolidated Statement of Operations for the fiscal year ended January 31, 2007.
The following table reflects the results of the Training Business reported as discontinued operations for the year ended January 31,
2007:
Net sales .......................................................................................................................................................... $
Cost of products sold .......................................................................................................................................
Gross profit ......................................................................................................................................................
Selling, general and administrative expenses ..................................................................................................
Operating income from discontinued operations .............................................................................................
Provision for income taxes ..............................................................................................................................
Income from discontinued operations, net of tax ............................................................................................
Gain on sale of discontinued operations, net of tax .........................................................................................
Total ................................................................................................................................................................ $
(in thousands)
5,634
1,259
4,375
4,056
319
207
112
3,834
3,946
No amounts related to interest expense or interest income have been allocated to discontinued operations.
42
NOTE 4 — PROPERTY AND EQUIPMENT, NET
January 31,
2009
2008
(In thousands)
Land .............................................................................................................................................................. $
Buildings and leasehold improvements ........................................................................................................
Furniture, fixtures and equipment .................................................................................................................
6,594
76,607
293,212
$
7,352
85,875
348,728
Less accumulated depreciation .....................................................................................................................
376,413
(273,476 )
441,955
(312,816 )
$ 102,937
$ 129,139
Depreciation expense, including amortization expense of assets recorded under capital leases, included in income (loss) from
continuing operations for the years ended January 31, 2009, 2008 and 2007 totaled $28.5 million, $29.8 million and $31.0 million,
respectively. The Company has property and equipment leased under capital leases for the German logistics center, which was vacated
during fiscal 2008 (see further discussion at Note 8 – Restructuring Programs). As of January 31, 2009 and 2008, the net book value of
$7.6 million and $8.9 million, respectively, for property and equipment under capital leases for the German logistics center is
classified in “other assets, net” within the Consolidated Balance Sheet.
NOTE 5 — GOODWILL AND INTANGIBLE ASSETS
The Company’s goodwill balance of $14.6 million, $2.9 million and $2.9 million at January 31, 2009, 2008 and 2007, respectively, is
included within “other assets, net” in the Consolidated Balance Sheet. The increase in goodwill during fiscal 2009 is due to the
acquisition of certain assets of Scribona AB (“ Scribona”) (see also Note 6 – Acquisition).
In conjunction with the Company’s annual impairment testing, the Company’s goodwill was tested for impairment on January 31,
2009. In accordance with SFAS No. 142, the impairment testing included a determination of the fair value of the Company’s reporting
units, which are also the Company’s operating segments, using market multiples and discounted cash flows modeling. The results of
the testing, which reflected the improvement in the Company’s European operations, indicated that the fair value of the Company’s
reporting units was greater than the carrying value of the Company’s reporting units, including goodwill. As a result, no goodwill
impairment was recorded at January 31, 2009.
During fiscal 2007, due to certain indicators of impairment within our European reporting unit, the Company performed an
impairment test for goodwill as of July 31, 2006. These impairment indicators included significantly lower than expected revenues in
Europe during the quarter, further deceleration in IT demand during the quarter and a heightened level of pricing pressure in Europe
during the quarter. The Company’s impairment testing included the determination of the European reporting unit’s fair value using
market multiples and discounted cash flows modeling. The Company’s reduced earnings and cash flow forecast for Europe, primarily
due to the increasingly competitive market conditions and uncertain demand, resulted in the Company determining that a goodwill
impairment charge was necessary. During the second quarter of fiscal 2007, the Company recorded a $136.1 million non-cash charge
for the goodwill impairment in Europe.
Also included within “other assets, net” are intangible assets as follows:
January 31, 2009
January 31, 2008
Gross
carrying
amount
Accumulated
amortization
(In thousands)
Net book
value
Gross
carrying
amount
Accumulated
amortization
(In thousands)
Net book
value
Capitalized software and development costs .... $ 241,402 $
Customer relationships .....................................
Trademarks .......................................................
Other intangible assets ......................................
35,333
7,912
2,077
Total ........................................................ $ 286,724 $
43
27,174
7,742
1,521
165,070 $ 76,332 $ 231,365 $
8,159
170
556
201,507 $ 85,217 $ 280,410 $
37,474
9,208
2,363
28,442
8,613
1,184
142,504 $ 88,861
9,032
595
1,179
180,743 $ 99,667
The Company capitalized intangible assets of $24.6 million, $18.4 million and $12.1 million for the years ended January 31, 2009,
2008 and 2007, respectively. These capitalized assets related primarily to software and software development expenditures to be used
in the Company’s operations and customer relationships acquired with the acquisition of Scribona assets (see also Note 6 —
Acquisition). There was no interest capitalized during the fiscal years ended January 31, 2009, 2008 and 2007.
The weighted average amortization period for all intangible assets capitalized during both fiscal 2009 and 2008 approximated five
years and during fiscal 2007 approximated six years. The weighted average amortization period of all intangible assets was
approximately six years for fiscal 2009, seven years for fiscal 2008 and approximately eight years for fiscal 2007.
Amortization expense included in income (loss) from continuing operations, resulting primarily from capitalized software and
development costs, for the years ended January 31, 2009, 2008 and 2007 totaled $22.7 million, $24.1 million and $22.1 million,
respectively. Estimated amortization expense of currently capitalized costs for intangible assets placed in service is as follows (in
thousands):
Fiscal year:
2010 ......................................................................................................................................................................................... $ 18,600
15,800
2011 .........................................................................................................................................................................................
12,900
2012 .........................................................................................................................................................................................
10,900
2013 .........................................................................................................................................................................................
9,400
2014 .........................................................................................................................................................................................
NOTE 6—ACQUISITION
In May 2008, the Company completed the acquisition of certain assets of Scribona, a publicly-traded IT distribution company in the
Nordic region of Europe, with operations in Sweden, Finland and Norway. The acquisition expands the Company’s presence and
leverages the Company’s infrastructure in the Nordic region of Europe. In conjunction with the acquisition, Tech Data paid
approximately $78.3 million in cash (based on the foreign currency exchange rates on the date of the payments) for the net value of
the acquired assets, including inventory and certain other assets, and the assumption of certain liabilities. In accordance with
Statement of Financial Accounting Standards No. 141, “Business Combinations”, the purchase price has been allocated to the assets
acquired and liabilities assumed based on their estimated fair values on the acquisition date, including $9.4 million for customer
relationships with estimated useful lives of seven years and $15.4 million of goodwill (using exchange rates on the date of
acquisition). The asset purchase agreement also provides for an additional earn-out payment of up to 1.5 million euros ($1.9 million at
January 31, 2009), if certain performance objectives are met in the first quarter of fiscal 2010. Such payment, if any, will be recorded
as an adjustment to the initial purchase price with a corresponding increase in goodwill.
During the fiscal year ended January 31, 2009, the Company completed the integration of Scribona and recognized $7.6 million of
integration costs, primarily associated with customer transition, relocation initiatives, consulting and other integration activities related
to the acquisition, which are included in “selling, general and administrative expenses” in the Consolidated Statement of Operations.
The operating results from the acquisition of certain assets of Scribona, AB, have been included in the Company’s consolidated results
of operations subsequent to the date of acquisition.
NOTE 7 — LOSS ON DISPOSAL OF SUBSIDIARIES
The Company’s loss on disposal of subsidiaries is the result of the Company’s decision to exit its operations in Israel and the United
Arab Emirates (“UAE”) as part of its ongoing initiatives to optimize profitability and return on capital employed.
In late March 2007, the Company made the decision to cease operations in the UAE, the closure of which was substantially completed
by the end of the second quarter of fiscal 2008. During the year ended January 31, 2008, the Company recorded a loss on disposal of
this subsidiary of $10.8 million, which includes a $9.8 million impairment on the Company’s investment in the UAE due to a foreign
currency exchange loss (previously recorded in shareholders’ equity as accumulated other comprehensive income) and $1.0 million
for severance costs and fixed asset write-offs. These costs are reflected in the Consolidated Statement of Operations as “loss on
disposal of subsidiaries”, which is a component of operating income. In addition, the UAE incurred operating losses of approximately
$0.9 million during the year ended January 31, 2008, comprised primarily of inventory write-downs and occupancy-related expenses.
During the quarter ended July 31, 2007, the Company executed an agreement for the sale of the Israel operations at an amount
approximating local currency net book value. In connection with this agreement, the Company recorded a loss on disposal of this
subsidiary of $3.7 million, which includes a $2.7 million impairment on the Company’s investment in Israel due to a foreign currency
exchange loss (previously recorded in shareholders’ equity as accumulated other comprehensive income) and $1.0 million for costs
related to the sale. These costs are reflected in the Consolidated Statement of Operations as “loss on disposal of subsidiaries”, which is
a component of operating income. The sale of the Israel operation closed during the quarter ended October 31, 2007. Israel had an
operating loss of $0.1 million during fiscal 2008 through the date of closing.
44
NOTE 8 — RESTRUCTURING PROGRAMS
The Company’s restructuring charges discussed below were incurred pursuant to formal plans developed by management and are
accounted for in accordance with the guidance set forth in SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal
Activities.” The costs related to these restructuring programs are reflected in the Consolidated Statement of Operations as
“restructuring charges”, which is a component of operating income (loss). The accrued restructuring charges are included in “accrued
expenses and other liabilities” in the Consolidated Balance Sheet.
Closure of European Logistics Center
On May 1, 2007, the Company’s Board of Directors approved the exit from our logistics center in Germany (the “Moers logistics
center”). The decision to exit this logistics center was made to enable the Company to capitalize on the long-term synergies of having
one logistics center serving Germany, Austria and the Czech Republic. Related to the Moers logistics center exit, Tech Data has
expanded its logistics center located in Bor, Czech Republic.
In connection with this closure, during fiscal 2008, the Company recorded $18.1 million in restructuring charges, comprised of $8.7
million of workforce reductions and $9.4 million for facility costs and other fixed asset write-offs. The remaining net book value of
the Moers logistics center of $8.9 million at January 31, 2008 was classified in “other assets, net” in the Consolidated Balance Sheet.
During fiscal 2009, the Company executed an agreement for the sublease of the Moers logistics center, which has a remaining balance
of $7.6 million included in “other assets, net” at January 31, 2009.
European Restructuring Program
In May 2005, the Company announced a formal restructuring program to better align the European operating cost structure with the
business environment prevailing at the time. The initiatives related to the restructuring program were completed during the third
quarter of fiscal 2007. In connection with this restructuring program, the Company recorded charges for workforce reductions and the
optimization of facilities and systems. During the fiscal year ended January 31, 2008, the Company recorded credits of $2.0 million
related to changes in estimates of previously recorded restructuring accruals. Through January 31, 2008 (since inception of the
program), the Company has incurred $52.7 million in charges related to the restructuring program, comprised of $38.5 million for
workforce reductions and $14.2 million for facility costs. No additional charges or credits were recorded during fiscal 2009.
In addition, during the fiscal year ended January 31, 2007, the Company incurred $8.6 million of external consulting costs related to
the restructuring program. These consulting costs are included in “selling, general and administrative expenses” in the Consolidated
Statement of Operations.
Summarized below is the activity related to restructuring accruals during the fiscal years ended January 31, 2009, 2008 and 2007. All
cash payments related to the restructuring program were funded by operating cash flows and borrowings under the Company’s credit
facilities.
Employee
termination
benefits
Facility
costs
Balance as of January 31, 2006 ................................................................................................. $
Charges to operations ................................................................................................................
Cash payments ...........................................................................................................................
Other(2) ........................................................................................................................................
Balance as of January 31, 2007 .................................................................................................
Charges to operations ................................................................................................................
Impairment of assets leased under capital lease and fixed asset write-offs(1) .............................
Cash payments ...........................................................................................................................
Other(2) ........................................................................................................................................
Balance as of January 31, 2008 .................................................................................................
Cash payments ...........................................................................................................................
Other(2) ........................................................................................................................................
Balance as of January 31, 2009 ................................................................................................. $
(In thousands)
2,059 $ 10,424 $
19,989
(17,508)
(518)
4,022
7,920
—
(10,932)
1,104
2,114
(15)
(271)
1,828 $
3,775
(8,825)
1,821
7,195
8,229
(5,767)
(3,142)
1,098
7,613
(1,759)
(823)
5,031 $
Total
12,483
23,764
(26,333)
1,303
11,217
16,149
(5,767)
(14,074)
2,202
9,727
(1,774)
(1,094)
6,859
(1)
(2)
The impairment of assets leased under capital lease and fixed asset write-offs were related to the Moers logistics facility and were recorded against the respective
asset accounts.
“Other” primarily relates to the effect of fluctuations in foreign currencies.
45
NOTE 9 — REVOLVING CREDIT LOANS
January 31,
2009
2008
(In thousands)
Receivables Securitization Program, interest rate of 2.25% at January 31, 2009, expiring October 2009 .......... $ — $ —
Multi-currency Revolving Credit Facility, interest rate of 1.05% at January 31, 2009, expiring March 2012 ....
—
Uncommitted revolving credit facilities, average interest rate of 4.33% at January 31, 2009, expiring on
—
various dates throughout fiscal 2010 ...............................................................................................................
57,906
18,315
$ 57,906 $ 18,315
The Company has an agreement (the “Receivables Securitization Program”), amended in October 2008, with a syndicate of banks that
allows the Company to transfer an undivided interest in a designated pool of U.S. accounts receivable, on an ongoing basis, to provide
security or collateral for borrowings up to a maximum of $300.0 million. Under this program, which expires in October 2009, the
Company legally isolates 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 $439.9 million and $510.5 million at January 31, 2009 and
January 31, 2008, respectively. As collections reduce accounts receivable balances included in the pool, the Company may transfer
interests in new receivables to bring the amount available to be borrowed up to the maximum. The Company pays interest on advances
under the Receivables Securitization Program at designated commercial paper rates plus an agreed-upon margin.
Under the terms of the Company’s Multi-currency Revolving Credit Facility with a syndicate of banks, amended in March 2007, the
Company is able to borrow funds in major foreign currencies up to a maximum of $250.0 million. Under this facility, which expires in
March 2012, the Company has provided either a pledge of stock or a guarantee of certain of its significant subsidiaries. The Company
pays interest on advances under this facility at the applicable LIBOR rate plus a margin based on the Company’s credit ratings. The
Company can fix the interest rate for periods of seven to 180 days under various interest rate options.
In addition to the facilities described above, the Company has additional uncommitted lines of credit and overdraft facilities totaling
approximately $451.4 million at January 31, 2009 to support its worldwide operations. Most of these facilities are provided on an
unsecured, short-term basis and are reviewed periodically for renewal.
The total capacity of the aforementioned credit facilities was approximately $1.0 billion, of which $57.9 million was outstanding at
January 31, 2009. The Company’s credit agreements contain limitations on the amounts of annual dividends and repurchases of
common stock. Additionally, the credit agreements require compliance with certain warranties and covenants. The financial ratio
covenants contained within the credit agreements include a debt to capitalization ratio, an interest to EBITDA (as defined per the
credit agreements) ratio and a tangible net worth requirement. At January 31, 2009, the Company was in compliance with all such
covenants. The ability to draw funds under these credit facilities is dependent upon sufficient collateral (in the case of the Receivables
Securitization Program) and meeting the aforementioned financial covenants, which may limit the Company’s ability to draw the full
amount of these facilities. As of January 31, 2009, the maximum amount that could be borrowed under these facilities, in
consideration of the availability of collateral and the financial covenants, was approximately $827.4 million.
At January 31, 2009, the Company had issued standby letters of credit of $29.9 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 these letters of credit
reduces the Company’s available capacity under the above-mentioned facilities by the same amount.
NOTE 10 — LONG-TERM DEBT
Convertible senior debentures, interest at 2.75% payable semi-annually, due December 2026 ..................... $ 350,000 $ 350,000
14,882
Capital leases ..................................................................................................................................................
11,767
Less—current maturities (included in “accrued expenses and other liabilities”) ............................................
361,767
(982)
364,882
(1,243)
$ 360,785 $ 363,639
January 31,
2009
2008
(In thousands)
46
In December 2006, the Company issued $350.0 million of convertible senior debentures due 2026. The debentures bear interest at
2.75% per year. The Company pays interest on the debentures on June 15 and December 15 of each year. In addition, beginning with
the period commencing on December 20, 2011 and ending on June 15, 2012 and for each six-month period thereafter, the Company
will pay contingent interest on the interest payment date for the applicable interest period if the market price of the debentures equals
specified levels. The convertible senior debentures are convertible into the Company’s common stock and cash, anytime after June 15,
2026, or i) if the market price of the common stock, as defined, exceeds 135% of the conversion price per share of common stock or
ii) if the Company calls the debentures for redemption or iii) upon occurrence of certain corporate transactions, as defined. Holders
have the right to convert the debentures into cash and shares of the Company’s common stock, if any, at a conversion rate of 18.4310
shares per $1,000 principal amount of debentures, equivalent to a conversion price of approximately $54.26 per share. Upon
conversion, the Company will deliver cash equal to the lesser of the aggregate principal amount of the debentures to be converted and
the Company’s total conversion obligation and shares of the Company’s common stock in respect of the remainder, if any, of the
Company’s conversion obligation. Holders have the option to require the Company to repurchase the debentures in cash on any of the
fifth, tenth or fifteenth anniversary dates from the issue date at 100% of the principal amount plus accrued interest to the repurchase
date. The debentures are redeemable in whole or in part for cash at the Company’s option at any time on or after December 20, 2011.
Additionally, the debentures are senior, unsecured obligations and rank equally in right of payment with all of the Company’s other
unsecured and unsubordinated indebtedness. The debentures are effectively subordinated to all of the Company’s existing and future
secured debt and are structurally subordinated to the indebtedness and other liabilities of the Company’s subsidiaries.
Future payments of long-term debt and capital leases at January 31, 2009 and for succeeding fiscal years, which assumes the $350
million convertible senior debentures will be redeemed on the first redemption date of December 20, 2011, are as follows (in
thousands):
Fiscal year:
2010 ....................................................................................................................................................................................... $
2011 .......................................................................................................................................................................................
2012 .......................................................................................................................................................................................
2013 .......................................................................................................................................................................................
2014 .......................................................................................................................................................................................
Thereafter ...............................................................................................................................................................................
Total payments .......................................................................................................................................................................
Less amounts representing interest on capital leases .............................................................................................................
1,718
1,718
351,718
1,718
1,442
5,582
363,896
(2,129)
Total principal payments ........................................................................................................................................................ $ 361,767
NOTE 11 — INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes” (“SFAS No. 109”). The
Company evaluates the realizability of its deferred tax assets on a quarterly basis. This evaluation considers all positive and negative
evidence and factors, such as the scheduled reversal of temporary differences, historical and projected future taxable income, and
prudent and feasible tax planning strategies.
Significant components of the provision for income taxes for continuing operations are as follows:
Current:
Federal .................................................................................................................................. $ 20,100 $ 31,857 $ 35,458
990
State ......................................................................................................................................
14,764
Foreign .................................................................................................................................
1,633
25,136
Total current ................................................................................................................
Deferred:
Federal ..................................................................................................................................
State ......................................................................................................................................
Foreign .................................................................................................................................
Total deferred ..............................................................................................................
47
Year ended January 31,
2009
2008
2007
(In thousands)
1,265
22,731
44,096
17,014
(243)
5,150
21,921
58,626
51,212
12,314
192
(5,969)
800
(302)
3,798
4,296
$ 66,017 $ 65,163 $ 55,508
6,537
The reconciliation of income tax computed at the U.S. federal statutory tax rate to income tax expense for continuing operations is as
follows:
Year ended January 31,
U.S. statutory rate ...............................................................................................................................
State income taxes, net of federal benefit ...........................................................................................
Changes in valuation allowance .........................................................................................................
Tax on foreign earnings different than U.S. rate .................................................................................
Nondeductible goodwill......................................................................................................................
Nondeductible interest ........................................................................................................................
Reserves established for foreign income tax contingencies ................................................................
Reversal of previously accrued income taxes .....................................................................................
Effect of company-owned life insurance ............................................................................................
Other—net ..........................................................................................................................................
2009
2008
35.0% 35.0%
0.4
15.8
(18.0)
—
2.9
1.1
(5.7)
1.9
1.7
0.8
18.3
(19.3)
—
1.9
2.1
(0.7)
0.1
0.2
35.1% 38.4%
2007
35.0%
(1.0)
(100.7)
47.5
(104.7)
(5.3)
—
6.7
2.4
(2.1)
(122.2)%
Included in the changes in the valuation allowance for fiscal 2008 is an income tax benefit of $7.5 million for the reversal of a
valuation allowance on deferred tax assets related to Brazil, which was recorded in prior fiscal years. Included in the valuation
allowance in fiscal 2007 is a non-cash charge of $8.4 million to increase the valuation allowance on deferred tax assets related to
specific jurisdictions in Europe that were recorded in prior fiscal years. In fiscal 2009, $10.7 million of previously accrued income
taxes were reversed due to statute expirations and the resolution of income tax examinations. In fiscal 2007, $3.0 million of previously
accrued income taxes were reversed due to the resolution of various income tax examinations.
The components of pretax income (loss) from continuing operations are as follows:
Year ended January 31,
2009
2008
2007
(In thousands)
United States ............................................................................................................................ $
Foreign .....................................................................................................................................
98,091 $ 127,502 $ 108,369
(153,788)
42,371
89,730
(45,419)
$ 187,821 $ 169,873 $
Significant components of the Company’s deferred tax liabilities and assets are as follows:
Deferred tax liabilities:
January 31,
2009
2008
(In thousands)
Depreciation and amortization ............................................................................................................ $
Capitalized marketing program costs ..................................................................................................
Convertible debenture interest .............................................................................................................
Goodwill ..............................................................................................................................................
Deferred costs currently deductible .....................................................................................................
Other, net .............................................................................................................................................
Total deferred tax liabilities .......................................................................................................
28,202 $
4,530
12,608
919
18,692
2,128
67,079
23,802
3,990
6,685
—
10,252
1,376
46,105
Deferred tax assets:
Accrued liabilities................................................................................................................................
Loss carryforwards ..............................................................................................................................
Amortizable goodwill ..........................................................................................................................
Depreciation and amortization ............................................................................................................
Disallowed interest expense ................................................................................................................
Other, net .............................................................................................................................................
Less: valuation allowance .............................................................................................................................
Total deferred tax assets.............................................................................................................
Net deferred tax (liability) asset ....................................................................................... $
43,079
158,733
11,560
3,783
9,166
7,019
233,340
(175,752)
57,588
(9,491) $
50,886
151,775
28,410
5,017
—
5,716
241,804
(182,464)
59,340
13,235
48
The net change in the deferred income tax valuation allowance was a decrease of $6.7 million in fiscal 2009, a decrease of $4.6
million in fiscal 2008 and an increase of $50.5 million in fiscal 2007. The valuation allowance at January 31, 2009 and 2008 primarily
relates to foreign net operating loss carryforwards of $764.3 million and $776.9 million, respectively. The majority of the net
operating losses have an indefinite carryforward period with the remaining portion expiring in fiscal years 2011 through 2023. The
Company evaluates a variety of factors in determining the realizability of deferred tax assets, including the scheduled reversal of
temporary differences, projected future taxable income, and prudent and feasible tax planning strategies.
To the extent that the Company generates consistent taxable income within those operations requiring a valuation allowance, the
Company may reduce the valuation allowance, thereby reducing the income tax expense and increasing net income in the same period.
The underlying net operating loss carryforwards remain available to offset future taxable income in the specific jurisdictions requiring
a valuation allowance, subject to applicable tax laws and regulations.
The activity in deferred tax liabilities during fiscal 2008 includes an adjustment of $5.6 million to reduce the deferred tax liability on
accumulated other comprehensive income (loss) which lapsed due to statute expirations. This adjustment did not impact deferred
income tax expense for fiscal 2008.
At January 31, 2009, there are no consolidated cumulative undistributed earnings of foreign subsidiaries. It is not currently practical to
estimate the amount of unrecognized deferred U.S. income tax that might be payable if any earnings were to be distributed by
individual foreign subsidiaries.
Effective February 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes — an interpretation of SFAS No. 109” (“FIN No. 48”). FIN No. 48 clarifies the accounting for uncertainty in income
taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109 and prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods,
disclosure and transition.
Unrecognized tax benefits totaling $3.7 million primarily related to the foreign taxation of certain transactions have a reasonable
possibility of significantly decreasing within the 12 months following January 31, 2009. Consistent with prior periods, the Company
recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. The Company has accrued
interest of $0.4 million at January 31, 2009, all of which would impact the effective tax rate if reversed. The provision for income
taxes for the fiscal years ended January 31, 2009 and 2008 includes interest expense of $0.5 million and $1.0 million, respectively, on
unrecognized income tax benefits for current and prior years. The change in the balance of accrued interest for both fiscal 2009 and
fiscal 2008 includes the current year end accrual, an interest benefit resulting from the expiration of statutes of limitation, and the
translation adjustments on foreign currencies.
A reconciliation of the beginning and ending balances of the total amount of gross unrecognized tax benefits, excluding accrued
interest and penalties, for the years ended January 31, 2009 and 2008 is as follows (in thousands):
Gross unrecognized tax benefits at February 1, 2007 .............................................................................................................. $ 10,481
5,137
Increases in tax positions for prior years ..................................................................................................................................
3,132
Increases in tax positions for current year ................................................................................................................................
(359)
Expiration of statutes of limitation ...........................................................................................................................................
1,190
Changes due to translation of foreign currencies .....................................................................................................................
19,581
Gross unrecognized tax benefits at January 31, 2008 ..............................................................................................................
1,748
Increases in tax positions for prior years ..................................................................................................................................
78
Increases in tax positions for current year ................................................................................................................................
(9,426)
Expiration of statutes of limitation ...........................................................................................................................................
(5,262)
Settlements ...............................................................................................................................................................................
(2,056)
Changes due to translation of foreign currencies .....................................................................................................................
4,663
Gross unrecognized tax benefits at January 31, 2009 .............................................................................................................. $
At January 31, 2009 and 2008, the amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was
$4.7 million and $12.0 million, respectively.
The Company conducts business primarily in the Americas and Europe and, as a result, one or more of its subsidiaries files income tax
returns in the U.S. federal, various state, local and foreign tax jurisdictions. In the normal course of business, the Company is subject
to examination by taxing authorities. The Company is no longer subject to examinations by the Internal Revenue Service for years
before fiscal 2006. Income tax returns of various foreign jurisdictions for fiscal 2003 and forward are currently under taxing authority
examination or remain subject to audit.
49
NOTE 12 — EMPLOYEE BENEFIT PLANS
Overview of Equity Incentive Plans
At January 31, 2009, the Company had awards outstanding from four equity-based compensation plans, one of which is currently
active and which authorizes the issuance of 9.5 million shares, of which approximately 3.4 million shares are available for future
grant. Under the plans, the Company is authorized to award officers, employees, and non-employee members of the Board of
Directors restricted stock, options to purchase common stock, maximum value stock-settled stock appreciation rights (“MV Stock-
settled SARs”), maximum value options (“MVOs”), 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 or is required under local law. Awards under the plans are priced as determined
by the Compensation Committee and under the terms of the Company’s active equity-based compensation plan 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
and four years from the date of grant.
Restricted Stock
During fiscal 2007, the Company’s Board of Directors made the decision to begin issuing restricted stock. The restricted stock awards
are primarily in the form of restricted stock units (“RSUs”) and typically vest annually over four years, unless mandated by country
law, with the exception of the grant of 60,000 shares of RSUs granted to the Company’s Chief Executive Officer in October 2006
(grant price of $36.66 per share), which vests quarterly over three years and a December 2006 grant to various employees of the
Company for 243,000 RSUs (grant price of $41.99 per share) which vest over three fiscal years. The Company granted 205,547 shares
of restricted stock in fiscal 2008 with a weighted average grant price of $35.74. All of the restricted stock awards have a fair market
value equal to the closing price of the Company’s common stock on the date of grant. Compensation expense of $7.5 million, $4.9
million and $0.5 million was recorded for the vesting of RSUs during fiscal 2009, 2008 and 2007, respectively.
A summary of the status of the Company’s restricted stock activity for the fiscal year ended January 31, 2009 is as follows:
Outstanding at January 31, 2008 ...........................................................................................................
Granted .................................................................................................................................................
Vested ...................................................................................................................................................
Canceled (1) ............................................................................................................................................
Outstanding at January 31, 2009 ...........................................................................................................
Shares
576,027
351,715
(119,646)
(185,418)
622,678
Weighted-
average grant date
fair value
$ 38.04
32.95
38.56
36.89
35.81
(1)
Includes 138,166 performance-based restricted stock awards which did not vest during fiscal 2007 and fiscal 2008 as the achievement of the performance targets
were not met. These performance-based restricted stock awards were cancelled during the first quarter of fiscal 2009. The calculation of the weighted average
grant date fair value excludes the performance-based restricted stock awards.
The total fair value of restricted stock which vested during the fiscal years ended January 31, 2009 and 2008 is $4.6 million and $0.8
million, respectively. There were no restricted stock awards which vested during the fiscal year ended January 31, 2007. As of
January 31, 2009, the unrecognized stock-based compensation expense related to non-vested RSUs was $21.8 million, which the
Company expects to be recognized over the next four years (over a remaining weighted average period of two years).
MV Stock-settled SARs, MVOs and Stock Options
MV Stock-settled SARs and MVOs are similar to traditional stock options, except these instruments contain a predetermined cap on
the maximum earnings potential a recipient can expect to receive upon exercise. In addition, upon exercise, holders of an MV Stock-
settled SAR will only receive shares with a value equal to the spread (the difference between the current market price per share of the
Company’s common stock subject to the predetermined cap and the grant price). The grant price of the MV Stock-settled SARs and
MVOs is determined using the last sale price of the Company’s common stock as quoted on the NASDAQ on the date of grant (or
such higher price as may be required by applicable laws and regulations of specific foreign jurisdictions). The other terms of the
awards (i.e., vesting schedule, contractual term, etc.) are not materially different from the terms of traditional stock options previously
granted by the Company.
No MV Stock-settled SARS or MVOs were issued during the fiscal year ended January 31, 2009. During the fiscal years ended
January 31, 2008 and 2007, the Company’s Board of Directors approved the issuance of 0.2 million (weighted average exercise price
of $35.44) and 1.5 million (weighted average exercise price of $36.88), respectively, of long-term incentive awards in the form of MV
Stock-settled SARs and MVOs pursuant to the Amended and Restated 2000 Equity Incentive Plan of Tech Data Corporation, as
50
amended. Compensation expense of $4.5 million, $5.3 million and $7.6 million was recorded for these instruments during fiscal 2009,
2008 and 2007, respectively.
A summary of the status of the Company’s MV Stock-settled SARs, MVOs and stock options activity for the fiscal year ended
January 31, 2009 is as follows:
Weighted-
average
exercise price
Shares
Weighted-
Average
remaining
contractual term
(in years)
Aggregate
intrinsic
value
(in thousands)
Outstanding at January 31, 2008 ................................................................
Granted ......................................................................................................
Exercised ....................................................................................................
Canceled ....................................................................................................
5,963,599 $
—
(48,404)
(726,101)
Outstanding at January 31, 2009 ................................................................
5,189,094
Vested and expected to vest at January 31, 2009 .......................................
5,172,518
Exercisable at January 31, 2009 .................................................................
4,232,235
36.73
—
25.66
39.35
36.46
36.46
36.41
4.8
4.8
4.3
$ 279
$ 279
$ 279
The aggregate intrinsic value in the table above represents the difference between the closing price of the Company’s common stock
on January 31, 2009 and the grant price for all “in-the-money” options at January 31, 2009. The intrinsic value of the equity-based
awards changes based on the fair market value of the Company’s common stock. The intrinsic value of the MV Stock-settled SARs,
MVO and stock option awards exercised during the fiscal year ended January 31, 2009, 2008 and 2007 was $0.4 million, $6.6 million
and $10.5 million, respectively. As of January 31, 2009, the Company expects $3.8 million of total unrecognized compensation cost
related to MV Stock-settled SARs, MVOs and stock options to be recognized over the next two fiscal years (over a weighted-average
period of one year). The total fair value of MV Stock-settled SARs, MVOs and stock options which vested during the fiscal year
ended January 31, 2009, 2008 and 2007 was $9.2 million, $8.3 million and $7.4 million, respectively.
The Company has elected to use the Hull-White Lattice (binomial) and Black-Scholes option-pricing models to determine the fair
value of MV Stock-settled SARs and MVO awards. The Company used the Black-Scholes option-pricing model for awards granted
prior to fiscal 2006. Both the Hull-White Lattice and Black-Scholes option–pricing models incorporate various assumptions including
expected volatility, expected life and risk-free interest rates, while the Hull-White Lattice model also incorporates a suboptimal
exercise factor (“SEF”) assumption. The Company calculates expected volatility using an equal blend of the historical volatility of the
Company’s common stock over the most recent period equal to the contractual term of the award and the implied volatility using
traded options with a variety of remaining maturities. The expected life for the Hull-White component of the valuation is equal to the
contractual term of the award and the Black-Scholes component is based on historical experience. The risk-free rate corresponds to the
ten-year Treasury rate on the date of the award as the contractual term of the award is generally 10 years. The SEF takes into
consideration early exercise behavior or patterns based on stock-price appreciation. The SEF is computed by analyzing historical
exercises and stock prices on the exercise date as a multiple of the original award price. Fair value calculations are subject to change
based upon the assumptions applied within the applicable models.
The weighted-average estimated fair value of the MV Stock-settled SARs and MVOs granted during the years ended January 31, 2008
and 2007 was $7.00 and $7.19, respectively, based on a two-step valuation utilizing both the Hull-White Lattice (binomial) and Black-
Scholes option-pricing models using the following weighted-average assumptions:
Year ended January 31, 2008
Expected
option term (years)
Expected
volatility
Hull-White Lattice ............................................................
Black-Scholes ...................................................................
10
4
42%
42%
Year ended January 31, 2007
Expected
option term (years)
Expected
volatility
Hull-White Lattice ............................................................
Black-Scholes ...................................................................
10
4
42%
42%
Risk-free
interest rate
4.74%
4.55%
Risk-free
interest rate
4.87%
4.74%
Expected
dividend yield
Suboptimal
exercise factor
0%
0%
1.19
—
Expected
dividend yield
Suboptimal
exercise factor
0%
0%
1.20
—
51
A summary of the status of the Company’s stock-based equity incentives outstanding representing MV Stock-settled SARs, MVOs
and stock options is as follows:
Range of exercise prices
$16.50 – $24.69 ........................................................................................
24.70 – 36.34 ........................................................................................
36.35 – 37.05 ........................................................................................
37.06 – 37.06 ........................................................................................
37.07 – 41.07 ........................................................................................
41.08 – 41.08 ........................................................................................
41.09 – 51.38 ........................................................................................
Outstanding
Exercisable
Number
outstanding
at 1/31/09
507,229
844,140
1,082,407
886,183
148,066
817,000
904,069
5,189,094
Weighted-
average
remaining
contractual
life (years)
2.7
3.7
7.1
5.9
4.1
4.9
3.0
4.8
Weighted-
average
exercise
price
$ 21.57
31.82
36.93
37.06
39.37
41.08
43.36
36.46
Number
exercisable
at 1/31/09
Weighted-
average
exercise
price
507,229 $ 21.57
30.92
669,690
36.93
536,481
37.06
663,589
39.42
137,497
41.08
817,000
43.36
900,749
4,232,235
36.41
The Company’s policy is to utilize shares of its treasury stock, to the extent available, for the exercise of awards (see further
discussion of the Company’s share repurchase program in Note 13 – Shareholders’ Equity below).
Employee Stock Purchase Plan
Under the 1995 Employee Stock Purchase Plan (the “ESPP”) approved in June 1995, the Company is authorized to issue up to
1,000,000 shares of common stock to eligible employees in the Company’s U.S. and Canadian subsidiaries. Under the terms of the
ESPP, employees can choose to have a fixed dollar amount or percentage deducted from their bi-weekly compensation to purchase the
Company’s common stock and/or elect to purchase shares once per calendar quarter. The purchase price of the stock is 85% of the
market value on the exercise date and employees are limited to a maximum purchase of $25,000 in fair market value each calendar
year. From the inception of the ESPP through January 31, 2009, the Company has issued 436,380 shares of common stock to the
ESPP. All shares purchased under the ESPP must be held for a period of one year.
Retirement Savings Plan
The Company sponsors the Tech Data Corporation 401(k) Savings Plan (“the 401(k) Savings Plan”) for its employees. At the
Company’s discretion, participant deferrals are matched monthly, in an amount equal to 50% of the first 6% of participant deferrals
and participants are fully vested following four years of qualified service. Effective January 1, 2008, the Company’s 401(k) Savings
Plan employee match is in cash. Prior to January 1, 2008, the Company’s 401(k) Saving Plan employee match was in the form of
Company stock. At January 31, 2009 and 2008, the number of shares of Tech Data common stock held by the Company’s 401(k)
Savings Plan totaled 244,427 and 280,000 shares, respectively. Aggregate contributions made by the Company to the 401(k) Savings
Plan were $2.3 million, $2.2 million and $2.2 million for fiscal 2009, fiscal 2008 and fiscal 2007, respectively.
NOTE 13 — SHAREHOLDERS’ EQUITY
In June 2008, the Company’s Board of Directors authorized a share repurchase program of up to $100.0 million of the Company’s
common stock. During the second and third quarters of fiscal 2009, the Company repurchased 2,912,517 shares at an average of
$34.33 per share, for a total cost, including expenses, of $100.0 million in connection with this repurchase program.
In September 2007, the Company’s Board of Directors authorized a share repurchase program of up to $100.0 million of the
Company’s common stock. During fiscal 2008, the Company repurchased 2,698,654 shares comprised of 2,698,126 shares purchased
in connection with the Company’s share repurchase program and 528 shares purchased outside of the stock repurchase program, at an
average of $37.06 per share, for a total cost, including expenses, of $100.0 million.
The Company’s share repurchases were made on the open market through block trades or otherwise and the number of shares
purchased and the timing of the purchases were based on working capital requirements, general business conditions and other factors,
including alternative investment opportunities. Shares repurchased by the Company are held in treasury for general corporate
purposes, including issuances under equity incentive and employee benefit plans.
52
NOTE 14 — COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases logistics centers, office facilities and certain equipment under noncancelable operating leases, the majority of
which expire at various dates through fiscal 2019. Fair value renewal and purchase options and escalation clauses exist for a
substantial portion of the operating leases included above. Rental expense related to continuing operations for all operating leases,
including minimum commitments under IT outsourcing agreements, totaled $59.9 million, $60.6 million and $59.3 million in fiscal
years 2009, 2008 and 2007, respectively. Future minimum lease payments at January 31, 2009 under all such leases, including
minimum commitments under IT outsourcing agreements and the minimum lease payments accrued in the Company’s restructuring
programs (see Note 8—Restructuring Programs) for succeeding fiscal years are as follows (in thousands):
Fiscal year:
2010 ....................................................................................................................................................................................... $
2011 .......................................................................................................................................................................................
2012 .......................................................................................................................................................................................
2013 .......................................................................................................................................................................................
2014 .......................................................................................................................................................................................
Thereafter ...............................................................................................................................................................................
59,728
50,176
31,426
27,400
22,072
42,343
Total payments ....................................................................................................................................................................... $ 233,145
Synthetic Lease Facility
The Company has a synthetic lease facility (the “Synthetic Lease”) with a group of financial institutions under which the Company
leases certain logistics centers and office facilities from a third-party lessor. During the second quarter of fiscal 2009, the Company
renewed its existing Synthetic Lease with a new lease agreement that expires in June 2013. Properties leased under the Synthetic
Lease are located in Clearwater and Miami, Florida; Fort Worth, Texas; Fontana, California; Suwanee, Georgia; Swedesboro, New
Jersey; and South Bend, Indiana. The Synthetic Lease has been accounted for as an operating lease and rental payments are calculated
at the applicable LIBOR rate plus a margin based on the Company’s credit ratings.
During the first four years of the lease term, the Company may, at its option, purchase any combination of the seven properties, at an
amount equal to each of the property’s cost, as long as the lease balance does not decrease below a defined amount. During the last
year of the lease term, until 180 days prior to the lease expiration, the Company may, at its option, i) purchase a minimum of two of
the seven properties, at an amount equal to each of the property’s cost, ii) exercise the option to renew the lease for a minimum of two
of the seven properties or iii) exercise the option to remarket a minimum of two of the seven properties and cause a sale of the
properties. If the Company elects to remarket the properties, it has guaranteed the lessor a percentage of the cost of each property, in
the aggregate amount of approximately $107.4 million (the “residual value”). The Company’s residual value guarantee related to the
Synthetic Lease has been recorded at the estimated fair value of the residual guarantee.
The sum of future minimum lease payments under the Synthetic Lease at January 31, 2009, which are included in the future minimum
lease payments presented above, was approximately $17.8 million.
The Synthetic Lease contains covenants that must be complied with, similar to the covenants described in certain of the credit
facilities discussed in Note 9—Revolving Credit Loans. As of January 31, 2009, the Company was in compliance with all such
covenants.
In January 2007, the Company sold approximately six acres of excess land located in Miami, Florida. The sale was executed pursuant
to the “excess sale” provisions of the Synthetic Lease agreement and resulted in a gain of $3.6 million recorded during the quarter
ended January 31, 2007. This gain is included within “selling, general and administrative expenses” in the Company’s Consolidated
Statement of Operations.
Contingencies
Prior to fiscal 2004, one of the Company’s European subsidiaries was audited in relation to various value-added tax (“VAT”) matters.
As a result of those audits, the subsidiary received notices of assessment that allege the subsidiary did not properly collect and remit
VAT. It is management’s opinion, based upon the opinion of outside legal counsel, that the Company has valid defenses related to a
substantial portion of these assessments. Although the Company is vigorously pursuing administrative and judicial action to challenge
the assessments, no assurance can be given as to the ultimate outcome. The resolution of such assessments could be material to the
Company’s operating results for any particular period, depending upon the level of income for such period.
53
The Company is also 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.
Guarantees
As is customary in the IT industry, to encourage certain customers to purchase products from Tech Data, 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.
The Company provides additional financial guarantees to finance companies on behalf of certain customers. The majority of these
guarantees are for an indefinite period of time, where the Company would be required to perform if the customer is in default with the
finance company related to purchases made from the Company. The Company reviews the underlying credit for these guarantees on at
least an annual basis. As of January 31, 2009 and 2008, the aggregate amount of guarantees under these arrangements totaled $31.9
million and $19.4 million, respectively, of which $23.1 million and $14.7 million, respectively, was outstanding. The Company
believes that, based on historical experience, the likelihood of a material loss pursuant to the above guarantees is remote.
NOTE 15 — SEGMENT INFORMATION
Tech Data operates predominately in a single industry segment as a distributor of IT products, logistics management, and other value-
added services. While the Company operates primarily in one industry, because of its global presence, the Company is managed by its
geographic segments. The Company’s geographic segments include the Americas (including North America and Latin America) and
Europe. The Company assesses performance of and makes decisions on how to allocate resources to its operating segments based on
multiple factors including current and projected operating income and market opportunities. The Company does not consider stock-
based compensation expense recognized under SFAS No. 123R in assessing the performance of its operating segments, and therefore
the Company is reporting stock-based compensation expense as a separate amount. 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:
Net sales to unaffiliated customers
Americas ................................................................................................................ $ 10,609,001 $ 11,003,893 $
9,965,074
11,475,371
Europe ....................................................................................................................
Total ....................................................................................................................... $ 24,080,484 $ 23,423,078 $ 21,440,445
13,471,483
12,419,185
Year ended January 31,
2009
2008
2007
(In thousands)
Operating income (loss)
Americas ................................................................................................................ $
Europe(1)(2) ...............................................................................................................
Stock-based compensation expense recognized under SFAS No. 123R ................
Total ....................................................................................................................... $
157,177 $
96,972
(11,990)
242,159 $
170,685 $
27,956
(10,287)
160,720
(156,930)
(7,973)
188,354 $
(4,183)
Depreciation and amortization
Americas ................................................................................................................ $
Europe ....................................................................................................................
17,820 $
33,414
18,153 $
35,728
17,344
35,790
54
Year ended January 31,
2009
2008
2007
(In thousands)
Total ............................................................................................................................. $
51,234 $
53,881 $
53,134
Capital expenditures
Americas ...................................................................................................................... $
Europe ..........................................................................................................................
15,024 $
17,523
22,618 $
15,741
Total ............................................................................................................................. $
32,547 $
38,359 $
15,112
28,617
43,729
Identifiable assets
Americas ...................................................................................................................... $ 1,740,757 $ 1,716,065 $ 1,601,962
3,101,902
Europe ..........................................................................................................................
3,282,997
3,504,870
Total ............................................................................................................................. $ 5,023,754 $ 5,220,935 $ 4,703,864
Goodwill
Americas ...................................................................................................................... $
Europe(3) ........................................................................................................................
2,966 $
11,644
Total ............................................................................................................................. $
14,610 $
2,966 $
—
2,966 $
2,966
—
2,966
(1)
(2)
(3)
For the year ended January 31, 2008, the amounts shown above include $16.1 million of restructuring costs related to the exit of the Company’s logistics center in
Germany and changes in estimates of previously recorded restructuring accruals for the 2005 restructuring program and $14.5 million of loss on disposal of
subsidiaries related to the closure of operations in the UAE and the sale of the Company’s Israel operations. For the year ended January 31, 2007, the amounts
shown above include $23.8 million of restructuring charges related to the European restructuring program and $8.6 million in external consulting costs associated
with the restructuring program (see also Note 8—Restructuring Programs).
For the year ended January 31, 2007, the amount shown above includes a non-cash charge of $136.1 million for the goodwill impairment in Europe (see also Note
5 —Goodwill and Intangible Assets).
Europe’s goodwill balance as of January 31, 2009 is the result of the May 2008 acquisition of certain assets of Scribona, AB (see also Note 6 – Acquisition).
NOTE 16 — FAIR VALUE OF FINANCIAL INSTRUMENTS
Effective February 1, 2008, the Company adopted the provisions of SFAS No. 157 which applies to financial assets and liabilities that
are being measured and reported on a fair value basis and expands disclosures about fair value measurements. The adoption of SFAS
No. 157 for financial assets and liabilities did not have a material effect on the Company’s existing fair-value measurement practices
but requires disclosure of a fair-value hierarchy of inputs used to value an asset or a liability. The three levels of the fair-value
hierarchy include: 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. A financial instrument’s level within the fair value hierarchy is based on the lowest level
of any input that is significant to the fair value measurement.
The Company’s foreign currency forward contracts 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 with gains and
losses on these contracts recorded in the Company’s Consolidated Statement of Operations within “net foreign currency exchange loss
(gain)” in the period in which their value changes, with the offsetting amount for unsettled positions being included in either “other
current assets” or “other current liabilities” in the Consolidated Balance Sheet.
The Company utilizes life insurance policies to fund certain of the Company’s nonqualified employee benefit plans. The investments
contained within the life insurance policies are marked-to-market each period by analyzing the change in the underlying value of the
invested assets (level 2 criteria) and the gains and losses are recorded in the Company’s Consolidated Statement of Operations. The
related deferred compensation liability is also marked-to-market each period based upon the various investment return alternatives
selected by the participants of the nonqualified employee benefit plans (level 2 criteria) and the gains and losses are recorded in the
Company’s Consolidated Statement of Operations.
The $350.0 million of convertible senior debentures are carried at cost. The estimated fair value of these convertible senior debentures
was approximately $289.6 million at January 31, 2009, based upon quoted market information (level 1 criteria).
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair
value because of the short maturity of these items. The carrying amount of debt outstanding pursuant to revolving debt and similar
55
bank credit agreements approximates fair value as interest rates on these instruments approximate current market rates (level 2
criteria).
NOTE 17 — INTERIM FINANCIAL INFORMATION (UNAUDITED)
Interim financial information for fiscal years 2009 and 2008 is as follows.
April 30,
July 31,
October 31,
January 31,
Quarter ended
Fiscal year 2009
Net sales .................................................................................................. $ 6,065,814 $ 6,166,021 $ 6,136,112 $ 5,712,537
(In thousands, except per share amounts)
Gross profit ............................................................................................. $
294,667 $
299,116 $
297,974 $
321,239
Net income .............................................................................................. $
22,966 $
23,680 $
18,390 $
58,590
Income per share—basic ......................................................................... $
Income per share—diluted ...................................................................... $
0.43 $
0.43 $
0.45 $
0.45 $
0.37 $
0.37 $
1.17
1.17
Fiscal year 2008
Net sales .................................................................................................. $ 5,402,077 $ 5,613,308 $ 5,923,814 $ 6,483,879
Gross profit ............................................................................................. $
255,248 $
274,311 $
283,746 $
321,103
Net income .............................................................................................. $
9,902 $
7,242 $
40,949 $
50,176
Income per share—basic ......................................................................... $
Income per share—diluted ...................................................................... $
0.18 $
0.18 $
0.13 $
0.13 $
0.74 $
0.73 $
0.92
0.92
Net income for the quarter ended April 30, 2007 includes loss on disposal of subsidiaries of $8.8 million related to the closure of the
Company’s UAE operations and $(0.5) million related to changes in estimates for the European restructuring program completed in
the third quarter of fiscal 2007, the net of which decreased diluted earnings per share by $0.15 per share for the quarter ended
April 30, 2007 (see also Note 7 – Loss on Disposal of Subsidiaries and Note 8 – Restructuring Programs).
Net income for the quarter ended July 31, 2007 includes loss on disposal of subsidiaries of $4.3 million related to the closure of the
Company’s UAE operations and sale of the Company’s Israel operations and $16.6 million related to the exit of the logistics center in
Germany, which decreased diluted earnings per share by $0.37 per share for the quarter ended July 31, 2007 (see also Note 7 – Loss
on Disposal of Subsidiaries and Note 8 – Restructuring Programs).
Net income for the quarter ended January 31, 2008 includes loss on disposal of subsidiaries of $1.4 million related to the closure of the
Company’s UAE operations which decreased diluted earnings per share by $0.04 per share for the quarter ended January 31, 2008 (see
also Note 7 – Loss on Disposal of Subsidiaries and Note 11 – Income Taxes).
56
ITEM 9.
None.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
ITEM 9A. 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 periods. In designing and evaluating our disclosure controls and procedures, management recognized that
disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the disclosure controls and procedures are met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-
making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented
by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of
any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may
become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be
detected.
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 January 31, 2009. Based on that evaluation, the Company’s CEO and CFO concluded that
the Company’s disclosure controls and procedures were effective in providing reasonable assurance that the objectives of the
disclosure controls and procedures are met as of January 31, 2009.
Management’s Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as
defined in Rule 13a-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even
those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and
presentation. Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of management, including our principal executive officer and principal financial
officer, we assessed the effectiveness of the Company’s internal control over financial reporting as of January 31, 2009. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”) in Internal Control—Integrated Framework. Based on our assessment, we have concluded that, as of January 31, 2009, the
Company’s internal control over financial reporting was effective based on those criteria.
The effectiveness of internal control over financial reporting as of January 31, 2009 has been audited by Ernst & Young, LLP, the
independent registered certified public accounting firm who also audited the Company’s consolidated financial statements, as stated in
their report below.
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 last quarter of fiscal 2009 that have materially
affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
57
Report of Independent Registered Certified Public Accounting Firm
The Board of Directors and Shareholders of
Tech Data Corporation:
We have audited Tech Data Corporation’s internal control over financial reporting as of January 31, 2009, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). Tech Data Corporation’s management is responsible for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the
accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Tech Data Corporation maintained, in all material respects, effective internal control over financial reporting as of
January 31, 2009, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Tech Data Corporation and subsidiaries as of January 31, 2009 and 2008, and the related consolidated
statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended January 31, 2009 of Tech
Data Corporation and subsidiaries and our report dated March 23, 2009, expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Tampa, Florida
March 23, 2009
58
ITEM 9B. Other Information
On March 24, 2009, the Board of Directors of the Company approved amendments to the Company’s Bylaws. The amendments
became effective immediately upon approval by the Board and implemented the changes summarized below.
Bylaw Article II was amended by inserting a new Section O that provides an advance notice requirement for shareholder proposals at
the Company’s annual meeting. Pursuant to Section O of Article II, a shareholder must notify the Company in advance to nominate
directors or propose business at an annual or special shareholder meeting. The Board of Directors believes it is in the shareholders’
interests to require advance notice and that certain information be provided when proposals are submitted.
The new provision provides that advance notice must be delivered to the Secretary of the Company not earlier than the 120th day nor
later than the 90th day prior to the anniversary of the preceding year’s annual meeting. In the event that the annual meeting date is more
than 30 days before or more than 60 days after the anniversary date of the previous year’s annual meeting, the shareholder notice must
be received by the later of the 90th day prior to the annual meeting and the 10th day following the mailing of notice or public
announcement of the annual meeting by the Company.
For special meetings to elect directors, a shareholder may submit a nominee by delivering notice to the Secretary of the Company no
later than the 30th day prior to such special meeting.
In the event that the number of directors is increased and there is no public announcement that names the nominees or specifies the
size of the increased Board at least 100 days prior to the first anniversary of the preceding year’s annual meeting, a shareholder notice
must be received by the Secretary of the Company not later than the 10th day following the day on which such public announcement is
first made by the Company.
This advance notice bylaw also provides that certain information must be provided by the proposing shareholder, including:
•
•
•
Information regarding the proponent of the proposal, such as disclosure of beneficial owners and the number of shares
beneficially owned, a description of any agreements among any group making the proposal and disclosure of hedging and
derivative transactions entered into by the group;
Information regarding the nominee for director, such as their qualifications and eligibility, material relationships and
compensation to be received by the nominee; and
Information regarding the business proposal, including a description of the reasons for the proposal and whether the
proponent received any payment to make the proposal.
In addition to the amendments related to advance notice, the Bylaw amendments also include certain changes throughout the Bylaws
to update references to officer titles and shareholders, add language referencing listing requirements and make technical corrections.
See the Bylaws of the Company included as Exhibit 3(ii) to this Form10-K.
59
PART III
ITEM 10. Directors and Executive Officers and Corporate Governance
The information required by Item 10 relating to executive officers of the Company is included under the caption “Executive Officers”
of Item 1 of this Form 10-K. The information required by Item 10 relating to Directors and corporate governance disclosures of the
Company is incorporated herein by reference to the Company’s definitive proxy statement for the 2009 Annual Meeting of
Shareholders (“Proxy Statement). The Proxy Statement for the 2009 Annual Meeting of Shareholders will be filed with the SEC prior
to May 31, 2009.
Code of Ethics
Tech Data has adopted a code of business conduct and ethics for directors, officers (including Tech Data’s principal executive officer,
principal financial officer, and principal accounting officer) and employees, known as the Code of Ethics. The Code of Ethics is
available, and may be obtained free of charge, on Tech Data’s website at http://www.techdata.com/content/td_ethics/main.aspx. Tech
Data intends to provide information required by Item 5.05 of Form 8-K by disclosing any amendment to, or waiver from, a provision
of the Code of Ethics that applies to Tech Data’s principal executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions on the Company’s website at the web address noted in this section.
ITEM 11. Executive Compensation
The information required by this item is incorporated herein by reference to the Company’s Proxy Statement.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated herein by reference to the Company’s Proxy Statement.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item is incorporated herein by reference to the Company’s Proxy Statement. However, the
information included in such Proxy Statement included under the caption entitled “Report of the Audit Committee” shall not be
deemed incorporated by reference in this Form 10-K and shall not otherwise be deemed filed under the Securities Act of 1933, as
amended, or under the Exchange Act .
Audit Committee
Tech Data has a separately designated, standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange
Act. The members of the Audit Committee are Charles E. Adair, Maximilian Ardelt, Harry J. Harczak, Jr., and John Y. Williams.
Audit Committee Financial Expert
The Board of Directors of Tech Data has determined that Charles E. Adair, Chairman of the Audit Committee, and Harry J. Harczak,
Jr. are audit committee financial experts as defined by Item 407(d) (5) (ii) of Regulation S-K under the Exchange Act, and all
members of the Audit Committee are independent within the meaning of applicable SEC rule and listing standards.
ITEM 14. Principal Accounting Fees and Services
Information regarding principal accounting fees and services is set forth under the caption “Independent Auditor Fees” in our Proxy
Statement, which is incorporated herein by reference to the Company’s definitive proxy statement for the 2009 Annual Meeting of
Shareholders. The Proxy Statement for the 2009 Annual Meeting of Shareholders will be filed with the SEC prior to May 31, 2009.
60
ITEM 15. Exhibits, Financial Statement Schedules.
PART IV
(a) See index to financial statements and schedules included in Item 8.
(b) The exhibit numbers on the following list correspond to the numbers in the exhibit table required pursuant to Item 601 of
Regulation S-K.
Exhibit
Number
3-N(9)
3(ii)(1)
4-A(15)
10-G(7)
10-Z(4)
10-AA(5)
10-BB(5)
10-NN(8)
10-OO(8)
10-AAa(10)
10-AAb(10)
10-AAc(10)
10-AAd(10)
10-AAe(10)
10-AAg(12)
10-AAi(13)
10-AAj(13)
10-AAl(17)
10-AAo(18)
10-AAq(19)
10-AAr(19)
10-AAs(19)
10-AAt(19)
Description
— Amended and Restated Articles of Incorporation of the Company filed on June 17, 2004 with the Secretary of
State of the State of Florida
Bylaws of Tech Data Corporation as adopted on March 24, 2009.
— Indenture between the Company and JP Morgan Trust Company, National Association, as successor trustees
Bank One Trust Company, N.A., dated as of December 10, 2001
— Employee Stock Ownership Plan as amended December 16, 1994
— 1990 Incentive and Non-Statutory Stock Option Plan as amended
— Non-Statutory Stock Option Grant Form
— Incentive Stock Option Grant Form
— Non-Employee Directors’ 1995 Non-Statutory Stock Option Plan
— 1995 Employee Stock Purchase Plan
— Transfer and Administration Agreement dated May 19, 2000
— Credit Agreement dated as of May 8, 2000
— Amended and Restated Participation Agreement dated as of May 8, 2000
— Amended and Restated Lease Agreement dated as of May 8, 2000
— Amended and Restated Agency Agreement dated as of May 8, 2000
— Tech Data Corporation 401(K) Savings Plan dated January 1, 2000
— 2000 Non-Qualified Stock Option Plan of Tech Data Corporation
— 2000 Equity Incentive Plan of Tech Data Corporation
— Amendment Agreement Number 1 to Credit Agreement dated November 21, 2002
— The Amended and Restated Credit Agreement dated May 2, 2003
— Second Amended and Restated Participation Agreement dated as of July 31, 2003
— Second Amended and Restated Lease Agreement dated as of July 31, 2003
— Second Amended and Restated Credit Agreement dated as of July 31, 2003
— Trust Agreement Between Tech Data Corporation and Fidelity Management Trust Company, Tech Data
Corporation 401(k) Savings Plan Trust, effective August 1, 2003
10-AAv(2)
— Amendment Agreement Number 2 to Amended and Restated Credit Agreement dated as of January 30, 2004
10-AAw(16)
— Amendment to the 2000 Equity Incentive Plan of Tech Data Corporation
10-AAx(2)
— Amended and Restated Tech Data Corporation 401(K) Savings Plan and Amendments 1-3
10-AAz(11)
— Amendment Number 2 to Receivables Purchase and Servicing Agreement dated May 19, 2000
10-AAaa(6)
— 2005 Deferred Compensation Plan
10-AAbb(9)
— Indenture for New 2% Subordinated Debentures between Tech Data and J.P. Morgan Trust Company, National
Association and Table of Contents of Indenture, including Cross-Reference Table to the Trust Indenture Act of
1939 and including form of new 2% Subordinated Debenture as an exhibit
61
Exhibit
Number
10-AAbb(3)
Description
— Amendment Number 8 to Transfer and Administration Agreement dated as of May 19, 2000
10-AAcc(20)
— Executive Severance Plan, effective March 31, 2005
10-AAdd(20) — First Amendment to the Tech Data Corporation 2005 Deferred Compensation Plan, effective January 1, 2005
10-AAee(20)
— Executive Incentive Plan – April 2005
10-AAff(20)
— Fourth Amendment to the Tech Data Corporation 401(k) Savings Plan, effective March 28, 2005.
10-AAgg(20) — Trade Receivables Purchase Facility Agreement between Tech Data Corporation and SunTrust Bank, dated May
26, 2005
10-AAhh(21) — First Amendment to Trade Receivables Purchase Facility Agreement
10-AAii(21)
— Amendment No. 10 to Transfer and Administration Agreement
10-AAjj(23)
— Uncommitted Account Receivable Purchase Agreement dated as of January 23, 2006
10-Akk(22)(23) — Master Agreement for the sale and purchase of the Azlan Training Business, dated as of March 7, 2006
10-AAll(24)
— Form of Tech Data Corporation 2000 Equity Incentive Plan Notice of Award and Award Agreement
10-AAmm(24) — Form of Tech Data Corporation 2000 Equity Incentive Plan Performance Grant in the form of Restricted Stock
Units Agreement
10-AAnn(24) — Amended and Restated 2000 Equity Incentive Plan of Tech Data Corporation
10-AAoo(24) — First Amendment to the Amended and Restated 2000 Equity Incentive Plan of Tech Data Corporation
10-AApp(25) — Employment Agreement Between Tech Data Corporation and Robert M. Dutkowsky, dated October 2, 2006
10-AAqq(25) — Form of Amended and Restated 2000 Equity Incentive Plan of Tech Data Corporation Notice of Grant and Grant
Agreement for Restricted Stock Units
10-AArr(27)
— Third Amended and Restated Credit Agreement dated as of March 20, 2007 (including related Amended and
Restated Guaranty Agreement and Increditor Agreement)
10-AAss(27)
— Third Omnibus Amendment dated as of March 20, 2007
10-AAtt(27)
10-AAuu(27)
Amendment Number 11 to Transfer and Administration Agreement dated as of March 20, 2007
Indenture for New 2.75% Convertible Senior Debentures due 2026 between Tech Data and U.S. Bank National
Association
10-AAvv(28) — Equity Incentive Bonus Plan
10-AAxx(28) — Trade Receivables Purchase Agreement
10-AAyy(29 ) — Amendment Number 12 to Transfer and Administration Agreement dated as of December 18, 2007
10-AAzz(30)
— First Amendment to Trade Receivables Purchase Agreement.
10-BBa(31)
10-BBb(31)
10-BBc(31)
10-BBd(3 2)
21-A(1)
23-A(1)
24(1)
Third Amended and Restated Lease Agreement dated June 27, 2008
Third Amended and Restated Credit Agreement dated June 27, 2008
Third Amended and Restated Participation Agreement dated June 27, 2008
Amendment No. 13 to Transfer and Administration Agreement dated as of October 22, 2008
— Subsidiaries of Registrant
— Consent of Ernst & Young LLP
— Power of Attorney (included on signature page)
62
Exhibit
Number
31-A(1)
31-B(1)
32-A(1)
32-B(1)
Description
— 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
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(25)
(26)
(27)
(28)
(29)
(30)
(31)
(32)
Filed herewith.
Incorporated by reference to the Exhibits included in the Company’s Form 10-K dated January 31, 2004, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Form 8-K dated December 31, 2004, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-Q for the quarter ended October 31, 1992, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Registration Statement on Form S-8, File No. 33-41074.
Incorporated by reference to the Exhibits included in the Company’s Form 8-K dated December 8, 2004, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-K for the year ended January 31, 1995, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Definitive Proxy Statement for the 1995 Annual Meeting of Shareholders, File No. 0-
14625.
Incorporated by reference to the Exhibits included in the Company’s Form S-4, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-Q for the quarter ended July 31, 2000, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Form 8-K dated August 27, 2004, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Registration Statement on Form S-8, File No. 333-93801.
Incorporated by reference to the Exhibits included in the Company’s Registration Statement on Form S-8, File No. 333-59198.
Incorporated by reference to the Exhibits included in the Company’s Form 10-Q for the quarter ended July 31, 2001, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Registration Statement on Form S-3, File No. 333-76858.
Incorporated by reference to the Exhibits included in the Company’s Definitive Proxy Statement for the 2003 Annual Meeting of Shareholders, File No. 0-
14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-K for the year ended January 31, 2003, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-Q for the quarter ended April 30, 2003, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-Q for the quarter ended July 31, 2003, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-Q for the quarter ended April 30, 2005, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-Q for the quarter ended October 31, 2005, File No. 0-14625.
Certain information contained in this exhibit has been omitted and filed separately with the Commission pursuant to a confidential treatment request under 17
C.F.R. Sections 200.80(b)(4), 200.83 and 230.406.
Incorporated by reference to the Exhibits included in the Company’s Form 10-K for the year ended January 31, 2006, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-Q for the quarter ended April 30, 2006, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-Q for the quarter ended October 31, 2006, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Form 8-K dated March 20, 2007, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-K dated January 31, 2007, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-Q dated April 30, 2007, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-K dated January 31, 2008, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-Q dated April 30, 2008, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-Q dated July 31, 2008, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-Q dated October 31, 2008, File No. 0-14625
63
TECH DATA CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
SCHEDULE II
Activity
Balance at
beginning
of period
Charged to
cost and
expenses
Deductions
Other(1)
Balance at
end of
period
$ (29,890)
(30,175)
(34,649)
$ 6,342
14,154
15,586
$ 55,598
64,146
68,967
Allowance for doubtful accounts receivable and sales returns
January 31,
2009 ........................................................................................ $ 64,146
68,967
2008 ........................................................................................
60,375
2007 ........................................................................................
$ 15,000
11,200
27,655
(1)
“Other” primarily includes recoveries, dispositions and the effect of fluctuations in foreign currency.
64
Pursuant to the requirements of Section 13 or 15(d) 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 on March 24, 2009.
SIGNATURES
TECH DATA CORPORATION
By /s/ ROBERT M. DUTKOWSKY
Robert M. Dutkowsky
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature to this Annual Report on Form 10-K appears below hereby appoints Jeffery P. Howells and David R.
Vetter, or either of them, as his or her attorney-in-fact to sign on his or her behalf individually and in the capacity stated below and to
file all amendments and post-effective amendments to this Annual Report on Form 10-K, and any and all instruments or documents
filed as a part of or in connection with this Annual Report on Form 10-K or the amendments thereto, and the attorney-in-fact, or either
of them, may make such changes and additions to this Annual Report on Form 10-K as the attorney-in-fact, or either of them, may
deem necessary or appropriate.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ ROBERT M. DUTKOWSKY
Robert M. Dutkowsky
/s/ JEFFERY P. HOWELLS
Jeffery P. Howells
/s/ JOSEPH B. TREPANI
Joseph B. Trepani
/s/ STEVEN A. RAYMUND
Steven A. Raymund
/s/ CHARLES E. ADAIR
Charles E. Adair
/s/ MAXIMILIAN ARDELT
Maximilian Ardelt
/s/ HARRY J. HARCZAK, JR.
Harry J. Harczak, Jr.
/s/ KATHY MISUNAS
Kathy Misunas
/s/ THOMAS I. MORGAN
Thomas I. Morgan
Chief Executive Officer, Director
March 24, 2009
Executive Vice President and Chief
Financial Officer, Director (principal
financial officer)
Senior Vice President and Corporate
Controller (principal accounting officer)
March 24, 2009
March 24, 2009
Chairman of the Board of Directors
March 24, 2009
Director
Director
Director
Director
Director
65
March 24, 2009
March 24, 2009
March 24, 2009
March 24, 2009
March 24, 2009
Signature
Title
Date
/s/ DAVID M. UPTON
David M. Upton
/s/ JOHN Y. WILLIAMS
John Y. Williams
Director
Director
March 24, 2009
March 24, 2009
66
Name of Subsidiary
Azlan European Finance Limited
Azlan GmbH
Azlan Group Limited
Azlan Limited
Azlan Logistics Limited
Azlan Overseas Holdings Ltd
Azlan Scandinavia AB
Brightstar Europe Limited
Computer 2000 Distribution Ltd.
Computer 2000 Portuguesa Lda.
Computer 2000 Publishing AB
Datatechnology Datech Ltd.
Datech 2000 Ltd.
Expander Express AB
Expander Informatic AB
Expander Technical AB
Frontline Distribution Ltd.
Frontline Distribution (Ireland) Ltd.
Globelle Computer Brokers N.V.
Hotlamps Limited
Horizon Technical Services (UK) Limited
Horizon Technical Services AB
Managed Training Services Limited
Maneboard Ltd
Maverick Presentation Products Limited
Quadrangle Technical Services Ltd
Screen Expert Limited
TD Brasil, Ltda.
TD Facilities, Ltd. (Partnership)
TD Fulfillment Services, LLC
TD Tech Data AB
TD United Kingdom Acquisition Limited
Tech Data (Netherlands) B.V.
Tech Data (Schweiz) GmbH
Tech Data bvba/sprl
Tech Data Canada Corporation
Tech Data Chile S.A.
Tech Data Corporation (“TDC”)
Tech Data Denmark ApS
Tech Data Deutschland GmbH
Tech Data Distribution s.r.o.
Tech Data Education, Inc.
Tech Data Espana S.L.U.
Tech Data Europe GmbH
Tech Data European Management GmbH
Tech Data Finance Partner, Inc.
Tech Data Finance SPV, Inc.
Tech Data Financing Corporation
Tech Data Finland OY
Tech Data Florida Services, Inc.
Tech Data France Holding Sarl
Tech Data France SAS
Tech Data GmbH & Co OHG
Tech Data Information Technology GmbH
Tech Data Global Finance LP
Tech Data International Sárl
1
Exhibit 21-A
State or Country of Incorporation
UK (non trading)
Germany
UK (non trading)
UK
UK
UK ( non trading)
Sweden
UK
UK
Portugal
Sweden (dormant)
UK (non trading)
UK (non trading)
Sweden (dormant)
Sweden (dormant)
Sweden (dormant)
UK (non trading)
Ireland (non trading)
Netherlands Antilles (dormant)
UK (non trading)
UK (non trading)
Sweden (dormant)
UK (non trading)
UK (non trading)
UK (non trading)
UK (non trading)
UK (non trading)
Brazil
Texas
Florida
Sweden
UK
Netherlands
Switzerland
Belgium
Canada – Nova Scotia
Chile
Florida
Denmark
Germany
Czech Republic
Florida
Spain
Germany
Germany
Florida
Delaware
Cayman Islands
Finland
Florida
France
France
Germany
Germany (non trading)
Cayman Islands
Switzerland
Name of Subsidiary
Tech Data Italia s.r.l.
Tech Data Latin America, Inc.
Tech Data Lateinamerika Holding GmbH
Tech Data Ltd
Tech Data Luxembourg Sárl
Tech Data Management GmbH
Tech Data Marne SNC
Tech Data Midrange GmbH
Tech Data Mexico S. de R. L. de C. V.
Tech Data Nederland B.V.
Tech Data Norge AS
Tech Data Operations Center, SA
Tech Data Österreich GmbH
Tech Data Peru S.A.C.
Tech Data Polska Sp.z.o.o.
Tech Data Product Management, Inc.
Tech Data Resources, LLC
Tech Data Service GmbH Austria
Tech Data Strategy GmbH
Tech Data Tennessee, Inc.
Tech Data Uruguay S.A.
State or Country of Incorporation
Italy
Florida
Germany (dormant)
UK (non trading)
Luxembourg
Austria
France
Germany (non trading)
Mexico
Netherlands
Norway
Costa Rica
Austria
Peru
Poland
Florida
Delaware
Austria
Germany
Florida
Uruguay
2
Consent of Independent Registered Certified Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statement (Form S-3 No. 333-139340) of Tech Data Corporation and in the related Prospectus
(2) Registration Statements (Forms S-8 Nos. 33-62181, 33-60479, 333-93801, 333-85509, 333-59198 and 333-144298) pertaining to
the Tech Data Corporation incentive plans of our reports dated March 23, 2009, with respect to the consolidated financial statements
and schedule of Tech Data Corporation and the effectiveness of internal control over financial reporting of Tech Data Corporation,
included in this Annual Report (Form 10-K) for the year ended January 31, 2009.
/s/ Ernst & Young LLP
Exhibit 23-A
Tampa, Florida
March 23, 2009
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
Exhibit 31-A
I, Robert M. Dutkowsky, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Tech Data Corporation (the “registrant”);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
c)
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 24, 2009
/s/ ROBERT M. DUTKOWSKY
Robert M. Dutkowsky
Chief Executive Officer
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
Exhibit 31-B
I, Jeffery P. Howells, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Tech Data Corporation (the “registrant”);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
c)
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 24, 2009
/S/ JEFFERY P. HOWELLS
Jeffery P. Howells
Executive Vice President and
Chief Financial Officer
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
Exhibit 32-A
I, Robert M. Dutkowsky, Chief Executive Officer of Tech Data Corporation, certify, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge:
(i)
The Annual Report on Form 10-K of Tech Data Corporation for the annual period ended January 31, 2009 (the “Report”)
fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, (15 U.S.C. 78m), and
(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: March 24, 2009
/s/ ROBERT M. DUTKOWSKY
Robert M. Dutkowsky
Chief Executive Officer
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
Exhibit 32-B
I, Jeffery P. Howells, Executive Vice President and Chief Financial Officer of Tech Data Corporation, certify, pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge:
(i)
The Annual Report on Form 10-K of Tech Data Corporation for the annual period ended January 31, 2009 (the “Report”)
fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, (15 U.S.C. 78m), and
(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: March 24, 2009
/S/ JEFFERY P. HOWELLS
Jeffery P. Howells
Executive Vice President and
Chief Financial Officer
Appendix A
GAAP TO NON-GAAP RECONCILIATION (UNAUDITED)
(In thousands, except per share amounts)
Operating Income
GAAP operating income (loss) ....................................................................
Goodwill impairment ..................................................................................
Loss on disposal of subsidiaries (1) .....................................................
Restructuring charges (2) ..................................................................
Other costs (3) ................................................................................
Non-GAAP operating income .....................................................................
2009
$ 242,159
—
—
—
—
$ 242,159
Fiscal year ended
January 31,
2008
$ 188,354
—
14,471
16,149
—
$ 218,974
2007
$ (4,183)
136,093
—
23,764
8,596
$ 164,270
Net Income
GAAP income (loss) from continuing operations ........................................
$ 123,626
$ 108,269
$ (100,927)
Discontinued operations, net of tax ..............................................................
—
GAAP net income (loss) ..............................................................................
123,626
Goodwill impairment ..................................................................................
Loss on disposal of subsidiaries (1) .....................................................
Restructuring charges (2) ..................................................................
Other costs (3) ................................................................................
Tax effect on non-GAAP adjustment items .................................................
Deferred tax assets valuation allowance ......................................................
—
—
—
—
—
—
—
108,269
—
14,471
16,149
—
(10)
—
3,946
(96,981)
136,093
—
23,764
8,596
(2,502)
8,352
Non-GAAP net income
$ 123,626
$ 138,879
$ 77,322
Net Income per Diluted Share (4)
GAAP net income (loss) per share from continuing operations
Discontinued operations, net of tax ..............................................................
$ 2.40
—
GAAP net income (loss) per share ...............................................................
Goodwill impairment ...................................................................................
Loss on disposal of subsidiaries (1) .....................................................
Restructuring charges (2) ..................................................................
Other costs (3) ................................................................................
Tax effect on non-GAAP adjustment items .................................................
Deferred tax assets valuation allowance .....................................................
2.40
—
—
—
—
—
—
$ 1.96
—
1.96
—
.26
.29
—
—
—
$ (1.83)
.07
(1.76)
2.46
—
.43
.16
(.04)
.15
Non-GAAP net income per diluted share ....................................................
$ 2.40
$ 2.51
$ 1.40
Weighted average common shares outstanding
Basic ..................................................................................................
Diluted ...............................................................................................
51,276
51,498
54,904
55,287
55,129
55,289
(1) Loss on disposal of subsidiaries relates to the exit of the company’s operations in the UAE and Israel.
(2) Restructuring charges for the fiscal year ended January 31, 2008 include $18.1 million related to the closure of a European logistics center and $(2.0) million for
changes in estimates related to the European restructuring program. Restructuring charges for the fiscal year ended January 31, 2007 relate to the company’s
European restructuring program completed in October 2006.
(3) Other costs represent consulting costs related to the company’s European restructuring program completed in October 2006.
(4) Periods that incurred a GAAP net loss per share from continuing operations are calculated using basic weighted average common shares outstanding.
Tech DaTa corporaTion corporaTe informaTion 2009 AnnuAl report
Board of Directors
Officers
robert M. Dutkowsky
Chief Executive Officer
Jeffery p. Howells
Executive Vice President and
Chief Financial Officer
néstor Cano
President,
Europe
Kenneth lamneck
President,
the Americas
Joseph A. osbourn
Executive Vice President and
Chief Information Officer
Charles V. Dannewitz
Senior Vice President,
Taxes and Treasurer
Joseph B. trepani
Senior Vice President and
Corporate Controller
David r. Vetter
Senior Vice President, General Counsel
and Secretary
Steven A. raymund
Chairman of the Board of Directors,
Tech Data Corporation
Charles e. Adair
Partner,
Cordova Ventures and Kowaliga Capital, Inc.
Maximilian Ardelt
Managing Director,
ConDigit Consult GmbH
robert M. Dutkowsky
Chief Executive Officer,
Tech Data Corporation
Harry J. Harczak, Jr.
Retired Executive Vice President,
CDW Corporation
Jeffery p. Howells
Executive Vice President and
Chief Financial Officer,
Tech Data Corporation
Kathleen Misunas
Founder and Principal,
Essential Ideas
thomas I. Morgan
Chairman and Chief Executive Officer,
Baker & Taylor, Inc.
David M. upton
Albert J. Weatherhead III
Professor of Business Administration,
Technology and Operations Management,
Harvard Business School
John Y. Williams
Managing Director,
Equity-South Advisors, LLC
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Corporate Headquarters
Tech Data Corporation
5350 Tech Data Drive
Clearwater, FL 33760
727-539-7429
www.techdata.com
Independent registered Certified
public Accounting Firm
Ernst & Young LLP, Tampa, FL
ethics reporting Hotline
866-TD ETHIC—866-833-8442
Stock listing
The NASDAQ Stock Market, Inc.
Ticker symbol: TECD
transfer Agent
BNY Mellon Shareowner Services
480 Washington Boulevard
Jersey City, NJ 07310-1900
866-357-3551
www.bnymellon.com/shareowner/isd
Annual Meeting of Shareholders
All interested parties are cordially invited to attend
the Annual Meeting of Shareholders on Wednesday,
June 10, 2009 at 3:00 p.m. at the company head-
quarters, Raymund Center, 5350 Tech Data Drive,
Clearwater, FL 33760.
Financial reports
Financial reports, including Form 10-K and annual
reports, can be accessed online at: www.techdata.com.
You may also obtain a copy upon written request to:
Tech Data Corporation
Attention: Investor Relations
5350 Tech Data Drive
Clearwater, FL 33760
Investor Inquiries
Investor Relations
Phone: 800-292-7906
Fax: 727-538-5860
Email: ir@techdata.com
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Tech DaTa corporaTion
5350 Tech Data Drive
Clearwater, Florida 33760
P: 727-539-7429
www.techdata.com
Diversify