Tech Data Corporation
5350 Tech Data Drive
Clearwater, FL 33760
P: 727 539 7429
www.techdata.com
STRENGTH WHERE IT COUNTS
2012 ANNUAL REPORT
Year Ended January 31, 2012
T
E
C
H
D
A
T
A
2
0
1
2
A
N
N
U
A
L
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P
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36179_Cover.indd 1
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STRENGTH
IN OUR BUSINESS
ON THE BALANCE SHEET
Tech Data Corporation is one of the world’s largest
wholesale distributors of technology products. Its advanced
logistics capabilities and value-added services enable over
125,000 resellers in more than 100 countries to efficiently
and cost effectively support the diverse technology needs of
end users, including small and medium businesses (SmB),
large enterprises, consumers and government agencies.
TOTAL CAPITALIzATION:
$2.1 billion
Equity $2.0 billion
Debt $0.1 billion
5%Debt
to Cap
IN THE RESULTS
For the fiscal years ended January 31,
$ in millions, except per share data
Sales
Gross margin
GAAP operating income
Non-GAAP operating income (1)
GAAP operating margin
Non-GAAP operating margin (1)
GAAP net income
Non-GAAP net income (1)
GAAP net income per diluted share
Non-GAAP net income per diluted share (1)
Return on invested capital (1)
Cash conversion cycle (days)
Cash and cash equivalents
Total debt
(1) Please refer to Appendix A for the GAAP to non-GAAP reconciliation
2012
2011
2010
$ 26,488
$ 24,376
$ 22,100
5.26%
328
356
1.24%
1.34%
206
226
4.66
5.09
14%
20
505
105
$
$
$
$
$
$
$
$
5.26%
334
334
1.37%
1.37%
214
214
4.36
4.36
14%
24
764
494
5.21%
$ 259
$ 259
1.17%
1.17%
$ 180
$ 180
$ 3.54
$ 3.54
13%
23
$ 983
$ 404
$
$
$
$
$
$
$
$
THROUGHOUT THE PORTFOLIO
DATA CENTER
~$7.5 BIllIoN
G
E
T
N
I
A
R
T E D S
U
P
P
SOFTWARE
~$4.6 BIllIoN
BROADLINE
L
Y
C
H
A
IN
S
E
C
SERVI
CONSUmER ELECTRONICS
~$3.5 BIllIoN
mOBILITY
~$1.8 BIllIoN
Dollars shown represent approximate
fiscal year 2012 sales. Our reporting
methodology results in some overlap
between certain categories.
TECH DATA CORPORATION
CORPORATE INFORMATION
BOARD OF DIRECTORS
Steven A. Raymund
Chairman of the Board of Directors
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
OFFICERS
Robert M. Dutkowsky
Chief Executive Officer
Jeffery P. Howells
Executive Vice President and
Chief Financial Officer
Néstor Cano
President, Europe
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
Harry J. Harczak, Jr.
Retired Executive Vice President,
CDW Corporation
Jeffery P. Howells
Executive Vice President and
Chief Financial Officer,
Tech Data Corporation
Kathy Misunas
Founder and Principal,
Essential Ideas
Thomas I. Morgan
Chairman and Chief Executive Officer,
Baker & Taylor, Inc.
Savio W. Tung
Chief Executive Officer, North America,
Investcorp
David M. Upton
American Standard Companies
Professor of Operations,
Oxford University
Murray Wright
President, the Americas
John Tonnison
Executive Vice President and
Chief Information Officer
Charles V. Dannewitz
Senior Vice President, Treasurer
Joseph B. Trepani
Senior Vice President,
Corporate Controller
David R. Vetter
Senior Vice President, General Counsel
and Secretary
TRANSFER AGENT
Wells Fargo Shareowner Services
P.O. BOX 64874
St. Paul, mN 55164-0874
800-468-9716
www.shareowneronline.com
ANNUAL mEETING
OF SHAREHOLDERS
All interested parties are cordially
invited to attend the Annual meeting of
Shareholders on Wednesday, may 30,
2012, at 3:00 p.m. at the corporate
headquarters, 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/investor. 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
36179_Cover.indd 2
4/10/12 4:16 PM
DATA
CENTER
~$7.5 BILLION
SOFTWARE
MOBILITY
~$4.5 BILLION
~$1.8 BILLION
CONSUMER
ELECTRONICS
~$3.5 BILLION
STRENGTH IN
LEADERSHIP
My Fellow
Shareholders,
I am pleased to report that Tech Data produced
another strong year, reaching new heights in sales
and earnings per share in fiscal 2012. Much like
the image of competitive rowers on the cover
of this year’s annual report, through a tremen-
dous amount of teamwork and discipline, and
drawing upon our company’s strengths, we
once again delivered value to our customers,
vendor partners and our shareholders.
We began fiscal 2012 on a strong note with
positive momentum from a recovering IT market.
As the year progressed, we faced a number of
challenges brought on by weakness in certain
European markets, general macro-economic
uncertainty in others, and a slowing IT market.
Despite these headwinds, the Tech Data
team demonstrated the strength, balance and
endurance of its operations by delivering another
solid financial performance for the year.
Fiscal 2012 Highlights:
• Grew sales by 9 percent, or 6 percent in
constant currency, to a record $26.5 billion
• Improved non-GAAP operating income to
$356.2 million, and non-GAAP net income to
$225.6 million (excludes charges related to
the exit of Brazil and Colombia)
• Achieved non-GAAP earnings per diluted
share of $5.09 — our fifth consecutive year of
double-digit earnings per share growth
• Generated $503 million of cash from operations
• Earned a return on invested capital of
14 percent
• Completed the acquisition of two specialty
software distributors in Europe
• Returned value to our shareholders through
the repurchase of $315 million of our stock —
the highest level of stock repurchases in any
one year in our history
Strength In Execution: The Engine Room
In competitive rowing, the engine room is
comprised of the team’s strongest athletes.
At Tech Data, execution is our engine room
and the linchpin of our strategy — providing
momentum and propelling us forward.
Strong execution was evident in both regions’
fiscal 2012 performance. In Europe, throughout
the year we experienced pockets of strength and
weakness in the economic environment, with
robust growth in markets such as the U.K. and
Germany, helping to offset softness in the southern
region and in consumer markets. This, together
with the acquisitions we completed in fiscal 2011,
resulted in 8 percent sales growth, in euros, and
the highest level of European sales in our com-
pany’s history. To further position the company
for the future, during the fiscal year we acquired
two European specialty software distributors
and realigned our European resources to match
our cost structure with market conditions. Our
European organization’s solid performance in
fiscal 2012 reflects how the region’s broad
geographic footprint, together with its diverse
array of product and customer sets, help mitigate
our overall exposure and it reaffirms our position
as Europe’s leading distributor of IT products.
Strength in execution was also evident in the
Americas region, which continued its solid track
record of responsible growth and excellent cost
2012 Annual Report [ 1 ]
36179_Narrative.indd 1
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Global Executive Committee (Pictured from left:)Murray Wright, President, the Americas// Néstor Cano, President, Europe// Bob Dutkowsky, Chief Executive Officer// Jeff Howells, Executive Vice President and Chief Financial Officer// Caryl Lucarelli, Vice President, Human Resources// John Tonnison, Executive Vice President and Chief Information Officer management. At year end, we ceased
operations in Brazil and Colombia – markets
that were generating insufficient levels of
profitability and return on invested capital.
Excluding charges related to exiting these
markets, the Americas region grew non-
GAAP operating income more than three
times the rate of sales growth and to its
highest level in 11 years. Our Americas
team’s execution excellence, new market
initiatives and innovative offerings continue
to drive exceptional results and differentiate
Tech Data throughout the region.
In fiscal 2012, our execution engine
extended beyond our regional operations
as we took a number of steps to further
strengthen our capital structure. During
the year, we retired $350 million of our
convertible debt and replaced it with
flexible and cost-effective credit facilities.
We also repurchased $315 million of our
stock in the fiscal year, bringing the total
amount of stock repurchased since fiscal
2006 to $915 million – representing more
than a third of our outstanding shares.
Solid earnings and superb asset manage-
ment resulted in excellent operating cash
flow, and, together with the new capital
structure, we ended the year with the
strongest balance sheet in our company’s
history, providing us with the flexibility to
drive a number of value-creating initiatives
in the future.
Balance Through Diversification
Over the last five years, the key driver to our
steady progression of improved earnings
and return on invested capital, as well as
more balanced results, has been our
diversification to higher-growth specialty
businesses, namely the data center, soft-
ware, mobility and consumer electronics.
With the shifting of the IT market landscape
to cloud-based, mobile and converged
offerings, we have unleashed the strength
of our broadline engine and built significant
practices in these specialty areas. Fueled
by demand for these products, as well as
our focus and investments, these specialty
business areas represented well over half
of Tech Data sales in fiscal 2012. From
industry-standard servers and software-
running data centers to “always on, always
connected” smartphones and network-
attached devices such as tablets, we believe
Tech Data is the only IT distributor in the
market today able to provide our reseller
customers with a robust end-to-end
continuum of offerings.
Endurance Through Innovation
For Tech Data, innovation means using
our IT systems to better serve the channel
and improve our productivity. Our innova-
tive platforms and tools give Tech Data
staying power with our vendor partners
and customers by making us more
responsive to their needs and easier for
them to do business with us. Fiscal 2012
saw the launch of several major game-
changing initiatives that are unmatched
in the IT distribution marketplace. In both
Europe and the Americas, we introduced
TDCloudTM, a comprehensive channel
program that provides resellers with access
to a broad range of cloud-enabling solutions
and services from leading vendors to help
our customers and Tech Data capitalize
on this high growth environment. Our
StreamOneTM Solutions Store in the U.S.
is the channel’s first application storefront
that gives independent software vendors
a platform to reach more customers, and
enables resellers to offer a wide array of
software solutions and cloud services in a
simple, automated fashion. And expanding
on our highly successful Brightstar Europe
joint venture, this past fiscal year we intro-
duced the groundbreaking TDMobilityTM
offering, a U.S. joint venture with Brightstar
Corp. that simplifies the selling, delivery
and support of mobile services for resellers
serving small and medium businesses and
brings to market the industry’s first end-to-
end platform across multiple wireless
carriers. Our ability to extend our vendors’
reach into the attractive SMB space, while
empowering our reseller customers and
simplifying their routes to market through
these offerings, illustrates how Tech Data
is using innovation as a differentiator
and delivering value-added services to
the channel.
Looking Ahead
As we begin the third year of our three-
year financial outlook cycle, and prepare
for our next long-term cycle, we are excited
and energized by the game-changing
technologies our vendor partners continue
to develop, and by our role in bringing
these products to market as efficiently
as possible. Our performance over the
last few years has clearly demonstrated
one of our key strengths — the ability to
successfully navigate the ever-changing
IT market landscape. For example, two
years ago when we set our three-year
goal of achieving a 1.5 percent operating
margin* in fiscal 2013, tablets did not
even appear on our line card. In fiscal
2012, our tablet sales exceeded $1 billion,
proving not only the speed at which tech-
nology is changing, but also the resiliency
of our business model to adapt to these
technological shifts and capitalize on
the opportunities.
We have proven that our flexible business
model provides us with multiple levers to
pull to help us achieve our goals. While
we cannot predict economic cycles or
what breakthrough products will once
again change the IT landscape, we are
confident that we are uniquely positioned
in the specialty areas that provide the
greatest opportunities for profitable
growth. We believe the strength of our
regional operations, our end-to-end
continuum of offerings, financial sound-
ness and disciplined capital deployment
strategy will continue to support our
long-term strategic financial goals and
to create shareholder value.
In closing, we thank our customers and
vendors for their continued partnership.
My thanks to our employees, who are
Tech Data’s greatest strength. Our
performance reflects their exemplary
collective efforts. And as always, we
thank you, our shareholders, for your
continued support and confidence in
Tech Data.
Sincerely,
Bob Dutkowsky
Chief Executive Officer
*Before stock compensation expense
[ 2 ] Tech Data Corporation
36179_Narrative.indd 2
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STRENGTH GoING FoRwARD
OUR GLOBAL EXECUTIVE COMMITTEE
Néstor Cano
President, Europe
European
Region
A diligent focus on working capital management generates strong
operating cash flow, particularly during slower-growth periods,
allowing us to weather economic cycles and take advantage of
opportunities in the market. Going forward, our performance will
be bolstered by enhancements to our capital structure in fiscal
2012 that provide us with additional financing flexibility at lower
rates and yield a low debt-to-capital ratio. Solid earnings, a strong,
flexible balance sheet and healthy cash generation have enabled
Over the last six years, our European region has undergone
us to follow a disciplined capital deployment strategy, one that
a significant business transformation that has considerably
has fueled our growth, both organically and through acquisitions,
improved its financial performance and positioned Tech Data
and returned value to our shareholders through stock buybacks
as Europe’s leading distributor of IT products. Powered by a
single European SAP system and supported by a metrics-driven
integrated regional structure, our European team has created
a partner-focused business model that is able to efficiently
serve customers and vendors on a local, regional or pan-
European basis. A relentless focus on execution and sales
force excellence, enabled by investments in training and tools,
drives organic growth; while an acquisition strategy focused
on specialty areas adds deep domain knowledge and
enables us to sell a full spectrum of technology products –
from the data center to the living room.
By leveraging its scale, diversified portfolio and highly skilled
workforce, and with an intense focus on continuous improve-
ment, Tech Data Europe is delivering value to customers and
vendor partners, producing strong and sustainable financial
results and solidifying our position as Europe’s number one
IT distributor.
Jeff Howells
Executive Vice President and CFO
Financials
Tech Data’s financial strength and stability reflect our
conservative and disciplined long-term approach to managing
the business. Over the past few years, our product diversifica-
tion efforts and focus on responsible growth have produced
stable gross margins, which, combined with our highly efficient
and resilient cost structure, have significantly improved our
earnings and return on invested capital.
of $915 million in the last seven years.
Caryl Lucarelli
Vice President, Human Resources
People
At the heart of Tech Data’s success is our team of highly engaged
employees who are committed to delivering execution excellence
every day. We value the unique contributions and experiences of
our 8,000+ team members throughout the Americas and Europe.
We leverage this diversity to foster an inclusive and collaborative
environment which benefits from innovative thinking and creative
solutions. Our company’s shared values, built upon a foundation
of integrity and respect, guide the manner in which we achieve
business results and interact with each other. Together with our
guiding principles, they unite us under a shared dedication to
teamwork, a passion for winning and a commitment to ownership
and partnership. A global competency model underpins our talent
recruitment, performance management and talent development
processes; and our compensation philosophy links pay with
performance, helping to deliver strong business results that are
aligned with our shareholders’ interests.
Our employees’ passion for excellence and commitment to our
shared values enable Tech Data to drive exceptional results in
a range of environments today, while enhancing our capabilities
to meet the dynamic needs of the IT market tomorrow.
2012 Annual Report [ 3 ]
36179_Narrative.indd 3
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Stock Performance
Assumes Initial Investment of $100 on February 1, 2007
$150
$100
$50
0
2007
2008
2009
2010
2011
2012
(cid:31) Tech Data Corporation
(cid:29) NASDAQ Stock Market (U.S. Companies)
(cid:28) S&P 500
(cid:27) SIC Code – 5045 Wholesale-Computers & Peripheral
Equipment & Software
With operations, delivery, consulting and development capabilities
integrated across the Americas and Europe, Tech Data Information
Technology provides the backbone for our corporation to tirelessly
execute, grow and diversify, and is the spark of innovation that
sets us apart.
Murray Wright
President, the Americas
Americas
Region
Success in today’s highly competitive IT Distribution market
requires the right skills, resources and tools. In the Americas
region, Tech Data has risen to the challenges of operating in
broad and diverse markets by creating a flexible business model
that responds quickly and creatively to the needs of our customers
and vendor partners. Drawing on the strength of our core business,
we are leading the way — fundamentally changing the traditional
view of distributors — by expanding into new and previously
untapped opportunities in the channel. Our innovative initiatives
around mobility, software, cloud solutions and supply chain
services are prime examples of how we are leveraging our
capabilities, adding value and differentiating Tech Data in the
IT distribution market.
In our Americas region, a keen focus on execution, diversification and
innovation, a highly engaged workforce, strong vendor partner and
customer relationships, and a demonstrated ability to continuously
adapt have been key factors to our success in the past and position
us exceptionally well for the future.
John Tonnison
Executive Vice President and CIO
Information
Systems
Enterprise-class, industrial-strength ERP systems underpin the
global operations of Tech Data, while innovative eBusiness
capabilities set the standard for business intelligence,
customer convenience and online interaction. Tech Data’s
global Information Technology organization marries deep
business and process expertise with a long-established
and proven SAP Center of Excellence. The group delivers
the core business systems that fuel scale, operational
excellence and diversification. Creative flair and agile
development methods, combined with special access to
the latest technologies from outstanding vendor partners,
fuse to deliver break-out, partner-empowering innovations
that include StreamOne (Tech Data’s cloud and software
marketplace), AccessTD (our mobile technology-sourcing
tool), InTouch (Europe’s reseller support platform) and
TDMobility (our cellular management solution). The Internet
Commerce Council of select reseller members guides Tech
Data’s online strategy to the opportunities for delivery of
the greatest value and differentiation for our customers.
“ We believe the strength of our regional
operations, our end-to-end continuum of
offerings, financial soundness and disciplined
capital deployment strategy will continue
to support our long-term strategic financial
goals and to create shareholder value.”
Bob Dutkowsky, Chief Executive Officer
[ 4 ] Tech Data Corporation
36179_Narrative.indd 4
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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, 2012
OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 0-14625
TECH DATA CORPORATION
(Exact name of Registrant as specified in its charter)
Florida
(State or other jurisdiction of
incorporation or organization)
5350 Tech Data Drive
Clearwater, Florida
(Address of principal executive offices)
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
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
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
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
No
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
Non-accelerated Filer
Accelerated Filer
Smaller Reporting Company Filer
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
Aggregate market value of the voting stock held by non-affiliates was $1,846,959,416 based on the reported last sale price of
common stock on July 31, 2011, 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 24, 2012
41,131,386
DOCUMENTS INCORPORATED BY REFERENCE
The registrant’s Proxy Statement for use at the Annual Meeting of Shareholders on May 30, 2012, is incorporated by reference
in Part III of this Form 10-K to the extent stated herein.
TABLE OF CONTENTS
Properties
Legal Proceedings
Business
ITEM 1.
Risk Factors
ITEM 1A.
ITEM 1B. Unresolved Staff Comments
ITEM 2.
ITEM 3.
ITEM 4. Mine Safety Disclosures
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder 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. Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
ITEM 8.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
ITEM 9.
ITEM 9A.
Controls and Procedures
ITEM 9B. Other Information
Selected Financial Data
PART III
ITEMS 10, 11 and 12
ITEM 13
ITEM 14.
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits, Financial Statement Schedules
PART IV
ITEM 15.
Signatures
Exhibits
Certifications
2
3
8
12
12
12
13
14
17
18
30
32
60
60
62
62
63
63
64
PART I
ITEM 1. Business.
Overview
Tech Data Corporation (“Tech Data,” “we,” “our,” “us,” or the “Company”), is one of the world’s largest wholesale distributors of
technology products. We serve as an indispensable link in the technology supply chain by bringing products from the world’s leading
technology vendors to market, as well as providing our customers with advanced logistics capabilities and value-added services. Our
customers include more than 125,000 value-added resellers (“VARs”), direct marketers, retailers and corporate resellers who support
the diverse technology needs of end users. We sell to customers in more than 100 countries throughout North America, South
America, Europe, the Middle East and Africa. Throughout this document we will make reference to the two primary geographic
markets we serve as the Americas (including North America and South America) and Europe. For a discussion of our geographic
reporting segments, see “Item 8. Financial Statements and Supplemental Data.”
The Company’s financial objectives are to grow sales at or above the market, gain share in select markets, improve profitability,
generate positive cash flow, and earn a return on invested capital well above our weighted average cost of capital. To achieve this, we
focus on a strategy of execution, diversification and innovation that we believe differentiates our business in the marketplace.
Execution is fundamental to our business success, and at its core are 29 logistics centers where each day, tens of millions of dollars of
technology products are received, packaged and shipped to our customers. Products are generally shipped from regionally located
logistics centers the same day the orders are received. In addition, execution is marked by a high level of service provided to our
customers through our company’s technical, sales and marketing support, electronic commerce tools, product integration services and
financing programs.
Our diversification strategy seeks to continuously remix our product and customer portfolios towards higher growth and higher return
market segments through organic growth initiatives and acquisitions. We believe that as industry standardization, mobility, cloud
computing, the convergence of consumer and professional devices and other potentially disruptive factors transform the way
technology is used and delivered, we will leverage our highly efficient logistics infrastructure to capture new market opportunities
emerging in specialty areas, such as data center, software, consumer electronics and mobility.
The final tenet of our strategy is innovation. Our IT systems and e-business tools and programs have provided our business with the
flexibility to effectively navigate fluctuations in market conditions, structural changes in the technology industry, as well as changes
created by products we sell. These IT systems and e-business tools and programs have also worked to strengthen our vendor and
customer relationships, while at the same time improving the efficiency and profitability of these business partners.
We believe our strategy of execution, diversification and innovation will continue to strengthen our position in the technology supply
chain and positions us for continued growth and improved profitability in the future.
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 fiscal 1989 through fiscal 2007, we expanded our geographic footprint and strengthened our position in certain product and
customer segments through the acquisitions of several distribution companies in both the Americas and Europe.
In fiscal 2008, we executed a joint venture agreement with Brightstar Corp., one of the world’s largest wireless products distributors
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. This joint venture generated revenues
of approximately $1.8 billion during the year ended January 31, 2012.
3
In fiscal 2011, we continued to support our diversification strategy by completing five acquisitions in Europe, including the
acquisition of Triade Holding B.V. (“Triade”), a privately-held portfolio of leading value-added distributors of consumer electronics
and information technology products in the Benelux region, Denmark and Norway. We believe the acquisition of Triade strengthened
our presence in Benelux, Denmark and Norway and enabled us to accelerate our diversification strategy into the consumer electronics
business in Europe, while leveraging our logistics infrastructure. In a related transaction, Brightstar Europe Limited (“BEL”), our
consolidated joint venture with Brightstar Corp., acquired Triade’s mobility subsidiaries in Belgium and the Netherlands (“MCC”),
significantly extending BEL’s mobility operations in Europe.
In fiscal 2012, expanding upon the success of our mobility distribution joint venture in Europe, we executed an agreement with
Brightstar Corp. to establish a joint venture in the United States, hereinafter referred to as TDMobility. TDMobility simplifies the
selling, delivery and support of mobile services for our resellers serving the small and medium business markets. In addition, during
the fiscal year we made two acquisitions in the European technology distribution marketplace. While the acquisitions did not have a
significant impact on our consolidated results of operations, the addition of these businesses expanded our product and customer
portfolios and continued to add desired skill sets, while leveraging our logistics infrastructure in Europe. Lastly, in fiscal 2012 we
exited our commercial in-country operations in Brazil and Colombia. Brazil’s complex legal, tax and regulatory environments
prevented us from generating an adequate level of profitability and a sufficient return on invested capital. In Colombia, a small
greenfield operation launched in fiscal 2010, we were unable to gain a level of traction equal to our investment in that market, and
thus we ceased our in-country operations at the end of fiscal 2012. We will continue to serve both the Brazil and Colombia markets
through our Miami-based export business.
Industry
The wholesale distribution model has proven to be well suited for both manufacturers and publishers of technology products (also
referred to in 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 and highly fragmented customer base.
Resellers in the traditional distribution model are able to build efficiencies and reduce costs by relying on distributors, such as Tech
Data, for a number of services, including multi-vendor solutions, product configuration/integration, marketing support, financing,
technical support, and inventory management, which includes direct shipment to end-users and, in some cases, provides end-users
with the distributors’ inventory availability.
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.
The technology distribution industry continues to address a broad spectrum of reseller and vendor requirements. While some vendors
have elected to sell directly to resellers or end-users for particular customer and product segments, we believe that a growing number
of vendors continue to embrace traditional distributors that have proven capabilities to manage multiple products and resellers,
provide access to fragmented markets, and deliver products in an efficient manner.
New products and market opportunities have helped to offset the impact of vendor direct sales on technology distributors. Further,
vendors continue to seek the logistics expertise of distributors to penetrate highly fragmented 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 and well-capitalized distributors are expected to continue to be
significant competitive advantages in this marketplace.
Products and Vendors
We distribute and market more than 150,000 products from more than 500 of the world’s leading computer hardware suppliers,
networking equipment suppliers, software publishers, and other suppliers of computer peripherals, physical security, consumer
electronics, digital signage and mobility hardware. These products are typically purchased directly from the vendor 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. Overall, we believe that our diversified and evolving product portfolio will provide a solid platform for
continued growth.
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 vendor. 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.
4
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. We
sell products in various countries throughout the world, and product categories may vary from region to region. On a consolidated
basis, over the years, our revenue mix which may fluctuate between and within different operating regions, has shifted from
commoditized products to more specialized offerings, reflected in an increase in systems and networking and a decrease in
peripherals as a percentage of total sales. During fiscal 2012, sales within our consolidated product categories approximated the
following:
Systems
Peripherals
Networking
Software
35%
29%
19%
17%
We generated approximately 25%, 27% and 28% of our consolidated net sales in fiscal 2012, 2011 and 2010, respectively, from
products purchased from Hewlett-Packard Company. There were no other vendors that accounted for 10% or more of our
consolidated net sales in fiscal 2012, 2011 or 2010.
Customers and Services
Our products are purchased directly from vendors in significant quantities and are marketed 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 2012, sales within our consolidated customer channels
approximated the following:
VARs
Direct marketers and retailers
Corporate resellers
53%
26%
21%
No single customer accounted for more than 10% percent of our net sales during fiscal 2012, 2011 or 2010.
The market for VARs is attractive because VARs generally rely on distributors as their principal source of technology 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
vendors for higher volume products, but utilize distributors as the primary source for other product requirements and an alternative
source for products acquired directly.
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 electric data interchange (“EDI”) services), customized
shipping documents, product configuration/integration services and access to flexible financing programs. We also provide services to
our vendors by providing 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% of our consolidated net sales.
We provide our vendors with one of the largest bases of resellers throughout the Americas and Europe, delivering products to
customers from our 29 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).
5
Sales and Electronic Commerce
Our sales representatives consist of field and inside telemarketing sales representatives. The sales representatives are provided
comprehensive training regarding our policies and procedures, technical characteristics of our products and product seminars offered
by our vendors. Field sales representatives are typically located in major metropolitan areas in their respective geographies and are
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 telephone 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, customers can gain remote access to
our information systems to place orders, or check order status, inventory 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. In fiscal 2012, approximately $11.6 billion (44%) of our consolidated net sales originated from orders received
electronically, compared to approximately $10.7 billion (44%) of our consolidated net sales in fiscal 2011.
Competition
We operate in a market characterized by intense competition, based upon such factors as rapid technological changes, product
availability, credit availability, price, speed of delivery, ability to tailor solutions to customer needs, quality and depth of product lines
and training, as well as service 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 broadline product distributors such as Ingram Micro Inc.,
Synnex Corp., and to a lesser extent, more specialized distributors such as Arrow Electronics, Inc. (“Arrow”) and Avnet, Inc.
(“Avnet”), along with some regional and local distributors. The competitive environment within Europe is highly fragmented, with
market share spread among many regional and local competitors such as ALSO/Actebis and international distributors such as Ingram
Micro Inc., Westcon Group, Inc. (including its Comstor business unit), Arrow and Avnet.
The Company also faces competition from companies entering or expanding into the logistics and product fulfillment and e-
commerce supply chain services market and the evolving direct sales relationships between manufacturers, resellers, and end-users
continue to introduce change into the competitive environment of our industry. As we expand our business into new areas, we may
face increased competition from other distributors as well as vendors. However, we believe vendors will continue to sell their
products through distributors, such as Tech Data, due to our ability to provide them with access to our broad customer base and serve
them in a highly efficient manner. Our network of logistics centers and our sales, credit and product management expertise allow our
vendors to expand their coverage markets, while lowering their selling, inventory and fulfillment costs.
Employees
On January 31, 2012, we had approximately 8,300 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.
Our success depends on the talent and dedication of our employees and we strive to attract, hire, develop and retain outstanding
employees. We believe we realize significant benefits from having a strong and seasoned management team with many years of
experience in the technology distribution and related industries. 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 technology products, logistics management, and other
value-added services. While we operate primarily in one industry, we manage our business in two geographic segments: the Americas
(including North America and South 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, our earnings potential and the risk exposure in those markets, including foreign
currency exchange, regulatory and political risks. To the extent we decide to close any of our operations, we may incur charges and
operating losses related to such closures and recognize a portion of our accumulated other comprehensive income (loss) in connection
with such a disposition.
6
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. Our business, like that of other distributors, is subject to the risk that the
value of inventory will be impacted adversely by suppliers’ price reductions or by technological changes affecting the usefulness or
desirability of the products comprising the inventory. 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. Information on Tech Data’s website is not incorporated into this Form 10-K
or the Company’s other securities filings and is not a part of them.
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 2, 2012:
Name
Robert M. Dutkowsky
Jeffery P. Howells
Néstor Cano
Murray Wright
John Tonnison
Charles V. Dannewitz
Joseph B. Trepani
David R. Vetter
Age
57
54
47
55
43
56
51
52
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 and Treasurer
Senior Vice President and Corporate Controller
Senior Vice President and 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 over 30 years of experience in the IT industry including senior management positions in sales,
marketing and channel distribution with leading manufacturers and software publishers, including International Business Machines
Corporation (“IBM”), EMC Corporation and J.D. Edwards, Inc. 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.
7
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.
Murray Wright, President, the Americas joined Tech Data in November 2006 as Senior Vice President, U.S. Sales, and in 2010, he
was promoted to President, the Americas. Mr. Wright has more than 25 years of experience in the IT industry including senior executive
positions with leading manufacturers and a global IT distributor. Prior to joining Tech Data, Mr. Wright was President of Lenovo
Canada, where he had responsibility for all company operations including sales, marketing and channel strategies. Prior to Lenovo,
Mr. Wright spent seven years with IT distributor, Ingram Micro Canada, where he served as General Manager. Mr. Wright also served
as General Manager of Sharp Electronics of Canada, Ltd., and began his career with Xerox Canada Inc. He earned a bachelor’s degree
from Clarkson University.
John Tonnison, Executive Vice President and Chief Information Officer, joined the Company in March 2001 as Vice President,
Worldwide E-Business and assumed the responsibilities of Senior Vice President of Information Technology in December 2006. In
February 2010, he was promoted to Executive Vice President and Chief Information Officer. Prior to joining Tech Data, Mr. Tonnison
held executive management positions in the U.S., United Kingdom and Germany with Computer 2000, Technology Solutions Network
and Mancos Computers. Mr. Tonnison was educated in the United Kingdom and became a U.S. citizen in 2006.
Charles V. Dannewitz, Senior Vice President 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 operations 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.
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. Risk factors that could cause actual
results to differ materially from our forward-looking statements are as follows:
Global Economic and Political Instability
Although there are indications that the global economy is improving, there can be no assurance that it will continue to improve. High
levels of unemployment in many of the markets we serve, including the United States and certain countries in Europe, as well as
austerity measures that may be implemented by governments in those markets, may constrain growth, increase unemployment and
depress consumer confidence. Sovereign credit issues, particularly in Europe, may also adversely affect credit markets in that region and
elsewhere. If a country within the euro area were to default on its debt or withdraw from the euro currency, or in a more extreme case, if
the euro currency were to be dissolved entirely, the impact on markets around the world could be immediate and significant. Persistent
political unrest in the Middle East and Africa may also have more general negative effects on the global economy. The uncertain global
economic environment 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
8
fragile economic environment may also result in changes in vendor terms and conditions, such as rebates, cash discounts and
cooperative marketing efforts, which may result in downward pressure on our gross margins. Deterioration in the financial and credit
markets heightens the risk of customer bankruptcies and delay in payment. Future deterioration in the credit markets could result in
reduced availability of credit insurance to cover customer accounts. This, in turn, may result in our reducing the credit lines we
provide to customers, thereby having a negative impact on our net sales. In addition, in such an environment, there is a 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.
Competition
The Company operates in a highly competitive environment. The technology 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. Our business strategy depends substantially on
our ability to continue to provide a diverse and innovative line of products to our customers, and if we fail to do so, our competitive
position could deteriorate. Demand weakness, such as occurred during the recent financial crisis, also 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 may have greater financial resources than the Company. If the Company’s competitive position declines,
its results of operations and prospects will be adversely affected.
Narrow Margins
Like other companies in the technology distribution industry, the Company’s business is characterized by narrow gross and operating
margins. These narrow margins magnify the impact on the Company’s operating results attributed to variations in sales and operating
costs and place a premium on our ability to leverage our infrastructure. 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.
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 or that the Company’s information systems’ security controls will
prevent a cybersecurity incident. In fiscal 2013, the Company will continue to deploy core applications currently operating in the
European business into the Americas region and continue to invest in the IT infrastructure in Europe. There can be no assurances that
there will be no disruptions, delays and/or negative operational impact from these ongoing implementations.
Acquisitions and Divestitures
As part of its growth and diversification strategies, the Company pursues the acquisition of companies that complement and/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 without significant costs.
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 or other natural disasters, major electrical failures or other
similar events may disrupt the Company’s business should its ability to distribute products be impacted by such an event. As a
company which operates in multiple geographic segments, the Company’s business, as well as those of its vendors or customers, can
also be adversely affected by acts of war and terrorism or by pandemics or other health events. Any of these events could disrupt the
Company’s distribution of products or significantly affect product demand or availability in ways that could materially and adversely
affect the Company’s results and prospects.
9
Dependence on Independent Shipping Companies
The Company relies on arrangements with independent shipping companies 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 an 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. The recent significant and ongoing political unrest in oil-
producing nations has caused oil prices to rise, which in turn has affected fuel prices and can be expected to continue to do so. There
can be no assurance that Tech Data will be able to pass along the full effect of these costs 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 technology 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 an adverse effect on the Company’s business.
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
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 products 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 revenue, operating margins, 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 vendors. A vendor 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
10
other significant vendors. 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 vendors, or significant changes in terms on their products may adversely affect 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 and / or
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. 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.
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 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, 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 incurrence of losses in some countries. The realization of any or all of these risks
could have a significant adverse effect on our financial results. In addition, 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 made investments in the country.
International Operations
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.
11
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,
product labeling and compliance requirements, hazardous materials and electronic waste recovery legislation, and other laws related
to trade and business activities. Such changes in legislation, both domestic and international, may have a significant adverse effect on
the Company’s business.
Potential Adverse Effects of Litigation or Regulatory Enforcement Actions
The Company cannot predict what losses we might incur in litigation matters, regulatory enforcement actions and contingencies that
we may be involved with from time to time. There are various claims, lawsuits and pending actions against us. It is our opinion that
the ultimate resolution of these matters will not have a material adverse effect on our consolidated financial position. However, the
resolution of certain of these matters could be material to our operating results for any particular period, depending on the level of
income for such period. We can make no assurances that we will ultimately be successful in our defense of any of these matters.
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 an 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.
Not applicable.
Unresolved Staff Comments.
ITEM 2. Properties.
Our executive offices are located in Clearwater, Florida. As of January 31, 2012, we operated a total of 29 logistics centers to provide
our customers timely delivery of products. These logistics centers are located in the following principal markets: Americas – 15, and
Europe – 14.
As of January 31, 2012, we leased or owned approximately 7.8 million square feet of space. 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 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 will not be material to the
Company’s consolidated financial position; however, it could be material to the Company’s operating results for any particular
period, depending upon the level of income for such period.
12
In December 2010, in a non-unanimous decision, a Brazilian appellate court overturned a 2003 trial court which had previously ruled
in favor of the Company’s Brazilian subsidiary related to the imposition of certain taxes on payments abroad related to the licensing
of commercial software products, commonly referred to as “CIDE tax”. The Company estimates the total exposure where the CIDE
tax, including interest, may be considered due, to be approximately $32.0 million as of January 31, 2012. The Brazilian subsidiary has
moved for clarification of the ruling and intends to appeal if the court does not rule in its favor. However, in order to pursue the next
level of appeal, the Brazilian subsidiary may be required to make a deposit or to provide a guarantee to the courts for the payment of
the CIDE tax pending the outcome of the appeal. Based on the legal opinion of outside counsel, the Company believes that the
chances of success on appeal of this matter are favorable and the Brazilian subsidiary intends to vigorously defend its position that the
CIDE tax is not due. However, no assurance can be given as to the ultimate outcome of this matter. The resolution of this matter will
not be material to the Company’s consolidated financial position or liquidity; however, it could be material to the Company’s
operating results for any particular period, depending upon the level of income for such period.
The Company is subject to various other legal proceedings and claims arising in the ordinary course of business. The Company’s
management does not expect 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.
ITEM 4.
Mine Safety Disclosures.
Not applicable.
13
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder 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 24, 2012, there were 263 holders of record and we believe that there are approximately 18,000 beneficial
holders.
Fiscal year 2012
Fourth quarter
Third quarter
Second quarter
First quarter
Fiscal year 2011
Fourth quarter
Third quarter
Second quarter
First quarter
$
$
Sales Price
High
Low
53.30 $
52.05
53.91
54.25
44.16
38.21
44.38
46.62
47.88 $
44.41
43.54
46.02
42.39
35.30
34.82
39.62
Stock Performance Chart
The five-year stock performance chart below assumes an initial investment of $100 on February 1, 2007 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 provided in accordance with SEC requirements
and are not intended to forecast or be indicative of possible future performance of our common stock.
14
Comparison of Cumulative Total Return
Assumes Initial Investment of $100 on February 1, 2007
Among Tech Data Corporation,
NASDAQ Stock Market (U.S.) Index and SIC Code 5045
Tech Data Corporation
NASDAQ Stock Market (U.S.) Index
2007 2008 2009 2010 2011 2012
126 140
100
110
49
93
100
96
61
88
113 121
SIC Code 5045 – Computer and Peripheral Equipment and Software
100
79
50
85
101
92
None.
Unregistered Sales of Equity Securities
Issuer Purchases of Equity Securities
During fiscal 2012, the Company’s Board of Directors authorized share repurchase programs for the repurchase of up to a total of $400.0
million of the Company’s common stock. Throughout fiscal 2012, the Company’s share repurchases were made on the open market
through block trades or otherwise. The number of shares purchased and the timing of the purchases were based on regulatory requirements,
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 plans and the
Company’s Employee Stock Purchase Plan (“ESPP”).
During fiscal 2012, the Company repurchased 6,736,436 shares at an average of $46.74 per share, for a total cost, including expenses, of
$314.9 million under these programs.
The following table presents information with respect to purchases of common stock by the Company under the share repurchase programs
during the quarter ended January 31, 2012:
Period
November 1 – November 30, 2011
December 1 – December 31, 2011
January 1 – January 31, 2012
Total number of
shares purchased
0
135,931
157,963
Issuer Purchases of Equity Securities
Total number of shares
purchased as part
of publicly announced
plan or programs
0
135,931
157,963
Average price paid
per share
0
50.64
50.66
$
$
$
15
Maximum dollar
value of shares
that may yet
be purchased under
the plan or programs
Total
Total number of
shares purchased
293,894
Average price paid
per share
$
50.65
Total number of shares
purchased as part
of publicly announced
plan or programs
293,894
Maximum dollar
value of shares
that may yet
be purchased under
the plan or programs
85,113,808
$
Issuer Purchases of Equity Securities
In conjunction with the share repurchase programs discussed above, we executed 10b5-1 plans that instruct the broker selected by us
to repurchase shares on behalf of the Company. The amount of common stock repurchased in accordance with the 10b5-1 plans on
any given trading day is determined by a formula in the plan, which is based on the market price of our common stock. Shares
repurchased by us are held in treasury for general corporate purposes, including issuances under equity incentive plans and the ESPP.
16
ITEM 6.
Selected Financial Data.
The following table sets forth certain selected consolidated financial data. 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)
2012
2011
Year ended January 31,
2010
2009
2008
(1)
Income statement data:
Net sales
Gross profit
Operating income
Consolidated net income
(5)
Net (income) loss attributable to noncontrolling
(2)(3)(4)
interest
$26,488,124 $24,375,973 $22,099,876 $24,080,484 $23,423,078
1,138,402
192,348
98,570
1,181,995
211,158
115,456
1,393,991
327,858
216,848
1,152,354
259,476
181,200
1,283,288
333,985
218,863
(10,452)
(4,620)
(1,045)
1,822
3,559
Net income attributable to shareholders of Tech Data
Corporation
(5)
$
206,396 $
214,243 $
180,155 $
117,278 $
102,129
Net income per share attributable to shareholders of
Tech Data Corporation—basic
Net income per share attributable to shareholders of
Tech Data Corporation—diluted
$
$
Dividends per common share
4.72 $
4.41 $
3.57 $
2.29 $
1.86
4.66 $
0
4.36 $
0
3.54 $
0
2.28 $
0
1.85
0
Balance sheet data:
Working capital
Total assets
(6)
Revolving credit loans and current maturities of
long-term debt, net
Long-term debt, net
Equity attributable to shareholders of Tech Data
Corporation
$ 1,739,323
5,785,418
$ 1,902,111
6,412,083
$ 2,250,430 $ 1,891,897 $ 2,044,418
5,009,144
4,815,384
5,696,453
48,490
57,253
434,435
60,076
65,860
338,157
58,888
331,233
19,558
323,810
1,973,823
2,114,466
2,088,895
1,737,693
1,945,332
(1) See Note 5 of Notes to Consolidated Financial Statements for discussion of the Company’s acquisitions in fiscal 2012 and 2011.
(2) During fiscal 2012, the Company incurred a $28.3 million loss on disposal of subsidiaries related to the closure of certain of the Company’s operations in Latin America
(see further discussion in Note 6 of Notes to the Consolidated Financial Statements).
(3) During fiscal 2008, the Company incurred a $14.5 million loss on disposal of subsidiaries related to the closure of the Company’s operations in the United Arab Emirates
and the sale of its Israel operations.
(4) During fiscal 2008, the Company recorded restructuring costs of $16.1 million related to the Company’s European restructuring programs.
(5) During fiscal 2012, the Company recorded a $13.6 million reversal of deferred tax valuation allowances which was substantially offset by the write-off of deferred income
tax assets associated with the closure of Brazil’s commercial operations. During fiscal 2010, the Company recorded a $5.4 million decrease in the deferred tax valuation
allowance See Note 8 of Notes to Consolidated Financial Statements. In fiscal 2009 the Company recorded a net reversal of $8.7 million in income tax reserves and in fiscal
2008, the Company recorded a decrease in the deferred tax valuation allowance of $7.5 million.
(6) See Note 1 of Notes to Consolidated Financial Statements for discussion of the Company’s adjustment of prior fiscal years due to its accounting for book overdrafts.
17
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, 2012 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 and political instability
competition
narrow margins
dependence on information systems
acquisitions and divestitures
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
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
international operations
changes in income tax and other regulatory legislation
potential adverse effects of litigation or regulatory enforcement actions
changes in accounting rules
volatility of common stock price
Overview
Tech Data is one of the world’s largest wholesale distributors of technology products. We serve as an indispensable link in the
technology supply chain by bringing products from the world’s leading technology vendors to market, as well as providing our
customers with advanced logistics capabilities and value-added services. Our customers include value-added resellers (“VARs”)
direct marketers, retailers and corporate resellers who support the diverse technology needs of end users. We manage our business in
two geographic segments: the Americas (including North America and South America) and Europe.
The Company’s financial objectives are to grow sales at or above the market rate of growth for technology products, gain share in
select markets, improve profitability, generate positive cash flow, and earn a return on invested capital above our weighted average
cost of capital. To achieve this, we are focused on a strategy of execution, diversification and innovation that we believe differentiates
our business in the marketplace.
18
The fundamental element of our strategy is superior execution. Our execution strategy is supported by our highly efficient logistics
infrastructure, combined with our multiple service offerings, to generate demand, develop markets and provide supply chain services
for our vendors and customers. The technology 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 and declining average selling prices per unit, 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. 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, 2012, we had a debt to capital ratio (calculated as total debt divided by the
aggregate of total debt and total equity) of 5%.
In addition to driving superior execution, we continue to diversify and realign our customer and product portfolios to improve long-
term profitability throughout our operations. Our broadline distribution business, characterized as high volume, more commoditized
offerings, and comprised primarily of personal computer systems, peripherals, supplies and other similar products, continues to be the
foundation of our business and represents a significant percentage of our revenue. However, as technology advances, we have
continued to evolve our business model, product mix, and value-added offerings in order to provide our vendors with the most
efficient distribution channel for their products, and our customers with a broad array of innovative solutions to sell. We have
responded to a changing IT landscape with investments in higher growth specialty areas, namely, the data center, software, consumer
electronics and mobility, all of which now contribute significantly to our financial results. Our investments in our European mobility
joint venture with Brightstar Corp. (“Brightstar”), which began in 2008, generated revenues of approximately $1.8 billion during
fiscal 2012. The most recent examples of such investments are acquisitions made in Europe during the second half of fiscal 2012. In
October 2011, we acquired the distribution business of Mensch und Maschine Software SE, a leading value-added distributor in the
design software market in several European countries for a purchase price of $41.0 million, including deferred payments and
earnouts, (based on the foreign currency exchange rates on the date of acquisition). In December 2011, we acquired an additional
value-added specialty software distributor in Belgium. These acquisitions, while not material to our consolidated financial results,
strengthen our position as Autodesk, Inc.’s leading value-added distributor by establishing a presence in Benelux and Romania,
extend our product portfolio to include the Autodesk, Inc. software for the manufacturing industry in Italy, France, UK and Poland,
and add a number of highly skilled and qualified professionals to our team across Europe. In addition, in April 2011, we executed an
agreement with Brightstar to establish a U.S. joint venture to capitalize on the mobility market serving small and medium size
businesses (“SMB”). The joint venture will assist our reseller customers in providing SMB end users with a wide array of products
and services including wireless activation and renewal processes, data services, software, hardware, technical support and billing
management. Finally, another strategic area of investment for us is our integrated supply chain services designed to provide
innovative third party logistics and other offerings to our business partners. Our evolving mix of products, services, customers and
geographies have played a key role in delivering balanced and improved operating results, and are important factors in achieving our
strategic financial goals. As we execute our diversification strategy 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.
The final tenet of our strategy is innovation. Our IT systems and e-business tools and programs have provided our business with the
flexibility to effectively navigate fluctuations in market conditions, structural changes in the technology industry, as well as changes
created by products we sell. One of our most recent and significant innovations is our StreamOne Solutions Store. The StreamOne
Solutions Store provides independent software vendors and cloud providers with a platform to market software-as-a-service and other
offerings to more than 20,000 of our resellers in the United States, thereby establishing a previously unavailable route to market for
these independent software vendors and cloud providers. Another example of our investment in innovation and one that we believe is
providing us with the flexibility to meet the demands of the ever-evolving technology market, is our continued deployment of internal
IT systems across both the Americas and Europe. We believe our pan-European IT systems provide us with a competitive advantage
allowing us to drive efficiencies throughout our business while delivering innovative solutions for our business partners. In the past,
we have implemented several components of our European IT systems into our North American IT infrastructure, including
standardizing our North America financial systems and logistics network on SAP. In fiscal 2013, we will continue to deploy core
applications currently operating our European business into our Americas region and continue to invest in our IT infrastructure in
Europe. While we have had numerous successful IT system implementations in both Europe and in North America to date, we can
make no assurances that we will not have disruptions, delays and/or negative operational impacts from these ongoing
implementations.
We believe our strategy of execution, diversification and innovation is differentiating us in the markets we serve and is delivering
solid sales growth, select market share gains, higher earnings per share, strong operating cash flow, and industry-leading returns on
invested capital. We are constantly monitoring the factors that we can control, including our net sales growth, management of costs,
19
working capital and capital spending. We also continuously evaluate the current and potential profitability and return on our
investments in all geographies and consider changes in current and future investments based on risks, opportunities and current and
anticipated market conditions. In connection with these evaluations, we may incur additional costs to the extent we decide to increase
or decrease our investments in certain geographies. We will also continue to evaluate targeted strategic investments across our
operations and new business opportunities. For example, during the fourth quarter of fiscal 2012, in response to current and
anticipated market conditions, we realigned our personnel resources in Europe, reducing personnel in certain lower growth, lower
margin markets and increasing personnel in those markets providing the greatest opportunity for profitability and shareholder returns,
resulting in an incremental year-over-year increase of $11.0 million in severance costs during the quarter, and a net reduction of our
personnel in Europe. We will continue to invest in those markets and product segments we believe provide us with the greatest
opportunities for profitable growth. In addition, during the fourth quarter of fiscal 2012 as part of our ongoing initiatives to optimize
profitability and return on invested capital, we closed our in-country commercial operations in Brazil and Colombia. Both of these
operations failed to meet our goals for profitability and return on investment. As a result of these closures, we incurred total cash and
non-cash charges of $28.3 million during the fourth quarter of fiscal 2012. These costs do not include any estimated costs associated
with the Brazilian subsidiary’s contingencies related to CIDE and other non-income related tax examinations previously disclosed.
We will maintain a legal entity in Brazil to address our future fiscal and legal responsibilities. We will continue to serve both of these
markets through our Miami-based export business.
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 ongoing 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.
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 for specifically identified
cooperative advertising programs and infrastructure funding are recorded when earned as adjustments to product costs or selling,
general and administrative expenses, depending on the nature of the programs.
20
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, if any, is charged to expense in the period identified.
The Company performed its annual goodwill impairment test as of January 31, 2012 and determined there was no impairment. 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 it is more likely than not that we will 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 not likely 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.
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 in assessing the performance of our operating segments, and therefore the
Company reports stock-based compensation expense separately. The following table summarizes our net sales, change in net sales,
operating income and Non-GAAP operating income by geographic region for the fiscal years ended January 31, 2012, 2011 and
2010:
2012
% of
net sales
2011
% of
net sales
2010
% of
net sales
Net sales by geographic region ($ in
thousands):
Americas
Europe
Total
$ 10,839,044
15,649,080
$ 26,488,124
40.9% $ 10,534,531
13,841,442
100.0% $ 24,375,973
59.1
21
43.2% $
9,570,088
12,529,788
100.0% $ 22,099,876
56.8
43.3%
56.7
100.0%
Year-over-year increase (decrease) in net
sales (%):
Americas (US$)
Europe (US$)
Europe (Euro)
Total (US$)
2012
2011
2010
2.9%
13.1%
8.1%
8.7%
10.1%
10.5%
17.5%
10.3%
(9.8)%
(7.0)%
(4.2)%
(8.2)%
Operating income ($ in thousands):
Americas
Europe
Stock-based compensation expense
Total
2012
% of
net sales
2011
% of
net sales
2010
% of
net sales
$ 174,882
163,675
(10,699)
$ 327,858
1.61 % $ 183,639
160,233
1.05 %
(0.04)%
(9,887)
1.24 % $ 333,985
1.74 % $ 143,869
1.16 % 126,832
(0.04)%
(11,225)
1.37 % $ 259,476
1.50 %
1.01 %
(0.05)%
1.17 %
2012
% of
net sales
2011
% of
net sales
2010
% of
net sales
Non-GAAP Operating income ($ in thousands):
Americas
Europe
Stock-based compensation expense
Total
$ 203,176
163,675
(10,699)
$ 356,152
1.87 % $ 183,639
160,233
1.05 %
(9,887)
(0.04)%
1.34 % $ 333,985
1.74 % $ 143,869
1.16 %
126,832
(11,225)
(0.04)%
1.37 % $ 259,476
1.50 %
1.01 %
(0.05)%
1.17 %
Non-GAAP operating income excludes the loss on disposal of subsidiaries of $28.3 million for the exit of the Company’s in-country
commercial operations in Brazil and Colombia in the fourth quarter of fiscal 2012. Management believes that this non-GAAP
measure, which excludes the costs of these actions, is useful to investors because it provides meaningful comparisons to prior periods’
financial results.
We sell many products purchased from the world’s leading systems, peripherals, networking and software vendors. Products
purchased from Hewlett-Packard Company generated 25%, 27% and 28% of our net sales in fiscal 2012, 2011 and 2010, respectively.
There were no other vendors that accounted for 10% or more of our net sales in the past three fiscal years.
The following table sets forth our Consolidated Statement of Income 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
Loss on disposal of subsidiaries
Operating income
Interest expense
Other expense (income), net
Income before income taxes
Provision for income taxes
Consolidated net income
Net income attributable to noncontrolling interest
Net income attributable to shareholders of Tech Data Corporation
22
2012
2011
100.00% 100.00% 100.00%
94.74 94.74 94.79
5.21
5.26
5.26
2010
3.91
0.11
4.02
1.24
0.12
0
1.12
0.30
0.82
(0.04)
0.78%
3.89
0
3.89
1.37
0.12
0
1.25
0.35
0.90
(0.02)
0.88%
4.04
0
4.04
1.17
0.12
(0.01)
1.06
0.24
0.82
0.00
0.82%
Net Sales
Our consolidated net sales were $26.5 billion in fiscal 2012, an increase of 8.7% when compared to fiscal 2011. The strengthening of
certain foreign currencies against the U.S. dollar positively impacted the year-over-year net sales comparison by approximately three
percentage points. On a regional basis, during fiscal 2012, net sales in the Americas increased by 2.9% compared to fiscal 2011 and
increased by 13.1% in Europe (an increase of 8.1% on a euro basis).
Throughout fiscal 2012, we were impacted by an overall slowing of the IT market and a challenging macro economic environment
within certain European countries. Despite these factors, net sales in both the Americas and Europe regions increased during fiscal 2012
compared to fiscal 2011 primarily as a result of the flexibility of our business model to successfully navigate the changing IT market.
The increase in net sales in the Americas during fiscal 2012 was primarily attributable to a generally stable demand for technology
products in the region in comparison to the prior fiscal year, offset by the impact of lower sales in Brazil and Colombia during fiscal
2012 as a result of our decision to close both of these operations. The reduction in net sales in Brazil and Colombia negatively impacted
the Americas growth rate in fiscal 2012 by approximately one percentage point. The increase in net sales in Europe (on a euro basis)
during fiscal 2012 was primarily attributable to our acquisitions of Triade Holding B.V.’s (“Triade”) mobility, consumer electronics and
IT distribution businesses in October 2010 and continued demand in the European commercial sector and for mobility products in the
region compared to the prior fiscal year. While difficult to quantify due to the integration of the acquisitions into our operations, we
believe the fiscal 2011 mobility and consumer electronics acquisitions contributed approximately four percentage points to our European
growth rates, on a euro basis. During fiscal 2012, we experienced lower European demand for IT products in certain geographies
resulting from weak economies in countries such as Spain and Portugal. This lower demand, however, was largely offset by strong sales
performance in other European markets, such as Germany, U.K., France and the Netherlands.
Our consolidated net sales were $24.4 billion in fiscal 2011, an increase of 10.3% when compared to fiscal 2010. The weakening of
certain foreign currencies against the U.S. dollar negatively impacted the year-over-year net sales comparison by approximately three
percentage points. On a regional basis, during fiscal 2011, net sales in the Americas increased by 10.1% compared to fiscal 2010 and
increased by 10.5% in Europe (an increase of 17.5% on a euro basis). The increase in net sales in both the Americas and Europe during
fiscal 2011 was attributable to the robust demand environment in both regions brought about by a recovery in IT spending throughout
the fiscal year and, to a lesser extent, the impact of our five acquisitions in Europe.
Gross Profit
Gross profit as a percentage of net sales (“gross margin”) during fiscal both 2012 and 2011 was 5.26% and was 5.21% in fiscal 2010.
The relative stability in our year-over-year gross margin is indicative of our product diversification efforts, disciplined approach to
managing our customer and vendor portfolios and effective execution of our pricing management practices.
Operating Expenses
Selling, general and administrative expenses (“SG&A”)
SG&A as a percentage of net sales increased to 3.91% in fiscal 2012, compared to 3.89% in fiscal 2011. The relative stability of our
SG&A as a percentage of net sales during fiscal 2012 compared to the prior year is primarily the result of increased costs incurred
related to acquisitions and to support our sales growth and diversification strategies being largely offset by operating leverage on the
increase in net sales and cost savings initiatives during both fiscal 2012 and 2011. In absolute dollars, SG&A increased $88.5 million in
fiscal 2012 compared to fiscal 2011. The increase in SG&A during fiscal 2012 is primarily attributable to the impact of the acquisition
of Triade’s mobility and consumer electronics businesses in the third quarter of fiscal 2011, the strengthening of certain foreign
currencies against the U.S. dollar, increased costs incurred to support our sales growth and diversification strategies, and increased
severance costs in Europe resulting from a realignment of resources in the region during the fourth quarter of fiscal 2012.
SG&A as a percentage of net sales declined to 3.89% in fiscal 2011, compared to 4.04% in fiscal 2010. The decrease in SG&A as a
percentage of sales was primarily attributable to the operating leverage achieved as our net sales increased at a more rapid rate than our
operating expenses. In absolute dollars, SG&A increased $56.4 million in fiscal 2011 compared to fiscal 2010. The increase in SG&A
during fiscal 2011 was primarily attributable to continued investments to support sales growth and strategic initiatives and operating
expenses related to acquisitions made during fiscal 2011, partially offset by the impact of weaker foreign currencies.
Loss on Disposal of Subsidiaries
We incurred losses on disposal of subsidiaries of $28.3 million during fiscal 2012 as a result of closing the Company’s in-country
commercial operations in Brazil and Colombia. The loss on disposal of these subsidiaries includes a $9.9 million impairment charge on
the Company’s investments in Brazil and Colombia due to a foreign currency exchange loss (previously recorded in shareholders’ equity
as accumulated other comprehensive income), $15.3 million related to the write-off of certain value-added tax receivables, and $3.1
million comprised primarily of severance costs, fixed asset write-offs and lease termination penalties. These costs do not include any
23
estimated costs associated with the Brazilian subsidiary’s contingencies related to CIDE and other non-income related tax
examinations. The operating losses of Brazil and Colombia for the fiscal year ended January 31, 2012, were not significant to the
Company’s consolidated operating results (see Note 6 and Note 13 of Notes to Consolidated Financial Statements for further
discussion).
Interest Expense
Interest expense increased 4.7% to $31.3 million in fiscal 2012 compared to $29.9 million in fiscal 2011. The increase in interest
expense in fiscal 2012 is primarily attributable to an increase in the average outstanding revolving credit loan balances as compared to
fiscal 2011.
Interest expense increased 8.3% to $29.9 million in fiscal 2011 compared to $27.6 million in fiscal 2010. The increase in interest
expense in fiscal 2011 is primarily attributable to an increase in the average outstanding revolving credit loan balances as compared to
fiscal 2010.
During the fiscal years 2012, 2011 and 2010, interest expense includes non-cash interest expense of $9.0 million, $10.3 million and
$10.3 million, respectively, related to the $350 million convertible senior debentures (see Note 7 of Notes to Consolidated Financial
Statements for further discussion).
Other Expense (Income), Net
Other expense (income), net, consists primarily of interest income, discounts on the sale of accounts receivable and net foreign
currency exchange gains (losses) on certain financing transactions and the related derivative instruments used to hedge such financing
transactions. Other expense (income), net, approximated $1.2 million of net expense in fiscal 2012 compared to $0.4 million of net
expense in fiscal 2011. The change in other expense (income), net, during fiscal 2012 is primarily attributable to an increase in
foreign currency exchange losses on derivative instruments used to hedge certain financing transactions and an increase in the
discount expense on the sale of accounts receivable compared to the prior year, partially offset by an increase in interest income
resulting from an increase in the average short-term cash investment balances in Europe. Other expense (income), net, approximated
$0.4 million of net expense in fiscal 2011 compared to $3.3 million of income in fiscal 2010. The change in other expense (income),
net, during fiscal 2011 is primarily attributable to a decrease in interest income, resulting from a decrease in the average short-term
cash investment balances, and greater discount expense on the sale of accounts receivable compared to the prior year. Discount on
sale of accounts receivable totaled $1.1 million and $0.5 million, respectively in fiscal 2012 and 2011. There was no discount on sale
of accounts receivable for fiscal 2010 as we did not sell accounts receivable during the fiscal year.
Provision for Income Taxes
Our effective tax rate was 26.6% in fiscal 2012 and 27.9% in fiscal 2011. The change in the effective tax rate during fiscal 2012
compared to fiscal 2011 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 during the respective periods. In fiscal 2012, we
recorded an income tax benefit of $13.6 million for the reversal of deferred income tax valuation allowances primarily related to
specific jurisdictions in Europe, which had been recorded in prior fiscal years. This income tax benefit was substantially offset by an
income tax expense associated with the write-off of deferred and other income tax assets related to the closure of our Brazil in-
country operations. On an absolute dollar basis, the provision for income taxes decreased 7.4% to $78.5 million in fiscal 2012
compared to $84.8 million in fiscal 2011. The change in the provision for income taxes is primarily due to the relative mix of earnings
and losses within certain countries in which we operate and the adjustments to income tax reserves and valuation allowances
discussed above.
Our effective tax rate was 27.9% in fiscal 2011 and 22.9% in fiscal 2010. The change in the effective tax rate during fiscal 2011
compared to fiscal 2010 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 during the respective periods. In fiscal 2010, we
reversed a $5.4 million deferred tax valuation allowance in a specific European jurisdiction and recorded the amount as an income tax
benefit. On an absolute dollar basis, the provision for income taxes increased 57.1% to $84.8 million in fiscal 2011 compared to $53.9
million in fiscal 2010. The change in the provision for income taxes is primarily due to higher taxable income, the relative mix of
earnings and losses within certain countries in which we operate and the adjustments to income tax reserves and valuation allowances
discussed above.
To the extent we generate future consistent taxable income within those operations currently requiring valuation allowances, the
valuation allowances 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.
24
The effective tax rate differed from the U.S. federal statutory rate of 35% during fiscal 2012, 2011 and 2010, due to the relative mix
of earnings or losses within the tax jurisdictions in which we operate and other adjustments, including: i) losses in tax jurisdictions
where we are not able to record a tax benefit; ii) earnings in tax jurisdictions where we have previously recorded valuation
allowances, on deferred tax assets; iii) the reversal of income tax reserves; iv) the write-off of deferred tax assets; and (v) 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 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.
Net income attributable to noncontrolling interest
Net income attributable to noncontrolling interest was $10.5 million, $4.6 million and $1.0 million, respectively, in fiscal 2012, 2011
and 2010. The net income attributable to noncontrolling interest represents Brightstar’s share of the improving results of Brightstar
Europe Limited, a joint venture between Tech Data and Brightstar as the joint venture is a consolidated subsidiary in our financial
statements. The year-over-year changes can be attributed to both the improving results in the joint venture’s operations and the
acquisition of Triade’s mobility subsidiaries in Belgium and the Netherlands (“MCC”) during the third quarter of fiscal 2011.
Impact of Inflation
During the fiscal years ended January 31, 2012, 2011 and 2010, we do not believe that inflation had a material impact on our
consolidated results of 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 the majority of our net sales are derived from Europe, our consolidated results closely follow the
seasonality trends in Europe. Additionally, the life cycles of major products, as well as the impact of future acquisitions and
divestitures, may also materially impact our business, financial condition, or results of operations (see Note 15 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 for all periods presented.
Cash Flows
The following table summarizes Tech Data’s Consolidated Statement of Cash Flows for the fiscal years ended January 31, 2012, 2011
and 2010:
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Years ended January 31,
2012
2011
(In thousands)
2010
$
503,412 $
(69,268)
(670,841)
161,300 $
(173,040)
(206,358)
535,465
(31,527)
37,360
25
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Years ended January 31,
2012
2011
(In thousands)
2010
(21,850)
(1,090)
38,793
$
(258,547)
$
(219,188)
$
580,091
As a distribution company, our business requires significant investment in working capital, particularly accounts receivable and
inventory, partially financed through our accounts payable to vendors. Overall, as our sales volume increases, our net investment in
working capital typically increases, which, in general, results in decreased cash flow from operating activities. Conversely, when sales
volume decreases, our net investment in working capital typically decreases, which, in general, results in increased cash flow from
operating activities.
Another important driver of our operating cash flows is our cash conversion cycle (also referred to as “net cash days”). Our net cash
days are defined as days of sales outstanding in accounts receivable (“DSO”) plus days of supply on hand in inventory (“DOS”), less
days of purchases outstanding in accounts payable (“DPO”). We manage our cash conversion cycle on a daily basis throughout the
year and our reported financial results reflect that cash conversion cycle at the balance sheet date. Our net cash days were 20 days at
the end of fiscal 2012, which was a decrease from fiscal 2011 of four days. The following table presents the components of our cash
conversion cycle, in days, as of January 31, 2012, 2011 and 2010:
Days of sales outstanding
Days of supply in inventory
Days of purchases outstanding
Cash conversion cycle (days)
2012
37
24
(41)
20
As of January 31,
2011
37
30
(43)
24
2010
38
26
(41)
23
Historically, we have presented certain book overdrafts, representing checks issued and wire transfers that have been initiated which
have not been presented for payment to the banks, as accounts payable. Based on agreements with our banks in certain countries, we
have determined that a significant portion of these book overdrafts are covered by rights of setoff in favor of the respective banks and
therefore, we have classified these amounts as a reduction of cash and accounts payable as of January 31, 2012. We have adjusted the
financial statements for the years ended January 31, 2011 and 2010 to reflect the right of setoff. The impact of this adjustment on
prior periods was to decrease cash and accounts payable as of January 31, 2011 by $76.2 million and to increase cash flows from
operating activities by $57.5 million for the year ended January 31, 2011, and to decrease cash flows from operating activities by $8.5
million for the year ended January 31, 2010. This change had the effect of reducing days of purchases outstanding by approximately
one day in both fiscal 2011 and 2010. The impact of this adjustment on prior quarters in fiscal 2012 was to decrease cash and
accounts payable as of October 31, July 31, and April 30, 2011 by $74.5 million, $97.8 million and $115.5 million, respectively, and
to increase cash flows from operating activities by $1.7 million for the year to date period ended October 31, 2011 and to decrease
cash flows from operating activities by $21.6 million and $39.2 million for the year to date periods ended July 31, 2011 and April 30,
2011, respectively. Management concluded that these adjustments are immaterial to the consolidated financial statements.
Net cash provided by operating activities was $503.4 million in fiscal 2012 compared to $161.3 million of cash provided by operating
activities in fiscal 2011. The increase in cash resulting from operating activities in fiscal 2012 compared to the same period of the
prior year can be attributed to i) a significant reduction in our inventories levels, and ii) the timing of both cash receipts from our
customers and payments to our vendors. Net cash provided by operating activities was $161.3 million in fiscal 2011 compared to
$535.5 million of cash provided by operating activities in fiscal 2010. The change in cash resulting from operating activities in fiscal
2011 compared to the same period of the prior year can be attributed to i) the timing of both cash receipts from our customers and
payments to our vendors, and ii) additional working capital requirements due to the stronger net sales performance in fiscal 2011
compared to fiscal 2010 as a result of a recovery in IT spending throughout fiscal 2011.
Net cash used in investing activities of $69.3 million during fiscal 2012 is the result of $24.9 million of cash used for acquisitions in
Europe and $44.4 million of expenditures for the continuing expansion and upgrading of our IT systems, office facilities and
equipment for our logistics centers in both the Americas and Europe. We expect to make total capital expenditures of approximately
$40.0 million during fiscal 2013 for equipment and machinery in our logistics centers, office facilities and IT systems.
Net cash used in investing activities of $173.0 million during fiscal 2011 is the net result of $141.1 million of cash used for
acquisitions in Europe and $31.9 million of expenditures for the continuing expansion and upgrading of our IT systems, office
facilities and equipment for our logistics centers in both the Americas and Europe.
26
Net cash used in financing activities of $670.9 million during fiscal 2012 is primarily the result of $314.9 million of cash used in the
repurchase of 6,736,436 shares of our common stock under our share repurchase programs, $45.4 million of net repayments on our
revolving credit lines and the $350.0 million repayment of our convertible senior debentures, partially offset by $35.1 million of
proceeds received from the reissuance of treasury stock related to the vesting and exercise of equity-based incentive awards and
purchases made through our Employee Stock Purchase Plan (“ESPP”).
Net cash used in financing activities of $206.4 million during fiscal 2011 is primarily the result of $200.0 million of cash used in the
repurchase of 5,084,770 shares of our common stock under our share repurchase programs and $47.1 million of net repayments on the
revolving credit lines and long-term debt, partially offset by $34.6 million of net borrowings and a capital contribution from our joint
venture partner related to our consolidated joint venture.
Capital Resources and Debt Compliance
We have maintained a conservative capital structure and have a debt to capital ratio of 5% at January 31, 2012. We believe this
conservative approach to our capital structure will continue to support us in a global economic environment that remains uncertain.
Within our capital structure, we have a range of financing facilities, which are diversified by type and geographic region with various
financial institutions worldwide. A significant portion of our cash and cash equivalents balance generally resides in our operations
outside of the United States and are deposited and/or invested with various financial institutions globally which we monitor regularly
for credit quality. However, we are exposed to risk of loss on funds deposited with the various financial institutions and we may
experience significant disruptions in our liquidity needs if one or more of these financial institutions were to declare bankruptcy or
other similar restructuring. 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
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 no longer be available to us on acceptable terms to fund our
working capital needs. The inability to obtain sufficient 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.
The following is a detailed discussion of our various financing facilities.
Convertible Senior Debentures
In December 2006, we issued $350.0 million of 2.75% convertible senior debentures due 2026. In accordance with the terms of the
debentures, in November 2011, we announced our election to fully redeem the debentures on December 20, 2011, at a redemption
price equal to the principal amount of the debentures plus any accrued and unpaid interest to, but excluding, the redemption date.
As of January 31, 2012, all of the debentures had either been redeemed by us or put to us and there were no debentures outstanding.
We funded the repayment of the debentures with available cash and our $500.0 million Credit Agreement, discussed below.
Loans Payable to Brightstar Corp.
As of January 31, 2012, we have two loans payable to our joint venture partner, Brightstar. The first loan was executed in October
2010, when Brightstar entered into an agreement to loan BEL its share of the funding requirements related to BEL’s acquisition of
MCC (the “Acquisition Loan”) (see Note 7 of Notes to Consolidated Financial Statements). The outstanding balance of the
Acquisition Loan from Brightstar, plus any accrued interest, has a repayment date of September 2015, or earlier if agreed between the
two parties, and bears interest at the applicable LIBOR rate plus 4.0% per year, which is payable annually on October 1. The
Acquisition Loan at January 31, 2012 totaled $14.9 million. The second loan is an interest-free revolving credit loan
27
issued in connection with BEL’s operations (the “Brightstar Revolver”). The terms of the Brightstar Revolver contain no contractual
repayment date and allow the revolving credit loan to increase or decrease in accordance with the working capital requirements of BEL, as
determined by the Company. The amount outstanding under the Brightstar Revolver at January 31, 2012 totaled $36.6 million. Effective
October 2010, a resolution of BEL’s board was approved stating that the Brightstar Revolver will not be repaid for the foreseeable future and
therefore this revolving credit loan has been classified as long-term debt in our Consolidated Balance Sheet at both January 31, 2012 and
2011.
Other Credit Facilities
In September 2011, we entered into a $500.0 million Credit Agreement with a syndicate of banks (the “Credit Agreement”), which replaced
our $250.0 million Multi-currency Revolving Credit Facility scheduled to expire in March 2012. The Credit Agreement, among other things,
i) provides for a maturity date of September 27, 2016, ii) provides for an interest rate on borrowings, facility fees and letter of credit fees
based on our non-credit enhanced senior unsecured debt rating as determined by Standard & Poor’s Rating Service and Moody’s Investor
Service, and iii) may be increased up to $750.0 million, subject to certain conditions. The Credit Agreement includes various covenants,
limitations and events of default customary for similar facilities for similarly rated borrowers, including a maximum debt to capitalization
ratio and minimum interest coverage. We have also provided a guarantee of certain of our significant subsidiaries. The Credit Agreement
expires in September 2016 and we pay interest on advances under the Credit Agreement at the applicable LIBOR rate plus a predetermined
margin that is based on our debt rating. There are no amounts outstanding under either of these facilities at either January 31, 2012 or 2011,
respectively.
As of January 31, 2012, we maintained a Receivables Securitization Program with a syndicate of banks 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 a maximum of $400.0 million. This program was renewed in August 2011 and amended in December 2011. The program will expire in
December 2012 and interest is to be paid on the Receivables Securitization Program at the applicable commercial paper or LIBOR rate plus
an agreed-upon margin. There were no amounts outstanding under the Receivables Securitization Program at January 31, 2012 or 2011.
In addition to the facilities described above, we have various other committed and uncommitted lines of credit and overdraft facilities
totaling approximately $550.2 million at January 31, 2012 to support our operations.
In consideration of the financial covenants discussed below, our maximum borrowing availability on the credit facilities is approximately
$1.5 billion, of which $48.0 million was outstanding at January 31, 2012. Our credit facilities contain limitations on the amounts of annual
dividends and repurchases of common stock. Additionally, the credit facilities require compliance with certain warranties and covenants. The
financial ratio covenants contained within the credit facilities include a debt to capitalization ratio and a minimum interest coverage ratio. At
January 31, 2012, 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. At January 31, 2012, we had also issued
standby letters of credit of $75.1 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 September 2011, we filed a shelf registration statement with the Securities and Exchange Commission for the issuance of debt securities.
The net proceeds from any issuance of debt securities are expected to be used for general corporate purposes, including the repayment or
refinancing of debt, capital expenditures and to meet working capital needs. As of January 31, 2012, we had not issued any debt securities
under this shelf registration statement, nor can any assurances be given that we will issue any debt securities under this registration in the
future.
Share Repurchase Programs
During fiscal 2012, the Company’s Board of Directors authorized share repurchase programs for the repurchase of up to a total of $400.0
million of the Company’s common stock. Throughout fiscal 2012, the Company’s share repurchases were made on the open market through
block trades or otherwise. The number of shares purchased and the timing of the purchases were based on regulatory requirements, 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 plans and our ESPP.
During fiscal 2012, we repurchased 6,736,436 shares at an average of $46.74 per share, for a total cost, including expenses, of $314.9 million
under these programs.
In conjunction with the share repurchase programs discussed above, we executed 10b5-1 plans that instruct the broker selected by us to
repurchase shares on behalf of the Company. The amount of common stock repurchased in accordance with the 10b5-1 plans on any given
trading day is determined by a formula in the plan, which is based on the market price of the Company’s common stock. Shares repurchased
by the Company are held in treasury for general corporate purposes, including issuances under equity incentive plans and our ESPP.
28
Contractual Obligations
As of January 31, 2012, future payments of debt and amounts due under future minimum lease payments, including minimum
commitments under IT outsourcing agreements, are as follows (in thousands):
Fiscal year:
2013
2014
2015
2016
2017
Thereafter
Total payments
Less amounts representing interest
Total principal payments
Operating
leases
Capital
lease
Debt
(1)
Total
$ 58,500 $ 763
49,800
43,600
35,100
14,000
20,200
221,200
0
763
763
723
643
3,320
6,975
(463)
$ 221,200 $6,512
$47,985 $107,248
50,563
44,363
50,763
14,643
59,826
327,406
(463)
$99,231 $326,943
0
0
14,940
0
36,306
99,231
0
(1) Amounts include all debt outstanding at January 31, 2012 under the Company’s committed and uncommitted revolving credit facilities and loan payable and revolving
credit loan payable to Brightstar and excludes estimated interest as the revolving credit facilities and loans payable are at variable rates of interest or interest free.
Fair value renewal 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 the Company 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, other than the IT outsourcing agreement included above, and the contracts
generally contain clauses allowing for cancellation without significant penalty.
At January 31, 2012, we have $1.1 million recorded as a current liability for uncertain tax positions. 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 liability for uncertain tax position has not been included in the contractual obligations table above and is not
material to our consolidated financial statements (see Note 8 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, the Company renewed its existing
Synthetic Lease with a new 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.
29
The sum of future minimum lease payments under the Synthetic Lease is approximately $2.7 million at January 31, 2012 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, 2012, we were in compliance
with all such covenants.
Guarantees
As is customary in the technology 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, 2012 and 2011, the aggregate amount of guarantees under
these arrangements totaled approximately $65.4 million and $62.1 million, respectively, of which approximately $28.4 million and
$43.0 million, respectively, was outstanding. We believe that, based on historical experience, the likelihood of a material loss
pursuant to the above guarantees is remote.
ITEM 7A.
Quantitative and Qualitative 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 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 2012 and 2011, the underlying exposures are
denominated primarily in the following currencies: U.S. dollar, Brazilian real, British pound, Canadian dollar, Chilean Peso,
Colombian Peso, Czech koruna, Danish krone, euros, Mexican Peso, Norwegian krone, Peruvian new sol, Polish zloty, Romanian leu,
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 and swap contracts to primarily hedge loans,
accounts receivable and accounts payable. We are also exposed to changes in interest rates primarily as a result of our short-term debt
used to maintain liquidity and to finance working capital, capital expenditures and acquisitions. Interest rate risk is also present in the
forward foreign currency contracts hedging intercompany and 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. We utilize various financing instruments, such as
receivables securitization, leases, revolving credit facilities, and trade receivable purchase facilities, to finance working capital needs.
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 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.
30
The following table represents the estimated maximum potential one-day loss in fair value at a 95% confidence level, calculated using
the VaR model at January 31, 2012 and 2011. 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.
January 31, 2012
January 31, 2011
VaR as of
Currency rate sensitive financial instruments
Interest rate sensitive financial instruments
Combined portfolio
$
$
(2,322)
0
(2,322)
(1,910)
(82)
(1,992)
$
(in thousands)
$
Actual future gains and losses associated with the Company’s derivative positions may differ materially from the analyses performed
as of January 31, 2012, 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.
31
ITEM 8. Financial Statements and Supplementary Data.
Index to Financial Statements
Financial Statements
Report of Independent Registered Certified Public Accounting Firm
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Shareholders’ Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Financial Statement Schedule
Schedule II—Valuation and Qualifying Accounts
Page
33
34
35
36
37
38
39
67
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.
32
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, 2012 and
2011, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the
three years in the period ended January 31, 2012. 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, 2012 and 2011, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended January 31, 2012, 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.
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, 2012, 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 21, 2012, expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Tampa, Florida
March 21, 2012
33
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, less allowance for doubtful accounts of $52,713 and $56,811
Inventories
Prepaid expenses and other assets
Total current assets
Property and equipment, net
Other assets, net
Total assets
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
Accrued expenses and other liabilities
Revolving credit loans and current maturities of long-term debt, net
Total current liabilities
Long-term debt, less current maturities
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 13)
Shareholders’ equity:
Common stock, par value $.0015; 200,000,000 shares authorized; 59,239,085 shares issued at
January 31, 2012 and 2011
Additional paid-in capital
Treasury stock, at cost (18,166,761 and 12,517,538 shares at January 31, 2012 and 2011)
Retained earnings
Accumulated other comprehensive income
Equity attributable to shareholders of Tech Data Corporation
Noncontrolling interest
Total equity
Total liabilities and equity
January 31,
2012
2011
$ 505,178 $ 763,725
2,896,671
2,205,394
181,147
6,046,937
94,315
270,831
$5,785,418 $6,412,083
2,871,243
1,802,976
202,505
5,381,902
88,595
314,921
$3,042,809 $3,147,753
562,638
434,435
4,144,826
60,076
68,754
4,273,656
551,280
48,490
3,642,579
57,253
83,438
3,783,270
89
769,826
(739,614)
1,659,767
283,755
1,973,823
28,325
2,002,148
89
768,757
(466,635)
1,453,371
358,884
2,114,466
23,961
2,138,427
$5,785,418 $6,412,083
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
34
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share amounts)
Net sales
Cost of products sold
Gross profit
Operating expenses:
Selling, general and administrative expenses
Loss on disposal of subsidiaries
Operating income
Interest expense
Other expense (income), net
Income before income taxes
Provision for income taxes
Consolidated net income
Net income attributable to noncontrolling interest
Net income attributable to shareholders of Tech Data Corporation
Net income per share attributable to shareholders of Tech Data Corporation
Basic
Diluted
Weighted average common shares outstanding:
Basic
Diluted
2012
Year ended January 31,
2011
$26,488,124 $24,375,973 $22,099,876
20,947,522
1,152,354
23,092,685
1,283,288
25,094,133
1,393,991
2010
1,037,839
28,294
1,066,133
327,858
31,343
1,193
295,322
78,474
216,848
(10,452)
206,396 $
949,303
0
949,303
333,985
29,926
444
303,615
84,752
218,863
(4,620)
214,243 $
892,878
0
892,878
259,476
27,639
(3,303)
235,140
53,940
181,200
(1,045)
180,155
4.72 $
4.66 $
4.41 $
4.36 $
3.57
3.54
43,749
44,327
48,587
49,085
50,517
50,938
$
$
$
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
35
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In thousands)
Consolidated net income
Other comprehensive income:
Foreign currency translation adjustment
Total comprehensive income
Comprehensive income attributable to noncontrolling interest
Comprehensive income attributable to shareholders of Tech Data Corporation
Year ended January 31,
2011
$216,848 $218,863 $181,200
2012
2010
(76,664)
140,184
8,917
125,285
306,485
1,318
$131,267 $213,546 $305,167
(614)
218,249
4,703
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
36
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(In thousands)
Tech Data Corporation Shareholders
Common Stock
Shares Amount
Additional
paid-in
capital
Treasury
stock
Retained
earnings
Accumulated other
comprehensive
income
Noncontrolling
interest
Total
equity
59,239 $
89 $775,754 $(331,692) $1,058,973 $
234,569 $
4,320 $1,742,013
0
0
0
0
0 (17,684)
52,494
0 11,225
0
0
0
0
0
0
0
0
0
0
0
0
34,810
0
11,225
0
180,155
125,012
0
273 125,285
1,045 181,200
59,239
89 769,295 (279,198) 1,239,128
359,581
5,638 2,094,533
0
0
0 (200,000)
0
0
0 (200,000)
0
0
0
0
0
0 (10,425)
12,563
0
9,887
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2,138
0
9,887
0
13,620
13,620
0
214,243
(697)
0
83
(614)
4,620 218,863
59,239
89 768,757 (466,635) 1,453,371
358,884
23,961 2,138,427
0
0
0 (314,886)
0
0
0 (314,886)
0
0
0
0
0
0
(9,630)
41,907
0 10,699
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
32,277
0
10,699
(75,129)
(1,535)
(76,664)
0
206,396
0
0
(4,553)
(4,553)
10,452 216,848
Balance—January 31,
2009
Issuance of treasury stock
for benefit plans and
equity-based awards
exercised, including
related tax benefit of
$1,873
Stock-based compensation
expense
Currency translation
adjustment
Net income
Balance—January 31,
2010
Purchase of treasury stock,
at cost
Issuance of treasury stock
for benefit plans and
equity-based awards
exercised, including
related tax benefit of
$1,072
Stock-based compensation
expense
Capital contributions from
joint venture partner
Currency translation
adjustment
Net income
Balance—January 31,
2011
Purchase of treasury stock,
at cost
Issuance of treasury stock
for benefit plan and
equity-based awards
exercised, including
related tax benefit of
$2,245
Stock-based compensation
expense
Currency translation
adjustment
Declaration of return of
capital to joint venture
partner
Net income
Balance—January 31,
2012
59,239 $
89 $769,826 $(739,614) $1,659,767 $
283,755 $
28,325 $2,002,148
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
37
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 operating activities
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired
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 reissuance of treasury stock
Cash paid for purchase of treasury stock
Capital contributions and borrowings from joint venture partner
Net (repayments) borrowings 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 (decrease) 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 to net cash provided by operating activities:
Net income attributable to shareholders of Tech Data Corporation
Net income attributable to noncontrolling interest
Consolidated net income
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Loss on disposal of subsidiaries
Depreciation and amortization
Provision for losses on accounts receivable
Stock-based compensation expense
Accretion of debt discount on convertible senior debentures
Deferred income taxes
Excess tax benefit from stock-based compensation
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable
Inventories
Prepaid expenses and other assets
Accounts payable
Accrued expenses and other liabilities
Total adjustments
Net cash provided by operating activities
2012
Year ended January 31,
2011
2010
$ 26,435,178
(25,827,475)
(18,313)
(85,978)
503,412
$ 24,258,805
(24,008,367)
(15,927)
(73,211)
161,300
$ 21,927,372
(21,329,102)
(14,015)
(48,790)
535,465
(24,898)
0
(13,385)
(30,985)
(69,268)
35,093
(314,886)
460
(41,195)
(352,316)
2,003
(670,841)
(21,850)
(258,547)
763,725
505,178
206,396
10,452
216,848
28,294
57,332
10,546
10,699
8,994
(29,746)
(2,003)
(48,887)
370,858
(43,358)
(41,081)
(35,084)
286,564
503,412
$
$
$
(141,138)
0
(18,614)
(13,288)
(173,040)
5,005
(200,000)
34,556
(46,645)
(454)
1,180
(206,358)
(1,090)
(219,188)
982,913
763,725
214,243
4,620
218,863
0
47,285
11,517
9,887
10,278
6,972
(1,180)
(113,303)
(349,429)
(34,601)
335,813
19,198
(57,563)
161,300
(8,153)
5,491
(14,486)
(14,379)
(31,527)
37,959
0
23,208
(19,116)
(5,654)
963
37,360
38,793
580,091
402,822
982,913
180,155
1,045
181,200
0
45,954
10,953
11,225
10,278
(2,541)
(963)
(168,152)
116,543
21,290
328,122
(18,444)
354,265
535,465
$
$
$
$
$
$
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
38
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 one of the world’s largest wholesale distributors of technology products. The Company
serves as an indispensable link in the technology supply chain by bringing products from the world’s leading technology vendors to market, as well
as providing customers with advanced logistics capabilities and value-added services. Tech Data’s customers include value-added resellers, direct
marketers, retailers and corporate resellers who support the diverse technology needs of end users. The Company is managed in two geographic
segments: the Americas (including North America and South 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. Noncontrolling 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
The consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the United States Securities and
Exchange Commission (“SEC”). The Company prepares its financial statements in conformity with generally accepted accounting principles in the
United States (“U.S. GAAP”). These principles require management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.
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) collectability 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 consolidated net sales for fiscal years 2012, 2011 and 2010.
The Company generated approximately 25%, 27% and 28% of consolidated net sales in fiscal 2012, 2011 and 2010, respectively, from products
purchased from Hewlett-Packard Company. There were no other vendors and no customers that accounted for 10% or more of the Company’s
consolidated net sales in fiscal 2012, 2011 or 2010.
Cash and Cash Equivalents
Short-term investments which are highly liquid and have an original maturity of 90 days or less are considered cash equivalents.
Historically, the Company presented certain book overdrafts, representing checks issued and wire transfers that have been initiated which have not
been presented for payment to the banks, as accounts payable. Based on its agreements with its banks in certain countries, the Company has
determined that a significant portion of these book overdrafts are covered by rights of setoff in favor of the respective banks and therefore, the
Company has classified these amounts as a reduction of cash and accounts payable as of January 31, 2012. The Company has adjusted its financial
statements for the years ended January 31, 2011 and 2010 to reflect the right of setoff. The impact of this adjustment on prior periods was to
decrease cash and accounts payable as of January 31, 2011 by $76.2 million and to increase cash flows from operating activities by $57.5 million
for the year ended January 31, 2011 and to decrease cash flows from operating activities by $8.5 million for the year ended January 31, 2010. The
impact of this adjustment on prior quarters in fiscal 2012 was to decrease cash and accounts payable as of October 31, July 31, and April 30, 2011
by $74.5 million, $97.8 million and $115.5 million, respectively, and to increase cash flows from operating activities by $1.7 million for the year to
date period ended October 31, 2011 and to decrease cash flows from operating activities by $21.6 million and $39.2 million for the year to date
periods ended July 31, 2011 and April 30, 2011, respectively. Management concluded that these adjustments are immaterial to the consolidated
financial statements.
The Company had other book overdrafts included in accounts payable of $28.7 million and $20.1 million at January 31, 2012 and 2011,
respectively, related to bank accounts where a right of setoff does not exist.
39
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 large number of customers and their dispersion across wide geographic areas, the existence of credit
insurance, specifically identified customer risks, historical write-off experience and the current economic environment. 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.
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 for specifically
identified cooperative advertising programs and infrastructure funding are recorded when earned 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 of
claims by vendors. 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:
Buildings and improvements
Leasehold improvements
Furniture, fixtures and equipment
Years
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.
40
Goodwill
The Company performs an annual review for the potential impairment of the carrying value of goodwill, or more frequently if current
events and circumstances indicate a possible impairment. An impairment loss is charged to expense in the period identified. 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 as of January 31st of each fiscal year.
Intangible Assets
Included within other assets at both January 31, 2012 and 2011 are certain intangible assets including capitalized software and
development costs, as well as customer and vendor relationships, noncompete agreements and trademarks acquired in connection with
various business acquisitions. Such capitalized costs and intangible assets are being amortized over a period of three to ten years.
The Company’s capitalized software has been obtained or developed for internal use only. Development and acquisition costs are
capitalized for computer software only when management authorizes and commits to funding a computer software project through the
approval of a capital expenditure requisition, and the software project is either for the development of new software, to increase the
life of existing software or to add significantly to the functionality of existing software. Once these requirements have been met,
capitalization would begin at the point that conceptual formulation, evaluation, design, and testing of possible software project
alternatives have been completed. Capitalization ceases when the software project is substantially complete and ready for its intended
use.
Costs of computer software developed or obtained for internal use that are capitalized include external direct costs of materials and
services consumed in developing or obtaining internal-use computer software and payroll and payroll-related costs for the Company’s
IT programmers performing software coding and testing activities (including development of data conversion programs) directly
associated with the internal-use computer software project. Prepaid maintenance fees associated with a software application are
accounted for separately from the related software and amortized over the life of the maintenance agreement. General, administrative,
overhead, training, non-development data conversion processes, and maintenance costs, as well as the costs associated with the
preliminary project and post-implementation stages are expensed as incurred.
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 2012, 2011 and
2010.
Income Taxes
Income taxes are accounted for under the asset and liability method, which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under
this method, deferred tax assets and liabilities are determined based on differences between the financial statements and tax basis of
assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a
change in tax rates on deferred tax assets and liabilities is recognized in income in the fiscal period that includes the enactment date.
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.
41
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 relative mix of taxable income and taxable loss jurisdictions, changes in the valuation of 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 to 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’s financial instruments which are subject to concentrations of credit risk consist primarily of cash and cash equivalents,
accounts receivable and foreign currency exchange contracts. The Company’s cash and cash equivalents are deposited and/or invested
with various financial institutions globally that are monitored on a regular basis by the Company for credit quality.
The Company sells its products to a large base of value-added resellers, direct marketers, retailers and corporate resellers throughout
North America, South America and Europe. The Company performs ongoing credit evaluations of its customers and generally does
not require collateral. The Company has obtained credit insurance, primarily in Europe, 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 2012, 2011 or 2010.
The Company also enters into foreign currency exchange contracts. In the event of a failure to honor one of these contracts by one of
the banks with which the Company has contracted, the Company believes any loss would be limited in most circumstances to the
exchange rate differential from the time the contract was executed until the time the contract was settled. The Company’s foreign
currency exchange contracts are executed with various financial institutions globally that are monitored on a regular basis by the
Company for credit quality.
Foreign Currency Translation
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. All income and expense accounts of foreign operations operating in a local
functional currency environment are translated at weighted average exchange rates for each period during the year.
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 the form of foreign currency forward contracts, 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 Income within “cost of products sold” for derivative instruments used to manage the
Company’s exposure to foreign denominated accounts receivable and accounts payable and within “other expense (income), net” for
derivative instruments used to manage the Company’s exposure to foreign denominated financing transactions. Such mark-to-market
gains and losses are recorded 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.
Comprehensive Income
Comprehensive income 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” and “other comprehensive income.”
The Company’s accumulated other comprehensive income (loss) included in total equity is comprised exclusively of changes in the
Company’s currency translation adjustment account (“CTA account”), including income taxes attributable to those changes. Total
accumulated other comprehensive income includes $23.0 million of income taxes at January 31, 2012, 2011 and 2010, respectively.
42
Comprehensive income attributable to shareholders of the Company decreased during the fiscal year ended January 31, 2012 as
compared to the prior year primarily as a result of the strengthening of the U.S. dollar against most currencies in which the Company
operated at January 31, 2012 compared to January 31, 2011. Comprehensive income attributable to shareholders of the Company
decreased during the fiscal year ended January 31, 2011 as compared to the prior year due to strengthening U.S. dollar against most
foreign currencies in which the Company operated during fiscal 2011. The spot rate of the U.S. dollar was relatively stable versus
other foreign currencies at January 31, 2011 compared to January 31, 2010.
Stock-Based Compensation
The Company records all equity-based incentive grants to employees and non-employee members of the Company’s Board of
Directors in “selling, general and administrative expenses” in the Company’s Consolidated Statement of Income based on their fair
values determined on the date of grant. Compensation expense, reduced for estimated forfeitures, is recognized on a straight-line basis
over the requisite service period of the award, which is generally the vesting term of the outstanding equity awards. The Company
estimates forfeiture rates based on its historical experience during the preceding five fiscal years.
Treasury Stock
Treasury stock is accounted for at cost. The reissuance of shares from treasury stock for exercises of equity-based awards or other
corporate purposes is based on the weighted average purchase price of the shares.
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.
Recently Adopted Accounting Standards
In December 2010, the Financial Accounting Standards Board (“FASB”) issued an accounting standard which modifies the two-step
goodwill impairment testing process for entities that have a reporting unit with a zero or negative carrying amount. For those
reporting units, an entity is required to perform step two of the goodwill impairment test if it is more likely than not that goodwill
impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider
whether there are any adverse qualitative factors indicating that an impairment exists. This accounting standard is effective for the
Company beginning with the quarter ending April 30, 2011. The Company has adopted this standard for the quarter ended April 30,
2011, which had no impact on its consolidated financial position, results of operations or cash flows.
In October 2009, the FASB issued an accounting standard requiring an entity to allocate revenue arrangement consideration at the
inception of a multiple-deliverable revenue arrangement to all of its deliverables based on their relative selling prices. This accounting
standard is effective for revenue arrangements entered into or materially modified by the Company beginning February 1, 2011 with
early adoption permitted. The Company has adopted this standard effective February 1, 2011, which did not have a material impact
on the Company’s consolidated financial position, results of operations or cash flows.
In October 2009, the FASB issued an accounting standard addressing how entities account for revenue arrangements that contain both
hardware and software elements. Due to the significant difference in the level of evidence required for separation of multiple
deliverables within different accounting standards, this particular accounting standard will modify the scope of accounting guidance
for software revenue recognition. Many tangible products containing software and non-software components that function together to
deliver the tangible products’ essential functionality will be accounted for under the revised multiple-element arrangement revenue
recognition guidance discussed above. This accounting standard is effective for revenue arrangements entered into or materially
modified by the Company beginning February 1, 2011 with early adoption permitted. The Company has adopted this standard
effective February 1, 2011, which did not have a material impact on the Company’s consolidated financial position, results of
operations or cash flows.
In June 2011, the FASB issued a new accounting standard related to the presentation of comprehensive income. This standard
requires presentation of comprehensive income in either a single statement of comprehensive income or two separate but consecutive
statements. This standard does not change the definitions of the components of net income and other comprehensive income, when an
item must be reclassified from other comprehensive income to net income, or earnings per share, which is calculated using net
income.
43
This standard is effective for the Company beginning February 1, 2012, and is required to be applied retrospectively, with early
adoption permitted. The Company has early adopted this standard as of January 31, 2012, which had no impact on its consolidated
financial position, results of operations or cash flows.
Recently Issued Accounting Standards
In September 2011, the FASB issued an accounting standard which simplifies how entities test goodwill for impairment. The
accounting standard permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair
value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step
goodwill impairment test described below. The accounting standard is effective for the Company beginning February 1, 2012, with
early adoption permitted. The Company does not expect the adoption of this guidance will have a material impact on its consolidated
financial position, results of operations or cash flows.
In May 2011, the FASB and International Accounting Standards Board issued a new accounting standard that amends the wording
used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value
measurements. This accounting standard does not extend the use of fair value accounting, but provides guidance on how it should be
applied where its use is already required or permitted by other standards within U.S. GAAP or International Financial Reporting
Standards. This accounting standard is effective for the Company beginning with the quarter ending April 30, 2012. The Company
does not expect the adoption of this guidance will have a material impact on its consolidated financial position, results of operations
or cash flows.
44
NOTE 2 — EARNINGS PER SHARE (“EPS”)
The Company reports a dual presentation of basic and diluted EPS. Basic EPS is computed by dividing net income attributable to
shareholders of Tech Data by the weighted average number of shares outstanding during the reported period. Diluted EPS reflects the
potential dilution related to equity-based incentives (further discussed in Note 9—Employee Benefit Plans) using the if-converted and
treasury stock methods, as applicable. The composition of basic and diluted EPS is as follows:
Net income per common share-
attributable to shareholders of
Tech Data - basic
Effect of dilutive securities:
Equity-based awards
Net income per common share
attributable to shareholders of
Tech Data - diluted
Year ended January 31, 2012
Year ended January 31, 2011
Year ended January 31, 2010
Net
income
Weighted
average
shares
Per
share
amount
Net
income
Weighted
average
shares
Per
share
amount
Net
income
Weighted
average
shares
Per
share
amount
(In thousands, except per share data)
$206,396 43,749 $ 4.72 $214,243 48,587 $ 4.41 $180,155 50,517 $ 3.57
0
578
0
498
0
421
$206,396 44,327 $ 4.66 $214,243 49,085 $ 4.36 $180,155 50,938 $ 3.54
At January 31, 2012, 2011 and 2010, there were 16,382, 564,776 and 2,421,279 shares, respectively, excluded from the computation
of diluted earnings per share because their effect would have been antidilutive.
The Company’s $350.0 million convertible senior debentures issued in December 2006 were repaid during December 2011. The
$350.0 million convertible senior debentures did not impact earnings per share at January 31, 2011 or 2010, as the conditions for the
contingent conversion feature had not been met (see further discussion in Note 7—Debt).
NOTE 3 — PROPERTY AND EQUIPMENT, NET
January 31,
2012
2011
Land
Buildings and leasehold improvements
Furniture, fixtures and equipment
Less accumulated depreciation
(In thousands)
$
$
4,727
81,818
338,789
425,334
(336,739)
$ 88,595
4,938
77,794
340,109
422,841
(328,526)
$ 94,315
Depreciation expense included in income for the years ended January 31, 2012, 2011 and 2010 totaled $21.9 million, $21.0 million
and $23.8 million, respectively.
45
NOTE 4 — GOODWILL AND INTANGIBLE ASSETS
The Company’s goodwill balance of $97.3 million and $70.4 million at January 31, 2012 and 2011, respectively, is included within
“other assets, net” in the Consolidated Balance Sheet.
The changes in the carrying amount of goodwill, by geographic segment, for the fiscal year ended January 31, 2012, are as follows:
Balance as of February 1, 2011
Goodwill acquired during the year
Foreign currency translation adjustment
Balance as of February 1, 2012
Americas
$ 2,966
0
0
$ 2,966
Europe
(In thousands)
$
67,460
31,011
(4,156)
94,315
$
Total
$70,426
31,011
(4,156)
$97,281
The increase in goodwill during fiscal 2012 is the result of the Company’s acquisitions in Europe (see also Note 5 – Acquisitions).
In conjunction with the Company’s annual impairment testing, the Company’s goodwill was tested for impairment as of January 31,
2012. 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 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, 2012.
Also included within “other assets, net” are intangible assets as follows:
January 31, 2012
January 31, 2011
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
Customer and vendor relationships
Other intangible assets
Total
$302,326 $ 223,148 $ 79,178 $280,751 $ 208,799 $ 71,952
59,017
98,080
7,010
9,636
$410,042 $ 264,197 $145,845 $375,868 $ 237,889 $137,979
85,076
10,041
26,059
3,031
36,544
4,505
61,536
5,131
The Company capitalized intangible assets of $48.2 million, $76.5 million and $19.1 million for the years ended January 31, 2012,
2011 and 2010, respectively. For fiscal 2012, these capitalized assets related primarily to software and software development
expenditures to be used in the Company’s operations and customer and vendor relationships related to the Company’s acquisitions
during fiscal 2012. For fiscal 2011, these capitalized assets resulted primarily from customer and vendor relationships related to the
Company’s acquisitions during fiscal 2011 (see also Note 5 – Acquisitions). There was no interest capitalized during any of the fiscal
years ended January 31, 2012, 2011 and 2010.
The weighted average amortization period for all intangible assets capitalized during fiscal 2012 approximated six years and
approximated five years and six years for fiscal 2011 and 2010, respectively. The weighted average amortization period of all
intangible assets was approximately six years for fiscal 2012, 2011 and 2010, respectively.
Amortization expense for the fiscal years ended January 31, 2012, 2011 and 2010, totaled $35.4 million, $26.3 million and $22.2
million, respectively. Estimated amortization expense of capitalized software and development costs placed in service at January 31,
2012, and customer and vendor relationships and other intangible assets is as follows (in thousands):
Fiscal year:
2013
2014
2015
2016
2017
$30,700
27,300
21,800
14,300
10,500
46
NOTE 5 — ACQUISITIONS
Acquisition of Triade Holding B.V. (“Triade”)
On October 1, 2010, the Company completed the acquisition of all of the outstanding shares of Triade, a privately-held portfolio of leading
value-added distributors of consumer electronics and information technology products in the Benelux region, Denmark and Norway, for a
purchase price of $58.5 million, of which $57.2 million was paid in cash (based on the foreign currency exchange rate on the date of
acquisition). The Company believes the acquisition of Triade strengthens the Company’s presence in these countries and has enabled the
Company to accelerate its diversification strategy into the consumer electronics business in Europe, while leveraging the Company’s existing
infrastructure.
The Company has accounted for the Triade acquisition as a business combination and the purchase price was assigned to the assets acquired,
including cash of $1.1 million, accounts receivable, inventory and certain other tangible assets totaling $181.3 million, and liabilities
assumed totaling $185.2 million, at their estimated fair value as of the acquisition date. The allocation of identifiable intangible assets and
goodwill, based on foreign currency exchange rates on the date of acquisition, includes $25.5 million for customer and vendor relationships
with estimated useful lives of seven years, $1.9 million for trademarks with an estimated useful life of 10 years and $33.9 million of
goodwill, none of which are deductible for tax purposes.
Acquisition of Mobile Communication Company B.V. and Mobile Communications Company Belgium N.V. (collectively “MCC”)
In a transaction related to the discussion above, on October 1, 2010, Brightstar Europe Limited (“BEL”), a consolidated joint venture
between the Company and Brightstar Corp. (“Brightstar”) completed the acquisition of all of the outstanding shares of certain of Triade’s
mobility subsidiaries in Belgium and the Netherlands (“MCC”) for a purchase price of $58.8 million, of which $57.8 million was paid in
cash (based on the foreign currency exchange rates on the date of acquisition). The Company and Brightstar each contributed 50% of the
purchase price to BEL to fund the acquisition. Brightstar’s funding was comprised of a capital contribution and a loan to BEL. The Company
believes BEL’s acquisition of MCC has significantly extended BEL’s mobility operations in Europe.
BEL’s acquisition of MCC and the related financing was a reconsideration event under the variable interest entity (“VIE”) accounting
standards. Based on the final structure of BEL and related analysis of the MCC acquisition, the Company concluded that the joint venture
continued to be a VIE and the results of BEL (including MCC) will continue to be consolidated in the Company’s financial statements. The
portion of the joint venture not owned by the Company will continue to be recognized as a noncontrolling interest in the Company’s
consolidated financial statements.
The Company has accounted for the MCC acquisition as a business combination and the purchase price has been assigned to the assets
acquired, including cash of $1.9 million, accounts receivable, inventory and certain other assets totaling $116.1 million, and liabilities
assumed totaling $84.3 million, at their estimated fair value as of the acquisition date. The allocation of identifiable intangible assets and
goodwill, based on foreign currency exchange rates on the date of the acquisition, includes $14.8 million for customer and vendor
relationships with estimated useful lives of seven years and $10.3 million of goodwill, none of which are deductible for tax purposes.
Other Acquisitions
During fiscal 2012, the Company made two business acquisitions in the European technology distribution marketplace comprised of the
distribution business of Mensch und Maschine Software SE, a leading value-added distributor in the design software market in several
European countries and an additional value-added specialty software distributor in Belgium. These acquisitions, while not material to the
Company’s consolidated financial results, strengthen the Company’s position as Autodesk, Inc.’s leading value-added distributor by
establishing a presence in Benelux and Romania, extending the Company’s product portfolio to include the Autodesk, Inc. software for the
manufacturing industry in Italy, France, UK and Poland and adding a number of highly skilled and qualified professionals, while leveraging
the Company’s existing logistics infrastructure in Europe.
In addition to the Triade and MCC acquisitions in fiscal 2011, the Company completed four other acquisitions in Europe that further
strengthened the Company’s European enterprise, broadline and mobility businesses. The aggregate purchase price for these acquisitions was
$36.4 million, of which $29.0 million was paid in cash (based on the foreign currency exchange rate on the date of acquisition). The
acquisitions have been accounted for as business combinations and the total purchase price of the acquisitions has been assigned to the assets
acquired, including accounts receivable, inventory and certain other assets totaling $24.4 million and liabilities assumed totaling $13.9
million, at their estimated fair value as of the acquisition dates. The allocation of the identifiable intangible assets includes $13.3 million for
customer and vendor relationships with estimated useful lives of five years, $5.4 million for a noncompete agreement with an estimated
useful life of four years, and $7.2 million of goodwill, none of which are deductible for tax purposes.
Proforma Financial Information
Proforma information for the Company’s acquisitions during fiscal 2012, 2011 and 2010 has not been presented as these acquisitions were
not material, either individually or in the aggregate, to the Company’s consolidated financial position or results of operations.
47
NOTE 6 — LOSS ON DISPOSAL OF SUBSIDIARIES
In the fourth quarter of fiscal 2012, as part of the Company’s ongoing initiatives to optimize profitability and return on invested
capital in Latin America, the decision was made to close the Company’s in-country commercial operations in Brazil and Colombia by
the end of fiscal 2012. During the fourth quarter of fiscal 2012, the Company recorded a loss on disposal of these subsidiaries of
$28.3 million, which includes a $9.9 million impairment on the Company’s investments in Brazil and Colombia due to a foreign
currency exchange loss (previously recorded in shareholders’ equity as accumulated other comprehensive income), $15.3 million
related to the write-off of certain value-added tax receivables and $3.1 million comprised primarily of severance costs, fixed asset
write-offs and lease termination penalties. These costs are reflected in the Consolidated Statement of Operations as “loss on disposal
of subsidiaries”, which is a component of operating income. These costs do not include any estimated costs associated with the
Brazilian subsidiary’s contingencies related to CIDE and other non-income related tax examinations (see further discussion in Note
13—Commitments and Contingencies). The operating losses of Brazil and Colombia for the fiscal year ended January 31, 2012 were
not significant to the Company’s consolidated operating results.
NOTE 7 — DEBT
Convertible senior debentures, interest at 2.75% payable semi-annually, due December 2026
Less—unamortized debt discount
Convertible senior debentures, net
Capital leases
Loan payable to Brightstar Corp., interest at LIBOR plus 4.0% payable annually, due
September 2015
Interest-free revolving credit loan payable to Brightstar Corp.
Other committed and uncommitted revolving credit facilities, average interest rate of 6.27%
and 3.27% at January 31, 2012 and 2011, expiring on various dates through fiscal 2013
Less—current maturities (included as “Revolving credit loans and current portion of long-term
debt, net”)
Total Long-term debt
$
January 31,
2012
2011
(In thousands)
0
0
0
6,512
$ 350,000
(8,993)
341,007
7,325
14,940
36,306
15,203
38,045
47,985
105,743
92,931
494,511
(48,490)
$ 57,253
(434,435)
$ 60,076
Convertible Senior Debentures
In December 2006, the Company issued $350.0 million of 2.75% convertible senior debentures due 2026. In accordance with the
accounting rules regarding the accounting treatment for convertible debt instruments requiring or permitting partial cash settlement
upon conversion, the Company accounted for the debt and equity components of the debentures in a manner that reflects the
estimated non-convertible debt borrowing rate at the date of the issuance of the debentures at 6.30%. Under this accounting treatment,
during the fiscal year ended January 31, 2012, the Company recorded contractual interest expense of $8.4 million and non–cash
interest expense of $9.0 million related to the debentures and for each of the fiscal years ended January 31, 2011 and 2010, the
Company recorded contractual interest expense of $9.6 million and non-cash interest expense of $10.3 million, respectively, related to
the debentures.
In accordance with the terms of the debentures, in November 2011, the Company announced its election to fully redeem the
debentures on December 20, 2011, at a redemption price equal to the principal amount of the debentures plus any accrued and unpaid
interest to, but excluding, the redemption date. As of January 31, 2012, all of the debentures had either been redeemed or put to the
Company and there were no debentures outstanding. The Company funded the repayment of the debentures with available cash and
the Company’s $500.0 million Credit Agreement, discussed below.
48
Loans Payable to Brightstar Corp.
In October 2010, Brightstar entered into an agreement to loan BEL its share of the funding requirements related to BEL’s acquisition
of MCC (the “Acquisition Loan”) (see Note 5 – Acquisitions). The Acquisition Loan from Brightstar, plus any accrued interest, has a
repayment date of September 2015, or earlier if agreed between the two parties, and bears interest of the applicable LIBOR rate plus
4.0% per year, which is payable annually on October 1.
The Company also has an interest-free revolving credit loan from Brightstar that was issued in connection with the operations of BEL
(the “Brightstar Revolver”). The terms of the Brightstar Revolver contain no contractual repayment date and allow for the revolving
credit loan to increase or decrease in accordance with the working capital requirements of BEL, as determined by the Company.
Effective October 2010, a resolution of BEL’s board was approved stating that the Brightstar Revolver will not be repaid for the
foreseeable future and therefore the revolving credit loan has been classified as long-term debt in the Company’s Consolidated
Balance Sheet at both January 31, 2012 and 2011.
Other Facilities
In September 2011, the Company entered into a $500.0 million Credit Agreement with a syndicate of banks (the “Credit
Agreement”), which replaced the Company’s $250.0 million Multi-currency Revolving Credit Facility scheduled to expire in March
2012. The Credit Agreement, among other things, i) provides for a maturity date of September 27, 2016, ii) provides for an interest
rate on borrowings, facility fees and letter of credit fees based on the Company’s non-credit enhanced senior unsecured debt rating as
determined by Standard & Poor’s Rating Service and Moody’s Investor Service, and iii) may be increased up to $750.0 million,
subject to certain conditions. The Credit Agreement includes various covenants, limitations and events of default customary for
similar facilities for similarly rated borrowers, including a maximum debt to capitalization ratio and minimum interest coverage. The
Company has also provided a guarantee of certain of its significant subsidiaries. The Company pays interest on advances under the
Credit Agreement at the applicable LIBOR rate plus a predetermined margin that is based on the Company’s debt rating. There are no
amounts outstanding under either of these facilities at either January 31, 2012 or 2011, respectively.
The Company has an agreement (the “Receivables Securitization Program”) 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 $400.0 million. Under this program, which was renewed in August 2011 and amended in
December 2011, 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 $619.8 million and $549.8 million at
January 31, 2012 and 2011, respectively. As collections reduce accounts receivable balances included in the security or collateral
pool, the Company may transfer interests in new receivables to bring the amount available to be borrowed up to the maximum. The
program will expire in December 2012 and the Company will pay interest on advances under the Receivables Securitization Program
at the applicable commercial paper or LIBOR rate plus an agreed-upon margin. There are no amounts outstanding under this program
at either January 31, 2012 or 2011.
In addition to the facilities described above, the Company has various other committed and uncommitted lines of credit and overdraft
facilities totaling approximately $550.2 million at January 31, 2012 to support its operations. Most of these facilities are provided on
an unsecured, short-term basis and are reviewed periodically for renewal.
In consideration of the financial covenants discussed below, the Company’s maximum borrowing availability on the credit facilities is
approximately $1.5 billion, of which $48.0 million was outstanding at January 31, 2012. The Company’s credit facilities contain
limitations on the amounts of annual dividends and repurchases of common stock. Additionally, the credit facilities require
compliance with certain warranties and covenants. The financial ratio covenants contained within the credit facilities include a debt to
capitalization ratio and a minimum interest coverage ratio. At January 31, 2012, 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. At January 31, 2012, the Company had also issued standby letters of credit of $75.1 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.
49
Future payments of debt and capital leases at January 31, 2012 and for succeeding fiscal years are as follows (in thousands):
Fiscal year:
2013
2014
2015
2016
2017
Thereafter
Total payments
Less amounts representing interest on capital leases
Total principal payments
$ 48,748
763
763
15,663
643
39,626
106,206
(463)
$105,743
NOTE 8 — INCOME TAXES
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that have been included in the financial statements. The Company
performs an evaluation of the realizability of the Company’s 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. The estimates and assumptions used by the Company in computing
the income taxes reflected in the Company’s consolidated financial statements could differ from the actual results reflected in the
income tax returns filed during the subsequent year. Adjustments are recorded based on filed returns when such returns are finalized
or the related adjustments are identified.
Significant components of the provision for income taxes are as follows:
Current:
Federal
State
Foreign
Total current
Deferred:
Federal
State
Foreign
Total deferred
2012
Year ended January 31,
2011
(In thousands)
2010
$ 65,526
1,694
41,000
108,220
(20,119)
115
(9,742)
(29,746)
$ 78,474
$46,356
897
30,527
77,780
(1,496)
1,862
6,606
6,972
$84,752
$27,431
916
28,134
56,481
2,403
538
(5,482)
(2,541)
$53,940
The reconciliation of income tax computed at the U.S. federal statutory tax rate to income tax expense is as follows:
U.S. statutory rate
State income taxes, net of federal benefit
Net changes in deferred tax valuation allowances
Tax on foreign earnings different than U.S. rate
Nondeductible interest
Reserve established for foreign income tax contingencies
Reversal of previously accrued income tax reserves
Effect of company-owned life insurance
Disposal of subsidiaries
Other, net
50
Year ended January 31,
2011
35.0%
0.6
(1.2)
(8.3)
1.3
0.5
(0.2)
(0.5)
0
0.7
27.9%
2012
35.0%
0.4
(3.4)
(10.1)
1.5
0.1
(0.4)
0
2.9
0.6
26.6%
2010
35.0%
0.5
(3.3)
(9.7)
3.0
0.1
(1.4)
(1.0)
0
(0.3)
22.9%
In fiscal 2012, the Company recorded an income tax benefit of $13.6 million for the reversal of deferred tax valuation allowances
primarily related to specific jurisdictions in Europe, which had been recorded in prior fiscal years. This income tax benefit was
substantially offset by an income tax expense associated with the write-off of deferred and other income tax assets related to the
closure of the Brazil in-country commercial operations.
In fiscal 2010, an income tax benefit of $5.4 million was recognized for the reversal of a deferred tax valuation allowance related to a
specific European jurisdiction, which had been recorded in prior fiscal years.
The components of pretax income are as follows:
United States
Foreign
2012
$133,274
162,048
$295,322
Year ended January 31,
2011
(In thousands)
$135,039
168,576
$303,615
2010
$ 92,551
142,589
$235,140
The significant components of the Company’s deferred tax liabilities and assets are as follows:
Deferred tax liabilities:
Depreciation and amortization
Capitalized marketing program costs
Convertible senior debentures interest
Goodwill
Deferred costs currently deductible
Other, net
Total deferred tax liabilities
Deferred tax assets:
Accrued liabilities
Loss carryforwards
Amortizable goodwill
Depreciation and amortization
Disallowed interest expense
Other, net
Less: valuation allowances
Total deferred tax assets
Net deferred tax liability
January 31,
2012
2011
(In thousands)
$ 48,111
4,008
0
2,711
14,468
5,333
74,631
43,521
130,396
16,109
5,945
16,693
15,960
228,624
(158,613)
70,011
4,620
$
$ 40,431
2,639
27,514
3,061
13,914
8,050
95,609
52,137
140,558
19,627
4,902
19,236
12,381
248,841
(186,586)
62,255
$ 33,354
The net change in the deferred tax valuation allowances was a decrease of $28.0 million in fiscal 2012, primarily resulting from the
utilization of net operating losses. The net change in the deferred tax valuation allowances was an increase of $0.7 million in fiscal
2011 and an increase of $10.2 million in fiscal 2010. The valuation allowances at both January 31, 2012 and 2011 primarily relate to
foreign net operating loss carryforwards. The Company’s foreign net operating loss carryforwards totaled $641.0 million and $686.4
million at January 31, 2012 and 2011, respectively. The majority of the net operating losses have an indefinite carryforward period
with the remaining portion expiring in fiscal years 2013 through 2025. The Company evaluates a variety of factors in determining the
realizability of deferred tax assets, including the scheduled reversal of temporary differences, historical and projected future taxable
income, and prudent and feasible tax planning strategies.
51
To the extent that the Company generates consistent taxable income within those operations with valuation allowances, the Company
may reduce the valuation allowances, thereby reducing the income tax expense and increasing net income in the period the
determination was made.
In conjunction with the acquisitions of Triade and MCC during fiscal 2011, the Company recorded a $9.2 million long-term deferred
tax liability (see also Note 5 – Acquisitions).
At January 31, 2012, there are $207.3 million of 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.
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, 2012 and 2011 and 2010 is as follows (in thousands):
Gross unrecognized tax benefits at January 31, 2009
Increases in tax positions for current year
Expiration of statutes of limitation
Settlements
Changes due to translation of foreign currencies
Gross unrecognized tax benefits at January 31, 2010
Increases in tax positions for prior years
Increases in tax positions for current year
Expiration of statutes of limitation
Gross unrecognized tax benefits at January 31, 2011
Increases in tax positions for prior years
Decreases in tax positions for prior years
Increases in tax positions for current year
Expiration of statutes of limitation
Settlements
Changes due to translation of foreign currencies
Gross unrecognized tax benefits at January 31, 2012
$ 4,663
1,071
(2,770)
(223)
366
3,107
2,742
86
(860)
5,075
1,590
(208)
56
(791)
(1,990)
(47)
$ 3,685
At January 31, 2012, 2011 and 2010, the amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate
was $2.5 million, $5.1 million and $3.1 million, respectively.
Unrecognized tax benefits that have a reasonable possibility of significantly decreasing within the 12 months following January 31,
2012 totaled $2.5 million and were primarily related to the foreign taxation of certain transactions. Consistent with prior periods, the
Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. The Company’s
accrued interest at January 31, 2012, would not have a material impact on the effective tax rate if reversed. The provision for income
taxes for each of the fiscal years ended January 31, 2012, 2011 and 2010 includes interest expense on unrecognized income tax
benefits for current and prior years which is not significant to the Company’s Consolidated Statement of Income. The change in the
balance of accrued interest for fiscal 2012, 2011 and 2010, includes the current year end accrual, an interest benefit resulting from the
expiration of statutes of limitation, and the translation adjustments on foreign currencies.
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 2009. Income tax returns of various foreign jurisdictions for fiscal 2006 and forward are currently under taxing
authority examination or remain subject to audit.
52
NOTE 9 — EMPLOYEE BENEFIT PLANS
Overview of Equity Incentive Plans
At January 31, 2012, the Company had awards outstanding from four equity-based compensation plans, only one of which is
currently active. The active plan was approved by the Company’s shareholders in June 2009 and includes 4.0 million shares available
for grant, of which approximately 3.2 million shares remain available for future grant at January 31, 2012. Under the active plan, 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 are used by the Company to attract talent and as a retention mechanism for the award recipients and have a
maximum term of ten years, unless a shorter period is specified by the Compensation Committee of the Company’s Board of
Directors (“Compensation Committee”) 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.
For the fiscal years ended January 31, 2012, 2011 and 2010, the Company recorded $10.7 million, $9.9 million and $11.2 million,
respectively, of stock-based compensation expense, and related income tax benefits of $2.9 million, $2.8 million and $2.6 million,
respectively. Cash received from equity-based incentives exercised during the fiscal years ended January 31, 2012, 2011 and 2010
was $35.1 million, $5.0 million and $38.0 million, respectively, and the actual benefit received from the tax deduction from the
exercise of equity-based incentives was $2.2 million, $1.1 million and $1.9 million, respectively, for the fiscal years ended
January 31, 2012, 2011 and 2010.
Restricted Stock
The Company’s restricted stock awards are primarily in the form of restricted stock units (“RSUs”) and typically vest annually
between three and four years from the date of grant, unless a different vesting schedule is mandated by country law. All of the RSUs
have a fair market value equal to the closing price of the Company’s common stock on the date of grant. Stock-based compensation
expense includes $9.4 million, $7.5 million and, $7.4 million for the vesting of RSUs during fiscal 2012, 2011 and 2010, respectively.
A summary of the status of the Company’s RSU activity for the fiscal year ended January 31, 2012 is as follows:
Outstanding at January 31, 2011
Granted
Vested
Canceled
Outstanding at January 31, 2012
Shares
543,841
272,949
(210,094)
(38,198)
568,498
Weighted-
average grant date
fair value
$38.60
48.53
37.40
41.35
43.74
The total fair value of RSUs which vested during the fiscal years ended January 31, 2012, 2011 and 2010 is $7.9 million, $7.1 million
and $9.4 million, respectively. As of January 31, 2012, the unrecognized stock-based compensation expense related to non-vested
RSUs was $19.9 million, which the Company expects to be recognized over the next three 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 Stock Market, Inc. on the
date of grant (or such higher price as may be required by applicable laws and regulations of specific foreign jurisdictions). MV Stock-
settled SARs, MVOs and stock options vest annually between three and four years from the date of grant and have a contractual term
of ten years.
53
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, 2012 is as follows:
Outstanding at January 31, 2011
Granted
Exercised
Canceled
Outstanding at January 31, 2012
Vested and expected to vest at January 31, 2012
Exercisable at January 31, 2012
Shares
2,881,356
12,882
(1,215,028)
(27,810)
1,651,400
1,638,799
1,296,587
Weighted-
average
exercise price
$35.36
48.79
37.76
23.95
33.89
33.95
36.72
Weighted-
Average
remaining
contractual term
(in years)
Aggregate
intrinsic
value
(in thousands)
4.2
4.1
3.3
$
29,783
29,444
19,712
Stock-based compensation expense includes $1.3 million, $2.4 million and $3.8 million for the vesting of MV Stock-settled SARS
and MVOs during fiscal 2012, 2011 and 2010, respectively.
The aggregate intrinsic value in the table above represents the difference between the closing price of the Company’s common stock
on January 31, 2012 and the grant price for all “in-the-money” equity-based awards at January 31, 2012. 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, 2012, 2011 and 2010 was $14.1
million, $5.3 million and $19.7 million, respectively. As of January 31, 2012, the Company expects $2.0 million of total unrecognized
compensation cost related to MV Stock-settled SARs and MVOs to be recognized over the next three fiscal years (over a weighted-
average period of one year). The total fair value of MV Stock-settled SARs and MVOs which vested during the fiscal years ended
January 31, 2012, 2011 and 2010 was $1.5 million, $4.5 million and $1.9 million, respectively. The weighted-average estimated fair
value of the 12,882 and 17,799 MVOs granted during the fiscal years ended January 31, 2012 and 2011 was $10.78 and $7.97,
respectively, based on a two-step valuation utilizing both the Hull-White Lattice (binomial) and Black-Scholes option-pricing models.
A summary of the status of the Company’s stock-based equity incentives outstanding, representing MV Stock-settled SARs, MVOs
and stock options, at January 31, 2012, is as follows:
Range of exercise prices
$21.13 – $21.13
24.04 – 35.38
35.95 – 36.66
37.04 – 37.04
37.06 – 41.08
41.55 – 48.79
51.17 – 51.17
Outstanding
Weighted-
average
remaining
contractual
life (years)
7.1
3.9
4.5
4.2
2.7
2.2
0.1
4.2
Weighted-
average
exercise
price
$ 21.13
31.80
36.58
37.04
39.24
44.09
51.17
33.89
Number
outstanding
at 1/31/12
339,766
340,329
84,000
295,130
450,116
138,559
3,500
1,651,400
Exercisable
Number
exercisable
at 1/31/12
Weighted-
average
exercise
price
23,648 $ 21.13
31.81
36.58
37.04
39.25
43.38
51.17
36.72
332,914
84,000
295,130
446,725
110,670
3,500
1,296,587
The Company’s policy is to utilize shares of its treasury stock, to the extent available, to satisfy its obligation to issue shares upon the
exercise of awards (see further discussion of the Company’s share repurchase program in Note 10 – Shareholders’ Equity below).
Employee Stock Purchase Plan
Under the 1995 Employee Stock Purchase Plan (the “ESPP”), 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 purchase
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, 2012, the Company has issued 472,442 shares of common stock to the ESPP. All shares purchased under
the ESPP must be held by the employees for a period of one year.
54
Retirement Savings Plan
The Company sponsors the Tech Data Corporation 401(k) Savings Plan (the “401(k) Savings Plan”) for its U.S. employees. At the
Company’s discretion, participant deferrals are matched monthly in cash, in an amount equal to 50% of the first 6% of participant
deferrals and participants are fully vested following four years of qualified service. Aggregate contributions made by the Company to
the 401(k) Savings Plan were $2.5 million, $2.3 million and $0.1 million for fiscal years 2012, 2011 and 2010, respectively. The
Company suspended the employer match for the 401(k) during the calendar year ended December 31, 2009, which was subsequently
reinstated effective January 2010. At January 31, 2012 and 2011, the number of shares of Tech Data common stock held by the
Company’s 401(k) Savings Plan totaled 157,722 and 184,699 shares, respectively.
NOTE 10 — SHAREHOLDERS’ EQUITY
During fiscal 2012, the Company’s Board of Directors authorized share repurchase programs for the repurchase of up to a total of
$400.0 million of the Company’s common stock. The Company’s share repurchases were made on the open market through block
trades or otherwise. The number of shares purchased and the timing of the purchases were based on regulatory requirements, 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 plans and the ESPP.
The Company’s common share repurchase and issuance activity for fiscal 2012 and 2011 is summarized as follows:
Treasury stock balance at January 31, 2010
Shares of common stock repurchased under share repurchase programs
Shares of treasury stock reissued
Treasury stock balance at January 31, 2011
Shares of common stock repurchased under share repurchase programs
Shares of treasury stock reissued
Treasury stock balance at January 31, 2012
Weighted-
average
price per
share
$ 35.90
39.33
37.28
46.74
40.71
Shares
7,776,419
5,084,770
(343,651)
12,517,538
6,736,436
(1,087,213)
18,166,761
NOTE 11 — FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company’s assets and liabilities carried or disclosed at fair value are classified in one of the following three categories: Level 1 –
quoted market prices in active markets for identical assets and liabilities; Level 2 – inputs other than quoted market prices included in
level 1 above that are observable for the asset or liability, either directly or indirectly; and, Level 3 – unobservable inputs for the asset
or liability. 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 Income on a basis consistent with the classification of
the change in the fair value of the underlying transactions giving rise to these foreign currency exchange gains and losses 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 fair value of the Company’s outstanding foreign currency forward contracts
at January 31, 2012 and 2011 was an unrealized gain of $6.6 million and $11.1 million, respectively, included in other current assets
and an unrealized loss of $11.9 million and $11.3 million, respectively, included in other current liabilities (see further discussion
below in Note 12 – Derivative Instruments).
The Company utilizes life insurance policies to fund the Company’s nonqualified deferred compensation plan. 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 Income. The
related deferred compensation liability is also marked-to-market each period based upon the various investment return alternatives
selected by the plan participants (level 2 criteria) and the gains and losses are recorded in the Company’s Consolidated Statement of
Income. The fair value of the Company’s nonqualified deferred compensation plan investments and related liability at January 31,
2012 is $32.7 million and $29.5 million, respectively.
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 credit facilities and
loans payable approximates fair value as the majority of these instruments have variable interest rates which approximate current
market rates (level 2 criteria).
55
NOTE 12 — DERIVATIVE INSTRUMENTS
In the ordinary course of business, the Company is exposed to movements in foreign currency exchange rates. The Company’s
foreign currency risk management objective is to protect earnings and cash flows from the impact of exchange rate changes primarily
through the use of foreign currency forward contracts to hedge both intercompany and third party loans, accounts receivable and
accounts payable. These derivatives are not designated as hedging instruments.
The Company employs established policies and procedures to manage the exposure to fluctuations in the value of foreign currencies.
It is the Company’s policy to utilize financial instruments to reduce risks where internal netting cannot be effectively employed.
Additionally, the Company does not enter into derivative instruments for speculative or trading purposes.
The Company’s foreign currency exposure relates to 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. The Company’s transactions in its
foreign operations are denominated primarily in the following currencies: U.S. dollar, Brazilian real, British pound, Canadian dollar,
Chilean peso, Colombian peso, Czech koruna, Danish krone, euros, Mexican peso, Norwegian krone, Peruvian new sol, Polish zloty,
Romanian leu, Swedish krona and Swiss franc.
The Company considers inventory as an economic hedge against foreign currency exposure in accounts payable in certain
circumstances. This practice offsets such inventory against corresponding accounts payable denominated in currencies other than the
functional currency of the subsidiary buying the inventory, when determining the net exposure to be hedged using traditional forward
contracts. Under this strategy, the Company would expect to increase or decrease selling prices for product purchased in foreign
currencies based on fluctuations in foreign currency exchange rates affecting the underlying accounts payable. To the extent the
Company incurs a foreign currency exchange loss (gain) on the underlying accounts payable denominated in the foreign currency, a
corresponding increase (decrease) in gross profit would be expected as the related inventory is sold. This strategy can result in a
certain degree of quarterly earnings volatility as the underlying accounts payable is remeasured using the foreign currency exchange
rate prevailing at the end of each period, or settlement date if earlier, whereas the corresponding increase (decrease) in gross profit is
not realized until the related inventory is sold.
The Company classifies foreign currency exchange gains and losses on its derivative instruments used to manage its exposures to
foreign currency denominated accounts receivable and accounts payable as a component of “cost of products sold” which is
consistent with the classification of the change in fair value upon remeasurement of the underlying hedged accounts receivable or
accounts payable. The Company classifies foreign currency exchange gains and losses on its derivative instruments used to manage
its exposures to foreign currency denominated financing transactions as a component of “other expense (income), net” which is
consistent with the classification of the change in fair value upon remeasurement of the underlying hedged loans. The total amount
recognized in earnings on the Company’s foreign currency forward contracts, which is included as a component of either “cost of
products sold” or “other expense (income), net”, was a net foreign currency exchange loss of $4.1 million, $6.7 million and $34.9
million, respectively, for the fiscal years ended January 31, 2012, 2011 and 2010. The gains and losses on the Company’s foreign
currency forward contracts are largely offset by the change in the fair value of the underlying hedged assets or liabilities. The
Company’s foreign currency forward contracts are also discussed in Note 11 – Fair Value of Financial Instruments.
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 monthly average notional amounts of derivative financial instruments outstanding during the fiscal years ended
January 31, 2012 and 2011 are $1.5 billion and $1.3 billion, respectively, with average maturities of 37 days and 40 days,
respectively. As discussed above, under the Company’s hedging policies, gains and losses on the derivative financial instruments
would be expected to be largely offset by the gains and losses on the underlying assets or liabilities being hedged.
The Company’s foreign currency forward contracts are also discussed in Note 11 – Fair Value of Financial Instruments.
NOTE 13 — COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases logistics centers, office facilities and certain equipment under non-cancelable operating leases, the majority of
which expire at various dates through fiscal 2019. Fair value renewal and escalation clauses exist for a substantial portion of the
56
operating leases. Rental expense for all operating leases, including minimum commitments under IT outsourcing agreements, totaled
$56.5 million, $53.5 million and $55.5 million in fiscal years 2012, 2011 and 2010, respectively. Future minimum lease payments at
January 31, 2012, under all such leases, including minimum commitments under IT outsourcing agreements, for succeeding fiscal
years and thereafter are as follows (in thousands):
Fiscal year:
2013
2014
2015
2016
2017
Thereafter
Total payments
$ 58,500
49,800
43,600
35,100
14,000
20,200
$221,200
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, 2012, which are included in the future minimum
lease payments presented above, was approximately $2.7 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 7—Debt. As of January 31, 2012, the Company was in compliance with all such covenants.
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 will not be material to the
Company’s consolidated financial position or liquidity; however, it could be material to the Company’s operating results for any
particular period, depending upon the level of income for such period.
In December 2010, in a non-unanimous decision, a Brazilian appellate court overturned a 2003 trial court which had previously ruled
in favor of the Company’s Brazilian subsidiary related to the imposition of certain taxes on payments abroad related to the licensing
of commercial software products, commonly referred to as “CIDE tax”. The Company estimates the total exposure where the CIDE
tax, including interest, may be considered due, to be approximately $32.0 million as of January 31, 2012. The Brazilian subsidiary has
moved for clarification of the ruling and intends to appeal if the court does not rule in its favor. However, in order to pursue the next
level of appeal, the Brazilian subsidiary may be required to make a deposit or to provide a guarantee to the courts for the payment of
the CIDE tax pending the outcome of the appeal. Based on the legal opinion of outside counsel, the Company believes that the
chances of success on appeal of this matter are favorable and the Brazilian subsidiary intends to vigorously defend its position that the
CIDE tax is not due. However, no assurance can be given as to the ultimate outcome of this matter. The resolution of this litigation
will not be material to the Company’s consolidated financial position or liquidity; however, it could be material to the Company’s
operating results for any particular period, depending upon the level of income for such period. In addition to the discussion regarding
the CIDE tax above, the Company’s
57
Brazilian subsidiary has been undergoing several examinations of non-income related taxes. Due to the complex nature of the
Brazilian tax system, the Company is unable to determine the likelihood of these examinations resulting in assessments. Such
assessments cannot be reasonably estimated at this time, but could be material to the Company’s consolidated results of operations for
any particular period, depending upon the level of income for such period. However, the Company believes such assessments, if they
were to occur, would not have a material adverse effect on the Company’s consolidated financial position or liquidity.
The Company is subject to various other legal proceedings and claims arising in the ordinary course of business. The Company’s
management does not expect that the outcome in any of these other legal proceedings, individually or collectively, will have a
material adverse effect on the Company’s financial condition, results of operations, or cash flows.
Guarantees
As is customary in the technology 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, 2012 and 2011, the aggregate amount of guarantees under these arrangements totaled $65.4
million and $62.1 million, respectively, of which $28.4 million and $43.0 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 14 — SEGMENT INFORMATION
Tech Data operates predominately in a single industry segment as a distributor of technology products, logistics management, and
other value-added services. While the Company operates primarily in one industry, it is managed based on geographic segments: the
Americas (including North America and South 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 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
Europe
Total
Operating income
Americas
(1)
Europe
Stock-based compensation expense
Total
Depreciation and amortization
Americas
Europe
Total
Capital expenditures
Americas
Europe
Total
Identifiable assets
Americas
2012
Year ended January 31,
2011
2010
$10,839,044
15,649,080
$26,488,124
$10,534,531
13,841,442
$24,375,973
$ 9,570,088
12,529,788
$22,099,876
$
$
$
$
$
$
174,882
163,675
(10,699)
327,858
16,338
40,994
57,332
29,338
15,032
44,370
$
$
$
$
$
$
183,639
160,233
(9,887)
333,985
16,200
31,085
47,285
18,392
13,510
31,902
$
$
$
$
$
$
143,869
126,832
(11,225)
259,476
16,004
29,950
45,954
17,365
11,500
28,865
$ 1,855,914
$ 1,996,765
$ 2,119,467
Europe
Total
Goodwill:
Americas
Europe
(2)
Total
Acquisition-related intangible assets, net:
Americas
Europe
(2)
Total
3,929,504
$ 5,785,418
4,415,318
$ 6,412,083
3,576,986
$ 5,696,453
$
$
$
$
2,966
94,315
97,281
0
61,000
61,000
$
$
$
$
2,966
67,460
70,426
0
53,581
53,581
$
$
$
$
2,966
14,053
17,019
0
11,286
11,286
(1) The decrease in operating income in the Americas for the fiscal year ended January 31, 2012, is primarily the result of $28.3 million loss related to the closure of the
operations in Brazil and Colombia during the fourth quarter of fiscal 2012.
(2) The increase in goodwill and acquisition-related intangible assets, net, at both January 31, 2012 and 2011, is the result of the European acquisitions completed during fiscal
2012 and fiscal 2011, respectively (see further discussion in Note 4—Goodwill and Intangible Assets and Note 5—Acquisitions).
58
NOTE 15 — INTERIM FINANCIAL INFORMATION (UNAUDITED)
Interim financial information for fiscal years 2012 and 2011 is as follows:
Fiscal year 2012:
Net sales
Gross profit
Consolidated net income
Net income attributable to shareholders of Tech Data
Corporation
Net income per share attributable to shareholders of Tech Data
Corporation:
Basic
Diluted
Fiscal year 2011:
Net sales
Gross profit
Consolidated net income
Net income attributable to shareholders of Tech Data
Corporation
April 30
July 31
October 31
(In thousands, except per share amounts)
January 31
Quarter ended
$6,332,128
$ 333,462
48,720
$
$6,449,461
$ 340,838
51,756
$
$6,593,983
$ 344,747
57,163
$
$7,112,552
$ 374,944
59,209
$
$
48,701
$
50,107
$
53,519
$
54,069
$
$
1.04
1.03
$
$
1.11
1.10
$
$
1.27
1.26
$
$
1.31
1.29
April 30
July 31
October 31
(In thousands, except per share amounts)
January 31
Quarter ended
$5,621,055
$ 292,803
45,644
$
$5,473,961
$ 287,537
40,832
$
$6,163,762
$ 324,202
51,163
$
$7,117,195
$ 378,746
81,224
$
$
45,633
$
40,855
$
50,458
$
77,297
Net income per share attributable to shareholders of Tech Data
Corporation:
Basic
Diluted
$
$
0.89
0.88
$
$
0.82
0.82
$
$
1.08
1.07
$
$
1.66
1.63
During the fourth quarter of fiscal 2012, the Company recorded a $28.3 million loss on disposal of subsidiaries related to the closure
of the commercial operations in Brazil and Colombia, which decreased diluted earnings per share by $0.46 for the quarter ended
January 31, 2012 (see also Note 6 – Loss on Disposal of Subsidiaries).
59
ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Controls and Procedures.
ITEM 9A.
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, 2012. 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, 2012.
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, 2012. 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, 2012, 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, 2012 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 included herein.
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 2012 that have materially
affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
60
Report of Independent Registered Certified Public Accounting Firm
The Board of Directors and Shareholders of
Tech Data Corporation
We have audited Tech Data Corporation and subsidiaries’ internal control over financial reporting as of January 31, 2012, 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 and subsidiaries’ 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 and subsidiaries maintained, in all material respects, effective internal control over financial
reporting as of January 31, 2012, 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, 2012 and 2011, and the related consolidated
statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended
January 31, 2012, of Tech Data Corporation and subsidiaries and our report dated March 21, 2012, expressed an unqualified opinion
thereon.
/s/ Ernst & Young LLP
Tampa, Florida
March 21, 2012
61
ITEM 9B.
None.
Other Information
PART III
ITEM 10.
Directors, 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 2012 Annual Meeting of
Shareholders (“Proxy Statement”). The Proxy Statement for the 2012 Annual Meeting of Shareholders will be filed with the SEC
prior to May 31, 2012.
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 Savio W.
Tung.
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.
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.
The information required by this item is incorporated herein by reference to the Company’s Proxy Statement.
Executive Compensation.
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
62
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 equity purchase
plans as of January 31, 2012 are summarized in the following table:
Equity Compensation Plan Information
Plan category
Equity compensation plans approved by shareholders for:
Employee equity compensation
Employee stock purchase
Non-employee directors’ equity compensation
Total
(2)
Employee equity compensation plan not approved by shareholders
Total
Number of
shares to
be issued upon
exercise of outstanding
equity-based incentives
Weighted average exercise
price of outstanding
equity-based incentives
(1)
Number of shares
remaining available for
future issuance
under equity
compensation plans
2,168,336
0
22,500
2,190,836
29,062
2,219,898
$24.87
0
35.25
24.98
42.56
25.21
3,247,797
527,558
0
3,775,355
0
3,775,355
(1) 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 maximum value stock-settled stock appreciation rights (“MV Stock-settled SARs”) would be $33.73 for equity
compensation plans approved by security holders, $42.56 for equity compensation plans not approved by shareholders and $33.89 for all equity compensation plans.
(2) The equity-based incentives outstanding include 984,934 MV Stock-settled SARs at an average exercise price of $32.57. 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 382,000 shares. The total of equity-based incentives
outstanding also includes 62,994 shares outstanding for non-employee directors.
The information required by Item 12 relating to Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters is incorporated 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.
ITEM 14.
Principal Accountant Fees and Services.
Information regarding principal accountant fees and services is set forth under the caption “Independent Registered Certified Public
Accounting Firm Fees” in the Company’s Proxy Statement.
63
ITEM 15.
Exhibits, Financial Statement Schedules.
(a) See index to financial statements and schedules included in Item 8.
PART IV
(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
(20)
3(ii)
(19)
10-NN
(4)
10-OO
(4)
10-AAa
(5)
10-AAi
(6)
10-AAt
(7)
10-AAaa
(3)
10-AAbb
(2)
10-AAcc
(8)
10-AAdd
(8)
10-AAee
(8)
10-AAii
(9)
10-AAjj
(10)
10-AAnn
(11)
10-AAoo
(11)
10-AApp
(12)
10-AArr
(13)
10-AAss
(13)
10-AAtt
(13)
Description
Amended and Restated Articles of Incorporation of Tech Data Corporation filed on June 23,
2009 with the Secretary of the State of Florida
Bylaws of Tech Data Corporation as adopted by the Board of Directors on March 24, 2009 and
approved by the Shareholders on June 10, 2009.
Non-Employee Directors’ 1995 Non-Statutory Stock Option Plan
1995 Employee Stock Purchase Plan
Transfer and Administration Agreement dated May 19, 2000
2000 Non-Qualified Stock Option Plan of Tech Data Corporation
Trust Agreement Between Tech Data Corporation and Fidelity Management Trust Company,
Tech Data Corporation 401(k) Savings Plan Trust, effective August 1, 2003
2005 Deferred Compensation Plan
Amendment Number 8 to Transfer and Administration Agreement dated as of May 19, 2000
Executive Severance Plan, effective March 31, 2005
First Amendment to the Tech Data Corporation 2005 Deferred Compensation Plan, effective
January 1, 2005
Executive Incentive Plan – April 2005
Amendment No. 10 to Transfer and Administration Agreement
Uncommitted Account Receivable Purchase Agreement dated as of January 23, 2006
Amended and Restated 2000 Equity Incentive Plan of Tech Data Corporation
First Amendment to the Amended and Restated 2000 Equity Incentive Plan of Tech Data
Corporation
Employment Agreement Between Tech Data Corporation and Robert M. Dutkowsky, dated
October 2, 2006
Third Amended and Restated Credit Agreement dated as of March 20, 2007 (including related
Amended and Restated Guaranty Agreement and Increditor Agreement)
Third Omnibus Amendment dated as of March 20, 2007
Amendment Number 11 to Transfer and Administration Agreement dated as of March 20, 2007
64
Exhibit
Number
10-AAuu
(13)
Description
Indenture for New 2.75% Convertible Senior Debentures due 2026 between Tech Data and U.S. Bank
National Association
10-AAvv
(14)
10-AAxx
(14)
10-AAyy
(15)
10-AAzz
(16)
10-BBa
(17)
10-BBb
(17)
10-BBc
(17)
10-BBd
(18)
10-BBe
(20)
10-BBf
(21)
10-BBg
(22)
10-BBh
(23)
10-BBi
(24)
10-BBj
(25)
10-BBk
(25)
10-BBl
(1)
10-BBm
(1)
21-A
(1)
23-A
(1)
24
(1)
31-A
(1)
31-B
(1)
32-A
(1)
32-B
(1)
Equity Incentive Bonus Plan
Trade Receivables Purchase Agreement
Amendment Number 12 to Transfer and Administration Agreement dated as of December 18, 2007
First Amendment to Trade Receivables Purchase Agreement.
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
2009 Equity Incentive Plan of Tech Data Corporation
Amendment Number 14 to Transfer and Administration Agreement dated as of October 16, 2009
Revolving Uncommitted Trade Receivables Purchase Agreement dated January 27, 2010
Amendment Number 15 to Transfer and Administration Agreement dated as of October 15, 2010
First Amendment to the Third Amended and Restated Credit Agreement dated as of March 20, 2007
Amendment No. 16 to Transfer and Administration Agreement dated as of August 31, 2011
Credit Agreement dated as of September 27, 2011
Amendment No. 17 to Transfer and Administration Agreement dated as of December 13, 2011
Tech Data Corporation 401(k) Savings Plan (as amended and restated January 1, 2006) and
Amendments 1 through 5
Subsidiaries of Registrant
Consent of Ernst & Young LLP
Power of Attorney (included on signature page)
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
65
Exhibit
Number
101
(26)
Description
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheet as of
January 31, 2012 and January 31, 2011; (ii) Consolidated Statement of Income for the fiscal years ended
January 31, 2012, 2011 and 2010; (iii) Consolidated Statement of Comprehensive Income for the fiscal
years ended January 31, 2012, 2011 and 2010; (iv) Consolidated Statement of Shareholders’ Equity for
the fiscal years ended January 31, 2012, 2011 and 2010; (v) Consolidated Statement of Cash Flows for
the fiscal years ended January 31, 2012, 2011 and 2010; (vi) Notes to the Consolidated Financial
Statements, detail tagged and (vii) Financial Statement Schedule II detail tagged.
(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)
Filed herewith.
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 8-K dated December 8, 2004, 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 10-Q for the quarter ended July 31, 2000, File No. 0-14625.
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, 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.
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 10-K for the year ended January 31, 2007, File No. 0-
14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-Q for the quarter ended April 30, 2007, File No. 0-
14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-K for the year ended January 31, 2008, File No. 0-
14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-Q for the quarter ended April 30, 2008, File No. 0-
14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-Q for the quarter ended July 31, 2008, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-Q for the quarter ended October 31, 2008, File No. 0-
14625
.
Incorporated by reference to the Exhibits included in the Company’s Form 8-K dated June 10, 2009, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-Q for the quarter ended July 31, 2009, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-Q for the quarter ended October 31, 2009, File No. 0-
14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-K for the year ended January 31, 2010, File No. 0-
14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-Q for the quarter ended October 31, 2010, File No. 0-
14625.
Incorporated by reference to the Exhibits included in the Company’s Form 10-Q for the quarter ended July 31, 2011, File No. 0-14625.
Incorporated by reference to the Exhibits included in the Company’s SC-TO I dated September 27, 2011, File No. 005-37498.
Pursuant to the applicable securities laws and regulations, we are deemed to have complied with the reporting obligation relating to the
submission of interactive data files in such exhibits and are not subject to liability under anti-fraud provisions of the federal securities
laws as long as we have made a good faith attempt to comply with the submission requirements and promptly amend the interactive
data files after becoming aware that the interactive data files fail to comply with the submission requirements. Users of this data are
advised that, pursuant to Rule 406T, these interactive data files are deemed not filed and otherwise are not subject to liability.
66
TECH DATA CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
SCHEDULE II
Allowance for doubtful accounts receivable and sales returns
January 31,
2012
2011
2010
Activity
Balance at
beginning
of period
Charged to
cost and
expenses Deductions
Other
(1)
Balance at
end of
period
$ 56,811 $ 10,546 $(30,772) $16,128 $ 52,713
56,811
54,627
(20,970)
(38,564)
11,637
26,640
11,517
10,953
54,627
55,598
(1)
“Other” primarily includes recoveries, dispositions and the effect of fluctuations in foreign currency.
67
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 21, 2012.
TECH DATA CORPORATION
By /S/ ROBERT M. DUTKOWSKY
Robert M. Dutkowsky
Chief Executive Officer
68
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.
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/ KATHLEEN MISUNAS
Kathleen Misunas
/s/ THOMAS I. MORGAN
Thomas I. Morgan
Chief Executive Officer, Director
(principal executive officer)
Executive Vice President and Chief
Financial Officer, Director
(principal financial officer)
Senior Vice President and Corporate
Controller (principal accounting officer)
March 21, 2012
March 21, 2012
March 21, 2012
Chairman of the Board of Directors
March 21, 2012
Director
Director
Director
Director
Director
69
March 21, 2012
March 21, 2012
March 21, 2012
March 21, 2012
March 21, 2012
Signature
/s/ SAVIO W. TUNG
Savio W. Tung
/s/ DAVID M. UPTON
David M. Upton
Title
Director
Director
70
Date
March 21, 2012
March 21, 2012
[THIS PAGE INTENTIONALLY LEFT BLANK]
36179.p74.indd 1
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STRENGTH
IN OUR BUSINESS
ON THE BALANCE SHEET
Tech Data Corporation is one of the world’s largest
wholesale distributors of technology products. Its advanced
logistics capabilities and value-added services enable over
125,000 resellers in more than 100 countries to efficiently
and cost effectively support the diverse technology needs of
end users, including small and medium businesses (SmB),
large enterprises, consumers and government agencies.
TOTAL CAPITALIzATION:
$2.1 billion
Equity $2.0 billion
Debt $0.1 billion
5%Debt
to Cap
IN THE RESULTS
For the fiscal years ended January 31,
$ in millions, except per share data
Sales
Gross margin
GAAP operating income
Non-GAAP operating income (1)
GAAP operating margin
Non-GAAP operating margin (1)
GAAP net income
Non-GAAP net income (1)
GAAP net income per diluted share
Non-GAAP net income per diluted share (1)
Return on invested capital (1)
Cash conversion cycle (days)
Cash and cash equivalents
Total debt
(1) Please refer to Appendix A for the GAAP to non-GAAP reconciliation
2012
2011
2010
$ 26,488
$ 24,376
$ 22,100
5.26%
328
356
1.24%
1.34%
206
226
4.66
5.09
14%
20
505
105
$
$
$
$
$
$
$
$
5.26%
334
334
1.37%
1.37%
214
214
4.36
4.36
14%
24
764
494
5.21%
$ 259
$ 259
1.17%
1.17%
$ 180
$ 180
$ 3.54
$ 3.54
13%
23
$ 983
$ 404
$
$
$
$
$
$
$
$
THROUGHOUT THE PORTFOLIO
DATA CENTER
~$7.5 BIllIoN
G
E
T
N
I
A
R
T E D S
U
P
P
SOFTWARE
~$4.6 BIllIoN
BROADLINE
L
Y
C
H
A
IN
S
E
C
SERVI
CONSUmER ELECTRONICS
~$3.5 BIllIoN
mOBILITY
~$1.8 BIllIoN
Dollars shown represent approximate
fiscal year 2012 sales. Our reporting
methodology results in some overlap
between certain categories.
TECH DATA CORPORATION
CORPORATE INFORMATION
BOARD OF DIRECTORS
Steven A. Raymund
Chairman of the Board of Directors
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
OFFICERS
Robert M. Dutkowsky
Chief Executive Officer
Jeffery P. Howells
Executive Vice President and
Chief Financial Officer
Néstor Cano
President, Europe
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
Harry J. Harczak, Jr.
Retired Executive Vice President,
CDW Corporation
Jeffery P. Howells
Executive Vice President and
Chief Financial Officer,
Tech Data Corporation
Kathy Misunas
Founder and Principal,
Essential Ideas
Thomas I. Morgan
Chairman and Chief Executive Officer,
Baker & Taylor, Inc.
Savio W. Tung
Chief Executive Officer, North America,
Investcorp
David M. Upton
American Standard Companies
Professor of Operations,
Oxford University
Murray Wright
President, the Americas
John Tonnison
Executive Vice President and
Chief Information Officer
Charles V. Dannewitz
Senior Vice President, Treasurer
Joseph B. Trepani
Senior Vice President,
Corporate Controller
David R. Vetter
Senior Vice President, General Counsel
and Secretary
TRANSFER AGENT
Wells Fargo Shareowner Services
P.O. BOX 64874
St. Paul, mN 55164-0874
800-468-9716
www.shareowneronline.com
ANNUAL mEETING
OF SHAREHOLDERS
All interested parties are cordially
invited to attend the Annual meeting of
Shareholders on Wednesday, may 30,
2012, at 3:00 p.m. at the corporate
headquarters, 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/investor. 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
36179_Cover.indd 2
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DATA
CENTER
~$7.5 BILLION
SOFTWARE
MOBILITY
~$4.5 BILLION
~$1.8 BILLION
CONSUMER
ELECTRONICS
~$3.5 BILLION
Tech Data Corporation
5350 Tech Data Drive
Clearwater, FL 33760
P: 727 539 7429
www.techdata.com
STRENGTH WHERE IT COUNTS
2012 ANNUAL REPORT
Year Ended January 31, 2012
T
E
C
H
D
A
T
A
2
0
1
2
A
N
N
U
A
L
R
E
P
O
R
T
36179_Cover.indd 1
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