Tech Data Corporation Reports Third Quarter Fiscal Year 2019 Results
CLEARWATER, Fla., Nov. 29, 2018 /PRNewswire/ -- Tech Data (Nasdaq: TECD) (the "Company") today announced its financial results for the third quarter ended October 31, 2018.
Third quarter ended October 31 Nine months ended October 31
, ,
---
($ in millions, 2018 2017 Y/Y 2018 2017 Y/Y
except per share amounts) Change Change
--- ---
Net Sales $9,340.0 $8,448.5 11% $26,774.4 $23,564.4 14%
Operating income (GAAP) $146.9 $79.6 85% $327.7 $258.2 27%
Operating margin (GAAP) 1.57% 0.94%
63 bps 1.22% 1.10%
12 bps
Operating income (Non-GAAP) $188.0 $135.7 39% $447.0 $386.8 16%
Operating margin (Non-GAAP) 2.01% 1.61%
40 bps 1.67% 1.64%
3 bps
Net income (GAAP) $114.2 $37.3 206% $223.8 $115.4 94%
Net income (Non-GAAP) $116.3 $76.7 52% $264.8 $213.5 24%
EPS - diluted (GAAP) $2.96 $0.97 205% $5.80 $3.03 91%
EPS - diluted (Non-GAAP) $3.02 $2.00 51% $6.87 $5.60 23%
--- ---
A reconciliation of GAAP to non-GAAP financial measures is presented in the financial tables of this press release.
This information is also available on the Investor Relations section of Tech Data's website at www.techdata.com/investor
.
Financial Highlights for the Third Quarter Ended October, 31, 2018:
-- Net sales were $9.3 billion, an increase of 11 percent compared to the
prior-year quarter. On a constant currency basis, net sales increased 12
percent.
-- Americas: Net sales were $4.1 billion (44 percent of worldwide net
sales), an increase of 13 percent. On a constant currency basis, net
sales increased 14 percent.
-- Europe: Net sales were $4.9 billion (53 percent of worldwide net
sales), an increase of 9 percent. On a constant currency basis, net
sales increased 12 percent.
-- Asia Pacific: Net sales were $0.3 billion (3 percent of worldwide
net sales), an increase of 6 percent. On a constant currency basis,
net sales increased 12 percent.
-- Gross profit was $556.6 million, an increase of $30.5 million, or 6
percent. As a percentage of net sales, gross profit was 5.96 percent
compared to 6.23 percent in the prior-year quarter.
-- Selling, general and administrative expenses ("SG&A") were $396.7
million, or 4.25 percent of net sales, compared to $416.8 million, or
4.93 percent of net sales in the prior-year quarter. Non-GAAP SG&A was
$368.6 million, a decrease of $21.8 million, or 6 percent. As a
percentage of net sales, non-GAAP SG&A was 3.95 percent, compared to
4.62 percent in the prior-year quarter. Included in SG&A and non-GAAP
SG&A expenses is a $25 million benefit from the collection of a
previously reserved accounts receivable.
-- Worldwide operating income was $146.9 million, or 1.57 percent of net
sales compared to $79.6 million or 0.94 percent of net sales in the
prior-year quarter. Non-GAAP operating income was $188.0 million, an
increase of $52.3 million, or 39 percent. As a percentage of net sales,
non-GAAP operating income was 2.01 percent, an improvement of 40 basis
points.
-- Americas: Operating income was $112.4 million, or 2.72 percent of
net sales, compared to $55.6 million, or 1.52 percent of net sales
in the prior-year quarter. Non-GAAP operating income was $124.8
million, an increase of $39.3 million, or 46 percent. As a
percentage of net sales, non-GAAP operating income was 3.01 percent,
an improvement of 68 basis points.
-- Europe: Operating income was $39.9 million, or 0.81 percent of net
sales, compared to $29.9 million, or 0.66 percent of net sales in
the prior-year quarter. Non-GAAP operating income was $66.2 million,
an increase of $12.8 million, or 24 percent. As a percentage of net
sales, non-GAAP operating income was 1.34 percent, an improvement of
16 basis points.
-- Asia Pacific: Operating income was $2.7 million, or 0.97 percent of
net sales, compared to $2.4 million, or 0.91 percent of net sales in
the prior-year quarter. Non-GAAP operating income was $4.6 million,
an increase of $0.7 million, or 18 percent. As a percentage of net
sales, non-GAAP operating income was 1.64 percent, an improvement of
17 basis points.
-- Included in worldwide and Americas operating income and non-GAAP
operating income is a $25 million benefit from the collection of a
previously reserved accounts receivable.
-- Stock-based compensation expense was $8.1 million, compared to $8.3
million in the prior-year quarter. This includes $0.6 million of
acquisition and integration-related stock compensation expense.
These expenses are excluded from the regional operating results and
presented as a separate line item in the company's segment reporting
(see the GAAP to non-GAAP reconciliation in the financial tables of
this press release).
-- Net income was $114.2 million, compared to $37.3 million in the
prior-year quarter. Non-GAAP net income was $116.3 million, an increase
of $39.6 million, or 52 percent. Included in net income and non-GAAP net
income is an $18 million (net of tax) benefit from the collection of a
previously reserved accounts receivable.
-- Earnings per share on a diluted basis ("EPS") were $2.96 compared to
$0.97 in the prior year quarter. Non-GAAP EPS were $3.02, an increase of
$1.02, or 51 percent compared to the prior-year quarter. Included in
earnings per share and non-GAAP earnings per share is a $0.47 benefit
from the collection of a previously reserved accounts receivable.
-- Net cash generated by operations during the quarter was $155 million.
-- Return on invested capital for the trailing twelve months was 8 percent,
compared to 9 percent in the prior-year period. The adjusted return on
invested capital for the trailing twelve month period was 12 percent,
essentially flat from the prior-year period.
"I am pleased to report that our teams delivered a strong Q3 performance with great execution across our three regions. Worldwide sales grew 11 percent and we achieved high double-digit non-GAAP operating income and earnings per share growth. In addition, we generated $155 million in cash from operations, earned an adjusted return on invested capital of 12 percent, paid down $100 million of debt and returned $44 million to our shareholders through share repurchases," said Rich Hume, chief executive officer. "Our Q3 results reflect the powerful combination of our end-to-end portfolio and strong execution by our global teams. They also validate the strategic role we play in the IT Supply chain - delivering high value through our end-to-end portfolio to channel partners across the broad spectrum of IT products and solutions."
Business Outlook
-- For the quarter ending January 31, 2019, the Company anticipates:
-- Worldwide net sales to be in the range of $10.5 billion to $10.9
billion
-- EPS to be in the range of $3.00 to $3.30 and non-GAAP EPS to be in
the range of $3.90 to $4.20
-- An effective tax rate in the range of 24 percent to 26 percent
-- This guidance assumes an average U.S. dollar to euro exchange rate of
$1.15 to EUR1.00.
Webcast Details
Tech Data will hold a conference call today at 9:00 a.m. (ET) to discuss its financial results for the third quarter ended October 31, 2018. A webcast of the call, including supplemental schedules, will be available to all interested parties and can be obtained at www.techdata.com/investor. The webcast will be available for replay for three months.
Non-GAAP Financial Information
The non-GAAP financial information contained in this release is included with the intention of providing investors a more complete understanding of the Company's operational results and trends, but should only be used in conjunction with results reported in accordance with Generally Accepted Accounting Principles ("GAAP"). Certain non-GAAP measures presented in this release or other releases, presentations and similar documents issued by the Company include sales, income or expense items as adjusted for the impact of changes in foreign currencies (referred to as "constant currency"), non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP earnings per diluted share and Adjusted Return on Invested Capital. Certain non-GAAP measures also exclude acquisition-related intangible assets amortization expense, benefits associated with legal settlements, acquisition, integration and restructuring expenses, value-added tax assessments and related interest expense, gain on disposal of subsidiary, tax indemnifications, acquisition-related financing expenses, changes in deferred tax valuation allowances and the impact of U.S. tax reform. A detailed reconciliation of the adjustments between results calculated using GAAP and non-GAAP in this release is contained in the attached financial schedules. This information can also be obtained from the Company's Investor Relations website at www.techdata.com/investor.
Forward-Looking Statements
Certain statements in this communication may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, including statements regarding Tech Data's plans, objectives, expectations and intentions, Tech Data's financial results and estimates and/or business prospects, involve a number of risks and uncertainties, and actual results could differ materially from those projected. These forward looking statements are based on current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which Tech Data operates, 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 Tech Data's future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances, are forward looking statements. 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.
For additional information with respect to risks and other factors which could occur, see Tech Data's Annual Report on Form 10-K for the year ended January 31, 2018, including Part I, Item 1A, "Risk Factors" therein, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other securities filings with the Securities and Exchange Commission (the "SEC") that are available at the SEC's website at www.sec.gov and other securities regulators. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Many of these factors are beyond Tech Data's control. Unless otherwise required by applicable securities laws, Tech Data disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Tech Data undertakes no duty to update any forward looking statements contained herein to reflect actual results or changes in Tech Data's expectations.
About Tech Data
Tech Data connects the world with the power of technology. Our end-to-end portfolio of products, services and solutions, highly specialized skills, and expertise in next-generation technologies enable channel partners to bring to market the products and solutions the world needs to connect, grow and advance. Tech Data is ranked No. 83 on the Fortune 500(®) and has been named one of Fortune's "World's Most Admired Companies" for nine straight years. To find out more, visit www.techdata.com or follow us on Twitter, LinkedIn and Facebook.
Contacts:
Charles V. Dannewitz, Executive Vice President, Chief Financial Officer
727-532-8028 (chuck.dannewitz@techdata.com)
Arleen Quiñones, Corporate Vice President, Investor Relations and Corporate Communications
727-532-8866 (arleen.quinones@techdata.com)
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three months ended October 31, Nine months ended October 31,
---
2018 2017 2018 2017
(As Adjusted1 )
(As Adjusted1 )
Net sales $9,340,029 $8,448,471 $26,774,449 $23,564,444
Cost of products sold 8,783,425 7,922,390 25,167,698 22,065,684
---
Gross profit 556,604 526,081 1,606,751 1,498,760
Operating expenses:
Selling, general and administrative expenses 396,675 416,766 1,234,355 1,179,996
Acquisition, integration, and restructuring expenses 20,277 29,748 66,799 101,931
Legal settlements and other, net (7,207) (15,406) (41,343)
Gain on disposal of subsidiary (29) (6,746) -
409,716 446,514 1,279,002 1,240,584
---
Operating income 146,888 79,567 327,749 258,176
Interest expense 25,405 25,925 79,380 85,205
Other expense (income), net 4,961 (1,243) 7,779 (1,374)
---
Income before income taxes 116,522 54,885 240,590 174,345
Provision for income taxes 2,306 17,617 16,809 58,964
---
Net income $114,216 $37,268 $223,781 $115,381
Earnings per share:
Basic $2.98 $0.98 $5.83 $3.05
Diluted $2.96 $0.97 $5.80 $3.03
Weighted average common shares outstanding:
Basic 38,358 38,186 38,357 37,877
===
Diluted 38,526 38,433 38,559 38,105
===
(1)Amounts have been adjusted to reflect the adoption of Accounting Standard Update 2014-09, Revenue from Contracts with Customers (ASC 606) on a full retrospective basis.
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except par value and share amounts)
(Unaudited)
October 31,
January 31,
2018 2018
ASSETS
(As Adjusted1 )
Current assets:
Cash and cash equivalents $646,479 $955,628
Accounts receivable, net 5,995,247 6,035,716
Inventories 3,201,213 2,965,521
Prepaid expenses and other assets 342,328 403,548
Total current assets 10,185,267 10,360,413
Property and equipment, net 268,304 279,091
Goodwill 932,409 969,168
Intangible assets, net 973,300 1,086,772
Other assets, net 200,323 224,915
Total assets $12,559,603 $12,920,359
===
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $7,073,089 $6,962,193
Accrued expenses and other liabilities 1,054,585 1,169,986
Revolving credit loans and current maturities of long-term debt, net 110,330 132,661
Total current liabilities 8,238,004 8,264,840
Long-term debt, less current maturities 1,301,559 1,505,248
Other long-term liabilities 182,251 228,779
Total liabilities $9,721,814 $9,998,867
---
Shareholders' equity:
Common stock, par value $0.0015; 200,000,000 shares authorized; 59,245,585 $89 $89
shares issued at October 31, 2018 and January 31, 2018
Additional paid-in capital 836,520 827,301
Treasury stock, at cost (21,507,391 and 21,083,972 shares at October 31, 2018
and January 31, 2018) (975,090) (940,124)
Retained earnings 2,969,715 2,745,934
Accumulated other comprehensive income 6,555 288,292
Total shareholders' equity 2,837,789 2,921,492
Total liabilities and shareholders' equity $12,559,603 $12,920,359
===
(1)Amounts have been adjusted to reflect the adoption of Accounting Standard Update 2014-09, Revenue from
Contracts with Customers (ASC 606) on a full retrospective basis.
TECH DATA CORPORATION AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(In thousands)
Three months ended October 31, 2018
Americas (1)
Europe (1) Asia Pacific (1)
Stock
Consolidated
Compensation
Expense
---
Net Sales $4,137,852 $4,920,156 $282,021 $9,340,029
===
Operating income (GAAP) (1) $112,399 $39,889 $2,739 $(8,139) $146,888
Acquisition, integration and restructuring expenses 5,989 13,132 578 578 20,277
Acquisition-related intangible assets amortization expense 13,569 7,640 1,314 22,523
Tax indemnifications - 5,541 5,541
Gain on disposal of subsidiary - (29) (29)
Legal settlements and other, net (7,207) (7,207)
Total non-GAAP operating income adjustments $12,351 $26,284 $1,892 $578 $41,105
---
Operating income (non-GAAP) $124,750 $66,173 $4,631 $(7,561) $187,993
===
Operating margin (GAAP) 2.72% 0.81% 0.97% 1.57%
Operating margin (non-GAAP) 3.01% 1.34% 1.64% 2.01%
(1) GAAP operating income does not include stock compensation expense at the regional level.
Three months ended October 31, 2017
Americas (1)
Europe (1) Asia Pacific (1)
Stock
Consolidated
Compensation
Expense
---
Net Sales $3,663,498 $4,518,669 $266,304 $8,448,471
===
Operating income (GAAP) (1) $55,551 $29,909 $2,432 $(8,325) $79,567
Acquisition, integration and restructuring expenses 14,149 14,128 287 1,184 29,748
Acquisition-related intangible assets amortization expense 15,816 9,362 1,207 26,385
Total non-GAAP operating income adjustments $29,965 $23,490 $1,494 $1,184 $56,133
---
Operating income (non-GAAP) $85,516 $53,399 $3,926 $(7,141) $135,700
===
Operating margin (GAAP) 1.52% 0.66% 0.91% 0.94%
Operating margin (non-GAAP) 2.33% 1.18% 1.47% 1.61%
(1) GAAP operating income does not include stock compensation expense at the regional level.
TECH DATA CORPORATION AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(In thousands)
Nine months ended October 31, 2018
Americas (1)
Europe (1) Asia Pacific (1)
Stock
Consolidated
Compensation
Expense
---
Net Sales $11,799,389 $14,130,985 $844,075 $26,774,449
Operating income (GAAP) (1) $261,671 $86,292 $3,480 $(23,694) $327,749
Acquisition, integration and restructuring expenses 19,061 44,462 1,030 2,246 66,799
Acquisition-related intangible assets amortization expense 40,782 23,696 4,064 68,542
Tax indemnifications - 6,451 (356) 6,095
Gain on disposal of subsidiary - (6,746) (6,746)
Legal settlements and other, net (15,406) (15,406)
Total non-GAAP operating income adjustments $44,437 $67,863 $4,738 $2,246 $119,284
---
Operating income (non-GAAP) $306,108 $154,155 $8,218 $(21,448) $447,033
===
Operating margin (GAAP) 2.22% 0.61% 0.41% 1.22%
Operating margin (non-GAAP) 2.59% 1.09% 0.97% 1.67%
(1) GAAP operating income does not include stock compensation expense at the regional level.
Nine months ended October 31, 2017
Americas (1)
Europe (1) Asia Pacific (1)
Stock
Consolidated
Compensation
Expense
---
Net Sales $10,568,516 $12,269,044 $726,884 $23,564,444
Operating income (GAAP) (1) $194,426 $73,172 $11,795 $(21,217) $258,176
Acquisition, integration and restructuring expenses 58,573 40,385 432 2,541 101,931
Acquisition-related intangible assets amortization expense 38,330 26,075 3,584 67,989
Legal settlements and other, net (42,659) 1,316 (41,343)
Total non-GAAP operating income adjustments $54,244 $67,776 $4,016 $2,541 $128,577
---
Operating income (non-GAAP) $248,670 $140,948 $15,811 $(18,676) $386,753
===
Operating margin (GAAP) 1.84% 0.60% 1.62% 1.10%
Operating margin (non-GAAP) 2.35% 1.15% 2.18% 1.64%
(1) GAAP operating income does not include stock compensation expense at the regional level.
TECH DATA CORPORATION AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(In thousands)
Selling, general and administrative expenses ("SG&A") Three months ended October 31,
2018 2017
---
Net Sales $9,340,029 $8,448,471
SG&A Expenses (GAAP) $396,675 $416,766
Tax indemnifications (5,541)
Acquisition-related intangible assets amortization expense (22,523) (26,385)
---
SG&A Expenses (non-GAAP) $368,611 $390,381
SG&A Expenses (GAAP) % 4.25% 4.93%
SG&A Expenses (non-GAAP) % 3.95% 4.62%
Nine months ended October 31,
2018 2017
---
Net Sales $26,774,449 $23,564,444
SG&A Expenses (GAAP) $1,234,355 $1,179,996
Tax indemnifications (6,095)
Acquisition-related intangible assets amortization expense (68,542) (67,989)
---
SG&A Expenses (non-GAAP) $1,159,718 $1,112,007
SG&A Expenses (GAAP) % 4.61% 5.01%
SG&A Expenses (non-GAAP) % 4.33% 4.72%
Three months ended October 31,
2018 2017
Net Income Diluted EPS Net Income Diluted EPS
GAAP Results $114,216 $2.96 $37,268 $0.97
Legal settlements and other, net (7,207) (0.19)
Acquisition, integration and restructuring expenses 20,277 0.53 29,748 0.77
Acquisition-related intangible assets amortization expense 22,523 0.58 26,385 0.69
Gain on disposal of subsidiary (29)
Tax indemnifications 5,541 0.14
Income tax effect of tax indemnifications (5,541) (0.14)
Income tax effect of other adjustments above (8,798) (0.23) (16,652) (0.43)
Income tax benefit from acquisition settlement (207)
Change in deferred tax valuation allowances (473) (0.01)
Impact of US tax reform (24,000) (0.62)
Non-GAAP Results $116,302 $3.02 $76,749 $2.00
Nine months ended October 31,
2018 2017
Net Income Diluted EPS Net Income Diluted EPS
GAAP Results $223,781 $5.80 $115,381 $3.03
Legal settlements and other, net (15,406) (0.40) (41,020) (1.08)
Value added tax assessments and related interest expense (928) (0.02)
Acquisition, integration and restructuring expenses 66,799 1.73 101,931 2.68
Acquisition-related intangible assets amortization expense 68,542 1.78 67,989 1.78
Acquisition-related financing expenses 8,807 0.23
Gain on disposal of subsidiary (6,746) (0.17)
Tax indemnifications 6,095 0.16
Income tax effect of tax indemnifications (6,095) (0.16)
Income tax effect of other adjustments above (31,110) (0.81) (39,548) (1.04)
Income tax benefit from acquisition settlement (13,046) (0.34)
Change in deferred tax valuation allowances (3,073) (0.08)
Impact of US tax reform (24,000) (0.62)
Non-GAAP Results $264,813 $6.87 $213,540 $5.60
TECH DATA CORPORATION AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(In thousands)
Return on Invested Capital (ROIC)
Twelve months ended October 31,
TTM Net Operating Profit After Tax (NOPAT)*: 2018 2017
---
Operating income $479,652 $361,293
Income taxes on operating income (1) (184,189) (94,679)
NOPAT $295,463 $266,614
Average Invested Capital:
Short-term debt (5-qtr end average) $117,542 $360,705
Long-term debt (5-qtr end average) 1,504,148 1,279,729
Shareholders' Equity (5-qtr end average) 2,840,505 2,439,925
---
Total average capital 4,462,195 4,080,359
Less: Cash (5-qtr end average) (660,638) (1,054,922)
Average invested capital less average cash $3,801,557 $3,025,437
ROIC 8% 9%
* Trailing Twelve Months is abbreviated as TTM.
(1) Income taxes on operating income was calculated using the trailing twelve months effective tax rate.
Adjusted Return on Invested Capital (ROIC)
Twelve months ended October 31,
TTM Net Operating Profit After Tax (NOPAT), as adjusted*: 2018 2017
---
Non-GAAP operating income (1) $662,984 $508,902
Income taxes on non-GAAP operating income (2) (180,184) (151,859)
NOPAT, as adjusted $482,800 $357,043
Average Invested Capital, as adjusted:
Short-term debt (5-qtr end average) $117,542 $360,705
Long-term debt (5-qtr end average) 1,504,148 1,279,729
Shareholders' Equity (5-qtr end average) 2,840,505 2,439,925
Tax effected impact of non-GAAP adjustments (3) 90,378 50,441
---
Total average capital, as adjusted 4,552,573 4,130,800
Less: Cash (5-qtr end average) (660,638) (1,054,922)
Average invested capital less average cash $3,891,935 $3,075,878
Adjusted ROIC 12% 12%
* Trailing Twelve Months is abbreviated as TTM.
(1) Represents operating income as adjusted to exclude acquisition, integration and restructuring expenses, legal settlements and other, net, gain on disposal of subsidiary, value added tax assessments and acquisition-related intangible assets
amortization expense.
(2)Income taxes on non-GAAP operating income was calculated using the trailing twelve months effective tax rate adjusted for the impact of non-GAAP adjustments during the respective periods.
(3)Represents the 5 quarter average of the year-to-date impact of non-GAAP adjustments.
TECH DATA CORPORATION AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
Guidance Reconciliation
Three months ending
January 31, 2019
Low end of guidance range High end of guidance range
---
Earnings per share - diluted $3.00 $3.30
Acquisition, integration and restructuring expenses 0.59 0.59
Acquisition-related intangible assets amortization expense 0.61 0.61
Income tax effect of the above adjustments (0.30) (0.30)
Non-GAAP earnings per share - diluted $3.90 $4.20
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SOURCE Tech Data Corporation
