Tech Data Corporation Reports First Quarter Fiscal Year 2019 Results
First quarter ended April 30, |
||||||
($ in millions, |
2018 |
2017 |
Y/Y |
|||
Net Sales |
$8,548.3 |
$7,023.6 |
22% |
|||
Operating income (GAAP) |
$70.5 |
$75.1 |
-6% |
|||
Operating margin (GAAP) |
0.82% |
1.07% |
-25 bps |
|||
Operating income (Non-GAAP) |
$124.1 |
$123.2 |
1% |
|||
Operating margin (Non-GAAP) |
1.45% |
1.75% |
-30 bps |
|||
Net income (GAAP) |
$33.7 |
$30.7 |
10% |
|||
Net income (Non-GAAP) |
$70.8 |
$70.1 |
1% |
|||
EPS - diluted (GAAP) |
$0.87 |
$0.82 |
6% |
|||
EPS - diluted (Non-GAAP) |
$1.84 |
$1.87 |
-2% |
Net sales and operating margin percentages for fiscal year 2018 have been adjusted to reflect the adoption on a full retrospective basis of the new revenue recognition standard ("ASC 606") that the Company adopted as of
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
Financial Highlights for the First Quarter Ended
- Net sales were
$8.5 billion , an increase of 22 percent compared to the prior-year quarter. The increase in net sales year-over-year is primarily attributed to changes in foreign currency exchange rates and an additional month ofTechnology Solutions' ("TS") sales. On a constant currency basis, net sales increased 13 percent. Americas : Net sales were$3.6 billion (42 percent of worldwide net sales), an increase of 15 percent compared to the prior-year quarter. The increase in net sales is primarily attributed to an additional month of TS sales.Europe : Net sales were$4.7 billion (55 percent of worldwide net sales), an increase of 26 percent compared to the prior-year quarter. The increase in net sales year-over-year is primarily attributed to changes in foreign currency exchange rates and an additional month of TS sales. On a constant currency basis, net sales increased 10 percent.- Asia
Pacific: Net sales were$0.3 billion (3 percent of worldwide net sales), an increase of 48 percent compared to the prior-year quarter. The increase in net sales is primarily attributed to an additional month of TS sales. On a constant currency basis, net sales increased 46 percent. - Gross profit was
$523.1 million , an increase of$66.0 million , or 14 percent compared to the prior-year quarter. The increase in gross profit is primarily attributed to an additional month of TS results and changes in foreign currency exchange rates. As a percentage of net sales, gross profit was 6.12 percent compared to 6.51 percent in the prior-year quarter. - Selling, general and administrative ("SG&A") expenses were
$422.4 million , or 4.94 percent of net sales, compared to$352.6 million , or 5.02 percent of net sales in the prior-year quarter. Non-GAAP SG&A expenses were$399.1 million , an increase of$65.2 million , or 20 percent, compared to the prior-year quarter. As a percentage of net sales, non-GAAP SG&A expenses were 4.67 percent, compared to 4.75 percent in the prior-year quarter. The increase in dollars, on both a GAAP and non-GAAP basis, is primarily attributed to the additional month of TS results and changes in foreign currency exchange rates. - Worldwide operating income was
$70.5 million , or 0.82 percent of net sales compared to$75.1 million or 1.07 percent of net sales in the prior-year quarter. Non-GAAP operating income was$124.1 million , an increase of$0.9 million , or 1 percent, compared to the prior-year quarter. As a percentage of net sales, non-GAAP operating income was 1.45 percent compared to 1.75 percent in the prior-year quarter. Americas : Operating income was$61.3 million , or 1.70 percent of net sales, compared to$50.9 million , or 1.62 percent of net sales in the prior-year quarter. Non-GAAP operating income was$85.9 million , an increase of$7.4 million , or 9 percent, compared to the prior-year quarter. As a percentage of net sales, non-GAAP operating income was 2.38 percent compared to 2.50 percent in the prior-year quarter.Europe : Operating income was$17.3 million , or 0.37 percent of net sales, compared to$24.8 million , or 0.67 percent of net sales in the prior-year quarter. Non-GAAP operating income was$43.6 million , a decrease of$0.5 million , or 1 percent, compared to the prior-year quarter. As a percentage of net sales, non-GAAP operating income was 0.94 percent compared to 1.19 percent in the prior-year quarter.Asia Pacific : Operating loss was($0.6) million , or (0.21) percent of net sales, compared to operating income of$4.3 million , or 2.37 percent of net sales in the prior-year quarter. Non-GAAP operating income was$1.1 million , a decrease of$4.1 million , or 79 percent, compared to the prior-year quarter. As a percentage of net sales, non-GAAP operating income was 0.40 percent compared to 2.87 percent in the prior-year quarter.- Stock-based compensation expense was
$7.6 million , an increase of$2.7 million , compared to the prior-year quarter. This includes$1.0 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
$33.7 million , compared to$30.7 million in the prior-year quarter. Non-GAAP net income was$70.8 million , an increase of$0.8 million , or 1 percent, compared to the prior-year quarter. - Earnings per share on a diluted basis ("EPS") were
$0.87 , compared to$0.82 in the prior year quarter. Non-GAAP EPS was$1.84 , a decrease of$0.03 , or 2 percent compared to the prior-year quarter. - Net cash used by operations during the quarter was
$567 million . - Return on invested capital for the trailing twelve months was 4 percent, compared to 11 percent in the prior year. Adjusted return on invested capital for the trailing twelve months was 11 percent, compared to 13 percent in the prior year.
"During Q1, our teams capitalized on upside demand, prudently controlled costs and effectively managed through vendor program changes. The result was topline growth and operating results that exceeded our expectations. Our performance is a testament to the flexibility of our business model, our strong relationships with channel partners, and to our teams' ability to execute and deliver a solid performance," said
Business Outlook
- For the quarter ending
July 31, 2018 , the Company anticipates worldwide net sales to be in the range of$8.6 billion to $8.9 billion . - For the quarter ending
July 31, 2018 , the Company anticipates EPS to be in the range of$1.13 to $1.43 and non-GAAP EPS to be in the range of$1.95 to $2.25 . - This guidance assumes an average U.S. dollar to euro exchange rate of
$1.18 to €1.00. - This guidance assumes weighted average diluted shares outstanding of 38.8 million.
- For the quarter ending
July 31, 2018 , and the fiscal year endingJanuary 31, 2019 , the Company anticipates its effective tax rate will be in the range of 25 percent to 27 percent.
Webcast Details
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
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
For additional information with respect to risks and other factors which could occur, see
About
Contacts:
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) |
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Three months ended |
|||
April 30, |
|||
2018 |
2017 |
||
(As Adjusted 1) |
|||
Net sales |
$ 8,548,319 |
$ 7,023,620 |
|
Cost of products sold |
8,025,202 |
6,566,532 |
|
Gross profit |
523,117 |
457,088 |
|
Operating expenses: |
|||
Selling, general and administrative expenses |
422,361 |
352,632 |
|
Acquisition, integration and restructuring expenses |
33,225 |
42,066 |
|
LCD settlements and other, net |
(2,965) |
(12,688) |
|
452,621 |
382,010 |
||
Operating income |
70,496 |
75,078 |
|
Interest expense |
25,922 |
31,008 |
|
Other expense (income), net |
1,917 |
(415) |
|
Income before income taxes |
42,657 |
44,485 |
|
Provision for income taxes |
8,958 |
13,831 |
|
Net income |
$ 33,699 |
$ 30,654 |
|
Earnings per share: |
|||
Basic |
$ 0.88 |
$ 0.82 |
|
Diluted |
$ 0.87 |
$ 0.82 |
|
Weighted average common shares outstanding: |
|||
Basic |
38,281 |
37,251 |
|
Diluted |
38,561 |
37,468 |
|
1 Amounts have been adjusted to reflect the adoption of Accounting Standards 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) |
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April 30, |
January 31, |
||
2018 |
2018 |
||
ASSETS |
(unaudited) |
(As Adjusted 1) |
|
Current assets: |
|||
Cash and cash equivalents |
$ 345,577 |
$ 955,628 |
|
Accounts receivable, net |
5,250,159 |
6,035,716 |
|
Inventories |
2,917,468 |
2,965,521 |
|
Prepaid expenses and other assets |
418,179 |
403,548 |
|
Total current assets |
8,931,383 |
10,360,413 |
|
Property and equipment, net |
270,738 |
279,091 |
|
Goodwill |
958,190 |
969,168 |
|
Intangible assets, net |
1,051,408 |
1,086,772 |
|
Other assets, net |
208,065 |
224,915 |
|
Total assets |
$ 11,419,784 |
$ 12,920,359 |
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|||
Current liabilities: |
|||
Accounts payable |
$ 5,701,778 |
$ 6,962,193 |
|
Accrued expenses and other liabilities |
1,012,750 |
1,169,986 |
|
Revolving credit loans and current maturities of long-term debt, net |
114,417 |
132,661 |
|
Total current liabilities |
6,828,945 |
8,264,840 |
|
Long-term debt, less current maturities |
1,505,174 |
1,505,248 |
|
Other long-term liabilities |
216,953 |
228,779 |
|
Total liabilities |
$ 8,551,072 |
$ 9,998,867 |
|
Shareholders' equity: |
|||
Common stock, par value $0.0015; 200,000,000 shares authorized; 59,245,585 shares issued at April 30, 2018 and January 31, 2018 |
$ 89 |
$ 89 |
|
Additional paid-in capital |
822,117 |
827,301 |
|
Treasury stock, at cost (20,927,954 and 21,083,972 shares at April 30, 2018 and January 31, 2018) |
(933,167) |
(940,124) |
|
Retained earnings |
2,779,633 |
2,745,934 |
|
Accumulated other comprehensive income |
200,040 |
288,292 |
|
Total shareholders' equity |
2,868,712 |
2,921,492 |
|
Total liabilities and shareholders' equity |
$ 11,419,784 |
$ 12,920,359 |
|
1 Amounts have been adjusted to reflect the adoption of Accounting Standards 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 April 30, 2018 |
|||||||||
Americas(1) |
Europe(1) |
APAC(1) |
Stock |
Consolidated |
|||||
Net Sales |
$ 3,618,206 |
$ 4,661,702 |
$ 268,411 |
$ 8,548,319 |
|||||
GAAP operating income (loss)(1) |
$ 61,342 |
$ 17,318 |
$ (577) |
$ (7,587) |
$ 70,496 |
||||
Acquisition, integration and restructuring expenses |
13,916 |
17,988 |
321 |
1,000 |
33,225 |
||||
Acquisition-related intangible assets amortization expense |
13,643 |
8,329 |
1,332 |
23,304 |
|||||
LCD settlements and other, net |
(2,965) |
- |
- |
(2,965) |
|||||
Total non-GAAP operating income adjustments |
$ 24,594 |
$ 26,317 |
$ 1,653 |
$ 1,000 |
$ 53,564 |
||||
Non-GAAP operating income |
$ 85,936 |
$ 43,635 |
$ 1,076 |
$ (6,587) |
$ 124,060 |
||||
GAAP operating margin |
1.70% |
0.37% |
-0.21% |
0.82% |
|||||
Non-GAAP operating margin |
2.38% |
0.94% |
0.40% |
1.45% |
|||||
(1) GAAP operating income does not include stock compensation expense at the regional level. |
|||||||||
Three months ended April 30, 2017 |
|||||||||
Americas(1) |
Europe(1) |
APAC(1) |
Stock |
Consolidated |
|||||
Net Sales |
$ 3,135,322 |
$ 3,707,265 |
$ 181,033 |
$ 7,023,620 |
|||||
GAAP operating income(1) |
$ 50,900 |
$ 24,799 |
$ 4,297 |
$ (4,918) |
$ 75,078 |
||||
Acquisition, integration and restructuring expenses |
30,182 |
11,572 |
- |
312 |
42,066 |
||||
Acquisition-related intangible assets amortization expense |
10,101 |
7,748 |
900 |
18,749 |
|||||
LCD settlements and other, net |
(12,688) |
- |
- |
(12,688) |
|||||
Total non-GAAP operating income adjustments |
$ 27,595 |
$ 19,320 |
$ 900 |
$ 312 |
$ 48,127 |
||||
Non-GAAP operating income |
$ 78,495 |
$ 44,119 |
$ 5,197 |
$ (4,606) |
$ 123,205 |
||||
GAAP operating margin |
1.62% |
0.67% |
2.37% |
1.07% |
|||||
Non-GAAP operating margin |
2.50% |
1.19% |
2.87% |
1.75% |
|||||
(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 April 30, |
||
2018 |
2017 |
||
Net Sales |
$ 8,548,319 |
$ 7,023,620 |
|
GAAP SG&A |
422,361 |
352,632 |
|
Acquisition-related intangible assets amortization expense |
(23,304) |
(18,749) |
|
Non-GAAP SG&A |
$ 399,057 |
$ 333,883 |
|
GAAP SG&A percentage of net sales |
4.94% |
5.02% |
|
Non- GAAP SG&A percentage of net sales |
4.67% |
4.75% |
Three months ended April 30, |
|||||
2018 |
2017 |
||||
Net Income |
Diluted EPS |
Net Income |
Diluted EPS |
||
GAAP Results |
$33,699 |
$0.87 |
$30,654 |
$0.82 |
|
Acquisition, integration and restructuring expenses |
33,225 |
0.86 |
42,066 |
1.12 |
|
Acquisition-related intangible assets amortization expense |
23,304 |
0.61 |
18,749 |
0.50 |
|
LCD settlements and other, net |
(2,965) |
(0.08) |
(12,688) |
(0.34) |
|
Acquisition-related financing expenses |
- |
- |
8,807 |
0.24 |
|
Value added tax assessments and related interest expense |
(928) |
(0.02) |
- |
- |
|
Income tax effect of adjustments above |
(12,908) |
(0.33) |
(17,529) |
(0.47) |
|
Reversal of deferred tax valuation allowances |
(2,600) |
(0.07) |
- |
- |
|
Non-GAAP results |
$70,827 |
$1.84 |
$70,059 |
$1.87 |
Return on
Twelve months ended April 30, |
|||
TTM Net Operating Profit After Tax (NOPAT)*: |
2018 |
2017 |
|
Operating income |
$ 405,497 |
$ 314,422 |
|
Income taxes on operating income(1) |
(242,229) |
(75,583) |
|
NOPAT |
$ 163,268 |
$ 238,839 |
|
Average Invested Capital: |
|||
Short-term debt (5-qtr end average) |
$ 262,413 |
$ 251,115 |
|
Long-term debt (5-qtr end average) |
1,683,828 |
697,482 |
|
Shareholders' Equity (5-qtr end average) |
2,745,501 |
2,197,319 |
|
Total average capital |
4,691,742 |
3,145,916 |
|
Less: Cash (5-qtr end average) |
(751,732) |
(1,040,295) |
|
Average invested capital less average cash |
$ 3,940,010 |
$ 2,105,621 |
|
ROIC |
4% |
11% |
|
* Trailing Twelve Months is abbreviated as TTM. |
|||
(1) Income taxes on operating income was calculated using the trailing 12 months effective tax rate during the respective periods. |
Adjusted Return on
Twelve months ended April 30, |
|||
TTM Net Operating Profit After Tax (NOPAT), as adjusted *: |
2018 |
2017 |
|
Non-GAAP operating income(1) |
$ 603,559 |
$ 404,583 |
|
Income taxes on non-GAAP operating income(2) |
(178,518) |
(117,875) |
|
NOPAT, as adjusted |
$ 425,041 |
$ 286,708 |
|
Average Invested Capital, as adjusted: |
|||
Short-term debt (5-qtr end average) |
$ 262,413 |
$ 251,115 |
|
Long-term debt (5-qtr end average) |
1,683,828 |
697,482 |
|
Shareholders' Equity (5-qtr end average) |
2,745,501 |
2,197,319 |
|
Tax effected impact of non-GAAP adjustments(3) |
95,713 |
20,249 |
|
Total average capital, as adjusted |
4,787,455 |
3,166,165 |
|
Less: Cash (5-qtr end average) |
(751,732) |
(1,040,295) |
|
Average invested capital less average cash |
$ 4,035,723 |
$ 2,125,870 |
|
Adjusted ROIC |
11% |
13% |
|
* Trailing Twelve Months is abbreviated as TTM. |
|||
(1) Represents operating income as adjusted to exclude acquisition, integration and restructuring expenses, LCD settlements and other, net, value added tax assessments and acquisition-related intangible assets amortization expense |
|||
(2) Income taxes on non-GAAP operating income was calculated using the trailing 12 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. |
Guidance Reconciliation
Three months ending July 31, 2018 |
|||
Low end of |
High end of |
||
Earnings per share - diluted |
$1.13 |
$1.43 |
|
Acquisition, integration and restructuring expenses |
0.49 |
0.49 |
|
Acquisition-related intangible assets amortization expense |
0.60 |
0.60 |
|
Income tax effect of the above adjustments |
(0.27) |
(0.27) |
|
Non-GAAP earnings per share - diluted |
$1.95 |
$2.25 |
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