TECD-10K-1.31.2013
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-K
 

(Mark One)
 
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2013
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
59-1578329
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
5350 Tech Data Drive
Clearwater, Florida
33760
(Address of principal executive offices)
(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   x
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   x
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  x
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  x    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
x
Accelerated Filer
¨
 
 
 
 
Non-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  x

Aggregate market value of the voting stock held by non-affiliates was $1,848,709,289 based on the reported last sale price of common stock on July 31, 2012 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

Outstanding at January 6, 2014

Common stock, par value $.0015 per share
38,061,955
 
 

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TABLE OF CONTENTS

 
 
 
 
 
 
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
 
 
 
 
 
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
 
 
 
 
 
 
 
ITEM 10
ITEM 11
ITEM 12
ITEM 13
ITEM 14.
 
 
 
 
 
ITEM 15.
 
 
 
Exhibits
 
Certifications
 
 

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EXPLANATORY NOTE
Restatement of Consolidated Financial Statements

The filing of this Annual Report on Form 10-K of Tech Data Corporation (“Tech Data,” “we,” “our,” “us,” or the “Company”) for the fiscal year ended January 31, 2013 was delayed pending the completion of an internal investigation of certain of the Company’s accounting practices. Concurrently, the Company engaged significant internal and external resources to perform supplemental procedures to assist in reviewing its financial statements and accounting practices (the "Supplemental Procedures"). The internal investigation and Supplemental Procedures have now been completed.
In this Annual Report on Form 10-K, we present restated consolidated financial statements and other financial information for certain periods and as of certain dates, as follows (collectively, the “Restated Periods”):

Consolidated balance sheet as of January 31, 2012;
Consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of shareholders’ equity and consolidated statements of cash flows for the fiscal years ended January 31, 2012 and 2011;
Selected financial data as of and for the fiscal years ended January 31, 2012, 2011, 2010 and 2009; and
Interim financial information for the fiscal 2013 quarters ended October 31, 2012, July 31, 2012 and April 30, 2012 and for each fiscal quarter of the year ended January 31, 2012.
The Company's Quarterly Reports on Form 10-Q for the first, second, and third quarters of fiscal 2014, which the Company expects to file prior to February 28, 2014, will include the restatement of previously issued consolidated financial statements and related information. Investors should not rely on our previously filed reports, earnings releases or similar communications relating to the Restated Periods, or on the unaudited financial results for the fourth quarter and fiscal year ended January 31, 2013 previously announced and filed in a Current Report on Form 8-K on March 4, 2013. We have not amended any previously filed reports.
For a description of the restatement, see Note 2 of Notes to Consolidated Financial Statements. For more information regarding the restatement and its effects, refer to Part I, Item 1A, “Risk Factors,” and Item 3, “Legal Proceedings,” Part II, Item 6, “Selected Financial Data,” and Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” and Note 16 of Notes to Consolidated Financial Statements.
For a description of material weaknesses in internal control over financial reporting identified by management and management's plan to remediate the material weaknesses, see Part II, Item 9A, “Controls and Procedures.”

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PART I
ITEM 1.
Business.
Overview
Tech Data Corporation 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 120,000 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 Supplementary Data.”
The Company’s financial objectives are to grow sales at or above the overall IT market growth rate by gaining share in select product areas, grow earnings in local currency, generate positive cash flow, and earn a return on invested capital 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. We have 28 logistics centers where each day, tens of millions of dollars of technology products are received from vendors, picked and packed 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 infrastructure to capture new market opportunities emerging in specialty areas, such as data center, software, mobility and consumer electronics.
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 of these business partners.
We believe our strategy of execution, diversification and innovation will continue to strengthen our value proposition with vendor partners and reseller customers while positioning us for continued market expansion and profitable growth.
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 geographically through the acquisitions of several distribution companies in both the Americas and Europe, significantly strengthening our position in certain product and customer segments.
In fiscal 2008, we executed a joint venture agreement with Brightstar Corp. ("Brightstar"), one of the world’s largest wireless products distributors and supply chain solutions providers. Brightstar Europe Limited ("BEL"), our consolidated joint venture with Brightstar, distributed mobile phones and other wireless devices to a variety of customers including mobile operators, dealers, agents, retailers and e-tailers in certain European markets. During the third quarter of fiscal 2013, we acquired Brightstar's fifty percent ownership interest in BEL. The terms of the acquisition agreement included a payment of $165.9 million in cash for Brightstar's equity in BEL and the repayment of all loans advanced by Brightstar to BEL. We funded the acquisition, repayment of the loans advanced by Brightstar and transaction costs with our available cash.
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 these geographies and enabled us to accelerate our diversification strategy into the consumer electronics business in

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Europe, while leveraging our logistics infrastructure. In a related transaction, BEL acquired Triade’s mobility subsidiaries in Belgium and the Netherlands, significantly extending BEL’s mobility operations in Europe.
During fiscal 2012, 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. Also in fiscal 2012, expanding upon the success of our mobility distribution joint venture in Europe, we executed an agreement with Brightstar 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 reseller customers serving the small and medium business markets. During the fourth quarter of fiscal 2014, we acquired Brightstar's fifty percent ownership interest in TDMobility.
In fiscal 2012, we also 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 are continuing to serve both the Brazil and Colombia markets through our Miami-based export business.
In fiscal 2013, we completed the acquisition of several distribution companies of Specialist Distribution Group, the distribution arm of Specialist Computer Holdings PLC (“SCH”), a privately-held IT services company headquartered in the United Kingdom, for a final purchase price of $358 million. The Company used the proceeds from the $350 million of Senior Notes issued in September 2012 and available cash to fund the acquisition. The acquired distribution companies are Specialist Distribution Group (SDG) Limited; ETC Metrologie SARL; Best’Ware France SA; ETC Africa SAS and SDG BV (collectively “SDG”). SDG is a leading distributor of value and broadline IT products in the UK, France and the Netherlands. Management believes the acquisition of SDG supports the Company’s diversification strategy by strengthening its European value and broadline offerings in key markets and expanding the Company’s vendor and customer portfolios, while leveraging the Company’s existing pan-European infrastructure. Simultaneously with the acquisition of SDG, the Company entered into a preferred supplier agreement whereby SCH, through its IT reseller business, will have annual purchase commitments through Tech Data for a period of five years, which the Company estimated would add incremental annual sales of approximately $500 million. In November 2013, the preferred supplier agreement was amended to extend the term of the agreement from five years to six years, expiring in January 2019. In connection with this amendment, while we expect the total sales during the extended term to be higher than originally forecast, we expect the incremental sales to be approximately $450 million to $475 million annually over six years versus the original forecast of $500 million annually over five years.
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 their 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 the resellers' 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 vast majority 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 a cost-effective and efficient manner.
New products and market opportunities have helped to offset the impact on technology distributors of vendor direct sales. Further, vendors continue to seek the logistics expertise of distributors to penetrate highly fragmented markets such as the small- and medium-sized business (“SMB”) sector, which relies 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.

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Products and Vendors
We distribute and market more than 150,000 products from more than 600 of the world’s leading technology hardware suppliers, networking equipment suppliers, software publishers, and other suppliers of technology peripherals, physical security, consumer electronics, digital signage and mobile phone hardware and accessories. 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 evolve 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.
 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 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. Over the years, our consolidated revenue mix, which may fluctuate between and within different operating regions, has shifted from commoditized products to more specialized offerings. Our consolidated revenue mix may fluctuate between and within our operating segments as well as within our product categories. These fluctuations can be influenced by our diversification strategies, new product offerings and supply and demand fluctuations within our operating regions.
During fiscal 2013, we modified our product categories to provide greater transparency and more relevant sales information in our strategic focus areas. Our consolidated net sales for fiscal 2013 and 2012 within our strategic focus categories approximated the following:
 
2013
2012
Broadline
47%
47%
Data Center
21%
23%
Software
19%
18%
Mobility
8%
6%
Consumer Electronics
5%
6%
Our strategic focus categories include the following products:
Broadline - We define our broadline category to include, among other products, notebooks, tablets, desktop systems, printers, supplies and components.
Data Center - We define our data center category to include products such as servers, server accessories, networking products, storage hardware and networking support services.
Software - We define our software category as a broad variety of applications containing computer instructions or data that can be stored electronically. We offer a variety of software products, such as virtualization software, security software (firewalls, intrusion, detection and encryption), desktop application software, operating system software, utilities software and software service and support.
Mobility - We define our mobility category to include mobile handsets, navigation devices, aircards, SIM cards and other mobility-related accessories.

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Consumer Electronics - We define our consumer electronics category to include car and home audio / visual equipment, blue-ray and DVD players, televisions and related accessories, cameras and related accessories, gaming and home appliances.
We generated approximately 21%, 25% and 27% of our consolidated net sales in fiscal 2013, 2012 and 2011, respectively, from products purchased from Hewlett-Packard Company. In addition, approximately 12% of our consolidated net sales in fiscal 2013 were from products purchased from Apple, Inc. There were no other vendors that accounted for 10% or more of our consolidated net sales in fiscal 2013, 2012 or 2011.
Customers and Services
Our products are purchased directly from vendors in significant quantities and are marketed to an active reseller base of approximately 120,000 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 2013 and 2012, sales within our consolidated customer channels approximated the following:  
 
2013
2012
VARs
52
%
53
%
Direct marketers and retailers
27
%
26
%
Corporate resellers
21
%
21
%
No single customer accounted for more than 10% of our net sales during fiscal 2013, 2012 or 2011.
The market for VARs is attractive because VARs generally rely on distributors as their principal source of technology products and the related financing for the products. 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 an extensive product offering from the world's leading technology vendors, 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 electronic 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 access to one of the largest bases of resellers throughout the Americas and Europe, delivering products to them from our 28 regionally located logistics centers. We have located our logistics centers near our customers which enables us to deliver products on a timely basis, thereby reducing the customers’ need to invest in inventory (see also Item 2, "Properties" for further discussion of our locations and logistics centers).
Sales and Electronic Commerce
Our sales team consists of field sales and inside telemarketing sales representatives. The sales representatives are provided comprehensive training on our policies and procedures, and the technical specifications of products, and attend 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 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 the Company and our customers. In fiscal 2013, approximately $10.8 billion (43%) of our consolidated net sales originated from orders received electronically.
Competition
We operate in a market characterized by intense competition, based on such factors as product availability, credit terms and availability, price, speed of delivery, effectiveness of information systems and e-commerce tools, ability to tailor solutions to

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customers' needs, quality and depth of product lines and training, as well as service and support provided by the distributor to the customer. We believe 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. ("Ingram Micro"), 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 in Europe is more fragmented, with market share spread among several regional and local competitors such as ALSO/Actebis and Esprinet, as well as international distributors such as Ingram Micro, 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 certain direct sales relationships between manufacturers, resellers, and end-users continue to introduce change into the competitive landscape 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 cost-effective and efficient manner. Our logistics capabilities, as well as our sales and marketing, credit and product management expertise allow our vendors to expand their market coverage, while lowering their selling, inventory and fulfillment costs.
Employees
On January 31, 2013, we had approximately 9,100 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 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 geographic 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 in connection with such a disposition. For information on our net sales, operating income and identifiable assets by geographic region, see Note 15 of Notes to Consolidated Financial Statements.
Asset Management
We manage our inventories in a manner that allows us to maintain sufficient quantities to achieve high order fill rates while attempting to stock only those products in high demand that have 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 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. The Company also uses floorplan financing arrangements as an additional approach to mitigate credit risk. 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 to 60 days. We also sell products on a prepayment, 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.

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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.


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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:
Our ability to earn profit is more challenging when sales slow from a down economy as a result of gross profit declining faster than cost reduction efforts taking effect.
Currently, the 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 have been implemented by governments in those markets, have constrained economic growth resulting in lower demand for the products and services we sell. When we experience a rapid decline in demand for products we experience more difficulty in achieving the gross profit and operating profit we desire due to the lower sales and increased pricing pressure. The fragile economic environment may also result in changes in vendor terms and conditions, such as rebates, cash discounts and cooperative marketing efforts, which may also result in downward pressure on our gross profit. As a result, there is pressure to reduce the cost of operations in order to maximize operating profits. To the extent we cannot reduce costs to offset such decline in operating profits, our operating margins typically deteriorate. The benefits from cost reductions may also take longer to fully realize and may not fully mitigate the impact of the reduced demand. Should we experience a decline in operating profits, especially in Europe, the valuations we develop for purposes of our goodwill impairment test may be adversely affected, potentially resulting in impairment charges. Deterioration in the financial and credit markets heightens the risk of customer bankruptcies and delays 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.
Our competitors can take more market share by reducing prices on key vendor products that contribute the most to our profitability.
The Company operates in a highly competitive environment. The technology distribution industry is characterized by intense competition, based primarily on product availability, credit terms and availability, price, effectiveness of information systems and e-commerce tools, speed of delivery, ability to tailor specific solutions to customer needs, quality and depth of product lines and training, service and support. Our customers are not required to purchase any specific volume of products from us and may move business if pricing is reduced by competitors, resulting in lower sales. As a result, we must be extremely flexible in determining when to reduce price to maintain market share and sales volumes and when to allow our sales volumes to fall to maintain the quality of our profitability. The Company competes with a variety of regional, national and international wholesale distributors, some of which may have greater financial resources than the Company.
To maintain competitive internal information and telecommunication systems and to protect such systems against security breaches, data protection breaches, or other cybersecurity attacks, we must incur costs that cannot easily be reduced in time of weak demand and could result in reduced profitability.
The Company is highly dependent upon its internal information and telecommunication systems to operate its business. These systems are costly to maintain and monitor for performance and against cybersecurity threats. In fiscal 2013, the Company continued to deploy core applications currently operating in its European region into the Americas region and to invest in the IT infrastructure in Europe. In the second quarter of fiscal year 2013, the Company implemented the sales, inventory and credit management modules of the SAP system in the United States. During this implementation, changes in the flow of information impacted the Company's ability to make critical margin management decisions. While the Company was in the process of improving the use and understanding of the system, the time needed to accomplish these improvements was longer than the Company anticipated, which negatively impacted our sales and profitability during fiscal year 2013.
We will not be able to ship products if our third party shipping companies cease operations temporarily or permanently.
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, will have an adverse effect on the Company's business.

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If our vendors do not continue to provide price protection for inventory we purchase from them our profit from the sale of that inventory will decline.
It is very typical in our industry that the value of inventory will decline as a result of price reductions by vendors or technological obsolescence. It is the policy of most of our 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.
Failure to obtain adequate product supplies from our largest vendors, or terminations of a supply or services agreement, or a significant change in vendor terms or conditions of sale by our largest vendors will negatively affect our revenue and operating profit.
The Company receives a significant percentage of revenues from products it purchases from certain vendors, such as Hewlett-Packard Company and Apple, Inc. These vendors have significant negotiating power over us and rapid, significant and adverse changes in 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, may reduce the profit we can earn on these vendors' products and result in loss of revenue and profitability. The Company's gross profit 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.
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 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 agreements. 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. Increases in interest rates would result in an increase in the interest rates on the Company's variable debt, which would increase the Company's interest expense resulting in lower profitability.
We conduct business in countries outside of the United States, which exposes us to fluctuations in foreign currency exchange rates that result in losses in certain periods.
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 of loss 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 incurring 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. In addition, our local competitors in certain markets may have different purchasing models that provide them reduced foreign currency exposure compared to the Company. This may result in market pricing that the Company cannot meet without significantly lower profit on sales.

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We have international operations which expose us to risks associated with conducting business in multiple jurisdictions.
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.  
In addition, 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.
Risks Related to our Financial Statements and Internal Controls
We face risks to our reputation and investor confidence arising from material weaknesses in our internal control environment.
In connection with the matters described in Note 2 of Notes to Consolidated Financial Statements, management has identified material weaknesses in internal control over financial reporting with respect to the control environment within the Company's primary operating subsidiary in the UK and two other European subsidiaries, inadequate controls over manual journal entries in Europe and in two subsidiaries in Latin America, inadequate account reconciliation procedures in Europe over certain aspects of vendor accounting and inadequate anti-fraud program and monitoring controls. Management has concluded that our internal control over financial reporting was not effective as of January 31, 2013. Our chief executive officer (“CEO”) and chief financial officer (“CFO”) have also concluded that our disclosure controls and procedures were not effective as of January 31, 2013. Our internal control over financial reporting, and our disclosure controls and procedures, likely continue to be ineffective at the end of fiscal 2014. Although management is implementing a plan to remediate these material weaknesses, the remedial actions may prove to be ineffective or inadequate and the Company may still be exposed to risk of misstatements in its financial statements. In such circumstances, investors and other users of the Company’s financial statements may lose confidence in the reliability of the Company’s financial information and the Company could fail to comply with certain representations, warranties and covenants in its debt and other financing-related agreements or be obligated to incur additional costs to improve the Company’s internal controls. The Company’s failure or inability to remediate the material weaknesses in a timely and effective manner could also adversely affect its reputation and its operating prospects, if the Company is perceived as experiencing financial control or other financial difficulties. See Part II, Item 9A, “Controls and Procedures,” for a further description of the material weaknesses identified by management and management’s plan to remediate these material weaknesses.
We 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, including in connection with the restatement of prior financial statements.
The SEC has requested information from the Company with respect to the restatement of our prior financial statements, and the Company is cooperating with the SEC request. See Item 3, “Legal Proceedings.” This pending SEC request for information and other potential proceedings could result in fines and other penalties. The Company has not reserved any amount in respect of these matters in its consolidated financial statements.
The Company cannot predict whether monetary losses, if any, it experiences in any proceedings related to the matters described in Note 2 of Notes to Consolidated Financial Statements will be covered by insurance or whether insurance proceeds recovered will be sufficient to offset such losses. Potential civil or regulatory proceedings may also divert the efforts and attention of the Company’s management from business operations.
The Company cannot predict what losses we might incur from other litigation matters, regulatory enforcement actions and contingencies that we may be involved with from time to time. There are various other claims, lawsuits and pending actions against us. It is our opinion that the ultimate resolution of these other 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 other matters.

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The focus of resources on the restatement effort could cause a delay in filing our Annual Report on Form 10-K for fiscal year 2014, which could result in violations of listing requirements, loss of investor confidence and defaults under our outstanding indebtedness and other instruments.

The resources necessary to complete the restatement work are the same resources that are required to complete our Annual Report on Form 10-K for fiscal year 2014. The restatement work was completed within days of the end of our 2014 fiscal year. While management will use all reasonable efforts to timely complete the annual report, no assurance can be given that the annual report will be filed on time. If the filing is late, investors will not have access to the most current financial information about the Company, additional relief will be required from NASDAQ and the Company may incur substantial costs and suffer damage to its reputation.

We have entered into certain waiver agreements with respect to outstanding indebtedness and other instruments in connection with our restatement of prior financial statements. Each of the waiver agreements relates primarily to representations that may have been incorrect when made and the Company’s potential failure to comply with certain covenants, including principally financial reporting covenants, as well as to potential defaults and events of default that may have arisen or could arise as a result of the foregoing. We cannot assure you that we will be able to obtain additional waiver agreements in connection with potential defaults resulting from a failure to timely file our Annual Report on Form 10-K for fiscal year 2014. We also cannot assure you that, upon any acceleration arising from a default, we would have sufficient funds to repay all of the outstanding amounts under our credit facilities (if they are then drawn). Any acceleration of our outstanding debt could have a material adverse effect on our liquidity and financial condition.

ITEM 1B.
Unresolved Staff Comments.
Not applicable.

ITEM 2.
Properties.
Our executive offices are located in Clearwater, Florida. As of January 31, 2013, we operated a total of 28 logistics centers to provide our customers timely delivery of products. These logistics centers are located in the following principal markets: the Americas – 14, and Europe – 14.
As of January 31, 2013, we leased or owned approximately 7.6 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 subsidiaries, located in Spain, was audited in relation to various value added tax (“VAT”) matters. As a result of those audits, the Spanish subsidiary received notices of assessment from the Regional Inspection Unit of Spain’s taxing authority that allege the subsidiary did not properly collect and remit VAT. The Spanish subsidiary appealed these assessments to the Madrid Central Economic Administrative Courts beginning in March 2010. Following the administrative court proceedings the matter was appealed to the Spanish National Appellate Court. During the fourth quarter of fiscal year 2014, the Spanish National Appellate Court issued an opinion upholding the assessment for several of the assessed years. Although the Company believes that the Spanish subsidiary's defense to the assessments has solid legal grounds and is continuing to vigorously defend its position by appealing to the Spanish Supreme Court, the risk that the assessments will be upheld has significantly increased. The Spanish National Appellate Court opinion represents a subsequent event that occurred prior to the issuance of the fiscal 2013 financial statements in relation to a loss contingency that existed as of January 31, 2013. As a result of this subsequent event, which is unrelated to the restatement discussed in Note 2 of Notes to the Consolidated Financial Statements, the Company has increased its accrual for costs associated with this matter by recording a charge of $41.0 million in the fiscal 2013 Consolidated Statement of Income, including $29.5 million recorded in "value added tax assessment" to cover the assessment and various penalties and $11.5 million recorded in "interest expense" for interest that could be assessed. The Company estimates the total exposure for these assessments (including previously recorded amounts), including various penalties and interest, is approximately $55.6 million, which is included in "accrued expenses and other liabilities" in the Consolidated Balance Sheet at January 31, 2013.
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 $29.7 million at January 31, 2013. The Brazilian subsidiary has appealed the unfavorable ruling to the Supreme Court and Superior Court, Brazil's two highest courts. 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, due to the lack of predictability of the Brazilian court system, the Company has concluded that it is reasonably possible that the Brazilian subsidiary may incur a loss up to the total exposure described above. The Company believes the resolution of this litigation will not be material to the Company’s consolidated

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net assets 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 Brazilian subsidiary has been undergoing several examinations of non-income related taxes. Given the complexity and lack of predictability of the Brazilian tax system, the Company believes that it is reasonably possible that a loss may have been incurred. However, due to the early stages of the examination, the complex nature of the Brazilian tax system and the absence of communication from the local tax authorities regarding these examinations, the Company is currently unable to determine the likelihood of these examinations resulting in assessments nor estimate the amount of loss, if any, that may be reasonably possible if such assessment were to be made.
In connection with the restatement of our prior financial statements, the SEC has requested information from the Company with respect to these matters. The Company is cooperating with the SEC’s request for information.
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.

ITEM 4.
Mine Safety Disclosures.
Not applicable.  

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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 January 6, 2014, there were 249 holders of record and we believe that there were 15,419 beneficial holders.
 
 
Sales Price
 
High  
 
Low  
 
 
 
 
Fiscal year 2013
 
 
 
Fourth quarter
$51.19
 
$42.90
Third quarter
$52.46
 
$42.25
Second quarter
$54.72
 
$45.46
First quarter
$59.29
 
$51.98

 
Sales Price  
 
High  
 
Low  
 
 
 
 
Fiscal year 2012
 
 
 
Fourth quarter
$53.30
 
$44.16
Third quarter
$52.05
 
$38.21
Second quarter
$53.91
 
$44.38
First quarter
$54.25
 
$46.62
Stock Performance Chart
The five-year stock performance chart below assumes an initial investment of $100 on February 1, 2008 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.  

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Comparison of Cumulative Total Return
Assumes Initial Investment of $100 on February 1, 2008
Among Tech Data Corporation,
NASDAQ Stock Market (U.S.) Index and SIC Code 5045








 
 
2008
 
2009
 
2010
 
2011
 
2012
 
2013
Tech Data Corporation
100
 
53
 
119
 
136
 
151
 
148
NASDAQ Stock Market (U.S.) Index
100
 
63
 
92
 
117
 
125
 
143
SIC Code 5045 – Computer and Peripheral Equipment and Software
100
 
64
 
110
 
133
 
128
 
119
Unregistered Sales of Equity Securities
None.
Issuer Purchases of Equity Securities
During the first half of fiscal 2013, the Company completed each of the $100.0 million share repurchase programs approved by the Company’s Board of Directors in May 2012 and November 2011. In conjunction with the Company’s share repurchase programs, 10b5-1 plans were executed that instruct the brokers selected by the Company 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 and benefit plans. The reissuance of shares from treasury stock is based on the weighted average purchase price of the shares.

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ITEM 6.
Selected Financial Data.
The following table sets forth certain selected consolidated financial data. The selected financial information as of January 31, 2012 and for the fiscal years ended January 31, 2012 and 2011 was derived from consolidated financial statements restated as more fully described in Note 2 of Notes to Consolidated Financial Statements included within Part II, Item 8 of this Form 10-K. The Company has not issued restated financial statements for the fiscal years ended January 31, 2010 and 2009 or a restated consolidated balance sheet as of January 31, 2011, but selected unaudited information about the restatement balances and adjustments for those periods is presented below. 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)
 
 
Year ended January 31, 
 
2013
 
2012
 
2011
 
2010
 
2009
 
 
 
(As restated) (1)
 
(As restated) (1)
 
(As restated) (1)
 
(As restated) (1)
Income statement data: (2)
 
 
 
 
 
 
 
 
 
Net sales  
$
25,358,329

 
$
25,647,313

 
$
23,619,938

 
$
22,089,258

 
$
24,076,787

Gross profit
1,303,054

 
1,377,441

 
1,278,253

 
1,163,704

 
1,164,795

Operating income (3) (4)
263,720

 
304,546

 
321,408

 
267,968

 
202,699

Consolidated net income (4) (5) (6) 
183,040

 
201,202

 
212,992

 
192,205

 
103,304

Net (income) loss attributable to noncontrolling interest (7)
(6,785
)
 
(10,452
)
 
(4,620
)
 
(1,045
)
 
1,822

Net income attributable to shareholders of Tech Data Corporation
$
176,255

 
$
190,750

 
$
208,372

 
$
191,160

 
$
105,126

Net income per share attributable to shareholders of Tech Data Corporation—basic
$
4.53

 
$
4.36

 
$
4.29

 
$
3.78

 
$
2.05

Net income per share attributable to shareholders of Tech Data Corporation—diluted
$
4.50

 
$
4.30

 
$
4.25

 
$
3.75

 
$
2.04

Dividends per common share
0

 
0

 
0

 
0

 
0

Balance sheet data: (2)
 
 
 
 
 
 
 
 
 
Working capital (8)
$
1,700,485

 
$
1,720,564

 
$
1,899,124

 
$
2,252,713

 
$
1,873,107

Total assets
6,830,960

 
5,796,268

 
6,524,639

 
5,748,103

 
4,834,078

Revolving credit loans and current maturities of long-term debt, net
167,522

 
48,490

 
434,435

 
70,846

 
58,888

Long-term debt, net
354,458

 
57,253

 
60,076

 
337,384

 
329,461

Equity attributable to shareholders of Tech Data Corporation
1,918,369

 
1,953,804

 
2,108,451

 
2,088,589

 
1,725,541

(1)
See Note 2 of Notes to Consolidated Financial Statements for discussion of the restatement of the Company's Consolidated Financial Statements.
(2)
See Note 6 of Notes to Consolidated Financial Statements for discussion of the Company’s acquisitions in fiscal 2013 and 2012.
(3)
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 7 of Notes to Consolidated Financial Statements).
(4)
During fiscal 2013, the Company increased an accrual for various VAT matters in one of its subsidiaries in Spain by $41.0 million, including operating expenses of $29.5 million in relation to the assessment and penalties and $11.5 million for associated interest expense (see further discussion in Note 14 of Notes to Consolidated Financial Statements).
(5)
During fiscal 2013, the Company recorded a $25.1 million reversal of deferred tax valuation allowances related to a specific jurisdiction in Europe.
(6)
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. See Note 9 of Notes to Consolidated Financial Statements. During fiscal 2010, the Company recorded a $5.4 million decrease in the deferred tax valuation allowance.
(7)
During fiscal 2013, the Company completed the acquisition of Brightstar Corp.’s fifty percent ownership interest in Brightstar Europe Limited, which was a consolidated joint venture between Tech Data and Brightstar Corp (see further discussion in Note 6 of Notes to Consolidated Financial Statements).
(8)
Working capital represents total current assets less total current liabilities in the Consolidated Balance Sheet.


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Note 2 of Notes to Consolidated Financial Statements presents the impact of the restatement on the Company’s previously issued consolidated financial statements as of January 31, 2012 and for the fiscal years ended January 31, 2012 and January 31, 2011. The following tables present the impact of the restatement on selected unaudited information as of January 31, 2011, 2010 and 2009 and for the fiscal years ended January 31, 2010 and 2009.
Reconciliation to previously issued financial statements (Unaudited):
(in thousands, except per share amounts)
 
Year ended January 31, 
 
2010 (9)
 
2009 (10)
 
 
 
(Unaudited)
 
(Unaudited)
 
 
 
(Unaudited)
 
(Unaudited)
 
(As reported)
 
(Adjustments)
 
(As restated)
 
(As reported)
 
(Adjustments)
 
(As restated)
Net Sales
$
22,099,876

 
$
(10,618
)
 
$
22,089,258

 
$
24,080,484

 
$
(3,697
)
 
$
24,076,787

Gross profit
1,152,354

 
11,350

 
1,163,704

 
1,181,995

 
(17,200
)
 
1,164,795

Operating income
259,476

 
8,492

 
267,968

 
211,158

 
(8,459
)
 
202,699

Consolidated net income
181,200

 
11,005

 
192,205

 
115,456

 
(12,152
)
 
103,304

Net income attributable to shareholders of Tech Data Corporation
$
180,155

 
$
11,005

 
$
191,160

 
$
117,278

 
$
(12,152
)
 
$
105,126

Net income per share attributable to shareholders of Tech Data Corporation—basic
$
3.57

 
$
0.21

 
$
3.78

 
$
2.29

 
$
(0.24
)
 
$
2.05

Net income per share attributable to shareholders of Tech Data Corporation—diluted
$
3.54

 
$
0.21

 
$
3.75

 
$
2.28

 
$
(0.24
)
 
$
2.04

(9)
Fiscal 2010 gross profit has been adjusted primarily for the impact of reversing the improper deferral during fiscal 2009 of net foreign currency exchange losses in a European subsidiary of $8.6 million and improper accounting for transactions with the Company's product suppliers ("vendor accounting"), including the recognition of vendor incentives, product discounts/price variances, promotions and other vendor credits of $6.5 million. Operating income primarily reflects the impact of the adjustments noted above and the reclassification of $6.7 million of investment income related to the Company's deferred compensation plan assets to other expense (income), net from SG&A expense where it was recorded as a reduction of the corresponding payroll expense related to the Company's deferred compensation plan. Consolidated net income primarily reflects the impact of these adjustments, net of the associated tax impact.
(10)
Fiscal 2009 gross profit has been adjusted primarily for the impact of the improper deferral of net foreign currency exchange losses in a European subsidiary of $15.6 million. The adjustment to operating income primarily reflects the impact of this adjustment, partially offset by the reclassification of $9.5 million of investment losses related to the Company's deferred compensation plan assets to other expense (income), net from SG&A expense. Consolidated net income primarily reflects the impact of these adjustments, net of the associated tax impact.

 
 
January 31, 2011
 
January 31, 2010
 
 
 
 
(Unaudited)
 
(Unaudited)
 
 
 
(Unaudited)
 
(Unaudited)
Balance sheet data:
 
(As reported)
 
(Adjustments)
 
(As restated)
 
(As reported)
 
(Adjustments)
 
(As restated)
Working capital
 
$
1,902,111

 
$
(2,987
)
 
$
1,899,124

 
$
2,250,430

 
$
2,283

 
$
2,252,713

Total assets
 
6,412,083

 
112,556

(11) 
6,524,639

 
5,696,453

 
51,650

(11) 
5,748,103

Revolving credit loans and current maturities of long-term debt, net
 
434,435

 
0

 
434,435

 
65,860

 
4,986

 
70,846

Long-term debt, net
 
60,076

 
0

 
60,076

 
338,157

 
(773
)
 
337,384

Equity attributable to shareholders of Tech Data Corporation
 
2,114,466

 
(6,015
)
 
2,108,451

 
2,088,895

 
(306
)
 
2,088,589

 
 
January 31, 2009
 
 
 
 
(Unaudited)
 
(Unaudited)
Balance sheet data:
 
(As reported)
 
(Adjustments)
 
(As restated)
Working capital
 
$
1,891,897

 
$
(18,790
)
 
$
1,873,107

Total assets
 
4,815,384

 
18,694

 
4,834,078

Revolving credit loans and current maturities of long-term debt, net
 
58,888

 
0

 
58,888

Long-term debt, net
 
331,233

 
(1,772
)
 
329,461

Equity attributable to shareholders of Tech Data Corporation
 
1,737,693

 
(12,152
)
 
1,725,541

(11)
Total assets at January 31, 2011 and 2010 includes adjustments primarily for inventory cutoff errors that were not appropriately recorded based on the delivery terms.

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Table of Contents

The following tables present the impact of the restatement and a subsequent event, unrelated to the restatement, that occurred prior to the issuance of the fiscal 2013 financial statements in relation to a loss contingency that existed as of January 31, 2013, on the unaudited financial results as of and for the fiscal year ended January 31, 2013 previously announced and filed in a Current Report on Form 8-K on March 4, 2013. For a description of the restatement, see Note 2 and Note 16 of Notes to Consolidated Financial Statements and for a description of the subsequent event see Note 14 of Notes to Consolidated Financial Statements.
Reconciliation to Unaudited Financial Information previously reported in Current Report on Form 8-K filed on March 4, 2013:
Consolidated Statement of Income
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended January 31, 2013
 
(Unaudited)
 
(Unaudited)
 
 
 
(As Reported)
 
(Adjustments)
 
(As Adjusted)
 
(In thousands, except per share amounts)
 
 
 
 
 
 
Net sales
$
25,361,017

 
$
(2,688
)
 
$
25,358,329

Cost of products sold
24,051,415

 
3,860

 
24,055,275

Gross profit
1,309,602

 
(6,548
)
 
1,303,054

Operating expenses:
 
 
 
 
 
Selling, general and administrative expenses
1,006,377

 
3,495

 
1,009,872

Value added tax assessment (a)
0

 
29,462

 
29,462

 
1,006,377

 
32,957

 
1,039,334

Operating income
303,225

 
(39,505
)
 
263,720

Interest expense (a)
18,541

 
11,585

 
30,126

Other expense (income), net
7,069

 
(2,941
)
 
4,128

Income before income taxes
277,615

 
(48,149
)
 
229,466

Provision for income taxes
56,240

 
(9,814
)
 
46,426

Consolidated net income
221,375

 
(38,335
)
 
183,040

Net income attributable to noncontrolling interest
(6,785
)
 
0

 
(6,785
)
Net income attributable to shareholders of Tech Data Corporation
$
214,590

 
$
(38,335
)
 
$
176,255

 
 
 
 
 
 
Net income per share attributable to shareholders of Tech Data Corporation:
 
 
 
 
 
Basic
$
5.52

 
$
(0.99
)
 
$
4.53

Diluted
$
5.48

 
$
(0.98
)
 
$
4.50

 
 
 
 
 
 
 
 
 
 
 
 
Balance sheet data:
January 31, 2013
 
(Unaudited)
 
(Unaudited)
 
 
 
(As reported)
 
(Adjustments)
 
(As Adjusted)
 
(in thousands)
Working capital
$
1,774,923

 
$
(74,438
)
 
$
1,700,485

Total assets
6,806,253

 
24,707

 
6,830,960

Revolving credit loans and current maturities of long-term debt, net
164,341

 
3,181

 
167,522

Long-term debt, net
354,458

 
0

 
354,458

Equity attributable to shareholders of Tech Data Corporation
1,977,630

 
(59,261
)
 
1,918,369

(a)
As a result of a subsequent event, unrelated to the restatement, that occurred prior to the issuance of the fiscal 2013 financial statements in relation to a loss contingency that existed as of January 31, 2013, the Company increased an accrual for various VAT matters in one of its subsidiaries in Spain by $41.0 million, including operating expenses of $29.5 million in relation to the assessment and penalties and $11.5 million for associated interest expense (see further discussion in Note 14 of Notes to Consolidated Financial Statements).


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ITEM 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The financial information presented in this Item 7 reflects the impact of the restatement as more fully described in Note 2 of Notes to Consolidated Financial Statements included within Part II, Item 8 of this Annual Report on Form 10-K.
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 (“Tech Data”, “we”, “our”, “us” or the “Company”) 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, 2013 for further information. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
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.
 Our financial objectives are to grow sales at or above the overall IT market growth rate by gaining share in select product areas, grow earnings in local currency, 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.
The fundamental element of our strategy is superior execution. Our execution strategy is supported by our highly efficient 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. In addition, during fiscal 2013, our gross margins were negatively impacted by significant growth in sales of tablets and mobile devices, and to a lesser extent, software, all of which result in lower margins for the Company. Finally, as further discussed below, during the second quarter of fiscal 2013, we implemented the sales, inventory and credit management modules of SAP in the United States (“U.S.”), which substantially completed the U.S. implementation of essentially the same SAP systems used in our European operations. While the system conversion and overall implementation went well, our execution in the U.S. was negatively impacted as the changes in the flow of information affected our service levels with certain customers in the U.S. as well as our productivity and ability to make critical margin management decisions. While we have seen an improvement in our operating income in dollars and as a percentage of net sales from the second quarter of fiscal 2013 through the remainder of the fiscal year, we nevertheless continued to see year-over-year declines in net sales, gross profit and operating income within our U.S. operations. As discussed further below, we have made improvements to our information flow and processes within our U.S. business during the third and fourth quarters of fiscal 2013, and we will continue to work diligently to return our U.S. business to acceptable levels of profitability. Excluding our most recent acquisition discussed below, more than 90% of the Company's net sales are on one common IT platform, which we believe will give Tech Data significant competitive advantages in providing greater supply chain opportunities by expanding our value-added services to our customers, on-boarding new vendors and products faster and improving our ability to rapidly respond to changes in the market.

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In addition to superior execution, our strategy includes continuing diversification and realignment of 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, remains a core part 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, including the data center, software, mobility and consumer electronics, which collectively now comprise more than 50% of our consolidated net sales.
Our European mobility business continues to be one of our strongest operations, posting double digit sales growth during both fiscal 2013 and 2012. During the third quarter of fiscal 2013, we completed the acquisition of Brightstar Corp.’s ("Brightstar") fifty percent ownership interest in Brightstar Europe Limited ("BEL"), which was a consolidated joint venture between Tech Data and Brightstar. The terms of the acquisition agreement included a payment of $165.9 million in cash for Brightstar's equity in BEL and the repayment of all loans advanced by Brightstar to BEL. We funded the acquisition, repayment of the loans advanced by Brightstar and transaction costs with our available cash.
On November 1, 2012, we completed the acquisition of several distribution companies of Specialist Distribution Group, the distribution arm of Specialist Computer Holdings PLC (“SCH”), a privately-held IT services company headquartered in the United Kingdom, for a final purchase price of approximately $358 million. We used the proceeds from the $350 million of Senior Notes issued in September 2012 and available cash to fund the acquisition. The acquired distribution companies are Specialist Distribution Group (SDG) Limited; ETC Metrologie SARL; Best’Ware France SA; ETC Africa SAS and SDG BV (collectively “SDG”). SDG is a leading distributor of value and broadline IT products in the UK, France and the Netherlands. We believe the acquisition of SDG supports our diversification strategy by strengthening our European value and broadline offerings in key markets and expanding our vendor and customer portfolios, while leveraging our existing pan-European infrastructure. Simultaneously with the acquisition of SDG, the Company entered into a preferred supplier agreement whereby SCH, through its IT reseller business, will have annual purchase commitments through Tech Data for a period of five years, which we estimated would add incremental annual sales of approximately $500 million. In November 2013, the preferred supplier agreement was amended to extend the term of the agreement from five years to six years, expiring in January 2019. In connection with this amendment, while we expect the total sales during the extended term to be higher than originally forecast, we expect the incremental sales to be approximately $450 million to $475 million annually over six years versus the original forecast of $500 million annually over five years. Included within the Company’s Consolidated Statement of Income are net sales of $617.4 million of SDG from the acquisition date of November 1, 2012 through the Company’s fiscal year ended January 31, 2013. The operating income of SDG for the same period was immaterial to the Company's operating results for the fiscal year ended January 31, 2013.
Another strategic area of investment is our integrated supply chain services designed to provide innovative third party logistics and other offerings to our business partners. We have seen these offerings grow not only within our European mobility business but also within our consumer electronics and other businesses in both geographies. Our evolving mix of products, services, customers and geographies 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 the products we sell. An 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 our Americas and European regions. We believe our global 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 American financial systems and logistics network on SAP. During the second quarter of fiscal 2013, we implemented the sales, inventory and credit management modules of SAP within our U.S. operations, which substantially completed the implementation of the enterprise resource planning (“ERP”) systems used in our European operations. As a result of our extensive experience installing essentially the same ERP systems in Europe, systemically the conversion and implementation went well. However, the changes to processes and the flow of information within Tech Data and with certain customers negatively impacted our service levels with a subset of our customers as well as our internal productivity during fiscal year 2013.
We believe our strategy of execution, diversification and innovation has differentiated us in the markets we serve and has delivered solid operating results and returns on invested capital in both the Americas and Europe for several years. While we experienced some performance degradation during fiscal 2013, we continue to believe that in the long-term our U.S. implementation of SAP

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will provide us with a competitive advantage, giving us greater flexibility to meet the demands of our customers and vendors, and the ability to expand our reach into new markets and services.
In addition, we diligently monitor the factors that we can control, including our management of costs, working capital and capital spending. We also continually 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 and to invest in those markets and product segments we believe provide us with the greatest opportunities for profitable growth. Finally, 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, 2013, we had a debt to total capital ratio (calculated as total debt divided by the aggregate of total debt and total equity) of 21%.
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, cost being determined on a moving average cost basis, which approximates 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 products, 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.  
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. Conversely, if

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actual vendor 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.
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. 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. Factors that may cause a goodwill, intangible asset or other long-lived asset impairment include negative industry or economic trends and significant under-performance relative to historical or projected future operating results. Our valuation methodology for goodwill includes, but is 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. The Company performed its annual goodwill impairment test as of January 31, 2013 and determined there was no impairment. The economic situation in Europe remains challenging for most markets in which we operate, and these challenges could put downward pressure on the valuations used in our goodwill impairment test discussed above. As of January 31, 2013, the Company's goodwill balance for its European operations amounted to $222.1 million. If actual results are substantially lower than the projections used in our valuation methodology, or if market discount rates or our market capitalization substantially increase or decrease, respectively, our future valuations could be adversely affected, potentially resulting in impairment charges.
Income Taxes
We record valuation allowances to reduce our deferred tax assets to the amount expected to be realized. We consider all positive and negative evidence available in determining the potential of realizing deferred tax assets, including the scheduled reversal of temporary differences, recent cumulative losses, recent and projected future taxable income, and prudent and feasible tax planning strategies. In making this determination, we place greater emphasis on recent cumulative losses and recent taxable income due to the inherent lack of subjectivity associated with these factors. 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, 2013, 2012 and 2011:
 


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2013 
 
% of net sales
 
2012  
 
% of net sales
 
2011
 
% of net sales
Net sales by geographic region ($ in thousands):
 
 
 
 
(As restated)
 
 
 
(As restated)
 
 
Americas
$
9,823,515

 
38.7%
 
$
10,405,428

 
40.6%
 
$
10,096,732

 
42.7%
Europe
15,534,814

 
61.3%
 
15,241,885

 
59.4%
 
13,523,206

 
57.3%
Total
$
25,358,329

 
100.0%
 
$
25,647,313

 
100.0%
 
$
23,619,938

 
100.0%
 
 
 
 
 
 
 
 
 
 
 
 
Year-over-year (decrease) increase in net sales (%):
2013 vs. 2012
 
 
 
2012 vs. 2011
 
 
 
 
 
 
Americas (US$)
(5.6)%
 
 
 
3.1%
 
 
 
 
 
 
Europe (US$)
1.9%
 
 
 
12.7%
 
 
 
 
 
 
Europe (Euro)
9.3%
 
 
 
7.7%
 
 
 
 
 
 
Total (US$)
(1.1)%
 
 
 
8.6%
 
 
 
 
 
 

 
2013  
 
% of net sales 
 
2012  
 
% of net sales  
 
2011  
 
% of net sales  
Operating income ($ in thousands):
 
 
 
 
(As restated)
 
 
 
(As restated)
 
 
Americas
$
150,055

 
1.53%
 
$
173,978

 
1.67%
 
$
178,043

 
1.76%
Europe
127,281

 
0.82%
 
142,562

 
0.94%
 
153,718

 
1.14%
Stock-based compensation expense
(13,616
)
 
(0.05)%
 
(11,994
)
 
(0.05)%
 
(10,353
)
 
(0.04)%
Total
$
263,720

 
1.04%
 
$
304,546

 
1.19%
 
$
321,408

 
1.36%

 
 
2013  
 
% of net sales 
 
2012  
 
% of net sales  
 
2011  
 
% of net sales  
Non-GAAP operating income ($ in thousands):
 
 
 
 
(As restated)
 
 
 
(As restated)
 
 
Americas
$
150,055

 
1.53%
 
$
202,272

 
1.94%
 
$
178,043

 
1.76%
Europe
173,817

 
1.12%
 
156,467

 
1.03%
 
160,516

 
1.19%
Stock-based compensation expense
(13,616
)
 
(0.05)%
 
(11,994
)
 
(0.05)%
 
(10,353
)
 
(0.04)%
Total
$
310,256

 
1.22%
 
$
346,745

 
1.35%
 
$
328,206

 
1.39%
For fiscal 2013, non-GAAP operating income excludes a value added tax assessment of $29.5 million in relation to an assessment and penalties for various VAT matters in one of our subsidiaries in Spain. For fiscal 2012, non-GAAP operating income excludes a 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. In addition, non-GAAP operating income excludes acquisition-related intangible assets amortization expense in Europe of $17.1 million, $13.9 million and $6.8 million, in fiscal 2013, 2012 and 2011, respectively. Management believes that this non-GAAP measure is useful to investors because it provides a meaningful comparison of our performance between periods.
We sell many products purchased from the world’s leading systems, peripherals, networking and software vendors. Products purchased from Hewlett-Packard Company generated 21%, 25% and 27% of our net sales in fiscal 2013, 2012 and 2011, respectively. In addition, approximately 12% of our consolidated net sales in fiscal 2013 were from products purchased from Apple, Inc. There were no other vendors that accounted for 10% or more of our net sales in the past three fiscal years.

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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:  
 
2013
 
2012  
 
2011  
Net sales
100.00

%
 
100.00

%
 
100.00

%
Cost of products sold
94.86

 
 
94.63

 
 
94.59

 
Gross profit
5.14

 
 
5.37

 
 
5.41

 
Operating expenses:
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
3.98

 
 
4.07

 
 
4.05

 
Loss on disposal of subsidiaries
0.00

 
 
0.11

 
 
0.00

 
     Value added tax assessment
0.12

 
 
0.00

 
 
0.00

 
 
4.10

 
 
4.18

 
 
4.05

 
Operating income
1.04

 
 
1.19

 
 
1.36

 
Interest expense
0.12

 
 
0.12

 
 
0.13

 
Other expense/(income), net
0.02

 
 
0.01

 
 
(0.02
)
 
Income before income taxes
0.90

 
 
1.06

 
 
1.25

 
Provision for income taxes
0.18

 
 
0.28

 
 
0.35

 
Consolidated net income
0.72

 
 
0.78

 
 
0.90

 
Net income attributable to noncontrolling interest
(0.02
)
 
 
(0.04
)
 
 
(0.02
)
 
Net income attributable to shareholders of Tech Data Corporation
0.70

%
 
0.74

%
 
0.88

%
Net Sales
Our consolidated net sales were $25.4 billion in fiscal 2013, a decrease of 1.1% when compared to fiscal 2012. The weakening of certain foreign currencies against the U.S. dollar negatively impacted the year-over-year net sales comparison by approximately four percentage points. On a regional basis, during fiscal 2013, net sales in the Americas decreased by 5.6% compared to fiscal 2012 and increased by 1.9% in Europe (an increase of 9.3% on a euro basis). Fiscal 2013 net sales includes $617.4 million of net sales from SDG, which we acquired on November 1, 2012. Included in fiscal 2012, are net sales of approximately $273.8 million related to the in-country operations of Brazil and Colombia, which we exited at the end of fiscal 2012. We continue to serve both the Brazilian and Colombian markets through our Miami-based export business. Excluding the net sales of SDG, the closure of our in-country operations in Brazil and Colombia and the negative impact of the weakening of certain foreign currencies against the U.S. dollar in fiscal 2013, consolidated net sales increased by approximately two percent in comparison with the same period of the prior fiscal year. The increase in net sales was primarily attributable to increased sales volume in tablets, our European mobile business, and software, partially offset by the negative impact of general market conditions in the Americas and the loss of some market share in the U.S. following the implementation of certain SAP modules during the second quarter of the fiscal year. During fiscal 2013, we experienced strong sales performance in certain European markets, including the U.K., Germany, and France.
Our consolidated net sales were $25.6 billion in fiscal 2012, an increase of 8.6% 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 3.1% compared to fiscal 2011 and increased by 12.7% in Europe (an increase of 7.7% 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 certain components of the acquisition into our operations, we believe the fiscal 2011 Triade acquisitions contributed approximately four percentage points to our European growth rates during fiscal 2012, 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,

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however, was largely offset by strong sales performance in other European markets, such as Germany, U.K., France and the Netherlands.
Gross Profit
Gross profit as a percentage of net sales (“gross margin”) during fiscal 2013 was 5.14% compared to 5.37% in fiscal 2012 and 5.41% in fiscal 2011. The decrease in our year-over-year gross margin is primarily due to a higher mix of lower margin mobile phones, tablets and software, as well as the aforementioned effects from our implementation of certain SAP modules in the U.S. during the second quarter of fiscal 2013. In addition, our fiscal 2013 gross margin was also impacted by a highly competitive selling environment in many of the countries in which we operate.
Operating Expenses
Selling, general and administrative expenses (“SG&A”)
SG&A as a percentage of net sales decreased to 3.98% in fiscal 2013, compared to 4.07% in fiscal 2012. During fiscal 2013, our year-over-year improvement in operating leverage was primarily driven by our ability to manage costs while delivering sales growth in Europe, offset by a decline in operating leverage in the United States due to the implementation of certain modules of SAP in the U.S., as previously discussed above. In absolute dollars, SG&A decreased $34.7 million in fiscal 2013 compared to fiscal 2012. The decrease in SG&A during fiscal 2013 is primarily attributable to the weakening of certain foreign currencies against the U.S. dollar in fiscal 2013 and the closure of our in-country operations in Brazil and Colombia in the fourth quarter of fiscal 2012, partially offset by increased costs incurred to support our sales growth in Europe and the impact of the SDG acquisition in the fourth quarter of fiscal 2013.
SG&A as a percentage of net sales increased to 4.07% in fiscal 2012, compared to 4.05% 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 $87.8 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 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.
Loss on Disposal of Subsidiaries
We incurred losses 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 ("VAT") receivables, and $3.1 million comprised primarily of severance costs, fixed asset write-offs and lease termination penalties. 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. 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 7 and Note 14 of Notes to Consolidated Financial Statements for further discussion).
Value Added Tax Assessment
Prior to fiscal 2004, one of our subsidiaries in Spain was audited in relation to various 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. During the fourth quarter of fiscal 2014, an appellate court issued an opinion upholding the assessment for several of the assessed years. The opinion represents a subsequent event that occurred prior to the issuance of the fiscal 2013 financial statements in relation to a loss contingency that existed as of January 31, 2013. As a result of this subsequent event, which is unrelated to the restatement discussed in Note 2 of Notes to Consolidated Financial Statements, we recorded a charge of $29.5 million to increase our accrual as of January 31, 2013 to cover the assessment and penalties (see Note 14 of Notes to Consolidated Financial Statements for further discussion).
Interest Expense
Interest expense decreased 4.0% to $30.1 million in fiscal 2013 compared to $31.4 million in fiscal 2012. The decrease in interest expense in fiscal 2013 in comparison to fiscal 2012 is primarily attributable to the repayment of the $350.0 million, 2.75% convertible senior debentures in December 2011 and the use of the Company's available cash and revolving credit facilities at lower rates of interest throughout fiscal 2013, partially offset by the $350.0 million, 3.75% Senior Notes issued in September 2012

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and interest expense of $11.5 million related to the appellate court ruling in the fourth quarter of fiscal 2014 in connection with the VAT assessment in one of the Company's subsidiaries in Spain discussed above (see Note 14 of Notes to Consolidated Financial Statements for further discussion). Interest expense increased 4.8% to $31.4 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.
For the fiscal years 2012 and 2011, interest expense includes non-cash interest expense of $9.0 million and $10.3 million, respectively, related to the $350 million convertible senior debentures.
Other Expense (Income), Net
Other expense (income), net, consists primarily of (gains) losses on investments in life insurance policies to fund the Company's nonqualified deferred compensation plan, 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, was approximately $4.1 million expense in fiscal 2013 compared to $0.9 million expense in fiscal 2012. The increase in other expense (income), net, during fiscal 2013 is primarily attributable to an increase in the premiums associated with foreign currency forward contracts, an increase of discount expense on the sale of accounts receivable, and a decrease in interest income resulting from both lower average short-term cash investments balances and interest rates as compared to the prior fiscal year, partially offset by an increase in gains on investments in life insurance policies related to the Company's nonqualified deferred compensation plan.
Other expense (income), net, was approximately $0.9 million expense in fiscal 2012 compared to $4.4 million income in fiscal 2011. The change in other expense (income), net, during fiscal 2012 is primarily attributable to lower gains on investments in life insurance policies related to the Company's nonqualified deferred compensation plan in 2012 compared to 2011.
Provision for Income Taxes
Our effective tax rate was 20.1% in fiscal 2013 and 26.1% in fiscal 2012. The change in the effective tax rate during fiscal 2013 compared to fiscal 2012 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 2013, we recorded an income tax benefit of $25.1 million for the reversal of deferred income tax valuation allowances related to a specific jurisdiction in Europe, which had been recorded in prior fiscal years. On an absolute dollar basis, the provision for income taxes decreased 34.7% to $46.4 million in fiscal 2013 compared to $71.1 million in fiscal 2012. The decrease 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. See Note 9 of Notes to Consolidated Financial Statements for discussion of the Company’s fiscal 2013, 2012 and 2011 components of the provision for income taxes, reconciliation of income tax computed at the U.S. federal statutory tax rate to income tax expense, and components of pre-tax income.
Our effective tax rate was 26.1% in fiscal 2012 and 28.0% 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 14.2% to $71.1 million in fiscal 2012 compared to $82.8 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.
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.
The effective tax rate differed from the U.S. federal statutory rate of 35% during fiscal 2013, 2012 and 2011, 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) changes to valuation allowances recorded on 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.

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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 $6.8 million, $10.5 million and $4.6 million, respectively, in fiscal 2013, 2012 and 2011. As discussed above, in September 2012, the Company completed the acquisition of Brightstar's fifty percent ownership interest in BEL. Net income attributable to noncontrolling interest represents Brightstar's portion of the operating results of BEL prior to the Company’s acquisition in September 2012.

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Non-GAAP financial data
Management believes that the presentation of non-GAAP operating income, non-GAAP net income and non-GAAP net income per diluted share is useful to investors because it provides a meaningful comparison of our performance between periods. The following tables provide a detailed reconciliation between results reported in accordance with generally accepted accounting principles in the United States ("GAAP") and non-GAAP financial measures.
 
Year ended January 31,
 
2013
 
2012
 
2011
 
(In thousands, except per share amounts)
 
 
 
(As restated)
 
(As restated)
GAAP to non-GAAP reconciliation of operating income:
 
 
 
 
 
Operating income
$
263,720

 
$
304,546

 
$
321,408

Value added tax assessment (1)
29,462

 
0

 
0

Loss on disposal of subsidiaries (2)
0

 
28,294

 
0

Acquisition-related intangible assets amortization expense (3)
17,074

 
13,905

 
6,798

Non-GAAP operating income
$
310,256

 
$
346,745

 
$
328,206

 
 
 
 
 
 
GAAP to non-GAAP reconciliation of net income attributable to shareholders of Tech Data Corporation:
 
 
 
 
 
Net income attributable to shareholders of Tech Data Corporation
$
176,255

 
$
190,750

 
$
208,372

Reversal of deferred tax valuation allowances (4)
(25,128
)
 
0

 
0

Value added tax assessment and interest expense, net of tax (1)
33,766

 
0

 
0

Loss on disposal of subsidiaries, net of tax (2)
0

 
19,221

 
0

Acquisition-related intangible assets amortization expense, net of tax (3)
12,559

 
10,521

 
5,033

Non-GAAP net income attributable to shareholders of Tech Data Corporation
$
197,452

 
$
220,492

 
$
213,405

 
 
 
 
 
 
GAAP to non-GAAP reconciliation of net income per share attributable to shareholders of Tech Data Corporation—diluted:
 
 
 
 
 
Net income per share attributable to shareholders of Tech Data Corporation—diluted
$
4.50

 
$
4.30

 
$
4.25

Reversal of deferred tax valuation allowances (4)
(0.64
)
 
0.00

 
0.00

Value added tax assessment and interest expense, net of tax (1)
0.86

 
0.00

 
0.00

Loss on disposal of subsidiaries, net of tax (2)
0.00

 
0.43

 
0.00

Acquisition-related intangible assets amortization expense, net of tax (3)
0.32

 
0.24

 
0.10

Non-GAAP net income per share attributable to shareholders of Tech Data Corporation—diluted
$
5.04

 
$
4.97

 
$
4.35

(1) Fiscal 2013 non-GAAP operating income excludes a $29.5 million value added tax assessment in relation to an assessment and penalties for various VAT matters in one of our subsidiaries in Spain. Fiscal 2013 non-GAAP net income excludes this impact and associated interest expense of $11.5 million, net of the $7.2 million tax impact.
(2) Fiscal 2012 non-GAAP operating income excludes a loss on disposal of subsidiaries of $28.3 million. Fiscal 2012 non-GAAP net income excludes the loss on disposal of subsidiaries, net of the $9.1 million tax impact.
(3) Fiscal 2013, 2012 and 2011 non-GAAP operating income excludes acquisition-related intangible assets amortization expense. Fiscal 2013, 2012, and 2011 non-GAAP net income excludes this expense, net of the related tax effects.
(4) Fiscal 2013 non-GAAP net income excludes the $25.1 million reversal of deferred tax valuation allowances related to a European jurisdiction.
Impact of Inflation
During the fiscal years ended January 31, 2013, 2012 and 2011, we do not believe that inflation had a material impact on our consolidated results of operations or on our financial position.

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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 sell. 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 16 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, 2013, 2012 and 2011:
 
Years ended January 31,  
 
2013
 
2012
 
2011
 
(In thousands)
 
 
 
(As restated)
 
(As restated)
Net cash provided by (used in):
 
 
 
 
 
Operating activities
$
120,753

 
$
524,906

 
$
176,129

Investing activities
(345,677
)
 
(69,122
)
 
(167,144
)
Financing activities
80,294

 
(670,841
)
 
(211,185
)
Effect of exchange rate changes on cash and cash equivalents
(1,068
)
 
(21,279
)
 
(2,633
)
Net decrease in cash and cash equivalents
$
(145,698
)
 
$
(236,336
)
 
$
(204,833
)
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. The following table presents the components of our cash conversion cycle, in days, as of January 31, 2013, 2012 and 2011:
 
 
As of January 31,  
 
2013
 
2012
 
2011
Days of sales outstanding
39
 
37
 
38
Days of supply in inventory
29
 
27
 
34
Days of purchases outstanding
(47)
 
(43)
 
(46)
Cash conversion cycle (days)
21
 
21
 
26
Net cash provided by operating activities was $120.8 million in fiscal 2013 compared to $524.9 million of cash provided by operating activities in fiscal 2012. The decrease in cash resulting from operating activities in fiscal 2013 compared to the same period of the prior year can be primarily attributed to i) the timing of both cash receipts from our customers and payments to our vendors, and ii) an increase in inventory levels. Net cash provided by operating activities was $524.9 million in fiscal 2012 compared to $176.1 million of cash provided by operating activities in fiscal 2011. The change 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 inventory levels, and ii) the timing of both cash receipts from our customers and payments to our vendors.


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Net cash used in investing activities of $345.7 million during fiscal 2013 is primarily the result of $310.3 million of cash used for acquisitions in Europe and $38.4 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 $37.0 million during fiscal 2014 for equipment and machinery in our logistics centers, office facilities and IT systems.
Net cash used in investing activities of $69.1 million during fiscal 2012 is primarily the result of $44.6 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 and $24.9 million of cash used for acquisitions in Europe.
Net cash provided by financing activities of $80.3 million during fiscal 2013 is primarily the result of $345.8 million in net proceeds from the issuance of Senior Notes in September 2012, $87.2 million of net borrowings on our revolving credit lines and $3.4 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”), partially offset by $185.1 million of cash used in the repurchase of shares of our common stock under our share repurchase programs and other share repurchases, $117.2 million of cash used for the acquisition of the noncontrolling interest in BEL, $49.5 million for repayment of loans due to our former joint venture partner and $9.1 million for the return of capital to our former joint venture partner.
Net cash used in financing activities of $670.8 million during fiscal 2012 is primarily the result of the $350.0 million repayment of our convertible senior debentures, $314.9 million of cash used in the repurchase of 6,736,436 shares of our common stock under our share repurchase programs and $41.2 million of net repayments on our revolving credit lines, 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 ESPP.
Capital Resources and Debt Compliance
Our debt to total capital ratio was 21% at January 31, 2013. We believe a 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. 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 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 our business.
Our credit facilities contain various financial and other covenants that may limit our ability to borrow or limit our flexibility in responding to business conditions. The Company has entered into certain waiver agreements with respect to these and other obligations within certain of the Company's credit facilities in connection with the restatement of our financial statements discussed in Note 2 of Notes to Consolidated Financial Statements. Each of the waiver agreements relates primarily to representations that may have been incorrect when made, the Company’s potential failure to comply with certain covenants, including principally financial reporting covenants, as well as the potential defaults and events of default that may have arisen or could arise as a result of the foregoing.
At January 31, 2013, we had approximately $340.6 million in cash and cash equivalents, of which $328.6 million was held in our foreign subsidiaries. As discussed above, the Company currently has sufficient resources, cash flows and liquidity within the United States to fund current and expected future working capital requirements. Historically, the Company has utilized and reinvested cash earned outside the United States to fund foreign operations and expansion and plans to continue reinvesting such earnings and future earnings indefinitely outside of the United States. If the Company’s plans for the use of cash earned outside of the United States change in the future, cash and cash equivalents held by our foreign subsidiaries could not be repatriated to the United States without potential negative income tax consequences.
The following is a detailed discussion of our various financing facilities.
Senior Notes
In September 2012, the Company issued $350.0 million aggregate principal amount of 3.75% Senior Notes in a public offering, resulting in cash proceeds of approximately $345.8 million, net of debt discount and debt issuance costs of approximately $1.3

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million and $2.9 million, respectively (the “Senior Notes”). The debt issuance costs incurred in connection with the public offering will be amortized over the life of the Senior Notes as additional interest expense using the effective interest method. We will pay interest on the Senior Notes semi-annually in arrears on March 21 and September 21 of each year, beginning on March 21, 2013. We may, at our option, redeem the Senior Notes at any time in whole or from time to time in part, at a redemption price equal to the greater of (i) 100% of the principal amount of the Senior Notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the Senior Notes being redeemed, discounted at a rate equal to the sum of the applicable Treasury Rate plus 50 basis points, plus accrued and unpaid interest up to the date of redemption. The Senior Notes are senior, unsecured obligations and rank equally in right of payment with all of our other unsecured and unsubordinated indebtedness.
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 a drawing under our $500.0 million Credit Agreement, discussed below.
Loans Payable to Brightstar Corp.
In October 2010, Brightstar entered into an agreement to loan BEL its share of the funding requirements for an acquisition by BEL (the “Acquisition Loan”). The Acquisition Loan from Brightstar, plus any accrued interest, had a repayment date of September 2015, or earlier if agreed between the two parties, and interest at the applicable LIBOR rate plus 4.0% per year, to be paid annually on October 1.
We also had 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 included no contractual repayment date and allowed 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 would not be repaid for the foreseeable future and therefore the revolving credit loan was classified as long-term debt in our Consolidated Balance Sheet at January 31, 2012.
As discussed previously in this MD&A, in September 2012, we completed the acquisition of Brightstar's fifty percent ownership interest in BEL and in accordance with the terms of the acquisition agreement, we repaid both the Acquisition Loan and the Brightstar Revolver.
Other Credit Facilities
We have a $500.0 million Credit Agreement with a syndicate of banks (the “Credit Agreement”), which, 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 to a maximum of $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. 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 was $42.9 million outstanding under the Credit Agreement at January 31, 2013, at an interest rate of 1.65%. There were no amounts outstanding under the Credit Agreement at January 31, 2012.
As of January 31, 2013, we maintained a Receivables Securitization Program with a syndicate of banks that 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 October 2012 for a period of two years and interest is to be paid on advances under the Receivables Securitization Program at the applicable commercial paper or LIBOR rate plus an agreed-upon margin. There was $83.5 million outstanding under this program at January 31, 2013, at an interest rate of 1.02%. There were no amounts outstanding under the Receivables Securitization Program at January 31, 2012.
In addition to the facilities described above, we have various other committed and uncommitted lines of credit and overdraft facilities totaling approximately $579.2 million at January 31, 2013 to support our operations. Most of these facilities are provided on an unsecured, short-term basis and are reviewed periodically for renewal. There was $40.6 million outstanding on these

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facilities at January 31, 2013, at a weighted average interest rate of 4.76%, and $48.0 million outstanding at January 31, 2012 at a weighted average interest rate of 7.15%.
In consideration of the financial covenants discussed below, our maximum borrowing availability on our credit facilities is approximately $767.1 million, of which $167.0 million was outstanding at January 31, 2013. Certain of our credit facilities contain limitations on the amounts of annual dividends and repurchases of common stock. Additionally, certain credit facilities require compliance with certain warranties and covenants. The financial ratio covenants contained within these credit facilities include a debt to capitalization ratio and a minimum interest coverage ratio. At January 31, 2013, we were in compliance with all such financial covenants, however, as discussed above, the Company has entered into certain waiver agreements with its financial institutions in connection with the Company's restatement discussed in Note 2 of Notes to Consolidated Financial Statements. The ability to draw funds under certain credit facilities is dependent upon sufficient collateral (in the case of the Receivables Securitization Program) and meeting the aforementioned financial covenants, which may limit our ability to draw the full amount of these facilities.
At January 31, 2013, we had also issued standby letters of credit of $84.4 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 borrowing availability under certain of the above-mentioned facilities.
Accounts Receivable Purchase Agreements
We have certain uncommitted accounts receivable purchase agreements under which certain accounts receivable may be sold, without recourse, to third-party financial institutions. Under these programs, we may sell certain accounts receivable in exchange for cash less a discount, as defined in the agreements. Available capacity under these programs, which we use as a source of working capital funding, is dependent on the level of accounts receivable eligible to be sold into these programs and the financial institutions' willingness to purchase such receivables. In addition, certain of these agreements also require that we continue to service, administer and collect the sold accounts receivable. At January 31, 2013 and 2012, the Company had a total of $284.7 million and $176.6 million, respectively, of accounts receivable sold to and held by financial institutions under these agreements. During the fiscal years ended January 31, 2013, 2012 and 2011, discount fees recorded under these facilities were $2.6 million, $1.1 million, and $0.5 million, respectively, which are included as a component of "other expense (income), net" in the Company's Consolidated Statement of Income.
Share Repurchase Programs
During fiscal 2013, we repurchased 3,752,939 shares of our common stock at a cost of $185.1 million in connection with both of our $100.0 million share repurchase programs approved by the Board of Directors in May 2012 and November 2011. Both share repurchase programs were completed during fiscal 2013. In addition, 125,609 shares were acquired outside of the stock repurchase programs related to the exercise of an employee’s equity incentive grants.
In conjunction with our share repurchase programs approved by the Board of Directors, 10b5-1 plans were executed that instruct the brokers selected by us to repurchase shares on our behalf. 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 plans, which is based on the market price of our common stock and average daily volumes. Shares repurchased by us are held in treasury for general corporate purposes, including issuances under equity incentive and benefit plans.

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Contractual Obligations
As of January 31, 2013, future payments of debt and amounts due under future minimum lease payments, including minimum commitments under IT outsourcing agreements, are as follows (in thousands):
 
 
Operating leases
 
Capital lease
 
Debt (1)
 
Total  
Fiscal year:
 
 
 
 
 
 
 
2014
$
55,300

 
$
793

 
$
180,100

 
$
236,193

2015
47,100

 
793

 
13,125

 
61,018

2016
39,600

 
751

 
13,125

 
53,476

2017
24,600

 
668

 
13,125

 
38,393

2018
20,500

 
668

 
359,385

 
380,553

Thereafter
35,600

 
4,459

 
0

 
40,059

Total payments
222,700

 
8,132

 
578,860

 
809,692

Less amounts representing interest
0

 
(1,889
)
 
(61,885
)
 
(63,774
)
Total principal payments
$
222,700

 
$
6,243

 
$
516,975

 
$
745,918


(1)
Amounts include interest on $350 million Senior Notes calculated at the fixed rate of 3.75% per year and excludes estimated interest on the committed and uncommitted revolving credit facilities as these facilities are at variable rates of interest.
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, 2013, we have $0.8 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 9 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, which was set to expire 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.
The sum of future minimum lease payments under the Synthetic Lease at January 31, 2013, which are included in the future minimum lease payments presented above, was approximately $0.8 million.
During June 2013, we renewed our existing Synthetic Lease with a new lease agreement that expires in June 2018 ("the 2013 Synthetic Lease"). The principal terms of the 2013 Synthetic Lease are substantially the same as the predecessor lease agreement. Upon not less than 30 days notice, we may, at our option, purchase one or any combination of the 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. Upon not less than 270 days, nor more than 360 days, prior to the lease expiration, we may, at our option, i) purchase a minimum of two of the 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 properties or iii) exercise the option to remarket a minimum of two of the properties and cause a sale of the properties. If we elect to remarket the

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properties, we have guaranteed the lessor a percentage of the cost of each property, in the aggregate amount of approximately $133.8 million. Future annual lease payments under the 2013 Synthetic Lease are approximately $2.8 million per year.
The Synthetic Lease contains covenants that must be complied with, similar to the covenants described in certain of the credit facilities discussed in Note 8 of Notes to Consolidated Financial Statements. As of January 31, 2013, the Company was in compliance with all such covenants, however, the Company has entered into certain waiver agreements with respect to the Synthetic Lease and the 2013 Synthetic Lease in connection with the Company’s restatement discussed in Note 2 of Notes to Consolidated Financial Statements. Each of the waiver agreements relates primarily to representations that may have been incorrect when made, the Company’s potential failure to comply with certain covenants, including principally financial reporting covenants, as well as the potential defaults and events of default that may have arisen or could arise as a result of the foregoing.
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 us. We review the underlying credit for these guarantees on at least an annual basis. As of January 31, 2013 and 2012, the outstanding amount of guarantees under these arrangements totaled $31.3 million and $28.4 million, respectively. 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 payable 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 2013 and 2012, the underlying exposures are denominated primarily in the following currencies: U.S. dollar, British pound, Canadian dollar, Chilean peso, Czech koruna, Danish krone, euro, 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. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to minimize overall borrowing costs. To achieve our objective, we use a combination of fixed and variable rate debt. The nature and amount of our long-term and short-term debt can be expected to vary as a result of future business requirements, market conditions and other factors. As of January 31, 2013, approximately 68% of our outstanding debt had fixed interest rates and all of our outstanding debt at January 31, 2012 was at variable rates of interest. We utilize various financing instruments, such as receivables securitization, leases, revolving credit facilities, and trade receivable purchase facilities,

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to finance working capital needs. To the extent that there are changes in interest rates, the fair value of the Company's fixed rate debt may fluctuate.
In order to provide an assessment of the Company’s foreign currency exchange rate and interest rate risk, the Company performed a sensitivity analysis using a value-at-risk (“VaR”) model. The VaR model consisted of using a Monte Carlo simulation to generate 1,000 random market price paths. The VaR model determines the potential impact of the fluctuation in foreign exchange rates and interest rates assuming a one-day holding period, normal market conditions and a 95% confidence level. The VaR is the maximum expected loss in fair value for a given confidence interval to the Company’s foreign exchange portfolio due to adverse movements in the rates. The model is not intended to represent actual losses but is used as a risk estimation and management tool. Firm commitments, assets and liabilities denominated in foreign currencies were excluded from the model.
The following table represents the estimated maximum potential one-day loss in fair value at a 95% confidence level, calculated using the VaR model at January 31, 2013 and 2012. 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.  
 
VaR
 
as of January 31,
 
2013  
 
2012  
 
(In thousands)
Foreign currency exchange rate sensitive financial instruments
$
(2,205
)
 
$
(2,322
)
Interest rate sensitive financial instruments (1)
(661
)
 
0

Combined portfolio
$
(2,866
)
 
$
(2,322
)

(1)
As of January 31, 2013, approximately 68% of our outstanding debt had fixed interest rates and as of January 31, 2012, none of our outstanding debt had fixed interest rates.
Actual future gains and losses associated with the Company’s derivative positions may differ materially from the analyses performed as of January 31, 2013, 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.
 

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ITEM 8.
Financial Statements and Supplementary Data.                     
Index to Financial Statements
 
 
Page  
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
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.

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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, 2013 and 2012 (restated), and the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows for the years ended January 31, 2013, January 31, 2012 (restated) and January 31, 2011 (restated). Our audits also included the financial statement schedule for 2013, 2012 (restated) and 2011 (restated) 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, 2013 and 2012 (restated), and the consolidated results of their operations and their cash flows for the years ended January 31, 2013, January 31, 2012 (restated) and January 31, 2011 (restated), in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule for 2013, 2012 (restated) and 2011 (restated), when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, Tech Data Corporation has restated its financial statements as of January 31, 2012, and for the years ended January 31, 2012 and January 31, 2011 to correct errors primarily relating to improper accounting for transactions with product suppliers, accounts receivable, manual journal entries, cash cut-off, certain inventory transactions, improper recognition of foreign currency exchange gains and losses, and certain other errors.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Tech Data Corporation and subsidiaries’ internal control over financial reporting as of January 31, 2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated February 5, 2014 expressed an adverse opinion thereon.

/s/ Ernst & Young LLP

Tampa, Florida
February 5, 2014


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TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except share amounts)

 
January 31,  
 
2013
 
2012
 
 
 
(As restated) (1)
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
340,564

 
$
486,262

Accounts receivable, less allowances of $58,284 and $56,753
3,215,920

 
2,778,641

Inventories
2,254,510

 
1,932,289

Prepaid expenses and other assets
334,431

 
197,308

Total current assets
6,145,425

 
5,394,500

Property and equipment, net
84,395

 
88,881

Other assets, net
601,140

 
312,887

Total assets
$
6,830,960

 
$
5,796,268

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
3,657,251

 
$
3,091,611

Accrued expenses and other liabilities
620,167

 
533,835

Revolving credit loans and current maturities of long-term debt, net
167,522

 
48,490

Total current liabilities
4,444,940

 
3,673,936

Long-term debt, less current maturities
354,458

 
57,253

Other long-term liabilities
113,193

 
82,950

Total liabilities
4,912,591

 
3,814,139

 
 
 
 
Commitments and contingencies (Note 14)

 


Shareholders’ equity:
 
 
 
Common stock, par value $.0015; 200,000,000 shares authorized; 59,239,085 shares issued at January 31, 2013 and 2012
89

 
89

Additional paid-in capital
680,715

 
773,087

Treasury stock, at cost (21,436,566 and 18,166,761 shares at January 31, 2013 and 2012)
(905,900
)
 
(739,614
)
Retained earnings
1,813,358

 
1,637,103

Accumulated other comprehensive income
330,107

 
283,139

Equity attributable to shareholders of Tech Data Corporation
1,918,369

 
1,953,804

Noncontrolling interest
0

 
28,325

Total equity
1,918,369

 
1,982,129

Total liabilities and equity
$
6,830,960

 
$
5,796,268

(1) See Note 2 - Restatement of Consolidated Financial Statements.
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
 

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Table of Contents

TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share amounts)

 
Year ended January 31,  
 
2013
 
2012
 
2011
 
 
 
(As restated) (1)
 
(As restated) (1)
Net sales
$
25,358,329

 
$
25,647,313

 
$
23,619,938

Cost of products sold
24,055,275

 
24,269,872

 
22,341,685

Gross profit
1,303,054

 
1,377,441

 
1,278,253

Operating expenses:
 
 
 
 
 
Selling, general and administrative expenses
1,009,872

 
1,044,601

 
956,845

Loss on disposal of subsidiaries (Note 7)
0

 
28,294

 
0

Value added tax assessment (Note 14)
29,462

 
0

 
0

 
1,039,334

 
1,072,895

 
956,845

Operating income
263,720

 
304,546

 
321,408

Interest expense
30,126

 
31,377

 
29,926

Other expense (income), net
4,128

 
858

 
(4,350
)
Income before income taxes
229,466

 
272,311

 
295,832

Provision for income taxes
46,426

 
71,109

 
82,840

Consolidated net income
183,040

 
201,202

 
212,992

Net income attributable to noncontrolling interest
(6,785
)
 
(10,452
)
 
(4,620
)
Net income attributable to shareholders of Tech Data Corporation
$
176,255

 
$
190,750

 
$
208,372

Net income per share attributable to shareholders of Tech Data Corporation
 
 
 
 
 
Basic
$
4.53

 
$
4.36

 
$
4.29

Diluted
$
4.50

 
$
4.30

 
$
4.25

Weighted average common shares outstanding:
 
 
 
 
 
Basic
38,871

 
43,749

 
48,587

Diluted
39,180

 
44,327

 
49,085

(1)
See Note 2 - Restatement of Consolidated Financial Statements.

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
 

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TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In thousands)
 
 
Year ended January 31,
 
2013
 
2012
 
2011
 
 
 
(As restated) (1)
 
(As restated) (1)
Consolidated net income
$
183,040

 
$
201,202

 
$
212,992

Other comprehensive income (loss):
 
 
 
 
 
Foreign currency translation adjustment
47,590

 
(76,819
)
 
(918
)
Total comprehensive income
230,630

 
124,383

 
212,074

Comprehensive income attributable to noncontrolling interest
(4,881
)
 
(8,917
)
 
(4,703
)
Comprehensive income attributable to shareholders of Tech Data Corporation
$
225,749

 
$
115,466

 
$
207,371

(1) See Note 2 - Restatement of Consolidated Financial Statements.
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
 

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TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(In thousands)  

 
Tech Data Corporation Shareholders  
 
 
 
 
 
Common Stock
 
Additional
paid-in
capital
 
Treasury
stock
 
Retained
earnings
 
Accumulated  other
comprehensive
income
 
Noncontrolling
interest  
 
Total
equity
 
Shares  
 
Amount  
 
Balance—January 31, 2010 (as reported)
59,239

 
$
89

 
$
769,295

 
$
(279,198
)
 
$
1,239,128

 
$
359,581

 
$
5,638

 
$
2,094,533

Adjustments (1)
 
 
 
 
998

 
 
 
(1,147
)
 
(157
)
 
 
 
(306
)
Balance—January 31, 2010 (as restated) (1)
59,239

 
89

 
770,293

 
(279,198
)
 
1,237,981

 
359,424

 
5,638

 
2,094,227

Purchase of treasury stock, at cost
0

 
0

 
0

 
(200,000
)
 
0

 
0

 
0

 
(200,000
)
Issuance of treasury stock for benefit plans and equity-based awards exercised, including related tax benefit of $1,072
0

 
0

 
(10,425
)
 
12,563

 
0

 
0

 
0

 
2,138

Stock-based compensation expense (as restated) (1)
0

 
0

 
10,353

 
0

 
0

 
0

 
0

 
10,353

Capital contributions from joint venture partner
0

 
0

 
0

 
0

 
0

 
0

 
13,620

 
13,620

Total other comprehensive loss (as restated) (1)
0

 
0

 
0

 
0

 
0

 
(1,001
)
 
83

 
(918
)
Net income (as restated) (1)
0

 
0

 
0

 
0

 
208,372

 
0

 
4,620

 
212,992

Balance—January 31, 2011 (as restated) (1)
59,239

 
89

 
770,221

 
(466,635
)
 
1,446,353

 
358,423

 
23,961

 
2,132,412

Purchase of treasury stock, at cost
0

 
0

 
0

 
(314,886
)
 
0

 
0

 
0

 
(314,886
)
Issuance of treasury stock for benefit plans and equity-based awards exercised, including related tax benefit of $2,718 (as restated) (1)
0

 
0

 
(9,128
)
 
41,907

 
0

 
0

 
0

 
32,779

Stock-based compensation expense (as restated) (1)
0

 
0

 
11,994

 
0

 
0

 
0

 
0

 
11,994

Total other comprehensive loss (as restated) (1)
0

 
0

 
0

 
0

 
0

 
(75,284
)
 
(1,535
)
 
(76,819
)
Declaration of return of capital to joint venture partner
0

 
0

 
0

 
0

 
0

 
0

 
(4,553
)
 
(4,553
)
Net income (as restated) (1)
0

 
0

 
0

 
0

 
190,750

 
0

 
10,452

 
201,202

Balance—January 31, 2012 (as restated) (1)
59,239

 
89

 
773,087

 
(739,614
)
 
1,637,103

 
283,139

 
28,325

 
1,982,129

Purchase of treasury stock, at cost
0

 
0

 
0

 
(185,114
)
 
0

 
0

 
0

 
(185,114
)
Issuance of treasury stock for benefit plan and equity-based awards exercised, including related tax benefit of $5,814
0

 
0

 
(20,072
)
 
18,828

 
0

 
0

 
0

 
(1,244
)
Stock-based compensation expense
0

 
0

 
13,616

 
0

 
0

 
0

 
0

 
13,616

Total other comprehensive income
0

 
0

 
0

 
0

 
0

 
49,494

 
(1,904
)