Tech Data Corporation, distributor of IT products, today announced results for the second quarter ended July 31, 2009.
Net sales for the second quarter ended July 31, 2009, were $5.2 billion, a decrease of 15.9 percent from $6.2 billion in the prior-year second quarter. The strengthening of the U.S. dollar against certain foreign currencies negatively impacted the year-over-year second-quarter net sales comparison by approximately 6 percentage points. Operating income for the second quarter was $53.7 million, or 1.04 percent of net sales. This compared to operating income of $42.2 million, or .68 percent of net sales in the prior-year second quarter. Second-quarter net income attributable to shareholders of Tech Data Corporation increased 59.1 percent to $35.2 million, or $.70 per diluted share compared to $22.1 million, or $.42 per diluted share for the prior-year period.
"Tech Data continues to execute very well in a challenging economic environment. Our second-quarter results exceeded our expectations for the third consecutive quarter and we believe our performance firmly validates our strategy in action. Disciplined sales execution, combined with focused expense and inventory management practices, enabled Tech Data to achieve market share gains while improving operating income and return on capital employed," said Robert M. Dutkowsky, chief executive officer, Tech Data Corporation. "We continue to invest in opportunities that are strengthening our expertise and expanding our IT solution offerings. With over $1.0 billion in available cash, Tech Data is well-positioned both strategically and financially to drive continued improvement throughout our organization."
Second-Quarter Financial Highlights
Net sales in the Americas (including North America and Latin America) were $2.40 billion, or 46 percent of worldwide net sales, representing a decrease of 14.5 percent over the prior-year second quarter. The Americas’ net sales decline was primarily attributable to the challenging economic environment and related slowdown in IT spending. Net sales in Europe totaled $2.79 billion, or 54 percent of worldwide net sales, representing a decrease of 17.1 percent (7.0 percent decrease on a euro basis) over the prior-year second quarter. Excluding the impact of the euro, Europe’s net sales were also affected by the challenging economic environment, partially offset by market share gains.
Gross margin for the second quarter was 5.19 percent compared to 4.85 percent in the prior-year second quarter. The year-over-year increase in gross margin was primarily attributable to solid execution of the company’s inventory, pricing and freight management practices.
Selling, general and administrative expenses (SG&A) were $215.2 million, or 4.15 percent of net sales compared to $257.0 million, or 4.17 percent of net sales in the prior-year second quarter. The $41.8 million decrease in SG&A expenses was primarily attributable to prudent cost management actions including adjustments to headcount and the related reductions in payroll expenses, lower credit costs, and the translation impact associated with the strengthening of the U.S. dollar against certain foreign currencies year-over-year.
Considering the factors discussed above, operating income in the Americas for the second quarter was $34.0 million, or 1.42 percent of net sales compared to $39.5 million, or 1.41 percent of net sales in the prior-year second quarter. In Europe, the company generated operating income of $22.5 million, or .81 percent of net sales compared to operating income of $5.7 million, or .17 percent of net sales in the prior-year second quarter. Stock-based compensation expense is not included in the regional segment reporting results. These expenses are presented as a separate line item in the company’s segment reporting (see "Supplementary Information" table attached).
Cash provided by operations during the second quarter totaled $410.2 million. The company continues to enjoy excellent liquidity and financial flexibility with a cash position of $1.1 billion at July 31, 2009.
The company recorded ($.1) million of noncontrolling interest during the second quarter, representing the company’s Brightstar Europe joint venture partner’s share of the loss incurred for the quarter.
The company’s effective tax rate for the second quarter was 25.7 percent compared to 36.0 percent in the prior-year period. The year-over-year decrease in the effective tax rate was primarily attributable to improved operating performance in the European region.
Six-month Results
Net sales for the six-month period ended July 31, 2009 were $10.2 billion, a decrease of 16.8 percent from $12.2 billion for the six-month period ended July 31, 2008. The strengthening of the U.S. dollar against certain foreign currencies negatively impacted the year-over-year six-month period net sales comparison by approximately 8 percentage points. On a regional basis, net sales in the Americas represented 45 percent of net sales and decreased 16.3 percent to $4.6 billion from $5.5 billion for the prior-year period. Europe represented 55 percent of net sales and decreased 17.3 percent (4.8 percent on a euro basis) to $5.6 billion from $6.7 billion for the six-month period ended July 31, 2008.
For the six-month period ended July 31, 2009, the company recorded operating income of $103.6 million, or 1.02 percent of net sales, compared with operating income of $84.5 million, or .69 percent of net sales, in the prior-year period. The company recorded net income attributable to shareholders of Tech Data Corporation of $66.9 million, or $1.33 per diluted share, for the six-month period ended July 31, 2009. This compared to net income attributable to shareholders of Tech Data Corporation of $43.5 million, or $.82 per diluted share, in the prior-year period.
Business Outlook
Statements made regarding the company’s business outlook are based on current expectations and the company’s internal plan. Due to the current economic environment and related decline in IT spending, combined with the potential strengthening of the U.S. dollar against certain foreign currencies, net sales for the third quarter ending October 31, 2009 are anticipated to decline year-over-year, but with some moderation compared to the decline in the first half of the fiscal year. The company believes demand in the Americas region is exhibiting recent signs of stability, while demand in Europe may decline further, which could impact operating results sequentially.
