Tech Data 2014 Annual Report Download - page 20

Table of Contents
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, 2014 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 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 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. 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.
In addition to execution, our strategy includes ongoing 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 specialty areas, including
the data center, software, mobility and consumer electronics, which collectively now comprise more than 50% of our consolidated net sales.
On November 1, 2012, we completed the acquisition of several distribution companies of Specialist Distribution Group (collectively "SDG"), 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
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ITEM 7.
Management
’
s Discussion and Analysis of Financial Condition and Results of Operations.