Tech Data Reports Fiscal 2006 First-Quarter Earnings1 Jun, 2005
Tech Data Reports Fiscal 2006 First-Quarter Earnings
Tech Data Corporation, announced results for the first quarter ended April 30, 2005. Net sales for the first quarter were $5.1 billion, an increase of 5.3 percent from $4.8 billion in the first quarter of fiscal 2005 and a decline of 9.6 percent from the fourth quarter of the last fiscal year. On a regional basis, net sales in the Americas increased 10.3 percent and in EMEA (Europe, Middle East and export sales to Africa) increased 1.7 percent (a decrease of 4.3 percent on a local currency basis) over the first quarter of fiscal 2005. Compared to the fourth quarter of the last fiscal year, net sales in the Americas increased 1.5 percent and in EMEA decreased 16.9 percent (16.1 percent on a local currency basis).
Operating income for the first quarter was $53.9 million, or 1.06 percent of sales, compared to $53.7 million, or 1.11 percent of sales, in the first quarter of last fiscal year. On a regional basis, first-quarter operating income in the Americas was 1.70 percent of sales compared to 1.57 percent of sales in the first quarter of fiscal 2005, and in EMEA, operating income was .55 percent of sales compared to .78 percent of sales in the first quarter of fiscal 2005. The year-over-year decline in EMEA's net sales (on a local currency basis) and operating income for the first quarter of fiscal 2006 reflects the weaker macro economic environment and slowing IT demand in many countries.
Net income for the first quarter totaled $33.5 million, or $.56 per diluted share, compared to $34.7 million, or $.59 per diluted share, in the first quarter of fiscal 2005. "Our Americas team drove sales to the high end of our planned range for the period, but our operating performance was adversely affected by the demand environment in EMEA," commented Steven A. Raymund, Tech Data's chairman and chief executive officer. "We are swiftly responding to the challenging EMEA market conditions by launching a formal restructuring program in the region to improve profitability."
* Net sales in the Americas during the first quarter were $2.3 billion or 45 percent of worldwide sales, while net sales in EMEA totaled $2.8 billion or 55 percent of worldwide sales.
* Gross margin for the first quarter was 5.46 percent of sales, a decrease from 5.71 percent of sales in the first quarter of fiscal 2005. The year-over- year decrease in gross margin is primarily the result of the competitive pricing environment.
* First-quarter selling, general and administrative expenses (SG&A) were 4.40 percent of sales, a decrease from 4.60 percent of sales in the first quarter of fiscal 2005. The year-over-year decrease in SG&A as a percent of sales is the result of continuing cost-saving initiatives, record low credit costs and productivity improvements.
* The worldwide effective income tax rate for the quarter ended April 30, 2005, was 30 percent.
* Cash flow provided by operations during the first quarter was $18.1 million.
* Tech Data initiated the first stock repurchase program in company history and repurchased 271 thousand shares during the first quarter of fiscal 2006.
EMEA Restructuring Program
The company also announced a formal restructuring program for the EMEA region. Cash charges associated with the restructuring program are estimated to be in the range of $40 million to $50 million over the next five to six quarters. Initiatives related to the program are targeted to generate annualized savings in the same range. Upon completion of the restructuring program as well as the current IT system upgrade and harmonization project, the company is targeting combined annualized savings of approximately $55 million to $65 million.