FOOL CONFERENCE CALL SYNOPSIS*
By Debora Tidwell (MF Debit)

Tech Data Corporation <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TECD)") else Response.Write("(NASDAQ: TECD)") end if %>
5350 Tech Data Drive
Clearwater, FL 34620-3122
(813) 539-7429
http://www.techdata.com/

UNION CITY, Ca., December 6, 1996/FOOLWIRE/ --- Tech Data released their third quarter 1997 results on Tuesday evening. They were pleased to report record results for the quarter. Their sales increased 46.6% to $1.237 billion versus $843 million in the same quarter last year. This represents sequential sales growth of 16.3% over the second quarter. Adjusting for the effects of the third quarter Microsoft Windows '95 sales last year of $31.4 million, their year over year sales growth was 52.3%. Gross profit as a percentage of sales equaled 6.95% versus 6.96% in the comparable quarter last year and 6.99% in the second quarter this year.

SELLING, GENERAL & ADMINISTRATIVE EXPENSES. SG&A expenses equaled 4.37% of sales in the third quarter versus 5% last year and 4.64% in the second quarter this year. A significant factor in the SG&A is the continued efficiency they are reaping from the conversion they did some 2 years ago. Then, certainly, the incremental sales above their plans yielded almost 90% bottom-line results. Once they go over their targeted goal and their short-term SG&A is fixed, incremental sales revenue has a very positive impact on their bottom line and third quarter historically has been a quarter where they have been able to achieve that. As a dollar value, SG&A expenses in the third quarter increased by approximately $4.7 million from Q2, primarily as a result of headcount additions. Operating income was $31.9 million or 2.58% of sales. Interest expense was $4.4 million.

INCOME. Pretax income was $27.5 million. The average tax rate was 39.1%. Their net income was $16.7 million or $0.38 per share based on average outstanding shares of 44.6 million.

NINE MONTH RESULTS. For the nine month period, sales increased 50.3% to $3.285 billion versus $2.186 billion in the same period last year. Gross profit as a percentage of sales equaled 6.98% versus 7.09% last year. SG&A expenses equaled 4.55% of sales versus 5.48% last year. Operating income was $79.6 million or 2.42% of sales. Interest expense was $15.2 million. Pretax income was $64.4 million with an average tax rate of 39.2%. Net income for the nine months was $39.2 million or $0.95 per share.

BALANCE SHEET -- RECEIVABLES & INVENTORY. Receivables totalled approximately $590 million at the end of the quarter. DSO was 43 days versus 44 days at the end of Q2. At October 31st, they had a bad debt allowance of $24.6 million. Inventory totalled approximately $641 million, up from $440 million at the end of Q2. Inventory turned approximately 8.5 times in Q3 versus 9.1 times in Q2. The increase in inventory turnover in Q3 is attributed to better availability of certain products that were on allocation in Q2 and a conscious effort to stock inventory more deeply. As they left the end of the second quarter, they were waiting for new product introductions from Compaq, IBM, Toshiba, and a variety of other systems manufacturers. They started receiving shipments in late July, but really August which is the beginning of the quarter they had plenty of product available and sales started to take off. They also consciously stocked deeper as they left the second quarter, the products started arriving in the beginning of the third quarter and you can see the buildup in inventory, yet their inventory turns are still very strong. Right now, they are having the same availability issues they faced before. The new high-end notebooks continue to be constrained. They are starting to see some shortages in the disk drive area.

OTHER EXPENSE/DEBT ITEMS. Prepaid expenses include $34 million of prepaid inventory and deferred income taxes of $15.5 million. The balance relates to normal prepaid operating expenses of $6.6 million. Their revolving credit loans total $340 million at October 31st, up from $236 million at the end of Q2. The increase is the result of growth in sales and the resulting increases in accounts receivable and inventory. Their equity reached approximately $419 million at October 31st. They had $210 million available at the end of the quarter out of their total credit line of $550 million. Their capital expenditures totalled approximately $7.8 million in Q3 and $13.5 million for the nine months ending October 31st. Depreciation and amortization was approximately $4.9 million for Q3 versus $4.8 million in Q2. They had 3190 employees at October 31st for a net addition of 394 employees during the quarter.

GEOGRAPHIC MIX. During the third quarter, their domestic operations represented 90% of consolidated Q3 sales versus 88% of consolidated sales in Q3 last year and 88% in Q2 this year. Their year-over-year domestic growth was 50%. Their international growth was 25%. Adjusting for sales of Windows '95 in the prior year, these growth rates would have been 54% and 36% respectively. All of their operations remain profitable for fiscal 1997.

RESULTS COMPARED TO GUIDANCE GIVEN LAST QUARTER. They provided forward looking guidance for the third quarter which, at the upper end, estimated sales of $1.150 billion and net income of $13.7 million or $0.31 per share. Their actual results exceeded those estimates by $87 million in sales and $3 million of net income or $0.07 per share. The overachievement related to stronger than expected demand, principally in the US market.

PRODUCT LINE INFORMATION. During the current Q3, their systems business represented 26% of sales or 77% year-over-year growth. Networking was 18% of sales or 45% year-over-year growth. Peripherals were 39% of sales or 41% year-over-year growth. Software was 17% of sales or year-over-year growth of 27%. On the customer side, their retail and direct marketing business accounted for 15% of sales with year-over-year growth of 103%. Their corporate business is 25% of sales and had 77% year-over-year growth. Their VAR business is 60% of sales or 29% year-over-year growth.

BUSINESS CONDUCTED ELECTRONICALLY GREW. A little over 20% of their business was done electronically in the third quarter compared to about 15% in the second quarter. That is important for several reasons because that is the dollar value, when you look at the number of orders and the number of lines, the percentages are much higher. Nearly all of their retail business comes in EDI and that is usually voluminous orders, relatively small quantities shipped direct to individual stores, so they see huge savings there. There are a lot of customers utilizing their suite of services for adding other kinds of information short of placing an order which, in the past would have required placing a phone call and talking to someone. Now they can check stock, get technical specs, and so on either through Tech Data's CD-ROM or through the Internet on Tech Data's Web page or through Tech Data's dial-up or direct connect Tech Data Online service. So the percentage of sales is a lagging and understating indicator.

OUTLOOK FOR THE FOURTH QUARTER. The company's internal plans for the fourth quarter fiscal 1997 is for sales to be $1.275 billion to $1.350 billion, an increase of 42-50% over sales of $900 million in the fourth quarter of last year. In addition, the company estimates fiscal 1997 sales in the $4.560 billion to $4.635 billion, an increase of 48-50% over fiscal 1996 sales of $3.087 billion. Based on the company's current internal plans, estimated net income for the fourth quarter of fiscal 1997 ranges from $17 million to $18 million, or $0.38 to $0.40 per share compared to net income in the prior year fourth quarter of $9.2 million or $0.24 per share. In addition, the company currently estimates net income for fiscal 1997 in the range of $56.2 to $57.2 million, or $1.33 to $1.35 per share compared to net income in the prior year of $21.5 million or $0.56 per share.

PERFORMANCE SO FAR IN Q4. They have noted that November started off on the softer side. Generally they see November take a breather, partly because of Thanksgiving and also Comdex with all the new products coming out and people distracted by going to the show. November usually shows a sequential downturn on a daily shipping basis and they saw that, although more than expected in the first half of November. It was somewhat slower than anticipated. It picked up nicely in the second half of November, almost recovering back to plan, but finishing a little below where they would have liked. So they have a little bit of work in front of them for December and January to be able to finish out the quarter in good standing. Overall though the various indices they monitor on a daily basis are pointing in the right direction.

AGGREGATION PROGRAM. The company was asked about Hewlett-Packard's entry into their Elect Program. They responded that at present they are prohibited from selling any HP laser printers or computers to the community of some 3000 dealers which now are serviced on an exclusive basis by designated wholesalers. HP hasn't made the complete move to embrace full open sourcing. This is sort of a halfway measure, one that Tech Data greets very positively and think will have a terrific impact. The second phase though should be more telling, because in the first phase the customers are not permitted to change their primary source. Two or three months later in the March timeframe there will be a general election in which the 3000 dealers are allowed to pick not only their alternative source, but their two co-primary sources and they think this will be the more important step in this two-part process. Ultimately HP could go the direction of every other major systems vendor and that is towards complete open sourcing. In terms of Tech Data's Elect Program, that is exactly what it is so far. It has been a program of special terms and conditions offered to customers interested in buying a certain qualified product line. What the HP initiative does is provide more impetus to the program and has caused Tech Data to reassess their approach and move more towards a division concept. So, by February 1st or so, they should have a new division in place at Tech Data very analogous to their retail group which is showing incredible success with better than 100% year over year growth. They will put in place the same kind of division with dedicated marketing, inside sales, etc. just as they have in retail. It provides a level of focus and resource to be successful in the aggregation business. They are successful today but they think the opportunity there is huge and they are only tapping a portion of what they could if they had a concerted, organized effort for that particular segment of the market.

EXPANSION -- BRAZIL OPERATIONS. The company was asked for an updated status on opening in Brazil. They responded that they have done a lot. They have already taken occupancy of a distribution facility there which is a combination office/distribution facility. It is in a very good location just outside the city of Sao Paolo. They have a team down there now of Americans plus Brazilians putting in place the necessary infrastructure to commence business on February 1st including installing systems, hiring the necessary staff, working with vendors on sign-up and rollout programs. They don't anticipate any problem in achieving their February 1st opening date. The vendors have embraced them with open arms. They have already received endorsements from most of the major vendors there including Compaq, IBM, Hewlett-Packard, Microsoft, and Acer to work with them in Brazil. There are plenty of risks in Latin America just by the nature of the political, legal, and economic environment they are operating in, not least of which is currency risk and they are instituting a number of measures to mitigate that. But, it's not like doing business in the US or for that matter Europe. They are obviously going into this with their eyes open and wouldn't be making this investment if they didn't think they had a pretty good assessment of the risks associated with proceeding and they are persuaded that the profit opportunities can offset the somewhat higher risk they face in that marketplace.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.