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Tech Data Corporation (NASDAQ:TECD)

Annual Shareholder Meeting Call

May 30, 2012 03:00 pm ET

Executives

Steven Raymund - Chairman

Bob Dutkowsky - CEO

Chuck Dannewitz - SVP & Treasurer

Analysts

[Abrupt start]

This meeting was announced in our proxy statement made available on April 20, 2012 to shareholders of record of March 21, 2012. I have been informed by David Vetter, Tech Data’s General Counsel and Secretary and also the supervisor of elections for today's meeting that there are 38,875,025 shares known to be present in person or by proxy which represents 94% of the total outstanding shares. As that represents a quorum I now call the 2012 Annual Meeting of Shareholders to order. At this time I would like to introduce our Directors and a few of the Officers that are here at today’s meeting. Please stand when I call your name.

All the members of the Board of Directors are here today. Steve Raymund, Chairman of the Board; Rob Dutkowsky, our Chief Executive Officer; Jeff Howells, Executive Vice President and Chief Financial Officer; Eddie Adair, Chairman of the Audit Committee; Max Ardelt; Harry Harczak; Kathleen Misunas, Chairwoman of the Compensation Committee; Tom Morgan, Chairman of the Government Committee; Savio Tung; and David Upton.

Three senior executive officers here with us today include Néstor Cano, President Europe; Murray Wright, President of the Americas and John Tonnison, Executive Vice President and Chief Information Officer.

Also joining us today are representatives of Ernst & Young who are our independent accounting firm, [Mike Lennon], coordinating partner and Jason (inaudible), Audit Engagement Partner. They’re available here to answer any questions that might be appropriately directed to them. If there are no objections we will proceed to the remaining minutes of the prior year’s annual meeting.

There are four business items that is set forth in this year's proxy statement. So elect three directors serving for 2015, Kathleen Misunas, Thomas I. Morgan, and Steven A. Raymund. To ratify the selection of Ernst & Young as our independent accountants for over the year 2013, to conduct an advisory vote to approve Named Executive Officer Compensation for fiscal 2012, to approve the executive incentive bonus plan and to transact such other business that may appropriately come before the meeting or any such (inaudible) thereof. You have already (inaudible) most vote again in this meeting. If you have not yet voted or if you want to change your vote please see our representatives at the table outside and they will be happy to assist you. We will now temporarily get [along] doing with the formal meeting.

Steven Raymund our chairman is going to make a special presentation and Bob Dutkowsky CEO will provide an update on Tech Data's business and operating results. Bob's update will be followed by an question-and-answer session. We will have microphones available for you, all of your question as well as our answers will be webcast. So please wait until the microphone comes to you for asking the questions. I would now like to introduce Steven Raymund our chairman.

Steven Raymund

[Technical Difficulty] in getting started I would first like to recognize and welcome a former board member of long standing John Williams who is joining us today and we had a similar bittersweet ceremony when John retired from the board last year. So and we are certainly delighted to see him here today participating in the meeting with us today. What I would like to do though at this time is to recognize one of our board members who is now retiring for 14 years of very distinguished and exemplary service to the corporation and that’s (inaudible) we had a nice dinner last night in which many of us with the board and management were sharing our memories of our good times with Matt and recognizing him for his main contribution to the company and I think it's a worth while on noting that most of us when we come here were we either already lived in Florida and we are flying some couple of hours away somewhere in the country to coordinating with an American company everything is conducted in proper American English and Mathew is very fluent in English.

Nevertheless have to, is [permanent] at supply here from Munich and send a better part really of a week for every coordinating and incurs certainly a great expense and inconvenience personally to participate in our meetings. But it's been well worth it I think for him, from an experience standpoint and also the corporation that benefits by his observations and his experience, his wisdom, his insight particularly I would say how it relates to the underground realities in the European arena which today represents 60% of our revenue and better than 60% of our employees perhaps we should be holding this meeting in Munich, although I think I remember some shareholder meetings in Munich that there were less than present many years ago.

But I do want to this time to recognize Matt for his instrumental role in Tech Data Corporation success during his tenure with us, Matt for your service, for your dedication contributing to the company's growth and success on behalf of all of our shareholders we thank you.

And we do have a plaque here for Matt and it says Board of Director since 1998 to 2012, in recognition of your instrumental role in Tech Data Corporation’s success during your tenure as a member of the Board of Directors to your service and dedication that has contributed to the company's growth and success over the past 14 years, on behalf of all Tech Data shareholders we thank you for your outstanding contribution.

Bob Dutkowsky

Good afternoon. I am Bob Dutkowsky, CEO of Tech Data. It's my privilege to be a part of this meeting today. First of all, let me echo my congratulations and heartfelt thanks to Matt. Matt you preceded over the growth of this company from a small idea to a Fortune 100 company here and thanks for your guidance and your wisdom and your direction.

The company is what it is today and you could take great pride in your contribution. On behalf of my 8500 colleagues around the world and the thousands and thousands of employees and customers you've influenced, thank you for that, we really appreciate it.

And to my fellow shareholders this afternoon I have the privilege to give you a quick update on our company. Before I start I may make some forward-looking statements but I would encourage you to check our filings with the Securities and Exchange Commission for any detail as well as the investor relations page at techdata.com. Our company today is extremely well positioned to benefit from one of the most dynamic industry sectors in the world.

We are one of the largest IT distributors in the world. We enjoy the number one distribution position in Europe and a number two distribution position in America. That company and the presence of that company has delivered exceptionally strong financial performance over both the last few years as well as the last quarter we just announced back about 10 days ago, as well as we've now built the business that has the industry leading return on invested capital performance.

Both of those in metrics, both our financial performance and our return on invested capital should give our shareholders tremendous confidence in the strength and the staying power of this company. We enjoy a very unique position in the IT ecosystem. We have the privilege to serve the world’s most aggressive and forward thinking vendors and deliver their products to over 125,000 resellers that take the product into the marketplace, add their unique value and solve difficulties and problems on behalf of their customers.

That position in the ecosystem has changed over the last few years as we still have a very vibrant collection of specialty businesses to use those unique strength of Tech Data to add different value in the marketplace. As one of our executives like to say, this is not your father’s Tech Data. It’s a very different company today. It’s a company that's positioned for long-term success and long-term growth.

Our strategy has been consistent over the last handful of years; we've focused on three components of the company. The first and foremost is our ability to execute on behalf of our customers and our vendors. Everyday Tech Data has to sell about $100 million of technology products and our average selling price is between $1,000 and $2,000. Take them in and then do the math. And think of the execution that takes place inside the four walls of virtual Tech Data around the world every single day. 75% of our orders arrive to us via e-commerce.

We make one of the world’s leading e-commerce companies in the world and those products are supplied and delivered by our 29 logistics centers that are all connected with the world’s most advanced IT system SAP. And so that investment in technology and people and process allows us to be a very, very competitive distributor in the marketplace. We backed up that execution with investments and innovation.

For us, the innovation primarily means IT system. The investments we make in IT systems to make our people more productive, to make our systems perform better, to make our processes cleaner and also to connect our customers and vendors to Tech Data.

Our goal is to make us to be the company that every IT vendor and every reseller wants to do business with and we differentiate ourselves through the use of IT systems.

We make tremendous investments every year. Those investments continue on a year-over-year basis, with very specific projects and tasks that make Tech Data more competitive and a better performing company.

And then lastly, we take all of those strengths, strengths of our executions and our investments in innovation and we always look for new markets. Whether those new markets or new customers, new products, new technology, new segments, our efforts around diversification has paid tremendous dividends over the last few years.

Where we diversified? We diversified into four key areas, into the datacenter, into software, into mobility products and into consumer electronics. The world today is an always on, always connected world that starts with the datacenter and ends in a leaving room and all points in between and Tech Data today touches products and services and technologies that serve all of those points.

So if you have a cell phone, if you have laptop, if you have a tablet, if you work in a business that has a datacenter, if you worry about the security and the environment that you work in is secure because of software, if you have a network in your home, all of those products that have been delivered through the Tech Data infrastructure.

And that breadth of our reach, that end-to-end continuum differentiates us in the marketplace, and from my point of you also positions us very well for any sea changes that are going to happen in technology in the next five to ten years. Your company is well positioned to advantage of the most dynamic and exciting industry on the planet, IT.

And no company, in my opinion, is in a position or is positioned as well as we are to take advantage of the things that will happen in technology in the next five to ten years. The diversification efforts of your company have paid tremendous dividend.

And these businesses, the data center, software, consumer electronics and mobility are real, live businesses. Starting with mobility, we sold nearly $2 billion of mobility product last year; consumer electronics, nearly $3.5 billion in sales; software, over $4.6 billion in sales; and products into the data center, over $7.5 billion into it.

Very aggressive, very large, very robust businesses that -- where we have executive ownership and people that are focused and people that have deep skills in these environments to differentiate Tech Data.

The results of our executions, our innovations and our diversification are, I would say, stunning. In an environment that over the last five years that only grew around 3% compounded sales, our operating income grew 12% compounded, our net income grew 14% compounded, and our diluted EPS grew 21% compound.

Our business is able to take small revenue opportunities and return exceptional growth to the shareholder. And that's the business model that I believe is unparalleled in our sector, and one that our team is very, very proud of.

I mentioned earlier, we were able to perform that well with exceptionally strong return on invested capital metric, and very strong cash flow generation with cash days of between 25 and -- 24 and 25, 26 days. Our metrics in this area are very important to us.

And then lastly, our capital allocation strategy is one that we're very proud of. Over the last five years, we bought 14 companies, we redeemed our $350 million convertible senior debenture, we bought $1billion of Tech Data stock since 2005, which represents about 38% of the outstanding shares.

And today, our Board authorized another $100 million stock buyback program. And I think that speaks of the belief and the strength and commitment that the Board has for this company and management of the company.

As we look to the future, we'll continue to use our strong balance sheet to repurchase shares as appropriate. We'll make selected M&A that will strengthen and diversify the company. And we'll invest in organic growth to drive for continued performance in those areas that I described.

And all of that over the last five years has rewarded our shareholders with very strong performance. You can see in the graph in front of you that Tech Data has outperformed the NASDAQ, Tech Data has outperformed the Dow Jones, and Tech Data has outperformed the S&P 500 over the period. Strong performance in a very dynamic and interesting marketplace.

So if you summarize it all, Tech Data is a company that's strategically positioned in the IT ecosystem. We have a clear strategy that we're executing day-in and day-out around the world. Our vibrant collection of specialty businesses has us positioned not only to take advantage of the IT growth today, but well into the future.

Our strong financial performance says that our strategy in execution is working well. We have the capital structure to continue to fund strategic moves. And we have an experienced management team that knows how to execute and run this play. With that, I would be anxious to entertain any questions that you may have.

So if there are no questions, let me turn the meeting back over to Chuck Dannewitz.

Chuck Dannewitz

Thank you, Bob. We will now reconvene with the formal portion of this meeting. We have the results of the voting by both Presidents in-person or by proxy. The first proposal was to elect three directors to serve until 2015; Kathleen Misunas, Thomas I. Morgan and Steven A. Raymund. For each nominee the vote casted for the nominee exceeded the votes casted against, and therefore, the nominated directors are elected.

The second proposal was to ratify the selection of Ernst & Young as our independent registered public accounting firm for fiscal 2013. Of the shares voted, they received the majority of those shares for the proposal passed. The next proposal was to conduct an advisory vote to approve named executive officer compensation for fiscal 2012. The majority of the shares voting for the proposal voted for the proposal.

Therefore, the proposal passed. The final proposal was to approve the Executive Incentive Bonus Plan. The majority of shares voting voted for the proposal. Therefore, that proposal also passed. That completes the agenda item. Is there any other business to be brought before the meeting? If not, we will adjourn the formal meeting.

On behalf of Tech Data Corporation, we thank you for your participation, your attendance and interest in the company. Thank you.

Question-and-Answer Session

[No Q&A session for this event]

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