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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended January 31, 2004

OR

For the transition period from              to             .

Commission File Number 0-14625

TECH DATA CORPORATION

(Exact name of Registrant as specified in its charter)

(Registrant’s Telephone Number, including Area Code): (727) 539-7429

Securities registered pursuant to Section 12(b) of the Act:

Common stock, par value $.0015 per share

Securities registered pursuant to Section 12(g) of the Act:

2% Convertible subordinated debentures due 2021

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  x    No  ¨

Aggregate market value of the voting stock held by non-affiliates was $1,715,897,833 based on the reported last sale price of common stock on July 31, 2003, which is the last business day of the registrant’s most recently completed second fiscal quarter.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant’s Proxy Statement for use at the Annual Meeting of Shareholders on June 10, 2004, is incorporated by reference in Part III of this Form 10-K to the extent stated herein.

Table of Contents

PART I

ITEM 1. Business

Overview

Tech Data Corporation (“Tech Data,” “we,” “our,” “us,” or the “Company”) is a leading distributor of information technology (“IT”) products, logistics management and other value-added services worldwide. We serve approximately 90,000 value-added resellers (“VARs”), direct marketers, retailers, corporate resellers, and Internet resellers in approximately 80 countries throughout the United States, Europe, Canada, Latin America, the Caribbean, and the Middle East.

We offer a variety of products from manufacturers and publishers such as Adobe, Apple, Cisco, Computer Associates, Creative Labs, Epson, Hewlett-Packard, IBM, Intel, Iomega, Lexmark, Microsoft, Nortel Networks, NEC, Palm, Seagate, Sony, Symantec, 3Com, Toshiba, Viewsonic, and Western Digital. Products are generally shipped the same day the orders are received from regionally located logistics centers.

Customers are provided with a high level of service through the Company’s pre- and post-sale technical support, electronic commerce tools (including on-line order entry, product integration services and electronic data interchange (“EDI”) services), customized shipping documents and flexible financing programs. While we strive to provide our customers with the best service available, revenues generated from the direct sale of services contributed less than 10% to Tech Data’s overall net sales.

History

Tech Data was incorporated in 1974 to market data processing supplies such as tapes, disk packs, and custom and stock tab forms for mini and mainframe computers directly to end users. With the advent of microcomputer dealers, we made the transition to a wholesale distributor in 1984 by broadening our product line to include hardware products and withdrawing entirely from end-user sales. From 1989 to 1994, we expanded internationally through the acquisition of privately-held distribution companies in Canada and France.

In July 1998, we substantially enhanced our European presence with the acquisition of 83% of the voting common stock of Europe’s leading technology products distributor, Computer 2000 AG (“Computer 2000”). With a presence in significant geographic markets in Europe, the Middle East and Latin America, the purchase of Computer 2000 expanded Tech Data’s presence to 26 countries worldwide. In April 1999, all of the shares of Computer 2000 were integrated into Tech Data Germany AG (“Tech Data Germany”). Following the acquisition of Computer 2000, there remained a very small minority interest at Tech Data Germany. These interests were acquired in the third quarter of fiscal 2003.

In May 1999, we nearly doubled our Canadian business through the acquisition of Globelle Corporation (“Globelle”), a leading publicly-held Canadian distributor. The purchase of Globelle provided critical mass, a complementary product and geographic focus to our Canadian operations.

During the first quarter of fiscal 2004, we expanded our presence in the European networking and communications market through the acquisition of Azlan Group PLC (“Azlan”) for approximately $224.4 million plus acquisition-related expenses of $2.6 million, for a total purchase price of $227.0 million. Tech Data acquired all of the outstanding stock of Azlan. The Azlan acquisition strengthened Tech Data’s position in Europe with respect to networking products and value-added services.

Industry

The wholesale distribution model has proven to be well suited for both manufacturers and publishers of IT products (“vendors”) and resellers of those products. The large number of resellers makes it cost efficient for vendors to rely on wholesale distributors to serve this diverse customer base.

Similarly, due to the large number of vendors and products, resellers often cannot or choose not to establish direct purchasing relationships with vendors. As a result, they frequently rely on wholesale distributors, such as Tech Data, who can leverage purchasing costs across multiple vendors to satisfy a significant portion of their product procurement, logistics, financing, marketing and technical support needs.

Through collaborative supply chain management initiatives, we continue to advance the efficiency of the distribution model. By leveraging our infrastructure and logistics expertise, vendors benefit from a cost-effective alternative to selling directly to resellers or end-users. Our ability to provide a “virtual warehouse” of products for resellers means they no longer need to hold inventory, which reduces their costs and risks associated with handling products. In addition to enabling fast reseller access to a comprehensive hardware and software offering, we frequently ship products directly to end-users on behalf of our customers, thereby reducing the

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resellers’ costs of storing, maintaining, and shipping the products themselves. We facilitate this approach by personalizing shipping labels and packing documents with the resellers’ brand identities (e.g., logos), marketing messages and other specialized content.

The increasing utilization of electronic ordering and information delivery systems, including the ability to transact business over the Web, continues to have a significant impact on the cost efficiency of the wholesale distribution model. For example, we have established a more seamless supply chain in which end-user orders flow immediately from reseller Web sites to our logistics centers in closest proximity to the order destination. Advances like these are possible due to the financial and technical resources available to large-scale distributors such as ourselves, enabling a reduction in both our customers’ and our own transaction costs through more efficient purchasing and lower selling and delivery costs.

In summary, the IT distribution industry continues to address a broad spectrum of reseller and vendor requirements despite certain vendors such as Hewlett-Packard Company (“HP”) continuing with direct sales of certain products, predominantly in the U.S., to end-users and resellers. New products and emerging market opportunities have helped to offset the impact of vendor direct sales on IT distributors. Further, vendors continue to seek the logistics expertise of distributors to penetrate key markets like the small- and mid-sized business (“SMB”) sector, which rely on VARs—our primary customer base—to gain access to and support for new technology. The economies of scale and global reach of large industry-leading distributors are expected to continue to be significant competitive advantages in this marketplace.

Our fiscal 2004 results, like other companies in the technology industry, were negatively affected on a local currency basis by the continued economic downturn, especially in the first semester of this fiscal year. During the second semester, however, we saw modest sales growth in local currencies on a worldwide basis. While future economic conditions and IT market demand remain uncertain, companies in our industry have found ways to improve efficiency during the slowdown. These actions should help strengthen profit potential when a sustained recovery in IT demand occurs.

Products and Vendors

We sell more than 80,000 products from the world’s leading peripheral, system and networking manufacturers and software publishers. These products are typically purchased directly from the manufacturer or software publisher on a non-exclusive basis. Conversely, our vendor agreements do not restrict us from selling similar products manufactured by competitors, nor do they require us to sell a specified quantity of product. As a result, we have the flexibility to terminate or curtail sales of one product line in favor of another due to technological change, pricing considerations, product availability, customer demand, or vendor distribution policies.

Our product line is continually strengthened in order to provide our customers with the latest technology products. However, from time to time, the demand for certain products that we sell exceeds the supply available from the manufacturer or publisher. In such cases, we generally receive an allocation of the available products. We believe that our ability to compete is not adversely affected by these periodic shortages and the resulting allocations.

It is our understanding that our vendor agreements are in the form customarily used by each manufacturer. Agreements typically contain provisions that allow termination by either party upon 30 days notice. In most instances, a vendor who elects to terminate a distribution agreement will repurchase from the distributor the vendor’s products carried in the distributor’s inventory.

Most of our vendor agreements also allow for stock rotation and price protection provisions. Stock rotation rights give us the ability, subject to certain limitations, to return for credit or exchange a portion of those inventory items purchased from the vendor. Price protection situations occur when a vendor credits us for declines in inventory value resulting from the vendor’s price reductions. Along with our inventory management policies and practices, these provisions reduce our risk of loss due to slow-moving inventory, vendor price reductions, product updates or obsolescence.

Sometimes the industry practices discussed above are not embodied in agreements and do not protect us in all cases from declines in inventory value. However, we believe that these practices provide a significant level of protection from such declines, although no assurance can be given that such practices will continue or that they will adequately protect us against declines in inventory value. See also Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)—Asset Management.

While we sell products in various countries throughout the world, and product categories may vary from region to region, over the past three years, sales within our consolidated product categories have remained fairly consistent within the following ranges:

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HP acquired Compaq Computer Corporation (“Compaq”) in May 2002. Worldwide net sales of products purchased from HP or HP/Compaq combined accounted for 32%, 33%, and 38% of consolidated net sales in fiscal 2004, 2003, and 2002, respectively. HP has increased the level of business it transacts directly with end-users and/or resellers. Our net sales have been adversely affected by this trend, which has been primarily focused on HP’s computer systems business in the United States. HP’s printer business and European computer systems business have not yet been significantly affected. HP also continues to modify certain contract terms and conditions, some of which may push additional costs into the channel. In response to these changes, we continue to evaluate and modify our pricing policies and terms and conditions with our customers, as well as pursue other vendor and product categories. It should also be noted that the adverse effect on our U.S. business of HP’s direct strategy has not been as dramatic in recent quarters. In each of the last four quarters, our sales of HP computer systems in the Americas represents less than three percent of our quarterly worldwide sales. While our future exposure in our HP systems business may not be significant, no assurance can be given that we will not be adversely affected should HP proceed with a more aggressive direct strategy within Europe or with its printer business. In addition, Microsoft software accounted for 10% of our net sales in fiscal 2003. There were no other vendors that accounted for 10% or more of our net sales in 2004, 2003, or 2002.

Customers and Services

We purchase products directly from manufacturers and publishers in large quantities for sale to an active reseller base of approximately 90,000 VARs, direct marketers, retailers, Internet resellers and corporate resellers. While we sell products in various countries throughout the world, and customer channels may vary from region to region, over the past three years sales within our consolidated customer channels have remained fairly consistent within the following ranges:

No single customer accounted for more than five percent of our net sales during fiscal 2004, 2003, or 2002.

The market for VARs is attractive because VARs generally rely on distributors as their principal source of computer products and financing. This reliance is due to VARs typically lacking the resources to establish a large number of direct purchasing relationships or stock significant product inventories. Direct marketers, retailers and corporate resellers may establish direct relationships with manufacturers and publishers for their more popular products, but utilize distributors as the primary source for other product requirements and the alternative source for products acquired directly. We have also developed special programs to meet the unique needs of direct marketers, retailers and Internet resellers.

In addition to a strong product offering, we provide resellers a high level of service through our pre- and post-sale technical support, suite of electronic commerce tools (including web order entry and EDI services), customized shipping documents, product configuration/integration services and flexible financing programs. We also provide services to our vendors by giving them the opportunity to participate in a number of special promotions, training programs and marketing services targeted to the needs of our resellers. While we believe that services such as these help to set us apart from our competition, they contribute less than 10% to our overall revenues.

We provide our vendors one of the largest bases of resellers throughout the Americas and Europe, delivering products to customers from our 29 regionally located logistics centers. Locating logistics centers near our customers enables us to deliver products on a timely basis, thereby reducing the customers’ need to invest in inventory. See Item 2—Properties for further discussion of our locations and logistics centers.

Sales and Electronic Commerce

Currently, our sales force consists of approximately 1,400 field and inside telemarketing sales representatives. Field sales representatives are located in major metropolitan areas. Each field representative is supported by inside telemarketing sales teams covering a designated territory. Our team concept provides a strong personal relationship between representatives of the customers and Tech Data. Territories with no field representation are serviced exclusively by the inside telemarketing sales teams. Customers typically call their inside sales teams on dedicated toll-free numbers or contact us through various electronic methods to place orders. If the product is in stock and the customer has available credit, customer orders are generally shipped the same day from the logistics facility nearest the customer.

Increasingly, customers rely upon our electronic ordering and information systems, in addition to our product catalogs and frequent mailings, as sources for product information, including availability and price. Our on-line computer systems allows the inside sales teams to check current stocking levels in the Company’s logistics centers. Through our website, most customers can gain remote

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access to our information systems to check product availability and pricing and to place orders. Certain of our larger customers have EDI services available whereby orders, order acknowledgments, invoices, inventory status reports, customized pricing information and other industry standard EDI transactions are consummated on-line, which improves efficiency and timeliness for ourselves and our customers. During fiscal 2004, approximately $5.9 billion (34%) of our worldwide sales dollar volume originated from orders received electronically, compared to approximately $5.4 billion (34%) in fiscal 2003.

We also provide comprehensive training to our field and inside sales representatives regarding technical characteristics of products and our policies and procedures. In addition, this training program is supplemented by product seminars offered by manufacturers and publishers.

Competition

We operate in a market characterized by intense competition, based upon such factors as product availability, credit availability, price, delivery and various services and support provided by the distributor to the customer. We believe that we are well equipped to compete effectively with other distributors in all of these areas.

We compete against several distributors in the Americas market, including Ingram Micro, Synnex, and several regional and local distributors. Competition outside of the Americas includes Ingram Micro, Actebis and a variety of smaller regional and local distributors.

We also compete with manufacturers and publishers who sell directly to resellers and end-users. Nevertheless, we believe that in the majority of cases, manufacturers and publishers choose to sell products through distributors rather than directly because of the relatively small volume and high selling costs associated with numerous small orders. Management also believes that our prompt delivery of products and efficient handling of returns provide an important competitive advantage over manufacturers’ and publishers’ efforts to market their products directly.

Employees

On January 31, 2004, we had approximately 8,400 employees located as follows: Americas – 3,100 and Europe – 5,300. Certain of our employees in various countries outside the Americas are subject to laws providing representation rights to employees on management boards. We consider relations with our employees to be good.

Foreign and Domestic Operations and Export Sales

We operate predominately in a single industry segment as a distributor of IT products, logistics management, and other value-added services. While we operate primarily in one industry, because of our global presence, we are managed by our geographic segments. Starting in the first quarter of fiscal 2004, we modified our management structure and combined our U.S., Canadian and Latin American operations into the Americas region. Our Canadian and Latin American operations were previously reported separately as the Other International region. As a result, our geographic segments include 1) the Americas (United States, Canada, Latin America and export sales to Latin America and the Caribbean from the U.S.) and 2) Europe (Europe, Middle East, and export sales to Africa). Prior year amounts have been reclassified to conform to the current period presentation. In fiscal 2004, 2003, and 2002, 55%, 47%, and 42%, respectively, of our sales were derived from outside of the Americas.

Over the last three fiscal years, we have entered new markets or expanded our presence in existing markets and exited certain markets based upon our assessment of, among other factors, risk and earnings potential. Such actions included:

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We continue to evaluate our risk exposure (e.g., risks surrounding currency rates, regulatory environments, political instability, etc.) and earnings potential around the world. To the extent we decide to close additional operations, we may incur charges and operating losses related to such closures, as well as recognize a portion of our accumulated other comprehensive income (loss) as a non-operating foreign currency exchange gain or loss.

See Note 11 of Notes to Consolidated Financial Statements for further information regarding the geographical distribution of our net sales, operating income and identifiable assets.

Additional Information Available

Our principal Internet address is www.techdata.com. We provide our annual and quarterly reports free of charge on www.techdata.com, as soon as reasonably practicable after they are electronically filed, or furnished to, the Securities and Exchange Commission (“SEC”). We provide a link to all SEC filings where current reports on Form 8-K and any amendments to previously filed reports may be accessed, free of charge.

Executive Officers

The following table sets forth the name, age and position of each of the persons who were serving as executive officers of Tech Data as of March 31, 2004.

Steven A. Raymund, Chairman of the Board of Directors and Chief Executive Officer, has been employed by the Company since 1981, serving as Chief Executive Officer since January 1986 and as Chairman of the Board of Directors since April 1991. He has a Bachelor of Science Degree in Economics from the University of Oregon and a Masters Degree from the Georgetown University School of Foreign Service. Mr. Raymund currently serves on the Board of Directors of Jabil Circuit, Inc.

Néstor Cano, President of Worldwide Operations, joined the Company (via Computer 2000) in July 1989 as a Software Product Manager and served in various management positions within the Company’s operations in Spain and Portugal from 1990 to 1995, after which time he was promoted to Regional Managing Director. In March 1999 he was appointed Executive Vice President of U.S. Sales and Marketing, and in January 2000 he was promoted to President of the Americas. He was promoted to President of Worldwide Operations in August 2000. Mr. Cano holds a PDG (similar to an MBA) from IESE Business School in Barcelona and an Engineering Degree from Barcelona University.

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Jeffery P. Howells, Executive Vice President and Chief Financial Officer, joined the Company in October 1991 as Vice President of Finance and assumed the responsibilities of Chief Financial Officer in March 1992. In March 1993, he was promoted to Senior Vice President and Chief Financial Officer and was promoted to Executive Vice President and Chief Financial Officer in March 1997. In 1998, Mr. Howells was appointed to the Company’s Board of Directors. From 1979 to 1991, he was employed by Price Waterhouse. Mr. Howells is a Certified Public Accountant and holds a Bachelor of Business Administration Degree in Accounting from Stetson University.

Kenneth Lamneck, President, the Americas, joined the Company in March 2004 as President, the Americas. Prior to Tech Data, he served in various management positions at Arrow Electronics Distribution Division and most recently served as President, Arrow Richey Electronics division since 1999. Mr. Lamneck holds a Bachelors Degree in Engineering from the United States Military Academy at West Point and a Masters Degree in Business Administration from the University of Texas.

Joseph A. Osbourn, Executive Vice President and Worldwide Chief Information Officer, joined the Company in October 2000. Prior to joining the Company, he was Senior Vice President and Chief Information Officer at Kmart Corporation from September 1999 to September 2000, Vice President of Information Services at Walt Disney World Company from September 1989 to September 1999, and with Price Waterhouse for ten years, most recently as a partner in Management Consulting Services. Mr. Osbourn holds a Bachelors Degree in Physics from the University of Louisville and a Masters Degree in Business Administration from Memphis State University.

Theresa A. Bazzone, Senior Vice President of U.S. Sales, joined the Company in November 1992 as Director, Software Product Marketing. During her 11 years with the Company, she has held various senior management positions with Tech Data including Vice President of Software Product Marketing as well as several Vice President and General Manager positions including Retail and Direct Marketing Sales, Strategic Business Development and Enterprise. In August 2002 she was promoted to her current role of Senior Vice President of U.S. Sales. Prior to joining the Company, she was employed by Corporate Software, Inc., from 1987 to 1992 serving in a variety of sales management positions.

Charles V. Dannewitz, Senior Vice President of Tax and Treasurer, joined the Company in February 1995 as Vice President of Taxes. He was promoted to Senior Vice President of Taxes in April 2000, and assumed responsibility for worldwide treasury in July 2003. Prior to joining the Company, he was employed by Price Waterhouse for 13 years, most recently as a Tax Partner. Mr. Dannewitz is a Certified Public Accountant and holds a Bachelor of Science Degree in Accounting from Illinois Wesleyan University.

Andreas Duerst, Senior Vice President of Central Europe, joined the Company in February 2000 as Managing Director of Swiss operations and was promoted to Senior Vice President of Central Europe in March 2003. Prior to joining the Company, Mr. Duerst was employed by Lucent Technologies from May 1995 to January 2000 as Managing Director of Central and Eastern Europe.

Andrew Gass, Senior Vice President of Northern Europe, joined the Company (via Computer 2000) in October 1995 as Finance and Operations Director of UK operations and was promoted to Deputy Managing Director in October 1998. From February 2000 to August 2001, Mr. Gass was a Managing Director at Sage Enterprise Solutions. He returned to the Company as Senior Vice President of Northern Europe in September 2001. Mr. Gass is a Chartered Accountant and holds a Bachelors Degree in Commerce from Edinburgh University.

Lawrence W. Hamilton, Senior Vice President of Human Resources, joined the Company in August 1993 as Vice President of Human Resources and was promoted to Senior Vice President of Human Resources in March 1996. Prior to joining the Company, he was employed by Bristol-Myers Squibb Company from 1985 to August 1993, most recently as Vice President—Human Resources and Administration of Linvatec Corporation (a division of Bristol-Myers Squibb Company). Mr. Hamilton holds a Bachelor of Arts Degree in Political Science from Fisk University and a Masters of Public Administration, Labor Policy from the University of Alabama.

William J. Hunter, Senior Vice President and Chief Financial Officer of Europe, joined the Company in April 1994 as Assistant Controller. In September 1996, he was promoted to Director of International Finance and in June 1997 became the Vice President and Controller for Europe. Effective June 1999, Mr. Hunter was promoted to Senior Vice President and Chief Financial Officer for Europe. Prior to joining the Company, he was employed by Price Waterhouse from January 1989 to April 1994. Mr. Hunter holds a Bachelor of Arts Degree in Philosophy from Tulane University and a Bachelor of Science Degree in Accounting from the University of South Florida.

Elio Levy, Senior Vice President of U.S. Marketing, joined the Company in October 1991 as Director of Software and was promoted to Vice President of Networking in January 1993. In January 1995, he was named Vice President of Marketing for Tech Data France and from January 1996 to June 1998 he served as President of Tech Data Canada. In June 1998, he returned to the Company’s U.S. operations as Vice President and General Manager of International Marketing, and in November 1998 he assumed the role of Vice President and General Manager, Peripherals. In April 2000 he was promoted to his current role of Senior Vice President of U.S. Marketing. Mr. Levy holds a Bachelor of Science Degree in Business from the College of Charleston.

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Richard Pryor-Jones, Senior Vice President and Managing Director of Azlan Group PLC, joined Azlan in 1997 as UK Sales Director, moving to UK Managing Director - a role which was later expanded to include the Nordics region. From 2000 to 2003, Mr. Pryor-Jones served as Azlan’s European Operations Director before moving into his present role in November 2003. Prior to joining Azlan, he was with Digital Equipment Corporation for 11 years where he served in various senior management roles.

Yuda Saydun, Senior Vice President of Business Development and President of Latin America Operations, joined the Company in April 1993 as Vice President and General Manager—Latin America. In March 1997 he was promoted to Senior Vice President and General Manager—Latin America and in April 2000 was promoted to President. In August 2003, he assumed the additional responsibilities of Senior Vice President, Business Development for the Americas. Prior to joining the Company, he was employed by American Express Travel Related Services Company, Inc. from 1982 to April 1993, most recently as Division Vice President, Cardmember Marketing. Mr. Saydun holds a Bachelor of Science Degree in Political and Diplomatic Sciences from Universite Libre de Bruxelles and a Masters of Business Administration Degree, Finance/Marketing from the University of California, Los Angeles.

William K. Todd, Jr., Senior Vice President of Logistics and Integration Services, joined the Company in June 1999 as Vice President and General Manager of Configuration and Assembly and was promoted to Senior Vice President of Logistics and Integration Services in April 2000. Prior to joining the Company, he was employed by Entex Information Services from September 1992 to June 1999 as the Senior Vice President of Distribution and Manufacturing. Mr. Todd holds a Bachelor of Science Degree in Business Management from New Hampshire College.

Joseph B. Trepani, Senior Vice President and Corporate Controller, joined the Company in March 1990 as Controller and held the position of Director of Operations from October 1991 through January 1995. In February 1995, he was promoted to Vice President and Worldwide Controller and to Senior Vice President and Corporate Controller in March 1998. Prior to joining the Company, Mr. Trepani was Vice President of Finance for Action Staffing, Inc. from July 1989 to February 1990. From 1982 to 1989, he was employed by Price Waterhouse. Mr. Trepani is a Certified Public Accountant and holds a Bachelor of Science Degree in Accounting from Florida State University.

David R. Vetter, Senior Vice President, General Counsel and Secretary, joined the Company in June 1993 as Vice President and General Counsel and was promoted to Corporate Vice President and General Counsel in April 2000. In March 2003, he was promoted to his current position of Senior Vice President, and effective July 2003, was appointed Corporate Secretary. Prior to joining the Company, he was employed by the law firm of Robbins, Gaynor & Bronstein, P.A. from 1984 to 1993, most recently as a partner. Mr. Vetter is a member of the Florida Bar and holds Bachelor of Arts Degrees in English and Economics from Bucknell University and a Juris Doctorate Degree from the University of Florida.

Gerard F. Youna, Senior Vice President of Southern Europe, joined the Company in 1989 as the Managing Director for Tech Data France. In 1999, he was promoted to Regional Managing Director for France and Israel. In September 2000, he was promoted to Senior Vice President of Southern Europe. Mr. Youna received a degree in IT Engineering from the Institut Informatique d’Entreprise in Paris, France.

Benjamin B. Godwin, Corporate Vice President, Real Estate and Corporate Services, joined the Company in August 1997 as Vice President of Real Estate and Corporate Services and was promoted to Corporate Vice President in March 2003. Prior to joining the Company, he was President of Godwin Real Estate, Inc., a real estate brokerage and appraisal firm he founded in 1985. Mr. Godwin holds a Bachelor of Business Administration degree from Georgia State University.

ITEM 2. Properties

Our worldwide executive offices are located in Clearwater, Florida. As of January 31, 2004, we operated a total of 29 logistics centers to provide our customers timely delivery of products. These logistics centers are located in the following principal markets: Americas – 12, and Europe – 17.

As of January 31, 2004, we leased or owned approximately seven million square feet of space worldwide. The majority of our office facilities and logistics centers are leased. Our facilities are well maintained and are adequate to conduct our current business. We do not anticipate any material difficulty in renewing our leases as they expire or securing replacement facilities.

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ITEM 3. Legal Proceedings

Prior to fiscal 2004, one of our European subsidiaries was audited in relation to various value-added tax (“VAT”) matters. As a result of those audits, the subsidiary received notices of assessment that allege the subsidiary did not properly collect and remit VAT. It is our opinion, based upon the opinion of outside legal counsel, that we have valid defenses related to a substantial portion of these assessments. Although we are vigorously pursuing administrative and judicial action to challenge the assessments, no assurance can be given as to the ultimate outcome. The resolution of such assessments could be material to our operating results for any particular period, depending upon the level of income for such period.

We are subject to various other legal proceedings and claims arising in the ordinary course of business. We do not expect the outcome in any of these other legal proceedings, individually or collectively, will have a material adverse effect on our financial condition, results of operations or cash flows.

ITEM 4. Submission of Matters to a Vote of Security Holders

There have been no matters submitted to a vote of security holders during the last quarter of the fiscal year ended January 31, 2004.

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PART II

ITEM 5. Market for the Registrant’s Common Stock and Related Shareholder Matters

Our common stock is traded on the NASDAQ Stock Market under the symbol “TECD”. We have not paid cash dividends since fiscal 1983 and the Board of Directors does not intend to institute a cash dividend payment policy in the foreseeable future. The table below presents the quarterly high and low sale prices for our common stock as reported by the NASDAQ Stock Market, Inc. As of February 20, 2004, there were 491 holders of record. We believe that there are approximately 29,000 beneficial holders.

Equity Compensation Plan Information⁽¹⁾

The number of shares issuable upon exercise of outstanding options granted to employees and non-employee directors, as well as the number of shares remaining available for future issuance, under our equity compensation plans as of January 31, 2004 are summarized in the following table:

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ITEM 6. Selected Consolidated Financial Data

The following table sets forth certain selected consolidated financial data and should be read in conjunction with the MD&A and our consolidated financial statements and notes thereto appearing elsewhere in this annual report.

FIVE YEAR FINANCIAL SUMMARY

(In thousands, except per share data)

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Annual Report on Form 10-K, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations, 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 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 that are difficult to predict. 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 Exhibit 99-A of our Annual Report on Form 10-K for the year ended January 31, 2004 for further information. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

Factors that could cause actual results to differ materially include the following:

Additional discussion of these and other factors affecting our business and prospects is contained in our periodic filings with the SEC, copies of which can be obtained at the Investor Relations section of our website at www.techdata.com.

Results of Operations

Starting in the first quarter of fiscal 2004, we modified our management structure and combined our U.S., Canadian and Latin American operations into the Americas region. Our Canadian and Latin American operations were previously reported separately as the Other International region. Prior year amounts have been reclassified to conform to the current period presentation.

Overview

During fiscal 2004, we saw our worldwide net sales grow to $17.4 billion, a 10.6% increase over fiscal 2003. This growth can be attributed to the performance of our European operations, where net sales grew 29.3% over fiscal 2003 as a result of our acquisition of Azlan Group PLC (“Azlan”), one of the leading distributors of networking and communications equipment in Europe; the strengthening of the euro, and stronger market demand during the second half of fiscal 2004 compared to 2003. European net sales represented 55% of our worldwide net sales during fiscal 2004. Net sales in the Americas declined by 6.0% in fiscal 2004 compared to fiscal 2003 due to the continued economic slowdown and the highly competitive market conditions within the United

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States. However, similar to Europe, the Americas saw stronger demand and reported positive, albeit slight, year-over-year growth during the second half of the year.

Gross profit as a percentage of net sales (“gross margin”) during fiscal 2004 was 5.64%, compared to 5.28% in fiscal 2003. This increase was largely due to the acquisition of Azlan, which reports higher gross margins on a relative basis than the rest of our worldwide operations, and the impact of implementing Emerging Issues Task Force Number 02-16, “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor” (“EITF Issue No. 02-16”). EITF Issue No. 02-16 resulted in a reclassification of funds received from vendors amounting to $51.6 million from selling, general and administrative expenses (“SG&A”), with $45.3 million recorded as a reduction of cost of good sold, thereby increasing gross margin, and the remaining $6.3 million being deferred until the related inventory is sold. The background and impact of EITF Issue No. 02-16 is discussed in greater detail later in this document. Absent the impact of Azlan and EITF Issue No. 02-16, our gross margin in fiscal 2004 would have declined compared to fiscal 2003. This decline was most pronounced in the Americas due to the highly competitive pricing environment and our desire to maintain, and in some cases, increase our market share.

SG&A as a percentage of net sales increased to 4.67% in fiscal 2004, compared to 3.89% in fiscal 2003. This increase is primarily attributable to the higher cost structure of Azlan and the impact of EITF Issue No. 02-16. Excluding these impacts, our SG&A as a percentage of net sales would have been roughly flat on a year-over-year basis, as we responded to the decrease in net sales on a local currency basis with improvements to the productivity and efficiency of our operations.

Operating income as a percentage of net sales (“operating margin”) was .95% of net sales, or 95 basis points, during fiscal 2004, compared to a negative 70 basis points during fiscal 2003. Fiscal 2004 and 2003 included special charges which reduced operating income by two basis points and 209 basis points, respectively. Excluding the impact of these special charges, operating margin declined by 42 basis points during fiscal 2004 compared to 2003. This decline is largely the result of the pricing pressure we saw in the Americas, where operating margins decreased to 1.54% of net sales in fiscal 2004, compared to 1.90% in 2003. In Europe, operating margins were adversely affected by competitive pricing in the region, although not as intense as that seen in the Americas, and incremental costs incurred during fiscal 2004 for employee severance costs and the harmonization and upgrade of our European systems infrastructure.

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The following table sets forth our Consolidated Statement of Income as a percentage of net sales for each of the three most recent fiscal years:

Non-GAAP Financial Information

The following reconciliation details the adjustments between results calculated using Generally Accepted Accounting Principles (“GAAP”) and the same results reported excluding special charges, the loss on disposition of subsidiaries and related tax effects (“non-GAAP information”). The non-GAAP information is included with the intention of providing investors a more complete understanding of our underlying operational results and trends, but should only be used in conjunction with results reported in accordance with GAAP (amounts in thousands except per share amounts).

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Net Sales

The following table represents our net sales by geographic segment:

Our net sales within the Americas declined on a year-over-year basis during fiscal 2004 and 2003. The vast majority of these declines took place within the United States, where our performance was adversely affected by the general economic slowdown, the effect of highly competitive market conditions within the distribution industry and the direct sales efforts of certain vendors, primarily HP.

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Our net sales within Europe increased on a year-over-year basis during fiscal 2004 and 2003. During fiscal 2004, this increase was primarily driven by the inclusion of Azlan, which was acquired in March 2003, and the stronger euro versus the U.S. dollar. Our “legacy” European operations (i.e., excluding Azlan) experienced a slight year-over-year decrease in net sales on a local currency basis during fiscal 2004.

Our year-over-year decline in net sales during fiscal 2004 in our legacy European operations on a local currency basis is primarily due to the impact of lower demand for technology products and services during the first half of this year and our exit last year from certain markets in Europe, more than offsetting the positive growth we saw during the second half of fiscal 2004, as further discussed below. Our year-over-year decline in net sales during fiscal 2003 was primarily attributed to the general slowdown of the IT industry during the period.

During the second semester of fiscal 2004, we began to see an improvement in sales performance on a local currency basis within both regions, and, in fact, experienced positive sales growth on a year-over-year basis, with the Americas growing approximately 1.5% during the second semester while our legacy European operations experienced sales growth in the mid-single digits on a percentage basis in local currency. This positive growth can be attributed to an improvement in general market demand during the second half of fiscal 2004 in both regions and our desire to maintain and, in some cases, increase our market share position with certain customers and/or vendors, while still achieving acceptable profit margins.

Gross Profit

Our consolidated gross margin increased 36 basis points in fiscal 2004 compared to the prior year, after declining by 12 basis points during fiscal 2003, compared to fiscal 2002. The increase in gross margin during fiscal 2004 is largely the result of the inclusion of the operating results of Azlan (which realize higher gross margins than our legacy operations) and the impact of our adoption of EITF Issue No. 02-16 as discussed below, offset by declining product gross margins in our legacy operations. Our legacy operations experienced a year-over-year decline in gross margins due to the highly competitive pricing environment during the period, especially in the Americas, and our desire to maintain or, in some cases, increase our market share position, as previously discussed above. In addition, as we analyzed business opportunities, our low cost structure allowed us to realize, in many cases, acceptable operating profits in spite of lower gross margins. The 12 basis point decrease in gross margin during fiscal 2003, as compared to fiscal 2002, was due to our European operations, which saw generally greater competitive margin pressures in an attempt to maintain market share.

Gross margin within both operating segments for fiscal year 2004 includes a reclassification pursuant to EITF Issue No. 02-16. EITF Issue No. 02-16 requires that, under certain circumstances, consideration received from vendors be treated as a reduction of cost of goods sold and not as a reduction of selling, general and administrative expenses. EITF Issue No. 02-16 further requires the recognition of such consideration be deferred until the related inventory is sold. The new guidance was applicable to vendor arrangements entered into or modified subsequent to December 31, 2002. As a result of implementing EITF Issue No. 02-16, for fiscal year 2004, we reclassified approximately $51.6 million (.30% of net sales) from selling, general and administrative expenses with $45.3 million (.26% of net sales) recorded as a reduction of cost of goods sold and the remaining $6.3 million (.04% of net sales) recorded as deferred revenue (offsetting inventory on the balance sheet) pending sale of the related inventory. During the fourth quarter of fiscal 2004, which represents the first quarter where EITF Issue No. 02-16 was applicable to all our vendor arrangements, we reclassified approximately $21.7 million (.44% of net sales) from selling, general and administrative expenses with $19.7 million (.40% of net sales) recorded as a reduction of cost of goods sold and the remaining $2.0 million (.04% of net sales) recorded as deferred revenue. Going forward, we do not expect there to be material deviations in the deferred revenue balance, however, the actual deferred revenue amounts recorded will be based on the nature and amount of vendor funding received and related quarter-end inventory levels. Similarly, to the extent there are no material changes to our future vendor agreements, of which no assurance can be made, we would expect the relative impact on gross margin and selling, general and administrative expenses in future quarters to be in the range of that experienced during the fourth quarter of fiscal 2004.

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Operating Expenses

Selling, general and administrative expenses

During fiscal 2004, SG&A increased by 32.7%, or $200.2 million from the prior year.

Similar to the increase in net sales and gross profit, the increase in SG&A for fiscal year 2004 can be attributed primarily to the inclusion of the results from Azlan, the strengthening of the euro against the U.S. dollar, and our adoption of EITF Issue No. 02-16. Also impacting our SG&A this year are the project and operating costs we have incurred for the harmonization and upgrade of our European systems infrastructure. Such costs expensed during fiscal 2004 approximated $24.2 million compared to $9.0 million in the prior year. Excluding the above factors, SG&A incurred by our legacy operations actually declined year-over-year on a local currency basis. This SG&A performance would have been more favorable had we not incurred charges this year associated with workforce reductions in excess of the amount incurred in the prior year.

During fiscal 2003, SG&A decreased by 9.6% or $65.2 million from the prior year. On a relative basis, SG&A decreased five basis points to 3.89% of net sales compared to 3.94% in fiscal 2002. Included in the $65.2 million in cost reductions are $8.6 million related to the elimination of goodwill amortization, as required by Statement of Financial Accounting Standards (“SFAS” or “Statement”) No. 142, “Goodwill and Other Intangible Assets”. However, this reduction was offset almost entirely by the approximate $9.0 million that we expensed on harmonizing and upgrading our European systems infrastructure during fiscal 2003.

We achieved the SG&A performance described above through our constant monitoring of costs, including tight budgetary controls and productivity reviews. These productivity reviews result in a highly variable cost model with an ability to better respond to changes in market demand compared to those companies with high fixed costs. As an example, during the economic downturn, we have managed our total headcount within our legacy operations down by over 30% from the fourth quarter of fiscal 2001, most of which came from general attrition. Likewise, we dramatically cut back on and continue to closely monitor discretionary expenses such as travel-related costs, consulting and supplies.

Special Charges

During fiscal 2004, we incurred special charges of $3.1 million, or .02% of net sales, related to the closure of our education business in the United States and the restructuring of this business to a more variable cost-based, outsourced model. These charges primarily include costs associated with employee severance, facility lease terminations and the write-offs of fixed assets associated with the business.

During fiscal 2003, operating income was negatively affected by a $328.9 million impairment to goodwill resulting from the application of SFAS No. 142. SFAS No. 142 revised the standards of accounting for goodwill by replacing the amortization of these assets with the requirement that they be reviewed annually for impairment, or more frequently if impairment indicators arise. During the fourth quarter of fiscal 2003, we performed our annual test of goodwill to determine if there was impairment. This testing included the determination of each reporting unit’s fair value using market multiples and discounted cash flows modeling. Our reduced earnings and cash flow forecast, primarily due to the prolonged downturn in the economy, uncertain demand, and competitive industry conditions, resulted in the determination that a goodwill impairment charge was necessary. The $328.9 million non-cash charge was recorded in the fourth quarter of fiscal 2003. In performing the annual test for goodwill impairment for fiscal 2004 and fiscal 2002, we determined there was no impairment.

During fiscal 2002, we incurred special charges of $27.0 million. These special charges related to the recording of: a) the write-off of previously capitalized software costs ($20.1 million); b) the impairment of certain Internet-related investments ($5.4 million) and; c) the write-off of development costs associated with a new German logistics center ($1.5 million), the construction of which has been indefinitely deferred. The remaining Internet-related investment had a carrying value of approximately $2.4 million at January 31, 2004 and 2003. Investments in these types of technologies are inherently risky and we could lose the remainder of our investment.

Loss on Disposition of Subsidiaries

During fiscal 2003, as a result of currency-related issues, political instability and continued economic concerns in the country, we decided to sell our operations in Argentina to local management. In addition, during the fourth quarter of fiscal 2003, we liquidated one of our European financing subsidiaries. With respect to the Argentina transaction, we recorded a charge of approximately $2.4 million on the sale, in addition to the realization of approximately $14.5 million in foreign currency exchange losses previously recorded in shareholders’ equity as accumulated other comprehensive income (loss). In connection with the liquidation of the European financing subsidiary, we repatriated approximately $70.0 million of capital, which resulted in the realization of approximately $11.2 million in foreign currency exchange gains previously recorded in shareholders’ equity as accumulated other comprehensive income (loss). The net effect of these transactions resulted in a total pre-tax loss of approximately $5.7 million, recorded within Loss on Disposition of Subsidiaries during fiscal 2003.

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There were no significant gains or losses resulting from dispositions of subsidiaries during fiscal 2004 and 2002.

Interest Expense, Interest Income, Foreign Currency Exchange Gains/Losses

Interest expense decreased 34.5% to $23.2 million in fiscal 2004 from $35.4 million in fiscal 2003. As more fully described below, we redeemed our $300.0 million, 5% convertible subordinated debentures during the fourth quarter of fiscal 2003. The debt instruments we utilized during fiscal 2004 were at lower interest rates as compared to the redeemed debentures, and accordingly, resulted in significantly lower interest expense. Interest income decreased 41.6% to $6.7 million in fiscal 2004 from $11.4 million in fiscal 2003. This reduction was primarily due to the use of excess cash to reduce debt and to fund a portion of the Azlan acquisition in March 2003.

Interest expense decreased 46.9% to $35.4 million in fiscal 2003 from $66.7 million in fiscal 2002. This decrease was the result of a significant reduction in our average outstanding indebtedness and a decline in our interest rates. The decrease in fiscal 2003 was slightly offset as a result of a $3.0 million premium payment related to the redemption of our $300.0 million, 5% convertible subordinated debentures on December 12, 2002. The debentures, scheduled to mature on July 1, 2003, were redeemed at a price of 101% or $303.0 million. This redemption allowed us to take advantage of the current lower interest rate environment. Interest income remained relatively flat at $11.4 million, increasing less than 1.0% over fiscal 2002.

We realized net foreign currency exchange gains of $1.9 million, $6.9 million and $0.1 million during the fiscal years ended January 31, 2004, 2003, and 2002, respectively. We recognize net foreign currency exchange gains and losses primarily due to the fluctuation in the value of the U.S. dollar versus the euro, and to a lesser extent, versus other currencies. It continues to be our goal to minimize foreign currency exchange gains and losses through an effective hedging program. Additionally, our hedging policy prohibits speculative foreign currency exchange transactions.

Provision for Income Taxes

Our effective tax rate was 31.0% in fiscal 2004 compared to 50.6% in fiscal 2003. The change in effective tax rate is primarily due to non-deductible special charges recognized during fiscal 2003. Due to a decrease in our taxable income before special charges, the provision for income taxes decreased 30.3% to $46.8 million in fiscal 2004 as compared to $67.1 million in fiscal 2003.

Our effective tax rate was 50.6% in fiscal 2003 compared to 34.0% in fiscal 2002 with the change again being primarily due to non-deductible charges recognized in fiscal 2003. The provision for income taxes increased 17.6% to $67.1 million in fiscal 2003 from $57.1 million in fiscal 2002. This tax increase was primarily due to an increase in fiscal 2003 taxable income as compared to fiscal 2002.

The effective tax rates are also impacted by favorable tax audit results, cumulative and current period net operating losses in certain geographic regions, and management’s determination of the related deferred tax asset that is more likely than not to be realized.

Our future effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates, changes in the valuation of our deferred tax assets or liabilities, or changes in tax laws or interpretations thereof. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. At January 31, 2004, the Company believes it has appropriately accrued for probable income tax exposures. To the extent the Company were to prevail in matters for which accruals have been established or be required to pay amounts in excess of such accruals, the Company’s effective tax rate in a given financial statement period could be materially affected.

Net Income and Earnings Per Share

As a result of the factors described above, net income increased to $104.1 million in fiscal 2004, or $1.81 per diluted share, compared to a net loss of ($199.8) million, or ($3.55) per diluted share in fiscal 2003. Excluding special charges and the loss on disposition of subsidiaries, net income decreased to $106.1 million, or $1.85 per diluted share in fiscal 2004 compared to $2.35 per diluted share in fiscal 2003.

As a result of the factors described above, net income decreased to a net loss of ($199.8) million in fiscal 2003, or ($3.55) per diluted share, compared to net income of $110.8 million, or $1.98 per diluted share in fiscal 2002. As discussed above, special charges and the loss on disposition of subsidiaries incurred during fiscal 2003 had the impact of reducing our diluted earnings per share by $5.90 per share. Special charges incurred during fiscal 2002 had the impact of reducing our diluted earnings per share by $.29 per share.

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Critical Accounting Policies and Estimates

The information included within Management’s Discussion and Analysis of Financial Condition and Results of Operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. On an on-going basis, we evaluate these estimates, including those related to bad debts, inventory, vendor incentives, goodwill and intangible assets, deferred taxes, and contingencies. Our estimates and judgments are based on currently available information, historical results, and other assumptions we believe are reasonable. Actual results could differ materially from these estimates. We believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements.

Accounts Receivable

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. In estimating the required allowance, we take into consideration the overall quality and aging of the receivable portfolio, the existence of credit insurance and specifically identified customer risks. If actual customer performance were to deteriorate to an extent not expected by us, additional allowances may be required which could have an adverse effect on our financial results.

Inventory

We value our inventory at the lower of its cost or market value. We write down our inventory for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value based upon an aging analysis of the inventory on hand, specifically known inventory-related risks, foreign currency fluctuations for foreign-sourced product and assumptions about future demand. Market conditions that are less favorable than those projected by management may require additional inventory write-downs, which could have an adverse effect on our financial results.

Vendor Incentives

We receive incentives from vendors related to cooperative advertising allowances, personnel funding, volume rebates and other incentive agreements. These incentives are generally under quarterly, semi-annual or annual agreements with the vendors; however, some of these incentives are negotiated on an ad hoc basis to support specific programs mutually developed with the vendor.

We have historically recorded unrestricted volume rebates and early payment discounts received from vendors as a reduction of inventory and recognized the incentives as a reduction of cost of products sold when the related inventory was sold. With the implementation of EITF Issue No. 02-16, such treatment is also applicable for all other incentives we receive from vendors, such as cooperative advertising allowances and personnel funding. The impact of the implementation of EITF Issue No. 02-16 is discussed within the Results of Operations section of this document.

Goodwill and Intangible Assets

The carrying value of goodwill is reviewed annually for impairment. Goodwill may also be reviewed more frequently if current events and circumstances indicate a possible impairment. An impairment loss is charged to expense in the period identified.

We also examine the carrying value of our intangible assets with finite lives, which includes capitalized software and development costs and purchased intangibles, as current events and circumstances warrant determining whether there are any impairment losses. If indicators of impairment are present in intangible assets used in operations and future cash flows are not expected to be sufficient to recover the assets’ carrying amount, an impairment loss is charged to expense in the period identified.

Deferred Taxes

We record valuation allowances to reduce our deferred tax assets to the amount expected to be realized. In assessing the adequacy of recorded valuation allowances, we consider a variety of factors including, the scheduled reversal of deferred tax liabilities, future taxable income, and prudent and feasible tax planning strategies. In the event we determine we would be able to use a deferred tax asset in the future in excess of its net carrying value, an adjustment to the deferred tax asset would reduce income tax expense, thereby increasing net income in the period such determination was made. However, the recognition of any future tax benefit resulting from the reduction of the $11.2 million valuation allowance associated with the purchase of Azlan would be recorded as a reduction in goodwill. Should we determine that we are unable to use all or part of our net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income tax expense, thereby reducing net income in the period such determination was made.

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Contingencies

We accrue for contingent obligations, including estimated legal costs, when the obligation is probable and the amount is reasonably estimable. As facts concerning contingencies become known, we reassess our position and make appropriate adjustments to the financial statements. Estimates that are particularly sensitive to future changes include tax, legal and other regulatory matters such as imports and exports, which are subject to change as events evolve and as additional information becomes available during the administrative and litigation process.

Recent Accounting Pronouncements

See Note 1 of Notes to Consolidated Financial Statements for the discussion on recent accounting pronouncements.

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Impact of Inflation

We have not been adversely affected by inflation, as technological advances and competition within the microcomputer industry have generally caused the prices of the products we sell to decline. Management believes that most price increases could be passed on to our customers, as prices charged by us are not set by long-term contracts; however, as a result of competitive pressure, there can be no assurance that the full effect of any such price increases could be passed on to our customers.

Quarterly Data—Seasonality

Our quarterly operating results have fluctuated significantly in the past and will likely continue to do so in the future as a result of seasonal variations in the demand for the products and services we offer. Narrow operating margins may magnify the impact of these factors on our operating results. Specific historical seasonal variations have included a reduction of demand in Europe during the summer months and an increase in European demand during our fiscal fourth quarter. The product cycle of major products and any company acquisition or disposition may also materially impact our business, financial condition, or results of operations. See Note 13 of Notes to Consolidated Financial Statements for further information regarding our quarterly results.

Liquidity and Capital Resources

Net cash provided by operating activities of $303.2 million in fiscal 2004 was primarily attributable to net income adjusted for non-cash charges and the positive effect of our focus on working capital management. One outcome of our working capital management was the reduction of our owned inventory levels (the percentage of inventory not financed by vendors) to a negative 24% at the end of fiscal 2004, meaning our accounts payable balances exceeded our inventory balances by 24%. This compares to a negative owned inventory of 8% at the end of fiscal 2003. We also monitor our cash conversion cycle or net cash days, defined as days sales outstanding in accounts receivable (“DSO”) plus days of supply on hand in inventory (“DOS”), less days purchases outstanding in accounts payable (“DPO”) as a key indicator of our working capital management. At the end of fiscal 2004, our net cash days were 32.9 days compared to 37.1 days at the end of fiscal 2003. DSO is calculated as quarter end accounts receivable divided by average daily net sales during the quarter. DOS is calculated as quarter end inventory divided by average daily cost of goods sold during the quarter. DPO is calculated as quarter end accounts payable divided by average daily cost of goods sold during the quarter.

Net cash used in investing activities of $251.5 million during fiscal 2004 was primarily attributable to the acquisition of Azlan and the continued investment related to the expansion of our management information systems, office facilities and equipment for our logistics centers, which included $18.3 million in capitalized costs related to harmonizing and upgrading our European systems infrastructure. We expect to make capital expenditures of approximately $55.0 - $60.0 million during fiscal 2005 to further expand or upgrade our IT systems, logistics centers and office facilities, which include approximately $14.0 - $18.0 million to continue upgrading our European systems infrastructure. We continue to make significant investments to implement new IT systems and upgrade our existing IT infrastructure in order to meet our changing business requirements. These implementations and upgrades occur at various levels throughout our organization and include, but are not limited to, new operating and enterprise systems, financial systems, web technologies, customer relationship management systems and telecommunications. While we believe we will realize increased operating efficiencies as a result of these investments, unforeseen circumstances or complexities could have an adverse impact on our business.

Net cash used in financing activities of $110.7 million during fiscal 2004 reflects the use of cash to pay down our revolving credit facilities partially offset by the proceeds from stock option exercises and purchases made through our Employee Stock Purchase Plan.

As of January 31, 2004, we maintained a $250.0 million Multi-currency Revolving Credit Facility with a syndicate of banks that expires in May 2006. We pay interest (average rate of 2.60% at January 31, 2004) under this facility at the applicable eurocurrency rate plus a margin based on our credit ratings. Additionally, we maintained a $400.0 million Receivables Securitization Program with a syndicate of banks that expires in August 2004, which we intend to renew. We pay interest (average rate of 1.73% at January 31, 2004) on the Receivables Securitization Program at designated commercial paper rates plus an agreed-upon margin. In addition to these credit facilities, we maintained lines of credit and overdraft facilities totaling approximately $598.7 million (average interest rate on borrowings was 3.11% at January 31, 2004).

The aforementioned credit facilities total approximately $1.2 billion, of which $80.2 million was outstanding at January 31, 2004. These credit facilities contain covenants that must be complied with on a continuous basis, including the maintenance of certain financial ratios, restrictions on payment of dividends and restrictions on the amount of common stock that may be repurchased annually. We were in compliance with all such covenants as of January 31, 2004. The ability to draw funds under these credit facilities is dependent upon sufficient collateral (in the case of the Receivables Securitization Program) and meeting the aforementioned financial covenants, which limits our ability to draw the full amount of these facilities. For example, our total borrowings on certain credit facilities are limited to a multiple of our earnings before interest, taxes, depreciation, and amortization (“EBITDA”) recognized during the last twelve months. The EBITDA calculation within our covenants allows for certain special charges, such as goodwill impairments, to be excluded. As of January 31, 2004, the maximum amount that could be borrowed under these facilities, in consideration of the availability of collateral and the financial covenants, was approximately $675 million. In addition, at January 31, 2004, we had issued standby letters of credit of $28.1 million. These letters of credit typically act as a guarantee of payment to certain

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third parties in accordance with specified terms and conditions. The issuance of these letters of credit reduces our available capacity under our credit agreements by the same amount. For a more detailed discussion of our credit facilities, see Note 5 of Notes to Consolidated Financial Statements.

In December 2001, we issued $290.0 million of convertible subordinated debentures due 2021. The debentures bear interest at 2% per year and are convertible into our common stock at any time, if the market price of the common stock exceeds a specified percentage of the conversion price per share of common stock, beginning at 120% and declining 1/2% each year until it reaches 110% at maturity, or in other specified instances. Holders may convert debentures into 16.7997 shares per $1,000 principal amount of debentures, equivalent to a conversion price of approximately $59.53 per share. The debentures are convertible into 4,871,913 shares of our common stock. Holders have the option to require us to repurchase the debentures on any of the fourth, eighth, twelfth or sixteenth anniversary dates from the issue date at 100% of the principal amount plus accrued interest to the repurchase date. Although it is our intention to use cash to satisfy any debentures submitted for repurchase, we have the option to satisfy such repurchases in either cash and/or our common stock, provided that shares of common stock at the first purchase date will be valued at 95% of fair market value (as defined in the indenture) and at 97.5% of fair market value for all subsequent purchase dates. The debentures are redeemable in whole or in part for cash, at our option at any time on or after December 20, 2005. We will pay contingent interest on the debentures during specified six-month periods beginning on December 15, 2005, if the market price of the debentures exceeds specified levels. In addition, the dilutive impact of the $290.0 million of convertible subordinated debentures, due 2021, is excluded from the diluted earnings per share calculations due to the conditions for the contingent conversion feature not being met.

In December 2002, the Company redeemed $300.0 million, 5% convertible subordinated debentures at a price of 101%, or $303.0 million, plus interest accrued to the redemption date. The redemption was funded through a combination of cash on hand and borrowings under the Company’s revolving credit loans. Unamortized deferred debt issuance costs associated with the issuance of the debentures were not significant.

In August 2000, we filed a universal shelf registration statement with the SEC for $500.0 million of debt and equity securities. The net proceeds from any issuance are expected to be used for general corporate purposes, including capital expenditures, the repayment or refinancing of debt and to meet working capital needs. As of January 31, 2004, we had not issued any debt or equity securities under this registration statement, nor can any assurances be given that we will issue any debt or equity securities under this registration statement in the future.

Our balance sheet at January 31, 2004 was one of the strongest in our history as evidenced by a senior debt to capital ratio of five percent and a total debt to capital ratio of 19%. We believe that our existing sources of liquidity, including cash resources and cash provided by operating activities, supplemented as necessary with funds available under our credit arrangements, will provide sufficient resources to meet our present and future working capital and cash requirements for at least the next 12 months.

Contractual Obligations

Principal maturities of long-term debt and amounts due under future minimum lease payments are as follows:

        Purchase orders for the purchase of inventory and other goods and services are not included in the table above. We are not able to determine the aggregate amount of such purchase orders that represent contractual obligations, as purchase orders typically represent authorizations to purchase rather than binding agreements. For the purposes of this table, contractual obligations for purchase of goods or services are defined as agreements that are enforceable and legally binding on Tech Data and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Our purchase orders are based on our current demand expectations and are fulfilled by our vendors within short time horizons. We do not have significant non-cancelable agreements for the purchase of inventory or other goods specifying minimum quantities or set prices that exceed our expected requirements for three months. We also enter into contracts for outsourced services; however, the obligations under these contracts were not significant and the contracts generally contain clauses allowing for cancellation without significant penalty.

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Off-Balance Sheet Arrangements

Synthetic Lease Facility

On July 31, 2003, we completed a restructuring of our synthetic lease facility with a group of financial institutions (the “Restructured Lease”) under which we lease certain logistics centers and office facilities from a third-party lessor. The Restructured Lease expires in 2008, at which time we have the following options: renew the lease for an additional five years, purchase the properties at an amount equal to their cost, or remarket the properties. If we elect to remarket the properties, we have guaranteed the lessor a percentage of the cost of each of the properties, in an aggregate amount of approximately $121.1 million. At any time during the lease term, we may, at our option, purchase up to four of the seven properties, at an amount equal to each property’s cost. The Restructured Lease contains covenants that must be complied with on a continuous basis, similar to the covenants described in certain of the aforementioned credit facilities. The amount funded under the Restructured Lease is treated as debt under the definition of the covenants required under both the Restructured Lease and the credit facilities. As of January 31, 2004, we were in compliance with all such covenants.

The Restructured Lease is fully funded at January 31, 2004, in the approximate amount of $141.3 million. The sum of future minimum lease payments under the Restructured Lease at January 31, 2004 was approximately $19.5 million. Properties leased under the Restructured Lease facility total 2.5 million square feet of space, with land totaling 224 acres located in Clearwater and Miami, Florida; Fort Worth, Texas; Fontana, California; Atlanta, Georgia; Swedesboro, New Jersey; and South Bend, Indiana.

The Restructured Lease has been accounted for as an operating lease. As discussed in Note 1 of Notes to Consolidated Financial Statements, the Financial Accounting Standards Board Interpretation (“FIN”) No. 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51” requires us to evaluate whether an entity with which we are involved meets the criteria of a VIE and, if so, whether we are required to consolidate that entity. We have determined that the third-party lessor of our synthetic lease facility does not meet the criteria of a VIE and, therefore, is not subject to the consolidation provisions of FIN No. 46.

Guarantees

To encourage certain customers to purchase product from the Company, the Company provides financial guarantees to third-party lenders on behalf of those customers. The majority of these guarantees are for an indefinite period of time, where the Company would be required to perform if the customer is in default with the third-party lender. As of January 31, 2004 and 2003, the aggregate amount of guarantees under these arrangements totaled approximately $18.6 million and $21.8 million, respectively, of which approximately $12.5 million and $10.9 million, respectively, was outstanding. Additionally, the Company believes that, based on historical experience, the likelihood of a payment pursuant to such guarantees is remote. The Company also provides residual value guarantees related to the Restructured Lease.

The Company sold trade receivables to a financial institution, amounting to approximately $33.6 million in January 2004. The transaction was accounted for as a sale and accordingly, has been excluded from the Consolidated Balance Sheet. Given these receivables were sold with recourse, the Company has considered the risk of loss associated with these receivables within its assessment of the adequacy of its allowance for doubtful accounts at January 31, 2004.

Asset Management

We manage our inventories by maintaining sufficient quantities to achieve high order fill rates while attempting to stock only those products in high demand with a rapid turnover rate. Inventory balances fluctuate as we add new product lines and when appropriate, we make large purchases, including cash purchases from manufacturers and publishers when the terms of such purchases are considered advantageous. Our contracts with most of our vendors provide price protection and stock rotation privileges to reduce the risk of loss due to manufacturer price reductions and slow moving or obsolete inventory. In the event of a vendor price reduction, we generally receive a credit for the impact on products in inventory, subject to certain limitations. In addition, we have the right to rotate a certain percentage of purchases, subject to certain limitations. Historically, price protection and stock rotation privileges as well as our inventory management procedures have helped to reduce the risk of loss of inventory value.

We attempt to control losses on credit sales by closely monitoring customers’ creditworthiness through our IT systems, which contain detailed information on each customer’s payment history and other relevant information. We have obtained credit insurance that insures a percentage of the credit extended by us to certain customers against possible loss. Customers who qualify for credit terms are typically granted net 30-day payment terms in the Americas. While credit terms in the European Union (“EU”) vary by country, the vast majority of customers in the EU are granted credit terms ranging from 30-60 days. We also sell products on a prepay, credit card, cash on delivery and floor plan basis.

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Deferred Tax Assets

Deferred tax assets have been recorded for net operating loss carryforwards and other deductible temporary differences. Our deferred tax assets relate to subsidiary operations located in different countries with separate taxing jurisdictions. Although aggregate foreign operations generate pre-tax income, certain subsidiaries have a history of net operating losses.

The net change in the deferred income tax valuation allowance was an increase of $33.3 million at January 31, 2004 with approximately $11.2 million of this increase being associated with the acquisition of Azlan. To the extent the Azlan acquisition-related deferred tax assets are realized in future periods, such benefit would be recorded as a reduction in goodwill.

The deferred tax valuation allowance at January 31, 2004 primarily relates to foreign net operating loss carryforwards of $323.1 million. The majority of the net operating losses have an indefinite carryforward period with the remaining portion expiring in years 2005 through 2014. We evaluate a variety of factors in determining the realizability of deferred tax assets including the scheduled reversal of deferred tax liabilities, projected future taxable income, and prudent and feasible tax planning strategies.

Acquisitions

Effective March 31, 2003, we completed the acquisition of Azlan, a European distributor of networking and communications products and provider of training and other value-added services. Shareholders of Azlan received 125 pence per ordinary share, resulting in total cash consideration of approximately 144.7 million pounds sterling ($224.4 million), which we funded from our existing credit facilities. We subsequently incurred acquisition-related expenses of approximately $2.6 million for a total purchase price of $227.0 million.

The Azlan acquisition strengthened our position in Europe with respect to networking products and value-added services and was accounted for using the purchase method in accordance with SFAS No. 141, “Business Combinations.” In accordance with SFAS No. 141, the net assets and results of operations of Azlan have been included in our consolidated financial statements since the date of acquisition. See also Note 2 in Notes to Consolidated Financial Statements.

ITEM 7a. Qualitative and Quantitative Disclosures About Market Risk

As a large international organization, we face exposure to adverse movements in foreign currency exchange rates. With our acquisition of Azlan and the sales performance this past year in Europe, the percentage of our business with exposure to currency risk is increasing. These exposures may change over time as business practices evolve and could have a material impact on our financial results in the future. In the normal course of business, we employ established policies and procedures to manage our exposure to fluctuations in the value of foreign currencies using a variety of financial instruments. It is our policy to utilize financial instruments to reduce risks where internal netting cannot be effectively employed and not to enter into foreign currency derivative instruments for speculative or trading purposes. Our primary exposure relates to transactions in Europe, Canada, and Latin America, where the currency collected from customers is different from the currency used to purchase the product. In addition, we have foreign currency risk related to debt that is denominated in currencies other than the U.S. dollar. Our foreign currency risk management objective is to protect our earnings and cash flows from the adverse impact of exchange rate changes. Foreign exchange risk is managed by using foreign currency forward, option and swap contracts to hedge intercompany loans, trade receivables and payables.

We have elected not to designate our foreign currency contracts as hedging instruments, and they are therefore marked-to-market with changes in their value recorded in the income statement each period. The underlying exposures are denominated primarily in the following currencies: U.S. dollar, British pound, Canadian dollar, Danish krone, euros, Swedish krona and Swiss franc.

The following table provides information about our foreign currency derivative financial instruments outstanding as of January 31, 2004 and 2003. The information is provided in United States dollar equivalents. For the foreign currency contracts, the table presents the notional amount (at contractual exchange rates) and the weighted average contractual foreign currency exchange rates. These contracts are generally for durations of 90 days or less.

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Foreign Currency Contracts

Notional Amounts by Expected Maturity

Average Forward Foreign Currency Exchange Rate

(Dollar amounts in millions, except weighted average contract rates)