Ingram Micro Reports Third Quarter Financial Results

Continued Execution Drives Strong Year-over-Year Increases in Gross Margin, Operating Margin, EPS

Oct 24, 2013, 16:05 ET from Ingram Micro Inc.

SANTA ANA, Calif., Oct. 24, 2013 /PRNewswire/ -- Ingram Micro Inc. (NYSE: IM), the world's largest wholesale technology distributor and a global leader in supply-chain and mobile device lifecycle services, today announced financial results for the third quarter ended Sept. 28, 2013. 

Third Quarter Ended

Sept. 28, 2013

Sept. 29, 2012

Change

Net sales ($B)

$10.2

$9.0

12%

Gross Margin

5.90%

5.02%

88bp

Operating margin

1.36%

1.03%

33bp

Non-GAAP operating margin

1.33%

1.14%

19bp

Earnings per diluted share

$0.50

$0.35

43%

Non-GAAP earnings per diluted share

$0.53

$0.41

29%

A reconciliation of GAAP financial measures to non-GAAP financial measures is presented in the Supplementary Information section in this press release.

"Our focus on execution in the third quarter delivered strong improvements in profitability, as we continued to invest in our strategic objectives," said Alain Monie, Ingram Micro CEO. "Our teams were disciplined in managing growth, which was rewarded with strong year-over-year increases in worldwide gross margin, operating margin and EPS. Consolidated operating margin increased meaningfully over last year, directly benefiting from strong contribution from our acquired mobility business and significant improvements in two businesses that underperformed last year, as Australia made further progress on our goal to exit the year at a profitable run-rate and Brazil delivered good profitability. Our operational and strategic execution continues to build positive momentum in all of the regions and markets we serve, which we expect to accelerate in the typically strong fourth quarter."

Worldwide sales were $10.2 billion, up 12 percent in U.S. dollars, when compared with $9.0 billion in the third quarter last year. The company's 2012 fourth quarter acquisitions of Brightpoint, Inc. (also referred to as the mobility business) and Aptec Holdings Ltd. contributed substantially to the year-over-year revenue growth and the company focused on maintaining pricing discipline in the face of a competitive environment, particularly in North America and Europe.

Worldwide gross profit was $599 million (5.90 percent of total sales), compared with $454 million (5.02 percent of total sales) in the 2012 third quarter. 2013 third quarter gross margin benefited by 63 basis points from the addition of higher gross margin revenue from the company's mobility business, driven largely by its services business.

Operating income was $138 million (1.36 percent of total sales), compared with 2012 third quarter operating income of $93 million (1.03 percent of total sales). 2013 third quarter net income was $79 million, or 50 cents per diluted share. This compares with 2012 third quarter net income of $53 million, or 35 cents per diluted share.     

Non-GAAP operating income for the 2013 third quarter was $135 million (1.33 percent of total sales). This compares with non-GAAP operating income for the 2012 third quarter of $103 million (1.14 percent of total sales).

2013 third quarter non-GAAP net income was $83 million, or 53 cents per diluted share, compared with non-GAAP net income of $62 million, or 41 cents per diluted share, in the 2012 third quarter. 

Non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP earnings per diluted share are non-GAAP financial measures that exclude the amortization of intangible assets, primarily associated with our acquisition of BrightPoint, and charges associated with reorganization, integration and transition costs and expense reduction programs.  For the 2013 third quarter, these non-GAAP financial measures also exclude a benefit related to the receipt of $29.5 million from a LCD flat panel class action settlement and the impact of a $5.0 million reserve recorded for estimated potential charges related to indirect tax declarations in Europe. Non-GAAP net income and non-GAAP earnings per diluted share also exclude the impact of foreign exchange gains or losses related to the translation effect on Euro-based inventory purchases in Ingram Micro's pan-European entity and a discrete tax benefit recognized in the first quarter of 2012 associated with the write-off of the historical tax basis of the investment we had maintained in one of our Latin American subsidiary holding companies. These non-GAAP financial measures are reconciled to their most directly comparable GAAP measures in the Supplementary Information section of this release.  

Further detail can be found in the financial statements and schedules attached to this news release or at www.ingrammicro.com.

Key 2013 third quarter business highlights:

  • The company's mobility business was accretive to 2013 third quarter non-GAAP earnings per diluted share by 7 cents, bringing total accretion from the mobility business for the nine months ended September 28, 2013 to 24 cents.  The company remains confident it will achieve its objective of 34 cents in accretion to 2013 full year non-GAAP earnings per diluted share.
  • Ingram Micro Mobility announced several new logistics services and distribution agreements with leading companies and OEMs, including Telecom New Zealand and BuyCell Wireless Group.
  • Ingram Micro Mobility also signed a distribution agreement with a leading mobility OEM for several European countries.
  • The company enhanced its cloud offerings and aggregation platform with the acquisition of SoftCom Inc.
  • Following the close of the quarter, the company expanded its supply chain capabilities and solutions offerings with the acquisition of CloudBlue Technologies, Inc., adding global enterprise IT asset disposition, onsite data destruction and e-waste recycling services for large enterprise customers, retail customers and OEMs.
  • The company launched at the end of the third quarter its new mobility business unit in Latin America.
  • Australia's revenue grew for the third quarter in a row and the country reduced its operating loss to less than $2 million, an improvement from the operating loss of $9 million in last year's third quarter and the operating loss of approximately $3 million in the 2013 second quarter. 
  • The company launched and started transacting in the third quarter its data capture/point of sale business in South Africa.
  • Ingram Micro Logistics signed four new customers during the quarter.
  • Promark announced the addition of several new vendors to its General Services Administration (GSA) schedule, including Panasonic, Falconstor, Jabra and Whiptail.

Outlook  

For the 2013 fourth quarter, the company currently expects gross margin to be up sequentially by high single digit basis points and worldwide revenue to increase over the 2013 third quarter in-line with historical seasonality.

Conference Call and Webcast

Additional information about Ingram Micro's financial results will be presented in a conference call with presentation slides today at 5 p.m. ET.  To listen to the conference call webcast and view the accompanying presentation slides, visit the company's website at www.ingrammicro.com (Investor Relations section). The conference call is also accessible by telephone at (888) 401-4668 (toll-free within the United States and Canada) or (719) 325-2463 (other countries), passcode "7850367."

The replay of the conference call with presentation slides will be available for one week at www.ingrammicro.com (Investor Relations section) or by calling (888) 203-1112 or (719) 457-0820 outside the United States and Canada, passcode "7850367."

About Ingram Micro Inc.

Ingram Micro is the world's largest wholesale technology distributor and a global leader in IT supply-chain, mobile device lifecycle services and logistics solutions. As a vital link in the technology value chain, Ingram Micro creates sales and profitability opportunities for vendors and resellers through unique marketing programs, outsourced logistics and mobile solutions, technical support, financial services and product aggregation and distribution. The company is the only global broad-based IT distributor, serving approximately 160 countries on six continents with the world's most comprehensive portfolio of IT products and services. Visit www.ingrammicro.com.

Cautionary Statement for the Purpose of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 The matters in this press release that are forward-looking statements, including statements relating to the expected benefits of acquisitions and the financial performance of the combined company, are based on current management expectations. Certain risks may cause such expectations to not be achieved and, in turn, may have a material adverse effect on Ingram Micro's business, financial condition and results of operations. Ingram Micro disclaims any duty to update any forward-looking statements. Important risk factors that could cause actual results to differ materially from those discussed in the forward-looking statements include, without limitation: (1) we have made and expect to continue to make investments in new businesses and initiatives, including acquisitions, which could disrupt our business and have an adverse effect on our operating results; (2) we are dependent on a variety of information systems, which, if not properly functioning, or unavailable, or if we experience system security breaches, data protection breaches or other cyber-attacks, could adversely disrupt our business and harm our reputation and earnings; (3) changes in macro-economic conditions may negatively impact a number of risk factors which, individually or in the aggregate, could adversely affect our results of operations, financial condition and cash flows; (4) we continually experience intense competition across all markets for our products and services; (5) we operate a global business that exposes us to risks associated with conducting business in multiple jurisdictions; (6) our failure to adequately adapt to IT industry changes could negatively impact our future operating results; (7) terminations of a supply or services agreement or a significant change in supplier terms or conditions of sale could negatively affect our operating margins, revenue or the level of capital required to fund our operations; (8) substantial defaults by our customers or the loss of significant customers could have a negative impact on our business, results of operations, financial condition or liquidity; (9) changes in, or interpretations of, tax rules and regulations, changes in the mix of our business amongst different tax jurisdictions, and deterioration of the performance of our business may adversely affect our effective income tax rates or operating margins and we may be required to pay additional taxes and/or tax assessments, as well as record valuation allowances relating to our deferred tax assets; (10) changes in our credit rating or other market factors such as adverse capital and credit market conditions or reductions in cash flow from operations may affect our ability to meet liquidity needs, reduce access to capital, and/or increase our costs of borrowing; (11) failure to retain and recruit key personnel would harm our ability to meet key objectives; (12) we cannot predict with certainty what losses we may incur as a result of litigation matters and contingencies that we may be involved with from time to time; (13) we may incur material litigation, regulatory or operational costs or expenses, and may be frustrated in our marketing efforts, as a result of environmental regulations or private intellectual property enforcement disputes; (14) we face a variety of risks in our reliance on third-party service companies, including shipping companies for the delivery of our products and outsourcing arrangements; (15) changes in accounting rules could adversely affect our future operating results; and (16) our quarterly results have fluctuated significantly.  We also face a variety of risks associated with our acquisitions and any other acquisitions we may make, including: management's ability to execute its plans, strategies and objectives for future operations, including the execution of integration plans, and to realize the expected benefits of our acquisitions; growth of the mobility industry, the government contracts business, and in new and untapped markets in geographies outside the U.S.; and other uncertainties or unknown, underestimated and/or undisclosed commitments or liabilities; and our ability to achieve the expected benefits and manage the costs of the integrations of our acquisitions.

Ingram Micro has instituted in the past and continues to institute changes to its strategies, operations and processes to address these risk factors and seek to mitigate their impact on Ingram Micro's results of operations and financial condition. However, no assurances can be given that Ingram Micro will be successful in these efforts. For a further discussion of significant factors to consider in connection with forward-looking statements concerning Ingram Micro, reference is made to Item 1A Risk Factors of Ingram Micro's Annual Report on Form 10-K for the fiscal year ended Dec. 29, 2012; other risks or uncertainties may be detailed from time to time in Ingram Micro's future SEC filings.

© 2013 Ingram Micro Inc.  All rights reserved. Ingram Micro and the registered Ingram Micro logo are trademarks used under license by Ingram Micro Inc.

 

Ingram Micro Inc.

Consolidated Balance Sheet

(Amounts in 000s)

(Unaudited)

September 28,

December 29,

2013

2012

ASSETS

Current assets:

   Cash and cash equivalents

$        501,626

$       595,147

   Trade accounts receivable, net

4,385,030

5,457,299

   Inventory

3,766,749

3,591,543

   Other current assets

535,242

522,390

      Total current assets

9,188,647

10,166,379

Property and equipment, net

480,406

481,324

Goodwill

439,866

428,401

Intangible assets, net

350,169

372,482

Other assets

22,591

31,862

   Total assets

$    10,481,679

$  11,480,448

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

   Accounts payable

$     5,060,364

$    6,065,159

   Accrued expenses

569,031

585,404

   Short-term debt and current maturities of long-term debt

77,161

111,268

      Total current liabilities

5,706,556

6,761,831

Long-term debt, less current maturities

813,403

943,275

Other liabilities

140,936

164,089

   Total liabilities

6,660,895

7,869,195

Stockholders' equity

3,820,784

3,611,253

   Total liabilities and stockholders' equity

$    10,481,679

$  11,480,448

 

 

 

Ingram Micro Inc.

Consolidated Statement of Income

(Amounts in 000s, except per share data)

(Unaudited)

Thirteen Weeks Ended

September 28, 2013

September 29, 2012

Net sales

$            10,150,615

$              9,034,141

Cost of sales

9,551,782

8,580,249

Gross profit

598,833

453,892

Operating expenses:

Selling, general and administrative

442,756

353,429

Amortization of intangible assets

11,638

2,546

Reorganization costs 

6,748

5,268

461,142

361,243

Income from operations

137,691

92,649

Interest and other:

Interest income

(2,031)

(1,445)

Interest expense

16,032

14,946

Net foreign currency exchange loss

8,117

2,204

Other

2,070

1,918

24,188

17,623

Income before income taxes

113,503

75,026

Provision for income taxes

34,565

21,715

Net income

$                  78,938

$                  53,311

Diluted earnings per share

$                      0.50

$                      0.35

Diluted weighted average shares outstanding

157,144

152,816

 

 

Ingram Micro Inc.

Consolidated Statement of Income

(Amounts in 000s, except per share data)

(Unaudited)

Thirty-nine Weeks Ended

September 28, 2013

September 29, 2012

Net sales

$            30,721,074

$            26,447,417

Cost of sales

28,941,182

25,073,238

Gross profit

1,779,892

1,374,179

Operating expenses:

Selling, general and administrative

1,382,159

1,064,853

Amortization of intangible assets

35,400

8,177

Reorganization costs 

20,050

6,664

1,437,609

1,079,694

Income from operations

342,283

294,485

Interest and other:

Interest income

(5,886)

(7,411)

Interest expense

45,973

38,252

Net foreign currency exchange loss 

9,865

9,564

Other

9,150

7,006

59,102

47,411

Income before income taxes

283,181

247,074

Provision for income taxes

84,798

42,516

Net income

$                198,383

$                204,558

Diluted earnings per share

$                      1.27

$                      1.33

Diluted weighted average shares outstanding

155,629

153,871

 

 

Ingram Micro Inc.

Consolidated Statement of Cash Flows

(Amounts in 000s)

(Unaudited)

Thirty-nine Weeks Ended

September 28, 2013

September 29, 2012

Cash flows from operating activities:

Net income

$                198,383

$                  204,558

 Adjustments to reconcile net income to cash provided (used) by operating activities:

Depreciation and amortization

94,359

41,791

Stock-based compensation 

21,649

21,815

Excess tax benefit from stock-based compensation

(1,787)

(5,197)

Loss on disposal of property and equipment

5,875

-

Gain on sale of land and building

(1,045)

-

Noncash charges for interest and bond discount amortization

1,842

1,449

Deferred income taxes

10,154

18,648

Changes in operating assets and liabilities:

Trade accounts receivable

1,010,692

704,089

Inventory

(199,279)

(386,598)

Other current assets

(42,667)

(42,729)

Accounts payable

(1,005,513)

(516,019)

Change in book overdrafts

53,840

17,233

Accrued expenses

(33,102)

(93,956)

Cash provided (used) by operating activities

113,401

(34,916)

Cash flows from investing activities:

Capital expenditures

(66,423)

(64,606)

Sales of marketable trading securities, net

542

935

Proceeds from sale of land and building

1,169

-

Acquisition and earn-out payments, net of cash acquired

(14,408)

(338)

Cash used by investing activities

(79,120)

(64,009)

Cash flows from financing activities:

Proceeds from exercise of stock options

39,517

29,331

Repurchase of Class A Common Stock

-

(50,000)

Excess tax benefit from stock-based compensation

1,787

5,197

Net proceeds from issuance of senior unsecured notes

-

296,256

Fees associated with the amendment and extension of credit facilities

(1,086)

-

Net proceeds from (repayments of) revolving credit facilities

(155,272)

79,561

Cash provided (used) by financing activities

(115,054)

360,345

Effect of exchange rate changes on cash and cash equivalents

(12,748)

3,253

Increase (decrease) in cash and cash equivalents

(93,521)

264,673

Cash and cash equivalents, beginning of period

595,147

891,403

Cash and cash equivalents, end of period

$                501,626

$              1,156,076

 

 

Ingram Micro Inc.

Supplementary Information

Income from Operations - Reconciliation of GAAP to Non-GAAP Information

(Amounts in Millions)

(Unaudited)

Thirteen Weeks Ended September 28, 2013

North America

Europe

Asia-Pacific

Latin America

Brightpoint

Stock-based

compensation

Consolidated

Total

Net Sales

$         4,061.8

$2,428.3

$    2,150.2

$           448.6

$   1,061.7

$                -

$     10,150.6

GAAP Operating Income

$             97.7

$      4.9

$         22.4

$              9.6

$        10.7

$             (7.7)

$         137.7

Reorganization, integration and transition costs

3.0

3.7

0.4

-

3.6

-

10.6

Amortization of intangible assets

1.8

0.5

0.2

0.2

8.9

-

11.6

LCD class action settlement

(28.5)

-

-

(1.0)

-

-

(29.5)

European indirect tax declarations charge

-

5.0

-

-

-

-

5.0

Non-GAAP Operating Income

$             74.0

$     14.0

$         23.0

$              8.9

$        23.2

$             (7.7)

$         135.4

GAAP Operating Margin

2.41%

0.20%

1.04%

2.15%

1.01%

1.36%

Non-GAAP Operating Margin

1.82%

0.58%

1.07%

1.97%

2.19%

1.33%

Thirteen Weeks Ended September 29, 2012

North America

Europe

Asia-Pacific

Latin America

Brightpoint

Stock-based

compensation

Consolidated

Total

Net Sales

$         3,972.2

$2,420.4

$    2,174.4

$           467.1

$           -

$                -

$      9,034.1

GAAP Operating Income

$             66.9

$     14.5

$          9.2

$              9.3

$           -

$             (7.2)

$           92.6

Reorganization, integration and transition costs

2.2

1.6

3.8

(0.0)

-

-

7.5

Amortization of intangible assets

1.6

0.5

0.1

0.2

-

-

2.5

Non-GAAP Operating Income

$             70.8

$     16.6

$         13.2

$              9.5

$           -

$             (7.2)

$         102.7

GAAP Operating Margin

1.69%

0.60%

0.42%

1.98%

1.03%

Non-GAAP Operating Margin

1.78%

0.69%

0.61%

2.03%

1.14%

 

 

Ingram Micro Inc.

Supplementary Information

Income from Operations - Reconciliation of GAAP to Non-GAAP Information

(Amounts in Millions)

(Unaudited)

Thirty-nine Weeks Ended September 28, 2013

North America

Europe

Asia-Pacific

Latin America

Brightpoint

Stock-based

compensation

Consolidated

Total

Net Sales

$         11,968.6

$7,527.7

$      6,475.4

$          1,370.4

$     3,378.9

$                -

$       30,721.1

GAAP Operating Income

$             219.2

$     31.5

$           55.3

$               24.7

$          33.2

$              (21.6)

$           342.3

Reorganization, integration and transition costs

6.8

6.6

4.0

-

17.0

-

34.4

Amortization of intangible assets

5.4

1.5

0.6

0.7

27.3

-

35.4

LCD class action settlement

(28.5)

-

-

(1.0)

-

-

(29.5)

European indirect tax declarations charge

-

5.0

-

-

-

-

5.0

Non-GAAP Operating Income

$             202.9

$     44.7

$           60.0

$               24.3

$          77.4

$              (21.6)

$           387.6

GAAP Operating Margin

1.83%

0.42%

0.85%

1.80%

0.98%

1.11%

Non-GAAP Operating Margin

1.70%

0.59%

0.93%

1.78%

2.29%

1.26%

 Thirty-nine Weeks Ended September 29, 2012 

 North America 

 Europe 

 Asia-Pacific 

 Latin America 

 Brightpoint 

Stock-based compensation 

Consolidated Total 

Net Sales

$         11,416.4

$7,527.6

$      6,162.3

$          1,341.1

$             -

$                 -

$       26,447.4

GAAP Operating Income

$             205.3

$     51.4

$           38.4

$               21.1

$             -

$              (21.8)

$           294.5

Reorganization, integration and transition costs

8.6

2.2

4.3

2.3

-

-

17.4

Amortization of intangible assets

5.0

1.6

0.9

0.7

-

-

8.2

Non-GAAP Operating Income

$             218.9

$     55.3

$           43.6

$               24.1

$             -

$              (21.8)

$           320.1

GAAP Operating Margin

1.80%

0.68%

0.62%

1.58%

1.11%

Non-GAAP Operating Margin

1.92%

0.73%

0.71%

1.80%

1.21%

 

Ingram Micro Inc.

Supplementary Information

Reconciliation of GAAP to Non-GAAP Financial Measures

(Amounts in Millions, except per share data)

(Unaudited)

Thirteen Weeks Ended September 28, 2013

Net Income

Diluted

Earnings per Share (a)

As Reported Under GAAP

$                         78.9

$                         0.50

Reorganization, integration and transition costs

7.4

0.05

Amortization of intangible assets

8.1

0.05

Pan-Europe foreign exchange loss

3.2

0.02

LCD class action settlement

(18.0)

(0.11)

European indirect tax declarations charge

3.5

0.02

Non-GAAP Financial Measure

$                         83.1

$                         0.53

Thirteen Weeks Ended September 29, 2012

Net Income

Diluted

Earnings per Share (a)

As Reported Under GAAP

$                         53.3

$                         0.35

Reorganization, integration and transition costs

5.2

0.03

Amortization of intangible assets

1.8

0.01

Pan-Europe foreign exchange loss

2.0

0.01

Non-GAAP Financial Measure

$                         62.2

$                         0.41

(a)

Per share impact is calculated by dividing net income amount by the diluted weighted average shares outstanding of 157,144 and 152,816 for the thirteen weeks ended September 28, 2013 and September 29, 2012, respectively.

 

Ingram Micro Inc.

Supplementary Information

Reconciliation of GAAP to Non-GAAP Financial Measures

(Amounts in Millions, except per share data)

(Unaudited)

Thirty-nine Weeks Ended September 28, 2013

Net Income

Diluted

Earnings per Share (a)

As Reported Under GAAP

$                       198.4

$                         1.27

Reorganization, integration and transition costs

24.1

0.16

Amortization of intangible assets

24.8

0.16

Pan-Europe foreign exchange loss

0.7

0.00

LCD class action settlement

(18.0)

(0.11)

European indirect tax declarations charge

3.5

0.02

Non-GAAP Financial Measure

$                       233.5

$                         1.50

 Thirty-nine Weeks Ended September 29, 2012 

 Net Income 

Diluted

 Earnings per Share (a) 

As Reported Under GAAP

$                       204.6

$                         1.33

Reorganization, integration and transition costs

14.4

0.09

Amortization of intangible assets

6.8

0.04

Pan-Europe foreign exchange loss

4.9

0.03

Discrete tax items (b)

(34.6)

(0.22)

Non-GAAP Financial Measure

$                       196.1

$                         1.27

(a)

Per share impact is calculated by dividing net income amount by the diluted weighted average shares outstanding of 155,629 and 153,871 for the thirty-nine weeks ended September 28, 2013 and September 29, 2012, respectively.

(b)

Reflects a net discrete benefit primarily related to the write-off of the historical tax basis of the investment we have maintained in one of our Latin American subsidiary holding companies, realized during the period.

 

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SOURCE Ingram Micro Inc.



RELATED LINKS

http://www.ingrammicro.com