Ingram Micro Reports 2012 Third Quarter Financial Results

Global Reach and Broad Product Portfolio Help Drive Revenue Growth in All Regions in Local Currencies

SANTA ANA, Calif.,Oct. 25, 2012/PRNewswire/ — Ingram Micro Inc.(NYSE: IM), the world’s largest wholesale technology distributor and a global leader in IT supply-chain, mobile device lifecycle services and logistics solutions, today announced financial results for the third quarter endedSeptember 29, 2012.

Worldwide sales of$9.03 billionwere up 1 percent in U.S. dollars when compared with$8.90 billionin the third quarter last year. The translation effect of foreign currencies had a negative impact of 5 percent on worldwide sales growth as compared with the prior year. The company experienced strong operating leverage with operating income increasing by more than 8 percent to$92.6 million, which includes$7.6 millionin restructuring and acquisition-related costs as discussed below, when compared to 2011 third quarter operating income of$85.4 million.

Worldwide gross profit was$453.9 million(5.02 percent of total sales), compared with$440.7 million(4.95 percent of total sales) in the 2011 third quarter. Gross profit as a percentage of revenue was up modestly from the prior year period due primarily to double digit sales growth inNorth Americain the company’s higher margin specialty business and in Ingram Micro Logistics. However, 2012 third quarter gross profit continues to be negatively impacted by significant sales growth in tablets and other personal devices, the majority of which are delivered to the market in a high velocity, yet lower cost to serve, fulfillment model, as well as a continued competitive selling environment, particularly in more commoditized product lines.

2012 third quarter net income was$53.3 million, or35 centsper diluted share, which includes an aggregate net negative impact of5 centsper diluted share for the following items:

  • A negative impact totaling approximately$5.3 millionpretax, or3 centsper diluted share, primarily related to restructuring inAustralia,New Zealandand inEurope. In conjunction with these cost cutting actions, the company has also expanded its capabilities in lower cost shared services centers serving each region. The combination of these actions taken in the third quarter are expected to result in annualized cost savings of more than$10 millionin 2013, more than half of which will benefitAustralia’s operating expense run rate;
  • A negative impact from acquisition costs totaling approximately$2.3 millionpretax, or1 centper diluted share, consisting primarily of legal and other consultative services, associated with the acquisition ofBrightpoint, Inc.; and
  • A negative impact from a net loss of$2.8 millionpretax, or1 centper diluted share, due to the foreign-currency translation impact on Euro-based inventory purchases in the company’s pan-European purchasing entity, which designatesthe United Statesdollar as its functional currency.

2011 third quarter net income was$23.3 million, or15 centsper diluted share, which included charges totaling$28.8 million, or18 centsper diluted share, comprised of: a non-cash valuation allowance of$24.8 millionrecorded against the company’s deferred tax assets inBraziland a charge of$4.0 millionafter tax related primarily to the termination of the company’s interest rate swap associated with the repayment of its term loan in September 2011.

 

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

 

Key 2012 third quarter highlights:

  • North America’s sales grew by 5 percent, increasing year-over-year for the 11th consecutive quarter, driven by growth in all U.S. divisions, including solid growth in the U.S. broadline business, as well as double-digit increases in the higher margin businesses of DBL, physical security and Ingram Micro Logistics. While growing share, the Canadian business declined modestly when compared to the 2011 third quarter, primarily due to soft market conditions and the non-recurrence of a special promotional program by a large vendor that drove strong Canadian sales last year.
  • Latin Americadelivered all-time record third quarter revenues, growing sales 11 percent in U.S. dollars versus the prior year period, despite foreign exchange headwinds of 8 percent.
  • Asia Pacificperformed well, as the two largest contributors –ChinaandIndia– each delivered double-digit growth in local currencies. Total sales for the region were up 6 percent in U.S. dollars and 10 percent in local currencies.
  • InEurope, the company’s three anchor countries ofGermany, theUKandFranceall experienced solid year-over-year sales growth in local currencies, offset somewhat by continued weakness in other countries as the region as a whole continues to experience challenging economic conditions. Although 2012 third quarter sales forEuropewere down in U.S. dollars by 9 percent, sales grew by 1 percent in local currencies.
  • During the third quarter, the company issued a 10-year,$300 millionbond with a 5 percent annual coupon. The bridge financing commitment letter entered into onJune 29, 2012was automatically terminated when these bonds were issued.
  • Working capital days were 26, within the company’s targeted range of 22 to 26 days.

The Company also completed the following acquisitions at the beginning of the fourth quarter in support of its long-term growth strategy to expand the company’s business in high growth markets, while increasing its services and solutions capabilities:

  • OnOctober 15, 2012,Ingram Microclosed the BrightPoint acquisition and established itself as a leading global provider of device lifecycle services and solutions for the mobile industry; and
  • The company broadened its geographic reach into theMiddle EastandNorth Africawith the acquisition of certain IT businesses ofDubai-basedAptec Holdings Ltd, a leading value-added distributor in theMiddle EastandAfrica, with products and solutions covering data center, storage, security, networking and software categories, including technical services.

“It is clear that the macroeconomic environment and mid-term perspective are difficult, however, we executed well during the quarter, with every region growing revenues in local currencies,” saidAlain Monie, president and chief executive officer,Ingram Micro Inc.”We also experienced excellent leverage in the model with overall operating income increasing by more than 8 percent on 1 percent revenue growth.”

“Our position as the world’s largest technology distributor provides valuable differentiation, giving us the ability to execute on our financial objectives despite challenging conditions,” Monie said. “Our industry-leading reach covers more than 145 countries with the world’s most comprehensive portfolio of IT products and services, which enables us to capture revenue opportunities in better performing regions such asAsia PacificandLatin Americaand in markets including SMB and certain retail and e-tail segments that many others cannot serve. This global reach and broad portfolio of IT products and services make us a highly attractive partner for vendors and customer alike.”

“In addition to our financial execution,” Monie continued, “we are also executing on several of our stated strategic initiatives: building out our mobility business through adding scale and high value services with BrightPoint, while also expanding our reach into theMiddle EastandAfricawith Aptec, all of which provide our vendor partners and customers even broader integrated IT/mobility offerings and a truly global platform.”

Bill Humes, chief operating and financial officer, commented: “We believe the combination of our recent acquisitions and our ongoing organic investments back into the business will ultimately benefit the company through a higher mix of faster growing markets – both geographic and product related – and the ability to offer higher margin products and services. To help facilitate these strategic initiatives, we continue to take what we believe are prudent and appropriate steps to provide a solid capital structure through a combination of cash, public debt and bank facilities. Our primary goal is to drive sustainable, long-term shareholder value, and we are taking the appropriate steps to do so.”

 

Nine-Month Period
For the nine months endedSeptember 29, 2012, worldwide sales were$26.45 billion, with gross profit of$1.37 billion (5.20 percent of total sales), compared with worldwide sales of$26.38 billion, with gross profit of$1.35 million (5.13 percent of total sales) for last year’s nine-month period.  Nine-month net income for 2012 was$205 million, or$1.33 per diluted share, versus$139 million, or86 cents per diluted share, for the 2011 nine-month period.

 

Outlook 
For the traditionalIngram Micro business, the Company currently expects 2012 fourth quarter sales to be relatively flat with the 2011 fourth quarter. While remaining under pressure, 2012 fourth quarter gross margin is expected to increase sequentially over the 2012 third quarter in-line with historic seasonality, although the company will not have the gross margin uplift from higher hard disk drive pricing that benefited the 2011 fourth quarter. For BrightPoint, October is typically one of the strongest months of the year, as customers stock up for the holiday selling season. Given that 2012 fourth quarter financial results will only include a stub period for BrightPoint that excludes the first half of October, the company currently expects BrightPoint to contribute around$900 million in sales and to be breakeven to slightly accretive to earnings per share in the 2012 fourth quarter, including an estimate of$9 million in quarterly amortization of intangibles related to the BrightPoint acquisition, but excluding one-time charges and integration costs.

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) 710-4011 (toll-free withinthe United States andCanada) or (913) 312-1466 (other countries), passcode “8549320.”

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 outsidethe United States andCanada, passcode “8549320.”

 

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 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, 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 loss we might 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 recently completed acquisition of Brightpoint, Inc., including: management’s ability to execute its plans, strategies and objectives for future operations, including the execution of integration plans; growth of the mobility industry; uncertainties relating to litigation; and other unknown, underestimated and/or undisclosed commitments or liabilities; and our ability to achieve the expected benefits and manage the costs of the transaction.

Ingram Micro has instituted in the past and continues to institute changes to its strategies, operations and processes to address these risk factors and 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 December 31, 2011 and Form 10-Q for the fiscal quarter ended June 30, 2012; other risks or uncertainties may be detailed from time to time in Ingram Micro’s future SEC filings.

 

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 145 countries on six continents with the world’s most comprehensive portfolio of IT products and services. Visit www.ingrammicro.com.

© 2012Ingram Micro Inc. All rights reserved.Ingram Microand the registeredIngram Micrologo are trademarks used under license byIngram Micro Inc.

 

 

Ingram Micro Inc.
Consolidated Balance Sheet
(Amounts in 000s)
(Unaudited)
September 29, December 31,
2012 2011
ASSETS
Current assets:
Cash and cash equivalents $                        1,156,076 $                          891,403
Trade accounts receivable, net 3,784,098 4,465,329
Inventory 3,338,513 2,942,164
Other current assets 363,417 319,506
Total current assets 8,642,104 8,618,402
Property and equipment, net 353,353 323,261
Intangible assets, net 65,374 73,330
Other assets 133,755 131,523
Total assets $                        9,194,586 $                        9,146,516
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $                        4,411,990 $                        4,893,437
Accrued expenses 441,024 524,010
Short-term debt and current maturities of long-term debt 159,979 92,428
Total current liabilities 5,012,993 5,509,875
Long-term debt, less current maturities 610,693 300,000
Other liabilities 83,051 63,864
Total liabilities 5,706,737 5,873,739
Stockholders’ equity 3,487,849 3,272,777
Total liabilities and stockholders’ equity $                        9,194,586 $                        9,146,516

 

Ingram Micro Inc.
Consolidated Statement of Income
(Amounts in 000s, except per share data)
(Unaudited)
Thirteen Weeks Ended
September 29, 2012 October 1, 2011
Net sales $                        9,034,141 $                        8,903,020
Cost of sales 8,580,249 8,462,300
Gross profit 453,892 440,720
Operating expenses:
Selling, general and administrative 355,975 354,185
Reorganization costs 5,268 1,156
361,243 355,341
Income from operations 92,649 85,379
Interest and other:
Interest income (1,445) (1,432)
Interest expense 14,946 13,048
Net foreign currency exchange loss (gain) 2,204 (1,348)
Loss from settlement of interest rate swap
      and senior unsecured term loan 5,624
Other 1,918 2,393
17,623 18,285
Income before income taxes 75,026 67,094
Provision for income taxes 21,715 43,768
Net income $                            53,311 $                            23,326
Diluted earnings per share $                                0.35 $                                0.15
Diluted weighted average
shares outstanding 152,816 156,767

 

Ingram Micro Inc.
Consolidated Statement of Income
(Amounts in 000s, except per share data)
(Unaudited)
Thirty-nine Weeks Ended
September 29, 2012 October 1, 2011
Net sales $                      26,447,417 $                      26,375,757
Cost of sales 25,073,238 25,021,733
Gross profit 1,374,179 1,354,024
Operating expenses:
Selling, general and administrative 1,073,030 1,070,556
Reorganization costs 6,664 887
1,079,694 1,071,443
Income from operations 294,485 282,581
Interest and other:
Interest income (7,411) (4,056)
Interest expense 38,252 40,561
Net foreign currency exchange loss (gain) 9,564 (1,313)
Loss from settlement of interest rate swap
      and senior unsecured term loan 5,624
Other 7,006 9,444
47,411 50,260
Income before income taxes 247,074 232,321
Provision for income taxes 42,516 92,954
Net income $                          204,558 $                          139,367
Diluted earnings per share $                                1.33 $                                0.86
Diluted weighted average
shares outstanding 153,871 161,543

 

Ingram Micro Inc.
Supplementary Information
Income from Operations
(Amounts in 000s)
(Unaudited)
Thirteen Weeks Ended September 29, 2012
Operating Operating
Net Sales Income  Margin
North America $           3,972,208 $                66,935 1.69%
Europe 2,420,425 14,498 0.60%
Asia-Pacific 2,174,409 9,193 0.42%
Latin America 467,099 9,263 1.98%
Stock-based compensation expense (7,240)
Consolidated Total $           9,034,141 $                92,649 1.03%
Thirteen Weeks Ended October 1, 2011
Operating Operating
Net Sales Income Margin
North America $           3,769,733 $                64,247 1.70%
Europe 2,653,054 16,198 0.61%
Asia-Pacific 2,059,944 7,773 0.38%
Latin America 420,289 6,241 1.48%
Stock-based compensation expense (9,080)
Consolidated Total $           8,903,020 $                85,379 0.96%

 

Ingram Micro Inc.
Supplementary Information
Income from Operations
(Amounts in 000s)
(Unaudited)
Thirty-nine Weeks Ended September 29, 2012
Operating Operating
Net Sales Income Margin
North America $          11,416,399 $              205,313 1.80%
Europe 7,527,622 51,412 0.68%
Asia-Pacific 6,162,273 38,447 0.62%
Latin America 1,341,123 21,128 1.58%
Stock-based compensation expense (21,815)
Consolidated Total $          26,447,417 $              294,485 1.11%
Thirty-nine Weeks Ended October 1, 2011
Operating Operating
Net Sales Income Margin
North America $          11,036,595 $              190,984 1.73%
Europe 8,169,408 65,195 0.80%
Asia-Pacific 5,955,784 32,482 0.55%
Latin America 1,213,970 18,988 1.56%
Stock-based compensation expense (25,068)
Consolidated Total $          26,375,757 $              282,581 1.07%

SOURCEIngram Micro Inc.

Investors, Damon Wright, +1-714-382-5013, damon.wright@ingrammicro.com, or Media, Lisa Zwick, +1-949-230-8794, lisa.zwick@ingrammicro.com