Sequential Sales Increase 12% to $7.4 Billion Operating Income, EPS
Improve Over Prior Two Quarters SANTA ANA, Calif., Oct. 29
/PRNewswire-FirstCall/ -- Ingram Micro Inc. (NYSE:IM), the world's
largest technology distributor, today announced financial results
for the third quarter of 2009, ended October 3, 2009. "An improving
demand environment, stronger foreign currencies and our proactive
efforts to engage our customers yielded solid results this
quarter," said Gregory Spierkel, chief executive officer. "Our
progress stems from a number of global and country-specific
initiatives aimed at strengthening reseller and vendor
relationships, making it easier and more valuable to do business
with us. We are focusing on top-line growth while managing gross
margins, operating expenses and working capital to drive operating
leverage." Worldwide sales for the 2009 third quarter were $7.38
billion, an 11 percent decrease from $8.28 billion in the 2008
third quarter, primarily reflecting the ongoing soft economic
environment. On a sequential basis, worldwide sales increased 12
percent from the 2009 second quarter. The translation impact of
foreign currencies had an approximate three percent negative effect
on the year-over-year comparison and a three percent positive
impact on the sequential quarterly comparison. Net income for the
2009 third quarter was $42.3 million, or $0.25 per diluted share,
which includes costs of approximately $0.04 per diluted share
related to expense-reduction programs. In the 2008 third quarter,
net income was $46.4 million, or $0.27 per diluted share, which
also included $0.02 per diluted share of costs related to
expense-reduction programs. "I'm especially pleased with our
progress toward greater profitability over the last few months,"
added Spierkel. "Sequential growth was the greatest in nine years,
despite the third quarter's typical weakness due to seasonality.
Operating income and earnings per share hit the year's highest
levels, leveraging a more streamlined infrastructure. We held the
line on costs, reducing operating expenses compared to second
quarter despite the better-than-seasonal increase in sales. Gross
margin declined sequentially from its six-year high in the second
quarter, as expected, but it was near prior-year levels. There is
more room to improve, but our initiatives over the past four
quarters are clearly delivering results." Additional Third Quarter
Highlights For additional detail regarding the results outlined
below, please refer to the financial statements and schedules
attached to this news release or visit http://www.ingrammicro.com/
. Regional Sales: Compared to the prior year, third-quarter sales
continue to be impacted by the weakened global economies coupled
with internal efforts to adjust the business mix toward more
profitable accounts. On a sequential basis, however, sales in every
region performed better than historical seasonal norms due to a
more favorable demand environment, the translation impact of
stronger foreign currencies, and our efforts to expand market
opportunities. -- North America sales were $3.22 billion (44
percent of total sales) versus $3.59 billion reported a year ago,
reflecting a 10 percent decrease. On a sequential basis, North
American sales increased 17 percent. -- Sales in the EMEA region
were $2.15 billion (29 percent of total sales) versus $2.57 billion
in the prior-year quarter, a decrease of 16 percent. The
translation impact of relatively weaker European currencies had a
negative impact on prior-year comparisons of approximately six
percentage points. -- Asia-Pacific sales were $1.64 billion (22
percent of total sales) versus $1.70 billion reported in the third
quarter of 2008. The 4 percent sales decrease reflects the negative
translation impact of regional currencies of approximately five
percentage points. -- Latin America sales were $373 million (5
percent of total sales) versus $430 million reported a year ago.
Nearly all of the 13 percent decrease compared to the prior-year
period is due to the negative translation impact of relatively
weaker regional currencies. Gross margin Gross margin in the 2009
third quarter was 5.44 percent, a decrease of 3 basis points from
5.47 percent in the 2008 third quarter. Pricing conditions remain
competitive but stable, considering the economic situation in most
countries. Operating expenses Total operating expenses declined 11
percent to $338.7 million (4.59 percent of total sales), which
included $8.4 million (0.11 percent of total sales) in costs
associated with the company's expense-reduction programs. In the
year-ago quarter, operating expenses were $380.4 million (4.59
percent of total sales) which included $4.1 million (0.05 percent
of total sales) in expense-reduction program costs. The translation
impact of relatively weaker foreign currencies contributed
approximately $12 million to the overall year-over-year decline in
operating expenses. Operating income Worldwide operating income was
$63.2 million (0.86 percent of total sales), which included $8.4
million (0.11 percent of sales) in expense-reduction program costs,
as noted above. In the prior-year quarter, operating income was
$72.5 million (0.87 percent of total sales), which included $4.1
million (0.05 percent of total sales) in expense-reduction program
costs. -- North America operating income was $30.4 million (0.94
percent of North America sales), which included $7.1 million (0.22
percent of sales) in expense-reduction program costs. In the
year-ago quarter, operating income was $45.5 million (1.27 percent
of sales), which included $0.7 million (0.02 percent of sales) in
expense-reduction program costs. -- EMEA operating income was $13.6
million (0.63 percent of EMEA sales), which included $0.6 million
(0.03 percent of sales) in expense-reduction program costs. In the
year-ago quarter, the region recorded an operating loss of $4.7
million (0.18 percent of sales), which included $3.1 million (0.12
percent of sales) in expense-reduction program costs. The
81-basis-point improvement in operating income was primarily
attributable to greater market stability in certain countries and
the benefits of the region's cost containment programs. --
Asia-Pacific operating income was $21.4 million (1.31 percent of
Asia-Pacific sales), which included $0.7 million (0.04 percent of
sales) in expense-reduction program costs, compared with operating
income of $25.4 million (1.49 percent of sales) in the year-ago
quarter, which included $0.3 million (0.02 percent of sales) in
expense-reduction program costs. The year-over-year decline in
operating income is primarily attributable to changes in the
product and geographic mix. -- Latin America operating income was
$4.7 million (1.27 percent of Latin America sales), compared with
$6.6 million (1.54 percent of sales) in the same period last year.
Adjusting to new tax regulations and business-mix changes in Brazil
caused most of the year-over-year change. -- Stock-based
compensation expense, which amounted to $6.9 million in the current
quarter and $0.3 million in the prior-year quarter, is presented as
a separate reconciling amount in the company's segment reporting in
both periods. As such, these expenses are not included in the
regional operating results, but are included in the total worldwide
operating results. -- Other income and expense for the quarter was
$6.8 million versus $12.2 million in the year-ago period, primarily
driven by higher net cash levels (cash less debt outstanding) and
lower average interest rates. -- The effective tax rate for the
quarter was 25 percent, compared to an effective tax rate of 23
percent in the year-ago quarter. -- Total depreciation and
amortization was $18.3 million. -- Capital expenditures were $10.3
million. Balance Sheet -- The balance of cash and cash equivalents
at the end of the quarter was more than $1.2 billion, an increase
of $466 million over the 2008 year-end balance. -- Total debt was
$436 million, a decrease of $43 million from 2008 year-end.
Debt-to-capitalization was reduced to 13 percent versus 15 percent
at the end of 2008. -- Inventory was $2.2 billion, or 29 days on
hand, compared with $2.3 billion, or 28 days on hand, at the end of
2008. -- Working capital days were 20 versus 22 at year-end 2008.
"The solid financial results this quarter were delivered through
the disciplined management of key areas of the business," said
William Humes, senior executive vice president and chief financial
officer. "While increasing sequential sales, we reduced expenses
and maintained working capital days below our normal range. We
ended the quarter with more than $1.2 billion of cash on hand,
providing us with ample flexibility to continue pursuing growth
opportunities as they emerge." Nine-Month Period For the nine
months ended October 3, 2009, worldwide sales were $20.71 billion,
a 19 percent decrease from $25.68 billion reported for the same
period a year ago, reflecting the weaker global economic
environment and unfavorable translation impact of weaker foreign
currencies of approximately five percentage points. Sales for North
America were $8.74 billion (a 16 percent decrease versus the
prior-year period); $6.43 billion for EMEA (a decrease of 25
percent); $4.52 billion for Asia-Pacific (a decrease of 16
percent); and $1.02 billion for Latin America (a 20 percent
decrease). Worldwide operating income for the nine-month period was
$149.4 million (0.72 percent of total sales), which included
expense-reduction program costs of $30.0 million (0.14 percent of
sales) and a goodwill impairment charge totaling of $2.5 million
(0.01 percent of sales). In the year-ago period, operating income
was $265.0 million (1.03 percent of sales), which included
expense-reduction program costs of $11.8 million (0.05 percent of
sales). Nine-month net income was $95.1 million, or $0.58 per
diluted share, which included expense-reduction program costs and a
goodwill impairment charge totaling $24.0 million after tax, or
$0.14 per diluted share. In the year-ago period, net income was
$169.4 million, or $0.99 per diluted share, which included
expense-reduction program costs of $0.05 per diluted share. Outlook
"Looking toward the balance of the year, we anticipate
year-over-year sales declines to be reduced to single-digit
percentages, aided by improving demand and our emphasis on a better
customer engagement," said Spierkel. "We expect a sequential uptick
in gross margin coming largely from our seasonally strong
fee-for-service business. Careful control of operating expenses
will continue, but we will also consider investments that will
improve our competitive position. Our two expense-reduction
programs will be completed by year-end, generating aggregate
annualized savings of approximately $140 million compared to the
first quarter of 2008." Spierkel continued: "While we are
optimistic about what appears to be a budding recovery, we are not
waiting for demand to return in order to achieve our objectives.
Our near term goals are clear - improve our sales traction across
all regions, nurture strategic business units, and execute with
vendor and customer success as a priority." 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 Web
cast and view the accompanying presentation slides, visit the
company's Web site at http://www.ingrammicro.com/ (Investor
Relations section). The conference call is also accessible by
telephone at (888) 455-0750 (toll-free within the United States and
Canada) or (210) 839-8501 (other countries). The replay of the
conference call with presentation slides will be available for one
week at http://www.ingrammicro.com/ (Investor Relations section) or
by calling (800) 678-3180 or (402) 220-3063 outside the United
States and Canada. 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 but not limited to statements about economic
conditions, capital resources, cost reduction actions, revenues,
operating income, margins, expenses, integration costs, operating
efficiencies, profitability, market share and rates of return, 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) difficult conditions in the global economy in
general have affected our business and results of operations and
these conditions are not expected to improve in the near future and
may worsen; (2) changes in our credit rating or other market
factors such as continued adverse capital and credit market
conditions may significantly affect our ability to meet liquidity
needs through reduced access to capital, or it may increase our
cost of borrowing; (3) our failure to adequately adapt to economic
and industry changes and to manage prolonged contractions could
negatively impact our future operating results; (4) if our business
does not perform well, we may be required to recognize further
impairments of our intangible or other long-lived assets or
establish a valuation allowance against our deferred income tax
assets, which could adversely affect our results of operations or
financial condition; (5) we continually experience intense
competition across all markets for our products and services, which
may intensify in a more difficult global economy; (6) we operate a
global business that exposes us to risks associated with
international activities; (7) we have made and expect to continue
to make investments in new business strategies and initiatives,
including acquisitions and continued enhancements to information
systems, processes and procedures and infrastructure on a global
basis, which could disrupt our business and have an adverse effect
on our operating results; (8) we are dependent on a variety of
information systems and a failure of these systems could disrupt
our business and harm our reputation and net sales; (9)
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; (10) changes in, or
interpretations of, tax rules and regulations may adversely affect
our effective tax rates or operating margins and we may be required
to pay additional tax assessments; (11) we cannot predict with
certainty what loss we might incur as a result of other litigation
matters and contingencies that we may be involved with from time to
time; (12) we may incur material litigation, regulatory or
operating costs or expenses, and may be frustrated in our marketing
efforts, as a result of new environmental regulations or private
intellectual property enforcement disputes; (13) future terrorist
or military actions could result in disruption to our operations or
loss of assets, in certain markets or globally; (14) the loss of a
key executive officer or other key employees, or changes affecting
the work force such as government regulations, collective
bargaining agreements or the limited availability of qualified
personnel, could disrupt operations or increase our cost structure;
(15) we face a variety of risks with outsourcing arrangements; (16)
changes in accounting rules could adversely affect our future
operating results; (17) our quarterly results have fluctuated
significantly; and (18) we are dependent on third-party shipping
companies for the delivery of our products. Ingram Micro has
instituted in the past and continues to institute changes to its
strategies, operations and processes intended 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 year ended January 3, 2009; other risks or
uncertainties may be detailed from time to time in Ingram Micro's
future SEC filings. About Ingram Micro Inc. 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 services, technical
support, financial services, and product aggregation and
distribution. The company serves approximately 150 countries and is
the only global broad-based IT distributor with operations in Asia.
Visit http://www.ingrammicro.com/. 2009 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 (Dollars in 000s) (Unaudited)
October 3, January 3, 2009 2009 ---------- ---------- ASSETS
Current assets: Cash $1,229,918 $763,495 Trade accounts receivable,
net 3,174,702 3,179,455 Inventory 2,206,997 2,306,617 Other current
assets 384,907 425,270 ---------- ---------- Total current assets
6,996,524 6,674,837 Property and equipment, net 214,470 202,142
Other assets 222,337 206,494 ---------- ---------- Total assets
$7,433,331 $7,083,473 ========== ========== LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts payable
$3,647,125 $3,427,362 Accrued expenses 402,268 485,573 Current
maturities of long-term debt 159,153 121,724 ---------- ----------
Total current liabilities 4,208,546 4,034,659 Long-term debt, less
current maturities 276,657 356,664 Other liabilities 60,607 36,305
---------- ---------- Total liabilities 4,545,810 4,427,628
Stockholders' equity 2,887,521 2,655,845 ---------- ----------
Total liabilities and stockholders' equity $7,433,331 $7,083,473
========== ========== Ingram Micro Inc. Consolidated Statement of
Income (Dollars in 000s, except per share data) (Unaudited)
Thirteen Weeks Ended -------------------------------------- October
3, 2009 September 27, 2008 --------------- ------------------ Net
sales $7,384,574 $8,283,703 Cost of sales 6,982,664 7,830,847
--------------- ------------------ Gross profit 401,910 452,856
--------------- ------------------ Operating expenses: Selling,
general and administrative 331,725 (a) 376,784 (a) Reorganization
costs 7,004 (a) 3,614 (a) --------------- ------------------
338,729 380,398 --------------- ------------------ Income from
operations 63,181 72,458 Interest and other 6,773 12,168
--------------- ------------------ Income before income taxes
56,408 60,290 Provision for income taxes 14,102 13,916
--------------- ------------------ Net income $42,306 $46,374
=============== ================== Diluted earnings per share $0.25
$0.27 =============== ================== Diluted weighted average
shares outstanding 166,738,625 169,340,081 ===============
================== (a) See related footnote on the schedule of
supplementary information for the thirteen weeks ended October 3,
2009 and September 27, 2008. Ingram Micro Inc. Consolidated
Statement of Income (Dollars in 000s, except per share data)
(Unaudited) Thirty-nine Weeks Ended
-------------------------------------- October 3, 2009 September
27, 2008 --------------- ------------------ Net sales $20,708,256
$25,677,635 Cost of sales 19,539,237 24,251,850 ---------------
------------------ Gross profit 1,169,019 1,425,785 ---------------
------------------ Operating expenses: Selling, general and
administrative 989,985 (a) 1,150,585 (a) Impairment of goodwill
2,490 (a) - Reorganization costs 27,124 (a) 10,227 (a)
--------------- ------------------ 1,019,599 1,160,812
--------------- ------------------ Income from operations 149,420
264,973 Interest and other 21,139 35,646 ---------------
------------------ Income before income taxes 128,281 229,327
Provision for income taxes 33,166 59,963 ---------------
------------------ Net income $95,115 $169,364 ===============
================== Diluted earnings per share $0.58 $0.99
=============== ================== Diluted weighted average shares
outstanding 164,720,379 171,261,980 ===============
================== (a) See related footnote on the schedule of
supplementary information for the thirty-nine weeks ended October
3, 2009 and September 27, 2008. Ingram Micro Inc. Supplementary
Information Income from Operations (Dollars in 000s) (Unaudited)
Thirteen Weeks Ended October 3, 2009
------------------------------------------ Operating Operating Net
Sales Income Margin ---------- --------- --------- North America
$3,219,252 $30,401 (a) 0.94% EMEA 2,154,260 13,569 (a) 0.63%
Asia-Pacific 1,638,252 21,389 (a) 1.31% Latin America 372,810 4,749
1.27% Reconciling amount (stock-based compensation) - (6,927) -
---------- --------- Consolidated Total $7,384,574 $63,181 (a)
0.86% ========== ========= Thirteen Weeks Ended September 27, 2008
-------------------------------------------- Operating Operating
Net Sales Income (Loss) Margin (Loss) ---------- -------------
------------- North America $3,586,467 $45,525 (b) 1.27% EMEA
2,567,126 (4,689) (b) (0.18%) Asia-Pacific 1,699,842 25,346 (b)
1.49% Latin America 430,268 6,607 1.54% Reconciling amount
(stock-based compensation) - (331) - ---------- -------------
Consolidated Total $8,283,703 $72,458 (b) 0.87% ==========
============= (a) The thirteen weeks ended October 3, 2009 includes
charges of $8,399 (0.11% of consolidated net sales) to operating
expenses comprised of the following: (1) charges of $7,120 in North
America (0.22% of North America net sales), which included
reorganization costs of $5,883 primarily related to employee
termination benefits for workforce reductions and facility exit
costs, and $1,237 charged to selling, general and administrative,
or SG&A, expenses, primarily for retention and accelerated
depreciation of fixed assets associated with the exit of
facilities; (2) reorganization costs of $622 in EMEA (0.03% of EMEA
net sales) related to employee termination benefits for workforce
reductions; and (3) charges of $657 in Asia-Pacific (0.04% of
Asia-Pacific net sales), which included reorganization costs of
$499 primarily related to employee termination benefits for
workforce reductions and facility exit costs, and $158 charged to
SG&A expenses primarily for costs incurred associated with the
acquisition and integration of Value Added Distributors Limited, or
VAD, and Vantex Technology Distribution Limited, or Vantex. (b) The
thirteen weeks ended September 27, 2008 includes charges of $4,064
(0.05% of consolidated net sales) to operating expenses comprised
of the following: (1) reorganization charges of $680 in North
America (0.02% of North America net sales), for employee
termination benefits associated with the Company's targeted
reduction of administrative and back-office positions and contract
terminations in North America, (2) charges of $3,107 in EMEA (0.12%
of EMEA net sales) which included reorganization costs of $2,657
related to employee termination benefits for workforce reductions
associated with restructuring the regional headquarters in EMEA,
and consulting and other costs totaling $450 associated with the
restructuring charged to SG&A expenses, and (3) reorganization
costs of $277 in Asia-Pacific (0.02% of Asia-Pacific net sales) for
employee termination benefits associated with headcount reductions
in China. Ingram Micro Inc. Supplementary Information Income from
Operations (Dollars in 000s) (Unaudited) Thirty-nine Weeks Ended
October 3, 2009 ---------------------------------------- Operating
Operating Net Sales Income Margin ---------- -------- ------ North
America $8,735,872 $52,313 (a) 0.60% EMEA 6,432,034 38,915 (a)
0.61% Asia-Pacific 4,524,077 58,013 (a)(b) 1.28% Latin America
1,016,273 14,964 (a) 1.47% Reconciling amount (stock-based
compensation) - (14,785) - ---------- -------- Consolidated Total
$20,708,256 $149,420 (a) 0.72% =========== ======== Thirty-nine
Weeks Ended September 27, 2008
------------------------------------------- Operating Operating Net
Sales Income Margin ---------- -------- ------ North America
$10,395,631 $130,495 (c) 1.26% EMEA 8,588,704 37,759 (c) 0.44%
Asia-Pacific 5,417,415 90,586 (c) 1.67% Latin America 1,275,885
21,662 1.70% Reconciling amount (stock-based compensation) -
(15,529) - ----------- -------- Consolidated Total $25,677,635
$264,973 (c) 1.03% =========== ======== (a) The thirty-nine weeks
ended October 3, 2009 includes charges of $29,976 (0.14% of
consolidated net sales) to operating expenses comprised of the
following: (1) net charges of $18,591 in North America (0.21% of
North America net sales), which included reorganization costs of
$16,208 primarily related to employee termination benefits for
workforce reductions and facility exit costs, and $2,383 charged to
SG&A expenses primarily for retention and accelerated
depreciation of fixed assets associated with the exit of
facilities; (2) net charges of $8,226 in EMEA (0.13% of EMEA net
sales), which included reorganization costs of $7,915 related to
employee termination benefits for workforce reductions and facility
exit costs, and $311 primarily for consulting costs associated with
the reorganization program charged to SG&A expenses; (3)
charges of $2,923 in Asia-Pacific (0.06% of Asia-Pacific net
sales), which included reorganization costs of $2,765 related to
employee termination benefits for workforce reductions and facility
exit costs, and $158 charged to SG&A expenses primarily for
costs incurred associated with the acquisition and integration of
VAD and Vantex; and (4) reorganization costs of $236 in Latin
America (0.02% of Latin America net sales) related to employee
termination benefits for workforce reductions. (b) The thirty-nine
weeks ended October 3, 2009 also includes impairment of goodwill of
$2,490 (0.01% of consolidated net sales and 0.06% of Asia-Pacific
net sales) related to the acquisitions of VAD and Vantex. (c) The
thirty-nine weeks ended September 27, 2008 includes net charges of
$11,771 (0.05% of consolidated net sales) to operating expenses
comprised of the following: (1) net charges of $1,557 in North
America (0.01% of North America net sales), which included
reorganization costs of $2,087 primarily for employee termination
benefits associated with the Company's targeted reduction of
administrative and back-office positions in North America, and a
credit adjustment of $530 for lower than expected costs to settle
lease obligations related to previous actions, (2) charges of
$9,937 in EMEA (0.12% of EMEA net sales), which included
reorganization costs of $8,393 related to employee termination
benefits for workforce reductions associated with restructuring the
regional headquarters in EMEA, and consulting and other costs
associated with the restructuring of $1,544 charged to SG&A
expenses, and (3) reorganization costs of $277 in Asia-Pacific
(0.01% of Asia-Pacific net sales) for employee termination benefits
associated with headcount reductions in China. DATASOURCE: Ingram
Micro Inc. CONTACT: Investor Relations, Ria Marie Carlson,
+1-714-382-4400, , or Kay Leyba, +1-714-382-4175, , or Media, Cliff
Crisanti, +1-714-382-1138, , or Lisa Zwick, +1-714-382-2378, , all
of Ingram Micro Inc. Web Site: http://www.ingrammicro.com/
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