Ingram Micro Reports Third Quarter Financial Results

IRVINE, Calif.--(BUSINESS WIRE)-- Ingram Micro Inc. today announced financial results for the third quarter ended Sept. 29, 2018. Ingram Micro experienced solid global demand and a strong increase in profitability, with growth across all lines of business. Worldwide 2018 third quarter sales were $12.04 billion, an increase of 3 percent in USD, with gross margin of 6.35 percent. This compares to sales of $11.66 billion and gross margin of 6.23 percent in the 2017 third quarter. The translation of foreign currencies versus last year had a negative impact of approximately 2 percentage points on worldwide sales for the quarter. 2018 third quarter non-GAAP operating income was $180 million, or 1.49 percent of revenue, and non-GAAP net income was $114 million. This compares to 2017 third quarter non-GAAP operating income of $147 million, or 1.26 percent of revenue, and non-GAAP net income of $87 million. 2018 third quarter GAAP operating income and net income was $140 million, or 1.16 percent of revenue, and $94 million, respectively, including: the pre-tax negative impact of $23 million in amortization expense and the pre-tax negative impact of $17 million in restructuring, acquisition and transition costs primarily related to a global reorganization program executed during the first quarter of 2018. This compares to 2017 third quarter GAAP operating income and net income of $105 million, or 0.90 percent of revenue, and $61 million, respectively.

Non-GAAP Disclosures

In addition to GAAP results, Ingram Micro is reporting non-GAAP operating income, non-GAAP operating margin and non-GAAP net income for the 2018 third quarter and the nine months ended Sept. 29, 2018. These non-GAAP measures exclude charges associated with reorganization, acquisitions, integration and transition costs, including those associated with the company’s cost savings programs, and the amortization of intangible assets. These Non-GAAP financial measures also exclude a gain on the sale of affiliates. Non-GAAP net income also excludes 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. 2018 third quarter and year to date non-GAAP net income excludes non-cash tax benefits primarily related to the intercompany sale of certain intangible assets and the impact on U.S. tax reform repatriation tax. 2017 year to date non-GAAP operating income further excludes merger costs and 2017 non-GAAP net income also excludes a non-cash tax benefit primarily related to the reversal of a valuation allowance against certain deferred tax assets in Australia. The non-GAAP measures noted above are primary indicators that Ingram Micro’s management uses internally to conduct and measure its business and evaluate the performance of its consolidated operations and operating segments. Ingram Micro’s management believes these non-GAAP financial measures are useful because they provide meaningful comparisons to prior periods and an alternate view of the impact of acquired businesses. These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. These non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting Ingram Micro’s business. A material limitation associated with these non-GAAP measures as compared to the GAAP measures is that they may not be comparable to other companies with similarly titled items that present related measures differently. The non-GAAP measures should be considered as a supplement to, and not as a substitute for or superior to, the corresponding measures calculated in accordance with GAAP. A reconciliation of GAAP to non-GAAP financial measures for the periods presented is attached to this press release.

About Ingram Micro Inc.

Ingram Micro helps businesses realize the promise of technology™. It delivers a full spectrum of global technology and supply chain services to businesses around the world. Deep expertise in technology solutions, mobility, cloud, and supply chain solutions enables its business partners to operate efficiently and successfully in the markets they serve. More at www.ingrammicro.com.

© 2018 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 Sheets
(Amounts in 000s)
(Unaudited)
       
 
September 29, December 30,
2018 2017
 
ASSETS
Current assets:
Cash and cash equivalents $ 479,991 $ 549,558
Restricted cash - 14,379
Trade accounts receivable, net 6,698,457 7,626,191
Inventory 4,454,516 4,471,440
Other current assets   687,351   618,733
 
Total current assets 12,320,315 13,280,301
 
Property and equipment, net 412,875 417,439
Goodwill 942,685 990,372
Intangible assets, net 341,775 385,152
Other assets   301,837   299,879
 
Total assets $ 14,319,487 $ 15,373,143
 
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 7,707,196 $ 7,760,380
Accrued expenses 813,628 881,672
Short-term debt and current maturities of long-term debt   128,360   127,512
 
Total current liabilities 8,649,184 8,769,564
 
Long-term debt, less current maturities 1,090,537 1,982,118
Other liabilities   186,231   298,904
 
Total liabilities 9,925,952 11,050,586
 
Stockholder's equity   4,393,535   4,322,557
 
Total liabilities and stockholder's equity $ 14,319,487 $ 15,373,143
 
 
Ingram Micro Inc.
Consolidated Statements of Income
(Amounts in 000s)
(Unaudited)
       
 
Thirteen Weeks Ended
September 29, 2018 September 30, 2017
 
Net sales $ 12,043,164 $ 11,660,547
Cost of sales   11,278,280     10,933,761  
Gross profit   764,884     726,786  
 
Operating expenses:
Selling, general and administrative 592,266 584,242
Amortization of intangible assets 22,781 23,211
Reorganization costs 9,630 2,071
Merger related costs   -     12,456  
  624,677     621,980  
 
Income from operations   140,207     104,806  
 
Other (income) expense:
Interest income (6,283 ) (3,608 )
Interest expense 25,255 25,806
Net foreign currency exchange gain (1,893 ) (8,816 )
Other   5,425     4,790  
  22,504     18,172  
 
Income before income taxes 117,703 86,634
 
Provision for income taxes   23,834     25,679  
 
Net income $ 93,869   $ 60,955  
 
 
Ingram Micro Inc.
Consolidated Statements of Income
(Amounts in 000s)
(Unaudited)
       
 
Thirty-nine Weeks Ended
September 29, 2018 September 30, 2017
 
Net sales $ 35,606,002 $ 32,890,193
Cost of sales   33,326,328     30,796,393  
Gross profit   2,279,674     2,093,800  
 
Operating expenses:
Selling, general and administrative 1,828,930 1,700,548
Amortization of intangible assets 70,858 68,477
Reorganization costs 44,984 11,421
Gain on sale of affiliates (1,940 ) -
Merger related costs   -     76,913  
  1,942,832     1,857,359  
 
Income from operations   336,842     236,441  
 
Other (income) expense:
Interest income (16,015 ) (8,943 )
Interest expense 78,708 77,206
Net foreign currency exchange gain (7,373 ) (10,373 )
Other   15,847     14,216  
  71,167     72,106  
 
Income before income taxes 265,675 164,335
 
Provision for income taxes   57,865     20,970  
 
Net income $ 207,810   $ 143,365  
 
 
Ingram Micro Inc.
Consolidated Statements of Cash Flows
(Amounts in 000s)
(Unaudited)
               
 
Thirty-nine Weeks Ended
September 29, 2018 September 30, 2017
 
Cash flows from operating activities:
Net income $ 207,810 $ 143,365
Adjustments to reconcile net income to cash provided (used) by operating activities:
Depreciation and amortization 154,155 150,931
Share-based compensation 21,333 20,517
Unpaid merger related costs - 44,540
Gain on marketable securities, net (3,396) (5,318)
Gain on sale of property and equipment (1,161) (2,930)
(Gain) loss on sale of affiliates (1,940) 1,739
Impairment of property and equipment 1,802 -
Noncash charges for interest and bond discount amortization 2,856 3,283
Deferred income taxes (17,765) (43,430)

 

Changes in operating assets and liabilities, net of effects of acquisitions:
Trade accounts receivable 743,557 322,006
Inventory (98,106) (424,014)
Other current assets (93,357) (15,476)
Accounts payable 105,497 (893,984)
Change in book overdrafts 57,616 (33,480)
Accrued expenses (139,819) (94,554)
Cash provided (used) by operating activities 939,082 (826,805)
 
Cash flows from investing activities:
Capital expenditures (92,651) (94,544)
Movements from restricted cash 14,379 51,021
Sale of marketable securities, net 2,728 -
Proceeds from sale of property and equipment 965 3,197
Proceeds from sale of affiliates 1,318 9,825
Return of investment 163 -
Acquisitions, net of cash acquired (3,188) (20,771)
Cash used by investing activities (76,286) (51,272)
 
Cash flows from financing activities:
Equity contribution from Parent - 37,500
Settlement of stock-based awards due to Merger (13,520) (48,177)
Other consideration for acquisitions (6,001) (15,100)
Dividends paid to shareholder (44,242) -
Net (repayments of) proceeds from revolving and other credit facilities (866,730) 545,482
Cash (used) provided by financing activities (930,493) 519,705
 
Effect of exchange rate changes on cash and cash equivalents (1,870) (5,897)
 
Decrease in cash and cash equivalents (69,567) (364,269)
 
Cash and cash equivalents, beginning of period 549,558 796,164
 
Cash and cash equivalents, end of period $ 479,991 $ 431,895
 
 
Ingram Micro Inc.
Supplementary Information
Income from Operations - Reconciliation of GAAP to Non-GAAP Information
(Amounts in Millions)
(Unaudited)
     
 
Thirteen Weeks Ended
September 29, 2018 September 30, 2017
 
Net Sales $ 12,043.2   $ 11,660.5  
 
GAAP Operating Income $ 140.2 $ 104.8
Reorganization, integration and transition costs 16.7 6.8
Amortization of intangible assets 22.8 23.2
Merger related costs   -     12.5  
 
Non-GAAP Operating Income $ 179.7   $ 147.3  
 
 
 
GAAP Operating Margin 1.16 % 0.90 %
Non-GAAP Operating Margin 1.49 % 1.26 %
 
 
Thirty-nine Weeks Ended
September 29, 2018 September 30, 2017
 
Net Sales $ 35,606.0   $ 32,890.2  
 
GAAP Operating Income $ 336.8 $ 236.4
Reorganization, integration and transition costs 69.8 23.8
Amortization of intangible assets 70.9 68.5
Gain on sale of affiliates (1.9 ) -
Merger related costs   -     76.9  
 
Non-GAAP Operating Income $ 475.6   $ 405.6  
 
 
 
GAAP Operating Margin 0.95 % 0.72 %
Non-GAAP Operating Margin 1.34 % 1.23 %
 
 
Ingram Micro Inc.
Supplementary Information
Reconciliation of GAAP to Non-GAAP Financial Measures
(Amounts in Millions)
(Unaudited)
     
 
Thirteen Weeks Ended
September 29, 2018 September 30, 2017
 
Net Income Net Income
 
As Reported Under GAAP $ 93.9 $ 61.0
Reorganization, integration and transition costs 12.6 4.7
Amortization of intangible assets 17.4 16.0
Merger related costs - 8.6
Pan-Europe foreign currency exchange loss (gain) 1.0 (3.1 )
Tax impact on US tax reform repatriation tax (4.0 ) -
Tax impact on intercompany sale of certain intangible assets   (6.8 )   -  
 
Non-GAAP Financial Measure $ 114.1   $ 87.2  
 
 
Thirty-nine Weeks Ended
September 29, 2018 September 30, 2017
 
Net Income Net Income
 
As Reported Under GAAP $ 207.8 $ 143.4
Reorganization, integration and transition costs 51.8 16.8
Amortization of intangible assets 52.5 48.7
Gain on sale of affiliates (1.5 ) -
Merger related costs - 55.1
Pan-Europe foreign currency exchange (gain) loss (1.3 ) 2.6
Reversal of a valuation allowance against certain deferred tax assets in Australia - (30.6 )
Tax impact on US tax reform repatriation tax (4.0 ) -
Tax impact on intercompany sale of certain intangible assets   (15.3 )   -  
 
Non-GAAP Financial Measure $ 290.0   $ 236.0  
 
 
Note: Amounts above are net of applicable income taxes.

Ingram Micro Inc.
Damon Wright
(714) 382-5013
damon.wright@ingrammicro.com

Source: Ingram Micro Inc.