Ingram Micro Reports Second Quarter Financial Results

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IRVINE, Calif.--(BUSINESS WIRE)-- Ingram Micro Inc. today announced financial results for the second quarter ended Jul. 1, 2017.

Second Quarter Results of Operations

Ingram Micro continued to experience solid demand across the majority of its largest countries, led by strength in technology solutions and mobility distribution. Worldwide 2017 second quarter sales were $10.83 billion, an increase of 7 percent in USD, with gross margin of 6.54 percent. This compares to sales of $10.12 billion and gross margin of 7.10 percent in the 2016 second quarter. The translation of foreign currencies versus last year had a negative impact of 1 percentage point on worldwide sales. Recent acquisitions contributed approximately 1 percentage point of growth to 2017 second quarter worldwide sales. 2017 second quarter non-GAAP operating income was $156 million, or 1.44 percent of revenue, and non-GAAP net income was $93 million. This compares to 2016 second quarter non-GAAP operating income of $157 million, or 1.55 percent of revenue, and non-GAAP net income of $92 million.

2017 second quarter gross margin, non-GAAP operating income and non-GAAP net income were impacted by a higher mix of sales of consumer focused product lines, particularly in international markets, as well as by strategic investments in the company’s cloud and commerce and fulfillment businesses and lower profit contribution from the company’s U.S. mobility business.

2017 second quarter GAAP operating income and net income was $91 million, or 0.84 percent of revenue, and $45 million, respectively, including:

  • The pre-tax negative impact of approximately $42 million in restructuring, merger, acquisition and transition costs primarily related to retention payments and the vesting of restricted shares and stock options due to HNA Group’s acquisition of Ingram Micro; and
  • The pre-tax negative impact of $23 million in amortization expense.

This compares to 2016 second quarter GAAP operating income and net income of $97 million, or 0.96 percent of revenue, and $55 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. These non-GAAP measures exclude charges associated with reorganization, merger, acquisitions, integration and transition costs, including those associated with the company’s previously announced cost savings programs, and the amortization of intangible assets. These non-GAAP financial measures also exclude a loss on the sale of affiliate and a gain related to a legal settlement in the 2016 second quarter. Non-GAAP net income 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. 2017 year-to-date 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.

© 2017 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)
   
 
July 1, December 31,
2017 2016
 
ASSETS
Current assets:
Cash and cash equivalents $ 532,964 $ 796,164
Restricted cash 13,895 64,916
Trade accounts receivable, net 5,866,169 6,354,905
Inventory 4,335,452 3,902,626
Other current assets   669,386   691,253
 
Total current assets 11,417,866 11,809,864
 
Property and equipment, net 398,241 381,876
Goodwill 929,711 904,920
Intangible assets, net 424,146 445,646
Other assets   213,809   176,643
 
Total assets $ 13,383,773 $ 13,718,949
 
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 6,334,570 $ 7,174,946
Accrued expenses 767,233 856,627
Short-term debt and current maturities of long-term debt   842,530   559,773
 
Total current liabilities 7,944,333 8,591,346
 
Long-term debt, less current maturities 912,832 832,459
Other liabilities   236,810   181,393
 
Total liabilities 9,093,975 9,605,198
 
Stockholder's equity   4,289,798   4,113,751
 
Total liabilities and stockholder's equity $ 13,383,773 $ 13,718,949
 
 
Ingram Micro Inc.
Consolidated Statement of Income
(Amounts in 000s)
(Unaudited)
   
 
Thirteen Weeks Ended
July 1, 2017 July 2, 2016
 
Net sales $ 10,826,707 $ 10,122,606
Cost of sales   10,118,321     9,403,660  
Gross profit   708,386     718,946  
 
Operating expenses:
Selling, general and administrative 558,683 569,819
Amortization of intangible assets 22,907 25,621
Reorganization costs 4,882 7,690
Merger related costs 30,783 3,488
Loss on sale of affiliate   -     14,878  
  617,255     621,496  
 
Income from operations   91,131     97,450  
 
Other expense (income):
Interest income (3,256 ) (2,117 )
Interest expense 25,237 18,152
Net foreign currency exchange loss 1,770 587
Other   4,810     4,116  
  28,561     20,738  
 
Income before income taxes 62,570 76,712
 
Provision for income taxes   18,013     22,060  
 
Net income $ 44,557   $ 54,652  
 
 
Ingram Micro Inc.
Consolidated Statement of Income
(Amounts in 000s)
(Unaudited)
   
 
Twenty-six Weeks Ended
July 1, 2017 July 2, 2016
 
Net sales $ 21,229,646 $ 19,459,207
Cost of sales   19,862,632     18,108,565  
Gross profit   1,367,014     1,350,642  
 
Operating expenses:
Selling, general and administrative 1,116,306 1,110,301
Amortization of intangible assets 45,266 52,646
Reorganization costs 9,350 24,256
Merger related costs 64,457 12,708
Loss on sale of affiliate   -     14,878  
  1,235,379     1,214,789  
 
Income from operations   131,635     135,853  
 
Other expense (income):
Interest income (5,335 ) (3,258 )
Interest expense 51,400 38,624
Net foreign currency exchange (gain) loss (1,557 ) 9,114
Other   9,426     7,198  
  53,934     51,678  
 
Income before income taxes 77,701 84,175
 
(Benefits from) Provision for income taxes   (4,709 )   27,624  
 
Net income $ 82,410   $ 56,551  
 
 
Ingram Micro Inc.
Consolidated Statement of Cash Flows
(Amounts in 000s)
(Unaudited)
           
 
Twenty-six Weeks Ended
July 1, 2017 July 2, 2016
 
Cash flows from operating activities:
Net income $ 82,410 $ 56,551
Adjustments to reconcile net income to cash (used) provided by operating activities:
Depreciation and amortization 99,585 104,318
Stock-based compensation 11,961 19,908
Merger related costs 64,457 12,708
Excess tax benefit from stock-based compensation - (8,351 )
Unrealized gain on marketable securities, net (3,073 ) -
Gain on sale of property and equipment (956 ) (1,115 )
Loss on sale of affiliate - 14,878
Noncash charges for interest and bond discount amortization 2,305 1,409
Deferred income taxes (38,626 ) 10,494

 

Changes in operating assets and liabilities, net of effects of acquisitions:
Trade accounts receivable 684,629 653,914
Inventory (325,735 ) (247,578 )
Other current assets 46,606 (87,108 )
Accounts payable (942,351 ) (235,962 )
Change in book overdrafts (150,898 ) (166,027 )
Accrued expenses   (102,480 )   (98,740 )
Cash (used) provided by operating activities   (572,166 )   29,299  
 
Cash flows from investing activities:
Capital expenditures (66,506 ) (50,476 )
Movements from restricted cash 51,021 -
Sale of marketable securities, net - 4,700
Realized gain on marketable securities, net (415 ) -
Proceeds from sale of property and equipment 719 590
Proceeds from sale of affiliate - 27,847
Acquisitions and earn-out payments, net of cash acquired   (20,737 )   (173,406 )
Cash used by investing activities   (35,918 )   (190,745 )
 
Cash flows from financing activities:
Proceeds from exercise of stock options - 3,538
Excess tax benefit from stock-based compensation - 8,351
Equity contribution from Parent 37,500 -
Settlement of stock-based awards due to Merger (34,779 ) -
Other consideration for acquisitions (14,164 ) (2,091 )
Net proceeds from revolving and other credit facilities   347,162     78,969  
Cash provided by financing activities   335,719     88,767  
 
Effect of exchange rate changes on cash and cash equivalents   9,165     16,293  
 
Decrease in cash and cash equivalents (263,200 ) (56,386 )
 
Cash and cash equivalents, beginning of period   796,164     935,267  
 
Cash and cash equivalents, end of period $ 532,964   $ 878,881  
 
 
Ingram Micro Inc.
Supplementary Information
Income from Operations - Reconciliation of GAAP to Non-GAAP Information
(Amounts in Millions)
(Unaudited)
     
 
Thirteen Weeks Ended
July 1, 2017 July 2, 2016
 
Net Sales $ 10,826.7   $ 10,122.6  
 
GAAP Operating Income $ 91.1 $ 97.5
Reorganization, integration and transition costs 11.3 19.5
Amortization of intangible assets 22.9 25.6
Merger related costs 30.8 3.5
Loss on sale of affiliate - 14.9
Settlement of a class action lawsuit   -     (3.8 )
 
Non-GAAP Operating Income $ 156.1   $ 157.2  
 
 
 
GAAP Operating Margin 0.84 % 0.96 %
Non-GAAP Operating Margin 1.44 % 1.55 %
 
 
Twenty-six Weeks Ended
July 1, 2017 July 2, 2016
 
Net Sales $ 21,229.6   $ 19,459.2  
 
GAAP Operating Income $ 131.6 $ 135.9
Reorganization, integration and transition costs 17.0 46.1
Amortization of intangible assets 45.3 52.7
Merger related costs 64.5 12.7
Loss on sale of affiliate - 14.9
Settlement of a class action lawsuit   -     (3.8 )
 
Non-GAAP Operating Income $ 258.4   $ 258.5  
 
 
 
GAAP Operating Margin 0.62 % 0.70 %
Non-GAAP Operating Margin 1.22 % 1.33 %
 
 
Ingram Micro Inc.
Supplementary Information
Reconciliation of GAAP to Non-GAAP Financial Measures
(Amounts in Millions)
(Unaudited)
   
 
Thirteen Weeks Ended
July 1, 2017 July 2, 2016
 
Net Income Net Income
 
As Reported Under GAAP $ 44.6 $ 54.7
Reorganization, integration and transition costs 7.8 13.3
Amortization of intangible assets 15.8 17.5
Merger related costs 21.2 2.4
Loss on sale of affiliate - 10.2
Settlement of a class action lawsuit - (2.6 )
Pan-Europe foreign currency exchange loss (gain)   3.9     (3.4 )
 
Non-GAAP Financial Measure $ 93.3   $ 92.1  
 
 
 
Twenty-six Weeks Ended
July 1, 2017 July 2, 2016
 
Net Income Net Income
 
As Reported Under GAAP $ 82.4 $ 56.6
Reorganization, integration and transition costs 12.1 33.3
Amortization of intangible assets 32.6 37.7
Merger related costs 46.6 9.3
Loss on sale of affiliate - 10.2
Settlement of a class action lawsuit - (2.6 )
Pan-Europe foreign currency exchange loss 5.7 0.2
Reversal of a valuation allowance against certain deferred tax assets in Australia   (30.6 )   -  
 
Non-GAAP Financial Measure $ 148.8   $ 144.7  
 
 
 
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.

Released September 7, 2017