Ingram Micro Reports Fourth Quarter Financial Results

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IRVINE, Calif.--(BUSINESS WIRE)-- Ingram Micro Inc. today announced financial results for the fourth quarter ended Dec. 31, 2016.

Fourth Quarter Results of Operations

Worldwide 2016 fourth quarter sales of $12.2 billion increased 8 percent in USD, with gross margin of 6.48 percent. This compares to sales of $11.3 billion with gross margin of 6.84 percent in the 2015 fourth quarter. The translation of foreign currencies versus last year had a negative impact of 2 percentage points on worldwide sales. Recent acquisitions contributed approximately 2 percentage points of growth to 2016 fourth quarter worldwide sales. 2016 fourth quarter non-GAAP operating income was $206 million, or 1.68 percent of revenue, and non-GAAP net income was $121 million. This compares to 2015 fourth quarter non-GAAP operating income of $239 million, or 2.11 percent of revenue, and non-GAAP net income of $153 million.

2016 fourth 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 smartphones in international markets, as well as by underperformance in some European countries and in the company’s U.S. mobility business.

2016 fourth quarter GAAP operating income and net income – which includes the negative impact of approximately $175 million in restructuring, merger and transition costs primarily related to the finalization of HNA Group’s acquisition of Ingram Micro in December 2016, and $25 million in amortization expense – was $5 million, or 0.04 percent of revenue, and a loss of $35 million, or -0.28 percent of revenue, respectively. This compares to 2015 fourth quarter GAAP operating income and net income of $196 million, or 1.73 percent of revenue, and $141 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, 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 in the fourth quarter of 2016 and a charge in the 2015 fourth quarter related to an impairment of internally developed software resulting from the company’s decision to stop its global ERP deployment. 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. In 2015, non-GAAP net income also excludes the non-cash benefit related to the release of valuation allowance in the company’s Brazilian subsidiary.

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)
 
December 31, January 2,
2016 2016
 
ASSETS
Current assets:
Cash and cash equivalents $ 796,164 $ 935,267
Restricted cash 64,916 -
Trade accounts receivable, net 6,354,905 5,663,754
Inventory 3,902,626 3,457,016
Other current assets   691,253   475,813
Total current assets 11,809,864 10,531,850
 
Property and equipment, net 381,876 381,414
Goodwill 904,920 843,001
Intangible assets, net 445,646 374,674
Other assets   176,643   169,750
Total assets $ 13,718,949 $ 12,300,689
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,174,946 $ 6,353,511
Accrued expenses 856,627 620,501
Short-term debt and current maturities of long-term debt   559,773   134,103
Total current liabilities 8,591,346 7,108,115
 
Long-term debt, less current maturities 832,459 1,090,702
Other liabilities   181,393   134,086
Total liabilities 9,605,198 8,332,903
 
Stockholders' equity   4,113,751   3,967,786
Total liabilities and stockholders' equity $ 13,718,949 $ 12,300,689
 
 
               
Ingram Micro Inc.
Consolidated Statement of Income

(Amounts in 000s)

(Unaudited)
 
Thirteen Weeks Ended
December 31, 2016 January 2, 2016
 
Net sales $ 12,242,766 $ 11,312,268
Cost of sales   11,449,573     10,538,845  
Gross profit   793,193     773,423  
 
Operating expenses:
Selling, general and administrative 600,279 550,188
Amortization of intangible assets 25,277 14,912
Reorganization costs 4,141 7,075
Merger related costs 155,795 -
Impairment of internally developed software - 5,145
Loss on sale of affiliate   2,880     -  
  788,372     577,320  
 
Income from operations   4,821     196,103  
 
Other expense (income):
Interest income (2,347 ) (479 )
Interest expense 21,647 20,067
Net foreign currency exchange loss 3,171 590
Other   8,448     5,767  
  30,919     25,945  
 
Income before income taxes (26,098 ) 170,158
 
Provision for income taxes   8,550     28,957  
 
Net income $ (34,648 ) $ 141,201  
 
 
               
Ingram Micro Inc.
Consolidated Statement of Income

(Amounts in 000s)

(Unaudited)
 
Fifty-two Weeks Ended
December 31, 2016 January 2, 2016
 
Net sales $ 41,928,799 $ 43,025,852
Cost of sales   39,069,585     40,314,560  
Gross profit   2,859,214     2,711,292  
 
Operating expenses:
Selling, general and administrative 2,258,953 2,076,528
Amortization of intangible assets 98,497 62,138
Reorganization costs 35,868 36,309
Merger related costs 170,400 -
Impairment of internally developed software - 121,001
Loss on sale of affiliate   17,758     -  
  2,581,476     2,295,976  
 
Income from operations   277,738     415,316  
 
Other expense (income):
Interest income (7,561 ) (3,129 )
Interest expense 79,911 81,866
Net foreign currency exchange loss 16,013 27,130
Other   18,666     13,023  
  107,029     118,890  
 
Income before income taxes 170,709 296,426
 
Provision for income taxes   70,283     81,321  
 
Net income $ 100,426   $ 215,105  
 
 
               
Ingram Micro Inc.
Consolidated Statement of Cash Flows
(Amounts in 000s)
(Unaudited)
 
Fifty-two Weeks Ended
December 31, 2016 January 2, 2016
 
Cash flows from operating activities:
Net income $ 100,426 $ 215,105
Adjustments to reconcile net income to cash (used) provided by operating activities:
Depreciation and amortization 203,708 153,144
Stock-based compensation 27,626 39,893
Unpaid Merger related costs 129,022 -
Excess tax benefit from stock-based compensation (9,267 ) (5,154 )
Unrealized gain on marketable securities, net (2,890 ) -
Gain on sale of property and equipment (2,158 ) (2,222 )
Loss on sale of affiliate 17,758 -
Impairment of internally developed software - 121,001
Noncash charges for interest and bond discount amortization 2,818 2,917
Deferred income taxes (7,981 ) (29,158 )

Changes in operating assets and liabilities, net of effects of acquisitions:

Trade accounts receivable (692,491 ) 399,538
Inventory (498,706 ) 596,493
Other current assets (239,822 ) (40,879 )
Accounts payable 869,194 3,950
Change in book overdrafts 9,844 (28,305 )
Accrued expenses   30,783     29,630  
Cash provided (used) provided by operating activities   (62,136 )   1,455,953  
 
Cash flows from investing activities:
Capital expenditures (110,579 ) (122,918 )
Movements to restricted cash (64,916 ) -
Sale of marketable securities, net 5,397 5,000
Realized gain on marketable securities, net (1,415 ) -
Proceeds from sale of property and equipment 2,377 1,223
Proceeds from sale of affiliate 23,307 -
Acquisitions, net of cash acquired   (174,972 )   (479,348 )
Cash used by investing activities   (320,801 )   (596,043 )
 
Cash flows from financing activities:
Proceeds from exercise of stock options 7,828 17,115
Repurchase of Class A Common Stock - (259,027 )
Excess tax benefit from stock-based compensation 9,267 5,154
Equity contribution from Parent 149,324 -
Settlement of stock-based awards due to Merger (84,408 ) -
Other consideration for acquisitions (2,091 ) (2,358 )
Dividends paid to shareholders - (30,182 )
Net proceeds from (repayments of) revolving and other credit facilities   160,986     (307,886 )
Cash provided (used) by financing activities   240,906     (577,184 )
 
Effect of exchange rate changes on cash and cash equivalents   2,928     (40,236 )
 
Increase (decrease) in cash and cash equivalents (139,103 ) 242,490
 
Cash and cash equivalents, beginning of year   935,267     692,777  
 
Cash and cash equivalents, end of year $ 796,164   $ 935,267  
 
 
                                 
Ingram Micro Inc.
Supplementary Information
Income from Operations - Reconciliation of GAAP to Non-GAAP Information
(Amounts in Millions)
(Unaudited)
 
Thirteen Weeks Ended December 31, 2016
Stock-based Loss on Sale Consolidated
North America Europe Asia-Pacific Latin America Compensation of Affiliate Total
 
Net Sales $ 4,842.1   $ 3,619.9   $ 3,012.5   $ 768.3   $ -   $ -   $ 12,242.8  
 
GAAP Operating Income (Loss) $ (34.6 ) $ 17.5 $ 37.8 $ 17.5 $ (30.5 ) $ (2.9 ) $ 4.8
Reorganization, integration and transition costs 9.2 5.9 (0.1 ) 1.9 - - 16.9
Amortization of intangible assets 9.5 13.4 1.8 0.5 - - 25.2
Merger related costs 113.1 6.2 3.1 1.0 32.4 - 155.8
Loss on sale of affiliate   -     -     -     -     -     2.9     2.9  
 
Non-GAAP Operating Income $ 97.2   $ 43.0   $ 42.6   $ 20.9   $ 1.9   $ -   $ 205.6  
 
 
GAAP Operating Margin (0.71 %) 0.48 % 1.25 % 2.28 % 0.04 %
Non-GAAP Operating Margin 2.01 % 1.19 % 1.41 % 2.72 % 1.68 %
 
 
Thirteen Weeks Ended January 2, 2016
Impairment of
Stock-based Internally Consolidated
North America Europe Asia-Pacific Latin America Compensation Developed Software Total
 
Net Sales $ 4,663.5   $ 3,378.7   $ 2,512.2   $ 757.9   $ -   $ -   $ 11,312.3  
 
GAAP Operating Income $ 99.7 $ 44.8 $ 50.4 $ 17.9 $ (11.6 ) $ (5.1 ) $ 196.1
Reorganization, integration and transition costs 14.3 4.7 2.9 1.2 - - 23.1
Amortization of intangible assets 8.4 4.0 2.0 0.5 - - 14.9
Impairment of internally developed software   -     -     -     -     -     5.1     5.1  
 
Non-GAAP Operating Income $ 122.4   $ 53.5   $ 55.3   $ 19.6   $ (11.6 ) $ -   $ 239.2  
 
 
GAAP Operating Margin 2.14 % 1.33 % 2.01 % 2.36 % 1.73 %
Non-GAAP Operating Margin 2.62 % 1.58 % 2.20 % 2.58 % 2.11 %
 
 
                                 
Ingram Micro Inc.
Supplementary Information
Income from Operations - Reconciliation of GAAP to Non-GAAP Information
(Amounts in Millions)
(Unaudited)
 
Fifty-two Weeks Ended December 31, 2016
Stock-based Loss on Sale Consolidated
North America Europe Asia-Pacific Latin America Compensation of Affiliate Total
 
Net Sales $ 17,679.8   $ 11,809.4   $ 9,782.2   $ 2,657.4   $ -   $ -   $ 41,928.8  
 
GAAP Operating Income (Loss) $ 184.5 $ (3.7 ) $ 132.7 $ 42.1 $ (60.1 ) $ (17.8 ) $ 277.7
Reorganization, integration and transition costs 40.3 32.6 1.1 6.1 - - 80.1
Amortization of intangible assets 45.4 41.4 7.6 4.1 - - 98.5
Merger related costs 127.7 6.2 3.1 1.0 32.4 - 170.4
Loss on sale of affiliate - - - - - 17.8 17.8
Settlement of a class action lawsuit   (3.8 )   -     -     -     -     -     (3.8 )
 
Non-GAAP Operating Income $ 394.1   $ 76.5   $ 144.5   $ 53.3   $ (27.7 ) $ -   $ 640.7  
 
 
GAAP Operating Margin 1.04 % (0.03 %) 1.36 % 1.58 % 0.66 %
Non-GAAP Operating Margin 2.23 % 0.65 % 1.48 % 2.01 % 1.53 %
 
 
Fifty-two Weeks Ended January 2, 2016
Impairment of
Stock-based Internally Consolidated
North America Europe Asia-Pacific Latin America Compensation Developed Software Total
 
Net Sales $ 18,200.7   $ 12,236.5   $ 10,066.1   $ 2,522.6   $ -   $ -   $ 43,025.9  
 
GAAP Operating Income $ 323.3 $ 65.7 $ 144.8 $ 42.4 $ (39.9 ) $ (121.0 ) $ 415.3
Reorganization, integration and transition costs 42.9 20.6 12.2 4.7 - - 80.4
Amortization of intangible assets 37.3 15.3 7.7 1.8 - - 62.1
Impairment of internally developed software - - - - - 121.0 121.0
Estimated settlement of employee related taxes   -     4.7     -     -     -     -     4.7  
 
Non-GAAP Operating Income $ 403.5   $ 106.3   $ 164.7   $ 48.9   $ (39.9 ) $ -   $ 683.5  
 
 
GAAP Operating Margin 1.78 % 0.54 % 1.44 % 1.68 % 0.97 %
Non-GAAP Operating Margin 2.22 % 0.87 % 1.64 % 1.94 % 1.59 %
 
 
               
Ingram Micro Inc.
Supplementary Information
Reconciliation of GAAP to Non-GAAP Financial Measures

(Amounts in Millions)

(Unaudited)
 

Thirteen Weeks Ended

December 31, 2016

Net Income
 
As Reported Under GAAP $ (34.6 )
Reorganization, integration and transition costs 13.2
Amortization of intangible assets 19.8
Merger related costs 121.9
Loss on sale of affiliate 2.2
Pan-Europe foreign currency exchange gain   (1.9 )
Non-GAAP Financial Measure $ 120.6  
 
 

Thirteen Weeks Ended

January 2, 2016

Net Income
 
As Reported Under GAAP $ 141.2
Reorganization, integration and transition costs 13.1
Amortization of intangible assets 11.1
Impairment of internally developed software 3.1
Pan-Europe foreign currency exchange gain (1.5 )
Release of Brazil valuation allowance   (14.3 )
Non-GAAP Financial Measure $ 152.7  
 
 
Note: Amounts above are net of applicable income taxes.
 
 
               
Ingram Micro Inc.
Supplementary Information
Reconciliation of GAAP to Non-GAAP Financial Measures

(Amounts in Millions)

(Unaudited)
 

 

Fifty-two Weeks Ended

December 31, 2016

Net Income
 
As Reported Under GAAP $ 100.4
Reorganization, integration and transition costs 58.6
Amortization of intangible assets 72.0
Merger related costs 132.6
Loss on sale of affiliate 12.4
Settlement of a class action lawsuit (2.6 )
Pan-Europe foreign currency exchange gain   (0.7 )
Non-GAAP Financial Measure $ 372.7  
 
 

Fifty-two Weeks Ended

January 2, 2016

Net Income
 
As Reported Under GAAP $ 215.1
Reorganization, integration and transition costs 55.2
Amortization of intangible assets 45.5
Impairment of internally developed software 102.8
Estimated settlement of employee related taxes 3.5
Pan-Europe foreign currency exchange loss 3.7
Release of Brazil valuation allowance   (14.3 )
Non-GAAP Financial Measure $ 411.5  
 
 
Note: Amounts above are net of applicable income taxes.
 

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

Source: Ingram Micro Inc.

Released April 25, 2017