Ingram Micro Reports Fourth Quarter Earnings

Strong Revenue Growth Drives 17% Increase in Non-GAAP Operating Income

SANTA ANA, Calif., Feb. 26, 2015 /PRNewswire/ -- Ingram Micro Inc. (NYSE: IM) today announced financial results for the fourth quarter ended Jan. 3, 2015.
















(US$ in millions, except

Fourth Quarter Ended




Year Ended





EPS and diluted shares)

Jan. 3,


Dec. 28, 


Change


Jan. 3,


Dec. 28, 


Change




2015


2013




2015


2013



















Net sales 

$13,956


$11,833


18%


$46,487


$42,554


9%

















Non-GAAP operating income

$247


$211


17%


$676


$598


13%



Non-GAAP operating margin

1.77%


1.78%


-1 bps


1.45%


1.41%


4 bps

















Operating income

$201


$173


16%


$487


$515


-5%



Operating margin

1.44%


1.46%


-2 bps


1.05%


1.21%


-16 bps

















Non-GAAP net income

$156


$139


12%


$409


$371


10%



Net income

$119


$112


6%


$267


$311


-14%

















Non-GAAP earnings per diluted share

$0.98


$0.88


11%


$2.56


$2.37


8%



Earnings per diluted share

$0.74


$0.71


4%


$1.67


$1.99


-16%

















Diluted shares outstanding (millions)

159.9


158.1




159.5


156.3



















 A reconciliation of GAAP financial measures to non-GAAP financial measures is presented in the Supplementary Information section in this press release.







Alain Monie, Ingram Micro CEO, commented, "As illustrated by strong financial performance, the fourth quarter was an excellent finish to another year of executing on our long-term plans and financial commitments. We continued to grow revenue well above market rates, resulting from strong performance across all regions and in all of our major product and services lines, including accelerated growth rates in mobility, supply chain solutions and cloud. We are consistently winning important customer contracts and vendor authorizations globally and we are profitably gaining share in a number of markets as illustrated by a 17 percent increase in non-GAAP operating income and 11 percent growth in non-GAAP earnings per diluted share. As our full year financial expectations indicate, we remain confident in our ability to deliver continued strong earnings growth, improved returns on capital and meaningful local currency revenue growth, particularly in our services business."

Fourth Quarter Results of Operations

Driven by strong growth across all geographies, worldwide sales increased year-over-year by more than $2 billion to $14.0 billion versus $11.8 billion in the 2013 fourth quarter. The addition of a 14th week in the 2014 fourth quarter benefited worldwide sales by approximately 7 percentage points when compared to last year. The translation of foreign currencies resulted in a year-over-year headwind to fourth quarter revenue growth of more than 4 percentage points. Non-GAAP operating income was up 17% over last year benefiting from strong performance in North America and Asia Pacific, driven by solid operating leverage and increasing revenue contribution from key strategic initiatives, including mobility, supply chain solutions and cloud. Europe's profitability was negatively impacted by the strengthening U.S. Dollar, a greater mix of consumer product sales and increased competitive pricing pressure. Interest and other expense increased by more than $10 million over the 2013 fourth quarter, due primarily to higher interest expense and nearly $4 million in higher foreign currency exchange losses. 

2014 fourth quarter non-GAAP net income was $156 million, leading to an historical high in earnings of 98 cents per diluted share, up from non-GAAP net income of $139 million, or 88 cents per diluted share in the prior year's fourth quarter. The translation of foreign currencies negatively impacted 2014 fourth quarter non-GAAP net income by $8 million, or 5 cents per diluted share, when compared to the 2013 fourth quarter.

Key 2014 fourth quarter business highlights:

  • Ingram Micro is strengthening its position as a leading global provider of device lifecycle services with the acquisition of ANOVO, a provider of reverse logistics and repair services for high-tech products such as smartphones and set-top boxes. The acquisition is expected to close in the 2015 first quarter. ANOVO generates annual revenue in excess of $300 million from operations in 11 countries across Europe and Latin America.
  • The company broadened its geographic reach and expanded its capabilities around high value solutions with the acquisition of a majority interest in Armada, the largest value-added technology distributor in Turkey with annual revenues of approximately $300 million.
  • Gartner, Inc. named CloudBlue, an Ingram Micro company and a leading provider of IT asset disposition services (ITAD), a "Leader" in the recently released "Magic Quadrant for IT Asset Disposition, Worldwide."
  • Ingram Micro further expanded its cloud marketplace to channel partners in Canada and Mexico, bringing an automated platform that makes it easier and more profitable for channel partners to deliver cloud services to small and mid-sized businesses. For the 2014 year, the company's cloud business grew in excess of 100 percent.
  • Google has teamed with Ingram Micro to handle inventory and shipping for a "modular" smartphone in a pilot region. 
  • Ingram Micro further expanded its government business with the addition of VMWare's line of solutions.
  • Dell named Ingram Micro "Distribution Partner of the Year" for the second consecutive year.
  • Microsoft awarded Ingram Micro the Gold Level of Excellence in Operations for delivering market-leading operational excellence supporting Microsoft technology over the past year.
  • Cisco honored the company as its Global Collaboration Midmarket Distributor of the Year.

Outlook 

The following statements are based on the company's current expectations for the 2015 first quarter and fiscal year and exclude the amortization of intangible assets, charges associated with acquisition-related costs, reorganization, integration and transition costs and other expense reduction programs and 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. These statements are forward-looking and actual results may differ materially.

For 2015, Ingram Micro expects the demand environment to remain stable and expects that the company will continue to outpace IT spending growth in local currency in the majority of its countries. 

For the 2015 year, revenue is expected to grow mid-single digits in local currency and to be relatively flat in U.S. dollars. The negative effect of currency translation versus last year impacts Ingram Micro's previously provided earnings expectations for 2015 by approximately 15 cents per diluted share. The company's financial expectations assume the average exchange rate for the 2015 year to be a $1.15 per Euro.

For the 2015 first quarter, revenue in U.S. dollars is expected to be flat to up 3 percent versus last year. The company anticipates, however, that it will continue to face increased competitive pricing pressure in Europe. Non-GAAP earnings per diluted share for the 2015 first quarter is expected to be in the range of 40 to 47 cents, which includes a negative impact of 4 cents related to currency movement, when compared with the first quarter last year.

Non-GAAP Disclosures

In addition to GAAP results, Ingram Micro is reporting non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP earnings per diluted share. These non-GAAP measures exclude charges associated with reorganization, integration and transition costs, including those associated with the company's previously announced organizational effectiveness program and integration of BrightPoint, as well as acquisition-related costs and the amortization of intangible assets. These non-GAAP financial measures also exclude a benefit related to the receipt of an LCD flat panel class action settlement and the impact of a reserve recorded in 2013 for estimated potential charges related to indirect tax declarations in Europe. Non-GAAP net income and non-GAAP earnings per diluted share 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.

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 similar 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 and may not be comparable to similarly titled measures used by other companies.

Reconciliation of GAAP to non-GAAP financial measures for the periods presented are attached to the press release.

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 (877) 869-3847 (toll-free within the United States and Canada) or (201) 689-8261 (other countries).

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 (877) 660-6853 or (201) 612-7415, conference ID "13599198."

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.

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 within the meaning of the Private Securities Litigation Reform Act, including statements relating to the expected benefits from new wins and market share and our ability to enhance earnings power, 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) changes in macro-economic conditions can affect our business and results of operations; (2) our acquisition and investment strategies may not produce the expected benefits, which may adversely affect results of operations; (3) we are dependent on a variety of information systems, which, if not properly functioning, and available, or if we experience system security breaches, data protection breaches or other cyber-attacks, could adversely disrupt our business and harm our reputation and net sales; (4) failure to retain and recruit key personnel would harm our ability to meet key objectives; (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 industry changes could negatively impact our future operating results; (7) we continually experience intense competition across all markets for our products and services; (8) termination of a key 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; (9) substantial defaults by our customers or the loss of significant customers could negatively impact our business, results of operations, financial condition or liquidity; (10) 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; (11) our goodwill and identifiable intangible assets could become impaired, which could reduce the value of our assets and reduce our net income in the year in which the write-off occurs;  (12) 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; (13) we cannot predict the outcome of litigation matters and other contingencies that we may be involved with from time to time; (14) We may become involved in intellectual property disputes that could cause us to incur substantial costs, divert the efforts of management or require us to pay substantial damages or licensing fees; (15) Our failure to comply with the requirements of environmental regulations could adversely affect our business;  (16) 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; (17) changes in accounting rules could adversely affect our future operating results; and (18) our quarterly results have fluctuated significantly.  There are additional contingencies associated with each of the above identified risks.  For example, in connection with our acquisition strategy, we risk failing to realize the anticipated benefits of an acquisition due to, among other things, the unsuccessful integration of an acquired business. Despite its global presence, Ingram Micro may fail to proactively identify and tap into emerging markets and geographies. We have historically instituted, and will continue to institute, changes to our strategies, operations and processes in an effort to address and mitigate risks; however, there are no assurances 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 our SEC filings, and specifically to Item 1A-  Risk Factors, of our latest Annual Report on Form 10K .

© 2014 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)










January 3,


December 28,


2015


2013





ASSETS




Current assets:




Cash and cash equivalents

$                          692,777


$                          674,390

Trade accounts receivable, net

6,115,328


5,454,832

Inventory

4,145,012


3,724,447

Other current assets

532,406


521,902





Total current assets

11,485,523


10,375,571





Property and equipment, net

432,430


488,699

Goodwill

532,483


527,526

Intangible assets, net

318,689


375,423

Other assets

62,318


23,976





Total assets

$                      12,831,443


$                      11,791,195





LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$                        6,522,369


$                        6,175,604

Accrued expenses

542,038


710,040

Short-term debt and current maturities of long-term debt

372,026


48,772





Total current liabilities

7,436,433


6,934,416





Long-term debt, less current maturities

1,096,889


797,454

Other liabilities

132,295


109,700





Total liabilities

8,665,617


7,841,570





Stockholders' equity

4,165,826


3,949,625





Total liabilities and stockholders' equity

$                      12,831,443


$                      11,791,195





 

Ingram Micro Inc.

Consolidated Statement of Income

(Amounts in 000s, except per share data)

(Unaudited)










Fourteen


Thirteen


 Weeks Ended


 Weeks Ended


January 3, 2015


December 28, 2013





Net sales

$                      13,956,218


$                      11,832,844

Cost of sales

13,180,915


11,123,179

Gross profit

775,303


709,665





Operating expenses:




Selling, general and administrative

544,205


509,414

Amortization of intangible assets

15,822


13,080

Reorganization costs 

14,308


14,579


574,335


537,073





Income from operations

200,968


172,592





Other expense (income):




Interest income

(1,100)


(1,766)

Interest expense

23,322


13,192

Net foreign currency exchange loss 

5,413


1,713

Other

2,394


6,536


30,029


19,675





Income before income taxes

170,939


152,917





Provision for income taxes

51,928


40,717





Net income

$                          119,011


$                          112,200





Diluted earnings per share

$                                0.74


$                                0.71





Diluted weighted average




shares outstanding

159,948


158,132





 

Ingram Micro Inc.

Consolidated Statement of Income

(Amounts in 000s, except per share data)

(Unaudited)










Fifty-three


Fifty-two 


Weeks Ended


Weeks Ended


January 3, 2015


December 28, 2013





Net sales

$                      46,487,426


$                      42,553,918

Cost of sales

43,821,709


40,064,361

Gross profit

2,665,717


2,489,557





Operating expenses:




Selling, general and administrative

2,025,948


1,891,573

Amortization of intangible assets

58,962


48,480

Reorganization costs 

93,545


34,629


2,178,455


1,974,682





Income from operations

487,262


514,875





Other expense (income):




Interest income

(4,882)


(7,652)

Interest expense

77,728


59,165

Net foreign currency exchange loss

4,260


11,578

Other

15,405


15,685


92,511


78,776





Income before income taxes

394,751


436,099





Provision for income taxes

128,060


125,516





Net income

$                          266,691


$                          310,583





Diluted earnings per share

$                                1.67


$                                1.99





Diluted weighted average




shares outstanding

159,452


156,272

 

Ingram Micro Inc.

Consolidated Statement of Cash Flows

(Amounts in 000s)

(Unaudited)






















Fifty-three


Fifty-two 






Weeks Ended


Weeks Ended






January 3, 2015


December 28, 2013









Cash flows from operating activities:





Net income

$                266,691


$                310,583


Adjustments to reconcile net income to cash 





 (used) provided by operating activities:






Depreciation and amortization

146,028


128,915



Stock-based compensation 

36,022


30,340



Excess tax benefit from stock-based compensation

(5,572)


(1,944)



Write-off of assets

12,855


8,399



Gain on sale of land and building

(1,684)


(1,045)



Noncash charges for interest and bond discount amortization

2,425


2,554



Deferred income taxes

(29,282)


(33,087)


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






Trade accounts receivable

(601,083)


(66,400)



Inventory

(405,611)


(159,779)



Other current assets

(24,268)


(13,654)



Accounts payable

252,977


234,913



Change in book overdrafts

52,486


(67,370)



Accrued expenses

(192,086)


93,615





Cash (used) provided by operating activities

(490,102)


466,040









Cash flows from investing activities:





Capital expenditures

(88,651)


(95,639)


Sale (purchase) of marketable securities, net

(187)


1,877


Proceeds from sale of land and building

67,470


1,169


Cost-based investment

(10,000)


-


Acquisitions and earn-out payment, net of cash acquired

(40,924)


(135,763)





Cash used by investing activities

(72,292)


(228,356)









Cash flows from financing activities:





Proceeds from exercise of stock options

19,334


43,384


Excess tax benefit from stock-based compensation

5,572


1,944


Net proceeds from issuance of senior unsecured notes, net of issuance costs

494,995


-


Fees associated with the amendment and extension of credit facilities

-


(1,086)


Net proceeds from (repayments of) revolving credit facilities

99,789


(195,729)


Other


-


(4,423)





Cash provided (used) by financing activities

619,690


(155,910)









Effect of exchange rate changes on cash and cash equivalents

(38,909)


(2,531)









Increase in cash and cash equivalents

18,387


79,243









Cash and cash equivalents, beginning of year

674,390


595,147









Cash and cash equivalents, end of year

$                692,777


$                674,390

 

Ingram Micro Inc.

Supplementary Information

Income from Operations - Reconciliation of GAAP to Non-GAAP Information

(Amounts in Millions)

(Unaudited)





























Fourteen Weeks Ended January 3, 2015











Stock-based


Consolidated



North America


Europe


Asia-Pacific


Latin America


compensation


Total














Net Sales


$           6,041.7


$           4,186.0


$           2,964.8


$              763.7


$                      -


$          13,956.2














GAAP Operating Income


$              124.2


$                34.2


$                37.3


$                16.6


$               (11.3)


$              201.0

Reorganization, integration and transition costs


12.3


16.4


2.4


1.4


-


32.5

Amortization of intangible assets


11.5


2.7


1.4


0.2


-


15.8

LCD class action settlement


(2.8)


-


-


-


-


(2.8)














Non-GAAP Operating Income


$              145.2


$                53.3


$                41.1


$                18.2


$               (11.3)


$              246.5








































GAAP Operating Margin


2.06%


0.82%


1.26%


2.17%




1.44%

Non-GAAP Operating Margin


2.40%


1.27%


1.39%


2.38%




1.77%





























Thirteen Weeks Ended December 28, 2013











Stock-based


Consolidated



North America


Europe


Asia-Pacific


Latin America


compensation


Total














Net Sales


$           4,719.9


$           4,047.1


$           2,384.3


$              681.5


$                      -


$          11,832.8














GAAP Operating Income


$                85.5


$                62.1


$                15.3


$                18.4


$                 (8.7)


$              172.6

Reorganization, integration and transition costs


8.6


10.9


5.6


-


-


25.1

Amortization of intangible assets


8.6


2.9


1.4


0.2


-


13.1














Non-GAAP Operating Income


$              102.7


$                75.9


$                22.3


$                18.6


$                 (8.7)


$              210.8








































GAAP Operating Margin


1.81%


1.53%


0.64%


2.70%




1.46%

Non-GAAP Operating Margin


2.18%


1.88%


0.94%


2.73%




1.78%

 

Ingram Micro Inc.

Supplementary Information

Income from Operations - Reconciliation of GAAP to Non-GAAP Information

(Amounts in Millions)

(Unaudited)





























Fifty-three Weeks Ended January 3, 2015











Stock-based


Consolidated



North America


Europe


Asia-Pacific


Latin America


compensation


Total














Net Sales


$          19,929.1


$          14,263.4


$           9,991.2


$           2,303.7


$                      -


$          46,487.4














GAAP Operating Income


$              343.5


$                28.2


$              108.8


$                42.8


$               (36.0)


$              487.3

Reorganization, integration and transition costs


52.2


78.0


6.9


2.5


-


139.6

Amortization of intangible assets


41.1


11.4


5.6


0.8


-


58.9

LCD class action settlement


(9.4)


-


-


-


-


(9.4)














Non-GAAP Operating Income


$              427.4


$              117.6


$              121.3


$                46.1


$               (36.0)


$              676.4








































GAAP Operating Margin


1.72%


0.20%


1.09%


1.86%




1.05%

Non-GAAP Operating Margin


2.14%


0.82%


1.21%


2.00%




1.45%





























Fifty-two Weeks Ended December 28, 2013











Stock-based


Consolidated



North America


Europe


Asia-Pacific


Latin America


compensation


Total














Net Sales


$          17,367.1


$          13,184.2


$           9,950.7


$           2,051.9


$                      -


$          42,553.9














GAAP Operating Income


$              329.3


$                92.8


$                80.0


$                43.1


$               (30.3)


$              514.9

Reorganization, integration and transition costs


23.9


23.3


12.3


-


-


59.5

Amortization of intangible assets


30.4


11.4


5.8


0.9


-


48.5

LCD class action settlement


(28.5)


-


-


(1.0)


-


(29.5)

European indirect tax declarations charge


-


5.0


-


-


-


5.0














Non-GAAP Operating Income


$              355.1


$              132.5


$                98.1


$                43.0


$               (30.3)


$              598.4








































GAAP Operating Margin


1.90%


0.70%


0.80%


2.10%




1.21%

Non-GAAP Operating Margin


2.04%


1.00%


0.99%


2.09%




1.41%

 

Ingram Micro Inc.

Supplementary Information

Reconciliation of GAAP to Non-GAAP Financial Measures

(Amounts in Millions, except per share data)

(Unaudited)





















Fourteen Weeks Ended January 3, 2015






Diluted




Net Income


Earnings per Share (a)








As Reported Under GAAP


$                       119.0


$                         0.74


Reorganization, integration and transition costs


27.3


0.17


Amortization of intangible assets


11.2


0.07


Pan-Europe foreign exchange loss


0.5


0.01


LCD class action settlement


(2.0)


(0.01)








Non-GAAP Financial Measure


$                       156.0


$                         0.98
















Thirteen Weeks Ended December 28, 2013






Diluted




Net Income


Earnings per Share (a)








As Reported Under GAAP


$                       112.2


$                         0.71


Reorganization, integration and transition costs


18.4


0.12


Amortization of intangible assets


9.6


0.06


Pan-Europe foreign exchange gain


(1.1)


(0.01)








Non-GAAP Financial Measure


$                       139.1


$                         0.88




(a)

Per share impact is calculated by dividing net income amount by the diluted weighted average shares outstanding of 159.9 and 158.1 for the fourteen weeks ended January 3, 2015 and thirteen weeks ended December 28, 2013, respectively.

 

Ingram Micro Inc.

Supplementary Information

Reconciliation of GAAP to Non-GAAP Financial Measures

(Amounts in Millions, except per share data)

(Unaudited)





















Fifty-three Weeks Ended January 3, 2015






Diluted




Net Income


Earnings per Share (a)








As Reported Under GAAP


$                       266.7


$                         1.67


Reorganization, integration and transition costs


112.4


0.71


Amortization of intangible assets


41.8


0.26


Pan-Europe foreign exchange gain


(5.6)


(0.04)


LCD class action settlement


(6.7)


(0.04)








Non-GAAP Financial Measure


$                       408.6


$                         2.56
















Fifty-two Weeks Ended December 28, 2013






Diluted




Net Income


Earnings per Share (a)








As Reported Under GAAP


$                       310.6


$                         1.99


Reorganization, integration and transition costs


43.2


0.28


Amortization of intangible assets


35.1


0.22


Pan-Europe foreign exchange loss


0.0


0.00


LCD class action settlement


(21.4)


(0.14)


European indirect tax declarations charge


3.6


0.02








Non-GAAP Financial Measure


$                       371.1


$                         2.37










(a)

Per share impact is calculated by dividing net income amount by the diluted weighted average shares outstanding of 159.5 and 156.3 for the fifty-three weeks ended January 3, 2015 and fifty-two weeks ended December 28, 2013, respectively.

 

Ingram Micro Inc.

 

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SOURCE Ingram Micro Inc.