Ingram Micro Reports 2020 Fiscal Second Quarter Financial Results

IRVINE, Calif.--(BUSINESS WIRE)-- Ingram Micro Inc. today announced financial results for the 2020 fiscal second quarter ended June 27, 2020. Ingram Micro delivered solid results with a strong increase in profitability led by robust performance in Technology Solutions and Commerce & Lifecycle Services. Worldwide 2020 second quarter sales were $10.49 billion, with gross profit of $821 million, or 7.83 percent of sales. The company continued to deliver stronger profitability based on a better mix of higher margin sales, including solutions addressing requirements for work-from-home IT needs, which led to continued gross margin expansion – up 81 basis points over the 2019 second quarter – despite a year-over-year decrease in second quarter sales of 9 percent in USD. The translation of foreign currencies compared to last year had a negative impact of approximately 2.4 percent on 2020 second quarter sales. This compares to sales of $11.53 billion, gross profit of $810 million and gross margin of 7.02 percent for the 2019 second quarter. 2020 second quarter non-GAAP operating income was $223 million, or 2.12 percent of sales, a 53 basis-point increase over last year, with non-GAAP net income for the 2020 second quarter of $150 million. This compares to 2019 second quarter non-GAAP operating income of $184 million, or 1.59 percent of sales, and non-GAAP net income of $119 million. 2020 second quarter GAAP operating income was $206 million, or 1.96 percent of sales (with the primary GAAP to non-GAAP difference made up of pre-tax amortization expense of $16 million), and GAAP net income was $142 million. This compares to 2019 second quarter GAAP operating income of $156 million, or 1.35 percent of sales, and GAAP net income of $97 million.

Impact of COVID-19

The company has benefited from its broad portfolio of products and solutions as a decrease in demand for certain services and Advanced Solutions offerings during the second quarter related to the COVID-19 pandemic, was offset by strength in Technology Solutions and ecommerce solutions demand across multiple categories and geographies as businesses and consumers shifted spending patterns in the work-from-home and shelter-in-place environment. While profitability has been strong during the first half of fiscal 2020, the shutdown of many businesses around the world could have a negative impact on the company’s financial performance through the remainder of the fiscal year.

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 second quarter and six months ended June 27, 2020 and June 29, 2019 as covered in this release. 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 benefit in the second quarter of 2019 related to the receipt of an LCD flat panel class action settlement. 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. 2020 six months ended non-GAAP net income also excludes the non-cash tax benefit of a research and development credit, reversal of a Spain UTP reserve upon a favorable court ruling, less non-deductible meal and entertainment in the US, and reduced US tax expense as a result of higher expected foreign tax credit utilization. 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.

Ingram Micro Inc.
Consolidated Balance Sheets
(Amounts in 000s)
(Unaudited)

	June 27,		December 28,
	2020		2019

ASSETS
Current assets:
Cash and cash equivalents	$	697,716	$	671,821
Trade accounts receivable, net		7,141,696		7,903,900
Inventory		4,693,040		4,193,232
Other current assets		626,428		688,627

Total current assets		13,158,880		13,457,580

Property and equipment, net		455,753		455,440
Goodwill		945,009		946,953
Intangible assets, net		231,517		253,179
Other assets		328,288		360,296

Total assets	$	15,119,447	$	15,473,448

LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable	$	7,610,188	$	8,088,974
Accrued expenses		884,839		1,065,307
Short-term debt and current maturities of long-term debt		95,837		142,437

Total current liabilities		8,590,864		9,296,718

Long-term debt, less current maturities		1,768,671		1,337,788
Other liabilities		160,743		169,289

Total liabilities		10,520,278		10,803,795

Stockholder's equity		4,599,169		4,669,653

Total liabilities and stockholder's equity	$	15,119,447	$	15,473,448

Ingram Micro Inc.
Consolidated Statements of Income
(Amounts in 000s)
(Unaudited)

	Thirteen Weeks Ended
	June 27, 2020			June 29, 2019

Net sales	$	10,488,959		$	11,537,545
Cost of sales		9,667,730			10,727,728
Gross profit		821,229			809,817

Operating expenses:
Selling, general and administrative		599,532			631,931
Amortization of intangible assets		15,747			17,843
Reorganization costs		-			3,931
		615,279			653,705

Income from operations		205,950			156,112

Other (income) expense:
Interest income		(5,262	)		(638	)
Interest expense		22,491			26,850
Net foreign currency exchange loss (gain)		2,651			(5,940	)
Other		(1,149	)		4,964
		18,731			25,236

Income before income taxes		187,219			130,876

Provision for income taxes		45,103			34,257

Net income	$	142,116		$	96,619

Ingram Micro Inc.
Consolidated Statements of Income
(Amounts in 000s)
(Unaudited)

	Twenty-six Weeks Ended
	June 27, 2020			June 29, 2019

Net sales	$	21,440,407		$	23,113,061
Cost of sales		19,823,777			21,531,783
Gross profit		1,616,630			1,581,278

Operating expenses:
Selling, general and administrative		1,239,009			1,257,857
Amortization of intangible assets		31,210			37,551
Reorganization costs		-			4,234
		1,270,219			1,299,642

Income from operations		346,411			281,636

Other (income) expense:
Interest income		(9,704	)		(2,991	)
Interest expense		47,134			53,888
Net foreign currency exchange gain		(4,763	)		(17,010	)
Other		5,610			11,333
		38,277			45,220

Income before income taxes		308,134			236,416

Provision for income taxes		74,689			63,262

Net income	$	233,445		$	173,154

Ingram Micro Inc.
Consolidated Statements of Cash Flows
(Amounts in 000s)
(Unaudited)

	Twenty-six Weeks Ended
	June 27, 2020			June 29, 2019

Cash flows from operating activities:
Net income	$	233,445		$	173,154
Adjustments to reconcile net income to cash used by operating activities:
Depreciation and amortization		93,598			97,668
Loss (gain) on marketable securities, net		2,375			(7,210	)
Gain on sale of property and equipment		(887	)		(439	)
Revaluation of other consideration for acquisitions		224			-
Noncash charges for interest and bond discount amortization		1,322			1,178
Deferred income taxes		22,710			583
Changes in operating assets and liabilities, net of effects of acquisitions:
Trade accounts receivable		616,782			1,168,517
Inventory		(578,757	)		(58,345	)
Other current assets		38,671			(26,019	)
Accounts payable		(103,562	)		(1,162,919	)
Change in book overdrafts		(223,252	)		(131,991	)
Accrued expenses		(178,472	)		(58,321	)
Cash used by operating activities		(75,803	)		(4,144	)

Cash flows from investing activities:
Capital expenditures		(68,375	)		(80,773	)
Sale (purchase) of marketable securities, net		489			(2,586	)
Proceeds from sale of property and equipment		643			1,084
Acquisitions, net of cash acquired		(23,366	)		(1,381	)
Cash used by investing activities		(90,609	)		(83,656	)

Cash flows from financing activities:
Other consideration for acquisitions		(124	)		(1,967	)
Dividends paid to shareholders		(178,192	)		(131,067	)
Net proceeds from revolving and other credit facilities		395,536			152,680
Cash provided by financing activities		217,220			19,646

Effect of exchange rate changes on cash and cash equivalents		(24,913	)		3,203

Increase (decrease) in cash and cash equivalents		25,895			(64,951	)

Cash and cash equivalents, beginning of period		671,821			533,949

Cash and cash equivalents, end of period	$	697,716		$	468,998

Ingram Micro Inc.
Supplementary Information
Income from Operations - Reconciliation of GAAP to Non-GAAP Information
(Amounts in Millions)
(Unaudited)

	Thirteen Weeks Ended
	June 27, 2020			June 29, 2019

Net Sales	$	10,489.0		$	11,537.5

GAAP Operating Income	$	206.0		$	156.1
Reorganization, integration and transition costs		1.1			14.1
Amortization of intangible assets		15.7			17.8
Settlement of a class action lawsuit		-			(4.2	)

Non-GAAP Operating Income	$	222.8		$	183.8



GAAP Operating Margin		1.96	%		1.35	%
Non-GAAP Operating Margin		2.12	%		1.59	%



	Twenty-six Weeks Ended
	June 27, 2020			June 29, 2019

Net Sales	$	21,440.4		$	23,113.1

GAAP Operating Income	$	346.4		$	281.6
Reorganization, integration and transition costs		3.5			22.4
Amortization of intangible assets		31.2			37.6
Settlement of a class action lawsuit		-			(4.2	)

Non-GAAP Operating Income	$	381.1		$	337.4



GAAP Operating Margin		1.62	%		1.22	%
Non-GAAP Operating Margin		1.78	%		1.46	%

Ingram Micro Inc.
Supplementary Information
Reconciliation of GAAP to Non-GAAP Financial Measures
(Amounts in Millions)
(Unaudited)

	Thirteen Weeks Ended
	June 27, 2020			June 29, 2019
	Net Income			Net Income

As Reported Under GAAP	$	142.1		$	96.6
Reorganization, integration and transition costs		0.7			9.7
Amortization of intangible assets		9.7			12.5
Settlement of a class action lawsuit		-			(2.9	)
Pan-Europe foreign currency exchange loss		0.5			3.2
Tax benefit on Spain UTP reversal, non-deductible meal and entertainment expenses and foreign tax credit utilization		(3.4	)		-

Non-GAAP Financial Measure	$	149.6		$	119.1


	Twenty-six Weeks Ended
	June 27, 2020			June 29, 2019
	Net Income			Net Income

As Reported Under GAAP	$	233.4		$	173.2
Reorganization, integration and transition costs		2.3			16.1
Amortization of intangible assets		19.8			27.2
Settlement of a class action lawsuit		-			(2.9	)
Pan-Europe foreign currency exchange gain		0.3			0.6
Tax benefit on research and development credit		(1.7	)		-
Tax benefit on Spain UTP reversal, non-deductible meal and entertainment expenses and foreign tax credit utilization		(3.4	)		-

Non-GAAP Financial Measure	$	250.7		$	214.2

Note: Amounts above are net of applicable income taxes.

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

Source: Ingram Micro Inc.

Released August 31, 2020

Ingram Micro Reports 2020 Fiscal Second Quarter Financial Results

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