SANTA ANA, Calif., Feb. 17 /PRNewswire/ -- Ingram Micro Inc. (NYSE:IM)
, the world's largest wholesale provider of technology products and services, today announced its financial results for the fourth quarter and full year 1999. Net income for the fourth quarter of 1999 was $75 million or $0.51 per diluted share, compared to $73 million or $0.49 for the prior year's fourth quarter.
Results for the recent period included a gain on sale of part of Ingram Micro's position in SOFTBANK Corp. common stock. The company also recorded certain reorganization expenses, as well as larger-than-usual provisions for excess inventory, vendor-sponsored programs and doubtful accounts, primarily resulting from industry changes and vendor practices.
Business Summary
Net sales for the fourth quarter of 1999 grew 26 percent to $7.83 billion. For the same period, net sales in the U.S. region grew 18 percent to $4.35 billion and net sales in the European region grew 19 percent to $2.36 billion. For geographic regions outside the United States and Europe, net sales increased 108 percent to $1.12 billion and includes net sales from the company's Asia-Pacific operations, reflecting the acquisition of Electronic Resources Ltd. in January 1999, as well as growth in the company's Canadian and Latin American operations.
"In 1999, demand for Ingram Micro's broad technology product offering and world-class logistics and fulfillment services was solid in all regions of the world with significant increases in supplying Internet retail sales and e-commerce-driven business," said Jerre Stead, chairman and chief executive officer. "Our teams around the world continue to lead with superior execution on accuracy, timeliness and product availability with dramatic increases in order volume."
SOFTBANK Investment Gain
During the fourth quarter of 1999, Ingram Micro recognized a gain, net of tax, of $125 million from the sale of 35 percent of its original position in SOFTBANK common stock. In the fall of 1998, Ingram Micro formed a strategic alliance with SOFTBANK to collaborate on business opportunities by providing reseller customers with technology products and services in each company's respective geographic regions. At the time of that agreement, each of the companies invested $50 million in the other's common stock.
During January 2000, Ingram Micro sold an additional 15 percent of its original position in SOFTBANK common stock for a gain, net of tax, of approximately $69 million. Ingram Micro used the proceeds from these sales to further strengthen its balance sheet by reducing debt.
Industry Transition Reflected in Cost of Sales
"In 1999, Ingram Micro and other distributors have experienced changes in vendor terms and conditions and incentive programs that have resulted in increasing the cost of goods we sell to our customers," said Stead. "As we enter 2000, we are implementing business changes to improve margins for our services by increasing our prices to include these higher costs as we also continue to tighten our business processes with our suppliers and our customers."
Based on rapid changes in the technology marketplace and significant changes to vendor programs, Cost of Sales during the fourth quarter of 1999 includes provisions substantially larger than the company's historical experience for excess and slow-moving inventory and for changes in compensation from vendor-sponsored programs. The total provisions for these two items equal $102 million or 1.30 percent of sales. The company has implemented and is continually refining changes to its pricing strategy, inventory management processes and participation in vendor-subsidized programs that are expected to demonstrate significant progress in reducing the impact of these costs on profitability as early as the first half of 2000.
Specific Customer Situations Reflected in Operating Expense
During the fourth quarter of 1999, specific customer situations, largely in the area of reconciling product returns from the retail market segment, resulted in providing an amount for doubtful accounts larger than the company's historical experience. This provision for doubtful accounts totaled $41 million or 0.52 percent of sales. The company has implemented changes in its product-return procedures that are expected to demonstrate significant progress in reducing costs for these provisions to amounts closer to historical levels as early as the first quarter of 2000.
Full-year Review
For the full fiscal year 1999, net sales topped $28.1 billion, growing 27 percent over 1998. Net income, excluding one-time reorganization costs of $13 million net of tax and extraordinary gain of $4 million net of tax, was $192 million or $1.30 per diluted share and compares to $245 million of net income or $1.64 per diluted share for 1998. Net income, including reorganization costs and the extraordinary gain, was $183 million or $1.24 per diluted share.
Strong Balance Sheet Position
At the end of fiscal 1999, Ingram Micro's capital position improved based on good asset utilization and contributions to equity from earnings and investment appreciation. Total debt declined $372 million from the end of 1998 to $1.35 billion at the end of 1999. Stockholders' Equity increased $568 million from the end of 1998 to $1.97 billion or $13.64 per outstanding share at the end of 1999. The increase in Stockholders' Equity at year-end includes the effect of unrealized gains of $357 million net of tax on the company's investment in SOFTBANK common stock. The company's position in SOFTBANK as of February 17, 2000 represents an unrealized gain of approximately $450 million net of tax.
Business Outlook
"With our year-end Balance Sheet, Ingram Micro is entering 2000 from a position of financial strength as the leader in the technology distribution industry, with unique capabilities to capitalize on opportunities around the world," said Stead. "There is broad recognition of the importance of high- volume, accurate and timely distribution services as evidenced by the challenges faced by many industries, especially in Internet fulfillment, in the fourth quarter of 1999."
Stead continued, "Our first priority is to improve profitability by marketing our products and services to customers and vendors that appropriately compensate us for our valuable services." Based on current estimates for the first quarter of 2000, Ingram Micro expects net income to range between $88 million and $94 million or between $0.60 and $0.64 per diluted share. This estimate includes a gain of $69 million, net of tax, or approximately $0.47 per diluted share, on the sale of SOFTBANK common stock during January of 2000.
About Ingram Micro Inc.
Ingram Micro Inc., headquartered in Santa Ana, Calif., is the world's largest wholesale provider of technology products and services, and is a leader in assembly and integration services with sales of $28 billion for the past four reported quarters. The company and its subsidiaries operate in 34 countries and distribute more than 280,000 products to more than 175,000 resellers. Ingram Micro can be found at http://www.ingrammicro.com/.
Forward-Looking Statement
This press release contains forward-looking statements regarding Ingram Micro's business prospects based on management's current expectations. The business outlook has been developed based on the currently available information on business trends and environment, customer and vendor discussions and contracts and internal forecasts. Actual results could differ materially from current expectations if demand for the company's products and services changes significantly, if the competitive pricing environment intensifies or if vendors change their rebates and incentives even further. There are additional risks outlined in Exhibit 99.01 of our Annual Report on form 10-K filed with the SEC for 1998 that could also cause Ingram Micro's actual results to differ materially from these estimates.
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