Earnings Before Reorganization Costs And Special Items Exceed Expectations
SANTA ANA, Calif., April 25, 2002 - Ingram Micro Inc. (NYSE: IM), the largest global wholesale provider of technology products and supply chain management services, today announced financial results for the first quarter ended March 30, 2002.
Net sales were $5.62 billion versus $7.19 billion in the first quarter of last year, a decline of 22 percent, with net income of $13.5 million or $0.09 per share (before reorganization costs, gain on the sale of securities and the cumulative effect of the adoption of a new accounting standard).
"Income and earnings per share before reorganization costs and special items surpassed the guidance we issued in February," explained Kent B. Foster, chairman and chief executive officer, Ingram Micro Inc. "Gross margins increased significantly -- reaching the highest point since the end of 2000 -- and operating expenses were down $44.3 million compared with a year ago. We also continued our superb management of working capital, with debt at the lowest level in five years and inventory metrics holding steady near last quarter's record achievements."
During the quarter, the company recorded reorganization costs of $3.4 million ($2.1 million after taxes), related primarily to facility consolidations and workforce reductions in conjunction with the company's global restructuring plan, as well as a gain on the sale of securities totaling $6.5 million ($4.1 million after taxes). Income including these items was $15.5 million or $0.10 per share, compared to $26.4 million or $0.18 per share in the year-ago quarter.
As previously announced, the company adopted Statement of Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets" (SFAS 142), during the first quarter of 2002, which requires that goodwill be reviewed for impairment upon adoption. As a result, the company recorded a one-time, non-cash charge of $280.9 million, net of income taxes, or $1.84 per share, for the cumulative effect of adopting SFAS 142. This was within the estimated range of $260 million to $290 million previously disclosed with the company's 2001 year-end results. Including the impact of adopting this accounting standard, net losses were $265.4 million or $1.74 per share.
Additional First Quarter Highlights
- Gross margin was 5.41 percent, seven basis points higher than the year-ago quarter and a 16-basis-point sequential improvement.
- Operating expenses were $269.4 million, $44.3 million less than the year-ago quarter and $15.6 million less than the fourth quarter of last year the result of rigorous cost controls and the restructuring actions the company announced last year. Previously, operating expenses included approximately $5 million per quarter for goodwill amortization, which has been eliminated in accordance with SFAS 142.
- Income from operations, before reorganization costs, was $34.2 million versus $70.5 million a year ago.
- Earnings before interest, income tax, depreciation and amortization (EBITDA) was $54.8 million, excluding reorganization costs and special items, compared with $99.5 million a year ago.
- Depreciation was $20.6 million and capital expenditures were $15.6 million.
- Inventory was $1.5 billion, 35 percent lower than a year ago. Inventory turns and days on hand remained relatively stable sequentially at 14 and 26, respectively. A year ago, inventory turns were 12 and days on hand were 31.
- Total debt (including off-balance sheet debt of $155 million associated with accounts receivable financing programs) was $503 million, a reduction of 26 percent since the end of 2001 and 62 percent less than the $1.3 billion a year ago. The total debt-to-capitalization ratio (including the off-balance sheet financing) was 24 percent.
The companys intense focus on profitability helped us exceed expectations this quarter, said Thomas A. Madden, executive vice president and chief financial officer, Ingram Micro Inc. Intelligent pricing, new fee-for-service accounts, and solid vendor rebates, discounts and marketing achievements helped boost the gross margin, while we continued to reduce operating expenses through tighter controls and business process improvements. At the same time, we fought the challenging economic environment and delivered revenues within our guidance range. Although prior-year sales comparisons continue to be difficult because of the demand environment currently experienced by most technology-related companies, the sequential sales decline of nine percent fits seasonal patterns.
The company combined the U.S. and Canadian regions at the beginning of the year, and now reports consolidated North American results. North American sales were $3.12 billion or 56 percent of the worldwide total, compared with combined sales in the U.S. and Canada of $4.35 billion in the first quarter of last year, a decline of 28 percent. European sales were 31 percent of the total at $1.76 billion, a decline of 14 percent (11 percent in local currencies) compared with sales of $2.05 billion a year ago. For geographic regions outside North America and Europe which includes Latin America and Asia-Pacific net sales were $740 million (13 percent of the total), a decline of six percent versus last year.
Worldwide operating income before reorganization costs was $34.2 million, down 51 percent versus the year-ago quarter, while the operating margin was 0.61 percent of revenues, consistent with the fourth quarter of last year despite the sequential sales decline. Geographically, operating income before reorganization costs was $24.3 million for North America, a decline of 54 percent compared with last year; $14.0 million for Europe, a decline of 41 percent versus a year ago; and an aggregated operating loss of $4.1 million for the other international regions, a 28 percent improvement over last year despite the economic difficulties in Argentina.
Our better-than-expected operational performance got 2002 off to a solid start, said Foster. We are pleased with the results, but not satisfied. We plan to improve our financial performance this year by further reducing expenses, expanding the supply chain services business and developing new opportunities for profitable growth. The achievements we make toward these three objectives will provide a foundation for future earnings power and enhanced value for our shareowners.
Outlook For The Second Quarter
The following statements are based on the companys current expectations
and internal plan. These statements are forward-looking and actual results may
differ materially, as outlined in the company's periodic filings with the Securities
and Exchange Commission.
According to the companys forecast for the second quarter ending June 29, 2002, sales are expected to range from $5.25 billion to $5.40 billion, with net income before any reorganization costs and special items ranging from $6.0 million to $9.0 million, or $0.04 to $0.06 per diluted share.
We do not expect strong demand to return in the second quarter and predicting the timing of an upturn is difficult, said Madden. Were hearing similar forecasts from our IT peers and industry experts throughout the world. As a result, our sales guidance for the second quarter reflects a normal sequential decline from four to seven percent. If the typical seasonal trends continue, sales in the third quarter would be relatively flat sequentially, followed by a sequential up-tick in the mid-single digits for the fourth quarter.
Conference Call And Webcast
Additional information about Ingram Micros financial results will be presented
in a conference call today at 5 p.m. EDT. To listen to the conference call via
telephone, call (888) 455-0750 (toll-free within the United States and Canada)
or (630) 395-0022 (other countries) and mention Ingram Micro.
To listen to the call via a live audio webcast, visit the Investor Relations page of the Ingram Micro Web site, located at www.ingrammicro.com/corp. The replay of the conference call will be available for one week through the Web site or by calling (800) 678-3180 or (402) 220-3063 (outside the United States and Canada).
To view the company's first quarter financials, see the Consolidated Balance Sheet, Statement Of Income and Supplementary Schedule. (You'll need Adobe Acrobat Reader to view these files.)
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 are based
on current management expectations that involve certain risks, including, without
limitation: intense competition in the U.S., Canada and internationally; the
severe downturn in economic conditions (particularly purchases of technology
products) may continue or worsen; future terrorist or military actions; continued
pricing and margin pressures; failure to adjust costs in a timely fashion in
response to a sudden decrease in demand; the potential for declines in inventory
values and continued restrictive vendor terms and conditions; the potential
decline as well as seasonal variations in demand for Ingram Micros products
and services; unavailability of adequate capital; inability to manage future
adverse industry trends; failure of information systems; significant credit
loss resulting from significant credit exposure to reseller customers and negative
trends in their businesses; interest rate and foreign currency fluctuations;
adverse impact of governmental controls and actions and political or economic
instability on foreign operations; changes in local, regional, and global economic
conditions and practices; dependence on key individuals and inability to retain
personnel; product supply shortages; the potential termination of a supply agreement
with a major supplier; difficulties and risks associated with integrating operations
and personnel in acquisitions; disruptions due to reorganization activities;
rapid product improvement and technological change and resulting obsolescence
risks; and dependence on independent shipping companies.
Ingram Micro has instituted in the past and continues to institute changes to its strategies, operations and processes to address these risk factors and to mitigate their impact on Ingram Micros results of operations and financial condition. However, no assurances can be given that Ingram Micro will be successful in these efforts. For a further discussion of these and other significant factors to consider in connection with forward-looking statements concerning Ingram Micro, reference is made to Exhibit 99.01 of Ingram Micros Annual Report on Form 10-K for the year ended December 29, 2001; other risks or uncertainties may be detailed from time to time in Ingram Micros future SEC filings.
About Ingram Micro Inc.
Ingram Micro Inc. is the largest global wholesale provider of technology products
and supply chain management services. The company operates in 37 countries with
sales of more than $25 billion for the fiscal year 2001. Ingram Micros
global regions provide the distribution of technology products and services,
marketing development and supply chain management services to nearly 170,000
technology solution providers and 1,700 manufacturers. The company is focused
on maximizing shareowner value and achieving customer satisfaction through innovation
in the information technology supply chain. Visit www.ingrammicro.com/corp.