SANTA ANA, Calif., Feb. 20 /PRNewswire-FirstCall/ -- Ingram Micro Inc. (NYSE: IM), the largest global wholesale provider of technology products and supply chain management services, today announced financial results for the fiscal year and fourth quarter that ended on Dec. 28, 2002.
Sales for the fourth quarter were $5.89 billion, a 4.1 percent decline versus a year ago but a 5.2 percent increase sequentially.
The company posted a fourth-quarter net loss, based on generally accepted accounting principles (GAAP), of $10.3 million or $0.07 per diluted share, primarily attributable to major-program costs of $62.7 million ($39.5 million net of tax) related to the profit enhancement program announced on Sept. 18, 2002. Excluding these costs, net income was $29.2 million or $0.19 per diluted share.
In the year-ago quarter, net income on a GAAP basis was $5.7 million or $0.04 per diluted share, which included reorganization costs and special items of $14.1 million ($8.7 million net of tax). Excluding these items, net income for the fourth quarter of 2001 was $14.4 million or $0.10 per diluted share.
"Our profit enhancement program is on track, paving the way for the company to be the IT distribution industry's performance leader," said Kent B. Foster, chairman and chief executive officer, Ingram Micro Inc. "Sales and earnings before major-program costs hit the top of the range of guidance we issued in October. Gross margins reflect exceptionally strong operational performance around the world, particularly in Europe. Looking ahead, our objectives are firmly in place. We are confident that we will be generating the $160 million in annualized operating income improvements identified in our profit enhancement program by this time next year, as we indicated when we introduced the plan in September."
Additional Fourth Quarter Highlights
For additional detail regarding the results outlined below, please refer to the financial schedules attached to this news release.
-- The gross margin increased 37 basis points to 5.62 percent versus 5.25
percent in the fourth quarter of 2001. Sequentially, the gross margin
increased 20 basis points over the 5.42 percent of revenues posted in
the third quarter of 2002. Affecting the gross margins were
major-program costs of $311,000 in the fourth quarter of 2002 and $1.2
million in the third quarter of 2002; excluding these costs, the gross
margin would have been 5.63 percent and 5.45 percent, respectively.
-- Total operating expenses, including major-program costs of $62.4
million, were $335.2 million versus $299.1 million in the year-ago
quarter, which included reorganization costs and special items.
Excluding these costs and special items, operating expenses were
$272.8 million or 4.63 percent of revenues, compared with $285.0
million or 4.64 percent of revenues in the fourth quarter of last year
and $262.4 million or 4.69 percent of revenues in the previous
quarter. In the prior year, operating expenses included approximately
$5.1 million for goodwill amortization, which was eliminated based on
new accounting rules adopted during the first quarter of 2002.
-- The company posted a fourth-quarter operating loss of $4.0 million,
including major-program costs, compared to operating income of $23.3
million, including reorganization costs and special items, in the
comparable period last year. Excluding major-program costs, income
from operations increased 57 percent to $58.7 million or 1.00 percent
of revenues from $37.4 million or 0.61 percent of revenues a year ago.
Sequentially, income from operations excluding major-program costs
increased 38 percent from the $42.5 million or 0.76 percent of
revenues reported in the third quarter.
-- Total depreciation (including accelerated depreciation of $4.6
million, a component of our major-program costs) was $24.5 million.
-- Capital expenditures were $12.2 million.
-- Inventory was $1.56 billion, 4 percent lower than a year ago.
Inventory turns and days on hand, at 14 and 26 respectively, were
stable sequentially and versus last year.
-- Total debt (including $75 million associated with our off-balance
sheet accounts receivable financing programs) was $441 million, 35
percent lower than the $680 million total debt a year ago (which
included $222 million associated with our off-balance sheet accounts
receivable financing programs). The total debt-to-capitalization
ratio (including the accounts receivable financing) was 21 percent
versus 27 percent a year ago. Net debt (total debt less $388 million
in cash and cash equivalents) was $53 million, or 3 percent of related
total capitalization.
"Every region ended the year on a high note," said Thomas A. Madden, executive vice president and chief financial officer, Ingram Micro Inc. "The soft sales we experienced in November were followed by a relatively robust December. The main driver of the solid earnings performance, however, was our continued diligence in building gross margins, coupled with tight management of our balance sheet. We've eliminated more than $1 billion of debt in 24 months, while inventory metrics have remained near record efficiency levels for the last five quarters. Working capital days, at 20, are at a historic low."
Regional Results
Fourth-quarter North American sales were 50 percent of the worldwide total or $2.96 billion, 10.6 percent lower than the year-ago quarter. Sales in Europe were approximately 35 percent of the total at $2.07 billion, a 3.5 percent increase versus a year ago (but a 6.1 percent decrease in local currencies). For the Latin America and Asia-Pacific regions combined, net sales increased 3.5 percent to $856.3 million or 15 percent of the total.
Regional operating income was also affected by costs related to the profit enhancement program. Including those costs, the North American region posted an operating loss of $18.6 million versus operating income of $35.9 million in the year-ago quarter; Europe generated operating income of $13.7 million versus a loss of $3.9 million a year ago; and the other regions' aggregated operating income was $940,000 versus a loss of $8.7 million in last year's fourth quarter.
Excluding the major-program costs, North American operating income was $36.8 million or 1.24 percent of revenues versus $40.6 million or 1.23 percent of revenues in the fourth quarter of last year. Europe generated operating income of $20.2 million or 0.97 percent of revenues, a significant improvement over the $4.5 million or 0.22 percent of revenues in the year-ago period. The Latin America and Asia-Pacific regions posted aggregated operating profits of $1.8 million, a $9.5 million improvement over the year-ago quarter's $7.7 million operating loss. The Asia-Pacific region posted a fourth-quarter operating profit.
Fiscal Year Results
For the 52 weeks ended Dec. 28, 2002, net sales were $22.46 billion, a 10.8 percent decline from the $25.19 billion in revenues posted for fiscal year 2001. Regional full-year sales were $12.13 billion for North America (18.5 percent less than 2001), $7.15 billion for Europe (flat in U.S. dollars and a decrease of 4.7 percent in local currencies) and $3.18 billion for the other international regions (a 1 percent increase). Gross profits, including major-program costs of $1.6 million, were $1.23 billion or 5.48 percent of revenues, 20 basis points higher than fiscal 2001.
Worldwide operating income was $50.2 million ($166.8 million, or 0.74 percent of revenues, before major-program costs related to the company's profit enhancement program announced in September and other restructuring costs related to previous actions) versus $92.9 million last year ($157.2 million, or 0.62 percent of revenues, before reorganization costs and special items). Regionally, full-year operating income was: $36.5 million for North America ($129.7 million before major-program and other reorganization costs); $12.7 million for Europe ($32.9 million before major-program and other reorganization costs); and, $971,000 for the other international regions ($4.2 million before major-program and other reorganization costs).
Net income for the 2002 fiscal year was affected by major-program and reorganization costs, as well as other special items and the cumulative effect of the adoption of a new accounting standard, as explained below. Including these costs and items, the company posted a fiscal-year net loss of $275.2 million or $1.81 per share versus net income of $6.7 million or $0.04 per share (which included reorganization costs, special items and extraordinary loss on repurchase of debentures of $42.1 million, net of taxes) in 2001. Excluding these costs and special items for both years, net income for 2002 was $75.0 million or $0.49 per share, a 54 percent increase over the $48.9 million or $0.32 per share in 2001.
Depreciation expense for the fiscal year was $98.8 million, which included $16.1 million of accelerated depreciation expenses, a component of our major-program costs. Capital expenditures for the fiscal year were $54.7 million.
Detail on Major-Program Costs and Special Items
Major-program costs for the fourth quarter totaled $62.7 million before taxes, of which $62.4 million were recorded as operating expenses, including: 1) reorganization costs of $39.5 million primarily for facility consolidations and workforce reductions throughout the world; and 2) $22.9 million of period costs primarily comprised of accelerated depreciation of fixed assets associated with the planned exit of facilities, asset write-offs associated with the outsourcing of our IT infrastructure, consulting fees directly associated with the profit enhancement plan and other related costs. In addition, $311,000 in inventory and vendor program losses related to the exit of certain markets were recorded as cost of sales.
For the 2002 fiscal year, major-program costs, reorganization costs and other special items were $110.1 million before tax, which included: reorganization costs of $71.1 million; period costs relating to operating expenses and costs of sales totaling $45.5 million; and a gain on the sale of securities of $6.5 million. Additionally, a one-time, non-cash charge of $280.9 million, net of taxes, was recorded in the first quarter of 2002, for the cumulative effect of adopting Statement of Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets."
For comparison purposes, reorganization costs and special items in the fourth quarter of 2001 totaled $14.1 million before taxes, of which $10.6 million were reorganization costs and $3.5 million was an impaired asset charge for an investment in an Internet-related company. For the 2001 fiscal year, reorganization costs and special items totaled $64.3 million before taxes, of which reorganization costs were $41.4 million; the write-off of capitalized software was $10.2 million; reserves for claims filed with a prior, insolvent insurance company were $9.2 million; and the $3.5 million impaired asset charge for an investment in an Internet-related company.
Outlook for the First Quarter
The following statements are based on the company's current expectations and internal forecasts. 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 company's forecast for the first quarter ending March 29, 2003, sales are expected to range from $5.40 billion to $5.55 billion, with net income before any major-program expenses and other special items ranging from $21 million to $24 million, or $0.14 to $0.16 per diluted share. Gross margins are expected to remain strong, within the range achieved in the second and third quarters of 2002.
The company's net results, required to be reported based on GAAP, will likely differ significantly from the forecast because of major-program costs related to the profit enhancement program, as the company indicated when it announced the program on Sept. 18, 2002.
"Recent reports of an uncertain demand environment have not diminished our longer-term outlook," said Foster. "Our profit enhancement targets were calculated using a flat revenue scenario and are not contingent on a resurgence of demand. We're confident that we will deliver on our promises, as we have in the past. Our gross margins will remain strong, we will manage expenses tightly and operating margins will improve. Our management team has the commitment and talent to make Ingram Micro the industry leader by every measure. I am optimistic about our potential and the future of this company."
Conference Call and Webcast
Additional information about Ingram Micro's financial results will be presented in a conference call today at 5 p.m. EST. To listen to the conference call, visit the company's Web site at www.ingrammicro.com/corp (Investor Relations section) or call (888) 455-0750 (toll-free within the United States and Canada) or (630) 395-0024 (other countries) and mention "Ingram Micro." The replay of the conference call will be available for one week through the company's Web site at www.ingrammicro.com/corp (Investor Relations section) or by calling (800) 678-3180 or (402) 220-3063 outside the United States and Canada.
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, including but not limited to statements about future sales levels, margins, restructuring charges, major-program expenses, cost savings, operating efficiencies, and profitability, are based on current management expectations that involve certain risks which if realized, in whole or in part, could have a material adverse effect on Ingram Micro's business, financial condition and results of operations, including, without limitation: (1) the company's failure to achieve the objectives of its profit enhancement program as announced in September 2002 or other process or organizational changes, in whole or in part, or delays in implementing components of the program; (2) intense competition, regionally and internationally, including competition from alternative business models, such as manufacturer-to-end-user selling, may lead to reduced prices, lower sales or reduced sales growth, lower gross margins, extended payment terms with customers, increased capital investment and interest costs, bad debt risks and product supply shortages; (3) termination of a supply or services agreement with a major supplier or customer or a significant change in supplier terms or conditions of sale; (4) failure of information systems and/or failure to successfully transition certain components of the company's IT infrastructure to its third-party provider could result in significant disruption to business or additional cost, or may not generate the intended level of cost savings; (5) disruptions in business operations due to reorganization activities; (6) the continuation or worsening of the severe downturn in economic conditions (particularly purchases of technology products) and failure to adjust costs in a timely fashion in response to a sudden decrease in demand; (7) losses resulting from significant credit exposure to reseller customers and negative trends in their businesses; (8) rapid product improvement and technological change and resulting obsolescence risks; (9) future terrorist or military actions; (10) dependence on key individuals and inability to retain personnel; (11) reductions in credit ratings and/or unavailability of adequate capital; (12) interest rate and foreign currency fluctuations; (13) adverse impact of governmental controls and actions or political or economic instability could adversely affect foreign operations; (14) failure to attract new sources of business from expansion of products or services or entry into new markets; (15) inability to manage future adverse industry trends; (16) difficulties and risks associated with integrating operations and personnel in acquisitions; (17) future periodic assessments required by current or new accounting standards may result in additional charges; and (18) 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 Micro's 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 significant factors to consider in connection with forward-looking statements concerning Ingram Micro, reference is made to Exhibit 99.01 of Ingram Micro's 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 Micro's future SEC filings. Ingram Micro disclaims any duty to update any forward-looking statements.
About Ingram Micro Inc.
As the world's leading wholesale provider of technology products and supply chain management services, Ingram Micro is the best way to get technology from the people who make it to the people who use it. Visit www.ingrammicro.com/corp .
(C) 2003 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
(Dollars in 000s)
(Unaudited)
December 28, December 29,
2002 2001
ASSETS
Current assets:
Cash and cash equivalents $387,513 $273,059
Investment in
available-for-sale securities -- 24,031
Accounts receivable, including
retained interest in securitized
receivables, net 2,354,906 2,297,957
Inventories 1,564,065 1,623,628
Other current assets 293,902 238,171
Total current assets 4,600,386 4,456,846
Property and equipment, net 250,244 303,833
Goodwill, net 233,922 508,227
Other 59,802 33,101
Total assets $5,144,354 $5,302,007
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,623,188 $2,607,145
Accrued expenses 438,787 279,669
Current maturities of
long-term debt 124,894 252,803
Total current liabilities 3,186,869 3,139,617
Convertible debentures 427 405
Long-term debt 16,779 --
Senior subordinated notes 223,846 204,899
Deferred income taxes and
other liabilities 80,444 89,788
Total liabilities 3,508,365 3,434,709
Stockholders' equity 1,635,989 1,867,298
Total liabilities and
stockholders' equity $5,144,354 $5,302,007
INGRAM MICRO INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(Dollars in 000s, except per share data)
(Unaudited)
Thirteen Weeks Ended December 28, 2002
Impact of
Reorganization
Costs, Other
Major-
As Program
Reported Costs and Non-GAAP
Under Special Financial
GAAP Items (a) Measure
Net sales $5,889,709 $-- $5,889,709
Cost of sales 5,558,522 311 5,558,211
Gross profit 331,187 (311) 331,498
Operating expenses:
Selling, general and
administrative 295,627 (22,859) 272,768
Reorganization costs 39,548 (39,548) --
Special items -- -- --
335,175 (62,407) 272,768
Income (loss) from operations (3,988) 62,718 58,730
Interest and other 12,334 -- 12,334
Income (loss) before income taxes (16,322) 62,718 46,396
Provision for (benefit from) income
taxes (6,040) 23,206 17,166
Net income (loss) $(10,282) $39,512 $29,230
Diluted earnings (loss) per share:
Net income (loss) $(0.07) $0.26 $0.19
Diluted weighted average shares
outstanding 151,828,157 151,828,157 151,828,157
Thirteen Weeks Ended December 29, 2001
Impact of
Reorganization
Costs, Other
Major-
As Program
Reported Costs and Non-GAAP
Under Special Financial
GAAP Items (b) Measure
Net sales $6,142,751 $-- $6,142,751
Cost of sales 5,820,297 -- 5,820,297
Gross profit 322,454 -- 322,454
Operating expenses:
Selling, general and
administrative 285,032 -- 285,032
Reorganization costs 10,610 (10,610) --
Special items 3,500 (3,500) --
299,142 (14,110) 285,032
Income (loss) from operations 23,312 14,110 37,422
Interest and other 13,583 -- 13,583
Income (loss) before income taxes 9,729 14,110 23,839
Provision for (benefit from) income
taxes 4,074 5,362 9,436
Net income (loss) $5,655 $8,748 $14,403
Diluted earnings (loss) per share:
Net income (loss) $0.04 $0.06 $0.10
Diluted weighted average shares
outstanding 150,848,595 150,848,595 150,848,595
(a) Major-program costs in 2002 include reorganization costs of $39,548
for facility consolidations and workforce reductions throughout the
world; $22,859 charged to selling, general and administrative
expenses, primarily comprised of accelerated depreciation of fixed
assets associated with the planned exit of facilities, asset
write-offs associated with the outsourcing of our IT infrastructure,
consulting fees directly associated with the profit-enhancement plan
and other related costs; and $311 recorded as cost of sales,
comprised of incremental inventory and vendor program losses caused
by the exit of certain markets.
(b) Reorganization costs and special items in 2001 included $10,610 of
reorganization costs for facility consolidation and workforce
reductions throughout the world; and $3,500 of impairment charge to
reduce the Company's minority equity investment in an
Internet-related company to estimated net realizable value.
INGRAM MICRO INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(Dollars in 000s, except per share data)
(Unaudited)
Fifty-two Weeks Ended December 28, 2002
Impact of
Reorganization
Costs, Other
Major-
As Program
Reported Costs and Non-GAAP
Under Special Financial
GAAP Items (a) Measure
Net sales $22,459,265 $-- $22,459,265
Cost of sales 21,227,627 1,552 21,226,075
Gross profit 1,231,638 (1,552) 1,233,190
Operating expenses:
Selling, general and
administrative 1,110,295 (43,944) 1,066,351
Reorganization costs 71,135 (71,135) --
Special items -- -- --
1,181,430 (115,079) 1,066,351
Income from operations 50,208 116,631 166,839
Other income (expense):
Gain on sale of available-for-
sale securities (6,535) 6,535 --
Interest and other 47,745 -- 47,745
41,210 6,535 47,745
Income before income taxes,
extraordinary item
and cumulative effect of
adoption of a new
accounting standard 8,998 110,096 119,094
Provision for (benefit from) income
taxes 3,329 40,736 44,065
Income before extraordinary item
and cumulative
effect of adoption of a new
accounting standard 5,669 69,360 75,029
Extraordinary loss on repurchase of
debentures,
net of income taxes -- -- --
Cumulative effect of adoption of a
new accounting
standard, net of income taxes (280,861) 280,861 --
Net income (loss) $(275,192) $350,221 $75,029
Diluted earnings (loss) per share:
Income before extraordinary item
and cumulative
effect of adoption of a new
accounting standard $0.04 $0.45 $0.49
Extraordinary loss on repurchase
of debentures -- -- --
Cumulative effect of adoption of
a new
accounting standard (1.85) 1.85 --
Net income (loss) $(1.81) $2.30 $0.49
Diluted weighted average shares
outstanding 152,145,669 152,145,669 152,145,669
Fifty-two Weeks Ended December 29, 2001
Impact of
Reorganization
Costs, Other
Major-
As Program
Reported Costs and Non-GAAP
Under Special Financial
GAAP Items (b) Measure
Net sales $25,186,933 $-- $25,186,933
Cost of sales 23,857,034 -- 23,857,034
Gross profit 1,329,899 -- 1,329,899
Operating expenses:
Selling, general and
administrative 1,172,665 -- 1,172,665
Reorganization costs 41,411 (41,411) --
Special items 22,893 (22,893) --
1,236,969 (64,304) 1,172,665
Income from operations 92,930 64,304 157,234
Other income (expense):
Gain on sale of available-for-
sale securities -- -- --
Interest and other 76,995 -- 76,995
76,995 -- 76,995
Income before income taxes,
extraordinary item
and cumulative effect of
adoption of a new
accounting standard 15,935 64,304 80,239
Provision for (benefit from) income
taxes 6,588 24,790 31,378
Income before extraordinary item
and cumulative
effect of adoption of a new
accounting standard 9,347 39,514 48,861
Extraordinary loss on repurchase of
debentures,
net of income taxes (2,610) 2,610 --
Cumulative effect of adoption of a
new accounting
standard, net of income taxes -- -- --
Net income (loss) $6,737 $42,124 $48,861
Diluted earnings (loss) per share:
Income before extraordinary item
and cumulative
effect of adoption of a new
accounting standard $0.06 $(0.26) $0.32
Extraordinary loss on repurchase
of debentures (0.02) (0.02) --
Cumulative effect of adoption of
a new
accounting standard -- -- --
Net income (loss) $0.04 $(0.28) $0.32
Diluted weighted average shares
outstanding 150,047,807 150,047,807 150,047,807
(a) Major-program costs and special items in 2002 include reorganization
costs of $71,135 for facility consolidations and workforce reductions
throughout the world; $43,944 charged to selling, general and
administrative expenses, primarily comprised of accelerated
depreciation of fixed assets associated with the planned exit of
facilities, asset write-offs associated with the outsourcing of our
IT infrastructure, consulting fees directly associated with the
profit-enhancement plan and other related costs; $1,552 recorded as
cost of sales, comprised of incremental inventory and vendor program
losses caused by the exit of certain markets; gain of $6,535 on the
sale of available-for-sale securities; and a one-time, non-cash
charge of $280,861 (net of taxes), recorded in the first quarter of
2002 for the cumulative effect of adopting Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets."
(b) Reorganization costs and special items in 2001 included $41,411 of
reorganization costs for facility consolidation and workforce
reductions throughout the world; $10,227 for the write-off of
capitalized software; $9,166 related to reserves recorded for claims
filed with one of the Company's prior credit insurance companies,
which was liquidated; $3,500 of impairment charge to reduce the
Company's minority equity investment in an Internet-related company
to estimated net realizable value; and an extraordinary loss of
$2,610 (net of taxes) on the repurchase of debentures.
INGRAM MICRO INC.
PRO FORMA CONSOLIDATED INCOME FROM OPERATIONS
(Dollars in 000s)
(Unaudited)
Thirteen Weeks Ended December 28,
2002
Impact of
Reorganization
Costs, Other
As Reported Major- Non-GAAP
Program
Under Costs and Financial
Special
GAAP Items Measure
North America $(18,637) $55,389 $36,752
Europe 13,709 6,486 20,195
Other international 940 843 1,783
$(3,988) $62,718 $58,730
Thirteen Weeks Ended December 29,
2001
Impact of
Reorganization
Costs, Other
As Reported Major- Non-GAAP
Program
Under Costs and Financial
Special
GAAP Items Measure
North America $35,905 $4,717 $40,622
Europe (3,922) 8,412 4,490
Other international (8,671) 981 (7,690)
$23,312 $14,110 $37,422
Fifty-two Weeks Ended December 28,
2002
Impact of
Reorganization
Costs, Other
As Reported Major- Non-GAAP
Program
Under Costs and Financial
Special
GAAP Items Measure
North America $36,498 $93,227 $129,725
Europe 12,739 20,147 32,886
Other international 971 3,257 4,228
$50,208 $116,631 $166,839
Fifty-two Weeks Ended December 29,
2001
Impact of
Reorganization
Costs, Other
As Reported Major- Non-GAAP
Program
Under Costs and Financial
Special
GAAP Items Measure
North America $104,673 $44,956 $149,629
Europe 13,642 13,574 27,216
Other international (25,385) 5,774 (19,611)
$92,930 $64,304 $157,234
SOURCE Ingram Micro Inc.