SANTA ANA, Calif., July 30 /PRNewswire-FirstCall/ -- Ingram Micro Inc. (NYSE: IM), the world's largest wholesale provider of technology products and services, today announced financial results for the second quarter of fiscal year 2003 (ended June 28, 2003).
Net income based on generally accepted accounting principles (GAAP) increased 31 percent to $11.5 million or $0.08 per diluted share versus $8.8 million or $0.06 per diluted share in the year-ago quarter. On a non-GAAP basis, net income excluding major-program costs increased 61 percent to $19.6 million or $0.13 per diluted share versus $12.2 million or $0.08 per diluted share in the year-ago quarter. Non-GAAP net income excludes major-program costs of $12.5 million (approximately $8.1 million net of tax) in the second quarter of 2003 and reorganization costs of $5.4 million (approximately $3.4 million net of tax) in the second quarter of 2002.
Worldwide sales for the quarter were $5.17 billion, a decline of 3.4 percent versus sales of $5.35 billion a year ago. North America generated 50 percent of the quarter's total sales, while Europe generated 34 percent and the Other International regions (Latin America and Asia-Pacific) generated 16 percent.
"Our resolve to deliver value and profitability was demonstrated throughout the organization," said Kent B. Foster, chairman and chief executive officer, Ingram Micro Inc. "The quarter began with soft North American demand, as we described three months ago, but we maintained our intelligent pricing strategy and reinforced our value to our business partners. Our European region delivered a solid performance despite a sluggish economy, while Asia-Pacific overcame the SARS threat to maintain operating profitability. As a result, sales and income exceeded the top end of the range of guidance issued at the end of April."
Additional Second Quarter Highlights
For additional detail regarding the results outlined below, please refer to the financial statements attached to this news release or visit www.ingrammicro.com/corp .
Regional Sales
-- North American sales were $2.57 billion, a decline of 13.1 percent
versus the year-ago quarter and 6.7 percent sequentially.
-- European sales were $1.78 billion, a 10.5 percent increase versus a
year ago (a local-currency decrease of approximately 9 percent) and a
decrease of 7.6 percent sequentially.
-- Sales in the Other International regions (Latin America and
Asia-Pacific) were $818 million, an increase of 4.4 percent versus a
year ago and 3.5 percent sequentially.
Gross Margin
-- The gross margin was 5.44 percent, a decrease of four basis points
versus the prior year but an increase of three basis points
sequentially on a GAAP basis and two basis points on a non-GAAP basis.
The gross margin has exceeded 5.40 percent for six consecutive
quarters.
Operating Expenses
-- On a GAAP basis, total operating expenses were $254.1 million or
4.91 percent of revenues versus $267.2 million or 4.99 percent of
revenues in the year-ago quarter.
-- Excluding major-program and reorganization costs, operating expenses
were $241.6 million or 4.67 percent of revenues versus $261.8 million
or 4.89 percent of revenues in the year-ago quarter -- a reduction of
$20.2 million or 22 basis points. The translation impact of the
relatively strong Euro added approximately $18 million to the quarter's
operating expenses versus the prior year.
Operating Income -- Worldwide
-- On a GAAP basis, income from operations was $27.3 million or
0.53 percent of revenues compared to $25.9 million or 0.48 percent of
revenues in the year-ago quarter.
-- Excluding major-program and reorganization costs, income from
operations increased 27 percent or 19 basis points, despite the slight
decline in sales, to $39.8 million or 0.77 percent of revenues from
$31.3 million or 0.58 percent of revenues a year ago.
Operating Income -- North America
-- On a GAAP basis, income from operations was $19.9 million or
0.77 percent of revenues versus $24.4 million or 0.83 percent of
revenues in the year-ago quarter.
-- Excluding major-program and reorganization costs, operating income was
$27.5 million or 1.07 percent of revenues versus $26.9 million or
0.91 percent of revenues in the year-ago quarter.
Operating Income -- Europe
-- On a GAAP basis, income from operations was $7.0 million or
0.39 percent of revenues versus a loss of $1.7 million or 0.11 percent
of revenues in the year-ago quarter. Operating income based on GAAP
for the second quarter was reduced by a $5.1 million charge associated
with the sale of the company's German semiconductor equipment
distribution business, a non-core operation that posted less than one
percent of European revenues and a small operating loss last year.
-- Excluding major-program and reorganization costs, operating income was
$11.8 million or 0.66 percent of revenues versus $0.2 million or
0.01 percent of revenues in the year-ago quarter.
Operating Income -- Other International (Latin America and Asia-Pacific)
-- On a GAAP basis, income from operations was $0.4 million or
0.06 percent of revenues versus $3.2 million or 0.41 percent of
revenues in the year-ago quarter.
-- Excluding major-program and reorganization costs, income from
operations was $0.5 million or 0.07 percent of revenues versus
$4.2 million or 0.53 percent of revenues in the year-ago quarter. The
decline primarily was attributable to a weakening economy and sluggish
IT demand environment in Latin America. The Asia-Pacific region
maintained an operating profit, despite the threat of SARS.
Depreciation and Capital Expenditures
-- Total depreciation (including accelerated depreciation of $2.3 million,
a component of our major-program costs) was $19.7 million.
-- Capital expenditures were approximately $6.5 million.
Balance Sheet Items
-- Inventory was $1.40 billion, 3 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 on a GAAP basis was $443 million or 21 percent of
capitalization, compared to debt of $336 million or 17 percent of
capitalization at the end of last year's second quarter. Including
$72 million associated with the company's off-balance sheet accounts
receivable financing programs, total debt on a non-GAAP basis was
$515 million with a debt-to-capitalization ratio of 23 percent,
generally flat with a year ago.
"Sales in the quarter started off slowly, as expected, but improved progressively," said Thomas A. Madden, executive vice president and chief financial officer, Ingram Micro Inc. "We held firm on gross margins without sacrificing strategic market share, while continuing our focus on inventory and debt. With the sale of our German semiconductor equipment distribution business and the launch of a components business unit in North America, we also further demonstrated our ability to shed unprofitable non-core operations and pursue profitable growth initiatives. Our profit-enhancement program continues to be on track, highlighted by an additional reduction in operating expenses and an increase in operating income compared to last year, despite slightly lower sales."
Six-Month Period
For the six months ended June 28, 2003, worldwide sales were $10.64 billion, a 3.0 percent decline from the $10.97 billion reported in the year-ago period. Regional sales were $5.33 billion for North America (a 12.3 percent decline), $3.71 billion for Europe (a 10.0 percent increase in U.S. dollars; a decline of approximately 9 percent in local currencies), and $1.61 billion for the Other International regions (a 5.6 percent increase). The gross margin was 5.43 percent versus 5.44 percent in the prior-year period.
Operating income on a GAAP basis for the six-month period was $54.4 million or 0.51 percent of revenues; excluding major-program costs of $32.7 million, operating income was $87.1 million or 0.82 percent of revenues. In the year-ago period, operating income on a GAAP basis was $56.8 million; excluding reorganization costs of $8.8 million, operating income was $65.6 million or 0.60 percent of revenues.
Six-month net income on a GAAP basis was $21.6 million or $0.14 per diluted share; excluding major-program costs, net income was $42.8 million or $0.28 per share. In the year-ago period, net income on a GAAP basis (before the adoption of a new accounting standard) was $24.3 million or $0.16 per share; excluding reorganization costs, net income was $25.7 million or $0.17 per diluted share.
Detail on Major-Program Costs and Special Items
Second-quarter major-program costs of $12.5 million before taxes, recorded as operating expenses, included reorganization costs of $1.3 million primarily for workforce reductions in North America and $11.2 million of period costs primarily comprised of the loss on the sale of the German semiconductor equipment distribution business mentioned above, accelerated depreciation of fixed assets associated with the planned exit of facilities and outsourcing of the company's IT infrastructure, relocation and transition costs, and other related costs.
Approximately $7.4 million of these costs were directly associated with the profit-enhancement program announced on Sept. 18, 2002. At that time, the company indicated that additional costs in connection with new opportunities may be incurred. The company's sale of the German semiconductor equipment distribution business, which resulted in a $5.1 million charge, was not part of the original profit-enhancement program, but is expected to improve future operating income for the European region by eliminating an unprofitable operation.
In the second quarter of last year, reorganization costs of $5.4 million before taxes were primarily related to workforce reductions worldwide and facility consolidations in North America and Europe.
Financial results excluding these costs and items, as well as those including off-balance sheet debt, are considered non-GAAP and are presented as supplemental information to enhance the public's understanding of, and highlight trends in, the company's financial results excluding reorganization costs, major-program costs and special items, as well as other financial metrics such as accounts receivable, days of sales outstanding and total borrowings including off-balance sheet debt. Ingram Micro's management utilizes these non-GAAP financial measures, along with primary GAAP measures, in analyzing and measuring the performance of the company's core operations from period to period.
Outlook for the Third 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 third quarter ending September 27, 2003, sales are expected to range from $5.175 billion to $5.350 billion, with net income excluding any major-program costs and other special items ranging from $21 million to $25 million, or $0.14 to $0.17 per diluted share.
The company's net income, required to be reported based on GAAP, will likely differ significantly from this forecast because of major-program costs related to the profit-enhancement program, announced on Sept. 18, 2002, or other actions that may be implemented. The company's major-program costs, and therefore GAAP earnings, in any one quarter cannot be reasonably estimated.
"I am cautiously optimistic about the latter half of the year," said Foster. "Our outlook reflects a steady, but not robust, demand environment. We see signs of stability in North America but economic conditions remain soft in Europe and Latin America. Asia is expected to grow at a controlled rate, as planned. We have proven our ability to execute consistently, despite challenging conditions, while our profit-enhancement program has positioned us for the future. We are a stronger, more nimble company today than we have ever been, and we intend to extend our leadership position throughout the world."
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. EDT. To listen to the conference call and view the accompanying presentation slides, visit the company's Web site at www.ingrammicro.com/corp (Investor Relations section). The conference call is also accessible by telephone at (888) 455-0750 (toll-free within the United States and Canada) or (415) 228-4834 (other countries).
The replay of the conference call with presentation slides will be available for one week 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 costs, 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) possible disruption in commercial activities in Asia-Pacific, Canada and other regions as a result of Severe Acute Respiratory Syndrome (SARS); (10) possible disruption in commercial activities caused by terrorist activity or armed conflict, including changes in logistics and security arrangements as a result thereof, and reduced customer demand; (11) dependence on key individuals and inability to retain personnel; (12) reductions in credit ratings and/or unavailability of adequate capital; (13) interest rate and foreign currency fluctuations; (14) adverse impact of governmental controls and actions or political or economic instability could adversely affect foreign operations; (15) failure to attract new sources of business from expansion of products or services or entry into new markets; (16) inability to manage future adverse industry trends; (17) difficulties and risks associated with integrating operations and personnel in acquisitions; (18) future periodic assessments required by current or new accounting standards may result in additional charges; and (19) 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 28, 2002; 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
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.
Note: Presentation slides, found at www.ingrammicro.com/corp, will
accompany the company's conference call today at 5 p.m. EDT (2 p.m. PDT).
Ingram Micro Inc.
Consolidated Balance Sheet
(Dollars in 000s)
(Unaudited)
June 28, December 28,
2003 2002
ASSETS
Current Assets:
Cash $371,324 $387,513
Accounts receivable, including
retained interest in
securitized receivables, net 1,974,147 2,354,906
Inventories 1,402,076 1,564,065
Other current assets 303,395 293,902
Total current assets 4,050,942 4,600,386
Property and equipment, net 227,276 250,244
Goodwill 241,538 233,922
Other 61,431 59,802
Total assets $4,581,187 $5,144,354
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,046,444 $2,623,188
Accrued expenses 306,621 438,787
Current maturities of long-term debt 197,983 124,894
Total current liabilities 2,551,048 3,186,869
Long-term debt, less current
maturities 244,928 241,052
Deferred income taxes and other
liabilities 89,583 80,444
Total liabilities 2,885,559 3,508,365
Stockholders' equity 1,695,628 1,635,989
Total liabilities and
stockholders' equity $4,581,187 $5,144,354
Ingram Micro Inc.
Consolidated Statement of Income
(Dollars in 000s, except per share data)
(Unaudited)
Thirteen Weeks Ended June 28, 2003
Impact of
Reorganization
Costs and Other Non-GAAP
As Reported Major-Program Financial
Under GAAP Costs (a) Measure
Net sales $5,170,635 $-- $5,170,635
Costs of sales 4,889,240 -- 4,889,240
Gross profit 281,395 -- 281,395
Operating expenses:
Selling, general and
administrative 252,781 (11,201) 241,580
Reorganization costs 1,292 (1,292) --
254,073 (12,493) 241,580
Income from operations 27,322 12,493 39,815
Interest and other 9,621 -- 9,621
Income before income taxes 17,701 12,493 30,194
Provision for income taxes 6,195 4,373 10,568
Net income $11,506 $8,120 $19,626
Diluted earnings per share:
Net income $0.08 $0.05 $0.13
Diluted weighted average
shares outstanding 151,246,278 151,246,278 151,246,278
Thirteen Weeks Ended June 29, 2002
Impact of
Reorganization
Costs and Other Non-GAAP
As Reported Major-Program Financial
Under GAAP Costs (b) Measure
Net sales $5,352,774 $-- $5,352,774
Costs of sales 5,059,683 -- 5,059,683
Gross profit 293,091 -- 293,091
Operating expenses:
Selling, general and
administrative 261,780 -- 261,780
Reorganization costs 5,370 (5,370) --
267,150 (5,370) 261,780
Income from operations 25,941 5,370 31,311
Interest and other 11,949 -- 11,949
Income before income taxes 13,992 5,370 19,362
Provision for income taxes 5,177 1,987 7,164
Net income $8,815 $3,383 $12,198
Diluted earnings per share:
Net income $0.06 $0.02 $0.08
Diluted weighted average
shares outstanding 151,935,976 151,935,976 151,935,976
(a)Major-program costs in 2003 include reorganization costs of $1,292
primarily for workforce reductions in North America and $11,201
charged to selling, general and administrative expenses, primarily
comprised of the loss on the sale of a German semiconductor equipment
distribution business, accelerated depreciation of fixed assets
associated with the planned exit of facilities and outsourcing of our
IT infrastructure, relocation and transition costs, and other related
costs.
(b)Reorganization costs of $5,370 in 2002 included costs for workforce
reductions throughout the world and costs to exit facilities in North
America and Europe.
Ingram Micro Inc.
Consolidated Statement of Income
(Dollars in 000s, except per share data)
(Unaudited)
Twenty-six Weeks Ended June 28, 2003
Impact of
Reorganization
Costs and Other Non-GAAP
As Reported Major-Program Financial
Under GAAP Costs (a) Measure
Net sales $10,644,849 $-- $10,644,849
Costs of sales 10,067,222 443 10,066,779
Gross profit 577,627 (443) 578,070
Operating expenses:
Selling, general and
administrative 509,983 (18,981) 491,002
Reorganization costs 13,231 (13,231) --
523,214 (32,212) 491,002
Income from operations 54,413 32,655 87,068
Interest and other 21,223 -- 21,223
Income before income taxes 33,190 32,655 65,845
Provision for income taxes 11,616 11,430 23,046
Net income $21,574 $21,225 $42,799
Diluted earnings per share:
Net income $0.14 $0.14 $0.28
Diluted weighted average
shares outstanding 151,236,507 151,236,507 151,236,507
Twenty-six Weeks Ended June 29, 2002
Impact of
Reorganization
Costs and Other Non-GAAP
As Reported Major-Program Financial
Under GAAP Costs (b) Measure
Net sales $10,969,325 $-- $10,969,325
Costs of sales 10,372,567 -- 10,372,567
Gross profit 596,758 -- 596,758
Operating expenses:
Selling, general and
administrative 531,199 -- 531,199
Reorganization costs 8,780 (8,780) --
539,979 (8,780) 531,199
Income from operations 56,779 8,780 65,559
Interest and other 18,252 6,535 24,787
Income before income taxes
and cumulative effect of
adoption of a new
accounting standard 38,527 2,245 40,772
Provision for income taxes 14,255 831 15,086
Income before cumulative
effect of adoption of a
new accounting standard 24,272 1,414 25,686
Cumulative effect of
adoption of a new
accounting standard (280,861) 280,861 --
Net income (loss) $(256,589) $282,275 $25,686
Diluted earnings (loss) per share:
Income before cumulative
effect of adoption of a
new accounting standard $0.16 $0.01 $0.17
Cumulative effect of
adoption of a new
accounting standard (1.84) 1.84 --
Net income (loss) $(1.68) $1.85 $0.17
Diluted weighted average
shares outstanding 152,300,027 152,300,027 152,300,027
(a)Major-program costs in 2003 include reorganization costs of $13,231
for workforce reductions throughout the world and facility
consolidations in Europe; $18,981 charged to selling, general and
administrative expenses, primarily comprised of the loss on the sale
of a German semiconductor equipment distribution business, accelerated
depreciation of fixed assets associated with the planned exit of
facilities and outsourcing of our IT infrastructure, relocation and
transition costs, and other related costs; and $443 recorded as cost
of sales, comprised of incremental inventory losses caused by the exit
of certain markets.
(b)Reorganization costs of $8,780 in 2002 included costs for workforce
reductions and facility consolidations throughout the world.
Ingram Micro Inc.
Consolidated Income From Operations
(Dollars in 000s)
(Unaudited)
Thirteen Weeks Ended June 28, 2003
Impact of
Reorganization
Costs and Other Non-GAAP
As Reported Major-Program Financial
Under GAAP Costs Measure
North America $19,888 $7,608 $27,496
Europe 6,962 4,822 11,784
Other International 472 63 535
$27,322 12,493 $39,815
Thirteen Weeks Ended June 29, 2002
Impact of
Reorganization
Costs and Other Non-GAAP
As Reported Major-Program Financial
Under GAAP Costs Measure
North America $24,441 $2,526 $26,967
Europe (1,744) 1,928 184
Other International 3,244 916 4,160
$25,941 $5,370 $31,311
Ingram Micro Inc.
Consolidated Income From Operations
(Dollars in 000s)
(Unaudited)
Twenty-six Weeks Ended June 28, 2003
Impact of
Reorganization
Costs and Other Non-GAAP
As Reported Major-Program Financial
Under GAAP Costs Measure
North America $34,739 $19,516 $54,255
Europe 18,396 12,904 31,300
Other International 1,278 235 1,513
$54,413 32,655 $87,068
Twenty-six Weeks Ended June 29, 2002
Impact of
Reorganization
Costs and Other Non-GAAP
As Reported Major-Program Financial
Under GAAP Costs Measure
North America $47,783 $3,522 $51,305
Europe 10,998 3,189 14,187
Other International (2,002) 2,069 67
$56,779 $8,780 $65,559
SOURCE Ingram Micro Inc.