Solid Sales Growth Drives Double-Digit Increase in Net Income SANTA
ANA, Calif., April 25 /PRNewswire-FirstCall/ -- Ingram Micro Inc.
(NYSE:IM), the world's largest technology distributor, today
announced financial results for the first quarter of 2006 (ended
April 1, 2006). Worldwide sales for the quarter were $7.60 billion,
an 8-percent increase from $7.05 billion in the prior-year period.
The translation impact of the relatively weaker European currencies
had an approximate 3 percentage-point negative effect on
comparisons to the prior year. First-quarter net income increased
45 percent to $61.7 million or $0.36 per diluted share, which
includes stock-based compensation expense of $8.0 million
(approximately $5.7 million net of tax) or approximately $0.03 per
diluted share related to the adoption of Statement of Financial
Accounting Standard No. 123 (revised 2004), Share-Based Payment, in
the first quarter of 2006. In the prior-year period, net income
based on generally accepted accounting principles (GAAP) was $42.4
million or $0.26 per diluted share, which includes major-program
and acquisition-related integration costs totaling $9.8 million
(approximately $6.8 million net of tax) or approximately $0.04 per
diluted share. Year-ago net income on a non-GAAP basis, which
excludes these costs, was $49.2 million, or $0.30 per diluted
share. For comparison purposes, first-quarter net income rose 25
percent over the prior year's non-GAAP net income. A reconciliation
of these non-GAAP items to GAAP net income can be found in the
tables attached to this press release. "We entered the year with
strong momentum from our successes in 2005," said Gregory M.
Spierkel, chief executive officer, Ingram Micro Inc. "Sales and net
income exceeded the guidance we issued in February, and every
region generated operating margins exceeding 100 basis points. We
continue to benefit from our efforts toward optimization and
differentiation -- sales were solid in every region, cost control
was excellent and our recent expansions into consumer electronics
and services are contributing to results." Additional First Quarter
Highlights For additional detail regarding the results outlined
below, please refer to the financial statements and schedules
attached to this news release or visit http://www.ingrammicro.com/.
Regional Sales: * North American sales were $3.21 billion (42
percent of total revenues), an increase of 9 percent versus the
$2.94 billion posted a year ago. * European sales were $2.70
billion (36 percent of total revenues) versus $2.65 billion in the
year-ago period. Sales in U.S. dollars were up 2 percent over the
prior-year period. The translation impact of the relatively weaker
European currencies had an approximate 9-percentage-point negative
impact on comparisons to the prior year. * Asia-Pacific sales were
$1.33 billion (17 percent of total revenues) versus $1.19 billion
in the prior-year period -- an increase of 12 percent. * Latin
American sales were $357 million (5 percent of total revenues), an
increase of 28 percent compared to the $279 million posted a year
ago. Gross margin Gross margin was 5.34 percent versus 5.38 percent
in the year-ago quarter. A more competitive environment and softer
economies in some European markets had an adverse impact on gross
margins during the quarter. Operating expenses * Total operating
expenses were $306.6 million or 4.04 percent of revenues, which
includes approximately $8.0 million or approximately 10 basis
points related to stock-based compensation expense, versus $303.3
million or 4.30 percent of revenues in the year-ago quarter. * For
comparison purposes, non-GAAP operating expenses in the year-ago
period, excluding the $9.8 million in major-program and integration
costs, were $293.5 million or 4.16 percent of revenues. Operating
income Worldwide operating income was $98.9 million or 1.30 percent
of revenues, which includes approximately $8.0 million or 10 basis
points related to stock- based compensation expense, compared to
$76.2 million or 1.08 percent of revenues in the year-ago quarter.
For comparison purposes, non-GAAP operating income in the year ago
period excluding major program and integration costs was $86.0
million or 1.22 percent of revenues in the prior year. * North
American operating income was $51.9 million or 1.62 percent of
revenues, an increase of 73 percent or 60 basis points versus the
$29.9 million or 1.02 percent of revenues in the year-ago quarter.
For comparison purposes, North American operating income on a
non-GAAP basis in the year-ago period, excluding major program
costs, was $35.7 million or 1.21 percent of revenues. * European
operating income was $34.5 million or 1.28 percent of revenues
versus $37.0 million or 1.40 percent of revenues in the year-ago
quarter. * Asia-Pacific operating income was $13.5 million or 1.02
percent of revenues compared to $6.1 million or 0.51 percent of
revenues in the previous year. For comparison purposes,
Asia-Pacific operating income on a non-GAAP basis in the prior
year, excluding integration costs, was $10.1 million or 0.85
percent of revenues. * Latin American operating income was $7.0
million or 1.95 percent of revenues, an increase of 114 percent and
78 basis points versus $3.2 million or 1.17 percent of revenues in
the year-ago quarter. * As stated above, stock-based compensation
expense associated with the adoption of SFAS 123R was approximately
$8.0 million or 10 basis points of impact on the worldwide
operating margin. These expenses are presented as a separate
reconciling amount in the Company's segment reporting. As such,
these expenses are not included in the regional operating results,
but are included in the worldwide operating results. * Other income
and expense for the quarter were $13.2 million versus $14.7 million
in the year-ago period. * Total depreciation was $12.3 million. *
Capital expenditures were approximately $7.3 million. Balance Sheet
* The cash balance at the end of the quarter was $326 million, flat
with the year-end balance. Total debt was $644 million, an increase
of $39 million from year-end. Debt-to-capitalization was 20 percent
and in line with the year-end. * Inventory was $2.19 billion or 28
days on hand compared to $2.21 billion or 27 days on hand at the
end of the year. * Working capital days were 24, an increase of
three days from year-end 2005 due to slight changes to the
company's revenue mix, particularly greater sales into the retail
sector. "We continue to perform well in highly competitive
environments," said William D. Humes, executive vice president and
chief financial officer. "All regions had solid revenue growth with
North America, Asia-Pacific and Latin America showing strong
operating leverage with year-over-year improvements in operating
margin. Europe's performance was solid despite a more competitive
market, as the region continued to gain market share and deliver
industry-leading operating margins. Every region continues to focus
on superior execution, keeping costs low while offering a greater
breadth of products and services for customers. The result is 10
consecutive quarters of year-over-year operating income
improvements." Outlook for the Second 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 guidance for the second quarter ending
July 1, 2006: * Sales are expected to range from $7.15 billion to
$7.35 billion. * Net income is expected to range from $49 million
to $56 million, or $0.29 to $0.33 per diluted share, which includes
approximately $8.0 million or $0.03 per share for the effect of
non-cash stock-based compensation expense in the second quarter
2006. For comparison purposes, 2005 did not include these expenses.
* The weighted average shares outstanding is expected to be
approximately 170 million and the effective tax rate for the second
quarter and full year of 2006 is currently estimated to be 28
percent. "Our second-quarter guidance reflects good year-over-year
sales growth with demand generally stable in all regions," said
Spierkel. "The sequential sales decline is in line with normal
historical trends, as the second and third quarters are our
softest. In the second quarter, we expect some margin pressure from
a more competitive market in Europe, attributable in part to the
effect of recent vendor consolidation efforts, which we believe
will ultimately create a more balanced, beneficial distribution
environment. In addition, we plan to invest in certain IT
capabilities that will improve our business over the long-term,
which could increase operating expenses by approximately $5 million
in the second quarter." 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 webcast and view the
accompanying presentation slides, visit the company's Web site at
http://www.ingrammicro.com/ (Investor Relations section). The
conference call is also accessible by telephone at (888) 455-0750
(toll-free within the United States and Canada) or (517) 308-9002
(other countries). The replay of the conference call with
presentation slides will be available for one week at
http://www.ingrammicro.com/ (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
revenues, sales levels, operating income, margins, stock-based
compensation expense, integration costs, cost synergies, operating
efficiencies, profitability, market share and rates of return, are
based on current management expectations that involve certain risks
which, if realized, in whole or in part, could cause such
expectations to fail to be achieved and have a material adverse
effect on Ingram Micro's business, financial condition and results
of operations, including, without limitation: (1) intense
competition, regionally and internationally, including competition
from alternative business models, such as manufacturer-to-end-user
selling, which 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; (2) integration of our
acquired businesses and similar transactions involve various risks
and difficulties -- our operations may be adversely impacted by an
acquisition that (i) is not suited for us, (ii) is improperly
executed, or (iii) substantially increases our debt; (3) foreign
exchange rate fluctuations, devaluation of a foreign currency,
adverse governmental controls or actions, political or economic
instability, or disruption of a foreign market, and other related
risks of our international operations may adversely impact our
operations in that country or globally; (4) we may not achieve the
objectives of our process improvement efforts or be able to
adequately adjust our cost structure in a timely fashion to remain
competitive, which may cause our profitability to suffer; (5) our
failure to attract new sources of profitable business from
expansion of products or services or risks associated with entry
into new markets, including geographies, products and services,
could negatively impact our future operating results; (6) an
interruption or failure of our information systems or subversion of
access or other system controls may result in a significant loss of
business, assets, or competitive information; (7) significant
changes in supplier terms, such as higher thresholds on sales
volume before distributors may qualify for discounts and/or
rebates, the overall reduction in the amount of incentives
available, reduction or termination of price protection, return
levels, or other inventory management programs, or reductions in
payment terms, may adversely impact our results of operations or
financial condition; (8) termination of a supply or services
agreement with a major supplier or product supply shortages may
adversely impact our results of operations; (9) changes in, or
interpretations of, tax rules and regulations may adversely affect
our effective tax rates or we may be required to pay additional tax
assessments; (10) we cannot predict with certainty, the outcome of
the SEC and U.S. Attorney's inquiries; (11) if there is a downturn
in economic conditions for an extended period of time, it will
likely have an adverse impact on our business; (12) we may
experience loss of business from one or more significant customers,
and an increased risk of credit loss as a result of reseller
customers' businesses being negatively impacted by dramatic changes
in the information technology products and services industry as
well as intense competition among resellers -- increased losses, if
any, may not be covered by credit insurance or we may not be able
to obtain credit insurance at reasonable rates or at all; (13)
rapid product improvement and technological change resulting in
inventory obsolescence or changes in demand may result in a decline
in value of a portion of our inventory; (14) future terrorist or
military actions could result in disruption to our operations or
loss of assets, in certain markets or globally; (15) the loss of a
key executive officer or other key employees, or changes affecting
the work force such as government regulations, collective
bargaining agreements or the limited availability of qualified
personnel, could disrupt operations or increase our cost structure;
(16) changes in our credit rating or other market factors may
increase our interest expense or other costs of capital, or capital
may not be available to us on acceptable terms to fund our working
capital needs; (17) our failure to adequately adapt to industry
changes and to manage potential growth and/or contractions could
negatively impact our future operating results; (18) future
periodic assessments required by current or new accounting
standards such as those relating to long-lived assets, goodwill and
other intangible assets and expensing of stock options may result
in additional non-cash charges; (19) seasonal variations in the
demand for products and services, as well as the introduction of
new products, may cause variations in our quarterly results; and
(20) the failure of certain shipping companies to deliver product
to us, or from us to our customers, may adversely impact our
results of operations. 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 Item 1A
Risk Factors of Ingram Micro's Annual Report on Form 10-K for the
year ended December 31, 2005; 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 a vital link in the
technology value chain, Ingram Micro creates sales and
profitability opportunities for vendors and resellers through
unique marketing programs, outsourced logistics services, technical
support, financial services, and product aggregation and
distribution. The company serves 100 countries and is the only
global IT distributor with operations in Asia. Visit
http://www.ingrammicro.com/. (C) 2006 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) April
1, December 31, 2006 2005 ASSETS Current assets: Cash $326,262
$324,481 Trade accounts receivable, net 3,087,211 3,186,115
Inventories 2,193,118 2,208,660 Other current assets 336,182
352,042 Total current assets 5,942,773 6,071,298 Property and
equipment, net 175,020 179,435 Goodwill 637,810 638,416 Other
146,733 145,841 Total assets $6,902,336 $7,034,990 LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts payable
$3,264,809 $3,476,845 Accrued expenses 407,412 479,422 Current
maturities of long-term debt 117,177 149,217 Total current
liabilities 3,789,398 4,105,484 Long-term debt, less current
maturities 526,805 455,650 Other liabilities 35,219 35,258 Total
liabilities 4,351,422 4,596,392 Stockholders' equity 2,550,914
2,438,598 Total liabilities and stockholders' equity $6,902,336
$7,034,990 Ingram Micro Inc. Consolidated Statement of Income
(Dollars in 000s, except per share data) (Unaudited) Thirteen Weeks
Ended April 1, 2006 April 2, 2005 Net sales $7,598,845 $7,051,992
Costs of sales 7,193,301 6,672,519 Gross profit 405,544 379,473
Operating expenses: Selling, general and administrative(1) 307,151
300,555 Reorganization costs (524) 2,692 306,627 303,247 Income
from operations 98,917 76,226 Interest and other 13,193 14,703
Income before income taxes 85,724 61,523 Provision for income taxes
24,003 19,072 Net income $61,721 $42,451 Diluted earnings per
share: Net income $0.36 $0.26 Diluted weighted average shares
outstanding 169,277,586 163,887,049 (1) Stock-based compensation
expense recognized in accordance with Statement of Financial
Accounting Standards No. 123 (revised 2004), "Share-Based Payment,"
which was adopted effective January 1, 2006, was $7,953 for the
thirteen weeks ended April 1, 2006. Ingram Micro Inc. Supplementary
Information Reconciliation of GAAP to Non-GAAP Financial Measures
(Dollars in 000s, except per share data) (Unaudited) Thirteen Weeks
Ended April 2, 2005 Non-GAAP As Reported Financial Under GAAP
Special Items Measure Operating expenses $303,247 $(9,831) (a)
$293,416 (d) Income from operations 76,226 9,831 (a) 86,057 Net
income 42,451 6,783 (b) 49,234 Diluted earnings per share $0.26
$0.04 (c) $0.30 (a) Includes costs associated with the Company's
outsourcing and optimization plan in North America, comprised of
reorganization costs of $741 primarily related to employee
termination benefits for workforce reductions and an adjustment
related to a previous action for higher than expected lease
obligation costs and $5,028 charged to selling, general and
administrative expenses, primarily comprised of consulting; and
costs associated with the integration of Tech Pacific in
Asia-Pacific, comprised of reorganization costs of $1,951 primarily
related to employee termination benefits for workforce reductions
and lease exit costs for facility consolidations, and $2,111
charged to selling, general and administrative expenses, primarily
comprised of consulting, retention and other costs associated with
the integration. (b) Includes adjustments noted in footnote (a)
above, net of estimated income taxes. (c) Includes adjustments
noted in footnote (b) above on a per share basis calculated by
dividing the adjusted amounts by the diluted weighted average
shares outstanding of 163,887,049. (d) As a percentage of net
sales, GAAP operating expenses for the thirteen weeks ended April
2, 2005 represent 4.30% and non-GAAP operating expenses represent
4.16%. Ingram Micro Inc. Supplementary Information Income from
Operations (Dollars in 000s) (Unaudited) Thirteen Weeks Ended April
1, 2006 Operating Operating Net Sales Income Margin North America
$3,206,595 $51,859 1.62% Europe 2,702,627 34,521 1.28% Asia-Pacific
1,332,832 13,533 1.02% Latin America 356,791 6,957 1.95%
Reconciling amount (stock-based compensation under SFAS 123R) --
(7,953) -- Consolidated Total $7,598,845 $98,917 1.30% Ingram Micro
Inc. Supplementary Information Income from Operations (Dollars in
000s) (Unaudited) Thirteen Weeks Ended April 2, 2005 Non-GAAP
Operating Special Operating Net Sales Income Items(a) Income North
America $2,939,286 $29,901 $5,769 $35,670 Europe 2,648,187 37,003
-- 37,003 Asia-Pacific 1,185,658 6,073 4,062 10,135 Latin America
278,861 3,249 -- 3,249 Consolidated Total $7,051,992 $76,226 $9,831
$86,057 Non-GAAP Operating Special Operating Margin Items Margin
(b) North America 1.02% 0.19% 1.21% Europe 1.40% -- 1.40%
Asia-Pacific 0.51% 0.34% 0.85% Latin America 1.17% -- 1.17%
Consolidated Total 1.08% 0.14% 1.22% (a) Special items in 2005
include costs associated with the Company's outsourcing and
optimization plan in North America, comprised of reorganization
costs of $741 primarily related to employee termination benefits
for workforce reductions and an adjustment related to a previous
action for higher than expected lease obligation costs and $5,028
charged to selling, general and administrative expenses, primarily
comprised of consulting; and costs associated with the integration
of Tech Pacific in Asia-Pacific, comprised of reorganization costs
of $1,951 primarily related to employee termination benefits for
workforce reductions and lease exit costs for facility
consolidations, and $2,111 charged to selling, general and
administrative expenses, primarily comprised of consulting,
retention and other costs associated with the integration. (b)
Non-GAAP operating margin is calculated by dividing non-GAAP
operating income by net sales. DATASOURCE: Ingram Micro Inc.
CONTACT: Media, Chris Kelly, +1-714-382-3355, , or Investors, Ria
Marie Carlson, +1-714-382-4400, , or Kay Leyba, +1-714-382-4175, ,
all of Ingram Micro Inc. Web site: http://www.ingrammicro.com/
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