Sales hit a first-quarter record SANTA ANA, Calif., April 24
/PRNewswire-FirstCall/ -- Ingram Micro Inc. (NYSE:IM), the world's
largest technology distributor, today announced financial results
for the first quarter of 2008 (ended March 29, 2008). Worldwide
sales for the quarter were $8.58 billion, a 4-percent increase from
$8.25 billion in the prior-year period. The translation impact of
the relatively stronger foreign currencies had an approximate
six-percentage-point positive effect on comparisons to the prior
year. Net income for the first quarter was $64.1 million, or $0.37
per diluted share, compared with $37.0 million, or $0.21 per
diluted share, in the year-ago period. The prior-year quarter
included a charge of $33.8 million, or $0.19 per diluted share,
which was recorded to cost of sales for commercial taxes on
software imports in Brazil, as well as a benefit of approximately
$0.02 per diluted share from the favorable resolution of a U.S. tax
audit. "We're pleased with the performance of our Asia-Pacific and
Latin America regions, both of which grew at double-digit rates
with good operating leverage," said Greg Spierkel, chief executive
officer, Ingram Micro Inc. "However, as we discussed in February,
softness in the economic environments in North America and Europe
is exerting pressure on our operations in those regions. We've made
good progress on the expense-containment plan instituted earlier
this year, but additional steps are necessary in this environment.
We are planning a restructuring in our Europe, Middle East and
Africa (EMEA) operations, primarily in the regional headquarters,
and made targeted reductions of office-based positions in North
America earlier this month. We're confident that the actions will
improve productivity and operational effectiveness without
sacrificing customer service or vendor relationships, or inhibiting
profitable growth." The planned actions are expected to generate
$18 million to $24 million of annualized savings, beginning in the
second and third quarters of 2008. Costs associated with these
actions are expected to be approximately $11 million to $13
million, the majority of which are expected to be incurred during
the second and third quarters of 2008. 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: o North American sales were $3.29 billion (38
percent of total revenues), essentially flat with the $3.28 billion
posted a year ago. o EMEA sales were $3.07 billion (36 percent of
total revenues), an increase of one percent versus the $3.05
billion in the year-ago quarter. The translation impact of the
relatively stronger European currencies had an approximate
eleven-percentage-point positive effect on comparisons to the prior
year. o Asia-Pacific sales were $1.81 billion (21 percent of total
revenues), an increase of 16 percent versus the $1.57 billion
reported in the year-ago quarter. The translation impact of the
relatively stronger regional currencies had an approximate
ten-percentage-point positive effect on comparisons to the prior
year. o Latin American sales were $407 million (5 percent of total
revenues), an increase of 18 percent compared to the $346 million
posted a year ago. Gross margin Gross margin was 5.66 percent, an
increase of 70 basis points versus the prior-year quarter, driven
by general business improvements in every region. In the prior-year
quarter, the charge related to Brazilian commercial taxes adversely
affected the gross margin by approximately 41 basis points.
Operating expenses Total operating expenses were $386.2 million or
4.50 percent of revenues versus $335.1 million or 4.06 percent of
revenues in the year-ago quarter. Softer sales growth due to the
weaker-demand environment, additional investments in people and
infrastructure to support our strategic initiatives, and growth in
our fee-for-services business had a negative impact on operating
expenses as a percent of revenues. Operating income Worldwide
operating income was $99.3 million or 1.16 percent of revenues. In
the year-ago quarter, operating income was $73.7 million or 0.89
percent of revenues, which includes the Brazilian tax charge of
approximately $33.8 million or 41 basis points. o North American
operating income was $40.6 million or 1.23 percent of revenues,
compared to $57.0 million or 1.74 percent of revenues in the
year-ago quarter. o EMEA operating income was $26.8 million or 0.87
percent of revenues, compared to $35.0 million or 1.15 percent of
revenues in the year-ago quarter. o Asia-Pacific operating income
increased 65 percent to $32.5 million or 1.79 percent of revenues
from $19.7 million or 1.25 percent of revenues in the year-ago
quarter. o Latin America operating income was $7.8 million or 1.92
percent of revenues. In the year ago quarter, the region recorded
an operating loss of $28.4 million or 8.20 percent of revenues due
to the $33.8 million commercial tax charge in Brazil, described
previously, which was approximately 9.76 percent of revenues. o
Stock-based compensation expense, which amounted to $8.4 million in
the current quarter and $9.6 million in the prior year quarter, is
presented as a separate reconciling amount in the company's segment
reporting in both periods. 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 was $12.7 million versus $15.4 million in the year-ago
period, primarily driven by lower interest rates. * The effective
tax rate for the quarter was 26 percent, which includes a favorable
two-percentage-point discrete impact of a tax-rate change in China.
The effective rate in the prior year period was 36.6 percent, which
was negatively impacted by the Brazilian commercial tax charge
referenced previously. * Total depreciation and amortization was
$16.9 million. * Capital expenditures were approximately $10.9
million. Balance Sheet * The cash balance at the end of the quarter
was $567 million, relatively flat with the year-end balance. *
Total debt was $609 million, an increase of $86 million from
year-end. Debt-to-capitalization was 15 percent versus 13 percent
at the end of 2007. * The company repurchased approximately 5.3
million shares during the first quarter of 2008, for an aggregate
amount of $86.6 million. Total shares repurchased since the
inception of the program in mid-November 2007 through the
quarter-end is 6.6 million shares for an aggregate amount of $111.7
million. * Inventory was $2.89 billion or 32 days on hand compared
to $2.77 billion or 27 days on hand at the end of the year. The
increase in inventory days is primarily due to the softer sales
environment. * Working capital days were 26, an increase of four
days from year-end, primarily due to higher inventory days. Working
capital days were roughly flat with the first quarter of the prior
year. "Despite the challenging economic environment, gross margins
were at the highest first-quarter level in 10 years," said William
D. Humes, executive vice president and chief financial officer.
"This is a direct result of our commitment to strategic initiatives
that improve the margin profile and continued focus on our most
profitable lines of business. Other bright spots included strong
performances in many of our emerging markets. We are clearly
focused on opportunities to reduce operating expenses and inventory
levels. While it's difficult to make rapid adjustments in these
areas when demand slows, we have improvement plans in place and I
expect to see good progress going forward." 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 June 28, 2008: -- Sales are expected to range
from $8.50 billion to $8.75 billion. -- Net income is expected to
range from $59 million to $64 million, or $0.34 to $0.37 per
diluted share. This does not include costs related to the
expense-reduction plans in North America and EMEA. The timing of
the costs cannot be predicted with certainty, but are estimated to
be approximately $2 million to $4 million in the second quarter,
with the balance substantially incurred in the third quarter. --
The weighted average shares outstanding and effective tax rate are
expected to be approximately 172 million and 28 percent,
respectively. "Our second-quarter guidance reflects continued
economic softness in North America and Europe, with solid growth in
Asia-Pacific and Latin America," said Spierkel. "The expected
sequential sales growth is following a fairly normal seasonal
pattern, with a modest benefit from slightly stronger foreign
currencies compared to the first quarter. While we are taking the
necessary steps to manage our cost structure in the current
economy, we will continue to pursue activities that improve our
infrastructure, generate greater customer loyalty, diversify our
business mix and enhance margins. The company has proven its
resiliency in similar economic environments and we will be stronger
than ever when the economy rebounds." 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 (210) 839-8501
(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 or disruptions due to changes to our
information systems or subversion of access or other system
controls may result in a significant loss of business, assets, or
competitive information and may adversely impact our results of
operations; (7) if there is a downturn in economic conditions for
an extended period of time, it will likely have an adverse impact
on our business; (8) 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; (9) termination of a supply or
services agreement with a major supplier or product supply
shortages may adversely impact our results of operations; (10)
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; (11) we cannot predict with
certainty, the outcome of the SEC and U.S. Attorney's inquiries or
assessments by Brazilian taxing authorities; (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 29,
2007; 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 more than 150
countries and is the only global broadline IT distributor with
operations in Asia. Visit http://www.ingrammicro.com/. (C) 2008
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) March 29, December 29, 2008 2007
ASSETS Current assets: Cash $567,344 $579,626 Trade accounts
receivable, net 3,639,654 4,054,824 Inventories 2,891,699 2,766,148
Other current assets 531,087 520,069 Total current assets 7,629,784
7,920,667 Property and equipment, net 184,114 181,416 Goodwill
745,939 733,481 Other assets 140,386 139,437 Total assets
$8,700,223 $8,975,001 LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable $3,984,771 $4,349,700 Accrued
expenses 545,141 602,295 Current maturities of long-term debt
181,339 135,616 Total current liabilities 4,711,251 5,087,611
Long-term debt, less current maturities 428,000 387,500 Other
liabilities 68,756 72,948 Total liabilities 5,208,007 5,548,059
Stockholders' equity 3,492,216 3,426,942 Total liabilities and
stockholders' equity $8,700,223 $8,975,001 Ingram Micro Inc.
Consolidated Statement of Income (Dollars in 000s, except per share
data) (Unaudited) Thirteen Weeks Ended March 29, 2008 March 31,
2007 Net sales $8,577,318 $8,245,704 Costs of sales 8,091,810
7,836,932 Gross profit 485,508 408,772 Operating expenses: Selling,
general and administrative 386,224 335,742 Reorganization credits -
(684) 386,224 335,058 Income from operations 99,284 73,714 Interest
and other 12,724 15,395 Income before income taxes 86,560 58,319
Provision for income taxes 22,505 21,339 Net income $64,055 $36,980
Diluted earnings per share: Net income $0.37 $0.21 Diluted weighted
average shares outstanding 174,405,002 175,074,739 Ingram Micro
Inc. Supplementary Information Income from Operations (Dollars in
000s) (Unaudited) Thirteen Weeks Ended March 29, 2008 Operating
Operating Net Sales Income Margin North America $3,290,181 $40,589
1.23% EMEA 3,066,370 26,778 0.87% Asia-Pacific 1,813,429 32,541
1.79% Latin America 407,338 7,824 1.92% Reconciling amount
(stock-based compensation under SFAS 123R) - (8,448) - Consolidated
Total $8,577,318 $99,284 1.16% Thirteen Weeks Ended March 31, 2007
Operating Operating Net Sales Income Margin North America
$3,283,438 $57,014 1.74% EMEA 3,047,297 34,954 1.15% Asia-Pacific
1,569,165 19,689 1.25% Latin America 345,804 (28,359)(a) (8.20%)
Reconciling amount (stock-based compensation under SFAS 123R) -
(9,584) - Consolidated Total $8,245,704 $73,714 (a) 0.89% (a) The
loss from operations recorded in Latin America for the thirteen
weeks ended March 31, 2007 includes a commercial tax charge of
$33,754 in Brazil (9.76% of Latin America net sales and 0.41% of
consolidated net sales). DATASOURCE: Ingram Micro Inc. CONTACT:
Investors, Ria Marie Carlson, +1-714-382-4400, , or Kay Leyba,
+1-714-382-4175, , or Media, Marie Connell, +1-714-382-2009, , or
Rekha Parthasarathy, +1-714-382-1319, , all of Ingram Micro Inc.
Web site: http://www.ingrammicro.com/
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