Sales reach record levels for the seventh consecutive quarter SANTA
ANA, Calif., July 24 /PRNewswire-FirstCall/ -- Ingram Micro Inc.
(NYSE:IM), the world's largest technology distributor, today
announced financial results for the second quarter, which ended
June 28, 2008. Worldwide sales for the quarter rose eight percent
to $8.82 billion, reaching a second-quarter record, compared to
$8.19 billion in the year-ago period. The translation impact of the
relatively stronger foreign currencies had an approximate
six-percentage-point positive effect on revenue growth comparisons
to the prior year. Second-quarter net income was $58.9 million, or
$0.35 per diluted share, which includes costs of approximately $5.5
million net of tax, or $0.03 per diluted share, related to
expense-reduction programs in North America and Europe. Net income
in the year-ago period was $52.4 million or $0.30 per diluted
share, which included a charge of $15 million ($9.2 million net of
tax or $0.05 per diluted share) to establish reserves related to
the previously disclosed United States Securities and Exchange
Commission (SEC) matter. "We're pleased to deliver results that
exceeded our guidance for the quarter, especially considering the
context of the current economic climate," said Gregory M. Spierkel,
chief executive officer, Ingram Micro Inc. "Despite increasingly
competitive markets, we were able to achieve the highest
second-quarter gross margin in a decade through pricing discipline,
growth in higher-margin business units and improvement in our
business mix. We continue to benefit from our decisions to
diversify our profit streams through fee-for-service models and
adjacent technologies, such as logistics and data
capture/point-of-sale." Additional Second-Quarter Highlights For
more 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 $3.52 billion (40 percent of total
revenues), an increase of seven percent compared with the $3.30
billion posted a year ago. The sales increase was driven primarily
by the addition of DBL Distributing, which was acquired in late
June 2007, as well as solid growth in Canada. o Europe, Middle East
and Africa (EMEA) sales were $2.96 billion (33 percent of total
revenues) versus $2.78 billion in the year-ago period, an increase
of six percent. The translation impact of the relatively stronger
European currencies had an approximate 13 percentage-point positive
impact on comparisons to the prior year. o Asia-Pacific sales
increased eight percent to $1.90 billion (22 percent of total
revenues) compared to $1.76 billion in the prior- year period. The
translation impact of the relatively stronger regional currencies
had an approximate six-percentage-point positive effect on
comparisons to the prior year. o Latin American sales were $438
million (five percent of total revenues), an increase of 28 percent
compared to the $344 million posted a year ago. Gross Margin Gross
margin in the 2008 second quarter was 5.53 percent, an increase of
12 basis points versus the prior-year quarter, driven primarily by
the positive impact of growth in higher-margin business segments
and general process improvements across the regions. Operating
Expenses Total operating expenses were $394.2 million or 4.47
percent of revenues, which includes $7.7 million (0.09 percent of
revenues) in expense-reduction program costs, as described above.
Operating expenses in the year-ago quarter were $357.1 million or
4.36 percent of revenues, including the SEC charge of $15 million
(0.18 percent of revenues). The increase in operating expenses as a
percentage of revenues is primarily the result of the weaker demand
environment, investments in people and infrastructure to support
strategic initiatives, and additional labor related to continued
growth in our fee-for- service business. Operating Income Worldwide
operating income was $93.2 million or 1.06 percent of revenues,
which includes $7.7 million (0.09 percent of revenues) in
expense-reduction program costs described above. In the year-ago
quarter, operating income was $85.7 million or 1.05 percent of
revenues, which included the $15 million (0.18 percent of revenues)
SEC charge. o North American operating income was $44.4 million or
1.26 percent of revenues, which includes $0.9 million (0.03 percent
of revenues) in expense-reduction program costs. Operating income
in the prior-year quarter was $38.5 million or 1.17 percent of
revenues, which included the $15 million SEC charge (0.45 percent
of revenues). o EMEA operating income was $15.7 million or 0.53
percent of revenues, which includes $6.8 million (0.23 percent of
revenues) in expense- reduction program costs. In the year ago
quarter, operating income was $22.9 million or 0.83 percent of
revenues. o Asia-Pacific operating income was $32.7 million or 1.72
percent of revenues versus $31.0 million or 1.76 percent of
revenues in the year-ago quarter. o Latin American operating income
more than doubled to $7.2 million or 1.65 percent of revenues
versus $3.5 million or 1.02 percent of revenues in the year-ago
quarter. o Stock-based compensation expense, which amounted to $6.7
million in the current quarter and $10.3 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 expenses
for the quarter were $10.8 million, compared to $15.1 million in
the year-ago period, primarily driven by lower debt levels,
declining interest rates and higher foreign currency gains in the
current year. -- Total depreciation and amortization was $18.0
million. -- Capital expenditures were $15.1 million. Balance Sheet
Highlights -- The cash balance at the end of the quarter was $748
million, an increase of $168 million versus the end of 2007. --
Total debt was $480 million, a decrease of $43 million from
year-end. Debt-to-capitalization was 12 percent, compared with 13
percent at year-end. -- The company purchased approximately 2.8
million shares during the second quarter of 2008, for an aggregate
amount of $47.7 million; an additional 0.6 million shares were
purchased for $9.8 million since the end of the second quarter
through July 18, 2008. Since the inception of the program in
mid-November 2007 through July 18, 2008, the company has purchased
10.0 million shares for an aggregate amount of $169.2 million. --
Inventory was $2.58 billion or 28 days on hand compared with $2.77
billion or 27 days on hand at the end of the year and 32 days at
the end of the first quarter. -- Working capital days were 23, an
increase of one day from year-end 2007 and a three-day improvement
versus the end of the first quarter. "Our regional operations
performed well within persistently soft economies in many parts of
the globe," said William D. Humes, executive vice president and
chief financial officer, Ingram Micro Inc. "We began to see some of
the benefits of our cost-containment and mix-management actions. We
made the tough decisions to reorganize where necessary and address
rising transportation costs through freight-recovery programs,
which will be implemented by the end of the third quarter. Our
focus on working capital yielded solid progress, as evidenced by
the increase in inventory velocity compared to earlier this year.
And, although competitive pricing within the industry was widely
reported, we were able to improve gross margins while surpassing
sales expectations. While growth in Asia-Pacific tempered somewhat
due to the softening global economy, the region delivered the
highest operating margin of the business units. Latin America was a
stand-out, generating more than double the operating income of last
year on 28 percent sales growth." Six-Month Period For the six
months ended June 28, 2008, worldwide sales were $17.39 billion, a
six-percent increase over the $16.43 billion reported a year ago,
which reflects the favorable translation impact of stronger foreign
currencies. Regional sales were $6.81 billion for North America (a
three- percent increase versus the prior-year period); $6.02
billion for Europe (an increase of three percent); $3.72 billion
for Asia-Pacific (an increase of 12 percent); and $846 million for
Latin America (a 23-percent increase versus the prior-year period).
Worldwide operating income for the six-month period was $192.5
million, or 1.11 percent of revenues, which included the
second-quarter expense-reduction program costs of $7.7 million
(approximately 0.04 percent of revenues). In the year-ago period,
operating income was $159.4 million, or 0.97 percent of revenues,
which included the first quarter Brazilian commercial tax charge of
approximately $33.8 million (approximately 0.21 percent of
revenues) and the second-quarter SEC charge of $15 million
(approximately 0.09 percent of revenues). Six-month net income was
$123.0 million, or $0.71 per diluted share, which included the
second-quarter expense-reduction program costs of $5.5 million
after tax or $0.03 per diluted share. In the year-ago period, net
income was $89.4 million, or $0.51 per diluted share, which
included the first-quarter charge for commercial taxes in Brazil of
$33.8 million after tax or $0.19 per diluted share, and the
second-quarter charge for the SEC matter of $9.2 million after tax
or $0.05 per diluted share. These charges totaled $43.0 million
after tax or $0.24 per diluted share for the prior year six-month
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
guidance for the third quarter 2008 ending Sept. 27, 2008: -- Sales
are expected to range from $8.5 billion to $8.8 billion. -- Net
income is expected to range from $52 million to $61 million, or
$0.31 to $0.36 per diluted share. This includes an estimated $7
million ($5 million net of tax) in costs to be incurred during the
third quarter related to the completion of expense-reduction plans
in North America and EMEA. This expense-reduction program is
expected to generate $18 million to $24 million of annualized
savings. -- Moreover, the company is evaluating additional
expense-reduction opportunities, which could result in related
costs and savings beyond the current program. The costs, savings
and timing of these additional actions, if implemented, cannot be
reasonably estimated at this time. -- The weighted average shares
outstanding is expected to be approximately 169 million and an
effective tax rate of 28 percent is estimated for the third quarter
2008 and the remainder of the year. "We expect the macro-economic
softness to continue into the third quarter," said Spierkel. "Solid
growth is expected from Latin America, but sales growth in the
other regions will be more modest. The benefits of our
cost-containment and freight-recovery efforts are expected to be
more visible in the third quarter, improving operating leverage. We
also expect continued progress in our fee-for-service and adjacency
operations. The actions we're taking today will buffer us from the
weaker market and better position us when the economic environment
improves. Overall, we continue to be confident about the business,
our industry and the strength of our management team." 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) June 28, December 29, 2008 2007
ASSETS Current assets: Cash $747,796 $579,626 Trade accounts
receivable, net 3,626,746 4,054,824 Inventories 2,584,291 2,766,148
Other current assets 457,104 520,069 Total current assets 7,415,937
7,920,667 Property and equipment, net 185,601 181,416 Goodwill
758,323 733,481 Other assets 135,677 139,437 Total assets
$8,495,538 $8,975,001 LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable $3,902,429 $4,349,700 Accrued
expenses 526,900 602,295 Current maturities of long-term debt
186,671 135,616 Total current liabilities 4,616,000 5,087,611
Long-term debt, less current maturities 293,500 387,500 Other
liabilities 71,173 72,948 Total liabilities 4,980,673 5,548,059
Stockholders' equity 3,514,865 3,426,942 Total liabilities and
stockholders' equity $8,495,538 $8,975,001 Ingram Micro Inc.
Consolidated Statement of Income (Dollars in 000s, except per share
data) (Unaudited) Thirteen Weeks Ended June 28, 2008 June 30, 2007
Net sales $8,816,615 $8,186,071 Cost of sales 8,329,193 7,743,256
Gross profit 487,422 442,815 Operating expenses: Selling, general
and administrative 387,578(a) 357,354(a) Reorganization costs
(credits) 6,613(a) (231) 394,191 357,123 Income from operations
93,231 85,692 Interest and other 10,755 15,147 Income before income
taxes 82,476 70,545 Provision for income taxes 23,541 18,145 Net
income $58,935 $52,400 Diluted earnings per share: Net income $0.35
$0.30 Diluted weighted average shares outstanding 170,239,703
176,583,738 (a) See related footnote on the succeeding schedule of
supplementary information for the thirteen weeks ended June 28,
2008 and June 30, 2007. Ingram Micro Inc. Consolidated Statement of
Income (Dollars in 000s, except per share data) (Unaudited)
Twenty-six Weeks Ended June 28, 2008 June 30, 2007 Net sales
$17,393,932 $16,431,775 Cost of sales 16,421,003 15,580,188(a)
Gross profit 972,929 851,587 Operating expenses: Selling, general
and administrative 773,801(a) 693,096(a) Reorganization costs
(credits) 6,613(a) (915) 780,414 692,181 Income from operations
192,515 159,406 Interest and other 23,478 30,542 Income before
income taxes 169,037 128,864 Provision for income taxes 46,047
39,484 Net income $122,990 $89,380 Diluted earnings per share: Net
income $0.71 $0.51 Diluted weighted average shares outstanding
172,343,947 175,908,800 (a) See related footnote on the succeeding
schedule of supplementary information for the twenty-six weeks
ended June 28, 2008 and June 30, 2007. Ingram Micro Inc.
Supplementary Information Income from Operations (Dollars in 000s)
(Unaudited) Thirteen Weeks Ended June 28, 2008 Operating Operating
Net Sales Income Margin North America $3,518,983 $44,380(a) 1.26%
EMEA 2,955,209 15,669(a) 0.53% Asia-Pacific 1,904,144 32,699 1.72%
Latin America 438,278 7,232 1.65% Reconciling amount (stock-based
compensation under SFAS 123R) - (6,749) - Consolidated Total
$8,816,614 $93,231(a) 1.06% Thirteen Weeks Ended June 30, 2007
Operating Operating Net Sales Income Margin North America
$3,301,497 $38,545(b) 1.17% EMEA 2,776,867 22,924 0.83%
Asia-Pacific 1,764,125 31,042 1.76% Latin America 343,582 3,494
1.02% Reconciling amount (stock-based compensation under SFAS 123R)
- (10,313) - Consolidated Total $8,186,071 $85,692(b) 1.05% (a)
Income from operations included net charges of $7,707 (0.09% of
consolidated net sales) comprised of the following: (1) net charges
of $877 in North America (0.03% of North America net sales) which
included reorganization costs of $1,407 for severance associated
with the Company's targeted reduction of administrative and
back-office positions in North America, and a credit adjustment of
$530 for lower than expected costs to settle lease obligations
related to previous actions, and (2) charges of $6,830 in EMEA
(0.23% of EMEA net sales) which included reorganization costs of
$5,736 related to employee termination benefits for workforce
reductions associated with restructuring the regional headquarters
in EMEA, and consulting and other costs associated with the
restructuring of $1,094 charged to selling, general and
administrative expenses. (b) Income from operations recorded in
North America for the thirteen weeks ended June 30, 2007 includes a
reserve for estimated losses of $15,000 associated with the SEC
matter regarding certain transactions with McAfee, Inc. (formerly
NAI) from 1998 through 2000 (0.45% of North America net sales and
0.18% of consolidated net sales). Ingram Micro Inc. Supplementary
Information Income from Operations (Dollars in 000s) (Unaudited)
Twenty-six Weeks Ended June 28, 2008 Operating Operating Net Sales
Income (Loss) Margin (Loss) North America $6,809,164 $84,969(a)
1.25% EMEA 6,021,578 42,448(a) 0.70% Asia-Pacific 3,717,573 65,240
1.75% Latin America 845,617 15,055 1.78% Reconciling amount
(stock-based compensation under SFAS 123R) - (15,197) -
Consolidated Total $17,393,932 $192,515(a) 1.11% Twenty-six Weeks
Ended June 30, 2007 Operating Operating Net Sales Income Margin
Operating Operating Net Sales Income (Loss) Margin (Loss) North
America $6,584,936 $95,559(b) 1.45% EMEA 5,824,163 57,878 0.99%
Asia-Pacific 3,333,290 50,730 1.52% Latin America 689,386
(24,864)(c) (3.61%) Reconciling amount (stock-based compensation
under SFAS 123R) - (19,897) - Consolidated Total $16,431,775
$159,406(b)(c) 0.97% (a) Income from operations included net
charges of $7,707 (0.04% of consolidated net sales) comprised of
the following: (1) net charges of $877 in North America (0.01% of
North America net sales) which included reorganization costs of
$1,407 for severance associated with the Company's targeted
reduction of administrative and back-office positions in North
America, and a credit adjustment of $530 for lower than expected
costs to settle lease obligations related to previous actions, and
(2) charges of $6,830 in EMEA (0.11% of EMEA net sales) which
included reorganization costs of $5,736 related to employee
termination benefits for workforce reductions associated with
restructuring the regional headquarters in EMEA, and consulting and
other costs associated with the restructuring of $1,094 charged to
selling, general and administrative expenses. (b) The income from
operations recorded in North America for the twenty-six weeks ended
June 30, 2007 includes a reserve for estimated losses of $15,000
associated with the SEC matter regarding certain transactions with
McAfee, Inc. (formerly NAI) from 1998 through 2000 (0.23% of North
America net sales and 0.09% of consolidated net sales). (c) The
loss from operations recorded in Latin America for the twenty-six
weeks ended June 30, 2007 includes a commercial tax charge of
$33,754 in Brazil (4.90% of Latin America net sales and 0.21% 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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