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Ingram Micro Reports Third Quarter Financial Results

Ingram Micro Inc. today announced financial results for the third quarter ended Sept. 30, 2017.

Third Quarter Results of Operations

Ingram Micro experienced strong global demand, led by strength in technology solutions and mobility distribution. Worldwide 2017 third quarter sales were $11.66 billion, an increase of 14 percent in USD, with gross margin of 6.23 percent. This compares to sales of $10.23 billion and gross margin of 7.00 percent in the 2016 third quarter. The translation of foreign currencies versus last year had a positive impact of 2 percentage points on worldwide sales. 2017 third quarter non-GAAP operating income was $147 million, or 1.26 percent of revenue, and non-GAAP net income was $87 million. This compares to 2016 third quarter non-GAAP operating income of $177 million, or 1.73 percent of revenue, and non-GAAP net income of $107 million.

2017 third quarter gross margin, non-GAAP operating income and non-GAAP net income were impacted by a higher mix of sales of lower margin, consumer focused product lines globally, lower profit contribution from the company’s U.S. mobility business, and continued strategic investments in the company’s cloud and commerce and fulfillment businesses.

2017 third quarter GAAP operating income and net income was $105 million, or 0.90 percent of revenue, and $61 million, respectively, including:

  • The pre-tax negative impact of approximately $19 million in restructuring, merger, acquisition and transition costs primarily related to retention payments and the vesting of restricted shares and stock options due to HNA Group’s acquisition of Ingram Micro; and
  • The pre-tax negative impact of $23 million in amortization expense.

This compares to 2016 third quarter GAAP operating income and net income of $137 million, or 1.34 percent of revenue, and $79 million, respectively.

Non-GAAP Disclosures

In addition to GAAP results, Ingram Micro is reporting non-GAAP operating income, non-GAAP operating margin and non-GAAP net income for the 2017 third quarter and the nine months ended September 30, 2017. These non-GAAP measures exclude charges associated with reorganization, merger, acquisitions, integration and transition costs, including those associated with the company’s previously announced cost savings programs, and the amortization of intangible assets. These non-GAAP financial measures also exclude a loss on the sale of affiliate and a gain related to a legal settlement in the 2016 second quarter. Non-GAAP net income also excludes the impact of foreign exchange gains or losses related to the translation effect on Euro-based inventory purchases in Ingram Micro’s pan-European entity. 2017 year-to-date non-GAAP net income also excludes a non-cash tax benefit primarily related to the reversal of a valuation allowance against certain deferred tax assets in Australia.

The non-GAAP measures noted above are primary indicators that Ingram Micro’s management uses internally to conduct and measure its business and evaluate the performance of its consolidated operations and operating segments. Ingram Micro’s management believes these non-GAAP financial measures are useful because they provide meaningful comparisons to prior periods and an alternate view of the impact of acquired businesses. These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. These non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting Ingram Micro’s business. A material limitation associated with these non-GAAP measures as compared to the GAAP measures is that they may not be comparable to other companies with similarly titled items that present related measures differently. The non-GAAP measures should be considered as a supplement to, and not as a substitute for or superior to, the corresponding measures calculated in accordance with GAAP.

A reconciliation of GAAP to non-GAAP financial measures for the periods presented is attached to this press release.

About Ingram Micro Inc.

Ingram Micro helps businesses realize the promise of technology™. It delivers a full spectrum of global technology and supply chain services to businesses around the world. Deep expertise in technology solutions, mobility, cloud, and supply chain solutions enables its business partners to operate efficiently and successfully in the markets they serve. More at www.ingrammicro.com.

© 2017 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
(Amounts in 000s)
(Unaudited)
 
September 30, December 31,
2017 2016
ASSETS
Current assets:
Cash and cash equivalents $ 431,895 $ 796,164
Restricted cash 13,895 64,916
Trade accounts receivable, net 6,300,198 6,354,905
Inventory 4,480,065 3,902,626
Other current assets   698,231   691,253
 
Total current assets 11,924,284 11,809,864
 
Property and equipment, net 397,239 381,876
Goodwill 937,708 904,920
Intangible assets, net 406,073 445,646
Other assets   245,757   176,643
 
Total assets $ 13,911,061 $ 13,718,949
 
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 6,571,889 $ 7,174,946
Accrued expenses 749,930 856,627
Short-term debt and current maturities of long-term debt   216,794   559,773
 
Total current liabilities 7,538,613 8,591,346
 
Long-term debt, less current maturities 1,747,942 832,459
Other liabilities   255,093   181,393
 
Total liabilities 9,541,648 9,605,198
 
Stockholder's equity   4,369,413   4,113,751
 
Total liabilities and stockholder's equity $ 13,911,061 $ 13,718,949
 
 
                         
Ingram Micro Inc.
Consolidated Statement of Income
(Amounts in 000s)
(Unaudited)
 
Thirteen Weeks Ended
September 30, 2017 October 1, 2016
 
Net sales $ 11,660,547 $ 10,226,826
Cost of sales   10,933,761     9,511,447  
Gross profit   726,786     715,379  
 
Operating expenses:
Selling, general and administrative 584,242 548,373
Amortization of intangible assets 23,211 20,574
Reorganization costs 2,071 7,471
Merger related costs   12,456     1,897  
  621,980     578,315  
 
Income from operations   104,806     137,064  
 
Other expense (income):
Interest income (3,608 ) (1,956 )
Interest expense 25,806 19,640
Net foreign currency exchange (gain) loss (8,816 ) 3,728
Other   4,790     3,020  
  18,172     24,432  
 
Income before income taxes 86,634 112,632
 
Provision for income taxes   25,679     34,109  
 
Net income $ 60,955   $ 78,523  
 
 
                         
Ingram Micro Inc.
Consolidated Statement of Income
(Amounts in 000s)
(Unaudited)
 
Thirty-nine Weeks Ended
September 30, 2017 October 1, 2016
 
Net sales $ 32,890,193 $ 29,686,033
Cost of sales   30,796,393     27,620,012  
Gross profit   2,093,800     2,066,021  
 
Operating expenses:
Selling, general and administrative 1,700,548 1,658,674
Amortization of intangible assets 68,477 73,220
Reorganization costs 11,421 31,727
Loss on sale of affiliate - 14,878
Merger related costs   76,913     14,605  
  1,857,359     1,793,104  
 
Income from operations   236,441     272,917  
 
Other expense (income):
Interest income (8,943 ) (5,214 )
Interest expense 77,206 58,264
Net foreign currency exchange (gain) loss (10,373 ) 12,842
Other   14,216     10,218  
  72,106     76,110  
 
Income before income taxes 164,335 196,807
 
Provision for income taxes   20,970     61,733  
 
Net income $ 143,365   $ 135,074  
 
 
                         
Ingram Micro Inc.
Consolidated Statement of Cash Flows
(Amounts in 000s)
(Unaudited)
 
Thirty-nine Weeks Ended
September 30, 2017 October 1, 2016
Cash flows from operating activities:
Net income $ 143,365 $ 135,074
Adjustments to reconcile net income to cash used by operating activities:
Depreciation and amortization 150,931 151,374
Stock-based compensation 20,517 29,564
Unpaid merger related costs 44,540 4,130
Excess tax benefit from stock-based compensation - (8,437 )
Gain on marketable securities, net (5,318 ) -
Gain on sale of property and equipment (2,930 ) (1,606 )
Loss on sale of affiliate 1,739 14,878
Noncash charges for interest and bond discount amortization 3,283 2,500
Deferred income taxes (43,430 ) (1,152 )
Changes in operating assets and liabilities, net of effects of acquisitions:
Trade accounts receivable 322,006 529,205
Inventory (424,014 ) (355,948 )
Other current assets (15,476 ) (63,572 )
Accounts payable (893,984 ) (400,839 )
Change in book overdrafts (33,480 ) (61,653 )
Accrued expenses   (94,554 )   (110,418 )
Cash used by operating activities   (826,805 )   (136,900 )
 
Cash flows from investing activities:
Capital expenditures (94,544 ) (80,229 )
Movements from restricted cash 51,021 -
Sale of marketable securities, net - 4,700
Proceeds from sale of property and equipment 3,197 1,237
Proceeds from sale of affiliate 9,825 27,847
Acquisitions, net of cash acquired   (20,771 )   (173,311 )
Cash used by investing activities   (51,272 )   (219,756 )
 
Cash flows from financing activities:
Proceeds from exercise of stock options - 3,296
Excess tax benefit from stock-based compensation - 8,437
Equity contribution from Parent 37,500 -
Settlement of stock-based awards due to Merger (48,177 ) -
Other consideration for acquisitions (15,100 ) (2,091 )
Net proceeds from revolving and other credit facilities   545,482     87,160  
Cash provided by financing activities   519,705     96,802  
 
Effect of exchange rate changes on cash and cash equivalents   (5,897 )   13,663  
 
Decrease in cash and cash equivalents (364,269 ) (246,191 )
 
Cash and cash equivalents, beginning of period   796,164     935,267  
 
Cash and cash equivalents, end of period $ 431,895   $ 689,076  
 
 
                         
Ingram Micro Inc.
Supplementary Information
Income from Operations - Reconciliation of GAAP to Non-GAAP Information
(Amounts in Millions)
(Unaudited)
 
Thirteen Weeks Ended
September 30, 2017 October 1, 2016
 
Net Sales $ 11,660.5   $ 10,226.8  
 
GAAP Operating Income $ 104.8 $ 137.1
Reorganization, integration and transition costs 6.8 17.0
Amortization of intangible assets 23.2 20.6
Merger related costs   12.5     1.9  
 
Non-GAAP Operating Income $ 147.3   $ 176.6  
 
GAAP Operating Margin 0.90 % 1.34 %
Non-GAAP Operating Margin 1.26 % 1.73 %
 
 
Thirty-nine Weeks Ended
September 30, 2017 October 1, 2016
 
Net Sales $ 32,890.2   $ 29,686.0  
 
GAAP Operating Income $ 236.4 $ 272.9
Reorganization, integration and transition costs 23.8 63.2
Amortization of intangible assets 68.5 73.3
Merger related costs 76.9 14.6
Loss on sale of affiliate - 14.9
Settlement of a class action lawsuit   -     (3.8 )
 
Non-GAAP Operating Income $ 405.6   $ 435.1  
 
GAAP Operating Margin 0.72 % 0.92 %
Non-GAAP Operating Margin 1.23 % 1.47 %
 
 
                         
Ingram Micro Inc.
Supplementary Information
Reconciliation of GAAP to Non-GAAP Financial Measures
(Amounts in Millions)
(Unaudited)
 
Thirteen Weeks Ended
September 30, 2017 October 1, 2016
 
Net Income Net Income
 
As Reported Under GAAP $ 61.0 $ 78.5
Reorganization, integration and transition costs 4.7 12.1
Amortization of intangible assets 16.0 14.6
Merger related costs 8.6 1.3

Pan-Europe foreign currency exchange (gain) loss

  (3.1 )   0.9  
 
Non-GAAP Financial Measure $ 87.2   $ 107.4  
 
 
Thirty-nine Weeks Ended
September 30, 2017 October 1, 2016
 
Net Income Net Income
 
As Reported Under GAAP $ 143.4 $ 135.1
Reorganization, integration and transition costs 16.8 45.4
Amortization of intangible assets 48.7 52.3
Merger related costs 55.1 10.6
Loss on sale of affiliate - 10.2
Settlement of a class action lawsuit - (2.6 )
Pan-Europe foreign currency exchange loss 2.6 1.1
Reversal of a valuation allowance against certain deferred tax assets in Australia   (30.6 )   -  
 
Non-GAAP Financial Measure $ 236.0   $ 252.1  

Note: Amounts above are net of applicable income taxes.

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