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Ingram Micro Reports First Quarter Financial Results

IRVINE, CA, Apr 29, 2016 (Marketwired via COMTEX) -- Ingram Micro Inc. IM, -0.06% today announced financial results for the first quarter ended Apr. 2, 2016.

"We saw stabilization of global IT demand in March, which has continued into April, however, IT spending was muted in the first two months of the year, particularly for high volume categories including PCs, smartphones, servers and storage," said Alain Monie, Ingram Micro CEO. "While we did not capture the full revenue and operating income opportunity available to us in the quarter, our focus on higher value business continues to show results as we delivered a 97 basis point increase in consolidated gross margin, buoyed by strong improvement across all regions. We have also increased the pace of some of our strategic investment as we focus on building and enhancing the global capabilities that will support our mid- and longer-term business objectives. We filed our preliminary proxy yesterday afternoon and our transaction to join HNA Group is on track to close in the second half of 2016."

First Quarter Results of Operations Worldwide 2016 first quarter sales decreased 12 percent in USD to $9.3 billion, with gross margin of 6.77 percent. This compares to sales of $10.6 billion with gross margin of 5.80 percent in the 2015 first quarter. The translation of foreign currencies versus last year had a negative impact of 3 percentage points on worldwide sales. Approximately $200 million, or 2 percent, of the reduction in 2016 first quarter worldwide sales was related to the company negotiating a favorable change in contract terms with some customers in Europe, as highlighted last quarter, which leads to recognizing these sales on a net basis versus a gross basis as the company did in the first quarter of last year. Additionally, last year's first quarter benefited from approximately $100 million, or 1 percent, in North American mobility distribution business that the company elected to exit this year due to profitability levels that did not meet the company's objectives. The remaining sales decline of 6 percent was primarily related to soft demand for high volume product categories, particularly in consumer markets, which was consistent with the broader overall IT market demand in the quarter. Significantly higher gross margin was the result of a focus on driving a better mix of higher value sales and solid returns on invested capital, as well as recent acquisitions.

Cash flow from operations for the 2016 first quarter significantly improved to $275 million when compared to approximately $60 million last year. Cash flow benefited from strong global execution on the company's working capital improvement program, which helped reduce working capital days at the end of the 2016 first quarter to 23 days, an 8 day improvement year-over-year.

Return on invested capital for the trailing 12 month period was 10.7 percent on a non-GAAP basis, close to 300 basis points above the company weighted average cost of capital. Return on invested capital on a GAAP basis was 5.9 percent.

2016 first quarter non-GAAP operating income was $101 million and non-GAAP earnings were 35 cents per diluted share, compared to non-GAAP operating income of $125 million and non-GAAP earnings of 43 cents per diluted share in the 2015 first quarter. Compared to the same period in 2015, the translation of foreign currencies negatively impacted 2016 first quarter non-GAAP earnings by 3 cents per diluted share. A better mix of high value sales was more than offset by negative leverage related to lower sales in a number of countries, as well as continued strategic investment, particularly in international markets.

GAAP operating income for the 2016 first quarter was $38 million and GAAP earnings were 1 cent per diluted share, compared to GAAP operating income of $98 million and GAAP earnings of 27 cents per diluted share in the year-earlier period. 2016 first quarter GAAP results were negatively impacted by costs associated with the pending merger with Tianjin Tianhai, as well as higher reorganization, integration and transition costs and higher amortization expense due to previously acquired customer relationships that were written-off as a result of the integration of certain operations into the company's existing facilities, and recent acquisitions.

Conference Call and Webcast As noted in the press release issued on February 17, 2016, due to the company's pending acquisition by Tianjin Tianhai whereby the company will join HNA Group, the company will not be holding a conference call to discuss its 2016 first quarter financial results nor will it be providing a financial outlook.

Non-GAAP Disclosures In addition to GAAP results, Ingram Micro is reporting non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP earnings per diluted share and non-GAAP return on invested capital. These non-GAAP measures exclude charges associated with reorganization, 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 charge in the 2015 second and fourth quarters related to an impairment of internally developed software resulting from the company's decision to stop its global ERP deployment and a charge in the 2015 third quarter for an estimated settlement of employee related taxes assessed in Europe. Non-GAAP net income and non-GAAP earnings per diluted share also exclude 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.

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 and may not be comparable to similarly titled measures used by other companies.

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(TM). 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.

Additional Information In connection with the proposed merger, Ingram Micro will file a proxy statement with the Securities and Exchange Commission (the "SEC"). STOCKHOLDERS ARE ADVISED TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Stockholders may obtain a free copy of the proxy statement (when available) and any other relevant documents filed with the SEC from the SEC's website at http://www.sec.gov. In addition, stockholders will be able to obtain, without charge, a copy of the proxy statement and other relevant documents (when available) from the "Investors" section of Ingram Micro's website or by contacting Ingram Micro's investor relations department via e-mail at damon.wright@ingrammicro.com.

Participants in the Solicitation Ingram Micro and its directors, executive officers and other members of its management and employees as well as Tianjin Tianhai and the HNA Group and their respective directors and officers may be deemed to be participants in the solicitation of proxies from Ingram Micro's stockholders with respect to the merger. Information about Ingram Micro's directors and executive officers and their ownership of Ingram Micro's common stock is set forth in the proxy statement for Ingram Micro's 2016 Annual Meeting of Stockholders and Ingram Micro's Annual Report on Form 10-K for the fiscal year ended January 2, 2016. Stockholders may obtain additional information regarding the direct and indirect interests of the participants in the solicitation of proxies in connection with the merger, including the interests of Ingram Micro's directors and executive officers in the merger, which may be different than those of Ingram Micro's stockholders generally, by reading the proxy statement (when available) and other relevant documents regarding the merger, which will be filed with the SEC.

Cautionary Statement for the Purpose of the Safe Harbor Provisions of the...


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