Ingram Micro: Fiscal 1Q12 Financial Results

Ingram Micro Inc. announced financial results for the 2012 first quarter ended Mar. 31, 2012.

Worldwide sales of $8.64 billion were 1 percent lower than last year’s record first quarter revenues of $8.72 billion, reflecting the translation effect of foreign currencies, which had a negative impact of 1 percent on the prior year comparison.

Worldwide gross profit was $467.6 million (5.41 percent of total sales), compared with $454.1 million (5.21 percent of total sales) in the 2011 first quarter. 2012 first quarter gross margin benefited by approximately 10 basis points from residual favorable pricing impacts from hard disk drives, predominantly in North America.

2012 first quarter net income increased to $90.0 million, or 58 cents per diluted share, which includes an aggregate benefit of approximately 15 cents per diluted share, for the following items:

• A net discrete tax benefit of $28.5 million, or 18 cents per diluted share, substantially all of which relates to the write-off of the historical tax basis the company has maintained in one of its Latin American subsidiary holding companies, which was realized in the quarter;  
• A  negative impact from charges totaling $3.1 million pretax, or 1 cent per diluted share, in costs associated with the transition of the company’s chief executive officer and implementation of various cost-cutting initiatives during the quarter; and
• Losses of $4.8 million pretax, or 2 cents per diluted share, due to the foreign-currency translation impact on Euro-based inventory purchases in the company’s pan-European entity, which designates the United States dollar as its functional currency. The foreign-currency related charge is a function of the timing of currency fluctuations within the quarter and should be recovered as the inventory is sold subsequent to the first quarter. This is similar to the company’s experience in previous years, including the 2011 first quarter when the company incurred $4.9 million in foreign currency losses for the same reason.

2011 first quarter net income was $56.3 million, or 34 cents per diluted share, which included a benefit of approximately $5 million, or 2 cents per diluted share, related to a release of certain bad debt reserves in North America and a negative impact of $4.9 million, or 2 cents per diluted share, related to foreign currency translation losses as detailed above.

Key 2012 first quarter highlights:
North America demonstrated strong leverage with operating income increasing 18 percent on a 3 percent increase in sales, driven in-part by additional benefit from favorable hard disk drive pricing, double digit sales growth in the company’s specialty business portfolio and improvements in the fee-for-service logistics business. 2012 first quarter North American results also include costs of $2.5 million, or 7 basis points of North American sales, associated with the company’s CEO transition.

Sales in Latin America hit an all-time high for a first quarter and the region increased its already solid operating profitability.

Asia Pacific sales hit an all-time first quarter high, led by double digit growth in China and India.

Australia improved gross margins and reduced its operating loss compared with the 2011 first quarter.

Europe‘s year-over-year decrease in sales was tempered by relative strength in Germany and the United Kingdom, both of which experienced modest sales growth versus the 2011 first quarter.

Working capital days were 25, within the company’s targeted range of 22 to 26 days.

"We continued the positive momentum with which we exited 2011, delivering solid first quarter results highlighted by improved profitability and strong sales in our higher margin businesses," said Alain Monie, president and CEO, Ingram Micro. "We opened the year well and we are beginning to reap the rewards from our efforts on many fronts. We still have areas for improvement and I look forward to building on our momentum and driving continued execution towards our strategic and financial goals."

Bill Humes, COO and CFO, commented: "The team did a good job delivering an overall return on invested capital for the quarter that was well above our weighted average cost of capital and maintaining working capital days within our targeted range of 22 to 26 days. We will continue to invest in the business to drive even stronger returns through accelerated growth and higher margin products and solutions, while effectively managing our operating expense leverage."

Outlook  
For the 2012 second quarter, sales are expected to be flat to slightly up sequentially. 2012 second quarter gross margin is expected to trend down sequentially, reflecting the removal of the residual benefit from hard disk drive pricing realized in the 2012 first quarter, as well as normal seasonal declines such as lower fee-based logistics business.