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Ingram Micro worldwide sales drop 19 per cent in Q4 FY15 on year-to-year comparison

Ingram Micro worldwide sales drop 19 per cent in Q4 FY15 on year-to-year comparison

However, there were some mitigating circumstances

Alain Monié - CEO, Ingram Micro

Alain Monié - CEO, Ingram Micro

Ingram Micro's fourth quarter sales have dropped 19 per cent in US dollars and 13 per cent on currency neutral terms when compared with the 2014 fourth quarter. However, there were mitigating circumstances.

In a statement the company said that, as highlighted on the company's 2015 third quarter earnings call, last year's fiscal fourth quarter benefited from approximately $US900 million related to an additional week of sales and also benefited from approximately $US500 million 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 company also had negotiated a favourable change in contract terms for some of its high volume European fulfillment business, which led to recognising the revenue on a net basis versus a gross basis as it did last year. This had a negative impact of about $US300 million on 2015 fourth quarter worldwide sales.

Worldwide fourth quarter sales were $US11.3 billion compared to the $US14 billion recorded in the 2014 fourth quarter.

Interestingly, Asia-Pacific (which includes Australia) net sales for the 52 weeks ending January 2, 2016, were $US10.066 billion up fractionally on the 53 weeks ending January 2, 2015 which came in at $US9.991 billion. It was the only region to record an increase.

Yearly net sales worldwide for these comparative periods were $US43.02 billion down $US3.47bn on the 2015 figure of $US46.49bn (which is a 53-week figure).

This follows it sale last week for $US 6 billion to Tianjin Tianhai Investment Company and this week's announcement that president and COO, Paul Read, will step down.

However, Ingram Micro CEO, Alain Monié, put an upbeat spin on the situation in the company's earnings statement.

"We had a solid close to a strong year of execution, and we are pleased with the progress we are making against our strategic initiatives," Monié said.

"We are excited about our pending transaction to join HNA Group, as we will have the opportunity to even better serve our vendor and customer partners and help them achieve their business objectives.

"Upon the closing of the transaction announced last week, we expect to have the ability to accelerate our investments, both organically and through M&A, to enhance and add to our capabilities in high value IT solutions, mobility lifecycle services, commerce and fulfillment solutions and Cloud, while also continuing to extend our geographic reach."

Fourth quarter results of operations

Cash flow from operations for the 2015 fourth quarter was $US500 million, bringing total cash flow from operations for the 2015 full year to $US1.5 billion. Cash flow benefited from the reduction in revenues and strong global execution on the company's working capital improvement program, which helped reduce working capital days at the end of the 2015 fourth quarter to 21, a 4 day improvement from the 2015 third quarter and year-over-year.

2015 fourth quarter non-GAAP operating margin was 2.11 per cent, up from 1.77 per cent last year. 2015 fourth quarter non-GAAP operating income of $US239 million was down only modestly when compared to non-GAAP operating income of $US247 million in the year earlier period, despite significant foreign currency headwinds and one less week of sales as noted above. GAAP operating income for the 2015 fourth quarter was $US196 million, or 1.73 per cent of sales, compared to $US201 million, or 1.44 per cent of sales, in the 2014 fourth quarter.

2015 fourth quarter non-GAAP earnings were $US1.01 per diluted share, up 3 per cent when compared to 2014 fourth quarter earnings of 98 cents per diluted share, and up 13 percent on a currency neutral basis. Compared to the same period in 2014, the translation of foreign currencies negatively impacted 2015 fourth quarter non-GAAP earnings by $US0.10 per diluted share. 2015 fourth quarter GAAP net income was $US141 million, or $US0.93 cents per diluted share. This compares to GAAP net income of $US119 million, or $US0.74 per diluted share, in the year-earlier period.

Key 2015 fourth quarter business highlights:

  • North America revenue was $US4.7 billion with non-GAAP operating margin of 2.62 percent and GAAP operating margin of 2.14 percent. Europe revenue was $US3.4 billion with non-GAAP operating margin of 1.58 per cent and GAAP operating margin of 1.33 per cent. Asia-Pacific revenue was $2.5 billion with non-GAAP operating margin of 2.20 percent and GAAP operating margin of 2.01 per cent. Latin America revenue was $US0.8 billion with non-GAAP operating margin of 2.58 per cent and GAAP operating margin of 2.36 per cent.
  • Return on invested capital for the 2015 full year was 10.7 per cent on a non-GAAP basis, nearly 300 basis points above the company weighted average cost of capital. Return on invested capital on a GAAP basis was 6.9 per cent.
  • During the quarter, Ingram Micro added to its expertise and capabilities across its key strategic initiatives, closing the following acquisitions:
    1. Commerce and fulfillment solutions provider, DocData, one of the leading European providers of order fulfillment, returns logistics and online payment services;
    2. Sao Paulo, Brazil-based, Grupo AÇÃO, one of Latin America's leading providers of critical value-add IT solutions with a portfolio of higher value products, including those from strategic vendors such as IBM, Oracle, Red Hat, EMC and VMware, and solutions offerings including integration services, sales support and financial services; and
    3. Cloud-focused Parallels Odin Service Automation platform.
  • Ingram Micro repurchased 1.7 million shares during the 2015 fourth quarter for a total cost of $US53 million.
  • Ingram Micro's US operations raised nearly $700,000 for local charities resulting from fund-raising events in New York and California.

As previously announced, Ingram Micro has suspended its quarterly dividend payment and its share repurchase program prior to the closing of the company's pending acquisition by Tianjin Tianhai Investment Company, whereby the company will join HNA Group. Also as a result of the acquisition, Ingram Micro is not providing an outlook for the 2016 first quarter or for the 2016 full year.

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Tags HNA GroupAlain MonieIngram MicroTianjin Tianhai Investment Companycloud computingresultssales

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