Ingram Micro Inc. (IM, Financial) filed Quarterly Report for the period ended 2009-04-04.
Ingram Micro Inc. is one of the leading distributors of information technology products and services worldwide. The company markets computer hardware networking equipment and software products to reseller customers in numerous countries. The company also provides logistics and fulfillment services to vendor and reseller customers. Ingram Micro Inc. has a market cap of $2.48 billion; its shares were traded at around $15.36 with a P/E ratio of 10.5 and P/S ratio of 0.1. Ingram Micro Inc. had an annual average earning growth of 20.5% over the past 5 years.
Our consolidated net sales decreased 21.4% to $6.75 billion for the thirteen weeks ended April 4, 2009, or first quarter of 2009, from $8.58 billion for the thirteen weeks ended March 29, 2008, or first quarter of 2008. Net sales from our North American operations decreased 15.7% to $2.77 billion in the first quarter of 2009 compared to $3.29 billion in the first quarter of 2008. Net sales from our EMEA operations decreased 26.1% to $2.27 billion in the first quarter of 2009 from $3.07 billion in the first quarter of 2008. Net sales from our Asia-Pacific operations decreased 23.6% to $1.38 billion in the first quarter of 2009 from $1.81 billion in the first quarter of 2008. Net sales from our Latin American operations decreased 21.1% to $321 million in the first quarter of 2009 from $407 million in the first quarter of 2008. The significant year-over-year decline in our consolidated net sales, as well as our regional net sales, is due primarily to the continued weakening in the overall macroeconomic environment and demand for technology products and services, which had spread to substantially all of our business units in each region by the end of 2008. The sluggish demand for technology products and services is expected to continue, and may worsen, over the near term. The translation impact of the strengthening U.S. dollar compared to most foreign currencies also contributed approximately 8% of the year-over-year decline in consolidated net sales. The translation impact of the strengthening U.S. dollar compared to European, Asia-Pacific and Latin American currencies negatively impacted the regional net sales by approximately 14, 12 and 18 percentage-points, respectively.
In February 2009, we announced that we are taking further actions to more align our expenses with declines in sales volume. These actions are expected to generate savings of approximately $100 million to $120 million annually, reaching the full run-rate by the time we exit 2009. Total restructuring and other related costs associated with these actions are expected to range from approximately $45 million to $65 million over the course of 2009. In the first quarter of 2009, we incurred reorganization costs of $13.8 million, or 0.21% of consolidated net sales, which consisted of (a) $12.0 million of employee termination benefits for workforce reductions in all four regions ($5.3 million in North America, $4.8 million in EMEA, $1.7 million in Asia-Pacific and $0.2 million in Latin America), (b) $1.2 million for facility consolidations in EMEA and (c) $0.6 million for contract terminations primarily for equipment leases in North America. If the current economic downturn worsens or continues beyond 2009, we may pursue other business process and/or organizational changes in our business or we may expand the reorganization program described above, which may result in additional charges related to consolidation of facilities, restructuring of business functions and workforce reductions in the future. However, any such actions may take time to implement and savings generated may not match the rate of revenue decline in any particular period. In connection with these actions, we also incurred $0.4 million in program costs such as retention costs and consulting expenses, or approximately 0.01% of consolidated net sales, which are recorded in SG&A expenses.
Net cash used by financing activities was $129.5 million in the first quarter of 2009 compared to net cash provided by financing activities of $4.3 million in the first quarter of 2008. The net cash used by financing activities in the first quarter of 2009 primarily reflects the net repayment of $135.8 million for our debt facilities enabled by the overall operational cash generation described above. The net cash provided by financing activities in the first quarter of 2008 primarily reflects net proceeds of $85.4 million from our debt facilities and proceeds of $5.2 million from the exercise of stock options, partially offset by our repurchase of Class A Common stock of $86.6 million.
We also have additional lines of credit, short-term overdraft facilities and other credit facilities with various financial institutions worldwide, which provide for borrowing capacity aggregating approximately $758 million at April 4, 2009. Most of these arrangements are on an uncommitted basis and are reviewed periodically for renewal. At April 4, 2009 and January 3, 2009, we had $83.3 million and $118.6 million, respectively, outstanding under these facilities. The weighted average interest rate on the outstanding borrowings under these facilities, which may fluctuate depending on geographic mix, was 4.8% and 5.1% per annum at April 4, 2009 and January 3, 2009, respectively. At April 4, 2009 and January 3, 2009, letters of credit totaling $27.3 million and $31.6 million, respectively, were issued principally to certain vendors to support purchases by our subsidiaries. The issuance of these letters of credit reduces our available capacity under these agreements by the same amount.
In 2003, our Brazilian subsidiary was assessed for commercial taxes on our purchases of imported software for the period January to September 2002. The principal amount of the tax assessed for this period was 12.7 million Brazilian reais. Prior to February 28, 2007, and after consultation with counsel, it had been our opinion that we had valid defenses to the payment of these taxes and it was not probable that any amounts would be due for the 2002 assessed period, as well as any subsequent periods. Accordingly, no reserve had been established previously for such potential losses. However, on February 28, 2007 changes to the Brazilian tax law were enacted. As a result of these changes, and after further consultation with counsel, it is now our opinion that we have a probable risk of loss and may be required to pay all or some of these taxes. Accordingly, in the first quarter of 2007, we recorded a charge to cost of sales of $33.8 million, consisting of $6.1 million for commercial taxes assessed for the period January 2002 to September 2002, and $27.7 million for such taxes that could be assessed for the period October 2002 to December 2005. The subject legislation provides that such taxes are not assessable on software imports after January 1, 2006. The sums expressed are based on an exchange rate of 2.092 Brazilian reais to the U.S. dollar, which was applicable when the charge was recorded. In the fourth quarters of 2008 and 2007, we released a portion of this commercial tax reserve amounting to $8.2 million and $3.6 million, respectively (19.6 million and 6.5 million Brazilian
Read the The complete ReportIM is in the portfolios of Third Avenue Management.
Ingram Micro Inc. is one of the leading distributors of information technology products and services worldwide. The company markets computer hardware networking equipment and software products to reseller customers in numerous countries. The company also provides logistics and fulfillment services to vendor and reseller customers. Ingram Micro Inc. has a market cap of $2.48 billion; its shares were traded at around $15.36 with a P/E ratio of 10.5 and P/S ratio of 0.1. Ingram Micro Inc. had an annual average earning growth of 20.5% over the past 5 years.
Highlight of Business Operations:
Our income from operations for the thirteen weeks ended April 4, 2009 includes $14.2 million of net charges, comprised of $6.2 million of net charges in North America, $6.1 million of net charges in EMEA, $1.7 million of charges in Asia-Pacific, and $0.2 million of charges in Latin America related to our reorganization and expense reduction programs as discussed in Note 9 to our consolidated financial statements.Our consolidated net sales decreased 21.4% to $6.75 billion for the thirteen weeks ended April 4, 2009, or first quarter of 2009, from $8.58 billion for the thirteen weeks ended March 29, 2008, or first quarter of 2008. Net sales from our North American operations decreased 15.7% to $2.77 billion in the first quarter of 2009 compared to $3.29 billion in the first quarter of 2008. Net sales from our EMEA operations decreased 26.1% to $2.27 billion in the first quarter of 2009 from $3.07 billion in the first quarter of 2008. Net sales from our Asia-Pacific operations decreased 23.6% to $1.38 billion in the first quarter of 2009 from $1.81 billion in the first quarter of 2008. Net sales from our Latin American operations decreased 21.1% to $321 million in the first quarter of 2009 from $407 million in the first quarter of 2008. The significant year-over-year decline in our consolidated net sales, as well as our regional net sales, is due primarily to the continued weakening in the overall macroeconomic environment and demand for technology products and services, which had spread to substantially all of our business units in each region by the end of 2008. The sluggish demand for technology products and services is expected to continue, and may worsen, over the near term. The translation impact of the strengthening U.S. dollar compared to most foreign currencies also contributed approximately 8% of the year-over-year decline in consolidated net sales. The translation impact of the strengthening U.S. dollar compared to European, Asia-Pacific and Latin American currencies negatively impacted the regional net sales by approximately 14, 12 and 18 percentage-points, respectively.
In February 2009, we announced that we are taking further actions to more align our expenses with declines in sales volume. These actions are expected to generate savings of approximately $100 million to $120 million annually, reaching the full run-rate by the time we exit 2009. Total restructuring and other related costs associated with these actions are expected to range from approximately $45 million to $65 million over the course of 2009. In the first quarter of 2009, we incurred reorganization costs of $13.8 million, or 0.21% of consolidated net sales, which consisted of (a) $12.0 million of employee termination benefits for workforce reductions in all four regions ($5.3 million in North America, $4.8 million in EMEA, $1.7 million in Asia-Pacific and $0.2 million in Latin America), (b) $1.2 million for facility consolidations in EMEA and (c) $0.6 million for contract terminations primarily for equipment leases in North America. If the current economic downturn worsens or continues beyond 2009, we may pursue other business process and/or organizational changes in our business or we may expand the reorganization program described above, which may result in additional charges related to consolidation of facilities, restructuring of business functions and workforce reductions in the future. However, any such actions may take time to implement and savings generated may not match the rate of revenue decline in any particular period. In connection with these actions, we also incurred $0.4 million in program costs such as retention costs and consulting expenses, or approximately 0.01% of consolidated net sales, which are recorded in SG&A expenses.
Net cash used by financing activities was $129.5 million in the first quarter of 2009 compared to net cash provided by financing activities of $4.3 million in the first quarter of 2008. The net cash used by financing activities in the first quarter of 2009 primarily reflects the net repayment of $135.8 million for our debt facilities enabled by the overall operational cash generation described above. The net cash provided by financing activities in the first quarter of 2008 primarily reflects net proceeds of $85.4 million from our debt facilities and proceeds of $5.2 million from the exercise of stock options, partially offset by our repurchase of Class A Common stock of $86.6 million.
We also have additional lines of credit, short-term overdraft facilities and other credit facilities with various financial institutions worldwide, which provide for borrowing capacity aggregating approximately $758 million at April 4, 2009. Most of these arrangements are on an uncommitted basis and are reviewed periodically for renewal. At April 4, 2009 and January 3, 2009, we had $83.3 million and $118.6 million, respectively, outstanding under these facilities. The weighted average interest rate on the outstanding borrowings under these facilities, which may fluctuate depending on geographic mix, was 4.8% and 5.1% per annum at April 4, 2009 and January 3, 2009, respectively. At April 4, 2009 and January 3, 2009, letters of credit totaling $27.3 million and $31.6 million, respectively, were issued principally to certain vendors to support purchases by our subsidiaries. The issuance of these letters of credit reduces our available capacity under these agreements by the same amount.
In 2003, our Brazilian subsidiary was assessed for commercial taxes on our purchases of imported software for the period January to September 2002. The principal amount of the tax assessed for this period was 12.7 million Brazilian reais. Prior to February 28, 2007, and after consultation with counsel, it had been our opinion that we had valid defenses to the payment of these taxes and it was not probable that any amounts would be due for the 2002 assessed period, as well as any subsequent periods. Accordingly, no reserve had been established previously for such potential losses. However, on February 28, 2007 changes to the Brazilian tax law were enacted. As a result of these changes, and after further consultation with counsel, it is now our opinion that we have a probable risk of loss and may be required to pay all or some of these taxes. Accordingly, in the first quarter of 2007, we recorded a charge to cost of sales of $33.8 million, consisting of $6.1 million for commercial taxes assessed for the period January 2002 to September 2002, and $27.7 million for such taxes that could be assessed for the period October 2002 to December 2005. The subject legislation provides that such taxes are not assessable on software imports after January 1, 2006. The sums expressed are based on an exchange rate of 2.092 Brazilian reais to the U.S. dollar, which was applicable when the charge was recorded. In the fourth quarters of 2008 and 2007, we released a portion of this commercial tax reserve amounting to $8.2 million and $3.6 million, respectively (19.6 million and 6.5 million Brazilian
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