FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
| (Mark One) | ||
| [X] |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
| For the quarterly period ended June 29, 2002 | ||
| OR | ||
| [ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the transition period from __________ to __________
Commission file number: 1-12203
Ingram Micro Inc.
Delaware |
62-1644402 |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
1600 E. St. Andrew Place, Santa Ana, California 92705-4931
(714) 566-1000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
The registrant had 150,469,181 shares of Class A Common Stock, par value $.01 per share, outstanding at June 29, 2002.
INGRAM MICRO INC.
INDEX
| Pages | ||||
| Part I | Financial Information | |||
| Item 1. | Financial Statements | |||
| Consolidated Balance Sheet at June 29, 2002 and December 29, 2001 | 3 | |||
| Consolidated Statement of Income for the thirteen and twenty-six weeks ended June 29, 2002 and June 30, 2001 | 4 | |||
| Consolidated Statement of Cash Flows for the twenty-six weeks ended June 29, 2002 and June 30, 2001 | 5 | |||
| Notes to Consolidated Financial Statements | 6-16 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17-25 | ||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 25 | ||
| Part II | Other Information | |||
| Item 1. Legal Proceedings | 26 | |||
| Item 2. Changes in Securities and Use of Proceeds | 26 | |||
| Item 3. Defaults Upon Senior Securities | 26 | |||
| Item 4. Submission of Matters to a Vote of Security Holders | 26 | |||
| Item 5. Other Information | 26 | |||
| Item 6. Exhibits and Reports on Form 8-K | 27 | |||
| Signatures | 27 |
2
Part I. Financial Information
Item 1. Financial Statements
INGRAM MICRO INC.
CONSOLIDATED BALANCE SHEET
| June 29, | December 29, | |||||||||||
| 2002 | 2001 | |||||||||||
| (Unaudited) | ||||||||||||
ASSETS |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 477,243 | $ | 273,059 | ||||||||
Investment in available-for-sale securities |
— | 24,031 | ||||||||||
Accounts receivable: |
||||||||||||
Trade receivables |
1,447,710 | 1,760,581 | ||||||||||
Retained interest in securitized receivables |
584,305 | 537,376 | ||||||||||
Total accounts receivable (less allowances
of $79,282 and $79,927) |
2,032,015 | 2,297,957 | ||||||||||
Inventories |
1,445,754 | 1,623,628 | ||||||||||
Other current assets |
209,846 | 238,171 | ||||||||||
Total current assets |
4,164,858 | 4,456,846 | ||||||||||
Property and equipment, net |
299,984 | 303,833 | ||||||||||
Goodwill, net |
231,794 | 508,227 | ||||||||||
Other |
46,763 | 33,101 | ||||||||||
Total assets |
$ | 4,743,399 | $ | 5,302,007 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||||||
Current liabilities: |
||||||||||||
Accounts payable |
$ | 2,287,646 | $ | 2,607,145 | ||||||||
Accrued expenses |
387,486 | 279,669 | ||||||||||
Current maturities of long-term debt |
125,116 | 252,803 | ||||||||||
Total current liabilities |
2,800,248 | 3,139,617 | ||||||||||
Convertible debentures |
415 | 405 | ||||||||||
Senior subordinated notes |
210,743 | 204,899 | ||||||||||
Deferred income taxes and other liabilities |
84,804 | 89,788 | ||||||||||
Total liabilities |
3,096,210 | 3,434,709 | ||||||||||
Commitments and contingencies (Note 9) |
— | — | ||||||||||
Stockholders’ equity: |
||||||||||||
Preferred Stock, $0.01 par value, 25,000,000
shares authorized; no shares issued and
outstanding |
— | — | ||||||||||
Class A Common Stock, $0.01 par value, 500,000,000
shares authorized; 150,469,181 and 149,024,793
shares issued and outstanding |
1,505 | 1,490 | ||||||||||
Class B Common Stock, $0.01 par value, 135,000,000
shares authorized; no shares issued and
outstanding |
— | — | ||||||||||
Additional paid-in capital |
704,918 | 691,958 | ||||||||||
Retained earnings |
971,356 | 1,227,945 | ||||||||||
Accumulated other comprehensive loss |
(29,889 | ) | (53,416 | ) | ||||||||
Unearned compensation |
(701 | ) | (679 | ) | ||||||||
Total stockholders’ equity |
1,647,189 | 1,867,298 | ||||||||||
Total liabilities and stockholders’ equity |
$ | 4,743,399 | $ | 5,302,007 | ||||||||
See accompanying notes to these consolidated financial statements.
3
INGRAM MICRO INC.
CONSOLIDATED STATEMENT OF INCOME
| Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||||||||||
| June 29, | June 30, | June 29, | June 30, | ||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||||||
Net sales |
$ | 5,352,774 | $ | 6,017,276 | $ | 10,969,325 | $ | 13,210,765 | |||||||||||
Cost of sales |
5,059,683 | 5,701,666 | 10,372,567 | 12,510,960 | |||||||||||||||
Gross profit |
293,091 | 315,610 | 596,758 | 699,805 | |||||||||||||||
Operating expenses: |
|||||||||||||||||||
Selling, general and administrative |
261,780 | 291,736 | 531,199 | 605,461 | |||||||||||||||
Reorganization costs |
5,370 | 19,056 | 8,780 | 19,056 | |||||||||||||||
| 267,150 | 310,792 | 539,979 | 624,517 | ||||||||||||||||
Income from operations |
25,941 | 4,818 | 56,779 | 75,288 | |||||||||||||||
Other expense (income): |
|||||||||||||||||||
Interest income |
(3,402 | ) | (991 | ) | (6,678 | ) | (3,430 | ) | |||||||||||
Interest expense |
8,205 | 13,483 | 15,249 | 32,274 | |||||||||||||||
Losses on sales of receivables |
2,145 | 3,979 | 4,858 | 12,081 | |||||||||||||||
Gain on sale of available-for-sale securities |
— | — | (6,535) | — | |||||||||||||||
Other |
5,001 | 3,047 | 11,358 | 6,089 | |||||||||||||||
| 11,949 | 19,518 | 18,252 | 47,014 | ||||||||||||||||
Income (loss) before income taxes, extraordinary item
and cumulative effect of adoption of a new
accounting standard |
13,992 | (14,700 | ) | 38,527 | 28,274 | ||||||||||||||
Provision for (benefit from) income taxes |
5,177 | (5,292 | ) | 14,255 | 11,253 | ||||||||||||||
Income (loss) before extraordinary item and cumulative
effect of adoption of a new accounting standard |
8,815 | (9,408 | ) | 24,272 | 17,021 | ||||||||||||||
Extraordinary loss on repurchase of debentures, net
of income taxes |
— | (2,610 | ) | — | (2,610 | ) | |||||||||||||
Cumulative effect of adoption of a new accounting
standard, net of income taxes |
— | — | (280,861 | ) | — | ||||||||||||||
Net income (loss) |
$ | 8,815 | $ | (12,018 | ) | $ | (256,589 | ) | $ | 14,411 | |||||||||
Basic earnings per share: |
|||||||||||||||||||
Income (loss) before extraordinary item and
cumulative effect of adoption of a new accounting standard |
$ | 0.06 | $ | (0.06 | ) | $ | 0.16 | $ | 0.12 | ||||||||||
Extraordinary loss on repurchase of debentures |
— | (0.02 | ) | — | (0.02 | ) | |||||||||||||
Cumulative effect of adoption of a new accounting standard |
— | — | (1.87 | ) | — | ||||||||||||||
Net income (loss) |
$ | 0.06 | $ | (0.08 | ) | $ | (1.71 | ) | $ | 0.10 | |||||||||
Diluted earnings per share: |
|||||||||||||||||||
Income (loss) before extraordinary item and
cumulative effect of adoption of a new accounting standard |
$ | 0.06 | $ | (0.06 | ) | $ | 0.16 | $ | 0.12 | ||||||||||
Extraordinary loss on repurchase of debentures |
— | (0.02 | ) | — | (0.02 | ) | |||||||||||||
Cumulative effect of adoption of a new accounting standard |
— | — | (1.84 | ) | — | ||||||||||||||
Net income (loss) |
$ | 0.06 | $ | (0.08 | ) | $ | (1.68 | ) | $ | 0.10 | |||||||||
See accompanying notes to these consolidated financial statements.
4
INGRAM MICRO INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in 000s)
(Unaudited)
| Twenty-six Weeks Ended | |||||||||||
| June 29, | June 30, | ||||||||||
| 2002 | 2001 | ||||||||||
Cash flows from operating activities: |
|||||||||||
Net income (loss) |
$ | (256,589 | ) | $ | 14,411 | ||||||
Adjustments to reconcile net income (loss) to cash
provided by operating activities: |
|||||||||||
Cumulative effect of adoption of a new accounting standard,
net of income taxes |
280,861 | — | |||||||||
Depreciation |
41,917 | 48,018 | |||||||||
Amortization of goodwill |
— | 10,610 | |||||||||
Noncash charges for write-off of property and equipment |
1,763 | — | |||||||||
Noncash charges for interest and compensation |
668 | 6,146 | |||||||||
Loss on repurchase of debentures, net of income taxes |
— | 2,610 | |||||||||
Deferred income taxes |
(15,746 | ) | (16,270 | ) | |||||||
Pretax gain from sale of available-for-sale securities |
(6,535 | ) | — | ||||||||
Changes in operating assets and liabilities, net of acquisitions: |
|||||||||||
Changes in amounts sold under accounts receivable programs |
(48,657 | ) | (710,742 | ) | |||||||
Accounts receivable |
419,803 | 750,980 | |||||||||
Inventories |
230,463 | 1,134,078 | |||||||||
Other current assets |
49,225 | 20,522 | |||||||||
Accounts payable |
(399,944 | ) | (1,210,489 | ) | |||||||
Accrued expenses |
39,125 | (40,839 | ) | ||||||||
Cash provided by operating activities |
336,354 | 9,035 | |||||||||
Cash flows from investing activities: |
|||||||||||
Purchase of property and equipment |
(32,756 | ) | (42,972 | ) | |||||||
Acquisitions, net of cash acquired |
(6,095 | ) | — | ||||||||
Net proceeds from sale of available-for-sale securities |
31,840 | — | |||||||||
Other |
1,478 | (1,659 | ) | ||||||||
Cash used by operating activities |
(5,533 | ) | (44,631 | ) | |||||||
Cash flows from financing activities: |
|||||||||||
Proceeds from exercise of stock options |
8,717 | 8,512 | |||||||||
Repurchase of convertible debentures |
— | (224,977 | ) | ||||||||
Net
proceeds from (repayments of) other debt |
(138,224 | ) | 54,944 | ||||||||
Net borrowings (repayments) under revolving credit facilities |
(2,000 | ) | 160,722 | ||||||||
Cash used by financing activities |
(131,507 | ) | (799 | ) | |||||||
Effect of exchange rate changes on cash and cash equivalents |
4,870 | 4,588 | |||||||||
Increase (decrease) in cash and cash equivalents |
204,184 | (31,807 | ) | ||||||||
Cash and cash equivalents, beginning of period |
273,059 | 150,560 | |||||||||
Cash and cash equivalents, end of period |
$ | 477,243 | $ | 118,753 | |||||||
See accompanying notes to these consolidated financial statements.
5
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in 000s, except per share data)
(Unaudited)
Note 1 — Organization and Basis of Presentation
Ingram Micro Inc. (“Ingram Micro”) and its subsidiaries are primarily engaged in distribution of information technology (“IT”) products and services worldwide. The Company operates in North America, Europe, Latin America and Asia Pacific.
The consolidated financial statements include the accounts of Ingram Micro and its subsidiaries (collectively referred to herein as the “Company”). These financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management, the accompanying unaudited consolidated financial statements contain all material adjustments (consisting of only normal, recurring adjustments) necessary to fairly state the financial position of the Company as of June 29, 2002, and its results of operations and cash flows for the thirteen and twenty-six weeks ended June 29, 2002 and June 30, 2001. All significant intercompany accounts and transactions have been eliminated in consolidation. As permitted under the applicable rules and regulations of the SEC, these financial statements do not include all disclosures and footnotes normally included with annual consolidated financial statements and, accordingly, should be read in conjunction with the consolidated financial statements, and the notes thereto, included in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 29, 2001. The results of operations for the thirteen and twenty-six weeks ended June 29, 2002 may not be indicative of the results of operations that can be expected for the full year.
Certain prior year balances have been reclassified to conform with the current year presentation. In addition, in fiscal year 2002, the Company combined its U.S. and Canadian operations and now reports these entities as its North American segment consistent with the Company’s current management organizational structure. The Company’s Canadian operations were previously reported under Other international operations.
Note 2 — Earnings Per Share
The Company reports a dual presentation of Basic Earnings per Share (“Basic EPS”) and Diluted Earnings per Share (“Diluted EPS”). Basic EPS is computed by