IRVINE, CA (Marketwired) - Ingram Micro Inc. (NYSE: IM) today announced financial results for the third quarter ended Oct. 1, 2016. "During the third quarter of this year we continued to deliver robust improvement in gross and operating margins leading to the strongest earnings per share for a third quarter in more than a decade," said Alain Monié, Ingram Micro CEO.
"We see further stabilization in market demand across most of the globe and our teams continue to leverage our investments in productivity and services to deliver improved bottom line results and growth in a number of areas as we benefit from the broadest solutions portfolio and widest geographic reach in the industry." Monié added, "We continue to make progress on our transaction to join the HNA Group and remain on track to close this year."
Third Quarter Results of Operations
Worldwide 2016 third quarter sales of $10.2 billion decreased 3 percent in USD, with gross margin increasing 69 basis points year-over-year to 7.0 percent. This compares to sales of $10.5 billion with gross margin of 6.31 percent in the 2015 third quarter. The translation of foreign currencies versus last year had a negative impact of 1 percentage point on worldwide sales.
Additionally, 2016 third quarter worldwide sales were negatively impacted versus last year by nearly $120 million, or 1 percent, related to the company negotiating a favorable change in contract terms with some customers in Europe, which leads to recognizing these sales on a net versus a gross basis as the company did in the third quarter of last year. Recent acquisitions contributed approximately 2 percentage points of growth to 2016 third quarter worldwide sales. Strong gross margin expansion was the result of a focus on driving a better mix of higher value sales, including increased contribution from services, as well as from recent acquisitions.
2016 third quarter GAAP operating income was $137 million, or 1.34 percent of revenue, compared to 2015 third quarter GAAP operating income of $119 million, or 1.14 percent of revenue. 2016 third quarter GAAP earnings per diluted share were 52 cents, compared to GAAP earnings per diluted share of 42 cents in the year-earlier period.
2016 third quarter non-GAAP operating income was $177 million, or 1.73 percent of revenue, a 13 basis point increase when compared to 2015 third quarter non-GAAP operating income of $169 million, or 1.60 percent of revenue. 2016 third quarter non-GAAP earnings per diluted share were up 6 percent to 71 cents, when compared to non-GAAP earnings per diluted share of 67 cents in the year-earlier period. Compared to the same period in 2015, the translation of foreign currencies negatively impacted 2016 third quarter non-GAAP earnings by 1 cent per diluted share. A better mix of high value business and solid operating leverage across most regions more than offset continued strategic investments.
On a GAAP basis, return on invested capital for the trailing 12 months was 7.7 percent compared to 6.3 percent in the 2015 third quarter. On a non-GAAP basis, return on invested capital for the trailing 12 month period was 10.9 percent, more than 300 basis points above the company weighted average cost of capital, and up compared to 10.6 percent in the similar trailing 12 month period last year.
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 third 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 benefit in the fourth quarter of 2014 related to the receipt of an LCD flat panel class action settlement, 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, a charge in the 2015 third quarter for an estimated settlement of employee related taxes assessed in Europe, a loss on the sale of affiliate and a gain related to a legal settlement in the 2016 second quarter. 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.
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™. 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