Ingram Micro announced financial results for the first quarter ended April 2, 2016. Worldwide sales decreased 12 percent in USD to $9.3 billion, with gross margin of 6.77 percent.
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This compares to sales of $10.6 billion with gross margin of 5.80 percent in the 2015 first quarter. The translation of foreign currencies versus last year had a negative impact of 3 percentage points on worldwide sales.
Approximately $200 million, or 2 percent, of the reduction in 2016 first quarter worldwide sales was related to the company negotiating a favorable change in contract terms with some customers in Europe, as highlighted last quarter, which leads to recognizing these sales on a net basis versus a gross basis as the company did in the first quarter of last year.
Additionally, last year's first quarter benefited from approximately $100 million, or 1 percent, 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 remaining sales decline of 6 percent was primarily related to soft demand for high volume product categories, particularly in consumer markets, which was consistent with the broader overall IT market demand in the quarter.
Significantly higher gross margin was the result of a focus on driving a better mix of higher value sales and solid returns on invested capital, as well as recent acquisitions.
Cash flow from operations for the 2016 first quarter significantly improved to $275 million when compared to approximately $60 million last year.
Cash flow benefited from strong global execution on the company's working capital improvement program, which helped reduce working capital days at the end of the 2016 first quarter to 23 days, an 8 day improvement year-over-year.
Return on invested capital for the trailing 12 month period was 10.7 percent on a non-GAAP basis, close to 300 basis points above the company weighted average cost of capital. Return on invested capital on a GAAP basis was 5.9 percent.
2016 first quarter non-GAAP operating income was $101 million and non-GAAP earnings were 35 cents per diluted share, compared to non-GAAP operating income of $125 million and non-GAAP earnings of 43 cents per diluted share in the 2015 first quarter.
Compared to the same period in 2015, the translation of foreign currencies negatively impacted 2016 first quarter non-GAAP earnings by 3 cents per diluted share. A better mix of high value sales was more than offset by negative leverage related to lower sales in a number of countries, as well as continued strategic investment, particularly in international markets.
GAAP operating income for the 2016 first quarter was $38 million and GAAP earnings were 1 cent per diluted share, compared to GAAP operating income of $98 million and GAAP earnings of 27 cents per diluted share in the year-earlier period.
2016 first quarter GAAP results were negatively impacted by costs associated with the pending merger with Tianjin Tianhai, as well as higher reorganization, integration and transition costs and higher amortization expense due to previously acquired customer relationships that were written-off as a result of the integration of certain operations into the company's existing facilities, and recent acquisitions. ■