|[July 16, 2014]
Fitch Affirms Ingram Micro at 'BBB-'; Outlook Stable
CHICAGO --(Business Wire)--
Fitch Ratings affirms the ratings for Ingram Micro (News - Alert), Inc. (NYSE: IM)
(Ingram Micro), including the long-term Issuer Default Rating (IDR) at
'BBB-'. Fitch's rating actions affect $1 billion of total debt as of
March 29, 2014. The Rating Outlook is Stable. A full list of current
ratings follows at the end of this press release.
The ratings and Outlook reflect Fitch's expectations for stable
operating performance, consistently positive annual free cash flow (FCF)
through the cycle, and solid credit protection measures. For 2014, Fitch
expects low-to mid-single digit revenue growth, driven by a modest
recovery in Europe, strong top line growth in emerging markets
(particularly Latin America), and the resumption of growth in the
Brightpoint (News - Alert) business with the support of Ingram's global scale and
position in the market.
Over the longer-term Fitch expects low single digit revenue growth,
driven by mature top line growth for the technology solutions
businesses, which represents the vast majority of total revenues. Ingram
Micro's focus on smaller but faster growing businesses, including
mobility, supply chain and cloud solutions, will be key to accelerating
Fitch expects operating EBITDA margin will remain thin but expand
slightly over the intermediate term, driven mainly by operating
efficiencies programs and expectations for improving results for the
Brightpoint business. Fitch expects operating EBITDA margin will exceed
1.7% over the intermediate-term and remain above 1.5% through the cycle.
For the latest 12 months (LTM) ended March 29, 2014, Fitch estimates
operating EBITDA margin was 1.65%, versus 1.55% for the comparable prior
Fitch expects consistently positive annual free cash flow (FCF), driven
by growing profitability in an upturn and the reduction of working
capital in a downturn. For 2014, Fitch forecasts $150 million to $200
million of FCF, driven by higher profitability and the resumption of
more typical working capital patterns following the full integration of
Brightpoint. Fitch believes annual FCF will be used for a combination of
smaller tuck-in acquisitions and share repurchases. As of March 29,
2014, $124 million was available under the company's $400 million share
repurchase authorization expiring October 2015.
Fitch expects total adjusted leverage (total debt adjusted for
capitalized rent expense and off balance sheet receivable sales programs
to operating EBITDAR) to remain below 3.5 times (x) over the longer-term
but end fiscal 2014 in the 2.25x to 2.5x range, driven by higher
Ratings strengths include:
--Significant customer and geographic diversification; --Substantial
competitive advantage from scale of operations, reslting in leading
positions across all geographies;
--Importance of wholesale distribution model to both original equipment
manufacturers (OEMs) and value added resellers (VARs).
Rating concerns include:
--Low margin and high working capital nature of the wholesale
distribution model, which can lead to volatility in profitability and
FCF, although working capital has historically provided a substantial
source of liquidity during cyclical downturns; --Exposure to cyclical IT
demand and general global economic conditions;
--Significant reliance on Hewlett-Packard (News - Alert) as a supplier.
Negative rating actions could result from total leverage adjusted for
operating leases and off balance sheet receivables sales facilities
approaching 3.5 times(x), driven by:
--Structurally lower operating EBITDA from sustained negative revenue
growth or competitive pricing; or
--Negative FCF from lower profitability in conjunction with diminished
working capital efficiency.
Fitch does not anticipate positive rating action, given Ingram Micro's
low profitability and need for financial flexibility to support working
Liquidity was solid as of March 29, 2014 and consisted primarily of $425
million in cash and cash equivalents ($152 million in the U.S.), an
undrawn $940 million senior unsecured revolving credit facility expiring
September 2018 and approximately $425 million of capacity under a $675
million North American accounts receivable securitization program which
expires November 2015. Ingram Micro also has several additional
committed and uncommitted receivable financing facilities which can
provide further significant liquidity.
Total debt as of March 29, 2014 was approximately $1 billion and
consisted principally of $250 million outstanding under the
aforementioned North American accounts receivable facility, $300 million
of 5.25% senior unsecured notes maturing in 2017 and $298 million of 5%
senior unsecured notes maturing in 2022. In addition, Ingram Micro has
$167 million outstanding under other debt and various uncommitted lines
Fitch affirms Ingram Micro's ratings as follows:
--IDR at 'BBB-';
--Senior unsecured debt at 'BBB-'
--Senior unsecured credit facility at 'BBB-'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Criteria:
--'Corporate Rating Methodology' (May 28, 2014).
Applicable Criteria and Related Research:
Corporate Rating Methodology - Including Short-Term Ratings and Parent
and Subsidiary Linkage
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'.
PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS
SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS
OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES
AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF
THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE
RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR
RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY
CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH
[ InfoTech Spotlight's Homepage ]