Vanstar Impacts Inacom Earnings10:07 AM EST Mon. May. 03, 1999
Inacom Corp.'s merger with Vanstar Corp. negatively impacted the integration and distribution firm's most recent financial results, although its early warning to Wall Street minimized the bad news.
For its first quarter ended March 27, Omaha-based Inacom reported a loss of $148.2 million or $3.29 per share, compared with earnings of $16.7 million or 37 cents per share for the year-ago period.
Revenue for the quarter dipped to $1.37 billion vs. 1998 revenue of $1.67 billion.
The company's warning a couple of weeks ago braced Wall Street for the expected loss. In fact, the actual loss sent Inacom's stock to $8.81 on April 22, down only 7 percent two days after reporting its financial results.
First-quarter results were in line with previously announced charges of $217 million related to the merger with Vanstar and other charges the company said were related to current market conditions. Excluding the charges, Inacom said the loss would have been $8.6 million or 19 cents per share, meeting Wall Street consensus estimates, according to First Call Corp.
"The disappointing performance was a result of revenue shortfall and we did not hit the vendor rebate targets. Given the late closing of the Vanstar transaction, we did not realize any synergies," said Dave Guenthner, executive vice president and chief financial officer of Inacom.
First-quarter charges included $103.9- million in restructuring charges and $113.1 million of unusual charges. These unusual charges included losses from liquidating duplicate inventories and facilities and other merger integration costs. On the upside, the company said it generated operating cash flow of $132 million for the quarter due to improved
inventory turns and collections on accounts receivable.
Inacom must cut costs and integrate Vanstar, said Tom Cal, analyst at Soundview Financial Group, Stamford, Conn. "They are trying to make it one company and need to make the distinction between Vanstar and Inacom invisible and that is not going to happen overnight," Cal said.