Organization and Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2013 |
Fair Value Disclosures [Abstract] | ' |
Nature of Operations | ' |
Nature of Operations |
Intcomex, Inc. (“Intcomex”) is a United States (“U.S.”) based pure play value-added international distributor of information technology (“IT”) products focused solely on serving Latin America and the Caribbean (the “Region”). Intcomex distributes computer equipment, components, peripherals, software, computer systems, accessories, networking products, digital consumer electronics and mobile devices to more than 50,000 customers in 39 countries. Intcomex offers single source purchasing to its customers by providing an in-stock selection of more than 12,000 products from over 130 vendors, including many of the world’s leading IT product manufacturers. The Company operates a sales and distribution center in the U.S. (the “Miami Operations”) and 19 sales and distribution centers in Latin America and the Caribbean with in-country operations in 11 countries—Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Jamaica, Mexico, Panama, Peru and Uruguay, collectively, (the “In-country Operations”). |
Organization | ' |
Organization |
The accompanying unaudited condensed consolidated financial statements include the accounts of Intcomex (the “Parent”) and its subsidiaries (collectively referred to herein as the “Company”) including the accounts of Intcomex Holdings, LLC (“Holdings”) (parent company of Software Brokers of America, Inc. (“SBA”), a Florida corporation), IXLA Holdings, Ltd. (“IXLA”), IFC International, LLC, a Delaware limited liability company (“IFC”) and Intcomex International Holdings Cooperatief U.A., a Netherlands cooperative (“Coop”). SBA is the parent company of five subsidiaries located in Florida. IXLA is the Cayman Islands limited time duration holding company of 19 subsidiaries located in Central America, South America and the Caribbean. IFC and Coop are the parent companies of Intcomex Holdings SPC-I, LLC (“Intcomex SPC-I Mexico”), a dually formed company in the U.S. and Mexico and parent company of Comercializadora Intcomex S.A. de C.V. (“Intcomex Mexico”). The unaudited condensed consolidated financial statements reflect the Company as the reporting entity for all periods presented. |
Use of Accounting Estimates | ' |
Use of Accounting Estimates |
The Company prepares its unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The principles require the Company to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, the reported amounts of revenues and expenses, cash flows and the related footnote disclosures during the reporting period. On an on-going basis, the Company reviews and evaluates its estimates and assumptions, including but not limited to, those that relate to the realizable value of accounts receivable, inventories, identifiable intangible assets, goodwill and other long-lived assets, income taxes and contingencies. Actual results could differ from these estimates. |
Principles of Consolidation | ' |
Principles of Consolidation |
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with the instructions to the Quarterly Report on Form 10-Q (“Quarterly Report”) and Article 10 of Regulation S-X, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not include certain information and disclosures normally required for comprehensive annual consolidated financial statements. Therefore, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2012, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 25, 2013 (“Annual Report”). The results of operations for the three and nine months ended September 30, 2013 may not be indicative of the results of operations that can be expected for the full year. |
In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all material adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position of the Company as of September 30, 2013, and its results of operations for the three and nine months ended September 30, 2013 and 2012 and its statements of cash flows for the nine months ended September 30, 2013 and 2012. All significant intercompany accounts and transactions have been eliminated in consolidation. |
Basis of Presentation | ' |
Basis of Presentation |
Certain immaterial reclassifications have been made to prior period balances in order to conform to the current period’s presentation. |
Restricted cash balance relates to a deposit held to meet certain obligations under an agreement with one of the Company’s vendors. Restricted cash is recorded at cost, which approximates fair value. |
The Company evaluated subsequent events through the date it issued its unaudited condensed consolidated financial statements, the date the Company filed its Quarterly Report. |
Fair Value of Financial Instruments | ' |
Fair Value of Financial Instruments |
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures (“ASC 820”) establishes a framework for all fair value measurements and expands disclosures related to fair value measurement and developments. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 requires that assets and liabilities measured at fair value are classified and disclosed in one of the following three categories: |
Level 1—Quoted market prices for identical assets or liabilities in active markets or observable inputs; |
Level 2—Significant other observable inputs that can be corroborated by observable market data; and |
Level 3—Significant unobservable inputs that cannot be corroborated by observable market data. |
The carrying amounts of cash and cash equivalents, restricted cash, trade accounts receivable, notes receivable and other, accounts payable, accrued expenses and other approximate fair value because of the short-term nature of these items. The carrying amounts of outstanding short-term debt approximate fair value because interest rates over the term of these financial instruments approximate current market interest rates available to the Company. The current market price of outstanding long-term debt approximates fair value because the Company’s $110,000 aggregate principal amount 13 1⁄4% Second Priority Senior Secured Notes due December 15, 2014 (the “13 1⁄4% Senior Notes”) are currently publicly tradable. The 13 1⁄4% Senior Notes are measured at fair value and are classified in the Level 1 category of ASC 820, as the fair value is measured at the quoted market price for identical liabilities in an active market. As of September 30, 2013 and December 31, 2012, the 13 1⁄4% Senior Notes were tradable at 96.625 and 101.50, respectively, of the principal amount. |
The Company is exposed to fluctuations in foreign exchange rates and reduces its exposure to the fluctuations by periodically using derivative financial instruments and entering into derivative transactions with large multinational banks to manage its primary risk, foreign currency price risk. The Company’s derivative transactions are comprised of the following types of instruments: |
Foreign currency forward contracts—Derivative instruments that convert one currency to another currency and contain a fixed amount, fixed exchange rate used for conversion and fixed future date on which the conversion will be made. The Company recognizes unrealized loss (gain) in the unaudited condensed consolidated statements of operations and comprehensive (loss) income for temporary fluctuations in the value of non-qualifying derivative instruments designated as cash flow hedges, if the fair value of the underlying hedged currency increases (decreases) prior to maturity. The Company reports realized loss (gain) upon conversion if the fair value of the underlying hedged currency increases (decreases) as of the maturity date. |
Foreign currency collars—Derivative instruments that contain a fixed floor price (put option) and fixed ceiling price (call option). If the market price exceeds the call option strike price or falls below the put option strike price, the Company receives the fixed price or pays the counterparty bank the market price. If the market price is between the call and put option strike prices, neither the Company nor the counterparty bank are required to make a payment. |
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The amount required to enter into similar offsetting contracts with similar remaining maturities based on quoted market prices approximates the fair value of derivative financial instruments. The Company’s foreign currency forward contracts are measured on a recurring basis based on foreign currency spot rates quoted by financial institutions (Level 2) and are marked-to-market each period with gains and losses on these contracts recorded in foreign exchange (gain) loss in the Company’s unaudited, condensed consolidated statements of operations in the period in which the value changes with the offsetting amount for unsettled positions included in other current assets or liabilities in the unaudited condensed, consolidated balance sheets. The location and amounts of the fair value in the balance sheets and (gain) loss in the statements of operations and comprehensive (loss) income related to the Company’s derivative instruments are described in “Note 9. Fair Value of Derivative Instruments” in these Notes to Condensed Consolidated Financial Statements (Unaudited). There were no changes to the Company’s valuation methodology for assets and liabilities measured at fair value for the three and nine months ended September 30, 2013 and 2012. The Company did not have any foreign currency collars or contracts outstanding as of September 30, 2013 and December 31, 2012. For the three and nine months ended September 30, 2013, the Company recognized a loss of $0 and $66, respectively, on the foreign currency forward contracts or collars outstanding. For the three and nine months ended September 30, 2012, the Company recognized a loss of $0 and $569, respectively, on the foreign currency forward contracts or collars outstanding. |
Off-Balance Sheet Arrangements | ' |
Off-Balance Sheet Arrangements |
The Company has agreements with unrelated third parties for factoring of specific accounts receivable in several of its In-country Operations. The factoring is treated as a sale in accordance with FASB ASC 860, Transfers and Servicing, and is accounted for as an off-balance sheet arrangement. Proceeds from the transfers reflect the face value of the account less a discount, which is recorded as a charge to interest expense in the Company’s consolidated statements of operations in the period the sale occurs. Net funds received are recorded as an increase to cash and a reduction to accounts receivable outstanding in the consolidated balance sheets. The Company reports the cash flows attributable to the sale of receivables to third parties and the cash receipts from collections made on behalf of and paid to third parties, on a net basis as trade accounts receivables in cash flows from operating activities in the Company’s unaudited condensed consolidated statement of cash flows. |
The Company acts as the collection agent on behalf of the third party for the arrangements and has no significant retained interests or servicing liabilities related to the accounts receivable sold. In order to mitigate credit risk related to the Company’s factoring of accounts receivable, the Company may purchase credit insurance, from time to time, for certain factored accounts receivable, resulting in risk of loss being limited to the factored accounts receivable not covered by credit insurance, which the Company does not believe to be significant. |
As of September 30, 2013 and December 31, 2012, the Company factored approximately $32,987 and $23,538, respectively, of accounts receivable pursuant to the Company’s agreements, representing the face amount of total outstanding receivables. For the three and nine months ended September 30, 2013, the Company incurred approximately $416 and $1,266 in expenses pursuant to the agreements. For the three and nine months ended September 30, 2012, the Company incurred approximately $328 and $733, respectively, in expenses pursuant to the agreements. |
Computation of Net (Loss) Income per Share | ' |
Computation of Net (Loss) Income per Share |
The Company reports both basic and diluted net (loss) income per share. Basic net (loss) income per share excludes dilution and is computed by dividing net (loss) income by the weighted average number of common shares outstanding during the period. Diluted net (loss) income per share is computed using the weighted average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares primarily reflect the potential dilution that could occur if stock options and other commitments to issue common stock were exercised using the treasury stock method. |
FASB ASC 260, Earnings per Share, requires that employee equity share options, non-vested shares and similar equity instruments granted by the Company be treated as potential common shares outstanding in computing diluted net (loss) income per share. Diluted shares outstanding include the dilutive effect of in-the-money options which is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock options, the amount of compensation cost for future service that the Company has not yet recognized, and the amount of tax benefits that would be recorded in additional paid in capital when the award becomes deductible are assumed to be used to repurchase shares. |
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The following table sets forth the computation of basic and diluted net (loss) income per weighted average share of common stock for the periods presented: |
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| | For the Three Months Ended | | | For the Nine Months Ended | |
September 30, | September 30, |
| | 2013 | | | 2012 | | | 2013 | | | 2012 | |
Numerator for basic and diluted net (loss) income per share of common stock(1): | | | | | | | | | | | | |
Net (loss) income | | $ | (2,293 | ) | | $ | (1,645 | ) | | $ | (9,331 | ) | | $ | 3,796 | |
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Denominator: | | | | | | | | | | | | |
Denominator for basic net (loss) income per share of common stock–weighted average shares | | | 167,947 | | | | 167,580 | | | | 167,869 | | | | 167,476 | |
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Effect of dilutive securities: | | | | | | | | | | | | |
Stock options and unvested restricted shares of common stock(1) | | | — | | | | — | | | | — | | | | 913 | |
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Denominator for diluted net (loss) income per share of common stock–adjusted weighted average shares | | | 167,947 | | | | 167,580 | | | | 167,869 | | | | 168,389 | |
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Net (loss) income per share of common stock: | | | | | | | | | | | | |
Basic | | $ | (13.65 | ) | | $ | (9.82 | ) | | $ | (55.59 | ) | | $ | 22.67 | |
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Diluted | | $ | (13.65 | ) | | $ | (9.82 | ) | | $ | (55.59 | ) | | $ | 22.54 | |
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-1 | The stock options were antidilutive for the three and nine months ended September 30, 2013, as the Company had a net loss for the periods. The stock options were antidilutive for the three and nine months ended September 30, 2012, as the Company had a net loss for the three months ended September 30, 2012 and the fair value was below the exercise price of the stock options. The restricted common stock was antidilutive for the three and nine months ended September 30, 2013 and for the three months ended September 30, 2012. The restricted common stock was dilutive for the nine months ended September 30, 2012. | | | | | | | | | | | | | | | |
Recently Issued and Adopted Accounting Guidance | ' |
Recently Issued and Adopted Accounting Guidance |
In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740) Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This update provides that an entity that has unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date should present the unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. This update is effective for reporting periods beginning after December 15, 2013. The Company does not believe the adoption of this guidance will have a material impact on the Company’s unaudited condensed consolidated financial statements. |
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In July 2013, the FASB issued ASU 2013-10, Derivatives and Hedging (Topic 815): Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes (A Consensus of the FASB Emerging Issues Task Force) provided that an entity that enters into derivative and hedging transactions. This update permits the spread between London Interbank Offered Rate, LIBOR, and Overnight Index Swap Rate, or OIS, or the Fed Funds Effective Swap Rate, to be used as a U.S. benchmark interest rate for hedge accounting purposes in addition to the benchmark interest rates on direct Treasury obligations of the U.S. government (“UST”) and the LIBOR swap rate. This update also removes the restriction on using different benchmark rates for similar hedges. This update is effective prospectively for qualifying new or redesigned hedging relationships entered into on or after July 17, 2013. The Company does not believe the adoption of this guidance will have a material impact on the Company’s unaudited condensed consolidated financial statements. |
Recently Adopted Accounting Guidance |
In February 2013, the FASB issued ASU 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This update provides that an entity that reports items of accumulated other comprehensive income improves the transparency of reporting reclassifications by presenting the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income, either on the face of the statement where net income is presented or in the notes, but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. This update is effective for reporting periods beginning after December 15, 2012. The Company adopted this guidance on January 1, 2013. The adoption of this guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements. |
In July 2012, the FASB issued ASU 2012-02, Intangibles—Goodwill and Other (Topic 350) which amended then existing guidance by giving an entity the option not to calculate annually the fair value of an indefinite-lived intangible asset if the entity determines that it is not more likely than not that the asset is impaired. Previous guidance required an entity to test indefinite-lived intangible assets for impairment, on at least an annual basis, by comparing the fair value of the asset with its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, an entity should recognize an impairment loss in the amount of that excess. This update is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The Company adopted this guidance on January 1, 2013. The adoption of this guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements. |
Derivatives and Hedging | ' |
The Company accounts for derivative instruments and hedging activities in accordance with FASB ASC 815, Derivatives and Hedging. The Company is exposed to certain risks related to its ongoing business operations including fluctuations in foreign exchange rates and reduces its exposure to these fluctuations by using derivative financial instruments from time to time, particularly foreign currency forward contracts and foreign currency option collar contracts. The Company enters into these foreign currency contracts to manage its primary risks including foreign currency price risk associated with forecasted inventory purchases used in the Company’s normal business activities, in a currency other than the currency in which the products are sold. The Company has and expects to continue to utilize derivative instruments with respect to a portion of its foreign exchange risks to achieve a more predictable cash flow by reducing its exposure to foreign exchange fluctuations. The Company enters into foreign currency forward and option collar contracts with large multinational banks. |
Compensation-Stock Compensation | ' |
The Company recognizes compensation expense for its share-based compensation plans utilizing the modified prospective method for awards issued, modified, repurchased or canceled under the provisions of FASB ASC 718, Compensation-Stock Compensation. Share-based compensation expense is based on the fair value of the award and measured at grant date, recognized as an expense in earnings over the requisite service period and is recorded in salary, wages and benefits in the consolidated statements of operations as part of selling, general and administrative expenses. |
Segment Reporting | ' |
FASB ASC 280, Segment Reporting provides guidance on the disclosures about segments and information related to reporting units. The Company operates in a single industry segment, that being a distributor of IT products. The Company’s operating segments are based on geographic location. Geographic areas in which the Company operates include sales generated from and invoiced by the Miami Operations and sales generated from and invoiced by all of the Latin American and Caribbean subsidiary operations. The subsidiary In-country Operations conduct business with sales and distribution centers in the following countries: Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Jamaica, Mexico, Panama, Peru, and Uruguay. The In-country Operations have been aggregated as one segment due to similar products and economic characteristics. The Company sells and distributes one type of product line, IT products, and does not provide any separately billable services. It is impracticable for the Company to report the revenues from external customers for the group of similar products within the product line because the general ledger used to prepare the Company’s financial statements does not track sales by product. |