Ingram Delivers Decent Numbers

Ingram Micro (IM - Analyst Report) reported third-quarter EPS of 25 cents, exceeding the Zacks Consensus Estimate of 20 cents.
 
Revenues
 
The company reported third-quarter revenues of $7.38 billion, down 11.0% on a year-over-year basis and up 12% on a sequential basis. The year-over-year decline in revenue can be attributed to the negative economic environment that prevailed throughout the last one year. Foreign currency translation negatively impacted the year-over-year comparison by approximately 3.0%, but had a positive impact on quarterly comparisons.

The geographic distribution of revenues was as follows. North America reported third-quarter sales of $3.22 billion, down 10.3% year over year but up17.0% sequentially. Europe, Middle East, and Africa (EMEA) region reported revenues of $2.15 billion, down 16% year over year. There is a 6% negative impact of foreign currencies on EMEA revenues on a year-over-year basis. Sales in the Asia-Pacific region were $1.64 billion, down 3.5% from $1.70 billion reported in the third quarter of 2008. The decline in sales may be attributed to negative translation impact of regional currencies of approximately five percentage points. Latin America sales were $373 million, down 13% from $430 million reported a year ago. Latin America sales declined as a result of negative translation impact of relatively weaker regional currencies.

Operating Results

Third quarter 2009 gross margin was 5.44%, a decrease of 3 basis points from 5.47% in the 2008 third quarter. This decline in gross margin may be attributed to tough economic conditions that prevailed throughout the past one year.

Operating expenses for the third quarter was $338.7 million (4.59% of total sales), down 11.0% from $380.4 million reported in the year-ago quarter. The translation impact of relatively weaker foreign currencies contributed approximately $12 million to the overall year-over-year decline in operating expenses. Total operating income was $63.2 million (0.86% of sales), down 12.8% from $72.5 million (0.87% of sales).

The company reported net income of $42.3 million, or 25 cents per share for the third quarter, which includes costs of approximately 4 cents per share related to expense-reduction programs. This compares to the third quarter 2008 net income of $46.4 million, or 27 cents per share, which also included 2 cents per share of costs related to expense-reduction programs.

Balance Sheet

The company exited the quarter with cash and cash equivalents of more than $1.2 billion, an increase of $466 million from year-end. Total debt balance at the end of the quarter was $436 million, a decrease of $43 million from year-end. The company incurred total capital expenditure of $10.3 million and had an inventory balance of $2.2 billion at the end of the quarter.

Guidance

The company did not provide any numerical guidance for the coming quarters but expects year-over-year sales to decline single-digits, on the basis of increased demand and better customer engagement. The company also expects a sequential increase in gross margin and a reduction in operating expense, which is expected to generate an annualized savings of $140 million.

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