Sharp Fiscal Management Pushes Ingram Into Black for Q2

For the second quarter, ended June 29, 2002, Ingram Micro recorded a net profit of $8.8 million on sales of $5.35 billion. That compares to the year-ago period when the distributor lost $12 million on sales of $6.02 billion.

By maintaining tight control over costs and putting a heavy emphasis on squeezing revenue out of nearly every service it performs for customers, the jumbo-sized Santa Ana, Calif.-based distributor vaulted back into the black after reporting a net loss of $265.4 million just three months ago. In addition, company executives hinted that the industry may indeed have bottomed out and be poised for a rebound. When, however, isn't something they are yet willing to predict.

"For the last four quarters, when you look at our sales sequentially quarter over quarter, the pattern has been consistent with historical patterns," says Michael Grainger, president and COO at Ingram Micro. "I think that's a pretty good indication that there's been a floor that has been established."

Looking ahead, the company expects that the third quarter will likely be flat compared to the second quarter. As for the fourth quarter, the company gave no specific guidance, but did say that if seasonal patterns do occur, sales should increase in the single digits over the third quarter.

On the downside, however, Ingram Micro made it clear that it would take another charge in the third quarter, possibly a stiffer one than before. That would make the period the sixth consecutive quarter in which Ingram Micro has taken a charge. And it may not be the last. Due to the nature of the reorganization, the company may have to spread out additional charges over a period of time to comply with strict accounting regulations.

With regards to the upcoming charge, Grainger would not or could not yet quantify its size. But, he said, "To the extent you use the last few quarters as a kind of a bench line, this would be more than that. That's why we felt like we needed to mention that [now."

Already the company, which employs 1,000 fewer people than it did at the end of last year, has decided to consolidate facilities in the Memphis area. Essentially, it's closing a configuration center that it inherited when it acquired assets from Intelligent Electronics.

Of the milestones achieved during the quarter, chairman and CEO Kent Foster singled out gross margins in a call with analysts Wednesday. After a sequential jump of 16 basis points last quarter, they rose again by 7 basis points this quarter to 5.48 percent, he said. That's the highest they have been since 1998.