Ingram Micro 1Q Revenue Falls 22 Percent, Lowers 2Q Forecast

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Ingram Micro said its second-quarter earnings forecast would be lower than analysts expected after reporting a 22 percent decrease in revenue and a $265.4 million loss, including special charges, for the first quarter ended March 30.

Excluding the charges, Ingram Micro earned $13.5 million, or 9 cents per share. Thomson Financial/First Call projected earnings of 6 cents per share before special charges.

The Santa Ana-based distributor recorded $5.62 billion in sales in the quarter, compared with $7.19 billion in the year-ago quarter.

The first-quarter loss included a $280.9 million one-time charge for adopting new accounting standards for goodwill and other intangible assets. Ingram Micro said earlier this year it expected a charge between $260 million and $290 million for the new standards.

The loss, $1.74 per share, compares with earnings of $26.4 million, or 18 cents per share, for the year-ago quarter.

"Gross margins increased significantly -- reaching the highest point since the end of 2000 -- and operating expenses were down $44.3 million compared with a year ago," said Chairman and CEO Kent Foster in a statement. "We also continued our superb management of working capital, with debt at the lowest level in five years and inventory metrics holding steady near last quarter's record achievements."

For the current quarter, Ingram Micro expects revenue between $5.25 billion and $5.4 billion, with net income, before any reorganization costs, ranging from $6 million to $9 million, or 4 cents to 6 cents per share.

"We do not expect strong demand to return in the second quarter, and predicting the timing of an upturn is difficult," said Thomas Madden, executive vice president and CFO. "We're hearing similar forecasts from our IT peers and industry experts throughout the world. As a result, our sales guidance for the second quarter reflects a normal sequential decline from 4 to 7 percent. If the typical seasonal trends continue, sales in the third quarter would be relatively flat sequentially, followed by a sequential uptick in the mid-single digits for the fourth quarter."

Ingram Micro ended the quarter with $1.5 billion in inventory, which was 35 percent lower than the year-ago period. Inventory turns and days on hand for the quarter were 14 and 26, respectively, compared with 12 turns and 31 days on hand for the year-ago quarter.

"The company's intense focus on profitability helped us exceed expectations this quarter," said Madden in a statement. "Intelligent pricing, new fee-for-service accounts, and solid vendor rebates, discounts and marketing achievements helped boost the gross margin, while we continued to reduce operating expenses through tighter controls and business process improvements. At the same time, we fought the challenging economic environment and delivered revenues within our guidance range. Although prior-year sales comparisons continue to be difficult because of the demand environment currently experienced by most technology-related companies, the sequential sales decline of 9 percent fits seasonal patterns."

North American sales were $3.12 billion, or 56 percent of the total, compared with combined sales of $4.35 billion in the United States and Canada in the first quarter of last year, a decline of 28 percent.

European sales were $1.76 billion, a decline of 14 percent, compared with sales of $2.05 billion a year ago.

Ingram Micro shares closed at $15.99 Thursday, prior to the news.

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