Thursday, information technology products distributor Ingram Micro Inc. (IM), reported a sharp decline in second-quarter profit as sales declined 25% from the previous year quarter on weaker demand caused by the global economic downturn. Adjusted earnings for the quarter was inline with analysts' consensus, but revenues fell short of Street expectations.
The Santa Ana, California-based company posted a second quarter net income of $25.3 million or $0.15 per share, compared to income of $58.9 million or $0.35 per share in the year ago quarter.
Results for the quarter included costs of about $0.05 per share related to expense-reduction programs and a goodwill impairment charge. Prior-year second quarter results included costs related to expense-reduction programs of $0.03 per share.
On average, seven analysts polled by Thomson Reuters expected the company to report earnings of $0.20 per share. Analysts' estimates typically exclude special items.
Commenting on the results, Gregory Spierkel, chief executive officer of Ingram Micro said, "Since we first experienced the effects of the downturn early last year, we have focused on operational improvements directly within our control - such as managing working capital and expenses, shedding underperforming operations and enhancing gross margins - which are generating visible results."
Net sales for the quarter declined 25% to $6.58 billion from $8.82 billion last year. Analysts had a consensus revenue estimate of $6.67 billion for the second quarter.
The sharp decline in sales was mainly attributable to weaker demand caused by the worldwide economic downturn and an approximate seven-percentage-point unfavorable translation impact of weaker foreign currencies.
Sales from North America declined 22% to $2.74 billion from the year earlier period reflecting the impact of the region's weakened economy and the company's focus on more profitable sales opportunities.
Sales in the EMEA region declined 32% to $2.01 billion compared to the prior-year quarter driven by soft demand as a result of weakened European economies, the exit of unprofitable businesses and a focus on more profitable sales opportunities. Currency translation had an approximate 12-percentage-point negative impact on sales.
Asia-Pacific sales declined 21% to $1.50 billion from the prior year mainly due to weaker demand caused by the softer regional economies. Currency translation had an approximate 9-percentage-point negative effect on sales.
Sales from Latin American declined 27% to $322 million a year ago as weaker economies dampened sales in most of the region's markets. Currency translation had an approximate 13-percentage-point negative effect on sales from the region.
Gross margin for the quarter improved 34 basis points to 5.87% from the year ago quarter, driven by efforts to shed underperforming businesses, pursue an improved mix of higher-margin accounts and products, control margin leakage and enhance service-based revenues.
Total operating expenses were $345.1 million or 5.25% of revenues, compared to $394.2 million or 4.47% of revenues a year before.
For the first six months of the year, the company reported a net income of $52.8 million or $0.32 per share, compared to $123.0 million or $0.71 per share in the prior year. Results for the quarter included expense-reduction program costs and a goodwill impairment charge totaling $17.6 million after tax or $0.11 per share, compared to expense-reduction program costs of $5.5 million after tax or $0.03 per share last year.
Net sales for the six-month period declined 23% to $13.3 billion from $17.4 billion reported a year ago.
Looking ahead to the third quarter Spierkel said, "we expect the overall demand environment to follow historical seasonal patterns. While we do not anticipate an economic rebound in the near term, our larger regions will begin to leverage some of the benefits of our recent cost-reduction and operational-improvement actions."
"While the demand picture is not deteriorating, we believe that the road to recovery will be protracted over a number of quarters as unemployment weighs on the confidence levels of consumers and small businesses," Spierkel added.
Among others in the industry, Arrow Electronics Inc. (ARW) yesterday reported its second-quarter results with a plunge in profit on lower revenues. Net income declined to $21.1 million or $0.18 per share from $96.2 million or $0.79 per share a year ago. Excluding items, net income was $37.2 million or $0.31 per share, compared to $102.1 million or $0.84 per share. Sales slipped 22% to $3.39 billion from the previous year.
IM closed Thursday's regular trading on the NYSE at $18.54, up $0.40 or 2.21%. However, after hours, the stock lost $1.04 or 5.61%. In the past 52-week period, Ingram stock has trended in the range of $8.65 - $20.01, with an average 3-month volume of 2.03 million shares.
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