Ingram Micro: EPS Exceeds, Future Declines Expected

| About: Ingram Micro (IM)

Ingram Micro (NYSE:IM) reported fourth quarter 2009 EPS of 64 cents, exceeding the Zacks Consensus Estimate of 52 cents per share.


The company reported fourth-quarter 2009 revenues of $8.81 billion, up 1.0% from $8.68 billion reported in the year-ago quarter (see conference call transcript here). The year-over-year increase in revenue may be attributed to good sales growth in North America. Foreign currency translation had a positive impact of six percentage points.

The geographic distribution of revenues was as follows:

North America reported fourth-quarter sales of $3.59 billion, down 5.0% from $3.80 billion reported in the year-ago quarter.

Europe, Middle East and Africa (EMEA) reported revenues of $3.05 billion, down 3.4% compared to $2.95 billion reported in the year-ago quarter. There is a 10% positive impact of foreign currencies on EMEA revenues on a year-over-year basis.

Sales in the Asia-Pacific region were $1.72 billion, up 16.0% from $1.49 billion reported in the fourth quarter of 2008.

Latin America sales were $446 million, down 2% from $455 million reported a year ago. Latin America sales witnessed a positive translation impact of relatively stronger regional currencies.

Operating Results

The third quarter 2009 gross margin was 5.69%, a decrease of 23 basis points from 5.46% in the 2008 fourth quarter. This decline in gross margin may be attributed to softer volumes in the fee-for-service division, weak margins in the company’s North American high-end home entertainment division and higher business volume generated by businesses in lower-margin geographies such as China.

Operating expenses for the third quarter was $354.7 million (4.03% of total sales), down 68.0% from $1.11 billion million (12.8% of total sales) reported in the year-ago quarter. The total operating expense for the fourth quarter included $7.7 million (0.09 percent of total sales) in costs associated with the company's expense-reduction programs. Total operating income was $146.5 million (1.66% of sales), up from operating loss of $597.1 million (6.77% of sales) in the year ago quarter.

The company reported net income of $107.0 million, or $0.64 per share for the fourth quarter, which includes costs of approximately 3 cents per share related to expense-reduction programs. This compares to the fourth quarter 2008 net loss of $564.3 million, or $3.48 per share, which also included a non-cash charge of $4.07 per diluted share for the impairment of goodwill, a benefit recorded in cost of sales of $0.05 per diluted share related to the release of a portion of the reserves for commercial taxes in Brazil, and costs of approximately $0.03 per diluted share related to expense-reduction programs.

Balance Sheet

The company exited the quarter with cash and cash equivalents of more than $911 million, an increase of $148.0 million from year-end. Total debt balance at the end of the quarter was $379 million, a decrease of $99 million from year-end. The company incurred total capital expenditure of $21.7 million and had an inventory balance of $2.5 billion at the end of the quarter.


The company did not provide any numerical guidance for the coming quarters but expects sequential sales to decline in line with the seasonal trends. The company also expects a sequential decline in gross margin and a reduction in operating expense.