In an unpredictable environment, we delivered earnings at the high end of our guidance, said Kent B. Foster, chairman and chief executive officer, Ingram Micro Inc. Profitability increased compared with the year-ago quarter despite the weak market for technology products that has affected the entire industry.

Key Highlights

Net sales were $7.2 billion versus $7.8 billion in the first quarter last year.

Gross margin was in line with the company’s previous guidance, rising to 5.34 percent of sales from 4.70 percent in the first quarter last year an increase of 64 basis points.

Income from operations was $70.5 million, consistent with the year-ago quarter, but improved eight basis points as a percentage of sales.

Net income was $26.4 million, or $0.18 per share, a seven percent increase over the $24.7 million, or $0.17 per share, reported in the first quarter 2000, excluding gains from the sale of securities and the repurchase of company debentures (with the gains, net income was $96.1 million, or $0.65 per share, in the first quarter 2000).

As expected, the soft technology market in the United States had an impact on the company’s net sales, which declined eight percent compared to the first quarter 2000 or approximately six percent before the adjustment for European exchange rates in 2000 and 2001. In the U.S. region, net sales declined 15 percent to $3.92 billion, while in Europe, net sales grew eight percent in local currencies but less than one percent in U.S. dollars to $2.05 billion. For geographic regions outside the United States and Europe, net sales increased five percent to $1.22 billion.

We began to experience a decline in demand late last year, which continued into this quarter, especially in the United States, said Michael J. Grainger, president and chief operating officer, Ingram Micro Inc. Nevertheless, we made measurable improvements in other vital areas. Gross profit and net income outperformed the first quarter last year and hit the high end of our range of guidance. We were able to reduce expenses by approximately $8 million during the quarter, as compared with the fourth quarter 2000, and operating efficiency continues to be a key area of focus.

The company’s ongoing focus on gross margin resulted in favorable operating margins compared to a year ago. In the United States, the operating margin was 1.21 percent, an improvement of 13 basis points, based on income from operations of $47.4 million. Income from operations in Europe improved nearly 64 percent, to $23.8 million or 1.16 percent of sales, an improvement of 45 basis points. Geographic regions outside the United States and Europe posted an operating loss of approximately $700,000. Operating losses from the developing Asia-Pacific region were offset by strong operating results from the Canadian and Latin American regions.

Depreciation expense was $23.3 million and amortization was $5.7 million for the first quarter 2001, resulting in earnings before interest, income tax, depreciation and amortization (EBITDA) of $99.5 million.

Balance Sheet Results

The company continued its rigorous management of the balance sheet during the quarter. Inventory was reduced $608.4 million or 21 percent from the end of last year to $2.31 billion, and inventory turns were 12, a historic high. Total debt at the end of the first quarter, including off-balance sheet debt, was $1.33 billion, resulting in a total debt-to-capitalization ratio of 41 percent.

Our balance sheet continues to be a strong competitive advantage, Grainger continued. Our debt-to-capitalization ratio is the lowest in the industry. The improvements in inventory showed extraordinary discipline and management diligence, particularly in this sluggish market. We also maintained our accounts receivable at a level of days sales outstanding consistent with historical performance, properly managed our payables and reduced total debt by more than $120 million since the end of last year.