Revenue of $1.16 billion was down 1.7% sequentially and 27% year over year. Excluding the impact of currency, revenue was down 25.4%. The sequential decline was due to seasonality and the impact of the recession. Lower commodity prices (especially copper and steel) were responsible for 30% of the year-over-year decline. Recession-related weakness accounted for the rest. Revenue per employee declined around 18% from the year-ago period, but was up 2.8% sequentially.
The industrial business declined 34%, driven by a double-digit decline in national account sales and reduction in channel inventories. Construction - including commercial, industrial and government - was down 23% due to broad-based recession-related weakness. Utilities declined 18%, as spending was restricted to maintenance activity. However, bidding activity for MRO alliance opportunities remains high.
The gross margin was 18.8%, down 82 basis points (bps) sequentially and 36 bps year over year. The declines were largely mix-related, as low-margin project sales were relatively stronger. Supplier rebates dwindled, further increasing the margin pressure. Pricing realization partially offset the negative impact.
Operating expenses were $169.9 million, down 7.8% sequentially and 16.5% year over year. The operating margin expanded 15 bps sequentially and declined 220 bps from the June quarter of 2008. Management initiated cost reduction efforts, including plant closures and workforce reductions; the benefits of which should be evident in ensuing quarters.
There were no special items in the quarter, other than a non cash interest expense of $3.8 million related to the adoption of FSP APB14-1. The company reported net income of $26.4 million, or 2.3% net margin, compared to $23.2 million, or 2.0%, in the previous quarter and $61.3 million, or 3.9%, in the year-ago quarter. The GAAP EPS of 62 cents was up from 52 cents in the March quarter and down from $1.38 in the June quarter of 2008.
Inventories declined -7.9% to $516.7 million, with inventory turns increasing from 6.8x to 7.3x. The cash balance at the end of the quarter was $103 million.
Management provided a broad guideline for the year. Accordingly, 2009 revenue is expected to be down 22-25%, compared to previous expectations of down 15-20%. Severance charges are expected to be $1-2 million (previously $2-3 million), tax rate 27% .
