The world’s largest technology distributor and supply-chain services provider, Ingram Micro Inc, has reported the second highest quarterly revenues in the company's history.
It also reported solid full financial year results which showed worldwide sales rising 5 per cent but falls in operating and net income compared with 2010.
Financial results for the 2011 fourth quarter and fiscal year ended December 31, show worldwide sales grew to $US9.95 billion, the highest quarterly sales for the company since the fourth quarter of 2007.
This compared with $9.88 billion reported in the fourth quarter 2010. The translation effect of foreign currencies did not have a significant impact on the prior year comparison.
Worldwide gross profit was $US554.3 million (5.57 per cent of total sales), compared with $559.9 million (5.66 per cent of total sales) in the 2010 fourth quarter.
The 2011 fourth quarter gross margin benefited by about 30 basis points from a favourable inventory position and pricing on hard disk drives. The 2010 fourth quarter gross margin included a $US9.1 million benefit, or about 9 basis points of sales, due to the partial release of the reserve for commercial taxes on software imports into Brazil.
Worldwide operating income for the 2011 fourth quarter was $US176.1 million (1.77 per cent of total sales), compared with $US167.3 million (1.69 per cent of total sales) in the same period last year.
The 2011 fourth quarter was negatively impacted by expense of $US4.2 million, or 4 basis points of sales, related to reorganisation charges associated with various cost-cutting initiatives implemented by the company during the quarter. The fourth quarter of 2010 included the 9 basis point favourable impact of the commercial tax reserve release noted above.
Net income was $US104.9 million, or $US0.68 per diluted share, including the $US0.02 per diluted share negative impact of the reorganisation charges recorded in the quarter. This compared with net income of $US115.0 million, or $US0.71 per diluted share in the 2010 fourth quarter, which included a benefit of $US0.05 per diluted share related to the release of a portion of the reserve for commercial taxes on software imports into Brazil.
The company said other key drivers of 2011 fourth quarter results were:
- North America operating margin of 214 basis points of sales was the highest in more than a decade, benefiting from solid execution across the business.
- EMEA operating income reached an all-time high of $US71.1 million, or 222 basis points of sales, driven in part by a favourable hard disk drive pricing and strength in the company's SMB market.
- Management's continued diligent focus on driving productivity and efficiencies throughout the business resulted in the lowest level of operating expense as a percentage of revenue in more than a decade at 380 basis points of sales. As noted previously, operating expense includes a negative impact of 4 basis points from reorganisation charges.
- Return on invested capital was 17.3 percent for the quarter, significantly exceeding the company's weighted average cost of capital.
"We had an excellent finish to 2011, driven by solid performance worldwide," Ingram Micro president and chief executive officer, Alain Monie, said.
"Strong revenues, combined with decade low operating expense as a percentage of sales, resulted in very strong operating income, highlighting the leverage our model can drive."
2011 financial year
For the year ended December 31, 2011, IM worldwide sales were $US36.3 billion, an increase of 5 per cent over the $US34.6 billion recorded for the 2010 year.
Worldwide operating income for the 2011 full year was $US458.6 million (1.26 per cent of total sales), compared with $US484.4 million (1.40 per cent of total sales) for the 2010 year.
For the full year, net income was $US244.2 million, or $1.53 per diluted share, which included charges in the 2011 third quarter totalling $US28.8 million, or $US0.18 per diluted share, comprised of: a non-cash valuation allowance of $US24.8 million recorded against the company's deferred tax assets in Brazil, driven by continuing losses generated in that business unit; and, a charge of $US4.0 million after tax related primarily to the termination of the company's interest rate swap associated with the repayment of its term loan in September 2011.
This compared with of 2010 full year net income was $US318.1 million, or $US1.94 per diluted share, which included a benefit of $US9.1 million, or $US0.05 per diluted share, related to the previously noted commercial tax reserve release.
For the full year 2012, the company said it expected revenue growth in-line with current IT spending forecasts of low to mid-single digit growth over 2011.
For the 2012 first quarter, revenues were currently expected to be flat to slightly down compared to the year earlier period due to expected year-over-year declines in EMEA revenues driven primarily by continued uncertainty surrounding the European economy and current expectations for a year-over-year decline in Australia's revenue contribution.
IM said the first quarter 2012 gross margin was expected to trend down sequentially in-line with seasonal norms after removing the impact of hard disk drive pricing in the fourth quarter of 2011, which the company did not expect would provide meaningful additional benefit in the first quarter of 2012.