Ingram Micro Inc. (IM)

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Ingram Micro (IM)

Q4 2012 Earnings Call

February 13, 2013 5:00 pm ET

Executives

Damon S. Wright - Senior Director of Investor Relations

William D. Humes - Chief Operating and Financial Officer

Alain MoniƩ - Chief Executive Officer, President, Director and Member of Executive Committee

Analysts

Brian G. Alexander - Raymond James & Associates, Inc., Research Division

Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division

Richard Kugele - Needham & Company, LLC, Research Division

Jim Suva - Citigroup Inc, Research Division

Osten Bernardez - Cross Research LLC

Keith M. Housum - Northcoast Research

Shaw Wu - Sterne Agee & Leach Inc., Research Division

Presentation

Operator

Good day, and welcome to the Ingram Micro Fourth Quarter Fiscal Year 2012 Conference Call. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Damon Wright, Head of Investor Relations. Please go ahead, sir.

Damon S. Wright

Thank you, and good afternoon to everyone joining us on today's call and via webcast. Joining me today are Alain MoniƩ, our President and Chief Executive Officer; and Bill Humes, our Chief Operating and Financial Officer. Each will make opening remarks, after which the call will be opened for a question-and-answer session. We've also prepared presentation slides to highlight key aspects of our financial performance, which may be found with today's news release at the Investor Relations section of Ingram Micro's website at ingrammicro.com.

During today's discussion, we will make statements that are forward looking. These forward-looking statements and all other statements made on this call that are not historical facts are subject to a number of risks and uncertainties. Please refer to today's news release and documents filed with the Securities and Exchange Commission, specifically the Risk Factors listed in Item 1A of both our Form 10-K for the fiscal year ended December 31, 2011, and our Form 10-Q for the fiscal quarter ended September 29, 2012, for more information on the risks that could cause actual results to differ materially. In addition, this conference call is the property of Ingram Micro and may not be recorded or rebroadcast without specific written permission from the company.

Presentation slides and a replay of the call will be available for 1 week on the company's website or by calling (888) 203-1112 and using password 3928426.

With that, I'd like to turn the call over to Bill. Bill?

William D. Humes

Thank you, Damon, and good afternoon, everyone. We had a strong finish to a successful year. Worldwide revenues hit all-time annual and quarterly highs, even excluding the benefit from our recent acquisitions. Although the selling environment remained challenging around the world, all regions finished well, helping to drive solid operating income contribution across the globe.

Turning to some specifics of our fourth quarter performance. Worldwide sales of $11.4 billion were up 14% in U.S. dollars when compared to Q4 last year. The translation effect of foreign currencies had a negative impact of approximately 1 percentage point. BrightPoint contributed a little over $1 billion in revenue, which reflects the stub period from October 16. The Aptec acquisition added approximately $75 million to the quarter's revenue. Combined, the 2 acquisitions contributed approximately 10 percentage points of the 14% total quarterly growth.

As we look at our regions, North America sales were up 6% to $4.5 billion, the highest in more than 10 years despite headwinds from Canada, which benefited from the previous year from a very strong product launch. Sales in our key SMB market increased at a double-digit rate as our teams are doing an excellent job of differentiating Ingram Micro. Our U.S. broadline business benefited from strong growth in our Advanced Computing and Technology divisions as we continue to move up the value stack and sell more high-end service-heavy solutions. Our higher-margin Specialty Division once again posted double-digit gains led by DBL and Avid.

Europe sales of $3.1 billion were down by 4% in U.S. dollars and 1% in local currency. Overall, the region performed relatively well given the macroeconomic climate and strong competition.

Asia Pacific performed well with very strong December helping the region hit a fourth quarter sales record of $2.2 billion, an 11% increase over last year. There was no material currency impact on the year-over-year comparison.

Aptec's business is included in our Asia Pacific region and contributed approximately 4 percentage points of growth. China and India once again registered double-digit growth led by continued robust sales of tablets in China and a higher share of organized retail and strong mobility sales in India.

While Australia continue to be a drag on the region, we made significant changes over the course of 2012, and rebuilding the business is a top priority. However, given the continued operational challenges we experienced in 2012 and the U.S. GAAP guidance on appropriately measuring the value of deferred tax assets, we have recorded a noncash valuation allowance during the quarter on the full $41.8 million of deferred tax assets we have in Australia. We are committed to the Australian market and are continuing to make the changes needed to return the business to profitability.

Latin America maintained its record pace for the year with sales hitting another all-time quarterly revenue high, increasing 5% in U.S. dollars and 4% in local currency to $600 million.

BrightPoint delivered on our expectations, adding a little over $1 billion to worldwide revenues for the period of October 16 through the end of the quarter. HP and Apple products were the largest contributors to total worldwide revenues, accounting for 18% and 10%, respectively.

Read the rest of this transcript for free on seekingalpha.com