Ingram Micro Inc. (IM)

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Ingram Micro (IM)

Q4 2010 Earnings Call

February 10, 2011 5:00 pm ET

Executives

Ria Carlson - Senior Vice President of Communications and Brand Management

William Humes - Chief Financial Officer, Principal Accounting Officer and Senior Executive Vice President

Gregory Spierkel - Chief Executive Officer, Director and Member of Executive Committee

Analysts

Benjamin Reitzes - Barclays Capital

Richard Gardner - Citigroup Inc

Scott Craig

William Fearnley - Janney Montgomery Scott LLC

Craig Hettenbach - Goldman Sachs Group Inc.

Presentation

Operator

Welcome to the Ingram Micro Fourth Quarter Earnings Report Conference Call. [Operator Instructions] Now, I will turn the meeting over to Ms. Ria Carlson, Chief Strategy and Communications Officer.

Ria Carlson

Thank you very much and good afternoon, everyone. Joining me today are Greg Spierkel, our Chief Executive Officer; and Bill Humes, our Chief Financial Officer. Greg will present a brief overview and then Bill will provide the financial review of the fourth quarter. Greg will come back to discuss our long-term growth strategy, business highlights and plans for the future, followed by a question-and-answer session.

The financial portion of this call is accompanied by presentation slides, which can be found with today’s news release at the Investor Relations section of our website at ingrammicro.com or by calling

(714) 382-2015.

Before we get started, I have a Safe Harbor announcement. 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 our Form 10-K for the fiscal year ended January 2, 2010, 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. The presentation slides and a replay of the call will be available for one week on the company’s website at ingrammicro.com or by calling (800) 678-3180.

I’d like to turn the call over to Greg Spierkel, our Chief Executive Officer. Greg?

Gregory Spierkel

Thank you, Ria, and good afternoon, everyone. With the end of 2010, we closed a volatile yet successful decade on record-breaking high note. The year's earnings per share and GAAP net income hit the highest levels in our history. Sales growth for the full year was more than 17%, a rate greater than any we've experienced since 1999. Our return on invested capital exceeded our cost of capital in each of the last six quarters. For the full year, return on invested capital was 13.6%, more than 400 basis points above our cost of capital.

The fourth quarter ended with a similar flourish. Earnings per share hit a quarterly record and net income was our second highest in the history. Sales grew 12%, the fourth consecutive quarter of double-digit growth. Our progress is tangible, and I'm extremely proud of the team for their hard work and dedication.

All regions generated double-digit sales growth during the quarter. Asia-Pacific and Latin America sales had quarterly records, while revenues in North America and EMEA were at their second highest each in the region's history. North America's revenue growth was the highest in 10 years for both the fourth quarter and a full year.

Worldwide operating income or margin surpassed 150 basis points for the quarter with three regions, North America, EMEA and Latin America, delivering operating margins above 170 basis points. In regions outside of North America, operating margins were strong but like those of last year, as Bill will describe in his financial overview.

Operating margins on a full year basis improved considerably, rising more than 25 basis points compared to the prior year. I'm proud of our results for the quarter and year and believe we are well positioned for the next decade. I'll give more detail about our strategy after Bill's financial review. Bill?

William Humes

Thanks, Greg. I'll start my discussion with sales, which can be found on Slide 3. In the fourth quarter, worldwide sales rose 12% to $9.88 billion, just shy of the record set in 2007. There was no meaningful impacts from foreign currency exchange on a consolidated basis, as general strengthening of currencies in Asia-Pacific and Latin America were offset by an overall weakening of European currencies.

Looking at our four regions, North America quarterly sales exceeded the $4 billion mark for the first time since 2001, coming in at $4.05 billion, an increase of 13% from the prior year. We generated double-digit sales growth in all our units except Avid, which is improving but still the dealing with the lingering effects of the weak housing market and consumer spending. Data Capture/Point-of-Sale, Canada and the U.S. Distribution business drove strong year-on-year performance.

EMEA sales grew 10% to $3.35 billion. The translation of weaker European currencies had an eight percentage point negative impact on year-over-year growth. Germany, the U.K., Spain and Italy were particularly strong, as was the pan-European data capture/point-of-sale unit.

Asia-Pacific sales increased 15% to a record $1.98 billion. The translation of stronger local currencies had a five percentage point positive impact on revenue growth. China and India generated double-digit growth in local currency and the DC/point of sales performed well across the region as a whole.

Latin America sales grew to $496 million, up 11% year-over-year and a quarterly record. The translation of stronger local currencies had a four percentage point positive impact on revenue growth. Mexico, Miami and Argentina posted double-digit sales growth in local currency, while Brazil contracted as we continued to make structural and management adjustments for the long term.

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