Ingram Micro Inc. (IM)

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Ingram Micro (IM)

Q4 2011 Earnings Call

February 08, 2012 5:00 pm ET

Executives

Ria Marie Carlson - Senior Vice President of Communications & Brand Management

Alain MoniƩ - Chief Executive Officer, President and Member of The Board of Directors

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

Analysts

Scott D. Craig - BofA Merrill Lynch, Research Division

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

Benjamin A. Reitzes - Barclays Capital, Research Division

Richard Kugele - Needham & Company, LLC, Research Division

Osten Bernardez - Cross Research LLC

Craig Hettenbach - Goldman Sachs Group Inc., Research Division

Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division

Richard Gardner - Citigroup Inc, Research Division

Mark H. Hillman - Collins Stewart LLC, Research Division

Unknown Analyst

Presentation

Operator

Welcome to the Ingram Micro Fourth Quarter Earnings Report Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now I will turn the meeting over to Ms. Ria Carlson, Senior Vice President. You may begin.

Ria Marie Carlson

Thank you very much, Jim. Thank you for joining us, and good afternoon. Joining me today are Alain Monie, our President and Chief Executive Officer; and Bill Humes, our Chief Financial Officer. Alain will provide opening comments and then Bill will provide additional details around our financial results for the fourth quarter. Alain will come back to discuss his view of the business 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.

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 1, 2011, 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.

Before I turn the call over to Alain, I have a personal note. This is my last of 44 earnings calls with Ingram Micro. As some of you know, I've accepted a University position and will be leaving the company in the coming weeks. I would like to thank all of you on this call, from analysts and shareholders to associates and board members for 11 enriching years. I truly appreciate the opportunities the company offered and I cherish the friendships I've made with many of you.

The IR program is in good hands with Damon Wright, who has proven himself as a talented professional in his first 6 months of the company. I wish all of you success and hope our paths cross again. With that, I'll turn the call over to Alain Monie, our President and Chief Executive Officer. Alain?

Alain MoniƩ

Thank you, Ria, and good afternoon, everyone. It is a pleasure to address the financial community for the first time as CEO of Ingram Micro. Since my return to the company in November, I have visited all of our regions and have taken stock of what we're doing well and what we need to improve. I'm highly confident that I have taken the reins of a company that is in overall solid shape. But I am also well aware that there are several areas of focus where we need to drive faster and improve the execution. I intend to ensure we do.

Turning to Q4. We wrapped up the year with a strong quarter. Sales of nearly $10 billion were just under an all-time record and helped drive the second highest quarterly earnings per share in more than a decade. Our ninth consecutive quarter of year-over-year sales growth was driven by solid demand in most parts of the world in our key customer segment, the SMB market.

We also experienced good corporate demand and saw a pickup in sales in the consumer market in some countries, particularly in December, along with pockets of growth in the government space for the first time during 2011.

The quarter benefited from strong revenue growth in several of our higher margin businesses, which helped drive a solid company-wide gross margin of 5.57%, a sequential increase of 62 basis points over Q3. A favorable inventory position and pricing environment on hard disk drives benefited overall gross margin by an estimated 30 basis points as prices rose following the Thailand flooding. That said, hard disk drives are a small portion of our overall sales. And even without this benefit, the sequential improvement exceeded the seasonal uptick we usually expect.

Excellent management of cost and our continued focus on adjusting our operations to the current business climate in Europe and Australia led to the lowest operating expense, as a percentage of revenue, in many years. This focus helped drive strong quarterly operating margins, illustrating the leverage our model can generate.

Turning to some highlights for the quarter. As it has all year, North America delivered another exceptional quarter, with strong sales and operating margin exceeding 200 basis points. The region executed well in its traditional broad-line business and saw particular strength in Data Capture/Point-Of-Sale and DBL consumer accessories, both of which delivered double-digit growth for the quarter.

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