Ingram Micro 2010 Annual Report Download - page 39

associated with reduced sales levels, and the translation effect of weaker foreign currencies compared to the
U.S. dollar, which generated approximately $30,000, or approximately two percentage-points, of the decline,
partially offset by an increase in stock-based compensation of $7,382 and the addition of approximately $6,600
from our recent acquisitions, or a total of approximately one percentage-point of the change in SG&A expenses.
As discussed in our critical accounting policies and estimates, in 2009 and 2008, we recorded charges of
$2,490 and $742,653, or 0.01% and 2.16% of consolidated net sales, respectively, for the full impairment of our
goodwill. The 2009 charge was entirely in Asia Pacific, related to goodwill from our 2009 acquisitions of VAD and
Vantex. The 2008 charge consisted of $243,190 in North America; $24,125 in EMEA; and $475,338 in Asia Pacific
(also, see Notes 2 and 4 to our consolidated financial statements).
In 2010, we recorded a net additional charge to reorganization costs of $1,137 primarily related to a previously
restructured facility in North America for which we now estimate we will incur higher costs than originally
anticipated through the life of the remaining lease. In 2009, we incurred a net charge for reorganization costs of
$34,083, or approximately 0.12% of consolidated net sales, which consisted of (a) $18,573 of employee termination
benefits for workforce reductions in all four regions, (b) $11,993 in facility consolidations in North America and
EMEA, (c) $819 for contract terminations primarily for equipment leases in North America, and (d) an adjustment
of $2,698 primarily for higher than expected costs to settle lease obligations related to previous reorganization
actions recorded primarily in North America in earlier years. In 2008, we incurred a net charge for reorganization
costs of $17,029, or approximately 0.05% of consolidated net sales, which consisted of (a) $14,588 of employee
termination benefits for workforce reductions associated with the restructuring of the regional headquarters in
EMEA and certain reductions of administrative and back-office positions in the North America and Asia Pacific
regions, (b) $2,571 in facility consolidations in EMEA and (c) $400 for contract terminations for equipment leases
in North America, partially offset by (d) $530 for the reversal of certain excess lease obligation reserves from
reorganization actions recorded in earlier years. We may pursue other business process and/or organizational
changes, which may result in additional charges related to consolidation of facilities, restructuring of business
functions and workforce reductions in the future.
Our consolidated operating margins were 1.40% and 1.00% in 2010 and 2009, respectively, compared to a
negative operating margin of 0.97% in 2008. Regionally, operating margins from our North American operations
were 1.58% and 0.86% in 2010 and 2009, respectively, and a negative operating margin of 0.35% in 2008.
Operating margins from our EMEA operations were 1.25%, 0.98% and 0.36% in 2010, 2009 and 2008, respectively.
Operating margins from our Asia Pacific operations were 1.49% and 1.34% in 2010 and 2009, respectively, and a
negative operating margin of 5.12% in 2008. Operating margins from our Latin American operations were 2.02%,
2.46% and 2.50% in 2010, 2009 and 2008, respectively. Our operating margin included the positive impact of
0.03%, 0.03% and 0.02% of our consolidated net sales (0.57%, 0.67% and 0.48% of Latin America’s net sales) in
2010, 2009 and 2008, respectively, from the previously discussed partial releases of reserves for commercial taxes
in Brazil. Operating margin was negatively impacted by goodwill impairment charges of 0.01% of our consolidated
net sales (0.04% of Asia Pacific net sales) in 2009 and 2.16% of our consolidated net sales (1.71% of North
American net sales, 0.21% of EMEA net sales, and 6.88% of Asia Pacific net sales) in 2008. Lastly, our
reorganization efforts and related charges negatively impacted our operating margins in 2009 and 2008 by
0.13% and 0.05% of consolidated net sales, respectively. Regionally, these negative impacts in 2009 and 2008,
respectively, were 0.20% and 0.01% of North American net sales and 0.10% and 0.14% of EMEA net sales. In 2009,
Asia Pacific and Latin America also had negative impacts to operating margin of 0.06% and 0.02% of the respective
region’s net sales.
Aside from the impact of commercial taxes, goodwill impairment and reorganization charges as discussed
above, the overall increase in our consolidated operating margin, as well as the operating margins in our North
American, EMEA and Asia Pacific regions, in 2010 compared to 2009 were largely due to the economies of scale
realized from the higher net sales in the current year and a full year of benefits from our expense-reduction
initiatives completed through the end of 2009. In Latin America, our operating margin decreased in 2010 compared
to 2009, which was primarily attributable to operational challenges in our Brazilian operations and the investments
in infrastructure and process improvements we made during 2010 to address these issues. From 2008 to 2009, our
consolidated operating margin and the operating margins of each of our regions each declined outside of the impacts
of commercial taxes, goodwill impairment and reorganization charges. Generally this year-over-year decline is a
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