Ingram Micro 2013 Annual Report Download - page 30

Table of Contents
The 4.1 percent increase in our consolidated net sales in 2012 compared with 2011 largely reflects our acquisitions of BrightPoint, Aptec in Asia-Pacific
and Promark in North America during the fourth quarter of 2012, which contributed approximately 3% of the year-over-year consolidated sales growth. In
addition, our North America, Asia-Pacific and Latin America regions showed solid growth, partially offset by declines in Europe. Net sales in 2012 reflected a
generally solid demand for technology products and services across a number of the markets in which we operate with greater strength coming from our North
and Latin American regions. In 2012, the translation impacts of weaker foreign currencies relative to the U.S. dollar had a negative impact of approximately
three percentage points on our consolidated net sales.
Our 4.1 percent increase in our North American net sales was driven by solid growth in all U.S. business divisions, including double-digit increases in
higher margin businesses of physical security, accessories and fee-for-service logistics, offset partially by a decline in our Canadian operation primarily due to
soft economic conditions and the benefit of a key product launch in 2011 that did not recur in 2012.
The 6.7 percent decrease in our European net sales in 2012 compared to 2011 in U.S. dollars was primarily attributable to the unfavorable translation
impacts of weaker European currencies which contributed approximately six percentage points of the decrease in the region's net sales. Our European net sales
were relatively flat in local currencies reflecting declines in our Southern European and Benelux countries, all of which continued to experience challenging
economic conditions, offset by solid growth in Germany, the UK and France.
The 5.4 percent increase in our Asia-Pacific net sales in 2012 compared to 2011 was primarily attributable to the strong growth in two of our largest
operations, China and India. Partially offsetting this, we continued to experience challenges in Australia, as a result of disruptions caused by the
implementation of a new ERP system, which negatively affected the region’s revenue growth by five percentage points, but did not have a significant impact on
the consolidated revenue growth. In addition, the translation of Asia-Pacific currencies had a negative impact of approximately two percentage points on net
sales growth. Our acquisition of Aptec contributed approximately 0.9% of the year-over-year sales growth in Asia-Pacific.
The 8.8 percent increase in our Latin American net sales in 2012 compared to 2011 primarily reflected continued robust demand in the region, partially
offset by the negative impact of foreign exchange translation which had a negative impact of approximately six percentage points.
Our gross margin was 5.38% in 2012 compared with 5.25% in 2011. The gross margin in 2012 and 2011 included approximately two and eight basis
points, respectively, from a favorable inventory position and pricing on hard disk drives due to product shortages caused by the 2011 flooding in Thailand.
The increase in gross margin in 2012 reflects the higher mix of mobility logistics services which was accretive to 2012 gross profit as a percentage of net sales
by approximately 14 basis points due to the acquisition of BrightPoint and improved performance in our higher margin specialty businesses and fee-for-
service logistics business, largely offset by a greater mix of high volume, lower gross margin sales. Gross margin was also impacted by a highly competitive
selling environment in many countries and a greater mix of sales into the e-tail and retail segments in international markets, which is generally lower margin
business.
Total SG&A expenses increased $110,695, or 7.7%, and increased 13 basis points as a percentage of net sales in 2012 compared to 2011.
Approximately $86,000 of the increase relates to our acquisitions during the fourth quarter of 2012. The increase also reflects direct variable costs associated
with the growth in volume of our business as well as acquisition-related costs of $11,898, asset impairments of $1,923 associated with the closure of our in-
country Argentina operations, costs of $2,500 associated with the exit of our former chief executive officer, and investments in strategic initiatives and system
and process improvements incurred in 2012. These factors were generally offset by the translation impacts of foreign currencies, which yielded an
approximate $34,000 reduction year-over-year, a decrease in stock-based compensation expense of $3,593 associated with our long-term incentive plans and
our continued cost control management.
Amortization of intangible assets was $20,711 in 2012 and $12,550 in 2011. Amortization as a percentage of net sales was 0.05% in 2012 and 0.03%
in 2011. The increase in 2012 was primarily due to our acquisition of BrightPoint.
In 2012, we recorded a net charge for reorganization costs of $9,676, or approximately 0.03% of consolidated net sales, which consisted of $9,044
primarily related to employee termination benefits for workforce reductions in our Australian and New Zealand operations in Asia-Pacific, Germany and other
parts of our European operations, as well as some in our Latin America and BrightPoint operations; and $632 primarily related to a previously restructured
facility in North America for which we modified estimates for higher than initially expected costs through the life of the remaining lease; partially offset by the
net reversal of certain employee termination obligations from reorganization actions recorded in earlier years that were settled favorably. In 2011, we recorded a
net charge for reorganization costs of $5,131, or approximately 0.01% of consolidated net sales, which consisted primarily of $6,215 of employee termination
benefits for workforce reductions in our Australian operations in Asia-Pacific as well as in parts of North America, Europe and Latin America, partially offset
by $1,084 for the net reduction of certain lease obligation liabilities from reorganization actions recorded in earlier years that were settled favorably. See Note 3
to our consolidated financial statements for further details.
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