Ingram Micro 2010 Annual Report Download - page 38

products and services initially surfaced in North America and EMEA early in 2008. By the end of 2008, the weak
macroeconomic environment had spread to substantially all of our business units in each region. Our fiscal 2008
was also a 53-week year, with an additional four business days compared to 2009. To a lesser extent, our efforts to
improve our overall returns on invested capital impacted sales in 2009, as we reassessed and deliberately walked
away from certain less profitable relationships. The translation impact of the fluctuations in foreign currencies
compared to the U.S. dollar negatively impacted our regional net sales in 2009 compared to 2008 by approximately
six percentage-points in EMEA, approximately five percentage points in Asia Pacific, approximately nine
percentage-points in Latin America, and three percentage-points on our consolidated net sales. Our exit of the
broad line distribution business in Finland and Norway, as well as the sale of the broad line distribution operations in
Denmark, in the second quarter of 2009, also negatively impacted EMEA’s 2009 net sales by approximately two
percentage-points. These decreases were partially offset by the increase in net sales of approximately one
percentage-point related to the acquisitions of Eurequat and Intertrade in the fourth quarter of 2008. The
year-over-year decrease in our Asia Pacific region’s net sales is net of an approximate one percentage-point
increase in net sales resulting from our VAD and Vantex acquisitions completed in the second quarter of 2009. The
net impact of these acquisitions and dispositions did not have a material impact in comparing our consolidated net
sales in 2009 to 2008.
Our gross margin was 5.47% in 2010, 5.66% in 2009 and 5.65% in 2008. The gross margin in each year
includes the positive impact of $9,112, $9,758 and $8,224, respectively, or 0.03%, 0.03% and 0.02%, respectively,
of consolidated net sales, from a partial release of our commercial tax reserve in Brazil. The 19 basis point gross
margin decline in 2010 compared to 2009 is primarily driven by a greater mix of lower-margin products,
geographies and competitive pricing environment, as well as our strategic decision to use gross margin as one
component of our efforts to drive sales growth and thereby generate higher operating leverage. Gross margins were
relatively consistent between 2009 and 2008, reflecting a continued competitive, but generally stable, pricing
environment during those years. We continuously evaluate and modify our pricing policies and certain terms,
conditions and credit offered to our customers to reflect those being imposed by our vendors and general market
conditions. We may experience fluctuations in our sales growth in the near term, or these modifications may
negatively impact our gross margin. In addition, increased competition and any further retractions or softness in
economies throughout the world may hinder our ability to maintain and/or improve gross margins from the levels
realized in recent periods.
Total SG&A expenses were $1,406,721, $1,337,696 and $1,512,578 in 2010, 2009 and 2008, respectively.
Total SG&A expenses as a percentage of net sales were 4.07%, 4.53% and 4.41% in 2010, 2009 and 2008,
respectively. Our SG&A expenses, as a percentage of net sales, declined in 2010 compared to 2009, primarily due to
the leverage from our higher volume of net sales, the continued positive impact of reorganization and profit
enhancement actions taken in 2009 and earlier, and ongoing cost control measures throughout our business in 2010.
The year-over-year increase in SG&A expenses of $69,025, or 5.2%, primarily reflects: the overall growth in our
traditional distribution business, where we continue to generate solid operating leverage; increased sales in our
logistics operation, which has a substantially higher expense ratio than our traditional distribution business;
investments in growth initiatives and system and process improvements; additional expenses of $11,000 resulting
from our acquisitions over the last year; and an increase in stock-based compensation expense of $4,835 associated
with our long-term incentive plans; partially offset by savings from our expense-reduction initiatives implemented
in 2008 and 2009; the absence of expense-reduction costs of $3,553 incurred in 2009; savings of approximately
$9,000 from our exit of the broad line distribution business in EMEA’s Nordic region during the second quarter of
2009; and a benefit of $2,380 related to the gain on the sale of land and a building in EMEA in the first quarter of
2010. Foreign currency exchange rates did not have a material impact in comparing total SG&A expenses in 2010 to
2009. Our SG&A expenses, as a percentage of net sales, increased in 2009 compared to 2008, primarily due to the
significant year-over-year decline in consolidated net sales as a result of the downturn in the global economies
which began in early 2008. The year-over-year decline in SG&A expenses of 11.6% in 2009 was primarily
attributable to the benefits of our expense-reduction initiatives implemented since mid-2008. The actions completed
in the second half of 2008 and through all of 2009 generated an estimated annualized reduction in total costs of
approximately $130,000 compared to our run rate in the first quarter of 2008. However, because many of these
actions, and the related cost reductions, were completed throughout 2009, we did not realize the full impact in
SG&A expense until 2010. Also contributing to the 2009 decline versus 2008 were the lower variable expenses
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