Ingram Micro 2011 Annual Report Download - page 44

Asia-Pacific operating margin of approximately 20 and 89 basis points, respectively; and losses due to continued
operational challenges in our Brazilian operations, which generated a year-over-year decline in consolidated and
Latin American operating margins of 2 and 30 basis points, respectively. In North America, our operating margin
increased in 2011 compared to 2010 largely due to the economies of scale realized from the higher net sales in
the current year and mix of business with slightly higher growth from higher margin specialty business units. 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.
Net other expense consisted primarily of interest income and expense, foreign currency exchange gains and
losses, costs of discounting drafts received from customers, primarily in EMEA, and other non-operating gains
and losses. We incurred net other expense of $70,775, $46,372 and $26,692 in 2011, 2010 and 2009,
respectively. The increase in 2011 compared to 2010 was primarily attributable to higher interest expense as a
result of a full year of interest expense associated with our $300,000 in public debt issued in August 2010; a
lower net cash position resulting from $225,905 in share repurchases; increased working capital required to
support year-over-year sales growth; the loss of $5,624 from the termination of our cash flow hedge and write-off
of the remaining unamortized deferred financing costs related to our senior unsecured term loan; and a $5,213
increase in expense from net losses on foreign currency exchange, the majority of which relate to the foreign-
currency translation impact on Euro-based inventory purchases in our pan-European entity, which designates the
U.S. dollar as its functional currency. The increase in 2010 compared to 2009 was primarily attributable to higher
interest expense as a result of the $300,000 in public debt issued in August 2010; $6,482 in higher costs related to
discounting drafts received from our customers; lower net cash positions as a result of $152,285 in share
repurchases during 2010; and increased working capital required to support year-over-year sales growth, partially
offset by a net foreign exchange gain.
Our provision for income taxes in 2011, 2010 and 2009 was $143,631, $120,001 and $67,110, respectively.
Our effective tax rate in 2011, 2010 and 2009 was 37.0%, 27.4% and 24.9%, respectively. The year-over-year
increase in the effective tax rate from 2010 to 2011 primarily reflected the non-cash income tax charge to record
a valuation allowance of $24,810 recorded against all of our deferred tax assets in Brazil as discussed in Note 7
to our consolidated financial statements, which increased our effective tax rate by 6.4%. Aside from the items
discussed above, the changes in our effective tax rates in 2011, 2010 and 2009 were primarily attributable to
change in mix of profit among different tax jurisdictions and losses in other tax jurisdictions in which we are not
able to record a tax benefit.
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