Tech Data Corp. (TECD) announced encouraging results for the fourth quarter of fiscal 2010. Net income was $70.1 million compared to $57.0 million in the year-ago quarter. Earnings per share (EPS) were $1.35 compared to $1.14 in the prior-year quarter.

Excluding the 10 cents per share for the reversal of a deferred tax valuation allowance in the European region, EPS came in at $1.25 per share, easily beating the Zacks Consensus Estimate of an income of $1.01 per share, posting a surprise of 23.76%.

The primary reasons for the improvement in net income were an outstanding effort in working capital management coupled with effective operating cost control and a weak dollar. Moreover, Tech Data benefited from a lower effective tax rate of 24.4% compared to 31.5% in the prior-year period, excluding the reversal of a deferred tax valuation allowance.

Tech Data sees stability in IT spending. Total revenue for the reported quarter was $6.28 billion, an increase of 10% from $5.71 billion in the prior-year quarter. This was above the Zacks Consensus Estimate of $6.10 billion.

This increase is due to improving IT demand combined with the strength of certain foreign currencies versus the U.S. dollar that positively impacted sales by 8 percentage points in the quarter. Moreover, the company said that this was its first fourth quarter sequential increase in five years.

North and Latin America (representing 40% of total sales) increased 6.7% to $2.50 billion and European sales (representing 60% of total sales) increased 12.3% to $3.78 billion. The increase in net sales in both regions is attributable to strengthening demand.

Results for the quarter exceeded management’s expectation, as interest expenses declined 40.5% and foreign-exchange loss fell 73.5% from last year. Moreover, a prudent execution of Tech Data’s inventory pricing and freight management practices resulted in a quarterly gross margin of 5.2% compared to 5.6% in the prior-year quarter. The gross margin was negatively impacted by the recovery of foreign currency exchange losses in the prior-year quarter.

Selling, General & Administrative (SG&A) expenses in the reported quarter were $233.7 million (3.7% of total sales) compared to $222.7 million (3.9% of total sales) in the year-ago quarter. As a percent of net sales, the decrease in SG&A was primarily due to productivity improvements and cost saving initiatives.

On a dollar basis Incorporatedrease in SG&A expenses was primarily attributable to the strength of certain foreign currencies against the U.S. dollar. Thus, operating income margin fell to 1.5% from 1.73% in the year-ago period.

During the reported quarter, Tech Data generated $44.3 million of cash from operations versus $62.6 million generated in the previous quarter. Tech Data has a net cash position of $712.6 million as on January 31, 2010.

At quarter-end, the company had approximately $1.12 billion of cash & cash equivalents compared to $1.2 billion at the end of the previous quarter. Total long-term debt at the end of the quarter was $338.1 million, compared to $336.2 million at the end of the previous quarter. Return on capital employed (ROCE) was 13.0% for fiscal 2010.

Outlook

Tech Data has forecasted that its first quarter fiscal 2011 revenue will increase in the mid single digit range year over year. This increase is due to improving IT demand combined with the strength of certain foreign currencies versus the U.S. dollar.

Exchange rate gains will positively impact the company’s operating results. The company also announced plans to increase internal investment Incorporatedrease workforce and spend more on developing systems that would drive growth.

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