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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended January 1, 2005
Commission File Number: 1-12203
INGRAM MICRO INC.
(Exact name of Registrant as specified in its charter)
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Delaware
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62-1644402 |
(State or other jurisdiction of
incorporation or organization) |
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(I.R.S. Employer
Identification No.) |
1600 E. ST. ANDREW PLACE, SANTA ANA, CALIFORNIA
92705
(Address, including zip code, of principal executive
offices)
(714) 566-1000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the
act:
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| Title of Each Class: |
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Name of Each Exchange on Which Registered: |
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CLASS A COMMON STOCK,
PAR VALUE $.01 PER SHARE
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NEW YORK STOCK EXCHANGE |
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K. o
Indicate by check mark if registrant is an accelerated filer (as
defined in Exchange Act Rule 12b of the
Act). Yes þ No o
The aggregate market value of the voting stock held by
non-affiliates of the registrant as of the last business day of
the Registrant’s most recently completed second fiscal
quarter, at July 3, 2004, was $1,816,286,920 based on the
closing sale price on such date of $14.11 per share
The Registrant had 159,123,352 shares of Class A
Common Stock, par value $.01 per share, outstanding at
February 17, 2005.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Proxy
Statement for the registrant’s Annual Meeting of
Shareowners to be held June 1, 2005 are incorporated by
reference into Part III of this Annual Report on
Form 10-K.
TABLE OF CONTENTS
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PART I
The following discussion includes forward-looking statements,
including but not limited to, management’s expectations of
competition; revenues, margin, expenses and other operating
results or ratios; operating efficiencies; costs synergies,
economic conditions; cost savings; capital expenditures;
liquidity; capital requirements, acquisitions and integration
costs, operating models, exchange rate fluctuations and rates of
return. In evaluating our business, readers should carefully
consider the important factors discussed in “Cautionary
Statements for the Purpose of the ‘Safe Harbor’
Provisions of the Private Securities Litigation Reform Act of
1995” included in Exhibit 99.1 to our Annual Report on
Form 10-K for the fiscal year ended January 1, 2005.
We disclaim any duty to update any forward-looking statements.
Introduction
Ingram Micro, a Fortune 100 company, is the largest global
information technology (“IT”) wholesale distributor,
providing sales, marketing, and logistics services for the IT
industry worldwide. More than just a conduit between suppliers
and resellers, Ingram Micro provides a vital link in the IT
supply chain by generating demand and developing markets for our
technology partners. We create value in the IT market by
extending the reach of our technology partners, capturing market
share for resellers and suppliers, creating innovative solutions
comprised of both products and services, offering financial
services and credit facilities, and providing efficient
fulfillment of IT products and services. With a broad range of
products and an array of services, we create operating
efficiencies for our partners around the world.
History
Ingram Micro’s global footprint was achieved through a
series of acquisitions, mergers and organic growth in North
America, Europe, Asia-Pacific and Latin America. We began
business in 1979 as a California corporation named Micro D Inc.
A series of mergers and acquisitions in the 1980’s led to
the creation of Ingram Micro, a subsidiary of Ingram
Distribution Group, which was a unit of the privately-held
Ingram Industries Inc. In November 1996, Ingram Micro completed
an initial public offering, and split off from its parent in a
tax-free reorganization. We have made significant acquisitions
to strengthen our presence in North America, Europe, and
Asia-Pacific since our initial public offering. Expansion of our
North American presence continued with the acquisition of
Intelligent Electronics Inc.’s Reseller Network Division in
1997. In the same year, we acquired a minority equity interest
in Electronic Resources Limited (“ERL”), a leading
Asian computer and electronic products distributor based in
Singapore, which expanded our presence in Singapore and Malaysia
and provided entry into Australia, China, Hong Kong, India,
Indonesia, New Zealand, Thailand, and Vietnam. We increased our
investment in ERL in 1999, by purchasing the remaining shares of
ERL, and renamed the subsidiary Ingram Micro Asia Ltd.
(“Ingram Micro Asia-Pacific”). By 1998, Ingram
Micro’s well-established presence in Europe already
included operations in Austria, Belgium, Denmark, Finland,
France, Germany, Italy, the Netherlands, Norway, Spain, Sweden,
Switzerland, and the United Kingdom. The acquisition of
publicly-held Macrotron, a distributor of personal computer
products established in 1972, solidified our presence in
Germany, Austria and Switzerland. In November 2004, we
strengthened our position in the Asia-Pacific region by
acquiring 100 percent of Techpac Holdings Limited
(“Tech Pacific”), one of Asia-Pacific’s largest
technology distributors based in Singapore. This acquisition
made Ingram Micro the largest IT wholesale distributor in
Australia, Hong Kong, India, Malaysia, New Zealand, and
Singapore and expands our presence in Thailand.
Industry
The worldwide IT products and services distribution industry
generally consists of two types of business: traditional
distribution business and fee-based supply chain services
business. Within the traditional distribution model, the
distributor buys, holds title to, and sells products and/or
services to resellers who, in turn, typically sell directly to
end-users, or other resellers. Hardware manufacturers and
software publishers, which we collectively call suppliers or
vendors, sell directly to distributors, resellers and end-users.
As demand for
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supply chain services grows, distributors will seek new
opportunities to provide services within and outside of the IT
sector to complement their traditional distribution business.
Fee-based supply chain services include the supply chain
components that ensure the flow of goods from origin to
consumption. In practical terms, logistics outsourcing
encompasses the materials management functions of the supply
chain, taking a product from the point of concept through
delivery to the customer.
The traditional IT distribution industry continues to undergo
change as a result of a number of factors. As margins have
narrowed on hardware and software products due to
commoditization trends as technology evolves along its life
cycle, suppliers and resellers have transitioned from a more
product-focused to a more solution-oriented business model.
Suppliers have also reduced the number of distribution partners
in several geographic markets as they streamline their supply
chains. However, we believe that suppliers continue to embrace
two-tier distributors that have a global presence and are able
to deliver products to market in a low-cost manner. Resellers in
the traditional distribution model continue to depend on
distributors for a number of services, including product
availability, marketing, credit, technical support, and
inventory management, which includes direct shipment to
end-users and, in some cases, allowing end-users to directly
access distributors’ inventory data. These services allow
resellers to reduce their inventory, staffing levels, and
backroom requirements, thereby streamlining their financial
investment and reducing their costs. As resellers adjust their
business models from selling products to selling solutions, they
rely on distributors to help them combine products with services
to complete the solutions they offer to their customers. As
resellers require more solution-oriented offerings, distributors
respond with enhanced value-added solutions and services
customized to the needs of their specific customer base.
A variety of reseller categories exist, including value-added
resellers (“VARs”), corporate resellers, systems
integrators, direct marketers, Internet-based resellers,
independent dealers, reseller purchasing associations, PC
assemblers, and consumer electronics (“CE”) retailers.
Different types of resellers are defined and distinguished by
the end-user market they serve, such as large corporate
accounts, mid-market, small-to-medium sized businesses
(“SMBs”), or home users, and by the level of value
they add to the basic products they sell. Many of our reseller
customers are heavily dependent on distribution partners with
the necessary systems, capital, inventory availability, and
distribution facilities in place to provide fulfillment and
other services. Characteristics of the local reseller and
supplier environment, as well as other factors specific to a
particular country or region, have shaped the evolution of
distribution models in different countries.
The evolving go-to-market strategies of IT market participants
present new opportunities for IT distributors beyond those based
on their traditional role. For example, many large suppliers use
manufacturer-direct sales initiatives to supplement their use of
the distribution channel. This direct-sales model can present
opportunities for suppliers to become distribution customers. As
such, distributors can sell logistics, fulfillment, and
marketing services, as well as provide third-party products to
suppliers in a fee-based supply chain services model. Other
suppliers are pursuing strategies to outsource functions such as
logistics, order management, and technical support to supply
chain partners as they look to minimize costs and investments in
distribution center assets and focus on their core competencies
in manufacturing, product development, and/or marketing.
Suppliers also outsource these functions to enhance their
responsiveness in the supply chain, reduce their inventory
carrying costs, and better respond to customer demand. Resellers
provide opportunities, as well. Retailers and Internet resellers
are seeking fulfillment services, inventory management, reverse
logistics, and other supply chain services that do not
necessarily require a traditional distribution model. In
summary, distributors continue to evolve their business models
to meet customers’ needs (both suppliers and resellers)
through provision of fee-for-services programs while remaining
an efficient and low-cost means of delivery for technology
hardware, software, and services.
Company Strengths
We believe that the following strengths enable us to further
enhance our leadership position in the IT distribution industry:
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Leading Global Market Reach. We are the largest IT
distributor in the world, by net sales, and believe that we are
the market share leader, by net sales, in North America,
Asia-Pacific, and Latin |
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America. We believe that the current IT industry environment
generally favors large, financially sound distributors that have
large product portfolios, economies of scale, strong business
partner relationships and wide geographic reach. Based on
publicly available information, we believe we offer the largest
breadth of product in the IT industry. Our scale allows us to
purchase products in large quantities and avail ourselves of
purchase opportunities from a broad range of suppliers and
provide competitive pricing for our reseller customers. Our
reseller customers can derive purchasing efficiencies and reduce
their investment in inventory while simultaneously enhancing
end-user service levels by establishing a supply relationship
with us. This relationship ensures resellers meet their product
inventory needs through a single point of contact rather than
purchasing product directly from multiple suppliers. We believe
that we also provide suppliers with access to a broad customer
base that few can reach directly in a more cost-effective
manner. With our geographic network of distribution centers and
world-class product management and logistics operations, our
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Ingram Micro is the only global full-line distributor with
operations in the Asia-Pacific region. In 2004, we strengthened
our position in this high-growth region by acquiring Tech
Pacific, one of Asia-Pacific’s largest technology
distributors, solidifying our capabilities in the retail
channel, third-party logistics, software distribution and
traditional distribution areas. This acquisition provides a
number of strategic benefits to Ingram Micro, its supplier
partners, and its customers, making Ingram Micro the largest
technology distributor in Australia, Hong Kong, India, Malaysia,
New Zealand, and Singapore and expands our presence in Thailand. |
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Our global market presence enables us to service our resellers
with our extensive network of distribution centers and support
offices. As of January 3, 2005, we had 70 distribution
centers worldwide, an increase from 48 distribution centers in
December of 2003 as a result of our Tech Pacific acquisition in
Asia-Pacific. We have sales offices and/or Ingram Micro sales
representatives in 36 countries, and sell our products and
services to resellers in more than 100 countries. We offer our
1,400 suppliers access to a global customer base of close to
165,000 resellers of various categories including VARs,
corporate resellers, direct marketers, retailers, Internet-based
resellers, and government and education resellers. |
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Strong Working Capital Management and Financial Position.
We have consistently demonstrated strong working capital
management in both positive and difficult economic conditions.
In particular, we have maintained a strong focus on optimizing
our investment in inventory, while minimizing the deployment of
debt and preserving customer fill rates and service levels. We
have significantly reduced our inventory days on hand as a
result of our focused and sustainable initiatives towards
reducing excess and obsolete goods, better buying strategies,
and a cultural orientation towards return on invested capital.
Furthermore, we continue to manage our accounts receivable
through collections, credit limit setting, customer terms and
process efficiencies to minimize our working capital
requirements. Our business process improvement programs have
also resulted in improving profitability, providing us with a
solid foundation for growth. Based on the strength of our
balance sheet and improving profit trends, we also believe that
we are well positioned to support our growth initiatives in our
core business and/or invest in incremental profitable growth
opportunities. Finally, we believe our solid financial position
provides us with a competitive advantage as a reliable,
long-term business partner for our supplier and reseller
partners. |
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Superior Execution and Vital Link in the Supply Chain. We
are committed to increasing our value to our customers and
suppliers as a vital link in the IT distribution and technology
supply chain. Through our understanding and fulfillment of the
needs of our reseller and supplier partners, we provide our
customers with the tools they need to increase the efficiency of
their operations, enabling them to minimize inventory levels,
improve customer delivery, and enhance profitability. Critical
to our superior execution is our ability to provide quick and
efficient order fulfillment along with consistent, accurate and
on-time delivery to our customers around the world. We seek to
maintain sufficient quantities of product inventories to achieve
favorable order fill rates while optimizing our investment in
working capital. |
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We provide business information to our customers, suppliers, and
end-users by leveraging our information systems. We give
resellers, and in some cases their customers, real-time access
to our product inventory data. By providing improved visibility
to all participants in the supply chain, we allow inventory
levels throughout the channel to more closely reflect end-user
demand. We maintain flexible information systems that can adapt
to changes and support distribution center operations,
back-office efficiency, data warehousing, and e-commerce. We
also provide our business partners with the ability to customize
their interactions with Ingram Micro via XML, EDI, Web-based
e-commerce tools, as well as InsideLine, which allows resellers
to link their internal ordering and accounting systems directly
to our inventory and distribution database on a real-time basis. |
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Our commitment to superior service levels has been widely
recognized throughout the IT industry, as evidenced by a number
of awards received by Ingram Micro during 2004. In the United
States, we were named the Best Performing Distributor by
Computer Reseller News’ most recent “Sourcing
Study — Top 10 Preferred Sources” in five out of
eight performance categories. Leading manufacturers, such as
Cisco, Computer Associates, IBM, Symantec and Veritas (before
being acquired by Symantec in late 2004) have also recognized us
as their leading distributor in various geographies worldwide. |
Our Strategic Focus
Our strategic focus falls into two broad areas, which support
and enhance our position as the IT distribution industry’s
“best way to deliver technology to the world.” We
drive profitable growth by growing and optimizing our core
business and expanding into adjacent markets. We continue to
make productivity improvements through our focus on the right
cost structure for our business.
Achieve Sustainable Profitable Growth
Our goal is to continually grow and optimize our core
business by increasing our value to our customers and
vendors, targeting high growth market and product segments, and
leveraging our business model to serve our partners.
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We continually strengthen our value to customers by enhancing
our programs, service offerings, and tools. An example is
our implementation of Choice Advantage in the U.S., a new
three-tiered, customizable partner service model engineered
exclusively to meet the diverse needs of our reseller customers.
Solution providers can determine which service level best fits
their business, resulting in tailored business services,
consistent resources, and predictable pricing across the board.
In this manner, Choice Advantage offers a framework that
separates Ingram Micro’s value-added distribution services
from the technology products that we sell. This business
initiative has been launched to more than 28,000 customers
across the U.S. In Germany, we have developed an internal
customer relationship management tool that provides in-depth
information about our customers which allows the German sales
teams to better respond to customer needs by tailoring the
services Ingram Micro offers. In North America, we expanded our
programs to help our customers target the health care and
finance industries. By taking existing product lines and
combining them with additional products to create customized
solutions, we equip our resellers to target these segments
directly and capture the growing IT sales opportunities within
these and other vertical markets. We are educating our customers
and manufacturer partners on such regulatory measures as the
Health Insurance Portability and Accountability Act,
Gramm-Leach-Bliley Act, and the Sarbanes-Oxley Act of 2002,
enabling our partners to identify and capitalize on
opportunities. A comprehensive set of support tools has been
created to assist our customers in the identification and
development of technology based applications that address the
specific needs of these vertical industries. |
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We continually improve our operations by enhancing our
capabilities while reducing costs to provide an efficient flow
of products and services through the IT value chain. We leverage
our IT systems and warehouse locations to support custom
shipment requirements. By optimizing delivery methodologies, we
deliver faster, while reducing shipping costs. In our North
American region, the operations, IT, |
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accounts payable and customer service teams work together to
develop an innovative approach to take costs out of our supply
chain, while improving the product receiving process in the
region’s distribution centers. We are also enhancing our
revenues through the development of tools and capabilities to
identify new growth opportunities. By streamlining our catalog
to include the products most desired by our customers, we
optimize inventory management, focus on higher margin
opportunities, and develop merchandising and pricing strategies
that produce enhanced business results. |
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Another example of leveraging core operations is our Pan
European Business Unit in Europe, which encompasses components,
networking, and supplies, and reflects our commitment, in
conjunction with our vendor partners, to centralize product
groups that have greater synergy and leverage on a pan-European
basis rather than on an individual country basis. This
centralized function provides reseller customers with optimized
stock availability and competitive pricing, providing true,
one-stop shopping for their components, networking and supplies
needs. |
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We benefit from a growth perspective by targeting market
segments that provide growth opportunities for existing
customers and vendors. The SMB customer segment is generally
one of the largest segments of the IT market in terms of
revenue, and typically provides higher gross margins for
distributors. The needs of SMB resellers in serving the highly
fragmented SMB end-user market are well addressed by our
distribution model. In North America, we serve our SMB resellers
through a variety of programs, including our VentureTech Network
(“VTN”) and SMB Alliance programs, both of which
provide partnering opportunities for training and education,
demand generation, financial services, marketing, and other
services. We also offer marketing and credit programs targeted
at SMB resellers in other markets. As a supplement to our SMB
programs in the United States, we offer menu-driven programs to
GovEd resellers through our GovEd Alliance program, which
includes new financial services offerings launched in 2004. Our
European operations have deployed extensive web based tools that
provide improved pricing and availability information for SMBs,
enhancing resellers’ experience with Ingram Micro Europe
with regard to purchasing and order management. |
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We look for opportunities to invest in high-growth and
profitable geographic markets. Our Tech Pacific acquisition
strengthened our presence in Asia-Pacific, one of the fastest
growing IT markets in the world. We will continually evaluate
developing markets for expansion where IT demand supports a
local presence. |
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We target emerging IT product and service segments in their
developmental stages establishing product expertise that can be
leveraged by our partners. This allows us to keep our broad
product line current based on emerging trends, offering
differentiation to our resellers through product availability,
education, training, and sales support tools. Emerging
technologies include, but are not limited to, high-end storage,
Internet Protocol (“IP”) communications, security,
mobility and networking products. |
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We provide supply chain solutions tailored to each region
to clients who are focused on increasing supply chain
efficiencies, lowering overhead costs, and maximizing profits.
We help our supply chain clients deliver products to key
customers and new markets on a fee-for-service basis, leveraging
over 20 years of experience in our core distribution
activities. In North America, Ingram Micro Logistics has
particularly strong expertise in fulfillment to consumers and
delivery of multi-unit shipments to North American retailers.
Suppliers gain scale by using us to reach both distribution and
direct channels. They also benefit from cost savings through our
inventory consolidation. We offer a range of retail solutions to
assist manufacturers in areas such as order management,
customized packaging, launch program management, accounts
receivable management, consigned inventory management, and
product returns services. |
Another strategic focus is expanding into adjacent markets
to augment our core business by leveraging our capabilities
and skills in complementary market segments.
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We actively seek adjacent markets for expansion. In 2004
we acquired Nimax Inc., a key participant in the value-added
distribution of automatic identification and data capture/point
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POS”), barcode and wireless products, and enterprise
mobility solutions. This acquisition enables us to gain an
immediate entry into the growing AIDC/ POS market, expand upon
our enterprise mobility offerings, and offer new partnership
opportunities to our manufacturer and solution provider
customers. The Nimax division will leverage Ingram Micro’s
global reach, broad customer base and established vertical
market solutions, marketing engine, back-office resources and
logistics capabilities to initially serve the North America,
Asia-Pacific and Latin America markets, with growth
opportunities in other global markets. Nimax customers will also
benefit from this acquisition by gaining access to training,
marketing and business development resources, world-class
logistics, and one-stop shopping for technology solutions.
Manufacturers will have access to a global footprint with a
broad customer base and a high-value marketing engine with
business development resources to serve key vertical markets. |
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We are also expanding our presence in the CE market by pursuing
new relationships with CE manufacturers to bring new lines of
converging technologies to solution providers, direct marketers,
e-tailers and retailers. This business initiative supports our
ongoing growth strategy and long-standing commitment to be the
leading go-to-market partner for the technology industry. Our
global operations have helped hundreds of IT and CE
manufacturers use the supply chain as a competitive springboard
to gain market share and maximize profits. In North America, we
serve as a distribution conduit for CE manufacturers in the home
automation, mobile phones and gaming arenas. In Europe, we
expanded our presence in the mobile technology market to include
smart phones and mobile connect cards, wireless email devices,
and services and subscriptions. We also service a variety of CE
manufacturers in Asia-Pacific and Latin America. |
Optimal Productivity
We strive to create the right cost structure for our business
by driving efficiency through process improvements,
leveraging economies of scale, taking cost out of our business
and cultivating a strong and capable workforce.
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Our focus on driving efficiencies and achieving the
best-in-class financial metrics has enabled us to improve our
operating margins. We employ a disciplined and focused
approach when we review our global operations and develop
initiatives designed to streamline business processes and
further increase our operating efficiency. For example,
employment of the Six Sigma methodology has enabled the success
of many of our profit enhancement initiatives, allowing us to
simultaneously reduce costs while improving customer service
levels. The standard Six Sigma approach facilitates sharing of
best practices, which enhances our service offerings to our
customers and suppliers with a more efficient use of resources. |
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By maximizing economies of scale and leveraging our
best-in-class logistics services, we are prepared to address
the changing needs of resellers and suppliers, providing a broad
array of distribution and supply chain management solutions,
services and programs. |
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We are continuously looking for ways to take cost out of our
business. During the period between 2001 to 2003, Ingram
Micro executed a series of significant actions to improve our
financial position. These profit enhancement programs resulted
in the restructuring of several functions, consolidation and
optimization of facilities and systems, reductions of workforce
worldwide, enhancement and/or rationalization of vendor and
customer programs, outsourcing of certain IT infrastructure
functions, geographic consolidations and administrative
restructuring. As a result, we enjoy a more nimble and
responsive business model. We are always focused on finding new
ways to more cost-effectively respond to market demands. |
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We leverage our human capital, to drive productivity
improvements by employing a workforce replete with innovation,
professionalism, and leadership. We believe that enhancing
our associates’ work environment and cultivating their
skills and capabilities build the foundation from which we can
drive productivity and achieve our long-term objectives. We
instill a culture built upon ethics, respect, and
accountability. We support individual growth, foster creativity,
promote well-being, sponsor community involvement, and recognize
the demands of work and personal life. Although our programs vary |
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across countries, many aspects of our environment make our
company attractive to potential candidates. We offer extensive
training to our associates, as well as education assistance,
tuition reimbursement, coaching and career development programs,
and self-promotion programs. More than 2,000 on-line training
and development programs are offered to provide consistency
across regions. We utilize a performance development process to
help our associates become successful in their careers with
Ingram Micro. We also use internal rotation programs to build
strength and cross-functional leadership in our associates in
certain regions. Our Global and Regional Awards of Excellence
are granted to associates or teams that demonstrate
extraordinary efforts resulting in associate value, customer
value, profitable growth, shareowner value, and/or community
value. |
Customers
We conduct business with most of the leading resellers of IT
products and services around the world including, in the United
States, Amazon.com, Buy.com, CDW Corporation Inc., CompuCom
Systems Inc., CompUSA Inc., Insight Enterprises, Office Depot
Inc., OfficeMax, PC Connection Inc., and SARCOM Inc. Our
reseller customers outside of the United States include Bechtle,
Brasoftware, Compugen, Econocom, Future Shop, Mainbit,
NexInnovations, and Systemax. In most cases, we have resale
contracts with our reseller customers that are terminable at
will after a short notice period and have no minimum purchase
requirements. Our business is not substantially dependent on any
of these contracts.
We also have specific agreements in place with certain
manufacturers and resellers to provide supply chain management
services such as order management, logistics management,
configuration management, and procurement management services.
These customers include BenQ, Gateway Inc., Intuit, and
Microsoft in North America, and ChannelWave, Digital River,
Hewlett-Packard store, and Sony in Europe. In cases where we do
have contracts, either party without cause can terminate them on
relatively short notice. Our business is not dependent on any of
these contracts. The service offerings we provide to our
customers are discussed further below under “Services.”
Sales and Marketing
We employ sales representatives worldwide who assist resellers
with product and solution specifications, system configuration,
new product/service introductions, pricing, and availability.
Our product management and marketing groups also promote our
sales growth, create demand for our suppliers’ products and
services, enable the launch of new products, and facilitate
customer contact. For example, our marketing programs are
tailored to meet specific supplier and reseller customer needs.
These needs are met through a wide offering of services by our
in-house marketing organization, including advertising, direct
mail campaigns, market research, on-line marketing, retail
programs, sales promotions, training, solutions marketing, and
assistance with trade shows and other events.
We have launched specialized business units in certain
geographic and product markets to serve customers with
particular needs. As we enter these specialized markets, we
continue to leverage our global leadership in world-class
logistics, market reach, and electronic commerce tools. Our
targeted market focus in Europe led to the formation of our Pan
European Business Unit, which manages components, networking,
and supplies on a centralized basis in most European countries
where we have a presence. For example, the Pan European Business
Unit offers a one-stop shopping opportunity to small- and
medium-sized resellers, PC assemblers, and OEMs, and markets a
wide range of components that these customers need to assemble
PC systems.
Selling Arrangements. We offer various credit terms to
qualifying customers, as well as prepay, credit card, and cash
on delivery terms. We also offer various alternative financing
solutions to our resellers based on their creditworthiness and,
in some cases, the creditworthiness of their end-users, to
assist our resellers and their end-users in acquiring products.
In limited situations and markets, we collect outstanding
receivables on behalf of our resellers. We closely monitor
reseller customers’ creditworthiness through our IMpulse
information system and other monitoring tools, which contain
detailed information on each customer’s
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payment history, as well as other relevant information. In most
markets, we use various levels of credit insurance to control
credit risks and allow sales expansion.
We have sold, and may continue to sell, to certain customers
where the transactions are financed by a third-party floor plan
financing company. These transactions generally involve higher
sales on limited lines of product. The expenses charged by these
financing companies will be paid by us, subsidized by our
suppliers, or billed to our reseller.
Products
We distribute and market hundreds of thousands of IT products
worldwide from the industry’s premier computer hardware
suppliers, networking equipment suppliers, and software
publishers worldwide. Product assortments vary by market, and
the suppliers’ relative contribution to our sales also
varies from country to country. On a worldwide basis, our
revenue mix by product category has remained relatively stable
over the past several years, although it may fluctuate between
and within different operating regions. Over the past several
years, our product category revenues on a consolidated basis
have generally been within the following ranges. However, our
peripherals and systems products have been close to or slightly
above the high-end of their respective ranges in the recent year:
| |
|
|
|
• Networking:
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10-15% |
|
• Software:
|
|
15-20% |
|
• Systems:
|
|
20-25% |
|
• Peripherals:
|
|
40-45% |
Networking. Our networking category includes networking
hardware, communication products and network security.
Networking hardware includes switches, hubs, routers, wireless
local area networks, wireless wide area networks, network
interface cards, network-attached storage and storage area
networks. Communication products incorporate Voice Over Internet
Protocol communications, modems, phone systems and video/audio
conferencing. Network security hardware includes firewalls,
Virtual Private Networks (“VPNs”), intrusion
detection, authentication devices and appliances.
Software. We define our software category as a broad
variety of applications containing computer instructions or data
that can be stored electronically. We offer a variety of
software products, such as business application software,
operating system software, entertainment software, middleware,
developer software tools, security software (firewalls,
intrusion detection, and encryption) and storage software.
Systems. We define our systems category as self-standing
computer systems capable of functioning independently. We offer
a variety of systems, such as servers, desktops, portable
personal computers, tablet personal computers, and personal
digital assistants.
Peripherals. We offer a variety of peripherals products,
including printers, scanners, displays, projectors, monitors,
panels, mass storage, and tape. We also include other products
and services in this category, including components (processors,
motherboards, hard drives, and memory), supplies and accessories
(ink and toner supplies, paper, carrying cases, and anti-glare
screens), CE products (cell phones, digital cameras, digital
video disc players, game consoles, and televisions), and
services (such as installation services, professional services,
service provider and carrier services, warranties and support,
configuration and assembly, packaged services, and mobile
communication services).
Suppliers
Our worldwide suppliers include leading computer hardware
suppliers, networking equipment suppliers, and software
publishers such as 3Com, Acer, Advanced Micro Devices Inc.,
Canon USA, Cisco Systems Inc., Computer Associates, Epson,
Hewlett-Packard, IBM, InFocus, Intel, Iomega, Juniper Networks,
Kingston Technology, Lexmark, Maxtor, Microsoft, NEC/
Mitsubishi, palmOne, Philips, Samsung, Seagate, Symantec,
Toshiba, Veritas Software Corporation, ViewSonic Corporation,
Western Digital and Xerox. We sell products purchased from many
vendors, but generated approximately 22%, 24% and 27% of our net
sales in fiscal years
8
2004, 2003 and 2002, respectively, from products purchased from
Hewlett-Packard Company. There were no other vendors that
represented 10% or more of our net sales in each of the last
three years.
Our suppliers generally warrant the products we distribute and
allow returns of defective products, including those returned to
us by our customers. We do not independently warrant the
products we distribute; however, local laws might impose
warranty obligations upon distributors, we do warrant services
and products that we build-to-order from components purchased
from other sources, and under limited circumstances in
Asia-Pacific. Provision for estimated warranty costs is recorded
at the time of sale and periodically adjusted to reflect actual
experience. Historically, warranty expense has not been material.
We have written distribution agreements with many of our
suppliers; however, these agreements usually provide for
nonexclusive distribution rights and often include territorial
restrictions that limit the countries in which we can distribute
the products. The agreements are also generally short term,
subject to periodic renewal, and often contain provisions
permitting termination by either party without cause upon
relatively short notice. A supplier who elects to terminate a
distribution agreement generally will repurchase its products
carried in the distributor’s inventory.
Services
In addition to our broad array of products, we also offer a
number of supply chain management services to our suppliers and
resellers. We focus on four broad categories of services: sales
and marketing, customer care, financial services, and logistics.
Our sales and marketing services include business development
and outsourced marketing services, demand generation programs
for suppliers and resellers, market research and business
intelligence, retail merchandizing, and software licensing
services. Our customer care services include call center support
and pre- and post-technical support. Our financial services
include credit and collection management services and tailored
financing programs. We also offer end-to-end supply chain
services to suppliers and resellers through our Ingram Micro
Logistics division which vary depending on regional requirements
and can include end-to-end order management and fulfillment,
retail logistics merchandizing, warehousing and storage,
contract manufacturing, distribution center services, product
procurement, reverse logistics, transportation management,
customer care, tailored financing programs, marketing services,
and other outsourcing services. While we provide our partners
with an array of presales services such as technical support,
product selection, credit options, and customized delivery, we
also offer additional services on a fee-for-service basis.
We also offer professional and technical services across North
America through our Ingram Micro Service Network
(“IMSN”), which serves as a collaboration and
partnership platform for over 550 VAR organizations. IMSN
enables VARs to expand their geographic reach and service
capabilities by providing a fully managed nationwide technical
support and service management solution owned and operated by
Ingram Micro. IMSN is comprised of over 10,000 certified
technicians in 800 North American markets throughout the United
States, Canada, and Puerto Rico. Our partners work together to
provide world-class IT business solutions and support to
end customers, including application services; consulting;
hardware and software support; installation, moves, adds, and
changes; migration services; local area network and wide area
network services; network design, integration and
implementation; and outsourcing services.
Although services represent one of the initiatives of our
long-term strategy, they have contributed less than 10% of our
revenues in the past and may not reach that level in the near
term.
Global Operations
We have local sales offices and/or Ingram Micro sales
representatives in various worldwide markets, including North
America (United States and Canada), Europe (Austria, Belgium,
Denmark, Finland, France, Germany, Hungary, Italy, The
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and
United Kingdom), Asia-Pacific (Australia, Bangladesh, the
People’s Republic of China including Hong Kong, India,
Indonesia, Malaysia, New Zealand, Pakistan, Philippines,
Singapore, Sri Lanka, Taiwan, and Thailand), and Latin America
(Argentina, Brazil, Chile, Mexico, and Peru). We also have
contracted sales agents, parties who act on our behalf, or
primary supplier relationships with independent third parties in
Costa
9
Rica, Dominican Republic, Ecuador, Guatemala, Panama, Trinidad/
Tobago, and Vietnam. Additionally, we serve markets where we do
not have an in-country presence through our various sales
offices, including our general telesales operations in Santa
Ana, California and Buffalo, New York and our export offices in
the United States (Miami, Florida), Singapore, Germany, The
Netherlands, and France. For a discussion of our geographic
reporting segments, see “Item 8. Financial Statements
and Supplemental Data.”
We operate internationally with distribution facilities in
various locations around the world. For a discussion of foreign
exchange risks relating to our international operations, see
“Item 7A. Quantitative and Qualitative Disclosures
about Market Risk.”
Competition
We operate in a highly competitive environment, both in the
United States and internationally. The IT products and services
distribution industry is characterized by intense competition,
based primarily on:
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• |
ability to tailor specific solutions to customer needs; |
| |
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• |
availability of technical and product information; |
| |
| |
• |
credit terms and availability; |
| |
| |
• |
effectiveness of sales and marketing programs; |
| |
| |
• |
price; |
| |
| |
• |
products and services availability; |
| |
| |
• |
quality and breadth of product lines and services; and |
| |
| |
• |
speed and accuracy of delivery. |
We believe we compete favorably with respect to each of these
factors.
We compete in North America against full-line distributors such
as Tech Data and Synnex Corporation as well as specialty
distributors in different product areas, such as ScanSource and
D&H Distributing. A more fragmented distribution channel
characterizes markets outside North America, which represent
over half of the IT industry’s sales; however,
consolidation has taken place in these markets, as well. We
believe that suppliers and resellers pursuing global strategies
continue to seek distributors with global sales and support
capabilities.
We compete internationally with a variety of national and
regional distributors. The European distribution landscape is
highly fragmented, with market share spread among many regional
and local competitors such as Actebis, and international
distributors such as Tech Data and Westcon/ Comstor. In the
Asia-Pacific market, we face competition from global, regional,
and local competitors including Arrow, Digiland, Redington, and
Synnex Technology International. In Latin America, we compete
with international and local distributors such as Tech Data,
Synnex Corporation and Bell Microproducts.
The evolving direct-sales relationships between manufacturers,
resellers, and end-users continue to introduce change into our
competitive landscape. We compete, in some cases, with hardware
suppliers and software publishers that sell directly to reseller
customers and end-users. However, we may become a business
partner to these companies by providing supply chain services
optimized for the IT market. Additionally, as consolidation
occurs among certain reseller segments and customers gain market
share and build capabilities similar to ours, certain resellers,
such as direct marketers, can become competitors for us. As some
manufacturer and reseller customers move their back-room
operations to distribution partners, outsourcing and value-added
services may be areas of opportunity. Examples of value-added
capabilities include configuration, innovative financing
programs, and order fulfillment programs. Many of our suppliers
and reseller customers are looking to outsourcing partners to
perform back-room operations. There has been an accelerated
movement among transportation and logistics companies to provide
many of these fulfillment and e-commerce supply chain services.
Within this arena, we face competition from major transportation
and
10
logistics suppliers such as Exel, Menlo, and UPS Supply Chain
Solutions; electronic manufacturing services providers such as
Solectron and Flextronics; and media companies such as
Technicolor.
We are constantly seeking to expand our business into areas
closely related to our core IT products and services
distribution business. As we enter new business areas, including
value-added services, we may encounter increased competition
from current competitors and/or from new competitors, some of
which may be our current customers. Application service
providers constitute a relatively new channel for suppliers to
remotely deliver software applications to end-users. Telephone
companies also represent competition for us when they offer
bundled broadband and equipment solutions directly to
end-customers.
Asset Management
We seek to maintain sufficient quantities of product inventories
to achieve optimum order fill rates. Our business, like that of
other distributors, is subject to the risk that the value of our
inventory will be affected adversely by suppliers’ price
reductions or by technological changes affecting the usefulness
or desirability of the products comprising the inventory. It is
the policy of many suppliers of IT products to offer
distributors like us, who purchase directly from them, limited
protection from the loss in value of inventory due to
technological change or a supplier’s price reductions.
Under many of these agreements, the distributor is restricted to
a designated period of time in which products may be returned
for credit or exchanged for other products or during which price
protection credits may be claimed. We take various actions,
including monitoring our inventory levels and controlling the
timing of purchases, to maximize our protection under supplier
programs and reduce our inventory risk. However, no assurance
can be given that current protective terms and conditions will
continue or that they will adequately protect us against
declines in inventory value, or that they will not be revised in
such a manner as to adversely impact our ability to obtain price
protection. In addition, suppliers may become insolvent and
unable to fulfill their protection obligations to us. We are
subject to the risk that our inventory values may decline and
protective terms under supplier agreements may not adequately
cover the decline in values. We manage this risk through
continual monitoring of existing inventory levels relative to
customer demand. On an ongoing basis, we reserve for excess and
obsolete inventories and write down our inventories to their
estimated net realizable value, reflecting our forecasts of
future demand and market conditions.
Historically, we have reduced the risk of decline in the value
of our inventory through price protection, vendor authorized
stock return privileges and inventory management procedures.
However, over the past number of years, major PC suppliers have
changed the terms and conditions of their price protection
plans, resulting in increased exposure for us as a distribution
partner. These changes in terms and conditions have made it more
difficult for us to match our inventory levels with the price
protection periods. Consequently, we bear risk that the value of
the inventory we hold will decline after these price protection
periods have passed. We continue to mitigate these risks by
managing the amount of inventory in the channel from our
suppliers to reflect the overall demand for our products.
Inventory levels may vary from period to period, due, in part,
to the addition of new suppliers or new lines with current
suppliers and strategic purchases of inventory. In addition,
payment terms with inventory suppliers may vary from time to
time, and could result in fewer inventories being financed by
suppliers and a greater amount of inventory being financed by
our capital.
Trademarks and Service Marks
We own or are the licensee of various trademarks and service
marks, including, among others, “Ingram Micro,” the
Ingram Micro logo, “V7” (Video Seven) and
“VentureTech Network.” Certain of these marks are
registered, or are in the process of being registered, in the
United States and various other countries. Even though our marks
may not be registered in every country where we conduct
business, in many cases we have acquired rights in those marks
because of our continued use of them. Our management believes
that the value of our marks is increasing with the development
of our business, but our business as a whole is not materially
dependent on these marks.
11
Employees
As of January 1, 2005, we employed approximately 13,600
associates (as measured on a full-time equivalent basis).
Certain of our operations in Europe and Latin America are
subject to syndicates, collective bargaining or similar
arrangements. Our success depends on the talent and dedication
of our associates, and we strive to attract, develop, and retain
outstanding associates. We have a process for continuously
measuring the status of associate satisfaction and responding to
associate priorities. We believe that our relationships with our
associates are generally good.
EXECUTIVE OFFICERS OF THE COMPANY
The following table lists the executive officers of Ingram Micro
as of March 1, 2005.
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| Name |
|
Age | |
|
Position |
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Kent B. Foster
|
|
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61 |
|
|
Chairman of the Board and Chief Executive Officer |
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Kevin M. Murai
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|
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41 |
|
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President |
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Gregory M.E. Spierkel
|
|
|
48 |
|
|
President |
|
Keith W. F. Bradley
|
|
|
41 |
|
|
Executive Vice President and President, Ingram Micro North
America |
|
Henri T. Koppen
|
|
|
62 |
|
|
Executive Vice President and President, Ingram Micro Europe |
|
Thomas A. Madden
|
|
|
51 |
|
|
Executive Vice President and Chief Financial Officer |
|
Alain Monié
|
|
|
54 |
|
|
Executive Vice President and President, Ingram Micro Asia-Pacific |
|
Larry C. Boyd
|
|
|
52 |
|
|
Senior Vice President, Secretary and General Counsel |
|
William D. Humes
|
|
|
40 |
|
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Senior Vice President and Chief Financial Officer Designee |
|
Alain Maquet
|
|
|
53 |
|
|
Senior Vice President and President, Ingram Micro Latin America |
|
Karen E. Salem
|
|
|
43 |
|
|
Senior Vice President and Chief Information Officer |
|
Matthew A. Sauer
|
|
|
57 |
|
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Senior Vice President, Human Resources |
|
James F. Ricketts
|
|
|
58 |
|
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Corporate Vice President and Treasurer |
Kent B. Foster. Mr. Foster, age 61, was elected
chairman of the board in May 2000 and is also our chief
executive officer. Mr. Foster joined us as chief executive
officer and president and a director in March 2000 after a
29-year career at GTE Corporation, a leading telecommunications
company with one of the industry’s broadest arrays of
products and services. From 1995 through 1999, Mr. Foster
served as president, GTE Corporation and was a member of
GTE’s board of directors from 1992 to 1999, serving as vice
chairman of the board of GTE from 1993 to 1999. He currently
serves on the board of directors of Campbell Soup Company, Inc.,
J.C. Penney Company, Inc., and New York Life Insurance Company.
Kevin M. Murai. Mr. Murai, age 41, became our
president in March 2004. He previously served as our executive
vice president and president of Ingram Micro North America from
January 2002 to March 2004, as executive vice president and
president of Ingram Micro U.S. from January 2000 to
December 2001, as senior vice president and president of Ingram
Micro Canada from December 1997 to January 2000, and vice
president of operations for Ingram Micro Canada from January
1993 to December 1997.
Gregory M.E. Spierkel. Mr. Spierkel, age 48,
became our president in March 2004. He previously served as
executive vice president and president of Ingram Micro Europe
from June 1999 to March 2004, and as senior vice president and
president of Ingram Micro Asia-Pacific from July 1997 to June
1999. Prior to working for Ingram Micro, Mr. Spierkel was
vice president of global sales and marketing at Mitel Inc., a
manufacturer of telecommunications and semiconductor products,
from March 1996 to June 1997 and was president of North America
at Mitel from April 1992 to March 1996.
12
Keith W.F. Bradley. Mr. Bradley, age 41, is our
executive vice president and president of Ingram Micro North
America. He has held these positions since January 2005. He
previously served as interim president and senior vice president
and chief financial officer of Ingram Micro North America from
June 2004 to January 2005, and as the region’s senior vice
president and chief financial officer from January 2003 to May
2004. Prior to joining Ingram Micro in February 2000 as vice
president and controller for the Company’s United States
operations, Mr. Bradley was vice president and global
controller of The Disney Stores, a subsidiary of Walt Disney
Company, and an auditor and consultant with Price Waterhouse in
the United Kingdom, United Arab Emirates and the United States.
Henri T. Koppen. Mr. Koppen, age 62, became our
executive vice president and president of Ingram Micro Europe in
March 2004. Mr. Koppen served as our executive vice
president from January 2004 to March 2004, as executive vice
president and president of Ingram Micro Asia-Pacific from
February 2002 to December 2003, and served as senior vice
president and president of Ingram Micro Asia-Pacific, from March
2000 through January 2002. He previously served as senior vice
president and president of Ingram Micro Latin America from
January 1998 to March 2000. Prior to working for Ingram Micro,
Mr. Koppen served as president, Latin America, for General
Electric Capital IT Solutions, a systems integrator/reseller
company, from July 1996 to December 1997 and vice president,
Latin America, for Ameridata Global Inc., a systems
integrator/reseller company, from May 1995 to July 1996.
Thomas A. Madden. Mr. Madden, age 51, became
our executive vice president and chief financial officer in July
2001. Ingram Micro announced in October 2004 that
Mr. Madden plans an early retirement from the company on
April 1, 2005, and will be teaching at the University of
California, Irvine’s Graduate School of Management. Prior
to joining Ingram Micro, Mr. Madden served as senior vice
president and chief financial officer from May 1997 to July 2001
of Arvin Meritor, Inc., a global supplier of systems, modules
and components for the automotive industry. From 1981 to 1997,
Mr. Madden held various management positions with Rockwell
International, including vice president of corporate
development, from 1996 to 1997, vice president of finance, from
1994 to 1996, and assistant corporate controller, from 1987 to
1994. Mr. Madden currently serves on the board of directors
of Mindspeed Technologies.
Alain Monié. Mr. Monié, age 54,
became our executive vice president and president of Ingram
Micro Asia-Pacific in January 2004. He joined Ingram Micro as
executive vice president in January 2003. Previously,
Mr. Monié was an international executive consultant
with aerospace and defense corporations from September 2002 to
January 2003. Mr. Monié also served as president of
the Latin American division of Honeywell International from
January 2000 to August 2002. He joined Honeywell following its
merger with Allied Signal Inc., where he built a 17-year career
on three continents, progressing from a regional sales manager
to head of Asia-Pacific operations from October 1997 to December
1999.
Larry C. Boyd. Mr. Boyd, age 52, became our
senior vice president, secretary and general counsel in March
2004. He previously served as senior vice president,
U.S. legal services, for Ingram Micro North America from
January 2000 to January 2004. Prior to joining Ingram Micro, he
was a partner with the law firm of Gibson, Dunn &
Crutcher from January 1985 to December 1999.
William D. Humes. Mr. Humes, age 40, has been
our senior vice president and chief financial officer designee
since October 2004, and will replace Mr. Madden as Ingram
Micro’s executive vice president and chief financial
officer on April 1, 2005. Mr. Humes served as Ingram
Micro’s corporate vice president and controller from
February 2004 to October 2004, vice president and corporate
controller from February 2002 to February 2004 and senior
director, worldwide financial planning, reporting and accounting
from September 1998 to February 2002. Prior to joining Ingram
Micro, Mr. Humes was a senior audit manager at
PricewaterhouseCoopers.
Alain Maquet. Mr. Maquet, age 53, became our
senior vice president and president Ingram Micro Latin America
on March 1, 2005. Mr. Maquet served as our senior vice
president, southern and western Europe from January 2001 to
February 2004. Mr. Maquet joined Ingram Micro in 1993 as
the managing director of France and had added additional
countries to his responsibilities over the years. His career
spans 30 years, 23 of which are in the technology industry,
and he co-started an IT distribution company before joining
Ingram Micro.
13
Karen E. Salem. Ms. Salem, age 43, became our
senior vice president and chief information officer in February
2005. Prior to joining Ingram Micro, Ms. Salem was senior
vice president and chief information officer of Winn-Dixie
Stores, Inc., a NYSE listed grocery retailer from September 2002
to February 2005. Ms. Salem was previously senior vice
president and chief information officer of Corning Cable
Systems, a fiber optic cable/equipment manufacturer, from
September 2000 to September 2002. From August 1999 to September
2000, Ms. Salem was chief information officer for AFC
Enterprises, Inc., a company of four entities: Church’s
Chicken and Biscuits, Popeyes Chicken, Cinnabon and
Seattle’s Best Coffee.
Matthew A. Sauer. Mr. Sauer, age 57, has been
our senior vice president of human resources since February
2003. He joined Ingram Micro in October 1996 as vice president
of human resources and was promoted in September 1999 to
corporate vice president of human resources strategies and
processes.
James F. Ricketts. Mr. Ricketts, age 58, is our
corporate vice president and treasurer. He has held this
position since April 1999. He previously served as vice
president and treasurer from September 1996 to April 1999. Prior
to his employment with Ingram Micro, Mr. Ricketts served as
treasurer of Sundstrand Corporation, a manufacturer of aerospace
and related technology products, from February 1992 to September
1996.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the
“Act”) provides a “safe harbor” for
“forward-looking statements” to encourage companies to
provide prospective information, so long as such information is
identified as forward-looking and is accompanied by meaningful
cautionary statements identifying important factors that could
cause actual results to differ materially from those discussed
in the statement. Except for historical information, certain
statements contained in this Annual Report on Form 10-K may
be “forward-looking statements” within the meaning of
the Act, including but not limited to, management’s
expectations for process improvement; competition; revenues,
expenses and other operating results or ratios; economic
conditions; liquidity; capital requirements; and exchange rate
fluctuations. Disclosures that use words such as we
“believe,” “anticipate,” “expect,”
“forecast” and similar expressions are intended to
identify forward-looking statements. Such statements are subject
to certain risks and uncertainties that could cause actual
results to differ materially from expectations. Any such
forward-looking statements, whether made in this report or
elsewhere, should be considered in the context with the various
disclosures made by us about our business. In evaluating our
business, readers should carefully consider the important
factors discussed in “Cautionary Statements for the Purpose
of the ‘Safe Harbor’ Provisions of the Private
Securities Litigation Reform Act of 1995” included in
Exhibit 99.01 to this Annual Report on Form 10-K. A
summary of these factors is as follows:
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1. Intense competition, regionally and internationally,
including competition from alternative business models, such as
manufacturer-to-end-user selling, which may lead to reduced
prices, lower sales or reduced sales growth, lower gross
margins, extended payment terms with customers, increased
capital investment and interest costs, bad debt risks and
product supply shortages. |
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2. Integration of our acquired businesses and similar
transactions involve various risks and difficulties. Our
operations may be adversely impacted by an acquisition that
(i) is not suited for us, (ii) is improperly executed,
or (iii) substantially increases our debt. |
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3. Foreign exchange rate fluctuations, devaluation of a
foreign currency, adverse governmental controls or actions,
political or economic instability, or disruption of a foreign
market, and other related risks of our international operations
may adversely impact our operations in that country or globally. |
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| |
4. We may not achieve the objectives of our process
improvement efforts or be able to adequately adjust our cost
structure in a timely fashion to remain competitive, which may
cause our profitability to suffer. |
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5. Our failure to attract new sources of profitable
business from expansion of products or services or entry into
new markets could negatively impact our future operating results. |
14
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6. An interruption or failure of our information systems or
subversion of access or other system controls may result in a
significant loss of business, assets, or competitive information. |
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7. Significant changes in supplier terms, such as higher
thresholds on sales volume before distributors may qualify for
discounts and/or rebates, the overall reduction in the amount of
incentives available, reduction or termination of price
protection, return levels, or other inventory management
programs, or reductions in payment terms, may adversely impact
our results of operations or financial condition. Additionally,
termination of a supply or services agreement with a major
supplier or product supply shortages may adversely impact our
results of operations. |
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| |
8. Changes in, or interpretations of, tax rules and
regulations may adversely affect our effective tax rates or we
may be required to pay additional tax assessments. |
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9. We cannot predict with certainty, the outcome of the SEC
and U.S. Attorney’s inquiries. |
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| |
10. If there is a downturn in economic conditions for an
extended period of time, it will likely have an adverse impact
on our business. |
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11. We may experience loss of business from one or more
significant customers, and an increased risk of credit loss as a
result of reseller customers’ businesses being negatively
impacted by dramatic changes in the information technology
products and services industry as well as intense competition
among resellers. Increased losses, if any, may not be covered by
credit insurance or we may not be able to obtain credit
insurance at reasonable rates or at all. |
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12. Rapid product improvement and technological change
resulting in inventory obsolescence or changes in demand may
result in a decline in value of a portion of our inventory. |
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13. Future terrorist or military actions could result in
disruption to our operations or loss of assets, in certain
markets or globally. |
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14. The loss of a key executive officer or other key
employees, or changes affecting the work force such as
government regulations, collective bargaining agreements or the
limited availability of qualified personnel, could disrupt
operations or increase our cost structure. |
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15. Changes in our credit rating or other market factors
may increase our interest expense or other costs of capital, or
capital may not be available to us on acceptable terms to fund
our working capital needs. |
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16. Our failure to adequately adapt to industry changes and
to manage potential growth and/or contractions could negatively
impact our future operating results. |
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17. Future periodic assessments required by current or new
accounting standards such as those relating to long-lived
assets, goodwill and other intangible assets and expensing of
stock options may result in additional non-cash charges. |
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18. Seasonal variations in the demand for products and
services, as well as the introduction of new products, may cause
variations in our quarterly results. |
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| |
19. The failure of certain shipping companies to deliver
product to us, or from us to our customers, may adversely impact
our results of operations. |
We operate our global business in a continually changing
environment that involves numerous risks and uncertainties.
Future events that may not have been anticipated or discussed
here could adversely affect our business, financial condition,
results of operations or cash flows. We disclaim any duty to
update these or any forward-looking statements.
AVAILABLE INFORMATION
We also make available, free of charge through our website,
www.ingrammicro.com, annual, quarterly, and
current reports (and amendments thereto) as soon as reasonably
practicable after our electronic filing
15
with the Securities and Exchange Commission. The information
posted on our Web site is not incorporated into this Annual
Report on Form 10-K.
Our corporate headquarters is located in Santa Ana, California.
We support our global operations through an extensive sales
office and distribution network throughout North America,
Europe, Latin America, and Asia-Pacific. As of January 1,
2005, we operated 70 distribution centers worldwide.
Additionally, we serve markets where we do not have an
in-country presence through various sales offices and
representative offices, including from Santa Ana, California;
Buffalo, New York; Miami, Florida; Singapore; and certain
countries in Europe. We are in the process of integrating Tech
Pacific into our operations in Asia-Pacific, which may result in
consolidation of facilities in 2005.
As of January 1, 2005, we leased substantially all our
facilities on varying terms. We do not anticipate any material
difficulties with the renewal of any of our leases when they
expire or in securing replacement facilities on commercially
reasonable terms. We also own several facilities, the most
significant of which are our office/distribution facilities in
Straubing, Germany; Santiago, Chile; and Singapore.
|
|
| ITEM 3. |
LEGAL PROCEEDINGS |
During 2002 and 2003, one of our Latin American subsidiaries was
audited by the Brazilian taxing authorities in relation to
certain commercial taxes. As a result of this audit, the
subsidiary received an assessment of 28.3 million Brazilian
reais, including interest and penalties through January 1,
2005, or approximately $10.7 million as of January 1,
2005, alleging these commercial taxes were not properly remitted
for the period January through September 2002. The Brazilian
taxing authorities may make similar claims for periods
subsequent to September 2002. Additional assessments, if
received, may be significant either individually or in the
aggregate. It is management’s opinion, based upon the
opinions of outside legal counsel, that we have valid defenses
related to this matter. Although we are vigorously pursuing
administrative and judicial action to challenge the assessment,
no assurance can be given as to the ultimate outcome. An
unfavorable resolution of this matter is not expected to have a
material impact on our financial condition, but depending upon
the time period and amounts involved it may have a material
negative effect on our results of operations.
We received an informal inquiry from the SEC during the third
quarter of 2004. The SEC’s focus to date has been related
to certain transactions with Network Associates, Inc.
(“NAI”) from 1998 through 2000. We have also received
subpoenas from the U.S. Attorney’s office for the
Northern District of California in connection with its grand
jury investigation of NAI which seek information concerning
these transactions. We are cooperating fully with the SEC’s
and the U.S. Attorney’s requests. Although the outcome
of the SEC and U.S. Attorney’s inquiries cannot be
predicted with certainty, it is not currently expected to have a
material effect on our ongoing consolidated financial position,
results of operations or cash flows.
|
|
| ITEM 4. |
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
No matters were submitted to a vote of security holders during
the fourth quarter of the fiscal year covered by this report,
through the solicitation of proxies or otherwise.
PART II
|
|
| ITEM 5. |
MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS |
As of February 17, 2005 there were 612 holders of record of
our Common Stock. Because many of such shares are held by
brokers and other institutions, on behalf of shareowners, we are
unable to estimate the total number of shareowners represented
by these record holders.
16
Common Stock. Our Common Stock is traded on the New York
Stock Exchange under the symbol IM. The following table sets
forth the high and low price per share of our Common Stock for
the periods indicated.
| |
|
|
|
|
|
|
|
|
|
| |
|
High | |
|
Low | |
| |
|
| |
|
| |
|
Fiscal Year 2004
|
|
|
|
|
|
|
|
|
| |
First Quarter
|
|
$ |
19.86 |
|
|
$ |
15.80 |
|
| |
Second Quarter
|
|
|
18.60 |
|
|
|
11.56 |
|
| |
Third Quarter
|
|
|
16.35 |
|
|
|
12.85 |
|
| |
Fourth Quarter
|
|
|
20.97 |
|
|
|
16.06 |
|
|
Fiscal Year 2003
|
|
|
|
|
|
|
|
|
| |
First Quarter
|
|
$ |
13.24 |
|
|
$ |
9.30 |
|
| |
Second Quarter
|
|
|
11.70 |
|
|
|
9.43 |
|
| |
Third Quarter
|
|
|
14.97 |
|
|
|
10.60 |
|
| |
Fourth Quarter
|
|
|
16.05 |
|
|
|
12.84 |
|
Dividend Policy. We have not declared nor paid any
dividends on our Common Stock in the preceding two fiscal years.
We currently intend to retain future earnings to finance the
growth and development of our business and, therefore, do not
anticipate declaring or paying cash dividends on our Common
Stock for the foreseeable future. Any future decision to declare
or pay dividends will be at the discretion of the Board of
Directors and will be dependent upon our financial condition,
results of operations, capital requirements, and such other
factors as the Board of Directors deems relevant. In addition,
certain of our debt facilities contain restrictions on the
declaration and payment of dividends.
Equity Compensation Plan Information. The following table
provides information, as of January 1, 2005, with respect to
equity compensation plans under which equity securities of our
company are authorized for issuance, aggregated as follows:
(i) all compensation plans previously approved by our
shareowners and (ii) all compensation plans not previously
approved by our shareowners.
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
(c) Number of securities | |
| |
|
|
|
|
|
remaining available for | |
| |
|
(a) Number of securities | |
|
|
|
future issuance under | |
| |
|
to be issued upon | |
|
(b) Weighted-average | |
|
equity compensation | |
| |
|
exercise of | |
|
exercise price of | |
|
plans (excluding | |
| |
|
outstanding options, | |
|
outstanding options, | |
|
securities reflected in | |
| Plan Category |
|
warrants and rights | |
|
warrants and rights | |
|
column(a)) | |
| |
|
| |
|
| |
|
| |
|
Equity compensation plans approved by shareowners
|
|
|
32,658,585 |
|
|
$ |
15.3972 |
|
|
|
19,589,496 |
|
| |
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved by shareowners
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
| |
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
32,658,585 |
|
|
$ |
15.3972 |
|
|
|
19,589,496 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| ITEM 6. |
SELECTED FINANCIAL DATA |
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents our selected consolidated financial
data. The information set forth below should be read in
conjunction with “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and the
historical consolidated financial statements and notes thereto,
included elsewhere in this Annual Report on Form 10-K.
Our fiscal year is a 52-week or 53-week period ending on the
Saturday nearest to December 31. References below to 2004,
2003, 2002, 2001, and 2000 represent the fiscal year
(52 weeks) ended January 1,
17
2005, the fiscal year (53 weeks) ended January 3,
2004, and the fiscal years (52 weeks) ended
December 28, 2002, December 29, 2001, and
December 30, 2000, respectively.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
2000 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(Dollars in 000s, except per share data) | |
|
Selected Operating Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$ |
25,462,071 |
|
|
$ |
22,613,017 |
|
|
$ |
22,459,265 |
|
|
$ |
25,186,933 |
|
|
$ |
30,715,149 |
|
|
Gross profit
|
|
|
1,402,042 |
|
|
|
1,223,488 |
|
|
|
1,231,638 |
|
|
|
1,329,899 |
|
|
|
1,556,298 |
|
|
Income from operations(1)
|
|
|
283,367 |
|
|
|
156,193 |
|
|
|
50,208 |
|
|
|
92,930 |
|
|
|
353,437 |
|
|
Income before income taxes and cumulative effect of adoption of
a new accounting standard(2)
|
|
|
263,276 |
|
|
|
115,794 |
|
|
|
8,998 |
|
|
|
11,691 |
|
|
|
366,398 |
|
|
Income before cumulative effect of adoption of a new accounting
standard(3)
|
|
|
219,901 |
|
|
|
149,201 |
|
|
|
5,669 |
|
|
|
6,737 |
|
|
|
226,173 |
|
|
Net income (loss)(4)
|
|
|
219,901 |
|
|
|
149,201 |
|
|
|
(275,192 |
) |
|
|
6,737 |
|
|
|
226,173 |
|
|
Basic earnings per share — income before cumulative
effect of adoption of a new accounting standard
|
|
|
1.41 |
|
|
|
0.99 |
|
|
|
0.04 |
|
|
|
0.05 |
|
|
|
1.55 |
|
|
Diluted earnings per share — income before cumulative
effect of adoption of a new accounting standard
|
|
|
1.38 |
|
|
|
0.98 |
|
|
|
0.04 |
|
|
|
0.04 |
|
|
|
1.52 |
|
|
Basic earnings per share — net income (loss)
|
|
|
1.41 |
|
|
|
0.99 |
|
|
|
(1.83 |
) |
|
|
0.05 |
|
|
|
1.55 |
|
|
Diluted earnings per share — net income (loss)
|
|
|
1.38 |
|
|
|
0.98 |
|
|
|
(1.81 |
) |
|
|
0.04 |
|
|
|
1.52 |
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic
|
|
|
155,451,251 |
|
|
|
151,220,639 |
|
|
|
150,211,973 |
|
|
|
147,511,408 |
|
|
|
145,213,882 |
|
| |
Diluted
|
|
|
159,680,040 |
|
|
|
152,308,394 |
|
|
|
152,145,669 |
|
|
|
150,047,807 |
|
|
|
148,640,991 |
|
|
Selected Balance Sheet Information(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
398,423 |
|
|
$ |
279,587 |
|
|
$ |
387,513 |
|
|
$ |
273,059 |
|
|
$ |
150,560 |
|
|
Total assets
|
|
|
6,926,737 |
|
|
|
5,474,162 |
|
|
|
5,144,354 |
|
|
|
5,302,007 |
|
|
|
6,608,982 |
|
|
Total debt(6)
|
|
|
514,832 |
|
|
|
368,255 |
|
|
|
365,946 |
|
|
|
458,107 |
|
|
|
545,618 |
|
|
Stockholders’ equity
|
|
|
2,240,810 |
|
|
|
1,872,949 |
|
|
|
1,635,989 |
|
|
|
1,867,298 |
|
|
|
1,874,392 |
|
|
|
| (1) |
Includes credit adjustment to reorganization costs of $2,896 in
2004 for previous actions and reorganization costs of $21,570,
$71,135, and $41,411 in 2003, 2002 and 2001, respectively, as
well as other major-program costs of $23,363 and $43,944 in 2003
and 2002, respectively, charged to selling, general and
administrative expenses, or SG&A expenses, and $443 and
$1,552 in 2003 and 2002, respectively, charged to costs of
sales, which were incurred in the implementation of our
broad-based reorganization plan, our comprehensive profit
enhancement program and additional profit enhancement
opportunities; and $22,893 of special items in 2001 (see
Note 3 to our consolidated financial statements). Fiscal
year 2003 also includes a charge of $20,000 related to the
bankruptcy of Micro Warehouse, one of our former customers. |
| |
| (2) |
Includes items noted in footnote (1) above as well as a
gain on forward currency hedge of $23,120 in 2004 and gains on
sales of available-for-sale securities of $6,535 and $111,458 in
2002 and 2000, respectively. |
18
|
|
| (3) |
Includes items noted in footnotes (1) and (2) above,
as well as the reversal of a deferred tax liability of $41,078
and $70,461 in 2004 and 2003, respectively, related to the gain
on sale of available-for-sale securities (see Note 8 to our
consolidated financial statements). |
| |
| (4) |
Includes items noted in footnotes (1), (2), and (3) above,
as well as the cumulative effect of adoption of a new accounting
standard, net of income taxes, of $280,861 in 2002 (see
Note 2 to our consolidated financial statements). |
| |
| (5) |
All balance sheet data are given at end of period. |
| |
| (6) |
Includes convertible debentures, senior subordinated notes,
revolving credit facilities and other long-term debt including
current maturities, but excludes off-balance sheet debt of $0,
$60,000, $75,000, $222,253, and $910,188 at the end of fiscal
years 2004, 2003, 2002, 2001, and 2000, respectively, which
amounts represent all of the undivided interests in transferred
accounts receivable sold to and held by third parties as of the
respective balance sheet dates (see Note 5 to our
consolidated financial statements). |
|
|
| ITEM 7. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS |
Overview of Our Business
We are the largest distributor of IT products and services
worldwide based on revenues. We offer a broad range of IT
products and services and help generate demand and create
efficiencies for our customers and suppliers around the world.
Through fiscal year 2000, we generated positive annual sales
growth from expansion of our existing operations, the
integration of numerous acquisitions worldwide, the addition of
new product categories and suppliers, the addition of new
customers, increased sales to our existing customer base, and
growth in the IT products and services distribution industry in
general. However, our worldwide net sales declined from
$30.7 billion in 2000 to $25.2 billion in 2001,
$22.5 billion in 2002 and $22.6 billion in 2003. These
declines were primarily the result of the general decline in
demand for IT products and services throughout the world,
beginning in the fourth quarter of 2000 and continuing through
most of 2003, as well as the decision of certain vendors to
pursue a direct sales model, and our exit from or downsizing of
certain markets in Europe and Latin America. In 2004, our net
sales increased to $25.5 billion, or approximately 13%
year-over-year. This increase primarily reflects a strengthening
of demand, which began in late 2003, as well as the inclusion of
approximately $0.4 billion of additional revenue arising
from the acquisition of Tech Pacific in November 2004.
Competitive pricing pressures, particularly in North America and
Europe, and the expansion of a direct sales strategy by one or
more of our major vendors could, however, adversely affect the
current improvements in our revenues and profitability over the
near term.
The IT distribution industry in which we operate is
characterized by narrow gross profit as a percentage of net
sales (“gross margin”) and narrow income from
operations as a percentage of net sales (“operating
margin”). Historically, our margins have been negatively
impacted by intense price competition, as well as changes in
vendor terms and conditions, including, but not limited to,
significant reductions in vendor rebates and incentives, tighter
restrictions on our ability to return inventory to vendors, and
reduced time periods qualifying for price protection. To
mitigate these factors, we have implemented, and continue to
refine, changes to our pricing strategies, inventory management
processes, and vendor program processes. In addition, we
continuously monitor and change, as appropriate, certain of the
terms and conditions offered to our customers to reflect those
being set by our vendors. As a result, gross margin improved
from 5.1% in 2000 to 5.5% in 2002 and has remained relatively
flat through 2004. However, we expect that these restrictive
vendor terms and conditions and competitive pricing pressures
will continue and may worsen in the foreseeable future which may
hinder our ability to maintain and/or improve our gross margins
from the levels realized in recent years.
19
Our SG&A expenses as a percentage of net sales were 3.9% in
2000, reflecting the benefit of greater economies of scale from
our revenue growth during this period. However, our SG&A
expenses as a percentage of net sales increased to 4.7% in 2001
and 5.0% in 2002 primarily due to the significant decline in our
net revenues during these years. As a result, we initiated a
broad-based reorganization plan in June 2001, a comprehensive
profit enhancement program in September 2002, and other detailed
actions across all our regions to streamline operations, improve
service and generate operating income improvements. As a result
of these actions, we reduced our SG&A expenses to 4.6% of
net sales in 2003, despite the soft demand of IT products and
services in 2003, and to 4.4% in 2004.
The IT products and services distribution business is working
capital intensive. Our business requires significant levels of
working capital primarily to finance accounts receivable and
inventories. We have relied heavily on debt, trade credit from
vendors and accounts receivable financing programs for our
working capital needs. At December 30, 2000, we had total
debt of $545.6 million plus an additional
$910.2 million in off-balance sheet debt from our accounts
receivable financing programs, and a cash balance of
$150.6 million. With the decline in revenue, which began in
late 2000, and our strong focus on management of working
capital, we reduced total debt to $368.3 million at
January 3, 2004 and reduced the amount financed through our
accounts receivable financing programs to $60.0 million,
and increased our cash balance to $279.6 million. At
January 1, 2005, our total debt increased to
$514.8 million as a result of our acquisition of Tech
Pacific and the elimination of amounts financed through our
previously off-balance sheet accounts receivable financing
programs, partially offset by an increase in our cash balance to
$398.4 million.
|
|
|
Acquisition of Tech Pacific |
In November 2004, we acquired all of the outstanding shares of
Techpac Holdings Limited, or Tech Pacific, one of
Asia-Pacific’s largest technology distributors, for cash
and the assumption of debt. This acquisition provides us with a
strong management and employee base with excellent execution
capabilities, history of solid operating margins and
profitability, and a strong presence in the growing Asia-Pacific
region.
Our Reorganization and Profit Enhancement Programs
In June 2001, we initiated a broad-based reorganization plan to
streamline operations and reorganize resources to increase
flexibility, improve service and generate cost savings and
operational efficiencies. This program resulted in restructuring
several functions, consolidation of facilities, and reductions
of workforce worldwide in each of the quarters through June
2002. Total reorganization costs associated with these actions
were $8.8 million and $41.4 million in 2002 and 2001,
respectively.
In September 2002, we announced a comprehensive profit
enhancement program, which was designed to improve operating
income through enhancements in gross margin and reduction of
SG&A expense. Key components of this initiative included
enhancement and/or rationalization of vendor and customer
programs, optimization of facilities and systems, outsourcing of
certain IT infrastructure functions, geographic consolidations
and administrative restructuring. For 2003 and 2002, we incurred
$31.0 million and $107.9 million, respectively, of
costs (or $138.9 million from inception of the program
through the end of fiscal year 2003) related to this profit
enhancement program, which was within our original announced
estimate of $140 million. These costs have consisted
primarily of reorganization costs of $13.6 million and
$62.4 million in 2003 and 2002, respectively, and other
program implementation costs, or other major-program costs, of
$17.4 million and $43.9 million charged to SG&A
expenses in 2003 and 2002, respectively, and $1.6 million
charged to cost of sales in 2002. We realized significant
benefits from the reduction in certain SG&A expenses and
from gross margin improvements as a result of our comprehensive
profit enhancement program.
During 2003, we incurred incremental reorganization costs of
$8.0 million and incremental other major-program costs of
$6.4 million ($6.0 million charged to SG&A
expenses and $0.4 million charged to cost of sales), which
were not part of the original scope of the profit enhancement
program announced in September
20
2002. These costs primarily related to the further consolidation
of our operations in the Nordic areas of Europe and a loss on
the sale of a non-core German semiconductor equipment
distribution business. These actions provided additional
operating income improvements primarily in the European region.
The actions related to our comprehensive profit enhancement
program were completed in 2003; however, we continue to pursue
business process improvements to create sustained cost
reductions or operational improvements over the long term.
Implementation of additional actions, including integration of
acquisitions, in the future, if any, could result in additional
costs as well as additional operating income improvements. The
following table summarizes our reorganization costs and other
major-program costs for the fiscal years 2003 and 2002 resulting
from the detailed actions initiated under our broad-based
reorganization plan and profit enhancement program and other
actions we have taken (in millions). The credit balances in 2004
represent adjustments to reorganization costs as a result of the
favorable resolution of obligations of costs relating to
previous actions:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fiscal Year | |
| |
|
| |
| |
|
2004 |
|
2003 | |
|
2002 | |
| |
|
|
|
| |
|
| |
| |
|
Reorganization | |
|
Other Major- |
|
Reorganization | |
|
Other Major- | |
|
Reorganization | |
|
Other Major- | |
| |
|
Costs | |
|
Program Costs |
|
Costs | |
|
Program Costs | |
|
Costs | |
|
Program Costs | |
| |
|
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
North America
|
|
$ |
(2.2 |
) |
|
$ |
— |
|
|
$ |
11.2 |
|
|
$ |
17.4 |
|
|
$ |
55.7 |
|
|
$ |
37.6 |
|
|
Europe
|
|
|
(1.0 |
) |
|
|
— |
|
|
|
9.2 |
|
|
|
6.4 |
|
|
|
12.6 |
|
|
|
7.5 |
|
|
Asia-Pacific
|
|
|
0.3 |
|
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
0.4 |
|
|
|
0.4 |
|
|
Latin America
|
|
|
— |
|
|
|
— |
|
|
|
1.1 |
|
|
|
— |
|
|
|
2.4 |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total
|
|
$ |
(2.9 |
) |
|
$ |
— |
|
|
$ |
21.6 |
|
|
$ |
23.8 |
|
|
$ |
71.1 |
|
|
$ |
45.5 |
|
| |
|
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Reorganization costs have generally consisted of employee
termination benefits for workforce reductions; facility exit
costs associated with the downsizing, consolidation and exit of
facilities; and other costs associated with reorganization
activities. Other major-program costs associated with our
comprehensive profit enhancement program announced in September
2002 included $23.4 million charged to SG&A expenses in
2003 ($17.4 million in North America and $6.0 million
in Europe) and $43.9 million in 2002 ($37.6 million in
North America, $6.0 million in Europe and $0.4 million
in Asia-Pacific) primarily consisting of program management and
consulting expenses; incremental depreciation resulting from the
reduction of estimated useful lives of fixed assets to coincide
with the planned exit of certain facilities, outsourcing of
certain IT infrastructure functions, and software replaced by a
more efficient solution; recruiting, retention, training and
other transition costs associated with the relocation of major
functions in North America and the outsourcing of certain IT
infrastructure functions; the loss on the sale of a non-core
German semiconductor equipment distribution business; and the
gain on the sale of excess land near our headquarters in
Southern California. Additionally, other major-program costs
included $0.4 million and $1.6 million in 2003 and
2002, respectively, charged to cost of sales, primarily
comprised of incremental inventory and vendor-program losses
caused by the decision to further consolidate and exit certain
European markets.
Our Critical Accounting Policies and Estimates
The discussions and analyses of our consolidated financial
condition and results of operations are based on our
consolidated financial statements, which have been prepared in
conformity with accounting principles generally accepted in the
United States of America (U.S.). The preparation of these
financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, disclosure of significant contingent assets and
liabilities at the financial statement date, and reported
amounts of revenue and expenses during the reporting period. On
an ongoing basis, we review and evaluate our estimates and
assumptions, including, but not limited to, those that relate to
accounts receivable; vendor programs; inventories; goodwill,
intangible and other long-lived assets; income taxes; and
contingencies and litigation. Our estimates are based on our
historical experience and a variety of other assumptions that we
believe to be reasonable under the circumstances, the results of
which form the basis for making our judgment about the carrying
values of assets and liabilities that are not readily available
from other sources. Although we believe our estimates, judgments
and assumptions are appropriate and reasonable based upon
available
21
information, these assessments are subject to a wide range of
sensitivity, therefore, actual results could differ from these
estimates.
We believe the following critical accounting policies are
affected by our judgment, estimates and/or assumptions used in
the preparation of our consolidated financial statements.
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| |
• |
Accounts Receivable — We provide allowances for
doubtful accounts on our accounts receivable, including our
retained interest in securitized receivables, for estimated
losses resulting from the inability of our customers to make
required payments. Changes in the financial condition of our
customers or other unanticipated events, which may affect their
ability to make payments, could result in charges for additional
allowances exceeding our expectations. Our estimates are
influenced by the following considerations: the large number of
customers and their dispersion across wide geographic areas; the
fact that no single customer accounts for 10% or more of our net
sales; a continuing credit evaluation of our customers’
financial conditions; aging of receivables, individually and in
the aggregate; credit insurance coverage; and the value and
adequacy of collateral received from our customers in certain
circumstances. |
| |
| |
• |
Vendor Programs — We receive funds from vendors
for price protection, product rebates, marketing, training,
product returns, infrastructure reimbursement and promotion
programs, which are recorded as adjustments to product costs,
revenue, or SG&A expenses according to the nature of the
program. Some of these programs may extend over one or more
quarterly reporting periods. We accrue rebates or other vendor
incentives as earned based on sales of qualifying products or as
services are provided in accordance with the terms of the
related program. Actual rebates may vary based on volume or
other sales achievement levels, which could result in an
increase or reduction in the estimated amounts previously
accrued. We also provide reserves for receivables on vendor
programs for estimated losses resulting from vendors’
inability to pay, or rejections of claims by vendors. |
| |
| |
• |
Inventories — Our inventory levels are based on
our projections of future demand and market conditions. Any
sudden decline in demand and/or rapid product improvements and
technological changes could cause us to have excess and/or
obsolete inventories. On an ongoing basis, we review for
estimated excess or obsolete inventories and write down our
inventories to their estimated net realizable value based upon
our forecasts of future demand and market conditions. If actual
market conditions are less favorable than our forecasts,
additional inventory reserves may be required. Our estimates are
influenced by the following considerations: protection from loss
in value of inventory under our vendor agreements, our ability
to return to vendors only a certain percentage of our purchases
as contractually stipulated, aging of inventories, a sudden
decline in demand due to an economic downturn, and rapid product
improvements and technological changes. |
| |
| |
• |
Goodwill, Intangible Assets and Other Long-Lived
Assets — Effective the first quarter of 2002, we
adopted the provisions of Statement of Financial Accounting
Standards No. 142, “Goodwill and Other Intangible
Assets” (“FAS 142”). FAS 142 eliminated
the amortization of goodwill. Instead, goodwill was reviewed for
impairment upon adoption and will be reviewed at least annually
thereafter. In connection with the initial impairment tests, we
obtained valuations of our individual reporting units from an
independent third-party valuation firm. The valuation
methodologies included, but were not limited to, estimated net
present value of the projected cash flows of these reporting
units. As a result of these initial impairment tests, we
recorded a noncash charge of $280.9 million, net of income
taxes of $2.6 million, in the first quarter of 2002 for the
cumulative effect of adopting this new standard, to reduce the
carrying value of goodwill to its fair value in accordance with
FAS 142. |
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| |
In the fourth quarters of 2004, 2003 and 2002, we performed our
annual impairment tests of our goodwill totaling
$559.7 million at January 1, 2005, $244.2 million
at January 3, 2004 and $233.9 million at
December 28, 2002 for our North American, European and
Asia-Pacific regions. In connection with each impairment test,
we obtained or updated valuations of our individual reporting
units from an independent third-party valuation firm. No
additional impairment was indicated based on these tests.
However, if actual results are substantially lower than our
projections underlying these valuations, or if |
22
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| |
market discount rates increase, this could adversely affect our
future valuations and result in future impairment charges. |
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| |
We also assess potential impairment of our goodwill, intangible
assets and other long-lived assets when there is evidence that
recent events or changes in circumstances have made recovery of
an asset’s carrying value unlikely. The amount of an
impairment loss would be recognized as the excess of the
asset’s carrying value over its fair value. Factors, which
may cause impairment, include significant changes in the manner
of use of the acquired asset, negative industry or economic
trends, and significant underperformance relative to historical
or projected future operating results. |
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• |
Income Taxes — As part of the process of
preparing our consolidated financial statements, we estimate our
income taxes in each of the taxing jurisdictions in which we
operate. This process involves estimating our actual current tax
expense together with assessing any temporary differences
resulting from the different treatment of certain items, such as
the timing for recognizing revenues and expenses, for tax and
financial reporting purposes. These differences may result in
deferred tax assets and liabilities, which are included in our
consolidated balance sheet. We are required to assess the
likelihood that our deferred tax assets, which include net
operating loss carryforwards and temporary differences that are
expected to be deductible in future years, will be recoverable
from future taxable income or other tax planning strategies. If
recovery is not likely, we must provide a valuation allowance
based on our estimates of future taxable income in the various
taxing jurisdictions, and the amount of deferred taxes that are
ultimately realizable. |
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| |
The provision for tax liabilities involves evaluations and
judgments of uncertainties in the interpretation of complex tax
regulations by various taxing authorities. In situations
involving tax related uncertainties, such as our gains on sales
of Softbank common stock (see Notes 2 and 8 to our
consolidated financial statements), we provide for tax
liabilities unless we consider it probable that additional taxes
will not be due. As additional information becomes available, or
these uncertainties are resolved with the taxing authorities,
revisions to these liabilities may be required, resulting in
additional provision for or benefit from income taxes in our
consolidated income statement. |
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| |
Our U.S. Federal tax returns were closed in September 2004
and 2003 for the fiscal years 2000 and 1999, respectively, and
certain state returns for fiscal years 2000 and 1999 were closed
in the third and fourth quarters of 2004, which resolved these
tax matters related to the gains on sales of Softbank common
stock in 1999 and 2000 in those jurisdictions. Accordingly, in
the third and fourth quarters of 2004, we reversed the related
Federal and state deferred tax liabilities of $40.0 million
and $1.1 million, respectively, associated with the gain on
the 2000 and 1999 sales, while in the third quarter of 2003, we
reversed the related Federal deferred tax liability of
$70.5 million associated with the gain on the 1999 sale,
thereby reducing our income tax provisions for both periods in
the consolidated statement of income. |
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• |
Contingencies and Litigation — There are
various claims, lawsuits and pending actions against us
incidental to our operations. If a loss arising from these
actions is probable and can be reasonably estimated, we record
the amount of the estimated loss. If the loss is estimated using
a range within which no point is more probable than another, the
minimum estimated liability is recorded. Based on current
available information, we believe that the ultimate resolution
of these actions will not have a material adverse effect on our
consolidated financial statements (see Note 10 to our
consolidated financial statements). As additional information
becomes available, we assess any potential liability related to
these actions and may need to revise our estimates. Future
revisions of our estimates could materially impact our
consolidated results of operations, cash flows or financial
position. |
23
Results of Operations
The following tables set forth our net sales by geographic
region (excluding intercompany sales) and the percentage of
total net sales represented thereby, as well as operating income
and operating margin by geographic region for each of the fiscal
years indicated (in millions).
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|
|
|
|
|
|
|
|
|
|
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
Net sales by geographic region:
|
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|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
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| |
North America
|
|
$ |
11,777 |
|
|
|
46.3 |
% |
|
$ |
10,965 |
|
|
|
48.5 |
% |
|
$ |
12,132 |
|
|
|
54.0 |
% |
| |
Europe
|
|
|
9,839 |
|
|
|
38.6 |
|
|
|
8,267 |
|
|
|
36.5 |
|
|
|
7,150 |
|
|
|
31.8 |
|
| |
Asia-Pacific
|
|
|
2,742 |
|
|
|
10.8 |
|
|
|
2,320 |
|
|
|
10.3 |
|
|
|
1,961 |
|
|
|
8.8 |
|
| |
Latin America
|
|
|
1,104 |
|
|
|
4.3 |
|
|
|
1,061 |
|
|
|
4.7 |
|
|
|
1,216 |
|
|
|
5.4 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total
|
|
$ |
25,462 |
|
|
|
100.0 |
% |
|
$ |
22,613 |
|
|
|
100.0 |
% |
|
$ |
22,459 |
|
|
|
100.0 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
Operating income (loss) and operating margin by geographic
region:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
North America
|
|
$ |
130.3 |
|
|
|
1.1 |
% |
|
$ |
94.5 |
|
|
|
0.9 |
% |
|
$ |
36.5 |
|
|
|
0.3 |
% |
| |
Europe
|
|
|
129.8 |
|
|
|
1.3 |
|
|
|
73.2 |
|
|
|
0.9 |
|
|
|
12.7 |
|
|
|
0.2 |
|
| |
Asia-Pacific
|
|
|
9.8 |
|
|
|
0.4 |
|
|
|
(10.3 |
) |
|
|
(0.4 |
) |
|
|
1.0 |
|
|
|
0.1 |
|
| |
Latin America
|
|
|
13.5 |
|
|
|
1.2 |
|
|
|
(1.2 |
) |
|
|
(0.1 |
) |
|
|
(0.0 |
) |
|
|
(0.0 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total
|
|
$ |
283.4 |
|
|
|
1.1 |
% |
|
$ |
156.2 |
|
|
|
0.7 |
% |
|
$ |
50.2 |
|
|
|
0.2 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We sell products purchased from many vendors, but generated
approximately 22%, 24% and 27% of our net sales in fiscal years
2004, 2003 and 2002, respectively, from products purchased from
Hewlett-Packard Company. There were no other vendors that
represented 10% or more of our net sales in each of the last
three years.
The following table sets forth certain items from our
consolidated statement of income as a percentage of net sales,
for each of the fiscal years indicated.
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|
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
Net sales
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0% |
|
|
Cost of sales
|
|
|
94.5 |
|
|
|
94.6 |
|
|
|
94.5 |
|
| |
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
5.5 |
|
|
|
5.4 |
|
|
|
5.5 |
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Selling, general and administrative
|
|
|
4.4 |
|
|
|
4.6 |
|
|
|
5.0 |
|
| |
Reorganization costs
|
|
|
0.0 |
|
|
|
0.1 |
|
|
|
0.3 |
|
| |
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
1.1 |
|
|
|
0.7 |
|
|
|
0.2 |
|
|
Other expense, net
|
|
|
0.1 |
|
|
|
0.2 |
|
|
|
0.2 |
|
| |
|
|
|
|
|
|
|
|
|
|
Income before income taxes and cumulative effect of adoption of
a new accounting standard
|
|
|
1.0 |
|
|
|
0.5 |
|
|
|
0.0 |
|
|
Provision for (benefit from) income taxes
|
|
|
0.2 |
|
|
|
(0.2 |
) |
|
|
0.0 |
|
| |
|
|
|
|
|
|
|
|
|
|
Income before cumulative effect of adoption of a new accounting
standard
|
|
|
0.8 |
|
|
|
0.7 |
|
|
|
0.0 |
|
|
Cumulative effect of adoption of a new accounting standard
|
|
|
— |
|
|
|
— |
|
|
|
(1.3 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
0.8 |
% |
|
|
0.7 |
% |
|
|
(1.3 |
)% |
| |
|
|
|
|
|
|
|
|
|
24
Results of Operations for the Years Ended January 1,
2005, January 3, 2004 and December 28, 2002
Our consolidated net sales were $25.5 billion,
$22.6 billion and $22.5 billion in 2004, 2003 and
2002, respectively. Our worldwide net sales increased
approximately 13% in 2004 compared to both 2003 and 2002. The
overall increase in net sales from 2002 to 2004 was primarily
attributable to a slightly improved demand environment for IT
products and services, particularly in North America and Europe,
the translation impact of the strengthening European currencies
compared to the U.S. dollar (which contributed
approximately four percentage points of the worldwide growth)
and additional revenue arising from the acquisition of Tech
Pacific in November 2004. However, competitive pricing
pressures, particularly in North America, the expansion of a
direct sales strategy by one or more of our major vendors and/or
softening of demand could adversely affect the current
improvements in our revenues and profitability over the near
term.
Net sales from our North American operations were
$11.8 billion, $11.0 billion and $12.1 billion in
2004, 2003 and 2002, respectively. Net sales from our North
American operations increased 7.4% in 2004 compared to 2003,
primarily reflecting the stronger demand for IT products and
services compared to the prior year. Net sales had decreased
9.6% in 2003 compared to 2002 due to the sluggish demand for IT
products and services in 2003, consistent with the prolonged
softness in the U.S. economy at that time and the decision
of certain vendors to pursue a direct sales model. Net sales
from our European operations were $9.8 billion,
$8.3 billion and $7.2 billion in 2004, 2003 and 2002,
respectively. The year-over-year growth in European net sales of
19% and 16% in 2004 and 2003, respectively, reflects the
translation impact of the strengthening European currencies,
which contributed approximately 11% and 18% in revenue growth in
2004 and 2003, respectively, increases in our market share in
certain operations within Europe, and strong demand for IT
products and services across the region in 2004. These growth
factors were partially offset by softer demand for technology
products and services in most countries in Europe and our
downsizing and/or exit of operations in certain markets within
the region in 2003 and 2002. Net sales from our Asia-Pacific
operations were $2.7 billion, $2.3 billion and
$2.0 billion in 2004, 2003 and 2002, respectively. The
growth in our 2004 net sales in Asia-Pacific reflects
approximately $400 million of revenue resulting from our
acquisition of Tech Pacific. Our continued focus on improving
the operating model and profitability in this region had a
tempering effect on sales growth in 2004. Net sales in our
Asia-Pacific region increased 18.3% in 2003 compared to 2002 as
a result of the overall growth in demand in this emerging
market. Net sales from our Latin American operations were
$1.1 billion, $1.1 billion and $1.2 billion in
2004, 2003 and 2002, respectively. Net sales from our Latin
American operations decreased 12.7% in 2003 compared to 2002 due
to weak economic conditions prevalent within the region at that
time and the downsizing of our operations in certain markets
during 2002, but revenues stabilized and improved slightly in
2004 consistent with the general demand environment in the
region.
Our gross margin has remained relatively stable at 5.5%, 5.4%
and 5.5% in 2004, 2003 and 2002, respectively, which reflects
strong inventory management, benefits from our comprehensive
profit enhancement program and improvements in our Asia-Pacific
and Latin America businesses, generally offsetting the impact of
the competitive pricing environment. We continuously evaluate
and modify our pricing policies and certain terms and conditions
offered to our customers to reflect those being imposed by our
vendors and general market conditions. As we continue to
evaluate our existing pricing policies and make future changes,
if any, we may experience tempered or negative sales growth in
the near term. In addition, increased competition and any
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 $1.1 billion,
$1.0 billion and $1.1 billion in 2004, 2003 and 2002,
respectively. In 2004, SG&A expenses increased by
$75.8 million compared to 2003 primarily due to the
translation impact of the strengthening European currencies of
approximately $36 million, realignment costs of
approximately $11 million associated with downsizing and
relocating activities in our under-performing German-based
networking unit, the addition of approximately $15 million
in operating expenses related to Tech Pacific, which was
acquired on November 10, 2004, and increased expenses
required to support the growth of our business, partially offset
by the benefits of our comprehensive profit enhancement program,
the reduction of related implementation costs of
$23.4 million from prior year (see Note 3 to our
consolidated financial statements) and a $20 million charge
related to the bankruptcy of Micro Warehouse, one of our former
25
customers, in 2003. As a percentage of net sales, total SG&A
expenses decreased to 4.4% in 2004 compared to 4.6% in 2003,
which included the impact of the Micro Warehouse bankruptcy of
approximately 0.1% of revenue in prior year. Aside from the
impact of the Micro Warehouse bankruptcy, total SG&A
decreased as a percentage of revenue due to the economies of
scale from the higher level of revenue, savings from our
comprehensive profit enhancement program and other actions we
have taken as well as the reduction of the related
implementation costs, and continued cost control measures. In
2003, we reduced SG&A expenses by $64.6 million
compared to 2002 as a result of the actions we have taken and
the reduction of other major-program costs of $20.6 million
in 2003, partially offset by the $20 million charge related
to the Micro Warehouse bankruptcy and the translation impact of
the strengthening European currencies of approximately
$46 million. SG&A expenses as a percentage of net
sales, which included the impact of the Micro Warehouse
bankruptcy, decreased to 4.6% in 2003 compared to 5.0% in 2002,
primarily due to savings from our comprehensive profit
enhancement program and other actions we have taken, as well as
the reduction of the related implementation costs, and continued
cost control measures. We continue to pursue and implement
business process improvements and organizational changes to
create sustained cost reductions without sacrificing customer
service over the long-term.
In December 2004, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123
(revised 2004), “Share-Based Payment,” or
FAS 123R. FAS 123R requires us to recognize
compensation cost relating to all share-based payments to our
employees based on their fair values beginning the third quarter
of 2005. We are evaluating the requirements of FAS 123R, as
well as our long-term incentive compensation strategies, and
expect that our adoption of FAS 123R will have a material
impact on our SG&A expenses. We have not determined the
method of adoption and have not determined whether the adoption
will result in amounts that are similar to our current pro forma
disclosures under FAS 123 (see Note 2 to our
consolidated financial statements).
As previously discussed, reorganization costs were
$21.6 million and $71.1 million in 2003 and 2002,
respectively, and in 2004 we had a net credit of
$2.9 million relating primarily to favorable resolution of
obligations related to prior actions (see Note 3 to our
consolidated financial statements). We are in the process of
integrating Tech Pacific with our operations in Asia-Pacific and
we may also pursue other business process or organizational
changes in our other regions, which will likely result in
additional charges related to consolidation of facilities,
restructuring of several functions and workforce reductions in
2005.
Our operating margin increased to 1.1% in 2004 from 0.7% and
0.2% in 2003 and 2002, respectively, primarily reflecting the
reduction of our operating expense ratio and reorganization
costs as discussed above. Our North American operating margin
increased to 1.1% in 2004 from 0.9% and 0.3% in 2003 and 2002,
respectively. The increase in operating margin for North America
in 2004 compared to 2003 reflects the impact of the charge
related to the Micro Warehouse bankruptcy of approximately 0.2%
of North America revenue in prior year, as well as economies of
scale from the higher volume of business, the benefits of our
comprehensive profit enhancement program and reduction of the
related implementation costs, partially offset by significant
competitive pressures on pricing. Operating margin for North
America increased in 2003 compared to 2002 primarily due to
lower reorganization and other major-program costs and
improvements realized from our profit enhancement program and
other actions we have taken, partially offset by the impact of
the Micro Warehouse bankruptcy and increased competitive
pressures on pricing. Our European operating margin increased to
1.3% in 2004 from 0.9% and 0.2% in 2003 and 2002, respectively.
Operating margin for Europe in 2004 and 2003 was positively
impacted by improvements from our profit enhancement program and
other actions we have taken, a reduction in related
implementation costs, and economies of scale from the higher
volume of business. Our Asia-Pacific operating margin was 0.4%,
(0.4%) and 0.1% in 2004, 2003 and 2002, respectively. Operating
results in the Asia-Pacific region deteriorated in 2003, largely
due to higher inventory and bad debt losses in greater China,
and intense price competition particularly in our components
business, which were exacerbated by the impacts of SARS and the
Gulf War on the region. However, 2004 was positively impacted by
Tech Pacific’s operating margin contribution, as well as
improvements and strengthening of our operating model. We
believe the addition of Tech Pacific and continued process
improvements will improve profitability over the long-term. Our
Latin American operating margin was 1.2% in 2004 compared to
negative operating margin of 0.1% or less in each of the past
two years. Strengthening
26
operating processes in Latin America during 2004 positively
impacted operating margin in this region. The negative operating
margins in 2003 and 2002 were primarily attributable to the
continued market softness and competitive pricing pressures in
the region as well as higher bad debt expense and inventory
related issues.
Other expense (income) consisted primarily of interest, losses
on sales of receivables under our ongoing accounts receivable
facilities, foreign currency exchange gains and losses, and
other non-operating gains and losses. We incurred net other
expense of $20.1 million, or 0.1% as a percentage of net
sales, in 2004 compared to $40.4 million, or 0.2% as a
percentage of net sales, in 2003 and $41.2 million, or 0.2%
as a percentage of net sales, in 2002. The decrease in 2004
primarily reflects a foreign-exchange gain of $23.1 million
on a forward currency exchange contract related to our
Australian dollar-denominated purchase of Tech Pacific. Other
expense decreased slightly in 2003 compared to 2002, which
included a gain of $6.5 million from the sale of our
remaining shares of Softbank common stock, and lower foreign
currency exchange losses.
Our provision for income taxes in 2004 and 2002 was
$43.4 million and $3.3 million, respectively, compared
to a benefit from income taxes of $33.4 million in 2003.
Fiscal year 2004 included a benefit of $41.1 million for
the reversal of previously accrued U.S. Federal and certain
state income taxes relating to the gain realized on the sale of
Softbank common stock in 2000 and 1999 while fiscal year 2003
included a benefit of $70.5 million for the reversal of
previously accrued U.S. Federal income taxes relating to
the gain realized on the sale of Softbank common stock in 1999.
Our effective tax provision rate in 2004 and 2002 was 16% and
37%, respectively, compared to effective tax benefit rate of 29%
in 2003. The decrease in the effective tax rate from 2002
through 2004 is primarily attributable to the reversals of the
previously accrued U.S. Federal and certain state income
taxes in 2004 and U.S. Federal income taxes in 2003 (see
Note 8 to our consolidated financial statements), as well
as changes in the proportion of income earned within the various
taxing jurisdictions, our ongoing tax strategies, and the
elimination of goodwill amortization in 2002, a substantial
portion of which was not deductible for tax purposes.
As noted in our discussion of critical accounting policies and
estimates, in the first quarter of 2002, we recorded a noncash
charge of $280.9 million, net of income taxes of
$2.6 million, for the cumulative effect of adopting
FAS 142. In the fourth quarters of 2004, 2003 and 2002, we
performed impairment tests of our goodwill and no additional
impairment was indicated based on these tests.
Quarterly Data; Seasonality
Our quarterly operating results have fluctuated significantly in
the past and will likely continue to do so in the future as a
result of:
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the impact of acquisitions we may make; |
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seasonal variations in the demand for our products and services
such as lower demand in Europe during the summer months and
worldwide pre-holiday stocking in the retail channel during the
September-to-December period; |
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competitive conditions in our industry, which may impact the
prices charged and terms and conditions imposed by our suppliers
and/or competitors and the prices or terms and conditions we
offer our customers, which in turn may negatively impact our
revenues and/or gross margins; |
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currency fluctuations in countries in which we operate; |
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variations in our levels of excess inventory and doubtful
accounts, and changes in the terms of vendor-sponsored programs
such as price protection and return rights; |
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changes in the level of our operating expenses; |
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the impact of and possible disruption caused by business model
changes or reorganization efforts, as well as the related
expenses and/or charges; |
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the loss or consolidation of one or more of our significant
suppliers or customers; |
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product supply constraints; |
27
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interest rate fluctuations, which may increase our borrowing
costs and may influence the willingness of customers and
end-users to purchase products and services; and |
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general economic or geopolitical conditions. |
These historical variations may not be indicative of future
trends in the near term. Our narrow operating margins may
magnify the impact of the foregoing factors on our operating
results.
The following table sets forth certain unaudited quarterly
historical financial data for each of the eight quarters in the
two years ended January 1, 2005. This unaudited quarterly
information has been prepared on the same basis as the annual
information presented elsewhere herein and, in our opinion,
includes all adjustments necessary for a fair presentation of
the selected quarterly information. This information should be
read in conjunction with the consolidated financial statements
and notes thereto included elsewhere in this Annual Report on
Form 10-K. The operating results for any quarter shown are
not necessarily indicative of results for any future period.
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Income | |
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Income | |
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Diluted | |
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Gross | |
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from | |
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before | |
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Earnings | |
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Net Sales | |
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Profit | |
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Operations | |
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Income Taxes | |
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Net Income | |
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Per Share | |
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(In millions, except per share data) | |
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Fiscal Year Ended January 1, 2005
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Thirteen Weeks Ended(1):
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April 3, 2004
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$ |
6,275.6 |
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$ |
341.4 |
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$ |
66.6 |
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$ |
55.2 |
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$ |
37.6 |
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$ |
0.24 |
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July 3, 2004
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5,716.6 |
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311.4 |
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47.9 |
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38.0 |
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25.9 |
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0.16 |
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October 2, 2004
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6,016.4 |
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329.6 |
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60.2 |
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54.9 |
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77.3 |
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0.49 |
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January 1, 2005
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7,453.4 |
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419.5 |
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108.7 |
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115.2 |
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79.2 |
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0.48 |
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Fiscal Year Ended January 3, 2004(2)
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Thirteen Weeks Ended(3):
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March 29, 2003
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$ |
5,474.2 |
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$ |
296.2 |
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$ |
27.1 |
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$ |
15.5 |
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$ |
10.1 |
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$ |
0.07 |
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June 28, 2003
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5,170.6 |
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281.4 |
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27.3 |
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17.7 |
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11.5 |
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0.08 |
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September 27, 2003
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5,207.4 |
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282.6 |
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20.8 |
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14.4 |
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81.2 |
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0.53 |
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January 3, 2004(2)
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6,760.8 |
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363.3 |
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81.0 |
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68.2 |
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46.4 |
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0.30 |
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| (1) |
Includes impact of charges related to reorganization costs and
adjustments related to previous restructuring actions. Pre-tax
quarterly charges (credits) in 2004 were recorded as
follows: first quarter, $0.1 million; second quarter,
$0.1 million; third quarter, $(2.7) million; fourth
quarter, $(0.4) million. The third quarter of 2004 also
includes a foreign-exchange gain of $4.3 million related to
the acquisition of Tech Pacific in Asia- Pacific and the
reversal of Softbank deferred tax liability of
$40.0 million. The fourth quarter of 2004 also includes a
foreign-exchange gain of $18.8 million related to the
acquisition of Tech Pacific in Asia-Pacific and the reversal of
Softbank deferred tax liability of $1.1 million. |
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| (2) |
Fiscal year 2003 is a 53-week year making the quarter ended
January 3, 2004 a fourteen-week period. |
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| (3) |
Includes impact of charges related to reorganization and other
major-program costs. Pre-tax quarterly charges in 2003 were
recorded as follows: first quarter, $20.2 million; second
quarter, $12.5 million; third quarter, $4.0 million;
fourth quarter, $8.7 million. The third quarter of 2003
also includes a pre-tax charge of $20 million in North
America related to the bankruptcy of Micro Warehouse, one of our
former customers, and the reversal of Softbank deferred tax
liability of $70.5 million. |
Liquidity and Capital Resources
We have financed our growth and cash needs largely through
income from operations, borrowings under revolving credit and
other facilities, sales of accounts receivable through
established accounts receivable facilities, trade and supplier
credit, and proceeds from senior subordinated notes issued in
August 2001. The
28
following is a detailed discussion of our cash flows for the
years ended January 1, 2005, January 3, 2004 and
December 28, 2002.
Our cash and cash equivalents totaled $398.4 million and
$279.6 million at January 1, 2005 and January 3,
2004, respectively.
Net cash provided by operating activities was
$360.9 million and $270.6 million in 2004 and 2002,
respectively, compared to net cash used by operating activities
of $94.8 million in 2003. The net cash provided by
operating activities in 2004 was primarily due to net income and
a net decrease in working capital, which reflects our continued
focus on working capital management. The net cash used by
operating activities in 2003 principally reflects an increase in
inventory and a decrease in accrued expenses, partially offset
by income adjusted for noncash charges and by a decrease in
accounts receivable. The increase in inventory largely reflects
increased inventory-stocking levels in response to recent
improvements in market conditions, and purchases for strategic
growth areas. The reduction of accrued expenses primarily
relates to the settlement of a currency interest rate swap in
the first quarter of 2003 and payments of variable incentive
compensation and profit enhancement program costs. The decrease
in accounts receivable reflects strong working capital
management during the year. The net cash provided by operating
activities in 2002 was primarily attributable to the overall
reduction in our net working capital due to our focus on working
capital management and the lower volume of business. Our debt
levels may increase and/or our cash balance may decrease if we
experience an increase in our working capital days or if we
experience significant sales growth.
Net cash used by investing activities was $411.5 million,
$36.9 million and $28.1 million in 2004, 2003 and
2002, respectively. The net cash used by investing activities in
2004 was primarily due to our business acquisitions of
$402.2 million and capital expenditures of
$37.0 million. The net cash used by investing activities in
2003 was primarily due to capital expenditures of
$35.0 million. The net cash used by investing activities in
2002 was primarily due to capital expenditures of approximately
$54.7 million, partially offset by cash proceeds of
approximately $31.8 million from the sale of Softbank
common stock. The reduction in our capital expenditures over the
period from 2002 to 2004 reflects the benefits of our previous
profit enhancement program which has enabled us to streamline
operations and optimize facilities as well as our decision to
outsource certain IT infrastructure functions which have reduced
our capital requirements. We presently expect our capital
expenditures to be approximately $50 million in 2005.
Net cash provided by financing activities was
$149.5 million and $9.3 million in 2004 and 2003,
respectively, compared to net cash used by financing activities
of $146.7 million in 2002. The net cash provided by
financing activities in 2004 primarily reflects proceeds
received from the exercise of stock options of
$84.5 million and an increase in book overdrafts of
$77.7 million. The net cash provided by financing
activities in 2003 primarily reflects proceeds received from the
exercise of stock options of $10.3 million. The net cash
used by financing activities in 2002 primarily resulted from the
net repayment of our revolving credit and other debt facilities
of $125.0 million. Debt was reduced primarily through cash
provided by operations, our continued focus on working capital
management and lower financing needs as a result of the lower
volume of business.
We account for all acquisitions after June 30, 2001 in
accordance with Statement of Financial Accounting Standards
No. 141, “Business Combinations.” The results of
operations of these businesses have been consolidated with our
results of operations beginning on their acquisition dates.
In November 2004, we acquired all of the outstanding shares of
Tech Pacific, one of Asia-Pacific’s largest technology
distributors, for 730 million Australian dollars
(approximately $554 million at closing date) for cash and
the assumption of debt. The purchase price includes preliminary
estimates of costs to restructure the operations of Tech
Pacific. The final costs incurred may differ materially as these
actions are completed. The purchase price has been allocated to
the assets acquired and liabilities assumed based on estimated
fair values on the transaction date. We are in the process of
completing the valuation of vendor and customer relationship
intangible assets and expect to finalize customer data analysis
and the valuation during the first quarter of fiscal year 2005
(see Note 4 to our consolidated financial statements).
29
To protect the value of our U.S. dollar investment in the
acquisition of Tech Pacific, which was denominated in Australian
dollars, we entered into a forward currency exchange contract
for a notional amount equal to 537 million Australian
dollars. The forward exchange contract was entered at an agreed
forward contract price of 0.71384 U.S. dollar to one
Australian dollar. This forward exchange contract was settled
concurrent with our payment of the purchase price for Tech
Pacific on November 10, 2004, the closing date of the
acquisition at a gain of $23.1 million.
In connection with our acquisition of Tech Pacific, the parties
agreed that 35 million Australian dollars, or approximately
$27 million, of the purchase price shall be held in an
escrow account to cover claims from us for various indemnities
by the sellers under the sale agreement, of which
10 million Australian dollars, or approximately
$8 million, was released on March 1, 2005, and
25 million Australian dollars, or approximately
$19 million, will be released in full to the sellers on
February 28, 2006 if no claims are made by us under the
sale agreement before such date.
In July 2004, we acquired substantially all of the assets and
assumed certain liabilities of Nimax, Inc., a privately-held
distributor of automatic identification and data
capture/point-of-sale, barcode and wireless products, as well as
enterprise mobility solutions. The purchase price, consisting of
a cash payment of $8.7 million in 2004 and
$1.0 million payable on or before October 31, 2006,
was allocated to the assets acquired and liabilities assumed
based on estimated fair values on the transaction date,
resulting in the recording of $0.9 million of other
amortizable intangible assets primarily related to customer and
vendor relationships. No goodwill was recorded in this
transaction. In addition to the cash payment, the purchase
agreement requires us to pay the seller up to $6.0 million
at the end of two years, based on a specified earn-out formula,
which will be recorded as an adjustment to the purchase price.
In April 2003, we increased our ownership in an India-based
subsidiary by acquiring approximately 37% of the subsidiary held
by minority shareholders. The total purchase price for this
acquisition consisted of a cash payment of $3.1 million,
resulting in the recording of $2.0 million of goodwill.
In February 2003, we increased our ownership in Ingram Macrotron
AG, a German-based distribution company, by acquiring the
remaining interest of approximately 3% held by minority
shareholders. The purchase price of this acquisition consisted
of a cash payment of $6.3 million, resulting in the
recording of $5.3 million of goodwill. Court actions have
been filed by several minority shareholders contesting the
adequacy of the purchase price paid for the shares and various
other actions, which could affect the purchase price. Depending
upon the outcome of these actions, additional payments for such
shares may be required.
We believe that our existing sources of liquidity, including
cash resources and cash provided by operating activities,
supplemented as necessary with funds available under our credit
arrangements, will provide sufficient resources to meet our
present and future working capital and cash requirements for at
least the next twelve months.
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On-Balance Sheet Capital Resources |
On July 29, 2004, we entered into a new revolving accounts
receivable-based financing program in the U.S., which provides
for up to $500 million in borrowing capacity secured by
substantially all U.S.-based receivables. At our option, the
program may be increased to as much as $600 million at any
time prior to July 29, 2006. This new facility expires on
March 31, 2008. Based on the terms and conditions of the
new program structure, borrowings under the program are
accounted for as a financing facility, or on-balance sheet debt.
At January 1, 2005, we had no borrowings under our new
revolving accounts receivable-based financing program.
On July 26, 2004, we amended our existing trade accounts
receivable program in Canada, which provides for borrowing
capacity up to 150 million Canadian dollars, or
approximately $124 million. Pursuant to the amendment, we
extended the program maturity to August 31, 2008, on
substantially similar terms and conditions that existed prior to
such amendment. However, under the new program, we obtained
certain rights
30
to repurchase transferred receivables. Based on the terms and
conditions of the new program structure, borrowings under the
program are accounted for as a financing facility, or on-balance
sheet debt. At January 1, 2005, we had no borrowings under
our amended trade accounts receivable program.
In June 2002, we entered into a three-year European revolving
trade accounts receivable backed financing facility supported by
the trade accounts receivable of a subsidiary in Europe for Euro
107 million, or approximately $146 million, with a
financial institution that has an arrangement with a related
issuer of third-party commercial paper. In August 2003, we
entered into another three-year European revolving trade
accounts receivable backed financing facility supported by the
trade accounts receivable of two other subsidiaries in Europe
for Euro 230 million, or approximately $314 million,
with the same financial institution and related issuer of
third-party commercial paper. In March 2004, the terms of these
agreements were amended to eliminate the minimum borrowing
requirements that existed under the original agreements and
remove the smaller of the two European subsidiaries from the
August 2003 facility. Both of these European facilities require
certain commitment fees and borrowings under both facilities
incur financing costs at rates indexed to EURIBOR.
We could, however, lose access to all or part of our financing
under these facilities under certain circumstances, including:
(a) a reduction in credit ratings of the third-party issuer
of commercial paper or the back-up liquidity providers, if not
replaced or (b) failure to meet certain defined eligibility
criteria for the trade accounts receivable, such as receivables
must be assignable and free of liens and dispute or set-off
rights. In addition, in certain situations, we could lose access
to all or part of our financing with respect to the August 2003
European facility as a result of the rescission of our
authorization to collect the receivables by the relevant
supplier under applicable local law. Based on our assessment of
the duration of these programs, the history and strength of the
financial partners involved, other historical data, various
remedies available to us under these programs, and the
remoteness of such contingencies, we believe that it is unlikely
that any of these risks will materialize in the near term. At
January 1, 2005, we had no borrowings under our European
facilities compared to $20.2 million at January 3,
2004.
In November 2004, we assumed from Tech Pacific a multi-currency
revolving trade accounts receivable backed financing facility in
Asia-Pacific supported by the trade accounts receivable of two
subsidiaries in the region for 200 million Australian
dollars, or approximately $156 million, with a financial
institution that has an arrangement with a related issuer of
third-party commercial paper that expires in June 2008. The
interest rate is dependent upon the currency in which the
drawing is made and is related to the local short-term bank
indicator rate for such currency. This facility has no fixed
repayment terms prior to maturity. At January 1, 2005, we
had borrowings of $132.3 million under this facility.
Our ability to access financing under our North American,
European and Asia-Pacific facilities is dependent upon the level
of eligible trade accounts receivable and the level of market
demand for commercial paper. At January 1, 2005, our actual
aggregate capacity under these programs, based on eligible
accounts receivable outstanding, was approximately
$996 million.
We also assumed from Tech Pacific in November 2004, a
multi-currency secured revolving loan facility, or assumed
facility, of 80 million Australian dollars, or
approximately $62 million, in connection with change of
control provisions triggered by our acquisition of Tech Pacific,
which may be terminated on or before April 2, 2005. The
interest rate is dependent upon the currency in which the
drawing is made, and is determined based on the short-term bank
indicator rate for such currency. The assumed facility was
substantially secured by the assets and stock of certain of our
Asia-Pacific subsidiaries, and has no fixed repayment terms
prior to maturity. However, on January 31, 2005, in
connection with the acquisition of Tech Pacific, we effected a
release of all liens and related security interests as well as
material covenant compliance requirements under this facility
through the issuance of a standby letter of credit for the same
amount in favor of the lender. At January 1, 2005, we had
no borrowings under this facility. The assumed facility can also
be used to support letters of credit. At January 1, 2005,
letters of credit totaling approximately $24.1 million were
issued to a vendor to support purchases by our subsidiaries and
to certain financial institutions to support banking lines for
certain subsidiaries, or local borrowings from banks made
available to certain of our
31
subsidiaries in the Asia-Pacific region. The issuance of these
letters of credit reduces our available capacity under the
assumed facility by the same amount.
We also have a $150 million revolving senior unsecured
credit facility with a bank syndicate that expires in December
2005. At January 1, 2005 and January 3, 2004, we had
no borrowings outstanding under this credit facility. This
facility can also be used to support letters of credit. At
January 1, 2005 and January 3, 2004, letters of credit
totaling approximately $24.3 million and
$63.7 million, respectively, were issued to certain vendors
and financial institutions to support purchases by our
subsidiaries, payment of insurance premiums and flooring
arrangements. The issuance of these letters of credit reduces
our available capacity under the agreement by the same amount.
On August 16, 2001, we sold $200 million of
9.875% senior subordinated notes due 2008 at an issue price
of 99.382%, resulting in net cash proceeds of approximately
$195.1 million, net of issuance costs of approximately
$3.7 million. Interest on the notes is payable
semi-annually in arrears on each February 15 and August 15. We
may redeem any of the notes beginning on August 15, 2005
with an initial redemption price of 104.938% of their principal
amount plus accrued interest. The redemption price of the notes
will be 102.469% plus accrued interest beginning on
August 15, 2006 and will be 100% of their principal amount
plus accrued interest beginning on August 15, 2007.
On August 16, 2001, we also entered into interest rate swap
agreements with two financial institutions, the effect of which
was to swap our fixed-rate obligation on our senior subordinated
notes for a floating rate obligation equal to 90-day LIBOR plus
4.260%. All other financial terms of the interest rate swap
agreements are identical to those of the senior subordinated
notes, except for the quarterly payments of interest, which will
be on each February 15, May 15, August 15 and November
15 and ending on the termination date of the swap agreements.
These interest rate swap arrangements contain ratings conditions
requiring posting of collateral by either party and at minimum
increments based on the market value of the instrument and
credit ratings of either party. The marked-to-market value of
the interest rate swap amounted to $14.5 million and
$20.5 million at January 1, 2005 and January 3,
2004, respectively, which is recorded in other assets with an
offsetting adjustment to the hedged debt, bringing the total
carrying value of the senior subordinated notes to
$213.9 million and $219.7 million, respectively.
We also have additional lines of credit, short-term overdraft
facilities and other credit facilities with various financial
institutions worldwide, which provide for borrowing capacity
aggregating approximately $525 million at January 1,
2005. Most of these arrangements are on an uncommitted basis and
are reviewed periodically for renewal. At January 1, 2005
and January 3, 2004, we had approximately
$168.6 million and $128.3 million, respectively,
outstanding under these facilities. At January 1, 2005 and
January 3, 2004, letters of credit totaling approximately
$30.5 million and $29.3 million, respectively, were
issued principally to certain vendors to support purchases by
our subsidiaries. The issuance of these letters of credit
reduces our available capacity under these agreements by the
same amount. The weighted average interest rate on the
outstanding borrowings under these facilities was 5.0% and
5.2% per annum at January 1, 2005 and January 3,
2004, respectively.
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Off-Balance Sheet Capital Resources |
We have a revolving trade accounts receivable-based facility in
Europe, which provides up to approximately $238 million of
additional financing capacity. This facility expires in 2007. At
January 1, 2005 and January 3, 2004, we had no trade
accounts receivable sold to and held by third parties under our
European program. Our financing capacity under the European
program is dependent upon the level of our trade accounts
receivable eligible to be transferred or sold into the accounts
receivable financing program. At January 1, 2005, our
actual aggregate capacity under this program, based on eligible
accounts receivable outstanding, was approximately
$209 million. We believe that there are sufficient eligible
trade accounts receivable to support our anticipated financing
needs under the remaining European accounts receivable financing
program.
Effective July 29, 2004, we terminated our
$700 million revolving accounts receivable securitization
program in the U.S., which was scheduled to expire in March
2005. On the same day, we entered into a new
32
revolving accounts receivable-based financing program, which
provides for up to $500 million in borrowing capacity
secured by substantially all U.S.-based receivables (see
“Capital Resources — On-Balance Sheet Capital
Resources” above). At January 3, 2004, the amount of
undivided interests sold to and held by third parties under the
former securitization program totaled $60 million. We also
amended on July 26, 2004 our existing accounts
receivable-based facility in Canada of 150 million Canadian
dollars (originally scheduled to expire in August 2004) and
extended the maturity to August 31, 2008. The Company had
no outstanding borrowings under this amended facility at
January 3, 2004.
We are required to comply with certain financial covenants under
some of our on-balance sheet financing facilities, as well as
our off-balance sheet accounts receivable-based facilities,
including minimum tangible net worth, restrictions on funded
debt and interest coverage and trade accounts receivable
portfolio performance covenants, including metrics related to
receivables and payables. We are also restricted in the amount
of additional indebtedness we can incur, dividends we can pay,
as well as the amount of common stock that we can repurchase
annually. At January 1, 2005, we were in compliance with
all covenants or other requirements set forth in our accounts
receivable financing programs and credit agreements or other
agreements with our creditors discussed above.
As is customary in trade accounts receivable-based financing
arrangements, a reduction in credit ratings of the third-party
issuer of commercial paper or a back-up liquidity provider
(which provides a source of funding if the commercial paper
market cannot be accessed) could result in an adverse change in,
or loss of, our financing capacity under these programs if the
commercial paper issuer and/or liquidity back-up provider is not
replaced. Loss of such financing capacity could have a material
adverse effect on our financial condition, results of operations
and liquidity. However, based on our assessment of the duration
of these programs, the history and strength of the financial
partners involved, other historical data, and the remoteness of
such contingencies, we believe it is unlikely that any of these
risks will materialize in the near term.
33
The following summarizes our financing capacity and contractual
obligations at January 1, 2005 (in millions), and the
effect of scheduled payments on such obligations are expected to
have on our liquidity and cash flows in future periods.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Payments Due by Period | |
| |
|
|
|
|
|
| |
| |
|
Total | |
|
Balance | |
|
Less Than | |
|
1-3 | |
|
3-5 | |
|
After 5 | |
| Contractual Obligations |
|
Capacity | |
|
Outstanding | |
|
1 Year | |
|
Years | |
|
Years | |
|
Years | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Senior subordinated notes(1)
|
|
$ |
213.9 |
|
|
$ |
213.9 |
|
|
$ |
— |
|
|
$ |
213.9 |
|
|
$ |
— |
|
|
$ |
— |
|
|
North American revolving accounts receivable-based financing
facilities(2)
|
|
|
624.0 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
European revolving trade accounts receivable backed financing
facilities(2)
|
|
|
460.0 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Asia-Pacific revolving trade accounts receivable backed
financing facilities(2)
|
|
|
156.0 |
|
|
|
132.3 |
|
|
|
— |
|
|
|
— |
|
|
|
132.3 |
|
|
|
— |
|
|
Revolving secured facility(3)
|
|
|
62.0 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Revolving senior unsecured credit facility(4)
|
|
|
150.0 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Bank overdrafts and other(5)
|
|
|
525.0 |
|
|
|
168.6 |
|
|
|
168.6 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Subtotal
|
|
|
2,190.9 |
|
|
|
514.8 |
|
|
|
168.6 |
|
|
|
213.9 |
|
|
|
132.3 |
|
|
|
— |
|
|
European accounts receivable financing programs(6)
|
|
|
238.0 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Minimum payments under operating leases and IT outsourcing
agreement(7)
|
|
|
514.0 |
|
|
|
514.0 |
|
|
|
85.3 |
|
|
|
149.8 |
|
|
|
127.4 |
|
|
|
151.5 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
2,942.9 |
|
|
$ |
1,028.8 |
|
|
$ |
253.9 |
|
|
$ |
363.7 |
|
|
$ |
259.7 |
|
|
$ |
151.5 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
See Note 7 to our consolidated financial statements. |
| |
| (2) |
The capacity amount in the table above represents the maximum
capacity available under these facilities. Our actual capacity
is dependent upon the actual amount of eligible trade accounts
receivable outstanding that may be used to support these
facilities. As of January 1, 2005, our actual aggregate
capacity under these programs based on eligible accounts
receivable outstanding was approximately $996 million (see
Note 7 to our consolidated financial statements). |
| |
| (3) |
The capacity amount in the table above represents the maximum
capacity available under this facility. This facility can also
be used to support letters of credit. At January 1, 2005,
letters of credit totaling approximately $24.1 million were
issued to certain vendors to support purchases by our
subsidiaries, and to certain financial institutions to support
banking lines for certain subsidiaries, or local borrowings from
banks made available to certain of our subsidiaries. The
issuance of these letters of credit reduces our available
capacity by the same amount. All liens and related security
requirements were released on January 31, 2005. See
“Capital Resources — On-Balance Sheet Capital
Resources.” |
| |
| (4) |
The capacity amount in the table above represents the maximum
capacity available under this facility. This facility can also
be used to support letters of credit. At January 1, 2005,
letters of credit totaling approximately $24.3 million were
issued to certain vendors and financial institutions to support
purchases by our subsidiaries, payment of insurance premiums and
flooring arrangements. The issuance of these letters of credit
reduces our available capacity by the same amount. |
| |
| (5) |
Certain of these programs can also be used to support letters of
credit. At January 1, 2005, letters of credit totaling
approximately $30.5 million were issued to certain vendors
to support purchases by our |
34
|
|
|
subsidiaries. The issuance of these letters of credit also
reduces our available capacity by the same amount. |
| |
| (6) |
Payments due by period were classified based on the maturity
dates of the related revolving accounts receivable financing
programs. The total capacity amount in the table above
represents the maximum capacity available under these programs.
Our actual capacity is dependent upon the actual amount of
eligible trade accounts receivable outstanding that may be
transferred or sold into these programs. As of January 1,
2005, our actual aggregate capacity under these programs based
on eligible accounts receivable outstanding was approximately
$209 million. |
| |
| (7) |
In December 2002, we entered into an agreement with a
third-party provider of IT outsourcing services. The services to
be provided include mainframe, major server, desktop and
enterprise storage operations, wide-area and local-area network
support and engineering; systems management services; help desk
services; and worldwide voice/ PBX. This agreement expires in
December 2009, but is cancelable at our option subject to
payment of termination fees. Additionally, we lease the majority
of our facilities and certain equipment under noncancelable
operating leases. Renewal and purchase options at fair values
exist for a substantial portion of the leases. Amounts in this
table represent future minimum payments on operating leases that
have remaining noncancelable lease terms in excess of one year
as well as under the IT outsourcing agreement. |
Our employee benefit plans permit eligible employees to make
contributions up to certain limits, which are matched by us at
stipulated percentages. Because our commitment under these plans
is not a fixed amount, they have not been included in the
contractual obligations table.
In December 1998, we purchased 2,972,400 shares of common
stock of Softbank for approximately $50.3 million. During
December 1999, we sold approximately 35% of our original
investment in Softbank common stock for approximately
$230.1 million, resulting in a pre-tax gain of
approximately $201.3 million, net of expenses. In January
2000, we sold an additional approximately 15% of our original
holdings in Softbank common stock for approximately
$119.2 million, resulting in a pre-tax gain of
approximately $111.5 million, net of expenses. In March
2002, we sold our remaining shares of Softbank common stock for
approximately $31.8 million, resulting in a pre-tax gain of
$6.5 million, net of expenses. We generally used the
proceeds from these sales to reduce existing indebtedness. The
realized gains, net of expenses, associated with the sales of
Softbank common stock in March 2002, January 2000 and December
1999 totaled $4.1 million, $69.3 million and
$125.2 million, respectively, net of deferred taxes of
$2.4 million, $42.1 million and $76.1 million,
respectively (see Notes 2 and 8 to our consolidated
financial statements).
The Softbank common stock was sold in the public market by
certain of our foreign subsidiaries, which are located in a
low-tax jurisdiction. At the time of each sale, we concluded
that U.S. taxes were not currently payable on the gains
based on our internal assessment and opinions received from our
outside advisors. However, in situations involving uncertainties
in the interpretation of complex tax regulations by various
taxing authorities, we provide for tax liabilities unless we
consider it probable that these taxes will not be due. The level
of opinions received from our outside advisors and our internal
assessment did not allow us to reach that conclusion on this
matter and the deferred taxes were provided accordingly. Our
U.S. Federal tax returns were closed in September 2004 and
2003 for the fiscal years 2000 and 1999, respectively, and
certain state returns for fiscal years 2000 and 1999 were closed
in the third and fourth quarters of 2004, which resolved these
matters for tax purposes in those jurisdictions. Accordingly, we
reversed the related Federal and certain state deferred tax
liabilities of $40.0 million and $1.1 million
associated with the gains on the 2000 and 1999 sales in the
third and fourth quarters of 2004, respectively, while we
reversed the related Federal deferred tax liability of
$70.5 million associated with the gain on the 1999 sale in
the third quarter of 2003, thereby reducing our income tax
provisions for both years in the consolidated statement of
income. Although we review our assessments in these matters on a
regular basis, we cannot currently determine when the remaining
deferred tax liabilities at January 1, 2005 of
$2.4 million, $2.4 million and $4.3 million
related to the 2002, 2000 and 1999 sales, respectively, will be
finally resolved with the taxing authorities, or if the deferred
taxes will ultimately be paid. As a result, we continue to
provide for these tax liabilities. If we are successful in
35
obtaining a favorable resolution of this matter, our tax
provision would be reduced to reflect the elimination of some or
all of these deferred tax liabilities. However, in the event of
an unfavorable resolution, we believe that we will be able to
fund any such taxes that may be assessed on this matter with our
available sources of liquidity.
During 2002 and 2003, one of our Latin American subsidiaries was
audited by the Brazilian taxing authorities in relation to
certain commercial taxes. As a result of this audit, the
subsidiary received an assessment of 28.3 million Brazilian
reais, including interest and penalties through January 1,
2005, or approximately $10.7 million as of January 1,
2005, alleging these commercial taxes were not properly remitted
for the period January through September 2002. The Brazilian
taxing authorities may make similar claims for periods
subsequent to September 2002. Additional assessments, if
received, may be significant either individually or in the
aggregate. It is management’s opinion, based upon the
opinions of outside legal advisors, that we have valid defenses
related to this matter. Although we are vigorously pursuing
administrative and judicial action to challenge the assessment,
no assurance can be given as to the ultimate outcome. An
unfavorable resolution of this matter is not expected to have a
material impact on our financial condition, but depending upon
the time period and amounts involved it may have a material
negative effect on our results of operations.
Transactions with Related Parties
We have loans receivable from certain of our executive officers
and other associates. These loans, ranging up to
$0.1 million, have interest rates ranging from 2.74% to
6.75% per annum and are payable up to four years. All loans
to executive officers, unless granted prior to their election to
such position, were granted and approved by the Human Resources
Committee of our Board of Directors prior to July 30, 2002,
the effective date of the Sarbanes-Oxley Act of 2002. No
material modification or renewals to these loans to executive
officers have been made since that date or subsequent to the
employee’s election as an executive officer, if later. At
January 1, 2005 and January 3, 2004, our employee
loans receivable balance was $0.5 million and
$0.9 million, respectively.
New Accounting Standards
Refer to Note 2 to consolidated financial statements for
the discussion of new accounting standards.
Market Risk
We are exposed to the impact of foreign currency fluctuations
and interest rate changes due to our international sales and
global funding. In the normal course of business, we employ
established policies and procedures to manage our exposure to
fluctuations in the value of foreign currencies and interest
rates using a variety of financial instruments. It is our policy
to utilize financial instruments to reduce risks where internal
netting cannot be effectively employed. It is our policy not to
enter into foreign currency or interest rate transactions for
speculative purposes.
Our foreign currency risk management objective is to protect our
earnings and cash flows resulting from sales, purchases and
other transactions from the adverse impact of exchange rate
movements. Foreign exchange risk is managed by using forward
contracts to offset exchange risk associated with receivables
and payables. By policy, we maintain hedge coverage between
minimum and maximum percentages. Currency interest rate swaps
are used to hedge foreign currency denominated principal and
interest payments related to intercompany and third-party loans.
During 2004, hedged transactions were denominated in
U.S. dollars, Canadian dollars, euros, pounds sterling,
Danish krone, Hungarian forint, Norwegian kroner, Swedish krona,
Swiss francs, Australian dollars, Hong Kong dollars, Indian
rupees, New Zealand dollars, Singaporean dollars, Thai baht,
Brazilian reais, Chilean peso and Mexican peso.
We are exposed to changes in interest rates primarily as a
result of our long-term debt used to maintain liquidity and
finance working capital, capital expenditures and business
expansion. Our interest rate risk management objective is to
limit the impact of interest rate changes on earnings and cash
flows and to lower our overall borrowing costs. To achieve our
objectives we use a combination of fixed- and variable-rate debt
and interest rate swaps. In August 2001, we entered into
interest rate swap agreements with two financial
36
institutions, the effect of which was to swap our fixed rate
obligation on our senior subordinated notes for a floating rate
obligation based on 90-day LIBOR plus 4.260%. As of
January 1, 2005 and January 3, 2004, substantially all
of our outstanding debt had variable interest rates.
Market Risk Management
Foreign exchange and interest rate risk and related derivatives
used are monitored using a variety of techniques including a
review of market value, sensitivity analysis and Value-at-Risk
(“VaR”). The VaR model determines the maximum
potential loss in the fair value of market-sensitive financial
instruments assuming a one-day holding period. The VaR model
estimates were made assuming normal market conditions and a 95%
confidence level. There are various modeling techniques that can
be used in the VaR computation. Our computations are based on
interrelationships between currencies and interest rates (a
“variance/co-variance” technique). The model includes
all of our forwards, cross-currency and other interest rate
swaps, fixed-rate debt and nonfunctional currency denominated
cash and debt (i.e., our market-sensitive derivative and other
financial instruments as defined by the SEC). The accounts
receivable and accounts payable denominated in foreign
currencies, which certain of these instruments are intended to
hedge, were excluded from the model.
The VaR model is a risk analysis tool and does not purport to
represent actual losses in fair value that will be incurred by
us, nor does it consider the potential effect of favorable
changes in market rates. It also does not represent the maximum
possible loss that may occur. Actual future gains and losses
will likely differ from those estimated because of changes or
differences in market rates and interrelationships, hedging
instruments and hedge percentages, timing and other factors.
The following table sets forth the estimated maximum potential
one-day loss in fair value, calculated using the VaR model (in
millions). We believe that the hypothetical loss in fair value
of our derivatives would be offset by gains in the value of the
underlying transactions being hedged.
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Interest Rate | |
|
Currency Sensitive | |
|
|
| |
|
Sensitive Financial | |
|
Financial | |
|
Combined | |
| |
|
Instruments | |
|
Instruments | |
|
Portfolio | |
| |
|
| |
|
| |
|
| |
|
VaR as of January 1, 2005
|
|
$ |
8.7 |
|
|
$ |
0.4 |
|
|
$ |
6.5 |
|
|
VaR as of January 3, 2004
|
|
|
10.5 |
|
|
|
0.1 |
|
|
|
9.0 |
|
|
|
| ITEM 7A. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Information concerning quantitative and qualitative disclosures
about market risk is included under the captions “Market
Risk” and “Market Risk Management” in
“Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in this
Form 10-K.
37
|
|
| ITEM 8. |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| |
|
|
|
|
| |
|
Page | |
| |
|
| |
|
|
|
|
39 |
|
|
|
|
|
40 |
|
|
|
|
|
41 |
|
|
|
|
|
42 |
|
|
|
|
|
43 |
|
|
|
|
|
70 |
|
|
|
|
|
71 |
|
38
INGRAM MICRO INC.
CONSOLIDATED BALANCE SHEET
(Dollars in 000s, except share data)
| |
|
|
|
|
|
|
|
|
|
|
| |
|
Fiscal Year End | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
ASSETS |
|
Current assets:
|
|
|
|
|
|
|
|
|
| |
Cash and cash equivalents
|
|
$ |
398,423 |
|
|
$ |
279,587 |
|
| |
Accounts receivable:
|
|
|
|
|
|
|
|
|
| |
|
Trade accounts receivable
|
|
|
3,037,417 |
|
|
|
1,955,979 |
|
| |
|
Retained interest in securitized receivables
|
|
|
— |
|
|
|
499,923 |
|
| |
|
|
|
|
|
|
| |
|
Total accounts receivable (less allowances of $93,465 and
$91,613)
|
|
|
3,037,417 |
|
|
|
2,455,902 |
|
| |
Inventories
|
|
|
2,175,185 |
|
|
|
1,915,403 |
|
| |
Other current assets
|
|
|
471,137 |
|
|
|
317,201 |
|
| |
|
|
|
|
|
|
| |
|
Total current assets
|
|
|
6,082,162 |
|
|
|
4,968,093 |
|
|
Property and equipment, net
|
|
|
199,133 |
|
|
|
210,722 |
|
|
Goodwill
|
|
|
559,665 |
|
|
|
244,174 |
|
|
Other assets
|
|
|
85,777 |
|
|
|
51,173 |
|
| |
|
|
|
|
|
|
| |
|
Total assets
|
|
$ |
6,926,737 |
|
|
$ |
5,474,162 |
|
| |
|
|
|
|
|
|
| |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
Current liabilities:
|
|
|
|
|
|
|
|
|
| |
Accounts payable
|
|
$ |
3,536,880 |
|
|
$ |
2,821,518 |
|
| |
Accrued expenses
|
|
|
607,684 |
|
|
|
390,244 |
|
| |
Current maturities of long-term debt
|
|
|
168,649 |
|
|
|
128,346 |
|
| |
|
|
|
|
|
|
| |
|
Total current liabilities
|
|
|
4,313,213 |
|
|
|
3,340,108 |
|
|
Long-term debt, less current maturities
|
|
|
346,183 |
|
|
|
239,909 |
|
|
Other liabilities
|
|
|
26,531 |
|
|
|
21,196 |
|
| |
|
|
|
|
|
|
| |
|
Total liabilities
|
|
|
4,685,927 |
|
|
|
3,601,213 |
|
| |
|
|
|
|
|
|
| |
|
Commitments and contingencies (Note 10)
|
|
|
|
|
|
|
|
|
| |
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
| |
Preferred Stock, $0.01 par value, 25,000,000 shares
authorized; no shares issued and outstanding
|
|
|
— |
|
|
|
— |
|
| |
Class A Common Stock, $0.01 par value,
500,000,000 shares authorized; 158,737,898 and
151,963,667 shares issued and outstanding in 2004 and 2003,
respectively
|
|
|
1,587 |
|
|
|
1,520 |
|
| |
Class B Common Stock, $0.01 par value,
135,000,000 shares authorized; no shares issued and
outstanding
|
|
|
— |
|
|
|
— |
|
| |
Additional paid-in capital
|
|
|
817,378 |
|
|
|
720,810 |
|
| |
Retained earnings
|
|
|
1,321,855 |
|
|
|
1,101,954 |
|
| |
Accumulated other comprehensive income
|
|
|
99,990 |
|
|
|
48,812 |
|
| |
Unearned compensation
|
|
|
— |
|
|
|
(147 |
) |
| |
|
|
|
|
|
|
| |
|
Total stockholders’ equity
|
|
|
2,240,810 |
|
|
|
1,872,949 |
|
| |
|
|
|
|
|
|
| |
|
Total liabilities and stockholders’ equity
|
|
$ |
6,926,737 |
|
|
$ |
5,474,162 |
|
| |
|
|
|
|
|
|
See accompanying notes to these consolidated financial
statements.
39
INGRAM MICRO INC.
CONSOLIDATED STATEMENT OF INCOME
(Dollars in 000s, except per share data)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fiscal Year | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
Net sales
|
|
$ |
25,462,071 |
|
|
$ |
22,613,017 |
|
|
$ |
22,459,265 |
|
|
Cost of sales
|
|
|
24,060,029 |
|
|
|
21,389,529 |
|
|
|
21,227,627 |
|
| |
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
1,402,042 |
|
|
|
1,223,488 |
|
|
|
1,231,638 |
|
| |
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Selling, general and administrative
|
|
|
1,121,571 |
|
|
|
1,045,725 |
|
|
|
1,110,295 |
|
| |
Reorganization costs
|
|
|
(2,896 |
) |
|
|
21,570 |
|
|
|
71,135 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
|
1,118,675 |
|
|
|
1,067,295 |
|
|
|
1,181,430 |
|
| |
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
283,367 |
|
|
|
156,193 |
|
|
|
50,208 |
|
| |
|
|
|
|
|
|
|
|
|
|
Other expense (income):
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Interest income
|
|
|
(7,354 |
) |
|
|
(9,933 |
) |
|
|
(11,870 |
) |
| |
Interest expense
|
|
|
37,509 |
|
|
|
33,447 |
|
|
|
32,702 |
|
| |
Losses on sales of receivables
|
|
|
5,015 |
|
|
|
10,206 |
|
|
|
9,363 |
|
| |
Net foreign exchange (gain) loss
|
|
|
(19,501 |
) |
|
|
3,695 |
|
|
|
8,736 |
|
| |
Gain on sale of available-for-sale securities
|
|
|
— |
|
|
|
— |
|
|
|
(6,535 |
) |
| |
Other
|
|
|
4,422 |
|
|
|
2,984 |
|
|
|
8,814 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
|
20,091 |
|
|
|
40,399 |
|
|
|
41,210 |
|
| |
|
|
|
|
|
|
|
|
|
|
Income before income taxes and cumulative effect of adoption of
a new accounting standard
|
|
|
263,276 |
|
|
|
115,794 |
|
|
|
8,998 |
|
|
Provision for (benefit from) income taxes
|
|
|
43,375 |
|
|
|
(33,407 |
) |
|
|
3,329 |
|
| |
|
|
|
|
|
|
|
|
|
|
Income before cumulative effect of adoption of a new accounting
standard
|
|
|
219,901 |
|
|
|
149,201 |
|
|
|
5,669 |
|
|
Cumulative effect of adoption of a new accounting standard, net
of $(2,633) in income taxes
|
|
|
— |
|
|
|
— |
|
|
|
(280,861 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
219,901 |
|
|
$ |
149,201 |
|
|
$ |
(275,192 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Income before cumulative effect of adoption of a new accounting
standard
|
|
$ |
1.41 |
|
|
$ |
0.99 |
|
|
$ |
0.04 |
|
| |
Cumulative effect of adoption of a new accounting standard
|
|
|
— |
|
|
|
— |
|
|
|
(1.87 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
Net income (loss)
|
|
$ |
1.41 |
|
|
$ |
0.99 |
|
|
$ |
(1.83 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Income before cumulative effect of adoption of a new accounting
standard
|
|
$ |
1.38 |
|
|
$ |
0.98 |
|
|
$ |
0.04 |
|
| |
Cumulative effect of adoption of a new accounting standard
|
|
|
— |
|
|
|
— |
|
|
|
(1.85 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
Net income (loss)
|
|
$ |
1.38 |
|
|
$ |
0.98 |
|
|
$ |
(1.81 |
) |
| |
|
|
|
|
|
|
|
|
|
See accompanying notes to these consolidated financial
statements.
40
INGRAM MICRO INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Dollars in 000s)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Accumulated | |
|
|
|
|
| |
|
|
|
|
|
|
|
Other | |
|
|
|
|
| |
|
Common Stock |
|
Additional | |
|
|
|
Comprehensive | |
|
|
|
|
| |
|
|
|
Paid-In | |
|
Retained | |
|
Income | |
|
Unearned | |
|
|
| |
|
Class A | |
|
Class B |
|
Capital | |
|
Earnings | |
|
(Loss) | |
|
Compensation | |
|
Total | |
| |
|
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
December 29, 2001
|
|
$ |
1,490 |
|
|
$ |
— |
|
|
$ |
691,958 |
|
|
$ |
1,227,945 |
|
|
$ |
(53,416 |
) |
|
$ |
(679 |
) |
|
$ |
1,867,298 |
|
|
Stock options exercised
|
|
|
17 |
|
|
|
|
|
|
|
10,359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,376 |
|
|
Income tax benefit from exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
2,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,951 |
|
|
Grant of restricted Class A Common Stock
|
|
|
|
|
|
|
|
|
|
|
310 |
|
|
|
|
|
|
|
|
|
|
|
(310 |
) |
|
|
— |
|
|
Issuance of Class A Common Stock related to Employee Stock
Purchase Plan
|
|
|
1 |
|
|
|
|
|
|
|
1,276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,277 |
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
835 |
|
|
|
|
|
|
|
|
|
|
|
576 |
|
|
|
1,411 |
|
|
Comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(275,192 |
) |
|
|
27,868 |
|
|
|
|
|
|
|
(247,324 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 28, 2002
|
|
|
1,508 |
|
|
|
— |
|
|
|
707,689 |
|
|
|
952,753 |
|
|
|
(25,548 |
) |
|
|
(413 |
) |
|
|
1,635,989 |
|
|
Stock options exercised
|
|
|
11 |
|
|
|
|
|
|
|
10,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,262 |
|
|
Income tax benefit from exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
1,151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,151 |
|
|
Grant of restricted Class A Common Stock
|
|
|
|
|
|
|
|
|
|
|
460 |
|
|
|
|
|
|
|
|
|
|
|
(460 |
) |
|
|
— |
|
|
Issuance of Class A Common Stock related to Employee Stock
Purchase Plan
|
|
|
1 |
|
|
|
|
|
|
|
474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
475 |
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
785 |
|
|
|
|
|
|
|
|
|
|
|
726 |
|
|
|
1,511 |
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
149,201 |
|
|
|
74,360 |
|
|
|
|
|
|
|
223,561 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 3, 2004
|
|
|
1,520 |
|
|
|
— |
|
|
|
720,810 |
|
|
|
1,101,954 |
|
|
|
48,812 |
|
|
|
(147 |
) |
|
|
1,872,949 |
|
|
Stock options exercised
|
|
|
66 |
|
|
|
|
|
|
|
84,452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,518 |
|
|
Income tax benefit from exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
10,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,099 |
|
|
Grant of restricted Class A Common Stock
|
|
|
|
|
|
|
|
|
|
|
589 |
|
|
|
|
|
|
|
|
|
|
|
(589 |
) |
|
|
— |
|
|
Issuance of Class A Common Stock related to Employee Stock
Purchase Plan
|
|
|
1 |
|
|
|
|
|
|
|
757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
758 |
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
935 |
|
|
|
|
|
|
|
|
|
|
|
736 |
|
|
|
1,671 |
|
|
Surrender of restricted Class A Common Stock associated
with payment of withholding tax
|
|
|
|
|
|
|
|
|
|
|
(264 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(264 |
) |
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
219,901 |
|
|
|
51,178 |
|
|
|
|
|
|
|
271,079 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2005
|
|
$ |
1,587 |
|
|
$ |
— |
|
|
$ |
817,378 |
|
|
$ |
1,321,855 |
|
|
$ |
99,990 |
|
|
$ |
— |
|
|
$ |
2,240,810 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to these consolidated financial
statements.
41
INGRAM MICRO INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in 000s)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fiscal Year | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net income (loss)
|
|
$ |
219,901 |
|
|
$ |
149,201 |
|
|
$ |
(275,192 |
) |
| |
Adjustments to reconcile net income (loss) to cash provided
(used) by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Cumulative effect of adoption of a new accounting standard, net
of income taxes
|
|
|
— |
|
|
|
— |
|
|
|
280,861 |
|
| |
|
Depreciation
|
|
|
57,657 |
|
|
|
78,519 |
|
|
|
98,763 |
|
| |
|
Gain on forward currency exchange contract
|
|
|
(23,120 |
) |
|
|
— |
|
|
|
— |
|
| |
|
Noncash charges for impairments and losses (gains) on
disposals of property and equipment and investments
|
|
|
— |
|
|
|
(980 |
) |
|
|
16,813 |
|
| |
|
Loss on sale of a business
|
|
|
— |
|
|
|
5,067 |
|
|
|
— |
|
| |
|
Noncash charges for interest and compensation
|
|
|
3,135 |
|
|
|
3,218 |
|
|
|
2,277 |
|
| |
|
Deferred income taxes
|
|
|
(25,853 |
) |
|
|
(53,903 |
) |
|
|
(40,112 |
) |
| |
|
Pre-tax gain on sale of available-for-sale securities
|
|
|
— |
|
|
|
— |
|
|
|
(6,535 |
) |
| |
|
Changes in operating assets and liabilities, net of effects of
acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Changes in amounts sold under accounts receivable programs
|
|
|
(60,000 |
) |
|
|
(15,000 |
) |
|
|
(147,253 |
) |
| |
|
|
Accounts receivable
|
|
|
(187,073 |
) |
|
|
95,248 |
|
|
|
240,645 |
|
| |
|
|
Inventories
|
|
|
(54,178 |
) |
|
|
(245,070 |
) |
|
|
134,246 |
|
| |
|
|
Other current assets
|
|
|
(77,885 |
) |
|
|
(812 |
) |
|
|
(2,898 |
) |
| |
|
|
Accounts payable
|
|
|
368,156 |
|
|
|
34,626 |
|
|
|
(72,263 |
) |
| |
|
|
Accrued expenses
|
|
|
140,194 |
|
|
|
(144,902 |
) |
|
|
41,279 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
|
Cash provided (used) by operating activities
|
|
|
360,934 |
|
|
|
(94,788 |
) |
|
|
270,631 |
|
| |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Purchase of property and equipment
|
|
|
(36,985 |
) |
|
|
(35,003 |
) |
|
|
(54,679 |
) |
| |
Proceeds from sale of property and equipment
|
|
|
— |
|
|
|
7,826 |
|
|
|
2,920 |
|
| |
Proceeds from forward currency exchange contract
|
|
|
23,120 |
|
|
|
— |
|
|
|
— |
|
| |
Acquisitions, net of cash acquired
|
|
|
(402,181 |
) |
|
|
(9,416 |
) |
|
|
(8,256 |
) |
| |
Net proceeds from sale of available-for-sale securities
|
|
|
— |
|
|
|
— |
|
|
|
31,840 |
|
| |
Other
|
|
|
4,501 |
|
|
|
(307 |
) |
|
|
68 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
|
Cash used by investing activities
|
|
|
(411,545 |
) |
|
|
(36,900 |
) |
|
|
(28,107 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Proceeds from exercise of stock options
|
|
|
84,518 |
|
|
|
10,262 |
|
|
|
10,376 |
|
| |
Net repayments of debt
|
|
|
(12,760 |
) |
|
|
(6,077 |
) |
|
|
(124,999 |
) |
| |
Changes in book overdrafts
|
|
|
77,742 |
|
|
|
5,144 |
|
|
|
(32,115 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
Cash provided (used) by financing activities
|
|
|
149,500 |
|
|
|
9,329 |
|
|
|
(146,738 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
19,947 |
|
|
|
14,433 |
|
|
|
18,668 |
|
| |
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
118,836 |
|
|
|
(107,926 |
) |
|
|
114,454 |
|
|
Cash and cash equivalents, beginning of year
|
|
|
279,587 |
|
|
|
387,513 |
|
|
|
273,059 |
|
| |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$ |
398,423 |
|
|
$ |
279,587 |
|
|
$ |
387,513 |
|
| |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments during the year:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Interest
|
|
$ |
34,937 |
|
|
$ |
38,581 |
|
|
$ |
31,926 |
|
| |
Income taxes
|
|
|
30,755 |
|
|
|
41,603 |
|
|
|
40,670 |
|
See accompanying notes to these consolidated financial
statements.
42
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in 000s, except per share data)
Note 1 — Organization and Basis of
Presentation
Ingram Micro Inc. (“Ingram Micro”) and its
subsidiaries are primarily engaged in the distribution of
information technology (“IT”) products and supply
chain solutions worldwide. Ingram Micro operates in North
America, Europe, Latin America and Asia-Pacific.
Note 2 — Significant Accounting Policies
Basis of Consolidation
The consolidated financial statements include the accounts of
Ingram Micro and its subsidiaries (collectively referred to
herein as the “Company”). All significant intercompany
accounts and transactions have been eliminated in consolidation.
Fiscal Year
The fiscal year of the Company is a 52- or 53-week period ending
on the Saturday nearest to December 31. All references
herein to “2004,” “2003” and
“2002” represent the 52-week fiscal year ended
January 1, 2005, 53-week fiscal year ended January 3,
2004, and the 52-week fiscal year ended December 28, 2002,
respectively.
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America (“U.S.”) requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at
the financial statement date, and reported amounts of revenue
and expenses during the reporting period. Significant estimates
primarily relate to the realizable value of accounts receivable,
vendor programs, inventories, goodwill, intangible and other
long-lived assets; income taxes; and contingencies and
litigation. Actual results could differ from these estimates.
Revenue Recognition
Revenue on products shipped is recognized when title and risk of
loss transfers, delivery has occurred, the price to the buyer is
determinable and collectibility is reasonably assured. Service
revenues are recognized upon delivery of the services. Service
revenues have represented less than 10% of total net sales for
2004, 2003 and 2002. The Company, under specific conditions,
permits its customers to return or exchange products. The
provision for estimated sales returns is recorded concurrently
with the recognition of revenue.
Vendor Programs
Funds received from vendors for price protection, product
rebates, marketing, training, product returns and promotion
programs are recorded as adjustments to product costs, revenue,
or selling, general and administrative expenses according to the
nature of the program. Some of these programs may extend over
one or more quarterly reporting periods. The Company accrues
rebates or other vendor incentives as earned based on sales of
qualifying products or as services are provided in accordance
with the terms of the related program.
The Company sells products purchased from many vendors, but
generated approximately 22%, 24% and 27% of its net sales in
fiscal years 2004, 2003 and 2002, respectively, from products
purchased from Hewlett-Packard Company. There were no other
vendors that represented 10% or more of the Company’s net
sales in each of the last three years.
43
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Warranties
The Company’s suppliers generally warrant the products
distributed by the Company and allow returns of defective
products, including those that have been returned to the Company
by its customers. The Company does not independently warrant the
products it distributes; however, the Company does warrant its
services with regard to products that it configures for its
customers and products that it builds to order from components
purchased from other sources, and under limited circumstances in
Asia-Pacific. In addition, the Company is obligated to provide
warranty protection for sales of certain IT products within the
European Union (“EU”) where vendors have not
affirmatively agreed to provide pass-through protection for up
to two years as required under the EU directive. Provision for
estimated warranty costs is recorded at the time of sale and
periodically adjusted to reflect actual experience. Warranty
expense and the related obligations are not material to the
Company’s consolidated financial statements.
Foreign Currency Translation and Remeasurement
Financial statements of foreign subsidiaries, for which the
functional currency is the local currency, are translated into
U.S. dollars using the exchange rate at each balance sheet
date for assets and liabilities and a weighted average exchange
rate for each period for statement of income items. Translation
adjustments are recorded in accumulated other comprehensive
income, a component of stockholders’ equity. The functional
currency of the Company’s operations in Latin America and
certain operations within the Company’s Asia-Pacific and
European regions is the U.S. dollar; accordingly, the
monetary assets and liabilities of these subsidiaries are
translated into U.S. dollars at the exchange rate in effect
at the balance sheet date. Revenues, expenses, gains or losses
are translated at the average exchange rate for the period, and
nonmonetary assets and liabilities are translated at historical
rates. The resultant remeasurement gains and losses of these
operations as well as gains and losses from foreign currency
transactions are included in the consolidated statement of
income.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts
receivable, accounts payable and other accrued expenses
approximate fair value because of the short maturity of these
items. The carrying amounts of outstanding debt issued pursuant
to bank credit agreements approximate fair value because
interest rates over the relative term of these instruments
approximate current market interest rates. At January 1,
2005 and January 3, 2004, the carrying value of the
Company’s 9.875% Senior Subordinated Notes due in 2008
was $213,894 and $219,702, respectively, which approximated
their fair value at the respective dates. See discussion of
Derivative Financial Instruments below.
Cash and Cash Equivalents
The Company considers all highly liquid investments with
original maturities of three months or less to be cash
equivalents. Book overdrafts of $213,057 and $135,315 as of
January 1, 2005 and January 3, 2004, respectively, are
included in accounts payable.
Inventories
Inventories are stated at the lower of average cost or market.
Property and Equipment
Property and equipment are recorded at cost and depreciated
using the straight-line method over the estimated useful lives
noted below. The Company also capitalizes computer software
costs that meet both the definition of internal-use software and
defined criteria for capitalization in accordance with Statement
of
44
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Position No. 98-1, “Accounting for the Cost of
Computer Software Developed or Obtained for Internal Use.”
Leasehold improvements are amortized over the shorter of the
lease term or the estimated useful life. Depreciable lives of
property and equipment are as follows:
| |
|
|
|
|
|
Buildings
|
|
|
40 years |
|
|
Leasehold improvements
|
|
|
3-17 years |
|
|
Distribution equipment
|
|
|
5-10 years |
|
|
Computer equipment and software
|
|
|
3-8 years |
|
Maintenance, repairs and minor renewals are charged to expense
as incurred. Additions, major renewals and betterments to
property and equipment are capitalized.
Long-Lived and Intangible Assets
In 2002, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 144 “Accounting for
the Impairment or Disposal of Long-lived Assets”
(“FAS 144”). In accordance with FAS 144, the
Company assesses potential impairments to its long-lived assets
when events or changes in circumstances indicate that the
carrying amount may not be fully recoverable. If required, an
impairment loss is recognized as the difference between the
carrying value and the fair value of the assets.
Goodwill
Goodwill represents the excess of the purchase price over the
fair value of the identifiable net assets acquired in an
acquisition accounted for using the purchase method. Effective
the first quarter of 2002, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 142,
“Goodwill and Other Intangible Assets”
(“FAS 142”). FAS 142 eliminated the
amortization of goodwill. Instead, goodwill was reviewed for
impairment upon adoption and will be reviewed at least annually
thereafter. In connection with the initial impairment tests, the
Company obtained valuations of its individual reporting units
from an independent third-party valuation firm. The valuation
methodologies included, but were not limited to, estimated net
present value of the projected future cash flows of these
reporting units. As a result of these impairment tests, the
Company recorded a noncash charge of $280,861, net of income
taxes of $2,633 to reduce the carrying value of goodwill to its
implied fair value in accordance with FAS 142. This charge
is reflected as a cumulative effect of adoption of a new
accounting standard in the Company’s consolidated statement
of income.
In the fourth quarters of 2004 and 2003, the Company performed
its impairment tests of goodwill in North America, Europe and
Asia-Pacific. In connection with these tests, valuations of the
individual reporting units were obtained or updated from an
independent third-party valuation firm. No additional impairment
was indicated based on these tests.
The changes in the carrying amount of goodwill for fiscal years
2003 and 2004 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
North | |
|
|
|
Asia- | |
|
Latin |
|
|
| |
|
America | |
|
Europe | |
|
Pacific | |
|
America |
|
Total | |
| |
|
| |
|
| |
|
| |
|
|
|
| |
|
Balance at December 28, 2002
|
|
$ |
78,310 |
|
|
$ |
2,111 |
|
|
$ |
153,501 |
|
|
$ |
— |
|
|
$ |
233,922 |
|
| |
Acquisitions
|
|
|
— |
|
|
|
5,281 |
|
|
|
2,017 |
|
|
|
— |
|
|
|
7,298 |
|
| |
Foreign currency translation
|
|
|
134 |
|
|
|
1,916 |
|
|
|
904 |
|
|
|
— |
|
|
|
2,954 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 3, 2004
|
|
|
78,444 |
|
|
|
9,308 |
|
|
|
156,422 |
|
|
|
— |
|
|
|
244,174 |
|
| |
Acquisitions
|
|
|
— |
|
|
|
2,610 |
|
|
|
308,497 |
|
|
|
— |
|
|
|
311,107 |
|
| |
Foreign currency translation
|
|
|
51 |
|
|
|
857 |
|
|
|
3,476 |
|
|
|
— |
|
|
|
4,384 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2005
|
|
$ |
78,495 |
|
|
$ |
12,775 |
|
|
$ |
468,395 |
|
|
$ |
— |
|
|
$ |
559,665 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The addition to goodwill of $2,610 in Europe for fiscal year
2004 represents the amount paid to the seller for the first and
second years’ achievements of the earn-out related to the
Company’s acquisition of an IT distributor in Belgium in
2002. This cash payment is an addition to the initial purchase
price required by the purchase agreement, which requires the
Company to pay the seller up to Euro 1.13 million for each
of the next three years based on an earn-out formula.
Investments in Available-for-Sale Securities
The Company classified its existing marketable equity securities
as available-for-sale in accordance with the provisions of
Statement of Financial Accounting Standards No. 115,
“Accounting for Certain Investments in Debt and Equity
Securities.” These securities are carried at fair market
value, with unrealized gains and losses reported in
stockholders’ equity as a component of accumulated other
comprehensive income (loss). Realized gains or losses on
securities sold were based on the specific identification method.
In December 1998, the Company purchased 2,972,400 shares of
common stock of SOFTBANK Corp. (“Softbank”),
Japan’s largest distributor of software, peripherals and
networking products, for approximately $50,262. During December
1999, the Company sold 1,040,400 shares or approximately
35% of its original investment in Softbank common stock for
approximately $230,109, resulting in a pre-tax gain of
approximately $201,318, net of expenses. In January 2000, the
Company sold an additional 445,800 shares or approximately
15% of its original holdings in Softbank common stock for
approximately $119,228, resulting in a pre-tax gain of
approximately $111,458, net of expenses. In March 2002, the
Company sold its remaining 1,486,200 shares or
approximately 50% of its original investment in Softbank common
stock for approximately $31,840, resulting in a pre-tax gain of
approximately $6,535, net of expenses. The realized gains, net
of expenses, associated with the sales of Softbank common stock
in March 2002, January 2000 and December 1999 totaled $4,117,
$69,327 and $125,220, respectively, net of deferred income taxes
of $2,418, $42,131 and $76,098, respectively (see Note 8 to
the Company’s consolidated financial statements).
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist principally of
trade accounts receivable and derivative financial instruments.
Credit risk with respect to trade accounts receivable is limited
due to the large number of customers and their dispersion across
geographic areas. No single customer accounts for 10% or more of
the Company’s net sales. The Company performs ongoing
credit evaluations of its customers’ financial conditions,
obtains credit insurance in certain locations and requires
collateral in certain circumstances. The Company maintains an
allowance for estimated credit losses.
Derivative Financial Instruments
The Company operates in various locations around the world. The
Company reduces its exposure to fluctuations in interest rates
and foreign exchange rates by creating offsetting positions
through the use of derivative financial instruments. The market
risk related to the foreign exchange agreements is offset by
changes in the valuation of the underlying items being hedged.
The Company currently does not use derivative financial
instruments for trading or speculative purposes, nor is the
Company a party to leveraged derivatives.
Foreign exchange risk is managed primarily by using forward
contracts to hedge receivables and payables. Currency interest
rate swaps are used to hedge foreign currency denominated
principal and interest payments related to intercompany loans.
All derivatives are recorded in the Company’s consolidated
balance sheet at fair value. The estimated fair value of
derivative financial instruments represents the amount required
to enter into similar offsetting contracts with similar
remaining maturities based on quoted market prices. As disclosed
in Note 7, the
46
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Company has an interest rate swap that is designated as a fair
value hedge. Changes in the fair value of this derivative are
recorded in current earnings and are offset by the like change
in the fair value of the hedged debt instrument. Changes in the
fair value of derivatives not designated as hedges are recorded
in current earnings.
The notional amount of forward exchange contracts is the amount
of foreign currency bought or sold at maturity. The notional
amount of interest rate swaps is the underlying principal amount
used in determining the interest payments exchanged over the
life of the swap. Notional amounts are indicative of the extent
of the Company’s involvement in the various types and uses
of derivative financial instruments and are not a measure of the
Company’s exposure to credit or market risks through its
use of derivatives.
Credit exposure for derivative financial instruments is limited
to the amounts, if any, by which the counterparties’
obligations under the contracts exceed the obligations of the
Company to the counterparties. Potential credit losses are
minimized through careful evaluation of counterparty credit
standing, selection of counterparties from a limited group of
high-quality institutions and other contract provisions.
Derivative financial instruments comprise the following:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fiscal Year End | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
| |
|
Notional | |
|
Estimated | |
|
Notional | |
|
Estimated | |
| |
|
Amounts | |
|
Fair Value | |
|
Amounts | |
|
Fair Value | |
| |
|
| |
|
| |
|
| |
|
| |
|
Foreign exchange forward contracts
|
|
$ |
1,401,648 |
|
|
$ |
(110,615 |
) |
|
$ |
1,466,546 |
|
|
$ |
(72,033 |
) |
|
Interest rate swaps
|
|
|
739,741 |
|
|
|
(4,131 |
) |
|
|
700,478 |
|
|
|
19,795 |
|
Comprehensive Income (Loss)
Statement of Financial Accounting Standards No. 130,
“Reporting Comprehensive Income”
(“FAS 130”) establishes standards for reporting
and displaying comprehensive income and its components in the
Company’s consolidated financial statements. Comprehensive
income is defined in FAS 130 as the change in equity (net
assets) of a business enterprise during a period from
transactions and other events and circumstances from nonowner
sources and is comprised of net income and other comprehensive
income (loss).
The components of accumulated other comprehensive income (loss)
are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Foreign | |
|
Unrealized | |
|
Accumulated | |
| |
|
Currency | |
|
Gain (Loss) on | |
|
Other | |
| |
|
Translation | |
|
Available-for- | |
|
Comprehensive | |
| |
|
Adjustment | |
|
Sale Securities | |
|
Income (Loss) | |
| |
|
| |
|
| |
|
| |
|
Balance at December 29, 2001
|
|
$ |
(52,744 |
) |
|
$ |
(672 |
) |
|
$ |
(53,416 |
) |
| |
Changes in foreign currency translation adjustments
|
|
|
27,196 |
|
|
|
— |
|
|
|
27,196 |
|
| |
Unrealized holding loss arising during the period
|
|
|
— |
|
|
|
4,789 |
|
|
|
4,789 |
|
| |
Reclassification adjustment for realized gain included in net
income
|
|
|
— |
|
|
|
(4,117 |
) |
|
|
(4,117 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Balance at December 28, 2002
|
|
|
(25,548 |
) |
|
|
— |
|
|
|
(25,548 |
) |
| |
Changes in foreign currency translation adjustments
|
|
|
74,360 |
|
|
|
— |
|
|
|
74,360 |
|
| |
|
|
|
|
|
|
|
|
|
|
Balance at January 3, 2004
|
|
|
48,812 |
|
|
|
— |
|
|
|
48,812 |
|
| |
Changes in foreign currency translation adjustments
|
|
|
51,178 |
|
|
|
— |
|
|
|
51,178 |
|
| |
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2005
|
|
$ |
99,990 |
|
|
$ |
— |
|
|
$ |
99,990 |
|
| |
|
|
|
|
|
|
|
|
|
47
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Earnings Per Share
The Company reports a dual presentation of Basic Earnings Per
Share (“Basic EPS”) and Diluted Earnings Per Share
(“Diluted EPS”). Basic EPS excludes dilution and is
computed by dividing net income by the weighted average number
of common shares outstanding during the reported period. Diluted
EPS reflects the potential dilution that could occur if stock
options and warrants, and other commitments to issue common
stock were exercised using the treasury stock method or the
if-converted method, where applicable.
The computation of Basic EPS and Diluted EPS is as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fiscal Year | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
Income before cumulative effect of adoption of a new accounting
standard
|
|
$ |
219,901 |
|
|
$ |
149,201 |
|
|
$ |
5,669 |
|
| |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
|
|
|
155,451,251 |
|
|
|
151,220,639 |
|
|
|
150,211,973 |
|
| |
|
|
|
|
|
|
|
|
|
|
Basic earnings per share before cumulative effect of adoption of
a new accounting standard
|
|
$ |
1.41 |
|
|
$ |
0.99 |
|
|
$ |
0.04 |
|
| |
|
|
|
|
|
|
|
|
|
|
Weighted average shares including the dilutive effect of stock
options and warrants (4,228,789; 1,087,755; and 1,933,696 for
2004, 2003, and 2002, respectively)
|
|
|
159,680,040 |
|
|
|
152,308,394 |
|
|
|
152,145,669 |
|
| |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share before cumulative effect of adoption
of a new accounting standard
|
|
$ |
1.38 |
|
|
$ |
0.98 |
|
|
$ |
0.04 |
|
| |
|
|
|
|
|
|
|
|
|
There were approximately 12,813,000, 23,756,000, and 18,182,000
options and warrants in 2004, 2003, and 2002, respectively, that
were not included in the computation of Diluted EPS because the
exercise price was greater than the average market price of the
Class A Common Stock, thereby resulting in an antidilutive
effect.
48
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Accounting for Stock-Based Compensation
The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 148, “Accounting for Stock
Based Compensation — Transition and Disclosure”
(“FAS 148”), which amends FASB Statement
No. 123, “Accounting for Stock-Based
Compensation.” As permitted by FAS 148, the Company
continues to measure compensation cost in accordance with
Accounting Principles Board Opinion No. 25,
“Accounting for Stock Issued to Employees”
(“APB 25”) and related interpretations, but
provides pro forma disclosures of net income and earnings per
share as if the fair-value method had been applied. The
following table illustrates the effect on net income and
earnings per share if the Company had applied the fair value
recognition provisions to stock-based employee compensation.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fiscal Year | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
Net income (loss), as reported
|
|
$ |
219,901 |
|
|
$ |
149,201 |
|
|
$ |
(275,192 |
) |
|
Compensation expense as determined under FAS 123, net of
related tax effects
|
|
|
26,479 |
|
|
|
28,363 |
|
|
|
31,610 |
|
| |
|
|
|
|
|
|
|
|
|
|
Pro forma net income (loss)
|
|
$ |
193,422 |
|
|
$ |
120,838 |
|
|
$ |
(306,802 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic — as reported
|
|
$ |
1.41 |
|
|
$ |
0.99 |
|
|
$ |
(1.83 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
Basic — pro forma
|
|
$ |
1.24 |
|
|
$ |
0.80 |
|
|
$ |
(2.04 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
Diluted — as reported
|
|
$ |
1.38 |
|
|
$ |
0.98 |
|
|
$ |
(1.81 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
Diluted — pro forma
|
|
$ |
1.21 |
|
|
$ |
0.79 |
|
|
$ |
(2.04 |
) |
| |
|
|
|
|
|
|
|
|
|
The weighted average fair value per option granted in 2004,
2003, and 2002 was $4.80, $3.93, and $6.88, respectively. The
fair value of options was estimated using the Black-Scholes
option-pricing model assuming no dividends and using the
following weighted average assumptions:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fiscal Year | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
Risk-free interest rate
|
|
|
2.72% |
|
|
|
1.90% |
|
|
|
3.49% |
|
|
Expected years until exercise
|
|
|
3.0 years |
|
|
|
3.0 years |
|
|
|
3.0 years |
|
|
Expected stock volatility
|
|
|
41.8% |
|
|
|
49.3% |
|
|
|
61.8% |
|
New Accounting Standards
In December 2004, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123
(revised 2004), “Share-Based Payment,” or
FAS 123R. FAS 123R revises Statement of Financial
Accounting Standards No. 123, “Accounting for
Stock-Based Compensation,” or FAS 123, and supersedes
Accounting Principles Board Opinion 25, “Accounting
for Stock Issued to Employees” and related interpretations
and Statement of Financial Accounting Standards No. 148,
“Accounting for Stock-Based Compensation-Transition and
Disclosure.” FAS 123R requires compensation cost
relating to all share-based payments to employees to be
recognized in the financial statements based on their fair
values in the first interim or annual reporting period beginning
after June 15, 2005. The pro forma disclosures previously
permitted under FAS 123 will no longer be an alternative to
financial statement recognition. The Company is evaluating the
requirements of FAS 123R and expects that the adoption of
FAS 123R will have a material impact on the Company’s
consolidated financial position or results of operation. The
Company has not determined the method of adoption and it has not
determined whether the adoption will result in amounts
recognized in the income statement that are similar to the
current pro forma disclosures under FAS 123.
49
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 3 — Reorganization Costs and Profit
Enhancement Program
In June 2001, the Company initiated a broad-based reorganization
plan to streamline operations and reorganize resources to
increase flexibility, improve service and generate cost savings
and operational efficiencies. This program resulted in
restructuring several functions, consolidation of facilities,
and reductions of workforce worldwide in each of the quarters
through June 2002. Total reorganization costs associated with
these actions were $8,780 and $41,411 in 2002 and 2001,
respectively.
In September 2002, the Company announced a comprehensive profit
enhancement program, which was designed to improve operating
income through enhancements in gross margins and reduction of
selling, general, and administrative expenses (“SG&A
expenses”). Key components of these initiatives included
enhancement and/or rationalization of vendor and customer
programs, optimization of facilities and systems; outsourcing of
certain IT infrastructure functions, geographic consolidations
and administrative restructuring. In addition, the Company has
implemented other actions outside the scope of the comprehensive
profit enhancement program, which are designed to further
improve operating results. The implementation of the actions
associated with the comprehensive profit enhancement program and
other actions taken resulted in restructuring costs and other
major-program costs, which are more fully described below.
For 2003 and 2002, the Company incurred $31,008 and $107,851,
respectively, of costs related to this profit enhancement
program. These costs have consisted primarily of reorganization
costs of $13,609 and $62,355 in 2003 and 2002, respectively, and
other program implementation costs charged to cost of sales and
SG&A expenses, or other major-program costs, of $17,399 and
$45,496 in 2003 and 2002, respectively. Reorganization costs
have included severance expenses, lease termination costs and
other costs associated with the exit of facilities or other
contracts. The other major-program costs have consisted of
program management and consulting expenses, accelerated
depreciation, losses on disposals of certain assets, costs
associated with geographic relocation, costs related to the
outsourcing of certain IT infrastructure functions, and
inventory and vendor-program losses primarily associated with
the exit of certain businesses.
During 2003, the Company incurred incremental reorganization
costs of $7,961 and incremental other major-program costs of
$6,407, which were not part of the original scope of the profit
enhancement program announced in September 2002. These costs
primarily related to the further consolidation of operations in
the Nordic areas of Europe and a loss on the sale of a non-core
German semiconductor equipment distribution business.
In 2004, the Company realized a net credit of $2,896, which
represents adjustments to reorganization costs resulting from
the favorable resolution of obligations relating to these
previous actions.
These actions are completed; however, we continue to pursue
business process improvements to create sustained cost
reductions or operational improvements over the long term.
Implementation of additional actions in the future, if any,
could result in additional costs as well as additional operating
income improvements.
50
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Reorganization Costs
Within the context of the broad-based reorganization plan and
comprehensive profit enhancement program, the Company has
developed and implemented detailed plans for restructuring
actions. The following table summarizes the components of the
Company’s reorganization costs by region for each of the
quarters in fiscal years 2004, 2003 and 2002 resulting from the
detailed actions initiated under the broad-based reorganization
plan and the profit enhancement program:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Employee | |
|
|
|
|
|
|
| |
|
Headcount | |
|
Termination | |
|
Facility | |
|
Other |
|
Total | |
| Quarter Ended |
|
Reduction | |
|
Benefits | |
|
Costs | |
|
Costs |
|
Cost | |
| |
|
| |
|
| |
|
| |
|
|
|
| |
|
January 1, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
North America
|
|
|
— |
|
|
$ |
9 |
|
|
$ |
250 |
|
|
$ |
— |
|
|
$ |
259 |
|
| |
Europe
|
|
|
— |
|
|
|
— |
|
|
|
(699 |
) |
|
|
— |
|
|
|
(699 |
) |
| |
Asia-Pacific
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
Latin America
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Subtotal
|
|
|
— |
|
|
|
9 |
|
|
|
(449 |
) |
|
|
— |
|
|
|
(440 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
North America
|
|
|
— |
|
|
|
— |
|
|
|
(2,585 |
) |
|
|
— |
|
|
|
(2,585 |
) |
| |
Europe
|
|
|
— |
|
|
|
— |
|
|
|
(67 |
) |
|
|
— |
|
|
|
(67 |
) |
| |
Asia-Pacific
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
Latin America
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Subtotal
|
|
|
— |
|
|
|
— |
|
|
|
(2,652 |
) |
|
|
— |
|
|
|
(2,652 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 3, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
North America
|
|
|
— |
|
|
|
(40 |
) |
|
|
323 |
|
|
|
— |
|
|
|
283 |
|
| |
Europe
|
|
|
— |
|
|
|
(59 |
) |
|
|
(153 |
) |
|
|
— |
|
|
|
(212 |
) |
| |
Asia-Pacific
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
Latin America
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Subtotal
|
|
|
— |
|
|
|
(99 |
) |
|
|
170 |
|
|
|
— |
|
|
|
71 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 3, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
North America
|
|
|
— |
|
|
|
(94 |
) |
|
|
(97 |
) |
|
|
— |
|
|
|
(191 |
) |
| |
Europe
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
Asia-Pacific
|
|
|
30 |
|
|
|
316 |
|
|
|
— |
|
|
|
— |
|
|
|
316 |
|
| |
Latin America
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Subtotal
|
|
|
30 |
|
|
|
222 |
|
|
|
(97 |
) |
|
|
— |
|
|
|
125 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Full year 2004
|
|
|
30 |
|
|
$ |
132 |
|
|
$ |
(3,028 |
) |
|
$ |
— |
|
|
$ |
(2,896 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Employee | |
|
|
|
|
|
|
| |
|
Headcount | |
|
Termination | |
|
Facility | |
|
Other | |
|
Total | |
| Quarter Ended |
|
Reduction | |
|
Benefits | |
|
Costs | |
|
Costs | |
|
Cost | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
January 3, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
North America
|
|
|
135 |
|
|
$ |
773 |
|
|
$ |
3,287 |
|
|
$ |
— |
|
|
$ |
4,060 |
|
| |
Europe
|
|
|
60 |
|
|
|
1,285 |
|
|
|
694 |
|
|
|
— |
|
|
|
1,979 |
|
| |
Asia-Pacific
|
|
|
10 |
|
|
|
41 |
|
|
|
— |
|
|
|
— |
|
|
|
41 |
|
| |
Latin America
|
|
|
90 |
|
|
|
631 |
|
|
|
125 |
|
|
|
13 |
|
|
|
769 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Subtotal
|
|
|
295 |
|
|
|
2,730 |
|
|
|
4,106 |
|
|
|
13 |
|
|
|
6,849 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 27, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
North America
|
|
|
20 |
|
|
|
422 |
|
|
|
253 |
|
|
|
— |
|
|
|
675 |
|
| |
Europe
|
|
|
45 |
|
|
|
591 |
|
|
|
158 |
|
|
|
(24 |
) |
|
|
725 |
|
| |
Asia-Pacific
|
|
|
5 |
|
|
|
20 |
|
|
|
— |
|
|
|
— |
|
|
|
20 |
|
| |
Latin America
|
|
|
45 |
|
|
|
70 |
|
|
|
— |
|
|
|
— |
|
|
|
70 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Subtotal
|
|
|
115 |
|
|
|
1,103 |
|
|
|
411 |
|
|
|
(24 |
) |
|
|
1,490 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 28, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
North America
|
|
|
245 |
|
|
|
1,658 |
|
|
|
(242 |
) |
|
|
48 |
|
|
|
1,464 |
|
| |
Europe
|
|
|
— |
|
|
|
(82 |
) |
|
|
141 |
|
|
|
(293 |
) |
|
|
(234 |
) |
| |
Asia-Pacific
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
| |
Latin America
|
|
|
20 |
|
|
|
61 |
|
|
|
— |
|
|
|
— |
|
|
|
61 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Subtotal
|
|
|
265 |
|
|
|
1,638 |
|
|
|
(101 |
) |
|
|
(245 |
) |
|
|
1,292 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 29, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
North America
|
|
|
280 |
|
|
|
3,564 |
|
|
|
— |
|
|
|
1,471 |
|
|
|
5,035 |
|
| |
Europe
|
|
|
60 |
|
|
|
864 |
|
|
|
5,787 |
|
|
|
81 |
|
|
|
6,732 |
|
| |
Asia-Pacific
|
|
|
10 |
|
|
|
12 |
|
|
|
— |
|
|
|
— |
|
|
|
12 |
|
| |
Latin America
|
|
|
15 |
|
|
|
160 |
|
|
|
— |
|
|
|
— |
|
|
|
160 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Subtotal
|
|
|
365 |
|
|
|
4,600 |
|
|
|
5,787 |
|
|
|
1,552 |
|
|
|
11,939 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Full year 2003
|
|
|
1,040 |
|
|
$ |
10,071 |
|
|
$ |
10,203 |
|
|
$ |
1,296 |
|
|
$ |
21,570 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Employee | |
|
|
|
|
|
|
| |
|
Headcount | |
|
Termination | |
|
Facility | |
|
Other | |
|
Total | |
| Quarter Ended |
|
Reduction | |
|
Benefits | |
|
Costs | |
|
Costs | |
|
Cost | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
December 28, 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
North America
|
|
|
265 |
|
|
$ |
1,824 |
|
|
$ |
25,431 |
|
|
$ |
6,980 |
|
|
$ |
34,235 |
|
| |
Europe
|
|
|
150 |
|
|
|
3,216 |
|
|
|
512 |
|
|
|
1,145 |
|
|
|
4,873 |
|
| |
Asia-Pacific
|
|
|
35 |
|
|
|
(28 |
) |
|
|
(28 |
) |
|
|
— |
|
|
|
(56 |
) |
| |
Latin America
|
|
|
25 |
|
|
|
496 |
|
|
|
— |
|
|
|
— |
|
|
|
496 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Subtotal
|
|
|
475 |
|
|
|
5,508 |
|
|
|
25,915 |
|
|
|
8,125 |
|
|
|
39,548 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 28, 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
North America
|
|
|
265 |
|
|
|
2,435 |
|
|
|
15,470 |
|
|
|
— |
|
|
|
17,905 |
|
| |
Europe
|
|
|
165 |
|
|
|
2,482 |
|
|
|
1,324 |
|
|
|
775 |
|
|
|
4,581 |
|
| |
Asia-Pacific
|
|
|
10 |
|
|
|
156 |
|
|
|
(141 |
) |
|
|
(9 |
) |
|
|
6 |
|
| |
Latin America
|
|
|
85 |
|
|
|
315 |
|
|
|
— |
|
|
|
— |
|
|
|
315 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Subtotal
|
|
|
525 |
|
|
|
5,388 |
|
|
|
16,653 |
|
|
|
766 |
|
|
|
22,807 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 29, 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
North America
|
|
|
270 |
|
|
|
1,629 |
|
|
|
897 |
|
|
|
— |
|
|
|
2,526 |
|
| |
Europe
|
|
|
90 |
|
|
|
1,883 |
|
|
|
437 |
|
|
|
(392 |
) |
|
|
1,928 |
|
| |
Asia-Pacific
|
|
|
30 |
|
|
|
389 |
|
|
|
— |
|
|
|
— |
|
|
|
389 |
|
| |
Latin America
|
|
|
80 |
|
|
|
527 |
|
|
|
— |
|
|
|
— |
|
|
|
527 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Subtotal
|
|
|
470 |
|
|
|
4,428 |
|
|
|
1,334 |
|
|
|
(392 |
) |
|
|
5,370 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 30, 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
North America
|
|
|
105 |
|
|
|
996 |
|
|
|
— |
|
|
|
— |
|
|
|
996 |
|
| |
Europe
|
|
|
20 |
|
|
|
448 |
|
|
|
814 |
|
|
|
— |
|
|
|
1,262 |
|
| |
Asia-Pacific
|
|
|
40 |
|
|
|
73 |
|
|
|
— |
|
|
|
— |
|
|
|
73 |
|
| |
Latin America
|
|
|
50 |
|
|
|
257 |
|
|
|
822 |
|
|
|
— |
|
|
|
1,079 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Subtotal
|
|
|
215 |
|
|
|
1,774 |
|
|
|
1,636 |
|
|
|
— |
|
|
|
3,410 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Full year 2002
|
|
|
1,685 |
|
|
$ |
17,098 |
|
|
$ |
45,538 |
|
|
$ |
8,499 |
|
|
$ |
71,135 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides a summary of the adjustments to
previous actions recorded during fiscal year 2004, which are
included in the amounts disclosed above:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Adjustments Recorded in Quarter Ended | |
|
|
| |
|
| |
|
|
| Adjustments to Detailed Actions |
|
January 1, | |
|
October 2, | |
|
July 3, | |
|
April 3, | |
|
Fiscal Year | |
| Taken for Fiscal Years Ended: |
|
2005 | |
|
2004 | |
|
2004 | |
|
2004 | |
|
2004 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
January 3, 2004
|
|
$ |
— |
|
|
$ |
(503 |
) |
|
$ |
(252 |
) |
|
$ |
(94 |
) |
|
$ |
(849 |
) |
|
Actions prior to December 28, 2002
|
|
|
(440 |
) |
|
|
(2,149 |
) |
|
|
323 |
|
|
|
(97 |
) |
|
|
(2,363 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
(440 |
) |
|
$ |
(2,652 |
) |
|
$ |
71 |
|
|
$ |
(191 |
) |
|
$ |
(3,212 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following are descriptions of the detailed actions under the
broad-based reorganization plan and the profit enhancement
program as well as adjustments recorded during 2004.
Year ended January 1,
2005
Reorganization costs for the detailed actions taken in the year
ended January 1, 2005 were $316 and were primarily
comprised of employee termination benefits for workforce
reductions of approximately 30 associates in Asia Pacific. These
termination benefits were fully paid in 2004.
Year ended January 3,
2004
Reorganization costs for 2003 were primarily comprised of
employee termination benefits for workforce reductions worldwide
and lease exit costs for facility consolidations in North
America, Europe and Latin America. These restructuring actions
are complete; however, future cash outlays will be required
primarily due to severance payment terms and future lease
payments related to exited facilities; and other costs,
primarily comprised of contract termination expenses associated
with outsourcing certain IT infrastructure functions.
The payment activities and adjustments in 2004 and the remaining
liability at January 1, 2005 related to these detailed
actions are summarized as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Outstanding | |
|
Amounts Paid | |
|
|
|
Remaining | |
| |
|
Liability at | |
|
and Charged | |
|
|
|
Liability at | |
| |
|
January 3, | |
|
Against the | |
|
|
|
January 1, | |
| |
|
2004 | |
|
Liability | |
|
Adjustments | |
|
2005 | |
| |
|
| |
|
| |
|
| |
|
| |
|
Employee termination benefits
|
|
$ |
1,580 |
|
|
$ |
1,232 |
|
|
$ |
(184 |
) |
|
$ |
164 |
|
|
Facility costs
|
|
|
4,798 |
|
|
|
1,495 |
|
|
|
(1,105 |
) |
|
|
2,198 |
|
|
Other costs
|
|
|
577 |
|
|
|
577 |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total
|
|
$ |
6,955 |
|
|
$ |
3,304 |
|
|
$ |
(1,289 |
) |
|
$ |
2,362 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
The adjustments reflect a net credit of $125 in North America
and a credit of $59 in Europe for lower than expected costs of
employee termination benefits; and a net credit of $253 in North
America and credit of $852 in Europe, for lower than expected
costs associated with the favorable resolution of lease exit
costs.
|
|
|
Actions prior to December 28, 2002 |
Prior to December 28, 2002, detailed actions under the
Company’s reorganization plans included workforce
reductions and facility consolidations worldwide as well as
outsourcing of certain IT infrastructure functions. Facility
consolidations primarily included consolidation of the
Company’s North American headquarters in Santa Ana,
California and the Mississauga, Canada office facility, closing
the Newark and Fullerton, California distribution centers,
downsizing the distribution centers in Miami, Florida, Carol
Stream, Illinois and Jonestown, Pennsylvania, downsizing the
Williamsville, New York office facility, closing the returns
processing centers in Santa Ana and Rancho Cucamonga, California
and Harrisburg, Pennsylvania, closure of the Memphis, Tennessee
configuration center, consolidation and/or exit of warehouse and
office facilities in Europe, Latin America and Asia-Pacific; and
other costs primarily comprised of contract termination expenses
associated with outsourcing certain IT infrastructure functions
as well as other costs associated with the reorganization
activities. These restructuring actions are completed; however,
future cash outlays will be required due to severance payment
terms and future lease payments related to exited facilities.
54
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The payment activities and adjustments in 2004 and the remaining
liability at January 1, 2005 related to these detailed
actions are summarized as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Outstanding | |
|
Amounts Paid | |
|
|
|
Remaining | |
| |
|
Liability at | |
|
and Charged | |
|
|
|
Liability at | |
| |
|
January 3, | |
|
Against the | |
|
|
|
January 1, | |
| |
|
2004 | |
|
Liability | |
|
Adjustments | |
|
2005 | |
| |
|
| |
|
| |
|
| |
|
| |
|
Employee termination benefits
|
|
$ |
497 |
|
|
$ |
337 |
|
|
$ |
— |
|
|
$ |
160 |
|
|
Facility costs
|
|
|
18,129 |
|
|
|
6,698 |
|
|
|
(1,923 |
) |
|
|
9,508 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total
|
|
$ |
18,626 |
|
|
$ |
7,035 |
|
|
$ |
(1,923 |
) |
|
$ |
9,668 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
The adjustments reflect lower than expected costs associated
with favorable resolution of lease exit costs totaling $1,856 in
North America and $67 in Europe.
|
|
|
Other Profit Enhancement Program Implementation
Costs |
Other costs recorded in SG&A expenses and cost of sales in
2003 related to the implementation of the Company’s profit
enhancement program totaled $23,806, of which $17,399 related to
actions contemplated under the original profit enhancement
program announced on September 18, 2002 and $6,407 related
to new profit improvement opportunities primarily consisting of
a loss on the sale of a non-core German semiconductor equipment
distribution business and further consolidation of the
Company’s operations in the Nordic areas of Europe. The
$23,806 in other major-program costs included $23,363 recorded
in SG&A, comprised of $11,741 of incremental accelerated
depreciation ($10,834 in North America and $907 in Europe) of
fixed assets associated with the planned exit of facilities, the
outsourcing of certain IT infrastructure functions in North
America and software replaced by a more efficient solution;
$9,502 in recruiting, retention, training and other transition
costs associated with the relocation of major functions and
outsourcing of certain IT infrastructure functions in North
America; and $5,057 related to a loss on the sale of a non-core
German semiconductor equipment distribution business; partially
offset by a gain of $2,937 on the sale of excess land near the
Company’s corporate headquarters in Southern California. In
addition, other major-program costs of $443 were recorded in
cost of sales, primarily comprised of incremental inventory
losses caused by the decision to further consolidate Nordic
areas in Europe.
Other costs incurred during 2002 related to the implementation
of the profit enhancement program included $43,944 recorded as
SG&A expenses, comprised of $16,034 of incremental
depreciation ($12,268 in North America, $3,688 in Europe and $78
in Asia-Pacific), resulting from the reduction of estimated
useful lives of fixed assets to coincide with the planned exit
of certain facilities; $7,642 for losses on disposals of assets
associated with outsourcing certain IT infrastructure functions
in North America; $15,543 for consulting costs directly related
to the profit enhancement program in North America; $2,462
($2,112 in North America and $350 in Asia-Pacific) for
recruiting, retention and training associated with the
relocation of major functions; and $2,263 of other costs
primarily related to the Company’s decision to exit certain
markets in Europe. The program implementation also resulted in
$1,552 recorded in cost of sales, primarily comprised of
incremental inventory and vendor-program related costs caused by
the decision to exit certain markets in Europe.
Note 4 — Acquisitions
The Company accounts for all acquisitions after June 30,
2001 in accordance with Statements of Financial Accounting
Standards No. 141, “Business Combinations.” The
results of operations of these businesses have been combined
with the Company’s results of operations beginning on their
acquisition dates.
In November 2004, the Company acquired all of the outstanding
shares of Techpac Holdings Limited, or Tech Pacific, one of
Asia-Pacific’s largest technology distributors, for cash
and the assumption of debt.
55
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
This strategic acquisition significantly strengthens the
Company’s management team and ability to execute its
operational objectives in the growing Asia-Pacific region. The
total estimated cost of the acquisition is as follows:
| |
|
|
|
|
|
|
Purchase price:
|
|
|
|
|
| |
Cash paid to sellers
|
|
$ |
385,022 |
|
| |
Debt assumed (net of cash acquired)
|
|
|
162,866 |
|
| |
Acquisition costs
|
|
|
5,800 |
|
| |
|
|
|
| |
|
$ |
553,688 |
|
| |
|
|
|
The purchase price includes preliminary estimates of costs to
restructure the operations of Tech Pacific. The final costs
incurred may differ materially as these actions are completed.
The purchase price has been allocated to the assets acquired and
liabilities assumed based on estimated fair values on the
transaction date. The Company is in the process of completing
the valuation of vendor and customer relationship intangible
assets and expects to finalize customer data analysis and the
valuation during the first quarter of fiscal year 2005. These
assets are expected to be amortized over the estimated useful
life of approximately six years. The preliminary purchase price
allocation is summarized as follows:
| |
|
|
|
|
|
Tangible assets, including accounts receivable, inventories,
property and equipment and other assets
|
|
$ |
475,026 |
|
|
Goodwill
|
|
|
308,497 |
|
|
Identifiable intangible assets — customer and vendor
relationships
|
|
|
36,000 |
|
|
Liabilities, including accounts payable and accrued expenses
|
|
|
(265,835 |
) |
| |
|
|
|
|
Fair value of assets acquired and liabilities assumed
|
|
$ |
553,688 |
|
| |
|
|
|
Less than one percent of the goodwill is expected to be
deductible for tax purposes. A strong management and employee
base with excellent execution capabilities, history of solid
operating margins and profitability, and a strong presence in
the growing Asia-Pacific region were among the factors that
contributed to a purchase price resulting in the recognition of
goodwill.
The following unaudited pro forma combined information assumes
the acquisition of Tech Pacific occurred as of the beginning of
each of the respective fiscal years presented below. These
unaudited pro forma results have been prepared for informational
purposes only and do not purport to represent what the results
of operations would have been had the acquisition occurred as of
those dates, nor of future results of operations. The unaudited
pro forma results for the fifty-two weeks ended January 1,
2005 and the fifty-three weeks January 3, 2004 are as
follows:
| |
|
|
|
|
|
|
|
|
|
| |
|
Fiscal Year | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
Net sales
|
|
$ |
27,651,703 |
|
|
$ |
24,842,426 |
|
| |
|
|
|
|
|
|
|
Net earnings
|
|
$ |
232,081 |
|
|
$ |
160,450 |
|
| |
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
| |
Basic
|
|
$ |
1.49 |
|
|
$ |
1.06 |
|
| |
|
|
|
|
|
|
| |
Diluted
|
|
$ |
1.45 |
|
|
$ |
1.05 |
|
| |
|
|
|
|
|
|
To protect the value of the Company’s U.S. dollar
investment in the acquisition of Tech Pacific, which was
denominated in Australian dollars, the Company entered into a
forward currency exchange contract for a notional amount equal
to 537 million Australian dollars. The forward exchange
contract was entered at an
56
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
agreed forward contract price of 0.71384 U.S. dollar to one
Australian dollar. This forward exchange contract was settled
concurrent with the Company’s payment of the purchase price
for Tech Pacific on November 10, 2004, the closing date of
the acquisition at a gain of $23,120.
In connection with the Company’s acquisition of Tech
Pacific, the parties agreed that 35 million Australian
dollars, or approximately $27,000, of the purchase price shall
be held in an escrow account to cover claims from Ingram Micro
for various indemnities by the sellers under the sale agreement,
of which 10 million Australian dollars, or approximately
$8,000, was released on March 1, 2005, and
25 million Australian dollars, or approximately $19,000,
will be released in full to the sellers on February 28,
2006 if no claims are made by the Company under the sale
agreement before such date.
In July 2004, the Company acquired substantially all of the
assets and assumed certain liabilities of Nimax, Inc., a
privately held distributor of automatic identification and data
capture/point-of-sale, barcode and wireless products, as well as
enterprise mobility solutions. The purchase price, consisting of
a cash payment of $8,749 in 2004 and $1,000 payable on or before
October 31, 2006, was allocated to the assets acquired and
liabilities assumed based on estimated fair values on the
transaction date, resulting in the recording of $918 of other
amortizable intangible assets primarily related to customer and
vendor relationships. No goodwill was recorded in this
transaction. In addition to the cash payment, the purchase
agreement requires the Company to pay the seller up to $6,000 at
the end of two years, based on a specified earn-out formula,
which will be recorded as an adjustment of the purchase price.
In April 2003, the Company increased its ownership in an
India-based subsidiary by acquiring approximately 37% of the
subsidiary held by minority shareholders. The total purchase
price for this acquisition consisted of a cash payment of
$3,145, resulting in the recording of approximately $2,017 of
goodwill.
In February 2003, the Company increased ownership in Ingram
Macrotron AG, a German-based distribution company, by acquiring
the remaining interest of approximately 3% held by minority
shareholders. The purchase price of this acquisition consisted
of a cash payment of $6,271, resulting in the recording of
$5,281 of goodwill. Court actions have been filed by several
minority shareholders contesting the adequacy of the purchase
price paid for the shares and various other actions, which could
affect the purchase price. Depending upon the outcome of these
actions, additional payments for such shares may be required.
The results of operations for the other companies acquired were
not material to the Company’s consolidated results of
operations on an individual or aggregate basis, and accordingly,
pro forma results of operations have not been presented.
Note 5 — Accounts Receivable
The Company has trade accounts receivable-based facilities in
Europe, which provide up to approximately $238,000 of additional
financing capacity, depending upon the level of trade accounts
receivable eligible to be transferred or sold. At
January 1, 2005 and January 3, 2004, the Company had
no trade accounts receivable sold to and held by third parties
under the European program. At January 1, 2005, the
Company’s actual aggregate capacity under this program,
based on eligible accounts receivable outstanding, was
approximately $208,885.
Effective July 29, 2004, the Company terminated its
$700,000 revolving accounts receivable securitization program in
the U.S., which was scheduled to expire in March 2005. On the
same day, the Company entered into a new revolving accounts
receivable-based financing program, which provides for up to
$500,000 in borrowing capacity secured by substantially all
U.S. based receivables (see Note 7 to the consolidated
financial statements for a detailed discussion of the new
program). In connection with the former program, most of the
Company’s U.S. trade accounts receivable were
transferred without recourse to a trust in exchange for a
beneficial interest in the total pool of trade receivables.
Sales of undivided interests to third parties under
57
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
this program resulted in a reduction of total accounts
receivable in the Company’s consolidated balance sheet. The
excess of the trade accounts receivable transferred over amounts
sold to and held by third parties at any one point in time
represented the Company’s retained interest in the
transferred accounts receivable and was shown in the
Company’s consolidated balance sheet as a separate caption
under accounts receivable. Retained interests were carried at
their fair value, estimated as the net realizable value, which
considered the relatively short liquidation period and included
an estimated provision for credit losses. At January 3,
2004, the amount of undivided interests sold to and held by
third parties under the former securitization program totaled
$60,000.
On July 26, 2004, the Company amended its existing accounts
receivable-based facility in Canada of 150 million Canadian
dollars (originally scheduled to expire in August 2004) and
extended the maturity to August 31, 2008 (see Note 7
to the consolidated financial statements for a detailed
discussion of this new facility). At January 3, 2004, the
Company had no trade accounts receivable sold to and held by
third parties under the former program.
The Company is required to comply with certain financial
covenants under some of its financing facilities, including
minimum tangible net worth, restrictions on funded debt,
interest coverage and trade accounts receivable portfolio
performance covenants. The Company is also restricted in the
amount of dividends it can pay as well as the amount of common
stock that it can repurchase annually. At January 1, 2005,
the Company was in compliance with all covenants or other
requirements set forth in its accounts receivable financing
programs discussed above.
Losses in the amount of $5,015, $10,206 and $9,363 for the
fiscal years 2004, 2003 and 2002, respectively, related to the
sale of trade accounts receivable under these facilities, or
off-balance sheet debt, are included in other expenses in the
Company’s consolidated statement of income.
Note 6 — Property and Equipment
Property and equipment consist of the following:
| |
|
|
|
|
|
|
|
|
| |
|
Fiscal Year End | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
Land
|
|
$ |
1,334 |
|
|
$ |
1,329 |
|
|
Buildings and leasehold improvements
|
|
|
136,328 |
|
|
|
125,095 |
|
|
Distribution equipment
|
|
|
206,615 |
|
|
|
206,504 |
|
|
Computer equipment and software
|
|
|
291,097 |
|
|
|
303,269 |
|
| |
|
|
|
|
|
|
| |
|
|
635,374 |
|
|
|
636,197 |
|
|
Accumulated depreciation
|
|
|
(436,241 |
) |
|
|
(425,475 |
) |
| |
|
|
|
|
|
|
| |
|
$ |
199,133 |
|
|
$ |
210,722 |
|
| |
|
|
|
|
|
|
58
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 7 — Long-Term Debt
The Company’s debt consists of the following:
| |
|
|
|
|
|
|
|
|
| |
|
Fiscal Year End | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
Senior subordinated notes
|
|
$ |
213,894 |
|
|
$ |
219,702 |
|
|
European revolving trade accounts receivable-backed financing
facilities
|
|
|
— |
|
|
|
20,207 |
|
|
Asia-Pacific revolving trade accounts receivable-backed
financing facilities
|
|
|
132,289 |
|
|
|
— |
|
|
Revolving unsecured credit facilities and other debt
|
|
|
168,649 |
|
|
|
128,346 |
|
| |
|
|
|
|
|
|
| |
|
|
514,832 |
|
|
|
368,255 |
|
|
Current maturities of long-term debt
|
|
|
(168,649 |
) |
|
|
(128,346 |
) |
| |
|
|
|
|
|
|
| |
|
$ |
346,183 |
|
|
$ |
239,909 |
|
| |
|
|
|
|
|
|
On July 29, 2004, the Company entered into a new revolving
accounts receivable-based financing program in the U.S., which
provides for up to $500,000 in borrowing capacity secured by
substantially all U.S.-based receivables. This financing program
replaced the Company’s revolving accounts receivable
securitization program or off-balance sheet debt (see
Note 5 to the consolidated financial statements for a
discussion of the former off-balance sheet debt). At the option
of the Company, the program may be increased to as much as
$600,000 at any time prior to July 29, 2006. This new
facility expires on March 31, 2008. Based on the terms and
conditions of the new program structure, borrowings under the
program are accounted for as a financing facility, or on-balance
sheet debt. At January 1, 2005, the Company had no
borrowings under this new facility.
On July 26, 2004, the Company amended its current trade
accounts receivable program in Canada, which provides for
borrowing capacity up to 150 million Canadian dollars, or
approximately $124,000 (see Note 5 to the consolidated
financial statements for a discussion of the former off-balance
sheet debt). Pursuant to the amendment, the Company extended the
program maturity to August 31, 2008, on substantially
similar terms and conditions that existed prior to such
amendment. However, under the new program, the Company obtained
certain rights to repurchase transferred receivables. Based on
the terms and conditions of the new program structure,
borrowings under the program are accounted for as on-balance
sheet debt. At January 1, 2005, the Company had no
borrowings under this amended facility.
In June 2002, the Company entered into a three-year European
revolving trade accounts receivable backed financing facility
supported by the trade accounts receivable of a subsidiary in
Europe for Euro 107,000, or approximately $146,000, with a
financial institution that has an arrangement with a related
issuer of third-party commercial paper. In August 2003, the
Company entered into another three-year European revolving trade
accounts receivable backed financing facility supported by the
trade accounts receivable of two other subsidiaries in Europe
for Euro 230,000, or approximately $314,000, with the same
financial institution and related issuer of third-party
commercial paper. In March 2004, the terms of these agreements
were amended to eliminate the minimum borrowing requirements
that existed under the original agreements and remove the
smaller of the two European subsidiaries from the August 2003
facility. Both of these European facilities require certain
commitment fees and borrowings under both facilities incur
financing costs at rates indexed to EURIBOR.
The Company could lose access to all or part of its financing
under these European facilities under certain circumstances,
including: (a) a reduction in credit ratings of the
third-party issuer of commercial paper or the back-up liquidity
providers, if not replaced or (b) failure to meet certain
defined eligibility criteria for the trade accounts receivable,
such as receivables must be assignable and free of liens and
dispute or set-off rights.
59
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
In addition, in certain situations, the Company could lose
access to all or part of its financing with respect to the
August 2003 European facility as a result of the rescission of
its authorization to collect the receivables by the relevant
supplier under applicable local law. Based on the Company’s
assessment of the duration of both programs, the history and
strength of the financial partners involved, other historical
data, various remedies available to the Company, and the
remoteness of such contingencies, the Company believes that it
is unlikely that any of these risks will materialize in the near
term. At January 1, 2005, the Company had no borrowings
under these facilities compared to $20,207 at January 3,
2004.
In November 2004, the Company assumed from Tech Pacific a
multi-currency revolving trade accounts receivable backed
financing facility in Asia-Pacific supported by the trade
accounts receivable of two subsidiaries in the region for
200 million Australian dollars, or approximately $156,000,
with a financial institution that has an arrangement with a
related issuer of third-party commercial paper that expires in
June 2008. The interest rate is dependent upon the currency in
which the drawing is made and is related to the local short-term
bank indicator rate for such currency. This facility has no
fixed repayment terms prior to maturity. At January 1,
2005, the Company had borrowings of $132,289 under this facility.
The Company’s ability to access financing under the North
American, European and Asia-Pacific facilities is dependent upon
the level of eligible trade accounts receivable and the level of
market demand for commercial paper. At January 1, 2005,
actual aggregate capacity under these programs, based on
eligible accounts receivable outstanding, was approximately
$996,267.
The Company also assumed from Tech Pacific in November 2004, a
multi-currency secured revolving loan facility, or assumed
facility, of 80 million Australian dollars, or
approximately $62,000, in connection with change of control
provisions triggered by the Company’s acquisition of Tech
Pacific, which may be terminated on or before April 2,
2005. The interest rate is dependent upon the currency in which
the drawing is made, and is related to the short-term bank
indicator rate for such currency. The assumed facility was
substantially secured by the assets and stock of certain of the
Company’s Asia-Pacific subsidiaries, and has no fixed
repayment terms prior to maturity. However, on January 31,
2005, in connection with the acquisition of Tech Pacific, the
Company effected a release of all liens and related security
interests as well as material covenant compliance requirements
under this facility through the issuance of a standby letter of
credit for the same amount in favor of the lender. At
January 1, 2005, the Company had no borrowings under this
facility. The assumed facility can also be used to support
letters of credit. At January 1, 2005, letters of credit
totaling approximately $24,129 were issued to a vendor to
support purchases by the Company’s subsidiaries and to
certain financial institutions to support banking lines for
certain subsidiaries, or local borrowings from banks made
available to certain of its subsidiaries in the Asia-Pacific
region. The issuance of these letters of credit reduces the
Company’s available capacity under the assumed facility by
the same amount.
The Company has a $150,000 revolving senior unsecured credit
facility with a bank syndicate that expires in December 2005. At
January 1, 2005 and January 3, 2004, the Company
had no borrowings outstanding under this credit facility. This
facility can also be used to support letters of credit. At
January 1, 2005 and January 3, 2004, letters of credit
totaling approximately $24,255 and $63,661, respectively, were
issued to certain vendors and financial institutions to support
purchases by its subsidiaries, payment of insurance premiums and
flooring arrangements. The issuance of these letters of credit
reduces the Company’s available capacity under the
agreement by the same amounts.
On August 16, 2001, the Company sold $200,000 of
9.875% senior subordinated notes due 2008 at an issue price
of 99.382%, resulting in net cash proceeds of approximately
$195,084, net of issuance costs of approximately $3,680.
Interest on the notes is payable semi-annually in arrears on
each February 15 and August 15. The Company may redeem any of
the notes beginning on August 15, 2005 with an initial
redemption price of 104.938% of their principal amount plus
accrued interest. The redemption price of the notes will be
102.469% plus accrued interest beginning on August 15, 2006
and will be 100% of their principal amount plus accrued interest
beginning on August 15, 2007. In addition, on or before
August 15, 2004, the
60
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Company may redeem an aggregate of 35% of the notes at a
redemption price of 109.875% of their principal amount plus
accrued interest using the proceeds from sales of certain kinds
of common stock.
On August 16, 2001, the Company also entered into interest
rate swap agreements with two financial institutions, the effect
of which was to swap the fixed-rate obligation on the senior
subordinated notes for a floating rate obligation equal to
90-day LIBOR plus 4.260%. All other financial terms of the
interest rate swap agreements are identical to those of the
senior subordinated notes, except for the quarterly payments of
interest, which will be on each February 15, May 15,
August 15 and November 15 and ending on the termination date of
the swap agreements. These interest rate swap arrangements
contain ratings conditions requiring posting of collateral by
either party and at minimum increments based on the market value
of the instrument and credit ratings of either party. The
marked-to-market value of the interest rate swap amounted to
$14,533 and $20,518 at January 1, 2005 and January 3,
2004, respectively, which is recorded in other assets with an
offsetting adjustment to the hedged debt, bringing the total
carrying value of the senior subordinated notes to $213,894 and
$219,702, respectively.
The Company also has additional lines of credit, short-term
overdraft facilities and other credit facilities with various
financial institutions worldwide, which provide for borrowing
capacity aggregating approximately $525,000 at January 1,
2005. Most of these arrangements are on an uncommitted basis and
are reviewed periodically for renewal. At January 1, 2005
and January 3, 2004, the Company had $168,649 and $128,346,
respectively, outstanding under these facilities. At
January 1, 2005 and January 3, 2004, letters of credit
totaling approximately $30,525 and $29,300, respectively, were
issued principally to certain vendors to support purchases by
the Company’s subsidiaries. The issuance of these letters
of credit reduces its available capacity under these agreements
by the same amount. The weighted average interest rate on the
outstanding borrowings under these facilities was 5.0% and
5.2% per annum at January 1, 2005 and January 3,
2004, respectively.
The Company is required to comply with certain financial
covenants under some of its financing facilities, including
minimum tangible net worth, restrictions on funded debt and
interest coverage and trade accounts receivable portfolio
performance covenants, including metrics related to receivables
and payables. The Company is also restricted in the amount of
additional indebtedness it can incur, dividends it can pay, as
well as the amount of common stock that it can repurchase
annually. At January 1, 2005, the Company was in compliance
with all covenants or other requirements set forth in the credit
agreements or other agreements with the Company’s creditors
discussed above.
Note 8 — Income Taxes
The components of income before income taxes and cumulative
effect of adoption of a new accounting standard consist of the
following:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fiscal Year | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
United States
|
|
$ |
85,757 |
|
|
$ |
36,477 |
|
|
$ |
3,058 |
|
|
Foreign
|
|
|
177,519 |
|
|
|
79,317 |
|
|
|
5,940 |
|
| |
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
263,276 |
|
|
$ |
115,794 |
|
|
$ |
8,998 |
|
| |
|
|
|
|
|
|
|
|
|
61
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The provision for (benefit from) income taxes before cumulative
effect of adoption of a new accounting standard consist of the
following:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fiscal Year | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Federal
|
|
$ |
23,173 |
|
|
$ |
414 |
|
|
$ |
9,901 |
|
| |
State
|
|
|
1,369 |
|
|
|
— |
|
|
|
2,364 |
|
| |
Foreign
|
|
|
44,686 |
|
|
|
20,082 |
|
|
|
31,176 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
|
69,228 |
|
|
|
20,496 |
|
|
|
43,441 |
|
| |
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Federal
|
|
|
(31,729 |
) |
|
|
(55,630 |
) |
|
|
(4,917 |
) |
| |
State
|
|
|
2,118 |
|
|
|
2,069 |
|
|
|
(2,493 |
) |
| |
Foreign
|
|
|
3,758 |
|
|
|
(342 |
) |
|
|
(32,702 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
(25,853 |
) |
|
|
(53,903 |
) |
|
|
(40,112 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
Provision for (benefit from) income taxes
|
|
$ |
43,375 |
|
|
$ |
(33,407 |
) |
|
$ |
3,329 |
|
| |
|
|
|
|
|
|
|
|
|
Deferred income taxes reflect the tax effect of temporary
differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the
Company’s net deferred tax assets and liabilities are as
follows:
| |
|
|
|
|
|
|
|
|
|
| |
|
Fiscal Year End | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
Net deferred tax assets and (liabilities):
|
|
|
|
|
|
|
|
|
| |
Net operating loss carryforwards
|
|
$ |
62,878 |
|
|
$ |
79,499 |
|
| |
Allowance on accounts receivable
|
|
|
22,660 |
|
|
|
16,708 |
|
| |
Available tax credits
|
|
|
23,299 |
|
|
|
17,403 |
|
| |
Inventories
|
|
|
(6,838 |
) |
|
|
(6,102 |
) |
| |
Realized gains on available-for-sale securities not currently
taxable
|
|
|
(9,108 |
) |
|
|
(50,186 |
) |
| |
Depreciation and amortization
|
|
|
(38,189 |
) |
|
|
(40,170 |
) |
| |
Employee benefits and compensation
|
|
|
29,025 |
|
|
|
20,615 |
|
| |
Restructuring charges
|
|
|
3,393 |
|
|
|
8,178 |
|
| |
Reserves and accruals
|
|
|
22,767 |
|
|
|
14,292 |
|
| |
Other
|
|
|
5,133 |
|
|
|
(3,123 |
) |
| |
|
|
|
|
|
|
| |
|
|
115,020 |
|
|
|
57,114 |
|
| |
Valuation allowance
|
|
|
(16,477 |
) |
|
|
(12,068 |
) |
| |
|
|
|
|
|
|
| |
Total
|
|
$ |
98,543 |
|
|
$ |
45,046 |
|
| |
|
|
|
|
|
|
Net current deferred tax assets of $92,553 and $44,643 were
included in other current assets at January 1, 2005 and
January 3, 2004, respectively. Net non-current deferred tax
assets of $5,990 and $403 were included in other assets of
January 1, 2005 and January 3, 2004, respectively. The
net increase in valuation allowance of $4,409 at January 1,
2005 primarily represents additional allowance for net operating
losses and other temporary items, as recovery of these assets is
not likely.
62
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
At December 28, 2002, the Company had deferred tax
liabilities of $2,418, $42,131 and $76,098 related to the gains
of $6,535, $111,458, and $201,318, respectively, realized on the
sales of Softbank common stock in 2002, 2000, and 1999,
respectively. The Softbank common stock was sold in the public
market by certain of Ingram Micro’s foreign subsidiaries,
which are located in a low-tax jurisdiction. At the time of
sale, the Company concluded that U.S. taxes were not
currently payable on the gains based on its internal assessment
and opinions received from its advisors. However, in situations
involving uncertainties in the interpretation of complex tax
regulations by various taxing authorities, the Company provides
for tax liabilities unless it considers it probable that taxes
will not be due. The level of opinions received from its
advisors and the Company’s internal assessment did not
allow the Company to reach that conclusion on this matter. The
Company’s U.S. Federal tax returns were closed in
September 2004 and 2003 for the fiscal years 2000 and 1999,
respectively, and certain state returns for fiscal years 2000
and 1999 were closed in the third and fourth quarters of 2004,
which resolved these matters for tax purposes in those
jurisdictions. Accordingly, the Company reversed the related
Federal and certain state deferred tax liabilities of $39,978
and $1,100 associated with the gain on the 2000 and 1999 sales
in the third and fourth quarters of 2004, respectively, while it
reversed the related Federal deferred tax liability of $70,461
associated with the gain on the 1999 sale in the third quarter
of 2003, thereby reducing its income tax provisions for both
years in the consolidated statement of income. Although the
Company reviews its assessments in these matters on a regular
basis, it cannot currently determine when the remaining deferred
tax liabilities at January 1, 2005 of $2,418, $2,407 and
$4,283 related to the 2002, 2000 and 1999 sales, respectively,
will be finally resolved with the taxing authorities, or if the
deferred taxes will ultimately be paid. As a result, the Company
continues to provide for these tax liabilities. However, in the
event of an unfavorable resolution, the Company believes that it
will be able to fund any such taxes that may be assessed on this
matter with available sources of liquidity.
Reconciliation of statutory U.S. federal income tax rate to
the Company’s effective rate is as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fiscal Year | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
U.S. statutory rate
|
|
$ |
92,147 |
|
|
$ |
40,528 |
|
|
$ |
3,149 |
|
|
Reversal of Softbank federal deferred tax liability
|
|
|
(41,078 |
) |
|
|
(70,461 |
) |
|
|
— |
|
|
State income taxes, net of federal income tax benefit
|
|
|
2,266 |
|
|
|
1,345 |
|
|
|
(83 |
) |
|
Effect of international operations
|
|
|
(10,210 |
) |
|
|
(4,021 |
) |
|
|
834 |
|
|
Other
|
|
|
250 |
|
|
|
(798 |
) |
|
|
(571 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Total tax provision
|
|
$ |
43,375 |
|
|
$ |
(33,407 |
) |
|
$ |
3,329 |
|
| |
|
|
|
|
|
|
|
|
|
The Company had net operating tax loss carryforwards of $263,527
at January 1, 2005, of which approximately 85% have no
expiration date. The remaining net operating tax loss
carryforwards expire through the year 2024.
The Company does not provide for income taxes on undistributed
earnings of foreign subsidiaries as such earnings are intended
to be permanently reinvested in those operations. The amount of
the foreign undistributed earnings is not practicably
determinable.
The American Jobs Creation Act of 2004 (“AJCA”) was
signed into law in October 2004 and replaces an export incentive
with a deduction from domestic manufacturing income. These
provisions are not expected to have a material impact on the
Company’s income tax provision. The AJCA also allows the
Company to repatriate up to $500,000 of permanently reinvested
foreign earnings in 2005 at an effective tax rate of 5.25%. The
Company is currently reviewing whether to take advantage of this
new provision of the AJCA.
63
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Note 9 — Transactions with Related Parties
The Company has loans receivable from certain of its executive
officers and other associates. These loans, ranging up to $120,
have interest rates ranging from 2.74% to 6.75% per annum
and are payable up to four years. All loans to executive
officers, unless granted prior to their election to such
position, were granted and approved by the Human Resources
Committee of the Company’s Board of Directors prior to
July 30, 2002, the effective date of the Sarbanes-Oxley Act
of 2002. No material modification or renewals to these loans to
executive officers have been made since that date or subsequent
to the employee’s election as an executive officer of the
Company, if later. At January 1, 2005 and January 3,
2004, the Company’s employee loans receivable balance was
$548 and $876, respectively.
Note 10 — Commitments and Contingencies
There are various claims, lawsuits and pending actions against
the Company incidental to its operations. It is the opinion of
management that the ultimate resolution of these matters will
not have a material adverse effect on the Company’s
consolidated financial position, results of operations or cash
flows.
As is customary in the IT distribution industry, the Company has
arrangements with certain finance companies that provide
inventory-financing facilities for its customers. In conjunction
with certain of these arrangements, the Company has agreements
with the finance companies that would require it to repurchase
certain inventory, which might be repossessed, from the
customers by the finance companies. Due to various reasons,
including among other items, the lack of information regarding
the amount of saleable inventory purchased from the Company
still on hand with the customer at any point in time, the
Company’s repurchase obligations relating to inventory
cannot be reasonably estimated. Repurchases of inventory by the
Company under these arrangements have been insignificant to date.
During 2002 and 2003, one of the Company’s Latin American
subsidiaries was audited by the Brazilian taxing authorities in
relation to certain commercial taxes. As a result of this audit,
the subsidiary received an assessment of 28.3 million
Brazilian reais, including interest and penalties through
January 1, 2005, or approximately $10,700 as of
January 1, 2005, alleging these commercial taxes were not
properly remitted for the period January through September 2002.
The Brazilian taxing authorities may make similar claims for
periods subsequent to September 2002. Additional assessments, if
received, may be significant either individually or in the
aggregate. It is management’s opinion, based upon the
opinions of outside legal advisors, that the Company has valid
defenses related to this matter. Although the Company is
vigorously pursuing administrative and judicial action to
challenge the assessment, no assurance can be given as to the
ultimate outcome. An unfavorable resolution of this matter is
not expected to have a material impact on the Company’s
financial condition, but depending upon the time period and
amounts involved it may have a material negative effect on the
Company’s results of operations.
In December 2002, the Company entered into an agreement with a
third-party provider of IT outsourcing services. The services to
be provided include mainframe, major server, desktop and
enterprise storage operations, wide-area and local-area network
support and engineering; systems management services; help desk
services; and worldwide voice/ PBX. This agreement expires in
December 2009, but is cancelable at the option of the Company
subject to payment of termination fees. The Company also leases
the majority of its facilities and certain equipment under
noncancelable operating leases. Renewal and purchase options at
fair values exist for a substantial portion of the leases.
Rental expense, including obligations related to IT outsourcing
services, for the years ended 2004, 2003 and 2002 was $110,826,
$89,809 and $92,489, respectively.
64
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Future minimum rental commitments on operating leases that have
remaining noncancelable lease terms in excess of one year as
well as minimum contractual payments under the IT outsourcing
agreement as of January 1, 2005 were as follows:
| |
|
|
|
|
|
2005
|
|
$ |
85,282 |
|
|
2006
|
|
|
77,717 |
|
|
2007
|
|
|
72,099 |
|
|
2008
|
|
|
65,519 |
|
|
2009
|
|
|
61,902 |
|
|
Thereafter
|
|
|
151,463 |
|
| |
|
|
|
| |
|
$ |
513,982 |
|
| |
|
|
|
The above minimum payments have not been reduced by minimum
sublease rental income of $89,074 due in the future under
noncancelable sublease agreements as follows: $8,388, $8,302,
$9,330, $9,544, $9,995 and $43,515 in 2005, 2006, 2007, 2008,
2009 and thereafter, respectively.
Note 11 — Segment Information
The Company operates predominantly in a single industry segment
as a distributor of IT products and services. The Company’s
operating segments are based on geographic location, and the
measure of segment profit is income from operations.
Geographic areas in which the Company operated during 2004
include North America (United States and Canada), Europe
(Austria, Belgium, Denmark, Finland, France, Germany, Hungary,
Italy, The Netherlands, Norway, Spain, Sweden, Switzerland and
United Kingdom), Asia-Pacific (Australia, The People’s
Republic of China [including Hong Kong], India, Malaysia, New
Zealand, Singapore, Taiwan, and Thailand), and Latin America
(Brazil, Chile, Mexico, and the Company’s Latin American
export operations in Miami). Intergeographic sales primarily
represent intercompany sales that are accounted for based on
established sales prices between the related companies and are
eliminated in consolidation.
Financial information by geographic segments is as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
As of and for the Fiscal Year Ended | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
North America
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Sales to unaffiliated customers
|
|
$ |
11,776,679 |
|
|
$ |
10,964,761 |
|
|
$ |
12,132,099 |
|
| |
|
Intergeographic sales
|
|
|
150,137 |
|
|
|
130,804 |
|
|
|
147,459 |
|
| |
Europe
|
|
|
9,839,185 |
|
|
|
8,267,000 |
|
|
|
7,150,128 |
|
| |
Asia-Pacific
|
|
|
2,741,608 |
|
|
|
2,319,982 |
|
|
|
1,961,458 |
|
| |
Latin America
|
|
|
1,104,599 |
|
|
|
1,061,274 |
|
|
|
1,215,580 |
|
| |
Eliminations of intergeographic sales
|
|
|
(150,137 |
) |
|
|
(130,804 |
) |
|
|
(147,459 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
|
Total
|
|
$ |
25,462,071 |
|
|
$ |
22,613,017 |
|
|
$ |
22,459,265 |
|
| |
|
|
|
|
|
|
|
|
|
65
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
As of and for the Fiscal Year Ended | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
Income (loss) from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
North America
|
|
$ |
130,321 |
|
|
$ |
94,501 |
|
|
$ |
36,498 |
|
| |
Europe
|
|
|
129,754 |
|
|
|
73,248 |
|
|
|
12,739 |
|
| |
Asia-Pacific
|
|
|
9,796 |
|
|
|
(10,335 |
) |
|
|
1,020 |
|
| |
Latin America
|
|
|
13,496 |
|
|
|
(1,221 |
) |
|
|
(49 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
|
Total
|
|
$ |
283,367 |
|
|
$ |
156,193 |
|
|
$ |
50,208 |
|
| |
|
|
|
|
|
|
|
|
|
|
Identifiable assets
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
North America
|
|
$ |
3,812,388 |
|
|
$ |
3,387,133 |
|
|
$ |
3,391,571 |
|
| |
Europe
|
|
|
2,105,086 |
|
|
|
1,668,710 |
|
|
|
1,278,812 |
|
| |
Asia-Pacific
|
|
|
690,047 |
|
|
|
173,573 |
|
|
|
191,104 |
|
| |
Latin America
|
|
|
319,216 |
|
|
|
244,746 |
|
|
|
282,867 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Total
|
|
$ |
6,926,737 |
|
|
$ |
5,474,162 |
|
|
$ |
5,144,354 |
|
| |
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
North America
|
|
$ |
19,767 |
|
|
$ |
23,128 |
|
|
$ |
38,401 |
|
| |
Europe
|
|
|
13,880 |
|
|
|
7,317 |
|
|
|
10,773 |
|
| |
Asia-Pacific
|
|
|
2,211 |
|
|
|
2,182 |
|
|
|
3,868 |
|
| |
Latin America
|
|
|
1,127 |
|
|
|
2,376 |
|
|
|
1,637 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Total
|
|
$ |
36,985 |
|
|
$ |
35,003 |
|
|
$ |
54,679 |
|
| |
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
North America
|
|
$ |
34,631 |
|
|
$ |
55,426 |
|
|
$ |
70,791 |
|
| |
Europe
|
|
|
17,580 |
|
|
|
17,491 |
|
|
|
21,297 |
|
| |
Asia-Pacific
|
|
|
3,426 |
|
|
|
3,194 |
|
|
|
3,428 |
|
| |
Latin America
|
|
|
2,020 |
|
|
|
2,408 |
|
|
|
3,247 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Total
|
|
$ |
57,657 |
|
|
$ |
78,519 |
|
|
$ |
98,763 |
|
| |
|
|
|
|
|
|
|
|
|
66
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Supplemental information relating to reorganization costs and
other profit enhancement program costs by geographic segment is
as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fiscal Year | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| |
|
| |
|
| |
|
| |
|
Reorganization costs
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
North America
|
|
$ |
(2,234 |
) |
|
$ |
11,234 |
|
|
$ |
55,662 |
|
| |
|
Europe
|
|
|
(978 |
) |
|
|
9,202 |
|
|
|
12,644 |
|
| |
|
Asia-Pacific
|
|
|
316 |
|
|
|
74 |
|
|
|
412 |
|
| |
|
Latin America
|
|
|
— |
|
|
|
1,060 |
|
|
|
2,417 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
|
Total
|
|
$ |
(2,896 |
) |
|
$ |
21,570 |
|
|
$ |
71,135 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Other profit enhancement program costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Charged to cost of sales
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Europe
|
|
$ |
— |
|
|
$ |
443 |
|
|
$ |
1,552 |
|
| |
|
|
|
|
|
|
|
|
|
| |
| |
Charged to operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
North America
|
|
$ |
— |
|
|
$ |
17,399 |
|
|
$ |
37,565 |
|
| |
|
Europe
|
|
|
— |
|
|
|
5,964 |
|
|
|
5,951 |
|
| |
|
Asia-Pacific
|
|
|
— |
|
|
|
— |
|
|
|
428 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
|
Total
|
|
$ |
— |
|
|
$ |
23,363 |
|
|
$ |
43,944 |
|
| |
|
|
|
|
|
|
|
|
|
Note 12 — Stock Options and Equity Incentive
Plans
The following summarizes the Company’s existing stock
option and equity incentive plans.
Equity Incentive Plans
In 2003, the Company’s shareowners approved the Ingram
Micro Inc. 2003 Equity Incentive Plan, which replaced the
Company’s three existing shareowner-approved equity
incentive plans, the 1996, 1998 and 2000 Equity Incentive Plans
(collectively called “the Equity Incentive Plans”) for
the granting of stock-based incentive awards including incentive
stock options, non-qualified stock options, restricted stock,
and stock appreciation rights, among others, to key employees
and members of the Company’s Board of Directors. As of
January 1, 2005, approximately 19,600,000 shares were
available for grant. Options granted under the Equity Incentive
Plans were issued at exercise prices ranging from $9.75 to
$53.56 per share and have expiration dates not longer than
10 years from the date of grant. The options granted
generally vest over a period of one to five years. In 2004, 2003
and 2002, the Company granted a total of 35,019, 40,676 and
17,322 shares, respectively, of restricted Class A
Common Stock to board members under the Equity Incentive Plans.
These shares have no purchase price and vest over a one-year
period. The Company recorded unearned compensation in 2004, 2003
and 2002 of $589, $460 and $310 respectively, as a component of
stockholders’ equity upon issuance of these grants.
In August 2001, the Human Resources Committee of the
Company’s Board of Directors authorized a modification of
the exercise schedule to retirees under the Equity Incentive
Plans. The modification extended the exercise period upon
retirement (as defined in the Equity Incentive Plans) from
12 months to 60 months for outstanding options as of
August 1, 2001 and for all options granted thereafter, but
not to exceed the contractual life of the option. Compensation
expense will be recorded upon the retirement of eligible
employees (associates 50 years of age and older who have
five or more years of service) and is calculated based on the
excess of the fair value of the Company’s stock on the
modification date ($14.28 per share) over
67
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
the exercise price of the modified option multiplied by the
number of vested but unexercised options outstanding upon
retirement. A noncash compensation charge of $935, $785 and $835
was recorded in 2004, 2003 and 2002 respectively, relating to
this modification.
A summary of activity under the Company’s stock option
plans is presented below:
| |
|
|
|
|
|
|
|
|
| |
|
|
|
Weighted-Average | |
| |
|
Shares | |
|
Exercise Price | |
| |
|
| |
|
| |
| |
|
(000s) | |
|
|
|
Outstanding at December 29, 2001
|
|
|
26,302 |
|
|
|
16.15 |
|
|
Stock options granted during the year
|
|
|
7,233 |
|
|
|
15.66 |
|
|
Stock options exercised
|
|
|
(1,627 |
) |
|
|
6.38 |
|
|
Forfeitures
|
|
|
(2,516 |
) |
|
|
17.72 |
|
| |
|
|
|
|
|
|
|
Outstanding at December 28, 2002
|
|
|
29,392 |
|
|
|
16.42 |
|
|
Stock options granted during the year
|
|
|
10,445 |
|
|
|
11.23 |
|
|
Stock options exercised
|
|
|
(1,106 |
) |
|
|
9.28 |
|
|
Forfeitures
|
|
|
(2,297 |
) |
|
|
15.71 |
|
| |
|
|
|
|
|
|
|
Outstanding at January 3, 2004
|
|
|
36,434 |
|
|
|
15.19 |
|
|
Stock options granted during the year
|
|
|
6,750 |
|
|
|
15.47 |
|
|
Stock options exercised
|
|
|
(6,695 |
) |
|
|
12.62 |
|
|
Forfeitures
|
|
|
(3,830 |
) |
|
|
17.25 |
|
| |
|
|
|
|
|
|
|
Outstanding at January 1, 2005
|
|
|
32,659 |
|
|
|
15.40 |
|
| |
|
|
|
|
|
|
The following table summarizes information about stock options
outstanding and exercisable at January 1, 2005:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Options Outstanding | |
|
Options Exercisable | |
| |
|
| |
|
| |
| |
|
Number | |
|
Weighted- | |
|
Weighted- | |
|
Number | |
|
Weighted- | |
| |
|
Outstanding at | |
|
Average | |
|
Average | |
|
Exercisable at | |
|
Average | |
| |
|
January 1, | |
|
Remaining | |
|
Exercise | |
|
January 1, | |
|
Exercise | |
| Range of Exercise Prices |
|
2005 | |
|
Life | |
|
Price | |
|
2005 | |
|
Price | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(000s) | |
|
|
|
|
|
(000s) | |
|
|
|
$ 9.75 - $12.35
|
|
|
10,731 |
|
|
|
7.5 |
|
|
|
11.26 |
|
|
|
4,872 |
|
|
|
11.42 |
|
|
$12.56 - $15.90
|
|
|
9,071 |
|
|
|
7.6 |
|
|
|
13.72 |
|
|
|
4,918 |
|
|
|
13.62 |
|
|
$16.10 - $19.69
|
|
|
10,222 |
|
|
|
7.1 |
|
|
|
17.16 |
|
|
|
6,055 |
|
|
|
17.27 |
|
|
$20.75 - $27.00
|
|
|
574 |
|
|
|
1.5 |
|
|
|
24.87 |
|
|
|
564 |
|
|
|
24.94 |
|
|
$27.06 - $53.56
|
|
|
2,061 |
|
|
|
1.6 |
|
|
|
32.91 |
|
|
|
2,061 |
|
|
|
32.91 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
32,659 |
|
|
|
6.9 |
|
|
|
15.40 |
|
|
|
18,470 |
|
|
|
16.74 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options exercisable totaled approximately 18,470,000,
20,637,000 and 15,817,000 at January 1, 2005,
January 3, 2004 and December 28, 2002, respectively,
at weighted-average exercise prices of $16.74, $16.92 and
$16.98, respectively.
In connection with the December 1999 sale of Softbank common
stock, the Company issued warrants, which were exercisable
immediately, to Softbank for the purchase of
1,500,000 shares of the Company’s Class A Common
Stock with an exercise price of $13.25 per share, which
approximated the market price of the Company’s common stock
on the warrant issuance date. The warrants expired unexercised
in December 2004.
68
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Employee Stock Purchase Plans
In 1998, the Board of Directors and the Company’s
shareowners approved the 1998 Employee Stock Purchase Plan (the
“Plan”) under which 3,000,000 shares of the
Company’s Class A Common Stock could be sold to
employees. Under the Plan, employees can elect to have between
1% and 6% of their earnings withheld to be applied to the
purchase of these shares. The purchase price under the Plan is
generally the lesser of the market price on the beginning or
ending date of the offering periods. Under the 1998 Plan,
offerings were made both in January and July of 2003 and 2002.
The 2003 and 2002 offerings ended on December 31, 2003 and
2002, respectively. In January 2004 and 2003, the Company issued
approximately 64,000 and 38,000 of the authorized shares and
converted $758 and $475, respectively, in accrued employee
contributions into stockholders’ equity as a result. This
Plan was discontinued by the Company effective fiscal year 2004.
Employee Benefit Plans
The Company’s employee benefit plans permit eligible
employees to make contributions up to certain limits, which are
matched by the Company at stipulated percentages. The
Company’s contributions charged to expense were $4,476 in
2004, $4,133 in 2003 and $5,046 in 2002.
Note 13 — Common Stock
Prior to November 6, 2001, the Company had two classes of
Common Stock, consisting of 500,000,000 authorized shares of
$0.01 par value Class A Common Stock and 135,000,000
authorized shares of $0.01 par value Class B Common
Stock, and 25,000,000 authorized shares of $0.01 par value
Preferred Stock. Class A stockholders are entitled to one
vote on each matter to be voted on by the stockholders whereas
Class B stockholders were entitled to ten votes on each
matter voted on by the stockholders. The two classes of stock
have the same rights in all other respects. On November 6,
2001, all outstanding shares of the Company’s Class B
Common Stock were automatically converted into shares of
Class A Common Stock on a one-for-one basis in accordance
with the terms of the Company’s certificate of
incorporation.
There were no changes in the number of issued and outstanding
shares of Class B Common Stock during the three-year period
ended January 1, 2005. The detail of changes in the number
of issued and outstanding shares of Class A Common Stock
for the three-year period ended January 1, 2005, is as
follows:
| |
|
|
|
|
|
| |
|
Class A | |
| |
|
| |
|
December 29, 2001
|
|
|
149,024,793 |
|
| |
Stock options exercised
|
|
|
1,626,973 |
|
| |
Grant of restricted Class A Common Stock
|
|
|
17,322 |
|
| |
Issuance of Class A Common Stock related to Employee Stock
Purchase Plan
|
|
|
109,267 |
|
| |
|
|
|
|
December 28, 2002
|
|
|
150,778,355 |
|
| |
Stock options exercised
|
|
|
1,106,229 |
|
| |
Grant of restricted Class A Common Stock
|
|
|
40,676 |
|
| |
Issuance of Class A Common Stock related to Employee Stock
Purchase Plan
|
|
|
38,407 |
|
| |
|
|
|
|
January 3, 2004
|
|
|
151,963,667 |
|
| |
Stock options exercised
|
|
|
6,695,330 |
|
| |
Grant of restricted Class A Common Stock
|
|
|
35,019 |
|
| |
Issuance of Class A Common Stock related to Employee Stock
Purchase Plan
|
|
|
63,545 |
|
| |
Surrender of restricted Class A Common Stock associated
with payment of withholding tax
|
|
|
(19,663 |
) |
| |
|
|
|
|
January 1, 2005
|
|
|
158,737,898 |
|
| |
|
|
|
69
INGRAM MICRO INC.
SCHEDULE II — VALUATION AND QUALIFYING
ACCOUNTS
(In thousands)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Balance at | |
|
Charged to | |
|
|
|
|
|
|
| |
|
beginning | |
|
costs and | |
|
|
|
|
|
Balance at | |
| Description |
|
of Year | |
|
expenses | |
|
Deductions | |
|
Other(*) | |
|
End of Year | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Allowance for doubtful accounts receivable and sales
returns:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
$ |
91,613 |
|
|
$ |
28,325 |
|
|
$ |
(38,017 |
) |
|
$ |
11,544 |
|
|
$ |
93,465 |
|
|
2003
|
|
|
89,889 |
|
|
|
54,096 |
|
|
|
(56,046 |
) |
|
|
3,674 |
|
|
|
91,613 |
|
|
2002
|
|
|
79,927 |
|
|
|
50,765 |
|
|
|
(46,415 |
) |
|
|
5,612 |
|
|
|
89,889 |
|
|
|
| * |
“Other” includes recoveries, acquisitions, and the
effect of fluctuation in foreign currency. |
70
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Ingram Micro
Inc.:
We have completed an integrated audit of Ingram Micro
Inc.’s January 1, 2005 consolidated financial
statements and of its internal control over financial reporting
as of January 1, 2005 and audits of its January 3,
2004 and December 28, 2002 consolidated financial
statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Our
opinions, based on our audits, are presented below.
Consolidated financial statements and financial statement
schedule
In our opinion, the consolidated financial statements listed in
the accompanying index present fairly, in all material respects,
the financial position of Ingram Micro Inc. and its subsidiaries
at January 1, 2005 and January 3, 2004, and the
results of their operations and their cash flows for each of the
three years in the period ended January 1, 2005 in
conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the
financial statement schedule listed in the accompanying index
presents fairly, in all material respects, the information set
forth therein when read in conjunction with the related
consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on these financial statements and financial statement
schedule based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit of financial statements
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
As discussed in Note 2 to the consolidated financial
statements, effective December 30, 2001, the Company
adopted Statement of Financial Accounting Standard No. 142,
“Goodwill and Other Intangible Assets.”
Internal control over financial reporting
Also, in our opinion, management’s assessment, included in
Management’s Report on Internal Control over Financial
Reporting appearing under Item 9A, that the Company
maintained effective internal control over financial reporting
as of January 1, 2005 based on criteria established in
Internal Control — Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), is fairly stated, in all material respects,
based on those criteria. Furthermore, in our opinion, the
Company maintained, in all material respects, effective internal
control over financial reporting as of January 1, 2005,
based on criteria established in Internal Control —
Integrated Framework issued by the COSO. The Company’s
management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our
responsibility is to express opinions on management’s
assessment and on the effectiveness of the Company’s
internal control over financial reporting based on our audit. We
conducted our audit of internal control over financial reporting
in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over
financial reporting was maintained in all material respects. An
audit of internal control over financial reporting includes
obtaining an understanding of internal control over financial
reporting, evaluating management’s assessment, testing and
evaluating the design and operating effectiveness of internal
control, and performing such other procedures as we consider
necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinions.
A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external
71
purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial
reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company;
(ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
As described in Management’s Report on Internal Control
over Financial Reporting, management has excluded Techpac
Holdings Limited from its assessment of internal control over
financial reporting as of January 1, 2005 because it was
acquired by the Company in a purchase business combination
during 2004. We have also excluded Techpac Holdings Limited from
our audit of internal control over financial reporting. Techpac
Holdings Limited is a wholly owned subsidiary of the Company
whose total assets and total revenues represent approximately
$570 million or 8.4%, and $400 million or 1.6%,
respectively, of the related consolidated financial statement
amounts as of and for the year ended January 1, 2005.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Los Angeles, California
March 7, 2005
72
|
|
| ITEM 9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE |
There have been no changes in our independent accountants or
disagreements with such accountants on accounting principles or
practices or financial statement disclosures.
|
|
| ITEM 9A. |
CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures. We
maintain “disclosure controls and procedures,” as such
term is defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934 (the “Exchange Act”), that are
designed to ensure that information required to be disclosed by
us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized, and reported within the time
periods specified in Securities and Exchange Commission rules
and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure. In designing and
evaluating our disclosure controls and procedures, management
recognized that disclosure controls and procedures, no matter
how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the disclosure
controls and procedures are met. Additionally, in designing
disclosure controls and procedures, our management necessarily
was required to apply judgment in evaluating the cost-benefit
relationship of those disclosure controls and procedures. The
design of any disclosure controls and procedures also is based
in part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future
conditions.
Based on their evaluation as of the end of the period covered by
this Annual Report on Form 10-K, our Chief Executive
Officer and Chief Financial Officer have concluded that our
disclosure controls and procedures were effective in providing
reasonable assurance that the objectives of the disclosure
controls and procedures are met.
Management’s Report on Internal Control over Financial
Reporting. Our management is responsible for establishing
and maintaining adequate internal control over financial
reporting as defined in Rule 13a-15(f) of the Securities
Exchange Act of 1934. Because of its inherent limitations,
internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures
may deteriorate.
We assessed the effectiveness of the Company’s internal
control over financial reporting as of January 1, 2005. In
making this assessment, we used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”) in Internal Control — Integrated
Framework. Based on our assessment using those criteria, we
concluded that our internal control over financial reporting was
effective as of January 1, 2005.
We have excluded Techpac Holdings Limited from our assessment of
internal control over financial reporting as of January 1,
2005 because it was acquired by the Company in a purchase
business combination on November 10, 2004. Techpac Holdings
Limited is a wholly owned subsidiary of the Company whose total
assets and total revenues represent approximately
$570 million or 8.4%, and $400 million or 1.6%,
respectively, of the related consolidated financial statement
amounts as of and for the year ended January 1, 2005.
Our management’s assessment of the effectiveness of our
internal control over financial reporting as of January 1,
2005 has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, as stated in
their report which appears on page 71 of this Annual Report
on Form 10-K.
Changes in Internal Control over Financial Reporting.
There was no change in our internal control over financial
reporting that occurred during the quarterly period ended
January 1, 2005 that has materially affected, or is
reasonably likely to materially affect, our internal control
over financial reporting.
|
|
| ITEM 9B. |
OTHER INFORMATION |
None.
73
PART III
Information regarding executive officers required by
Item 401 of Regulation S-K is furnished in a separate
disclosure in Part I of this report, under the caption
“Executive Officers of the Company,” because we will
not furnish such information in our definitive Proxy Statement
prepared in accordance with Schedule 14A.
The Notice and Proxy Statement for the 2005 Annual Meeting of
Shareowners, to be filed pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended, which is
incorporated by reference in this Annual Report on
Form 10-K pursuant to General Instruction G
(3) of Form 10-K, will provide the remaining
information required under Part III
(Items 10, 11, 12, 13 and 14).
PART IV
|
|
| ITEM 15. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
|
|
|
(a) 1. Financial Statements |
|
|
|
| |
|
See “Index to Consolidated Financial Statements” under
“Item 8. Financial Statements and Supplemental
Data” on page 38 of this Annual Report. |
|
|
| (a) |
2. Financial Statement Schedules |
|
|
|
| |
|
See “Financial Statement Schedule II —
Valuation and Qualifying Accounts” on page 70 of this
Annual Report under “Item 8. Financial Statements and
Supplemental Data.” |
| |
|
|
|
|
| Exhibit | |
|
|
| No. | |
|
Exhibit |
| | |
|
|
| 3.1 |
|
|
|
Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.01 to the Company’s
Registration Statement on Form S-1 (File
No. 333-08453) (the “IPO S-1”)) |
| |
| 3.2 |
|
|
|
Certificate of Amendment of the Certificate of Incorporation of
the Company dated as of June 5, 2001 (incorporated by
reference to Exhibit 3.2 to the Company’s Registration
Statement on Form S-4 (File No. 333-69816) (the
“2001 S-4”)) |
| |
| 3.3 |
|
|
|
Amended and Restated Bylaws of the Company dated as of
May 25, 2004 (incorporated by reference to
Exhibit 3.04 to the Company’s Quarterly Report on Form
10-Q for the fiscal period ended July 3, 2004 (the
“2004 Q2 10-Q”)) |
| |
| 4.1 |
|
|
|
Indenture between the Company as Issuer and Bank One Trust
Corp., N.A. as Trustee, dated as of August 16, 2001,
relating to
97/8% Senior
Subordinated Notes due 2008 (incorporated by reference to
Exhibit 4.1 to the 2001 S-4) |
| |
| 10.1 |
|
|
|
Amended and Restated Reorganization Agreement dated as of
October 17, 1996 among the Company, Ingram Industries Inc.,
and Ingram Entertainment Inc. (incorporated by reference to
Exhibit 10.13 to the Company’s Registration Statement
on Form S-1 (File No. 333-16667) (the “Thrift
Plan S-1”)) |
| |
| 10.2 |
|
|
|
Thrift Plan Liquidity Agreement dated as of November 6,
1996 among the Company and the Ingram Thrift Plan (incorporated
by reference to Exhibit 10.16 to the Thrift Plan S-1) |
| |
| 10.3 |
|
|
|
Tax Sharing and Tax Services Agreement dated as of
November 6, 1996 among the Company, Ingram Industries, and
Ingram Entertainment (incorporated by reference to
Exhibit 10.17 to the Thrift Plan S-1) |
| |
| 10.4 |
|
|
|
Employee Benefits Transfer and Assumption Agreement dated as of
November 6, 1996 among the Company, Ingram Industries, and
Ingram Entertainment (incorporated by reference to
Exhibit 10.19 to the Thrift Plan S-1) |
| |
| 10.5 |
|
|
|
Amended and Restated Exchange Agreement dated as of
November 6, 1996 among the Company, Ingram Industries,
Ingram Entertainment and the other parties thereto (incorporated
by reference to Exhibit 10.21 to the Thrift Plan S-1) |
74
| |
|
|
|
|
| Exhibit | |
|
|
| No. | |
|
Exhibit |
| | |
|
|
| |
| 10.6 |
|
|
|
Ingram Micro Supplemental Investment Savings Plan |
| |
| 10.7 |
|
|
|
First Amendment to Supplemental Investment Savings Plan |
| |
| 10.8 |
|
|
|
Ingram Micro Inc. 1996 Equity Incentive Plan (incorporated by
reference to Exhibit 10.09 to the IPO S-1) |
| |
| 10.9 |
|
|
|
Ingram Micro Inc. Amended and Restated 1996 Equity Incentive
Plan (incorporated by reference to Exhibit 10.10 to the IPO
S-1) |
| |
| 10.10 |
|
|
|
Amendment No. 1 to the Ingram Micro Inc. Amended and
Restated 1996 Equity Incentive Plan (incorporated by reference
to Exhibit 10.06 to the Company’s Annual Report on
Form 10-K for the 1998 fiscal year (the “1998 10-K”)) |
| |
| 10.11 |
|
|
|
Ingram Micro Inc. 1998 Equity Incentive Plan (incorporated by
reference to Exhibit 10.43 to the 1998 10-K) |
| |
| 10.12 |
|
|
|
Ingram Micro Inc. 2000 Equity Incentive Plan (incorporated by
reference to Exhibit 99.01 to the Company’s
Registration Statement on Form S-8 (File
No. 333-39780)) |
| |
| 10.13 |
|
|
|
Ingram Micro Inc. 2003 Equity Incentive Plan (incorporated by
reference to Exhibit 10.06 to the Company’s Annual
Report on Form 10-K for the 2003 fiscal year (the “2003
10-K”)) |
| |
| 10.14 |
|
|
|
Employment Agreement with Kent B. Foster, dated March 6,
2000 (incorporated by reference to Exhibit 10.55 to the
Company’s Annual Report for fiscal year ended (the
“1999 10-K”)) |
| |
| 10.15 |
|
|
|
Executive Retention Plan (incorporated by reference to
Exhibit 10.1 to the Company’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2001 (the “2001 Q2
10-Q”)) |
| |
| 10.16 |
|
|
|
Executive Retention Plan Agreement with Kevin M. Murai
(incorporated by reference to Exhibit 10.03 to the 2001 Q2
10-Q) |
| |
| 10.17 |
|
|
|
Executive Retention Plan Agreement with Gregory M.E. Spierkel
(incorporated by reference to Exhibit 10.04 to the 2001 Q2
10-Q) |
| |
| 10.18 |
|
|
|
Executive Retention Plan Agreement with Henri T. Koppen
(incorporated by reference to Exhibit 10.45 to the
Company’s Annual Report on Form 10-K for the 2002 fiscal
year (the “2002 10-K”)) |
| |
| 10.19 |
|
|
|
Amendment to Executive Retention Plan Agreement with Henri T.
Koppen (incorporated by reference to Exhibit 10.44 to the
2003 10-K) |
| |
| 10.20 |
|
|
|
Ingram Micro Inc. Executive Incentive Plan (incorporated by
reference to Exhibit 10.44 to the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 29, 2002
(the “2002 Q3 10-Q”)) |
| |
| 10.21 |
|
|
|
Executive Officer Severance Policy adopted October 2003
(incorporated by reference to Exhibit 10.52 to the 2003
10-K) |
| |
| 10.22 |
|
|
|
2003 Executive Retention Agreement with Michael J. Grainger
dated December 19, 2003 (incorporated by reference to
Exhibit 10.46 to the 2003 10-K) |
| |
| 10.23 |
|
|
|
Separation Agreement dated as of January 30, 2004 with
James E. Anderson, Jr. (incorporated by reference to
Exhibit 10.47 to the 2003 10-K) |
| |
| 10.24 |
|
|
|
Compensation Agreement — Form of Incentive Stock
Option Award Agreement (incorporated by reference to
Exhibit 10.55 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended October 2, 2004 (the
“2004 Q3 10-Q”)) |
| |
| 10.25 |
|
|
|
Compensation Agreement — Form of Non-Qualified Stock
Option Award Agreement (incorporated by reference to
Exhibit 10.56 to the 2004 Q3 10-Q) |
| |
| 10.26 |
|
|
|
Compensation Agreement — Form of Restricted Stock
Award Agreement (incorporated by reference to Exhibit 10.57
to the 2004 Q3 10-Q) |
| |
| 10.27 |
|
|
|
Compensation Agreement — Form of Board of Directors
Compensation Election Form (Committee Chairman) (incorporated by
reference to Exhibit 99.4 to the Current Report on Form 8-K
filed on December 23, 2004 (the “12/23/04 8-K”) |
75
| |
|
|
|
|
| Exhibit | |
|
|
| No. | |
|
Exhibit |
| | |
|
|
| |
| 10.28 |
|
|
|
Compensation Agreement — Form of Board of Directors
Compensation Election Form (Non-Committee Chairman)
(incorporated by reference to Exhibit 99.5 to the 12/23/04
8-K) |
| |
| 10.29 |
|
|
|
Compensation Agreement — Form of Board of Directors
Distribution Election and Beneficial Designation Form
(incorporated by reference to Exhibit 99.6 to the 12/23/04
8-K) |
| |
| 10.30 |
|
|
|
Compensation Agreement — Form of Board of Directors
Restricted Stock Units Deferral Election Agreement (incorporated
by reference to Exhibit 99.7 to the 12/23/04 8-K) |
| |
| 10.31 |
|
|
|
Compensation Agreement — Form of Board of Directors
Compensation Deferral Election Form (incorporated by reference
to Exhibit 99.8 to the 12/23/04 8-K) |
| |
| 10.32 |
|
|
|
Form of Restricted Stock Unit Award Agreement for Members of the
Board of Directors (incorporated by reference to
Exhibit 99.2 to the Current Report on Form 8-K filed
February 14, 2005) |
| |
| 10.33 |
|
|
|
US$150,000,000 Credit Agreement dated as of December 13,
2002 among the Company, as Initial Borrower and Guarantor,
Ingram European Coordination Center N.V., as Initial Borrower,
certain financial institutions as the Lenders, ABN AMRO Bank
N.V., as the Syndication Agent for the Lenders and The Bank of
Nova Scotia, as the Administrative Agent for the Lenders (the
“2002 Credit Agreement”) (incorporated by reference to
Exhibit 10.41 to the 2002 10-K) |
| |
| 10.34 |
|
|
|
Amendment No. 1 dated as of February 21, 2003 to the
2002 Credit Agreement (incorporated by reference to
Exhibit 10.42 to the 2002 10-K) |
| |
| 10.35 |
|
|
|
Amended and Restated German Master Receivables Transfer and
Servicing Agreement between BNP Paribas Bank N.V. as Transferee
and Ingram Micro Distribution GMBH as Originator and Ingram
Micro Holding GMBH as Depositor, dated August 14, 2003 and
restated as of March 31, 2004 (incorporated by reference to
Exhibit 10.2 to the Company’s Quarterly Report on Form
10-Q for the quarter ended April 3, 2004) |
| |
| 10.36 |
|
|
|
Receivables Funding Agreement, dated July 29, 2004, among
General Electric Capital Corporation, the Company, and Funding
(incorporated by reference to Exhibit 10.54 to the 2004 Q2
10-Q) |
| |
| 10.37 |
|
|
|
Receivables Sale Agreement, dated July 29, 2004 between the
Company and Ingram Funding Inc. (incorporated by reference to
Exhibit 10.55 to the 2004 Q2 10-Q) |
| |
| 10.38 |
|
|
|
Share Sale Agreement with the stockholders of Techpac Holdings
Limited, a company incorporated in Bermuda, dated
September 26, 2004 (incorporated by reference to
Exhibit 10.54 to the 2004 Q3 10-Q) |
| |
| 10.39 |
|
|
|
Receivables Purchase Agreement dated June 21, 2004, as
amended on August 4, 2004 and November 3, 2004
(incorporated by reference to Exhibit 99.3 to the 12/23/04
8-K) |
| |
| 10.40 |
|
|
|
Waiver Letter relating to Techpac Holdings Limited’s Senior
Subscription Agreement and Receivables Purchase Agreement dated
12/22/04 (incorporated by reference to Exhibit 99.2 to the
12/23/04 8-K) |
| |
| 14.1 |
|
|
|
Code of Conduct (incorporated by reference to Exhibit 14.01
to the 2003 10-K) |
| |
| 21.1 |
|
|
|
Subsidiaries of the Registrant |
| |
| 23.1 |
|
|
|
Consent of Independent Registered Public Accounting Firm |
| |
| 31.1 |
|
|
|
Certification by Principal Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act |
| |
| 31.2 |
|
|
|
Certification by Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act |
| |
| 32.1 |
|
|
|
Certification by Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act |
| |
| 32.2 |
|
|
|
Certification by Principal Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act |
| |
| 99.1 |
|
|
|
Cautionary Statements for Purposes of the “Safe
Harbor” Provisions of the Private Securities Litigation
Reform Act of 1995 |
76
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED
THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED.
|
|
| |
|
| |
Larry C. Boyd |
| |
Senior Vice President, Secretary and
General Counsel |
March 9, 2005
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS
ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE
DATES INDICATED.
| |
|
|
|
|
|
|
| Signature |
|
Title |
|
Date |
| |
|
|
|
|
| |
/s/ Kent B. Foster
Kent B. Foster |
|
Chairman and Chief Executive Officer
(Principal Executive Officer) |
|
March 9, 2005 |
| |
/s/ Thomas A. Madden
Thomas A. Madden |
|
Executive Vice President and Chief Financial Officer
(Principal Financial Officer) |
|
March 9, 2005 |
| |
/s/ William D. Humes
William D. Humes |
|
Senior Vice President and Chief Financial Officer Designee
(Principal Accounting Officer) |
|
March 9, 2005 |
| |
/s/ Howard I. Atkins
Howard I. Atkins |
|
Director |
|
March 9, 2005 |
| |
/s/ John R. Ingram
John R. Ingram |
|
Director |
|
March 9, 2005 |
| |
/s/ Martha R. Ingram
Martha R. Ingram |
|
Director |
|
March 9, 2005 |
| |
/s/ Orrin H. Ingram II
Orrin H. Ingram II |
|
Director |
|
March 9, 2005 |
| |
/s/ Dale R. Laurance
Dale R. Laurance |
|
Director |
|
March 9, 2005 |
| |
/s/ Linda Fayne Levinson
Linda Fayne Levinson |
|
Director |
|
March 9, 2005 |
| |
/s/ Gerhard Schulmeyer
Gerhard Schulmeyer |
|
Director |
|
March 9, 2005 |
77
| |
|
|
|
|
|
|
| Signature |
|
Title |
|
Date |
| |
/s/ Michael T. Smith
Michael T. Smith |
|
Director |
|
March 9, 2005 |
| |
/s/ Joe B. Wyatt
Joe B. Wyatt |
|
Director |
|
March 9, 2005 |
78
EXHIBIT INDEX
| |
|
|
|
|
| Exhibit | |
|
|
| No. | |
|
Exhibit |
| | |
|
|
| 3.1 |
|
|
|
Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.01 to the Company’s
Registration Statement on Form S-1 (File
No. 333-08453) (the “IPO S-1”)) |
| |
| 3.2 |
|
|
|
Certificate of Amendment of the Certificate of Incorporation of
the Company dated as of June 5, 2001 (incorporated by
reference to Exhibit 3.2 to the Company’s Registration
Statement on Form S-4 (File No. 333-69816) (the
“2001 S-4”)) |
| |
| 3.3 |
|
|
|
Amended and Restated Bylaws of the Company dated as of
May 25, 2004 (incorporated by reference to
Exhibit 3.04 to the Company’s Quarterly Report on Form
10-Q for the fiscal period ended July 3, 2004 (the
“2004 Q2 10-Q”)) |
| |
| 4.1 |
|
|
|
Indenture between the Company as Issuer and Bank One Trust
Corp., N.A. as Trustee, dated as of August 16, 2001,
relating to
97/8% Senior
Subordinated Notes due 2008 (incorporated by reference to
Exhibit 4.1 to the 2001 S-4) |
| |
| 10.1 |
|
|
|
Amended and Restated Reorganization Agreement dated as of
October 17, 1996 among the Company, Ingram Industries Inc.,
and Ingram Entertainment Inc. (incorporated by reference to
Exhibit 10.13 to the Company’s Registration Statement
on Form S-1 (File No. 333-16667) (the “Thrift
Plan S-1”)) |
| |
| 10.2 |
|
|
|
Thrift Plan Liquidity Agreement dated as of November 6,
1996 among the Company and the Ingram Thrift Plan (incorporated
by reference to Exhibit 10.16 to the Thrift Plan S-1) |
| |
| 10.3 |
|
|
|
Tax Sharing and Tax Services Agreement dated as of
November 6, 1996 among the Company, Ingram Industries, and
Ingram Entertainment (incorporated by reference to
Exhibit 10.17 to the Thrift Plan S-1) |
| |
| 10.4 |
|
|
|
Employee Benefits Transfer and Assumption Agreement dated as of
November 6, 1996 among the Company, Ingram Industries, and
Ingram Entertainment (incorporated by reference to
Exhibit 10.19 to the Thrift Plan S-1) |
| |
| 10.5 |
|
|
|
Amended and Restated Exchange Agreement dated as of
November 6, 1996 among the Company, Ingram Industries,
Ingram Entertainment and the other parties thereto (incorporated
by reference to Exhibit 10.21 to the Thrift Plan S-1) |
| |
| 10.6 |
|
|
|
Ingram Micro Supplemental Investment Savings Plan |
| |
| 10.7 |
|
|
|
First Amendment to Supplemental Investment Savings Plan |
| |
| 10.8 |
|
|
|
Ingram Micro Inc. 1996 Equity Incentive Plan (incorporated by
reference to Exhibit 10.09 to the IPO S-1) |
| |
| 10.9 |
|
|
|
Ingram Micro Inc. Amended and Restated 1996 Equity Incentive
Plan (incorporated by reference to Exhibit 10.10 to the IPO
S-1) |
| |
| 10.10 |
|
|
|
Amendment No. 1 to the Ingram Micro Inc. Amended and
Restated 1996 Equity Incentive Plan (incorporated by reference
to Exhibit 10.06 to the Company’s Annual Report on
Form 10-K for the 1998 fiscal year (the “1998 10-K”)) |
| |
| 10.11 |
|
|
|
Ingram Micro Inc. 1998 Equity Incentive Plan (incorporated by
reference to Exhibit 10.43 to the 1998 10-K) |
| |
| 10.12 |
|
|
|
Ingram Micro Inc. 2000 Equity Incentive Plan (incorporated by
reference to Exhibit 99.01 to the Company’s
Registration Statement on Form S-8 (File
No. 333-39780)) |
| |
| 10.13 |
|
|
|
Ingram Micro Inc. 2003 Equity Incentive Plan (incorporated by
reference to Exhibit 10.06 to the Company’s Annual
Report on Form 10-K for the 2003 fiscal year (the “2003
10-K”)) |
| |
| 10.14 |
|
|
|
Employment Agreement with Kent B. Foster, dated March 6,
2000 (incorporated by reference to Exhibit 10.55 to the
Company’s Annual Report for fiscal year ended (the
“1999 10-K”)) |
| |
| 10.15 |
|
|
|
Executive Retention Plan (incorporated by reference to
Exhibit 10.1 to the Company’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2001 (the “2001 Q2
10-Q”)) |
| |
| 10.16 |
|
|
|
Executive Retention Plan Agreement with Kevin M. Murai
(incorporated by reference to Exhibit 10.03 to the 2001 Q2
10-Q) |
| |
|
|
|
|
| Exhibit | |
|
|
| No. | |
|
Exhibit |
| | |
|
|
| |
| 10.17 |
|
|
|
Executive Retention Plan Agreement with Gregory M.E. Spierkel
(incorporated by reference to Exhibit 10.04 to the 2001 Q2
10-Q) |
| |
| 10.18 |
|
|
|
Executive Retention Plan Agreement with Henri T. Koppen
(incorporated by reference to Exhibit 10.45 to the
Company’s Annual Report on Form 10-K for the 2002 fiscal
year (the “2002 10-K”)) |
| |
| 10.19 |
|
|
|
Amendment to Executive Retention Plan Agreement with Henri T.
Koppen (incorporated by reference to Exhibit 10.44 to the
2003 10-K) |
| |
| 10.20 |
|
|
|
Ingram Micro Inc. Executive Incentive Plan (incorporated by
reference to Exhibit 10.44 to the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 29, 2002
(the “2002 Q3 10-Q”)) |
| |
| 10.21 |
|
|
|
Executive Officer Severance Policy adopted October 2003
(incorporated by reference to Exhibit 10.52 to the 2003
10-K) |
| |
| 10.22 |
|
|
|
2003 Executive Retention Agreement with Michael J. Grainger
dated December 19, 2003 (incorporated by reference to
Exhibit 10.46 to the 2003 10-K) |
| |
| 10.23 |
|
|
|
Separation Agreement dated as of January 30, 2004 with
James E. Anderson, Jr. (incorporated by reference to
Exhibit 10.47 to the 2003 10-K) |
| |
| 10.24 |
|
|
|
Compensation Agreement — Form of Incentive Stock
Option Award Agreement (incorporated by reference to
Exhibit 10.55 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended October 2, 2004 (the
“2004 Q3 10-Q”)) |
| |
| 10.25 |
|
|
|
Compensation Agreement — Form of Non-Qualified Stock
Option Award Agreement (incorporated by reference to
Exhibit 10.56 to the 2004 Q3 10-Q) |
| |
| 10.26 |
|
|
|
Compensation Agreement — Form of Restricted Stock
Award Agreement (incorporated by reference to Exhibit 10.57
to the 2004 Q3 10-Q) |
| |
| 10.27 |
|
|
|
Compensation Agreement — Form of Board of Directors
Compensation Election Form (Committee Chairman) (incorporated by
reference to Exhibit 99.4 to the Current Report on Form 8-K
filed on December 23, 2004 (the “12/23/04 8-K”) |
| 10.28 |
|
|
|
Compensation Agreement — Form of Board of Directors
Compensation Election Form (Non-Committee Chairman)
(incorporated by reference to Exhibit 99.5 to the 12/23/04
8-K) |
| |
| 10.29 |
|
|
|
Compensation Agreement — Form of Board of Directors
Distribution Election and Beneficial Designation Form
(incorporated by reference to Exhibit 99.6 to the 12/23/04
8-K) |
| |
| 10.30 |
|
|
|
Compensation Agreement — Form of Board of Directors
Restricted Stock Units Deferral Election Agreement (incorporated
by reference to Exhibit 99.7 to the 12/23/04 8-K) |
| |
| 10.31 |
|
|
|
Compensation Agreement — Form of Board of Directors
Compensation Deferral Election Form (incorporated by reference
to Exhibit 99.8 to the 12/23/04 8-K) |
| |
| 10.32 |
|
|
|
Form of Restricted Stock Unit Award Agreement for Members of the
Board of Directors (incorporated by reference to
Exhibit 99.2 to the Current Report on Form 8-K filed
February 14, 2005) |
| |
| 10.33 |
|
|
|
US$150,000,000 Credit Agreement dated as of December 13,
2002 among the Company, as Initial Borrower and Guarantor,
Ingram European Coordination Center N.V., as Initial Borrower,
certain financial institutions as the Lenders, ABN AMRO Bank
N.V., as the Syndication Agent for the Lenders and The Bank of
Nova Scotia, as the Administrative Agent for the Lenders (the
“2002 Credit Agreement”) (incorporated by reference to
Exhibit 10.41 to the 2002 10-K) |
| |
| 10.34 |
|
|
|
Amendment No. 1 dated as of February 21, 2003 to the
2002 Credit Agreement (incorporated by reference to
Exhibit 10.42 to the 2002 10-K) |
| |
| 10.35 |
|
|
|
Amended and Restated German Master Receivables Transfer and
Servicing Agreement between BNP Paribas Bank N.V. as Transferee
and Ingram Micro Distribution GMBH as Originator and Ingram
Micro Holding GMBH as Depositor, dated August 14, 2003 and
restated as of March 31, 2004 (incorporated by reference to
Exhibit 10.2 to the Company’s Quarterly Report on Form
10-Q for the quarter ended April 3, 2004) |
| |
| 10.36 |
|
|
|
Receivables Funding Agreement, dated July 29, 2004, among
General Electric Capital Corporation, the Company, and Funding
(incorporated by reference to Exhibit 10.54 to the 2004 Q2
10-Q) |
| |
| 10.37 |
|
|
|
Receivables Sale Agreement, dated July 29, 2004 between the
Company and Ingram Funding Inc. (incorporated by reference to
Exhibit 10.55 to the 2004 Q2 10-Q) |
| |
|
|
|
|
| Exhibit | |
|
|
| No. | |
|
Exhibit |
| | |
|
|
| |
| 10.38 |
|
|
|
Share Sale Agreement with the stockholders of Techpac Holdings
Limited, a company incorporated in Bermuda, dated
September 26, 2004 (incorporated by reference to
Exhibit 10.54 to the 2004 Q3 10-Q) |
| |
| 10.39 |
|
|
|
Receivables Purchase Agreement dated June 21, 2004, as
amended on August 4, 2004 and November 3, 2004
(incorporated by reference to Exhibit 99.3 to the 12/23/04
8-K) |
| |
| 10.40 |
|
|
|
Waiver Letter relating to Techpac Holdings Limited’s Senior
Subscription Agreement and Receivables Purchase Agreement dated
12/22/04 (incorporated by reference to Exhibit 99.2 to the
12/23/04 8-K) |
| |
| 14.1 |
|
|
|
Code of Conduct (incorporated by reference to Exhibit 14.01
to the 2003 10-K) |
| |
| 21.1 |
|
|
|
Subsidiaries of the Registrant |
| |
| 23.1 |
|
|
|
Consent of Independent Registered Public Accounting Firm |
| |
| 31.1 |
|
|
|
Certification by Principal Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act |
| |
| 31.2 |
|
|
|
Certification by Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act |
| |
| 32.1 |
|
|
|
Certification by Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act |
| |
| 32.2 |
|
|
|
Certification by Principal Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act |
| |
| 99.1 |
|
|
|
Cautionary Statements for Purposes of the “Safe
Harbor” Provisions of the Private Securities Litigation
Reform Act of 1995 |