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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 2, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ___________
COMMISSION FILE NUMBER: 1-12203
INGRAM MICRO INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 62-1644402
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1600 E. ST. ANDREW PLACE., SANTA ANA, CALIFORNIA 92799-5125
(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: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE
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 [X] No [ ]
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. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant at March 16, 1999 was $849,177,318 based on the closing sale
price on such date of $18.75 per share.
The Registrant had 68,332,803 shares of Class A Common Stock, par value
$.01 per share, and 74,722,166 shares of Class B Common Stock, par value $.01
per share, outstanding at March 16, 1999.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Annual Report to
Shareowners for the fiscal year ended January 2, 1999 are incorporated by
reference into Parts I and II of this Annual Report on Form 10-K. Portions of
the Proxy Statement for the Registrant's Annual Meeting of Shareowners to be
held May 19, 1999 are incorporated by reference into Part III of this Annual
Report on Form 10-K.
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PART I
ITEM 1. BUSINESS
In evaluating the business of Ingram Micro Inc., readers should carefully
consider the important factors discussed under Exhibit 99.01 hereto and under
"--Safe Harbor for Forward-Looking Statements."
OVERVIEW
Ingram Micro Inc. ("Ingram Micro" or the "Company") is the leading
wholesale distributor of computer-based technology products and services
worldwide. The Company markets computer hardware, networking equipment, and
software products to more than 140,000 reseller customers in more than 130
countries. As a wholesale distributor, the Company markets its products to
resellers as opposed to marketing directly to end-user customers.
Ingram Micro offers one-stop shopping to its reseller customers by
providing a comprehensive inventory which, in the aggregate on a global basis,
consists of more than 200,000 products (as measured by distinct manufacturer's
part numbers) from over 1,500 suppliers, including most of the computer
industry's leading hardware manufacturers, networking equipment suppliers, and
software publishers. The Company's broad product offerings include: desktop and
notebook personal computers, servers, and workstations; mass storage devices;
CD-ROM drives; monitors; printers; scanners; modems; networking hubs, routers,
and switches; network interface cards; business application software;
entertainment software; and computer supplies. In addition, to enhance sales and
to support its suppliers and reseller customers, the Company provides a wide
range of outsourcing and value-added programs, such as order fulfillment,
tailored financing programs, channel assembly, systems configuration, assembly
of private label or unbranded systems, and marketing programs. The Company also
provides virtual warehouse and distribution services for a number of resellers
(internet and otherwise).
The Company is focused on providing a broad range of products and services,
quick and efficient order fulfillment, and consistent on-time and accurate
delivery to its reseller customers around the world. The Company believes that
IMpulse, the Company's on-line information system, provides a competitive
advantage through real-time worldwide information access and processing
capabilities. IMpulse is a single, standardized, real-time information system
and operating environment, used across substantially all of the Company's
worldwide operations. This on-line information system, coupled with the
Company's exacting operating procedures in telesales, credit support, customer
service, purchasing, technical support, and warehouse operations, enables the
Company to provide its reseller customers with superior service in an efficient
and low cost manner.
The Company's earliest predecessor began business in 1979 as a California
corporation named Micro D, Inc. This company and its parent, Ingram Micro
Holdings Inc. ("Holdings"), grew through a series of acquisitions, mergers, and
internal growth to encompass the Company's current operations. Ingram Micro Inc.
was incorporated in Delaware on April 29, 1996, in order to effect the
reincorporation of the Company in Delaware. The successor to Micro D, Inc. and
Holdings were merged into Ingram Micro Inc. in October 1996.
In November 1996, the Company completed the sale of 23,200,000 shares of
its Class A Common Stock pursuant to an initial public offering (the "IPO") at
an offering price of $18.00 per share. Immediately prior to the closing of the
IPO, the Company was split-off from its then parent, Ingram Industries Inc.
("Ingram Industries"), in a tax-free reorganization (the "Split-Off").
THE INDUSTRY
The worldwide computer-based technology products and services distribution
industry generally consists of suppliers, which sell directly to wholesalers,
resellers, and end-users; wholesale distributors, which sell to resellers; and
resellers, which sell to other resellers and directly to end-users. A variety of
reseller categories exists, including corporate resellers, value-added resellers
or "VARs," systems integrators, original equipment manufacturers, direct
marketers, independent dealers, owner-operated chains, franchise chains, and
computer retailers. Different types of resellers are defined and distinguished
by the end-user market they serve, such as large corporate accounts, small
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and medium-sized businesses, or home users, and by the level of value they add
to the basic products they sell. Wholesale distributors generally sell only to
resellers and purchase a wide range of products in bulk directly from
manufacturers. Different wholesale distribution models have evolved in
particular countries and geographies depending on the characteristics of the
local reseller environment, as well as other factors specific to a particular
country or region.
Based on data compiled by market researcher International Data Corp., the
growth of the computer-based technology products and services wholesale
distribution industry continues to exceed the growth of the computer industry as
a whole. To minimize costs and focus on their core capabilities in
manufacturing, product development, and marketing, many suppliers are seeking to
outsource an increasing portion of certain functions such as distribution,
service, and technical support to the wholesale distribution channel. Growing
product complexity, shorter product life cycles, and an increasing number of
computer-based technology products due to the emergence of open systems
architectures and the recognition of certain industry standards have led
resellers to depend on wholesale distributors for more of their product,
marketing, and technical support needs. In addition, resellers are relying to an
increasing extent on wholesale distributors for inventory management and credit
to avoid stocking large inventories and maintaining credit lines to finance
their working capital needs. The Company believes that new opportunities for
growth in the computer-based technology products and services wholesale
distribution industry will emerge as new product categories, such as computer
telephone integration ("CTI") and the digital video disc format, arise from the
ongoing convergence of computing, communications, and consumer electronics.
Markets outside the United States, which represent over half of the
computer-based technology industry's sales, are characterized by a more
fragmented wholesale distribution channel than in the United States.
Increasingly, suppliers and resellers pursuing global growth are seeking
wholesale distributors with international sales and support capabilities.
A number of emerging industry trends are providing new opportunities and
challenges for wholesale distributors of computer-based technology products and
services. For example, the emergence of the internet provides distributors with
an additional means to serve both suppliers and reseller customers through the
development and use of effective electronic commerce tools. The growing presence
and importance of such electronic commerce capabilities also provides
distributors with new business opportunities as new categories of products,
customers, and suppliers develop.
The Company believes that the chain of relationships between suppliers,
manufacturers, distributors, resellers and end-users is transforming from a
manufacturer-push business model to one that is governed by end-user demand. In
the traditional industry model, distributors simply moved product from
manufacturers to resellers who in turn service end-user businesses or customers.
In contrast, the "demand chain" management model reverses these steps as
follows: (1) the Company starts by listening to the needs of the end-user
business or consumer, (2) with a clear understanding of these needs, the Company
works with resellers who design, sell and support solutions to arrive at
solutions that address the needs of the end-user business or consumer, and (3)
the Company works closely with suppliers and manufacturers to ensure that these
solutions can be delivered through or on behalf of the resellers in a cost
effective and timely manner.
The challenges for this new model include the extent to which reseller and
manufacturer partners of the Company embrace the model and the speed with which
the Company's partners choose to make changes to their traditional way of doing
business so as to support demand chain management. Some of these challenges
within the last year have been the slower than anticipated speed of PC
manufacturers to fully develop their channel assembly programs and the effort by
some manufacturers to duplicate the success of the direct sales business model
by launching limited direct sales initiatives focused on specific types of
customers. However, the Company believes that this direct sales model presents
vendor partnership opportunities for the Company. Overall, the Company believes
that, with the largest global distribution network for computer-based technology
products and services, it is well positioned in the long term to lead in the
customer-driven marketplace.
The Company further believes that the dynamics of the computer-based
technology products and services wholesale distribution business favor the
largest distributors, which have access to financing and are able to achieve
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economies of scale, breadth of geographic coverage, and the strongest vendor
relationships. Consequently, the distributors with these characteristics are
tending to take share from smaller distributors as the industry undergoes a
process of consolidation. However, smaller high value-added niche distributors
may continue to compete successfully in the consolidated market. The Company
also believes that the need for wholesale distributors to implement high
volume/low cost operations on a worldwide basis is continuing to grow due to
ongoing price competition, the increasing demand for value-added services, the
increasing utilization of electronic commerce, and the increasing globalization
of the computer-based technology products and services industry. In summary, the
computer-based technology products and services wholesale distribution industry
is growing rapidly while simultaneously consolidating, creating an industry
environment in which market share leadership and cost efficiency are of
paramount importance.
BUSINESS STRATEGY
The Company's strategic decisions and activities are guided by the
following Vision and Mission statements:
OUR VISION. We will always exceed expectations . . . with every partner,
every day.
OUR MISSION. To maximize shareowner value by being the best distributor of
technology for the world.
In addition, the Company's values encourage teamwork, respect,
accountability, integrity, and innovation.
The Company believes that it is the leading worldwide wholesale distributor
of computer-based technology products and services and that it has developed the
capabilities and scale of operations critical for long-term success in the
computer-based technology products and services distribution industry.
The Company's strategy of offering a broad line of products and services
provides reseller customers with one-stop shopping. The Company generally is
able to purchase products in large quantities and to avail itself of special
purchase opportunities from a broad range of suppliers. This allows the Company
to take advantage of various discounts from its suppliers, which in turn enables
the Company to provide competitive pricing to its reseller customers. The
Company's global market presence provides suppliers with access to a broad base
of geographically dispersed resellers, serviced by the Company's extensive
network of distribution centers and support offices. The Company's size has
permitted it to attract highly qualified associates and increase investment in
personnel development and training. Also, the Company benefits from being able
to make large investments in information systems, warehousing systems, and
infrastructure. Further, the Company is able to spread the costs of these
investments across its worldwide operations.
The Company is pursuing a number of strategies to further enhance its
leadership position within the computer-based technology products and services
marketplace, including the following:
EXPAND WORLDWIDE MARKET AND PRODUCT COVERAGE. Ingram Micro is committed to
expanding its already extensive worldwide market coverage through internal
growth in all markets in which it currently participates. In addition, the
Company intends to pursue acquisitions, joint ventures, and strategic
relationships in order to take advantage of growth opportunities and to leverage
its strong systems, infrastructure, and global management skills.
By providing greater worldwide market coverage, Ingram Micro also increases
the scale of its business, which results in greater cost economies. In addition,
as it increases its global reach, the Company diversifies its business across
different markets, reducing its exposure to individual market downturns. In
1998, the Company acquired Macrotron AG, a Germany-based distributor with 1997
sales of approximately $1.2 billion; the assembly facilities of Tulip Computer
N.V. in The Netherlands; and Nordemaq Comercial de Maquinas Nordeste Ltda. in
Brazil. Effective September 1998, the Company purchased the remaining 30% of its
Mexican subsidiary, Ingram Dicom, from the minority shareholders. As of February
19, 1999, the Company increased its ownership of Electronic Resources Ltd.
("ERL"), a leading distributor of electronic components and computer peripherals
in Asia, from 21% to 95% (on a fully diluted basis). ERL will be subsequently
renamed Ingram Micro Asia Ltd. In 1998, the Company also entered into strategic
alliances with SOFTBANK Corp. ("SOFTBANK"), Japan's leading provider of
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information and distribution services for the digital information industry, and
with Solectron Corporation ("Solectron"), a worldwide provider of electronics
manufacturing services to leading original equipment manufacturers ("OEMs"). The
overall goal of the Ingram Micro-SOFTBANK alliance is to provide global account
services to value-added resellers, with Ingram Micro serving as SOFTBANK's
exclusive supplier in markets outside Japan and Korea, and SOFTBANK fulfilling
Ingram Micro's sales to the Japanese and Korean markets. The Ingram
Micro-Solectron alliance enables both companies to leverage their combined
resources, including existing facilities, systems and personnel, to provide
global build-to-order and configure-to-order assembly services for personal
computers, servers, and other related products in the United States, Canada,
Europe, Asia, and Latin America.
The Company has grown its operations outside the United States principally
through acquisitions, and currently has subsidiaries or offices in 28 countries
and sales representatives in another five countries, including Argentina,
Australia, Brazil, Canada, China, Colombia, Costa Rica, Chile, Ecuador, India,
Indonesia, Japan, Malaysia, Mexico, New Zealand, Norway, Peru, Singapore,
Switzerland, Thailand, Venezuela, and 11 countries of the European Union. The
Company believes that it is the market share leader in the United States,
Canada, and Mexico, the third largest full-line distributor in Europe, the
second largest distributor in Asia (excluding Japan), and the second largest
Pan-Latin America distributor, based on publicly available data and management's
knowledge of the industry. The Company's objective is to achieve the number one
market share position in each of the markets in which it operates either through
operations or strategic alliances. In keeping with this objective, Ingram Micro
continues efforts aimed at providing resellers of all sizes and types the means
to meet their end-user requirements for products and support worldwide. To that
end, Ingram Micro continues to strengthen its alliance with Allied Computing
Services Ltd. ("ACSL"), an international network of computer resellers in North
America, Europe, Latin America, and Asia. Within the alliance, Ingram Micro acts
as a coordination center and, in some cases, as product supplier for the network
while the ACSL resellers provide the local support and service.
The Company continues to pursue initiatives to expand its global product
and service offerings in various categories, some of which include enterprise
solutions, CTI, imaging, and computer consumable supplies and accessories. For
example, in order to meet corporate resellers' increasing demand for enterprise
solutions on a worldwide basis, Ingram Micro formed a global Enterprise
Solutions Group ("ESG") in 1998. Through ESG, Ingram Micro provides reseller
partners with enterprise solutions from multiple platforms, major operating
systems, and advanced software providers, as well as customizes these solutions
with a wide range of storage and connectivity options, and professional
services. In the area of computer telephony integration, the Telecom Integration
Division is focused on becoming a one-stop shop for CTI solutions. The Supplies
and Accessories Division continues its initiatives to provide a broad line of
computer consumable supplies and computer accessories to the Company's reseller
customers on a global basis. The recently formed Imaging Division will provide a
focused and dedicated approach to the consumer, professional, printing and
publishing, and applied imaging markets.
LEAD IN STREAMLINING THE DEMAND CHAIN. The computer-based technology
products and services distribution industry is changing at a rapid pace. The
chain of relationships that spans across component suppliers, manufacturers,
distributors, resellers and end-users is transforming from a manufacturer-push
business model to one that is governed by end-user demand. The Company believes
that the term "demand chain" describes the build-to-demand model to which the
channel is evolving. In this industry model, the role of distributors is
expanded from the traditional movement of products from manufacturers to
resellers, to one that encompasses almost all aspects of demand chain
management, including assembly, configuration, inventory management, order
management, and end-user fulfillment. Ingram Micro believes that distributors
with strong execution and broad product offerings will be best able to lead the
movement to the demand chain model. The Company is committed to leading this
industry evolution from a build-to-supply to a build-to-demand model, which is a
customer-centric, multi-vendor channel model that enables the most efficient
commerce between end-users and the developers of technology solutions.
The Company's commitment to streamlining the demand chain is evident in its
investment in infrastructure and programs that enable the most efficient flow of
products, services, and information up and down the demand chain. Frameworks(TM)
Total Integration Services(TM) ("Frameworks") is the Company's vehicle to
deliver world-class channel assembly, reconfiguration, contract manufacturing,
and private label/unbranded solutions. Ingram Micro is rapidly enhancing and
expanding electronic commerce tools that facilitate reseller to end-user
commerce. Another
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key element of the Company's demand chain focus is Affiniti(TM) ("Affiniti"), a
comprehensive suite of value-added services matched precisely to the needs of
its supplier and reseller partners. Equally important to streamlining the demand
chain is the development of industry-wide performance metrics and standards that
enable close collaboration among demand chain partners through better
information management. Ingram Micro has spearheaded this effort through its key
role in the formation of RosettaNet, an independent, self-funded, non-profit
organization dedicated to promoting an industry-wide initiative to adopt common
electronic business interfaces worldwide.
EXPLOIT INFORMATION SYSTEMS LEADERSHIP AND ENHANCE ELECTRONIC COMMERCE
CAPABILITIES. Ingram Micro continually invests in its information systems, which
are crucial in supporting the Company's growth and its ability to maintain high
service and performance levels. The Company has a scalable, full-featured
information system, IMpulse, which the Company believes is critical to its
ability to deliver worldwide, real-time information to both suppliers and
reseller customers. IMpulse is an industry-leading information system, used
across substantially all of the Company's markets worldwide, which has been
customized to suit local market requirements. The Company believes that it is
the only full-line wholesale distributor of computer-based technology products
and services in the world with such a centralized global system that is capable
of supporting future growth and new business ventures.
The Company's information systems provide the infrastructure that allows
the implementation of a customer-centric channel model. It provides the
information necessary for Ingram Micro to act as the agent of commerce among
suppliers, resellers, and end-users. The Company is rapidly enhancing and
deploying seamless, easy-to-use electronic commerce solutions that provide
resellers with the ability to do business with Ingram Micro and with end-users
with greater ease and at lower cost. The Company's electronic commerce
capabilities have expanded to include: SpeedSource, an electronic commerce
ordering tool which gives resellers quick access to real-time ordering, product
allocation, order status, product search, pricing and availability; InsideLine,
a direct communication link, currently in selected use, which furnishes
resellers with real-time access to the Company's mainframe inventory systems;
and Prime Access, currently in production, which, upon completion of rollout to
resellers, will equip them with personalized Web storefronts that are linked
directly to Ingram Micro's order processes and inventory systems.
PROVIDE SUPERIOR EXECUTION FOR RESELLER CUSTOMERS. Consistent with its
overall emphasis on "winning customers for life," Ingram Micro continually
refines and integrates its systems and business processes to provide superior
execution and service to resellers. The Company's electronic commerce tools will
enable resellers to do business with their end-user customers quickly, easily,
and at lower cost. To ensure efficient product delivery, the Company continues
to expand and upgrade its distribution network. For example, the Company has
begun construction of new distribution centers in Lickdale, Pennsylvania
(600,000 square feet), Ontario, Canada (500,000 square feet) and Straubing,
Germany (400,000 square feet); and plans have been announced for a 550,000
square foot Pan-European facility in Heerlen, The Netherlands, which will be one
of the largest and most technologically advanced distribution centers in Europe.
Also, Ingram Micro has implemented processes that will allow most of its U.S.
distribution centers to increase operating capacity from 20 hours a day to 24
hours a day. The Company works continuously to improve its formal systems for
evaluating and tracking key performance metrics such as responsiveness to
customers, processing accuracy, and order fulfillment. Ingram Micro uses these
metrics as well as customer satisfaction surveys to measure improvements on all
the key elements that are believed to be important to the customer.
Ingram Micro strives to maximize order fill rates by maintaining optimum
quantities of product in its 54 distribution centers worldwide. Together with
the Company's control systems and processes, this results in substantially all
orders in the United States received by 5:00 p.m. being shipped on the same day,
with highly accurate shipping performance. Another indication of the quality of
Ingram Micro's processes is the ISO 9002 certification of all its distribution
centers in the U.S. and a number of locations outside the U.S., as well as its
customer service, configuration, returns operation and consolidation center. In
addition, the Company has implemented a number of programs that significantly
reduce the time required for resellers to obtain product. For example, Delivery
Plus is an enhanced direct shipment program in which Ingram Micro sets up a
permanent location either on site or adjacent to a supplier's manufacturing
facility. Ingram Micro takes possession of product at the supplier's location
and then ships it to the reseller or end-user, depending on the reseller's
specification.
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DELIVER WORLD-CLASS OUTSOURCING AND VALUE-ADDED PROGRAMS TO SUPPLIERS AND
RESELLERS. As a global service-focused organization, Ingram Micro strives to
compete on the basis of total value rather than solely on price. By
understanding and anticipating customer needs, the Company continually develops
and provides innovative business solutions that provide full back-room
outsourcing services to resellers and suppliers. The Affiniti program aims to
transform the Company's relationships with its customers from pure transactional
relationships to consultative partnerships where Ingram Micro satisfies not only
the customers' product needs but also their service requirements. Such
relationships will enable the Company to transition from a commodity business to
a full solution provider, with expected benefits in revenue generation and
margin enhancement. Under the Affiniti initiative, the Company identifies and
deploys value-added services to its supplier and reseller partners such as
co-location, product reconfiguration, channel assembly, electronic commerce
tools, outsourcing services, financing programs, etc. Together, these services
are intended to link reseller customers and suppliers to Ingram Micro as a
one-stop provider of computer-based technology products and related services,
while meeting demand by suppliers and resellers to outsource their non-core
business activities and thereby lower their operating costs.
MAINTAIN LOW COST LEADERSHIP THROUGH CONTINUOUS IMPROVEMENTS IN SYSTEMS AND
PROCESSES. Intense competition and narrow margins characterize the
computer-based technology products and services distribution industry, and as a
result, achieving economies of scale and controlling operating expenses are
critical to achieving and maintaining profitable growth. Over the past five
years, the Company has been successful in reducing SG&A expenses (including
expenses allocated from Ingram Industries prior to the Split-Off) as a
percentage of net sales, to 4.1% in 1998 from 5.1% in 1994.
The Company initiated a number of new programs in 1998 that are designed
to continue reducing operating expenses as a percentage of net sales. Many
U.S.-developed programs are slated for implementation in the Company's
international operations, while other programs are region-specific. Current
productivity improvement programs include: (i) system enhancements to
automatically route orders to the most cost-efficient warehouse based on
customer needs and warehouse capacity; (ii) increased utilization of most of the
Company's existing warehouse locations resulting from the expansion of operating
hours from 20 to 24 hours per day; (iii) automated proof-of-delivery
notifications to improve collection on past due invoices; (iv) creation of
"co-location" programs with key vendors to ship product directly from the vendor
to the end user; and (v) the expansion of the Company's electronic commerce
tools, including deployment of Internet ordering capabilities in 13 countries to
date, to increase the number of orders placed without the assistance of a
telesales representative. See "--Information Systems."
The Company will, on an ongoing basis, examine its business processes and
systems to determine how it can continue to improve, while simultaneously
lowering costs.
DEVELOP HUMAN RESOURCES FOR EXCELLENCE AND TO SUPPORT FUTURE GROWTH. Ingram
Micro's growth to date is a result of the talent, dedication, and teamwork of
its associates. Future growth and success will be substantially dependent upon
the retention and development of existing associates, as well as the recruitment
of additional associates with superior talent.
Transferring functional skills and implementing cross-training programs
across all Ingram Micro locations have proven to be important factors in the
Company's growth and global expansion. The Ingram Micro Leadership Institute has
been established as the vehicle for defining the required, recommended, and
elective training opportunities for all levels of management in the Company. In
conjunction with these programs, the Company is expanding its human resource
systems worldwide to provide enhanced applicant tracking, hiring screens, career
and succession planning, education assistance, stock ownership participation,
and benefits administration. Also, the Company continues to seek top quality
associates worldwide through local, professional, and college recruiting
programs. Recognizing that hiring and retaining associates hinges, in part, on
providing a competitive salary and benefits package, the Company has developed a
global salary structure based on a comprehensive review of competitive salaries
and benefits by region. Based on feedback from the Company's annual associate
surveys and leadership behavior questionnaires, Ingram Micro has modified many
aspects of its programs and processes. This continual improvement process
contributed to Ingram Micro earning a place on Fortune magazine's 1999 list of
the "100 Best Companies to Work for in America."
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Continued development of the Company's values-based management program,
which includes the Company's Partners in Excellence initiative, continues to be
a top priority. Partners in Excellence serves as a guidepost for all associates
that links individual rewards and incentive programs to the Company's values. As
program rollout continues, more emphasis will be placed on global integration
and best practices replication.
CUSTOMERS
Ingram Micro sells to more than 140,000 reseller customers in more than 130
countries worldwide. No single customer accounted for more than 4% of Ingram
Micro's net sales in 1998, 1997, or 1996.
The Company conducts business with most of the leading resellers of
computer-based technology products around the world including, in the United
States, CDW Computer Centers, CompuCom/Dataflex, CompUSA/Computer City, Elcom
Services Group, En Pointe Technologies, Entex Information Services, Micro
Warehouse, Office Max, and Staples. The Company's reseller customers outside the
United States include DGS Retail Limited, Future Shop, IMS, Info Products UK
PLC, Laboratorios Magneticos, Nueva Wall Mart, Price Club (Mexico), SHL
Computer, and Telenor. The Company has certain limited contracts with its
reseller customers, most of which have a short term, or are terminable at will,
and have no minimum purchase requirements. The Company's business is not
substantially dependent on any such contracts.
SALES AND MARKETING
As of the end of fiscal 1998, Ingram Micro's telesales department had
approximately 2,700 telesales representatives worldwide, of whom more than 1,380
representatives are located in the United States, 800 representatives are
located in Europe, 240 representatives are located in Canada and 200
representatives are located in Latin America. These telesales representatives
assist resellers with product specifications, system configuration, new
product/service introductions, pricing, and availability. The Company's two main
United States telesales centers are located in Santa Ana, California and
Williamsville (Buffalo), New York and are supported by an extensive national
field sales organization. Ingram Micro also had approximately 200 field sales
representatives worldwide, including more than 50 in the United States, at
fiscal year end 1998.
The sales organization is organized to focus on resellers who comprise the
VAR (consisting of value-added resellers, system integrators, network
integrators, application VARs, original equipment manufacturers and Internet
service providers), Commercial (consisting of corporate resellers, direct
marketers, independent dealers and owner-operated chains), Consumer (consisting
of consumer electronics stores, computer superstores, mass merchants, office
product superstores, software only stores and warehouse clubs), and
Telecommunications (consisting of telephone companies, telecommunications
contractors and interconnect value-added resellers) market sectors. In addition,
the Company utilizes a variety of product-focused groups specializing in
specific product types. Specialists in mass storage, memory, networks,
processors, telephony, UNIX workstations and servers, and other product
categories promote sales growth and facilitate customer contacts for their
particular product group. Ingram Micro also offers a variety of marketing
programs tailored to meet specific supplier and reseller customer needs.
Services provided by the Company's in-house marketing services group include
advertising, direct mail campaigns, market research, on-line marketing, retail
programs, sales promotions, training, and assistance with trade shows and other
events.
SELLING ARRANGEMENTS. The Company offers various credit terms to qualifying
customers as well as prepay, credit card, and COD terms. The Company closely
monitors customers' credit worthiness through its on-line computer system, which
contains detailed information on each customer's payment history and other
relevant information. In addition, the Company participates in a national credit
association whose members exchange credit rating information on customers. In
most markets, the Company utilizes various levels of credit insurance to allow
sales expansion and control credit risks. The Company establishes reserves for
estimated credit losses in the normal course of business. Historically, the
Company has not experienced credit losses materially in excess of established
credit loss reserves. However, if the Company's receivables experience a
substantial deterioration in their collectibility or if the Company cannot
obtain credit insurance at reasonable rates, the Company's financial
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condition and results of operations may be adversely impacted.
The Company also sells to certain customers in the United States through
master reseller arrangements that involve higher volume sales on limited lines
of product. These sales are generally funded by floor plan financing companies
whose fees are subsidized by the Company's suppliers. Historically, the Company
received payment from these financing institutions within three business days
from the date of the sale, allowing the Company's master reseller business to
operate at much lower relative working capital levels than the Company's
wholesale distribution business. Starting in the second half of 1998, certain of
the industry's leading hardware manufacturers reduced their flooring fee
subsidies. As a result, payments from institutions that finance master reseller
sales with these reduced subsidies are now received within 15 days. This delay
in payment has increased the Company's average borrowing levels and interest
costs.
PRODUCTS AND SUPPLIERS
Ingram Micro believes that it has the largest inventory of products in the
industry, based on a review of publicly available data with respect to its major
competitors. The Company distributes and markets more than 200,000 products from
the industry's premier computer hardware manufacturers, networking equipment
suppliers, and software publishers worldwide. Product assortments vary by
market, and the relative importance of manufacturers to Ingram Micro varies from
country to country. On a worldwide basis, the Company's sales mix is more
heavily weighted toward hardware products and networking equipment than software
products. Net sales of software products have decreased as a percentage of total
net sales in recent years due to a number of factors, including bundling of
software with microcomputers and declines in software prices. The Company
believes that this is a trend that applies to the computer-based technology
products distribution industry as a whole, and the Company expects it to
continue.
Ingram Micro's worldwide supplier list includes almost all of the leading
computer hardware manufacturers, networking equipment manufacturers, and
software publishers such as Apple Computer, Cisco Systems, Compaq Computer,
Corel, Epson, Hewlett-Packard, IBM, Intel, Iomega, Microsoft, NEC Technologies,
Novell, Seagate, Sun Microsystems, Quantum, Symantec, 3Com, Toshiba, Viewsonic,
and Western Digital.
The Company's suppliers generally warrant the products distributed by the
Company and allow the Company to return 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 the following: (i) its services with regard to products which it
configures for its customers, and (ii) products which it builds to order from
components purchased from other sources.
The Company has written distribution agreements with many of its suppliers;
however, these agreements usually provide for nonexclusive distribution rights
and often include territorial restrictions that limit the countries in which
Ingram Micro is permitted to 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 from the distributor the supplier's products carried in the
distributor's inventory. The Company does not believe that its business is
substantially dependent on the terms of any such agreements.
The Company's business, like that of other wholesale distributors, is
subject to the risk that the value of its 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 most suppliers of technology products to protect distributors, such as
the Company, who purchase directly from such suppliers from the loss in value of
inventory due to technological change or the supplier's price reductions. Under
many such agreements, the distributor has the right to return for credit or
exchange for other products a portion of those inventory items purchased, within
a designated period of time. In addition, under the terms of many distribution
agreements, suppliers will credit the distributor for declines in inventory
value resulting from the supplier's price reductions if the distributor complies
with certain conditions. However, major PC suppliers in the last year have
decreased the
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availability of price protection for distributors. The shorter time periods
during which distributors may receive rebates or credit for decreases in
manufacturer prices on unsold inventory have made it more difficult for the
Company to match its inventory levels with the price protection periods.
Consequently, the Company's risk of loss due to declines in value of inventory
held by the Company after such price protection periods have passed has
increased. The Company is taking various actions, including closer monitoring of
its inventory levels and decreased purchases, to lessen such risk.
While the industry practices discussed above are sometimes not embodied in
written agreements and do not protect the Company in all cases from declines in
inventory value, management believes that these practices provide a significant
level of protection from such declines. No assurance can be given, however, that
such practices will continue or that they will adequately protect the Company
against declines in inventory value. The Company's risk of inventory loss could
be greater outside the United States, where agreements with suppliers are more
restrictive with regard to price protection and the Company's ability to return
unsold inventory. The Company establishes reserves for estimated losses due to
obsolete inventory in the normal course of business. Historically, the Company
has not experienced losses due to obsolete inventory materially in excess of
established inventory reserves.
FRAMEWORKS
To better serve both global and regional customers, the Company introduced
Frameworks, worldwide channel assembly and configuration initiative, in 1997, to
deliver customized, fully tested computer systems to its reseller customers and
to assist with reducing manufacturers' inventory overhead. Frameworks currently
provides the Company with four distinct business opportunities: reconfiguration;
channel assembly; private label and unbranded offerings; and OEM manufacturing.
Reconfiguration consists of opening "name" brand finished product, already
assembled and packaged by a vendor, and upgrading it with features such as
memory, components, accessories, and third party software. Channel assembly
consists of assembling individual OEM components into a manufacturer-authorized
computer. Private label or unbranded systems are computers specially assembled
for resellers at the Frameworks facility, using components, accessories, and
software from various manufacturers. Private label systems display the
reseller's brand on the box, system, and monitor. Unbranded systems, with no
resellers' name or brand on the box, system and monitor, were developed at the
request of reseller customers who build unbranded or private label systems
themselves. By participating in this unbranded systems program, customers can
outsource assembly operations that they currently perform, allowing them to
focus on selling, servicing and supporting their customers. Finally, the Company
also provides manufacturing services to OEMs.
Frameworks has the capability to produce over 2.5 million units annually
from facilities in Memphis, Tennessee and `s-Hertogenbosch, The Netherlands. In
addition, the Company entered into a strategic alliance with Solectron
Corporation in June 1998 to provide assembly services in the United States,
Canada, Europe, Asia and Latin America. This alliance is expected to allow
Frameworks eventually to deliver customized, fully tested computer systems to
customers from up to 10 locations worldwide.
INFORMATION SYSTEMS
Ingram Micro's systems are primarily mainframe-based and provide the high
level of scalability and performance required to manage such a large and complex
business operation. IMpulse, Ingram Micro's enterprise wide system, is a single,
standardized, real-time information system and operating environment, used
across substantially all of the Company's worldwide operations. It has been
customized as necessary for use in all countries in which the Company operates
and has the capability to handle multiple languages and currencies. On a daily
basis, the Company's systems typically handle 50 million on-line transactions,
80,000 orders, and 150,000 shipments. This compares to 12 million on-line
transactions, 26,000 orders, and 37,000 shipments handled on a daily basis by
IMpulse in 1996. The Company has designed IMpulse as a scalable system that has
the capability to support increased transaction volume. The overall on-line
response time for the Company's network of over 14,000 user stations (terminals,
printers, personal computers, and radio frequency hand held terminals) is less
than one second.
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Worldwide, Ingram Micro's centralized processing system supports more than
40 operational functions including receiving, customer management, order
processing, shipping, inventory management, and accounting. At the core of the
IMpulse system is on-line, real-time distribution software to which considerable
enhancements and modifications have been made to support the Company's growth
and its low cost business model. The Company makes extensive use of advanced
telecommunications technologies with customer service-enhancing features, such
as Automatic Call Distribution to route customer calls to the telesales
representatives. The Telesales Department uses its Sales Wizard system for
on-line, real-time tracking of all customer calls, for proactive outbound
calling, and for status reports on sales statistics such as number of customer
calls, customer call intentions, and total sales generated. IMpulse allows the
Company's telesales representatives to deliver real-time information on product
pricing, inventory availability, and order status to reseller customers. The
Sales Adjusted Gross Profit pricing system enables telesales representatives to
make informed pricing decisions through access to specific product and
order-related costs for each sales opportunity.
In the United States, the Company has implemented CTI technology, which
provides the telesales representatives with Automatic Number Identification
capability and advanced telecommunications features such as on-screen call
waiting and automatic call return, thereby reducing the time required to process
customer orders.
To complement Ingram Micro's telesales, customer service, and technical
support capabilities, IMpulse offers a number of different electronic products
and services through which customers can conduct business with the Company, such
as the Customer Automated Purchasing System, Electronic Data Interchange, the
Bulletin Board Service, the Ingram Micro Web site "www.ingrammicro.com,"
internet-based Electronic Catalog, In-Depth Library, and Auction Block. The
Electronic Catalog provides reseller customers with access to product pricing
and availability, with the capability to search by product category, name, or
manufacturer. The In-Depth Library is a comprehensive multi-manufacturer
database of timely and accurate product, sales, marketing, and technical
information, which is updated nightly for new information. Auction Block is a
real-time, on-line bidding service that allows reseller customers to
competitively bid on unopened products that are not returnable to suppliers
(e.g., discontinued products, products with cosmetic damage to their packaging,
returned products not conforming to the supplier's return policies; etc.).
The Company's information systems provide the infrastructure that allows
the implementation of a customer-centric channel model. It provides the
information necessary for Ingram Micro to act as the agent of commerce among
suppliers, resellers, and end-users. The Company is rapidly enhancing and
deploying seamless, easy-to-use electronic commerce solutions that provide
resellers with the ability to do business with Ingram Micro and with end-users
with greater ease and at lower cost. The Company's electronic commerce
capabilities have expanded to include: SpeedSource, an electronic commerce
ordering tool which gives resellers quick access to real-time ordering, product
allocation, order status, product search, pricing and availability; InsideLine,
a direct communication link, currently in selected use, which furnishes
resellers with real-time access to the Company's mainframe inventory systems;
and Prime Access, currently in production, which, upon completion of rollout to
resellers, will equip them with personalized Web storefronts that are linked
directly to Ingram Micro's order processes and inventory systems.
The Company's warehouse operations use extensive bar-coding technology and
radio frequency technology for receiving and shipping, and real-time links to
United Parcel Service and Federal Express for freight processing and shipment
tracking. The Customer Service Department uses the POWER System for on-line
documentation and faster processing of customer product returns. To ensure that
adequate inventory levels are maintained, the Company's buyers depend on the
purchasing system to track inventory on a continual basis. Many other features
of IMpulse help to expedite the order processing cycle and reduce operating
costs for the Company as well as its reseller customers and suppliers.
The Company employs various security measures and backup systems designed
to protect against unauthorized use or failure of its information systems.
Access to the Company's information systems is controlled through the use of
passwords and additional security measures are taken with respect to sensitive
information. The Company has a contract with Sungard Recovery Services for
disaster recovery and twice per year performs a complete
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systems test, including applications and database integrity. In addition, the
Company has backup power sources for emergency power and also has the capability
to automatically reroute incoming calls, such as from its Santa Ana (West Coast
sales) facility to its Buffalo (East Coast sales) facility. The Company has not
in the past experienced significant failures or downtime of IMpulse or any of
its other information systems, but any such failure or significant downtime
could prevent the Company from taking customer orders, printing product
pick-lists and/or shipping product, and could prevent customers from accessing
price and product availability information from the Company.
The Company believes that in order to remain competitive, it will be
necessary to upgrade its information systems on a continuing basis. The Company
has begun to migrate its IMpulse system from a mainframe-based system using
Cobol language to a client-server based system using Oracle database management
systems. The Company believes that this new information system architecture will
address the Company's need for a distributed computing environment and will
increase system scalability and fault tolerance.
EURO CONVERSION AND YEAR 2000
See "--Euro Conversion" and "--Year 2000 Matters" under "Item 7. --
Management's Discussion and Analysis of Financial Condition and Results of
Operations" for discussion relating to the impact of the euro conversion and
Year 2000 matters.
NON-U.S. OPERATIONS AND EXPORT SALES
OPERATIONS OUTSIDE THE UNITED STATES. The Company has subsidiaries or
offices in 28 countries and sales representatives in another five countries,
including Argentina, Australia, Brazil, Canada, China, Colombia, Costa Rica,
Chile, Ecuador, India, Indonesia, Japan, Malaysia, Mexico, New Zealand, Norway,
Peru, Singapore, Switzerland, Thailand, Venezuela, and 11 countries of the
European Union. In 1998, 1997, and 1996, 34.7%, 30.4%, and 33.0%, respectively,
of the Company's net sales were derived from operations outside of the United
States. The Company expects its net sales from operations outside the United
States to increase as a percentage of total net sales in the future due to both
organic growth and growth from acquisitions, including the mid-1998 acquisitions
of Macrotron in Germany and an assembly facility and related business acquired
from Tulip Computer N.V. in The Netherlands.
In February 1999, the Company completed a tender offer for the remaining
outstanding shares of common stock and warrants for ERL. Ingram Micro's
ownership in ERL has increased to approximately 95% of the issued shares (on a
fully diluted basis). The Company's net sales from operations outside the United
States are primarily denominated in currencies other than the U.S. dollar.
Accordingly, the Company's operations outside the United States impose risks
upon its business as a result of exchange rate fluctuations. Although the
Company attempts to mitigate the effect of exchange rate fluctuations on its
business, primarily by attempting to match the currencies of sales and costs, as
well as through the use of foreign currency borrowings and derivative financial
instruments such as forward exchange contracts, the Company does not seek to
remove all risk associated with such fluctuations. See "Item 7. -- Management's
Discussion and Analysis of Financial Condition and Results of Operations."
EXPORT MARKETS. The Company's Export operations continue to serve those
markets where the Company does not have a stand-alone, in-country presence. The
Miami, Florida; Santa Ana, California; and Brussels, Belgium Export operations
(which have been reorganized as part of the Latin America, U.S. and European
operations, respectively) serve more than 1,750 resellers in approximately 100
countries. In addition, the Export branch in Latin America has field sales
representatives based in Buenos Aires, Argentina; Bogota, Colombia; San Jose,
Costa Rica; Caracas, Venezuela; and Quito, Ecuador.
For segment information regarding the Company's United States and non-U.S.
operations, see Note 10 of Notes to Consolidated Financial Statements.
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COMPETITION
The Company operates in a highly competitive environment, both in the
United States and internationally. The computer-based technology products
distribution industry is characterized by intense competition, based primarily
on price, product availability, speed and accuracy of delivery, effectiveness of
sales and marketing programs, credit availability, ability to tailor specific
solutions to customer needs, quality and breadth of product lines and service,
and availability of technical and product information. The Company believes it
competes favorably with respect to each of these factors. In addition, the
Company believes that as customers move their back-room operations to
distribution partners, outsourcing and value-added capabilities (such as channel
assembly, configuration, innovative financing programs, and order fulfillment
programs) will become more important competitive factors. With the emergence of
the Internet reseller storefronts, the Company seeks to provide virtual
warehouse and distribution operations.
Ingram Micro's U.S. competitors include full-line distributors Tech Data,
Merisel and Pinacor (MicroAge's distribution arm), as well as specialty
distributors such as Gates/Arrow (desktop and enterprise products), Daisytek
(consumables), Access Graphics (enterprise products) and Avnet (industrial and
enterprise products). Ingram Micro competes internationally with a variety of
national and regional distributors. In the European market, competitors include
international distributors such as CHS Electronics and Tech Data (which acquired
C2000, a European competitor), and several regional and local distributors,
including Actebis, Raab Karcher and Scribona. In Canada, Ingram Micro competes
with Merisel, Globelle, Beamscope and Tech Data. In Latin America, Ingram Micro
competes with international distributors including CHS Electronics and Tech
Data, and several regional and local distributors including MPS Mayorista,
Alvimer and Sonda-Beamscope S.A. In the Asia Pacific market, Ingram Micro
(through a majority interest in ERL and a strategic agreement with SOFTBANK),
faces both regional and local competitors, of whom the largest are Tech Pacific,
a broadline distributor which operates in eight countries, and SiS Distribution
Ltd., a Hong Kong-based distributor of microcomputer products which is 80% owned
by CHS Electronics.
The Company is constantly seeking to expand its business into areas closely
related to its core computer-based technology products distribution business. As
the Company enters new business areas, including value-added services, it may
encounter increased competition from current competitors and/or from new
competitors, some of which may be current customers of the Company. For example,
as the Company continues to develop the Frameworks unbranded systems program,
there may be competition from current vendors and customers in addition to other
distributors. Also, as electronic purchases of software become more prevalent in
the industry, electronic software distributors may become significant
competitors of the Company.
Ingram Micro also competes with hardware manufacturers and software
publishers that sell directly to reseller customers and end-users. As hardware
manufacturers look to increase direct sales volumes while tightening terms and
conditions, some customers are buying more products directly from the
manufacturer rather than through distribution. Together with the risk of
decreased purchase discounts and rebates, the Company's sales volumes and profit
margins may be adversely affected.
ASSET MANAGEMENT
The Company maintains sufficient quantities of product inventories to
achieve high order fill rates. The Company believes that the risks associated
with slow moving and obsolete inventory are substantially mitigated by price
protection and stock return privileges provided by suppliers. In the event of a
supplier price reduction, the Company generally receives a credit for products
in its inventory. In addition, the Company has the right to return a certain
percentage of purchases, subject to certain limitations. Historically, price
protection, stock return privileges, and inventory management procedures have
helped to reduce the risk of decline in the value of inventory. However, major
PC suppliers have stated that it is their intention to reduce the amount of
inventory in the channel, particularly in light of the growth of vendor direct
and channel assembly strategies. In the last year, these suppliers have
decreased the availability of price protection for distributors. The shorter
time periods during which distributors may receive rebates or credit for
decreases in manufacturer prices on unsold inventory have made it more difficult
for the Company to match its inventory levels with the price protection periods.
Consequently, the
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Company's risk of loss due to declines in value of inventory held by the Company
after such price protection periods have passed has increased. The Company is
taking various actions, including closer monitoring of its inventory levels and
decreased purchases, to lessen such risk. The Company's risk of decline in the
value of inventory could also be greater outside the United States, where
agreements with suppliers are more restrictive with regard to price protection
and the Company's ability to return unsold inventory.
The Company establishes reserves for estimated losses due to obsolete
inventory in the normal course of business. Historically, the Company has not
experienced losses due to obsolete inventory materially in excess of established
inventory reserves. Inventory levels may vary from period to period, due in part
to the addition of new suppliers or new lines with current suppliers and large
cash purchases of inventory due to advantageous terms offered by suppliers. In
addition, payment terms with inventory suppliers may vary from time to time, and
could result in less inventory being financed by vendors and a greater amount of
inventory being financed by the Company's debt.
EMPLOYEES
As of January 2, 1999, the Company employed over 14,400 associates located
as follows: United States--8,620, Europe--3,965, all other regions--1,832. As a
result of the Company's acquisition of ERL in February 1999, the Company has
approximately 880 additional associates in Asia. Ingram Micro believes that its
success depends on the skill and dedication of its associates. The Company
strives to attract, develop, and retain outstanding personnel. Certain of the
Company's operations in Europe, Latin America and Canada are subject to
collective bargaining or similar arrangements. The Company considers its
employee relations to be good.
On March 11, 1999, the Company announced that the Company is accelerating a
number of actions to increase flexibility and service and maximize cost savings
and efficiencies. Outside of the United States, the Company has been increasing
its cost effectiveness through attrition and personnel redeployment since late
1998. In the United States, the Company is instituting many structural changes,
including the closing of its California-based consolidation center, re-alignment
of its sales forces and the creation of a merchandising organization that
integrates its purchasing, vendor sales and product marketing functions. In
addition, new programs and process improvements to increase productivity are
being deployed in the Company's distribution centers. These and other changes
are reducing the Company's worldwide work force by approximately 1,400 full-time
employee equivalents.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information with respect to each
person who is an executive officer of the Company as of March 16, 1999:
NAME AGE PRESENT AND PRIOR POSITIONS HELD(1) YEARS POSITIONS HELD
- ---- --- ----------------------------------- --------------------
Jerre L. Stead(2) 56 Chairman of the Board and Aug. 1996-Present
Chief Executive Officer
Chief Executive Officer and Chairman Jan. 1995-Aug. 1995
of the Board, Legent Corporation, a
software development company
Executive Vice President, Chairman May 1993-Dec. 1994
and Chief Executive Officer, AT&T
Corp. Global Information Solutions
(NCR Corp.), a computer manufacturer
President and Chief Executive Officer, AT&T Sept. 1991-Apr. 1993
Corp. Global Business Communication
Systems, a communications company
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NAME AGE PRESENT AND PRIOR POSITIONS HELD(1) YEARS POSITIONS HELD
- ---- --- ----------------------------------- --------------------
Jeffrey R. Rodek(3) 45 President; Worldwide Chief Operating Officer Dec. 1994-Present
Senior Vice President, Americas and July 1991-Sept. 1994
Caribbean, Federal Express,
an express shipping firm
Michael J. Grainger 46 Executive Vice President; Worldwide Chief Oct. 1996-Present
Financial Officer
Chief Financial Officer May 1996-Oct. 1996
Vice President and Controller, Ingram July 1990-Oct. 1996
Industries
Douglas R. Antone 46 Executive Vice President; President, July 1998-Present
Frameworks Worldwide
Senior Vice President, Marketing July 1997-July 1998
Senior Vice President; President, June 1994-July 1997
Ingram Alliance
Senior Vice President, Worldwide Sales Nov. 1993-May 1994
and Marketing, Borland International,
a software development company
Philip D. Ellett 44 Executive Vice President; President, Mar. 1999-Present
Ingram Micro North America
Executive Vice President; President, June 1998-Feb. 1999
Ingram Micro Europe
Senior Vice President; President, May 1997-June 1998
Ingram Micro Europe
Senior Vice President; Chief Operating Jan. 1997-April 1997
Officer, Ingram Micro Europe
Senior Vice President; General Manager, Jan. 1996-Jan. 1997
U.S. Consumer Markets Division
President, Gates/Arrow, an electronics Aug. 1994-Dec. 1995
distributor
President and Chief Executive Officer, Oct. 1991-Aug. 1994
Gates/F.A. Distributing, Inc., an
electronics distributor
Robert D. Grambo 34 Executive Vice President; President, Feb. 1999-Present
Ingram Micro Europe
Senior Vice President; Chief Operating July 1998-Feb. 1999
Officer, Ingram Micro Europe
Senior Vice President, Sales, Ingram Micro U.S. Sept. 95-July 1998
Vice President, Sales, Ingram Micro U.S. Apr. 94-Sep. 1995
Vice President, Product Marketing Apr. 93-Apr. 1994
Guy P. Abramo 37 Senior Vice President, Marketing, Worldwide Sept. 1998-Present
Partner, Yankelovich Partners, a marketing May 1998-Oct. 1998
professional services company
Managing Director, Marketing Intelligence, Feb. 1995-May 1998
Peat Marwick LLP, an accounting
and professional services company
Manager, Marketing, Mobil Corporation June 1984-Feb. 1995
an international oil company
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NAME AGE PRESENT AND PRIOR POSITIONS HELD(1) YEARS POSITIONS HELD
- ---- --- ----------------------------------- --------------------
James E. Anderson, Jr. 51 Senior Vice President, Secretary and Jan. 1996-Present
General Counsel
Vice President, Secretary and General Sept. 1991-Nov. 1996
Counsel, Ingram Industries
David M. Carlson 58 Senior Vice President, Chief Feb. 1997-Present
Technology Officer
President, Consumer Focused Jan. 1996-Feb. 1997
Technology, a consulting firm
Vice President, Technology and Mar. 1995-Dec. 1995
Network Services, Florist
Transworld Delivery Corp.
Senior Vice President, Corporate July 1985-Jan. 1995
Information Systems, Kmart
Corporation, a retail company
David M. Finley 58 Senior Vice President, Human Resources, July 1996-Present
Worldwide
Senior Vice President, Human Resources, May 1995-July 1996
Budget Rent a Car, a car rental company
Vice President, Human Resources, The Southland Jan. 1977-May 1995
Corporation, a convenience retail company
Henri T. Koppen 56 Senior Vice President; President, Ingram Micro Jan. 1998-Present
Latin America
President, Latin America, General Electric July 1996-Dec. 1997
Capital Information Technology Solutions, a
systems integrator/reseller company
Vice President, Latin America, Ameridata Global May 1995-July 1996
Inc., a systems integrator/reseller company
General Manager, Mexico, Control Data Systems May 1994-May 1995
Inc., a systems manufacturer and integrator
Director, North America Marketing, Control Data May 1992-April 1994
Systems Inc., a systems manufacturer and integrator
Gregory M.E. Spierkel 42 Senior Vice President; President, July 1998-Present
Ingram Micro Asia-Pacific
Vice President, Global Sales & Marketing, March
1996-June 1997 Mitel Inc., a manufacturer of
telecommunications and semiconductor products
President, North America, Mitel Inc., a April 1992-March 1996
manufacturer of telecommunications and
semiconductor products
James F. Ricketts 52 Vice President; Worldwide Treasurer Sept. 1996-Present
Vice President; Treasurer Feb. 1992-Sept. 1996
Sundstrand Corporation, a manufacturer
of aerospace and related technology systems
- -------------
(1) The first position and any other positions not given a separate corporate
identification are with the Company.
(2) Mr. Stead is a director of Armstrong World Industries, Inc., Thomas &
Betts, and Conexant Systems, Inc.
(3) Mr. Rodek is a director of Hyperion Solutions and a member of its
Compensation Committee; and a director of EXE Technologies and a member of
its Audit Committee.
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TRADEMARKS AND SERVICE MARKS
The Company owns or is the licensee of various trademarks and service
marks, including, among others, "Ingram Micro," "IMpulse," the Ingram Micro
logo, "Partnership America," "Leading the Way in Worldwide Distribution, "
"Frameworks Total Integration Services," and "Affiniti." Certain of these marks
are registered, or are in the process of being registered, in the United States
and various other countries. Even though the Company's marks may not be
registered in every country where the Company conducts business, in many cases
the Company has acquired rights in those marks because of its continued use of
them. Management believes that the value of the Company's marks is increasing
with the development of its business, but that the business of the Company as a
whole is not materially dependent on such marks.
SAFE HARBOR FOR FORWARD-LOOKING INFORMATION
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. In order to take advantage of the
"safe harbor" provisions of the Act, the Company identifies the following
important factors which could affect the Company's actual results and cause such
results to differ materially from those projected, forecasted, estimated,
budgeted or otherwise expressed by the Company in forward-looking statements
made by or on behalf of the Company:
(1) Intense competition may lead to reduced prices, lower sales or reduced
sales growth, and lower gross margins.
(2) The Company's narrow margins magnify the impact on operating results
of variations in operating costs. A number of factors may reduce the
Company's margins even further. For example, if PC manufacturers
substantially reduce or terminate price protection programs, if PC
manufacturers substantially raise the threshold on sales volume before
distributors may qualify for discounts and/or rebates, if the
Company's receivables experience a substantial deterioration in their
collectibility or if the Company cannot obtain credit insurance at
reasonable rates, the Company's financial condition and results of
operations may be adversely impacted.
(3) Seasonal variations in the demand for products and services, as well
as the introduction of new products, may cause variations in the
Company's quarterly results.
(4) The availability (or lack thereof) of capital on acceptable terms may
hamper the Company in its efforts to fund its increasing working
capital needs.
(5) The failure of the Company to adequately manage its growth may
adversely impact the Company's results of operations.
(6) A failure of the Company's information systems may adversely impact
the Company's results of operations. In addition, the failure of the
Company or its vendors, resellers, customers, shipping companies, and
other third party systems to achieve substantial Y2K readiness may
adversely impact the Company's financial condition and results of
operations.
(7) Devaluation of a foreign currency, or other disruption of a foreign
market, may adversely impact the Company's operations in that country
or globally.
(8) The loss of a key executive officer or other key employee may
adversely impact the Company's operations.
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(9) The inability of the Company to obtain products on favorable terms may
adversely impact the Company's results of operations.
(10) The Company's operations may be adversely impacted by an acquisition
that (i) is not suited for the Company, (ii) is improperly executed,
or (iii) substantially increases the Company's debt.
(11) The Company's financial condition may be adversely impacted by a
decline in value of a portion of the Company's inventory.
(12) The failure of certain shipping companies to deliver product to the
Company, or from the Company to its customers, may adversely impact
the Company's results of operations.
(13) Rapid technological change may alter the market for the Company's
products and services, requiring the Company to anticipate such
technological changes, to the extent possible.
(14) If the Company's inventory suppliers terminate or substantially reduce
the subsidies relating to floor planning financing for the Company's
master reseller business, such change in policy may adversely impact
the Company's financial condition and results of operations.
Reference is made to Exhibit 99.01 hereto for additional discussion of the
foregoing factors, as well as additional factors which may affect the Company's
actual results and cause such results to differ materially from those projected,
forecasted, estimated, budgeted or otherwise expressed in forward-looking
statements.
ITEM 2. PROPERTIES
Ingram Micro's worldwide executive headquarters, as well as its West Coast
sales and support offices, are located in a three-building office complex in
Santa Ana, California. The Company also maintains an East Coast operations
center in Williamsville (Buffalo), New York.
As of March 22, 1999, the Company operates seven distribution centers in
the continental United States located in Carrollton, Texas, Carol Stream,
Illinois, Fremont, California, Fullerton, California, Harrisburg, Pennsylvania,
Millington, Tennessee, and Miami, Florida. The Company also operates 71
distribution centers outside of the U.S.--in Australia, Brazil, Canada, Chile,
China, India, Hong Kong, Malaysia, Mexico, New Zealand, Norway, Peru, Singapore,
Switzerland, Thailand and most countries of the European Union.
As of March 22, 1999, the Company operates two integration centers located
in Memphis, Tennessee and `s-Hertogenbosch, The Netherlands in addition to three
returns centers, two in Santa Ana, California and one in Toronto, Canada. As of
the same date, the Company operates a freight consolidation center in Fremont,
California, which, along with one of the Company's Santa Ana returns centers,
will be closed by the second quarter of 1999.
As of March 22, 1999, all of the Company's facilities are leased, with the
exception of the distribution center in Roncq, France. These leases have varying
terms. The Company does not anticipate any material difficulty in renewing any
of its leases as they expire or securing replacement facilities, in each case on
commercially reasonable terms. In addition, the Company owns two undeveloped
properties in Santa Ana, California totaling approximately 16.27 acres, and has
options on approximately 60 acres in Millington, Tennessee.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a
party or to which any of its property is subject.
As a result of an internal review by the Company of export shipments made
from its United States distribution facilities, the Company has determined that
certain of these shipments and related documentation were not in compliance with
U.S. export regulations. The Company has notified the appropriate federal
government agencies
17
19
pursuant to applicable voluntary self-disclosure procedures (the "Disclosure").
The reported shipments consisted of modems and other telecommunications products
and shrink-wrapped, commercial software readily available through normal retail
outlets which contained encryption features controlled under export regulations.
These shipments had a total value of approximately $673,240. Violations of
export laws and regulations are subject to both civil and criminal penalties,
including in appropriate circumstances suspension or loss of export privileges.
Since the Disclosure, a representative of the Department of Commerce has
requested additional documents relating to the Disclosure, but the Company does
not know what position the Department will take upon further review of the
Disclosure. The Company is not able to estimate at this time the amount or
nature of penalties, if any, that might be sought against the Company as a
result of the reported violations; however, penalties to which the Company
potentially may be subject could be material.
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 March 29, 1999, there were 578 holders of record of the Class A
Common Stock and 140 holders of record of the Class B Common Stock. The Company
believes that there are approximately 27,000 beneficial holders of the Class A
Common Stock.
Information as to the Company's quarterly stock prices is included on the
inside back cover of the Company's 1998 Annual Report to Shareowners, which is
included as part of Exhibit 13.01 and is incorporated in this Annual Report on
Form 10-K.
Information as to the principal market on which the Class A Common Stock is
traded is included on the inside back cover of the Company's 1998 Annual Report
to Shareowners, which is included as part of Exhibit 13.01 and is incorporated
in this Annual Report on Form 10-K.
DIVIDEND POLICY
The Company has not declared or paid any dividends on its Class A or Class
B Common Stock in the preceding two fiscal years. The Company currently intends
to retain its future earnings to finance the growth and development of its
business and, therefore, does not anticipate declaring or paying cash dividends
on its Class A or Class B 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 the Company's financial condition, results
of operations, capital requirements, and such other factors as the Board of
Directors deems relevant. In addition, certain of the Company's debt facilities
contain restrictions on the declaration and payment of dividends.
18
20
ITEM 6. SELECTED FINANCIAL DATA
The selected financial information of Ingram Micro for the five year period
ended January 2, 1999 is included on page 18 of the Company's 1998 Annual Report
to Shareowners, which is included as part of Exhibit 13.01 and is incorporated
in this Annual Report on Form 10-K. It should be read in conjunction with the
consolidated financial statements included on pages 30 through 50 of the
Company's 1998 Annual Report to Shareowners which are also included as part of
Exhibit 13.01 and incorporated in this Annual Report on Form 10-K and the
financial statement schedule below in Item 14 of this Annual Report on Form
10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations is included on pages 19 through 29 of the Company's 1998 Annual
Report to Shareowners, which are also included as part of Exhibit 13.01 and are
incorporated in this Annual Report on Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The required disclosure is included on page 26 of the Company's 1998 Annual
Report to Shareowners, which are also included as part of Exhibit 13.01 and
incorporated in this Annual Report on Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements are included on pages 30
through 50 of the Company's 1998 Annual Report to Shareowners, which are also
included as part of Exhibit 13.01 and incorporated in this Annual Report on Form
10-K. Reference is made to the Index to the Financial Statements in Item 14
below.
A financial statement schedule for the Company, and report thereon, are
included on pages 24 and 25, respectively, of this Annual Report on Form 10-K.
Reference is made to the Index to Financial Statements in Item 14 below.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in the Company's independent accountants or
disagreements with such accountants on accounting principles or practices or
financial statement disclosures.
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 because the
Company will not furnish such information in its definitive Proxy Statement
prepared in accordance with Schedule 14A.
The Notice and Proxy Statement for the 1999 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, and 13).
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. The consolidated financial statements, together with the report thereon
of PricewaterhouseCoopers LLP dated February 10, 1999, except as to Note
14, which is as February 19, 1999 all appearing on pages 30 through 51 in
the 1998 Annual Report to Shareowners, are incorporated in this Annual
Report on Form 10-K. With the exception of the aforementioned information
and
19
21
the information incorporated in Items 5, 6, 7, and 8, the 1998 Annual
Report to Shareowners is not deemed filed as part of this Annual Report on
Form 10-K.
INGRAM MICRO INC. PAGE NO. IN
----------------- ANNUAL REPORT
TO SHAREOWNERS
--------------
Index to Financial Information 17
Consolidated Balance Sheet at January 2, 1999 and January 3, 1998 30
Consolidated Statement of Income for the years ended January 2, 1999,
January 3, 1998, and December 28, 1996 31
Consolidated Statement of Stockholders' Equity for the years ended
January 2, 1999, January 3, 1998, and December 28, 1996 32
Consolidated Statement of Cash Flows for the years ended
January 2, 1999, January 3, 1998, and December 28, 1996 33
Notes to Consolidated Financial Statements 34-50
Report of Independent Accountants 51
Pages 18 through 52 and the inside back cover page of the 1998 Annual
Report to Shareowners of Ingram Micro Inc. include the Selected Financial Data,
Management's Discussion and Analysis of Financial Condition and Results of
Operations, the Consolidated Financial Statements and related notes thereto, the
Independent Accountants' Report, Shareholder Information and Quarterly Stock
Prices. These pages are filed with the Securities and Exchange Commission as
Exhibit 13.01 to this Annual Report on Form 10-K.
2. Financial Statement Schedules:
Report of Independent Accountants on Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts
3. List of Exhibits:
3.01 -- Form of Certificate of Incorporation of the Registrant
(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"))
3.02 -- Amended and Restated Bylaws of the Registrant (incorporated
by reference to Exhibit 3.02 to the Company's Annual Report
on Form 10-K for the fiscal year ended January 3, 1998)
10.01 -- Ingram Micro Inc. Executive Incentive Bonus Plan
(incorporated by reference to Exhibit 10.01 to the IPO S-1)
10.02 -- Ingram Micro Inc. Management Incentive Bonus Plan
(incorporated by reference to Exhibit 10.02 to the IPO S-1)
10.03 -- Ingram Micro Inc. General Employee Incentive Bonus Plan
(incorporated by reference to Exhibit 10.03 to the IPO S-1)
10.04 -- Agreement dated as of December 21, 1994 between the Company
and Jeffrey R. Rodek (incorporated by reference to Exhibit
10.04 to the IPO S-1)
10.05 -- Agreement dated as of April 25, 1988 between the Company and
Sanat K. Dutta (incorporated by reference to Exhibit 10.05
to the IPO S-1)
10.06 -- 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 fiscal year ended January 3, 1998)
10.07 -- Ingram Micro Inc. Rollover Stock Option Plan (incorporated
by reference to Exhibit 10.07 to the IPO S-1)
10.08 -- Ingram Micro Inc. Key Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.08 to the IPO S-1)
10.09 -- Ingram Micro Inc. 1996 Equity Incentive Plan (incorporated
by reference to Exhibit 10.09 to
20
22
the IPO S-1)
10.10 -- Ingram Micro Inc. Amended and Restated 1996 Equity Incentive
Plan (incorporated by reference to Exhibit 10.10 to the IPO
S-1)
10.11 -- Severance Agreement dated as of June 1, 1996 among the
Company, Ingram Industries, Linwood A. Lacy, Jr., and
NationsBank, N.A., as trustee of the Linwood A. Lacy, Jr.
1996 Irrevocable Trust dated February 1996 (incorporated by
reference to Exhibit 10.11 to the IPO S-1)
10.12 -- Credit Agreement dated as of October 30, 1996 among the
Company and Ingram European Coordination Center N.V., Ingram
Micro Singapore Pte Ltd., and Ingram Micro Inc., as
Borrowers and Guarantors, certain financial institutions, as
the Lenders, NationsBank of Texas, N.A., as Administrative
Agent for the Lenders and The Bank of Nova Scotia as
Documentation Agent for the Lenders (incorporated by
reference to Exhibit 10.12 to the Company's Registration
Statement on Form S-1 (File No. 333-16667) (the "Thrift Plan
S-1"))
10.13 -- Amended and Restated Reorganization Agreement dated as of
October 17, 1996 among the Company, Ingram Industries, and
Ingram Entertainment (incorporated by reference to Exhibit
10.13 to the Thrift Plan S-1)
10.14 -- Registration Rights Agreement dated as of November 6, 1996
among the Company and the persons listed on the signature
pages thereof (incorporated by reference to Exhibit 10.14 to
the Thrift Plan S-1)
10.15 -- Board Representation Agreement dated as of November 6, 1996
(incorporated by reference to Exhibit 10.15 to the Thrift
Plan S-1)
10.16 -- 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)
10.17 -- Tax Sharing and Tax Services Agreement dated as November 6,
1996 among the Company, Ingram Industries, and Ingram
Entertainment (incorporated by reference to Exhibit 10.17 to
the Thrift Plan S-1)
10.18 -- Agreement with Douglas R. Antone dated May 15, 1998, as
amended October 28, 1998
10.19 -- 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)
10.20 -- Data Center Services Agreement dated as of November 6, 1996
among the Company, Ingram Book Company, and Ingram
Entertainment Inc. (incorporated by reference to Exhibit
10.20 to the Thrift Plan S-1)
10.21 -- 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)
10.22 -- Agreement dated as of August 26, 1996 between the Company
and Jerre L. Stead (incorporated by reference to Exhibit
10.22 to the IPO S-1)
10.23 -- Definitions for Ingram Funding Master Trust Agreements
(incorporated by reference to Exhibit 10.23 to the IPO S-1)
10.24 -- Asset Purchase and Sale Agreement dated as of February 10,
1993 between Ingram Industries and Ingram Funding Inc.
(incorporated by reference to Exhibit 10.24 to the IPO S-1)
10.25 -- Pooling and Servicing Agreement dated as of February 10,
1993 among Ingram Funding, Ingram Industries and Chemical
Bank (incorporated by reference to Exhibit 10.25 to the IPO
S-1)
10.26 -- Amendment No. 1 to the Pooling and Servicing Agreement dated
as of February 12, 1993, the Asset Purchase and Sale
Agreement dated as of February 12, 1993, and the Liquidity
Agreement dated as of February 12, 1993 (incorporated by
reference to Exhibit 10.26 to the IPO S-1)
10.27 -- Certificate Purchase Agreement dated as of July 23, 1993
(incorporated by reference to Exhibit 10.27 to the IPO S-1)
21
23
10.28 -- Schedule of Certificate Purchase Agreements (incorporated by
reference to Exhibit 10.28 to the IPO S-1)
10.29 -- Series 1993-1 Supplement to Ingram Funding Master Trust
Pooling and Servicing Agreement dated as of July 23, 1993
(incorporated by reference to Exhibit 10.29 to the IPO S-1)
10.30 -- Schedule of Supplements to Ingram Funding Master Trust
Pooling and Servicing Agreement dated as of July 23, 1993
(incorporated by reference to Exhibit 10.30 to the IPO S-1)
10.31 -- Letter of Credit Reimbursement Agreement dated as of
February 10, 1993 (incorporated by reference to Exhibit
10.31 to the IPO S-1)
10.32 -- Liquidity Agreement dated as of February 10, 1993
(incorporated by reference to Exhibit 10.32 to the IPO S-1)
10.33 -- Amendment No. 2 to the Pooling and Servicing Agreement dated
as of February 12, 1993, the Asset Purchase and Sale
Agreement dated as of February 12, 1993, and the Liquidity
Agreement dated as of February 12, 1993 (incorporated by
reference to Exhibit 10.33 to the IPO S-1)
10.34 -- Agreement dated as of October 10, 1996 between the Company
and Michael J. Grainger (incorporated by reference to
Exhibit 10.34 to the IPO S-1)
10.35 -- Form of Repurchase Agreement (incorporated by reference to
Exhibit 10.35 to the IPO S-1)
10.36 -- First Amendment to the Credit Agreement dated as of October
28, 1997 (incorporated by reference to Exhibit 10.36 to the
Company's Registration Statement on Form S-3 (File No.
333-39457) (the "Rollover/Thrift Plan S-3"))
10.37 -- European Credit Agreement dated as of October 28, 1997 among
the Company and Ingram European Coordination Center N.V., as
Borrowers and Guarantors, certain financial institutions, as
the Lenders, The Bank of Nova Scotia, as Administrative
Agent for the Lenders and NationsBank of Texas, N.A. as
Documentation Agent for the Lenders, as arranged by The Bank
of Nova Scotia and NationsBanc Capital Markets, Inc., as the
Arrangers (incorporated by reference to Exhibit 10.37 to the
Rollover/Thrift Plan S-3)
10.38 -- Canadian Credit Agreement dated as of October 28, 1997 among
the Company and Ingram Micro Inc. (Canada), as Borrowers and
Guarantors, certain financial institutions, as the Lenders,
The Bank of Nova Scotia., as Administrative Agent for the
Lenders, Royal Bank of Canada as the Syndication Agent for
the Lenders, and Bank of Tokyo-Mitsubishi (Canada) as the
Co-Agent (incorporated by reference to Exhibit 10.38 to the
Rollover/Thrift Plan S-3)
10.39 -- Retirement Agreement between the Company and David P. Dukes
(incorporated by reference to Exhibit 10.39 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
July 4, 1998)
10.40 -- Second Amendment to Credit Agreement dated as of September
25, 1998, among the Company, Ingram European Coordination
Center N.V. ("IECC"), and Ingram Micro Inc. (Canada), as
Borrowers and Guarantors, and certain financial institutions
as the Relevant Required Lenders, amending the US
$1,000,000,000 Credit Agreement dated as of October 30,
1996, also among certain financial institutions, as the
Lenders, NationsBank, N.A (successor in interest by merger
with NationsBank of Texas, N.A.), as Administrative Agent
for the Lenders, and The Bank of Nova Scotia, as
Documentation Agent for the Lenders and certain named
Co-Agents (incorporated by reference to Exhibit 10.40 to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended October 3, 1998 ("the Q3 98 10-Q"))
10.41 -- First Amendment to European Credit Agreement dated as of
September 25, 1998, among the Company and IECC as the
Primary Borrowers and Guarantors, and certain financial
institutions as the Relevant Required Lenders, amending the
US $500,000,000 European Credit Agreement dated as of
October 28, 1997, also among the Company and IECC, as the
Primary Borrowers and Guarantors, certain financial
institutions as the Lenders, The Bank of Nova Scotia, as
Administrative Agent for the Lenders and NationsBank, N.A.
(successor in interest by merger to NationsBank of Texas,
N.A.), as Documentation Agent for the Lenders, as arranged
by The Bank of Nova Scotia and NationsBanc Capital Markets,
Inc., as the Arrangers (incorporated by reference to Exhibit
10.41 to the Q3 98 10-Q)
22
24
10.42 -- First Amendment to Canadian Credit Agreement dated as of
September 25, 1998, among the Company and Ingram Micro Inc.
(Canada) as the Borrowers and Guarantors, and certain
financial institutions as the Relevant Required Lenders,
amending the US $150,000,000 Canadian Credit Agreement dated
as of October 28, 1997, also among the Company, Ingram Micro
Inc. (Canada) as the Borrowers and Guarantors, certain
financial institutions as the Lenders, The Bank of Nova
Scotia, as Administrative Agent for the Lenders, Royal Bank
of Canada, as Syndication Agent for the Lenders, and Bank of
Tokyo-Mitsubishi (Canada) as the Co-Agent (incorporated by
reference to Exhibit 10.42 to the Q3 98 10-Q)
10.43 -- Ingram Micro Inc. 1998 Equity Incentive Plan
13.01 -- Portions of Annual Report to Shareowners for the year ended
January 2, 1999
21.01 -- Subsidiaries of the Registrant
23.01 -- Consent of Independent Accountants regarding certain
Registration Statements on Form S-8
23.02 -- Consent of Independent Accountants regarding Registration
Statements on Form S-3
27.01 -- Financial Data Schedule (included in electronic version
only)
99.01 -- Cautionary Statements for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act
of 1995
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended January 2,
1999.
23
25
INGRAM MICRO INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Balance at Charged to Balance
beginning costs and at end of
Description of year expenses Deductions Other(*) year
- ----------- ------------ ------------ ------------ ---------- -----------
Allowance for doubtful accounts receivable
& sales returns:
1998 $ 48,541 $ 32,534 $(31,200) $ 6,029 $ 55,904
1997 38,622 31,652 (27,102) 5,369 48,541
1996 30,791 28,619 (25,394) 4,606 38,622
Inventory obsolescence:
1998 $ 18,886 $ 26,129 $(27,554) $ 933 $ 18,394
1997 13,326 21,524 (20,201) 4,237 18,886
1996 12,245 13,836 (12,602) (153) 13,326
* Other includes recoveries, acquisitions and the effect of fluctuation in
foreign currency.
24
26
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Ingram Micro Inc.
Our audits of the consolidated financial statements referred to in our report
dated February 10, 1999, except as to Note 14, which is as of February 19, 1999
appearing in the 1998 Annual Report to Shareowners of Ingram Micro Inc. (which
report and consolidated financial statements are incorporated by reference in
this Annual Report on Form 10-K) also included an audit of the financial
statement schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion,
this financial statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
Costa Mesa, California
February 10, 1999, except as to Note 14,
which is as of February 19, 1999
25
27
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.
INGRAM MICRO INC.
By: /s/ James E. Anderson, Jr.
----------------------------------
Name: James E. Anderson, Jr.
Title: Senior Vice President, Secretary
and General Counsel
April 1, 1999
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/ Jerre L. Stead Chief Executive Officer (Principal April 1, 1999
- ------------------------------------------ Executive Officer); Chairman of the
Jerre L. Stead Board
/s/ Michael J. Grainger Executive Vice President and Worldwide April 1, 1999
- ------------------------------------------ Chief Financial Officer (Principal
Michael J. Grainger Financial Officer and Principal
Accounting Officer)
/s/ Martha R. Ingram Director April 1, 1999
- ------------------------------------------
Martha R. Ingram
/s/ John R. Ingram Director April 1, 1999
- ------------------------------------------
John R. Ingram
/s/ Philip M. Pfeffer Director April 1, 1999
- ------------------------------------------
Philip M. Pfeffer
/s/ Don H. Davis, Jr. Director April 1, 1999
- ------------------------------------------
Don H. Davis, Jr.
/s/ J. Phillip Samper Director April 1, 1999
- ------------------------------------------
J. Phillip Samper
/s/ Joe B. Wyatt Director April 1, 1999
- ------------------------------------------
Joe B. Wyatt
26
28
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
3.01 -- Form of Certificate of Incorporation of the Registrant
(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"))
3.02 -- Amended and Restated Bylaws of the Registrant (incorporated
by reference to Exhibit 3.02 to the Company's Annual Report
on Form 10-K for the fiscal year ended January 3, 1998)
10.01 -- Ingram Micro Inc. Executive Incentive Bonus Plan
(incorporated by reference to Exhibit 10.01 to the IPO S-1)
10.02 -- Ingram Micro Inc. Management Incentive Bonus Plan
(incorporated by reference to Exhibit 10.02 to the IPO S-1)
10.03 -- Ingram Micro Inc. General Employee Incentive Bonus Plan
(incorporated by reference to Exhibit 10.03 to the IPO S-1)
10.04 -- Agreement dated as of December 21, 1994 between the Company
and Jeffrey R. Rodek (incorporated by reference to Exhibit
10.04 to the IPO S-1)
10.05 -- Agreement dated as of April 25, 1988 between the Company and
Sanat K. Dutta (incorporated by reference to Exhibit 10.05
to the IPO S-1)
10.06 -- 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 fiscal year ended January 3, 1998)
10.07 -- Ingram Micro Inc. Rollover Stock Option Plan (incorporated
by reference to Exhibit 10.07 to the IPO S-1)
10.08 -- Ingram Micro Inc. Key Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.08 to the IPO S-1)
10.09 -- Ingram Micro Inc. 1996 Equity Incentive Plan (incorporated
by reference to Exhibit 10.09 to the IPO S-1)
10.10 -- Ingram Micro Inc. Amended and Restated 1996 Equity Incentive
Plan (incorporated by reference to Exhibit 10.10 to the IPO
S-1)
10.11 -- Severance Agreement dated as of June 1, 1996 among the
Company, Ingram Industries, Linwood A. Lacy, Jr., and
NationsBank, N.A., as trustee of the Linwood A. Lacy, Jr.
1996 Irrevocable Trust dated February 1996 (incorporated by
reference to Exhibit 10.11 to the IPO S-1)
10.12 -- Credit Agreement dated as of October 30, 1996 among the
Company and Ingram European Coordination Center N.V., Ingram
Micro Singapore Pte Ltd., and Ingram Micro Inc., as
Borrowers and Guarantors, certain financial institutions, as
the Lenders, NationsBank of Texas, N.A., as Administrative
Agent for the Lenders and The Bank of Nova Scotia as
Documentation Agent for the Lenders (incorporated by
reference to Exhibit 10.12 to the Company's Registration
Statement on Form S-1 (File No. 333-16667) (the "Thrift Plan
S-1"))
10.13 -- Amended and Restated Reorganization Agreement dated as of
October 17, 1996 among the Company, Ingram Industries, and
Ingram Entertainment (incorporated by reference to Exhibit
10.13 to the Thrift Plan S-1)
10.14 -- Registration Rights Agreement dated as of November 6, 1996
among the Company and the persons listed on the signature
pages thereof (incorporated by reference to Exhibit 10.14 to
the Thrift Plan S-1)
10.15 -- Board Representation Agreement dated as of November 6, 1996
(incorporated by reference to Exhibit 10.15 to the Thrift
Plan S-1)
10.16 -- 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)
10.17 -- Tax Sharing and Tax Services Agreement dated as November 6,
1996 among the Company, Ingram Industries, and Ingram
Entertainment (incorporated by reference to Exhibit 10.17 to
the Thrift Plan S-1)
29
EXHIBIT INDEX (Continued)
Exhibit
Number Description
------- -----------
10.18 -- Agreement with Douglas R. Antone dated May 15, 1998, as
amended October 28, 1998
10.19 -- 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)
10.20 -- Data Center Services Agreement dated as of November 6, 1996
among the Company, Ingram Book Company, and Ingram
Entertainment Inc. (incorporated by reference to Exhibit
10.20 to the Thrift Plan S-1)
10.21 -- 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)
10.22 -- Agreement dated as of August 26, 1996 between the Company
and Jerre L. Stead (incorporated by reference to Exhibit
10.22 to the IPO S-1)
10.23 -- Definitions for Ingram Funding Master Trust Agreements
(incorporated by reference to Exhibit 10.23 to the IPO S-1)
10.24 -- Asset Purchase and Sale Agreement dated as of February 10,
1993 between Ingram Industries and Ingram Funding Inc.
(incorporated by reference to Exhibit 10.24 to the IPO S-1)
10.25 -- Pooling and Servicing Agreement dated as of February 10,
1993 among Ingram Funding, Ingram Industries and Chemical
Bank (incorporated by reference to Exhibit 10.25 to the IPO
S-1)
10.26 -- Amendment No. 1 to the Pooling and Servicing Agreement dated
as of February 12, 1993, the Asset Purchase and Sale
Agreement dated as of February 12, 1993, and the Liquidity
Agreement dated as of February 12, 1993 (incorporated by
reference to Exhibit 10.26 to the IPO S-1)
10.27 -- Certificate Purchase Agreement dated as of July 23, 1993
(incorporated by reference to Exhibit 10.27 to the IPO S-1)
10.28 -- Schedule of Certificate Purchase Agreements (incorporated by
reference to Exhibit 10.28 to the IPO S-1)
10.29 -- Series 1993-1 Supplement to Ingram Funding Master Trust
Pooling and Servicing Agreement dated as of July 23, 1993
(incorporated by reference to Exhibit 10.29 to the IPO S-1)
10.30 -- Schedule of Supplements to Ingram Funding Master Trust
Pooling and Servicing Agreement dated as of July 23, 1993
(incorporated by reference to Exhibit 10.30 to the IPO S-1)
10.31 -- Letter of Credit Reimbursement Agreement dated as of
February 10, 1993 (incorporated by reference to Exhibit
10.31 to the IPO S-1)
10.32 -- Liquidity Agreement dated as of February 10, 1993
(incorporated by reference to Exhibit 10.32 to the IPO S-1)
10.33 -- Amendment No. 2 to the Pooling and Servicing Agreement dated
as of February 12, 1993, the Asset Purchase and Sale
Agreement dated as of February 12, 1993, and the Liquidity
Agreement dated as of February 12, 1993 (incorporated by
reference to Exhibit 10.33 to the IPO S-1)
10.34 -- Agreement dated as of October 10, 1996 between the Company
and Michael J. Grainger (incorporated by reference to
Exhibit 10.34 to the IPO S-1)
10.35 -- Form of Repurchase Agreement (incorporated by reference to
Exhibit 10.35 to the IPO S-1)
10.36 -- First Amendment to the Credit Agreement dated as of October
28, 1997 (incorporated by reference to Exhibit 10.36 to the
Company's Registration Statement on Form S-3 (File No.
333-39457) (the "Rollover/Thrift Plan S-3"))
30
EXHIBIT INDEX (Continued)
Exhibit
Number Description
------- -----------
10.37 -- European Credit Agreement dated as of October 28, 1997 among
the Company and Ingram European Coordination Center N.V., as
Borrowers and Guarantors, certain financial institutions, as
the Lenders, The Bank of Nova Scotia, as Administrative
Agent for the Lenders and NationsBank of Texas, N.A. as
Documentation Agent for the Lenders, as arranged by The Bank
of Nova Scotia and NationsBanc Capital Markets, Inc., as the
Arrangers (incorporated by reference to Exhibit 10.37 to the
Rollover/Thrift Plan S-3)
10.38 -- Canadian Credit Agreement dated as of October 28, 1997 among
the Company and Ingram Micro Inc. (Canada), as Borrowers and
Guarantors, certain financial institutions, as the Lenders,
The Bank of Nova Scotia., as Administrative Agent for the
Lenders, Royal Bank of Canada as the Syndication Agent for
the Lenders, and Bank of Tokyo-Mitsubishi (Canada) as the
Co-Agent (incorporated by reference to Exhibit 10.38 to the
Rollover/Thrift Plan S-3)
10.39 -- Retirement Agreement between the Company and David P. Dukes
(incorporated by reference to Exhibit 10.39 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
July 4, 1998)
10.40 -- Second Amendment to Credit Agreement dated as of September
25, 1998, among the Company, Ingram European Coordination
Center N.V. ("IECC"), and Ingram Micro Inc. (Canada), as
Borrowers and Guarantors, and certain financial institutions
as the Relevant Required Lenders, amending the US
$1,000,000,000 Credit Agreement dated as of October 30,
1996, also among certain financial institutions, as the
Lenders, NationsBank, N.A (successor in interest by merger
with NationsBank of Texas, N.A.), as Administrative Agent
for the Lenders, and The Bank of Nova Scotia, as
Documentation Agent for the Lenders and certain named
Co-Agents (incorporated by reference to Exhibit 10.40 to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended October 3, 1998 ("the Q3 98 10-Q"))
10.41 -- First Amendment to European Credit Agreement dated as of
September 25, 1998, among the Company and IECC as the
Primary Borrowers and Guarantors, and certain financial
institutions as the Relevant Required Lenders, amending the
US $500,000,000 European Credit Agreement dated as of
October 28, 1997, also among the Company and IECC, as the
Primary Borrowers and Guarantors, certain financial
institutions as the Lenders, The Bank of Nova Scotia, as
Administrative Agent for the Lenders and NationsBank, N.A.
(successor in interest by merger to NationsBank of Texas,
N.A.), as Documentation Agent for the Lenders, as arranged
by The Bank of Nova Scotia and NationsBanc Capital Markets,
Inc., as the Arrangers (incorporated by reference to Exhibit
10.41 to the Q3 98 10-Q)
10.42 -- First Amendment to Canadian Credit Agreement dated as of
September 25, 1998, among the Company and Ingram Micro Inc.
(Canada) as the Borrowers and Guarantors, and certain
financial institutions as the Relevant Required Lenders,
amending the US $150,000,000 Canadian Credit Agreement dated
as of October 28, 1997, also among the Company, Ingram Micro
Inc. (Canada) as the Borrowers and Guarantors, certain
financial institutions as the Lenders, The Bank of Nova
Scotia, as Administrative Agent for the Lenders, Royal Bank
of Canada, as Syndication Agent for the Lenders, and Bank of
Tokyo-Mitsubishi (Canada) as the Co-Agent (incorporated by
reference to Exhibit 10.42 to the Q3 98 10-Q)
10.43 -- Ingram Micro Inc. 1998 Equity Incentive Plan
13.01 -- Portions of Annual Report to Shareowners for the year ended
January 2, 1999
21.01 -- Subsidiaries of the Registrant
23.01 -- Consent of Independent Accountants regarding certain
Registration Statements on Form S-8
23.02 -- Consent of Independent Accountants regarding Registration
Statements on Form S-3
27.01 -- Financial Data Schedule (included in electronic version
only)
99.01 -- Cautionary Statements for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act
of 1995