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Ingram Micro 2000 Annual Report
shaping the future
of technology distribution
www.ingrammicro.com/corp

Table of contents

  • Page 1
    w w w. i n g r a m m i c r o . c o m / c o r p s h a p i n g t h e f u t u r e of technology distribution Ing ram Micro 2000 Annual Repor t

  • Page 2
    Vision Mission ] ] ] We will always exceed expectations ...with every partner, every day. To maximize shareowner value by being the best provider of technology products and services for the world. Teamwork Respect Accountability Integrity Innovation Values

  • Page 3
    ...fiscal year 2000. Ingram Micro's global regions provide distribution of technology products and services, market development programs and supply chain management...451 812,384 247,508 110,679 0.88 Net Sales Gross Profit Income From Operations Net Income Diluted Earnings Per Share Total Assets Total ...

  • Page 4
    ... than in 1999. Finally, in the fourth quarter of 2000, demand for IT products declined significantly in the United States. In spite of these challenges, we are proud to report that our net sales grew 9 percent to $30.7 billion for the year (13 percent when adjusted for European currencies). 30 25...

  • Page 5
    ... the power of increasing gross margins to affect our operating profit. The actions we took advanced the company in its continuous goal to drive profitable growth and increase return on invested capital. Our intense focus on reducing working capital needs throughout the year also had a significant...

  • Page 6
    ...chief information officer, became the first chief strategy and information officer in our company's history. These appointments further strengthen our management team and enable Mike and Guy to use their abilities to the fullest. Looking Ahead We are proud of our achievements in 2000 - but our work...

  • Page 7
    ...General Counsel Asger Falstrup Senior Vice President and President, Ingram Micro Canada David M. Finley Senior Vice President, Human Resources Henri T. Koppen Senior Vice President and President, Ingram Micro Asia-Pacific Jorge G. Reyes Vice President and Acting President, Ingram Micro Latin America...

  • Page 8
    ..., that company is Ingram Micro. Two decades ago, we began constructing a powerful logistics machine that has enabled us to become the world's largest distributor of technology products and services. We've refined and enhanced this infrastructure throughout the years. Now, it is the foundation for...

  • Page 9
    The strategies Ingram Micro creates lead our industry to the future.

  • Page 10
    [ Ingram Micro executives Kelly Johnson, Andy Magsar ili, Camille Alvarez, Mayra Victor ia and Jim Jensen meet to set strateg ic direction for new products and services. ] |.07 INGRAM MICRO

  • Page 11
    ... homes.Wireless and handheld devices are enabling instant connectivity from remote locations. High-end storage solutions are being created to handle the massive amounts of data people can now exchange. In the midst of it all is Ingram Micro, facilitating the transfer of products and information...

  • Page 12
    Ingram Micro sees the shape of the future in emerging technology markets.

  • Page 13
    [ Ingram Micro plays a key role in getting emerging technologies, such as wireless emergency communication, into the markets that need them. ] INGRAM MICRO |.09

  • Page 14
    ... a year in which we greatly enhanced and expanded our e-commerce offering around the world.We rolled out new e-commerce sites in nine countries within Asia and Latin America and in our Miami export division. Plus, we upgraded existing sites in Australia, Canada, Chile, Mexico, the United States and...

  • Page 15
    Our customers purchased $8 billion in products and services electronically in 2000.

  • Page 16
    [ A solution provider checks prices, places orders and tracks h i s s h i p m e n t s at w w w. i n g ra m m i c r o. c o m . ] INGRAM MICRO |.11

  • Page 17
    ...and send orders quickly and accurately. To ensure quality of service, all our United States facilities, as well as several locations in Canada, Mexico, Europe and India, adhere to ISO 9002 distribution standards. These standards are set by the Geneva, Switzerland-based International Organization For...

  • Page 18
    We are the supply chain engine to the technology industry.

  • Page 19
    [ D i s t r i b u t i o n - c e n t e r a s s o c i a t e E r i c a Va s q u e z efficiently processes orders for Ingram Micro customers. ] INGRAM MICRO |.13

  • Page 20
    .... Ingram Micro agrees.That's why we're a leader in developing outsourcing programs to enhance and expand our relationships with our partners. Manufacturers can outsource all their logistics and fulfillment functions to us or purchase individual fee-based services. We also offer procurement, stocking...

  • Page 21
    We are the first distributor to offer complete outsourcing services.

  • Page 22
    [ W i t h I n g r a m M i c r o 's t r a n s p a r e n t l o g i s t i c s s e r v i c e s , o u r m a n u f a c t u r e r p a r t n e r s ' shipments are delivered quickly and efficiently to their ultimate customers. ] INGRAM MICRO |.15

  • Page 23
    ... enough to make its vision a reality. Ingram Micro is just such a company. We recognize technology's growing importance in the world economy; and, going forward, we'll continue to play a key role in helping the technology industry reach its potential. At the same time, we'll drive toward our own...

  • Page 24
    ...income Consolidated statement of stockholders' equity Consolidated statement of cash flows Notes to consolidated financial statements Management's statement of financial responsibility Report of independent accountants Company information .18 .19 .30 .31 .32 .33 .34 .51 .51 .52 INGRAM MICRO | .17

  • Page 25
    ... below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations"and the historical consolidated financial statements and notes thereto, included elsewhere in this Annual Report to Shareowners. The fiscal year of the Company is a 52- or...

  • Page 26
    ... results of operat i o n s In evaluating the business of Ingram Micro, readers should carefully consider the important factors discussed in Exhibit 99.01 to the Company's Annual Report on Form 10-K for the fiscal year ended December 30,2000 "Cautionary Statements for the Purpose of the 'Safe Harbor...

  • Page 27
    ...the Company's net sales by geographic region (excluding intercompany sales), and the percentage of total net sales represented thereby, for each of the periods indicated. Fiscal Year 2000 1999 (Dollars in millions) 1998 Net Sales by Geographic Region: United States Europe Other international Total...

  • Page 28
    ...due to pricing policy changes implemented in the same quarter and the Company's decision to eliminate certain vendor programs. Both decisions were geared towards the improvement of gross margin.In addition, towards the end of 2000, the demand for information technology products and services softened...

  • Page 29
    ..., and the expansion of the Company's product and service offerings. Net sales also increased as a result of the January 1999 acquisition of Electronic Resources,Ltd. ("ERL") in the Asia Pacific region and the July 1998 acquisition of Munich, Germany-based Macrotron AG ("Macrotron"). Net sales from...

  • Page 30
    ...of resources to support the Company's custom-configuration services capabilities. In connection with these reorganization efforts,the Company recorded a charge of $20.3 million for the fiscal year ended January 1, 2000.The reorganization charge included $12.3 million in employee termination benefits...

  • Page 31
    ....This information should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report to Shareowners.The operating results for any quarter shown are not necessarily indicative of results for any future period. .24 | INGRAM MICRO

  • Page 32
    ... quarter ended April 1, 2000, income before income taxes included a pre-tax gain of approximately $111.5 million, net of related costs, realized from the sale of Softbank common stock. As indicated in the table above, the Company's net sales in the fourth quarter of each fiscal year have generally...

  • Page 33
    ... to the increase in trade creditor financing of product inventory (through an increase in accounts payable) and a reduction in the g rowth rate of accounts receivable over 1998. Net cash used by investing activities was $19.5 million, $138.4 million, and $218.6 million in 2000,1999, and 1998...

  • Page 34
    ... facilities relating to accounts receivable in Europe and Canada which provide up to approximately $260 million of additional financing capacity. Under these programs, the Company had sold approximately $210 million and $188 million of trade accounts receivable in the aggregate at December 30,2000...

  • Page 35
    ..., the Company employs established policies and procedures to manage its exposure to fluctuations in the value of foreign currencies and interest rates using a variety of financial instruments. It is the Company's policy to utilize financial instruments to reduce risks where internal netting cannot...

  • Page 36
    ... with forward-looking statements concerning the Company, reference is made to Exhibit 99.01 of the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 2000; other risks or uncertainties may be detailed from time to time in the Company's future SEC filings. INGRAM MICRO | .29

  • Page 37
    ... (Dollars in 000s, except per share data) Fiscal Year End 2000 1999 Assets Current assets: Cash Investment in available-for-sale securities Accounts receivable: Trade accounts receivable Retained interest in securitized receivables Total accounts receivable (less allowances of $96,994 and $100...

  • Page 38
    ... (Dollars in 000s, except per share data) Fiscal Year 2000 1999 1998 Net sales Cost of sales Gross profit Expenses: Selling, general and administrative Reorganization costs $ 30,715,149 29,... $ $ 1.64 - 1.64 See accompanying notes to these consolidated financial statements. INGRAM MICRO | .31

  • Page 39
    ...Stock related to Employee Stock Purchase Plan Warrants issued Amortization of unearned compensation Comprehensive income January 1, 2000 Noncash compensation charge related to stock options Stock options exercised Income tax benefit from exercise of stock... financial statements. .32 | INGRAM MICRO

  • Page 40
    ... and liabilities, net of effects of acquisitions: Changes in amounts sold under accounts receivable programs Accounts receivable Inventories Other current assets Accounts payable Accrued expenses Cash provided (used) by operating activities Cash Flows From Investing Activities: Purchase of property...

  • Page 41
    ...Company" or "Ingram Micro") is primarily engaged, directly and through its wholly- and majorityowned subsidiaries, in distribution of information technology products and services worldwide.The Company conducts the majority of its operations in the United States, Europe, Canada,Latin America and Asia...

  • Page 42
    ...less to be cash equivalents. Book overdrafts of $184,945 and $140,149 as of December 30, 2000 and January 1, 2000, respectively, are included in accounts payable. Inventories Inventories are stated at the lower of average cost or market. Long-lived assets The Company assesses potential impairments...

  • Page 43
    ... following assumptions: Risk-free interest rate Term of warrant Expected stock volatility 6.27% 5 year s 55.4% The estimated fair value of the warrants has been included in other expenses in the Company's consolidated statement of income for fiscal 1999. At December 30,2000 and January 1,2000, the...

  • Page 44
    ... operates internationally with distribution facilities in various locations around the world.The Company reduces its exposure to fluctuations in interest rates and foreign exchange rates by creating offsetting positions through the use of derivative financial instruments.The market risk related to...

  • Page 45
    ... cost in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related interpretations, but provides pro forma disclosures of net income and earnings per share as if the fair-value method had been applied. .38 | INGRAM MICRO

  • Page 46
    ..., as amended, is effective for the Company in fiscal 2001.The Company does not expect the adoption of FAS 133 to have a material impact on its reported consolidated financial condition or results of operations. In September 2000,the Financial Accounting Standards Board issued Statement of Financial...

  • Page 47
    ... - Acquisitions In January 1999, the Company purchased 44,114,340 shares of the common stock of Ingram Micro Asia Ltd.(formerly known as Electronic Resources Ltd.,"ERL") from certain shareholders,which increased the Company's ownership to 39.6% from the 21% ownership held in 1998. In accordance with...

  • Page 48
    ... pool of trade receivables without recourse.The trust has issued fixed-rate medium-term certificates to investors and has the ability to issue variable rate certificates to support a commercial paper program.In March 2000, the Company completed a new 5-year accounts receivable securitization program...

  • Page 49
    ...,including minimum tangible net worth, restrictions on funded debt and interest coverage.The credit facilities also restrict the amount of dividends the Company can pay as well as the amount of common stock that the Company can repurchase annually. At December 30,2000, the Company was in compliance...

  • Page 50
    ... of the following: Fiscal Year End Revolving Credit facilities Commercial paper Overdraft facilities Other Current maturities of other long-term debt $ $ 2000 75,484 29,577 42,774 177,748 325,583 (42,774) 282,809 $ 1999 503,537 155,470 31,020 217,165 907,192 (31,020) 876,172 $ Annual maturities of...

  • Page 51
    ... extraordinary item consist of the following: Fiscal Year United States Foreign Total $ $ 2000 332,241 30,268 362,509 $...reporting purposes and the amounts used for income tax purposes. Significant components of the Company's net deferred tax assets and liabilities are as follows: Fiscal Year 2000 Net...

  • Page 52
    ... of the statutory U.S.federal income tax rate to the Company's effective tax rate is as follows: Fiscal Year U.S. statutory rate State income taxes, net of federal income tax benefit Foreign rates in excess of statutory rate Other Effective tax rate 2000 35% 3 1 (1) 38% 1999 35% 3 - - 38% 1998...

  • Page 53
    ..., Belgium, Denmark, Finland,France, Germany, Hungary, Italy,The Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland, and the United Kingdom) and Other international (Australia, China,India, Malaysia, New Zealand, Singapore,Thailand, Canada, Argentina, Brazil,Chile, Mexico, and Peru...

  • Page 54
    ... weighted average assumptions: Fiscal Year Risk-free interest rate Expected years until exercise Expected stock volatility 2000 6.30% 2.2 years 59.2% 1999 5.45% 2.7 years 55.5% 1998 5.01% 4.0 years 57.4% Rollover stock option plan Certain of the Company's employees participated in the qualified...

  • Page 55
    ...2.13 7.00 12.58 19.22 29.63 47.60 $ 15.38 Stock options exercisable totaled approximately 10,933,000;7,260,000; and 4,717,000 at December 30,2000, January 1, 2000,and January 2, 1999, respectively, at weighted average exercise prices of $15.38, $13.42,and $10.29, respectively. .48 | INGRAM MICRO

  • Page 56
    ...,000 shares, respectively, of the Company's Class A Common Stock could be sold to employees. Under the Plans,employees can elect to have between 1% and 6% of their earnings withheld to be applied to the purchase of these shares.The purchase price under the Plans is generally the lesser of the market...

  • Page 57
    ... Redeemable Class B Common Stock Conversion of Class B Common Stock to Class A Common Stock Vesting of Redeemable Class B Common Stock Issuance of Class A Common stock Related to Employee Stock Purchase Plan Grant of restricted Class A Common Stock January 1, 2000 Stock options exercised Repurchase...

  • Page 58
    ... their operations and their cash flows for each of the three years in the period ended December 30,2000 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management;our responsibility is to...

  • Page 59
    ...Rockwell International Corporation Guy P. Abra m o Executive Vice President and Chief Strategy and Information Officer John R. Ingra m Vice Chairman, Ingram Industries Inc. J a m es E. Anderson, Jr. Senior Vice President,Secretary and General Counsel D avid M . Finley Senior Vice President,Human...

  • Page 60
    Corporate Offices ] Ingram Micro Inc. 1600 E. St. Andrew Place Santa Ana, CA 92705 Phone: 714.566.1000 Common Stock ] The Class A Common Stock of Ingram Micro is traded on the New York Stock Exchange under the symbol IM. Price Range of Class A Common Stock Fiscal 1999 HIGH First Quarter $ 36.31 ...

  • Page 61
    © 2001 Ingram Micro Inc. All rights reserved. Ingram Micro and the Ingram Micro logo are trademarks used under license by Ingram Micro Inc. All other trademarks are the property of their respective companies. 3/01 16009.1000