Ingram Micro 2000 Annual Report Download - page 28

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Consolidated net sales increased 9.4% to $30.7 billion in 2000 from $28.1 billion in 1999.The increase in worldwide net sales
was primarily attributable to growth in overall demand for technology products, the addition of new customers, increased sales to
the existing customer base, and expansion of the Company’s product and service offerings.
Net sales from U.S. operations increased 9.7% to $18.5 billion in 2000 from $16.8 billion in 1999 primarily due to growth
in demand for technology products and expansion of the Company’s product and service offerings.The sales growth in U.S. opera-
tions,however, was moderated,especially in the second quarter of 2000, compared to historical sales g rowth primarily 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 in the U.S. consistent with the slowing of the U.S. economy.This softness in U.S. sales
has continued to date and may continue and/or worsen for the next several quarters. Net sales from European operations grew
approximately 16.1% in local currencies in 2000, but when converted to U.S.dollars, net sales only increased by 1.7% to $7.5
billion in 2000 from $7.3 billion in 1999 as a result of weaker European currencies compared to the U.S.dollar.The sales growth,
in local curre n cy, reflects overall growth in European operat i o n s , but was negat i ve ly affected by the softness in demand for tech n o l o g y
products and services. For geographic regions outside the U.S. and Europe (“Other International”), net sales increased 22.5% to
$4.8 billion in 2000 from $3.9 billion in 1999 primarily due to the growth in the Company’s Asia Pacific and Latin American
operations.The Company’s Canadian operations, however, experienced only moderate sales growth in 2000 as compared to the
Asia Pacific and Latin American operations primarily due to the overall softness in demand for technology products and services
in the Canadian market in the first half of the year, and lower than anticipated purchases by the Canadian government in the first
quarter of 2000.The Canadian government purchases are generally strong in the first quarter of each year as this coincides with
the Canadian government’s fiscal year-end.
Gross margin increased to 5.1% in 2000 from 4.8% in 1999.The improvement in the gross margin percentage was primarily
due to pricing policy changes initiated during the second quarter of 2000 to more appropriately reflect the value and related costs
of services provided to the Company ’s customers , p a rt i a l ly offset by the impact of changes in vendor terms and conditions including,
but not limited to, significant reductions in vendor rebates and incentives,tighter restrictions on the Company’s ability to return
inventory to vendors, and reduced time periods qualifying for price protection.The Company has implemented and continues to
refine changes to its pricing strategies, inventory management processes, and administration of vendor subsidized programs. In
addition, the Company continues to change certain of the terms and conditions offered to its customers to reflect those being
imposed by its vendors. Management believes gross margins in early 2001 may decline sequentially from the seasonally high fourth
quarter of 2000; however, it expects actions taken in 2000 as well as its continued focus on gross margin improvement will result
in moderate year-over-year improvements overall in 2001.As the Company continues to seek profitable growth through its pricing
policy changes made to date, and through future pricing policy changes, if any, it may experience moderated sales g rowth in the
near term.Additionally, no assurances can be given that the Company will be successful in its efforts to maintain and improve
gross margin.
Total SG&A expenses increased 7.8% to $1.2 billion in 2000 from $1.1 billion in 1999, but decreased as a percentage of net
sales to 3.9% in 2000 from 4.0% in 1999.The increase in SG&A spending was at t ri bu t a ble to increased expenses re q u i red to support
the growth of the Company’s business. Expenses related to expansion consist of incremental personnel and support costs,lease
expenses related to new operating facilities, and the expenses associated with the development and maintenance of information
systems.The overall decrease in SG&A expenses as a percentage of net sales is attributable to economies of scale from greater sales
volume, and continued cost-control measures. As noted above, demand for information technology products and services in the
U.S. has recently softened, which may lead to tempered and/or negative sales growth in the U.S. for the next several quarters and
a resulting increase in SG&A expenses as a percentage of net sales in the near term.The Company continues to pursue and imple-
ment process improvements and organizational changes to create sustainable cost reductions without sacrificing customer service
over the long-term.
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INGRAM MICRO