Ingram Micro 2000 Annual Report Download - page 29

.2 2 |INGRAM MICRO
In 1999, the Company recorded a charge of $20.3 million related to reorganization efforts primarily in the Company’s U.S.
and European operations.The Company did not incur any reorganization charges in 2000.
Income from operations, excluding reorganization costs,increased as a percentage of net sales to 1.2% in 2000 from 0.8%
in 1999.The increase in income from operations, excluding reorganization costs, as a percentage of net sales is primarily due to
the increase in gross margin as described above. U.S. income from operations, excluding reorganization costs, as a percentage of
net sales increased to 1.5% in 2000 from 0.9% in 1999, primarily as a result of gross margin improvements. European income
from operations,excluding reorganization costs, as a percentage of net sales increased to 0.7% in 2000 compared to 0.3% in 1999
also as a result of gross margin improvements. Other International income from operations, excluding reorganization costs, as a
percentage of net sales decreased to 0.5% in 2000 from 1.0% in 1999.The decrease in income from operations as a percentage of
net sales for Other International was primarily related to the Asia Pacific operations,which experienced a loss from operations as
the Company continues to invest in infrastructure and refine its business processes in this developing market.
Other (income) expense consisted primarily of interest, foreign currency exchange losses,gains on sales of available-for-sale
securities,and fees associated with the Company’s accounts receivable facilities. In 2000,the Company recorded net other income
of $9.1 million, compared to $90.5 million in 1999.The decrease in other income is primarily attributable to the lower gain real-
ized on the sale of Softbank common stock in 2000 compared to 1999.In December 1999, the Company sold 1,040,400 shares or
approximately 35% of its original investment in Softbank common stock for a pre-tax gain of approximately $201.3 million,net of
related costs. In January 2000, the Company sold an additional 445,800 shares or approximately 15% of its original holdings in
Softbank common stock for a pre-tax gain of approximately $111.5 million, net of related costs.The decrease in interest expense
was due to the decrease in the average borrowings outstanding in 2000 compared to 1999 resulting from improved working capital
management,the use of proceeds received from the sale of Softbank common stock in December 1999 and January 2000 to repay
existing indebtedness, and an increase in the utilization of the Company’s accounts receivable facilities, partially offset by an
increase in interest rates for the same period.The increase in other expenses was attributable to the increase in fees related to
increased capacity and utilization of the Company’s accounts receivable facilities. Management continues to focus on improving
utilization of working capital to reduce or moderate debt levels in relation to revenue growth.Despite these efforts, a substantial
portion of the Company’s existing credit facilities have variable interest rate terms and therefore net interest expense in future
periods may fluctuate.
The provision for income taxes, excluding extraordinary items, increased 25.2% to $138.8 million in 2000 from $110.9
million in 1999, reflecting the 24.8% increase in the Company’s income before income taxes.The Company’s effective tax rate
remained relatively consistent at 38.3% in 2000 compared to 38.2% in 1999.
In 2000 and 1999,the Company repurchased Zero Coupon Convertible Senior Debentures with a total carrying value of
$235.2 and $56.5 million, respectively, as of their repurchase dates for approximately $231.3 million and $50.3 million in cash,
respectively.The debentures repurchased resulted in an extraordinary gain of $2.4 million and $3.8 million in 2000 and 1999,
respectively, net of $1.5 million and $2.4 million in income taxes, respectively.
1 9 9 9 c o m p a r e d t o 1 9 9 8
Consolidated net sales increased 27.4% to $28.1 billion in 1999 from $22.0 billion in 1998.The increase in worldwide net
sales was primarily attributable to overall growth in the demand for technology products, the addition of new customers, increased
sales to the existing customer base, 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 U.S. operations increased 16.8% to $16.8 billion in 1999 from $14.4 billion in 1998 primarily due to growth
of its current business. Net sales from European operations increased 30.6% to $7.3 billion in 1999 from $5.6 billion in 1998 due
to the overall growth in the Company’s existing European operations and the acquisition of Macrotron in July 1998. Other
International net sales increased 93.9% to $3.9 billion in 1999 from $2.0 billion in 1998 due to the acquisition of ERL and growth
in the Company’s Canadian and Latin American operations.
Ma n a g e m e n t’s discu s sion and analysis ]c o n t i nu e d