Ingram Micro 2000 Annual Report Download - page 31

.2 4 |INGRAM MICRO
Other (income) expense consisted primarily of interest, foreign currency exchange losses,gains on sales of securities and
miscellaneous non-operating (income) expenses. During 1999, the Company recorded net other income of $90.5 million, or 0.3%
as a percentage of net sales,as compared to net other expense of $79.7 million, or 0.4% as a percentage of net sales in 1998.The
increase in other income over 1998 is primarily attributable to the gain realized on the sale of Softbank common stock, partially
offset by an increase in interest expense. In December 1999, the Company sold 1,040,400 shares or 35% of its original holdings
in Softbank common stock for a pre-tax gain of approximately $201.3 million, net of related costs. Interest expense increased pri-
marily due to increased borrowings to finance the January 1999 ERL acquisition; the fourth quarter 1998 investment in Softbank;
the July 1998 acquisition of Macrotron; changing vendor terms and conditions associated with floor plan financing arrangements;
and the growth of the Company’s ongoing operations.This increase was partially offset by a decrease in average interest rates in fis-
cal 1999 compared to fiscal 1998.
The provision for income taxes, excluding extraordinary items, decreased 31.4% to $110.9 million in 1999 from $161.7
million in 1998, primarily reflecting the 28.6% decrease in the Company’s income before income taxes.The Company’s effective
tax rate was 38.2% in 1999 compared to 39.7% in 1998.The decrease in the effective tax rate was primarily due to tax planning
in certain countries.
In March 1999,the Company repurchased Zero Coupon Convertible Senior Debentures with a carrying value of $56.5 million
as of the repurchase date for approximately $50.3 million in cash.The debenture repurchase resulted in an extraordinary gain of
$3.8 million (net of $2.4 million in income taxes).
Q u a r t e r l y d a t a ; s e a s o n a l i t y
The Company’s quarterly operating results have fluctuated significantly in the past and will likely continue to do so in the
future as a result of seasonal variations in the demand for the products and services offered by the Company; changing competitive
conditions including pricing; variation in the amount of provisions for excess and obsolete inventory, vendor sponsored programs,
and doubtful accounts resulting from technological changes or other changes in the market or economy as a whole; changes in the
level of operating expenses to support seasonal changes in demand;the impact of acquisitions; the introduction by suppliers of new
hardware and software products and services which may result in the obsolescence of existing products and/or affect the mix of
products sold or overall demand;the loss or consolidation of a significant supplier or customer; product supply constraints;interest
rate fluctuations;currency fluctuations;and general economic conditions.The Company’s narrow operating margins may magnify
the impact of these factors on the Company’s operating results. Specific historical seasonal variations in the Company’s operating
results have included a reduction of demand in Europe during the summer months,increased Canadian government purchasing in
the first quarter (except in the first quarter of 2000,as explained above), and worldwide pre-holiday stocking in the retail channel
during the September-to-November period.
The following table sets forth certain unaudited quarterly historical financial data for each of the eight quarters in the period
ended December 30, 2000.This unaudited quarterly information has been prepared on the same basis as the annual information
presented elsewhere herein and, in the Company’s opinion, includes all adjustments (consisting only of normal recurring adjust-
ments) necessary for a fair presentation of the selected quarterly information.This information should be read in conjunction with
the consolidated financial statements and notes thereto included elsewhere in this Annual Report to Shareowners.The operating
results for any quarter shown are not necessarily indicative of results for any future period.
Ma n a g e m e n t’s discu s sion and analysis ]c o n t i nu e d