Ingram Micro 2000 Annual Report Download - page 43

.3 6 |INGRAM MICRO
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in an acquisition accounted
for using the purchase method, and is amortized on a straight-line basis over periods ranging from 10 to 30 years. Accumulated
amortization was $76,560 at December 30, 2000 and $54,521 at January 1, 2000.
Investments in available-for-sale securities
The Company classifies its existing marke t a ble equity securities as ava i l a ble-for-sale in accordance with the provisions of
S t a tement of Financial Accounting Standards No. 1 1 5 , “Accounting for Certain Investments in Debt and Equity Securi t i e s.”These secu-
rities are carried at fair market va l u e, with unrealized gains and losses re p o rted in stock h o l d e rs ’ equity as a component of accumu l at e d
other compre h e n s i ve income (loss). Realized gains or losses on securities sold are based on the specific identification method.
In December 1998, the Company purchased 2,972,400 shares of common stock of SOFTBANK Corp. (“Softbank”), Japan’s
largest distributor of software, peripherals and networking products, for approximately $50,262. During December 1999, the
Company sold 1,040,400 shares or approximately 35% of its original investment in Softbank common stock for approximately
$230,109 resulting in a pre-tax gain of approximately $201,318, net of related expenses. In January 2000,the Company sold an
additional 445,800 shares or approximately 15% of its original holdings in Softbank common stock for approximately $119,228,
net of expenses, resulting in a pre-tax gain of approximately $111,458.The realized gains, net of expenses, associated with the sales
of Softbank common stock in January 2000 and December 1999 totaled $69,327 and $125,220, respectively, net of deferred taxes
of $42,131 and $76,098, respectively. The Company used the net proceeds from the sales to repay existing indebtedness. During
April 2000, Softbank effected a 3 for 1 stock split.All Softbank share information has been adjusted to give retroactive effect to
Softbank’s stock split.
In connection with the December 1999 sale of Softbank common stock, the Company issued warrants to Softbank for the
purchase of 1,500,000 shares of the Company’s Class A Common Stock with an exercise price of $13.25 per share, which approxi-
mated the market price of the Company’s common stock on the warrant issuance date.The warrants were exercisable immediately
and have a 5-year term.The estimated fair value of these warrants upon issuance was approximately $11,264 and was determined
using the Black-Scholes option-pricing model using the following assumptions:
Risk-free interest rate 6.27%
Term of warrant 5 year s
Expected stock volatility 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 unrealized holding gain associated with the Softbank common stock totaled
$16,965 and $356,936, respectively, net of $10,801 and $227,248, respectively, in deferred income taxes.
Concentration of credit risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of
trade accounts receivable and derivative financial instruments. Credit risk with respect to trade accounts receivable is limited due
to the large number of customers and their dispersion across geographic areas. No single customer accounts for 10% or more of
the Company’s net sales. The Company performs ongoing credit evaluations of its customers’financial conditions, obtains credit
insurance in certain locations and requires collateral in certain circumstances.The Company maintains an allowance for potential
credit losses.
N o tes to co n s o l i d ated financial st a t e m e nts ]c o n t i nu e d
Dollars in 000s,except per share data