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Ingram Micro 1999 Annual Report
technologytechnology
the power behind the world’s
www.ingrammicro.com

Table of contents

  • Page 1
    the power behind the world's technology w w w. i n g r a m m i c r o . c o m Ingram Micro 1999 Annual Report

  • Page 2
    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

  • Page 3
    Ingram Micro, headquartered in Santa Ana, Calif., is the world's leading wholesale provider of technology products and services, with 1999 sales of more than $28 billion. The company and its subsidiaries operate in 34 countries and distribute more than 280,000 products for more than 1,700 ...

  • Page 4
    ... took actions to meet those challenges. In September 1999 we initiated a search for Ingram Micro's next chief executive officer to ensure that we have the best possible team executing our strategies to improve profitability and pursue new market opportunities. Our objective was to find someone who...

  • Page 5
    ... Demand for Ingram Micro's broad product offering and world-class logistics and fulfillment services was solid in all regions of the world, with significant increases in sales to Internet retail storefronts and other e-commerce-driven business markets. As a result, we achieved net sales globally of...

  • Page 6
    ... online community, opening state-of-the-art our associates and benefits for our shareowners in the new millennium. I am confident that the years ahead will provide each of us as shareowners the return we expect from our investment. We at Ingram Micro work each day to continue building the...

  • Page 7
    ... right person to lead Ingram Micro in the 21st century. He has a proven track record of managing change in the dynamic telecommunications industry and a unique ability to transform a sizable organization. During his 29-year career at GTE Corporation, Foster helped transform the company from a local...

  • Page 8
    ... of the world Successes • Acquisition of Electronic Resources Limited (ERL) to bolster Ingram Micro Asia-Pacific • Establishment of Ingram Micro operations in Argentina, Hungary and Portugal • Expansion of Ingram Micro's IMpulse order-management system worldwide Expand customer relationships...

  • Page 9
    ... scenes that makes what is on the surface live, grow and sustain. Think about the roots of a tree, giving nourishment and foundation to the growing trunk, leaves and branches. Or consider the backstage assistants of a theater production, providing lighting, set changes and microphones so the actors...

  • Page 10
    ... from a technology reseller. Resellers - from the large computer retail stores to the consultants who come to your office or school to set up networks and software volume licensing. And we take care of the logistics - managing inventory, tracking orders, taking returns, ensuring delivery and more...

  • Page 11
    ...best digital camera for his real estate appraisal business. The computer retail store counts on Ingram Micro to stock its shelves with the widest variety of products for customers like David. Ingram Micro carries more than 280,000 products from 1,700 manufacturers worldwide, so technology resellers...

  • Page 12
    ... made possible because manufacturers are realigning their businesses to focus on creating smaller, faster technologies. Ingram Micro provides logistics and fulfillment services to major manufacturers, such as 3Com and Microsoft, so they can concentrate their resources on research and development.

  • Page 13
    ...from Canada to Germany to China - or any other country they desire. Our role is behind the scenes, using our best-in-class global logistics capabilities to let manufacturers concentrate on innovation and get new products to market fast. The Power Behind The World's Technology 11 Ingram Micro Annual...

  • Page 14
    ...transfer their online shopping carts directly to Ingram Micro for fulfillment and delivery. Although we are transparent in the process, we play an essential role in e-commerce by fulfilling the technology orders you place online. The Power Behind The World's Technology 12 Ingram Micro Annual Report

  • Page 15
    ... work anywhere. Carol's order was forwarded directly to an Ingram Micro warehouse, where it was packaged and shipped to her within 12 hours - in a box labeled with the e-tailer's name. Ingram Micro efficiently delivers technology products for the world's leading e-commerce sites, including Amazon...

  • Page 16
    ... all of her company's 67 offices worldwide. To do this, she works with a corporate reseller, who logs into Ingram Micro and instantly orders the proper hardware, software and services for Mia's employees across the globe. Ingram Micro has a presence in every corner of the world, with 70 facilities...

  • Page 17
    ... and state-of-the-art systems will succeed in the new distribution P O W E R I N G A H E A D I N T H E N E W technology curve. And what company is providing the products and services to that reseller? Most likely, it's Ingram Micro. Ingram Micro is the only truly global IT distributor.And...

  • Page 18
    "We at Ingram Micro work each day to continue building the leadership, infrastructure and strength that make us successful now and for the future." - Jerre Stead, Chairman of the Board, Ingram Micro Inc. 16 Ingram Micro Annual Report

  • Page 19
    ... balance sheet consolidated statement of 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...

  • Page 20
    ...Ingram Micro" or the "Company"). The information set forth 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...

  • Page 21
    ... fiscal year ended January 1, 2000 and "-Cautionary Statements for the Purpose of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995." O v e r v i e w Ingram Micro is the leading distributor of information technology products and services worldwide.The Company's net...

  • Page 22
    ...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 1999 1998 (Dollars in millions) 1997 Net sales by geographic region: United States Europe Other international Total...

  • Page 23
    ..., 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 24
    ... 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 25
    ...1997.The increase in worldwide net sales was primarily attributable to the addition of new customers, increased sales to the existing customer base, expansion of the Company's product offerings, growth in the information technology products and services distribution industry in general, and the July...

  • Page 26
    ... 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 Annual Report

  • Page 27
    ... year-end business purchases and holiday period purchases made by customers. L i q u i d i t y a n d C a p i t a l R e s o u r c e s Cash Flows The Company has financed its growth and cash needs largely through income from operations and borrowings, trade and supplier credit, its initial public...

  • Page 28
    ... increased its ownership of Walton Kft., a Hungarian-based computer products distributor, from approximately 33% to 100% in September 1999.Total cash paid for these acquisitions was approximately $4.5 million, net of cash acquired. Capital Resources The Company has three credit facilities with...

  • Page 29
    ... growth initiatives and to manage working capital requirements. The Company also established certain other facilities relating to accounts receivable in Europe and Canada during 1999. Under these programs, the Company has sold approximately $188 million of trade accounts receivable in the aggregate...

  • Page 30
    ...debt had fixed interest rates.The Company finances working capital needs through various bank loans and commercial paper programs. Market Risk Management Foreign exchange and interest rate risk and related derivatives use is monitored using a variety of techniques including a review of market value...

  • Page 31
    ...-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 January 1, 2000; other risks or uncertainties may be detailed from time to time in the Company's future SEC filings. 29 Ingram Micro Annual Report

  • Page 32
    ... D B A L A N C E S H E E T Fiscal Year End 1999 1998 (Dollars in 000s, except per share data) ASSETS Current assets: Cash Investment in available-for-sale securities Trade accounts receivable (less allowances of $100,754 in 1999 and $55,904 in 1998) Inventories Other current assets Total current...

  • Page 33
    ...data) O F Fiscal Year I N C O M E 1999 1998 1997 Net sales Cost of sales Gross profit Expenses: Selling, general...Income from operations Other (income) expense: Interest income Interest expense Gain on sale of available-for-sale securities Net... financial statements. 31 Ingram Micro Annual Report

  • Page 34
    ...related to stock options Stock options exercised Income tax benefit from exercise of stock options Vesting of Redeemable Class B Common Stock Conversion of Class B Common Stock to Class A Common Stock Grant of restricted Class A Common Stock Issuance of Class A Common Stock related to Employee Stock...

  • Page 35
    ... borrowings under revolving credit facilities Cash (used) provided by financing activities Effect of exchange rate changes on cash Increase in cash Cash, beginning of year Cash, end of year Supplemental disclosure of cash flow information: Cash payments during the year: Interest Income taxes $ 183...

  • Page 36
    ...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 Pacific...

  • Page 37
    ... of Computer Software Developed or Obtained for Internal Use." This statement requires capitalization of computer software costs that meet both the definition of internal-use software and defined criteria for capitalization.The Company amortizes the costs of computer 35 Ingram Micro Annual Report

  • Page 38
    ...Scholes option-pricing model using the following assumptions: Risk-free interest rate Term of warrant Expected stock volatility 6.27% 5 years 55.4% The estimated fair value of the warrants has been included in other expenses in the Statement of Income for fiscal 1999. 36 Ingram Micro Annual Report

  • Page 39
    .... Credit risk with respect to trade accounts receivable is limited due to the large number of customers and their dispersion across geographic areas.The Company sells its products primarily in the United States, Europe, Canada, Latin America and Asia Pacific.The Company performs ongoing credit...

  • Page 40
    ... Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), but provides pro forma disclosures of net income and earnings per share as if the fair-value method had been applied. Earnings Per Share The Company reports a dual presentation of Basic Earnings per Share...

  • Page 41
    ... reallocation of resources to the Company's custom-configuration services capabilities. In connection with these reorganization efforts, the Company recorded a charge of $20,305 for the fiscal year ended January 1, 2000.The reorganization charge included $12,322 in employee termination benefits for...

  • Page 42
    ... 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 Singapore law...

  • Page 43
    ...amount outstanding under this commercial paper program at January 2, 1999, totaled $150,000. In March 2000, the Company completed a new 5-year accounts receivable securitization program in the U.S., which provides for the issuance of up to $700,000 in commercial paper. 41 Ingram Micro Annual Report

  • Page 44
    ... $150,000 of commercial paper issued under the Company's accounts receivable program (see Note 5) with the remainder issued in Europe.The weighted average interest rate on the commercial paper was 3.68% and 5.27% at January 1, 2000 and January 2, 1999, respectively. 42 Ingram Micro Annual Report

  • Page 45
    ...at January 1, 2000, and January 2, 1999, respectively. Other long-term debt, excluding the convertible debentures, consists of the following: Fiscal Year End Revolving Credit facilities Commercial paper Overdraft facilities Other Current maturities of other long-term debt $ $ 1999 503,537 155,470 31...

  • Page 46
    ... the carrying amount of assets and liabilities for financial 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 1999 Net deferred tax assets and (liabilities): Tax in excess of...

  • Page 47
    Reconciliation 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 1999 35% 3 2 (2) 38% 1998 35% 4 1 0...

  • Page 48
    ... the United States, Europe (Austria, Belgium, Denmark, Finland, France, Germany, Hungary, Italy,The Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom) and Other international (Argentina, Australia, Brazil, Canada, Chile, China, India, Indonesia, Malaysia, Mexico, New...

  • Page 49
    ...'s stock option plans been determined based on the fair value of the options consistent with the method of FAS 123, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below: Fiscal Year 1999 Net Income Diluted earnings per share As reported Pro...

  • Page 50
    ....60 18.96 29.56 46.82 13.42 $ $ Stock options exercisable totaled approximately 7,260,184, 4,717,000 and 3,004,000 at January 1, 2000, January 2, 1999, and January 3, 1998, respectively, at weighted average exercise prices of $13.42, $10.29, and $3.49, respectively. 48 Ingram Micro Annual Report

  • Page 51
    ... the original offering price upon termination of employment prior to certain specified vesting dates (50% of the shares vested on April 1, 1998; 25% on April 1, 1999; and the remaining 25% vest on April 1, 2000). The Company has repurchased 248,170 of such shares. 49 Ingram Micro Annual Report

  • Page 52
    ... Plan, 107,000 restricted shares of Class B Common Stock to certain officers and employees of the Company.These shares generally vest over four years. Prior to vesting, these restricted shares are subject to forfeiture to the Company without consideration upon termination of employment. At January...

  • Page 53
    ... 2, 1999, and the results of their operations and their cash flows for each of the three years in the period ended January 1, 2000 in conformity with accounting principles generally accepted in the United States.These financial statements are the responsibility of the Company's management; our...

  • Page 54
    ... Corporation Guy P. Abramo Senior Vice President and Chief Information Officer James E. Anderson, Jr. Senior Vice President, Secretary and General Counsel Kent B. Foster Chief Executive Officer and President, Ingram Micro Inc. David M. Finley Senior Vice President,Worldwide Human Resources...

  • Page 55
    Corporate Offices Ingram Micro Inc. 1600 E. St. Andrew Place Santa Ana, CA 92705 Phone: 714.566.1000 Transfer Agent & Registrar First Chicago Trust Company of New York A Division of EquiServe Post Office Box 2500 Jersey City, NJ 07303-2500 Phone: 201.324.1644 Annual Meeting The 2000 Annual Meeting...

  • Page 56
    © 2 0 0 0 Ingram M icro Inc. All rights reserved. Ingram M icro and the Ingram M icro logo are tradem arks used under license by Ingram M icro Inc. All other tradem arks are the property of their respective com panies. 4 / 0 0 9 3 5 1 .1 0 0 0