Ingram Micro 1999 Annual Report Download - page 28

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Ingram Micro
Annual Report
a reduction in the growth rate of accounts receivable over 1998.The significant decrease in cash used by operating activities in 1998
compared to 1997 was primarily attributable to the increase in trade creditor financing of product inventory through the increase
in accounts payable, partially offset by the increase in accounts receivable resulting from the continued growth of the Company.
Net cash used by investing activities was $138.4 million, $218.6 million, and $193.3 million, in 1999, 1998 and 1997, respec-
tively.These uses of cash were due in part to the Company’s expansion of warehouses and other facilities, the development of
information systems and the Company’s commitment to growth through acquisitions and strategic alliances. In 1999, the Company
used approximately $241.9 million in cash for acquisitions, net of cash acquired, and $135.3 million in capital expenditures.The
use of cash was partially offset by the proceeds from the sale of Softbank common stock totaling approximately $230.1 million.
In 1998, the Company used approximately $96.6 million in cash for acquisitions, net of cash acquired, approximately $143.2
million in capital expenditures, and approximately $50.3 million for the purchase of Softbank common stock. Mitigating the uses
of cash, the Company entered into a sale/leaseback agreement whereby the Company sold its Santa Ana, California facility and a
portion of its Buffalo, New York facility to a third party and received approximately $75.3 million in cash. In 1997, the Company
used approximately $34.0 million in cash for acquisitions, net of cash acquired, $101.5 million in capital expenditures, and
approximately $71.2 million in cash primarily for the purchase of common stock and warrants to acquire common stock of
ERL (see Note 4 of the Notes to Consolidated Financial Statements).
Net cash used by financing activities was $413.8 million in 1999 compared to cash provided of $497.1 million and $888.4
million in 1998 and 1997, respectively. Net cash used by financing activities in 1999 was primarily due to the repurchase of the
convertible debentures and the net decrease in borrowings under the revolving credit facilities primarily resulting from the use of
the proceeds received from the sale of Softbank common stock to repay indebtedness, as well as to the continued focus on working
capital management. Net cash provided by financing activities in 1998 was primarily due to the proceeds from the convertible
debentures and stock option exercises.The reduction of cash provided by financing activities in 1998 compared to 1997 is due in
part to the Company’s ability to finance its operations through trade creditors as well as the increase in proceeds from stock option
exercises. Net cash provided by financing activities in 1997 was due primarily to the increase in revolving credit of $770.4 million.
Acquisitions
In December 1997, the Company purchased approximately 21% of the outstanding common stock, and approximately 19% of
an outstanding class of warrants of ERL, a publicly traded electronic components distributor based in Singapore, for approximately
$71 million. In January 1999, the Company purchased additional shares from specific shareholders, which brought the Company’s
total ownership to approximately 39.6%. In January and February 1999, the Company made open-market purchases of ERL shares
and warrants, and on February 19, 1999, completed a tender offer for the remaining outstanding shares and warrants of ERL.
These additional purchases resulted in ownership of approximately 95% of both the outstanding common stock and warrants of
ERL. In the third quarter of 1999, the Company commenced a take-over offer for the remaining ERL shares and warrants not
already owned by Ingram Micro.As a result of the take-over offer, the Company purchased additional shares and warrants of ERL,
increasing the Company’s ownership position to 100% of the outstanding shares of ERL and approximately 99% of the outstanding
warrants.The total cash paid for these purchases in 1999 was approximately $237.4 million, net of cash acquired.
In April 1999, the Company acquired ITG Computers, an Australian computer products distributor. In addition, the Company’s
majority-owned Macrotron subsidiary 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 bank syndicates providing an aggregate credit availability of $1.65 billion. Under
these credit facilities, the Company is required to comply with certain financial covenants, including minimum tangible net worth,
restrictions on funded debt and interest coverage.The credit facilities also restrict the amount of dividends the Company can pay as