Ingram Micro 2001 Annual Report Download - page 22

Notes to Consolidated Financial Statements
(Dollars in 000s, except per share data)
Quarter Ended June 30, 2001
In June 2001, the Company initiated a reorganization plan primarily in the U.S. and, to a limited extent, in Europe and Other International
operations. This reorganization plan included the closure of the Newark, California distribution center, downsizing the Miami, Florida
distribution center, closing the returns processing centers in Santa Ana and Rancho Cucamonga, California and centralizing returns in
the Harrisburg, Pennsylvania returns center; restructuring the U.S. sales force, consolidating the U.S. product management division;
and reorganizing the information technology resources.
In connection with this reorganization effort, the Company recorded a charge of $19,056 ($18,047, $872, and $137 in the U.S., Europe, and
Other International, respectively) for the quarter ended June 30, 2001. Reorganization costs included $10,024 in employee termination
benefits for approximately 1,600 employees ($9,155 for approximately 1,440 employees in the U.S., $732 for approximately 120 employees
in Europe, and $137 for approximately 40 employees in Other International); $8,605 for closing, downsizing and consolidating certain
distribution and returns processing centers relating primarily to excess lease costs, net of estimated sublease income ($8,490 and $115
in the U.S. and Europe, respectively); and $427 of other costs associated with the reorganization ($402 and $25 in the U.S. and Europe,
respectively). The Company anticipates that these initiatives will be substantially completed within twelve months from June 30, 2001.
At December 29, 2001, the outstanding liability in connection with these reorganization efforts was approximately $4,028. The reorganization
charges and related activities for the period ended December 29, 2001 are summarized as follows:
Amounts Paid
and Charged Remaining
Reorganization Against the Liability at
Costs Liability Adjustments December 29, 2001
Employee termination benefits $ 10,024 $ 8,521 $ - $ 1,503
Facility costs 8,605 6,080 - 2,525
Other costs 427 427 - -
Total $ 19,056 $ 15,028 $ - $ 4,028
Quarter Ended September 29, 2001
The Company’s reorganization plan for the third quarter of 2001 focused primarily in the U.S. and Europe and, to a limited extent, Other
International. This reorganization plan included facility consolidations in the Company’s U.S. headquarters and two warehouse and
office facilities in Southern Europe, and headcount reductions in Europe and Other International operations.
In connection with this reorganization plan, the Company recorded a charge of $11,745 ($6,274, $4,290, and $1,181 in the U.S., Europe, and
Other International, respectively) for the quarter ended September 29, 2001. Reorganization costs included $2,370 in employee termination
benefits for approximately 250 employees ($1,189 for approximately 150 employees in Europe, and $1,181 for approximately 100 employees
in Other International); $7,590 for closing, downsizing and consolidating facilities ($6,274 and $1,316 in the U.S. and Europe,
respectively); and $1,785 of other costs associated with the reorganization in Europe. The Company anticipates that these initiatives
will be substantially completed within twelve months from September 29, 2001.
At December 29, 2001, the outstanding liability in connection with these reorganization efforts was approximately $5,579. The reorganization
charges and related activities for the period ended December 29, 2001 are summarized as follows:
Amounts Paid and Remaining
Reorganization Charged Against Liability at
Costs the Liability Adjustments December 29, 2001
Employee termination benefits $ 2,370 $ 2,363 $ - $ 7
Facility costs 7,590 3,362 - 4,228
Other costs 1,785 441 - 1,344
Total $ 1 1 ,74 5 $ 6,1 66 $ - $ 5,579
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Notes to Consolidated Financial Statements
(Dollars in 000s, except per share data)
At December 29, 2001, December 30, 2000, and January 1, 2000, there were $405, $220,035, and $440,943, respectively, in Zero Coupon
Convertible Senior Debentures that were convertible into approximately 5,000; 3,051,000; and 6,428,000 shares of Class A Common Stock
(see Note 7). These potential shares were excluded from the computation of Diluted EPS because their effect would be antidilutive.
Additionally, there were approximately 16,155,000; 11,178,000; and 3,483,000 options in 2001, 2000, and 1999, respectively, that were not
included in the computation of Diluted EPS because the exercise price was greater than the average market price of the Class A Common
Stock, thereby resulting in an antidilutive effect.
New Accounting Standards
In September 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 140, “Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities – a replacement of FASB Statement No. 125” (“FAS 140”).
FAS 140 revises the standards for accounting for securitizations and other transfers of financial assets and collateral. The accounting
standards of FAS 140 are effective for transfers and servicing of financial assets and extinguishments of liabilities occuring after March
31, 2001. The adoption of FAS 140 did not have a material impact on the Company’s consolidated financial position or results of operations.
In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, “Business
Combinations” (“FAS 141”), and No. 142, “Goodwill and Other Intangible Assets” (“FAS 142”). FAS 141 eliminates the pooling-of-interests
method of accounting for business combinations initiated after June 30, 2001 and further clarifies the criteria to recognize intangible
assets separately from goodwill. FAS 141 did not have a material impact on the Company’s consolidated financial position or results of
operations. In accordance with FAS 142, the Company will no longer amortize goodwill or indefinite lived intangible assets effective
the beginning of fiscal 2002. Instead, these assets will be reviewed for impairment upon adoption and at least annually thereafter.
Amortization expense was $20,963, $22,039, and $22,900 in 2001, 2000, and 1999, respectively. The Company is currently evaluating
the effect that the adoption may have on its consolidated financial position. It is expected that, as a result of the implementation of
FAS 142, the Company will record a non-cash charge for the cumulative effect of the change in accounting principle upon adoption
ranging from $260,000 to $290,000, net of tax benefits ranging from $7,000 to $12,000, in the first quarter of 2002.
In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143, “Accounting for Asset
Retirement Obligations” (“FAS 143”). FAS 143 requires capitalizing asset retirement costs as part of the total cost of the related long-lived
asset and subsequently allocating the total expense to future periods using a systematic and rational method. Adoption of FAS 143 is
required for the Company’s fiscal year beginning December 29, 2002. The Company has not yet assessed what impact, if any, FAS 143 may
have on its consolidated financial position or results of operations.
In October 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, “Accounting for
the Impairment or Disposal of Long-Lived Assets” (“FAS 144”). FAS 144 supersedes FAS 121 but retains many of its fundamental provisions.
In addition, FAS 144 expands the scope of discontinued operations to include more disposal transactions. The provisions of FAS 144 are
effective for the Company’s fiscal year beginning December 30, 2001. The Company is in the process of assessing what impact, if any, FAS
144 may have on its consolidated financial position or results of operations.
Reclassifications
Certain prior year balances have been reclassified to conform with the current year presentation.
Note 3 - Reorganization Costs and Special Items
The Company recorded aggregate charges of $41,411 for reorganization costs and $22,893 of other special items, which are discussed more
fully below. These charges are presented separately as components of income from operations in the consolidated statement of income.
Reorganization Costs
During 2001, the Company initiated a broad-based reorganization plan to streamline operations and reorganize resources to increase
flexibility, generate cost savings and operational efficiencies and improve services. Within the context of this broad-based reorganization
plan, the Company has developed and implemented detailed plans for significant restructuring actions as discussed below.
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