Ingram Micro 2001 Annual Report Download - page 23

Notes to Consolidated Financial Statements
(Dollars in 000s, except per share data)
In April 1999, the Company acquired ITG Computers, an Australian computer products distributor. In addition, the Company increased
its ownership of Walton Kft., a Hungarian based computer products distributor, to 100% in September 1999, including a 33% interest
previously held by the Company’s majority-owned subsidiary Ingram Macrotron AG. Total cash paid for these acquisitions was
approximately $4,532, net of cash acquired. These acquisitions were accounted for using the purchase method, and the results of
their operations have been combined with those of the Company since their acquisition dates. The purchase price was allocated to
the assets acquired and liabilities assumed based on their estimated fair values at the dates of acquisition. The excess of the
purchase prices over the net assets acquired was approximately $4,922 and is being amortized on a straight-line basis over 10 years.
In December 2001, the Company concluded a business combination involving certain assets and liabilities of its former subdistributor in
the People’s Republic of China, which was accounted for in accordance with FAS 141. In addition, during September 2001, the Company
acquired certain assets of an IT distribution business in the United Kingdom. The purchase price for these transactions aggregated
$15,923 in cash and was allocated to the assets acquired and liabilities assumed based on their estimated fair values on the transaction
dates, resulting in the recording of approximately $105,376 of goodwill. These transactions had no significant impact on the Company’s
consolidated results of operations.
Note 5 - Accounts Receivable
In March 2000, the Company entered into a revolving five-year accounts receivable securitization program in the U.S., which
provides for the issuance of up to $700,000 in commercial paper. In connection with this program most of the Company’s U.S. trade
accounts receivable are transferred without recourse to a trust, in exchange for a beneficial interest in the total pool of trade receivables.
The trust has issued fixed-rate, medium-term certificates and has the ability to support a commercial paper program through the issuance
of undivided interests in the pool of trade receivables to third parties. Sales of undivided interests to third parties under this program
result in a reduction of total accounts receivable in the Company’s consolidated balance sheet. The excess of the trade accounts receivable
transferred over amounts sold to and held by third parties at any one point in time represents the Company’s retained interest in the
transferred accounts receivable (“securitized receivables”) and is shown in the Company’s consolidated balance sheet as a separate
caption under accounts receivable. Retained interests are carried at their fair market value, estimated as the net realizable value, which
considers the relatively short liquidation period and includes an estimated provision for credit losses. At December 29, 2001 and
December 30, 2000, the amount of undivided interests sold to and held by third parties, or what the Company refers to as off-balance
sheet debt, totaled $80,000 and $700,000, respectively.
The Company also has certain other facilities relating to accounts receivable in Europe and Canada which provide up to approximately
$248,000 of additional financing capacity. Under these programs, approximately $142,253 and $210,188 of trade accounts receivable were
sold to and held by third parties at December 29, 2001 and December 30, 2000, respectively, resulting in a further reduction of trade
accounts receivable in the Company’s consolidated balance sheet.
The aggregate amount of trade accounts receivable sold to and held by third parties under the U.S., Europe, and Canada programs, or
off-balance sheet debt, as of December 29, 2001 and December 30, 2000 totaled approximately $222,253 and $910,188, respectively.
Losses in the amount of $20,332, $13,351 and $7,223 in 2001, 2000 and 1999, respectively, related to the sale of trade accounts receivable
under these facilities are included in other expenses in the Company’s consolidated statement of income.
Note 6 - Property and Equipment
Property and equipment consist of the following:
Fiscal Year End 2001 2000
Land $ 8,891 $ 6,552
Buildings and leasehold improvements 104,395 132,158
Distribution equipment 203,207 205,546
Computer equipment and software 333,012 298,933
649,505 643,1 89
Accumulated depreciation (345,672) (292,360)
$303,833 $350,829
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Notes to Consolidated Financial Statements
(Dollars in 000s, except per share data)
Quarter Ended December 29, 2001
The Company’s reorganization plan for the fourth quarter of 2001 focused primarily in Europe, and to a limited extent, in the U.S and Other
International. This reorganization plan included facility consolidations, primarily in Europe and workforce reductions in the U.S., Europe
and Other International.
In connection with this reorganization effort, the Company recorded a charge of $10,610 ($1,217, $8,412, and $981 in the U.S., Europe, and
Other International, respectively) for the quarter ended December 29, 2001. Reorganization costs included $4,316 in employee termination
benefits for approximately 300 employees ($1,082 for approximately 110 employees in the U.S., $2,505 for approximately 120 employees in
Europe, and $729 for approximately 70 employees in Other International); $5,224 for closing, downsizing and consolidating facilities ($49,
$4,941 and $234 in the U.S., Europe and Other International, respectively); and $1,070 of other costs associated with the reorganization
($87, $966, and $17 in the U.S., Europe and Other International, respectively). The Company anticipates that these initiatives will be
substantially completed within twelve months from December 29, 2001.
At December 29, 2001, the outstanding liability in connection with these reorganization efforts was approximately $5,368. The
reorganization charges and related activities for the period ended December 29, 2001 are summarized as follows:
Amounts Paid Remaining
Reorganization and Charged Liability at
CostsAgainst the Liability Adjustments December 29, 2001
Employee termination benefits $ 4,316 $ 1,825 $ - $ 2,491
Facility costs 5,224 3,1 13 - 2,1 1 1
Other costs 1,070 304 - 766
Total $ 1 0,61 0 $ 5,242 $ - $ 5,368
Special Items
The special items of $22,893 were comprised of the following charges: $10,227 for the write-off of electronic storefront technologies that
were replaced by the Company with a more efficient solution, and inventory management software, which was no longer required because
of the Company’s business process and systems improvements; an impairment charge of $3,500 to reduce the Company’s minority equity
investment in an internet-related company to estimated net realizable value; and $9,166 to fully reserve for the Company’s outstanding
insurance claims with an independent and unrelated former credit insurer, which went into liquidation on October 3, 2001. As of December
29, 2001, approximately $7,597 of insurance claims were written-off against the reserve. The remaining claims are expected to be written-
off against the balance of the reserve in 2002.
Note 4 - Acquisitions
In 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, the Company was required to extend a tender offer for the remaining shares and warrants of ERL as
a result of its increased ownership. The Company offered to purchase the remaining outstanding shares and warrants for approximately
$1.20 and $0.65 per share and warrant, respectively, during the tender offer period from January 4, 1999 to February 19, 1999. In addition,
during January and February 1999, the Company made open market purchases of ERL shares and warrants. As a result of the open
market purchases and the tender offer, the Company’s ownership in ERL increased to approximately 95%. In the third quarter of 1999, the
Company commenced a take-over offer for the remaining ERL shares and warrants it did not already own. As a result of the takeover, the
Company purchased an additional 12,151,748 shares and 1,337,962 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 aggregate purchase price paid during 1999 for
these ERL shares and warrants, net of cash acquired, was approximately $237,396.
Prior to 1999, the Company accounted for its investment in ERL, which totaled approximately $71,212, under the equity method. Due to the
purchase of ERL common stock and warrants in 1999, the Company has consolidated the results of ERL. The Company accounted for the
acquisition of ERL under the purchase method; accordingly, the results of ERL’s operations have been combined with those of the
Company commencing with the year ended January 1, 2000. The purchase price was allocated to the assets acquired and liabilities
assumed based on their estimated fair values at the date of acquisition. The excess of the purchase price, including the $71,212 paid in
December 1997, over the net assets acquired was approximately $240,506 and is being amortized on a straight-line basis over 30 years.
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