<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ___________
COMMISSION FILE NUMBER: 1-12203
INGRAM MICRO INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 62-1644402
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1600 E. ST. ANDREW PLACE, SANTA ANA, CALIFORNIA 92799-5125
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(714) 566-1000
- --------------------------------------------------------------------------------
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
The Registrant had 29,766,858 shares of Class A Common Stock, par value $.01 per
share, and 106,961,852 shares of Class B Common Stock, par value $.01 per share,
outstanding at September 27, 1997.
<PAGE> 2
INGRAM MICRO INC.
INDEX
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at September 27, 1997 and December 28, 1996 3
Consolidated Statement of Income for the thirteen weeks and thirty-nine
weeks ended September 27, 1997 and September 28, 1996 4
Consolidated Statement of Cash Flows for the thirty-nine weeks
ended September 27, 1997 and September 28, 1996 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 5. Other Information 16-17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INGRAM MICRO INC.
CONSOLIDATED BALANCE SHEET
(dollars in 000s, except per share data)
<TABLE>
<CAPTION>
September 27, December 28,
1997 1996
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 60,211 $ 48,279
Trade accounts receivable (less allowances of $52,243
in 1997 and $38,622 in 1996) 1,304,476 1,143,028
Inventories 2,251,663 1,818,047
Other current assets 170,157 145,964
---------- ----------
Total current assets 3,786,507 3,155,318
Property and equipment, net 187,483 161,172
Goodwill, net 112,067 25,918
Other 43,870 24,539
---------- ----------
Total assets $4,129,927 $3,366,947
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,459,169 $2,047,988
Accrued expenses 244,028 162,887
Current maturities of long-term debt 25,302 23,899
---------- ----------
Total current liabilities 2,728,499 2,234,774
Long-term debt 392,438 280,134
Other 20,624 6,190
---------- ----------
Total liabilities 3,141,561 2,521,098
Minority interest 4,407 3,476
Commitments and contingencies
Redeemable Class B Common Stock 16,698 17,223
Stockholders' equity:
Preferred Stock, $0.01 par value, 1,000,000 shares
authorized; no shares issued and outstanding - -
Class A Common Stock, $0.01 par value, 265,000,000 shares
authorized; 29,766,858 and 25,047,696 shares issued
and outstanding in 1997 and 1996, respectively 298 250
Class B Common Stock, $0.01 par value, 135,000,000 shares
authorized; 106,961,852 and 109,043,762 shares issued
and outstanding in 1997 and 1996 (including redeemable
shares of 2,385,400 in 1997 and 2,460,400 in 1996) 1,046 1,066
Additional paid in capital 479,516 449,657
Retained earnings 497,439 372,801
Cumulative translation adjustment (10,720) 1,910
Unearned compensation (318) (534)
---------- ----------
Total stockholders' equity 967,261 825,150
---------- ----------
Total liabilities and stockholders' equity $4,129,927 $3,366,947
========== ==========
</TABLE>
See accompanying notes to these consolidated financial statements.
3
<PAGE> 4
INGRAM MICRO INC.
CONSOLIDATED STATEMENT OF INCOME
(dollars in 000s, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
------------------------------- --------------------------------
September 27, September 28, September 27, September 28,
1997 1996 1997 1996
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net sales $ 4,087,334 $ 2,931,543 $ 11,454,139 $ 8,474,710
Cost of sales 3,823,338 2,734,089 10,713,183 7,900,223
----------- ----------- ------------ -----------
Gross profit 263,996 197,454 740,956 574,487
Expenses:
Selling, general and administrative 176,585 133,840 491,951 386,492
Charges allocated from Ingram Industries - 1,116 - 3,259
Noncash compensation charge 1,825 1,057 5,372 8,859
----------- ----------- ------------ -----------
178,410 136,013 497,323 398,610
----------- ----------- ------------ -----------
Income from operations 85,586 61,441 243,633 175,877
Other (income) expense:
Interest income (658) (427) (2,710) (1,188)
Interest expense 6,944 3,082 23,348 10,608
Interest expense charged by Ingram Industries - 9,740 - 30,912
Net foreign currency exchange loss 571 55 852 447
Other 3,060 79 9,474 1,689
----------- ----------- ------------ -----------
9,917 12,529 30,964 42,468
----------- ----------- ------------ -----------
Income before income taxes and
minority interest 75,669 48,912 212,669 133,409
Provision for income taxes 31,073 21,603 87,101 55,459
----------- ----------- ------------ -----------
Income before minority interest 44,596 27,309 125,568 77,950
Minority interest 304 382 931 383
----------- ----------- ------------ -----------
Net income $ 44,292 $ 26,927 $ 124,637 $ 77,567
=========== =========== ============ ===========
Earnings per share $ 0.30 $ 0.22 $ 0.85 $ 0.64
=========== =========== ============ ===========
</TABLE>
See accompanying notes to these consolidated financial statements.
4
<PAGE> 5
INGRAM MICRO INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in 000s)
(Unaudited)
<TABLE>
<CAPTION>
Thirty-nine Weeks Ended
-------------------------------
September 27, September 28,
1997 1996
------------- -------------
<S> <C> <C>
Cash provided (used) by operating activities:
Net income $ 124,637 $ 77,567
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 34,159 25,253
Deferred income taxes (1,774) (3,144)
Minority interest 931 383
Noncash compensation charge 5,372 8,859
Changes in operating assets and liabilities,
net of effects of acquisitions:
Trade accounts receivable (168,966) (63,799)
Inventories (323,122) 194,288
Other current assets (24,827) (16,280)
Accounts payable 180,914 25,890
Accrued expenses 63,495 24,235
--------- ---------
Cash (used) provided by operating activities (109,181) 273,252
Cash (used) provided by investing activities:
Acquisitions, net of cash acquired 25,125 -
Escrow deposit (10,000) -
Purchase of property & equipment (61,774) (62,503)
Proceeds from sale of property & equipment 10,334 -
Other 681 (2,034)
--------- ---------
Cash (used) by investing activities (35,634) (64,537)
Cash provided (used) by financing activities:
Proceeds from sale (repurchase) of Redeemable Class B Common Stock (525) 17,223
Exercise of stock options including tax benefits 24,729 -
Decrease in borrowings from Ingram Industries - (194,090)
Proceeds from debt 101,238 2,481
Net borrowings (repayments) under revolving credit facilities 33,883 (29,612)
Distribution to Ingram Industries - (20,000)
Minority interest investment - 2,400
--------- ---------
Cash provided (used) by financing activities 159,325 (221,598)
Effect of exchange rate changes on cash (2,578) (837)
--------- ---------
Increase (decrease) in cash 11,932 (13,720)
Cash, beginning of period 48,279 56,916
--------- ---------
Cash, end of period $ 60,211 $ 43,196
========= =========
Supplemental disclosure of cash flow information:
Cash payments during the period:
Interest $ 22,789 $ 41,814
Income taxes 81,844 60,090
Cash payments include payments made to Ingram Industries for interest and U.S. income taxes.
</TABLE>
See accompanying notes to these consolidated financial statements.
5
<PAGE> 6
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS IN 000S, EXCEPT PER SHARE DATA)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Ingram Micro Inc. (the "Company" or "Ingram Micro") is primarily
engaged in wholesale distribution of computer-based technology products and
services. The Company conducts the majority of its operations in North America
and Europe. In November 1996, the Company's former parent, Ingram Industries
Inc. ("Ingram Industries"), consummated a split-off of the Company in a tax-free
reorganization (the "Split-Off"). In connection with the Split-Off, certain
stockholders of Ingram Industries exchanged all or some of their shares of
Ingram Industries Common Stock for 107,251,362 shares of Class B Common Stock of
the Company in specified ratios.
The consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. In the opinion of management, the
accompanying unaudited consolidated financial statements contain all
adjustments, consisting of only normal recurring adjustments, necessary to
present fairly the financial position of the Company and its wholly-owned and
majority-owned subsidiaries as of September 27, 1997, their results of
operations for the thirteen and thirty-nine weeks ended September 27, 1997 and
September 28, 1996 and their cash flows for the thirty-nine weeks ended
September 27, 1997 and September 28, 1996. All significant intercompany accounts
and transactions have been eliminated in consolidation. The results of
operations for the thirty-nine weeks ended September 27, 1997 may not be
indicative of the results of operations that can be expected for the entire
fiscal year ending January 3, 1998.
NOTE 2 - EARNINGS PER SHARE
Historical earnings per share for the thirteen and thirty-nine weeks
ended September 28, 1996 reflect the Company's capital structure as a result of
the Split-Off. Earnings per share is determined based on the number of shares
outstanding after giving effect to the Split-Off in addition to all dilutive
common stock and common stock equivalent shares. Pursuant to the Securities and
Exchange Commission Staff Accounting Bulletins and Staff policy, such shares
issued within 12 months of the initial public offering (the "IPO") of the
Company's Class A Common Stock are treated as if they were outstanding for all
periods presented prior to the IPO using the treasury stock method. The number
of common and common equivalent shares outstanding used in the computation of
earnings per share for the thirteen and thirty-nine weeks ended September 27,
1997 was 146,827,680 and 145,947,027, respectively, and for the thirteen and
thirty-nine weeks ended September 28, 1996 was 122,248,680 and 121,687,287.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("FAS
128") which will become effective in the fourth quarter of 1997. FAS 128
replaces the presentation of earnings per share reflected on the Statement of
Income with a dual presentation of Basic Earnings per Share ("Basic EPS") and
Diluted Earnings per Share ("Diluted EPS"). Basic EPS excludes dilution and is
computed by dividing net income by the weighted average number of common shares
outstanding during the period. Diluted EPS reflects the potential dilution that
could occur if stock options and other commitments to issue common stock were
exercised resulting in the issuance of common stock that then shared in the
earnings of the Company. FAS 128 does not permit early application; however, it
requires, when implemented in the fourth quarter, the restatement of previously
reported earnings per share for each income statement presented. Pro forma
disclosure of earnings per share information as if the Company implemented FAS
128 during the thirteen and thirty-nine weeks ended September 27, 1997 and
September 28, 1996 is as follows:
6
<PAGE> 7
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollars in 000s, except per share data)
PRO FORMA EARNINGS PER SHARE:
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
-------------------------------- -------------------------------
September 27, September 28, September 27, September 28,
1997 1996 1997 1996
------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
Net income $ 44,292 $ 26,927 $ 124,637 $ 77,567
============ ============ ============= ============
Weighted average shares 136,294,984 109,518,171 135,355,851 108,006,965
============ ============ ============= ============
Basic earnings per share $ 0.32 $ 0.25 $ 0.92 $ 0.72
============ ============ ============= ============
Weighted average shares including
the dilutive effect of stock options
(10,532,696 and 10,591,176 for the 13
and 39 weeks ended September 27,
1997, respectively, and 12,730,509
and 13,680,322 for the 13 and 39
weeks ended September 28, 1996) 146,827,680 122,248,680 145,947,027 121,687,287
============ ============ ============= ============
Diluted earnings per share $ 0.30 $ 0.22 $ 0.85 $ 0.64
============ ============ ============= ============
</TABLE>
NOTE 3 - ACQUISITIONS
On July 18, 1997, the Company completed the acquisition of the Intelligent
Electronics Inc. ("IE") indirect distribution business, its Reseller Network
Division ("RND"). The purchase price was $78 million, payable by the assumption
of liabilities in excess of current assets (including $29,964 in cash acquired),
based on the balance sheet of RND at closing. The Company deposited $10 million
of the purchase price into an escrow account for final settlement of any
purchase price adjustments. This acquisition was accounted for using the
purchase method and the results of RND's operations have been combined with
those of the Company since the date of acquisition. The purchase price was
allocated based on estimated fair values at the date of acquisition. The excess
of purchase price over net assets acquired is being amortized on a
straight-line basis over 20 years.
The following table reflects unaudited pro forma combined results of
operations of the Company and RND as if the acquisition had occurred at the
beginning of fiscal 1996:
<TABLE>
<CAPTION>
(In thousands except per share amounts) Thirty-nine Weeks Ended
----------------------------------
September 27, September 28,
1997 1996
------------- -------------
<S> <C> <C>
Net sales $12,503,442 $10,881,120
Net income $ 108,116 $ 72,957
Earnings per share $ 0.74 $ 0.60
</TABLE>
These unaudited pro forma results have been prepared for comparative
purposes only and include certain pro forma adjustments. Such pro forma amounts
are not necessarily indicative of what actual consolidated results of
7
<PAGE> 8
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(dollars in 000s, except per share data)
operations might have been if the acquisition had been effective at the
beginning of fiscal 1996. Pro forma combined results of operations for the nine
months ended September 28, 1996 exclude a nonrecurring charge of $61.6 million
taken by RND in the 3rd quarter of fiscal 1996 primarily relating to the
write-off of previously recorded goodwill. If this nonrecurring charge were
included, pro forma combined results of operations for the nine months ended
September 28, 1996 would reflect net income of $11,381 and earnings per share
of $0.09.
In April 1997, the Company acquired Tallgrass Technologies A.S., a
distributor of computer products based in Norway. In August 1997, the Company
acquired J&W Computer GmbH, a distributor of computer products based in
Germany. The purchase price and results of operations of the acquired
businesses were not material in relation to the Company's consolidated assets
and results of operations.
NOTE 4 - LONG-TERM DEBT
On October 28, 1997, the Company entered into two new multi-currency
revolving credit agreements totaling $650 million with two syndicates of banks
in order to supplement its existing $1 billion credit facility which matures on
October 30, 2001. The European credit facility provides for aggregate borrowings
up to $500 million while the Canadian credit facility provides for aggregate
borrowings up to $150 million. These new credit facilities are unsecured; the
European credit facility matures on October 28, 2002 and the Canadian credit
facility matures on October 28, 2001. The Company is required to comply with
certain financial covenants, including minimum net worth, current ratio,
interest coverage, restrictions on the amount of funded debt and restrictions on
the payment of dividends. These covenants as well as interest rate options
available under the new European and Canadian credit facilities are
substantially the same as those provided under the Company's existing $1 billion
credit facility, as amended.
NOTE 5 - COMMON STOCK
The Company has two classes of Common Stock, consisting of 265,000,000
authorized shares of $0.01 par value Class A Common Stock and 135,000,000
authorized shares of $0.01 par value Class B Common Stock, and 1,000,000
authorized shares of $0.01 par value Preferred Stock. Class A stockholders are
entitled to one vote on each matter to be voted on by the stockholders whereas
Class B stockholders are entitled to ten votes on each matter to be voted on by
the stockholders. The two classes of stock have the same rights in all other
respects. Each share of Class B Common Stock may at any time be converted to a
share of Class A Common Stock; however, conversion will occur automatically on
the earliest of (i) November 6, 2001; (ii) the sale or transfer of such share of
Class B Common Stock to any person not specifically authorized to hold such
shares by the Company's Certificate of Incorporation; or (iii) the date on which
the number of shares of Class B Common Stock then outstanding represents less
than 25% of the aggregate number of shares of Class A Common Stock and Class B
Common Stock then outstanding.
Initial Public Offering
On November 1, 1996, the Company sold 23,200,000 shares of Class A Common
Stock at $18.00 per share in an initial public offering. Proceeds of $393,844,
net of underwriters' commissions and expenses of the offering aggregating
$23,756, were received and used to repay indebtedness to Ingram Industries in
the amount of $366,340.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Ingram Micro is the leading wholesale distributor of computer-based
technology products and services worldwide. In November 1996, the Company was
split-off from Ingram Industries (the "Split-Off") and completed an initial
public offering (the "IPO") of its Class A Common Stock that raised $393.8
million, net of underwriters' discounts and expenses, of which approximately
$366.3 million was used to repay certain indebtedness to Ingram Industries.
Concurrently with the completion of the IPO, the Company entered into a $1
billion credit facility with a syndicate of banks for which NationsBank of Texas
N.A. and The Bank of Nova Scotia acted as agents. On October 28, 1997, the
Company added two new multi-currency revolving credit facilities totaling $650
million, providing the Company total committed revolving credit facilities of
$1.65 billion. In addition, the Company assumed an Ingram Industries accounts
receivable securitization program under which $160 million of fixed rate medium
term certificates and $150 million in trust certificate-backed commercial paper
was outstanding at September 27, 1997. See "-- Liquidity and Capital Resources."
In connection with the Split-Off, certain outstanding Ingram Industries
stock options, incentive stock units ("ISUs"), and stock appreciation rights
("SARs") held by certain employees of Ingram Industries, Ingram Entertainment
Inc., and Ingram Micro were converted to options to purchase up to an aggregate
of approximately 10,989,000 shares of Class A Common Stock ("Rollover Stock
Options"). The Company recorded a pre-tax noncash compensation charge of
approximately $1.8 million ($1.5 million net of tax) and $5.4 million ($4.4
million net of tax) in the thirteen and thirty-nine week periods ended September
27, 1997, respectively. Noncash compensation charges for the comparable prior
year periods were $1.0 million ($0.6 million net of tax) and $8.9 million ($5.4
million net of tax) for the thirteen and thirty-nine week periods ended
September 28, 1996, respectively. Noncash compensation charges relate to the
vested portion of certain Rollover Stock Options based on the difference between
the estimated fair value of such options at the applicable measurement dates and
the exercise price of such options. The Company will record additional noncash
compensation charges over the remaining vesting periods of the Rollover Stock
Options. These additional charges are expected to be approximately $1.8 million
($1.5 million net of tax) in the 4th quarter of 1997, compared to $14.5 million
($14.1 million net of tax) for the comparable prior year period, $4.8 million
($3.7 million net of tax) for 1998 and $2.7 million ($1.9 million net of tax)
for 1999.
RESULTS OF OPERATIONS
The following table sets forth 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.
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
----------------------------------------- -----------------------------------------
September 27, September 28, September 27, September 28,
1997 1996 1997 1996
----------------- ------------------ ------------------- -----------------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales by geographic region (1):
United States $ 2,968 72.6% $ 2,052 70.0% $ 8,045 70.2% $ 5,763 68.0%
Europe 716 17.5% 559 19.1% 2,185 19.1% 1,745 20.6%
Other international 403 9.9% 321 10.9% 1,224 10.7% 967 11.4%
--------------- ----------------- ------------------ ----------------
Total $ 4,087 100.0% $ 2,932 100.0% $11,454 100.0% $ 8,475 100.0%
=============== ================= ================== ================
</TABLE>
(1) Net sales are classified by location of the shipping destination of
products. Products sold through the U.S. Export Division are classified
as other international sales. This change in presentation was implemented
in the 2nd quarter of 1997. Prior to the change, the Company classified
U.S. Export Division sales as United States sales.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS CONTINUED
The following table sets forth certain items from the Company's
Consolidated Statement of Income as a percentage of net sales, for each of the
periods indicated.
<TABLE>
<CAPTION>
Percentage of Net Sales
--------------------------------------------------------------------
Thirteen Weeks Ended Thirty-nine Weeks Ended
------------------------------- -------------------------------
September 27, September 28, September 27, September 28,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 93.5% 93.3% 93.5% 93.2%
----- ----- ----- -----
Gross profit 6.5% 6.7% 6.5% 6.8%
Expenses:
SG&A expenses and charges allocated
from Ingram Industries 4.4% 4.6% 4.3% 4.6%
Noncash compensation charge 0.0% 0.0% 0.1% 0.1%
----- ----- ----- -----
Income from operations 2.1% 2.1% 2.1% 2.1%
Other expense, net 0.2% 0.4% 0.2% 0.5%
----- ----- ----- -----
Income before income taxes and minority interest 1.9% 1.7% 1.9% 1.6%
Provision for income taxes 0.8% 0.8% 0.8% 0.7%
Minority interest 0.0% 0.0% 0.0% 0.0%
----- ----- ----- -----
Net income 1.1% 0.9% 1.1% 0.9%
===== ===== ===== =====
</TABLE>
THIRTEEN WEEKS ENDED SEPTEMBER 27, 1997 AS COMPARED TO THE THIRTEEN WEEKS ENDED
SEPTEMBER 28, 1996
Consolidated net sales increased 39.4% to $4.09 billion in the third
quarter of 1997 from $2.93 billion in the third quarter of 1996. The increase in
worldwide net sales was attributable to growth in the microcomputer products
industry in general, the addition of new customers, increased sales to the
existing customer base, improved product availability, and expansion of the
Company's product offerings.
Net sales from U.S. operations increased 44.6% to $2.97 billion in the
third quarter of 1997 from $2.05 billion in the third quarter of 1996. In
addition to the factors above that impacted net sales worldwide, U.S. net sales
were positively impacted by the acquisition of the Intelligent Electronics Inc.
("IE") indirect distribution business, its Reseller Network Division ("RND"),
which was completed on July 18, 1997. The RND business model, which is
complementary to Ingram Alliance, is known as the "wholesale aggregation" or
"master reseller" business. Concurrent with the RND acquisition, the Company
more fully integrated its master reseller business into its wholesale
distribution business. Net sales from European operations increased 28.2% to
$716.4 million in the third quarter of 1997 from $558.7 million in the third
quarter of 1996. The U.S. dollar was stronger against most European currencies
during the third quarter of 1997 relative to the third quarter of 1996. At
constant exchange rates, net sales from European operations would have increased
37.9% in the third quarter of 1997 as compared to the third quarter of 1996.
Other international net sales (which include export sales from the United
States) increased 25.6% to $403.4 million in the third quarter of 1997 from
$321.0 million in the third quarter of 1996. Growth in other international net
sales occurred principally due to growth in net sales from the Company's
Canadian, Mexican and export operations.
Cost of sales as a percentage of net sales increased to 93.5% in the
third quarter of 1997 from 93.3% in the third quarter of 1996. This increase was
largely attributable to the increase as a percentage of net sales of the master
reseller (wholesale aggregation) business, which has lower gross margins, as
well as competitive pricing pressures in other international regions.
Total SG&A expenses (including charges allocated from Ingram Industries
in 1996) increased 30.8% to $176.6 million in the third quarter of 1997 from
$135.0 million in the third quarter of 1996. However, total SG&A expenses
decreased as a percentage of net sales to 4.4% in the third quarter
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS CONTINUED
of 1997 from 4.6% in the third quarter of 1996. The increased level of spending
was attributable to expenses required to support expansion of the Company's
business, consisting primarily of incremental personnel and support costs, lease
payments relating to new operating facilities, and expenses associated with the
development and maintenance of information systems. The decrease in SG&A
expenses as a percentage of net sales was primarily attributable to the growth
of the Company's master reseller (wholesale aggregation) business, which
utilizes a lower cost business model, and economies of scale from higher sales
volumes.
Noncash compensation charges increased 72.7% to $1.8 million in the
third quarter of 1997 from $1.0 million in the third quarter of 1996. The amount
of noncash compensation charges varies from period to period due to the impact
of vesting and forfeitures related to the underlying stock options. The Company
expects to record additional noncash compensation charges of approximately $1.8
million in the fourth quarter of 1997.
Excluding noncash compensation charges, total income from operations
increased 39.9% to $87.4 million in the third quarter of 1997 from $62.5 million
in the third quarter of 1996 and, as a percentage of net sales, remained
unchanged at 2.1% in the third quarter of 1997 and 1996. Income from operations
in the United States excluding the noncash compensation charge, expressed as a
percentage of U.S. net sales, decreased to 2.6% in the third quarter of 1997
from 2.8% in the third quarter of 1996 due to the impact of higher cost of sales
as a percentage of U.S. net sales. The increase in cost of sales as a percentage
of U.S. net sales was due to the increase as a percentage of net sales of the
master reseller (wholesale aggregation) business, which has lower gross margins.
Excluding noncash compensation charges, income from operations in Europe
increased as a percentage of European net sales to 0.7% in the third quarter of
1997 from 0.0% in the third quarter of 1996, largely as a result of lower SG&A
expenses as a percentage of European net sales. Excluding noncash compensation
charges, income from operations as a percentage of net sales for other
international regions (which includes export operations) decreased to 1.6% in
the third quarter of 1997 from 1.8% in the third quarter of 1996 due to the
impact of higher cost of sales as a percentage of other international net sales.
For the reasons set forth above, income from operations, including
noncash compensation charges, increased 39.3% to $85.6 million in the third
quarter of 1997 from $61.4 million in the third quarter of 1996 and, as a
percentage of sales, remained unchanged at 2.1% during the third quarter of 1997
and 1996.
Other expense, net, which consists primarily of net interest expense
(including interest expense charged by Ingram Industries in 1996), foreign
currency exchange losses, and miscellaneous non-operating expenses, decreased
20.8% to $9.9 million in the third quarter of 1997 from $12.5 million in the
third quarter of 1996. As a percentage of net sales, other expense, net,
decreased to 0.2% in the third quarter of 1997 from 0.4% in the third quarter of
1996. The decrease in other expense was largely attributable to a year-over-year
decrease in interest expense to $6.9 million in the third quarter of 1997 from
$12.8 million in the third quarter of 1996. The decrease in interest expense
primarily related to lower levels of debt resulting from repayment of
indebtedness to Ingram Industries with proceeds from the IPO in the fourth
quarter of 1996. The decrease in interest expense was partially offset by the
increase in other expense to $3.1 million in the third quarter of 1997 from $0.1
million in the third quarter of 1996, resulting from the reclassification of
$2.5 million of financing costs in the third quarter of 1997 relating to the
Company's accounts receivable securitization program. See "-- Liquidity and
Capital Resources." Such expenses were reflected as interest expense charged by
Ingram Industries in the third quarter of 1996.
The provision for income taxes increased 43.8% to $31.1 million in the
third quarter of 1997 from $21.6 million in the third quarter of 1996. The
increase in the provision for income taxes reflects the increase in the
Company's income before income taxes and minority interest of 54.7% in the third
quarter of 1997 over the comparable 1996 period. The Company's effective tax
rate was 41.1% in the third quarter of 1997 compared to 44.2% in the third
quarter of 1996. The decrease in the effective tax rate was primarily due to the
effect of certain international taxes recognized in the third quarter of 1996.
Excluding noncash compensation charges of $1.5 million (net of tax) for
the third quarter of 1997 and $0.6 million (net of tax) for the third quarter of
1996, net income increased 66.2% to $45.8 million in the third quarter of 1997
from $27.6 million in the third quarter of 1996 and, as a percentage of net
sales, increased to 1.1% in the third
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS CONTINUED
quarter of 1997 from 0.9% in the third quarter of 1996. Pro forma earnings per
share, excluding noncash compensation charges, increased 34.8% to $0.31 in the
third quarter of 1997 from $0.23 in the third quarter of 1996. Net income,
including noncash compensation charges, increased 64.5% to $44.3 million in the
third quarter of 1997 from $26.9 million in the third quarter of 1996. Earnings
per share, including the noncash compensation charge, increased 36.4% to $0.30
in the third quarter of 1997 from $0.22 in the third quarter of 1996.
THIRTY-NINE WEEKS ENDED SEPTEMBER 27, 1997 AS COMPARED TO THE THIRTY-NINE WEEKS
ENDED SEPTEMBER 28, 1996
Consolidated net sales for the first nine months of 1997 increased
35.2% to $11.5 billion from $8.5 billion in the first nine months of 1996. The
increase in worldwide net sales was attributable to the same factors summarized
in the discussion of net sales for the thirteen weeks ended September 27, 1997
and September 28, 1996.
Net sales from U.S. operations increased 39.6% to $8.0 billion in the
first nine months of 1997 from $5.8 billion in the first nine months of 1996. In
addition to the factors above that impacted net sales worldwide, U.S. net sales
were positively impacted by the acquisition of IE's RND which was completed on
July 18, 1997. The RND business model, which is complementary to Ingram
Alliance, is known as the "wholesale aggregation" or "master reseller" business.
Concurrent with the RND acquisition, the Company more fully integrated its
master reseller business into its wholesale distribution business. Net sales
from European operations increased 25.2% to $2.2 billion in the first nine
months of 1997 from $1.7 billion in the first nine months of 1996. The U.S.
dollar was stronger against most European currencies during the first nine
months of 1997 relative to the first nine months of 1996. At constant exchange
rates, net sales from European operations would have increased 32.8% in the
first nine months of 1997 as compared to the first nine months of 1996. Other
international net sales (which include export sales from the United States)
increased 26.6% to $1.2 billion in the first nine months of 1997 from $966.9
million in the first nine months of 1996. Growth in other international net
sales was attributable to the same factors summarized in the discussion of other
international net sales for the thirteen weeks ended September 27, 1997 and
September 28, 1996.
Cost of sales as a percentage of net sales increased to 93.5% in the
first nine months of 1997 from 93.2% in the first nine months of 1996. This
increase was largely attributable to the increase as a percentage of net sales
of the master reseller (wholesale aggregation) business, which has lower gross
margins, as well as competitive pricing pressures in Europe and other
international regions.
Total SG&A expenses (including charges allocated from Ingram Industries
in 1996) increased 26.2% to $492.0 million in the first nine months of 1997 from
$389.8 million in the first nine months of 1996. However, total SG&A expenses
decreased as a percentage of net sales to 4.3% in the first nine months of 1997
from 4.6% in the first nine months of 1996. The increased level of spending as
well as the decrease in SG&A expenses as a percentage of net sales was primarily
attributable to the same factors summarized in the discussion of total SG&A
expenses for the thirteen weeks ended September 27, 1997 and September 28, 1996.
Noncash compensation charges decreased 39.4% to $5.4 million in the
first nine months of 1997 from $8.9 million in the first nine months of 1996.
The higher amount in 1996 was due to the initial noncash compensation charge
recorded in the first quarter of 1996 when the terms and grants of these stock
options were established.
Excluding noncash compensation charges, total income from operations
increased 34.8% to $249.0 million for the nine months ended September 27, 1997
from $184.7 million for the comparable 1996 period and, as a percentage of net
sales, remained unchanged at 2.2%. Income from operations in the United States
excluding the noncash compensation charge, expressed as a percentage of U.S. net
sales, decreased to 2.6% in the nine months ended 1997 from 2.7% in the nine
months ended 1996 due to the impact of higher cost of sales as a percentage of
U.S. net sales. The increase in cost of sales as a percentage of U.S. net sales
was due to the increase as a percentage of net sales of the master reseller
(wholesale aggregation) business, which has lower gross margins. Excluding the
noncash compensation charge, income from operations in Europe as a percentage of
European net sales improved to 0.7% in the first nine months of 1997 from 0.5%
in the corresponding 1996 period. Excluding the noncash compensation charge,
income from operations as a percentage of other international net sales (which
includes export operations) decreased to 1.8% in the first nine months of 1997
from 2.1% in the first nine months of 1996 due to the impact of higher cost of
sales as a percentage of other international net sales.
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS CONTINUED
For the reasons set forth above, income from operations increased 38.5% to
$243.6 million for the first nine months of 1997 from $175.9 million in the
first nine months of 1996. As a percentage of sales, income from operations,
including noncash compensation charges, remained unchanged at 2.1% during the
first nine months of 1997 and 1996.
Other expense, net, which consists primarily of net interest expense
(including interest expense charged by Ingram Industries in 1996), foreign
currency exchange losses, and miscellaneous non-operating expenses, decreased
27.1% to $31.0 million in the first nine months of 1997 from $42.5 million in
the first nine months of 1996. As a percentage of net sales, other expense, net,
decreased to 0.2% in the first nine months of 1997 from 0.5% in the first nine
months of 1996. The decrease in other expense was largely attributable to a
year-over-year decrease in interest expense to $23.3 million in the first nine
months of 1997 from $41.5 million in the first nine months of 1996. The decrease
in interest expense primarily related to lower levels of debt resulting from
repayment of indebtedness to Ingram Industries with proceeds from the IPO in the
fourth quarter of 1996. The decrease in interest expense was partially offset by
the increase in other expense to $9.5 million in the first nine months of 1997
from $1.7 million in the first nine months of 1996 resulting from the
reclassification of $8.2 million of financing costs in the first nine months of
1997 relating to the Company's accounts receivable securitization program. See
"--Liquidity and Capital Resources." Such expenses were reflected as interest
expense charged by Ingram Industries in the first nine months of 1996.
The provision for income taxes increased 57.1% to $87.1 million in the
first nine months of 1997 from $55.5 million in the first nine months of 1996.
The increase in the provision for income taxes reflects the increase in the
Company's income before income taxes and minority interest of 59.4% in the first
nine months of 1997 over the comparable 1996 period. The Company's effective tax
rate was 41.0% in the first nine months of 1997 compared to 41.6% in the first
nine months of 1996. The decrease in the effective tax rate was primarily due to
the effect of certain international taxes recognized in the third quarter of
1996.
Excluding noncash compensation charges of $4.4 million (net of tax) for the
first nine months of 1997 and $5.4 million (net of tax) for the first nine
months of 1996, net income increased 55.6% to $129.1 million in the first nine
months of 1997 from $83.0 million in the first nine months of 1996 and, as a
percentage of net sales, increased to 1.1% in the first nine months of 1997 from
1.0% in the first nine months of 1996. Pro forma earnings per share, excluding
noncash compensation charges, increased 27.5% to $0.88 for the first nine months
of 1997 from $0.69 in the first nine months of 1996. Net income, including
noncash compensation charges, increased 60.7% to $124.6 million for the first
nine months of 1997 from $77.6 million in the first nine months of 1996.
Earnings per share, including the noncash compensation charge, increased 32.8%
to $0.85 in the first nine months of 1997 from $0.64 in the first nine months of
1996.
QUARTERLY DATA; SEASONALITY
The Company's quarterly sales and operating results have varied in the past
and will likely continue to do so in the future as a result of seasonal
variations in the demand for the products and services offered by the Company,
the introduction of new hardware and software technologies and products offering
improved features and functionality, the introduction of new products and
services by the Company and its competitors, the loss or consolidation of a
significant supplier or customer, changes in the level of operating expenses,
inventory adjustments, product supply constraints, competitive conditions
including pricing, interest rate fluctuations, the impact of acquisitions,
currency fluctuations, and general economic conditions. The Company's narrow
operating margins may magnify such fluctuations, particularly on a quarterly
basis.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its growth and cash needs largely through income
from operations and borrowings, trade and supplier credit and, more recently,
the public sale of 23,200,000 shares of its Class A Common Stock at $18.00 per
share in the IPO completed in November 1996.
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS CONTINUED
Cash used by operating activities was $109.2 million in the thirty-nine
weeks ended September 27, 1997 as compared to cash provided by operating
activities of $273.3 million in the thirty-nine weeks ended September 28, 1996.
The significant increase in cash used by operating activities in the thirty-nine
weeks ended September 27, 1997 over the comparable 1996 period was largely due
to the increase in inventories at September 27, 1997 from December 28, 1996
which accounted for a use of $323.1 million as compared to a source of $194.3
million in the corresponding 1996 period resulting from the net decrease in
inventories at September 28, 1996 from December 30, 1995. Inventories at
December 30, 1995 were higher than the September 28, 1996 balances due to the
launch of Microsoft Windows 95 in the third quarter of 1995. The increase in
inventory levels at September 27, 1997 as compared to December 28, 1996 reflect
purchases made in preparation for the 4th quarter of 1997.
Net cash used by investing activities was $35.6 million in the thirty-nine
weeks ended September 27, 1997 as compared to $64.5 million in the thirty-nine
weeks ended September 28, 1996. The decrease in net cash used by investing
activities is due to cash acquired in connection with the acquisition of IE's
RND as well as proceeds of $10.3 million realized on the sale and leaseback of a
distribution center in the thirty-nine weeks ended September 27, 1997.
Net cash provided by financing activities was $159.3 million in the
thirty-nine weeks ended September 27, 1997 as compared to cash used by financing
activities of $221.6 million in the thirty-nine weeks ended September 28, 1996.
The increase in net cash provided by financing activities was caused primarily
by proceeds drawn under the revolving credit facility and long-term debt of
$135.1 million in the thirty-nine weeks ended September 27, 1997 as compared to
the net repayment of borrowings from Ingram Industries and the revolving credit
facility in the thirty-nine weeks ended September 28, 1996 as well as a
distribution to Ingram Industries in connection with the Split-Off of $20.0
million in the 1996 period. The Company's debt to capitalization ratio was 30.2%
at September 27, 1997, up from 26.9% at December 28, 1996 but down substantially
from 63.1% at September 28, 1996.
Prior to the Split-Off, the Company's sources of capital were primarily
borrowings from Ingram Industries. Ingram Industries stopped providing financing
to the Company following the Split-Off. In November 1996, the Company entered
into a $1 billion credit facility and, in October 1997, entered into two
additional multi-currency revolving credit agreements (collectively referred to
as "the Credit Facilities") totaling $650 million, providing the Company with
total committed revolving credit facilities of $1.65 billion. The Company is
required to comply with certain financial covenants, including minimum net
worth, restrictions on funded debt, current ratio and interest coverage, which
will be reviewed for compliance as of the end of each fiscal quarter. The
Credit Facilities also restrict the Company's ability to pay dividends.
Borrowings will be subject to the satisfaction of customary conditions,
including the absence of any material adverse change in the Company's business
or financial condition. At September 27, 1997, the Company was in compliance
with these financial covenants and had $200.6 million in outstanding borrowings
under the Credit Facilities.
From February 1993 through the Split-Off, the Company had an agreement with
Ingram Industries whereby the Company sold all of its domestic trade accounts
receivable to Ingram Industries on an ongoing basis. Ingram Industries
transferred certain trade accounts receivable from the Company and other Ingram
Industries affiliates to a trust which sold certificates representing undivided
interests in the total pool of trade receivables without recourse. As of
November 1, 1996, Ingram Industries had sold $160 million of fixed rate medium
term certificates and established a commercial paper program, supported by a
variable rate certificate. The arrangement with the trust extends to December
31, 1999, renewable biannually under an evergreen provision up to a maximum term
of 20 years. In connection with the Split-Off, in partial satisfaction of
amounts due to Ingram Industries, the Ingram Industries accounts receivable
securitization program was assumed by the Company, which is now the sole seller
of receivables. Under the amended program, certain of the Company's domestic
receivables are transferred to the trust. The Company believes the amended
program contains sufficient trade accounts receivable to support the outstanding
fixed rate medium term certificates as well as an unspecified amount under the
variable rate certificate which supports the commercial paper program. At
September 27, 1997, the amount of commercial paper outstanding totaled $150.0
million. Assumption of the securitization program resulted in a $160 million
reduction of
14
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS CONTINUED
trade accounts receivable and long-term debt in the Company's consolidated
balance sheet at September 27, 1997 and December 28, 1996.
The Company announced on October 15, 1997 that it has signed a definitive
agreement with Empresas Quintec S.A. to acquire the leading Chilean computer
products distributor, Computacion Tecnica, S.A. and its affiliated companies,
including Systems & Solutions Informatica Ltda., based in Sao Paulo, Brazil;
Computek Enterprises (U.S.A.) Inc., based in Miami, Florida; and Computacion
Tecnica Peruana S.A. located in Lima, Peru (collectively "Computek"). The
acquisition is expected to be completed in the fourth quarter of 1997. See
"-- Part II, Item 5. Other Information."
The Company announced on November 10, 1997 that it has entered into an
agreement to acquire a minority equity ownership position in Electronic
Resources Ltd. ("ERL"), an electronic components distributor based in Singapore
and operating in ten countries within Asia. Under the terms of the agreement,
the Company will purchase, from two individuals, 21 percent of ERL's outstanding
shares with an option to acquire an additional 8.4 percent of the shares
currently outstanding through April 30, 1999. In addition, the Company will
purchase, from the two individuals, 19.1 percent of an outstanding class of
warrants to acquire shares of ERL. The Company's existing Asian operations in
Singapore and Malaysia will be transferred to ERL in conjunction with the share
purchase. The sale of the existing Asian operations to ERL, representation on
ERL's board of directors and two services agreements between the Company and ERL
are subject to the approval of ERL's shareholders at an Extraordinary General
Meeting expected to be held in December 1997. Shares of ERL are traded on the
Stock Exchange of Singapore under the symbol "ER". See "-- Part II, Item 5.
Other Information."
The Company believes that its existing cash and credit facilities are
adequate to pay the purchase price for Computek and ERL and discharge its other
obligations under the agreements.
COMMENTS ON FORWARD-LOOKING INFORMATION
In connection with the "safe-harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company, in its Form 10-K for the year ended
December 28, 1996, outlined cautionary statements identifying important factors
that could cause the Company's actual results to differ materially from those
projected in forward-looking statements made by, or on behalf of, the Company.
Such forward-looking statements, as made within this Form 10-Q, should be
considered in conjunction with the information included in the Company's Annual
Report on Form 10-K for the year ended December 28, 1996, including Exhibit
99.01 attached thereto.
NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("FAS 128")
which will become effective in the fourth quarter of 1997. FAS 128 replaces the
presentation of earnings per share reflected on the Statement of Income with a
dual presentation of Basic Earnings per Share ("Basic EPS") and Diluted Earnings
per Share ("Diluted EPS"). FAS 128 does not permit early application; however,
it requires, when implemented in the fourth quarter of 1997, restatement of
previously reported earnings per share for each income statement presented. The
Company does not expect the adoption of FAS 128 to have a material impact on its
reported financial condition or results of operations. However, pro forma
disclosure of earnings per share as computed under FAS 128 is presented in the
notes to consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS
130") which will become effective in fiscal 1998. The Company does not expect
the adoption of FAS 130 to have a material impact on its reported financial
condition or results of operations.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("FAS 131") which will become effective in
fiscal 1998. FAS 131 establishes standards for the way publicly-held companies
report information about operating segments as well as disclosures about
products and services, geographic areas and major customers.
15
<PAGE> 16
However, the Company does not expect the adoption of FAS 131 to have a
material impact on its reported consolidated financial condition or results of
operations.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a
party or to which any of its property is subject.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Between June 29, 1997 and September 27, 1997, the Company issued 21,547
shares of Class A Common Stock upon exercise of outstanding Rollover Stock
Options. The shares of Class A Common Stock were issued at prices ranging from
$1.54 to $2.85. All such shares of Class A Common Stock were exempt from
registration pursuant to Rule 701 under the Securities Act of 1933, because the
Rollover Stock Options were originally granted by Ingram Industries prior to the
Split-Off.
ITEM 5. OTHER INFORMATION
The Company announced on October 15, 1997 that it has signed a definitive
agreement with Empresas Quintec S.A. to acquire the leading Chilean computer
products distributor, Computacion Tecnica, S.A. ("Computek") and its affiliated
companies. Through this acquisition, the Company will gain five distribution
centers - two in Brazil, one in Chile, one in Peru, and one in Miami - which
will allow the Company to expand its Latin American presence in these strategic
markets. On November 10, 1997, the Company announced that it has entered into an
agreement to acquire a minority equity ownership position in Electronic
Resources Ltd. ("ERL"), an electronic components distributor based in Singapore
and operating in ten countries within Asia. See "-- Part I, Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations." As discussed in Exhibit 99.01 to the Company's 1996 Annual Report
on Form 10-K, acquisitions such as Computek and ERL involve a number of risks
and difficulties for the Company. The inability to successfully integrate
Computek's operations into the Company's existing operations or a diminution in
value of the ERL investment could have a material adverse effect on the
Company's financial condition and results of operations.
A Registration Statement on Form S-1 (the "Form S-1") filed by the Company
with the Securities and Exchange Commission covering 3,383,369 shares of Class A
Common Stock was declared effective on June 27, 1997. The Form S-1 relates to
the offer and sale of up to 1,378,369 shares of Class A Common Stock by the
Company at various prices to holders of stock options issued (upon exercise of
such stock options) under the Ingram Micro Inc. 1996 Rollover Stock Option Plan
who are current or former employees or directors of Ingram Industries, Ingram
Entertainment, or their respective subsidiaries. The Form S-1 also relates to
the offer and sale by the Ingram Thrift Plan, the Ingram Micro Thrift Plan and
the Ingram Entertainment Thrift Plan (collectively, the "Thrift Plans"), of a
total of 2,005,000 shares of Class A Common Stock of the Company (resulting from
the conversion of shares of Class B Common Stock of the Company held by the
Thrift Plans) in order to meet their liquidity needs. The Company kept the
Prospectus filed in connection with the Form S-1 available until July 30, 1997.
A Registration Statement on Form S-3 (the "Form S-3") was filed by the
Company with the Securities and Exchange Commission on November 4, 1997 covering
10,949,298 shares of Class A Common Stock. Certain of the shares registered on
the Form S-3 represent shares previously registered on Form S-1 but not sold.
Such shares were carried forward from the Form S-1. The Registration Statement
has not yet been declared effective. The Form S-3 relates to the offer and sale
of up to 2,485,944 shares of Class A Common Stock by the Company at various
prices to holders of stock options issued (upon exercise of such stock options)
under the Ingram Micro Inc. 1996 Rollover Stock Option Plan who are current or
former employees or directors of Ingram Industries, Ingram Entertainment, or
their respective subsidiaries. The Form S-3 also relates to up to 250,000 shares
of Class A Common Stock which may be offered and sold by the Company to
immediate family members of certain participants in the Ingram Micro Inc.
Amended and Restated 1996 Equity Incentive Plan. In addition, the Form S-3 also
relates to the offer and sale by the Ingram Thrift Plan, the Ingram
16
<PAGE> 17
Micro Thrift Plan and the Ingram Entertainment Thrift Plan (collectively, the
"Thrift Plans"), of a total of 8,213,354 shares of Class A Common Stock of the
Company (resulting from the conversion of shares of Class B Common Stock of the
Company held by the Thrift Plans) in order to meet their liquidity needs.
As is the case with many computer systems, some of the Company's systems
use two digit data fields which recognize dates using the assumption that the
first two digits are "19" (i.e., the number 97 is recognized as the year 1997).
Therefore, the Company's date critical functions relating to the year 2000 and
beyond, such as sales, distribution, purchasing, inventory control, merchandise
planning and replenishment, facilities, and financial systems, may be severely
affected unless changes are made to these computer systems. The Company expects
to resolve these issues in a timely manner and is currently engaged in a review
of all existing computer systems in order to implement the required changes.
However, no assurance can be given that these issues can be resolved in a timely
manner or that the Company will not incur significant expense in resolving these
issues.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number Description
------ -----------
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the thirteen weeks ended
September 27, 1997.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INGRAM MICRO INC.
By: /s/ MICHAEL J. GRAINGER
---------------------------------
Name: Michael J. Grainger
Title: Executive Vice President and
Worldwide Chief Financial
Officer (Principal Financial
Officer and Principal
Accounting Officer)
November 10, 1997
18
<PAGE> 19
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS OF INGRAM MICRO INC. FOR THE
THIRTY-NINE WEEKS ENDED SEPTEMBER 27, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-29-1996
<PERIOD-END> SEP-27-1997
<EXCHANGE-RATE> 1
<CASH> 60,211
<SECURITIES> 0
<RECEIVABLES> 1,356,719
<ALLOWANCES> 52,243
<INVENTORY> 2,251,663
<CURRENT-ASSETS> 3,786,507
<PP&E> 305,724
<DEPRECIATION> 118,241
<TOTAL-ASSETS> 4,129,927
<CURRENT-LIABILITIES> 2,728,499
<BONDS> 0
0
0
<COMMON> 1,344
<OTHER-SE> 965,917
<TOTAL-LIABILITY-AND-EQUITY> 4,129,927
<SALES> 11,454,139
<TOTAL-REVENUES> 11,454,139
<CGS> 10,713,183
<TOTAL-COSTS> 11,210,506
<OTHER-EXPENSES> 10,326
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,348
<INCOME-PRETAX> 212,669
<INCOME-TAX> 87,101
<INCOME-CONTINUING> 124,637
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 124,637
<EPS-PRIMARY> 0.85
<EPS-DILUTED> 0.85
</TABLE>
