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FORM 10-K

SECURITIES AND EXCHANGE COMMISSION

FOR THE TRANSITION PERIOD FROM          TO         

COMMISSION FILE NUMBER: 1-12203

INGRAM MICRO INC.

1600 E. ST. ANDREW PLACE, SANTA ANA, CALIFORNIA 92705

(714) 566-1000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE

     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    [   ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

     Indicate by check mark if registrant is an accelerated filer (as defined in Exchange Act Rule 12b of the Act).     Yes    [X]     No    [   ]

     The aggregate market value of the voting stock held by non-affiliates of the registrant as of the last business day of the Registrant’s most recently completed second fiscal quarter, at June 28, 2002, was $1,520,306,741 based on the closing sale price on such date of $13.75 per share.

     The Registrant had 150,987,935 shares of Class A Common Stock, par value $.01 per share, outstanding at February 22, 2003.

     DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Annual Report to Shareowners for the fiscal year ended December 28, 2002 are incorporated by reference into Parts I and II of this Annual Report on Form 10-K. Portions of the Proxy Statement for the registrant’s Annual Meeting of Shareowners to be held May 7, 2003 are incorporated by reference into Part III of this Annual Report on Form 10-K.

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PART I

ITEM 1. BUSINESS

     In evaluating the business of Ingram Micro Inc. (“Ingram Micro” or “the Company”), readers should carefully consider the important factors discussed under Exhibit 99.01 hereto and under “—Safe Harbor for Forward-Looking Statements.”

Overview

     Ingram Micro, a Fortune 100 company, is the leading distributor of Information Technology (“IT”) products and services worldwide. We sell computer hardware, networking equipment, and software products to nearly 170,000 reseller customers in more than 100 countries. We also provide supply chain optimization services and demand generation services for our suppliers and reseller customers. As a distributor, we market our products and services primarily to resellers and suppliers who in turn market and sell directly to end-user customers.

     We offer our customers an aggregation of, and access to, a broad array of products and services by distributing and marketing hundreds of thousands of IT products worldwide from over 1,700 suppliers, including most of the computer industry’s leading hardware suppliers, networking equipment suppliers, and software publishers. Our broad product offering includes:

•		desktop and notebook personal computers (“PCs”), servers, and workstations;
•		personal digital assistants;
•		wireless devices;
•		mass storage devices;
•		CD-ROM, CD-RW, and DVD drives;
•		monitors;
•		printers;
•		scanners;
•		modems;
•		networking hubs, routers, and switches;
•		network interface cards;
•		components, such as microprocessors, and hard drives;
•		business application software;
•		entertainment software and video games;
•		consumer electronics;
•		computer supplies and accessories; and
•		services such as:

	-		configuration and assembly services,
	-		communication services/mobile wireless,
	-		broadband services,
	-		packaged services, and
	-		professional services (xSP).

     In conjunction with our distribution business, we provide various services to our suppliers and customers, including call center support, pre- and post-technical support, credit and collection services, financial services, and marketing services.

     We also provide supply chain management services such as:

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•		end-to-end order management and fulfillment;
•		contract warehousing;
•		procurement of product packaging;
•		product pack out and cartonization;
•		reverse logistics;
•		transportation management;
•		customer care;
•		credit and collection management services;
•		retail merchandising;
•		retail launch and replenishment;
•		tailored financing programs;
•		demand generation programs for suppliers and resellers;
•		outsourced marketing services; and
•		business intelligence and market research.

     Although services represent one of the initiatives of our long-term strategy, they have contributed less than 10% of our revenues in the past and may not reach that level in the near term.

     We are focused on providing a broad range of products and services, quick and efficient order fulfillment, and consistent on-time and accurate delivery to our customers around the world. We believe that IMpulse, our on-line information system, provides a competitive advantage through real-time worldwide information access and processing capabilities. IMpulse is a single, standardized, real-time information system and operating environment, used across substantially all of our worldwide operations. This on-line information system, coupled with our exacting operating procedures in telesales, credit support, customer service, purchasing, technical support, and warehouse operations, enables us to provide our customers with superior service in an efficient and low-cost manner. In addition to traditional, world-class distribution services, we offer demand generating marketing programs, customer communities, and new product launch programs.

     Our earliest predecessor began business in 1979 as a California corporation named Micro D, Inc. This company and its parent, Ingram Micro Holdings Inc., or Holdings, grew through a series of acquisitions, mergers, and internal growth to encompass our current operations. On April 29, 1996, we were reincorporated in the state of Delaware. Holdings and the successor to Micro D, Inc. were merged into Ingram Micro Inc. in October 1996. We completed an initial public offering and were split-off, in a tax-free reorganization, from our former parent in November 1996.

The Industry

     The worldwide IT products and services distribution industry generally consists of:

•		manufacturers and software publishers, which we collectively call suppliers or vendors, and which sell directly to distributors, resellers, and end-users;
•		distributors, which sell to resellers; and
•		resellers, which sell directly to end-users and, in certain cases, to other resellers.

     A variety of reseller categories exist, including value-added resellers (“VARs”), corporate resellers, systems integrators, original equipment manufacturers (“OEMs”), direct marketers, independent dealers,

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reseller purchasing associations, PC assemblers, and computer retailers. Many of these resellers are heavily dependent on distribution partners with the necessary systems, capital, inventory availability, and distribution facilities in place to provide fulfillment and other services. Different types of resellers are defined and distinguished by the end-user market they serve, such as large corporate accounts, small- to medium-sized businesses (“SMBs”), or home users, and by the level of value they add to the basic products they sell. Distributors generally sell to resellers and purchase a wide range of products in bulk directly from suppliers. Characteristics of the local reseller and supplier environment, as well as other factors specific to a particular country or region, have shaped the evolution of distribution models in different countries.

     According to a December 2002 IDC report, total worldwide IT spending on hardware, software, and services was estimated at approximately $871 billion for calendar year 2002. Despite the continuing economic downturn that has impacted overall demand for IT products and services in 2001 and 2002, distribution continues to perform a significant role in delivering IT products to market in a low-cost manner. Although some suppliers are pursuing direct-sales strategies in certain product or customer categories, other suppliers are pursuing strategies to outsource functions such as logistics, order management, and technical support to supply chain partners as they look to minimize costs and investments in warehouse assets and focus on their core competencies in manufacturing, product development, and/or marketing. Another reason suppliers outsource these functions is to enhance their responsiveness in the supply chain, reduce their inventory carrying costs, and better respond to customer demand. Two-tier distributors are evolving from their traditional distribution roles by offering a combination of fee-based supply chain management services and product-oriented services to meet these demands.

     A number of resellers also depend on distributors for many of their product, marketing, credit, and technical support needs. This is due to increased product complexity, the large number of available IT products, generally shorter product life cycles, and customers’ desire for resellers to integrate systems consisting of components from multiple suppliers. Resellers also continue to rely on distributors for inventory management services, including direct shipment to end-users and, in some cases, allowing their end-users to access a distributor’s inventory directly. These services allow resellers to reduce their inventory, staffing levels and warehouse requirements, thereby lowering their financial needs and reducing their costs.

     The technology distribution industry continues to undergo significant change as a result of several factors. The slowing global IT market has caused suppliers to reexamine their business models as seen in the merger of Hewlett-Packard and Compaq Computer Corporation in May 2002. Manufacturer-direct sales initiatives, developed in an effort to duplicate the success of the direct-sales business model, have been adopted to varying degrees by some large suppliers. Although the manufacturer-direct model may remove distributors from their traditional role, we believe that this direct-sales model presents new partnership opportunities, such as providing logistics and fulfillment services and third-party products to suppliers and reseller customers. We also believe that suppliers continue to embrace the two-tier distribution channel as a strategic means to deliver products to market in a relatively low-cost manner.

     Consolidation has also occurred among two-tier distributors due to more restrictive terms and conditions from suppliers, reductions in the number of supplier-authorized distributors, a high level of price competition among distributors, and evolving supplier business models. These conditions have driven several weaker competitors from the market or led distribution players to merge with each other. As a result of this consolidation, the U.S. IT market is largely served by three major IT distributors, a number of other smaller IT distributors, and several large

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retailers. Markets outside the United States, which represent over half of the IT industry’s sales, are characterized by a more fragmented distribution channel; however, consolidation has also taken place in these markets.

     A number of emerging industry trends provide new opportunities and challenges for distributors of IT products and services. For example, the focus on driving efficiency in business models, and, in particular, in the supply chain, provides distributors with an additional opportunity to serve both suppliers and reseller customers by becoming providers of IT supply chain services. Furthermore, the growing presence and importance of fulfillment capabilities also provide distributors with new business opportunities as new categories of products, customers, and suppliers emerge. Data storage products, for example, enjoyed increasing demand with the growing use of the Internet, data warehousing, and e-mail, and the resulting need for faster dependable data access and richer content. Increasing demand for wireless products also presents strong growth opportunities for distributors that offer a combination of wireless products and services to customers.

Company Strengths

     We believe that the following strengths will enable us to further enhance our leadership position in the IT distribution industry:

	•		Leading Global Market Position. We are the largest IT distributor in the world, by net sales, and believe that we are the market share leader, by net sales, in North America, Latin America, Asia-Pacific, and in a number of countries in Europe. Our fiscal 2002 net sales were $22.5 billion, with net sales of $12.1 billion in North America, $7.2 billion in Europe, and $3.2 billion in other regions of the world. We believe that the current IT industry environment favors large distributors that have access to financing, are able to achieve economies of scale, have breadth of geographic coverage, and have the strongest supplier relationships. Our scale allows us to purchase products in large quantities and avail ourselves of special purchase opportunities from a broad range of suppliers, which enables us to take advantage of various discounts from our suppliers and provide competitive pricing for our reseller customers.
	•		Worldwide Market Presence. Our global market presence provides suppliers with access to a broad base of geographically dispersed resellers. We service these resellers with our extensive network of distribution centers and support offices, almost all of which are integrated by IMpulse, our global information transaction system. As of December 28, 2002, we had 49 distribution centers worldwide, sold our products and services to resellers in more than 100 countries, and had sales offices and/or Ingram Micro sales representatives in 33 countries. We offer our suppliers access to a global customer base of close to 170,000 resellers of all sizes and types. Our broad geographic coverage places us closer to the end-user, enabling us to provide faster delivery times, better customer service, local presence, and market intelligence. In addition, our global reach allows us to better diversify our business across different markets, which reduces our exposure to individual market downturns. We continuously evaluate and modify our geographic footprint to focus on markets that we believe provide the best opportunity for profitable growth. In 2002, this included scaling back operations in certain locations in Latin America and Europe while continuing to develop markets in Asia-Pacific.
	•		Broad Portfolio of Products. Based on a review of our major competitors’ publicly available data, we believe that we offer the largest number of products in the IT industry. We distribute and market hundreds of thousands of IT products worldwide from over 1,700 suppliers, enabling us to offer a wide variety of products, satisfy customer requirements for product availability, and meet end-

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			user demand for multi-supplier and multi-product IT configurations. Our reseller customers derive purchasing efficiencies and reduce their investment in inventory while simultaneously enhancing end-user service levels. They accomplish this by establishing a supply relationship with us that meets their product needs through a single point of contact, rather than making many purchases from multiple suppliers directly. We also believe that we provide suppliers with access to a broad customer base that few suppliers can reach directly in a more cost-effective manner. Moreover, suppliers that sell their products directly to end-users often use us as a secondary source to fulfill orders from customers that require multi-supplier product configurations. We continuously monitor customer demand and strive to focus our product inventory investment on products that provide opportunities for profitable growth.
	•		Speed of Execution and Consistency of Service. We are focused on providing quick and efficient order fulfillment and consistent on-time and accurate delivery to our customers around the world. We seek to maintain sufficient quantities of product inventories to achieve optimum order fill rates while optimizing our investment in working capital. Our advanced control systems and processes enable us to provide same-day shipping for any order in the United States, Canada, and certain locations in Europe received by 5:00 p.m., with highly accurate shipping performance. We consistently measure and monitor our performance based on metrics such as our price and consistency of service, responsiveness and product knowledge, accuracy and on-time delivery, timeliness and warehouse proximity, fulfillment and product availability, and credit availability.
			Our commitment to superior service has been widely recognized throughout the IT industry. For example, we were ranked first in the 2002 VARBusiness listing of the top 25 U.S. distributors for the fifth consecutive year. We have also been recognized as the top U.S. distributor by several leading manufacturers including Symantec, Cisco Systems, and Citrix Systems, Inc. Ingram Micro Europe was named Distributor of the Year by Computer Associates International Inc. and Ingram Micro Asia-Pacific was recognized by Computer Associates with an Innovator of the Year award. Also, at IBM’s PartnerWorld conference in February 2003, we earned six of the seven Distributor of the Year awards. For 2002, we captured the top market share position for IBM’s Personal Computing Division and eServer xSeries Division in the Americas region. Additionally, our operations in the United States and Mexico have received ISO 9001 certification for customer service, returns, consolidation, operations, configuration, and distribution centers. Furthermore, we have received ISO 9002 certification in the following countries: Denmark, France, India, Italy, Mexico, Spain, Sweden, and the United Kingdom.
	•		Intelligent Business Systems. Our information systems allow us to act as a source for business information, as well as product and service solutions, for suppliers, resellers, and end-users. We believe that we are the only full-line distributor of IT products and services in the world with a single centralized global transaction system. We believe that IMpulse provides a competitive advantage through real-time, worldwide information access and processing capabilities. IMpulse is used across substantially all of our worldwide operations and is customized to suit local market requirements. Access to IMpulse gives resellers, and in some cases their customers, real-time access to our product inventory. By providing improved visibility to all participants in the supply chain, we allow inventory levels throughout the channel to more closely reflect end-user demand.
			We believe that in order to remain competitive, it is necessary to continuously upgrade our information systems. In 2002, we made several investments in software technology that will enable us to provide greater integration between our web-based and legacy systems, access and exploit our enterprise data to a greater degree, and more readily exchange information with our business partners. In 2003, we expect to launch several new applications that will enhance our flexibility and profitability by streamlining operations

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			and offering new services to customers. In addition, as part of our profit enhancement program, we have outsourced certain components of our IT infrastructure to Affiliated Computer Services, Inc. (“ACS”). The transition of our outsourced functions is expected to be completed during the third quarter of 2003. After this transition, we believe these actions will reduce operating expenses while improving service levels and freeing management to focus on the deployment of new business applications. The contract with ACS covers certain IT infrastructure functions located in North America, such as mainframe, major server, desktop and enterprise storage operations; wide area and local area network support and engineering; systems management services; internal associate help desk services; and worldwide voice/PBX. We will retain IT strategy and architecture for worldwide application development, quality assurance, and customer and partner programs.
			We have also developed other information systems for warehouse operations, back-office efficiency, data warehouse, and e-commerce initiatives that are integrated into IMpulse, providing a single information supply chain. We believe that our on-line information systems, coupled with our exacting operating procedures in telesales, credit support, customer service, purchasing, technical support, and warehouse operations, enable us to provide our customers with superior service in an efficient and low-cost manner.
	•		Strong Working Capital Management. We have consistently decreased working capital required to operate our business. In particular, we focus on managing our investment in our accounts receivable and inventory. We evaluate accounts receivable based on a days sales outstanding formula. Our days sales outstanding are calculated by dividing accounts receivable at the end of each quarter, which are adjusted to include amounts financed off-balance sheet under our accounts receivable financing programs, by our average daily net sales during the quarter. The inclusion of our off-balance sheet financing amounts related to our accounts receivable financing programs differs slightly from generally accepted accounting principles (“GAAP”); however, management believes this calculation better reflects the level of outstanding receivables with customers regardless of the form of financing we use for our operations. Inventory is measured by inventory turns, which are calculated by dividing our annualized costs of sales during the preceding quarter by our inventory at the end of that quarter.
			At December 30, 2000, our GAAP days’ sales outstanding were 27 days compared to 36 days at December 28, 2002. The primary reason for this change was the reduction in the level of our off-balance sheet debt associated with our accounts receivable financing programs. During this difficult economic period, we successfully managed our days’ sales outstanding, including the amounts supporting our off-balance sheet debt, to a consistent range near 37 days and increased our inventory turns from 10 to 14. In an environment of lower demand for IT products, as is currently the case, our ability to reduce our working capital requirements has enabled us to reduce our invested capital and debt. We reduced our on-balance sheet debt by $180 million and reduced our off-balance sheet financing associated with our accounts receivable financing programs by approximately $835 million during the same period. As a result, we believe we are well positioned to meet our anticipated liquidity needs.

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Business Strategy

     We are pursuing a number of strategies to position our company as the IT distribution industry’s “leader by every measurement”, including the following:

•		Reduce Costs and Enhance Profitability through Continuous Business Process Improvements. We constantly strive to reduce costs in our business and embrace a culture of business process improvement led by the adoption of the Six Sigma methodology, which uses data and statistical analysis to measure performance. We employ a disciplined approach when we review our global operations and develop initiatives designed to streamline business processes and further increase our operating efficiency. Most recently, in September 2002, we announced a comprehensive profit enhancement program that we expect will substantially increase our operating profit while delivering greater value and performance for customers and suppliers through improved processes and systems. This program is the result of an extensive review of our operations, primarily in North America but also in our international businesses, to identify opportunities to reduce costs and expand gross margin. Some of the program’s key components include:
		•		Enhanced vendor and customer programs. Employment of Six Sigma methodology will enable the success of many of the initiatives throughout the profit enhancement program, allowing us to simultaneously reduce costs while improving customer service levels. For example, in North America we have aligned our sales, marketing, and product management functions to deliver total technology solutions — both products and services — to customers and suppliers. By breaking down the barriers that separated these functions, we have been able to simplify contacts for customers and suppliers, streamline purchasing and pricing decisions, develop more customized fee-based services, and generate greater demand. Also, in Europe, successful completion of Six Sigma projects has reduced lost shipments and returns of damaged goods, improved order processing cycle time and matching of invoices, and simplified and standardized internal business processes within certain geographies. These business process improvements result in enhanced service levels for customers and suppliers with a more efficient use of resources.
		•		Optimization of facilities and systems. As we continue to evolve our traditional distribution business model to also be a provider of integrated technology solutions, the requirements of our infrastructure are changing. The distribution network and information systems are being refined to accommodate this dynamic environment. In North America, we are transferring our configuration and returns services from dedicated facilities to multi-functional distribution centers, while sub-letting excess warehouse and office space. In Europe, we have closed our Frameworks assembly facility and have expanded the service areas of some distribution centers to include multiple countries. By maximizing economies of scale and leveraging our best-in-class logistics services, we expect to be better able to address the changing needs of customers and suppliers, providing a broad array of distribution and supply chain management strategies.
		•		Outsourcing of IT infrastructure management services. Additionally, we have identified opportunities to significantly reduce the cost of our information technology systems by outsourcing our IT infrastructure to a third-party provider, ACS, which we believe will generate significant savings without sacrificing service to our customers and associates. We will retain IT strategy and application development and will transition to ACS certain infrastructure functions located in North America, such as mainframe computing, major

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			network and desktop operations, help desk services, PBX and systems management. We believe this action allows our IT infrastructure capacity costs and services to be more variable than in the past.
	•		Geographic consolidations and administrative restructuring. Through the combination of the U.S. and Canadian regions early in 2002, we have gained efficiencies by centralizing certain administrative processes that serve a single North American region, while maintaining local customer contact in each country. This was demonstrated in the formation of regional credit and product management departments to serve both the United States and Canada. The European region has also consolidated operations in the Nordic countries, as well as downsized operations in Portugal and Austria. In other regions, service for Argentina and Peru was transferred to the Latin American export office in Miami, our operations in Chile were downsized, and the Australian distribution and call center operations have been centralized in Sydney. Furthermore, we have applied this consolidation trend to our administrative services and products, such as travel, office supplies, temporary labor, and marketing promotions. For example, we are concentrating our business in North America with a select group of preferred suppliers for these administrative services and products to maximize our purchasing power, enhance the services we receive, and reduce costs. We expect to pursue other consolidation opportunities around the world as part of this ongoing effort.
		These actions are just a sample of the dozens of initiatives that have been folded into our operations, evidencing our commitment to our profit enhancement program and to creating a best-in-class organization.

•

Pursue Growth Opportunities by Increasing Our Market Share in Strategic Geographies, Emerging Product and Service Markets, and Expanding and Profitable Product and Service Segments. We intend to increase our market share through profitable growth opportunities in targeted markets and leverage our global leadership in world-class logistics, market reach, and electronic commerce in the following areas:

	•		Focus on growing geographic markets. We intend to develop our business in growing geographic markets such as Asia-Pacific. The Asia-Pacific market is the fastest growing technology market in the world and industry experts predict IT spending in this region will grow at double-digit rates. Our Asia-Pacific region generated positive operating income in the fourth quarter of 2002 and we believe it is now poised for growth. We have built an efficient infrastructure to support our long-term strategy of leadership in this region and we are committed to achieve profitable growth.
	•		Focus on emerging products and service markets. We aggressively target emerging IT product and service segments in their developmental stages and establish product expertise. This allows us to keep our broad product line current with emerging trends. For example, in response to rising channel demand for complete wireless solutions, we partnered with Sprint and T-Mobile in 2002 to enable solution providers to deliver complete wireless solutions to customers across the United States. We have also teamed with Sprint and Cisco Systems in the United States to offer a cost-effective and flexible third-party broadband solution that includes a router and high-speed Internet access for SMB customers. We are offering new solutions to our customers through high-end storage, computer telephony integration (“CTI”), networking products, and xSPs such as managed or remote accessed applications. Our

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			Converging Technologies Group manages and develops our CTI solution offerings, which have been made possible by the convergence of voice and data applications. Examples of converging products include PC-based phone systems, unified messaging applications, and a variety of video conferencing and voice-over-Internet protocol products.
	•		Focus on expanding profitable product and service segments. In 2002, we launched a European games division in Germany and expanded this initiative in France, and launched a separate initiative in Mexico. We believe we are the first broadline IT distributor in Europe to gain distribution rights from leading manufacturers in the video gaming industry. We are also making adjustments to our portfolio of products and services, targeting those areas that we believe offer the most profit potential. In North America, we have established a category management team that works closely with sales and product management to continually establish an ideal mix of products and services. By streamlining our catalog to include fewer but more desirable products, we can better control inventory, concentrate on higher-margin opportunities, and become more focused in demand-generation activities. Also, by cultivating new ideas and rejuvenating existing technologies, we believe we can develop our marketing revenues, identify and develop supplier relationships that will differentiate us from our competitors, and introduce new products and services to our customers.

•

Maintain High Focus on Small- and Medium-Sized Business Market. We understand our SMB reseller customers’ needs to increase profitability and deliver superior service to a highly fragmented SMB end-user market. We intend to continue our high focus on SMB resellers by delivering programs targeted towards their needs, which we believe will create additional revenue and profit opportunities for us by capitalizing on:

	•		our compelling value proposition to resellers and suppliers;
	•		the continued growth of the SMB customer segment, which is the largest segment of the IT market in terms of revenue;
	•		generally higher gross margins for distributors in the SMB segment;
	•		our distribution model, which we believe is better able to address the needs of the SMB customer than a vendor-direct sales model; and
	•		strong growth in the government and education (“GovEd”) market sector.
		We continue to serve our SMB resellers through our VentureTech Network™ (“VTN”) and SMB Alliance programs. VTN is Ingram Micro’s premier solution provider organization with more than 300 members across the United States. This program offers SMB resellers growth through partnering, training and education, financial services, marketing, and access to business resource partners. Our VTN reseller members provide turn-key solutions that are researched, configured, tested, installed and proactively supported to meet the demanding requirements of customers’ businesses. SMB Alliance promotes partnerships for SMB solution providers and offers resellers an array of benefits ranging from attractive financing packages and enhanced technical support to expanded networking opportunities and dedicated sales support. In June 2002, we enhanced our long-standing government and education program, Partnership America, and renamed the program Ingram Micro GovEd Alliance. GovEd Alliance is structured as a menu-driven offering, including value-added services of “Flexible

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		Financing Programs”, “Discounted Business Resources”, and “Go-To-Market Services”, which provide the opportunity for expense reduction, bidding competitiveness, and increased customer loyalty.

•		Continue to Provide Outstanding Execution for Reseller Customers. Our commitment to superior service has been widely recognized throughout the IT distribution industry. We have received a number of awards from suppliers, customers, and other third-parties which reflect our goal to lead our industry by every measurement. Most recently, Fortune Magazine ranked us No. 1 in the wholesalers (electronics and office equipment) industry on its list of America’s Most Admired Companies for 2002. Fortune’s annual poll of 10,000 executives, directors, and securities analysts selected us as best-in-class based on our continued innovation, management leadership, employee talent, financial soundness, use of corporate assets, long-term investment value, social responsibility and quality of products and services.
		We continually refine and integrate our systems and business processes to provide outstanding execution and service to resellers. We believe our e-commerce tools enable resellers to do business with their end-user customers quickly, easily, and at a lower cost. For example, we continually expand features and functions to increase usage and ordering from our 31 www.ingrammicro.com country websites. Furthermore, in the area of process improvement, we work continuously to advance our formal systems for evaluating and tracking key performance metrics of our operations such as responsiveness to customers, processing accuracy, and order fill rate. We use these metrics as well as customer satisfaction surveys to measure improvements on all key elements believed to be important to the customer.

•		Deliver World-Class Outsourcing and Value-Added Programs to Suppliers and Resellers. As resellers and suppliers seek ways to generate demand, reduce costs, improve efficiencies, and outsource non-core business activities, we remain committed to providing low-cost distribution capabilities as well as world-class value-added business services. Our outsourcing services and value-added programs are intended to link resellers, end-users, and suppliers through us as a seamless one-stop provider of IT products and related services, while meeting and exceeding requirements of our suppliers and resellers to outsource their non-core business activities and thereby lower their operating costs. For example, we provide turn-key logistics solutions for major hardware and software suppliers, as well as complete inventory and fulfillment solutions for major e-commerce clients in the IT industry. Likewise, we provide cost-effective services such as sales/account management, credit, technical support, education, marketing, logistics management and other business solutions. We offer these services for a fee, independent from our IT distribution business. This model leverages our existing capital investment in infrastructure and enables us to support suppliers’ go-to-market strategies and provide supply chain management services in both direct and indirect channels. Although services represent one of the initiatives of our long-term strategy, they have contributed less than 10% of our revenues in the past and may not reach that level in the near term.
		We also offer marketing, training, and other programs to our customers, particularly VARs, to assist them in introducing emerging technology solutions as well as specific virtual solutions to their customers. In addition, for complex technology solutions, we provide a specialty sales force and a highly trained technical support staff as a pre- and post- sales resource to our customers. We believe this strategy enables us to effectively facilitate the introduction of new technology solutions, developed by our supplier partners, to our reseller customers while simultaneously allowing us to establish a preferred position in servicing emerging suppliers.

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Customers

     We continue to be well positioned in providing world-class fulfillment and value-added services to VARs, corporate resellers, direct marketers, retailers, and Internet-based resellers. Our sales organization has resources dedicated to the recruitment, development, and sales support of these marketplaces. Our goal is to seamlessly manage the flow of goods and services from our supplier partners through the reseller to the end-user, providing specific solutions to a diverse customer base. We sell to nearly 170,000 reseller customers in more than 100 countries worldwide. No single customer accounted for more than 4% of our net sales in 2002, 2001, or 2000.

     We conduct business with most of the leading resellers of IT products and services around the world including, in the United States, Amazon.com, Buy.com, CDW, Circuit City, Comark, Compucom, CompUSA, Insight, Micro Warehouse, OfficeMax, PC Connection, SARCOM, and Staples. Our reseller customers outside the United States include Bechtle, Brasoftware Informática, Econocom, Mainbit, Media Markt, Micro Warehouse, Open Systems Solutions and Systemax. In some cases, we have resale contracts with our reseller customers that are terminable at will after a short notice period and have no minimum purchase requirements. Our business is not substantially dependent on any of these contracts.

     We also have specific agreements in place with certain manufacturers and resellers to provide supply chain management services such as order management, logistics management, configuration management, and procurement management services. These customers include ABM Systems, Amazon.com, CompUSA, Intuit, Iomega, SARCOM, and Targus Group in North America and Dixons Store Group, Hewlett-Packard, NCR and Wstore in Europe. These agreements generally have longer terms than our resale agreements, but, in most cases, can be terminated on relatively short notice by either party without cause. The service offerings we provide to our customers are discussed further below under — “Services.”

Sales and Marketing

     We employ sales representatives worldwide who assist resellers with product specifications, system configuration, new product/service introductions, pricing, and availability. Our sales organization generally focuses on resellers in the following market sectors:

	•		value-added resellers, or VARs;
	•		corporate resellers;
	•		direct and consumer marketers; and
	•		government and education resellers.

     Our product management and marketing groups also promote our sales growth, create demand for our suppliers’ products and services, enable the launch of new products, and facilitate customer contact. For example, our marketing programs are tailored to meet specific supplier and reseller customer needs. These needs are met through a wide offering of services by our in-house marketing organization, including advertising, direct mail campaigns, market research, on-line marketing, retail programs, sales promotions, training, and assistance with trade shows and other events.

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     We have launched specialized business units in certain geographic and product markets to serve customers with particular needs. As we enter these specialized markets, we continue to leverage our global leadership in world-class logistics, market reach, and electronic commerce tools. For example, we expanded our business into the video gaming market in Canada, France, Germany, and Mexico. We believe we are the first broadline IT distributor in Europe to gain distribution rights from leading manufacturers in the video gaming industry. Another example of our targeted market focus is our formation of two strategic business units in Europe that focus on specific market and customer segments. Ingram Micro Europe Components division (“Components”) and Ingram Micro Networking Services™ division (“Networking Services”) have a pan-European scope and service reseller customers throughout Europe in all the countries where we have a presence. The Components business unit offers a one-stop shopping opportunity to small- and medium-sized resellers, PC assemblers, and OEMs and markets a wide range of components that these customers need to assemble PC systems. The Networking Services business unit specializes in high-end networking and communication products, in addition to services such as product consulting, project management, sales support and training, and technical and customer support. In 2002, we continued to invest in these business units, enhancing our IT infrastructure to enable every European operation to directly leverage the inventory and services available from the central European facilities in Germany and The Netherlands.

     Selling Arrangements. We offer various credit terms to qualifying customers as well as prepay, credit card, and cash on delivery terms. We also offer “end-user” financing based upon the end-user’s credit worthiness and collect outstanding accounts receivable on behalf of the reseller in certain markets. We closely monitor reseller customers’ credit worthiness through our IMpulse information system, which contains detailed information on each customer’s payment history as well as other relevant information. In addition, we participate in a U.S. credit association whose members exchange customer credit rating information. In most markets, we use various levels of credit insurance to allow sales expansion and control credit risks. We establish reserves for estimated credit losses in the normal course of business. If our receivables experience a substantial deterioration in their collectibility or if we cannot obtain credit insurance at reasonable rates, our financial condition and results of operations may be adversely impacted. Under specific conditions, we permit our customers to return or exchange products. At the time of sale, we establish a reserve for estimated sales returns.

     We have sold, and may continue to sell, but on a more limited basis, to certain customers where the transactions are financed by a third-party floor plan financing company. These transactions generally involve higher sales on limited lines of product. The expenses charged by these financing companies will either be subsidized by our suppliers, paid by us or billed to our reseller. We receive payment from these financing institutions within three to 30 days from the date of sale, depending on the specific arrangement.

Products and Suppliers

     We distribute and market hundreds of thousands of IT products worldwide from the industry’s premier computer hardware suppliers, networking equipment suppliers, and software publishers worldwide. Product assortments vary by market, and the suppliers’ relative contribution to our sales also varies from country to country. On a worldwide basis, our revenues by product category have remained relatively stable even among fluctuating markets. Over the last several years, our product category revenues have generally been within the following ranges, although over recent periods, our percentages for software and systems have been in the higher and lower end of these ranges, respectively:

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	•		Peripherals: 40-45%
	•		Systems: 25-30%
	•		Software: 15-20%
	•		Networking: 10-15%

     Our worldwide suppliers include leading computer hardware suppliers, networking equipment suppliers, and software publishers such as 3Com, Adobe, Acer, Apple Computer, APC, Cisco Systems, Computer Associates, Epson, Hewlett-Packard, IBM, Iomega, InFocus, Intel, Lexmark, Microsoft, NEC/Mitsubishi Electronics, Novell, Palm, Phillips, Maxtor, Seagate, Sony, Symantec, Tektronix, Toshiba, Veritas, Viewsonic, Western Digital and Xerox.

     Our suppliers generally warrant the products we distribute and allow returns of defective products, including those returned to us by our customers. We do not independently warrant the products we distribute; however, we do warrant our services and the products that we build to order from components purchased from other sources. Provision for estimated warranty costs is recorded at the time of sale and periodically adjusted to reflect actual experience. Historically, warranty expense has not been material.

     We have written distribution agreements with many of our suppliers; however, these agreements usually provide for nonexclusive distribution rights and often include territorial restrictions that limit the countries in which we can distribute the products. The agreements are also generally short term, subject to periodic renewal, and often contain provisions permitting termination by either party without cause upon relatively short notice. A supplier who elects to terminate a distribution agreement generally will repurchase its products carried in the distributor’s inventory.

     Our business, like that of other distributors, is subject to the risk that the value of our inventory will be affected adversely by suppliers’ price reductions or by technological changes affecting the usefulness or desirability of the products comprising the inventory. It is the policy of many suppliers of IT products to offer distributors like us, who purchase directly from them, limited protection from the loss in value of inventory due to technological change or a supplier’s price reductions. Under many of these agreements, the distributor is restricted to a designated period of time in which products may be returned for credit or exchanged for other products or during which price protection credits may be claimed. We take various actions, including monitoring our inventory levels and controlling the timing of purchases, to maximize our protection under supplier programs and reduce our inventory risk. However, no assurance can be given that current protective terms and conditions will continue or that they will adequately protect us against declines in inventory value, or that they will not be revised in such a manner as to adversely impact our ability to obtain price protection. In addition, suppliers may become insolvent and unable to fulfill their protection obligations to us. We are subject to the risk that our inventory values may decline and protective terms under supplier agreements may not adequately cover the decline in values.

Services

     We offer end-to-end supply chain services to suppliers, Internet-based resellers, brick-and-mortar retailers selling on-line, and large resellers. Some of our supply chain management customers include ABM Systems, Amazon.com, CompUSA, Intuit, Iomega, SARCOM, and Targus Group in North America and Dixons Store Group, Hewlett-Packard, NCR and WStore in Europe. Through Ingram Micro Logistics we provide end-to-end order management and fulfillment, contract manufacturing, warehouse services, product procurement, product pack out and cartonization, reverse logistics, transportation management, customer care, tailored financing programs, marketing services, credit and collection management services, and other outsourcing services.

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     To complement our core competencies, increase customer satisfaction, and expand these outsourcing opportunities by providing “best-in-class” solutions, we have entered into various strategic alliances in areas such as e-commerce, telemarketing, transportation, and marketing services. By leveraging our core competencies to offer these services, we enable our clients to reduce their fixed investments while at the same time accessing our latest technology and world-class customer service metrics. Our agreements with these customers are generally for a number of years, although either party usually may terminate the agreement after a relatively short notice period.

     We also offer regional and nationwide services in North America through our Ingram Micro Service Network (“IMSN”) which partners with over 450 reseller members. IMSN enables VARs to increase their end-user customer satisfaction and loyalty by providing a fully managed nationwide technical support solution with our industry-leading expertise. This service is provided by a community of over 10,000 certified technicians in over 450 locations throughout the U.S., Canada, and Puerto Rico. Our partners work together to provide world-class IT business solutions and support to customers including application services; consulting; hardware and software support; installation, moves, adds, and changes; migration services; Local-Area Network and Wide-Area Network services; network design, integration and implementation; and outsourcing services.

     Additionally, we offer channel assembly (bringing together individual OEM components into a manufacturer-authorized computer) and reconfiguration services (opening brand named finished product and upgrading it with features such as memory, components, accessories, and third-party software) within several regions in which we operate.

     Although services represent one of the initiatives of our long-term strategy, they have contributed less than 10% of our revenues in the past and may not reach that level in the near term.

Information Systems and Related Tools

     As part of our ongoing profit enhancement program, we announced plans in 2002 to appoint a third-party service provider, ACS, to manage our IT infrastructure functions. This initiative is intended to lower our ongoing IT operating expenses and reduce IT-related investments. We included the anticipated savings generated by this action in the expected operating income improvements described in our September 18, 2002 press release announcing our profit enhancement program. This initiative also allows us to take advantage of ACS’ economies of scale to achieve a lower cost structure for our business while allowing the flexibility to access the expertise needed to manage a variety of technology platforms. Additionally, this will enable our internal IT staff to focus on strategic business and technology initiatives and the IT connectivity requirements of our customers and supply partners. The contract with ACS covers mainframe, major server, desktop and enterprise storage operations; wide area and local area network support and engineering; systems management services; internal associate help desk services; and voice/PBX for our North America operations. We will retain responsibility for IT strategy and architecture, worldwide application development, quality assurance, and customer and partner programs internally.

     Our systems utilize a variety of platforms designed to provide the high level of scalability and performance required to manage our large and complex business operations. IMpulse is a single, proprietary, standardized, real-time information system and operating environment, used across substantially all of our worldwide operations. It has been customized as necessary for use in substantially all countries in which we operate and can handle multiple languages and currencies. We have designed IMpulse as a scalable system that can support increased

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transaction volume. IMpulse supports over 39,000 mainframe connections (terminals, printers, PCs, and radio frequency hand-held terminals) worldwide with an internal response time of less than one second.

     Worldwide, our centralized processing system supports more than 40 operational functions including customer management, inventory management, order management, warehouse management, and accounting. At the core of the IMpulse system is on-line, real-time distribution software to which considerable enhancements and modifications have been made to support our low-cost business model and its growth. We make extensive use of advanced telecommunications technologies with customer service enhancing features, such as Automatic Call Distribution to route customer calls to telesales representatives. The Telesales Department uses its Sales Wizard system for on-line, real-time tracking of all customer calls, for proactive outbound calling, and for status reports on sales statistics such as number of customer calls, customer call intentions, and total sales generated. IMpulse allows our telesales representatives to deliver real-time information on product pricing, inventory availability, and order status to reseller customers. The pricing functionality within IMpulse enables telesales representatives to make informed pricing decisions through access to specific product, order, and fulfillment related information for each sales opportunity. We have also invested in developing segmentation accounting tools, which enable various levels of sales and product management to analyze and report sales activity with increased visibility into our customer, supplier, and product mix to establish pricing guidelines.

     In the United States, we use CTI technology, which provides the telesales representatives with Automatic Number Identification capability and advanced telecommunications features such as on-screen call waiting, call routing, and automatic call return, thereby reducing the time required to process customer orders.

     In order for us to act as the agent of commerce among suppliers, resellers, and end-users, we continued to improve our website, www.ingrammicro.com, during 2002. Major enhancements included improving our search capability, adding on-line returns processing, and offering automated on-line volume software license ordering. The website communicates with IMpulse through a real-time connection that provides seamless interaction between the two environments. All of our web applications and many internal applications are built using Java to enhance their flexibility and reusability.

     We are enhancing and deploying other seamless electronic commerce tools that allow resellers to do business with us at lower cost and with greater ease. This includes our VentureTech Network website, www.venturetechnetwork.com, which enables communication between solutions integrators and SMB customers. Additionally, our GovEd Alliance program includes a website, www.ingrammicro.com/goved, which provides independent resellers with information about tools and resources to help them compete in the public sector market. These include finance options; GSA pass through program; newsletters; news, events, and discounts on third party-services; manufacturer product information; as well as other business development tools.

     To complement our telesales, customer service, and technical support capabilities, IMpulse offers a number of different electronic products and services through which customers can conduct business with us. These products and services include the Customer Automated Purchasing System, Electronic Data Interchange (“EDI”), several customized Extensible Markup Language (“XML”) based solutions, select RosettaNet Pips (Partner Interface Processes), InsideLine, the Bulletin Board Service, Internet-based Electronic Catalog, and TechNotes. The Electronic Catalog provides reseller customers with access to product pricing and availability, with the capability to search by product category, name, or manufacturer. TechNotes is a comprehensive multi-manufacturer database that customers can deploy on their own websites that contains timely and accurate product, sales, and technical information. TechNotes information is updated regularly by our supplier partners. In Europe, Asia-

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Pacific, and Canada, we also subscribe to CNet’s data sheets program, and in Latin America we create our own tech notes without the assistance of suppliers.

     In 2002, we completed the deployment of our next-generation operations and logistics system, IM-First, throughout our U.S. distribution network. This system allows our distribution centers to process orders 24 hours a day, seven days a week. IM-First leverages state-of-the-art distributed processing technology, including a wireless and paperless distribution management system. IM-First was further enhanced in 2002 to provide greater customization capabilities for our shipping documents. Customers can now tailor packing slips and other shipping documents to meet their own specifications.

     In addition, our warehouse operations use extensive bar-coding and radio frequency technology for receiving and shipping, and real-time links to carriers such as United Parcel Service and Federal Express for freight processing and shipment tracking. The customer service department uses the POWER System for on-line documentation and faster processing of customer product returns. To ensure that adequate inventory levels are maintained, our buyers depend on the Orion system to track inventory on a continual basis. These systems and many other features in IMpulse help to expedite the order processing cycle and reduce our operating costs as well as the costs for our reseller customers and suppliers.

     We employ various security measures and backup systems designed to protect against unauthorized access or use, or the failure of our information systems. Access to our information systems is controlled through the use of firewalls, passwords, virtual private networks (“VPNs”), and digital signatures. We have taken additional security measures with respect to sensitive information. Through ACS, we have disaster recovery services available from IBM Business Continuity & Recovery Services. Additionally, we have backup power sources at a number of major sites for emergency power. We have not experienced any material failures or downtime of IMpulse or any of our other information systems, but any systems failure or material downtime could prevent us from taking customer orders, printing product pick-lists and/or shipping product, and could also prevent our customers from accessing price and product availability information.

Global Operations

     We have local sales offices and/or Ingram Micro sales representatives in various worldwide markets including in North America (the United States and Canada), Europe (Austria, Belgium, Denmark, Finland, France, Germany, Hungary, Italy, The Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom), Latin America (Argentina, Brazil, Chile, Mexico, Peru, and Puerto Rico), and Asia-Pacific (Australia, Bangladesh, the People’s Republic of China [including Hong Kong], India, Malaysia, New Zealand, Pakistan, Singapore, Sri Lanka, and Thailand). We also have contracted sales agents, parties who act on our behalf or primary supplier relationships with independent third parties in Costa Rica, Dominican Republic, Ecuador, Guatemala, Indonesia, Panama, Trinidad/Tobago, and Vietnam. Additionally, we serve markets where we do not have an in-country presence through our various sales offices, including our general telesales operations in Santa Ana, California and Buffalo, New York and our export offices in Miami, Florida, Singapore, and certain countries in Europe.

     Our financial transactions from operations outside the United States are primarily denominated in currencies other than the U.S. dollar. Accordingly, our operations outside the United States impose risks upon our business as a result of exchange rate fluctuations. We mitigate most of this risk primarily through matching the currencies of our non-U.S. net sales, costs, and borrowings in foreign currencies, and utilizing derivative financial instruments such as forward exchange contracts.

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Competition

     We operate in a highly competitive environment, both in the United States and internationally. The IT products and services distribution industry is characterized by intense competition, based primarily on:

	•		price;
	•		product and services availability;
	•		speed and accuracy of delivery;
	•		effectiveness of sales and marketing programs;
	•		credit terms and availability;
	•		ability to tailor specific solutions to customer needs;
	•		quality and breadth of product lines and services; and
	•		availability of technical and product information.

     We believe we compete favorably with respect to each of these factors.

     We compete in the U.S. against full-line distributors such as Tech Data and Synnex Information Technologies, as well as specialty distributors such as Daisytek in consumables, Avnet and Arrow in industrial and enterprise products, and Douglas Stewart in educational products. The U.S. competitive landscape continues to undergo major consolidation as seen in the merger of Hewlett-Packard and Compaq Computer Corporation and the acquisition of Gates/Arrow by Synnex in 2002. Markets outside the United States, which represent over half of the IT industry’s sales, are characterized by a more fragmented distribution channel; however, consolidation has taken place in these markets as well. In Europe, four of our local market competitors, namely Esprinet (Italy), Copaco (The Netherlands), Also (Switzerland, Germany and Austria) and WestCoast (UK) have created a marketing alliance called the “European Wholesale Group” to better address the international needs of suppliers and resellers. Suppliers and resellers pursuing global strategies continue to seek distributors with global sales and support capabilities.

     We compete internationally with a variety of national and regional distributors. In the European market, competitors include international distributors such as Tech Data, Actebis, and Westcon/Comstor. The European distribution landscape is highly fragmented, with market share spread among many regional and local competitors. Examples include Scribona in the Nordic Region; Esprinet in Italy; OpenGate in Italy, Spain, and Portugal; Maxdata in Germany, Austria, and Switzerland; and Northamber in the United Kingdom. Other international distributors such as Arrow, Avnet and Bell Micro are strong competitors in many European countries. Hybrid reseller/distributors such as Computacentre and Specialist Computer Holdings provide additional pan-European competition. In Canada, we compete with Tech Data, Synnex, Supercom, and EMJ as well as a number of smaller distributors. In Latin America, we compete with international distributors such as Tech Data, and several regional and local distributors including Bell Micro, Deltron, Intcomex, Mexmal, MPS, Officer, and Synnex. In the Asia-Pacific market, we face competition from global, regional, and local competitors including Arrow, Digiland, ECS, Synnex and Tech Pacific. We also face competition in local markets such as Digital China and PCI in the People’s Republic of China, Redington in India, and Express Data in Australia.

     As some manufacturer and reseller customers move their back-room operations to distribution partners, outsourcing and value-added services may be areas of opportunity. Examples of value-added capabilities include configuration, innovative financing programs, and order fulfillment programs. Many of our suppliers and reseller customers are looking to outsourcing partners to perform back-room operations. To better meet these expanding opportunities, we offer fee-based end-to-end logistics

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services through Ingram Micro Logistics to suppliers and retailers selling on-line. There has been an accelerated movement among transportation and logistics companies to provide many of these fulfillment and e-commerce supply chain services. Within this arena, we face competition from major transportation and logistics suppliers such as Exel, Menlo, and UPS Supply Chain Services; electronic manufacturing services providers such as Solectron and Flextronics; and media companies such as Technicolor.

     We are constantly seeking to expand our business into areas closely related to our core IT products and services distribution business. As we enter new business areas, including value-added services, we may encounter increased competition from current competitors and/or from new competitors, some of which may be our current customers. Application service providers constitute a relatively new channel for suppliers to remotely deliver software applications to end-users. Telephone companies also represent competition for us when they offer bundled broadband and equipment solutions directly to end-customers.

     The evolving direct-sales relationships between manufacturers, resellers, and end-users continue to introduce change into our competitive landscape. We compete, in some cases, with hardware suppliers and software publishers that sell directly to reseller customers and end-users. However, we may become a business partner to these companies by providing supply chain services optimized for the IT market.

Asset Management

     We seek to maintain sufficient quantities of product inventories to achieve optimum order fill rates. We believe that the risks associated with slow-moving and obsolete inventory are partially mitigated by price protection and stock return privileges provided by suppliers. In the event of a supplier price reduction, we generally receive a credit based upon the terms and conditions with that supplier. In addition, we have the right to return a certain percentage of purchases, subject to certain limitations. We are exposed to inventory risk to the extent that supplier protections are not available on all products or quantities and are subject to time restrictions. In addition, suppliers may become insolvent and unable to fulfill their protection obligations to us. We manage this risk through continual monitoring of existing inventory levels relative to customer demand. To the extent necessary, we have established and continue to accrue for excess and obsolete inventory reserves.

     Historically, price protection, stock return privileges, and inventory management procedures have helped reduce the risk of decline in the value of inventory. However, major PC suppliers have stated that it is their intention to control the amount of inventory in the channel, particularly in light of the growth of vendor-direct and build-to-order strategies. A number of our suppliers have changed the terms and conditions of their price protection plans. These changes have resulted in increased exposure for us as the distribution partner. The shorter time periods during which distributors may receive credit for decreases in manufacturer prices on unsold inventory, as well as changes in the methodology to determine what level of unsold inventory distributors will be compensated for as a result of a price decrease, have decreased the levels of price protection we receive from suppliers. These changes in terms and conditions have made it more difficult for us to match our inventory levels with the price protection periods. Consequently, we bear risk that the value of the inventory we hold will decline after these price protection periods have passed. We continue to mitigate these risks by managing the amount of inventory in the channel from our suppliers to reflect the overall demand for our products.

     Inventory levels may vary from period to period, due in part to the addition of new suppliers or new lines with current suppliers and large cash purchases of inventory due to advantageous terms offered by suppliers. In addition, payment terms with inventory suppliers may vary from time to time, and could result in less inventory being financed by suppliers and a greater amount of inventory being financed by our capital.

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Trademarks and Service Marks

     We own or are the licensee of various trademarks and service marks, including, among others, “Ingram Micro,” the Ingram Micro logo, and “VentureTech Network.” Certain of these marks are registered, or are in the process of being registered, in the United States and various other countries. Even though our marks may not be registered in every country where we conduct business, in many cases we have acquired rights in those marks because of our continued use of them. Our management believes that the value of our marks is increasing with the development of our business, but our business as a whole is not materially dependent on these marks.

Employees

     As of December 28, 2002, we employed approximately 12,700 associates (as measured on a full-time equivalent basis). Our success depends on the talent and dedication of our associates. We strive to attract, develop, and retain outstanding associates. Certain of our operations in Europe and Latin America are subject to syndicates, collective bargaining or similar arrangements. We have a process for continuously measuring the status of associate satisfaction and responding to associate priorities. We believe that our relationships with our associates are generally good.

EXECUTIVE OFFICERS OF THE COMPANY

     The following table lists the executive officers of Ingram Micro as of March 1, 2003.