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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended January 1, 2005
Commission File Number: 1-12203
INGRAM MICRO INC.
(Exact name of Registrant as specified in its charter)
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Delaware
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62-1644402 |
(State or other jurisdiction of
incorporation or organization) |
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(I.R.S. Employer
Identification No.) |
1600 E. ST. ANDREW PLACE, SANTA ANA, CALIFORNIA
92705
(Address, including zip code, of principal executive
offices)
(714) 566-1000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the
act:
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| Title of Each Class: |
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Name of Each Exchange on Which Registered: |
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CLASS A COMMON STOCK,
PAR VALUE $.01 PER SHARE
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NEW YORK STOCK EXCHANGE |
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 þ No o
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. o
Indicate by check mark if registrant is an accelerated filer (as
defined in Exchange Act Rule 12b of the
Act). Yes þ No o
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 July 3, 2004, was $1,816,286,920 based on the
closing sale price on such date of $14.11 per share
The Registrant had 159,123,352 shares of Class A
Common Stock, par value $.01 per share, outstanding at
February 17, 2005.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Proxy
Statement for the registrant’s Annual Meeting of
Shareowners to be held June 1, 2005 are incorporated by
reference into Part III of this Annual Report on
Form 10-K.
TABLE OF CONTENTS
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PART I
The following discussion includes forward-looking statements,
including but not limited to, management’s expectations of
competition; revenues, margin, expenses and other operating
results or ratios; operating efficiencies; costs synergies,
economic conditions; cost savings; capital expenditures;
liquidity; capital requirements, acquisitions and integration
costs, operating models, exchange rate fluctuations and rates of
return. In evaluating our business, readers should carefully
consider the important factors discussed in “Cautionary
Statements for the Purpose of the ‘Safe Harbor’
Provisions of the Private Securities Litigation Reform Act of
1995” included in Exhibit 99.1 to our Annual Report on
Form 10-K for the fiscal year ended January 1, 2005.
We disclaim any duty to update any forward-looking statements.
Introduction
Ingram Micro, a Fortune 100 company, is the largest global
information technology (“IT”) wholesale distributor,
providing sales, marketing, and logistics services for the IT
industry worldwide. More than just a conduit between suppliers
and resellers, Ingram Micro provides a vital link in the IT
supply chain by generating demand and developing markets for our
technology partners. We create value in the IT market by
extending the reach of our technology partners, capturing market
share for resellers and suppliers, creating innovative solutions
comprised of both products and services, offering financial
services and credit facilities, and providing efficient
fulfillment of IT products and services. With a broad range of
products and an array of services, we create operating
efficiencies for our partners around the world.
History
Ingram Micro’s global footprint was achieved through a
series of acquisitions, mergers and organic growth in North
America, Europe, Asia-Pacific and Latin America. We began
business in 1979 as a California corporation named Micro D Inc.
A series of mergers and acquisitions in the 1980’s led to
the creation of Ingram Micro, a subsidiary of Ingram
Distribution Group, which was a unit of the privately-held
Ingram Industries Inc. In November 1996, Ingram Micro completed
an initial public offering, and split off from its parent in a
tax-free reorganization. We have made significant acquisitions
to strengthen our presence in North America, Europe, and
Asia-Pacific since our initial public offering. Expansion of our
North American presence continued with the acquisition of
Intelligent Electronics Inc.’s Reseller Network Division in
1997. In the same year, we acquired a minority equity interest
in Electronic Resources Limited (“ERL”), a leading
Asian computer and electronic products distributor based in
Singapore, which expanded our presence in Singapore and Malaysia
and provided entry into Australia, China, Hong Kong, India,
Indonesia, New Zealand, Thailand, and Vietnam. We increased our
investment in ERL in 1999, by purchasing the remaining shares of
ERL, and renamed the subsidiary Ingram Micro Asia Ltd.
(“Ingram Micro Asia-Pacific”). By 1998, Ingram
Micro’s well-established presence in Europe already
included operations in Austria, Belgium, Denmark, Finland,
France, Germany, Italy, the Netherlands, Norway, Spain, Sweden,
Switzerland, and the United Kingdom. The acquisition of
publicly-held Macrotron, a distributor of personal computer
products established in 1972, solidified our presence in
Germany, Austria and Switzerland. In November 2004, we
strengthened our position in the Asia-Pacific region by
acquiring 100 percent of Techpac Holdings Limited
(“Tech Pacific”), one of Asia-Pacific’s largest
technology distributors based in Singapore. This acquisition
made Ingram Micro the largest IT wholesale distributor in
Australia, Hong Kong, India, Malaysia, New Zealand, and
Singapore and expands our presence in Thailand.
Industry
The worldwide IT products and services distribution industry
generally consists of two types of business: traditional
distribution business and fee-based supply chain services
business. Within the traditional distribution model, the
distributor buys, holds title to, and sells products and/or
services to resellers who, in turn, typically sell directly to
end-users, or other resellers. Hardware manufacturers and
software publishers, which we collectively call suppliers or
vendors, sell directly to distributors, resellers and end-users.
As demand for
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supply chain services grows, distributors will seek new
opportunities to provide services within and outside of the IT
sector to complement their traditional distribution business.
Fee-based supply chain services include the supply chain
components that ensure the flow of goods from origin to
consumption. In practical terms, logistics outsourcing
encompasses the materials management functions of the supply
chain, taking a product from the point of concept through
delivery to the customer.
The traditional IT distribution industry continues to undergo
change as a result of a number of factors. As margins have
narrowed on hardware and software products due to
commoditization trends as technology evolves along its life
cycle, suppliers and resellers have transitioned from a more
product-focused to a more solution-oriented business model.
Suppliers have also reduced the number of distribution partners
in several geographic markets as they streamline their supply
chains. However, we believe that suppliers continue to embrace
two-tier distributors that have a global presence and are able
to deliver products to market in a low-cost manner. Resellers in
the traditional distribution model continue to depend on
distributors for a number of services, including product
availability, marketing, credit, technical support, and
inventory management, which includes direct shipment to
end-users and, in some cases, allowing end-users to directly
access distributors’ inventory data. These services allow
resellers to reduce their inventory, staffing levels, and
backroom requirements, thereby streamlining their financial
investment and reducing their costs. As resellers adjust their
business models from selling products to selling solutions, they
rely on distributors to help them combine products with services
to complete the solutions they offer to their customers. As
resellers require more solution-oriented offerings, distributors
respond with enhanced value-added solutions and services
customized to the needs of their specific customer base.
A variety of reseller categories exist, including value-added
resellers (“VARs”), corporate resellers, systems
integrators, direct marketers, Internet-based resellers,
independent dealers, reseller purchasing associations, PC
assemblers, and consumer electronics (“CE”) retailers.
Different types of resellers are defined and distinguished by
the end-user market they serve, such as large corporate
accounts, mid-market, small-to-medium sized businesses
(“SMBs”), or home users, and by the level of value
they add to the basic products they sell. Many of our reseller
customers are heavily dependent on distribution partners with
the necessary systems, capital, inventory availability, and
distribution facilities in place to provide fulfillment and
other services. 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.
The evolving go-to-market strategies of IT market participants
present new opportunities for IT distributors beyond those based
on their traditional role. For example, many large suppliers use
manufacturer-direct sales initiatives to supplement their use of
the distribution channel. This direct-sales model can present
opportunities for suppliers to become distribution customers. As
such, distributors can sell logistics, fulfillment, and
marketing services, as well as provide third-party products to
suppliers in a fee-based supply chain services model. 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
distribution center assets and focus on their core competencies
in manufacturing, product development, and/or marketing.
Suppliers also outsource these functions to enhance their
responsiveness in the supply chain, reduce their inventory
carrying costs, and better respond to customer demand. Resellers
provide opportunities, as well. Retailers and Internet resellers
are seeking fulfillment services, inventory management, reverse
logistics, and other supply chain services that do not
necessarily require a traditional distribution model. In
summary, distributors continue to evolve their business models
to meet customers’ needs (both suppliers and resellers)
through provision of fee-for-services programs while remaining
an efficient and low-cost means of delivery for technology
hardware, software, and services.
Company Strengths
We believe that the following strengths enable us to further
enhance our leadership position in the IT distribution industry:
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Leading Global Market Reach. 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,
Asia-Pacific, and Latin |
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America. We believe that the current IT industry environment
generally favors large, financially sound distributors that have
large product portfolios, economies of scale, strong business
partner relationships and wide geographic reach. Based on
publicly available information, we believe we offer the largest
breadth of product in the IT industry. Our scale allows us to
purchase products in large quantities and avail ourselves of
purchase opportunities from a broad range of suppliers and
provide competitive pricing for our reseller customers. Our
reseller customers can derive purchasing efficiencies and reduce
their investment in inventory while simultaneously enhancing
end-user service levels by establishing a supply relationship
with us. This relationship ensures resellers meet their product
inventory needs through a single point of contact rather than
purchasing product directly from multiple suppliers. We believe
that we also provide suppliers with access to a broad customer
base that few can reach directly in a more cost-effective
manner. With our geographic network of distribution centers and
world-class product management and logistics operations, our
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Ingram Micro is the only global full-line distributor with
operations in the Asia-Pacific region. In 2004, we strengthened
our position in this high-growth region by acquiring Tech
Pacific, one of Asia-Pacific’s largest technology
distributors, solidifying our capabilities in the retail
channel, third-party logistics, software distribution and
traditional distribution areas. This acquisition provides a
number of strategic benefits to Ingram Micro, its supplier
partners, and its customers, making Ingram Micro the largest
technology distributor in Australia, Hong Kong, India, Malaysia,
New Zealand, and Singapore and expands our presence in Thailand. |
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Our global market presence enables us to service our resellers
with our extensive network of distribution centers and support
offices. As of January 3, 2005, we had 70 distribution
centers worldwide, an increase from 48 distribution centers in
December of 2003 as a result of our Tech Pacific acquisition in
Asia-Pacific. We have sales offices and/or Ingram Micro sales
representatives in 36 countries, and sell our products and
services to resellers in more than 100 countries. We offer our
1,400 suppliers access to a global customer base of close to
165,000 resellers of various categories including VARs,
corporate resellers, direct marketers, retailers, Internet-based
resellers, and government and education resellers. |
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Strong Working Capital Management and Financial Position.
We have consistently demonstrated strong working capital
management in both positive and difficult economic conditions.
In particular, we have maintained a strong focus on optimizing
our investment in inventory, while minimizing the deployment of
debt and preserving customer fill rates and service levels. We
have significantly reduced our inventory days on hand as a
result of our focused and sustainable initiatives towards
reducing excess and obsolete goods, better buying strategies,
and a cultural orientation towards return on invested capital.
Furthermore, we continue to manage our accounts receivable
through collections, credit limit setting, customer terms and
process efficiencies to minimize our working capital
requirements. Our business process improvement programs have
also resulted in improving profitability, providing us with a
solid foundation for growth. Based on the strength of our
balance sheet and improving profit trends, we also believe that
we are well positioned to support our growth initiatives in our
core business and/or invest in incremental profitable growth
opportunities. Finally, we believe our solid financial position
provides us with a competitive advantage as a reliable,
long-term business partner for our supplier and reseller
partners. |
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Superior Execution and Vital Link in the Supply Chain. We
are committed to increasing our value to our customers and
suppliers as a vital link in the IT distribution and technology
supply chain. Through our understanding and fulfillment of the
needs of our reseller and supplier partners, we provide our
customers with the tools they need to increase the efficiency of
their operations, enabling them to minimize inventory levels,
improve customer delivery, and enhance profitability. Critical
to our superior execution is our ability to provide quick and
efficient order fulfillment along with consistent, accurate and
on-time delivery to our customers around the world. We seek to
maintain sufficient quantities of product inventories to achieve
favorable order fill rates while optimizing our investment in
working capital. |
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We provide business information to our customers, suppliers, and
end-users by leveraging our information systems. We give
resellers, and in some cases their customers, real-time access
to our product inventory data. 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 maintain flexible information systems that can adapt
to changes and support distribution center operations,
back-office efficiency, data warehousing, and e-commerce. We
also provide our business partners with the ability to customize
their interactions with Ingram Micro via XML, EDI, Web-based
e-commerce tools, as well as InsideLine, which allows resellers
to link their internal ordering and accounting systems directly
to our inventory and distribution database on a real-time basis. |
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Our commitment to superior service levels has been widely
recognized throughout the IT industry, as evidenced by a number
of awards received by Ingram Micro during 2004. In the United
States, we were named the Best Performing Distributor by
Computer Reseller News’ most recent “Sourcing
Study — Top 10 Preferred Sources” in five out of
eight performance categories. Leading manufacturers, such as
Cisco, Computer Associates, IBM, Symantec and Veritas (before
being acquired by Symantec in late 2004) have also recognized us
as their leading distributor in various geographies worldwide. |
Our Strategic Focus
Our strategic focus falls into two broad areas, which support
and enhance our position as the IT distribution industry’s
“best way to deliver technology to the world.” We
drive profitable growth by growing and optimizing our core
business and expanding into adjacent markets. We continue to
make productivity improvements through our focus on the right
cost structure for our business.
Achieve Sustainable Profitable Growth
Our goal is to continually grow and optimize our core
business by increasing our value to our customers and
vendors, targeting high growth market and product segments, and
leveraging our business model to serve our partners.
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We continually strengthen our value to customers by enhancing
our programs, service offerings, and tools. An example is
our implementation of Choice Advantage in the U.S., a new
three-tiered, customizable partner service model engineered
exclusively to meet the diverse needs of our reseller customers.
Solution providers can determine which service level best fits
their business, resulting in tailored business services,
consistent resources, and predictable pricing across the board.
In this manner, Choice Advantage offers a framework that
separates Ingram Micro’s value-added distribution services
from the technology products that we sell. This business
initiative has been launched to more than 28,000 customers
across the U.S. In Germany, we have developed an internal
customer relationship management tool that provides in-depth
information about our customers which allows the German sales
teams to better respond to customer needs by tailoring the
services Ingram Micro offers. In North America, we expanded our
programs to help our customers target the health care and
finance industries. By taking existing product lines and
combining them with additional products to create customized
solutions, we equip our resellers to target these segments
directly and capture the growing IT sales opportunities within
these and other vertical markets. We are educating our customers
and manufacturer partners on such regulatory measures as the
Health Insurance Portability and Accountability Act,
Gramm-Leach-Bliley Act, and the Sarbanes-Oxley Act of 2002,
enabling our partners to identify and capitalize on
opportunities. A comprehensive set of support tools has been
created to assist our customers in the identification and
development of technology based applications that address the
specific needs of these vertical industries. |
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We continually improve our operations by enhancing our
capabilities while reducing costs to provide an efficient flow
of products and services through the IT value chain. We leverage
our IT systems and warehouse locations to support custom
shipment requirements. By optimizing delivery methodologies, we
deliver faster, while reducing shipping costs. In our North
American region, the operations, IT, |
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accounts payable and customer service teams work together to
develop an innovative approach to take costs out of our supply
chain, while improving the product receiving process in the
region’s distribution centers. We are also enhancing our
revenues through the development of tools and capabilities to
identify new growth opportunities. By streamlining our catalog
to include the products most desired by our customers, we
optimize inventory management, focus on higher margin
opportunities, and develop merchandising and pricing strategies
that produce enhanced business results. |
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Another example of leveraging core operations is our Pan
European Business Unit in Europe, which encompasses components,
networking, and supplies, and reflects our commitment, in
conjunction with our vendor partners, to centralize product
groups that have greater synergy and leverage on a pan-European
basis rather than on an individual country basis. This
centralized function provides reseller customers with optimized
stock availability and competitive pricing, providing true,
one-stop shopping for their components, networking and supplies
needs. |
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We benefit from a growth perspective by targeting market
segments that provide growth opportunities for existing
customers and vendors. The SMB customer segment is generally
one of the largest segments of the IT market in terms of
revenue, and typically provides higher gross margins for
distributors. The needs of SMB resellers in serving the highly
fragmented SMB end-user market are well addressed by our
distribution model. In North America, we serve our SMB resellers
through a variety of programs, including our VentureTech Network
(“VTN”) and SMB Alliance programs, both of which
provide partnering opportunities for training and education,
demand generation, financial services, marketing, and other
services. We also offer marketing and credit programs targeted
at SMB resellers in other markets. As a supplement to our SMB
programs in the United States, we offer menu-driven programs to
GovEd resellers through our GovEd Alliance program, which
includes new financial services offerings launched in 2004. Our
European operations have deployed extensive web based tools that
provide improved pricing and availability information for SMBs,
enhancing resellers’ experience with Ingram Micro Europe
with regard to purchasing and order management. |
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We look for opportunities to invest in high-growth and
profitable geographic markets. Our Tech Pacific acquisition
strengthened our presence in Asia-Pacific, one of the fastest
growing IT markets in the world. We will continually evaluate
developing markets for expansion where IT demand supports a
local presence. |
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We target emerging IT product and service segments in their
developmental stages establishing product expertise that can be
leveraged by our partners. This allows us to keep our broad
product line current based on emerging trends, offering
differentiation to our resellers through product availability,
education, training, and sales support tools. Emerging
technologies include, but are not limited to, high-end storage,
Internet Protocol (“IP”) communications, security,
mobility and networking products. |
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We provide supply chain solutions tailored to each region
to clients who are focused on increasing supply chain
efficiencies, lowering overhead costs, and maximizing profits.
We help our supply chain clients deliver products to key
customers and new markets on a fee-for-service basis, leveraging
over 20 years of experience in our core distribution
activities. In North America, Ingram Micro Logistics has
particularly strong expertise in fulfillment to consumers and
delivery of multi-unit shipments to North American retailers.
Suppliers gain scale by using us to reach both distribution and
direct channels. They also benefit from cost savings through our
inventory consolidation. We offer a range of retail solutions to
assist manufacturers in areas such as order management,
customized packaging, launch program management, accounts
receivable management, consigned inventory management, and
product returns services. |
Another strategic focus is expanding into adjacent markets
to augment our core business by leveraging our capabilities
and skills in complementary market segments.
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We actively seek adjacent markets for expansion. In 2004
we acquired Nimax Inc., a key participant in the value-added
distribution of automatic identification and data capture/point
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POS”), barcode and wireless products, and enterprise
mobility solutions. This acquisition enables us to gain an
immediate entry into the growing AIDC/ POS market, expand upon
our enterprise mobility offerings, and offer new partnership
opportunities to our manufacturer and solution provider
customers. The Nimax division will leverage Ingram Micro’s
global reach, broad customer base and established vertical
market solutions, marketing engine, back-office resources and
logistics capabilities to initially serve the North America,
Asia-Pacific and Latin America markets, with growth
opportunities in other global markets. Nimax customers will also
benefit from this acquisition by gaining access to training,
marketing and business development resources, world-class
logistics, and one-stop shopping for technology solutions.
Manufacturers will have access to a global footprint with a
broad customer base and a high-value marketing engine with
business development resources to serve key vertical markets. |
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We are also expanding our presence in the CE market by pursuing
new relationships with CE manufacturers to bring new lines of
converging technologies to solution providers, direct marketers,
e-tailers and retailers. This business initiative supports our
ongoing growth strategy and long-standing commitment to be the
leading go-to-market partner for the technology industry. Our
global operations have helped hundreds of IT and CE
manufacturers use the supply chain as a competitive springboard
to gain market share and maximize profits. In North America, we
serve as a distribution conduit for CE manufacturers in the home
automation, mobile phones and gaming arenas. In Europe, we
expanded our presence in the mobile technology market to include
smart phones and mobile connect cards, wireless email devices,
and services and subscriptions. We also service a variety of CE
manufacturers in Asia-Pacific and Latin America. |
Optimal Productivity
We strive to create the right cost structure for our business
by driving efficiency through process improvements,
leveraging economies of scale, taking cost out of our business
and cultivating a strong and capable workforce.
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Our focus on driving efficiencies and achieving the
best-in-class financial metrics has enabled us to improve our
operating margins. We employ a disciplined and focused
approach when we review our global operations and develop
initiatives designed to streamline business processes and
further increase our operating efficiency. For example,
employment of the Six Sigma methodology has enabled the success
of many of our profit enhancement initiatives, allowing us to
simultaneously reduce costs while improving customer service
levels. The standard Six Sigma approach facilitates sharing of
best practices, which enhances our service offerings to our
customers and suppliers with a more efficient use of resources. |
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By maximizing economies of scale and leveraging our
best-in-class logistics services, we are prepared to address
the changing needs of resellers and suppliers, providing a broad
array of distribution and supply chain management solutions,
services and programs. |
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We are continuously looking for ways to take cost out of our
business. During the period between 2001 to 2003, Ingram
Micro executed a series of significant actions to improve our
financial position. These profit enhancement programs resulted
in the restructuring of several functions, consolidation and
optimization of facilities and systems, reductions of workforce
worldwide, enhancement and/or rationalization of vendor and
customer programs, outsourcing of certain IT infrastructure
functions, geographic consolidations and administrative
restructuring. As a result, we enjoy a more nimble and
responsive business model. We are always focused on finding new
ways to more cost-effectively respond to market demands. |
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We leverage our human capital, to drive productivity
improvements by employing a workforce replete with innovation,
professionalism, and leadership. We believe that enhancing
our associates’ work environment and cultivating their
skills and capabilities build the foundation from which we can
drive productivity and achieve our long-term objectives. We
instill a culture built upon ethics, respect, and
accountability. We support individual growth, foster creativity,
promote well-being, sponsor community involvement, and recognize
the demands of work and personal life. Although our programs vary |
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across countries, many aspects of our environment make our
company attractive to potential candidates. We offer extensive
training to our associates, as well as education assistance,
tuition reimbursement, coaching and career development programs,
and self-promotion programs. More than 2,000 on-line training
and development programs are offered to provide consistency
across regions. We utilize a performance development process to
help our associates become successful in their careers with
Ingram Micro. We also use internal rotation programs to build
strength and cross-functional leadership in our associates in
certain regions. Our Global and Regional Awards of Excellence
are granted to associates or teams that demonstrate
extraordinary efforts resulting in associate value, customer
value, profitable growth, shareowner value, and/or community
value. |
Customers
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 Corporation Inc., CompuCom
Systems Inc., CompUSA Inc., Insight Enterprises, Office Depot
Inc., OfficeMax, PC Connection Inc., and SARCOM Inc. Our
reseller customers outside of the United States include Bechtle,
Brasoftware, Compugen, Econocom, Future Shop, Mainbit,
NexInnovations, and Systemax. In most 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 BenQ, Gateway Inc., Intuit, and
Microsoft in North America, and ChannelWave, Digital River,
Hewlett-Packard store, and Sony in Europe. In cases where we do
have contracts, either party without cause can terminate them on
relatively short notice. Our business is not dependent on any of
these contracts. 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 and solution specifications, system configuration,
new product/service introductions, pricing, and availability.
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, solutions marketing, and
assistance with trade shows and other events.
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. Our
targeted market focus in Europe led to the formation of our Pan
European Business Unit, which manages components, networking,
and supplies on a centralized basis in most European countries
where we have a presence. For example, the Pan European 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.
Selling Arrangements. We offer various credit terms to
qualifying customers, as well as prepay, credit card, and cash
on delivery terms. We also offer various alternative financing
solutions to our resellers based on their creditworthiness and,
in some cases, the creditworthiness of their end-users, to
assist our resellers and their end-users in acquiring products.
In limited situations and markets, we collect outstanding
receivables on behalf of our resellers. We closely monitor
reseller customers’ creditworthiness through our IMpulse
information system and other monitoring tools, which contain
detailed information on each customer’s
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payment history, as well as other relevant information. In most
markets, we use various levels of credit insurance to control
credit risks and allow sales expansion.
We have sold, and may continue to sell, 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 be paid by us, subsidized by our
suppliers, or billed to our reseller.
Products
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
revenue mix by product category has remained relatively stable
over the past several years, although it may fluctuate between
and within different operating regions. Over the past several
years, our product category revenues on a consolidated basis
have generally been within the following ranges. However, our
peripherals and systems products have been close to or slightly
above the high-end of their respective ranges in the recent year:
| |
|
|
|
• Networking:
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|
10-15% |
|
• Software:
|
|
15-20% |
|
• Systems:
|
|
20-25% |
|
• Peripherals:
|
|
40-45% |
Networking. Our networking category includes networking
hardware, communication products and network security.
Networking hardware includes switches, hubs, routers, wireless
local area networks, wireless wide area networks, network
interface cards, network-attached storage and storage area
networks. Communication products incorporate Voice Over Internet
Protocol communications, modems, phone systems and video/audio
conferencing. Network security hardware includes firewalls,
Virtual Private Networks (“VPNs”), intrusion
detection, authentication devices and appliances.
Software. We define our software category as a broad
variety of applications containing computer instructions or data
that can be stored electronically. We offer a variety of
software products, such as business application software,
operating system software, entertainment software, middleware,
developer software tools, security software (firewalls,
intrusion detection, and encryption) and storage software.
Systems. We define our systems category as self-standing
computer systems capable of functioning independently. We offer
a variety of systems, such as servers, desktops, portable
personal computers, tablet personal computers, and personal
digital assistants.
Peripherals. We offer a variety of peripherals products,
including printers, scanners, displays, projectors, monitors,
panels, mass storage, and tape. We also include other products
and services in this category, including components (processors,
motherboards, hard drives, and memory), supplies and accessories
(ink and toner supplies, paper, carrying cases, and anti-glare
screens), CE products (cell phones, digital cameras, digital
video disc players, game consoles, and televisions), and
services (such as installation services, professional services,
service provider and carrier services, warranties and support,
configuration and assembly, packaged services, and mobile
communication services).
Suppliers
Our worldwide suppliers include leading computer hardware
suppliers, networking equipment suppliers, and software
publishers such as 3Com, Acer, Advanced Micro Devices Inc.,
Canon USA, Cisco Systems Inc., Computer Associates, Epson,
Hewlett-Packard, IBM, InFocus, Intel, Iomega, Juniper Networks,
Kingston Technology, Lexmark, Maxtor, Microsoft, NEC/
Mitsubishi, palmOne, Philips, Samsung, Seagate, Symantec,
Toshiba, Veritas Software Corporation, ViewSonic Corporation,
Western Digital and Xerox. We sell products purchased from many
vendors, but generated approximately 22%, 24% and 27% of our net
sales in fiscal years
8
2004, 2003 and 2002, respectively, from products purchased from
Hewlett-Packard Company. There were no other vendors that
represented 10% or more of our net sales in each of the last
three years.
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, local laws might impose
warranty obligations upon distributors, we do warrant services
and products that we build-to-order from components purchased
from other sources, and under limited circumstances in
Asia-Pacific. 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.
Services
In addition to our broad array of products, we also offer a
number of supply chain management services to our suppliers and
resellers. We focus on four broad categories of services: sales
and marketing, customer care, financial services, and logistics.
Our sales and marketing services include business development
and outsourced marketing services, demand generation programs
for suppliers and resellers, market research and business
intelligence, retail merchandizing, and software licensing
services. Our customer care services include call center support
and pre- and post-technical support. Our financial services
include credit and collection management services and tailored
financing programs. We also offer end-to-end supply chain
services to suppliers and resellers through our Ingram Micro
Logistics division which vary depending on regional requirements
and can include end-to-end order management and fulfillment,
retail logistics merchandizing, warehousing and storage,
contract manufacturing, distribution center services, product
procurement, reverse logistics, transportation management,
customer care, tailored financing programs, marketing services,
and other outsourcing services. While we provide our partners
with an array of presales services such as technical support,
product selection, credit options, and customized delivery, we
also offer additional services on a fee-for-service basis.
We also offer professional and technical services across North
America through our Ingram Micro Service Network
(“IMSN”), which serves as a collaboration and
partnership platform for over 550 VAR organizations. IMSN
enables VARs to expand their geographic reach and service
capabilities by providing a fully managed nationwide technical
support and service management solution owned and operated by
Ingram Micro. IMSN is comprised of over 10,000 certified
technicians in 800 North American markets throughout the United
States, Canada, and Puerto Rico. Our partners work together to
provide world-class IT business solutions and support to
end 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.
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.
Global Operations
We have local sales offices and/or Ingram Micro sales
representatives in various worldwide markets, including North
America (United States and Canada), Europe (Austria, Belgium,
Denmark, Finland, France, Germany, Hungary, Italy, The
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and
United Kingdom), Asia-Pacific (Australia, Bangladesh, the
People’s Republic of China including Hong Kong, India,
Indonesia, Malaysia, New Zealand, Pakistan, Philippines,
Singapore, Sri Lanka, Taiwan, and Thailand), and Latin America
(Argentina, Brazil, Chile, Mexico, and Peru). We also have
contracted sales agents, parties who act on our behalf, or
primary supplier relationships with independent third parties in
Costa
9
Rica, Dominican Republic, Ecuador, Guatemala, 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
the United States (Miami, Florida), Singapore, Germany, The
Netherlands, and France. For a discussion of our geographic
reporting segments, see “Item 8. Financial Statements
and Supplemental Data.”
We operate internationally with distribution facilities in
various locations around the world. For a discussion of foreign
exchange risks relating to our international operations, see
“Item 7A. Quantitative and Qualitative Disclosures
about Market Risk.”
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:
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• |
ability to tailor specific solutions to customer needs; |
| |
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• |
availability of technical and product information; |
| |
| |
• |
credit terms and availability; |
| |
| |
• |
effectiveness of sales and marketing programs; |
| |
| |
• |
price; |
| |
| |
• |
products and services availability; |
| |
| |
• |
quality and breadth of product lines and services; and |
| |
| |
• |
speed and accuracy of delivery. |
We believe we compete favorably with respect to each of these
factors.
We compete in North America against full-line distributors such
as Tech Data and Synnex Corporation as well as specialty
distributors in different product areas, such as ScanSource and
D&H Distributing. A more fragmented distribution channel
characterizes markets outside North America, which represent
over half of the IT industry’s sales; however,
consolidation has taken place in these markets, as well. We
believe that 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. The European distribution landscape is
highly fragmented, with market share spread among many regional
and local competitors such as Actebis, and international
distributors such as Tech Data and Westcon/ Comstor. In the
Asia-Pacific market, we face competition from global, regional,
and local competitors including Arrow, Digiland, Redington, and
Synnex Technology International. In Latin America, we compete
with international and local distributors such as Tech Data,
Synnex Corporation and Bell Microproducts.
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. Additionally, as consolidation
occurs among certain reseller segments and customers gain market
share and build capabilities similar to ours, certain resellers,
such as direct marketers, can become competitors for us. 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. 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
10
logistics suppliers such as Exel, Menlo, and UPS Supply Chain
Solutions; 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.
Asset Management
We seek to maintain sufficient quantities of product inventories
to achieve optimum order fill rates. 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. We manage this risk through
continual monitoring of existing inventory levels relative to
customer demand. On an ongoing basis, we reserve for excess and
obsolete inventories and write down our inventories to their
estimated net realizable value, reflecting our forecasts of
future demand and market conditions.
Historically, we have reduced the risk of decline in the value
of our inventory through price protection, vendor authorized
stock return privileges and inventory management procedures.
However, over the past number of years, major PC suppliers have
changed the terms and conditions of their price protection
plans, resulting in increased exposure for us as a distribution
partner. 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 strategic purchases of inventory. In addition,
payment terms with inventory suppliers may vary from time to
time, and could result in fewer inventories being financed by
suppliers and a greater amount of inventory being financed by
our capital.
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, “V7” (Video Seven) 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.
11
Employees
As of January 1, 2005, we employed approximately 13,600
associates (as measured on a full-time equivalent basis).
Certain of our operations in Europe and Latin America are
subject to syndicates, collective bargaining or similar
arrangements. Our success depends on the talent and dedication
of our associates, and we strive to attract, develop, and retain
outstanding associates. 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, 2005.
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|
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| Name |
|
Age | |
|
Position |
|
Kent B. Foster
|
|
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61 |
|
|
Chairman of the Board and Chief Executive Officer |
|
Kevin M. Murai
|
|
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41 |
|
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President |
|
Gregory M.E. Spierkel
|
|
|
48 |
|
|
President |
|
Keith W. F. Bradley
|
|
|
41 |
|
|
Executive Vice President and President, Ingram Micro North
America |
|
Henri T. Koppen
|
|
|
62 |
|
|
Executive Vice President and President, Ingram Micro Europe |
|
Thomas A. Madden
|
|
|
51 |
|
|
Executive Vice President and Chief Financial Officer |
|
Alain Monié
|
|
|
54 |
|
|
Executive Vice President and President, Ingram Micro Asia-Pacific |
|
Larry C. Boyd
|
|
|
52 |
|
|
Senior Vice President, Secretary and General Counsel |
|
William D. Humes
|
|
|
40 |
|
|
Senior Vice President and Chief Financial Officer Designee |
|
Alain Maquet
|
|
|
53 |
|
|
Senior Vice President and President, Ingram Micro Latin America |
|
Karen E. Salem
|
|
|
43 |
|
|
Senior Vice President and Chief Information Officer |
|
Matthew A. Sauer
|
|
|
57 |
|
|
Senior Vice President, Human Resources |
|
James F. Ricketts
|
|
|
58 |
|
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Corporate Vice President and Treasurer |
Kent B. Foster. Mr. Foster, age 61, was elected
chairman of the board in May 2000 and is also our chief
executive officer. Mr. Foster joined us as chief executive
officer and president and a director in March 2000 after a
29-year career at GTE Corporation, a leading telecommunications
company with one of the industry’s broadest arrays of
products and services. From 1995 through 1999, Mr. Foster
served as president, GTE Corporation and was a member of
GTE’s board of directors from 1992 to 1999, serving as vice
chairman of the board of GTE from 1993 to 1999. He currently
serves on the board of directors of Campbell Soup Company, Inc.,
J.C. Penney Company, Inc., and New York Life Insurance Company.
Kevin M. Murai. Mr. Murai, age 41, became our
president in March 2004. He previously served as our executive
vice president and president of Ingram Micro North America from
January 2002 to March 2004, as executive vice president and
president of Ingram Micro U.S. from January 2000 to
December 2001, as senior vice president and president of Ingram
Micro Canada from December 1997 to January 2000, and vice
president of operations for Ingram Micro Canada from January
1993 to December 1997.
Gregory M.E. Spierkel. Mr. Spierkel, age 48,
became our president in March 2004. He previously served as
executive vice president and president of Ingram Micro Europe
from June 1999 to March 2004, and as senior vice president and
president of Ingram Micro Asia-Pacific from July 1997 to June
1999. Prior to working for Ingram Micro, Mr. Spierkel was
vice president of global sales and marketing at Mitel Inc., a
manufacturer of telecommunications and semiconductor products,
from March 1996 to June 1997 and was president of North America
at Mitel from April 1992 to March 1996.
12
Keith W.F. Bradley. Mr. Bradley, age 41, is our
executive vice president and president of Ingram Micro North
America. He has held these positions since January 2005. He
previously served as interim president and senior vice president
and chief financial officer of Ingram Micro North America from
June 2004 to January 2005, and as the region’s senior vice
president and chief financial officer from January 2003 to May
2004. Prior to joining Ingram Micro in February 2000 as vice
president and controller for the Company’s United States
operations, Mr. Bradley was vice president and global
controller of The Disney Stores, a subsidiary of Walt Disney
Company, and an auditor and consultant with Price Waterhouse in
the United Kingdom, United Arab Emirates and the United States.
Henri T. Koppen. Mr. Koppen, age 62, became our
executive vice president and president of Ingram Micro Europe in
March 2004. Mr. Koppen served as our executive vice
president from January 2004 to March 2004, as executive vice
president and president of Ingram Micro Asia-Pacific from
February 2002 to December 2003, and served as senior vice
president and president of Ingram Micro Asia-Pacific, from March
2000 through January 2002. He previously served as senior vice
president and president of Ingram Micro Latin America from
January 1998 to March 2000. Prior to working for Ingram Micro,
Mr. Koppen served as president, Latin America, for General
Electric Capital IT Solutions, a systems integrator/reseller
company, from July 1996 to December 1997 and vice president,
Latin America, for Ameridata Global Inc., a systems
integrator/reseller company, from May 1995 to July 1996.
Thomas A. Madden. Mr. Madden, age 51, became
our executive vice president and chief financial officer in July
2001. Ingram Micro announced in October 2004 that
Mr. Madden plans an early retirement from the company on
April 1, 2005, and will be teaching at the University of
California, Irvine’s Graduate School of Management. Prior
to joining Ingram Micro, Mr. Madden served as senior vice
president and chief financial officer from May 1997 to July 2001
of Arvin Meritor, Inc., a global supplier of systems, modules
and components for the automotive industry. From 1981 to 1997,
Mr. Madden held various management positions with Rockwell
International, including vice president of corporate
development, from 1996 to 1997, vice president of finance, from
1994 to 1996, and assistant corporate controller, from 1987 to
1994. Mr. Madden currently serves on the board of directors
of Mindspeed Technologies.
Alain Monié. Mr. Monié, age 54,
became our executive vice president and president of Ingram
Micro Asia-Pacific in January 2004. He joined Ingram Micro as
executive vice president in January 2003. Previously,
Mr. Monié was an international executive consultant
with aerospace and defense corporations from September 2002 to
January 2003. Mr. Monié also served as president of
the Latin American division of Honeywell International from
January 2000 to August 2002. He joined Honeywell following its
merger with Allied Signal Inc., where he built a 17-year career
on three continents, progressing from a regional sales manager
to head of Asia-Pacific operations from October 1997 to December
1999.
Larry C. Boyd. Mr. Boyd, age 52, became our
senior vice president, secretary and general counsel in March
2004. He previously served as senior vice president,
U.S. legal services, for Ingram Micro North America from
January 2000 to January 2004. Prior to joining Ingram Micro, he
was a partner with the law firm of Gibson, Dunn &
Crutcher from January 1985 to December 1999.
William D. Humes. Mr. Humes, age 40, has been
our senior vice president and chief financial officer designee
since October 2004, and will replace Mr. Madden as Ingram
Micro’s executive vice president and chief financial
officer on April 1, 2005. Mr. Humes served as Ingram
Micro’s corporate vice president and controller from
February 2004 to October 2004, vice president and corporate
controller from February 2002 to February 2004 and senior
director, worldwide financial planning, reporting and accounting
from September 1998 to February 2002. Prior to joining Ingram
Micro, Mr. Humes was a senior audit manager at
PricewaterhouseCoopers.
Alain Maquet. Mr. Maquet, age 53, became our
senior vice president and president Ingram Micro Latin America
on March 1, 2005. Mr. Maquet served as our senior vice
president, southern and western Europe from January 2001 to
February 2004. Mr. Maquet joined Ingram Micro in 1993 as
the managing director of France and had added additional
countries to his responsibilities over the years. His career
spans 30 years, 23 of which are in the technology industry,
and he co-started an IT distribution company before joining
Ingram Micro.
13
Karen E. Salem. Ms. Salem, age 43, became our
senior vice president and chief information officer in February
2005. Prior to joining Ingram Micro, Ms. Salem was senior
vice president and chief information officer of Winn-Dixie
Stores, Inc., a NYSE listed grocery retailer from September 2002
to February 2005. Ms. Salem was previously senior vice
president and chief information officer of Corning Cable
Systems, a fiber optic cable/equipment manufacturer, from
September 2000 to September 2002. From August 1999 to September
2000, Ms. Salem was chief information officer for AFC
Enterprises, Inc., a company of four entities: Church’s
Chicken and Biscuits, Popeyes Chicken, Cinnabon and
Seattle’s Best Coffee.
Matthew A. Sauer. Mr. Sauer, age 57, has been
our senior vice president of human resources since February
2003. He joined Ingram Micro in October 1996 as vice president
of human resources and was promoted in September 1999 to
corporate vice president of human resources strategies and
processes.
James F. Ricketts. Mr. Ricketts, age 58, is our
corporate vice president and treasurer. He has held this
position since April 1999. He previously served as vice
president and treasurer from September 1996 to April 1999. Prior
to his employment with Ingram Micro, Mr. Ricketts served as
treasurer of Sundstrand Corporation, a manufacturer of aerospace
and related technology products, from February 1992 to September
1996.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the
“Act”) provides a “safe harbor” for
“forward-looking statements” to encourage companies to
provide prospective information, so long as such information is
identified as forward-looking and is accompanied by meaningful
cautionary statements identifying important factors that could
cause actual results to differ materially from those discussed
in the statement. Except for historical information, certain
statements contained in this Annual Report on Form 10-K may
be “forward-looking statements” within the meaning of
the Act, including but not limited to, management’s
expectations for process improvement; competition; revenues,
expenses and other operating results or ratios; economic
conditions; liquidity; capital requirements; and exchange rate
fluctuations. Disclosures that use words such as we
“believe,” “anticipate,” “expect,”
“forecast” and similar expressions are intended to
identify forward-looking statements. Such statements are subject
to certain risks and uncertainties that could cause actual
results to differ materially from expectations. Any such
forward-looking statements, whether made in this report or
elsewhere, should be considered in the context with the various
disclosures made by us about our business. In evaluating our
business, readers should carefully consider the important
factors discussed in “Cautionary Statements for the Purpose
of the ‘Safe Harbor’ Provisions of the Private
Securities Litigation Reform Act of 1995” included in
Exhibit 99.01 to this Annual Report on Form 10-K. A
summary of these factors is as follows:
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1. Intense competition, regionally and internationally,
including competition from alternative business models, such as
manufacturer-to-end-user selling, which may lead to reduced
prices, lower sales or reduced sales growth, lower gross
margins, extended payment terms with customers, increased
capital investment and interest costs, bad debt risks and
product supply shortages. |
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| |
2. Integration of our acquired businesses and similar
transactions involve various risks and difficulties. Our
operations may be adversely impacted by an acquisition that
(i) is not suited for us, (ii) is improperly executed,
or (iii) substantially increases our debt. |
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| |
3. Foreign exchange rate fluctuations, devaluation of a
foreign currency, adverse governmental controls or actions,
political or economic instability, or disruption of a foreign
market, and other related risks of our international operations
may adversely impact our operations in that country or globally. |
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| |
4. We may not achieve the objectives of our process
improvement efforts or be able to adequately adjust our cost
structure in a timely fashion to remain competitive, which may
cause our profitability to suffer. |
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| |
5. Our failure to attract new sources of profitable
business from expansion of products or services or entry into
new markets could negatively impact our future operating results. |
14
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6. An interruption or failure of our information systems or
subversion of access or other system controls may result in a
significant loss of business, assets, or competitive information. |
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| |
7. Significant changes in supplier terms, such as higher
thresholds on sales volume before distributors may qualify for
discounts and/or rebates, the overall reduction in the amount of
incentives available, reduction or termination of price
protection, return levels, or other inventory management
programs, or reductions in payment terms, may adversely impact
our results of operations or financial condition. Additionally,
termination of a supply or services agreement with a major
supplier or product supply shortages may adversely impact our
results of operations. |
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| |
8. Changes in, or interpretations of, tax rules and
regulations may adversely affect our effective tax rates or we
may be required to pay additional tax assessments. |
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9. We cannot predict with certainty, the outcome of the SEC
and U.S. Attorney’s inquiries. |
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| |
10. If there is a downturn in economic conditions for an
extended period of time, it will likely have an adverse impact
on our business. |
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| |
11. We may experience loss of business from one or more
significant customers, and an increased risk of credit loss as a
result of reseller customers’ businesses being negatively
impacted by dramatic changes in the information technology
products and services industry as well as intense competition
among resellers. Increased losses, if any, may not be covered by
credit insurance or we may not be able to obtain credit
insurance at reasonable rates or at all. |
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| |
12. Rapid product improvement and technological change
resulting in inventory obsolescence or changes in demand may
result in a decline in value of a portion of our inventory. |
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| |
13. Future terrorist or military actions could result in
disruption to our operations or loss of assets, in certain
markets or globally. |
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| |
14. The loss of a key executive officer or other key
employees, or changes affecting the work force such as
government regulations, collective bargaining agreements or the
limited availability of qualified personnel, could disrupt
operations or increase our cost structure. |
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15. Changes in our credit rating or other market factors
may increase our interest expense or other costs of capital, or
capital may not be available to us on acceptable terms to fund
our working capital needs. |
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16. Our failure to adequately adapt to industry changes and
to manage potential growth and/or contractions could n |