NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In 000s, except per share data)
(Unaudited)
Note 1 Organization and Basis of Presentation
Ingram Micro Inc. and its subsidiaries are primarily engaged in the distribution of information technology
(IT) products and supply chain and mobile device lifecycle services worldwide. Ingram Micro Inc. and its subsidiaries operate in North America, Europe, Asia-Pacific, Middle East and Africa (Asia-Pacific), and
Latin America. In 2012, we added a reporting segment for mobility which reflects our acquisition of Brightpoint, Inc. (BrightPoint).
The consolidated financial statements include the accounts of Ingram Micro Inc. and its subsidiaries. Unless the context otherwise requires, the use of the terms Ingram Micro, we,
us and our in these notes to the consolidated financial statements refers to Ingram Micro Inc. and its subsidiaries. These consolidated financial statements have been prepared by us, without audit, pursuant to the rules and
regulations of the United States Securities and Exchange Commission (the SEC). In the opinion of management, the accompanying unaudited consolidated financial statements contain all material adjustments (consisting of only normal,
recurring adjustments) necessary to fairly state our consolidated financial position as of March 30, 2013, and our consolidated results of operations, comprehensive income and cash flows for the thirteen weeks ended March 30, 2013 and
March 31, 2012. All significant intercompany accounts and transactions have been eliminated in consolidation. As permitted under the applicable rules and regulations of the SEC, these consolidated financial statements do not include all
disclosures and footnotes normally included with annual consolidated financial statements and, accordingly, should be read in conjunction with the consolidated financial statements and the notes thereto, included in our Annual Report on Form 10-K
filed with the SEC for the year ended December 29, 2012. The consolidated results of operations for the thirteen weeks ended March 30, 2013 may not be indicative of the consolidated results of operations that can be expected for the full
year.
Comprehensive Income
Comprehensive income consisted primarily of our net income, foreign currency translation adjustments and unrealized gains and losses from our foreign currency forward contracts designated as cash flow
hedges.
Book Overdrafts
Book overdrafts of $349,494 and $415,207 as of March 30, 2013 and December 29, 2012, respectively, represent checks issued on disbursement bank accounts but not yet paid by such banks. These
amounts are classified as accounts payable in our consolidated balance sheet. We typically fund these overdrafts through normal collections of funds or transfers from other bank balances at other financial institutions. Under the terms of our
facilities with the banks, the respective financial institutions are not legally obligated to honor the book overdraft balances as of March 30, 2013 and December 29, 2012, or any balance on any given date.
Trade Accounts Receivable Factoring Programs
We have two uncommitted factoring programs, one in North America and one in Europe, under which trade accounts receivable of two large customers may be sold, without recourse, to financial
institutions. Available capacity under these programs is dependent on the amount of trade accounts receivable already sold to and held by the financial institutions, the level of our trade accounts receivable eligible to be sold into these programs
and the financial institutions willingness to purchase such receivables. At March 30, 2013 and December 29, 2012, we had a total of $141,791 and $242,626, respectively, of trade accounts receivable sold to and held by financial
institutions under these programs. Factoring fees of $532 and $1,304 incurred for the thirteen weeks ended March 30, 2013 and March 31, 2012, respectively, related to the sale of trade accounts receivable under both facilities are included
in other in the other expense (income) section of our consolidated statement of income.
7
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In 000s, except per share data)
(Unaudited)
Note 2 Share Repurchase Program
In October 2010, our Board of Directors authorized a three-year, $400,000 share repurchase program, of which $124,095
is remaining for repurchase at March 30, 2013. Under the program, we may repurchase shares in the open market and through privately negotiated transactions. Our repurchases are funded with available borrowing capacity and cash. The timing and
amount of specific repurchase transactions will depend upon market conditions, corporate considerations and applicable legal and regulatory requirements. We account for repurchased shares of common stock as treasury stock. Treasury shares are
recorded at cost and are included as a component of stockholders equity in our consolidated balance sheet. We have issued shares of common stock out of our cumulative balance of treasury shares. Such shares are issued to certain of our
associates upon the exercise of their options or vesting of their equity awards under the Ingram Micro Inc. 2011 Incentive Plan (see Note 4). We did not repurchase shares during the thirteen weeks ended March 30, 2013 and March 31, 2012.
Our stock issuance activity for the thirteen weeks ended March 30, 2013 and March 31, 2012 is summarized in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted
Average Price
Per Share
|
|
|
Amount
|
|
Cumulative balance at December 29, 2012
|
|
|
38,029
|
|
|
$
|
17.04
|
|
|
$
|
648,066
|
|
Issuance of Class A Common Stock
|
|
|
(302
|
)
|
|
|
17.24
|
|
|
|
(5,208
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative balance at March 30, 2013
|
|
|
37,727
|
|
|
|
17.04
|
|
|
$
|
642,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative balance at December 31, 2011
|
|
|
35,643
|
|
|
$
|
16.96
|
|
|
$
|
604,331
|
|
Issuance of Class A Common Stock
|
|
|
(293
|
)
|
|
|
18.45
|
|
|
|
(5,397
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative balance at March 31, 2012
|
|
|
35,350
|
|
|
|
16.94
|
|
|
$
|
598,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 3 Earnings Per Share
We report a dual presentation of Basic Earnings per Share (Basic EPS) and Diluted Earnings per Share
(Diluted EPS). Basic EPS excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding during the reported period. Diluted EPS uses the treasury stock method to compute the potential
dilution that could occur if stock-based awards and other commitments to issue common stock were exercised.
The computation
of Basic EPS and Diluted EPS is as follows:
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
|
March 30,
2013
|
|
|
March 31,
2012
|
|
Net income
|
|
$
|
49,759
|
|
|
$
|
89,973
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
|
|
|
151,084
|
|
|
|
150,789
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
$
|
0.33
|
|
|
$
|
0.60
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares, including the dilutive effect of stock-based awards (3,473 and 3,795 for the thirteen weeks ended
March 30, 2013 and March 31, 2012, respectively)
|
|
|
154,557
|
|
|
|
154,584
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
$
|
0.32
|
|
|
$
|
0.58
|
|
|
|
|
|
|
|
|
|
|
8
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In 000s, except per share data)
(Unaudited)
There were approximately 1,708 and 1,386 stock-based awards for the thirteen weeks ended
March 30, 2013 and March 31, 2012, respectively, that were not included in the computation of Diluted EPS because the exercise price was greater than the average market price of the Class A Common Stock during the respective periods,
thereby having an antidilutive effect.
Note 4 Stock-Based Compensation
We currently have a single stock incentive plan, the Ingram Micro Inc. 2011 Incentive Plan (the
2011 Plan), for the granting of equity-based incentive awards including incentive stock options, non-qualified stock options, restricted stock, restricted stock units and stock appreciation rights, among others, to key employees and
members of our Board of Directors. We grant time- and/or performance-vested restricted stock and/or restricted stock units, in addition to stock options, to key employees and members of our Board of Directors. The performance measures for vesting of
restricted stock and restricted stock units for grants to management for the periods presented are based on earnings growth, return on invested capital, total shareholder return and income before tax.
Stock options granted during the thirteen weeks ended March 30, 2013 and March 31, 2012 were 52 and 51, respectively, and
restricted stock and restricted stock units granted were 962 and 136, respectively. As of March 30, 2013, approximately 9,800 shares were available for grant under the 2011 Plan, taking into account granted options, time-vested restricted
stock units/awards and performance-vested restricted stock units assuming maximum achievement. Stock-based compensation expense for the thirteen weeks ended March 30, 2013 and March 31, 2012 was $7,416 and $9,446, respectively, and the
related income tax benefit was $2,209 and $3,012, respectively.
During the thirteen weeks ended March 30, 2013 and
March 31, 2012, a total of 754 and 1,346 stock options, respectively, were exercised, and 1,878 and 1,745 restricted stock and/or restricted stock units vested, respectively. These restricted stock and/or restricted stock units included 1,535
and 1,152 shares, respectively, issued based on performance-based grants previously approved by the Human Resources Committee of the Board of Directors.
Note 5 Derivative Financial Instruments
The notional amounts and fair values of derivative instruments in our consolidated balance sheet were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional Amounts (1)
|
|
|
Fair Value
|
|
|
|
March 30,
2013
|
|
|
December 29,
2012
|
|
|
March 30,
2013
|
|
|
December 29,
2012
|
|
Derivatives designated as hedging instruments recorded in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
17,866
|
|
|
$
|
|
|
|
$
|
724
|
|
|
$
|
|
|
Accrued expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
13,068
|
|
|
|
|
|
|
|
(326
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,934
|
|
|
|
|
|
|
|
398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not receiving hedge accounting treatment recorded in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
1,014,521
|
|
|
|
817,172
|
|
|
|
7,488
|
|
|
|
2,897
|
|
Accrued expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
881,309
|
|
|
|
607,836
|
|
|
|
(4,537
|
)
|
|
|
(3,776
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,895,830
|
|
|
|
1,425,008
|
|
|
|
2,951
|
|
|
|
(879
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,926,764
|
|
|
$
|
1,425,008
|
|
|
$
|
3,349
|
|
|
$
|
(879
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In 000s, except per share data)
(Unaudited)
(1)
|
Notional amounts represent the gross amount of foreign currency bought or sold at maturity for foreign exchange contracts.
|
The amount recognized in earnings from our derivative instruments, including ineffectiveness, was a net gain (loss) of $19,094 and
$(20,518) for the thirteen weeks ended March 30, 2013 and March 31, 2012, respectively, which was largely offset by the change in the fair value of the underlying hedged assets or liabilities. The gains or losses on derivative instruments
are classified in our consolidated statement of income on a consistent basis with the classification of the change in fair value of the underlying hedged assets or liabilities. The unrealized gains (losses) associated with our cash flow hedging
transactions, net of taxes, are reflected in our consolidated statement of comprehensive income for the thirteen weeks ended March 30, 2013 and March 31, 2012.
Cash Flow and Other Hedges
Our designated hedges have consisted primarily
of foreign currency forward contracts to hedge certain foreign currency-denominated intercompany management fees. There were no such designated hedges outstanding as of December 29, 2012. We also use foreign currency forward contracts that are
not designated as hedges primarily to manage currency risk associated with foreign currency-denominated trade accounts receivable, accounts payable and intercompany loans.
Note 6 Fair Value Measurements
Our assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:
Level 1 quoted market prices in active markets for identical assets and liabilities; Level 2 observable market-based inputs or unobservable inputs that are corroborated by market data; and Level 3 unobservable inputs that are
not corroborated by market data.
At March 30, 2013 and December 29, 2012, our assets and liabilities measured at
fair value on a recurring basis included cash equivalents, consisting primarily of money market accounts and short-term certificates of deposit, of $12,403 and $189,381, respectively, and marketable trading securities (included in other currents
assets in our consolidated balance sheet) of $49,542 and $46,938, respectively, both determined based on Level 1 criteria, as defined above, and derivative assets of $8,212 and $2,897, respectively, and derivative liabilities of $4,863 and $3,776,
respectively, determined based on Level 2 criteria. The change in the fair value of all derivative instruments was a net unrealized gain (loss) of $4,228 and $(8,593) for the thirteen weeks ended March 30, 2013 and March 31, 2012,
respectively. The fair value of the cash equivalents approximated cost and the gain or loss on the marketable trading securities was recognized in the consolidated statement of income to reflect these investments at fair value.
Our senior unsecured notes due in 2022 and 2017 are stated at amortized cost, and their respective fair value were determined based on
Level 2 criteria above. Our senior unsecured notes due in August 2022 had a fair value of approximately $324,000 and $307,000 at March 30, 2013 and December 29, 2012, respectively, while our senior unsecured notes due in August 2017 had a
fair value of approximately $318,000 and $326,000 at March 30, 2013 and December 29, 2012, respectively (see Note 9).
Note 7 Acquisitions, Goodwill and Intangible Assets
On October 15, 2012, we completed the acquisition of BrightPoint, a U.S. publicly traded company and a global
leader in providing device lifecycle services to the wireless industry, for cash and the assumption of its debt. The results of operations of BrightPoint are included in our consolidated financial statements from the date of the merger. The
consideration paid was $868,192, net of cash acquired, primarily comprised of $9.00 cash per share of BrightPoints outstanding common stock (including common stock underlying restricted stock units and shares issued pursuant to restricted
stock awards accelerated upon closing of the transaction) and payment of BrightPoints outstanding debt of $260,257 as of October 15, 2012.
10
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In 000s, except per share data)
(Unaudited)
The following table summarizes the preliminary allocation of the purchase price to the
estimated fair values of the assets acquired and liabilities assumed on the closing date of October 15, 2012:
|
|
|
|
|
Tangible assets (includes trade accounts receivable, inventory, property and equipment and other assets)
|
|
$
|
1,156,075
|
|
Goodwill
|
|
|
418,895
|
|
Identifiable intangible assets
|
|
|
309,000
|
|
Liabilities (includes accounts payable, accrued expenses and other liabilities)
|
|
|
(1,015,778
|
)
|
|
|
|
|
|
|
|
$
|
868,192
|
|
|
|
|
|
|
We expect to realize operational benefits by leveraging existing channel relationships and utilizing the
assembled workforce. We also expect the combined entity to achieve significant savings in corporate and operational overhead costs. We anticipate opportunities for growth through our entry into the global wireless industry, expansion of our
geographic reach and customer segment diversity, and the ability to leverage additional products and capabilities. These factors, among others, contributed to a purchase price in excess of the estimated fair value of BrightPoints net
identifiable assets acquired, and, as a result, we have recorded goodwill in connection with this transaction.
The components
of identifiable intangible assets acquired in connection with the BrightPoint acquisition were as follows:
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Estimated
Useful Life
|
|
Logistics customer relationships
|
|
$
|
237,000
|
|
|
|
10 years
|
|
Distribution customer relationships
|
|
|
59,000
|
|
|
|
7 years
|
|
Trade name
|
|
|
13,000
|
|
|
|
3 years
|
|
|
|
|
|
|
|
|
|
|
Total identifiable intangible assets
|
|
$
|
309,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following represents pro-forma operating results for the thirteen weeks ended March 31, 2012 as
if BrightPoint had been included in our consolidated statements of operations as of the first date of fiscal year 2012 and include business combination accounting effects from our acquisition including amortization of acquired intangible assets and
increase in interest expense associated with the issuance of our senior unsecured notes due in 2022 and additional borrowings from our revolving senior unsecured credit facility debt to fund the acquisition.
|
|
|
|
|
|
|
Thirteen
Weeks Ended
March 31,
2012
|
|
Net sales
|
|
$
|
10,005,469
|
|
|
|
|
|
|
Net income
|
|
$
|
90,845
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
Basic
|
|
$
|
0.60
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.59
|
|
|
|
|
|
|
The above unaudited pro forma results have been prepared for informational purposes only and do not
purport to represent what the results of operations would have been had the acquisition occurred as of those dates, nor of future results of operations.
11
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In 000s, except per share data)
(Unaudited)
On September 30, 2012, we acquired certain IT distribution businesses of Aptec
Holdings Ltd. (Aptec), a Dubai-based value-added distributor in the Middle East and Africa, with products and solutions covering data center, storage, security, networking and software categories, including technical services. In
addition, we acquired the Turkey business of Aptec on November 30, 2012. Excluding its Saudi Arabia business, we acquired Aptec for a cash price of approximately $16,302. The acquisition of the Saudi Arabia business is expected to close during
the second half of 2013. This acquisition broadens our reach into the Middle East and Africa, while also building our portfolio of higher margin value-added distribution businesses. The purchase price has been preliminarily allocated to the assets
acquired and liabilities assumed based on their estimated fair values on the transaction date, resulting in the recording of identifiable intangible assets of $1,834, primarily related to vendor and customer relationships and trademarks with
estimated useful lives of 10 and 3 years, respectively, and goodwill of $4,951.
On November 30, 2012, we acquired all of
the outstanding shares of Promark Technology Inc. (Promark), a value-added distributor in the U.S. with a core technology focus on data storage, data management and electronic document imaging products and services. This acquisition
further strengthens our position in higher value products and solutions and extends our reach within the public sector in the U.S. We acquired Promark for an initial cash payment of $7,707; payment of its outstanding debt of $4,675; a hold-back
amount of $2,250, which will be released upon settlement of certain closing matters; and a maximum potential earn-out of $1,000 to be paid out by the first quarter of 2015 based upon the achievement of certain pre-defined targets. We have recorded
an earn-out obligation of $800, which reflects the estimated fair value of the payout to be achieved. The aggregate purchase price of $15,432 has been preliminarily allocated to the assets acquired and liabilities assumed based on their estimated
fair values on the transaction date, resulting in the recording of identifiable intangible assets of $8,526, primarily related to U.S. General Services Administration IT schedule and vendor and customer relationships with estimated useful lives of
20 and 10 years, respectively, and goodwill of $4,555.
In the first quarter of 2012, we paid one of the annual earn-out
payments related to a prior period acquisition totaling $333, which was previously accrued at the time of the acquisition.
All acquisitions for the periods presented above, with the exception of BrightPoint, were not material, individually or in aggregate, to
us as a whole and therefore, pro forma financial information has not been presented.
The changes in the carrying amount of
goodwill for the year ended December 29, 2012 and the thirteen weeks ended March 30, 2013 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
America
|
|
|
Asia-
Pacific
|
|
|
BrightPoint
|
|
|
Total
|
|
Balance at December 31, 2011
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Acquisitions
|
|
|
4,555
|
|
|
|
4,951
|
|
|
|
418,895
|
|
|
|
428,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 29, 2012
|
|
$
|
4,555
|
|
|
$
|
4,951
|
|
|
$
|
418,895
|
|
|
$
|
428,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 29, 2012
|
|
$
|
4,555
|
|
|
$
|
4,951
|
|
|
$
|
418,895
|
|
|
$
|
428,401
|
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 30, 2013
|
|
$
|
4,555
|
|
|
$
|
4,951
|
|
|
$
|
418,895
|
|
|
$
|
428,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The gross carrying amounts of finite-lived identifiable intangible assets of $443,309 and $445,385 at
March 30, 2013 and December 29, 2012, respectively, are amortized over their remaining estimated lives ranging up to 20 years. The net carrying amount was $359,082 and $372,482 at March 30, 2013 and December 29, 2012,
respectively. Amortization expense was $11,765 and $2,925 for the thirteen weeks ended March 30, 2013 and March 31, 2012, respectively.
12
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In 000s, except per share data)
(Unaudited)
Note 8 Reorganization and Expense-Reduction Program Costs
During the first quarter of 2013, we began integrating certain BrightPoint operations into Ingram Micro, resulting in
headcount reductions. We also continued to move certain transactions-oriented service and support functions in Europe to our European shared services center and exited a portion of one of our Australian offices in Asia-Pacific. Associated with these
actions, we incurred reorganization costs of $8,841 ($3,298, $2,699, $2,679 and $165 in Asia-Pacific, BrightPoint, Europe and North America, respectively) primarily related to $5,564 of employee termination benefits for workforce reductions of
approximately 120 associates in connection with the integration of our acquisitions and transition of some functions to shared services centers and $3,277 of facility exit costs in one of our offices in Asia-Pacific. The remaining liabilities and
2013 activities associated with these actions are summarized in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganization
Costs
|
|
|
Amounts Paid
and
Charged
Against the
Liability
|
|
|
Adjustments
|
|
|
Remaining
Liability
at
March 30,
2013
|
|
Employee termination benefits
|
|
$
|
5,564
|
|
|
$
|
(1,839
|
)
|
|
$
|
(31
|
)
|
|
$
|
3,694
|
|
Facility costs
|
|
|
3,277
|
|
|
|
(337
|
)
|
|
|
27
|
|
|
|
2,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,841
|
|
|
$
|
(2,176
|
)
|
|
$
|
(4
|
)
|
|
$
|
6,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments in the table above reflect the net foreign currency impact on the U.S. dollar liability. We
expect the remaining liabilities to be substantially utilized by the end of 2016.
In 2012, we implemented headcount
reductions primarily in Australia and New Zealand to better align our operating expenses with each countrys lower sales volumes. Additionally, we moved certain transactions-oriented service and support functions to shared service centers in
Asia-Pacific and Europe. We closed our in-country Argentina operations in Latin America and will service this market through our export operations in Miami. Associated with these actions, we incurred net reorganization costs of $557 ($301, $224 and
$32 in Asia-Pacific, Latin America and North America, respectively) primarily related to employee termination benefits for workforce reductions for 79 employees during the thirteen weeks ended March 31, 2012. The remaining liabilities and 2013
activities associated with these actions are summarized in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
Liability at
December 29,
2012
|
|
|
Amounts Paid
and
Charged
Against the
Liability
|
|
|
Adjustments
|
|
|
Remaining
Liability
at
March 30,
2013
|
|
Employee termination benefits
|
|
$
|
1,826
|
|
|
$
|
(442
|
)
|
|
$
|
(211
|
)
|
|
$
|
1,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments in the table above reflect the a reduction of $175 to reorganization liabilities recorded in
prior years for these actions for lower than expected employee termination benefits, as well as the net foreign currency impact that decreased the U.S. dollar liability. We expect the remaining liabilities to be substantially utilized by the end of
2014.
In the second half of 2011, we implemented a cost-reduction program related to our Australian operations in
Asia-Pacific primarily to align our level of operating expenses with declines in sales volume as a result of the system-implementation complications and loss of market share in that country. We also implemented headcount reductions in certain
operations in North America, Europe and Latin America. The remaining liabilities and 2013 activities associated with these actions are summarized in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
Liability at
December 29,
2012
|
|
|
Amounts Paid
and
Charged
Against the
Liability
|
|
|
Adjustments
|
|
|
Remaining
Liability
at
March 30,
2013
|
|
Employee termination benefits
|
|
$
|
79
|
|
|
$
|
(79
|
)
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In 000s, except per share data)
(Unaudited)
In 2009 and earlier, we incurred costs to integrate past acquisitions, as well as
launching various other outsourcing and optimization plans, to improve operating efficiencies and better align our level of operating expenses with the decline in sales volumes resulting from the economic downturn in that period. While these
reorganization actions were completed prior to the periods included herein, future cash outlays are required for future lease payments related to exited facilities. The remaining liabilities and 2013 activities associated with these actions are
summarized in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
Liability at
December 29,
2012
|
|
|
Amounts Paid
and
Charged
Against the
Liability
|
|
|
Adjustments
|
|
|
Remaining
Liability
at
March 30,
2013
|
|
Facility costs
|
|
$
|
6,214
|
|
|
$
|
(768
|
)
|
|
$
|
(179
|
)
|
|
$
|
5,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments in the table above reflect the net foreign currency impact on the U.S. dollar liability. We
expect the remaining liabilities, all of which are associated with facility costs, to be fully utilized by the end of 2015.
Note 9 Debt
The carrying value of our outstanding debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
March 30,
2013
|
|
|
December 29,
2012
|
|
Senior unsecured notes, 5.25% due 2017
|
|
$
|
300,000
|
|
|
$
|
300,000
|
|
Senior unsecured notes, 5.00% due 2022, net of unamortized discount of $1,680 and $1,725, respectively
|
|
|
298,320
|
|
|
|
298,275
|
|
North America revolving trade accounts receivable-backed financing program
|
|
|
444,995
|
|
|
|
345,000
|
|
Lines of credit and other debt
|
|
|
158,640
|
|
|
|
111,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,201,955
|
|
|
|
1,054,543
|
|
Short-term debt and current maturities of long-term debt
|
|
|
(158,640
|
)
|
|
|
(111,268
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,043,315
|
|
|
$
|
943,275
|
|
|
|
|
|
|
|
|
|
|
Note 10 Income Taxes
Our effective tax rate for the thirteen weeks ended March 30, 2013 was a tax provision of 34.6% compared to a tax
benefit of 1.6% for the thirteen weeks ended March 31, 2012. Under U.S. accounting rules for income taxes, quarterly effective tax rates may vary significantly depending on the actual operating results in the various tax jurisdictions, as well
as changes in the valuation allowance related to the expected recovery of our deferred tax assets. The thirteen weeks ended March 30, 2013 included a net discrete benefit of approximately $1,184, or 1.6 percentage points of the effective tax
rate, while the thirteen weeks ended March 31, 2012 included a net discrete benefit of approximately $28,532, or 32.2 percentage points of the effective tax rate. The remaining year-over-year change in our effective tax rate reflects the change
in mix of profit among different tax jurisdictions and losses in certain tax jurisdictions in which we are not able to record a tax benefit.
14
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In 000s, except per share data)
(Unaudited)
Our effective tax rate differed from the U.S. federal statutory rate of 35% during these
periods primarily due to the discrete items noted above, as well as the relative mix of earnings or losses within the tax jurisdictions in which we operate, such as: a) earnings in lower-tax jurisdictions for which no U.S. taxes have been provided
because such earnings are planned to be reinvested indefinitely outside the United States; and b) changes in the valuation allowance on deferred tax assets.
At March 30, 2013, we had gross unrecognized tax benefits of $39,399 compared to $38,790 at December 29, 2012, representing a net increase of $609 during the thirteen weeks ended March 30,
2013. Substantially all of the gross unrecognized tax benefits, if recognized, would impact our effective tax rate in the period of recognition. We recognize interest and penalties related to unrecognized tax benefits in income tax expense. In
addition to the gross unrecognized tax benefits identified above, the interest and penalties recorded to date by us totaled $8,286 and $7,889 at March 30, 2013 and December 29, 2012, respectively.
Our future effective tax rate will continue to be affected by changes in the relative mix of taxable income and losses in the tax
jurisdictions in which we operate, changes in the valuation of deferred tax assets, or changes in tax laws or interpretations thereof. In addition, our income tax returns are subject to continuous examination by the U.S. Internal Revenue Service
(IRS) and other tax authorities. In 2010, the IRS initiated an examination of tax years 2007 to 2009, which was concluded during the second quarter of 2012. As the statute of limitations has been extended for the periods 2008 to 2009, it
is possible that the IRS may reopen audits for these periods. During the thirteen weeks ended March 30, 2013, the IRS initiated its examination of tax years 2010 to 2011.
It is possible that within the next twelve months, ongoing tax examinations in the U.S. states and several of our foreign jurisdictions may be resolved, that new tax exams may commence and that other
issues may be effectively settled. However, we do not expect our assessment of unrecognized tax benefits to change significantly over that time.
Note 11 Segment Information
We operate predominantly in a single industry segment as a distributor of IT products and supply chain solutions
worldwide. Our IT distribution reporting segments are based on geographic location, and the measure of segment profit is income from operations. We do not allocate stock-based compensation recognized (see Note 4) to our operating units;
therefore, we are reporting this as a separate amount.
Geographic areas in which we operated during 2013 include
North America (the United States and Canada), Europe (Austria, Belgium, France, Germany, Hungary, Italy, the Netherlands, Spain, Sweden, Switzerland and the United Kingdom), Asia-Pacific (Australia, the Peoples Republic of China including
Hong Kong, India, Indonesia, Malaysia, New Zealand, Singapore, Thailand, Lebanon, United Arab Emirates, Turkey, Egypt and South Africa), and Latin America (Brazil, Chile, Colombia, Mexico, Peru, and our Latin American export operations in
Miami).
As discussed in Note 7, our acquisition of BrightPoint in October 2012 expanded our product and service offerings to
mobile device lifecycle services and logistics solution worldwide and has been added as a reporting segment. BrightPoint has operations in the following geographic areas: the United States, Finland, Germany, Norway, Poland, Portugal, Senegal,
Slovakia, South Africa, Spain, Sweden, Switzerland, the United Arab Emirates, the United Kingdom, Australia, Hong Kong, India, Malaysia, New Zealand and Singapore.
15
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In 000s, except per share data)
(Unaudited)
Financial information by reporting segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
|
March 30,
2013
|
|
|
March 31,
2012
|
|
Net sales
|
|
|
|
|
|
|
|
|
IT Distribution:
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
3,867,819
|
|
|
$
|
3,606,947
|
|
Europe
|
|
|
2,668,995
|
|
|
|
2,647,056
|
|
Asia-Pacific
|
|
|
2,194,507
|
|
|
|
1,949,752
|
|
Latin America
|
|
|
461,958
|
|
|
|
431,626
|
|
BrightPoint
|
|
|
1,069,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,262,444
|
|
|
$
|
8,635,381
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
|
|
|
|
|
|
IT Distribution:
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
55,575
|
|
|
$
|
69,649
|
|
Europe
|
|
|
13,944
|
|
|
|
22,000
|
|
Asia-Pacific
|
|
|
13,835
|
|
|
|
14,420
|
|
Latin America
|
|
|
5,551
|
|
|
|
7,428
|
|
BrightPoint
|
|
|
9,307
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
(7,416
|
)
|
|
|
(9,446
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
90,796
|
|
|
$
|
104,051
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
|
|
|
|
|
IT Distribution:
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
11,026
|
|
|
$
|
15,298
|
|
Europe
|
|
|
806
|
|
|
|
758
|
|
Asia-Pacific
|
|
|
1,126
|
|
|
|
8,556
|
|
Latin America
|
|
|
316
|
|
|
|
148
|
|
BrightPoint
|
|
|
2,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
15,431
|
|
|
$
|
24,760
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
|
|
IT Distribution:
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
7,119
|
|
|
$
|
7,026
|
|
Europe
|
|
|
2,536
|
|
|
|
2,591
|
|
Asia-Pacific
|
|
|
1,845
|
|
|
|
1,554
|
|
Latin America
|
|
|
329
|
|
|
|
323
|
|
BrightPoint
|
|
|
6,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
18,227
|
|
|
$
|
11,494
|
|
|
|
|
|
|
|
|
|
|
16
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In 000s, except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
|
March 30,
2013
|
|
|
March 31,
2012
|
|
Amortization of intangible assets
|
|
|
|
|
|
|
|
|
IT Distribution:
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
1,785
|
|
|
$
|
1,690
|
|
Europe
|
|
|
498
|
|
|
|
550
|
|
Asia-Pacific
|
|
|
212
|
|
|
|
460
|
|
Latin America
|
|
|
222
|
|
|
|
225
|
|
BrightPoint
|
|
|
9,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,765
|
|
|
$
|
2,925
|
|
|
|
|
|
|
|
|
|
|
Income from operations for the thirteen weeks ended March 30, 2013 included an aggregate of $13,244
in charges comprised of: (a) $8,666 in reorganization costs, as discussed in Note 8, and (b) $4,578 primarily for legal, consulting and other costs associated with the integration of BrightPoint and transition costs incurred for certain executives,
charged to SG&A expenses, ($2,475, $2,592, $3,295 and $4,882 of net charges in North America, Europe, Asia-Pacific and BrightPoint, respectively). Income from operations for the thirteen weeks ended March 31, 2012 included an aggregate
of $3,057 in charges comprised of reorganization costs of $557 ($32, $301 and $224 of net charges in North America, Asia-Pacific and Latin America, respectively) and costs of $2,500 associated with the transition of our former chief
executive officer, charged to SG&A expenses in North America.
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
March 30,
2013
|
|
|
December 29,
2012
|
|
Identifiable assets
|
|
|
|
|
|
|
|
|
IT Distribution:
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
3,765,128
|
|
|
$
|
4,103,657
|
|
Europe
|
|
|
2,474,931
|
|
|
|
2,883,678
|
|
Asia-Pacific
|
|
|
1,850,492
|
|
|
|
1,880,431
|
|
Latin America
|
|
|
516,247
|
|
|
|
652,552
|
|
BrightPoint
|
|
|
2,050,561
|
|
|
|
1,960,130
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,657,359
|
|
|
$
|
11,480,448
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets
|
|
|
|
|
|
|
|
|
IT Distribution:
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
332,371
|
|
|
$
|
329,175
|
|
Europe
|
|
|
45,812
|
|
|
|
50,498
|
|
Asia-Pacific
|
|
|
44,976
|
|
|
|
45,898
|
|
Latin America
|
|
|
9,512
|
|
|
|
9,415
|
|
BrightPoint
|
|
|
403,583
|
|
|
|
418,820
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
836,254
|
|
|
$
|
853,806
|
|
|
|
|
|
|
|
|
|
|
Net sales for the United States, which is our country of domicile, were $3,657,340 and $3,138,448 for the
thirteen weeks ended March 30, 2013 and March 31, 2012, respectively. Long-lived assets located in the United States were $593,281 and $595,949 as of March 30, 2013 and December 29, 2012, respectively.
17
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In 000s, except per share data)
(Unaudited)
Note 12 Commitments and Contingencies
Our Brazilian subsidiary has received a number of tax assessments including: (1) a 2005 Federal import tax
assessment claiming certain commercial taxes totaling Brazilian Reais 12,714 ($6,421 at March 30, 2013 exchange rates) were due on the import of software acquired from international vendors for the period January through September of 2002;
(2) a 2007 Sao Paulo Municipal tax assessment claiming Brazilian Reais 29,111 ($14,702 at March 30, 2013 exchange rates) of service taxes were due on the resale of acquired software covering years 2002 through 2006, plus Brazilian Reais
25,972 ($13,116 at March 30, 2013 exchange rates) of associated penalties; and (3) a 2011 Federal income tax assessment, a portion of which claims statutory penalties totaling Brazilian Reais 15,900 ($8,030 at March 30, 2013 exchange
rates) for delays in providing certain electronic files during the audit of tax years 2008 and 2009, which was conducted through the course of 2011. After working with our advisors, we believe the matters raised in the various assessments, other
than the three assessments noted above, represent a remote risk of loss.
In addition to the amounts assessed, it is possible
that we could also be assessed up to Brazilian Reais 39,495 ($19,947 at March 30, 2013 exchange rates) for penalties and interest on the 2005 assessment and up to Brazilian Reais 127,026 ($64,155 at March 30, 2013 exchange rates) for
interest and inflationary adjustments on the 2007 assessment. After working with our advisors on these matters, we believe we have good defenses against each matter and do not believe it is probable that we will suffer a material loss for amounts in
the 2007 and the 2011 assessments or any other unassessed amounts noted above. While we will continue to vigorously pursue administrative and, if applicable, judicial action in defending against the 2005 Federal import tax assessment, we continue to
maintain a reserve for the full amount assessed at March 30, 2013.
There are various other claims, lawsuits and pending
actions against us incidental to our operations. It is the opinion of management that the ultimate resolution of these matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.
However, we can make no assurances that we will ultimately be successful in our defense of any of these matters.
As is
customary in the IT distribution industry, we have arrangements with certain finance companies that provide inventory-financing facilities for their customers. In conjunction with certain of these arrangements, we have agreements with the finance
companies that would require us to repurchase certain inventory, which might be repossessed from the customers by the finance companies. Due to various reasons, including among other factors, the lack of information regarding the amount of saleable
inventory purchased from us still on hand with the customer at any point in time, repurchase obligations relating to inventory cannot be reasonably estimated. Repurchases of inventory by us under these arrangements have been insignificant to date.
Note 13 New Accounting Standards
In December 2011, the FASB issued a new accounting standard related to enhanced disclosures on offsetting (netting) of
assets and liabilities in the financial statements. This standard requires improved information about financial instruments and derivative instruments that are either allowed to be offset in accordance with another accounting standard or subject to
an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with another accounting standard. Under this standard, financial statements should disclose the gross amounts of those recognized
assets and liabilities and the amounts offset, whether permitted by another accounting standard or subject to master netting arrangement, to determine the net amounts presented in the statement of financial position. This standard was effective for
us beginning December 30, 2012 and did not have a material impact on our consolidated financial position.
18