NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In 000s, except per share data)
Note 1 — Organization and Basis of Presentation
Ingram Micro Inc. and its subsidiaries are primarily engaged in the distribution of information technology (“IT”) products, supply chain services and mobile device lifecycle services worldwide. Ingram Micro Inc. and its subsidiaries operate in North America, Europe, Asia-Pacific, Middle East and Africa, and Latin America. Beginning in 2012, we added a reportable segment for mobility which reflects our acquisition of Brightpoint, Inc. (“BrightPoint”).
Note 2 — Significant Accounting Policies
Basis of Consolidation
The consolidated financial statements include the accounts of Ingram Micro Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. 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.
Fiscal Year
Our fiscal year is a
52
- or
53
-week period ending on the Saturday nearest to December 31. All references herein to “2013,” “2012,” and “2011” represent the
52
-week fiscal years ended December 28, 2013, December 29, 2012 and December 31, 2011, respectively.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S.”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement date, and reported amounts of revenue and expenses during the reporting period. We review our estimates and assumptions on an on-going basis. Significant estimates primarily relate to the realizable value of accounts receivable, vendor programs, inventory, goodwill, intangible and other long-lived assets, income taxes and contingencies and litigation. Actual results could differ from these estimates.
Revenue Recognition
Revenue is recognized when: an arrangement exists; delivery has occurred, including transfer of title and risk of loss for product sales, or services have been rendered for service revenues; the price to the buyer is fixed or determinable; and collection is reasonably assured. Service revenues represent less than 10% of total net sales for 2013, 2012 and 2011. We, under specific conditions, permit our customers to return or exchange products. The provision for estimated sales returns is recorded concurrently with the recognition of revenue. The net impact on gross margin from estimated sales returns is included in allowances against trade accounts receivable in the consolidated balance sheet. We also have limited contractual relationships with certain of our customers and suppliers whereby we assume an agency relationship in the transaction. In such arrangements, we recognize as revenues the net fee associated with serving as an agent.
Vendor Programs
Funds received from vendors for price protection, product rebates, marketing/promotion, infrastructure reimbursement and meet-competition programs are recorded as adjustments to product costs, revenue, or selling, general and administrative (“SG&A”) expenses according to the nature of the program. Some of these programs may extend over one or more quarterly reporting periods. We accrue rebates or other vendor incentives as earned based on sales of qualifying products or as services are provided in accordance with the terms of the related program.
We sell products purchased from many vendors, but generated approximately
15%
,
18%
and
21%
of our net sales in 2013, 2012 and 2011, respectively, from products purchased from Hewlett-Packard Company, and approximately
10%
of our consolidated net sales in 2012 from products purchased from Apple Inc. The year-over-year decreases in products purchased from these vendors, as a percentage of net sales, for the periods discussed above reflects the higher mix of products purchased from other vendors as a result of changes in the market in general and our acquisition of BrightPoint which does not have significant products purchased from these vendors. There were no other vendors whose products represented 10% or more of our net sales for each of the last three fiscal years.
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
Warranties
Our suppliers generally warrant the products distributed by us and allow returns of defective products, including those that have been returned to us by our customers. We generally do not independently warrant the products we distribute; however, local laws might impose warranty obligations upon distributors (such as in the case of supplier liquidation). We are obligated to provide warranty protection for sales of certain IT products within the European Union (“EU”) for
up to two years
as required under the EU directive where vendors have not affirmatively agreed to provide pass-through protection. In addition, we warrant the services we provide, products that we build-to-order from components purchased from other sources, and our own branded products. Provision for estimated warranty costs is recorded at the time of sale and periodically adjusted to reflect actual experience. Warranty expense and the related obligations are not material to our consolidated financial statements.
Foreign Currency Translation and Remeasurement
Financial statements of our foreign subsidiaries, for which the functional currency is the local currency, are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and a weighted average exchange rate for each period for statement of income items. Translation adjustments are recorded in accumulated other comprehensive income, a component of stockholders’ equity. The functional currency of a few operations within our Europe, Asia-Pacific and Latin America regions is the U.S. dollar; accordingly, the monetary assets and liabilities of these subsidiaries are remeasured into U.S. dollars at the exchange rate in effect at the balance sheet date. Revenues, expenses, gains or losses are remeasured at the average exchange rate for the period, and nonmonetary assets and liabilities are remeasured at historical rates. The resultant remeasurement gains and losses of these operations as well as gains and losses from foreign currency transactions are included in the consolidated statement of income.
Cash and Cash Equivalents
We consider all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents.
Book overdrafts of
$347,837
and
$415,207
as of December 28, 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 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 December 28, 2013 and December 29, 2012, or any balance on any given date.
Trade Accounts Receivable Factoring Programs
We have several uncommitted factoring programs 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 level of our trade accounts receivable eligible to be sold into these programs and the financial institutions’ willingness to purchase such receivables. At December 28, 2013 and December 29, 2012, we had a total of
$381,451
and
$242,626
, respectively, of trade accounts receivable sold to and held by the financial institutions under these programs. Factoring fees of
$2,851
,
$3,822
and
$3,068
incurred in 2013, 2012 and 2011, 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.
Inventory
Our inventory consists of finished goods purchased from various vendors for resale. Inventory is stated at the lower of average cost or market, and is determined from the price we pay vendors, including freight and duties. We do not include labor, overhead or other general or administrative costs in our inventory.
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
Property and Equipment
Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives noted below. We also capitalize computer software costs that meet both the definition of internal-use software and defined criteria for capitalization. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life. Depreciable lives of property and equipment are as follows:
|
|
|
Buildings
|
30-40 years
|
Leasehold improvements
|
3-17 years
|
Distribution equipment
|
5-10 years
|
Computer equipment and software
|
3-10 years
|
Maintenance, repairs and minor renewals are charged to expense as incurred. Additions, major renewals and betterments to property and equipment are capitalized.
Long-Lived and Intangible Assets
We assess potential impairments to our long-lived and intangible assets when events or changes in circumstances indicate that the carrying amount may not be fully recoverable. If required, an impairment loss is recognized as the difference between the carrying value and the fair value of the assets. The gross carrying amounts of finite-lived identifiable intangible assets of
$496,789
and
$445,385
at December 28, 2013 and December 29, 2012, respectively, are amortized over their remaining estimated lives ranging up to
20
years with the predominant amounts having lives of
3
to
10
years. The net carrying amount was
$375,423
and
$372,482
at December 28, 2013 and December 29, 2012, respectively. Amortization expense was
$48,480
,
$20,711
and
$12,550
for 2013, 2012 and 2011, respectively. Future minimum amortization expense of finite-lived identifiable intangible assets that we expect to recognize over the next five years and thereafter are as follows:
|
|
|
|
|
2014
|
$
|
57,038
|
|
2015
|
54,702
|
|
2016
|
48,189
|
|
2017
|
48,094
|
|
2018
|
47,259
|
|
Thereafter
|
120,141
|
|
|
$
|
375,423
|
|
There were
no
impairments to our long-lived and other identifiable intangible assets in 2013, 2012 and 2011.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired in an acquisition and is reviewed annually for potential impairment, or when circumstances warrant.
Additions to goodwill in 2013 were due to our acquisitions of SoftCom, Inc. ("SoftCom"), CloudBlue Technologies, Inc. ("CloudBlue") and Shipwire, Inc. ("Shipwire") in North America during the third and fourth quarters of 2013. Additionally, we adjusted goodwill in 2013 to reflect the finalization of the allocation of purchase price related to the fourth quarter 2012 acquisitions of BrightPoint, Aptec Holdings Ltd. ("Aptec") and Promark Technology Inc. ("Promark"). The adjustments include the finalization of the valuation of a noncontrolling interest in one of the acquired BrightPoint subsidiaries as well as the assessment of certain tax matters (see Note 4 "Acquisitions, Goodwill and Intangible Assets").
Goodwill is required to be tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that goodwill may be impaired. We perform our annual goodwill impairment review during our fiscal fourth quarter, using a combination of the income and market approach. Our annual review indicated that we had no impairment of goodwill, and all of our reporting units had estimated fair values that were in excess of their carrying values, including goodwill. In addition, we regularly evaluate whether events and circumstances have occurred that may indicate a potential change in recoverability of goodwill, including a deterioration in general economic conditions, an increased competitive environment, a change in management,
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
key personnel, strategy, vendors, or customers, negative or declining cash flows, or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods.
The changes in the carrying amount of goodwill for 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
|
|
Acquisitions
|
105,064
|
|
|
—
|
|
|
—
|
|
|
105,064
|
|
Adjustments/reclassifications
|
(800
|
)
|
|
1,671
|
|
|
(6,810
|
)
|
|
(5,939
|
)
|
Balance at December 28, 2013
|
$
|
108,819
|
|
|
$
|
6,622
|
|
|
$
|
412,085
|
|
|
$
|
527,526
|
|
Concentration of Credit Risk
Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents, trade accounts receivable from customers and vendors, and derivative financial instruments. Our cash and cash equivalents are deposited and/or invested with various financial institutions globally that are monitored by us regularly for credit quality. Our trade accounts receivable reflect a large number of customers and dispersed across wide geographic areas, none of which has accounted for
10%
or more of our consolidated net sales in 2013, 2012 and 2011 and no customer accounts receivable balance was greater than
10%
of our total trade accounts receivable at December 28, 2013 nor December 29, 2012. We perform ongoing credit evaluations of our customers’ financial conditions, obtain credit insurance in many locations and require collateral in certain circumstances. We maintain an allowance for estimated credit losses.
Derivative Financial Instruments
We operate in various locations around the world. We reduce our exposure to fluctuations in foreign exchange rates by creating offsetting positions through the use of derivative financial instruments in situations where there are not offsetting balances that create a natural hedge. The market risk related to the foreign exchange agreements is offset by changes in the valuation of the underlying items being hedged. In accordance with our policy, we do not use derivative financial instruments for trading or speculative purposes, nor are we a party to leveraged derivatives.
Foreign exchange risk is managed primarily by using forward contracts to hedge foreign currency-denominated receivables, payables and intercompany loans and expenses. Interest rate swaps and forward contracts are used to hedge foreign currency-denominated principal and interest payments related to intercompany loans.
All derivatives are recorded in our consolidated balance sheet at fair value. The estimated fair value of derivative financial instruments represents the amount required to enter into similar offsetting contracts with similar remaining maturities based on market-derived prices. Changes in the fair value of derivatives not designated as hedging instruments are recorded in current earnings. Changes in the fair value of derivatives designated as hedging instruments are reflected in accumulated other comprehensive income.
The notional amount of forward exchange contracts is the amount of foreign currency bought or sold at maturity. The notional amount of interest rate swaps is the underlying principal amount used in determining the interest payments exchanged over the life of the swap. Notional amounts are indicative of the extent of our involvement in the various types and uses of derivative financial instruments but are not a measure of our exposure to credit or market risks through our use of derivatives.
Credit exposure for derivative financial instruments is limited to the amounts, if any, by which the counterparties’ obligations under the contracts exceed our obligations to the counterparties. We manage the potential risk of credit losses through careful evaluation of counterparty credit standing, selection of counterparties from a limited group of financial institutions and other contract provisions including collateral deposits.
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
Treasury Stock
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.
Comprehensive Income
Comprehensive income consists primarily of our net income, foreign currency translation adjustments and, fair value adjustments to our interest rate swap agreement designated as a cash flow hedge, which we settled in September 2011.
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
2013
|
|
2012
|
|
2011
|
Net income
|
$
|
310,583
|
|
|
$
|
305,909
|
|
|
$
|
244,240
|
|
Weighted average shares
|
152,900
|
|
|
150,654
|
|
|
155,882
|
|
Basic earnings per share
|
$
|
2.03
|
|
|
$
|
2.03
|
|
|
$
|
1.57
|
|
Weighted average shares including the dilutive effect of stock-based awards (3,372, 3,063 and 3,706 for 2013, 2012 and 2011, respectively)
|
156,272
|
|
|
153,717
|
|
|
159,588
|
|
Diluted earnings per share
|
$
|
1.99
|
|
|
$
|
1.99
|
|
|
$
|
1.53
|
|
There were approximately
2,069
,
3,487
and
2,671
stock-based awards in 2013, 2012 and 2011, respectively, which 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, thereby resulting in an antidilutive effect.
Income Taxes
We estimate income taxes in each of the taxing jurisdictions in which we operate. This process involves estimating our actual current tax expense together with assessing the future tax impact of any differences resulting from the different treatment of certain items, such as the timing for recognizing revenues and expenses for tax versus financial reporting purposes. These differences may result in deferred tax assets and liabilities, which are included in our consolidated balance sheet. We are required to assess the likelihood that our deferred tax assets, which include net operating loss carryforwards, tax credits and temporary differences that are expected to be deductible in future years, will be recoverable from future taxable income. In making that assessment, we consider the nature of the deferred tax assets and related statutory limits on utilization, recent operating results, future market growth, forecasted earnings, future taxable income, the mix of earnings in the jurisdictions in which we operate and prudent and feasible tax planning strategies. If, based upon available evidence, recovery of the full amount of the deferred tax assets is not likely; we provide a valuation allowance on any amount not likely to be realized.
Our effective tax rate includes the impact of not providing taxes on undistributed foreign earnings considered indefinitely reinvested. Material changes in our estimates of cash, working capital and long-term investment requirements in the various jurisdictions in which we do business could impact our effective tax rate if we no longer consider our foreign earnings to be indefinitely reinvested.
The provision for tax liabilities and recognition of tax benefits involves evaluations and judgments of uncertainties in the interpretation of complex tax regulations by various taxing authorities. In situations involving uncertain tax positions related to income tax matters, we do not recognize benefits unless their sustainability is deemed more likely than not. As additional information becomes available, or these uncertainties are resolved with the taxing authorities, revisions to these liabilities or benefits may be required, resulting in additional provision for or benefit from income taxes reflected in our consolidated statement of income.
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
Accounting for Stock-Based Compensation
We use the Black-Scholes option-pricing model to determine the fair value of stock options and the closing market price of our common stock on the date of the grant to determine the fair value of our restricted stock and restricted stock units. Stock-based compensation expense is recorded for all stock options, restricted stock and restricted stock units that are ultimately expected to vest as the requisite service is rendered. We recognize these compensation costs, net of an estimated forfeiture rate, on a straight-line basis over the requisite service period of the award, which is the vesting term of outstanding stock-based awards. We estimate the forfeiture rate based on our historical experience during the
preceding five fiscal years
.
New Accounting Standards
In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11,
Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists
, which requires a reporting entity to present an unrecognized tax benefit as a liability in the financial statements separate from deferred tax assets if a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available as of the reporting date to settle taxes that would result from the disallowance of the tax position or if a reporting entity does not intend to use the deferred tax asset for such purpose. This guidance will be effective for us beginning December 29, 2013, the first day of fiscal year 2014 and is not expected to have a material impact on our consolidated financial statements.
Note 3 — Reorganization Costs
2013 Actions
In 2013, we incurred net reorganization costs primarily relating to a number of key initiatives, including: (a) the integration of BrightPoint operations into Ingram Micro, resulting in headcount reductions and the closure of certain BrightPoint facilities, and the exit of a portion of our Australian offices in Asia-Pacific; (b) headcount reductions in Europe to respond to the current market environment, and (c) the transition of certain transaction-oriented service and support functions to shared services centers.
2012 Actions
In 2012, we implemented headcount reductions primarily in Australia and New Zealand to better align our operating expenses with each country’s lower sales volumes. Additionally, we moved certain transactions-oriented service and support functions to global shared service centers located in Asia-Pacific and Europe. We closed our in-country Argentina operations in Latin America and are now servicing this market through our export operations in Miami. Associated with these actions, we incurred net reorganization costs related to employee termination benefits.
2011 and Prior Actions
In 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 and the loss of market share in that country. We also implemented headcount reductions in certain operations in North America, Europe and Latin America.
In 2009 and earlier, we incurred costs to integrate past acquisitions, and launched 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.
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
A summary of the reorganization and expense-reduction program costs incurred in 2013, 2012 and 2011 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganization costs
|
|
|
Headcount Reduction
|
|
Employee Termination Benefits
|
|
Facility Costs
|
|
Total Reorganization Costs
|
|
Adjustments to Prior Year Costs
|
|
Total Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended December 28, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
IT Distribution:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
|
$
|
3,698
|
|
|
$
|
—
|
|
|
$
|
3,698
|
|
|
$
|
173
|
|
|
$
|
3,871
|
|
Europe
|
|
|
|
11,316
|
|
|
—
|
|
|
11,316
|
|
|
(188
|
)
|
|
11,128
|
|
Asia-Pacific
|
|
|
|
952
|
|
|
4,259
|
|
|
5,211
|
|
|
(12
|
)
|
|
5,199
|
|
Latin America
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
BrightPoint
|
|
|
|
9,361
|
|
|
5,070
|
|
|
14,431
|
|
|
—
|
|
|
14,431
|
|
Total
|
|
628
|
|
$
|
25,327
|
|
|
$
|
9,329
|
|
|
$
|
34,656
|
|
|
$
|
(27
|
)
|
|
$
|
34,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended December 29, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
IT Distribution:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
|
$
|
34
|
|
|
$
|
—
|
|
|
$
|
34
|
|
|
$
|
779
|
|
|
$
|
813
|
|
Europe
|
|
|
|
3,087
|
|
|
—
|
|
|
3,087
|
|
|
(32
|
)
|
|
3,055
|
|
Asia-Pacific
|
|
|
|
4,523
|
|
|
—
|
|
|
4,523
|
|
|
(115
|
)
|
|
4,408
|
|
Latin America
|
|
|
|
432
|
|
|
—
|
|
|
432
|
|
|
—
|
|
|
432
|
|
BrightPoint
|
|
|
|
668
|
|
|
300
|
|
|
968
|
|
|
—
|
|
|
968
|
|
Total
|
|
359
|
|
$
|
8,744
|
|
|
$
|
300
|
|
|
$
|
9,044
|
|
|
$
|
632
|
|
|
$
|
9,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
IT Distribution:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
|
$
|
1,216
|
|
|
$
|
—
|
|
|
$
|
1,216
|
|
|
$
|
(467
|
)
|
|
$
|
749
|
|
Europe
|
|
|
|
2,070
|
|
|
—
|
|
|
2,070
|
|
|
(617
|
)
|
|
1,453
|
|
Asia-Pacific
|
|
|
|
2,730
|
|
|
—
|
|
|
2,730
|
|
|
—
|
|
|
2,730
|
|
Latin America
|
|
|
|
199
|
|
|
—
|
|
|
199
|
|
|
—
|
|
|
199
|
|
Total
|
|
123
|
|
$
|
6,215
|
|
|
$
|
—
|
|
|
$
|
6,215
|
|
|
$
|
(1,084
|
)
|
|
$
|
5,131
|
|
Adjustments in the table above primarily reflect increases or decreases in estimated costs for employee terminations or to exit facilities.
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
The remaining liabilities and 2013 activities associated with the aforementioned actions are summarized in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganization Liability
|
|
|
|
Remaining Liability at December 29, 2012
|
|
Expenses (Income), Net
|
|
Amounts Paid
and Charged
Against the
Liability
|
|
Foreign Currency Translation (a)
|
|
Remaining Liability at December 28, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 Reorganization actions
|
|
|
|
|
|
|
|
|
|
|
|
Employee termination benefits
|
|
$
|
—
|
|
|
$
|
25,327
|
|
|
$
|
(12,615
|
)
|
|
$
|
177
|
|
|
$
|
12,889
|
|
|
Facility Costs
|
|
—
|
|
|
9,329
|
|
|
(3,438
|
)
|
|
(385
|
)
|
|
$
|
5,506
|
|
|
Subtotal
|
|
—
|
|
|
34,656
|
|
|
(16,053
|
)
|
|
(208
|
)
|
|
18,395
|
|
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 Reorganization actions
|
|
|
|
|
|
|
|
|
|
|
|
Employee termination benefits
|
|
1,826
|
|
|
(200
|
)
|
|
(604
|
)
|
|
37
|
|
|
1,059
|
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 Reorganization actions
|
|
|
|
|
|
|
|
|
|
|
|
Employee termination benefits
|
|
79
|
|
|
—
|
|
|
(79
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 and prior reorganization actions
|
|
|
|
|
|
|
|
|
|
|
|
Facility Costs
|
|
6,214
|
|
|
173
|
|
|
(3,137
|
)
|
|
(230
|
)
|
|
$
|
3,020
|
|
(d)
|
|
|
$
|
8,119
|
|
|
$
|
34,629
|
|
|
$
|
(19,873
|
)
|
|
$
|
(401
|
)
|
|
$
|
22,474
|
|
|
(a)
Reflects the net foreign currency impact on the U.S. dollar liability.
(b)
We expect the remaining liabilities to be substantially utilized by the end of 2016.
(c)
We expect the remaining liabilities to be substantially utilized by the end of 2014.
(d)
We expect the remaining liabilities to be fully utilized by the end of 2015.
Note 4 — Acquisitions, Goodwill and Intangible Assets
2013 Acquisitions
On December 2, 2013, we acquired all of the issued and outstanding shares of Shipwire, a global provider of e-commerce fulfillment services for small-to-medium-sized business worldwide for cash of
$86,000
. The major classes of assets and liabilities to which we preliminarily allocated the purchase price were goodwill of
$65,000
, and identifiable intangible assets of
$25,000
, primarily consisting of software, trade name and customer relationships with estimated lives of
five
years. The goodwill recognized in connection with the acquisition is primarily attributable to the assembled workforce and our expectation of extending Shipwire's brand and the reach of its networked platform, while enhancing our existing portfolio of products and services. This acquisition will expand our solutions offerings into the large and growing e-commerce fulfillment market.
On September 30, 2013, we completed the acquisition of Norcross, Georgia-based CloudBlue, a provider of enterprise IT asset disposition, on-site data destruction and e-waste recycling services to large enterprise customers for cash of
$38,500
. We have preliminarily allocated the purchase price to the identifiable assets acquired and liabilities assumed at their estimated fair values which included approximately
$15,000
of intangible assets and approximately
$25,000
of goodwill. The identifiable intangible assets primarily consisted of customer relationships, software and trade name with estimated useful lives up to
five
years. The goodwill recognized is primarily attributable to the assembled workforce and our expectation of expanding our supply chain solutions portfolio with a full suite of in-demand services.
On September 12, 2013, we acquired all of the outstanding shares of Canada-based SoftCom, a cloud marketplace and global service provider, for cash of
$11,000
and payment of outstanding debt of
$3,400
. In addition, the purchase price includes a deferred payment of
$5,000
, payable over three years and a
$3,650
three-year performance-based earn-out. We have preliminarily allocated the purchase price to the identifiable assets acquired and liabilities assumed at their estimated fair values which included approximately
$9,000
of intangible assets and approximately
$15,000
of goodwill. The identifiable intangible assets primarily consisted of domain names and software with estimated useful lives of
six
years. The goodwill recognized is primarily attributable to the assembled workforce and the enhancement of cloud offerings road map and aggregation platform to our reseller partners.
These entities have been included in our consolidated results of operations since their respective acquisition dates.
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
Pro forma results of operations have not been presented for the 2013 acquisitions because the effects of the business combinations for these acquisitions, individually and in aggregate, were not material to our consolidated results of operations.
2012 Acquisitions
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 BrightPoint’s 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 BrightPoint’s outstanding debt of
$260,257
as of October 15, 2012.
We are realizing operational benefits by leveraging existing channel relationships and utilizing the assembled workforce. We also have achieved significant savings in corporate and operational overhead costs. We anticipate continued 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 BrightPoint’s net identifiable assets acquired, and, as a result, we have recorded goodwill in connection with this transaction.
The following table summarizes the 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)
|
$
|
1,158,450
|
|
Goodwill
|
412,085
|
|
Identifiable intangible assets
|
309,000
|
|
Liabilities (includes accounts payable, accrued expenses and other liabilities)
|
(1,011,343
|
)
|
|
$
|
868,192
|
|
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 unaudited pro forma operating results for the years ended December 29, 2012 and December 31, 2011 as if BrightPoint had been included in our consolidated statement of income as of the first day of fiscal year 2011 and includes 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.
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
2012
|
|
2011
|
Net sales
|
$
|
41,802,220
|
|
|
$
|
41,573,084
|
|
Net income
|
$
|
310,791
|
|
|
$
|
282,901
|
|
Earnings per share
|
|
|
|
Basic
|
$
|
2.06
|
|
|
$
|
1.81
|
|
Diluted
|
$
|
2.02
|
|
|
$
|
1.77
|
|
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.
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
In the fourth quarter of 2012, we acquired Aptec, excluding its Saudi Arabia business, for a cash price of approximately
$16,302
. The purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair values on the transaction dates, resulting in the recording of goodwill of
$6,622
and 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.
On
November 30, 2012
, we acquired all of the outstanding shares of Promark for an initial cash payment of
$7,707
; payment of its outstanding debt of
$4,675
; a hold-back amount of
$2,250
, 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 allocated the purchase price to the identifiable assets acquired and liabilities assumed at their estimated fair values with
$3,755
recorded as goodwill. This acquisition further strengthens our position in higher value products and solutions and extends our reach within the public sector in the North American region.
Pro forma results of operations of Aptec and Promark have not been presented because the effects of the business combinations of these acquisitions, individually and in the aggregate, were not material to our consolidated results of operations.
Note 5 — Property and Equipment
Property and equipment consist of the following:
|
|
|
|
|
|
|
|
|
|
Fiscal Year End
|
|
2013
|
|
2012
|
Land
|
$
|
11,614
|
|
|
$
|
11,706
|
|
Buildings and leasehold improvements
|
190,604
|
|
|
186,934
|
|
Distribution equipment
|
286,902
|
|
|
278,064
|
|
Computer equipment and software
|
690,841
|
|
|
636,723
|
|
|
1,179,961
|
|
|
1,113,427
|
|
Accumulated depreciation
|
(691,262
|
)
|
|
(632,103
|
)
|
|
$
|
488,699
|
|
|
$
|
481,324
|
|
Note 6 — Debt
The carrying value of our outstanding debt consists of the following:
|
|
|
|
|
|
|
|
|
|
Fiscal Year End
|
|
2013
|
|
2012
|
Senior unsecured notes, 5.25% due 2017
|
$
|
300,000
|
|
|
$
|
300,000
|
|
Senior unsecured notes, 5.00% due 2022, net of unamortized discount of $1,546 and $1,725, respectively
|
298,454
|
|
|
298,275
|
|
North America revolving trade accounts receivable-backed financing program
|
199,000
|
|
|
345,000
|
|
Lines of credit and other debt
|
48,772
|
|
|
111,268
|
|
|
846,226
|
|
|
1,054,543
|
|
Short-term debt and current maturities of long-term debt
|
(48,772
|
)
|
|
(111,268
|
)
|
|
$
|
797,454
|
|
|
$
|
943,275
|
|
In August 2012, we issued through a public offering
$300,000
of
5.00%
senior unsecured notes due 2022, resulting in cash proceeds of approximately
$296,256
, net of discount and issuance costs of
$1,794
and
$1,950
, respectively. Interest on the notes is payable semiannually in arrears on February 10 and August 10, commencing February 10, 2013. We also have
$300,000
of
5.25%
senior unsecured notes due 2017. Interest on the notes is payable semiannually in arrears on March 1 and September 1 of each year. These notes may be redeemed by us in whole at any time or in part from time to time, at our option, at redemption prices that are designated in the terms and conditions of the respective notes.
We have a revolving trade accounts receivable-backed financing program in North America which provides for up to
$675,000
in borrowing capacity. This financing program matures in November 2015. This financing program, subject to the financial institutions’ approval and availability of eligible receivables, may be increased to
$900,000
in accordance with the extended terms
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
of the program. The interest rate of this program is dependent on designated commercial paper rates (or, in certain circumstances, an alternate rate) plus a predetermined margin. We had borrowings of
$199,000
and
$345,000
at December 28, 2013 and December 29, 2012, respectively, under this North American financing program.
We have
three
revolving trade accounts receivable-backed financing programs in Europe and in Asia-Pacific:
|
|
a)
|
a program which provides for a borrowing capacity of up to
€105,000
, or approximately
$145,000
at December 28, 2013 exchange rates. In June 2013, we entered into an agreement to increase the borrowing capacity of this program to
€105,000
from the previous amount of
€100,000
and to extend its maturity to
January 2017
.
|
|
|
b)
|
A program which provides for a maximum borrowing capacity of up to
€45,000
, or approximately
$62,000
at December 28, 2013 exchange rates. In May 2013, this program was extended and in June 2013, we entered into an agreement to reduce the borrowing capacity of this program to
€45,000
from the previous amount of
€90,000
and to extend its maturity to
May 2016
.
|
|
|
c)
|
A program which provides for a maximum borrowing capacity of up to
160,000
Australian dollars, or approximately
$142,000
at December 28, 2013 exchange rates, maturing in
May 2014
.
|
The current programs require certain commitment fees, and borrowings under this program incur financing costs based on the local short-term bank indicator rate for the currency in which the drawing is made plus a predetermined margin. We had
no
borrowings at December 28, 2013 or December 29, 2012 under any of these three financing program.
Our ability to access financing under all our trade accounts receivable-backed financing programs in North America, Europe and Asia-Pacific, as discussed above, is dependent upon the level of eligible trade accounts receivable as well as continued covenant compliance. We may lose access to all or part of our financing under these programs under certain circumstances, including: (a) a reduction in sales volumes leading to related lower levels of eligible trade accounts receivable; (b) failure to meet certain defined eligibility criteria for the trade accounts receivable, such as receivables remaining assignable and free of liens and dispute or set-off rights; (c) performance of our trade accounts receivable; and/or (d) loss of credit insurance coverage for our European and Asia-Pacific facilities. At
December 28, 2013
, our actual aggregate capacity under these programs was approximately
$997,000
based on eligible trade accounts receivable available, of which
$199,000
of such capacity was used. Even if we do not borrow, or choose not to borrow to the full available capacity of certain programs, most of our trade accounts receivable-backed financing programs prohibit us from assigning, transferring or pledging the underlying eligible receivables as collateral for other financing programs. At
December 28, 2013
, the amount of trade accounts receivable which would be restricted in this regard totaled approximately
$1,525,000
.
We have a
$940,000
revolving senior unsecured credit facility from a syndicate of multinational banks, which was scheduled to mature in
September 2016
. In August 2013, we entered into an amendment of this facility to extend its maturity to
September 30, 2018
. In addition, the amendment provides an option to increase the total commitment by
$310,000
, subject to certain conditions. The interest rate on this facility is based on LIBOR, plus a predetermined margin that is based on our debt ratings and leverage ratio. We had
no
borrowings at
December 28, 2013
and
December 29, 2012
, under this credit facility. This credit facility may also be used to issue letters of credit. At
December 28, 2013
and
December 29, 2012
, letters of credit of
$7,996
and
$4,491
, respectively, were issued to certain vendors and financial institutions to support purchases by our subsidiaries, payment of insurance premiums and flooring arrangements. Our available capacity under the agreement is reduced by the amount of any outstanding letters of credit.
We also have additional lines of credit, short-term overdraft facilities and other credit facilities with various financial institutions worldwide, which provide for borrowing capacity aggregating approximately
$969,000
at
December 28, 2013
. Most of these arrangements are on an uncommitted basis and are reviewed periodically for renewal. At
December 28, 2013
and
December 29, 2012
, respectively, we had
$48,772
and
$111,268
outstanding under these facilities. The weighted average interest rate on the outstanding borrowings under these facilities, which may fluctuate depending on geographic mix, was
9.0%
and
7.9%
per annum at
December 28, 2013
and
December 29, 2012
, respectively. At
December 28, 2013
and
December 29, 2012
, letters of credit totaling
$31,636
and
$30,829
, respectively, were issued to various customs agencies and landlords to support our subsidiaries. The issuance of these letters of credit reduces our available capacity under these agreements by the same amount.
We are required to comply with certain financial covenants under the terms of certain of our financing facilities, including restrictions on funded debt and liens and covenants related to tangible net worth, leverage and interest coverage ratios and trade accounts receivable portfolio performance including metrics related to receivables and payables. We are also restricted by other covenants, including, but not limited to, restrictions on the amount of additional indebtedness we can incur, dividends we can pay, and the amount of common stock that we can repurchase annually. At
December 28, 2013
, we were in compliance with all material covenants or other material requirements set forth in our trade accounts receivable-backed programs, senior unsecured notes due
2017
and
2022
, revolving senior unsecured credit facility and other credit agreements, as discussed above.
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
Note 7 — Income Taxes
We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The estimates and assumptions we use in computing the income taxes reflected in our consolidated financial statements could differ from the actual results reflected in our income tax returns filed during the subsequent year. We record adjustments based on filed returns as such returns are finalized and resultant adjustments are identified.
The components of income before income taxes consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
2013
|
|
2012
|
|
2011
|
United States
|
$
|
200,663
|
|
|
$
|
156,134
|
|
|
$
|
129,412
|
|
Foreign
|
235,436
|
|
|
240,050
|
|
|
258,459
|
|
Total
|
$
|
436,099
|
|
|
$
|
396,184
|
|
|
$
|
387,871
|
|
The provision for income taxes consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
2013
|
|
2012
|
|
2011
|
Current:
|
|
|
|
|
|
Federal
|
$
|
80,910
|
|
|
$
|
13,642
|
|
|
$
|
29,238
|
|
State
|
8,225
|
|
|
2,547
|
|
|
3,951
|
|
Foreign
|
69,468
|
|
|
80,003
|
|
|
81,617
|
|
|
158,603
|
|
|
96,192
|
|
|
114,806
|
|
Deferred:
|
|
|
|
|
|
Federal
|
(13,894
|
)
|
|
(20,738
|
)
|
|
23,772
|
|
State
|
(1,776
|
)
|
|
1,161
|
|
|
707
|
|
Foreign
|
(17,417
|
)
|
|
13,660
|
|
|
4,346
|
|
|
(33,087
|
)
|
|
(5,917
|
)
|
|
28,825
|
|
Provision for income taxes
|
$
|
125,516
|
|
|
$
|
90,275
|
|
|
$
|
143,631
|
|
The reconciliation of the statutory U.S. federal income tax rate to our effective tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
2013
|
|
2012
|
|
2011
|
U.S. statutory rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State income taxes, net of federal income tax benefit
|
1.5
|
|
|
1.2
|
|
|
1.5
|
|
U.S. tax on foreign earnings, net of foreign tax credits
|
(4.6
|
)
|
|
0.6
|
|
|
0.2
|
|
Effect of international operations
|
(5.6
|
)
|
|
(7.7
|
)
|
|
(9.7
|
)
|
Effect of change in valuation allowances
|
2.9
|
|
|
2.6
|
|
|
8.7
|
|
Effect of worthless stock deduction
|
—
|
|
|
(9.0
|
)
|
|
—
|
|
Other
|
(0.4
|
)
|
|
0.1
|
|
|
1.3
|
|
Effective tax rate
|
28.8
|
%
|
|
22.8
|
%
|
|
37.0
|
%
|
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
Deferred income taxes reflect the tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our net deferred tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
Fiscal Year End
|
|
2013
|
|
2012
|
Deferred tax assets:
|
|
|
|
Net operating loss carryforwards
|
$
|
293,514
|
|
|
$
|
223,790
|
|
Tax credit carryforwards
|
134,573
|
|
|
94,732
|
|
Employee benefits, including stock-based compensation
|
51,764
|
|
|
60,292
|
|
Reorganization and restructuring reserves
|
3,138
|
|
|
4,410
|
|
Inventory
|
32,627
|
|
|
31,999
|
|
Depreciation and amortization
|
38,899
|
|
|
69,264
|
|
Allowance on trade accounts receivable
|
12,991
|
|
|
13,476
|
|
Reserves and accruals not currently deductible for income tax purposes
|
27,545
|
|
|
26,478
|
|
Other
|
33,308
|
|
|
17,700
|
|
Total deferred tax assets
|
628,359
|
|
|
542,141
|
|
Valuation allowance
|
(315,312
|
)
|
|
(241,095
|
)
|
Subtotal
|
313,047
|
|
|
301,046
|
|
Deferred tax liabilities:
|
—
|
|
|
|
Depreciation and amortization
|
(154,079
|
)
|
|
(166,239
|
)
|
Outside basis difference on earnings of foreign subsidiaries
|
(60,345
|
)
|
|
(61,560
|
)
|
Other
|
(15,250
|
)
|
|
(17,272
|
)
|
Total deferred tax liabilities
|
(229,674
|
)
|
|
(245,071
|
)
|
Net deferred tax assets
|
$
|
83,373
|
|
|
$
|
55,975
|
|
Out of the amounts shown above, net current deferred tax assets of
$83,001
and
$106,986
are included in other current assets at
December 28, 2013
and
December 29, 2012
, respectively. Net non-current deferred tax assets of
$372
as of
December 28, 2013
are included in other non-current assets and net non-current deferred tax liabilities of
$51,011
as of
December 29, 2012
are included in deferred income taxes.
We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence, including the nature of the deferred tax assets and related statutory limits on utilization, recent operating results, future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event we were to determine that we would be able to realize our deferred income tax assets in the future in excess of or less than the net recorded amount, we would make an adjustment to the valuation allowance which would reduce or increase the provision for income taxes.
At December 28, 2013, we had deferred tax assets related to net operating loss carryforwards of
$293,514
, along with a valuation allowance of
$235,757
, with the net amount reflecting the amount more likely than not to be realized. Of the remaining
$57,757
of net deferred tax assets associated with NOL carryforwards,
$22,001
has no expiration date. Included in the amounts noted above at December 28, 2013 is
$59,494
of deferred tax assets for local statutory losses that were generated by our Luxembourg subsidiary during 2013, along with an offsetting valuation allowance. A portion of the carryforwards may expire before being applied to reduce future income tax liabilities. We monitor all of our other deferred tax assets for realizability in a similar manner to those described above and will record or release valuation allowances as required to reflect the amount more likely than not to be realized.
At December 28, 2013, our total deferred tax assets related to foreign tax credit carryforwards in the U.S. was
$134,342
and our total valuation allowance related to such credit carryforwards was
$55,508
, with the net amount reflecting the amount more likely than not to be realized based on our current ability to generate the character of income required to utilize these credits prior to expiry through
2021
.
The valuation allowance increased by a net
$74,217
during 2013, driven largely by the increase in the valuation allowance on deferred tax assets related to the net operating losses in Luxembourg and the foreign tax credit carryforwards, as noted above.
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
The remaining increase relates primarily to book operating losses in certain subsidiaries that are currently not expected to be realized through future taxable income in these entities, partially offset by previously reserved amounts which became realizable based on taxable income generated in the current year, as well as the impacts of translation adjustments for previously established valuation allowances in currencies other than the U.S. dollar.
We have not provided deferred taxes on undistributed earnings from certain of our foreign subsidiaries that are indefinitely reinvested. These undistributed earnings may become taxable upon an actual or deemed repatriation of assets from the subsidiaries or a sale or liquidation of the subsidiaries. We estimate that our total net undistributed earnings upon which we have not provided deferred tax total approximately
$2,000,000
at
December 28, 2013
, and
$2,100,000
at
December 29, 2012
. A determination of the deferred tax liability on such earnings is not practicable as such liability is dependent upon our U.S. foreign tax credit position that would exist at the time any remittance would occur.
Tax benefits claimed from the exercise of employee stock options and other employee stock programs that are in excess of (less than) the amount recorded upon grant are recorded as an increase (decrease) in stockholders’ equity. In 2013, 2012 and 2011, these amounts totaled
$422
,
$5,810
and
$3,625
, respectively.
The total amount of gross unrecognized tax benefits is
$35,398
as of December 28, 2013, substantially all of which would impact the effective tax rate if recognized. A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
2013
|
|
2012
|
|
2011
|
Gross unrecognized tax benefits at beginning of the year
|
$
|
38,790
|
|
|
$
|
24,888
|
|
|
$
|
23,641
|
|
Increases in tax positions for prior years
|
4,918
|
|
|
17,281
|
|
|
3,953
|
|
Decreases in tax positions for prior years
|
(61
|
)
|
|
(900
|
)
|
|
(1,221
|
)
|
Increases in tax positions for current year
|
737
|
|
|
2,716
|
|
|
1,197
|
|
Decreases in tax positions for current year
|
—
|
|
|
—
|
|
|
—
|
|
Settlements
|
(1,078
|
)
|
|
(343
|
)
|
|
(789
|
)
|
Lapse in statute of limitations
|
(7,908
|
)
|
|
(4,852
|
)
|
|
(1,893
|
)
|
Gross unrecognized tax benefits at end of the year
|
$
|
35,398
|
|
|
$
|
38,790
|
|
|
$
|
24,888
|
|
We recognize interest and penalties related to unrecognized tax benefits in income tax expense. As of December 28, 2013, the total accrual for interest and penalties on our unrecognized tax benefits is
$7,333
.
We conduct business globally and, as a result, we and/or one or more of our subsidiaries file income tax returns in the U.S. federal and various state jurisdictions and in over thirty foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities in many of the jurisdictions in which we operate. In the U.S., the IRS has concluded its examination for the years prior to 2010. In our material tax jurisdictions, the statute of limitations is open, in general, for
three
-
five
years.
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 8 — Derivative Financial Instruments
Our derivatives designated as hedging instruments have consisted primarily of foreign currency forward contracts to hedge certain foreign currency-denominated intercompany management fees. 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. At December 28, 2013 and December 29, 2012, we had no derivatives that are designated as hedging instruments.
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
The notional amounts and fair values of derivative instruments in our consolidated balance sheet were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional Amounts(1)
|
|
Fair Value
|
|
December 28,
2013
|
|
December 29,
2012
|
|
December 28,
2013
|
|
December 29,
2012
|
Derivatives not receiving hedge accounting treatment recorded in:
|
|
|
|
|
|
|
|
Other current assets
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
$
|
334,519
|
|
|
$
|
817,172
|
|
|
$
|
2,942
|
|
|
$
|
2,897
|
|
Accrued expenses
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
1,486,407
|
|
|
607,836
|
|
|
(8,887
|
)
|
|
(3,776
|
)
|
Total
|
$
|
1,820,926
|
|
|
$
|
1,425,008
|
|
|
$
|
(5,945
|
)
|
|
$
|
(879
|
)
|
(1) Notional amounts represent the gross amount of foreign currency bought or sold at maturity for foreign exchange contracts.
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
2013
|
|
2012
|
|
2011
|
Net gain (loss) recognized in earnings
|
(11,657
|
)
|
|
(35,181
|
)
|
|
1,799
|
|
Note 9 — 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.
As of December 28, 2013, our assets and liabilities measured at fair value on a recurring basis are categorized in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 28, 2013
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets:
|
|
|
|
|
|
|
|
Cash equivalents, consisting primarily of money market accounts and short-term certificates of deposit
|
$
|
50,735
|
|
|
$
|
50,735
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Marketable trading securities (a)
|
53,856
|
|
|
53,856
|
|
|
—
|
|
|
—
|
|
Derivative assets
|
2,942
|
|
|
—
|
|
|
2,942
|
|
|
—
|
|
Total assets at fair value
|
$
|
107,533
|
|
|
$
|
104,591
|
|
|
$
|
2,942
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Derivative liabilities
|
$
|
8,887
|
|
|
$
|
—
|
|
|
$
|
8,887
|
|
|
$
|
—
|
|
Contingent consideration
|
3,650
|
|
|
—
|
|
|
—
|
|
|
3,650
|
|
Total liabilities at fair value
|
$
|
12,537
|
|
|
$
|
—
|
|
|
$
|
8,887
|
|
|
$
|
3,650
|
|
(a) Included in other current assets in our consolidated balance sheet.
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
As of December 29, 2012, our assets and liabilities measured at fair value on a recurring basis are categorized in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 29, 2012
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets:
|
|
|
|
|
|
|
|
Cash equivalents, consisting primarily of money market accounts and short-term certificates of deposit
|
$
|
189,381
|
|
|
$
|
189,381
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Marketable trading securities (a)
|
46,938
|
|
|
46,938
|
|
|
—
|
|
|
—
|
|
Derivative assets
|
2,897
|
|
|
—
|
|
|
2,897
|
|
|
—
|
|
Total assets at fair value
|
$
|
239,216
|
|
|
$
|
236,319
|
|
|
$
|
2,897
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Derivative liabilities
|
$
|
3,776
|
|
|
$
|
—
|
|
|
$
|
3,776
|
|
|
$
|
—
|
|
Total liabilities at fair value
|
$
|
3,776
|
|
|
$
|
—
|
|
|
$
|
3,776
|
|
|
$
|
—
|
|
(a) Included in other current assets in our consolidated balance sheet.
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 values were determined based on Level 2 criteria. The fair values and carrying values of these notes are shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 28, 2013
|
|
|
|
Fair Value
|
|
Carrying Value
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Senior unsecured notes, 5.25% due 2017
|
$
|
300,000
|
|
|
$
|
318,000
|
|
|
$
|
—
|
|
|
$
|
318,000
|
|
|
$
|
—
|
|
Senior unsecured notes, 5.00% due 2022
|
298,454
|
|
|
301,200
|
|
|
—
|
|
|
301,200
|
|
|
—
|
|
|
$
|
598,454
|
|
|
$
|
619,200
|
|
|
$
|
—
|
|
|
$
|
619,200
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 29, 2012
|
|
|
|
Fair Value
|
|
Carrying Value
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Senior unsecured notes, 5.25% due 2017
|
$
|
300,000
|
|
|
$
|
326,000
|
|
|
$
|
—
|
|
|
$
|
326,000
|
|
|
$
|
—
|
|
Senior unsecured notes, 5.00% due 2022
|
298,275
|
|
|
307,000
|
|
|
—
|
|
|
307,000
|
|
|
—
|
|
|
$
|
598,275
|
|
|
$
|
633,000
|
|
|
$
|
—
|
|
|
$
|
633,000
|
|
|
$
|
—
|
|
The carrying amounts of our trade accounts receivable, accounts payable and other accrued expenses approximate fair value because of the short maturity of these items. Our North American, European and Asia-Pacific revolving trade accounts receivable-backed financing programs bear interest at variable rates based on designated commercial paper rates and local reference rates, respectively, plus a predetermined fixed margin. The interest rates of our revolving unsecured credit facilities and other debt are dependent upon the local short-term bank indicator rate for a particular currency, which also resets regularly. The carrying amounts of all these facilities approximate their fair value because of the revolving nature of the borrowings and because the all-in rate (consisting of variable rates and fixed margin) adjusts regularly to reflect current market rates with appropriate consideration for our credit profile.
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
Note 10 — Commitments and Contingencies
Our Brazilian subsidiary has received a number of tax assessments including the following: (1) a 2005 Federal import tax assessment claiming certain commercial taxes totaling Brazilian Reais
12,714
(
$5,401
at December 28, 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
(
$12,368
at December 28, 2013 exchange rates) of service taxes were due on the resale of acquired software covering years 2002 through 2006, plus Brazilian Reais
25,972
(
$11,034
at December 28, 2013 exchange rates) of associated penalties; (3) a 2011 Federal income tax assessment, a portion of which claims statutory penalties totaling Brazilian Reais
15,900
(
$6,755
at December 28, 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; (4) a 2012 Sao Paulo municipal tax assessment claiming Brazilian Reais
2,996
(
$1,272
at December 28, 2013 exchange rates) of service taxes due on the importation of software covering the year 2007 plus Brazilian Reais
1,498
(
$636
at December 28, 2013 exchange rates) of associated penalties; and (5) a 2013 Sao Paulo municipal tax assessment claiming Brazilian Reais
10,725
(
$4,556
at December 28, 2013 exchange rates) of service taxes due on the importation of software covering the years 2008, 2009, 2010 and January through May 2011 plus Brazilian Reais
5,362
(
$2,278
at December 28, 2013 exchange rates) of associated penalties. 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 tax amount assessed at December 28, 2013 in item (1) above. After working with our advisors, we believe the other matters noted above do not represent a probable loss.
In addition to the amounts described above, incremental charges for possible penalties, interest and inflationary adjustments could be imposed in an amount up to Brazilian Reais
206,701
(
$87,815
at December 28, 2013 exchange rates) for 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 these matters.
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 our 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 items, 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.
We have guarantees to third parties that provide financing to a limited number of our customers. Net sales under these arrangements accounted for less than one percent of our consolidated net sales for 2013, 2012 and 2011. The guarantees require us to reimburse the third party for defaults by these customers up to an aggregate of
$5,600
. The fair value of these guarantees has been recognized as cost of sales to these customers and is included in other accrued liabilities.
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
We lease the majority of our facilities and certain equipment under noncancelable operating leases. Rental expense, including obligations related to IT outsourcing services, for the years ended 2013, 2012 and 2011 was
$113,709
,
$96,669
and
$93,725
, respectively.
Future minimum rental commitments on operating leases that have remaining noncancelable lease terms as of December 28, 2013 are as follows:
|
|
|
|
|
2014
|
$
|
102,351
|
|
2015
|
71,865
|
|
2016
|
59,779
|
|
2017
|
50,019
|
|
2018
|
41,983
|
|
Thereafter
|
96,450
|
|
|
$
|
422,447
|
|
The above minimum payments have not been reduced by minimum sublease rental income of
$6,980
due in the future under noncancelable sublease agreements as follows:
$4,277
and
$2,703
in 2014 and 2015, respectively.
Note 11 — Segment Information
Subsequent to our acquisition of BrightPoint, we have operated predominantly in the following industry segments: (1) distribution of IT products and supply chain solutions worldwide and (2) distribution of mobile devices as well as device lifecycle services and logistics solutions. Our IT distribution reporting segments are based on geographic location, and the measure of segment profit is income from operations.
Geographic areas in which we operated our IT distribution reporting segments during 2013 include North America (the United States and Canada), Europe (Austria, Belgium, France, Germany, Hungary, Italy, Israel, the Netherlands, Spain, Sweden, Switzerland and the United Kingdom), Asia-Pacific (Australia, the People’s 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).
Our BrightPoint reporting segment has operations in the following geographic areas: the United States, Denmark, 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.
We do not allocate stock-based compensation recognized (see Note 12) to our operating units; therefore, we are reporting this as a separate amount.
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
Financial information by reporting segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
2013
|
|
2012
|
|
2011
|
Net sales
|
|
|
|
|
|
IT Distribution:
|
|
|
|
|
|
North America
|
$
|
16,433,994
|
|
|
$
|
15,880,103
|
|
|
$
|
15,250,560
|
|
Europe
|
10,843,514
|
|
|
10,614,811
|
|
|
11,371,043
|
|
Asia-Pacific
|
8,698,116
|
|
|
8,347,170
|
|
|
7,920,649
|
|
Latin America
|
2,051,899
|
|
|
1,943,841
|
|
|
1,786,449
|
|
BrightPoint
|
4,526,395
|
|
|
1,041,374
|
|
|
—
|
|
Total
|
$
|
42,553,918
|
|
|
$
|
37,827,299
|
|
|
$
|
36,328,701
|
|
Income from operations
|
|
|
|
|
|
IT Distribution:
|
|
|
|
|
|
North America
|
$
|
296,263
|
|
|
$
|
283,689
|
|
|
$
|
281,155
|
|
Europe
|
84,966
|
|
|
103,278
|
|
|
136,306
|
|
Asia-Pacific
|
74,394
|
|
|
53,613
|
|
|
46,508
|
|
Latin America
|
43,080
|
|
|
37,700
|
|
|
25,488
|
|
BrightPoint
|
46,512
|
|
|
11,290
|
|
|
—
|
|
Stock-based compensation expense
|
(30,340
|
)
|
|
(27,218
|
)
|
|
(30,811
|
)
|
Total
|
$
|
514,875
|
|
|
$
|
462,352
|
|
|
$
|
458,646
|
|
Capital expenditures
|
|
|
|
|
|
IT Distribution:
|
|
|
|
|
|
North America
|
$
|
62,513
|
|
|
$
|
64,529
|
|
|
$
|
91,873
|
|
Europe
|
6,498
|
|
|
4,420
|
|
|
8,745
|
|
Asia-Pacific
|
10,164
|
|
|
17,945
|
|
|
21,100
|
|
Latin America
|
1,516
|
|
|
1,161
|
|
|
470
|
|
BrightPoint
|
14,948
|
|
|
4,245
|
|
|
—
|
|
Total
|
$
|
95,639
|
|
|
$
|
92,300
|
|
|
$
|
122,188
|
|
Depreciation
|
|
|
|
|
|
IT Distribution:
|
|
|
|
|
|
North America
|
$
|
34,282
|
|
|
$
|
26,677
|
|
|
$
|
27,520
|
|
Europe
|
9,702
|
|
|
10,133
|
|
|
10,892
|
|
Asia-Pacific
|
7,570
|
|
|
6,987
|
|
|
4,759
|
|
Latin America
|
1,356
|
|
|
1,265
|
|
|
1,561
|
|
BrightPoint
|
27,525
|
|
|
4,643
|
|
|
—
|
|
Total
|
$
|
80,435
|
|
|
$
|
49,705
|
|
|
$
|
44,732
|
|
Amortization of intangible assets
|
|
|
|
|
|
IT Distribution:
|
|
|
|
|
|
North America
|
$
|
8,374
|
|
|
$
|
6,706
|
|
|
$
|
7,539
|
|
Europe
|
2,002
|
|
|
3,857
|
|
|
2,313
|
|
Asia-Pacific
|
830
|
|
|
1,079
|
|
|
1,797
|
|
Latin America
|
887
|
|
|
902
|
|
|
901
|
|
BrightPoint
|
36,387
|
|
|
8,167
|
|
|
—
|
|
Total
|
$
|
48,480
|
|
|
$
|
20,711
|
|
|
$
|
12,550
|
|
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
The integration, transition and other costs included in income from operations by reporting segments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
2013
|
|
2012
|
|
2011
|
Integration, transition and other costs (a)
|
|
|
|
|
|
IT Distribution:
|
|
|
|
|
|
North America
|
$
|
(17,123
|
)
|
|
$
|
8,515
|
|
|
$
|
—
|
|
Europe
|
5,839
|
|
|
—
|
|
|
—
|
|
Asia-Pacific
|
2,210
|
|
|
43
|
|
|
—
|
|
Latin America
|
(1,033
|
)
|
|
1,923
|
|
|
—
|
|
BrightPoint
|
10,546
|
|
|
5,884
|
|
|
—
|
|
Total
|
$
|
439
|
|
|
$
|
16,365
|
|
|
$
|
—
|
|
(a)
Costs are primarily for legal, consulting and other costs associated with the integration of BrightPoint, acquisitions-related costs and other transition costs incurred for certain executives, charged to SG&A expenses. For the fiscal year ended December 28, 2013, also included is a gain of
$28,461
and
$1,033
related to the settlement of legal matters in North America and Latin America, respectively. For the fiscal year ended December 29, 2012, it also included asset impairments of
$1,923
associated with our closure of in-country Argentina operations in Latin America, charged to SG&A expenses.
For a segment breakdown of reorganization costs, refer to Note 3.
|
|
|
|
|
|
|
|
|
|
Fiscal Year End
|
|
2013
|
|
2012
|
Identifiable assets
|
|
|
|
IT Distribution:
|
|
|
|
North America
|
$
|
3,965,210
|
|
|
$
|
4,103,657
|
|
Europe
|
3,630,667
|
|
|
2,883,678
|
|
Asia-Pacific
|
1,429,984
|
|
|
1,880,431
|
|
Latin America
|
836,188
|
|
|
652,552
|
|
BrightPoint
|
1,929,146
|
|
|
1,960,130
|
|
Total
|
$
|
11,791,195
|
|
|
$
|
11,480,448
|
|
Long-lived assets
|
|
|
|
IT Distribution:
|
|
|
|
North America
|
$
|
402,823
|
|
|
$
|
329,175
|
|
Europe
|
45,951
|
|
|
50,498
|
|
Asia-Pacific
|
42,548
|
|
|
45,898
|
|
Latin America
|
8,447
|
|
|
9,415
|
|
BrightPoint
|
364,353
|
|
|
418,820
|
|
Total
|
$
|
864,122
|
|
|
$
|
853,806
|
|
Net sales and long-lived assets for the United States, which is our country of domicile, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year End
|
|
2013
|
|
2012
|
|
2011
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
$
|
15,667,744
|
|
|
37
|
%
|
|
$
|
14,464,308
|
|
|
38
|
%
|
|
$
|
13,385,690
|
|
|
37
|
%
|
Outside of the United States
|
26,886,174
|
|
|
63
|
|
|
23,362,991
|
|
|
62
|
|
|
22,943,011
|
|
|
63
|
|
Total
|
$
|
42,553,918
|
|
|
100
|
%
|
|
$
|
37,827,299
|
|
|
100
|
%
|
|
$
|
36,328,701
|
|
|
100
|
%
|
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year End
|
|
|
|
2013
|
|
2012
|
Long-lived assets:
|
|
|
|
|
|
|
|
United States
|
$
|
625,719
|
|
|
72
|
%
|
|
$
|
595,949
|
|
|
70
|
%
|
Outside of the United States
|
238,403
|
|
|
28
|
|
|
257,857
|
|
|
30
|
|
Total
|
$
|
864,122
|
|
|
100
|
%
|
|
$
|
853,806
|
|
|
100
|
%
|
Note 12 — Stock-Based Compensation
Our stock-based compensation expense for 2013, 2012 and 2011 was
$30,340
,
$27,218
and
$30,811
, respectively, and the related income tax benefits were
$9,161
,
$8,075
and
$8,760
, respectively.
We have elected to use the Black-Scholes option-pricing model to determine the fair value of stock options. The Black-Scholes model incorporates various assumptions including volatility, expected life, and interest rates. The expected volatility is based on the historical volatility of our common stock over the most recent period commensurate with the estimated expected life of our stock options. The expected life of an award is based on historical experience and the terms and conditions of the stock-based awards granted to employees. The fair value of options granted in 2013, 2012 and 2011 was estimated assuming no dividends and using the following weighted average assumptions:
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
2013
|
|
2012
|
|
2011
|
Expected life of stock options
|
3.1 years
|
|
5.0 years
|
|
5.0 years
|
Risk-free interest rate
|
0.57%
|
|
0.89%
|
|
2.11%
|
Expected stock volatility
|
25.9%
|
|
34.6%
|
|
32.7%
|
Fair value of options granted
|
$3.62
|
|
$5.79
|
|
$6.35
|
Equity Incentive Plan
We currently have a single stock incentive plan, the Ingram Micro Inc. 2011 Incentive 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. During the second quarter of 2013, our stockholders approved an amendment of the Ingram Micro Inc. 2011 Incentive Plan (the “2011 Amended Plan”), which increased the number of shares that we may issue by
12,000
. The authorized pool of shares available for grant is a fungible pool. The authorized share limit is reduced by
one
share for every share subject to a stock option or stock appreciation right granted and
2.37
shares for every share granted after June 8, 2011 (
2.29
shares after June 7, 2013) under any award other than an option or stock appreciation right for awards.
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. Options granted generally vest over a period of up to
three
years and have expiration dates not longer than
10
years. In 2013, a majority of the options granted had a contractual term of
four
years. A portion of the restricted stock and restricted stock units vest over a time period of
one
to
three
years. The remainder of the restricted stock and restricted stock units vests upon achievement of certain performance measures over a time period of
one
to
three
years. In 2013, 2012 and 2011, the performance measures for restricted stock and restricted stock units for grants to management were based on earnings growth, return on invested capital total shareholder return and profit before tax. As of December 28, 2013, approximately
13,805
shares were available for grant under the 2011 Amended Plan, taking into account granted options, time-vested restricted stock units/awards and performance-vested restricted stock units assuming maximum achievement.
During 2013, 2012 and 2011 previously granted restricted stock units of
2,101
,
2,132
and
1,144
, respectively, were converted to Class A Common Stock. Approximately
684
,
683
and
326
shares, respectively, were withheld to satisfy the employees’ minimum statutory obligation for the applicable taxes and cash was remitted to the appropriate taxing authorities. Total payments for the employees’ tax obligations to the taxing authorities were approximately
$13,045
,
$13,011
and
$6,294
in 2013, 2012 and 2011, respectively. The withheld shares had the effect of share repurchases by us as they reduced and retired the number of shares that would have otherwise been issued as a result of the vesting. Of the restricted stock and/or units that were converted to Class A Common Stock, there were
1,535
,
1,495
and
133
in 2013, 2012 and 2011, respectively, based on performance-based grants previously approved by the Human Resources Committee of the Board of Directors. In 2011, the Human Resources Committee
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
of the Board of Directors determined that the performance measures for certain performance-based grants were not met, resulting in the cancellation of approximately
772
restricted stock units.
Stock Award Activity
Stock option activity under the 2011 Amended Plan was as follows for the three years ended December 28, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No. of Shares
|
|
Weighted-
Average
Price
|
|
Weighted-Average
Remaining
Contractual
Term
(in Years)
|
|
Aggregate
Intrinsic
Value
|
Outstanding at January 1, 2011
|
10,415
|
|
|
$
|
16.41
|
|
|
3.7
|
|
|
Granted
|
40
|
|
|
19.62
|
|
|
|
|
|
Exercised
|
(2,397
|
)
|
|
15.44
|
|
|
|
|
|
Forfeited/cancelled/expired
|
(42
|
)
|
|
16.25
|
|
|
|
|
|
Outstanding at December 31, 2011
|
8,016
|
|
|
16.72
|
|
|
2.8
|
|
|
Granted
|
51
|
|
|
18.31
|
|
|
|
|
|
Exercised
|
(2,116
|
)
|
|
14.80
|
|
|
|
|
|
Forfeited/cancelled/expired
|
(306
|
)
|
|
18.37
|
|
|
|
|
|
Outstanding at December 29, 2012
|
5,645
|
|
|
17.36
|
|
|
2.7
|
|
|
Granted
|
1,452
|
|
|
25.70
|
|
|
|
|
|
Exercised
|
(2,619
|
)
|
|
16.56
|
|
|
|
|
|
Forfeited/cancelled/expired
|
(291
|
)
|
|
20.14
|
|
|
|
|
|
Outstanding at December 28, 2013
|
4,187
|
|
|
20.56
|
|
|
3.1
|
|
$
|
15,469
|
|
Vested and expected to vest at December 28, 2013
|
4,022
|
|
|
20.34
|
|
|
3.1
|
|
$
|
15,469
|
|
Exercisable at December 28, 2013
|
2,783
|
|
|
17.83
|
|
|
2.7
|
|
$
|
15,444
|
|
The aggregate intrinsic value in the table above represents the difference between our closing stock price on December 28, 2013 and the option exercise price, multiplied by the number of in-the-money options on December 28, 2013. This amount changes based on the fair market value of our common stock. Total intrinsic value of stock options exercised in 2013, 2012 and 2011 was
$11,655
,
$8,273
and
$9,999
, respectively. Total fair value of stock options expensed was
$458
,
$298
and
$251
for 2013, 2012 and 2011, respectively. As of December 28, 2013, the unrecognized stock-based compensation costs related to stock options was
$4,803
. We expect this cost to be recognized over a remaining weighted-average period of approximately
2.9
years.
Cash received from stock option exercises in 2013, 2012 and 2011 was
$43,384
,
$31,335
and
$39,465
, respectively, and the actual benefit realized for the tax deduction from stock option exercises of the share-based payment awards totaled
$3,785
,
$2,975
and
$3,248
in 2013, 2012 and 2011, respectively.
The following table summarizes information about stock options outstanding and exercisable at December 28, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
Range of Exercise Prices
|
Number
Outstanding at
December 28,
2013
|
|
Weighted-
Average
Remaining
Life
|
|
Weighted-
Average
Exercise
Price
|
|
Number
Exercisable at
December 28,
2013
|
|
Weighted-
Average
Exercise
Price
|
$10.62 – $17.80
|
1,296
|
|
|
2.8
|
|
$
|
15.96
|
|
|
1,292
|
|
|
$
|
15.96
|
|
$17.92 – $20.70
|
1,474
|
|
|
2.6
|
|
19.43
|
|
|
1,474
|
|
|
19.43
|
|
$20.80 – $21.60
|
17
|
|
|
3.2
|
|
21.50
|
|
|
17
|
|
|
21.50
|
|
$26.00 – $26.00
|
1,400
|
|
|
3.9
|
|
26.00
|
|
|
—
|
|
|
—
|
|
|
4,187
|
|
|
3.1
|
|
20.56
|
|
|
2,783
|
|
|
17.83
|
|
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
Activity related to restricted stock and restricted stock units was as follows for the three years ended December 28, 2013:
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted-
Average
Grant Date
Fair Value
|
Non-vested at January 1, 2011
|
5,110
|
|
|
$
|
10.84
|
|
Granted
|
1,961
|
|
|
19.37
|
|
Vested
|
(1,145
|
)
|
|
9.92
|
|
Forfeited
|
(1,006
|
)
|
|
18.02
|
|
Non-vested at December 31, 2011
|
4,920
|
|
|
12.98
|
|
Granted
|
2,866
|
|
|
17.21
|
|
Vested
|
(2,132
|
)
|
|
12.79
|
|
Forfeited
|
(147
|
)
|
|
17.66
|
|
Non-vested at December 29, 2012
|
5,507
|
|
|
15.13
|
|
Granted
|
4,071
|
|
|
19.26
|
|
Vested
|
(2,101
|
)
|
|
18.34
|
|
Forfeited
|
(447
|
)
|
|
17.74
|
|
Non-vested at December 28, 2013
|
7,030
|
|
|
16.39
|
|
As of December 28, 2013, the unrecognized stock-based compensation cost related to non-vested restricted stock and restricted stock units was
$57,513
. We expect this cost to be recognized over a remaining weighted-average period of approximately
1.5
years.
Note 13 — Employee Benefit Plans
Our U.S.-based employee benefit plans permit eligible employees to make contributions up to certain limits, which are matched by us at stipulated percentages. Our contributions charged to expense were
$4,891
,
$4,350
and
$3,859
in 2013, 2012 and 2011, respectively.
Note 14 — Common Stock
Share Repurchase Program
In October 2010, our Board of Directors authorized a
$400,000
share repurchase program that has been extended to October 27, 2015, of which
$124,095
was remaining for repurchase at December 28, 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. 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, as amended (see Note 12). We did not repurchase shares during the year ended December 28, 2013.
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
Our stock repurchase and issuance activity for 2013, 2012 and 2011 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
Repurchased
|
|
Weighted-
Average
Price Per Share
|
|
Net Amount
Repurchased
|
Cumulative balance at January 1, 2011
|
23,713
|
|
|
$
|
16.40
|
|
|
$
|
388,817
|
|
Repurchase of Class A Common Stock
|
12,476
|
|
|
18.11
|
|
|
225,905
|
|
Issuance of Class A Common Stock
|
(546
|
)
|
|
19.01
|
|
|
(10,391
|
)
|
Cumulative balance at December 31, 2011
|
35,643
|
|
|
16.96
|
|
|
604,331
|
|
Repurchase of Class A Common Stock
|
2,729
|
|
|
18.32
|
|
|
50,000
|
|
Issuance of Class A Common Stock
|
(343
|
)
|
|
18.27
|
|
|
(6,265
|
)
|
Cumulative balance at December 29, 2012
|
38,029
|
|
|
17.04
|
|
|
648,066
|
|
Issuance of Class A Common Stock
|
(508
|
)
|
|
17.24
|
|
|
(8,766
|
)
|
Cumulative balance at December 28, 2013
|
37,521
|
|
|
17.04
|
|
|
$
|
639,300
|
|
Classes of Common Stock
We have two classes of Common Stock, consisting of
500,000
authorized shares of
$0.01
par value Class A Common Stock and
135,000
authorized shares of
$0.01
par value Class B Common Stock, and
25,000
authorized shares of
$0.01
par value Preferred Stock.
There were no issued and outstanding shares of Class B Common Stock or Preferred Stock during the three-year period ended December 28, 2013. The detail of changes in the number of outstanding shares of Class A Common Stock for the three-year period ended December 28, 2013, is as follows:
|
|
|
|
|
Class A
Common Stock
|
January 1, 2011
|
158,745
|
|
Stock options exercised
|
2,397
|
|
Release of restricted stock units, net of shares withheld for employee taxes
|
791
|
|
Grant of restricted Class A Common Stock
|
27
|
|
Repurchase of Class A Common Stock
|
(12,476
|
)
|
December 31, 2011
|
149,484
|
|
Stock options exercised
|
2,116
|
|
Release of restricted stock units, net of shares withheld for employee taxes
|
1,432
|
|
Grant of restricted Class A Common Stock
|
17
|
|
Repurchase of Class A Common Stock
|
(2,729
|
)
|
December 29, 2012
|
150,320
|
|
Stock options exercised
|
2,619
|
|
Release of restricted stock units, net of shares withheld for employee taxes
|
1,402
|
|
Grant of restricted Class A Common Stock
|
15
|
|
Repurchase of Class A Common Stock
|
—
|
|
December 28, 2013
|
154,356
|
|
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
Note 15 - Legal Settlement
We have been a claimant in a class action proceeding seeking damages from certain manufacturers of LCD flat panel displays. On July 12, 2013, the federal district judge overseeing the proceeding issued an order approving a plan of distribution to the class claimants. In July 2013, we received a distribution of
$29,494
, net of all attorney fees and expenses, which was reflected as a reduction of selling, general and administrative expenses in 2013. In January 2014, the federal district judge overseeing the proceeding issued an order approving a final distribution which entitles us to an incremental award of approximately $
6,500
, net of all attorney fees and expenses, which is expected to be received and recognized in the first quarter of 2014.