1
EXHIBIT 99.01
CAUTIONARY STATEMENTS FOR PURPOSES OF THE
"SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
"safe harbor" for "forward-looking statements" to encourage companies to provide
prospective information, so long as such information is identified as
forward-looking and is accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to differ
materially from those discussed in the forward-looking statement(s). Ingram
Micro Inc. (the "Company") desires to take advantage of the safe harbor
provisions of the Act.
Except for historical information, the Company's Annual Report on Form 10-K
for the year ended January 3, 1998 to which this exhibit is appended, the
Company's quarterly reports on Form 10-Q, the Company's current reports on Form
8-K, periodic press releases, as well as other public documents and statements,
may contain forward-looking statements within the meaning of the Act.
In addition, representatives of the Company from time to time participate
in speeches and calls with market analysts, conferences with investors and
potential investors in the Company's securities, and other meetings and
conferences. Some of the information presented in such speeches, calls, meetings
and conferences may be forward-looking within the meaning of the Act.
It is not reasonably possible to itemize all of the many factors and
specific events that could affect the Company and/or the microcomputer products
distribution industry as a whole. In some cases, information regarding certain
important factors that could cause actual results to differ materially from
those projected, forecasted, estimated, budgeted or otherwise expressed in
forward-looking statements made by or on behalf of the Company may appear or be
otherwise conveyed together with such statements. The following additional
factors (in addition to other possible factors not listed) could affect the
Company's actual results and cause such results to differ materially from those
projected, forecasted, estimated, budgeted or otherwise expressed in
forward-looking statements made by or on behalf of the Company:
Intense Competition. The Company operates in a highly competitive
environment, both in the United States and internationally. The microcomputer
products distribution industry is characterized by intense competition, based
primarily on price, product availability, speed and accuracy of delivery,
effectiveness of sales and marketing programs, credit availability, ability to
tailor specific solutions to customer needs, quality and breadth of product
lines and services, and availability of technical and product information. The
Company's competitors include regional, national, and international wholesale
distributors, as well as hardware manufacturers, networking equipment
manufacturers, and software publishers that sell directly to resellers and large
resellers who resell to other resellers. There can be no assurance that the
Company will not lose market share in the United States or in international
markets, or that it will not be forced in the future to reduce its prices in
response to the actions of its competitors and thereby experience a further
reduction in its gross margins. See "Narrow Margins" below.
The Company entered the channel assembly business during 1997. Certain of
the Company's competitors in channel assembly may be more experienced and may
have more established contacts with suppliers and other types of partners,
providing those competitors with a competitive advantage over the Company.
Success in the channel assembly business requires a significant infrastructure
investment, and there can be no assurance that product can be assembled and
delivered in a cost effective manner sufficient to adequately cover the
Company's investment. As the Company initiates other business models, such as
electronic software distribution, it faces competition from companies with more
experience in this arena. There also exists a risk that, after investing in the
new distribution method, this form of software delivery may not generate the
volume adequate to cover the Company's investment. In addition, as the Company
enters new business areas, it may also encounter increased competition from
current competitors and/or from new competitors, some of which may be current
customers of the Company. There can be no assurance that increased competition
and
A-1
2
adverse reaction from customers resulting from the Company's expansion into new
business areas will not have a material adverse effect on the Company's
business, financial condition, or results of operations.
Narrow Margins. As a result of intense price competition in the
microcomputer products wholesale distribution industry, the Company's margins
have historically been narrow and are expected in the future to continue to be
narrow. These narrow margins magnify the impact on operating results of
variations in operating costs. The Company receives purchase discounts from
suppliers based on a number of factors, including sales or purchase volume and
breadth of customers. These purchase discounts directly affect gross margins.
Because many purchase discounts from suppliers are based on percentage increases
in sales of products, it may become more difficult for the Company to achieve
the percentage growth in sales required for larger discounts due to the current
size of the Company's revenue base. The Company's gross margins have been
further reduced by the Company's entry into the master reseller business, which
has lower gross margins than the Company's traditional wholesale distribution
business. In addition, as a result of the Company's narrow margins, if the
Company's receivables experience a substantial deterioration in their
collectibility or the Company cannot obtain credit insurance at reasonable
rates, the Company's financial condition and results of operations may be
adversely impacted.
Fluctuations in Quarterly Results. The Company's quarterly net sales and
operating results have varied significantly in the past and will likely continue
to do so in the future as a result of seasonal variations in the demand for the
products and services offered by the Company, the introduction of new hardware
and software technologies and products offering improved features and
functionality, the introduction of new products and services by the Company and
its competitors, the loss or consolidation of a significant supplier or
customer, changes in the level of operating expenses, inventory adjustments,
product supply constraints, competitive conditions including pricing, interest
rate fluctuations, the impact of acquisitions, currency fluctuations, and
general economic conditions. The Company's narrow margins may magnify the impact
of these factors on the Company's operating results. The Company believes that
period-to-period comparisons of its operating results should not be relied upon
as an indication of future performance. In addition, the results of any
quarterly period are not indicative of results to be expected for a full fiscal
year. In certain future quarters, the Company's operating results may be below
the expectations of public market analysts or investors. In such event, the
market price of the Common Stock would be materially adversely affected.
Capital Intensive Nature of Business. The Company's business requires
significant levels of capital to finance accounts receivable and product
inventory that is not financed by trade creditors. In order to continue its
expansion, including acquisitions, the Company will need additional financing,
including debt financing, which may or may not be available on terms acceptable
to the Company, or at all. In addition to the Company's prospects, financial
condition and results of operations, macroeconomic factors such as fluctuations
in interest rates or a general economic downturn may restrict the Company's
ability to raise the necessary capital. No assurance can be given that the
Company will continue to be able to raise capital in adequate amounts for these
or other purposes on terms acceptable to the Company, and the failure to do so
could have a material adverse effect on the Company's business, financial
condition, and results of operations. See "-- Fluctuations in Quarterly
Results," "-- Acquisitions" and "-- Risk of Termination of Subsidized Floor Plan
Financing for the Company's Master Reseller Business" below.
Management of Growth. The rapid growth of the Company's business has
required the Company to make significant recent additions in personnel and has
significantly increased the Company's working capital requirements. Although the
Company has experienced significant sales growth in recent years, such growth
should not be considered indicative of future sales growth. Such growth has
resulted in new and increased responsibilities for management personnel and has
placed and continues to place a significant strain upon the Company's
management, operating and financial systems, and other resources. There can be
no assurance that the strain placed upon the Company's management, operating and
financial systems, and other resources will not have a material adverse effect
on the Company's business, financial condition, and results of operations, nor
can there be any assurance that the Company will be able to attract or retain
sufficient personnel to continue the expansion of its operations. Also crucial
to the Company's success in managing its growth will be its ability to achieve
additional economies of scale. There can be no assurance that the Company will
be able
A-2
3
to achieve such economies of scale, and the failure to do so could have a
material adverse effect on the Company's business, financial condition, and
results of operations.
Dependence on Information Systems. The Company depends on a variety of
information systems for its operations, particularly its centralized IMpulse
information processing system which supports more than 40 operational functions
including inventory management, order processing, shipping, receiving, and
accounting. At the core of IMpulse is on-line, real-time distribution software
which supports basic order entry and processing and customers' shipments and
returns. Although the Company has not in the past experienced significant
failures or downtime of IMpulse or any of its other information systems, any
such failure or significant downtime could prevent the Company from taking
customer orders, printing product pick-lists, and/or shipping product and could
prevent customers from accessing price and product availability information from
the Company. In order to react to changing market conditions, the Company must
continuously expand and improve IMpulse and its other information systems. From
time to time the Company may acquire other businesses having information systems
and records which must be converted and integrated into IMpulse or other Company
information systems. This can be a lengthy and expensive process that results in
a significant diversion of resources from other operations.
The Company believes that customer information systems are becoming
increasingly important in the wholesale distribution of technology products. As
a result, the Company has recently enriched its customer information systems by
adding new features, including on-line ordering through the Internet. However,
there can be no assurance that competitors will not develop customer information
systems that are superior to those offered by the Company. The inability of the
Company to develop competitive customer information systems could adversely
affect the Company's business, financial condition, and results of operations.
As is the case with many computer software systems, some of the Company's
systems use two digit data fields which recognize dates using the assumption
that the first two digits are "19" (i.e., the number 97 is recognized as the
year 1997). Therefore, the Company's date critical functions relating to the
year 2000 and beyond, such as sales, distribution, purchasing, inventory
control, merchandise planning and replenishment, facilities, and financial
systems, may be severely affected unless changes are made to these computer
systems. With the assistance of an outside consultant, the Company commenced a
review of the Company's internal systems in mid-1997 to identify applications
that are not Year 2000 ready and to assess the impact of the Year 2000 problem.
The Company has developed an overall plan and a systematic process to modify its
internal systems to be Year 2000 ready. The Company commenced remediation of its
main frame programs in early 1998 to comply with Year 2000 requirements. The
Company anticipates that the other required Year 2000 modifications will be made
on a timely basis and does not believe that the cost of such modifications will
have a material effect on the Company's operating results. There can be no
assurance, however, that the Company will be able to modify successfully and in
a timely manner all of its internal services and systems to comply with Year
2000 requirements, which could have a material adverse effect on the Company's
operating results. In addition, the Company faces risks to the extent that
suppliers of products (including components for its channel assembly and
configuration initiative), services (including services provided by independent
shipping companies), and business on a worldwide basis may not have business
systems or products that comply with Year 2000 requirements. In the event any
such third parties cannot provide the Company with products, services or systems
that meet Year 2000 requirements in a timely manner, the Company's operating
results could be materially adversely affected. The Company's operating results
also could be materially adversely affected if it were to be held responsible
for the failure of any products sold by the Company to be Year 2000 compliant
despite its disclaimer of product warranties and the limitation of liability
contained in its sales terms and conditions.
Exposure to Foreign Markets; Currency Risk. The Company, through its
subsidiaries, operates in a number of countries outside the United States, and
the Company expects its international net sales to increase as a percentage of
total net sales in the future. The Company's international net sales are
primarily denominated in currencies other than the U.S. dollar. Accordingly, the
Company's international operations impose risks upon its business as a result of
exchange rate fluctuations. Through its recent acquisitions in Latin America and
joint venture in Asia, the Company now has operations in certain countries which
may be viewed as having greater risk of exchange rate fluctuations. There can be
no assurance that exchange rate fluctuations
A-3
4
will not have a material adverse effect on the Company's business, financial
condition, or results of operations in the future. In certain countries outside
the United States, operations are accounted for primarily on a U.S. dollar
denominated basis. In the event of an unexpected devaluation of the local
currency in those countries (as occurred in Mexico in December 1994 and more
recently in 1997 in Asia and Latin America), the Company may experience
significant foreign exchange losses. In addition, the Company's operations may
be significantly adversely affected as a result of the general economic impact
of the devaluation of the local currency.
The Company's international operations are subject to other risks such as
the imposition of governmental controls, export license requirements,
restrictions on the export of certain technology, political instability, trade
restrictions, tariff changes, difficulties in staffing and managing
international operations, difficulties in collecting accounts receivable and
longer collection periods, and the impact of local economic conditions and
practices.
Dependence on Key Individuals. The Company is dependent in large part on
its ability to retain the services of its key management, sales, and operational
personnel. The Company's continued success is also dependent upon its ability to
retain and attract other qualified employees, including highly skilled
technical, managerial, and marketing personnel, to meet the Company's needs.
Competition for qualified personnel is intense, particularly in the area of
technical support. The Company may not be successful in attracting and retaining
the personnel it requires, which could have a material adverse effect on the
financial condition and results of operations of the Company.
Product Supply; Dependence on Key Suppliers. The ability of the Company to
obtain particular products or product lines in the required quantities and to
fulfill customer orders on a timely basis is critical to the Company's success.
In most cases, the Company has no guaranteed price or delivery agreements with
its suppliers. As a result, the Company has experienced, and may in the future
continue to experience, short-term inventory shortages. In addition,
manufacturers who currently distribute their products through the Company may
decide to distribute, or to substantially increase their existing distribution,
through other distributors, their own dealer networks, or directly to resellers.
Further, the personal computer industry experiences significant product supply
shortages and customer order backlogs from time to time due to the inability of
certain manufacturers to supply certain products on a timely basis. There can be
no assurance that suppliers will be able to maintain an adequate supply of
products to fulfill the Company's customer orders on a timely basis or that the
Company will be able to obtain particular products or that a product line
currently offered by suppliers will continue to be available.
Acquisitions. As part of its growth strategy, the Company pursues the
acquisition of companies that either complement or expand its existing business.
Acquisitions involve a number of risks and difficulties, including expansion
into new geographic markets and business areas, the possibility that the Company
could incur or acquire substantial debt in connection with the acquisitions, the
requirement to understand local business practices, the diversion of
management's attention to the assimilation of the operations and personnel of
the acquired companies, the integration of the acquired companies' management
information systems with those of the Company, potential adverse short-term
effects on the Company's operating results, the amortization of acquired
intangible assets, and the need to present a unified corporate image.
Risk of Declines in Inventory Value. The Company's business, like that of
other wholesale distributors, is subject to the risk that the value of its
inventory will be adversely affected by price reductions by suppliers or by
technological changes affecting the usefulness or desirability of the products
comprising the inventory. It is the policy of most suppliers of microcomputer
products to protect distributors such as the Company, who purchase directly from
such suppliers, from the loss in value of inventory due to technological change
or the supplier's price reductions. These policies are sometimes not embodied in
written agreements and do not protect the Company in all cases from declines in
inventory value. No assurance can be given that such practices will continue,
that unforeseen new product developments will not materially adversely affect
the Company, or that the Company will be able to successfully manage its
existing and future inventories. The Company's risk of declines in inventory
value could be greater outside the United States where agreements with suppliers
are more restrictive with regard to price protection and the Company's ability
to return unsold
A-4
5
inventory. For those suppliers participating in the Company's channel assembly
program, the extent to which the amount of inventory in the channel is reduced
may directly impact the amount of price protection which will be provided by
those suppliers. If major PC suppliers substantially decrease the availability
of price protection to wholesale distributors, such change in policy could have
a material adverse effect on the Company's financial condition and results of
operations.
Dependence on Independent Shipping Companies. The Company relies almost
entirely on arrangements with independent shipping companies for the delivery of
its products. The termination of the Company's arrangements with one or more of
these independent shipping companies, or the failure or inability of one or more
of these independent shipping companies to deliver products from suppliers to
the Company or products from the Company to its reseller customers or their
end-user customers could have a material adverse effect on the Company's
business, financial condition, or results of operations.
Rapid Technological Change; Alternate Means of Software Distribution. The
microcomputer products industry is subject to rapid technological change, new
and enhanced product specification requirements, and evolving industry
standards. These changes may cause inventory in stock to decline substantially
in value or to become obsolete. In addition, suppliers may give the Company
limited or no access to new products being introduced.
Net sales of software products have decreased as a percentage of total net
sales in recent years due to a number of factors, including bundling of software
with microcomputers; sales growth in Ingram Alliance, which is a hardware-only
business; declines in software prices; and the emergence of alternative means of
software distribution, such as site licenses and electronic distribution. The
Company expects this trend to continue.
Risk of Termination of Subsidized Floor Plan Financing for the Company's
Master Reseller Business. The master reseller business is characterized by gross
margins and operating margins that are even narrower than those of the U.S.
microcomputer products wholesale distribution business and by competition based
almost exclusively on price, programs, and execution. A substantial majority of
the Company's master reseller sales are funded by floor plan financing
companies. The Company typically receives payment from these financing
institutions within three business days from the date of the sale, allowing the
Company's master reseller business to operate at much lower relative working
capital levels than the Company's wholesale distribution business. Such floor
plan financing is typically subsidized for the Company's reseller customers by
its suppliers. If the arrangements for such subsidies are terminated or
substantially reduced, such change in policy could have a material adverse
effect on the Company's financial condition and results of operations.
A-5