Exhibit 99.1
Media Contact: Investor Contact:
Jennifer Baier Ria Marie Carlson
Ingram Micro Inc. Ingram Micro Inc.
714.382.2692 714.382.4400
jennifer.baier@ingrammicro.com ria.carlson@ingrammicro.com
INGRAM MICRO OUTLINES PROFIT-ENHANCEMENT TARGETS,
UPDATES GUIDANCE
Comprehensive program improves processes and enhances service,
positions company for long-term growth
SANTA ANA, Calif., Sept. 18, 2002 -- Ingram Micro Inc. (NYSE: IM) today
announced that it expects to realize an additional $160 million in operating
income by 2004 from its ongoing comprehensive business improvement program that
Chairman and Chief Executive Officer Kent B. Foster said will position the
company as the IT distribution industry's "leader by every measurement."
The program is expected to substantially increase operating profits while
delivering new levels of value and performance for customers and vendors through
improved processes and systems. It is the result of extensive reviews of the
company's operations, primarily focused on North America, which identified
potential opportunities for reducing costs and expanding gross margins.
"For more than a year, we have been making solid, step-by-step improvements
in our gross margins, operating expenses and balance sheet," said Foster.
"Compared to a year ago, we reduced annualized expenses by approximately $100
million and improved gross margins by 23 basis points, while reducing our net
debt-to-capital ratio to 2 percent and delivering working capital metrics that
are among the best in our industry and the company's history. We're pleased with
our progress, but not satisfied. We have initiated further plans to accelerate
these efforts, giving us a giant leap toward our goal of being the best
performing, most profitable company in the IT distribution and supply chain
business."
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The program's actions are expected to generate additional operating income
of $15 million in the second half of 2002, growing to $125 million in 2003 and
reaching the full annualized run-rate of $160 million during the first quarter
of 2004. The operating income increases are not contingent upon an improvement
in end-market demand and were calculated utilizing a flat annual sales scenario
for 2003 and 2004, as compared to 2002. This flat sales scenario is not intended
to represent a sales projection by management; rather, it was used for modeling
purposes only. Actual improvements will vary depending on annual revenues.
Total costs associated with the program, estimated at approximately $140
million ($88 million after income taxes), are expected to be recorded over the
next six quarters through December 2003. Approximately half of the after-tax
costs will require cash expenditures; the remainder will be non-cash charges.
Program costs for the second half of 2002 are estimated at approximately $95
million ($60 million after income taxes), more than half of which are expected
to be recorded in the fourth quarter of 2002. Costs recorded in any individual
period may vary depending on the timing of certain actions, and additional costs
may be incurred in connection with new savings opportunities.
The company expects that program costs will be charged to operating income
as restructuring costs, costs of sales, and selling, general and administrative
(SG&A) expenses, depending on the nature of the action. Restructuring costs
generally include severance expenses, lease terminations, certain asset
write-offs and other costs associated with the exit of facilities. Costs
recorded as costs of sales or SG&A expenses primarily include program management
and consulting expenses, accelerated depreciation of certain assets,
inventory-related costs, and costs associated with geographic relocation. The
company will provide supplemental pro-forma operating results related to these
program costs on a quarterly basis.
"The quick, 18-month pre-tax payback of the overall program reflects the
high internal rate of return criteria that were utilized in evaluating each of
the initiatives," said Thomas A. Madden, executive vice president and chief
financial officer.
Implementation is "moving full-speed ahead," according to Foster, with many
initiatives already underway and nearly all expected to be completed by the end
of 2003. The company intends to provide updates on the plan's progress each
quarter with financial results.
Some of the program's key components include:
o Enhanced vendor and customer programs. The company has embraced a
culture of business process improvement led by the adoption of
the Six Sigma
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methodology. This will enable the success of many of the
initiatives throughout the program, allowing the company to
simultaneously reduce costs while improving customer service
levels. For example, in North America the company has aligned its
sales, marketing and product management functions to deliver
total technology solutions - both products and services - to
customers and vendors. By breaking down the barriers that
separated these functions, the company is able to simplify
contacts for customers and vendors, streamline purchasing and
pricing decisions, develop more customized fee-based services and
generate greater demand. These business process improvements
result in enhanced service for customers and vendors with a more
efficient use of resources.
o Optimization of facilities and systems. As the company continues
to evolve from a product-centric business model to a provider of
integrated technology solutions, the requirements of its
infrastructure are changing. The distribution network and
information systems are being refined to accommodate this dynamic
environment. In North America, the company is transferring its
configuration and returns services from dedicated facilities to
multi-functional distribution centers, while sub-letting excess
warehouse and office space. In Europe, the company plans to close
its Frameworks assembly facility and expand the service areas of
some distribution centers to include multiple countries.
Additionally, the company has identified opportunities to
significantly reduce the cost of its information technology
systems. By maximizing economies of scale and leveraging its
best-in-class logistics services, the company is better able to
address the changing needs of customers and vendors, providing a
broad array of distribution and supply chain management
strategies.
o Geographic consolidations and administrative restructuring.
Through the combination of the U.S. and Canadian regions early
this year, the company is gaining efficiencies by centralizing
certain administrative processes that serve a single North
American region, while maintaining local customer contact in each
country. This was demonstrated in the recent formation of
regional credit and product management departments to serve both
the United States and Canada. The European region has
consolidated operations in the Nordic countries, Portugal and
Austria. In other regions, service for Argentina and Peru was
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transferred to the Latin American export office in Miami,
operations in Chile were downsized, and the Australian
distribution and call center operations are being centralized in
Sydney. The company expects to pursue other consolidation
opportunities around the world as part of this effort.
According to Michael J. Grainger, president and chief operating officer,
the plans were developed with a thoughtful, process-oriented approach that
positions the company for the future. "Distribution is the engine that moves
technology," he said. "By strengthening our leadership position, we help our
vendors and customers become more profitable, our associates become more
valuable, and generate a better return for our shareowners. We aim to be the
best in everything that we do, from financial performance to customer service,
and this plan puts us squarely on the right course."
Outlook
On July 31, 2002, the company issued guidance for the third quarter, ending
Sept. 28, 2002, indicating that sales would range from $5.30 to $5.45 billion
and earnings per share would be between $0.09 and $0.11 (excluding restructuring
and major profit-enhancement program costs, as stated above, and special items).
Based on updated internal estimates and forecasts, the company believes that
sales and earnings per share will be at or above the high end of those ranges.
The earnings per share estimates include the operating income improvements from
the profit-enhancement program and exclude restructuring and profit-enhancement
program costs, as well as other special items.
For the fourth quarter of 2002, sales are expected to follow normal
seasonal patterns, with sequential growth in the mid-single digits.
Conference call scheduled
Additional information about Ingram Micro's business improvement program
will be presented in a conference call today at 5 p.m. EDT. To listen to the
conference call via telephone, call (888) 455-0750 (toll-free within the United
States and Canada) or (415) 228-4834 (other countries) and mention "Ingram
Micro." To listen to the conference call via a live audio webcast, visit the
Investor Relations page of the Ingram Micro Web site at
www.ingrammicro.com/corp. A replay of the conference call will be available for
one week
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through the Web site or by calling (800) 678-3180 (toll-free in the United
States and Canada) or (402) 220-3063 (other countries).
Cautionary Statement for the Purpose of the Safe Harbor Provisions
of the Private Securities Litigation Reform Act of 1995
The matters in this press release that are forward-looking statements are
based on current management expectations that involve certain risks, including,
without limitation: disruptions in business operations due to reorganization
activities; difficulties and risks associated with integrating operations and
personnel into new organizational structures; dependence on key individuals and
inability to retain personnel; the continuation or worsening of the severe
downturn in economic conditions (particularly purchases of technology products);
significant credit loss resulting from significant credit exposure to reseller
customers and negative trends in their businesses; continued pricing and margin
pressures; intense competition within regional markets and internationally;
potential material decline in net sales if major suppliers significantly
increase the level of business they transact directly with end-users and/or
resellers in different product categories, customer segments, and/or
geographies; failure to adjust costs in a timely fashion in response to a sudden
decrease in demand; the potential for declines in inventory values and continued
restrictive vendor terms and conditions; the potential decline as well as
seasonal variations in demand for Ingram Micro's products and services; future
terrorist or military actions; unavailability of adequate capital; inability to
manage future adverse industry trends; failure of information systems; interest
rate and foreign currency fluctuations; adverse impact of governmental controls
and actions and political or economic instability on foreign operations; changes
in local, regional, and global economic conditions and practices; product supply
shortages; the potential termination of a supply agreement with a major
supplier; difficulties and risks associated with integrating operations and
personnel in acquisitions; rapid product improvement and technological change
and resulting obsolescence risks; and dependence on independent shipping
companies.
Ingram Micro has instituted in the past and continues to institute changes
to its strategies, operations and processes to address these risk factors and to
mitigate their impact on Ingram Micro's results of operations and financial
condition. However, no assurances can be given that Ingram Micro will be
successful in these efforts. For a further discussion of these and other
significant factors to consider in connection with forward-looking statements
concerning Ingram Micro, reference is made to Exhibit 99.01 of Ingram Micro's
Annual Report on Form 10-K for the year ended December 29, 2001; other risks or
uncertainties may be detailed from time to time in Ingram Micro's future SEC
filings.
About Ingram Micro Inc.
Ingram Micro Inc. is the leading wholesale provider of technology products
and supply chain management services in the world. With sales of more than $25
billion for the fiscal year 2001, the company provides the best way to get
technology from the people who make it to the people who use it. Visit
www.ingrammicro.com/corp.
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under license by Ingram Micro Inc. All other logos, brand names and product
names are trademarks of their respective companies.