Consistent with its North American strategy, company realigns and consolidates key business operations and taps outsource expertise for a more flexible cost structure; positioning the company for continued profitable growthSANTA ANA, Calif., April 11, 2005 /PRNewswire-FirstCall via COMTEX/ -- Ingram Micro Inc.
(NYSE: IM), the world's largest technology distributor, today announced an
outsourcing and optimization plan that will significantly improve operating
efficiencies and realign and consolidate select business operations.
A key component of the plan is an outsourcing agreement that will move
transaction-oriented service and support functions - including selected North
America positions in finance and shared services, customer service, vendor
management and selected U.S. positions in technical support and inside sales
(excluding field sales and management positions) - to a leading global
business process outsource provider by the end of 2005. The company is in
final negotiations with two providers and should reach a decision by month-
end.
In addition, the company will restructure and consolidate other job
functions within the North American region. Approximately 550 associates in
total will be affected by the actions.
According to Keith Bradley, president, Ingram Micro North America, the
plan creates a more variable cost structure by outsourcing business processes
to lower-cost geographies outside North America and realigning and
consolidating key customer-facing teams for a closer working relationship
within Ingram Micro's North America locations. Ultimately, these actions
position the company with greater flexibility for continued profitable growth.
"This plan supports our key business objectives and helps us deliver our
expected operating income targets within the third quarter of 2005," said
Bradley. "Consistent with the company's three-part business strategy to
expand the core business, pursue new and adjacent markets and build more
services capabilities, this plan further strengthens our core North American
business operations. We will gain efficiencies and greater flexibility in our
cost structure while maintaining a strong focus on developing innovative
services and solutions that benefit our customers and vendor partners. We are
committed to creating profitable growth for our channel partners, as well as
Ingram Micro, both now and in the future."
Savings generated by the plan are expected to be approximately $10 million
in 2005, starting in the second quarter, ramping up to an annualized savings
of $25 million by the first quarter of 2006. Actual operating expenses for
the 2004 fiscal year will serve as the baseline for the savings estimate.
Total costs of the actions are estimated at approximately $26 million
(approximately $18 million net of tax) of which approximately $5.5 million
were incurred in the first quarter of 2005 with the remainder recorded through
the fourth quarter of 2005. Nearly all the costs will be charged to operating
expenses and include reorganization costs, consulting, relocation and other
transition expenses associated with these actions.
Ingram Micro is taking the following steps to ensure high quality service
is maintained and a smooth transition is made for its customers and vendor
partners:
- All field sales positions and management positions will remain in their
existing locations.
- Over the next several months, Ingram Micro will conduct in-depth
knowledge sharing and training sessions with teams established at the
outsource provider and run parallel operations, as well as conduct
ongoing testing and business process improvements.
- Ingram Micro will leverage the experience of its chosen business
process outsource provider in preparing many FORTUNE 100 companies with
executing against outsourcing strategies and proven methodologies in
call center management, best-of-breed technologies and process
controls.
"We all know change - especially when it includes people - is never easy.
But this is the right move for our company. We're being careful to consider
the needs of our customers, business partners, associates and shareholders
throughout this process," added Bradley. "We will substantially complete all
phases of the plan by the end of 2005 for a quick pay-back of less than 18
months, with care taken to maintain our high customer service levels."
About Ingram Micro Inc.
As a vital link in the technology value chain, Ingram Micro creates sales
and profitability opportunities for vendors and resellers through unique
marketing programs, outsourced logistics services, technical support,
financial services, and product aggregation and distribution. The company
serves 100 countries and is the only global IT distributor with operations in
Asia. Visit http://www.ingrammicro.com .
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,
including but not limited to statements about future revenues, sales levels,
operating income, margins, integration costs, cost synergies, operating
efficiencies, profitability, market share and rates of return, are based on
current management expectations that involve certain risks which, if realized,
in whole or in part, could cause such expectations to fail to be achieved and
have a material adverse effect on Ingram Micro's business, financial condition
and results of operations, including, without limitation: (1) intense
competition, regionally and internationally, including competition from
alternative business models, such as manufacturer-to-end-user selling, which
may lead to reduced prices, lower sales or reduced sales growth, lower gross
margins, extended payment terms with customers, increased capital investment
and interest costs, bad debt risks and product supply shortages; (2)
integration of our acquired businesses and similar transactions involve
various risks and difficulties -- our operations may be adversely impacted by
an acquisition that (i) is not suited for us, (ii) is improperly executed, or
(iii) substantially increases our debt; (3) foreign exchange rate
fluctuations, devaluation of a foreign currency, adverse governmental controls
or actions, political or economic instability, or disruption of a foreign
market, and other related risks of our international operations may adversely
impact our operations in that country or globally; (4) we may not achieve the
objectives of our process improvement efforts or be able to adequately adjust
our cost structure in a timely fashion to remain competitive, which may cause
our profitability to suffer; (5) our failure to attract new sources of
profitable business from expansion of products or services or entry into new
markets could negatively impact our future operating results; (6) an
interruption or failure of our information systems or subversion of access or
other system controls may result in a significant loss of business, assets, or
competitive information; (7) significant changes in supplier terms, such as
higher thresholds on sales volume before distributors may qualify for
discounts and/or rebates, the overall reduction in the amount of incentives
available, reduction or termination of price protection, return levels, or
other inventory management programs, or reductions in payment terms, may
adversely impact our results of operations or financial condition; (8)
termination of a supply or services agreement with a major supplier or product
supply shortages may adversely impact our results of operations; (9) changes
in, or interpretations of, tax rules and regulations may adversely affect our
effective tax rates or may we may be required to pay additional tax
assessments; (10) we cannot predict with certainty, outcome of the SEC and
U.S. Attorney's inquiries; (11) if there is a downturn in economic conditions
for an extended period of time, it will likely have an adverse impact on our
business; (12) we may experience loss of business from one or more significant
customers, and an increased risk of credit loss as a result of reseller
customers' businesses being negatively impacted by dramatic changes in the
information technology products and services industry as well as intense
competition among resellers -- increased losses, if any, may not be covered by
credit insurance or we may not be able to obtain credit insurance at
reasonable rates or at all; (13) rapid product improvement and technological
change resulting in inventory obsolescence or changes in demand may result in
a decline in value of a portion of our inventory; (14) future terrorist or
military actions could result in disruption to our operations or loss of
assets, in certain markets or globally; (15) the loss of a key executive
officer or other key employees, or changes affecting the work force such as
government regulations, collective bargaining agreements or the limited
availability of qualified personnel, could disrupt operations or increase our
cost structure; (16) changes in our credit rating or other market factors may
increase our interest expense or other costs of capital, or capital may not be
available to us on acceptable terms to fund our working capital needs; (17)
our failure to adequately adapt to industry changes and to manage potential
growth and/or contractions could negatively impact our future operating
results; (18) future periodic assessments required by current or new
accounting standards such as those relating to long-lived assets, goodwill and
other intangible assets and expensing of stock options may result in
additional non-cash charges; (19) seasonal variations in the demand for
products and services, as well as the introduction of new products, may cause
variations in our quarterly results; and (20) the failure of certain shipping
companies to deliver product to us, or from us to our customers, may adversely
impact our results of operations.
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 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 January 1, 2005; other risks or uncertainties may
be detailed from time to time in Ingram Micro's future SEC filings. Ingram
Micro disclaims any duty to update any forward-looking statements.
SOURCE Ingram Micro Inc.
Media: Marie Meoli of WhiteFox Marketing, +1-714-382-2190 or
marie.meoli@ingrammicro.com; or Lisa Zwick of Moxxi Communications, +1-714-382-2546
or lisa.zwick@ingrammicro.com; or Jennifer Baier Anaya, of Ingram Micro Inc.,
+1-714-382-2692 or jennifer.baier@ingrammicro.com; or Investors: Kay Leyba,
+1-714-382-4175 or kay.leyba@ingrammicro.com, or Ria Marie Carlson, +1-714-382-4400
or ria.carlson@ingrammicro.com, both of Ingram Micro Inc.
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