NEW YORK, June 3 /PRNewswire/ -- Ingram Micro, Inc.'s $400 million zero-coupon senior convertible debentures due 2018 are rated 'BBB+' by Fitch IBCA. Proceeds from the offering will be used to refinance existing debt. The rating reflects Ingram Micro's leading position in the highly competitive wholesale microcomputer distribution business. Also considered is the potential impact to Ingram Micro's business and financial position from declining prices in the microcomputer industry as well as how these trends will affect the company's potential future growth and funding needs.
Ingram Micro, headquartered in Santa Ana, CA, is the world's largest wholesale distributor of computer-based technology products. The company has consistently improved sales with total revenues for the 12 months ending April 4, 1998 increasing approximately 39.9% over the same period a year earlier. Ingram Micro has been successful, in part, through its large size and scale, supplemented by a modest-sized acquisitions strategy. However, Ingram Micro operates in an industry characterized by constant price declines due to rapid technological change and the accompanying business risk.
Maintenance of earnings before interest, taxes, depreciation and amortization (EBITDA) margins is an important consideration in the wholesale microcomputer distribution business. Ingram Micro has maintained its EBITDA margins and increased EBITDA dollars through revenue growth and lower SG&A costs as a percent of revenue, strong purchasing power, and superior execution of the distribution function. However, EBITDA dollars are still subject to the effects of price declines. In order to provide additional value to its customers, Ingram Micro has instituted new value-added programs, such as its channel assembly and electronic software distribution programs. These initiatives may help mitigate pricing pressures on EBITDA dollars. Nevertheless, as these are newer programs, more time is required to realize their full positive contribution to Ingram Micro's financial and business profile.
Fitch IBCA expects that Ingram Micro will need to continue to grow to expand its economies of scale and benefit from lower unit costs. This growth requirement suggests continued modest-sized strategic acquisition activity, possible increased funding requirements and potential increased risk. Although this latest debt issuance will not materially affect Ingram Micro's existing leverage levels, leverage remains high and Fitch IBCA expects it to remain at or near present levels in the future. Leverage for the twelve months ending April 4, 1998, as defined by total debt to EBITDA, increased to 2.53 times from 1.57 times in 1997 for the same period. While Fitch IBCA recognizes Ingram Micro's strong position and market leadership, the rating agency will continue to monitor Ingram Micro's responses to price declines and possible future growth and financing requirements.
Source: Fitch IBCA, Inc.
Contact: Mark L. Swirsky, 212-908-0531, or Peter Jordan, 212-908-0566,
or Pam Stubing, 212-908-0638, all of Fitch IBCA