NEW YORK, June 3 /PRNewswire/ -- Standard & Poor's today assigned its triple-'B' rating to Ingram Micro Inc.'s $400 million zero-coupon senior convertible debentures due 2018, and to Ingram Micro's three unsecured revolving credit facilities totaling $1.65 billion. A triple-'B' corporate credit rating also was assigned.
The outlook is stable.
The ratings reflect Ingram Micro's position as the leading broad-line distributor of microcomputers and related products and its consistent profitability, partially offset by the highly competitive industry environment and substantial, growth-related funding requirements.
Santa Ana, Calif.-based Ingram Micro distributes about 145,000 products, including computer systems, storage and peripheral devices, networking and communications equipment, and software. Ingram Micro's revenues have grown in excess of 35% annually, reflecting strong underlying industry growth and consolidation of market share among leading players. Ingram Micro has successfully offset industry pricing pressure and declining gross margins with efficient asset management and economies of scale. Operating margins (before depreciation and amortization) were 2.7% in fiscal 1997.
Ingram Micro's highly liquid balance sheet is moderately leveraged; pretax interest coverage is expected to remain in excess of 6 times (x). However, relatively thin margins, combined with growth-related working capital funding requirements, are expected to result in negative free operating cash flow. Total revolving credit facilities of $1.65 billion provide adequate financial flexibility. The proposed issue will be used to pay down existing bank debt.
Highly competitive industry conditions and growth-related working capital funding requirements limit the potential for rating improvement. Ingram Micro's good market position and consistent profitability provide downside protection. -- CreditWire
Source: Standard & Poor's CreditWire
Contact: Martha Toll-Reed of Standard & Poor's, 212-208-1823