UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended January 1, 2005

Commission File Number: 1-12203

INGRAM MICRO INC.

(Exact name of Registrant as specified in its charter)

1600 E. ST. ANDREW PLACE, SANTA ANA, CALIFORNIA 92705

(Address, including zip code, of principal executive offices)

(714) 566-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the act:

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     o

      Indicate by check mark if registrant is an accelerated filer (as defined in Exchange Act Rule 12b of the Act).     Yes þ          No o

      The aggregate market value of the voting stock held by non-affiliates of the registrant as of the last business day of the Registrant’s most recently completed second fiscal quarter, at July 3, 2004, was $1,816,286,920 based on the closing sale price on such date of $14.11 per share

      The Registrant had 159,123,352 shares of Class A Common Stock, par value $.01 per share, outstanding at February 17, 2005.

      DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Proxy Statement for the registrant’s Annual Meeting of Shareowners to be held June 1, 2005 are incorporated by reference into Part III of this Annual Report on Form 10-K.

TABLE OF CONTENTS

PART I

      The following discussion includes forward-looking statements, including but not limited to, management’s expectations of competition; revenues, margin, expenses and other operating results or ratios; operating efficiencies; costs synergies, economic conditions; cost savings; capital expenditures; liquidity; capital requirements, acquisitions and integration costs, operating models, exchange rate fluctuations and rates of return. In evaluating our business, readers should carefully consider the important factors discussed in “Cautionary Statements for the Purpose of the ‘Safe Harbor’ Provisions of the Private Securities Litigation Reform Act of 1995” included in Exhibit 99.1 to our Annual Report on Form 10-K for the fiscal year ended January 1, 2005. We disclaim any duty to update any forward-looking statements.

Introduction

      Ingram Micro, a Fortune 100 company, is the largest global information technology (“IT”) wholesale distributor, providing sales, marketing, and logistics services for the IT industry worldwide. More than just a conduit between suppliers and resellers, Ingram Micro provides a vital link in the IT supply chain by generating demand and developing markets for our technology partners. We create value in the IT market by extending the reach of our technology partners, capturing market share for resellers and suppliers, creating innovative solutions comprised of both products and services, offering financial services and credit facilities, and providing efficient fulfillment of IT products and services. With a broad range of products and an array of services, we create operating efficiencies for our partners around the world.

History

      Ingram Micro’s global footprint was achieved through a series of acquisitions, mergers and organic growth in North America, Europe, Asia-Pacific and Latin America. We began business in 1979 as a California corporation named Micro D Inc. A series of mergers and acquisitions in the 1980’s led to the creation of Ingram Micro, a subsidiary of Ingram Distribution Group, which was a unit of the privately-held Ingram Industries Inc. In November 1996, Ingram Micro completed an initial public offering, and split off from its parent in a tax-free reorganization. We have made significant acquisitions to strengthen our presence in North America, Europe, and Asia-Pacific since our initial public offering. Expansion of our North American presence continued with the acquisition of Intelligent Electronics Inc.’s Reseller Network Division in 1997. In the same year, we acquired a minority equity interest in Electronic Resources Limited (“ERL”), a leading Asian computer and electronic products distributor based in Singapore, which expanded our presence in Singapore and Malaysia and provided entry into Australia, China, Hong Kong, India, Indonesia, New Zealand, Thailand, and Vietnam. We increased our investment in ERL in 1999, by purchasing the remaining shares of ERL, and renamed the subsidiary Ingram Micro Asia Ltd. (“Ingram Micro Asia-Pacific”). By 1998, Ingram Micro’s well-established presence in Europe already included operations in Austria, Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Spain, Sweden, Switzerland, and the United Kingdom. The acquisition of publicly-held Macrotron, a distributor of personal computer products established in 1972, solidified our presence in Germany, Austria and Switzerland. In November 2004, we strengthened our position in the Asia-Pacific region by acquiring 100 percent of Techpac Holdings Limited (“Tech Pacific”), one of Asia-Pacific’s largest technology distributors based in Singapore. This acquisition made Ingram Micro the largest IT wholesale distributor in Australia, Hong Kong, India, Malaysia, New Zealand, and Singapore and expands our presence in Thailand.

Industry

      The worldwide IT products and services distribution industry generally consists of two types of business: traditional distribution business and fee-based supply chain services business. Within the traditional distribution model, the distributor buys, holds title to, and sells products and/or services to resellers who, in turn, typically sell directly to end-users, or other resellers. Hardware manufacturers and software publishers, which we collectively call suppliers or vendors, sell directly to distributors, resellers and end-users. As demand for

supply chain services grows, distributors will seek new opportunities to provide services within and outside of the IT sector to complement their traditional distribution business. Fee-based supply chain services include the supply chain components that ensure the flow of goods from origin to consumption. In practical terms, logistics outsourcing encompasses the materials management functions of the supply chain, taking a product from the point of concept through delivery to the customer.

      The traditional IT distribution industry continues to undergo change as a result of a number of factors. As margins have narrowed on hardware and software products due to commoditization trends as technology evolves along its life cycle, suppliers and resellers have transitioned from a more product-focused to a more solution-oriented business model. Suppliers have also reduced the number of distribution partners in several geographic markets as they streamline their supply chains. However, we believe that suppliers continue to embrace two-tier distributors that have a global presence and are able to deliver products to market in a low-cost manner. Resellers in the traditional distribution model continue to depend on distributors for a number of services, including product availability, marketing, credit, technical support, and inventory management, which includes direct shipment to end-users and, in some cases, allowing end-users to directly access distributors’ inventory data. These services allow resellers to reduce their inventory, staffing levels, and backroom requirements, thereby streamlining their financial investment and reducing their costs. As resellers adjust their business models from selling products to selling solutions, they rely on distributors to help them combine products with services to complete the solutions they offer to their customers. As resellers require more solution-oriented offerings, distributors respond with enhanced value-added solutions and services customized to the needs of their specific customer base.

      A variety of reseller categories exist, including value-added resellers (“VARs”), corporate resellers, systems integrators, direct marketers, Internet-based resellers, independent dealers, reseller purchasing associations, PC assemblers, and consumer electronics (“CE”) retailers. Different types of resellers are defined and distinguished by the end-user market they serve, such as large corporate accounts, mid-market, small-to-medium sized businesses (“SMBs”), or home users, and by the level of value they add to the basic products they sell. Many of our reseller customers are heavily dependent on distribution partners with the necessary systems, capital, inventory availability, and distribution facilities in place to provide fulfillment and other services. Characteristics of the local reseller and supplier environment, as well as other factors specific to a particular country or region, have shaped the evolution of distribution models in different countries.

      The evolving go-to-market strategies of IT market participants present new opportunities for IT distributors beyond those based on their traditional role. For example, many large suppliers use manufacturer-direct sales initiatives to supplement their use of the distribution channel. This direct-sales model can present opportunities for suppliers to become distribution customers. As such, distributors can sell logistics, fulfillment, and marketing services, as well as provide third-party products to suppliers in a fee-based supply chain services model. Other suppliers are pursuing strategies to outsource functions such as logistics, order management, and technical support to supply chain partners as they look to minimize costs and investments in distribution center assets and focus on their core competencies in manufacturing, product development, and/or marketing. Suppliers also outsource these functions to enhance their responsiveness in the supply chain, reduce their inventory carrying costs, and better respond to customer demand. Resellers provide opportunities, as well. Retailers and Internet resellers are seeking fulfillment services, inventory management, reverse logistics, and other supply chain services that do not necessarily require a traditional distribution model. In summary, distributors continue to evolve their business models to meet customers’ needs (both suppliers and resellers) through provision of fee-for-services programs while remaining an efficient and low-cost means of delivery for technology hardware, software, and services.

Company Strengths

      We believe that the following strengths enable us to further enhance our leadership position in the IT distribution industry:

Our Strategic Focus

      Our strategic focus falls into two broad areas, which support and enhance our position as the IT distribution industry’s “best way to deliver technology to the world.” We drive profitable growth by growing and optimizing our core business and expanding into adjacent markets. We continue to make productivity improvements through our focus on the right cost structure for our business.

Achieve Sustainable Profitable Growth

      Our goal is to continually grow and optimize our core business by increasing our value to our customers and vendors, targeting high growth market and product segments, and leveraging our business model to serve our partners.

      Another strategic focus is expanding into adjacent markets to augment our core business by leveraging our capabilities and skills in complementary market segments.

Optimal Productivity

      We strive to create the right cost structure for our business by driving efficiency through process improvements, leveraging economies of scale, taking cost out of our business and cultivating a strong and capable workforce.

Customers

      We conduct business with most of the leading resellers of IT products and services around the world including, in the United States, Amazon.com, Buy.com, CDW Corporation Inc., CompuCom Systems Inc., CompUSA Inc., Insight Enterprises, Office Depot Inc., OfficeMax, PC Connection Inc., and SARCOM Inc. Our reseller customers outside of the United States include Bechtle, Brasoftware, Compugen, Econocom, Future Shop, Mainbit, NexInnovations, and Systemax. In most cases, we have resale contracts with our reseller customers that are terminable at will after a short notice period and have no minimum purchase requirements. Our business is not substantially dependent on any of these contracts.

      We also have specific agreements in place with certain manufacturers and resellers to provide supply chain management services such as order management, logistics management, configuration management, and procurement management services. These customers include BenQ, Gateway Inc., Intuit, and Microsoft in North America, and ChannelWave, Digital River, Hewlett-Packard store, and Sony in Europe. In cases where we do have contracts, either party without cause can terminate them on relatively short notice. Our business is not dependent on any of these contracts. The service offerings we provide to our customers are discussed further below under “Services.”

Sales and Marketing

      We employ sales representatives worldwide who assist resellers with product and solution specifications, system configuration, new product/service introductions, pricing, and availability.

      Our product management and marketing groups also promote our sales growth, create demand for our suppliers’ products and services, enable the launch of new products, and facilitate customer contact. For example, our marketing programs are tailored to meet specific supplier and reseller customer needs. These needs are met through a wide offering of services by our in-house marketing organization, including advertising, direct mail campaigns, market research, on-line marketing, retail programs, sales promotions, training, solutions marketing, and assistance with trade shows and other events.

      We have launched specialized business units in certain geographic and product markets to serve customers with particular needs. As we enter these specialized markets, we continue to leverage our global leadership in world-class logistics, market reach, and electronic commerce tools. Our targeted market focus in Europe led to the formation of our Pan European Business Unit, which manages components, networking, and supplies on a centralized basis in most European countries where we have a presence. For example, the Pan European Business Unit offers a one-stop shopping opportunity to small- and medium-sized resellers, PC assemblers, and OEMs, and markets a wide range of components that these customers need to assemble PC systems.

      Selling Arrangements. We offer various credit terms to qualifying customers, as well as prepay, credit card, and cash on delivery terms. We also offer various alternative financing solutions to our resellers based on their creditworthiness and, in some cases, the creditworthiness of their end-users, to assist our resellers and their end-users in acquiring products. In limited situations and markets, we collect outstanding receivables on behalf of our resellers. We closely monitor reseller customers’ creditworthiness through our IMpulse information system and other monitoring tools, which contain detailed information on each customer’s

payment history, as well as other relevant information. In most markets, we use various levels of credit insurance to control credit risks and allow sales expansion.

      We have sold, and may continue to sell, to certain customers where the transactions are financed by a third-party floor plan financing company. These transactions generally involve higher sales on limited lines of product. The expenses charged by these financing companies will be paid by us, subsidized by our suppliers, or billed to our reseller.

Products

      We distribute and market hundreds of thousands of IT products worldwide from the industry’s premier computer hardware suppliers, networking equipment suppliers, and software publishers worldwide. Product assortments vary by market, and the suppliers’ relative contribution to our sales also varies from country to country. On a worldwide basis, our revenue mix by product category has remained relatively stable over the past several years, although it may fluctuate between and within different operating regions. Over the past several years, our product category revenues on a consolidated basis have generally been within the following ranges. However, our peripherals and systems products have been close to or slightly above the high-end of their respective ranges in the recent year:

      Networking. Our networking category includes networking hardware, communication products and network security. Networking hardware includes switches, hubs, routers, wireless local area networks, wireless wide area networks, network interface cards, network-attached storage and storage area networks. Communication products incorporate Voice Over Internet Protocol communications, modems, phone systems and video/audio conferencing. Network security hardware includes firewalls, Virtual Private Networks (“VPNs”), intrusion detection, authentication devices and appliances.

      Software. We define our software category as a broad variety of applications containing computer instructions or data that can be stored electronically. We offer a variety of software products, such as business application software, operating system software, entertainment software, middleware, developer software tools, security software (firewalls, intrusion detection, and encryption) and storage software.

      Systems. We define our systems category as self-standing computer systems capable of functioning independently. We offer a variety of systems, such as servers, desktops, portable personal computers, tablet personal computers, and personal digital assistants.

      Peripherals. We offer a variety of peripherals products, including printers, scanners, displays, projectors, monitors, panels, mass storage, and tape. We also include other products and services in this category, including components (processors, motherboards, hard drives, and memory), supplies and accessories (ink and toner supplies, paper, carrying cases, and anti-glare screens), CE products (cell phones, digital cameras, digital video disc players, game consoles, and televisions), and services (such as installation services, professional services, service provider and carrier services, warranties and support, configuration and assembly, packaged services, and mobile communication services).

Suppliers

      Our worldwide suppliers include leading computer hardware suppliers, networking equipment suppliers, and software publishers such as 3Com, Acer, Advanced Micro Devices Inc., Canon USA, Cisco Systems Inc., Computer Associates, Epson, Hewlett-Packard, IBM, InFocus, Intel, Iomega, Juniper Networks, Kingston Technology, Lexmark, Maxtor, Microsoft, NEC/ Mitsubishi, palmOne, Philips, Samsung, Seagate, Symantec, Toshiba, Veritas Software Corporation, ViewSonic Corporation, Western Digital and Xerox. We sell products purchased from many vendors, but generated approximately 22%, 24% and 27% of our net sales in fiscal years

2004, 2003 and 2002, respectively, from products purchased from Hewlett-Packard Company. There were no other vendors that represented 10% or more of our net sales in each of the last three years.

      Our suppliers generally warrant the products we distribute and allow returns of defective products, including those returned to us by our customers. We do not independently warrant the products we distribute; however, local laws might impose warranty obligations upon distributors, we do warrant services and products that we build-to-order from components purchased from other sources, and under limited circumstances in Asia-Pacific. Provision for estimated warranty costs is recorded at the time of sale and periodically adjusted to reflect actual experience. Historically, warranty expense has not been material.

      We have written distribution agreements with many of our suppliers; however, these agreements usually provide for nonexclusive distribution rights and often include territorial restrictions that limit the countries in which we can distribute the products. The agreements are also generally short term, subject to periodic renewal, and often contain provisions permitting termination by either party without cause upon relatively short notice. A supplier who elects to terminate a distribution agreement generally will repurchase its products carried in the distributor’s inventory.

Services

      In addition to our broad array of products, we also offer a number of supply chain management services to our suppliers and resellers. We focus on four broad categories of services: sales and marketing, customer care, financial services, and logistics. Our sales and marketing services include business development and outsourced marketing services, demand generation programs for suppliers and resellers, market research and business intelligence, retail merchandizing, and software licensing services. Our customer care services include call center support and pre- and post-technical support. Our financial services include credit and collection management services and tailored financing programs. We also offer end-to-end supply chain services to suppliers and resellers through our Ingram Micro Logistics division which vary depending on regional requirements and can include end-to-end order management and fulfillment, retail logistics merchandizing, warehousing and storage, contract manufacturing, distribution center services, product procurement, reverse logistics, transportation management, customer care, tailored financing programs, marketing services, and other outsourcing services. While we provide our partners with an array of presales services such as technical support, product selection, credit options, and customized delivery, we also offer additional services on a fee-for-service basis.

      We also offer professional and technical services across North America through our Ingram Micro Service Network (“IMSN”), which serves as a collaboration and partnership platform for over 550 VAR organizations. IMSN enables VARs to expand their geographic reach and service capabilities by providing a fully managed nationwide technical support and service management solution owned and operated by Ingram Micro. IMSN is comprised of over 10,000 certified technicians in 800 North American markets throughout the United States, Canada, and Puerto Rico. Our partners work together to provide world-class IT business solutions and support to end customers, including application services; consulting; hardware and software support; installation, moves, adds, and changes; migration services; local area network and wide area network services; network design, integration and implementation; and outsourcing services.

      Although services represent one of the initiatives of our long-term strategy, they have contributed less than 10% of our revenues in the past and may not reach that level in the near term.

Global Operations

      We have local sales offices and/or Ingram Micro sales representatives in various worldwide markets, including North America (United States and Canada), Europe (Austria, Belgium, Denmark, Finland, France, Germany, Hungary, Italy, The Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and United Kingdom), Asia-Pacific (Australia, Bangladesh, the People’s Republic of China including Hong Kong, India, Indonesia, Malaysia, New Zealand, Pakistan, Philippines, Singapore, Sri Lanka, Taiwan, and Thailand), and Latin America (Argentina, Brazil, Chile, Mexico, and Peru). We also have contracted sales agents, parties who act on our behalf, or primary supplier relationships with independent third parties in Costa

Rica, Dominican Republic, Ecuador, Guatemala, Panama, Trinidad/ Tobago, and Vietnam. Additionally, we serve markets where we do not have an in-country presence through our various sales offices, including our general telesales operations in Santa Ana, California and Buffalo, New York and our export offices in the United States (Miami, Florida), Singapore, Germany, The Netherlands, and France. For a discussion of our geographic reporting segments, see “Item 8. Financial Statements and Supplemental Data.”

      We operate internationally with distribution facilities in various locations around the world. For a discussion of foreign exchange risks relating to our international operations, see “Item 7A. Quantitative and Qualitative Disclosures about Market Risk.”

Competition

      We operate in a highly competitive environment, both in the United States and internationally. The IT products and services distribution industry is characterized by intense competition, based primarily on:

      We believe we compete favorably with respect to each of these factors.

      We compete in North America against full-line distributors such as Tech Data and Synnex Corporation as well as specialty distributors in different product areas, such as ScanSource and D&H Distributing. A more fragmented distribution channel characterizes markets outside North America, which represent over half of the IT industry’s sales; however, consolidation has taken place in these markets, as well. We believe that suppliers and resellers pursuing global strategies continue to seek distributors with global sales and support capabilities.

      We compete internationally with a variety of national and regional distributors. The European distribution landscape is highly fragmented, with market share spread among many regional and local competitors such as Actebis, and international distributors such as Tech Data and Westcon/ Comstor. In the Asia-Pacific market, we face competition from global, regional, and local competitors including Arrow, Digiland, Redington, and Synnex Technology International. In Latin America, we compete with international and local distributors such as Tech Data, Synnex Corporation and Bell Microproducts.

      The evolving direct-sales relationships between manufacturers, resellers, and end-users continue to introduce change into our competitive landscape. We compete, in some cases, with hardware suppliers and software publishers that sell directly to reseller customers and end-users. However, we may become a business partner to these companies by providing supply chain services optimized for the IT market. Additionally, as consolidation occurs among certain reseller segments and customers gain market share and build capabilities similar to ours, certain resellers, such as direct marketers, can become competitors for us. As some manufacturer and reseller customers move their back-room operations to distribution partners, outsourcing and value-added services may be areas of opportunity. Examples of value-added capabilities include configuration, innovative financing programs, and order fulfillment programs. Many of our suppliers and reseller customers are looking to outsourcing partners to perform back-room operations. There has been an accelerated movement among transportation and logistics companies to provide many of these fulfillment and e-commerce supply chain services. Within this arena, we face competition from major transportation and

logistics suppliers such as Exel, Menlo, and UPS Supply Chain Solutions; electronic manufacturing services providers such as Solectron and Flextronics; and media companies such as Technicolor.

      We are constantly seeking to expand our business into areas closely related to our core IT products and services distribution business. As we enter new business areas, including value-added services, we may encounter increased competition from current competitors and/or from new competitors, some of which may be our current customers. Application service providers constitute a relatively new channel for suppliers to remotely deliver software applications to end-users. Telephone companies also represent competition for us when they offer bundled broadband and equipment solutions directly to end-customers.

Asset Management

      We seek to maintain sufficient quantities of product inventories to achieve optimum order fill rates. Our business, like that of other distributors, is subject to the risk that the value of our inventory will be affected adversely by suppliers’ price reductions or by technological changes affecting the usefulness or desirability of the products comprising the inventory. It is the policy of many suppliers of IT products to offer distributors like us, who purchase directly from them, limited protection from the loss in value of inventory due to technological change or a supplier’s price reductions. Under many of these agreements, the distributor is restricted to a designated period of time in which products may be returned for credit or exchanged for other products or during which price protection credits may be claimed. We take various actions, including monitoring our inventory levels and controlling the timing of purchases, to maximize our protection under supplier programs and reduce our inventory risk. However, no assurance can be given that current protective terms and conditions will continue or that they will adequately protect us against declines in inventory value, or that they will not be revised in such a manner as to adversely impact our ability to obtain price protection. In addition, suppliers may become insolvent and unable to fulfill their protection obligations to us. We are subject to the risk that our inventory values may decline and protective terms under supplier agreements may not adequately cover the decline in values. We manage this risk through continual monitoring of existing inventory levels relative to customer demand. On an ongoing basis, we reserve for excess and obsolete inventories and write down our inventories to their estimated net realizable value, reflecting our forecasts of future demand and market conditions.

      Historically, we have reduced the risk of decline in the value of our inventory through price protection, vendor authorized stock return privileges and inventory management procedures. However, over the past number of years, major PC suppliers have changed the terms and conditions of their price protection plans, resulting in increased exposure for us as a distribution partner. These changes in terms and conditions have made it more difficult for us to match our inventory levels with the price protection periods. Consequently, we bear risk that the value of the inventory we hold will decline after these price protection periods have passed. We continue to mitigate these risks by managing the amount of inventory in the channel from our suppliers to reflect the overall demand for our products.

      Inventory levels may vary from period to period, due, in part, to the addition of new suppliers or new lines with current suppliers and strategic purchases of inventory. In addition, payment terms with inventory suppliers may vary from time to time, and could result in fewer inventories being financed by suppliers and a greater amount of inventory being financed by our capital.

Trademarks and Service Marks

      We own or are the licensee of various trademarks and service marks, including, among others, “Ingram Micro,” the Ingram Micro logo, “V7” (Video Seven) and “VentureTech Network.” Certain of these marks are registered, or are in the process of being registered, in the United States and various other countries. Even though our marks may not be registered in every country where we conduct business, in many cases we have acquired rights in those marks because of our continued use of them. Our management believes that the value of our marks is increasing with the development of our business, but our business as a whole is not materially dependent on these marks.

Employees

      As of January 1, 2005, we employed approximately 13,600 associates (as measured on a full-time equivalent basis). Certain of our operations in Europe and Latin America are subject to syndicates, collective bargaining or similar arrangements. Our success depends on the talent and dedication of our associates, and we strive to attract, develop, and retain outstanding associates. We have a process for continuously measuring the status of associate satisfaction and responding to associate priorities. We believe that our relationships with our associates are generally good.

EXECUTIVE OFFICERS OF THE COMPANY

      The following table lists the executive officers of Ingram Micro as of March 1, 2005.

      Kent B. Foster. Mr. Foster, age 61, was elected chairman of the board in May 2000 and is also our chief executive officer. Mr. Foster joined us as chief executive officer and president and a director in March 2000 after a 29-year career at GTE Corporation, a leading telecommunications company with one of the industry’s broadest arrays of products and services. From 1995 through 1999, Mr. Foster served as president, GTE Corporation and was a member of GTE’s board of directors from 1992 to 1999, serving as vice chairman of the board of GTE from 1993 to 1999. He currently serves on the board of directors of Campbell Soup Company, Inc., J.C. Penney Company, Inc., and New York Life Insurance Company.

      Kevin M. Murai. Mr. Murai, age 41, became our president in March 2004. He previously served as our executive vice president and president of Ingram Micro North America from January 2002 to March 2004, as executive vice president and president of Ingram Micro U.S. from January 2000 to December 2001, as senior vice president and president of Ingram Micro Canada from December 1997 to January 2000, and vice president of operations for Ingram Micro Canada from January 1993 to December 1997.

      Gregory M.E. Spierkel. Mr. Spierkel, age 48, became our president in March 2004. He previously served as executive vice president and president of Ingram Micro Europe from June 1999 to March 2004, and as senior vice president and president of Ingram Micro Asia-Pacific from July 1997 to June 1999. Prior to working for Ingram Micro, Mr. Spierkel was vice president of global sales and marketing at Mitel Inc., a manufacturer of telecommunications and semiconductor products, from March 1996 to June 1997 and was president of North America at Mitel from April 1992 to March 1996.

      Keith W.F. Bradley. Mr. Bradley, age 41, is our executive vice president and president of Ingram Micro North America. He has held these positions since January 2005. He previously served as interim president and senior vice president and chief financial officer of Ingram Micro North America from June 2004 to January 2005, and as the region’s senior vice president and chief financial officer from January 2003 to May 2004. Prior to joining Ingram Micro in February 2000 as vice president and controller for the Company’s United States operations, Mr. Bradley was vice president and global controller of The Disney Stores, a subsidiary of Walt Disney Company, and an auditor and consultant with Price Waterhouse in the United Kingdom, United Arab Emirates and the United States.

      Henri T. Koppen. Mr. Koppen, age 62, became our executive vice president and president of Ingram Micro Europe in March 2004. Mr. Koppen served as our executive vice president from January 2004 to March 2004, as executive vice president and president of Ingram Micro Asia-Pacific from February 2002 to December 2003, and served as senior vice president and president of Ingram Micro Asia-Pacific, from March 2000 through January 2002. He previously served as senior vice president and president of Ingram Micro Latin America from January 1998 to March 2000. Prior to working for Ingram Micro, Mr. Koppen served as president, Latin America, for General Electric Capital IT Solutions, a systems integrator/reseller company, from July 1996 to December 1997 and vice president, Latin America, for Ameridata Global Inc., a systems integrator/reseller company, from May 1995 to July 1996.

      Thomas A. Madden. Mr. Madden, age 51, became our executive vice president and chief financial officer in July 2001. Ingram Micro announced in October 2004 that Mr. Madden plans an early retirement from the company on April 1, 2005, and will be teaching at the University of California, Irvine’s Graduate School of Management. Prior to joining Ingram Micro, Mr. Madden served as senior vice president and chief financial officer from May 1997 to July 2001 of Arvin Meritor, Inc., a global supplier of systems, modules and components for the automotive industry. From 1981 to 1997, Mr. Madden held various management positions with Rockwell International, including vice president of corporate development, from 1996 to 1997, vice president of finance, from 1994 to 1996, and assistant corporate controller, from 1987 to 1994. Mr. Madden currently serves on the board of directors of Mindspeed Technologies.

      Alain Monié. Mr. Monié, age 54, became our executive vice president and president of Ingram Micro Asia-Pacific in January 2004. He joined Ingram Micro as executive vice president in January 2003. Previously, Mr. Monié was an international executive consultant with aerospace and defense corporations from September 2002 to January 2003. Mr. Monié also served as president of the Latin American division of Honeywell International from January 2000 to August 2002. He joined Honeywell following its merger with Allied Signal Inc., where he built a 17-year career on three continents, progressing from a regional sales manager to head of Asia-Pacific operations from October 1997 to December 1999.

      Larry C. Boyd. Mr. Boyd, age 52, became our senior vice president, secretary and general counsel in March 2004. He previously served as senior vice president, U.S. legal services, for Ingram Micro North America from January 2000 to January 2004. Prior to joining Ingram Micro, he was a partner with the law firm of Gibson, Dunn & Crutcher from January 1985 to December 1999.

      William D. Humes. Mr. Humes, age 40, has been our senior vice president and chief financial officer designee since October 2004, and will replace Mr. Madden as Ingram Micro’s executive vice president and chief financial officer on April 1, 2005. Mr. Humes served as Ingram Micro’s corporate vice president and controller from February 2004 to October 2004, vice president and corporate controller from February 2002 to February 2004 and senior director, worldwide financial planning, reporting and accounting from September 1998 to February 2002. Prior to joining Ingram Micro, Mr. Humes was a senior audit manager at PricewaterhouseCoopers.

      Alain Maquet. Mr. Maquet, age 53, became our senior vice president and president Ingram Micro Latin America on March 1, 2005. Mr. Maquet served as our senior vice president, southern and western Europe from January 2001 to February 2004. Mr. Maquet joined Ingram Micro in 1993 as the managing director of France and had added additional countries to his responsibilities over the years. His career spans 30 years, 23 of which are in the technology industry, and he co-started an IT distribution company before joining Ingram Micro.

      Karen E. Salem. Ms. Salem, age 43, became our senior vice president and chief information officer in February 2005. Prior to joining Ingram Micro, Ms. Salem was senior vice president and chief information officer of Winn-Dixie Stores, Inc., a NYSE listed grocery retailer from September 2002 to February 2005. Ms. Salem was previously senior vice president and chief information officer of Corning Cable Systems, a fiber optic cable/equipment manufacturer, from September 2000 to September 2002. From August 1999 to September 2000, Ms. Salem was chief information officer for AFC Enterprises, Inc., a company of four entities: Church’s Chicken and Biscuits, Popeyes Chicken, Cinnabon and Seattle’s Best Coffee.

      Matthew A. Sauer. Mr. Sauer, age 57, has been our senior vice president of human resources since February 2003. He joined Ingram Micro in October 1996 as vice president of human resources and was promoted in September 1999 to corporate vice president of human resources strategies and processes.

      James F. Ricketts. Mr. Ricketts, age 58, is our corporate vice president and treasurer. He has held this position since April 1999. He previously served as vice president and treasurer from September 1996 to April 1999. Prior to his employment with Ingram Micro, Mr. Ricketts served as treasurer of Sundstrand Corporation, a manufacturer of aerospace and related technology products, from February 1992 to September 1996.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

      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 statement. Except for historical information, certain statements contained in this Annual Report on Form 10-K may be “forward-looking statements” within the meaning of the Act, including but not limited to, management’s expectations for process improvement; competition; revenues, expenses and other operating results or ratios; economic conditions; liquidity; capital requirements; and exchange rate fluctuations. Disclosures that use words such as we “believe,” “anticipate,” “expect,” “forecast” and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from expectations. Any such forward-looking statements, whether made in this report or elsewhere, should be considered in the context with the various disclosures made by us about our business. In evaluating our business, readers should carefully consider the important factors discussed in “Cautionary Statements for the Purpose of the ‘Safe Harbor’ Provisions of the Private Securities Litigation Reform Act of 1995” included in Exhibit 99.01 to this Annual Report on Form 10-K. A summary of these factors is as follows:

      We operate our global business in a continually changing environment that involves numerous risks and uncertainties. Future events that may not have been anticipated or discussed here could adversely affect our business, financial condition, results of operations or cash flows. We disclaim any duty to update these or any forward-looking statements.

AVAILABLE INFORMATION

      We also make available, free of charge through our website, www.ingrammicro.com, annual, quarterly, and current reports (and amendments thereto) as soon as reasonably practicable after our electronic filing

with the Securities and Exchange Commission. The information posted on our Web site is not incorporated into this Annual Report on Form 10-K.

      Our corporate headquarters is located in Santa Ana, California. We support our global operations through an extensive sales office and distribution network throughout North America, Europe, Latin America, and Asia-Pacific. As of January 1, 2005, we operated 70 distribution centers worldwide. Additionally, we serve markets where we do not have an in-country presence through various sales offices and representative offices, including from Santa Ana, California; Buffalo, New York; Miami, Florida; Singapore; and certain countries in Europe. We are in the process of integrating Tech Pacific into our operations in Asia-Pacific, which may result in consolidation of facilities in 2005.

      As of January 1, 2005, we leased substantially all our facilities on varying terms. We do not anticipate any material difficulties with the renewal of any of our leases when they expire or in securing replacement facilities on commercially reasonable terms. We also own several facilities, the most significant of which are our office/distribution facilities in Straubing, Germany; Santiago, Chile; and Singapore.

      During 2002 and 2003, one of our Latin American subsidiaries was audited by the Brazilian taxing authorities in relation to certain commercial taxes. As a result of this audit, the subsidiary received an assessment of 28.3 million Brazilian reais, including interest and penalties through January 1, 2005, or approximately $10.7 million as of January 1, 2005, alleging these commercial taxes were not properly remitted for the period January through September 2002. The Brazilian taxing authorities may make similar claims for periods subsequent to September 2002. Additional assessments, if received, may be significant either individually or in the aggregate. It is management’s opinion, based upon the opinions of outside legal counsel, that we have valid defenses related to this matter. Although we are vigorously pursuing administrative and judicial action to challenge the assessment, no assurance can be given as to the ultimate outcome. An unfavorable resolution of this matter is not expected to have a material impact on our financial condition, but depending upon the time period and amounts involved it may have a material negative effect on our results of operations.

      We received an informal inquiry from the SEC during the third quarter of 2004. The SEC’s focus to date has been related to certain transactions with Network Associates, Inc. (“NAI”) from 1998 through 2000. We have also received subpoenas from the U.S. Attorney’s office for the Northern District of California in connection with its grand jury investigation of NAI which seek information concerning these transactions. We are cooperating fully with the SEC’s and the U.S. Attorney’s requests. Although the outcome of the SEC and U.S. Attorney’s inquiries cannot be predicted with certainty, it is not currently expected to have a material effect on our ongoing consolidated financial position, results of operations or cash flows.

      No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report, through the solicitation of proxies or otherwise.

PART II

      As of February 17, 2005 there were 612 holders of record of our Common Stock. Because many of such shares are held by brokers and other institutions, on behalf of shareowners, we are unable to estimate the total number of shareowners represented by these record holders.

      Common Stock. Our Common Stock is traded on the New York Stock Exchange under the symbol IM. The following table sets forth the high and low price per share of our Common Stock for the periods indicated.

      Dividend Policy. We have not declared nor paid any dividends on our Common Stock in the preceding two fiscal years. We currently intend to retain future earnings to finance the growth and development of our business and, therefore, do not anticipate declaring or paying cash dividends on our Common Stock for the foreseeable future. Any future decision to declare or pay dividends will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements, and such other factors as the Board of Directors deems relevant. In addition, certain of our debt facilities contain restrictions on the declaration and payment of dividends.

      Equity Compensation Plan Information. The following table provides information, as of January 1, 2005, with respect to equity compensation plans under which equity securities of our company are authorized for issuance, aggregated as follows: (i) all compensation plans previously approved by our shareowners and (ii) all compensation plans not previously approved by our shareowners.

SELECTED CONSOLIDATED FINANCIAL DATA

      The following table presents our selected consolidated financial data. The information set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical consolidated financial statements and notes thereto, included elsewhere in this Annual Report on Form 10-K.

      Our fiscal year is a 52-week or 53-week period ending on the Saturday nearest to December 31. References below to 2004, 2003, 2002, 2001, and 2000 represent the fiscal year (52 weeks) ended January 1,

2005, the fiscal year (53 weeks) ended January 3, 2004, and the fiscal years (52 weeks) ended December  28, 2002, December 29, 2001, and December 30, 2000, respectively.

Overview of Our Business

      We are the largest distributor of IT products and services worldwide based on revenues. We offer a broad range of IT products and services and help generate demand and create efficiencies for our customers and suppliers around the world. Through fiscal year 2000, we generated positive annual sales growth from expansion of our existing operations, the integration of numerous acquisitions worldwide, the addition of new product categories and suppliers, the addition of new customers, increased sales to our existing customer base, and growth in the IT products and services distribution industry in general. However, our worldwide net sales declined from $30.7 billion in 2000 to $25.2 billion in 2001, $22.5 billion in 2002 and $22.6 billion in 2003. These declines were primarily the result of the general decline in demand for IT products and services throughout the world, beginning in the fourth quarter of 2000 and continuing through most of 2003, as well as the decision of certain vendors to pursue a direct sales model, and our exit from or downsizing of certain markets in Europe and Latin America. In 2004, our net sales increased to $25.5 billion, or approximately 13% year-over-year. This increase primarily reflects a strengthening of demand, which began in late 2003, as well as the inclusion of approximately $0.4 billion of additional revenue arising from the acquisition of Tech Pacific in November 2004. Competitive pricing pressures, particularly in North America and Europe, and the expansion of a direct sales strategy by one or more of our major vendors could, however, adversely affect the current improvements in our revenues and profitability over the near term.

      The IT distribution industry in which we operate is characterized by narrow gross profit as a percentage of net sales (“gross margin”) and narrow income from operations as a percentage of net sales (“operating margin”). Historically, our margins have been negatively impacted by intense price competition, as well as changes in vendor terms and conditions, including, but not limited to, significant reductions in vendor rebates and incentives, tighter restrictions on our ability to return inventory to vendors, and reduced time periods qualifying for price protection. To mitigate these factors, we have implemented, and continue to refine, changes to our pricing strategies, inventory management processes, and vendor program processes. In addition, we continuously monitor and change, as appropriate, certain of the terms and conditions offered to our customers to reflect those being set by our vendors. As a result, gross margin improved from 5.1% in 2000 to 5.5% in 2002 and has remained relatively flat through 2004. However, we expect that these restrictive vendor terms and conditions and competitive pricing pressures will continue and may worsen in the foreseeable future which may hinder our ability to maintain and/or improve our gross margins from the levels realized in recent years.

      Our SG&A expenses as a percentage of net sales were 3.9% in 2000, reflecting the benefit of greater economies of scale from our revenue growth during this period. However, our SG&A expenses as a percentage of net sales increased to 4.7% in 2001 and 5.0% in 2002 primarily due to the significant decline in our net revenues during these years. As a result, we initiated a broad-based reorganization plan in June 2001, a comprehensive profit enhancement program in September 2002, and other detailed actions across all our regions to streamline operations, improve service and generate operating income improvements. As a result of these actions, we reduced our SG&A expenses to 4.6% of net sales in 2003, despite the soft demand of IT products and services in 2003, and to 4.4% in 2004.

      The IT products and services distribution business is working capital intensive. Our business requires significant levels of working capital primarily to finance accounts receivable and inventories. We have relied heavily on debt, trade credit from vendors and accounts receivable financing programs for our working capital needs. At December 30, 2000, we had total debt of $545.6 million plus an additional $910.2 million in off-balance sheet debt from our accounts receivable financing programs, and a cash balance of $150.6 million. With the decline in revenue, which began in late 2000, and our strong focus on management of working capital, we reduced total debt to $368.3 million at January 3, 2004 and reduced the amount financed through our accounts receivable financing programs to $60.0 million, and increased our cash balance to $279.6 million. At January 1, 2005, our total debt increased to $514.8 million as a result of our acquisition of Tech Pacific and the elimination of amounts financed through our previously off-balance sheet accounts receivable financing programs, partially offset by an increase in our cash balance to $398.4 million.

      In November 2004, we acquired all of the outstanding shares of Techpac Holdings Limited, or Tech Pacific, one of Asia-Pacific’s largest technology distributors, for cash and the assumption of debt. This acquisition provides us with a strong management and employee base with excellent execution capabilities, history of solid operating margins and profitability, and a strong presence in the growing Asia-Pacific region.

Our Reorganization and Profit Enhancement Programs

      In June 2001, we initiated a broad-based reorganization plan to streamline operations and reorganize resources to increase flexibility, improve service and generate cost savings and operational efficiencies. This program resulted in restructuring several functions, consolidation of facilities, and reductions of workforce worldwide in each of the quarters through June 2002. Total reorganization costs associated with these actions were $8.8 million and $41.4 million in 2002 and 2001, respectively.

      In September 2002, we announced a comprehensive profit enhancement program, which was designed to improve operating income through enhancements in gross margin and reduction of SG&A expense. Key components of this initiative included enhancement and/or rationalization of vendor and customer programs, optimization of facilities and systems, outsourcing of certain IT infrastructure functions, geographic consolidations and administrative restructuring. For 2003 and 2002, we incurred $31.0 million and $107.9 million, respectively, of costs (or $138.9 million from inception of the program through the end of fiscal year 2003) related to this profit enhancement program, which was within our original announced estimate of $140 million. These costs have consisted primarily of reorganization costs of $13.6 million and $62.4 million in 2003 and 2002, respectively, and other program implementation costs, or other major-program costs, of $17.4 million and $43.9 million charged to SG&A expenses in 2003 and 2002, respectively, and $1.6 million charged to cost of sales in 2002. We realized significant benefits from the reduction in certain SG&A expenses and from gross margin improvements as a result of our comprehensive profit enhancement program.

      During 2003, we incurred incremental reorganization costs of $8.0 million and incremental other major-program costs of $6.4 million ($6.0 million charged to SG&A expenses and $0.4 million charged to cost of sales), which were not part of the original scope of the profit enhancement program announced in September

2002. These costs primarily related to the further consolidation of our operations in the Nordic areas of Europe and a loss on the sale of a non-core German semiconductor equipment distribution business. These actions provided additional operating income improvements primarily in the European region.

      The actions related to our comprehensive profit enhancement program were completed in 2003; however, we continue to pursue business process improvements to create sustained cost reductions or operational improvements over the long term. Implementation of additional actions, including integration of acquisitions, in the future, if any, could result in additional costs as well as additional operating income improvements. The following table summarizes our reorganization costs and other major-program costs for the fiscal years 2003 and 2002 resulting from the detailed actions initiated under our broad-based reorganization plan and profit enhancement program and other actions we have taken (in millions). The credit balances in 2004 represent adjustments to reorganization costs as a result of the favorable resolution of obligations of costs relating to previous actions:

      Reorganization costs have generally consisted of employee termination benefits for workforce reductions; facility exit costs associated with the downsizing, consolidation and exit of facilities; and other costs associated with reorganization activities. Other major-program costs associated with our comprehensive profit enhancement program announced in September 2002 included $23.4 million charged to SG&A expenses in 2003 ($17.4 million in North America and $6.0 million in Europe) and $43.9 million in 2002 ($37.6 million in North America, $6.0 million in Europe and $0.4 million in Asia-Pacific) primarily consisting of program management and consulting expenses; incremental depreciation resulting from the reduction of estimated useful lives of fixed assets to coincide with the planned exit of certain facilities, outsourcing of certain IT infrastructure functions, and software replaced by a more efficient solution; recruiting, retention, training and other transition costs associated with the relocation of major functions in North America and the outsourcing of certain IT infrastructure functions; the loss on the sale of a non-core German semiconductor equipment distribution business; and the gain on the sale of excess land near our headquarters in Southern California. Additionally, other major-program costs included $0.4 million and $1.6 million in 2003 and 2002, respectively, charged to cost of sales, primarily comprised of incremental inventory and vendor-program losses caused by the decision to further consolidate and exit certain European markets.

Our Critical Accounting Policies and Estimates

      The discussions and analyses of our consolidated financial condition and results of operations are based on our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America (U.S.). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of significant contingent assets and liabilities at the financial statement date, and reported amounts of revenue and expenses during the reporting period. On an ongoing basis, we review and evaluate our estimates and assumptions, including, but not limited to, those that relate to accounts receivable; vendor programs; inventories; goodwill, intangible and other long-lived assets; income taxes; and contingencies and litigation. Our estimates are based on our historical experience and a variety of other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making our judgment about the carrying values of assets and liabilities that are not readily available from other sources. Although we believe our estimates, judgments and assumptions are appropriate and reasonable based upon available

information, these assessments are subject to a wide range of sensitivity, therefore, actual results could differ from these estimates.

      We believe the following critical accounting policies are affected by our judgment, estimates and/or assumptions used in the preparation of our consolidated financial statements.

Results of Operations

      The following tables set forth our net sales by geographic region (excluding intercompany sales) and the percentage of total net sales represented thereby, as well as operating income and operating margin by geographic region for each of the fiscal years indicated (in millions).

      We sell products purchased from many vendors, but generated approximately 22%, 24% and 27% of our net sales in fiscal years 2004, 2003 and 2002, respectively, from products purchased from Hewlett-Packard Company. There were no other vendors that represented 10% or more of our net sales in each of the last three years.

      The following table sets forth certain items from our consolidated statement of income as a percentage of net sales, for each of the fiscal years indicated.

Results of Operations for the Years Ended January 1, 2005, January 3, 2004 and December 28, 2002

      Our consolidated net sales were $25.5 billion, $22.6 billion and $22.5 billion in 2004, 2003 and 2002, respectively. Our worldwide net sales increased approximately 13% in 2004 compared to both 2003 and 2002. The overall increase in net sales from 2002 to 2004 was primarily attributable to a slightly improved demand environment for IT products and services, particularly in North America and Europe, the translation impact of the strengthening European currencies compared to the U.S. dollar (which contributed approximately four percentage points of the worldwide growth) and additional revenue arising from the acquisition of Tech Pacific in November 2004. However, competitive pricing pressures, particularly in North America, the expansion of a direct sales strategy by one or more of our major vendors and/or softening of demand could adversely affect the current improvements in our revenues and profitability over the near term.

      Net sales from our North American operations were $11.8 billion, $11.0 billion and $12.1 billion in 2004, 2003 and 2002, respectively. Net sales from our North American operations increased 7.4% in 2004 compared to 2003, primarily reflecting the stronger demand for IT products and services compared to the prior year. Net sales had decreased 9.6% in 2003 compared to 2002 due to the sluggish demand for IT products and services in 2003, consistent with the prolonged softness in the U.S. economy at that time and the decision of certain vendors to pursue a direct sales model. Net sales from our European operations were $9.8 billion, $8.3 billion and $7.2 billion in 2004, 2003 and 2002, respectively. The year-over-year growth in European net sales of 19% and 16% in 2004 and 2003, respectively, reflects the translation impact of the strengthening European currencies, which contributed approximately 11% and 18% in revenue growth in 2004 and 2003, respectively, increases in our market share in certain operations within Europe, and strong demand for IT products and services across the region in 2004. These growth factors were partially offset by softer demand for technology products and services in most countries in Europe and our downsizing and/or exit of operations in certain markets within the region in 2003 and 2002. Net sales from our Asia-Pacific operations were $2.7 billion, $2.3 billion and $2.0 billion in 2004, 2003 and 2002, respectively. The growth in our 2004 net sales in Asia-Pacific reflects approximately $400 million of revenue resulting from our acquisition of Tech Pacific. Our continued focus on improving the operating model and profitability in this region had a tempering effect on sales growth in 2004. Net sales in our Asia-Pacific region increased 18.3% in 2003 compared to 2002 as a result of the overall growth in demand in this emerging market. Net sales from our Latin American operations were $1.1 billion, $1.1 billion and $1.2 billion in 2004, 2003 and 2002, respectively. Net sales from our Latin American operations decreased 12.7% in 2003 compared to 2002 due to weak economic conditions prevalent within the region at that time and the downsizing of our operations in certain markets during 2002, but revenues stabilized and improved slightly in 2004 consistent with the general demand environment in the region.

      Our gross margin has remained relatively stable at 5.5%, 5.4% and 5.5% in 2004, 2003 and 2002, respectively, which reflects strong inventory management, benefits from our comprehensive profit enhancement program and improvements in our Asia-Pacific and Latin America businesses, generally offsetting the impact of the competitive pricing environment. We continuously evaluate and modify our pricing policies and certain terms and conditions offered to our customers to reflect those being imposed by our vendors and general market conditions. As we continue to evaluate our existing pricing policies and make future changes, if any, we may experience tempered or negative sales growth in the near term. In addition, increased competition and any retractions or softness in economies throughout the world may hinder our ability to maintain and/or improve gross margins from the levels realized in recent periods.

      Total SG&A expenses were $1.1 billion, $1.0 billion and $1.1 billion in 2004, 2003 and 2002, respectively. In 2004, SG&A expenses increased by $75.8 million compared to 2003 primarily due to the translation impact of the strengthening European currencies of approximately $36 million, realignment costs of approximately $11 million associated with downsizing and relocating activities in our under-performing German-based networking unit, the addition of approximately $15 million in operating expenses related to Tech Pacific, which was acquired on November 10, 2004, and increased expenses required to support the growth of our business, partially offset by the benefits of our comprehensive profit enhancement program, the reduction of related implementation costs of $23.4 million from prior year (see Note 3 to our consolidated financial statements) and a $20 million charge related to the bankruptcy of Micro Warehouse, one of our former

customers, in 2003. As a percentage of net sales, total SG&A expenses decreased to 4.4% in 2004 compared to 4.6% in 2003, which included the impact of the Micro Warehouse bankruptcy of approximately 0.1% of revenue in prior year. Aside from the impact of the Micro Warehouse bankruptcy, total SG&A decreased as a percentage of revenue due to the economies of scale from the higher level of revenue, savings from our comprehensive profit enhancement program and other actions we have taken as well as the reduction of the related implementation costs, and continued cost control measures. In 2003, we reduced SG&A expenses by $64.6 million compared to 2002 as a result of the actions we have taken and the reduction of other major-program costs of $20.6 million in 2003, partially offset by the $20 million charge related to the Micro Warehouse bankruptcy and the translation impact of the strengthening European currencies of approximately $46 million. SG&A expenses as a percentage of net sales, which included the impact of the Micro Warehouse bankruptcy, decreased to 4.6% in 2003 compared to 5.0% in 2002, primarily due to savings from our comprehensive profit enhancement program and other actions we have taken, as well as the reduction of the related implementation costs, and continued cost control measures. We continue to pursue and implement business process improvements and organizational changes to create sustained cost reductions without sacrificing customer service over the long-term.

      In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,” or FAS 123R. FAS 123R requires us to recognize compensation cost relating to all share-based payments to our employees based on their fair values beginning the third quarter of 2005. We are evaluating the requirements of FAS 123R, as well as our long-term incentive compensation strategies, and expect that our adoption of FAS 123R will have a material impact on our SG&A expenses. We have not determined the method of adoption and have not determined whether the adoption will result in amounts that are similar to our current pro forma disclosures under FAS 123 (see Note 2 to our consolidated financial statements).

      As previously discussed, reorganization costs were $21.6 million and $71.1 million in 2003 and 2002, respectively, and in 2004 we had a net credit of $2.9 million relating primarily to favorable resolution of obligations related to prior actions (see Note 3 to our consolidated financial statements). We are in the process of integrating Tech Pacific with our operations in Asia-Pacific and we may also pursue other business process or organizational changes in our other regions, which will likely result in additional charges related to consolidation of facilities, restructuring of several functions and workforce reductions in 2005.

      Our operating margin increased to 1.1% in 2004 from 0.7% and 0.2% in 2003 and 2002, respectively, primarily reflecting the reduction of our operating expense ratio and reorganization costs as discussed above. Our North American operating margin increased to 1.1% in 2004 from 0.9% and 0.3% in 2003 and 2002, respectively. The increase in operating margin for North America in 2004 compared to 2003 reflects the impact of the charge related to the Micro Warehouse bankruptcy of approximately 0.2% of North America revenue in prior year, as well as economies of scale from the higher volume of business, the benefits of our comprehensive profit enhancement program and reduction of the related implementation costs, partially offset by significant competitive pressures on pricing. Operating margin for North America increased in 2003 compared to 2002 primarily due to lower reorganization and other major-program costs and improvements realized from our profit enhancement program and other actions we have taken, partially offset by the impact of the Micro Warehouse bankruptcy and increased competitive pressures on pricing. Our European operating margin increased to 1.3% in 2004 from 0.9% and 0.2% in 2003 and 2002, respectively. Operating margin for Europe in 2004 and 2003 was positively impacted by improvements from our profit enhancement program and other actions we have taken, a reduction in related implementation costs, and economies of scale from the higher volume of business. Our Asia-Pacific operating margin was 0.4%, (0.4%) and 0.1% in 2004, 2003 and 2002, respectively. Operating results in the Asia-Pacific region deteriorated in 2003, largely due to higher inventory and bad debt losses in greater China, and intense price competition particularly in our components business, which were exacerbated by the impacts of SARS and the Gulf War on the region. However, 2004 was positively impacted by Tech Pacific’s operating margin contribution, as well as improvements and strengthening of our operating model. We believe the addition of Tech Pacific and continued process improvements will improve profitability over the long-term. Our Latin American operating margin was 1.2% in 2004 compared to negative operating margin of 0.1% or less in each of the past two years. Strengthening

operating processes in Latin America during 2004 positively impacted operating margin in this region. The negative operating margins in 2003 and 2002 were primarily attributable to the continued market softness and competitive pricing pressures in the region as well as higher bad debt expense and inventory related issues.

      Other expense (income) consisted primarily of interest, losses on sales of receivables under our ongoing accounts receivable facilities, foreign currency exchange gains and losses, and other non-operating gains and losses. We incurred net other expense of $20.1 million, or 0.1% as a percentage of net sales, in 2004 compared to $40.4 million, or 0.2% as a percentage of net sales, in 2003 and $41.2 million, or 0.2% as a percentage of net sales, in 2002. The decrease in 2004 primarily reflects a foreign-exchange gain of $23.1 million on a forward currency exchange contract related to our Australian dollar-denominated purchase of Tech Pacific. Other expense decreased slightly in 2003 compared to 2002, which included a gain of $6.5 million from the sale of our remaining shares of Softbank common stock, and lower foreign currency exchange losses.

      Our provision for income taxes in 2004 and 2002 was $43.4 million and $3.3 million, respectively, compared to a benefit from income taxes of $33.4 million in 2003. Fiscal year 2004 included a benefit of $41.1 million for the reversal of previously accrued U.S. Federal and certain state income taxes relating to the gain realized on the sale of Softbank common stock in 2000 and 1999 while fiscal year 2003 included a benefit of $70.5 million for the reversal of previously accrued U.S. Federal income taxes relating to the gain realized on the sale of Softbank common stock in 1999. Our effective tax provision rate in 2004 and 2002 was 16% and 37%, respectively, compared to effective tax benefit rate of 29% in 2003. The decrease in the effective tax rate from 2002 through 2004 is primarily attributable to the reversals of the previously accrued U.S. Federal and certain state income taxes in 2004 and U.S. Federal income taxes in 2003 (see Note 8 to our consolidated financial statements), as well as changes in the proportion of income earned within the various taxing jurisdictions, our ongoing tax strategies, and the elimination of goodwill amortization in 2002, a substantial portion of which was not deductible for tax purposes.

      As noted in our discussion of critical accounting policies and estimates, in the first quarter of 2002, we recorded a noncash charge of $280.9 million, net of income taxes of $2.6 million, for the cumulative effect of adopting FAS 142. In the fourth quarters of 2004, 2003 and 2002, we performed impairment tests of our goodwill and no additional impairment was indicated based on these tests.

Quarterly Data; Seasonality

      Our quarterly operating results have fluctuated significantly in the past and will likely continue to do so in the future as a result of:

      These historical variations may not be indicative of future trends in the near term. Our narrow operating margins may magnify the impact of the foregoing factors on our operating results.

      The following table sets forth certain unaudited quarterly historical financial data for each of the eight quarters in the two years ended January 1, 2005. This unaudited quarterly information has been prepared on the same basis as the annual information presented elsewhere herein and, in our opinion, includes all adjustments necessary for a fair presentation of the selected quarterly information. This information should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. The operating results for any quarter shown are not necessarily indicative of results for any future period.

Liquidity and Capital Resources

      We have financed our growth and cash needs largely through income from operations, borrowings under revolving credit and other facilities, sales of accounts receivable through established accounts receivable facilities, trade and supplier credit, and proceeds from senior subordinated notes issued in August 2001. The

following is a detailed discussion of our cash flows for the years ended January 1, 2005, January 3, 2004 and December 28, 2002.

      Our cash and cash equivalents totaled $398.4 million and $279.6 million at January 1, 2005 and January 3, 2004, respectively.

      Net cash provided by operating activities was $360.9 million and $270.6 million in 2004 and 2002, respectively, compared to net cash used by operating activities of $94.8 million in 2003. The net cash provided by operating activities in 2004 was primarily due to net income and a net decrease in working capital, which reflects our continued focus on working capital management. The net cash used by operating activities in 2003 principally reflects an increase in inventory and a decrease in accrued expenses, partially offset by income adjusted for noncash charges and by a decrease in accounts receivable. The increase in inventory largely reflects increased inventory-stocking levels in response to recent improvements in market conditions, and purchases for strategic growth areas. The reduction of accrued expenses primarily relates to the settlement of a currency interest rate swap in the first quarter of 2003 and payments of variable incentive compensation and profit enhancement program costs. The decrease in accounts receivable reflects strong working capital management during the year. The net cash provided by operating activities in 2002 was primarily attributable to the overall reduction in our net working capital due to our focus on working capital management and the lower volume of business. Our debt levels may increase and/or our cash balance may decrease if we experience an increase in our working capital days or if we experience significant sales growth.

      Net cash used by investing activities was $411.5 million, $36.9 million and $28.1 million in 2004, 2003 and 2002, respectively. The net cash used by investing activities in 2004 was primarily due to our business acquisitions of $402.2 million and capital expenditures of $37.0 million. The net cash used by investing activities in 2003 was primarily due to capital expenditures of $35.0 million. The net cash used by investing activities in 2002 was primarily due to capital expenditures of approximately $54.7 million, partially offset by cash proceeds of approximately $31.8 million from the sale of Softbank common stock. The reduction in our capital expenditures over the period from 2002 to 2004 reflects the benefits of our previous profit enhancement program which has enabled us to streamline operations and optimize facilities as well as our decision to outsource certain IT infrastructure functions which have reduced our capital requirements. We presently expect our capital expenditures to be approximately $50 million in 2005.

      Net cash provided by financing activities was $149.5 million and $9.3 million in 2004 and 2003, respectively, compared to net cash used by financing activities of $146.7 million in 2002. The net cash provided by financing activities in 2004 primarily reflects proceeds received from the exercise of stock options of $84.5 million and an increase in book overdrafts of $77.7 million. The net cash provided by financing activities in 2003 primarily reflects proceeds received from the exercise of stock options of $10.3 million. The net cash used by financing activities in 2002 primarily resulted from the net repayment of our revolving credit and other debt facilities of $125.0 million. Debt was reduced primarily through cash provided by operations, our continued focus on working capital management and lower financing needs as a result of the lower volume of business.

      We account for all acquisitions after June 30, 2001 in accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations.” The results of operations of these businesses have been consolidated with our results of operations beginning on their acquisition dates.

      In November 2004, we acquired all of the outstanding shares of Tech Pacific, one of Asia-Pacific’s largest technology distributors, for 730 million Australian dollars (approximately $554 million at closing date) for cash and the assumption of debt. The purchase price includes preliminary estimates of costs to restructure the operations of Tech Pacific. The final costs incurred may differ materially as these actions are completed. The purchase price has been allocated to the assets acquired and liabilities assumed based on estimated fair values on the transaction date. We are in the process of completing the valuation of vendor and customer relationship intangible assets and expect to finalize customer data analysis and the valuation during the first quarter of fiscal year 2005 (see Note 4 to our consolidated financial statements).

      To protect the value of our U.S. dollar investment in the acquisition of Tech Pacific, which was denominated in Australian dollars, we entered into a forward currency exchange contract for a notional amount equal to 537 million Australian dollars. The forward exchange contract was entered at an agreed forward contract price of 0.71384 U.S. dollar to one Australian dollar. This forward exchange contract was settled concurrent with our payment of the purchase price for Tech Pacific on November 10, 2004, the closing date of the acquisition at a gain of $23.1 million.

      In connection with our acquisition of Tech Pacific, the parties agreed that 35 million Australian dollars, or approximately $27 million, of the purchase price shall be held in an escrow account to cover claims from us for various indemnities by the sellers under the sale agreement, of which 10 million Australian dollars, or approximately $8 million, was released on March 1, 2005, and 25 million Australian dollars, or approximately $19 million, will be released in full to the sellers on February 28, 2006 if no claims are made by us under the sale agreement before such date.

      In July 2004, we acquired substantially all of the assets and assumed certain liabilities of Nimax, Inc., a privately-held distributor of automatic identification and data capture/point-of-sale, barcode and wireless products, as well as enterprise mobility solutions. The purchase price, consisting of a cash payment of $8.7 million in 2004 and $1.0 million payable on or before October 31, 2006, was allocated to the assets acquired and liabilities assumed based on estimated fair values on the transaction date, resulting in the recording of $0.9 million of other amortizable intangible assets primarily related to customer and vendor relationships. No goodwill was recorded in this transaction. In addition to the cash payment, the purchase agreement requires us to pay the seller up to $6.0 million at the end of two years, based on a specified earn-out formula, which will be recorded as an adjustment to the purchase price.

      In April 2003, we increased our ownership in an India-based subsidiary by acquiring approximately 37% of the subsidiary held by minority shareholders. The total purchase price for this acquisition consisted of a cash payment of $3.1 million, resulting in the recording of $2.0 million of goodwill.

      In February 2003, we increased our ownership in Ingram Macrotron AG, a German-based distribution company, by acquiring the remaining interest of approximately 3% held by minority shareholders. The purchase price of this acquisition consisted of a cash payment of $6.3 million, resulting in the recording of $5.3 million of goodwill. Court actions have been filed by several minority shareholders contesting the adequacy of the purchase price paid for the shares and various other actions, which could affect the purchase price. Depending upon the outcome of these actions, additional payments for such shares may be required.

      We believe that our existing sources of liquidity, including cash resources and cash provided by operating activities, supplemented as necessary with funds available under our credit arrangements, will provide sufficient resources to meet our present and future working capital and cash requirements for at least the next twelve months.

      On July 29, 2004, we entered into a new revolving accounts receivable-based financing program in the U.S., which provides for up to $500 million in borrowing capacity secured by substantially all U.S.-based receivables. At our option, the program may be increased to as much as $600 million at any time prior to July 29, 2006. This new facility expires on March 31, 2008. Based on the terms and conditions of the new program structure, borrowings under the program are accounted for as a financing facility, or on-balance sheet debt. At January 1, 2005, we had no borrowings under our new revolving accounts receivable-based financing program.

      On July 26, 2004, we amended our existing trade accounts receivable program in Canada, which provides for borrowing capacity up to 150 million Canadian dollars, or approximately $124 million. Pursuant to the amendment, we extended the program maturity to August 31, 2008, on substantially similar terms and conditions that existed prior to such amendment. However, under the new program, we obtained certain rights

to repurchase transferred receivables. Based on the terms and conditions of the new program structure, borrowings under the program are accounted for as a financing facility, or on-balance sheet debt. At January 1, 2005, we had no borrowings under our amended trade accounts receivable program.

      In June 2002, we entered into a three-year European revolving trade accounts receivable backed financing facility supported by the trade accounts receivable of a subsidiary in Europe for Euro 107 million, or approximately $146 million, with a financial institution that has an arrangement with a related issuer of third-party commercial paper. In August 2003, we entered into another three-year European revolving trade accounts receivable backed financing facility supported by the trade accounts receivable of two other subsidiaries in Europe for Euro 230 million, or approximately $314 million, with the same financial institution and related issuer of third-party commercial paper. In March 2004, the terms of these agreements were amended to eliminate the minimum borrowing requirements that existed under the original agreements and remove the smaller of the two European subsidiaries from the August 2003 facility. Both of these European facilities require certain commitment fees and borrowings under both facilities incur financing costs at rates indexed to EURIBOR.

      We could, however, lose access to all or part of our financing under these facilities under certain circumstances, including: (a) a reduction in credit ratings of the third-party issuer of commercial paper or the back-up liquidity providers, if not replaced or (b) failure to meet certain defined eligibility criteria for the trade accounts receivable, such as receivables must be assignable and free of liens and dispute or set-off rights. In addition, in certain situations, we could lose access to all or part of our financing with respect to the August 2003 European facility as a result of the rescission of our authorization to collect the receivables by the relevant supplier under applicable local law. Based on our assessment of the duration of these programs, the history and strength of the financial partners involved, other historical data, various remedies available to us under these programs, and the remoteness of such contingencies, we believe that it is unlikely that any of these risks will materialize in the near term. At January 1, 2005, we had no borrowings under our European facilities compared to $20.2 million at January 3, 2004.

      In November 2004, we assumed from Tech Pacific a multi-currency revolving trade accounts receivable backed financing facility in Asia-Pacific supported by the trade accounts receivable of two subsidiaries in the region for 200 million Australian dollars, or approximately $156 million, with a financial institution that has an arrangement with a related issuer of third-party commercial paper that expires in June 2008. The interest rate is dependent upon the currency in which the drawing is made and is related to the local short-term bank indicator rate for such currency. This facility has no fixed repayment terms prior to maturity. At January 1, 2005, we had borrowings of $132.3 million under this facility.

      Our ability to access financing under our North American, European and Asia-Pacific facilities is dependent upon the level of eligible trade accounts receivable and the level of market demand for commercial paper. At January 1, 2005, our actual aggregate capacity under these programs, based on eligible accounts receivable outstanding, was approximately $996 million.

      We also assumed from Tech Pacific in November 2004, a multi-currency secured revolving loan facility, or assumed facility, of 80 million Australian dollars, or approximately $62 million, in connection with change of control provisions triggered by our acquisition of Tech Pacific, which may be terminated on or before April 2, 2005. The interest rate is dependent upon the currency in which the drawing is made, and is determined based on the short-term bank indicator rate for such currency. The assumed facility was substantially secured by the assets and stock of certain of our Asia-Pacific subsidiaries, and has no fixed repayment terms prior to maturity. However, on January 31, 2005, in connection with the acquisition of Tech Pacific, we effected a release of all liens and related security interests as well as material covenant compliance requirements under this facility through the issuance of a standby letter of credit for the same amount in favor of the lender. At January 1, 2005, we had no borrowings under this facility. The assumed facility can also be used to support letters of credit. At January 1, 2005, letters of credit totaling approximately $24.1 million were issued to a vendor to support purchases by our subsidiaries and to certain financial institutions to support banking lines for certain subsidiaries, or local borrowings from banks made available to certain of our

subsidiaries in the Asia-Pacific region. The issuance of these letters of credit reduces our available capacity under the assumed facility by the same amount.

      We also have a $150 million revolving senior unsecured credit facility with a bank syndicate that expires in December 2005. At January 1, 2005 and January 3, 2004, we had no borrowings outstanding under this credit facility. This facility can also be used to support letters of credit. At January 1, 2005 and January 3, 2004, letters of credit totaling approximately $24.3 million and $63.7 million, respectively, were issued to certain vendors and financial institutions to support purchases by our subsidiaries, payment of insurance premiums and flooring arrangements. The issuance of these letters of credit reduces our available capacity under the agreement by the same amount.

      On August 16, 2001, we sold $200 million of 9.875% senior subordinated notes due 2008 at an issue price of 99.382%, resulting in net cash proceeds of approximately $195.1 million, net of issuance costs of approximately $3.7 million. Interest on the notes is payable semi-annually in arrears on each February 15 and August 15. We may redeem any of the notes beginning on August 15, 2005 with an initial redemption price of 104.938% of their principal amount plus accrued interest. The redemption price of the notes will be 102.469% plus accrued interest beginning on August 15, 2006 and will be 100% of their principal amount plus accrued interest beginning on August 15, 2007.

      On August 16, 2001, we also entered into interest rate swap agreements with two financial institutions, the effect of which was to swap our fixed-rate obligation on our senior subordinated notes for a floating rate obligation equal to 90-day LIBOR plus 4.260%. All other financial terms of the interest rate swap agreements are identical to those of the senior subordinated notes, except for the quarterly payments of interest, which will be on each February 15, May 15, August 15 and November 15 and ending on the termination date of the swap agreements. These interest rate swap arrangements contain ratings conditions requiring posting of collateral by either party and at minimum increments based on the market value of the instrument and credit ratings of either party. The marked-to-market value of the interest rate swap amounted to $14.5 million and $20.5 million at January 1, 2005 and January 3, 2004, respectively, which is recorded in other assets with an offsetting adjustment to the hedged debt, bringing the total carrying value of the senior subordinated notes to $213.9 million and $219.7 million, respectively.

      We also have additional lines of credit, short-term overdraft facilities and other credit facilities with various financial institutions worldwide, which provide for borrowing capacity aggregating approximately $525 million at January 1, 2005. Most of these arrangements are on an uncommitted basis and are reviewed periodically for renewal. At January 1, 2005 and January 3, 2004, we had approximately $168.6 million and $128.3 million, respectively, outstanding under these facilities. At January 1, 2005 and January 3, 2004, letters of credit totaling approximately $30.5 million and $29.3 million, respectively, were issued principally to certain vendors to support purchases by our subsidiaries. The issuance of these letters of credit reduces our available capacity under these agreements by the same amount. The weighted average interest rate on the outstanding borrowings under these facilities was 5.0% and 5.2% per annum at January 1, 2005 and January 3, 2004, respectively.

      We have a revolving trade accounts receivable-based facility in Europe, which provides up to approximately $238 million of additional financing capacity. This facility expires in 2007. At January 1, 2005 and January 3, 2004, we had no trade accounts receivable sold to and held by third parties under our European program. Our financing capacity under the European program is dependent upon the level of our trade accounts receivable eligible to be transferred or sold into the accounts receivable financing program. At January 1, 2005, our actual aggregate capacity under this program, based on eligible accounts receivable outstanding, was approximately $209 million. We believe that there are sufficient eligible trade accounts receivable to support our anticipated financing needs under the remaining European accounts receivable financing program.

      Effective July 29, 2004, we terminated our $700 million revolving accounts receivable securitization program in the U.S., which was scheduled to expire in March 2005. On the same day, we entered into a new

revolving accounts receivable-based financing program, which provides for up to $500 million in borrowing capacity secured by substantially all U.S.-based receivables (see “Capital Resources — On-Balance Sheet Capital Resources” above). At January 3, 2004, the amount of undivided interests sold to and held by third parties under the former securitization program totaled $60 million. We also amended on July 26, 2004 our existing accounts receivable-based facility in Canada of 150 million Canadian dollars (originally scheduled to expire in August 2004) and extended the maturity to August 31, 2008. The Company had no outstanding borrowings under this amended facility at January 3, 2004.

      We are required to comply with certain financial covenants under some of our on-balance sheet financing facilities, as well as our off-balance sheet accounts receivable-based facilities, including minimum tangible net worth, restrictions on funded debt and interest coverage and trade accounts receivable portfolio performance covenants, including metrics related to receivables and payables. We are also restricted in the amount of additional indebtedness we can incur, dividends we can pay, as well as the amount of common stock that we can repurchase annually. At January 1, 2005, we were in compliance with all covenants or other requirements set forth in our accounts receivable financing programs and credit agreements or other agreements with our creditors discussed above.

      As is customary in trade accounts receivable-based financing arrangements, a reduction in credit ratings of the third-party issuer of commercial paper or a back-up liquidity provider (which provides a source of funding if the commercial paper market cannot be accessed) could result in an adverse change in, or loss of, our financing capacity under these programs if the commercial paper issuer and/or liquidity back-up provider is not replaced. Loss of such financing capacity could have a material adverse effect on our financial condition, results of operations and liquidity. However, based on our assessment of the duration of these programs, the history and strength of the financial partners involved, other historical data, and the remoteness of such contingencies, we believe it is unlikely that any of these risks will materialize in the near term.

      The following summarizes our financing capacity and contractual obligations at January 1, 2005 (in millions), and the effect of scheduled payments on such obligations are expected to have on our liquidity and cash flows in future periods.

      Our employee benefit plans permit eligible employees to make contributions up to certain limits, which are matched by us at stipulated percentages. Because our commitment under these plans is not a fixed amount, they have not been included in the contractual obligations table.

      In December 1998, we purchased 2,972,400 shares of common stock of Softbank for approximately $50.3 million. During December 1999, we sold approximately 35% of our original investment in Softbank common stock for approximately $230.1 million, resulting in a pre-tax gain of approximately $201.3 million, net of expenses. In January 2000, we sold an additional approximately 15% of our original holdings in Softbank common stock for approximately $119.2 million, resulting in a pre-tax gain of approximately $111.5 million, net of expenses. In March 2002, we sold our remaining shares of Softbank common stock for approximately $31.8 million, resulting in a pre-tax gain of $6.5 million, net of expenses. We generally used the proceeds from these sales to reduce existing indebtedness. The realized gains, net of expenses, associated with the sales of Softbank common stock in March 2002, January 2000 and December 1999 totaled $4.1 million, $69.3 million and $125.2 million, respectively, net of deferred taxes of $2.4 million, $42.1 million and $76.1 million, respectively (see Notes 2 and 8 to our consolidated financial statements).

      The Softbank common stock was sold in the public market by certain of our foreign subsidiaries, which are located in a low-tax jurisdiction. At the time of each sale, we concluded that U.S. taxes were not currently payable on the gains based on our internal assessment and opinions received from our outside advisors. However, in situations involving uncertainties in the interpretation of complex tax regulations by various taxing authorities, we provide for tax liabilities unless we consider it probable that these taxes will not be due. The level of opinions received from our outside advisors and our internal assessment did not allow us to reach that conclusion on this matter and the deferred taxes were provided accordingly. Our U.S. Federal tax returns were closed in September 2004 and 2003 for the fiscal years 2000 and 1999, respectively, and certain state returns for fiscal years 2000 and 1999 were closed in the third and fourth quarters of 2004, which resolved these matters for tax purposes in those jurisdictions. Accordingly, we reversed the related Federal and certain state deferred tax liabilities of $40.0 million and $1.1 million associated with the gains on the 2000 and 1999 sales in the third and fourth quarters of 2004, respectively, while we reversed the related Federal deferred tax liability of $70.5 million associated with the gain on the 1999 sale in the third quarter of 2003, thereby reducing our income tax provisions for both years in the consolidated statement of income. Although we review our assessments in these matters on a regular basis, we cannot currently determine when the remaining deferred tax liabilities at January 1, 2005 of $2.4 million, $2.4 million and $4.3 million related to the 2002, 2000 and 1999 sales, respectively, will be finally resolved with the taxing authorities, or if the deferred taxes will ultimately be paid. As a result, we continue to provide for these tax liabilities. If we are successful in

obtaining a favorable resolution of this matter, our tax provision would be reduced to reflect the elimination of some or all of these deferred tax liabilities. However, in the event of an unfavorable resolution, we believe that we will be able to fund any such taxes that may be assessed on this matter with our available sources of liquidity.

      During 2002 and 2003, one of our Latin American subsidiaries was audited by the Brazilian taxing authorities in relation to certain commercial taxes. As a result of this audit, the subsidiary received an assessment of 28.3 million Brazilian reais, including interest and penalties through January 1, 2005, or approximately $10.7 million as of January 1, 2005, alleging these commercial taxes were not properly remitted for the period January through September 2002. The Brazilian taxing authorities may make similar claims for periods subsequent to September 2002. Additional assessments, if received, may be significant either individually or in the aggregate. It is management’s opinion, based upon the opinions of outside legal advisors, that we have valid defenses related to this matter. Although we are vigorously pursuing administrative and judicial action to challenge the assessment, no assurance can be given as to the ultimate outcome. An unfavorable resolution of this matter is not expected to have a material impact on our financial condition, but depending upon the time period and amounts involved it may have a material negative effect on our results of operations.

Transactions with Related Parties

      We have loans receivable from certain of our executive officers and other associates. These loans, ranging up to $0.1 million, have interest rates ranging from 2.74% to 6.75% per annum and are payable up to four years. All loans to executive officers, unless granted prior to their election to such position, were granted and approved by the Human Resources Committee of our Board of Directors prior to July 30, 2002, the effective date of the Sarbanes-Oxley Act of 2002. No material modification or renewals to these loans to executive officers have been made since that date or subsequent to the employee’s election as an executive officer, if later. At January 1, 2005 and January 3, 2004, our employee loans receivable balance was $0.5 million and $0.9 million, respectively.

New Accounting Standards

      Refer to Note 2 to consolidated financial statements for the discussion of new accounting standards.

Market Risk

      We are exposed to the impact of foreign currency fluctuations and interest rate changes due to our international sales and global funding. In the normal course of business, we employ established policies and procedures to manage our exposure to fluctuations in the value of foreign currencies and interest rates using a variety of financial instruments. It is our policy to utilize financial instruments to reduce risks where internal netting cannot be effectively employed. It is our policy not to enter into foreign currency or interest rate transactions for speculative purposes.

      Our foreign currency risk management objective is to protect our earnings and cash flows resulting from sales, purchases and other transactions from the adverse impact of exchange rate movements. Foreign exchange risk is managed by using forward contracts to offset exchange risk associated with receivables and payables. By policy, we maintain hedge coverage between minimum and maximum percentages. Currency interest rate swaps are used to hedge foreign currency denominated principal and interest payments related to intercompany and third-party loans. During 2004, hedged transactions were denominated in U.S. dollars, Canadian dollars, euros, pounds sterling, Danish krone, Hungarian forint, Norwegian kroner, Swedish krona, Swiss francs, Australian dollars, Hong Kong dollars, Indian rupees, New Zealand dollars, Singaporean dollars, Thai baht, Brazilian reais, Chilean peso and Mexican peso.

      We are exposed to changes in interest rates primarily as a result of our long-term debt used to maintain liquidity and finance working capital, capital expenditures and business expansion. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve our objectives we use a combination of fixed- and variable-rate debt and interest rate swaps. In August 2001, we entered into interest rate swap agreements with two financial

institutions, the effect of which was to swap our fixed rate obligation on our senior subordinated notes for a floating rate obligation based on 90-day LIBOR plus 4.260%. As of January 1, 2005 and January 3, 2004, substantially all of our outstanding debt had variable interest rates.

Market Risk Management

      Foreign exchange and interest rate risk and related derivatives used are monitored using a variety of techniques including a review of market value, sensitivity analysis and Value-at-Risk (“VaR”). The VaR model determines the maximum potential loss in the fair value of market-sensitive financial instruments assuming a one-day holding period. The VaR model estimates were made assuming normal market conditions and a 95% confidence level. There are various modeling techniques that can be used in the VaR computation. Our computations are based on interrelationships between currencies and interest rates (a “variance/co-variance” technique). The model includes all of our forwards, cross-currency and other interest rate swaps, fixed-rate debt and nonfunctional currency denominated cash and debt (i.e., our market-sensitive derivative and other financial instruments as defined by the SEC). The accounts receivable and accounts payable denominated in foreign currencies, which certain of these instruments are intended to hedge, were excluded from the model.

      The VaR model is a risk analysis tool and does not purport to represent actual losses in fair value that will be incurred by us, nor does it consider the potential effect of favorable changes in market rates. It also does not represent the maximum possible loss that may occur. Actual future gains and losses will likely differ from those estimated because of changes or differences in market rates and interrelationships, hedging instruments and hedge percentages, timing and other factors.

      The following table sets forth the estimated maximum potential one-day loss in fair value, calculated using the VaR model (in millions). We believe that the hypothetical loss in fair value of our derivatives would be offset by gains in the value of the underlying transactions being hedged.

      Information concerning quantitative and qualitative disclosures about market risk is included under the captions “Market Risk” and “Market Risk Management” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

INGRAM MICRO INC.

CONSOLIDATED BALANCE SHEET

(Dollars in 000s, except share data)

See accompanying notes to these consolidated financial statements.

INGRAM MICRO INC.

CONSOLIDATED STATEMENT OF INCOME

(Dollars in 000s, except per share data)

See accompanying notes to these consolidated financial statements.

INGRAM MICRO INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Dollars in 000s)

See accompanying notes to these consolidated financial statements.

INGRAM MICRO INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollars in 000s)