Ingram Micro Holding Corp 10-Q

Item 1. Financial Statements INGRAM MICRO HOLDING CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except par value and share data) (Unaudited) September 28, 2024 December 30, 2023 ASSETS Current assets: Cash and cash equivalents $ 849,472 $ 948,490 Trade accounts receivable (less allowances of $ 173,209 and $ 163,727 , respectively) 8,873,468 8,988,799 Inventory 4,939,438 4,659,624 Other current assets 819,476 757,404 Total current assets 15,481,854 15,354,317 Property and equipment, net 484,575 452,613 Operating lease right-of-use assets 419,866 430,705 Goodwill 850,065 851,780 Intangible assets, net 814,850 880,433 Other assets 511,513 450,466 Total assets $ 18,562,723 $ 18,420,314 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 9,468,084 $ 9,230,439 Accrued expenses and other 970,954 1,061,409 Short-term debt and current maturities of long-term debt 494,418 265,719 Short-term operating lease liabilities 104,258 105,564 Total current liabilities 11,037,714 10,663,131 Long-term debt, less current maturities 3,344,033 3,657,889 Long-term operating lease liabilities, net of current portion 359,244 366,139 Other liabilities 207,827 226,866 Total liabilities 14,948,818 14,914,025 Commitments and contingencies (Note 10) Stockholders’ equity: Class A Common Stock, par value $ 0.01 , 251,015,810 shares authorized at September 28, 2024 and December 30, 2023, respectively; and 220,742,854 shares issued and outstanding at September 28, 2024 and December 30, 2023, respectively 2,207 2,207 Class B Common Stock, par value $ 0.01 , 2,510,158 shares authorized at September 28, 2024 and December 30, 2023, respectively; and 1,657,146 shares issued and outstanding September 28, 2024 and December 30, 2023, respectively 17 17 Additional paid-in capital 2,643,807 2,655,776 Retained earnings 1,254,283 1,079,776 Accumulated other comprehensive loss ( 286,409 ) ( 231,487 ) Total stockholders’ equity 3,613,905 3,506,289 Total liabilities and stockholders’ equity $ 18,562,723 $ 18,420,314 See accompanying notes to these unaudited condensed consolidated financial statements. 4 INGRAM MICRO HOLDING CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands, except per share data) (Unaudited) Thirteen Weeks Ended Thirty-Nine Weeks Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Net sales $ 11,762,628 $ 11,925,373 $ 34,639,001 $ 35,020,863 Cost of sales 10,917,136 11,070,529 32,130,141 32,452,386 Gross profit 845,492 854,844 2,508,860 2,568,477 Operating expenses: Selling, general and administrative 627,318 623,352 1,917,419 1,935,975 Restructuring costs — 19,090 22,018 19,090 Total operating expenses 627,318 642,442 1,939,437 1,955,065 Income from operations 218,174 212,402 569,423 613,412 Other (income) expense: Interest income ( 11,791 ) ( 8,779 ) ( 32,156 ) ( 25,160 ) Interest expense 86,254 98,321 257,790 284,751 Net foreign currency exchange loss (gain) 10,675 ( 10,462 ) 29,938 18,641 Other 13,813 12,984 34,784 25,481 Total other (income) expense 98,951 92,064 290,356 303,713 Income before income taxes 119,223 120,338 279,067 309,699 Provision for income taxes 42,254 33,555 97,961 93,511 Net income $ 76,969 $ 86,783 $ 181,106 $ 216,188 Basic and diluted earnings per share for Class A and Class B shares $ 0.35 $ 0.39 $ 0.81 $ 0.97 See accompanying notes to these unaudited condensed consolidated financial statements. 5 INGRAM MICRO HOLDING CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Amounts in thousands) (Unaudited) Thirteen Weeks Ended Thirty-Nine Weeks Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Net income $ 76,969 $ 86,783 $ 181,106 $ 216,188 Other comprehensive income (loss), net of tax Foreign currency translation adjustment 85,371 ( 107,689 ) ( 54,409 ) ( 34,533 ) Other ( 171 ) 283 ( 513 ) 1,483 Other comprehensive income (loss), net of tax 85,200 ( 107,406 ) ( 54,922 ) ( 33,050 ) Comprehensive income (loss) $ 162,169 $ ( 20,623 ) $ 126,184 $ 183,138 See accompanying notes to these unaudited condensed consolidated financial statements. 6 INGRAM MICRO HOLDING CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Amounts in thousands, except share data) (Unaudited) Thirteen Weeks Ended September 28, 2024 Class A Common Stock Class B Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shares Amount Shares Amount Balance at June 29, 2024 220,742,854 $ 2,207 1,657,146 $ 17 $ 2,655,776 $ 1,177,314 $ ( 371,609 ) $ 3,463,705 Net income — — — — — 76,969 — 76,969 Foreign currency translation adjustment — — — — — — 85,371 85,371 Other — — — — ( 11,969 ) — ( 171 ) ( 12,140 ) Balance at September 28, 2024 220,742,854 $ 2,207 1,657,146 $ 17 $ 2,643,807 $ 1,254,283 $ ( 286,409 ) $ 3,613,905 Thirty-Nine Weeks Ended September 28, 2024 Class A Common Stock Class B Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shares Amount Shares Amount Balance at December 30, 2023 220,742,854 $ 2,207 1,657,146 $ 17 $ 2,655,776 $ 1,079,776 $ ( 231,487 ) $ 3,506,289 Dividends declared — — — — — ( 6,599 ) — ( 6,599 ) Net income — — — — — 181,106 — 181,106 Foreign currency translation adjustment — — — — — — ( 54,409 ) ( 54,409 ) Other — — — — ( 11,969 ) — ( 513 ) ( 12,482 ) Balance at September 28, 2024 220,742,854 $ 2,207 1,657,146 $ 17 $ 2,643,807 $ 1,254,283 $ ( 286,409 ) $ 3,613,905 See accompanying notes to these unaudited condensed consolidated financial statements. 7 INGRAM MICRO HOLDING CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Amounts in thousands, except share data) (Unaudited) Thirteen Weeks Ended September 30, 2023 Class A Common Stock Class B Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shares Amount Shares Amount Balance at July 1, 2023 220,742,854 $ 2,207 1,657,146 $ 17 $ 2,655,776 $ 856,469 $ ( 263,102 ) $ 3,251,367 Net income — — — — — 86,783 — 86,783 Foreign currency translation adjustment — — — — — — ( 107,689 ) ( 107,689 ) Other — — — — — — 283 283 Balance at September 30, 2023 220,742,854 $ 2,207 1,657,146 $ 17 $ 2,655,776 $ 943,252 $ ( 370,508 ) $ 3,230,744 Thirty-Nine Weeks Ended September 30, 2023 Class A Common Stock Class B Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shares Amount Shares Amount Balance at December 31, 2022 220,742,854 $ 2,207 1,657,146 $ 17 $ 2,655,776 $ 737,526 $ ( 337,458 ) $ 3,058,068 Dividends declared — — — — — ( 10,462 ) — ( 10,462 ) Net income — — — — — 216,188 — 216,188 Foreign currency translation adjustment — — — — — — ( 34,533 ) ( 34,533 ) Other — — — — — — 1,483 1,483 Balance at September 30, 2023 220,742,854 $ 2,207 1,657,146 $ 17 $ 2,655,776 $ 943,252 $ ( 370,508 ) $ 3,230,744 See accompanying notes to these unaudited condensed consolidated financial statements. 8 INGRAM MICRO HOLDING CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited) Thirty-Nine Weeks Ended September 28, 2024 September 30, 2023 Cash flows from operating activities: Net income $ 181,106 $ 216,188 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 140,902 138,770 Noncash charges for interest and bond discount amortization 21,607 23,938 Loss on repayment of term loans 1,927 4,872 Amortization of operating lease asset 96,780 79,644 Deferred income taxes ( 36,493 ) ( 44,687 ) Gain on foreign exchange ( 5,106 ) ( 856 ) Other ( 12,451 ) ( 978 ) Changes in operating assets and liabilities, net of effects of acquisitions: Trade accounts receivable ( 109,758 ) 151,326 Inventory ( 286,770 ) 512,866 Other assets ( 85,682 ) ( 99,613 ) Accounts payable 245,182 ( 638,980 ) Change in book overdrafts 37,110 ( 54,902 ) Operating lease liabilities ( 94,555 ) ( 72,745 ) Accrued expenses and other ( 69,921 ) ( 155,079 ) Cash provided by operating activities 23,878 59,764 Cash flows from investing activities: Capital expenditures ( 106,643 ) ( 164,986 ) Proceeds from deferred purchase price of factored receivables 188,877 111,695 Issuance of notes receivable ( 48,692 ) — Proceeds from notes receivable 29,465 — Other 14,001 ( 3,275 ) Cash provided by (used in) investing activities 77,008 ( 56,566 ) Cash flows from financing activities: Dividends paid to shareholders ( 6,174 ) ( 10,462 ) Change in unremitted cash collections from servicing factored receivables ( 15,612 ) ( 25,661 ) Repayment of Term Loans ( 250,000 ) ( 560,000 ) Gross proceeds from other debt 89,132 29,024 Gross repayments of other debt ( 105,002 ) ( 43,794 ) Net proceeds from revolving and other credit facilities 162,617 139,286 Purchase of Colsof shares ( 21,846 ) — Other ( 11,539 ) ( 466 ) Cash used in financing activities ( 158,424 ) ( 472,073 ) Effect of exchange rate changes on cash and cash equivalents ( 41,480 ) 13,365 Decrease in cash and cash equivalents ( 99,018 ) ( 455,510 ) Cash and cash equivalents at beginning of period 948,490 1,320,137 Cash and cash equivalents at end of period $ 849,472 $ 864,627 Supplemental disclosure of non-cash investing information: Amounts obtained as a beneficial interest in exchange for transferring trade receivables in factoring arrangements $ 185,688 $ 100,017 See accompanying notes to these unaudited condensed consolidated financial statements. 9 INGRAM MICRO HOLDING CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share, unit and per share data) Note 1 – Organization and Basis of Presentation Ingram Micro Holding Corporation and its subsidiaries (“Ingram Micro”) are primarily engaged in the distribution of information technology (“IT”) products, cloud and other services worldwide. Ingram Micro operates in North America; Europe, Middle East and Africa (“EMEA”); Asia-Pacific; and Latin America. Ingram Micro Holding Corporation is a holding company with no material assets other than the indirect ownership of the stock of Ingram Micro Inc., and its operations are conducted through its wholly owned subsidiaries. Unless the context otherwise requires, the use of the terms “Ingram Micro,” “we,” “us,” “our” and the “Company” in these notes to the unaudited condensed consolidated financial statements refers to Ingram Micro Holding Corporation together with its consolidated subsidiaries. The use of the term “Platinum” means Platinum Equity, LLC together with its affiliated investment vehicles. The accompanying unaudited condensed consolidated financial statements have been prepared by us pursuant to accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all material adjustments (consisting of only normal, recurring adjustments) necessary to fairly state our consolidated financial position as of September 28, 2024, our consolidated results of operations and comprehensive income for the Thirteen Weeks Ended September 28, 2024, Thirty-Nine Weeks Ended September 28, 2024, Thirteen Weeks Ended September 30, 2023 and Thirty-Nine Weeks Ended September 30, 2023 and our consolidated cash flows for the Thirty-Nine Weeks Ended September 28, 2024 and Thirty-Nine Weeks Ended September 30, 2023. The accompanying unaudited condensed consolidated interim financial information has been prepared in accordance with Article 10 of the Securities and Exchange Commission’s (“SEC”) Regulation S-X. Accordingly, as permitted by Article 10 of the SEC’s Regulation S-X, it does not include all of the information required by U.S. GAAP for complete financial statements. The Condensed Consolidated Balance Sheet as of December 30, 2023 was derived from the audited financial statements at that date and does not include all the disclosures required by U.S. GAAP, as permitted by Article 10 of the SEC’s Regulation S-X. All intercompany accounts and transactions have been eliminated in consolidation. The consolidated results of operations for the Thirteen Weeks Ended September 28, 2024 and Thirty-Nine Weeks Ended September 28, 2024 may not be indicative of the consolidated results of operations that can be expected for the full year. Note 2 – Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. We review our estimates and assumptions on an on-going basis. Significant estimates primarily relate to the realizable value of accounts receivable, vendor programs, inventory, goodwill, intangible and other long-lived assets, income taxes and contingencies and litigation. Actual results could differ significantly from these estimates. 10 INGRAM MICRO HOLDING CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share, unit and per share data) Revenue Recognition In our distribution services model, we buy, hold title to and sell technology products and provide services to resellers, referred to subsequently as our customer, while also providing resellers with multi-vendor solutions, integration services, electronic commerce tools, marketing, financing, training and enablement, technical support and inventory management. In both Technology Solutions, which consists of C lient and Endpoint Solutions (formerly referred to as Commercial & Consumer) and Advanced Solutions, and Cloud, we generally sell products and services to our customers (resellers) based on purchase orders instead of long-term contracts. Our agreements are generally not subject to minimum purchase requirements. Our customers place purchase orders with us for each transaction. Generally, our customers may cancel, delay or modify their purchase orders. In order to set up an account to trade with us, our customers generally have to accept our standard terms and conditions of sale which, together with the purchase order, form a binding contract on each individual order to which the purchase order applies. Our pricing varies greatly and depends on many factors including costs, competitive pressure, availability of inventory, seasonality and vendor promotional programs, among others. We may offer early payment discounts or volume incentive rebates to our customers. The customer contracts relating to our other services generally provide for an initial term of three to five years , subject to extension by the mutual agreement of the parties, allow for termination for convenience by either party generally after the second year and the pricing is fixed by discrete type of service and typically varies depending on the volume of the relevant services. We do not believe any contract related to our Other services has a material impact on our business or financial condition. Products are delivered via shipment from our facilities, drop-shipment directly from our vendor, or by electronic delivery of keys for software products. We recognize revenue when the control of products is transferred to our customers, which generally happens at the point of shipment or point of delivery. Any supplemental distribution services we provide are typically recognized over time as the services are performed. Service contracts may be based on a fixed price or on a fixed unit-price per transaction or other objective measure of output. Additionally, we offer services related to our supply chain management and CloudBlue platform. Our fee-based commerce and supply chain services are billed and recognized on a per-item service fee arrangement at the point when the service is provided. Our CloudBlue platform generates revenue through licensing the right to use the intellectual property (on-premise license), which is recognized at a point in time, providing the right to access (platform as a service), which is recognized over time across the term of the contract, or through our cloud marketplace, which is recognized in the amount of the net fee associated with serving as an agent when the services are provided. Service revenues represented less than 10% of total net sales for the Thirteen Weeks Ended September 28, 2024, Thirty-Nine Weeks Ended September 28, 2024, Thirteen Weeks Ended September 30, 2023 and Thirty-Nine Weeks Ended September 30, 2023. Related contract liabilities were not material for the periods presented. Agency Services We have contracts with certain customers where our performance obligation is to arrange for the products or services to be provided by another party. In these arrangements, as we assume an agency relationship in the transaction, revenue is recognized in the amount of the net fee associated with serving as an agent when the services are completed. These arrangements primarily relate to certain fulfillment contracts, as well as sales of certain software products, and extended vendor services, such as vendor warranties. Variable Consideration We, under specific conditions, permit our customers to return or exchange products. The provision for estimated sales returns is recorded concurrently with the recognition of revenue. A liability is recorded within accrued expenses and other on the Condensed Consolidated Balance Sheets for estimated product returns based upon historical experience and an asset is recorded within inventory on the Condensed Consolidated Balance Sheets for the amount expected to be recorded for inventory upon product return. Amounts recorded within inventory are $ 124,595 and $ 127,143 as of September 28, 2024 and December 30, 2023, respectively. We also provide volume discounts, early payment discounts and other discounts to certain customers which are considered variable consideration. A provision for such discounts is recorded as a reduction of revenue at the time of sale based on an evaluation of the contract terms and historical experience. 11 INGRAM MICRO HOLDING CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share, unit and per share data) Practical Expedients We account for shipping and handling activities that occur after the customer has obtained control of a good as fulfillment activities rather than a promised service. Accordingly, we accrue all fulfillment costs related to the shipping and handling of goods at the time of shipment. Additionally, we exclude the amount of certain taxes collected concurrent with revenue-producing activities from revenue. We disaggregate revenue by geography, which we believe provides a meaningful depiction of the nature of our revenue, (see Note 11, “Segment Information”). Book Overdrafts Book overdrafts of $ 446,491 and $ 409,420 as of September 28, 2024 and December 30, 2023, respectively, represent checks issued on disbursement bank accounts but not yet paid by such banks. These amounts are classified as accounts payable in our Condensed Consolidated Balance Sheets. We typically fund these overdrafts through normal collections of funds or transfers from other bank balances at other financial institutions. Under the terms of our facilities with the banks, the respective financial institutions are not legally obligated to honor the book overdraft balances as of September 28, 2024 and December 30, 2023, nor any balance on any given date. Factoring Programs We have several uncommitted factoring programs under which trade accounts receivable of several customers may be sold, without recourse, to financial institutions. Available capacity under these programs is dependent on the level of our trade accounts receivable eligible to be sold into these programs and the financial institutions’ willingness to purchase such receivables. The receivables under these factoring programs are sold at face value and are excluded from our Condensed Consolidated Balance Sheets. We account for these transactions as sales of receivables because control of the underlying asset is transferred and subsequent to the date of transfer, we typically do not have any continuing involvement in the transferred asset, except as discussed below. For certain of our factoring programs in EMEA, there is a deferred purchase price (“DPP”) which is paid to us at a later time once the customer pays the factored invoices. Subsequent to the sale, the DPP represents a beneficial interest in the transferred trade accounts receivable and is disclosed as a non-cash investing activity in our Condensed Consolidated Statements of Cash Flows. Accordingly, cash proceeds from the payments of DPPs are presented as investing activities in our Co ndensed Consolidated Statements of Cash Flows. At September 28, 2024 and December 30, 2023, there were $ 46,746 and $ 48,532 , respectively, of DPP recorded within other current assets on our Condensed Consolidated Balance Sheets. In arrangements where we collect the customer payments on behalf of the financial institution, the net cash flows related to these collections are reported as financing activities in the Condensed Consolidated Statements of Cash Flows. At September 28, 2024 and December 30, 2023, we recorded unremitted cash within accrued expenses and other of $ 264 and $ 16,066 , respectively. At September 28, 2024 and December 30, 2023, we had a total of $ 593,584 and $ 738,714 , respectively, of trade accounts receivable sold to and held by financial institutions under these programs. Factoring fees of $ 8,193 and $ 7,430 were incurred for the Thirteen Weeks Ended September 28, 2024 and Thirteen Weeks Ended September 30, 2023, respectively, and $ 26,666 and $ 19,633 were incurred for the Thirty-Nine Weeks Ended September 28, 2024 and Thirty-Nine Weeks Ended September 30, 2023 , respectively. Factoring fees were related to the sale of trade accounts receivable under the facilities and are included in “other” within the other (income) expense section of our Condensed Consolidated Statements of Income. 12 INGRAM MICRO HOLDING CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share, unit and per share data) Inventory Our inventory consists of finished goods purchased from various vendors for resale. We value our inventory at the lower of its cost or net realizable value, cost being determined on a moving average cost basis, which approximates the first-in, first-out method. We write down our inventory for estimated excess or obsolescence equal to the difference between the cost of inventory and the net realizable value based upon an aging analysis of the inventory on hand, specifically known inventory-related risks (such as technological obsolescence and the nature of vendor terms surrounding price protection and product returns), foreign currency fluctuations for foreign-sourced products and assumptions about future demand. Market conditions or changes in terms and conditions by our vendors that are less favorable than those projected by management may require additional inventory write-downs, which could have an adverse effect on our consolidated financial results. Inventory is determined from the price we pay vendors, including freight and duties; we do not include labor, overhead or other general or administrative costs in our inventory. Self-Insurance We self-insure coverage for certain U.S. employee medical claims. Amounts accrued for such medical insurance coverage aggregate to $ 8,415 and $ 7,051 as of September 28, 2024 and December 30, 2023, respectively, and is classified within accrued expenses and other on the Condensed Consolidated Balance Sheets. Dividends Paid to Shareholders For the Thirteen Weeks Ended September 28, 2024 and Thirty-Nine Weeks Ended September 28, 2024, we paid a cash dividend of $ 0 and $ 6,174 respectively, to Aptec Saudi minority interest stockholders of record and for the Thirteen Weeks Ended September 30, 2023 and Thirty-Nine Weeks Ended September 30, 2023, we paid a cash dividend of $ 9,909 and $ 10,462 , respectively, to the Aptec Saudi minority interest stockholders of record. Earn-outs We may be required to make earn-out payments upon the achievement of certain predefined targets attributable to acquisitions completed in recent years. At the acquisition date, the value of any earn-out is estimated using various valuation methodologies which include projections of future earnings as defined in each acquisition purchase agreement. Such projections are then discounted to reflect the risk in achieving the projected earnings, as well as the passage of time and time value of money. The fair value measurement of the earn-out is based primarily on significant inputs not observable in an active market and thus represents a Level 3 measurement as defined under U.S. GAAP. Changes in the fair value of the earn-out primarily reflects adjustments to the timing and amount of payments as well as the related accretion driven by the time value of money. These adjustments are recorded within selling, general and administrative (“SG&A”) expenses within the Condensed Consolidated Statements of Income, as applicable. The fair value of earn-out contingent consideration is presented within accrued expenses and other in our Condensed Consolidated Balance Sheets. For the amounts currently recognized on the Condensed Consolidated Balance Sheets, see Note 5, “Fair Value Measurements”. Supplier Finance Programs As part of our ongoing efforts to manage our working capital, we have worked with our vendors to optimize our terms and conditions, which include the related payment terms. We are party to agreements, initiated either by the vendor or us, which allow vendors, at their discretion, to determine invoices that they want to sell to participating financial institutions. We are not a party to the agreements between the participating financial institutions and the vendors in connection with these programs, and the financial institutions do not provide us with incentives such as rebates. There are no assets pledged under these agreements and no interest is charged by the financial institutions as balances are typically paid when they are due. Certain agreements may require a parent guarantee, although parent guarantees are also required in certain vendor agreements that do not involve financial institutions. The payment terms under these arrangements typically range from 30 to 90 days. Certain programs provide for extended payment terms which are with in standard industry practice and consistent with the range of payment terms we negotiate with our vendors, regardless of whether they have an agreement with a financial institution. At September 28, 2024 and December 30, 2023, the outstanding payment obligations under these arrangements included in accounts payable in the Condensed Consolidated Balance Sheets were $ 2,400,853 an d $ 2,373,913 , respectively. 13 INGRAM MICRO HOLDING CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share, unit and per share data) In situations where amounts are not paid within the specified payment terms and interest is incurred, we reclassify the amount from accounts payable to debt. There were no outstanding payment obligations under these programs included in short-term debt and current maturities of long-term debt in the Condensed Consolidated Balance Sheets as of September 28, 2024 and December 30, 2023, respectively. Stock Conversion and Stock Split In connection with our initial public offering (“IPO”), on October 23 , 2024, we converted our Class A voting common stock and Class B non-voting common stock into Common Stock, par value $ 0.01 per share ( “Common Stock”), on a 1-for-1 basis and effected a 8,367.19365 -for-1 stock split with respect to our Common Stock. All figures have been presented on the basis of this stock split wherever applicable for all the periods presented w ithin these unaudited condensed consolidated financial statements. Revision of Previously Issued Condensed Consolidated Financial Statements In connection with our prior year-end reporting procedures, we identified errors related to the balance sheet presentation of our multi-period software license agreements, for which the unbilled amounts were incorrectly presented on a gross basis within accounts receivable, other current assets, other assets, accounts payable, accrued expenses and other, and other liabilities. These unbilled amounts should have been presented on a net basis as we serve as an agent in these transactions and do not have a present right to payment until we have the contractual right to bill and the vendor satisfies its performance obligations under the arrangement. Upon identification, management evaluated and concluded the impact of these errors was not material to any of our previously issued interim unaudited condensed consolidated financial statements. However, in order to present the condensed consolidated financial statements for the Thirty-Nine Weeks Ended September 30, 2023 correctly and consistent with the condensed consolidated financial statements for the Thirty-Nine Weeks Ended September 28, 2024, we have revised the Condensed Consolidated Statement of Cash Flows for that period as follows: Thirty-Nine Weeks Ended September 30, 2023 As Reported Adjustment As Revised Condensed Consolidated Statement of Cash Flows: Cash flows from Operating Activities: Changes in operating assets and liabilities, net of effects of acquisitions: Trade accounts receivable $ 20,750 $ 130,576 $ 151,326 Other assets $ ( 338,721 ) $ 239,108 $ ( 99,613 ) Accounts payable $ ( 503,479 ) $ ( 135,501 ) $ ( 638,980 ) Accrued expenses and other $ 79,104 $ ( 234,183 ) $ ( 155,079 ) Cash provided by operating activities $ 59,764 $ — $ 59,764 New Accounting Standards In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures”, which requires public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis. This update is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. The adoption of this guidance is not expected to have a material financial impact on our results of operations, financial position, or liquidity, and we expect to have increased reportable segment disclosures within our Segment Information note to our consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740) Improvements to Income Tax Disclosures”, which requires public entities to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold on an annual basis in order to enhance the transparency and decision usefulness of income tax disclosures. This update is effective for annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the adoption impact that this ASU will have on our income tax disclosures in the notes to our consolidated financial statements. 14 INGRAM MICRO HOLDING CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share, unit and per share data) In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses”, which requires disclosure in the notes to the financial statements of specified information about certain costs and expenses. The amendments are effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments should be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. We are currently evaluating the adoption impact that this ASU will have on our consolidated financial statements and related disclosures. Note 3 – Employee Awards We issue cash awards to certain employees, which include both time-vested and performance-vested awards. The time-vested cash awards vest over a time period of three years , and the performance-vested cash awards vest upon the achievement of a certain performance target measured after a time period of three years . The performance condition for the cash awards for grants to management is based on earnings growth. Cumulative compensation expense for cash awards is recognized as a liability. Each cash award has a fixed fair value of $ 1.00 . We recognize these compensation costs, net of an estimated forfeiture rate, over the requisite service period of the award, which is the vesting term of the outstanding cash award. We estimate the forfeiture rate based on our historical experience. Activity related to the cash awards is as follows: Number of Cash Awards (in thousands) Non-vested at December 30, 2023 67,598 Granted 1,895 Vested ( 851 ) Forfeited ( 1,326 ) Non-vested at March 30, 2024 67,316 Granted 31,976 Vested ( 20,223 ) Forfeited ( 1,835 ) Non-vested at June 29, 2024 77,234 Granted 630 Vested ( 1,034 ) Forfeited ( 1,956 ) Non-vested at September 28, 2024 74,874 Thirteen Weeks Ended Thirty-Nine Weeks Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Compensation expense - cash awards $ 6,087 $ 6,057 $ 18,332 $ 25,395 Related income tax benefit $ 1,522 $ 1,515 $ 4,583 $ 6,349 As of September 28, 2024, the unrecognized compensation costs related to the cash awards were $ 39,328 . We expect these costs to be recognized over a remaining weighted-average period of approximately 1.6 years. Participation Plan for Certain Key Employees In July 2021, we adopted the 2021 Participation Plan (the “Plan”) to provide incentive compensation to certain key management. Under the Plan, participants are granted units, the value of which are related to our financial performance. Half of the units vest over a period of time specified in the applicable award agreement, typically in annual tranches over 15 INGRAM MICRO HOLDING CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share, unit and per share data) five years. Once vested, certain qualifying events are required for any payment related to these units, with accelerated vesting in the event of certain change in control or public offering events, in each case subject to the participant’s continued employment through the applicable vesting date. The other half are payable to participants only upon the occurrence of certain qualifying events. Any payment to a participant under the time-based or performance-based units is conditioned on our reaching a minimum valuation at the time of a qualifying event or through a series of qualifying events. A qualifying event may be either a sale of some or all of our capital stock or a sale of all or substantially all of our assets. Each performance unit granted under the Plan has an initial grant date value of $ 1.00 . As of September 28, 2024, no qualifying events have occurred or are probable of occurring, no awards under the Plan have vested (i.e., upon reaching a minimum qualifying event value) and no liability or compensation expense has been recognized by us. Further, no amounts have been paid under the Plan. Activity related to the awards granted in the Plan was as follows: Number of Units (in thousands) Non-vested at December 30, 2023 194,600 Granted 4,916 Non-vested at March 30, 2024 199,516 Granted 9,664 Non-vested at June 29, 2024 209,180 Forfeited ( 2,130 ) Non-vested at September 28, 2024 207,050 Through September 28, 2024, there has been no compensation costs recognized for these awards. Note 4 – Derivative Financial Instruments We use foreign currency forward contracts that are not designated as hedges primarily to manage currency risk associated with foreign currency-denominated trade accounts receivable, accounts payable and intercompany loans. At September 28, 2024 and December 30, 2023, we had no derivatives that were designated as hedging instruments. In the first quarter of 2023, we entered into agreements to purchase interest rate caps, which established a 5.5 % upper limit on the London Interbank Offered Rate (“LIBOR”) interest rate applicable to a substantial portion of the borrowings under the senior secured term loan facility (the “Term Loan Credit Facility”) through the first quarter of 2025. These interest rate cap agreements qualify for hedge accounting treatment and, accordingly, we recorded the fair value of the agreements as an asset and the change in fair value within accumulated other comprehensive loss during the period in which the change occurs. Due to the cessation of the LIBOR interest rate on June 30, 2023, we amended the interest rate cap agreements to establish a 5.317 % upper limit on the Secured Overnight Financing Rate (“SOFR”) interest rate in order to align with the conversion to a SOFR-based rate for the underlying Term Loan Credit Facility. We elected to apply the practical expedient under ASU 2020-04 and continued to apply hedge accounting treatment until September 2023 when we dedesignated the interest rate cap in connection with the refinancing of our Term Loan Credit Facility, the impact of which was immaterial. 16 INGRAM MICRO HOLDING CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share, unit and per share data) The notional amounts and fair values of derivative instruments in our Condensed Consolidated Balance Sheets are as follows: Notional Amounts (1) Fair Value September 28, 2024 December 30, 2023 September 28, 2024 December 30, 2023 Derivatives not receiving hedge accounting treatment recorded in: Other current assets Foreign exchange contracts $ 365,142 $ 515,691 $ 5,932 $ 1,805 Interest rate cap 1,375,000 1,099,807 171 707 Other (2) 1,265 1,265 9,503 8,758 Other assets Interest rate cap — 275,193 — 177 Accrued expenses and other Foreign exchange contracts 686,080 1,162,669 ( 10,953 ) ( 11,416 ) Total $ 2,427,487 $ 3,054,625 $ 4,653 $ 31 (1) Notional amounts represent the gross amount of foreign currency bought or sold at maturity for foreign exchange contracts. (2) Related to a convertible note receivable derivative. The amount recognized in earnings from our derivative instruments is as follows and is largely offset by the change in fair value of the underlying hedged assets or liabilities: Thirteen Weeks Ended Thirty-Nine Weeks Ended Location of (gain) loss in income September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Derivative instruments not qualifying as cash flow hedges: Net loss (gain) recognized in earnings Net foreign currency exchange loss (gain) $ ( 9,322 ) $ ( 10,033 ) $ ( 19,277 ) $ 24,555 Interest expense $ 128 $ 1,370 $ 813 $ 1,370 Derivative instruments qualifying as hedging instruments: (Gain) loss recognized in accumulated other comprehensive income $ — $ — $ — $ ( 1,188 ) (Gain) loss reclassified from accumulated other comprehensive income to income Interest expense $ ( 171 ) $ ( 171 ) $ ( 513 ) $ ( 183 ) There were no material gain or loss amounts excluded from the assessment of effectiveness. We report our derivatives at fair value as either assets or liabilities within our Condensed Consolidated Balance Sheets. See Note 5, “Fair Value Measurements”, for information on derivative fair values recorded on our Condensed Consolidated Balance Sheets for the periods presented. 17 INGRAM MICRO HOLDING CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share, unit and per share data) Note 5 – Fair Value Measurements Our assets and liabilities carried at fair value are classified and disclosed in one of the following three categories: Level 1 – quoted market prices in active markets for identical assets and liabilities; Level 2 – observable market-based inputs or unobservable inputs that are corroborated by market data; and Level 3 – unobservable inputs that are not corroborated by market data. As of September 28, 2024, our assets and liabilities measured at fair value on a recurring basis are categorized in the table below: September 28, 2024 Total Level 1 Level 2 Level 3 Assets: Derivative assets $ 15,435 $ — $ 15,435 $ — Interest rate cap 171 — 171 — Investments held in Rabbi Trust 92,697 92,697 — — Total assets at fair value $ 108,303 $ 92,697 $ 15,606 $ — Liabilities: Derivative liabilities $ 10,953 $ — $ 10,953 $ — Contingent consideration 3,137 — — 3,137 Total liabilities at fair value $ 14,090 $ — $ 10,953 $ 3,137 As of December 30, 2023, our assets and liabilities measured at fair value on a recurring basis are categorized in the table below: December 30, 2023 Total Level 1 Level 2 Level 3 Assets: Derivative assets $ 10,563 $ — $ 10,563 $ — Interest rate cap 884 — 884 — Investments held in Rabbi Trust 82,498 82,498 — — Total assets at fair value $ 93,945 $ 82,498 $ 11,447 $ — Liabilities: Derivative liabilities $ 11,416 $ — $ 11,416 $ — Contingent consideration 4,391 — — 4,391 Total liabilities at fair value $ 15,807 $ — $ 11,416 $ 4,391 The fair value of the cash equivalents approximated cost and the change in the fair value of the marketable trading securities was recognized in the Condensed Consolidated Statements of Income to reflect these investments at fair value. 18 INGRAM MICRO HOLDING CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share, unit and per share data) Our senior secured notes due in 2029 and Term Loan Credit Facility are stated at amortized cost, and their respective fair values were determined based on Level 2 criteria. The fair values and carrying values of these notes are shown in the tables below: September 28, 2024 Fair Value Total Level 1 Level 2 Level 3 Carrying Value Senior secured notes, 4.75 % due 2029 $ 1,952,500 $ — 1,952,500 $ — $ 1,968,014 Term loan credit facility 1,158,550 — 1,158,550 — 1,117,692 $ 3,111,050 $ — $ 3,111,050 $ — $ 3,085,706 December 30, 2023 Fair Value Total Level 1 Level 2 Level 3 Carrying Value Senior secured notes, 4.75 % due 2029 $ 1,875,000 $ — $ 1,875,000 $ — $ 1,962,750 Term loan credit facility 1,402,950 — 1,402,950 — 1,362,487 $ 3,277,950 $ — $ 3,277,950 $ — $ 3,325,237 Note 6 – Acquisitions, Goodwill and Intangible Assets In the third quarter of 2024, we exercised our option to acquire the remaining 49 % of shares of Colsof, of which we now own 100 %, and paid cash of $ 21,846 . Earn-out and Holdback Liabilities Earn-out liabilities for the Thirty-Nine Weeks Ended September 28, 2024 decreased by $ 1,254 to $ 3,137 . Holdback liabilities for the Thirty-Nine Weeks Ended September 28, 2024 decreased by $ 111 to $ 0 . Finite-lived Identifiable Intangible Assets Finite-lived identifiable intangible assets are amortized over their remaining estimated useful lives ranging up to 13 years with the predominant amounts having lives of 10 to 13 years. The gross carrying amounts of finite-lived identifiable intangible assets are $ 1,106,927 and $ 1,106,751 at September 28, 2024 and December 30, 2023, respectively, and the net carrying amounts of finite-lived identifiable int angible assets by type are as follows: September 28, 2024 December 30, 2023 Customer and vendor relationships $ 436,466 $ 474,080 Tradename and trademarks 336,822 358,228 Software and developed technology 41,562 48,125 Total Intangible assets, net $ 814,850 $ 880,433 Amortization expense w as $ 21,771 and $ 21,790 for the Thirteen Weeks Ended September 28, 2024 and Thirteen Weeks Ended September 30, 2023, respectively, and $ 65,265 and $ 65,313 for the Thirty-Nine Weeks Ended September 28, 2024 and Thirty-Nine Weeks Ended September 30, 2023 , respectively. 19 INGRAM MICRO HOLDING CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share, unit and per share data) Note 7 – Debt The carrying value of our outstanding debt consists of the following: September 28, 2024 December 30, 2023 Senior secured notes, 4.75 % due 2029, net of unamortized deferred financing costs of $ 31,986 and $ 37,250 , respectively $ 1,968,014 $ 1,962,750 Term loan credit facility, net of unamortized discount of $ 12,398 and $ 11,733 , respectively, and unamortized deferred financing costs of $ 29,910 and $ 35,780 , respectively 1,117,692 1,362,487 ABL revolving credit facility 100,000 30,000 Revolving trade accounts receivable-backed financing programs 258,327 331,920 Lines of credit and other debt 394,418 236,451 Total debt 3,838,451 3,923,608 Short-term debt and current maturities of long-term debt ( 494,418 ) ( 265,719 ) Total long-term debt $ 3,344,033 $ 3,657,889 In June 2024 we voluntarily repaid $ 150,000 on our Term Loan Credit Facility. In September 2024, we refinanced our existing Term Loan Credit Facility and repaid $ 100,000 of the principal balance of our outstanding term loans. The refinancing reduced the interest rate spread over the SOFR by 25 basis points and eliminated the credit-spread adjustment. Borrowings under the Term Loan Credit Facility bear interest at a rate per annum equal to, at our option, either (1) the base rate (which is the highest of (a) the then-current federal funds rate set by the Federal Reserve Bank of New York, plus 0.50 %, (b) the prime rate on such day and (c) the one-month SOFR rate published on such date plus 1.00 %) plus a margin of 1.75 % or (2) SOFR (subject to a 0.50 % floor) plus a margin of 2.75 %. Additionally, in connection with such refinancing, we extended the maturity date of the term loans to September 19, 2031. As a result of applying the debt guidance under Accounting Standards Codification 470, we accounted for the refinancing primarily as a modification resulting in a loss of $ 1,927 . Also in September 2024, we entered into Amendment No. 4 to the ABL Credit Agreement, to amend the ABL Credit Agreement to, among other things, extend the maturity date to September 20, 2029. Note 8 – Restructuring Costs In the third quarter of 2023, as a result of changing global and local market conditions, we initiated a global restructuring plan. In the first quarter of 2024, we took further actions under this plan, resulting in organizational and staffing changes and a headcount reduction of 503 employ ees . We currently do not anticipate material future costs to be incurred under this restructuring plan. There were no material restructuring costs in the Thirteen Weeks Ended September 28, 2024. The following tables summarize the restructuring costs incurred in the Thirty-Nine Weeks Ended September 28, 2024 and Thirty-Nine Weeks Ended September 30, 2023: Restructuring Costs Headcount Reduction (Number of Employees) Employee Termination Benefits Facility and Other Costs Total Restructuring Costs Thirty-Nine Weeks Ended September 28, 2024 North America $ 6,960 $ 230 $ 7,190 EMEA 11,307 — 11,307 Asia-Pacific 3,194 — 3,194 Latin America 268 59 327 Total 503 $ 21,729 $ 289 $ 22,018 20 INGRAM MICRO HOLDING CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share, unit and per share data) Restructuring Costs Headcount Reduction (Number of Employees) Employee Termination Benefits Facility and Other Costs Total Restructuring Costs Thirty-Nine Weeks Ended September 30, 2023 North America $ 12,572 $ 3,401 $ 15,973 EMEA 1,664 28 1,692 Asia-Pacific 1,316 — 1,316 Latin America 109 — 109 Total 606 $ 15,661 $ 3,429 $ 19,090 The remaining liabilities, which are recorded within accrued expenses and other on our Condensed Consolidated Balance Sheets, and activities associated with the aforementioned actions for 2023 and 2024 are summarized in the table below: Restructuring Liability Beginning Liability Expenses, Net Amounts Paid and Charged Against the Liability Foreign Currency Translation Remaining Liability Thirty-Nine Weeks Ended September 28, 2024 Employee termination benefits $ 2,060 $ 21,729 $ ( 18,841 ) $ 32 $ 4,980 Facility and other costs — 289 ( 289 ) — — Total $ 2,060 $ 22,018 $ ( 19,130 ) $ 32 $ 4,980 The remaining liabilities will be substantially paid by the end of fiscal year 2024. Note 9 – Income Taxes For the Thirteen Weeks Ended September 28, 2024, and Thirteen Weeks Ended September 30, 2023, our effective tax rate was 35.4 % and 27.9 %, respectively. For the Thirty-Nine Weeks Ended September 28, 2024, and Thirty-Nine Weeks Ended September 30, 2023, our effective tax rate was 35.1 % and 30.2 %, respectively. Under U.S. accounting rules for income taxes, interim effective tax rates may vary significantly depending on the actual operating results in the various tax jurisdictions, as well as changes in the valuation allowance related to the expected recovery of deferred tax assets. The tax provision for the Thirteen Weeks Ended September 28, 2024, included $ 4,481 of tax expense, or 3.8 percentage points of the effective tax rate, which is associated with withholding tax expense from our business operations in the Latin America region, primarily from our Miami Export business. The tax provision for the Thirteen Weeks Ended September 28, 2024, also included $ 4,139 of tax expense, or 3.5 percentage points of the effective tax rate, due to a reduction in estimated U.S. foreign tax credit utilization in 2024. The tax provision for the Thirteen Weeks Ended September 30, 2023, included $ 4,057 of tax expense, or 3.4 percentage points of the effective tax rate, which is associated with withholding tax expense from our business operations in the Latin America region, primarily from our Miami Export business. In addition, the tax provision for the Thirteen Weeks Ended September 30, 2023, included $ 5,777 of net tax benefit, or 4.8 percentage points of the effective tax rate, primarily due to an increase in actual 2022 U.S. foreign tax credit utilization as compared to our previous estimate, partially offset by a variety of other small tax adjustments. 21 INGRAM MICRO HOLDING CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share, unit and per share data) The tax provision for the Thirty-Nine Weeks Ended September 28, 2024, included $ 10,407 of tax expense, or 3.7 percentage points of the effective tax rate, which is associated with withholding tax expense from our business operations in the Latin America region, primarily from our Miami Export business. In addition, the tax provision for the Thirty-Nine Weeks Ended September 28, 2024, included $ 1,878 of tax expense, or 0.7 percentage points of the effective tax rate, due to foreign exchange losses generated by a foreign subsidiary that is currently under valuation allowance. The tax provision for the Thirty-Nine Weeks Ended September 28, 2024, also included $ 5,817 of tax expense, or 2.1 percentage points of the effective tax rate, due to a reduction in estimated U.S. foreign tax credit utilization in 2024. The tax provision for the Thirty-Nine Weeks Ended September 30, 2023, included $ 7,743 of tax expense, or 2.5 percentage points of the effective tax rate, which is associated with withholding tax expense from our business operations in the Latin America region, primarily from our Miami Export business. The tax provision for the Thirty-Nine Weeks Ended September 30, 2023, also included $ 5,949 of net tax benefit, or 1.9 percentage points of the effective tax rate, primarily due to an increase in actual 2022 U.S. foreign tax credit utilization as compared to our previous estimate, partially offset by $ 1,666 of tax expense, or 0.5 percentage points of the effective tax rate, due to a reduction in estimated U.S. foreign tax credit utilization in 2023. Our effective tax rate during these periods differed from the U.S. federal statutory rate of 21% primarily due to the items noted above, as well as the relative mix of earnings or losses and various tax rates, including state taxes, within the jurisdictions in which we operate, such as: (a) losses in certain jurisdictions in which we are not able to record a tax benefit; (b) changes in the valuation allowance on deferred tax assets; and (c) changes in tax laws or interpretations thereof. At September 28, 2024 , we had gross unrecognized tax benefits of $ 15,566 compared to $ 16,785 at December 30, 2023 . Substantially all of the remaining gross unrecognized tax benefits, if recognized, would impact our effective tax rate in the period of recognition. We recognize interest and penalties related to unrecognized tax benefits in income tax expense. Total accruals for interest and penalties on our unrecognized tax benefits were $ 9,246 and $ 9,282 at September 28, 2024 and December 30, 2023, respectively. Our future effective tax rate will continue to be affected by changes in the relative mix of taxable income and losses and various tax rates in the tax jurisdictions in which we operate, changes in the valuation of deferred tax assets or changes in tax laws or interpretations thereof. In addition, in the normal course of business, we are subject to tax examination by taxing authorities in the U.S., states and over fifty foreign jurisdictions in which we operate. In our material tax jurisdictions, the statute of limitations is open, in general, for three to five years. In the U.S., our federal tax returns for the tax years from 2019 to 2022 are under audit by the IRS. It is possible that within the next twelve months, (1) ongoing tax examinations of our U.S. federal tax returns, individual states and several of our foreign jurisdictions may be resolved, (2) new tax exams may commence and (3) other issues may be effectively settled. However, we do not expect our assessment of unrecognized tax benefits to change significantly over that time. Note 10 – Commitments and Contingencies As a company with a substantial employee population and with operations in a large number of countries, Ingram Micro is involved, either as a plaintiff or defendant, in a variety of ongoing claims, demands, suits, investigations, tax matters and proceedings that arise from time to time in the ordinary course of its business. The Company records a provision with respect to a claim, suit, investigation, or proceeding when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. If there is at least a reasonable possibility that a material loss may have been incurred associated with pending legal claims, or when assertion of unasserted material claims is considered probable, we disclose such fact, and if reasonably estimable, we provide an estimate of the possible loss or range of possible loss. We record our best estimate of a loss related to pending legal and regulatory proceedings when the loss is considered probable and the amount can be reasonably estimated. Where a range of loss can be reasonably estimated with no best estimate in the range, we record the minimum estimated liability. As additional information becomes available, we assess the potential liability related to pending legal and regulatory proceedings and revise our estimates and update our disclosures accordingly. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. Our legal costs associated with legal matters are recorded to expense as incurred. 22 INGRAM MICRO HOLDING CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share, unit and per share data) The Company reviews claims, suits, investigations and proceedings at least quarterly, and decisions are made with respect to recording or adjusting provisions and disclosing reasonably possible losses or range of losses (individually or in the aggregate). Whether any losses, damages, or remedies finally determined in any claim, suit, investigation or proceeding could reasonably have a material effect on the Company’s business, financial condition, results of operations or cash flows will depend on a number of variables, including: the timing and amount of such losses or damages; the structure and type of any such remedies; the significance of the impact of such losses, damages or remedies may have in the consolidated financial statements; and the unique facts and circumstances of the particular matter that may give rise to additional factors. Our Brazilian subsidiary has received a number of tax assessments primarily related to tax reporting compliance topics as well as transaction-tax related matters largely involving applicability of tax and categorization of products and services. The total amount related to these assessments and similar tax exposures that are not yet assessed that give rise to a probable risk where a reserve has been established is Brazilian Reais 40,606 ($ 7,460 at September 28, 2024 exchange rates) in principal and associated penalties, interest and fines. The total amount related to these assessments and similar tax exposures that are not yet assessed that we believe give rise to a reasonably possible loss is Brazilian Reais 764,917 ($ 140,530 at September 28, 2024 exchange rates) in principal and associated penalties, interest and fines. In June 2013, the French Competition Authority (“FCA”) launched an investigation of our subsidiary in France (“Ingram Micro France”), one of our competitors and one of our vendors in relation to alleged anticompetitive practices. In October 2018, the investigation services of the FCA filed a Statement of Objections against Ingram Micro France, as primary infringer, and Ingram Micro Europe BVBA and Ingram Micro, as parent companies (“Ingram”). In March 2020, the Board of the FCA issued its decision imposing a fine of € 62,900 on Ingram regarding volume allocations of Apple products. In July 2020, we appealed the decision of the Board of the FCA to the Paris Court of Appeals. On October 6, 2022, the Paris Court of Appeals issued a decision maintaining the infraction of volume allocation and reducing the fine to € 19,500 . In November 2022 the Company further appealed this matter to the “Cour de Cassation.” As the appeal to the “Cour de Cassation” did not suspend the obligation to pay the fine, in the third quarter of 2022, we recorded a contingent liability at that time within our Condensed Consolidated Balance Sheets. Under the payment plan agreed with the French Treasury, Ingram Micro France had already paid approximately $ 11,000 . On November 4, 2022, Ingram Micro France made an additional payment of approximately $ 9,000 to complete the total amount of the fine and the French Treasury released the third-party surety bond. As a result of the appeals court ruling, the Company determined that the best estimate of probable loss related to this matter is limited to the amounts already paid to date. On June 3, 2021, the reseller whose complaint to the FCA gave rise to the investigation filed a follow-on civil claim in the Paris Commercial Court seeking approximately € 95,000 ($ 105,944 at September 28, 2024 exchange rates) in damages from Ingram, one of our competitors and one of our vendors. On May 30, 2022, the Paris Commercial Court postponed the hearing on this reseller claim pending resolution of the appeal on the main case. On October 24, 2022, the reseller requested the re-opening of the proceedings and we petitioned the Paris Commercial Court to stay the proceedings until the main case is decided by the “Cour de Cassation.” On May 15, 2023, the Paris Commercial Court did not accept the request to suspend the case and set a calendar for a final hearing, which took place in June 2024. A decision is expected in November 2024. We are currently evaluating this matter and cannot currently estimate the probability or amount of any potential loss. In January 2021, we first learned through external sources that in June 2019, the Court of Additional Chief Metropolitan Magistrate (Special Acts), Central District, Tis Hazari in New Delhi (the “New Delhi Court”) issued a summoning order naming Ingram Micro India Ltd. (“IMIL”) as one of 40 legal entity defendants in a criminal complaint. IMIL is accused by the Serious Fraud Office of cheating and criminal conspiracy based on four payments it made over 15 years ago at the request of a certain vendor. In February 2021, outside legal counsel appeared on IMIL’s behalf at the New Delhi Court and requested relevant documentation pertaining to these charges to assess IMIL’s legal position. IMIL has vigorously contested the charges as we believe the charges to be meritless and in December 2021 filed a motion to dismiss. 23 INGRAM MICRO HOLDING CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share, unit and per share data) In September 2021, the Company’s subsidiary in Saudi Arabia received a tax assessment for Saudi Riyal 238,152 ($ 63,491 at September 28, 2024 exchange rates) in tax and associated penalties issued by ZATCA (tax and customs authority) asserting that withholding tax was due on payments to non-resident vendors for software distributed to resellers from 2015 through 2020. We believe the tax assessment gives rise to a reasonably possible loss of Saudi Riyal 159,985 ($ 42,652 at September 28, 2024 exchange rates) in tax and a probable risk of Saudi Riyal 5,466 ($ 1,457 at September 28, 2024 exchange rates) in tax. In addition, we believe it is possible the tax authorities will assess us for payments to non-resident vendors for software distributed to resellers for the years 2021 through the third quarter of 2024, which gives rise to a reasonably possible loss of Saudi Riyal 360,177 ($ 96,023 at September 28, 2024 exchange rates) in tax and a probable risk of Saudi Riyal 1,375 ($ 367 at September 28, 2024 exchange rates) in tax. Associated penalties have a remote risk due to the assessments being based on a difference in interpretation of Saudi tax law. In February 2024 and early April 2024, ZATCA issued new guidelines on taxation of payments for software, which largely appear to no longer assert that withholding tax is due on payments to non-resident vendors for software distributed to resellers. While we continue to analyze the guidelines it is unclear how ZATCA will utilize the guidelines with respect to the pre-guidelines periods since they are only applicable on a prospective basis; however, we believe they are a positive development as the new guidelines appear to be largely consistent with the interpretation before the assessments were made. In May 2024, at our request, the court granted a third 6-month suspension of the case. In September 2024, we submitted a resolution proposal for the years 2015 through 2020 for Saudi Riyal 5,466 ($ 1,457 at September 28, 2024 exchange rates), which is in alignment with the probable risk listed above. We strongly believe that we have administered taxes correctly, that these payments to non-resident vendors for software distributed to resellers are not subject to withholding tax and that we will ultimately prevail in this matter. We may be subject to non-income based tax unasserted claims related to transactions with certain non-U.S. affiliates and indirect tax related matters. As of September 28, 2024, the Company is unable to reasonably estimate the possible losses or range of losses, if any, arising from unasserted claims due to a number of factors, including the presence of complex or novel legal theories and the ongoing discovery and development of information important to potential unasserted claims. Claims, suits, investigations and proceedings are inherently uncertain, and it is not possible to predict the ultimate outcome of unasserted claims. It is possible that the Company’s business, financial condition, results of operations or cash flows could be materially affected in any particular period by the resolution of potential claims. As is customary in the IT distribution industry, we have arrangements with certain finance companies that provide inventory-financing facilities for our customers. In conjunction with certain of these arrangements, we have agreements with the finance companies that would require us to repurchase certain inventory that might be repossessed from the customers by the finance companies. Due to various reasons, including among other items, the lack of information regarding the amount of salable inventory purchased from us that is still on hand with the customer at any point in time, repurchase obligations relating to inventory cannot be reasonably estimated. Repurchases of inventory by us under these arrangements have been insignificant to date. We have guarantees to third parties that provide financing to a limited number of our customers. Net sales under these arrangements accounted for less than one percent of our consolidated net sales for each of the periods presented. The guarantees require us to reimburse the third party for defaults by these customers up to an aggregate of $ 4,874 . The fair value of these guarantees has been recognized as cost of sales on the Condensed Consolidated Statements of Income to these customers and is included in accrued expenses and other on the Condensed Consolidated Balance Sheets. Note 11 – Segment Information ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. Our CODM is our Chief Executive Officer. Our reportable segments coincide with the geographic operating segments which include North America, EMEA, Asia-Pacific and Latin America. The measure of segment profit is income from operations. 24 INGRAM MICRO HOLDING CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share, unit and per share data) Geographic areas in which we operated our reportable segments during the periods presented include North America (the United States and Canada), EMEA, (Austria, Belgium, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Denmark, Egypt, Finland, France, Germany, Hungary, Ireland, Israel, Italy, Kosovo, Lebanon, Luxembourg, Macedonia, Morocco, Netherlands, Norway, Oman, Pakistan, Poland, Portugal, Qatar, Romania, Saudi Arabia, Serbia, Slovenia, Spain, Sweden, Switzerland, Turkey, United Arab Emirates and the United Kingdom), Asia-Pacific (Australia, Bangladesh, the People’s Republic of China including Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Philippines, Singapore, Sri Lanka and Thailand) and Latin America (Brazil, Chile, Colombia, Costa Rica, Mexico, Peru, Uruguay and our Latin American export operations in Miami). We do not allocate certain Corporate Costs or time-vested and performance-vested cash-based compensation recognized to our reportable segments (see Note 3, “Employee Awards”); therefore, we are reporting these amounts separately. Assets by reportable segment are not presented below as our CODM does not review assets by reportable segment. 25 INGRAM MICRO HOLDING CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share, unit and per share data) Financial information by reportable segment is as follows: Thirteen Weeks Ended Thirty-Nine Weeks Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Net sales North America $ 4,283,677 $ 4,551,370 $ 12,704,320 $ 13,662,409 EMEA 3,470,507 3,474,126 10,194,670 10,355,358 Asia-Pacific 3,153,879 2,899,522 9,161,016 8,236,696 Latin America 854,565 1,000,355 2,578,995 2,766,400 Total $ 11,762,628 $ 11,925,373 $ 34,639,001 $ 35,020,863 Income from operations North America $ 83,330 $ 79,205 $ 206,974 $ 225,528 EMEA 66,912 72,185 168,558 210,342 Asia-Pacific 58,158 55,885 169,985 170,704 Latin America 27,746 19,998 75,462 59,374 Corporate ( 11,885 ) ( 8,814 ) ( 33,224 ) ( 27,141 ) Cash-based compensation expense ( 6,087 ) ( 6,057 ) ( 18,332 ) ( 25,395 ) Total $ 218,174 $ 212,402 $ 569,423 $ 613,412 Capital expenditures North America $ 29,970 $ 52,962 $ 93,158 $ 140,358 EMEA 3,948 2,191 9,462 12,413 Asia-Pacific 2,324 3,140 3,455 6,934 Latin America 730 2,486 2,570 5,281 Total $ 36,972 $ 60,779 $ 108,645 $ 164,986 Depreciation North America $ 19,688 $ 15,357 $ 54,547 $ 49,685 EMEA 3,854 4,106 11,520 13,321 Asia-Pacific 1,646 1,938 4,948 5,857 Latin America 1,482 1,341 4,622 4,594 Total $ 26,670 $ 22,742 $ 75,637 $ 73,457 Amortization of intangible assets North America $ 10,537 $ 10,547 $ 31,619 $ 31,636 EMEA 6,055 5,994 18,009 17,852 Asia-Pacific 4,367 4,368 13,093 13,241 Latin America 812 881 2,544 2,584 Total $ 21,771 $ 21,790 $ 65,265 $ 65,313 Integration, transition and other costs (a) North America $ 1,170 $ 2,978 $ 3,249 $ 2,994 EMEA 1,756 ( 1,672 ) 2,785 ( 1,095 ) Asia-Pacific ( 2 ) ( 1 ) 110 ( 10 ) Latin America ( 298 ) 1,909 ( 1,650 ) 3,885 Corporate 11,885 8,814 33,224 27,141 Total $ 14,511 $ 12,028 $ 37,718 $ 32,915 (a) Costs are primarily related to (i) an advisory fee paid to Platinum Equity Advisors, LLC ( “ Platinum Advisors ” ), ii) professional, consulting and legal costs in connection with our initial public offering and iii) consulting, retention and transition costs associated with our organizational effectiveness program charged to SG&A. 26 INGRAM MICRO HOLDING CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share, unit and per share data) Note 12 – Earnings Per Share Basic and diluted earnings per share is presented in conformity with the two-class method required for multiple classes of common stock. We report a dual presentation of basic earnings per share and diluted earnings per share. Basic earnings per share excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding during the reported period. Diluted earnings per share is computed the same as basic earnings per share as we do not have any participating and potentially dilutive securities for any of the periods presented. The computation of basic ear nings per share and diluted earnings per share adjusted to give effect to the stock split is as follows: Thirteen Weeks Ended September 28, 2024 September 30, 2023 Class A Class B Class A Class B Net income $ 76,395 $ 574 $ 86,136 $ 647 Weighted average shares 220,742,854 1,657,146 220,742,854 1,657,146 Basic earnings per share $ 0.35 $ 0.35 $ 0.39 $ 0.39 Diluted earnings per share $ 0.35 $ 0.35 $ 0.39 $ 0.39 Thirty-Nine Weeks Ended September 28, 2024 September 30, 2023 Class A Class B Class A Class B Net income $ 179,757 $ 1,349 $ 214,578 $ 1,610 Weighted average shares 220,742,854 1,657,146 220,742,854 1,657,146 Basic earnings per share $ 0.81 $ 0.81 $ 0.97 $ 0.97 Diluted earnings per share $ 0.81 $ 0.81 $ 0.97 $ 0.97 Note 13 - Related Party Transactions In connection with our acquisition by Platinum, we entered into a Corporate Advisory Services Agreement (the “CASA”) with Platinum Advisors , an entity affiliated with Platinum, pursuant to which Platinum Advisors provides corporate and advisory services to us. The Company incurs an annual fee of $ 25,000 , plus expenses incurred by Platinum Advisors in rendering such services. During the Thirteen Weeks Ended September 28, 2024, and Thirteen Weeks Ended September 30, 2023 , we incurred fees and exp enses of $ 6,373 and $ 6,325 , respectively, under the CASA. During the Thirty-Nine Weeks Ended September 28, 2024, and Thirty-Nine Weeks Ended September 30, 2023 , we incurred fees and exp enses of $ 19,024 and $ 19,106 , respectively, under the CASA. These amounts have been included within SG&A expenses within the Condensed Consolidated Statements of Income. Note 14 - Subsequent Events On October 25, 2024, we completed an IPO, in which we issued and sold 11,600,000 shares of our Common Stock at a public offering price of $ 22.00 per share. We received approximately $ 233,110 in net proceeds after deducting $ 14,036 of underwriting discounts and approximately $ 8,054 in estimated offering costs. Upon the closing of the IPO, we used the net proceeds from the offering to repay $ 233,100 of debt outstanding under our Term Loan Credit Facility. The underwriters were granted a 30 -day option to purchase up to an additional 2,790,000 shares of Common Stock from Imola JV Holdings, L.P. (the “Selling Stockholder”) , which was exercised in full and closed on November 4, 2024. 27 INGRAM MICRO HOLDING CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share, unit and per share data) In connection with our IPO, we issued 2,607,713 time vesting restricted stock units with an average grant date fair value of $ 22.00 per share to certain key employees and directors, of which 1,473,720 restricted stock units vested immediately upon grant resulting in an expense of $ 32,422 that will be recorded within SG&A in the fourth quarter. The unvested balance of these awards will vest over a weighted-average period of 2.0 years . We also issued 2,467,775 of performance vesting restricted stock units, 50 % of which will vest upon the achievement of a qualifying event, whereby the returns on invested capital by Platinum is 2.0 times the total of all capital or other contributions made by Platinum and the remaining 50 % will vest upon the achievement of a qualifying event, whereby the returns on invested capital by Platinum is 2.5 times the total of all capital or other contributions made by Platinum, in each case, except in certain circumstance s as specified in the award agreement, subject to the grantee ’ s continuous service with us through such qualifying event. The weighted-average grant date fair value of these awards, which was calculated using a Monte Carlo valuation model, was $ 17.42 per share . Immediately prior to the IPO, the Plan was terminated and all participation units were cancelled (See section “ Participation Plan for Certain Key Employees ” , within Note 3, “ Employee Awards ” , for further information). In connection with our IPO, we also terminated the CASA. 28