Ingram Micro 2006 Annual Report Download - page 39

affect our operating results. We do not carry broad insurance covering such terrorist or military actions, and even if
we were to seek such coverage, the cost would likely be prohibitive.
Failure to retain and recruit key personnel would harm our ability to meet key objectives. Because of the
nature of our business, which includes (but is not limited to) high volume of transactions, business complexity, wide
geographical coverage, and broad scope of products, suppliers, and customers, we are dependent in large part on our
ability to retain the services of our key management, sales, IT, operational, and finance personnel. Our continued
success is also dependent upon our ability to retain and recruit other qualified employees, including highly skilled
technical, managerial, and marketing personnel, to meet our needs. Competition for qualified personnel is intense.
In addition, we have recently reduced our personnel in various geographies and functions through our restructuring
and outsourcing activities. These reductions could negatively impact our relationships with our workforce, or make
hiring other employees more difficult. We may not be successful in attracting and retaining the personnel we
require, which could have a material adverse effect on our business. Additionally, changes in workforce, including
government regulations, collective bargaining agreements or the availability of qualified personnel could disrupt
operations or increase our operating cost structure.
We face a variety of risks with outsourcing arrangements. We have outsourced various transaction-oriented
service and support functions in North America to a leading global business process outsource provider outside the
United States. We have also outsourced a significant portion of our IT infrastructure function and certain IT
application development functions to third-party providers. We may outsource additional functions to third-party
providers. Our reliance on third-party providers to provide service to us, our customers and suppliers and for our IT
requirements to support our business could result in significant disruptions and costs to our operations, including
damaging our relationships with our suppliers and customers, if these third-party providers do not meet their
obligations to adequately maintain an appropriate level of service for the outsourced functions or fail to adequately
support our IT requirements. As a result of our outsourcing activities, it may also be more difficult to recruit and
retain qualified employees for our business needs.
Changes in our credit rating, or other market factors may increase our interest expense or other costs of
capital, or capital may not be available to us on acceptable terms to fund our working capital needs. Our
business requires significant levels of capital to finance accounts receivable and product inventory that is not
financed by trade creditors. This is especially true when our business is expanding, including through acquisitions,
but we still have substantial demand for capital even during periods of stagnant or declining net sales. In order to
continue operating our business, we will continue to need access to capital, including debt financing. In addition,
changes in payment terms with either suppliers or customers could increase our capital requirements. The capital
we require may not be available on terms acceptable to us, or at all. Changes in our credit ratings, as well as
macroeconomic factors such as fluctuations in interest rates or a general economic downturn, may restrict our
ability to raise the necessary capital in adequate amounts or on terms acceptable to us, and the failure to do so could
harm our ability to operate or expand our business.
Rapid changes in the operating environment for IT distributors have placed significant strain on our
business, and we offer no assurance that our ability to manage future adverse industry trends will be
successful. Dynamic changes in the industry have resulted in new and increased responsibilities for management
personnel and have placed and continue to place a significant strain upon our management, operating and financial
systems, and other resources. This strain may result in disruptions to our business and decreased revenues and
profitability. In addition, we may not be able to attract or retain sufficient personnel to manage our operations
through such dynamic changes. Even with sufficient personnel we cannot assure our ability to successfully manage
future adverse industry trends. Also crucial to our success in managing our operations will be our ability to achieve
additional economies of scale. Our failure to achieve these additional economies of scale could harm our
profitability.
Changes in accounting rules could adversely affect our future operating results. Our financial statements
are prepared in accordance with U.S. generally accepted accounting principles. These principles are subject to
interpretation by various governing bodies, including the FASB and the SEC, who create and interpret appropriate
accounting standards. A change from current accounting standards could have a significant adverse effect on our
results of operations.
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