Ingram Micro 2010 Annual Report Download - page 47

liabilities. The issuance of these letters of credit also reduces our available capacity under the respective
facilities by the same amount.
(4) We lease the majority of our facilities and certain vehicles and equipment under noncancelable operating leases.
Amounts in this table represent future minimum payments on operating leases that have had original
noncancelable lease terms in excess of 12 months.
(5) In December 2008, we renewed for another five years our agreement with a third-party provider of IT
outsourcing services. The services include mainframe, major server, desktop and enterprise storage operations,
wide-area and local-area network support and engineering; systems management services; and worldwide
voice/PBX. This agreement is cancelable at our option. We also have an agreement with a leading global IT
outsource service provider. The services provided include certain IT functions related to our application
development functions. This agreement expires in August 2011 and may be terminated by us subject to
payment of termination fees. Amounts in this table represent future minimum payments in excess of one year
for our IT and business process outsourcing agreements.
(6) At January 1, 2011, our liability for unrecognized tax benefits, including interest and penalties, was $26,647,
the long-term portion of which amounted to $24,910. We are not able to reasonably estimate the timing of
payments of the long-term portion of our liability for unrecognized tax benefits, or the amount the long-term
portion will increase or decrease over time; therefore, this portion of the liability was excluded in the
contractual obligations table above (see Note 7 to our consolidated financial statements).
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 both 2010 and 2009.
The guarantees require us to reimburse the third party for defaults by these customers up to an aggregate of $21,000.
The fair value of these guarantees has been recognized as cost of sales to these customers and is included in other
accrued liabilities.
Because our commitments under our employee benefit plans are not fixed amounts, they have not been
included in the contractual obligations table.
Other Matters
See Part I, Item 3 “Legal Proceedings” for discussions of legal matters and contingencies.
New Accounting Standards
See Note 2 to our 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 using a variety of financial instruments. It is
our policy to utilize financial instruments to reduce risks where internal netting cannot be effectively employed and
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. We generally
maintain hedge coverage between minimum and maximum percentages. Cross-currency interest rate swaps are
used to hedge foreign currency denominated principal and interest payments related to intercompany and third-
party loans. During 2010, hedged transactions were denominated in U.S. dollars, Canadian dollars, euros, British
pounds, Danish krone, Hungarian forint, Israeli shekel, Norwegian kroner, Swedish krona, Swiss francs, Australian
dollars, Chinese yuan, Indian rupees, Malaysian ringit, New Zealand dollars, Philippine pesos, Singaporean dollars,
Sri Lankan rupees, Thai baht, Argentine pesos, Brazilian reais, Chilean pesos and Mexican pesos.
We are exposed to changes in interest rates on a portion of our long-term debt used to maintain liquidity and
finance working capital, capital expenditures and business expansion. Our management objective is to finance our
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