Ingram Micro 2013 Annual Report Download - page 15

Table of Contents
We operate a global business that exposes us to risks associated with conducting business in multiple jurisdictions. Sales outside the United
States, made up approximately 63% of our net revenue in 2013. In addition, an increasing portion of our business activity is being conducted in emerging
markets, including China and India. As a result, our future operating results and financial condition could be significantly affected by risks associated with
conducting business in multiple jurisdictions, including, but not limited to, the following:
•trade protection laws, policies and measures;
•import and export duties, customs levies and value-added taxes;
•compliance with foreign and domestic import and export regulations and anticorruption laws, including the Iran Threat Reduction and Syria Human
Rights Act of 2012, U.S. Foreign Corrupt Practices Act, or similar laws of other jurisdictions for our business activities outside the U.S., the violation
of which could result in severe penalties including monetary fines, criminal proceedings and suspension of export privileges;
•laws and regulations regarding consumer and data protection, privacy, network security, encryption and payments;
•managing compliance with legal and regulatory requirements and prohibitions, including compliance with local laws and regulations that differ or are
conflicting among jurisdictions;
•environmental laws and regulations, such as those relating to product disposal;
•differing employment practices and labor issues;
•political instability, terrorism and potential military conflicts or civilian unrest; economic instability in a specific country or region;
•earthquakes, power shortages, telecommunications failures, water shortages, tsunamis, floods, hurricanes, typhoons, fires, extreme weather
conditions, medical epidemics or pandemics and other natural or manmade disasters or business interruptions in a region or specific country;
•complex and changing tax laws and regulations in various jurisdictions;
•potential restrictions on our ability to repatriate funds from our foreign subsidiaries; and
•difficulties in staffing and managing international operations.
The potential criminal penalties for violations of import/export regulation, data privacy, anti-corruption and competition laws, particularly the
U.S. Foreign Corrupt Practices Act, and data privacy laws and environmental laws and regulations in many non-U.S. jurisdictions, create heightened risks
for our international operations. In the event that a governing regulatory body determined that we have violated any of these laws, including applicable
import/export regulations or anti-corruption laws, we could be fined significant sums, incur sizable legal defense costs and/or our import/export capabilities
could be restricted, which could have a material and adverse effect on our business and reputation.
Additionally, we have been and expect to continue to be subject to new and increasingly complex U.S. and non-U.S. government regulations that affect
our operations in the U.S. and globally. These regulations could result in increased costs to implement processes necessary to comply or such compliance
could result in the reduction of the level of business we can effectively process.
While we have and will continue to adopt measures designed to promote compliance with these laws, we cannot assure you that such measures will be
adequate or that our business will not be materially and adversely impacted in the event of an alleged violation.
We are also exposed to market risk primarily related to foreign currencies and interest rates. In particular, we are exposed to changes in the value of the
U.S. dollar versus the local currency in which the products are sold and goods and services are purchased, including devaluation and revaluation of local
currencies. Since more than half of our sales are from countries outside of the United States, other currencies, including, but not limited to, the euro, British
pound, Chinese yuan, Indian rupee, Australian dollar, Mexican peso, and Brazilian real, can have an impact on Ingram Micro’s results (expressed in U.S.
dollars).
In particular, the uncertainty with respect to the ability of certain European countries to continue to service their sovereign debt obligations and the related
European financial restructuring efforts may cause the value of the euro and other European currencies to fluctuate. Currency variations also contribute to
variations in sales of products and services in impacted jurisdictions. For example, in the event that one or more European countries were to replace the euro
with another currency, Ingram Micro’s sales into such countries, or into Europe generally, would likely be adversely affected until stable exchange rates are
established. Accordingly, fluctuations in foreign currency rates, most notably the strengthening of the U.S. dollar against the euro, could adversely affect our
revenue growth in future periods. In addition, currency variations can adversely affect margins on sales of our products in countries outside of the United
States.
We have managed our exposure to fluctuations in the value of currencies and interest rates using a variety of financial instruments entered into with
financial institutions. Although we believe that our exposures are appropriately diversified across counterparties and that, through our ongoing monitoring
procedures, these counterparties are creditworthy financial institutions,
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