Tech Data 2014 Annual Report Download - page 14

Table of Contents
We have international operations which expose us to risks associated with conducting business in multiple jurisdictions.
The Company's international operations are subject to other risks such as the imposition of governmental controls, export license requirements,
restrictions on the export of certain technology, political instability, trade restrictions, tariff changes, difficulties in staffing and managing
international operations, changes in the interpretation and enforcement of laws (in particular related to items such as duty and taxation),
difficulties in collecting accounts receivable, longer collection periods and the impact of local economic conditions and practices. There can be
no assurance that these and other factors will not have an adverse effect on the Company's business.
In addition, while the Company's labor force in the Americas is currently non-union, employees of certain European subsidiaries are subject to
collective bargaining or similar arrangements. The Company does business in certain foreign countries where labor disruption is more common
than is experienced in the United States and some of the freight carriers used by the Company are unionized. A labor strike by a group of the
Company's employees, one of the Company's freight carriers, one of its vendors, a general strike by civil service employees, or a governmental
shutdown could have an adverse effect on the Company's business. Many of the products the Company sells are manufactured in countries other
than the countries in which the Company's logistics centers are located. The inability to receive products into the logistics centers because of
government action or labor disputes at critical ports of entry may have an adverse effect on the Company's business.
Risks Related to our Financial Statements and Internal Controls
We face risks to our reputation and investor confidence arising from material weaknesses in our internal control environment.
Management has identified material weaknesses in internal control over financial reporting with respect to the control environment within the
Company's primary operating subsidiary in the UK and two other European subsidiaries, inadequate controls over manual journal entries in
Europe and in two subsidiaries in Latin America, inadequate account reconciliation procedures in Europe over certain aspects of vendor
accounting and inadequate anti-fraud program and monitoring controls. Management has concluded that our internal control over financial
reporting was not effective as of January 31, 2014. Our chief executive officer (“CEO”) and chief financial officer (“CFO”) have also concluded
that our disclosure controls and procedures were not effective as of January 31, 2014. Although management is implementing a plan to remediate
these material weaknesses, the remedial actions may prove to be ineffective or inadequate and the Company may still be exposed to risk of
misstatements in its financial statements. In such circumstances, investors and other users of the Company’s financial statements may lose
confidence in the reliability of the Company’s financial information and the Company could fail to comply with certain representations,
warranties and covenants in its debt and other financing-related agreements or be obligated to incur additional costs to improve the Company’s
internal controls. The Company’s failure or inability to remediate the material weaknesses in a timely and effective manner could also adversely
affect its reputation, credit rating and its operating prospects, if the Company is perceived as experiencing financial control or other financial
difficulties. See Part II, Item 9A, “Controls and Procedures,” for a further description of the material weaknesses identified by management and
management’s plan to remediate these material weaknesses.
We cannot predict what losses we might incur in litigation matters, regulatory enforcement actions and contingencies that we may be
involved with from time to time, including in connection with the restatement of prior financial statements.
The SEC has requested information from the Company with respect to the restatement of certain of our consolidated financial statements and
other financial information from fiscal 2009 to fiscal 2013, and the Company is cooperating with the SEC request. See Item 3, “Legal
Proceedings.” This pending SEC request for information and other potential proceedings could result in fines and other penalties. The Company
has not reserved any amount in respect of these matters in its consolidated financial statements.
The Company cannot predict whether monetary losses, if any, it experiences in any proceedings related to the restatement will be covered by
insurance or whether insurance proceeds recovered will be sufficient to offset such losses. Potential civil or regulatory proceedings may also
divert the efforts and attention of the Company’s management from business operations.
The Company cannot predict what losses we might incur from other litigation matters, regulatory enforcement actions and contingencies that we
may be involved with from time to time. There are various other claims, lawsuits and pending actions against us. We do not expect that the
ultimate resolution of these other matters will have a material adverse effect on our consolidated financial position. However, the resolution of
certain of these matters could be material to our operating results for any particular period, depending on the level of income for such period. We
can make no assurances that we will ultimately be successful in our defense of any of these other matters.
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