Avnet 2013 Annual Report Download - page 11

Table of Contents
In addition to the cost of compliance, the potential criminal penalties for violations of export regulations and anti-
corruption laws by the
Company or its third-
party agents create heightened risks for the Company's international operations. In the event that a governing regulatory
body determined that the Company had violated applicable import or export regulations or anti-
corruption laws, the Company could be fined
significant sums, incur sizable legal defense costs and/or its import or export capabilities could be restricted, which could have a material and
adverse effect on the Company's business. Additionally, allegations that the Company has violated a governmental regulation may negatively
impact the Company's reputation, which may result in customers or suppliers being unwilling to do business with the Company. While the
Company has adopted measures designed to ensure compliance with these laws, the Company cannot be assured that such measures will be
adequate or that its business will not be materially and adversely impacted in the event of an alleged violation.
The Company's acquisition strategy may not produce the expected benefits, which may adversely affect the Company's results of operations.
Avnet has made, and expects to continue to make, strategic acquisitions or investments in companies around the world to further its
strategic objectives and support key business initiatives. Acquisitions and investments involve risks and uncertainties, some of which may differ
from those associated with Avnet's historical operations. The risks relating to such transactions include, but are not limited to, risks relating to
expanding into emerging markets and business areas, adding additional product lines and services, incurring unanticipated costs or liabilities
associated with the companies acquired and diverting management's attention from existing business operations. As a result, the Company's
profitability may be negatively impacted. In addition, the Company may not be successful in integrating the acquired businesses or the
integration may be more difficult, costly or time-
consuming than anticipated. Further, any litigation relating to a potential acquisition will result
in an increase in the expenses associated with the acquisition or cause a delay in completing the acquisition, thereby impacting the Company's
profitability. The Company may experience disruptions that could, depending on the size of the acquisition, have a material adverse effect on its
business, especially where an acquisition target may have pre-existing non-compliance or pre-
existing deficiencies or material weaknesses in
internal controls as those terms are defined under relevant SEC rules and regulations. Furthermore, the Company may not realize all of the
anticipated benefits from its acquisitions, which could materially and adversely affect the Company's financial performance.
Major disruptions to the Company
’s logistics capability could have a material adverse impact on the Company’s operations.
The Company's global logistics services are operated through specialized, centralized or outsourced distribution centers around the globe.
The Company also depends almost entirely on third-
party transportation service providers for the delivery of products to its customers. A major
interruption or disruption in service at one or more of its distribution centers for any reason (such as natural disasters, pandemics, or significant
disruptions of services from our third-
party providers) could cause cancellations or delays in a significant number of shipments to customers and,
as a result, could have a severe impact on the Company's business, operations and financial performance.
If the Company
’
s internal information systems fail to function properly, or if the Company is unsuccessful in the integration or upgrade of
information systems, its business operations could suffer.
The Company's expanding operations put increasing pressure on the Company's information systems to facilitate the day-to-
day operations
of the business and to produce timely, accurate and reliable reports on financial and operational results. Currently, the Company's global
operations are tracked with multiple information systems, some of which are subject to ongoing IT projects designed to streamline or optimize
the Company's global information systems. There is no guarantee that the Company will be successful at all times in these efforts or that there
will not be integration difficulties that will adversely affect the Company's ability to complete business transactions timely or the accurate and
timely recording and reporting of financial data. In addition, the Company's information technology is subject to cybersecurity breaches,
computer hacking or other general system failures. Maintaining and operating these systems requires continuous investments. A security breach
could result in sensitive data being manipulated or exposed to unauthorized persons or to the public. A failure of any of these information
systems in a way described above or material difficulties in upgrading these information systems could have material adverse effects on the
Company's business and its compliance with reporting obligations under federal securities laws.
Declines in the value of the Company's inventory or unexpected order cancellations by the Company's customers could materially and
adversely affect its business, results of operations, financial condition and liquidity.
The electronic components and computer products industries are subject to rapid technological change, new and enhanced products,
changes in customer needs and changes in industry standards, which can contribute to a decline in value or obsolescence of inventory.
Regardless of the general economic environment, it is possible that prices will decline due to a decrease in demand or an oversupply of products
and, as a result of the price declines, there may be greater risk of declines in inventory value. Although
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• the risk of non-
compliance with local laws.