Ingram Micro 1999 Annual Report Download - page 31

The VaR model is a risk analysis tool and does not purport to represent actual losses in fair value that will be incurred by the
Company, nor does it consider the potential effect of favorable changes in market rates. It also does not represent the maximum
possible loss that may occur.Actual future gains and losses will differ from those estimated because of changes or differences in
market rates and interrelationships, hedging instruments and hedge percentages, timing and other factors.
The estimated loss in fair value on the Company’s foreign currency-sensitive and interest rate-sensitive financial instruments was
derived using the VaR model and a one-day holding period. At January 1, 2000, the estimated loss in fair value on the Company’s for-
eign currency-sensitive financial instruments and interest rate-sensitive financial instruments was $0.1 million and $4.3 million,
respectively. At January 2, 1999, the estimated loss in fair value on the Company’s foreign currency-sensitive financial instruments and
interest rate-sensitive financial instruments was $1.3 million and $1.6 million, respectively.The decrease in the estimated loss in fair
value on foreign currency-sensitive financial instruments from January 2, 1999 to January 1, 2000 was due to a lower notional value
of outstanding foreign currency-sensitive instruments.The increase in the estimated loss in fair value on interest rate-sensitive financial
instruments from January 2, 1999 to January 1, 2000 was due to higher interest rate volatility.The Company believes that the hypo-
thetical loss in fair value of its derivatives would be offset by increases in the value of the underlying transactions being hedged.
Euro Conversion
On January 1, 1999, a single currency called the euro was introduced in Europe. Eleven of the 15 member countries of the
European Union adopted the euro as their common legal currency on that date. Fixed conversion rates between these participating
countries’ existing currencies (the “legacy currencies”) and the euro were established as of that date.The legacy currencies are
scheduled to remain legal tender as denominations of the euro until at least January 1, 2002 (but not later than July 1, 2002).
During this transition period, parties may settle transactions using either the euro or a participating country's legacy currency.
Beginning in January 2002, new euro-denominated bills and coins will be issued and legacy currencies will be withdrawn from
circulation.The Company has implemented plans to address the issues raised by the euro currency conversion.These plans include,
among others, the need to adapt computer information systems and business processes and equipment to accommodate euro-
denominated transactions; the need to analyze the legal and contractual implications on contracts; and the ability of the Company’s
customers and vendors to accommodate euro-denominated transactions on a timely basis. Since the implementation of the euro
on January 1, 1999, the Company has experienced improved efficiencies in its cash management program in Europe as all intracom-
pany transactions within participating countries are conducted in euros. In addition, the Company has reduced hedging activities in
Europe for transactions conducted between euro participating countries. Since the Company’s information systems and processes
generally accommodate multiple currencies, the Company anticipates that modifications to its information systems, equipment
and processes will be made on a timely basis and does not expect any failures which would have a material adverse effect on the
Company’s financial position or results of operations or that the costs of such modifications will have a material effect on the
Company’s financial position or results of operations.The Company has not experienced any material adverse effects on its financial
position or results of operations in connection with the January 1, 1999 first stage conversion.
Cautionary Statements for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995
The matters in this Annual Report that are forward-looking statements are based on current management expectations that
involve certain risks, including without limitation: intense competition; continued pricing and margin pressures; the potential for
continued restrictive vendor terms and conditions; the potential decline as well as seasonal variations in demand for the Company’s
products; unavailability of adequate capital; management of growth; reliability of information systems; foreign currency fluctua-
tions; dependency on key individuals; product supply shortages; the potential termination of a supply agreement with a major
supplier; acquisitions; rapid product improvement and technological change, and resulting obsolescence risks; risk of credit loss;
dependency on independent shipping companies; and the termination of subsidized floor plan financing.
The Company has and continues to institute changes to its strategies, operations and processes to address these risk factors and
to mitigate their impact on the Company’s results of operations and financial condition. However, no assurances can be given that the
Company will be successful in these efforts. For a further discussion of these and other significant factors to consider in connection
with forward-looking statements concerning the Company, reference is made to Exhibit 99.01 of the Company’s Annual Report on
Form 10-K for the fiscal year ended January 1, 2000; other risks or uncertainties may be detailed from time to time in the
Company’s future SEC filings. 2299
Ingram Micro
Annual Report