Ingram Micro 2008 Annual Report Download - page 23

we sell or cause us to record inventory write-downs. In addition, suppliers could become insolvent and unable to
fulfill their protection obligations to us. We offer no assurance that our price protection will continue, that
unforeseen new product developments will not materially adversely affect us, or that we will successfully manage
our existing and future inventories. Significant changes in supplier terms, such as higher thresholds on sales volume
before distributors may qualify for discounts and/or rebates, the overall reduction in the amount of incentives
available, reduction or termination of price protection, return levels, or other inventory management programs, or
reductions in payment terms or trade credit, or vendor-supported credit programs, may adversely impact our results
of operations or financial condition.
We also have significant credit exposure to our reseller customers and negative trends in their businesses could
cause us significant credit loss. As is customary in many industries, we extend credit to our reseller customers for a
significant portion of our net sales. Resellers have a period of time, generally 30 to 45 days after date of invoice, to
make payment. We are subject to the risk that our reseller customers will not pay for the products they have
purchased. The risk that we may be unable to collect on receivables may increase if our reseller customers
experience decreases in demand for their products and services or otherwise become less stable, due to adverse
economic conditions. If there is a substantial deterioration in the collectibility of our receivables or if we cannot
obtain credit insurance at reasonable rates, are unable to collect under existing credit insurance policies, or fail to
take other actions to adequately mitigate such credit risk, our earnings, cash flows and our ability to utilize
receivable-based financing could deteriorate.
Economic downturns may also lead to restructuring actions and associated expenses in response to the lower
sales volume. In addition, we may not be able to adequately adjust our cost structure in a timely fashion to remain
competitive, which may cause our profitability to suffer.
Changes in our credit rating or other market factors, such as continued adverse capital and credit
market conditions or reduction of cash flow from operations, may significantly affect our ability to meet
liquidity needs, reduce access to capital, and/or increase our costs of borrowing. Our business requires
significant levels of capital to finance accounts receivable and product inventory that is not financed by trade
creditors. This is especially true when our business is expanding, including through acquisitions, but we still have
substantial demand for capital even during periods of stagnant or declining net sales. In order to continue operating
our business, we will continue to need access to capital, including debt financing. In addition, changes in payment
terms with either suppliers or customers could increase our capital requirements. Our ability to repay current or
future indebtedness when due, or have adequate sources of liquidity to meet our business needs may be affected by
changes to the cash flows of our subsidiaries. A reduction of cash flow generated by our subsidiaries may have an
adverse effect on our liquidity. Under certain circumstances, legal, tax or contractual restrictions may limit our
ability or make it more costly to redistribute cash between subsidiaries to meet the company’s overall operational or
strategic investment needs, or for repayment of indebtedness requirements.
We believe that our existing sources of liquidity, including cash resources and cash provided by operating
activities, supplemented as necessary with funds available under our credit arrangements, will provide sufficient
resources to meet our present and future working capital and cash requirements for at least the next twelve months.
However, the capital and credit markets have been experiencing unprecedented levels of volatility and disruption.
Such market conditions may limit our ability to replace, in a timely manner, maturing liabilities or affect our ability
to access committed capacities or the capital we require may not be available on terms acceptable to us, or at all, due
to inability of our finance partners to meet their commitments to us. The lack of availability of such funding could
harm our ability to operate or expand our business.
In addition, our cash and cash equivalents (including trade receivables collected and/or monies set aside for
payment to creditors) are deposited and/or invested with various financial institutions located in the various
countries in which we operate. We endeavor to monitor these financial institutions regularly for credit quality;
however, we are exposed to risk of loss on such funds or we may experience significant disruptions in our liquidity
needs if one or more of these financial institutions were to suffer bankruptcy or similar restructuring.
Our failure to adequately adapt to economic and industry changes and to manage prolonged contractions
could negatively impact our future operating results. Rapid changes in the operating environment for IT
distributors have placed significant strain on our business, and we offer no assurance that our ability to manage future
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