Ingram Micro 2008 Annual Report Download - page 37

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reorganization costs primarily related to employee termination benefits for workforce reductions and other costs
related to contract terminations for equipment leases. During the third quarter of 2008, we also announced cost-
reduction programs related to our Asia-Pacific operations, incurring reorganization costs of $0.3 million, primarily
related to employee termination benefits.
As most economists expect the current economic downturn to last through most of 2009 and potentially
beyond, we continue to make adjustments to improve profitability and position us for the future. We are taking
additional actions in 2009 to ensure our expenses remain aligned with declines in sales volume, including further
restructuring actions in Europe and North America. These actions are expected to generate savings of approx-
imately $100 million to $120 million annually, reaching the full run-rate by the time we exit 2009. Total
restructuring and other related costs associated with these actions are expected to range from approximately
$45 million to $65 million.
Acquisitions
We have complemented our internal growth initiatives with strategic business acquisitions including our
acquisitions over the past five years of the distribution businesses of Eurequat SA, Intertrade A.F. AG, Paradigm
Distribution Ltd. and Symtech Nordic AS in EMEA, the Cantechs Group in Asia-Pacific and Nimax in North
America, each of which expanded our value-added distribution of mobile data and AIDC/POS solutions; AVAD, the
leading distributor for solution providers and custom installers serving the home automation and entertainment
market in the U.S.; DBL, a leading distributor of consumer electronics accessories in the U.S.; VPN Dynamics and
Securematics, which expanded our networking product and services offerings in the U.S.; and Tech Pacific, one of
Asia-Pacific’s largest technology distributors.
Working Capital and Debt
The IT products and services distribution business is working capital intensive. Our business requires
significant levels of working capital primarily to finance accounts receivable and inventories. However, our
business generally requires less financing during an economic downturn because of reduced working capital
demands. We have relied heavily on trade credit from vendors, accounts receivable financing programs and debt
facilities for our working capital needs. Due to our narrow operating margins, we maintain a strong focus on
management of working capital and cash provided by operations, as well as our debt levels. However, our debt
levels may fluctuate significantly on a day-to-day basis due to timing of customer receipts and periodic payments to
vendors. Our future debt requirements may increase to support growth in our overall level of business, changes in
our required working capital profile, or to fund acquisitions or other investments in the business.
Our Critical Accounting Policies and Estimates
The discussions and analyses of our consolidated financial condition and results of operations are based on our
consolidated financial statements, which have been prepared in conformity with accounting principles generally
accepted in the U.S. The preparation of these financial statements requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of significant contingent assets and liabilities at
the financial statement date, and reported amounts of revenue and expenses during the reporting period. On an
ongoing basis, we review and evaluate our estimates and assumptions, including, but not limited to, those that relate
to accounts receivable; vendor programs; inventories; goodwill, intangible and other long-lived assets; income
taxes; and contingencies and litigation. Our estimates are based on our historical experience and a variety of other
assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for
making our judgment about the carrying values of assets and liabilities that are not readily available from other
sources. Although we believe our estimates, judgments and assumptions are appropriate and reasonable based upon
available information, these assessments are subject to a wide range of sensitivity. Therefore, actual results could
differ from these estimates.
We believe the following critical accounting policies are affected by our judgments, estimates and/or
assumptions used in the preparation of our consolidated financial statements.
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