Ingram Micro 2011 Annual Report Download - page 26

• earthquakes, power shortages, telecommunications failures, water shortages, tsunamis, floods, hurricanes,
typhoons, fires, extreme weather conditions, medical epidemics or pandemics and other natural or
manmade disasters or business interruptions in a region or specific country;
• complex and changing tax laws and regulations in various jurisdictions;
• the risk of non-compliance with local laws;
• potential restrictions on our ability to repatriate funds from our foreign subsidiaries cost effectively or at
all; and
• difficulties in staffing and managing international operations.
The potential criminal penalties for violations of export regulations and anti-corruption laws, particularly the
U.S. Foreign Corrupt Practices Act, data privacy laws and environmental laws and regulations in many
jurisdictions, create heightened risks for our international operations. In the event that a governing regulatory
body determined that we have violated applicable export regulations or anti-corruption laws, we could be fined
significant sums, incur sizable legal defense costs and/or our export capabilities could be restricted, which could
have a material and adverse effect on our business and reputation. While we have and will continue to adopt
measures designed to promote compliance with these laws, we cannot be assured that such measures will be
adequate or that our business will not be materially and adversely impacted in the event of an alleged violation.
Additionally, we are exposed to market risk primarily related to foreign currencies and interest rates. In
particular, we are exposed to changes in the value of the U.S. dollar versus the local currency in which the
products are sold and goods and services are purchased, including devaluation and revaluation of local
currencies. Since more than half of our sales are from countries outside of North America, other currencies,
including the euro, British pound, Chinese yuan, Indian rupee, Australian dollar, Mexican peso, and Brazilian
real, can have an impact on Ingram Micro’s results (expressed in U.S. dollars). In particular, the uncertainty with
respect to the ability of certain European countries to continue to service their sovereign debt obligations and the
related European financial restructuring efforts may cause the value of the euro and other European currencies to
fluctuate. Currency variations also contribute to variations in sales of products and services in impacted
jurisdictions. For example, in the event that one or more European countries were to replace the euro with
another currency, Ingram Micro’s sales into such countries, or into Europe generally, would likely be adversely
affected until stable exchange rates are established. Accordingly, fluctuations in foreign currency rates, most
notably the strengthening of the dollar against the euro, could adversely affect our revenue growth in future
periods. In addition, currency variations can adversely affect margins on sales of our products in countries
outside of the United States.
We manage our exposure to fluctuations in the value of currencies and interest rates using a variety of
financial instruments. Although we believe that our exposures are appropriately diversified across counterparties
and that, through our ongoing monitoring procedures, these counterparties are creditworthy financial institutions,
we are exposed to credit loss in the event of nonperformance by our counterparties to foreign exchange and
interest rate swap contracts and we may not be able to adequately mitigate all foreign currency-related risks. In
addition, our hedging activities may not offset fully any adverse financial impact resulting from currency
variations, which could affect our financial results.
Our failure to adequately adapt to IT industry changes could negatively impact our future operating
results. The IT products industry is subject to rapid technological change, new and enhanced product
specification requirements, evolving industry standards and changes in the way technology products are
distributed and/or managed. Suppliers may give us limited or no access to new products being introduced.
Changes may cause inventory in stock to decline substantially in value or to become obsolete, regardless of the
general economic environment. Although it is the policy of many suppliers of IT products to offer distributors
like us, who purchase directly from them, limited protection from the loss in value of inventory due to
technological change or such suppliers’ price reductions (“price protection”), if major suppliers decrease the
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