Avnet 2015 Annual Report Download - page 11

TableofContents
emerginganddevelopingeconomies,theCompany’soperationsaresubjecttoavarietyofrisksthatarespecifictointernational
operations,including,butnotlimitedto,thefollowing:
·potentialrestrictionsontheCompany’sabilitytorepatriatefundsfromitsforeignsubsidiaries;
·foreigncurrencyandinterestratefluctuationsandtheimpactontheCompany’sresultsofoperations;
·importandexportdutiesandvalue-addedtaxes;
·compliance with foreign and domestic import and export regulations, data privacy regulations, business licensing
requirements,environmentalregulationsandanti-corruptionlaws,thefailureofwhichcouldresultinseverepenalties
includingmonetaryfines,criminalproceedingsandsuspensionofimportorexportprivileges;
·complexandchangingtaxlawsandregulations;
·regulatoryrequirementsandprohibitionsthatdifferbetweenjurisdictions;
·economicandpoliticalinstability,terrorismandpotentialmilitaryconflictsorcivilianunrest;
·fluctuationsinfreightcosts,limitationsonshippingandreceivingcapacity,andotherdisruptionsinthetransportation
andshippinginfrastructure;
·naturaldisastersandhealthconcerns;
·differingenvironmentalregulationsandemploymentpracticesandlaborissues;and
·theriskofnon-compliancewithlocallaws.
Inadditiontothecostofcompliance,thepotentialcriminalpenaltiesforviolationsofimportor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
andcontrols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transactssales,paysexpenses,ownsassetsandincursliabilitiesincountriesusingcurrenciesotherthanthe
U.S.Dollar.BecausetheCompany’sconsolidatedfinancialstatementsarepresentedinU.S.Dollars,theCompanymusttranslate
sales,incomeandexpenses,aswellasassetsandliabilities, intoU.S.Dollarsatexchangeratesineffectduring eachreporting
period. Therefore, increases or decreases in the exchanges rates between the U.S. Dollar and other currencies the Company
transacts in affect the Company’s reported amounts of sales, operating income, assets and liabilities denominated in foreign
currencies. In addition, unexpected and dramatic changes in foreign currency exchange rates may negatively affect the
Company’searningsfromthosemarkets.WhiletheCompanymayusederivativefinancialinstrumentstofurtherreduceitsnet
exposuretoforeigncurrencyexchangeratefluctuations,therecanbenoassurancethatfluctuationsinforeigncurrencyexchange
rateswillnotmateriallyaffecttheCompany’sfinancialresults.Further,foreigncurrencyinstabilityanddisruptionsinthecredit
andcapitalmarketsmayincreasecreditrisksforsomeoftheCompany’scustomersandmayimpairitscustomers’abilitytorepay
existingobligations.
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