Ingram Micro 2006 Annual Report Download - page 41

ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our corporate headquarters is located in Santa Ana, California. We support our global operations through an
extensive sales and administrative office and distribution network throughout North America, Europe,
Latin America, and Asia-Pacific. As of December 30, 2006, we operated 108 distribution centers worldwide.
As of December 30, 2006, we leased substantially all our facilities on varying terms. We do not anticipate any
material difficulties with the renewal of any of our leases when they expire or in securing replacement facilities on
commercially reasonable terms. We also own several facilities, the most significant of which are our office/
distribution facilities in Straubing, Germany.
ITEM 3. LEGAL PROCEEDINGS
In 2003, our Brazilian subsidiary was assessed for commercial taxes on its purchases of imported software for
the period January to September 2002. The principal amount of the tax assessed for this period is $5,946. It has been
our opinion, based upon the opinion of outside legal counsel, that we have valid defenses to the assessment of these
taxes for the 2002 assessed period, as well as any subsequent periods. Accordingly, no reserve has been established
previously for such potential losses. However, proposed changes to the tax law were approved by the Brazilian
legislature on February 6, 2007, and submitted to the president for signature on February 9, 2007. If enacted in its
present form, it is our opinion, based upon the opinion of outside legal counsel, that we will likely be required to take
a charge of $33,028, which represents $5,946 of tax for the 2002 assessed period and $27,082 of potential tax
assessment for the period from October 2002 to December 2005. The pending statute provides that no tax is due on
such software importation after January 1, 2006. While the tax authorities may seek to impose interest and penalties
in addition to the tax assessed, we continue to believe, based on the opinion of outside legal counsel, that we have
valid defenses to the assessment of interest and penalties, which as of December 30, 2006, potentially amount to
approximately $16,800 and $24,800, respectively. Therefore, we currently do not anticipate establishing an
additional reserve for interest and penalties. All sums expressed are based upon an exchange rate prevailing on
December 30, 2006 of 2.138 Brazilian Reais to the U.S. Dollar. We will continue to vigorously pursue admin-
istrative and judicial action to challenge the current, and any subsequent assessments. However, we can make no
assurances that we will ultimately be successful in defending any such assessments, if made.
We received an informal inquiry from the SEC during the third quarter of 2004. The SEC’s focus to date has
been related to certain transactions with McAfee, Inc. (formerly Network Associates, Inc. or NAI) from 1998
through 2000. We also received subpoenas from the U.S. Attorney’s office for the Northern District of California
(“Department of Justice”) in connection with its grand jury investigation of NAI, which seek information
concerning these transactions. On January 4, 2006, McAfee and the SEC made public the terms of a settlement
they had reached with respect to McAfee. We continue to cooperate fully with the SEC and the Department of
Justice in their inquiries. We have engaged in discussions with the SEC toward a possible resolution of matters
concerning these NAI-related transactions. We cannot predict with certainty the outcome of these discussions, nor
their timing, nor can we reasonably estimate the amount of any loss or range of loss that might be incurred as a result
of the resolution of these matters with the SEC and the Department of Justice. Such amounts may be material to our
consolidated results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by
this report, through the solicitation of proxies or otherwise.
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