Ingram Micro 2006 Annual Report Download - page 71

plan to integrate the operations of Tech Pacific with the Company. Total integration expenses incurred for the year
ended December 31, 2005 were $12,711, comprised of $6,709 of reorganization costs, primarily for employee
termination benefits for workforce reductions for approximately 320 employees and lease exit costs for facility
consolidations, as well as $6,002 of other costs charged to SG&A expenses, primarily comprised of consulting,
retention and other costs associated with the integration, as well as incremental depreciation of fixed assets resulting
from the reduction in useful lives to coincide with the facility closures. The Company substantially completed the
integration of the operations of its pre-existing Asia-Pacific business with Tech Pacific in 2005.
The payment activities and adjustments in 2006 and the remaining liability at December 30, 2006 related to the
above detailed actions are summarized in the table below. The credit adjustments reflect lower than expected costs
associated with employee termination benefits in North America and lower than expected costs to settle a lease
obligation in Asia-Pacific.
Outstanding
Liability at
December 31,
2005
Amounts Paid
and Charged
Against the
Liability Adjustments
Remaining
Liability at
December 30,
2006
Employee termination benefits ......... $2,760 $(2,044) $(647) $ 69
Facility costs ...................... 2,666 (912) (17) 1,737
Total ............................ $5,426 $(2,956) $(664) $1,806
The Company expects the remaining liabilities for the employee termination benefits and facility costs to be
fully utilized by the first quarter of 2007 and the third quarter of 2014, respectively.
In addition, in prior periods, the Company implemented other actions designed to improve operating income
through reductions of SG&A expenses and enhancements in gross margins. Key components of those initiatives
included workforce reductions and facility consolidations worldwide as well as outsourcing of certain IT infra-
structure functions. Facility consolidations primarily included consolidation, closing or downsizing of office
facilities, distribution centers, returns processing centers and configuration centers throughout North America,
consolidation and/or exit of warehouse and office facilities in Europe, Latin America and Asia-Pacific, and other
costs primarily comprised of contract termination expenses associated with outsourcing certain IT infrastructure
functions as well as other costs associated with the reorganization activities. These restructuring actions are
complete; however, future cash outlays will be required primarily for future lease payments related to exited
facilities.
The payment activities and adjustments in 2006 and the remaining liability at December 30, 2006 related to
these prior period detailed actions are summarized in the table below. The credit adjustment reflects the reversal of
remaining restructuring reserves related to a portion of a restructured leased facility in North America that
management elected to reoccupy in the current period, and lower than expected costs to settle lease obligations in
North America and Europe, as well as lower than expected costs incurred associated with employee termination
benefits in Europe.
Outstanding
Liability at
December 31,
2005
Amounts Paid
and Charged
Against the
Liability Adjustments
Remaining
Liability at
December 30,
2006
Employee termination benefits ......... $ 60 $ (12) $ (23) $ 25
Facility costs ...................... 5,509 (893) (1,040) 3,576
Total .......................... $5,569 $(905) $(1,063) $3,601
The Company expects the remaining liabilities for the employee termination benefits and facility costs to be
fully utilized by the first quarter of 2007 and the third quarter of 2015, respectively.
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INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)