Ingram Micro 2008 Annual Report Download - page 71

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annum at January 3, 2009 and December 29, 2007, respectively. At January 3, 2009 and December 29, 2007, letters
of credit totaling $31,607 and $30,232, respectively, were issued principally to certain vendors to support purchases
by the Company’s subsidiaries. The issuance of these letters of credit reduces the Company’s available capacity
under these agreements by the same amount.
The Company is required to comply with certain financial covenants under the terms of some of its financing
facilities, including restrictions on funded debt and covenants related to tangible net worth, leverage and interest
coverage ratios, and trade accounts receivable portfolio performance, including metrics related to receivables and
payables. The Company is also restricted by other covenants, including but not limited to restrictions on the amount
of additional indebtedness it can incur, dividends it can pay, and the amount of common stock that it can repurchase
annually. At January 3, 2009, the Company was in compliance with all material covenants or other material
requirements set forth in its accounts receivable financing programs andcredit agreements or other agreements with
the Company’s creditors as discussed above. The impairment charge to goodwill of $742,653 in the fourth quarter of
2008 did not affect the Company’s compliance with any of its covenants.
Note 7 — Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the
financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences
between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities
is recognized in income in the period that includes the enactment date. The estimates and assumptions the Company
uses in computing the income taxes reflected in its consolidated financial statements could differ from the actual
results reflected in its income tax returns filed during the subsequent year. The Company records adjustments based
on filed returns as such returns are finalized and resultant adjustments are identified.
The components of income (loss) before income taxes consist of the following:
2008 2007 2006
Fiscal Year Ended
United States ..................................... $(150,887) $122,268 $133,399
Foreign.......................................... (231,251) 262,970 233,934
Total............................................ $(382,138) $385,238 $367,333
61
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)