Ingram Micro 2013 Annual Report Download - page 57

Table of Contents
INGRAM MICRO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In 000s, except per share data)
The remaining increase relates primarily to book operating losses in certain subsidiaries that are currently not expected to be realized through future taxable
income in these entities, partially offset by previously reserved amounts which became realizable based on taxable income generated in the current year, as well
as the impacts of translation adjustments for previously established valuation allowances in currencies other than the U.S. dollar.
We have not provided deferred taxes on undistributed earnings from certain of our foreign subsidiaries that are indefinitely reinvested. These
undistributed earnings may become taxable upon an actual or deemed repatriation of assets from the subsidiaries or a sale or liquidation of the subsidiaries.
We estimate that our total net undistributed earnings upon which we have not provided deferred tax total approximately $2,000,000 at December 28, 2013, and
$2,100,000 at December 29, 2012. A determination of the deferred tax liability on such earnings is not practicable as such liability is dependent upon our
U.S. foreign tax credit position that would exist at the time any remittance would occur.
Tax benefits claimed from the exercise of employee stock options and other employee stock programs that are in excess of (less than) the amount recorded
upon grant are recorded as an increase (decrease) in stockholders’ equity. In 2013, 2012 and 2011, these amounts totaled $422, $5,810 and $3,625,
respectively.
The total amount of gross unrecognized tax benefits is $35,398 as of December 28, 2013, substantially all of which would impact the effective tax rate
if recognized. A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:
Fiscal Year Ended
2013
2012
2011
Gross unrecognized tax benefits at beginning of the year $ 38,790
$ 24,888
$ 23,641
Increases in tax positions for prior years 4,918
17,281
3,953
Decreases in tax positions for prior years (61)
(900)
(1,221)
Increases in tax positions for current year 737
2,716
1,197
Decreases in tax positions for current year —
—
—
Settlements (1,078)
(343)
(789)
Lapse in statute of limitations (7,908)
(4,852)
(1,893)
Gross unrecognized tax benefits at end of the year $35,398
$ 38,790
$ 24,888
We recognize interest and penalties related to unrecognized tax benefits in income tax expense. As of December 28, 2013, the total accrual for interest and
penalties on our unrecognized tax benefits is $7,333.
We conduct business globally and, as a result, we and/or one or more of our subsidiaries file income tax returns in the U.S. federal and various state
jurisdictions and in over thirty foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities in many of the
jurisdictions in which we operate. In the U.S., the IRS has concluded its examination for the years prior to 2010. In our material tax jurisdictions, the statute of
limitations is open, in general, for three - five years.
It is possible that within the next twelve months, ongoing tax examinations in the U.S. states and several of our foreign jurisdictions may be resolved,
that new tax exams may commence and that other issues may be effectively settled. However, we do not expect our assessment of unrecognized tax benefits to
change significantly over that time.
Note 8 — Derivative Financial Instruments
Our derivatives designated as hedging instruments have consisted primarily of foreign currency forward contracts to hedge certain foreign currency-
denominated intercompany management fees. We also use foreign currency forward contracts that are not designated as hedges primarily to manage currency
risk associated with foreign currency-denominated trade accounts receivable, accounts payable and intercompany loans. At December 28, 2013 and December
29, 2012, we had no derivatives that are designated as hedging instruments.
57