Tech Data 2014 Annual Report Download - page 29

Table of Contents
comprised primarily of severance costs, fixed asset write-offs and lease termination penalties. These costs do not include any estimated costs
associated with the Brazilian subsidiary’s contingencies related to CIDE and other non-income related tax examinations. The operating losses of
Brazil and Colombia for the fiscal year ended January 31, 2012, were not significant to the Company’
s consolidated operating results (see Note 6
of Notes to Consolidated Financial Statements for further discussion).
Interest Expense
Interest expense decreased 11.7% to $26.6 million in fiscal 2014 compared to $30.1 million in fiscal 2013. The decrease is primarily attributable
to higher interest expense in fiscal 2013 due to $11.5 million recorded in fiscal 2013 related to the appellate court ruling in the fourth quarter of
fiscal 2014 in connection with the VAT assessment in one of the Company's subsidiaries in Spain discussed above (see Note 13 of Notes to
Consolidated Financial Statements for further discussion), partially offset by an increase in fiscal 2014 interest expense due to the $350.0
million, 3.75% Senior Notes (the "Senior Notes") issued in September 2012.
Interest expense decreased 4.0% to $30.1 million in fiscal 2013 compared to $31.4 million in fiscal 2012. The decrease in interest expense in
fiscal 2013 in comparison to fiscal 2012 is primarily attributable to the repayment of the $350.0 million, 2.75% convertible senior debentures in
December 2011 and the use of the Company's available cash and revolving credit facilities at lower rates of interest throughout fiscal 2013,
partially offset by the Senior Notes issued in September 2012 and interest expense of $11.5 million recorded in fiscal 2013 in connection with
the VAT assessment in one of the Company's subsidiaries in Spain discussed above. Fiscal 2012 interest expense includes non-cash interest
expense of $9.0 million related to the $350.0 million, 2.75% convertible senior debentures.
Other (Income) Expense, Net
Other (income) expense, net, consists primarily of (gains) losses on investments in life insurance policies to fund the Company's nonqualified
deferred compensation plan, interest income, discounts on the sale of accounts receivable and net foreign currency exchange (gains) losses on
certain financing transactions and the related derivative instruments used to hedge such financing transactions. Other (income) expense, net, was
approximately $3.4 million income in fiscal 2014 compared to $4.1 million expense in fiscal 2013. The change in other (income) expense, net,
during fiscal 2014 is primarily attributable to an increase in net foreign currency exchange gains and lower hedging costs on certain financing
transactions as compared to the prior fiscal year and a gain related to the acquisition of the remaining fifty percent ownership interest in TD
Mobility from Brightstar Corp. ("Brightstar"), our joint venture partner.
Other (income) expense, net, was approximately $4.1 million expense in fiscal 2013 compared to $0.9 million expense in fiscal 2012. The
change in other (income) expense, net, during fiscal 2013 is primarily attributable to an increase in the premiums associated with foreign
currency forward contracts, an increase in discount expense on the sale of accounts receivable, and a decrease in interest income resulting from
both lower average short-term cash investments balances and interest rates as compared to the prior fiscal year, partially offset by an increase in
gains on investments in life insurance policies related to the Company's nonqualified deferred compensation plan.
Provision for Income Taxes
Our effective tax rate was 11.9% in fiscal 2014 and 20.1% in fiscal 2013. The change in the effective tax rate during fiscal 2014 compared to
fiscal 2013 is primarily due to the relative mix of earnings and losses within the taxing jurisdictions in which we operate and changes in the
amounts of income tax reserves and valuation allowances during the respective periods. In fiscal 2014 and 2013, we recorded income tax
benefits of $45.3 million and $25.1 million, respectively, for the reversal of valuation allowances primarily related to specific jurisdictions in
Europe, which had been recorded in prior fiscal years. See Note 8 of Notes to Consolidated Financial Statements for discussion of the
Company’s fiscal 2014, 2013 and 2012 components of the provision for income taxes, reconciliation of income tax computed at the U.S. federal
statutory tax rate to income tax expense, and components of pre-tax income.
On an absolute dollar basis, the provision for income taxes decreased 47.5% to $24.4 million in fiscal 2014 compared to $46.4 million in fiscal
2013. The decrease in the provision for income taxes is primarily due to the relative mix of earnings and losses within certain countries in which
we operate and the adjustments to income tax reserves and valuation allowances discussed above.
Our effective tax rate was 20.1% in fiscal 2013 and 26.1% in fiscal 2012. The change in the effective tax rate during fiscal 2013 compared to
fiscal 2012 is primarily due to the relative mix of earnings and losses within the taxing jurisdictions in which we operate and changes in the
amounts of income tax reserves and valuation allowances during the respective periods. In fiscal 2013 and 2012, we recorded income tax
benefits of $25.1 million and $13.6 million, respectively, for the reversal of deferred income tax valuation allowances primarily related to
specific jurisdictions in Europe, which had been recorded in prior fiscal years.This income tax benefit was substantially offset by income tax
expense associated with the write-off of deferred and other income tax assets related to the closure of our Brazil in-country operations.
26