Tech Data 2013 Annual Report Download - page 30

Table of Contents
and interest expense of $11.5 million 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 14 of Notes to Consolidated Financial Statements for further discussion).
Interest expense increased 4.8% to $31.4 million in fiscal 2012 compared to $29.9 million in fiscal 2011. The increase in interest expense in fiscal
2012 is primarily attributable to an increase in the average outstanding revolving credit loan balances as compared to fiscal 2011.
For the fiscal years 2012 and 2011, interest expense includes non-cash interest expense of $9.0 million and $10.3 million, respectively, related to
the $350 million convertible senior debentures.
Other Expense (Income), Net
Other expense (income), 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 expense (income), net, was
approximately $4.1 million expense in fiscal 2013 compared to $0.9 million expense in fiscal 2012. The increase in other expense (income), net,
during fiscal 2013 is primarily attributable to an increase in the premiums associated with foreign currency forward contracts, an increase of
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.
Other expense (income), net, was approximately $0.9 million expense in fiscal 2012 compared to $4.4 million income in fiscal 2011. The change in
other expense (income), net, during fiscal 2012 is primarily attributable to lower gains on investments in life insurance policies related to the
Company's nonqualified deferred compensation plan in 2012 compared to 2011.
Provision for Income Taxes
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, we recorded an income tax benefit of $25.1 million for
the reversal of deferred income tax valuation allowances related to a specific jurisdiction in Europe, which had been recorded in prior fiscal years.
On an absolute dollar basis, the provision for income taxes decreased 34.7% to $46.4 million in fiscal 2013 compared to $71.1 million in fiscal
2012. 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. See Note 9 of Notes to Consolidated Financial
Statements for discussion of the Company’s fiscal 2013, 2012 and 2011 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.
Our effective tax rate was 26.1% in fiscal 2012 and 28.0% in fiscal 2011. The change in the effective tax rate during fiscal 2012 compared to fiscal
2011 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 2012, we recorded an income tax benefit of $13.6 million 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 an 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. On an absolute dollar basis, the provision for income taxes decreased 14.2% to
$71.1 million in fiscal 2012 compared to $82.8 million in fiscal 2011. The change 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.
To the extent we generate future consistent taxable income within those operations currently requiring valuation allowances, the valuation
allowances on the related deferred tax assets will be reduced, thereby reducing tax expense and increasing net income in the same period. The
underlying net operating loss carryforwards remain available to offset future taxable income in the specific jurisdictions requiring the valuation
allowance, subject to applicable tax laws and regulations.
The effective tax rate differed from the U.S. federal statutory rate of 35% during fiscal 2013, 2012 and 2011, due to the relative mix of earnings or
losses within the tax jurisdictions in which we operate and other adjustments, including: i) losses in tax jurisdictions where we are not able to record
a tax benefit; ii) earnings in tax jurisdictions where we have previously recorded valuation allowances on deferred tax assets; iii) the reversal of
income tax reserves; iv) changes to valuation allowances recorded on deferred tax assets; and (v) earnings in lower-tax jurisdictions for which no
U.S. taxes have been provided because such earnings are planned to be reinvested indefinitely outside the United States.
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