Tech Data 2015 Annual Report Download - page 14

Table of Contents
We have international operations which expose us to risks associated with conducting business in multiple jurisdictions.
The Company's international operations are subject to other risks such as the imposition of governmental controls, export license requirements,
restrictions on the export of certain technology, political instability, trade restrictions, tariff changes, difficulties in staffing and managing
international operations, changes in the interpretation and enforcement of laws (in particular related to items such as duty and taxation),
difficulties in collecting accounts receivable, longer collection periods and the impact of local economic conditions and practices. There can be
no assurance that these and other factors will not have an adverse effect on the Company's business.
In addition, while the Company's labor force in the Americas is currently non-union, employees of certain European subsidiaries are subject to
collective bargaining or similar arrangements. The Company does business in certain foreign countries where labor disruption is more common
than is experienced in the United States and some of the freight carriers used by the Company are unionized. A labor strike by a group of the
Company's employees, one of the Company's freight carriers, one of its vendors, a general strike by civil service employees, or a governmental
shutdown could have an adverse effect on the Company's business. Many of the products the Company sells are manufactured in countries
other than the countries in which the Company's logistics centers are located. The inability to
receive products into the logistics centers because
of government action or labor disputes at critical ports of entry may have an adverse effect on the Company's business.
We cannot predict what losses we might incur in litigation matters, regulatory enforcement actions and contingencies that we may be
involved with from time to time, including in connection with the restatement of prior financial statements.
The SEC has requested information from the Company with respect to the restatement of certain of our consolidated financial statements and
other financial information from fiscal 2009 to fiscal 2013, and the Company is cooperating with the SEC request. See Item 3, “Legal
Proceedings.” This pending SEC request for information and other potential proceedings could result in fines and other penalties. The
Company has not reserved any amount in respect of these matters in its consolidated financial statements.
The Company cannot predict whether monetary losses, if any, it experiences in any proceedings related to the restatement will be covered by
insurance or whether insurance proceeds recovered will be sufficient to offset such losses. Potential civil or regulatory proceedings may also
divert the efforts and attention of the Company’s management from business operations.
The Company cannot predict what losses we might incur from other litigation matters, regulatory enforcement actions and contingencies that
we may be involved with from time to time. There are various other claims, lawsuits and pending actions against us. We do not expect that the
ultimate resolution of these other matters will have a material adverse effect on our consolidated financial position. However, the resolution of
certain of these matters could be material to our operating results for any particular period, depending on the level of income for such period.
We can make no assurances that we will ultimately be successful in our defense of any of these other matters.
ITEM 1B. Unresolved Staff Comments.
Not applicable.
ITEM 2. Properties.
Our executive offices are located in Clearwater, Florida. As of January 31, 2015, we operated a total of 26 logistics centers to provide our
customers timely delivery of products. Fourteen of these logistics centers are located in the Americas and twelve are located in Europe.
As of January 31, 2015, we leased or owned approximately 7.7 million square feet of space. The majority of our office facilities and logistics
centers are leased. Our facilities are well maintained and are adequate to conduct our current business. We do not anticipate significant
difficulty in renewing our leases as they expire or securing replacement facilities.
ITEM 3. Legal Proceedings.
Prior to fiscal 2004, one of the Company’s subsidiaries, located in Spain, was audited in relation to various value added tax (“VAT”) matters.
As a result of those audits, the Spanish subsidiary received notices of assessment from the Regional Inspection Unit of Spain’s taxing authority
that allege the subsidiary did not properly collect and remit VAT. The Spanish subsidiary appealed these assessments to the Madrid Central
Economic Administrative Courts beginning in March 2010. Following the administrative court proceedings the matter was appealed to the
Spanish National Appellate Court. During the fourth quarter of fiscal year 2014, the Spanish National Appellate Court issued an opinion
upholding the assessment for several of the assessed years. The Spanish National Appellate Court opinion represented a subsequent event that
occurred prior to the issuance of the fiscal 2013 financial statements in relation to a loss contingency that existed as of January 31, 2013. The
Company increased its accrual for costs associated with this matter by recording a charge of $41.0 million in the fiscal 2013 Consolidated
Statement of Income, including $29.5 million recorded in "value added tax assessment" to cover the assessment and various penalties and
$11.5 million recorded in "interest expense" for interest that could be assessed. During the second quarter of fiscal year 2015, the Madrid
Economic Administrative Court issued a decision revoking the penalties for certain of the assessed years. As a result of this decision, during the
fiscal year ended January 31, 2015 the Company decreased its accrual for costs associated with this matter by $6.2 million, which is recorded in
"value added tax assessment" in the Consolidated Statement of Income. The Company believes that the Spanish subsidiary's defense to the
remaining assessments has solid legal grounds and is continuing to vigorously defend its position by appealing to the Spanish Supreme Court.
The Company estimates the total exposure for these assessments, including various penalties and interest, was approximately $43.7 million
and