Avnet 2005 Annual Report Download - page 67

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AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
The provision for (benefit from) income taxes noted above is computed based upon the split of income
(loss) before income taxes from U.S. and foreign operations. U.S. taxable income (loss) before income taxes
was $85,439,000, $13,682,000 and ($78,485,000) and foreign taxable income (loss) before income taxes was
$154,320,000, $84,716,000 and ($920,000) in fiscal 2005, 2004 and 2003, respectively.
A reconciliation between the federal statutory tax rate and the effective tax rate is as follows:
Years Ended
July 2, July 3, June 27,
2005 2004 2003
Federal statutory rateÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35.0% 35.0% (35.0)%
State and local income taxes, net of federal benefit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.4 (1.1) (4.5)
Impairment of investments in unconsolidated entities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 0.7
Foreign tax rates, including impact of valuation allowances ÏÏÏÏÏÏÏÏÏÏ (3.9) (10.2) (5.3)
Reversal of contingency reserves (Note 8)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2.3) Ì Ì
Other non-deductible expensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.4 1.2 1.2
Other, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.8) 1.0 1.0
Effective tax rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 29.8% 25.9% (41.9)%
Foreign tax rates generally consist of the impact of the difference between foreign and federal statutory
rates applied to foreign income (losses) and also include the impact of valuation allowances placed against the
Company's otherwise realizable foreign loss carry-forwards. The Company reclassified certain contingency
reserves to the valuation allowance in fiscal 2005 (see Note 8). The additional valuation allowances recorded
during fiscal 2004 and 2003 are substantially offset by tax benefits related to certain foreign losses that are
deductible in the United States. The Company determines its valuation allowance through an evaluation of
relevant factors used to assess the likelihood of recoverability of the Company's deferred tax assets.
The significant components of deferred tax assets and liabilities, included primarily in other long-term
assets on the consolidated balance sheets, are as follows:
July 2, July 3,
2005 2004
(Thousands)
Deferred tax assets:
Inventory valuation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 5,421 $ 12,060
Accounts receivable valuationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19,497 16,845
Federal, state and foreign tax loss carry-forwards ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 335,395 328,678
Various accrued liabilities and other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21,646 57,102
381,959 414,685
Less Ì valuation allowance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (191,983) (174,090)
189,976 240,595
Deferred tax liabilities:
Depreciation and amortization of property, plant and equipmentÏÏÏÏÏ 9,081 7,544
Net deferred tax assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 180,895 $ 233,051
As of July 2, 2005, the Company had foreign net operating loss carryforwards of approximately
$759,183,000, approximately $78,431,000 of which have expiration dates ranging from fiscal 2006 to 2021 and
the remaining $680,752,000 of which have no expiration date. The Company also had U.S. federal net
59