Avnet 2008 Annual Report Download - page 27

Table of Contents
during fiscal 2006 related to work force reductions of over 250 personnel primarily in administrative and support
functions in the EMEA and Americas regions. The positions eliminated were Avnet personnel that were deemed
redundant by management as a result of the integration of Memec into Avnet. The facility exit charges related to
liabilities for remaining non-cancelable lease obligations and the write-down of leasehold improvements and other
property, plant and equipment relating to the facilities being exited due to the integration of Memec. The facilities,
which supported administrative and support functions, and some sales functions, were identified for consolidation
based upon the termination of certain personnel discussed above and the relocation of other personnel into other
existing Avnet facilities. The IT-related charges resulted from management’s review of certain capitalized systems
and hardware as part of the integration effort. A substantial portion of this write-off, which was recorded in the first
quarter of fiscal 2006, relates to mainframe hardware that was scrapped due to the purchase of new, higher capacity
hardware to handle the increased capacity needs with the addition of Memec. Similarly, certain capitalized IT assets
were written off when they became redundant either to other acquired systems or new systems under development in
the first quarter of fiscal 2006 as a result of the acquisition of Memec. Other charges in fiscal 2006 related primarily
to certain other contractual obligations and contract termination charges.
Of the $31.6 million recorded to expense for the Memec-related restructuring activity during fiscal 2006,
$11.6 million represented non-cash asset write-downs, which consisted primarily of the charge to cost of sales for
inventory write-downs and the write-down of IT and other fixed assets. In addition, certain severance and lease
liabilities in the amount of $1.3 million were assumed by the buyer of the net assets of a small, non-
core EM business
in the EMEA region (see Gain ( Loss) on Sale of Assets, net in this MD&A for further discussion). Of the remaining
Memec-related charges, $15.4 million was paid during fiscal 2006. As of June 28, 2008, remaining Memec-related
reserves related to the restructuring actions taken in fiscal 2006 totaled $0.05 million relating to facility exit costs that
management expects to be utilized by fiscal 2010.
As a result of the Memec acquisition and its subsequent integration into Avnet, the Company incurred
integration costs during fiscal 2006, which totaled $21.9 million pre-tax, $14.6 million after-tax and $0.10 per share
on a diluted basis. The integration costs, particularly in the first nine months of fiscal 2006, related to incremental
salary costs, primarily of Memec personnel, who were retained following the close of the acquisition, solely to assist
in the integration of Memec’s IT systems, administrative and logistics operations into those of Avnet. Generally,
these identified personnel were retained for nine months or less following the close of the acquisition. These
personnel had no other meaningful day-to-day operational responsibilities outside of the integration efforts. Also
included in integration costs are certain professional fees, travel, meeting, marketing and communication costs that
were incrementally incurred solely related to the Memec integration efforts. Professional fees included primarily
consulting and legal advice associated with the efforts to merge the numerous legal entities that exist globally
between the Avnet and Memec operations. Integration costs, along with restructuring and other charges, are
presented separately from selling, general and administrative expenses. All integration costs recorded in fiscal 2006
represent amounts incurred and paid during fiscal 2006.
Restructuring and other charges related to business line divestitures and other actions
During the third quarter of fiscal 2006, the Company divested two of its end-user business lines in TS Americas
(see Gain ( Loss) on Sales of Assets, net
in this MD&A for further discussion). As a result, restructuring charges were
incurred due to certain actions taken by the Company following these divestitures. The Company also incurred
restructuring costs and other charges relating to certain cost-cutting measures and other actions taken by TS in the
EMEA region and certain actions at corporate in fiscal 2006. The restructuring and other charges incurred during the
fiscal 2006 related to these actions totaled $16.5 million pre-tax, $11.0 million after-tax and $0.08 per share on a
diluted basis. The pre-tax charges, which are included in “restructuring, integration and other charges” in the
accompanying consolidated statement of operations, consisted of severance costs of $5.9 million related to TS
operations in the Americas and EMEA regions, facility exit costs in the Americas and EMEA regions totaling
$6.5 million, and $4.1 million for other charges. Other charges included $3.2 million pre-
tax, which related primarily
to a curtailment charge resulting from a small UK-based pension plan that the Company elected to terminate,
$1.8 million related to the reassessment of an existing environmental liability, $0.4 million of other charges, and a
reversal of $1.3 million for charges recorded through restructuring charges in prior fiscal years primarily in TS
EMEA.
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