Avnet 2008 Annual Report Download - page 29

Table of Contents
operating expenses decreased $0.3 million to $76.1 million in fiscal 2008 as compared to $76.4 million in fiscal
2007. Included in operating income in both the current and prior year were restructuring, integration and other
charges as described above totaling $38.9 million and $7.4 million, respectively.
Operating income for fiscal 2007 was $678.3 million, or 4.33% of consolidated sales, as compared with
operating income of $433.1 million, or 3.04% of consolidated sales, in fiscal 2006. The gross margin and operating
expense trends discussed previously in this MD&A contributed to the 129 basis point improvement in operating
income margin year over year. The operating income margin in fiscal 2007 as compared with fiscal 2006 benefited
by 10 basis points as a result of the change to net revenue reporting for supplier service contracts and was negatively
impacted by 5 basis points from the restructuring, integration and other charges in connection with the cost reduction
initiatives and the Access integration activity as well as other items previously discussed, which amounted to
$7.4 million pre-tax. In comparison, operating income for fiscal 2006 was negatively impacted by a total of
$69.9 million (0.5% of consolidated sales) for restructuring charges previously described. See Restructuring,
Integration and Other Charges
for further discussion. The overall improvement in operating income margin without
these charges was driven by the increased sales volume, gross profit margin growth, continued focus on cost
management and the full benefit of the synergies achieved subsequent to the successful Memec integration
completed at the end of fiscal 2006.
Interest Expense and Other Income, net
Interest expense for fiscal 2008 totaled $72.3 million, down $4.9 million, or 6.3%, as compared with
$77.2 million in fiscal 2007. The year-over-year decrease in interest expense for fiscal 2008 was primarily the result
of a lower effective interest rate on short-term debt outstanding and refinancing activities which occurred during
fiscal 2007, whereby higher interest rate debt was repaid or replaced with lower interest rate debt as described further
below. See also Financing Transactions for further discussion of the Company’s outstanding debt.
Interest expense for fiscal 2007 totaled $77.2 million, down $19.3 million, or 20.0%, from interest expense of
$96.5 million in fiscal 2006. The decrease in interest expense is attributable to the reduction in the average debt
balance year over year and a lower effective interest rate on debt outstanding during fiscal 2007. The lower effective
interest rate is a direct result of the refinancing activities that occurred in fiscal 2006 and fiscal 2007, whereby higher
interest rate debt was repaid or replaced with lower interest rate debt. Specifically, during the fourth quarter of fiscal
2006, the Company repurchased $113.6 million of its 9
3
/ 4 % Notes due February 15, 2008 with available liquidity.
During fiscal 2007, the Company issued $300.0 million principal amount of 6.625% Notes due 2016 in September
2006, and used the proceeds and available liquidity to fund the repurchase of $361.4 million of the 9
3
/ 4 % Notes,
which was completed in October 2006. The Company also repaid the remaining $143.7 million of the 8.00% Notes
that matured on November 15, 2006 and, in March 2007, the Company issued $300.0 million principal amount of
5.875% Notes due 2014 and used the proceeds to repay amounts outstanding under the 2005 Credit Facility and the
Securitization Program. See Financing Transactions for further discussion of the Company’s outstanding debt.
Other income, net, was $21.0 million in fiscal 2008 as compared with $9.9 million in fiscal 2007. The year-over-
year increase was primarily due to foreign currency exchange gains compared with losses in the prior year, higher
interest income resulting from higher investment balances, and income from an equity method investment compared
with losses in the prior year.
Other income, net, was $9.9 million in fiscal 2007 as compared with $4.8 million in fiscal 2006. The increase in
fiscal 2007 other income, net, compared with fiscal 2006 was primarily the result of higher short-term interest rates
in combination with higher cash balances. In addition, during fiscal 2007, the Company recorded a benefit in other
income due to the recovery of a non-trade receivable during the first quarter, however, this benefit was offset by
equity method investment losses.
Gain (Loss) on Sale of Assets, net
During fiscal 2008, the Company recognized a gain on sale of assets totaling $49.9 million pre-tax,
$32.2 million after tax and $0.21 per share on a diluted basis. In April 2008, the Company sold its equity investment
in Calence LLC and recognized a gain of $42.4 million pre-tax, $25.9 million after tax and $0.17 per share on a
diluted basis. In
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