Avnet 2008 Annual Report Download - page 78

Table of Contents
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
During fiscal 2007, the Company recorded restructuring charges of $13,626,000 and also recorded in
“restructuring, integration and other charges” Access integration costs of $7,331,000, the write-down of $661,000
related to an Avnet-owned building in EMEA, and the reversal of $1,739,000 related primarily to excess severance
and lease reserves, certain of which were previously established through “restructuring, integration and other
charges” in prior fiscal periods (see further discussions in this Note 17). Partially offsetting these charges was a pre-
tax benefit of $12,526,000 which resulted from the favorable outcome of a contingent liability acquired in connection
with an acquisition completed in a prior year. The impact of both the restructuring, integration and other charges,
including the exit-related charges in the table above, and the acquisition related benefit recorded during fiscal 2007
was $7,353,000 pre-tax, $5,289,000 after tax and $0.03 per share on a diluted basis.
Severance charges related to Avnet personnel reductions of 96 employees in all three regions of EM and
42 employees in TS Americas and EMEA (a total of 138 employees) in administrative, finance and sales functions
associated with the cost reduction initiatives implemented during the third and fourth quarter of fiscal 2007 as part of
the Company’s continuing focus on operational efficiency and Avnet employees who were deemed redundant as a
result of the Access integration. The facility exit charges related to vacated Avnet facilities in the Americas and
Japan. Other charges consisted primarily of IT-related and other asset write-downs and other contract termination
costs. Included in the asset write-downs were Avnet software in the Americas that was made redundant as a result of
the acquisition, Avnet system hardware in EMEA that was replaced with higher capacity hardware to handle
increased capacity due to the addition of Access, and the write-down of certain capitalized construction costs
abandoned as a result of the acquisition. Other charges incurred included contractual obligations related to abandoned
activities, the write-down of an Avnet-owned building in EMEA and Access integration costs. The write-
down of the
building was based on management’s estimate of the current market value and possible selling price, net of selling
costs, for the property. The integration costs related to incremental salary costs, primarily of Access personnel, who
were retained following the close of the acquisition solely to assist in the integration of Access’s IT systems,
administrative and logistics operations into those of Avnet. 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 Access integration efforts.
During fiscal 2008, amounts utilized as presented in the preceding table consisted of all cash payments.
Adjustments during fiscal 2008 related to excess severance and other reserves. As of June 28, 2008, management
expects the majority of the remaining reserves to be utilized by the end of fiscal 2009.
Fiscal 2006
During fiscal 2006, the Company incurred certain restructuring, integration and other charges as a result of the
acquisition of Memec on July 5, 2005 and its subsequent integration into Avnet’s existing operations (see Note 2). In
addition, the Company incurred restructuring and other charges primarily relating to actions taken following the
divestitures of certain TS business lines in the Americas region in the second half of fiscal 2006, certain cost
reduction actions taken by TS in the EMEA region and other items during fiscal 2006.
The restructuring, integration and other charges incurred during fiscal 2006 totaled $69,960,000 pre-tax
($60,983,000 included in “restructuring, integration and other charges” and $8,977,000 recorded in “cost of sales”
for
the write-down of inventory as a result of the Company’s decision to terminate certain supplier relationships in
connection with the integration of Memec) and $49,870,000 after-tax, or $0.34 per share on a diluted basis. The pre-
tax charge of $60,983,000 includes $21,894,000 for Memec integration related costs (primarily incremental salary
and other costs), $22,284,000 for severance costs ($16,352,000 in EM resulting primarily from the Memec
integration and $5,932,000 for the reduction of certain TS personnel), $9,085,000 of facility exit costs ($2,575,000 in
EM and $6,510,000 in TS), which included $2,671,000 of impairment charges related to two owned but vacant Avnet
buildings, $2,426,000 for the write-down of certain capitalized IT-related initiatives, primarily in the Americas, and
$6,591,000 for other charges. During fiscal 2006, the Company also recorded a reversal of excess
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