Avnet 2012 Annual Report Download - page 65

Table of Contents
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
During fiscal 2012 , 2011 and 2010 , the Company granted 349,070 , 380,200 and 242,390
performance shares, respectively, to be awarded
to participants in the Performance Share Program, of which 6,800
cumulatively have been forfeited. The actual amount of performance shares
issued at the end of the three-
year period is determined based upon the level of achievement of the defined performance goals and can range
from 0% to 200% of the initial award. The Company anticipates issuing 355,484 shares in the first quarter of fiscal 2013
based upon the goals
achieved during the three-year performance period which ended June 30, 2012. During fiscal 2012 , 2011
and 2010, the Company recognized
compensation expense associated with the Performance Share Programs of $10,502,000 , $7,374,000 and $9,171,000 , respectively.
Outside director equity compensation
Non-employee directors are awarded shares equal to a fixed dollar amount of Avnet common stock upon their re-
election each year, as part
of their director compensation package. Directors may elect to receive this compensation in the form of common stock or they may elect to defer
their compensation to be paid in common stock at a later date. During fiscal 2012 , 2011 and 2010
, compensation cost associated with the
outside director stock bonus plan was $1,110,000 , $1,050,000 , $1,020,000 , respectively.
Employee stock purchase plan
The Company has an Employee Stock Purchase Plan (“ESPP”)
under the terms of which eligible employees of the Company are offered
options to purchase shares of Avnet common stock at a price equal to 95%
of the fair market value on the last day of each monthly offering
period. Based on the terms of the ESPP, Avnet is not required to record expense in the consolidated statements of operations related to the ESPP.
The Company has a policy of repurchasing shares on the open market to satisfy shares purchased under the ESPP, and expects future
repurchases during fiscal 2013
to be similar to the number of shares repurchased during fiscal 2012, based on current estimates of participation
in the program. During fiscal 2012 , 2011 and 2010 , there were 64,187 , 62,329 and 67,168
shares, respectively, of common stock issued under
the ESPP program.
13. Commitments and contingencies
Bell
During fiscal 2011
, the Company recognized a contingent liability for potential unpaid import duties associated with the acquisition of
Bell Microproducts Inc. (“Bell”). Prior to the acquisition of Bell by Avnet, Customs and Border Protection (“CBP”)
initiated a review of the
importing process at one of Bell’
s subsidiaries and identified compliance deficiencies. Subsequent to the acquisition of Bell by Avnet, CBP
began a compliance audit. The Company evaluated projected duties, interest and penalties that potentially may be imposed as a result of the audit
and recognized a contingent liability of $10,000,000 which was recorded to goodwill in fiscal 2011
. Depending on the ultimate resolution of the
matter with CBP, the Company estimates that the range of the potential exposure associated with the liability may be up to $73,000,000
;
however, the Company believes the contingent liability recorded is a reasonable estimate of the liability based upon the facts available at this
time.
Other
During fiscal 2012, the Company recorded $6,665,000
for (i) a legal claim associated with an acquired business for a potential royalty
claim related to periods prior to acquisition by Avnet and (ii) a legal claim associated with an indemnification of a prior divested business.
From time to time, the Company may become a party to, or otherwise involved in various lawsuits, claims, investigations and other legal
proceedings arising in the ordinary course of conducting its business. While litigation is subject to inherent uncertainties, management does not
anticipate that any ongoing matters will have a material adverse effect on the Company’s financial condition, liquidity or results of operations.
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