Avnet 2003 Annual Report Download - page 82
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Please find page 82 of the 2003 Avnet annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued
software and software licenses (all non-cash charges) and reserves for remaining lease commitments on leased
hardware and software which will no longer be utilized by the Company's operations in light of the decisions
made and the reorganizations completed as discussed above.
During the fourth quarter of 2003, the Company executed certain additional actions that resulted in
charges totaling $6,605,000 pre-tax. The incremental impact of these actions was substantially oÅset by
certain adjustments that the Company recorded, also in the fourth quarter of 2003, primarily relating to
certain of the charges recorded in the second quarter of 2003. The new charge activity, mostly for severance
and consolidation of selected facilities, related to each of the Company's three operating groups and its
corporate functions in the Americas and EMEA regions. The additional census reductions totaled approxi-
mately 175 and resulted primarily from: (1) EM's decision to combine its Cilicon and RF and Microwave
sales divisions; and (2) AC's decision to reduce its participation in certain market segments where proÑtability
of the products in question have not yielded acceptable economic returns to the Company. The fourth quarter
adjustments to prior restructuring and other charges reÖect changes in estimates from the time the charges
and applicable reserves were initially recorded, relating to: (1) reserves for severance and for leases and other
contractual commitments that were determined to be excessive during the fourth quarter based upon
payments made or still to be made and/or based upon more favorable than anticipated sublease or lease
buyout arrangements; and (2) an adjustment, based upon estimated sales price net of costs to sell as derived
from current market studies and comparable sales, of a portion of a write-down that was recorded in the
second quarter of 2003 related to an owned facility that was vacated and classiÑed as held for sale during that
quarter.
Of the 2003 charges, $29,544,000 remains unexpended at June 27, 2003 relating primarily to severance
costs, substantially all of which is expected to be utilized during the Ñrst quarter of 2004, contractual lease
commitments, substantially all of which is expected to be utilized by the end of 2007, and remaining payments
on the IT-related contracts discussed above, substantially all of which is expected to be utilized during the Ñrst
quarter of 2004.
Subsequent to 2003, the Company announced certain additional restructuring and cost cutting initiatives
in response to the ongoing downturn in the technology industry. The resulting anticipated charges can be
broken into three categories: (1) the combination of CM and AC, which the Company announced in July
2004 (see Note 16), is expected to result in the elimination of certain duplicative executive and support
functions (no material eliminations in sales and marketing positions are anticipated), the closing of certain
warehousing and logistics operations in the Americas and EMEA and the elimination of certain duplicative IT
platforms; (2) the reorganization of the Company's global IT resources, which are currently administered
generally on a separate basis within each of the Company's operating groups, is expected to result in
elimination of certain IT-related positions globally in addition to write-oÅ of certain IT-related assets; and
(3) various other reductions within EM and corporate functions, which are expected to include certain census
reductions, primarily in non-customer facing positions, and the consolidation of certain administrative
facilities. These reduction eÅorts, most of which are expected to be completed during 2004, are expected to
result in additional charges of approximately $50,000,000, roughly half of which are expected to be cash
changes. Management anticipates cost savings to the Company from these reduction eÅorts will be
approximately $90,000,000 annually, most of which should be completed from the business by the end of the
third quarter of 2004.
In the fourth quarter of 2002, the Company recorded charges representing a write-down in value of
certain assets acquired in the 2001 acquisition of Kent and certain other charges taken in response to business
conditions. The charge totaled $79,623,000 pre-tax ($21,600,000 included in cost of sales and $58,023,000
included in operating expenses) and $62,084,000 after tax, or $0.52 per share on a diluted basis.
The Kent-related items resulted from the acquisition of Kent being accounted for using the ""pooling-of-
interests'' method of accounting for the acquisition. These items relate speciÑcally to assets or obligations that
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