Avnet 2005 Annual Report Download - page 27

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Restructuring and Other Charges
The Company recorded a number of restructuring and other charges during fiscal 2004 and 2003. There
were no restructuring charges recorded in fiscal 2005. The prior year charges relate primarily to the
reorganization of operations in each of the three major regions of the world in which the Company operates,
generally taken in response to business conditions at the time of the charge and as part of the Company's
efforts to return to the profitability levels enjoyed by the business prior to the industry and economic downturn
that commenced in fiscal 2001. See Note 17 to the consolidated financial statements appearing in Item 15 of
this Report for a more detailed summary of activity within the restructuring and other charge accounts during
the past three years.
Fiscal 2005
Although there were no restructuring charges recorded in fiscal 2005, the Company recorded certain
adjustments to reserves totaling $1.3 million during fiscal 2005, which were recorded through selling, general
and administration expenses. The adjustments related primarily to the reversal of certain excess legal expense
reserves associated with finalization of termination payments and reversal of excess severance reserves, offset
in part by additional severance costs recorded based upon revised estimates of required payouts. The Company
also reduced certain lease reserves due to modification to sublease and termination assumptions based upon
ongoing market conditions.
Fiscal 2004
During the first and second quarters of fiscal 2004, the Company executed certain restructuring and cost
reduction initiatives designed to continue improving the profitability of the Company. These actions can
generally be broken into three categories: (1) the combination of the Company's former Computer Marketing
(""CM'') and Applied Computing (""AC'') segments into one computer products and services business called
Technology Solutions (""TS''), as discussed in Note 16 to the consolidated financial statements appearing in
Item 15 of this Report; (2) the reorganization of the Company's global IT resources, which had previously
been administered generally on a separate basis within each of the Company's operating groups; and
(3) various other reductions within EM and certain centralized support functions.
Restructuring and other charges incurred during the first quarter of fiscal 2004 totaled $32.1 million pre-
tax and $22.1 million after-tax, or $0.18 per share on a diluted basis. The pre-tax charge consisted of severance
costs ($9.4 million), charges related to consolidation of selected facilities ($10.8 million), write-downs of
certain capitalized IT-related initiatives ($6.9 million) and other items, consisting primarily of the write-off of
the remaining unamortized deferred loan costs associated with the Company's multi-year credit facility
terminated in September 2003 ($5.0 million).
Severance costs resulted from workforce reductions of approximately 400 personnel completed during the
first quarter, primarily in executive, support and other non-customer facing functions in the Americas and
EMEA regions. Management also identified a number of facilities for consolidation primarily in the Americas
and EMEA regions. These facilities generally related to certain logistics and warehousing operations as well as
certain administrative facilities across both operating groups and at the corporate level. The charges related to
reserves for remaining non-cancelable lease obligations and write-downs to fair market value of owned assets
located in these facilities that have been vacated. Management also evaluated and elected to discontinue a
number of IT-related initiatives that, in light of recent business restructurings, no longer met the Company's
return on investment standards for continued use or deployment. These charges related to write-offs of
capitalized hardware and software.
Restructuring charges incurred during the second quarter of fiscal 2004 totaled $23.5 million pre-tax,
$16.4 million after-tax, or $0.14 per diluted share. The charges consisted of severance costs ($5.3 million),
charges related to write-downs of owned assets and consolidation of selected facilities ($4.8 million), write-
downs of certain capitalized IT-related initiatives ($12.9 million) and other items ($0.5 million).
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