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AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
presented herein are included in Stock-based Compensation in this Note 1. Management expects that the
fiscal 2005 pro forma impacts will be a reasonable approximation of the expense associated with share-based
payments in fiscal 2006. In addition, the Company will continue to use the Black-Scholes option valuation
model to value stock options.
In December 2004, the FASB issued Staff Position No. 109-2 (""FSP 109-2''), Accounting and
Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act
of 2004, which provides guidance for implementing the repatriation of earnings provisions of the American
Jobs Creation Act of 2004 (the ""Jobs Act'') and the impact on the Company's income tax expense and
deferred income tax liabilities. The Jobs Act was enacted in October 2004. However, FSP 109-2 allows
additional time beyond the period of enactment to allow the Company to evaluate the effect of the Jobs Act on
the Company's plan for reinvestment or repatriation of foreign earnings. The Company is currently evaluating
the impact of the repatriation provisions of FSP 109-2 and expects to complete this evaluation before the end
of fiscal 2006. The Company is performing its evaluation in stages and, at this point, is considering a range
between zero and $100,000,000 for potential repatriation. However, the related range of income tax effects
from such repatriation cannot be reasonably estimated at this time.
In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of ARB No. 43,
Chapter 4 (""SFAS 151''). SFAS 151 requires that abnormal inventory costs such as abnormal freight,
handling costs and spoilage be expensed as incurred rather than capitalized as part of inventory, and requires
the allocation of fixed production overhead costs to be based on normal capacity. SFAS 151 is to be applied
prospectively and is effective for inventory costs incurred during fiscal years beginning after June 15, 2005.
The adoption of SFAS 151 will not have a material impact on the Company's consolidated financial
statements.
In September 2004, the Emerging Issues Task Force (""EITF'') of the FASB reached a final consensus
on EITF Issue No. 04-08 (""EITF 04-08''), The Effect of Contingently Convertible Instruments on Diluted
Earnings Per Share. EITF 04-08 requires instruments with conversion features that are contingent upon an
issuer's stock price to be included in the earnings per share calculation using the ""if-converted'' method
regardless of whether the contingency is met. However, EITF 04-08 allows for treasury stock method
treatment for any convertible instruments that have provisions requiring cash-settlement up to the par value.
EITF 04-08 is effective for interim and annual periods ending after December 15, 2004. In December 2004,
the Company made an irrevocable election to satisfy the principal portion of its 2.0% Convertible Senior
Debentures (see Note 7), if converted, in cash. Therefore, the Company has applied the treasury stock
method for the Debentures both prospectively and retroactively for all periods presented. The adoption of
EITF 04-08 had no impact on the Company's consolidated financial statements or earnings per share as the
Debentures were antidilutive both retrospectively and for the year ended July 2, 2005. In addition, EITF 04-08
does not require retrospective application for the 4.5% Convertible Notes, which matured on September 1,
2004, because the Company settled these Notes in cash upon maturity.
2. Acquisitions and dispositions
Acquisition Subsequent to Fiscal 2005
On July 5, 2005, the Company acquired Memec Group Holdings Limited (""Memec''), a global
distributor that markets and sells a portfolio of semiconductor devices from industry leading suppliers in
addition to providing customers with engineering expertise and design services. Memec, with sales of
$2.29 billion in its fiscal year ended December 31, 2004, is anticipated to be fully integrated into the
Electronics Marketing group of Avnet by the end of fiscal 2006, with a substantial portion of the integration to
be completed by the end of the second quarter of fiscal 2006.
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