Avnet 2006 Annual Report Download - page 34

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$0.60 per share on a diluted basis, in fiscal 2004. The fiscal 2006 results were negatively impacted by a total of
$83.8 million after tax, or $0.57 per share on a diluted basis, as detailed in the following table.
Year Ended July 1, 2006
Gross Operating Pre-tax Net Diluted
Profit Income Income Income EPS
($ in thousands, except per share data)
Restructuring, integration and other charges
(primarily Memec acquisition-related)ÏÏÏ $8,977 $53,456 $ 53,456 $38,829 $0.26
Restructuring and other costs related to
business divestitures and other actions ÏÏÏ Ì 16,504 16,504 11,041 0.08
Stock-based compensation expenseÏÏÏÏÏÏÏÏ Ì 16,645 16,645 10,554 0.07
Incremental amortization expense for
intangible assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 4,160 4,160 2,696 0.02
Loss on sale of business lines, netÏÏÏÏÏÏÏÏÏ Ì 2,601 2,601 7,074 0.05
Debt extinguishment costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 22,585 13,653 0.09
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $8,977 $93,366 $115,951 $83,847 $0.57
The fiscal 2004 results include the negative after-tax impact of restructuring and other charges and debt
extinguishment costs, discussed previously in this MD&A, totaling $52.8 million, or $0.44 per share on a
diluted basis.
Critical Accounting Policies
The Company's consolidated financial statements have been prepared in accordance with U.S. GAAP.
The preparation of these consolidated financial statements requires the Company to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the reporting
period. These estimates and assumptions are based upon the Company's continuous evaluation of historical
results and anticipated future events. Actual results may differ from these estimates under different
assumptions or conditions.
The Securities and Exchange Commission defines critical accounting polices as those that are, in
management's view, most important to the portrayal of the Company's financial condition and results of
operations and that require significant judgments and estimates. Management believes the Company's most
critical accounting policies relate to:
Valuation of Receivables
The Company maintains an allowance for doubtful accounts for estimated losses resulting from customer
defaults. Bad debt reserves are recorded based upon historic default averages as well as the Company's regular
assessment of the financial condition of its customers. Therefore, if collection experience or the financial
condition of specific customers were to deteriorate, management would evaluate whether additional al-
lowances and corresponding charges to the consolidated statement of operations are required.
Valuation of Inventories
Inventories are recorded at the lower of cost (first in Ì first out) or estimated market value. The
Company's inventories include high-technology components, embedded systems and computing technologies
sold into rapidly changing, cyclical and competitive markets whereby such inventories may be subject to early
technological obsolescence.
The Company regularly evaluates inventories for excess, obsolescence or other factors that may render
inventories less marketable. Write-downs are recorded so that inventories reflect the approximate net
realizable value and take into account the Company's contractual provisions with its suppliers, which may
provide certain protections to the Company for product obsolescence and price erosion in the form of rights of
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