Avnet 2006 Annual Report Download - page 74

AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
allowances recorded during fiscal 2004 are substantially offset by tax benefits related to certain foreign losses
that are deductible in the United States. The Company determines its valuation allowance through an
evaluation of relevant factors used to assess the likelihood of recoverability of the Company's deferred tax
assets.
The significant components of deferred tax assets and liabilities, included primarily in other long-term
assets on the consolidated balance sheets, are as follows:
July 1, July 2,
2006 2005
(Thousands)
Deferred tax assets:
Inventory valuation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 7,108 $ 5,421
Accounts receivable valuationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,057 19,497
Federal, state and foreign tax loss carry-forwards ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 409,344 335,395
Various accrued liabilities and other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 49,117 21,646
481,626 381,959
Less Ì valuation allowance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (270,745) (191,983)
210,881 189,976
Deferred tax liabilities:
Depreciation and amortization of property, plant and equipmentÏÏÏÏÏ 833 9,081
Net deferred tax assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 210,048 $ 180,895
During fiscal 2006, the Company acquired deferred tax assets and related valuation allowances as a result
of the acquisition of Memec (see Note 2). Following the acquisition, Avnet analyzed these assets based upon
the evaluation of relevant factors, assessed the likelihood of recoverability of these deferred tax assets and
established, through purchase accounting, appropriate adjustments to these valuation allowances. As of July 1,
2006, the Company had foreign net operating loss carry-forwards, including those acquired with Memec, of
approximately $1,064,404,000, approximately $100,030,000 of which have expiration dates ranging from fiscal
2007 to 2021 and the remaining $964,374,000 of which have no expiration date. The carrying value of the
Company's net operating loss carry-forwards is dependent upon the Company's ability to generate sufficient
future taxable income in certain tax jurisdictions. In addition, the Company considers historic levels of
income, expectations and risk associated with estimates of future taxable income and on-going prudent and
feasible tax planning strategies in assessing a tax valuation allowance. The Company also had U.S. federal net
operating loss carry-forwards of approximately $123,431,000 as of July 1, 2006, which have expiration dates
ranging from fiscal 2019 to 2025.
10. Pension and retirement plans
Pension Plan
The Company's noncontributory defined benefit pension plan (the ""Plan'') covers substantially all
domestic employees. Employees are eligible to participate in the Plan following the first year of service during
which they worked at least 1,000 hours. The Plan provides defined benefits pursuant to a cash balance feature
whereby a participant accumulates a benefit based upon a percentage of current salary, which varies with age,
and interest credits. The Company uses June 30 as the measurement date for determining pension expense
and benefit obligations for each fiscal year.
Not included in the tabulations and discussions that follow are pension plans of certain
non-U.S. subsidiaries, which are not material.
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