Avnet 2006 Annual Report Download - page 87

AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
As of July 1, 2006, remaining Memec-related reserves related to the restructuring actions taken in fiscal
2006 total $3,711,000, of which $2,960,000 related to severance reserves, the majority of which management
expects to utilize by the end of fiscal 2007, facility exit costs and other costs of $751,000, the majority of which
management expects to utilize by fiscal 2009.
Also resulting from the Memec acquisition and its subsequent integration into Avnet, the Company
incurred certain costs during fiscal 2006, amounting to $21,894,000 pre-tax, $14,647,000 after tax or $0.10 per
share on a diluted basis. The integration costs, particularly in the first nine months of fiscal 2006, related to
incremental salary costs, primarily of Memec personnel, who were retained by Avnet following the close of the
acquisition, solely to assist in the integration of Memec's IT systems, administrative and logistics operations
into those of Avnet. Generally, these identified personnel were retained nine months or less following the close
of the acquisition. These personnel had no other meaningful day-to-day operational responsibilities outside of
the integration effort. Also included in integration costs are certain professional fees, travel, meeting,
marketing and communication costs that were incrementally incurred solely related to the Memec integration
efforts. Professional fees included primarily consulting and legal advice associated with the efforts to merge
the numerous legal entities that exist globally between the Avnet and Memec operations. Integration costs,
along with restructuring and other charges, are presented separately from selling, general and administrative
expenses on the consolidated statement of operations. All integration costs recorded in fiscal 2006 represent
amounts incurred and paid during the fiscal 2006.
Restructuring and other charges related to business line divestitures and other actions
During the third quarter of fiscal 2006, the Company divested its end-user business lines in TS Americas
(see Note 2). As a result, restructuring charges were incurred due to certain actions taken by the Company
following these divestitures. The Company also incurred restructuring costs and other charges relating to
certain cost-cutting measures and other actions taken by TS in the EMEA region and certain actions at
corporate in fiscal 2006.
The following table summarizes the activity relating to the restructuring and other charges related to
business line divestitures and other actions taken during fiscal 2006:
Severance Facility
Costs Exit Costs Other Total
(Thousands)
Fiscal 2006 pre-tax charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 5,932 $ 6,510 $ 362 $12,804
Amounts utilizedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,017) (4,241) (267) (6,525)
Other, principally foreign currency translationÏÏÏÏÏÏ 57 12 2 71
Balance at July 1, 2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 3,972 $ 2,281 $ 97 $ 6,350
The restructuring and other charges incurred during fiscal 2006 totaled $16,504,000 pre-tax ($12,804,000
included in the preceding table, and $3,700,000 relating to other charges net of reversals of previously recorded
reserves discussed below), $11,041,000 after-tax and $0.08 per share on a diluted basis. The pre-tax charges,
which are included in restructuring, integration and other charges in the accompanying consolidated statement
of operations, consisted of severance costs of $5,932,000 related to TS operations in the Americas and EMEA
regions, facility exit costs in the Americas and EMEA regions totaling $6,510,000, and $362,000 for other
charges. Not included in the table above are other charges totaling $3,700,000 pre-tax, consisting of
$3,179,000 related primarily to a curtailment charge resulting from a small UK-based pension plan that the
Company elected to terminate, $1,818,000 related to the reassessment of an existing environmental liability
and a reversal of $1,297,000 for charges recorded in prior fiscal years primarily in TS EMEA, a portion of
which was recorded through restructuring charges in prior years (see Fiscal 2005 and 2004 reserve discussion
in this Note 17).
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