Avnet 2006 Annual Report Download - page 90

Download and view the complete annual report

Please find page 90 of the 2006 Avnet annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 98

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98

AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Restructuring and other charges incurred during the first quarter of fiscal 2004 totaled $32,153,000 pre-
tax and $22,186,000 after-tax, or $0.18 per share on a diluted basis. The pre-tax charge consisted of severance
costs ($9,393,000), charges related to consolidation of selected facilities ($10,848,000), write-downs of
certain capitalized IT-related initiatives ($6,909,000) 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 as discussed in Note 7 ($5,003,000).
Severance charges related to workforce reductions of approximately 400 personnel completed during the
first quarter of fiscal 2004, 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 similar to the decisions reached in the second quarter
of fiscal 2004 as discussed below. These charges related to the write-off of capitalized hardware and software.
Restructuring charges incurred during the second quarter of fiscal 2004 totaled $23,465,000 pre-tax,
$16,351,000 after-tax, or $0.14 per diluted share. The charges consisted of severance costs ($5,298,000),
charges related to write-downs of owned assets and consolidation of selected facilities ($4,795,000), write-
downs of certain capitalized IT-related initiatives ($12,850,000) and other items ($522,000).
Severance charges related to workforce reductions of approximately 120 personnel, the majority of whom
staffed warehousing, administrative and support functions, primarily for facilities within the TS operations in
EMEA that were identified for consolidation as part of the combination of CM and AC. A smaller portion of
these charges also impacted operations in the Americas. The combination of CM and AC in EMEA also led
to charges related to reserves for remaining non-cancelable lease obligations and write-downs to fair market
value of assets located in the facilities that were vacated. The facilities primarily related to warehousing and
administrative offices that became redundant with the combination of the two former operating groups into
TS. 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 the write-off of capitalized hardware and software. Lastly, the
Company's efforts to combine CM and AC in EMEA resulted in the decision to merge the former CM
EMEA operations onto the computer systems that had historically been used in the AC EMEA business. The
change in the use of this significant asset in CM EMEA generated a need to analyze the group of long-lived
assets within the former CM EMEA operations for impairment. As a result of this analysis, the Company
recorded an impairment charge to write-down certain long-lived assets to their estimated fair market values.
This charge, totaling $9,430,000, of which $4,228,000 relates to the CM EMEA computer systems, is included
in the facilities and IT-related charges quantified above.
During the fourth quarter of fiscal 2004, as part of management's ongoing analysis of the reserves for
various restructuring activities, the Company recorded adjustments to certain of its remaining reserves. The
adjustments occurred primarily in the Company's EM and TS operations in EMEA and related to
adjustments to reduce excess severance reserves based upon revised estimates of statutorily required payouts
and recording of additional charges related to leased facilities due to modifications to sublease and termination
assumptions based upon ongoing market conditions. The Company also negotiated a favorable buyout of a
hardware and software maintenance contract, which resulted in the reversal of certain IT-related reserves.
These adjustments are reflected on the ""Adjustments'' line item in the above table for fiscal 2004.
The combined charges recorded during fiscal 2004 totaled $55,618,000 pre-tax and $38,537,000 after-tax,
or $0.32 per diluted share.
84