Avnet 2007 Annual Report Download - page 18

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combined charges amounted to $69.9 million pre-tax (including $9.0 million recorded in cost of sales),
$49.9 million after tax and $0.34 per share on a diluted basis. Fiscal 2006 results also include a loss on the sale
of business lines consisting of a loss on the sale of two small, non-core EM businesses in the EMEA region
recorded in the fourth quarter for which no tax benefit was available, partially offset by a gain on sale of the TS
single tier businesses in the Americas recorded in the third quarter. The net loss on sale of businesses recorded
in fiscal 2006 amounted to $2.6 million pre-tax, $7.1 million after tax and $0.05 per share on a diluted basis. In
addition, the fiscal 2006 results include debt extinguishment costs associated with the early repurchase of
$254.1 million of the Company’s 8% Notes due November 15, 2006 in the first quarter and the early repurchase
of $113.6 million of the Company’s 93⁄4% Notes due February 15, 2008 in the fourth quarter. The debt
extinguishment costs amounted to $22.6 million pre-tax, $13.6 million after tax and $0.09 per share on a
diluted basis. In comparison with fiscal 2005, fiscal 2006 results include incremental stock-based compen-
sation expense resulting from the Company’s adoption of the Financial Accounting Standards Board’s
(“FASB”) Statement of Financial Accounting Standard (“SFAS”) 123R, Share-based Payments
(“SFAS 123R”), and modifications to stock-based compensation plans in fiscal 2006. The incremental
charges amounted to $16.6 million pre-tax, $10.6 million after tax, and $0.07 per share on a diluted basis.
The Company also incurred incremental amortization expense associated with amortizable intangible assets
recorded in fiscal 2006 as a result of the Memec acquisition which amounted to $4.2 million pre-tax,
$2.7 million after tax and $0.02 per share on a diluted basis. The total impact of these charges recorded in fiscal
2006 amounted to $115.9 million pre-tax, $83.9 million after tax and $0.57 per share on a diluted basis.
(c) Includes the impact of restructuring and other charges recorded in both the first and second quarters of fiscal
2004 in connection with cost cutting initiatives and the combination of the Computer Marketing (“CM”) and
Applied Computing (“AC”) operating groups into one Technology Solutions operating group. These charges
amounted to $55.6 million (all of which was included in operating expenses), $38.6 million after-tax and
$0.32 per share on a diluted basis. Fiscal 2004 results also include the impact of debt extinguishment costs
associated with the Company’s cash tender offer completed during the third quarter of fiscal 2004 for
$273.4 million of the 77⁄8% Notes due February 15, 2005. These debt extinguishment costs amounted to
$16.4 million pre-tax, $14.2 million after-tax and $0.12 per share on a diluted basis. The total impact of these
charges recorded in fiscal 2004 amounted to $72.0 million pre-tax, $52.8 million after-tax and $0.44 per share
on a diluted basis.
(d) Includes the impact of restructuring and other charges related to certain cost cutting initiatives instituted during
fiscal 2003, including severance costs, charges for consolidation of facilities and write-offs of certain
capitalized IT-related initiatives. These charges totaled $106.8 million pre-tax (all of which was included
in operating expenses), $65.7 million after-tax and $0.55 per share on a diluted basis. Fiscal 2003 results also
include the impact of debt extinguishment costs associated with the Company’s cash tender offers and
repurchases completed during the third quarter of fiscal 2003 for $159.0 million of its 6.45% Notes due
August 15, 2003 and $220.1 million of its 8.20% Notes due October 17, 2003. These debt extinguishment costs
amounted to $13.5 million pre-tax, $8.2 million after tax and $0.07 per share on a diluted basis. The total
impact of the charges recorded in fiscal 2003 amounted to $120.3 million pre-tax, $73.9 million after-tax and
$0.62 per share on a diluted basis.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
For an understanding of Avnet and the significant factors that influenced the Company’s performance during
the past three fiscal years, the following discussion should be read in conjunction with the description of the
business appearing in Item 1 of this Report and the consolidated financial statements, including the related notes,
and other information appearing in Item 15 of this Report. The Company operates on a “52/53-week” fiscal year.
The fiscal years ended June 30, 2007, July 1, 2006 and July 2, 2005 all contained 52 weeks.
There are numerous references to the impact of foreign currency translation in the discussion of the Company’s
results of operations that follow. Over the past several years, the exchange rates between the US Dollar and many
foreign currencies, especially the Euro, have fluctuated significantly. For example, the US Dollar has weakened
against the Euro by approximately 7% when comparing fiscal 2007 to fiscal 2006, but strengthened against the Euro
by approximately 4% from fiscal 2006 to fiscal 2005. When the weaker US Dollar exchange rates of the current year
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