Avnet 2007 Annual Report Download - page 79

the exit-related charges in the table above, and the acquisition related benefit recorded during fiscal 2007 was
$7,353,000 pre-tax, $5,289,000 after tax and $0.03 per share on a diluted basis.
Severance charges related to Avnet personnel reductions of 96 employees in all three regions of EM and
42 employees in TS Americas and EMEA (a total of 138 employees) in administrative, finance and sales functions
associated with the cost reduction initiatives implemented during the third and fourth quarter of fiscal 2007 as part
of the Company’s continuing focus on operational efficiency and Avnet employees who were deemed redundant as
a result of the Access integration. The facility exit charges related to vacated Avnet facilities in the Americas and
Japan. Other charges in the preceding table consisted primarily of IT-related and other asset write-downs and other
contract termination costs. Included in the asset write-downs were Avnet software in the Americas that was made
redundant as a result of the acquisition, Avnet system hardware in EMEA that was replaced with higher capacity
hardware to handle increased capacity due to the addition of Access, and the write-down of certain capitalized
construction costs abandoned as a result of the acquisition. Other charges incurred included contractual obligations
related to abandoned activities. Not included in the preceding table were other charges recorded in “restructuring,
integration and other items” during fiscal 2007 related to the write-down of an Avnet owned building in EMEA and
Access integration costs. The write-down of the building was based on management’s estimate of the current market
value and possible selling price, net of selling costs, for the property. The integration costs related to incremental
salary costs, primarily of Access personnel, who were retained following the close of the acquisition solely to assist
in the integration of Access’s IT systems, administrative and logistics operations into those of Avnet. These
personnel had no other meaningful day-to-day operational responsibilities outside of the integration efforts. Also
included in integration costs are certain professional fees, travel, meeting, marketing and communication costs that
were incrementally incurred solely related to the Access integration efforts.
Total amounts utilized during fiscal 2007 as presented in the preceding table included $5,080,000 of cash
payments and $738,000 of non-cash write-downs. As of June 30, 2007, management expects the majority of the
reserves to be utilized by the end of fiscal 2008.
Fiscal 2006
During fiscal 2006, the Company incurred certain restructuring, integration and other charges as a result of the
acquisition of Memec on July 5, 2005 and its subsequent integration into Avnet’s existing operations (see Note 2). In
addition, the Company incurred restructuring and other charges primarily relating to actions taken following the
divestitures of certain TS business lines in the Americas region in the second half of fiscal 2006, certain cost
reduction actions taken by TS in the EMEA region and other items during fiscal 2006.
The restructuring, integration and other charges incurred during fiscal 2006 totaled $69,960,000 pre-tax
($60,983,000 included in “restructuring, integration and other charges” and $8,977,000 recorded in “cost of sales”
for the write-down of inventory as a result of supplier terminations in connection with the integration of Memec) and
$49,870,000 after-tax, or $0.34 per share on a diluted basis. The pre-tax charge of $60,983,000 includes
$21,894,000 for Memec integration related costs (primarily incremental salary and other costs), $22,284,000
for severance costs ($16,352,000 in EM resulting primarily from the Memec integration and $5,932,000 for the
reduction of certain TS personnel), $9,085,000 of facility exit costs ($2,575,000 in EM and $6,510,000 in TS),
which included $2,671,000 of impairment charges related to two owned but vacant Avnet buildings, $2,426,000 for
the write-down of certain capitalized IT-related initiatives, primarily in the Americas, and $6,591,000 for other
charges. During fiscal 2006, the Company also recorded a reversal of excess reserves amounting to $1,297,000
related primarily to restructuring charges recorded in prior fiscal years in TS EMEA.
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AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)