Avnet 2008 Annual Report Download - page 25

Table of Contents
points, as compared with 73.1% in fiscal 2006; however, this metric for fiscal 2006 was negatively impacted by the
$9.0 million line termination charge (see Restructuring, Integration and Other Charges for further discussion). The
year
-over-year improvement in both of these metrics is primarily due to the Company’s realization of operating
expense synergies following the acquisition and integration of Memec. The metrics were also positively impacted by
the Company’s ongoing focus on managing levels of operating costs through its various operational excellence
initiatives.
Restructuring, Integration and Other Charges
Fiscal 2008
During fiscal 2008, the Company incurred restructuring, integration and other charges totaling $38.9 million
pre-tax, $31.5 million after tax and $0.21 per share on a diluted basis, related to cost reductions considered necessary
by management to improve the performance at certain business units and integration costs associated with recently
acquired businesses. The restructuring charges related primarily to severance and facility exit costs. Integration costs
recorded during fiscal 2008 included professional fees, facility moving costs, travel, meeting, marketing and
communication costs that were incrementally incurred as a result of the integration efforts of the recently acquired
businesses. The total of the restructuring charges and integration costs, net of $0.7 million for reversals of excess
lease and severance reserves established in prior fiscal periods, amounted to $29.9 million pre-
tax, $21.9 million after
tax and $0.15 per share on a diluted basis. Other charges included $6.0 million pre-tax, $7.7 million after tax and
$0.05 per share on a diluted basis related to the settlement of an indemnification to a former executive of an acquired
company (which was not tax deductible) and provision for additional environmental costs associated with the
reassessment of existing environmental matters which amounted to $3.0 million pre-tax, $1.8 million after tax and
$0.01 per share on a diluted basis.
The cost reduction actions taken during fiscal 2008 included severance charges related to personnel reductions
of over 350 employees in administrative, finance and sales functions. Personnel reductions consisted of
100 employees in all three regions of EM and over 250 in the Americas and EMEA for TS. The facility exit charges
related to five vacated office facilities, which included two facilities in the EM EMEA region, two in the TS EMEA
region and one in the TS Asia region. These facility exit charges consisted of reserves for remaining lease liabilities
and the write-down of leasehold improvements and other fixed assets. Other charges incurred included contractual
obligations with no on-going benefit to the Company.
The total amounts utilized during fiscal 2008 consisted of $8.4 million in cash payments and $0.7 million for the
non-cash write downs of assets. As of June 28, 2008, management expects the majority of the remaining severance
reserves to be utilized in fiscal 2009, the remaining facility exit cost reserves to be utilized by the end of fiscal 2013
and other contractual obligations to be utilized by the end of fiscal 2010.
Fiscal 2007
During fiscal 2007, the Company incurred certain restructuring, integration and other charges amounting to
$7.4 million pre-tax, $5.3 million after tax and $0.03 per share on a diluted basis as a result of cost-reduction
initiatives in all three regions, the acquisition of Access on December 31, 2006 and other items. This included
restructuring charges of $13.6 million consisting of severance costs of $10.8 million, facility exit-costs of
$1.0 million, and other contract termination costs of $1.8 million. In addition, in connection with the Access
acquisition, the Company recorded integration costs of $7.3 million. The Company also recorded in “restructuring,
integration and other charges” the write-down of $0.7 million related to an Avnet-owned building in EMEA, and the
reversal of $1.7 million related primarily to excess severance and lease reserves, certain of which were previously
established through “restructuring, integration and other charges” in prior fiscal periods. Partially offsetting these
charges was a pre-tax benefit of $12.5 million which resulted from the favorable outcome of a contingent liability
acquired in connection with an acquisition completed in a prior year.
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
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