Avnet 2008 Annual Report Download - page 26

Table of Contents
a result of the Access integration. The facility exit charges related to vacated Avnet facilities in the Americas and
Japan. Other charges consisted primarily of Avnet 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 of Access, 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, 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’ 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.
Of the $13.6 million recorded to expense related to the cost-reduction activities and exit-related activity
associated with the Access integration, $0.7 million represented non-cash write-downs. As of June 28, 2008, the
remaining reserves totaled $0.5 million which included severance reserves of $0.3 million and facility exit reserves
for leases of $0.2 million. Management expects the majority of the reserves to be utilized in fiscal 2009.
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, which is discussed further under Memec-
related restructuring, integration and
other items. In addition, the Company has incurred restructuring and other charges primarily relating to actions taken
following the divestitures of two TS end-user business lines in the Americas region, certain cost reduction actions
taken by TS in the EMEA region, and other items, which are discussed further under r estructuring and other
charges related to business line divestitures and other actions. The restructuring, integration and other charges
incurred for all of these activities totaled $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 for fiscal 2006.
Memec-related restructuring, integration and other items
During fiscal 2006, the acquired Memec business was being integrated into the Company’s existing EM
operations in all three regions. As a result of the acquisition integration efforts, the Company established and
approved plans to restructure certain of Avnet’s existing operations to accommodate the integration of Memec into
Avnet.
The restructuring and other charges (excluding integration charges discussed below) incurred during fiscal 2006
related to the integration of Memec totaled $31.6 million pre-tax, $24.2 million after-tax and $0.16 per share on a
diluted basis. The pre-tax charges included inventory write-downs due to the Company’s decision to terminate
certain supplier relationships in connection with the acquisition of Memec amounting to $9.0 million recorded in
“cost of sales” as discussed below. The remaining pre-tax charge of $22.6 million, which was included in
“restructuring, integration and other charges” in the accompanying consolidated statement of operations, included
$16.4 million for severance costs, $2.6 million of facility exit costs related primarily to remaining lease obligations
on exited facilities, $2.4 million for the write-down of certain capitalized IT-related initiatives, primarily in the
Americas, and $1.2 million for other charges related primarily to other contractual obligations that were no longer
utilized in the combined Avnet and Memec business.
The charge for terminated inventory lines related to the Company’s strategic decision during the first half of
fiscal 2006 to exit certain product lines within EM in the Americas as a result of the Memec acquisition. The charge
in the third quarter of fiscal 2006 was a result of similar strategic decisions made in the EMEA region. The
terminated lines were product lines that Avnet management elected not to continue with the combined Avnet and
Memec business. As a result, management recorded a write-down of the related inventory on hand to fair market
value due to the lack of contractual return privileges when a line is terminated by Avnet. Severance charges incurred
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