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Table of Contents
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
$130,452,000 and foreign income before income taxes was $356,101,000, $333,239,000 and $185,695,000 in fiscal
2008, 2007 and 2006, respectively.
A reconciliation between the federal statutory tax rate and the effective tax rate is as follows:
Foreign tax rates generally consist of the impact of the difference between foreign and federal statutory rates
applied to foreign income (losses) and also include the impact of valuation allowances against the Company’s
otherwise realizable foreign loss carry-forwards.
The decrease in the fiscal 2008 effective tax rate over prior year is due to (i) certain statutory tax rate reductions;
(ii) a favorable audit settlement, offset by; (iii) the recognition of transfer pricing exposures; and (iv) a change to
estimates for existing tax positions. The decrease in the fiscal 2007 effective tax rate over prior year is attributable to;
(i) the mix of pre-tax income towards the lower statutory tax rate jurisdictions; (ii) a similar dollar amount of net
contingency reserves applied against significantly higher pre-tax income; and (iii) the negative impact increasing
prior year’s effective tax rate related to the loss on the sale of an EM business for which no tax benefit was available.
In addition, in fiscal 2006, the Company recorded additional contingency reserves due to the recognition of tax
exposures in the EMEA and Asia regions, partially offset by the favorable settlement of a European audit. The
Company determines its valuation allowance through an evaluation of relevant factors used to assess the likelihood
of recoverability of the Company’s deferred tax assets.
The significant components of deferred tax assets and liabilities, included primarily in “other assets” on the
consolidated balance sheets, are as follows:
61
Years Ended
June 28,
June 30,
July 1,
2008
2007
2006
Federal statutory rate
35.0
%
35.0
%
35.0
%
State and local income taxes, net of federal benefit
2.2
1.8
2.0
Foreign tax rates, including impact of valuation allowances
(5.3
)
(5.0
)
(3.8
)
Change in contingency reserves
(1)
(3.5
)
0.9
1.6
Other, net
1.2
0.3
0.5
Effective tax rate
29.6
%
33.0
%
35.3
%
(1)
Fiscal 2008 included a benefit of 5.5% related to tax audit settlements.
June 28,
June 30,
2008
2007
(Thousands)
Deferred tax assets:
Inventory valuation
$
9,103
$
7,120
Accounts receivable valuation
14,418
24,017
Federal, state and foreign tax loss carry
-
forwards
419,642
400,923
Depreciation and amortization of property, plant and equipment
6,794
6,825
Various accrued liabilities and other
2,403
43,496
452,360
482,381
Less
valuation allowance
(344,034
)
(346,947
)
108,326
135,434
Deferred tax liabilities
—
Net deferred tax assets
$
108,326
$
135,434