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Table of Contents
Interest expense for fiscal 2008 totaled $72.3 million, down $4.9 million, or 6.3%, as compared with
$77.2 million in fiscal 2007. The year-over-year decrease in interest expense for fiscal 2008 was primarily the result
of a lower effective interest rate on short-term debt outstanding and refinancing activities which occurred during
fiscal 2007, whereby higher interest rate debt was repaid or replaced with lower interest rate debt.
Other expense, net, was $11.6 million in fiscal 2009 as compared with other income of $21.0 million in the prior
year. The expense incurred in fiscal 2009 was primarily due to the impact of foreign currency exchange losses in
fiscal 2009 as compared with income recognized in fiscal 2008 and lower interest income in fiscal 2009 as compared
with fiscal 2008. In addition, fiscal 2008 included income from the Company’s equity method investment in Calence
LLC prior to the sale of the investment (see Gain on Sale of Assets in this MD&A ) .
Other income, net, was $21.0 million in fiscal 2008 as compared with $9.9 million in fiscal 2007. The year-over-
year increase was primarily due to foreign currency exchange gains compared with losses in the prior year, higher
interest income resulting from higher investment balances, and income from an equity method investment compared
with losses in the prior year.
Gain on Sale of Assets
During fiscal 2009, the Company recognized a gain totaling $14.3 million pre-tax, $8.7 million after-tax and
$0.06 per share as a result of certain earn-out provisions associated with the prior sale of the Company’s equity
investment in Calence LLC.
During fiscal 2008, the Company recognized a gain on sale of assets totaling $49.9 million pre-tax,
$32.2 million after tax and $0.21 per share on a diluted basis. In April 2008, the Company sold its equity investment
in Calence LLC and recognized a gain of $42.4 million pre-tax, $25.9 million after tax and $0.17 per share on a
diluted basis. In October 2007, the Company sold a building in the EMEA region and recognized a gain of
$4.5 million pre- and after tax and $0.03 per share on a diluted basis. Due to local tax allowances, the building sale
was not taxable. The Company also recognized a gain of $3.0 million pre-tax, $1.8 million after tax and $0.01 per
share on a diluted basis for the second receipt of contingent purchase price proceeds related to the fiscal 2006 sale of
a TS end-user business.
During fiscal 2007, the Company recorded a gain related to the receipt of contingent purchase price proceeds
from the fiscal 2006 sale of a TS end-user business. The gain amounted to $3.0 million pre-tax, $1.8 million after tax
and $0.01 per share on a diluted basis.
Debt Extinguishment Costs
During fiscal 2007, the Company redeemed the $361.4 million balance outstanding on its 9
3
/
4
% Notes due
February 15, 2008 (the “9
3
/
4
% Notes”).
The Company used the net proceeds of $296.1 million from the issuance in
September 2006 of $300.0 million principal amount of 6.625% Notes due September 15, 2016 plus available
liquidity, to repurchase the 9
3
/
4
% Notes. In connection with the repurchase, the Company terminated two interest
rate swaps with a total notional amount of $200.0 million that hedged a portion of the 9
3
/
4
% Notes. Debt
extinguishment costs incurred during fiscal 2007 as a result of the redemption totaled $27.4 million pre-tax,
$16.5 million after tax, or $0.11 per share on a diluted basis, and consisted of $20.3 million for a make-whole
redemption premium, $5.0 million associated with the two interest rate swap terminations, and $2.1 million to write-
off certain deferred financing costs.
Income Tax Provision
Avnet’s effective tax rate on its income (loss) before income taxes was 3.6% in fiscal 2009 as compared with
29.6% in fiscal 2008. The effective tax rate in fiscal 2009 was negatively impacted by the non-deductibility of
substantially all of the impairment charges and changes to existing tax positions. Partially offsetting these impacts
was a net tax benefit of $21.7 million, or $0.14 per share, related primarily to the release of tax reserves due to the
settlement of certain tax audits in Europe.
Avnet’s effective tax rate on its income before income taxes was 29.6% in fiscal 2008 as compared with 33.0%
in fiscal 2007. The year-over-year decrease in effective tax rate was primarily due to the combination of certain
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