Avnet 2011 Annual Report Download - page 26

Table of Contents
extended periods following the close of the acquisitions solely to assist in the integration of the acquired businesses’
IT systems and
administrative and logistics operations into those of Avnet. These identified personnel have no other meaningful day-to-
day
operational responsibilities outside of the integration effort. Transaction costs of $15.6 million pre-
tax consisted primarily of
professional fees for brokering the deals, due diligence work and other legal costs. In addition, the Company recorded a reversal of
$11.3 million pre-
tax related to (i) the reversal of restructuring reserves established in prior years that were deemed to be no longer
required, (ii) acquisition adjustments for which the purchase allocation period had closed and (iii) exit-
related reserves originally
established through goodwill in prior years that were deemed no longer required and were credited to the consolidated statement of
operations rather than to goodwill because the associated goodwill was impaired in fiscal 2009.
Severance charges recorded in fiscal 2011 related to personnel reductions of over 550 employees in administrative, finance and
sales functions primarily in connection with the integration of the acquired Bell business into the existing EM Americas, TS Americas
and TS EMEA regions and, to a lesser extent, other cost reduction actions in other regions. Facility exit costs consisted of lease
liabilities, fixed asset write-
downs and other related charges associated with 50 vacated facilities: 23 in the Americas, 25 in EMEA
and two in the Asia/Pac region. Total amounts utilized during fiscal 2011 consisted of $25.6 million in cash payments, $3.3 million in
non-
cash asset write downs and $0.3 million related to adjustments to reserves and foreign currency translation. As of July 2, 2011,
management expects the majority of the remaining severance reserves to be utilized by the end of fiscal
2012 and the remaining
facility exit cost reserves to be utilized by the end of fiscal 2015.
Fiscal 2010
During fiscal 2010, the Company recognized restructuring, integration and other charges of $25.4 million pre-
tax, $18.8 million
after tax and $0.12 per share on a diluted basis. The Company recognized restructuring charges of $16.0 million pre-
tax for the
remaining cost reduction actions announced during fiscal 2009 which included severance costs, facility exit costs and other charges
related to contract termination costs and fixed asset write-downs. The Company also recognized integration costs of $2.9 million pre-
tax for professional fees, facility moving costs and travel, meeting, marketing and communication costs that were incrementally
incurred as a result of the integration efforts of the recently acquired businesses, $6.5 million pre-tax for a value-
added tax exposure in
Europe related to an audit of prior years, and $3.2 million pre-tax of other charges including acquisition-
related costs which would
have been capitalized under the prior accounting rules. The Company also recorded a credit of $3.2 million pre-
tax to adjust reserves
related to prior restructuring activity which were determined to be no longer required.
Severance charges recorded in fiscal 2010 of $9.7 million related to personnel reductions of over 150 employees in
administrative, finance and sales functions in connection with the cost reduction actions in all three regions. Facility exit costs of
$3.7 million consisted of lease liabilities and fixed asset write-
downs associated with seven vacated facilities in the Americas, one in
EMEA and four in the Asia/Pac region. Other charges of $2.6 million consisted primarily of contractual obligations with no on-
going
benefit to the Company. The total amounts utilized during fiscal 2011 consisted of $1.1 million in cash payments, and $0.4 million
related to adjustments to reserves and foreign currency translation. As of July 2, 2011, the remaining reserves totaled $2.2 million, of
which $0.2 million related to remaining facility exit cost and severance reserves which are expected to be utilized by the end of fiscal
2013 and $2.0 million related to other contractual obligations which are expected to be utilized by the end of fiscal 2012.
Fiscal 2009
In response to the decline in sales and gross profit margin due to weaker market conditions, the Company initiated significant
cost reduction actions during fiscal 2009 to realign its expense structure with market conditions. As a result, the Company incurred
restructuring, integration and other charges totaling $99.3 million pre-
tax, $65.3 million after tax and $0.43 per share during fiscal
2009 related to the cost reductions as well as integration costs associated with recently acquired businesses. Restructuring charges
included severance of $50.8 million, facility exit-
costs of $29.6 million and other charges of $4.5 million related to contract
termination costs, fixed asset write-
downs and other charges. The Company also recorded a reversal of $2.5 million to adjust
estimated costs for severance, lease and other reserves related to prior year restructuring activity which were deemed excessive and
that reversal was credited to restructuring, integration and other charges. Integration costs of $11.2 million included professional fees,
facility moving costs, travel, meeting, marketing and communication costs that were incrementally incurred as a result of the
acquisition integration efforts. Other items recorded to restructuring, integration and other charges included a net credit of $1.2 million
related to acquisition adjustments for which the purchase allocation period had closed, a loss of $3.1 million resulting from a decline
in the market value of certain small investments that the Company liquidated, and $3.8 million of incremental intangible asset
amortization.
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