Avnet 2011 Annual Report Download - page 63

Table of Contents
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
During fiscal 2011, the Company had a full tax valuation allowance against significant tax assets related to a legal entity in
EMEA due to, among several other factors, a history of losses in that entity. Recently, the entity has been experiencing improved
earnings which has required the partial release of the valuation allowance to the extent the entity had taxable income during each of
the first three quarters of fiscal 2011. Therefore, the release of valuation allowance, net of the U.S. tax expense, positively impacted
the Company’
s effective tax rate. In addition, during the fourth quarter of fiscal 2011, the Company determined a portion of the tax
valuation allowance for this legal entity was no longer required due to the expected continuation of improved earnings in the future
and, as a result, the Company’s effective tax rate was positively impacted (decreased)
upon the release of the tax valuation allowance,
net of the U.S. tax expense. The Company will continue to evaluate the need for a valuation allowance against these tax assets and
may release additional valuation allowance associated with this entity in the future. Factors that are considered in such an evaluation
include historic levels of income, expectations and risk associated with estimates of future taxable income and ongoing prudent and
feasible tax planning strategies.
Avnet’
s effective tax rate on income before income taxes was 29.9% in fiscal 2010 as compared with an effective tax rate of
3.2% in fiscal 2009. The fiscal 2009 effective tax rate was impacted by non-
deductible impairment charges and a change to estimates
for existing tax positions, net of favorable tax audit settlements of $21,672,000. Excluding the impact of these items, the effective tax
rate for fiscal 2009 would have been 28.6%.
The significant components of deferred tax assets and liabilities, included primarily in “other assets”
on the consolidated balance
sheets, are as follows:
The change in the valuation allowance from fiscal 2010 to fiscal 2011 was a combination of (i) a reduction of $76,055,000
primarily due to the previously mentioned release of valuation allowance in EMEA, of which $64,215,000 impacted the effective tax
rate and $11,840,000 did not impact the effective tax rate because deferred income taxes and income tax payables associated with the
release of the valuation allowance were recorded which offset a portion of the benefit as a result of the release and (ii) an increase of
$55,404,000 related primarily to the translation impact of foreign currency exchange rates and acquired valuation allowances.
As of July 2, 2011, the Company had foreign net operating loss carry-
forwards of approximately $1,333,787,000, of which
$37,065,000 will expire during fiscal 2012 and 2013, substantially all of which have full valuation allowances, $289,220,000 have
expiration dates ranging from fiscal 2014 to 2031 and the remaining $1,007,502,000 have no expiration date. The carrying value of the
Company’s net operating loss carry-forwards is dependent upon the Company’
s ability to generate sufficient future taxable income in
certain tax jurisdictions. In addition, the Company considers historic levels of income, expectations and risk associated with estimates
of future taxable income and on-going prudent and feasible tax planning strategies in assessing a tax valuation allowance.
57
July 2,
July 3,
2011 2010
(Thousands)
Deferred tax assets:
Inventory valuation
$
13,680
$
8,276
Accounts receivable valuation
27,916
24,264
Federal, state and foreign tax loss carry
-
forwards
394,093
361,988
Various accrued liabilities and other
57,686
101,254
493,375
495,782
Less
—
valuation allowance
(310,772
)
(331,423
)
182,603
164,359
Deferred tax liabilities:
Depreciation and amortization of property, plant and equipment
(43,302
)
(23,177
)
Net deferred tax assets
$
139,301
$
141,182