Avnet 2012 Annual Report Download - page 25

Table of Contents
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 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 2012 consisted of $1.2 million in cash payments, and $0.2 million related to adjustments to reserves and foreign currency
translation. As of June 30, 2012, the remaining reserves totaled $0.8 million, which are expected to be utilized by the end of fiscal 2013.
Operating Income
During fiscal 2012, the Company generated operating income of $884.2 million, down 4.9%, as compared with $930.0 million in the prior
year. Consolidated operating income margin was 3.4% as compared with 3.5% in the prior year. Both periods included restructuring, integration
and other charges as described in Restructuring, Integration and Other Charges
above. Excluding these charges from both periods, operating
income was $957.8 million, or 3.7% of sales, in fiscal 2012 as compared with $1.01 billion, or 3.8% of sales, in the prior year. EM operating
income of $751.4 million was down 9.7% year over year. While EM's operating income margin remained within management's target range of
5.0% to 5.5%, it declined 50 basis points year over year to 5.0%. This decline in EM operating income margin was primarily due to the negative
operating leverage, particularly in EMEA related to the year-over-
year decline in sales in fiscal 2012 due to macroeconomic conditions in the
region as compared with the positive operating leverage last year due to the particularly strong sales growth in fiscal 2011. In addition, lower
operating income margin in EM Asia, due to economic slowing in China, also contributed to EM's overall decline in operating income margin.
The decline at EM was somewhat mitigated by the benefits from cost reduction actions taken in response to business conditions. TS operating
income of $319.3 million increased 11.4% year over year and operating income margin increased 46 basis points to 3.0% primarily due to
improvement in the western regions, which was driven by the combination of higher gross profit margins and the benefits from restructuring
initiatives. Corporate operating expenses were $113.0 million in fiscal 2012 as compared with $112.0 million in fiscal 2011.
During fiscal 2011, the Company generated operating income of $930.0 million, an increase of 46.3% as compared with operating income
of $635.6 million in fiscal 2010. The increase in operating income was attributable to the impact of acquisitions and the growth in gross profit
dollars associated with the 17.1% organic sales growth. Consolidated operating income margin was 3.5% and 3.3% in fiscal 2011 and 2010,
respectively. Both periods included restructuring, integration and other charges as described in
Restructuring, Integration and Other Charges
above. Excluding these charges, operating income for fiscal 2011 was $1.01 billion, or 3.8% of consolidated sales, as compared with operating
income of $661.0 million, or 3.5% of consolidated sales, for fiscal 2010. EM operating income of $832.4 million increased 69.3% year over year
and operating income margin increased 105 basis points to 5.5%. All three regions within EM contributed, but the improvement was primarily
driven by the operating leverage in the EMEA region with its 31.9% year-over-
year revenue growth. TS operating income of $286.7 million
increased 13.9% year over year while operating income margin declined 57 basis points year over year to 2.5% due primarily to lower gross
profit margins in the EMEA region which includes lower operating margins of the acquired businesses as compared with the other TS
businesses. Corporate operating expenses were $112.0 million in fiscal 2011 as compared with $82.3 million in fiscal 2010 primarily due to net
periodic pension expense recognized in fiscal 2011as compared with pension income recognized in fiscal 2010.
Interest Expense and Other Income (Expense), net
Interest expense for fiscal 2012 was $90.9 million, down $1.6 million, or 1.7%, compared with the prior year. The decrease in interest
expense was primarily due to (i) the pay off of $104.4 million of 3.75% convertible debt in March 2011 and (ii) lower interest expense incurred
under foreign bank credit facilities as compared with the prior year. See Financing Transactions
for further discussion of the Company's
outstanding debt.
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