Avnet 2013 Annual Report Download - page 25

Table of Contents
primarily of professional fees for due diligence work and other legal costs associated with the transaction, along with the gain from the reversal
earn-out liability previously described.
Fiscal
2012
During fiscal 2012
, the Company took certain actions to reduce costs in both operating groups in response to market conditions and
incurred acquisition and integration costs associated with acquired businesses during the fiscal year. As a result, the Company recorded
restructuring, integration and other charges of $73.6 million . Restructuring charges of $50.3 million consisted of $33.2 million
for severance,
$12.0 million for facility exit costs and fixed asset write-downs, and $5.1 million
for other restructuring charges, primarily other lease
obligations that have no ongoing benefit to the Company. Integration costs and acquisition transaction costs were $9.4 million and
$10.6
million , respectively. The Company recorded a credit of $3.3 million
to adjust reserves related to prior year restructuring activity that were no
longer required. In addition, the Company recorded $6.7 million
for (i) a legal claim associated with an acquired business and a potential royalty
claim related to periods prior to acquisition by Avnet and (ii) a legal claim associated with an indemnification of a prior divested business. The
tax-effected impact of restructuring, integration and other charges was $53.0 million and $0.35 per share on a diluted basis
Severance charges recorded in fiscal 2012 related to the reduction of over 800
employees in sales, administrative and finance functions in
connection with the cost reduction actions taken in all three regions in both operating groups with employee reductions of approximately 480
in
EM and 320 in TS. Facility exit costs for vacated facilities related to 12 facilities in the Americas, 5 in EMEA and 13
in the Asia region and
consisted of reserves for remaining lease liabilities and the write-down of leasehold improvements and other fixed assets.
Fiscal
2011
During fiscal 2011 , the Company recognized restructuring, integration and other charges of $77.2 million
associated primarily with the
integration of the acquired Bell business. Restructuring costs included $28.6 million for severance and $17.3 million for facility exit costs for
lease liabilities, fixed asset write-
downs and other related charges associated with vacated facilities and $1.8 million for other charges.
Integration costs were $25.1 million and acquisition transactions costs were $15.6 million
. In addition, the Company recorded a reversal of
$11.3 million
related to (i) the reversal of restructuring reserves established in prior years that were deemed 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. The tax-effected impact of restructuring, integration, and other charges was $56.2 million
and
$0.36 per share on a diluted basis
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 region. Total
amounts utilized during fiscal 2012 consisted of $12.1 million in cash payments and $3.2 million
related to adjustments to reserves and foreign
currency translation.
Operating Income
During fiscal 2013 , the Company generated operating income of $626.0 million , representing a 29.2%
decline as compared with prior
year operating income of
$884.2 million . Consolidated operating income margin was 2.5% as compared with 3.4%
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 $775.5 million , or 3.0% of sales, in fiscal 2013 as compared with $957.8 million
, or
3.7% of sales, in the prior year. EM operating income of $624.0 million decreased 17.0%
year over year and operating income margin decreased
90 basis points year over year to 4.1%
. The decline in EM operating income margin was primarily due to lower gross profit margin as
previously mentioned, resulting in lower profitability in the western regions, offset partially by the benefits of cost reduction actions taken. TS
operating income of $278.4 million decreased 12.8% year over year and operating income margin decreased 27 basis points to 2.7%
due
primarily to the effects of the decline in revenue, as previously described and, to a lesser extent, the effects of recent acquisitions as certain cost
synergies have not yet been attained, in particular in EMEA, and which are not expected to be fully achieved for several quarters while the
integration work is in process. Corporate operating expenses were $126.9 million in fiscal 2013 as compared with $112.9 million in fiscal 2012 .
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
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