Avnet 2013 Annual Report Download - page 26

Table of Contents
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 during fiscal 2011 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 $112.9 million in fiscal 2012
as compared with
$112.0 million in fiscal 2011 .
Interest Expense and Other Income (Expense), net
Interest expense for fiscal 2013 was $107.7 million , an increase of $16.8 million , or 18.5%
, compared with the prior year. The increase
in interest expense was primarily due to higher average debt balances and incremental interest expense related to the 4.875% Notes issued during
the second quarter of fiscal 2013, the proceeds of which were used to repay the short-term debt, which had lower interest rates. See
Financing
Transactions for further discussion of the Company's outstanding debt.
Interest expense for fiscal 2012 was $90.9 million , down $1.6 million , or 1.7% , compared with the prior year. The year-over-
year
decrease in interest expense was 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.
During fiscal 2013 , the Company recognized $0.1 million of other expense as compared with $5.4 million in the prior year. The year-
over-
year increase in other income is attributable to a reduction in foreign currency exchange losses in the current year. Included in other income
for fiscal 2013 is a gain on sale of marketable securities partially offset by a loss due to the devaluation of the Venezuelan currency.
During fiscal 2012 , the Company recognized $5.4 million of other expense as compared with other income of $10.7 million
in the prior
year. The year
-over-
year increase in other expense was due primarily to foreign exchange losses in fiscal 2012 compared with foreign currency
exchange gains in the prior year.
Gain on Bargain Purchase and Other
During fiscal 2013 , the Company recognized a gain on bargain purchase and other of $31.0 million pre-
tax, which consisted of (i) a gain
on bargain purchase related to the acquisition of Internix of $32.7 million pre- and after tax and $0.23
per share on a diluted basis, which was
partially offset by (ii) a loss of $1.7 million pre-tax and after tax and $0.01
per share on a diluted basis as a result of the divestiture of a small
business in the TS Asia region.
During fiscal 2012, the Company recognized a gain on bargain purchase of $4.3 million pre-
and after tax and $0.03 per share on a diluted
basis. In January 2012, the Company acquired Unidux Electronics Limited, a Singapore publicly traded company, through a tender offer. After
assessing the assets acquired and liabilities assumed, the consideration paid was below the fair value of the acquired net assets and, as a result,
the Company recognized the gain. In addition, the Company recognized other charges of $1.4 million pre-
tax, $0.9 million after tax and $0.01
per share on a diluted basis related to the write-down of an investment in a small technology company and the write-
off of certain deferred
financing costs associated with the early termination of a credit facility (see Financing Transactions for further discussion).
During fiscal 2011, the Company acquired Unidux, a Japanese publicly traded company, through a tender offer. After reassessing all assets
acquired and liabilities assumed, the consideration paid was below the fair value of the acquired net assets and, as a result, the Company
recognized a gain on bargain purchase of $31.0 million pre-
and after tax and $0.20 per share on a diluted basis. In addition, the Company
recognized other charges of $2.0 million pre-
tax, $1.4 million after tax and $0.01 per share on a diluted basis primarily related to an impairment
of buildings in EMEA and recognized a loss of $6.3 million pre-
tax, $3.9 million after tax and $0.02 per share on a diluted basis related to the
write-down of prior investments in smaller technology start-up companies.
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