Avnet 2013 Annual Report Download - page 27

Table of Contents
Income Tax Provision
Avnet’s effective tax rate on income before income taxes was 18.1% in fiscal 2013 as compared with an effective tax rate of 28.3%
in
fiscal 2012 . Included in the fiscal 2013 effective tax rate is a net tax benefit of $50.4 million , which is comprised of (i) a tax benefit of
$41.6
million
for the reversal of previously established valuation allowances against deferred tax assets that were now determined to be realizable, a
portion of which related to a legal entity in EMEA (discussed further below), (ii) net favorable audit settlements resulting in a benefit of
$33.2
million , partially offset by (iii) a tax provision of $24.4 million
primarily related to the establishment of a valuation allowance against deferred
tax assets that were determined to be unrealizable during fiscal 2013 . The fiscal 2013 effective tax rate is lower than the fiscal 2012
effective tax
rate primarily due to a favorable impact from audit settlements and, to a lesser extent, the amount of the valuation allowance released in fiscal
2013 (as discussed further below) as compared with the amount released in fiscal 2012
due to the reduced level of income and mix of income in
the current year. In fiscal 2012
, withholding tax related to legal entity reorganization resulted in an increase to the rate that does not exist in the
current year.
Prior to fiscal 2011, the Company established a full valuation allowance against significant deferred tax assets related to a legal entity in
EMEA due to, among several other factors, a history of losses in that entity. Since fiscal 2011, the Company determined a portion of the
valuation allowance related to this entity was no longer required due to the expected continuation of improved earnings in the foreseeable future
and, as a result, the Company's effective tax rate was positively impacted (decreased) upon the release of the valuation allowance. In fiscal 2013
and 2012, the valuation allowance released associated with this EMEA legal entity was $27.1 million and $22.1 million
, respectively, net of the
U.S. tax expense associated with the release. The Company will continue to evaluate the need for a valuation allowance against these tax assets
and will adjust the valuation allowance as deemed appropriate which, when adjusted, will result in an impact to the effective tax rate. 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. Excluding the benefit in both fiscal years related to the release of the tax
valuation allowance associated with the EMEA legal entity, the effective tax rate for fiscal 2013 would have been 23.0%
as compared with
31.1% for fiscal 2012.
Avnet’s effective tax rate on income before income taxes was 28.3% in fiscal 2012 ; compared with an effective tax rate of 23.2%
in fiscal
2011 . The fiscal 2012
effective tax rate is higher than the fiscal 2011 effective tax rate primarily due to a lower amount of valuation allowance
released in fiscal 2012 as compared with fiscal 2011, and, to a lesser extent, a more favorable impact from audit settlements and changes to
existing tax positions in fiscal 2012 as compared with fiscal 2011. These favorable impacts were partially offset by withholding tax in fiscal
2012.
Avnet's effective tax rate is primarily a function of the tax rates in the numerous jurisdictions in which it does business applied to the mix
of pre-
tax book income. The effective tax rate may vary year over year as a result of changes in tax requirements in these jurisdictions,
management's evaluation of its ability to generate sufficient taxable income to offset net operating loss carry-
forwards and the establishment of
reserves for unfavorable outcomes of tax positions taken on certain matters that are common to multinational enterprises and the actual outcome
of those matters.
Net Income
As a result of the factors described in the preceding sections of this MD&A, the Company’s net income in fiscal 2013 was $450.1 million
,
or $3.21 per share on a diluted basis, compared with net income of $567.0 million , or $3.79 per share on a diluted basis, in fiscal 2012
and
$669.1 million , or $4.34 per share on a diluted basis, in fiscal 2011 .
Fiscal 2013 , 2012 and 2011 results were impacted by certain items as presented in the following tables:
25
Year Ended June 29, 2013
Operating
Income (Loss)
Pre-tax
Income (Loss)
Net
Income (Loss)
Diluted
EPS
(Thousands, except per share data)
Restructuring, integration and other charges
$
(149,501
)
$
(149,501
)
$
(116,382
)
$
(0.83
)
Gain on bargain purchase and other
—
31,011
30,974
0.22
Net tax benefit
—
—
50,376
0.36
Total
$
(149,501
)
$
(118,490
)
$
(35,032
)
$
(0.25
)