Avnet 2014 Annual Report Download - page 25

total gross profit dollars relative to operating expenses. SG&A expenses as a percentage of gross profit at TS increased 346
basis points year
over year due primarily to the effects of the decrease in sales as previously described and, to a lesser extent, the effects of recent acquisitions as
certain cost synergies had not yet been attained.
Restructuring, Integration and Other Expenses
During fiscal 2014, the Company took certain actions in an effort to reduce future operating costs including activities necessary to achieve
planned synergies from recently acquired businesses. In addition, the Company incurred integration and other costs primarily associated with
acquired or divested businesses and for the consolidation of facilities. As a result, during fiscal 2014 the Company recorded restructuring,
integration and other expenses of $94.6 million . Restructuring expenses of $65.7 million consisted of $53.3 million for severance,
$11.6 million
for facility exit costs and asset impairments, and $0.9 million
for other restructuring expenses. Integration and other costs including acquisition
costs were $20.5 million and $8.8 million , respectively. The Company also recorded a net benefit of $0.3 million
for changes in estimates for
restructuring liabilities established in prior years. The after tax impact of restructuring, integration, and other expenses was $70.8 million
and
$0.50 per share on a diluted basis.
Severance expense recorded in fiscal 2014 related to the reduction, or planned reduction, of over 1,100
employees, primarily in operations,
sales and business support functions, in connection with cost reduction actions taken in both operating groups, including reductions in recently
acquired or integrated businesses. Facility exit costs primarily consisted of liabilities for remaining lease obligations and the impairment of long-
lived assets for facilities and information technology systems the Company ceased using. Other restructuring costs related primarily to other
miscellaneous restructuring and exit costs. Of the $65.7 million in restructuring expenses recorded during fiscal 2014 , $41.3 million
related to
EM, $23.1 million related to TS and $1.3 million related to corporate business support functions.
During the fourth quarter of fiscal 2014, the Company incurred restructuring expenses related to certain actions intended to achieve
planned synergies from recent acquisitions and to reduce future operating costs. The Company also incurred integration and other costs primarily
related to costs associated with recently acquired businesses and restructuring related actions. As a result, the Company recorded restructuring,
integration and other expenses of $28.0 million during the quarter, including restructuring costs of $19.6 million, integration costs of $8.1
million, other costs of $1.9 million and a benefit for changes in estimates for costs associated with previous restructuring actions of $1.6 million.
The tax-
effected impact of restructuring, integration and other expenses for the fourth quarter of fiscal 2014 was $20.9 million and $0.15 per
share on a diluted basis. When all such restructuring actions are substantially complete, which is expected to occur by the second quarter of fiscal
2015, the Company expects to realize approximately $30.0 million to $35.0 million in annualized operating cost benefits. When realized, the
annualized cost savings are expected to benefit the EM operating group by approximately $10.0 million and the TS operating group by
approximately $20.0 million to $25.0 million.
Integration costs are primarily related to the integration of acquired businesses, integration of regional business units and incremental costs
incurred as part of the consolidation, relocation and closure of warehouse and office facilities. Integration costs include consulting costs for
information technology system and business operation integration assistance, facility moving costs, legal fees, travel, meeting, marketing and
communication costs that are incrementally incurred as a result of such integration activities. Also included in integration costs are incremental
salary costs specific to integration, consolidation and closure activities. Other costs consists primarily of professional fees incurred for
acquisitions, additional costs incurred for businesses divested or exited in current or prior periods, any ongoing facilities operating costs
associated with the consolidation, relocation and closure of facilities once such facilities have been vacated or substantially vacated, and other
miscellaneous costs that relate to restructuring, integration and other expenses. Integration and other costs in fiscal 2014
were comprised of
many different costs, none of which were individually material.
During fiscal 2013
, the Company took certain restructuring actions to reduce costs in both operating groups in response to then current
market conditions and incurred acquisition and integration costs primarily associated with recently acquired businesses. As a result, the
Company recorded restructuring, integration and other expenses of $149.5 million . Restructuring expenses of $120.0 million consisted of
$73.3
million for severance, $34.4 million for facility exit costs and asset impairments, and $12.3 million
for other restructuring expenses. Integration
costs were $35.7 million and other costs were a net benefit of $3.2 million . The Company also recorded a benefit of $3.1 million
for changes in
estimates for restructuring liabilities established in prior years. The after tax impact of restructuring, integration, and other expenses was
$116.4
million and $0.83 per share on a diluted basis.
During fiscal 2012
, the Company took certain restructuring actions to reduce costs in both operating groups in response to then current
market conditions and incurred acquisition and integration costs primarily associated with recently acquired businesses. As a result, the
Company recorded restructuring, integration and other expenses of $73.6 million . Restructuring expenses of $50.3 million consisted of
$33.2
million for severance, $12.0 million for facility exit costs and asset impairments, and $5.1 million for
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