Avnet 2014 Annual Report Download - page 61

Table of Contents AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The tax provision is computed based upon income before income taxes from both U.S. and foreign operations. U.S. income before income
taxes was $235.4 million , $174.0 million and $320.3 million and foreign income before income taxes was $465.7 million , $375.3 million
and
$470.4 million in fiscal 2014 , 2013 and 2012 , respectively.
Reconciliations of the federal statutory tax rate to the effective tax rates are as follows:
Foreign tax rates represents the impact of the difference between foreign and federal statutory rates applied to foreign income or loss and
also include the impact of valuation allowances established against the Company's otherwise realizable foreign deferred tax assets, which are
primarily loss carry-forwards.
Avnet’s effective tax rate on income before income taxes was 22.2% in fiscal 2014 as compared with an effective tax rate of 18.1%
in
fiscal 2013 . Included in the fiscal 2014 effective tax rate is a net tax benefit of $43.8 million
, which is comprised primarily of (i) a tax benefit of
$33.4 million
for the release of valuation allowances against deferred tax assets that were determined to be realizable, primarily related to a legal
entity in EMEA (discussed further below), and (ii) a net tax benefit of $7.0 million
resulting from losses related to an investment in a foreign
subsidiary. The fiscal 2014 effective tax rate is higher than the fiscal 2013
effective tax rate primarily due to a lower amount of tax benefits from
audit settlements in fiscal 2014 as compared to fiscal 2013, partially offset by a greater tax benefit from the valuation allowances released in
fiscal 2014 as compared with the amount released in fiscal 2013.
The Company applies the guidance in ASC 740, which requires management to use its judgment to the appropriate weighting of all
available evidence when assessing the need for the establishment or the release of valuation allowances. As
part of this analysis, the Company
examines all available evidence on a jurisdiction by jurisdiction basis and weighs the positive and negative evidence when determining the need
for full or partial valuation allowances. The evidence considered for each jurisdiction includes, among other items: (i) the historic levels of
income or losses over a range of time periods, which may extend beyond the most recent three fiscal years depending upon the historical
volatility of income in an individual jurisdiction; (ii) expectations and
58
Years Ended
June 28, 2014
June 29, 2013 June 30, 2012
(Thousands)
Current:
Federal
$
71,714
$
17,212
$
94,237
State and local
8,038
7,034
19,466
Foreign
91,415
84,965
98,278
Total current taxes
171,167
109,211
211,981
Deferred:
Federal
11,305
2,619
6,896
State and local
3,810
2,390
758
Foreign
(30,759
)
(15,028
)
4,128
Total deferred taxes
(15,644
)
(10,019
)
11,782
Income tax expense
$
155,523
$
99,192
$
223,763
Years Ended
June 28, 2014
June 29, 2013 June 30, 2012
Federal statutory rate
35.0
%
35.0
%
35.0
%
State and local income taxes, net of federal benefit
1.3
1.1
1.8
Foreign tax rates, net of valuation allowances
(9.3
)
(7.2
)
(5.4
)
Release of valuation allowance, net of U.S. tax expense
(4.8
)
(6.4
)
(2.8
)
Change in contingency reserves
(0.1
)
0.4
0.5
Tax audit settlements
(0.6
)
(6.0
)
(1.0
)
Other, net
0.7
1.2
0.2
Effective tax rate
22.2
%
18.1
%
28.3
%