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Income Taxes | 12 Months Ended
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Jun. 29, 2013
Income Tax Disclosure [Abstract] |
Income taxes | Income taxes The components of the provision for income taxes are indicated in the table below. The tax provision for deferred income taxes results from temporary differences arising principally from inventory valuation, accounts receivable valuation, net operating losses, certain accruals and depreciation, net of any changes to the valuation allowance.
| Years Ended
| June 29, 2013 |  | June 30, 2012 |  | July 2, 2011
| (Thousands)
Current: |  |  |  |  |
Federal | $ | 17,212 |  |  | $ | 94,237 |  |  | $ | 64,476 |
State and local | 7,034 |  |  | 19,466 |  |  | 11,724 |
Foreign | 84,965 |  |  | 98,278 |  |  | 109,731 |
Total current taxes | 109,211 |  |  | 211,981 |  |  | 185,931 |
Deferred: |  |  |  |  |
Federal | 2,619 |  |  | 6,896 |  |  | 41,029 |
State and local | 2,390 |  |  | 758 |  |  | 5,273 |
Foreign | (15,028 | ) |  | 4,128 |  |  | (30,336 | )
Total deferred taxes | (10,019 | ) |  | 11,782 |  |  | 15,966 |
Provision for income taxes | $ | 99,192 |  |  | $ | 223,763 |  |  | $ | 201,897 |
The provision for income taxes noted above is computed based upon the split of income before income taxes from U.S. and foreign operations. U.S. income before income taxes was $174,000,000, $320,333,000 and $273,287,000 and foreign income before income taxes was $375,265,000, $470,449,000 and $597,679,000 in fiscal 2013, 2012 and 2011, respectively. Reconciliations of the federal statutory tax rate to the effective tax rates are as follows:
| Years Ended
| June 29, 2013 |  | June 30, 2012 |  | July 2, 2011
Federal statutory rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
State and local income taxes, net of federal benefit | 1.1 |  |  | 1.8 |  |  | 1.5 |
Foreign tax rates, net of valuation allowances | (7.2 | ) |  | (5.4 | ) |  | (5.3 | )
Release of valuation allowance, net of U.S. tax expense (as discussed below) | (6.4 | ) |  | (2.8 | ) |  | (7.4 | )
Change in contingency reserves | 0.4 |  |  | 0.5 |  |  | 1.4 |
Tax audit settlements | (6.0 | ) |  | (1.0 | ) |  | (0.4 | )
Other, net | 1.2 |  |  | 0.2 |  |  | (1.6 | )
Effective tax rate | 18.1 | % |  | 28.3 | % |  | 23.2 | %
Foreign tax rates generally consist of 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 against the Company's otherwise realizable foreign loss carry-forwards. 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 $50,376,000, which is comprised of (i) a tax benefit of $41,572,000 for the release of valuation allowance against deferred tax assets that were determined to be realizable, primarily related to a legal entity in EMEA (discussed further below), (ii) net favorable audit settlements resulting in a benefit of $33,182,000, partially offset by (iii) a tax provision of $24,378,000 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, a greater impact to the rate from 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. During fiscal 2013, the Company had a partial valuation allowance against significant tax assets related to a legal entity in EMEA due to, among several other factors, a history of losses in that entity. Since fiscal 2010, the entity has been experiencing improved earnings, which required the partial release of the valuation allowance to the extent the entity has projected taxable income. In each of fiscal 2013 and 2012, the Company determined a portion of the valuation allowance for this legal 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, net of the U.S. tax expense. In fiscal 2013 and 2012, the valuation allowance released associated with this EMEA legal entity was $27,055,000 and $22,127,000, 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. During fiscal 2013, the Company's effective tax rate was favorably impacted primarily by the settlement of two audits by the U.S. Internal Revenue Service ("IRS") for the Company and an acquired company. As a result, the Company recognized a tax benefit of $33,005,000 in fiscal 2013. Avnet’s effective tax rate on income before income taxes was 28.3% in fiscal 2012 as compared with an effective tax rate of 23.2% in fiscal 2011. As compared with 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 the amount released in 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. The significant components of deferred tax assets and liabilities, included primarily in “other assets” on the consolidated balance sheets, are as follows:
| June 29, 2013 |  | June 30, 2012
| (Thousands)
Deferred tax assets: |  |  |
Inventory valuation | $ | 19,509 |  |  | $ | 13,298 |
Accounts receivable valuation | 27,185 |  |  | 29,984 |
Federal, state and foreign tax loss carry-forwards | 333,940 |  |  | 304,410 |
Various accrued liabilities and other | 33,031 |  |  | 88,792 |
| 413,665 |  |  | 436,484 |
Less — valuation allowance | (230,821 | ) |  | (244,093 | )
| 182,844 |  |  | 192,391 |
Deferred tax liabilities: |  |  |
Depreciation and amortization of property, plant and equipment | (50,469 | ) |  | (54,745 | )
Net deferred tax assets | $ | 132,375 |  |  | $ | 137,646 |
The change in the valuation allowance from fiscal 2012 to fiscal 2013 was a combination of (i) a net reduction of $41,572,000 primarily due to the previously mentioned release of valuation allowance in EMEA, $31,867,000 of which impacted the effective tax rate while the remainder was offset in deferred income taxes, and (ii) a net increase of $28,300,000 primarily related to additional valuation allowances for newly acquired companies and companies with a history of losses. As of June 29, 2013, the Company had foreign net operating loss carry-forwards of approximately $1,186,832,000, of which $43,463,000 will expire during fiscal 2014 and 2015, substantially all of which have full valuation allowances, $238,701,000 have expiration dates ranging from fiscal 2016 to 2033 and the remaining $904,668,000 have no expiration date. The carrying value of the Company’s net operating loss carry-forwards is dependent upon the Company’s ability to generate sufficient future taxable income in certain tax jurisdictions. In addition, the Company considers historic levels of income, expectations and risk associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing a tax valuation allowance. Accruals for unrecognized tax benefits are included in “accrued expenses and other” and “other long term liabilities” on the consolidated balance sheet. These contingency reserves relate to various tax matters that result from uncertainties in the application of complex income tax regulations in the numerous jurisdictions in which the Company operates. The change to contingency reserves during fiscal 2013 is primarily due to favorable non-cash audit settlements, which are included in the “reductions for tax positions taken in prior periods” caption in the following table. As of June 29, 2013, unrecognized tax benefits were $123,930,000, of which approximately $117,708,000, if recognized, would favorably impact the effective tax rate and the remaining balance would be substantially offset by valuation allowances. As of June 30, 2012, unrecognized tax benefits were $146,626,000, of which approximately $126,933,000, if recognized, would favorably impact the effective tax rate, and the remaining balance would be substantially offset by valuation allowances. The accrual for unrecognized tax benefits included accrued interest expense and penalties of $24,979,000 and $24,664,000, net of applicable state tax benefit, as of the end of fiscal 2013 and 2012, respectively. Reconciliations of the beginning and ending accrual balances for unrecognized tax benefits are as follows:
| June 29, 2013 |  | June 30, 2012
| (Thousands)
Balance at beginning of year | $ | 146,626 |  |  | $ | 175,151 |
Additions for tax positions taken in prior periods, including interest | 11,732 |  |  | 19,262 |
Reductions for tax positions taken in prior periods, including interest | (33,776 | ) |  | (35,898 | )
Additions for tax positions taken in current period | 7,445 |  |  | 8,179 |
Reductions related to cash settlements with taxing authorities | (9,064 | ) |  | (7,460 | )
Reductions related to the lapse of statute of limitations | (2,812 | ) |  | (3,810 | )
Additions (reductions) related to foreign currency translation | 3,779 |  |  | (8,798 | )
Balance at end of year | $ | 123,930 |  |  | $ | 146,626 |
The evaluation of income tax positions requires management to estimate the ability of the Company to sustain its position and estimate the final benefit to the Company. To the extent that these estimates do not reflect the actual outcome there could be an impact on the consolidated financial statements in the period in which the position is settled, the statute of limitations expire or new information becomes available as the impact of these events are recognized in the period in which they occur. It is difficult to estimate the period in which the amount of a tax position will change as settlement may include administrative and legal proceedings whose timing the Company cannot control. The effects of settling tax positions with tax authorities and statute expirations may significantly impact the accrual for income tax contingencies. Within the next twelve months, management estimates that approximately $23,884,000 of tax contingencies will be settled primarily through agreement with the tax authorities for tax positions related to valuation matters and positions related to acquired entities; such matters are common to multinational companies. The expected cash payment related to the settlement of these contingencies is $16,303,000. The Company conducts business globally and consequently files income tax returns in numerous jurisdictions including those listed in the following table. It is also routinely subject to audit in these and other countries. The Company is no longer subject to audit in its major jurisdictions for periods prior to fiscal year 2006. The years remaining subject to audit, by major jurisdiction, are as follows:
Jurisdiction |  | Fiscal Year
Belgium, Germany and United States (federal and state) |  | 2010-2013
United Kingdom |  | 2009-2013
Hong Kong |  | 2007-2013
Singapore |  | 2006-2013
Netherlands and Taiwan |  | 2008-2013

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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