Pension and retirement plans

12 Months Ended

Jun. 30, 2012

Compensation and Retirement Disclosure [Abstract]

Pension and retirement plans

Pension and retirement plans

Pension Plan

The Company’s noncontributory defined benefit pension plan (the “Plan”) covers substantially all domestic employees. Employees are eligible to participate in the Plan following the first year of service during which they worked at least 1,000 hours. The Plan provides defined benefits pursuant to a cash balance feature whereby a participant accumulates a benefit based upon a percentage of current salary, which varies with age, and interest credits. The Company uses June 30 as the measurement date for determining pension expense and benefit obligations for each fiscal year. Not included in the tabulations and discussions that follow are pension plans of certain non-U.S. subsidiaries, which are not material.

The following tables outline changes in benefit obligations, plan assets and the funded status of the Plan as of the end of fiscal 2012 and 2011:

	June 30, 2012			July 2, 2011
	(Thousands)
Changes in benefit obligations:
Benefit obligations at beginning of year	$	297,527		$	276,938
Service cost	28,380			23,874
Interest cost	14,925			13,918
Plan amendments	3,360			—
Actuarial loss	48,620			5,168
Benefits paid	(17,656		)	(22,371		)
Benefit obligations at end of year	$	375,156		$	297,527
Change in plan assets:
Fair value of plan assets at beginning of year	$	324,752		$	278,964
Actual return on plan assets	(5,647		)	67,659
Benefits paid	(17,656		)	(22,371		)
Contributions	—			500
Fair value of plan assets at end of year	$	301,449		$	324,752
Funded status of the plan recognized as a non-current asset (liability)	$	(73,707	)	$	27,225
Amounts recognized in accumulated other comprehensive income:
Unrecognized net actuarial loss	$	218,837		$	147,311
Unamortized prior service credit	(9,196		)	(14,431		)
	$	209,641		$	132,880
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Net actuarial (gain) loss	$	81,206		$	(34,931	)
Prior service cost	3,360			—
Amortization of net actuarial loss	(9,680		)	(8,938		)
Amortization of prior service credit	1,875			1,875
	$	76,761		$	(41,994	)

The Plan was amended effective June 1, 2012 to improve pre-retirement death benefits so that the pre-retirement death benefits will be payable without regard to marital status, and will be based on 100% of the participant's vested cash account. The increase in liability is recognized as a prior service cost and will be amortized staring in fiscal year 2013.

Included in “accumulated other comprehensive income” at June 30, 2012 is a pre-tax charge of $218,837,000 of net actuarial losses which have not yet been recognized in net periodic pension cost, of which $14,899,000 is expected to be recognized as a component of net periodic benefit cost during fiscal 2013. Also included is a pre-tax credit of $9,196,000 of prior service credit which has not yet been recognized in net periodic pension costs, of which $1,573,000 is expected to be recognized as a component of net periodic benefit costs during fiscal 2013.

Weighted average assumptions used to calculate actuarial present values of benefit obligations are as follows:

	2012	2011
Discount rate	4.00%	5.25%

Weighted average assumptions used to determine net benefit costs are as follows:

	2012	2011
Discount rate	5.25%	5.25%
Expected return on plan assets	8.50%	8.50%

The Company bases its discount rate on a hypothetical portfolio of bonds rated Aa by Moody’s Investor Services or AA by Standard & Poor's. The bonds selected for this determination are based upon the estimated amount and timing of services of the pension plan.

Components of net periodic pension costs during the last three fiscal years are as follows:

	Years Ended
	June 30, 2012			July 2, 2011			July 3, 2010
	(Thousands)
Service cost	$	28,380		$	23,874		$	—
Interest cost	14,925			13,918			15,748
Expected return on plan assets	(26,938		)	(27,560		)	(30,137		)
Recognized net actuarial loss	9,680			8,938			5,687
Amortization of prior service credit	(1,875		)	(1,875		)	(4,884		)
Net periodic pension cost	$	24,172		$	17,295		$	(13,586	)

The Company made no contributions in fiscal 2012 and $500,000 in 2011.

Benefit payments are expected to be paid to participants as follows for the next five fiscal years and the aggregate for the five years thereafter (in thousands):

2013	$	28,399
2014	24,035
2015	24,903
2016	28,741
2017	31,977
2018 through 2022	218,671

The Plan’s assets are held in trust and were allocated as follows as of the June 30 measurement date for fiscal 2012 and 2011:

	2012		2011
Equity securities	75	%	76	%
Debt securities	24		24
Cash and receivables	1		—

The general investment objectives of the Plan are to maximize returns through a diversified investment portfolio in order to earn annualized returns that meet the long-term cost of funding the Plan’s pension obligations while maintaining reasonable and prudent levels of risk. The target rate of return on Plan assets is currently 8.5%, which represents the average rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the benefit obligation. This assumption has been determined by combining expectations regarding future rates of return for the investment portfolio along with the historical and expected distribution of investments by asset class and the historical rates of return for each of those asset classes. The mix of equity securities is typically diversified to obtain a blend of domestic and international investments covering multiple industries. The Plan assets do not include any material investments in Avnet common stock. The Plan’s investments in debt securities are also diversified across both public and private fixed income securities. The Company’s current target allocation for the investment portfolio is for equity securities, both domestic and international, to represent approximately 76% of the portfolio with a policy for minimum investment in equity securities of 60% of the portfolio and a maximum of 92%. The majority of the remaining portfolio of investments is to be invested in fixed income securities.

As of June 30, 2012, the market value of plan assets by investment category was: U.S. Equity ($178.9 million); U.S. Bonds ($72.6 million); International Equity ($46.9 million) and cash and receivables ($3.0 million). Asset values are Level 1 for all asset categories as the fair values are based upon quoted market prices for identical assets. The pension assets were highly diversified to reduce the potential risk of significant concentrations of credit risk.