Pension and retirement plans

12 Months Ended

Jun. 29, 2013

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 and other small pension plans that 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 2013 and 2012:

	June 29, 2013			June 30, 2012
	(Thousands)
Changes in benefit obligations:
Benefit obligations at beginning of year	$	375,156		$	297,527
Service cost	36,920			28,380
Interest cost	14,653			14,925
Plan amendments	—			3,360
Actuarial (gain) loss	(13,545		)	48,620
Benefits paid	(21,304		)	(17,656		)
Benefit obligations at end of year	$	391,880		$	375,156
Change in plan assets:
Fair value of plan assets at beginning of year	$	301,449		$	324,752
Actual return on plan assets	45,228			(5,647		)
Benefits paid	(21,304		)	(17,656		)
Contributions	40,000			—
Fair value of plan assets at end of year	$	365,373		$	301,449
Funded status of the plan recognized as a non-current liability	$	(26,507	)	$	(73,707	)
Amounts recognized in accumulated other comprehensive income:
Unrecognized net actuarial loss	$	173,069		$	218,837
Unamortized prior service credit	(7,623		)	(9,196		)
	$	165,446		$	209,641
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Net actuarial (gain) loss	$	(30,870	)	$	81,206
Prior service cost	—			3,360
Amortization of net actuarial loss	(14,898		)	(9,680		)
Amortization of prior service credit	1,573			1,875
	$	(44,195	)	$	76,761

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 amortization began in fiscal year 2013.

Included in “accumulated other comprehensive income” at June 29, 2013 is a pre-tax charge of $173,069,000 of net actuarial losses which have not yet been recognized in net periodic pension cost, of which $12,686,000 is expected to be recognized as a component of net periodic benefit cost during fiscal 2014. Also included is a pre-tax credit of $7,623,000 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 2014.

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

	2013	2012
Discount rate	4.50%	4.00%

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

	2013	2012
Discount rate	4.00%	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 29, 2013			June 30, 2012			July 2, 2011
	(Thousands)
Service cost	$	36,920		$	28,380		$	23,874
Interest cost	14,653			14,925			13,918
Expected return on plan assets	(27,905		)	(26,938		)	(27,560		)
Recognized net actuarial loss	14,898			9,680			8,938
Amortization of prior service credit	(1,573		)	(1,875		)	(1,875		)
Net periodic pension cost	$	36,993		$	24,172		$	17,295

The Company made $40,000,000 of contributions in fiscal 2013 and none in 2012.

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):

2014	$	28,436
2015	23,802
2016	27,310
2017	30,627
2018	34,448
2019 through 2023	240,710

The Plan’s assets are held in trust and were allocated as follows as of the June 30 measurement date for fiscal 2013 and 2012:

	2013		2012
Equity securities	75	%	75	%
Fixed income	24		24
Cash and cash equivalents	1		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.

FASB ASC 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described below:

Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.

Level 2: Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The following table sets forth by level, within the fair value hierarchy, the Plan's investments at fair value as of June 29, 2013.

	Level 1		Level 2		Level 3		Total
	(Thousands)
Cash and cash equivalents	$	3,032	$	—	$	—	$	3,032
Equities:
U.S. common stocks	—		219,225		—		219,225
International common stocks	—		56,458		—		56,458
Fixed Income:
U.S. government agencies	—		10,004		—		10,004
U.S. corporate bonds	—		76,654		—		76,654
Total	$	3,032	$	362,341	$	—	$	365,373

The following table sets forth by level, within the fair value hierarchy, the Plan's investments at fair value as of June 30, 2012.

	Level 1		Level 2		Level 3		Total
	(Thousands)
Cash and cash equivalents	$	3,045	$	—	$	—	$	3,045
Equities:
U.S. common stocks	—		178,857		—		178,857
International common stocks	—		46,897		—		46,897
Fixed Income:
U.S. government agencies	—		10,087		—		10,087
U.S. corporate bonds	—		62,563		—		62,563
Total	$	3,045	$	298,404	$	—	$	301,449

The Plan’s investments in equity and fixed income investments are stated at unit value, or the equivalent of net asset value, which is a practical expedient for estimating the fair values of those investments. Each of these investments may be redeemed daily without notice and had no unfunded commitments as of June 29, 2013.

The fixed income investments provide a steady return with medium volatility and assist with capital preservation and income generation. The equity investments have higher expected volatility and return than the fixed income investments.