For a description of the Company's critical accounting policies and an understanding of the significant factors that influenced the Company's performance during the quarter ended December 29, 2012, this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the consolidated financial statements, including the related notes, appearing in Item 1 of this Report, as well as the Company's Annual Report on Form 10-K for the year ended June 30, 2012.
There are references to the impact of foreign currency translation in the discussion of the Company's results of operations. When the U.S. Dollar strengthens and the stronger U.S. Dollar exchange rates of the current year are used to translate the results of operations of Avnet's subsidiaries denominated in foreign currencies, the resulting impact is a decrease in U.S. Dollars of reported results. Conversely, when the weaker U.S. Dollar exchange rates of the current year are used to translate the results of operations of Avnet's subsidiaries denominated in foreign currencies, the resulting impact is an increase in U.S. Dollars of reported results. In the discussion that follows, results excluding this impact are referred to as "excluding the translation impact of changes in foreign currency exchange rates" or "constant currency." In addition to disclosing financial results that are determined in accordance with U.S. generally accepted accounting principles ("GAAP"), the Company also discloses certain non-GAAP financial information, including:
• Income or expense items as adjusted for the translation impact of changes in foreign currency exchange rates, as discussed above.

•         Sales adjusted for certain items that impact the year-over-year
          analysis, which include: (i) the impact of acquisitions by adjusting
          Avnet's prior periods to include the sales of businesses acquired as if
          the acquisitions had occurred at the beginning of the period presented;
          and (ii) the impact of a divestiture by adjusting Avnet's prior periods
          to exclude the sales of the business divested as if the divestiture had
          occurred at the beginning of the period presented. In addition, the
          prior year sales of EM and TS are adjusted for the impact of the
          transfer of a business unit from TS Americas to EM Americas that was
          completed at the beginning of fiscal 2013. Sales taking into account
          the combination of these adjustments are referred to as "pro forma
          sales" or "organic sales."


•         Operating income excluding restructuring, integration and other charges
          incurred in the second quarters and first halves of fiscal 2013 and
          2012 (see Restructuring, Integration and Other Charges in this MD&A).

The reconciliation to GAAP is presented in the following table:

                                             Second Quarters Ended                     Six Months Ended
                                        December 29,         December 31,       December 29,       December 31,
                                            2012                 2011               2012               2011
                                                                     (Thousands)
GAAP operating income                $      195,573        $      230,889     $      295,546     $      453,953
Restructuring, integration and other
charges                                      24,906                34,505             62,314             34,505
Adjusted operating income            $      220,479        $      265,394     $      357,860     $      488,458

Management believes that providing this additional information is useful to the reader to better assess and understand operating performance, especially when comparing results with previous periods or forecasting performance for future periods, primarily because management typically monitors the business both including and excluding these adjustments to GAAP results. Management also uses these non-GAAP measures to establish operational goals and, in some cases, for measuring performance for compensation purposes. However, analysis of results on a non-GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with GAAP.

manufacturers ("OEMs"), electronic manufacturing services ("EMS") providers, original design manufacturers ("ODMs") and value-added resellers ("VARs"). Avnet distributes electronic components, computer products and software as received from its suppliers or with assembly or other value added by Avnet. Additionally, Avnet provides engineering design, materials management and logistics services, system integration and configuration, and supply chain services that can be customized to meet the requirements of both customers and suppliers. Avnet has two primary operating groups - Electronics Marketing ("EM") and Technology Solutions ("TS"). Both operating groups have operations in each of the three major economic regions of the world: the Americas; Europe, the Middle East and Africa ("EMEA"); and Asia/Pacific, consisting of Asia, Australia and New Zealand ("Asia" or "Asia/Pac"). A brief summary of each operating group is provided below:
• EM markets and sells semiconductors and interconnect, passive and electromechanical devices ("IP&E") and embedded products for the world's leading electronic component manufacturers. EM markets and sells its products and services to a diverse customer base serving many end-markets including automotive, communications, computer hardware and peripheral, industrial and manufacturing, medical equipment, military and aerospace. EM also offers an array of value-added services that help customers evaluate, design-in and procure electronic components throughout the lifecycle of their technology products and systems. By working with EM, customers and suppliers can accelerate their time to market and realize cost efficiencies in both the design and manufacturing process.

• As a global IT solutions distributor, TS collaborates with its customers and suppliers to create and deliver services, software and hardware solutions that address the business needs of end-user customers locally and around the world. TS focuses on the global value-added distribution of enterprise computing servers and systems, software, storage, services and complex solutions from the world's foremost technology manufacturers, marketing and selling them to and through the VAR channel. TS also serves the worldwide OEM market for computing technology, system integrators and non-PC OEMs that require embedded systems and solutions including engineering, product prototyping, integration and other value-added services. The operating group has sales and marketing divisions dedicated to these customer segments as well as independent software vendors.

Results of Operations
Executive Summary
Revenue for the second quarter of fiscal 2013 of $6.70 billion exceeded management's expectations at both operating groups as sequential growth returned to normal seasonality after two quarters of below seasonal growth. Organic revenue increased 9.4% sequentially in constant dollars, which was driven by stronger-than-expected calendar year end IT spending by end customers at TS and stronger-than-expected sales in high-volume, lower gross profit margin fulfillment business in EM Asia. EM organic revenue in constant currency decreased 1.7% sequentially, which was in line with normal seasonal growth of flat to down 3% for a December quarter. For TS, organic revenue increased 27% sequentially in constant dollars, which was slightly above the high end of normal seasonality of up 20% to 26%. On a year-over-year basis, revenue of $6.70 billion was essentially flat as compared with the second quarter of fiscal 2012 revenue of $6.69 billion.
Gross profit margin of 11.5% decreased 24 basis points over the prior year second quarter and decreased 19 basis points sequentially. EM gross profit margin decreased 80 basis points year over year due primarily to a temporary benefit in the prior year's gross profit margin related to the hard disk drive shortages in the year ago quarter and a revenue mix shift to the lower-margin Asia region in the current year second quarter. Asia revenue represented 41% of the total EM revenue in the current year second quarter as compared with 35% in the prior year second quarter. Sequentially, EM gross profit margin decreased 23 basis points, primarily due to a higher percentage of lower-margin fulfillment revenue in Asia and a sequential revenue mix shift, in which Asia revenue represented 38% of total EM revenue in the first quarter of fiscal 2013 as compared with 41% in the current year second quarter. TS gross profit margin increased 32 basis points year over year, primarily driven by the Americas, and increased 49 basis points sequentially with all three regions contributing. These increases were driven primarily by the revenue mix of higher margin products.
Consolidated operating income margin was 2.9% as compared with 3.5% in the prior year second quarter. Both periods included restructuring, integration and other charges. Excluding these charges from both periods, operating income margin was 3.3% of sales in the second quarter of fiscal 2013 as compared to 4.0% of sales in the prior year second quarter. EM operating income margin decreased 105 basis points year over year to 3.8%. This decline in EM operating income margin was primarily due to lower gross profit margin as previously mentioned, combined with lower profitability in the western regions, offset partially by the benefits of cost reduction actions taken. TS operating income margin decreased 27 basis points year over year to 3.6% due primarily to recent acquisitions as the related cost synergies have not yet been attained, in particular in Europe, and which are not expected to be fully achieved for several quarters while the integration work is in process. On a sequential basis, TS operating

income margin improved 202 basis points with all three regions contributing as a result of stronger-than-expected revenue growth and higher gross profit margins as noted above.
In response to the decline in profitability, the Company has been taking expense reduction actions to align its resources to expected sales levels. As a result of these expense reduction actions, the Company estimates it realized approximately $100 million in annualized cost benefits in the second quarter of fiscal 2013 as compared with the prior year. Sales
The table below provides the comparison of reported second quarter fiscal 2013 and 2012 sales for the Company and its operating groups to pro forma (or organic) sales (as defined previously) to allow readers to better understand and assess the Company's revenue performance by operating group and region.

                                                                          Pro forma        Pro forma       Pro forma
                        Q2-Fiscal FY     Q2-Fiscal FY     Year-Year      Q2-Fiscal FY     Q2-Fiscal FY     Year-Year
                            '13              '12          % Change           '13              '12          % Change
                                                           (Dollars in thousands)
Avnet, Inc.            $  6,699,465     $  6,693,573         0.1  %     $  6,702,995     $  7,104,650         (5.7 )%
EM                        3,673,513        3,595,607         2.2                   -        3,755,407         (2.2 )
TS                        3,025,952        3,097,966        (2.3 )         3,029,482        3,349,243         (9.6 )
EM
Americas               $  1,264,851     $  1,401,751        (9.8 )%     $          -     $  1,449,974        (12.8 )%
EMEA                        914,351          943,335        (3.1 )                 -          957,786         (4.5 )
Asia/Pacific              1,494,311        1,250,521        19.5                   -        1,347,647         10.9
TS
Americas               $  1,598,292     $  1,648,250        (3.0 )%     $  1,601,822     $  1,706,189         (6.1 )%
EMEA                        963,819        1,006,173        (4.2 )                 -        1,199,511        (19.7 )
Asia/Pacific                463,841          443,543         4.6                   -                -            -
Totals by Region
Americas               $  2,863,143     $  3,050,001        (6.1 )%     $  2,866,673     $  3,156,163         (9.2 )%
EMEA                      1,878,170        1,949,508        (3.7 )                 -        2,157,297        (12.9 )
Asia/Pacific              1,958,152        1,694,064        15.6                   -        1,791,190          9.3

The following tables present the reconciliation of the reported sales to pro forma sales for the second quarters of fiscal 2013 and 2012.

                      As         Acquisition      Pro forma
Q2 Fiscal 2013     Reported        Sales(1)         Sales
                                 (Thousands)
Avnet, Inc.      $ 6,699,465    $       3,530    $ 6,702,995
TS                 3,025,952            3,530      3,029,482
TS
Americas         $ 1,598,292    $       3,530    $ 1,601,822


_____________________

                                                           Transfer of
                      As                                   TS Business      Pro forma
Q2 Fiscal 2012     Reported      Acquisition Sales(1)         to EM           Sales
                                              (Thousands)
Avnet, Inc.      $ 6,693,573    $              411,077    $          -     $ 7,104,650
EM                 3,595,607                   153,506           6,294       3,755,407
TS                 3,097,966                   257,571          (6,294 )     3,349,243
EM
Americas         $ 1,401,751    $               41,929    $      6,294     $ 1,449,974
EMEA                 943,335                    14,451               -         957,786
Asia               1,250,521                    97,126               -       1,347,647
TS
Americas         $ 1,648,250    $               64,233    $     (6,294 )   $ 1,706,189
EMEA               1,006,173                   193,338               -       1,199,511


_____________________

Tekdata Interconnetions, Limited acquired in October 2012 in the EM EMEA region Magirus AG acquired in October 2012 in the TS EMEA region Brightstar Partners, Inc., BPS Software and Genilogix acquired in November 2012 in the TS Americas region
Consolidated sales for the second quarter of fiscal 2013 were $6.70 billion, an increase of 0.1%, or $5.9 million, from the prior year second quarter consolidated sales of $6.69 billion. Organic sales (as defined earlier in this MD&A) decreased 5.7% year over year and decreased 4.8% excluding the translation impact of changes in foreign currency exchange rates. The organic revenue decline was primarily due to the revenue decline at TS. On a sequential basis, organic sales increased 10% and increased 9% excluding the translation impact of changes in foreign currency exchange rates, which represented a return to normal seasonal growth at both EM and TS after two quarters of below normal seasonal growth.
EM sales of $3.67 billion in the second quarter of fiscal 2013 decreased 2.2% from the prior year second quarter sales of $3.60 billion. EM organic revenue in constant currency decreased 0.9% year over year and decreased 1.7% sequentially, which was in line with normal seasonal growth of flat to down 3% for a December quarter. On a regional basis, the Americas organic revenue decreased 12.8% year over year primarily due to a decision to exit the commercial components business in Latin America. For EMEA, which experienced several quarters of double-digit organic revenue contraction in fiscal 2012, organic revenue was down less than 1% year over year in constant currency. Asia organic revenue increased 10.9% year over year, which was stronger than expected and was primarily due to higher revenue in the high-volume, lower gross margin fulfillment business. The growth in Asia resulted in a regional shift in the mix of sales between the lower-margin Asia region and the higher-margin western regions, which negatively impacted both EM's consolidated gross profit and operating income margins. TS sales of $3.03 billion in the second quarter of fiscal 2013 declined 2.3% from the prior year second quarter sales of $3.10 billion. Organic revenue decreased 9.1% year over year in constant dollars primarily due to weaker sales in the western regions. In the Americas region, year-over-year organic sales decreased 6.1%, EMEA decreased 18.0% in constant currency, while Asia increased 4.6%. On a sequential basis, organic revenue increased 27% in constant dollars which was slightly above the high end of normal seasonality of up 20% to 26%. The seasonal revenue growth was higher than expected after two quarters of below seasonal growth. On a product level, storage and sales of supplier service contracts were the most notable product categories that were up year over year. Consolidated sales for the first half of fiscal 2013 were $12.57 billion, a decrease of 4.2% as compared with sales of $13.12 billion for the first half of fiscal 2012. On an organic basis excluding the impact of changes in foreign currency exchange rates, sales for the first half of fiscal 2013 were down 6.4% as compared with the same period in the prior year. EM sales of $7.33 billion for the first half of fiscal 2013 were down 1.2% as compared with the first half of the prior year and organic revenue was down 3.0% in constant currency. The decrease was primarily driven by the western regions, which was substantially offset by an increase in the Asia region. TS sales of $5.24 billion for the first half of fiscal 2013 were down 8.1% as compared with the first half of fiscal 2012 and organic revenue was down 10.9% in constant currency, primarily due to declines in the western regions.

Gross Profit and Gross Profit Margins
Consolidated gross profit for the second quarter of fiscal 2013 was $768.5 million, a decrease of $15.7 million, or 2.0%, from the prior year second quarter and a decrease of 8.6% on a pro forma basis in constant currency. Gross profit margin of 11.5% decreased 24 basis points over the prior year second quarter and decreased 19 basis points sequentially. EM gross profit margin decreased 80 basis points year over year due primarily to a temporary benefit in the prior year's gross profit margin related to the hard disk drive shortages in the year ago quarter and a revenue mix shift to the lower-margin Asia region in the current year second quarter. Revenue from the Asia region represented 41% of total EM revenue as compared with 35% in the prior year second quarter. Sequentially, EM gross profit margin decreased 23 basis points primarily due to a higher percentage of lower-margin fulfillment revenue in Asia and a sequential revenue mix shift, in which Asia revenue represented 38% of total EM revenue in the first quarter of fiscal 2013 as compared with 41% in the current year second quarter. TS gross profit margin increased 32 basis points year over year, primarily driven by the Americas, and increased 49 basis points sequentially with all three regions contributing. These increases were driven primarily by the revenue mix of higher margin products.
Consolidated gross profit and gross profit margins were $1.45 billion and 11.6%, respectively, for the first half of fiscal 2013 as compared with $1.54 billion and 11.7%, respectively, for the first half of fiscal 2012. For the first half of fiscal 2013, EM gross profit margin decreased 53 basis points year over year and TS gross profit margin increased 17 basis points year over year driven largely by the same factors as discussed in the quarterly gross profit margin analysis.
Selling, General and Administrative Expenses Selling, general and administrative expenses ("SG&A expenses") were $548.0 million in the second quarter of fiscal 2013, an increase of $29.2 million, or 5.6%, from the prior year second quarter. This increase consisted of (i) an increase of approximately $65 million related to expenses from businesses acquired, partially offset by (ii) a decrease of approximately $29 million related to recent cost reduction actions in existing businesses and (iii) a decrease of approximately $7 million related to the translation impact of changes in foreign currency exchange rates. Metrics that management monitors with respect to its operating expenses are SG&A expenses as a percentage of sales and as a percentage of gross profit. In the second quarter of fiscal 2013, SG&A expenses as a percentage of sales were 8.2% and as a percentage of gross profit were 71.3% as compared with 7.7% and 66.2%, respectively, in the second quarter of fiscal 2012. SG&A expenses as a percentage of gross profit at TS increased 410 basis points year over year due primarily to recent acquisitions as the related cost synergies have not yet been attained, in particular in Europe, and which are not expected to be fully achieved for several quarters while the integration work is in process. The SG&A expenses as a percentage of gross profit at EM increased 595 basis points year over year, primarily due to the decline in gross profit as previously mentioned. SG&A expenses for the first half of fiscal 2013 were $1.09 billion, or 8.7% of consolidated sales, as compared with $1.05 billion, or 8.0% of consolidated sales, in the first half of fiscal 2012. SG&A expenses were 75.4% of gross profit in the first half of fiscal 2013 as compared with 68.2% in the first half of 2012. Restructuring, Integration and Other Charges During the second quarter of fiscal 2013, the Company initiated additional expense reduction actions in both operating groups in response to continued weakness in business conditions. The Company also incurred acquisition and integration costs associated with recently acquired businesses. As a result, the Company recorded restructuring, integration and other charges of $24.9 million pre-tax, $19.9 million after tax and $0.14 per share on a diluted basis for the second quarter. Restructuring charges of $16.1 million pre-tax consisted of $7.3 million for severance, $8.5 million for facility exit costs and fixed asset write-downs and $0.3 million for other restructuring charges. Pre-tax integration costs and acquisition transaction costs were $7.6 million and $3.0 million, respectively. In addition, the Company recorded a credit of $1.8 million pre-tax to adjust reserves related to prior year restructuring activity that were no longer required.
During the first six months of fiscal 2013, the Company recorded restructuring, integration and other charges of $62.3 million pre-tax, $47.0 million after tax and $0.33 per share on a diluted basis. Restructuring charges of $46.3 million pre-tax consisted of $33.2 million for severance, $12.7 million for facility exit costs and fixed asset write downs and $0.4 million for other restructuring charges. Pre-tax integration costs and acquisition transaction costs were $12.6 million and $5.8 million, respectively. In addition, the Company recorded a credit of $2.4 million pre-tax to adjust reserves related to prior year restructuring activity that were no longer required.
Severance charges recorded in the first six months of fiscal 2013 related to over 800 employees in sales, administrative and finance functions in connection with the cost reduction actions taken in all three regions in both operating groups with employee reductions of approximately 560 in EM, 225 in TS and the remaining in business support functions. Facility exit costs for vacated facilities related to fourteen facilities in the Americas, ten in EMEA, and five in Asia and consisted of reserves for remaining lease liabilities and the write-down of fixed assets. The Company estimates that these actions, in combination with prior actions taken

during fiscal 2012, have resulted in approximately $100 million in annualized expense reductions in the second quarter of fiscal 2013 as compared with the prior year.
Integration costs incurred related to the integration of acquired businesses and incremental costs incurred as part of the consolidation and closure of certain office and warehouse locations. Integration costs included IT consulting costs for system integration assistance, facility moving costs, legal fees, travel, meeting, marketing and communication costs that were incrementally incurred as a result of the integration activity. Also included in integration costs are incremental salary costs associated with the consolidation and closure activities as well as costs associated with acquisition activity, primarily related to the acquired businesses' personnel who were retained by Avnet following the close of the acquisitions solely to assist in the integration of the acquired businesses' IT systems and administrative and logistics operations into those of Avnet. These identified personnel have no other meaningful day-to-day operational responsibilities outside of the integration effort. Acquisition transaction costs consisted primarily of professional fees for due diligence work and other legal costs associated with the transaction. Comparatively, in the second quarter and first half of fiscal 2012, restructuring, integration and other charges amounted to $34.5 million pre-tax, $23.6 million after tax and $0.16 per share on a diluted basis. Restructuring charges of $28.9 million pre-tax consisted of $19.8 million for severance, $7.4 million for facility exit costs and $1.7 million for other restructuring charges, primarily other onerous lease liabilities. Integration and acquisition transactions costs were $3.4 million pre-tax and $3.1 million pre-tax, respectively. In addition, the Company recorded a credit of $0.9 million pre-tax to adjust reserves related to prior year restructuring activity that were no longer required.
Operating Income
During the second quarter of fiscal 2013, the Company generated operating income of $195.6 million, down 15.3%, as compared with $230.9 million in the prior year second quarter. Consolidated operating income margin was 2.9% as compared with 3.5% in the prior year second quarter. Both periods included restructuring, integration and other charges as described in Restructuring, Integration and Other Charges above. Excluding these charges from both periods, operating income was $220.5 million, or 3.3% of sales, in the second quarter of fiscal 2013 as compared with $265.4 million, or 4.0% of sales, in the prior year second quarter. EM operating income of $140.1 million declined 19.9% year over year and operating income margin decreased 105 basis points year over year to 3.8%. This decline in EM operating income margin was primarily due the decline in gross . . .