Table of Contents AVNET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Reconciliations of the federal statutory tax rate to the effective tax rates are as follows: Tax rates on foreign income represents the impact of the difference between foreign rates and the U.S. federal statutory rate applied to foreign income or loss, foreign income taxed in the U.S. at rates other than its’ statutory rate, and the impact of valuation allowances established against the Company’s otherwise realizable foreign deferred tax assets, which are primarily net operating loss carry-forwards. Avnet’s effective tax rate on income before income taxes from continuing operations was 25.7% in fiscal 2019 as compared with an effective tax rate of 198.5% in fiscal 2018. Included in the fiscal 2018 effective tax rate is a net tax benefit of $34.1 million related to the mix of income in lower tax jurisdictions. The fiscal 2019 effective tax rate is lower than the fiscal 2018 effective tax rate primarily due to the reduction in (i) the transition tax expense recorded under the requirements of the Act, and (ii) goodwill impairment. The Company applies the guidance in ASC 740  Income Taxes , 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 and types 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 risks associated with underlying estimates of future taxable income, including considering the historical trend of down- cycles in the Company’s served industries; (iii) jurisdictional specific limitations on the utilization of deferred tax assets including when such assets expire; and (iv) prudent and feasible tax planning strategies. 63 Years Ended June 29, 2019 June 30, 2018 July 1, 2017 U.S. federal statutory rate 21.0 % 28.0 % 35.0 % State and local income taxes, net of federal benefit 0.3 (6.1)  (1.7)  Tax on foreign income, net of valuation allowances (0.5) (23.5) (23.5) Establishment/(release) of valuation allowances, net of U.S. tax expense (3.2)  (0.1)  1.3 Change in unrecognized tax benefit reserves 17.9 (7.4) 3.6 Tax audit settlements 0.9 4.5 0.1 Impact of the Act - transition tax 7.1 158.5  — Impact of the Act - deferred tax effects (5.6)  4.2  — Impairment of investments, including goodwill (8.0) 35.1  — Other, net (4.2)  5.3 0.4 Effective tax rate - continuing operations 25.7 % 198.5 % 15.2 %