Avnet 2002 Annual Report Download - page 81

AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
The following table summarizes the special charges for the past three years, including activity in the
related accrued liability and reserve accounts subsequent to initially recording the charge:
Reorganization Acquisition Impairment of
Charges Integration Costs Investments Other Total
(Thousands)
Balance at July 2, 1999 ÏÏÏÏÏÏÏÏÏÏÏ $ 3,321 $ Ì $ Ì $ Ì $ 3,321
2000 activity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,586 31,679 Ì 2,699 48,964
Amounts utilized ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,907 23,406 Ì 2,699 44,012
Balance at June 30, 2000 ÏÏÏÏÏÏÏÏÏÏ Ì 8,273 Ì Ì 8,273
2001 activity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 127,274 157,331 42,880 Ì 327,485
Amounts utilized ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 108,957 123,868 42,880 Ì 275,705
Balance at June 29, 2001 ÏÏÏÏÏÏÏÏÏÏ 18,317 41,736 Ì Ì 60,053
2002 activity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,712 29,734 36,177 Ì 79,623
Amounts utilized ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23,954 50,148 36,177 Ì 110,279
Balance at June 28, 2002 ÏÏÏÏÏÏÏÏÏÏ $ 8,075 $ 21,322 $ Ì $ Ì $ 29,397
Total amounts utilized in 2002, 2001 and 2000 consist of cash payments of $48,355,000, $91,681,000 and
$24,888,000, respectively and non-cash write-downs of $77,961,000, $184,024,000, and $19,124,000, respec-
tively. Additionally, 2002 amounts utilized include $16,037,000 in cash recoveries of prior year special charges
discussed more fully below.
In the fourth quarter of 2002, the Company recorded a special charge representing a write-down in value
of certain assets acquired in the 2001 acquisition of Kent and certain other charges taken in response to
current business conditions. The special charge totaled $79,623,000 pre-tax ($21,600,000 included in cost of
sales and $58,023,000 included in operating expenses) and $62,084,000 after tax, or $0.52 per share on a
diluted basis for the fourth quarter and the year.
The Kent-related items resulted from the acquisition of Kent being accounted for using the ""pooling-of-
interests'' method of accounting for the acquisition. Under this method, items that normally would have been
reÖected as adjustments to goodwill if the purchase method of accounting could have been used were instead
recorded to the Company's consolidated statement of operations. These items amounted to $29,734,000 pre-
tax and relate primarily to write-downs to the value of receivables considered uncollectible ($8,200,000),
excess and obsolete inventory ($21,600,000) and property, plant and equipment and non-cancelable lease
obligations ($15,971,000) acquired in the Kent acquisition, net of approximately $16,037,000 pre-tax in cash
recoveries of certain charges recorded as part of the special charges taken in the fourth quarter of 2001. The
write-downs of Kent-related assets were recorded at the earliest date that management had suÇcient
information to evaluate the recoverability of the assets in order to conclude that a write-down was necessary to
record the assets at their net realizable value.
The remaining pre-tax special charge recorded in the fourth quarter of 2002, amounting to $49,889,000,
includes an impairment charge of $36,177,000 pre-tax to write-down certain of the Company's investments in
unconsolidated Internet-related businesses to their fair market value and $13,712,000 pre-tax for severance
charges taken for workforce reductions of approximately 850 individuals announced during the fourth quarter.
The impairments recorded to the Company's investments are considered capital losses for tax purposes and are
therefore only deductible to the extent the Company has available capital gains. As there are no capital gains
to oÅset these losses currently or forecasted in the foreseeable future, the Company has generally not recorded
a tax beneÑt for these losses. The timing of the impairment charge to the investments is a function of the
timing with which Ñnancial and other information regarding these ventures typically becomes available to the
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