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AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
receivables. The eligible receivables were sold without legal recourse to third party conduits through a wholly
owned bankruptcy-remote special purpose entity that is consolidated for financial reporting purposes. The
Company continues servicing the sold receivables and charges the third party conduits a monthly servicing fee
at market rates; accordingly, no servicing asset or liability has been recorded.
At July 2, 2005, the Program qualified for sale treatment under SFAS 140. As of July 2, 2005 and July 3,
2004, the Company had no drawings outstanding under the Program and therefore there are no securitized
accounts receivable held by the third party conduits. Cash outflows for reduced drawings under the Program in
the consolidated statements of cash flows for fiscal 2003 reflect the impact of a lower amount of accounts
receivable being sold, on a revolving basis, into the third party conduits during that fiscal year.
In August 2005, the Company amended the Program to, among other things, increase the maximum
amount available for borrowing from $350,000,000 to $450,000,000. In addition, the amended Program now
provides that financing under the Program no longer qualifies as off-balance sheet financing. As a result, the
receivables and related debt obligation will remain on the Company's consolidated balance sheet when
amounts are drawn on the Program. The Program, as amended, has a one year term which expires in August
2006.
At July 2, 2005, the Program agreement required the Company to maintain senior unsecured credit
ratings above certain minimum ratings triggers in order to continue utilizing the Program in its current form.
These minimum ratings triggers are Ba3 by Moody's Investor Services or BB Ì by Standard & Poors. The
minimum ratings triggers were eliminated in the amended agreement discussed above, and were replaced with
minimum interest coverage and leverage ratios as defined in the Credit Facility (see Note 7).
Expenses associated with the Program in effect at July 2, 2005 were as follows:
Years Ended
July 2, July 3, June 27,
2005 2004 2003
(Thousands)
Losses on sales of receivables and discount on retained interest, net
of servicing revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ Ì $ 52 $1,244
Program, facility and professional feesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,999 2,358 1,864
TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,999 $2,410 $3,108
Losses on sales of receivables and discount on retained interest, net of related servicing revenues, were
recorded in interest expense while the other costs associated with the Program were recorded in selling,
general and administrative expenses in the accompanying consolidated statements of operations. To the extent
there have been drawings under the Program, the Company has historically measured the fair value of its
retained interests at the time of a securitization using a present value model incorporating two key
assumptions: (1) a weighted average life of trade accounts receivable of 45 days and (2) a discount rate of
6.75% per annum.
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