Avnet 2011 Annual Report Download - page 59

Table of Contents
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The results of step one indicated that the goodwill related to the EM Asia, TS EMEA and TS Asia reporting units was fully
impaired. Therefore, the Company only performed step two of the impairment analysis for its EM Americas reporting unit. Step two
of the impairment test required the Company to fair value all of the reporting unit’
s assets and liabilities, including identifiable
intangible assets, and compare the implied fair value of goodwill to its carrying value. The results of step two indicated that the
goodwill in the EM Americas reporting unit was also fully impaired.
During the fourth quarter of fiscal 2009, the Company performed its annual goodwill impairment test which indicated that three
of its six reporting units, including EM Asia and TS EMEA, continued to have fair values below their carrying values. As a result, the
Company was required to recognize the impairment of additional goodwill which arose subsequent to the second quarter of fiscal
2009 in the EM Asia and TS EMEA reporting units. Of the non-cash goodwill impairment charges of $62,282,000 pre-
and after tax
and $0.41 per share recognized in the fourth quarter, $41,433,000 related to the business acquired in Japan in the third quarter of fiscal
2009, which was assigned to the EM Asia reporting unit. Accounting standards require goodwill from an acquisition to be assigned to
a reporting unit and also requires goodwill to be tested on a reporting unit level, not by individual acquisition. As noted above, the
annual impairment analysis indicated that the fair value of the EM Asia reporting unit continued to be below its carrying value. As a
result, the goodwill from the acquisition was required to be impaired. The remaining $20,849,000 of the impairment charges related to
additional goodwill in the TS EMEA reporting unit primarily as a result of final acquisition adjustments during the purchase price
allocation period related to an acquisition for which the goodwill had been fully impaired in the second quarter of fiscal 2009.
Intangible assets
As of July 2, 2011, “Other assets”
included customer relationship intangible assets with a carrying value of $124,662,000;
consisting of $170,417,000 in original cost value and $45,755,000 of accumulated amortization and foreign currency translation.
These assets are being amortized over a weighted average life of eight years. During fiscal 2011, the Company recognized
$89,372,000 in intangible assets associated with acquisitions completed during fiscal 2011. Intangible asset amortization expense was
$21,240,000, $8,629,000 and $12,272,000 in fiscal 2011, 2010 and 2009, respectively. Amortization expense for the next five years is
expected to be approximately $21,000,000 each year for fiscal 2012 through 2015 and $16,000,000 for 2016.
During fiscal 2009, the Company evaluated the recoverability of its long-
lived assets at each of the reporting units where
goodwill was deemed to be impaired. Based upon this evaluation, which utilized Level 3 criteria under fair value measurement
standards, the Company determined that certain of its amortizable intangible assets were impaired. As a result, the Company
recognized a non-cash intangible asset impairment charge of $31,393,000 pre-
and after tax and $0.21 per share during the second
quarter of fiscal 2009. In conjunction with the annual goodwill impairment test, the Company again evaluated the recoverability of its
long-lived assets during the fourth quarter of fiscal 2009 and determined that no impairment had occurred.
7. External financing
Short-term debt consists of the following:
Bank credit facilities consist of various committed and uncommitted lines of credit with financial institutions utilized primarily
to support the working capital requirements of foreign operations. The weighted average interest rate on the bank credit facilities was
7.8% and 4.0% at the end of fiscal 2011 and 2010, respectively. In connection with acquisitions completed in fiscal 2011 (see Note 2),
the Company assumed debt of $420,259,000, of which $211,933,000 was repaid (including associated fees) at the acquisition dates.
As of the end of the fiscal 2011, the outstanding balances associated with the assumed debt and credit facilities consisted of
$16,627,000 in bank credit facilities and other debt primarly used to support the acquired foreign operations. The total debt assumed
during fiscal 2011 included the 3.75% Notes due March 2024 acquired from Bell which had a fair value of $110,000,000 and that has
substantially been repaid as is discussed further below.
53
July 2,
July 3,
2011 2010
(Thousands)
Bank credit facilities
$
81,951
$
35,617
Borrowings under the accounts receivable securitization program
160,000
—
Other debt due within one year
1,128
932
Short
-
term debt
$
243,079
$
36,549