Ingram Micro 2006 Annual Report Download - page 53

Investing activities used net cash of $105.3 million, $179.4 million and $411.5 million in 2006, 2005 and 2004,
respectively. The net cash used by investing activities in 2006 was primarily due to capital expenditures of
$39.2 million, short-term collateral deposits on financing arrangements of $35.0 million and cash payments related
to acquisitions, including the first earn-out payment of $30.0 million for AVAD discussed below. The net cash used
by investing activities in 2005 and 2004 was primarily due to business acquisitions of $140.6 million (primarily
AVAD in North America) and $402.2 million (primarily Tech Pacific in Asia-Pacific), respectively, and capital
expenditures of $38.8 million and $37.0 million, respectively. Our relatively flat capital expenditures over the
period from 2004 to 2006 reflect the benefits of our previous profit enhancement program which has enabled us to
streamline operations and optimize facilities as well as our decision to outsource certain IT infrastructure functions
which have reduced our capital requirements. We presently expect our capital expenditures to approximate
$60 million in 2007.
Financing activities provided net cash of $52.7 million, $120.4 million and $149.5 million in 2006, 2005 and
2004, respectively. The net cash provided by financing activities in 2006 primarily reflects the proceeds from the
exercise of stock options of $98.1 million and an increase in our book overdrafts of $42.2 million, partially offset by
the net payments of debt facilities of $96.5 million. The net cash provided by financing activities in 2005 primarily
reflects the net proceeds from our debt facilities of $305.8 million and proceeds from the exercise of stock options of
$49.3 million, partially offset by the redemption of our senior subordinated notes of $205.8 million. The increase in
debt in 2005 primarily reflects higher financing needs as a result of the acquisition of AVAD as well as the funds to
redeem our senior subordinated notes. The net cash provided by financing activities in 2004 primarily reflects
proceeds received from the exercise of stock options of $84.5 million and an increase in book overdrafts of
$77.7 million.
Acquisitions
In June 2006, we acquired the assets of SymTech Nordic AS, the leading Nordic distributor of automatic
identification and data capture and point-of-sale technologies to solution providers and system integrators. The
purchase price for this acquisition consisted of a cash payment of $3.6 million which, following the preliminary
allocation of purchase price to the assets and liabilities acquired, resulted in the recording of $0.9 million of
goodwill and $0.2 million of amortizable intangible assets primarily related to customer relationships and non-
compete agreements.
In July 2005, we acquired certain net assets of AVAD, the leading distributor for solution providers and custom
installers serving the home automation and entertainment market in the U.S. This strategic acquisition accelerated
our entry into the adjacent CE market and has improved operating margin in our North American operations. AVAD
was acquired for an initial purchase price of $136.4 million. The purchase agreement also requires us to pay the
seller earn-out payments of up to $80 million over the three years following the acquisition date, if certain
performance levels are achieved, and additional payments of up to $100 million are possible in 2010, if
extraordinary performance levels are achieved over the five-year period following the date of acquisition. Such
payments, if any, will be recorded as adjustments to the initial purchase price. The purchase price was allocated to
the assets acquired and liabilities assumed based on estimated fair values on the transaction date, resulting in the
recording of $47.6 million of goodwill, $24.2 million of trademarks with indefinite lives and $28.7 million of
vendor relationships and other amortizable intangible assets with average estimated useful lives of approximately
10 years. In December 2005, we recorded a payable of $30.0 million, which was paid in 2006, to the sellers for the
initial earn-out in accordance with the provisions of the purchase agreement, resulting in an increase of goodwill for
the same amount (see Note 4 to our consolidated financial statements).
During 2005, we also acquired the remaining shares of stock held by minority shareholders of our subsidiaries
in New Zealand and India. The total purchase price for these acquisitions consisted of cash payments of $0.6 million,
resulting in the recording of approximately the same amount of goodwill in Asia-Pacific.
In November 2004, we acquired all of the outstanding shares of Tech Pacific, one of Asia-Pacific’s largest
technology distributors, for 730 million Australian dollars (approximately $554 million at closing date) for cash and
the assumption of debt. The purchase price has been allocated to the assets acquired and liabilities assumed based on
estimated fair values on the transaction date, resulting in the recording of $308.5 million of goodwill and
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