Avnet 2001 Annual Report Download - page 49

47
Avnet, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
47
The unaudited pro forma results shown above include the non-
recurring items referred to in Note 17. In addition, the unaudited
pro forma results shown above exclude any benefits that resulted
from the acquisition due to synergies that were derived from the
elimination of any duplicated costs. The historical results of operations
of other companies acquired during 2000 would not have had a
material effect on the Company’s results of operations in that year,
on a pro forma basis.
Cash expended (net of cash on the books of the companies acquired
and including interest bearing obligations assumed) in 1999 relating
to acquisitions totaled approximately $35,365,000. In the aggregate,
the operations acquired during 1999 had sales totaling approxi-
mately $184,000,000 during the fiscal year of each such operation
immediately preceding its acquisition. The historical results of
operations of the companies acquired in 1999 would not have had
a material effect on the Company’s results of operations in that year,
on a pro forma basis. On July 2, 1999, the Company completed the
disposition of its Allied Electronics business (see Note 17).
Disposition of discontinued operations
On October 10, 2000, the Company sold K*TEC Electronics
Corporation (“K*TEC”), its contract manufacturing operation, for
$237,200,000, consisting of $175,000,000 in cash, a $50,000,000 senior
secured note which was redeemed on January 26, 2001 and a
$12,200,000 unsecured note maturing on October 10, 2001. The
unsecured note is subject to a post-closing adjustment based upon
K*TEC’s net asset value as of October 7, 2000. A gain on the sale
of K*TEC of approximately $21,500,000 pre-tax, $12,889,000 after-
tax, or $0.11 per diluted share, was recorded in 2001. The purchaser
is disputing K*TEC’s net asset value as of October 7, 2000, and the
ultimate outcome is not determinable at this time; however,
management believes it will not have a material effect on the finan-
cial position or results of operations of the Company. The net assets
and operations of K*TEC are reflected as discontinued operations
in the accompanying consolidated financial statements. Corporate
and shared general and administrative costs of the Company were
not allocated to discontinued operations. The net assets and results
of operations of K*TEC were not material in the years presented.
3. ACCOUNTS RECEIVABLE SECURITIZATION
In June 2001, the Company entered into a five-year accounts
receivable securitization program (the “Program”) with a financial
institution. The Program allows the Company to sell on a revolving
basis an undivided interest in up to $350,000,000 in eligible
receivables. The eligible receivables are sold to bank conduits
through a bankruptcy-remote special purpose entity which is
consolidated for financial reporting purposes. The Company
retains a subordinated interest and servicing rights to those eligible
receivables sold under the Program.
The transaction has been accounted for as a sale under Statement
of Financial Accounting Standards No. 140, “Accounting for
Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities.” As of June 29, 2001, the Company has sold
$350,000,000 of receivables under the Program which is reflected
as a reduction of receivables in the accompanying consolidated
balance sheet. Included in receivables in the accompanying
consolidated balance sheet is the Company’s retained interest
in eligible receivables of $163,138,000 at June 29, 2001. Key
economic assumptions used in measuring the retained interests at
the date of the securitization include a weighted average life of 45
days and a discount rate of 6.75% per annum. At June 29, 2001, a
10 and 20 percent adverse change in the assumed discount rate
would have an approximate impact on the retained interest of
$92,000 and $184,000, respectively.
4. INVENTORIES
June 29, June 30,
2001 2000
(In thousands)
Finished goods $1,827,486 $1,936,638
Work-in-process 19,104 7,744
Raw materials 70,454 68,839
$1,917,044 $2,013,221