Avnet 2003 Annual Report Download - page 83
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Please find page 83 of the 2003 Avnet annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued
were on the books of Kent at the acquisition and, therefore, under the ""pooling-of-interests'' method, these
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: (1) write-downs to the value
of receivables considered uncollectible after the Company had exhausted eÅorts of collecting these amounts
from Kent's pre-acquisition customers ($8,200,000 pre-tax); (2) excess and obsolete inventory, primarily for
customer-speciÑc inventory held by Kent at the acquisition date that was subsequently determined, through
ongoing negotiations with the customer, to require a write-down to net realizable value ($21,600,000 pre-tax);
and (3) charges to record additional write-downs to approximate fair market value on held-for-sale properties
acquired in the Kent acquisition or to record lease reserves for non-cancelable lease obligations on properties
the Company committed to exit ($15,971,000 pre-tax); (4) net of approximately $16,037,000 pre-tax in cash
recoveries of certain charges recorded as part of the restructuring and integration charges taken in the fourth
quarter of 2001.
The remaining pre-tax charge recorded in the fourth quarter of 2002, which amounted to $49,889,000,
included 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, primarily in the Americas region, with more limited reductions in
EMEA and Asia, totaling approximately 850 individuals announced during the fourth quarter. The impair-
ments recorded to the Company's Internet-related investments are considered capital losses for tax purposes
and are therefore only deductible to the extent the Company has available capital gains. At that time, there
were no capital gains, available or forecasted in the foreseeable future, to oÅset these losses. Therefore, the
Company generally did not record a tax beneÑt for these losses.
In the fourth quarter of 2001, the Company recorded restructuring and integration charges in connection
with the acquisition and integration of Kent and for costs related to actions taken in response to business
conditions and other restructuring activity. The charge amounted to $327,485,000 pre-tax ($80,596,000
included in cost of sales and $246,889,000 included in selling, general and administrative expenses) and
$236,692,000 after-tax, or $1.99 per share on a diluted basis. Approximately $157,331,000 of the pre-tax
charge resulted from the acquisition of Kent having been accounted for using the ""pooling-of-interests''
method as discussed above. These items consisted of costs incurred in completing the acquisition including
signiÑcant change-in-control and other executive beneÑt-related payments made as a result of the acquisition
($68,343,000 pre-tax), professional fees for investment banking, legal and accounting services rendered to
both Avnet and Kent ($12,683,000 pre-tax), as well as adjustments to the assets acquired and liabilities
assumed ($76,305,000 pre-tax). The adjustments to the assets acquired and liabilities assumed were primarily
recorded as a result of the Company's eÅorts to realize certain synergies of the combined Kent-Avnet
operations. In order to achieve such cost savings in the combined enterprise, elimination of certain duplicative
positions, facilities and inventory was required. These charges included accruals for severance for approxi-
mately 130 employees terminated ($4,650,000 pre-tax), write-downs of receivables considered uncollectible
($7,988,000 pre-tax), inventory write-downs related to termination of non-strategic product lines
($20,488,000 pre-tax), write-downs associated with the disposal of Ñxed assets ($25,081,000 pre-tax), lease
terminations ($8,462,000 pre-tax) and other items ($9,636,000 pre-tax).
The balance of the pre-tax charge recorded in the fourth quarter of 2001, amounting to $170,154,000,
related to a number of actions taken to cope with market conditions and to strengthen Avnet's operations.
These actions included cost reductions associated with the reorganization of the Company's business, the
integration of recent acquisitions, as well as important cost-cutting actions taken in response to business
conditions. These charges fall into a number of categories including severance for the elimination of
approximately 880 employees, related to the Company's EM, CM and corporate operations in all three global
regions ($28,531,000 pre-tax), inventory write-downs related to terminations of non-strategic product lines
($9,440,000 pre-tax), inventory valuation adjustments for special inventory purchases to meet customer
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