Avnet 2005 Annual Report Download - page 59

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AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
The consideration for the Memec acquisition consisted of stock and cash valued at approximately
$504,229,000, including transaction costs, plus the assumption of $239,960,000 of Memec's net debt (debt less
cash acquired). Under the terms of the purchase, Memec investors received approximately 24,011,000 shares
of Avnet common stock plus $63,957,000 of cash. The shares of Avnet common stock were valued at
$17.42 per share, which represents the five-day average stock price beginning two days before the acquisition
announcement on April 26, 2005.
The Memec acquisition will be accounted for as a business combination. Assets acquired and liabilities
assumed will be recorded in the Company's fiscal 2006 consolidated balance sheet at their fair values as of
July 5, 2005. A preliminary allocation of purchase price to the assets acquired and liabilities assumed at the
date of acquisition is presented in the table below. This allocation is based upon a preliminary valuation using
management's estimates and assumptions. This preliminary allocation is subject to refinement as the
Company has not yet completed its evaluation of the fair value of assets and liabilities acquired, including the
valuation of any potential intangible assets created through the acquisition. Furthermore, the assets and
liabilities in the table below include preliminary estimates of severance for Memec workforce reductions, lease
liabilities, write-downs in value of Memec owned facilities that will no longer be used or for which the use will
be substantially changed in the combined business, and write-offs or write-downs in value of certain Memec
information technology assets that will have limited or no use in the combined business. These estimates are
also subject to further refinement as the Company finalizes the actions that will be taken and the charges
associated with the integration of Memec into Avnet's operations.
July 5, 2005
(Unaudited)
(In thousands)
Current assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 723,804
Property, plant and equipment, netÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,714
GoodwillÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 500,766
Other assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,206
Total assets acquiredÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,243,490
Current liabilities, excluding current portion of long-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 459,258
Long term liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,700
Total debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,343
Total liabilities assumed ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 499,301
Net assets acquiredÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 744,189
The acquisition of Memec will provide for expansion of EM in each of the three major economic regions.
The combination of Memec's Asian operations with Avnet's already industry-leading position, based on sales,
in the Asia region will provide Avnet with a dominant position in this key growth region. Memec's already
established position in Japan Ì the only U.S.-based distributor with such a presence in the Japanese
market Ì also represents a significant opportunity by providing entry into this major electronic component
marketplace. In addition, because Memec's operations and business model is similar to Avnet's, management
believes significant synergies can be obtained in the combined businesses, thus allowing for significant
operating cost reductions upon completion of the integration of Memec. The combination of these factors are
the drivers behind the excess of purchase price paid over the value of assets and liabilities acquired.
The consideration paid in excess of Memec net assets is reflected as a preliminary estimate of goodwill in
the table above. As stated previously, the Company has not completed its valuation of any potential intangible
assets created as a result of the acquisition. The Company has engaged a third party valuation consultant who
is currently assisting management in this valuation process. Any intangible assets identified and valued as a
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