Avnet 2006 Annual Report Download - page 65

AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Total amounts utilized for exit-related activities during fiscal 2006 consisted of $43,067,000 in cash
payments and $7,757,000 in non-cash asset write-downs.
The purchase accounting reserves established for severance are for reductions of workforce acquired from
Memec relating to over 700 personnel primarily in the Americas and EMEA regions, including reductions in
senior management, administrative, finance and certain operational functions. These reductions are based on
management's assessment of redundant Memec positions compared with existing Avnet positions and are
driven primarily by the consolidation of Memec facilities into Avnet facilities.
The costs associated with the consolidation of over 60 Memec facilities are presented in Facility Exit
Reserves/Write-downs in the table above and include estimated future payments for non-cancelable leases,
early lease termination costs, and write-downs or write-offs of Memec owned assets in these facilities,
including capitalized equipment and leasehold improvements. These actions relate primarily to facilities
located in the Americas and EMEA. These reserves have been established through purchase accounting based
on actual costs incurred and, for reserves remaining at the end of fiscal 2006, are based on management's best
estimates of cost to be incurred.
The other reserves in the table above relate primarily to remaining commitments and termination charges
related to other contractual commitments of Memec that will no longer be of use in the combined business.
Cash payments for severance are expected to be substantially paid out by the end of fiscal 2008, whereas
reserves for other contractual commitments, particularly for certain lease commitments, will extend into fiscal
2013.
Unaudited Pro forma results
Unaudited pro forma financial information is presented below as if the acquisition of Memec occurred at
the beginning of fiscal 2005. The pro forma information presented below does not purport to present what the
actual results would have been had the acquisition in fact occurred at the beginning of fiscal 2005, nor does the
information project results for any future period. Pro forma financial information is not presented for fiscal
2006 because the acquisition occurred on July 5, 2005, which was three days after the beginning of the
Company's fiscal year 2006. As a result, the accompanying consolidated statement of operations for fiscal
2006 effectively includes Memec's results of operations for comparative purposes.
Pro Forma Results
Year Ended
July 2, 2005
(Thousands, except per
share data
Pro forma sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $13,350,482
Pro forma operating income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 369,008
Pro forma net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 161,984
Pro forma diluted earnings per shareÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1.11
Combined results for Avnet and Memec for the twelve months ended July 2, 2005 were adjusted for the
following in order to create the unaudited pro forma results in the table above:
‚ $47,957,000 pre-tax, $31,156,000 after-tax, or $0.20 per diluted share, for the twelve months ended
July 2, 2005 for interest expense relating to Memec's shareholder loans that were retired at acquisition
through the issuance of Avnet common stock;
‚ $12,038,000 pre-tax, $7,870,000 after-tax or $0.05 per diluted share for the twelve months ended
July 2, 2005 for capitalized costs written off relating to Memec's cancelled initial public offering and
restructuring charges incurred by Memec.
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