Avnet 2006 Annual Report Download - page 66

AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
‚ $1,899,000 pre-tax, $1,236,000 after-tax, or $0.01 per diluted share, for the twelve months ended
July 2, 2005 for amortization relating to intangible assets and deferred financing costs for the
shareholder loans that were retired at acquisition; and
‚ the impact on pro forma diluted earnings per share of the 24,011,000 shares of Avnet's common stock
issued as part of the consideration.
Unaudited pro forma results above exclude any benefits that may result from the acquisition due to
synergies that were derived from the elimination of any duplicative costs. In addition, the pro forma results
have not been adjusted to remove the following Memec costs, which management considers to be non-
recurring:
‚ $20,243,000 pre-tax, $13,141,000 after-tax, or $0.08 per diluted share, for the twelve months ended
July 2, 2005, for interest expense relating to Memec's loan secured by receivables and term loans that
were paid immediately upon the close of the acquisition; and
‚ $11,537,000 pre-tax, $7,595,000 after-tax, or $0.05 per diluted share, for the twelve months ended
July 2, 2005, for selling, general and administrative costs relating to Memec's non-recurring consulting
and other project costs and annual management fee that will no longer be incurred following the
acquisition and other severance-related costs.
Divestitures and investments
During the third quarter of fiscal 2006, the Company completed the divestiture of two end-user business
lines in its Technology Solutions (""TS'') Americas business. In January 2006, the Company sold its TS
Americas end-user enterprise server and storage business line to a value-added reseller for net proceeds of
$11,190,000. This business line sold various products and services directly to end-users. The Company
concurrently executed an exclusive distribution agreement whereby the acquiring company will procure
certain enterprise computer products under customary terms from Avnet for a five-year contract period.
In February 2006, the Company contributed cash and certain operating assets and liabilities of its TS
Americas end-user network solutions business line into a joint venture with Calence Inc. in exchange for an
investment interest in the joint venture, called Calence LLC. This business line provided network and related
products and services directly to customers and generated annual revenues of less than $200,000,000 for
Avnet. Avnet's equity investment in Calence LLC of $18,799,000 (consisting of $13,948,000 in cash paid and
$4,851,000 of net assets contributed) is being accounted for under the equity method, with this investment
included in other long-term assets on the accompanying consolidated balance sheet.
In April 2006, the Company sold the net assets of two small, non-core EM specialty businesses in EMEA
and retained a 16% investment in one of the businesses following the sale. Net proceeds received from the sale
of these two businesses were $11,589,000.
As a result of these divestitures, the Company recorded a net pre-tax loss of $2,601,000 during fiscal
2006.
Fiscal 2005
During fiscal 2005, the Company incurred $2,465,000 of costs associated with the acquisition of Memec,
consisting primarily of legal and other costs associated with the due diligence efforts. These costs are
capitalized as part of other long-term assets in the accompanying consolidated balance sheet at July 2, 2005
and are reflected as part of cash flows for acquisitions of operations and investments in the accompanying
consolidated statement of cash flows for the year ended July 2, 2005. In August 2004, Avnet completed the
acquisition of DNS Slovakia (""DNS''), a value-added distributor of enterprise computing solutions. DNS,
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