Avnet 2006 Annual Report Download - page 67

AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
with annual sales of approximately $15,000,000, was integrated into Avnet's Technology Solutions operations
in Europe. The Company acquired DNS for cash consideration, net of cash acquired, totaling $1,098,000.
Fiscal 2004
During fiscal 2004, the Company completed a contingent purchase price payment associated with its
January 2000 acquisition of 84% of the stock of Eurotronics B.V., which went to market as SEI. Pursuant to
the terms of the share purchase agreement, in fiscal 2004, Avnet paid $48,930,000 to former shareholders of
Eurotronics B.V. in final settlement of contingent consideration related to this acquisition. This payment
resulted in an addition to goodwill of $33,930,000 and a reduction of additional paid-in capital of $15,000,000,
based upon an initial estimate of the fair value of the stock guarantee incorporated into the purchase price
accounting at the time of the Eurotronics B.V. acquisition. During fiscal 2004, the Company also acquired the
interest of a 9% minority shareholder in the Company's majority-owned Brazilian subsidiary, Avnet do Brasil,
LTDA and made contingent purchase price payments associated with certain companies acquired in prior
years. The acquisition of minority interests and contingent purchase price payments discussed above required a
total investment of $50,528,000, all of which was paid in cash.
3. Accounts receivable securitization
As of July 2, 2005, the Company had an accounts receivable securitization program (the ""Program'')
with two financial institutions that allowed the Company to sell, on a revolving basis, an undivided interest of
up to $350,000,000 in eligible U.S. receivables while retaining a subordinated interest in a portion of the
receivables. The eligible receivables were sold without legal recourse to third party conduits through a wholly
owned bankruptcy-remote special purpose entity that is consolidated for financial reporting purposes. The
Company continues servicing the sold receivables and charges the third party conduits a monthly servicing fee
at market rates; accordingly, no servicing asset or liability has been recorded. At July 2, 2005, the Program
qualified for sale treatment under SFAS 140. As of July 2, 2005 and July 3, 2004, the Company had no
drawings outstanding under the Program and therefore there were no securitized accounts receivable held by
the third party conduits.
In August 2005, the Company amended the Program to, among other things, increase the maximum
amount available for borrowing from $350,000,000 to $450,000,000. In addition, the amended Program now
provides that financing under the Program no longer qualifies as off-balance sheet financing. As a result, the
receivables and related debt obligation remain on the Company's consolidated balance sheet as amounts are
drawn on the Program. The Program, as amended, has a one year term which has recently been renewed and
expires in August 2007. At July 1, 2006, there was $40,000,000 in drawings outstanding under the Program.
Expenses associated with the Program in effect at July 1, 2006 were as follows:
Years Ended
July 1, July 2, July 3,
2006 2005 2004
(Thousands)
Losses on sales of receivables and discount on retained interest, net
of servicing revenuesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ Ì $ Ì $ 52
Program, facility and professional fees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,678 2,999 2,358
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,678 $2,999 $2,410
Losses on sales of receivables and discount on retained interest, net of related servicing revenues, were
recorded in interest expense while the other costs associated with the Program were recorded in selling,
general and administrative expenses in the accompanying consolidated statements of operations. To the extent
there have been drawings under the Program, the Company has historically measured the fair value of its
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