Avnet 2007 Annual Report Download - page 59

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.
As a result of the acquisition and subsequent integration of Memec, the Company recorded certain exit-related
liabilities during the purchase price allocation period which closed at the end of fiscal 2006. These exit-related
liabilities consisted of severance for workforce reductions, non-cancelable lease commitments and lease termi-
nation charges for leased facilities, and other contract termination costs associated with the exit activities.
The following table summarizes the utilization of reserves during fiscal 2007 related to exit activities
established through purchase accounting in connection with the acquisition of Memec:
Severance
Reserves
Facility Exit
Reserves Other Total
(Thousands)
Balance at July 1, 2006 . . ..................... $1,610 $18,605 $2,457 $22,672
Amounts utilized .......................... (697) (6,570) (449) (7,716)
Adjustments.............................. (528) (56) — (584)
Other, principally foreign currency translation ..... 38 30 1 69
Balance at June 30, 2007 . ..................... $ 423 $12,009 $2,009 $14,441
Total amounts utilized for exit-related activities during fiscal 2007 consisted of $7,716,000 in cash payments
and $584,000 in severance and lease reserves deemed excessive and therefore reversed through goodwill during
fiscal 2007. 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.
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 is to 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 initial
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.
3. Accounts receivable securitization
The Company has an accounts receivable securitization program (the “Program”) with a group of financial
institutions that allows the Company to sell, on a revolving basis, an undivided interest of up to $450,000,000 in
eligible U.S. receivables while retaining a subordinated interest in a portion of the receivables. Financing under the
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AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)