Avnet 2008 Annual Report Download - page 58

Table of Contents
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 termination
charges for leased facilities, and other contract termination costs associated with the exit activities.
The following table summarizes the utilization of reserves during fiscal 2008 related to exit activities established
through purchase accounting in connection with the acquisition of Memec:
Total amounts utilized for exit-related activities during fiscal 2008 consisted of $3,928,000 in cash payments
and $302,000 in lease reserves deemed excessive and therefore reversed through goodwill during fiscal 2008. Cash
payments for severance are expected to be substantially paid out by the end of fiscal 2009, 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 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 million 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) was accounted for under the equity method, with this investment included in “other long-term assets”
on
the accompanying consolidated balance sheet. As previously discussed in this Note 2, the Company sold its
investment in Calence LLC in fiscal 2008 which generated a pre-tax gain of $42,426,000.
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.
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
55
Severance
Facility Exit
Reserves
Reserves
Other
Total
(Thousands)
Balance at June 30, 2007
$
423
$
12,009
$
2,009
$
14,441
Amounts utilized
(44
)
(3,884
)
—
(
3,928
)
Adjustments
—
(
302
)
—
(
302
)
Other, principally foreign currency translation
56
34
—
90
Balance at June 28, 2008
$
435
$
7,857
$
2,009
$
10,301
3.
Accounts receivable securitization