Avnet 2011 Annual Report Download - page 56

Table of Contents
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Prior year acquisition-related exit activity accounted for in purchase accounting
Prior to fiscal 2010, certain restructuring charges were recognized as part of purchase accounting under previous accounting
standards. During fiscal 2007 and 2006, the Company recorded certain exit-
related liabilities through purchase accounting which
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. During fiscal 2011, the Company paid $462,000 in cash
associated with these reserves. In addition, the Company released $2,258,000 of lease reserves that were determined to be no longer
required and recorded the credit to “restructuring, integration and other charges”
rather than as a credit to goodwill because the
goodwill was impaired in fiscal 2009 (see Note 6). As of July 2, 2011, the total remaining reserve was $2,827,000 which related
primarily to facility exit costs and other contractual lease obligations which management expects to be substantially utilized by the end
of fiscal 2013.
Investments and divestitures
The Company completed its divestiture of New ProSys Corp. (“ProSys”), a value-
added reseller and provider of IT infrastructure
solutions. Avnet acquired ProSys as part of the Bell acquisition on July 6, 2010, and announced its intention to sell this business at that
time. Total consideration included a cash payment at closing, a short-term receivable and a three-year earn-out based upon ProSys’
anticipated results. As a result of the divestiture, the Company received cash proceeds of $19,108,000 and wrote off goodwill
associated with the ProSys business (see Note 6). No gain or loss was recorded as a result of the divestiture. Also during fiscal 2011,
the Company recognized a loss of $6,308,000 pre-tax, $3,857,000 after tax and $0.02 per share on a diluted basis included in “
Gain on
bargain purchase and other” related to the write down of prior investments in smaller technology start-
up companies (see Notes 5 and
6 for other amounts included in “Gain on bargain purchase and other”).
During fiscal 2010, the Company recognized a gain on the sale of assets as a result of certain earn-
out provisions associated with
the prior sale of the Company’s equity investment in Calence LLC. The gain on sale of assets was $8,751,000 pre-
tax, $5,370,000
after tax and $0.03 per share on a diluted basis. In addition, the Company sold a cost method investment and received proceeds of
approximately $3,034,000 in the second quarter of fiscal 2010.
During fiscal 2009, the Company recognized a gain on the sale of assets amounting to $14,318,000 pre-
tax, $8,727,000 after tax
and $0.06 per share as a result of certain earn-out provisions associated with the prior sale of the Company’
s equity investment in
Calence LLC.
3. Accounts receivable securitization
In August 2010, the Company amended its accounts receivable securitization program (the “Program”)
with a group of financial
institutions to allow the Company to sell, on a revolving basis, an undivided interest of up to $600,000,000 ($450,000,000 prior to the
amendment) in eligible U.S. receivables while retaining a subordinated interest in a portion of the receivables. The eligible receivables
are sold through a wholly-owned bankruptcy-
remote special purpose entity that is consolidated for financial reporting purposes. Such
eligible receivables are not directly available to satisfy claims of the Company’
s creditors. Financing under the Program does not
qualify 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 has a one year term that expires at the end of August 2011 which is
expected to be renewed for another year on comparable terms. There were $160,000,000 in borrowings outstanding under the Program
at July 2, 2011 and no amounts outstanding as of July 3, 2010. Interest on borrowings is calculated using a base rate or a commercial
paper rate plus a spread of 0.425%. The facility fee is 0.50%. Expenses associated with the Program, which were not material in the
past three fiscal years, consisted of program, facility and professional fees recorded in selling, general and administrative expenses in
the accompanying consolidated statements of operations.
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