0000008858 2010-10-03 2011-01-01 0000008858 2009-10-04 2010-01-02 0000008858 2009-06-28 2010-07-03 0000008858 2010-01-02 0000008858 2009-06-27 0000008858 2011-01-01 0000008858 2010-07-03 0000008858 2011-01-21 0000008858 2009-06-28 2010-01-02 0000008858 2010-07-04 2011-01-01 iso4217:USD xbrli:shares xbrli:shares iso4217:USD <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Note 1 - us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock--> <!-- xbrl,ns --> <!-- xbrl,nx --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b> </div> <div align="left"> </div> <div align="center" style="font-size: 10pt"><b></b></div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>1. Basis of presentation</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all adjustments necessary to present fairly the Company&#8217;s financial position, results of operations and cash flows. All such adjustments are of a normal recurring nature, except for (i)&#160;the gain on bargain purchase discussed in Note 2 and (ii)&#160;the restructuring, integration and other charges discussed in Note 12. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Actual results may differ from these estimates. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company operates on a &#8220;52/53&#160;week&#8221; fiscal year, and as a result, the six months ended January&#160;1, 2011 contained twenty six weeks while the six months ended January&#160;2, 2010 contained twenty seven weeks. Interim results of operations are not necessarily indicative of the results to be expected for the full fiscal year. The information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company&#8217;s Annual Report on Form 10-K for the fiscal year ended July&#160;3, 2010. </div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <!-- Begin Block Tagged Note 2 - avt:AcquisitionsAndDivestituresTextBlock--> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>2. Acquisitions and divestitures</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the first quarter of fiscal 2011, the Company acquired three businesses: Bell Microproducts Inc. (&#8220;Bell&#8221;), which is described further below; Tallard Technologies, a value-added distributor of IT solutions in Latin America with annualized revenues of approximately $250 million, which is reported as part of the TS Americas region; and Unidux, Inc., (&#8220;Unidux&#8221;) an electronics component distributor in Japan with annualized revenues of approximately $370&#160;million, which is reported as part of the EM Asia region. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Unidux, a Japanese publicly traded company, was acquired through a tender offer in which the Company obtained over 95% controlling interest. The non-controlling interest was recorded at fair value but was not material. The acquisition of the non-controlling interest in Unidux was completed during the second quarter of fiscal 2011. As mentioned, Unidux was a publicly traded company which shares were trading below its book value for a period of time. In a tender offer, Avnet offered a purchase price per share for Unidux that was above the prevailing trading price thereby representing a premium to the then recent trading levels. Even though the purchase price was below book value, 95% of the Unidux shareholders tendered their shares. As a result, the Company acquired Unidux for a purchase price of $132,780,000, net of cash acquired, and recognized a gain on bargain purchase of $30,990,000 pre- and after tax and $0.20 per share on a diluted basis. Prior to recognizing the gain, the Company reassessed the assets acquired and liabilities assumed in the acquisition. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the second quarter of fiscal 2011, the Company acquired three businesses with annualized revenues of approximately $50&#160;million for an aggregate purchase price of $43,525,000, net of cash acquired. Of the three businesses acquired, two are reported as part of the EM Americas region and one is reported as part of the EM Asia region. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During fiscal 2011, the Company recognized restructuring and integration charges, and transaction and other costs associated with the acquisitions, all of which were recognized in the consolidated statement of operations and are described further in Note 12. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Bell</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On July&#160;6, 2010, subsequent to fiscal year 2010, the Company completed its previously announced acquisition of Bell, a value-added distributor of storage and server products and solutions and computer components products, providing integration and support services to OEMs, VARs, system builders and end users in the US, Canada, EMEA and Latin America. Bell operated both a distribution and single tier reseller business and generated sales of approximately $3.0&#160;billion in calendar 2009, of which 42%, 41% and 17% was generated in North America, EMEA and Latin America, respectively. The consideration for the transaction totaled $255,691,000 which consisted of $7.00 cash per share of Bell common stock, cash payment for Bell equity awards, and cash payments required under existing Bell change of control agreements plus the assumption of $323,321,000 of Bell net debt. Of the debt acquired, Avnet repaid approximately $209,651,000 of debt (including associated fees) immediately after closing. The Company is integrating Bell into both the EM and TS operating groups and expects significant cost saving synergies upon completion of the integration activities, which are anticipated to be completed by the end of fiscal 2011. </div> <!-- Folio --> <!-- /Folio --> </div> <!-- PAGEBREAK --> <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Preliminary allocation of purchase price</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Bell acquisition is accounted for as a purchase business combination. Assets acquired and liabilities assumed are recorded in the accompanying consolidated balance sheet at their estimated fair values, using management&#8217;s estimates and assumptions, as of July&#160;6, 2010 (see following table). As of the end of the first quarter, the Company had not yet completed its evaluation of the fair value of certain assets and liabilities acquired, primarily (i)&#160;the final valuation of amortizable intangible assets identified as a result of the acquisition (see Note 3), (ii)&#160;the final valuation of certain income tax accounts, and (iii)&#160;certain contingent liabilities associated with the former Bell Latin America business. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the second quarter of fiscal 2011, the Company completed its valuation of the identifiable amortizable intangible assets and adjusted it to $60,000,000 (see Note 3). </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company also recognized a contingent liability of $18,000,000 for potential unpaid import duties associated with the former Bell Latin America business. Prior to the acquisition of Bell by Avnet, the US Customs and Border Protection (&#8220;CBP&#8221;) initiated a review of the importing process at one of Bell&#8217;s subsidiaries and identified compliance deficiencies. Subsequent to the acquisition of Bell by Avnet, CBP began a compliance audit to identify any duty owed as a result of the prior non-compliance. The Company has evaluated projected duties, interest and penalties that potentially may be imposed as a result of the audit and believes the contingent liability recorded is a reasonable estimate of the liability based upon facts available. Depending on the ultimate resolution of the matter with CBP, there may be additional exposure in excess of the recorded amount but a reasonably possible range is not currently estimable. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company expects remaining final evaluations for certain income tax accounts to be completed in fiscal 2011 which may result in additional adjustments to the preliminary values presented in the following table. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company acquired accounts receivable which were recorded at the estimated fair value amounts; however, adjustments to acquired amounts were not significant as book value approximated fair value due to the short term nature of accounts receivables. 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and </div></td> </tr> </table> </div> <div style="margin-top: 10pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="4%" style="background: transparent">&#160;</td> <td width="3%" nowrap="nowrap" align="left"><b>&#8226;</b></td> <td width="1%">&#160;</td> <td> <div style="text-align: justify">$5,181,000 pre-tax, $3,168,000 after tax, or $0.02 per diluted share for the first six months of fiscal 2010 for Bell transaction costs that were expensed upon closing. </div></td> </tr> </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Pro forma results above exclude the impact of synergies that may be realized upon completion of the integration activity. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Pro forma financial information is not presented for fiscal 2011 because the Bell acquisition occurred on July&#160;6, 2010, which is three days after the beginning of the Company&#8217;s fiscal year 2011. The accompanying consolidated statement of operations for the first quarter of fiscal 2011 included sales of $781,135,000 related to the acquired Bell business. The Company is in the process of integrating the Bell business into the Avnet existing business, which includes IT systems integration, and administrative, sales and logistics operations integrations. As a result, after the first quarter of fiscal 2011, the Company is no longer able to identify the acquired Bell business separately from the on-going Avnet business. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Prior year acquisition-related exit activity accounted for in purchase accounting</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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 the first six months of fiscal 2011, the Company paid $235,000 in cash associated with these reserves. 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