Avnet fears possible $73m bill as US Customs probe deeper
Shoves $10m in goodwill tip jar, hopes for the best
Avnet has warned it may be liable to cough $73m for duties, interest or fines arising from a US Customs and Border Protection probe into unpaid import tax owed by the previously acquired Bell Microproducts operation.
In an SEC filing, enterprise distie Avnet said this was a worst case scenario and it has actually set aside $10m, recorded to goodwill in fiscal 2011, to settle any issues.
It said that prior to its acquisition of Bell in 2010, the CBP "initiated a review of the importing process at one of Bell's subsidiaries and identified compliance deficiencies".
After Avnet closed the Bell deal the CPB kickstarted a compliance audit, the distributor revealed.
"The company [Avnet] evaluated projected duties, interest and penalties that potentially may be imposed as a result of the audit and recognised a contingent liability of $10m.
"Depending on the ultimate resolution of the matter with CBP, the company estimates that the range of the potential exposure associated with the liability may be up to $73m," Avnet added.
However, Avnet reiterated that it expects any financial pay-outs to be limited to the $10m, "a reasonable estimate of the liability".
According to the SEC filing, Avnet's sales for the nine months ended 31 March 2012 were $19.4bn, some $220m lower than the previous comparable period a year earlier.
The is despite spending $241.7m on nine acquisitions with aggregate annualised revenues of roughly $730m.
This explains why Avnet is in cost cutting mode - closing its Leeds office and proposing to transfer staff to its sites in Warrington and Haslingden.
As part of part of the UK restructure, Paul Cook, one of three sales directors at the distributor, is leaving the business.
In the reshuffle, sales director Laura Harman will add the HP franchise to the networking, security, storage, wireless and mobility units she runs, while enterprise sales director Matt Tedstone will push high growth areas including storage and services.
"These are difficult business decisions," said country manager John Toal, who added: "It is imperative that we are decisive in taking action to rebalance our resource requirements accordingly".
The Channel was awaiting further comments on the CBP liability at the time of going to press. ®