|
|
| Item 7. |
Management’s Discussion and Analysis of Financial
Condition and Results of Operations |
For an understanding of the significant factors that influenced
the Company’s performance during the past three fiscal
years, the following discussion should be read in conjunction
with the consolidated financial statements, including the related
notes, and other information appearing elsewhere in this Report.
Reference herein to any particular year or quarter generally
refers to the Company’s fiscal year periods.
Effective as of the beginning of 1999, the Company changed its
organizational structure to strengthen its focus on its core
businesses and thereby better meet the needs of both its
customers and suppliers. This change involved dividing the former
Electronic Marketing Group into its two major lines of business:
the distribution of electronic components and the distribution
of computer products. Accordingly, the Company currently consists
of two major operating groups, Electronics Marketing
(“EM”) and the Computer Marketing Group
(“CMG”). (Through the end of 1998, these two units
comprised the former Electronic Marketing Group.) EM, which
focuses on the global distribution of and value-added services
associated with electronic components, is comprised of three
regional operations — EM Americas, EM EMEA (Europe,
Middle East and Africa) and EM Asia. CMG, which focuses on
middle-to high-end value-added computer products distribution and
related services, consists of Avnet Computer, Hall-Mark Global
Solutions and a number of other specialty businesses. The
business of each of these operations is described in Item 1
of this Report. References below under Results of Operations to
“EM” and “CMG” are to the new group
structure. Subsequent to the end of 1999, the Company announced
the creation of a third operating group — Avnet Applied
Computing (“AAC”). AAC, which is being created by
carving out certain business segments from EM and CMG, is still
in the formative stages. Accordingly, this discussion and
analysis will not include any additional reference to AAC.
In October 1997, the Company completed the disposition of
its Channel Master business, the sole remaining operation in the
former Video Communications Group. The disposition of the Channel
Master business did not and will not have a material impact on
the Company’s financial condition and liquidity.
Results of Operations
Consolidated sales were a record $6.350 billion in 1999, up 7% as
compared with sales of $5.916 billion in 1998. EM’s record
sales of $4.795 billion in 1999 were up over 7% as compared with
$4.474 billion in 1998, and CMG’s sales of $1.555 billion in
1999 were up almost 11% as compared with $1.404 billion in 1998.
Excluding the impact of acquisitions, EM’s sales for 1999
were approximately 5% higher than in 1998 and CMG’s sales
were up approximately 2% during that comparative period. EM
Americas’ sales in 1999 of $3.451 billion were up over 4% as
compared with the prior year, while EM EMEA’s 1999 sales
were up over 10% and EM Asia’s sales were up 49% due in part
to sales of newly-acquired businesses. Excluding the impact of
acquisitions, EM EMEA’s and EM Asia’s 1999 sales were
up approximately 5% and 14%, respectively, as compared with the
prior year. Consolidated sales also benefitted from the extra
week of operations in 1999 as compared with 1998 and 1997 due to
the Company’s “52/53 week” fiscal calendar.
(See note 1 to the consolidated financial statements appearing
elsewhere in this Report.)
Consolidated sales were $5.916 billion in 1998, up 10% as
compared with sales of $5.391 billion in 1997. EM’s sales of
$4.474 billion in 1998 were up approximately 8% as compared with
$4.140 billion in 1997, and CMG’s sales of $1.404 billion
in 1998 were up over 29% as compared with $1.085 billion in 1997.
Channel Master’s sales in 1998 for the portion of the year
prior to its disposition were $38 million as compared with $166
million in 1997. EM Americas’ sales in 1998 of $3.308
billion were up almost 10% as compared with the prior year, while
EM EMEA’s 1998 sales were up approximately 4% and EM
Asia’s sales were essentially unchanged.
In connection with the change in organizational structure
referred to above, the Company reorganized both its EM Americas
and EM EMEA operations. During the first quarter of 1999, the
Company recorded $26.5 million pre-tax and
$15.7 million after-tax ($0.43 per share on a diluted basis)
of incremental special charges associated primarily with the
European portion of its EM EMEA operations. Approximately
$18.6 million of the pre-tax charge is included in operating
expenses, most of which required an outflow of cash, and
$7.9 million is included in cost of sales, which represented
a non-cash write-down. These charges
11
included severance, inventory reserves required related to
supplier terminations and other items. The first quarter charges
in 1999 also included some incremental costs associated with the
completion of the reorganization of EM Americas, most of the
costs for which were recorded in the fourth quarter of 1998 as
discussed below. These costs included primarily employee
relocation and special incentive payments as well as some
additional severance costs. At July 2, 1999, the last day of
fiscal 1999, the only cash remaining to be expended in
connection with the first quarter special charges were amounts
associated with long-term real property lease terminations and
contractual commitments, the amounts of which were not material.
The initial special charge related to the reorganization of EM
Americas was recorded during the fourth quarter of 1998. At that
time, the Company recorded $35.4 million pre-tax and
$21.2 million after-tax ($0.57 per share on a diluted basis)
of incremental special charges associated principally with this
reorganization. Approximately $25.7 million of the pre-tax
charge was included in operating expenses and $9.7 million
was included in cost of sales. These charges included severance,
real property lease termination costs, inventory reserves
required related to supplier terminations, the write-down of
goodwill and other items. The write-down of goodwill related to a
small underperforming operating unit, the ultimate disposition
of which will not have a material impact on the Company’s
future results of operations. Of the special charges of
$35.4 million pre-tax, approximately $17.1 million did
not require an outflow of cash and $18.3 million required the use
of cash, substantially all of which had been expended at
July 2, 1999.
Management expects that the Company’s future results of
operations will benefit from the expected cost savings resulting
from these reorganizations, and that the impact on liquidity and
sources and uses of capital resources will not be material. The
reorganization of EM’s European operations will have one
more phase which has not yet been finalized. That phase relates
to the consolidation of warehousing operations in Europe.
Construction of the central warehouse facility located in
Tongeren, Belgium has been completed and it is currently
anticipated that the warehouse will begin operations in the
second quarter of fiscal year 2000. The implementation of this
final phase will result in some incremental special charges
related primarily to severance and various other relocation
related costs.
In addition to the first quarter 1999 special charges referred to
above, the 1999 results include the fourth quarter net gain
associated with management’s decision to exit the printed
catalog business. The net gain consisted of the $252.3 million
pre-tax gain on the sale of the Company’s former Allied
Electronics subsidiary on July 2, 1999, the last day of
fiscal 1999, offset somewhat by charges of $42.8 million recorded
in connection with the intended disposition of the Avnet Setron
catalog operation in Germany. Most of the charge related to the
intended disposition of Avnet Setron involved the non-cash
write-off of goodwill and a reserve for inventory on product
lines not typically sold by EM’s core businesses. The net
positive effect on fourth quarter 1999 pre-tax income, net income
and diluted earnings per share was $209.5 million,
$79.7 million and $2.25, respectively. The unusually large
impact on taxes was as a result of the elimination of goodwill
attributable to the Allied and Setron businesses for which no tax
benefit is available.
In total, the special items recorded in 1999 as discussed above
positively impacted income before income taxes, net income and
diluted earnings per share by $183.0 million,
$64.0 million and $1.78, respectively. Of the
$183.0 million pre-tax gain related to special items,
charges of $56.1 million are included in operating expenses
and $13.1 million are included in cost of sales, and the
$252.3 million net pre-tax gain on the sale of Allied
Electronics is shown separately in the Consolidated Statement of
Income. The net positive impact of the special items on diluted
earnings per share for 1999 ($1.78) was $0.04 less than the sum
of the applicable amounts for the fourth quarter and first
quarter ($2.25 per share less $0.43 per share) due to the effect
of the Company’s stock repurchase program on the weighted
average number of shares outstanding (see “Liquidity and
Capital Resources” below) and the amount of the special
items.
In addition to the fourth quarter 1998 special charges referred
to above, the 1998 results included the second quarter gain on
the sale of the Company’s former Channel Master business
amounting to $33.8 million pre-tax, offset somewhat in
operating expenses by $13.3 million of costs relating to the
divestiture of Avnet Industrial, the closure of the
Company’s corporate headquarters in Great Neck, New York,
and the anticipated loss on the sale of Company-owned real
estate. At the time the special charges were recorded, they
represented primarily a non-cash write-down to reflect the
expected value to be received upon the disposition
12
of Avnet Industrial and the Company-owned real estate. The
Company has subsequently disposed of Avnet Industrial for an
amount approximating the written down value and is still in the
process of disposing of the Company-owned real estate, the
written down value of which is still believed to approximate its
market value based upon real estate appraisals. The disposition
of the Company-owned real estate will not have a material impact
on the Company’s future results of operations, liquidity and
sources and uses of capital resources. The net effect of these
items was to increase 1998 income before income taxes by
$20.5 million and net income by $8.7 million ($0.21 per
share on a diluted basis for the second quarter).
In total, the special items recorded in 1998, as discussed above,
negatively impacted income before income taxes, net income and
diluted earnings per share by $14.9 million,
$12.5 million, and $0.32 per share, respectively. (The
effective tax rate related to the special items reflects the
impact of certain amounts which are not subject to income taxes.)
The net positive impact of the special items on diluted earnings
per share for 1998 ($0.32) was $0.04 less than the sum of the
applicable amounts for the second quarter and fourth quarter
($0.21 per share less $0.57 per share) due to the effect of the
Company’s stock repurchase program on the weighted average
number of shares outstanding and the amount of the special items.
In 1999, sales of semiconductors, computer products, connectors
and other products (principally passives and electromechanical
devices) represented 56%, 27%, 7% and 10%, respectively, of
consolidated sales, as compared with 54%, 27%, 9% and 10%,
respectively, in 1998 (including in 1998 Channel Master’s
sales which are reflected in ‘other’ products).
Consolidated gross profit margins (before special charges) were
15.1% in 1999 as compared with 16.7% and 17.8% in 1998 and 1997,
respectively. This downward trend is due primarily to the
competitive environment in the electronic distribution
marketplace as a result of the global industry cyclical downtrend
as well as the effect of increased sales of computer products
(including microprocessors, DRAMS, disk drives, etc.), which have
lower gross profit margins than other products in the
Company’s product lines. EM’s gross profit margins were
relatively stable over the four quarters in 1999, possibly an
indication that the electronics distribution industry may be
beginning to rebound from the longest cyclical downtrend in its
history. Although operating expenses (before special charges) in
absolute dollars were sequentially higher during the last three
years, they remained unchanged at 11.3% as a percentage of sales
during 1999 as compared with 1998 even during this difficult
business cycle within the industry. Comparative operating
expenses were negatively impacted by approximately $10.5 million
of incremental costs associated with the Company’s year 2000
remediation program (see below), the extra week of expenses due
to the Company’s “52/53 week” fiscal calendar
and by normal operating expenses incurred by newly acquired
businesses. The Company reduced operating expenses (before
special charges) as a percentage of sales to 11.3% in 1998 as
compared with 11.7% in 1997. As a result, operating income
(before special charges) of $242.5 million in 1999
represented 3.8% of sales, as compared with $319.9 million
or 5.4% of sales in 1998 and $327.7 million or 6.1% of sales
in 1997.
Other income was $1.9 million in 1999 as compared with
$2.4 million and $11.7 million in 1998 and 1997,
respectively. Other income in 1997 included the third quarter
$7.6 million gain on the sale of the Company’s former
Culver City, California facility. Interest expense was $52.1
million in 1999, as compared with $40.0 million and
$26.1 million in 1998 and 1997, respectively. The
significant increase in interest expense during the last few
years was due primarily to increased borrowings to fund the
Company’s stock repurchase program, its acquisition program
and the additional working capital requirements to support the
growth in business.
As a result of the factors described above, consolidated net
income including all special items in 1999 was
$174.5 million, or $4.86 per share on a diluted basis, as
compared with $151.4 million, or $3.80 per share on a
diluted basis, in 1998 and $182.8 million, or $4.25 per
share on a diluted basis, in 1997. Excluding the special items
referred to above, net income in 1999 was $110.5 million, or
$3.08 per share on a diluted basis, as compared with net income
of $163.9 million, or $4.12 per share on a diluted basis in
1998. Net income before special items as a percentage of sales
was 1.7% in 1999 as compared with 2.8% and 3.4% in 1998 and 1997,
respectively.
As the Company has increased its investment in foreign
operations, the financial statement impact associated with the
volatility of foreign currency exchange rates has become more
apparent. The translation
13
into U.S. dollars of the financial statements of the
Company’s foreign subsidiaries resulted in a charge recorded
directly to shareholders’ equity amounting to
$4.2 million, $17.0 million and $20.5 million in
1999, 1998 and 1997, respectively. The charge in 1999 was due
primarily to the weakening of British and French currencies
against the dollar. The charge in 1998 was due primarily to the
weakening of the French, Canadian and Far East currencies against
the U.S. dollar, and the charge in 1997 was due primarily to the
weakening of the French, German, Italian and Swedish currencies
against the U.S. dollar. The effect of foreign currency exchange
rate fluctuations on the 1999 statement of income was not
material due to the fact that Avnet’s international
operations represent only 28% of sales and a smaller percentage
of income. Had the various average foreign currency exchange
rates remained the same during 1999 as compared with 1998,
Avnet’s consolidated 1999 sales and net income would have
been less than 1% higher than the actual reported results for
1999.
Liquidity and Capital Resources
Over the last three years, cash generated from income before
depreciation, amortization, the pre-tax gain on the dispositions
of Allied Electronics and Channel Master, and other non-cash
items amounted to $452.2 million. During that period,
$184.6 million was used for working capital needs (excluding
cash) resulting in $267.6 million of net cash flows
provided from operations. In addition, $220.8 million, net,
was needed for other normal business operations including
purchases of property, plant and equipment ($148.8 million)
and dividends ($77.3 million), offset by cash generated from
other immaterial items ($5.3 million). This resulted in
$46.8 million being generated from normal business
operations. During that three-year period, the Company also used
$98.8 million, net, for the repurchase of its common stock
($520.1 million) and the repayment of other debt
($2.8 million), offset somewhat by the net cash generated
from dispositions of operations in excess of the cash used for
acquisitions ($424.1 million). This overall use of cash of
$52.0 million was financed by $316.2 million raised
from the issuance of commercial paper, the issuance of the 6.45%
Notes due August 15, 2003 (see below) and an increase in
bank debt, offset by a $264.2 million increase in cash and
cash equivalents.
In 1999, the Company generated $9.8 million from income
before depreciation, amortization, the pre-tax gain on the sale
of Allied Electronics and other non-cash items, and generated
$62.2 million by reducing working capital, resulting in
$72.0 million of net cash flows provided from operations. In
addition, the Company used $99.5 million for other normal
business operations including purchases of property, plant and
equipment ($73.0 million) and dividends
($26.8 million), offset by cash generated from other
immaterial items ($0.3 million). This resulted in
$27.5 million being used for normal business operations. The
Company also used $70.1 million to repurchase its common
stock and generated $338.4 million from its disposition of Allied
Electronics, net of cash used for acquisitions, and the issuance
of other debt. Of this overall generation of cash of
$240.8 million, $11.4 million was used to reduce debt
and $229.4 million was added to cash and equivalents.
In 1998, the Company generated $209.4 million from income
before depreciation, amortization, the pre-tax gain on the sale
of Channel Master and other non-cash items, and used
$203.3 million for working capital needs, resulting in
$6.1 million of net cash flows provided from operations. In
addition, the Company used $60.8 million for other normal
business operations including purchases of property, plant and
equipment ($38.5 million) and dividends
($24.5 million), offset by cash generated from other
immaterial items ($2.2 million). This resulted in
$54.7 million being used for normal business operations. The
Company also used $308.2 million to repurchase its common
stock and generated $87.4 million from its disposition of
Channel Master, net of cash used for acquisitions, and the
issuance of other debt. This overall use of cash of
$275.5 million was financed by a $298.8 million
increase in bank debt and commercial paper, offset by a
$23.3 million increase in cash.
The Company’s quick assets at July 2, 1999 totaled
$1.273 billion as compared with $976.9 million at
June 26, 1998. At July 2, 1999, quick assets exceeded
the Company’s current liabilities by $476.8 million as
compared with $369.8 million excess at the end of 1998.
Working capital at July 2, 1999 was $1.517 billion as
compared with $1.461 billion at June 26, 1998. At
July 2, 1999 to support each dollar of current liabilities,
the Company had $1.60 of quick assets and $1.31 of other current
assets, for a total of $2.91 as compared with
14
$3.41 at the end of the prior fiscal year. However, the above
balance sheet amounts at July 2, 1999 were significantly
impacted by the $377.0 million of cash received on that day
in connection with the sale of Allied Electronics. On
July 2, 1999, cash and cash equivalents included
$240.1 million of before-tax proceeds from the sale of
Allied Electronics with the balance of the cash received at
closing having been used to reduce commercial paper outstanding.
In addition, current liabilities at July 2, 1999 included
approximately $134.7 million of accrued income taxes payable
as a result of the gain on the sale of Allied Electronics.
In the first quarter of 1999, the Company issued $200.0 million
of 6.45% Notes due August 15, 2003 (the “Notes”).
The net proceeds received by the Company from the sale of the
Notes were approximately $198.3 million after deduction of
the underwriting discounts and other expenses associated with the
sale of the Notes. The net proceeds from the Notes have been
used to repay indebtedness which the Company may re-borrow for
general corporate purposes, including capital expenditures,
acquisitions, repurchase of the Company’s common stock and
working capital needs.
In June 1999, the Company entered into separate credit agreements
with Banca Commerciale Italiana and UniCredito Italiano. The
agreements provide eighteen-month facilities with lines of credit
totaling 83 billion Italian Lira (USD equivalent of
approximately $43.8 million). The facilities are currently
being used primarily as a source of working capital financing for
the Company’s Italian subsidiary. In addition, in September
1998, the Company entered into an agreement with KBC, a Belgian
bank, to finance the construction of the new Avnet Europe, NV/ SA
distribution center in Tongeren, Belgium. The agreement provides
for multiple term loans totaling 665 million Belgian Francs
(USD equivalent of approximately $16.9 million) which may
be converted into term loans with maturities between three and
fifteen years. The facilities are currently being used to finance
real estate, computer equipment, infrastructure and project
consultancy costs related to the new European distribution
center.
In the first quarter of 1998, the Company renegotiated its
revolving credit agreement with a syndicate of banks led by
NationsBank of North Carolina, N.A., which has now merged
with Bank of America. The agreement provides a five-year facility
with a line of credit of up to $700.0 million. The Company
may select from various interest rate options and maturities
under this facility. This credit facility serves as a primary
funding vehicle as well as a backup for the Company’s
commercial paper program pursuant to which the Company is
authorized to issue short-term notes for current operational
business requirements. The credit agreement contains various
covenants, none of which management believes materially limit the
Company’s financial flexibility to pursue its intended
financial strategy.
On September 25, 1998, the Company’s Board of Directors
authorized a new $100 million stock repurchase program. The
stock is to be purchased in the open market from time-to-time or
in directly negotiated purchases. This program is in addition to
the $200 million and $250 million programs authorized by the
Board of Directors in August 1996 and November 1997,
respectively, and which were completed during 1998. During 1999,
the Company repurchased approximately 1.4 million shares of its
common stock for an aggregate purchase price of approximately
$70.1 million. During 1998 and 1997, the Company used
approximately $308.2 million and $141.8 million, respectively, to
purchase a total of 7.5 million shares (4.9 million shares in
1998 and 2.6 million shares in 1997). Taking into account the
Board of Directors’ authorizations since August 1996,
the Company has purchased almost 8.9 million shares using
approximately $520 million in the process. The Company suspended
its stock repurchase program in January 1999 as softer
operating earnings caused its interest coverage ratio to fall
below the Company’s self-imposed limit.
At July 2, 1999, the Company had $202.2 million outstanding
under its commercial paper program, $272.2 million outstanding
under its various bank syndicated revolving credit facilities,
$200.0 million of the 6.45% Notes due August 15, 2003,
$100.0 million of the 6 7/8% Notes due March 15, 2004,
and $17.1 million of other debt. This $791.5 million of total
debt outstanding at July 2, 1999 represents a decrease of
$19.4 million from the $810.9 million outstanding at
June 26, 1998. The Company’s debt to capital
(shareholders’ equity plus total debt) ratio was
approximately 36% at July 2, 1999 and 38% at June 26,
1998.
During the last three years, the Company’s
shareholders’ equity decreased by $107.6 million to $1,397.6
million at July 2, 1999, while total debt increased by
$294.0 million to $791.5 million. The decrease in
shareholders’ equity during that three-year period was the
net result of the positive impact of net income
15
($508.6 million) and other items, net, principally related to
stock option and incentive programs ($16.3 million), offset by
the repurchase of common stock ($520.1 million), dividends ($70.6
million) and cumulative translation adjustments ($41.8 million).
The Company’s favorable balance sheet ratios would
facilitate additional financing, if, in the opinion of
management, such financing would enhance the future operations of
the Company.
Currently, the Company does not have any material commitments for
capital expenditures. The Company and the former owners of a
Company-owned site in Oxford, North Carolina have entered into a
Consent Decree and Court Order with the Environmental Protection
Agency (EPA) for the environmental clean-up of the site, the cost
of which, according to the EPA’s remedial investigation and
feasibility study, is estimated to be approximately $6.3
million, exclusive of the $1.5 million in EPA past costs paid by
the potentially responsible parties (PRP’s). Pursuant to a
Consent Decree and Court Order entered into between the Company
and the former owners of the site, the former owners have agreed
to bear at least 70% of the clean-up costs of the site, and the
Company will be responsible for not more than 30% of those costs.
In addition, the Company has received notice from a third party
of its intention to seek indemnification for costs it may incur
in connection with an environmental clean-up at a site in Rush,
Pennsylvania resulting from the alleged disposal of wire
insulation material at the site by a former unit of the Company.
Based upon the information known to date, management believes
that the Company has appropriately accrued in its financial
statements for its share of the costs of the clean-ups at all the
above mentioned sites. The Company is also a PRP, or has been
notified of claims made against it, at an environmental clean-up
site in Huguenot, New York. At this time, management cannot
estimate the amount of the Company’s potential liability, if
any, for clean-up costs in connection with this site, but does
not anticipate that this matter or any other contingent matters
will have a material adverse impact on the Company’s
financial condition, liquidity or results of operations.
Management is not now aware of any commitments, contingencies or
events within the Company’s control which may significantly
change its ability to generate sufficient cash from internal or
external sources to meet its needs.
Pending Acquisitions
During the last few months, the Company has announced agreements
to acquire three businesses which are expected to have a
substantial positive impact on the Company. In June 1999,
the Company entered into a merger agreement to acquire Marshall
Industries and its wholly-owned subsidiary, Sterling Electronics,
one of the world’s largest distributors of electronic
components and computer products, for a combination of cash and
Avnet stock. The merger is subject to the approval of both the
Avnet and Marshall shareholders at meetings to be held on
October 19, 1999. In the merger, holders of Marshall common
stock will receive, in exchange for each share they hold, either
$39.00 in cash or 0.81569 of a share of Avnet common stock
(subject to variation between 0.74772 and 0.91765 of a share
depending upon a 20-day average of the closing prices of Avnet
common stock ending five trading days before the date of the
special meeting of Marshall shareholders being held to vote on
the transaction), or a combination of cash and Avnet common
stock. Details of the transaction are delineated in the Joint
Proxy Statement/ Prospectus of Avnet and Marshall dated
September 8, 1999, which shareholders of Avnet are
encouraged to read. The transaction has a total value of
approximately $840.9 million. This includes a purchase price for
the equity of Marshall of approximately $684.1 million,
consisting of $360.1 million in cash and $324.0 million in Avnet
stock, as well as direct transaction expenses of $12.6 million
and the assumption of Marshall debt of $161.5 million, less
potential stock option proceeds of $17.3 million if all holders
of Marshall stock options exercise such options. The above
amounts assume the issuance of 6.777 million shares of Avnet
stock at a price of $47.8125, both amounts being subject to
change as specified in the merger agreement. Marshall’s
annual sales are approximately $1.7 billion.
The Company has also entered into separate agreements to acquire
84% of Eurotronics, B.V. (which does business under the name
SEI), a pan-European electronics components distributor
headquartered in the Netherlands, and 94% of the SEI Macro Group,
an electronics components distributor headquartered in the
United Kingdom. The combined transaction value of these two
acquisitions, including the assumption of debt, is in the range
of $200.0 – $250.0 million to be paid for with a
combination of cash and Avnet stock. Both
16
transactions are subject to antitrust approvals, and the
acquisition of the SEI Macro Group is subject to the approval of
the selling company’s shareholders. The Company will acquire
the remaining 16% of Eurotronics along with the acquisition of
Marshall (which holds the 16%) and the remaining 6% of the SEI
Macro Group when it completes the acquisition of Eurotronics. The
combined annual sales of Eurotronics and the SEI Macro Group are
approximately $750 million.
In order to finance the cash component of these transactions and
to provide additional working capital capacity, the Company is in
the process of entering into a $500 million 364-day credit
facility with a syndicate of banks. This credit facility is in
addition to the currently outstanding $700 million 5-year bank
syndicated credit facility entered into in September 1997
referred to above.
To capitalize on growing world markets for electronic components
and computer products, the Company has pursued and expects to
continue to pursue strategic acquisitions to expand its business.
Management believes that the Company has the ability to generate
sufficient capital resources from internal or external sources
in order to continue its expansion program. In addition, as with
past acquisitions, management does not expect that future
acquisitions will materially impact the Company’s liquidity.
Market Risks
Certain of the Company’s operations, primarily its
international subsidiaries, occasionally purchase and sell
products in currencies other than their functional currencies.
This subjects the Company to the risks associated with
fluctuations of foreign currency exchange rates. The Company
reduces this risk by utilizing natural hedging (offsetting
receivables and payables) as well as by creating offsetting
positions through the use of derivative financial instruments,
primarily forward foreign exchange contracts with maturities of
less than sixty days. The market risk related to the foreign
exchange contracts is offset by the changes in valuation of the
underlying items being hedged. The amount of risk and the use of
derivative financial instruments described above is not material
to the Company’s financial position or results of
operations. Including the recently issued Notes, approximately
38% of the Company’s outstanding debt is in fixed rate
instruments and 62% is subject to variable short-term interest
rates. Accordingly, the Company will be impacted by any change in
short-term interest rates. The Company does not hedge either its
investment in its foreign operations or its floating interest
rate exposures.
The Year 2000 Issue
With the calendar year 2000 only a few months away, many
companies, including Avnet, are having to modify their computer
systems and applications which currently use two-digit fields to
designate a year (“Year 2000 Issue”). Management has
assessed and continues to assess the impact of the Year 2000
Issue on the Company’s reporting systems and operations. The
Company has engaged several outside consulting firms and is
using internal resources to perform a comprehensive remediation
of the Company’s computer systems before the year 2000. The
Company’s remediation plan with respect to its critical
internal systems has consisted of four phases: (i) high
level assessment of systems, (ii) detailed assessment,
remediation and unit testing, (iii) deployment and
(iv) integration testing. The Company has already completed
all four phases on most of its critical internal systems, and is
in the deployment and integration testing phases for the
remaining critical systems. All phases for all critical systems
are expected to be completed during the second quarter of fiscal
2000. The costs to modify the existing computer systems and
applications are significant; however, they have not been and
will not be material to the Company’s financial position or
results of operations. The current estimate (including potential
capital expenditures) is in the range of $15.0 million to $17.0
million, of which the Company has already incurred or has
committed to incur approximately $13.0 million.
Management believes that the Company’s most reasonably
likely worst case year 2000 scenario would involve the failure by
third parties to provide products or services to the Company as
a result of problems experienced by such third parties with
respect to the Year 2000 Issue. Third party system failures could
cause the Company to experience disruption of receipt of
products from suppliers, interruption of telecommunication and
transportation services, or interruption of other critical
services. While it is unpredictable at this point in time whether
such a worst case scenario is likely to occur, it is possible
that any such disruptions of sufficient
17
magnitude could have a material adverse effect on the
Company’s operations, liquidity and financial condition. The
Company is in contact with all its major suppliers to ascertain
their progress in implementing year 2000 remediation. Although
the Company cannot control the efforts of the many third parties
with which it interfaces, management does not currently
anticipate that there will be any significant disruption of the
Company’s ability to transact business. If, however, the
Company determines that critical supplies or services from third
parties are in jeopardy as a result of the Year 2000 Issue, the
Company will immediately adopt or develop contingency plans which
are responsive to the circumstances. The Company has already
developed and is continuing to implement systems which will
identify interchangeable products for many of the products the
Company sells. These systems would be an important part of the
Company’s overall contingency plan in the event a particular
supplier becomes unable to meet the Company’s requirements
for delivering products to it.
The Euro
Effective on January 1, 1999, a single European currency
(the “Euro”) was introduced and certain member
countries of the European Union established fixed conversion
rates between their existing national currencies and the Euro.
The participating countries adopted the Euro as their common
legal currency on that date, and during the transition period
through January 1, 2002 either the Euro or the participating
country’s national currency will be accepted as legal
currency. The Company is addressing the issues raised by the
introduction of the Euro including, among other things, the
potential impact on its internal systems, tax and accounting
considerations, business issues and foreign exchange rate risks.
Although management is still evaluating the impact of the Euro,
management does not anticipate, based upon information currently
available, that the introduction of the Euro will have a material
adverse impact on the Company’s financial condition or
results of operations.
Item 7A. Quantitative and Qualitative
Disclosures About Market Risk
See Note 1 to the consolidated financial statements
appearing at the end of this Report, and “Liquidity and
Capital Resources” in Item 7 of this Report.
Item 8. Financial Statements and Supplementary
Data
The Financial Statements and Supplementary Data are listed under
Item 14 of this Report.
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the
Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain
Beneficial Owners and Management
Item 13. Certain Relationships and Related
Transactions
The information called for by Items 10, 11, 12
and 13 (except to the extent set forth in Item 4A
above) is incorporated in this Report by reference to the
Company’s definitive proxy statement relating to the Annual
Meeting of Shareholders anticipated to be held November 22,
1999.
18
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K
a. The following documents are filed as part of this
Report:
| |
|
|
|
|
|
|
|
|
|
|
Page |
|
|
|
|
|
|
1. |
|
Financial Statements and Supplementary Data |
|
|
|
|
|
|
|
|
|
|
|
Report of Independent Public Accountants |
|
|
21 |
|
|
|
Avnet, Inc. and Subsidiaries Consolidated Financial
Statements: |
|
|
|
|
|
|
|
|
|
|
|
Statements of Income for the years ended
July 2, 1999, June 26, 1998 and June 27, 1997 |
|
|
22 |
|
|
|
|
|
|
|
|
Balance Sheets at July 2, 1999 and
June 26, 1998 |
|
|
23 |
|
|
|
|
|
|
|
|
Statements of Shareholders’ Equity for the
years ended July 2, 1999, June 26, 1998 and
June 27, 1997 |
|
|
24 |
|
|
|
|
|
|
|
|
Statements of Cash Flows for the years ended
July 2, 1999, June 26, 1998 and June 27, 1997 |
|
|
25 |
|
|
|
|
|
|
|
|
Notes to Consolidated Financial Statement |
|
|
26-39 |
|
|
2. |
|
Financial Statement Schedules |
|
|
|
|
|
|
|
|
|
|
|
Schedule II for the years ended July 2,
1999, June 26, 1998 and June 27, 1997 |
|
|
40 |
|
|
|
Schedules other than those above have been omitted because they
are not applicable or the required information is shown in the
financial statements or notes thereto. |
|
|
|
|
|
3. |
|
Exhibits — The exhibit index for this Report can be found on pages 41 to 42. |
b. Reports on Form 8-K
During the fourth quarter of fiscal 1999, the Company filed a
Current Report on Form 8-K bearing a cover date of
May 6, 1999, in which it reported, pursuant to Item 5
of Form 8-K, and whereby it filed (1) a Certificate of
Amendment of the Company’s Certificate of Incorporation
filed with the New York Department of State on February 11,
1999; (2) a Restated Certificate of Incorporation of the
Company filed with the New York Department of State on
February 22, 1999; and (3) the Avnet 1997 Stock Option
Plan as amended and restated on January 29, 1999.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
|
| |
AVNET, INC. |
| |
(Registrant) |
|
|
|
| |
By: |
/s/ ROY VALLEE |
|
|
| |
|
| |
Roy Vallee, Chairman of the Board, Chief Executive Officer and
Director |
Date: September 29, 1999
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons
on behalf of the Registrant and in the capacities indicated on
September 29, 1999.
| |
|
|
| Signature |
|
Title |
|
|
|
/s/ ROY VALLEE
(Roy Vallee) |
|
Chairman of the Board, Chief Executive Officer and Director |
*
(Eleanor Baum) |
|
Director |
*
(J. Veronica Biggins) |
|
Director |
*
(Joseph F. Caligiuri) |
|
Director |
*
(Lawrence W. Clarkson) |
|
Director |
*
(Ehud Houminer) |
|
Director |
*
(James A. Lawrence) |
|
Director |
*
(Salvatore J. Nuzzo) |
|
Director |
*
(Frederic Salerno) |
|
Director |
*
(Frederick S. Wood) |
|
Director |
/s/ RAYMOND SADOWSKI
(Raymond Sadowski) |
|
Senior Vice President, Chief Financial Officer and Assistant
Secretary |
/s/ JOHN F. COLE
(John F. Cole) |
|
Controller and Principal Accounting Officer |
*By: /s/ RAYMOND SADOWSKI
(Raymond Sadowski)
Attorney-in-Fact |
|
|
20
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Avnet, Inc.:
We have audited the accompanying consolidated balance sheets of
Avnet, Inc. (a New York corporation) and Subsidiaries as of
July 2, 1999 and June 26, 1998 and the related
consolidated statements of income, shareholders’ equity and
cash flows for each of the three years in the period ended
July 2, 1999. These financial statements are the
responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Avnet, Inc. and Subsidiaries as of July 2, 1999 and
June 26, 1998, and the results of their operations and their
cash flows for each of the three years in the period ended
July 2, 1999 in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedule listed
in the index of financial statements is presented for purposes
of complying with the Securities and Exchange Commission’s
rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data
required to be set forth therein in relation to the basic
financial statements taken as a whole.
|
|
| |
/s/ ARTHUR ANDERSEN LLP |
Phoenix, Arizona
August 4, 1999
21
AVNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
July 2, |
|
June 26, |
|
June 27, |
|
|
1999 |
|
1998 |
|
1997 |
|
|
|
|
|
|
|
|
Sales |
|
$ |
6,350,042 |
|
|
$ |
5,916,267 |
|
|
$ |
5,390,626 |
|
|
|
|
|
|
|
Cost of sales (Note 14) |
|
|
5,401,472 |
|
|
|
4,935,848 |
|
|
|
4,428,779 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
948,570 |
|
|
|
980,419 |
|
|
|
961,847 |
|
|
|
|
|
|
|
Selling, shipping, general and administrative expenses
(Note 14) |
|
|
775,337 |
|
|
|
709,243 |
|
|
|
634,101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
173,233 |
|
|
|
271,176 |
|
|
|
327,746 |
|
|
|
|
|
|
|
Other income, net |
|
|
1,875 |
|
|
|
2,363 |
|
|
|
11,749 |
|
|
|
|
|
|
|
Interest expense |
|
|
(52,096 |
) |
|
|
(39,988 |
) |
|
|
(26,076 |
) |
|
|
|
|
|
|
Gain on dispositions of businesses (Note 14) |
|
|
252,279 |
|
|
|
33,795 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
375,291 |
|
|
|
267,346 |
|
|
|
313,419 |
|
|
|
|
|
|
|
Income taxes (Note 7) |
|
|
200,834 |
|
|
|
115,922 |
|
|
|
130,656 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
174,457 |
|
|
$ |
151,424 |
|
|
$ |
182,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
4.90 |
|
|
$ |
3.85 |
|
|
$ |
4.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
4.86 |
|
|
$ |
3.80 |
|
|
$ |
4.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used to compute earnings per share (Note 1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
35,595 |
|
|
|
39,375 |
|
|
|
42,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
35,917 |
|
|
|
39,823 |
|
|
|
43,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements
22
AVNET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
July 2, |
|
June 26, |
|
|
1999 |
|
1998 |
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
311,982 |
|
|
$ |
82,607 |
|
|
|
|
|
|
|
|
Receivables, less allowances of $27,626 and $31,807, respectively |
|
|
960,639 |
|
|
|
894,289 |
|
|
|
|
|
|
|
|
Inventories (Note 3) |
|
|
997,247 |
|
|
|
1,061,739 |
|
|
|
|
|
|
|
|
Other |
|
|
43,455 |
|
|
|
29,722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
2,313,323 |
|
|
|
2,068,357 |
|
|
|
|
|
|
|
Property, plant and equipment, net (Note 4) |
|
|
194,012 |
|
|
|
155,491 |
|
|
|
|
|
|
|
Goodwill, net of accumulated amortization of $60,404 and $62,461,
respectively (Note 1) |
|
|
385,648 |
|
|
|
460,882 |
|
|
|
|
|
|
|
Other assets |
|
|
91,714 |
|
|
|
48,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,984,697 |
|
|
$ |
2,733,697 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings due within one year (Note 5) |
|
$ |
288 |
|
|
$ |
243 |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
480,377 |
|
|
|
451,441 |
|
|
|
|
|
|
|
|
Accrued expenses and other (Note 6) |
|
|
315,198 |
|
|
|
155,423 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
795,863 |
|
|
|
607,107 |
|
|
|
|
|
|
|
Long-term debt, less due within one year (Note 5) |
|
|
791,226 |
|
|
|
810,695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,587,089 |
|
|
|
1,417,802 |
|
|
|
|
|
|
|
|
|
|
|
Commitments & contingencies (Notes 9 & 11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity (Note 10): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock $1.00 par, authorized 120,000,000 shares, issued
44,416,000 shares and 44,335,000 shares, respectively |
|
|
44,416 |
|
|
|
44,335 |
|
|
|
|
|
|
|
Additional paid-in capital |
|
|
435,930 |
|
|
|
434,695 |
|
|
|
|
|
|
|
Retained earnings |
|
|
1,496,357 |
|
|
|
1,342,988 |
|
|
|
|
|
|
|
Cumulative translation adjustments |
|
|
(46,041 |
) |
|
|
(41,804 |
) |
|
|
|
|
|
|
Treasury stock at cost, 9,224,599 shares and 7,872,000 shares,
respectively |
|
|
(533,054 |
) |
|
|
(464,319 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders’ equity |
|
|
1,397,608 |
|
|
|
1,315,895 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities & shareholders’ equity |
|
$ |
2,984,697 |
|
|
$ |
2,733,697 |
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements
23
AVNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Years ended July 2, 1999, June 26, 1998 and
June 27, 1997
(In thousands, except per share amounts)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
Cumulative |
|
|
|
Total |
|
|
Common |
|
Paid-in |
|
Retained |
|
Translation |
|
Treasury |
|
Shareholders’ |
|
|
Stock |
|
Capital |
|
Earnings |
|
Adjustments |
|
Stock |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 28, 1996 |
|
$ |
43,842 |
|
|
$ |
418,441 |
|
|
$ |
1,058,350 |
|
|
$ |
(4,243 |
) |
|
$ |
(11,179 |
) |
|
$ |
1,505,211 |
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
182,763 |
|
|
|
|
|
|
|
|
|
|
|
182,763 |
|
|
|
|
|
|
|
Translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,524 |
) |
|
|
|
|
|
|
(20,524 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
162,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends, $.60 per share |
|
|
|
|
|
|
|
|
|
|
(25,563 |
) |
|
|
|
|
|
|
|
|
|
|
(25,563 |
) |
|
|
|
|
|
|
Repurchase of stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(147,396 |
) |
|
|
(147,396 |
) |
|
|
|
|
|
|
Other, net, principally stock option and incentive programs |
|
|
190 |
|
|
|
6,739 |
|
|
|
|
|
|
|
|
|
|
|
772 |
|
|
|
7,701 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 27, 1997 |
|
|
44,032 |
|
|
|
425,180 |
|
|
|
1,215,550 |
|
|
|
(24,767 |
) |
|
|
(157,803 |
) |
|
|
1,502,192 |
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
151,424 |
|
|
|
|
|
|
|
|
|
|
|
151,424 |
|
|
|
|
|
|
|
Translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,037 |
) |
|
|
|
|
|
|
(17,037 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
134,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends, $.60 per share |
|
|
|
|
|
|
|
|
|
|
(23,986 |
) |
|
|
|
|
|
|
|
|
|
|
(23,986 |
) |
|
|
|
|
|
|
Repurchase of stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(302,606 |
) |
|
|
(302,606 |
) |
|
|
|
|
|
|
Other, net, principally stock option and incentive programs |
|
|
303 |
|
|
|
9,515 |
|
|
|
|
|
|
|
|
|
|
|
(3,910 |
) |
|
|
5,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 26, 1998 |
|
|
44,335 |
|
|
|
434,695 |
|
|
|
1,342,988 |
|
|
|
(41,804 |
) |
|
|
(464,319 |
) |
|
|
1,315,895 |
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
174,457 |
|
|
|
|
|
|
|
|
|
|
|
174,457 |
|
|
|
|
|
|
|
Translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,237 |
) |
|
|
|
|
|
|
(4,237 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends, $.60 per share |
|
|
|
|
|
|
|
|
|
|
(21,088 |
) |
|
|
|
|
|
|
|
|
|
|
(21,088 |
) |
|
|
|
|
|
|
Repurchase of stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70,147 |
) |
|
|
(70,147 |
) |
|
|
|
|
|
|
Other, net, principally stock option and incentive programs |
|
|
81 |
|
|
|
1,235 |
|
|
|
|
|
|
|
|
|
|
|
1,412 |
|
|
|
2,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, July 2, 1999 |
|
$ |
44,416 |
|
|
$ |
435,930 |
|
|
$ |
1,496,357 |
|
|
$ |
(46,041 |
) |
|
$ |
(533,054 |
) |
|
$ |
1,397,608 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements
24
AVNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
July 2, |
|
June 26, |
|
June 27, |
|
|
1999 |
|
1998 |
|
1997 |
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
174,457 |
|
|
$ |
151,424 |
|
|
$ |
182,763 |
|
|
|
|
|
|
|
Non-cash and other reconciling items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
52,275 |
|
|
|
50,542 |
|
|
|
49,398 |
|
|
|
|
|
|
|
|
Deferred taxes (Note 7) |
|
|
(32,294 |
) |
|
|
(1,721 |
) |
|
|
(5,137 |
) |
|
|
|
|
|
|
|
Other, net (Note 12) |
|
|
24,922 |
|
|
|
42,936 |
|
|
|
5,941 |
|
|
|
|
|
|
|
|
Pre-tax gain on dispositions of businesses (Notes 2 and 14) |
|
|
(209,547 |
) |
|
|
(33,795 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,813 |
|
|
|
209,386 |
|
|
|
232,965 |
|
|
|
|
|
|
|
Changes in (net of effects from businesses acquired): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
(64,447 |
) |
|
|
(113,745 |
) |
|
|
(23,492 |
) |
|
|
|
|
|
|
|
Inventories |
|
|
19,393 |
|
|
|
(94,300 |
) |
|
|
(86,863 |
) |
|
|
|
|
|
|
|
Payables, accruals and other, net |
|
|
107,195 |
|
|
|
4,717 |
|
|
|
66,929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided from operating activities |
|
|
71,954 |
|
|
|
6,058 |
|
|
|
189,539 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock |
|
|
(70,147 |
) |
|
|
(308,218 |
) |
|
|
(141,784 |
) |
|
|
|
|
|
|
Issuance of notes in public offering, net |
|
|
198,305 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
(Repayment)/issuance of commercial paper and bank debt, net |
|
|
(209,773 |
) |
|
|
298,749 |
|
|
|
28,893 |
|
|
|
|
|
|
|
(Payment of) proceeds from other debt |
|
|
(128 |
) |
|
|
604 |
|
|
|
(3,250 |
) |
|
|
|
|
|
|
Cash dividends (Note 12) |
|
|
(26,735 |
) |
|
|
(24,548 |
) |
|
|
(25,867 |
) |
|
|
|
|
|
|
Other, net |
|
|
603 |
|
|
|
3,973 |
|
|
|
4,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used for financing activities |
|
|
(107,875 |
) |
|
|
(29,440 |
) |
|
|
(137,467 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
(73,016 |
) |
|
|
(38,437 |
) |
|
|
(37,346 |
) |
|
|
|
|
|
|
Disposition/(acquisition) of operations, net (Notes 2 and
14) |
|
|
338,584 |
|
|
|
86,853 |
|
|
|
(1,359 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided from (used for) investing activities |
|
|
265,568 |
|
|
|
48,416 |
|
|
|
(38,705 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
(272 |
) |
|
|
(1,739 |
) |
|
|
(1,863 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— increase |
|
|
229,375 |
|
|
|
23,295 |
|
|
|
11,504 |
|
|
|
|
|
|
|
— at beginning of year |
|
|
82,607 |
|
|
|
59,312 |
|
|
|
47,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— at end of year |
|
$ |
311,982 |
|
|
$ |
82,607 |
|
|
$ |
59,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional cash flow information (Note 12) |
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements
25
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies:
Principles of consolidation — The accompanying
financial statements include the accounts of the Company and all
of its subsidiaries. All intercompany accounts and transactions
have been eliminated. Minority interests at the end of 1999 and
1998, which amounts are not material, are included in the caption
“Accrued expenses and other”.
Inventories — Stated at cost (first-in,
first-out) or market, whichever is lower.
Depreciation and amortization — Depreciation and
amortization is generally provided for by the straight-line
method over the estimated useful lives of the assets.
Goodwill — Goodwill represents the excess of the
purchase price over the fair value of net assets acquired.
Except for an immaterial amount of goodwill applicable to
purchases made before October 31, 1970, goodwill is being
amortized on a straight-line basis over 40 years.
Long-lived assets — Statement of Financial
Accounting Standards No. 121 (“SFAS 121”),
“Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of”, requires that
long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the
assets in question may not be recoverable. The Company
continually evaluates the carrying value and the remaining
economic useful life of all long-lived assets, and will adjust
the carrying value and the related depreciation and amortization
period if and when appropriate.
Foreign currency translation — The assets and
liabilities of foreign operations are translated into U.S.
dollars at the exchange rate in effect at the balance sheet date
with the related translation gains and losses reported as a
separate component of shareholders’ equity and comprehensive
income. Results of operations are translated using the average
exchange rate prevailing throughout the period.
Income taxes — No provision for U.S. income
taxes has been made for $70,258,000 of cumulative unremitted
earnings of foreign subsidiaries at July 2, 1999 because
those earnings are expected to be permanently reinvested outside
the U.S. If such earnings were remitted to the U.S., any net U.S.
income taxes would not have a material impact on the results of
operations of the Company.
Earnings per share — Basic earnings per share is
computed based on the weighted average number of common shares
outstanding and excludes any potential dilution. Diluted earnings
per share reflects potential dilution from the exercise or
conversion of securities into common stock. The number of
dilutive securities for 1999, 1998 and 1997 amounting to 322,000
shares, 448,000 shares and 451,000 shares, respectively, relate
to stock options and restricted stock awards.
Comprehensive income — Effective as of the
beginning of fiscal 1999, the Company adopted Statement of
Financial Accounting Standards No. 130 (“SFAS
130”), “Reporting Comprehensive Income”. SFAS 130
establishes reporting standards designed to measure all of the
changes in shareholders’ equity that result from
transactions and other economic events of the period excluding
transactions with owners (“Comprehensive Income”).
Comprehensive Income for the Company consists only of net income
and equity foreign currency translation adjustments.
Cash equivalents — The Company considers all
highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
Concentration of credit risk — Financial
instruments which potentially subject the Company to a
concentration of credit risk principally consist of cash and cash
equivalents and trade accounts receivable. The Company invests
its excess cash primarily in overnight Eurodollar time deposits
with quality financial institutions. The Company sells electronic
components and computer products primarily to original equipment
manufacturers including military contractors and the military,
throughout North and South America, Europe and the Asia/ Pacific
region. To reduce credit risk, management performs ongoing credit
evaluations of its
26
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
customers’ financial condition. The Company maintains
reserves for potential credit losses, but has not experienced any
material losses related to individual customers or groups of
customers in any particular industry or geographic area.
Derivative financial instruments — Many of the
Company’s operations, primarily its international
subsidiaries, occasionally purchase and sell products in
currencies other than their functional currencies. This subjects
the Company to the risks associated with the fluctuations of
foreign currency exchange rates. The Company reduces this risk by
utilizing natural hedging (offsetting receivables and payables)
as well as by creating offsetting positions through the use of
derivative financial instruments, primarily forward foreign
exchange contracts with maturities of less than sixty days. The
market risk related to the foreign exchange contracts is offset
by the changes in valuation of the underlying items being hedged.
The amount of risk and the use of derivative financial
instruments described above is not material to the Company’s
financial position or results of operations. The Company does
not hedge its investment in its foreign operations nor its
floating interest rate exposures.
Fiscal year — The Company operates on a
“52/53 week” fiscal year which ends on the Friday
closest to June 30th. Fiscal year 1999 contained
53 weeks as compared with 52 weeks in fiscal 1998 and
1997. Unless otherwise noted, all references to the “year
1999” or any other “year” shall mean the
Company’s fiscal year.
Management estimates — The preparation of
financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect certain reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
New accounting standard — In June 1998, the
Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133
(“SFAS 133”), “Accounting for Derivative
Instruments and Hedging Activities”. SFAS 133
establishes accounting and reporting standards requiring that
every derivative instrument, including certain derivative
instruments embedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its
fair value. SFAS 133 requires that changes in the
derivative’s fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative’s gains
and losses to offset related results on the hedged item in the
income statement, and requires that a company must formally
document, designate and assess the effectiveness of transactions
that receive hedge accounting. SFAS 133 is effective for
fiscal years beginning after June 15, 2000 and will not
require retroactive restatement of prior period financial
statements. The Company has not yet quantified the impact of
adopting SFAS 133 on its financial statements, but does not
expect the impact to be material.
2. Acquisitions and dispositions:
Since July 1, 1996, the Company has completed nine
acquisitions — two in North America, two in Europe,
three in the Asia/ Pacific region, one in the Middle East and one
in South America. Four of the acquisitions were completed in
1999 and five were completed during 1998. All acquisitions have
been accounted for as purchases. The acquisitions completed in
1999 consisted of a 60% interest in Max India, Ltd., including
100% of Max India’s Hong Kong-based subsidiary, a 70%
interest in Gallium Electronics, Ltd., the JBA Computer Solutions
Division (CSD) of JBA International, Inc. and a 70%
interest in Bridge International. The acquisitions completed in
1998 consisted of ECR Sales Management, Inc., EXCEL-MAX
Pte Ltd., CiNERGi Pte Ltd., Bytech Systems Ltd.
and Optilas International SA.
Cash expended (net of cash on the books of the companies
acquired) in 1999 and 1998 relating to these acquisitions totaled
approximately $38,416,000 and $9,378,000, respectively. Cash
expended for the acquisi-
27
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
tion of operations in 1997 includes a deferred payment and cash
paid for professional and other fees associated with various
acquisitions completed during 1996. In the aggregate, the
operations acquired during 1999 and 1998 had sales totaling
approximately $184,000,000 and $119,000,000, respectively, during
the fiscal year of each such operation immediately preceding its
acquisition. The historical results of operations of the
companies acquired would not have had a material effect on the
Company’s results of operations in 1999 and 1998, on a pro
forma basis. On July 2, 1999, the last day of fiscal 1999,
the Company completed the disposition of its Allied Electronics
business and during 1998 the company disposed of its Channel
Master and Avnet Industrial businesses (See note 14).
The Company has announced its intent to acquire three businesses
which are expected to have a substantial impact on the Company.
In June 1999, the Company announced that it had entered into a
merger agreement to acquire Marshall Industries, one of the
world’s largest distributors of electronic components and
computer products, for a combination of cash and Avnet stock. The
merger is subject to the approval of both the Avnet and Marshall
shareholders. In the merger, holders of Marshall common stock
will receive, in exchange for each share they hold, $39.00 in
either cash or Avnet common stock, or a combination thereof, as
defined in the merger agreement. The transaction has a total
value of approximately $840,900,000. This includes a purchase
price for the equity of Marshall of approximately $684,100,000,
consisting of $360,100,000 in cash and $324,000,000 in Avnet
stock, as well as direct transaction expenses of $12,600,000 and
the assumption of Marshall debt of $161,500,000, less potential
stock option proceeds of $17,300,000 if all holders of Marshall
stock options exercise such options. The above amounts assume the
issuance of 6,777,000 shares of Avnet stock at a price of
$47.8125, both amounts which are subject to change as specified
in the merger agreement. Marshall’s annual sales are
approximately $1,700,000,000.
The Company has also entered into separate agreements to acquire
84% of Eurotronics, B.V. and 94% of the SEI Macro Group, two
European electronic components distributors. The combined
transaction value, including the assumption of debt, is in the
range of $200,000,000 – $250,000,000 to be paid for
with a combination of cash and Avnet stock. All amounts are
subject to change based upon the financial situation at the time
each transaction is effective.
Both transactions are subject to regulatory approvals, and the
acquisition of the SEI Macro Group is subject to the approval of
the selling company’s shareholders. The Company will acquire
the remaining 16% of Eurotronics in connection with the
acquisition of Marshall and the remaining 6% of the SEI Macro
Group when it completes the acquisition of Eurotronics. The
combined annual sales of Eurotronics and the SEI Macro Group are
approximately $750,000,000.
3. Inventories:
| |
|
|
|
|
|
|
|
|
|
|
July 2, |
|
June 26, |
|
|
1999 |
|
1998 |
|
|
|
|
|
|
|
|
|
|
(Thousands) |
|
|
|
|
|
|
Finished goods |
|
$ |
909,609 |
|
|
$ |
967,472 |
|
|
|
|
|
|
|
Work-in-process |
|
|
5,625 |
|
|
|
8,244 |
|
|
|
|
|
|
|
Raw materials |
|
|
82,013 |
|
|
|
86,023 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
997,247 |
|
|
$ |
1,061,739 |
|
|
|
|
|
|
|
|
|
|
28
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
4. Property, plant and equipment, net:
| |
|
|
|
|
|
|
|
|
|
|
July 2, |
|
June 26, |
|
|
1999 |
|
1998 |
|
|
|
|
|
|
|
|
|
|
(Thousands) |
|
|
|
|
|
|
Land |
|
$ |
5,200 |
|
|
$ |
5,231 |
|
|
|
|
|
|
|
Buildings |
|
|
77,523 |
|
|
|
54,948 |
|
|
|
|
|
|
|
Machinery, fixtures and equipment |
|
|
306,028 |
|
|
|
262,401 |
|
|
|
|
|
|
|
Leasehold improvements |
|
|
12,611 |
|
|
|
13,603 |
|
|
|
|
|
|
|
|
|
|
|
|
|
401,362 |
|
|
|
336,183 |
|
|
|
|
|
|
|
Less accumulated depreciation and amortization |
|
|
207,350 |
|
|
|
180,692 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
194,012 |
|
|
$ |
155,491 |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense related to property, plant
and equipment was $37,825,000, $37,156,000 and $35,815,000 in
1999, 1998 and 1997, respectively.
5. External financing:
| |
|
|
|
|
|
|
|
|
|
|
July 2, |
|
June 26, |
|
|
1999 |
|
1998 |
|
|
|
|
|
|
|
|
|
|
(Thousands) |
|
|
|
|
|
|
6 7/8% Notes due March 15, 2004 |
|
$ |
100,000 |
|
|
$ |
100,000 |
|
|
|
|
|
|
|
6.45% Notes due August 15, 2003 |
|
|
200,000 |
|
|
|
— |
|
|
|
|
|
|
|
Commercial paper |
|
|
202,200 |
|
|
|
394,950 |
|
|
|
|
|
|
|
Bank credit facilities |
|
|
272,160 |
|
|
|
302,759 |
|
|
|
|
|
|
|
Other |
|
|
17,154 |
|
|
|
13,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
791,514 |
|
|
|
810,938 |
|
|
|
|
|
|
|
Less borrowings due within one year |
|
|
288 |
|
|
|
243 |
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
$ |
791,226 |
|
|
$ |
810,695 |
|
|
|
|
|
|
|
|
|
|
In June 1999, the Company entered into separate credit agreements
with Banca Commerciale Italiana and UniCredito Italiano. The
agreements provide eighteen month facilities with lines of credit
totaling 83 billion Italian Lira (USD equivalent of
approximately $43,770,000). The facilities are currently being
used primarily as a source of working capital financing for the
Company’s Italian subsidiary. At July 2, 1999, the
entire 83 billion Lira had been borrowed under the
facilities at an effective annual interest rate of 3.2%.
In September 1998, the Company entered into an agreement
with KBC, a Belgian bank, to finance the construction of the new
Avnet Europe, NV/ SA distribution center in Tongeren, Belgium.
The agreement provides for multiple term loans totaling
665,000,000 Belgian Francs (USD equivalent of approximately
$16,900,000) which may be converted into term loans with
maturities between three and fifteen years. The facilities are
currently being used to finance real estate, computer equipment,
infrastructure and project consultancy costs related to the new
European distribution center. At July 2, 1999 the Company
had borrowed 328,730,082 Belgian Francs (USD equivalent of
approximately $8,340,000) under the facility at an effective
annual rate of 4.3%.
In the first quarter of 1998, the Company renegotiated its
revolving credit agreement with a syndicate of banks led by
NationsBank of North Carolina, N.A., which has now merged
with Bank of America. The agreement provides a five-year facility
with a line of credit of up to $700,000,000. This credit
facility is currently being used primarily as a backup facility
to the Company’s commercial paper program and as a primary
funding vehicle for foreign currency denominated borrowings at
floating rates of interest. At July 2,
29
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
1999, the approximate weighted average interest rates on
outstanding commercial paper and foreign currency denominated
borrowings under this facility were 5.4% and 4.4%, respectively,
and at June 26, 1998 were 5.6%, 5.8%, and 4.2%,
respectively, on outstanding commercial paper, U.S. dollar
denominated borrowings and foreign currency denominated
borrowings under this facility. (There were no U.S. dollar
denominated borrowings outstanding under the syndicated credit
facility at July 2, 1999.) The Company was in compliance
with the various covenants contained in the agreement.
At July 2, 1999, the fair value of the 6 7/8% Notes due
March 15, 2004 and the 6.45% Notes due August 15,
2003 were approximately $99,810,000 and $196,920,000,
respectively. Annual payments on external financing in 2000,
2001, 2002, 2003 and 2004 will be $288,000, $44,727,000,
$921,000, $435,250,000 and $300,440,000, respectively.
6. Accrued expenses and other:
| |
|
|
|
|
|
|
|
|
|
|
July 2, |
|
June 26, |
|
|
1999 |
|
1998 |
|
|
|
|
|
|
|
|
|
|
(Thousands) |
|
|
|
|
|
|
Payroll, commissions and related |
|
$ |
56,447 |
|
|
$ |
56,282 |
|
|
|
|
|
|
|
Insurance |
|
|
14,159 |
|
|
|
16,757 |
|
|
|
|
|
|
|
Income taxes |
|
|
153,245 |
|
|
|
14,590 |
|
|
|
|
|
|
|
Dividends payable (Note 12) |
|
|
— |
|
|
|
5,647 |
|
|
|
|
|
|
|
Other |
|
|
91,347 |
|
|
|
62,147 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
315,198 |
|
|
$ |
155,423 |
|
|
|
|
|
|
|
|
|
|
The significantly higher amount of accrued income taxes at
July 2, 1999 as compared with the prior year end relates
primarily to the income taxes due on the gain on the sale of
Allied Electronics.
7. Income taxes:
The Company follows the liability method of accounting for income
taxes. Deferred income taxes are recorded for temporary
differences between the amount of income and expense reported for
financial reporting and tax purposes.
A reconciliation between the federal statutory tax rate and the
effective tax rate is as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
July 2, |
|
June 26, |
|
June 27, |
|
|
1999 |
|
1998 |
|
1997 |
|
|
|
|
|
|
|
|
Federal statutory rate |
|
|
35.0% |
|
|
|
35.0% |
|
|
|
35.0% |
|
|
|
|
|
|
|
State and local income taxes, net of federal benefit |
|
|
7.6 |
|
|
|
5.3 |
|
|
|
5.1 |
|
|
|
|
|
|
|
Amortization and disposition of goodwill |
|
|
11.8 |
|
|
|
1.9 |
|
|
|
1.4 |
|
|
|
|
|
|
|
Other, net |
|
|
(.9 |
) |
|
|
1.2 |
|
|
|
.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
|
53.5% |
|
|
|
43.4% |
|
|
|
41.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The significant impact of the amortization and disposition of
goodwill on the 1999 effective tax rate was due to the
elimination of goodwill related to Allied Electronics and Avnet
Setron which was not tax benefited (See note 14.)
The components of the provision for income taxes are indicated in
the next table. The provision (future tax benefit) for deferred
income taxes results from temporary differences arising
principally from inventory
30
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
valuation, accounts receivable valuation, net operating losses
related to foreign operations, certain accruals and depreciation.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
July 2, |
|
June 26, |
|
June 27, |
|
|
1999 |
|
1998 |
|
1997 |
|
|
|
|
|
|
|
|
|
|
|
|
(Thousands) |
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
177,271 |
|
|
$ |
89,456 |
|
|
$ |
97,433 |
|
|
|
|
|
|
|
State and local |
|
|
44,759 |
|
|
|
22,371 |
|
|
|
26,018 |
|
|
|
|
|
|
|
Foreign |
|
|
11,098 |
|
|
|
5,816 |
|
|
|
12,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current taxes |
|
|
233,128 |
|
|
|
117,643 |
|
|
|
135,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
(5,924 |
) |
|
|
(1,163 |
) |
|
|
(4,101 |
) |
|
|
|
|
|
|
State and local |
|
|
(747 |
) |
|
|
(538 |
) |
|
|
(1,228 |
) |
|
|
|
|
|
|
Foreign |
|
|
(25,623 |
) |
|
|
(20 |
) |
|
|
192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred taxes |
|
|
(32,294 |
) |
|
|
(1,721 |
) |
|
|
(5,137 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
$ |
200,834 |
|
|
$ |
115,922 |
|
|
$ |
130,656 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The significant components of deferred tax assets and liabilities
included on the balance sheet as of the beginning and end of
1999 were as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
July 2, |
|
June 26, |
|
|
1999 |
|
1998 |
|
|
|
|
|
|
|
|
|
|
(Thousands) |
|
|
|
|
|
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory valuation |
|
$ |
16,388 |
|
|
$ |
13,799 |
|
|
|
|
|
|
|
Accounts receivable valuation |
|
|
6,434 |
|
|
|
3,242 |
|
|
|
|
|
|
|
Foreign tax loss carry-forwards |
|
|
29,084 |
|
|
|
— |
|
|
|
|
|
|
|
Various accrued liabilities and other |
|
|
23,328 |
|
|
|
21,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
75,234 |
|
|
|
38,362 |
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization of property, plant and equipment |
|
|
2,845 |
|
|
|
2,834 |
|
|
|
|
|
|
|
Other |
|
|
1,287 |
|
|
|
923 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4,132 |
|
|
|
3,757 |
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets |
|
$ |
71,102 |
|
|
$ |
34,605 |
|
|
|
|
|
|
|
|
|
|
8. Pension and profit sharing plans:
The Company’s noncontributory defined benefit pension plan
and its 401(k) plan cover substantially all domestic employees,
except for those who were employed at Channel Master, which was
sold during 1998, and who were covered by a profit sharing plan.
The expense recorded in 1998 and 1997 related to the profit
sharing plan was $427,000 and $1,413,000, respectively. The
expense relating to the Avnet 401(k) Plan for 1999, 1998 and 1997
amounted to $711,000, $553,000 and $606,000, respectively. The
noncontributory pension plan was amended as of January 1,
1994 to provide defined benefits pursuant to a cash balance
feature whereby a participant accumulates a benefit based upon a
percentage of current salary, which varies with age, and interest
credits. At July 2, 1999, the market value of the pension
plan assets was $189,778,000 and these
31
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
assets were comprised of common stocks (70%), U.S. Government
securities (8%), corporate debt obligations (21%), and money
market funds (1%).
The following tables outline changes in benefit obligations, plan
assets, and the funded status of the plan as of the end of 1999
and 1998:
| |
|
|
|
|
|
|
|
|
|
|
|
July 2, |
|
June 26, |
|
|
1999 |
|
1998 |
|
|
|
|
|
|
|
|
|
|
(Thousands) |
|
|
|
|
|
|
Changes in benefit obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligations at beginning of year |
|
$ |
140,983 |
|
|
$ |
118,311 |
|
|
|
|
|
|
|
Service cost |
|
|
8,525 |
|
|
|
6,860 |
|
|
|
|
|
|
|
Interest cost |
|
|
9,510 |
|
|
|
9,056 |
|
|
|
|
|
|
|
Actuarial (gain) loss |
|
|
(11,436 |
) |
|
|
13,353 |
|
|
|
|
|
|
|
Benefits paid |
|
|
(7,379 |
) |
|
|
(6,597 |
) |
|
|
|
|
|
|
|
|
|
|
Benefit obligations at end of year |
|
$ |
140,203 |
|
|
$ |
140,983 |
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year |
|
$ |
167,451 |
|
|
$ |
146,826 |
|
|
|
|
|
|
|
Actual return on plan assets |
|
|
29,706 |
|
|
|
27,222 |
|
|
|
|
|
|
|
Benefits paid |
|
|
(7,379 |
) |
|
|
(6,597 |
) |
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year |
|
$ |
189,778 |
|
|
$ |
167,451 |
|
|
|
|
|
|
|
|
|
|
|
Information on funded status of plan and the amount recognized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status |
|
$ |
49,575 |
|
|
$ |
26,468 |
|
|
|
|
|
|
|
Unrecognized transition asset |
|
|
(4,810 |
) |
|
|
(7,639 |
) |
|
|
|
|
|
|
Unrecognized net actuarial gain |
|
|
(38,151 |
) |
|
|
(9,234 |
) |
|
|
|
|
|
|
Unamortized prior service credit |
|
|
(2,293 |
) |
|
|
(2,614 |
) |
|
|
|
|
|
|
|
|
|
|
Prepaid pension cost recognized in the balance sheet |
|
$ |
4,321 |
|
|
$ |
6,981 |
|
|
|
|
|
|
|
|
|
|
Weighted average assumptions used to calculate actuarial present
values of benefit obligations were as follows:
| |
|
|
|
|
|
|
|
|
|
|
1999 |
|
1998 |
|
|
|
|
|
|
Discount rate |
|
|
7.0 |
% |
|
|
8.0 |
% |
|
|
|
|
|
|
Expected return on plan assets |
|
|
9.0 |
% |
|
|
9.0 |
% |
Under the cash balance plan, service costs are based solely on
current year salary levels; therefore, projected salary increases
are not taken into account.
32
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Components of net periodic benefit costs during the last three
years are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
July 2, |
|
June 26, |
|
June 27, |
|
|
1999 |
|
1998 |
|
1997 |
|
|
|
|
|
|
|
|
|
|
|
|
(Thousands) |
|
|
|
|
|
|
Service Cost |
|
$ |
8,525 |
|
|
$ |
6,860 |
|
|
$ |
6,302 |
|
|
|
|
|
|
|
Interest cost |
|
|
9,510 |
|
|
|
9,056 |
|
|
|
8,588 |
|
|
|
|
|
|
|
Expected return on plan assets |
|
|
(12,352 |
) |
|
|
(11,311 |
) |
|
|
(10,786 |
) |
|
|
|
|
|
|
Amortization of transition asset |
|
|
(2,829 |
) |
|
|
(2,830 |
) |
|
|
(2,830 |
) |
|
|
|
|
|
|
Recognized net actuarial gain |
|
|
127 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
Amortization of prior service credit |
|
|
(321 |
) |
|
|
(321 |
) |
|
|
(321 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
2,660 |
|
|
$ |
1,454 |
|
|
$ |
953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not included in the above tabulations are pension plans of
certain non-U.S. subsidiaries which are not material.
9. Long-term leases:
The Company leases many of its operating facilities and is also
committed under lease agreements for transportation and operating
equipment. Rent expense charged to operations for the three
years ended July 2, 1999 is as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
July 2, |
|
June 26, |
|
June 27, |
|
|
1999 |
|
1998 |
|
1997 |
|
|
|
|
|
|
|
|
|
|
|
|
(Thousands) |
|
|
|
|
|
|
Buildings |
|
$ |
22,744 |
|
|
$ |
21,288 |
|
|
$ |
18,297 |
|
|
|
|
|
|
|
Equipment |
|
|
4,926 |
|
|
|
4,938 |
|
|
|
4,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
27,670 |
|
|
$ |
26,226 |
|
|
$ |
22,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At July 2, 1999, aggregate future minimum lease commitments,
principally for buildings, in 2000, 2001, 2002, 2003, 2004 and
thereafter (through 2015) are $21,533,000, $17,493,000,
$15,164,000, $11,178,000, $8,021,000 and $17,454,000,
respectively.
33
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
10. Stock-based compensation plans:
Stock option plans:
The Company has four stock option plans with shares still
available for grant:
| |
|
|
|
|
|
|
|
|
|
|
1990 and 1996 |
|
1995 and 1997 |
|
|
Qualified Plans |
|
Non-Qualified Plans |
|
|
|
|
|
|
Minimum exercise price as a percentage of fair market value at
date of grant |
|
|
1990 Plan -100% |
|
|
|
1995 Plan -85% |
|
|
|
|
1996 Plan -100% |
|
|
|
1997 Plan -85% |
|
|
|
|
|
|
|
Life of options |
|
|
10 years |
|
|
|
10 years |
|
|
|
|
|
|
|
Exercisable |
|
|
In whole or installments |
|
|
25% annually after one year |
|
|
|
|
|
|
Plan termination date |
|
|
1990 Plan 11/28/00 |
|
|
|
1995 Plan 8/31/05 |
|
|
|
|
1996 Plan 12/31/06 |
|
|
|
1997 Plan 11/19/07 |
|
|
|
|
|
|
|
Shares available for grant at July 2, 1999 |
|
|
1990 Plan 54,075 |
|
|
|
1995 Plan 49,000 |
|
|
|
|
1996 Plan 644,500 |
|
|
|
1997 Plan 326,000 |
|
Under the non-qualified plans, the excess of the fair market
value at the date of grant over the exercise price is considered
deferred compensation which is amortized and charged against
income as it is earned.
The following is a summary of the changes in outstanding options
for the three years ended July 2, 1999:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1999 |
|
1998 |
|
1997 |
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
Weighted |
|
|
|
Weighted |
|
|
|
|
Average |
|
|
|
Average |
|
|
|
Average |
|
|
|
|
Exercise |
|
|
|
Exercise |
|
|
|
Exercise |
|
|
Shares |
|
Price |
|
Shares |
|
Price |
|
Shares |
|
Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of year |
|
|
2,382,905 |
|
|
$ |
46.58 |
|
|
|
2,212,088 |
|
|
$ |
39.67 |
|
|
|
1,777,061 |
|
|
$ |
34.60 |
|
|
|
|
|
|
|
Granted |
|
|
1,093,000 |
|
|
|
36.36 |
|
|
|
557,500 |
|
|
|
62.69 |
|
|
|
661,000 |
|
|
|
50.83 |
|
|
|
|
|
|
|
Exercised |
|
|
(81,103 |
) |
|
|
31.89 |
|
|
|
(302,783 |
) |
|
|
26.39 |
|
|
|
(189,473 |
) |
|
|
30.63 |
|
|
|
|
|
|
|
Canceled or expired |
|
|
(138,275 |
) |
|
|
49.32 |
|
|
|
(83,900 |
) |
|
|
44.01 |
|
|
|
(36,500 |
) |
|
|
41.94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year |
|
|
3,256,527 |
|
|
$ |
43.40 |
|
|
|
2,382,905 |
|
|
$ |
46.58 |
|
|
|
2,212,088 |
|
|
$ |
39.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following information relates to options outstanding at
July 2, 1999:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Options Outstanding |
|
|
|
|
Options Exercisable |
|
|
Weighted |
|
|
|
|
Weighted |
|
Average |
|
|
|
Weighted |
| Range of |
|
Number |
|
Average |
|
Remaining |
|
|
|
Average |
| Exercise |
|
of Options |
|
Exercise |
|
Contractual |
|
Number |
|
Exercise |
| Prices |
|
Outstanding |
|
Price |
|
Life |
|
Of Options |
|
Price |
|
|
|
|
|
|
|
|
|
|
|
|
Under $20 |
|
|
66,977 |
|
|
$ |
17.72 |
|
|
|
43 Months |
|
|
|
66,977 |
|
|
$ |
17.72 |
|
|
$20.00 – 30.00 |
|
|
173,125 |
|
|
|
27.07 |
|
|
|
45 Months |
|
|
|
166,875 |
|
|
|
27.03 |
|
|
30.00 – 40.00 |
|
|
1,446,175 |
|
|
|
35.77 |
|
|
|
94 Months |
|
|
|
439,175 |
|
|
|
35.78 |
|
|
40.00 – 50.00 |
|
|
959,750 |
|
|
|
47.39 |
|
|
|
83 Months |
|
|
|
589,250 |
|
|
|
46.93 |
|
|
50.00 – 60.00 |
|
|
30,000 |
|
|
|
53.00 |
|
|
|
99 Months |
|
|
|
7,500 |
|
|
|
53.00 |
|
|
60.00 – 70.00 |
|
|
580,500 |
|
|
|
63.14 |
|
|
|
98 Months |
|
|
|
170,125 |
|
|
|
63.04 |
|
34
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Employee stock purchase plan:
In October 1995, the Company implemented the Avnet Employee
Stock Purchase Plan (ESPP). Under the terms of the ESPP, eligible
employees of the Company are offered options to purchase shares
of Avnet common stock at a price equal to 85% of the fair market
value on the first or last day, whichever is lower, of each
monthly offering period. A total of 500,000 shares of Avnet
common stock were initially reserved for sale under the ESPP and
in November 1998 an additional 500,000 shares were reserved.
At July 2, 1999, employees had purchased 493,105 shares and
506,895 shares were still available for purchase under the ESPP.
Incentive stock:
The Company has an Incentive Stock Program wherein a total of
210,886 shares were still available for award at July 2,
1999 based upon operating achievements. Delivery of incentive
shares is spread equally over a four-year period and is subject
to the employee’s continuance in the Company’s employ.
As of July 2, 1999, 56,148 shares previously awarded have
not yet been delivered. The program will terminate on
December 31, 1999.
At July 2, 1999, 5,104,031 common shares were reserved for
stock options (including the ESPP) and stock incentive programs.
Pro forma information:
The Company follows Accounting Principles Board Opinion 25
(“APB 25”), “Accounting for Stock Issued to
Employees”, in accounting for its stock-based compensation
plans. In applying APB 25, no expense was recognized for options
granted under the various stock option plans (except in the rare
circumstances where the exercise price was less than the fair
market value on the date of the grant) nor was expense recognized
in connection with shares purchased by employees under the ESPP.
Statement of Financial Accounting Standards No. 123
(“SFAS 123”), “Accounting for Stock-Based
Compensation”, requires disclosure of pro forma net income
as if a fair value-based method of measuring stock-based
compensation had been applied. Because the SFAS 123 method
of accounting has not been applied to options granted prior to
January 1, 1995, the resulting pro forma compensation cost
may not be representative of that to be expected in future years.
Reported and pro forma net income and diluted earnings per share
are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
July 2, |
|
June 26, |
|
June 27, |
|
|
1999 |
|
1998 |
|
1997 |
|
|
|
|
|
|
|
|
|
|
|
|
(Thousands, except earnings per share) |
|
|
|
|
|
|
Net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported |
|
$ |
174,457 |
|
|
$ |
151,424 |
|
|
$ |
182,763 |
|
|
|
|
|
|
|
Pro forma |
|
|
168,046 |
|
|
|
146,599 |
|
|
|
179,835 |
|
| |
|
|
|
|
|
|
Diluted earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported |
|
$ |
4.86 |
|
|
$ |
3.80 |
|
|
$ |
4.25 |
|
|
|
|
|
|
|
Pro forma |
|
|
4.72 |
|
|
|
3.70 |
|
|
|
4.20 |
|
35
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The fair value of the stock options granted is estimated on the
date of grant using the Black-Scholes option pricing model. The
weighted average assumptions used, and the weighted average
estimated fair value of an option granted are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
July 2, |
|
June 26, |
|
June 27, |
|
|
1999 |
|
1998 |
|
1997 |
|
|
|
|
|
|
|
|
Expected life (years) |
|
|
5.9 |
|
|
|
6.0 |
|
|
|
5.7 |
|
|
|
|
|
|
|
Risk-free interest rate |
|
|
4.6% |
|
|
|
6.1% |
|
|
|
6.7% |
|
|
|
|
|
|
|
Volatility |
|
|
24.0% |
|
|
|
23.0% |
|
|
|
24.0% |
|
|
|
|
|
|
|
Dividend yield |
|
|
1.7% |
|
|
|
1.0% |
|
|
|
1.2% |
|
|
|
|
|
|
|
Weighted average fair value |
|
$ |
9.03 |
|
|
$ |
20.87 |
|
|
$ |
16.75 |
|
11. Contingent liabilities:
From time to time, the Company may become liable with respect to
pending and threatened litigation, taxes and environmental and
other matters. The Company has been designated a potentially
responsible party or has had other claims made against it in
connection with environmental clean-ups at several sites. Based
upon the information known to date, the Company believes that it
has appropriately reserved for its share of the costs of the
clean-ups and it is not anticipated that any contingent matters
will have a material adverse impact on the Company’s
financial condition, liquidity or results of operations.
12. Additional cash flow information:
Other non-cash and reconciling items primarily includes
provisions for doubtful accounts and certain non-recurring items
(See note 14), and in 1997 is net of the gain on the sale of
the Company’s former Culver City, California facility of
$7,578,000.
Due to the Company’s fiscal year end (See note 1) and
its historical dividend payment dates, the fiscal year ended
July 2, 1999 includes the cash payment of the July 1,
1999 dividend. This results in the inclusion of five quarterly
dividend payments in 1999 as compared with four quarterly
payments in 1998 and 1997.
The net cash disbursed in each of the three years in connection
with acquisitions (See note 2), as well as the net cash
collected in those years from dispositions, are reflected as
“cash flows from disposition/acquisition of operations,
net”.
Interest and income taxes paid were as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
July 2, |
|
June 26, |
|
June 27, |
|
|
1999 |
|
1998 |
|
1997 |
|
|
|
|
|
|
|
|
|
|
|
|
(Thousands) |
|
|
|
|
|
|
Interest |
|
$ |
47,764 |
|
|
$ |
38,906 |
|
|
$ |
26,123 |
|
|
|
|
|
|
|
Income taxes |
|
|
91,913 |
|
|
|
126,851 |
|
|
|
145,387 |
|
13. Segment and geographic information:
The Company currently consists of two major operating groups,
Electronics Marketing (“EM”) and the Computer Marketing
Group (“CMG”). EM focuses on the global distribution
of and value-added services associated with electronic
components, and CMG focuses on middle-to high-end, value-added
computer products distribution and related services.
36
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
July 2, |
|
June 26, |
|
June 27, |
|
|
1999 |
|
1998 |
|
1997 |
|
|
|
|
|
|
|
|
|
|
|
|
(Millions) |
|
|
|
|
|
|
Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronics Marketing |
|
$ |
4,795.1 |
|
|
$ |
4,474.2 |
|
|
$ |
4,139.7 |
|
|
|
|
|
|
|
Computer Marketing |
|
|
1,554.9 |
|
|
|
1,403.7 |
|
|
|
1,084.7 |
|
|
|
|
|
|
|
Video Communications |
|
|
— |
|
|
|
38.4 |
|
|
|
166.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,350.0 |
|
|
$ |
5,916.3 |
|
|
$ |
5,390.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronics Marketing |
|
$ |
256.1 |
|
|
$ |
297.3 |
|
|
$ |
307.0 |
|
|
|
|
|
|
|
Computer Marketing |
|
|
43.0 |
|
|
|
61.7 |
|
|
|
51.6 |
|
|
|
|
|
|
|
Video Communications |
|
|
— |
|
|
|
3.0 |
|
|
|
12.3 |
|
|
|
|
|
|
|
Corporate and special charges |
|
|
(125.9 |
) |
|
|
(90.8 |
) |
|
|
(43.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
173.2 |
|
|
$ |
271.2 |
|
|
$ |
327.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronics Marketing |
|
$ |
1,662.6 |
|
|
$ |
1,695.9 |
|
|
$ |
1,560.5 |
|
|
|
|
|
|
|
Computer Marketing |
|
|
489.1 |
|
|
|
423.3 |
|
|
|
363.0 |
|
|
|
|
|
|
|
Video Communications |
|
|
— |
|
|
|
— |
|
|
|
81.4 |
|
|
|
|
|
|
|
Corporate |
|
|
833.0 |
|
|
|
614.5 |
|
|
|
589.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,984.7 |
|
|
$ |
2,733.7 |
|
|
$ |
2,594.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronics Marketing |
|
$ |
50.3 |
|
|
$ |
19.8 |
|
|
$ |
15.4 |
|
|
|
|
|
|
|
Computer Marketing |
|
|
7.7 |
|
|
|
7.1 |
|
|
|
10.7 |
|
|
|
|
|
|
|
Video Communications |
|
|
— |
|
|
|
— |
|
|
|
4.6 |
|
|
|
|
|
|
|
Corporate |
|
|
15.0 |
|
|
|
11.5 |
|
|
|
6.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
73.0 |
|
|
$ |
38.4 |
|
|
$ |
37.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation & amortization expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronics Marketing |
|
$ |
17.5 |
|
|
$ |
17.8 |
|
|
$ |
18.0 |
|
|
|
|
|
|
|
Computer Marketing |
|
|
6.7 |
|
|
|
5.6 |
|
|
|
4.2 |
|
|
|
|
|
|
|
Video Communications |
|
|
— |
|
|
|
— |
|
|
|
4.9 |
|
|
|
|
|
|
|
Corporate |
|
|
28.1 |
|
|
|
27.1 |
|
|
|
22.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
52.3 |
|
|
$ |
50.5 |
|
|
$ |
49.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales, by geographic area, are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
4,888.5 |
|
|
$ |
4,748.0 |
|
|
$ |
4,253.8 |
|
|
|
|
|
|
|
EMEA (Europe, Middle East and Africa) |
|
|
1,241.2 |
|
|
|
1,021.5 |
|
|
|
989.9 |
|
|
|
|
|
|
|
Asia/ Pacific |
|
|
220.3 |
|
|
|
146.8 |
|
|
|
146.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,350.0 |
|
|
$ |
5,916.3 |
|
|
$ |
5,390.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
|
|
|
|
July 2, |
|
June 26, |
|
June 27, |
|
|
1999 |
|
1998 |
|
1997 |
|
|
|
|
|
|
|
|
|
|
|
|
(Millions) |
|
|
|
|
|
|
Assets, by geographic area, are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
2,316.3 |
|
|
$ |
2,121.8 |
|
|
$ |
2,068.9 |
|
|
|
|
|
|
|
EMEA (Europe, Middle East and Africa) |
|
|
535.5 |
|
|
|
525.0 |
|
|
|
438.5 |
|
|
|
|
|
|
|
Asia/ Pacific |
|
|
132.9 |
|
|
|
86.9 |
|
|
|
86.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,984.7 |
|
|
$ |
2,733.7 |
|
|
$ |
2,594.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14. Non-recurring items:
Reorganization charges:
During the first quarter of 1999, the Company recorded
$26,519,000 pre-tax and $15,740,000 after-tax ($0.43 per share on
a diluted basis) of incremental special charges associated
principally with the reorganization of its Electronics Marketing
EMEA (Europe, Middle East and Africa) operations. These charges
include severance, real property lease termination costs,
inventory reserves required related to supplier terminations and
other items. Approximately $18,613,000 of the pre-tax charge,
which required an outflow of cash, is included in operating
expenses and $7,906,000, which represented a non-cash write-down,
is included in cost of sales. Substantially all of the cash
associated with this item has been expended at July 2, 1999.
During the fourth quarter of 1998, the Company recorded
$35,400,000 pre-tax and $21,200,000 after-tax ($0.57 per share on
a diluted basis), of incremental special charges associated
principally with the reorganization of its EM Americas operation.
Approximately $25,700,000 of the pre-tax charge is included in
operating expenses and $9,700,000 is included in cost of sales.
These charges include severance, real property lease termination
costs, inventory reserves required related to supplier
terminations, the write-down of goodwill and other items. The
write-down of goodwill relates to a small underperforming
operating unit. Of the special charges of $35,400,000 pre-tax,
approximately $17,100,000 did not require an outflow of cash and
$18,300,000 required the use of cash, all of which has been
expended at July 2, 1999.
Dispositions and other:
In the fourth quarter of 1999, the Company recorded a gain on the
sale of its Allied Electronics business in the amount of
$252,279,000 pre-tax, offset somewhat by charges taken in
connection with the intended disposition of the Avnet Setron
catalog operation in Germany amounting to $42,732,000.
Approximately $37,492,000 of the pre-tax charge, consisting
principally of the write-off of goodwill, is included in
operating expenses and $5,240,000 is included in cost of sales,
while the pre-tax gain on Allied Electronics is shown separately
on the income statement. The net effect of these items is to
increase income before taxes, net income and diluted earnings per
share by approximately $209,547,000, $79,709,000 and $2.25 per
share for the fourth quarter, respectively.
In the second quarter of 1998, the Company recorded a gain on the
sale of Channel Master amounting to $33,795,000 pre-tax, offset
somewhat in operating expenses by costs relating to the
divestiture of Avnet Industrial, the closure of the
Company’s corporate headquarters in Great Neck, New York,
and the anticipated loss on the sale of Company-owned real
estate, amounting to $13,300,000 in the aggregate. The effect of
these items is to increase income before income taxes, net income
and diluted earnings per share by approximately $20,500,000,
$8,700,000 and $0.21 per share for the second quarter,
respectively.
In total, the non-recurring items recorded in 1999 as discussed
above positively impacted income before taxes, net income and
diluted earnings per share by $183,028,000, $63,969,000 and $1.78
per share, respectively. The net positive impact of the
non-recurring items on diluted earnings per share for 1999
($1.78)
38
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
was $0.04 less than the sum of the applicable amounts for the
fourth quarter and first quarter ($2.25 per share less $0.43 per
share) due to the effect of the Company’s stock repurchase
program on the weighted average number of shares outstanding and
the amount of the non-recurring items.
In total, the non-recurring items recorded in 1998 as discussed
above negatively impacted income before income taxes, net income
and diluted earnings per share by $14,905,000, $12,500,000 and
$0.32 per share, respectively. The impact of the non-recurring
items on diluted earnings per share for 1998 ($0.32) was $0.04
less than the sum of the applicable amounts for the second
quarter and fourth quarter ($0.21 per share less $0.57 per share)
due to the effect of the Company’s stock repurchase program
on the weighted average number of shares outstanding and the
amount of the non-recurring items.
15. Summary of quarterly results (unaudited):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First |
|
Second |
|
Third |
|
Fourth |
|
|
|
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
|
Year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Millions, except per share data) |
|
|
|
|
|
|
1999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
1,581.6 |
|
|
$ |
1,526.9 |
|
|
$ |
1,599.2 |
|
|
$ |
1,642.3 |
|
|
$ |
6,350.0 |
|
|
|
|
|
|
|
Gross Profit |
|
|
231.9 |
(a) |
|
|
228.8 |
|
|
|
243.8 |
|
|
|
244.1 |
(b) |
|
|
948.6 |
(a)(b) |
|
|
|
|
|
|
Pre-tax income |
|
|
28.7 |
(a) |
|
|
45.9 |
|
|
|
45.1 |
|
|
|
255.6 |
(b) |
|
|
375.3 |
(a)(b) |
|
|
|
|
|
|
Net income |
|
|
15.7 |
(a) |
|
|
26.5 |
|
|
|
25.7 |
|
|
|
106.6 |
(b) |
|
|
174.5 |
(a)(b) |
|
|
|
|
|
|
Diluted earnings per share |
|
|
0.42 |
(a) |
|
|
0.74 |
|
|
|
0.73 |
|
|
|
3.01 |
(b) |
|
|
4.86 |
(a)(b)(e) |
|
|
|
|
|
|
1998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
1,398.8 |
|
|
$ |
1,460.8 |
|
|
$ |
1,512.1 |
|
|
$ |
1,544.6 |
|
|
$ |
5,916.3 |
|
|
|
|
|
|
|
Gross Profit |
|
|
242.0 |
|
|
|
245.9 |
|
|
|
252.2 |
|
|
|
240.3 |
(d) |
|
|
980.4 |
(d) |
|
|
|
|
|
|
Pre-tax income |
|
|
72.5 |
|
|
|
94.2 |
(c) |
|
|
70.8 |
|
|
|
29.8 |
(d) |
|
|
267.3 |
(c)(d) |
|
|
|
|
|
|
Net income |
|
|
42.1 |
|
|
|
52.1 |
(c) |
|
|
40.7 |
|
|
|
16.5 |
(d) |
|
|
151.4 |
(c)(d) |
|
|
|
|
|
|
Diluted earnings per share |
|
|
1.02 |
|
|
|
1.27 |
(c) |
|
|
1.03 |
|
|
|
0.44 |
(d) |
|
|
3.80 |
(c)(d)(e) |
|
|
| (a) |
Includes the impact of incremental special charges associated
with the reorganization of the Company’s Electronics
Marketing Group amounting to $26.5 million pre-tax, $15.7 million
after-tax and $0.43 per share on a diluted basis. |
| |
| (b) |
Includes the net gain on exiting the printed catalog business
consisting of the July 2, 1999 sale of Allied Electronics,
offset somewhat by charges recorded in connection with the
intended disposition of the Avnet Setron catalog operations in
Germany. The net positive effect on fourth quarter fiscal year
1999 pre-tax income, net income and diluted earnings per share
was $209.5 million, $79.7 million and $2.25, respectively. |
| |
| (c) |
Includes the net positive impact of $20.5 million pre-tax, $8.7
million after-tax and $0.21 per share on a diluted basis of the
gain on the sale of Channel Master, offset by costs related to
the divestiture of Avnet Industrial, the closure of the
Company’s headquarters in Great Neck, NY and the anticipated
loss on the sale of Company-owned real estate. |
| |
| (d) |
Includes incremental special charges associated with the
reorganization of the Company’s Electronics Marketing Group,
amounting to $35.4 million pre-tax ($9.7 million in gross profit
and $25.7 million in operating expenses), $21.2 million
after-tax and $0.57 per share on a diluted basis. |
| |
| (e) |
Diluted earnings per share for fiscal 1999 is less by $0.04 and
in fiscal 1998 is greater by $0.04 than the sum of the applicable
amounts for each of the quarters due to the effect of the stock
repurchase program on the weighted average number of shares
outstanding and the amount of the special items. |
39
SCHEDULE II
AVNET, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Years Ended July 2, 1999, June 26, 1998 and
June 27, 1997
(Thousands)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Column C |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Column A |
|
Column B |
|
Additions |
|
Column D |
|
Column E |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
(2) |
|
|
|
|
|
|
Balance at |
|
Charged to |
|
Charged to other |
|
|
|
|
|
|
beginning of |
|
costs and |
|
accounts — |
|
Deductions — |
|
Balance at end |
| Description |
|
period |
|
expenses |
|
describe |
|
describe |
|
of period |
|
|
|
|
|
|
|
|
|
|
|
|
1999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
31,807 |
|
|
$ |
10,672 |
|
|
$ |
1,634 |
(a) |
|
$ |
16,429 |
(b) |
|
$ |
27,626 |
|
|
|
|
|
|
|
|
|
|
|
|
731 |
(c) |
|
|
789 |
(d) |
|
|
|
|
|
|
|
|
|
|
Reorganization charges (Note 14) |
|
|
8,800 |
|
|
|
26,519 |
|
|
|
— |
|
|
|
7,906 |
(e) |
|
|
3,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,092 |
(f) |
|
|
|
|
|
1998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
|
27,915 |
|
|
|
12,482 |
|
|
|
147 |
(a) |
|
|
8,680 |
(b) |
|
|
31,807 |
|
|
|
|
|
|
|
|
|
|
|
|
748 |
(c) |
|
|
805 |
(d) |
|
|
|
|
|
|
|
|
|
|
Reorganization charges (Note 14) |
|
|
— |
|
|
|
35,400 |
|
|
|
— |
|
|
|
17,100 |
(e) |
|
|
8,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,500 |
(f) |
|
|
|
|
|
1997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
|
34,615 |
|
|
|
10,107 |
|
|
|
588 |
(a) |
|
|
17,395 |
(b) |
|
|
27,915 |
|
|
|
| (a) |
Recovery of amounts previously written off |
| |
| (b) |
Uncollectible accounts written off |
(c) Acquisitions
(d) Dispositions
(e) Non-cash write-downs
(f) Cash payments
40
INDEX TO EXHIBITS
| |
|
|
|
|
| Exhibit |
|
|
| Number |
|
Exhibit |
|
|
|
|
2A. |
|
|
Stock Purchase Agreement dated as of June 7, 1999, between the
Company and Electrocomponents Plc. (incorporated herein by
reference to the Company’s Current Report on Form 8-K dated
July 2, 1999, Exhibit 2). |
|
2B. |
|
|
Amended and Restated Agreement and Plan of Merger dated as of
June 25, 1999, between the Company and Marshall Industries
(incorporated herein by reference to Appendix A to Joint
Proxy Statement/ Prospectus included in the Company’s
Registration Statement on Form S-4, Registration Number
333-86721). |
|
3A. |
|
|
Restated Certificate of Incorporation of the Company
(incorporated herein by reference to the Company’s Current
Report on Form 8-K dated May 6, 1999, Exhibit 3(i)(b)). |
|
3B. |
|
|
By-laws of the Company (incorporated herein by reference to the
Company’s Current Report on Form 8-K dated February 12,
1996, Exhibit 3(ii)). |
|
4. |
|
|
Note: The total amount of securities authorized under any
instrument which defines the rights of holders of Company’s
long-term debt does not exceed 10% of the total assets of the
Company and its subsidiaries on a consolidated basis. Therefore,
none of such instruments are required to be filed as exhibits to
this Report. The Company agrees to furnish copies of such
instruments to the Commission upon request. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Compensation Plans and Arrangements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10A. |
|
|
Employment Agreement dated September 25, 1997 between the Company
and Roy Vallee (incorporated herein by reference to the
Company’s Current Report on Form 8-K dated September 25,
1997, Exhibit 99). |
|
10B. |
|
|
Employment Agreement dated June 28, 1997 between the Company and
Steven C. Church (incorporated herein by reference to the
Company’s Current Report on Form 8-K dated February 6, 1998,
Exhibit 99.1). |
|
10C. |
|
|
Employment Agreement dated October 13, 1997 between the Company
and Brian Hilton (incorporated herein by reference to the
Company’s Current Report on Form 8-K dated February 6, 1998,
Exhibit 99.2). |
|
10D. |
|
|
Employment Agreement dated June 29, 1998 between the Company and
David R. Birk (incorporated herein by reference to the
Company’s Current Report on Form 8-K dated September 18,
1998, Exhibit 99.3). |
|
10E. |
|
|
Employment Agreement dated June 29, 1998 between the Company and
Raymond Sadowski (incorporated herein by reference to the
Company’s Current Report on Form 8-K dated September 18,
1998, Exhibit 99.4). |
|
10F. |
|
|
Employment Agreement dated July 6, 1998 between the Company and
George Smith (incorporated herein by reference to the
Company’s Current Report on Form 8-K dated
September 28, 1999, Exhibit 99.) |
|
10G. |
|
|
Avnet 1984 Stock Option Plan (incorporated herein by reference to
the Company’s Registration Statement on Form S-8,
Registration No. 2-96800, Exhibit 4-B). |
|
10H. |
|
|
Avnet 1988 Stock Option Plan (incorporated herein by reference to
the Company’s Registration Statement on Form S-8,
Registration No. 33-29475, Exhibit 4-B). |
|
10I. |
|
|
Avnet 1990 Stock Option Plan (incorporated herein by reference to
the Company’s Annual Report on Form 10-K for the fiscal
year ended June 30, 1992, Exhibit 10E). |
|
10J. |
|
|
Avnet 1995 Stock Option Plan (incorporated herein by reference to
the Company’s Current Report on Form 8-K dated February 12,
1996, Exhibit 10). |
|
10K. |
|
|
Avnet 1996 Incentive Stock Option Plan (incorporated herein by
reference to the Company’s Registration Statement on Form
S-8, Registration No. 333-17271, Exhibit 99). |
41
| |
|
|
|
|
| Exhibit |
|
|
| Number |
|
Exhibit |
|
|
|
|
10L. |
|
|
Amended and Restated Avnet 1997 Stock Option Plan (incorporated
herein by reference to the Company’s Current Report on Form
8-K dated May 6, 1999, Exhibit 10). |
|
10M. |
|
|
1994 Avnet Incentive Stock Program (incorporated herein by
reference to the Company’s Registration Statement on Form
S-8, Registration No. 333-00129, Exhibit 99). |
|
10N. |
|
|
Stock Bonus Plan for Outside Directors (incorporated herein by
reference to the Company’s Current Report on Form 8-K dated
September 23, 1997, Exhibit 99.2). |
|
10O. |
|
|
Retirement Plan for Outside Directors of Avnet, Inc., effective
July 1, 1993 (incorporated herein by reference to the
Company’s Annual Report on Form 10-K for the fiscal year
ended June 30, 1992, Exhibit 10I). |
|
10P. |
|
|
Avnet, Inc. Deferred Compensation Plan for Outside Directors
(incorporated herein by reference to the Company’s Current
Report on Form 8-K dated September 23, 1997, Exhibit 99.1). |
|
21.* |
|
|
List of subsidiaries of the Company - page 43. |
|
23.* |
|
|
Consent of Arthur Andersen LLP - page 44. |
|
24. |
|
|
Powers of Attorney (incorporated herein by reference to the
Company’s Current Report on Form 8-K dated
September 28, 1999). |
|
27.* |
|
|
Financial Data Schedule (electronic filing only). |
|
|
| * |
Filed herewith |
42
EXHIBIT 21
AVNET, INC. AND SUBSIDIARIES
SUBSIDIARIES OF AVNET, INC.
| |
|
|
|
|
|
|
Jurisdiction |
| Name |
|
of Incorporation |
|
|
|
|
Avnet Asia Pte. Ltd. |
|
|
Singapore |
|
|
|
|
|
|
|
Avnet Bytech Ltd. |
|
|
England |
|
|
|
|
|
|
|
Avnet CiNERGi Pte Ltd. |
|
|
Singapore |
|
|
|
|
|
|
|
Avnet Computer Technologies, Inc. |
|
|
Delaware |
|
|
|
|
|
|
|
Avnet Computer Technologies Leasing, Inc. |
|
|
Delaware |
|
|
|
|
|
|
|
Avnet de Mexico, S.A. de C.V. |
|
|
Mexico |
|
|
|
|
|
|
|
Avnet de Puerto Rico, Inc. |
|
|
Puerto Rico |
|
|
|
|
|
|
|
Avnet Direct, Inc. |
|
|
Delaware |
|
|
|
|
|
|
|
Avnet do Brasil, Ltda. |
|
|
Brazil |
|
|
|
|
|
|
|
Avnet EMG GmbH does business as Avnet E2000 |
|
|
Germany |
|
|
|
|
|
|
|
Avnet EMG Ltd. |
|
|
England |
|
|
|
|
|
|
|
Avnet EMG S.r.l. |
|
|
Italy |
|
|
|
|
|
|
|
Avnet Europe NV/ SA |
|
|
Belgium |
|
|
|
|
|
|
|
Avnet France, S.A. which includes three subsidiaries |
|
|
France |
|
|
|
|
|
|
|
Avnet Gallium Co. Limited |
|
|
Israel |
|
|
|
|
|
|
|
Avnet GTDG Singapore Pte Limited |
|
|
Singapore |
|
|
|
|
|
|
|
Avnet Holding Corporation II |
|
|
Delaware |
|
|
|
|
|
|
|
Avnet Holding Germany GmbH |
|
|
Germany |
|
|
|
|
|
|
|
Avnet Holdings Limited |
|
|
England |
|
|
|
|
|
|
|
Avnet Hong Kong Limited |
|
|
Hong Kong |
|
|
|
|
|
|
|
Avnet, Inc. |
|
|
Delaware |
|
|
|
|
|
|
|
Avnet International (Canada) Ltd. |
|
|
Ontario |
|
|
|
|
|
|
|
Avnet Kopp (Pty.) Limited which includes two subsidiaries |
|
|
South Africa |
|
|
|
|
|
|
|
Avnet Limited |
|
|
Hong Kong |
|
|
|
|
|
|
|
Avnet Lyco Limited which includes one subsidiary |
|
|
Ireland |
|
|
|
|
|
|
|
Avnet Marketing Services |
|
|
California |
|
|
|
|
|
|
|
Avnet Max Limited |
|
|
India |
|
|
|
|
|
|
|
Avnet-Mercuries Company Limited |
|
|
Taiwan |
|
|
|
|
|
|
|
Avnet Nortec AB which includes seven subsidiaries |
|
|
Sweden |
|
|
|
|
|
|
|
Avnet Pacific Pty Limited |
|
|
Australia |
|
|
|
|
|
|
|
Avnet Setron Elektronik Vertrieb GmbH which includes two
subsidiaries and affiliates |
|
|
Germany |
|
|
|
|
|
|
|
BFI Optilas International SA which includes eleven subsidiaries |
|
|
France |
|
|
|
|
|
|
|
Disti Export Trading Corp. |
|
|
Barbados |
|
|
|
|
|
|
|
Optilas International S.A which includes five subsidiaries |
|
|
France |
|
|
|
|
|
|
|
Optional Systems Resource, Inc. |
|
|
Delaware |
|
43
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our report included in this
Form 10-K, into the Company’s Registration Statement on
Form S-3 No. 333-53691 relating to debt securities of
Avnet, Inc., Registration Statement on Form S-4
No. 333-86721 relating to common stock of Avnet, Inc.
issuable in connection with the proposed merger of Marshall
Industries into Avnet, Inc., Registration Statements on
Form S-8 No. 333-84671 and No. 033-62583 relating
to common stock of Avnet, Inc. issuable under the Avnet Employee
Stock Purchase Plan, and Registration Statements on Form S-8
No. 2-84883, No. 2-96800, No. 33-29475,
No. 33-43855, No. 033-64765, No. 333-17271,
No. 333-45735, No. 333-00129 and No. 333-45267
relating to common stock of Avnet, Inc. issuable under the 1981,
1984, 1988, 1990, 1995, 1996 and 1997 Stock Option Plans, the
1994 Avnet Incentive Stock Program and the Avnet Deferred
Compensation Plan, respectively.
|
|
| |
/s/ ARTHUR ANDERSEN LLP |
Phoenix, Arizona
September 27, 1999
44
5
1
U.S. DOLLARS
YEAR
JUL-02-1999
JUL-02-1999
1
311,982
0
988,265
27,626
997,247
2,313,323
401,362
207,350
2,984,697
795,863
791,226
0
0
44,416
1,353,192
2,984,697
6,350,042
6,350,042
5,401,472
6,176,809
0
0
52,096
375,291
200,834
174,457
0
0
0
174,457
4.90
4.86
