Avnet 2000 Annual Report Download - page 26

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AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Acquisitions and dispositions (continued):
The acquisitions completed in 2000 consisted of Marshall Industries, Integrand Solutions, Eurotronics B.V. (SEI), the SEI Macro Group, PCD Italia S.r.l. and
Matica S.p.A. (counted as a single acquisition), Cosco Electronics/ Jung Kwang and the remaining 60% of SEI Nordstar S.p.A. 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 Computer Solutions Division (CSD) of JBA International, Inc. and a 70% interest in Bridge International. The acquisitions completed in 1998 con-
sisted of ECR Sales Management, Inc., EXCEL-MAX Pte Ltd., CiNERGi Pte Ltd., Bytech Systems Ltd. and Optilas International SA.
The acquisitions completed during 2000 required a total investment of $961,243,000 (net of $762,000 of cash on the books of the companies acquired) of
which $603,143,000 was paid in cash, $351,877,000 in Avnet stock and $6,985,000 in Avnet stock options, net of related tax benefits of $4,760,000. In the
aggregate, the operations acquired during 2000, had sales totaling approximately $2,684,000,000 during the fiscal year of each such operation immediately
proceeding its acquisition.
The following unaudited pro forma results reflect the acquisition of Marshall Industries as if it occurred on July 3, 1999 and June 27, 1998, the first day of
the Company’s 2000 and 1999 fiscal years, respectively, and does not purport to present what actual results would have been had the acquisition, in fact,
occurred at those dates or to project results for any future period:
Years Ended
June 30, July 2,
(Thousands, except per share data) 2000 1999
Sales $ 9,734,915 $ 8,065,147
Income before income taxes 267,573 371,585
Net Income 152,187 159,527
Diluted earnings per share $ 1.74 $ 1.86
The unaudited pro forma results shown above include the special charges referred to in Note 14. In addition, the unaudited pro forma results shown above
exclude any potential benefits that might result from the acquisition due to synergies that may be derived and from the elimination of any duplicated costs.
The historical results of operations of other companies acquired during 2000 would not have had a material effect on the Company’s results of operations in
that year, on a pro forma basis.
Cash expended (net of cash on the books of the companies acquired) in 1999 and 1998 relating to acquisitions totaled approximately $38,416,000 and
$9,378,000, respectively. 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
in 1999 and 1998 would not have had a material effect on the Company’s results of operations in those years, 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).
Subsequent to the end of 2000, on July 3, 2000, the Company completed the acquisition of the Savoir Technology Group, Inc., the leading distributor of IBM
mid-range server products in the Americas, by issuing approximately 1,868,000 shares (or 3,736,000 shares as adjusted to reflect the two-for-one stock split
to be distributed on September 28, 2000) of Avnet common stock. Savoir Technology Group, Inc. reported 1999 revenues of $767,000,000. The Company
has also entered into an agreement to purchase part of the VEBA Electronics Group from Germany-based E.On AG (formerly VEBA AG) for a cash purchase
price of approximately $740,000,000, including the assumption of debt. Under the terms of the agreement, the Company will acquire (a) the Munich,
Germany- headquartered EBV Group, comprised of EBV Elektronik and WBC, both pan-European semiconductor distributors, and Atlas Services Europe,
logistics provider for EBV and WBC; and (b) the Nettetal, Germany-based RKE Systems, a computer products and services distributor. The combined com-
panies being acquired from E.On AG reported calendar 1999 sales of approximately $1,800,000,000 (using average exchange rates for calendar 1999).
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. Inventories:
June 30, July 2,
(Thousands) 2000 1999
Finished goods $ 1,811,699 $ 909,609
Work-in-process 6,742 5,625
Raw materials 68,839 82,013
$ 1,887,280 $ 997,247
4. Property, plant and equipment, net:
Property, plant and equipment are recorded at cost and consist of the following:
June 30, July 2,
(Thousands) 2000 1999
Land $ 10,398 $ 5,200
Buildings 101,032 77,523
Machinery, fixtures and equipment 483,987 306,028
Leasehold improvements 17,302 12,611
612,719 401,362
Less accumulated depreciation and amortization 322,817 207,350
$ 289,902 $ 194,012
Depreciation and amortization expense related to property, plant and equipment was $53,900,000, $37,825,000 and $37,156,000 in 2000, 1999 and 1998,
respectively.
5. External financing:
June 30, July 2,
(Thousands) 2000 1999
7 7/ 8% Notes due February 15, 2005 $ 360,000 $ —
6 7/ 8% Notes due March 15, 2004 100,000 100,000
6.45% Notes due August 15, 2003 200,000 200,000
Commercial paper 559,395 202,200
Bank credit facilities 689,704 272,160
Other 28,798 17,154
1,937,897 791,514
Less borrowings due within one year 499,287 288
Long-term debt $ 1,438,610 $ 791,226
In October 1999, the Company entered into a $500,000,000 364-day credit facility with a syndicate of banks led by Bank of America in order to partially
finance the cash component of the acquisition of Marshall Industries and to provide additional working capital capacity. The Company may select from vari-
ous interest rate options and maturities under the facility, although the Company intends to utilize the facility primarily as a back-up for its commercial paper
program pursuant to which the Company is authorized to issue short-term notes for current operational business requirements.