Avnet 2000 Annual Report Download - page 27

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AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. External financing (continued):
The credit facility contains various covenants, none of which management believes materially limit the Company’s financial flexibility to pursue its intended
business strategy. The Company intends to renew and possibly increase the amount of the 364-day facility for another 364-day period. There are no out-
standing borrowings under the facility. The Company also has an additional credit facility with Bank of America which provides a line of credit up to
$100,000,000 and which expires in October 2000.
In February 2000, the Company raised $360,000,000 (before deducting underwriting expenses and other costs) in the public market by issuing the 7 7/ 8%
Notes due February 2005.
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 of which approximately
$619,000,000 was outstanding at June 30, 2000 with the remainder serving as a back-up for outstanding commercial paper. 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. The approximate weighted average interest rates on outstanding commercial paper and foreign currency denomi-
nated borrowings under this facility at June 30, 2000 were 7.0% and 4.5%, respectively, and at July 2, 1999 were 5.4% and 4.4%, respectively. As of June
30, 2000, the Company was in compliance with the various covenants contained in the agreement.
The Company also has bank credit facilities in certain European and Asian countries with various maturities and interest rates.
At June 30, 2000, the fair value of the 7 7/ 8% Notes due February 15, 2005, the 6 7/ 8% Notes due March 15, 2004 and the 6.45% Notes due August 15,
2003 were approximately $359,200,000, $95,800,000 and $191,500,000, respectively. Annual payments on external financing in 2001, 2002, 2003, 2004 and
2005 will be $499,287,000, $2,218,000, $701,491,000, $301,274,000 and $360,803,000, respectively.
6. Accrued expenses and other: June 30, July 2,
(Thousands) 2000 1999
Payroll, commissions and related $ 91,853 $ 56,447
Insurance 14,478 14,159
Income taxes 40,964 153,245
Dividends payable (Note 12) 6,626 -
Other 148,056 91,347
$ 301,977 $ 315,198
The significantly higher amount of accrued income taxes at July 2, 1999 as compared with the current year end relates primarily to the income taxes due on
the gain on the sale of Allied Electronics.
AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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
June 30, July 2, June 26,
2000 1999 1998
Federal statutory rate 35.0% 35.0% 35.0%
State and local income taxes, net of federal benefit 5.2 7.6 5.3
Amortization and disposition of goodwill 2.6 11.8 1.9
Other, net .2 (.9) 1.2
Effective tax rate 43.0% 53.5% 43.4%
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 valuation, accounts receivable valuation, net operating losses related to foreign operations, certain
accruals and depreciation.
Years Ended
June 30, July 2, June 26,
(Thousands) 2000 1999 1998
Current:
Federal $ 100,305 $ 177,271 $ 89,456
State and local 22,958 44,759 22,371
Foreign 26,567 11,098 5,816
Total current taxes 149,830 233,128 117,643
Deferred:
Federal (11,864) (5,924) (1,163)
State and local (2,672) (747) (538)
Foreign (25,904) (25,623) (20)
Total deferred taxes (40,440) (32,294) (1,721)
Provision for income taxes $ 109,390 $ 200,834 $ 115,922