Avnet 2005 Annual Report Download - page 14

‚ Avnet Visual and Data Solutions concentrates on specialized video and display products, network
products and storage solutions, while targeting primarily VARs and system integrators with its wireless
switch and wireless standalone solutions. Avnet Visual and Data Solutions does business in eight
European countries.
‚ Avnet Enterprise Solutions provides end-user customers with information technology solutions includ-
ing hardware, software, maintenance, financial and professional services. Avnet Enterprise Solutions is
a solutions integrator specializing in network solutions. Avnet Enterprise Solutions leverages its unique
suite of technical and financial strategies and services to minimize risk, maximize flexibility and
optimize the use of capital on IT infrastructures, and thus bring value to businesses intent on managing
their total cost of technology infrastructure Ì from the data center, through the network, to the
desktop. Avnet Enterprise Solutions provides services to customers primarily in the U.S.
Foreign Operations
As noted in the operating group discussions, Avnet's operations are deployed globally with significant
operations in the three major economic regions of the world: the Americas, EMEA, and Asia. Historically,
Avnet's operations in the Americas region (primarily the United States) have contributed the largest
percentage of consolidated sales. During fiscal 2005, 2004 and 2003, the percentage of the Company's sales in
the Americas has been 52%, 53% and 56%, respectively. The EMEA region's contribution to Avnet's
consolidated sales has remained relatively stable at approximately 33% in each of the past three fiscal years.
The Asia region has been continuously growing as a percentage of consolidated sales with 15%, 14% and 11%,
respectively, of consolidated sales being generated in that region during fiscal 2005, 2004 and 2003. This
growth in Asia is indicative of a worldwide industry trend and is a result of Avnet's continued investment into
this rapidly growing region, particularly in the Peoples' Republic of China. Management expects the Asia
region to continue to grow, both in volume of business and as a percentage of the Company's global business in
the future, although the rate of growth may not remain at the same robust percentages exhibited in the past
three to four years. Furthermore, the fiscal 2006 acquisition of Memec will provide Avnet with an expanded
presence in the Asia region in addition to making Avnet one of the only U.S. based electronic components
distributors with a significant presence in Japan.
Avnet's foreign operations are subject to a variety of risks including potential restrictions on transfers of
funds due to statutory or tax regulations, foreign currency fluctuations, import and export duties and
regulations, changing foreign tax laws and regulations, potential military conflicts, less flexible employee
contracts in the event of business downturns, and the burden and cost of compliance with foreign laws. The
most common of these risks is the Company's exposure to foreign currency fluctuations, which are hedged
regularly as part of Avnet's treasury and cash management operations. These risks are discussed further at
Quantitative and Qualitative Disclosures About Market Risk appearing in Item 7A of this Report. Addition-
ally, the specific impacts of foreign currency fluctuations, most notably the Euro, on the Company's
consolidated financial statements are further discussed in Management's Discussion and Analysis of Financial
Condition and Results of Operations appearing in Item 7 of this Report.
Acquisitions
Subsequent to fiscal 2005 (on July 5, 2005), the Company completed the acquisition of Memec, a global
distributor that markets and sells a portfolio of semiconductor devices from industry-leading suppliers, and a
provider of engineering expertise and design services. The acquisition of Memec is the Company's largest
acquisition to date, based on annual sales. Memec's sales in its fiscal year ended December 31, 2004 were
$2.29 billion. The consideration for the Memec acquisition consisted of stock and cash valued at approxi-
mately $504.2 million, including transaction cost, plus the assumption of approximately $240.0 million of
Memec's net debt (debt less cash acquired). Under the terms of the purchase, Memec investors received
approximately 24.011 million shares of Avnet common stock plus approximately $64.0 million of cash. The
shares of Avnet common stock were valued at $17.42 per share, which represents the five-day average stock
price beginning two days before the acquisition announcement on April 26, 2005. See Organizational
Structure in this Item 1 for further discussion of the integration of Memec into EM's operations.
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