Avnet 2005 Annual Report Download - page 37

Capital Structure
The Company uses a variety of financing arrangements, both short-term and long-term, to fund its
operations. The Company also uses diversified sources of funding so that it does not become overly dependent
on one source and to achieve lower cost of funding through these different alternatives. These financing
arrangements include public bonds, short-term and long-term bank loans and an accounts receivable
securitization program. For a detailed description of the Company's external financing arrangements
outstanding at July 2, 2005, please refer to Note 7 to the consolidated financial statements appearing in
Item 15 of this Report.
The following table summarizes the Company's capital structure as of the end of fiscal 2005 with a
comparison with the end of fiscal 2004:
July 2, % of Total July 3, % of Total
2005 Capitalization 2004 Capitalization
(Dollars in thousands)
Short-term debtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 61,298 1.8% $ 160,660 4.9%
Long-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,183,195 35.4 1,196,160 36.1
Total debtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,244,493 37.2 1,356,820 41.0
Shareholders' equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,097,033 62.8 1,953,426 59.0
Total capitalization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $3,341,526 100.0 $3,310,246 100.0
Long-term debt in the above table includes a fair value adjustment increasing total debt and capitaliza-
tion by $0.9 million and $13.6 million at July 2, 2005 and July 3, 2004, respectively. The fair value adjustment
relates to the interest rate hedges on the Company's 8.00% Notes and 9
3
/ 4 % Notes discussed in Financing
Transactions.
Financing Transactions
In August 2005, the Company issued $250.0 million of 6.00% senior notes due September 1, 2015 (the
""6% Notes''). The proceeds from the offering, net of discount and underwriting fees, totaled $246.5 million.
These proceeds were used to launch a tender offer to purchase up to $250.0 million of the Company's
8.00% Notes due November 15, 2006 (the ""8% Notes'') at a price of $1,045 per $1,000 principal amount of
8% Notes. The tender offer period closes on September 13, 2005.
In August 2005, the Company also amended its accounts receivable securitization program which, among
other things, now provides that financing under the facility no longer qualifies as off-balance sheet financing
(see Off-Balance Sheet Arrangements). As a result, the receivables and related debt obligation will remain on
the Company's consolidated balance sheet when amounts are drawn on the facility.
During fiscal 2005, the Company repaid the remaining $3.0 million of the 4.5% Convertible Notes upon
maturity on September 1, 2004 and repaid the remaining $86.6 million of the 7
7
/ 8 % Notes upon maturity on
February 15, 2005.
In March 2004, the Company issued $300.0 million of 2% Convertible Senior Debentures due March 15,
2034 (the ""Debentures''). The Debentures are convertible into Avnet common stock, at a rate of
29.5516 shares of common stock per $1,000 principal amount of Debentures. The Debentures are only
convertible under certain circumstances, including if: (i) the closing price of the Company's common stock
reaches $45.68 per share (subject to adjustment in certain circumstances) for a specified period of time;
(ii) the average trading price of the Debentures falls below a certain percentage of the conversion value per
Debenture for a specified period of time; (iii) the Company calls the Debentures for redemption; or
(iv) certain corporate transactions, as defined, occur. Upon conversion, the Company will deliver cash in lieu
of common stock as the Company made an irrevocable election in December 2004 to satisfy the principal
portion of the Debentures, if converted, in cash. The Company may redeem some or all of the Debentures for
cash any time on or after March 20, 2009 at the Debentures' full principal amount plus accrued and unpaid
interest, if any. Holders of the Debentures may require the Company to purchase, in cash, all or a portion of
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