Avnet 2001 Annual Report Download - page 33

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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.
On June 8, 2001, Avnet completed its acquisition of Kent
Electronics Corporation (“Kent”) following approval of the
Amended and Restated Merger Agreement and Plan of Merger
dated as of March 21, 2001 (the “Merger Agreement”) by Avnet and
Kent shareholders on June 6, 2001. Pursuant to the Merger
Agreement, Kent was merged into Avnet and its separate existence
ceased. Kent shareholders received 0.87 of a share of Avnet
common stock for each share of Kent common stock held, with
cash paid in lieu of any fractional shares based on $25.84 per Avnet
share. Avnet issued approximately 25.3 million shares of its
common stock to Kent shareholders and an additional 1.7 million
shares have been reserved for issuance upon the exercise of
outstanding warrants and stock options assumed in the transaction.
The accompanying consolidated financial statements and notes
related to years prior to fiscal year 2001 have been restated to reflect
the acquisition of Kent, which has been accounted for as a “pooling-
of-interests.” The periods combined are more fully discussed in
Note 2 to the Consolidated Financial Statements. The combination
does not give effect to the potentially significant synergies that
the Company expects to realize from the combined operations
beginning in 2002. As discussed later in this “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” (“MD&A”) and in the notes to the Consolidated
Financial Statements, the Company recorded a one-time charge in the
fourth quarter of 2001, a significant portion of which resulted from
the Kent acquisition being accounted for as a “pooling-of-interests.”
The Company currently consists of three major operating groups,
Electronics Marketing (“EM”), Computer Marketing (“CM”) and
Avnet Applied Computing (“AAC”). EM focuses on the global
distribution of and value-added services associated with electronic
components. CM focuses on the distribution of middle- to high-end
value-added computer products and related services. AAC,
which was created by combining certain segments from EM’s and
CM’s operations, provides the latest technologies such as micro-
processors to system integrators and manufacturers of general
purpose computers, and provides design, integration, marketing and
financing to developers of application-specific computer solutions.
AAC began operating in the Americas effective as of the beginning
of the second quarter of 2000, in Europe effective as of the
beginning of the third quarter of 2000 and in Asia effective
as of the beginning of 2001. The results for AAC before it began
operating separately are included in EM and CM as the results of
the operating groups have not been restated. In addition, the results
for the current and prior years include acquisitions completed
by the Company during the last few years, which significantly
affect the comparative financial results discussed below. These
acquisitions, which affected each of the Company’s operating groups,
are discussed below in the “Acquisitions” section of this MD&A.
On August 31, 2000, the Company’s Board of Directors declared
a two-for-one stock split to be effected in the form of a stock
dividend (the “Stock Split”). The additional common stock was
distributed on September 28, 2000 to shareholders of record on
September 18, 2000. All references in this MD&A, and elsewhere
in this Report, to the number of shares, per share amounts and
market prices of the Company’s common stock prior to September
28, 2000 have been restated to reflect the Stock Split and the
resulting increased number of shares outstanding.
RESULTS OF OPERATIONS
The results of operations for 2001 discussed below reflect dramat-
ically different results during the first half of the year as compared
with the second half. The results for the first half of 2001 reflected
the strong rebound in the electronic component distribution
industry, which began to positively impact the Company’s results
during the later part of the second quarter of 2000 following the
longest cyclical downtrend in the industry’s history. The results for
the second half of 2001 were negatively affected by the quickest and
sharpest downturn ever experienced in the electronic components
industry as well as by the general slowdown in the global economic
environment. Consequently, although many of the metrics for the
year compare somewhat favorably to prior years, the results are
disappointing as the Company’s consolidated fourth quarter 2001
sales and net income from continuing operations before special
Management’s Discussion
and Analysis of Financial Condition and Results of Operations
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