Avnet 2001 Annual Report Download - page 40

and computer products, for a combination of cash and Avnet stock.
The total cost of the acquisition of Marshall, including estimated
expenses, was approximately $764.6 million, consisting of the cost
for the Marshall shares of $326.8 million in cash, $269.3 million in
Avnet stock and $7.0 million in Avnet stock options (net of related
tax benefits of $4.8 million) as well as $17.5 million for direct
transaction costs and estimated expenses and $144 million for the
refinancing of Marshall net debt. The above dollar value of Avnet
stock reflects the issuance of 6,817,943 shares of Avnet stock valued
at an assumed price of $39.50 per share.
In November 1999, Kent acquired all of the outstanding common
stock of Orange Coast Datacomm, Inc., Orange Coast Cabling, Inc.
and Go Telecomm, Inc., collectively known as Orange Coast.
Orange Coast provided comprehensive end-to-end voice and data
network solutions to major corporations from offices in Irvine and
Santa Clara, California.
On October 14, 1999, the Company acquired 94% of the SEI Macro
Group, an electronics components distributor headquartered in the
United Kingdom, and during the second quarter of fiscal 2000
acquired 16% of Eurotronics B.V. (which did business under the
name SEI), a pan-European electronics components distributor
headquartered in the Netherlands. On January 3, 2000, the
Company completed its acquisition of the SEI Macro Group and
Eurotronics B.V. (SEI). The combined annual sales of Eurotronics
and the SEI Macro Group were approximately $750 million.
To capitalize on growing world markets for electronic components
and computer products, the Company has pursued and expects to
continue to pursue strategic acquisitions to expand its business.
However, the Company does not anticipate further material
acquisitions until it has completed the integration of its recent
acquisitions and strengthened its balance sheet. Management
believes that the Company has the ability to generate sufficient
capital resources from internal or external sources in order to
continue its expansion program. In addition, as with past acqui-
sitions, management does not expect that any future acquisitions
will materially impact the Company’s liquidity.
MARKET RISKS
Many of the Company’s operations, primarily its international
subsidiaries, occasionally purchase and sell products in currencies
other than their functional currencies. This subjects the Company
to the risks associated with fluctuations of foreign currency
exchange rates. The Company reduces this risk by utilizing natural
hedging (offsetting receivables and payables) as well as by creating
offsetting positions through the use of derivative financial
instruments, primarily forward foreign exchange contracts with
maturities of less than sixty days. The market risk related to the
foreign exchange contracts is offset by the changes in valuation of
the underlying items being hedged. The amount of risk and the
use of derivative financial instruments described above are not
material to the Company’s financial position or results of
operations. As of September 14, 2001, approximately 63% of the
Company’s outstanding debt (including as debt the $350 million
outstanding under the Company’s accounts receivable securitization
program) was in variable rate short-term instruments and 37% was
in fixed rate instruments. Accordingly, the Company will be
impacted by any change in short-term interest rates. The Company
does not hedge either its investment in its foreign operations or
its floating interest rate exposures. The Company adopted the
Financial Accounting Standards Board’s Statement of Financial
Accounting Standards No. 133 (“SFAS 133”), “Accounting for
Derivative Instruments and Hedging Activities,” as amended
by Statement of Financial Accounting Standards No. 138,
“Accounting for Certain Derivative Instruments and Certain
Hedging Activities,” on July 1, 2000. The adoption of SFAS 133,
as amended, did not have a material impact on the Company’s
financial statements.
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