Avnet 2003 Annual Report Download - page 40
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Please find page 40 of the 2003 Avnet annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Company will account for them using the shortcut method as deÑned by 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 and
Hedging Activities.''
During 2003, the Company amended its syndicated bank credit facilities. Prior to the 2003 amendments,
the bank credit facilities included a multi-year credit facility with a syndicate of banks that provided up to
$428.8 million in Ñnancing and a 364-day credit facility providing up to $488.7 in Ñnancing (the original
syndicated bank credit facility also included a $82.5 million term loan facility that matured in November
2001). The multi-year credit facility was a three-year revolving, multi-currency facility that was to mature on
October 25, 2004. The Company was able to select from various interest rate options and maturities under this
facility.
The amended terms of the multi-year credit facility reduced the available borrowings under the facility to
$350.0 million. Additionally, the 364-day credit facility was terminated as part of the 2003 amendments.
These amendments also modiÑed certain covenants to the agreement. The Company was in compliance with
all of the covenants at June 27, 2003.
The amended agreement also contained a ""springing lien'' provision whereby borrowings under the
amended multi-year credit facility would become secured by various assets of the Company if (a) Avnet
received a debt rating of Ba1 or lower by Moody's or BB° or lower by S&P or (b) if Avnet terminated its
current accounts receivable securitization program (see below) without simultaneously entering into another
securitization with similar terms.
On September 8, 2003, Moody's adjusted the Company's debt rating to Ba2. Management believed it was
in the Company's best interests to terminate the facility rather than allow the liens to spring when no amounts
were outstanding or expected to be drawn prior to the facility's October 2004 expiration. See ""Liquidity'' for
further discussion of the Company's borrowing capacity and expected Ñnancing needs.
In addition to its primary Ñnancing arrangements, the Company has several small lines of credit in
various locations to fund the short-term working capital, foreign exchange, overdraft and letter of credit needs
of its wholly owned subsidiaries in Europe and Asia. Avnet generally guarantees its subsidiaries' debt under
these facilities.
OÅ-Balance Sheet Arrangements
The Company has a $350 million accounts receivable securitization program (the ""Program'') with two
Ñnancial institutions whereby it may sell, on a revolving basis, an undivided interest in a pool of its trade
accounts receivable. Under the Program, the Company may sell receivables in securitization transactions and
retain a subordinated interest and servicing rights to those receivables. Receivables sold under the Program are
sold without legal recourse to third party conduits through a wholly-owned bankruptcy-remote special purpose
entity that is consolidated for Ñnancial reporting purposes. The Program qualiÑes for sale treatment under
Statement of Financial Accounting Standards No. 140, ""Accounting for Transfer and Servicing of Financial
Assets and Extinguishment of Liabilities.'' The availability for Ñnancing under the Program is dependent on
the level of the Company's trade receivables from month to month. There were no receivables sold under the
Program at June 27, 2003. At June 28, 2002, the Company had sold $200.0 million of receivables under the
Program, which is reÖected as a reduction of receivables in the consolidated balance sheets. The cash received
from the sale of receivables was used primarily to pay down outstanding debt. The purpose of the Program is
to provide the Company with an additional source of liquidity at interest rates more favorable than it could
receive through other forms of Ñnancing. The Program was amended during 2003 to adjust certain minimum
senior unsecured credit ratings that the Company must maintain in order to continue using the Program in its
current form. These minimum credit ratings were again amended subsequent to 2003. Under the Program, as
amended in 2004, the minimum credit rating triggers are Ba3 by Moody's Investor Services (""Moody's'') and
BB¿ by Standard & Poors (""S&P''). This most recent amendment eÅectively extended the term of the
Program to August 2005.
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