Avnet 2004 Annual Report Download - page 23

signiÑcant impact on EM's results of operations than on those of Avnet's computer products operating group,
TS, where revenues increased by 7.2% from Ñscal 2003 to Ñscal 2004. EM's revenues grew in Ñscal 2004 in all
three regions, with the Asia/PaciÑc region leading the way with a $430.5 million increase in annual sales,
representing nearly 50% growth year-over-year. This growth in the Asia/PaciÑc region, especially in the
electronic component industry, is indicative of the ongoing trend for the past several years where this region
has continued to represent one of the Company's most signiÑcant growth opportunities. Management believes
Avnet is well-positioned to capitalize on this growth based on its already established position in the Asia
region, and speciÑcally in the Peoples' Republic of China. As a result of this trend, the Asia/PaciÑc region
now accounts for 22.0% of EM's global sales as compared with 17.4% in Ñscal 2003. The Ñscal 2004 growth in
TS's sales was driven primarily by growth in the Americas region on strength of sales primarily in storage,
software and networking products and services. As a result of the more rapid growth in EM as compared with
TS, EM's sales constituted 57.5% of Avnet's consolidated sales, up from 55.1% in Ñscal 2003 and 54.3% in
Ñscal 2002.
Independent of future growth rates, operating eÇciency and working capital management will remain a
key focus of Avnet's overall value-based management initiatives and its eÅorts to continue growing
proÑtability and return on capital at a faster rate than growth in revenues.
As a distributor, it is diÇcult to forecast the material trends of the electronic component and computer
product industry, aside from some of the normal seasonality discussed herein, because Avnet does not typically
have material forward-looking information available from its customers and suppliers beyond approximately
three to four months of forecast information. As such, management relies on the publicly available
information published by certain industry groups and other related analyses in evaluating its business prospects
in the longer term.
Sales
The tables below provide a year-over-year summary of sales for the Company and its operating groups:
Three-Year Analysis of Sales: By Operating Group and Geography
Years Ended Percent Change
July 3, % of June 27, % of June 28, % of 2004 to 2003 to
2004 Total 2003 Total 2002 Total 2003 2002
(Dollars in millions)
Sales by Operating Group:
EM ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 5,892.4 57.5% $4,988.4 55.1% $4,841.9 54.3% 18.1% 3.0%
TSÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,352.3 42.5 4,060.0 44.9 4,078.3 45.7 7.2 (0.4)
$10,244.7 $9,048.4 $8,920.2 13.2 1.4
Sales by Geographic Area:
Americas ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 5,409.6 52.8% $5,028.7 55.6% $5,346.3 59.9% 7.6% (5.9)%
EMEA ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,380.2 33.0 2,997.1 33.1 2,874.4 32.2 12.8 4.3
Asia/PaciÑcÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,454.9 14.2 1,022.6 11.3 699.5 7.9 42.3 46.2
$10,244.7 $9,048.4 $8,920.2 13.2 1.4
Consolidated sales for Ñscal 2004 of $10.24 billion increased by $1.19 billion, or 13.2%, over Ñscal 2003
sales of $9.05 billion. Avnet Ñnished Ñscal 2004 with its strongest annual sales results since Ñscal 2001. As
discussed above, this signiÑcant sales growth is largely a result of an electronic component and computer
product industry that has emerged from the roughly three-year industry and economic downturn that
commenced midway through the Company's Ñscal 2001. Changes in foreign currency exchange rates from
Ñscal 2003 to 2004 also contributed to this growth in sales year-over-year by roughly $410 million. As the table
above shows, the consolidated sales growth was composed of year-over-year increases in sales in both of the
Company's operating groups as well as across all three global regions in which Avnet does business.
EM's sales of $5.89 billion in Ñscal 2004 were up $904 million, or 18.1%, over EM's Ñscal 2003 sales of
$4.99 billion. The Asia/PaciÑc region was the largest driver of EM's growth with Ñscal 2004 sales of
$1.30 billion, up $430 million, or 49.6%, from sales of $868 million in Ñscal 2003, and representing the sixth
14