Avnet 2004 Annual Report Download - page 24

consecutive year of record sales for this region of EM's operations. This growth in the Asia/PaciÑc region is
indicative of an ongoing trend whereby technology manufacturing continues to shift to this region, especially in
the component industry in which EM competes, as well as the growth of the indigenous markets. Avnet
continues to invest in this region, in the form of IT initiatives and logistics and service centers, to take
advantage of the ongoing growth opportunities of this rapidly expanding technology marketplace. EM also
generated sales growth in the other two regions of the world with EM EMEA's Ñscal 2004 sales of
$2.13 billion growing 22.7% over Ñscal 2003 sales of $1.74 billion and EM Americas' Ñscal 2004 sales of
$2.46 billion growing 3.3% over Ñscal 2003 sales of $2.38 billion. In addition to the impact of changes in
foreign currency exchange rates, the increased sales in Ñscal 2004 in all regions is a result of increasing
customer demand coupled with steady improvements in technology-related capital spending. These higher
demand and spending levels were prevalent throughout the majority of Ñscal 2004 with an expected minor
summer Öattening of demand levels in the Americas and EMEA regions in the Ñnal month of Ñscal 2004 as
well as a leveling oÅ in Asia primarily as a result of the abnormally high incoming business levels in this region
throughout the Ñscal year up until the end of the fourth quarter. EM's foreign results were positively impacted
by changes in foreign currency exchange rates, which yielded roughly $270 million of EM's year-over-year
consolidated sales growth.
TS's sales of $4.35 billion in Ñscal 2004 were up $292 million, or 7.2%, over TS's Ñscal 2003 sales of
$4.06 billion. The Americas region has traditionally accounted for greater than 65% of TS's global sales as was
the case again in Ñscal 2004. As a result, growth in the Americas region drove much of TS's growth overall
with sales of $2.95 billion, up 11.4% over TS Americas' Ñscal 2003 sales of $2.65 billion. The growth in TS's
Americas business was driven primarily by strength of sales in storage, software and networking products and
services. TS EMEA's Ñscal 2004 sales of $1.25 billion were down 0.8% from Ñscal 2003 sales of $1.26 billion.
However, TS EMEA's sales results in Ñscal 2004 were positively impacted by changes in foreign currency
exchange rates by an estimated $148 million. The decline in sales on a constant dollar basis in TS EMEA is
primarily a function of TS's strategic decision in the second half of Ñscal 2003 to exit certain low-proÑt, low
return-on-capital employed business. The customer engagements exited accounted for estimated annualized
sales in excess of $300 million in Ñscal 2003. TS Asia's Ñscal 2004 sales of $156 million were up $2 million, or
1.2%, from Ñscal 2003 sales of $154 million.
A combination of the regional and operating group factors discussed above resulted in EM constituting a
larger percentage of Avnet's consolidated sales in Ñscal 2004, 58%, as compared with Ñscal 2003 and 2002 at
55% and 54%, respectively. This larger contribution from the EM operating group is also typical for an up-
cycle in the electronic component and computer product industry. On a consolidated basis, the dispersion of
the Company's sales on a regional basis also continued to shift toward the Asia/PaciÑc region with this region
now constituting a record 14% of Avnet's consolidated sales, as compared with less than 8% as recently as
Ñscal 2002. The EMEA region's contribution to consolidated sales has remained relatively stable over the past
three Ñscal years, in the 32-33% range, while the Americas region has declined from nearly 60% in Ñscal 2002
to less than 53% in Ñscal 2004.
The Company closed Ñscal 2003 with sales of $9.05 billion, up $128 million, or 1.4%, as compared with
Ñscal 2002 consolidated sales of $8.92 billion. The strengthening of the Euro as compared with the US Dollar
drove much of this slight increase in consolidated sales between Ñscal 2003 and 2002. The relatively Öat sales
performance on a constant dollar basis between these two years was indicative of an electronic component and
computer product industry that had stabilized but remained relatively weak following the precipitous decline
of the industry and the economic downturn that began midway through Ñscal 2001. EM's sales of $4.99 billion
in Ñscal 2003 were up $147 million, or 3.0%, over Ñscal 2002 sales of $4.84 billion, driven by the strength in the
Euro and growth in the Asia/PaciÑc region. TS's sales of $4.06 billion in Ñscal 2003 were down slightly by
$18 million, or 0.4%, from Ñscal 2002 sales of $4.08 billion driven primarily by growth in Ñscal 2003 in the
enterprise computing and storage markets, oÅset by reduced activity in telecommunications and networking
sectors and the early impacts of the strategic decision to exit low-proÑt, low return-on-capital employed
business in Ñscal 2003 as discussed above.
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