Avnet 2004 Annual Report Download - page 37

borrowings. Circumstances that could affect the Company's ability to meet the required covenants and
conditions of the Program include the Company's ongoing profitability and perceived financial strength or
weakness by credit rating agencies and various other economic, market and industry factors. The Company was
in compliance with all covenants of the Program at July 3, 2004.
The Credit Facility discussed in Financing Transactions contains certain covenants with various
limitations on debt incurrence, dividends, investments and capital expenditures and also includes Ñnancial
covenants requiring the Company to maintain minimum interest coverage and leverage ratios, as deÑned.
Management does not believe that the covenants in the Credit Facility limit the Company's ability to pursue
its intended business strategy or future Ñnancing needs. The Company was in compliance with all covenants of
the Credit Facility as of July 3, 2004.
See Liquidity for further discussion of the Company's availability under these various facilities.
Liquidity
The Company had total borrowing capacity of $700.0 million at July 3, 2004 under the Credit Facility
and the Program, against which $18.9 million in letters of credit were issued under the Credit Facility as of
July 3, 2004, resulting in $681.1 million of net availability. The Company also had an additional $312.7 million
of cash and cash equivalents at July 3, 2004. There are no signiÑcant Ñnancial commitments of the Company
outside of normal debt and lease maturities as disclosed in Long-Term Contractual Obligations below.
Management believes that Avnet's borrowing capacity, its current cash availability and the Company's
expected ability to generate operating cash Öows are suÇcient to meet its projected Ñnancing needs. If the
current up-cycle in the electronic components and computer products industry continues, the Company is less
likely to generate positive cash Öows from working capital reductions. However, any additional cash
requirements are expected to be oÅset by the operating cash Öows generated by the Company's enhanced
proÑtability model resulting from the signiÑcant cost reductions achieved by the Company in recent years.
Furthermore, the next signiÑcant public debt maturity is not until the $400.0 million 8% Notes mature in
November 2006, which provides over two years for the Company to review repayment or reÑnancing
alternatives.
The following table highlights the Company's liquidity and related ratios for the past two years:
COMPARATIVE ANALYSIS Ì LIQUIDITY
(Dollars in millions)
Years Ended Percentage
July 3, 2004 June 27, 2003(1) Change
Current Assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $3,484.0 $3,126.1 11.4%
Quick Assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,056.6 1,867.3 10.1
Current Liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,645.0 1,306.1 26.0
Working Capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,839.0 1,820.0 1.0
Total DebtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,356.8 1,466.1 (7.5)
Total Capital (total debt plus total shareholders' equity) 3,310.2 3,298.6 0.4
Quick RatioÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.3:1 1.4:1
Working Capital RatioÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.1:1 2.4:1
Debt to Total CapitalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 41.0% 44.4%
(1) Ratios that include cash and cash equivalents include $78.5 million of restricted cash held in escrow at
June 27, 2003 to fund remaining principal and interest payments on the 6.45% and 8.20% Notes (see
Financing Transactions for further discussion).
The Company's quick assets (consisting of cash and cash equivalents and receivables) at July 3, 2004
have increased primarily due to the increase in receivables as a function of the growth in sales volumes during
Ñscal 2004 net of a lesser decrease in cash and cash equivalents used to fund the growth of the business and for
the pay-down of certain of the Company's debt balances (see Cash Flow and Financing Transactions for
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