Avnet 2004 Annual Report Download - page 58

AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
In March 2004, the Company issued $300,000,000 of 2% Convertible Senior Debentures due March 15,
2034 (the ""Debentures''). The Debentures are convertible into Avnet common stock at a rate of
29.5516 shares of common stock per $1,000 principal amount of Debentures. The Debentures are only
convertible under certain circumstances, including if: (i) the closing price of the Company's common stock
reaches $45.68 per share (subject to adjustment in certain circumstances) for a speciÑed period of time;
(ii) the average trading price of the Debentures falls below a certain percentage of the conversion value per
Debenture for a speciÑed period of time; (iii) the Company calls the Debentures for redemption; or
(iv) certain corporate transactions, as deÑned, occur. Upon conversion, the Company has the right to deliver
to the holder cash or a combination of cash and common stock, in lieu of solely common stock. The Company
may redeem some or all of the Debentures for cash any time on or after March 20, 2009 at the Debentures'
full principal amount plus accrued and unpaid interest, if any. Holders of the Debentures may require the
Company to purchase, in cash, all or a portion of the Debentures on March 15, 2009, 2014, 2019, 2024 and
2029, or upon a fundamental change, as deÑned, at the Debentures' full principal amount plus accrued and
unpaid interest, if any.
The proceeds from the issuance of the Debentures, net of underwriting fees, were $292,500,000. The
Company used these proceeds to fund the tender and purchase of $273,367,000 of its 7
7
/ 8 % Notes due
February 15, 2005. The Company incurred debt extinguishment costs of $16,370,000 pre-tax, $14,215,000
after-tax and $0.12 per share on a diluted basis during Ñscal 2004 related primarily to premiums and other
transaction costs associated with this tender.
During Ñscal 2004, the Company also repaid in cash the $100,000,000 of 6
7
/ 8 % Notes that matured on
March 15, 2004.
In February 2003, the Company used the proceeds of $465,313,000, net of underwriting fees, from the
issuance in that month of the Company's $475,000,000 of 9
3
/ 4 % Notes due February 15, 2008 (the
""9
3
/ 4 % Notes'') to redeem $159,141,000 of its 6.45% Notes due August 15, 2003 (the ""6.45% Notes'') and
$220,056,000 of its 8.20% Notes due October 17, 2003 (the ""8.20% Notes). The excess proceeds after these
early redemptions were held in an escrow account and used to repay the remaining principal on the
6.45% Notes and 8.20% Notes at their respective maturity dates plus interest due through their maturities. At
June 27, 2003, the balance in this escrow account was $78,543,000. During the third quarter of Ñscal 2003, the
Company incurred debt extinguishment costs of $13,487,000 pre-tax, $8,152,000 after-tax and $0.07 per share
on a diluted basis, related primarily to premiums and other transaction costs associated with the tender and
early redemption of the 6.45% Notes and the 8.20% Notes.
At June 27, 2003, the Company had a multi-year credit facility with a syndicate of banks led by Bank of
America that provided up to $350,000,000 in Ñnancing that was to mature on October 25, 2004. At June 27,
2003 and during Ñscal 2004, there were no outstanding borrowings under this multi-year credit facility.
Because the Company did not expect to draw on the facility prior to its October 2004 expiration, the Company
terminated the facility in September 2003. The Company wrote-oÅ the remaining unamortized deferred loan
costs associated with this facility, which amounted to $4,514,000 as of the date the facility was terminated
(see Note 17).
The Company has two interest rate swaps with a total notional amount of $400,000,000 in order to hedge
the change in fair value of the 8.00% Notes due November 15, 2006 (the ""8% Notes'') related to Öuctuations
in interest rates. These contracts are classiÑed as fair value hedges and mature in November 2006. The interest
rate swaps modify the Company's interest rate exposure by eÅectively converting the Ñxed rate on the
8% Notes to a Öoating rate (4.5% at July 3, 2004) based on three-month U.S. LIBOR plus a spread through
their maturities. In July 2003, the Company entered into three additional interest rate swaps with a total
notional amount of $300,000,000 in order to hedge the change in fair value of the 9
3
/ 4 % Notes related to
Öuctuations in interest rates. These hedges are also classiÑed as fair value hedges and mature in February
2008. These interest rate swaps modify the Company's interest exposure by eÅectively converting the Ñxed
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