Avnet 2005 Annual Report Download - page 35

Download and view the complete annual report

Please find page 35 of the 2005 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.

Page out of 87

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87

working capital. Similar to free cash flow, management believes that this breakout is an important measure to
help management and investors understand the trends in the Company's cash flows, including the impact of
management's focus on asset utilization and efficiency through reductions in the net balance of receivables,
inventories and accounts payable.
Years Ended
July 2, July 3, June 27,
2005 2004 2003
(Thousands)
Net income (loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 168,239 $ 72,897 $ (46,116)
Non-cash and other reconciling items(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 172,595 140,783 215,573
Cash flow generated from (used for) working capital
(excluding cash and cash equivalents)(2)ÏÏÏÏÏÏÏÏÏÏÏÏ 121,002 (149,031) 482,421
Net cash flow from operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 461,836 64,649 651,878
Cash flow generated from (used for):
Purchases of property, plant and equipment ÏÏÏÏÏÏÏÏÏÏ (31,338) (28,623) (34,169)
Cash proceeds from sales of property, plant and
equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,271 5,229 16,379
Acquisition of operations and investments ÏÏÏÏÏÏÏÏÏÏÏÏ (3,563) (50,528) (9,210)
Effect of exchange rates on cash and cash equivalents (10,816) 8,834 13,194
Other, net financing activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,274 13,914 (474)
Net free cash flow ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 425,664 13,475 637,598
Reduced drawings under accounts receivable
securitization program ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (200,000)
Repayment of debt, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (100,464) (96,275) (201,365)
Net increase (decrease) in cash and cash equivalents $ 325,200 $ (82,800) $ 236,233
(1) Non-cash and other reconciling items are the combination of depreciation and amortization, deferred
income taxes, non-cash restructuring and other charges, and other, net, in cash flows from operations.
(2) Cash flow generated from working capital is the combination of the changes in the Company's working
capital and other balance sheet accounts in cash flows from operations (receivables, inventories, accounts
payable and accrued expenses and other, net).
Avnet generated operating cash flows of $461.8 million during fiscal 2005. This positive cash flow is
largely driven by the Company's improved profitability in fiscal 2005, as further discussed in Results of
Operations in this MD&A, and the generation of cash from its working capital, excluding cash and cash
equivalents. Management has continued to focus on improving asset utilization and efficiency since the
economic and industry downturn that began in fiscal 2001. This focus was enhanced again in fiscal 2005 as the
Company weathered the mid-cycle inventory correction in the electronic components sector. The Company's
efforts to manage the combined balance of accounts receivable and inventories, net of accounts payable,
allowed the Company to generate positive cash flows from these working capital components of $166.4 million
in fiscal 2005. A significant catalyst for this cash flow has been the Company's ability to effectively manage
inventory levels throughout its business. As discussed in Results of Operations, EM achieved record quarterly
inventory turns in the fourth quarter of fiscal 2005 as a direct result of this effort. The cash flows associated
with purchases and sales of property, plant and equipment remained relatively consistent in fiscal 2005 when
compared with prior years. Cash expenditures for acquisitions of operations relate to the first quarter fiscal
2005 acquisition of DNS Slovakia, a small computer product distributor, as well as certain legal and other
costs incurred in fiscal 2005 related to the acquisition of Memec, which did not close until after fiscal 2005.
Trends in foreign currency exchange rates shifted in fiscal 2005 to generate a net cash outflow as most foreign
currencies, particularly the Euro, weakened slightly against the U.S. Dollar in the second half of fiscal 2005.
This negative cash flow results from the translation of Avnet's cash and cash equivalents held in foreign
currencies, which were generally higher throughout the second half of fiscal 2005 resulting largely from the
combination of the Company's higher profitability and working capital management as it emerged from the
mid-cycle inventory correction. The combination of these factors yielded net free cash flow in fiscal 2005 of
27