Avnet 2006 Annual Report Download - page 45

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Flow) and the increase in reserves for restructuring and purchase accounting established during fiscal 2006
(see discussion in Results of Operations Ì Restructuring, Integration and Other Charges). As a result of the
factors noted above, total working capital decreased by approximately 1.8% during fiscal 2006. Total capital
grew primarily due to the 24.0 million shares of Avnet common stock granted to Memec's former shareholders
in connection with the acquisition and the increase in retained earnings by $204.5 million of net income. This
corresponding $418.2 million growth in equity is also the primary reason for the Company's debt to capital
ratio dropping from 37.2% at July 2, 2005 to 30.4% at July 1, 2006, as the Company paid off the majority of
Memec's outstanding debt as part of the close of the acquisition.
Long-Term Contractual Obligations
The Company has the following contractual obligations outstanding as of July 1, 2006 (in millions):
Due in Less Due in Due in Due After
Total Than 1 Year 1-3 Years 4-5 Years 5 Years
Long-term debt, including amounts
due within one year(1) ÏÏÏÏÏÏÏÏÏÏ $1,242.3 $ 316.0 $ 363.2 $ 9.7 $ 553.4
Operating leases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 213.9 58.3 79.2 49.8 26.6
$1,456.2 $ 374.3 $ 442.4 $ 59.5 $ 580.0
(1) Excludes the fair value adjustment of $7.5 million at July 1, 2006 related to the two interest rate swaps
outstanding on fixed rate debt instruments.
The Company does not currently have any material commitments for capital expenditures.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company seeks to reduce earnings and cash flow volatility associated with changes in interest rates
and foreign currency exchange rates by entering into financial arrangements intended to provide a hedge
against all or a portion of the risks associated with such volatility. The Company continues to have exposure to
such risks to the extent they are not hedged.
The Company has used interest rate swaps that convert certain fixed rate debt to variable rate debt,
effectively hedging the change in fair value of the fixed rate debt resulting from fluctuations in interest rates.
At July 1, 2006, the Company had two interest rate swaps outstanding under which the Company pays a
variable interest rate and receives a fixed interest rate. The following table sets forth the scheduled maturities
of the Company's debt outstanding and interest rate swaps at July 1, 2006 (dollars in millions):
Fiscal Year
2007 2008 2009 2010 2011 Thereafter Total
Liabilities:
Fixed rate debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $145 $361 $ 2 $ 2 $ 2 $553 $1,065
Floating rate debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $171 $ Ì $ Ì $ Ì $ 6 $ Ì $ 177
Interest Rate Swaps:
Fixed to variable (notional amounts) $ Ì $200 $ Ì $ Ì $ Ì $ Ì $ 200
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