Avnet 2007 Annual Report Download - page 33

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In March 2006, FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets — an Amendment of
FASB Statement No. 140” (“SFAS 156”). SFAS 156 provides guidance on the accounting for servicing assets and
liabilities when an entity undertakes an obligation to service a financial asset by entering into a servicing contract.
This statement is effective for all transactions at the beginning of fiscal 2008. The adoption of SFAS 156 will not
have a material impact on the Company’s consolidated financial condition or results of operations.
In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments — an
Amendment of FASB Statements No. 133 and 140 (“SFAS 155”). SFAS 155 allows financial instruments that contain
an embedded derivative and that otherwise would require bifurcation to be accounted for as a whole on a fair value
basis, at the holders’ election. SFAS 155 also clarifies and amends certain other provisions of SFAS 133 and
SFAS 140. SFAS 155 is effective beginning fiscal 2008. The adoption of SFAS 155 will not have a material effect on
the Company’s consolidated financial statements.
Liquidity and Capital Resources
Cash Flows
The following table summarizes the Company’s cash flow activities for fiscal 2007, 2006 and 2005, including
the Company’s computation of free cash flow and a reconciliation of this metric to the nearest GAAP measures of
net income and net cash flow from operations. Management’s computation of free cash flow consists of net cash
flow from operations plus cash flows generated from or used for purchases and sales of property, plant and
equipment, acquisitions and divestitures of operations, effects of exchange rates on cash and cash equivalents and
other financing activities. Management believes that the non-GAAP metric of free cash flow is a useful measure to
help management and investors better assess and understand the Company’s operating performance and sources and
uses of cash. Management also believes the analysis of free cash flow assists in identifying underlying trends in the
business. Computations of free cash flow may differ from company to company. Therefore, the analysis of free cash
flow should be used as a complement to, and in conjunction with, the Company’s consolidated statements of cash
flows presented in the accompanying financial statements appearing in Item 15 of this Report.
Management also analyzes cash flow from operations based upon its three primary components noted in the table
below: net income, non-cash and other reconciling items and cash flow generated from or used for working capital.
Similar to free cash flow, management believes that this breakout is an important measure to help management and
investors better understand the trends in the Company’s cash flows, including the impact of management’s focus on asset
utilization and efficiency through its management of the net balance of receivables, inventories and accounts payable.
June 30,
2007 July 1,
2006 July 2,
2005
Years Ended
(Thousands)
Net income ..................................... $393,067 $ 204,547 $ 168,239
Non-cash and other reconciling items(1) ................ 205,374 199,766 172,595
Cash flow generated from (used for) working capital
(excluding cash and cash equivalents)(2) .............. 126,198 (423,427) 121,002
Net cash flow provided by (used for) operations ....... 724,639 (19,114) 461,836
Cash flow generated from (used for):
Purchases of property, plant and equipment ............ (58,782) (51,803) (31,338)
Cash proceeds from sales of property, plant and
equipment ................................... 2,774 4,368 7,271
Acquisitions and divestitures of operations, net ......... (429,786) (294,335) (3,563)
Effect of exchange rates on cash and cash equivalents .... 7,925 3,353 (10,816)
Other, net financing activities ...................... 69,512 30,991 2,274
Net free cash flow ............................. 316,282 (326,540) 425,664
Repayment of debt, net ............................. (35,645) (34,614) (100,464)
Net increase (decrease) in cash and cash equivalents . . . $ 280,637 $(361,154) $ 325,200
33