Avnet 2007 Annual Report Download - page 38

Download and view the complete annual report

Please find page 38 of the 2007 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 92

  • 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
  • 88
  • 89
  • 90
  • 91
  • 92

The Credit Facility discussed in Financing Transactions contain certain covenants with various limitations on
debt incurrence, dividends, investments and capital expenditures and also includes financial covenants requiring the
Company to maintain minimum interest coverage and leverage ratios, as defined. Management does not believe that
the covenants in the Credit Facility limit the Company’s ability to pursue its intended business strategy or future
financing needs. The Company was in compliance with all covenants of the Credit Facility as of June 30, 2007.
See Liquidity for further discussion of the Company’s availability under these various facilities.
Liquidity
The Company had total borrowing capacity of $950.0 million at June 30, 2007 under the Credit Facility and the
Securitization Program, against which $21.2 million in letters of credit were issued under the Credit Facility, which
resulted in $928.8 million of net availability at the end of fiscal 2007. The Company also had $557.4 million of cash
and cash equivalents at June 30, 2007. During fiscal 2007, the Company utilized $410.4 million of debt plus cash on
hand to fund the Access acquisition (including the estimated amount due to the sellers and transaction costs, the
gross purchase price was $437.6 million. See Note 2 to the accompanying consolidated financial statements). The
Company has no other significant financial commitments outside of normal debt and lease maturities discussed in
Capital Structure and Contractual Obligations. Management believes that Avnet’s borrowing capacity, its current
cash availability and the Company’s expected ability to generate operating cash flows are sufficient to meet its
projected financing needs. Generally, the Company is more likely to utilize operating cash flows for working capital
requirements in a growing electronic component and computer products industry. However, additional cash
requirements for working capital are generally expected to be offset by the operating cash flows generated by the
Company’s enhanced profitability resulting from the Company’s cost reductions achieved in recent years and its
focus on profitable growth. During fiscal 2007, the Company repaid the remaining $143.7 million of the
8.00% Notes that matured in November 15, 2006 and redeemed all of the $361.4 million outstanding 93⁄4% Notes,
as previously discussed. During March 2007, the Company issued $300.0 million principal amount of 5.875% Notes
dues 2014 and used the proceeds to repay amounts outstanding under the Credit Facility and Securitization
Program. The 5.875% Notes are the next significant public debt maturity due to mature in 2014. In addition, the
holders of the 2% Convertible Senior Debentures due 2034 may require the Company to redeem the Debentures for
cash in March 2009 if the share price of the Company’s stock reaches $45.68 (see Financing Transactions for
further discussion).
The following table highlights the Company’s liquidity and related ratios for the past two years:
COMPARATIVE ANALYSIS — LIQUIDITY
June 30, 2007 July 1, 2006
Percentage
Change
Years Ended
(Dollars in millions)
Current Assets .................................. $5,488.8 $4,467.5 22.9%
Quick Assets ................................... 3,660.4 2,753.8 32.9
Current Liabilities ................................ 2,777.0 2,438.3 13.9
Working Capital ................................. 2,711.8 2,029.1 33.6
Total Debt ..................................... 1,209.4 1,234.8 (2.1)
Total Capital (total debt plus total shareholders’ equity) .... 4,610.0 4,066.0 13.4
Quick Ratio .................................... 1.3:1 1.1:1
Working Capital Ratio ............................ 2.0:1 1.8:1
Debt to Total Capital.............................. 26.2% 30.4%
The Company’s quick assets (consisting of cash and cash equivalents and receivables) increased 32.9% from
July 1, 2006 to June 30, 2007 primarily as a result of the Access acquisition and the increase in cash and cash
equivalents. Quick and current assets were both impacted by the increase in cash and cash equivalents since fiscal
2006. Current liabilities grew 13.9% due to the Access acquisition offset by the reduction in outstanding bank credit
facilities, primarily in Asia, and the repayment of the 8.00% Notes that matured in November 2006. As a result of
38