Avnet 2007 Annual Report Download - page 63

In June 2006, the Company repurchased $113,640,000 of the $475,000,000 of 93⁄4% Notes due February 15,
2008 (the 93⁄4% Notes”) and, in connection with this repurchase, the Company terminated one of the interest rate
swaps with a notional amount of $100,000,000 that hedged a portion of the 93⁄4% Notes. The termination of this
swap and repurchase of the related hedged debt (93⁄4% Notes) resulted in debt extinguishment costs of $10,919,000
pre-tax, $6,601,000 after tax and $0.04 per share on a diluted basis. As a result of the tender and total repurchases in
fiscal 2006, as previously described, and the termination of interest rate swaps noted below, the Company incurred
total debt extinguishment costs of $22,585,000 pre-tax, $13,653,000 after tax and $0.09 per share on a diluted basis,
relating primarily to premiums and other transaction costs.
The $300,000,000 2% Convertible Senior Debentures due March 15, 2034 (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 specified
period of time; (ii) the average trading price of the Debentures falls below a certain percentage of the conversion
value per Debenture for a specified period of time; (iii) the Company calls the Debentures for redemption; or
(iv) certain corporate transactions, as defined, occur. Upon conversion, the Company will deliver cash in lieu of
common stock as the Company made an irrevocable election in December 2004 to satisfy the principal portion of
the Debentures, if converted, in cash. 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 defined, at the Debentures’ full principal amount plus
accrued and unpaid interest, if any.
The hedged fixed rate debt and the interest rate swaps outstanding at the end of fiscal 2006 were adjusted to
current market values through interest expense in the accompanying consolidated statements of operations. The
Company accounts for hedges using the shortcut method as defined under Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by Statement of
Financial Accounting Standards No. 138, Accounting for Certain Derivative Instruments and Hedging Activities.
Due to the effectiveness of the hedges since inception, the market value adjustments for the hedged debt and the
interest rate swaps directly offset one another. The fair value of the interest rate swaps at July 1, 2006 was a liability
of $7,481,000 which is included in “other long-term liabilities” and a corresponding fair value adjustment of the
hedged debt decreased long-term debt by the same amount. As discussed previously in this Note 7, the Company
terminated all remaining interest rate swaps during the first quarter of fiscal 2007 in connection with the redemption
of the 93⁄4% Notes.
The Company had total borrowing capacity of $950,000,000 at June 30, 2007 under the Amended Credit
Facility and the accounts receivable securitization program (see Note 3), against which $21,152,000 in letters of
credit were issued under the Amended Credit Facility as of June 30, 2007, resulting in $928,848,000 of net
availability. Although these issued letters of credit are not actually drawn upon at June 30, 2007, they utilize
borrowing capacity under the Amended Credit Facility and are considered in the overall borrowing capacity noted
above.
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AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)