Avnet 2008 Annual Report Download - page 38

Table of Contents
At June 28, 2008, the Company had a liability for income tax contingencies (or unrecognized tax benefits) of
$124.8 million. Management estimates approximately $22.5 million associated with the liability for unrecognized tax
benefits is reasonably expected to be paid in the next twelve months. Cash payments associated with the remaining
liability cannot reasonably be estimated as it is difficult to estimate the timing and amount of tax settlements. The
Company does not currently have any material commitments for capital expenditures.
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, from time to time, which are 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. During fiscal
year 2007, the Company terminated its remaining swaps in connection with the redemption of its 9
3
/ 4 % Notes (see
Financing Transactions
). There were no interest rate swaps outstanding as of the end of fiscal years 2008 and 2007.
The following table sets forth the scheduled maturities of the Company’s debt outstanding at June 28, 2008 (dollars
in millions):
The following table sets forth the carrying value and fair value of the Company’s debt at June 28, 2008 (dollars
in millions):
Many of the Company’
s subsidiaries, from time to time, purchase and sell products in currencies other than their
functional currencies. This subjects the Company to the risks associated with fluctuations in foreign currency
exchange rates. The Company reduces this risk by utilizing natural hedging (offsetting receivables and payables) as
well as by creating offsetting positions through the use of derivative financial instruments, primarily forward foreign
exchange contracts with maturities of less than sixty days. The Company adjusts all foreign denominated balances
and any outstanding foreign exchange contracts to fair market value through the consolidated statements of
operations. Therefore, the market risk related to foreign exchange contracts is offset by changes in valuation of the
underlying items being hedged. The asset or liability representing the fair value of foreign exchange contracts is
classified in the captions “other current assets” or “accrued expenses and other,” as applicable, in the accompanying
consolidated balance sheets. A hypothetical 10% change in currency exchange rates under the contracts outstanding
at June 28, 2008 would result in an increase or decrease of approximately $7.6 million to the fair value of the forward
foreign exchange contracts, which would generally be offset by an opposite effect on the related hedged positions.
The financial statements and supplementary data are listed under Item 15 of this Report.
35
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Fiscal Year
2009
2010
2011
2012
2013
Thereafter
Total
Liabilities:
Fixed rate debt(1)
$
2.2
$
8.2
$
2.1
$
1.3
$
1.2
$
1,151.7
$
1,166.7
Floating rate debt
$
41.6
$
—
$
—
$
—
$
19.7
$
—
$
61.3
(1)
Excludes discounts on long
-
term notes.
Carrying Value at
Fair Value at
Carrying Value at
Fair Value at
June 28, 2008
June 28, 2008
June 30, 2007
June 30, 2007
Liabilities:
Fixed rate debt(1)
$
1,166.7
$
1,145.5
$
1,160.9
$
1,217.0
Average interest rate
5.1
%
5.1
%
Floating rate debt
$
61.3
$
61.3
$
51.5
$
51.5
Average interest rate
2.5
%
1.5
%
(1)
Excludes discounts and premiums on long
-
term notes.
Item 8.
Financial Statements and Supplementary Data