Avnet 2009 Annual Report Download - page 34

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Table of Contents
owned subsidiaries in Europe, Asia and Canada. Avnet generally guarantees its subsidiaries’ debt under these
facilities.
Covenants and Conditions
The Securitization Program discussed previously requires the Company to maintain certain minimum interest
coverage and leverage ratios as defined in the Credit Agreement (see discussion below) in order to continue utilizing
the Securitization Program. The Securitization Program also contains certain covenants relating to the quality of the
receivables sold. If these conditions are not met, the Company may not be able to borrow any additional funds and
the financial institutions may consider this an amortization event, as defined in the agreement, which would permit
the financial institutions to liquidate the accounts receivables sold to cover any outstanding borrowings.
Circumstances that could affect the Company’s ability to meet the required covenants and conditions of the
Securitization Program include the Company’s ongoing profitability and various other economic, market and
industry factors. Management does not believe that the covenants under the Securitization Program 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 Securitization Program at June 27, 2009.
The Credit Agreement discussed in Financing Transactions contains 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 Agreement 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 Agreement as of June 27,
2009.
See Liquidity below 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 27, 2009 under the Credit Agreement and
the Securitization Program. There were $86.6 million in borrowings outstanding and $1.5 million in letters of credit
issued under the Credit Agreement resulting in $861.9 million of net availability at the end of fiscal 2009. The
Company also had $943.9 million of cash and cash equivalents at June 27, 2009.
During fiscal 2009, the Company utilized approximately $314.9 million of cash and cash equivalents, net of
cash acquired, for acquisitions. Although the markets have continued to be challenging, the Company expects to
continue to make strategic investments through acquisition activity to the extent the investments strengthen Avnet’s
competitive position and meet management’s return on capital thresholds.
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 during a high growth period in the electronic component and computer products industry.
During fiscal 2009, the Company experienced weakening demand, as previously discussed in this MD&A, and in
combination with the Company’s continued focus on managing working capital, the Company generated $1.1 billion
of cash from operating activities during fiscal 2009. The substantial cash generation allowed the Company to use
cash on hand to purchase the $300.0 million 2% Debentures in March and April 2009. Although management
expects to continue to generate cash from operating activities, it does not expect to continue to generate the levels of
cash from operating activities that were generated during fiscal 2009 because revenues seem to be stabilizing and
working capital velocity is at appropriate levels expected for the business.
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