<PAGE> 1
Filed pursuant to Rule 424 (b) (2)
Registration No. 333-53691
PROSPECTUS SUPPLEMENT
- ----------------------------------
(TO PROSPECTUS DATED AUGUST 11, 1998)
$200,000,000
LOGO
AVNET, INC.
6.45% NOTES DUE 2003
Interest on the 6.45% Notes due 2003 (the "Notes") of Avnet, Inc. ("Avnet"
or the "Company") will accrue from the date of issuance thereof and will be
payable semi-annually on February 15 and August 15 of each year, commencing
February 15, 1999. The Notes will mature on August 15, 2003. The Notes are not
redeemable prior to maturity and do not provide for any sinking fund.
The Notes will constitute unsecured and unsubordinated indebtedness of the
Company and will rank pari passu with all other unsecured and unsubordinated
indebtedness of the Company.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note.......................... 99.919% .6% 99.319%
- -------------------------------------------------------------------------------------------------------------
Total............................. $199,838,000 $1,200,000 $198,638,000
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from August 25, 1998.
(2) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $440,000.
------------------------
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by them, subject to approval of certain
legal matters by counsel for the Underwriters and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the Notes
will be made through the book-entry facilities of The Depository Trust Company
on or about August 25, 1998.
------------------------
MERRILL LYNCH & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
CHASE SECURITIES INC.
FIRST CHICAGO CAPITAL MARKETS, INC.
------------------------
The date of this Prospectus Supplement is August 20, 1998.
<PAGE> 2
Certain persons participating in this offering may engage in transactions
that stabilize, maintain, or otherwise affect the price of the Notes. Such
transactions may include stabilizing and the purchase of the Notes to cover
syndicate short positions. For a description of these activities, see
"Underwriting."
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Notes
being offered hereby are estimated to be $198,198,000 after the deduction of the
underwriting discounts and the estimated expenses of this offering. The Company
intends to use the net proceeds from this offering to repay indebtedness which
it may re-borrow for general corporate purposes, which may include capital
expenditures, possible acquisitions, repurchases of the Company's common stock,
and working capital. Pending such use, the net proceeds may be temporarily
invested in short-term securities.
Depending on market conditions, the financial needs of the Company and
other factors, the Company may, from time to time, undertake additional
financings. The amount and timing of such financings, if any, cannot be
determined at this time.
CAPITALIZATION
The following table sets forth the consolidated capitalization and
short-term debt of the Company at June 26, 1998, and as adjusted to give effect
to the issuance of the Notes pursuant to this offering and the application of
the net proceeds therefrom. This table should be read in conjunction with the
Company's audited and unaudited financial statements incorporated herein by
reference:
<TABLE>
<CAPTION>
JUNE 26, 1998
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN MILLIONS)
<S> <C> <C>
Short-term debt............................................. $ 0.2 $ 0.2
======== ========
Long-term debt, less amounts due within one year:
Commercial paper(1)....................................... $ 395.0 $ 321.8
Syndicated credit facility domestic(1).................... 125.0 --
Syndicated credit facility foreign(1)(2).................. 177.8 177.8
6 7/8% Notes due March 15, 2004........................... 100.0 100.0
6.45% Notes offered hereby(3)............................. -- 200.0
Other..................................................... 12.9 12.9
-------- --------
Total long-term debt........................................ 810.7 812.5
-------- --------
Shareholders' equity:
Common stock, $1.00 par value............................. 44.3 44.3
Additional paid-in capital................................ 434.7 434.7
Retained earnings......................................... 1,343.0 1,343.0
Cumulative translation adjustments........................ (41.8) (41.8)
Treasury stock, at cost................................... (464.3) (464.3)
-------- --------
Total shareholders' equity.................................. 1,315.9 1,315.9
-------- --------
Total capitalization........................................ $2,126.6 $2,128.4
======== ========
</TABLE>
- ---------------
(1) These items are classified as long-term debt as they are backed by, or are
direct borrowings under, a bank syndicated credit facility. The bank
syndicated credit facility is a revolving credit agreement with a syndicate
of banks led by NationsBank of North Carolina, N.A., which provides a
five-year facility with a line of credit of up to $700,000,000. Amounts
repaid under the revolving credit agreement may be re-borrowed for general
corporate purposes. See "Use of Proceeds."
(2) A portion of the syndicated credit facility is being used for loans
denominated in foreign currencies which carry more favorable interest rates
than are available in the United States. Accordingly, the proceeds from the
issuance of the Notes will not be used to pay down such borrowings.
(3) Does not include original issue discount of $162,000 which represents the
difference between the face amount of the Notes and the price paid by the
public.
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<PAGE> 3
BUSINESS
Avnet is one of the world's largest industrial distributors of electronic
components and computer products, with sales in fiscal 1998 of $5.92 billion.
The Company is a vital link in the chain that connects suppliers of
semiconductors, interconnect products, passives and electromechanical devices to
original equipment manufacturers ("OEMs") that design and build the electronics
equipment for end-market use, and to other industrial customers. In addition,
the Company distributes a variety of computer products to both the end user and
the reseller channels. Through its electronic component distribution activities,
Avnet acts as an extension of a supplier's sales force by marketing products to
a larger base of customers than individual suppliers could do economically.
While many suppliers can only serve a few hundred of the larger OEMs, Avnet is
franchised to sell products of more than 100 of the world's leading component
manufacturers to a global customer base of approximately 100,000 OEMs. As part
of its distribution activities, Avnet adds various processes that customize
products to meet individual OEM customer specifications, and provides material
management and logistic services. Management believes that over the past five
years, the Company has grown faster than the electronic distribution industry
generally. From calendar 1992 through calendar 1997, sales of the Company's
electronic component and computer distribution businesses have increased from
approximately $1.69 billion to approximately $5.53 billion, a compound annual
growth rate ("CAGR") of 26.8%.
To capitalize on growing world markets for electronic components and
computer products, Avnet has pursued and continues to pursue strategic
acquisitions with a focus on international expansion. Beginning with its
acquisition in June 1991 of The Access Group Ltd., a United Kingdom-based
electronic components distributor, the Company has completed twenty-three
acquisitions. During its last three fiscal years, the Company completed nine
acquisitions: three in Europe; four in Asia/Pacific; one in North America; and
one in South Africa. Avnet has approximately 9,000 employees globally and
maintains locations throughout the United States, Canada, Mexico, Europe, Asia,
Australia, New Zealand and South Africa. In fiscal 1998, Avnet derived
approximately 20% of its sales from operations outside of North America.
One of Avnet's critical strengths is the breadth and quality of the
suppliers whose products it carries. Listed below are the major product
categories and the approximate sales in fiscal 1998, the percentage of the
Company's consolidated sales and the major suppliers in each category:
- - Semiconductors: Sales of semiconductors in fiscal 1998 were approximately
$3.22 billion, or 54% of consolidated sales. The Company's major suppliers of
semiconductors are Advanced Micro Devices, Analog Devices, Harris,
Hewlett-Packard, Hitachi, Integrated Device Technology, Intel, LSI Logic,
Micron Semiconductors, Motorola, National Semiconductor, Philips/Signetics,
Texas Instruments and Xilinx.
- - Computer Products: Sales of computer products in fiscal 1998 from all of the
Company's business units were approximately $1.59 billion, or 27% of
consolidated sales. The Company's major suppliers of computer products are
Cabletron, Compaq Computer Corporation, Computer Associates, Hewlett-Packard,
IBM, Intel, Oracle, Seagate Technology and Wyse Technology.
- - Connectors: Sales of connector products in fiscal 1998 were approximately
$0.51 billion, or 9% of consolidated sales. The Company's major suppliers of
connectors are AMP, Amphenol/Bendix, ELCO, ITT Cannon, Kings, Molex,
Pyle-National, T&B Ansley/Augat and 3M.
- - Passives, Electromechanical and other: Sales of passives, electromechanical
and other products in fiscal 1998 were approximately $0.60 billion, or 10% of
consolidated sales. The Company's major suppliers of these products are AVX,
Bourns, Cherry, Leach, Murata-Erie, Philips, Teledyne, Valor and Vishay.
S-3
<PAGE> 4
Effective as of the beginning of fiscal 1999, the Company changed its
organizational structure to better focus on its core businesses in order to
better meet the needs of both its customers and suppliers. The Company currently
consists of two major operating groups, the Electronics Marketing Group ("EMG")
and the Computer Marketing Group ("CMG") (through the end of fiscal 1998 these
two units comprised the former Electronic Marketing Group). EMG focuses on the
global distribution of and value-added services associated with electronic
components. CMG focuses on middle-to high-end, value-added computer products
distribution in North America, Europe and Australia. In addition, the Company
sold its Channel Master business in October 1997 which contributed minimal sales
in fiscal 1998.
ELECTRONICS MARKETING GROUP
EMG is the Company's largest operating group, with fiscal 1998 sales of
$4.47 billion, representing approximately 76% of Avnet's consolidated sales. EMG
is comprised of three regional operations: EMG Americas, which had sales of
$3.31 billion in fiscal 1998, or approximately 56% of Avnet's consolidated
sales; EMG EMEA (Europe, Middle East and Africa), which had sales of $1.02
billion in fiscal 1998, or approximately 17% of Avnet's consolidated sales; and
EMG Asia, which had sales of $0.14 billion in fiscal 1998, or approximately 3%
of Avnet's consolidated sales.
EMG Americas
EMG Americas was reorganized effective as of the beginning of fiscal 1999
in order to provide more value to its customers and suppliers through increased
product specialization and to provide focused services through a single account
manager. Immediately prior to the reorganization, EMG Americas consisted
primarily of four business units as described below -- Hamilton Hallmark, Time
Electronics, Penstock and Allied Electronics.
Hamilton Hallmark has primarily distributed semiconductors and offered an
array of value-added services to its customers, such as inventory replenishment
systems, kitting and semiconductor programming. It has been franchised by the
top five United States semiconductor manufacturers: Advanced Micro Devices,
Intel, Motorola, National Semiconductor and Texas Instruments. Hamilton
Hallmark's customers have been principally computer, telecommunications and
aerospace OEMs. In 1997, the Electronic Buyers' News survey ranked Hamilton
Hallmark as the most preferred distributor overall for the tenth successive
year. Hamilton Hallmark has also distributed computer products, connectors,
passives and electromechanical products for industrial, commercial and military
use.
Time Electronics has been the world's leading distributor of interconnect
products, including value-added connectors, electromechanical and passive
components and cable assembly services, and has also distributed some
complementary semiconductor lines. Its customers have been principally
industrial and military/ aerospace OEMs.
Penstock has been the leading technical communications specialist
distributor in the United States. It has distributed, designed, engineered and
added value to microwave/radio frequency wireless, fiber optics and hybrid
components, which it has sold principally to telecommunication OEMs.
Allied Electronics has been a broad line industrial distributor of active
and passive electronic components, test equipment and electronic equipment,
which it has sold by means of its catalog and telesales operations.
Avnet Integrated Material Services ("IMS") has been the materials
management and logistic services organization which has acted as a single
coordinating point responsible for providing all the materials and services
needed by customers who purchase products from multiple Avnet divisions. IMS has
acted as a coordinator for other Avnet business units, and therefore, has not
recorded any sales of its own.
As part of the Company's overall reorganization effective at the beginning
of fiscal 1999, the Company reorganized its EMG Americas business unit. In the
EMG Americas reorganization, the sales forces of Hamilton Hallmark, Time
Electronics and Penstock were combined, and the telesales operations of those
units were aligned with Allied Electronics. Through a single account manager,
customers now have complete access to the products and services of the Company's
core distribution business, including those of the former
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<PAGE> 5
Hamilton Hallmark, Time Electronics and Penstock divisions, as well as complete
access to the following Avnet global brands (services):
- - Avnet Design Services -- A suite of engineering and technical services for
customers, including turnkey logic designs, reference designs and product
designs, and demand creation services for suppliers.
- - Avnet Integrated Material Services -- Customer specific materials management,
including leading-edge, information technology-based services, and pin-point
logistics. IMS develops and implements innovative materials management
solutions for EMG Americas' major customers and their contract manufacturers.
- - Allied -- Catalog, CD ROM and Internet sales to research and development
departments of OEMs, maintenance and repair organizations and small OEM
customers.
- - Avnet Personal Computer Components -- Microprocessors, motherboards, memory,
networking products, and mass storage to personal computer OEMs and systems
integrators in North America.
These Avnet global brands offer focused services and unique financial
models in the other two EMG geographic regions as well as in EMG Americas.
In addition, the EMG Americas organization has created product business
groups ("PBGs") which specialize in the various product categories that the
Company sells as opposed to being organized along individual supplier lines.
There are currently five PBGs, which are responsible for purchasing, inventory
management, supplier relationship and product marketing. The PBGs are as
follows: Semiconductors; Interconnect, Passive and Electromechanical; Radio
Frequency and Microwave; Defense and Aerospace; and OEM Systems.
EMG EMEA
EMG EMEA principally distributes semiconductors throughout Europe and in
Africa. The Company has created Avnet Time operations in certain locations which
specialize in interconnect products, including value-added connectors,
electromechanical and passive components and cable assembly services. Similar to
EMG Americas, the EMEA operations have complete access to the Avnet global
brands, Avnet Design Services, Avnet IMS, Allied and Avnet Personal Computer
Components, discussed above under "EMG Americas." Although management is
planning to reorganize the Company's EMG EMEA operations along lines similar to
that of EMG Americas, a final detailed plan has not been firmly established nor
are the plans at a stage where the aggregate reorganization costs associated
therewith can be accurately quantified. However, some initial reorganization
steps have been taken, and the relevant costs were included in the Company's
fourth quarter fiscal 1998 special charges. It is currently anticipated that the
balance of the associated special charges of EMG EMEA will be reflected in the
first quarter fiscal 1999 financial statements.
EMG Asia
EMG Asia principally distributes semiconductors throughout the Asia and
Pacific region. It currently has a sales presence in ten countries in the region
including Australia, New Zealand, Singapore, Taiwan, Hong Kong, mainland China,
Thailand, the Philippines, Indonesia and Malaysia. All of the EMG Asia
operations have complete access to the products and services provided by the
Avnet global brands.
COMPUTER MARKETING GROUP
CMG is an international distributor of computer products to value-added
resellers and end users focusing primarily on middle- to high-end value-added
computer products and services. CMG's fiscal 1998 sales were $1.40 billion,
representing approximately 24% of Avnet's consolidated sales. As a result of the
acquisition of Hall-Mark Electronics Corporation in July 1993, two independent
business units, Avnet Computer and Hall-Mark Computer Products, now operate
together as Avnet's CMG.
S-5
<PAGE> 6
Avnet Computer sells industry leading high-end systems, mid-range servers,
workstations, PCs, software, storage, networking, peripherals and services to
end user customers. Avnet Computer is one of North America's leading technology
solutions integrators, deploying hardware, software, and services across the
enterprise. Avnet Computer leverages its array of financial, acquisition and
technical services to bring value to businesses intent on managing their total
cost of technology infrastructure -- from the data center, through the network,
to the desktop.
Hall-Mark Computer Products concentrates on sales of computer systems,
peripherals and components to the reseller channel. Management believes that
Hall-Mark Computer Products is the industry's leading technical distributor of
open systems in support of a limited line card of the foremost computer and
peripherals manufacturers, which include Compaq, Hewlett-Packard, IBM and Intel.
Hall-Mark Computer provides those manufacturers' products to Value-Added
Resellers, along with complementary value-added solutions and in-house
engineering support, complex systems integration and configuration services.
CMG has also created Avnet Direct, an Internet commerce company which sells
computer systems to businesses and individuals on the World Wide Web. These
computer systems are configured from thousands of name-brand computer and
peripheral equipment products and software carried in CMG's inventories. During
fiscal 1998, CMG expanded its operations into Europe by starting an operation in
Germany and by acquiring Bytech Systems in the United Kingdom.
DESCRIPTION OF THE NOTES
The following description of the particular terms of the notes offered
hereby (referred to herein as the "Notes" and in the accompanying Prospectus
dated August 11, 1998 (the "Prospectus"), as the "Offered Debt Securities")
supplements, and to the extent inconsistent therewith, replaces, the description
of the general terms and provisions of the Debt Securities set forth in the
Prospectus, to which description reference is hereby made. The following summary
of the Notes is qualified in its entirety by reference to the Indenture referred
to in the Prospectus.
GENERAL
The Notes will be limited to $200,000,000 aggregate principal amount and
will be issued under the Indenture. The Notes will be issued only in fully
registered form, in denominations of $1,000 and integral multiples of $1,000,
will bear interest from August 25, 1998, at the annual rate set forth on the
cover page of this Prospectus Supplement, and will mature on August 15, 2003.
Interest will be payable semi-annually on February 15 and August 15 of each
year, commencing February 15, 1999, to the Persons in whose names the Notes (or
any predecessor Notes) are registered in the security register at the close of
business on the applicable Regular Record Date, which is the February 1 or
August 1 next preceding such interest payment date. The Notes will not be
redeemable by the Company prior to their stated maturity date and do not provide
for any sinking fund.
The Notes will constitute unsecured and unsubordinated indebtedness of the
Company and will rank pari passu with all other unsecured and unsubordinated
indebtedness of the Company.
The Notes will be subject to defeasance and discharge and to defeasance of
certain obligations as described under the caption "Description of
Securities -- Defeasance and Discharge" in the Prospectus.
DEPOSITARY
Upon issuance, all Notes will be represented by one or more fully
registered global certificates (the "Global Notes"). Each Global Note will be
deposited with, or on behalf of, The Depository Trust Company (the "Depositary")
and registered in the name of the Depositary or its nominee. Unless and until a
Global Note is exchanged in whole or in part for Notes in definitive form, such
Global Note may not be transferred except as a whole by the Depositary to a
nominee of the Depositary, or by such a nominee to the Depositary or another
nominee of the Depositary, or by the Depositary or any such nominee to a
successor of such Depositary or a nominee of such successor.
S-6
<PAGE> 7
The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934. The Depositary holds securities that its participants ("Participants")
deposit with the Depositary and also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
accounts of the Participants, thereby eliminating the need for physical movement
of securities certificates. The Depositary's Participants include securities
brokers and dealers (including the Underwriters), banks, trust companies,
clearing corporations and certain other organizations. The Depositary is owned
by a number of its Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the Depositary's book-entry system is also available to
others, such as securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants"). The Rules applicable to the
Depositary and its Participants are on file with the Securities and Exchange
Commission.
Purchases of Notes under the Depositary's system must be made by or through
Participants, which will receive a credit for the Notes on the records of the
Depositary. The ownership interest of each actual purchaser of each Note (a
"Beneficial Owner") is in turn to be recorded on the Participants' or Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from the Depositary of a purchase, but Beneficial Owners are expected to receive
written confirmations providing details of a purchase, as well as periodic
statements of their holdings, from the Participant or Indirect Participant
through which the Beneficial Owner entered into the purchase. Ownership of
beneficial interests in Global Notes will be shown on, and the transfers of such
ownership interests will be effected only through, records maintained by the
Depositary (with respect to interests of Participants) and on the records of
Participants (with respect to interests of persons held through Participants).
The laws of some states may require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and such
laws may impair the ability to own, transfer or pledge beneficial interests in
Global Notes.
So long as the Depositary, or its nominee, is the registered owner of a
Global Note, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by such Global Note
for all purposes under the Indenture. Except as provided below, Beneficial
Owners of a Global Note will not be entitled to have the Notes represented by
such Global Note registered in their names, will not receive or be entitled to
receive physical delivery of the Notes in definitive form and will not be
considered the owners or holders thereof under the Indenture. Accordingly, each
person owning a beneficial interest in a Global Note must rely on the procedures
of the Depositary and, if such person is not a Participant, on the procedures of
the Participant through which such person owns its interest, to exercise any
rights of a holder under the Indenture. The Company understands that under
existing industry practices, in the event that the Company requests any action
of Noteholders, or an owner of a beneficial interest in a Global Note desires to
take any action which a Noteholder is entitled to take under the Indenture, the
Depositary would authorize the Participants holding the relevant beneficial
interests to take such action, and such Participants would authorize Beneficial
Owners owning through such Participants to take such action or would otherwise
act upon the instruction of Beneficial Owners. Conveyance of notices and other
communications by the Depositary to Participants, by Participants to Indirect
Participants, and by Participants and Indirect Participants to Beneficial Owners
will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Payment of principal of, and interest on, Notes registered in the name of
the Depositary or its nominee will be made to the Depositary or its nominee, as
the case may be, as the holder of the Global Note or Notes representing such
Notes. None of the Company, the Trustee or any other agent of the Company or of
the Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests, or for supervising or reviewing any records relating to such
beneficial ownership interests. The Company expects that the Depositary, upon
receipt of any payment of principal or interest in respect of a Global Note,
will credit the accounts of beneficial interest in such Global Note as
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<PAGE> 8
shown on the records of the Depositary. The Company also expects that payments
by Participants to Beneficial Owners will be governed by standing customer
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participants.
If (x) the Depositary is at any time unwilling or unable to continue as
Depositary and a successor Depositary is not appointed by the Company within 60
days, or (y) the Company executes and delivers to the Trustee an order to the
effect that the Global Notes shall be exchangeable, or (z) an Event of Default
has occurred and is continuing with respect to the Notes, the Global Note or
Notes will be exchangeable for Notes in definitive form of like tenor and of an
equal aggregate principal amount, in denominations of $1,000 and integral
multiples thereof. Such definitive Notes shall be registered in such name or
names as the Depositary shall instruct the Trustee. It is expected that such
instructions may be based upon directions received by the Depositary from
Participants with respect to ownership of beneficial interest in Global Notes.
S-8
<PAGE> 9
UNDERWRITING
Subject to the terms and conditions set forth in a pricing agreement (the
"Pricing Agreement"), the Company has agreed to sell to the Underwriters named
below (the "Underwriters"), and the Underwriters have severally agreed to
purchase, the principal amount of the Notes set forth opposite their respective
names below.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
UNDERWRITERS ---------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated.......... $100,000,000
NationsBanc Montgomery Securities LLC....................... 50,000,000
Chase Securities Inc........................................ 25,000,000
First Chicago Capital Markets, Inc.......................... 25,000,000
------------
Total.......................................... $200,000,000
============
</TABLE>
In the Pricing Agreement, the several Underwriters named therein have
agreed, subject to the terms and conditions set forth therein, to purchase all
of the Notes being sold pursuant to the Pricing Agreement if any such Notes are
purchased. The Pricing Agreement provides that, in the event of a default by an
Underwriter named therein, the purchase commitments of the non-defaulting
Underwriters named therein may in certain circumstances be increased.
The Underwriters have advised the Company that they propose initially to
offer the Notes offered hereby to the public at the public offering price set
forth on the cover page of this Prospectus Supplement and to certain dealers at
such price less a concession not in excess of .35% of the principal amount
thereof. The Underwriters may allow, and such dealers may reallow, a discount
not in excess of .25% of the principal amount thereof on sales to certain other
dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
The Notes constitute a new issue of securities with no established trading
market. The Company does not intend to apply for the listing of the Notes on a
national securities exchange. The Company has been advised by the Underwriters
that the Underwriters intend to make a market in the Notes, but the Underwriters
are not obligated to do so and may discontinue market-making at any time without
notice. No assurance can be given as to whether or not a trading market for the
Notes will develop or as to the liquidity of any trading market for the Notes
which may develop.
Until the distribution of the Notes is completed, rules of the Securities
and Exchange Commission may limit the ability of the Underwriters and certain
selling group members, if any, to bid for and purchase the Notes. As an
exception to these rules, the Underwriters are permitted to engage in certain
transactions that stabilize the price of the Notes. Such transactions consist of
bids or purchases for the purpose of pegging, fixing or maintaining the price of
the Notes.
If the Underwriters create a short position in the Notes in connection with
this offering (i.e., they sell more Notes than are set forth on the cover page
of this Prospectus Supplement), the Underwriters may reduce that short position
by purchasing Notes in the open market. In general, purchases of a security for
the purpose of stabilization or to reduce a short position could cause the price
of the security to be higher than it might be in the absence of such purchases.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Notes. In addition, neither the
Company nor any of the Underwriters makes any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
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<PAGE> 10
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments the Underwriters may be required to make in respect
thereof.
Because more than ten percent of the net proceeds of the offering will be
received by affiliates of NASD members participating in the offering, in their
capacity as lenders under the bank syndicated credit facility, the offering is
being conducted in accordance with NASD Conduct Rule 2710(c)(8).
Certain of the Underwriters or their affiliates engage from time to time in
various general financing and banking transactions with the Company. Merrill
Lynch, Pierce, Fenner & Smith Incorporated acted as the Company's financial
advisor in connection with the Company's acquisition of Hall-Mark Electronics
Corporation in 1993 and an underwriter in the public offering in 1994 of the
Company's 6 7/8% Notes due March 15, 2004, and may in the future provide
investment banking services to the Company, for which it would receive customary
fees and commissions.
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<PAGE> 11
PROSPECTUS
LOGO
AVNET, INC.
DEBT SECURITIES
Avnet, Inc., a New York corporation (the "Company"), may offer, from time
to time, debt securities consisting of debentures, notes and/or other unsecured
evidences of indebtedness (the "Debt Securities") at an aggregate principal
amount not to exceed $500,000,000 or, if the principal of the Debt Securities is
payable in a foreign or composite currency, the equivalent thereof at the time
of the initial offerings. The Debt Securities may be offered as separate series
and may be offered in amounts, at prices and on terms to be determined at the
time of sale. When a particular series of Debt Securities (the "Offered Debt
Securities") are offered, a supplement to this Prospectus (a "Prospectus
Supplement") will be delivered with this Prospectus setting forth the terms of
such Offered Debt Securities, including, if applicable, the specific
designation, aggregate principal amount, denominations, currency, purchase
price, maturity, rate (which may be fixed or variable) and time of payment of
interest, redemption terms, and any listing on a securities exchange of the
Offered Debt Securities.
The Debt Securities may be issued in registered or bearer form or both. In
addition, all or a portion of the Debt Securities of a series may be issued in
temporary or permanent global form. Debt Securities in bearer form will be
offered only to non-United States persons and to offices located outside the
United States of certain United States financial institutions.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The Offered Debt Securities may be sold directly by the Company, or
indirectly through agents designated from time to time or through underwriters
or dealers, or through a combination of such methods. See "Plan of
Distribution." If any agents of the Company or any underwriters or dealers are
involved in the sale of the Offered Debt Securities, the names of such agents,
underwriters or dealers and any applicable commissions or discounts will also be
set forth in the Prospectus Supplement. The net proceeds to the Company from
such sale will be set forth in the Prospectus Supplement.
------------------------
The date of this Prospectus is August 11, 1998.
<PAGE> 12
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the following regional
offices of the Commission: New York Regional Office, 7 World Trade Center, 13th
Floor, New York, New York 10048; and Chicago Regional Office, Suite 1500,
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661-2511. Copies
of such materials can be obtained at prescribed rates from the Public Reference
Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Information on the operation of the Public Reference
Section may be obtained by calling the Commission at 1-800-SEC-0330. Such
material can also be obtained on the Commission's Web site at
http://www.sec.gov, and can be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005, and the Pacific Stock
Exchange, Inc., 301 Pine Street, San Francisco, California 94104 or 618 South
Spring Street, Los Angeles, California 90014, on which exchanges the common
stock of the Company is listed.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(which, together with all amendments and exhibits thereto, is referred to herein
as the "Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus
omits certain of the information contained in the Registration Statement, and
reference is hereby made to the Registration Statement for further information
with respect to the Company and the Debt Securities offered hereby. Any
statement contained herein concerning the provisions of any contract or other
document is not necessarily complete, and is qualified in its entirety by
reference to the copy of such contract or other document filed as an exhibit to
the Registration Statement or otherwise filed with the Commission. The
Registration Statement may be inspected without charge at the office of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and copies thereof may be obtained from the Commission at prescribed
rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
1-4224) are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
June 27, 1997;
2. The Company's definitive proxy statement dated October 10, 1997,
for the annual meeting of the shareholders of the Company held on November
19, 1997;
3. The Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended September 26, 1997, December 26, 1997, and March 27, 1998;
and
4. The Company's Current Reports on Form 8-K bearing cover dates of
September 23, 1997, September 25, 1997, February 6, 1998, and July 30,
1998.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering
of the Debt Securities shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents.
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<PAGE> 13
Any statement contained herein or in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in any subsequently filed
document deemed to be incorporated herein or contained in the accompanying
Prospectus Supplement modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of the Registration Statement or this
Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all of the documents incorporated herein by reference (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into the documents that this Prospectus incorporates).
Requests for such copies should be directed to Raymond Sadowski, Senior Vice
President, Avnet, Inc., 2211 South 47th Street, Phoenix, Arizona 85034
(telephone (602) 643-2000).
THE COMPANY
The Company is one of the world's largest distributors of electronic and
electromechanical components and computer products sold principally to
industrial customers, with operations in the United States, Canada, Mexico,
Europe, Asia, Australia, New Zealand and South Africa. The Company's principal
suppliers are Intel, Motorola, National Semiconductor, Texas Instruments,
Advanced Micro Devices, Harris Corporation, AMP, Inc., ITT Cannon,
Amphenol/Bendix Corporation, Compaq Corporation, Hewlett Packard, IBM, Connor
Peripherals and Seagate Technology. Its primary customers are original equipment
manufacturers. Electronic components are shipped either as received from the
Company's suppliers or with assembly or other value added. The Company also
provides integrated materials management services with respect to the electronic
components it sells.
The principal executive offices of the Company are located at 2211 South
47th Street, Phoenix, Arizona 85034, telephone (602) 643-2000.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of the Company's earnings to fixed
charges, on a consolidated basis, for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------------------
JUNE 26, JUNE 27, JUNE 28, JUNE 30, JULY 1,
1998(1) 1997 1996 1995 1994(2)
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C>
6.5 10.3 10.7 8.7 7.9
</TABLE>
- ---------------
(1) Income before income taxes for the year ended June 26, 1998, includes (a)
the gain on the sale of Channel Master amounting to $33.8 million pre-tax,
(b) costs relating to the divestiture of Avnet Industrial, the closure of
the Company's corporate headquarters in Great Neck, New York, and the loss
on the sale of Company-owned real estate, amounting to $13.3 million pre-tax
in the aggregate, and (c) incremental special charges associated principally
with the reorganization of the Company's Electronic Marketing Group
amounting to $35.4 million pre-tax. Had such one-time items (amounting to
$14.9 million pre-tax, net) not been included, the ratio of earnings to
fixed charges for the year ended June 26, 1998, would have been 6.8 on a pro
forma basis.
(2) Income before income taxes for the year ended July 1, 1994, includes
restructuring and integration charges of $22.7 million pre-tax which are
principally attributable to the acquisition of Hall-Mark Electronics
Corporation. Had such one-time charges not been included, the ratio of
earnings to fixed charges for the year ended July 1, 1994, would have been
8.9 on a pro forma basis.
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<PAGE> 14
SELECTED FINANCIAL DATA
The selected financial data set forth below have been derived from the
consolidated financial statements of the Company. Reference is hereby made to
such financial statements and accompanying notes that are included in the
documents incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------------------
JULY 1, JUNE 30, JUNE 28, JUNE 27, JUNE 26,
1994(1) 1995 1996 1997 1998(2)(3)(4)
-------- -------- -------- -------- -------------
(IN MILLIONS EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales.................................. $3,547.7 $4,300.0 $5,207.8 $5,390.6 $5,916.3
Cost of sales.......................... 2,851.6 3,483.6 4,238.7 4,428.8 4,935.9
-------- -------- -------- -------- --------
Gross profit........................... 696.1 816.4 969.1 961.8 980.4
Operating expenses..................... 531.3 554.9 620.1 634.1 709.2
-------- -------- -------- -------- --------
Operating income....................... 164.8 261.5 349.0 327.7 271.2
Interest expense....................... (14.8) (23.2) (25.9) (26.1) (40.0)
Other income, net...................... 4.8 5.1 2.0 11.8 2.3
Gain on sale of Channel Master......... -- -- -- -- 33.8
-------- -------- -------- -------- --------
Income before income taxes and
cumulative effect of accounting
change............................... 154.8 243.4 325.1 313.4 267.3
Income taxes........................... 66.7 103.1 136.8 130.6 115.9
-------- -------- -------- -------- --------
Income before cumulative effect of
accounting change.................... 88.1 140.3 188.3 182.8 151.4
Cumulative effect of change in method
of accounting for income taxes....... (2.8) -- -- -- --
-------- -------- -------- -------- --------
Net income............................. $ 85.3 $ 140.3 $ 188.3 $ 182.8 $ 151.4
======== ======== ======== ======== ========
Earnings per share(5):
Basic................................ $ 2.10(6) $ 3.44 $ 4.34 $ 4.29 $ 3.85
======== ======== ======== ======== ========
Diluted.............................. $ 2.09(6) $ 3.32 $ 4.31 $ 4.25 $ 3.80
======== ======== ======== ======== ========
Shares used to compute earnings per
share:
Basic................................ 40.6 40.7 43.3 42.6 39.4
======== ======== ======== ======== ========
Diluted.............................. 40.8 43.4(7) 43.7 43.0 39.8
======== ======== ======== ======== ========
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital...................... $ 888.0 $1,057.1 $1,293.9 $1,319.0 $1,461.3
Total assets......................... 1,787.7 2,125.6 2,521.7 2,594.1 2,733.7
Long-term debt....................... 303.1 419.0 497.2 514.4 810.7
Shareholders' equity................. 1,108.5 1,239.4 1,505.2 1,502.2 1,315.9
</TABLE>
- ---------------
(1) Includes in operating expenses restructuring and integration charges of
$22.7 million pre-tax and $13.5 million after-tax, which are principally
attributable to the acquisition of Hall-Mark Electronics Corporation.
(2) Includes the second quarter gain on the sale of Channel Master amounting to
$33.8 million pre-tax, offset somewhat in operating expenses by costs
relating to the divestiture of Avnet Industrial, the closure of the
Company's corporate headquarters in Great Neck, New York, and the
anticipated loss on the sale of Company-owned real estate, amounting to
$13.3 million in the aggregate. At the time the special charges were
recorded, they represented primarily a non-cash writedown to reflect the
expected value to be received upon the disposition of Avnet Industrial and
the Company-owned real estate (the cash component of the charge is
approximately $2.5 million). The Company has subsequently disposed of
(footnotes continued on following page)
4
<PAGE> 15
Avnet Industrial for an amount approximating the written down value, and is
still in the process of disposing of the Company-owned real estate, the
written down value of which is still believed to approximate its market
value, based upon real estate appraisals. The disposition of Avnet
Industrial and of the Company-owned real estate will not have a material
impact on the Company's future results of operations, liquidity and sources
and uses of capital resources. The net effect of these items is to increase
income before income taxes, net income, and diluted earnings per share by
approximately $20.5 million, $8.7 million, and $0.21 per share for the
second quarter, respectively.
(3) Includes the fourth quarter impact of incremental special charges associated
principally with the reorganization of the Company's Electronic Marketing
Group, amounting to $35.4 million pre-tax, $21.2 million after-tax and $0.57
per share on a diluted basis for the fourth quarter. Approximately $25.7
million of the pre-tax charge is included in operating expenses, and $9.7
million is included in cost of sales. These charges include severance, real
property lease termination costs, inventory reserves required related to
supplier terminations, the writedown of goodwill and other items. The
writedown of goodwill relates to a small underperforming operating unit, the
ultimate disposition of which will not have a material impact on the
Company's future results of operations. Of the special charges of $35.4
million pre-tax, approximately $17.1 million will not require an outflow of
cash and $18.3 million will require the use of cash ($9.5 million of the
$18.3 million has been paid as of the end of fiscal 1998). The balance of
cash is expected to be paid by the end of fiscal 1999, except for amounts
associated with long-term real property lease terminations and contractual
commitments, the amounts of which are not material. Management expects that
the Company's future results of operations will benefit from the expected
cost savings resulting from the reorganization, and that the impact on
liquidity and sources and uses of capital resources will not be material.
(4) Diluted earnings per share for fiscal 1998 in total exceeded by $0.04 the
sum of the applicable amounts for each of the quarters of fiscal 1998 due to
the effect of the Company's stock repurchase program and the special items
recorded during the fiscal year.
(5) In December 1997, the Company adopted the provisions of SFAS No. 128,
"Earnings per Share," which requires the presentation of both Basic and
Diluted earnings per common share. Consistent with the requirements of SFAS
No. 128, net earnings per common share and weighted average common shares
outstanding have been restated to conform with the provisions of SFAS No.
128 for all periods presented.
(6) Basic and diluted earnings per share before cumulative effect of accounting
change were $2.17 and $2.16, respectively. The impact on basic and diluted
earnings per share of the cumulative effect of a change in method of
accounting for income taxes was $(0.07) in both cases.
(7) In computing diluted earnings per share for 1995, the 6% Convertible
Subordinated Debentures (which were converted into common stock in the first
quarter of fiscal 1996) were considered common equivalent shares.
5
<PAGE> 16
USE OF PROCEEDS
Except as may be set forth in a Prospectus Supplement, the Company intends
to use the net proceeds from the sale of the Debt Securities for general
corporate purposes, which may include repayment of debt, capital expenditures,
possible acquisitions, repurchases of the Company's common stock, and working
capital. Pending such use, the net proceeds may be temporarily invested in
short-term securities.
Depending on market conditions, the financial needs of the Company and
other factors, the Company may, from time to time, undertake additional
financings. The amount and timing of such financings, if any, cannot be
determined at this time.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement (the "Offered Debt Securities") and the
extent, if any, to which such general provisions may apply to the Offered Debt
Securities will be described in the Prospectus Supplement relating to such
Offered Debt Securities.
The Debt Securities are to be issued under an Indenture dated as of
February 1, 1994 (the "Indenture"), between the Company and The First National
Bank of Chicago, as Trustee (the "Trustee"), which is an exhibit incorporated by
reference in the Registration Statement. The following summary of certain
general provisions of the Indenture and the Debt Securities does not purport to
be complete and is subject to, and is qualified in its entirety by reference to,
the provisions of the Indenture, including the definitions therein of certain
terms. Whenever particular provisions in the Indenture are referred to herein,
such provisions are incorporated by reference herein. Unless otherwise defined
herein, all capitalized terms in this section have the same meanings given to
such terms in the Indenture.
GENERAL
The aggregate principal amount of Debt Securities which can be issued under
the Indenture is unlimited. The Debt Securities to which this Prospectus relates
will be issued from time to time in one or more series in amounts the proceeds
of which will aggregate up to $500,000,000 and will be offered to the public on
terms determined by market conditions at the time of sale. The Debt Securities
will be unsecured and will rank pari passu with all other unsecured and
unsubordinated indebtedness of the Company. The Indenture does not limit the
amount of other indebtedness or securities, other than certain secured
indebtedness as described below, that may be issued by the Company.
Debt Securities of a series may be issued in registered form ("Registered
Securities") or bearer form ("Bearer Securities") or both as specified in the
terms of the series. Debt Securities in bearer form will be offered only to
non-United States persons and to offices located outside the United States of
certain United States financial institutions. Debt Securities of a series may be
issued in whole or in part in the form of one or more global securities ("Global
Securities") registered in the name of a depository or its nominee and, in such
case, beneficial interests in the Global Securities will be shown on, and
transfers thereof will be effected only through, records maintained by the
designated depository and its participants.
Reference is made to the Prospectus Supplement relating to the particular
series of Offered Debt Securities offered thereby for the following terms of
such Offered Debt Securities:
- The designation, aggregate principal amount and authorized denominations;
- The issue price expressed as a percentage of the aggregate principal
amount;
- The date or dates of maturity;
- The interest rate per annum (fixed or floating) or the method by which
such interest rate will be determined;
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<PAGE> 17
- The dates interest will commence accruing and, if applicable, be paid
and, for Registered Securities, the record dates for interest payments;
- Where principal and interest, if any, will be paid;
- Any optional or mandatory sinking fund provisions;
- The dates and redemption prices relating to any optional or mandatory
redemption provisions and other terms and provisions of any optional or
mandatory redemptions;
- The denominations of Registered Securities if other than denominations of
$1,000 and any multiple thereof, and the denominations of Bearer
Securities if other than denominations of $5,000;
- The portion of the principal amount payable on declaration of
acceleration of maturity or provable in bankruptcy, if other than the
principal amount;
- Any Events of Default, if not set forth in the Indenture;
- The currency or currencies, including composite currencies, of payment of
the principal (and premium, if any) and interest (if any), if other than
the currency of the United States of America;
- If the principal (and premium, if any) or interest, if any, are to be
payable, at the election of the Company or any Holder thereof, in coin or
currency other than that in which the Offered Debt Securities of the
series are stated to be payable, the period or periods within which, and
the terms and conditions on which, such election may be made;
- If such securities are to be denominated in a currency or currencies,
including composite currencies, other than the currency of the United
States of America, the equivalent price in the currency of the United
States of America for purposes of determining the voting rights of
Holders of such Offered Debt Securities as Outstanding Securities under
the Indenture;
- If the amount of payments of principal (and premium, if any), or portions
thereof, or interest may be determined with reference to an index,
formula or other method, the manner of determining such amounts;
- Whether the Offered Debt Securities will be issuable in registered or
bearer form or both, any restrictions applicable to the offer, sale or
delivery of the Offered Debt Securities in bearer form, and whether the
Offered Debt Securities in bearer form will be exchangeable (and the
terms on which such exchange may be made) for Offered Debt Securities in
registered form;
- Whether Offered Debt Securities will be issued in whole or in part in the
form of one or more Global Securities and, if so, the method of
transferring beneficial interest in such Global Security or Global
Securities;
- The application, if any, of certain provisions of the Indenture relating
to defeasance and discharge, and related conditions;
- Any additional restrictive covenants or other material terms relating
thereto which may not be inconsistent with the Indenture; and
- Any applicable federal income tax consequences.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
principal (and premium, if any) will be payable, and the Registered Securities
will be transferable, at the corporate trust office of the Trustee in New York,
New York. Unless other arrangements are made, interest, if any, will be paid by
checks mailed to the Holders of Registered Securities at their registered
addresses. To the extent set forth in the Prospectus Supplement relating
thereto, Bearer Securities and the coupons appertaining thereto will be payable,
against surrender thereof, subject to any applicable laws and regulations, at
the offices of such paying agencies outside the United States as the Company may
appoint from time to time. No service charge will be made for any transfer or
exchange of the Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
7
<PAGE> 18
One or more series of the Debt Securities may be issued as discounted Debt
Securities (bearing no interest or interest at a rate which at the time of
issuance is below market rates) to be sold at a substantial discount below their
stated principal amount. Federal income tax consequences and other special
considerations applicable to any such discounted Debt Securities will be
described in the Prospectus Supplement relating thereto.
The Company will comply with Section 14(e) of the Exchange Act, and any
tender offer rules of the Commission under the Exchange Act which may then be
applicable, in connection with any obligation of the Company to purchase Offered
Debt Securities at the option of the holders thereof. Any such obligation
applicable to a series of Debt Securities will be described in the Prospectus
Supplement or Prospectus Supplements relating thereto.
The Company may at any time purchase Debt Securities at any price in the
open market or otherwise. Debt Securities so purchased by the Company may, at
its sole option, be held, resold or surrendered to the Trustee for cancellation.
CERTAIN DEFINITIONS
"Attributable Debt" means, as to any particular lease, the greater of (i)
the fair market value of the property subject to the lease (as determined by the
Company's Board of Directors), or (ii) the total net amount of rent required to
be paid during the remaining term of the lease, discounted by the weighted
average effective interest cost per annum of the outstanding Debt Securities of
all series, compounded semi-annually.
"Consolidated Net Assets" means total assets after deducting therefrom all
current liabilities as set forth in the most recent balance sheet of the Company
and its consolidated Subsidiaries and computed in accordance with generally
accepted accounting principles.
"Funded Debt" means (i) all indebtedness for money borrowed having a
maturity of more than twelve months from the date as of which the determination
is made or having a maturity of twelve months or less but by its terms being
renewable or extendible beyond twelve months from such date at the option of the
borrower, and (ii) rental obligations payable more than twelve months from such
date under leases which are capitalized in accordance with generally accepted
accounting principles (such rental obligations to be included as Funded Debt at
the amount so capitalized and to be included as an asset for the purposes of the
definition of Consolidated Net Assets).
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Principal Property" means any manufacturing or processing plant or
warehouse owned at the date hereof or hereafter acquired by the Company or any
Restricted Subsidiary of the Company which is located within the United States
and the gross book value (including related land and improvements thereon and
all machinery and equipment included therein without deduction of any
depreciation reserves) of which on the date as of which the determination is
being made exceeds 2% of Consolidated Net Assets, other than (i) any such
manufacturing or processing plant or warehouse or any portion thereof (together
with the land on which it is erected and fixtures comprising a part thereof)
which is financed by industrial development bonds which are tax exempt pursuant
to Section 103 of the Internal Revenue Code (or which receive similar tax
treatment under any subsequent amendments thereto or any successor laws thereof
or under any other similar statute of the United States), (ii) any property
which in the opinion of the Company's Board of Directors is not of material
importance to the total business conducted by the Company as an entirety, or
(iii) any portion of a particular property which is similarly found not to be of
material importance to the use or operation of such property.
"Restricted Subsidiary" means a Subsidiary of the Company (i) substantially
all the property of which is located, or substantially all the business of which
is carried on, within the United States, and (ii) which owns a Principal
Property.
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<PAGE> 19
"Subsidiary" means any corporation more than 50% of the outstanding Voting
Stock of which at the time of determination is owned, directly or indirectly, by
the Company and/or by one or more other Subsidiaries.
"Voting Stock" means capital stock of a corporation of the class or classes
having general voting power under ordinary circumstances to elect at least a
majority of the Board of Directors, managers or trustees of such corporation
(irrespective of whether or not at the time stock of any other class or classes
shall have or might have voting power upon the occurrence of any contingency).
HIGHLY LEVERAGED TRANSACTIONS
Unless otherwise described in a Prospectus Supplement relating to any
Offered Debt Securities, there are no covenants or provisions contained in the
Indenture which may afford the holders of Offered Debt Securities direct
protection in the event of a highly leveraged transaction involving the Company.
RESTRICTIONS ON SECURED DEBT
The Company covenants in the Indenture, for the benefit of each series of
Debt Securities other than any series which specifically provides otherwise,
that if the Company or any Restricted Subsidiary shall after the date of the
Indenture incur or guarantee any loans, notes, bonds, debentures or other
similar evidences of indebtedness for money borrowed ("Debt") secured by a
mortgage, pledge or lien ("Mortgage") on any Principal Property of the Company
or any Restricted Subsidiary, or on any share of stock or Debt of any Restricted
Subsidiary, the Company will secure or cause such Restricted Subsidiary to
secure the Debt Securities equally and ratably with (or, at the Company's
option, prior to) such secured Debt, unless the aggregate amount of all such
secured Debt (plus all Attributable Debt which is not excluded as described
below under the caption "-- Restrictions on Sale and Leaseback Financings")
would not exceed 10% of Consolidated Net Assets.
This restriction will not apply to, and there will be excluded from secured
Debt in any computation of the above restriction, Debt secured by (a) Mortgages
on property of, or on any shares of stock of or Debt of, any corporation
existing at the time such corporation becomes a Restricted Subsidiary, (b)
Mortgages in favor of the Company or a Restricted Subsidiary, (c) Mortgages in
favor of governmental bodies to secure progress, advance or other payments, (d)
Mortgages on property, shares of stock or Debt existing at the time of
acquisition thereof (including acquisition through merger or consolidation) and
purchase money and construction or improvement Mortgages which are entered into
within 180 days after the acquisition of such property, shares or Debt or, in
the case of real property, within 180 days after the later of (1) the completion
of construction on, substantial repair to, alteration or development of, or
substantial improvement to, such property, or (2) the commencement of commercial
operations on such property, (e) mechanics' and similar liens arising in the
ordinary course of business in respect of obligations not due or being contested
in good faith, (f) Mortgages arising from deposits with, or the giving of any
form of security to, any governmental agency required as a condition to the
transaction of business or to the exercise of any privilege, franchise or
license, (g) Mortgages for taxes, assessments or government charges or levies
which are not then due or, if delinquent, are being contested in good faith, (h)
Mortgages (including judgment liens) arising from legal proceedings being
contested in good faith, (i) Mortgages existing at the date of the Indenture and
(j) any extension, renewal or refunding of any Mortgage referred to in the
foregoing clauses (a) through (i) inclusive.
RESTRICTIONS ON SALE AND LEASEBACK FINANCINGS
The Company covenants in the Indenture, for the benefit of each series of
Debt Securities other than any series which specifically provides otherwise,
that the Company will not itself, and will not permit any Restricted Subsidiary
to, enter into any sale and leaseback transaction involving any Principal
Property, unless after giving effect thereto the aggregate amount of all
Attributable Debt with respect to all such transactions, plus all secured Debt
which is not excluded as described above under the caption "-- Restrictions on
Secured Debt," would not exceed 10% of Consolidated Net Assets.
This restriction will not apply to, and there will be excluded from
Attributable Debt in any computation of the above restriction, any sale and
leaseback transaction if (a) the lease is for a period, including renewal
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<PAGE> 20
rights, of not in excess of three years, (b) the sale or transfer of the
Principal Property is made within 180 days after its acquisition or within 180
days after the later of (1) the completion of construction on, substantial
repair to, alteration or development of, or substantial improvement to, such
property, or (2) the commencement of commercial operations thereon, (c) the
transaction is between the Company and a Restricted Subsidiary, or between
Restricted Subsidiaries, (d) the Company or a Restricted Subsidiary would be
entitled to incur a Mortgage on such Principal Property securing Debt in an
amount equal to the Attributable Debt with respect to such transaction without
equally or ratably securing the Securities, or (e) the Company or a Restricted
Subsidiary, within 180 days after the sale or transfer is completed, applies to
the retirement of Funded Debt of the Company or a Restricted Subsidiary ranking
on a parity with or senior to the Debt Securities, or to the purchase of other
property which will constitute a Principal Property having a fair market value
at least equal to the fair market value of the Principal Property leased, an
amount equal to the greater of the net proceeds of the sale of the Principal
Property or the fair market value (as determined by the Company's Board of
Directors) of the Principal Property leased at the time of entering into such
arrangement (as determined by the Board of Directors).
RESTRICTIONS ON MERGERS AND CONSOLIDATIONS
The Company covenants in the Indenture that it will not merge or sell,
convey, transfer or lease all or substantially all of its assets unless (i) the
successor Person is the Company or another Person organized under the laws of
the United States (including any state thereof and the District of Columbia)
which assumes the Company's obligations in the Debt Securities and under the
Indenture, and (ii) after giving effect to such transaction, the Company or the
successor Person would not be in default under the Indenture.
EVENTS OF DEFAULT
The Indenture defines "Events of Default" with respect to the Debt
Securities of any series as being one of the following events: (i) default in
the payment of any installment of interest on that series for 30 days after
becoming due; (ii) default in the payment of principal on that series when due;
(iii) default in the deposit of any sinking fund payment on that series when
due; (iv) default in the performance of any other covenant in the Debt
Securities of that series or the Indenture (other than a covenant included in
the Indenture solely for the benefit of any series of Debt Securities other than
that series) for 90 days after notice; (v) certain events of bankruptcy,
insolvency or reorganization; and (vi) any other Event of Default provided with
respect to Debt Securities of that series. If an Event of Default shall occur
and be continuing with respect to the Debt Securities of any series, either the
Trustee or the holders of at least 25% in principal amount of the Debt
Securities then outstanding of that series may declare the principal amount of
the Debt Securities of such series (or, in the case of Debt Securities sold at
an original issue discount, the amount specified in the terms thereof) and the
accrued interest thereon, if any, to be due and payable. Under certain
conditions, such a declaration may be rescinded.
The Indenture provides that the Trustee shall, within 90 days after the
occurrence of a default known to it, give the affected holders of Debt
Securities notice of all uncured defaults known to it (the term "default" to
mean the events specified above without grace periods); provided that, except in
the case of default in the payment of principal of or interest on any Debt
Security, the Trustee shall be protected in withholding such notice if it in
good faith determines that the withholding of such notice is in the interest of
the affected holders of Debt Securities.
The Company will be required to furnish to the Trustee annually a statement
by certain officers of the Company certifying that there are no defaults or
specifying any default.
The holders of a majority in principal amount of the outstanding Debt
Securities of any series will have the right, subject to certain limitations, to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee with respect to the Debt Securities of such series, and to waive certain
defaults with respect thereto. The Indenture provides that in case an Event of
Default shall occur and be continuing, the Trustee shall exercise such of its
rights and powers under the Indenture, and use the same degree of care and skill
in exercising the same, as a prudent
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<PAGE> 21
Person would exercise or use under the circumstances in the conduct of such
Person's own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any of the holders of Debt Securities unless they shall have offered
to the Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by the Trustee in compliance with such
request.
MODIFICATION OF THE INDENTURE
With certain exceptions, the Indenture may be modified or amended with the
consent of the holders of not less than a majority in principal amount of the
outstanding Debt Securities of each series affected by the modification;
provided that no such modification or amendment may be made, without the consent
of the holder of each Debt Security affected, which would (i) reduce the
principal amount of or the interest on any Debt Security, or change the stated
maturity of the principal of, or any installment of interest on, any Debt
Security or the other terms of payment thereof, or (ii) reduce the above-stated
percentage of Debt Securities, the consent of the holders of which is required
to modify or amend the Indenture, or the percentage of Debt Securities of any
series, the consent of the holders of which is required to waive certain past
defaults.
DEFEASANCE AND DISCHARGE
The Indenture provides that the Company may elect, with respect to the Debt
Securities of any series, to terminate (and be deemed to have satisfied) any and
all of its obligations in respect of such Debt Securities (except for certain
obligations to register the transfer or exchange of Debt Securities, to replace
stolen, lost or mutilated Debt Securities, to maintain paying agencies and hold
monies for payment in trust and, if so specified with respect to the Debt
Securities of a certain series, to pay the principal of (and premium, if any)
and interest, if any, on such specified Debt Securities) on the 91st day after
the deposit with the Trustee, in trust, of money and/or U.S. Government
Obligations (as defined) which, through the payment of interest thereon and
principal thereof in accordance with their terms, will provide money in an
amount sufficient to pay any installment of principal of (and premium, if any),
and interest, if any, on, and any mandatory sinking fund payments in respect of,
such Debt Securities on the stated maturity of such payments in accordance with
the terms of the Indenture and such Debt Securities. Such a trust may be
established only if, among other things, the Company has delivered to the
Trustee an Opinion of Counsel (who may be counsel to the Company) to the effect
that, based upon applicable Federal income tax law or a ruling published by the
United States Internal Revenue Service, such a defeasance and discharge will not
be deemed, or result in, a taxable event with respect to holders of such Debt
Securities. If so specified with respect to the Debt Securities of a series,
such a trust may be established only if establishment of the trust would not
cause the Debt Securities of any such series listed on any nationally recognized
securities exchange to be de-listed as a result thereof.
CONCERNING THE TRUSTEE
The First National Bank of Chicago is the Trustee under the Indenture and
has been appointed by the Company as initial Security Registrar with regard to
the Debt Securities. The Company currently does, and from time to time in the
future may, maintain lines of credit and have customary banking relationships
with the Trustee. The Trustee may serve as trustee for other debt securities
issued by the Company from time to time.
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<PAGE> 22
PLAN OF DISTRIBUTION
The Company may sell Offered Debt Securities to or through one or more
underwriters or dealers, directly to institutional investors or other
purchasers, through agents, or through a combination of such or other methods.
The distribution of the Offered Debt Securities may be effected from time to
time in one or more transactions at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices.
If underwriters are used in the sale, the Offered Debt Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The Offered Debt Securities may be offered to the public either through
underwriting syndicates represented by one or more managing underwriters or
directly by one or more firms acting as underwriters. The underwriter or
underwriters with respect to a particular underwritten offering of Offered Debt
Securities will be named in the Prospectus Supplement relating to such offering
and, if an underwriting syndicate is used, the managing underwriter or
underwriters will be set forth on the cover of such Prospectus Supplement.
Unless otherwise set forth in the Prospectus Supplement, the obligations of the
underwriters to purchase the Offered Debt Securities will be subject to certain
conditions precedent and the underwriters will be obligated to purchase all the
Offered Debt Securities if any are purchased.
The Offered Debt Securities may be sold directly by the Company or through
agents designated by the Company from time to time. Any agent involved in the
offer or sale of the Offered Debt Securities in respect of which this Prospectus
is delivered will be named, and any commissions payable by the Company to such
agent will be set forth, in the Prospectus Supplement relating thereto. Unless
otherwise indicated in the Prospectus Supplement, any such agent will be acting
on a best efforts basis for the period of its appointment.
In connection with the sale of Offered Debt Securities, underwriters or
agents may receive compensation from the Company or from purchasers of Offered
Debt Securities for whom they may act as agents in the form of discounts,
concessions or commissions. Underwriters may sell Offered Debt Securities to or
through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
from the purchasers for whom they may act as agents. Underwriters, dealers and
agents that participate in the distribution of Offered Debt Securities may be
deemed to be underwriters, and any discounts or commissions received by them
from the Company and any profit on the resale of Offered Debt Securities by them
may be deemed to be underwriting discounts and commissions, under the Securities
Act. Any such underwriter or agent will be identified, and any such compensation
received from the Company will be described, in the related Prospectus
Supplement.
If so indicated in the related Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Offered Debt Securities from
the Company at the public offering price set forth in the Prospectus Supplement
pursuant to contracts providing for payment and delivery on a future date.
Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and other institutions, but in all cases
such institutions must be approved by the Company. The obligations of any
purchaser under any such contract will be subject to the condition that the
purchase of the Offered Debt Securities shall not at the time of delivery be
prohibited under the laws of the jurisdiction to which such purchaser is
subject. The underwriters and such other agents will not have any responsibility
in respect of the validity or performance of such contracts.
Under agreements which may be entered into by the Company, underwriters and
agents who participate in the distribution of Offered Debt Securities may be
entitled to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act, or to contribution by the
Company with respect to payments they may be required to make in respect
thereof.
Certain of the underwriters or agents and their affiliates may engage in
transactions with and perform services for the Company or its affiliates in the
ordinary course of their respective businesses.
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<PAGE> 23
If underwriters or dealers are used in the sale, until the distribution of
the Offered Debt Securities is completed, rules of the Securities and Exchange
Commission may limit the ability of any such underwriters and certain selling
group members, if any, to bid for and purchase the Offered Debt Securities. As
an exception to these rules, representatives of any underwriters are permitted
to engage in certain transactions that stabilize the price of the Offered Debt
Securities. Such transactions may consist of bids or purchases for the purpose
of pegging, fixing or maintaining the price of the Offered Debt Securities.
If the underwriters create a short position in the Offered Debt Securities
in connection with the offerings, i.e., if they sell more Offered Debt
Securities than are set forth on the cover page of the Prospectus Supplement,
the representatives of the underwriters may reduce that short position by
purchasing Offered Debt Securities in the open market. The representatives of
the underwriters may also elect to reduce any short position by exercising all
or part of any overallotment option, if any, described in the Prospectus
Supplement.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. Neither the Company nor any
underwriter or agent makes any representation or prediction as to the direction
or magnitude of any effect that the transactions described above may have on the
price of the Offered Debt Securities. In addition, neither the Company nor any
underwriter or agent makes any representation that the representatives of any
underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The representatives of the underwriters may also impose a penalty bid on
certain underwriters and selling group members, if any. This means that if the
representatives of the underwriters purchase Offered Debt Securities in the open
market to reduce the underwriters' short position or to stabilize the price of
the Offered Debt Securities, they may reclaim the amount of the selling
concession from the underwriters and selling group members who sold those
Offered Debt Securities as part of the offering. The imposition of a penalty bid
might also have an effect on the price of the Offered Debt Securities to the
extent that it discourages resales of the Offered Debt Securities.
The Debt Securities may or may not be listed on a national securities
exchange or traded in the over-the-counter market. No assurances can be given as
to the liquidity of the trading market for any of such securities.
LEGAL MATTERS
The validity of the Offered Debt Securities will be passed upon for the
Company by David R. Birk, Senior Vice President and General Counsel of the
Company. Mr. Birk beneficially owns 17,794 shares of the Company's common stock,
including 14,375 shares issuable upon exercise of employee stock options.
Certain legal matters with respect to the Offered Debt Securities will be passed
upon for the underwriters, dealers or agents, if any, by Fried, Frank, Harris,
Shriver & Jacobson (a partnership including professional corporations), One New
York Plaza, New York, New York 10004, unless otherwise specified in the
Prospectus Supplement.
EXPERTS
The consolidated financial statements and schedule incorporated by
reference in this Prospectus and elsewhere in the Registration Statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said report.
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<PAGE> 24
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE
OFFERING COVERED BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, THE NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT
PAGE
----
<S> <C>
Use of Proceeds.......................... S-2
Capitalization........................... S-2
Business................................. S-3
Description of the Notes................. S-6
Underwriting............................. S-9
PROSPECTUS
Available Information.................... 2
Incorporation of Certain Documents by
Reference.............................. 2
The Company.............................. 3
Ratio of Earnings to Fixed Charges....... 3
Selected Financial Data.................. 4
Use of Proceeds.......................... 6
Description of Debt Securities........... 6
Plan of Distribution..................... 12
Legal Matters............................ 13
Experts.................................. 13
</TABLE>
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LOGO
$200,000,000
AVNET, INC.
6.45% NOTES DUE 2003
------------------------------
PROSPECTUS SUPPLEMENT
------------------------------
MERRILL LYNCH & CO.
NATIONSBANC MONTGOMERY
SECURITIES LLC
CHASE SECURITIES INC.
FIRST CHICAGO CAPITAL
MARKETS, INC.
AUGUST 20, 1998
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