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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) DECEMBER 22, 1999
AVNET, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
NEW YORK 1-4224 11-1890605
(STATE OR OTHER JURISDICTION (COMMISSION (I.R.S. EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
</TABLE>
<TABLE>
<S> <C>
2211 SOUTH 47TH STREET, PHOENIX, ARIZONA 85034
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE -- (480) 643-2000
NOT APPLICABLE
(FORMER NAME OR FORMER ADDRESS IF CHANGED SINCE LAST REPORT)
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ITEM 5. OTHER EVENTS.
In connection with a Registration Statement on Form S-3 to be filed by
Avnet, Inc. ("Avnet"), the following pro forma financial information relating to
the acquisition by Avnet of Marshall Industries ("Marshall") on October 20, 1999
is filed herewith. The acquisition was previously reported in a Form 8-K of
Avnet bearing cover date of October 20, 1999.
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<CAPTION>
PAGES
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<S> <C>
Unaudited Pro Forma Condensed Consolidated Financial
Statements
Introduction................................................ 3
Pro Forma Condensed Consolidated Statement of Income for the
first quarter ended October 1, 1999....................... 4
Pro Forma Condensed Consolidated Balance Sheet as of October
1, 1999................................................... 5
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements...................................... 6
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTION
The following unaudited pro forma condensed consolidated financial
statements have been prepared to illustrate the effect of the merger of Marshall
into Avnet and include an unaudited Pro Forma Condensed Consolidated Statement
of Income for the first quarter ended October 1, 1999 and an unaudited Pro Forma
Condensed Consolidated Balance Sheet as of October 1, 1999. The pro forma
financial statements are based on the historical consolidated financial
statements of Avnet as of and for the first quarter ended October 1, 1999 and
the historical consolidated financial statements of Marshall as of and for the
first quarter ended August 31, 1999.
The unaudited Pro Forma Condensed Consolidated Statement of Income for the
first quarter ended October 1, 1999 assumes that the merger had been consummated
as of the first day of the quarter presented (July 3, 1999), and the unaudited
Pro Forma Condensed Consolidated Balance Sheet as of October 1, 1999 assumes
that the merger was consummated on October 1, 1999.
The pro forma adjustments are based on the Amended and Restated Agreement
and Plan of Merger dated as of June 25, 1999, between Avnet and Marshall and
related agreements, under which Marshall shareholders received cash and/or Avnet
common stock for their shares of Marshall common stock. For purposes of
preparing the unaudited pro forma condensed consolidated financial statements,
the value of the Avnet common stock issued is based upon the average closing
price of Avnet common stock for a period commencing two trading days before and
ending two trading days after the October 12, 1999 measurement date, the day on
which the exchange ratio for the Avnet stock component of the purchase price was
determined pursuant to the Merger Agreement, and on the 16,687,614 shares of
Marshall common stock outstanding on the October 20, 1999 effective date of the
merger, plus the number of options on Marshall common stock outstanding on the
effective date which were converted to options on Avnet common stock. The
estimated aggregate amount to be allocated to the assets acquired consists of
(in thousands):
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<S> <C>
Avnet common shares issued to Marshall shareholders......... $269,309
Cash paid to Marshall shareholders.......................... 326,798
Avnet stock options (net of tax effect)..................... 6,985
Estimated costs and expenses of the merger.................. 11,500
--------
$614,592
========
</TABLE>
The pro forma adjustments are based on preliminary estimates, which are
derived from available information and certain assumptions. Although Avnet
believes, based on available information, that the fair values and allocation of
the merger consideration included in the unaudited pro forma condensed
consolidated financial statements are reasonable estimates, final purchase
accounting adjustments will be made on the basis of future evaluations and
estimates. As a result, the final allocation of costs related to the merger may
differ significantly from that presented herein. The unaudited Pro Forma
Condensed Consolidated Statement of Income excludes any potential benefits that
might result from the merger due to synergies that may be derived and from the
elimination of any duplicate costs. In addition, the pro forma adjustments do
not reflect possible acquisition related costs relating to restructuring,
integration, abandonment of assets and other similar items, which could result
in significant other charges. The unaudited pro forma condensed consolidated
financial statements do not purport to be indicative of the results that
actually would have occurred if the merger occurred on October 1, 1999 or of
results which may be obtained in the future. The unaudited pro forma condensed
consolidated financial statements should be read in conjunction with (1) the
notes to the unaudited pro forma condensed consolidated financial statements
which appear in this report; (2) the historical condensed consolidated financial
statements and accompanying notes for Marshall at August 31, 1999 and for the
first quarter then ended, which appear in Avnet's Current Report on Form 8-K
bearing cover date of October 20, 1999; and (3) the historical condensed
consolidated financial statements and accompanying notes for Avnet at October 1,
1999 and for the quarter then ended, which appear in its Quarterly Report on
Form 10-Q for the first quarter ended October 1, 1999.
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AVNET, INC. AND MARSHALL INDUSTRIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE FIRST QUARTER ENDED OCTOBER 1, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
The following unaudited pro forma condensed consolidated statement of
income for the first quarter ended October 1, 1999 assumes that the merger was
completed as of July 3, 1999.
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<CAPTION>
FIRST QUARTER ENDED OCTOBER 1, 1999
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PRO FORMA
AVNET(1) MARSHALL ADJUSTMENTS(A) PRO FORMA
---------- -------- -------------- ----------
<S> <C> <C> <C> <C>
Sales....................................... $1,654,323 $446,937 $2,101,260
Cost of sales............................... 1,423,520 379,628 1,803,148
---------- -------- ----------
Gross profit................................ 230,803 67,309 298,112
Operating expenses.......................... 182,360 49,178 $ 1,142(b) 232,680
---------- -------- ------- ----------
Operating income............................ 48,443 18,131 (1,142) 65,432
Interest expense............................ (9,866) (2,792) (3,322)(c) (15,980)
Other income (expense), net................. 813 (548) (572)(c) (307)
---------- -------- ------- ----------
Income before taxes......................... 39,390 14,791 (5,036) 49,145
Income taxes................................ 17,244 6,343 (1,578)(d) 22,009
---------- -------- ------- ----------
Net income.................................. $ 22,146 $ 8,448 $(3,458) $ 27,136
========== ======== ======= ==========
Earnings per share(e):
Basic..................................... $ 0.63 $ 0.65
========== ==========
Diluted................................... $ 0.63 $ 0.64
========== ==========
Shares used to compute earnings per
share(e):
Basic..................................... 35,200 42,018
========== ==========
Diluted................................... 35,405 42,400
========== ==========
</TABLE>
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(1) The condensed consolidated statement of income for Avnet for its first
quarter ended October 1, 1999 includes incremental special charges
associated with the reorganization of its Electronics Marketing European
operations consisting primarily of costs related to the consolidation of
warehousing operations. The negative effect on first quarter pre-tax income,
net income and diluted earnings per share were $6,112, $3,976 and $0.11,
respectively.
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AVNET, INC. AND MARSHALL INDUSTRIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF OCTOBER 1, 1999
(IN THOUSANDS)
(UNAUDITED)
The following unaudited pro forma condensed consolidated balance sheet as
of October 1, 1999 assumes that the merger was completed at that date.
<TABLE>
<CAPTION>
AS OF OCTOBER 1, 1999
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PRO FORMA
AVNET MARSHALL ADJUSTMENTS PRO FORMA
---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Assets:
Current assets:
Cash and interest-bearing
investments........................ $ 92,850 $ 1,697 $ (49,348)(a) $ 45,199
Receivables.......................... 1,048,937 227,939 1,276,876
Inventories.......................... 1,144,668 343,993 1,488,661
Other................................ 55,493 25,217 80,710
---------- -------- --------- ----------
Total current assets............... 2,341,948 598,846 (49,348) 2,891,446
Property, plant & equipment at cost,
net.................................. 209,705 37,612 247,317
Goodwill................................ 391,308 116,427 200,169(b) 707,904
Investments in unconsolidated
affiliates........................... -- 41,260 (9,503)(b) 31,757
Other assets............................ 100,738 1,557 1,300(c) 103,595
---------- -------- --------- ----------
Total assets....................... $3,043,699 $795,702 $ 142,618 $3,982,019
========== ======== ========= ==========
Liabilities:
Current liabilities:
Borrowings due within one year....... $ 825 $ 18,750 $ (18,750)(c) $ 825
Accounts payable..................... 596,904 168,217 765,121
Accrued expenses and other........... 206,964 43,809 (4,760)(d) 246,013
---------- -------- --------- ----------
Total current liabilities.......... 804,693 230,776 (23,510) 1,011,959
Long-term debt, less due within one
year................................. 818,791 141,000 309,000(c) 1,268,791
---------- -------- --------- ----------
Total liabilities.................. 1,623,484 371,776 285,490 2,280,750
---------- -------- --------- ----------
Shareholders' equity:
Common stock............................ 44,439 16,619 (16,619)(e) 44,439
Additional paid-in capital.............. 436,789 41,139 (163,548)(e) 314,380
Retained earnings....................... 1,513,224 357,423 (357,423)(f) 1,513,224
Cumulative translation adjustments...... (41,165) (822) 822(f) (41,165)
Valuation adjustment.................... -- 9,567 (9,567)(f) --
Common stock held in treasury........... (533,072) -- 403,463(e) (129,609)
---------- -------- --------- ----------
Total shareholders' equity......... 1,420,215 423,926 (142,872) 1,701,269
---------- -------- --------- ----------
Total liabilities and shareholders'
equity.......................... $3,043,699 $795,702 $ 142,618 $3,982,019
========== ======== ========= ==========
</TABLE>
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NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
1. AVNET HISTORICAL FINANCIAL DATA
The historical data presented represents the statement of income of Avnet
for the first quarter ended October 1, 1999 and the balance sheet of Avnet as of
October 1, 1999. The statement of income for the first quarter ended October 1,
1999 includes incremental special charges associated with the reorganization of
Avnet's Electronics Marketing European operations consisting primarily of costs
related to the consolidation of warehousing operations. The negative effect on
first quarter pre-tax income, net income and diluted earnings per share were
$6,112, $3,976 and $0.11, respectively. More detailed information can be found
in the consolidated financial statements and the accompanying notes which appear
in Avnet's Form 10-Q for the first quarter ended October 1, 1999.
2. MARSHALL HISTORICAL FINANCIAL DATA
The historical data presented represents the statement of income for the
first quarter ended August 31, 1999 and the balance sheet of Marshall as of
August 31, 1999. The amount included in the line entitled "Interest expense and
other -- net" in Marshall's consolidated statement of income for the first
quarter ended August 31, 1999 which is not interest expense has been
reclassified to "Other income (expense), net" on the Pro Forma Condensed
Consolidated Statement of Income.
3. PRO FORMA ADJUSTMENTS -- CONDENSED CONSOLIDATED STATEMENT OF INCOME
(a) Avnet expects to achieve operating efficiencies from the merger. It is
anticipated that cost savings will result principally from such areas
as warehousing, sales facilities, administration, operations and
computer systems. Such anticipated cost savings have not been reflected
in the accompanying pro forma condensed consolidated financial
statements.
In addition, the unaudited Pro Forma Condensed Consolidated Statement
of Income does not reflect any sales attrition which may result from
the merger or the portion of costs of the integration into Avnet of the
Marshall business which will be charged to operations in fiscal 2000.
Such one-time costs, which cannot be accurately estimated at this time,
represent only those integration expenses related to Avnet. Costs
related to Marshall as a result of the integration, which also cannot
be accurately estimated at this time, will eventually be included in
goodwill.
(b) Adjustment to reflect the incremental amortization of estimated
goodwill determined on a straight-line basis over 40 years resulting
from the purchase accounting related to the merger amounting to $1,142.
The amount of the incremental amortization of estimated goodwill takes
into account the fact that the Marshall historical statements of income
already include amortization of goodwill which will be part of the
goodwill recorded by Avnet following the merger.
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NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(c) Adjustment to reflect the net increase in interest expense and the
decrease in interest income, based upon a presumption of, but not a
commitment for, the execution of the transactions described below:
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<CAPTION>
QUARTER ENDED
OCT. 1, 1999
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(IN THOUSANDS)
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Proposed issuance of short-term borrowings at an assumed
interest rate of 5.5%..................................... $ 6,114
Elimination of interest on certain Marshall debt which is
assumed repaid.............................................. (2,792)
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Net increase in interest expense............................ $ 3,322
=======
Decrease in interest income (included in 'Other income
(expense), net') resulting from the utilization of
available cash and interest-bearing investments........... $ 572
=======
</TABLE>
A 1/8% change in interest rates will result in a change in interest
expense of $375 per annum.
(d) The income tax impact, assuming an effective tax rate of 40.525%,
applied to the deductible pro forma adjustments to the condensed
consolidated statement of income described above. (Note: the
amortization of goodwill described in note (b) above is not tax
benefitted.)
(e) Assumes the issuance of 6,818,000 shares of Avnet common stock from
treasury to consummate the merger and additional diluted shares of
177,000 relating to the conversion of Marshall stock options into Avnet
stock options.
4. PRO FORMA ADJUSTMENTS -- CONDENSED CONSOLIDATED BALANCE SHEET
(a) Adjustments to reflect: (1) proceeds from the issuance of new debt, net
of related debt issuance costs ($448,700), (2) payment of the cash
portion of the merger consideration ($326,798), (3) repayment of
Marshall debt (borrowings due within one year $18,750 and long-term
debt $141,000) and (4) payment of direct costs associated with the
merger ($11,500).
(b) Adjustments to reflect the increase in cost in excess of net assets
acquired attributable to the merger as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Components of purchase price:
Common stock portion of merger consideration................ $269,309
Cash portion of merger consideration........................ 326,798
Issuance of Avnet stock options in exchange for outstanding
Marshall stock options.................................... 6,985
Estimated direct costs related to the merger (excludes
write-off of assets and liabilities to be incurred as a
result of the integration of Marshall into Avnet, the
amount of which cannot be accurately estimated at this
time)..................................................... 11,500
--------
614,592
Less:
Book value of net assets acquired including cost in excess
of net assets acquired on the books of Marshall amounting
to $125,930............................................... 423,926
--------
Cost in excess of net assets acquired....................... $190,666
========
</TABLE>
Note -- The total goodwill to be recorded by Avnet resulting from the
merger is $316,596 ($190,666 indicated above and the $125,930 on the
books of Marshall).
(c) Adjustment to reflect: (1) retirement of Marshall debt (borrowings due
within one year $18,750 and long-term debt $141,000), (2) proposed
issuance of debt in connection with the merger ($450,000) and (3) debt
issuance costs associated with new borrowings ($1,300).
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NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(d) Adjustment to record tax benefit related to the issuance of Avnet stock
options in exchange for Marshall stock options.
(e) Adjustment to reflect: (1) issuance of Avnet common stock from treasury
in exchange for Marshall common stock (treasury shares $403,463 and
reduction in additional paid-in capital $134,154), (2) increase in
additional paid in capital related to the deferred compensation
associated with the issuance of Avnet stock options in exchange for
outstanding Marshall stock options ($11,745) and (3) elimination of
Marshall common stock and additional paid-in capital (common stock
$16,619 and additional paid-in capital $41,139).
(f) Adjustment to reflect the elimination of Marshall retained earnings,
cumulative translation adjustments and valuation adjustment.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits:
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<CAPTION>
EXHIBIT NO.
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<C> <S>
2 Amended and Restated Agreement and Plan of Merger dated as
of June 25, 1999, between Avnet, Inc. and Marshall
Industries, filed as Appendix A to the Joint Proxy
Statement/Prospectus constituting Part I of Avnet's
Registration Statement on Form S-4, Registration No.
333-86721, and incorporated herein by reference.
</TABLE>
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AVNET, INC.
(Registrant)
By: /s/ RAYMOND SADOWSKI
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Raymond Sadowski
Senior Vice President and
Chief Financial Officer
Date: December 22, 1999
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