Avnet - 10-Q quarterly report FY

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SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

Commission File #1-4224

IRS Employer Identification No. 11-1890605

2211 South 47th Street, Phoenix, Arizona 85034

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.     Yes þ  No o

The total number of shares outstanding of the registrant’s Common Stock (net of treasury shares) as of January 25, 2002 ............ 118,633,799 shares

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AVNET, INC. AND SUBSIDIARIES

INDEX

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FORWARD-LOOKING STATEMENTS

      This report contains forward-looking statements with respect to the financial condition, results of operations and business of Avnet, Inc. (“Avnet” or the “Company”). You can find many of these statements by looking for words like “believes,” “expects,” “anticipates,” “estimates” or similar expressions in this report or in documents incorporated by reference in this report.

      These forward-looking statements are subject to numerous assumptions, risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by the forward-looking statements include the following:

      Because forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by them. We caution you not to place undue reliance on these statements, which speak only as of the date of this report.

      We do not undertake any obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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PART I

FINANCIAL INFORMATION

Item 1.     Financial Statements

AVNET, INC. AND SUBSIDIARIES

See Notes to Consolidated Financial Statements

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AVNET, INC. AND SUBSIDIARIES

See Notes to Consolidated Financial Statements

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AVNET, INC. AND SUBSIDIARIES

See Notes to Consolidated Financial Statements

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AVNET, INC. AND SUBSIDIARIES

See Notes to Consolidated Financial Statements

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5.     Inventories:

8.     Comprehensive income (loss):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

9. Earnings (loss) per share:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

10. Additional cash flow information:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      11. Segment information:

12. Accounts receivable securitization:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

13. Financial Instruments:

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Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

Organization

      The Company currently consists of three major operating groups: Electronics Marketing (“EM”), Computer Marketing (“CM”) and Applied Computing (“AC”). EM focuses on the global distribution of, and value-added services associated with, electronics components; CM focuses on middle-to-high-end, value-added computer products distribution and related services; and AC serves the needs of personal computer original equipment manufacturers (“OEMs”) and system integrators by providing the latest technologies such as microprocessors, DRAM modules and motherboards, and serves the needs of embedded systems OEMs that require technical services such as product prototyping, configurations and other value-added services.

      With the retirement of Brian Hilton, president of EM, to be effective with the close of fiscal 2002, Roy Vallee, Chairman and CEO of the Company, announced in January 2002 that 22-year Avnet employee Andy Bryant, president of CM, would become the new president of EM. In addition, Rick Hamada, a 20-year Avnet employee, has been promoted to president of CM worldwide replacing Mr. Bryant. Mr. Hamada was the president of CM’s largest division before assuming his new responsibilities.

Acquisitions

      The results for the current year include a number of acquisitions completed by the Company subsequent to the end of last year’s first fiscal quarter that affect the comparative financial results discussed below. In October 2000, the Company acquired certain European operations of VEBA Electronics Group (consisting of EBV, WBC, Atlas Logistics and RKE Systems, collectively, the “VEBA Group”). In February 2001, the Company acquired RDT Technologies Ltd., and in May 2001, the Company completed the acquisition of Sunrise Technology Ltd. Also, effective June 8, 2001, the Company acquired Kent Electronics Corporation (“Kent”) in a transaction accounted for as a “pooling-of-interests.” Accordingly, the accompanying consolidated financial statements and notes, as well as the information in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) for periods prior to the acquisition, have been restated to reflect the acquisition of Kent.

      The Company has pursued and expects to continue to pursue strategic acquisitions to expand its business. However, the Company currently does not anticipate further material acquisitions until it has completed the full integration of its recent acquisitions and strengthened its balance sheet. Management believes that the Company has the ability to generate sufficient capital resources from internal or external sources in order to continue its expansion program. In addition, as with past acquisitions, management does not expect that future acquisitions will materially impact the Company’s liquidity.

Stock Split

      On August 31, 2000, the Company’s Board of Directors declared a two-for-one stock split to be effected in the form of a stock dividend (the “Stock Split”). The additional common stock was distributed on September 28, 2000 to shareholders of record on September 18, 2000. All references in this MD & A and elsewhere in this Report, to the number of shares, per share amounts and market prices of the Company’s common stock have been restated to reflect the stock split and the resulting increased number of shares outstanding.

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RESULTS OF OPERATIONS

Overview

      The results for fiscal 2002 to date reflect an extremely difficult environment across all of the Company’s operating groups, although the EM business has been most severely affected, offset only to a limited extent by acquisitions completed since the first fiscal quarter of 2001. However, enterprise revenues for the second quarter were somewhat better than expected. As noted below, both CM and AC posted strong sequential sales gains in the second quarter of the current fiscal year as compared with the first quarter which, when combined with a significantly slower rate of sequential quarterly sales decline at EM, appears to provide evidence that the decline in business conditions has hit its low-point and that the business environment should begin to improve.

Sales

      The Company closed the second quarter of fiscal 2002 with consolidated sales of $2.36 billion, down 35% year-over-year, but up sequentially by 7% as compared with the first quarter of fiscal 2002. Sales for EM in the second quarter of fiscal 2002 of $1.17 billion were down 49% as compared with last year’s second quarter and down by 5% sequentially from the first quarter of fiscal 2002. Sales for CM of $704.8 million and AC of $483.1 million were down 15% and 1%, respectively, as compared with last year’s second quarter. However, CM and AC each grew sales by over 23% sequentially from the first quarter of fiscal 2002, benefiting from a strong seasonal gain. As a result, CM and AC combined accounted for approximately 50% of enterprise sales for the second quarter of fiscal 2002.

      Consolidated sales for the first half of fiscal 2002 were $4.56 billion, down 33% as compared with $6.82 billion in the first half of last year. EM sales of $2.41 billion and CM sales of $1.28 billion in the first half of fiscal 2002 were down 47% and 16%, respectively, as compared with the prior year first half sales of $4.54 billion for EM and $1.52 billion for CM. AC had sales of $874.8 million in the first half of fiscal 2002 as compared with sales of $761.2 million in the first half of fiscal 2001, an increase of 15%.

      The table below provides fiscal period revenues and analysis for the Company and its operating units.

FISCAL PERIOD REVENUES AND ANALYSIS

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Gross Margins

      Consolidated gross profit margins of 13.50% in the second quarter of fiscal 2002 were lower by 145 basis points as compared with 14.95% in the second quarter of fiscal 2001, while consolidated gross margins decreased by 61 basis points from the first quarter of fiscal 2002. These decreases were caused primarily by a change in the mix of business within the Company as CM and AC, which have lower gross margins than EM, provided a higher proportion of consolidated sales as compared with prior periods. In addition, the product mix within these operating groups also affected gross profit margins, as disk drive and microprocessor sales, two product groups with historically low margins, increased as a percentage of sales within the groups. The overall gross profit margins of the Company will continue to be affected by the changing product mix as it adjusts to economic and market factors. The two computing technology businesses (AC and CM), which service distinct sectors of the technology supply chain, are becoming a significant counterbalance to the heavily cyclical components business of EM. As a result, the mix of business factor is an ever-important one in determining Avnet’s consolidated gross margins.

      Consolidated gross profit margins in the first half of fiscal 2002 were 13.8% as compared with 15.1% in the first half of last year. This decrease in gross profit margins was due primarily to the mix of business as described above.

Operating Expenses

      For the second consecutive quarter, operating expenses in absolute dollars were lower on both a year- over-year and on a sequential quarterly basis. Operating expenses totaled $294.8 million for the second quarter of fiscal 2002, as compared with $351.6 million in the second quarter a year ago and $306.9 million in the first quarter of fiscal 2002. In response to the economic and market conditions of the last twelve months, all three operating groups have executed expense reduction plans. The second quarter fiscal 2002 results reflect a reduction in annualized operating expenses in excess of $240 million as compared with the run rate of expenses at the end of the second quarter of fiscal 2001. This reduction is based on a pro forma adjustment to the actual reported expenses in the second quarter of fiscal 2001 to account for the impact of the operations of the VEBA Group, which were acquired partway through that quarter. Although operating expenses decreased in absolute dollars, operating expenses for the second quarter of fiscal 2002 increased as a percentage of sales from a year ago, to 12.5% in fiscal 2002 from 9.7% in fiscal 2001. This increase was caused primarily by the significant and rapid decrease in consolidated sales at a higher rate than the reduction in variable operating expenses.

      Operating expenses for the first half of fiscal 2002 were $601.7 million down significantly as compared with $660.2 million in the first half of last year. However, the decrease in operating expenses did not keep pace with the drop in sales during that period resulting in an increase in expenses as a percentage of sales to 13.2% in the first half of fiscal 2002 as compared with 9.7% in the first half of last year.

Operating Income (Loss)

      Operating income of $23.8 million in the second quarter of fiscal 2002 represented 1.01% of sales as compared with $191.1 million, or 5.26% of sales, in the second quarter of fiscal 2001. However, operating income for the second quarter was $20.2 million higher than the $3.6 million earned in the first quarter of the current fiscal year. Operating income as a percentage of sales for the second quarter of fiscal 2002 was up 85 basis points sequentially from the first quarter of fiscal 2002.

      EM’s operating loss before the allocation of corporate expenses was $1.8 million in the second quarter of fiscal 2002 as compared with income of $172.5 million in the prior year’s second quarter. CM’s operating income before the allocation of corporate expenses was $23.0 million in the second quarter of fiscal 2002 as compared with $29.8 million in the second quarter of last year. AC produced operating income of $17.0 million in the second quarter of fiscal 2002 as compared with $16.0 million in the second quarter of last year. The high rate of decline in operating income at EM is a result of the more severe impact of the economic downturn on EM’s business as discussed previously.

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      Operating income for the first half fiscal 2002 was $27.4 million as compared with $370.1 million in the first half of last year. Operating income as a percentage of sales was 0.6% in the first half of the current year as compared with 5.4% last year.

Interest Expense

      Interest expense for the second quarter of fiscal 2002 was down on both a sequential quarter and year-over-year basis. Interest expense was $33.1 million for the second quarter of fiscal 2002 as compared with last year’s second quarter expense of $53.6 million, a decrease of over 38%. Sequentially, interest expense was down by 13% as compared with the first quarter of fiscal 2002. Interest expense in the first half of fiscal 2002 of $71.2 million was down 22% as compared with $91.4 million in last year’s first half. The reduction of interest expense was primarily driven by a significant reduction in debt as each of the operating groups generated cash during the first half of fiscal 2002 fueled by reductions in working capital. Working capital reduction is one of the ways the Company lowers its cost of doing business in response to difficult business conditions. Driven primarily by reductions in working capital, enterprise debt was reduced by $203 million during the quarter, and since the end of December 2000, excluding the impact of the Company’s asset securitization program as described later in this MD&A, debt was reduced by over $1.2 billion.

Change in Accounting Principle — Goodwill

      In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets,” which establishes financial accounting and reporting for acquired goodwill and other intangible assets. SFAS 142 requires that ratable amortization of goodwill be replaced with periodic tests for goodwill impairment and that intangible assets with finite lives be amortized over their useful lives. The Company has elected to early adopt the provisions of SFAS 142 effective June 30, 2001, the first day of the Company’s fiscal year 2002. Therefore, the amortization of goodwill was suspended effective on that date. Under the required transitional provisions of SFAS 142, the Company identified and evaluated its reporting units for impairment as of June 30, 2001 using a two-step process. The Company engaged an outside valuation consultant to assist in this process. The first step was to ascertain whether there was an indication that any of the Company’s goodwill was impaired. This was accomplished by identifying the Company’s reporting units pursuant to the guidelines set out in SFAS 142 and then determining the carrying value of each of those reporting units by assigning the Company’s assets and liabilities, including existing goodwill, to each of those reporting units as of June 30, 2001. For the purpose of this process, the reporting unit structure was defined as each of the three regional (Americas, EMEA and Asia/Pacific) businesses for each of the Company’s operating groups. The fair value of each reporting unit was determined by using a combination of present value and multiple of earnings valuation techniques. Such fair value was then compared to the carrying value of each reporting unit. As a result of completing the first step of the process, it was determined that there was an impairment of goodwill related to the Company’s EM and CM operations in both EMEA and Asia. There was no impairment of goodwill in the Americas region. In the second step of the process, the implied fair value of the affected reporting unit’s goodwill was compared to its carrying value in order to determine the amount of impairment, that is the amount by which the carrying amount exceeded the fair value. As a result of the valuation process, the Company recorded an impairment charge of $580.5 million, which was recorded as a cumulative effect of a change in accounting principle in the first quarter of fiscal 2002 and is reflected in the accompanying consolidated statement of operations for the first half ended December 28, 2001. As reflected in the accompanying consolidated statement of cash flows for the first half of fiscal 2002, the charge resulting from the cumulative effect of change in accounting principle did not impact cash flow. This cumulative effect of change in accounting principle may be adjusted slightly by the end of fiscal 2002 based upon the resolution of acquisition cost contingencies.

      The magnitude of the impairment charge was significantly impacted by the timing of the effective date of when the fair value analysis was performed and the designation of the reporting unit structure. Since the Company adopted SFAS 142 on June 30, 2001, the fair value analysis was required to be completed as of that date. Due to the difficult business and economic conditions which severely impacted the market sectors in which the Company operates at that date and the uncertainty as to when such conditions would materially

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Net Income (Loss)

      As a result of the factors described above, the Company recorded a net loss of $2.6 million from continuing operations in the second quarter of fiscal 2002, or $0.02 per share on a diluted basis, a significant sequential improvement as compared with a net loss of $19.2 million, or $0.16 per share on a diluted basis, in the first quarter of the current fiscal year. This compares with income from continuing operations in the second quarter of last year of $81.9 million, or $0.69 per share on a diluted basis. Including income from discontinued operations, net income in last year’s second quarter was $99.6 million, or $0.83 per share on a diluted basis.

      Net income (loss) from continuing operations in the first half of fiscal 2002 was a loss of $21.8 million as compared with income of $164.3 million in the first half of last year. Including the cumulative effect of change in accounting principle related to goodwill discussed above, the Company had a net loss of $602.3 million for the first half of fiscal 2002. Fiscal 2001 first half net income, including $20.4 million of income from discontinued operations, was $184.7 million.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow

      During the first half of fiscal 2002, the Company generated $41.0 million from income before the cumulative effect of the change in accounting principle, depreciation, amortization and other non-cash items, and generated $563.3 million from reductions in working capital, resulting in $604.3 million of net cash flows generated from operations. In addition, the Company used $54.6 million for other normal business operations including purchases of property, plant and equipment ($45.6 million) and dividends ($17.7 million), offset somewhat by cash generated from other items ($8.7 million). This resulted in $549.7 million in cash flow generation from normal business operations. The Company also used $25.4 million for acquisitions and investments in non-consolidated entities. As a result, the Company generated $524.3 million during the first half of fiscal year 2002 of which $497.5 million was used for the net repayment of debt and $26.8 million was added to the Company’s available cash and cash equivalents. As previously announced, the Company will look to more effectively deploy its cash to fuel future earnings growth and deliver increased shareholder value by discontinuing the payment of its cash dividend effective after the dividend payment on January 2, 2002.

      Currently, the Company does not have any material commitments for capital expenditures.

Capital Structure

      On November 16, 2001, the Company issued $400.0 million of 8.0% Notes due November 16, 2006 (the “Notes”). The net proceeds received by the Company from the sale of the Notes were approximately $394.3 million after deduction of the underwriting discounts and other expenses associated with the sale. The net proceeds from the Notes have been used to repay commercial paper and other short-term indebtedness. The Notes were hedged with two interest rate swaps as discussed in Note 13 to the accompanying consolidated financial statements.

      On October 25, 2001, the Company entered into agreements providing $1 billion in financing with a syndicate of banks led by Bank of America in order to replace the then existing $1.25 billion 364-day credit facility and the $700 million five-year credit facility. This new bank financing is divided into three separate credit facilities: a multi-year facility, a 364-day facility and a term loan facility. The multi-year facility is a

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      On October 12, 2001, Avnet Financial Services CVA, a wholly-owned subsidiary incorporated in Belgium, entered into an agreement with a Belgian bank which provides for the issuance of up to Euro 100 million in Treasury Notes. The Treasury Note program is a multi-currency program pursuant to which short term notes may be issued with maturities from seven days to one year with either fixed or floating rates of interest. This program is intended to partially finance the working capital requirements of the Company’s European operations.

      In June 2001, the Company entered into a five-year $350 million accounts receivable securitization program whereby it sells, on a revolving basis, an undivided interest in a pool of its trade accounts receivable. Under the program, the Company sells receivables in securitization transactions and retains a subordinated interest and servicing rights to those receivables. At December 28, 2001, the Company had sold $350 million of receivables under the program, which is reflected as a reduction of receivables in the accompanying balance sheet. The cash received from the sale of receivables was used primarily to pay down outstanding borrowings. Accordingly, the amount of debt reflected on the balance sheets included in this report has been reduced by the $350 million of receivables sold under the program. The purpose of this program is to provide the Company with an additional source of liquidity at interest rates more favorable than it could receive through other forms of financing. On February 6, 2002, the Company amended its accounts receivable securitization agreements to provide an additional $100 million, bringing the aggregate funding available under the program up to $450 million.

      In October 2000, the Company issued $250.0 million of 8.20% Notes due October 17, 2003 (the “8.20% Notes”) and issued $325.0 million of Floating Rate Notes due October 17, 2001 (the “Floating Rate Notes”). The proceeds from the sale of the 8.20% Notes and the Floating Rate Notes were approximately $572.7 million after deduction of underwriting discounts and other expenses associated with the sale. The Floating Rate Notes were repaid upon their maturity in October 2001. The Floating Rate Notes bore interest at an annual rate equal to three-month LIBOR, reset quarterly, plus 87.5 basis points (0.875%). After temporarily using the net proceeds from the 8.20% Notes and the Floating Rate Notes to pay down commercial paper and make investments in short-term securities, the net proceeds were used to fund the acquisition of certain European operations of the VEBA Group as described in the “Acquisitions” section above.

      On October 27, 2000, the Company entered into a $1.25 billion 364-day credit facility with a syndicate of banks. This facility provided additional working capital capacity. The Company was able to select from various interest rate options and maturities under this facility, although the Company utilized the facility primarily as back-up for its commercial paper program. This facility expired upon maturity and was replaced by the $1.0 billion of credit facilities described above.

      The Company also has several small credit facilities available to fund the short term working capital, foreign exchange, overdraft and letter of credit needs of its European and Asian operations.

Liquidity

      The Company’s quick assets at December 28, 2001 totaled $1.485 billion as compared with $1.727 billion at June 29, 2001. At December 28, 2001, quick assets were greater than the Company’s current liabilities by $181.8 million as compared with a $843.2 million deficit at the end of fiscal 2001. Working capital at December 28, 2001 was $1.897 billion as compared with $1.177 billion at June 29, 2001. At December 28,

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MARKET RISK

Legal/Regulatory Risk Analysis

      The Company and the former owners of a Company-owned site in Oxford, North Carolina have entered into a Consent Decree and Court Order with the Environmental Protection Agency (EPA) for the environmental clean-up of the site, the cost of which, according to the EPA’s remedial investigation and feasibility study, is estimated to be approximately $6.3 million, exclusive of the $1.5 million in EPA past costs paid by the potentially responsible parties (PRP’s). Pursuant to a Consent Decree and Court Order entered into between the Company and the former owners of the site, the former owners have agreed to bear at least 70% of the clean-up costs of the site, and the Company will be responsible for not more than 30% of those costs. In addition, the Company has become aware of claims that may be made against it and/or its Sterling Electronics Corp. subsidiary, which was acquired as part of the acquisition of Marshall Industries. Sterling once owned 92.46% of the capital stock of Phaostron, Inc. In August 1995, Sterling sold the interest in Phaostron to Westbase, Inc. At the time of the sale, Sterling and Westbase entered into an agreement related to environmental costs resulting from alleged contamination at a facility leased by Phaostron that is a part of the San Gabriel Valley Superfund Site. The agreement provided that Sterling would pay up to $800,000 for environmental costs associated with the site. The Company does not believe that Sterling or the Company will be responsible for environmental costs in excess of $800,000 and has established what it believes to be adequate reserves for any share of such costs that may be borne by Sterling or the Company. In addition, the Company has received notice from a third party of its intention to seek indemnification for costs it may incur in connection with an environmental clean-up at a site in Rush, Pennsylvania resulting from the alleged disposal of wire insulation material at the site by a former unit of the Company. Based upon the information known to date, management believes that the Company has appropriately accrued in its financial statements for its share of the costs of the clean-ups with respect to the above mentioned sites. The Company is also a defendant in a lawsuit brought against it at an environmental clean-up site in Huguenot, New York. At this time, management cannot estimate the amount of the Company’s potential liability, if any, for clean-up costs in connection with this site, but does not anticipate that this matter, or any other contingent matters, will have a material adverse impact on the Company’s financial condition, liquidity or results of operations.

Impact of Foreign Currency and Interest Rate Fluctuations

      Many of the Company’s operations, primarily its international subsidiaries, occasionally purchase and sell products in currencies other than their functional currencies. This subjects the Company to the risks associated with fluctuations of foreign currency exchange rates. The Company reduces this risk by utilizing natural hedging (offsetting receivables and payables) as well as by creating offsetting positions through the use of derivative financial instruments, primarily forward foreign exchange contracts with maturities of less than sixty days. The market risk related to the foreign exchange contracts is offset by the changes in valuation of the underlying items being hedged. The amount of risk and the use of derivative financial instruments described above is not material to the Company’s financial position or results of operations.

      The Company is also exposed to the impact of changes in short-term interest rates. The Company utilizes a mix of debt maturities along with both fixed rate and variable rate debt to manage changes in interest rates. In addition, the Company enters into interest rate swaps to further manage its exposure to interest rate changes related to its borrowings and to lower its overall borrowing costs. As of January 30, 2002,

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      The Company does not hedge either its investment in its foreign operations or its floating interest rate exposures. The Company adopted the Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 133 (“SFAS 133”) “Accounting for Derivative Instruments and Hedging Activities” on July 1, 2000. The adoption of SFAS 133 did not have a material impact on the Company’s financial statements.

Item 3.     Quantitative and Qualitative Disclosures About Market Risk

      See Note 1 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended June 29, 2001 and the “Liquidity and Capital Resources” and “Market Risk” sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of this
Form 10-Q.

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PART II — OTHER INFORMATION

Item 4.     Submission of Matters to a Vote of Security Holders:

      (a) The 2001 Annual Meeting of Shareholders of the Company was held on November 29, 2001.

      (b) Not required. Proxies were solicited by the Company pursuant to Regulation 14A under the Securities Exchange Act of 1934, and no solicitation in opposition to management’s nominees for the board of directors was made. All of the nominees were elected.

      (c) The shareholders of the Company were asked to vote upon (i) election of directors, (ii) a proposal to approve an amendment to the Avnet Employee Stock Purchase Plan to authorize an additional 1,000,000 shares reserved for sale under the Plan, and (iii) ratification of the appointment of Arthur Andersen LLP as independent public accountants for the fiscal year ending June 28, 2002. All proposals were adopted by the shareholders by the following votes: