Avnet, Inc.
Oct 28, 2010

Avnet, Inc. Reports First Quarter Fiscal Year 2011 Results

Record Sales; EPS More than Doubles

PHOENIX, Oct 28, 2010 (BUSINESS WIRE) -- Avnet, Inc. (NYSE:AVT) today announced results for the first quarter fiscal year 2011 ended October 2, 2010.

Three Months Ended
October 2, October 3, Net
2010 2009 Change
$ in millions, except per share data
Sales $ 6,182.4 $ 4,355.0 42.0 %
GAAP Operating Income $ 194.5 $ 89.0 118.5 %
Adjusted Operating Income (1) $ 222.5 $ 107.1 107.8 %
GAAP Net Income $ 138.2 $ 50.9 171.5 %
Adjusted Net Income (1) $ 142.7 $ 67.2 112.2 %
GAAP Diluted EPS $ 0.90 $ 0.33 172.7 %
Adjusted Diluted EPS (1) $ 0.93 $ 0.44 111.4 %

(1) A reconciliation of GAAP to non-GAAP financial measures is presented in the Non-GAAP Financial Information section in this press release.

Roy Vallee, Chairman and Chief Executive Officer, commented, "We accelerated our start to the new fiscal year by completing three acquisitions in July that should add approximately $4 billion to our annual revenue and produce a return on capital employed of at least 12.5% when the integrations are completed. In addition to the financial benefits, the integrations of Bell Micro, Tallard Technologies and Unidux are enhancing our competitive position in key technologies, expanding our presence in higher growth geographies and increasing our global scale and scope advantages. The combination of 26% organic growth and the beneficial impact of value-creating acquisitions drove reported revenue up 42% year over year to a record $6.2 billion. On the bottom line, adjusted diluted earnings per share more than doubled year over year to $0.93 and return on capital employed (ROCE) was within our target range of 14% - 16% for the fourth consecutive quarter. As we complete the integrations throughout the balance of fiscal 2011 and fully realize the anticipated synergies of at least $60 million, we will be better positioned to take advantage of additional growth opportunities and deliver improved financial results."

Avnet Electronics Marketing Results

Electronics Marketing
Year-over-Year Growth Rates
Q1 F'11 Reported Pro forma(2)
Revenue Revenue Revenue
(in millions)
Total

$ 3,620.6 48.5 % 39.8 %
Excluding FX (1)

52.1 % 43.1 %
Americas

$ 1,259.7 66.3 % 32.9 %
EMEA

$ 1,079.7 36.9 % 49.5 %
Excluding FX (1)

49.7 % 63.4 %
Asia

$ 1,281.2 43.7 % 39.4 %
Q1 F'11 Q1 F'10 Change
Operating Income

$ 192.1 $ 81.4 $ 110.7
Operating Income Margin

5.31 % 3.34 % 197 bps

(1) Year-over-year revenue growth rate excluding the impact of changes in foreign currency exchange rates.
(2) Pro forma revenue is defined later in this release.

Mr. Vallee added, "While the expected deceleration in EM's bookings this quarter implies that the electronics supply chain inventory replenishment cycle is nearing an end, our billings indicate that end demand remains solid across all three regions. Pro forma revenue grew nearly 40% year over year and sequential growth of 4.2% was well above normal seasonality. Gross profit margin for EM, excluding the impact of the recently acquired embedded business, increased year over year in all three regions and has now substantially recovered to pre-recession levels. Operating income margin also improved year over year in all three regions and, at 5.3%, was within our target range for the third consecutive quarter. Although we grew inventory in absolute terms, Electronics Marketing's working capital velocity continues at record levels and ROWC remained at or above our stated targets in all three regions."

Avnet Technology Solutions Results

Technology Solutions
Year-over-Year Growth Rates
Q1 F'11 Reported Pro forma(2)
Revenue Revenue Revenue
(in millions)
Total

$ 2,561.8 33.6 % 11.3 %
Excluding FX (1)

36.4 % 13.6 %
Americas

$ 1,461.5 25.8 % 13.8 %
EMEA

$ 807.8 44.6 % 1.7 %
Excluding FX (1)

55.9 % 9.7 %
Asia

$ 292.5 48.7 % 31.6 %
Q1 F'11 Q1 F'10 Change
Operating Income

$ 56.7 $ 51.4 $ 5.3
Operating Income Margin

2.21 % 2.68 % -47 bps

(1) Year-over-year revenue growth rate excluding the impact of changes in foreign currency exchange rates.
(2) Pro forma revenue is defined later in this release.

Mr. Vallee further added, "Technology Solutions delivered another quarter of better-than-normal sequential growth which resulted in a fourth consecutive quarter of strong year-over-year organic revenue growth of 11.3% and on a reported basis total revenue grew 34% to $2.6 billion. Operating income grew 10% year over year; however, operating income margin declined due primarily to the impact of acquisitions as we have yet to realize the majority of the expense synergies affecting TS and the acquired businesses historically operated at lower margins than our legacy business. The integrations of Bell and Tallard are proceeding as planned and we are very comfortable with our enterprise-wide expense synergy target related to Bell. We also remain committed to achieving our previously stated enterprise ROWC target of 30%."

Cash Flow

Ray Sadowski, Chief Financial Officer, stated, "Our strong financial position allowed us to complete three acquisitions this quarter while maintaining our investment grade credit statistics, which we expect to improve when we fully realize the expected synergy benefits. During the quarter, we used approximately $112 million of cash for operations primarily to grow working capital to support the strong growth in business. Working Capital velocity metrics remain near record levels and while inventory was up $683 million sequentially, $401 million of that growth was due to the impact of acquisitions and foreign currency translation."

Outlook For Fiscal 2nd Quarter Ending on January 1, 2011

The above EPS guidance does not include any potential restructuring charges or any charges related to acquisitions and post-closing integration activities. In addition, the above guidance assumes that the average Euro to U.S. Dollar currency exchange rate for the second quarter of fiscal 2011 is $1.40 to EUR 1.00. This compares with an average exchange rate of $1.48 to EUR 1.00 in the second quarter of fiscal 2010 and $1.29 to EUR 1.00 in the first quarter of fiscal 2011.

Forward Looking Statements

This press release contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on management's current expectations and are subject to uncertainty and changes in facts and circumstances. The forward-looking statements herein include statements addressing future financial and operating results of Avnet and may include words such as "will," "anticipate," "expect," believe," and "should," and other words and terms of similar meaning in connection with any discussions of future operating or financial performance, business prospects or market conditions. Actual results may vary materially from the expectations contained in the forward-looking statements.

The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: the Company's ability to retain and grow market share and to generate additional cash flow, risks associated with any acquisition activities and the successful integration of acquired companies, any significant and unanticipated sales decline, changes in business conditions and the economy in general, changes in market demand and pricing pressures, any material changes in the allocation of product or product rebates by suppliers, other competitive and/or regulatory factors affecting the businesses of Avnet generally.

More detailed information about these and other factors is set forth in Avnet's filings with the Securities and Exchange Commission, including the Company's reports on Form 10-K, Form 10-Q and Form 8-K. Avnet is under no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Information

In addition to disclosing financial results that are determined in accordance with generally accepted accounting principles in the United States ("GAAP"), the Company also discloses in this press release certain non-GAAP financial information including adjusted operating income, adjusted net income and adjusted diluted earnings per share, as well as revenue adjusted for the impact of acquisitions and other items (as defined in the Pro Forma (Organic) Revenue section of this release). Management believes pro forma revenue is a useful measure for evaluating current period performance as compared with prior periods and for understanding underlying trends.

Management believes that operating income adjusted for restructuring, integration and other items is a useful measure to help investors better assess and understand the Company's operating performance, especially when comparing results with previous periods or forecasting performance for future periods, primarily because management views the excluded items to be outside of Avnet's normal operating results. Management analyzes operating income without the impact of these items as an indicator of ongoing margin performance and underlying trends in the business. Management also uses these non-GAAP measures to establish operational goals and, in some cases, for measuring performance for compensation purposes.

Management believes net income and EPS adjusted for the impact of the items described above is useful to investors because it provides a measure of the Company's net profitability on a more comparable basis to historical periods and provides a more meaningful basis for forecasting future performance. Additionally, because of management's focus on generating shareholder value, of which net profitability is a primary driver, management believes net income and EPS excluding the impact of these items provides an important measure of the Company's net results of operations for the investing public. However, analysis of results and outlook on a non-GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with GAAP.

First Quarter Fiscal 2011

First Quarter Fiscal 2011
Diluted
Op Income Pre-tax Net Income EPS
$ in thousands, except per share data
GAAP results $ 194,462 $ 204,799 $ 138,174 $ 0.90
Restructuring, integration and other charges 28,067 28,067 20,161 0.13
Gain on bargain purchase and other - (29,023 ) (29,577 ) (0.19 )

Income tax adjustments

- - 13,932 0.09
Total adjustments 28,067 (956 ) 4,516 0.03

Adjusted results

$ 222,529 $ 203,843 $ 142,690 0.93

Items impacting the first quarter of fiscal 2011 consisted of the following:

First Quarter Fiscal 2010

First Quarter Fiscal 2010
Diluted
Op Income Pre-tax Net Income EPS
$ in thousands, except per share data
GAAP results $ 89,000 $ 76,635 $ 50,895 $ 0.33
Restructuring, integration and other charges 18,072 18,072 13,202 0.09
Income tax adjustments - - 3,145 0.02
Total adjustments 18,072 18,072 16,347 0.11
Adjusted results $ 107,072 $ 94,707 $ 67,242 0.44

Items impacting the first quarter of fiscal 2010 consisted of the following:

Pro Forma (Organic) Revenue

Pro forma or Organic revenue is defined as reported revenue adjusted for (i) the impact of acquisitions by adjusting Avnet's prior periods to include the sales of businesses acquired as if the acquisitions had occurred at the beginning of fiscal 2010; (ii) the impact of the extra week of sales in the prior year first quarter due to the "52/53 week" fiscal year; and (iii) the impact of the transfer of the existing embedded business from TS Americas to EM Americas which occurred in the first quarter of fiscal 2011, which did not have an impact to Avnet on a consolidated basis but did impact the groups by $98 million. Sales taking into account the combination of these adjustments is referred to as "pro forma sales" or "organic sales".

Revenue adjusted for this impact is presented in the following table:

Revenue Acquisition Extra Week Pro forma
as Reported Revenue in Q1 FY10 Revenue
(in thousands)
Q1 Fiscal 2011

$ 6,182,388 $ 21,387 $ - $ 6,203,775
Q1 Fiscal 2010

$ 4,355,036 $ 969,174 $ (417,780 ) $ 4,906,430
Q2 Fiscal 2010

4,834,524 1,108,575 - 5,943,099
Q3 Fiscal 2010

4,756,786 1,026,859 - 5,783,645
Q4 Fiscal 2010

5,213,826 921,216 - 6,135,042
Fiscal year 2010

$ 19,160,172 $ 4,025,824 $ (417,780 ) $ 22,768,216

"Acquisition Revenue" as presented in the preceding table includes the following acquisitions:

Acquired Business

Operating Group

Acquisition Date

Bell Micro Products Inc. TS/EM July 2010
Tallard Technologies TS July 2010
Unidux EM July 2010

Teleconference Webcast and Upcoming Events

Avnet will host a Webcast of its quarterly teleconference today at 2:00 p.m. Eastern Time. The live Webcast event, as well as other financial information including Ray Sadowski's, chief financial officer, "CFO Review of Results" and financial statement reconciliations of GAAP and non-GAAP financial measures, will be available through www.ir.avnet.com. Please log onto the site 15 minutes prior to the start of the event to register or download any necessary software. An archive copy of the presentation will also be available after the Webcast.

For a listing of Avnet's upcoming events and other information, please visit Avnet's investor relations website at www.ir.avnet.com.

About Avnet

Avnet, Inc. (NYSE:AVT) is one of the largest distributors of electronic components, computer products and embedded technology serving customers in more than 70 countries worldwide. Avnet accelerates its partners' success by connecting the world's leading technology suppliers with a broad base of more than 100,000 customers by providing cost-effective, value-added services and solutions. For the fiscal year ended July 3, 2010, Avnet generated revenue of $19.16 billion. For more information, visit www.avnet.com. (AVT_IR)

AVNET, INC.
FINANCIAL HIGHLIGHTS
(MILLIONS EXCEPT PER SHARE DATA)

FIRST QUARTERS ENDED

OCTOBER 2, OCTOBER 3,
2010 * 2009 *
Sales $6,182.4 $4,355.0
Income before income taxes 204.8 76.6
Net income 138.2 50.9
Net income per share:
Basic $0.91 $0.34
Diluted $0.90 $0.33

* See Notes to Consolidated Statements of Operations on Page 12.

AVNET, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS EXCEPT PER SHARE DATA)
FIRST QUARTERS ENDED
OCTOBER 2, OCTOBER 3,
2010 * 2009 *
Sales $6,182,388 $4,355,036
Cost of sales 5,459,243 3,855,298
Gross profit 723,145 499,738

Selling, general and administrative expenses

500,616 392,666

Restructuring, integration and other charges (Note 1 *)

28,067 18,072
Operating income 194,462 89,000
Other income, net 3,339 2,917
Interest expense (22,025) (15,282)
Gain on bargain purchase and other (Note 2*) 29,023 -
Income before income taxes 204,799 76,635
Income tax provision 66,625 25,740
Net income $138,174 $50,895
Net earnings per share:
Basic $0.91 $0.34
Diluted $0.90 $0.33
Shares used to compute earnings
per share:
Basic 152,004 151,276
Diluted 153,646 152,635

* See Notes to Consolidated Statements of Operations on Page 12.

AVNET, INC.
CONSOLIDATED BALANCE SHEETS
(THOUSANDS)
OCTOBER 2, JULY 3,
2010 2010

Assets:

Current assets:
Cash and cash equivalents $661,706 $1,092,102
Receivables, net 4,415,707 3,574,541
Inventories 2,495,497 1,812,766
Prepaid and other current assets 268,026 150,759
Total current assets 7,840,936 6,630,168
Property, plant and equipment, net 346,219 302,583
Goodwill 773,931 566,309
Other assets 341,651 283,322
Total assets 9,302,737 7,782,382

Less liabilities:

Current liabilities:
Borrowings due within one year 498,398 36,549
Accounts payable 3,454,992 2,862,290
Accrued expenses and other 647,235 540,776
Total current liabilities 4,600,625 3,439,615
Long-term debt 1,260,119 1,243,681
Other long-term liabilities 111,795 89,969
Total liabilities 5,972,539 4,773,265

Shareholders' equity

$3,330,198 $3,009,117
AVNET, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS)
FIRST QUARTERS ENDED
OCTOBER 2, OCTOBER 3,
2010 2009

Cash flows from operating activities:

Net income

$138,174 $50,895

Non-cash and other reconciling items:

Depreciation and amortization 20,843 15,647
Deferred income taxes (13,020) 11,757
Stock based compensation 8,602 15,124
Gain on bargain purchase and other (29,023) -
Other, net 21,270 4,504

Changes in (net of effects from businesses acquired):

Receivables (110,909) (219,366)

Inventories

(269,768) (135,520)
Accounts payable 130,710 312,827
Accrued expenses and other, net (9,209) (49,642)
Net cash flows (used for) provided by operating activities (112,330) 6,226

Cash flows from financing activities:

Borrowings under accounts receivable securitization program

190,000 -

Repayment of notes

(5,205) -

Proceeds from bank debt, net

60,445 29,349

Proceeds from other debt, net

16,210 210

Other, net

82 1,873
Net cash flows provided by financing activities 261,532 31,432

Cash flows from investing activities:

Purchases of property, plant, and equipment

(31,938) (10,314)

Cash proceeds from sales of property, plant and equipment

388 1,241

Acquisitions of operations, net of cash acquired and other

(574,815) (476)

Net cash flows used for investing activities (606,365) (9,549)

Effect of exchange rates on cash and cash equivalents

26,767 15,266

Cash and cash equivalents:

- (decrease) increase

(430,396) 43,375

- at beginning of period

1,092,102 943,921

- at end of period

$661,706 $987,296
AVNET, INC.
SEGMENT INFORMATION
(MILLIONS)
FIRST QUARTERS ENDED
OCTOBER 2, OCTOBER 3,

SALES:

2010 2009
Electronics Marketing $3,620.6 $2,438.0
Technology Solutions 2,561.8 1,917.0

Consolidated

$6,182.4 $4,355.0
OPERATING INCOME (LOSS):
Electronics Marketing $192.1 $81.4
Technology Solutions 56.7 51.4
Corporate (26.3) (25.7)
222.5 107.1

Restructuring, integration and other charges

(28.1) (18.1)
Consolidated $194.4 $89.0

AVNET, INC.
NOTES TO CONSOLIDATED STATEMENTS OF OPERATIONS
FIRST QUARTER OF FISCAL 2011

(1) The results for the first quarter of fiscal 2011 included restructuring, integration and other charges which totaled $28,067,000 pre-tax, $20,161,000 after tax and $0.13 per share on a diluted basis and were incurred primarily in connection with the acquisitions and integrations of acquired businesses. The charges included transaction costs of $10,762,000 pre-tax associated with the Bell, Tallard and Unidux acquisitions and primarily included broker fees, professional fees for legal and accounting due diligence and related costs. Restructuring charges of $10,704,000 pre-tax consisted of severance costs of $8,279,000 and facility exit related costs and other charges of $2,425,000 which were incurred as a result of the integration activities associated with the acquisitions. Integration costs of $7,322,000 pre-tax included professional fees associated with legal and IT consulting, facility moving costs, travel, meeting, marketing and communication costs that were incrementally incurred as a result of the integration activity. Also included in integration costs are incremental salary and associated employee benefit costs, primarily of the acquired businesses' personnel who were retained by Avnet for extended periods following the close of the acquisitions solely to assist in the integration of the acquired business' IT systems and administrative and logistics operations into those of Avnet. These identified personnel have no other meaningful day-to-day operational responsibilities outside of the integration effort. The Company also recorded a reversal of $721,000 pre-tax related to restructuring reserves established in prior years.

The results for the first quarter of fiscal 2010 included restructuring, integration and other charges which totaled $18,072,000 pre-tax, $13,202,000 after tax and $0.09 per share on a diluted basis. Restructuring costs of $15,991,000 pre-tax related to the remaining cost reductions that began in fiscal 2009 and consisted of severance, facility exit costs and fixed asset write-downs associated with the exited facilities. The Company also recognized $2,931,000 pre-tax of integration costs associated with acquired businesses, $1,104,000 pre-tax of other charges and a reversal of $1,954,000 pre-tax related to restructuring reserves established in prior years.

(2) During the first quarter of fiscal 2011, the Company acquired Unidux, Inc., a Japanese publicly traded electronics component distributor, through a tender offer. After evaluating all assets acquired and liabilities assumed, the consideration paid was below the fair value of the acquired net assets and, as a result, the Company recognized a gain on bargain purchase of $30,990,000 pre- and after tax, and $0.20 per share on a diluted basis. It is not uncommon that the trading price of certain Japanese public companies shares are below book value, which was the primary driver of the gain on bargain purchase. In addition, the Company recognized other charges of $1,967,000 pre-tax, $1,413,000 after tax and $0.01 per share on a diluted basis primarily related to the write down of two buildings in EMEA.

SOURCE: Avnet, Inc.

Investor Relations Contact:
Avnet, Inc.
Vincent Keenan
Investor Relations
480-643-7053
investorrelations@avnet.com

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