Avnet, Inc.
Aug 10, 2016

Avnet Reports Fourth Quarter and Fiscal Year 2016 Results

PHOENIX--(BUSINESS WIRE)-- Avnet, Inc. (NYSE:AVT) today announced results for the fourth quarter and fiscal year 2016 ended July 2, 2016.

Q4 Fiscal 2016 Results

"In the June quarter, our Technology Solutions (TS) group delivered seasonal sequential growth while Electronics Marketing (EM) sequential growth was below our normal seasonal range. Even with the year-over-year decline in revenue, our gross profit margin increased and our Avnet Advantage program resulted in $70 million of annual expense reduction exiting fiscal 2016," said Bill Amelio, interim CEO of Avnet. "Moving forward, we are defining a clear strategy that leverages our strengths, and we are focusing on accelerating growth, taking cost out of the business and delivering services that will add value for our partners."

Amelio further added, "We have also increased the pace of some of our strategic investments as we focus on building and enhancing our global capabilities. Our recent offer to acquire Premier Farnell is one example of how we aim to strengthen our digital footprint worldwide. With disciplined execution against our priorities, we can drive sustained growth over time."

 
      Fourth Quarters Ended
July 2, 2016       June 27, 2015       Change
$ in millions, except per share data
Sales $ 6,226.8 $ 6,796.3 (8.4) %
Constant Currency (1) (8.3) %
Operating Income 173.0 180.5 (4.2) %
Adjusted Operating Income (1) 194.7 243.8 (20.1) %
Net Income 96.8 158.7 (39.0) %
Adjusted Net Income (1) 112.3 159.5 (29.6) %
Diluted EPS $ 0.75 $ 1.15 (34.8) %
Adjusted Diluted EPS (1) $ 0.86 $ 1.16 (25.9) %
 
(1)   Year-over-year sales growth rate excludes the impact of changes in foreign currency exchange rates. A discussion on the impact of foreign currency on the Company's results of operations, the definition of organic sales and a reconciliation of non-GAAP financial information is attached as exhibit 99.2 ("Exhibit 99.2") to the Form 8-K filed with the Securities Exchange Commission on August 10, 2016.

Cash Flow and Returns to Shareholders

"We used cash this quarter as EM built inventory in support of the ERP implementation in the Americas and our accounts payable declined as our fiscal calendar ended after the calendar quarter," said Kevin Moriarty, CFO of Avnet. "Our balance sheet remains strong as we have over $1 billion of cash on hand and approximately $1.2 billion of available liquidity under our credit facility and accounts receivable securitization program."

Moriarty added, "With dedicated financing already committed for the Premier Farnell offer, we are well positioned to complete the acquisition and make investments that will transform our business to satisfy the needs of our customers and suppliers around the world."

Avnet Electronics Marketing Results

 
            Year-over-Year Growth Rates
Q4 FY16 Reported       Organic
Sales Sales Sales
(in millions)
EM Total $ 3,939.2 (8.7) % (8.7) %
Constant Currency (1) (9.4) % (9.4) %
Americas $ 1,082.2 (14.8) % (14.8) %
EMEA $ 1,293.0 3.9 % 3.9 %
Constant Currency (1) 2.2 % 2.2 %
Asia $ 1,564.0 (13.2) % (13.2) %
Constant Currency (1) (13.8) % (13.8) %
     
Q4 FY16 Q4 FY15 Change
Operating Income $ 155.6 $ 205.9 (24.4) %
Operating Income Margin 4.0 % 4.8 % (82) bps
 
(1)   Refer to Exhibit 99.2.
 

Avnet Technology Solutions Results

 
            Year-over-Year Growth Rates
Q4 FY16 Reported       Organic
Sales Sales Sales
(in millions)
TS Total $ 2,287.6 (7.8) % (8.9) %
Constant Currency (1) (6.4) % (7.6) %
Americas $ 1,382.9 (7.6) % (8.0) %
EMEA $ 620.8 (0.7) % (4.5) %
Constant Currency (1) 0.8 % (3.0) %
Asia $ 283.9 (20.8) % (20.8) %
Constant Currency (1) (17.8) % (17.8) %
 
      Q4 FY16       Q4 FY15       Change
Operating Income $ 70.8 $ 77.6 (8.8) %
Operating Income Margin 3.1 % 3.1 % (3) bps
 
(1)   Refer to Exhibit 99.2.
 

Fiscal 2016 Avnet Results

 
      FISCAL YEARS ENDED
July 2, 2016       June 27, 2015       Change
 
$ in millions, except per share data
Sales $ 26,219.3 $ 27,924.7 (6.1) %
Constant Currency (1) (3.2) %
Operating Income 787.7 827.7 (4.8) %
Adjusted Operating Income (1) 895.6 972.5 (7.9) %
Net Income 506.5 571.9 (11.4) %
Adjusted Net Income (1) 562.1 623.1 (9.8) %
Diluted EPS $ 3.80 $ 4.12 (7.8) %
Adjusted Diluted EPS (1) $ 4.22 $ 4.49 (6.0) %
 
(1)   Refer to Exhibit 99.2.
 

Outlook for First Quarter of Fiscal 2017 Ending on October 1, 2016

The above guidance excludes any acquisitions, the amortization of intangibles, any potential restructuring, integration and other expenses and certain income tax adjustments. In addition, the above guidance assumes that the average U.S. Dollar to Euro currency exchange rate for the first quarter of fiscal 2017 is $1.11 to €1.00. This compares with an average exchange rate of $1.11 to €1.00 in the first quarter of fiscal 2016 and $1.13 to €1.00 in the fourth quarter of fiscal 2016.

In alignment with Avnet's goal to build a global embedded solutions business, Avnet transferred a portion of its embedded computing solutions business to EM Americas from TS Americas at the beginning of fiscal 2017. As a result of this transfer, approximately $450 million of annual revenue that had been previously reported in TS will be included within EM beginning in fiscal 2017. Therefore, the above guidance for the first quarter of fiscal 2017 takes into account the transfer from TS to EM of approximately $100 million. When adjusted for this transfer and the impact of foreign currency, the midpoint of guidance for EM and TS would represent sequential growth rates of +1% and -5%, respectively, as compared with a normal seasonal range of -2% to +2% for EM and -10% to -5% for TS.

Refer to Exhibit 99.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on August 10, 2016, for a reconciliation of non-GAAP guidance.

Forward-Looking Statements

This document 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," "intend," "estimate," "forecast," "expect," "feel," "believe," "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 differ 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, an industry down-cycle in semiconductors, IT hardware or software products, declines in sales, 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, and 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. Except as required by law, Avnet is under no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Teleconference and Upcoming Events

Avnet will host a quarterly teleconference today at 11:00 a.m. Eastern Time. Financial information, including financial statement reconciliations of GAAP to 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 teleconference will also be available after the call.

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

From components to cloud and design to disposal, Avnet (NYSE: AVT) accelerates the success of customers who build, sell and use technology globally by providing them with a comprehensive portfolio of innovative products, services and solutions. Avnet is a Fortune 500 company with revenues of $26.2 billion for the fiscal year 2016. For more information, visit www.avnet.com. (AVT_IR)

 

AVNET, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 
      Fourth Quarters Ended       Years Ended
July 2,       June 27, July 2,       June 27,
2016 2015 2016 2015
(Thousands, except per share data)
Sales $ 6,226,812 $ 6,796,331 $ 26,219,279 $ 27,924,657
Cost of sales   5,495,773   6,010,535   23,181,768   24,731,537
Gross profit 731,039 785,796 3,037,511 3,193,120
Selling, general and administrative expenses 542,100 561,585 2,170,524 2,274,642
Restructuring, integration and other expenses   15,966   43,734   79,318   90,805
Operating income 172,973 180,477 787,669 827,673
Other expense, net (7,964) (3,080) (18,105) (19,043)
Interest expense   (29,750)   (23,729)   (99,055)   (95,665)
Income before income taxes 135,259 153,668 670,509 712,965
Income tax expense (benefit)   38,453   (5,065)   163,978   141,052
Net income $ 96,806 $ 158,733 $ 506,531 $ 571,913
Earnings per share:
Basic $ 0.76 $ 1.16 $ 3.87 $ 4.18
Diluted $ 0.75 $ 1.15 $ 3.80 $ 4.12
Shares used to compute earnings per share:
Basic   127,930   135,855   130,858   136,688
Diluted   129,799   137,622   133,173   138,791
Cash dividends paid per common share $ 0.17 $ 0.16 $ 0.68 $ 0.64
 
 

AVNET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 
      July 2,       June 27,
2016 2015
(Thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 1,031,478 $ 932,553
Receivables, net 4,975,120 5,054,307
Inventories 2,856,231 2,482,183
Prepaid and other current assets   141,144   115,858
Total current assets 9,003,973 8,584,901
Property, plant and equipment, net 612,658 568,779
Goodwill 1,281,220 1,278,756
Intangible assets, net 78,397 99,731
Other assets   263,557   267,786
Total assets $ 11,239,805 $ 10,799,953
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 1,152,599 $ 331,115
Accounts payable 3,233,781 3,338,052
Accrued expenses and other   556,113   603,129
Total current liabilities 4,942,493 4,272,296
Long-term debt 1,339,204 1,646,501
Other liabilities   266,822   196,135
Total liabilities 6,548,519 6,114,932
Shareholders' equity   4,691,286   4,685,021
Total liabilities and shareholders' equity $ 11,239,805 $ 10,799,953
 
 

AVNET, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 
      Years Ended
July 2,       June 27,
2016 2015
(Thousands)
Cash flows from operating activities:
Net income $ 506,531 $ 571,913
Non-cash and other reconciling items:
Depreciation 98,403 95,645
Amortization 28,076 51,674
Deferred income taxes 122,734 18,436
Stock-based compensation 56,908 62,006
Other, net 48,333 87,649
Changes in (net of effects from businesses acquired):
Receivables 25,642 (204,114)
Inventories (367,684) (73,226)
Accounts payable (114,335) 156,565
Accrued expenses and other, net   (180,293)   (182,665)
Net cash flows provided by operating activities   224,315   583,883
 
Cash flows from financing activities:
Issuance of notes, net of issuance costs 541,500
Repayment of notes (250,000)
Borrowings (repayments) under accounts receivable securitization, net 80,000 35,000
Borrowings (repayments) of bank and revolving debt, net 142,840 (115,173)
Repurchases of common stock (380,943) (159,984)
Dividends paid on common stock (88,594) (87,330)
Other, net   (11,448)   (13,501)
Net cash flows provided (used) for financing activities   33,355   (340,988)
 
Cash flows from investing activities:
Purchases of property, plant and equipment (147,548) (174,374)
Acquisitions of businesses, net of cash acquired (19,675)
Other, net   14,710   (11,969)
Net cash flows used for investing activities   (152,513)   (186,343)
 
Effect of currency exchange rate changes on cash and cash equivalents   (6,232)   (52,970)
 
Cash and cash equivalents:
— increase (decrease) 98,925 3,582
— at beginning of period   932,553   928,971
— at end of period $ 1,031,478 $ 932,553
 
 

AVNET, INC.

SEGMENT INFORMATION

(UNAUDITED)

 
     

Fourth Quarters
Ended

      Years Ended
July 2,       June 27, July 2,       June 27,
2016 2015 2016* 2015
(Millions)
Sales:
Electronics Marketing $ 3,939.2 $ 4,315.9 $ 16,566.8 $ 17,344.7
Technology Solutions   2,287.6   2,480.5   9,652.5   10,580.0
Avnet Sales $ 6,226.8 $ 6,796.4 $ 26,219.3 $ 27,924.7
Operating Income (Expense):
Electronics Marketing $ 155.6 $ 205.9 $ 725.9 $ 797.4
Technology Solutions 70.8 77.6 317.9 325.7
Corporate   (31.7)   (39.7)   (148.2)   (150.5)
194.7 243.8 895.6 972.5
Restructuring, integration and other expenses (16.0) (43.7) (79.3) (90.8)
Amortization of intangible assets and other   (5.8)   (19.6)   (28.6)   (54.0)
Operating Income $ 173.0 $ 180.5 $ 787.7 $ 827.7
 
*   Sub-totals and totals may not foot due to rounding

Investor Relations Contact
Avnet, Inc.
Vincent Keenan, 480-643-7053
Investor Relations
investorrelations@avnet.com
or
Media Relations Contact
Maureen O'Leary, 480-643-7499
Corporate Communications
maureen.oleary@avnet.com

Source: Avnet, Inc.

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