Avnet, Inc.
Oct 27, 2016

Avnet Reports First Quarter Fiscal Year 2017 Results

Strategic Transition Underway

PHOENIX--(BUSINESS WIRE)-- Avnet, Inc. (NYSE:AVT) today announced results for the first quarter fiscal year 2017 ended October 1, 2016.

Highlights

The first quarter of fiscal 2016 ended October 3, 2015, had an extra week of sales, which resulted in an estimated $525 million impact on adjusted sales and $0.11 to $0.13 on adjusted diluted EPS.

                 
First Quarters Ended
October 1, 2016 October 3, 2015 Change

$ in millions, except per share data

Adjusted Sales (1) $ 6,040.3 $ 6,969.7 (13.3 ) %
Constant Currency (2)

(13.3

)

%
Sales $ 4,173.4 $ 4,600.8 (9.3 ) %
Constant Currency (2)

(9.7

)

%
 
Operating Income 131.0 170.0 (22.9 ) %
Adjusted Operating Income (1) 193.1 240.4 (19.7 ) %
Net Income 68.8 130.3 (47.1 ) %
Adjusted Net Income (3) 118.4 152.9 (22.6 ) %
Adjusted Diluted EPS (3) $ 0.91 $ 1.12 (18.8 ) %
Diluted EPS $ 0.53 $ 0.96 (44.8 ) %
 
(1)  

As the TS business is a discontinued operation, the Avnet reported Sales and Operating Income amounts exclude the sales and operating income from TS for the periods presented. References to Adjusted Sales and Adjusted Operating Income include the sales and operating income, respectively, of TS as well as other historical adjustments. See the reconciliation of non-GAAP financial information attached as exhibit 99.2 to the Form 8-K filed with the Securities Exchange Commission on October 27, 2016 ("Exhibit 99.2").

(2) 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 included in Exhibit 99.2.
(3) Non-GAAP financial measures. See Exhibit 99.2.

"We took a significant step in our strategic transition as we completed the acquisition of Premier Farnell on October 17th and announced the sale of our Technology Solutions operating group to Tech Data Corporation on September 19th. With the sale of TS, we will be singularly focused on leveraging EM's design and supply chain services with Premier Farnell's digital platform to offer the broadest suite of products and services to support customers at every stage of the product lifecycle," said Bill Amelio, CEO of Avnet. "Just as technology has impacted many areas of commerce, it is changing how our customer's want to interact from design through production. As engineers do more of their research online, we are confident that the combination of EM and Premier Farnell will allow us to reach a broader base of customers earlier in the design cycle with a much lower cost to serve."

Amelio further added, "Avnet has a long history of adapting to changes in the technology marketplace and we believe the strategic direction we are setting today will expand our growth opportunities, increase our margins and returns and generate increased shareholder value in the future."

Cash Flow and Returns to Shareholders

"At the end of October we will use approximately $180 million of our offshore cash and approximately $660 million of new debt to pay for the acquisition of Premier Farnell. While our borrowing levels will be temporarily elevated, once completed, we expect to use a meaningful portion of the proceeds from the sale of TS to reduce debt and return to historical credit statistics consistent with our investment grade rating," said Kevin Moriarty, CFO of Avnet. "Even after paying for Premier Farnell, the proceeds from the sale of TS will allow us to maintain a strong balance sheet, fund future growth and provide excess cash that we can return to shareholders."

Discontinued Operations

On September 19, 2016, Avnet announced that it had entered into an agreement to sell its TS business to Tech Data Corporation. The transaction is subject to customary closing conditions and regulatory approval and is expected to close in the first half of calendar 2017. As a result of the pending sale and having met applicable accounting requirements, Avnet, Inc. is reporting the TS business as a discontinued operation beginning with the first quarter of fiscal 2017 and prior periods have been adjusted for comparability.

Avnet Electronics Marketing Results

The first quarter of fiscal 2016 ended October 3, 2015, had an extra week of sales, which resulted in an estimated $300 million impact on EM sales

                 
Year-over-Year Growth Rates

Q1 FY17
Sales

Reported
Sales

Organic
Sales

 

(in millions)

EM Total $ 4,173.4 (9.3 ) % (3.0 ) %

Constant Currency (1)

(9.7 ) % (3.4 ) %
Americas $ 1,305.8 (5.1 ) % 1.0 %
EMEA $ 1,265.3 (5.4 ) % 1.5 %
Constant Currency (1) (5.3 ) % 1.7 %
Asia $ 1,602.3 (15.1 ) % (9.0 ) %
Constant Currency (1)

(16.1

)

%

(10.1

)

%
 
                Q1 FY17     Q1 FY16     Change
Operating Income $ 186.5 $ 217.7 (14.3 ) %
Operating Income Margin 4.5 % 4.7 % (26 ) bps
(1)   Refer to Exhibit 99.2.
 

Avnet Technology Solutions Results

The first quarter of fiscal 2016 ended October 3, 2015 had an extra week of sales, which resulted in an estimated $225 million impact on TS sales

                 
Year-over-Year Growth Rates

Q1 FY17
Sales

Reported
Sales

Organic
Sales

 

(in millions)

TS Total (1) $ 1,866.9 (21.2 ) % (14.8 ) %
Constant Currency (2) (20.3 ) % (13.8 ) %
Americas $ 1,043.5 (25.4 ) % (17.7 ) %
EMEA $ 580.3 (14.3 ) % (11.0 ) %
Constant Currency (2) (10.0 ) % (6.5 ) %
Asia $ 243.1 (17.1 ) % (10.1 ) %
Constant Currency (2) (18.3 ) % (11.4 ) %
                 
Q1 FY17 Q1 FY16 Change
Operating Income (1) $ 42.7 $ 69.8 (38.9 ) %
Operating Income Margin 2.3 % 3.0 % (66 ) bps
(1)   The TS business is a discontinued operation. Refer to Exhibit 99.2.
(2) Refer to Exhibit 99.2.

Outlook for Second Quarter of Fiscal 2017 Ending on December 31, 2016

The above guidance excludes any additional acquisitions, the amortization of intangibles, any potential restructuring, integration and other expenses and certain income tax adjustments. The above guidance also excludes any results from the TS business. In addition, the above guidance assumes that the average U.S. Dollar to Euro currency exchange rate for the second quarters of fiscal 2017 is $1.09 to €1.00, consistent with the second quarter of fiscal 2016.

Refer to Exhibit 99.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 27, 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, the separation and pending sale of the TS business, 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 from design to disposal, Avnet, Inc. (NYSE: AVT) accelerates the success of customers who build, sell and use technology by providing a comprehensive portfolio of innovative products, services and solutions. For more information, visit www.avnet.com. (AVT_IR)

Visit Avnet's Investor Relations website at www.ir.avnet.com or contact us at investorrelations@avnet.com.

 

AVNET, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

       

First Quarters Ended

October 1,
2016

October 3,
2015

(Thousands, except per share data)

Sales $ 4,173,405 $ 4,600,802
Cost of sales   3,647,920     4,037,546  
Gross profit 525,485 563,256
Selling, general and administrative expenses 365,025 380,751
Restructuring, integration and other expenses   29,469     12,518  
Operating income 130,991 169,987
Other income (expense), net (13,733 ) 882
Interest expense   (27,237 )   (22,032 )
Income from continuing operations before income taxes 90,021 148,837
Income tax expense   21,435     37,849  
Income from continuing operations 68,586 110,988
Income from discontinued operations, net of income taxes of $21,295 and $9,403, respectively   257     19,266  
Net income $ 68,843   $ 130,254  
 
Earnings per share- basic:
Continuing operations $ 0.54 $ 0.83
Discontinued operations   0.00     0.14  
Net income per share - basic $ 0.54   $ 0.97  
 
Earnings per share- diluted:
Continuing operations $ 0.53 $ 0.82
Discontinued operations   0.00     0.14  
Net income per share - diluted $ 0.53   $ 0.96  
 
Shares used to compute earnings per share:
Basic   127,531     133,783  
Diluted   129,763     136,326  
Cash dividends paid per common share $ 0.17   $ 0.17  
 
 

AVNET, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

             

October 1,
2016

July 2,
2016

(Thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 1,196,545 $ 1,031,478
Receivables, net 2,876,346 2,803,678
Inventories 2,418,761 2,589,659
Prepaid and other current assets 76,514 81,196
Assets held for sale   3,131,587   2,497,962
Total current assets 9,699,753 9,003,973
Property, plant and equipment, net 471,321 453,209
Goodwill 620,850 621,852
Intangible assets, net 20,823 22,571
Other assets 233,376 239,133
Non-current assets held for sale     899,067
Total assets $ 11,046,123 $ 11,239,805

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Short-term debt $ 98,017 $ 1,152,599
Accounts payable 1,463,555 1,616,694
Accrued expenses and other 419,445 394,888
Liabilities held for sale   1,452,851   1,778,312
Total current liabilities 3,433,868 4,942,493
Long-term debt 2,609,617 1,339,204
Other liabilities 213,612 223,053
Non-current liabilities held for sale     43,769
Total liabilities 6,257,097 6,548,519
Shareholders' equity   4,789,026   4,691,286
Total liabilities and shareholders' equity $ 11,046,123 $ 11,239,805
 
 

AVNET, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

             
Three Months Ended

October 1,
2016

October 3,
2015

(Thousands)
Cash flows from operating activities:
Net income $ 68,843 $ 130,254
Less: Income from discontinued operations, net of tax   257     19,266  
Income from continuing operations 68,586 110,988
 
Non-cash and other reconciling items:
Depreciation 19,694 8,237
Amortization 1,930 2,436
Deferred income taxes 6,412 3,381
Stock-based compensation 17,576 24,350
Other, net 10,714 9,411
Changes in (net of effects from businesses acquired):
Receivables (64,587 ) 124,076
Inventories 182,240 (282,846 )
Accounts payable (164,777 ) (2,476 )
Accrued expenses and other, net   33,522     (33,535 )
Net cash flows provided (used) for operating activities- continuing operations   111,310     (35,978 )
Net cash flows (used) provided by operating activities- discontinued operations   (111,446 )   2,237  
Net cash flows used for operating activates   (136 )   (33,741 )
 
Cash flows from financing activities:
Repayment of notes (300,000 ) (250,000 )
Repayments under accounts receivable securitization, net (150,265 ) (33,045 )
Borrowings of bank and revolving debt, net 669,803 418,756
Repurchases of common stock (143,725 )
Dividends paid on common stock (21,676 ) (22,612 )
Other, net   682     (2,503 )
Net cash flows provided (used) for financing activities - continuing operations   198,544     (33,129 )
Net cash flows used for financing activities - discontinued operations   (4,756 )   (160 )
Net cash flows provided (used) for financing activities   193,788     (33,289 )
 
Cash flows from investing activities:
Purchases of property, plant and equipment (34,729 ) (31,205 )
Other, net   432     1,568  
Net cash flows used for investing activities - continuing operations   (34,297 )   (29,637 )
Net cash flows used for investing activities - discontinued operations   (95 )   (2,395 )
Net cash flows used for investing activities   (34,392 )   (32,032 )
 
Effect of currency exchange rate changes on cash and cash equivalents 5,807 (8,796 )
Net change in cash and cash equivalents 165,067 (107,858 )
Cash and cash equivalents at beginning of period   1,031,478     932,553  
Cash and cash equivalents at end of period $ 1,196,545   $ 824,695  
 
 

AVNET, INC.
SEGMENT INFORMATION
(UNAUDITED)

             
First Quarters Ended

October 1,
2016

October 3,
2015*

(Millions)
Sales:
Electronics Marketing (continuing operations) $ 4,173.4 $ 4,600.8
Technology Solutions (discontinued operations) 1,866.9 2,368.9
 
Operating Income (Expense):
Electronics Marketing (continuing operations) $ 186.5 $ 213.0
Technology Solutions (discontinued operations) 42.7 74.5
Corporate specific to or benefiting Electronic Marketing (23.6 ) (32.1 )
Corporate specific to or benefiting Technology Solutions   (12.5 )   (15.1 )
193.1 240.4
Restructuring, integration and other expenses - continuing operations (29.5 ) (12.5 )
Restructuring, integration and other expenses - discontinued operations (4.2 ) (13.4 )
Amortization of acquired intangible assets and other - continuing operations (2.4 ) (2.8 )
Amortization of acquired intangible assets and other - discontinued operations (4.5 ) (4.6 )
Less: TS discontinued operations   (21.5 )   (37.0 )
Operating Income $ 131.0   $ 170.0  

* Sub-totals and totals may not foot due to rounding

 

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

Source: Avnet, Inc.

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