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Avnet Reports Fiscal Fourth Quarter and 2018 Financial Results

Fourth quarter sales rose 10 percent year over year

Transformation delivered cash flow from operations of $236 million, the highest in five years

PHOENIX--(BUSINESS WIRE)--Aug. 8, 2018-- Avnet, Inc. (Nasdaq: AVT) today announced results for the fourth quarter and fiscal year ended June 30, 2018.

Fourth Quarter Key Financial Highlights

  • Sales of $5.06 billion increased 9.8% year over year
    • Sales grew 6.7% year over year in constant currency
  • GAAP operating income margin of 2.5%
    • Non-GAAP adjusted operating income margin improved year over year to 3.7%
  • GAAP diluted EPS from continuing operations of $0.49
    • Non-GAAP diluted EPS of $0.99 increased 18% year over year
  • Delivered the strongest adjusted operating income dollars and margin performance in five quarters
  • Net working capital days improved sequentially by 7 days, from 93 to 86, and improved 14 days from the second quarter
  • Cash flow from operations reached $236 million

CEO Commentary

“We closed fiscal 2018 with great momentum in revenue growth, earnings and cash flow generation,” said Bill Amelio, Chief Executive Officer, Avnet. “Avnet’s unique ecosystem gives our customers access to an unparalleled suite of capabilities. We can now guide our enterprise and startup customers alike from idea to product and product to market. We do this by reducing complexity and delivering solutions that get products to market quickly and cost effectively. Our ecosystem is foundational, and when coupled with our ongoing transformation initiatives, we see a very exciting road ahead.”

Key Financial Metrics
($ in millions, except per share data)

 
Fourth Quarter Results (GAAP)
    Jun – 18   Jun – 17   Change Y/Y   Mar – 18   Change Q/Q
Sales   $ 5,059.2     $ 4,606.4     9.8   %   $ 4,795.1       5.5   %
Operating Income (Loss)     127.9       93.4     37.0   %     (54.4 )     335.2   %
Operating Income (Loss) Margin     2.5 %     2.0 %   50   bps     (1.1 ) %   366   bps
Diluted Earnings (Loss) Per Share   $ 0.49     $ 0.59     (16.9 ) %   $ (2.64 )     118.6   %
Fourth Quarter Results (Non-GAAP)(1)
    Jun – 18   Jun – 17   Change Y/Y   Mar – 18   Change Q/Q
Sales   $ 5,059.2     $ 4,606.4     9.8   %   $ 4,795.1       5.5   %
Adjusted Operating Income     186.5       155.2     20.2   %     174.9       6.7   %
Adjusted Operating Income Margin     3.7 %     3.4 %   32   bps     3.7   %   4   bps
Adjusted Diluted Earnings Per Share   $ 0.99     $ 0.84     17.9   %   $ 1.02       (2.9 ) %
Segment and Geographical Mix
    Jun – 18   Jun – 17   Change Y/Y   Mar – 18   Change Q/Q
Electronic Components (EC) Sales   $ 4,668.7     $ 4,260.7     9.6   %   $ 4,404.1       6.0   %
EC Operating Income Margin     3.4 %     3.6 %   (15 ) bps     3.6   %   (15 ) bps
Premier Farnell (PF) Sales   $ 390.5     $ 345.7     13.0   %   $ 391.0       (0.1 ) %
PF Operating Income Margin     11.8 %     10.3 %   149   bps     11.4   %   42   bps
Americas Sales   $ 1,339.2     $ 1,332.2     0.5   %   $ 1,276.4       4.9   %
EMEA Sales     1,779.6       1,651.0     7.8   %     1,812.3       (1.8 ) %
Asia Sales     1,940.4       1,623.2     19.6   %     1,706.3       13.7   %

(1)

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

CFO Commentary

“Our transformation efforts are contributing meaningfully toward our goals of growing Avnet’s higher margin businesses, reducing our expenses and optimizing working capital. This progress culminated in $236 million of cash flow from operations in the fourth quarter, Avnet’s best operating cash flow performance in five years,” stated Tom Liguori, Chief Financial Officer, Avnet. ”Our focus on optimizing operating expenses resulted in an additional $37 million of savings being implemented at the end of the fourth quarter to further streamline expenses as we enter fiscal year 2019.”

Additional Fourth Quarter Highlights

  • Named a global distribution partner for Microsemi Corp., a wholly owned subsidiary of Microchip Technology. This expands Avnet’s multi-year relationship with Microchip, and gives Avnet customers access to Microsemi’s complete portfolio of semiconductor and system solutions for aerospace and defense, communications, data center and industrial markets.
  • Added three new suppliers to the Electronic Components business and four new suppliers to Premier Farnell
  • Surpassed one million members in Avnet’s online communities of element14 and Hackster.io, more than double the members from one year ago
  • Earned a ranking in the top 10 on the 2018 Gartner Supply Chain Top 25 list
  • Expanded the Company’s industry expertise by adding semiconductor veteran Oleg Khaykin to Avnet’s board of directors, where he serves on the audit and the corporate governance committees
  • Strengthened the Electronic Components business unit by adding Tony Roybal, who joined Avnet as regional president, Americas Electronic Components, reporting to Phil Gallagher
  • Continued to maintain a strong book-to-bill ratio above 1.0 across all regions
  • Delivered the strongest sales quarter of the year for the Electronic Components business with 6% sales growth sequentially
  • Doubled online sales year-over-year
  • Repurchased 2.9 million Avnet shares for $117 million
  • Paid $0.19 per share dividend for a total of $22.1 million
  • Reported end of quarter cash and cash equivalents of $621.1 million; debt was $1.7 billion with a leverage ratio of approximately 2.2

Outlook for the First Quarter of Fiscal 2019 Ending on September 29, 2018

      Guidance Range     Midpoint
Sales     $4.8B - $5.2B     $5.0B
Non-GAAP Diluted EPS(1)     $0.95 - $1.05     $1.00
Estimated Tax Rate     20% - 24%     22%

(1)

  A reconciliation of non-GAAP guidance to GAAP guidance is presented in the “Non-GAAP Financial Information” section of this press release.
     
     

The above guidance excludes any additional acquisitions, any results of discontinued operations, amortization of intangibles, accelerated depreciation, any potential restructuring, integration, and other expenses and certain income tax adjustments including certain impacts of the recent tax law changes in the U.S. The above guidance assumes 117 million average diluted shares outstanding and the average U.S. Dollar to Euro currency exchange rate for the first quarter of fiscal 2019 is $1.16 to €1.00. This compares with an average exchange rate of $1.17 to the Euro in the first quarter of fiscal 2018.

Today’s Conference Call and Webcast Details:

Avnet will host a quarterly teleconference and webcast today at 1:30 p.m. PDT. The live webcast can be accessed from the following link Avnet Earnings Call Webcast and Slides and will be available for 90 days.

To participate in the live call, dial 877-407-8112 or 201-689-8840. To access the slides follow the webcast link above, or the slides can be accessed via Avnet’s Investor Relations web page at: www.ir.avnet.com.

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: Avnet’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, implementing and maintaining ERP systems, supplier losses and changes to supplier programs, an industry down-cycle in semiconductors, 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 price discounts 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 Avnet’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.

About Avnet

From idea to design and from prototype to production, Avnet supports customers at each stage of a product’s lifecycle. A comprehensive portfolio of design and supply chain services makes Avnet the go-to guide for innovators who set the pace for technological change. For nearly a century, Avnet has helped its customers and suppliers around the world realize the transformative possibilities of technology. Learn more about Avnet at www.avnet.com. Visit the Avnet Investor Relations website at www.ir.avnet.com or contact us at investorrelations@avnet.com. (AVT_IR)

AVNET, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

                             
      Fourth Quarters Ended     Years Ended
      June 30,   July 1,     June 30,   July 1,
      2018   2017     2018   2017
      (Thousands, except per share data)
Sales     $ 5,059,220     $ 4,606,404       $ 19,036,892     $ 17,439,963  
Cost of sales       4,400,588       3,975,788         16,509,708       15,070,521  
Gross profit       658,632       630,616         2,527,184       2,369,442  
Selling, general and administrative expenses       493,840       495,210         1,970,103       1,770,627  
Goodwill Impairment expense                     181,440        
Restructuring, integration and other expenses       36,848       42,033         145,125       137,415  
Operating income       127,944       93,373         230,516       461,400  
Other (expense) income, net       (7,639 )     (13,495 )       17,086       (44,305 )
Interest expense       (26,779 )     (25,173 )       (102,525 )     (106,691 )
Income from continuing operations before taxes       93,526       54,705         145,077       310,404  
Income tax expense (benefit)       35,787       (18,574 )       287,966       47,053  
Income (loss) from continuing operations, net of tax       57,739       73,279         (142,889 )     263,351  
Income (loss) from discontinued operations, net of tax       876       8,167         (13,535 )     261,927  
Net income (loss)     $ 58,615     $ 81,446       $ (156,424 )   $ 525,278  
                             
Earnings (loss) per share - basic:                            
Continuing operations     $ 0.49     $ 0.59       $ (1.19 )   $ 2.07  
Discontinued operations       0.01       0.07         (0.11 )     2.06  
Net income (loss) per share basic     $ 0.50     $ 0.66       $ (1.30 )   $ 4.13  
                             
Earnings (loss) per share - diluted:                            
Continuing operations     $ 0.49     $ 0.59       $ (1.19 )   $ 2.05  
Discontinued operations       0.01       0.07         (0.11 )     2.03  
Net income (loss) per share diluted     $ 0.50     $ 0.65       $ (1.30 )   $ 4.08  
                             
Shares used to compute earnings per share:                            
Basic       116,948       124,209         119,909       127,032  
Diluted       117,863       125,062         119,909       128,651  
Cash dividends paid per common share     $ 0.19     $ 0.18       $ 0.74     $ 0.70  
                                     
                                     

AVNET, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

               
      June 30,   July 1,
      2018   2017
      (Thousands)
ASSETS              
Current assets:              
Cash and cash equivalents     $ 621,125   $ 836,384
Marketable securities           281,326
Receivables, net       3,641,139     3,337,624
Inventories       3,141,822     2,824,709
Prepaid and other current assets       206,513     253,765
Total current assets       7,610,599     7,533,808
Property, plant and equipment, net       522,909     519,575
Goodwill       980,872     1,148,347
Intangible assets, net       219,913     277,291
Other assets       262,552     220,568
Total assets     $ 9,596,845   $ 9,699,589
               
LIABILITIES AND SHAREHOLDERS’ EQUITY              
Current liabilities:              
Short-term debt     $ 165,380   $ 50,113
Accounts payable       2,269,478     1,861,635
Accrued expenses and other       534,603     542,023
Total current liabilities       2,969,461     2,453,771
Long-term debt       1,489,219     1,729,212
Other liabilities       453,084     334,538
Total liabilities       4,911,764     4,517,521
Shareholders’ equity       4,685,081     5,182,068
Total liabilities and shareholders’ equity     $ 9,596,845   $ 9,699,589
               
               

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

               
      Years Ended
      June 30, 2018   July 1, 2017
      (Thousands)
Cash flows from operating activities:              
Net (loss) income     $ (156,424 )   $ 525,278  
Less: (Loss) income from discontinued operations, net of tax       (13,535 )     261,927  
Loss (income) from continuing operations       (142,889 )     263,351  
               
Non-cash and other reconciling items:              
Depreciation       143,397       101,407  
Amortization       91,475       53,953  
Deferred income taxes       (87,141 )     (17,705 )
Stock-based compensation       23,990       47,686  
Goodwill impairment expense       181,440        
Other, net       49,383       29,104  
Changes in (net of effects from businesses acquired and divested):              
Receivables       (296,175 )     (371,820 )
Inventories       (308,663 )     84,408  
Accounts payable       409,608       163,604  
Accrued expenses and other, net       189,060       (132,941 )
Net cash flows provided by operating activities - continuing operations       253,485       221,047  
Net cash flows used by operating activities - discontinued operations             (589,738 )
Net cash flows provided (used) by operating activities       253,485       (368,691 )
               
Cash flows from financing activities:              
Issuance of notes, net of issuance costs             296,374  
Repayment of notes             (530,800 )
Repayments under accounts receivable securitization, net       (37,000 )     (588,000 )
Borrowings (repayments) under senior unsecured credit facility, net       8,850       (50,029 )
(Repayments) borrowings under bank credit facilities and other debt, net       (97,954 )     27,877  
Borrowings of term loans             530,756  
Repayments of term loans             (511,358 )
Repurchases of common stock       (323,516 )     (275,884 )
Dividends paid on common stock       (88,255 )     (88,657 )
Other, net       (4,018 )     (1,870 )
Net cash flows used by financing activities - continuing operations       (541,893 )     (1,191,591 )
Net cash flows provided by financing activities - discontinued operations             3,447  
Net cash flows used by financing activities       (541,893 )     (1,188,144 )
               
Cash flows from investing activities:              
Purchases of property, plant and equipment       (155,873 )     (120,397 )
Acquisitions of businesses, net of cash acquired       (15,254 )     (802,744 )
Other, net       6,653       18,656  
Net cash flows used for investing activities - continuing operations       (164,474 )     (904,485 )
Net cash flows provided by investing activities - discontinued operations       236,205       2,242,959  
Net cash flows provided by investing activities       71,731       1,338,474  
Effect of currency exchange rate changes on cash and cash equivalents       1,418       23,267  
Cash and cash equivalents:              
— (decrease) increase       (215,259 )     (195,094 )
— at beginning of period       836,384       1,031,478  
— at end of period     $ 621,125     $ 836,384  
                   
                   

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 certain non-GAAP financial information including (i) adjusted operating income, (ii) adjusted other income (expense), (iii) adjusted income tax expense, (iv) adjusted income from continuing operations, (v) adjusted diluted earnings per share, and (vi) sales adjusted for the impact of acquisitions and other items (as defined in the Organic Sales section of this document).

There are also references to the impact of foreign currency in the discussion of the Company’s results of operations. When the U.S. Dollar strengthens and the stronger exchange rates of the current year are used to translate the results of operations of Avnet’s subsidiaries denominated in foreign currencies, the resulting impact is a decrease in U.S. Dollars of reported results. Conversely, when the U.S. Dollar weakens and the weaker exchange rates of the current year are used to translate the results of operations of Avnet’s subsidiaries denominated in foreign currencies, the resulting impact is an increase in U.S. Dollars of reported results. In the discussion of the Company’s results of operations, results excluding this impact are referred to as “excluding the impact of changes in foreign currency exchange rates” or “constant currency.” Management believes organic sales and sales in constant currency are useful measures for evaluating current period performance as compared with prior periods and for understanding underlying trends. In order to determine the translation impact of changes in foreign currency exchange rates on sales, income or expense items for subsidiaries reporting in currencies other than the U.S. Dollar, the Company adjusts the average exchange rates used in current periods to be consistent with the average exchange rates in effect during the comparative period.

Management believes that operating income adjusted for restructuring, integration and other expenses, goodwill impairment expense and amortization of acquired intangible assets and other, are useful measures to help investors better assess and understand the Company’s operating performance. This is especially the case 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 or non-cash in nature. Management analyzes operating income without the impact of these items as well as other income (expense) excluding certain amounts 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 many cases, for measuring performance for compensation purposes. Management measures operating income for our reportable segments excluding restructuring, integration and other expenses, goodwill impairment expense and amortization of acquired intangible assets and other.

Additional non-GAAP metrics management uses is adjusted operating income margin, which is defined as adjusted operating income (as defined above) divided by sales.

Management also believes income tax expense, income from continuing operations and diluted earnings per share from continuing operations adjusted for the impact of the items described above and certain items impacting other expense and income tax expense are useful to investors because they provide a measure of the Company’s net profitability on a more comparable basis to historical periods and provide 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 income from continuing operations and diluted earnings per share from continuing operations excluding the impact of these items provides an important measure of the Company’s net profitability for the investing public.

Any analysis of results and outlook on a non-GAAP basis should be used as a complement to, and in conjunction with, results presented in accordance with GAAP.

      Fiscal   Quarters Ended
      Year to Date   June 30,   March 31,   December 30,   September 30,
      2018*   2018*   2018*   2017*   2017*
      ($ in thousands, except per share amounts)
GAAP operating income (loss) - continuing operations     $ 230,516     $ 127,944     $ (54,401 )   $ 87,018     $ 69,955  
Restructuring, integration and other expenses - continuing operations       145,125       36,848       25,120       36,762       46,394  
Goodwill impairment expense - continuing operations       181,440       -       181,440       -       -  
Amortization of intangible assets and other - continuing operations       91,923       21,736       22,725       21,877       25,585  
Adjusted operating income (loss) - continuing operations       649,004       186,529       174,884       145,657       141,934  
                                 
GAAP other income (expense), net - continuing operations     $ 17,086     $ (7,639 )   $ 8,384     $ 762     $ 15,579  
Foreign currency (gain) loss and other expenses- continuing operations       (9,762 )     (559 )     137       546       (9,886 )
Adjusted other income (expense), net - continuing operations       7,324       (8,198 )     8,521       1,308       5,693  
                                 
GAAP income (loss) before income taxes- continuing operations     $ 145,077     $ 93,526     $ (72,063 )   $ 62,140     $ 61,474  
Restructuring, integration and other expenses - continuing operations       145,125       36,848       25,120       36,762       46,394  
Goodwill impairment expense - continuing operations       181,440       -       181,440       -       -  
Amortization of intangible assets and other - continuing operations       91,923       21,736       22,725       21,877       25,585  
Foreign currency (gain) loss and other expenses- continuing operations       (9,762 )     (559 )     137       546       (9,886 )
Adjusted income (loss) before income taxes - continuing operations       553,803       151,551       157,359       121,325       123,567  
                                 
GAAP income tax expense (benefit) - continuing operations     $ 287,966     $ 35,787     $ 243,541     $ 5,346     $ 3,292  
Restructuring, integration and other expenses - continuing operations       41,460       9,921       5,757       9,004       16,778  
Amortization of intangible assets and other - continuing operations       18,556       4,376       4,575       4,405       5,200  
Foreign currency (gain) loss and other expenses- continuing operations       (3,494 )     (180 )     33       84       (3,431 )
Discrete income tax (expense) benefit items, net - continuing operations       (218,444 )     (14,549 )     (218,810 )     8,017       6,898  
Adjusted income tax expense - continuing operations       126,044       35,355       35,096       26,856       28,737  
                                 
GAAP income (loss) - continuing operations     $ (142,889 )   $ 57,739     $ (315,604 )   $ 56,794     $ 58,182  
Restructuring, integration and other expenses (net of tax) - continuing operations       103,665       26,927       19,363       27,758       29,616  
Goodwill impairment expense (net of tax) - continuing operations       181,440       -       181,440       -       -  
Amortization of intangible assets and other (net of tax) - continuing operations       73,367       17,360       18,150       17,472       20,385  
Foreign currency (gain) loss and other expenses (net of tax) - continuing operations       (6,268 )     (379 )     104       462       (6,455 )
Discrete income tax expense (benefit) items, net - continuing operations       218,444       14,549       218,810       (8,017 )     (6,898 )
Adjusted income (loss) - continuing operations       427,759       116,196       122,263       94,469       94,829  
                                 
GAAP diluted earnings (loss) per share - continuing operations     $ (1.19 )   $ 0.49     $ (2.64 )   $ 0.47     $ 0.47  
Restructuring, integration and other expenses (net of tax) - continuing operations       0.86       0.23       0.16       0.23       0.24  
Goodwill impairment expense (net of tax) - continuing operations       1.52       -       1.52       -       -  
Amortization of intangible assets and other (net of tax) - continuing operations       0.61       0.15       0.15       0.14       0.16  
Foreign currency (gain) loss and other expenses (net of tax) - continuing operations       (0.05 )     -       -       -       (0.05 )
Discrete income tax expense (benefit) items, net - continuing operations       1.82       0.12       1.83       (0.07 )     (0.06 )
Adjusted diluted EPS - continuing operations       3.57       0.99       1.02       0.78       0.76  

*

  May not foot/crossfoot due to rounding
     
     
          Fiscal Year 2017
          Quarters Ended
    Fiscal   July 1,   April 1,   December 31,   October 1,
    2017*   2017*   2017*   2016*   2016*
          ($ in thousands, except per share amounts)
GAAP selling, general and administrative expenses - continuing operations   $ 1,770,627     $ 495,210     $ 480,190     $ 431,555     $ 363,672  
Amortization of intangible assets and other - continuing operations     (54,526 )     (19,822 )     (22,497 )     (9,829 )     (2,378 )
Adjusted operating expenses - continuing operations     1,716,101       475,388       457,693       421,726       361,294  
                               
GAAP operating income - continuing operations   $ 461,400     $ 93,373     $ 114,283     $ 124,230     $ 129,514  
Restructuring, integration and other expenses - continuing operations     137,415       42,033       35,513       30,400       29,469  
Amortization of intangible assets and other - continuing operations     54,526       19,822       22,497       9,829       2,378  
Adjusted operating income - continuing operations     653,341       155,228       172,293       164,459       161,361  
                               
GAAP other (expense) income, net - continuing operations   $ (44,305 )   $ (13,495 )   $ 19,439     $ (36,514 )   $ (13,734 )
Unrealized (gain) loss on marketable securities and other - continuing operations     765       14,624       (13,859 )     -       -  
Acquisition related FX hedging and financing costs - continuing operations     43,707       -       -       32,700       11,007  
Adjusted other (expense) income, net - continuing operations     167       1,129       5,580       (3,814 )     (2,727 )
                               
GAAP income before income taxes- continuing operations   $ 310,404     $ 54,705     $ 106,188     $ 60,968     $ 88,544  
Restructuring, integration and other expenses - continuing operations     137,415       42,033       35,513       30,400       29,469  
Amortization of intangible assets and other - continuing operations     54,526       19,822       22,497       9,829       2,378  
Unrealized (gain) loss on marketable securities and other - continuing operations     765       14,624       (13,859 )     -       -  
Acquisition related FX hedging and financing costs - continuing operations     43,707       -       -       32,700       11,007  
Adjusted income before income taxes - continuing operations     546,817       131,184       150,339       133,897       131,398  
                               
GAAP income tax expense (benefit) - continuing operations   $ 47,053     $ (18,574 )   $ 16,268     $ 28,503     $ 20,856  
Restructuring, integration and other expenses - continuing operations     45,403       16,324       12,455       7,378       9,246  
Amortization of intangible assets and other - continuing operations     14,670       6,654       5,077       2,342       597  
Unrealized (gain) loss on marketable securities and other - continuing operations     1,381       6,812       (5,431 )     -       -  
Acquisition related FX hedging and financing costs - continuing operations     6,968       -       -       4,230       2,738  
Discrete income tax benefit (expense) items, net - continuing operations     14,695       14,987       7,712       (9,369 )     1,365  
Adjusted income tax expense - continuing operations     130,170       26,203       36,081       33,084       34,802  
                               
GAAP income - continuing operations   $ 263,351     $ 73,279     $ 89,920     $ 32,465     $ 67,688  
Restructuring, integration and other expenses (net of tax) - continuing operations     92,012       25,709       23,058       23,022       20,223  
Amortization of intangible assets and other (net of tax) - continuing operations     39,856       13,168       17,420       7,487       1,781  
Unrealized (gain) loss on marketable securities and other (net of tax) - continuing operations     (616 )     7,812       (8,428 )     -       -  
Acquisition related FX hedging and financing costs (net of tax) - continuing operations     36,739       -       -       28,470       8,269  
Discrete income tax expense (benefit) items, net - continuing operations     (14,695 )     (14,987 )     (7,712 )     9,369       (1,365 )
Adjusted income - continuing operations     416,647       104,981       114,258       100,813       96,596  
                               
GAAP diluted EPS - continuing operations   $ 2.05     $ 0.59     $ 0.69     $ 0.25     $ 0.52  
Restructuring, integration and other expenses (net of tax) - continuing operations     0.73       0.21       0.18       0.18       0.16  
Amortization of intangible assets and other (net of tax) - continuing operations     0.32       0.11       0.14       0.06       0.01  
Unrealized (gain) loss on marketable securities and other (net of tax) - continuing operations     (0.01 )     0.06       (0.07 )     -       -  
Acquisition related FX hedging and financing costs (net of tax) - continuing operations     0.28       -       -       0.22       0.06  
Discrete income tax expense (benefit) items, net - continuing operations     (0.13 )     (0.13 )     (0.06 )     0.07       (0.01 )
Adjusted diluted EPS - continuing operations     3.24       0.84       0.88       0.77       0.74  
*   May not foot/crossfoot due to rounding
     
     

Organic Sales

Organic sales is defined as sales adjusted for the impact of significant acquisitions, divestitures and other items by adjusting Avnet’s prior and current (if necessary) periods to include the sales of acquired businesses and exclude the sales of divested businesses as if the acquisitions and divestitures had occurred at the beginning of the earliest period presented. Organic sales is measured on a sales from continuing operations basis. Organic sales in constant currency is defined as organic sales (as defined above) excluding the impact of changes in foreign currency exchange rates.

The following table presents reported and organic sales growth rates for the fourth quarter and full year of fiscal 2018 compared to fiscal 2017.

      Fourth Quarter Ended     Year Ended
              Organic               Organic
                Year-Year %               Year-Year %
      As Reported   Organic   Change in     As Reported   Organic   Change in
      and Organic   Year-Year   Constant     and Organic   Year-Year   Constant
      Fiscal 2018   % Change   Currency     Fiscal 2018   % Change   Currency
      (Dollars in millions)
Avnet     $ 5,059.2   9.8 %   6.7 %     $ 19,036.9   6.8   %   3.6   %
Avnet by region                                        
Americas     $ 1,339.2   0.5 %   0.5 %     $ 5,011.4   (5.8 ) %   (5.8 ) %
EMEA       1,779.6   7.8     0.0         6,790.9   11.5       2.5    
Asia       1,940.4   19.6     18.8         7,234.6   12.9       12.7    
Avnet by segment                                        
EC     $ 4,668.7   9.6 %   6.5 %     $ 17,543.6   6.5   %   3.4   %
PF       390.5   13.0     8.6         1,493.3   11.1       6.5    
                                             
                                             

The following table presents the reconciliation of reported sales to organic sales for the fourth quarter and full year of fiscal 2017.

      Fourth Quarter                    
      Ended     Year Ended
      As Reported     Sales as       Organic
      and Organic     Reported   Sales from   Sales
      Fiscal 2017     Fiscal 2017   Acquisitions (1)   Fiscal 2017
      (in millions)
Avnet     $ 4,606.4     $ 17,440.0   $ 378.3   $ 17,818.3
Avnet by region                            
Americas     $ 1,332.2     $ 5,163.9   $ 154.4   $ 5,318.3
EMEA       1,651.0       5,912.9     178.9     6,091.8
Asia       1,623.2       6,363.2     45.0     6,408.2
Avnet by segment                            
EC     $ 4,260.7     $ 16,474.1   $   $ 16,474.1
PF       345.7       965.9     378.3     1,344.2

(1)

  Includes Premier Farnell acquired on October 17, 2016, which has operations in each Avnet region.
     
     

Sales from suppliers lost as a result of supplier channel changes were $2.3 million, $0.5 million and $3.3 million in the fourth quarter of fiscal 2018 for the Americas, EMEA and Asia regions, respectively compared to sales of $61.7 million, $103.8 million and $71.5 million in the fourth quarter of fiscal 2017 for the Americas, EMEA and Asia regions, respectively.

Sales from suppliers lost as a result of supplier channel changes were $36.8 million, $45.1 million and $45.8 million in fiscal 2018 for the Americas, EMEA and Asia regions, respectively compared to sales of $263.2 million, $388.1 million and $328.3 million in fiscal 2017 for the Americas, EMEA and Asia regions, respectively.

Historical Segment Financial Information

          Fiscal Year 2018
          Quarters Ended
          Fourth Quarter   Third Quarter   Second Quarter   First Quarter
      Fiscal Year   June 30,   March 31,   December 30,   September 30,
      2018*   2018     2018*   2017     2017  
      (in millions)
Sales:                                
Electronic Components     $ 17,543.6     $ 4,668.7     $ 4,404.1     $ 4,163.5     $ 4,307.2  
Premier Farnell       1,493.3       390.5       391.0       358.1       353.7  
Avnet sales     $ 19,036.9     $ 5,059.2     $ 4,795.1     $ 4,521.6     $ 4,660.9  
                                 
Operating income:                                
Electronic Components     $ 587.3     $ 160.1     $ 157.7     $ 129.9     $ 139.6  
Premier Farnell       160.8       46.0       44.4       35.6       34.8  
        748.1       206.1       202.1       165.5       174.4  
Corporate expenses       (99.0 )     (19.7 )     (27.2 )     (19.8 )     (32.4 )
Restructuring, integration and other expenses       (145.1 )     (36.8 )     (25.1 )     (36.8 )     (46.4 )
Goodwill impairment expense       (181.4 )     -       (181.4 )     -       -  
Amortization of acquired intangible assets and other       (91.9 )     (21.7 )     (22.7 )     (21.9 )     (25.6 )
Avnet operating income (loss)     $ 230.5     $ 127.9     $ (54.4 )   $ 87.0     $ 70.0  
                                 
Sales by geographic area:                                
Americas     $ 5,011.4     $ 1,339.2     $ 1,276.4     $ 1,210.2     $ 1,185.5  
EMEA       6,790.9       1,779.6       1,812.3       1,506.0       1,693.0  
Asia       7,234.6       1,940.4       1,706.3       1,805.4       1,782.4  
Avnet sales     $ 19,036.9     $ 5,059.2     $ 4,795.1     $ 4,521.6     $ 4,661.0  

*

  May not foot/crossfoot due to rounding
     
     
          Fiscal Year 2017
          Quarters Ended
          Fourth Quarter   Third Quarter   Second Quarter   First Quarter
      Fiscal Year   July 1,   April 1,   December 31,   October 1,
      2017   2017   2017   2016   2016
      (in millions)
Sales:                                
Electronic Components     $ 16,474.1     $ 4,260.7     $ 4,090.9     $ 4,004.3     $ 4,118.1  
Premier Farnell (1)       965.9       345.7       351.0       269.2       -  
Avnet sales     $ 17,440.0     $ 4,606.4     $ 4,441.9     $ 4,273.6     $ 4,118.1  
                                 
Operating income:                                
Electronic Components     $ 661.0     $ 152.4     $ 156.8     $ 166.7     $ 185.1  
Premier Farnell (1)       99.8       35.5       40.3       24.0       -  
        760.8       187.9       197.1       190.7       185.1  
Corporate expenses (2)       (107.5 )     (32.7 )     (24.9 )     (26.3 )     (23.7 )
Restructuring, integration and other expenses       (137.4 )     (42.0 )     (35.5 )     (30.4 )     (29.5 )
Amortization of acquired intangible assets and other       (54.5 )     (19.8 )     (22.5 )     (9.8 )     (2.4 )
Avnet operating income     $ 461.4     $ 93.4     $ 114.3     $ 124.2     $ 129.5  
                                 
Sales by geographic area:                                
Americas     $ 5,163.9     $ 1,332.2     $ 1,328.6     $ 1,252.6     $ 1,250.5  
EMEA       5,912.9       1,651.0       1,615.9       1,380.7       1,265.3  
Asia       6,363.2       1,623.2       1,497.4       1,640.3       1,602.3  
Avnet sales     $ 17,440.0     $ 4,606.4     $ 4,441.9     $ 4,273.6     $ 4,118.1  

(1)

  Premier Farnell was acquired on October 17, 2016.

(2)

  Prior to the divestiture of the Technology Solutions business in Q3 FY17, a portion of Corporate support expenses were classified within discontinued operations.
     
     

Guidance Reconciliation

The following table presents the reconciliation of non-GAAP adjusted diluted earnings per share guidance to the expected GAAP diluted earnings per share guidance for the first quarter of fiscal 2019.

      Low End of     High End of
      Guidance Range     Guidance Range
                 
Adjusted diluted earnings per share guidance     $ 0.95       $ 1.05  
Restructuring, integration and other expense (net of tax) (1)       (0.22 )       (0.14 )
Amortization of intangibles and other (net of tax)       (0.16 )       (0.15 )
Income tax expense adjustments       (0.04 )       0.04  
GAAP diluted earnings per share guidance     $ 0.53       $ 0.80  

(1)

  Includes accelerated depreciation.

 

Source: Avnet, Inc.

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