Avnet Reports Third Quarter Fiscal Year 2017 Results
Investing in New Global ERP System to Support Digital Transformation Provides Fiscal 2018 Outlook Reflecting Impact of Supplier Program Changes
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Diluted earnings per share from continuing operations of
$0.69 -
Adjusted diluted EPS from continuing operations of
$0.88
-
Adjusted diluted EPS from continuing operations of
-
Premier Farnell sales exceeded expectations and contributed to margin expansion -
Completed sale of Technology Solutions for
~$2.4 billion in cash and~$250 million in Tech Data Corporation shares -
Paid down
~$1.8 billion of debt and increased share repurchase authorization by$500 million -
Accelerating ERP depreciation charges of approximately
$18 million in FY17 and$72 million in FY18
Third Quarters Ended | ||||||||||||
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Change | ||||||||||
Avnet (1) | $ in millions, except per share data | |||||||||||
Sales | $ | 4,441.9 | $ | 4,082.0 | 8.8 | % | ||||||
Constant Currency (2) | 10.6 | % | ||||||||||
Operating Income | 114.3 | 150.0 | (23.8 | ) | % | |||||||
Adjusted Operating Income (3) | 172.3 | 161.3 | 6.8 | % | ||||||||
Income from continuing operations | 89.9 | 107.8 | (16.6 | ) | % | |||||||
Adjusted Income from continuing operations (3) | 114.3 | 107.1 | 6.7 | % | ||||||||
Diluted EPS | $ | 0.69 | $ | 0.82 | (15.9 | ) | % | |||||
Adjusted Diluted EPS (3) | $ | 0.88 | $ | 0.81 | 8.6 | % | ||||||
_______________________ |
(1) | The information excludes the Technology Solutions (TS) business as the sale of this business was completed during the quarter. See "Discontinued Operations," below. | |
(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 Avnet results of operations is included in
Exhibit 99.2 to the Form 8-K filed with the |
|
(3) | Non-GAAP measures. Refer to Exhibit 99.2 for a reconciliation of non-GAAP financial information. |
"Our organic revenue grew 3.4% sequentially in constant currency and
adjusted operating income increased 4.8%. Our investments in e-commerce
continue to yield results as digital sales exceeded a
Avnet Regional Sales Results
Year-over-Year Growth Rates | |||||||||||||
Q3 FY17 | Reported | Organic | |||||||||||
Sales | Sales | Sales | |||||||||||
(in millions) |
|||||||||||||
Avnet Total | $ | 4,441.9 | 8.8 | % | 0.2 | % | |||||||
Constant Currency (1) | 10.6 | % | 1.8 | % | |||||||||
|
$ | 1,328.6 | 8.3 | % | (2.8 | ) | % | ||||||
EMEA | $ | 1,615.9 | 21.4 | % | 7.4 | % | |||||||
Constant Currency (1) | 27.0 | % | 12.3 | % | |||||||||
|
$ | 1,497.4 | (1.7 | ) | % | (4.2 | ) | % | |||||
Constant Currency (1) | (1.6 | ) | % | (4.1 | ) | % | |||||||
___________________ |
(1) | Refer to Exhibit 99.2. |
-
Sales increased 10.6% from the year ago quarter in constant currency
- Organic sales increased 1.8% in constant currency
- EMEA organic sales increased 12.3% year over year in constant currency on an organic basis, representing the 15th consecutive quarter of organic growth
-
Gross profit margin increased 142 basis points from the year ago
quarter primarily due to the addition of
Premier Farnell , as well as improvements in theAsia region -
Working capital (defined as receivables plus inventories less accounts
payables) increased 9.1% sequentially, primarily due to an increase in
the EMEA and
Asia regions
Cash Flow and Returns to Shareholders
-
Cash flow from continuing operations was a use of
$163 million in the March quarter -
Cash and cash equivalents at the end of the quarter was
$1.13 billion ; net debt (total debt less cash and cash equivalents) was$628 million -
During the March quarter, the Company repurchased 3.1 million shares,
representing an aggregate investment of
$140.1 million -
Entering the fourth quarter, the Company had
$534.8 million remaining under the current share repurchase authorization -
Avnet paid a dividend of
$0.18 per share or$23.1 million during the quarter
"In the March quarter, we used approximately
ERP Update
Given the Company is now solely focused on components and has acquired
significant digital resources, the Company recently performed a thorough
review of both its Enterprise Resource Planning (ERP) system in the
Outlook for Fourth Quarter of Fiscal 2017
Ending on
-
Sales are expected to be in the range of
$4.35 billion to$4.65 billion -
Adjusted diluted earnings per share from continuing operations is
expected to be in the range of
$0.72 to$0.82 per share - The guidance assumes 127 million average diluted shares outstanding and an adjusted tax rate of 22% to 26%
Preliminary Outlook for Fiscal 2018 Ending on
-
Sales are expected to be in the range of
$17.3 billion to$17.7 billion -
Adjusted diluted earnings per share from continuing operations is
expected to be in the range of
$3.00 to$3.50 per share - The guidance assumes 126 million average diluted shares outstanding and an adjusted tax rate of 22% to 26%
The above guidance excludes any additional acquisitions, the
amortization of intangibles, Evolve accelerated depreciation, any
potential restructuring, integration, and other expenses and certain
income tax adjustments. In addition, the above guidance assumes that the
average
Refer to Exhibit 99.2 to the Current Report on Form 8-K filed with the
Discontinued Operations
In
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 and transitioning to a global ERP system, supplier losses and changes to supplier programs, the sale of the TS business, 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 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
Teleconference and Upcoming Events
Avnet will host a quarterly teleconference today at
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 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.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) |
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Third Quarters Ended | Nine Months Ended | ||||||||||||||||||||||||
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2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||
(Thousands, except per share data) | |||||||||||||||||||||||||
Sales | $ | 4,441,896 | $ | 4,081,961 | $ | 12,833,559 | $ | 12,771,628 | |||||||||||||||||
Cost of sales | 3,811,910 | 3,561,019 | 11,094,733 | 11,189,459 | |||||||||||||||||||||
Gross profit | 629,986 | 520,942 | 1,738,826 | 1,582,169 | |||||||||||||||||||||
Selling, general and administrative expenses | 480,190 | 362,064 | 1,275,417 | 1,093,982 | |||||||||||||||||||||
Restructuring, integration and other expenses | 35,513 | 8,854 | 95,382 | 35,455 | |||||||||||||||||||||
Operating income | 114,283 | 150,024 | 368,027 | 452,732 | |||||||||||||||||||||
Other income (expense), net | 19,439 | 1,453 | (30,809 | ) | 284 | ||||||||||||||||||||
Interest expense | (27,534 | ) | (21,388 | ) | (81,518 | ) | (64,385 | ) | |||||||||||||||||
Income from continuing operations before taxes | 106,188 | 130,089 | 255,700 | 388,631 | |||||||||||||||||||||
Income tax expense | 16,268 | 22,297 | 65,627 | 69,774 | |||||||||||||||||||||
Income from continuing operations, net of tax | 89,920 | 107,792 | 190,073 | 318,857 | |||||||||||||||||||||
Income (loss) from discontinued operations, net of tax | (35,237 | ) | 15,667 | 36,671 | 90,868 | ||||||||||||||||||||
Gain on sale of discontinued operations, net of tax | 217,088 | — | 217,088 | — | |||||||||||||||||||||
Income from discontinued operations, net of tax | 181,851 | 15,667 | 253,759 | 90,868 | |||||||||||||||||||||
Net income | $ | 271,771 | $ | 123,459 | $ | 443,832 | $ | 409,725 | |||||||||||||||||
Earnings per share - basic: | |||||||||||||||||||||||||
Continuing operations | $ | 0.70 | $ | 0.83 | $ | 1.48 | $ | 2.42 | |||||||||||||||||
Discontinued operations | 1.42 | 0.12 | 1.98 | 0.69 | |||||||||||||||||||||
Net income per share - basic | $ | 2.12 | $ | 0.95 | $ | 3.46 | $ | 3.11 | |||||||||||||||||
Earnings per share - diluted: | |||||||||||||||||||||||||
Continuing operations | $ | 0.69 | $ | 0.82 | $ | 1.46 | $ | 2.37 | |||||||||||||||||
Discontinued operations | 1.41 | 0.12 | 1.95 | 0.68 | |||||||||||||||||||||
Net income per share - diluted | $ | 2.10 | $ | 0.94 | $ | 3.41 | $ | 3.05 | |||||||||||||||||
Shares used to compute earnings per share: | |||||||||||||||||||||||||
Basic | 128,487 | 129,811 | 127,973 | 131,834 | |||||||||||||||||||||
Diluted | 129,432 | 131,650 | 129,847 | 134,298 | |||||||||||||||||||||
Cash dividends paid per common share | $ | 0.18 | $ | 0.17 | $ | 0.52 | $ | 0.51 |
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
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2017 | 2016 | ||||||||||||||
(Thousands) | |||||||||||||||
ASSETS | |||||||||||||||
Current assets: | |||||||||||||||
Cash and cash equivalents | $ | 1,129,233 | $ | 1,031,478 | |||||||||||
Marketable securities | 261,549 | — | |||||||||||||
Receivables, net | 3,237,440 | 2,769,906 | |||||||||||||
Inventories | 2,771,236 | 2,559,921 | |||||||||||||
Prepaid and other current assets | 273,534 | 81,197 | |||||||||||||
Current assets held for sale | — | 2,561,471 | |||||||||||||
Total current assets | 7,672,992 | 9,003,973 | |||||||||||||
Property, plant and equipment, net | 526,025 | 453,209 | |||||||||||||
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1,140,978 | 621,852 | |||||||||||||
Intangible assets, net | 285,390 | 22,571 | |||||||||||||
Other assets | 220,393 | 239,133 | |||||||||||||
Non-current assets held for sale | — | 899,067 | |||||||||||||
Total assets | $ | 9,845,778 | $ | 11,239,805 | |||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||
Current liabilities: | |||||||||||||||
Short-term debt | $ | 32,574 | $ | 1,152,599 | |||||||||||
Accounts payable | 1,731,275 | 1,590,777 | |||||||||||||
Accrued expenses and other | 880,794 | 394,888 | |||||||||||||
Current liabilities held for sale | — | 1,804,229 | |||||||||||||
Total current liabilities | 2,644,643 | 4,942,493 | |||||||||||||
Long-term debt | 1,724,234 | 1,339,204 | |||||||||||||
Other liabilities | 377,328 | 223,053 | |||||||||||||
Non-current liabilities held for sale | — | 43,769 | |||||||||||||
Total liabilities | 4,746,205 | 6,548,519 | |||||||||||||
Shareholders' equity | 5,099,573 | 4,691,286 | |||||||||||||
Total liabilities and shareholders' equity | $ | 9,845,778 | $ | 11,239,805 |
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
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Nine Months Ended | ||||||||||||||||
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2017 | 2016 | |||||||||||||||
(Thousands) | ||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income | $ | 443,832 | $ | 409,725 | ||||||||||||
Less: Income from discontinued operations, net of tax | 253,759 | 90,868 | ||||||||||||||
Income from continuing operations | 190,073 | 318,857 | ||||||||||||||
Non-cash and other reconciling items: | ||||||||||||||||
Depreciation | 63,800 | 50,789 | ||||||||||||||
Amortization | 34,185 | 5,900 | ||||||||||||||
Deferred income taxes | (15,562 | ) | 3,963 | |||||||||||||
Stock-based compensation | 41,778 | 47,724 | ||||||||||||||
Other, net | 10,563 | 28,687 | ||||||||||||||
Changes in (net of effects from businesses acquired and divested): | ||||||||||||||||
Receivables | (335,617 | ) | 254,305 | |||||||||||||
Inventories | 86,103 | (351,731 | ) | |||||||||||||
Accounts payable | 86,120 | (103,236 | ) | |||||||||||||
Accrued expenses and other, net | (20,977 | ) | (73,147 | ) | ||||||||||||
Net cash flows provided by operating activities - continuing operations | 140,466 | 182,111 | ||||||||||||||
Net cash flows (used) provided by operating activities - discontinued operations | (325,096 | ) | 115,016 | |||||||||||||
Net cash flows (used) provided by operating activities | (184,630 | ) | 297,127 | |||||||||||||
Cash flows from financing activities: | ||||||||||||||||
Issuance of notes, net of issuance costs | 296,374 | 542,043 | ||||||||||||||
Repayment of notes | (530,800 | ) | (250,000 | ) | ||||||||||||
Borrowings (repayments) under accounts receivable securitization, net | (492,000 | ) | (400,012 | ) | ||||||||||||
Borrowings (repayments) of bank and revolving debt, net | (168,386 | ) | 412,253 | |||||||||||||
Borrowings of term loans | 530,756 | — | ||||||||||||||
Repayments of term loans | (511,358 | ) | — | |||||||||||||
Repurchases of common stock | (124,598 | ) | (334,177 | ) | ||||||||||||
Dividends paid on common stock | (66,477 | ) | (66,944 | ) | ||||||||||||
Other, net | 15,838 | (12,028 | ) | |||||||||||||
Net cash flows used for financing activities - continuing operations | (1,050,651 | ) | (108,865 | ) | ||||||||||||
Net cash flows provided by financing activities - discontinued operations | 3,447 | 36,227 | ||||||||||||||
Net cash flows used for financing activities | (1,047,204 | ) | (72,638 | ) | ||||||||||||
Cash flows from investing activities: | ||||||||||||||||
Purchases of property, plant and equipment | (107,960 | ) | (106,776 | ) | ||||||||||||
Acquisitions of businesses, net of cash acquired | (801,164 | ) | — | |||||||||||||
Other, net | 18,404 | 9,559 | ||||||||||||||
Net cash flows used for investing activities - continuing operations | (890,720 | ) | (97,217 | ) | ||||||||||||
Net cash flows provided (used) for investing activities - discontinued operations | 2,235,384 | (25,092 | ) | |||||||||||||
Net cash flows provided (used) for investing activities | 1,344,664 | (122,309 | ) | |||||||||||||
Effect of currency exchange rate changes on cash and cash equivalents | (15,075 | ) | 1,752 | |||||||||||||
Net change in cash and cash equivalents | 97,755 | 103,932 | ||||||||||||||
Cash and cash equivalents at beginning of period | 1,031,478 | 932,553 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 1,129,233 | $ | 1,036,485 |
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Investor Relations Contact
Investor Relations
investorrelations@avnet.com
or
Media
Relations Contact
Maureen O'Leary, 480-643-7499
Corporate
Communications
maureen.oleary@avnet.com
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