UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) January 25, 2007
AVNET, INC.
(Exact Name of Registrant as Specified in Its Charter)
New York
(State or Other Jurisdiction of Incorporation)
| 1-4224 | 11-1890605 | |
| (Commission File Number) | (IRS Employer Identification No.) | |
| 2211 South 47th Street, Phoenix, Arizona | 85034 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
(480) 643-2000
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2. below):
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On January 25, 2007, Avnet, Inc. issued a press release announcing its second quarter results for
fiscal 2007. A copy of the press release is attached hereto as Exhibit 99.1.
The information in this Current Report on Form 8-K and the Exhibit attached hereto is being
furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act
of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it
be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange
Act, except as shall be expressly set forth in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| 99.1 | Press Release of Avnet, Inc. dated January 25, 2007 |
S I G N A T U R E
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
| AVNET, INC. (Registrant) |
||||
| Date: January 25, 2007 | By: | /s/ Raymond Sadowski | ||
| Raymond Sadowski | ||||
| Senior Vice President and Chief Financial Officer |
||||
Exhibit 99.1
January 25, 2007
Avnet, Inc. Reports Second Quarter Fiscal Year 2007 Results
Revenue Diversification and Operating Leverage Drive Strong Growth in Earnings
Avnet, Inc. Reports Second Quarter Fiscal Year 2007 Results
Revenue Diversification and Operating Leverage Drive Strong Growth in Earnings
Phoenix, Arizona - Avnet, Inc. (NYSE:AVT) today reported revenue of $3.89 billion for second
quarter fiscal 2007 ended December 30, 2006, representing an increase of 3.5% over second quarter
fiscal 2006. Excluding the impact of divestitures during fiscal year 2006, second quarter revenue
grew 6.0% over the year ago quarter and 3.2% excluding the impact of foreign currency translation.
Net income for second quarter fiscal 2007 was $99.1 million, or $0.67 per share on a diluted basis,
as compared with net income of $49.6 million, or $0.34 per share on a diluted basis, for the second
quarter last year. Excluding the impact of $32.4 million of restructuring and other charges
recorded in the prior year quarter, net income and diluted earnings per share increased 40% year
over year. Included in these results is stock compensation expense of $0.02 per diluted share in
both the current year and prior year second quarter.
Operating income for second quarter fiscal 2007 was $163.8 million, up 72% as compared with
operating income of $95.5 million in the year ago quarter and up 28% excluding last year’s
restructuring and other charges mentioned above. Operating income as a percent of sales was 4.2%,
up 81 basis points from last year’s second quarter, excluding the restructuring and other charges
recorded in the year ago quarter, with both operating groups contributing to the improvement.
Roy Vallee, Chairman and Chief Executive Officer, commented, “Our strong performance this quarter
was the result of our highly diversified revenue base and continuously improving expense
productivity across both operating groups. While year over year revenue growth slowed to 3.5% this
quarter, we were able to grow operating income eight times faster than revenues for the quarter.
When combined with solid working capital velocity, driven by a sequential reduction in inventory
dollars at EM and seasonally higher sales at TS, return on capital employed improved 155 basis
points over the year ago quarter to 11%, the highest level in over ten years.”
Electronics Marketing (EM) sales of $2.33 billion in the second quarter fiscal 2007 were up 3.4% on
a year over year basis and 5.1% when adjusted for divestitures. EM sales in EMEA and Asia
increased 9.4% and 7.5%, respectively, year over year while the Americas region decreased 3.9%.
Excluding divestitures and the impact of foreign currency translation, year over year growth at EM
EMEA was 6.6%. EM operating income of $119.1 million for second quarter fiscal 2007 was up 30%
over the prior year second quarter operating income of $91.5 million and operating income margin of
5.1% was up 104 basis points over the prior year quarter representing the fourth consecutive
quarter of operating margin in excess of 5.0%.
Mr. Vallee added, “Electronics Marketing delivered another quarter of significant year over year
margin expansion. While revenue growth was dampened by a relatively mild component industry
correction, our gross profit margin at EM was up on both a sequential and year over year basis.
During the quarter, EM reduced inventory by $51 million
1
sequentially in reported U.S. dollars or
approximately $67 million in constant dollars. With inventory managed back to desired levels and
our margins improving, we believe EM is well positioned to drive further earnings improvement as we
enter our seasonally strong March quarter.”
Technology Solutions (TS) sales of $1.56 billion in the second quarter fiscal 2007 were up 3.7%
year over year and up 7.3% when adjusted for the divestiture of Avnet Enterprise
Solutions (“AES”). Second quarter sales in the Americas (excluding AES in the prior year quarter)
and EMEA increased 3.5% and 17.5%, respectively, year over year, while sales in Asia were
essentially flat. Excluding the impact of foreign currency translation, top line growth in EMEA
was 7.0%. TS operating income was $64.0 million, a 15.8% increase as compared with second quarter
fiscal 2006 operating income of $55.3 million, and operating income margin of 4.1% increased by 43
basis points over the prior year second quarter.
Mr. Vallee further added, “Technology Solutions produced its fourteenth straight quarter of year
over year improvement in both operating income dollars and margin. We closed out another strong
December quarter with 28% sequential growth and remain excited about our prospects for TS going
forward as we integrate the recently acquired Access Distribution business. In addition to adding
approximately $2 billion in annual sales, TS is now positioned to sell a broader range of products
and services into an expanded VAR base with the contributions of several hundred talented new
associates. With return on capital consistently exceeding our hurdle rate, TS continues to grow
economic profits and shareholder value.”
The acquisition of Access Distribution was completed on December 31, 2006, the first day of Avnet’s
fiscal third quarter. The integration of the Access business into Avnet’s Technology Solutions
Group is expected to be essentially complete by the end of June 2007 with projected annual costs
savings of at least $15 million.
The Company generated $230 million of free cash flow (as defined later in this release) during the
second quarter of fiscal 2007. As a result, the Company ended the quarter with $390 million of
cash and cash equivalents and net debt (total debt less cash and cash equivalents) of $774 million
prior to the acquisition of Access.
Ray Sadowski, Chief Financial Officer, stated: “This quarter’s cash flow performance is further
evidence of the impact our value based management initiatives have had on the cash generation
capability of our business, and consequently our balance sheet. Over the last four quarters we
have generated approximately $330 million of free cash flow thereby significantly strengthening our
balance sheet and allowing us to finance the Access acquisition with existing liquidity while
maintaining investment grade credit statistics.”
Outlook
For Avnet’s third quarter fiscal 2007, management expects sales at EM to be in the range of $2.43 billion to $2.53 billion and anticipates sales for TS, including Access, to be between $1.67 billion to $1.77 billion. Therefore, Avnet’s consolidated sales are forecasted to be $4.10 billion to $4.30 billion for third quarter fiscal 2007 ending on March 31, 2007. Management expects the third quarter earnings to be in the range of $0.67 to $0.71 per share, including approximately $0.02 per share related to the expensing of stock-based compensation. The above EPS guidance does not include the amortization of intangibles and integration charges related to the acquisition of Access Distribution as those amounts have not yet been determined.
For Avnet’s third quarter fiscal 2007, management expects sales at EM to be in the range of $2.43 billion to $2.53 billion and anticipates sales for TS, including Access, to be between $1.67 billion to $1.77 billion. Therefore, Avnet’s consolidated sales are forecasted to be $4.10 billion to $4.30 billion for third quarter fiscal 2007 ending on March 31, 2007. Management expects the third quarter earnings to be in the range of $0.67 to $0.71 per share, including approximately $0.02 per share related to the expensing of stock-based compensation. The above EPS guidance does not include the amortization of intangibles and integration charges related to the acquisition of Access Distribution as those amounts have not yet been determined.
2
Forward Looking Statements
This press release contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on management’s current expectations and are subject to uncertainty and changes in factual 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 or business prospects. Actual results may vary materially from the expectations contained in the forward-looking statements.
This press release contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on management’s current expectations and are subject to uncertainty and changes in factual 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 or business prospects. 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 the post-closing integration of Access
Distribution, any significant and unanticipated sales decline, changes in business conditions and
the economy in general, changes in market demand and pricing pressures, allocations of products 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 (“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. The non-GAAP financial information is used to reflect the Company’s results of operations excluding certain items that have arisen from restructuring, integration and other charges in the periods presented.
In addition to disclosing financial results that are determined in accordance with generally accepted accounting principles (“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. The non-GAAP financial information is used to reflect the Company’s results of operations excluding certain items that have arisen from restructuring, integration and other charges in the periods presented.
Management believes that operating income adjusted for restructuring, integration and other charges
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
restructuring, integration and other charges 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 similarly believes net income and diluted earnings per share adjusted for the impact of
the items discussed 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 diluted EPS excluding the impact of these items provides an important measure of the Company’s
net results of operations for the investing public.
3
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. Reconciliations of the Company’s
reported results to the results adjusted for the items discussed above are included in the
following table:
| Operating | ||||||||||||
| Quarter ended December 31, 2005 | Income | Net Income | Diluted EPS | |||||||||
| (in thousands, except per share data) | ||||||||||||
GAAP results |
$ | 95,498 | $ | 49,636 | $ | 0.34 | ||||||
Restructuring, integration and other charges |
32,423 | 21,360 | 0.14 | |||||||||
Adjusted results |
$ | 127,921 | $ | 70,996 | $ | 0.48 | ||||||
Cash Flow Activity
The following table summarizes the Company’s cash flow activity for the second quarters and first six months of fiscal 2006 and 2007, including the Company’s computation of free cash flow and a reconciliation of this metric to the nearest GAAP measures of net income and net cash flow from operations. Management’s computation of free cash flow consists of net cash flow from operations plus cash flows generated from or used for purchases and sales of property, plant and equipment, acquisitions of operations, effects of exchange rates on cash and cash equivalents and other financing activities. Management believes that the non-GAAP metric of free cash flow is a useful measure to help management and investors better assess and understand the Company’s operating performance and sources and uses of cash. Management also believes the analysis of free cash flow assists in identifying underlying trends in the business. Computations of free cash flow may differ from company to company. Therefore, the analysis of free cash flow should be used as a complement to, and in conjunction with, the Company’s consolidated statements of cash flows presented in the accompanying financial statements.
The following table summarizes the Company’s cash flow activity for the second quarters and first six months of fiscal 2006 and 2007, including the Company’s computation of free cash flow and a reconciliation of this metric to the nearest GAAP measures of net income and net cash flow from operations. Management’s computation of free cash flow consists of net cash flow from operations plus cash flows generated from or used for purchases and sales of property, plant and equipment, acquisitions of operations, effects of exchange rates on cash and cash equivalents and other financing activities. Management believes that the non-GAAP metric of free cash flow is a useful measure to help management and investors better assess and understand the Company’s operating performance and sources and uses of cash. Management also believes the analysis of free cash flow assists in identifying underlying trends in the business. Computations of free cash flow may differ from company to company. Therefore, the analysis of free cash flow should be used as a complement to, and in conjunction with, the Company’s consolidated statements of cash flows presented in the accompanying financial statements.
Management also analyzes cash flow from operations based upon its three primary components noted in
the table below: net income, non-cash and other reconciling items and cash flow generated from
(used for) working capital. Similar to free cash flow, management believes that this breakout is
an important measure to help management and investors understand the trends in the Company’s cash
flows, including the impact of management’s focus on asset utilization and efficiency through its
management of the net balance of receivables, inventories and accounts payable.
| Second Quarters Ended | Six Months Ended | |||||||||||||||
| December 30, | December 31, | December 30, | December 31, | |||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
| (in thousands) | ||||||||||||||||
Net income |
$ | 99,088 | $ | 49,636 | $ | 163,231 | $ | 74,533 | ||||||||
Non-cash and other reconciling items |
45,933 | 47,814 | 96,783 | 81,672 | ||||||||||||
Cash flow generated from (used for) working capital
(excluding cash and cash equivalents) |
92,653 | (109,192 | ) | (48,957 | ) | (317,205 | ) | |||||||||
Net cash flow generated from (used for) operations |
237,674 | (11,742 | ) | 211,057 | (161,000 | ) | ||||||||||
Cash flow generated from (used for): |
||||||||||||||||
Purchases of property, plant and equipment |
(13,574 | ) | (10,918 | ) | (27,619 | ) | (24,067 | ) | ||||||||
Cash proceeds from sales of property, plant and equipment |
234 | 1,337 | 962 | 1,629 | ||||||||||||
Acquisitions of operations, net |
(4,180 | ) | (6,032 | ) | (4,180 | ) | (304,022 | ) | ||||||||
Effect of exchange rates on cash and cash equivalents |
3,696 | (1,498 | ) | 3,784 | (2,537 | ) | ||||||||||
Other, net financing activities |
6,488 | 1,510 | 9,570 | 23,579 | ||||||||||||
Net free cash flow |
$ | 230,338 | $ | (27,343 | ) | $ | 193,574 | $ | (466,418 | ) | ||||||
4
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 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.
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 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 technology services and solutions with more than 250 locations serving 70 countries worldwide. The company markets, distributes and optimizes the supply-chain and provides design-chain services for the products of the world’s leading electronic component suppliers, enterprise computer manufacturers and embedded subsystem providers. Avnet brings a breadth and depth of capabilities, such as maximizing inventory efficiency, managing logistics, assembling products and providing engineering design assistance for its 100,000 customers, accelerating their growth through cost-effective, value-added services and solutions. For the fiscal year ended July 1, 2006, Avnet generated revenue of $14.25 billion. For more information, visit www.avnet.com.
Avnet, Inc. (NYSE:AVT) is one of the largest distributors of electronic components, computer products and technology services and solutions with more than 250 locations serving 70 countries worldwide. The company markets, distributes and optimizes the supply-chain and provides design-chain services for the products of the world’s leading electronic component suppliers, enterprise computer manufacturers and embedded subsystem providers. Avnet brings a breadth and depth of capabilities, such as maximizing inventory efficiency, managing logistics, assembling products and providing engineering design assistance for its 100,000 customers, accelerating their growth through cost-effective, value-added services and solutions. For the fiscal year ended July 1, 2006, Avnet generated revenue of $14.25 billion. For more information, visit www.avnet.com.
Investor Relations Contact:
Avnet, Inc.
Vincent Keenan
Investor Relations
(480) 643-7053
investorrelations@avnet.com
Avnet, Inc.
Vincent Keenan
Investor Relations
(480) 643-7053
investorrelations@avnet.com
5
AVNET, INC.
FINANCIAL HIGHLIGHTS
(MILLIONS EXCEPT PER SHARE DATA)
FINANCIAL HIGHLIGHTS
(MILLIONS EXCEPT PER SHARE DATA)
| SECOND QUARTERS ENDED | ||||||||
| DECEMBER 30, | DECEMBER 31, | |||||||
| 2006 | 2005 * | |||||||
Sales |
$ | 3,891.2 | $ | 3,759.1 | ||||
Income before income taxes |
148.7 | 75.3 | ||||||
Net income |
99.1 | 49.6 | ||||||
Net income per share: |
||||||||
Basic |
$ | 0.67 | $ | 0.34 | ||||
Diluted |
$ | 0.67 | $ | 0.34 | ||||
| FIRST HALVES ENDED | ||||||||
| DECEMBER 30, | DECEMBER 31, | |||||||
| 2006 * | 2005 * | |||||||
Sales |
$ | 7,539.6 | $ | 7,027.4 | ||||
Income before income taxes |
247.8 | 112.5 | ||||||
Net income |
163.2 | 74.5 | ||||||
Net income per share: |
||||||||
Basic |
$ | 1.11 | $ | 0.51 | ||||
Diluted |
$ | 1.11 | $ | 0.51 | ||||
* See Notes to Consolidated Statements of Operations on Page 11.
6
AVNET, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS EXCEPT PER SHARE DATA)
| SECOND | FIRST | |||||||||||||||
| QUARTERS ENDED | HALVES ENDED | |||||||||||||||
| DECEMBER 30, | DECEMBER 31, | DECEMBER 30, | DECEMBER 31, | |||||||||||||
| 2006 | 2005* | 2006* | 2005* | |||||||||||||
Sales |
$ | 3,891,180 | $ | 3,759,112 | $ | 7,539,580 | $ | 7,027,377 | ||||||||
Cost of sales (Note 1*) |
3,397,309 | 3,297,276 | 6,577,344 | 6,142,309 | ||||||||||||
Gross profit |
493,871 | 461,836 | 962,236 | 885,068 | ||||||||||||
Selling, general and administrative
expenses |
330,055 | 341,451 | 653,449 | 680,221 | ||||||||||||
Restructuring, integration and
other charges (Note 1*) |
— | 24,887 | — | 38,673 | ||||||||||||
Operating income |
163,816 | 95,498 | 308,787 | 166,174 | ||||||||||||
Other income, net |
2,635 | 2,960 | 6,381 | 4,838 | ||||||||||||
Interest expense |
(17,741 | ) | (23,115 | ) | (40,027 | ) | (46,844 | ) | ||||||||
Debt extinguishment costs (Note 2*) |
— | — | (27,358 | ) | (11,665 | ) | ||||||||||
Income before income taxes |
148,710 | 75,343 | 247,783 | 112,503 | ||||||||||||
Income tax provision |
49,622 | 25,707 | 84,552 | 37,970 | ||||||||||||
Net income |
$ | 99,088 | $ | 49,636 | $ | 163,231 | $ | 74,533 | ||||||||
Net earnings per share: |
||||||||||||||||
Basic |
$ | 0.67 | $ | 0.34 | $ | 1.11 | $ | 0.51 | ||||||||
Diluted |
$ | 0.67 | $ | 0.34 | $ | 1.11 | $ | 0.51 | ||||||||
Shares used to compute earnings
per share: |
||||||||||||||||
Basic |
146,967 | 145,978 | 146,843 | 145,374 | ||||||||||||
Diluted |
148,130 | 146,821 | 147,666 | 146,886 | ||||||||||||
* See Notes to Consolidated Statements of Operations on Page 11.
7
AVNET, INC.
CONSOLIDATED BALANCE SHEETS
(THOUSANDS)
CONSOLIDATED BALANCE SHEETS
(THOUSANDS)
| DECEMBER 30, | JULY 1, | |||||||
| 2006 | 2006 | |||||||
Assets: |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 389,823 | $ | 276,713 | ||||
Receivables, net |
2,716,668 | 2,477,043 | ||||||
Inventories |
1,623,562 | 1,616,580 | ||||||
Prepaid and other current assets |
113,829 | 97,126 | ||||||
Total current assets |
4,843,882 | 4,467,462 | ||||||
Property, plant and equipment, net |
165,981 | 159,433 | ||||||
Goodwill |
1,301,135 | 1,296,597 | ||||||
Other assets |
247,814 | 292,201 | ||||||
Total assets |
6,558,812 | 6,215,693 | ||||||
Less liabilities: |
||||||||
Current liabilities: |
||||||||
Borrowings due within one year |
306,260 | 316,016 | ||||||
Accounts payable |
1,807,123 | 1,654,154 | ||||||
Accrued expenses and other |
502,983 | 468,154 | ||||||
Total current liabilities |
2,616,366 | 2,438,324 | ||||||
Long-term debt, less due within one year |
857,105 | 918,810 | ||||||
Other long-term liabilities |
26,340 | 27,376 | ||||||
Total liabilities |
3,499,811 | 3,384,510 | ||||||
Shareholders’ equity |
$ | 3,059,001 | $ | 2,831,183 | ||||
8
AVNET, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS)
| FIRST HALVES ENDED | ||||||||
| DECEMBER 30, | DECEMBER 31, | |||||||
| 2006 | 2005 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 163,231 | $ | 74,533 | ||||
Non-cash and other reconciling items: |
||||||||
Depreciation and amortization |
25,983 | 32,975 | ||||||
Deferred income taxes |
42,441 | 2,044 | ||||||
Non-cash restructuring and other charges |
— | 12,945 | ||||||
Other, net |
28,359 | 33,708 | ||||||
Changes in (net of effects from business acquisitions): |
||||||||
Receivables |
(201,972 | ) | (333,864 | ) | ||||
Inventories |
18,018 | (52,590 | ) | |||||
Accounts payable |
124,802 | 134,322 | ||||||
Accrued expenses and other, net |
10,195 | (65,073 | ) | |||||
Net cash flows provided by (used for)
operating activities |
211,057 | (161,000 | ) | |||||
Cash flows from financing activities: |
||||||||
Issuance of notes in public offerings, net of
issuance costs |
296,085 | 246,483 | ||||||
Repayment of notes |
(505,035 | ) | (256,325 | ) | ||||
Proceeds from bank debt, net |
127,636 | 58,111 | ||||||
Proceeds from (repayment of) other debt, net |
850 | (578 | ) | |||||
Other, net |
9,570 | 23,579 | ||||||
Net cash flows (used for) provided by
financing activities |
(70,894 | ) | 71,270 | |||||
Cash flows from investing activities: |
||||||||
Purchases of property, plant, and equipment |
(27,619 | ) | (24,067 | ) | ||||
Cash proceeds from sales of property, plant and
equipment |
962 | 1,629 | ||||||
Acquisitions of operations, net |
(4,180 | ) | (304,022 | ) | ||||
Net cash flows used for investing activities |
(30,837 | ) | (326,460 | ) | ||||
Effect of exchange rates on cash and cash equivalents |
3,784 | (2,537 | ) | |||||
Cash and cash equivalents: |
||||||||
— increase (decrease) |
113,110 | (418,727 | ) | |||||
— at beginning of period |
276,713 | 637,867 | ||||||
— at end of period |
$ | 389,823 | $ | 219,140 | ||||
9
AVNET, INC.
SEGMENT INFORMATION
(MILLIONS)
SEGMENT INFORMATION
(MILLIONS)
| SECOND | FIRST | |||||||||||||||
| QUARTERS ENDED | HALVES ENDED | |||||||||||||||
| DECEMBER 30, | DECEMBER 31, | DECEMBER 30, | DECEMBER 31, | |||||||||||||
| SALES: | 2006 | 2005 | 2006 | 2005 | ||||||||||||
Electronics Marketing |
$ | 2,333.8 | $ | 2,257.3 | $ | 4,769.2 | $ | 4,368.5 | ||||||||
Technology Solutions |
1,557.4 | 1,501.8 | 2,770.4 | 2,658.9 | ||||||||||||
Consolidated |
$ | 3,891.2 | $ | 3,759.1 | $ | 7,539.6 | $ | 7,027.4 | ||||||||
OPERATING INCOME (LOSS): |
||||||||||||||||
Electronics Marketing |
$ | 119.1 | $ | 91.5 | $ | 244.7 | $ | 161.5 | ||||||||
Technology Solutions |
64.0 | 55.3 | 103.0 | 87.8 | ||||||||||||
Corporate |
(19.3 | ) | (18.9 | ) | (38.9 | ) | (36.9 | ) | ||||||||
| 163.8 | 127.9 | 308.8 | 212.4 | |||||||||||||
Restructuring, integration and
other charges |
— | (32.4 | ) | — | (46.2 | ) | ||||||||||
Consolidated |
$ | 163.8 | $ | 95.5 | $ | 308.8 | $ | 166.2 | ||||||||
10
AVNET, INC.
NOTES TO CONSOLIDATED STATEMENTS OF OPERATIONS
SECOND QUARTER AND FIRST HALF OF FISCAL 2007
NOTES TO CONSOLIDATED STATEMENTS OF OPERATIONS
SECOND QUARTER AND FIRST HALF OF FISCAL 2007
(1) The results for fiscal 2006 included restructuring, integration and other charges, amounting
to $32,423,000 pre-tax (of which $7,536,000 is included in cost of sales), $21,360,000 after tax
and $0.14 per share on a diluted basis for the second quarter, and $46,209,000 pre-tax (of which
$7,536,000 is included in cost of sales), $31,366,000 after tax and $0.20 per share on a diluted
basis for the first half of fiscal 2006. The integration costs and substantially all of the
restructuring charges resulted from certain actions taken and costs incurred in all three regions
resulting from the July 5, 2005 acquisition and integration of Memec. These charges included
severance related to reduction of Avnet headcount and consolidation of certain Avnet facilities
resulting from the integration of Memec’s personnel and facilities, in addition to write-downs of
certain owned assets and capitalized IT-related initiatives that were rendered redundant as a
result of the Memec acquisition. Also included in the restructuring, integration and other
charges for the second quarter of fiscal 2006 were the write-down of certain inventory for
terminated lines, with such charges recorded through cost of sales in the accompanying consolidated
statement of operations, and the write-down to fair market value of two owned warehouse and
administrative buildings that the Company has vacated.
(2) During the first half of fiscal 2007, the Company incurred debt extinguishment costs amounting
to $27,358,000 pre-tax, $16,538,000 after tax and $0.11 per share on a diluted basis. In September
2006, the Company elected to redeem on October 12, 2006 all of its outstanding 93/4% Notes due
February 15, 2008. The costs incurred as a result of the election notice included $20,322,000 for a
make-whole redemption premium, $4,939,000 associated with the termination of two interest rate
swaps that hedged $200,000,000 of the 93/4% Notes, and $2,097,000 to write-off certain deferred
financing costs. The Company used the net proceeds from the issuance in the first quarter of
$300,000,000 principal amount of 6.625% Notes due September 15, 2016, plus available liquidity, to
repurchase the 93/4% Notes on October 12, 2006.
During the first half of fiscal 2006, the Company incurred debt extinguishment costs amounting
to $11,665,000 pre-tax, $7,052,000 after tax and $0.05 per share on a diluted basis. These costs
related to the Company’s repurchase of $254,095,000 principal amount of the Company’s 8.00% Notes
due November 15, 2006. The Company used the proceeds from the issuance during the first quarter of
$250,000,000 principal amount of 6.00% Notes due September 1, 2015, plus cash on hand, to fund this
repurchase.
11