UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

__________________

FORM 8-K

CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

__________________

Date of Report (Date of earliest event reported)    October 29, 2015

AVNET, INC.
(Exact name of registrant as specified in its charter)

 

(480) 643-2000

(Registrant’s telephone number, including area code.)

N/A

(Former name and 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):

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13.e-4(c))

 

 

Item 2.02.Results of Operations and Financial Condition.

 

On October  29, 2015, Avnet, Inc. issued a press release announcing its first quarter results of operations for fiscal 2016.  A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein.

 

Also attached is the CFO Review of Fiscal 2016 First Quarter Results as Exhibit 99.2 and is incorporated by reference herein.

 

The information in this Current Report on Form 8-K and the exhibits attached hereto are being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933 except as shall be expressly set forth in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

The following materials are attached as exhibits to this Current Report on Form 8-K:

 

 

 

SIGNATURES

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 hereunto duly authorized.

 

 

 

Exhibit 99.1

 

 

 

 

Avnet, Inc. Reports First Quarter Fiscal Year 2016 Results

Revenue Growth and Operating Expense Efficiencies Continue Year-over-Year

Expansion of Margins and Returns

 

Phoenix, October 29, 2015 - Avnet, Inc. (NYSE:AVT) today announced results for the first quarter fiscal year 2016 ended October 3, 2015.

 

Q1 Fiscal 2016 Results

 

 

 

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Rick Hamada, Chief Executive Officer, commented, “Our team delivered a strong Q1 performance starting with revenues at the high end of our expectations for both operating groups led by growth in our EMEA region.  In constant currency, both EM and TS EMEA increased revenue over 15% year over year and delivered strong leverage as over 80% of the incremental gross profit dollars dropped through to operating income. With this growth and our continued discipline in expense management, both operating groups expanded operating income margin year over year and adjusted diluted earnings per share increased 10% to $1.12.  With working capital velocity consistent with the year ago quarter, return on working capital increased 100 basis points to 21% and our trailing twelve months cash flow from operations was over $590 million.  While we continue to navigate a global marketplace with mixed economic signals and a stronger dollar, we will continue to focus on expanding margins and returns while maintaining our disciplined approach to capital allocation."

 

Avnet Electronics Marketing Results

 

 

 

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Mr. Hamada added, “In our September quarter, EM grew revenue 8.7% year over year in constant currency as double digit growth at EM EMEA offset slower growth in our Asia region related to select high volume supply chain engagements. As in recent quarters, this strong growth in EMEA was reduced to 2.2% year-over-year growth at the EM global level due to the stronger dollar versus the year ago quarter.  Our results in EMEA coupled with our disciplined expense management combined to grow operating income more than twice as fast as revenue and operating income margin increased

13 basis points from the year ago quarter.  EM’s inventory increased sequentially to support expected growth in high volume supply chain engagements in our Asia region. Return on working capital is consistent with the year ago quarter and economic profit increased 7.3% year over year. We did see bookings moderate late in the quarter as our book to bill ratio finished at 0.95 to 1.0, although through the first three weeks of fiscal Q2, our book to bill ratio has improved to parity. Excluding the estimated impact of the extra week from our fiscal Q1,  our guidance is within our normal seasonal range driven by strong growth in high volume supply chain engagements in EM Asia and we remain committed to driving continued improvement in our financial performance.”

 

Avnet Technology Solutions Results

 

 

 

 

 

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Mr. Hamada further added, "TS continued to deliver improved financial performance as operating income margin expanded year over year for a fourth consecutive quarter and return on working capital increased 539 basis points from the year ago quarter.  Key elements of this performance included revenue growth in our core datacenter solutions business combined with ongoing expense efficiencies. In our September quarter, TS revenue grew 1.3% year over year, or 7.8% in constant currency, as double digit growth at TS EMEA was offset by a significant decline in our computing components business. TS operating income grew 19.5% year over year led by our EMEA region where operating income more than doubled from the year ago quarter.  TS Americas grew operating income double digits year over year while our Asia region declined due to the decline in our computing components business and the strengthening of the U.S. Dollar against local currencies.  We believe that our computing components revenue is stabilizing and operating income margin is consistent with

the year ago quarter as a result of our deliberate focus on higher gross profit margin engagements.  Going forward, we will continue to focus on higher growth segments as we leverage our investments in solution sales and help our channel partners transition their customers to 3rd platform technologies.”

 

Cash Flow/Dividend

 

 

Kevin Moriarty, Chief Financial Officer, stated, “Our team continues to do a good job of managing working capital as working capital velocity remained consistent with the year ago quarter even as we continue to invest to support growth.  With increased operating income and a slow growth environment, our trailing twelve months cash flow from operations grew to over $590 million this quarter.  Consistent with our capital allocation priorities, which includes elements of returning cash to shareholders, we increased our dividend for the second consecutive year and our Board authorized an additional $250 million for our disciplined share repurchase program. During the quarter, we invested another $145 million in our share repurchase program and have $407 million remaining in our current authorization. Our ongoing focus on operating efficiencies including our Avnet Advantage program, contributed to additional leverage this quarter as our adjusted operating expense to gross profit ratio declined 225 basis points from the year ago quarter to 69.6%. With improving profitability and strong cash generation, we are well positioned to invest in our growth strategies while maintaining our discipline in how and when we return capital to shareholders.”

 

Outlook for Second Quarter of Fiscal 2016 Ending on January 2, 2016

 

 

The above guidance excludes the amortization of intangibles and any potential restructuring, integration and other expenses. In addition, the above guidance assumes that the average U.S. Dollar to Euro currency exchange rate is $1.12 to €1.00. This compares with an average exchange rate of $1.25 to €1.00 in the second quarter of fiscal 2015.

 

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,” “estimate,” “forecast,” “expect,” "feel," “believe,” and “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, 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.

 

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 in this document certain non-GAAP financial information including adjusted operating income, adjusted operating expenses, adjusted net income and adjusted diluted earnings per share, as well as 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 for sales, income or expense items, the Company adjusts the exchange rates used in current periods to be consistent with the exchange rates in effect during prior periods.

 

Management believes that operating income and operating expenses adjusted for (i) restructuring, integration and other expenses and (ii) amortization of acquired intangible assets and other, are useful measures 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 or non-cash in nature. Management analyzes operating income and operating expenses without the impact of these items 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.

 

Additional non-GAAP metrics management uses are adjusted operating income margin, which is defined as adjusted operating income (as defined above) divided by sales and adjusted operating expense to gross profit ratio, which is defined as adjusted operating expenses (as defined above) divided by gross profit.

 

Management also believes net income and diluted EPS adjusted for (i) the impact of the items described above, (ii) certain items impacting other expense and (iii) certain items impacting income tax expense 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 profitability for the investing public.

 

Other metrics management monitors in its assessment of business performance include return on working capital (ROWC), return on capital employed (ROCE) and working capital velocity (WC velocity).

 

 

 

 

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 2016

 

 

 

 

 

Fiscal 2015

 

* Does not foot due to rounding

 

 

Organic Sales

Organic sales is defined as reported sales adjusted for the impact of acquisitions and divestitures by adjusting Avnet’s prior 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. Additionally, fiscal 2016 sales are adjusted for the estimated impact of the extra week of sales in the first quarter of fiscal 2016 due to the 14-week fiscal first quarter and 53-week fiscal year. Organic sales in constant currency is defined as organic sales (as defined above) excluding the impact of changes in foreign currency exchange rates as discussed above.

 

The following table presents the reconciliation of reported sales to organic sales for the first quarter of fiscal 2016.

 

 

 

 

ROWC, ROCE and WC Velocity

 

The following tables (in thousands) presents the calculation for ROWC, ROCE and WC velocity.

 

 

 

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Teleconference and Upcoming Events

 

Avnet will host a quarterly teleconference today at 2:00 p.m. Eastern Time. Financial information including financial statement reconciliations of GAAP to non-GAAP financial measures, will be available through www.ir.avnet.com. Please log onto the site 15 minutes prior to the start of the event to register or download any necessary software. An archive copy of the teleconference will also be available after the call.

 

For a listing of Avnet’s upcoming events and other information, please visit Avnet’s investor relations website at www.ir.avnet.com.

 

About Avnet

 

From components to cloud and design to disposal, Avnet, Inc. (NYSE: AVT) accelerates the success of customers who build, sell and use technology globally by providing them with a comprehensive portfolio of innovative products, services and solutions. Avnet is a Fortune 500 company with revenues of $27.9 billion in fiscal year 2015. For more information, visit www.avnet.com. (AVT_IR)

 

Investor Relations Contact

Avnet, Inc.

Vincent Keenan

Investor Relations

(480) 643-7053

investorrelations@avnet.com 

AVNET, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

 

AVNET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

AVNET, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)