avt_Current Folio_8K

 

 

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)    August 8, 2019

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

 

 

 

 

 

New York 

 

1-4224

 

11-1890605

(State or other jurisdiction

 

(Commission

 

(IRS Employer

Of incorporation)

 

File Number)

 

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.)

 

N/A

(Former name or former address, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

 

 

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered:

Common stock, par value $1.00 per share

 

AVT

 

Nasdaq Global Select Market

 

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 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 

Item 2.02     Results of Operations and Financial Condition.

 

On August 8, 2019, Avnet, Inc. (the “Company”) issued a press release announcing its fourth quarter and year end results of operations for fiscal 2019. 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 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:

 

 

 

 

Exhibit
Number

   

Description

 

 

 

99.1

 

Press Release, dated August 8, 2019.

 

 

 

 

 

2

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.

 

 

 

 

 

 

 

Date: August 8, 2019

 

AVNET, INC.

 

 

 

 

 

 

 

 

By:

 

/s/ Thomas Liguori

 

 

 

 

Name: Thomas Liguori

 

 

 

 

Title: Chief Financial Officer

 

 

 

 

 

 

3

avt_Ex_ 99-1

Exhibit 99.1

 

Picture 3

 

Avnet Reports Fourth Quarter and Fiscal 2019 Financial Results

 

Quarterly sales of $4.7 billion within guidance despite macroeconomic headwinds and tariffs

 

Fiscal year sales rose 3%, SG&A expenses were reduced by $117 million, or 6%, and cash flow from continuing operations totaled $591 million

 

PHOENIX – August 8, 2019 - Avnet, Inc. (Nasdaq: AVT) today announced results for the fourth quarter and fiscal year ended June 29, 2019.

 

Fiscal Fourth Quarter Key Financial Metrics

·

Sales of $4.7 billion, which were in line with guidance, declined 7.5% from a year ago and 0.4% from the prior quarter. Sales guidance for the fiscal fourth quarter anticipated lower-than-historical seasonality and emerging macroeconomic headwinds across all geographies.

·

GAAP diluted loss per share from continuing operations, which includes $137 million of goodwill impairment expense, totaled $0.33; on an adjusted basis, diluted earnings per share was $0.95.

·

GAAP operating margin of (0.6)%, adjusted operating margin of 3.3%.

·

Selling, general and administrative (SG&A) expenses declined $40.6 million, or 8.1%, over the prior year quarter and benefited from the acceleration of planned cost optimization actions and a disciplined approach to spending while prioritizing investments to drive growth.

·

Cash flow from operations totaled $335 million, up sequentially from $269 million in the fiscal third quarter.

·

Returned $138 million to shareholders with $117 million in stock buybacks and dividends totaling $21 million.

·

Reduced revolving debt by $354 million with net debt of $1.2 billion at the end of the quarter.

·

Recorded a goodwill impairment totaling $137 million related to the Electronic Components operating group as a result of the declining macroeconomic environment and business outlook.

·

For the fiscal year ended June 29, 2019, Avnet generated cash flow from continuing operations totaling $591 million, repurchased nearly 13 million shares (more than 10%) of Avnet stock and reduced SG&A expenses by $117 million, or 6%, compared to a year ago.

 

CEO Commentary

“Avnet continued to execute well in our fiscal fourth quarter despite rapidly changing market conditions,” said Avnet CEO Bill Amelio. “We are pleased to have delivered revenues within our target range. We did see margin pressure that was greater than anticipated due to mix and the softening of customer demand, which were exacerbated by global trade tensions and associated tariffs. We remain committed to the multi-pronged strategy we laid out at our 2018 Investor Day, which regardless of market fluctuations, promises to deliver superior service, innovation and support to our customers, suppliers and partners, as well as enhance value for our shareholders long term.”

 

Key Financial Metrics

($ in millions, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fourth Quarter Results (GAAP)(2)

 

 

 

Jun – 19

   

Jun – 18

   

Change Y/Y

   

Mar – 19

   

Change Q/Q

 

Sales

 

$

4,680.9

 

 

$

5,059.2

 

 

(7.5)

%

 

$

4,698.8

 

 

(0.4)

%

 

Operating Income (Loss)

 

 

(30.0)

 

 

 

121.5

 

 

(124.7)

%

 

 

153.1

 

 

(119.6)

%

 

Operating Income (Loss) Margin

 

 

(0.6)

%

 

 

2.4

%

 

(304)

bps

 

 

3.3

%

 

(390)

bps

 

Diluted Earnings (Loss) Per Share

 

$

(0.33)

 

 

$

0.49

 

 

(167.3)

%

 

$

0.87

 

 

(137.9)

%

 

Fourth Quarter Results (Non-GAAP)(1)(2)

 

 

 

Jun – 19

   

Jun – 18

   

Change Y/Y

   

Mar – 19

   

Change Q/Q

 

Sales

 

$

4,680.9

 

 

$

5,059.2

 

 

(7.5)

%

 

$

4,698.8

 

 

(0.4)

%

 

Adjusted Operating Income

 

 

156.3

 

 

 

180.1

 

 

(13.3)

%

 

 

178.1

 

 

(12.3)

%

 

Adjusted Operating Income Margin

 

 

3.3

%

 

 

3.6

%

 

(22)

bps

 

 

3.8

%

 

(45)

bps

 

Adjusted Diluted Earnings Per Share

 

$

0.95

 

 

$

0.99

 

 

(4.0)

%

 

$

1.09

 

 

(12.8)

%

 

Segment and Geographical Mix(2)

 

 

 

Jun – 19

   

Jun – 18

   

Change Y/Y

 

Mar – 19

   

Change Q/Q

 

Electronic Components (EC) Sales

 

$

4,337.5

 

 

$

4,668.7

 

 

(7.1)

%

 

$

4,331.3

 

 

0.1

%

 

EC Operating Income Margin

 

 

3.3

%

 

 

3.4

%

 

(18)

bps

 

 

3.5

%

 

(29)

bps

 

Farnell Sales

 

$

343.4

 

 

$

390.5

 

 

(12.0)

%

 

$

367.5

 

 

(6.5)

%

 

Farnell Operating Income Margin

 

 

9.7

%

 

 

11.2

%

 

(153)

bps

 

 

12.4

%

 

(275)

bps

 

Americas Sales

 

$

1,266.3

 

 

$

1,339.2

 

 

(5.4)

%

 

$

1,297.2

 

 

(2.4)

%

 

EMEA Sales

 

 

1,638.5

 

 

 

1,779.6

 

 

(7.9)

%

 

 

1,740.9

 

 

(5.9)

%

 

Asia Sales

 

 

1,776.1

 

 

 

1,940.4

 

 

(8.5)

%

 

 

1,660.7

 

 

7.0

%

 


(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.

(2)

Certain prior year amounts in the Company’s measurement of operating income have been recasted to reflect the adoption of new accounting standards during the first quarter of fiscal 2019.

 

 

CFO Commentary

“During the fourth fiscal quarter, we generated strong operating cash flow of $335 million and put the cash to work repurchasing stock and paying a dividend, in accordance with our capital allocation strategy,” stated Tom Liguori, Avnet Chief Financial Officer. “As we continue to monitor the prevailing market conditions, including current inventory corrections, we have pulled forward our three year $245 million cost reduction plan by accelerating $50 million of annual savings and efficiency improvements to be completed by the end of the first quarter of fiscal 2020, while still making investments in key growth areas including IoT and Farnell.”

 

 

 

Additional Fourth Quarter Fiscal 2019 Highlights and Key Developments

·

IoT pipeline rose 5% quarter over quarter to $630 million, and continues to expand to new markets including retail and healthcare.

·

Avnet’s distribution center and warehouse in Chandler, Arizona became an authorized Foreign Trade Zone (FTZ) increasing global logistics efficiency, improving cash flow, reducing customs related fees, and mitigating potential exposure from punitive tariffs that may be imposed on imports.   

·

Farnell announced the launch of the new Raspberry Pi 4 Model B Computer, the most powerful Raspberry Pi model ever made.

·

Avnet’s community, Hackster.io reached 1 million members, bringing Avnet’s total community members, when combined with element14, to 1.6 million. 

·

At Mobile World Congress Shanghai, Avnet showcased key parts of its end-to-end IoT solution including the highly scalable IoTConnect cloud-based software platform. We also highlighted our IoT connectivity solutions, all of which provide greater security while affording flexible cellular connectivity.

·

Farnell added more than 159,000 SKUs to its e-commerce site, providing customers access to a wider breadth of technology and products.

 

Awards and Notable Recognition Received During the Quarter

·

Avnet Silica received the Global Partner of the Year award from Xilinx, and was named 2018 EMEA Distributor of the Year from ON Semi.

·

Avnet Integrated was recognized as Supplier of the Year by GIRA and received the Supplier Appreciation and Dedicated Support award from Avaya.

·

Avnet Japan was named Microsoft’s FY19 Distributor MVP.

·

Avnet Abacus was named EMEA Distributor of the Year by both TE Connectivity and Molex.

·

NXP recognized Avnet Asia for delivering the Best Performance in Demand Creation.

·

Recognizing Avnet’s supply chain expertise and pioneering implementation of advanced digital technologies and processes, Supply & Demand Chain Executive magazine selected Avnet as a 2019 SDCE 100 Award recipient. 

·

Farnell received the Gold award for Best Global Performance from TDK Epcos, and the Outstanding Performance award from Neutrik.

 

 

Outlook for the First Quarter of Fiscal 2020 Ending on September 28, 2019

 

 

 

 

 

 

 

    

Guidance Range

    

Midpoint

Sales

 

$4.4B - $4.7B

 

$4.55B

Non-GAAP Diluted EPS(1)

 

$0.60 - $0.70

 

$0.65

Estimated Annual Tax Rate

 

19% - 23%

 

21%


(1)

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

 

 

Avnet’s first quarter fiscal 2020 guidance reflects a sequential decline in sales in the Americas and EMEA regions and stable business trends in Asia, and continued pricing pressure in all businesses.  It also reflects a full quarter of industry slowing, compared with a partial quarter of slowing in the immediately preceding quarter (4QFY19).

 

The above guidance is based upon market conditions existing as of today, and excludes any acquisitions, 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 also excludes any potential impact from recently announced U.S. tariffs on certain goods imported from China. The above guidance assumes 104 million average diluted shares outstanding and average U.S. Dollar to Euro and GBP currency exchange rates are as shown below:

 

 

 

 

 

 

 

 

 

 

Q1 Fiscal

 

 

 

 

 

 

2020

 

Q4 Fiscal

 

Q1 Fiscal

 

 

Guidance

    

2019

    

2019

USD to Euro

 

$1.12

 

$1.12

 

$1.16

USD to GBP

 

$1.23

 

$1.29

 

$1.30

 

 

Today’s Conference Call and Webcast Details

 

Avnet will host a quarterly teleconference and webcast today at 1:30 p.m. PDT/4:30 p.m. EDT to discuss the financial results and provide a corporate update. To participate in the live call, dial 877-407-8112 or 201-689-8840. To access the slides, visit Avnet’s Investor Relations web page at: https://ir.avnet.com/.  A replay of the conference call will be available for 30 days, through September 9 at 5:00 p.m. EDT, and can be accessed by dialing: 877-660-6853 or 201-612-7415 and using Conference ID: 13692882. The live webcast will be available for 90 days.

 

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 IT systems, supplier losses and changes to supplier programs, an industry down-cycle in electronic components including 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

 

Avnet is a global technology solutions provider with an extensive ecosystem delivering design, product, marketing and supply chain expertise for customers at every stage of the product lifecycle. We transform ideas into intelligent solutions, reducing the time, cost and complexities of bringing products to market. 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.  (AVT_IR)

 

Investor Relations Contacts

 

Joe Burke, 480-643-7431

Joseph.Burke@avnet.com 

 

Ina McGuinness, 480-643-7053

investorrelations@avnet.com

 

Media Relations Contact

 

Maureen O’Leary, 480-643-7499
Maureen.OLeary@avnet.com

 

 

AVNET, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fourth Quarters Ended

 

Years Ended

 

 

    

June 29,

    

June 30,

    

June 29,

    

June 30,

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

(Thousands, except per share data)

 

Sales

 

$

4,680,909

 

$

5,059,220

 

$

19,518,592

 

$

19,036,892

 

Cost of sales

 

 

4,085,784

 

 

4,400,588

 

 

17,032,490

 

 

16,509,708

 

Gross profit

 

 

595,125

 

 

658,632

 

 

2,486,102

 

 

2,527,184

 

Selling, general and administrative expenses

 

 

459,611

 

 

500,257

 

 

1,874,651

 

 

1,991,401

 

Goodwill Impairment expense

 

 

137,396

 

 

 —

 

 

137,396

 

 

181,440

 

Restructuring, integration and other expenses

 

 

28,158

 

 

36,848

 

 

108,144

 

 

145,125

 

Operating (loss) income

 

 

(30,040)

 

 

121,527

 

 

365,911

 

 

209,218

 

Other income (expense), net

 

 

1,807

 

 

(3,526)

 

 

11,231

 

 

28,606

 

Interest and other financing expenses, net

 

 

(34,810)

 

 

(24,475)

 

 

(134,874)

 

 

(92,747)

 

Income (loss) from continuing operations before taxes

 

 

(63,043)

 

 

93,526

 

 

242,268

 

 

145,077

 

Income tax (benefit) expense

 

 

(27,915)

 

 

35,787

 

 

62,157

 

 

287,966

 

Income (loss) from continuing operations, net of tax

 

 

(35,128)

 

 

57,739

 

 

180,111

 

 

(142,889)

 

Income (loss) from discontinued operations, net of tax

 

 

3,292

 

 

876

 

 

(3,774)

 

 

(13,535)

 

Net (loss) income

 

$

(31,836)

 

$

58,615

 

$

176,337

 

$

(156,424)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share - basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.33)

 

$

0.49

 

$

1.64

 

$

(1.19)

 

Discontinued operations

 

 

0.03

 

 

0.01

 

 

(0.03)

 

 

(0.11)

 

Net (loss) income per share basic

 

$

(0.30)

 

$

0.50

 

$

1.61

 

$

(1.30)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.33)

 

$

0.49

 

$

1.63

 

$

(1.19)

 

Discontinued operations

 

 

0.03

 

 

0.01

 

 

(0.04)

 

 

(0.11)

 

Net (loss) income per share diluted

 

$

(0.30)

 

$

0.50

 

$

1.59

 

$

(1.30)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used to compute earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

105,615

 

 

116,948

 

 

109,820

 

 

119,909

 

Diluted

 

 

105,615

 

 

117,863

 

 

110,798

 

 

119,909

 

Cash dividends paid per common share

 

$

0.20

 

$

0.19

 

$

0.80

 

$

0.74

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AVNET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

    

June 29,

    

June 30,

 

 

 

2019

 

2018

 

 

 

(Thousands)

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

546,105

 

$

621,125

 

Receivables, net

 

 

3,168,369

 

 

3,641,139

 

Inventories

 

 

3,008,424

 

 

3,141,822

 

Prepaid and other current assets

 

 

153,438

 

 

206,513

 

Total current assets

 

 

6,876,336

 

 

7,610,599

 

Property, plant and equipment, net

 

 

452,171

 

 

522,909

 

Goodwill

 

 

876,728

 

 

980,872

 

Intangible assets, net

 

 

143,520

 

 

219,913

 

Other assets

 

 

215,801

 

 

262,552

 

Total assets

 

$

8,564,556

 

$

9,596,845

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Short-term debt

 

$

300,538

 

$

165,380

 

Accounts payable

 

 

1,864,342

 

 

2,269,478

 

Accrued expenses and other

 

 

413,696

 

 

534,603

 

Total current liabilities

 

 

2,578,576

 

 

2,969,461

 

Long-term debt

 

 

1,419,922

 

 

1,489,219

 

Other liabilities

 

 

425,585

 

 

453,084

 

Total liabilities

 

 

4,424,083

 

 

4,911,764

 

Shareholders’ equity

 

 

4,140,473

 

 

4,685,081

 

Total liabilities and shareholders’ equity

 

$

8,564,556

 

$

9,596,845

 

 

 

 

 

 

 

 

 

 

 

AVNET, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

Years Ended

 

 

    

June 29, 2019

    

June 30, 2018

 

 

 

(Thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income (loss)

 

$

176,337

 

$

(156,424)

 

Less: Loss from discontinued operations, net of tax

 

 

(3,774)

 

 

(13,535)

 

Income (loss) from continuing operations

 

 

180,111

 

 

(142,889)

 

 

 

 

 

 

 

 

 

Non-cash and other reconciling items:

 

 

 

 

 

 

 

Depreciation

 

 

97,160

 

 

143,397

 

Amortization

 

 

83,682

 

 

91,475

 

Deferred income taxes

 

 

33,801

 

 

(87,141)

 

Stock-based compensation

 

 

30,098

 

 

23,990

 

Goodwill impairment expense

 

 

137,396

 

 

181,440

 

Asset impairment expense

 

 

54,687

 

 

5,538

 

Other, net

 

 

(21,265)

 

 

43,845

 

Changes in (net of effects from businesses acquired and divested):

 

 

 

 

 

 

 

Receivables

 

 

464,981

 

 

(296,175)

 

Inventories

 

 

81,929

 

 

(308,663)

 

Accounts payable

 

 

(377,855)

 

 

409,608

 

Accrued expenses and other, net

 

 

(173,671)

 

 

189,060

 

Net cash flows provided by operating activities - continuing operations

 

 

591,054

 

 

253,485

 

Net cash flows used for operating activities - discontinued operations

 

 

(56,284)

 

 

 —

 

Net cash flows provided by operating activities

 

 

534,770

 

 

253,485

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Borrowings (repayments) under accounts receivable securitization, net

 

 

122,300

 

 

(37,000)

 

Borrowings (repayments) under senior unsecured credit facility, net

 

 

(61,738)

 

 

8,850

 

Borrowings (repayments) under bank credit facilities and other debt, net

 

 

505

 

 

(97,954)

 

Repurchases of common stock

 

 

(568,712)

 

 

(323,516)

 

Dividends paid on common stock

 

 

(87,158)

 

 

(88,255)

 

Other, net

 

 

12,127

 

 

(4,018)

 

Net cash flows used for financing activities - continuing operations

 

 

(582,676)

 

 

(541,893)

 

Net cash flows used for financing activities

 

 

(582,676)

 

 

(541,893)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(122,690)

 

 

(155,873)

 

Acquisitions of businesses, net of cash acquired

 

 

(56,417)

 

 

(15,254)

 

Other, net

 

 

30,422

 

 

6,653

 

Net cash flows used for investing activities - continuing operations

 

 

(148,685)

 

 

(164,474)

 

Net cash flows provided by investing activities - discontinued operations

 

 

123,473

 

 

236,205

 

Net cash flows (used) provided by investing activities

 

 

(25,212)

 

 

71,731

 

Effect of currency exchange rate changes on cash and cash equivalents

 

 

(1,902)

 

 

1,418

 

Cash and cash equivalents:

 

 

 

 

 

 

 

— decrease

 

 

(75,020)

 

 

(215,259)

 

— at beginning of period

 

 

621,125

 

 

836,384

 

— at end of period

 

$

546,105

 

$

621,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 operating expenses, (iii) adjusted other income (expense), (iv) adjusted income tax expense, (v) adjusted income from continuing operations, (vi) adjusted diluted earnings per share from continuing operations, and (vii) 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 “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 and operating expenses 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 and operating expenses 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 income (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. Adjustments to income tax expense and the effective income tax rate include the effect of changes in tax laws including recent tax law changes in the U.S., changes in valuation allowances and unrecognized tax benefits, income tax audit settlements and adjustments to the adjusted interim effective tax rate based upon the expected annual adjusted effective tax rate.  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. All amounts below relate to Avnet’s continuing operations.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal

 

Quarters Ended

 

 

 

 

Year to Date

 

June 29,

 

March 30,

 

December 29,

 

September 29,

 

 

 

 

2019*

  

2019*

 

2019*

 

2018*

 

2018

  

 

 

 

($ in thousands, except per share amounts)

 

GAAP selling, general and administrative expenses - continuing operations

 

 

$

1,874,651

 

$

459,611

 

$

468,171

 

$

471,723

 

$

475,146

 

Amortization of intangible assets and other - continuing operations

 

 

 

(84,257)

 

 

(20,737)

 

 

(22,080)

 

 

(20,513)

 

 

(20,927)

 

Adjusted operating expenses - continuing operations

 

 

 

1,790,393

 

 

438,872

 

 

446,092

 

 

451,210

 

 

454,219

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income (loss) - continuing operations

 

 

$

365,911

 

$

(30,040)

 

$

153,085

 

$

96,050

 

$

146,816

 

Restructuring, integration and other expenses - continuing operations

 

 

 

108,144

 

 

28,158

 

 

2,939

 

 

62,260

 

 

14,788

 

Goodwill impairment expense - continuing operations

 

 

 

137,396

 

 

137,396

 

 

 -

 

 

 -

 

 

 -

 

Amortization of intangible assets and other - continuing operations

 

 

 

84,257

 

 

20,737

 

 

22,080

 

 

20,513

 

 

20,927

 

Adjusted operating income - continuing operations

 

 

 

695,708

 

 

156,252

 

 

178,103

 

 

178,823

 

 

182,531

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP income (loss) before income taxes- continuing operations

 

 

$

242,268

 

$

(63,043)

 

$

125,563

 

$

64,916

 

$

114,831

 

Restructuring, integration and other expenses - continuing operations

 

 

 

108,144

 

 

28,158

 

 

2,939

 

 

62,260

 

 

14,788

 

Goodwill impairment expense - continuing operations

 

 

 

137,396

 

 

137,396

 

 

 -

 

 

 -

 

 

 -

 

Amortization of intangible assets and other - continuing operations

 

 

 

84,257

 

 

20,737

 

 

22,080

 

 

20,513

 

 

20,927

 

Other expenses - continuing operations

 

 

 

509

 

 

509

 

 

 -

 

 

 -

 

 

 -

 

Adjusted income before income taxes - continuing operations

 

 

 

572,574

 

 

123,758

 

 

150,581

 

 

147,689

 

 

150,546

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP income tax expense (benefit) - continuing operations

 

 

$

62,157

 

$

(27,915)

 

$

30,628

 

$

28,141

 

$

31,302

 

Restructuring, integration and other expenses  - continuing operations

 

 

 

26,746

 

 

7,455

 

 

306

 

 

15,665

 

 

3,320

 

Goodwill impairment expense - continuing operations

 

 

 

18,566

 

 

18,566

 

 

 -

 

 

 -

 

 

 -

 

Amortization of intangible assets and other - continuing operations

 

 

 

17,986

 

 

4,382

 

 

4,747

 

 

4,379

 

 

4,478

 

Other expenses - continuing operations

 

 

 

57

 

 

57

 

 

 -

 

 

 

 

 

 

 

Income tax (expense) benefit items, net - continuing operations

 

 

 

(8,143)

 

 

20,896

 

 

(4,059)

 

 

(16,742)

 

 

(8,238)

 

Adjusted income tax expense - continuing operations

 

 

 

117,369

 

 

23,441

 

 

31,622

 

 

31,443

 

 

30,862

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP income (loss) - continuing operations

 

 

$

180,111

 

$

(35,128)

 

$

94,935

 

$

36,775

 

$

83,529

 

Restructuring, integration and other expenses (net of tax) - continuing operations

 

 

 

81,398

 

 

20,703

 

 

2,633

 

 

46,595

 

 

11,468

 

Goodwill impairment expense (net of tax) - continuing operations

 

 

 

118,830

 

 

118,830

 

 

 -

 

 

 -

 

 

 -

 

Amortization of intangible assets and other (net of tax) - continuing operations

 

 

 

66,271

 

 

16,355

 

 

17,333

 

 

16,134

 

 

16,449

 

Other expenses (net of tax) - continuing operations

 

 

 

452

 

 

452

 

 

 -

 

 

 -

 

 

 -

 

Income tax expense (benefit) items, net - continuing operations

 

 

 

8,143

 

 

(20,896)

 

 

4,059

 

 

16,742

 

 

8,238

 

Adjusted income - continuing operations

 

 

 

455,205

 

 

100,316