0000008858false00000088582020-04-272020-04-27

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)    April 27, 2020

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 or to be 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:

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 April 27, 2020, Avnet, Inc. (the “Company”) issued a press release announcing its third quarter results of operations for fiscal 2020. 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 April 27, 2020.

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: April 27, 2020

AVNET, INC.

By:

/s/ Thomas Liguori

Name: Thomas Liguori

Title: Chief Financial Officer

avt_Ex_ 99-1

 

 

Exhibit 99.1

 

Picture 1

 

Avnet Reports Third Quarter Fiscal 2020 Financial Results

 

Third quarter sales of $4.3 billion

Operating cash flow of $98 million; improved debt profile with debt reduction of $92 million 

PHOENIX – April 27, 2020  Avnet, Inc. (Nasdaq: AVT) today announced results for its third fiscal quarter ended March 28, 2020.  

Third Quarter Key Financial Highlights:

·

Sales of $4.3 billion compared with $4.7 billion a year ago.

·

GAAP diluted loss per share from continuing operations of $1.29, compared with EPS of $0.87 a year ago.

o

Non-GAAP adjusted diluted EPS of $0.38 compared with $1.09 a year ago.

o

Foreign exchange rates negatively impacted adjusted diluted EPS by $0.03, compared to prior year. 

o

Incurred $160 million of goodwill and other impairment expenses due to the impacts of the COVID-19 outbreak and the corresponding decline in Avnet’s share price.

·

GAAP operating loss totaled $115.8 million, compared with GAAP operating income of $153.1 million a year ago.

o

Adjusted operating income declined 60.5% year over year to $70.4 million.

·

GAAP operating loss margin was 2.7%, compared with GAAP operating income margin of 3.3% a year ago.

o

Adjusted operating income margin was 1.6%, compared with 3.8% a year ago.

·

Cash flow from operations of $98 million, and totaled $777 million over the trailing four quarter period.

·

Improved debt profile with revolving debt reduction of $92 million, with net debt of $1.19 billion at the end of the quarter.

CEO Commentary

“Our third quarter results validated the resilience of our business model,” said Avnet CEO Bill Amelio. “We generated strong cash flow and revenues while adjusting our priorities to respond swiftly and

 

 

 

effectively to the COVID-19 pandemic and ensure business continuity for all our stakeholders. Our first priority is the safety of our employees globally, and we quickly enacted protective and preventative measures to promote the health and safety of our employees while continuing to support the needs of our customers, suppliers, and business partners.”

Key Financial Metrics

($ in millions, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third Quarter Results (GAAP)

 

 

 

Mar – 20

   

Mar – 19

   

Change Y/Y

   

Dec – 19

   

Change Q/Q

 

Sales

 

$

4,309.8

 

 

$

4,698.8

 

 

(8.3)

%

 

$

4,534.8

 

 

(5.0)

%

 

Operating (Loss) Income

 

 

(115.8)

 

 

 

153.1

 

 

(175.6)

%

 

 

46.5

 

 

(349.1)

%

 

Operating (Loss) Income Margin

 

 

(2.7)

%

 

 

3.3

%

 

(595)

bps

 

 

1.0

%

 

(371)

bps

 

Diluted (Loss) Earnings Per Share

 

$

(1.29)

 

 

$

0.87

 

 

(248.3)

%

 

$

0.05

 

 

(2,680.0)

%

 

Third Quarter Results (Non-GAAP)(1)

 

 

 

Mar – 20

   

Mar – 19

   

Change Y/Y

   

Dec – 19

   

Change Q/Q

 

Sales

 

$

4,309.8

 

 

$

4,698.8

 

 

(8.3)

%

 

$

4,534.8

 

 

(5.0)

%

 

Adjusted Operating Income

 

 

70.4

 

 

 

178.1

 

 

(60.5)

%

 

 

82.2

 

 

(14.4)

%

 

Adjusted Operating Income Margin

 

 

1.6

%

 

 

3.8

%

 

(216)

bps

 

 

1.8

%

 

(18)

bps

 

Adjusted Diluted Earnings Per Share

 

$

0.38

 

 

$

1.09

 

 

(65.1)

%

 

$

0.40

 

 

(5.0)

%

 

Segment and Geographical Mix

 

 

 

Mar – 20

   

Mar – 19

   

Change Y/Y

 

Dec – 19

   

Change Q/Q

 

Electronic Components (EC) Sales

 

$

3,974.7

 

 

$

4,331.3

 

 

(8.2)

%

 

$

4,203.6

 

 

(5.5)

%

 

EC Operating Income Margin

 

 

2.1

%

 

 

3.5

%

 

(141)

bps

 

 

2.2

%

 

(9)

bps

 

Farnell Sales

 

$

335.1

 

 

$

367.5

 

 

(8.8)

%

 

$

331.2

 

 

1.2

%

 

Farnell Operating Income Margin

 

 

7.0

%

 

 

12.4

%

 

(545)

bps

 

 

6.0

%

 

94

bps

 

Americas Sales

 

$

1,203.6

 

 

$

1,297.2

 

 

(7.2)

%

 

$

1,186.6

 

 

1.4

%

 

EMEA Sales

 

 

1,512.5

 

 

 

1,740.9

 

 

(13.1)

%

 

 

1,425.8

 

 

6.1

%

 

Asia Sales

 

 

1,593.7

 

 

 

1,660.7

 

 

(4.0)

%

 

 

1,922.4

 

 

(17.1)

%

 


(1)

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

CFO Commentary

“Despite headwinds including the outbreak of COVID-19, we generated cash flow from operations totaling $98 million in the third quarter and delivered quarterly sales of $4.3 billion,” said Avnet CFO Tom Liguori. “These results showed the strength of our counter-cyclical balance sheet and our ability to adapt quickly to current conditions. We reprioritized our capital allocation plan to conserve cash and manage our debt, including $92 million in debt reduction with net debt of $1.19 billion at the end of the quarter. We are resolutely focused on managing our working capital and generating cash during this period.”

 

 

 

Additional Third Quarter Fiscal 2020 Updates

·

Returned $58 million to shareholders with $37 million in share repurchases and $21 million in dividends paid during the quarter.

·

Announced that Avnet will redeem $300 million of its outstanding 5.875% notes at the end of April 2020.

·

Continued strong demand in aerospace and defense end markets, while auto and industrial end markets experienced weakness.

·

Expanded North America business with Micron franchise; Micron is the 4th largest Semiconductor Company in the world.

·

Announced exclusive global distribution deal with Sequans Communications for modem component Monarch Go, enabling new IoT devices to launch on Verizon with no additional testing required, significantly reducing time to market.

·

Won ON Semiconductor’s 2019 Distributor of the Year award globally, as well as in the Americas and for Silica.

 

COVID-19: Business Updates

During the third quarter, Avnet accelerated customers’ abilities to provide life-saving medical solutions by utilizing the Company’s end-to-end ecosystem in the fight against COVID-19. Employees in our Electronic Components business, Avnet Integrated, and Farnell all worked closely with our customers and partners to source, assemble, integrate and service medical devices and peripherals that enabled them to focus resources where they were needed most.

In addition, in the fourth quarter Avnet continues to respond to the COVID-19 outbreak in the following ways:

·

Avnet and Hackster.io are joining forces with the United Nations Development Programme (UNDP) and twelve leading technology companies to launch the COVID-19 Detect and Protect Challenge. The goal is to design low-cost and easily deployable technology that helps detect and prevent COVID-19 outbreaks in developing countries.

·

Enabling a major vacuum company to start producing ventilators by delivering prototyping and testing materials for the printed circuit boards designed into its new ventilator.

·

Joining with one of the biggest EMS in Italy and other companies that are producing the first 1,000 pieces of a new open-source pulmonary mechanical ventilator leveraging Raspberry Pi and Multicomp products.

·

Enabling a leading manufacturer to help meet the UK’s National Health Service’s 10x increase in demand for paraPAC ventilators by assisting with components needed for the prototype.

·

Directly supporting COVID-19 relief efforts by donating everything from personal protective equipment for medical professionals to 3D printers, to local, direct contributions in hard-hit communities.

 

 

 

Update on Guidance

Avnet is continuing to serve the needs of its suppliers, customers, and business partners and remains confident in its liquidity position. However, the Company is unable to predict the extent to which the global COVID-19 pandemic may impact its business operations, financial performance, and the results of operations for the next quarter. Therefore, Avnet will not be issuing guidance for the fourth quarter of fiscal 2020 ending on June 27, 2020.

Today’s Conference Call and Webcast Details

Avnet will host a quarterly webcast and teleconference today at 1:30 p.m. AZ / PDT and 4:30 p.m. EDT to discuss its financial results and provide a corporate update. The webcast can be accessed via Avnet’s Investor Relations web page at: www.ir.avnet.com, or from the following link Avnet Earnings Call Webcast and Slides.  

Due to increased call volumes globally, the wait times when dialing in by phone may be longer than usual. Therefore, Avnet suggests using the webcast link above instead of the conference call line to avoid any delays. Those who would still like to participate in the live call can dial 877-407-8112 or 201-689-8840. A replay of the conference call will be available for 30 days, through May 27 at 5:00 p.m. EDT, and can be accessed by dialing: 877-660-6853 or 201-612-7415 and using Conference ID: 13700077. The 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: the scope and duration of the COVID-19 outbreak and its impact on global economic systems, financial markets and Avnet’s operations, employees, customers and supply chain; 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; disruptions to the business resulting from pandemics, epidemics or other health related crisis (such as COVID-19 outbreak); 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.

Investor Relations Contacts

Joe Burke, 480-643-7431

Joseph.Burke@avnet.com 

 

Kensey Biggs, 480-643-7053

kcb@abmac.com

Media Relations Contact

Jeanne Forbis, 480-643-7499

jeanne.forbis@avnet.com

 

 

 

 

AVNET, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third Quarters Ended

 

Nine Months Ended

 

 

    

March 28,

    

March 30,

    

March 28,

    

March 30,

 

 

 

2020

 

2019

 

2020

 

2019

 

 

 

(Thousands, except per share data)

 

Sales

 

$

4,309,818

 

$

4,698,824

 

$

13,474,632

 

$

14,837,683

 

Cost of sales

 

 

3,790,885

 

 

4,074,629

 

 

11,886,247

 

 

12,946,706

 

Gross profit

 

 

518,933

 

 

624,195

 

 

1,588,385

 

 

1,890,977

 

Selling, general and administrative expenses

 

 

469,646

 

 

468,171

 

 

1,391,024

 

 

1,415,040

 

Goodwill and intangible asset impairment expense

 

 

145,836

 

 

 —

 

 

145,836

 

 

 —

 

Restructuring, integration and other expenses

 

 

19,211

 

 

2,939

 

 

58,073

 

 

79,986

 

Operating (loss) income

 

 

(115,760)

 

 

153,085

 

 

(6,548)

 

 

395,951

 

Other (expense) income, net

 

 

(12,608)

 

 

8,731

 

 

(8,162)

 

 

9,424

 

Interest and other financing expenses, net

 

 

(29,718)

 

 

(36,253)

 

 

(97,254)

 

 

(100,064)

 

Income (loss) from continuing operations before taxes

 

 

(158,086)

 

 

125,563

 

 

(111,964)

 

 

305,311

 

Income tax (benefit) expense

 

 

(29,425)

 

 

30,628

 

 

(30,270)

 

 

90,072

 

Income (loss) from continuing operations, net of tax

 

 

(128,661)

 

 

94,935

 

 

(81,694)

 

 

215,239

 

Loss from discontinued operations, net of tax

 

 

 —

 

 

(6,887)

 

 

(1,548)

 

 

(7,066)

 

Net (loss) income

 

$

(128,661)

 

$

88,048

 

$

(83,242)

 

$

208,173

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share - basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(1.29)

 

$

0.87

 

$

(0.81)

 

$

1.93

 

Discontinued operations

 

 

 —

 

 

(0.06)

 

 

(0.01)

 

 

(0.06)

 

Net (loss) income per share basic

 

$

(1.29)

 

$

0.81

 

$

(0.82)

 

$

1.87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(1.29)

 

$

0.87

 

$

(0.81)

 

$

1.91

 

Discontinued operations

 

 

 —

 

 

(0.06)

 

 

(0.01)

 

 

(0.06)

 

Net (loss) income per share diluted

 

$

(1.29)

 

$

0.81

 

$

(0.82)

 

$

1.85

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used to compute earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

99,479

 

 

108,074

 

 

101,013

 

 

111,222

 

Diluted

 

 

99,479

 

 

108,822

 

 

101,013

 

 

112,252

 

Cash dividends paid per common share

 

$

0.21

 

$

0.20

 

$

0.63

 

$

0.60

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AVNET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

    

March 28,

    

June 29,

 

 

 

2020

 

2019

 

 

 

(Thousands)

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

402,655

 

$

546,105

 

Receivables, net

 

 

2,987,791

 

 

3,168,369

 

Inventories

 

 

2,745,219

 

 

3,008,424

 

Prepaid and other current assets

 

 

180,956

 

 

153,438

 

Total current assets

 

 

6,316,621

 

 

6,876,336

 

Property, plant and equipment, net

 

 

413,371

 

 

452,171

 

Goodwill

 

 

760,939

 

 

876,728

 

Intangible assets, net

 

 

77,306

 

 

143,520

 

Operating lease assets

 

 

271,243

 

 

 —

 

Other assets

 

 

250,248

 

 

215,801

 

Total assets

 

$

8,089,728

 

$

8,564,556

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Short-term debt

 

$

399,965

 

$

300,538

 

Accounts payable

 

 

1,733,673

 

 

1,864,342

 

Accrued expenses and other

 

 

418,654

 

 

413,696

 

Short-term operating lease liabilities

 

 

55,496

 

 

 —

 

Total current liabilities

 

 

2,607,788

 

 

2,578,576

 

Long-term debt

 

 

1,194,240

 

 

1,419,922

 

Long-term operating lease liabilities

 

 

247,539

 

 

 —

 

Other liabilities

 

 

362,883

 

 

425,585

 

Total liabilities

 

 

4,412,450

 

 

4,424,083

 

Shareholders’ equity

 

 

3,677,278

 

 

4,140,473

 

Total liabilities and shareholders’ equity

 

$

8,089,728

 

$

8,564,556

 

 

 

 

 

 

 

 

 

 

 

 

 

AVNET, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

    

March 28, 2020

    

March 30, 2019

 

 

 

(Thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net (loss) income

 

$

(83,242)

 

$

208,173

 

Less: Loss from discontinued operations, net of tax

 

 

(1,548)

 

 

(7,066)

 

Income (loss) from continuing operations

 

 

(81,694)

 

 

215,239

 

 

 

 

 

 

 

 

 

Non-cash and other reconciling items:

 

 

 

 

 

 

 

Depreciation

 

 

75,535

 

 

72,692

 

Amortization

 

 

62,240

 

 

63,123

 

Amortization of operating lease assets

 

 

46,560

 

 

 —

 

Deferred income taxes

 

 

(42,529)

 

 

45,286

 

Stock-based compensation

 

 

20,757

 

 

24,204

 

Goodwill and intangible asset impairment

 

 

145,836

 

 

 —

 

Other, net

 

 

35,000

 

 

42,786

 

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

 

 

 

 

 

 

 

Receivables

 

 

150,095

 

 

436,382

 

Inventories

 

 

227,996

 

 

(125,410)

 

Accounts payable

 

 

(112,923)

 

 

(399,526)

 

Accrued expenses and other, net

 

 

(84,263)

 

 

(118,347)

 

Net cash flows provided by operating activities - continuing operations

 

 

442,610

 

 

256,429

 

Net cash flows used for operating activities - discontinued operations

 

 

 —

 

 

(56,284)

 

Net cash flows provided by operating activities

 

 

442,610

 

 

200,145

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Borrowings (repayments) under accounts receivable securitization, net

 

 

(127,400)

 

 

342,000

 

Repayments under bank credit facilities and other debt, net

 

 

(1,639)

 

 

(11,386)

 

Borrowings (repayments) under senior unsecured credit facility, net

 

 

(1,194)

 

 

85,005

 

Repurchases of common stock

 

 

(235,830)

 

 

(447,901)

 

Dividends paid on common stock

 

 

(63,235)

 

 

(66,188)

 

Other, net

 

 

(15,132)

 

 

10,042

 

Net cash flows used for financing activities - continuing operations

 

 

(444,430)

 

 

(88,428)

 

Net cash flows used for financing activities

 

 

(444,430)

 

 

(88,428)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(61,156)

 

 

(101,383)

 

Acquisitions of businesses, net of cash acquired

 

 

(51,509)

 

 

(66,458)

 

Other, net

 

 

(12,547)

 

 

42,069

 

Net cash flows used for investing activities - continuing operations

 

 

(125,212)

 

 

(125,772)

 

Net cash flows provided by investing activities - discontinued operations

 

 

 —

 

 

123,473

 

Net cash flows used for investing activities

 

 

(125,212)

 

 

(2,299)

 

Effect of currency exchange rate changes on cash and cash equivalents

 

 

(16,418)

 

 

(5,291)

 

Cash and cash equivalents:

 

 

 

 

 

 

 

— (decrease) increase

 

 

(143,450)

 

 

104,127

 

— at beginning of period

 

 

546,105

 

 

621,125

 

— at end of period

 

$

402,655

 

$

725,252

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 significant 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 and intangible asset 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 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 most cases, for measuring performance for compensation purposes. Management measures operating income for its reportable segments excluding restructuring, integration and other expenses, goodwill and intangible asset 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

 

March 28,

 

December 29,

 

September 29,

 

 

 

2020*

  

2020*

 

2019*

 

2019*

 

 

 

($ in thousands, except per share amounts)

GAAP selling, general and administrative expenses - continuing operations

 

 

$

1,391,024

 

$

469,646

 

$

464,873

 

$

456,503

Amortization of intangible assets and other - continuing operations

 

 

 

(62,603)

 

 

(21,071)

 

 

(21,454)

 

 

(20,078)

Adjusted operating expenses - continuing operations

 

 

 

1,328,420

 

 

448,576

 

 

443,419

 

 

436,426

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating (loss) income - continuing operations

 

 

$

(6,548)

 

$

(115,760)

 

$

46,475

 

$

62,738

Restructuring, integration and other expenses - continuing operations

 

 

 

58,073

 

 

19,211

 

 

14,265

 

 

24,598

Goodwill and intangible asset impairment expense - continuing operations

 

 

 

145,836

 

 

145,836

 

 

 -

 

 

 -

Amortization of intangible assets and other - continuing operations

 

 

 

62,603

 

 

21,071

 

 

21,454

 

 

20,078

Adjusted operating income - continuing operations

 

 

 

259,965

 

 

70,358

 

 

82,194

 

 

107,414

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP (loss) income before income taxes- continuing operations

 

 

$

(111,964)

 

$

(158,086)

 

$

12,086

 

$

34,038

Restructuring, integration and other expenses - continuing operations

 

 

 

58,073

 

 

19,211

 

 

14,265

 

 

24,598

Goodwill and intangible asset impairment expense - continuing operations

 

 

 

145,836

 

 

145,836

 

 

 -

 

 

 -

Amortization of intangible assets and other - continuing operations

 

 

 

62,603

 

 

21,071

 

 

21,454

 

 

20,078

Other expenses - continuing operations

 

 

 

19,528

 

 

15,526

 

 

4,002

 

 

 -

Adjusted income before income taxes - continuing operations

 

 

 

174,078

 

 

43,558

 

 

51,807

 

 

78,713

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP income tax expense (benefit) - continuing operations

 

 

$

(30,270)

 

$

(29,425)

 

$

6,870

 

$

(7,714)

Restructuring, integration and other expenses  - continuing operations

 

 

 

13,989

 

 

4,372

 

 

3,377

 

 

6,240

Goodwill and intangible asset impairment expense - continuing operations

 

 

 

6,226

 

 

6,226

 

 

 -

 

 

 -

Amortization of intangible assets and other - continuing operations

 

 

 

12,506

 

 

4,307

 

 

3,964

 

 

4,235

Other expenses - continuing operations

 

 

 

5,732

 

 

4,992

 

 

740

 

 

 -

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

 

 

 

24,659

 

 

15,119

 

 

(4,071)

 

 

13,611

Adjusted income tax expense - continuing operations

 

 

 

32,843

 

 

5,591

 

 

10,880

 

 

16,372

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP (loss) income - continuing operations

 

 

$

(81,694)

 

$

(128,661)

 

$

5,216

 

$

41,752

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

 

 

 

44,084

 

 

14,839

 

 

10,888

 

 

18,358

Goodwill and intangible asset impairment expense (net of tax) - continuing operations

 

 

 

139,610

 

 

139,610

 

 

 -

 

 

 -

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

 

 

 

50,097

 

 

16,764

 

 

17,490

 

 

15,843

Other expenses (net of tax) - continuing operations

 

 

 

13,796

 

 

10,534

 

 

3,262

 

 

 -

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

 

 

 

(24,659)

 

 

(15,119)

 

 

4,071

 

 

(13,611)

Adjusted income - continuing operations

 

 

 

141,235

 

 

37,967

 

 

40,927

 

 

62,341

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted (loss) earnings per share - continuing operations

 

 

$

(0.81)

 

$

(1.29)

 

$

0.05

 

$

0.40

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

 

 

 

0.44

 

 

0.15

 

 

0.11

 

 

0.18

Goodwill and intangible asset impairment expense (net of tax) - continuing operations

 

 

 

1.38

 

 

1.39

 

 

 -

 

 

 -

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

 

 

 

0.50

 

 

0.17

 

 

0.17

 

 

0.15

Other expenses (net of tax) - continuing operations

 

 

 

0.14

 

 

0.11

 

 

0.03

 

 

 -

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

 

 

 

(0.25)

 

 

(0.15)

 

 

0.04

 

 

(0.13)

Adjusted diluted EPS - continuing operations

 

 

 

1.40

 

 

0.38

 

 

0.40

 

 

0.60


* May not foot/ cross foot due to rounding and differences in average diluted shares between quarterly periods compared to the fiscal year to date.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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