-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, APhIj8PBVCvrbXMJTqxcJlXkiCVuwKbQ0ajKklcEK9cswzW1ygGPy5GMdxe7W4sy nikbtjU6h/8RlyqDFtbjLg== 0000008858-96-000024.txt : 19961111 0000008858-96-000024.hdr.sgml : 19961111 ACCESSION NUMBER: 0000008858-96-000024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960927 FILED AS OF DATE: 19961108 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AVNET INC CENTRAL INDEX KEY: 0000008858 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 111890605 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-62583 FILM NUMBER: 96656767 BUSINESS ADDRESS: STREET 1: 80 CUTTER MILL RD - 5TH FL CITY: GREAT NECK STATE: NY ZIP: 11021 BUSINESS PHONE: 5164667000 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended September 27, 1996 Commission File #1-4224 Avnet, Inc. (Exact name of registrant as specified in its charter) New York 11-1890605 (State or other jurisdiction of IRS Employer I.D. Number incorporation or organization) 80 Cutter Mill Road, Great Neck, N.Y. 11021 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code . . . . . . . .516-466-7000 Not Applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No The number of shares of the registrant's Common Stock (net of treasury shares) as of the close of the period covered by this report . . . . . 43,423,625 shs. The number of units then outstanding of other publicly-traded securities of the registrant: 6 7/8% Notes Due March 15, 2004 . . . . . . . . . . . . . . $100,000,000 AVNET, INC. AND SUBSIDIARIES INDEX Part I. Financial Information Page No. Item 1. Financial Statements: Consolidated Balance Sheets - September 27, 1996 and June 28, 1996 3 Consolidated Statements of Income - First Quarters Ended September 27, 1996 and September 29, 1995 4 Consolidated Statements of Cash Flows - First Quarters Ended September 27, 1996 and September 29, 1995 5 Notes to Consolidated Financial Statements 6 - 7 Item 2. Management's Discussion and Analysis 8 - 10 Part II. Other Information 11 - 12 Signature Page 13 PART I - FINANCIAL INFORMATION Item I. Financial Statements AVNET, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands) September 27, June 28, 1996 1996 (unaudited) (audited) Assets: Current assets: Cash and cash equivalents $ 56,868 $ 47,808 Receivables, less allowances of $37,309 and $34,615, respectively 801,612 802,442 Inventories (Note 3) 892,555 935,612 Other 30,091 27,280 Total current assets 1,781,126 1,813,142 Property, plant & equipment, at cost, net 178,804 176,929 Goodwill, net of accumulated amortization of $40,257 and $36,998, respectively 491,674 494,666 Other assets 38,939 36,919 Total assets $2,490,543 $2,521,656 Liabilities: Current liabilities: Borrowings due within one year $ 279 $ 282 Accounts payable 338,911 353,918 Accrued expenses and other 190,708 165,022 Total current liabilities 529,898 519,222 Long-term debt, less due within one year 419,536 497,223 Commitments and contingencies (Note 4) Total liabilities 949,434 1,016,445 Shareholders' equity (Note 5): Common stock $1.00 par, authorized 60,000,000 shares, issued 43,845,000 shares and 43,842,000 shares, respectively 43,845 43,842 Additional paid-in capital 418,983 418,441 Retained earnings 1,094,209 1,058,350 Cumulative translation adjustments (4,767) (4,243) Common stock held in treasury at cost, 421,000 shares and 421,000 shares, respectively (11,161) (11,179) Total shareholders' equity 1,541,109 1,505,211 Total liabilities and shareholders' equity $2,490,543 $2,521,656 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AVNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (thousands, except per share data) First Quarter Ended September 27, September 29, 1996 1995 (unaudited) Sales $1,281,812 $1,189,102 Cost of sales 1,049,322 960,401 Gross Profit 232,490 228,701 Operating expenses: Selling, shipping, general and administrative 143,617 139,856 Depreciation and amortization 9,153 8,386 Operating income 79,720 80,459 Investment and other income, net 770 871 Interest expense (6,900) (4,602) Income before income taxes 73,590 76,728 Income taxes 31,217 32,184 Net income $ 42,373 $ 44,544 Earnings per share $0.97 $1.02 Shares used to compute earnings per share 43,709 43,720 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AVNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) First Quarter Ended September 27, September 29, 1996 1995 (unaudited) Cash flows from operating activities: Net income $ 42,373 $ 44,544 Add non-cash and other reconciling items: Depreciation and amortization 10,960 9,800 Deferred taxes (706) (425) Other, net (Note 6) 4,974 4,478 57,601 58,397 Receivables (3,243) (52,343) Inventories 43,057 (77,648) Payables, accruals and other, net 11,373 35,717 Net cash flows provided from (used for) operating activities 108,788 (35,877) Cash flows from financing activities: Issuance (repayment) of bank debt and commercial paper, net of issuance costs (73,760) 123,653 Payment of other debt (3,936) (7,001) Cash dividends (6,513) (6,121) Other, net (1,744) 1,000 Net cash flows (used for) provided from financing (85,953) 111,531 Cash flows from investing activities: Purchases of property, plant and equipment (13,521) (6,431) Acquisition of operations, net (Note 6) (269) (59,730) Net cash flows used for investing activities (13,790) (66,161) Effect of exchange rates on cash and cash equivalents 15 73 Cash and cash equivalents: - increase 9,060 9,566 - at beginning of year 47,808 49,332 - at end of period $ 56,868 $ 58,898 Additional cash flow information (Note 6) SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AVNET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position as of September 27, 1996 and June 28, 1996; the results of operations for the first quarters ended September 27, 1996 and September 29, 1995; and the cash flows for the first quarters ended September 27, 1996 and September 29, 1995. 2. The results of operations for the first quarter ended September 27, 1996 are not necessarily indicative of the results to be expected for the full year. 3. Inventories: (Thousands) September 27, June 28, 1996 1996 Finished goods $799,179 $844,510 Work in process 14,077 13,306 Purchased parts and raw materials 79,299 77,796 $892,555 $935,612 4. From time to time, the Company may become liable with respect to pending and threatened litigation, taxes, and environmental and other matters. The Company has been designated a potentially responsible party or has had other claims made against it in connection with environmental clean- ups at several sites. Based upon the information known to date, the Company believes that it has appropriately reserved for its share of the costs of the clean-ups and it is not anticipated that any contingent matters will have a material adverse impact on the Company's financial condition, liquidity or results of operations. 5. Number of shares of common stock reserved for stock option and stock incentive programs: 3,683,439 6. Additional cash flow information: Other non-cash and reconciling items primarily include the provision for doubtful accounts. AVNET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. Additional cash flow information (Continued) Cash expended for the acquisition of operations in the first quarter of fiscal 1997 includes only the cash paid for professional and other fees associated with various acquisitions completed during fiscal 1996. In the first quarter of fiscal 1996, cash expended for the acquisition of operations includes the cash paid in connection with the acquisitions of VSI Electronics and Setron Schiffer Electronik GmbH & Co., KG offset by cash received in connection with the sale of the motor, motor repair shop and OEM business of Brownell Electro. Interest and income taxes paid in the first quarters were as follows: (Thousands) 1997 1996 Interest $6,081 $ 7,105 Income taxes $4,892 $ 2,492 Item 2 Management's Discussion and Analysis Results of Operations For the first quarter of fiscal 1997 ended September 27, 1996, consolidated sales were a record $1.282 billion, up 8% when compared with last year's first quarter sales of $1.189 billion. This increase was due primarily to stronger sales at the Electronic Marketing Group's Computer Marketing Group. The Electronic Marketing Group's sales in the first quarter of 1997 were $1.234 billion, up 8% as compared with $1.144 billion in 1996, and the Video Communications Group's sales in the first quarter of 1997 were almost $48 million, or 6% higher than the prior year's sales of $45 million. Although comparative sales were also positively impacted by fiscal 1996 acquisitions - Avnet Setron, Avnet Mercuries and Avnet Kopp which were acquired in September 1995, December 1995 and February 1996, respectively--this favorable effect was largely offset by decreased sales due to the divestiture in the first quarter of 1996 of the motor, motor repair shop and OEM business of Brownell Electro. The first quarter's sales were characterized by mixed results in the various Electronic Marketing Group operations. First quarter 1997 sales were higher than the prior year's first quarter at each of the Electronic Marketing Group's North American operations, most significantly at the Computer Marketing Group and Allied Electronics. Sales at EMG International, which includes all of the Electronic Marketing Group's international operations outside of North America, were higher than the prior year comparative period due to the impact of acquisitions, and were slightly lower if the impact of acquisitions were excluded. Consolidated gross profit margins of 18.1% in the first quarter of 1997 were lower by 1.1% of sales as compared with 19.2% in the first quarter of last year. Even though operating expenses as a percentage of sales of 11.9% were also lower, by 0.5% of sales, as compared with 12.4% in the prior year, the decrease was not enough to offset totally the decline in the consolidated gross profit margins. As a result, operating income as a percentage of sales was 6.2% in the first quarter of 1997 as compared with 6.8% in the first quarter of last year. Interest expense was substantially higher in the first quarter of 1997 as compared with the prior year like period due to a combination of factors. Last year's first quarter interest expense was positively affected by the reversal of $1.3 million of interest expense which was accrued at June 30, 1995 with respect to the Company's 6% Convertible Subordinated Debentures Due 2012 (the "Debentures"). Following the Company's call for redemption of the Debentures, almost 100% of the outstanding Debentures were converted into common stock of the Company in September 1995, thereby eliminating the requirement to pay interest on the Debentures subsequent to the interest payment made on April 15, 1995 and necessitating the reversal of interest accrued at June 30, 1995. The balance of the increase in interest expense was due to the net effect of an increase in the average amount of borrowings outstanding offset by a decrease in the Company's effective interest rate. Net income in the first quarter of 1997 was $42.4 million, down almost 5% when compared with $44.5 million in the prior year's first quarter. Net income as a percentage of sales was 3.3% in the first quarter of 1997 as compared with 3.7% in the prior year period. The Electronic Marketing Group's earnings decreased 2% compared with its last year's first quarter earnings. The Electronic Marketing Group's North American operations posted improved income from operations, primarily due to sharply improved results at the Computer Marketing Group, while income from operations at EMG International was down as compared with last year's first quarter. The Video Communications Group's first quarter 1997 net income was down as compared with the prior year period. Liquidity and Capital Resources During the first quarter of 1997, the Company generated $57.6 million from income before depreciation and other non-cash items, and generated another $51.2 million from a reduction in working capital needs resulting in $108.8 million of net cash flows being provided from operations. In addition, the Company used $21.8 million for other normal business operations including purchases of property, plant and equipment ($13.5 million), dividends ($6.5 million) and other items ($1.8 million). This resulted in $87.0 million being generated from normal business operations. The Company also used $4.2 million for acquisition related expenditures ($0.3 million) and for the repayment of other debt ($3.9 million). This overall net generation of cash of $82.8 million was used to pay down $73.7 million of outstanding bank debt and commercial paper with the remaining $9.1 million being used to increase cash and cash equivalents. The Company's quick assets at September 27, 1996, totaled $858.5 million as compared with $850.3 million at June 28, 1996 and exceeded the Company's current liabilities by $328.6 million as compared with a $331.0 million excess at June 28, 1996. Working capital at September 27, 1996 was $1,251.2 million as compared with $1,293.9 million at June 28, 1996. At the end of the first quarter, to support each dollar of current liabilities, the Company had $1.62 of quick assets and $1.74 of other current assets for a total of $3.36 of current assets as compared with $3.49 at June 28, 1996. In August 1995, the Company notified its Debentureholders of its decision to call for redemption on September 15, 1995 the entire amount of outstanding Debentures. Holders of $105.2 million of the Debentures exercised their right to convert the Debentures into approximately 2.4 million shares of Avnet common stock at a conversion price of $43.00 principal amount per share, thereby increasing shareholders' equity by $105.2 million. The remaining outstanding Debentures, amounting to $0.1 million, were redeemed on September 15, 1995, at a premium of 1.2% plus accrued interest. In addition, shareholders' equity was reduced by approximately $0.9 million due to the write-off of unamortized deferred loan expenses associated with the Debentures. During the first quarter of 1997, shareholders' equity increased by $35.9 million to $1,541.1 million at September 27, 1996, while total debt decreased by $77.7 million to $419.8 million. As a result, the total debt to capital (shareholders' equity plus total debt) ratio was 21.4% at September 27, 1996 as compared with 24.8% at June 28, 1996. The Company's favorable balance sheet ratios would facilitate additional financing if, in the opinion of management, such financing would enhance the future operations of the Company. On August 1, 1996, the Company's Board of Directors authorized the purchase of up to $200 million of Avnet common stock. The stock is to be purchased in the open market from time to time or in directly negotiated purchases. However, no shares were purchased until after the end of the first quarter. At September 27, 1996, the Company did not have any material commitments for capital expenditures. The Company and the former owners of a Company-owned site in Oxford, North Carolina have entered into a Consent Decree and Court Order with the Environmental Protection Agency (EPA) for the environmental clean-up of the site, the cost of which, according to the EPA's remedial investigation and feasibility study, is estimated to be approximately $6.3 million, exclusive of the $1.5 million in EPA past costs paid by the potentially responsible parties (PRPs). Pursuant to a Consent Decree and Court Order entered into between the Company and the former owners of the site, the former owners have agreed to bear at least 70% of the clean-up costs of the site, and the Company will be responsible for not more than 30% of those costs. The Company is also a PRP in an environmental clean-up at a site in North Smithfield, Rhode Island. In addition, the Company has received notice from a third party of its intention to seek indemnification for costs it may incur in connection with an environmental clean-up at a site in Rush, Pennsylvania resulting from the alleged disposal of wire insulation material at the site by a former unit of the Company. Based upon the information known to date, the Company believes that it has appropriately accrued in its financial statements for its share of the costs of the clean-up at all of the above mentioned sites. The Company is also a PRP, or has been notified of claims made against it, at environmental clean-up sites in Huguenot, New York and in Hempstead, New York. At this time, the Company cannot estimate the amount of its potential liability, if any, for clean-up costs in connection with these sites, but does not anticipate that these matters or any other contingent matters will have a material adverse impact on the Company's financial condition, liquidity or results of operations. The Company is not now aware of any commitments, contingencies or events within its control which may significantly change its ability to generate sufficient cash from internal or external sources to meet its needs. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K: A. The following documents are filed as part of this report: 1. Exhibits: Exhibit No. 3A Certificate of Incorporation of the Company as currently in effect (incorporated by reference). 3B By-Laws of the Registrant as currently in effect (incorporated herein by reference to Commission file No. 1-4224, Current Report on Form 8-K dated February 12, 1996 Exhibit 3 (ii)). *11 - Computation of earnings per share *Filed herewith EXHIBIT 11 AVNET, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (Thousands, except per share data) First Quarter Ended September 27, September 29, 1996 1995 (unaudited) A. Primary earnings per share: Common shares outstanding (weighted average) 43,425 43,280 Common equivalent shares: Contingent shares issuable 138 112 Exercise of warrants and options using the treasury method 146 328 Total common and common equivalent shares 43,709 43,720 Income used for computing earnings per share $42,373 $44,544 Earnings per share $0.97 $1.02 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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) By: s/Raymond Sadowski Raymond Sadowski Senior Vice President, Chief Financial Officer and Assistant Secretary By: s/John F. Cole John F. Cole Controller and Principal Accounting Officer November 8, 1996 Date EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 3-MOS JUN-27-1997 SEP-27-1996 56,868 0 838,921 37,309 892,555 1,781,126 371,694 192,890 2,490,543 529,898 419,536 0 0 43,845 1,497,264 2,490,543 1,281,812 1,282,582 1,049,322 1,192,939 9,153 0 6,900 73,590 31,217 42,373 0 0 0 42,373 .97 0
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