EX-99.1 2 c858-20180125ex991a2e278.htm EX-99.1 avt_Ex_ 99-1

Exhibit 99.1

 

 

 

 

 

 

 

 

 

Avnet, Inc.

2211 South 47th Street

Phoenix, AZ 85034

PRESS RELEASE

 

 

 

Avnet Reports Second Quarter Fiscal 2018 Results

 

Phoenix, January 25, 2018 - Avnet, Inc. (NYSE:AVT) today announced results for the second quarter ended December 30, 2017.

 

Second Quarter Results

·

Sales of $4.5 billion were at the high end of our guidance 

o

Sales increased 5.8% year over year

o

Organic sales increased 1.9% in constant currency from the year ago quarter 

·

Diluted earnings per share (EPS) from continuing operations of $0.47

o

Adjusted diluted EPS from continuing operations of $0.78

·

Cash generated from operating activities was $68.8 million in the December quarter

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarters Ended

 

 

 

 

 

 

 

 

 

 

 

 

Organic

 

 

    

December 30, 2017

    

December 31, 2016 (1)

    

Change

 

    

Growth (2)

  

Avnet

 

$ in millions, except per share data

 

 

 

 

Sales

 

$

4,521.6

 

$

4,273.6

 

5.8

%

 

4.6

%

Constant Currency (3)

 

 

 

 

 

 

 

3.1

%

 

1.9

%

Americas

 

 

1,210.2

 

 

1,252.6

 

(3.4)

%

 

(4.8)

%

EMEA

 

 

1,506.0

 

 

1,380.7

 

9.1

%

 

7.0

%

Constant Currency (3)

 

 

 

 

 

 

 

0.8

%

 

(1.2)

%

Asia

 

 

1,805.4

 

 

1,640.3

 

10.1

%

 

9.8

%

Constant Currency (3)

 

 

 

 

 

 

 

10.2

%

 

9.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

 

87.0

 

 

124.2

 

(30.0)

%

 

 

 

Adjusted Operating Income (2)

 

 

145.7

 

 

164.5

 

(11.4)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

 

56.8

 

 

32.5

 

74.9

%

 

 

 

Adj Income from continuing operations (2)

 

 

94.5

 

 

100.8

 

(6.3)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS continuing operations

 

$

0.47

 

$

0.25

 

88.0

%

 

 

 

Adj Diluted EPS continuing operations (2)

 

$

0.78

 

$

0.77

 

1.3

%

 

 

 

(1)

Financial information is for continuing operations and excludes the Technology Solutions (TS) business as the sale of this business was completed during Q3 FY17.

(2)

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

(3)

Year-over-year sales growth rate excludes the impact of changes in foreign currency exchange rates. A discussion on the impact of foreign currency on Avnet results of operations is included in the “Non-GAAP Financial Information” section of this press release.

 

 

 

 

“Our team delivered a strong quarter with improvements across our business. We exceeded our financial commitments and importantly, the Americas region has stabilized after several quarters of challenges,” said Avnet CEO Bill Amelio.  “Our unique ecosystem and growth engines are really coming together nicely. Our communities, comprised of engineers, makers and start-ups doing design work, added nearly 10% new member growth sequentially, and our digital revenue continues to grow and exceeded an $800 million annual run rate. Premier Farnell delivered strong revenue growth with improving operating margins. Customers and suppliers are recognizing how Avnet can uniquely provide critical services at each stage of the product lifecycle as we help customers move from idea to product and from product to market. With our ecosystem performing well coupled with a strong book to bill we are pleased to be able to increase our fiscal 2018 revenue and EPS guidance in this important transition year at Avnet.”

 

Operating Group Results

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year-over-Year Growth Rates

 

 

 

Q2 FY18

 

Reported

 

 

Organic

 

 

    

Sales

    

Sales

  

    

Sales (1)

  

 

 

 

(in millions)

 

 

 

 

 

 

 

Sales

 

 

 

 

 

 

 

 

 

 

Electronic Components

 

$

4,163.5

 

 

4.0

%

 

4.0

%

Constant Currency (2)

 

 

 

 

 

1.4

%

 

1.4

%

 

 

 

 

 

 

 

 

 

 

 

Premier Farnell (acquired Oct 17, 2016)

 

$

358.1

 

 

33.0

%

 

12.3

%

Constant Currency (2)

 

 

 

 

 

27.5

%

 

7.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Q2 FY18

    

Q2 FY17

    

Change

Operating Income

 

 

 

 

 

 

 

 

 

 

 

Electronic Components

 

$

129.8

 

 

$

166.7

 

 

(22.1)

%

Premier Farnell

 

 

35.6

 

 

 

24.0

 

 

48.6

%

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

 

 

 

 

 

 

 

 

 

 

Electronic Components

 

 

3.1

%

 

 

4.2

%

 

(104)

bps

Premier Farnell

 

 

10.0

%

 

 

8.9

%

 

105

bps

 

(1)

Non-GAAP measure.  Refer to the “Non-GAAP Financial Information” section of this press release.

(2)

Refer to “Non-GAAP Financial Information” section in this press release.

 

·

Electronic Components sales exceeded expectations driven by the Americas and Asia regions

o

Sales increased 4.0% year over year driven by the EMEA and Asia regions

o

Organic sales increased 1.4% from the year ago quarter in constant currency

o

Electronic Components Asia organic sales increased 9.5% year over year in constant currency

·

Premier Farnell sales increased 33.0% year over year

o

Organic sales increased 7.7%  from the year ago quarter in constant currency

·

Electronic Components operating income margin declined year over year due to supplier channel and program changes

·

Premier Farnell operating income margin improved year over year due to the realization of cost synergies 

 

 

 

Cash Flow and Returns to Shareholders

 

·

Returned $89 million of cash to shareholders via share repurchases and dividends

·

Cash and cash equivalents at the end of the quarter was $589.5 million; net debt (total debt less cash and cash equivalents) was $1.14 billion with stable leverage ratios

·

Repurchased $67.4 million, or 1.7 million shares, in the quarter. Entering the third quarter, the Company had approximately $460 million remaining under the current share repurchase authorization

·

Avnet paid a dividend of $0.18 per share, or $21.6 million, during the quarter

 

“In the December quarter, we generated $69 million of cash from continuing operations, which represents a sequential increase of $197 million,” said Ken Jacobson, interim CFO of Avnet. “We utilized the proceeds from the sale of marketable securities to buy back $67 million, or 1.7 million shares. Our disciplined share repurchase program, along with our quarterly dividend, has returned $183 million to shareholders during the first 6 months of fiscal 2018, demonstrating our commitment to our capital allocation priorities. Our transformation and cost reduction initiatives continue to gain traction, as operating income and operating margin increased sequentially. With the expectation of seasonally strong growth in the March quarter, additional cost reductions, and a strong balance sheet, we are well positioned to improve upon our performance in the second half of fiscal 2018 as we progress towards our long term financial objectives.”

 

 

Outlook for Third Quarter of Fiscal 2018 Ending on March 31, 2018

 

·

Sales are expected to be in the range of $4.65 billion to $4.95 billion

·

Adjusted diluted earnings per share1 is expected to be in the range of $0.90 to $1.00 per share

·

The guidance assumes 121 million average diluted shares outstanding and an adjusted tax rate of 21% to 25%

 

The above guidance excludes any additional acquisitions, any results of discontinued operations, amortization of intangibles, accelerated depreciation, any potential restructuring, integration, and other expenses and certain income tax adjustments. In addition, the above guidance assumes that the average U.S. Dollar to Euro currency exchange rate for the third quarter of fiscal 2018 is $1.21 to €1.00. This compares with an average exchange rate of $1.06 to the Euro in the third quarter of fiscal 2017.

 

Outlook for Fiscal 2018 Ending on June 30, 2018

 

·

Sales are expected to be in the range of $18.5 billion to $18.9 billion

·

Adjusted diluted earnings per share1 is expected to be in the range of $3.35 to $3.55 per share

·

The guidance assumes 122 million average diluted shares outstanding and an adjusted tax rate of 21% to 25%

 

The above guidance represents a 2% and 3% increase in sales and adjusted diluted earnings per share guidance, respectively, compared to the mid-point of prior fiscal 2018 guidance. The above guidance excludes any additional acquisitions, any results of discontinued operations, amortization of intangibles, accelerated depreciation, any potential restructuring, integration, and other expenses and certain income tax adjustments. In addition, the above guidance assumes that the average U.S. Dollar to Euro currency exchange rate for fiscal 2018 is $1.19 to €1.00. This compares with an average exchange rate of $1.09 to the Euro in fiscal 2017.

 

 

 

1 Refer to the “Non-GAAP Financial Information” section of this press release for a reconciliation of non-GAAP guidance.

 

 

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 ERP systems and transitioning to a global ERP system, supplier losses and changes to supplier programs, an industry down-cycle in 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.

 

Teleconference and Upcoming Events

 

Avnet will host a quarterly teleconference today at 10:00 a.m. Eastern Time. Financial information including financial statement reconciliations of non-GAAP to 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 idea to design and from prototype to production, Avnet supports customers at each stage of a product’s lifecycle. A comprehensive portfolio of design and supply chain services makes Avnet the go-to guide for innovators who set the pace for technological change. 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.

 

Visit the Avnet Investor Relations website at www.ir.avnet.com or contact us at investorrelations@avnet.com. (AVT_IR)

 

Investor Relations Contact

 

Vincent Keenan

Investor Relations

(480) 643-7053

investorrelations@avnet.com 

 

 

 

Media Relations Contact

 

Maureen O’Leary

Corporate Communications

(480) 643-7499

maureen.o’leary@avnet.com

 

 

 

AVNET, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarters Ended

 

Six Months Ended

 

 

    

December 30,

    

December 31,

    

December 30,

    

December 31,

 

 

 

2017

 

2016

 

2017

 

2016

 

 

 

(Thousands, except per share data)

 

Sales

 

$

4,521,636

 

$

4,273,559

 

$

9,182,578

 

$

8,391,663

 

Cost of sales

 

 

3,919,175

 

 

3,687,374

 

 

7,967,563

 

 

7,282,823

 

Gross profit

 

 

602,461

 

 

586,185

 

 

1,215,015

 

 

1,108,840

 

Selling, general and administrative expenses

 

 

478,681

 

 

431,555

 

 

974,886

 

 

795,227

 

Restructuring, integration and other expenses

 

 

36,762

 

 

30,400

 

 

83,156

 

 

59,869

 

Operating income

 

 

87,018

 

 

124,230

 

 

156,973

 

 

253,744

 

Other income (expense), net

 

 

762

 

 

(36,514)

 

 

16,341

 

 

(50,248)

 

Interest expense

 

 

(25,640)

 

 

(26,748)

 

 

(49,700)

 

 

(53,984)

 

Income from continuing operations before taxes

 

 

62,140

 

 

60,968

 

 

123,614

 

 

149,512

 

Income tax expense

 

 

5,346

 

 

28,503

 

 

8,638

 

 

49,359

 

Income from continuing operations, net of tax

 

 

56,794

 

 

32,465

 

 

114,976

 

 

100,153

 

Income (loss) from discontinued operations, net of tax

 

 

(10,070)

 

 

70,753

 

 

(9,949)

 

 

71,908

 

Net income

 

$

46,724

 

$

103,218

 

$

105,027

 

$

172,061

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share - basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.47

 

$

0.25

 

$

0.94

 

$

0.78

 

Discontinued operations

 

 

(0.08)

 

 

0.55

 

 

(0.08)

 

 

0.56

 

Net income per share basic

 

$

0.39

 

$

0.80

 

$

0.86

 

$

1.34

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.47

 

$

0.25

 

$

0.93

 

$

0.77

 

Discontinued operations

 

 

(0.08)

 

 

0.54

 

 

(0.08)

 

 

0.55

 

Net income per share diluted

 

$

0.39

 

$

0.79

 

$

0.85

 

$

1.32

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used to compute earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

120,400

 

 

127,901

 

 

121,543

 

 

127,716

 

Diluted

 

 

121,749

 

 

130,347

 

 

122,867

 

 

130,055

 

Cash dividends paid per common share

 

$

0.18

 

$

0.17

 

$

0.36

 

$

0.34

 

 

 

 

AVNET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

    

December 30,

    

July 1,

 

 

 

2017

 

2017

 

 

 

(Thousands)

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

589,518

 

$

836,384

 

Marketable securities

 

 

136,443

 

 

281,326

 

Receivables, net

 

 

3,295,014

 

 

3,337,624

 

Inventories

 

 

3,285,926

 

 

2,824,709

 

Prepaid and other current assets

 

 

269,204

 

 

253,765

 

Total current assets

 

 

7,576,105

 

 

7,533,808

 

Property, plant and equipment, net

 

 

507,692

 

 

519,575

 

Goodwill

 

 

1,181,013

 

 

1,148,347

 

Intangible assets, net

 

 

269,743

 

 

277,291

 

Other assets

 

 

265,952

 

 

220,568

 

Total assets

 

$

9,800,505

 

$

9,699,589

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Short-term debt

 

$

243,351

 

$

50,113

 

Accounts payable

 

 

1,958,145

 

 

1,861,635

 

Accrued expenses and other

 

 

554,140

 

 

542,023

 

Total current liabilities

 

 

2,755,636

 

 

2,453,771

 

Long-term debt

 

 

1,488,066

 

 

1,729,212

 

Other liabilities

 

 

308,259

 

 

334,538

 

Total liabilities

 

 

4,551,961

 

 

4,517,521

 

Shareholders’ equity

 

 

5,248,544

 

 

5,182,068

 

Total liabilities and shareholders’ equity

 

$

9,800,505

 

$

9,699,589

 

 

 

 

 

 

 

 

 

 

 

 

AVNET, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

    

December 30, 2017

    

December 31, 2016

 

 

 

(Thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

 

$

105,027

 

$

172,061

 

Less: Income (loss) from discontinued operations, net of tax

 

 

(9,949)

 

 

71,908

 

Income from continuing operations

 

 

114,976

 

 

100,153

 

 

 

 

 

 

 

 

 

Non-cash and other reconciling items:

 

 

 

 

 

 

 

Depreciation

 

 

77,510

 

 

45,616

 

Amortization

 

 

47,256

 

 

11,759

 

Deferred income taxes

 

 

(55,921)

 

 

9,312

 

Stock-based compensation

 

 

17,090

 

 

32,525

 

Other, net

 

 

22,386

 

 

13,069

 

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

 

 

 

 

 

 

 

Receivables

 

 

108,459

 

 

(127,153)

 

Inventories

 

 

(410,361)

 

 

139,672

 

Accounts payable

 

 

75,342

 

 

133,698

 

Accrued expenses and other, net

 

 

(55,955)

 

 

(55,437)

 

Net cash flows (used) provided by operating activities - continuing operations

 

 

(59,218)

 

 

303,214

 

Net cash flows used by operating activities - discontinued operations

 

 

 —

 

 

(63,124)

 

Net cash flows (used) provided by operating activities

 

 

(59,218)

 

 

240,090

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Issuance of notes, net of issuance costs

 

 

 —

 

 

296,374

 

Repayment of notes

 

 

 —

 

 

(378,559)

 

Borrowings (repayments) under accounts receivable securitization, net

 

 

78,000

 

 

(264,963)

 

Borrowings (repayments) under senior unsecured credit facility, net

 

 

(99,971)

 

 

771,174

 

Repayments under bank credit facilities and other debt, net

 

 

(27,381)

 

 

(18,978)

 

Borrowings of term loans

 

 

 —

 

 

530,756

 

Repurchases of common stock

 

 

(135,458)

 

 

 —

 

Dividends paid on common stock

 

 

(43,572)

 

 

(43,426)

 

Other, net

 

 

(1,214)

 

 

13,825

 

Net cash flows (used) provided by financing activities - continuing operations

 

 

(229,596)

 

 

906,203

 

Net cash flows used by financing activities - discontinued operations

 

 

 —

 

 

(16,505)

 

Net cash flows (used) provided by financing activities

 

 

(229,596)

 

 

889,698

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(67,397)

 

 

(70,424)

 

Acquisitions of businesses, net of cash acquired

 

 

(14,661)

 

 

(798,366)

 

Other, net

 

 

2,402

 

 

7,766

 

Net cash flows used for investing activities - continuing operations

 

 

(79,656)

 

 

(861,024)

 

Net cash flows provided (used) by investing activities - discontinued operations

 

 

112,664

 

 

(3,093)

 

Net cash flows provided (used) by investing activities

 

 

33,008

 

 

(864,117)

 

Effect of currency exchange rate changes on cash and cash equivalents

 

 

8,940

 

 

(27,007)

 

Cash and cash equivalents:

 

 

 

 

 

 

 

— (decrease) increase

 

 

(246,866)

 

 

238,664

 

— at beginning of period

 

 

836,384

 

 

1,031,478

 

— at end of period

 

$

589,518

 

$

1,270,142

 

 

 

 

 

 

 

 

 

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, 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 “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 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 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 non-recurring 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.

 

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 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 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. 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.

 

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).

   

 

 

·

ROWC is defined as annualized adjusted operating income (as defined above) divided by the sum of the monthly average balances of receivables and inventories less accounts payable from both continuing and discontinued operations.

 

·

ROCE is defined as annualized, tax effected adjusted operating income (as defined above) divided by the monthly average balances of interest-bearing debt and equity (including the impact of adjustments to operating income discussed above) less cash and cash equivalents from both continuing and discontinued operations.

 

·

WC velocity is defined as annualized sales divided by the sum of the monthly average balances of receivables and inventories less accounts payable.

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarters Ended

 

 

 

    

Fiscal Year to Date

 

December 30,

    

September 30,

    

 

 

  

2018

  

2017*

  

2017*

 

 

 

 

($ in thousands, except per share amounts)

 

GAAP selling, general and administrative expenses - continuing operations

 

 

$

974,886

 

$

478,681

 

$

496,206

 

Amortization of intangible assets and other - continuing operations

 

 

 

(47,462)

 

 

(21,877)

 

 

(25,585)

 

Adjusted operating expenses - continuing operations

 

 

 

927,424

 

 

456,804

 

 

470,620

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income - continuing operations

 

 

$

156,973

 

$

87,018

 

$

69,955

 

Restructuring, integration and other expenses - continuing operations

 

 

 

83,156

 

 

36,762

 

 

46,394

 

Amortization of intangible assets and other - continuing operations

 

 

 

47,462

 

 

21,877

 

 

25,585

 

Adjusted operating income - continuing operations

 

 

 

287,591

 

 

145,657

 

 

141,934

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP other income (expense), net - continuing operations

 

 

$

16,341

 

$

762

 

$

15,579

 

Foreign currency gain (loss) - continuing operations

 

 

 

(9,340)

 

 

546

 

 

(9,886)

 

Adjusted other income (expense), net - continuing operations

 

 

 

7,000

 

 

1,308

 

 

5,692

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP income before income taxes- continuing operations

 

 

$

123,614

 

$

62,140

 

$

61,474

 

Restructuring, integration and other expenses - continuing operations

 

 

 

83,156

 

 

36,762

 

 

46,394

 

Amortization of intangible assets and other - continuing operations

 

 

 

47,462

 

 

21,877

 

 

25,585

 

Foreign currency gain (loss) - continuing operations

 

 

 

(9,340)

 

 

546

 

 

(9,886)

 

Adjusted income before income taxes - continuing operations

 

 

 

244,892

 

 

121,325

 

 

123,567

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP income tax expense (benefit) - continuing operations

 

 

$

8,638

 

$

5,346

 

$

3,292

 

Restructuring, integration and other expenses  - continuing operations

 

 

 

25,782

 

 

9,004

 

 

16,778

 

Amortization of intangible assets and other - continuing operations

 

 

 

9,605

 

 

4,405

 

 

5,200

 

Foreign currency gain (loss) - continuing operations

 

 

 

(3,347)

 

 

84

 

 

(3,431)

 

Discrete income tax benefit items, net - continuing operations

 

 

 

14,915

 

 

8,017

 

 

6,898

 

Adjusted income tax expense - continuing operations

 

 

 

55,593

 

 

26,856

 

 

28,737

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP income - continuing operations

 

 

$

114,976

 

$

56,794

 

$

58,182

 

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

 

 

 

57,374

 

 

27,758

 

 

29,616

 

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

 

 

 

37,857

 

 

17,472

 

 

20,385

 

Foreign currency gain (loss) (net of tax) - continuing operations

 

 

 

(5,993)

 

 

462

 

 

(6,455)

 

Discrete income tax benefit items, net - continuing operations

 

 

 

(14,915)

 

 

(8,017)

 

 

(6,898)

 

Adjusted income - continuing operations

 

 

 

189,298

 

 

94,469

 

 

94,829

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted EPS - continuing operations

 

 

$

0.93

 

$

0.47

 

$

0.47

 

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

 

 

 

0.47

 

 

0.23

 

 

0.24

 

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

 

 

 

0.31

 

 

0.14

 

 

0.16

 

Foreign currency gain (loss) (net of tax) - continuing operations

 

 

 

(0.05)

 

 

0.00

 

 

(0.05)

 

Discrete income tax benefit items - continuing operations

 

 

 

(0.12)

 

 

(0.07)

 

 

(0.06)

 

Adjusted diluted EPS - continuing operations

 

 

 

1.54

 

 

0.78

 

 

0.76

 

* May not foot due to rounding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year 2017

 

 

 

 

 

Quarters Ended

 

    

Fiscal

 

July 1,

    

April 1,

    

December 31,

    

October 1,

 

 

2017*

  

2017*

  

2017*

  

2016*

  

2016*

 

 

 

 

 

($ in thousands, except per share amounts)

GAAP selling, general and administrative expenses - continuing operations

 

$

1,770,627

 

$

495,210

 

$

480,190

 

$

431,555

 

$

363,672

Amortization of intangible assets and other - continuing operations

 

 

(54,526)

 

 

(19,822)

 

 

(22,497)

 

 

(9,829)

 

 

(2,378)

Adjusted operating expenses - continuing operations

 

 

1,716,101

 

 

475,388

 

 

457,693

 

 

421,726

 

 

361,294

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income - continuing operations

 

$

461,400

 

$

93,373

 

$

114,283

 

$

124,230

 

$

129,514

Restructuring, integration and other expenses - continuing operations

 

 

137,415

 

 

42,033

 

 

35,513

 

 

30,400

 

 

29,469

Amortization of intangible assets and other - continuing operations

 

 

54,526

 

 

19,822

 

 

22,497

 

 

9,829

 

 

2,378

Adjusted operating income - continuing operations

 

 

653,341

 

 

155,228

 

 

172,293

 

 

164,459

 

 

161,361

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP other (expense) income, net - continuing operations

 

$

(44,305)

 

$

(13,495)

 

$

19,439

 

$

(36,514)

 

$

(13,734)

Unrealized (gain) loss on marketable securities and other - continuing operations

 

 

765

 

 

14,624

 

 

(13,859)

 

 

 -

 

 

 -

Acquisition related FX hedging and financing costs - continuing operations

 

 

43,707

 

 

 -

 

 

 -

 

 

32,700

 

 

11,007

Adjusted other (expense) income, net - continuing operations

 

 

167

 

 

1,129

 

 

5,580

 

 

(3,814)

 

 

(2,727)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP income before income taxes- continuing operations

 

$

310,404

 

$

54,705

 

$

106,188

 

$

60,968

 

$

88,544

Restructuring, integration and other expenses - continuing operations

 

 

137,415

 

 

42,033

 

 

35,513

 

 

30,400

 

 

29,469

Amortization of intangible assets and other - continuing operations

 

 

54,526

 

 

19,822

 

 

22,497

 

 

9,829

 

 

2,378

Unrealized (gain) loss on marketable securities and other - continuing operations

 

 

765

 

 

14,624

 

 

(13,859)

 

 

 -

 

 

 -

Acquisition related FX hedging and financing costs - continuing operations

 

 

43,707

 

 

 -

 

 

 -

 

 

32,700

 

 

11,007

Adjusted income before income taxes - continuing operations

 

 

546,817

 

 

131,184

 

 

150,339

 

 

133,897

 

 

131,398

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP income tax expense (benefit) - continuing operations

 

$

47,053

 

$

(18,574)

 

$

16,268

 

$

28,503

 

$

20,856

Restructuring, integration and other expenses  - continuing operations

 

 

45,403

 

 

16,324

 

 

12,455

 

 

7,378

 

 

9,246

Amortization of intangible assets and other - continuing operations

 

 

14,670

 

 

6,654

 

 

5,077

 

 

2,342

 

 

597

Unrealized (gain) loss on marketable securities and other - continuing operations

 

 

1,381

 

 

6,812

 

 

(5,431)

 

 

 -

 

 

 -

Acquisition related FX hedging and financing costs - continuing operations

 

 

6,968

 

 

 -

 

 

 -

 

 

4,230

 

 

2,738

Discrete income tax benefit (expense) items, net - continuing operations

 

 

14,695

 

 

14,987

 

 

7,712

 

 

(9,369)

 

 

1,365

Adjusted income tax expense - continuing operations

 

 

130,170

 

 

26,203

 

 

36,081

 

 

33,084

 

 

34,802

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP income - continuing operations

 

$

263,351

 

$

73,279

 

$

89,920

 

$

32,465

 

$

67,688

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

 

 

92,012

 

 

25,709

 

 

23,058

 

 

23,022

 

 

20,223

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

 

 

39,856

 

 

13,168

 

 

17,420

 

 

7,487

 

 

1,781

Unrealized (gain) loss on marketable securities and other (net of tax) - continuing operations

 

 

(616)

 

 

7,812

 

 

(8,428)

 

 

 -

 

 

 -

Acquisition related FX hedging and financing costs (net of tax) - continuing operations

 

 

36,739

 

 

 -

 

 

 -

 

 

28,470

 

 

8,269

Discrete income tax expense (benefit) items, net - continuing operations

 

 

(14,695)

 

 

(14,987)

 

 

(7,712)

 

 

9,369

 

 

(1,365)

Adjusted income - continuing operations

 

 

416,647

 

 

104,981

 

 

114,258

 

 

100,813

 

 

96,596

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted EPS - continuing operations

 

$

2.05

 

$

0.59

 

$

0.69

 

$

0.25

 

$

0.52

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

 

 

0.73

 

 

0.21

 

 

0.18

 

 

0.18

 

 

0.16

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

 

 

0.32

 

 

0.11

 

 

0.14

 

 

0.06

 

 

0.01

Unrealized (gain) loss on marketable securities and other (net of tax) - continuing operations

 

 

(0.01)

 

 

0.06

 

 

(0.07)

 

 

 -

 

 

 -

Acquisition related FX hedging and financing costs (net of tax) - continuing operations

 

 

0.28

 

 

 -

 

 

 -

 

 

0.22

 

 

0.06

Discrete income tax expense (benefit) items, net - continuing operations

 

 

(0.13)

 

 

(0.13)

 

 

(0.06)

 

 

0.07

 

 

(0.01)

Adjusted diluted EPS - continuing operations

 

 

3.24

 

 

0.84

 

 

0.88

 

 

0.77

 

 

0.74

* May not foot due to rounding

 

 

 

 

 

 

Organic Sales

 

Organic sales is defined as sales adjusted for the impact of significant acquisitions, divestitures and other items by adjusting Avnet’s prior and current (if necessary) 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. Organic sales is measured on a sales from continuing operations basis. Organic sales in constant currency is defined as organic sales (as defined above) excluding the impact of changes in foreign currency exchange rates.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As Reported

 

 

 

 

Organic

 

 

 

As Reported

 

 

 

Year-Year %

 

 

 

Year-Year %

 

 

 

and Organic

 

As Reported

 

Change in

 

Organic

 

Change in

 

 

 

Q2-Fiscal

 

Year-Year

 

Constant 

 

Year-Year

 

Constant

 

 

    

2018

    

% Change

    

Currency

    

% Change

    

Currency

 

 

 

(Dollars in millions)

Avnet

 

$

4,521.6

 

5.8

%

 

3.1

%

 

4.6

%

 

1.9

%

Avnet by region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

1,210.2

 

(3.4)

%

 

 —

 

 

(4.8)

%

 

 —

 

EMEA

 

 

1,506.0

 

9.1

 

 

0.8

%

 

7.0

 

 

(1.2)

%

Asia

 

 

1,805.4

 

10.1

 

 

10.2

 

 

9.8

 

 

9.9

 

Avnet by segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EC

 

$

4,163.5

 

4.0

%

 

1.4

%

 

4.0

%

 

1.4

%

PF

 

 

358.1

 

33.0

 

 

27.5

 

 

12.3

 

 

7.7

 

 

The following table presents the reconciliation of reported sales to organic sales for the second quarters and first six months of fiscal 2017.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarter Ended

 

Six Months Ended

 

 

Sales as

 

 

 

Organic

 

Sales as

 

 

 

Organic

 

 

Reported

 

Sales from

 

Sales

 

Reported

 

Sales from

 

Sales

 

    

Fiscal 2017

  

Acquisitions (1)

  

Fiscal 2017

  

Fiscal 2017

  

Acquisitions (1)

  

Fiscal 2017

 

 

(in millions)

Avnet

 

$

4,273.6

 

$

49.6

 

$

4,323.2

 

$

8,391.7

 

$

378.4

 

$

8,770.0

Avnet by region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

1,252.6

 

$

18.3

 

$

1,270.9

 

$

2,503.1

 

$

154.5

 

$

2,657.6

EMEA

 

 

1,380.7

 

 

26.5

 

 

1,407.2

 

 

2,646.0

 

 

178.9

 

 

2,824.9

Asia

 

 

1,640.3

 

 

4.8

 

 

1,645.1

 

 

3,242.6

 

 

45.0

 

 

3,287.6

Avnet by segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EC

 

$

4,004.4

 

$

 —

 

$

4,004.4

 

$

8,122.4

 

$

 —

 

$

8,122.4

PF

 

 

269.2

 

 

49.6

 

 

318.8

 

 

269.2

 

 

378.4

 

 

647.6

(1)

Includes Premier Farnell acquired on October 17, 2016, which has operations in each Avnet region.

 

 

Sales from suppliers lost as a result of supplier channel changes were $61.8 million, $92.5 million and $79.5 million in the second quarter of fiscal 2017 for the Americas, EMEA and Asia regions, respectively compared to sales of $4.0 million, $1.0 million and $2.6 million in the second quarter of fiscal 2018 for the Americas, EMEA and Asia regions, respectively.

 

 

 

 

 

 

Historical Segment Financial Information

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal 

 

Second Quarter

 

First Quarter

 

 

Year to Date

 

December 30,

 

September 30,

 

 

2018*

 

2017

 

2017

 

 

(in millions)

Sales:

 

 

 

 

 

 

 

 

 

Electronic Components

 

$

8,470.8

 

$

4,163.5

 

$

4,307.2

Premier Farnell

 

 

711.8

 

 

358.1

 

 

353.7

Avnet sales

 

$

9,182.6

 

$

4,521.6

 

$

4,660.9

 

 

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

 

Electronic Components

 

$

269.5

 

$

129.9

 

$

139.6

Premier Farnell

 

 

70.4

 

 

35.6

 

 

34.8

 

 

 

339.9

 

 

165.5

 

 

174.4

Corporate expenses

 

 

(52.2)

 

 

(19.8)

 

 

(32.4)

Restructuring, integration and other expenses

 

 

(83.2)

 

 

(36.8)

 

 

(46.4)

Amortization of acquired intangible assets and other

 

 

(47.5)

 

 

(21.9)

 

 

(25.6)

Avnet operating income

 

$

157.0

 

$

87.0

 

$

70.0

 

 

 

 

 

 

 

 

 

 

Sales by geographic area:

 

 

 

 

 

 

 

 

 

Americas

 

$

2,395.7

 

$

1,210.2

 

$

1,185.5

EMEA

 

 

3,199.0

 

 

1,506.0

 

 

1,693.0

Asia

 

 

3,587.8

 

 

1,805.4

 

 

1,782.4

Avnet sales

 

$

9,182.6

 

$

4,521.6

 

$

4,660.9

* May not foot due to rounding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year 2017

 

 

 

 

Quarters Ended

 

 

 

 

Fourth Quarter

 

Third Quarter

 

Second Quarter

 

First Quarter

 

 

Fiscal Year

 

July 1,

 

April 1,

 

December 31,

 

October 1,

 

 

2017

 

2017

 

2017

 

2016

 

2016

 

 

(in millions)

Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Electronic Components

 

$

16,474.1

 

$

4,260.7

 

$

4,090.9

 

$

4,004.3

 

$

4,118.1

Premier Farnell (1)

 

 

965.9

 

 

345.7

 

 

351.0

 

 

269.2

 

 

 -

Avnet sales

 

$

17,440.0

 

$

4,606.4

 

$

4,441.9

 

$

4,273.6

 

$

4,118.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Electronic Components

 

$

661.0

 

$

152.4

 

$

156.8

 

$

166.7

 

$

185.1

Premier Farnell (1)

 

 

99.8

 

 

35.5

 

 

40.3

 

 

24.0

 

 

 -

 

 

 

760.8

 

 

187.9

 

 

197.1

 

 

190.7

 

 

185.1

Corporate expenses (2)

 

 

(107.5)

 

 

(32.7)

 

 

(24.9)

 

 

(26.3)

 

 

(23.7)

Restructuring, integration and other expenses

 

 

(137.4)

 

 

(42.0)

 

 

(35.5)

 

 

(30.4)

 

 

(29.5)

Amortization of acquired intangible assets and other

 

 

(54.5)

 

 

(19.8)

 

 

(22.5)

 

 

(9.8)

 

 

(2.4)

Avnet operating income

 

$

461.4

 

$

93.4

 

$

114.3

 

$

124.2

 

$

129.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales by geographic area:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

5,163.9

 

$

1,332.2

 

$

1,328.6

 

$

1,252.6

 

$

1,250.5

EMEA

 

 

5,912.9

 

 

1,651.0

 

 

1,615.9

 

 

1,380.7

 

 

1,265.3

Asia

 

 

6,363.2

 

 

1,623.2

 

 

1,497.4

 

 

1,640.3

 

 

1,602.3

Avnet sales

 

$

17,440.0

 

$

4,606.4

 

$

4,441.9

 

$

4,273.6

 

$

4,118.1

(1)

Premier Farnell was acquired on October 17, 2016.

(2)

Prior to the divestiture of the Technology Solutions business in Q3 FY17, a portion of Corporate support expenses were classified within discontinued operations.

 

 

 

Guidance Reconciliation

 

The following table presents the reconciliation of non-GAAP adjusted diluted earnings per share guidance to the expected GAAP diluted earnings per share guidance for the third quarter of fiscal 2018.

 

 

 

 

 

 

 

 

 

 

 

Low End of

 

High End of

 

 

    

Guidance Range

    

Guidance Range

    

 

 

 

 

 

 

 

 

Adjusted diluted earnings per share guidance

 

$

0.90

 

$

1.00

 

Restructuring, integration and other expense (net of tax) (1)

 

 

(0.17)

 

 

(0.11)

 

Amortization of intangibles and other (net of tax)

 

 

(0.15)

 

 

(0.14)

 

Income tax expense adjustments

 

 

0.08

 

 

0.11

 

GAAP diluted earnings per share guidance

 

$

0.66

 

$

0.86

 

(1)

Includes accelerated depreciation.

 

The following table presents the reconciliation of non-GAAP adjusted diluted earnings per share guidance to the expected GAAP diluted earnings per share guidance for fiscal 2018.

 

 

 

 

 

 

 

 

 

 

 

Low End of

 

High End of

 

 

    

Guidance Range

    

Guidance Range

    

 

 

 

 

 

 

 

 

Adjusted diluted earnings per share guidance

 

$

3.35

 

$

3.55

 

Restructuring, integration and other expense (net of tax) (1)

 

 

(0.87)

 

 

(0.74)

 

Amortization of intangibles and other (net of tax)

 

 

(0.61)

 

 

(0.57)

 

Other Income

 

 

(0.05)

 

 

(0.05)

 

Income tax expense adjustments

 

 

0.22

 

 

0.28

 

GAAP diluted earnings per share guidance

 

$

2.04

 

$

2.47

 

(1)

Includes accelerated depreciation.