- Press Release
Avnet Reports First Quarter Fiscal Year 2017 Results
Strategic Transition Underway
Phoenix, USA, 27 október 2016:
PHOENIX--(BUSINESS WIRE) -- Avnet, Inc. (NYSE:AVT) today announced results for the first quarter fiscal year 2017 ended October 1, 2016.
- Completed purchase of Premier Farnell in October, expects to realize $70 to $80 million of synergies
- Announced sale of Technology Solutions (TS) for $2.6 billion, expects to close in Q3 or Q4 FY2017
- Q1 financial results consistent with previous expectations
- Electronics Marketing sales and operating income exceeded the midpoint of expectations
- TS reported as discontinued operations
The first quarter of fiscal 2016 ended October 3, 2015, had an extra week of sales, which resulted in an estimated $525 million impact on adjusted sales and $0.11 to $0.13 on adjusted diluted EPS.
|First Quarters Ended|
|October 1, 2016||October 3, 2015||Change|
$ in millions, except per share data
|Adjusted Sales (1)||$||6,040.3||$||6,969.7||(13.3||)||%|
|Constant Currency (2)||
|Constant Currency (2)||
|Adjusted Operating Income (1)||193.1||240.4||(19.7||)||%|
|Adjusted Net Income (3)||118.4||152.9||(22.6||)||%|
|Adjusted Diluted EPS (3)||$||0.91||$||1.12||(18.8||)||%|
As the TS business is a discontinued operation, the Avnet reported Sales and Operating Income amounts exclude the sales and operating income from TS for the periods presented. References to Adjusted Sales and Adjusted Operating Income include the sales and operating income, respectively, of TS as well as other historical adjustments. See the reconciliation of non-GAAP financial information attached as exhibit 99.2 to the Form 8-K filed with the Securities Exchange Commission on October 27, 2016 ("Exhibit 99.2").
|(2)||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 the Company's results of operations, the definition of organic sales and a reconciliation of non-GAAP financial information is included in Exhibit 99.2.|
|(3)||Non-GAAP financial measures. See Exhibit 99.2.|
- TS sales and operating income below expectations
- The year-over-year decline in adjusted operating income was driven by the decline in sales including the impact of the extra week in fiscal 2016
"We took a significant step in our strategic transition as we completed the acquisition of Premier Farnell on October 17th and announced the sale of our Technology Solutions operating group to Tech Data Corporation on September 19th. With the sale of TS, we will be singularly focused on leveraging EM's design and supply chain services with Premier Farnell's digital platform to offer the broadest suite of products and services to support customers at every stage of the product lifecycle," said Bill Amelio, CEO of Avnet. "Just as technology has impacted many areas of commerce, it is changing how our customer's want to interact from design through production. As engineers do more of their research online, we are confident that the combination of EM and Premier Farnell will allow us to reach a broader base of customers earlier in the design cycle with a much lower cost to serve."
Amelio further added, "Avnet has a long history of adapting to changes in the technology marketplace and we believe the strategic direction we are setting today will expand our growth opportunities, increase our margins and returns and generate increased shareholder value in the future."
Cash Flow and Returns to Shareholders
- Cash generated from operations over the trailing twelve months increased $34 million to $258 million
- Cash and cash equivalents at the end of the quarter was $1.20 billion; net debt (total debt less cash and cash equivalents) was $1.51 billion
- The Company has $174.9 million remaining under the current share repurchase authorization
- The Company paid a dividend of $0.17 per share or $21.7 million during the quarter
"At the end of October we will use approximately $180 million of our offshore cash and approximately $660 million of new debt to pay for the acquisition of Premier Farnell. While our borrowing levels will be temporarily elevated, once completed, we expect to use a meaningful portion of the proceeds from the sale of TS to reduce debt and return to historical credit statistics consistent with our investment grade rating," said Kevin Moriarty, CFO of Avnet. "Even after paying for Premier Farnell, the proceeds from the sale of TS will allow us to maintain a strong balance sheet, fund future growth and provide excess cash that we can return to shareholders."
On September 19, 2016, Avnet announced that it had entered into an agreement to sell its TS business to Tech Data Corporation. The transaction is subject to customary closing conditions and regulatory approval and is expected to close in the first half of calendar 2017. As a result of the pending sale and having met applicable accounting requirements, Avnet, Inc. is reporting the TS business as a discontinued operation beginning with the first quarter of fiscal 2017 and prior periods have been adjusted for comparability.
Avnet Electronics Marketing Results
The first quarter of fiscal 2016 ended October 3, 2015, had an extra week of sales, which resulted in an estimated $300 million impact on EM sales
|Year-over-Year Growth Rates|
Constant Currency (1)
|Constant Currency (1)||(5.3||)||%||1.7||%|
|Constant Currency (1)||
|Q1 FY17||Q1 FY16||Change|
|Operating Income Margin||4.5||%||4.7||%||(26||)||bps|
|(1)||Refer to Exhibit 99.2.|
- Excluding the impact of the extra week of sales in the prior year quarter and the decision to exit certain select high volume supply chain engagements in the Asia region, sales would have increased by approximately 1%.
- Gross profit margin increased 35 basis points from the year ago quarter due to an improvement in the Asia region and a regional mix shift to the higher margin western regions, both of which were driven by the decision to exit certain low margin supply chain engagements.
- Operating income margin declined 26 basis points from the year ago quarter primarily due to the decline in sales related to the extra week in the year ago quarter and higher expenses related to the ERP implementation in the Americas region.
- Working capital (defined as receivables plus inventories less accounts payables) increased 16.0% from the year ago quarter due to the transfer of the embedded computing solutions business from TS at the beginning of fiscal 2017 and a decrease in accounts payable. Excluding the transfer of the embedded computing solutions business from TS at the beginning of fiscal 2017 and the impact of foreign currency exchange rates, inventory declined 8.2% sequentially.
Avnet Technology Solutions Results
The first quarter of fiscal 2016 ended October 3, 2015 had an extra week of sales, which resulted in an estimated $225 million impact on TS sales
|Year-over-Year Growth Rates|
|TS Total (1)||$||1,866.9||(21.2||)||%||(14.8||)||%|
|Constant Currency (2)||(20.3||)||%||(13.8||)||%|
|Constant Currency (2)||(10.0||)||%||(6.5||)||%|
|Constant Currency (2)||(18.3||)||%||(11.4||)||%|
|Q1 FY17||Q1 FY16||Change|
|Operating Income (1)||$||42.7||$||69.8||(38.9||)||%|
|Operating Income Margin||2.3||%||3.0||%||(66||)||bps|
|(1)||The TS business is a discontinued operation. Refer to Exhibit 99.2.|
|(2)||Refer to Exhibit 99.2.|
- At a product level, year-over-year declines in servers, storage and software drove the revenue decline
Outlook for Second Quarter of Fiscal 2017 Ending on December 31, 2016
- Avnet outlook only includes the EM business, including Premier Farnell
- Sales are expected to be in the range of $4.2 billion to $4.5 billion
- Adjusted diluted earnings per share is expected to be in the range of $0.69 to $0.79 per share
- The guidance assumes 130 million average diluted shares outstanding and an adjusted tax rate of 23% to 27
The above guidance excludes any additional acquisitions, the amortization of intangibles, any potential restructuring, integration and other expenses and certain income tax adjustments. The above guidance also excludes any results from the TS business. In addition, the above guidance assumes that the average U.S. Dollar to Euro currency exchange rate for the second quarters of fiscal 2017 is $1.09 to €1.00, consistent with the second quarter of fiscal 2016.
Refer to Exhibit 99.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 27, 2016, for a reconciliation of non-GAAP guidance.
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 Company's ability to retain and grow market share and to generate additional cash flow, risks associated with any acquisition activities and the successful integration of acquired companies, the separation and pending sale of the TS business, an industry down-cycle in semiconductors, IT hardware or software products, declines in sales, changes in business conditions and the economy in general, changes in market demand and pricing pressures, any material changes in the allocation of product or product rebates by suppliers, and other competitive and/or regulatory factors affecting the businesses of Avnet generally.
More detailed information about these and other factors is set forth in Avnet's filings with the Securities and Exchange Commission, including the Company's reports on Form 10-K, Form 10-Q and Form 8-K. Except as required by law, Avnet is under no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Teleconference and Upcoming Events
Avnet will host a quarterly teleconference today at 11:00 a.m. Eastern Time. Financial information including financial statement reconciliations of GAAP to non-GAAP financial measures, will be available through www.ir.avnet.com. Please log onto the site 15 minutes prior to the start of the event to register or download any necessary software. An archive copy of the teleconference will also be available after the call.
For a listing of Avnet's upcoming events and other information, please visit Avnet's investor relations website at www.ir.avnet.com.
From components to cloud and from design to disposal, Avnet, Inc. (NYSE: AVT) accelerates the success of customers who build, sell and use technology by providing a comprehensive portfolio of innovative products, services and solutions. For more information, visit www.avnet.com. (AVT_IR)
First Quarters Ended
(Thousands, except per share data)
|Cost of sales||3,647,920||4,037,546|
|Selling, general and administrative expenses||365,025||380,751|
|Restructuring, integration and other expenses||29,469||12,518|
|Other income (expense), net||(13,733||)||882|
|Income from continuing operations before income taxes||90,021||148,837|
|Income tax expense||21,435||37,849|
|Income from continuing operations||68,586||110,988|
|Income from discontinued operations, net of income taxes of $21,295 and $9,403, respectively||257||19,266|
|Earnings per share- basic:|
|Net income per share - basic||$||0.54||$||0.97|
|Earnings per share- diluted:|
|Net income per share - diluted||$||0.53||$||0.96|
|Shares used to compute earnings per share:|
|Cash dividends paid per common share||$||0.17||$||0.17|
|Cash and cash equivalents||$||1,196,545||$||1,031,478|
|Prepaid and other current assets||76,514||81,196|
|Assets held for sale||3,131,587||2,497,962|
|Total current assets||9,699,753||9,003,973|
|Property, plant and equipment, net||471,321||453,209|
|Intangible assets, net||20,823||22,571|
|Non-current assets held for sale||—||899,067|
LIABILITIES AND SHAREHOLDERS' EQUITY
|Accrued expenses and other||419,445||394,888|
|Liabilities held for sale||1,452,851||1,778,312|
|Total current liabilities||3,433,868||4,942,493|
|Non-current liabilities held for sale||—||43,769|
|Total liabilities and shareholders' equity||$||11,046,123||$||11,239,805|
|Three Months Ended|
|Cash flows from operating activities:|
|Less: Income from discontinued operations, net of tax||257||19,266|
|Income from continuing operations||68,586||110,988|
|Non-cash and other reconciling items:|
|Deferred income taxes||6,412||3,381|
|Changes in (net of effects from businesses acquired):|
|Accrued expenses and other, net||33,522||(33,535||)|
|Net cash flows provided (used) for operating activities- continuing operations||111,310||(35,978||)|
|Net cash flows (used) provided by operating activities- discontinued operations||(111,446||)||2,237|
|Net cash flows used for operating activates||(136||)||(33,741||)|
|Cash flows from financing activities:|
|Repayment of notes||(300,000||)||(250,000||)|
|Repayments under accounts receivable securitization, net||(150,265||)||(33,045||)|
|Borrowings of bank and revolving debt, net||669,803||418,756|
|Repurchases of common stock||—||(143,725||)|
|Dividends paid on common stock||(21,676||)||(22,612||)|
|Net cash flows provided (used) for financing activities - continuing operations||198,544||(33,129||)|
|Net cash flows used for financing activities - discontinued operations||(4,756||)||(160||)|
|Net cash flows provided (used) for financing activities||193,788||(33,289||)|
|Cash flows from investing activities:|
|Purchases of property, plant and equipment||(34,729||)||(31,205||)|
|Net cash flows used for investing activities - continuing operations||(34,297||)||(29,637||)|
|Net cash flows used for investing activities - discontinued operations||(95||)||(2,395||)|
|Net cash flows used for investing activities||(34,392||)||(32,032||)|
|Effect of currency exchange rate changes on cash and cash equivalents||5,807||(8,796||)|
|Net change in cash and cash equivalents||165,067||(107,858||)|
|Cash and cash equivalents at beginning of period||1,031,478||932,553|
|Cash and cash equivalents at end of period||$||1,196,545||$||824,695|
|First Quarters Ended|
|Electronics Marketing (continuing operations)||$||4,173.4||$||4,600.8|
|Technology Solutions (discontinued operations)||1,866.9||2,368.9|
|Operating Income (Expense):|
|Electronics Marketing (continuing operations)||$||186.5||$||213.0|
|Technology Solutions (discontinued operations)||42.7||74.5|
|Corporate specific to or benefiting Electronic Marketing||(23.6||)||(32.1||)|
|Corporate specific to or benefiting Technology Solutions||(12.5||)||(15.1||)|
|Restructuring, integration and other expenses - continuing operations||(29.5||)||(12.5||)|
|Restructuring, integration and other expenses - discontinued operations||(4.2||)||(13.4||)|
|Amortization of acquired intangible assets and other - continuing operations||(2.4||)||(2.8||)|
|Amortization of acquired intangible assets and other - discontinued operations||(4.5||)||(4.6||)|
|Less: TS discontinued operations||(21.5||)||(37.0||)|
* Sub-totals and totals may not foot due to rounding
View source version on businesswire.com: http://www.businesswire.com/news/home/20161027005614/en/
Vincent Keenan, 480-643-7053
Maureen O'Leary, 480-643-7499
Source: Avnet, Inc.
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