Quarterly sales grew 12% year over year to $5.05 billion; GAAP diluted EPS of $0.33 decreased 30%; Adjusted diluted EPS of $1.04 rose 33%
PHOENIX--(BUSINESS WIRE)--Avnet, Inc. (Nasdaq: AVT)
today announced results for the second quarter ended December 29, 2018.
Second Quarter Key Financial Highlights
-
Sales rose 11.7% year over year (13.1% in constant currency) to $5.05
billion
-
GAAP diluted EPS from continuing operations decreased 30% year over
year to $0.33
-
Non-GAAP adjusted diluted EPS rose 33% year over year to $1.04
-
Foreign exchange rates negatively impacted adjusted diluted EPS by
$0.02
-
GAAP operating income rose 18% year over year to $96.1 million
-
Adjusted operating income rose 28% year over year to $178.8 million
-
GAAP operating income margin was 1.9%, up from 1.8% a year ago
-
Adjusted operating income margin was 3.5%, up from 3.1% a year ago
-
Returned $197 million to shareholders with $175 million of share
repurchases and dividends of $22 million
CEO Commentary
“Our second quarter results demonstrate the tremendous progress we are
making in transforming Avnet into a global technology solutions
company,” said Avnet CEO Bill Amelio. “Even with the current
uncertainties in Asia, Avnet posted strong gains in revenue and
profitability compared to a year ago. Our unique ecosystem approach is
really starting to pay off with our suppliers and customers. With the
addition of Softweb Solutions, we now have the software and hardware to
deliver an end-to-end IoT capability that can lower costs, speed time to
market, and reduce complexity for our customers.”
Key Financial Metrics
($ in millions, except per share data)
|
|
Second Quarter Results (GAAP)
(2)
|
|
|
Dec – 18
|
|
Dec – 17
|
|
Change Y/Y
|
|
Sep – 18
|
|
Change Q/Q
|
Sales
|
|
$
|
5,049.0
|
|
|
$
|
4,521.6
|
|
|
11.7
|
%
|
|
$
|
5,089.9
|
|
|
(0.8)
|
%
|
Operating Income
|
|
|
96.1
|
|
|
|
81.6
|
|
|
17.7
|
%
|
|
|
146.8
|
|
|
(34.6)
|
%
|
Operating Income Margin
|
|
|
1.9
|
%
|
|
|
1.8
|
%
|
|
9
|
bps
|
|
|
2.9
|
%
|
|
(98)
|
bps
|
Diluted Earnings Per Share
|
|
$
|
0.33
|
|
|
$
|
0.47
|
|
|
(29.8)
|
%
|
|
$
|
0.72
|
|
|
(54.2)
|
%
|
Second Quarter Results (Non-GAAP)
(1)(2)
|
|
|
Dec – 18
|
|
Dec – 17
|
|
Change Y/Y
|
|
Sep – 18
|
|
Change Q/Q
|
Sales
|
|
$
|
5,049.0
|
|
|
$
|
4,521.6
|
|
|
11.7
|
%
|
|
$
|
5,089.9
|
|
|
(0.8)
|
%
|
Adjusted Operating Income
|
|
|
178.8
|
|
|
|
140.3
|
|
|
27.5
|
%
|
|
|
182.5
|
|
|
(2.0)
|
%
|
Adjusted Operating Income Margin
|
|
|
3.5
|
%
|
|
|
3.1
|
%
|
|
44
|
bps
|
|
|
3.6
|
%
|
|
(5)
|
bps
|
Adjusted Diluted Earnings Per Share
|
|
$
|
1.04
|
|
|
$
|
0.78
|
|
|
33.3
|
%
|
|
$
|
1.03
|
|
|
1.0
|
%
|
Segment and Geographical Mix
(2)
|
|
|
Dec – 18
|
|
Dec – 17
|
|
Change Y/Y
|
|
Sep – 18
|
|
Change Q/Q
|
Electronic Components (EC) Sales
|
|
$
|
4,680.7
|
|
|
$
|
4,163.5
|
|
|
12.4
|
%
|
|
$
|
4,710.8
|
|
|
(0.6)
|
%
|
EC Operating Income Margin
|
|
|
3.4
|
%
|
|
|
3.1
|
%
|
|
27
|
bps
|
|
|
3.4
|
%
|
|
(5)
|
bps
|
Premier Farnell (PF) Sales
|
|
$
|
368.3
|
|
|
$
|
358.1
|
|
|
2.8
|
%
|
|
$
|
379.1
|
|
|
(2.9)
|
%
|
PF Operating Income Margin
|
|
|
10.8
|
%
|
|
|
9.3
|
%
|
|
142
|
bps
|
|
|
10.8
|
%
|
|
0
|
bps
|
Americas Sales
|
|
$
|
1,300.4
|
|
|
$
|
1,210.2
|
|
|
7.5
|
%
|
|
$
|
1,271.8
|
|
|
2.3
|
%
|
EMEA Sales
|
|
|
1,668.6
|
|
|
|
1,506.0
|
|
|
10.8
|
%
|
|
|
1,714.9
|
|
|
(2.7)
|
%
|
Asia Sales
|
|
|
2,080.0
|
|
|
|
1,805.4
|
|
|
15.2
|
%
|
|
|
2,103.2
|
|
|
(1.1)
|
%
|
_______________
|
(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.
|
(2)
|
|
Certain prior year amounts in the Company’s measurement of operating
income have been recasted to reflect the adoption of new accounting
standards during the first quarter of fiscal 2019.
|
CFO Commentary
“This quarter, we continued to execute broadly across our stated goals
including accelerating the Americas, optimizing our cost structure and
reducing share count,” stated Tom Liguori, Avnet Chief Financial
Officer. “We delivered year-over-year, double-digit sales growth while
reducing selling, general and administrative expenses by $12 million.
Our diluted share count decreased by 10 million shares year over year or
8%. Our remaining buyback authorization stands at $440 million at the
end of the quarter which we will utilize appropriately to signal our
continued confidence in Avnet’s long-term outlook.”
Additional Second Quarter Fiscal 2019 Highlights and Key Developments
-
Expanded Avnet’s Internet of Things (IoT) capabilities with the
acquisition of Softweb Solutions. The integration of Softweb’s
best-of-breed artificial intelligence (AI) software for IoT
applications, along with its data services and digital process
capabilities, provides Avnet with rapid design, development, and
deployment capabilities that can help customers increase efficiency,
speed time to market and help their businesses transform.
-
Capitalized on the significance of electronica,
a leading trade show for electronics, by building Avnet City. This
was the first time Avnet used an industry event to bring together
under one exhibit the expanse of Avnet’s end-to-end ecosystem. The
well-received Avnet exhibit included community-oriented events hosted
by Hackster.io and element14, and demonstrations highlighting the
Company’s innovation capabilities, including robotics, AI and virtual
reality.
-
Demonstrated at CES the depth and breadth of Avnet’s IoT R&D resources
including its role as a lead partner for Microsoft Azure Sphere; the
unveiling of Avnet’s SmartEdge Agile, which is ideal for
developing machine learning applications such as predictive
maintenance and remote monitoring; and Avnet’s SmartEdge Industrial
IoT Gateway, which is designed for automation applications that
require strong end-to-end security.
-
Generated $72 million of cash flow from continuing operations during
the quarter.
-
Recorded restructuring, integration and other expenses of $62 million
during the second quarter primarily for non-cash impairment and
severance costs. These charges were incurred in connection with the
continued transformation of our IT, distribution center and business
operations including the re-prioritization of our IT initiatives and
resources. Second quarter transformation projects are expected to
deliver approximately $10 million in savings per quarter once fully
implemented.
Awards and Notable Recognition Received During the Quarter
-
Received ROHM Semiconductor’s Global Distributor Award
-
Named Supplier of the Year by L3 Technologies for the second year in a
row
-
Received Infineon’s Top Distributor Award in Asia and Greater China
-
Recognized by Micron with the Most Valuable Demand Creation
Distributor Award in Asia
-
Received several TE Connectivity awards in China/Asia for Excellent
Solution Design and Growth
Outlook for the Third Quarter of Fiscal 2019 Ending on March 30, 2019
|
|
Guidance Range
|
|
Midpoint
|
Sales
|
|
$4.5B - $4.9B
|
|
$4.7B
|
Non-GAAP Diluted EPS(1)
|
|
$1.03 - $1.13
|
|
$1.08
|
Estimated Annual Tax Rate
|
|
19% - 23%
|
|
21%
|
_______________
|
(1)
|
|
A reconciliation of non-GAAP guidance to GAAP guidance is presented
in the “Non-GAAP Financial Information” section of this press
release.
|
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 including certain impacts of
the recent tax law changes in the U.S. The above guidance assumes 110
million average diluted shares outstanding and average U.S. Dollar to
Euro and GBP currency exchange rates are as shown below:
|
|
Q3 Fiscal
|
|
|
|
|
|
|
2019
|
|
Q2 Fiscal
|
|
Q3 Fiscal
|
|
|
Guidance
|
|
2019
|
|
2018
|
US to Euro
|
|
$1.14
|
|
$1.14
|
|
$1.23
|
US to GBP
|
|
$1.29
|
|
$1.29
|
|
$1.39
|
Today’s Conference Call and Webcast Details
Avnet will host a quarterly teleconference and webcast today at 2:30
p.m. MST/4:30 p.m. EST to discuss the financial results and provide a
corporate update. To participate in the live call, dial 877-407-8112 or
201-689-8840. To access the slides, follow the webcast link below. The
slides also can be accessed via Avnet’s Investor Relations web page at: www.ir.avnet.com.
A replay of the conference call will be available for 30 days,
through February 23 at 5:00 p.m. EST, and can be accessed by dialing:
877-660-6853 or 201-612-7415 and using Conference ID: 13685891. The live
webcast can be accessed from the following link Avnet
Earnings Call Webcast and Slides and will be available for 90 days.
Forward-Looking Statements
This document contains certain “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
statements are based on management’s current expectations and are
subject to uncertainty and changes in facts and circumstances. The
forward-looking statements herein include statements addressing future
financial and operating results of Avnet and may include words such as
“will,” “anticipate,” “intend,” “estimate,” “forecast,” “expect,”
“feel,” “believe,” “should,” and other words and terms of similar
meaning in connection with any discussions of future operating or
financial performance, business prospects or market conditions. Actual
results may differ materially from the expectations contained in the
forward-looking statements.
The following factors, among others, could cause actual results to
differ materially from those described in the forward-looking
statements: Avnet’s ability to retain and grow market share and to
generate additional cash flow, risks associated with any acquisition
activities and the successful integration of acquired companies,
implementing and maintaining IT systems, supplier losses and changes to
supplier programs, an industry down-cycle in semiconductors, declines in
sales, changes in business conditions and the economy in general,
changes in market demand and pricing pressures, any material changes in
the allocation of product or price discounts by suppliers, and other
competitive and/or regulatory factors affecting the businesses of Avnet
generally.
More detailed information about these and other factors is set forth in
Avnet’s filings with the Securities and Exchange Commission, including
Avnet’s reports on Form 10-K, Form 10-Q and Form 8-K. Except as required
by law, Avnet is under no obligation to update any forward-looking
statements, whether as a result of new information, future events or
otherwise.
About Avnet
Avnet is a global technology solutions provider with an extensive
ecosystem delivering design, product, marketing and supply chain
expertise for customers at every stage of the product lifecycle. We
transform ideas into intelligent solutions, reducing the time, cost and
complexities of bringing products to market. For nearly a century, Avnet
has helped its customers and suppliers around the world realize the
transformative possibilities of technology. Learn more about Avnet at www.avnet.com.
(AVT_IR)
AVNET, INC.
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(UNAUDITED)
|
|
|
|
Second Quarters Ended
|
|
Six Months Ended
|
|
|
December 29,
|
|
December 30,
|
|
December 29,
|
|
December 30,
|
|
|
|
2018
|
|
|
|
2017
|
|
|
|
2018
|
|
|
|
2017
|
|
|
|
(Thousands, except per share data)
|
Sales
|
|
$
|
5,048,980
|
|
|
$
|
4,521,636
|
|
|
$
|
10,138,859
|
|
|
$
|
9,182,578
|
|
Cost of sales
|
|
|
4,418,947
|
|
|
|
3,919,175
|
|
|
|
8,872,077
|
|
|
|
7,967,563
|
|
Gross profit
|
|
|
630,033
|
|
|
|
602,461
|
|
|
|
1,266,782
|
|
|
|
1,215,015
|
|
Selling, general and administrative expenses
|
|
|
471,723
|
|
|
|
484,082
|
|
|
|
946,868
|
|
|
|
985,674
|
|
Restructuring, integration and other expenses
|
|
|
62,260
|
|
|
|
36,762
|
|
|
|
77,048
|
|
|
|
83,156
|
|
Operating income
|
|
|
96,050
|
|
|
|
81,617
|
|
|
|
242,866
|
|
|
|
146,185
|
|
Other income, net
|
|
|
2,584
|
|
|
|
3,349
|
|
|
|
692
|
|
|
|
22,270
|
|
Interest and other financing expenses, net
|
|
|
(33,718
|
)
|
|
|
(22,826
|
)
|
|
|
(63,811
|
)
|
|
|
(44,841
|
)
|
Income from continuing operations before taxes
|
|
|
64,916
|
|
|
|
62,140
|
|
|
|
179,747
|
|
|
|
123,614
|
|
Income tax expense
|
|
|
28,141
|
|
|
|
5,346
|
|
|
|
59,443
|
|
|
|
8,638
|
|
Income from continuing operations, net of tax
|
|
|
36,775
|
|
|
|
56,794
|
|
|
|
120,304
|
|
|
|
114,976
|
|
Loss from discontinued operations, net of tax
|
|
|
(374
|
)
|
|
|
(10,070
|
)
|
|
|
(179
|
)
|
|
|
(9,949
|
)
|
Net income
|
|
$
|
36,401
|
|
|
$
|
46,724
|
|
|
$
|
120,125
|
|
|
$
|
105,027
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share - basic:
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
0.33
|
|
|
$
|
0.47
|
|
|
$
|
1.07
|
|
|
$
|
0.94
|
|
Discontinued operations
|
|
|
0.00
|
|
|
|
(0.08
|
)
|
|
|
(0.01
|
)
|
|
|
(0.08
|
)
|
Net income per share basic
|
|
$
|
0.33
|
|
|
$
|
0.39
|
|
|
$
|
1.06
|
|
|
$
|
0.86
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share - diluted:
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
0.33
|
|
|
$
|
0.47
|
|
|
$
|
1.06
|
|
|
$
|
0.93
|
|
Discontinued operations
|
|
|
0.00
|
|
|
|
(0.08
|
)
|
|
|
(0.01
|
)
|
|
|
(0.08
|
)
|
Net income per share diluted
|
|
$
|
0.33
|
|
|
$
|
0.39
|
|
|
$
|
1.05
|
|
|
$
|
0.85
|
|
|
|
|
|
|
|
|
|
|
Shares used to compute earnings per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
110,332
|
|
|
|
120,400
|
|
|
|
112,796
|
|
|
|
121,543
|
|
Diluted
|
|
|
111,462
|
|
|
|
121,749
|
|
|
|
113,967
|
|
|
|
122,867
|
|
Cash dividends paid per common share
|
|
$
|
0.20
|
|
|
$
|
0.18
|
|
|
$
|
0.40
|
|
|
$
|
0.36
|
|
|
AVNET, INC.
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(UNAUDITED)
|
|
|
|
December 29,
|
|
June 30,
|
|
|
2018
|
|
2018
|
|
|
(Thousands)
|
ASSETS
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
482,166
|
|
$
|
621,125
|
Receivables, net
|
|
|
3,445,807
|
|
|
3,641,139
|
Inventories
|
|
|
3,306,299
|
|
|
3,141,822
|
Prepaid and other current assets
|
|
|
156,451
|
|
|
206,513
|
Total current assets
|
|
|
7,390,723
|
|
|
7,610,599
|
Property, plant and equipment, net
|
|
|
462,914
|
|
|
522,909
|
Goodwill
|
|
|
1,010,568
|
|
|
980,872
|
Intangible assets, net
|
|
|
184,979
|
|
|
219,913
|
Other assets
|
|
|
185,515
|
|
|
262,552
|
Total assets
|
|
$
|
9,234,699
|
|
$
|
9,596,845
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Short-term debt
|
|
$
|
1,845
|
|
$
|
165,380
|
Accounts payable
|
|
|
2,046,571
|
|
|
2,269,478
|
Accrued expenses and other
|
|
|
424,350
|
|
|
534,603
|
Total current liabilities
|
|
|
2,472,766
|
|
|
2,969,461
|
Long-term debt
|
|
|
1,961,467
|
|
|
1,489,219
|
Other liabilities
|
|
|
391,729
|
|
|
453,084
|
Total liabilities
|
|
|
4,825,962
|
|
|
4,911,764
|
Shareholders’ equity
|
|
|
4,408,737
|
|
|
4,685,081
|
Total liabilities and shareholders’ equity
|
|
$
|
9,234,699
|
|
$
|
9,596,845
|
|
AVNET, INC.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(UNAUDITED)
|
|
|
|
Six Months Ended
|
|
|
December 29, 2018
|
|
December 30, 2017
|
|
|
(Thousands)
|
Cash flows from operating activities:
|
|
|
|
|
Net income
|
|
$
|
120,125
|
|
|
$
|
105,027
|
|
Less: Loss from discontinued operations, net of tax
|
|
|
(179
|
)
|
|
|
(9,949
|
)
|
Income from continuing operations
|
|
|
120,304
|
|
|
|
114,976
|
|
|
|
|
|
|
Non-cash and other reconciling items:
|
|
|
|
|
Depreciation
|
|
|
48,124
|
|
|
|
77,510
|
|
Amortization
|
|
|
41,220
|
|
|
|
47,256
|
|
Deferred income taxes
|
|
|
44,857
|
|
|
|
(55,921
|
)
|
Stock-based compensation
|
|
|
17,077
|
|
|
|
17,090
|
|
Other, net
|
|
|
77,437
|
|
|
|
22,386
|
|
Changes in (net of effects from businesses acquired and divested):
|
|
|
|
|
Receivables
|
|
|
193,520
|
|
|
|
108,459
|
|
Inventories
|
|
|
(209,582
|
)
|
|
|
(410,361
|
)
|
Accounts payable
|
|
|
(205,254
|
)
|
|
|
75,342
|
|
Accrued expenses and other, net
|
|
|
(140,495
|
)
|
|
|
(55,955
|
)
|
Net cash flows used for operating activities - continuing operations
|
|
|
(12,792
|
)
|
|
|
(59,218
|
)
|
Net cash flows used for operating activities - discontinued
operations
|
|
|
(56,284
|
)
|
|
|
—
|
|
Net cash flows used for operating activities
|
|
|
(69,076
|
)
|
|
|
(59,218
|
)
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
Borrowings under accounts receivable securitization, net
|
|
|
366,000
|
|
|
|
78,000
|
|
Repayments under senior unsecured credit facility, net
|
|
|
(59,420
|
)
|
|
|
(99,971
|
)
|
Repayments under bank credit facilities and other debt, net
|
|
|
(595
|
)
|
|
|
(27,381
|
)
|
Repurchases of common stock
|
|
|
(335,404
|
)
|
|
|
(135,458
|
)
|
Dividends paid on common stock
|
|
|
(44,701
|
)
|
|
|
(43,572
|
)
|
Other, net
|
|
|
15,200
|
|
|
|
(1,214
|
)
|
Net cash flows used for financing activities - continuing operations
|
|
|
(58,920
|
)
|
|
|
(229,596
|
)
|
Net cash flows used for financing activities
|
|
|
(58,920
|
)
|
|
|
(229,596
|
)
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
Purchases of property, plant and equipment
|
|
|
(70,186
|
)
|
|
|
(67,397
|
)
|
Acquisitions of businesses, net of cash acquired
|
|
|
(62,514
|
)
|
|
|
(14,661
|
)
|
Other, net
|
|
|
963
|
|
|
|
2,402
|
|
Net cash flows used for investing activities - continuing operations
|
|
|
(131,737
|
)
|
|
|
(79,656
|
)
|
Net cash flows provided by investing activities - discontinued
operations
|
|
|
123,473
|
|
|
|
112,664
|
|
Net cash flows (used) provided by investing activities
|
|
|
(8,264
|
)
|
|
|
33,008
|
|
Effect of currency exchange rate changes on cash and cash equivalents
|
|
|
(2,699
|
)
|
|
|
8,940
|
|
Cash and cash equivalents:
|
|
|
|
|
— decrease
|
|
|
(138,959
|
)
|
|
|
(246,866
|
)
|
— at beginning of period
|
|
|
621,125
|
|
|
|
836,384
|
|
— at end of period
|
|
$
|
482,166
|
|
|
$
|
589,518
|
|
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 other
income (expense), (iii) adjusted income tax expense, (iv) adjusted
income from continuing operations, (v) adjusted diluted earnings per
share, and (vi) sales adjusted for the impact of acquisitions and other
items (as defined in the Organic Sales section of this document).
There are also references to the impact of foreign currency in the
discussion of the Company’s results of operations. When the U.S. Dollar
strengthens and the stronger exchange rates of the current year are used
to translate the results of operations of Avnet’s subsidiaries
denominated in foreign currencies, the resulting impact is a decrease in
U.S. Dollars of reported results. Conversely, when the U.S. Dollar
weakens and the weaker exchange rates of the current year are used to
translate the results of operations of Avnet’s subsidiaries denominated
in foreign currencies, the resulting impact is an increase in U.S.
Dollars of reported results. In the discussion of the Company’s results
of operations, results excluding this impact are referred to as
“constant currency.” Management believes organic sales and sales in
constant currency are useful measures for evaluating current period
performance as compared with prior periods and for understanding
underlying trends. In order to determine the translation impact of
changes in foreign currency exchange rates on sales, income or expense
items for subsidiaries reporting in currencies other than the U.S.
Dollar, the Company adjusts the average exchange rates used in current
periods to be consistent with the average exchange rates in effect
during the comparative period.
Management believes that operating income adjusted for restructuring,
integration and other expenses, goodwill impairment expense and
amortization of acquired intangible assets and other, are useful
measures to help investors better assess and understand the Company’s
operating performance. This is especially the case when comparing
results with previous periods or forecasting performance for future
periods, primarily because management views the excluded items to be
outside of Avnet’s normal operating results or non-cash in nature.
Management analyzes operating income without the impact of these items
as well as other income (expense) excluding certain amounts as an
indicator of ongoing margin performance and underlying trends in the
business. Management also uses these non-GAAP measures to establish
operational goals and, in many cases, for measuring performance for
compensation purposes. Management measures operating income for our
reportable segments excluding restructuring, integration and other
expenses, goodwill impairment expense and amortization of acquired
intangible assets and other.
Additional non-GAAP metrics management uses is adjusted operating income
margin, which is defined as adjusted operating income (as defined above)
divided by sales.
Management also believes income tax expense, income from continuing
operations and diluted earnings per share from continuing operations
adjusted for the impact of the items described above and certain items
impacting other 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 Year to Date
|
|
Quarters Ended
|
|
|
2019*
|
|
December 29, 2018*
|
|
September 29, 2018
|
|
|
($ in thousands, except per share amounts)
|
GAAP selling, general and administrative expenses - continuing
operations
|
|
$
|
946,868
|
|
|
$
|
471,723
|
|
|
$
|
475,146
|
|
Amortization of intangible assets and other - continuing operations
|
|
|
(41,440
|
)
|
|
|
(20,513
|
)
|
|
|
(20,927
|
)
|
Adjusted operating expenses - continuing operations
|
|
|
905,429
|
|
|
|
451,210
|
|
|
|
454,219
|
|
|
|
|
|
|
|
|
GAAP operating income - continuing operations
|
|
$
|
242,866
|
|
|
$
|
96,050
|
|
|
$
|
146,816
|
|
Restructuring, integration and other expenses - continuing operations
|
|
|
77,048
|
|
|
|
62,260
|
|
|
|
14,788
|
|
Amortization of intangible assets and other - continuing operations
|
|
|
41,440
|
|
|
|
20,513
|
|
|
|
20,927
|
|
Adjusted operating income - continuing operations
|
|
|
361,354
|
|
|
|
178,823
|
|
|
|
182,531
|
|
|
|
|
|
|
|
|
GAAP income before income taxes- continuing operations
|
|
$
|
179,747
|
|
|
$
|
64,916
|
|
|
$
|
114,831
|
|
Restructuring, integration and other expenses - continuing operations
|
|
|
77,048
|
|
|
|
62,260
|
|
|
|
14,788
|
|
Amortization of intangible assets and other - continuing operations
|
|
|
41,440
|
|
|
|
20,513
|
|
|
|
20,927
|
|
Adjusted income before income taxes - continuing operations
|
|
|
298,235
|
|
|
|
147,689
|
|
|
|
150,546
|
|
|
|
|
|
|
|
|
GAAP income tax expense - continuing operations
|
|
$
|
59,443
|
|
|
$
|
28,141
|
|
|
$
|
31,302
|
|
Restructuring, integration and other expenses - continuing operations
|
|
|
18,985
|
|
|
|
15,665
|
|
|
|
3,320
|
|
Amortization of intangible assets and other - continuing operations
|
|
|
8,857
|
|
|
|
4,379
|
|
|
|
4,478
|
|
Income tax expense items, net - continuing operations
|
|
|
(24,980
|
)
|
|
|
(16,742
|
)
|
|
|
(8,238
|
)
|
Adjusted income tax expense - continuing operations
|
|
|
62,305
|
|
|
|
31,443
|
|
|
|
30,862
|
|
|
|
|
|
|
|
|
GAAP income - continuing operations
|
|
$
|
120,304
|
|
|
$
|
36,775
|
|
|
$
|
83,529
|
|
Restructuring, integration and other expenses (net of tax) -
continuing operations
|
|
|
58,063
|
|
|
|
46,595
|
|
|
|
11,468
|
|
Amortization of intangible assets and other (net of tax) -
continuing operations
|
|
|
32,583
|
|
|
|
16,134
|
|
|
|
16,449
|
|
Income tax expense items, net - continuing operations
|
|
|
24,980
|
|
|
|
16,742
|
|
|
|
8,238
|
|
Adjusted income - continuing operations
|
|
|
235,930
|
|
|
|
116,246
|
|
|
|
119,684
|
|
|
|
|
|
|
|
|
GAAP diluted earnings per share - continuing operations
|
|
$
|
1.06
|
|
|
$
|
0.33
|
|
|
$
|
0.72
|
|
Restructuring, integration and other expenses (net of tax) -
continuing operations
|
|
|
0.51
|
|
|
|
0.42
|
|
|
|
0.10
|
|
Amortization of intangible assets and other (net of tax) -
continuing operations
|
|
|
0.29
|
|
|
|
0.14
|
|
|
|
0.14
|
|
Income tax expense items, net - continuing operations
|
|
|
0.21
|
|
|
|
0.15
|
|
|
|
0.07
|
|
Adjusted diluted EPS - continuing operations
|
|
|
2.07
|
|
|
|
1.04
|
|
|
|
1.03
|
|
_______________
|
* May not foot/crossfoot due to rounding
|
|
|
|
Fiscal
|
|
Quarters Ended
|
|
|
Year to Date
|
|
June 30,
|
|
March 31,
|
|
December 30,
|
|
September 30,
|
|
|
2018*
|
|
2018*
|
|
2018*
|
|
2017*
|
|
2017*
|
|
|
($ in thousands, except per share amounts)
|
GAAP selling, general and administrative expenses - continuing
operations(1)
|
|
$
|
1,991,401
|
|
|
$
|
500,257
|
|
|
$
|
505,471
|
|
|
$
|
484,082
|
|
|
$
|
501,593
|
|
Amortization of intangible assets and other - continuing operations
|
|
|
(91,923
|
)
|
|
|
(21,736
|
)
|
|
|
(22,725
|
)
|
|
|
(21,877
|
)
|
|
|
(25,585
|
)
|
Adjusted operating expenses - continuing operations(1)
|
|
|
1,899,478
|
|
|
|
478,521
|
|
|
|
482,746
|
|
|
|
462,204
|
|
|
|
476,007
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating income (loss) - continuing operations(1)
|
|
$
|
209,218
|
|
|
$
|
121,527
|
|
|
$
|
(58,494
|
)
|
|
$
|
81,617
|
|
|
$
|
64,568
|
|
Restructuring, integration and other expenses - continuing operations
|
|
|
145,125
|
|
|
|
36,848
|
|
|
|
25,120
|
|
|
|
36,762
|
|
|
|
46,394
|
|
Goodwill impairment expense - continuing operations
|
|
|
181,440
|
|
|
|
-
|
|
|
|
181,440
|
|
|
|
-
|
|
|
|
-
|
|
Amortization of intangible assets and other - continuing operations
|
|
|
91,923
|
|
|
|
21,736
|
|
|
|
22,725
|
|
|
|
21,877
|
|
|
|
25,585
|
|
Adjusted operating income - continuing operations(1)
|
|
|
627,706
|
|
|
|
180,111
|
|
|
|
170,791
|
|
|
|
140,256
|
|
|
|
136,547
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP other income (expense), net - continuing operations(1)
|
|
$
|
28,606
|
|
|
$
|
(3,526
|
)
|
|
$
|
9,862
|
|
|
$
|
3,349
|
|
|
$
|
18,921
|
|
Foreign currency (gain) loss and other expenses- continuing
operations
|
|
|
(9,762
|
)
|
|
|
(559
|
)
|
|
|
137
|
|
|
|
546
|
|
|
|
(9,886
|
)
|
Adjusted other income (expense), net - continuing operations(1)
|
|
|
18,844
|
|
|
|
(4,085
|
)
|
|
|
9,999
|
|
|
|
3,895
|
|
|
|
9,035
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP income (loss) before income taxes- continuing operations
|
|
$
|
145,077
|
|
|
$
|
93,526
|
|
|
$
|
(72,063
|
)
|
|
$
|
62,140
|
|
|
$
|
61,474
|
|
Restructuring, integration and other expenses - continuing operations
|
|
|
145,125
|
|
|
|
36,848
|
|
|
|
25,120
|
|
|
|
36,762
|
|
|
|
46,394
|
|
Goodwill impairment expense - continuing operations
|
|
|
181,440
|
|
|
|
-
|
|
|
|
181,440
|
|
|
|
-
|
|
|
|
-
|
|
Amortization of intangible assets and other - continuing operations
|
|
|
91,923
|
|
|
|
21,736
|
|
|
|
22,725
|
|
|
|
21,877
|
|
|
|
25,585
|
|
Foreign currency (gain) loss and other expenses- continuing
operations
|
|
|
(9,762
|
)
|
|
|
(559
|
)
|
|
|
137
|
|
|
|
546
|
|
|
|
(9,886
|
)
|
Adjusted income before income taxes - continuing operations
|
|
|
553,803
|
|
|
|
151,551
|
|
|
|
157,359
|
|
|
|
121,325
|
|
|
|
123,567
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP income tax expense - continuing operations
|
|
$
|
287,966
|
|
|
$
|
35,787
|
|
|
$
|
243,541
|
|
|
$
|
5,346
|
|
|
$
|
3,292
|
|
Restructuring, integration and other expenses - continuing operations
|
|
|
41,460
|
|
|
|
9,921
|
|
|
|
5,757
|
|
|
|
9,004
|
|
|
|
16,778
|
|
Amortization of intangible assets and other - continuing operations
|
|
|
18,556
|
|
|
|
4,376
|
|
|
|
4,575
|
|
|
|
4,405
|
|
|
|
5,200
|
|
Foreign currency (gain) loss and other expenses- continuing
operations
|
|
|
(3,494
|
)
|
|
|
(180
|
)
|
|
|
33
|
|
|
|
84
|
|
|
|
(3,431
|
)
|
Income tax (expense) benefit items, net - continuing operations
|
|
|
(218,444
|
)
|
|
|
(14,549
|
)
|
|
|
(218,810
|
)
|
|
|
8,017
|
|
|
|
6,898
|
|
Adjusted income tax expense - continuing operations
|
|
|
126,044
|
|
|
|
35,355
|
|
|
|
35,096
|
|
|
|
26,856
|
|
|
|
28,737
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP income (loss) - continuing operations
|
|
$
|
(142,889
|
)
|
|
$
|
57,739
|
|
|
$
|
(315,604
|
)
|
|
$
|
56,794
|
|
|
$
|
58,182
|
|
Restructuring, integration and other expenses (net of tax) -
continuing operations
|
|
|
103,665
|
|
|
|
26,927
|
|
|
|
19,363
|
|
|
|
27,758
|
|
|
|
29,616
|
|
Goodwill impairment expense (net of tax) - continuing operations
|
|
|
181,440
|
|
|
|
-
|
|
|
|
181,440
|
|
|
|
-
|
|
|
|
-
|
|
Amortization of intangible assets and other (net of tax) -
continuing operations
|
|
|
73,367
|
|
|
|
17,360
|
|
|
|
18,150
|
|
|
|
17,472
|
|
|
|
20,385
|
|
Foreign currency (gain) loss and other expenses (net of tax) -
continuing operations
|
|
|
(6,268
|
)
|
|
|
(379
|
)
|
|
|
104
|
|
|
|
462
|
|
|
|
(6,455
|
)
|
Income tax expense (benefit) items, net - continuing operations
|
|
|
218,444
|
|
|
|
14,549
|
|
|
|
218,810
|
|
|
|
(8,017
|
)
|
|
|
(6,898
|
)
|
Adjusted income - continuing operations
|
|
|
427,759
|
|
|
|
116,196
|
|
|
|
122,263
|
|
|
|
94,469
|
|
|
|
94,829
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP diluted earnings (loss) per share - continuing operations
|
|
$
|
(1.19
|
)
|
|
$
|
0.49
|
|
|
$
|
(2.64
|
)
|
|
$
|
0.47
|
|
|
$
|
0.47
|
|
Restructuring, integration and other expenses (net of tax) -
continuing operations
|
|
|
0.86
|
|
|
|
0.23
|
|
|
|
0.16
|
|
|
|
0.23
|
|
|
|
0.24
|
|
Goodwill impairment expense (net of tax) - continuing operations
|
|
|
1.52
|
|
|
|
-
|
|
|
|
1.52
|
|
|
|
-
|
|
|
|
-
|
|
Amortization of intangible assets and other (net of tax) -
continuing operations
|
|
|
0.61
|
|
|
|
0.15
|
|
|
|
0.15
|
|
|
|
0.14
|
|
|
|
0.16
|
|
Foreign currency (gain) loss and other expenses (net of tax) -
continuing operations
|
|
|
(0.05
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.05
|
)
|
Income tax expense (benefit) items, net - continuing operations
|
|
|
1.82
|
|
|
|
0.12
|
|
|
|
1.83
|
|
|
|
(0.07
|
)
|
|
|
(0.06
|
)
|
Adjusted diluted EPS - continuing operations
|
|
|
3.57
|
|
|
|
0.99
|
|
|
|
1.02
|
|
|
|
0.78
|
|
|
|
0.76
|
|
_______________
|
(1) Certain prior year amounts in the Company’s
measurement of operating income have been recasted to reflect the
adoption of new accounting standards during fiscal 2019.
|
* May not foot/crossfoot 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.
The following table presents reported and organic sales growth rates for
the second quarter of fiscal 2019 compared to the second quarter of
fiscal 2018.
|
|
Second Quarters Ended
|
|
|
Sales
|
|
Sales
|
|
|
|
Organic
|
|
|
as Reported
|
|
as Reported
|
|
|
|
Year-Year %
|
|
|
and Organic
(1)
|
|
and Organic
(1)
|
|
Organic
|
|
Change in
|
|
|
Fiscal
|
|
Fiscal
|
|
Year-Year
|
|
Constant
|
|
|
2019
|
|
2018
|
|
% Change
|
|
Currency
|
|
|
(Dollars in millions)
|
Avnet
|
|
$
|
5,049.0
|
|
$
|
4,521.6
|
|
11.7
|
%
|
|
13.1
|
%
|
Avnet by region
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
1,300.4
|
|
$
|
1,210.2
|
|
7.5
|
%
|
|
7.5
|
%
|
EMEA
|
|
|
1,668.6
|
|
|
1,506.0
|
|
10.8
|
|
|
14.5
|
|
Asia
|
|
|
2,080.0
|
|
|
1,805.4
|
|
15.2
|
|
|
15.6
|
|
Avnet by segment
|
|
|
|
|
|
|
|
|
EC
|
|
$
|
4,680.7
|
|
$
|
4,163.5
|
|
12.4
|
%
|
|
13.8
|
%
|
PF
|
|
|
368.3
|
|
|
358.1
|
|
2.8
|
|
|
5.2
|
|
_______________
|
(1) The acquisition of Softweb at the end of December
2018 did not have an impact on sales reported for the second
quarter of fiscal 2019.
|
Sales from suppliers lost as a result of supplier channel changes were
$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 Year 2019
|
|
|
|
Quarters Ended
|
|
|
|
|
Second Quarter
|
|
First Quarter
|
|
|
Fiscal Year
|
|
December 29,
|
|
September 29,
|
|
|
2019*
|
|
|
2018
|
|
|
|
2018
|
|
|
|
(in millions)
|
Sales:
|
|
|
|
|
|
|
Electronic Components
|
|
$
|
9,391.5
|
|
|
$
|
4,680.7
|
|
|
$
|
4,710.8
|
|
Premier Farnell
|
|
|
747.4
|
|
|
|
368.3
|
|
|
|
379.1
|
|
Avnet sales
|
|
$
|
10,138.9
|
|
|
$
|
5,049.0
|
|
|
$
|
5,089.9
|
|
|
|
|
|
|
|
|
Operating income:
|
|
|
|
|
|
|
Electronic Components
|
|
$
|
320.5
|
|
|
$
|
158.6
|
|
|
$
|
161.9
|
|
Premier Farnell
|
|
|
80.4
|
|
|
|
39.6
|
|
|
|
40.8
|
|
|
|
|
400.9
|
|
|
|
198.2
|
|
|
|
202.7
|
|
Corporate expenses
|
|
|
(39.6
|
)
|
|
|
(19.4
|
)
|
|
|
(20.2
|
)
|
Restructuring, integration and other expenses
|
|
|
(77.0
|
)
|
|
|
(62.3
|
)
|
|
|
(14.8
|
)
|
Amortization of acquired intangible assets and other
|
|
|
(41.4
|
)
|
|
|
(20.5
|
)
|
|
|
(20.9
|
)
|
Avnet operating income
|
|
$
|
242.9
|
|
|
$
|
96.0
|
|
|
$
|
146.8
|
|
|
|
|
|
|
|
|
Sales by geographic area:
|
|
|
|
|
|
|
Americas
|
|
$
|
2,572.2
|
|
|
$
|
1,300.4
|
|
|
$
|
1,271.8
|
|
EMEA
|
|
|
3,383.5
|
|
|
|
1,668.6
|
|
|
|
1,714.9
|
|
Asia
|
|
|
4,183.2
|
|
|
|
2,080.0
|
|
|
|
2,103.2
|
|
Avnet sales
|
|
$
|
10,138.9
|
|
|
$
|
5,049.0
|
|
|
$
|
5,089.9
|
|
|
|
|
|
Fiscal Year 2018
|
|
|
|
Quarters Ended
|
|
|
|
|
Fourth Quarter
|
|
Third Quarter
|
|
Second Quarter
|
|
First Quarter
|
|
|
Fiscal Year
|
|
June 30,
|
|
March 31,
|
|
December 30,
|
|
September 30,
|
|
|
2018*
|
|
|
2018
|
|
|
2018*
|
|
|
2017
|
|
|
|
2017
|
|
|
|
(in millions)
|
Sales:
|
|
|
|
|
|
|
|
|
|
|
Electronic Components
|
|
$
|
17,543.6
|
|
|
$
|
4,668.7
|
|
|
$
|
4,404.1
|
|
|
$
|
4,163.5
|
|
|
$
|
4,307.2
|
|
Premier Farnell
|
|
|
1,493.3
|
|
|
|
390.5
|
|
|
|
391.0
|
|
|
|
358.1
|
|
|
|
353.7
|
|
Avnet sales
|
|
$
|
19,036.9
|
|
|
$
|
5,059.2
|
|
|
$
|
4,795.1
|
|
|
$
|
4,521.6
|
|
|
$
|
4,660.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income:(1)
|
|
|
|
|
|
|
|
|
|
|
Electronic Components
|
|
$
|
587.3
|
|
|
$
|
160.1
|
|
|
$
|
157.7
|
|
|
$
|
129.9
|
|
|
$
|
139.6
|
|
Premier Farnell(1)
|
|
|
152.0
|
|
|
|
43.7
|
|
|
|
42.2
|
|
|
|
33.5
|
|
|
|
32.6
|
|
|
|
|
739.3
|
|
|
|
203.8
|
|
|
|
199.9
|
|
|
|
163.4
|
|
|
|
172.2
|
|
Corporate expenses(1)
|
|
|
(111.7
|
)
|
|
|
(23.8
|
)
|
|
|
(29.2
|
)
|
|
|
(23.1
|
)
|
|
|
(35.6
|
)
|
Restructuring, integration and other expenses
|
|
|
(145.1
|
)
|
|
|
(36.8
|
)
|
|
|
(25.1
|
)
|
|
|
(36.8
|
)
|
|
|
(46.4
|
)
|
Goodwill impairment expense
|
|
|
(181.4
|
)
|
|
|
-
|
|
|
|
(181.4
|
)
|
|
|
-
|
|
|
|
-
|
|
Amortization of acquired intangible assets and other
|
|
|
(91.9
|
)
|
|
|
(21.7
|
)
|
|
|
(22.7
|
)
|
|
|
(21.9
|
)
|
|
|
(25.6
|
)
|
Avnet operating income (loss)(1)
|
|
$
|
209.2
|
|
|
$
|
121.5
|
|
|
$
|
(58.5
|
)
|
|
$
|
81.6
|
|
|
$
|
64.6
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales by geographic area:
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
5,011.4
|
|
|
$
|
1,339.2
|
|
|
$
|
1,276.4
|
|
|
$
|
1,210.2
|
|
|
$
|
1,185.5
|
|
EMEA
|
|
|
6,790.9
|
|
|
|
1,779.6
|
|
|
|
1,812.3
|
|
|
|
1,506.0
|
|
|
|
1,693.0
|
|
Asia
|
|
|
7,234.6
|
|
|
|
1,940.4
|
|
|
|
1,706.3
|
|
|
|
1,805.4
|
|
|
|
1,782.4
|
|
Avnet sales
|
|
$
|
19,036.9
|
|
|
$
|
5,059.2
|
|
|
$
|
4,795.1
|
|
|
$
|
4,521.6
|
|
|
$
|
4,660.9
|
|
_______________
|
(1) Certain prior year amounts in the Company’s
measurement of operating income have been recasted to reflect the
adoption of new accounting standards during fiscal 2019.
|
* May not foot/crossfoot due to rounding
|
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 2019.
|
|
Low End of
|
|
High End of
|
|
|
Guidance Range
|
|
Guidance Range
|
|
|
|
|
|
Adjusted diluted earnings per share guidance
|
|
$
|
1.03
|
|
|
$
|
1.13
|
|
Restructuring, integration and other expense (net of tax)
|
|
|
(0.06
|
)
|
|
|
-
|
|
Amortization of intangibles and other (net of tax)
|
|
|
(0.16
|
)
|
|
|
(0.14
|
)
|
Income tax expense adjustments
|
|
|
(0.05
|
)
|
|
|
0.09
|
|
GAAP diluted earnings per share guidance
|
|
$
|
0.76
|
|
|
$
|
1.08
|
|
Investor Relations Contacts
Tom Liguori, CFO
Avnet
480-643-7550
or
Ina McGuinness
480-643-7053
investorrelations@avnet.com
Media Relations Contact
Maureen O’Leary
Media Relations
480-643-7499
maureen.oleary@avnet.com