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Avnet, Inc. Reports First Quarter Fiscal Year 2014 Results

Stocks in this article: AVT

Avnet, Inc. (NYSE:AVT) today announced results for the first quarter fiscal year 2014 ended September 28, 2013.

Q1 Fiscal 2014 Results

  FIRST QUARTERS ENDED
September 28,       September 29,      
  2013 2012 Change  
$ in millions, except per share data
 
Sales $ 6,345.5 $ 5,870.1 8.1 %
 
GAAP Operating Income 179.0 100.0 79.0 %
Adjusted Operating Income (1) 199.5 144.5 38.1 %
 
GAAP Net Income 120.6 100.3 20.3 %
Adjusted Net Income (1) 126.0 88.9 41.7 %
 
GAAP Diluted EPS $ 0.86 $ 0.70 22.9 %
Adjusted Diluted EPS (1) $ 0.90 $ 0.62 45.2 %

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

  • Sales for the quarter ended September 28, 2013 increased 8.1% year over year to $6.3 billion; organic revenue (as defined later in the document) grew 3.7% year over year and 3.5% in constant currency
  • Adjusted operating income of $199.5 million increased 38.1% year over year and adjusted operating income margin of 3.1% increased 68 basis points year over year
  • Adjusted net income of $126.0 million increased 41.7% and adjusted diluted earnings per share of $0.90 increased 45.2% year over year, primarily due to higher operating income at both operating groups as a result of revenue growth and the impact of cost reductions implemented in the prior fiscal year

Rick Hamada, Chief Executive Officer, commented, “Our team kicked off the new fiscal year with a solid performance as both operating groups leveraged year-over-year revenue growth into increased margins and returns. Enterprise revenue increased 8.1% from the year ago quarter and adjusted operating income grew approximately five times faster than revenue driven primarily by our disciplined approach to portfolio actions and expense management throughout fiscal 2013. Adjusted operating income margin of 3.1% increased 68 basis points year over year and return on working capital was up 458 basis points to 19.8%. This represents the first time in seven quarters that these two important metrics expanded year over year. With our improving performance and overall financial profile, we were also pleased to announce our decision to initiate a dividend during our first quarter. Given our confidence in, and commitment to, long-term shareholder value creation, we believed it was an appropriate time to incorporate a more consistent element of returning cash to shareholders as part of our ongoing capital allocation priorities. With four consecutive quarters of seasonal growth and a strong balance sheet, we are positioned to build on this performance and continue progress toward our long-term goals.”

 

Avnet Electronics Marketing Results

 
            Year-over-Year Growth Rates
Q1 FY14 Reported       Organic
Revenue   Revenue   Revenue  
(in millions)
EM Total $ 3,938.1 7.8 % 8.5 %
Excluding FX (1) 7.3 % 8.0 %
Americas $ 1,199.7 -6.8

%

1.2 %
EMEA $ 1,097.9 14.5 % 13.4 %
Excluding FX (1) 8.8 % 7.7 %
Asia $ 1,640.5 16.6 % 11.1 %
 
Q1 FY14   Q1 FY13   Change  
Operating Income $ 175.8 $ 149.1 17.9 %
Operating Income Margin 4.5 % 4.1 % 38 bps

(1) Year-over-year revenue growth rate excluding the impact of changes in foreign currency exchange rates.

  • Reported revenue increased 7.8% year over year to $3.9 billion while organic revenue was up 8.0% in constant currency
  • After adjusting for acquisitions, the transfer of certain operations from EM to TS and currency, sequential revenue growth of 1.2% was at the high end of normal seasonality as better than expected growth in Asia offset seasonal declines in the western regions
  • Operating income margin of 4.5% increased 38 basis points from the year ago quarter primarily due to an improvement in the Americas region
  • Working capital velocity increased 4.9% year over year primarily due to an improvement in inventory turns
  • Return on working capital (ROWC) increased 302 basis points year over year due primarily to higher operating income

Mr. Hamada added, “Similar to the June quarter, EM sales were at the high end of normal seasonality as organic revenue in constant currency increased 1.2% sequentially with strong demand in the Asia region offsetting seasonal declines in the western regions. Asia revenue grew 12.6% sequentially, which helped drive EM’s year-over-year organic growth to 8.0% in constant currency. Operating income margin was flat sequentially and increased 38 basis points from the year ago quarter due to an improvement in the Americas region partially offset by a decline in EMEA and the geographic mix shift to Asia. The Asia region, which grew to represent 42% of EM sales this quarter, delivered record revenue and operating income while driving returns to their highest level in three years. In the EMEA region, we recently completed the first step of our acquisition of MSC Investoren, which will strengthen our position in semiconductor distribution and allow us to tap the embedded systems marketplace for new growth opportunities in Europe. With a strong competitive position and year-over-year growth rates improving, we expect to capitalize on profitable growth opportunities and drive further improvement in margins and returns across the EM portfolio.”

 

Avnet Technology Solutions Results

 

            Year-over-Year Growth Rates
Q1 FY14 Reported       Organic
Revenue Revenue Revenue
(in millions)
TS Total $ 2,407.4 8.6 % -3.3 %
Excluding FX (1) 8.9 % -3.0 %
Americas $ 1,288.9 10.7 % -0.8 %
EMEA $ 694.3 9.3 % -10.5 %
Excluding FX (1) 6.1 % -13.1 %
Asia $ 424.2 1.8 % 2.3

%

 
Q1 FY14 Q1 FY13 Change
Operating Income $ 62.6 $ 38.7 61.9

%

Operating Income Margin 2.6 % 1.7 % 86 bps

(1) Year-over-year revenue growth rate excluding the impact of changes in foreign currency exchange rates.

  • Reported revenue increased 8.6% year over year to $2.4 billion and organic revenue declined 3.0% in constant currency
  • Operating income margin increased 86 basis points year over year to 2.6% primarily due to the improvements in the Americas and Asia regions
  • Return on working capital (ROWC) increased 632 basis points year over year primarily due to higher operating income
  • At a product level, year over year growth in services, storage and software was partially offset by a decline in servers

Mr. Hamada further added, “In the September quarter, TS revenue was within our expected range, though at the lower end of expectations. Revenue of $2.4 billion decreased 8.1% sequentially while year-over-year organic revenue was down 3.0% in constant currency. Organic revenue declined 11.1% sequentially in constant currency as compared with normal seasonality of down 5 to 10 percent. Operating income grew 61.9% from the year ago quarter driven primarily by an improvement in gross profit and from cost reduction initiatives implemented in fiscal 2013. At a regional level, both the Americas and Asia regions realized significant improvements in profitability, which contributed to an 86 basis point improvement in operating income margin from the year ago quarter. With the transfer of EM’s reverse logistics operations to the TS services offerings this quarter, we are further integrating our customer facing resources to leverage our VAR base to accelerate growth in higher margin services focused on software, education and lifecycle solutions. Despite some challenges in the marketplace, our focus on converged solutions supported by a broad line card and expanded services, positions us to capitalize on growth opportunities as we enter the seasonally strong December quarter.”

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