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Avnet, Inc. Reports Second Quarter Fiscal Year 2014 Results

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

   

Q2 Fiscal 2014 Results

 
SECOND QUARTERS ENDED
 

December 28,2013

   

December 29,2012

    Change
$ in millions, except per share data
Sales $7,421.9     $6,699.5     10.8 %
 
GAAP Operating Income 221.6 195.6 13.3 %
Adjusted Operating Income (1) 263.2 228.5 15.2 %
 
GAAP Net Income 124.9 137.5 (9.2 )%
Adjusted Net Income (1) 163.9 145.6 12.6 %
 
GAAP Diluted EPS $0.89 $0.99 (10.1 )%
Adjusted Diluted EPS (1) $1.17 $1.05 11.4 %
 

(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 December 28, 2013 increased 10.8% year over year to record sales of $7.4 billion; organic sales (as defined later in the document) grew 8.2% year over year and 8.1% in constant currency
  • Adjusted operating income of $263.2 million increased 15.2% and adjusted operating income margin of 3.6% increased 14 basis points year over year. Sequentially, adjusted operating income and adjusted operating income margin were up 31.9% and 41 basis points, respectively
  • Adjusted net income of $163.9 million increased 12.6% and adjusted diluted earnings per share of $1.17 increased 11.4% year over year. Sequentially, adjusted net income and adjusted diluted earnings per share increased 30.1% and 30.0%, respectively, driven by the significant profit growth typically associated with the strong seasonal sales performance in the Technology Solutions (TS) segment

Rick Hamada, Chief Executive Officer, commented, “We are encouraged by the overall progress in our financial performance this quarter as we exceeded our original expectations for both revenue and earnings while also experiencing continued momentum in our year-over-year organic growth. In the December quarter, strong demand for IT infrastructure in our TS Americas region and continued growth in our Asia components business drove revenue above our expectations at both operating groups. Revenue grew 17.0% sequentially to a record $7.4 billion and year-over-year organic growth improved for a third consecutive quarter to 8.2%. The growth in revenue, combined with continued expense and working capital discipline, drove operating margins and return on working capital to 3.6% and 24.0%, respectively, our highest level in six quarters. With growth now evident in many of our served markets, we expect to build on this performance and leverage future growth into higher margins and returns across our portfolio.”

       

Avnet Electronics Marketing Results

 
Year-over-Year Growth Rates

Q2 FY14Sales

ReportedSales

   

OrganicSales

(in millions)
EM Total $ 4,154.8 13.1 % 11.9 %
Excluding FX (1) 12.7 % 11.4 %
Americas $ 1,204.4

-4.8

%

3.2 %
EMEA $ 1,217.0 33.1 % 18.0 %
Excluding FX (1) 27.4 % 13.0 %
Asia $ 1,733.4 16.0 % 14.4 %
 
Q2' FY14 Q2' FY13 Change
Operating Income $ 171.7 $ 143.0 20.1 %
Operating Income Margin 4.1 % 3.9 % 24 bps
 

(1)

Year-over-year sales growth rate excluding the impact of changes in foreign currency exchange rates.

 
  • Reported sales increased 13.1% year over year to $4.2 billion while organic sales were up 11.4% in constant currency
  • Sequential sales growth of 1.6% (in constant currency) was above the Company's expectations and the high end of normal seasonality due to better than expected growth in the high volume fulfillment business in Asia
  • Operating income margin increased 24 basis points year over year to 4.1% primarily due to improvements in the Americas and Asia regions
  • Working capital (defined as receivables plus inventory less accounts payables) increased 5.2% sequentially due to the acquisition of MSC and a decrease in payables as EM continued its strong inventory management discipline; excluding acquisitions and the impact of currency, inventory declined 4.9%
  • Return on working capital (ROWC) increased 236 basis points year over year primarily due to higher operating income

Mr. Hamada added, “Our selective participation in certain high volume fulfillment engagements in EM Asia drove revenue above expectations as revenue in this region grew 5.7% sequentially and 16.0% year over year. This growth in turn drove EM’s sequential organic sales growth above normal seasonality and year-over-year organic sales growth in constant currency increased to 11.4%. At the regional level, organic sales were up 13.0% in constant currency in EMEA, while Asia and the Americas were up 14.4% and 3.2%, respectively. This growth in revenue when combined with the impact of expense actions implemented in fiscal 2013 drove operating income up 20.1%, which resulted in operating income margin increasing 24 basis points to 4.1%. During the quarter, EM also completed its acquisition of MSC, which will provide new profitable growth opportunities in our EMEA region as we integrate the operations and realize the expected competitive benefits and synergies in the coming quarters. Given two consecutive quarters of year-over-year expansion in margins and returns, we feel confident that we can leverage our expected growth in our higher margin western regions and build on this performance in the seasonally stronger quarters of March and June at EM.”

       

Avnet Technology Solutions Results

 

Year-over-Year Growth Rates

Q2 FY14Sales

ReportedSales

   

OrganicSales

(in millions)
TS Total $ 3,267.1 8.0 % 3.8 %
Excluding FX (1) 8.3 % 4.1 %
Americas $ 1,859.2 16.3 % 8.0 %
EMEA $ 936.0

-2.9

%

-2.9

%

Excluding FX (1)

-5.8

%

-5.8

%

Asia $ 471.9 1.7 % 2.0 %
 
Q2' FY14 Q2' FY13 Change
Operating Income $ 120.2 $ 113.1 6.3 %
Operating Income Margin 3.7 % 3.7 % -6 bps
 

(1)

Year-over-year sales growth rate excluding the impact of changes in foreign currency exchange rates.

 
  • Reported sales increased 8.0% year over year to $3.3 billion and organic sales increased 3.8% in reported dollars and 4.1% in constant currency
  • Sequential sales growth of 35.7% (34.6% on an organic basis in constant currency) was above the Company's expectations and the high end of normal seasonality
  • Operating income margin decreased 6 basis points year over year and was up 108 basis points sequentially to 3.7%, driven by the strong sales growth
  • ROWC decreased 432 basis points year over year primarily due to investments in working capital and increased over 1,500 basis points sequentially due to strong profit growth
  • At a product level, software, storage and services grew over 30% sequentially while software and storage drove the year-over-year growth

Mr. Hamada further added, “TS revenue exceeded our original expectations and normal seasonality driven by strong demand in our Americas region, which grew 44% sequentially. When combined with seasonal growth in EMEA and Asia, organic sales in constant currency increased 35% sequentially and 4.1% year over year. This strong sequential sales growth drove operating income dollars and margin up 92% and 108 basis points, respectively. On a year-over-year basis, TS' organic revenue growth turned positive for the first time in eight quarters and operating income grew 6.3%. We remain confident that our continuing investments in higher growth markets, including converged solutions, software and professional services, will allow us to develop and deliver incremental value to our partners. With end users remaining highly focused on optimizing their data center investments, including the growing interest in hybrid cloud solutions, the breadth of tools and services that TS has developed will help navigate this dynamic landscape to accelerate progress to results. While we are pleased to see year-over-year growth return to TS at the global level, it is not consistent at this time across all regions. However, we believe our competitive position including our strong supplier and customer relationships, position us well for continued progress in improving margins and returns.”

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