Business Editors
PHOENIX--(BUSINESS WIRE)--Aug. 7, 2002
Avnet Inc. (NYSE:AVT) Wednesday reported net income from continuing operations before special items of $0.7 million, or $0.01 per fully diluted share, on revenues of $2.14 billion for its fiscal fourth quarter ended June 28, 2002.
Net income from continuing operations, before special items, for the fourth quarter of fiscal 2001 was $5.7 million, or $0.05 per share, on revenues of $2.54 billion.
Including special items outlined below, Avnet reported a net loss from continuing operations for the fourth quarter of 2002 of $61.4 million, or $0.51 per share on a fully diluted basis, as compared with the previous fiscal 2001 fourth quarter loss from continuing operations of $231.0 million or $1.96 per fully diluted share.
Total special charges during the fourth quarter of fiscal 2002 amounted to $79.6 million pre-tax ($21.6 million included in cost of sales and $58.0 million included in operating expenses) and $62.1 million after-tax.
Special items reported for the fourth quarter of fiscal 2002 included the impact of incremental charges related to the value of assets acquired in connection with the acquisition of Kent Electronics, the write-down of investments in Internet-related businesses, and severance costs. The impact on diluted earnings per share was $0.52 for the fourth quarter and the full fiscal year.
Commenting on Avnet's results from operations, Roy Vallee, Avnet's chairman and CEO stated, "We are pleased to see a return to profitability before special items in our fiscal fourth quarter, despite experiencing a second consecutive quarterly decline in sales.
"In addition, fourth quarter revenues were down over $390 million year over year, and yet our team managed their way to profitability. This is a reflection of our global team's ability to manage through this difficult market environment."
Avnet reported that revenues from microprocessors and disk drives sold into the PC-Builder market declined by approximately $100 million on a sequential quarterly basis due primarily to substantial excess inventories in the white-box PC manufacturing supply chain.
These revenue declines were offset by slight growth in the sales of electronic components, enterprise computing products, and embedded systems into the non-PC OEM market, leaving company-wide revenues down by approximately $70 million sequentially. Enterprise gross profit margins improved sequentially for the second quarter in a row.
The company reported that, excluding special charges, it reduced operating expenses further during the fourth quarter bringing the total annualized reduction of operating expenses to approximately $300 million since December 2000.
Driven by cash generated through working capital reductions during the June 2002 quarter, Avnet reduced debt by approximately $150 million, including amounts outstanding under its asset securitization program as debt. Since the end of December 2000, excluding the impact of its accounts receivable securitization program, Avnet has reduced debt by approximately $1.5 billion.
Looking forward to the September quarter, Avnet anticipates it will experience the typical seasonality that accompanies the summer quarter. Based upon the anticipated mix in business revenues, sales and earnings are expected to be roughly flat compared to the June 2002 quarter.
Beyond the September quarter, Vallee stated, "We anticipate that the December 2002 quarter will yield improved financial results, due primarily to the historic seasonal strength that normally accompanies our computing businesses.
"After that, we expect to see gradual improvements in the technology markets we serve."
Vallee concluded his remarks by stating: "It is our intent to file the CEO and CFO certifications required by the SEC and the Sarbanes-Oxley Act by the required due date, which is the date Avnet files its Form 10-K for fiscal 2002 which is due on or before Sept. 26, 2002."
For the full fiscal year 2002 ended June 28, 2002, Avnet reported revenues of $8.92 billion as compared with $12.81 billion in fiscal 2001. For the full fiscal year 2002, Avnet reported a net loss from continuing operations, before special items, of $22.3 million or $0.19 per fully diluted share.
Including special items and the cumulative effect of change in accounting principle discussed below, the company reported a loss of $664.9 million, or $5.61 per share on a diluted basis. For the fiscal year 2001, the company reported net income from continuing operations before special items of $236.8 million or $1.99 per fully diluted share.
Including special items and income from discontinued operations, the company reported net income of $15.4 million or $0.13 per fully diluted share.
The company adopted Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets" on June 30, 2001, the first day of fiscal 2002. Therefore, the amortization of goodwill was suspended effective on that date. The company also performed its transitional impairment analysis of goodwill as of June 30, 2001, as required by SFAS 142.
This analysis yielded an impairment charge of $580.5 million with a corresponding reduction in the book value of goodwill in the company's EM and CM operations in Europe and Asia. The company also completed its annual impairment analysis of the remaining goodwill as of March 29, 2002, the first day of its fiscal fourth quarter, which yielded no additional charge.
Forward-Looking Statements
This press release contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on management's current expectations and are subject to uncertainty and changes in factual circumstances.
The forward-looking statements herein include statements addressing future financial and operating results of Avnet. Actual results may vary 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: changes in business conditions and the economy in general, changes in market demand and pricing pressures, allocations of products by suppliers, failure to obtain and retain expected synergies from newly acquired businesses, 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 Annual Report on Form 10-K for fiscal 2001 and the most recent quarterly report on Form 10-Q.
Avnet is under no obligation to (and expressly disclaims any such obligation to) update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.
Additional Information
Phoenix-based Avnet Inc., a Fortune 500 company, is one of the world's largest distributors of semiconductors, interconnect, passive and electromechanical components, enterprise network and computer equipment, and embedded sub-systems from leading manufacturers.
Serving customers in 63 countries, Avnet markets, inventories and adds value to these products and provides world-class supply-chain management and engineering services. Please feel free to visit Avnet's Web site at www.ir.avnet.com or contact us at investorrelations@avnet.com.
AVNET INC. (MILLIONS EXCEPT PER SHARE DATA) INCLUDING SPECIAL ITEMS (a)(b) FOURTH QUARTERS ENDED --------------------- JUNE 28, JUNE 29, 2002 (a)(c) 2001 (b)(c) % CHANGE ---------- ----------- -------- Sales $2,144.8 $2,537.8 (15%) Loss from continuing operations before income taxes (77.9) (315.6) 75% Loss from continuing operations (61.4) (231.0) 73% Loss per share from continuing operations: Basic ($0.51) ($1.96) 74% Diluted ($0.51) ($1.96) 74% EXCLUDING SPECIAL ITEMS FOURTH QUARTERS ENDED --------------------- JUNE 28, JUNE 29, 2002 (c) 2001 (c) % CHANGE -------- -------- -------- Sales $2,144.8 $2,537.8 (15%) Income from continuing operations before income taxes 1.7 11.9 (86%) Income from continuing operations 0.7 5.7 (88%) Earnings per share from continuing operations: Basic $0.01 $0.05 (80%) Diluted $0.01 $0.05 (80%) (a) Fiscal 2002 fourth quarter results shown above include the impact of incremental special charges related to the value of assets acquired in connection with the acquisition of Kent Electronics, which was accounted for as a "Pooling-of-Interests," the impairment of investments in Internet-related businesses and severance costs. The special charges amounted to $79.6 million pre-tax ($21.6 million included in cost of sales and $58.0 million included in operating expenses) and $62.1 million after-tax. The impact on diluted earnings per share was $0.52 for the fourth quarter. (b) Fiscal 2001 fourth quarter results shown above include the impact of incremental special charges related to the acquisition and integration of Kent Electronics, which was accounted for as a "Pooling-of-Interests," and other integration, restructuring and cost cutting initiatives taken in response to business conditions. The special charges amounted to $327.5 million pre-tax ($80.6 million included in cost of sales and $246.9 million included in operating expenses) and $236.7 million after-tax. The impact on diluted earnings per share was $2.01 for the fourth quarter. (c) Effective as of the beginning of fiscal 2002, the company adopted Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," which requires, among other things, that goodwill no longer be amortized. Had last year's results also excluded the amortization of goodwill, the fourth quarter net income for fiscal 2001 would have been higher by $8.7 million ($0.07 per share). The above earnings are from continuing operations only. Information on discontinued operations and the impairment of goodwill under SFAS 142 can be found on the attached statements of operations. AVNET INC. (MILLIONS EXCEPT PER SHARE DATA) INCLUDING SPECIAL ITEMS (a)(b) FISCAL YEARS ENDED ------------------ JUNE 28, JUNE 29, 2002 (a)(c) 2001 (b)(c) % CHANGE ---------- ---------- -------- Sales $8,920.2 $12,814.0 (30%) Income (loss) from continuing operations before income taxes (120.8) 87.3 (238%) Income (loss) from continuing operations (84.4) 0.1 -- Earnings (loss) per share from continuing operations: Basic ($ 0.71) -- -- Diluted ($ 0.71) -- -- EXCLUDING SPECIAL ITEMS FISCAL YEARS ENDED ------------------ JUNE 28, JUNE 29, 2002 (c) 2001 (c) % CHANGE -------- -------- -------- Sales $8,920.2 $12,814.0 (30%) Income (loss) from continuing operations before income taxes (41.2) 414.7 (110%) Income (loss) from continuing operations (22.3) 236.8 (109%) Earnings (loss) per share from continuing operations: Basic ($0.19) $2.02 (109%) Diluted ($0.19) $1.99 (110%) (a) Fiscal 2002 results shown above include the impact of incremental special charges related to the value of assets acquired in connection with the acquisition of Kent Electronics, which was accounted for as a "Pooling-of-Interests," the impairment of investments in Internet-related businesses and severance costs. The special charges amounted to $79.6 million pre-tax ($21.6 million included in cost of sales and $58.0 million included in operating expenses) and $62.1 million after-tax. The impact on diluted earnings per share was $0.52 for the year. (b) Fiscal 2001 results shown above include the impact of incremental special charges related to the acquisition and integration of Kent Electronics, which was accounted for as a "Pooling-of-Interests," and other integration, restructuring and cost cutting initiatives taken in response to business conditions. The special charges amounted to $327.5 million pre-tax ($80.6 million included in cost of sales and $246.9 million included in operating expenses) and $236.7 million after-tax. The impact on diluted earnings per share was $1.99 for the year. (c) Effective as of the beginning of fiscal 2002, the company adopted Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," which requires, among other things, that goodwill no longer be amortized. Had last year's results also excluded the amortization of goodwill, net income for fiscal 2001 would have been higher by $33.1 million ($0.28 per share). The above earnings are from continuing operations only. Information on discontinued operations and the impairment of goodwill under SFAS 142 can be found on the attached statements of operations. AVNET INC. CONSOLIDATED STATEMENTS OF OPERATIONS (THOUSANDS EXCEPT PER SHARE DATA) INCLUDING SPECIAL ITEMS (a)(b) FOURTH QUARTERS ENDED --------------------- JUNE 28, JUNE 29, 2002 (a)(c) 2001 (b)(c) ----------- ----------- Sales $ 2,144,752 $ 2,537,755 Cost of sales 1,862,105 2,225,323 Gross profit 282,647 312,432 Operating expenses 336,074 590,058 Operating income (loss) (53,427) (277,626) Other income, net 2,005 8,397 Interest expense (26,451) (46,328) Income (loss) from continuing operations before income taxes (77,873) (315,557) Income taxes (16,472) (84,521) Income (loss) from continuing operations (61,401) (231,036) Income (loss) from discontinued operations, net of income taxes -- (5,111) Income (loss) before cumulative effect of change in accounting principle (61,401) (236,147) Cumulative effect of change in accounting principle -- -- Net income (loss) ($61,401) ($236,147) Earnings (loss) per share from continuing operations: Basic ($0.51) ($1.96) Diluted ($0.51) ($1.96) Earnings (loss) per share before cumulative effect of change in accounting principle, net: Basic ($0.51) ($2.01) Diluted ($0.51) ($2.01) Net earnings (loss) per share: Basic ($0.51) ($2.01) Diluted ($0.51) ($2.01) Shares used to compute earnings (loss) per share: Basic 119,397 117,697 Diluted 119,397 117,697 FISCAL YEARS ENDED ------------------ JUNE 28, JUNE 29, 2002 (a)(c) 2001 (b)(c) ----------- ---------- Sales $8,920,248 $12,814,010 Cost of sales 7,697,434 10,948,484 Gross profit 1,222,814 1,865,526 Operating expenses 1,225,799 1,611,874 Operating income (loss) (2,985) 253,652 Other income, net 6,755 25,495 Interest expense (124,583) (191,895) Income (loss) from continuing operations before income taxes (120,813) 87,252 Income taxes (36,377) 87,155 Income (loss) from continuing operations (84,436) 97 Income (loss) from discontinued operations, net of income taxes -- 15,305 Income (loss) before cumulative effect of change in accounting principle (84,436) 15,402 Cumulative effect of change in accounting principle (580,495) -- Net income (loss) ($664,931) $15,402 Earnings (loss) per share from continuing operations: Basic ($0.71) -- Diluted ($0.71) -- Earnings (loss) per share before cumulative effect of change in accounting principle, net: Basic ($0.71) $0.13 Diluted ($0.71) $0.13 Net earnings (loss) per share: Basic ($5.61) $0.13 Diluted ($5.61) $0.13 Shares used to compute earnings (loss) per share: Basic 118,561 117,263 Diluted 118,561 118,815 (a) Fiscal 2002 fourth quarter and entire year results shown above include the impact of incremental special charges related to the value of assets acquired in connection with the acquisition of Kent Electronics, which was accounted for as a "Pooling-of-Interests," the impairment of investments in Internet-related businesses and severance costs. The special charges amounted to $79.6 million pre-tax ($21.6 million included in cost of sales and $58.0 million included in operating expenses) and $62.1 million after-tax. The impact on diluted earning per share was $0.52 for the fourth quarter of the year. (b) Fiscal 2001 fourth quarter and entire year results shown above include the impact of incremental special charges related to the acquisition and integration of Kent Electronics, which was accounted for as a "Pooling-of-Interests," and other integration, restructuring and cost cutting initiatives taken in response to business conditions. The special charges amounted to $327.5 million pre-tax ($80.6 million included in cost of sales and $246.9 million included in operating expenses) and $236.7 million after-tax. The impact on diluted earning per share was $2.01 for the fourth quarter and $1.99 for the year. (c) Effective as of the beginning of fiscal 2002, the company adopted Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," which requires, among other things, that goodwill no longer be amortized. Had last year's results also excluded the amortization of goodwill, the fourth quarter and total year net income for fiscal 2001 would have been higher by $8.7 million ($0.07 per share) and $33.1 million ($0.28 per share), respectively. AVNET INC. CONSOLIDATED STATEMENTS OF OPERATIONS (THOUSANDS EXCEPT PER SHARE DATA) EXCLUDING SPECIAL ITEMS (a)(b) FOURTH QUARTERS ENDED --------------------- JUNE 28, JUNE 29, 2002 (a)(c) 2001 (b)(c) ----------- ----------- Sales $2,144,752 $2,537,755 Cost of sales 1,840,505 2,144,727 Gross profit 304,247 393,028 Operating expenses 278,051 343,169 Operating income 26,196 49,859 Other income, net 2,005 8,397 Interest expense (26,451) (46,328) Income (loss) from continuing operations before income taxes 1,750 11,928 Income taxes 1,067 6,272 Income (loss) from continuing operations 683 5,656 Income (loss) from discontinued operations, net of income taxes - (5,111) Income (loss) before cumulative effect of change in accounting principle 683 545 Cumulative effect of change in accounting principle - - Net income (loss) $683 $545 Earnings (loss) per share from continuing operations: Basic $0.01 $0.05 Diluted $0.01 $0.05 Earnings (loss) per share before cumulative effect of change in accounting principle, net: Basic $0.01 - Diluted $0.01 - Net earnings (loss) per share: Basic $0.01 - Diluted $0.01 - Shares used to compute earnings (loss) per share: Basic 119,397 117,697 Diluted 119,397 117,697 FISCAL YEARS ENDED ------------------ JUNE 28, JUNE 29, 2002 (a)(c) 2001 (b)(c) ----------- ----------- Sales $8,920,248 $12,814,010 Cost of sales 7,675,834 10,867,888 Gross profit 1,244,414 1,946,122 Operating expenses 1,167,776 1,364,985 Operating income 76,638 581,137 Other income, net 6,755 25,495 Interest expense (124,583) (191,895) Income (loss) from continuing operations before income taxes (41,190) 414,737 Income taxes (18,838) 177,948 Income (loss) from continuing operations (22,352) 236,789 Income (loss) from discontinued operations, net of income taxes - 15,305 Income (loss) before cumulative effect of change in accounting principle (22,352) 252,094 Cumulative effect of change in accounting principle (580,495) - Net income (loss) ($602,847) $252,094 Earnings (loss) per share from continuing operations: Basic ($0.19) $2.02 Diluted ($0.19) $1.99 Earnings (loss) per share before cumulative effect of change in accounting principle, net: Basic ($0.19) $2.15 Diluted ($0.19) $2.12 Net earnings (loss) per share: Basic ($5.09) $2.15 Diluted ($5.09) $2.12 Shares used to compute earnings (loss) per share: Basic 118,561 117,263 Diluted 118,561 118,815 (a) Fiscal 2002 fourth quarter and entire year results shown above exclude the impact of incremental special charges related to the value of assets acquired in connection with the acquisition of Kent Electronics, which was accounted for as a "Pooling-of-Interests", the impairment of investments in Internet-related businesses and severance costs. The special charges amounted to $79.6 million pre-tax ($21.6 million included in cost of sales and $58.0 million included in operating expenses) and $62.1 million after-tax. The impact on diluted earning per share was $0.52 for the fourth quarter of the year. (b) Fiscal 2001 fourth quarter and entire year results shown above exclude the impact of incremental special charges related to the acquisition and integration of Kent Electronics, which was accounted for as a "Pooling-of-Interests", and other integration, restructuring and cost cutting initiatives taken in response to business conditions. The special charges amounted to $327.5 million pre-tax ($80.6 million included in cost of sales and $246.9 million included in operating expenses) and $236.7 million after-tax. The impact on diluted earning per share was $2.01 for the fourth quarter and $1.99 for the year. (c) Effective as of the beginning of fiscal 2002, the Company adopted Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," which requires, among other things, that goodwill no longer be amortized. Had last year's results also excluded the amortization of goodwill, the fourth quarter and total year net income for fiscal 2001 would have been higher by $8.7 million ($0.07 per share) and $33.1 million ($0.28 per share), respectively. AVNET INC. CONSOLIDATED BALANCE SHEETS (THOUSANDS) JUNE 28, JUNE 29, 2002 (a) 2001 (a) -------- -------- Assets: Current assets: Cash and cash equivalents $159,234 $97,279 Receivables 1,374,017 1,629,566 Inventories 1,417,305 1,917,044 Other 224,751 103,600 Total current assets 3,175,307 3,747,489 Property, plant & equipment 349,924 417,159 Goodwill 844,597 1,404,863 Other assets 312,126 294,637 Total assets 4,681,954 5,864,148 Less liabilities: Current liabilities: Borrowings due within one year 59,309 1,302,129 Accounts payable 891,234 853,196 Accrued expenses and other 326,293 414,740 Total current liabilities 1,276,836 2,570,065 Long-term debt, less due within one year 1,565,836 919,493 Other long-term liabilities 34,772 - Total liabilities 2,877,444 3,489,558 Shareholders' equity $1,804,510 $2,374,590 (a) The Company has an accounts receivable securitization program whereby it sells an interest in a pool of its trade accounts receivable. The purpose of the program is to provide the Company with an additional source of liquidity at interest rates more favorable than it could receive through other forms of financing. At June 28, 2002 and June 29, 2001, the Company had sold $200.0 million and $350.0 million, respectively, of receivables under the program. This is reflected as a reduction of receivables, with the proceeds used to pay down debt, in the above balance sheet. AVNET INC. SEGMENT INFORMATION (MILLIONS) FOURTH QUARTERS ENDED FISCAL YEARS ENDED --------------------- ------------------ JUNE 28, JUNE 29, JUNE 28, JUNE 29, SALES 2002 2001 2002 2001 --------------------- -------- -------- -------- -------- Electronics Marketing $1,216.6 $1,553.9 $4,841.9 $8,286.6 Computer Marketing 570.9 619.7 2,399.3 2,855.6 Applied Computing 357.3 364.2 1,679.1 1,671.8 Consolidated $2,144.8 $2,537.8 $8,920.3 $12,814.0 OPERATING INCOME (LOSS) ------------------------ Electronics Marketing $18.1 $41.5 $22.7 $532.4 Computer Marketing 19.0 14.7 63.0 86.4 Applied Computing (2.2) 17.0 42.8 63.9 Headquarters (8.7) (23.3) (51.9) (101.5) Consolidated Before Special Items 26.2 49.9 76.6 581.2 Special Items (79.6) (327.5) (79.6) (327.5) Consolidated ($53.4) ($277.6) ($3.0) $253.7
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