Avnet Inc. Reports First Quarter Fiscal 2003 Results; Operating Income Up Sharply From Prior Year.Business Editors PHOENIX--(BUSINESS WIRE)--Oct. 24, 2002 Avnet Avnet, Inc. (NYSE: AVT) is a technology B2B distributor headquartered in Phoenix, Arizona. The company states on their website that:
See: New York Stock Exchange :AVT AVT avian arginine vasotocin. See vasotocin. ) today reported that first quarter fiscal year 2003 revenues were essentially flat from the prior sequential One after the other in some consecutive order such as by name or number. quarter and the prior year first quarter, and reported breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations earnings per share. On quarterly revenues of $2.17 billion, the company had a net loss of $488,000, or $0.00 per share. These results compare with revenues of $2.20 billion for the first quarter of fiscal year 2002 and a net loss before cumulative effect of change in accounting principle of $19.2 million, or $0.16 per share. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $20 million was up $16 million from the prior year first quarter, representing the first quarterly year-over-year operating income growth, excluding special charges, since the March 2001 quarter. Top line results for the company's three operating groups were roughly in line with expectations. Electronics Marketing (EM) sales grew by 2.1% sequentially and by 0.3% on a year-over-year basis. EM's sequential sales growth was slightly more than expected, benefiting from a stronger Euro. In constant U.S. dollars, EM sales would have been flat sequentially. As expected, the sequential change in revenues at Computer Marketing (CM) and Applied Computing computing - computer (AC) essentially offset each other, with seasonal revenue decline at CM and seasonal revenue growth at AC. First quarter fiscal year 2003 sales at CM were down nearly 7% both sequentially and year-over-year, while AC grew revenues by 11.9% sequentially and 2.1% year-over-year. On a regional level, revenues in the company's Asia region for the first quarter of fiscal 2003 grew by 11% sequentially and were up a robust 31% year-over-year. With the close of the first fiscal quarter of 2003, Avnet's Asia region now constitutes 10% of enterprise revenues, up from 7% for the same period in fiscal 2002. Revenues grew slightly in EMEA (Europe, Middle East, Africa) Refers to that region of the world. For example, one might see products packaged differently for the UK, EMEA and Asia Pacific markets. , by 0.6% sequentially, due primarily to the change in the value of the Euro, but declined by 0.7% year-over-year. Revenues in the Americas A·mer·i·cas , the See America. grew by 0.3% sequentially, but declined by 5% year-over-year. Enterprise gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. declined sequentially from 14.2%, excluding special charges in the fourth quarter of fiscal year 2002, to 13.7% in the first quarter of fiscal 2003 due primarily to shifts in business mix between the company's computing businesses, as well as continued pricing pressures in the IT markets served by Avnet. Revenue growth in the lower gross profit margin PC-Builder segment of AC, coupled with reduced CM revenues of higher gross profit margin business, drove the majority of the decline in enterprise gross profit margins. Gross profit margin at EM remains relatively stable, both year-over-year and sequentially. Operating profit margin Operating profit margin The ratio of operating profit to net sales. of 0.92% in the first quarter of fiscal year 2003 was up 76 basis points as compared with 0.16% in the first quarter of fiscal year 2002; however, operating profit margin was down on a sequential basis, excluding special charges in the fourth quarter of fiscal year 2002, as a result of the weaker business mix described above. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. for the first quarter of fiscal year 2003 were down almost 10% as compared with the first quarter of the prior year and were slightly lower on a sequential quarterly basis, excluding special charges. Actual expense reductions resulting from cost cutting initiatives were somewhat offset by several mitigating mit·i·gate v. mit·i·gat·ed, mit·i·gat·ing, mit·i·gates v.tr. To moderate (a quality or condition) in force or intensity; alleviate. See Synonyms at relieve. v.intr. To become milder. factors including the impact of the change in the value of the Euro, annual merit wage increases and some severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when costs, net of a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. cash recovery item. Commenting on the company's operating results, Chairman and Chief Executive Officer Roy Roy, city (1990 pop. 24,603), Weber co., N Utah, near Great Salt Lake; settled by Mormons 1877, inc. 1937. Computer equipment is manufactured, and many residents work at nearby Hill Air Force Base. Vallee stated: "Over the last five quarters, we have experienced relatively stable revenues and have improved earnings per share from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the from a loss of $0.16 per share in the first quarter of fiscal 2002 to breakeven in the current quarter. Yet, we have not seen significant improvement in the technology markets we serve. Therefore, we are taking additional actions to lower costs consistent with our commitment to reasonable profitability at any level of revenue." Vallee further commented: "We have targeted additional cost reductions of approximately $80 million on an annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. basis and have begun implementing those reductions, which we expect to complete by the end of the December December: see month. 2002 quarter. These actions will entail entail, in law, restriction of inheritance to a limited class of descendants for at least several generations. The object of entail is to preserve large estates in land from the disintegration that is caused by equal inheritance by all the heirs and by the ordinary shrinking our infrastructure cost by further reducing census and the number of facilities on a worldwide basis spanning each of our operating and support groups. We do not expect these actions to impact the company's ability to retain and grow market share. And, as previously stated, we will continue to monitor revenue growth and make further expense reductions, if needed." The company reported that it continued its progress of reducing working capital and total debt during the September September: see month. 2002 quarter. On essentially flat revenues, the company generated cash of approximately $130 million, primarily through working capital reductions, and further reduced total debt for the seventh consecutive quarter. Total debt, including amounts outstanding under the accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. program, was reduced by an additional $91 million during the September 2002 quarter, bringing total debt reductions to approximately $1.6 billion since December 2000. Addressing the company's outstanding debt and liquidity position, Chief Financial Officer Ray Sadowski noted: "We have access to $650 million of total borrowing capacity under our multi-year syndicated bank facility and accounts receivable securitization program, of which approximately $230 million was outstanding under these facilities at the end of the September 2002 quarter. If needed, we can use available credit balances on these facilities to deal with any maturing debt or other operational needs as they arise. We are anticipating over $200 million of additional cash flow generation during the next three quarters, including cash flows stemming from tax refunds Tax refund Money back from the government when too much tax has been paid or withheld from a salary. in excess of $150 million received in October October: see month. 2002, the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. cost reductions, and expected further reductions in working capital." Vallee further noted: "I remain pleased with our team's performance during this unprecedented market environment. We are competing well, have reduced our cost base, and have generated substantial cash over the past seven quarters. Our working capital productivity levels are at near-historic highs -- an accomplishment made more significant given we are not enjoying any substantial revenue growth. Although we are managing through a difficult period, I am excited about the operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. that these working capital efficiencies and cost reductions are bringing to our business." Providing guidance on the December 2002 quarter and the balance of the fiscal year, Vallee stated, "We anticipate continuously improved financial and operational results over the next three quarters. We believe that typical December quarter seasonality in our computer businesses should allow us to meet current consensus estimates of $0.05 per share. We currently expect that our combined computer businesses will grow in the December 2002 quarter by approximately 15% - 20% on a sequential basis, and that EM's sales will be relatively flat. Expense reductions should enhance profitability and our ability to meet consensus expectations for the quarter ending in March 2003 of $0.06 per share, and the full fiscal year 2003 of $0.22 per share, barring any significant and unanticipated sales declines. While we do expect to see some revenue growth in calendar 2003, we are not depending on that revenue growth for profitability." Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or . The forward-looking statements herein include statements addressing future financial and operating results of Avnet and may include words such as "anticipate," "expect," believe," and "should." 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: the effects of additional actions taken to lower costs, the company's ability to retain and grow market share, the company's ability to generate additional cash flow during the next three quarters, the December quarter's typical seasonality, any significant and unanticipated sales decline, changes in business conditions and the economy in general, changes in market demand and pricing pressures, allocations of products by suppliers, and other competitive and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for fiscal 2002. 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 (1) To attach one device to another. (2) A physical port (plug, socket) or wireless port (transmitter, receiver) used to attach one device to another. , passive and electromechanical The use of electricity to run moving parts. Disk drives, printers and motors are examples. Electromechanical systems must be designed for the eventual deterioration of moving components that wear over time. The first TVs were electromechanical systems (see video/TV history). components, enterprise network and computer equipment, and embedded Inserted into. See embedded system. sub-systems from leading manufacturers. Serving customers in 63 countries, Avnet markets, inventories and adds value to these products and provides world-class world-class adj. 1. Ranking among the foremost in the world; of an international standard of excellence; of the highest order: a world-class figure skater. 2. supply-chain management and engineering services. Please feel free to visit Avnet's Investor Relations Investor relations The process by which the corporation communicates with its investors. Web site at www.ir.avnet.com or contact us at investorrelations@avnet.com.
AVNET INC.
(MILLIONS EXCEPT PER SHARE DATA)
FIRST QUARTERS ENDED
--------------------------
SEPT. 27, SEPT. 28, %
2002 2001 (1) CHANGE
--------------------------
Sales $2,173.9 $2,201.2 (1%)
Loss before income taxes (1.1) (33.9) 97%
Net loss (0.5) (19.2) 97%
Net loss per share:
Basic $- ($0.16) 100%
Diluted $- ($0.16) 100%
(1) The above operating information for the quarter ended Sept. 28, 2001 excludes the cumulative effect of change in accounting principle for the impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of goodwill recorded as a result of the adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangibles," for which further detail can be found on the attached statements of operations.
AVNET INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS EXCEPT PER SHARE DATA)
FIRST QUARTERS
ENDED
----------------
SEPT. 27, SEPT. 28,
2002 2001
----------- ---------------
Sales $2,173,890 $2,201,195
Cost of sales 1,876,271 1,890,633
----------- ---------------
Gross profit 297,619 310,562
Operating expenses 277,666 306,937
----------- ---------------
Operating income 19,953 3,625
Other income, net 5,938 594
Interest expense (27,031) (38,071)
----------- ---------------
Loss before income taxes (1,140) (33,852)
Income taxes (652) (14,645)
----------- ---------------
Loss before cumulative effect of
change in accounting principle (488) (19,207)
Cumulative effect of change in
accounting principle - (580,495)
----------- ---------------
Net loss ($488) ($599,702)
=========== ===============
Loss per share before cumulative
effect of change in accounting
principle:
Basic $- ($0.16)
=========== ===============
Diluted $- ($0.16)
=========== ===============
Net loss per share:
Basic $- ($5.09)
=========== ===============
Diluted $- ($5.09)
=========== ===============
Shares used to compute loss
per share:
Basic 119,420 117,851
=========== ===============
Diluted 119,420 117,851
=========== ===============
AVNET INC.
CONSOLIDATED BALANCE SHEETS
(THOUSANDS)
SEPT. 27 JUNE 28,
2002 (1) 2002 (1)
----------- -----------
Assets:
Current assets:
Cash and cash equivalents $173,209 $159,234
Receivables, net 1,391,359 1,374,017
Inventories 1,271,870 1,417,305
Other 264,506 254,976
----------- -----------
Total current assets 3,100,944 3,205,532
Property, plant & equipment, net 332,581 349,924
Goodwill 845,617 844,597
Other assets 268,153 281,901
----------- -----------
Total assets 4,547,295 4,681,954
----------- -----------
Less liabilities:
Current liabilities:
Borrowings due within one year 282,679 59,309
Accounts payable 804,477 891,234
Accrued expenses and other 281,541 326,293
----------- -----------
Total current liabilities 1,368,697 1,276,836
Long-term debt, less due within one year 1,351,078 1,565,836
Other long-term liabilities 35,156 34,772
----------- -----------
Total liabilities 2,754,931 2,877,444
----------- -----------
Shareholders' equity $1,792,364 $1,804,510
=========== ===========
(1) 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 fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. than it could receive through other forms of financing. At Sept. 27, 2002 and June June: see month. 28, 2002, the company had sold $100.0 million and $200.0 million, respectively, of receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed under the program. This is reflected as a reduction of receivables, with the proceeds used to pay down debt, in the above balance sheets.
AVNET INC.
SEGMENT INFORMATION
(MILLIONS)
FIRST QUARTERS ENDED
---------------------------
SEPT. 27, SEPT. 28,
SALES 2002 2001
----------------------- --------- ---------
Electronics Marketing $1,241.8 $1,237.6
Computer Marketing 532.2 572.0
Applied Computing 399.9 391.6
--------- ---------
Consolidated $2,173.9 $2,201.2
========= =========
OPERATING INCOME (LOSS)
-----------------------
Electronics Marketing $14.7 ($5.0)
Computer Marketing 7.2 10.8
Applied Computing 3.3 14.5
Headquarters (5.2) (16.7)
--------- ---------
Consolidated $20.0 $3.6
========= =========
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