Avnet Sales, Earnings Soar

Electronic News, May 1, 2000 by Heidi Elliott

Distributor Avnet Inc. saw its sales and earnings for the quarter ending in March skyrocket, thanks in part to acquisitions, improved gross margins, and overall robust market conditions.

Sales for the third quarter of the company's fiscal year 2000 were a record $2.69 billion, up 68 percent from $1.6 billion in the same quarter in 1999, and up 28 percent from $2.1 billion in the immediately preceding quarter. Excluding special charges, net income for the quarter was $50.2 million, or $1.13 per diluted share, up from $25.7 million, or 73 cents per share on a diluted basis last year. The special charges are related to acquisitions in Europe. Including the special charges, net income was $41.3 million, or 93 cents per diluted share.

"These are exciting times for Avnet," Roy Vallee, Avnet chairman and chief executive officer, told analysts last week.

The special charges include a $10.1 million pretax charge associated with the integration of the recently acquired SEI Eurotronics and Macro operations into Avnet's Electronics Marketing (EM) Europe, Middle East, and Asia business, a $3.1 million pretax charge associated with the integration of JBA Computer Solutions into Avnet's Computer Marketing (CM) North American business and a $1.6 million pretax charge associated with the consolidation of EM's European warehousing operations.

"We are extremely pleased with the results for Avnet's third quarter, which are better than we expected just a short time ago," Vallee said. "The robust conditions in the electronics components industry and the extremely successful integration of Marshall into our EM Americas' business were the key drivers to our improved results. We reached our previous all-time high earnings per share even though we are still in the early stages of integrating four recent strategic acquisitions."

Excluding its acquisitions, sales on a pro forma basis grew 23 percent over last year and rose 14 percent sequentially, Vallee told analysts. Avnet's largest operating group, the Electronics Marketing Group, achieved growth of 19 percent before counting acquisitions. "We are very pleased with our organic top line growth," Vallee said. "In North America, we increased market share and increased gross margin, while in Europe we're still challenged. It did contribute to earnings per share. We still have a lot of work to do."

On the computer systems side, business was down slightly. However, so far in April demand has rebounded. Meanwhile, the company's Applied Computing group, created a few quarters ago, is on a $1.2 billion annual run rate. Vallee also noted the company continues to see cost savings from acquisitions, which will mean improving results going forward.