Avnet Sales Up, Net Down

Electronic News, August 9, 1999 by Heidi Elliott

As expected, Avnet Inc., Phoenix, reported a sales increase, and net income decrease for its fourth quarter and fiscal year.

The company recorded sales of $6.35 billion for its fiscal year, which ended July 2. Sales were up 7 percent over last year's sales of $5.92 billion. Net income for the year, excluding special charges and a one-time gain, was $110.5 million, or $3.08 per share on a diluted basis. Last year, net income, excluding special charges and the gain on the sale of Channel Master, was $163.9 million, or $4.12 per share. Net income dropped 33 percent. Due to the effect of the company's stock repurchase program and special items, diluted earnings per share for fiscal 1999 are 4 cents less than the sum of the applicable amounts for each of the quarters of 1999.

"The quarter came in right in line with expectations," said Analyst Rob Damron, managing director at Tucker Anthony Cleary Gull Inc. in Milwaukee. "There's clearly some positives and some negatives, but the overall balance is positive. I expect to see improvement going forward. We're in the early stages of an electronic component industry up-cycle and Avnet is benefiting from that."

In addition to a fourth quarter net gain from the sale of the Allied catalog business, fiscal year results include a first-quarter pretax charge of $26.5 million associated primarily with the reorganization of the company's Electronics Marketing Group European operations.

Including all special items, consolidated net income for fiscal year 1999 was $174.5 million, or $4.86 per share on a diluted basis, up from net income of $151.4 million, or $3.80 per share on a diluted basis, in fiscal 1998. Fiscal year 1998 results included a net pretax charge of $14.9 million, which included the gain on the sale of Channel Master, offset by costs relating to the divestiture of Avnet Industrial, the closure of the former corporate headquarters in Great Neck, N.Y., the loss on the sale of real estate, and the corporate reorganization.

In a conference call with analysts, Roy Vallee, Avnet chairman and chief executive officer, said he believes the distribution is turning around. "These are very exciting times," he said last week, noting that he expects the historically sluggish summer months to be slow, then pick up at the end of the year.

He said the acquisition of Marshall Industries is progressing on schedule. "We have a number of acquisitions on the horizon," Vallee added, pointing to the intended purchase of two European distributors with ties to Marshall. Avnet has signed a letter of intent to acquire the remainder of Sonepar Electronique International (SEI), owned by Eurotronics BV, based in the Netherlands. Marshall has a 16 percent minority stake in that company. Eurotronics has sales of $550 million. Avnet is also in negotiations to acquire another U.K. distribution company that has sales of $200 million. Vallee said he expects those acquisitions to be completed shortly after the Marshall deal closing, which is expected by Oct. 1.

In other news, Avnet announced it has made a strategic investment in QuestLink Technology Inc., an online company that provides technical information resources for electronics engineers.