Avnet Financials Break Records

Electronic News, August 14, 2000 by Heidi Elliott

Exceptional year predicted in 2001 also

A day after announcing that it was part of the consortium that will purchase third-ranked distributor VEBA Electronics Group, Avnet released its fiscal fourth quarter and fiscal 2000 results, setting company records in many areas.

For the three months ending June 30, sales were a record $2.7 billion, up 66 percent from the prior-year's sales of $1.6 billion. Net income for the quarter was also a record at $66.6 million, or $1.48 per share on a diluted basis, up from net income (excluding special items) of $26.8 million, or 76 cents per share on a diluted basis, last year.

Net income and diluted earnings per share before special items were higher by 148 percent and 95 percent, respectively, as compared with last year's fourth quarter. Including the net gain recorded in connection with the sale of the Allied Electronics catalog businesses, net income and diluted earnings per share for last year's fourth quarter were $106.5 million and $3.01, respectively.

It was an exceptional year, said Roy Vallee, Avnet chairman and chief executive officer. He attributed the results to continued strength in the electronics components industry, substantially improved results in the computer business, and the benefits associated with integrating its acquisitions, especially the merger with Marshall Industries.

Other public distributors have set financial records themselves in the June quarter. For instance, Arrow Electronics, the top distributor, had tremendous gains in the June quarter. Other distributors also fared extremely well including Pioneer-Standard, Reptron Electronics, Kent Electronics, All American Semiconductor and Nu Horizons. They have all reported extremely positive results, up on both year-over-year and sequential bases - with many achieving sales and/or earnings records.

In releasing Avnet's results, Vallee noted that the company continues to see synergies from its acquisitions. "Our earnings per share reached a record high in the fourth quarter even though we have not yet achieved all of the expected benefits resulting from our recently completed strategic acquisitions," he said.

In looking at the quarter by company sector, the Electronics Marketing group saw its sales increase 62 percent to almost $2 billion. The Computer Marketing Group (CMG) also saw an increase in sales, though less dramatic. Sales rose to $519 million for the quarter, up 13 percent sequentially.

"CMG's fourth-quarter results have improved dramatically as compared with the third quarter," Vallee added. "In addition, Avnet Applied Computing contributed another successful earnings quarter despite its sales being negatively impacted by the inability of certain suppliers to provide the product necessary to meet customer demand."

And though the company is somewhat smarting from the inability to get certain products, long lead-times and allocation issues are present for many components including microcontrollers, embedded processors, EPROMs, ASICs, DRAMs, both ceramic and tantalum capacitors, and 2mm connectors. "There's not a lot of relief in this area," said Steve Church, Avnet co-president. "One of our main (jobs) is chasing parts for our customers."

For the company's 2000 fiscal year, sales were a record $9.2 billion, up 44 percent from the previous-year's sales of $6.4 billion. Net income, excluding special charges, was $175.6 million, or $4.22 per share on a diluted basis, up 59 percent from last year's net income of $110.5 million, excluding special charges and a one-time gain, or $3.08 per share on a diluted basis. The results for fiscal 2000 include incremental special charges of $49 million pretax, $30.4 million after-tax, or 73 cents per share on a diluted basis. The charges were related primarily to the integration of Marshall Industries, SEI Eurotronics, and the Macro Group into the Electronics Marketing Group. Including the special charges, fiscal 2000 net income and diluted earnings per share were $145.1 million and $3.49, respectively.

Looking forward, Vallee told analysts to expect more good news. "Avnet should post records in (fiscal) 2001," he said. "We're in for a very exciting year."