Financial: Avnet Reports Second Quarter Results - Company Financial Information

Edge: Work-Group Computing Report, Feb 1, 1999

Avnet Inc. (NYSE:AVT) Tuesday reported results for its second quarter and first half ended Jan. 1, 1999. Net income for the second quarter of fiscal 1999 was $26.5 million, or $0.74 per share on a diluted basis, as compared with last year's net income, before special items, of $43.4 million, or $1.06 per share on a diluted basis.

Sales for the second quarter of fiscal 1999 were $1.53 billion as compared with $1.46 billion in the second quarter of last year. For the first half of fiscal 1999, Avnet reported net income, before special charges, of $57.9 million, or $1.59 per share on a diluted basis, as compared with net income, before special items, of $85.5 million, or $2.08 per share, in last year's first half. Sales for the first half of the current fiscal year were $3.11 billion as compared with $2.86 billion last year. Not included in the second quarter's comparative results discussed above is the fiscal 1998 gain on the sale of the company's former Channel Master business amounting to approximately $33.8 million before income taxes and operating expenses of $13.3 million for costs relating to the anticipated divestiture of Avnet Industrial, the closure of the company's corporate headquarters in Great Neck, NY, and the anticipated loss on the sale of company-owned real estate. The net effect of these items was to increase pre-tax income, net income, and diluted earnings per share by approximately $20.5 million, $8.7 million, and $0.21, respectively. Accordingly, last year's second quarter net income and diluted earnings per share including special items was $52.1 million and $1.27, respectively. The first half fiscal 1999 results mentioned above do not include $26.5 million pre-tax, $15.7 million after-tax and $0.43 per share on a diluted basis of incremental special charges (recorded in the first quarter) associated principally with the reorganization of the company's electronics marketing group European operations. Approximately $18.6 million of the pre-tax charge is included in operating expenses and $7.9 million is included in cost of sales. These charges include severance, inventory reserves required related to supplier terminations and other items. Including these charges, the first half of fiscal 1999 net income and diluted earnings per share were $42.2 million and $1.16, respectively. Mr. Vallee, Chairman and CEO, reported that despite a difficult end to the second quarter, sales for the Electronics Marketing Group (EMG) of $1.15 billion in the second quarter of fiscal 1999 and $2.38 billion in the first half of fiscal 1999 were up approximately 6% and 10%, respectively, as compared with the prior year periods. EMG's operating income, excluding special charges, was $50.7 million for the second quarter and $106.8 million for the first half of fiscal 1999, down 23% and 21%, respectively, as compared with $65.9 million and $135.6 million, respectively, in the prior year periods. The Computer Marketing Group's (CMG) sales of $375 million for the second quarter of fiscal 1999 and $727 million for the first half of fiscal 1999 were up approximately 3% and 11%, respectively, as compared with sales of $365 million and $654 million in the prior year periods. Operating income of $7.5 million for the second quarter of fiscal 1999 and $19.0 million for the first half of fiscal 1999 were down 48% and 20%, respectively, as compared with $14.3 million and $23.8 million, respectively, in the prior year periods. The prior year consolidated financial statements include the results for Channel Master, which was sold during the second quarter of fiscal 1998. Mr. Vallee indicated that the results for EMG reflected a shortfall in December sales of core products and that this resulted in significantly lower gross profit dollars for EMG as compared with the immediately preceding first quarter, while gross profit margins remained fairly stable over that period. Additionally, Mr. Vallee indicated that CMG also experienced a shortfall in expected December sales as well as lower gross profit margins which, when coupled with higher operating expenses to support the anticipated higher sales, resulted in lower profits. Headquartered in Phoenix, Arizona, Avnet, Inc. is a Fortune 500 company with annual sales exceeding $5.9 billion. With sales in 58 countries, Avnet markets, inventories and adds value to the products of the most prestigious electronic components and computer equipment manufacturers for customers worldwide

                              Avnet Inc.
                     Income Statement Highlights
                   (Millions Except Per Share Data)
                         Second Quarters Ended

Including Special Items(a)

                               Jan. 1,           Dec. 26,
                                1999              1997(a)  % Change

Sales                         $1,526.9          $1,460.7        5%

Operating income                  58.2              67.9     - 14%

Net income                        26.5              52.1     - 49%

Earnings per share:
 Basic                           $0.74             $1.29     - 43%
 Diluted                         $0.74             $1.27     - 42%

Excluding Special Items(a)

                               Jan. 1,          Dec. 26,  % Change
                                1999              1997(a)

Sales                         $1,526.9          $1,460.7        5%

Operating income                  58.2              81.2     - 28%

Net income                        26.5              43.4     - 39%

Earnings per share:
 Basic                           $0.74             $1.08     - 31%
 Diluted                         $0.74             $1.06     - 30%