Avnet Reports Third Quarter Fiscal 2020 Financial Results

In addition to disclosing financial results that are determined in accordance with generally accepted accounting principles in the United States (“GAAP”), the Company also discloses certain non-GAAP financial information including (i) adjusted operating income, (ii) adjusted operating expenses, (iii) adjusted other income (expense), (iv) adjusted income tax expense, (v) adjusted income from continuing operations, (vi) adjusted diluted earnings per share from continuing operations, and (vii) sales adjusted for the impact of significant acquisitions and other items (as defined in the Organic Sales section of this document).

There are also references to the impact of foreign currency in the discussion of the Company’s results of operations. When the U.S. Dollar strengthens and the stronger exchange rates of the current year are used to translate the results of operations of Avnet’s subsidiaries denominated in foreign currencies, the resulting impact is a decrease in U.S. Dollars of reported results. Conversely, when the U.S. Dollar weakens and the weaker exchange rates of the current year are used to translate the results of operations of Avnet’s subsidiaries denominated in foreign currencies, the resulting impact is an increase in U.S. Dollars of reported results. In the discussion of the Company’s results of operations, results excluding this impact are referred to as “constant currency.” Management believes organic sales and sales in constant currency are useful measures for evaluating current period performance as compared with prior periods and for understanding underlying trends. In order to determine the translation impact of changes in foreign currency exchange rates on sales, income or expense items for subsidiaries reporting in currencies other than the U.S. Dollar, the Company adjusts the average exchange rates used in current periods to be consistent with the average exchange rates in effect during the comparative period.

Management believes that operating income and operating expenses adjusted for restructuring, integration and other expenses, goodwill and intangible asset impairment expense and amortization of acquired intangible assets and other, are useful measures to help investors better assess and understand the Company’s operating performance. This is especially the case when comparing results with previous periods or forecasting performance for future periods, primarily because management views the excluded items to be outside of Avnet’s normal operating results or non-cash in nature. Management analyzes operating income and operating expenses without the impact of these items as an indicator of ongoing margin performance and underlying trends in the business. Management also uses these non-GAAP measures to establish operational goals and, in most cases, for measuring performance for compensation purposes. Management measures operating income for its reportable segments excluding restructuring, integration and other expenses, goodwill and intangible asset impairment expense and amortization of acquired intangible assets and other.

Additional non-GAAP metrics management uses is adjusted operating income margin, which is defined as adjusted operating income (as defined above) divided by sales.

Management also believes income tax expense, income from continuing operations and diluted earnings per share from continuing operations adjusted for the impact of the items described above and certain items impacting other income (expense) and income tax expense are useful to investors because they provide a measure of the Company’s net profitability on a more comparable basis to historical periods and provide a more meaningful basis for forecasting future performance. Adjustments to income tax expense and the effective income tax rate include the effect of changes in tax laws including recent tax law changes in the U.S., changes in valuation allowances and unrecognized tax benefits, income tax audit settlements and adjustments to the adjusted interim effective tax rate based upon the expected annual adjusted effective tax rate. Additionally, because of management’s focus on generating shareholder value, of which net profitability is a primary driver, management believes income from continuing operations and diluted earnings per share from continuing operations excluding the impact of these items provides an important measure of the Company’s net profitability for the investing public.

Any analysis of results and outlook on a non-GAAP basis should be used as a complement to, and in conjunction with, results presented in accordance with GAAP. All amounts below relate to Avnet’s continuing operations.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal

 

Quarters Ended

 

 

 

Year to Date

 

March 28,

 

December 29,

 

September 29,

 

 

 

2020*

 

2020*

 

2019*

 

2019*

 

 

 

($ in thousands, except per share amounts)

GAAP selling, general and administrative expenses - continuing operations

 

 

$

1,391,024

 

 

$

469,646

 

 

$

464,873

 

 

$

456,503

 

Amortization of intangible assets and other - continuing operations

 

 

 

(62,603

)

 

 

(21,071

)

 

 

(21,454

)

 

 

(20,078

)

Adjusted operating expenses - continuing operations

 

 

 

1,328,420

 

 

 

448,576

 

 

 

443,419

 

 

 

436,426

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating (loss) income - continuing operations

 

 

$

(6,548

)

 

$

(115,760

)

 

$

46,475

 

 

$

62,738

 

Restructuring, integration and other expenses - continuing operations

 

 

 

58,073

 

 

 

19,211

 

 

 

14,265

 

 

 

24,598

 

Goodwill and intangible asset impairment expense - continuing operations

 

 

 

145,836

 

 

 

145,836

 

 

 

-

 

 

 

-

 

Amortization of intangible assets and other - continuing operations

 

 

 

62,603

 

 

 

21,071

 

 

 

21,454

 

 

 

20,078

 

Adjusted operating income - continuing operations

 

 

 

259,965

 

 

 

70,358

 

 

 

82,194

 

 

 

107,414

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP (loss) income before income taxes- continuing operations

 

 

$

(111,964

)

 

$

(158,086

)

 

$

12,086

 

 

$

34,038

 

Restructuring, integration and other expenses - continuing operations

 

 

 

58,073

 

 

 

19,211

 

 

 

14,265

 

 

 

24,598

 

Goodwill and intangible asset impairment expense - continuing operations

 

 

 

145,836

 

 

 

145,836

 

 

 

-

 

 

 

-

 

Amortization of intangible assets and other - continuing operations

 

 

 

62,603

 

 

 

21,071

 

 

 

21,454

 

 

 

20,078

 

Other expenses - continuing operations

 

 

 

19,528

 

 

 

15,526

 

 

 

4,002

 

 

 

-

 

Adjusted income before income taxes - continuing operations

 

 

 

174,078

 

 

 

43,558

 

 

 

51,807

 

 

 

78,713

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP income tax expense (benefit) - continuing operations

 

 

$

(30,270

)

 

$

(29,425

)

 

$

6,870

 

 

$

(7,714

)

Restructuring, integration and other expenses - continuing operations

 

 

 

13,989

 

 

 

4,372

 

 

 

3,377

 

 

 

6,240

 

Goodwill and intangible asset impairment expense - continuing operations

 

 

 

6,226

 

 

 

6,226

 

 

 

-

 

 

 

-

 

Amortization of intangible assets and other - continuing operations

 

 

 

12,506

 

 

 

4,307

 

 

 

3,964

 

 

 

4,235

 

Other expenses - continuing operations

 

 

 

5,732

 

 

 

4,992

 

 

 

740

 

 

 

-

 

Income tax benefit (expense) items, net - continuing operations

 

 

 

24,659

 

 

 

15,119

 

 

 

(4,071

)

 

 

13,611

 

Adjusted income tax expense - continuing operations

 

 

 

32,843

 

 

 

5,591

 

 

 

10,880

 

 

 

16,372

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP (loss) income - continuing operations

 

 

$

(81,694

)

 

$

(128,661

)

 

$

5,216

 

 

$

41,752

 

Restructuring, integration and other expenses (net of tax) - continuing operations

 

 

 

44,084

 

 

 

14,839

 

 

 

10,888

 

 

 

18,358

 

Goodwill and intangible asset impairment expense (net of tax) - continuing operations

 

 

 

139,610

 

 

 

139,610

 

 

 

-

 

 

 

-

 

Amortization of intangible assets and other (net of tax) - continuing operations

 

 

 

50,097

 

 

 

16,764

 

 

 

17,490

 

 

 

15,843

 

Other expenses (net of tax) - continuing operations

 

 

 

13,796

 

 

 

10,534

 

 

 

3,262

 

 

 

-

 

Income tax (benefit) expense items, net - continuing operations

 

 

 

(24,659

)

 

 

(15,119

)

 

 

4,071

 

 

 

(13,611

)

Adjusted income - continuing operations

 

 

 

141,235

 

 

 

37,967

 

 

 

40,927

 

 

 

62,341

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted (loss) earnings per share - continuing operations

 

 

$

(0.81

)

 

$

(1.29

)

 

$

0.05

 

 

$

0.40

 

Restructuring, integration and other expenses (net of tax) - continuing operations

 

 

 

0.44

 

 

 

0.15

 

 

 

0.11

 

 

 

0.18

 

Goodwill and intangible asset impairment expense (net of tax) - continuing operations

 

 

 

1.38

 

 

 

1.39

 

 

 

-

 

 

 

-

 

Amortization of intangible assets and other (net of tax) - continuing operations

 

 

 

0.50

 

 

 

0.17

 

 

 

0.17

 

 

 

0.15

 

Other expenses (net of tax) - continuing operations

 

 

 

0.14

 

 

 

0.11

 

 

 

0.03

 

 

 

-

 

Income tax (benefit) expense items, net - continuing operations

 

 

 

(0.25

)

 

 

(0.15

)

 

 

0.04

 

 

 

(0.13

)

Adjusted diluted EPS - continuing operations

 

 

 

1.40

 

 

 

0.38

 

 

 

0.40

 

 

 

0.60

 

______________________________
* May not foot/cross foot due to rounding and differences in average diluted shares between quarterly periods compared to the fiscal year to date.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal

 

Quarters Ended

 

 

 

Year to Date

 

June 29,

 

March 30,

 

December 29,

 

September 29,

 

 

 

2019*

 

2019*

 

2019*

 

2018*

 

2018

 

 

 

($ in thousands, except per share amounts)

GAAP selling, general and administrative expenses - continuing operations

 

 

$

1,874,651

 

 

$

459,611

 

 

$

468,171

 

 

$

471,723

 

 

$

475,146

 

Amortization of intangible assets and other - continuing operations

 

 

 

(84,257

)

 

 

(20,737

)

 

 

(22,080

)

 

 

(20,513

)

 

 

(20,927

)

Adjusted operating expenses - continuing operations

 

 

 

1,790,393

 

 

 

438,872

 

 

 

446,092

 

 

 

451,210

 

 

 

454,219

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income (loss) - continuing operations

 

 

$

365,911

 

 

$

(30,040

)

 

$

153,085

 

 

$

96,050

 

 

$

146,816

 

Restructuring, integration and other expenses - continuing operations

 

 

 

108,144

 

 

 

28,158

 

 

 

2,939

 

 

 

62,260

 

 

 

14,788

 

Goodwill and intangible asset impairment expense - continuing operations

 

 

 

137,396

 

 

 

137,396

 

 

 

-

 

 

 

-

 

 

 

-

 

Amortization of intangible assets and other - continuing operations

 

 

 

84,257

 

 

 

20,737

 

 

 

22,080

 

 

 

20,513

 

 

 

20,927

 

Adjusted operating income - continuing operations

 

 

 

695,708

 

 

 

156,252

 

 

 

178,103

 

 

 

178,823

 

 

 

182,531

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP income (loss) before income taxes- continuing operations

 

 

$

242,268

 

 

$

(63,043

)

 

$

125,563

 

 

$

64,916

 

 

$

114,831

 

Restructuring, integration and other expenses - continuing operations

 

 

 

108,144

 

 

 

28,158

 

 

 

2,939

 

 

 

62,260

 

 

 

14,788

 

Goodwill and intangible asset impairment expense - continuing operations

 

 

 

137,396

 

 

 

137,396

 

 

 

-

 

 

 

-

 

 

 

-

 

Amortization of intangible assets and other - continuing operations

 

 

 

84,257

 

 

 

20,737

 

 

 

22,080

 

 

 

20,513

 

 

 

20,927

 

Other expenses - continuing operations

 

 

 

509

 

 

 

509

 

 

 

-

 

 

 

-

 

 

 

-

 

Adjusted income before income taxes - continuing operations

 

 

 

572,574

 

 

 

123,758

 

 

 

150,581

 

 

 

147,689

 

 

 

150,546

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP income tax expense (benefit) - continuing operations

 

 

$

62,157

 

 

$

(27,915

)

 

$

30,628

 

 

$

28,141

 

 

$

31,302

 

Restructuring, integration and other expenses - continuing operations

 

 

 

26,746

 

 

 

7,455

 

 

 

306

 

 

 

15,665

 

 

 

3,320

 

Goodwill and intangible asset impairment expense - continuing operations

 

 

 

18,566

 

 

 

18,566

 

 

 

-

 

 

 

-

 

 

 

-

 

Amortization of intangible assets and other - continuing operations

 

 

 

17,986

 

 

 

4,382

 

 

 

4,747

 

 

 

4,379

 

 

 

4,478

 

Other expenses - continuing operations

 

 

 

57

 

 

 

57

 

 

 

-

 

 

 

-

 

 

 

-

 

Income tax (expense) benefit items, net - continuing operations

 

 

 

(8,143

)

 

 

20,896

 

 

 

(4,059

)

 

 

(16,742

)

 

 

(8,238

)

Adjusted income tax expense - continuing operations

 

 

 

117,369

 

 

 

23,441

 

 

 

31,622

 

 

 

31,443

 

 

 

30,862

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP income (loss) - continuing operations

 

 

$

180,111

 

 

$

(35,128

)

 

$

94,935

 

 

$

36,775

 

 

$

83,529

 

Restructuring, integration and other expenses (net of tax) - continuing operations

 

 

 

81,398

 

 

 

20,703

 

 

 

2,633

 

 

 

46,595

 

 

 

11,468

 

Goodwill and intangible asset impairment expense (net of tax) - continuing operations

 

 

 

118,830

 

 

 

118,830

 

 

 

-

 

 

 

-

 

 

 

-

 

Amortization of intangible assets and other (net of tax) - continuing operations

 

 

 

66,271

 

 

 

16,355

 

 

 

17,333

 

 

 

16,134

 

 

 

16,449

 

Other expenses (net of tax) - continuing operations

 

 

 

452

 

 

 

452

 

 

 

-

 

 

 

-

 

 

 

-

 

Income tax expense (benefit) items, net - continuing operations

 

 

 

8,143

 

 

 

(20,896

)

 

 

4,059

 

 

 

16,742

 

 

 

8,238

 

Adjusted income - continuing operations

 

 

 

455,205

 

 

 

100,316

 

 

 

118,960

 

 

 

116,246

 

 

 

119,684

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted earnings (loss) per share - continuing operations

 

 

$

1.63

 

 

$

(0.33

)

 

$

0.87

 

 

$

0.33

 

 

$

0.72

 

Restructuring, integration and other expenses (net of tax) - continuing operations

 

 

 

0.74

 

 

 

0.20

 

 

 

0.02

 

 

 

0.42

 

 

 

0.10

 

Goodwill and intangible asset impairment expense (net of tax) - continuing operations

 

 

 

1.07

 

 

 

1.13

 

 

 

-

 

 

 

-

 

 

 

-

 

Amortization of intangible assets and other (net of tax) - continuing operations

 

 

 

0.60

 

 

 

0.15

 

 

 

0.16

 

 

 

0.14

 

 

 

0.14

 

Other expenses (net of tax) - continuing operations

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Income tax expense (benefit) items, net - continuing operations

 

 

 

0.07

 

 

 

(0.20

)

 

 

0.04

 

 

 

0.15

 

 

 

0.07

 

Adjusted diluted EPS - continuing operations

 

 

 

4.11

 

 

 

0.95

 

 

 

1.09

 

 

 

1.04

 

 

 

1.03

 

______________________________
* May not foot/cross foot due to rounding and differences in average diluted shares between quarterly periods compared to the fiscal year to date.

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