Avnet, Inc. (NYSE:AVT) today announced results for the third quarter fiscal year 2015 ended March 28, 2015.
- Sales for the quarter ended March 28, 2015 increased 7.0% organically on a constant currency basis and reported sales increased 0.8% year over year to $6.74 billion
- Adjusted operating income of $230.4 million increased 3.0% year over year and adjusted operating income margin of 3.4% increased 7 basis points year over year
- Adjusted net income of $143.5 million was essentially flat from the year ago quarter and adjusted diluted earnings per share of $1.04 increased 1.0% year over year
- Excluding the impact of changes in foreign currency exchange rates, adjusted diluted earnings per share would have been $1.15, which represents an increase of approximately 12% from the year ago quarter
Rick Hamada, Chief Executive Officer, commented, "I believe our team has done a good job navigating the continuing environment of mixed signals among various business and economic indicators, including the significant strengthening of the U.S. Dollar during our March quarter. Our organic growth rate improved this quarter as revenue increased 7.0% in constant currency over the prior year with both operating groups contributing to the momentum. Our EMEA region grew 7.4% year over year on an organic basis in constant currency driven by demand for both electronic components and enterprise IT products. In our Americas region, both operating groups grew revenue approximately 4% year over year while Asia grew close to 7% year over year. Our earnings were also negatively impacted by a stronger dollar as a 13.8% year-over-year growth in our adjusted operating income in local currencies was reduced to a 3.0% reported increase. Adjusted operating income margin increased 7 basis points year over year and adjusted EPS was $1.04. Despite the understandable questions about growth in this current environment, we have thus far not seen any material changes to demand trends as reflected on our dashboards."
- Sales increased 8.7% organically on a constant currency basis and reported sales increased 2.1% year over year to $4.2 billion
- Operating income margin was flat year over year at 4.7% as strength in the Asia and EMEA regions was offset by weakness due to the translation impact of the strong U.S. Dollar
- Working capital (defined as receivables plus inventories less accounts payables) was essentially flat from the year ago quarter in reported dollars but increased 9.9% in constant currency primarily in support of the organic sales growth
- Return on working capital (ROWC) increased 8 basis points year over year and increased 128 basis points sequentially
Mr. Hamada added, "Electronics Marketing's (EM) streak of year-over-year organic growth reached eight quarters as sales increased 8.7% organically in constant currency, 2.1% on a reported basis, with all three regions contributing to this growth. Year over year, EM Asia organic sales grew double digits for a seventh consecutive quarter while EMEA grew 8.2% in constant currency and the Americas grew 3.7%. In our March quarter, EM EMEA's operating income in local currencies grew 2.7 times faster than revenue and operating income margin expanded 91 basis points year over year. These strong organic results were significantly reduced at the EM global level after translation into U.S. Dollars. EM's reported operating income increased 2% year over year with operating income margin flat to the year ago quarter. Our EM team continued their disciplined approach to managing working capital as our velocity and returns improved year over year. With our book to bill ratio above parity for the quarter and a seasonal outlook for June sales, we remain encouraged about our prospects for continued profitable growth from our global EM business."
- Sales increased 4.3% organically on a constant currency basis and decreased 1.3% year over year to $2.5 billion
- Operating income increased 11.8% to $68.1 million and operating income margin increased 32 basis points year over year to 2.7%
- ROWC increased 365 basis points year over year primarily due to higher operating income in the Americas region
- At a product level, year-over-year growth in software, storage, and networking and security was offset by a decline in computing components
Mr. Hamada further added, "In constant currency, Technology Solutions (TS) sales grew 4.3% led by our EMEA region, which grew 6.0%, and the Americas, which grew 4.9%. Continued demand for datacenter solutions in our western regions was offset by a double digit decline in our computing components business and the translation impact of the strong U.S. Dollar as TS reported revenue declined 1.3% from the prior year quarter. TS delivered strong leverage as operating income grew 11.8% year over year and operating income margin increased 32 basis points driven by a significant improvement in the Americas region. At TS EMEA, which has been improving their financial performance throughout fiscal 2015, operating income grew 22% in local currencies through the first nine months of fiscal 2015 and operating income margin expanded 38 basis points. Continued investment in converged solutions, including private/hybrid cloud, and greater software mix has been driving steady growth for TS. We will continue to focus our resources on higher growth opportunities as we progress towards our stated goals."
- Cash generated from operations was approximately $60 million in the March quarter and for the trailing twelve months, cash generated from operations was approximately $318 million
- Cash and cash equivalents at the end of the quarter was $803.5 million; net debt (total debt less cash and cash equivalents) was approximately $1.3 billion
- The Company repurchased approximately 925,000 shares during the quarter at an aggregate cost of $38.8 million. Through the first nine months of the fiscal year, the Company repurchased approximately 3.6 million shares at an aggregate cost of $147.6 million. Entering the fourth quarter, the Company had approximately $318.3 million remaining under the current repurchase authorization
- The Company paid a quarterly dividend of $0.16 per share or $21.7 million and $0.48 per share or $65.6 million for the first nine months of the fiscal year
Kevin Moriarty, Chief Financial Officer, stated, "Some of our growth in profits this quarter were reinvested in working capital to support the strong year-over-year top-line organic growth in local currency. Even with the strong organic growth, the team did an effective job managing working capital as our cash cycle declined half a day from the year ago quarter driven by a one day decline in days of inventory. During the quarter, we returned approximately $61 million of cash to shareholders through our dividend and disciplined share repurchase program, which brings our total cash returned to shareholders to $213 million in fiscal 2015. With our strong balance sheet and ample liquidity, we remain well positioned to fund future profitable growth while continuing to return cash to shareholders via both our dividend and disciplined share repurchase program."
Outlook for Fourth Quarter of Fiscal 2015 Ending on June 27, 2015
- EM sales are expected to be in the range of $4.15 billion to $4.45 billion and TS sales are expected to be in the range of $2.45 billion to $2.75 billion
- Avnet sales are expected to be in the range of $6.6 billion and $7.2 billion
- Adjusted diluted earnings per share is expected to be in the range of $1.02 to $1.12 per share
- The guidance assumes 138 million average diluted shares outstanding and a tax rate of 27% to 31%
The above guidance excludes the amortization of intangibles and any potential restructuring, integration and other expenses. In addition, the above guidance assumes that the average U.S. Dollar to Euro currency exchange rate for the fourth quarter of fiscal 2015 is $1.08 to €1.00. This compares with an average exchange rate of $1.37 to €1.00 in the fourth quarter of fiscal 2014 and $1.13 to €1.00 in the third quarter of fiscal 2015.