AVT Avnet Inc

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

__________________

FORM 8-K

CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

__________________

Date of Report (Date of earliest event reported)    January 28, 2016

AVNET, INC.
(Exact name of registrant as specified in its charter)

(480) 643-2000

(Registrant’s telephone number, including area code.)

N/A

(Former name and former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13.e-4(c))

Item 2.02.Results of Operations and Financial Condition.

On January  28, 2016, Avnet, Inc. issued a press release announcing its second quarter results of operations for fiscal 2016.  A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein.

Also attached is the CFO Review of Fiscal 2016 Second Quarter Results as Exhibit 99.2 and is incorporated by reference herein.

The information in this Current Report on Form 8-K and the exhibits attached hereto are being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933 except as shall be expressly set forth in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

The following materials are attached as exhibits to this Current Report on Form 8-K:

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Exhibit 99.1

Avnet, Inc. Reports Second Quarter Fiscal Year 2016 Results

Year-Over-Year Margin Expansion

Despite Softer Demand in the Americas Region 

Phoenix, January 28, 2016 - Avnet, Inc. (NYSE:AVT) today announced results for the second quarter fiscal year 2016 ended January 2, 2016.

Q2 Fiscal 2016 Results

Rick Hamada, Chief Executive Officer, commented, “Our team stayed focused on profitability as both gross profit and adjusted operating income margins expanded year over year even as revenue came in near the low end of expectations due to weaker demand in the Americas region. This softness resulted in below seasonal sequential growth and revenue declined 5.1% year over year in constant currency. Our EMEA region continued their multi-quarter growth trend as revenue increased 3.5% year over year in constant currency led by continued strength in our Electronics Marketing (EM) business. The focus on profitable growth and continued portfolio management at Technology Solutions (TS) helped drive enterprise gross profit margin up 27 basis points year over year. This improvement in gross profit margin and continued expense reductions were offset by the translation impact of the stronger U.S. Dollar as operating income declined 7% year over year in reported dollars and 0.8% in constant currency.  While economic indicators suggest a slower growth environment as we enter calendar 2016, we continue to invest in our organic growth initiatives including Internet of  Things, embedded solutions, and third platform technologies. Finally, given our strong cash flow and disciplined share repurchase program, we are taking advantage of the current market pullback to increase the investment in our equity."

Avnet Electronics Marketing Results

Mr. Hamada added, “In our December quarter, EM’s revenue was at the low end of expectations due to slower than expected sequential growth in our high volume supply chain engagements in Asia and weaker demand in industrial markets in our Americas region. As a result, revenue declined 7.6% sequentially in constant currency (1% excluding the extra week in our September quarter) and 3.4% year over year.  Year-over-year declines in our Asia and Americas regions were partially offset by

another strong quarter in our EMEA region where revenue grew 7.5% in constant currency. Our EMEA team leveraged their multi-quarter trend of organic growth into improved profitability as operating income grew nearly twice as fast as revenue in constant currency and operating income margin expanded year over year for the seventh consecutive quarter. Despite this performance in EMEA, EM’s operating income declined 9.1% from the year ago quarter driven by the declines in the other regions and the translation impact of the stronger U.S. Dollar. Our book to bill ratio of 0.98 to 1.0 finished below parity for the third consecutive quarter. In this environment of slower growth and mixed economic signals, we will continue to focus on aligning our resources with current market conditions.”

Avnet Technology Solutions Results

Mr. Hamada further added, "TS experienced a  weaker than expected close in our Americas region, which led to below seasonal growth in the typically strong December quarter.  Revenue declined 12.2% year over year in our Americas region driven by declines in storage and computing components, coupled with softer demand in Latin America. This resulted in TS sequential growth of 19.6% (after adjusting for currency and the extra week in the September quarter) as compared with our typical seasonal growth of 26% to 30%. TS EMEA’s organic revenue declined 2% year over year in constant currency as 5% growth in our core business was offset by a decline in our computing components business. TS Asia’s revenue declined 23% year over year with a third of this decline related to the translation impact of the stronger U.S. Dollar. Despite this revenue decline,  our ongoing 

portfolio and expense management had a positive impact on profitability as both gross profit and operating income margins improved year over year in all three regions.  For calendar 2015, TS’ operating income margin improved 40 basis points over calendar 2014 to 3.3%, representing meaningful progress toward our target range of 3.4% to 3.9%.  With continued momentum at TS EMEA and our investments in higher growth third platform technologies gaining traction, we expect to drive further improvements in margins and returns over time.”

Cash Flow/Dividend

Kevin Moriarty, Chief Financial Officer, stated, “Cash flow from operations for the December quarter was approximately $118 million and $444 million for the trailing twelve months. During the quarter, we repurchased $40 million of our shares and following the recent decline in equity markets, we have invested an additional $65 million in our share repurchase program quarter to date. We still have approximately $303 million remaining in our share repurchase program and are prepared to continue to invest in our stock when it presents a compelling value. Our focus on operating efficiencies, including our Avnet Advantage initiative, contributed toward operating leverage in the first half of fiscal 2016 as adjusted operating expense as a percentage of gross profit declined 106 basis points to 68.4%, compared to the first half of fiscal 2015. We ended the quarter with approximately $916 million in cash, which when combined with our strong cash flow generation, provides ample liquidity to invest in profitable growth going forward.”

Outlook for Third Quarter of Fiscal 2016 Ending on April 2, 2016

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 is $1.09 to €1.00. This compares with an average exchange rate of $1.13 to €1.00 in the third quarter of fiscal 2015.

Forward-Looking Statements

This document contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on management’s current expectations and are subject to uncertainty and changes in facts and circumstances. The forward-looking statements herein include statements addressing future financial and operating results of Avnet and may include words such as “will,” “anticipate,” “intend,” “estimate,” “forecast,” “expect,” "feel," “believe,” and “should,” and other words and terms of similar meaning in connection with any discussions of future operating or financial performance, business prospects or market conditions. Actual results may differ materially from the expectations contained in the forward-looking statements.

The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: the Company’s ability to retain and grow market share and to generate additional cash flow, risks associated with any acquisition activities and the successful integration of acquired companies, declines in sales, changes in business conditions and the economy in general, changes in market demand and pricing pressures, any material changes in the allocation of product or product rebates by suppliers, and other competitive and/or regulatory factors affecting the businesses of Avnet generally.

More detailed information about these and other factors is set forth in Avnet’s filings with the Securities and Exchange Commission, including the Company’s reports on Form 10-K, Form 10-Q and Form 8-K. Except as required by law, Avnet is under no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Information

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 in this document certain non-GAAP financial information including adjusted operating income, adjusted operating expenses, adjusted net income and adjusted diluted earnings per share, as well as sales adjusted for the impact of 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 “excluding the impact of changes in foreign currency exchange rates” or “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 for sales, income or expense items, the Company adjusts the exchange rates used in current periods to be consistent with the exchange rates in effect during prior periods.

Management believes that operating income and operating expenses adjusted for (i) restructuring, integration and other expenses and (ii) amortization of acquired intangible assets and other, are useful measures to help investors better assess and understand the Company’s operating performance, especially 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 many cases, for measuring performance for compensation purposes.

Additional non-GAAP metrics management uses are adjusted operating income margin, which is defined as adjusted operating income (as defined above) divided by sales and adjusted operating expense to gross profit ratio, which is defined as adjusted operating expenses (as defined above) divided by gross profit.

Management also believes net income and diluted EPS adjusted for (i) the impact of the items described above, (ii) certain items impacting other expense and (iii) certain items impacting income tax expense is useful to investors because it provides a measure of the Company’s net profitability on a more comparable basis to historical periods and provides a more meaningful basis for forecasting future performance. Additionally, because of management’s focus on generating shareholder value, of which net profitability is a primary driver, management believes net income and diluted EPS excluding the impact of these items provides an important measure of the Company’s net profitability for the investing public.

Other metrics management monitors in its assessment of business performance include return on working capital (ROWC), return on capital employed (ROCE) and working capital velocity (WC velocity).

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.

Fiscal 2016

* Does not foot due to rounding

Fiscal 2015

* Does not foot due to rounding

Organic Sales

Organic sales is defined as reported sales adjusted for the impact of more than insignificant acquisitions and divestitures by adjusting Avnet’s prior periods to include the sales of acquired businesses and exclude the sales of divested businesses as if the acquisitions and divestitures had occurred at the beginning of the earliest period presented. In addition, fiscal 2016 sales are adjusted for the estimated impact of the extra week of sales in the first quarter of fiscal 2016 due to it being a 14-week quarter and 53-week fiscal year. Organic sales in constant currency is defined as organic sales (as defined above) excluding the impact of changes in foreign currency exchange rates as discussed above.

The following tables present the reconciliation of reported sales to organic sales for the second quarter and first six months of fiscal 2016 and fiscal 2015.

ROWC, ROCE and WC Velocity

The following tables (in thousands) presents the calculation for ROWC, ROCE and WC velocity.