Avnet (AVT) Q4 2003 earnings summary

Executive summary

• FY03 sales rose 1.4% YoY to $9.05B as markets stabilized; operating income was $12.7M vs. a $3.0M loss in FY02, while net loss was $46.1M, or $0.39/share.

• FY03 results included $106.8M of restructuring charges and $13.5M of debt-extinguishment costs, totaling $73.9M after tax, or $0.62/share.

• Q4 FY03 returned to quarterly profitability, with net income of $11.5M after losses in Q1 and Q2; quarterly sales were $2.19B.

Financial highlights

• Gross profit was $1.215B and gross margin 13.43%, down from $1.223B and 13.71% in FY02; FY02 margin included a 24-bp restructuring impact.

• SG&A was $1.202B, or 13.3% of sales, vs. $1.226B, or 13.7%, in FY02; operating expenses fell $23.6M despite higher restructuring charges.

• Interest expense fell 15.8% YoY to $104.9M; other income rose to $26.2M, primarily from favorable currency translation.

• Operating cash flow was $651.9M; cash and cash equivalents ended FY03 at $395.5M, up $236.2M YoY.

Outlook and guidance

• FY03 cost actions were expected to yield ~$90M in annual savings, with substantially all savings to be reflected in FY04 results.

• Further restructuring was expected to incur ~$50M in charges, roughly half cash, and deliver ~$90M in annual savings, mostly realized by the end of Q3 FY04.

• Management expected Asia to continue growing as a share of sales; no material acquisitions were anticipated in the near term.