Avnet (AVT) Q4 2004 earnings summary

Executive summary

• FY04 sales rose 13.2% to $10.24B as demand recovered and cost reductions strengthened operating leverage; operating income grew to $202.2M from $12.7M.

• Adjusted to exclude restructuring and other charges, operating income was $257.9M and net income was $125.6M; reported diluted EPS was $0.60.

• Management entered FY05 targeting revenue growth faster than served technology markets, with EPS and return on capital growing faster than revenue.

Financial highlights

• Revenue was $10.24B, up 13.2% YoY; approximately one-third of sales growth reflected foreign currency translation.

• Gross profit was $1.36B; gross margin was 13.3% versus 13.4% in FY03, reaching 13.9% in Q4, the highest in two years.

• Reported operating income was $202.2M versus $12.7M; FY04 included $55.6M of restructuring and other charges.

• Net income was $72.9M, or $0.60 diluted EPS, versus a $46.1M net loss, or $0.39 diluted loss per share, in FY03.

• Adjusted to exclude restructuring and debt extinguishment costs, FY04 net income was $125.6M; charges totaled $72.0M pre-tax and $52.8M after-tax.

Outlook and guidance

• FY05 priorities: organic growth, new business opportunities, operational excellence, quality revenue growth, and improved expense and asset productivity.

• Targeted revenue growth faster than served technology markets, with EPS and return on capital increasing faster than revenue.

• Electronics Marketing planned to maintain regionally run operations while leveraging global processes; Technology Solutions planned investment in enterprise computing, software vendors, and Asia.

• Management expected Asia to keep growing but at a slower rate than the robust growth of recent years; near-term demand visibility was limited to roughly 3–4 months of customer and supplier forecasts.