Avnet Inc. Reports Operating Results (10-Q)
Avnet Inc. has a market cap of $5.01 billion; its shares were traded at around $33.6 with a P/E ratio of 7.9 and P/S ratio of 0.2.
Highlight of Business Operations:EM sales of $3.60 billion in the second quarter of fiscal 2012 increased 1.0% over the prior year second quarter sales of $3.56 billion. The comparison to prior year was impacted by the transfer of the Latin America computing components business from TS Americas to EM Americas as well as by acquisitions, primarily in Asia. Excluding the impact of these items, organic revenue was down 3.5% year over year, which was the second consecutive quarter of revenue contraction as the supply chain inventory correction continued during the December quarter. On a regional basis, declines in EMEA and Asia of 12.8% and 4.7%, respectively, offset organic revenue growth of 5.3% in the Americas, which benefited from the increased demand for hard disk drives as a result of supply constraints and the associated temporary lift in pricing on those components.
TS sales of $3.10 billion in the second quarter of fiscal 2012 decreased 3.5% over the prior year second quarter sales of $3.21 billion. The year-over-year revenue decrease was due primarily to the Americas and EMEA regions which were down 9.6% and 3.8%, respectively, partially offset by growth of 31% in Asia. The comparison with prior year was impacted by the transfer of the Latin America computing components business from TS Americas to EM Americas as well as by acquisitions. Organic revenue increased 2.5% year over year driven by 5.5% growth in the Americas and 14.4% growth in Asia, which was partially offset by a decline in EMEA of 6.1%. On a product level, industry standard servers and software revenue increased more than 35% year over year while storage device revenue increased more than 20%.
Selling, general and administrative expenses (“SG&A expenses”) were $518.7 million in the second quarter of fiscal 2012, an increase of $2.3 million, or 0.4%, from the prior year second quarter. Of the $2.3 million increase, approximately $7 million related to additional expenses from businesses acquired, which was offset by a decrease in expenses for the existing business due primarily to the cost reduction actions taken. Metrics that management monitors with respect to its operating expenses are SG&A expenses as a percentage of sales and as a percentage of gross profit. In the second quarter of fiscal 2012, SG&A expenses as a percentage of sales were 7.7% and were 66.2% as a percentage of gross profit as compared with 7.6% and 66.8%, respectively, in the second quarter of fiscal 2011. SG&A expenses as a percentage of gross profit at TS decreased over 300 basis points year over year and was at its lowest level in eight quarters. SG&A expenses for the first half of fiscal 2012 were $1.05 billion, or 8.0% of consolidated sales, as compared with $1.02 billion, or 7.9% of consolidated sales, in the first half of fiscal 2011. SG&A expenses were 68.2% of gross profit in the first half of fiscal 2012 as compared with 68.0% in the first half of 2011.
During the second quarter and first half of fiscal 2012, the Company generated $450.0 million and $245.8 million, respectively, of cash from its operating activities as compared with cash usage of $79.2 million and $191.5 million in the second quarter and first half of fiscal 2011, respectively. These results are comprised of: (i) cash flow generated from net income excluding non-cash and other reconciling items, which includes the add-back of depreciation and amortization, deferred income taxes, stock-based compensation and other non-cash items (primarily the provision for doubtful accounts and periodic pension costs) and (ii) cash flow used for working capital, excluding cash and cash equivalents. Cash generated by working capital during the second quarter of fiscal 2012 included an increase in payables of $420.4 million, driven primarily by TS due to the December quarter being its seasonally strongest due to the calendar-year-end-based budgeting cycles of many of its customers. In addition, inventory decreased $91.7 million, primarily attributable to EM. These cash inflows were partially offset by an increase in accounts receivable of $224.7 million, primarily related to TS and its double-digit sequential revenue growth in the December quarter. Net days outstanding decreased almost three days during the second quarter as receivable days continue to be at or near pre-recession levels as there have not been any significant change in terms provided to customers and the Company has not experienced an overall deterioration in timely customer payments. Comparatively, cash used for working capital during the second quarter of fiscal 2011 consisted of accounts receivable growth of $434.3 million, inventory growth of $71.3 million, partially offset by growth in payables of $164.7 million.
During the second quarter and first half of fiscal 2012, the Company received net proceeds of $78.5 million and $467.5 million, respectively, primarily from borrowings under the accounts receivable securitization program and bank credit facilities. In addition, during the second quarter and first half of fiscal 2012, the Company used $139.0 million and $221.0 million, respectively, of cash to repurchase common stock under the $500 million share repurchase program authorized by the Board in August 2011 (see Item 2. Unregistered Sales of Equity Securities and Use of Proceeds in this Form 10-Q). During the second quarter and first half of fiscal 2011, the Company received net proceeds of $259.4 million and $520.9 million, respectively, primarily from borrowings under the accounts receivable securitization program and bank credit facilities which, along with available cash, were used primarily to fund acquisitions and the working capital needs of the business to support the growth in revenue in prior fiscal year.
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