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Avnet see stronger revenue from computer sales
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Friday, January 24, 2003
Avnet Inc., Phoenix, today reported that second quarter fiscal 2003 revenues increased from the prior sequential quarter, and the company returned to profitability before special charges.
On quarterly revenues of $2.35 billion, the company reported net income, before special charges, of $7.1 million, or 6 cents per share on a diluted basis.
These results compare with revenues of $2.36 billion and a net loss of $2.6 million, or 2 cents per share on a diluted basis, for the second quarter of fiscal 2002.
Avnet reported a net loss for the second quarter of $58.7 million, or 49 cents per share on a diluted basis.
Operating income, before special charges, was $31.6 million, up by 58% from $20 million on a sequential quarterly basis and up 33% from $23.8 million as compared with the prior year second quarter. Including special charges.
Avnet said that consolidated revenues increased significantly on a sequential quarterly basis due to stronger than expected seasonal demand in the company's Computer Marketing group.
Computer Marketing (CM) revenues increased 28.3% from the prior sequential quarter to $682.9 million. Applied Computing (AC) also had a strong quarter, with revenues of $459.7 million, up 14.9% from the prior sequential quarter.
On a year-over-year basis, revenues at CM and AC were down by 3.1% and 4.9%, respectively, as compared with the second quarter of last year.
Revenues at Electronics Marketing (EM) declined by 3% sequentially; however, revenues were up by 2.7% on a year-over-year basis. EM's sequential sales decline was due to continued weakness in the Americas-based components markets.
Enterprise gross profit margin declined slightly on a sequential basis from 13.69% in the first quarter of fiscal 2003 to 13.45% due primarily to the mix of business as the lower margin computer businesses (CM and AC) accounted for 49% of consolidated revenues as compared with 43% in the first quarter of fiscal 2003.
Enterprise gross profit margin was essentially flat as compared with the prior year second quarter margin of 13.5% as the mix of business in each of these two quarters was very similar.
Operating profit margin, before special charges, of 1.35% in the second quarter of fiscal 2003 was up 34 basis points, as compared with 1.01% in the second quarter of fiscal 2002 and increased sequentially by 43 basis points primarily as a result of the increase in revenues from the first quarter of fiscal 2003.
In connection with the company's continuing cost reduction initiatives, Avnet recorded certain special charges during the December 2002 quarter. Total special charges during the second quarter of fiscal 2003 amounted to $106.7 million pre-tax (all of which is included in operating expenses) and $65.8 million after-tax, or $0.55 per share on a diluted basis.
These charges related to severance for workforce reductions announced during the quarter, reserves for non-cancelable lease commitments and write-downs of owned assets at facilities identified for consolidation and charges related to write-offs of certain capitalized IT-related initiatives.
Of the special charge of $106.7 million, $59.0 million represented non-cash write-downs and $47.7 million requires the use of cash.
"The special charge was somewhat higher than our initial estimates as we increased our cost cutting actions to yield benefits in excess of $90 million on an annualized basis, of which $80 million was removed from the business as of the end of the December 2002 quarter," the company said.
"We continue to believe that the industry is past the deepest part of this economic trough and we are in a stable but stagnant market. We remain committed to improving profitability in this environment," said Roy Vallee, chairman and chief executive, in a statement.
The company reported that it also continued its progress on reducing working capital and total debt during the December 2002 quarter. The company generated cash of approximately $307 million, primarily through working capital reductions and the previously announced tax refund of approximately $165 million. As a result, the company further reduced total debt for the eighth consecutive quarter.
Since the peak of the last up-cycle in December 2000, debt has been reduced by nearly $1.9 billion to $1.4 billion, including as debt $50 million outstanding under the accounts receivable securitization program, at Dec. 27, 2002., Avnet said.
"Avnet should cross over into slight revenue growth for the enterprise year-over-year in the March 2003 quarter, although revenues will likely fall sequentially due to seasonal factors," said Vallee.
"We expect March 2003 quarter revenues to exceed the September 2002 quarter level of $2.17 billion and be in the range of $2.25 to $2.3 billion for the quarter. We expect sequential revenue decline of 5-10% from our computer businesses, mitigated somewhat by 2-3% growth at our EM business.
"Factoring in the operating leverage we have following our most recent cost cutting actions, we expect earnings per share for the March 2003 quarter to be between $0.07 and $0.09, thereby producing another sequential quarter of EPS growth. Based upon current market conditions, we expect to exceed the current fiscal year 2003 earnings per share consensus estimates of $0.21 before special charges."
By: DocMemory
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