Avnet’s Best Quarter in 3 Years

Including such charges, fiscal 2004 operating income of $202.2 million was up $189.5 million over fiscal 2003. Net income for fiscal 2004 was $72.9 million, or $.60 per share on a diluted basis, as compared with a net loss of $46.1 million, or $0.39 per share on a diluted basis in fiscal 2003. Excluding certain charges in both fiscal years, net income in fiscal 2004 reached $125.6 million, or $1.04 per share on a diluted basis, as compared with fiscal 2003 net income of $27.8 million, or $0.23 per share on a diluted basis. Roy Vallee, Chairman and Chief Executive Officer, stated, “The global technology industry recovery gained momentum throughout our fiscal year and we finished with the highest quarterly year-over-year revenue growth rate in over three years. Fiscal 2004 was a year in which revenue growth combined with operating efficiency to drive a dramatic increase in operating income. Leveraging Avnet’s global capabilities to enable the success of our customers and suppliers has allowed us to capitalize on the improved technology market.” “During fiscal 2004, the Avnet team was focused on delivering higher returns on capital through quality revenue growth and operational excellence,” said Ray Sadowski, Chief Financial Officer. “This focus improved our operating margins significantly during the last fiscal year. As we look into fiscal 2005, we see additional opportunities to improve operational efficiency thereby facilitating our ability to continue to improve our customer service and our bottom line, as well as to strengthen our balance sheet.” Gross profit dollars per employee for fiscal 2004 increased 21% and operating income per employee, excluding restructuring charges, increased by 132% over the prior year. Operating expenses as a percentage of gross profit dropped to its lowest level in three years, coming in at 85% (81% excluding restructuring charges) for the year and 77% in the fourth quarter. Mr. Vallee added, “Over the last three years Avnet has been focused on value based management through our “Driving Value” initiative. This focus continues to meaningfully impact our business operations as evidenced by the continued improvement in our expense and asset productivity metrics. Specifically, our net operating profit after tax return on working capital is the highest that it has been in over three years with the fourth quarter result representing the eighth consecutive quarter of year-over-year improvement.” Looking forward to the first quarter of Avnet’s fiscal 2005, Mr. Vallee stated, “Based on current business conditions, seasonal factors and the current value of the Euro to the U.S. Dollar, we expect Technology Solutions revenue growth to be the range of minus 2% to positive 2% sequentially and Electronics Marketing revenues to decline 1-4% sequentially. Therefore, Avnet’s consolidated sales should be in the range of $2.55 billion to $2.65 billion in the first quarter of fiscal 2005, which represents a growth of 6% to 10% as compared with the first quarter of fiscal 2004. We expect earnings to decline sequentially and be in the range of $0.30 to $0.35 per share, up significantly from a GAAP loss of $0.09 per share and pro forma income of $0.09 per share in the fiscal 2004 first quarter.”. Management believes the pro forma measures also help indicate underlying trends in the business. Management also uses pro forma measures to establish operational goals and, in some cases, for measuring performance for compensation purposes.