Avnet, Inc. (AVT) reported an adjusted net income of $83.9 million or 59 cents per share in the first quarter of fiscal 2013 (ended September 30, 2012) compared to $139.0 million or 90 cents per share in the year-earlier quarter and an adjusted net income of $145.3 million or 99 cents per share in the fourth quarter of fiscal 2012. The earnings surpassed the Zacks Consensus Estimate of 55 cents per share but failed to meet management's guidance range of 78 cents to 88 cents per share for the quarter.
Sales came in at $5.87 billion, down 8.7% year over year and nearly 7% sequentially. The year-over-year decline was caused by the company's weak businesses, especially in the Western region. The revenues in the quarter, however, were within management's guidance range of $5.80 billion to $6.40 billion but missed the Zacks Consensus Estimate of $5.89 billion.
On a segmental basis, revenues from Electronics Marketing (EM) declined 4.3% from the year-ago quarter to $3.65 billion; within management's guidance range of $3.55 billion - $3.85 billion. The annual decline was due to the weak industrial end markets.
Revenues from Technology Solutions (TS) fell 15.1% from the year-ago quarter to $2.21 billion. The segmental revenues were slightly below management's guidance range of $2.25 billion - $2.55 billion. Low demand from the EMEA region also continues to pervasively affect the segment's yields.
Gross margin in the quarter was 11.7%, which remained flat year over year, but slightly down from 12.0% in the previous quarter. Excluding restructuring, integration and other charges, adjusted operating margin was 2.3% versus 3.5% in the year-ago quarter and 3.7% in the previous quarter. The year-over-year drop was mainly due to the revenue weakness experienced by the TS segment.
EM operating margin came in at 4.0% compared to 5.0% in the year-ago quarter and 5.1% in the previous quarter. The lower gross margin in the Western regions and a geographic mix shift towards low-margin Asian region adversely impacted the segment's margin during the quarter.
TS operating margins decreased to 1.6% from 2.5% in the year-ago quarter and 2.7% in the fourth quarter of fiscal 2012. The annual decline was mainly due to the fall in the EMEA region margin.
Balance Sheet and Cash flow
Avnet ended the year with cash and cash equivalents of $1.0 billion, which remained flat year over year. As of September 29, 2012, long-term debt was $1.4 billion compared to $1.3 billion at the end of the previous quarter.
During the quarter, the company generated $81 million of cash from operating activities. Capital spending in the quarter amounted to $24.4 million.
The company has repurchased 4.17 million shares at an average price of $31 during the first quarter of fiscal 2013. Since August 2011, Avnet has bought-back 15.44 million shares worth $456.6 million.
For the second quarter of fiscal 2013, the company projects consolidated sales in the range of $5.95 billion and $6.65 billion. Avnet projects that EM sales and TS sales will be in the range of $3.35 billion to $3.65 billion and $2.60 billion and $3.00 billion, respectively. Adjusted EPS (excluding restructuring charges, acquisitions charges and post-closing integration activities) is likely to be within 79 cents to 89 cents per share along with a tax rate of 27% - 31%.