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Avnet Analyst Day 2010 Presentation 3 Financial Report
 

Avnet Analyst Day 2010 Presentation 3 Financial Report

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Avnet, Inc. 2010 Analyst Day & 50th Anniversary Celebration: Dec 15, 2010 ...

Avnet, Inc. 2010 Analyst Day & 50th Anniversary Celebration: Dec 15, 2010

Presenters included: Roy Vallee, chairman and chief executive officer; Rick Hamada, president and chief operating officer; Ray Sadowski, senior vice president and chief financial officer; Harley Feldberg, president, Electronics Marketing; and Phil Gallagher, president, Technology Solutions.

Following the analyst day event, Avnet commemorated its 50th anniversary on the New York Stock Exchange by ringing the closing bell.

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    Avnet Analyst Day 2010 Presentation 3 Financial Report Avnet Analyst Day 2010 Presentation 3 Financial Report Presentation Transcript

    • Avnet Analyst Day 2010 Performance & Potential Avnet, Inc. December 15, 20101 Accelerating Your Success™
    • Financial Report Ray Sadowski Chief Financial Officer2 Accelerating Your Success™
    • Agenda • Historical Results – Performance through the recession • Strong Financial Position • Long-term Business Model • Acquisition Integration Update3 Accelerating Your Success™
    • Historical Results
    • Avnet’s Journey – The Last Decade Two 100 Year Floods in one decade; yet steady progress ($ in billions) Avnet, Inc. Revenue Record Less revenue $25 severe in 2010 downturn $22.8 $23 $21 6 years of growth with $19 revenue peaking in CY ‘08 $17.9 $17.0 $16.7 $17 Tech Bubble downturn $14.8 $15 $13 $12.7 $12.6 $10.6 $10.8 $11 $9.5 $8.9 $9 $7 $5 CY00 CY01 CY02 CY03 CY04 CY05 CY06 CY07 CY08 CY09 CY10* 5 Accelerating Your Success™ * CY10 is an estimate based upon three completed quarters and guidance for Q4CY10
    • Avnet, Inc. – Gross Profit $ and %($ in billions) Margins impacted by geographic and business mix $3.00 15.0% 16% 14.6% $2.72 13.8% 13.5% 13.0% 14% 13.1% 12.9% 13.0% 12.9% $2.50 $2.31 11.8% 11.9% $2.21 12% $1.92 $1.96 $2.00 $1.90 10% $1.63 $1.54 $1.50 $1.45 8% $1.23 $1.24 6% $1.00 4% $0.50 2% $0.00 0% CY00 CY01 CY02 CY03 CY04 CY05 CY06 CY07 CY08 CY09 CY10* GP $ GP % of Sales 6 Accelerating Your Success™ * CY10 is an estimate based upon three completed quarters and guidance for Q4CY10
    • Avnet, Inc. – Operating Income $ and %($ in millions) Significant operating leverage during periods of growth: Demonstrated during CY 03-07 growth period $900 $865 6% Starting a new trend in CY 10 $800 5.1% $750 5% $694 $700 $650 $599 3.8% $600 4.4% 4% 4.1% $500 3.0% 3.9% 2.9% $443 3% $400 2.3% $377 2.7% $317 1.8% $300 2% $238 1.1% $200 $166 1% $101 $100 $0 0% CY00 CY01 CY02 CY03 CY04 CY05 CY06 CY07 CY08 CY09 CY10* Op Income $ Op Income % 7 Accelerating Your Success™ Note: Excludes restructuring, integration and other charges * CY10 is an estimate based upon three completed quarters and guidance for Q4CY10
    • Avnet, Inc. – EPS Y/Y more than doubled to record level $4.00 Dramatic trough to trough performance $3.64 Steep decline in profits $3.50 tied to significant revenue loss $3.12 $3.00 $2.90 $2.49 $2.50 $2.32 $2.00 $1.72 $1.50 $1.50 $1.40 $1.00 $0.48 $0.50 $0.43 $0.06 $0.00 CY00 CY01 CY02 CY03 CY04 CY05 CY06 CY07 CY08 CY09 CY10* 8 Accelerating Your Success™ Excludes restructuring, integration and other charges * CY10 is an estimate based upon three completed quarters and guidance for Q4CY10
    • Avnet, Inc. - Working Capital Velocity & Inventory Turns Significantly higher velocity due to VBM and geographic and business mix 35% 12 30% 9.7 30.0% 10 9.1 WC Velocity & Inventory Turns 25% 8.2 8.1 7.9 7.6 7.5 8 24.1% 7.2 WC % of Sales 23.2% 6.9 6.9 20% 5.9 5.9 6.0 5.9 5.2 5.3 18.6% 19.0% 6 15% 17.0% 17.0% 16.8% 17.1% 4.3 5.4 5.3 14.6% 3.3 13.4% 4 4.3 4.2 10% 2 5% 0% 0 CY00 CY01 CY02 CY03 CY04 CY05 CY06 CY07 CY08 CY09 CY10* Average WC % of Sales WC Velocity Inventory Turns 9 Accelerating Your Success™ * CY10 is an estimate based upon three completed quarters and guidance for Q4CY10
    • VBM Improved ROWC ROWC moves to record level ROWC reached following recession higher peak 30% 28.4% VBM launched early 2001 ROWC improved as 26.4% VBM combined with 25% organic growth + M&A 23.9% 22.1% 22.8% 20% ROWC declined 18.2% due to the dramatic 17.5% cycle downturn 15.5% 15% 10% 9.4% 7.5% 4.7% 5% 0% CY00 CY01 CY02 CY03 CY04 CY05 CY06 CY07 CY08 CY09 CY10*10 Accelerating Your Success™ Note: Excludes restructuring, integration and other charges * CY10 is an estimate based upon three completed quarters and guidance for Q4CY10
    • VBM Improved ROCE New ROCE target established in 2009 14% - 16% 18% ROCE improved as VBM combined with 16% organic growth + M&A 15.6% 14% 11.9% 12% VBM launched early 2001 10.3% 10.0% 10.0% 10% 8.5% ROCE declined due 7.5% 7.8% 8% to the dramatic cycle downturn 6% 4.0% 4% 2.8% 1.8% 2% 0% CY00 CY01 CY02 CY03 CY04 CY05 CY06 CY07 CY08 CY09 CY10* Previous ROCE target New ROCE target range11 Accelerating Your Success™ Note: Excludes restructuring, integration and other charges * CY10 is an estimate based upon three completed quarters and guidance for Q4CY10
    • Strong Financial Position
    • VBM Cash Flow from Operations($ in millions) Annual Totals $462m $-19m $725m $454m $1,118m $-30m $1,200 $1,000 $800 $809 $126 $600 $166 $206 $142 $400 $121 $200 $20 $173 $499 $200 $393 $410 $204 $289 $168 $0 -$211 -$200 -$423 -$582 -$400 -$600 FY05 FY06 FY07 FY08 FY09 FY10 Net Income Non Cash Items Working Capital13 Accelerating Your Success™
    • VBM Cash Flow from Operations($ in millions) $2.9 Billion of cumulative cash from net income + non-cash Items over the past 6 years $1,200 $1,000 $800 $809 $126 $600 $166 $206 $142 $400 $121 $200 $20 $173 $499 $200 $393 $410 $204 $289 $168 $0 -$211 -$200 -$423 -$582 -$400 -$600 FY05 FY06 FY07 FY08 FY09 FY10 Net Income Non Cash Items Working Capital14 Accelerating Your Success™
    • Strengthened Balance Sheet ($ in millions) $1,400 $1,280 $200 $1,244 $1,235 $1,209 $1,225 $1,200 $970 $150 $1,000 (7.1%) (6.5%) $800 (5.8%) (5.6%) $100 $600 (5.0%) (5.4%) $96.5 $400 $85.1 $77.2 $72.3 $66.5 $61.7 $50 $200 $0 $0 FY05 FY06 FY07 FY08 FY09 FY10 Total Debt Interest Expense (Effective interest rate noted above line) Key Credit Statistics 2005 2006 2007 2008 2009 2010 Debt to EBITDA 3.2 2.1 1.6 1.5 1.7 1.7 EBITDA Coverage 4.5 6.1 9.9 11.5 8.6 12.1 Debt to Capital 37.2% 30.4% 26.2% 22.9% 26.0% 29.8%15 Accelerating Your Success™
    • Financing Strategic Objectives• Maintain Avnet’s Investment Grade credit ratings – Cost of Debt Capital – Access to Capital – Trading Partner Relationships – Competitive Position• Optimize Avnet’s cost of capital• Ensure adequate availability of capital / liquidity to meet the needs of the business – Fund organic growth – Fund M&A growth16 Accelerating Your Success™
    • Capital Allocation Strategy • Disciplined internal resource allocation • Reinvest cash generation for growth - primarily through value creating M&A = ROCE ≥ 12.5% – Continue to believe the best use of cash is to fund future growth • Return “Excess” cash to shareholders when appropriate – Dividends (perpetual) – Stock buyback17 Accelerating Your Success™
    • Liquidity Framework Low High • Normal Float $200M $300M • Working Capital Expansion $200M $500M • Debt Due Within 3 Years -- -- • Committed M&A $100M $100M • Potential M&A $200M $500M • Total $700M $1.4B18 Accelerating Your Success™
    • Long-Term Business Model
    • Long-term Model Philosophy• Remain committed to achieving ROCE of 14% – 16% – Adjusted for impairment of goodwill on legacy businesses = ~16% – Incremental investments including acquisitions will be held to a minimum 12.5% ROCE threshold• Top operational goal is generating 30% ROWC at the enterprise level – Varies by group and region due to different tax rates• Shift of business mix towards Asia and TS, including growth in Latin America, could negatively impact operating margins• These margin declines should be positively offset by higher asset velocity20 Accelerating Your Success™
    • Long-Term Business Model No change from previous model FY09 Actual FY10 Actual 3 Year GoalROCE Avnet 8.7% 14.7% 14 - 16%*ROWC Avnet 17.8% 27.0% 30.0%Working Capital Velocity Avnet 5.9 7.8 6.7 - 7.5Operating Income Margin Electronics Marketing 3.9% 4.5% 5.0 - 5.5% Technology Solutions 2.9% 3.1% 3.4 - 3.9% Avnet 3.0% 3.5% 4.0 - 4.5% *Note: ROCE goal of 12.5% = ~16.0% after impairment of goodwill; items above do not include restructuring, integration or other charges.21 Accelerating Your Success™
    • Operating Leverage 25% Value Creating M&A Operating Income Growth 20% 65% Drop Through 60% Drop Through 55% Drop Through 15% 10% 5% 5% 6% 7% 8% 9% 10% Gross Profit Growth22 Accelerating Your Success™
    • Revenue Seasonality Sequential Revenue Growth Sept Dec Mar Jun EM +1% to -3% 0% to -3% +4% to +7% 0% to +4% TS -1% to -5% +22% to +28% -16% to -20% +3% to +7% Avnet 0% to -4% +8% to +12% -4% to -7% +1% to +5% Percent of Annual Revenue30% Numbers provided are estimates for a28% typical quarter and can vary based26% upon several factors including but not limited to:24% – Economic/Market conditions – M&A activity22% – End of fiscal calendar20% – Foreign currency exchange rates Sept Dec Mar Jun EM TS AVT 23 Accelerating Your Success™
    • AcquisitionIntegration Update
    • Bell Integration Update• Retained all key personnel, suppliers and customers• Converted Bell’s Americas business to Avnet’s IT system• Comfortable with synergy target of at least $60M ($ in millions) Q1 Q2 Q3 Q4 % Complete 51% 72% 86% 100% Cumulative annualized synergies @ end of quarter $30.4 $43.1 $51.6 $60.0 Incremental annualized synergies @ end of quarter $30.4 $12.7 $8.5 $8.4 ($ in millions) Q1 Q2 Q3 Q4 Synergies impacting current quarter $6.3 $9.2 $11.8 $13.9 Year to date synergies realized $6.3 $15.5 $27.3 $41.2 Note: Full synergies goal of $60 million annualized ($15 million per quarter) is expected to be achieved as we enter fiscal year 2012.25 Accelerating Your Success™
    • Summary• Took advantage of the V-shaped recovery to deliver record results• Long term priorities continue to focus on driving profitable growth and increasing Economic Profit $ – ROWC > 30% – ROCE = 14 – 16%; incremental > 12.5%• Demonstrating strong operating leverage• Strong balance sheet and liquidity – Investment grade credit statistics – Higher EPS and growth potential• Proven mgm’t team; growing long-term shareholder value26 Accelerating Your Success™
    • Q&A