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November 22, 2011
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Avnet, Inc. (AVT) recently announced today that it entered into a five-year $1.0 billion senior unsecured revolving credit facility.
In addition, the facility will include a $250 million accordion feature enabling Avnet to increase its borrowing capacity to upto $1.25 billion, subject to certain conditions.
The facility will mature on November 18, 2016. The facility replaces the existing facility. Avnet has a five-year $500.0 million unsecured revolving credit facility with a syndicate of banks that expires in September 2012. Avnet had $61.5 million in borrowings under this facility at the end of the first quarter of 2012.
Management stated that the new expanded credit facility will increase the company’s liquidity at attractive terms and conditions. Backed up the new facility and strong balance sheet, Avnet can pursue strategic growth objectives.
Last month, Avnet reported a net income of $139.0 million or $0.90 per diluted share in the first quarter of fiscal 2012 compared to a net income of $238.1 million or $1.54 per share in the fourth quarter of fiscal 2011 and a net income of $138.2 million or $0.90 in the year-ago quarter.
The net reported in the quarter missed the Zacks Consensus Estimate by a penny and was at the low-end of management’s guidance range of $0.90 -$0.98.
Avnet reported sales of $6,426.0 million, down 3.9% from a year-ago and down 7.0% sequentially. Revenues were within management’s guidance range of $6.25 billion - $6.85 billion.
On a segmental basis, revenues from Electronics Marketing (EM) increased 5.4% from the year-ago quarter to $3.82 billion, within management’s guidance range of $3.75 billion - $4.05 billion.
Revenues from Technology Solutions (TS) improved 1.9% from the year-ago quarter to $2.61 billion, ahead of management’s guidance range of $2.5 billion - $2.85 billion.
Gross margin declined to 11.7% from 12.0% in the previous quarter but was flat sequentially. Excluding restructuring, integration and other charges, adjusted operating margin was 3.5% compared to 3.9% in the previous quarter but was flat sequentially.
During the quarter, Avnet generated net cash of $204 million from operations and used $40.0 million in capital expenditures. Avnet ended the quarter with cash and cash equivalents of $622.4 million, down from $675.3 million at the end of the previous quarter.
In August, Avnet's Board of Directors approved a $500 million share repurchase program. During the quarter, Avnet repurchased 3.45 million shares for an aggregate cost of $90.9 million.
Going forward, Avnet projects consolidated sales in the range of $6.45 billion and $7.15 billion in the second quarter of fiscal 2012, the company Avnet expects EM sales and TS sales to be in the range of $3.45 billion - $3.75 billion and $3.0 billion - $3.40 billion, respectively. Adjusted EPS is expected in the range of $1.01 - $1.09.
We continue to maintain a Neutral recommendation on Avnet. Our recommendation is supported by a Zacks #3 Rank, which translates into a short-term rating of Hold.
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