Avnet, Inc. (AVT)

AVT 
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Avnet Inc. (AVT)

Q4 2008 Earnings Call

August 6, 2008 2:00 pm ET

Executives

Vincent Keenan - Vice President of Investor Relations

Roy Vallee - Chairman of the Board and Chief Executive Officer

Raymond Sadowski - Chief Financial Officer

Rick Hamada - Chief Operating Officer

Harley Feldberg - President of Electronics Marketing

John Paget - President of Technologies Solutions

Analysts

William Stein - Credit Suisse

Ingrid Aja - Merrill Lynch

Brian Alexandra - Raymond James

Jim Suva - Citigroup

Carter Shoop - Deutsche Bank

Matt Sheerin - Thomas Weisel Partners

[Brandon Furlong] - [Marriot Tavec]

Sean Conner - FAS Advisors

Presentation

Operator

Please stand by our presentation will now begin. I would now like to turn the floor over to Vince Keenan, Avnet's Vice President of Investor Relations.

Vincent Keenan - Vice President of Investor Relations

Good afternoon and welcome to Avnet's Fourth Quarter Fiscal Yearend 2008 Corporate Update. If you are listening by telephone today and have not accessed the slides that accompany this presentation, please go to our website, www.ir.avnet.com and click on the icon announcing today’s events.

In addition to disclosing financial results that are determined in accordance with Generally Accepted Accounting Principals, or GAAP, the company also discloses non-GAAP results of operations that exclude certain items. Reconciliations of the company’s analysis of results to GAAP can be found in the Form 8-K filed with the SEC today and with several of the slides in this presentation and on Avnet's Investor Relations website.

As we provide the highlights for our fourth quarter and fiscal yearend 2008, please note that we had excluded restructuring, integration and other items from both the current and prior year period in the accompanying presentation and slides. Additionally in discussing pro forma sales or organic growth prior periods are adjusted to include acquisition.

Before we get started with the presentation from Avnet management, I would like to review Avnet's Safe Harbor statement.

This presentation contains certain forward-looking statements which are statements addressing future financial and operating results of Avnet. Listed on this slide are several factors that could cause actual results to differ materially from those described in the forward-looking statements. More detailed information about these and other factors are set forth in Avnet's filings with the SEC.

In just a few moments, Roy Vallee, Avnet's Chairman and CEO, will provide Avnet's fourth quarter and fiscal yearend 2008 highlights. Following Roy, Ray Sadowski, Chief Financial Officer of Avnet will review the company’s financial performance during the quarter and provide first quarter fiscal 2009 guidance, after which a Q&A will follow.

Also here today to take any questions you may have with related to Avnet’s business operations is Rick Hamada, Avnet’s Chief Operating Officer, Harley Feldberg President of Electronics Marketing and John Paget, President of Technologies Solutions.

With that, let me introduce Mr. Roy Vallee to discuss Avnet’s fourth quarter and fiscal year 2008 business highlights.

Roy Vallee - Chairman of the Board and Chief Executive Officer

Thank you Vince and hello everyone, thank you all for taking the time to be with us and for your interest in Avnet. Fiscal year 2008 was more of a challenge than we anticipated when we initially established our plans and budgets in the June 2007 timeframe. But August, they have all publicized issues about housing, credit and all began to spread throughout the economy and we begin to experience slower growth in our end markets. While slower organic growth has had a negative impact on our progress toward our long-term financial goals. We remained focused on driving return on capital employed to 12.5 to 14%. As we have stated many times, our Valued Based Management or VBM discipline is embodied by this key metric, which when coupled with growth is a proxy for shareholder value creation.

Similar to the mix of data points we read about on the economy, the details of our results are also mixed and raises the question, is the glass half empty or half full. Now that we have closed the books on this fiscal year, we can see that we missed our sales budget, earnings per share finished below our plan, and operating profit margin was down year-over-year. Well, that sounds like a glass half empty kind of year.

Putting things in perspective, however, we believe we can also view fiscal year 2008 as a glass half full year. We delivered record sales and EPS for the fiscal year, increased working capital velocity and generated a significant amount of cash from operations. As a result of the performance of our entire global team, Avnet was able to increase return on capital employed by 7 basis points at the enterprise level and grow economic profit dollars despite the well publicized difficult environment. This was accomplished through a disciplined VBM approach to managing our operations and making value-creating acquisitions. That sounds like a glass half full kind of year.

In addition to the consistent focus on our growth and margins, VBM requires that we pay similar attention to the management of working capital. In fiscal 2008, this was especially important as the slowdown in organic growth and business mix shifts reduced our operating income margin. This meant that working capital velocity had to improve. Our team did an excellent job reacting real time to market conditions and as a result improved working capital velocity, reduced our cash cycle by two days and generated more than $450 million of cash from operations. This performance further strengthened our investment grade balance sheet thereby providing the financial flexibility for us to continue investing in value-creating M&A to supplement our growth and enhance our competitiveness.

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