avnet analyst day 2010 presentation 3 financial report

Accelerating Your Success™1 Accelerating Your Success™

Avnet Analyst Day 2010

Performance & Potential

Avnet, Inc.

December 15, 2010


Financial Report

Ray Sadowski

Chief Financial Officer


Agenda

• Historical Results

– Performance through the recession

• Strong Financial Position

• Long-term Business Model

• Acquisition Integration Update

Historical Results


$12.7

$10.6

$8.9$9.5

$10.8

$12.6

$14.8

$17.0$17.9

$16.7

$22.8

$5

$7

$9

$11

$13

$15

$17

$19

$21

$23

$25

CY00 CY01 CY02 CY03 CY04 CY05 CY06 CY07 CY08 CY09 CY10*

Avnet, Inc. Revenue

Avnet’s Journey – The Last Decade

($ in billions)

6 years of growth with

revenue peaking in CY ‘08

Tech Bubble

downturn

Less

severe

downturn

Two 100 Year Floods in one decade; yet steady progress

Record

revenue

in 2010

* CY10 is an estimate based upon three completed quarters and guidance for Q4CY10


$1.90

$1.54

$1.23 $1.24

$1.45

$1.63

$1.92

$2.21

$2.31

$1.96

$2.7215.0%

14.6%13.8%

13.1%13.5%

12.9% 13.0% 13.0% 12.9%

11.8% 11.9%

0%

2%

4%

6%

8%

10%

12%

14%

16%

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00


GP $ GP % of Sales

Avnet, Inc. – Gross Profit $ and %


Margins impacted by geographic and business mix($ in billions)


$650

$238

$101

$166

$317

$377

$599

$750

$694

$443

$865

5.1%

2.3%

1.1%

1.8%

2.9%3.0%

4.1%

4.4%

3.9%

2.7%

3.8%

0%

1%

2%

3%

4%

5%

6%

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900


Op Income $ Op Income %

Significant operating leverage during periods of growth:

Demonstrated during CY 03-07 growth period

Starting a new trend in CY 10

Avnet, Inc. – Operating Income $ and %


Note: Excludes restructuring, integration and other charges

($ in millions)


Avnet, Inc. – EPS

$2.49

$0.43

$0.06

$0.48

$1.40 $1.50

$2.32

$3.12

$2.90

$1.72

$3.64

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00


Steep decline in profits

tied to significant

revenue loss

Y/Y more than doubled

to record level

Excludes restructuring, integration and other charges


Dramatic trough to

trough performance


23.2%

30.0%

24.1%

18.6% 19.0%

17.0% 17.0% 16.8% 17.1%

14.6%13.4%

4.3 3.34.2

5.4 5.3

5.9 5.9 6.0 5.9

6.9

7.5

5.2

4.3

5.3

7.26.9

7.67.9

8.2 8.1

9.1

9.7

0

2

4

6

8

10

12

0%

5%

10%

15%

20%

25%

30%

35%


WC

Ve

loc

ity

& In

ve

nto

ry T

urn

s

WC

% o

f S

ale

s

Average WC % of Sales WC Velocity Inventory Turns


Avnet, Inc. - Working Capital Velocity & Inventory Turns

Significantly higher velocity due to VBM and geographic and business mix


VBM Improved ROWC

22.1%

7.5%

4.7%

9.4%

15.5%

17.5%

23.9%

26.4%

22.8%

18.2%

28.4%

0%

5%

10%

15%

20%

25%

30%



ROWC declined

due to the dramatic

cycle downturn

ROWC moves to

record level

following recession

VBM launched

early 2001 ROWC improved as

VBM combined with

organic growth + M&A

ROWC reached

higher peak



8.5%

2.8%

1.8%

4.0%

7.5% 7.8%

10.3%

11.9%

10.0% 10.0%

15.6%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%


VBM Improved ROCE


ROCE declined due

to the dramatic

cycle downturn

VBM launched

early 2001

New ROCE target

established in 2009

14% - 16%

ROCE improved as

VBM combined with

organic growth + M&A


New ROCE target range Previous ROCE target

Strong Financial

Position


VBM Cash Flow from Operations

$168 $204$393

$499$289

$410$173

$200

$206$166

$20

$142$121

-$423

$126

-$211

$809

-$582

-$600

-$400

-$200

$0

$200

$400

$600

$800

$1,000

$1,200

FY05 FY06 FY07 FY08 FY09 FY10

Net Income Non Cash Items Working Capital

$462m $725m $454m $1,118m$-19m

Annual Totals

$-30m($ in millions)


$2.9 Billion of cumulative cash from net income +

non-cash Items over the past 6 years

VBM Cash Flow from Operations

$168 $204$393

$499$289

$410$173

$200

$206$166

$20

$142$121

-$423

$126

-$211

$809

-$582

-$600

-$400

-$200

$0

$200

$400

$600

$800

$1,000

$1,200


Net Income Non Cash Items Working Capital

($ in millions)


Strengthened Balance Sheet

Key Credit Statistics

$1,244 $1,235 $1,209 $1,225

$970

$1,280

$85.1

$96.5

$77.2 $72.3 $66.5 $61.7

$0

$50

$100

$150

$200

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400


Total Debt Interest Expense

(5.8%)

(7.1%)(6.5%)

(Effective interest rate noted above line)

(5.6%)(5.0%)

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%

(5.4%)

($ in millions)


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 growth


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 buyback


Liquidity Framework

• 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 $1.4B

Low High

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 velocity


Long-Term Business Model

*Note: ROCE goal of 12.5% = ~16.0% after impairment of goodwill; items above

do not include restructuring, integration or other charges.

No change from previous model

FY09 Actual FY10 Actual 3 Year Goal

ROCE

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 - 7.5

Operating 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%


55% Drop Through

60% Drop Through

65% Drop Through

5%

10%

15%

20%

25%

5% 6% 7% 8% 9% 10%

Op

era

tin

g In

co

me

Gro

wth

Gross Profit Growth

Operating Leverage

Value Creating M&A


Revenue Seasonality

Numbers provided are estimates for a

typical quarter and can vary based

upon several factors including but not

limited to:

– Economic/Market conditions

– M&A activity

– End of fiscal calendar

– Foreign currency exchange rates

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%

20%

22%

24%

26%

28%

30%

Sept Dec Mar Jun

EM TS AVT

Percent of Annual Revenue

Acquisition

Integration Update


Bell Integration Update

Note: Full synergies goal of $60 million annualized ($15 million per quarter) is expected to be achieved

as we enter fiscal year 2012.

• 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

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

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

($ in millions)

($ in millions)


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 value

avnet analyst day 2010 presentation 3 financial report

Sports

success note

completed quarters

op income

operating income

billions avnet

organic growth

years of growth

roce improved asvbm