AVNET INC - FORM 8-K - EX-99.2 - March 3, 2017

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EX-99.1 - EX-99.1 - AVNET INCavt-20170303ex9915ef59e.htm
EX-10.2 - EX-10.2 - AVNET INCavt-20170303ex102bb74c1.htm
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EX-2.2 - EX-2.2 - AVNET INCavt-20170303ex2234c3e56.htm
8-K - 8-K - AVNET INCavt-20170303x8k.htm

 

Exhibit 99.2

 

UNAUDITED PRO FORMA FINANCIAL INFORMATION

 

On February 27, 2017, Avnet, Inc. (the “Company”) completed the previously announced divestiture of its Technology Solutions operating group (the “TS Business”) to Tech Data Corporation (“Tech Data”) for approximately $2.4 billion in cash, which excludes net working capital and other contractual sales price adjustments, and 2.8 million shares of Tech Data common stock which is valued at $247.2 million using the closing price on February 27, 2017.

 

The following unaudited pro forma condensed consolidated balance sheet as of December 31, 2016, reflects the Company’s financial position as if the sale of the TS Business had occurred on that date. The following unaudited pro forma condensed consolidated statements of operations for the six months ended December 31, 2016, and the three fiscal years ended July 2, 2016, June 27, 2015, and June 28, 2014, reflect the Company’s results of operations as if the sale of the TS Business had occurred on June 30, 2013. The unaudited pro forma condensed consolidated financial statements do not purport to represent what the actual results of operations or financial position would have been had the divestiture occurred on the dates assumed, nor are they necessarily indicative of future results of operations or financial position.

 

The unaudited pro forma condensed consolidated financial statements and the accompanying notes are based upon and should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended July 2, 2016 filed with the SEC on August 12, 2016, and the Quarterly Report on Form 10-Q for the period ended December 31, 2016 filed with the SEC on January 30, 2017.

 

The unaudited pro forma condensed consolidated financial statements are presented based on currently available information and reflect certain estimates and assumptions, which are described in the accompanying notes and which management believes are reasonable. The actual results may differ materially from the estimates and assumptions within the accompanying unaudited pro forma condensed consolidated financial statements as a result of several factors, including the completion of the final net working capital adjustments due to changes in net working capital between the pro forma assumptions and the actual closing net working capital at the date of the divestiture and the determination of the final income tax expense from the divestiture.

 

 

 

 

AVNET, INC.

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2016

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

As Previously

    

Pro Forma

    

 

    

Total

 

 

 

Reported

 

Adjustments

 

Note

 

Pro Forma

 

 

 

(Thousands, except share amounts)

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$
1,270,142

 

$
2,260,130

 

2b

 

$
3,530,272

 

Marketable securities

 

 

 —

 

 
247,232

 

2c

 

 
247,232

 

Receivables, net

 

 
2,996,110

 

 

 —

 

 

 

 
2,996,110

 

Inventories

 

 
2,697,796

 

 

 —

 

 

 

 
2,697,796

 

Prepaid and other current assets

 

 
59,564

 

 

 —

 

 

 

 
59,564

 

Assets held for sale

 

 
4,053,487

 

 
(4,053,487)

 

2a

 

 

 —

 

Total current assets

 

 
11,077,099

 

 
(1,546,125)

 

 

 

 
9,530,974

 

Property, plant and equipment, net

 

 
565,108

 

 

 —

 

 

 

 
565,108

 

Goodwill

 

 
1,098,471

 

 

 —

 

 

 

 
1,098,471

 

Intangible assets, net

 

 
296,058

 

 

 —

 

 

 

 
296,058

 

Other assets

 

 
219,259

 

 

 —

 

 

 

 
219,259

 

Total assets

 

$
13,255,995

 

$
(1,546,125)

 

 

 

$
11,709,870

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Short-term debt

 

$
246,729

 

$
(86,147)

 

2d

 

$
160,582

 

Accounts payable

 

 
1,774,021

 

 

 —

 

 

 

 
1,774,021

 

Accrued expenses and other

 

 
456,397

 

 
370,000

 

2e

 

 
826,397

 

Liabilities held for sale

 

 
2,332,646

 

 
(2,332,646)

 

2a

 

 

 —

 

Total current liabilities

 

 
4,809,793

 

 
(2,048,793)

 

 

 

 
2,761,000

 

Long-term debt

 

 
3,382,431

 

 

 —

 

 

 

 
3,382,431

 

Other liabilities

 

 
351,909

 

 

 —

 

 

 

 
351,909

 

Total liabilities

 

 
8,544,133

 

 
(2,048,793)

 

 

 

 
6,495,340

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 
4,711,862

 

 
502,668

 

2d

 

 
5,214,530

 

Total liabilities and shareholders’ equity

 

$
13,255,995

 

$
(1,546,125)

 

 

 

$
11,709,870

 

See notes to unaudited pro forma condensed consolidated financial statements

 

 

 

AVNET, INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2016

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

As Previously

    

Pro Forma

    

 

    

 

    

 

 

Reported

 

Adjustments

 

Note

 

Pro Forma

 

 

 

(Thousands, except per share amounts)

 

Sales

 

$
8,391,663

 

$

 —

 

 

 

$
8,391,663

 

Cost of sales

 

 
7,282,823

 

 

 —

 

 

 

 
7,282,823

 

Gross profit

 

 
1,108,840

 

 

 —

 

 

 

 
1,108,840

 

Selling, general and administrative expenses

 

 
795,227

 

 

 —

 

 

 

 
795,227

 

Restructuring, integration and other expenses

 

 
59,869

 

 

 —

 

 

 

 
59,869

 

Operating income

 

 
253,744

 

 

 —

 

 

 

 
253,744

 

Other expense, net

 

 
(50,248)

 

 

 —

 

 

 

 
(50,248)

 

Interest expense

 

 
(53,984)

 

 

 —

 

 

 

 
(53,984)

 

Income from continuing operations before income taxes

 

 
149,512

 

 

 —

 

 

 

 
149,512

 

Income tax expense

 

 
49,359

 

 

 —

 

 

 

 
49,359

 

Income from continuing operations

 

 
100,153

 

 

 —

 

 

 

 
100,153

 

Income from discontinued operations

 

 
71,908

 

 
(71,908)

 

3

 

 

 —

 

Net income

 

$
172,061

 

$
(71,908)

 

 

 

$
100,153

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share - basic:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$
0.78

 

$

 —

 

 

 

$
0.78

 

Discontinued operations

 

 
0.56

 

 
(0.56)

 

3

 

 

 —

 

Net income per share - basic

 

$
1.34

 

 
(0.56)

 

 

 

 
0.78

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share - basic:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$
0.77

 

$

 —

 

 

 

$
0.77

 

Discontinued operations

 

 
0.55

 

 
(0.55)

 

3

 

 

 —

 

Net income per share - basic

 

$
1.32

 

 
(0.55)

 

 

 

 
0.77

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used to compute earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 
127,716

 

 

 —

 

 

 

 
127,716

 

Diluted

 

 
130,055

 

 

 —

 

 

 

 
130,055

 

Cash dividends paid per common share

 

$
0.34

 

$

 —

 

 

 

$
0.34

 

 

See notes to unaudited pro forma condensed consolidated financial statements

 

 

 

AVNET, INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED JULY 2, 2016

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

    

 

    

 

 

As Previously

 

Pro Forma

 

 

 

 

 

 

Reported

 

Adjustments 4

 

 

Pro Forma

 

 

 

(Thousands, except per share amounts)

 

Sales

 

$
26,219,279

 

$
(9,478,682)

 

 

$
16,740,597

 

Cost of sales

 

 
23,181,768

 

 
(8,519,117)

 

 

 
14,662,651

 

Gross profit

 

 
3,037,511

 

 
(959,565)

 

 

 
2,077,946

 

Selling, general and administrative expenses

 

 
2,170,524

 

 
(710,251)

 

 

 
1,460,273

 

Restructuring, integration and other expenses

 

 
79,318

 

 
(34,557)

 

 

 
44,761

 

Operating income

 

 
787,669

 

 
(214,757)

 

 

 
572,912

 

Other expense, net

 

 
(18,105)

 

 
15,115

 

 

 
(2,990)

 

Interest expense

 

 
(99,055)

 

 
7,147

 

 

 
(91,908)

 

Income before income taxes

 

 
670,509

 

 
(192,495)

 

 

 
478,014

 

Income tax expense

 

 
163,978

 

 
(76,874)

 

 

 
87,104

 

Net income

 

$
506,531

 

$
(115,621)

 

 

$
390,910

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$
3.87

 

$
(0.88)

 

 

$
2.99

 

Diluted

 

$
3.80

 

$
(0.87)

 

 

$
2.93

 

Shares used to compute earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 
130,858

 

 

 —

 

 

 
130,858

 

Diluted

 

 
133,173

 

 

 —

 

 

 
133,173

 

Cash dividends paid per common share

 

$
0.68

 

$

 —

 

 

$
0.68

 

 

See notes to unaudited pro forma condensed consolidated financial statements

 

 

 

 

 

AVNET, INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED JUNE 27, 2015

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

    

 

    

 

 

As Previously

 

Pro Forma

 

 

 

 

 

 

Reported

 

Adjustments 4

 

 

Pro Forma

 

 

 

(Thousands, except per share amounts)

 

Sales

 

$
27,924,657

 

$
(10,236,449)

 

 

$
17,688,208

 

Cost of sales

 

 
24,731,537

 

 
(9,255,978)

 

 

 
15,475,559

 

Gross profit

 

 
3,193,120

 

 
(980,471)

 

 

 
2,212,649

 

Selling, general and administrative expenses

 

 
2,274,642

 

 
(770,507)

 

 

 
1,504,135

 

Restructuring, integration and other expenses

 

 
90,805

 

 
(36,306)

 

 

 
54,499

 

Operating income

 

 
827,673

 

 
(173,658)

 

 

 
654,015

 

Other expense, net

 

 
(19,043)

 

 
23,333

 

 

 
4,290

 

Interest expense

 

 
(95,665)

 

 
8,585

 

 

 
(87,080)

 

Income before income taxes

 

 
712,965

 

 
(141,740)

 

 

 
571,225

 

Income tax expense

 

 
141,052

 

 
(54,916)

 

 

 
86,136

 

Net income

 

$
571,913

 

$
(86,824)

 

 

$
485,089

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$
4.18

 

$
(0.64)

 

 

$
3.54

 

Diluted

 

$
4.12

 

$
(0.63)

 

 

$
3.49

 

Shares used to compute earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 
136,688

 

 

 —

 

 

 
136,688

 

Diluted

 

 
138,791

 

 

 —

 

 

 
138,791

 

Cash dividends paid per common share

 

$
0.64

 

$

 —

 

 

$
0.64

 

 

See notes to unaudited pro forma condensed consolidated financial statements

 

 

 

 

AVNET, INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED JUNE 28, 2014

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

    

 

    

 

 

As Previously

 

Pro Forma

 

 

 

 

 

 

Reported

 

Adjustments 4

 

 

Pro Forma

 

 

 

(Thousands, except per share amounts)

 

Sales

 

$
27,499,654

 

$
(10,586,258)

 

 

$
16,913,396

 

Cost of sales

 

 
24,273,923

 

 
(9,571,018)

 

 

 
14,702,905

 

Gross profit

 

 
3,225,731

 

 
(1,015,240)

 

 

 
2,210,491

 

Selling, general and administrative expenses

 

 
2,341,168

 

 
(798,835)

 

 

 
1,542,333

 

Restructuring, integration and other expenses

 

 
94,623

 

 
(27,847)

 

 

 
66,776

 

Operating income

 

 
789,940

 

 
(188,558)

 

 

 
601,382

 

Other expense, net

 

 
16,010

 

 
5,498

 

 

 
21,508

 

Interest expense

 

 
(104,823)

 

 
13,936

 

 

 
(90,887)

 

Income before income taxes

 

 
701,127

 

 
(169,124)

 

 

 
532,003

 

Income tax expense

 

 
155,523

 

 
(70,968)

 

 

 
84,555

 

Net income

 

$
545,604

 

$
(98,156)

 

 

$
447,448

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$
3.95

 

$
(0.71)

 

 

$
3.24

 

Diluted

 

$
3.89

 

$
(0.70)

 

 

$
3.19

 

Shares used to compute earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 
137,991

 

 

 —

 

 

 
137,991

 

Diluted

 

 
140,119

 

 

 —

 

 

 
140,119

 

Cash dividends paid per common share

 

$
0.60

 

$

 —

 

 

$
0.60

 

 

See notes to unaudited pro forma condensed consolidated financial statements

 

 

 

 

AVNET, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

1.

Basis of presentation

 

The historical consolidated financial statements of the Company have been adjusted in the accompanying unaudited pro forma condensed consolidated financial statements to give effect to pro forma events that are (i) directly attributable to the divestiture transaction, (ii) factually supportable, and (iii) with respect to the unaudited pro forma condensed consolidated statements of operations, are expected to have a continuing impact on the results of operations.

 

2.

Unaudited pro forma condensed consolidated balance sheet adjustments

 

a.

Represents the elimination of assets and liabilities related to the TS Business which were classified as held for sale as reported by the Company in its December 31, 2016 Quarterly Report filed on Form 10-Q.

 

b.

Represents the receipt of approximately $2.3 billion in cash proceeds from the sale of the TS Business, net of approximately $24 million in estimated transaction related costs and approximately $116 million of estimated cash and other purchase price adjustments. The effective date of the divestiture is February 27, 2017; therefore, customary net working capital price adjustments related to the effective period were estimated for pro forma adjustments.

 

c.

Represents the receipt of 2,785,402 of shares of Tech Data common stock valued at $247.2 million using the closing price of Tech Data common stock of $88.76 per share on February 27, 2017.

 

d.

Represents the elimination of TS Business debt outstanding as of December 31, 2016.

 

e.

Represents the estimated net gain of approximately $294 million, giving effect to the divestiture of the TS Business as of June 30, 2013, which includes accounting adjustments for the recognition of cumulative foreign currency translation losses of approximately $208 million related to the TS Business and an estimated income tax expense of approximately $370 million as a result of the sale.  The actual gain will differ from the pro forma estimate due to the difference in timing between the assumed closing date for the pro forma financial statements and the actual closing date of February 27,  2017, the consideration adjustments, if any, for the final net working capital adjustment, and the actual income tax expense incurred on the sale.  As the estimated gain is directly attributable to the divesture and is not expected to have a continuing impact on the Company’s operations, the estimated gain is only reflected in shareholders’ equity on the unaudited pro forma condensed consolidated balance sheet. 

 

3.

Unaudited pro forma condensed consolidated statement of operations adjustments for the six months ended December 31, 2016

 

 The Company included the results of the TS business as discontinued operations in its most recent Quarterly Report on Form 10-Q for the period ended December 31, 2016. As a result, the pro forma adjustments reflect the elimination of net income from discontinued operations, net of tax, and the basic and diluted earnings per share from discontinued operations. 

 

4.

Unaudited pro forma condensed consolidated statement of operations adjustments for the fiscal years 2016, 2015 and 2014

 

These adjustments reflect the elimination of sales, expenses and other amounts directly attributable to the TS divestiture. Excluded from these amounts are certain general corporate overhead expenses not specifically benefiting the TS Business.  Such general corporate overhead expenses do not meet the requirements to be presented in discontinued operations and thus, will be presented as part of Avnet’s continuing operations.  These adjustments include the estimated income tax effect of the pro forma adjustments using an estimated effective tax rate of 39.9%, 38.7%, and 42.0% for fiscal years 2016, 2015 and 2014, respectively.

 

 

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