Cash Flow and Returns to Shareholders
- Cash flow from continuing operations was a use of $163 million in the March quarter
- Cash and cash equivalents at the end of the quarter was $1.13 billion; net debt (total debt less cash and cash equivalents) was $628 million
- During the March quarter, the Company repurchased 3.1 million shares, representing an aggregate investment of $140.1 million
- Entering the fourth quarter, the Company had $534.8 million remaining under the current share repurchase authorization
- Avnet paid a dividend of $0.18 per share or $23.1 million during the quarter
“In the March quarter, we used approximately $2.4 billion of cash from the sale of our Technology Solutions business to strengthen our balance sheet and increase the amount of funds available to return to shareholders,” said Kevin Moriarty, CFO of Avnet. “We paid down approximately $1.8 billion of debt, which will reduce our future interest expense and result in credit statistics that solidly support our investment grade credit rating.
We also increased our dividend 5.9% while allocating an additional $500 million to our share repurchase program. In addition, we locked in the gain on our Tech Data Corporation shares to ensure that we will have another $250 million of cash available over the next twelve months. With our strong balance sheet and improved liquidity, we are well positioned to invest in growth and our digital transformation that will drive financial performance in the future.”
ERP Update
Given the Company is now solely focused on components and has acquired significant digital resources, the Company recently performed a thorough review of both its Enterprise Resource Planning (ERP) system in the Americas (“Evolve”) and its global IT strategy going forward. The Company has decided to pursue a global ERP system that incorporates key elements of its international ERP systems that have been successfully supporting the business for many years. In addition to supporting the Company’s emerging digital business model, the global ERP system is expected to enhance the customer experience, lower operational cost and improve global analytics.
While this system may take up to 24 months to complete, the Company will continue to invest necessary resources to modify and maintain the Evolve system in the Americas to continue to deliver support to customers and suppliers. As a result of this decision, the Company expects to recognize accelerated depreciation on the Evolve system, which will negatively impact results by approximately $18 million per quarter over the next eight quarters.
