Avnet 2012 Annual Report Download - page 23

Table of Contents
Consolidated sales in fiscal 2011 were $26.53 billion, an increase of 38.5%, or $7.37 billion, from fiscal 2010 consolidated sales of
$19.16 billion. This increase was due to the combination of growth through acquisitions and organic growth of 17.1%. EM sales of
$15.07 billion in fiscal 2011 increased 37.4% over fiscal 2010 sales of $10.97 billion. The year-over-
year comparisons were impacted by
acquisitions and the transfer of the TS Americas embedded business to EM Americas. Organic sales increased 21.9% year over year and all three
regions contributed with organic growth of 14.2%, 34.4% and 19.5% in the Americas, EMEA and Asia, respectively, largely attributable to the
continued strong end demand across the technology industry. TS sales of $11.47 billion in fiscal 2011 increased 40.0% over fiscal 2010 sales of
$8.19 billion. The year-over-
year comparisons were positively impacted by recent acquisitions, and partially offset by the transfer of the TS
Americas embedded business to EM and a divestiture. Organic sales increased 11.3% year over year driven by the Americas and Asia regions
with increased organic sales of 13.0% and 31.4%, respectively. In the EMEA region, organic sales increased 1.7%. On a product level, year-
over-year sales growth was driven primarily by demand for storage and servers.
Gross Profit and Gross Profit Margins
Consolidated gross profit in fiscal 2012 was $3.05 billion, a decrease of $57.2 million, or 1.8%, from the prior year and decreased 4.0% on
a pro forma basis in constant currency. Gross profit margin of 11.9% improved 16 basis points over the prior year. EM gross profit margin was
down 38 basis points year over year, with all three regions experiencing declines. The Americas region was impacted by the transfer of the lower
gross margin Latin America computing components business from TS Americas to EM Americas at the beginning of fiscal 2012. In addition, the
regional mix of business was slightly more skewed to the lower margin regions in the current fiscal year as the higher gross margin EMEA
region represented 28% of the overall EM revenue mix as compared with 32% in the prior year. TS gross profit margin improved 73 basis points
year over year. The year
-over-
year improvement was driven by the western regions, particularly EMEA. The Americas region's gross profit
margin benefited from the transfer of the Latin America business to EM as mentioned previously.
Consolidated gross profit in fiscal 2011 was $3.11 billion, an increase of $827.6 million, or 36.3%, from fiscal 2010 due primarily to
strong organic sales growth and the increase in sales related to acquisitions. Gross profit margin of 11.7% declined 19 basis points year over year
due primarily to the impact of businesses acquired, which had product lines with lower gross margins than Avnet’
s other product lines. EM gross
profit margin increased 10 basis points where the addition of the lower margin embedded business acquired from Bell Microproducts Inc.
("Bell") and the embedded business transferred from TS mostly offset the margin increase that occurred in the legacy EM business and
geographic mix shift. TS gross profit margin declined 52 basis points year over year primarily attributable to the EMEA region and the impact of
the integration of the Bell business, which has a lower gross profit margin profile than the other TS EMEA product lines. Although the Bell
business had a lower gross profit margin profile due to its product mix, the Company estimates it realized the full impact of over $60 million in
annualized synergies in the first quarter of fiscal 2012.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (“SG&A expenses”)
were $2.09 billion in fiscal 2012, essentially flat from the prior year,
decreasing only $7.8 million. This $7.8 million decrease consisted of (i) approximately $51 million related to both a decrease in expenses for the
existing business due primarily to cost reduction actions taken and a decrease in variable expenses related to the revenue decline, and (ii)
approximately $6 million related to a decrease due to the translation impact of changes in foreign currency exchange rates, partially offset by (iii)
an increase of approximately $49 million related to expenses from businesses acquired. Metrics that management monitors with respect to its
operating expenses are SG&A expenses as a percentage of sales and as a percentage of gross profit. In fiscal 2012, SG&A expenses as a
percentage of sales were 8.1% and were 68.6% as a percentage of gross profit as compared with 7.9% and 67.6%, respectively, in fiscal 2011.
SG&A expenses as a percentage of gross profit at TS decreased over 250 basis points year over year. EM SG&A expenses as a percentage of
gross profit increased approximately 250 basis points from the prior year near record low, which was attributable to the strong operating leverage
in a particularly high growth environment in the prior year.
SG&A expenses were $2.10 billion in fiscal 2011, which was an increase of $481.5 million, or 29.7%, from fiscal 2010. The increase in
SG&A expenses was primarily a result of approximately $304 million of additional SG&A expenses associated with acquisitions, $170 million
of incremental costs necessary to support the 17.1% year-over-
year organic sales growth, net of incremental cost savings from integration
activity and the additional week of expenses in fiscal 2010 and $7 million due to the translation impact of changes in foreign currency exchange
rates. In fiscal 2011, SG&A expenses were 7.9% of sales and 67.6% of gross profit as compared with 8.5% and 71.0%, respectively, in fiscal
2010. This continued year-over-
year improvement reflects the operating leverage in the business model realized from recent revenue growth and
effective expense management.
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