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Avnet Reports Q1

PHOENIX — {complink 577|Avnet Inc.} today announced results for the first quarter fiscal year 2011 ended October 2, 2010.

•Sales for the quarter ended October 2, 2010 increased 42.0% year over year to a record $6.18 billion; pro forma revenue (as defined later in this release) was up 26.4% year over year

•Adjusted operating income increased 107.8% to $222.5 million and adjusted operating income margin of 3.6% was up 114 basis points year over year

•Adjusted diluted earnings per share increased 111.4% over the prior year quarter to $0.93 per share

•Included in GAAP net income is a total of $4.5 million after tax and $0.03 per share on a diluted basis related to restructuring, integration and other charges and a non-cash tax adjustment offset by a gain on a bargain purchase related to the acquisition of Unidux.

Roy Vallee, Chairman and Chief Executive Officer, commented, “We accelerated our start to the new fiscal year by completing three acquisitions in July that should add approximately $4 billion to our annual revenue and produce a return on capital employed of at least 12.5% when the integrations are completed. In addition to the financial benefits, the integrations of Bell Micro, Tallard Technologies and Unidux are enhancing our competitive position in key technologies, expanding our presence in higher growth geographies and increasing our global scale and scope advantages. The combination of 26% organic growth and the beneficial impact of value-creating acquisitions drove reported revenue up 42% year over year to a record $6.2 billion. On the bottom line, adjusted diluted earnings per share more than doubled year over year to $0.93 and return on capital employed (ROCE) was within our target range of 14% – 16% for the fourth consecutive quarter. As we complete the integrations throughout the balance of fiscal 2011 and fully realize the anticipated synergies of at least $60 million, we will be better positioned to take advantage of additional growth opportunities and deliver improved financial results.”

Avnet Electronics Marketing Results
•Record revenue of $3.62 billion were up 48.5% year over year and 52.1% in constant currency

•Pro forma revenue grew 39.8% year over year and 43.1% in constant currency

•Gross profit margin improved 27 basis points year over year; 70 basis points excluding the impact of acquisitions and the embedded business transferred from TS

•Operating income margin improved 197 basis points year over year; 227 basis points excluding the impact of acquisitions and the embedded business transferred from TS; all three regions contributed to the increase

•Return on working capital (ROWC) was up 1,461 basis points year over year

Mr. Vallee added, “While the expected deceleration in EM's bookings this quarter implies that the electronics supply chain inventory replenishment cycle is nearing an end, our billings indicate that end demand remains solid across all three regions. Pro forma revenue grew nearly 40% year over year and sequential growth of 4.2% was well above normal seasonality. Gross profit margin for EM, excluding the impact of the recently acquired embedded business, increased year over year in all three regions and has now substantially recovered to pre-recession levels. Operating income margin also improved year over year in all three regions and, at 5.3%, was within our target range for the third consecutive quarter. Although we grew inventory in absolute terms, Electronics Marketing's working capital velocity continues at record levels and ROWC remained at or above our stated targets in all three regions.”

Avnet Technology Solutions Results
•Cash used for operations was $112 million for the quarter due to the increase in working capital requirements to support the strong growth in business

•The Company used $575 million during the quarter for acquisitions, net of cash acquired

•Cash and cash equivalents at the end of the quarter was $662 million; net debt was $1.1 billion

Ray Sadowski, Chief Financial Officer, stated, “Our strong financial position allowed us to complete three acquisitions this quarter while maintaining our investment grade credit statistics, which we expect to improve when we fully realize the expected synergy benefits. During the quarter, we used approximately $112 million of cash for operations primarily to grow working capital to support the strong growth in business. Working Capital velocity metrics remain near record levels and while inventory was up $683 million sequentially, $401 million of that growth was due to the impact of acquisitions and foreign currency translation.”

Outlook For Fiscal 2nd Quarter Ending on January 1, 2011
•EM sales are expected to be in the range of $3.4 billion to $3.7 billion and TS sales are expected to be between $2.9 billion and $3.3 billion

•Consolidated sales are forecasted to be between $6.3 billion and $7.0 billion

•Adjusted diluted earnings per share (“EPS”) is expected to be in the range of $0.99 to $1.07 per share

The above EPS guidance does not include any potential restructuring charges or any charges related to acquisitions and post-closing integration activities. In addition, the above guidance assumes that the average Euro to U.S. Dollar currency exchange rate for the second quarter of fiscal 2011 is $1.40 to EUR 1.00. This compares with an average exchange rate of $1.48 to EUR 1.00 in the second quarter of fiscal 2010 and $1.29 to EUR 1.00 in the first quarter of fiscal 2011.

{complink 577|Avnet Inc.}

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