UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March ~~30, 2019~~28, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File ~~#1-4224~~#1-4224

AVNET, INC.

(Exact name of registrant as specified in its charter)


New York
~~New York~~				11-1890605
(State or other jurisdiction				(IRS Employer
of ~~incorporation)~~incorporation or organization)				Identification No.)


2211 South 47th Street, Phoenix, Arizona
~~2211 South 47th Street, Phoenix, Arizona~~		85034
(Address of principal executive offices)		(Zip Code)

~~(480)~~ (480) 643-2000

(Registrant’s telephone number, including area code.)

N/A

(Former name, former address and former fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of Each Exchange on Which registered:
Common stock, par value $1.00 per share	AVT	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Yes ☑þ No ☐◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large ~~accelerated filer~~ Accelerated Filer ☑		Accelerated ~~filer~~ Filer ☐
Non-accelerated ~~filer~~ Filer ☐		Smaller ~~reporting company~~ Reporting Company ☐
Emerging ~~growth company~~ Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of April ~~18, 2019,~~23, 2020, the total number of shares outstanding of the registrant’s Common Stock was ~~106,296,252~~98,746,669 shares, net of treasury shares.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

INDEX

~~INDEX~~

	Page No.
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets at March ~~30, 2019~~28, 2020 and June ~~30, 2018~~29, 2019	2

Consolidated Statements of Operations for the third quarters and nine months ended March ~~30, 2019~~28, 2020 and March ~~31, 2018~~30, 2019	3

Consolidated Statements of Comprehensive Income for the third quarters and nine months ended March ~~30, 2019~~28, 2020 and March ~~31, 2018~~30, 2019	4

Consolidated Statements of Shareholders’ Equity for the third quarters and nine months ended March 28, 2020 and March 30, 2019	5

Consolidated Statements of Cash Flows for the nine months ended March ~~30, 2019~~28, 2020 and March ~~31, 2018~~30, 2019	5 6

Notes to Consolidated Financial Statements	6 7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21 22

Item 3. Quantitative and Qualitative Disclosures About Market Risk	30 32

Item 4. Controls and Procedures	30 33

PART II. OTHER INFORMATION	31

Item 1. Legal Proceedings	31 33

Item 1A. Risk Factors	31 33

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	32 34

Item 6. Exhibits	33 35

Signature Page	34 36

Table of Contents

PART I

FINANCIAL INFORMATION

~~Item 1.~~
Item 1.
Financial Statements

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

March 30,

June 30,

2019

2018

(Thousands, except share

amounts)

ASSETS

Current assets:

Cash and cash equivalents

$
725,252

$
621,125

Receivables, less allowances of $51,830 and $48,959, respectively

3,188,863

3,641,139

Inventories

3,211,979

3,141,822

Prepaid and other current assets

129,316

206,513

Total current assets

7,255,410

7,610,599

Property, plant and equipment, net

455,484

522,909

Goodwill

1,027,432

980,872

Intangible assets, net

168,375

219,913

Other assets

192,979

262,552

Total assets

$
9,099,680

$
9,596,845

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Short-term debt

$
50,401

$
165,380

Accounts payable

1,836,543

2,269,478

Accrued expenses and other

446,320

534,603

Total current liabilities

2,333,264

2,969,461

Long-term debt

2,023,628

1,489,219

Other liabilities

380,316

453,084

Total liabilities

4,737,208

4,911,764

Commitments and contingencies (Note 7)

Shareholders’ equity:

Common stock $1.00 par; authorized 300,000,000 shares; issued 106,653,956 shares and 115,825,062 shares, respectively

106,654

115,825

Additional paid-in capital

1,565,083

1,528,713

Retained earnings

2,935,077

3,235,894

Accumulated other comprehensive loss

(244,342)

(195,351)

Total shareholders’ equity

4,362,472

4,685,081

Total liabilities and shareholders’ equity

$
9,099,680

$
9,596,845


	March 28,		June 29,
	2020		2019
	(Thousands, except share
	amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	402,655	$	546,105
Receivables, less allowances of $50,874 and $53,499, respectively		2,987,791		3,168,369
Inventories		2,745,219		3,008,424
Prepaid and other current assets		180,956		153,438
Total current assets		6,316,621		6,876,336
Property, plant and equipment, net		413,371		452,171
Goodwill		760,939		876,728
Intangible assets, net		77,306		143,520
Operating lease assets (Note 5)		271,243		—
Other assets		250,248		215,801
Total assets	$	8,089,728	$	8,564,556
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	399,965	$	300,538
Accounts payable		1,733,673		1,864,342
Accrued expenses and other		418,654		413,696
Short-term operating lease liabilities (Note 5)		55,496		—
Total current liabilities		2,607,788		2,578,576
Long-term debt		1,194,240		1,419,922
Long-term operating lease liabilities (Note 5)		247,539		—
Other liabilities		362,883		425,585
Total liabilities		4,412,450		4,424,083
Commitments and contingencies (Note 7)
Shareholders’ equity:
Common stock $1.00 par; authorized 300,000,000 shares; issued 98,760,983 shares and 104,037,769 shares, respectively		98,761		104,038
Additional paid-in capital		1,587,294		1,573,005
Retained earnings		2,390,425		2,767,469
Accumulated other comprehensive loss		(399,202)		(304,039)
Total shareholders’ equity		3,677,278		4,140,473
Total liabilities and shareholders’ equity	$	8,089,728	$	8,564,556

See notes to consolidated financial statements.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Third Quarters Ended

Nine Months Ended


March 30,

March 31,

March 30,

March 31,

2019

2018

2019

2018

(Thousands, except per share amounts)
Sales

$
4,698,824

$
4,795,093

$
14,837,683

$
13,977,672
Cost of sales

4,074,629

4,141,556

12,946,706

12,109,120
Gross profit

624,195

653,537

1,890,977

1,868,552
Selling, general and administrative expenses

468,171

505,471

1,415,040

1,491,144
Goodwill impairment expense (Note 4)

—

181,440

—

181,440
Restructuring, integration and other expenses

2,939

25,120

79,986

108,277
Operating income (loss)

153,085

(58,494)

395,951

87,691
Other income, net

8,731

9,862

9,424

32,132
Interest and other financing expenses, net

(36,253)

(23,431)

(100,064)

(68,272)
Income (loss) from continuing operations before taxes

125,563

(72,063)

305,311

51,551
Income tax expense

30,628

243,541

90,072

252,179
Income (loss) from continuing operations, net of tax

94,935

(315,604)

215,239

(200,628)
Loss from discontinued operations, net of tax

(6,887)

(4,462)

(7,066)

(14,411)
Net income (loss)

88,048

(320,066)

208,173

(215,039)

Earnings (loss) per share - basic:

Continuing operations

$
0.87

$
(2.64)

$
1.93

$
(1.66)
Discontinued operations

(0.06)

(0.04)

(0.06)

(0.12)
Net income (loss) per share basic

0.81

(2.68)

1.87

(1.78)

Earnings (loss) per share - diluted:

Continuing operations

$
0.87

$
(2.64)

$
1.91

$
(1.66)
Discontinued operations

(0.06)

(0.04)

(0.06)

(0.12)
Net income (loss) per share diluted

0.81

(2.68)

1.85

(1.78)

Shares used to compute earnings per share:

Basic

108,074

119,601

111,222

120,895
Diluted

108,822

119,601

112,252

120,895
Cash dividends paid per common share

$
0.20

$
0.19

$
0.60

$
0.55


	Third Quarters Ended				Nine Months Ended
	March 28,		March 30,		March 28,		March 30,
	2020		2019		2020		2019
	(Thousands, except per share amounts)
Sales	$	4,309,818	$	4,698,824	$	13,474,632	$	14,837,683
Cost of sales		3,790,885		4,074,629		11,886,247		12,946,706
Gross profit		518,933		624,195		1,588,385		1,890,977
Selling, general and administrative expenses		469,646		468,171		1,391,024		1,415,040
Goodwill and intangible asset impairment expense		145,836		—		145,836		—
Restructuring, integration and other expenses		19,211		2,939		58,073		79,986
Operating (loss) income		(115,760)		153,085		(6,548)		395,951
Other (expense) income, net		(12,608)		8,731		(8,162)		9,424
Interest and other financing expenses, net		(29,718)		(36,253)		(97,254)		(100,064)
Income (loss) from continuing operations before taxes		(158,086)		125,563		(111,964)		305,311
Income tax (benefit) expense		(29,425)		30,628		(30,270)		90,072
Income (loss) from continuing operations, net of tax		(128,661)		94,935		(81,694)		215,239
Loss from discontinued operations, net of tax		—		(6,887)		(1,548)		(7,066)
Net (loss) income		(128,661)		88,048		(83,242)		208,173

Earnings (loss) per share - basic:
Continuing operations	$	(1.29)	$	0.87	$	(0.81)	$	1.93
Discontinued operations		—		(0.06)		(0.01)		(0.06)
Net (loss) income per share basic		(1.29)		0.81		(0.82)		1.87

Earnings (loss) per share - diluted:
Continuing operations	$	(1.29)	$	0.87	$	(0.81)	$	1.91
Discontinued operations		—		(0.06)		(0.01)		(0.06)
Net (loss) income per share diluted		(1.29)		0.81		(0.82)		1.85

Shares used to compute earnings per share:
Basic		99,479		108,074		101,013		111,222
Diluted		99,479		108,822		101,013		112,252
Cash dividends paid per common share	$	0.21	$	0.20	$	0.63	$	0.60

See notes to consolidated financial statements.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Third Quarters Ended

Nine Months Ended


March 30,

March 31,

March 30,

March 31,

2019

2018

2019

2018

(Thousands)

Net income (loss)

$
88,048

$
(320,066)

$
208,173

$
(215,039)

Other comprehensive income (loss), net of tax:

Foreign currency translation and other

1,193

114,073

(55,203)

230,857

Pension adjustments, net

1,249

5,121

6,212

15,310

Total comprehensive income (loss)

$
90,490

$
(200,872)

$
159,182

$
31,128


	Third Quarters Ended				Nine Months Ended
	March 28,		March 30,		March 28,		March 30,
	2020		2019		2020		2019
	(Thousands)
Net (loss) income	$	(128,661)	$	88,048	$	(83,242)	$	208,173
Other comprehensive (loss) income, net of tax:
Foreign currency translation and other		(96,351)		1,193		(105,311)		(55,203)
Pension adjustments, net		3,167		1,249		10,148		6,212
Total comprehensive (loss) income	$	(221,845)	$	90,490	$	(178,405)	$	159,182

See notes to consolidated financial statements.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~SHAREHOLDERS’ EQUITY

(Unaudited)

Nine Months Ended

March 30,

March 31,

2019

2018

(Thousands)

Cash flows from operating activities:

Net income (loss)

$
208,173

$
(215,039)

Less: Loss from discontinued operations, net of tax

(7,066)

(14,411)

Income (loss) from continuing operations

215,239

(200,628)

Non-cash and other reconciling items:

Depreciation

72,692

114,111

Amortization

63,123

69,860

Deferred income taxes

45,286

(74,126)

Stock-based compensation

24,204

18,427

Goodwill impairment expense

—

181,440

Other, net

42,786

30,305

Changes in (net of effects from businesses acquired and divested):

Receivables

436,382

(98,147)

Inventories

(125,410)

(337,939)

Accounts payable

(399,526)

180,732

Accrued expenses and other, net

(118,347)

133,837

Net cash flows provided by operating activities - continuing operations

256,429

17,872

Net cash flows used for operating activities - discontinued operations

(56,284)

—

Net cash flows provided by operating activities

200,145

17,872

Cash flows from financing activities:

Borrowings (repayments) under accounts receivable securitization, net

342,000

(47,000)

Repayments under senior unsecured credit facility, net

(11,386)

(99,971)

Borrowings (repayments) under bank credit facilities and other debt, net

85,005

(44,293)

Repurchases of common stock

(447,901)

(209,466)

Dividends paid on common stock

(66,188)

(66,198)

Other, net

10,042

(2,738)

Net cash flows used for financing activities - continuing operations

(88,428)

(469,666)

Net cash flows used for financing activities

(88,428)

(469,666)

Cash flows from investing activities:

Purchases of property, plant and equipment

(101,383)

(112,217)

Acquisitions of businesses, net of cash acquired

(66,458)

(18,621)

Other, net

42,069

7,020

Net cash flows used for investing activities - continuing operations

(125,772)

(123,818)

Net cash flows provided by investing activities - discontinued operations

123,473

153,933

Net cash flows (used) provided by investing activities

(2,299)

30,115

Effect of currency exchange rate changes on cash and cash equivalents

(5,291)

15,360

Cash and cash equivalents:

— increase (decrease)

104,127

(406,319)

— at beginning of period

621,125

836,384

— at end of period

$
725,252

$
430,065


									Accumulated
	Common		Common		Additional				Other		Total
	Stock-		Stock-		Paid-In		Retained		Comprehensive		Shareholders’
	Shares		Amount		Capital		Earnings		(Loss) Income		Equity
	(Thousands)
Balance, June 29, 2019		104,038	$	104,038	$	1,573,005	$	2,767,469	$	(304,039)	$	4,140,473
Net income		—		—		—		41,752		—		41,752
Translation adjustments and other		—		—		—		—		(102,146)		(102,146)
Pension liability adjustments, net		—		—		—		—		3,813		3,813
Cash dividends		—		—		—		(21,451)		—		(21,451)
Repurchases of common stock		(2,631)		(2,631)		—		(109,504)		—		(112,135)
Stock-based compensation		64		64		7,701		—		—		7,765
Balance, September 28, 2019		101,471	$	101,471	$	1,580,706	$	2,678,266	$	(402,372)	$	3,958,071
Net income		—		—		—		3,668		—		3,668
Translation adjustments and other		—		—		—		—		93,186		93,186
Pension liability adjustments, net		—		—		—		—		3,168		3,168
Cash dividends		—		—		—		(20,975)		—		(20,975)
Repurchases of common stock		(2,135)		(2,135)		—		(85,423)		—		(87,558)
Stock-based compensation		13		13		7,760		—		—		7,773
Balance, December 28, 2019		99,349	$	99,349	$	1,588,466	$	2,575,536	$	(306,018)	$	3,957,333
Net loss		—		—		—		(128,661)		—		(128,661)
Translation adjustments and other		—		—		—		—		(96,351)		(96,351)
Pension liability adjustments, net		—		—		—		—		3,167		3,167
Cash dividends		—		—		—		(20,810)		—		(20,810)
Repurchases of common stock		(1,104)		(1,104)		—		(35,640)		—		(36,744)
Stock-based compensation		516		516		(1,172)		—		—		(656)
Balance, March 28, 2020		98,761	$	98,761	$	1,587,294	$	2,390,425	$	(399,202)	$	3,677,278


									Accumulated
	Common		Common		Additional				Other		Total
	Stock-		Stock-		Paid-In		Retained		Comprehensive		Shareholders’
	Shares		Amount		Capital		Earnings		(Loss) Income		Equity
	(Thousands)
Balance, June 30, 2018		115,825	$	115,825	$	1,528,713	$	3,235,894	$	(195,351)	$	4,685,081
Net income		—		—		—		83,724		—		83,724
Translation adjustments and other		—		—		—		—		8,801		8,801
Pension liability adjustments, net		—		—		—		—		756		756
Cash dividends		—		—		—		(22,932)		—		(22,932)
Repurchases of common stock		(3,315)		(3,315)		—		(153,582)		—		(156,897)
Effects of new accounting principles		—		—		—		(3,832)		—		(3,832)
Stock-based compensation		521		521		25,851		—		—		26,372
Balance, September 29, 2018		113,031	$	113,031	$	1,554,564	$	3,139,272	$	(185,794)	$	4,621,073
Net income		—		—		—		36,401		—		36,401
Translation adjustments and other		—		—		—		—		(65,197)		(65,197)
Pension liability adjustments, net		—		—		—		—		4,207		4,207
Cash dividends		—		—		—		(21,769)		—		(21,769)
Repurchases of common stock		(4,116)		(4,116)		—		(170,967)		—		(175,083)
Stock-based compensation		36		36		9,069		—		—		9,105
Balance, December 29, 2018		108,951	$	108,951	$	1,563,633	$	2,982,937	$	(246,784)	$	4,408,737
Net income		—		—		—		88,048		—		88,048
Translation adjustments and other		—		—		—		—		1,193		1,193
Pension liability adjustments, net		—		—		—		—		1,249		1,249
Cash dividends		—		—		—		(21,487)		—		(21,487)
Repurchases of common stock		(2,816)		(2,816)		—		(114,421)		—		(117,237)
Stock-based compensation		519		519		1,450		—		—		1,969
Balance, March 30, 2019		106,654	$	106,654	$	1,565,083	$	2,935,077	$	(244,342)	$	4,362,472

See notes to consolidated financial statements.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended
	March 28,		March 30,
	2020		2019
	(Thousands)
Cash flows from operating activities:
Net (loss) income	$	(83,242)	$	208,173
Less: Loss from discontinued operations, net of tax		(1,548)		(7,066)
Income (loss) from continuing operations		(81,694)		215,239

Non-cash and other reconciling items:
Depreciation		75,535		72,692
Amortization		62,240		63,123
Amortization of operating lease assets		46,560		—
Deferred income taxes		(42,529)		45,286
Stock-based compensation		20,757		24,204
Goodwill and intangible asset impairment		145,836		—
Other, net		35,000		42,786
Changes in (net of effects from businesses acquired and divested):
Receivables		150,095		436,382
Inventories		227,996		(125,410)
Accounts payable		(112,923)		(399,526)
Accrued expenses and other, net		(84,263)		(118,347)
Net cash flows provided by operating activities - continuing operations		442,610		256,429
Net cash flows used for operating activities - discontinued operations		—		(56,284)
Net cash flows provided by operating activities		442,610		200,145

Cash flows from financing activities:
Borrowings (repayments) under accounts receivable securitization, net		(127,400)		342,000
Repayments under bank credit facilities and other debt, net		(1,639)		(11,386)
Borrowings (repayments) under senior unsecured credit facility, net		(1,194)		85,005
Repurchases of common stock		(235,830)		(447,901)
Dividends paid on common stock		(63,235)		(66,188)
Other, net		(15,132)		10,042
Net cash flows used for financing activities - continuing operations		(444,430)		(88,428)
Net cash flows used for financing activities		(444,430)		(88,428)

Cash flows from investing activities:
Purchases of property, plant and equipment		(61,156)		(101,383)
Acquisitions of businesses, net of cash acquired		(51,509)		(66,458)
Other, net		(12,547)		42,069
Net cash flows used for investing activities - continuing operations		(125,212)		(125,772)
Net cash flows provided by investing activities - discontinued operations		—		123,473
Net cash flows used for investing activities		(125,212)		(2,299)

Effect of currency exchange rate changes on cash and cash equivalents		(16,418)		(5,291)

Cash and cash equivalents:
— (decrease) increase		(143,450)		104,127
— at beginning of period		546,105		621,125
— at end of period	$	402,655	$	725,252

See notes to consolidated financial statements.

Table of Contents

AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of presentation and new accounting pronouncements

In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all adjustments necessary to present fairly Avnet, Inc.’s and its consolidated subsidiaries’ (collectively, the “Company” or “Avnet”) financial position, results of operations, comprehensive income and cash flows. All such adjustments are of a normal recurring nature.

The preparation of financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Actual results may differ from these ~~estimates.~~estimates and assumptions.

Interim results of operations are not necessarily indicative of the results to be expected for the full fiscal year. The information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June ~~30, 2018.~~29, 2019.

Certain reclassifications have been made in prior periods to conform to the current period ~~presentation including reclassifications as a result of recently adopted accounting pronouncements.~~presentation.

Recently adopted accounting pronouncements

~~In May 2014, the Financial Accounting Standards Board (the “FASB”) issued~~The Company adopted Accounting Standards Update (“ASU”) No. ~~2014-09,~~ ~~Revenue from Contracts with Customers~~2016-02, “Leases (Topic ~~606)~~ ~~(“ASU 2014-09”~~842),” and ~~collectively with~~ its related ~~subsequent~~ amendments ~~“Topic 606”~~(collectively “ASC 842”)~~. Topic 606 supersedes previous revenue recognition guidance and requires the Company to recognize revenue to depict the transfer~~ on June 30, 2019 (the first day of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for such goods or services. The Company adopted Topic 606 on July 1, 2018fiscal 2020) using the modified ~~retrospective~~ transition method applied to those contracts which were not completed as of July 1, 2018. Under this transition method, the Company’s results in the consolidated statements of operations for the third quarter and nine months ended March 30, 2019 are presented under Topic 606, whileapproach without restating the comparative ~~results~~period consolidated financial statements. The standard requires lessees to recognize a right-of-use asset and a short-term and long-term lease liability for the third quarter and nine months ended March 31, 2018 were not retrospectively adjusted, as such results were recognized in accordance with the revenue recognition policy discussed under Summary of Significant Accounting Policies in Note 1 of the Company’s Fiscal 2018 Annual Report on Form 10-K.all leases.

The adoption of ~~Topic 606~~ASC 842 did not have a material impact on the Company’s consolidated ~~financial~~ statements as of operations or retained earnings. The Company elected the ~~adoption date and as~~package of ~~and for~~practical expedients permitted under the ~~nine months ended March 30, 2019. Substantially all of~~transition guidance that allowed, among other things, the ~~Company’s sales continue~~historical lease classification to be recognized when products are shipped from the Company’s facilities or delivered to customers, depending on the underlying contractual terms. For a nominal portion of the Company’s contracts where the accounting did change, the adoption of Topic 606 resulted in an increase to the opening balance of retained earnings of $2.0 million as of July 1, 2018. This impact was primarily due to the acceleration of recognition of net sales and associated gross profit related to certain uncompleted contracts for the manufacture of goods with no alternative use and for which the Company has an enforceable right to payment, including a reasonable profit margin, from the customer for performance completed to date. For these contracts, the Company recognizes revenue over time as control of the goods transfers through the manufacturing process, rather than when the goods are delivered, title has transferred,carried forward without reassessment and the ~~risks~~hindsight practical expedient. The Company elected to not separate lease and ~~rewards of ownership are passed to the customer, as under previous revenue recognition guidance.~~

non-lease components for its real estate leases. Refer to Note ~~2 herein~~5 for ~~further discussion regarding revenue recognition and~~additional disclosures related ~~accounting policies.~~to leases.

In ~~March~~August 2017, the FASB issued ~~Accounting Standards Update No. 2017-07,~~ ~~Compensation - Retirement Benefits (Topic 715)- Improving the Presentation of Net Periodic Cost and Net Periodic Postretirement Benefit Cost~~ ("ASU No. 2017-07"). ASU No. 2017-07 requires that the service cost component of net periodic pension costs be included in the same line item as other compensation costs arising from services rendered by employees during the period, with the other components of the net periodic pension costs reported separately from the service cost component2017-12, Derivatives and ~~below operating~~

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Hedging (Topic 815) - ~~(Continued)~~

~~income. The Company adopted this standard effective the first quarter of fiscal year 2019, which required changes~~Targeted Improvements to ~~the classification of net periodic pension costs in the consolidated statements of operations~~Accounting for ~~all periods presented. The service cost component of the net periodic pension cost is now included in “Selling, general~~ Hedging Activities” and administrative expenses” with all other components of net periodic pension costs within “Other income, net” in the consolidated statements of operations. The adoption of ASU No. 2017-07 did not have any impact on the Company’s reported amount of income from continuing operations before taxes.

~~During the first quarter of fiscal 2019, the Company adopted ASU 2016-16 -~~ ~~Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.~~ This update addresses the recognition of current and deferred income taxes resulting from an intra-entity transfer of any asset other than inventory. This update has been applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings. The adoption of this update resulted in a cumulative reduction to the opening balance of retained earnings of $5.8 million and a reduction to other assets of $5.8 million.

~~In February 2018, the FASB issued Accounting Standards Update 2018-02,~~ ~~Income Statement–Reporting Comprehensive Income (Topic 220):-Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~ ~~(“ASU 2018-02”~~its related amendments (collectively “ASC 815”), which ~~provides entities~~improves the ~~option~~financial reporting of hedging relationships to ~~reclassify accumulated other comprehensive income~~better portray the economic results of an entity’s risk management activities in its financial statements and makes certain targeted improvements to ~~retained earnings for stranded tax effects resulting from~~simplify the ~~tax legislation enacted by the U.S. federal governments on December 22, 2017 (the “Act”). The update also requires certain new disclosures regardless~~qualification and application of ~~the election.~~hedge accounting compared to historical GAAP. This update is effective for ~~interim and annual reporting periods~~fiscal years beginning after December 15, 2018, with early adoption permitted. The ~~update should be applied either~~adoption of ASC 815 in the period of adoption or retrospectively to each period (or periods) in which the effect of the income tax rate change resulting from the Act is recognized. The Company has early adopted ASU 2018-02 during the thirdfirst quarter of fiscal ~~2019 and has elected~~2020 did not ~~to reclassify any stranded tax effects from~~have an impact on the ~~Act to retained earnings. As a result, there was no impact to the~~Company’s consolidated financial ~~statements as a result of the adoption of ASU 2018-02.~~ statements.

Recently issued accounting pronouncements

In ~~October 2018,~~March 2020, the FASB issued ~~Accounting Standards Update~~ASU No. ~~2018-16,~~ 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU No. 2020-04”), which provides optional guidance to ease the potential burden in accounting for reference rate reform on financial reporting. The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform if certain criteria are met. The company is currently evaluating the potential effects of adopting the provisions of ASU No. 2020-04.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In January 2020, the FASB issued ASU No. 2020-01 - Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)~~: Inclusion~~-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (“ASU No.2020-01”), which clarifies the interaction of the ~~Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate~~accounting for ~~Hedge Accounting Purposes, which permits use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815. This update is~~certain equity securities, equity method investments, and certain derivatives. ASU No. 2020-01 will be effective for the Company in the first quarter of fiscal ~~2020.~~2022, and early adoption is permitted. The Company ~~intends~~is currently evaluating the potential effects of adopting the provisions of ASU No. 2020-01.

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes(Topic 740), (“ASU No. 2019-12”) which removes certain exceptions to ~~adopt this update concurrently with~~the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU ~~2017-12.~~No. 2019-12 will be effective for the Company in the first quarter of fiscal 2022, and early adoption is permitted. Depending on the amendment, adoption may be applied on the retrospective, modified retrospective or prospective basis. The Company ~~does not expect any impact from~~is currently evaluating the ~~adoption~~potential effects of adopting the provisions of ASU ~~2018-16 on its consolidated financial statements as the Company does not currently have any interest rate related derivative financial instruments.~~No. 2019-12.

In August 2018, the FASB issued ~~Accounting Standards Update~~ASU No. 2018-15, Intangibles—Goodwill and Other— Internal-Use Software(Subtopic 350-40):Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force) ("ASU No. 2018-15"). ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop internal-use software. ASU No. 2018-15 is effective for the Company in the first quarter of fiscal 2021, with early adoption permitted, and is to be applied either retrospectively or prospectively. The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2018-15.

In August ~~2017,~~2018, the FASB issued ~~Accounting Standards Update 2017-12,~~ ~~Derivatives~~ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU No. 2018-14”). The new guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans, including removing certain previous disclosure requirements, adding certain new disclosure requirements, and ~~Hedging (Topic 815)~~ - ~~Targeted Improvements to Accounting for Hedging Activities~~ (“clarifying certain other disclosure requirements. ASU 2017-12”), which improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements and makes certain targeted improvements to simplify the qualification and application of hedge accounting compared to current GAAP. This update isNo. 2018-14 will be effective for the Company in the first quarter of fiscal ~~years beginning after December 15, 2018, with~~2022, and early adoption is permitted. The ~~Company is currently evaluating the impact of the~~Company’s planned adoption of ASU ~~2017-12~~No. 2018-14 is not expected to have an impact on ~~its~~the Company’s consolidated financial statements.

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

In ~~February~~June 2016, the FASB issued ~~Accounting Standards Update~~ASU No. ~~2016-02,~~ ~~Leases~~ (“2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU ~~2016-02”~~No. 2016-13") and also issued subsequent amendments to the initial guidance: ASU ~~2017-13,~~No. 2018-19, ASU ~~2018-10,~~No. 2019-04, ASU ~~2018-11, ASU 2018-20~~No. 2019-05, and ASU ~~2019-01~~No. 2019-11 (collectively, Topic ~~842)~~326). Topic ~~842 requires companies to generally recognize operating~~326 revises the methodology for measuring credit losses on financial instruments and ~~financing lease liabilities on~~ the ~~consolidated balance sheet and corresponding right-of-use assets created by those leases with lease terms~~timing of ~~more than 12 months. The~~when such losses are recorded. Topic 326 is effective for the Company ~~will adopt Topic 842 when it becomes effective~~ in the first quarter of fiscal ~~2020~~2021, with early adoption permitted, and is to be applied using ~~the~~a modified retrospective ~~cumulative effect adjustment transition method and record a cumulative effect adjustment as of the adoption date.~~approach. The Company is currently evaluating the ~~impact~~potential effects of ~~its pending adoption~~adopting the provisions of Topic 842 on its consolidated financial statements, including assessing certain available practical expedients, and expects that most operating lease commitments related to the Company’s real estate, vehicle and equipment leases will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption, which will materially increase total assets and total liabilities relative to such amounts prior to adoption. The Company does not expect the adoption to have a material impact on the consolidated statements of operations or consolidated statements of cash flows. The Company has established an implementation team inclusive of external advisors and is in the process of gathering information specific to its current operating lease portfolio. The Company’s information gathering, analysis and evaluation of the new standard will continue through the adoption date of Topic 842 in the first quarter of fiscal 2020.326.

~~2. Revenue recognition~~

~~Prior to the adoption of Topic 606, the Company’s revenue recognition policy was in accordance with ASC Topic 605,~~ ~~Revenue Recognition~~. Effective July 1, 2018, the Company adopted Topic 606 using the modified retrospective transition method, resulting in accounting policy changes surrounding revenue recognition which replace revenue recognition policies discussed in the Summary of Significant Accounting Policies in Note 1 of the Company’s Fiscal 2018 Annual Report on Form 10-K. The adoption of Topic 606 did not have a material impact on the Company’s consolidated financial statements.

The Company’s revenues are generated from the distribution and sale of electronic components including semiconductors, interconnect, passive and electromechanical (“IP&E”) devices and other integrated electronic components from the world’s leading electronic component manufacturers. The Company’s expertise in design, supply chain and logistics enable it to sell to customers of all sizes from startups and mid-sized businesses to enterprise-level original equipment manufacturers (“OEMs”), electronic manufacturing services (“EMS”) providers and original design manufacturers (“ODMs”). The Company sells to a variety of markets ranging from automotive to medical to defense and aerospace. The Company also sells integrated solutions including the assembly or manufacture of embedded electronic component products and systems, touch and passive displays, and standard or specialized boards. The Company’s revenue arrangements primarily consist of performance obligations related to the transfer of promised products. The Company considers customer purchase orders, which in some cases are governed by master agreements, to be the contracts with a customer. All revenue is generated from contracts with customers.

Revenue is recognized at the point at which control of the underlying products are transferred to the customer, which includes determining whether products are distinct and separate performance obligations. For electronic component and related product sales, this generally occurs upon shipment of the products, however, this may occur at a later date depending on the agreed upon sales terms, such as delivery at the customer's designated location, or when products that are consigned at customer locations are consumed. In limited instances, where products are not in stock and delivery times are critical, product is purchased from the supplier and drop-shipped to the customer. The Company typically takes control of the products when shipped by the manufacturer and then recognizes revenue when control of the product transfers to the customer. The Company does not have material product warranty obligations as the assurance type product warranties provided by the component manufacturers are passed through to the Company’s customers.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

2. Acquisitions and discontinued operations

~~For contracts related to~~

Acquisitions

In the ~~specialized manufacture~~second quarter of ~~products for customers with no alternative use and for which~~fiscal 2020, the Company has an enforceable right to payment, including a reasonable profit margin, the Company recognizes revenue over time as control of the products transfer through the manufacturing process. The contract assets associated with such specialized manufacturing products are not material as these contracts represent less than 2% of the Company’s total sales.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products. The Company estimates different forms of variable consideration at the time of sale based on historical experience, current conditions and contractual obligations. Revenue is recorded net of customer discounts and rebates. When the Company offers the right or has a history of accepting returns of product, historical experience is utilized to establish a liability for the estimate of expected returns and an asset for the right to recover the product expected to be returned. These adjustments are made in the same period as the underlying sales transactions.

The Company considers the following indicators amongst others when determining whether it is acting as a principal in the contract where revenue would be recorded on a gross basis: (i) the Company is primarily responsible for fulfilling the promise to provide the specified products or services, (ii) the Company has inventory risk before the specified products have been transferred to a customer or after transfer of control to the customer and (iii) the Company has discretion in establishing the price for the specified products or services. If a transaction does not meet the Company's indicators of being a principal in the transaction, then the Company is acting as an agent in the transaction and the associated revenues are recognized on a net basis.

Sales and other tax amounts collected from customers for remittance to governmental authorities are excluded from revenue. The Company has elected to treat shipping and handling of product as a fulfillment activity. The practical expedient not to disclose information about remaining performance obligations has also been elected as these contracts have an original duration of one year or less. The Company does not have any payment terms that exceed one year from the point it has satisfied the related performance obligations.

~~3. Acquisitions and Discontinued operations~~

~~Acquisition of Softweb Solutions~~

At the end of December 2018, the Company acquired Softweb Solutions (“Softweb”) a privately held software and artificial intelligence company that delivers software solutions for Internet of Things (IoT) applications and systems designed to increase efficiency, speed time to market, and help businesses transform.completed 2 acquisitions. The impact of ~~this acquisition~~these acquisitions was not material to the Company’s consolidated balance sheets or statements of operations and as a result, the Company has not disclosed the preliminary allocation of purchase price or the pro-forma impact of the acquisition.

See Note 3 for further discussion of impairment considerations related to goodwill and long-lived assets.

Discontinued Operations

In February 2017, the Company completed the sale of its Technology Solutions business (“TS business”) to Tech Data Corporation (the “Buyer”). The TS business and the financial impacts of the divestiture are classified as discontinued operations in all periods presented. In August 2018, the Company executed a settlement agreement with the Buyer resulting in a final ~~adjustment~~sales price increase of $120.0 million and a final geographic allocation of the TS business sales price for tax reporting purposes. This incremental consideration received from the sale of the TS business as well as cash settlements from the resolution of indemnification claims and other cash reimbursements have been classified as cash ~~flow~~flows from discontinued operations investing activities. Income tax payments related to the gain on sale of the TS business have been classified as cash ~~flow~~flows from discontinued operations operating activities.

Under the contractual terms of the sale of the TS business, the Company has indemnified the Buyer for certain liabilities including tax related matters, which may result in future indemnification expenses and indemnification payments to the Buyer depending upon the outcome of those matters subject to indemnification.

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

4.3. Goodwill and ~~long-lived~~intangible assets

Goodwill

The following table presents the change in goodwill by reportable segment for the nine months ended March ~~30, 2019.~~ 28, 2020.


	Electronic
	Components		Farnell		Total
	(Thousands)
Carrying value at June 29, 2019 ⁽¹⁾	$	390,896	$	485,832	$	876,728
Additions from acquisitions		30,562		—		30,562
Impairment of goodwill		(120,475)		—		(120,475)
Foreign currency translation		(5,970)		(19,906)		(25,876)
Carrying value at March 28, 2020 ⁽¹⁾	$	295,013	$	465,926	$	760,939

Electronic

Premier

Components

Farnell

Total

(Thousands)
Carrying value at June 30, 2018 (1)

$
479,699

$
501,173

$
980,872
Additions from acquisitions

49,405

—

49,405
Foreign currency translation

(2,309)

(536)

(2,845)
Carrying value at March 30, 2019 (1)

$
526,795

$
500,637

$
1,027,432

⁽¹⁾~~Includes accumulated impairment of $1,045,110 from fiscal 2009 and $181,440 from fiscal 2018~~

(1)Includes accumulated impairment of $1,045,110 from fiscal 2009, $181,440 from fiscal 2018 and $137,396 from fiscal 2019

The Company evaluates each quarter if facts and circumstances indicate that it is more likely than not that the fair value of its reporting units is less than their carrying value, which would require the Company to perform an interim goodwill impairment test. Indicators the Company evaluates to determine whether an interim goodwill impairment test is necessary include, but are not limited to, (i) a sustained decrease in share price or market capitalization as of any fiscal quarter end, (ii) changes in ~~the~~ macroeconomic or industry environments, (iii) the results of and the amount of time passed since the last goodwill impairment test and (iv) the long-term expected financial performance of its reporting units. ~~During the third quarter~~

Table of ~~fiscal 2019, the Company concluded that an interim goodwill impairment test was not required.~~Contents

AVNET, INC. AND SUBSIDIARIES

During the third quarter of fiscal 2018, the Company impaired all of the goodwill in the Americas reporting unit and recorded $181.4 million of goodwill impairment expense, which is classified within goodwill impairment expense in the Consolidated Statements of Operations.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Intangible Assets

The following table presents the Company’s acquired intangible assets at March ~~30, 2019,~~28, 2020 and June ~~30, 2018,~~29, 2019, respectively.


	March 28, 2020						June 29, 2019
	Acquired		Accumulated		Net Book		Acquired		Accumulated		Net Book
	Amount ⁽¹⁾		Amortization		Value		Amount		Amortization		Value
	(Thousands)
Customer related	$	290,199	$	(247,495)	$	42,704	$	292,266	$	(208,329)	$	83,937
Trade name		50,627		(29,810)		20,817		52,760		(24,752)		28,008
Technology and other		52,674		(38,889)		13,785		63,753		(32,178)		31,575
	$	393,500	$	(316,194)	$	77,306	$	408,779	$	(265,259)	$	143,520

March 30, 2019

June 30, 2018

Acquired

Accumulated

Net Book

Acquired

Accumulated

Net Book


Amount

Amortization

Value

Amount

Amortization

Value

(Thousands)

Customer related

$
299,155

$
(196,551)

$
102,604

$
300,126

$
(148,416)

$
151,710

Trade name

54,267

(23,212)

31,055

54,391

(16,711)

37,680

Technology and other

64,740

(30,024)

34,716

52,793

(22,270)

30,523

$
418,162

$
(249,787)

$
168,375

$
407,310

$
(187,397)

$
219,913

~~Table~~(1)Includes intangible asset impairment of ~~Contents~~

$17,494 in the third quarter of fiscal 2020

~~AVNET, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

Intangible asset amortization expense from continuing operations was ~~$21.9~~$21.0 million and ~~$22.6~~$21.9 million for the third quarters of fiscal ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~$63.1~~$62.2 million and ~~$69.9~~$63.1 million for the first nine months of fiscal ~~2019~~2020 and ~~2018,~~2019, respectively. Intangible assets have a weighted average remaining useful life of approximately 2 years. The following table presents the estimated future amortization expense for the remainder of fiscal ~~2019~~2020 and the next five fiscal years (in thousands):



Fiscal Year
Remainder of fiscal 2019	$	21,179
2020		83,522
Remainder of fiscal 2020			$	18,708
2021		41,493		36,410
2022		14,774		12,610
2023		6,043		4,795
2024		1,364		1,472
2025				3,311
Total	$	168,375	$	77,306

Goodwill and intangible asset impairment expense

An interim goodwill impairment test was performed as of March 28, 2020. The macroeconomic impacts of the global coronavirus pandemic (“COVID-19”) and the corresponding decline in the Company’s share price below tangible book value, were indicators in the third quarter of fiscal 2020, that goodwill was potentially not recoverable.

The Company recorded non-cash goodwill impairment expense of $120.5 million during the third quarter of fiscal 2020, related to reporting units in the Electronic Components (EC) reportable segment including goodwill in the Americas and goodwill associated with recent acquisitions. The impairment of goodwill in such reporting units was primarily the result of COVID-19 related impacts including the significant decline in market capitalization during the quarter as well as a reduction in expected future operating results.

In assessing goodwill for impairment in the third quarter of fiscal 2020, the Company was required to make significant judgments related to the fair value of its reporting units. The Company used a combination of an income approach, specifically a discounted cash flow methodology, and a market approach to estimate the fair value of its reporting units. The discounted cash flow methodology includes market participant assumptions for, among other factors, forecasted sales, gross profit margins, operating expenses, cash flows, perpetual growth rates and long-term discount rates, all of which required judgments and estimates by management that are inherently uncertain. The market approach methodology required significant assumptions related to comparable transactions, market multiples, capital structure and control

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

premiums. The interim goodwill impairment testing results were also reconciled with the Company’s market capitalization on and around March 28, 2020, as the final step in the impairment testing.

The Company also performed asset impairment testing over long-lived assets, including intangible assets and property, plant and equipment, as of March 28, 2020 due primarily to the same indicators that led to the interim goodwill impairment testing. As a result of such long-lived asset impairment testing, the Company recorded $25.3 million in impairment expense substantially all related to intangible assets.

Other impairment expense

During the third quarter of fiscal 2020, the Company also recorded $15.3 million of equity investment impairment expense classified within other (expense) income, net in the consolidated statements of operations.

4. Debt

Short-term debt consists of the following ~~(in~~(carrying balances in thousands):


	March 30, 2019		June 30, 2018		March 30, 2019		June 30, 2018
	Interest Rate				Carrying Balance

									March 28,		June 29,		March 28,		June 29,
									2020		2019		2020		2019
									Interest Rate				Carrying Balance
Bank credit facilities and other	3.41	%	2.91	%	$	50,401	$	60,380	4.76	%	1.02	%	$	65	$	538
Accounts receivable securitization program	—		2.63	%		—		105,000
Accounts receivable securitization program (due August 2020)									1.71	%	—			99,900		—
Public notes due June 2020									5.88	%	5.88	%		300,000		300,000
Short-term debt					$	50,401	$	165,380					$	399,965	$	300,538

Bank credit facilities and other consists primarily of various committed and uncommitted lines of credit and other forms of bank debt with financial institutions utilized primarily to support the working capital requirements of the Company including its foreign operations.

~~Long-term debt consists of the following (in thousands):~~

March 30, 2019

June 30, 2018

March 30, 2019

June 30, 2018

Interest Rate

Carrying Balance

Revolving credit facilities:

Accounts receivable securitization program

3.25
%

—

$
447,000

$
—

Credit Facility

5.68

—

85,600

—

Public notes due:

June 2020

5.88
%

5.88
%

300,000

300,000

December 2021

3.75
%

3.75
%

300,000

300,000

December 2022

4.88
%

4.88
%

350,000

350,000

April 2026

4.63
%

4.63
%

550,000

550,000

Other long-term debt

1.11
%

1.26
%

449

383

Long-term debt before discount and debt issuance costs

2,033,049

1,500,383

Discount and debt issuance costs – unamortized

(9,421)

(11,164)

Long-term debt

$
2,023,628

$
1,489,219

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

The Company has ana trade accounts receivable securitization program (the “Securitization Program”) in the United States with a group of financial institutions to allow the Company to transfer, on an ongoing revolving basis, an undivided interest in a designated pool of trade accounts receivable, to provide security or collateral for borrowings up to a maximum of $500 million. The Securitization Program does not qualify for off balance sheet accounting treatment and any borrowings under the Securitization Program are recorded as debt in the consolidated balance sheets. Under the Securitization Program, the Company legally sells and isolates certain U.S. trade accounts receivable into a wholly owned and consolidated bankruptcy remote special purpose entity. Such receivables, which are recorded within “Receivables” in the consolidated balance sheets, totaled ~~$820.9~~$756.7 million and ~~$790.5~~$857.3 million at March ~~30, 2019,~~28, 2020 and June ~~30, 2018,~~29, 2019, respectively. The Securitization Program contains certain covenants relating to the quality of the receivables sold. The Securitization Program also requires the Company to maintain certain minimum interest coverage and leverage ratios, which the Company was in compliance with as of March ~~30, 2019,~~28, 2020, and June ~~30, 2018. The Securitization Program expires in August 2020 and as a result the Company has classified outstanding balances as long-term debt as of March 30,~~29, 2019. Interest on borrowings is calculated using a one-month LIBOR rate plus a spread of 0.75%. The facility fee on the unused balance of the facility is up to 0.35%.

On March 31, 2020, the Company notified Wells Fargo Bank, N.A., as Trustee, that it has elected to redeem on April 30, 2020, all of its outstanding 5.875% Notes due June 15, 2020 (“Notes”) at a make-whole redemption price in accordance with the terms of the Notes and the indenture. On April 30, 2020, the Company redeemed $300 million in principal amount of the Notes with a combination of cash on hand and by drawing on its existing $1.25 billion senior unsecured revolving credit facility, which is scheduled to mature on June 28, 2023. The make-whole premium for the early redemption was not material.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Long-term debt consists of the following (carrying balances in thousands):


	March 28,			June 29,		March 28,		June 29,
	2020		��	2019		2020		2019
	Interest Rate					Carrying Balance
Revolving credit facilities:
Accounts receivable securitization program	—			3.15	%	$	—	$	227,300
Credit Facility (due June 2023)	—			5.68	%		—		1,100
Public notes due:
December 2021	3.75	%		3.75	%		300,000		300,000
December 2022	4.88	%		4.88	%		350,000		350,000
April 2026	4.63	%		4.63	%		550,000		550,000
Other long-term debt	1.18	%		1.00	%		1,559		403
Long-term debt before discount and debt issuance costs							1,201,559		1,428,803
Discount and debt issuance costs – unamortized							(7,319)		(8,881)
Long-term debt						$	1,194,240	$	1,419,922

The Company has a five-year $1.25 billion senior unsecured revolving credit facility (the “Credit Facility”) with a syndicate of banks, consisting of revolving credit facilities and the issuance of up to $200.0 million of letters of credit and up to $300.0 million of loans in certain approved currencies, which expires in June 2023. Subject to certain conditions, the Credit Facility may be increased up to $1.50 billion. Under the Credit Facility, the Company may select from various interest rate options, currencies and maturities. The Credit Facility contains certain covenants including various limitations on debt incurrence, share repurchases, dividends, investments and capital expenditures. The Credit Facility also includes financial covenants requiring the Company to maintain minimum interest coverage and leverage ratios, which the Company was in compliance with as of March ~~30, 2019~~28, 2020 and June ~~30, 2018.~~29, 2019. As of March ~~30, 2019~~28, 2020 and June ~~30, 2018,~~29, 2019, there were ~~$3.0~~$1.6 million and ~~$2.0~~$4.0 million, respectively, in letters of credit issued under the Credit Facility.

As of March ~~30,~~28, 2020, the carrying value and fair value of the Company’s total debt was $1.59 billion and $1.60 billion, respectively. At June 29, 2019, the carrying value and fair value of the Company’s total debt was ~~$2.07~~$1.72 billion and ~~$2.12 billion, respectively. At June 30, 2018, the carrying value and fair value of the Company’s total debt was $1.65 billion and $1.67~~$1.78 billion, respectively. Fair value for the public notes was estimated based upon quoted market prices and for other forms of debt fair value approximates carrying value due to the market based variable nature of the interest rates on those debt facilities.

5. Leases

Substantially all the Company’s leases are classified as operating leases and are predominately related to real property for distribution centers, office space and integration facilities with a lease term of up to 18 years. The Company’s equipment leases are primarily for automobiles and equipment, and are not material to the consolidated financial statements.

The Company determines if an arrangement contains a lease at inception based on whether it conveys the right to control the use of an identified asset in exchange for consideration. Lease right-of-use assets (“operating lease assets”) and associated liabilities (“operating lease liabilities”) are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Certain lease agreements may include one or more options to extend or terminate a lease. Lease terms are inclusive of these options if it is reasonably certain that the Company will exercise such options.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company’s leases generally do not provide a readily determinable implicit borrowing rate, as such, the discount rate used to calculate present value is based upon an estimate of the Company’s secured borrowing rate. The estimated secured borrowing rates used at the date of adoption for each lease varies in accordance with the lease term and the currency of the lease payments. Lease cost is recognized on a straight-line basis over the lease term and is included as a component of “Selling, general, and administrative expenses” in the consolidated statements of operations. Lease payments are primarily fixed; however, certain lease agreements contain variable payments, which are expensed as incurred and not included in the measurement of operating lease assets and liabilities.

The components of lease cost related to the Company’s operating leases were as follows (in thousands):


	Third Quarter		Nine Months
	Ended		Ended
	March 28, 2020
Operating lease cost	$	19,257	$	57,633
Variable lease cost		5,496		15,594
Total lease cost	$	24,753	$	73,227

Future minimum operating lease payments as of March 28, 2020 are as follows (in thousands):


Fiscal Year
Remainder of fiscal 2020	$	19,735
2021		58,995
2022		49,061
2023		42,079
2024		32,965
Thereafter		167,259
Total future operating lease payments		370,094
Total imputed interest on operating lease liabilities		(67,059)
Total operating lease liabilities	$	303,035

Prior to the Company’s adoption of ASC 842, future minimum operating lease payments as of June 29, 2019 were as follows (in thousands) on an undiscounted basis and excluding non-lease components:


Fiscal Year
2020	$	68,710
2021		52,225
2022		42,069
2023		32,245
2024		23,305
Thereafter		85,196
Total lease payments	$	303,750

Other information pertaining to operating leases consists of the following:


Operating Lease Term and Discount Rate
Weighted-average remaining lease term in years	9.6
Weighted-average discount rate	3.8	%

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Supplemental cash flow information related to the Company’s operating leases for the nine months ended March 28, 2020 was as follows (in thousands):


Supplemental Cash Flow Information:
Cash paid for operating lease liabilities	$	46,418
Operating lease assets obtained from new operating lease liabilities		30,750

6. Derivative financial instruments

Many of the Company’s subsidiaries purchase and sell products in currencies other than their functional currencies. This subjects the Company to the risks associated with fluctuations in foreign currency exchange rates. The Company reduces this risk by utilizing natural hedging (e.g., offsetting receivables and payables in the same foreign currency) as well as by creating offsetting positions through the use of derivative financial instruments, primarily forward foreign exchange contracts typically with maturities of less than 60 days (“economic hedges”), but no longer than one year. The Company continues to have exposure to foreign currency risks to the extent they are not economically hedged. The Company adjusts any economic hedges to fair value through the consolidated statements of operations primarily within ~~“other~~“Other (expense) income, net.” The fair value of forward foreign exchange contracts, which are based upon Level 2 criteria under the ASC 820 fair value hierarchy, are classified in the captions “Prepaid and other current assets” or “Accrued expenses and other,” as applicable, in the accompanying consolidated balance sheets as of March ~~30, 2019~~28, 2020 and June ~~30, 2018.~~29, 2019. The Company’s master netting and other similar arrangements with various financial institutions related to derivative financial instruments allow for the right of offset. The Company’s policy is to present derivative financial instruments with the same counterparty as either a net asset or liability when the right of offset exists.

The Company generally does not hedge its investments in its foreign operations. The Company does not enter into derivative financial instruments for trading or speculative purposes and monitors the financial stability and credit standing of its counterparties.

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

The Company’s foreign currency exposure relates primarily to international transactions where the currency collected from customers can be different from the currency used to purchase from suppliers. The Company’s foreign operations transactions are denominated primarily in the following currencies: U.S. Dollar, Euro, British Pound, Japanese Yen, Chinese Yuan, Taiwan Dollar, Canadian Dollar and Mexican Peso. The Company also, to a lesser extent, has foreign operations transactions in other ~~European~~EMEA and ~~Asia/Pacific~~Asia foreign currencies.

The fair values of ~~derivative financial instruments~~forward foreign currency exchange contracts not receiving hedge accounting treatment recorded in the Company’s consolidated balance sheets are as follows:


	March 28,		June 29,
	2020		2019
	(Thousands)
Prepaid and other current assets	$	15,614	$	5,511
Accrued expenses and other		14,147		6,154

March 30,

June 30,

2019

2018

(Thousands)

Forward foreign currency exchange contracts not receiving hedge accounting treatment recorded in:

Prepaid and other current assets

$
2,636

$
2,259

Accrued expenses and other

3,262

7,083

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The amounts recorded to other (expense) income, net, related to derivative financial instruments for economic hedges are as follows:

Third Quarters Ended

Nine Months Ended

March 30,

March 31,

March 30,

March 31,

2019

2018

2019

2018

(Thousands)
Net derivative financial instrument (loss) gain

$
(398)

$
3,354

$
(17)

$
5,070


	Third Quarters Ended				Nine Months Ended
	March 28,		March 30,		March 28,		March 30,
	2020		2019		2020		2019
	(Thousands)
Net derivative financial instrument (loss) gain	$	(3,247)	$	(398)	$	7,856	$	(17)

Under the Company’s economic hedging policies, gains and losses on the derivative financial instruments are classified within the same line item in the consolidated statements of operations ~~and~~ as the remeasurement of the underlying assets or liabilities being economically hedged.

7. Commitments and contingencies

From time to time, the Company may become a party to, or be otherwise involved in various lawsuits, claims, investigations and other legal proceedings arising in the ordinary course of conducting its business. While litigation is subject to inherent uncertainties, management does not anticipate that any such matters will have a material adverse effect on the Company’s financial condition, liquidity or results of operations.

The Company is also currently subject to various pending and potential legal matters and investigations relating to compliance with governmental laws and regulations, including import/export and environmental matters. For certain of these matters it is not possible to determine the ultimate outcome, and the Company cannot reasonably estimate the maximum potential exposure or the range of possible loss for such matters due primarily to being in the early stages of the related proceedings and investigations. The Company currently believes that the resolution of such matters will not have a material adverse effect on the Company’s financial position or liquidity but could possibly be material to its results of operations in any one reporting period.

As of March ~~30, 2019~~28, 2020 and June ~~30, 2018,~~29, 2019, the Company had aggregate estimated liabilities of $14.7 million ~~and $14.2 million, respectively,~~ classified within accrued expenses and other for such compliance-related matters that were reasonably estimable as of such dates.

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

8. Income taxes

The Company’s effective tax rate on its loss from continuing operations before taxes was 18.6% in the third quarter of fiscal 2020. During the third quarter of fiscal 2020, the Company’s effective tax rate was unfavorably impacted primarily by (i) the impairment of goodwill that is not deductible for tax purposes, partially offset by (ii) the release of unrecognized tax benefit reserves net of settlements.

During the third quarter of fiscal 2019, the Company’s effective tax rate on its income from continuing operations before taxes was 24.4% ~~in the third quarter of fiscal 2019.~~. During the third quarter of fiscal 2019, the Company’s effective tax rate was unfavorably impacted primarily by (i) an increase due to the impact from recently issued U.S. income tax regulations, partially offset by (ii) decreases in unrecognized tax benefits due to the expiration of the statute of limitations in various jurisdictions.

~~During~~For the ~~third quarter~~first nine months of fiscal ~~2018,~~2020, the Company’s effective tax rate on its loss from continuing operations before income taxes was 27.0%. The effective tax rate for the first nine months of ~~338.0%~~fiscal 2020 was ~~unfavorably~~favorably impacted primarily by (i) the ~~one-time mandatory deemed repatriation~~release of unrecognized tax ~~liability expense (“the transition tax”) estimate recorded under the requirements~~benefit reserves net of ~~U.S. federal government enacted tax legislation (the “Act”)~~settlements and (ii) ~~the goodwill impairment discussed in Note 4, which was not tax deductible, partially offset primarily by (iii)~~ the mix of income in lower tax jurisdictions, partially offset by (iii) goodwill impairment expense that is not deductible for tax purposes and (iv) ~~the release~~a valuation allowance against interest deduction deferred tax assets.

Table of ~~reserves due to the expiration of the statute of limitations in various jurisdictions.~~Contents

AVNET, INC. AND SUBSIDIARIES

~~For~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

During the first nine months of fiscal 2019, the Company’s effective tax rate on its income from continuing operations before taxes was 29.5%. The effective tax rate for the first nine months of fiscal 2019 was unfavorably impacted primarily by (i) an adjustment to the transition tax on unremitted foreign earnings recorded under the requirements of ~~the Act,~~recent U.S. tax law changes (the “Act”) , (ii) net increases in unrecognized tax benefits, and (iii) an increase due to the impact from recently issued U.S. income tax regulations associated with the Act, partially offset by (iv) an adjustment to the deferred tax impacts of the Act, (v) the mix of income in lower tax jurisdictions, and (vi) the release of valuation allowances against deferred tax assets that were deemed to be realizable.

During the first nine months of fiscal 2018, the Company’s effective tax rate on its income from continuing operations before taxes of 489.2% was unfavorably impacted primarily by (i) the transition tax expense recorded under the requirements of the Act, (ii) the goodwill impairment, which was not tax deductible, and (iii) the tax expense created from remeasuring net deferred tax assets as a result of applying the requirements of the Act, partially offset primarily by (iv) the mix of income in lower tax jurisdictions and (v) the release of reserves due to the expiration of the statute of limitations in various jurisdictions.

The Company’s effective tax rate in fiscal 2019 is based on the Company’s interpretation of tax regulations under the Act including the computation of Global Intangible Low Taxed Income (“GILTI”). The Company has made a policy election to account for any impacts of the GILTI tax as a period expense. The Company’s fiscal 2019 effective tax rate may change in future periods due to changes in ~~U.S.~~ tax ~~regulations~~laws and ~~the~~ issuance of additional guidance ~~related to the Act.~~and regulations of tax laws.

During the second quarter of fiscal 2019, which corresponds to the end of the measurement period allowed for under Staff Accounting Bulletin 118 (“SAB 118”), the Company finalized its estimate of the transition tax, resulting in an increase to the tax liability of $10.8 million due to additional analysis performed on foreign tax pools and earnings and profits computations. The total transition tax recorded as a result of the Act is estimated to be $257.5 million. The transition tax may change in the future due to changes in U.S. tax regulations, new guidance from federal and state regulators and related interpretations of the Act.

The Company ~~continues~~has considered the expected impact of COVID-19 in evaluating the need for valuation allowances and unrecognized tax benefit reserves.

The United States enacted the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act is an approximately $2 trillion emergency economic stimulus package in response to ~~evaluate~~the COVID-19 outbreak, which among other things contains numerous income tax provisions. Some of these tax provisions are expected to be effective retroactively for years ending before the date of enactment. The Company analyzed the impact of the CARES Act ~~including the Company’s historical assertion related to ASC 740 unremitted earnings. The Company has~~and does not ~~changed~~foresee a significant impact on its ~~historical assertion as~~consolidated financial position, results of ~~March 30, 2019 that its ASC 740 unremitted earnings are permanently reinvested.~~operations, effective tax rate and cash flows.

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

9. Pension plan

The Company has a noncontributory defined benefit pension plan that covers substantially all ~~U.S. employees and includes an acquired closed noncontributory defined benefit pension plan covering certain~~ current or former ~~Premier Farnell~~ U.S. employees (the “Plan”). Components of net periodic pension cost ~~from continuing operations~~ for the Plan ~~were~~was as ~~follows, which reflect the adoption of ASU 2017-07 as discussed further in Note 1:~~follows:


	Third Quarters Ended				Nine Months Ended
	March 30,		March 31,		March 30,		March 31,
	2019		2018		2019		2018
	(Thousands)

									Third Quarters Ended				Nine Months Ended
									March 28,		March 30,		March 28,		March 30,
									2020		2019		2020		2019
									(Thousands)
Service cost	$	3,582	$	4,305	$	11,050	$	12,040	$	3,786	$	3,582	$	11,358	$	11,050
Total net periodic pension cost within selling, general and administrative expenses		3,582		4,305		11,050		12,040		3,786		3,582		11,358		11,050


Interest cost		8,010		4,529		21,238		16,095		5,638		8,010		16,914		21,238
Expected return on plan assets		(16,003)		(10,862)		(42,605)		(38,376)		(12,668)		(16,003)		(38,003)		(42,605)
Amortization of prior service credits		(392)		(393)		(1,178)		(1,179)
Amortization of prior service cost (credit)										534		(392)		1,603		(1,178)
Recognized net actuarial loss		2,091		3,456		7,161		10,948		3,658		2,091		10,972		7,161
Total net periodic pension benefit within other income, net		(6,294)		(3,270)		(15,384)		(12,512)

Net periodic pension (benefit) cost	$	(2,712)	$	1,035	$	(4,334)	$	(472)
Total net periodic pension benefit within other (expense) income, net										(2,838)		(6,294)		(8,514)		(15,384)

Net periodic pension cost (benefit)									$	948	$	(2,712)	$	2,844	$	(4,334)

In connection with the adoption of ASU No. 2017-07, the Company now classifies service cost as a component of selling, general and administrative expenses and other components of net periodic pension costs within other income, net. The Company ~~contributed $8.0 million~~expects to make contributions to the Plan of $4.0 million during the remainder of fiscal 2020. The Company made $4.0 million of contributions during the first nine months of fiscal ~~2019 and expects to make an additional contribution to the Plan of $8.0 million in the remainder of fiscal 2019.~~2020.

Amounts reclassified out of accumulated other comprehensive income, net of tax, to other income, net during the third quarters and first nine months of fiscal 2019 and fiscal 2018 were not material and substantially all related to net periodic pension costs including recognition of actuarial losses and amortization of prior service credits.

In connection with the sale of the TS business, a significant number of former employees became terminated vested employees under the Plan. During fiscal 2018, the aggregate amount of former employee withdrawals from the Plan exceeded the pension accounting settlement threshold for fiscal 2018, which required a settlement expense under ASC 715 pension accounting. As a result, the Company recorded a pension settlement expense of $4.9 million and $18.9 million in the third quarter and first nine months of fiscal 2018, respectively, which was classified as a component of loss from discontinued operations.

1516

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

10. Shareholders’ equity

Share repurchase program

In August ~~2018,~~2019, the Company’s Board of Directors amended the Company’s existing share repurchase program, increasing the cumulative total of authorized share repurchases to ~~authorize the repurchase of up to $2.45~~$2.95 billion of common stock in the open market or through privately negotiated transactions. The timing and actual number of shares repurchased will depend on a variety of factors such as share price, expected liquidity, expected compliance with financial debt convents, corporate and regulatory requirements, and prevailing market conditions. During the third quarter and nine months ended March ~~30, 2019,~~28, 2020, the Company repurchased ~~2.8~~1.1 million and ~~10.2~~5.9 million shares, respectively, under this program for a total cost of ~~$117.2~~$36.7 million and ~~$449.2~~$236.4 million, respectively. As of March ~~30, 2019,~~28, 2020, the Company had ~~$322.9~~$469.0 million remaining under its share repurchase authorization.

As a result of the economic uncertainty caused by COVID-19, the Company has temporarily suspended share repurchases.

Common stock dividend

In February ~~2019,~~2020, the Company’s Board of Directors approved a dividend of ~~$0.20~~$0.21 per common share and dividend payments of ~~$21.5~~$20.8 million were made in March ~~2019.~~2020. During the nine months ended March ~~30, 2019,~~28, 2020, the Company paid dividends of ~~$0.60~~$0.63 per common share and ~~$66.2~~$63.2 million in total.

11. Earnings per share


	Third Quarters Ended				Nine Months Ended
	March 30,		March 31,		March 30,		March 31,
	2019		2018		2019		2018
	(Thousands, except per share data)

									Third Quarters Ended				Nine Months Ended
									March 28,		March 30,		March 28,		March 30,
									2020		2019		2020		2019
									(Thousands, except per share data)
Numerator:
Income (loss) from continuing operations	$	94,935	$	(315,604)	$	215,239	$	(200,628)	$	(128,661)	$	94,935	$	(81,694)	$	215,239
Loss from discontinued operations		(6,887)		(4,462)		(7,066)		(14,411)
Net income (loss)	$	88,048	$	(320,066)	$	208,173	$	(215,039)

Loss from discontinued operations, net of tax										—		(6,887)		(1,548)		(7,066)
Net (loss) income									$	(128,661)	$	88,048	$	(83,242)	$	208,173

Denominator:
Weighted average common shares for basic earnings per share		108,074		119,601		111,222		120,895		99,479		108,074		101,013		111,222
Net effect of dilutive stock based compensation awards		748		—		1,030		—		—		748		—		1,030
Weighted average common shares for diluted earnings per share		108,822		119,601		112,252		120,895		99,479		108,822		101,013		112,252
Basic earnings (loss) per share - continuing operations	$	0.87	$	(2.64)	$	1.93	$	(1.66)
Basic (loss) earnings per share - continuing operations									$	(1.29)	$	0.87	$	(0.81)	$	1.93
Basic loss per share - discontinued operations		(0.06)		(0.04)		(0.06)		(0.12)		—		(0.06)		(0.01)		(0.06)
Basic earnings (loss) per share	$	0.81	$	(2.68)	$	1.87	$	(1.78)
Diluted earnings (loss) per share - continuing operations	$	0.87	$	(2.64)	$	1.91	$	(1.66)
Basic (loss) earnings per share									$	(1.29)	$	0.81	$	(0.82)	$	1.87
Diluted (loss) earnings per share - continuing operations									$	(1.29)	$	0.87	$	(0.81)	$	1.91
Diluted loss per share - discontinued operations		(0.06)		(0.04)		(0.06)		(0.12)		—		(0.06)		(0.01)		(0.06)
Diluted earnings (loss) per share	$	0.81	$	(2.68)	$	1.85	$	(1.78)
Diluted (loss) earnings per share									$	(1.29)	$	0.81	$	(0.82)	$	1.85
Stock options excluded from earnings per share calculation due to anti-dilutive effect		528		1,591		410		1,591		1,431		528		1,018		410

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

For the three and nine months ended March ~~31, 2018,~~28, 2020, the diluted net loss per share is the same as basic net loss per share as the effects of ~~all~~208,399 and 775,060 potential common shares, respectively, would be ~~anti-dilutive as the Company had net losses.~~anti-dilutive.

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

12. Additional cash flow information

Non-cash investing and financing activities and supplemental cash flow information were as follows:


	Nine Months Ended
	March 30,		March 31,
	2019		2018
	(Thousands)

					Nine Months Ended
					March 28,		March 30,
					2020		2019
					(Thousands)
Non-cash Investing Activities:
Capital expenditures incurred but not paid	$	10,310	$	21,282	$	5,366	$	10,310
Unsettled sale of marketable securities		—		4,121
Non-cash Financing Activities:
Unsettled share repurchases	$	4,740	$	—		—	$	4,740
Supplemental Cash Flow Information:
Interest	$	87,845	$	55,924	$	88,472	$	87,845
Income taxes - continuing and discontinued operations		150,765		94,773
Income tax payments - continuing and discontinued operations						14,689		150,765

Included in cash and cash equivalents as of March ~~30, 2019~~28, 2020 and June ~~30, 2018~~29, 2019 was ~~$6.5~~$4.1 million and ~~$6.1~~$9.4 million, respectively, of cash equivalents, which was primarily comprised of investment grade money market funds and overnight time deposits.

13. Segment information

Electronic Components (“EC”) and ~~Premier~~ Farnell (“Farnell”) are the Company’s reportable segments (“operating groups”). EC markets and sells semiconductors and interconnect, passive and electromechanical devices and integrated components to a diverse customer base serving many end-markets. Farnell distributes electronic components and related products to the electronic system design community utilizing multi-channel sales and marketing resources.

1718

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


	Third Quarters Ended				Nine Months Ended
	March 28,		March 30,		March 28,		March 30,
	2020		2019		2020		2019
	(Thousands)
Sales:
Electronic Components	$	3,974,669	$	4,331,351	$	12,472,484	$	13,722,890
Farnell		335,149		367,473		1,002,148		1,114,793
		4,309,818		4,698,824		13,474,632		14,837,683
Operating income (loss):
Electronic Components	$	84,841	$	153,319	$	290,271	$	473,783
Farnell		23,350		45,651		65,109		126,088
		108,191		198,970		355,380		599,871
Corporate		(37,833)		(20,866)		(95,416)		(60,414)
Restructuring, integration and other expenses		(19,211)		(2,939)		(58,073)		(79,986)
Goodwill and intangible asset impairment expense		(145,836)		—		(145,836)		—
Amortization of acquired intangible assets and other		(21,071)		(22,080)		(62,603)		(63,520)
Operating (loss) income	$	(115,760)	$	153,085	$	(6,548)	$	395,951

Sales, by geographic area:
Americas ⁽¹⁾	$	1,203,605	$	1,297,220	$	3,605,944	$	3,869,435
EMEA ⁽²⁾		1,512,476		1,740,916		4,409,258		5,124,409
Asia/Pacific ⁽³⁾		1,593,737		1,660,688		5,459,430		5,843,839
Sales	$	4,309,818	$	4,698,824	$	13,474,632	$	14,837,683

⁽¹⁾	Includes sales from the United States of $1.11 billion and $1.22 billion for the third quarters ended March 28, 2020 and March 30, 2019, respectively. Includes sales from the United States of $3.37 billion and $3.61 billion for the first nine months of fiscal 2020 and 2019, respectively.

⁽²⁾

Includes sales from Germany and Belgium of $568.0 million and $278.3 million, respectively, for the third quarter ended March 28, 2020, and $1.69 billion and $837.7 million, respectively, for the first nine months of fiscal 2020. Includes sales from Germany and Belgium of $666.2 million and $311.9 million, respectively, for the third quarter ended March 30, 2019, and $2.00 billion and $868.2 million, respectively, for the first nine months of fiscal 2019.

⁽³⁾

Includes sales from China (including Hong Kong), Taiwan and Singapore of $524.1 million, $649.7 million and $239.3 million, respectively, for the third quarter ended March 28, 2020, and $1.76 billion, $2.39 billion and $722.7 million, respectively, for the first nine months of fiscal 2020. Includes sales from China (including Hong Kong), Taiwan and Singapore of $565.5 million, $659.7 million and $237.2 million, respectively, for the third quarter ended March 30, 2019, and $1.93 billion, $2.47 billion and $779.5 million, respectively, for the first nine months of fiscal 2019.

Third Quarters Ended

Nine Months Ended

March 30,

March 31,

March 30,

March 31,

2019

2018

2019

2018

(Thousands)
Sales:












Electronic Components

$
4,331,351

$
4,404,115

$
13,722,890

$
12,874,885
Farnell

367,473

390,978

1,114,793

1,102,787

4,698,824

4,795,093

14,837,683

13,977,672
Operating income:

Electronic Components

$
153,319

$
157,713

$
473,783

$
427,162
Farnell

45,651

42,162

126,088

108,245

198,970

199,875

599,871

535,407
Corporate (1)

(20,866)

(29,084)

(60,414)

(87,812)
Restructuring, integration and other expenses

(2,939)

(25,120)

(79,986)

(108,277)
Goodwill impairment expense

—

(181,440)

—

(181,440)
Amortization of acquired intangible assets and other

(22,080)

(22,725)

(63,520)

(70,187)
Operating income (loss)

$
153,085

$
(58,494)

$
395,951

$
87,691

Sales, by geographic area:

Americas (2)

$
1,297,220

$
1,276,426

$
3,869,435

$
3,672,160
EMEA (3)

1,740,916

1,812,334

5,124,409

5,011,336
Asia/Pacific (4)

1,660,688

1,706,333

5,843,839

5,294,176
Sales

$
4,698,824

$
4,795,093

$
14,837,683

$
13,977,672

~~(1)~~Corporate is not a reportable segment and represents certain centrally incurred overhead expenses and assets that are not included in the EC and Farnell measures of profitability or assets. Corporate amounts represent a reconciling item between segment measures of profitability or assets and total Avnet amounts reported in the consolidated financial statements.

~~(2)~~Includes sales from the United States of $1.22 billion and $1.18 billion for the third quarters ended March 30, 2019 and March 31, 2018, respectively. Includes sales from the United States of $3.61 billion and $3.40 billion for the first nine months of fiscal 2019 and 2018, respectively.

~~(3)~~Includes sales from Germany and Belgium of $666.2 million and $311.9 million, respectively, for the third quarter ended March 30, 2019, and $2.00 billion and $868.2 million, respectively, for the first nine months of fiscal 2019. Includes sales from Germany and Belgium of $717.8 million and $281.1 million, respectively, for the third quarter ended March 31, 2018, and $1.98 billion and $786.0 million, respectively, for the first nine months of fiscal 2018.

~~(4)~~Includes sales from China (including Hong Kong), Taiwan and Singapore of $565.5 million, $659.7 million and $237.2 million, respectively, for the third quarter ended March 30, 2019, and $1.93 billion, $2.47 billion and $779.5 million, respectively, for the first nine months of fiscal 2019. Includes sales from China (including Hong Kong), Taiwan and Singapore of $638.1 million, $616.7 million and $231.6 million, respectively, for the third quarter ended March 31, 2018, and $1.92 billion, $1.99 billion and $677.8 million, respectively, for the first nine months of fiscal 2018.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


	March 28,		June 29,
	2020		2019
	(Thousands)
Property, plant, and equipment, net, by geographic area:
Americas ⁽¹⁾	$	193,859	$	213,802
EMEA ⁽²⁾		183,903		200,379
Asia/Pacific		35,609		37,990
Property, plant, and equipment, net	$	413,371	$	452,171

March 30,

June 30,

2019

2018

(Thousands)

Property, plant, and equipment, net, by geographic area:

Americas (1)

$
219,283

$
276,156

EMEA (2)

197,090

204,797

Asia/Pacific

39,111

41,956

Property, plant, and equipment, net

$
455,484

$
522,909

⁽¹⁾	Includes property, plant and equipment, net, of $189.0 million and $209.9 million as of March 28, 2020 and June 29, 2019, respectively, in the United States.

⁽²⁾

Includes property, plant and equipment, net, of $86.2 million, $71.5 million and $22.8 million in Germany, the United Kingdom and Belgium, respectively, as of March 28, 2020; and $95.2 million, $70.5 million and $25.2 million in Germany, the United Kingdom and Belgium, respectively, as of June 29, 2019.

~~(1)Includes property, plant and equipment, net, of $215.0 million and $271.4 million as of March 30, 2019, and June 30, 2018, respectively, in the United States.~~

~~(2)~~Includes property, plant and equipment, net, of $94.8 million, $65.3 million and $27.2 million in Germany, the UK and Belgium, respectively, as of March 30, 2019; and $99.4 million, $52.5 million and $43.4 million in Germany, the UK and Belgium, respectively, as of June 30, 2018.

14. Restructuring expenses

Fiscal ~~2019~~2020

During fiscal ~~2019,~~2020, the Company undertook restructuring actions in order to improve operating efficiencies and further integrate the acquisition of Farnell. These restructuring actions included certain costs associated with the continued transformation of the Company’s information technology, distribution center footprint and business operations including the re-prioritization of its information technology initiatives and resources. Restructuring expenses are included as a component of restructuring, integration and other expenses in the ~~Consolidated Statements~~consolidated statements of ~~Operations.~~operations. The activity related to the restructuring liabilities and ~~assets~~asset impairments associated with restructuring activities established during fiscal ~~2019~~2020 is presented in the following table:


			Facility
			and Contract		Asset
	Severance		Exit Costs		Impairments		Total
	(Thousands)
Fiscal 2019 restructuring expenses	$	23,640	$	553	$	52,344	$	76,537

											Facility
											and Contract		Asset
									Severance		Exit Costs		Impairments		Total
									(Thousands)
Fiscal 2020 restructuring expenses									$	26,895	$	3,066	$	7,111	$	37,072
Cash payments		(12,782)		(200)		—		(12,982)		(18,141)		(798)		—		(18,939)
Non-cash amounts		—		—		(52,344)		(52,344)		—		—		(7,111)		(7,111)
Other, principally foreign currency translation		(118)		(5)		—		(123)		(68)		(39)		—		(107)
Balance at March 30, 2019	$	10,740	$	348	$	—	$	11,088
Balance at March 28, 2020									$	8,686	$	2,229	$	—	$	10,915

Severance expense recorded in the first nine months of fiscal ~~2019~~2020 related to the reduction, or planned reduction, of ~~over 300~~approximately 400 employees, primarily in executive management, operations, information technology, warehouse, sales and business support functions. ~~Facility and contract exit costs primarily consist of liabilities for remaining lease obligations for exited facilities and for contractual termination costs.~~ Asset impairments ~~represents an asset impairment expense of $52.3 million that relates~~relate primarily to software long-lived assets that were impaired as a result of the restructuring of information technology operations including the re-prioritization of information technology initiatives and resources. Of the ~~$76.5~~$37.1 million in restructuring expenses recorded during the first nine months of fiscal ~~2019, $75.1~~2020, $28.9 million related to EC, ~~$1.1~~$6.3 million related to Farnell and ~~$0.3~~$1.9 million related to ~~corporate executive and business support functions.~~Corporate. The Company expects the majority of the remaining severance amounts to be paid by the end of fiscal ~~2019.~~2020.

1920

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Fiscal ~~2018~~2019 and prior

During fiscal ~~2018~~2019 and prior, the Company incurred restructuring expenses related to various restructuring actions intended to achieve planned synergies from acquired businesses and to reduce future operating expenses. The following table presents the activity during the first nine months of fiscal ~~2019~~2020 related to the remaining restructuring liabilities from continuing operations established during fiscal ~~2018~~2019 and prior:


			Facility
			and Contract		Asset
	Severance		Exit Costs		Impairments		Total
	(Thousands)
Balance at June 30, 2018	$	25,918	$	2,890	$	416	$	29,224

											Facility
											and Contract
									Severance		Exit Costs		Total
									(Thousands)
Balance at June 29, 2019									$	21,537	$	5,381	$	26,918
Cash payments		(21,328)		(969)		—		(22,297)		(13,465)		(3,294)		(16,759)
Changes in estimates, net		(877)		(155)		—		(1,032)		(3,448)		373		(3,075)
Non-cash amounts		—		218		(416)		(198)
Other, principally foreign currency translation		(432)		39		—		(393)		(548)		(118)		(666)
Balance at March 30, 2019	$	3,281	$	2,023	$	—	$	5,304
Balance at March 28, 2020									$	4,076	$	2,342	$	6,418

The Company expects the majority of the remaining amounts to be paid by the end of fiscal ~~2019.~~2020.

2021

Table of Contents

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) with respect to the financial condition, results of operations and business of the Company. You can find many of these statements by looking for words like “believes,” “plans,” “expects,” “anticipates,” “should,” “will,” “may,” “estimates” or similar expressions in this Quarterly Report or in documents incorporated by reference in this Quarterly Report. These forward-looking statements are subject to numerous assumptions, risks and uncertainties. You should understand that the following important factors, in addition to those discussed elsewhere in this Quarterly Report and in the Company’s Annual Report on Form 10-K for the fiscal year ended June 29, 2019, could affect the Company’s future results of operations, and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements: the scope and duration of the COVID-19 outbreak and its impact on global economic systems, access to financial markets and the Company’s employees, operations, customers, and supply chain; competitive pressures among distributors of electronic components; an industry down-cycle in semiconductors; relationships with key suppliers and allocations of products by suppliers; risks relating to the Company’s international sales and operations, including risks relating to the ability to repatriate cash, foreign currency fluctuations, duties and taxes, and compliance with international and U.S. laws; risks relating to acquisitions, divestitures and investments; adverse effects on the Company’s supply chain, shipping costs, third-party service providers, customers and suppliers, including as a result of issues caused by natural and weather-related disasters or pandemics and health related crisis; risks related to cyber-attacks and the Company’s information systems, including related to current or future implementations; general economic and business conditions (domestic, foreign and global) affecting the Company’s operations and financial performance and, indirectly, the Company’s credit ratings, debt covenant compliance, and liquidity and access to financing; geopolitical events, including the uncertainty caused by the United Kingdom’s planned exit from the European Union commonly referred to as “Brexit”; and legislative or regulatory changes affecting the Company’s businesses.

Any forward-looking statement speaks only as of the date on which that statement is made. Except as required by law, the Company assumes no obligation to update any forward-looking statement to reflect events or circumstances that occur after the date on which the statement is made.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

For a description of the Company’s critical accounting policies and an understanding of the significant factors that influenced the Company’s performance during the quarter ended March ~~30, 2019,~~28, 2020, this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the consolidated financial statements, including the related notes, appearing in Item 1 of this Quarterly Report on Form 10-Q, as well as the Company’s Annual Report on Form 10-K for the fiscal year ended June ~~30, 2018.~~29, 2019.

There are references to the impact of foreign currency translation in the discussion of the Company’s results of operations. When the U.S. Dollar strengthens and the stronger exchange rates of the current year are used to translate the results of operations of Avnet’s subsidiaries denominated in foreign currencies, the resulting impact is a decrease in U.S. Dollars of reported results. Conversely, when the U.S. Dollar weakens and the weaker exchange rates of the current year are used to translate the results of operations of Avnet’s subsidiaries denominated in foreign currencies, the resulting impact is an increase in U.S. Dollars of reported results. In the discussion that follows, results excluding this impact, primarily for subsidiaries in Europe, the Middle East and Africa (“EMEA”) and Asia/Pacific (“Asia”), are referred to as “constant currency.”

In addition to disclosing financial results that are determined in accordance with generally accepted accounting principles in the U.S. (“GAAP”), the Company also discloses certain non-GAAP financial information, including:

●

Sales adjusted for certain items that impact the year-over-year analysis, which includes the impact of certain acquisitions by adjusting Avnet’s prior periods to include the sales of acquired businesses, as if the acquisitions had occurred at the beginning of the earliest period presented. Sales taking into account these adjustments are referred to as “organic sales.”

Table of Contents

●

Operating income (loss) excluding (i) restructuring, integration and other expenses, (see Restructuring, Integration and Other Expenses in this MD&A), (ii) goodwill and intangible asset impairment expense and other and (iii) amortization of acquired intangible ~~assets and other.~~assets. Operating income excluding such amounts is referred to as “adjusted operating income.”

The reconciliation of operating income (loss) to adjusted operating income is presented in the following table:


	Third Quarters Ended				Nine Months Ended
	March 30,		March 31,		March 30,		March 31,
	2019*		2018		2019*		2018
	(Thousands)
Operating income (loss)	$	153,085	$	(58,494)	$	395,951	$	87,691

									Third Quarters Ended				Nine Months Ended
									March 28,		March 30,		March 28,		March 30,
									2020		2019		2020		2019
									(Thousands)
Operating (loss) income									$	(115,760)	$	153,085	$	(6,548)	$	395,951
Restructuring, integration and other expenses		2,939		25,120		79,986		108,277		19,211		2,939		58,073		79,986
Goodwill impairment expense		—		181,440		—		181,440
Goodwill and intangible asset impairment expense										145,836		—		145,836		—
Amortization of acquired intangible assets and other		22,080		22,725		63,520		70,187		21,071		22,080		62,603		63,520
Adjusted operating income	$	178,103	$	170,791	$	539,456	$	447,595	$	70,358	$	178,103	$	259,964	$	539,456

~~___________~~

* May not foot due to rounding

Management believes that providing this additional information is useful to readers to better assess and understand operating performance, especially when comparing results with prior periods or forecasting performance for future periods, primarily because management typically monitors the business both including and excluding these adjustments to GAAP results. Management also uses these non-GAAP measures to establish operational goals and, in many cases, for measuring performance for compensation purposes. However, any analysis of results on a non-GAAP basis should be used as a complement to, and in conjunction with, results presented in accordance with GAAP.

2123

Table of Contents

OVERVIEW

~~OVERVIEW~~

Organization

~~Organization~~

Avnet, Inc. ~~(the~~and its consolidated subsidiaries’ (collectively, the “Company” or “Avnet”), is a global technology solutions company with an extensive ecosystem delivering design, product, marketing and supply chain expertise for customers at every stage of the product lifecycle. Avnet transforms ideas into intelligent solutions, reducing the time, cost and complexities of bringing products to market around the world. Founded in 1921 and incorporated in New York in 1955, the Company works with over 1,400 technology suppliers to serve 2.1 million customers in more than 140 countries.

Avnet has two primary operating groups — Electronic Components (“EC”) and ~~Premier~~ Farnell (“Farnell”). Both operating groups have operations in each of the three major economic regions of the world: (i) the Americas, (ii) EMEA and (iii) Asia. A summary of each operating group is provided in Note 13, “Segment information” to the Company’s consolidated financial statements included in this Quarterly Report on Form 10-Q.

Results of Operations

~~Executive Summary~~Significant Risks and Uncertainties

~~Sales~~In late 2019, there was an outbreak of a new strain of coronavirus (“COVID-19”). On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, constrained work force participation and created significant volatility and disruption of financial markets. The extent of the impact of the COVID-19 pandemic on the Company’s operational and financial performance, including its ability to execute its business strategies and initiatives in the expected time frames, will depend on future developments, including the duration and spread of the COVID-19 outbreak, continued restrictions on travel and transport and the continued impact on worldwide economic and geopolitical conditions, all of which are uncertain and cannot be predicted.

During the third quarter of fiscal 2020, the Company experienced softer product demand, pricing constraints, increased costs associated with its logistics operations, a reduction in global distribution center utilization, and shipping delays. The Company’s suppliers and customers were also negatively impacted, including delays in the production and export of products. The impact to the Company’s customers may also result in an increase in past due accounts receivable or customer bankruptcies. To mitigate the impact of COVID-19, the Company has taken a variety of measures to ensure the availability and functioning of its critical infrastructure by implementing business continuity plans and to promote the safety and security of its employees while complying with various government mandates, including work-from-home arrangements and social-distancing initiatives to reduce the transmission of COVID-19 such as splitting work-shifts on a rotating basis, providing face masks for employees at facilities significantly impacted and requiring on-site body temperature monitoring before entering certain facilities.

The COVID-19 pandemic has had a negative impact on the Company’s results of operations and financial performance for the third quarter of fiscal ~~2019 were $4.70 billion,~~2020, and the Company expects it will continue to have a ~~decline of 2.0%, or $96.3 million, from~~negative impact on its revenue, earnings and cash flows in the ~~prior year third quarter sales of $4.80 billion. In constant currency, sales for the third~~fourth quarter of fiscal ~~2019 increased~~2020 and possibly into fiscal 2021. Accordingly, current results and financial condition discussed herein may not be indicative of future operating results and trends. See the additional Risk Factor included in Part II—Item 1A of this quarterly report regarding the impacts of the COVID-19 outbreak.

Additionally, as a result of the notification the Company received from Texas Instruments (“TI”) in the second quarter of fiscal 2020 related to the termination of the Company’s distribution agreement, the Company may experience lower sales and gross profit in the future if the impact of the termination is not offset by ~~1.2%~~sales growth, gross margin improvements or operating cost reductions from strategic initiatives designed to mitigate such impacts. Sales from TI products represented approximately 10% of total sales in fiscal 2019.

Table of Contents

Executive Summary

Sales of $4.31 billion were down 8.3% year over ~~the~~year and 7.3% in constant currency as compared to prior year ~~third quarter as growth~~sales of $4.70 billion. The year-over-year sales decline, which occurred in both operating groups and across all three regions, was primarily due to lower demand resulting from the continuation of the global industry-wide slowdown that started in the ~~Company’s Americas and EMEA regions of 1.6% and 3.8%, respectively, were partially offset by a decline in Asia of 2.0%.~~

~~Sales for the first nine months~~second half of fiscal 2019 ~~were $14.84 billion, an increase of $860.0 million or 6.2% as compared~~and to ~~sales of $13.98 billion in~~a lesser extent due to the ~~first nine month of fiscal 2018. In constant currency, sales for~~impacts from the ~~first nine months of fiscal 2019 increased by 7.9% over the prior year as all regions experienced organic sales growth.~~COVID-19 outbreak.

Gross profit margin ~~for the third quarter~~ of ~~fiscal 2019~~12.0% decreased 35124 basis points compared to the third quarter of fiscal 2018 as declines in EC gross profit margin were partially offset by improvements at Farnell. EC gross profit margin decreased year over year and Farnell gross profit margin increased year over year primarily driven by changes in product mix.

~~Avnet operating income margin was 3.3%~~13.3% in the third quarter of fiscal 2019 primarily due to a combination of product and customer mix, geographical market mix and overall declines in gross profit margin due to the global industry-wide slowdown and the impacts from the COVID-19 outbreak.

Operating loss of $115.8 million decreased $268.8 million or 175.6% as compared to third quarter of fiscal 2019 operating income. Operating loss margin was 2.7% in the third quarter of fiscal 2020 as compared with a ~~1.2%~~3.3% operating ~~loss~~income margin in the third quarter of fiscal ~~2018. Both periods included amortization and restructuring, integration and other expenses. The~~2019. Adjusted operating income margin was 1.6% in the third quarter of fiscal ~~2018 also included goodwill impairment expense. Excluding these expenses from both periods, adjusted operating income margin was~~2020 as compared to 3.8% in the third quarter of fiscal 2019, ~~as compared to 3.6%~~a decline of 216 basis points. The decrease in ~~the third quarter of fiscal 2018. The increase in~~adjusted operating income and adjusted operating income margin is primarily due to the ~~reduction in operating expenses from the Company’s restructuring and integration efforts, partially offset by a decline~~decrease in sales and gross profit margin.

2225

Table of Contents

Sales

~~Sales~~

The following tables present reported and organic sales growth rates ~~between fiscal 2019 and fiscal 2018~~ for the third quarter and first nine months of fiscal ~~2019.~~ 2020 as compared to fiscal 2019 by region and by operating group.


	Third Quarters Ended
							As Reported
	Sales		Sales		As Reported		and Organic
	as Reported		as Reported		and		Year-Year %
	and Organic		and Organic		Organic		Change in
	Fiscal		Fiscal		Year-Year		Constant
	2019 (1)		2018		% Change		Currency
	(Dollars in thousands)

									Third Quarters Ended
															As Reported
									Sales		Sales		As Reported		and Organic
									as Reported		as Reported		and		Year-Year %
									and Organic		and Organic		Organic		Change in
									Fiscal		Fiscal		Year-Year		Constant
									2020		2019		% Change		Currency
									(Dollars in thousands)
Avnet	$	4,698,824	$	4,795,093	(2.0)	%	1.2	%	$	4,309,818	$	4,698,824	(8.3)	%	(7.3)	%
Avnet by region
Americas	$	1,297,220	$	1,276,426	1.6	%	1.6	%	$	1,203,605	$	1,297,220	(7.2)	%	(7.2)	%
EMEA		1,740,916		1,812,334	(3.9)		3.8			1,512,476		1,740,916	(13.1)		(10.4)
Asia		1,660,688		1,706,333	(2.7)		(2.0)			1,593,737		1,660,688	(4.0)		(4.2)
Avnet by segment
Avnet by operating group
EC	$	4,331,351	$	4,404,115	(1.7)	%	1.5	%	$	3,974,669	$	4,331,351	(8.2)	%	(7.3)	%
Farnell		367,473		390,978	(6.0)		(1.5)			335,149		367,473	(8.8)		(7.6)


	Nine Months Ended
							As Reported
	Sales		Sales		As Reported		and Organic
	as Reported		as Reported		and		Year-Year %
	and Organic		and Organic		Organic		Change in
	Fiscal		Fiscal		Year-Year		Constant
	2020 ⁽¹⁾		2019 ⁽¹⁾		% Change		Currency
	(Dollars in thousands)
Avnet	$	13,474,632	$	14,837,683	(9.2)	%	(8.1)	%
Avnet by region
Americas	$	3,605,944	$	3,869,435	(6.8)	%	(6.8)	%
EMEA		4,409,258		5,124,409	(14.0)		(10.7)
Asia		5,459,430		5,843,839	(6.6)		(6.7)
Avnet by operating group
EC	$	12,472,484	$	13,722,890	(9.1)	%	(8.1)	%
Farnell		1,002,148		1,114,793	(10.1)		(8.4)

___________

(1)

Sales from acquisitions in the first nine months of fiscal 2020 and fiscal 2019 were not material.

~~(1)~~ ~~The acquisition~~

Sales of ~~Softweb occurred at the end of December 2018 andsales from Softweb are not material for Organic sales measurement purposes.~~

Nine Months Ended

As Reported

Sales

Sales

As Reported

and Organic

as Reported

as Reported

and

Year-Year %

and Organic

and Organic

Organic

Change in

Fiscal

Fiscal

Year-Year

Constant

2019 (1)

2018

% Change

Currency

(Dollars in thousands)
Avnet

$
14,837,683

$
13,977,672

6.2
%

7.9
%
Avnet by region

Americas

$
3,869,435

$
3,672,160

5.4
%

5.4
%
EMEA

5,124,409

5,011,336

2.3

6.5

Asia

5,843,839

5,294,176

10.4

10.8

Avnet by segment

EC

$
13,722,890

$
12,874,885

6.6
%

8.3
%
Farnell

1,114,793

1,102,787

1.1

3.8

~~___________~~

~~(1)~~ ~~The acquisition of Softweb occurred at the end of December 2018 and sales from Softweb are not material for Organic sales measurement purposes.~~

~~Sales~~$4.31 billion for the third quarter of fiscal ~~2019~~2020 were ~~$4.70 billion, a decrease of 2.0%,~~down $389.0 million, or ~~$96.3 million,~~8.3%, from the prior year third quarter sales of ~~$4.80~~$4.70 billion. Sales in constant currency ~~grew 1.2%~~decreased 7.3% over the prior year third quarter ~~as a result of growth in the Company’s Americas and EMEA~~with all three regions of ~~1.6%~~both operating groups contributing to the decline. These decreases are primarily due to lower demand resulting from the continuation of the global industry-wide slowdown and ~~3.8%, respectively, partially offset by declines in Asia~~to a lesser extent due to the impacts from the COVID-19 outbreak.

EC sales of ~~2.0%.~~

~~Sales in the Company’s EC segment of $4.33~~$3.97 billion in the third quarter of fiscal ~~2019~~2020 decreased ~~$72.8~~$356.7 million or ~~1.7%~~8.2% from the prior year third quarter sales of ~~$4.40~~$4.33 billion. ~~Excluding the impact of foreign currency exchange rates,~~ EC sales ~~increased 1.5% year-over-year primarily due to increases~~ in ~~sales in EC EMEA and EC Americas, partially offset by declines in Asia.~~

~~Table of Contents~~

constant currency declined 7.3% year over year. Farnell sales for the third quarter of fiscal ~~2019~~2020 were ~~$367.5~~$335.1 million, a decrease of ~~$23.5~~$32.3 million or ~~6.0%~~8.8% from the prior year third quarter sales of ~~$391.0~~$367.5 million. Farnell sales in constant currency declined ~~1.5%~~7.6% year over ~~year primarily driven by uncertainties related~~year.

On a regional basis, sales declined 7.2% in the Americas, 10.4% in EMEA in constant currency and 4.2% in Asia in constant currency. Due to the ~~United Kingdom’s exit from~~timing of the ~~European Union (Brexit) impacting market demand.~~spread of COVID-19, Asia was impacted throughout the fiscal quarter, while

Table of Contents

EMEA became impacted later in the fiscal quarter. The Company expects that all three regions will be impacted in the fiscal fourth quarter.

Sales for the first nine months of fiscal ~~2019~~2020 were ~~$14.84~~$13.47 billion, ~~an increase~~a decline of ~~6.2%~~$1.36 billion as compared to sales of ~~$13.98~~$14.84 billion for the first nine months of fiscal ~~2018~~2019. This decrease was primarily due to ~~sales growth at both EC and Farnell. Sales~~the global industry-wide slowdown, which began in ~~constant currency increased by 7.9% year over year with all regions contributing to~~ the ~~organic growth.~~

As discussed in Note 2 to the Company’s consolidated financial statements included in this Quarterly Report on Form 10-Q, the adoption of the new revenue recognition accounting standard during the first quartersecond half of fiscal 2019, ~~did not have~~and to a ~~material~~lesser extent, the impact onof the ~~amounts of sales reported or the comparability of sales and gross profit margins year over year for all periods presented in the consolidated statements of operations.~~COVID-19 outbreak.

Gross Profit and Gross Profit Margins

Gross profit for the third quarter of fiscal ~~2019~~2020 was ~~$624.2~~$518.9 million, a decrease of ~~$29.3~~$105.3 million, or ~~4.5%~~16.9%, from the third quarter of fiscal ~~2018~~2019 gross profit of ~~$653.5~~$624.2 million driven primarily by ~~the 2.0% decrease in sales and~~ the decline in ~~gross profit margin.~~sales. Gross profit margin decreased 35to 12.0% or 124 basis points ~~to 13.3%~~ from the third quarter of fiscal ~~2018~~2019 gross profit margin of ~~13.6%. The decrease~~13.3% driven by declines in gross profit ~~margins resulted from year over year decreases~~margin in ~~the Company’s EMEA and Asia regions, partially offset by an increase~~both operating groups. The declines in ~~the Americas.~~

~~EC gross profit and~~ gross profit margin ~~for the third quarter~~in both operating groups are primarily due to a combination of ~~fiscal 2019 decreased 4.3%~~unfavorable changes in product and ~~approximately 30 basis points, respectively, as compared to the third quarter of fiscal 2018. Farnell~~customer mix, geographical market mix and overall declines in gross profit margin ~~increased 35 basis points~~due to current market conditions including the impacts of COVID-19. Sales in the higher margin western regions represented approximately 63% of sales in the third quarter of fiscal ~~2019~~2020 as compared to 65% during the third quarter of fiscal ~~2018 primarily driven by product mix.~~2019.

Gross profit and gross profit margins were $1.59 billion and 11.8%, respectively, for the first nine months of fiscal 2020 as compared with $1.89 billion and 12.7%, respectively, for the first nine months of fiscal 2019 as compared with $1.87 billion and 13.4%, respectively, for the first nine months of fiscal 2018 primarily due to an increased mix of sales coming from the lower-margin Asia region and from the impact of supplier program changes.2019.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A expenses”) were ~~$468.2~~$469.6 million in the third quarter of fiscal ~~2019, a decrease~~2020, an increase of ~~$37.3~~$1.5 million, or ~~7.4%~~0.3%, from the third quarter of fiscal ~~2018.~~2019. The year-over-year ~~decrease~~increase in SG&A expenses was primarily due to ~~a reduction~~increases in SG&A expenses from recent acquisitions, costs to fund strategic investments and initiatives and the impacts of ~~expenses resulting~~the COVID-19 outbreak, partially offset by cost savings from ~~management’s~~ restructuring ~~programs, the impact of~~activities and changes in foreign currency translation rates year over ~~year and due to lower Corporate costs, partially offset by an increase as a result of sales volume growth.~~year.

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 the third quarter of fiscal ~~2019,~~2020, SG&A expenses as a percentage of sales were ~~10.0%~~10.9% and as a percentage of gross profit were ~~75.0%~~90.5%, as compared with ~~10.5%~~10.0% and ~~77.3%~~75.0%, respectively, in the third quarter of fiscal ~~2018.~~2019. The increase in SG&A expenses as a percentage of both sales and gross profit is primarily the result of the decrease in sales and gross profit margin. Amortization expense, which is included within SG&A expenses, was relatively consistent year over year.

SG&A expenses for the first nine months of fiscal ~~2019~~2020 were ~~$1.42~~$1.39 billion, or ~~9.5%~~10.3% of sales, as compared with ~~$1.49~~$1.42 billion, or ~~10.7%~~9.5% of sales, in the first nine months of fiscal ~~2018.~~2019. SG&A expenses were ~~74.8%~~87.6% of gross profit in the first nine months of ~~2019~~2020 as compared with ~~79.8%~~74.8% in the first nine months of fiscal ~~2018.~~ 2019.

The ~~year-over-year decrease~~Company expects increases in SG&A expenses was primarily due to the reduction of expenses resulting from management’s restructuring programs, the impact of changes in foreign currency translation year over year and due to lower Corporate costs, partially offset by an increase as a result of ~~sales volume growth.~~the impact of COVID-19 including, but not limited to, increases associated with its logistics operations and related freight costs, costs for personal protective equipment and sanitation supplies, and costs from implementing work-from-home arrangements and social-distancing initiatives.

Goodwill and Intangible Asset Impairment Expense

During the third quarter of fiscal ~~2018,~~2020, the Company ~~impaired all of the goodwill in the Americas reporting unit and recorded $181.4~~incurred $145.8 million of goodwill and intangible asset impairment expense. See Note 3 “Goodwill and intangible assets” to the Company’s consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion of impairment expenses.

~~Table of Contents~~

~~The Company evaluates each quarter if facts~~A change in future business conditions and circumstances indicate that it is more likely than not that the fair value of its reporting units is less than their carrying value, which would require the Company to perform an interim goodwill impairment test. Indicators the Company evaluates to determine whether an interim goodwill impairment test is necessary include, but are not limited to, (i) a sustained decrease in share price or market capitalization as of any fiscal quarter end, (ii) changes in the macroeconomic or industry environments, (iii) the results of and the amount of time passed since the last goodwill impairment test and (iv) the long-term expected financial performance as result of ~~its reporting units.~~

Each fiscal year, during the fiscal fourth quarter, the Company is required to perform an annual goodwill impairment test. The annual goodwill impairment testing typically includes consideration of the Company’s annual long-term planning as well as current market conditions when determining whether there is a goodwill impairment for any of the Company’s reporting units. The results of a quantitative annual goodwill impairment testCOVID-19 or otherwise, may result in a need to recognize additional impairment expenses in the ~~impairment~~future.

Table of ~~goodwill at one or more of the Company’s reporting units even if a qualitative assessment concludes that goodwill is not impaired.~~Contents

Restructuring, Integration and Other Expenses

As a result of management’s focus on improving operating efficiencies and further integrating the acquisition of Farnell, the Company has incurred certain restructuring costs. These costs also ~~related~~relate to the continued transformation of the Company’s information technology, distribution center footprint and business ~~operations including the re-prioritization of its information technology initiatives and resources.~~operations. In addition, the Company incurred integration, accelerated depreciation and other costs. Integration costs are primarily related to the integration of acquired businesses including Farnell, the integration of certain regional and global businesses, ~~including Avnet after the sale of the TS business,~~ and incremental costs incurred as part of the consolidation, relocation, sale and closure of ~~warehouse~~distribution centers and office facilities. Accelerated depreciation relates to the incremental depreciation expense incurred related to the shortening of the estimated useful life for certain information technology ~~assets and from the integration of Farnell.~~assets. Other costs consist primarily of any other miscellaneous costs that relate to restructuring, integration and other expenses, including certain costs associated with the impact of the COVID-19 outbreak and acquisition related ~~costs and a gain on the sale of real estate.~~costs.

The Company recorded restructuring, integration and other expenses of ~~$2.9~~$19.2 million during the third quarter of fiscal ~~2019.~~2020. The Company recorded ~~$13.4~~$9.2 million of restructuring costs in the third quarter of fiscal ~~2019,~~2020, which are expected to provide approximately $12.0 million in annual operating expense savings once such restructuring actions are completed. ~~Included in the restructuring costs was severance costs of $7.8 million and a $5.4 million non-cash impairment expense related to information technology software.~~ During the third quarter of fiscal ~~2019,~~2020, the Company also incurred integration costs of ~~$2.4~~$5.6 million, accelerated depreciation expense of $2.7 million, ~~partially offset by a gain on the sale~~other costs of ~~real estate of $15.1~~$1.8 million and a reversal of ~~$0.5~~$0.1 million for changes in estimates for costs associated with prior year restructuring actions. The ~~after tax~~after-tax impact of restructuring, integration and other expenses were ~~$2.6~~$14.8 million and ~~$0.02~~$0.15 per share on a diluted basis.

During the first nine months of fiscal ~~2019,~~2020, the Company incurred restructuring costs of ~~$76.5~~$37.1 million, integration costs of ~~$8.7~~$10.1 million, accelerated depreciation of ~~$8.6~~$8.1 million, other costs of ~~$2.3 million, partially offset by a gain on the sale of real estate of $15.1~~$4.4 million and reversals of ~~$1.0~~$1.6 million for changes in estimates for costs associated with prior year restructuring actions. The after tax impact of restructuring, integration and other expenses for the first nine months of fiscal ~~2019~~2020 was ~~$60.7~~$44.1 million and ~~$0.54~~$0.44 per share on a diluted basis.

Comparatively, in the third quarter of fiscal 2018, restructuring, integration and other expenses were $25.1 million. The after tax impact of restructuring, integration, and other expenses was $19.4 million and $0.16 per share on a diluted basis.

In the first nine months of fiscal 2018, restructuring, integration and other expenses was $108.3 million. The after tax impact of restructuring, integration and other expenses for the first nine months of fiscal 2018 was $76.7 million and $0.63 per share on a diluted basis.

See Note 14 “Restructuring expenses” to the Company’s consolidated financial statements included in this Quarterly Report on Form 10-Q.

~~Table of Contents~~

Operating Income (Loss)

Operating ~~income~~loss for the third quarter of fiscal ~~2019~~2020 was ~~$153.1~~$115.8 million, ~~an increase~~a decrease of ~~$211.6~~$268.8 million, or ~~361.7%~~175.6%, from the third quarter of fiscal ~~2018~~2019 operating ~~loss~~income of ~~$58.5~~$153.1 million. The ~~year over year increase~~year-over-year decrease in operating income was primarily driven by the ~~reduction~~decline in ~~selling, general~~sales and ~~administrative expenses and no goodwill impairment expense~~gross profit margin as compared to the third quarter of fiscal ~~2018, partially offset by the decline in sales and gross profit margin.~~2019. Adjusted operating income for the third quarter of fiscal ~~2019~~2020 was ~~$178.1~~$70.4 million, ~~an increase~~a decrease of ~~$7.3~~$107.7 million, or ~~4.3%~~60.5%, from the third quarter of fiscal ~~2018.~~2019. The ~~year over year increase~~year-over-year decrease in adjusted operating income was primarily driven by the ~~reduction~~decline in ~~selling, general~~sales and ~~administrative expenses as compared~~gross profit margin discussed further above.

EC operating income margin decreased 141 basis points year over year to ~~the prior~~2.1% and Farnell operating income margin decreased 545 basis points year ~~third quarter, partially offset~~over year to 7.0%. These declines were primarily driven by the decline in sales and gross profit ~~margin.~~margin, partially offset by the reduction in SG&A expenses.

~~EC operating income margin decreased 4 basis points year over year to 3.5% and Farnell operating income margin increased 164 basis points year over year to 12.4%.~~

Operating ~~income~~loss for the first nine months of fiscal ~~2019~~2020 was ~~$396.0~~$6.5 million, or ~~2.7%~~0.1% of consolidated sales, as compared with operating income of ~~$87.7~~$396.0 million, or ~~0.6%~~2.7% of consolidated sales, in the first nine months of ~~2018.~~fiscal 2019. Adjusted operating income for the first nine months of fiscal ~~2019~~2020 was ~~$539.5~~$260.0 million, a decrease of $279.5 million, or ~~3.6% of consolidated sales, as compared with adjusted operating income of $447.6 million, or 3.2% of consolidated sales in~~51.8%, from the first nine months of ~~2018.~~fiscal 2019. The year-over-year decrease in adjusted operating income was primarily driven by the decline in sales and gross profit margin.

Interest and Other Financing Expenses, Net and Other (Expense) Income, Net

Interest and other financing expenses in the third quarter of fiscal ~~2019~~2020 was ~~$36.3~~$29.7 million, ~~an increase~~a decrease of ~~$12.8~~$6.5 million, or ~~54.7%~~18.0%, as compared with interest and other financing expenses of ~~$23.4~~$36.3 million in the third quarter of fiscal ~~2018.~~2019. Interest and other financing expenses in the first nine months of fiscal ~~2019~~2020 was ~~$100.1~~$97.3 million, ~~an increase~~a decrease of ~~$31.8~~$2.8 million,

Table of Contents

or ~~46.6%~~2.8%, as compared with interest and other financing expenses of ~~$68.3~~$100.1 million in the first nine months of fiscal ~~2018.~~2019. The ~~increase~~decrease in interest and other financing expenses in the ~~third quarter and~~first nine months of fiscal 2020 compared to the first nine months of fiscal 2019 ~~compared to the third quarter and first nine months of fiscal 2018~~ was primarily related to ~~increased expenses~~lower outstanding borrowings in ~~foreign regions to finance working capital needs including increases in average debt outstanding and from lower interest income from investments in cash equivalents between the~~ fiscal ~~years.~~2020.

During the third quarter of fiscal ~~2019,~~2020, the Company had ~~$8.7~~$12.6 million of other ~~income~~expense as compared with ~~$9.9~~$8.7 million of other income in the third quarter of fiscal ~~2018.~~2019. Other expense included $15.3 million of equity investment impairment expense in the third quarter of fiscal 2020. During the first nine months of fiscal ~~2019,~~2020, the Company had ~~$9.4~~$8.2 million of other ~~income~~expense as compared with ~~$32.1~~$9.4 million of other income in the first nine months of fiscal ~~2018. In the third quarter and first nine months of fiscal 2019, the Company had~~2019. The year-over-year differences in other income ~~related~~was primarily due to the ~~Company’s pension plans, partially offset by~~equity investment impairment expense in fiscal 2020 and differences in foreign currency ~~losses.~~exchange rates between fiscal 2020 and fiscal 2019.

Income Tax Expense

The Company’s effective tax rate on its ~~income~~loss from continuing operations before taxes was ~~24.4%~~18.6% in the third quarter of fiscal ~~2019.~~2020. During the third quarter of fiscal ~~2019,~~2020, the Company’s effective tax rate was unfavorably impacted primarily by (i) ~~an increase due to~~ the ~~impact from recently issued U.S. income~~impairment of goodwill that is not deductible for tax ~~regulations,~~purposes, partially offset by (ii) ~~decreases in~~the release of unrecognized tax ~~benefits due to~~benefit reserves net of settlements.

For the ~~expiration of the statute of limitations in various jurisdictions.~~

~~During the third quarter~~first nine months of fiscal ~~2018,~~2020, the Company’s effective tax rate on its loss from continuing operations before taxes of 338.0% was unfavorably impacted primarily by (i) the one-time mandatory deemed repatriation tax liability expense (“the transition tax”) estimate recorded under the requirements of U.S. federal government enacted tax legislation (the “Act”) and (ii) the goodwill impairment discussed in Note 4, which was not tax deductible, partially offset primarily by (iii) the mix of income ~~in lower tax jurisdictions and (iv) the release of reserves due to the expiration of the statute of limitations in various jurisdictions.~~

~~For the first nine months of fiscal 2019, the Company’s effective tax rate on its income from continuing operations before~~ taxes was ~~29.5%~~27.0%. The effective tax rate for the first nine months of fiscal ~~2019~~2020 was ~~unfavorably~~favorably impacted primarily by (i) ~~an adjustment to~~ the ~~transition tax recorded under the requirements~~release of ~~the Act, (ii) net increases in~~ unrecognized tax ~~benefits,~~benefit reserves net of settlements and ~~(iii) an increase due to the impact from recently issued U.S. income tax regulations, partially offset by (iv)~~

~~Table of Contents~~

~~an adjustment to the deferred tax impacts of the Act, (v)~~(ii) the mix of income in lower tax jurisdictions, partially offset by (iii) goodwill impairment expense that is not deductible for tax purposes and ~~(vi) the release of~~(iv) a valuation ~~allowances~~allowance against interest deduction deferred tax ~~assets that were deemed to be realizable.~~assets.

See Note 8 “Income taxes” to the Company’s consolidated financial statements included in this Quarterly Report on Form ~~10-Q.~~10-Q for further discussion on the effective tax rate and COVID-19 considerations.

Loss from Discontinued Operations

Loss from discontinued operations was $1.5 million in the first nine months of fiscal 2020. Loss from discontinued operations was $6.9 million and $7.1 million in the third quarter and first nine months of fiscal 2019 primarily related to additional income tax expenses associated with the TS business.

Loss from discontinued operations was $4.5 million and $14.4 million in the third quarter and the first nine months of fiscal 2018, respectively, primarily as a result of settlement losses associated with the Company’s pension plan due to former TS business employees requesting and receiving distributions from the Company’s pension plan during fiscal 2018.

Net Income (Loss)

As a result of the factors described in the preceding sections of this MD&A, the Company’s net ~~income~~loss for the third quarter of fiscal ~~2019~~2020 was ~~$88.0~~$128.7 million, or ~~$0.81~~$1.29 per share on a diluted basis, as compared with ~~$320.1~~$88.0 million of net ~~loss,~~income, or ~~$2.68~~$0.81 per share on a diluted basis, in the third quarter of fiscal ~~2018.~~2019.

As a result of the factors described in the preceding sections of this MD&A, the Company’s net income for the first nine months of fiscal 2019 was $208.2 million, or $1.85 per share on a diluted basis, as compared with $215.0 million of net loss, or $1.78 per share on a diluted basis, in the first nine months of fiscal 2018.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow

Cash Flow from Operating Activities

During the first nine months of fiscal ~~2019,~~2020, the Company generated $442.6 million of cash flow from operations for continuing operations compared to $256.4 million of cash ~~from its operating activities from continuing operations compared to $17.9 million~~generated in the first nine months of fiscal ~~2018.~~2019. These operating cash flows were comprised of: (i) cash flow generated from net income from continuing operations, adjusted for the impact of non-cash and other items, which includes depreciation and amortization expenses, goodwill and intangible asset impairment ~~expenses,~~expense, deferred income taxes, stock-based compensation expense, amortization of operating lease assets and other non-cash items ~~(including provisions for doubtful accounts and net periodic pension costs)~~ and (ii) cash flows used for, or generated from, working capital and other, excluding cash and cash equivalents. Cash generated from working capital and other was $180.9 million during the first nine months of fiscal 2020, including decreases in accounts receivable of $150.1 million and inventories of $228.0 million, offset by decreases in accounts payable of $112.9 million and accrued expenses and other of $84.3 million. Comparatively, cash used for working

Table of Contents

capital and other was $206.9 million during the first nine months of fiscal 2019, including ~~increases~~an increase in inventories of $125.4 million and decreases in accounts payable of $399.5 million and accrued expenses and other of $118.3 million, partially offset by a decrease in accounts receivable of $436.4 million. The Company utilized cash to invest in inventory primarily to support sales growth and for certain investments in additional inventories at Farnell. Comparatively, cash used for working capital and other was $121.5 million during

Cash Flow from Financing Activities

During the first nine months of fiscal ~~2018, including increases in inventories~~2020, the Company made net repayments of ~~$337.9~~$127.4 million and accounts receivable of $98.1 million. The increase in cash used for inventories and accounts receivable, was partially offset by increases in accounts payable of $180.7 million and accrued expenses and other of $133.8 million.

~~Table of Contents~~

~~The Company also used $56.3 million of cash from discontinued operations operating activities related to income taxes paid on~~under the ~~gain from the sale of the TS business during~~Securitization Program. During the first nine months of fiscal ~~2019.~~2020, the Company paid dividends on common stock of $63.2 million and repurchased $235.8 million of common stock.

~~Cash Flow from Financing Activities~~

During the first nine months of fiscal 2019, the Company received net proceeds of $342.0 million under the ~~accounts receivable securitization program~~Securitization Program and $85.0 million under the Credit Facility and repaid $11.4 million from borrowings of various bank credit ~~facilities and repaid $11.4 million under the Credit Facility.~~facilities. During the first nine months of fiscal 2019, the Company paid dividends on common stock of $66.2 million and repurchased $447.9 million of common stock. Additionally, included in other, net is approximately $18.7 million of cash received from the exercises of stock options.

Cash Flow from Investing Activities

During the first nine months of fiscal 2018, the Company made net repayments of $47.0 million under the accounts receivable securitization program. Additionally, the Company repaid $44.3 million from borrowings of various bank credit facilities and $100.0 million under the Credit Facility. During the first nine months of fiscal 2018, the Company paid dividends on common stock of $66.2 million and repurchased $209.5 million of common stock.

~~Cash Flow from Investing Activities~~

~~During the first nine months of fiscal 2019,~~2020, the Company used ~~$101.4~~$61.2 million for capital expenditures primarily related to warehouse and facilities, ~~computer~~and information technology hardware and software ~~purchases and information technology system development~~ costs compared to ~~$112.2~~$101.4 million for capital expenditures in the first nine months of fiscal ~~2018.~~2019. During the first nine months of fiscal ~~2019,~~2020, the Company used ~~$66.5~~$51.5 million of cash for acquisitions, which is net of the cash acquired, compared to ~~$18.6~~$66.5 million of cash for acquisitions, which is net of cash acquired in the first nine months of fiscal ~~2018. Additionally,~~2019. In addition, the Company paid $12.5 million for other investing activities during the first nine months of fiscal 2020, and included in other, net is $41.0 million of cash received from the sale of real estate in EMEA during the first nine months of fiscal 2019.

During the first nine months of fiscal 2019, the Company received $123.5 million of cash from investing activities – discontinued operations from the sale of the TS business. During the first nine months of fiscal 2018, the Company generated $153.9 million of cash from investing activities – discontinued operations, substantially all driven by the sale of marketable securities obtained through the sale of the TS business.

Contractual Obligations

For a detailed description of the Company’s long-term debt and lease commitments for the next five years and thereafter, see Long-Term Contractual Obligations appearing in Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended June ~~30, 2018.~~29, 2019. With the exception of the Company’s debt transactions discussed herein, there are no material changes to this information outside of normal borrowings and repayments of long-term debt and operating lease payments. The Company does not currently have any material non-cancellable commitments for capital expenditures or inventory ~~purchases.~~purchases outside of the normal course of business.

Financing Transactions

See Note 5,4, “Debt” to the Company’s consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information on financing transactions including the Credit Facility, the Securitization Program, and other outstanding debt as of March ~~30, 2019.~~28, 2020. The Company was in compliance with all covenants under the Credit Facility and the Securitization Program as of March ~~30, 2019~~28, 2020 and June ~~30, 2018.~~29, 2019.

The Company has various lines of credit, financing arrangements and other forms of bank debt in the U.S. and various foreign locations to fund the short-term working capital, foreign exchange, overdraft and letter of credit needs of its wholly owned subsidiaries. Outstanding borrowings under such forms of debt at the end of third quarter of fiscal ~~2019~~2020 was ~~$0.8~~$1.6 million.

2830

Table of Contents

As an alternative form of financing outside of the United States, the Company sells certain of its trade accounts receivable on a non-recourse basis to third-party financial institutions pursuant to factoring agreements. The Company accounts for these transactions as sales of receivables and presents cash proceeds as cash provided by operating activities in the consolidated statements of cash flows. Factoring fees for the sales of ~~receivables~~trade accounts receivable are recorded within “Interest and other financing expenses, net” and were not material.

Liquidity

The Company held cash and cash equivalents of ~~$725.3~~$402.7 million as of March ~~30, 2019,~~28, 2020, of which ~~$660.7~~$335.5 million was held outside the United States. As of June ~~30, 2018,~~29, 2019, the Company held cash and cash equivalents of ~~$621.1~~$546.1 million, of which ~~$545.3~~$476.6 million was held outside of the United States.

As of the end of the third quarter of fiscal ~~2019,~~2020, the Company had a combined total borrowing capacity of $1.75 billion under the Credit Facility and the Securitization Program. There were ~~$85.6 million in~~no borrowings outstanding and ~~$3.0~~$1.6 million in letters of credit issued under the Credit Facility and ~~$447.0~~$99.9 million in borrowings outstanding under the Securitization Program, resulting in approximately ~~$1.21~~$1.63 billion of total availability as of March ~~30, 2019.~~28, 2020. Availability under the Securitization Program is subject to the Company having sufficient eligible trade accounts receivable in the Americas to support desired borrowings.

Borrowings under the Credit Facility and the Securitization Program require the Company to maintain certain financial and other covenants. All other forms of debt and financing do not include financial or other covenants. The Company ~~currently~~was in compliance with all covenants under the Credit Facility and the Securitization Program as of March 28, 2020.

The Company expects to ~~utilize~~renew or replace the Securitization Program on similar terms, subject to market conditions including conditions associated with the impact of the COVID-19 outbreak, before its maturity in August 2020. If the Company cannot renew or replace on similar terms, then any outstanding borrowings will be repaid using cash on hand or availability under ~~credit facilities to support working capital~~the Credit Facility.

As previously announced, on April 30, 2020, the Company redeemed $300.0 million in principal of the 5.875% Notes due June 2020 with a combination of cash on hand and ~~other general corporate purposes to~~from available borrowing capacity under the ~~extent~~Credit Facility. The make-whole premium for the early redemption of such ~~incremental borrowings do~~notes was not ~~impact the Company’s investment grade credit rating.~~ material.

During the third quarter and first nine months of fiscal ~~2019,~~2020, the Company had an average daily balance outstanding of approximately ~~$29.8~~$68.7 million and ~~$71.2~~$53.5 million, respectively, under the Credit Facility and approximately ~~$456.0~~$229.5 million and $259.0 million, respectively, under the Securitization Program. During the third quarter and first nine months of fiscal 2018, the Company had an average daily balance outstanding of approximately $0.6 million and $3.0 million, respectively, under the Credit Facility and approximately $298.0 million and $230.0$375.5 million, respectively, under the Securitization Program.

During periods of weakening demand in the electronic components industry, the Company typically generates cash from operating activities. Conversely, the Company is more likely to use operating cash flows for working capital requirements during periods of higher growth. The Company generated ~~$492.0~~$777.2 million in cash flows from operating activities over the trailing four fiscal quarters ended March ~~30, 2019~~28, 2020 from continuing operations.

Table of Contents

Liquidity is subject to many factors, such as normal business operations as well as general economic, financial, competitive, legislative, and regulatory factors that are beyond the Company’s control. This includes the potential impact on liquidity and related compliance with debt covenants as a result of the uncertain future impacts of the COVID-19 outbreak. To the extent the cash balances held in foreign locations cannot be remitted back to the U.S. in a tax efficient manner, those cash balances are generally used for ongoing working capital, capital ~~expenditure needs~~expenditures and ~~to support acquisitions, and are currently expected to be permanently reinvested outside the U.S. The Company is still evaluating the impact of repatriating any additional~~other foreign ~~cash as a result of the Act.~~business needs. In addition, local government regulations may restrict the Company’s ability to move funds among various locations under certain circumstances. Management does not believe such restrictions would limit the Company’s ability to pursue its intended business strategy.

The Company continuously monitors and reviews its liquidity position and funding needs. Management believes that ~~Avnet’s~~the Company’s ability to generate operating cash flows in the future and available borrowing capacity, including capacity for the non-recourse sale of trade accounts receivable, ~~and the Company’s expected ability to generate operating cash flows in the future~~ will be sufficient to meet its future liquidity needs. The Company may also ~~may issue~~renew or replace expiring debt ~~or equity securities~~arrangements in the future and management believes the Company will have adequate access to the capital markets, if needed.

~~Historically~~ Although the future impact of the COVID-19 outbreak on the capital markets and financial institutions is uncertain, the Company has ~~made,~~historically and ~~expects~~believes it will have the ability in the future to ~~continue~~generate operating cash flows in periods of declining sales.

As a result of the evolving impacts of the COVID-19 outbreak and the related uncertain future business conditions, the Company in unlikely to make near-term strategic investments through acquisition activity to the extent the investments strengthen Avnet’s competitive position, further its business strategies and meet management’s return on capital thresholds. The Company also expects to make capital expenditures, including expenditures for warehouse facilities and information technology related tools and systems. Additionally, asacquisitions. As the Company ~~integrates Farnell,~~implements operating cost savings restructuring plans, responds to current business environment challenges, including the impact of the COVID-19 outbreak, and pursues ways to become more efficient and cost effective, the Company also expects to use cash for restructuring, integration and other expenses.

~~Table of Contents~~

~~In addition to continuing to make investments in acquisitions, as~~As of March ~~30, 2019,~~28, 2020, the Company may repurchase up to an aggregate of ~~$322.9~~$469.0 million of shares of the Company’s common stock through a ~~$2.45~~$2.95 billion share repurchase program approved by the Board of Directors. The Company may repurchase stock from time to time at the discretion of management, subject to strategic considerations, market conditions and other factors. The Company may terminate or limit the share repurchase program at any time without prior notice. ~~The timing~~As a result of the impacts of the COVID-19 outbreak and ~~actual number of shares repurchased will depend on a variety of factors such as share price, corporate~~the corresponding need to manage liquidity and ~~regulatory requirements, and prevailing market conditions. Additionally,~~leverage, the Company ~~currently expects~~has temporarily suspended share repurchases and is unlikely to ~~pay~~engage in such repurchases in the near term.

The Company has historically paid quarterly cash dividends on shares of its common stock, and future dividends are subject to approval ofby the Board of Directors. During the third quarter of fiscal ~~2019,~~2020, the Board of Directors approved a dividend of ~~$0.20~~$0.21 per share, which resulted in ~~$21.5~~$20.8 million of dividend payments during the quarter.

Recently Issued Accounting Pronouncements

See Note 1, “Basis of presentation and new accounting pronouncements” to the Company’s consolidated financial statements included in this Quarterly Report on Form 10-Q for a description of recently issued accounting pronouncements.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

~~Item 3.Quantitative and Qualitative Disclosures About Market Risk~~

The Company seeks to reduce earnings and cash flow volatility associated with changes in foreign currency exchange rates by entering into financial arrangements that are intended to provide an economic hedge against all or a portion of the risks associated with such volatility. The Company continues to have exposure to such risks to the extent they are not economically hedged.

See Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in the Company’s Annual Report on Form 10-K for the fiscal year ended June ~~30, 2018,~~29, 2019, for further discussion of market risks associated with foreign currency exchange rates and interest rates. Avnet’s exposure to such risks has not changed materially since June ~~30, 2018,~~29, 2019, as the Company continues to economically hedge the majority of its foreign currency exchange exposures. Thus, any increase or decrease in fair value of the Company’s forward foreign currency exchange contracts is generally offset by an opposite effect on the related economically hedged position. For interest rate risk, the Company continues to maintain a combination of fixed and variable rate debt to mitigate the exposure to ~~fluctuation~~fluctuations in market interest rates.

Table of Contents

See Liquidity and Capital Resources — Financing Transactions appearing in Item 2 of this Quarterly Report on Form 10-Q for further discussion of the Company’s financing transactions and capital structure. As of March ~~30, 2019, 72%~~28, 2020, 94% of the Company’s debt bears interest at a fixed rate and ~~28%~~6% of the Company’s debt bears interest at variable rates. Therefore, a hypothetical 1.0% (100 basis points) increase in interest rates would result in a ~~$1.5~~$0.2 million decrease in income from continuing operations before income taxes in the Company’s consolidated statement of operations for the third quarter of fiscal ~~2019.~~2020.

Item 4.

Controls and Procedures

~~Item 4.Controls and Procedures~~

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the ~~Securities~~ Exchange ~~Act of 1934, as amended (the “Exchange Act”))~~Act) as of the end of the reporting period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s disclosure controls and procedures are effective such that material information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to management, including the Company’s principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

During the third quarter of fiscal ~~2019,~~2020, there were no changes to the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

~~Table of Contents~~

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

~~Item 1.Legal Proceedings~~

As a result primarily of certain former manufacturing operations, the Company has incurred and may have future liability under various federal, state and local environmental laws and regulations, including those governing pollution and exposure to, and the handling, storage and disposal of, hazardous substances. For example, under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and similar state laws, the Company is and may be liable for the costs of cleaning up environmental contamination on or from certain of its current or former properties, and at off-site locations where the Company disposed of wastes in the past. Such laws may impose joint and several liability. Typically, however, the costs for clean up at such sites are allocated among potentially responsible parties based upon each party’s relative contribution to the contamination, and other factors.

Pursuant to SEC regulations, including but not limited to Item 103 of Regulation S-K, the Company regularly assesses the status of and developments in pending environmental and other compliance related legal proceedings to determine whether any such proceedings should be identified specifically in this discussion of legal proceedings, and has concluded that no particular pending legal proceeding requires public disclosure. Based on the information known to date, management believes that the Company has appropriately accrued in its consolidated financial statements for its share of the estimable costs of environmental and other compliance related matters.

The Company is also currently subject to various pending and potential legal matters and investigations relating to compliance with governmental laws and regulations, including import/export and environmental matters. The Company currently believes that the resolution of such matters will not have a material adverse effect on the Company’s financial position or liquidity but could possibly be material to its results of operations in any one reporting period.

~~Item 1A.Risk Factors~~

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Exchange Act with respect to the financial condition, results of operations and business of the Company. You can find many of these statements by looking for words like “believes,” “plans,” “expects,” “anticipates,” “should,” “will,” “may,” “estimates” or similar expressions in this Quarterly Report or in documents incorporated by reference in this Quarterly Report. These forward-looking statements are subject to numerous assumptions, risks and uncertainties. You should understand that the following important factors, in addition to those discussed elsewhere in this Quarterly Report and in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2018, could affect the Company’s future results of operations, and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements:

Item 1A.

~~competitive pressures among distributors of electronic components;~~Risk Factors

~~an industry down-cycle in semiconductors;~~

~~relationships with key suppliers and allocations of products by suppliers;~~

risks relating to the Company’s international sales and operations, including risks relating to the ability to repatriate cash, foreign currency fluctuations, duties and taxes, and compliance with international and U.S. laws;

~~risks relating to acquisitions, divestitures and investments;~~

adverse effects on the Company’s supply chain, shipping costs, third-party service providers, customers and suppliers, including as a result of issues caused by natural and weather-related disasters;

~~Table of Contents~~

~~risks related to cyber-attacks and the Company’s information systems, including related to current or future implementations;~~

general economic and business conditions (domestic, foreign and global) affecting the Company’s operations and financial performance and, indirectly, the Company’s credit ratings, debt covenant compliance, and liquidity and access to financing;

geopolitical events, including the uncertainty caused by the United Kingdom’s planned exit from the European Union commonly referred to as “Brexit.” While the specific terms and impact of Brexit are not yet known, Brexit may adversely impact the United Kingdom and/or the European Union and therefore may adversely impact the Company’s operations and financial condition. The Company is monitoring the Brexit negotiations and developing contingency plans, including changes to its logistics operations and shipment routes and preparing for changes in trade facilitation regulations; and

~~legislative or regulatory changes affecting the Company’s businesses.~~

The discussion of the Company’s business and operations should be read together with the risk factor set forth below and the risk factors contained in Item 1A of its Annual Report on Form 10-K for the fiscal year ended June ~~30, 2018,~~29, 2019, which describe various risks and uncertainties to which the Company is or may become subject. These risks and uncertainties have the potential to affect the Company’s business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. AsOther than the additional risk factor set forth below, as of March ~~30, 2019,~~28, 2020, there have been no material changes to the risk factors set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended June ~~30, 2018.~~29, 2019.

Table of Contents

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, impacted the operations of the Company’s business partners and negatively impacted the Company’s operations and financial results.

The COVID-19 outbreak has negatively impacted the global economy, disrupted global supply chains, constrained workforce participation due to travel restrictions and quarantine orders, disrupted logistics and distribution systems, and created significant volatility and disruption of financial markets. As a result, this pandemic has negatively impacted the operations of the Company and its customers and suppliers, and heightened the risks of customer bankruptcies, customer delayed payments, acceleration of TI’s planned withdrawal as a supplier, restrictions on access to financial markets and other risk factors described in the Company’s Annual Report. While the Company has not yet experienced any material disruption to its upstream supply chain and many of its distribution centers remain operational under business continuity plans, it has experienced increased logistics costs, softer product demand, price constraints, longer lead times in certain regions, reduction in global distribution center utilization, and shipping delays. To mitigate the impact of COVID-19, the Company has implemented business continuity plans, with a focus on employee safety and mitigation of business disruptions. The Company is also taking, steps to conserve cash and effectively manage its debt, including pausing its share repurchase program and its investment and acquisition activities. As the scope and duration of the COVID-19 outbreak is unknown and the extent of its economic impact continues to evolve globally, there is significant uncertainty related to the ultimate impact that it will have on the Company’s business, its employees, results of operations and financial condition, and to what extent the Company’s actions to mitigate such impacts will be successful and sufficient.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

~~Item 2.Unregistered Sales of Equity Securities and Use of Proceeds~~

~~The~~In August 2019, the Company’s Board of Directors ~~has approved~~amended the Company’s existing share repurchase program, increasing the cumulative total of upauthorized share repurchases to ~~$2.45~~$2.95 billion of the Company’s common ~~stock under the Company’s share repurchase program.~~stock. The following table includes the Company’s monthly purchases of the Company’s common stock during the third quarter of fiscal ~~2019,~~2020 under the share repurchase program which is part of a publicly announced plan.

Total Number of

Approximate Dollar

Total

Average

Shares Purchased

Value of Shares That

Number

Price

as Part of Publicly

May Yet Be

of Shares

Paid per

Announced Plans

Purchased under the

Period

Purchased

Share

or Programs

Plans or Programs

December 31 – January 25

1,266,377

$
39.50

1,266,377

$
390,116,000

January 28 – February 22

277,154

$
44.19

277,154

$
377,869,000

February 25 – March 29

1,272,749

$
43.19

1,272,749

$
322,905,000


				Total Number of	Approximate Dollar
	Total	Average		Shares Purchased	Value of Shares That
	Number	Price		as Part of Publicly	May Yet Be
	of Shares	Paid per		Announced Plans	Purchased under the
Period	Purchased	Share		or Programs	Plans or Programs
December 29 – January 25	—	$	—	—	$	505,736,000
January 26 – February 22	475,993	$	36.67	475,993	$	488,282,000
February 23 – March 28	628,000	$	30.72	628,000	$	468,992,000

3234

Table of Contents

~~Item 6.Exhibits~~

Item 6.

Exhibits

Exhibit
Number		Exhibit
~~Number~~10.1*		~~Exhibit~~Amendment No. 1 to Fourth Amended and Restated Receivables Purchase Agreement, dated February 28, 2020, among Avnet, Inc., Avnet Receivables Corporation, the companies and financial institutions party thereto and Wells Fargo Bank, N.A., as agent.

10.2*		First Amendment to the May 8, 2018 Amended and Restated Avnet Deferred Compensation Plan, dated February 6, 2020.

31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*		XBRL ~~Instance Document.~~- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*		XBRL Taxonomy Extension Schema Document.

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document.

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document.

*	Filed herewith.
**	Furnished herewith. The information in these exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to liability under that section, and shall not be incorporated by reference into anyfiling under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

3335

Table of Contents

~~SIGNATURE~~

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: ~~April 26, 2019~~May 1, 2020

	AVNET, INC.


	By:	/s/ THOMAS LIGUORI
		Thomas Liguori
		Chief Financial Officer

3436


	March 30,		June 30,
	2019		2018
	(Thousands, except share
	amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	725,252	$	621,125
Receivables, less allowances of $51,830 and $48,959, respectively		3,188,863		3,641,139
Inventories		3,211,979		3,141,822
Prepaid and other current assets		129,316		206,513
Total current assets		7,255,410		7,610,599
Property, plant and equipment, net		455,484		522,909
Goodwill		1,027,432		980,872
Intangible assets, net		168,375		219,913
Other assets		192,979		262,552
Total assets	$	9,099,680	$	9,596,845
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	50,401	$	165,380
Accounts payable		1,836,543		2,269,478
Accrued expenses and other		446,320		534,603
Total current liabilities		2,333,264		2,969,461
Long-term debt		2,023,628		1,489,219
Other liabilities		380,316		453,084
Total liabilities		4,737,208		4,911,764
Commitments and contingencies (Note 7)
Shareholders’ equity:
Common stock $1.00 par; authorized 300,000,000 shares; issued 106,653,956 shares and 115,825,062 shares, respectively		106,654		115,825
Additional paid-in capital		1,565,083		1,528,713
Retained earnings		2,935,077		3,235,894
Accumulated other comprehensive loss		(244,342)		(195,351)
Total shareholders’ equity		4,362,472		4,685,081
Total liabilities and shareholders’ equity	$	9,099,680	$	9,596,845


	Electronic		Premier
	Components		Farnell		Total
	(Thousands)
Carrying value at June 30, 2018 (1)	$	479,699	$	501,173	$	980,872
Additions from acquisitions		49,405		—		49,405
Foreign currency translation		(2,309)		(536)		(2,845)
Carrying value at March 30, 2019 (1)	$	526,795	$	500,637	$	1,027,432


	March 30, 2019						June 30, 2018
	Acquired		Accumulated		Net Book		Acquired		Accumulated		Net Book
	Amount		Amortization		Value		Amount		Amortization		Value
	(Thousands)
Customer related	$	299,155	$	(196,551)	$	102,604	$	300,126	$	(148,416)	$	151,710
Trade name		54,267		(23,212)		31,055		54,391		(16,711)		37,680
Technology and other		64,740		(30,024)		34,716		52,793		(22,270)		30,523
	$	418,162	$	(249,787)	$	168,375	$	407,310	$	(187,397)	$	219,913


				Total Number of	Approximate Dollar
	Total	Average		Shares Purchased	Value of Shares That
	Number	Price		as Part of Publicly	May Yet Be
	of Shares	Paid per		Announced Plans	Purchased under the
Period	Purchased	Share		or Programs	Plans or Programs
December 31 – January 25	1,266,377	$	39.50	1,266,377	$	390,116,000
January 28 – February 22	277,154	$	44.19	277,154	$	377,869,000
February 25 – March 29	1,272,749	$	43.19	1,272,749	$	322,905,000