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 ~~September 28, 2019~~October 3, 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

AVNET, INC.

(Exact name of registrant as specified in its charter)


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


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

(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 every Interactive Data File required to be submitted 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 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 ☐
Non-accelerated Filer ☐		Smaller Reporting Company ☐
Emerging 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 October ~~17, 2019,~~21, 2020, the total number of shares outstanding of the registrant’s Common Stock was ~~100,962,258~~98,829,336 shares, net of treasury shares.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

INDEX

	Page No.
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets at ~~September 28, 2019~~October 3, 2020 and June ~~29, 2019~~27, 2020	2

Consolidated Statements of Operations for the first quarters ended October 3, 2020 and September 28, 2019 ~~and September 29, 2018~~	3

Consolidated Statements of Comprehensive Income for the first quarters ended October 3, 2020 and September 28, 2019 ~~and September 29, 2018~~	4

Consolidated Statements of Shareholders’ Equity for the first quarters ended October 3, 2020 and September 28, 2019 ~~and September 29, 2018~~	5

Consolidated Statements of Cash Flows for the first quarters ended October 3, 2020 and September 28, 2019 ~~and September 29, 2018~~	6

Notes to Consolidated Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3. Quantitative and Qualitative Disclosures About Market Risk	2728

Item 4. Controls and Procedures	2728

PART II. OTHER INFORMATION	27

Item 1. Legal Proceedings	2729

Item 1A. Risk Factors	2829

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2830

Item 6. Exhibits	2931

Signature Page	3032

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 28,		June 29,		October 3,		June 27,
	2019		2019		2020		2020

	(Thousands, except share				(Thousands, except share
	amounts)				amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	664,108	$	546,105	$	483,056	$	477,038
Receivables, less allowances of $50,541 and $53,499, respectively		3,129,387		3,168,369
Receivables						2,964,531		2,928,386
Inventories		3,025,980		3,008,424		2,944,673		2,731,988
Prepaid and other current assets		169,471		153,438		209,928		191,394
Total current assets		6,988,946		6,876,336		6,602,188		6,328,806
Property, plant and equipment, net		437,467		452,171		404,136		404,607
Goodwill		858,656		876,728		798,865		773,734
Intangible assets, net		120,139		143,520		47,448		65,437
Operating lease assets (Note 5)		278,570		—
Operating lease assets						288,669		275,917
Other assets		229,559		215,801		240,089		256,696
Total assets	$	8,913,337	$	8,564,556	$	8,381,395	$	8,105,197
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	638,402	$	300,538	$	166,992	$	51
Accounts payable		2,025,518		1,864,342		2,005,126		1,754,078
Accrued expenses and other		418,230		413,696		535,376		472,924
Short-term operating lease liabilities (Note 5)		55,149		—
Short-term operating lease liabilities						58,912		53,313
Total current liabilities		3,137,299		2,578,576		2,766,406		2,280,366
Long-term debt		1,191,975		1,419,922		1,195,203		1,424,791
Long-term operating lease liabilities (Note 5)		245,406		—
Long-term operating lease liabilities						262,850		253,719
Other liabilities		380,586		425,585		379,425		419,923
Total liabilities		4,955,266		4,424,083		4,603,884		4,378,799
Commitments and contingencies (Note 7)
Commitments and contingencies (Note 9)
Shareholders’ equity:
Common stock $1.00 par; authorized 300,000,000 shares; issued 101,470,636 shares and 104,037,769 shares, respectively		101,471		104,038
Common stock $1.00 par; authorized 300,000,000 shares; issued 98,843,595 shares and 98,792,542 shares, respectively						98,844		98,793
Additional paid-in capital		1,580,706		1,573,005		1,599,331		1,594,140
Retained earnings		2,678,266		2,767,469		2,367,720		2,421,845
Accumulated other comprehensive loss		(402,372)		(304,039)		(288,384)		(388,380)
Total shareholders’ equity		3,958,071		4,140,473		3,777,511		3,726,398
Total liabilities and shareholders’ equity	$	8,913,337	$	8,564,556	$	8,381,395	$	8,105,197

See notes to consolidated financial statements.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	First Quarters Ended				First Quarters Ended
	September 28,		September 29,		October 3,		September 28,
	2019		2018		2020		2019

	(Thousands, except per share amounts)				(Thousands, except per share amounts)
Sales	$	4,630,009	$	5,089,879	$	4,723,059	$	4,630,009
Cost of sales		4,086,170		4,453,129		4,206,979		4,086,170
Gross profit		543,839		636,750		516,080		543,839
Selling, general and administrative expenses		456,503		475,146		471,158		456,503
Restructuring, integration and other expenses		24,598		14,788		26,420		24,598
Operating income		62,738		146,816		18,502		62,738
Other income (expense), net		4,931		(1,892)
Other (expense) income, net						(19,498)		4,931
Interest and other financing expenses, net		(33,631)		(30,093)		(22,301)		(33,631)
Income from continuing operations before taxes		34,038		114,831
Income tax (benefit) expense		(7,714)		31,302
Income from continuing operations, net of tax		41,752		83,529
Income from discontinued operations, net of tax		—		195
Net income		41,752		83,724
Income (loss) before taxes						(23,297)		34,038
Income tax benefit						(4,408)		(7,714)
Net (loss) income					$	(18,889)	$	41,752

Earnings per share - basic:
Continuing operations	$	0.40	$	0.73
Discontinued operations		—		—
Net income per share basic		0.40		0.73

Earnings per share - diluted:
Continuing operations	$	0.40	$	0.72
Discontinued operations		—		—
Net income per share diluted		0.40		0.72
Earnings (loss) per share:
Basic					$	(0.19)	$	0.40
Diluted					$	(0.19)	$	0.40

Shares used to compute earnings per share:
Basic		103,130		115,260		98,897		103,130
Diluted		104,377		116,471		98,897		104,377
Cash dividends paid per common share	$	0.21	$	0.20	$	0.21	$	0.21

See notes to consolidated financial statements.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	First Quarters Ended				First Quarters Ended
	September 28,		September 29,		October 3,		September 28,
	2019		2018		2020		2019

	(Thousands)				(Thousands)
Net income	$	41,752	$	83,724
Other comprehensive (loss) income, net of tax:
Net (loss) income					$	(18,889)	$	41,752
Other comprehensive income (loss), net of tax:
Foreign currency translation and other		(102,146)		8,801		90,373		(102,146)
Pension adjustments, net		3,813		756		9,623		3,813
Total comprehensive (loss) income	$	(56,581)	$	93,281
Total comprehensive income (loss)					$	81,107	$	(56,581)

See notes to consolidated financial statements.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

~~(unaudited)~~(Unaudited)

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
Other comprehensive loss

—

—

—

—

(98,333)

(98,333)
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

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
Other comprehensive income

—

—

—

—

9,557

9,557
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

~~See notes to consolidated financial statements.~~

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Unaudited)~~


									Accumulated
	Common		Common		Additional				Other		Total
	Stock-		Stock-		Paid-In		Retained		Comprehensive		Shareholders’
	Shares		Amount		Capital		Earnings		(Loss) Income		Equity

	(Thousands)
Balance, June 27, 2020		98,793	$	98,793	$	1,594,140	$	2,421,845	$	(388,380)	$	3,726,398
Net loss		—		—		—		(18,889)		—		(18,889)
Translation adjustments and other		—		—		—		—		90,373		90,373
Pension liability adjustments, net		—		—		—		—		9,623		9,623
Cash dividends		—		—		—		(20,756)		—		(20,756)
Effects of new accounting principles, net		—		—		—		(14,480)		—		(14,480)
Stock-based compensation		51		51		5,191		—		—		5,242
Balance, October 3, 2020		98,844	$	98,844	$	1,599,331	$	2,367,720	$	(288,384)	$	3,777,511

First Quarters Ended

September 28,

September 29,

2019

2018

(Thousands)
Cash flows from operating activities:

Net income

$
41,752

$
83,724
Less: Income from discontinued operations, net of tax

—

195
Income from continuing operations

41,752

83,529

Non-cash and other reconciling items:

Depreciation

24,669

25,389
Amortization

19,911

20,810
Amortization of operating lease asset

15,839

—
Deferred income taxes

(3,970)

36,830
Stock-based compensation

7,218

9,044
Other, net

8,034

14,994
Changes in (net of effects from businesses acquired and divested):

Receivables

(6,703)

(19,292)
Inventories

(64,194)

(269,649)
Accounts payable

189,746

95,119
Accrued expenses and other, net

(36,660)

(81,753)
Net cash flows provided (used) for operating activities - continuing operations

195,642

(84,979)
Net cash flows provided (used) for operating activities

195,642

(84,979)

Cash flows from financing activities:

Borrowings (repayments) under accounts receivable securitization, net

110,800

(40,000)
Repayments under senior unsecured credit facility, net

(1,100)

(1,217)
Repayments under bank credit facilities and other debt, net

(745)

(50,330)
Repurchases of common stock

(110,805)

(149,094)
Dividends paid on common stock

(21,451)

(22,932)
Other, net

548

17,328
Net cash flows used for financing activities - continuing operations

(22,753)

(246,245)
Net cash flows used for financing activities

(22,753)

(246,245)

Cash flows from investing activities:

Purchases of property, plant and equipment

(29,864)

(41,007)
Other, net

(12,515)

65
Net cash flows used for investing activities - continuing operations

(42,379)

(40,942)
Net cash flows provided by investing activities - discontinued operations

—

120,000
Net cash flows (used) provided by investing activities

(42,379)

79,058

Effect of currency exchange rate changes on cash and cash equivalents

(12,507)

(3,107)

Cash and cash equivalents:

— increase (decrease)

118,003

(255,273)
— at beginning of period

546,105

621,125
— at end of period

$
664,108

$
365,852


									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

See notes to consolidated financial statements.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	First Quarters Ended
	October 3,		September 28,
	2020		2019

	(Thousands)
Cash flows from operating activities:
Net (loss) income	$	(18,889)	$	41,752

Non-cash and other reconciling items:
Depreciation		21,845		24,669
Amortization		20,117		19,911
Amortization of operating lease assets		14,079		15,839
Deferred income taxes		6,614		(3,970)
Stock-based compensation		4,961		7,218
Asset impairment expense		15,166		—
Other, net		10,898		8,034
Changes in (net of effects from businesses acquired and divested):
Receivables		(7,116)		(6,703)
Inventories		(136,426)		(64,194)
Accounts payable		228,740		189,746
Accrued expenses and other, net		(37,545)		(36,660)
Net cash flows provided by operating activities		122,444		195,642

Cash flows from financing activities:
Borrowings under accounts receivable securitization, net		166,900		110,800
Repayments under senior unsecured credit facility, net		(234,190)		(1,100)
Repayments under bank credit facilities and other debt, net		(545)		(745)
Repurchases of common stock		—		(110,805)
Dividends paid on common stock		(20,756)		(21,451)
Other, net		281		548
Net cash flows used for financing activities		(88,310)		(22,753)

Cash flows from investing activities:
Purchases of property, plant and equipment		(19,998)		(29,864)
Acquisitions of assets		(18,700)		—
Other, net		753		(12,515)
Net cash flows used for investing activities		(37,945)		(42,379)

Effect of currency exchange rate changes on cash and cash equivalents		9,829		(12,507)

Cash and cash equivalents:
— increase		6,018		118,003
— at beginning of period		477,038		546,105
— at end of period	$	483,056	$	664,108

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. 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 ~~29, 2019.~~27, 2020.

Certain reclassifications have been made in prior periods to conform to the current period presentation.

~~Recently adopted accounting pronouncements~~Fiscal year

The Company ~~adopted Accounting Standards Update (“ASU”) No. 2016-02,~~ ~~“Leases (Topic 842),”~~operates on a “52/53 week” fiscal year, and ~~its related amendments (collectively “ASC 842”) on June 30, 2019 (the~~fiscal 2021 contains 53 weeks compared to fiscal 2020, which contained 52 weeks. As a result, the first ~~day~~quarter of fiscal 2020) using the modified transition approach without restating the comparative period consolidated financial statements. The standard requires lessees to recognize a right-of-use (“ROU”) asset and lease liability for all leases.

The adoption of ASC 842 did not have a material impact on the Company’s consolidated statements of operations or retained earnings. The Company elected the package of practical expedients permitted under the transition guidance that allowed, among other things, the historical lease classification to be carried forward without reassessment and the hindsight practical expedient. The Company elected to not separate lease and non-lease components for its real estate leases. Refer to Note 5 for additional disclosures related to leases.

~~In August 2017, the FASB issued ASU 2017-12,~~ ~~Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities”~~ and its related amendments (collectively “ASC 815”), 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 accounting2021 ended October 3, 2020 contained 14 weeks compared to ~~current GAAP. This update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The adoption of ASC 815 in~~ the first quarter of fiscal 2020 ~~did not have any impact on the Company’s consolidated financial statements.~~ended September 28, 2019, which contained 13 weeks.

Recently ~~issued~~adopted accounting pronouncements

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. The adoption of ASU No. 2018-15 ~~is effective for the Company~~ in the first quarter of fiscal 2021 did not have a material impact on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU No. 2016-13") and also issued subsequent amendments to the initial guidance: ASU No. 2018-19, ASU No. 2019-04, ASU No. 2019-05, and ASU No. 2019-11 (collectively, Topic 326). Topic 326 revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. On June 28, 2020, the Company adopted Topic 326 using a modified retrospective approach with ~~early adoption permitted,~~a cumulative effect adjustment to the opening balance of retained earnings, which increased the allowance for credit losses by $17.2 million ($14.5 million, net of tax of $2.7 million). Increases in the allowance for credit losses relate to the required change from an incurred loss model to an expected loss model, and the related change in timing of loss recognition where an allowance for credit losses is now applied at the time the asset, or pool of assets, is recognized.

Recently issued accounting pronouncements

In March 2020, the FASB issued ASU No. 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 ~~be applied either retrospectively or prospectively. The Company is currently evaluating~~ease the potential ~~effects of adopting the provisions of ASU No. 2018-15.~~

burden in accounting for reference rate reform on financial reporting. The new guidance provides optional

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

expedients and exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform if certain criteria are met. This guidance is effective upon issuance through December 31, 2022. The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2020-04.

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)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (“ASU No.2020-01”), which clarifies the interaction of the accounting for 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 2022, and early adoption is permitted. The Company 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 the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 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 a retrospective, modified retrospective or prospective basis. The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2019-12.

In August 2018, the FASB issued ~~Accounting Standards Update~~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 clarifying certain other disclosure requirements. ~~The~~ ASU No. 2018-14 will be effective for the Company in the first quarter of fiscal 2022, and early adoption is permitted. The Company’s planned adoption of ASU No. 2018-14 is not expected to have ana material impact on the Company’s consolidated financial statements.

2. ~~Discontinued operations~~Summary of significant accounting policies

Except for the changes below, no material changes have been made to the Company’s significant accounting policies as disclosed in Note 1, Summary of Significant Accounting Policies, in its Annual Report on Form 10-K filed on August 14, 2020 for the year ended June 27, 2020.

Receivables – Receivables, predominately comprised of trade accounts and notes receivable, are reported at amortized cost, net of the allowance for credit losses in the consolidated balance sheets. The allowance for credit losses is a valuation account that is deducted from the receivables’ amortized cost basis to present the net amount expected to be collected. The Company estimates the allowance for credit losses using relevant available information about expected credit losses, including information about historical credit losses, past events, current conditions, and other factors which may affect the collectability of receivables. Adjustments to historical loss information are made for differences in current receivable-specific risk characteristics such as changes in customer behavior, economic and industry changes, or other relevant factors. Expected credit losses are estimated on a pooled basis, when similar risk characteristics exist.

3. Acquisitions

In ~~February 2017,~~the first quarter of fiscal 2021, the Company completed ~~the sale~~an asset acquisition. The impact 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 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 from discontinued operations investing activities. Income tax payments relatedthis asset acquisition was not material to the ~~gain on sale~~Company’s consolidated balance sheets or statements of ~~the TS business have been classified as cash flow from discontinued operations operating activities.~~operations.

~~Under~~

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

4. Receivables

The Company’s receivables and allowance for credit losses were as follows:


	October 3,		June 27,
	2020		2020

	(In thousands)
Receivables	$	3,046,058	$	2,993,404
Allowance for Credit Losses		(81,527)		(65,018)

The Company had the ~~contractual terms~~following activity in the allowance for credit losses during the first quarter 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.fiscal 2021:


	October 3,
	2020
	(In thousands)
Balance at June 27, 2020	$	65,018
Effect of adoption of ASU No. 2016-12 (Note 1)		17,205
Credit Loss Provision		1,786
Credit Loss Recoveries		(126)
Write offs		(4,023)
Foreign Currency Effect and Other		1,667
Balance at October 3, 2020	$	81,527

3.5. Goodwill and intangible assets

Goodwill

The following table presents the change in goodwill by reportable segment for the three months ended ~~September 28, 2019.~~October 3, 2020.


	Electronic						Electronic
	Components		Farnell		Total		Components		Farnell		Total

	(Thousands)						(Thousands)
Carrying value at June 29, 2019 ⁽¹⁾	$	390,896	$	485,832	$	876,728
Additions from acquisitions		—		—		—
Carrying value at June 27, 2020 ⁽¹⁾							$	297,836	$	475,898	$	773,734
Foreign currency translation		(5,108)		(12,964)		(18,072)		6,606		18,525		25,131
Carrying value at September 28, 2019 ⁽¹⁾	$	385,788	$	472,868	$	858,656
Carrying value at October 3, 2020 ⁽¹⁾							$	304,442	$	494,423	$	798,865

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

(1)	Includes accumulated impairment of $1,045,110 from fiscal 2009, $181,440 from fiscal 2018, $137,396 from fiscal 2019 and $118,731 from fiscal 2020.

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 first quarter of fiscal ~~2020,~~2021, the Company concluded that an interim goodwill impairment test was not required.

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~~AVNET, INC. AND SUBSIDIARIES~~

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

~~Intangible Assets~~

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

September 28, 2019

June 29, 2019

Acquired

Accumulated

Net Book

Acquired

Accumulated

Net Book


Amount

Amortization

Value

Amount

Amortization

Value

(Thousands)

Customer related

$
284,993

$
(218,402)

$
66,591

$
292,266

$
(208,329)

$
83,937

Trade name

51,323

(26,107)

25,216

52,760

(24,752)

28,008

Technology and other

62,255

(33,923)

28,332

63,753

(32,178)

31,575

$
398,571

$
(278,432)

$
120,139

$
408,779

$
(265,259)

$
143,520

Intangible asset amortization expense from continuing operations was $19.9 million and $20.8 million for the first quarters of fiscal 2020 and 2019, respectively. Intangible assets have a weighted average remaining useful life of approximately two years. The following table presents the estimated future amortization expense for the remainder of fiscal 2020 and the next five fiscal years (in thousands):

Fiscal Year

Remainder of fiscal 2020

$
59,212
2021

39,439
2022

14,132
2023

5,864
2024

1,492
2025

—
Total

$
120,139

~~4. Debt~~

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

September 28,

June 29,

September 28,

June 29,

2019

2019

2019

2019

Interest Rate

Carrying Balance

Bank credit facilities and other

1.08
%

1.02
%

$
302

$
538

Accounts receivable securitization program

2.80
%

—

338,100

—

Public notes due June 2020

5.88
%

5.88
%

300,000

300,000

Short-term debt

$
638,402

$
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.

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Intangible Assets

The following table presents the Company’s acquired intangible assets at October 3, 2020 and June 27, 2020, respectively.


	October 3, 2020						June 27, 2020
	Acquired		Accumulated		Net Book		Acquired		Accumulated		Net Book
	Amount		Amortization		Value		Amount⁽¹⁾		Amortization		Value

	(Thousands)
Customer related	$	311,121	$	(291,936)	$	19,185	$	300,937	$	(266,759)	$	34,178
Trade name		53,729		(35,914)		17,815		51,698		(32,493)		19,205
Technology and other		55,666		(45,218)		10,448		53,641		(41,587)		12,054
	$	420,516	$	(373,068)	$	47,448	$	406,276	$	(340,839)	$	65,437

⁽¹⁾Acquired amount reduced by impairment of $17,473 from fiscal 2020.

Intangible asset amortization expense was $20.1 million and $19.9 million for the first quarters of fiscal 2021 and 2020, respectively. Intangible assets have a weighted average remaining useful life of approximately 3 years. The following table presents the estimated future amortization expense for the remainder of fiscal 2021 and the next five fiscal years (in thousands):


Fiscal Year
Remainder of fiscal 2021	$	20,058
2022		14,668
2023		6,415
2024		2,995
2025		1,472
2026		1,472
Thereafter		368
Total	$	47,448

6. Debt

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


	October 3,		June 27,		October 3,		June 27,
	2020		2020		2020		2020

	Interest Rate				Carrying Balance
Bank credit facilities and other	8.45	%	5.69	%	$	92	$	51
Accounts receivable securitization program	1.20	%	—			166,900		—
Short-term debt					$	166,992	$	51

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In July 2020, the Company amended and extended for one year, its 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~~$450 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 ~~$839.6~~$728.4 million and ~~$857.3~~$703.8 million at ~~September 28, 2019,~~October 3, 2020 and June ~~29, 2019,~~27, 2020, 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 September 28, 2019, and June 29, 2019. The Securitization Program expires in August 2020 and as a result the Company has classified outstanding balances as short-term debt as of September 28, 2019. Interest on borrowings is calculated using a one-month LIBOR rate plus a spread of ~~0.75%.~~1.05% The facility fee on the unused balance of the facility is up to ~~0.35%~~0.40%.

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


	September 28,		June 29,		September 28,		June 29,		October 3,		June 27,		October 3,		June 27,
	2019		2019		2019		2019		2020		2020		2020		2020

	Interest Rate				Carrying Balance				Interest Rate				Carrying Balance
Revolving credit facilities:
Accounts receivable securitization program	—		3.15	%	$	—	$	227,300
Credit Facility	—		5.68	%		—		1,100
Credit Facility (due June 2023)									—		1.28	%	$	—	$	230,000
Public notes due:
December 2021	3.75	%	3.75	%		300,000		300,000	3.75	%	3.75	%		300,000		300,000
December 2022	4.88	%	4.88	%		350,000		350,000	4.88	%	4.88	%		350,000		350,000
April 2026	4.63	%	4.63	%		550,000		550,000	4.63	%	4.63	%		550,000		550,000
Other long-term debt	1.12	%	1.00	%		348		403	1.18	%	1.19	%		1,518		1,491
Long-term debt before discount and debt issuance costs						1,200,348		1,428,803						1,201,518		1,431,491
Discount and debt issuance costs – unamortized						(8,373)		(8,881)						(6,315)		(6,700)
Long-term debt					$	1,191,975	$	1,419,922					$	1,195,203	$	1,424,791

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, which were amended during the first quarter of fiscal 2021, requiring the Company to maintain minimum interest coverage and leverage ratios, which the Company was in compliance with as of ~~September 28, 2019~~October 3, 2020 and June ~~29, 2019.~~ 27, 2020.

As of ~~September 28, 2019,~~October 3, 2020 and June ~~29, 2019,~~27, 2020, there were ~~$4.2~~$1.3 million and ~~$4.0~~$1.6 million, respectively, in letters of credit issued under the Credit Facility.

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~~AVNET, INC. AND SUBSIDIARIES~~

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

As of ~~September 28, 2019,~~October 3, 2020, the carrying value and fair value of the Company’s total debt was ~~$1.83~~$1.36 billion and ~~$1.91~~$1.46 billion, respectively. At June ~~29, 2019,~~27, 2020, the carrying value and fair value of the Company’s total debt was ~~$1.72~~$1.42 billion and ~~$1.78~~$1.52 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.

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

5.7. 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 ~~remaining~~ lease term of up to 1918 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.

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 the Company’s incremental secured borrowing rate. The incremental secured borrowing rates used at the date of adoption for each lease varies in accordance with the remaining 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):


	First Quarter
	Ended		First Quarters Ended
	September 28, 2019		October 3, 2020		September 28, 2019
Operating lease cost	$	18,802	$	18,402	$	18,802
Variable lease cost		5,268		6,288		5,268
Total lease cost	$	24,070	$	24,690	$	24,070

Future minimum operating lease payments as of ~~September 28, 2019~~October 3, 2020 are as follows (in thousands):


Fiscal Year
Remainder of fiscal 2021	$	51,333
2022		59,795
2023		50,999
2024		38,900
2025		32,006
Thereafter		156,634
Total future operating lease payments		389,667
Total imputed interest on operating lease liabilities		(67,905)
Total operating lease liabilities	$	321,762

Other information pertaining to operating leases consists of the following:

Supplemental cash flow information related to the Company’s operating leases for the first quarters ended October 3, 2020 and September 28, 2019, respectively, was as follows (in thousands):

Fiscal Year

Remainder of fiscal 2020

$
49,441

2021

53,034

2022

42,442

2023

36,932

2024

29,215

Thereafter

158,895

Total future operating lease payments

369,959

Total imputed interest on operating lease liabilities

(69,404)

Total operating lease liabilities

$
300,555

1112

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

~~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~~	%

~~Supplemental cash flow information related to the Company’s operating leases for the three months ended September 28, 2019 was as follows (in thousands):~~

Supplemental Cash Flow Information:

Cash paid for operating lease liabilities

$
15,322

Operating lease assets obtained from new operating lease liabilities

6,404

6.8. 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 (expense) income, ~~(expense),~~ 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 ~~September 28, 2019~~October 3, 2020 and June ~~29, 2019.~~27, 2020. 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.

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.

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

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

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


	September 28,		June 29,		October 3,		June 27,
	2019		2019		2020		2020

	(Thousands)				(Thousands)
Prepaid and other current assets	$	4,058	$	5,511	$	8,480	$	18,989
Accrued expenses and other		5,705		6,154		18,471		15,605

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

First Quarters Ended

September 28,

September 29,

October 3,

September 28,

2019

2018

2020

2019

(Thousands)

Net derivative financial instrument gain

9,500

2,792

Net derivative financial instrument (loss) gain

(7,816)

9,500

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 as the remeasurement of the underlying assets or liabilities being economically hedged.

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

7.9. 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 ~~September 28, 2019,~~October 3, 2020 and June ~~29, 2019,~~27, 2020, the Company had aggregate estimated liabilities of ~~$14.7~~$18.8 million classified within accrued expenses and other for such compliance-related matters that were reasonably estimable as of such dates.

~~Table~~During the first quarter of ~~Contents~~fiscal 2021, the Company recorded a gain on legal settlement of $8.2 million, which is classified as a component of Restructuring, integration and other expenses.

~~AVNET, INC. AND SUBSIDIARIES~~

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

8.10. Income taxes

During the first quarter of fiscal 2020, the Company’s effective tax rate on its income before taxes was a benefit of 22.7%. During the first quarter of fiscal 2020, the Company’s effective tax rate was favorably impacted primarily by (i) the release of unrecognized tax benefit reserves and (ii) the mix of income in lower tax jurisdictions. During the first quarter of fiscal 2019, the Company’s effective tax rate was unfavorably impacted primarily by (i) an adjustment to the provisional estimate for the one-time mandatory deemed repatriation tax liability recorded under the requirements of recent tax law changes in the United States (the “Act”) and (ii) increases in unrecognized tax benefits, partially offset by (iii) an adjustment to the provisional deferred tax impacts of the Act and (iv) the mix of income in lower tax jurisdictions.

The Company’s effective tax rates in fiscal years 2019 and 2020 are 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 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.

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

9.11. Pension plan

The Company has a noncontributory defined benefit pension plan that covers substantially all current or former U.S. employees (the “Plan”). Components of net periodic pension cost for the Plan ~~were~~was as follows:


	First Quarters Ended				First Quarters Ended
	September 28,		September 29,		October 3,		September 28,
	2019		2018		2020		2019

	(Thousands)				(Thousands)
Service cost	$	3,786	$	3,734	$	3,938	$	3,786
Total net periodic pension cost within selling, general and administrative expenses		3,786		3,734		3,938		3,786

Interest cost		5,638		6,614		3,976		5,638
Expected return on plan assets		(12,668)		(13,301)		(12,420)		(12,668)
Amortization of prior service cost (credit)		534		(393)
Amortization of prior service cost						75		534
Recognized net actuarial loss		3,637		2,535		5,151		3,637
Total net periodic pension benefit within other income (expense), net		(2,859)		(4,545)
Total net periodic pension benefit within other (expense) income, net						(3,218)		(2,859)

Net periodic pension cost (benefit)	$	927	$	(811)
Net periodic pension cost					$	720	$	927

The Company made $8.0 million of contributions during the first quarter of fiscal 2021 and expects to make additional contributions to the Plan of $8.0 million ~~during fiscal 2020. There were 0 contributions made during~~in the ~~first quarter~~remainder of fiscal ~~2020.~~2021.

Amounts reclassified out of accumulated other comprehensive income, net of tax, to other income (expense), net during the first quarters of fiscal 2020 and fiscal 2019 were not material and substantially all related to net periodic pension costs including recognition of actuarial losses and amortization of prior service costs and credits.

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

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

~~10.~~12. Shareholders’ equity

Share repurchase program

In August 2019, the Company’s Board of Directors ~~authorized a $500 million increase in~~amended the Company’s existing share repurchase program, increasing the cumulative total of authorized share repurchases to $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 ~~three months~~first quarter ended ~~September 28, 2019,~~October 3, 2020, the Company ~~repurchased 2.6 million~~did not repurchase any shares under this ~~program for a total cost of $112.1 million.~~program. As of ~~September 28, 2019,~~October 3, 2020, the Company had ~~$593.3~~$469.0 million remaining under its share repurchase authorization.

Common stock dividend

In August ~~2019,~~2020, the Company’s Board of Directors approved a dividend of $0.21 per common share and dividend payments of ~~$21.5~~$20.8 million were made in September ~~2019.~~

~~11. Earnings per share~~

First Quarters Ended

September 28,

September 29,

2019

2018

(Thousands, except per share data)
Numerator:

Income from continuing operations

$
41,752

$
83,529
Income from discontinued operations

—

195
Net income

$
41,752

$
83,724

Denominator:

Weighted average common shares for basic earnings per share

103,130

115,260
Net effect of dilutive stock based compensation awards

1,247

1,211
Weighted average common shares for diluted earnings per share

104,377

116,471
Basic earnings per share - continuing operations

$
0.40

$
0.73
Basic earnings per share - discontinued operations

—

—
Basic earnings per share

$
0.40

$
0.73
Diluted earnings per share - continuing operations

$
0.40

$
0.72
Diluted earnings per share - discontinued operations

—

—
Diluted earnings per share

$
0.40

$
0.72
Stock options excluded from earnings per share calculation due to anti-dilutive effect

388

1,113

2020.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

~~12.~~13. Earnings per share


	First Quarters Ended
	October 3,		September 28,
	2020		2019

	(Thousands, except per share data)
Numerator:
Net (loss) income	$	(18,889)	$	41,752

Denominator:
Weighted average common shares for basic earnings per share		98,897		103,130
Net effect of dilutive stock based compensation awards		—		1,247
Weighted average common shares for diluted earnings per share		98,897		104,377
Basic (loss) earnings per share	$	(0.19)	$	0.40
Diluted (loss) earnings per share	$	(0.19)	$	0.40
Stock options excluded from earnings per share calculation due to anti-dilutive effect		875		388

For the first quarter of fiscal 2021, the diluted net loss per share is the same as the basic net loss per share as the effect of all potential common shares would be anti-dilutive.

14. Additional cash flow information

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


	First Quarters Ended				First Quarters Ended
	September 28,		September 29,		October 3,		September 28,
	2019		2018		2020		2019

	(Thousands)				(Thousands)
Non-cash Investing Activities:
Capital expenditures incurred but not paid	$	7,500	$	9,690	$	3,173	$	7,500
Non-cash Financing Activities:
Unsettled share repurchases	$	2,734	$	11,228		—	$	2,734
Supplemental Cash Flow Information:
Interest	$	19,214	$	13,826	$	12,538	$	19,214
Income tax (refunds) payments - continuing and discontinued operations		(5,192)		54,519
Income tax net payments (refunds)						19,258		(5,192)

Included in cash and cash equivalents as of ~~September 28, 2019~~October 3, 2020 and June ~~29, 2019~~27, 2020 was ~~$16.1~~$5.8 million and ~~$9.4~~$20.9 million, respectively, of cash equivalents, which was primarily comprised of investment grade money market funds and overnight time deposits.

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

~~13.~~15. Segment information

Electronic Components (“EC”) and 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.


	First Quarters Ended				First Quarters Ended
	September 28,		September 29,		October 3,		September 28,
	2019		2018		2020		2019

	(Thousands)				(Thousands)
Sales:
Electronic Components	$	4,294,187	$	4,710,825	$	4,382,148	$	4,294,187
Farnell		335,822		379,054		340,911		335,822
		4,630,009		5,089,879		4,723,059		4,630,009
Operating income:
Electronic Components	$	112,286	$	161,913	$	84,440	$	112,286
Farnell		21,805		40,793		11,959		21,805
		134,091		202,706		96,399		134,091
Corporate ⁽¹⁾		(26,677)		(20,175)
Corporate						(31,302)		(26,677)
Restructuring, integration and other expenses		(24,598)		(14,788)		(26,420)		(24,598)
Amortization of acquired intangible assets and other		(20,078)		(20,927)		(20,175)		(20,078)
Operating income	$	62,738	$	146,816	$	18,502	$	62,738

Sales, by geographic area:
Americas ⁽²⁾	$	1,215,757	$	1,271,793
EMEA ⁽³⁾		1,470,924		1,714,917
Asia/Pacific ⁽⁴⁾		1,943,328		2,103,169
Americas ⁽¹⁾					$	1,205,695	$	1,215,757
EMEA ⁽²⁾						1,480,674		1,470,924
Asia/Pacific ⁽³⁾						2,036,690		1,943,328
Sales	$	4,630,009	$	5,089,879	$	4,723,059	$	4,630,009

⁽¹⁾

~~Corporate is not a reportable segment~~Includes sales from the United States of $1.13 billion and ~~represents certain centrally incurred overhead expenses~~$1.14 billion for the first quarters ended October 3, 2020 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.September 28, 2019, respectively.

⁽²⁾	Includes sales from ~~the United States~~Germany and Belgium of ~~$1.14 billion~~$574.8 million and ~~$1.18 billion~~$294.4 million, respectively, for the first ~~quarters~~quarter ended ~~September 28, 2019 and September 29, 2018, respectively.~~

⁽³⁾	October 3, 2020. Includes sales from Germany and Belgium of $580.3 million and $277.8 million, respectively, for the first quarter ended September 28, 2019.

⁽³⁾	Includes sales from ~~Germany~~China (including Hong Kong), Taiwan and ~~Belgium~~Singapore of ~~$685.7~~$631.8 million, $916.3 million and ~~$280.1~~$272.0 million, respectively, for the first quarter ended ~~September 29, 2018.~~

⁽⁴⁾

October 3, 2020. Includes sales from China (including Hong Kong), Taiwan and Singapore of $623.5 million, $870.4 million and $239.6 million, respectively, for the first quarter ended September 28, 2019. ~~Includes sales from China (including Hong Kong), Taiwan and Singapore of $693.1 million, $888.7 million and $280.4 million, respectively, for the first quarter ended September 29, 2018.~~

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


	September 28,		June 29,		October 3,		June 27,
	2019		2019		2020		2020

	(Thousands)				(Thousands)
Property, plant, and equipment, net, by geographic area:
Americas ⁽¹⁾	$	208,925	$	213,802	$	173,378	$	183,892
EMEA ⁽²⁾		192,338		200,379		192,997		183,382
Asia/Pacific		36,204		37,990		37,761		37,333
Property, plant, and equipment, net	$	437,467	$	452,171	$	404,136	$	404,607

⁽¹⁾	Includes property, plant and equipment, net, of ~~$205.4~~$169.2 million and ~~$209.9~~$179.4 million as of ~~September 28, 2019,~~October 3, 2020 and June ~~29, 2019,~~27, 2020, respectively, in the United States.

⁽²⁾

Includes property, plant and equipment, net, of ~~$87.3~~$86.1 million, ~~$72.0~~$80.8 million and ~~$23.5~~$22.5 million in Germany, the UKUnited Kingdom and Belgium, respectively, as of ~~September 28, 2019;~~October 3, 2020; and ~~$95.2~~$84.9 million, ~~$70.5~~$72.7 million and ~~$25.2~~$22.4 million in Germany, the UKUnited Kingdom and Belgium, respectively, as of June ~~29, 2019.~~27, 2020.

~~14.~~16. Restructuring expenses

Fiscal ~~2020~~2021

During fiscal ~~2020,~~2021, the Company undertook restructuring actions in order to improve operating efficiencies and ~~further integrate the acquisition of Farnell.~~reduce operating expenses. Restructuring expenses are included as a component of restructuring, integration and other expenses in the consolidated statements of operations. The activity related to the restructuring liabilities ~~and assets~~associated with restructuring activities established during fiscal ~~2020~~2021 is presented in the following table:


									Facility
			Asset						and Contract
	Severance		Impairments		Total		Severance		Exit Costs		Total

	(Thousands)						(Thousands)
Fiscal 2020 restructuring expenses	$	11,576	$	6,711	$	18,287
Fiscal 2021 restructuring expenses							$	24,815	$	2,037	$	26,852
Cash payments		(5,730)		—		(5,730)		(4,732)		(200)		(4,932)
Non-cash amounts		—		(6,711)		(6,711)		—		—		—
Other, principally foreign currency translation		(115)		—		(115)		(38)		(2)		(40)
Balance at September 28, 2019	$	5,731	$	—	$	5,731
Balance at October 3, 2020							$	20,045	$	1,835	$	21,880

Severance expense recorded in the first quarter of fiscal ~~2020~~2021 related to the reduction, or planned reduction, of over ~~200~~150 employees, primarily in executive management, operations, information technology, warehouse, sales and business support functions. Asset impairments relate primarily to software 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 ~~$18.3~~$26.9 million in restructuring expenses recorded during the first quarter of fiscal ~~2020, $15.1~~2021, $12.3 million related to EC, ~~and $3.2~~$9.2 million related to ~~Farnell.~~Farnell and $5.4 million related to Corporate. The Company expects the majority of the remaining severance amounts to be paid by the end of fiscal ~~2020.~~2021.

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Fiscal ~~2019~~2020 and prior

During fiscal ~~2019~~2020 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 quarter of fiscal ~~2020~~2021 related to the remaining restructuring liabilities ~~from continuing operations~~ established during fiscal ~~2019~~2020 and prior:


			Facility						Facility
			and Contract						and Contract
	Severance		Exit Costs		Total		Severance		Exit Costs		Total

	(Thousands)						(Thousands)
Balance at June 29, 2019	$	21,537	$	5,381	$	26,918
Balance at June 27, 2020							$	13,574	$	3,368	$	16,942
Cash payments		(7,231)		(2,055)		(9,286)		(1,802)		(208)		(2,010)
Changes in estimates, net		(1,455)		618		(837)		(304)		(33)		(337)
Other, principally foreign currency translation		(63)		(124)		(187)		390		99		489
Balance at September 28, 2019	$	12,788	$	3,820	$	16,608
Balance at October 3, 2020							$	11,858	$	3,226	$	15,084

The Company expects the majority of the remaining amounts to be paid by the end of fiscal ~~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 27, 2020, 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 pandemic 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, operations of its distribution centers, shipping costs, third-party service providers, customers and suppliers, including as a result of issues caused by natural and weather-related disasters, pandemics and health related crisis, social unrest or warehouse modernization and relocation efforts; 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

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 ~~September 28, 2019,~~October 3, 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 ~~29, 2019.~~27, 2020. The Company operates on a “52/53 week” fiscal year and fiscal 2021 contains 53 weeks compared to 52 weeks in fiscal 2020. As a result, the first quarter of fiscal 2021 ended October 3, 2020, contained 14 weeks and the first quarter of fiscal 2020 ended September 28, 2019 contained 13 weeks. This extra week in the first quarter of fiscal 2021 impacts the year-over-year analysis in this MD&A.

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.”

Table of Contents

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. In addition, fiscal 2021 sales are adjusted for the estimated impact of the extra week of sales in the first quarter of fiscal 2021 due to it being a 14-week quarter, as discussed above. Sales taking into account these adjustments are referred to as “organic sales.”

●

Operating income (loss) excluding (i) restructuring, integration and other expenses, (see Restructuring, Integration and Other Expenses in this MD&A), and (ii) ~~goodwill impairment expense 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:


	First Quarters Ended				First Quarters Ended
	September 28,		September 29,		October 3,		September 28,
	2019		2018		2020		2019

	(Thousands)				(Thousands)
Operating income	$	62,738	$	146,816	$	18,502	$	62,738
Restructuring, integration and other expenses		24,598		14,788		26,420		24,598
Amortization of acquired intangible assets and other		20,078		20,927		20,175		20,078
Adjusted operating income	$	107,414	$	182,531	$	65,097	$	107,414

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.

2021

Table of Contents

OVERVIEW

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 Farnell (“Farnell”). Both operating groups have operations in each of the three major economic regions of the world: (i) the Americas, (ii) ~~Europe, Middle East and Africa (“EMEA”)~~EMEA and (iii) ~~Asia/Pacific (“Asia”).~~Asia. A summary of each operating group is provided in Note ~~13,~~15, “Segment information” to the Company’s consolidated financial statements included in this Quarterly Report on Form 10-Q.

Results of Operations

Significant Risks and Uncertainties

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, constrained work force participation, disrupted logistics and distribution systems, and created significant volatility and disruption of financial markets. As the scope and duration of the COVID-19 pandemic is unknown and the extent of its economic impact continues to evolve globally, there is significant uncertainty related to the ultimate impact 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. Accordingly, current results and financial condition discussed herein may not be indicative of future operating results and trends. See the risk factor regarding the impacts of the COVID-19 pandemic included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 27, 2020.

Executive Summary

Sales of ~~$4.63~~$4.72 billion were ~~down 9.0%~~up 2.0% year over year ~~and 7.8% in constant currency~~ as compared to prior year sales of $4.63 billion. Excluding the impact of the additional week in the first quarter of fiscal 2021, sales decreased $212.9 million or 4.6% and decreased 6.0% in constant currency year-over-year. The organic decreases in sales are a result of ~~$5.09 billion. Both~~the negative impacts from the COVID-19 pandemic on both operating ~~groups in~~segments across all three regions, ~~contributed~~and from lower sales of Texas Instruments’ (“TI”) products due to the ~~year-over-year decline~~termination of the Company’s TI distribution agreement in ~~sales as~~ the ~~global industry-wide slowdown resulted in weaker year over year demand.~~second quarter of fiscal 2021.

Gross profit margin of ~~11.7%~~10.9% decreased 7682 basis points compared to ~~12.5%~~11.7% in the first quarter of fiscal ~~2019~~2020 primarily due to a combination of geographical market mix, product and customer mix, and overall declines in gross profit ~~declines at both EC and Farnell.~~margin due to the negative impacts from the COVID-19 pandemic.

Operating income of ~~$62.7~~$18.5 million decreased ~~$84.1~~$44.2 million or ~~57.3%~~70.5% as compared to first quarter of fiscal 2020 operating income. Operating income margin was 0.4% in the first quarter of fiscal ~~2019. Operating~~2021 as compared to 1.4% in the first quarter of fiscal 2020. Adjusted operating income margin was 1.4% in the first quarter of fiscal ~~2020~~2021 as compared with a 2.9% in the first quarter of fiscal 2019. Both periods included amortization and restructuring, integration and other expenses. Excluding these expenses from both periods, adjusted operating income margin wasto 2.3% in the first quarter of fiscal 2020, ~~as compared to 3.6% in the first quarter of fiscal 2019,~~ a decline of ~~127~~94 basis points. The decrease in adjusted operating income and adjusted operating income margin is primarily due to the decrease in ~~sales and~~ gross profit ~~margin, partially offset by reductions in operating expenses from the Company’s restructuring and integration efforts.~~margin.

Sales

The following table presents the reconciliation of reported sales to organic sales for the first quarter of fiscal 2021 by region and by operating group.

2122

Table of Contents


			Estimated						Organic
	Sales		Extra		Organic				Sales
	As Reported		Week in		Sales		TI Sales		Adj for TI
	Q1-Fiscal		Q1-Fiscal		Q1-Fiscal		Q1-Fiscal		Q1-Fiscal
	2021		2021 ⁽¹⁾		2021		2021⁽²⁾		2021⁽²⁾

	(in thousands)
Avnet	$	4,723,059	$	306,000	$	4,417,059	$	240,984	$	4,176,075
Avnet by region
Americas	$	1,205,695	$	77,000	$	1,128,695	$	68,500	$	1,060,195
EMEA		1,480,674		97,000		1,383,674		102,910		1,280,764
Asia		2,036,690		132,000		1,904,690		69,574		1,835,116
Avnet by operating group
EC	$	4,382,148	$	284,000	$	4,098,148	$	240,984	$	3,857,164
Farnell		340,911		22,000		318,911		—		318,911

~~Sales~~___________

(1)

The impact of the additional week of sales in the first quarter of fiscal 2021 is estimated.

(2)

Sales adjusted for the impact of the termination of the Texas Instruments (“TI”) distribution contract, which will be completed by December 2020. Sales of TI products were $241 million in the first quarter of fiscal 2021 and $443 million in the first quarter of fiscal 2020.

The following table presents reported and organic sales growth rates ~~between fiscal 2020 and fiscal 2019~~ for the first quarter of fiscal ~~2020.~~2021 as compared to fiscal 2020 by region and by operating group.


													Organic
					Sales						Organic		Sales
					As Reported						Sales		Adj for TI
	Sales		Sales		Year-Year %		Organic		Organic		Year-Year %		Year-Year %
	As Reported		As Reported		Change in		Sales		Sales		Change in		Change in
	Q1-Fiscal		Year-Year		Constant		Q1-Fiscal		Year-Year		Constant		Constant
	2021		% Change		Currency		2021		% Change		Currency		Currency⁽¹⁾

	(Dollars in thousands)
Avnet	$	4,723,059	2.0	%	0.6	%	$	4,417,059	(4.6)	%	(6.0)	%	(1.8)	%
Avnet by region
Americas	$	1,205,695	(0.8)	%	(0.8)	%	$	1,128,695	(7.2)	%	(7.2)	%	(4.9)	%
EMEA		1,480,674	0.7		(3.6)			1,383,674	(5.9)		(10.2)		(7.7)
Asia		2,036,690	4.8		4.6			1,904,690	(2.0)		(2.2)		4.6
Avnet by operating group
EC	$	4,382,148	2.1	%	0.7	%	$	4,098,148	(4.6)	%	(5.9)	%	(1.3)	%
Farnell		340,911	1.5		(0.5)			318,911	(5.0)		(7.1)		(7.1)

___________

First 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

$
4,630,009

$
5,089,879

(9.0)
%

(7.8)
%
Avnet by region

Americas

$
1,215,757

$
1,271,793

(4.4)
%

(4.4)
%
EMEA

1,470,924

1,714,917

(14.2)

(10.5)

Asia

1,943,328

2,103,169

(7.6)

(7.7)

Avnet by segment

EC

$
4,294,187

$
4,710,825

(8.8)
%

(7.7)
%
Farnell

335,822

379,054

(11.4)

(9.0)

(1)

Sales growth rates excluding the impactof the termination of the TI distribution agreement, which will be completed by December 2020.

Sales of $4.72 billion for the first quarter of fiscal ~~2020~~2021 were ~~down $459.9~~up $93.1 million, or ~~9.0%~~2.0%, from the prior year first quarter sales of ~~$5.09~~$4.63 billion. ~~Sales~~Organic sales in constant currency in the first quarter of fiscal 2021 decreased ~~7.8%~~by 6.0% over the prior year first quarter ~~with all three regions~~as a result of decreased sales in both operating groups ~~contributing to the decline. These decreases are primarily due to the current industry-wide economic downturn.~~and across all three regions.

EC sales of ~~$4.29~~$4.38 billion in the first quarter of fiscal ~~2020 decreased $416.6~~2021 increased $88.0 million or ~~8.8%~~2.1% from the prior year first quarter sales of ~~$4.71~~$4.29 billion. On an organic basis, EC sales decreased 4.6% year over year and 5.9% in constant ~~currency declined 7.7% in constant currency year over year.~~ currency. This decrease was across all three regions and resulted primarily from the negative impacts of COVID-19 and lower sales of TI products.

Table of Contents

Farnell sales for the first quarter of fiscal ~~2020~~2021 were ~~$335.8~~$340.9 million, ~~a decrease~~an increase of ~~$43.2~~$5.1 million or ~~11.4%~~1.5% from the prior year first quarter sales of ~~$379.1~~$335.8 million. ~~Farnell~~Organic sales decreased $16.9 million or 5.0% year over year and decreased 7.1% in constant ~~currency declined 9.0% year over year.~~currency. These decreases were a result of the negative impacts of COVID-19 and the related impact on market demand.

On a regional basis, organic sales in the first quarter of fiscal 2021 declined ~~4.4%~~7.2% in the Americas, ~~10.5%~~10.2% in EMEA in constant currency and ~~7.7%~~2.2% in Asia in constant currency. ~~All the regional declines are primarily due to the industry-wide economic downturn impacting the demand for electronic components.~~

As a result of the recent notification the Company received from Texas Instruments (“TI”) 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 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.

Gross Profit and Gross Profit Margins

Gross profit for the first quarter of fiscal ~~2020~~2021 was ~~$543.8~~$516.1 million, a decrease of ~~$92.9~~$27.7 million, or ~~14.6%~~5.1%, from the first quarter of fiscal ~~2019~~2020 gross profit of ~~$636.8 million driven primarily by the decline in sales.~~$543.8 million. Gross profit margin decreased 76to 10.9% or 82 basis points ~~to 11.7%~~ from the first quarter of fiscal ~~2019~~2020 gross profit margin of ~~12.5%~~11.7% driven by declines in gross profit margin in both operating ~~segments, most predominately in the Company’s Farnell segment.~~groups. The declines in gross profit margin in both operating groups are primarily due to a combination of geographical market mix, unfavorable changes in product and customer ~~mix, geographical market~~ mix, and overall declines in gross profit margin due to current market ~~conditions.~~conditions including the impacts of COVID-19. Sales in the higher margin western regions represented approximately 57% of sales in the first quarter of fiscal 2021 as compared to 58% during the first quarter of fiscal 2020.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A expenses”) were ~~$456.5~~$471.2 million in the first quarter of fiscal ~~2020, a decrease~~2021, an increase of ~~$18.6~~$14.7 million, or ~~3.9%~~3.2%, from the first quarter of fiscal ~~2019.~~2020. The year-over-year ~~decrease~~increase in SG&A expenses was primarily due to ~~a reduction~~increases in SG&A expenses from the extra week in the first quarter of ~~expenses resulting from management’s restructuring programs,~~fiscal 2021, the impact of ~~changes in~~ foreign currency ~~translation rates year over year~~due to the weakening of the U.S. Dollar and the impacts of the COVID-19 pandemic, partially offset by cost savings from ~~the decline in sales.~~restructuring activities.

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 first quarter of fiscal ~~2020,~~2021, SG&A expenses as a percentage of sales were ~~9.9%~~10.0% and as a percentage of gross profit were ~~83.9%~~91.3%, as compared with ~~9.3%~~9.9% and ~~74.6%~~83.9%, respectively, in the first quarter of fiscal ~~2019.~~2020. 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, partially offset by the decline in SG&A expenses.~~margin.

Restructuring, Integration and Other Expenses

As a result of management’s focus on improving operating efficiencies and ~~further integrating the acquisition of Farnell,~~reducing operating costs, 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.~~costs and benefitted from a gain on a legal settlement. Integration costs are primarily related to ~~the integration of acquired businesses including Farnell,~~ the integration of certain regional and global businesses and incremental costs incurred as part of the consolidation, relocation, sale and closure of 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.~~ Other costs consist primarily of any other miscellaneous costs that relate to restructuring, integration and other expenses, including acquisition related ~~costs.~~costs and specific and incremental costs incurred associated with the impacts of the COVID-19 pandemic. Included in restructuring, integration and other expenses is a gain of $8.2 million resulting from a legal settlement.

The Company recorded restructuring, integration and other expenses of ~~$24.6~~$26.4 million during the first quarter of fiscal ~~2020.~~2021. The Company recorded ~~$18.3~~$26.9 million of restructuring costs in the first quarter of fiscal ~~2020,~~2021, which are expected to provide approximately ~~$20.0~~$21.0 million in annual operating expense savings once such restructuring actions are completed. ~~Included in the restructuring costs was severance costs of $11.6 million and a $6.7 million non-cash impairment expense related to information technology software.~~ During the first quarter of fiscal ~~2020,~~2021, the Company also incurred integration costs of ~~$1.7~~$7.3 million ~~accelerated depreciation expense~~and other charges of ~~$2.7~~$0.7 million ~~other costs~~offset by a gain on legal settlement of ~~$2.1~~$8.2 million and a reversal of ~~$0.2~~$0.3 million for changes in estimates for costs associated with prior year restructuring actions. The after-tax impact of restructuring, integration and other expenses were ~~$18.4~~$21.8 million and ~~$0.18 per share on a diluted basis.~~

Comparatively, in the first quarter of fiscal 2019, restructuring, integration and other expenses were $14.8 million. The after-tax impact of restructuring, integration, and other expenses was $11.5 million and $0.10$0.22 per share on a diluted basis.

See Note 1416 “Restructuring expenses” to the Company’s consolidated financial statements included in this Quarterly Report on Form 10-Q.

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Operating Income

Operating income for the first quarter of fiscal ~~2020~~2021 was ~~$62.7~~$18.5 million, a decrease of ~~$84.1~~$44.2 million, or ~~57.3%~~70.5%, from the first quarter of fiscal ~~2019~~2020 operating income of ~~$146.8~~$62.7 million. The ~~year over year~~year-over-year decrease in operating income was primarily driven by the decline in ~~sales and~~ gross profit margin ~~partially offset by the reduction in SG&A expenses~~ as compared to the first quarter of fiscal ~~2019.~~2020. Adjusted operating income for the first quarter of fiscal ~~2020~~2021 was ~~$107.4~~$65.1 million, a decrease of ~~$75.1~~$42.3 million, or ~~41.2%~~39.4%, from the first quarter of fiscal ~~2019.~~2020. The ~~year over year~~year-over-year decrease in adjusted operating income was primarily driven by the decline in ~~sales and~~ gross profit margin ~~partially offset by the reduction in SG&A expenses.~~discussed further above.

EC operating income margin decreased 8368 basis points year over year to ~~2.6%~~1.9% and Farnell operating income margin decreased ~~427~~298 basis points year over year to ~~6.5%~~3.5%. These declines were primarily driven by the decline in gross profit margin.

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

Interest and other financing expenses in the first quarter of fiscal ~~2020~~2021 was ~~$33.6~~$22.3 million, ~~an increase~~a decrease of ~~$3.5~~$11.3 million, or ~~11.8%~~33.7%, as compared with interest and other financing expenses of ~~$30.1~~$33.6 million in the first quarter of fiscal ~~2019.~~2020. The ~~increase~~decrease in interest and other financing expenses in the first quarter of fiscal ~~2020~~2021 compared to the first quarter of fiscal ~~2019~~2020 was primarily related to ~~increased expenses~~lower outstanding borrowings in ~~foreign regions to finance working capital needs.~~the first quarter of fiscal 2021.

During the first quarter of fiscal ~~2020,~~2021, the Company had $19.5 million of other expense as compared with $4.9 million of other income ~~as compared with $1.9~~in the first quarter of fiscal 2020. The year-over-year differences in other income was primarily due to the $15.2 million of equity investment impairment expense included in the other expense in the first quarter of fiscal ~~2019. The increase~~2021 and differences in ~~other income was primarily due to favorable~~ foreign currency ~~gains in~~exchange rates between the first ~~quarter~~quarters of fiscal ~~2020 as compared to foreign currency losses in the first quarter of~~2021 and fiscal ~~2019.~~

2020.

Income Tax Expense

The Company’s effective tax rate on its ~~income from continuing operations~~loss before taxes was ~~(22.7)%~~a benefit of 18.9% in the first quarter of fiscal ~~2020 as compared with 27.3% in the first quarter of fiscal 2019.~~2021. During the first quarter of fiscal ~~2020,~~2021, the Company’s effective tax rate was ~~favorably~~unfavorably impacted primarily by increases to valuation allowances, partially offset by (i) the release of unrecognized tax benefit reserves and (ii) the mix of income in lower tax jurisdictions. During the first quarter of fiscal 2019, the Company’s effective tax rate was unfavorably impacted primarily by (i) an adjustment to the provisional estimate for the one-time mandatory deemed repatriation tax liability recorded under the requirements of recent tax law changes in the United States (the “Act”) and (ii) increases in unrecognized tax benefits, partially offset by (iii) an adjustment to the provisional deferred tax impacts of the Act and (iv) the mix of income in lower tax jurisdictions.

See Note 810 “Income taxes” to the Company’s consolidated financial statements included in this Quarterly Report on Form ~~10-Q.~~

~~Income from Discontinued Operations~~

~~Income from discontinued operations was $0.2 million in~~10-Q for further discussion on the ~~first quarter of fiscal 2019, primarily related to additional income~~effective tax ~~expenses associated with the TS business.~~rate.

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 first quarter of fiscal ~~2020~~2021 was ~~$41.8~~$18.9 million, or ~~$0.40~~$0.19 per share on a diluted basis, as compared with ~~$83.7~~net income of $41.8 million, or ~~$0.72~~$0.40 per share on a diluted basis, in the first quarter of fiscal ~~2019.~~2020.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow

Cash Flow from Operating Activities

During the first quarter of fiscal ~~2020,~~2021, the Company generated $122.4 million of cash flow from operations compared to $195.6 million of cash ~~from its operating activities from continuing operations compared to $85.0 million of cash used~~generated in the first quarter of fiscal ~~2019.~~2020. 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, 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 $47.7 million

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during the first quarter of fiscal 2021, including an increase in accounts payable of $228.7 million, offset by increases in inventories of $136.4 million and accounts receivable of $7.1 million, and a decrease in accrued expenses and other of $37.5 million. Comparatively, cash generated from working capital and other was $82.2 million during the first quarter of fiscal 2020, including an increase in accounts payable of $189.7 million, offset by increases in inventories of $64.2 million and accounts receivable of $6.7 million, and a decrease in accrued expenses and other of $36.7 million. ~~Comparatively, cash used for working capital and other was $275.6 million during the first quarter of fiscal 2019, including~~

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increases in inventories of $269.6 million, increases in accounts receivable of $19.3 million and a decrease in accrued expenses and other of $81.8 million, partially offset by increases in accounts payable of $95.1 million.

Cash Flow from Financing Activities

During the first quarter of fiscal 2021, the Company received net proceeds of $166.9 million under the Securitization Program and made a net repayment of $234.2 million under the Credit Facility. During the first quarter of fiscal 2021, the Company paid dividends on common stock of $20.8 million.

During the first quarter of fiscal 2020, the Company received net proceeds of $110.8 million under the Securitization Program. During the first quarter of fiscal 2020, the Company paid dividends on common stock of $21.5 million and repurchased $110.8 million of common stock.

During the first quarter of fiscal 2019, the Company made net repayments of $40.0 million under the Securitization Program and net repayments of $50.3 million from borrowings of various bank credit facilities. During the first quarter of fiscal 2019, the Company paid dividends on common stock of $22.9 million and repurchased $149.1 million of common stock. Additionally, included in other, net is approximately $17.6 million of cash received from the exercises of stock options.

Cash Flow from Investing Activities

During the first quarter of fiscal ~~2020,~~2021, the Company used ~~$29.9~~$20.0 million for capital expenditures primarily related to warehouse and facilities, and information technology hardware and software costs compared to ~~$41.0~~$29.9 million for capital expenditures in the first quarter of fiscal ~~2019. In addition,~~2020. During the first quarter of fiscal 2021, the Company paid $18.7 million for an asset acquisition. The Company paid $12.8 million for other investing ~~activities.~~

~~During~~activities during the first quarter of fiscal ~~2019, the Company received $120.0 million of cash from investing activities – discontinued operations from the sale of the TS business.~~2020.

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 ~~29, 2019.~~27, 2020. 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 4,6, “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 ~~September 28, 2019.~~October 3, 2020. The Company was in compliance with all covenants under the Credit Facility and the Securitization Program as of ~~September 28, 2019~~October 3, 2020 and June ~~29, 2019.~~27, 2020.

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 first quarter of fiscal ~~2020~~2021 was ~~$0.6~~$1.6 million.

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.

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Liquidity

The Company held cash and cash equivalents of ~~$664.1~~$483.1 million as of ~~September 28, 2019,~~October 3, 2020, of which ~~$592.6~~$412.1 million was held outside the United States. As of June ~~29, 2019,~~27, 2020, the Company held cash and cash equivalents of ~~$546.1~~$477.0 million, of which ~~$476.6~~$411.2 million was held outside of the United States.

As of the end of the first quarter of fiscal ~~2020,~~2021, the Company had a combined total borrowing capacity of ~~$1.75~~$1.70 billion under the Credit Facility and the Securitization Program. There were no borrowings outstanding and ~~$4.2~~$1.3 million in letters of credit issued under the Credit Facility and ~~$338.1~~$166.9 million in borrowings outstanding under the Securitization Program, resulting in approximately ~~$1.41~~$1.48 billion of total availability as of ~~September 28, 2019.~~October 3, 2020. Availability under the Securitization Program is subject to the Company having sufficient eligible trade accounts receivable in the Americas to support desired borrowings. The Company expects to renew or replace the Securitization Program on similar terms, subject to market conditions, before its maturity in August 2020. The Company expects to redeem the $300.0 million of Notes due June 2020 either through the issuance of new notes or from available borrowing capacity

Borrowings under the Credit Facility require the Company to maintain certain financial and other covenants and the Securitization has cross default provisions associated with the covenants in the Credit Facility. The Credit Facility requires the Company to maintain minimum interest coverage and leverage ratios, which were amended in the first quarter of fiscal 2021. All other forms of debt and financing do not include financial or other covenants. The Company was in compliance with all covenants under the Credit Facility as of October 3, 2020.

During the first quarter of fiscal ~~2020,~~2021, the Company had an average daily balance outstanding of approximately ~~$50.6~~$86.2 million under the Credit Facility and approximately ~~$488.4 million under the Securitization Program. During the first quarter of fiscal 2019, the Company had an average daily balance outstanding of approximately $65.0~~$290.0 million 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 ~~$871.7~~$657.0 million in cash flows from operating activities over the trailing four fiscal quarters ended ~~September 28, 2019 from continuing operations.~~October 3, 2020.

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

~~Historically~~As a result of the evolving impacts of the COVID-19 pandemic and the related uncertain future business conditions, the Company ~~has made, and expects~~in unlikely to ~~continue 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 financial thresholds.~~material acquisitions. As the Company implements ~~the~~ operating cost ~~savings~~saving restructuring plans ~~responds~~including plans to ~~current business environment challenges and pursues ways to become more efficient and cost effective,~~reduce operating costs by $75 million annually by the second quarter of fiscal 2021, the Company also expects to use cash for restructuring, integration and other expenses.

~~In addition to continuing to make investments in acquisitions, as~~27

Table of ~~September 28, 2019,~~Contents

As of October 3, 2020, the Company may repurchase up to an aggregate of ~~$593.3~~$469.0 million of shares of the Company’s common stock through a $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 pandemic 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 first quarter of fiscal ~~2020,~~2021, the Board of Directors approved a dividend of $0.21 per share, which resulted in ~~$21.5~~$20.8 million of dividend payments during the quarter.

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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

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 ~~29, 2019,~~27, 2020, 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 ~~29, 2019,~~27, 2020, 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.

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 ~~September 28, 2019, 82%~~October 3, 2020, 88% of the Company’s debt bears interest at a fixed rate and ~~18%~~12% 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 ~~$0.8~~$0.4 million decrease in income ~~from continuing operations~~ before income taxes in the Company’s consolidated statement of operations for the first quarter of fiscal ~~2020.~~2021.

Item 4.

Controls and Procedures

The Company’s management, including its Interim 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 Interim 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.

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During the first quarter of fiscal ~~2020,~~2021, 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.

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

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,

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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

The discussion of the Company’s business and operations should be read together with the revised risk factors 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 ~~29, 2019,~~27, 2020, 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 revised risk factors set forth below, as of ~~September 28, 2019,~~October 3, 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 27, 2020.

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, impacted the operations of the Company and its business partners and negatively impacted the Company’s operations and financial results, and such impact and uncertainty is likely to continue until there is access to a vaccine in each of the regions in which the Company operates.

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 resulted in or heightened the risks of customer bankruptcies, customer delayed or defaulted 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, delays to warehouse modernization and relocation efforts, 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. These mitigation efforts may be impacted by restrictions implemented by applicable regulatory authorities. The Company is also taking steps to conserve cash and effectively manage its debt. 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.

29 ~~2019.~~

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Major disruptions to the Company’s logistics capability could have an adverse impact on the Company’s operations.

The Company’s global logistics services are operated through specialized, centralized or outsourced distribution centers around the globe. The Company also depends almost entirely on third-party transportation service providers for the delivery of products to its customers. A major interruption, disruption or delay in service at one or more of its distribution centers for any reason (such as information technology upgrades and operating issues, warehouse modernization and relocation efforts, natural disasters, pandemics, civil unrest or significant disruptions of services from the Company’s third-party transportation providers) could cause cancellations or delays in a significant number of shipments to customers and, as a result, could have an adverse impact on the Company’s business partners, causing customers to terminate or significantly reduce their volume of business with the Company, which could reduce the Company’s market share and negatively impact its competitive position, operating results and profitability.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

In August 2019, the Company’s Board of Directors ~~authorized a $500 million increase in~~amended the Company’s existing share repurchase program, increasing the cumulative total of authorized share repurchases to $2.95 billion of the Company’s common stock. ~~The following table includes the Company’s monthly purchases of the Company’s common stock during~~During the first quarter of fiscal ~~2020,~~2021, the Company did not repurchase any shares under the share repurchase program ~~which is part~~resulting in $469.0 million of ~~a publicly announced plan.~~availability under the share repurchase program as of October 3, 2020.

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

June 29 – July 27

429,100

$
43.87

429,100

$
186,605,000

July 28 – August 24

829,869

$
41.52

829,869

$
652,146,000

August 25 – September 28

1,372,037

$
42.89

1,372,037

$
593,295,000

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Item 6.

Exhibits

Exhibit
Number		Exhibit

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 - 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 any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

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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: October ~~25, 2019~~30, 2020

	AVNET, INC.


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

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	September 28, 2019						June 29, 2019
	Acquired		Accumulated		Net Book		Acquired		Accumulated		Net Book
	Amount		Amortization		Value		Amount		Amortization		Value
	(Thousands)
Customer related	$	284,993	$	(218,402)	$	66,591	$	292,266	$	(208,329)	$	83,937
Trade name		51,323		(26,107)		25,216		52,760		(24,752)		28,008
Technology and other		62,255		(33,923)		28,332		63,753		(32,178)		31,575
	$	398,571	$	(278,432)	$	120,139	$	408,779	$	(265,259)	$	143,520


Fiscal Year
Remainder of fiscal 2020	$	59,212
2021		39,439
2022		14,132
2023		5,864
2024		1,492
2025		—
Total	$	120,139


Fiscal Year
Remainder of fiscal 2020	$	49,441
2021		53,034
2022		42,442
2023		36,932
2024		29,215
Thereafter		158,895
Total future operating lease payments		369,959
Total imputed interest on operating lease liabilities		(69,404)
Total operating lease liabilities	$	300,555


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


				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
June 29 – July 27	429,100	$	43.87	429,100	$	186,605,000
July 28 – August 24	829,869	$	41.52	829,869	$	652,146,000
August 25 – September 28	1,372,037	$	42.89	1,372,037	$	593,295,000

First Quarters Ended

October 3, 2020

September 28, 2019

Operating Lease Term and Discount Rate

Weighted-average remaining lease term in years

Weighted-average discount rate