2

~~AVNET, INC. AND SUBSIDIARIES~~


	October 2,		July 3,
	2021		2021

	(Thousands, except share
	amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	299,101	$	199,691
Receivables		3,720,296		3,576,130
Inventories		3,283,825		3,236,837
Prepaid and other current assets		161,845		150,763
Total current assets		7,465,067		7,163,421
Property, plant and equipment, net		351,873		368,452
Goodwill		823,953		838,105
Intangible assets, net		23,074		28,539
Operating lease assets		257,614		265,988
Other assets		289,728		260,917
Total assets	$	9,211,309	$	8,925,422
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	—	$	23,078
Accounts payable		2,467,743		2,401,357
Accrued expenses and other		588,340		572,457
Short-term operating lease liabilities		57,256		58,346
Total current liabilities		3,113,339		3,055,238
Long-term debt		1,389,689		1,191,329
Long-term operating lease liabilities		230,350		239,838
Other liabilities		332,332		354,833
Total liabilities		5,065,710		4,841,238
Commitments and contingencies (Note 7)
Shareholders’ equity:
Common stock $1.00 par; authorized 300,000,000 shares; issued 99,336,434 shares and 99,601,393 shares, respectively		99,336		99,601
Additional paid-in capital		1,631,667		1,622,160
Retained earnings		2,593,367		2,516,170
Accumulated other comprehensive loss		(178,771)		(153,747)
Total shareholders’ equity		4,145,599		4,084,184
Total liabilities and shareholders’ equity	$	9,211,309	$	8,925,422

~~CONSOLIDATED STATEMENTS OF OPERATIONS~~

~~(Unaudited)~~

Second Quarters Ended

Six Months Ended


December 30,

December 31,

December 30,

December 31,


2017

2016

2017

2016

(Thousands, except per share amounts)

Sales

$
4,521,636

$
4,273,559

$
9,182,578

$
8,391,663

Cost of sales

3,919,175

3,687,374

7,967,563

7,282,823

Gross profit

602,461

586,185

1,215,015

1,108,840

Selling, general and administrative expenses

478,681

431,555

974,886

795,227

Restructuring, integration and other expenses

36,762

30,400

83,156

59,869

Operating income

87,018

124,230

156,973

253,744

Other income (expense), net

762

(36,514)

16,341

(50,248)

Interest expense

(25,640)

(26,748)

(49,700)

(53,984)

Income from continuing operations before taxes

62,140

60,968

123,614

149,512

Income tax expense

5,346

28,503

8,638

49,359

Income from continuing operations, net of tax

56,794

32,465

114,976

100,153

Income (loss) from discontinued operations, net of tax

(10,070)

70,753

(9,949)

71,908

Net income

46,724

103,218

105,027

172,061

Earnings (loss) per share - basic:

Continuing operations

$
0.47

$
0.25

$
0.94

$
0.78

Discontinued operations

(0.08)

0.55

(0.08)

0.56

Net income per share basic

0.39

0.80

0.86

1.34

Earnings (loss) per share - diluted:

Continuing operations

$
0.47

$
0.25

$
0.93

$
0.77

Discontinued operations

(0.08)

0.54

(0.08)

0.55

Net income per share diluted

0.39

0.79

0.85

1.32

Shares used to compute earnings per share:

Basic

120,400

127,901

121,543

127,716

Diluted

121,749

130,347

122,867

130,055

Cash dividends paid per common share

$
0.18

$
0.17

$
0.36

$
0.34

See notes to consolidated financial statements.

3

4

7

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

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

~~The following table summarizes the final purchase price allocation (in thousands):~~

Cash

$
46,354
Trade and other receivables, net

187,303
Inventories

328,037
Property, plant and equipment

52,621
Intangible assets

319,966
Total identifiable assets acquired

$
934,281

Accounts payable, accrued liabilities and other current liabilities

$
160,572
Short-term debt

242,814
Other long-term liabilities

150,109
Total identifiable liabilities acquired

$
553,495
Net identifiable assets acquired

380,786
Goodwill

460,534
Net assets acquired

$
841,320

~~Approximately $10.0 million of goodwill associated with the PF acquisition is expected to be deductible for tax purposes.~~

~~Dragon Innovation~~

In August 2017, the Company acquired Dragon Innovation, Inc. (“Dragon”), a provider of manufacturing logistics services to entrepreneurs. The impact of this acquisition was not material to the Company’s consolidated balance sheets or statements of operations.

~~3. Discontinued operations and gain on sale~~

In February 2017, the Company completed the sale of its Technology Solutions (“TS”) business to Tech Data Corporation (the “Buyer”). Included in the gain on sale recorded upon completion of the sale were estimates for certain income taxes due on the gain and additional cash consideration expected from the Buyer related to a closing date net working capital sales price adjustment (the “closing date adjustment”). The Company is finalizing the closing date adjustment with the Buyer as provided for in the sales agreement and has included an estimate of this amount as the principal component of the $269.2 million of prepaid and other current assets as of December 30, 2017. The final closing date adjustment, as determined through the established process outlined in the sales agreement, may be materially different from the Company’s estimate. The impact of any probable changes in the closing date adjustment will be recorded as an adjustment to the gain on sale from discontinued operations in the period such change occurs. Additionally, the income taxes associated with the gain will be impacted by the final geographic allocation of the sales price, which must be agreed to with the Buyer after determination of the closing date adjustment as required in the sales agreement and may be materially different from the Company’s estimates. The impact of any changes in estimated income taxes on the gain will be recorded as an adjustment to the gain on sale from discontinued operations in the period such change in estimate occurs. The Company expects the closing date adjustment to be finalized by the endfirst quarters of fiscal ~~2018~~2022 and ~~the income tax on the gain to be finalized during fiscal 2019.~~2021:


	October 2,		October 3,
	2021		2020

	(Thousands)
Balance at beginning of the period	$	88,160	$	65,018
Effect of adopting credit loss accounting standard		—		17,205
Credit Loss Provisions		4,174		1,786
Credit Loss Recoveries		(276)		(126)
Receivables Write offs		(3,193)		(4,023)
Foreign Currency Effect and Other		(947)		1,667
Balance at end of the period	$	87,918	$	81,527

8

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

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

The Company received 2.8 million shares of the Buyer’s common stock at closing (the “Shares”), which has been recorded within “Marketable securities” on the Company’s Consolidated Balance Sheets. Unrealized and realized gains or losses due to changes in fair value based upon Level 1 quoted active market prices of the Shares are recorded in “Other income (expense), net” on the Consolidated Statements of Operations. The sales agreement includes time based contractual restrictions related to the Company’s sale of the Shares and as such, the Company entered into economic hedges to reduce the Company’s exposure to price fluctuations of the Shares during the restricted period, which fixes the net amount that the Company will realize upon the sale of the Shares. The Company records changes in fair value related to the economic share price hedges within “Other income (expense), net”, offsetting the changes in fair value of the underlying Shares. During the six months ended December 30, 2017, the Company sold 1.4 million Shares, the net proceeds of which have been included in “Cash flows from investing activities – discontinued operations.”

In connection with the sale of the TS business, the Company entered into a Transition Services Agreement (“TSA”), pursuant to which the Buyer will pay the Company to provide certain information technology, distribution, facilities, finance and human resources related services for various periods of time depending upon the services not to exceed approximately two years from the closing date. Expenses incurred by the Company to provide such services under the TSA are classified within selling, general and administrative expenses and amounts billed to the Buyer to provide such services are classified as a reduction of such expenses. The Buyer has terminated substantially all TSA services outside of certain information technology services and all remaining TSA services are expected to be terminated by the end of fiscal 2018.

Financial results of the TS business for the second quarter and six months ended December 31, 2016 are presented as “Income from discontinued operations, net of tax” on the Consolidated Statements of Operations and are summarized as follows:

Second Quarter Ended

Six Months Ended

December 31, 2016

(Thousands)

Sales

$
2,453,262

$
4,375,464

Cost of sales

2,199,235

3,928,164

Gross profit

254,027

447,300

Selling, general and administrative expenses

158,356

324,381

Restructuring, integration and other expenses

3,316

7,540

Operating income

92,355

115,379

Interest and other expense, net

(10,635)

(10,630)

Income from discontinued operations before income taxes

81,720

104,749

Income tax expense

10,967

32,841

Income from discontinued operations, net of taxes

$
70,753

$
71,908

Included within selling, general and administrative expenses of discontinued operations was $14.1 million and $26.6 million of estimated corporate expenses, excluding general overhead, specific to or benefiting the TS business for the second quarter and six months ended December 31, 2016.

The loss from discontinued operations, net of tax, in the second quarter and first six months of fiscal 2018 substantially all relates to settlement losses associated with the Company’s pension plan due to former TS business employees requesting and receiving distributions from the Company’s pension plan during fiscal 2018. Refer to Note 9, “Pension plan,” for further information on the pension settlement losses.

9

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

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

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

Goodwill

The following table presents the change in goodwill by reportable segment for the ~~six~~three months ended ~~December 30, 2017. All of the accumulated impairment was recognized in fiscal 2009.~~October 2, 2021.


	Electronic
	Components		Farnell		Total

	(Thousands)
Carrying value at July 3, 2021 ⁽¹⁾	$	310,582	$	527,523	$	838,105
Foreign currency translation		(3,489)		(10,663)		(14,152)
Carrying value at October 2, 2021 ⁽¹⁾	$	307,093	$	516,860	$	823,953

Electronic

Premier


Components

Farnell

Total

(Thousands)
Carrying value at July 1, 2017 (1)

635,048

513,299

1,148,347
Additions from acquisitions

21,539

—

21,539
Foreign currency translation

6,263

17,662

23,925
Measurement period adjustments

2,530

(15,328)

(12,798)
Carrying value at December 30, 2017 (1)

$
665,380

$
515,633

$
1,181,013

(1)

⁽¹⁾

Includes accumulated ~~impairment~~impairments of ~~$1,045,110~~

$1,482,677 from prior fiscal years.

8

Table of Contents

The Company’s reporting units passed goodwill impairment testing using a quantitative impairment model in the fourth quarter of fiscal 2017, however, the Company’s Electronic Components (“EC”) Americas reporting units had an estimated fair value that was not substantially in excess of its carrying value. The Company also evaluates each quarter if facts and circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value, which would require the Company to perform an interim goodwill impairment test. Indicators that 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, (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.AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Intangible Assets

The following table presents the Company’s acquired intangible assets at ~~December 30, 2017,~~October 2, 2021 and July ~~1, 2017,~~3, 2021, respectively.


	October 2, 2021						July 3, 2021
	Acquired		Accumulated		Net Book		Acquired		Accumulated		Net Book
	Amount		Amortization		Value		Amount⁽¹⁾		Amortization		Value

	(Thousands)
Customer related	$	318,429	$	(307,121)	$	11,308	$	324,416	$	(312,392)	$	12,024
Trade name		56,024		(46,340)		9,684		57,184		(45,019)		12,165
Technology and other		56,697		(54,615)		2,082		57,809		(53,459)		4,350
	$	431,150	$	(408,076)	$	23,074	$	439,409	$	(410,870)	$	28,539

December 30, 2017

July 1, 2017

Acquired

Accumulated

Net Book

Acquired

Accumulated

Net Book


Amount

Amortization

Value

Amount

Amortization

Value

(Thousands)

Customer related

$
308,024

$
(118,563)

$
189,461

$
277,865

$
(79,578)

$
198,287

Trade name

55,973

(12,500)

43,473

46,915

(6,720)

40,195

Technology and other

54,354

(17,545)

36,809

50,369

(11,560)

38,809

$
418,351

$
(148,608)

$
269,743

$
375,149

$
(97,858)

$
277,291

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

10

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

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

Intangible asset amortization expense ~~from continuing operations~~ was ~~$21.8~~$5.2 million and ~~$9.8 million for the second quarters of fiscal 2018 and 2017, respectively, and $47.3 million and $11.8~~$20.1 million for the first ~~six months~~quarters of fiscal ~~2018~~2022 and ~~2017,~~2021, 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 ~~2018,~~2022 and the next five fiscal years ~~and thereafter~~ (in thousands):

Fiscal Year

Remainder of fiscal 2018

43,635
2019

85,765
2020

83,488
2021

40,226
2022

12,685
2023

3,703
Thereafter

241
Total

$
269,743


Fiscal Year
Remainder of fiscal 2022	$	10,037
2023		6,534
2024		3,191
2025		1,472
2026		1,472
2027		368
Total	$	23,074

4. Debt

~~5. Debt~~

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


									October 2,	July 3,		October 2,		July 3,
									2021	2021		2021		2021

	December 30, 2017		July 1, 2017		December 30, 2017		July 1, 2017
	Interest Rate				Carrying Balance
									Interest Rate			Carrying Balance
Bank credit facilities and other	2.41	%	2.27	%	$	23,351	$	50,113	—	1.24	%	$	—	$	23,078
Accounts receivable securitization program	1.93	%	—			220,000		—
Short-term debt					$	243,351	$	50,113				$	—	$	23,078

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.

9

Table of Contents

~~The~~AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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


	October 2,		July 3,		October 2,		July 3,
	2021		2021		2021		2021

	Interest Rate				Carrying Balance
Revolving credit facilities:
Accounts receivable securitization program	0.83	%	—		$	82,200	$	—
Credit Facility (due June 2023)	1.18	%	—			115,891		—
Public notes due:
December 2022	4.88	%	4.88	%		350,000		350,000
April 2026	4.63	%	4.63	%		550,000		550,000
May 2031	3.00	%	3.00	%		300,000		300,000
Other long-term debt	1.40	%	1.22	%		792		1,185
Long-term debt before discount and debt issuance costs						1,398,883		1,201,185
Discount and debt issuance costs – unamortized						(9,194)		(9,856)
Long-term debt					$	1,389,689	$	1,191,329

In August 2021, the Company ~~has an~~amended and extended for two years its trade accounts receivable securitization program (the ~~“Program”~~“Securitization Program”) in the United States with a group of financial ~~institutions to allow~~institutions. The Securitization Program allows 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 ~~$400~~$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 ~~$730.8~~$772.1 million and ~~$807.5~~$717.4 million at ~~December 30, 2017,~~October 2, 2021, and July ~~1, 2017,~~3, 2021, respectively. The Securitization Program contains certain covenants relating to the quality of the receivables sold. The Program also requires the Company to maintain certain minimum interest coverage and leverage ratios, which the Company was in compliance with as of December 30, 2017, and July 1, 2017. The Program expires in August 2018 and as a result the Company has classified outstanding balances as short-term debt as of December 30, 2017. Interest on borrowings is calculated using a ~~base rate or a commercial paper~~one-month LIBOR rate plus a spread of ~~0.40% with a~~0.75%. The facility fee ~~of 0.40%.~~

11

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

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

~~Long-term debt consists~~on the unused balance of the ~~following (in thousands):~~facility is up to 0.35%.

December 30, 2017

July 1, 2017

December 30, 2017

July 1, 2017

Interest Rate

Carrying Balance

Revolving credit facilities:

Accounts receivable securitization program

—

1.53
%

$
—

$
142,000

Credit Facility

—

2.77
%

—

99,970

Notes due:

June 2020

5.88
%

5.88
%

300,000

300,000

December 2021

3.75
%

3.75
%

300,000

300,000

December 2022

4.88
%

4.88
%

350,000

350,000

April 2026

4.63
%

4.63
%

550,000

550,000

Other long-term debt

1.36
%

1.36
%

451

642

Long-term debt before discount and debt issuance costs

1,500,451

1,742,612

Discount and debt issuance costs - unamortized

(12,385)

(13,400)

Long-term debt

$
1,488,066

$
1,729,212

The Company has a five-year $1.25 billion ~~senior unsecured~~ revolving credit facility (the “Credit Facility”) with a syndicate of banks, ~~consisting~~which expires in June 2023. It consists of revolving credit facilities and the issuance of up to ~~$150.0~~$200.0 million of letters of credit and up to $300.0 million of loans in certain approved currencies, which expires in ~~July 2019.~~June 2023. Subject to certain conditions, the Credit Facility may be increased up to $1.50 billion. Under the Credit Facility, the Company may select from various interest rate options, currencies, and maturities. The Credit Facility contains certain covenants including various limitations on debt incurrence, share repurchases, dividends, investments, and capital expenditures. The Credit Facility also includes financial covenants requiring the Company to maintain minimum interest coverage and leverage ratios, which the Company was in compliance with as of ~~December 30, 2017,~~October 2, 2021, and July ~~1, 2017.~~ 3, 2021.

As of ~~December 30, 2017,~~October 2, 2021, and July ~~1, 2017,~~3, 2021, there were ~~$2.0~~$1.2 million and ~~$3.1~~$1.3 million, respectively, in letters of credit issued under the Credit Facility.

As of ~~December 30, 2017,~~October 2, 2021, the carrying value and fair value of the Company’s total debt was ~~$1.73~~$1.39 billion and ~~$1.80~~$1.47 billion, respectively. At July ~~1, 2017,~~3, 2021, the carrying value and fair value of the Company’s total debt was ~~$1.78~~$1.21 billion and ~~$1.85~~$1.30 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 ~~agreements.~~facilities.

10

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

5. Leases

Substantially all the Company’s leases are classified as operating leases and are predominately related to real property for distribution centers, office space, and integration facilities with a lease term of up to 17 years. The Company’s equipment leases are primarily for automobiles and equipment and are not material to the consolidated financial statements.

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


	First Quarters Ended
	October 2,		October 3,
	2021		2020
Operating lease cost	$	17,847	$	18,402
Variable lease cost		6,118		6,288
Total lease cost	$	23,965	$	24,690

Future minimum operating lease payments as of October 2, 2021, are as follows (in thousands):


Fiscal Year
Remainder of fiscal 2022	$	50,480
2023		58,378
2024		41,960
2025		33,060
2026		28,426
Thereafter		133,533
Total future operating lease payments		345,837
Total imputed interest on operating lease liabilities		(58,231)
Total operating lease liabilities	$	287,606

Other information pertaining to operating leases consists of the following:


	First Quarters Ended
	October 2,		October 3,
	2021		2020
Operating Lease Term and Discount Rate
Weighted-average remaining lease term in years	9.0		9.3
Weighted-average discount rate	3.8	%	3.8	%

11

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Supplemental cash flow information related to the Company’s operating leases was as follows (in thousands):


	First Quarters Ended
	October 2,		October 3,
	2021		2020
Supplemental Cash Flow Information:
Cash paid for operating lease liabilities	$	14,826	$	14,710
Operating lease assets obtained from new operating lease liabilities		7,578		21,718

6. Derivative financial instruments

Many of the Company’s subsidiaries purchase and sell products in currencies other than their functional ~~currencies. This~~currencies, which subjects the Company to the risks associated with fluctuations in ~~foreign~~ currency exchange rates. The Company ~~reduces~~uses economic hedges to reduce this risk by utilizing natural hedging ~~(e.g.~~(i.e., offsetting receivables and payables in the same foreign currency) ~~as well as by~~and creating offsetting positions through the use of derivative financial instruments ~~primarily~~(primarily forward foreign exchange contracts typically with maturities of less than 60 days, ~~(“economic hedges”),~~ but no longer than one ~~year.~~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 income (expense),~~“Other 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 ~~“other~~“Prepaid and other current assets” or ~~“accrued~~“Accrued expenses and other,” as applicable, in the accompanying consolidated balance sheets as of ~~December 30, 2017,~~October 2, 2021, and July ~~1, 2017.~~3, 2021. 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.

12

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

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

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, ~~Canadian Dollar,~~ 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~~Asian foreign currencies.

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


	October 2,		July 3,
	2021		2021

	(Thousands)
Prepaid and other current assets	$	6,835	$	15,722
Accrued expenses and other		13,557		23,994

December 30,

July 1,

2017

2017

(Thousands)

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

Other current assets

$
4,380

$
7,297

Accrued expenses

2,489

4,142

12

Table of Contents

In addition to amounts included in the above table, there was approximately $12.8 million and $34.0 million as of December 30, 2017 and July 1, 2017, respectively, of accrued expenses related to derivative financial instruments used to economically hedge the fair value changes in marketable securities discussed further in Note 3.AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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

Second Quarters Ended

Six Months Ended

December 30,

December 31,

December 30,

December 31,

2017

2016

2017

2016

(Thousands)

Net derivative financial instrument (loss) gain

$
(1,361)

$
771

$
1,715

$
(8,737)


	First Quarters Ended
	October 2,		October 3,
	2021		2020

	(Thousands)
Net derivative financial instrument loss	$	(8,771)	$	(7,816)

The above table excludes approximately $27.0 million and $35.0 million for the second quarter and first six months of fiscal 2017, respectively, of derivative financial instrument losses in other income (expenses), net, associated with foreign currency derivative financial instruments purchased to economically hedge the British Pound purchase price of the PF acquisition.

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

7. Commitments and contingencies

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

13

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

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

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.~~regulations. 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~~particularly regarding to matters ~~due primarily to being~~ in ~~the~~ early ~~stages of the related proceedings and investigations.~~stages. 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~~single reporting period.

As of ~~December 30, 2017~~October 2, 2021, and July ~~1, 2017,~~3, 2021, the Company had aggregate estimated liabilities of ~~$14.2~~$14.7 million classified within accrued expenses and other for such compliance-related matters that were reasonably estimable as of such dates.

~~8. Income taxes~~

During the ~~second~~first quarter of fiscal ~~2018,~~2021, the Company ~~made certain estimates related to the impact~~recorded a gain on legal settlement of ~~the Act including the remeasurement~~$8.2 million, which is classified as a component of ~~deferred~~Restructuring, integration and other expenses.

8. Income taxes at the new expected tax rates. The amounts recorded in the three months ended December 30, 2017 for the remeasurement of U.S. net deferred tax assets principally relate to the reduction in the U.S. corporate income tax rate. The Company has provisionally recorded an expense of $11.1 million to account for these deferred tax impacts. This estimate is provisional as the Company continues to analyze the impacts of the Act, or in certain cases, U.S. Treasury is expected to issue further guidance on the application of certain provisions of the Act.

The Act includes a one-time mandatory repatriation transition tax on certain net accumulated earnings and profits of the Company’s foreign subsidiaries. The Company was not able to make a reasonable estimate of the income tax expense associated with the Company’s approximately $3.3 billion of unremitted foreign earnings as of July 1, 2017, as the required information related to each foreign subsidiaries’ unremitted foreign earnings and related foreign tax credit pools was not readily available. We expect a reasonable estimate to be recorded by the end of fiscal 2018 and the accounting for this aspect of the Act to be complete by the end of the measurement period. As of December 30, 2017, consistent with historical conclusions, the Company’s cash balances held in foreign locations are expected to be permanently reinvested outside the United States as the impact of the Act on the Company’s current position is not yet fully understood and is still under evaluation by the Company.

The Company’s effective tax rate on its income before ~~income~~ taxes ~~from continuing operations~~ was ~~8.6%~~23.2% in the ~~second~~first quarter of fiscal ~~2018.~~2022. During the ~~second~~first quarter of fiscal ~~2018,~~2022, the Company’s effective tax rate was ~~favorably~~unfavorably impacted primarily by ~~the mix of income in lower tax jurisdictions, partially offset by the tax expense created from remeasuring net deferred tax assets as a result of applying the requirements of the Act.~~ increases to valuation allowances.

During the ~~second~~first quarter of fiscal ~~2017,~~2021, the Company’s effective tax rate on its loss before taxes was a benefit of ~~46.7%~~18.9%. During the first quarter of fiscal 2021, the Company’s effective tax rate was unfavorably impacted primarily by ~~(i) net~~ increases to valuation allowances, ~~against deferred tax assets created primarily from acquisition related expenses that were deemed unrealizable and (ii) the impact of non-deductible acquisition related expenses,~~ partially offset by ~~(iii)~~(i) the release of unrecognized tax benefit reserves and (ii) the mix of income in lower tax jurisdictions.

For the first six months of fiscal 2018 the Company’s effective tax rate on its income before income taxes from continuing operations was 7.0%. The effective tax rate for the first six months of fiscal 2018 was favorably impacted primarily by (i) the mix of income in lower tax jurisdictions and (ii) the release of unrecognized tax benefit reserves primarily due to the negotiation of a favorable outcome in a foreign jurisdiction, partially offset by (iii) the tax expense created from remeasuring net deferred tax assets as a result of applying the requirements of the Act.

~~During the first six months of fiscal 2017, the Company’s effective tax rate of~~33.0% was unfavorably impacted primarily by (i) net increases to valuation allowances against deferred tax assets that were deemed unrealizable and (ii) the impact of non-deductible acquisition related expenses, partially offset by (iii) the mix of income in lower tax jurisdictions.

1413

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

9. Pension plan

The Company has a noncontributory defined benefit pension plan ~~(the “Plan”)~~ that covers substantially all current or former U.S. employees ~~as of January 1, 2018, and an acquired closed noncontributory defined benefit pension plan in the U.S. covering certain PF employees (collectively, the “Plans”~~(the “Plan”). Components of net ~~period~~periodic pension cost for the ~~Plans were~~Plan was as follows:


									First Quarters Ended
									October 2,		October 3,
									2021		2020

	Second Quarters Ended				Six Months Ended
	December 30,		December 31,		December 30,		December 31,
	2017		2016 (1)		2017		2016 (1)
	(Thousands)
									(Thousands)
Service cost	$	3,867	$	10,848	$	7,735	$	21,696	$	3,752	$	3,938
Total net periodic pension cost within selling, general and administrative expenses										3,752		3,938

Interest cost		5,783		3,774		11,566		7,548		3,947		3,976
Expected return on plan assets		(13,757)		(10,588)		(27,514)		(21,176)		(12,284)		(12,420)
Amortization of prior service credits		(393)		(393)		(786)		(786)
Amortization of prior service cost										1		75
Recognized net actuarial loss		3,746		3,851		7,492		7,702		4,086		5,151
Pension settlement charge		13,984		—		13,984		—
Net periodic pension cost	$	13,230	$	7,492	$	12,477	$	14,984
Total net periodic pension benefit within other expense, net										(4,250)		(3,218)

Net periodic pension (benefit) cost									$	(498)	$	720

⁽¹⁾

~~Includes discontinued operations~~

The Company ~~contributed~~made $8.0 million to of contributions during the ~~Plans during the~~first ~~six months~~quarter of fiscal ~~2018~~2022 and expects to make an additional ~~contribution~~contributions to the ~~Plans~~Plan of up to $8.0 million in the remainder of fiscal ~~2018.~~2022.

The Plans meet the definition of defined benefit plans and as a result, the Company applies ASC 715 pension accounting to the Plans. The Plans, however, are cash balance plans that are similar in nature to defined contribution plans in that a participant’s benefit is defined in terms of stated account balances. The cash balance plans provides the Company with the benefit of applying any earnings on the Plan’s investments beyond the fixed return provided to participants, toward the Company’s future cash funding obligations.

Amounts reclassified out of accumulated other comprehensive income (loss), net of tax, to operating expenses during the second quarters and the first six months of fiscal 2018 and fiscal 2017 were not material and substantially all related to net periodic pension costs including recognition of actuarial losses and amortization of prior service credits.

In connection with the sale of the TS business, a significant number of former employees became terminated vested employees under the Plan. During the second quarter of fiscal 2018, the aggregate amount of former employee withdrawals from the Plan exceeded the pension accounting threshold for fiscal 2018, which required a settlement charge under ASC 715 pension accounting. As a result, the Company recognized a $14.0 million pension settlement charge before taxes in the second quarter of fiscal 2018 classified within loss from discontinued operations.

15

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

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

10. Shareholders’ equity

Share repurchase program

In ~~November 2017,~~August 2019, the Company’s Board of Directors ~~authorized a $200 million increase in~~amended the Company’s existing share repurchase ~~program. With this increase,~~program, increasing the ~~Company may repurchase up~~cumulative total of authorized share repurchases to ~~$1.95~~$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 ~~second~~first quarter ~~and six months~~ ended ~~December 30, 2017,~~October 2, 2021, the Company repurchased ~~1.7~~0.3 million ~~and 3.6 million~~ shares ~~respectively,~~ under this program for a total cost of ~~$67.4 million and $139.4 million, respectively.~~$10.5 million. As of ~~December 30, 2017,~~October 2, 2021, the Company had ~~$459.6~~$458.5 million remaining under its share repurchase authorization.

Common stock dividend

In ~~November 2017,~~August 2021, the Company’s Board of Directors approved a dividend of ~~$0.18~~$0.24 per common share and dividend payments of ~~$21.6~~$23.9 million were made in ~~December 2017. During the six months ended December 31, 2017, the Company paid dividends of $0.36 per common share and $43.6 million in total.~~September 2021.

~~11. Earnings per share~~

Second Quarters Ended

Six Months Ended

December 30,

December 31,

December 30,

December 31,

2017

2016

2017

2016

(Thousands, except per share data)

Numerator:



Income from continuing operations

$
56,794

$
32,465

$
114,976

$
100,153

Income (loss) from discontinued operations

(10,070)

70,753

(9,949)

71,908

Net income

$
46,724

$
103,218

$
105,027

$
172,061

Denominator:

Weighted average common shares for basic earnings per share

120,400

127,901

121,543

127,716

Net effect of dilutive stock based compensation awards

1,349

2,446

1,324

2,339

Weighted average common shares for diluted earnings per share

121,749

130,347

122,867

130,055

Basic earnings per share - continuing operations

$
0.47

$
0.25

$
0.94

$
0.78

Basic earnings (loss) per share - discontinued operations

(0.08)

0.55

(0.08)

0.56

Basic earnings per share

$
0.39

$
0.80

$
0.86

$
1.34

Diluted earnings per share - continuing operations

$
0.47

$
0.25

$
0.93

$
0.77

Diluted earnings (loss) per share - discontinued operations

(0.08)

0.54

(0.08)

0.55

Diluted earnings per share

$
0.39

$
0.79

$
0.85

$
1.32

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

1,508

7

1,508

7

~~See Note 3 for additional information on income (loss) from discontinued operations.~~

1614

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

11. Earnings per share


	First Quarters Ended
	October 2,		October 3,
	2021		2020

	(Thousands, except per share data)
Numerator:
Net income (loss)	$	111,318	$	(18,889)

Denominator:
Weighted average common shares for basic earnings per share		99,647		98,897
Net effect of dilutive stock-based compensation awards		1,469		—
Weighted average common shares for diluted earnings per share		101,116		98,897
Basic earnings (loss) per share	$	1.12	$	(0.19)
Diluted earnings (loss) per share	$	1.10	$	(0.19)
Stock options excluded from earnings per share calculation due to anti-dilutive effect		897		875

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

12. Additional cash flow information

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


					First Quarters Ended
					October 2,		October 3,
					2021		2020

	Six Months Ended
	December 30,		December 31,
	2017		2016
	(Thousands)
					(Thousands)
Non-cash Investing Activities:
Capital expenditures incurred but not paid	$	17,765	$	8,661	$	4,508	$	3,173
Non-cash Financing Activities:
Unsettled share repurchases	$	3,971		—	$	937		—
Supplemental Cash Flow Information:
Interest	$	48,061	$	61,062	$	11,636	$	12,538
Income taxes	$	65,245	$	67,200
Income tax net payments						27,977		19,258

Included in cash and cash equivalents as of ~~December 30, 2017,~~October 2, 2021, and July ~~1, 2017,~~3, 2021, was ~~$5.2~~$3.4 million and ~~$208.3~~$3.8 million, respectively, of cash equivalents, which was primarily comprised of investment grade money market funds and overnight time deposits.

15

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

13. Segment information

Electronic Components (“EC”) and ~~Premier~~ Farnell (“~~PF”~~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. ~~PF was acquired during the second quarter of the prior year and~~Farnell distributes electronic components and related products to the electronic system design community utilizing multi-channel sales and marketing resources.


	First Quarters Ended
	October 2,		October 3,
	2021		2020

	(Thousands)
Sales:
Electronic Components	$	5,129,497	$	4,382,148
Farnell		455,198		340,911
		5,584,695		4,723,059
Operating income:
Electronic Components	$	162,462	$	84,440
Farnell		49,593		11,959
		212,055		96,399
Corporate		(33,301)		(31,302)
Restructuring, integration and other expenses		(5,272)		(26,420)
Amortization of acquired intangible assets and other		(5,239)		(20,175)
Operating income	$	168,243	$	18,502
				��
Sales, by geographic area:
Americas ⁽¹⁾	$	1,258,811	$	1,205,695
EMEA ⁽²⁾		1,747,579		1,480,674
Asia/Pacific ⁽³⁾		2,578,305		2,036,690
Sales	$	5,584,695	$	4,723,059

⁽¹⁾	Includes sales from the United States of $1.16 billion and $1.13 billion for the first quarters ended October 2, 2021, and October 3, 2020, respectively.

⁽²⁾	Includes sales from Germany and Belgium of $697.1 million and $307.6 million, respectively, for the first quarter ended October 2, 2021. Includes sales from Germany and Belgium of $574.8 million and $294.4 million, respectively, for the first quarter ended October 3, 2020.

⁽³⁾

Includes sales from China (including Hong Kong), Taiwan and Singapore of $826.8 million, $1.20 billion and $264.0 million, respectively, for the first quarter ended October 2, 2021. Includes sales from China (including Hong Kong), Taiwan and Singapore of $631.8 million, $916.3 million and $272.0 million, respectively, for the first quarter ended October 3, 2020.

1716

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Second Quarters Ended

Six Months Ended

December 30,

December 31,

December 30,

December 31,

2017

2016

2017

2016

(Thousands)

Sales:













Electronic Components

$
4,163,519

$
4,004,342

$
8,470,769

$
8,122,446

Premier Farnell

358,117

269,217

711,809

269,217

4,521,636

4,273,559

9,182,578

8,391,663

Operating income (loss):

Electronic Components

$
129,848

$
166,705

$
269,449

$
351,756

Premier Farnell

35,630

23,974

70,425

23,974

165,478

190,679

339,874

375,730

Corporate (1)

(19,821)

(26,220)

(52,283)

(49,910)

Restructuring, integration and other expenses

(36,762)

(30,400)

(83,156)

(59,869)

Amortization of acquired intangible assets and other

(21,877)

(9,829)

(47,462)

(12,207)

Operating Income

$
87,018

$
124,230

156,973

253,744

Sales, by geographic area:

Americas (2)

$
1,210,251

$
1,252,606

$
2,395,735

$
2,503,114

EMEA (3)

1,506,015

1,380,694

3,199,000

2,645,988

Asia/Pacific (4)

1,805,370

1,640,259

3,587,843

3,242,561

Sales

$
4,521,636

$
4,273,559

$
9,182,578

$
8,391,663

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

~~(2)~~Includes sales from the United States of $1.12 billion and $1.16 billion for the second quarters ended December 30, 2017, and December 31, 2016, respectively. Includes sales from the United States of $2.21 billion and $2.38 billion for the first six months of fiscal 2018 and 2017, respectively.

~~(3)~~Includes sales from Germany and Belgium of $571.3 million and $242.4 million, respectively, for the second quarter ended December 30, 2017, and $1.25 billion and $504.9 million, respectively, for the first six months of fiscal 2018. Includes sales from Germany and Belgium of $518.7 million and $227.5 million, respectively, for the second quarter ended December 31, 2016, and $1.04 billion and $430.2 million, respectively, for the first six months of fiscal 2017.

~~(4)~~Includes sales from China (including Hong Kong), Taiwan and Singapore of $639.8 million, $715.3 million and $217.3 million, respectively, for the second quarter ended December 30, 2017, and $1.30 billion, $1.37 billion and $446.2 million, respectively, for the first six months of fiscal 2018. Includes sales from China (including Hong Kong), Taiwan and Singapore of $611.8 million, $597.1 million and $220.6 million, respectively, for the second quarter ended December 31, 2016, and $1.24 billion, $1.19 billion and $453.0 million, respectively, for the first six months of fiscal 2017.


	October 2,		July 3,
	2021		2021

	(Thousands)
Property, plant, and equipment, net, by geographic area:
Americas ⁽¹⁾	$	138,380	$	146,042
EMEA ⁽²⁾		178,887		185,753
Asia/Pacific		34,606		36,657
Property, plant, and equipment, net	$	351,873	$	368,452

18

⁽¹⁾	Includes property, plant and equipment, net, of $135.0 million and $142.7 million as of October 2, 2021, and July 3, 2021, respectively, in the United States.

⁽²⁾

Includes property, plant and equipment, net, of $74.1 million, $81.0 million and $19.9 million in Germany, the United Kingdom and Belgium, respectively, as of October 2, 2021; and $77.9 million, $83.5 million and $20.9 million in Germany, the United Kingdom and Belgium, respectively, as of July 3, 2021.

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

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

December 30,

July 1,

2017

2017

(Thousands)

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

Americas (1)

$
274,138

$
296,038

EMEA (2)

196,663

186,127

Asia/Pacific

36,891

37,410

Property, plant, and equipment, net

$
507,692

$
519,575

~~(1)Includes property, plant and equipment, net, of $268.8 million and $289.1 million as of December 30, 2017, and July 1, 2017, respectively, in the United States.~~

~~(2)~~Includes property, plant and equipment, net, of $96.2 million, $50.5 million and $41.1 million in Germany, UK and Belgium, respectively, as of December 30, 2017, and $85.6 million, $52.1 million and $39.8 million in Germany, UK and Belgium, respectively, as of July 1, 2017.

14. Restructuring expenses

Fiscal ~~2018~~2021 and prior

During fiscal ~~2018, the Company executed certain restructuring actions in an effort to integrate acquisitions~~2021 and reduce future 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 established during fiscal 2018 is presented in the following table:

Facility


Asset




Severance

Exit Costs

Impairments

Other

Total

(Thousands)

Fiscal 2018 restructuring expenses

$
32,976

157

936

120

$
34,189

Cash payments

(19,253)

(26)

—

(73)

(19,352)

Non-cash amounts

—

—

(936)

—

(936)

Other, principally foreign currency translation

25

4

—

—

29

Balance at December 30, 2017

$
13,748

$
135

$
—

$
47

$
13,930

Severance expense recorded in the first six months of fiscal 2018 related to the reduction, or planned reduction of approximately 600 employees, primarily in executive management, operations, warehouse, sales and business support functions. Facility exit costs primarily consist of liabilities for remaining lease obligations for exited facilities. Asset impairments relate to the impairment of property, plant and equipment as a result of the underlying restructuring activities. Other restructuring costs related primarily to other miscellaneous restructuring and exit costs. Of the $34.2 million in restructuring expenses recorded during the first six months of fiscal 2018, $28.7 million related to EC, $4.2 million related to PF and $1.3 million related to corporate executive and business support functions. The Company expects the majority of the remaining amounts to be paid by the end of fiscal 2018.

19

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

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

~~Fiscal 2017~~

~~During fiscal 2017,~~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 ~~six months~~quarter of fiscal ~~2018~~2022 related to the remaining restructuring liabilities ~~from continuing operations~~ established during fiscal ~~2017:~~2021 and prior:


			Facility
			and Contract
	Severance		Exit Costs		Total

	(Thousands)
Balance at July 3, 2021	$	35,099	$	4,863	$	39,962
Cash payments		(11,892)		(1,319)		(13,211)
Changes in estimates, net		(330)		0		(330)
Other, principally foreign currency translation		(359)		(41)		(400)
Balance at October 2, 2021	$	22,518	$	3,503	$	26,021

Facility


Severance

Exit Costs

Total

(Thousands)
Balance at July 1, 2017

$
12,186

$
76

$
12,262
Cash payments

(8,198)

(78)

(8,276)
Changes in estimates, net

(1,056)

—

(1,056)
Non-cash amounts

—

—

—
Other, principally foreign currency translation

146

2

148
Balance at December 30, 2017

$
3,078

$
—

$
3,078

The Company expects the majority of the remaining amounts to be paid by the end of fiscal ~~2018.~~2022.

2017

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. The following important factors, in addition to those discussed elsewhere in this Quarterly Report, and the Company’s Annual Report on Form 10-K for the fiscal year ended July 3, 2021, 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, or warehouse modernization and relocation efforts; risks related to cyber-attacks, other privacy and security incidents and information systems failures, including related to current or future implementations, integrations or upgrades; 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, liquidity, and access to financing; constraints on employee retention and hiring; geopolitical events; and legislative or regulatory changes affecting the Company’s businesses.

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

Item 2.

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

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

For a description of the Company’s critical accounting policies and an understanding of Avnet and the significant factors that influenced the Company’s performance during the quarter ended ~~December 30, 2017,~~October 2, 2021, 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 July ~~1, 2017.~~3, 2021. The Company operates on a “52/53 week” fiscal year and fiscal 2022 contains 52 weeks compared to 53 weeks in fiscal 2021. As a result, the first quarter of fiscal 2022 contained 13 weeks and the first quarter of fiscal 2021 contained 14 weeks. This extra week in the first quarter of fiscal 2021 impacts the year-over-year analysis in this MD&A.

~~There are~~The discussion of the Company’s results of operations includes references to the impact of foreign currency ~~translation in the discussion of the Company’s results of operations.~~translation. 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~~result 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~~result 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.”

18

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. Additionally, the Company has adjusted sales for the impact of the termination of the Texas Instruments (“TI”) distribution agreement between fiscal years. Sales taking into account these adjustments are referred to as “organic sales.”

·

●

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

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


									First Quarters Ended
									October 2,		October 3,
									2021		2020

	Second Quarters Ended				Six Months Ended
	December 30,		December 31,		December 30,		December 31,
	2017		2016		2017		2016
	(Thousands)
									(Thousands)
Operating income	$	87,018	$	124,230	$	156,973	$	253,744	$	168,243	$	18,502
Restructuring, integration and other expenses		36,762		30,400		83,156		59,869		5,272		26,420
Amortization of acquired intangible assets and other		21,877		9,829		47,462		12,207		5,239		20,175
Adjusted operating income	$	145,657	$	164,459	$	287,591	$	325,820	$	178,754	$	65,097

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.

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OVERVIEW

~~OVERVIEW~~

Organization

~~Organization~~

Avnet, Inc.~~, founded in 1921~~ and ~~incorporated in New York in 1955, together with~~ its consolidated subsidiaries ~~(the~~(collectively, the “Company” or “Avnet”), is a leading global ~~value-added~~technology distributor and solutions provider. Avnet has served customers’ evolving needs for an entire century. Avnet supports customers at each stage of ~~electronic components. Avnet creates~~ a ~~vital link in~~product’s lifecycle, from idea to design and from prototype to production. Avnet’s unique position at the center of the technology value chain enables it to accelerate the design and supply ~~chain that connects~~stages of product development so customers can realize revenue faster. Decade after decade, Avnet helps its customers and suppliers around the ~~world’s leading electronic component manufacturers~~world realize the transformative possibilities of technology. Founded in 1921, the Company works with ~~a global customer base primarily comprised of original equipment manufacturers, electronic manufacturing services providers and original design manufacturers.~~ suppliers in every major technology segment to serve customers in more than 140 countries.

Avnet ~~distributes electronic components, as received from its suppliers or through a customized integrated solution, and offers assembly and other value-added services.~~

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

Results of Operations

Executive Summary

Sales ~~for~~of $5.58 billion in the ~~second~~first quarter of fiscal ~~2018~~2022 were ~~$4.52 billion, an increase~~18.2% higher than the prior year first quarter sales of ~~5.8% from~~$4.72 billion. Excluding the impact of changes in foreign currency, sales ~~for the second quarter of fiscal 2017 of $4.27 billion. The increase in~~increased 17.5% as compared to sales ~~was due to the Company’s acquisition of PF and increased sales EC’s EMEA and Asia regions, offset by sales declines~~ in the ~~Americas region. Sales on an organic basis in constant currency increased~~prior year ~~over year by 1.9% with both EC and PF contributing to the increase.~~ first quarter.

Gross profit margin ~~for~~of 11.8% increased 88 basis points compared to 10.9% in the ~~second~~first quarter of fiscal ~~2018 remained relatively flat compared~~2021. This increase is primarily due to strong overall demand for electronic components and improvements in product and customer mix, partially offset by an unfavorable geographic regional sales mix.

Operating income of $168.2 million was $149.7 million higher than the ~~second~~first quarter of fiscal ~~2017. EC~~2021. Operating income margin was 3.0% in the first quarter of fiscal 2022, as compared to 0.4% in the prior year first quarter. The increase in operating income margin is the result of increases in sales and in gross profit margin ~~decreased year over year primarily due to supplier program changes,~~ and ~~a higher percentage of sales coming~~ from ~~the lower-margin Asia region. PF gross profit margin decreased year over year primarily driven by changes in customer mix.~~

~~Avnet~~lower operating ~~income margin was 1.9% in the second quarter of fiscal 2018 as compared with 2.9% in the second quarter of fiscal 2017. Both periods included amortization and restructuring, integration and other~~ expenses. ~~Excluding these expenses from both periods, adjusted~~Adjusted operating income margin was 3.2% in the ~~second~~first quarter of fiscal ~~2018~~2022 as compared to ~~3.8%~~1.4% in the ~~second~~first quarter of fiscal ~~2017. EC~~2021, an increase of 182 basis points. This increase in adjusted operating income margin ~~decreased 104 basis points year over year to 3.1%~~is primarily due to the ~~decline~~increases in sales and gross ~~profit margin. PF operating income~~ margin, ~~increased 105 basis points year over year to 10.0% due primarily to revenue growth~~partially offset by increases in selling, general and ~~the realization of post-acquisition cost synergies.~~ administrative expenses.

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Sales

~~Sales~~

Reported sales were the same as organic sales in the first quarter of fiscal 2022. The following ~~tables present~~table presents the reconciliation of reported sales to organic sales for the ~~second quarters and~~ first ~~six months~~quarter of fiscal ~~2017.~~ 2021 by geographic region and by operating group.


													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⁾

					As Reported				Organic
	As Reported				Year-Year %				Year-Year %
	and Organic		As Reported		Change in		Organic		Change in
	Q2-Fiscal		Year-Year		Constant		Year-Year		Constant
	2018		% Change		Currency		% Change		Currency
	(Dollars in thousands)
											(Thousands)
Avnet	$	4,521,636	5.8	%	3.1	%	4.6	%	1.9	%	$	4,723,059	$	306,000	$	4,417,059	$	240,984	$	4,176,075
Avnet by region
Americas	$	1,210,251	(3.4)	%	—		(4.8)	%	—		$	1,205,695	$	77,000	$	1,128,695	$	68,500	$	1,060,195
EMEA		1,506,015	9.1		0.8	%	7.0		(1.2)	%		1,480,674		97,000		1,383,674		102,910		1,280,764
Asia		1,805,370	10.1		10.2		9.8		9.9			2,036,690		132,000		1,904,690		69,574		1,835,116
Avnet by segment
Avnet by operating group
EC	$	4,163,519	4.0	%	1.4	%	4.0	%	1.4	%	$	4,382,148	$	284,000	$	4,098,148	$	240,984	$	3,857,164
PF		358,117	33.0		27.5		12.3		7.7
Farnell												340,911		22,000		318,911		—		318,911

___________

Second Quarter Ended

Six Months Ended

As

As

Reported

Organic Sales

Reported

Organic Sales

Fiscal 2017

Acquisitions (1)

Fiscal 2017

Fiscal 2017

Acquisitions (1)

Fiscal 2017

(Thousands)

Avnet

$
4,273,559

$
49,639

$
4,323,198

$
8,391,663

$
378,352

$
8,770,015

Avnet by region

Americas

$
1,252,606

$
18,282

$
1,270,888

$
2,503,114

$
154,426

$
2,657,540

EMEA

1,380,694

26,558

1,407,252

2,645,988

178,879

2,824,867

Asia

1,640,259

4,799

1,645,058

3,242,561

45,047

3,287,608

Avnet by segment

EC

$
4,004,342

$
—

$
4,004,342

$
8,122,446

$
—

$
8,122,446

PF

269,217

49,639

318,856

269,217

378,352

647,569

⁽¹⁾

~~Includes PF acquired on October 17, 2016, which has operations~~The impact of the additional week of sales in ~~each Avnet region.~~

the first quarter of fiscal 2021 is estimated.

(2)

Sales adjusted for the impact of the termination of the Texas Instruments (“TI”) distribution agreement.

~~Second~~The following table presents reported and organic sales growth rates for the first quarter of fiscal 2022 as compared to fiscal 2021 by geographic region and by operating group.


			Sales				Organic		Sales
			As Reported				Sales		Adj for TI
	Sales		Year-Year %		Organic		Year-Year %		Year-Year %
	As Reported		Change in		Sales		Change in		Change in
	Year-Year		Constant		Year-Year		Constant		Constant
	% Change		Currency		% Change		Currency		Currency⁽¹⁾
Avnet	18.2	%	17.5	%	26.4	%	25.6	%	32.9	%
Avnet by region
Americas	4.4	%	4.4	%	11.5	%	11.5	%	18.7	%
EMEA	18.0		16.2		26.3		24.3		34.3
Asia	26.6		26.4		35.4		35.2		40.3
Avnet by operating group
EC	17.1	%	16.5	%	25.2	%	24.6	%	32.3	%
Farnell	33.5		30.1		42.7		39.0		39.0

___________

(1)

Sales growth rates excluding the impactof the termination of the TI distribution agreement.

Sales of $5.58 billion for the first quarter of fiscal 2022 were up $861.6 million, or 18.2%, from the prior year first quarter sales of ~~$4.52 billion~~$4.72 billion. Sales in constant currency in the first quarter of fiscal 2022 increased ~~5.8%~~by 17.5% year over year. The increase in sales is primarily the ~~prior year second quarter sales~~result of ~~$4.27 billion primarily due to the acquisition of PF and increased sales in EC’s EMEA and Asia regions. On a regional basis,~~ increased sales in the ~~EC’s~~Company’s Asia and EMEA regions and ~~Asia~~sales growth at Farnell. Organic sales in constant currency excluding TI sales in the first quarter of fiscal 2022 were 32.9% higher than sales in the first quarter of fiscal 2021, reflecting sales growth in both operating groups across all regions driven by strong demand ~~across many product verticals were offset by a decrease~~globally for electronic components.

EC sales of $5.13 billion in the first quarter of fiscal 2022 increased $747.3 million or 17.1% from the prior year first quarter sales of $4.38 billion. On an organic basis, EC sales excluding TI increased 32.3% year over year in constant currency, reflecting sales growth in all three regions. The increase in sales in the ~~Americas region~~Company’s EC operating group is primarily due ~~primarily~~ to ~~supplier channel~~improvements in overall market demand and ~~program changes.~~stronger demand in certain industry sectors, particularly the transportation and industrial sectors.

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~~Organic~~Farnell sales for the first quarter of fiscal 2022 were $455.2 million, an increase of $114.3 million or 33.5% from the prior year first quarter sales of $340.9 million. Sales in constant currency increased ~~1.9%~~30.1% year over ~~the prior year second quarter with both operating groups contributing to this increase driven by overall~~year. These increases were primarily a result of increased market demand ~~partially offset by~~in all three regions.

As a result of the recent notification the Company received from Maxim Integrated Products, Inc. (“Maxim”) related to the termination of the Company’s distribution agreement for the Electronic Components operating group, the Company may experience lower sales and gross profit in the future if the impact of ~~supplier program changes.~~

~~Sales for~~ the first six months of fiscal 2018 were $9.18 billion, an increase of 9.4% as compared to sales of $8.39 billion for the first six months of fiscal 2017 primarily due to the acquisition of PF. Organic sales for the first six months of 2018 increased $412.6 million over the first six months of fiscal 2017 organic sales primarily due to increases in EMEA and Asia,termination is not offset by ~~declines~~sales growth, gross margin improvements or operating cost reductions. Sales from Maxim products represented approximately 3% of total sales in ~~the Americas.~~fiscal 2021.

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~~Table of Contents~~

Gross Profit ~~and Gross Profit Margins~~

Gross profit for the ~~second~~first quarter of fiscal ~~2018~~2022 was ~~$602.5~~$659.7 million, an increase of ~~$16.3~~$143.6 million, or ~~2.8%~~27.8%, from the ~~second~~first quarter of fiscal ~~2017~~2021 gross profit of ~~$586.2 million driven primarily by the acquisition of PF.~~$516.1 million. Gross profit margin ~~remained relatively flat with~~increased to 11.8% (or 88 basis points) from the ~~year ago second quarter.~~

ECfirst quarter of fiscal 2021 gross profit margin ~~decreased year over year primarily due to supplier program changes and a sales mix shift to the lower-margin Asia region. Asia sales represented 42%~~ of ~~the total EC sales in the second quarter of fiscal 2018 as compared with 40% in the second quarter of fiscal 2017. PF gross profit margin decreased year over year primarily~~10.9%, driven ~~by customer mix.~~

Gross profit and gross profit margins were $1.22 billion and 13.2%, respectively, for the first six months of fiscal 2018 as compared with $1.11 billion and 13.2%, respectively, for the first six months of fiscal 2017. Decreases in EC’s gross profit margin due to supplier program changes were offset by increases in gross profit margin in both operating groups. The increases in gross profit margin in both operating groups are primarily due to strong demand for electronic components that resulted in a favorable pricing environment, partially offset by unfavorable geographic region sales mix. Sales in the ~~acquisition~~higher gross profit margin western regions represented approximately 54% of ~~PF.~~sales in the first quarter of fiscal 2022, as compared to 57% during the first quarter of fiscal 2021.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A expenses”) were ~~$478.7~~$486.2 million in the ~~second~~first quarter of fiscal ~~2018,~~2022, an increase of ~~$47.1~~$15.0 million, or ~~10.9%~~3.2%, from the ~~second~~first quarter of fiscal ~~2017.~~2021. The year-over-year increase in SG&A expenses was primarily due to ~~the acquisition of PF,~~increases in costs to support sales growth, increased costs related to inflation including merit pay increases for employees, and to a lesser extent the impact of ~~changes in~~ foreign currency ~~exchange rates and increased expenses~~ due to ~~sales growth, partially offset by decreases from restructuring actions taken in~~ the ~~trailing twelve months ended December 30, 2017. The increase includes $11.9 million~~weakening of ~~additional amortization expense year over year from~~ the ~~acquisition of PF.~~ U.S. Dollar.

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 ~~second~~first quarter of fiscal ~~2018,~~2022, SG&A expenses ~~as a percentage~~were 8.7% of sales ~~were 10.6%~~ and ~~as a percentage~~73.7% of gross profit, ~~were 79.5%,~~ as compared with ~~10.1%~~10.0% and ~~73.6%~~91.3%, respectively, in the ~~second~~first quarter of fiscal ~~2017.~~2021. The ~~increases~~decrease in SG&A expenses as a percentage of ~~sales and as a percentage of~~ gross profit ~~is due~~ primarily ~~to the acquisition of PF and the impact of supplier program changes on EC’s~~results from operating leverage created from higher sales, ~~and gross profit.~~

~~SG&A expenses for the first six months of fiscal 2018 were $974.9 million, or 10.6% of sales, as compared with $795.2 million, or 9.5% of sales,~~increase in ~~the first six months of fiscal 2017. SG&A expenses were 80.2% of~~ gross profit ~~in the first six months of 2018 as compared with 71.7% in the first six months of fiscal 2017. The year-over-year increase~~margin, and lower amortization expense, partially offset by increases in SG&A ~~expenses was primarily due to the acquisition of PF and the impact of supplier program changes on EC’s sales and gross profit.~~expenses.

Restructuring, Integration, and Other Expenses

As a result of the aforementioned supplier channel and program changes, the focus on lowering overall operating costs, and the integration of PF, the Company has incurred certain restructuring costs. In addition, the Company incurred integration, accelerated depreciation, acquisition/divestiture and other costs. Integration costs are primarily related to the integration of acquired businesses including PF, the integration of certain regional and global businesses including Avnet after the TS divestiture, and incremental costs incurred as part of the consolidation, relocation, and closure of warehouse and office facilities. Accelerated depreciation relates to the incremental depreciation expense incurred related to the shortening of the estimated useful life of the Company’s enterprise resource planning (“ERP”) system in the Americas compared to depreciation expense based on the original useful life of such ERP system as such ERP system is in the process of being replaced. Acquisition/divestiture costs consist primarily of professional fees and other costs incurred related to the acquisition, divestiture and closure of businesses including the acquisition of PF and the divestiture of TS. Other costs consist primarily of any other miscellaneous costs that relate to restructuring, integration and other expenses.

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~~Table of Contents~~

The Company recorded restructuring, integration and other expenses of ~~$36.8~~$5.3 million during the ~~second~~first quarter of fiscal ~~2018.~~2022, substantially all of which was related to integration costs. The Company recorded $12.9 million of restructuring costs in the second quarter of fiscal 2018 in order to realize approximately $2.0 million in expected annualized operating cost savings once such restructuring actions initiated before the end of the second quarter of fiscal 2018 are completed. During the second quarter of fiscal 2018, the Company incurred integration costs of $8.2 million, accelerated depreciation of $16.9 million, other costs of $0.2 million and a reversal of $1.4 million for changes in estimates for costs associated with prior year restructuring actions. The after taxafter-tax impact of restructuring, integration and other expenses were ~~$27.8~~$4.3 million and ~~$0.23~~$0.04 per share on a diluted basis.

During the first six months of fiscal 2018, the Company incurred restructuring costs of $34.2 million, integration costs of $16.4 million, accelerated depreciation of $33.3 million, other costs of $0.7 million and reversals of $1.4 million for changes in estimates for costs associated with prior year restructuring actions. The after tax impact of restructuring, integration and other expenses for the first six months of fiscal 2018 was $57.4 million and $0.47 per share on a diluted basis.

Comparatively, in the second quarter of fiscal 2017, restructuring, integration and other expenses from continuing operations were $30.4 million. The after tax impact of restructuring, integration, and other expenses was $23.0 million and $0.18 per share on a diluted basis.

In the first six months of fiscal 2017, restructuring, integration and other expenses from continuing operations was $59.9 million. The after tax impact of restructuring, integration and other expenses for the first six months of fiscal 2017 was $43.2 million and $0.34 per share on a diluted basis.

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

Operating Income

Operating income for the ~~second~~first quarter of fiscal ~~2018~~2022 was ~~$87.0~~$168.2 million, ~~a decrease~~an increase of ~~$37.2~~$149.7 million, from the first quarter of fiscal 2021 operating income of $18.5 million. Adjusted operating income for the first quarter of fiscal 2022 was $178.8 million, an increase of $113.7 million, or ~~30.0%~~174.6%, from the ~~second~~first quarter of fiscal ~~2017 operating income of $124.2 million.~~2021. The ~~year over year decrease~~year-over-year increase in adjusted operating income was primarily driven by ~~declines~~the increase in ~~the EC’s Americas~~sales and ~~EMEA regions due primarily to supplier program changes,~~in gross profit margin, partially offset by an increase ~~at PF. Adjusted operating income for the second quarter of fiscal 2018 was $145.7 million, a decrease of $18.8 million, or 11.4%, from the second quarter of fiscal 2017.~~in SG&A expenses.

EC operating income margin ~~decreased 104~~increased 124 basis points year over year to ~~3.1% due primarily to supplier program changes partially offset by cost reductions from restructuring actions. PF~~3.2% and Farnell operating income margin increased ~~105~~738 basis points year over year to ~~10.0% due primarily to sales growth~~10.9%.

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Interest and ~~the realization of post-acquisition cost synergies.~~ Other Financing Expenses, Net and Other Expense, Net

~~Operating income for the first six months of fiscal 2018 was $157.0 million, or 1.7% of consolidated sales, as compared with operating income of $253.7 million, or 3.0%~~Interest and other financing expenses in the first ~~six months of 2017 primarily driven by declines in EC partially offset by the acquisition of PF.~~

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

~~Interest expense in the second~~ quarter of fiscal ~~2018~~2022 was ~~$25.6~~$22.8 million, ~~a decrease~~an increase of ~~$1.1~~$0.5 million, or ~~4.1%~~2.4%, as compared with interest ~~expense~~and other financing expenses of ~~$26.7~~$22.3 million in the ~~second~~first quarter of fiscal ~~2017. Interest~~2021. The increase in interest and other financing expenses was primarily related to more outstanding borrowings during the first quarter of fiscal 2022 as compared to the first quarter of fiscal 2021.

During the first quarter of fiscal 2022, the Company had $0.4 million of other expense as compared with $19.5 million of other expense in the first six months of fiscal 2018 was $49.7 million, a decrease of $4.3 million or 7.9%, as compared with interest expense of $54.0 million in the first six months of fiscal 2017. The decrease in interest expense in the second quarter and first six months of fiscal 2018 compared to the second quarter and first six months of fiscal 2017 was primarily related to the impact of the Company’s repayment of its outstanding term loans and borrowings on its revolving credit facilities, which were used to help fund the PF acquisition.

25

~~Table of Contents~~

~~During the second~~ quarter of fiscal ~~2018, the Company had $0.8 million of other income, net, as compared with $36.5 million of~~2021. The year-over-year differences in other expense net, in the second quarter of fiscal 2017. During the first six months of fiscal 2017, the Company recognized $16.3 million of other income as compared with $50.2 million of other expenses in the first six months of fiscal 2017. In the first six months of fiscal 2018, the Company had foreign currency gainswas primarily due to the ~~strengthening of~~equity investment impairment expense included in the ~~Euro compared to~~other expense in the ~~U.S. Dollar and British Pound. In the second~~first quarter ~~and first six months~~ of fiscal ~~2017, the Company incurred additional financing~~2021, and ~~economic~~differences in foreign currency ~~hedging costs associated with~~exchange rates between the ~~PF acquisition.~~first quarters of fiscal 2022 and fiscal 2021.

Income Tax ~~Expense~~

The Company’s effective tax rate on its income before ~~income~~ taxes ~~from continuing operations~~ was ~~8.6%~~23.2% in the ~~second~~first quarter of fiscal ~~2018.~~2022. During the ~~second~~first quarter of fiscal ~~2018,~~2022, the Company’s effective tax rate was favorably impacted primarily by the mix of income in lower tax jurisdictions, partially offset by the tax expense created from remeasuring net deferred tax assets as a result of applying the requirements of the Act.

~~During the second quarter of fiscal 2017, the Company’s effective tax rate of 46.7% was~~ unfavorably impacted primarily by ~~(i) net~~ increases to valuation allowances against deferred tax assets created primarily from acquisition related expenses that were deemed unrealizable and (ii) the impact of non-deductible acquisition related expenses, partially offset by (iii) the mix of income in lower tax jurisdictions.allowances.

For the first six months of fiscal 2018 the Company’s effective tax rate on its income before income taxes from continuing operations was 7.0%. The effective tax rate for the first six months of fiscal 2018 was favorably impacted primarily by (i) the mix of income in lower tax jurisdictions and (ii) the release of unrecognized tax benefit reserves primarily due to the negotiation of a favorable outcome in a foreign jurisdiction, partially offset by the (iii) tax expense created from remeasuring net deferred tax assets as a result of applying the requirements of the Act.

During the first six months of fiscal 2017, the Company’s effective tax rate of 33% was unfavorably impacted primarily by (i) net increases to valuation allowances against deferred tax assets that were deemed unrealizable and (ii) the impact of non-deductible acquisition related expenses, partially offset by (iii) the mix of income in lower tax jurisdictions.

~~See Note 8 “Income taxes” to the Company’s consolidated financial statements included in this Quarterly Report on Form 10-Q.~~

~~Income from Discontinued Operations~~

Loss from discontinued operations was $10.1 million and $9.9 million in the second quarter and the first six months of fiscal 2018, respectively, primarily as a result of settlement losses associated with the Company’s pension plan due to former TS business employees requesting and receiving distributions from the Company’s pension plan during fiscal 2018. Refer to Note 9, “Pension Plan,” for further information on the pension settlement losses.

Income from discontinued operations was $70.8 million and $71.9 million in the second quarter and the first six months of fiscal 2017, respectively due to the operating results of the TS business, which was sold in the third quarter of fiscal 2017.

See Note 3, “Discontinued operations” to the Company’s consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information and detail on the financial results of discontinued operations.

Net Income (Loss)

As a result of the factors described in the preceding sections of this MD&A, the Company’s net income for the second quarter of fiscal 2018 was $46.7 million, or $0.38 per share on a diluted basis, as compared with $103.2 million, or $0.79 per share on a diluted basis, in the second quarter of fiscal 2017.

26

~~Table of Contents~~

As a result of the factors described in the preceding sections of this MD&A, the Company’s net income for the first ~~six months~~quarter of fiscal ~~2018~~2022 was ~~$105.0~~$111.3 million, or ~~$0.85~~$1.10 per share on a diluted basis, as compared with ~~$172.1~~net loss of $18.9 million, or ~~$1.32~~$0.19 per share on a diluted basis, in the first ~~six months~~quarter of fiscal ~~2017.~~ 2021.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow

Cash Flow from Operating Activities

During the first ~~six months~~quarter of fiscal ~~2018,~~2022, the Company used ~~$59.2~~$31.0 million of cash flow from ~~its operating activities~~operations compared to a$122.4 million of cash ~~generation of $240.1 million~~generated by operations in the first ~~six months~~quarter of fiscal ~~2017.~~2021. 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),~~ (ii) cash flows used for, or generated from, working capital and other, excluding cash and cash ~~equivalents, and (iii) operating cash flows used for, or generated from, the TS business, which is classified as a discontinued operation.~~equivalents. Cash used for working capital and other was ~~$282.5~~$191.6 million during the first ~~six months~~quarter of fiscal ~~2018,~~2022, including increases in accounts receivable of $170.0 million and in inventories of $74.0 million both to support sales growth in the first quarter of fiscal 2022, and a decrease in accrued expenses and other of $32.9 million, offset by an increase in accounts payable of $85.2 million. Comparatively, cash generated from working capital and other was $47.7 million during the first quarter of fiscal 2021, including an increase in accounts payable of $228.7 million, offset by increases in inventories of ~~$410.4~~$136.4 million and accounts receivable of $7.1 million, and a decrease in accrued expenses and other of $56.0 million. The Company utilized cash to invest in inventory levels primarily as a result of a strong book to bill and lengthening purchasing lead times. The increase in cash used was partially offset by a decrease in accounts receivable of $108.5 million and an increase in accounts payable of $75.3 million. Comparatively, cash generated from working capital and other was $90.8 million during the first six months of fiscal 2017, including a decrease in inventories of $139.7 million and an increase in accounts payable of $133.7 million, partially offset by an increase in accounts receivable of $127.2 million and a decrease in accrued expenses and other of $55.4$37.5 million.

Cash used for operating activities of discontinued operations was $63.1 million in the first six months of fiscal 2017 as the sale of the TS business was completed in the third quarter of fiscal 2017.

Cash Flow from Financing Activities

During the first ~~six months~~quarter of fiscal ~~2018,~~2022, the Company received net proceeds of ~~$78.0~~$118.7 million under the ~~Company’s accounts receivable securitization program.~~Credit Facility, and $59.3 million under the Securitization Program. During the first ~~six months~~quarter of fiscal ~~2018, the Company repaid $27.4 million from borrowings of various bank credit facilities and $100.0 million under the Company’s Credit Facility. During the first six months of fiscal 2018,~~2022, the Company paid dividends on common stock of ~~$43.6~~$23.9 million and repurchased ~~$135.5~~$9.6 million of common stock.

During the first ~~six months~~quarter of fiscal ~~2017,~~2021, the Company received net proceeds of ~~$296.4~~$166.9 million ~~as a result of the issuance of $300.0 million of 3.75% Notes due December 2021. Additionally, the Company received net proceeds of $530.8 million and $771.2 million from borrowings~~ under the ~~Term Loan~~Securitization Program and ~~from~~made a net repayment of $234.2 million under the ~~Company’s~~ Credit ~~Facility, respectively.~~Facility. During the first ~~six months~~quarter of fiscal ~~2017,~~2021, the Company repaid $378.6 million of notes and acquired debt and made net repayments of $265.0 million under the Company’s accounts receivable securitization program. During the first six months of fiscal 2017, the Company repaid $19.0 million from borrowings of various bank credit facilities and paid dividends on common stock of ~~$43.4~~$20.8 million.

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Table of Contents

Cash Flow from Investing Activities

During the first ~~six months~~quarter of fiscal ~~2018,~~2022, the Company used ~~$67.4~~$12.0 million for capital expenditures ~~primarily related to information system development costs, computer hardware and software purchases and facilities costs~~ compared to ~~$70.4~~$20.0 million for capital expenditures in the first ~~six months~~quarter of fiscal ~~2017.~~2021. During the first ~~six months~~quarter of fiscal ~~2018,~~2021, the Company ~~used $14.7~~paid $18.7 million ~~of cash~~ for ~~acquisitions, which is net of the cash acquired compared to $798.4 million of cash for acquisitions, which is net of the cash acquired in the first six months of fiscal 2017.~~ an asset acquisition.

27

~~Table of Contents~~

During the first six months of fiscal 2018, the Company generated $112.7 million of cash from investing activities – discontinued operations, substantially all driven by the sale of marketable securities obtained through the sale of the TS business.

Contractual Obligations

For a detailed description of the Company’s long-term debt and lease commitments for the next five years and thereafter, see Long-Term Contractual Obligations appearing in Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended July ~~1, 2017. With the exception of the Company’s debt transactions discussed herein, there~~3, 2021. There are no material changes to this information outside of normal borrowings and repayments of long-term debt and operating lease payments. The Company does not currently have any material non-cancellable commitments for capital expenditures or inventory ~~purchases.~~purchases outside of the normal course of business.

Financing Transactions

See Note 5,4, “Debt” to the Company’s consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information on financing transactions including the Credit Facility, the Securitization Program, and other outstanding debt as of ~~December 30, 2017.~~October 2, 2021. The Company was in compliance with all covenants under the Credit Facility and the Securitization Program as of ~~December 30, 2017.~~October 2, 2021, and July 3, 2021.

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. ~~Avnet generally guarantees its subsidiaries’ obligations under such debt facilities.~~ Outstanding borrowings under such forms of debt at the end of ~~second~~first quarter of fiscal ~~2018~~2022 was ~~$0.9~~$116.7 million.

~~Liquidity~~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 first-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 trade accounts receivable are recorded within “Interest and other financing expenses, net” and were not material.

Liquidity

The Company held cash and cash equivalents of ~~$589.5~~$299.1 million as of ~~December 30, 2017,~~October 2, 2021, of which ~~$568.7~~$236.5 million was held outside the United States. As of July ~~1, 2017,~~3, 2021, the Company held cash and cash equivalents of ~~$836.4~~$199.7 million, of which ~~$619.5~~$150.5 million was held outside of the United States.

As of the end of the ~~second~~first quarter of fiscal ~~2018,~~2022, the Company had a combined total borrowing capacity of ~~$1.65~~$1.70 billion under the Credit Facility and the Securitization Program. There were no$115.9 million in borrowings outstanding and ~~$2.0~~$1.2 million in letters of credit issued under the Credit Facility, and ~~$220.0~~$82.2 million ~~in borrowings~~ outstanding under the Securitization Program, resulting in approximately ~~$1.37~~$1.48 billion of total availability as of ~~December 30, 2017.~~October 2, 2021. Availability under the Securitization Program is subject to the Company having sufficient eligible trade accounts receivable in the United States to support desired borrowings. The Company currently expects to utilize availability under credit facilities to support working capital and other general corporate purposes to the extent such incremental borrowings do not impact the Company’s investment grade credit rating.

During the ~~second~~first quarter ~~and first six months~~ of fiscal ~~2018,~~2022, the Company had an average daily balance outstanding of approximately ~~$0.1~~$353.0 million ~~and $5.3 million, respectively,~~ under the Credit Facility and approximately ~~$225.0~~$139.4 million ~~and $195.0 million, respectively,~~ under the Program. During the second quarter and first six months of fiscal 2017, the Company had an average daily balance outstanding of approximately $818.6 million and $635.2 million, respectively, under the Credit Facility and approximately $622.0 million and $671.0 million, respectively, under theSecuritization 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 used ~~$141.4~~$62.5 million in cash flows ~~from~~for operating activities over the trailing four fiscal quarters ended ~~December 30, 2017 for continuing operations.~~October 2, 2021.

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Liquidity is subject to many factors, such as normal business operations ~~as well as~~and general economic, financial, competitive, legislative, and regulatory factors that are beyond the Company’s control. To the extent the cash balances held in foreign locations cannot be remitted back to the U.S. in a tax efficient manner, those cash balances are generally used for ongoing working capital, capital ~~expenditure needs~~expenditures and ~~to support acquisitions, and are currently expected to be permanently reinvested outside the United States. The Company is still evaluating the impact of repatriating such~~other foreign ~~cash as a result of changes in U.S. tax law from the Act, which was signed into law on December 22, 2017.~~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 continually monitors and reviews its liquidity position and funding needs. Management believes that ~~Avnet’s available borrowing capacity, its current cash on hand including the remaining proceeds and marketable securities from the sale of the TS business and~~ the Company’s ~~expected~~ ability to generate operating cash flows in the future and available borrowing capacity, including capacity for the non-recourse sale of trade accounts receivable, 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.

The Company ~~expects~~has historically generated operating cash flows and believes it will have the ability to ~~make material income tax payments on its unremitted foreign earnings as a result~~do so in the future.

As of the impact of the Act. The Act requires the Company to pay a one-time transition tax on unremitted foreign earnings (the “transition tax”), which the Company expects to make a policy decision to pay over an eight year period. The Company is still gathering the necessary information to make reasonable estimates for the amount of the transition tax, but the Company expects the transition tax owed will be material due to the Company’s approximately $3.3 billion of unremitted foreign earnings as of July 1, 2017.

Historically the Company has made, and expects to continue to make, strategic investments through acquisition activity to the extent the investments strengthen Avnet’s competitive position, further its business strategies and meet management’s return on capital thresholds. The Company also expects to make capital expenditures, including expenditures over the next two fiscal years to implement a global ERP system. Additionally, as the Company integrates PF and restructures to transform Avnet into an electronic components focused business, the Company expects to use cash for restructuring, integration and other expenses.

~~In addition to continuing to make investments in acquisitions, as of December 30, 2017,~~October 2, 2021, the Company may repurchase up to an aggregate of ~~$459.6~~$458.5 million of shares of the Company’s common stock through a ~~$1.95~~$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 and actual number~~During the first quarter of ~~shares repurchased will depend on a variety of factors such as share price, corporate and regulatory requirements, and prevailing market conditions. Additionally,~~fiscal 2022, the Company ~~currently expects to pay~~repurchased $10.5 million of common stock.

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 ~~second~~first quarter of fiscal ~~2018,~~2022, the Board of Directors approved a dividend of ~~$0.18~~$0.24 per share, which resulted in ~~$21.6~~$23.9 million of dividend payments during the quarter.

Recently Issued Accounting Pronouncements

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

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

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

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

29

~~Table of Contents~~

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 July ~~1, 2017,~~3, 2021, 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 July ~~1, 2017,~~3, 2021, 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. The Company’s exposure to market price risk related to marketable securities is mitigated through the purchase of a derivative financial instrument that economically fixes the value of the marketable securities.

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 ~~December 30, 2017,~~October 2, 2021, approximately 86% of the Company’s debt bears interest at a fixed rate and 14% 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 ~~$0.6~~$0.5 million decrease in income ~~from continuing operations~~ before income taxes in the Company’s consolidated statement of operations for the ~~second~~first quarter of fiscal ~~2018.~~2022.

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Table of Contents

Item 4.

Controls and Procedures

~~Item 4.Controls and Procedures~~

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

During the ~~second~~first quarter of fiscal ~~2018,~~2022, there were no changes to the Company’s internal control over financial reporting (as defined in ~~Rule~~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.

30

~~Table of Contents~~

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

~~Item 1.Legal Proceedings~~

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

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

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~~single reporting period.

~~Item 1A.Risk Factors~~

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act with respect to the financial condition, results of operations and business of the Company. You can find many of these statements by looking for words like “believes,” “plans,” “expects,” “anticipates,” “should,” “will,” “may,” “estimates” or similar expressions in this Quarterly Report or in documents incorporated by reference in this Quarterly Report. These forward-looking statements are subject to numerous assumptions, risks and uncertainties. You should understand that the following important factors, in addition to those discussed elsewhere in this Quarterly Report and in the Company’s Annual Report on Form 10-K for the fiscal year ended July 1, 2017, could affect the Company’s future results of operations, and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements:

Item 1A.

·

~~the effect of global economic conditions, including the current global economic uncertainty;~~Risk Factors

·

~~competitive pressures among distributors of electronic components and computer products;~~

·

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

·

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

·

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

·

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

·

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

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~~Table of Contents~~

·

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

·

general economic and business conditions (domestic and foreign) affecting Avnet's financial performance and, indirectly, Avnet's credit ratings, debt covenant compliance, and liquidity and access to financing; and

·

~~legislative or regulatory changes affecting Avnet’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.

The discussion of ~~Avnet’s~~the Company’s business and operations should be read together with the risk factors contained in Item 1A of its Annual Report on Form 10-K for the fiscal year ended July ~~1, 2017,~~3, 2021, which describe various risks and uncertainties to which the Company is or may become subject. These risks and uncertainties have the potential to affect ~~Avnet’s~~the Company’s business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. As of ~~December 30, 2017,~~October 2, 2021, 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 July ~~1, 2017.~~3, 2021.

26

Table of Contents

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

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

~~The~~In August 2019, the Company’s Board of Directors ~~has approved~~amended the Company’s existing share repurchase program, increasing the cumulative total of upauthorized share repurchases to ~~$1.95~~$2.95 billion of the Company’s common ~~stock under the Company’s share repurchase program, which includes an increase of $200 million approved in November 2017.~~stock. The following table includes the Company’s monthly purchases of the Company’s common stock during the ~~second~~first quarter of fiscal ~~2018,~~2022, under the share repurchase program, which is part of a publicly announced plan.


				Total Number of	Approximate Dollar
	Total	Average		Shares Purchased	Value of Shares That
	Number	Price		as Part of Publicly	May Yet Be
	of Shares	Paid per		Announced Plans	Purchased under the
Period	Purchased	Share		or Programs	Plans or Programs
July 4 – July 31	—		—	—	$	468,992,000
August 1 – August 28	31,415	$	40.06	31,415	$	467,733,000
August 29 – October 2	243,449	$	37.97	243,449	$	458,489,000

Total Number of

Approximate Dollar

Total

Average

Shares Purchased

Value of Shares That

Number

Price

as Part of Publicly

May Yet Be

of Shares

Paid per

Announced Plans

Purchased under the

Period

Purchased

Share

or Programs

Plans or Programs

October

527,300

$
40.55

527,300

$
305,612,000

November

805,100

$
39.51

805,100

$
473,802,000

December

350,825

$
40.39

350,825

$
459,632,000

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Table of Contents

~~Item 6.Exhibits~~

Item 6.

Exhibits

Exhibit
Number	Exhibit
~~Number~~	~~Exhibit~~
10.1		~~Letter~~Amendment No. 4 to the Fourth Amended and Restated Receivables Purchase Agreement, ~~between~~dated August 16, 2021, among Avnet, Inc., Avnet Receivables Corporation, Wells Fargo Bank, N.A., as agent, and the ~~Company~~companies and ~~Thomas Liguori~~financial institutions party thereto (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K ~~dated December 28, 2017, Exhibit 10.2)~~filed on August 18, 2021).

~~10.2~~	~~Form of Change of Control Agreement between the Company and Thomas Liguori (incorporated herein by reference to the Company’s Current Report on Form 8-K dated February 14, 2011, Exhibit 10.3).~~

10.3*	Amendment No. 1 to the Third Amended and Restated Receivables Purchase Agreement, dated as of October 31, 2017, among Avnet, Inc., Avnet Receivables Corporation, the companies and financial institutions party thereto and JPMorgan Chase Bank, N.A., as agent.

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

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

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

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

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

101.SCH*	XBRL Taxonomy Extension Schema Document.

101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.

101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB*	XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.

*

Filed herewith.

**

Furnished herewith. The information in these exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to liability under that section, and shall not be incorporated by reference into any ~~registration statement or other document filed~~filing under the Securities Act ~~of 1933, as amended,~~or the Exchange Act, except ~~as expressly set forth~~to the extent that the registrant specifically incorporates it by ~~specific reference in such filing.~~reference.

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Table of Contents

~~SIGNATURE~~

SIGNATURE

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

Date: October 29, 2021

	AVNET, INC. ~~(Registrant)~~


	By:	/s/ ~~KEN JACOBSON~~THOMAS LIGUORI
		~~Ken Jacobson~~Thomas Liguori
		~~Interim~~ Chief Financial Officer

~~Date: January 26, 2018~~

3429


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

For the quarterly period ended October 2, 2021

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

For the transition period from _____ to _____


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)


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

Large ~~accelerated filer~~ Accelerated Filer ☑		Accelerated ~~filer~~ Filer ☐
Non-accelerated ~~filer ☐(Do not check if a smaller reportingcompany)~~Filer ☐		Smaller ~~reporting company~~ Reporting Company ☐
Emerging ~~growth company~~ Growth Company ☐

	Page No.
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Consolidated Balance Sheets at ~~December 30, 2017~~October 2, 2021 and July ~~1, 201~~3, 20217	2
	2

Consolidated Statements of Operations for the ~~second~~first quarters ended October 2, 2021 and ~~six months ended December 30, 2017 and December 31, 2016~~October 3, 2020	3
	3

Consolidated Statements of Comprehensive Income for the ~~second~~first quarters ended October 2, 2021 and ~~six months ended December 30, 2017 and December 31, 2016~~October 3, 2020	4
	4

Consolidated Statements of Shareholders’ Equity for the first quarters ended October 2, 2021 and October 3, 2020	5

Consolidated Statements of Cash Flows for the ~~six months~~first quarters ended ~~December 30, 2017~~October 2, 2021 and ~~December 31, 2016~~October 3, 2020	5
	6

Notes to Consolidated Financial Statements	6
	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	18

Item 3. Quantitative and Qualitative Disclosures About Market Risk	29
	25

Item 4. Controls and Procedures	30
	26

PART II. OTHER INFORMATION	31


Item 1. Legal Proceedings	31
	26

Item 1A. Risk Factors	31
	26

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	32
	27
~~Item 6. Exhibits~~	33

Item 6. Exhibits	28

Signature Page	34 29


	December 30,		July 1,
	2017		2017
	(Thousands, except share
	amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	589,518	$	836,384
Marketable securities		136,443		281,326
Receivables, less allowances of $50,559 and $47,272, respectively		3,295,014		3,337,624
Inventories		3,285,926		2,824,709
Prepaid and other current assets		269,204		253,765
Total current assets		7,576,105		7,533,808
Property, plant and equipment, net		507,692		519,575
Goodwill		1,181,013		1,148,347
Intangible assets, net		269,743		277,291
Other assets		265,952		220,568
Total assets	$	9,800,505	$	9,699,589
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	243,351	$	50,113
Accounts payable		1,958,145		1,861,635
Accrued expenses and other		554,140		542,023
Total current liabilities		2,755,636		2,453,771
Long-term debt		1,488,066		1,729,212
Other liabilities		308,259		334,538
Total liabilities		4,551,961		4,517,521
Commitments and contingencies (Note 7)
Shareholders’ equity:
Common stock $1.00 par; authorized 300,000,000 shares; issued 119,600,864 shares and 123,080,952 shares, respectively		119,601		123,081
Additional paid-in capital		1,520,858		1,503,490
Retained earnings		3,724,978		3,799,363
Accumulated other comprehensive loss		(116,893)		(243,866)
Total shareholders’ equity		5,248,544		5,182,068
Total liabilities and shareholders’ equity	$	9,800,505	$	9,699,589


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

	(Thousands)
Balance, July 3, 2021		99,601	$	99,601	$	1,622,160	$	2,516,170	$	(153,747)	$	4,084,184
Net income		—		—		—		111,318		—		111,318
Translation adjustments and other		—		—		—		—		(29,036)		(29,036)
Pension liability adjustments, net		—		—		—		—		4,012		4,012
Cash dividends		—		—		—		(23,893)		—		(23,893)
Repurchases of common stock		(275)		(275)		—		(10,228)		—		(10,503)
Stock-based compensation		10		10		9,507		—		—		9,517
Balance, October 2, 2021		99,336	$	99,336	$	1,631,667	$	2,593,367	$	(178,771)	$	4,145,599


Cash	$	46,354
Trade and other receivables, net		187,303
Inventories		328,037
Property, plant and equipment		52,621
Intangible assets		319,966
Total identifiable assets acquired	$	934,281

Accounts payable, accrued liabilities and other current liabilities	$	160,572
Short-term debt		242,814
Other long-term liabilities		150,109
Total identifiable liabilities acquired	$	553,495
Net identifiable assets acquired		380,786
Goodwill		460,534
Net assets acquired	$	841,320


	Second Quarter Ended		Six Months Ended
	December 31, 2016
	(Thousands)
Sales	$	2,453,262	$	4,375,464
Cost of sales		2,199,235		3,928,164
Gross profit		254,027		447,300
Selling, general and administrative expenses		158,356		324,381
Restructuring, integration and other expenses		3,316		7,540
Operating income		92,355		115,379
Interest and other expense, net		(10,635)		(10,630)
Income from discontinued operations before income taxes		81,720		104,749
Income tax expense		10,967		32,841
Income from discontinued operations, net of taxes	$	70,753	$	71,908


	Electronic		Premier
	Components		Farnell		Total
	(Thousands)
Carrying value at July 1, 2017 (1)		635,048		513,299		1,148,347
Additions from acquisitions		21,539		—		21,539
Foreign currency translation		6,263		17,662		23,925
Measurement period adjustments		2,530		(15,328)		(12,798)
Carrying value at December 30, 2017 (1)	$	665,380	$	515,633	$	1,181,013


	December 30, 2017						July 1, 2017
	Acquired		Accumulated		Net Book		Acquired		Accumulated		Net Book
	Amount		Amortization		Value		Amount		Amortization		Value
	(Thousands)
Customer related	$	308,024	$	(118,563)	$	189,461	$	277,865	$	(79,578)	$	198,287
Trade name		55,973		(12,500)		43,473		46,915		(6,720)		40,195
Technology and other		54,354		(17,545)		36,809		50,369		(11,560)		38,809
	$	418,351	$	(148,608)	$	269,743	$	375,149	$	(97,858)	$	277,291


Fiscal Year
Remainder of fiscal 2018		43,635
2019		85,765
2020		83,488
2021		40,226
2022		12,685
2023		3,703
Thereafter		241
Total	$	269,743


			Facility			Asset
	Severance		Exit Costs		Impairments		Other		Total
	(Thousands)
Fiscal 2018 restructuring expenses	$	32,976		157		936		120	$	34,189
Cash payments		(19,253)		(26)		—		(73)		(19,352)
Non-cash amounts		—		—		(936)		—		(936)
Other, principally foreign currency translation		25		4		—		—		29
Balance at December 30, 2017	$	13,748	$	135	$	—	$	47	$	13,930


	Second Quarter Ended						Six Months Ended
	As						As
	Reported				Organic Sales		Reported				Organic Sales
	Fiscal 2017		Acquisitions (1)		Fiscal 2017		Fiscal 2017		Acquisitions (1)		Fiscal 2017
	(Thousands)
Avnet	$	4,273,559	$	49,639	$	4,323,198	$	8,391,663	$	378,352	$	8,770,015
Avnet by region
Americas	$	1,252,606	$	18,282	$	1,270,888	$	2,503,114	$	154,426	$	2,657,540
EMEA		1,380,694		26,558		1,407,252		2,645,988		178,879		2,824,867
Asia		1,640,259		4,799		1,645,058		3,242,561		45,047		3,287,608
Avnet by segment
EC	$	4,004,342	$	—	$	4,004,342	$	8,122,446	$	—	$	8,122,446
PF		269,217		49,639		318,856		269,217		378,352		647,569


				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
October	527,300	$	40.55	527,300	$	305,612,000
November	805,100	$	39.51	805,100	$	473,802,000
December	350,825	$	40.39	350,825	$	459,632,000