TABLE OF CONTENTS

PART I

Item 1. Business

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

For nearly a century, Avnet has helped its consolidated subsidiaries (the “Company” or “Avnet”customers and suppliers realize the transformative possibilities of technology while continuously expanding the breadth and depth of its capabilities. Today, as technologies like the Internet of Things (“IoT”), continue to increase the complexity in product development, Avnet is a global value-added distributor of electronic components.once again redefining itself by offering what customers need to bring their product to life through one partner. Over the past few years, Avnet creates a vital linksignificantly enhanced its expertise in design, supply chain and logistics by acquiring the capabilities to better serve customers in the technologyearlier stages of product development—encompassing research, prototyping and manufacturing—as well as acquiring expertise in software development, a critical component of an end-to-end IoT solution. These capabilities were acquired through the purchase of Premier Farnell (“Farnell”) (fiscal 2017), Hackster.io (fiscal 2017), Dragon Innovation (fiscal 2018) and Softweb Solutions (fiscal 2019). Avnet’s ecosystem, which combines these newly acquired capabilities with Avnet’s historical design, supply chain that connectsand integrated solutions capabilities, is designed to match its customers’ needs along their entire product development journey, providing both end-to-end and à la carte support options, as well as digital tools, to meet varying needs and buying preferences.

Avnet can support every stage of the world’s leading electronic component manufacturers withproduct lifecycle and serves a global customer base primarily comprisedwide range of customers: from startups and mid-sized businesses to enterprise-level original equipment manufacturers (“OEMs”), electronic manufacturing services (“EMS”) providers and original design manufacturers (“ODMs”). Avnet distributes electronic components, as received from its suppliers or through a customized integrated solution, and offers assembly and other value-added services.

Avnet supportsworks with customers of all types and sizes at each stageevery size, in every corner of the product lifecycle with a comprehensive portfolio of design and supply chain services. With deep expertise in design and engineering, broad line distribution, integration and services, Avnet is uniquely positionedworld, to meet critical time-to-market needs for customers globally.guide today’s ideas into tomorrow’s technology.

Organizational Structure

At the end of fiscal 2017, Avnet hadhas 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;Americas, Europe, the(ii) Middle East and Africa (“EMEA”); and (iii) Asia/Pacific consisting of Asia, Australia and New Zealand (“Asia”). Each operating group has its own management team that includes senior executives and leadership both at the global and regional levels, who manage various functions within such businesses. Each operating group also has distinct financial reporting that is evaluated at the executive level on which operating decisions and strategic planning and resource allocation for the Company as a whole are made. Divisions (“business units”) exist within each operating group that serve primarily as sales and marketing units to further streamline the sales efforts within each operating group and enhance each operating group’s ability to work with its customers and suppliers, generally along more specific geographies or product lines or geographies.lines. However, each business unit relies heavily on the support services provided by the operating groups as well as centralized support at the corporate level.

A description of each operating group is presented below. Further financial information by operating group is provided in Note 17 “Segment information” to the consolidated financial statements appearing in Item 15 of this Annual Report on Form 10-K.

Avnet’s foreign operations are subject to a variety of risks. These risks are discussed further under Risk Factors in Item 1A and under Quantitative and Qualitative Disclosures About Market Risk in Item 7A of this Report. Additionally, the specific translation impacts of foreign currency fluctuations, most notably the Euro and the British Pound, on the Company’s consolidated financial statements are further discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Report.

Electronic Components

Avnet’s EC operating group primarily supports high-volume customers. It markets, sells and sells semiconductors,distributes electronic components including semiconductors, interconnect, passive and electromechanical, (“IP&E”) devices,or “IP&E,” components and other integrated components from the world’s leading electronic component manufacturers. With

EC serves a global reach that extendsvariety of markets ranging from automotive to more than 100 countries, EC’s products and services catermedical to a diverse customer base serving many end-markets including automotive, communications, computer hardware and peripherals, industrial and manufacturing, medical equipment, and defense and aerospace. EC alsoIt offers an array of customer support that helps customers evaluate, design-in, and procure electronic componentsoptions throughout the entire product lifecycle, of their technology productsincluding both turnkey and systems.

AcquisitionsFarnell

Avnet has historically pursued business acquisitions to further its strategic objectives and support key business initiatives, completing 100 acquisitions since 1991. This acquisition program was a significant factor in Avnet becoming one of the largest value-added distributors ofAvnet’s Farnell operating group supports primarily lower-volume customers that need electronic components including integrated productsquickly to develop, prototype and solutions. In fiscal 2017, this trend continued with the acquisitionstest their products. It distributes a comprehensive portfolio of Premier Farnell, a global distributor ofkits, tools, electronic components that utilizes a digital platformand industrial automation components, as well as test and measurement products to provide innovatorsboth engineers and engineers withentrepreneurs. Farnell brings the latest products, services and development software, and Hackster.io,trends all together in element14, an industry-leading online community that helps users learn howwhere engineers collaborate to solve one another’s design create and program internet-connected hardware. Avnet expects to continue to pursue strategic acquisitions to expand its market presence, increase its scale and scope, and extend its product and service offerings throughout all stages of the technology product lifecycle.

See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II of this Annual Report on Form 10-K for additionalchallenges. In element14, members get consolidated information on acquisitions completed during fiscal 2017.

Discontinued Operations

During fiscal 2017,new technologies as well as access to experts and product specifications. Members can see what other engineers are working on, learn from online training and get the Company sold the Technology Solutions operating group (the “TS Business”) or “TS”, which was historically a reportable operating segment. With the sale of the TS Business, the Company is focused on providing design and supply chain solutions specifichelp they need to the electronic components industry.

See Note 3 to the Company’s consolidated financial statements included in Item 15 of this Annual Report on Form 10-K for further discussion on the sale of the TS Business.optimize their own designs.

Major Products

One of Avnet’s competitive strengths is the breadth and quality of the suppliers whose products it distributes. Texas Instruments products accounted for approximately 10% of the Company’s sales during fiscal 2019, and 11% of the Company’s consolidated sales from continuing operations during fiscal 2017, 20162018 and 2015,2017, and was the only supplier from which sales of its products software and services exceeded 10% of consolidated sales. Listed in the table below are the major product categories and the Company’s approximate sales of each during the past three fiscal years. Fiscal 2016 contained 53 weeks comparedCertain prior year amounts have been reclassified between major product categories to 52 weeks inconform to the other fiscal years presented.2019 classification. Other consists primarily of test and measurement as well as maintenance, repair and operations (MRO) products.

A competitive advantage is the breadth of the Company’s supplier product line card. Because of the number of Avnet’s suppliers, many customers can simplify their procurement process and make all of their required purchases from Avnet, rather than purchasing from several different distributors or other vendors.parties.

Seasonality

Historically, Avnet’s business and continuing operations has not been materially impacted by seasonality, with the exception of a relatively minoran impact on consolidated results from shifts in regional sales trends from Asia in the first half of a fiscal year to the western regions of the Americas and EMEA regions in the second half of a fiscal year. 

Number of Employees

At July 1, 2017,June 29, 2019, Avnet had approximately 15,70015,500 employees compared to 17,70015,400 employees at June 30, 2018, and 15,700 employees at July 2, 2016, and 18,800 at June 27, 2015.1, 2017.

Available Information

The Company files its annual report on Form 10-K, quarterly reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and other documents, including registration statements, with the U.S. Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934. A copy1934 or the Securities Act of any document the Company files with the SEC is available for review at the SEC’s public reference room, 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the public reference room by calling the SEC at 1-800-SEC-0330.1933, as applicable. The Company’s SEC filings are also available to the public on the SEC’s website at http://www.sec.gov and through the New York Stock ExchangeThe Nasdaq Global Select Market (“NYSE”Nasdaq”), 20 Broad Street,165 Broadway, New York, New York 10005,10006, on which the Company’s common stock is listed.

A copy of any of the Company’s filings with the SEC, or any of the agreements or other documents that constitute exhibits to those filings, can be obtained by request directed to the Company at the following address and telephone number:

Avnet, Inc.

2211 South 47th Street

Phoenix, Arizona 85034

(480) 643-2000

Attention: Corporate Secretary

The Company also makes these filings available, free of charge, through its website (see “Avnet Website” below).

In addition, the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports, if any, filed or furnished pursuant to Section 13(a) or 15(d) of Securities Exchange Act of 1934,filings with the SEC, as well as Section 16 filings made by any of the Company’s executive officers or directors with respect to Avnetthe Company’s common stock, are available on the Company’s website (http://www.avnet.com under the “Company — Investor Relations — SEC Filings” caption) as soon as reasonably practicable after the reportfiling is electronically filed with, or furnished to, the Securities and Exchange Commission.SEC.

These details about Avnet’sthe Company’s website and its content are only for information. The contents of the Company’s website are not, nor shall they be deemed to be, incorporated by reference in this Report.

Item 1A. Risk Factors

Forward-Looking Statements and Risk Factors

This Report contains forward-looking statements with respect to the financial condition, results of operations and business of Avnet. These statements are generally identified by words like “believes,” “plans,” “expects,” “anticipates,” “should,” “will,” “may,” “estimates” or similar expressions. Forward-looking statements are subject to numerous assumptions, risks and uncertainties. Except as required by law, Avnet does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Factors that may cause actual results to differ materially from those contained in the forward-looking statements include those discussed below.

The factors discussed below make the Company’s operating results for future periods difficult to predict and, therefore, prior results are not necessarily indicative of results to be expected in future periods. Any of the below factors, or any other factors discussed elsewhere in this Report, may have an adverse effect on the Company’s financial results, operations, prospects and liquidity. The Company’s operating results have fluctuated in the past and likely will continue to do so. If the Company’s operating results fall below its forecasts and the expectations of public market analysts and investors, the trading price of the Company’s common stock will likely decrease.

Economic weakness and geopolitical uncertainty could adversely affect the Company’s results and prospects.

The Company’s financial results, operations and prospects depend significantly on worldwide economic and geopolitical conditions, the demand for its products and services, and the financial condition of its customers and suppliers. Economic weakness and geopolitical uncertainty, including the uncertainty caused by the United Kingdom’s planned exit from the European Union commonly referred to as “Brexit,” have in the past resulted, and may result in the future, in decreased sales, margins and earnings. Economic weakness and geopolitical uncertainty may also lead the Company to impair assets, including goodwill, intangible assets and other long-lived assets, take restructuring actions and reduce

consumption models. Not only does the Company compete with other global distributors, it also competes for customers with regional distributors and some of the Company’s own suppliers that maintain direct sales efforts. In addition, as the Company expands its offerings and geographies, the Company may encounter increased competition from current or new competitors. The Company’s failure to maintain and enhance its competitive position could adversely affect its business and prospects. Furthermore, the Company’s efforts to compete in the marketplace could cause deterioration of gross profit margins and, thus, overall profitability.

The size of the Company’s competitors vary across market sectors, as do the resources the Company has allocated to the sectors and geographic areas in which it does business. Therefore, some competitors may have greater resources or a more extensive customer or supplier base than the Company has in one or more of its market sectors and geographic areas, which may result in the Company not being able to effectively compete in certain markets which could impact the Company’s profitability and prospects.

Changes in customer needs and consumption models could significantly affect the Company’s operating results.

Changes in customer needs and consumption models may cause a decline in the Company’s billings, which would have a negative impact on the Company’s financial results. While the Company attempts to identify changes in market conditions as soon as possible, the dynamics of these industries make prediction of, and timely reaction to such changes difficult. Future downturns in the semiconductor and embedded solutions industries could adversely affect the Company’s operating results and negatively impact the Company’s ability to maintain its current profitability levels. In addition, the semiconductor industry has historically experienced periodic fluctuations in product supply and demand, often associated with changes in economic conditions, technology and manufacturing capacity. During fiscal years 2017, 2016,2019, 2018, and 2015,2017, sales of semiconductors represented approximately 78%77%, 83%78%, and 84%78% of the Company's consolidated sales, respectively, and the Company’s sales closely follow the strength or weakness of the semiconductor industry.

Due to the Company’s increased online sales, system interruptions and delays that make its websites and services unavailable or slow to respond may reduce the attractiveness of its products and services to its customers. If the Company is unable to continually improve the efficiency of its systems, it could cause systems interruptions or delays and adversely affect the Company’s operating results.

Failure to maintain or adddevelop new relationships with key suppliers could adversely affect the Company’s sales.

One of the Company’s competitive strengths is the breadth and quality of the suppliers whose products the Company distributes. However, billings of products and services from one of the Company’s suppliers, Texas Instruments (“TI”), accounted for approximately 11%10% of the Company’s consolidated billings in fiscal 2017.2019. Management expects TI’s products and services to continue to account for roughly a similar percentage of the Company’s consolidated billings in fiscal 2018.2020. The Company’s contracts with its suppliers vary in duration and are generally terminable by either party at will upon notice. To the extent any primary suppliers terminate or significantly

The Company’s non-U.S. locations represent a significant portion of its sales and, consequently, the Company is exposed to risks associated with operating internationally that could adversely affect the Company’s operating results.

During fiscal 2019, 2018, and 2017 2016approximately 75%, 76% and 2015 approximately 72%, 73% and 73%, respectively, of the Company’s sales came from its operations outside the United States. As a result of the Company’s international operations, in particular those in emerging and developing economies, the Company’s operations are subject to a variety of risks that are specific to international operations, including, but not limited to, the following:

In addition to the cost of compliance, the potential criminal penalties for violations of import or export regulations and anti-corruption laws by the Company or its third-party agents create heightened risks for the Company’s international operations. In the event that a governing regulatory body determines that the Company has violated applicable import or export regulations or anti-corruption laws, the Company could be fined significant sums, incur sizable legal defense costs and/or its import or export capabilities could be restricted, which could have a material and adverse effect on the Company’s business. Additionally, allegations that the Company has violated a governmental regulation may negatively impact the Company’s reputation, which may result in customers or suppliers being unwilling to do business with the

its net exposure to foreign currency exchange rate fluctuations, there can be no assurance that fluctuations in foreign currency exchange rates will not materially affect the Company’s financial results. Further, foreign currency instability and disruptions in the credit and capital markets may increase credit risks for some of the Company’s customers and may impair its customers’ ability to repay existing obligations.

Recently, the U.S. government imposed new or higher tariffs on certain products imported into the U.S., and the Chinese government imposed new or higher tariffs on certain products imported into China, which have increased the costs of procuring certain products the Company purchases from its suppliers. The higher tariffs, along with any additional tariffs or trade restrictions that may be implemented by the U.S. or by other countries on U.S. goods in the future, may  result in further increased costs and other related expenses. While the Company intends to reflect such increased costs in its selling prices, such price increases may impact the Company’s sales and customer demand for certain products. In addition, increased operational expenses incurred in minimizing the number of products subject to the tariffs could adversely affect the operating profits for certain of its business units. Neither such U.S. tariffs nor any retaliatory tariffs imposed by other countries on U.S. goods have yet had a significant impact, but there can be no assurance that future actions or escalations that affect trade relations will not occur or will not materially affect the Company’s sales and results of operations. To the extent that Company sales or profitability are negatively affected by any such tariffs or other trade actions, the Company’s business and results of operations may be materially adversely affected.

If the Company’s internal information systems fail to function properly, or if the Company is unsuccessful in the implementation, integration or upgrade of information systems, its business operations could suffer.

The Company is dependent on its information systems to facilitate the day-to-day operations of the business and to produce timely, accurate and reliable information on financial and operational results. Currently, the Company’s global operations are tracked with multiple information systems, some of which are subject to ongoing IT projects designed to streamline or optimize the Company’s global information systems. The Company is in the process of implementing a new global enterprise resource planning (“ERP”) platform to meet the current, emerging and future needs of Avnet. This global ERP implementation isThese IT projects are extremely complex, in part, because of a wide range of processes, the multiple legacy systems used and the Company’s business operations. There is no guarantee that the Company will be successful at all times in implementing this ERP and other information systemsthese efforts or that there will not be implementation or integration difficulties that will adversely affect the Company’s ability to complete business transactions and ensure accurate recording and reporting of financial data. In addition, the Company may be unable to achieve the expected efficiencies and cost savings as a result of the ERP implementationIT projects, thus negatively impacting the Company’s financial results. A failure of any of these information systems in a way described above or material difficulties in upgrading these information systems could have an adverse effect on the Company’s business, internal controls and reporting obligations under federal securities laws.

The Company’s acquisition strategy may not produce the expected benefits, which may adversely affect the Company’s results of operations.

Avnet has made, and expects to continue to make, strategic acquisitions or investments in companies around the world to further its strategic objectives and support key business initiatives. Acquisitions and investments involve risks and uncertainties, some of which may differ from those associated with Avnet’s historical operations. The risks relating to such acquisitions and investments include, but are not limited to, risks relating to expanding into emerging markets and business areas, adding additional product lines and services, impacting existing customer and supplier relationships, incurring costs or liabilities associated with the companies acquired, incurring potential impairment charges on acquired goodwill and other intangible assets and diverting management’s attention from existing business operations. As a result, the Company’s profitability may be negatively impacted. In addition, the Company may not be successful in integrating the acquired businesses or the integration may be more difficult, costly or time-consuming than anticipated. Further, any litigation relating to a potential acquisition will result in an increase in the expenses associated with the acquisition or cause a delay in completing the acquisition, thereby impacting the Company’s profitability. The Company may experience disruptions that could, depending on the size of the acquisition, have an adverse effect on its business, especially where an

acquisition target may have pre-existing compliance issues or pre-existing deficiencies or material weaknesses in internal controls over financial reporting. Furthermore, the Company

enhanced products, changes in customer needs and changes in industry standards and regulatory requirements, which can contribute to a decline in value or obsolescence of inventory. Regardless of the general economic environment, it is possible that prices will decline due to a decrease in demand or an oversupply of products and, as a result of the price declines, there may be greater risk of declines in inventory value. Although it is the policy of many of the Company’s

In order to be successful, the Company must attract, retain, train, motivate and develop key employees, and failure to do so could adversely impact the Company’s results and strategic initiatives.

Identifying, developing internally or hiring externally, training and retaining qualified employees are critical to the Company’s future, and competition for experienced employees in the Company’s industry can be intense. Changing demographics and labor work force trends may result in a loss of knowledge and skills as experienced workers leave the Company. In addition, as global opportunities and industry demand shifts, and as the Company expands its offerings, realignment, training and hiring of skilled personnel may not be sufficiently rapid. From time to time the Company has effected restructurings, which eliminate a number of positions. Even if such personnel are not directly affected by the restructuring effort, such terminations can have a negative impact on morale and the Company’s ability to attract and hire new qualified personnel in the future. If the Company loses existing qualified personnel or is unable to hire new qualified personnel, as needed, the Company’s business, financial condition and results of operations could be seriously harmed.

The agreements governing some of the Company’s financings contain various covenants and restrictions that limit management’s discretion in operating the business and could prevent management from engaging in some activities that may be beneficial to the Company’s business.

The agreements governing the Company’s financing, including its credit facility, accounts receivable securitization program and the indentures governing the Company’s outstanding notes, contain various covenants and restrictions that, in certain circumstances, limit the Company’s ability, and the ability of certain subsidiaries, to:

As a result of these covenants and restrictions, the Company may be limited in the future in how it conducts its business and may be unable to raise additional debt, repurchase common stock, pay a dividend, compete effectively or make further investments.

The Company may become involved in intellectual property disputeslegal proceedings that could cause it to incur substantial costs, divert management’s efforts or require it to pay substantial damages or licensing fees.

From time to time, the Company receives notifications alleging infringementsmay become involved in legal proceedings, including government investigations, that arise out of the ordinary conduct of the Company’s business, including matters involving intellectual property rights, allegedly held by others relating to the Company’s business or the products or services it sells. Litigation with respect to patents or other intellectual propertycommercial matters, could result in substantial costs and diversion of management’s effortsmerger-related matters, product liability and other resources and could have an adverse effect on the Company’s operations. Further, theactions. The Company may be obligated to indemnify and defend its customers if the products or services the Company sells are alleged to infringe any third party’s intellectual property rights. While the Company may be able to seek indemnification from its suppliers for itself and its customers against such claims, there is no assurance that it will be successful in realizing such indemnification or that the Company will be fully protected against such claims. In addition,However, the Company is exposed to potential liability for technology and products that it develops for which it has no indemnification protections. If an infringement claim against the

services, which could affect its ability to compete effectively. In addition, the Company’s expanding business activities may include the assembly or manufacture of electronic component products and systems. Product defects, whether caused by a design, assembly, manufacture or component failure or error, or manufacturing processes not in compliance with applicable statutory and regulatory requirements may result in product liability claims, product recalls, fines and penalties. Product liability risks could be particularly significant with respect to aerospace, automotive and medical applications because of the risk of serious harm to users of such products. Legal proceedings could result in substantial costs and diversion of management’s efforts and other resources and could have an adverse effect on the Company’s operations and business reputation.

Changes in tax rules and regulations, changes in interpretation of tax rules and regulations, changes in business performance or unfavorable assessments from tax audits could adversely affect the Company’s effective tax rates, deferred taxes, financial condition and results of operations.

As a multinational corporation, the Company is subject to the tax laws and regulations of the United States and many foreign jurisdictions. From time to time, regulations may be enacted that could adversely affect the Company’s tax positions. There can be no assurance that the Company’s cash flow, and in some cases the effective tax rate, will not be adversely affected by these potential changes in regulations or by changes in the interpretation of existing tax law and regulations.

On December 22, 2017, the U.S. federal government enacted tax legislation (the “Tax Cuts and Jobs Act” or the “Act”) which includes provisions to lower the corporate income tax rate, impose new taxes on certain foreign earnings, limit deductibility of certain U.S. costs and levy a one-time deemed repatriation tax on accumulated offshore earnings, among others. The Act is subject to interpretation and implementation guidance by both federal and state tax authorities, as well as amendments and technical corrections. Any or all of these could impact the Company unfavorably. 

Many countries are adopting provisions to align their international tax rules with the Base Erosion and Profit Shifting Project, led by the Organisation for Economic Co-operation and Development, to standardize and modernize global corporate tax policy. These provisions, individually or as a whole, may negatively impact taxation of international business.

The tax laws and regulations of the various countries where the Company has operations are extremely complex and subject to varying interpretations. Although the Company believes that its historical tax positions are sound and consistent with applicable laws, regulations and existing precedent, there can be no assurance that these tax positions will not be challenged by relevant tax authorities or that the Company would be successful in defending against any such challenge.

The Company’s future income tax expense could also be favorably or adversely affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities and changes to its operating structure.

If the Company fails to maintain effective internal controls, it may not be able to report its financial results accurately or timely, or prevent or detect fraud, which could have an adverse effect on the Company’s business or the market price of the Company’s securities.

Effective internal controls over financial reporting are necessary for the Company to provide reliable financial reports and to effectively prevent or detect fraud. If the Company cannot provide reliable financial reports and effectively prevent or detect fraud, its brand and operating results could be harmed. Internal controls over financial reporting may not prevent or detect misstatements because such controls are inherently limited; such limitations include the possibility of human error, the circumvention or overriding of controls, or fraud. Therefore, even effective internal controls cannot provide absolute assurance with respect to the preparation and fair presentation of financial statements. In addition, if not properly maintained and updated, internal controls over financial reporting may become inadequate. If the Company fails

to maintain the adequacy of its internal controls, including any failure to implement required new or improved internal controls, or if the Company experiences difficulties in their implementation, the Company’s business and operating results could be harmed. Additionally, the Company may be subject to sanctions or investigations by regulatory authorities, and the Company could fail to meet its reporting obligations, all of which could have an adverse effect on its business or the market price of the Company’s securities.

Failure to comply with the requirements of environmental regulations could adversely affect the Company’s business.

The Company is subject to various federal, state, local and foreign laws and regulations addressing environmental and other impacts from product disposal, use of hazardous materials in products, recycling of products at the end of their useful life and other related matters. While the Company strives to ensure it is in full compliance with all applicable regulations, certain of these regulations impose liability without fault. Additionally, the Company may be held responsible for the prior activities of an entity it acquired. Failure to comply with these regulations could result in substantial costs, fines and civil or criminal sanctions, as well as third-party claims for property damage or personal injury. Further, environmental laws may become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with violations.

Item 3. 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 (“CERCLA”) 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.

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

Item 4. Mine Safety Disclosures

Not applicable.

Stock Performance Graphs and Cumulative Total Returns

The graph below comparesmatches the cumulative 5-year total return of holders of Avnet, Inc.’sAvnet’s common stock with the cumulative total returns of the S&P 500Nasdaq Composite index and certain of Avnet’s peer companies (“peer group”). The graph tracks the performance of a hypothetical $100 investment in Avnet’s common stock, in thecustomized peer group and the S&P 500 index (with the reinvestment of all dividends) from June 30, 2012 to July 1, 2017. Theseven companies comprising the peer group are:that includes: Agilysys Inc., Anixter International Inc., Arrow Electronics Inc., Inc., Insight Enterprises Inc., Scansource Inc., Synnex Corp.Corp and Tech Data Corp. Ingram Micro, Inc. was acquiredThe graph assumes that the value of the investment in fiscal 2017Avnet’s common stock, in each index, and terminated its registration with the SEC and, therefore, is no longer included in the graph below.peer group (including reinvestment of dividends) was $100 on 6/28/2014 and tracks it through 6/29/2019.

Issuer Purchases of Equity Securities

In February 2017,August 2018, the Company’s Board of Directors amended the Company’s existing share repurchase program to authorize the repurchase of up to $1.75$2.45 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, corporate and regulatory requirements, and prevailing market conditions. The following table includes the Company’s monthly purchases of Avnet’s common stock during the fourth fiscal quarter ended July 1, 2017,June 29, 2019, under the share repurchase program, which is part of a publicly announced plan:

Item 6. Selected Financial Data

The following selected financial data has been derived from the Company’s consolidated financial statements. The data set forth below should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

For an understanding of Avnet and the significant factors that influenced the Company’s performance during the past three fiscal years, the following discussion should be read in conjunction with the description of the business appearing in Item 1 of this Report and the consolidated financial statements, including the related notes and schedule, and other information appearing in Item 15 of this Report. The Company operates on a “52/53 week” fiscal year. Fiscal years 2019, 2018 and 2017 and 2015 both containedall contain 52 weeks, and fiscal 2016 contained 53 weeks. The extra week impacts the year-over-year analysis of fiscal 2016 compared to fiscal 2017 and fiscal 2015 in this MD&A.

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

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

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

Results of Operations

Executive Summary

Sales for fiscal 20172019 were $17.44$19.52 billion, an increase of 4.2%2.5% from fiscal 20162018 sales of $16.74$19.04 billion. Sales in constant currency increased by 4.4% year over year. EC sales in fiscal 2019 of $18.06 billion primarily due toincreased $516.9 million or 2.9% over the acquisition of Premier Farnell (“PF”). Organicprior year and sales in constant currency increased 1.0%4.8% year over year. Electronic Components (“EC”)This increase in sales was primarily related to growth in the Americas, EMEA and Asia regions of 3.1%, 4.7% and 5.7%, respectively. Farnell sales of $16.47$1.46 billion decreased 1.6%2.3% and EC organic sales in constant currency increased approximately 1.0%remained flat year over year.

Gross profit margin of 13.6% increased 11712.7% decreased 54 basis points from fiscal 20162018. The year-over-year decline was primarily due to industry specific and macroeconomic conditions as both operating groups experienced gross margin declines in the EMEA and Asia regions, partially offset by increases in the Americas.

Operating income was $365.9 million in fiscal 2019, representing a result74.9% increase compared with fiscal 2018 operating income of gross profit margin improvements from the acquisition of PF. 

$209.2 million. Operating income margin was 2.6%1.9% in fiscal 2017 and 3.4%2019 as compared with 1.1% in fiscal 2016. Excluding2018. Both years included goodwill impairment expense, amortization of acquired intangibles, and restructuring, integration and other expenses and amortization expense associated with acquired intangible assetsexpenses. Excluding these amounts from both periods,years, adjusted operating income was $695.7 million, or 3.6% of sales, in fiscal 2019 representing a $68.0 million and 27 basis point increase as compared with $627.7 million, or 3.3% of sales, in fiscal 2018. The improvement in operating income margin was 3.7% in bothprimarily the result of effective cost management, including the impact of cost reduction actions taken during fiscal 2017 and2018 for which the full benefit was realized during fiscal 2016. EC operating income margin of 4.0% decreased 34 basis points year over year primarily due to declines in the Americas region.

2019.

Sales

Items Impacting Year-over-Year Sales Comparisons

During fiscal 2017, the Company acquired PF. There were no acquisitions in fiscal 2016Three-Year Analysis of Sales: By Operating Group and fiscal 2015. To facilitate more meaningful year-over-year comparisons, the discussions that follow include organic sales as well as sales on a reported basis. Unless otherwise noted, amounts relate to Avnet’s continuing operations for all periods presented.Geography

The table below compares Avnetprovides a year-over-year summary of sales by geographic region for fiscal 2017, fiscal 2016the Company and fiscal 2015.

its operating groups.