UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~April 3,~~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 _____

Commission File #1-4224

AVNET, INC.

(Exact name of registrant as specified in its charter)


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


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

(480) 643-2000

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

N/A

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

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


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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes þ No ◻

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

Large Accelerated Filer ☑		Accelerated Filer ☐
Non-accelerated Filer ☐		Smaller Reporting Company ☐
Emerging Growth Company ☐

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

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

As of ~~April~~October 21, 2021, the total number of shares outstanding of the registrant’s Common Stock was ~~99,502,049~~99,222,109 shares, net of treasury shares.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

INDEX

	Page No.
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Consolidated Balance Sheets at ~~April~~October 2, 2021 and July 3, 2021 ~~and June 27, 2020~~	2

Consolidated Statements of Operations for the ~~third~~first quarters ~~and nine months~~ ended ~~April 3,~~October 2, 2021 and ~~March 28,~~October 3, 2020	3

Consolidated Statements of Comprehensive Income for the ~~third~~first quarters ~~and nine months~~ ended ~~April 3,~~October 2, 2021 and ~~March 28,~~October 3, 2020	4

Consolidated Statements of Shareholders’ Equity for the ~~third~~first quarters ~~and nine months~~ ended ~~April 3,~~October 2, 2021 and ~~March 28,~~October 3, 2020	5

Consolidated Statements of Cash Flows for the ~~nine months~~first quarters ended ~~April 3,~~October 2, 2021 and ~~March 28,~~October 3, 2020	6

Notes to Consolidated Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2018

Item 3. Quantitative and Qualitative Disclosures About Market Risk	2925

Item 4. Controls and Procedures	2926

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	3026

Item 1A. Risk Factors	3026

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3027

Item 6. Exhibits	3128

Signature Page	3229

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

April 3,

June 27,

2021

2020

(Thousands, except share

amounts)

ASSETS

Current assets:

Cash and cash equivalents

$
322,749

$
477,038

Receivables

3,365,677

2,928,386

Inventories

2,760,156

2,731,988

Prepaid and other current assets

156,023

191,394

Total current assets

6,604,605

6,328,806

Property, plant and equipment, net

381,083

404,607

Goodwill

838,460

773,734

Intangible assets, net

33,770

65,437

Operating lease assets

275,662

275,917

Other assets

��
232,335

256,696

Total assets

$
8,365,915

$
8,105,197

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Short-term debt

$
300,043

$
51

Accounts payable

2,001,743

1,754,078

Accrued expenses and other

526,974

472,924

Short-term operating lease liabilities

57,182

53,313

Total current liabilities

2,885,942

2,280,366

Long-term debt

895,913

1,424,791

Long-term operating lease liabilities

250,108

253,719

Other liabilities

396,065

419,923

Total liabilities

4,428,028

4,378,799

Commitments and contingencies (Note 9)

Shareholders’ equity:

Common stock $1.00 par; authorized 300,000,000 shares; issued 99,489,060 shares and 98,792,542 shares, respectively

99,489

98,793

Additional paid-in capital

1,611,114

1,594,140

Retained earnings

2,452,723

2,421,845

Accumulated other comprehensive loss

(225,439)

(388,380)

Total shareholders’ equity

3,937,887

3,726,398

Total liabilities and shareholders’ equity

$
8,365,915

$
8,105,197


	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

See notes to consolidated financial statements.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Third Quarters Ended				Nine Months Ended				First Quarters Ended
	April 3,		March 28,		April 3,		March 28,		October 2,		October 3,
	2021		2020		2021		2020		2021		2020

	(Thousands, except per share amounts)								(Thousands, except per share amounts)
Sales	$	4,916,714	$	4,309,818	$	14,307,945	$	13,474,632	$	5,584,695	$	4,723,059
Cost of sales		4,348,364		3,790,885		12,712,262		11,886,247		4,925,002		4,206,979
Gross profit		568,350		518,933		1,595,683		1,588,385		659,693		516,080
Selling, general and administrative expenses		463,092		469,646		1,376,333		1,391,024		486,178		471,158
Goodwill and long-lived asset impairment expense		—		145,836		—		145,836
Restructuring, integration and other expenses		17,574		19,211		55,943		58,073		5,272		26,420
Operating income (loss)		87,684		(115,760)		163,407		(6,548)
Other income (expense), net		4,779		(12,608)		(16,052)		(9,640)
Operating income										168,243		18,502
Other expense, net										(409)		(19,498)
Interest and other financing expenses, net		(22,342)		(29,718)		(66,128)		(97,254)		(22,844)		(22,301)
Income (loss) before taxes		70,121		(158,086)		81,227		(113,442)		144,990		(23,297)
Income tax benefit		(37,363)		(29,425)		(26,532)		(30,200)
Income tax expense (benefit)										33,672		(4,408)
Net income (loss)	$	107,484	$	(128,661)	$	107,759	$	(83,242)	$	111,318	$	(18,889)

Earnings (loss) per share:
Basic	$	1.08	$	(1.29)	$	1.09	$	(0.82)	$	1.12	$	(0.19)
Diluted	$	1.07	$	(1.29)	$	1.08	$	(0.82)	$	1.10	$	(0.19)

Shares used to compute earnings per share:
Basic		99,542		99,479		99,125		101,013		99,647		98,897
Diluted		100,247		99,479		100,013		101,013		101,116		98,897
Cash dividends paid per common share	$	0.21	$	0.21	$	0.63	$	0.63	$	0.24	$	0.21

See notes to consolidated financial statements.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Third Quarters Ended				Nine Months Ended				First Quarters Ended
	April 3,		March 28,		April 3,		March 28,		October 2,		October 3,
	2021		2020		2021		2020		2021		2020

	(Thousands)								(Thousands)
Net income (loss)	$	107,484	$	(128,661)	$	107,759	$	(83,242)	$	111,318	$	(18,889)
Other comprehensive income (loss), net of tax:
Foreign currency translation and other		(65,021)		(96,351)		145,352		(105,311)		(29,036)		90,373
Pension adjustments, net		3,983		3,167		17,589		10,148		4,012		9,623
Total comprehensive income (loss)	$	46,446	$	(221,845)	$	270,700	$	(178,405)
Total comprehensive income									$	86,294	$	81,107

See notes to consolidated financial statements.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)


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

	(Thousands)												(Thousands)
Balance, June 27, 2020		98,793	$	98,793	$	1,594,140	$	2,421,845	$	(388,380)	$	3,726,398
Net loss		—		—		—		(18,889)		—		(18,889)
Translation adjustments and other		—		—		—		—		90,373		90,373
Pension liability adjustments, net		—		—		—		—		9,623		9,623
Cash dividends		—		—		—		(20,756)		—		(20,756)
Effects of new accounting principles, net		—		—		—		(14,480)		—		(14,480)
Stock-based compensation		51		51		5,191		—		—		5,242
Balance, October 3, 2020		98,844	$	98,844	$	1,599,331	$	2,367,720	$	(288,384)	$	3,777,511
Balance, July 3, 2021														99,601	$	99,601	$	1,622,160	$	2,516,170	$	(153,747)	$	4,084,184
Net income		—		—		—		19,163		—		19,163		—		—		—		111,318		—		111,318
Translation adjustments and other		—		—		—		—		120,000		120,000		—		—		—		—		(29,036)		(29,036)
Pension liability adjustments, net		—		—		—		—		3,983		3,983		—		—		—		—		4,012		4,012
Cash dividends		—		—		—		(20,756)		—		(20,756)		—		—		—		(23,893)		—		(23,893)
Repurchases of common stock														(275)		(275)		—		(10,228)		—		(10,503)
Stock-based compensation		18		18		10,814		—		—		10,832		10		10		9,507		—		—		9,517
Balance, January 2, 2021		98,862	$	98,862	$	1,610,145	$	2,366,127	$	(164,401)	$	3,910,733
Net income		—		—		—		107,484		—		107,484
Translation adjustments and other		—		—		—		—		(65,021)		(65,021)
Pension liability adjustments, net		—		—		—		—		3,983		3,983
Cash dividends		—		—		—		(20,888)		—		(20,888)
Stock-based compensation		627		627		969		—		—		1,596
Balance, April 3, 2021		99,489	$	99,489	$	1,611,114	$	2,452,723	$	(225,439)	$	3,937,887
Balance, October 2, 2021														99,336	$	99,336	$	1,631,667	$	2,593,367	$	(178,771)	$	4,145,599


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

	(Thousands)												(Thousands)
Balance, June 29, 2019		104,038	$	104,038	$	1,573,005	$	2,767,469	$	(304,039)	$	4,140,473
Net income		—		—		—		41,752		—		41,752
Translation adjustments and other		—		—		—		—		(102,146)		(102,146)
Pension liability adjustments, net		—		—		—		—		3,813		3,813
Cash dividends		—		—		—		(21,451)		—		(21,451)
Repurchases of common stock		(2,631)		(2,631)		—		(109,504)		—		(112,135)
Stock-based compensation		64		64		7,701		—		—		7,765
Balance, September 28, 2019		101,471	$	101,471	$	1,580,706	$	2,678,266	$	(402,372)	$	3,958,071
Net income		—		—		—		3,668		—		3,668
Translation adjustments and other		—		—		—		—		93,186		93,186
Pension liability adjustments, net		—		—		—		—		3,168		3,168
Cash dividends		—		—		—		(20,975)		—		(20,975)
Repurchases of common stock		(2,135)		(2,135)		—		(85,423)		—		(87,558)
Stock-based compensation		13		13		7,760		—		—		7,773
Balance, December 28, 2019		99,349	$	99,349	$	1,588,466	$	2,575,536	$	(306,018)	$	3,957,333
Balance, June 27, 2020														98,793	$	98,793	$	1,594,140	$	2,421,845	$	(388,380)	$	3,726,398
Net loss		—		—		—		(128,661)		—		(128,661)		—		—		—		(18,889)		—		(18,889)
Translation adjustments and other		—		—		—		—		(96,351)		(96,351)		—		—		—		—		90,373		90,373
Pension liability adjustments, net		—		—		—		—		3,167		3,167		—		—		—		—		9,623		9,623
Cash dividends		—		—		—		(20,810)		—		(20,810)		—		—		—		(20,756)		—		(20,756)
Repurchases of common stock		(1,104)		(1,104)		—		(35,640)		—		(36,744)
Effects of new accounting principles, net														—		—		—		(14,480)		—		(14,480)
Stock-based compensation		516		516		(1,172)		—		—		(656)		51		51		5,191		—		—		5,242
Balance, March 28, 2020		98,761	$	98,761	$	1,587,294	$	2,390,425	$	(399,202)	$	3,677,278
Balance, October 3, 2020														98,844	$	98,844	$	1,599,331	$	2,367,720	$	(288,384)	$	3,777,511

See notes to consolidated financial statements.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended

April 3,

March 28,

2021

2020

(Thousands)
Cash flows from operating activities:

Net income (loss)

$
107,759

$
(83,242)

Non-cash and other reconciling items:

Depreciation

67,462

75,535
Amortization

35,730

62,240
Amortization of operating lease assets

42,054

46,560
Deferred income taxes

11,510

(42,529)
Stock-based compensation

22,293

20,757
Goodwill, long-lived asset and other impairments

15,166

145,836
Other, net

7,558

36,548
Changes in (net of effects from businesses acquired and divested):

Receivables

(405,700)

150,095
Inventories

63,017

227,996
Accounts payable

224,151

(112,923)
Accrued expenses and other, net

6,526

(84,263)
Net cash flows provided by operating activities

197,526

442,610

Cash flows from financing activities:

Repayments under accounts receivable securitization, net

—

(127,400)
Repayments under senior unsecured credit facility, net

(232,347)

(1,194)
Repayments under bank credit facilities and other debt, net

(2,192)

(1,639)
Repurchases of common stock

—

(235,830)
Dividends paid on common stock

(62,400)

(63,235)
Other, net

(11,455)

(15,132)
Net cash flows used for financing activities

(308,394)

(444,430)

Cash flows from investing activities:

Purchases of property, plant and equipment

(39,001)

(61,156)
Acquisitions of assets

(18,371)

(51,509)
Other, net

6,201

(12,547)
Net cash flows used for investing activities

(51,171)

(125,212)

Effect of currency exchange rate changes on cash and cash equivalents

7,750

(16,418)

Cash and cash equivalents:

— decrease

(154,289)

(143,450)
— at beginning of period

477,038

546,105
— at end of period

$
322,749

$
402,655


	First Quarters Ended
	October 2,		October 3,
	2021		2020

	(Thousands)
Cash flows from operating activities:
Net income (loss)	$	111,318	$	(18,889)

Non-cash and other reconciling items:
Depreciation		21,833		21,845
Amortization		5,210		20,117
Amortization of operating lease assets		13,751		14,079
Deferred income taxes		(3,259)		6,614
Stock-based compensation		9,178		4,961
Impairments		—		15,166
Other, net		2,603		10,898
Changes in (net of effects from businesses acquired and divested):
Receivables		(169,992)		(7,116)
Inventories		(73,971)		(136,426)
Accounts payable		85,217		228,740
Accrued expenses and other, net		(32,856)		(37,545)
Net cash flows (used) provided by operating activities		(30,968)		122,444

Cash flows from financing activities:
Borrowings under accounts receivable securitization, net		59,300		166,900
Borrowings (repayments) under senior unsecured credit facility, net		118,716		(234,190)
Borrowings (repayments) under bank credit facilities and other debt, net		(734)		(545)
Repurchases of common stock		(9,566)		—
Dividends paid on common stock		(23,893)		(20,756)
Other, net		(1,337)		281
Net cash flows provided (used) by financing activities		142,486		(88,310)

Cash flows from investing activities:
Purchases of property, plant and equipment		(12,025)		(19,998)
Acquisitions of assets and businesses		—		(18,700)
Other, net		318		753
Net cash flows used for investing activities		(11,707)		(37,945)

Effect of currency exchange rate changes on cash and cash equivalents		(401)		9,829

Cash and cash equivalents:
— increase		99,410		6,018
— at beginning of period		199,691		477,038
— at end of period	$	299,101	$	483,056

See notes to consolidated financial statements.

Table of Contents

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

1. Basis of presentation and new accounting pronouncements

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

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

Interim results of operations ~~are~~do not necessarily ~~indicative of~~indicate the results to be expected for the full fiscal year. The information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended ~~June 27, 2020.~~

~~Certain reclassifications have been made in prior periods to conform to the current period presentation.~~July 3, 2021.

Fiscal year

The Company operates on a “52/53 week” fiscal year, and fiscal ~~2021~~2022 contains 5352 weeks compared to fiscal ~~2020,~~2021, which contained 5253 weeks. As a result, the first ~~nine months~~quarter of fiscal ~~2021 ended April 3, 2021,~~2022, contained 4013 weeks compared to the first ~~nine months~~quarter of fiscal ~~2020 ended March 28, 2020,~~2021, which contained 3914 weeks.

Recently adopted accounting pronouncements

In ~~August 2018,~~December 2019, the FASB issued ASU No. ~~2018-15,~~2019-12, ~~Intangibles—Goodwill and Other— Internal-Use Software~~~~(Subtopic 350-40):~~~~Customer’s~~Simplifying the Accounting for ~~Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus~~Income Taxes (Topic 740) (“ASU No. 2019-12”), which simplifies the income tax accounting, eliminates certain exceptions within ASC Topic 740, Income Taxes, and clarifies certain aspects of the ~~FASB Emerging Issues Task Force)~~ ("current guidance to promote consistency among reporting entities. Most amendments within ASU No. ~~2018-15"). ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in~~2019-12 are required to be applied on a ~~hosting arrangement that is~~prospective basis, while certain amendments must be applied on a ~~service contract with the requirements for capitalizing implementation costs incurred to develop internal-use software.~~retrospective or modified retrospective basis. The Company’s adoption of ASU No. ~~2018-15 in~~2019-12 beginning the first quarter of fiscal ~~2021~~2022 did not have a material impact on the Company’s ~~consolidated financial statements.~~Consolidated Financial Statements.

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

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

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

Recently issued accounting pronouncements

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU No. 2020-04”), which provides optional guidance to ease the potential burden in accounting for reference rate reform on financial reporting. The new guidance provides optional expedients and exceptions for applying ~~generally accepted accounting principles~~GAAP to transactions affected by reference rate reform if certain criteria are met. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU No. 2021-01”), to clarify certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting to apply to derivatives that are affected by the discounting transition. Both ASU No. 2020-04 and ASU No. 2021-01 are effective upon issuance through December 31, 2022. The Company is currently evaluating the effects of adopting the provisions of ASU No. 2020-04 and ASU No. 2021-01, but does not currently expect a material impact on the Company’s ~~consolidated financial statements.~~Consolidated Financial Statements.

~~In December 2019, the FASB issued ASU No. 2019-12,~~ ~~Simplifying the Accounting for Income Taxes~~~~(Topic 740)~~ (“ASU No. 2019-12”), which removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU No. 2019-12 will be effective for the Company in the first quarter of fiscal 2022, and early adoption is permitted. Depending on the amendment, adoption may be applied on a retrospective, modified retrospective or prospective basis. The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2019-12.

~~In August 2018, the FASB issued ASU No. 2018-14,~~ ~~Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans~~ (“ASU No. 2018-14”). The new guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans, including removing certain previous disclosure requirements, adding certain new disclosure requirements, and clarifying certain other disclosure requirements. ASU No. 2018-14 will be effective for the Company in the first quarter7

Table of ~~fiscal 2022, and early adoption is permitted. The Company’s planned adoption of ASU No. 2018-14 is not expected to have a material impact on the Company’s consolidated financial statements.~~Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

2. ~~Summary of significant accounting policies~~Receivables

~~Except~~The Company’s receivables and allowance for ~~the changes below, no material changes have been made to the Company’s significant accounting policies~~credit losses were as ~~disclosed in Note 1, Summary of Significant Accounting Policies, in its Annual Report on Form 10-K for the fiscal year ended June 27, 2020.~~follows:


	October 2,		July 3,
	2021		2021

	(Thousands)
Receivables	$	3,808,214	$	3,664,290
Allowance for Credit Losses		(87,918)		(88,160)

~~Receivables~~ ~~– Receivables, predominately comprised of trade accounts and notes receivable, are reported at amortized cost, net of~~

The Company had the following activity in the allowance for credit losses induring the consolidated balance sheets. The allowance for credit losses is a valuation account that is deducted from the receivables’ amortized cost basis to present the net amount expected to be collected. The Company estimates the allowance for credit losses using relevant available information about expected credit losses, including information about historical credit losses, past events, current conditions,first quarters of fiscal 2022 and other factors which may affect the collectability of receivables. Adjustments to historical loss information are made for differences in current receivable specific risk characteristics such as changes in customer behavior, economic and industry changes, or other relevant factors. Expected credit losses are estimated on a pooled basis, when similar risk characteristics exist.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

3. ~~Acquisitions~~Goodwill and intangible assets

In the first quarter of fiscal 2021, the Company completed an asset acquisition. The impact of this asset acquisition was not material to the Company’s consolidated balance sheets or statements of operations.Goodwill

The following table presents the change in goodwill by reportable segment for the three months ended 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

(1)	Includes accumulated impairments of $1,482,677 from prior fiscal years.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

~~4. Receivables~~

Intangible Assets

The following table presents the Company’s ~~receivables~~acquired intangible assets at October 2, 2021 and ~~allowance for credit losses were as follows:~~

April 3,

June 27,

2021

2020

(Thousands)
Receivables

$
3,451,466

$
2,993,404
Allowance for Credit Losses

(85,789)

(65,018)

~~The Company had the following activity in the allowance for credit losses during the first nine months of fiscal 2021:~~July 3, 2021, respectively.

April 3,

2021

(Thousands)
Balance at June 27, 2020

$
65,018
Effect of adoption of new credit loss accounting standard (Note 1)

17,205
Credit Loss Provisions

7,370
Credit Loss Recoveries

(192)
Receivables Write offs

(5,666)
Foreign Currency Effect and Other

2,054
Balance at April 3, 2021

$
85,789


	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

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

Intangible asset amortization expense was $5.2 million and $20.1 million for the first quarters of fiscal 2022 and 2021, respectively.

The following table presents the estimated future amortization expense for the remainder of fiscal 2022 and the next five fiscal years (in thousands):


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

~~5. Goodwill and intangible assets~~4. Debt

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

~~The following table presents the change in goodwill by reportable segment for the nine months ended April 3, 2021.~~

Electronic




Components

Farnell

Total

(Thousands)
Carrying value at June 27, 2020 ⁽¹⁾

$
297,836

$
475,898

$
773,734
Foreign currency translation

12,142

52,584

64,726
Carrying value at April 3, 2021 ⁽¹⁾

$
309,978

$
528,482

$
838,460

~~(1)~~

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


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

	Interest Rate			Carrying Balance
Bank credit facilities and other	—	1.24	%	$	—	$	23,078
Short-term debt				$	—	$	23,078

~~The Company evaluates each quarter if facts~~Bank credit facilities and ~~circumstances indicate that it is more likely than not that~~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 ~~fair value~~working capital requirements of ~~its reporting units is less than their carrying value, which would require~~ the Company, to perform an interim goodwill impairment test. Indicators the Company evaluates to determine whether an interim goodwill impairment test is necessary include, but are not limited to, (i) a sustained decrease in share price or market capitalization as of any fiscal quarter end, (ii) changes in 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 ofincluding its ~~reporting units. During the third quarter of fiscal 2021, the Company concluded that an interim goodwill impairment test was not required.~~foreign operations.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

~~Intangible Assets~~

~~The following table presents the Company’s acquired intangible assets at April 3, 2021 and June 27, 2020, respectively.~~

April 3, 2021

June 27, 2020

Acquired

Accumulated

Net Book

Acquired

Accumulated

Net Book


Amount

Amortization

Value

Amount⁽¹⁾

Amortization

Value

(Thousands)

Customer related

$
324,923

$
(312,189)

$
12,734

$
300,937

$
(266,759)

$
34,178

Trade name

57,259

(42,788)

14,471

51,698

(32,493)

19,205

Technology and other

57,756

(51,191)

6,565

53,641

(41,587)

12,054

$
439,938

$
(406,168)

$
33,770

$
406,276

$
(340,839)

$
65,437

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

Intangible asset amortization expense was $5.3 million and $21.0 million for the third quarters of fiscal 2021 and 2020, respectively, and $35.7 million and $62.2 million for the first nine months of fiscal 2021 and 2020, respectively. Intangible assets have a weighted average remaining useful life of less than ~~3 years. The following table presents the estimated future amortization expense for the remainder of fiscal 2021 and the next five fiscal years (in thousands):~~

Fiscal Year

Remainder of fiscal 2021

$
5,261
2022

15,431
2023

6,610
2024

3,156
2025

1,472
2026

1,472
Thereafter

368
Total

$
33,770

~~6. Debt~~

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


	April 3,		June 27,		April 3,		June 27,		October 2,		July 3,		October 2,		July 3,
	2021		2020		2021		2020		2021		2021		2021		2021

	Interest Rate				Carrying Balance				Interest Rate				Carrying Balance
Bank credit facilities and other	0.93	%	5.69	%	$	43	$	51
Revolving credit facilities:
Accounts receivable securitization program	—		—			—		—	0.83	%	—		$	82,200	$	—
Public notes due December 2021	3.75	%	—			300,000		—
Short-term debt					$	300,043	$	51
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

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.

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

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

In ~~July 2020,~~August 2021, the Company amended and extended for ~~one year,~~two years its trade accounts receivable securitization program (the “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 $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 ~~$683.3~~$772.1 million and ~~$703.8~~$717.4 million at ~~April~~October 2, 2021, and July 3, 2021, ~~and June 27, 2020,~~ respectively. The Securitization Program contains certain covenants relating to the quality of the receivables sold. Interest on borrowings is calculated using a one-month LIBOR rate plus a spread of ~~1.05%~~0.75%. The facility fee on the unused balance of the facility is up to ~~0.40%~~0.35%.

During the third quarter of fiscal 2021, the Company committed to an early redemption of all $300 million of its outstanding 3.75% Public notes due December 2021. The loss on debt extinguishment, primarily related to a contractual make-whole premium, is expected to be approximately $5 million and will be classified as a component of other income (expense), net upon redemption of the notes, which is expected to occur on April 30, 2021.

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

April 3,

June 27,

April 3,

June 27,

2021

2020

2021

2020

Interest Rate

Carrying Balance

Revolving credit facilities:

Credit Facility (due June 2023)

—

1.28
%

$
—

$
230,000

Public notes due:

December 2021

—

3.75
%

—

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

1.21
%

1.19
%

1,312

1,491

Long-term debt before discount and debt issuance costs

901,312

1,431,491

Discount and debt issuance costs – unamortized

(5,399)

(6,700)

Long-term debt

$
895,913

$
1,424,791

The Company has a five-year $1.25 billion ~~senior unsecured~~ revolving credit facility (the “Credit Facility”) with a syndicate of banks, ~~consisting~~which expires in June 2023. It consists of revolving credit facilities and the issuance of up to $200.0 million of letters of credit and up to $300.0 million of loans in certain approved currencies, which expires in June 2023. Subject to certain conditions, the Credit Facility may be increased up to $1.50 billion. Under the Credit Facility, the Company may select from various interest rate options, currencies, and maturities. The Credit Facility contains certain covenants including various limitations on debt incurrence, share repurchases, dividends, investments, and capital expenditures. The Credit Facility also includes financial covenants ~~which were amended during the first quarter of fiscal 2021,~~ requiring the Company to maintain minimum interest coverage and leverage ratios, which the Company was in compliance with as of ~~April 3,~~October 2, 2021, and ~~June 27, 2020.~~July 3, 2021.

As of ~~April~~October 2, 2021, and July 3, 2021, ~~and June 27, 2020,~~ there were ~~$1.3~~$1.2 million and ~~$1.6~~$1.3 million, respectively, in letters of credit issued under the Credit Facility.

As of ~~April~~October 2, 2021, the carrying value and fair value of the Company’s total debt was $1.39 billion and $1.47 billion, respectively. At July 3, 2021, the carrying value and fair value of the Company’s total debt was ~~$1.20~~$1.21 billion and ~~$1.28 billion, respectively. At June 27, 2020, the carrying value and fair value of the Company’s total debt was $1.42 billion and $1.52~~$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 facilities.

1110

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

~~other forms of debt fair value approximates carrying value due to the market based variable nature of the interest rates on those debt facilities.~~

7.5. 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):


	Third Quarters Ended				Nine Months Ended				First Quarters Ended
	April 3,		March 28,		April 3,		March 28,		October 2,		October 3,
	2021		2020		2021		2020		2021		2020
Operating lease cost	$	18,608	$	19,257	$	55,105	$	57,633	$	17,847	$	18,402
Variable lease cost		5,584		5,496		17,296		15,594		6,118		6,288
Total lease cost	$	24,192	$	24,753	$	72,401	$	73,227	$	23,965	$	24,690

Future minimum operating lease payments as of ~~April 3,~~October 2, 2021, are as follows (in thousands):


Fiscal Year
Remainder of fiscal 2021	$	18,649
2022		63,946
Remainder of fiscal 2022			$	50,480
2023		54,508		58,378
2024		39,425		41,960
2025		32,493		33,060
2026				28,426
Thereafter		162,426		133,533
Total future operating lease payments		371,447		345,837
Total imputed interest on operating lease liabilities		(64,157)		(58,231)
Total operating lease liabilities	$	307,290	$	287,606

Other information pertaining to operating leases ~~as of April 3, 2021,~~ consists of the following:


~~Operating Lease Term and Discount Rate~~
~~Weighted-average remaining lease term in years~~	~~9.2~~
~~Weighted-average discount rate~~	~~3.8~~	%

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

Nine Months Ended

April 3,

March 28,

2021

2020
Supplemental Cash Flow Information:

Cash paid for operating lease liabilities

$
44,219

$
46,418
Operating lease assets obtained from new operating lease liabilities

36,150

30,750


	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	%

1211

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

8.6. 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, but no longer than one ~~year (“economic hedges”)~~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),~~expense, net.” The fair value of forward foreign exchange contracts, which are based upon Level 2 criteria under the ASC 820 fair value hierarchy, are classified in the captions “Prepaid and other current assets” or “Accrued expenses and other,” as applicable, in the accompanying consolidated balance sheets as of ~~April 3,~~October 2, 2021, and ~~June 27, 2020.~~July 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.

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

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

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


	April 3,		June 27,		October 2,		July 3,
	2021		2020		2021		2021

	(Thousands)				(Thousands)
Prepaid and other current assets	$	14,781	$	18,989	$	6,835	$	15,722
Accrued expenses and other		24,196		15,605		13,557		23,994

Table of Contents

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:

Third Quarters Ended

Nine Months Ended

First Quarters Ended

April 3,

March 28,

April 3,

March 28,

October 2,

October 3,

2021

2020

2021

2020

2021

2020

(Thousands)

Net derivative financial instrument (loss) gain

(2,574)

(3,247)

(13,201)

7,856

Net derivative financial instrument loss

(8,771)

(7,816)

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

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

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

9.7. Commitments and contingencies

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

The Company is also currently subject to various pending and potential legal matters and investigations relating to compliance with governmental laws and regulations. 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, particularly ~~with regard~~regarding to matters in early 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 ~~April~~October 2, 2021, and July 3, 2021, ~~and June 27, 2020,~~ the Company had aggregate estimated liabilities of $14.7 million ~~and $18.8 million, respectively,~~ classified within accrued expenses and other for such compliance-related matters that were reasonably estimable as of such dates.

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

~~10.~~8. Income taxes

The Company’s effective tax rate on its income before taxes was ~~a benefit of 53.3%~~23.2% in the ~~third~~first quarter of fiscal ~~2021.~~2022. During the ~~third~~first quarter of fiscal ~~2021,~~2022, the Company’s effective tax rate was ~~favorably~~unfavorably impacted primarily by ~~(i) the tax benefit arising from the reduction in value of certain businesses for income tax purposes and (ii) decreases~~increases to valuation ~~allowances, partially offset by (iii) increases to unrecognized tax benefit reserves.~~allowances.

During the ~~third~~first quarter of fiscal ~~2020,~~2021, the Company’s effective tax rate on its loss before taxes was a benefit of ~~18.6%~~18.9%. During the ~~third~~first quarter of fiscal ~~2020,~~2021, the Company’s effective tax rate was unfavorably impacted primarily by ~~(i) the impairment of goodwill that is not deductible for tax purposes, partially offset by (ii) the release of unrecognized tax benefit reserves net of settlements.~~

For the first nine months of fiscal 2021, the Company’s effective tax rate on its income before taxes was a benefit of 32.7%. The effective tax rate for the first nine months of fiscal 2021 was favorably impacted primarily by (i) the tax benefit arising from the reduction in value of certain businesses for income tax purposes, (ii) decreasesincreases to valuation allowances, ~~and (iii) the mix of income in lower tax jurisdictions,~~ partially offset ~~by (iv) increases to unrecognized tax benefit reserves.~~

During the first nine months of fiscal 2020, the Company’s effective tax rate on its loss before taxes was a benefit of 26.6%. The effective tax rate for the first nine months of fiscal 2020 was favorably impacted primarily by (i) the release of unrecognized tax benefit reserves ~~net of settlements~~ and (ii) the mix of income in lower tax ~~jurisdictions, partially offset by (iii) goodwill impairment expense that is not deductible for tax purposes and (iv) a valuation allowance against deferred tax assets.~~jurisdictions.

1413

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

~~11.~~9. Pension plan

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


	Third Quarters Ended				Nine Months Ended				First Quarters Ended
	April 3,		March 28,		April 3,		March 28,		October 2,		October 3,
	2021		2020		2021		2020		2021		2020

	(Thousands)								(Thousands)
Service cost	$	3,938	$	3,786	$	11,813	$	11,358	$	3,752	$	3,938
Total net periodic pension cost within selling, general and administrative expenses		3,938		3,786		11,813		11,358		3,752		3,938

Interest cost		3,976		5,638		11,928		16,914		3,947		3,976
Expected return on plan assets		(12,421)		(12,668)		(37,261)		(38,003)		(12,284)		(12,420)
Amortization of prior service cost		75		534		226		1,603		1		75
Recognized net actuarial loss		5,151		3,658		15,453		10,972		4,086		5,151
Total net periodic pension benefit within other income (expense), net		(3,219)		(2,838)		(9,654)		(8,514)
Total net periodic pension benefit within other expense, net										(4,250)		(3,218)

Net periodic pension cost	$	719	$	948	$	2,159	$	2,844
Net periodic pension (benefit) cost									$	(498)	$	720

The Company made ~~$12.0~~$8.0 million of contributions during the first ~~nine months~~quarter of fiscal ~~2021~~2022 and expects to make additional contributions to the Plan of ~~$4.0~~up to $8.0 million in the remainder of fiscal ~~2021.~~2022.

~~12.~~10. Shareholders’ equity

Share repurchase program

In August 2019, the Company’s Board of Directors amended the Company’s existing share repurchase program, increasing the cumulative total of authorized share repurchases to $2.95 billion of common stock in the open market or through privately negotiated transactions. The timing and actual number of shares repurchased will depend on a variety of factors such as share price, expected liquidity, expected compliance with financial debt convents, corporate and regulatory requirements, and prevailing market conditions. During the ~~third~~first quarter ended ~~April 3,~~October 2, 2021, the Company ~~did not repurchase any~~repurchased 0.3 million shares under this ~~program.~~program for a total cost of $10.5 million. As of ~~April 3,~~October 2, 2021, the Company had ~~$469.0~~$458.5 million remaining under its share repurchase authorization.

Common stock dividend

In ~~February~~August 2021, the Company’s Board of Directors approved a dividend of ~~$0.21~~$0.24 per common share and dividend payments of ~~$20.9~~$23.9 million were made in ~~March~~September 2021.

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

	(Thousands)
Non-cash Investing Activities:
Capital expenditures incurred but not paid	$	4,508	$	3,173
Non-cash Financing Activities:
Unsettled share repurchases	$	937		—
Supplemental Cash Flow Information:
Interest	$	11,636	$	12,538
Income tax net payments		27,977		19,258

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

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

13. ~~Earnings per share~~

Third Quarters Ended

Nine Months Ended

April 3,

March 28,

April 3,

March 28,

2021

2020

2021

2020

(Thousands, except per share data)
Numerator:



Net income (loss)

$
107,484

$
(128,661)

$
107,759

$
(83,242)

Denominator:

Weighted average common shares for basic earnings per share

99,542

99,479

99,125

101,013
Net effect of dilutive stock-based compensation awards

705

—

888

—
Weighted average common shares for diluted earnings per share

100,247

99,479

100,013

101,013
Basic earnings (loss) per share

$
1.08

$
(1.29)

$
1.09

$
(0.82)
Diluted earnings (loss) per share

$
1.07

$
(1.29)

$
1.08

$
(0.82)
Stock options excluded from earnings per share calculation due to anti-dilutive effect

642

1,431

793

1,018

~~For the three and nine months ended March 28, 2020, 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.~~

~~14. Additional cash flow information~~

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

Nine Months Ended

April 3,

March 28,

2021

2020

(Thousands)

Non-cash Investing Activities:

Capital expenditures incurred but not paid

$
5,232

$
5,366

Supplemental Cash Flow Information:

Interest

$
61,127

$
88,472

Income tax net payments

56,135

14,689

Included in cash and cash equivalents as of April 3, 2021 and June 27, 2020 was $43.2 million and $20.9 million, respectively, of cash equivalents, which was primarily comprised of investment grade money market funds and overnight time deposits.

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

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

~~15.~~ Segment information

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


	Third Quarters Ended				Nine Months Ended				First Quarters Ended
	April 3,		March 28,		April 3,		March 28,		October 2,		October 3,
	2021		2020		2021		2020		2021		2020

	(Thousands)								(Thousands)
Sales:
Electronic Components	$	4,520,608	$	3,974,669	$	13,245,143	$	12,472,484	$	5,129,497	$	4,382,148
Farnell		396,106		335,149		1,062,802		1,002,148		455,198		340,911
		4,916,714		4,309,818		14,307,945		13,474,632		5,584,695		4,723,059
Operating income (loss):
Operating income:
Electronic Components	$	118,565	$	84,841	$	306,927	$	290,271	$	162,462	$	84,440
Farnell		23,861		23,350		50,412		65,109		49,593		11,959
		142,426		108,191		357,339		355,380		212,055		96,399
Corporate		(31,885)		(37,833)		(102,114)		(95,416)		(33,301)		(31,302)
Restructuring, integration and other expenses		(17,574)		(19,211)		(55,943)		(58,073)		(5,272)		(26,420)
Goodwill and long-lived asset impairment expense		—		(145,836)		—		(145,836)
Amortization of acquired intangible assets and other		(5,283)		(21,071)		(35,875)		(62,603)		(5,239)		(20,175)
Operating income (loss)	$	87,684	$	(115,760)	$	163,407	$	(6,548)
Operating income									$	168,243	$	18,502
												��
Sales, by geographic area:
Americas ⁽¹⁾	$	1,160,973	$	1,203,605	$	3,468,118	$	3,605,944	$	1,258,811	$	1,205,695
EMEA ⁽²⁾		1,585,631		1,512,476		4,412,652		4,409,258		1,747,579		1,480,674
Asia/Pacific ⁽³⁾		2,170,110		1,593,737		6,427,175		5,459,430		2,578,305		2,036,690
Sales	$	4,916,714	$	4,309,818	$	14,307,945	$	13,474,632	$	5,584,695	$	4,723,059

⁽¹⁾

Includes sales from the United States of ~~$1.08~~$1.16 billion and ~~$1.11 billion for the third quarters ended April 3, 2021, and March 28, 2020, respectively. Includes sales from the United States of $3.24 billion and $3.37~~$1.13 billion for the first ~~nine months of fiscal~~quarters ended October 2, 2021, and October 3, 2020, respectively.

⁽²⁾

Includes sales from Germany and Belgium of ~~$619.4~~$697.1 million and ~~$276.4 million, respectively, for the third quarter ended April 3, 2021; and $1.71 billion and $825.8~~$307.6 million, respectively, for the first ~~nine months of fiscal~~quarter ended October 2, 2021. Includes sales from Germany and Belgium of ~~$568.0~~$574.8 million and ~~$278.3 million, respectively, for the third quarter ended March 28, 2020; and $1.69 billion and $837.7~~$294.4 million, respectively, for the first ~~nine months of fiscal~~quarter ended October 3, 2020.

⁽³⁾

Includes sales from China (including Hong Kong), Taiwan and Singapore of ~~$717.7~~$826.8 million, ~~$956.8 million and $249.5 million, respectively, for the third quarter ended April 3, 2021; and $2.02 billion, $2.95~~$1.20 billion and ~~$774.1~~$264.0 million, respectively, for the first ~~nine months of fiscal~~quarter ended October 2, 2021. Includes sales from China (including Hong Kong), Taiwan and Singapore of ~~$524.1~~$631.8 million, ~~$649.7~~$916.3 million and ~~$239.3 million, respectively, for the third quarter ended March 28, 2020; and $1.76 billion, $2.39 billion and $722.7~~$272.0 million, respectively, for the first ~~nine months of fiscal~~quarter ended October 3, 2020.

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


	April 3,		June 27,		October 2,		July 3,
	2021		2020		2021		2021

	(Thousands)				(Thousands)
Property, plant, and equipment, net, by geographic area:
Americas ⁽¹⁾	$	155,834	$	183,892	$	138,380	$	146,042
EMEA ⁽²⁾		187,837		183,382		178,887		185,753
Asia/Pacific		37,412		37,333		34,606		36,657
Property, plant, and equipment, net	$	381,083	$	404,607	$	351,873	$	368,452

⁽¹⁾	Includes property, plant and equipment, net, of ~~$152.3~~$135.0 million and ~~$179.4~~$142.7 million as of ~~April~~October 2, 2021, and July 3, 2021, ~~and June 27, 2020,~~ respectively, in the United States.

⁽²⁾

Includes property, plant and equipment, net, of ~~$80.2~~$74.1 million, ~~$83.3~~$81.0 million and ~~$21.3~~$19.9 million in Germany, the United Kingdom and Belgium, respectively, as of ~~April 3,~~October 2, 2021; and ~~$84.9~~$77.9 million, ~~$72.7~~$83.5 million and ~~$22.4~~$20.9 million in Germany, the United Kingdom and Belgium, respectively, as of ~~June 27, 2020.~~July 3, 2021.

~~16.~~14. Restructuring expenses

Fiscal 2021

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

Facility




and Contract


Severance

Exit Costs

Total

(Thousands)
Fiscal 2021 restructuring expenses

$
36,992

$
2,894

$
39,886
Cash payments

(21,097)

(1,497)

(22,594)
Non-cash amounts

—

(56)

(56)
Other, principally foreign currency translation

570

13

583
Balance at April 3, 2021

$
16,465

$
1,354

$
17,819

Severance expense recorded in the first nine months of fiscal 2021 related to the reduction, or planned reduction, of over 300 employees, primarily in executive management, operations, information technology, warehouse, sales and business support functions. Of the $39.9 million in restructuring expenses recorded during the first nine months of fiscal 2021, $22.5 million related to EC, $9.4 million related to Farnell and $8.0 million related to Corporate. The Company expects the majority of the remaining severance amounts to be paid by the end of fiscal 2021.

~~Table of Contents~~

~~AVNET, INC. AND SUBSIDIARIES~~

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

~~Fiscal 2020~~ and prior

During fiscal ~~2020~~2021 and prior, the Company incurred restructuring expenses related to various restructuring actions intended to achieve planned synergies from acquired businesses and to reduce future operating expenses. The following table presents the activity during the first ~~nine months~~quarter of fiscal ~~2021~~2022 related to the remaining restructuring liabilities established during fiscal ~~2020~~2021 and prior:


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

	(Thousands)						(Thousands)
Balance at June 27, 2020	$	13,574	$	3,368	$	16,942
Balance at July 3, 2021							$	35,099	$	4,863	$	39,962
Cash payments		(5,569)		(1,042)		(6,611)		(11,892)		(1,319)		(13,211)
Changes in estimates, net		(2,901)		10		(2,891)		(330)		0		(330)
Other, principally foreign currency translation		579		216		795		(359)		(41)		(400)
Balance at April 3, 2021	$	5,683	$	2,552	$	8,235
Balance at October 2, 2021							$	22,518	$	3,503	$	26,021

The Company expects the majority of the remaining amounts to be paid by the end of fiscal ~~2021.~~2022.

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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”~~“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~~The following important factors, in addition to those discussed elsewhere in this Quarterly Report, ~~the Company’s Quarterly Reports on Form 10-Q for the fiscal quarters ended October 3, 2020, and January 3, 2021~~ and the Company’s Annual Report on Form 10-K for the fiscal year ended ~~June 27, 2020,~~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, ~~social unrest~~ 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, ~~and~~ liquidity, and access to financing; constraints on employee retention and hiring; geopolitical ~~events, including the uncertainty caused by the United Kingdom’s exit from, and agreement for a new partnership with, the European Union;~~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

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 ~~April 3,~~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 ~~Quarterly Reports on Form 10-Q for the fiscal quarters ended October 3, 2020, and January 2, 2021 and~~ Annual Report on Form 10-K for the fiscal year ended ~~June 27, 2020.~~July 3, 2021. The Company operates on a “52/53 week” fiscal year and fiscal ~~2021~~2022 contains 5352 weeks compared to 5253 weeks in fiscal ~~2020.~~2021. As a result, the first ~~nine months~~quarter of fiscal ~~2021 ended April 3, 2021,~~2022 contained 4013 weeks and the first ~~nine months~~quarter of fiscal ~~2020 ended March 28, 2020~~2021 contained 3914 weeks. This extra week ~~in the first nine months of fiscal 2021, which occurred~~ 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.”

2018

Table of Contents

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

●

Sales adjusted for certain items that impact the year-over-year analysis, which includes the impact of certain acquisitions by adjusting Avnet’s prior periods to include the sales of acquired businesses, as if the acquisitions had occurred at the beginning of the earliest period presented. In addition, fiscal 2021 sales are adjusted for the estimated impact of the extra week of sales in the first quarter of fiscal 2021 due to it being a 14-week quarter, as discussed above. ~~Sales taking into account these adjustments are referred to as “organic sales.”~~ 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 ~~(loss)~~ excluding (i) restructuring, integration and other expenses, (see Restructuring, Integration and Other Expenses in this MD&A), (ii) amortization of acquired intangible assets, and (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 ~~(loss)~~ to adjusted operating income is presented in the following table:


	Third Quarters Ended				Nine Months Ended				First Quarters Ended
	April 3,		March 28,		April 3,		March 28,		October 2,		October 3,
	2021		2020		2021		2020		2021		2020

	(Thousands)								(Thousands)
Operating income (loss)	$	87,684	$	(115,760)	$	163,407	$	(6,548)
Operating income									$	168,243	$	18,502
Restructuring, integration and other expenses		17,574		19,211		55,943		58,073		5,272		26,420
Goodwill and long-lived asset impairment expense		—		145,836		—		145,836
Amortization of acquired intangible assets and other		5,283		21,071		35,875		62,603		5,239		20,175
Adjusted operating income	$	110,541	$	70,358	$	255,225	$	259,964	$	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.

2119

Table of Contents

OVERVIEW

Organization

Avnet, Inc. and its consolidated ~~subsidiaries’~~subsidiaries (collectively, the “Company” or “Avnet”), is a leading global technology distributor and solutions ~~company with extensive capabilities that can deliver~~provider. Avnet has served customers’ evolving needs for an entire century. Avnet supports customers at each stage of a product’s lifecycle, from idea to design ~~product, marketing~~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 expertise for~~stages of product development so customers ~~at every stage of the product lifecycle.~~can realize revenue faster. Decade after decade, Avnet ~~transforms ideas into intelligent solutions, reducing the time, cost~~helps its customers and ~~complexities of bringing products to market~~suppliers around the ~~world.~~world realize the transformative possibilities of technology. Founded in 1921, the Company works with ~~over 1,400~~suppliers in every major technology ~~suppliers~~segment to serve ~~2.1 million~~ customers in more than 140 countries.

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

Results of Operations

~~Significant Risks and Uncertainties~~

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, constrained work force participation, disrupted logistics and distribution systems, and created significant volatility and disruption of financial markets. As the scope and duration of the COVID-19 pandemic is unknown and its economic impact continues to evolve globally, there is significant uncertainty related to the ultimate impact it will have on the Company’s business, its employees, results of operations and financial condition, and to what extent the Company’s actions to mitigate such impacts will be successful and sufficient. Accordingly, current results and financial condition discussed herein may not be indicative of future operating results and trends. See the risk factors regarding the impacts of the COVID-19 pandemic included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 27, 2020 and Quarterly Reports on Form 10-Q for the fiscal quarters ended October 3, 2020 and January 2, 2021.

~~The Company did not experience any meaningful financial impact during the third quarter of fiscal 2021 associated with the COVID-19 pandemic.~~

Executive Summary

Sales of ~~$4.92~~$5.58 billion in the ~~third~~first quarter of fiscal ~~2021~~2022 were ~~14.1%~~18.2% higher than the prior year ~~third~~first quarter sales of ~~$4.31~~$4.72 billion. Excluding the impact of changes in foreign currency, sales increased ~~10.7%~~17.5% as compared to sales in the prior year ~~third~~first quarter.

Gross profit margin of ~~11.6% decreased 48~~11.8% increased 88 basis points compared to ~~12.0%~~10.9% in the ~~third~~first quarter of fiscal ~~2020.~~2021. This ~~decrease~~increase is primarily due to ~~geographical market mix~~strong overall demand for electronic components and ~~to a lesser extent,~~improvements in product and customer mix, partially offset by an unfavorable geographic regional sales mix.

Operating income of ~~$87.7~~$168.2 million was ~~$203.4~~$149.7 million higher ~~as compared to~~than the ~~third~~first quarter of fiscal ~~2020. This represents an increase of 175.7%.~~2021. Operating income margin was ~~1.8%~~3.0% in the ~~third~~first quarter of fiscal ~~2021,~~2022, as compared to ~~a negative 2.7% operating loss margin~~0.4% in the prior ~~year.~~year first quarter. The increase in operating income margin ~~when compared to the prior year third quarter~~ is the result of ~~the goodwill~~increases in sales and ~~long-lived asset impairment expense~~ in ~~the prior year quarter.~~gross profit margin and from lower operating expenses. Adjusted operating income margin was ~~2.3%~~3.2% in the ~~third~~first quarter of fiscal 2022 as compared to 1.4% in the first quarter of fiscal 2021, ~~as compared to 1.6% in the third quarter of fiscal 2020,~~ an increase of 62182 basis points. This increase in adjusted operating income margin is primarily due to the ~~increase~~increases in sales and ~~reductions~~gross margin, partially offset by increases in selling, general and administrative ~~expenses resulting from the Company’s cost savings initiatives, partially offset by the decrease in gross profit margin.~~expenses.

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Sales

Reported sales were the same as organic sales in the first quarter of fiscal 2022. The following table presents the reconciliation of reported sales to organic sales for the ~~third~~first quarter ~~and first nine months~~ of fiscal 2021 by geographic region and by operating group. ~~Reported sales were the same as organic sales in the third quarter and first nine months of fiscal 2020.~~


		Quarter Ended						Nine Months Ended
		Sales
		As Reported				Organic										Organic				Estimated						Organic
		and				Sales		Sales				Organic				Sales		Sales		Extra		Organic				Sales
		Organic		TI Sales		Adj for TI		As Reported		Estimated		Sales		TI Sales		Adj for TI		As Reported		Week in		Sales		TI Sales		Adj for TI
		Q3-Fiscal		Q3-Fiscal		Q3-Fiscal		Q3-Fiscal		Extra		Q3-Fiscal		Q3-Fiscal		Q3-Fiscal		Q1-Fiscal		Q1-Fiscal		Q1-Fiscal		Q1-Fiscal		Q1-Fiscal
		2021		2021⁽¹⁾		2021⁽¹⁾		2021		Week⁽²⁾		2021		2021⁽¹⁾		2021⁽¹⁾		2021		2021⁽¹⁾		2021		2021⁽²⁾		2021⁽²⁾

		(Thousands)																(Thousands)
Avnet		$	4,916,714	$	1,659	$	4,915,055	$	14,307,945	$	306,000	$	14,001,945	$	292,212	$	13,709,733	$	4,723,059	$	306,000	$	4,417,059	$	240,984	$	4,176,075
Avnet by region
Americas		$	1,160,973	$	416	$	1,160,557	$	3,468,118	$	77,000	$	3,391,118	$	82,885	$	3,308,233	$	1,205,695	$	77,000	$	1,128,695	$	68,500	$	1,060,195
EMEA			1,585,631		483		1,585,148		4,412,652		97,000		4,315,652		124,232		4,191,420		1,480,674		97,000		1,383,674		102,910		1,280,764
Asia			2,170,110		760		2,169,350		6,427,175		132,000		6,295,175		85,095		6,210,080		2,036,690		132,000		1,904,690		69,574		1,835,116
Avnet by operating group	Avnet by operating group
EC		$	4,520,608	$	1,659	$	4,518,949	$	13,245,143	$	284,000	$	12,961,143	$	292,212	$	12,668,931	$	4,382,148	$	284,000	$	4,098,148	$	240,984	$	3,857,164
Farnell			396,106		—		396,106		1,062,802		22,000		1,040,802		—		1,040,802		340,911		22,000		318,911		—		318,911

___________

(1)

Sales adjusted for the impact of the termination of the TI distribution contract, which was completed in December 2020. Sales of TI products was $401 million in the third quarter of fiscal 2020 and $2 million in the third quarter of fiscal 2021. Sales of TI products was $1.24 billion in the first nine months of fiscal 2020 and $292 million in the first nine months of fiscal 2021.

~~(2)~~

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

(2)

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

The following table presents reported and organic sales growth rates for the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2021~~2022 as compared to fiscal ~~2020~~2021 by geographic region and by operating group.


		Quarter Ended						Nine Months Ended
				Sales As		Organic										Organic
		Sales As		Reported		Sales				Sales As				Organic		Sales				Sales				Organic		Sales
		Reported		and Organic		Adj for TI				Reported				Sales		Adj for TI				As Reported				Sales		Adj for TI
		and		Year-Year %		Year-Year %		Sales As		Year-Year %		Organic		Year-Year %		Year-Year %		Sales		Year-Year %		Organic		Year-Year %		Year-Year %
		Organic		Change in		Change in		Reported		Change in		Sales		Change in		Change in		As Reported		Change in		Sales		Change in		Change in
		Year-Year		Constant		Constant		Year-Year		Constant		Year-Year		Constant		Constant		Year-Year		Constant		Year-Year		Constant		Constant
		% Change		Currency		Currency⁽¹⁾		% Change		Currency		% Change		Currency		Currency⁽¹⁾		% Change		Currency		% Change		Currency		Currency⁽¹⁾
Avnet		14.1	%	10.7	%	22.0	%	6.2	%	3.9	%	3.9	%	1.6	%	9.5	%	18.2	%	17.5	%	26.4	%	25.6	%	32.9	%
Avnet by region
Americas		(3.5)	%	(3.5)	%	4.9	%	(3.8)	%	(3.8)	%	(6.0)	%	(6.0)	%	(0.2)	%	4.4	%	4.4	%	11.5	%	11.5	%	18.7	%
EMEA		4.8		(3.4)		6.5		0.1		(6.0)		(2.1)		(8.2)		(1.8)		18.0		16.2		26.3		24.3		34.3
Asia		36.2		35.0		50.3		17.7		17.0		15.3		14.6		25.4		26.6		26.4		35.4		35.2		40.3
Avnet by operating group	Avnet by operating group
EC		13.7	%	10.5	%	22.9	%	6.2	%	4.0	%	3.9	%	1.7	%	10.4	%	17.1	%	16.5	%	25.2	%	24.6	%	32.3	%
Farnell		18.2		12.3		12.3		6.1		2.4		3.9		0.2		0.2		33.5		30.1		42.7		39.0		39.0

___________

(1)

Sales growth rates excluding the impact of the termination of the TI distribution ~~agreement, which was completed in December 2020.~~agreement.

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Sales of ~~$4.92~~$5.58 billion for the ~~third~~first quarter of fiscal ~~2021~~2022 were up ~~$606.9~~$861.6 million, or ~~14.1%~~18.2%, from the prior year ~~third~~first quarter sales of ~~$4.31~~$4.72 billion. Sales in constant currency in the ~~third~~first quarter of fiscal ~~2021~~2022 increased by ~~10.7% year-over-year.~~17.5% year over year. The increase in sales is primarily the result of increased sales in the Company’s EC Asia ~~region~~and EMEA regions and sales growth at Farnell. ~~The year-over-year sales increases were impacted by lower sales of TI products in the third quarter of fiscal 2021.~~ Organic sales in constant currency excluding TI sales in the ~~third~~first quarter of fiscal ~~2021~~2022 were ~~22.0%~~32.9% higher than sales in the ~~third~~first quarter of fiscal ~~2020~~2021, reflecting ~~improvements~~sales growth in both operating groups across all ~~regions.~~regions driven by strong demand globally for electronic components.

EC sales of ~~$4.52~~$5.13 billion in the ~~third~~first quarter of fiscal ~~2021~~2022 increased ~~$545.9~~$747.3 million or ~~13.7%~~17.1% from the prior year ~~third~~first quarter sales of ~~$3.97~~$4.38 billion. On an organic basis, EC sales excluding TI increased ~~22.9%~~32.3% year over year in constant currency, reflecting sales growth in all three regions. The increase in sales in the Company’s EC operating group is primarily due to improvements in overall market demand and stronger demand in certain industry sectors, particularly the transportation and industrial sectors.

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Farnell sales for the ~~third~~first quarter of fiscal ~~2021~~2022 were ~~$396.1~~$455.2 million, an increase of ~~$61.0~~$114.3 million or ~~18.2%~~33.5% from the prior year ~~third~~first quarter sales of ~~$335.1~~$340.9 million. Sales in constant currency increased ~~12.3% year-over-year.~~30.1% year over year. These increases were primarily a result of ~~improved~~increased market demand in all three regions.

~~Sales~~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 ~~first nine months of fiscal 2021 were $14.31 billion, an increase of $833.3 million as compared to~~Electronic Components operating group, the Company may experience lower sales ~~of $13.47 billion for the first nine months of fiscal 2020. The increase in sales was primarily due to growth~~and gross profit in the ~~Asia region and~~future if the ~~global benefit~~impact of ~~an extra week of sales in~~ the ~~first quarter of fiscal 2021, partially~~termination is not offset by ~~the decline in TI sales. Organic~~sales growth, gross margin improvements or operating cost reductions. Sales from Maxim products represented approximately 3% of total sales in ~~constant currency excluding TI sales increased 9.5% year-over-year in the first nine months of~~ fiscal 2021.

Gross Profit

Gross profit for the ~~third~~first quarter of fiscal 2022 was $659.7 million, an increase of $143.6 million, or 27.8%, from the first quarter of fiscal 2021 ~~was $568.4 million, an increase of $49.4 million, or 9.5%, from the third quarter of fiscal 2020~~ gross profit of ~~$518.9~~$516.1 million. Gross profit margin ~~decreased~~increased to ~~11.6%~~11.8% (or 4888 basis points) from the ~~third~~first quarter of fiscal ~~2020~~2021 gross profit margin of ~~12.0%~~10.9%, driven by ~~declines~~increases in gross profit margin in both operating groups. The ~~declines~~increases in gross profit margin in both operating groups are primarily due to ~~geographical market mix and, to~~strong demand for electronic components that resulted in a ~~lesser extent, from~~favorable pricing environment, partially offset by unfavorable ~~changes in product and customer~~geographic region sales mix. Sales in the higher gross profit margin western regions represented approximately ~~56% of sales in the third quarter of fiscal 2021, as compared to 63% during the third quarter of fiscal 2020.~~

Gross profit and gross profit margin were $1.60 billion and 11.2%, respectively, for the first nine months of fiscal 2021, as compared with $1.59 billion and 11.8%, respectively, for the first nine months of fiscal 2020. The decline in gross profit margin during the first nine months of fiscal 2021 compared to the first nine months of fiscal 2020 is primarily due to geographical market mix and, to a lesser extent, from unfavorable changes in product and customer mix. Sales in the higher gross profit margin western regions represented approximately 55%54% of sales in the first ~~nine months~~quarter of fiscal ~~2021~~2022, as compared to ~~59%~~57% during the first ~~nine months~~quarter of fiscal ~~2020.~~2021.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A expenses”) were ~~$463.1~~$486.2 million in the ~~third~~first quarter of fiscal ~~2021, a decrease~~2022, an increase of ~~$6.6~~$15.0 million, or ~~1.4%~~3.2%, from the ~~third~~first quarter of fiscal ~~2020.~~2021. The year-over-year ~~decrease~~increase in SG&A expenses was primarily due to ~~the cost savings from restructuring activities~~increases in costs to support sales growth, increased costs related to inflation including merit pay increases for employees, and ~~lower amortization expense, partially offset by~~to a lesser extent the impact of foreign currency due to the weakening of the 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 ~~third~~first quarter of fiscal ~~2021,~~2022, SG&A expenses ~~as a percentage~~were 8.7% of sales ~~were 9.4%~~ and ~~as a percentage~~73.7% of gross profit, ~~were 81.5%,~~ as compared with ~~10.9%~~10.0% and ~~90.5%~~91.3%, respectively, in the ~~third~~first quarter of fiscal ~~2020.~~2021. The decrease in SG&A expenses as a percentage of gross profit primarily results from operating leverage created from higher sales, ~~cost savings from restructuring activities,~~increase in gross profit margin, and lower amortization expense, partially offset by ~~foreign currency due to the weakening U.S. Dollar and from the decrease in gross profit margin.~~

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SG&A expenses for the first nine months of fiscal 2021 were $1.38 billion, or 9.6% of sales, as compared with $1.39 billion, or 10.3% of sales, in the first nine months of fiscal 2020. The year-over-year decreaseincreases in SG&A expenses was primarily due to the cost savings from restructuring activities and lower amortization expense, partially offset by the impact of foreign currency due to the weakening U.S. Dollar and from the decrease in gross profit margin. SG&A expenses were 86.3% of gross profit in the first nine months of 2021 as compared with 87.6% in the first nine months of fiscal 2020.expenses.

Restructuring, Integration, and Other Expenses

As a result of management’s focus on improving operating efficiencies and reducing operating costs, the Company has incurred certain restructuring, integration, and other costs. Restructuring costs primarily relate to the restructuring of the Company’s information technology, distribution center footprint, and business operations. Integration costs primarily relate to the integration of certain regional and global businesses, as well as incremental costs incurred as part of the consolidation, relocation, sale and closure of distribution centers and office facilities. Other costs consist primarily of any other miscellaneous costs that relate to restructuring, integration and other expenses, including acquisition related costs and specific and incremental costs incurred associated with the impacts of the COVID-19 pandemic.

The Company recorded restructuring, integration and other expenses of ~~$17.6~~$5.3 million during the ~~third~~first quarter of fiscal ~~2021. The Company recorded $5.4 million~~2022, substantially all of ~~restructuring costs in the third quarter of fiscal 2021,~~ which ~~are expected~~was related to ~~provide over $7.0 million in annual operating expense savings once such restructuring actions are completed. During the third quarter of fiscal 2021, the Company also incurred~~ integration ~~costs of $12.0 million and other expenses of $0.2 million.~~costs. The after-tax impact of restructuring, integration and other expenses were ~~$13.5~~$4.3 million and ~~$0.13~~$0.04 per share on a diluted basis.

During the first nine months of fiscal 2021, the Company incurred restructuring costs of $39.9 million, integration costs of $26.5 million, which was offset by a gain on legal settlement of $8.2 million, a reversal of $2.1 million for changes in estimates for costs associated with prior year restructuring actions and a net reversal of other expenses of $0.2 million. The after-tax impact of restructuring, integration and other expenses for the first nine months of fiscal 2021 was $44.6 million and $0.44 per share on a diluted basis.

~~See Note 16 “Restructuring expenses” to the Company’s consolidated financial statements included in this Quarterly Report on Form 10-Q.~~

Operating Income ~~(Loss)~~

Operating income for the ~~third~~first quarter of fiscal 2022 was $168.2 million, an increase of $149.7 million, from the first quarter of fiscal 2021 ~~was $87.7 million, an increase~~operating income of ~~$203.4 million, or 175.7%, from the third quarter of fiscal 2020 operating loss of $115.8 million, which included goodwill and long-lived asset impairment expense of $145.8~~$18.5 million. Adjusted operating income for the ~~third~~first quarter of fiscal ~~2021~~2022 was ~~$110.5~~$178.8 million, an increase of ~~$40.2~~$113.7 million, or ~~57.1%~~174.6%, from the ~~third~~first quarter of fiscal ~~2020.~~2021. The year-over-year increase in adjusted operating income was primarily driven by the increase in sales and in gross profit margin, partially offset by ~~the reduction~~an increase in SG&A expenses.

EC operating income margin increased 49124 basis points year over year to ~~2.6%~~3.2% and Farnell operating income margin ~~decreased 95~~increased 738 basis points year over year to ~~6.0%~~10.9%.

Operating income for the first nine months of fiscal 2021 was $163.4 million, or 1.1% of consolidated sales, as compared with operating loss of $6.5 million, or negative 0.1% of consolidated sales in the first nine months of fiscal 2020. Adjusted operating income for the first nine months of fiscal 2021 was $255.2 million, a decrease of $4.7 million, or 1.8%, from the first nine months of fiscal 2020. The year-over-year decrease in adjusted operating income was primarily driven by the decline in gross profit margin, partially offset by the increase in sales and the reduction in SG&A expenses.

2522

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

Interest and other financing expenses in the ~~third~~first quarter of fiscal ~~2021~~2022 was ~~$22.3~~$22.8 million, ~~a decrease~~an increase of ~~$7.4~~$0.5 million, or ~~24.8%~~2.4%, as compared with interest and other financing expenses of $29.7 million in the third quarter of fiscal 2020. Interest and other financing expenses in the first nine months of fiscal 2021 was $66.1 million, a decrease of $31.1 million, or 32.0%, as compared with interest and other financing expenses of $97.3$22.3 million in the first ~~nine months~~quarter of fiscal ~~2020.~~2021. The ~~decrease~~increase in interest and other financing expenses inwas primarily related to more outstanding borrowings during the first ~~nine months~~quarter of fiscal ~~2021~~2022 as compared to the first ~~nine months~~quarter of fiscal ~~2020 was primarily related to lower outstanding borrowings during fiscal 2021 as compared to fiscal 2020.~~2021.

During the ~~third~~first quarter of fiscal ~~2021,~~2022, the Company had ~~$4.8 million of other income as compared with $12.6 million of other expense in the third quarter of fiscal 2020. During the first nine months of fiscal 2021, the Company had $16.1~~$0.4 million of other expense as compared with ~~$9.6~~$19.5 million of other expense in the first ~~nine months~~quarter of fiscal ~~2020.~~2021. The year-over-year differences in other ~~income (expense)~~expense was primarily due to ~~$15.2 million of~~the equity investment impairment expense included in the other expense in the first ~~nine months~~quarter of fiscal 2021, and differences in foreign currency exchange rates between the first ~~nine months~~quarters of fiscal ~~2021~~2022 and fiscal ~~2020.~~2021.

Income Tax ~~Benefit~~

For the first nine months of fiscal 2021, the Company’s effective tax rate on its income before taxes was a benefit of 32.7%. The effective tax rate for the first nine months of fiscal 2021 was favorably impacted primarily by (i) the tax benefit arising from the reduction in value of certain businesses for income tax purposes, (ii) decreases to valuation allowances, and (iii) the mix of income in lower tax jurisdictions, partially offset by (iv) increases to unrecognized tax benefit reserves.allowances.

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 ~~third~~first quarter of fiscal ~~2021~~2022 was ~~$107.5~~$111.3 million, or ~~$1.07~~$1.10 per share on a diluted basis, as compared with net loss of ~~$128.7~~$18.9 million, or ~~$1.29 per share on a diluted basis, in the third quarter of fiscal 2020.~~

As a result of the factors described in the preceding sections of this MD&A, the Company’s net income for the first nine months of fiscal 2021 was $107.8 million, or $1.08 per share on a diluted basis, as compared with net loss of $83.2 million, or $0.82$0.19 per share on a diluted basis, in the first ~~nine months~~quarter of fiscal ~~2020.~~2021.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow

Cash Flow from Operating Activities

During the first ~~nine months~~quarter of fiscal ~~2021,~~2022, the Company ~~generated $197.5~~used $31.0 million of cash flow from operations compared to ~~$442.6~~$122.4 million of cash generated by operations in the first ~~nine months~~quarter of fiscal ~~2020.~~2021. These operating cash flows were comprised of: (i) cash flow generated from net income, 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, and (ii) cash flows used for, or generated from, working capital and other, excluding cash and cash equivalents. Cash used for working capital and other was ~~$112.0~~$191.6 million during the first ~~nine months~~quarter of fiscal ~~2021,~~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 ~~receivable of $405.7 million, offset by a decrease in inventories of $63.0 million, increases in accounts~~ payable of ~~$224.2 million and accrued expenses and other~~

~~Table of Contents~~

~~of $6.5~~$85.2 million. Comparatively, cash generated from working capital and other was ~~$180.9~~$47.7 million during the first ~~nine months~~quarter of fiscal ~~2020,~~2021, including ~~decreases in accounts receivable of $150.1 million and inventories of $228.0 million, offset by decreases~~an increase in accounts payable of ~~$112.9~~$228.7 million, offset by increases in inventories of $136.4 million and accounts receivable of $7.1 million, and a decrease in accrued expenses and other of ~~$84.3~~$37.5 million.

Cash Flow from Financing Activities

During the first ~~nine months~~quarter of fiscal ~~2021,~~2022, the Company ~~made a~~received net ~~repayment~~proceeds of ~~$232.3~~$118.7 million under the Credit Facility, and $59.3 million under the Securitization Program. During the first quarter of fiscal 2022, the Company paid dividends on common stock of ~~$62.4 million.~~$23.9 million and repurchased $9.6 million of common stock.

During the first ~~nine months~~quarter of fiscal ~~2020,~~2021, the Company ~~made~~received net ~~repayments~~proceeds of ~~$127.4~~$166.9 million under the Securitization Program and made a net repayment of $234.2 million under the Credit Facility. During the first quarter of fiscal 2021, the Company paid dividends on common stock of ~~$63.2 million, and repurchased $235.8 million of common stock.~~$20.8 million.

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Cash Flow from Investing Activities

During the first ~~nine months~~quarter of fiscal ~~2021,~~2022, the Company used ~~$39.0~~$12.0 million for capital expenditures ~~primarily related to warehouse and facilities, and information technology hardware and software costs,~~ compared to ~~$61.2~~$20.0 million for capital expenditures in the first ~~nine months~~quarter of fiscal ~~2020.~~2021. During the first ~~nine months~~quarter of fiscal 2021, the Company paid ~~$18.4~~$18.7 million for an asset acquisition. ~~The Company used $51.5 million of cash for acquisitions, which is net of the cash acquired, and paid $12.5 million for other investing activities during the first nine months of fiscal 2020.~~

Contractual Obligations

For a detailed description of the Company’s long-term debt and lease commitments for the next five years and thereafter, see Long-Term Contractual Obligations appearing in Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended ~~June 27, 2020.~~July 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 outside of the normal course of business.

Financing Transactions

See Note 6,4, “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 ~~April 3,~~October 2, 2021. The Company was in compliance with all covenants under the Credit Facility and the Securitization Program as of ~~April 3,~~October 2, 2021, and ~~June 27, 2020.~~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. Outstanding borrowings under such forms of debt at the end of ~~third~~first quarter of fiscal ~~2021~~2022 was ~~$1.4~~$116.7 million.

As an alternative form of financing outside of the United States, the Company sells certain of its trade accounts receivable on a non-recourse basis to ~~third-party~~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 ~~$322.7~~$299.1 million as of ~~April 3,~~October 2, 2021, of which ~~$243.1~~$236.5 million was held outside the United States. As of ~~June 27, 2020,~~July 3, 2021, the Company held cash and cash equivalents of ~~$477.0~~$199.7 million, of which ~~$411.2~~$150.5 million was held outside of the United States.

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As of the end of the ~~third~~first quarter of fiscal ~~2021,~~2022, the Company had a combined total borrowing capacity of $1.70 billion under the Credit Facility and the Securitization Program. There were no$115.9 million in borrowings outstanding and ~~$1.3~~$1.2 million in letters of credit issued under the Credit Facility, and ~~no borrowings~~$82.2 million outstanding under the Securitization Program, resulting in approximately ~~$1.61~~$1.48 billion of total availability as of ~~April 3,~~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.

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

During the ~~third~~first quarter of fiscal ~~2021, the Company committed to an early redemption of all $300 million of its outstanding 3.75% Notes due December 2021. The Company expects to refinance such notes.~~

~~During the third quarter and first nine months of fiscal 2021,~~2022, the Company had an average daily balance outstanding of approximately ~~$249.1~~$353.0 million ~~and $138.2 million, respectively,~~ under the Credit Facility and approximately ~~$76.5~~$139.4 million ~~and $198.6 million, respectively,~~ under the Securitization Program.

During periods of weakening demand in the electronic components industry, the Company typically generates cash from operating activities. Conversely, the Company is more likely to use operating cash flows for working capital requirements during periods of higher growth. The Company ~~generated $485.1~~used $62.5 million in cash flows ~~from~~for operating activities over the trailing four fiscal quarters ended ~~April 3,~~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. ~~This includes the potential impact on liquidity and related compliance with debt covenants as a result of the uncertain future impacts of the COVID-19 pandemic.~~ To the extent the cash balances held in foreign locations cannot be remitted back to the U.S. in a tax efficient manner, those cash balances are generally used for ongoing working capital, capital expenditures and other foreign business needs. In addition, local government regulations may restrict the Company’s ability to move funds among various locations under certain circumstances. Management does not believe such restrictions would limit the Company’s ability to pursue its intended business strategy.

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

As ~~a result~~ of the evolving impacts of the COVID-19 pandemic and the related uncertain future business conditions, the Company is unlikely to make near-term strategic investments through material acquisitions. The Company also expects to use cash for restructuring, integration and other expenses.

~~As of April 3,~~October 2, 2021, the Company may repurchase up to an aggregate of ~~$469.0~~$458.5 million of shares of the Company’s common stock through a $2.95 billion share repurchase program approved by the Board of Directors. The Company may repurchase stock from time to time at the discretion of management, subject to strategic considerations, market conditions and other factors. The Company may terminate or limit the share repurchase program at any time without prior notice. ~~As a result~~During the first quarter of ~~the impacts of the COVID-19 pandemic and the corresponding need to manage liquidity and leverage,~~fiscal 2022, the Company ~~has temporarily suspended share repurchases.~~repurchased $10.5 million of common stock.

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The Company has historically paid quarterly cash dividends on shares of its common stock, and future dividends are subject to approval by the Board of Directors. During the ~~third~~first quarter of fiscal ~~2021,~~2022, the Board of Directors approved a dividend of ~~$0.21~~$0.24 per share, which resulted in ~~$20.9~~$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

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

See Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in the Company’s Annual Report on Form 10-K for the fiscal year ended ~~June 27, 2020,~~July 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 ~~June 27, 2020,~~July 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 fluctuations in market interest rates.

See Liquidity and Capital Resources — Financing Transactions appearing in Item 2 of this Quarterly Report on Form 10-Q for further discussion of the Company’s financing transactions and capital structure. As of ~~April 3,~~October 2, 2021, approximately ~~100%~~86% of the Company’s debt bears interest at a fixed rate and ~~a very insignificant percentage~~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 ~~an insignificant~~a $0.5 million decrease in income before income taxes in the Company’s consolidated statement of operations for the ~~third~~first quarter of fiscal ~~2021.~~2022.

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Item 4.

Controls and Procedures

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

During the ~~third~~first quarter of fiscal ~~2021,~~2022, there were no changes to the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

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

The discussion of 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 ~~June 27, 2020 and the revised risk factors contained in Item 1A of its Quarterly Report on Form 10-Q for the fiscal quarter ended October~~July 3, ~~2020,~~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 the Company’s business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. As of ~~April 3,~~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 ~~June 27, 2020 other than as revised by those risk factors contained in the Company’s Quarterly Reports on Form 10-Q for the fiscal quarters ended October~~July 3, ~~2020 and January 2,~~ 2021.

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Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

In August 2019, the Company’s Board of Directors amended the Company’s existing share repurchase program, increasing the cumulative total of authorized share repurchases to $2.95 billion of the Company’s common stock. ~~During~~The following table includes the ~~third~~Company’s monthly purchases of the Company’s common stock during the first quarter of fiscal ~~2021, the Company did not repurchase any shares~~2022, under the share repurchase program, ~~resulting in $469.0 million~~which is part of ~~availability under the share repurchase program as of April 3, 2021.~~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

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Item 6.

Exhibits

Exhibit
Number		Exhibit

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

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

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

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

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

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

101.SCH*		XBRL Taxonomy Extension Schema Document.

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document.

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document.

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

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SIGNATURE

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

Date: ~~April 30,~~October 29, 2021

	AVNET, INC.


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

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	April 3, 2021						June 27, 2020
	Acquired		Accumulated		Net Book		Acquired		Accumulated		Net Book
	Amount		Amortization		Value		Amount⁽¹⁾		Amortization		Value

	(Thousands)
Customer related	$	324,923	$	(312,189)	$	12,734	$	300,937	$	(266,759)	$	34,178
Trade name		57,259		(42,788)		14,471		51,698		(32,493)		19,205
Technology and other		57,756		(51,191)		6,565		53,641		(41,587)		12,054
	$	439,938	$	(406,168)	$	33,770	$	406,276	$	(340,839)	$	65,437


Fiscal Year
Remainder of fiscal 2021	$	5,261
2022		15,431
2023		6,610
2024		3,156
2025		1,472
2026		1,472
Thereafter		368
Total	$	33,770