Financial Data and Key Metrics Changes - The company reported sales of $4.6 billion and adjusted EPS of $0.60 for Q1 2020, which were in line with guidance, but down 9% year-over-year [6][21] - Gross margin declined by 76 basis points year-over-year to 11.8%, primarily due to lower sales and margins at Farnell [21] - SG&A expenses decreased by $19 million year-over-year, contributing to cash flow generation of $196 million in the quarter [21][26] Business Line Data and Key Metrics Changes - Electronic Components revenue was $4.3 billion, down approximately 1% quarter-over-quarter, with operating margins at 2.6%, compared to 3.4% a year ago [11][22] - Farnell reported revenues of $336 million, an 11% decline year-over-year, with operating margins of 6.5% [12][24] - The Americas region saw revenue of $1.2 billion, down 4% year-over-year and sequentially, while EMEA revenue was $1.5 billion, down 14% year-over-year [23][24] Market Data and Key Metrics Changes - PMI data across the United States, Europe, and China are all below 50, indicating industrial contraction [6] - Asia showed signs of stabilization with a sequential revenue increase of 9% to $1.9 billion, although still 7.6% lower than the prior year [24] - The company noted mid to long-term opportunities in retail and healthcare, with positive trends in defense and aerospace, while industrial and automotive markets remain soft [7][11] Company Strategy and Development Direction - The company is transitioning to a technology solutions provider, focusing on higher-margin segments and expanding digital capabilities [9][10] - A strategic shift in the relationship with Texas Instruments is underway, with plans to replace lost revenue by driving sales from existing suppliers and seeking new suppliers [9][10][28] - The five areas of focus for the company include amplifying Electronics Components distribution, scaling higher-margin segments, expanding digital capabilities, leveraging the ecosystem for growth, and driving continuous improvement [10][12] Management's Comments on Operating Environment and Future Outlook - Management anticipates that the current market correction will continue into 2020, but remains optimistic about long-term growth prospects [8][20] - The company is committed to reducing operating expenses and improving efficiencies, with a target of $50 million in cost reductions [19][26] - Management expects operating margins to improve as macro conditions stabilize, with a target of 2.1% to 2.6% total operating margins by summer 2020 [31] Other Important Information - The company is pursuing an acquisition of Witekio to enhance its IoT solutions and expand its ecosystem [16][18] - The transition with Texas Instruments is expected to be completed by December 31, 2020, with a focus on replacing gross profit dollars through new business [28] Q&A Session Summary Question: Transition with Texas Instruments - Management indicated that the transition will be completed by December 2020, with a linear revenue exit expected throughout the year [35][36] Question: TI Strategy Acceleration - Management clarified that the decision by TI to accelerate their direct sales strategy was not due to performance issues with Avnet [40] Question: Operating Margins Dynamics - Management explained that the decline in operating margins was influenced by a shift towards lower-margin regions and pricing pressures [42] Question: Filling the Revenue Gap Left by TI - Management outlined a threefold strategy to fill the revenue gap, including new designs, switching commodity components, and capturing share from other suppliers [46][47] Question: Working Capital Impact from TI Revenue Exit - Management noted that the exit of TI revenue would result in approximately $300 million in cash flow associated with receivables [55] Question: December Quarter Guidance - Management indicated that the guidance assumes stabilization in Farnell margins and continued pricing pressure in the Americas and EMEA [58]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 28, 2019 ☐ 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 jurisdic ...

PART I [Item 1. Business](index=3&type=section&id=Item%201.%20Business) Avnet, Inc. is a global technology solutions provider offering design, product, marketing, and supply chain expertise to 2.1 million customers in over 140 countries through its EC and Farnell groups - Avnet, Inc. is a global technology solutions company, founded in 1921, serving **2.1 million customers** in over **140 countries** with expertise across the electronic product lifecycle[5](index=5&type=chunk) - Strategic acquisitions, including Premier Farnell and Softweb Solutions, have enhanced capabilities in design, supply chain, and IoT solutions[6](index=6&type=chunk) - Avnet operates through two primary groups: **Electronic Components (EC)** for high-volume customers and **Farnell** for lower-volume prototyping needs[8](index=8&type=chunk)[11](index=11&type=chunk)[16](index=16&type=chunk) Major Product Sales (Fiscal Years 2017-2019) | Product Category | June 29, 2019 ($ Millions) | June 30, 2018 ($ Millions) | July 1, 2017 ($ Millions) | |:-----------------------------------|:---------------------------|:---------------------------|:--------------------------| | Semiconductors | $14,973.3 | $14,890.9 | $13,537.9 | | Interconnect, passive & electromechanical (IP&E) | 3,516.0 | 3,227.0 | 2,736.1 | | Computers | 533.1 | 461.9 | 504.2 | | Other | 496.2 | 457.1 | 661.8 | | **Total Sales** | **$19,518.6** | **$19,036.9** | **$17,440.0** | - **Texas Instruments** products represented approximately **10% of consolidated sales** in fiscal 2019, and **11%** in fiscal 2018 and 2017[17](index=17&type=chunk) - The electronic components industry is highly competitive, with key competitors including Arrow Electronics, Future Electronics, and Digi-Key Electronics[19](index=19&type=chunk) - Avnet's business is not materially impacted by seasonality, aside from regional sales shifts from Asia to Americas and EMEA in the second half of the fiscal year[22](index=22&type=chunk) - The company employed approximately **15,500 individuals** as of June 29, 2019, a slight increase from the prior fiscal year[23](index=23&type=chunk) [Item 1A. Risk Factors](index=7&type=section&id=Item%201A.%20Risk%20Factors) Avnet faces diverse risks including economic and geopolitical uncertainties, intense competition, supply chain dependencies, international operational challenges, and threats to information systems and data security - Economic weakness and geopolitical uncertainty, including Brexit, could negatively impact sales, margins, earnings, and increase foreign currency volatility[31](index=31&type=chunk) - The highly competitive market, rapid technological advances, and global distributors pose risks of gross profit margin deterioration[32](index=32&type=chunk)[33](index=33&type=chunk) - **Semiconductor sales** constituted approximately **77% of consolidated sales** in fiscal 2019, making the company highly vulnerable to industry fluctuations[34](index=34&type=chunk) - Dependence on key suppliers, with **Texas Instruments** representing approximately **10% of consolidated billings** in fiscal 2019, creates risk from contract termination or modification[35](index=35&type=chunk) - International operations, comprising **75% of sales** in fiscal 2019, expose Avnet to foreign currency fluctuations, trade restrictions, complex tax laws, and political instability[36](index=36&type=chunk)[37](index=37&type=chunk) - Failures in internal information systems, IT project implementation challenges, or unsuccessful acquisition integration could disrupt operations and negatively impact financial results[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) - Disruptions to global logistics, including distribution centers and third-party transportation, could cause shipment delays and adverse business impacts[41](index=41&type=chunk) - Cyber-attacks, security breaches, or data privacy incidents could lead to sales losses, increased costs, significant liability, and reputational damage[42](index=42&type=chunk) - Rapid technological change or unexpected customer order cancellations could lead to inventory value declines, adversely affecting business despite supplier protections[43](index=43&type=chunk)[44](index=44&type=chunk) - Significant customer or supplier defaults on accounts receivable, or the loss of major customers, could negatively impact working capital and financial condition[45](index=45&type=chunk) - Inability to attract and retain key employees or the loss of experienced workers could adversely impact results and strategic initiatives[47](index=47&type=chunk) - Changes in tax rules, interpretations, or unfavorable tax audits, particularly from the Tax Cuts and Jobs Act, could adversely affect effective tax rates and financial results[51](index=51&type=chunk) - Failure to maintain effective internal controls could result in inaccurate financial reporting, fraud, and harm to the company's brand and stock price[52](index=52&type=chunk)[53](index=53&type=chunk) [Item 1B. Unresolved Staff Comments](index=15&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved comments from the SEC staff regarding its previous filings - The company has no unresolved staff comments[55](index=55&type=chunk) [Item 2. Properties](index=15&type=section&id=Item%202.%20Properties) Avnet owns and leases approximately **7 million square feet** of global space, with key warehousing and value-added operations in the US, Belgium, UK, and Germany - Avnet owns approximately **2.1 million square feet** and leases **4.9 million square feet** of space globally, with about **26%** located in the United States[56](index=56&type=chunk) Key Facilities Summary | Location | Approximate Footage | Owned/Leased | Primary Use | |:----------------------------|:--------------------|:-------------|:-----------------------------------------------| | Chandler, Arizona | 400,000 | Owned | EC warehousing and value-added operations | | Tongeren, Belgium | 390,000 | Owned | EC warehousing and value-added operations | | Leeds, United Kingdom | 330,000 | Owned | Current Farnell warehousing and value-added operations | | Leeds, United Kingdom | 360,000 | Leased | Future Farnell warehousing and value-added operations | | Poing, Germany | 300,000 | Owned | EC warehousing and value-added operations | | Chandler, Arizona | 150,000 | Leased | EC warehousing, integration and value-added operations | | Gaffney, South Carolina | 220,000 | Owned | Farnell warehousing | | Hong Kong, China | 210,000 | Leased | EC warehousing | | Phoenix, Arizona | 180,000 | Leased | Corporate and EC Americas headquarters | [Item 3. Legal Proceedings](index=16&type=section&id=Item%203.%20Legal%20Proceedings) Avnet is involved in various legal proceedings and investigations, which management believes will not materially affect financial position or liquidity, but could impact results in a single reporting period - Avnet is subject to various legal proceedings and investigations concerning governmental laws and regulations, including import/export and environmental matters[58](index=58&type=chunk) - Management anticipates these matters will not materially affect financial position or liquidity, but could be material to results of operations in a single reporting period[58](index=58&type=chunk) [Item 4. Mine Safety Disclosures](index=16&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Avnet, as the company does not have operations subject to mine safety disclosures - This item is not applicable[59](index=59&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=16&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Avnet's common stock trades on Nasdaq under AVT, with dividends determined by the Board and an active share repurchase program with **$205.4 million** remaining as of June 29, 2019 - Avnet's common stock is listed on the Nasdaq Global Select Market under the symbol **AVT**[60](index=60&type=chunk) - As of July 26, 2019, there were **1,738 registered holders** of Avnet's common stock[62](index=62&type=chunk) - The Board of Directors determines future dividends based on financial condition, operating results, and capital requirements, subject to potential debt facility restrictions[61](index=61&type=chunk) - A **$2.45 billion** share repurchase program was authorized in August 2018, with **$205.4 million** remaining available as of June 29, 2019[68](index=68&type=chunk)[147](index=147&type=chunk) Issuer Purchases of Equity Securities (Q4 Fiscal 2019) | Period | Total Number of Shares Purchased | Average Price per Share | Approximate Dollar of Shares That May Yet Be Purchased under the Plans or Programs ($) | |:--------------------|:---------------------------------|:------------------------|:---------------------------------------------------------------------------------------| | April 1 – April 26 | 571,322 | $46.16 | $296,530,000 | | April 29 – May 24 | 901,400 | $43.90 | $256,955,000 | | May 27 – June 28 | 1,199,579 | $42.95 | $205,429,000 | Cumulative 5-Year Total Return (June 2014 - June 2019) | Index | 6/28/2014 | 6/27/2015 | 7/2/2016 | 7/1/2017 | 6/30/2018 | 6/29/2019 | |:-------------------|:----------|:----------|:---------|:---------|:----------|:----------| | Avnet, Inc. | $100 | $97.69 | $94.98 | $93.24 | $104.75 | $112.60 | | Nasdaq Composite | 100 | 114.44 | 112.51 | 144.35 | 178.42 | 192.30 | | Peer Group | 100 | 92.18 | 97.84 | 129.12 | 117.09 | 122.06 | [Item 6. Selected Financial Data](index=19&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents a five-year summary of Avnet's selected financial data, including statements of operations, balance sheet items, and key ratios, noting fluctuations and significant expenses Consolidated Statements of Operations (Selected Data, FY2015-2019) | Metric | June 29, 2019 ($ Millions) | June 30, 2018 ($ Millions) | July 1, 2017 ($ Millions) | July 2, 2016 ($ Millions) | June 27, 2015 ($ Millions) | |:-------------------------------------|:---------------------------|:---------------------------|:--------------------------|:--------------------------|:---------------------------| | Sales | $19,518.6 | $19,036.9 | $17,440.0 | $16,740.6 | $17,655.3 | | Gross profit | 2,486.1 | 2,527.2 | 2,369.4 | 2,077.9 | 2,210.1 | | Operating income | 365.9 | 209.2 | 443.7 | 565.1 | 646.1 | | Income tax expense | 62.2 | 288.0 | 47.1 | 87.1 | 86.1 | | Income (loss) from continuing operations | 180.1 | (142.9) | 263.4 | 390.9 | 485.4 | | Income (loss) from discontinued operations | (3.8) | (13.5) | 261.9 | 115.6 | 86.5 | | Net income (loss) | 176.3 | (156.4) | 525.3 | 506.5 | 571.9 | | Diluted EPS | $1.59 | $(1.30) | $4.08 | $3.80 | $4.12 | | Cash dividends per share | $0.80 | $0.74 | $0.70 | $0.68 | $0.64 | Consolidated Balance Sheets (Selected Data, FY2015-2019) | Metric | June 29, 2019 ($ Millions) | June 30, 2018 ($ Millions) | July 1, 2017 ($ Millions) | July 2, 2016 ($ Millions) | June 27, 2015 ($ Millions) | |:-----------------------|:---------------------------|:---------------------------|:--------------------------|:--------------------------|:---------------------------| | Working capital | $4,297.8 | $4,641.1 | $5,080.0 | $4,061.5 | $4,312.6 | | Total assets | 8,564.6 | 9,596.8 | 9,699.6 | 11,239.8 | 10,800.0 | | Long-term debt | 1,419.9 | 1,489.2 | 1,729.2 | 1,339.2 | 1,646.5 | | Shareholders' equity | 4,140.5 | 4,685.1 | 5,182.1 | 4,691.3 | 4,685.0 | Key Financial Ratios (FY2015-2019) | Ratio | June 29, 2019 | June 30, 2018 | July 1, 2017 | July 2, 2016 | June 27, 2015 | |:-------------------------------------|:--------------|:--------------|:-------------|:-------------|:--------------| | Operating income as a percentage of sales | 1.9% | 1.1% | 2.5% | 3.4% | 3.7% | | Net income (loss) as a percentage of sales | 0.9% | (0.8)% | 3.0% | 3.0% | 3.2% | | Quick ratio | 1.4:1 | 1.4:1 | 1.8:1 | 0.8:1 | 0.9:1 | | Current ratio | 2.7:1 | 2.6:1 | 3.1:1 | 1.8:1 | 2.0:1 | | Total debt to capital ratio | 29.4% | 26.1% | 25.6% | 34.7% | 29.7% | Summary of Quarterly Results (FY2018-2019) | Metric (Millions) | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Fiscal Year | |:------------------|:--------------|:---------------|:--------------|:---------------|:------------| | **2019** | | | | | | | Sales | $5,089.9 | $5,049.0 | $4,698.8 | $4,680.9 | $19,518.6 | | Gross profit | 636.8 | 630.0 | 624.2 | 595.1 | 2,486.1 | | Net income (loss) | 83.7 | 36.4 | 88.0 | (31.8) | 176.3 | | Diluted EPS | 0.72 | 0.33 | 0.81 | (0.30) | 1.59 | | **2018** | | | | | | | Sales | $4,660.9 | $4,521.6 | $4,795.1 | $5,059.2 | $19,036.9 | | Gross profit | 612.6 | 602.5 | 653.5 | 658.6 | 2,527.2 | | Net income (loss) | 58.3 | 46.7 | (320.1) | 58.6 | (156.4) |\ | Diluted EPS | 0.47 | 0.39 | (2.68) | 0.50 | (1.30) | - Fiscal 2019 included **$108.1 million** in restructuring, integration, and other expenses, and **$137.4 million** in goodwill impairment expense[74](index=74&type=chunk)[76](index=76&type=chunk) - Fiscal 2018 included **$145.1 million** in restructuring, integration, and other expenses, **$181.4 million** in goodwill impairment expense, and a **$230.0 million** one-time mandatory deemed repatriation tax expense[74](index=74&type=chunk)[76](index=76&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Avnet's financial performance over three fiscal years, detailing sales, profitability, and liquidity, highlighting a **2.5% sales increase** in fiscal 2019, improved operating income, and strong operating cash flows - Sales for fiscal 2019 increased by **2.5%** to **$19.52 billion** from **$19.04 billion** in fiscal 2018, representing a **4.4% increase** in constant currency[84](index=84&type=chunk)[88](index=88&type=chunk) - **EC sales** in fiscal 2019 increased by **2.9%** to **$18.06 billion** (4.8% in constant currency), while **Farnell sales** decreased by **2.3%** to **$1.46 billion** due to macroeconomic uncertainties[84](index=84&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk) - Gross profit margin decreased by **54 basis points** to **12.7%** in fiscal 2019, driven by industry conditions and a higher sales mix from the Asia region in EC[84](index=84&type=chunk)[94](index=94&type=chunk) - Operating income increased by **74.9%** to **$365.9 million** in fiscal 2019 from **$209.2 million** in fiscal 2018, with adjusted operating income rising to **$695.7 million** (3.6% of sales) due to cost management[84](index=84&type=chunk)[108](index=108&type=chunk) - Goodwill impairment expense of **$137.4 million** was recorded in fiscal 2019 for EC reporting units in the Americas and Asia, following a **$181.4 million** impairment in fiscal 2018[99](index=99&type=chunk)[266](index=266&type=chunk)[268](index=268&type=chunk) - Restructuring, integration, and other expenses totaled **$108.1 million** in fiscal 2019, including **$95.5 million** for restructuring costs, projected to generate **$50.0 million** in incremental annualized operating cost savings[74](index=74&type=chunk)[102](index=102&type=chunk) - Net income in fiscal 2019 was **$176.3 million** (**$1.59 diluted EPS**), a significant improvement from a net loss of **$156.4 million** (**$-1.30 diluted EPS**) in fiscal 2018[122](index=122&type=chunk) - Cash flows from operating activities increased to **$591.1 million** in fiscal 2019 from **$253.5 million** in fiscal 2018, primarily due to decreases in accounts receivable and inventories[123](index=123&type=chunk) - As of June 29, 2019, the company held **$546.1 million** in cash and cash equivalents, with **$1.52 billion** combined availability under its Credit Facility and Securitization Program[141](index=141&type=chunk)[142](index=142&type=chunk) Long-Term Contractual Obligations (as of June 29, 2019) | Contractual Obligations | Total ($ Millions) | Less than 1 year ($ Millions) | 1-3 years ($ Millions) | 3-5 years ($ Millions) | More than 5 years ($ Millions) | |:---------------------------------|:-------------------|:------------------------------|:-----------------------|:-----------------------|:-------------------------------| | Long-term debt obligations | $1,729.3 | $300.6 | $528.7 | $350.0 | $550.0 | | Interest expense on long-term debt obligations | 289.7 | 78.0 | 108.1 | 58.0 | 45.6 | | Operating lease obligations | 303.8 | 68.7 | 94.3 | 55.6 | 85.2 | - Critical accounting policies encompass inventory valuation (lower of cost or net realizable value) and income tax accounting (deferred tax assets/liabilities, unrecognized tax benefits)[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Avnet manages market risks, including interest rate and foreign currency fluctuations, through financial arrangements, natural hedging, and derivative instruments - Avnet utilizes financial arrangements to mitigate earnings and cash flow volatility arising from interest rate and foreign currency exchange rate changes[166](index=166&type=chunk) Scheduled Maturities of Debt (as of June 29, 2019) | Liability Type | 2020 ($ Millions) | 2021 ($ Millions) | 2022 ($ Millions) | Fiscal 2023 ($ Millions) | 2024 ($ Millions) | Thereafter ($ Millions) | Total ($ Millions) | |:-------------------|:------------------|:------------------|:------------------|:-------------------------|:------------------|:------------------------|:-------------------| | Fixed rate debt | $300.4 | $0.2 | $300.1 | $350.0 | — | $550.0 | $1,500.7 | | Floating rate debt | $0.2 | $228.4 | — | — | — | — | $228.6 | Carrying and Fair Value of Debt (as of June 29, 2019 and June 30, 2018) | Debt Type | Carrying Value at June 29, 2019 ($ Millions) | Fair Value at June 29, 2019 ($ Millions) | Carrying Value at June 30, 2018 ($ Millions) | Fair Value at June 30, 2018 ($ Millions) | |:-------------------|:---------------------------------------------|:-----------------------------------------|:---------------------------------------------|:-----------------------------------------| | Fixed rate debt | $1,500.7 | $1,565.2 | $1,500.8 | $1,520.4 | | Average interest rate | 4.8% | | 4.8% | | | Floating rate debt | $228.6 | $228.4 | $165.0 | $165.0 | | Average interest rate | 3.2% | | 2.7% | | - Foreign currency exposure from international transactions is managed via natural hedging and derivative financial instruments, primarily forward foreign currency exchange contracts with maturities typically under sixty days[169](index=169&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=36&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This item refers to the consolidated financial statements and supplementary data, which are detailed under Item 15 of this report - The financial statements and supplementary data are listed under Item 15 of this Report[171](index=171&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=36&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with accountants regarding accounting and financial disclosure - There are no changes in and disagreements with accountants on accounting and financial disclosure[171](index=171&type=chunk) [Item 9A. Controls and Procedures](index=36&type=section&id=Item%209A.%20Controls%20and%20Procedures) Avnet's management, including the CEO and CFO, concluded that disclosure controls and internal control over financial reporting were effective as of June 29, 2019 - Management, including the CEO and CFO, concluded that Avnet's disclosure controls and procedures were effective as of June 29, 2019[172](index=172&type=chunk) - Management assessed and concluded that the company maintained effective internal control over financial reporting as of June 29, 2019, based on the 2013 COSO framework[173](index=173&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the fourth quarter of fiscal 2019[175](index=175&type=chunk) [Item 9B. Other Information](index=37&type=section&id=Item%209B.%20Other%20Information) This item indicates that no other information is required to be reported - This item is not applicable[175](index=175&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=37&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information for this item is incorporated by reference from the definitive proxy statement for the Annual Meeting of Stockholders anticipated on November 19, 2019 - Information is incorporated by reference from the definitive proxy statement for the Annual Meeting of Stockholders anticipated on November 19, 2019[177](index=177&type=chunk) [Item 11. Executive Compensation](index=37&type=section&id=Item%2011.%20Executive%20Compensation) Information for this item is incorporated by reference from the definitive proxy statement for the Annual Meeting of Stockholders anticipated on November 19, 2019 - Information is incorporated by reference from the definitive proxy statement for the Annual Meeting of Stockholders anticipated on November 19, 2019[178](index=178&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=37&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information for this item is incorporated by reference from the definitive proxy statement for the Annual Meeting of Stockholders anticipated on November 19, 2019 - Information is incorporated by reference from the definitive proxy statement for the Annual Meeting of Stockholders anticipated on November 19, 2019[179](index=179&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=37&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information for this item is incorporated by reference from the definitive proxy statement for the Annual Meeting of Shareholders anticipated on November 19, 2019 - Information is incorporated by reference from the definitive proxy statement for the Annual Meeting of Shareholders anticipated on November 19, 2019[180](index=180&type=chunk) [Item 14. Principal Accounting Fees and Services](index=37&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information for this item is incorporated by reference from the definitive proxy statement for the Annual Meeting of Stockholders anticipated on November 19, 2019 - Information is incorporated by reference from the definitive proxy statement for the Annual Meeting of Stockholders anticipated on November 19, 2019[181](index=181&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=38&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all documents filed, including consolidated financial statements, financial statement schedules, and a comprehensive list of exhibits, with detailed notes and auditor reports - This section includes the Consolidated Financial Statements, Financial Statement Schedule II (Valuation and Qualifying Accounts), and a list of all exhibits[184](index=184&type=chunk) - The Consolidated Financial Statements include the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Operations, Comprehensive Income, Shareholders' Equity, Cash Flows, and Notes to Consolidated Financial Statements[184](index=184&type=chunk) - KPMG LLP, the company's auditor since 2002, provided opinions on the consolidated financial statements and internal control over financial reporting[189](index=189&type=chunk)[193](index=193&type=chunk) [1. Consolidated Financial Statements](index=39&type=section&id=1.%20Consolidated%20Financial%20Statements) This subsection presents Avnet's audited consolidated financial statements for fiscal years 2017-2019, including balance sheets, statements of operations, comprehensive income, shareholders' equity, cash flows, and detailed notes on accounting policies and segment information Consolidated Balance Sheets (as of June 29, 2019 and June 30, 2018) | ASSETS | 2019 (Thousands) | 2018 (Thousands) | |:--------------------------------------------------------------------------------|:-----------------|:-----------------| | Cash and cash equivalents | $546,105 | $621,125 | | Receivables, less allowances | 3,168,369 | 3,641,139 | | Inventories | 3,008,424 | 3,141,822 | | Prepaid and other current assets | 153,438 | 206,513 | | **Total current assets** | **6,876,336** | **7,610,599** | | Property, plant and equipment, net | 452,171 | 522,909 | | Goodwill | 876,728 | 980,872 | | Intangible assets, net | 143,520 | 219,913 | | Other assets | 215,801 | 262,552 | | **Total assets** | **$8,564,556** | **$9,596,845** | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Current liabilities: | | | | Short-term debt | $300,538 | $165,380 | | Accounts payable | 1,864,342 | 2,269,478 | | Accrued expenses and other | 413,696 | 534,603 | | **Total current liabilities** | **2,578,576** | **2,969,461** | | Long-term debt | 1,419,922 | 1,489,219 | | Other liabilities | 425,585 | 453,084 | | **Total liabilities** | **4,424,083** | **4,911,764** | | Shareholders' equity: | | | | Common stock | 104,038 | 115,825 | | Additional paid-in capital | 1,573,005 | 1,528,713 | | Retained earnings | 2,767,469 | 3,235,894 | | Accumulated other comprehensive loss | (304,039) | (195,351) | | **Total shareholders' equity** | **4,140,473** | **4,685,081** | | **Total liabilities and shareholders' equity** | **$8,564,556** | **$9,596,845** | Consolidated Statements of Operations (Fiscal Years 2017-2019) | Metric | June 29, 2019 (Thousands) | June 30, 2018 (Thousands) | July 1, 2017 (Thousands) | |:---------------------------------------------|:--------------------------|:--------------------------|:-------------------------| | Sales | $19,518,592 | $19,036,892 | $17,439,963 | | Cost of sales | 17,032,490 | 16,509,708 | 15,070,521 | | Gross profit | 2,486,102 | 2,527,184 | 2,369,442 | | Selling, general and administrative expenses | 1,874,651 | 1,991,401 | 1,788,330 | | Goodwill impairment expense | 137,396 | 181,440 | — | | Restructuring, integration and other expenses | 108,144 | 145,125 | 137,415 | | Operating income | 365,911 | 209,218 | 443,697 | | Other income (expense), net | 11,231 | 28,606 | (33,717) | | Interest and other financing expenses, net | (134,874) | (92,747) | (99,576) | | Income from continuing operations before taxes | 242,268 | 145,077 | 310,404 | | Income tax expense | 62,157 | 287,966 | 47,053 | | Income (loss) from continuing operations, net of tax | 180,111 | (142,889) | 263,351 | | Income (loss) from discontinued operations, net of tax | (3,774) | (13,535) | 261,927 | | Net income (loss) | $176,337 | $(156,424) | $525,278 | | Diluted earnings (loss) per share | $1.59 | $(1.30) | $4.08 | Consolidated Statements of Cash Flows (Fiscal Years 2017-2019) | Cash Flow Activity | June 29, 2019 (Thousands) | June 30, 2018 (Thousands) | July 1, 2017 (Thousands) | |:---------------------------------------------------------|:--------------------------|:--------------------------|:-------------------------| | Net cash flows provided by operating activities - continuing operations | $591,054 | $253,485 | $221,047 | | Net cash flows used for operating activities - discontinued operations | (56,284) | — | (589,738) | | **Net cash flows provided (used) by operating activities** | **534,770** | **253,485** | **(368,691)** | | Net cash flows used for financing activities - continuing operations | (582,676) | (541,893) | (1,191,591) | | Net cash flows provided by financing activities - discontinued operations | — | — | 3,447 | | **Net cash flows used for financing activities** | **(582,676)** | **(541,893)** | **(1,188,144)** | | Net cash flows used for investing activities - continuing operations | (148,685) | (164,474) | (904,485) | | Net cash flows provided by investing activities - discontinued operations | 123,473 | 236,205 | 2,242,959 | | **Net cash flows (used) provided by investing activities** | **(25,212)** | **71,731** | **1,338,474** | | Effect of currency exchange rate changes on cash and cash equivalents | (1,902) | 1,418 | 23,267 | | Cash and cash equivalents at end of period | $546,105 | $621,125 | $836,384 | - The company adopted Topic 606, Revenue from Contracts with Customers, on July 1, 2018, using the modified retrospective method, with no material impact on consolidated financial statements[190](index=190&type=chunk)[232](index=232&type=chunk)[234](index=234&type=chunk) - Avnet completed the sale of its Technology Solutions (TS) business in February 2017, with financial impacts classified as discontinued operations across all presented periods[248](index=248&type=chunk) - Goodwill impairment expense of **$137.4 million** was recorded in fiscal 2019, primarily due to lower operating results and reduced future expectations in the EC operating group's Americas and Asia regions[266](index=266&type=chunk) - Total debt (short-term and long-term) was **$1.72 billion** at June 29, 2019, with a fair value of **$1.78 billion**[278](index=278&type=chunk) - The effective tax rate on income from continuing operations before income taxes was **25.7%** in fiscal 2019, significantly lower than **198.5%** in fiscal 2018, primarily due to reduced transition tax expense and goodwill impairment[115](index=115&type=chunk)[287](index=287&type=chunk) - The company changed its assertion on unremitted foreign earnings, now expecting future repatriation and recording deferred tax liabilities accordingly[286](index=286&type=chunk) - Unrecognized tax benefits totaled **$147.2 million** as of June 29, 2019, with an estimated **$38.1 million** expected to be settled within the next twelve months[290](index=290&type=chunk)[291](index=291&type=chunk) - Stock-based compensation expense totaled **$30.1 million** in fiscal 2019, covering stock options, restricted stock units, and performance share units[309](index=309&type=chunk) Segment Sales and Operating Income (Fiscal Years 2017-2019) | Metric (Millions) | June 29, 2019 | June 30, 2018 | July 1, 2017 | |:------------------|:--------------|:--------------|:-------------| | **Sales:** | | | | | Electronic Components | $18,060.3 | $17,543.6 | $16,474.1 | | Farnell | 1,458.3 | 1,493.3 | 965.9 | | **Total Sales** | **$19,518.6** | **$19,036.9** | **$17,440.0**| | **Operating income:** | | | | | Electronic Components | $614.9 | $587.3 | $661.0 | | Farnell | 159.3 | 151.9 | 99.8 | | Corporate | (78.5) | (111.5) | (125.2) | | Restructuring, integration and other expenses | (108.1) | (145.1) | (137.4) | | Goodwill impairment | (137.4) | (181.4) | — | | Amortization of acquired intangible assets and other | (84.3) | (91.9) | (54.5) | | **Total Operating Income** | **$365.9** | **$209.2** | **$443.7** | [2. Financial Statement Schedule](index=80&type=section&id=2.%20Financial%20Statement%20Schedule) This section includes Schedule II, detailing Valuation and Qualifying Accounts for fiscal years 2017-2019, with breakdowns of changes in allowance for doubtful accounts and valuation allowance on tax loss carry-forwards Schedule II: Valuation and Qualifying Accounts (Fiscal Years 2017-2019) | Account Description | Period Start ($ Thousands) | Additions (Income) ($ Thousands) | Deductions ($ Thousands) | Period End ($ Thousands) | |:---------------------------------------------------|:---------------------------|:---------------------------------|:-------------------------|:-------------------------| | **Fiscal 2019** | | | | | | Allowance for doubtful accounts | $48,959 | $10,360 | $(5,820) | $53,499 | | Valuation allowance on tax loss carry-forwards | 239,483 | (5,274) | (2,746) | 231,463 | | **Fiscal 2018** | | | | | | Allowance for doubtful accounts | 47,272 | 6,033 | (4,346) | 48,959 | | Valuation allowance on tax loss carry-forwards | 241,687 | (4,704) | 2,500 | 239,483 | | **Fiscal 2017** | | | | | | Allowance for doubtful accounts | 27,448 | 10,741 | 14,361 | 47,272 | | Valuation allowance on tax loss carry-forwards | 63,694 | 4,477 | 173,516 | 241,687 | - The reduction in valuation allowance on tax loss carry-forwards in fiscal 2019 primarily reflects a release due to changes in management's expectation of realizing certain tax assets[342](index=342&type=chunk) [3. Exhibits](index=81&type=section&id=3.%20Exhibits) This section provides a comprehensive index of exhibits filed with the Form 10-K, including various agreements, corporate documents, stock compensation plans, and certifications - Exhibits include the Interest Purchase Agreement for the TS business sale, corporate governance documents (Certificate of Incorporation, By-laws), and indentures for debt securities[344](index=344&type=chunk) - Executive compensation plans, including letter agreements, employment agreements, change of control agreements, and various stock compensation plans, are filed as exhibits[344](index=344&type=chunk)[345](index=345&type=chunk) - Bank agreements, including the Securitization Program and the Amended and Restated Credit Agreement, outline the company's financing arrangements[346](index=346&type=chunk) - Certifications from the CEO and CFO, pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, are included as exhibits[346](index=346&type=chunk)

Avnet, Inc (NASDAQ:AVT) Q4 2019 Results Earnings Conference Call August 8, 2019 4:30 PM ET Company Participants Joe Burke - Investor Relations Bill Amelio - Chief Executive Officer Tom Liguori - Chief Financial Officer Phil Gallagher - Global President, Electronic Components Conference Call Participants Param Singh - Bank of America Merrill Lynch Shawn Harrison - Longbow Research Madison Suhr - Raymond James Matt Sheerin - Stifel Tim Yang - Citigroup Operator I would now like to turn the floor over to Joe ...

FORM 10-Q Filing Information [Filing Details](index=1&type=section&id=Filing%20Details) Avnet, Inc.'s Form 10-Q filing details for the period ended March 30, 2019, confirm SEC compliance and registrant classification - Avnet, Inc. filed its Quarterly Report on Form 10-Q for the period ended March 30, 2019[1](index=1&type=chunk) - The registrant confirmed compliance with Section 13 or 15(d) of the Securities Exchange Act of 1934 filing requirements for the preceding 12 months and the past 90 days[1](index=1&type=chunk) - Avnet, Inc. is classified as a **Large Accelerated Filer**[1](index=1&type=chunk) Common Stock Outstanding | Metric | Value | | :----- | :---- | | Common Stock Outstanding (as of April 18, 2019) | 106,296,252 shares | PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Avnet, Inc.'s unaudited interim consolidated financial statements include balance sheets, statements of operations, comprehensive income, cash flows, and detailed explanatory notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets present Avnet, Inc.'s financial position at March 30, 2019, compared to June 30, 2018, detailing assets, liabilities, and equity changes Consolidated Balance Sheets (Thousands) | Metric | March 30, 2019 (Thousands) | June 30, 2018 (Thousands) | | :----------------------------------- | :------------------------- | :------------------------ | | **ASSETS** | | | | Cash and cash equivalents | $725,252 | $621,125 | | Receivables, net | $3,188,863 | $3,641,139 | | Inventories | $3,211,979 | $3,141,822 | | Total current assets | $7,255,410 | $7,610,599 | | Total assets | $9,099,680 | $9,596,845 | | **LIABILITIES AND SHAREHOLDERS' EQUITY** | | | | Short-term debt | $50,401 | $165,380 | | Accounts payable | $1,836,543 | $2,269,478 | | Total current liabilities | $2,333,264 | $2,969,461 | | Long-term debt | $2,023,628 | $1,489,219 | | Total liabilities | $4,737,208 | $4,911,764 | | Total shareholders' equity | $4,362,472 | $4,685,081 | | Total liabilities and shareholders' equity | $9,099,680 | $9,596,845 | - Total assets decreased by approximately **$497 million** from June 30, 2018, to March 30, 2019[5](index=5&type=chunk) - Total liabilities decreased by approximately **$174 million**, while long-term debt increased by over **$534 million**[5](index=5&type=chunk) [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) The Consolidated Statements of Operations detail Avnet, Inc.'s financial performance for the third quarters and nine months ended March 30, 2019, and March 31, 2018 Consolidated Statements of Operations (Thousands) | Metric | Q3 2019 (Thousands) | Q3 2018 (Thousands) | 9 Months 2019 (Thousands) | 9 Months 2018 (Thousands) | | :----------------------------------- | :------------------ | :------------------ | :------------------------ | :------------------------ | | Sales | $4,698,824 | $4,795,093 | $14,837,683 | $13,977,672 | | Gross profit | $624,195 | $653,537 | $1,890,977 | $1,868,552 | | Operating income (loss) | $153,085 | $(58,494) | $395,951 | $87,691 | | Income (loss) from continuing operations, net of tax | $94,935 | $(315,604) | $215,239 | $(200,628) | | Net income (loss) | $88,048 | $(320,066) | $208,173 | $(215,039) | | Basic EPS - Net income (loss) | $0.81 | $(2.68) | $1.87 | $(1.78) | | Diluted EPS - Net income (loss) | $0.81 | $(2.68) | $1.85 | $(1.78) | | Cash dividends paid per common share | $0.20 | $0.19 | $0.60 | $0.55 | - Sales for the third quarter of fiscal year 2019 decreased by **2.0% year-over-year**, while sales for the first nine months of fiscal year 2019 increased by **6.2% year-over-year**[7](index=7&type=chunk) - The company reported a net income of **$88.0 million** in the third quarter of fiscal year 2019, a significant improvement from a net loss of **$320.1 million** in the third quarter of fiscal year 2018, primarily due to the absence of goodwill impairment expense in the current quarter[7](index=7&type=chunk) [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) The Consolidated Statements of Comprehensive Income detail net income (loss) and other comprehensive income (loss) for the third quarters and nine months ended March 30, 2019, and March 31, 2018 Consolidated Statements of Comprehensive Income (Thousands) | Metric | Q3 2019 (Thousands) | Q3 2018 (Thousands) | 9 Months 2019 (Thousands) | 9 Months 2018 (Thousands) | | :----------------------------------- | :------------------ | :------------------ | :------------------------ | :------------------------ | | Net income (loss) | $88,048 | $(320,066) | $208,173 | $(215,039) | | Foreign currency translation and other | $1,193 | $114,073 | $(55,203) | $230,857 | | Pension adjustments, net | $1,249 | $5,121 | $6,212 | $15,310 | | Total comprehensive income (loss) | $90,490 | $(200,872) | $159,182 | $31,128 | - Total comprehensive income significantly improved from a loss of **$200.9 million** in the third quarter of fiscal year 2018 to an income of **$90.5 million** in the third quarter of fiscal year 2019[9](index=9&type=chunk) - Foreign currency translation had a substantial positive impact in the third quarter of fiscal year 2018 (**$114.1 million**) but a negative impact over the nine months ended March 30, 2019 (**$55.2 million loss**)[9](index=9&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The Consolidated Statements of Cash Flows summarize cash generated or used in operating, investing, and financing activities for the nine months ended March 30, 2019, and March 31, 2018 Consolidated Statements of Cash Flows (Thousands) | Metric | 9 Months 2019 (Thousands) | 9 Months 2018 (Thousands) | | :-------------------------------------------------- | :------------------------ | :------------------------ | | Net cash flows provided by operating activities | $200,145 | $17,872 | | Net cash flows used for financing activities | $(88,428) | $(469,666) | | Net cash flows (used) provided by investing activities | $(2,299) | $30,115 | | Cash and cash equivalents at end of period | $725,252 | $430,065 | - Net cash flows from operating activities significantly increased to **$200.1 million** in the first nine months of fiscal year 2019 from **$17.9 million** in the prior year[12](index=12&type=chunk) - Cash used for financing activities decreased substantially from **$(469.7) million** in fiscal year 2018 to **$(88.4) million** in fiscal year 2019, partly due to net proceeds from accounts receivable securitization[12](index=12&type=chunk) - Cash and cash equivalents at the end of the period increased to **$725.3 million** from **$430.1 million** year-over-year[12](index=12&type=chunk) [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures for the consolidated financial statements, covering accounting policies, pronouncements, segment information, and specific financial line items [1. Basis of presentation and new accounting pronouncements](index=8&type=section&id=1.%20Basis%20of%20presentation%20and%20new%20accounting%20pronouncements) This note outlines the basis for interim financial statements and discusses the impact of new accounting pronouncements like Topic 606 and Topic 842 - The Company adopted Topic 606, Revenue from Contracts with Customers, on July 1, 2018, using the modified retrospective transition method, resulting in a **$2.0 million increase to retained earnings** with no material impact on consolidated financial statements[16](index=16&type=chunk)[17](index=17&type=chunk) - ASU No. 2017-07, Compensation - Retirement Benefits, adopted in fiscal year 2019, reclassified service costs to 'Selling, general and administrative expenses' and other pension costs to 'Other income, net', with no impact on income from continuing operations before taxes[19](index=19&type=chunk)[20](index=20&type=chunk) - The Company will adopt Topic 842, Leases, in the first quarter of fiscal year 2020, expecting a material increase in total assets and liabilities due to the recognition of operating lease liabilities and right-of-use assets, but no material impact on statements of operations or cash flows[26](index=26&type=chunk) [2. Revenue recognition](index=12&type=section&id=2.%20Revenue%20recognition) This note details Avnet's revenue recognition policies, including Topic 606 adoption, for electronic components and integrated solutions, with revenue generally recognized upon transfer of control - Avnet generates revenue from the distribution and sale of electronic components (semiconductors, IP&E devices) and integrated solutions, serving a diverse customer base across various markets[28](index=28&type=chunk) - Revenue is recognized when control of the products transfers to the customer, typically upon shipment, or at delivery/consumption for consigned products[29](index=29&type=chunk) - For specialized manufacturing products with no alternative use and an enforceable right to payment, revenue is recognized over time as control transfers through the manufacturing process, though these contracts represent **less than 2% of total sales**[30](index=30&type=chunk) [3. Acquisitions and Discontinued operations](index=13&type=section&id=3.%20Acquisitions%20and%20Discontinued%20operations) This note discusses the Softweb Solutions acquisition and the financial impacts of the divested Technology Solutions (TS) business as discontinued operations - Avnet acquired Softweb Solutions, a software and AI company for IoT applications, at the end of December 2018, with an immaterial impact on consolidated financial statements[34](index=34&type=chunk) - The Technology Solutions (TS) business, sold in February 2017, is classified as discontinued operations in all presented periods, with a final adjustment of **$120.0 million** executed in August 2018[35](index=35&type=chunk) - The Company has indemnified the Buyer for certain liabilities, including tax-related matters, from the TS business sale, which may result in future indemnification expenses[36](index=36&type=chunk) [4. Goodwill and long-lived assets](index=14&type=section&id=4.%20Goodwill%20and%20long-lived%20assets) This note details changes in goodwill by segment, carrying values of acquired intangible assets, and their amortization expenses Goodwill Carrying Value by Segment (Thousands) | Segment | Carrying value at June 30, 2018 (Thousands) | Additions from acquisitions (Thousands) | Foreign currency translation (Thousands) | Carrying value at March 30, 2019 (Thousands) | | :---------------- | :---------------------------------------- | :-------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Electronic Components | $479,699 | $49,405 | $(2,309) | $526,795 | | Premier Farnell | $501,173 | — | $(536) | $500,637 | | Total | $980,872 | $49,405 | $(2,845) | $1,027,432 | - Goodwill increased by **$46.6 million** to **$1,027.4 million** at March 30, 2019, primarily due to additions from acquisitions in the Electronic Components segment[38](index=38&type=chunk) - During the third quarter of fiscal year 2018, the Company recorded **$181.4 million** of goodwill impairment expense for the Americas reporting unit; no interim impairment test was required in the third quarter of fiscal year 2019[39](index=39&type=chunk) Intangible Assets Net Book Value (Thousands) | Intangible Asset Type | Net Book Value (March 30, 2019, Thousands) | Net Book Value (June 30, 2018, Thousands) | | :-------------------- | :----------------------------------------- | :---------------------------------------- | | Customer related | $102,604 | $151,710 | | Trade name | $31,055 | $37,680 | | Technology and other | $34,716 | $30,523 | | Total | $168,375 | $219,913 | - Intangible assets, net, decreased by **$51.5 million** from June 30, 2018, to March 30, 2019, with amortization expense of **$63.1 million** for the first nine months of fiscal year 2019[41](index=41&type=chunk)[43](index=43&type=chunk) [5. Debt](index=16&type=section&id=5.%20Debt) This note details Avnet's short-term and long-term debt, including credit facilities and securitization programs, along with covenant compliance and fair value disclosures Debt Summary (Thousands) | Debt Type | March 30, 2019 (Thousands) | June 30, 2018 (Thousands) | | :----------------------------------- | :------------------------- | :------------------------ | | Short-term debt | $50,401 | $165,380 | | Long-term debt | $2,023,628 | $1,489,219 | | Total debt (carrying value) | $2,074,029 | $1,654,599 | | Total debt (fair value) | $2,120,000 | $1,670,000 | - Short-term debt decreased significantly from **$165.4 million** to **$50.4 million**, while long-term debt increased by over **$534 million**, primarily due to the accounts receivable securitization program being classified as long-term debt[45](index=45&type=chunk)[46](index=46&type=chunk)[48](index=48&type=chunk) - The Company has a **$1.25 billion** senior unsecured revolving credit facility expiring in June 2023 and an accounts receivable securitization program with a maximum of **$500 million**, expiring in August 2020[48](index=48&type=chunk)[49](index=49&type=chunk) - Avnet was in compliance with all covenants under its Credit Facility and Securitization Program as of March 30, 2019, and June 30, 2018[48](index=48&type=chunk)[49](index=49&type=chunk) [6. Derivative financial instruments](index=17&type=section&id=6.%20Derivative%20financial%20instruments) This note describes Avnet's use of derivative financial instruments, primarily forward foreign exchange contracts, to mitigate foreign currency risks, detailing their fair values and impact on net other income - Avnet uses derivative financial instruments, mainly forward foreign exchange contracts (typically **less than 60 days maturity**), to reduce foreign currency exchange rate risks, primarily for international transactions where currencies collected differ from those used for purchases[51](index=51&type=chunk)[53](index=53&type=chunk) Fair Value of Derivative Financial Instruments (Thousands) | Metric | March 30, 2019 (Thousands) | June 30, 2018 (Thousands) | | :---------------------------------------------------------------------------------------------------- | :------------------------- | :------------------------ | | Forward foreign currency exchange contracts (assets) | $2,636 | $2,259 | | Forward foreign currency exchange contracts (liabilities) | $3,262 | $7,083 | Net Derivative Financial Instrument (Loss) Gain (Thousands) | Metric | Q3 2019 (Thousands) | Q3 2018 (Thousands) | 9 Months 2019 (Thousands) | 9 Months 2018 (Thousands) | | :---------------------------------------- | :------------------ | :------------------ | :------------------------ | :------------------------ | | Net derivative financial instrument (loss) gain | $(398) | $3,354 | $(17) | $5,070 | [7. Commitments and contingencies](index=19&type=section&id=7.%20Commitments%20and%20contingencies) This note addresses Avnet's involvement in various legal proceedings, claims, and investigations, including compliance matters, and estimated liabilities - Avnet is subject to various legal proceedings and investigations, including environmental and import/export matters, arising in the ordinary course of business[56](index=56&type=chunk)[57](index=57&type=chunk) - Management believes that the resolution of current legal matters will not have a material adverse effect on the Company's financial position or liquidity, but could be material to results of operations in any one reporting period[57](index=57&type=chunk) Aggregate Estimated Liabilities for Compliance-Related Matters (Thousands) | Metric | March 30, 2019 (Thousands) | June 30, 2018 (Thousands) | | :---------------------------------------------------------------------------------------------------- | :------------------------- | :------------------------ | | Aggregate estimated liabilities for compliance-related matters | $14,700 | $14,200 | [8. Income taxes](index=20&type=section&id=8.%20Income%20taxes) This note details Avnet's effective tax rates for the third quarters and nine months of fiscal years 2019 and 2018, explaining impacts from U.S. tax regulations and the transition tax Effective Tax Rate on Income from Continuing Operations Before Taxes | Metric | Q3 2019 Effective Tax Rate | Q3 2018 Effective Tax Rate | 9 Months 2019 Effective Tax Rate | 9 Months 2018 Effective Tax Rate | | :----------------------------------- | :------------------------- | :------------------------- | :------------------------------- | :------------------------------- | | Effective tax rate on income from continuing operations before taxes | 24.4% | 338.0% | 29.5% | 489.2% | - The third quarter of fiscal year 2019 effective tax rate was unfavorably impacted by new U.S. income tax regulations, partially offset by decreases in unrecognized tax benefits[59](index=59&type=chunk) - The third quarter and nine-month fiscal year 2018 effective tax rates were significantly impacted by the one-time mandatory deemed repatriation tax liability (transition tax) and non-deductible goodwill impairment expense[60](index=60&type=chunk)[62](index=62&type=chunk) - The total transition tax recorded as a result of the Act is estimated to be **$257.5 million**, finalized during the second quarter of fiscal year 2019[64](index=64&type=chunk) [9. Pension plan](index=21&type=section&id=9.%20Pension%20plan) This note outlines Avnet's net periodic pension cost components for its defined benefit plan, reflecting ASU 2017-07 adoption and discontinued operations' pension settlement expenses Net Periodic Pension (Benefit) Cost (Thousands) | Metric | Q3 2019 (Thousands) | Q3 2018 (Thousands) | 9 Months 2019 (Thousands) | 9 Months 2018 (Thousands) | | :---------------------------------------------------------------------------------------------------- | :------------------ | :------------------ | :------------------------ | :------------------------ | | Total net periodic pension cost within selling, general and administrative expenses | $3,582 | $4,305 | $11,050 | $12,040 | | Total net periodic pension benefit within other income, net | $(6,294) | $(3,270) | $(15,384) | $(12,512) | | Net periodic pension (benefit) cost | $(2,712) | $1,035 | $(4,334) | $(472) | - The Company contributed **$8.0 million** to the Plan during the first nine months of fiscal year 2019 and expects an additional **$8.0 million** contribution in the remainder of fiscal year 2019[67](index=67&type=chunk) - A pension settlement expense of **$4.9 million** (third quarter of fiscal year 2018) and **$18.9 million** (nine months of fiscal year 2018) was recorded due to former TS business employees' withdrawals, classified as loss from discontinued operations[69](index=69&type=chunk) [10. Shareholders' equity](index=22&type=section&id=10.%20Shareholders%27%20equity) This note details Avnet's share repurchase program and common stock dividend payments, including authorized and executed amounts - The Board of Directors amended the share repurchase program in August 2018, authorizing up to **$2.45 billion** of common stock repurchases[71](index=71&type=chunk) Share Repurchase Program (Q3 2019) | Metric | Q3 2019 | | :----------------------------------- | :------ | | Shares repurchased | 2.8 million | | Total cost of repurchases | $117.2 million | | Remaining authorization (as of March 30, 2019) | $322.9 million | - The Company approved a dividend of **$0.20 per common share** in February 2019, resulting in **$21.5 million** in payments during March 2019; total dividends paid for the nine months ended March 30, 2019, were **$0.60 per share**, totaling **$66.2 million**[72](index=72&type=chunk) [11. Earnings per share](index=22&type=section&id=11.%20Earnings%20per%20share) This note provides basic and diluted earnings per share calculations for continuing and discontinued operations for the third quarters and nine months ended March 30, 2019, and March 31, 2018 Earnings Per Share | Metric | Q3 2019 | Q3 2018 | 9 Months 2019 | 9 Months 2018 | | :----------------------------------- | :------ | :------ | :------------ | :------------ | | Basic EPS - Continuing operations | $0.87 | $(2.64) | $1.93 | $(1.66) | | Basic EPS - Discontinued operations | $(0.06) | $(0.04) | $(0.06) | $(0.12) | | Basic EPS - Net income (loss) | $0.81 | $(2.68) | $1.87 | $(1.78) | | Diluted EPS - Continuing operations | $0.87 | $(2.64) | $1.91 | $(1.66) | | Diluted EPS - Discontinued operations | $(0.06) | $(0.04) | $(0.06) | $(0.12) | | Diluted EPS - Net income (loss) | $0.81 | $(2.68) | $1.85 | $(1.78) | | Weighted average common shares for basic EPS | 108,074 | 119,601 | 111,222 | 120,895 | | Weighted average common shares for diluted EPS | 108,822 | 119,601 | 112,252 | 120,895 | - Diluted EPS for the third quarter of fiscal year 2019 was **$0.81**, a significant improvement from a loss of **$(2.68)** in the third quarter of fiscal year 2018; for the nine months, diluted EPS was **$1.85**, up from a loss of **$(1.78)** in the prior year[73](index=73&type=chunk) - For periods with net losses (third quarter and nine months of fiscal year 2018), diluted net loss per share was the same as basic net loss per share because potential common shares were anti-dilutive[74](index=74&type=chunk) [12. Additional cash flow information](index=23&type=section&id=12.%20Additional%20cash%20flow%20information) This note provides supplemental cash flow information, including non-cash investing and financing activities, and details on interest and income taxes paid Additional Cash Flow Information (Thousands) | Metric | 9 Months 2019 (Thousands) | 9 Months 2018 (Thousands) | | :----------------------------------- | :------------------------ | :------------------------ | | Capital expenditures incurred but not paid | $10,310 | $21,282 | | Unsettled share repurchases | $4,740 | — | | Interest paid | $87,845 | $55,924 | | Income taxes paid (continuing and discontinued operations) | $150,765 | $94,773 | - Interest paid increased by **$31.9 million**, and income taxes paid increased by **$56.0 million** for the first nine months of fiscal year 2019 compared to the prior year[75](index=75&type=chunk) - Cash and cash equivalents included **$6.5 million** (March 30, 2019) and **$6.1 million** (June 30, 2018) of investment grade money market funds and overnight time deposits[75](index=75&type=chunk) [13. Segment information](index=23&type=section&id=13.%20Segment%20information) This note presents financial information by Avnet's Electronic Components (EC) and Premier Farnell (Farnell) segments, and by geographic area, detailing sales and operating income - Avnet operates through two primary segments: Electronic Components (EC), which distributes semiconductors and IP&E devices, and Premier Farnell (Farnell), which distributes electronic components and related products through multi-channel sales[76](index=76&type=chunk) Sales and Operating Income by Segment/Region (Thousands) | Segment/Region | Q3 2019 Sales (Thousands) | Q3 2018 Sales (Thousands) | 9 Months 2019 Sales (Thousands) | 9 Months 2018 Sales (Thousands) | | :--------------- | :------------------------ | :------------------------ | :------------------------------ | :------------------------------ | | **Sales** | | | | | | Electronic Components | $4,331,351 | $4,404,115 | $13,722,890 | $12,874,885 | | Farnell | $367,473 | $390,978 | $1,114,793 | $1,102,787 | | Americas | $1,297,220 | $1,276,426 | $3,869,435 | $3,672,160 | | EMEA | $1,740,916 | $1,812,334 | $5,124,409 | $5,011,336 | | Asia/Pacific | $1,660,688 | $1,706,333 | $5,843,839 | $5,294,176 | | **Operating Income** | | | | | | Electronic Components | $153,319 | $157,713 | $473,783 | $427,162 | | Farnell | $45,651 | $42,162 | $126,088 | $108,245 | - EC sales decreased by **1.7%** in the third quarter of fiscal year 2019 year-over-year but increased by **6.6%** for the first nine months of fiscal year 2019; Farnell sales decreased by **6.0%** in the third quarter of fiscal year 2019 year-over-year[78](index=78&type=chunk) [14. Restructuring expenses](index=25&type=section&id=14.%20Restructuring%20expenses) This note details fiscal year 2019 restructuring actions, including severance, facility exit costs, and asset impairments, aimed at improving operating efficiencies and integrating acquired businesses - Avnet incurred **$76.5 million** in restructuring expenses during the first nine months of fiscal year 2019, primarily for severance (**$23.6 million**), facility and contract exit costs (**$0.6 million**), and asset impairments (**$52.3 million**)[88](index=88&type=chunk) - These actions aimed to improve operating efficiencies and integrate the Farnell acquisition, leading to a reduction of **over 300 employees** and re-prioritization of IT initiatives[87](index=87&type=chunk)[88](index=88&type=chunk) Restructuring Expenses (Thousands) | Restructuring Type | Fiscal 2019 Expenses (Thousands) | Cash Payments (Thousands) | Non-cash Amounts (Thousands) | Balance at March 30, 2019 (Thousands) | | :----------------- | :------------------------------- | :------------------------ | :--------------------------- | :------------------------------------ | | Severance | $23,640 | $(12,782) | — | $10,740 | | Facility and Contract Exit Costs | $553 | $(200) | — | $348 | | Asset Impairments | $52,344 | — | $(52,344) | — | | Total | $76,537 | $(12,982) | $(52,344) | $11,088 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Avnet's financial condition and results of operations for the third quarter and first nine months of fiscal year 2019, covering key metrics, segment performance, and liquidity [OVERVIEW](index=28&type=section&id=OVERVIEW) This overview introduces Avnet as a global technology solutions company, detailing its operating groups and summarizing sales and operating income performance for the third quarter and first nine months of fiscal year 2019 - Avnet, Inc. is a global technology solutions company founded in 1921, working with **over 1,400 technology suppliers** and serving **2.1 million customers** in **more than 140 countries**[96](index=96&type=chunk) - The Company operates through two primary operating groups: Electronic Components (EC) and Premier Farnell (Farnell), both with operations across the Americas, EMEA, and Asia[97](index=97&type=chunk) Sales and Operating Income Margin (Billions) | Metric | Q3 2019 (Billions) | Q3 2018 (Billions) | YoY Change (%) | | :----- | :----------------- | :----------------- | :------------- | | Sales | $4.70 | $4.80 | (2.0)% | | Sales (Constant Currency) | N/A | N/A | 1.2% | | Operating Income Margin | 3.3% | (1.2)% | +4.5 pp | | Adjusted Operating Income Margin | 3.8% | 3.6% | +0.2 pp | - Sales for the first nine months of fiscal year 2019 increased by **6.2%** to **$14.84 billion** (**7.9% in constant currency**), with all regions experiencing organic sales growth[99](index=99&type=chunk) [Sales](index=29&type=section&id=Sales) This section details sales performance by segment (EC, Farnell) and geographic region (Americas, EMEA, Asia) for the third quarter and first nine months of fiscal year 2019, including constant currency adjustments Sales by Segment/Region (Thousands) | Segment/Region | Q3 2019 Sales (Thousands) | Q3 2018 Sales (Thousands) | YoY % Change (Reported) | YoY % Change (Constant Currency) | | :--------------- | :------------------------ | :------------------------ | :---------------------- | :------------------------------- | | Avnet Total | $4,698,824 | $4,795,093 | (2.0)% | 1.2% | | Americas | $1,297,220 | $1,276,426 | 1.6% | 1.6% | | EMEA | $1,740,916 | $1,812,334 | (3.9)% | 3.8% | | Asia | $1,660,688 | $1,706,333 | (2.7)% | (2.0)% | | EC | $4,331,351 | $4,404,115 | (1.7)% | 1.5% | | Farnell | $367,473 | $390,978 | (6.0)% | (1.5)% | Sales by Segment/Region (Thousands) | Segment/Region | 9 Months 2019 Sales (Thousands) | 9 Months 2018 Sales (Thousands) | YoY % Change (Reported) | YoY % Change (Constant Currency) | | :--------------- | :------------------------------ | :------------------------------ | :---------------------- | :------------------------------- | | Avnet Total | $14,837,683 | $13,977,672 | 6.2% | 7.9% | | Americas | $3,869,435 | $3,672,160 | 5.4% | 5.4% | | EMEA | $5,124,409 | $5,011,336 | 2.3% | 6.5% | | Asia | $5,843,839 | $5,294,176 | 10.4% | 10.8% | | EC | $13,722,890 | $12,874,885 | 6.6% | 8.3% | | Farnell | $1,114,793 | $1,102,787 | 1.1% | 3.8% | - Farnell sales declined **1.5% year-over-year** in constant currency for the third quarter of fiscal year 2019, primarily due to uncertainties related to Brexit impacting market demand[108](index=108&type=chunk) [Gross Profit and Gross Profit Margins](index=30&type=section&id=Gross%20Profit%20and%20Gross%20Profit%20Margins) This section analyzes changes in gross profit and margins for the third quarter and first nine months of fiscal year 2019, attributing shifts to sales volume, product mix, and supplier program changes Gross Profit and Gross Profit Margin (Millions) | Metric | Q3 2019 (Millions) | Q3 2018 (Millions) | YoY Change (%) | | :----- | :----------------- | :----------------- | :------------- | | Gross profit | $624.2 | $653.5 | (4.5)% | | Gross profit margin | 13.3% | 13.6% | (35 bps) | | EC gross profit margin | N/A | N/A | (30 bps) | | Farnell gross profit margin | N/A | N/A | +35 bps | - The decrease in gross profit margin in the third quarter of fiscal year 2019 was driven by year-over-year decreases in the EMEA and Asia regions, partially offset by an increase in the Americas[111](index=111&type=chunk) - For the first nine months of fiscal year 2019, gross profit margin decreased to **12.7%** from **13.4%** in the prior year, primarily due to an increased mix of sales from lower-margin Asia and supplier program changes[113](index=113&type=chunk) [Selling, General and Administrative Expenses](index=30&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses) This section discusses changes in Selling, General and Administrative (SG&A) expenses, highlighting reductions from restructuring and foreign currency translation, and their impact on SG&A as a percentage of sales and gross profit Selling, General and Administrative Expenses (Millions) | Metric | Q3 2019 (Millions) | Q3 2018 (Millions) | YoY Change (%) | | :----- | :----------------- | :----------------- | :------------- | | SG&A expenses | $468.2 | $505.5 | (7.4)% | | SG&A as % of sales | 10.0% | 10.5% | (0.5 pp) | | SG&A as % of gross profit | 75.0% | 77.3% | (2.3 pp) | - The decrease in SG&A expenses was primarily due to reductions from management's restructuring programs, favorable foreign currency translation rates, and lower Corporate costs, partially offset by sales volume growth[114](index=114&type=chunk)[116](index=116&type=chunk) - For the first nine months of fiscal year 2019, SG&A expenses decreased to **$1.42 billion** (**9.5% of sales**) from **$1.49 billion** (**10.7% of sales**) in the prior year[116](index=116&type=chunk) [Goodwill Impairment Expense](index=30&type=section&id=Goodwill%20Impairment%20Expense) This section explains the goodwill impairment expense recorded in fiscal year 2018 and the Company's quarterly evaluation process for goodwill impairment - During the third quarter of fiscal year 2018, Avnet recorded **$181.4 million** of goodwill impairment expense related to the Americas reporting unit[117](index=117&type=chunk) - No interim goodwill impairment test was required in the third quarter of fiscal year 2019, as facts and circumstances did not indicate that the fair value of reporting units was less than their carrying value[118](index=118&type=chunk) - The Company performs an annual goodwill impairment test during the fiscal fourth quarter, considering long-term planning and market conditions[119](index=119&type=chunk) [Restructuring, Integration and Other Expenses](index=32&type=section&id=Restructuring%2C%20Integration%20and%20Other%20Expenses) This section details Avnet's restructuring, integration, and other expenses, including severance, asset impairments, accelerated depreciation, and real estate sale gains, and their financial impact - Avnet incurred **$2.9 million** in restructuring, integration, and other expenses in the third quarter of fiscal year 2019, down from **$25.1 million** in the third quarter of fiscal year 2018[121](index=121&type=chunk)[123](index=123&type=chunk) - Third quarter of fiscal year 2019 expenses included **$13.4 million** in restructuring costs (severance, IT software impairment), **$2.4 million** in integration costs, and **$2.7 million** in accelerated depreciation, partially offset by a **$15.1 million gain** on real estate sale[121](index=121&type=chunk) - For the first nine months of fiscal year 2019, total restructuring, integration, and other expenses were **$79.9 million**, with an after-tax impact of **$60.7 million** (**$0.54 diluted EPS**)[122](index=122&type=chunk) [Operating Income (Loss)](index=34&type=section&id=Operating%20Income%20%28Loss%29) This section analyzes Avnet's significant operating income improvement for the third quarter and first nine months of fiscal year 2019, driven by reduced SG&A and no goodwill impairment Operating Income (Loss) (Millions) | Metric | Q3 2019 (Millions) | Q3 2018 (Millions) | YoY Change (%) | | :----- | :----------------- | :----------------- | :------------- | | Operating income (loss) | $153.1 | $(58.5) | +361.7% | | Adjusted operating income | $178.1 | $170.8 | +4.3% | | EC operating income margin | 3.5% | 3.54% | (4 bps) | | Farnell operating income margin | 12.4% | 10.76% | +164 bps | - The substantial increase in operating income was primarily due to reduced selling, general and administrative expenses and the absence of goodwill impairment expense compared to the third quarter of fiscal year 2018[125](index=125&type=chunk) - For the first nine months of fiscal year 2019, operating income was **$396.0 million** (**2.7% of sales**), and adjusted operating income was **$539.5 million** (**3.6% of sales**), both significantly higher than the prior year[127](index=127&type=chunk) [Interest and Other Financing Expenses, Net and Other Income, Net](index=34&type=section&id=Interest%20and%20Other%20Financing%20Expenses%2C%20Net%20and%20Other%20Income%2C%20Net) This section reviews changes in net interest and other financing expenses, and net other income, for the third quarter and first nine months of fiscal year 2019, attributing shifts to financing costs and pension-related income/losses Interest and Other Financing Expenses, Net and Other Income, Net (Millions) | Metric | Q3 2019 (Millions) | Q3 2018 (Millions) | YoY Change (%) | | :----- | :----------------- | :----------------- | :------------- | | Interest and other financing expenses, net | $36.3 | $23.4 | +54.7% | | Other income, net | $8.7 | $9.9 | (12.1)% | - The increase in interest and other financing expenses was primarily due to increased expenses in foreign regions to finance working capital needs, including higher average debt outstanding and lower interest income[128](index=128&type=chunk) - Other income in the third quarter and the first nine months of fiscal year 2019 was related to the Company's pension plans, partially offset by foreign currency losses[129](index=129&type=chunk) [Income Tax Expense](index=34&type=section&id=Income%20Tax%20Expense) This section analyzes Avnet's effective tax rates and influencing factors for the third quarter and first nine months of fiscal years 2019 and 2018, including U.S. tax regulations and the transition tax Effective Tax Rate on Income from Continuing Operations Before Taxes | Metric | Q3 2019 Effective Tax Rate | Q3 2018 Effective Tax Rate | 9 Months 2019 Effective Tax Rate | 9 Months 2018 Effective Tax Rate | | :----------------------------------- | :------------------------- | :------------------------- | :------------------------------- | :------------------------------- | | Effective tax rate on income from continuing operations before taxes | 24.4% | 338.0% | 29.5% | 489.2% | - The third quarter of fiscal year 2019 effective tax rate was unfavorably impacted by new U.S. income tax regulations, partially offset by decreases in unrecognized tax benefits[130](index=130&type=chunk) - The third quarter and nine-month fiscal year 2018 effective tax rates were significantly impacted by the one-time mandatory deemed repatriation tax liability (transition tax) and non-deductible goodwill impairment[131](index=131&type=chunk)[134](index=134&type=chunk) [Loss from Discontinued Operations](index=36&type=section&id=Loss%20from%20Discontinued%20Operations) This section reports the loss from discontinued operations for the third quarter and first nine months of fiscal years 2019 and 2018, primarily due to tax expenses and pension settlement losses from the divested TS business Loss from Discontinued Operations (Millions) | Metric | Q3 2019 (Millions) | Q3 2018 (Millions) | 9 Months 2019 (Millions) | 9 Months 2018 (Millions) | | :----- | :----------------- | :----------------- | :----------------------- | :----------------------- | | Loss from discontinued operations | $6.9 | $4.5 | $7.1 | $14.4 | - Loss from discontinued operations in fiscal year 2019 was primarily due to additional income tax expenses associated with the TS business[136](index=136&type=chunk) - Losses in fiscal year 2018 were mainly due to pension settlement losses from former TS business employees requesting distributions from the pension plan[137](index=137&type=chunk) [Net Income (Loss)](index=36&type=section&id=Net%20Income%20%28Loss%29) This section summarizes Avnet's net income (loss) and diluted earnings per share for the third quarter and first nine months of fiscal years 2019 and 2018, reflecting all discussed financial factors Net Income (Loss) (Millions) | Metric | Q3 2019 (Millions) | Q3 2018 (Millions) | 9 Months 2019 (Millions) | 9 Months 2018 (Millions) | | :----- | :----------------- | :----------------- | :----------------------- | :----------------------- | | Net income (loss) | $88.0 | $(320.1) | $208.2 | $(215.0) | | Diluted EPS | $0.81 | $(2.68) | $1.85 | $(1.78) | - Avnet reported a net income of **$88.0 million** (**$0.81 diluted EPS**) in the third quarter of fiscal year 2019, a significant turnaround from a net loss of **$320.1 million** (**$(2.68) diluted EPS**) in the third quarter of fiscal year 2018[138](index=138&type=chunk) - For the first nine months of fiscal year 2019, net income was **$208.2 million** (**$1.85 diluted EPS**), compared to a net loss of **$215.0 million** (**$(1.78) diluted EPS**) in the prior year[139](index=139&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=36&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses Avnet's liquidity and capital resources, including cash flow from operating, financing, and investing activities, contractual obligations, financing transactions, and overall liquidity [Cash Flow](index=36&type=section&id=Cash%20Flow) This sub-section details Avnet's cash flows from operating, financing, and investing activities for the first nine months of fiscal years 2019 and 2018, highlighting significant changes and drivers - Cash generated from operating activities from continuing operations increased significantly to **$256.4 million** in the first nine months of fiscal year 2019, compared to **$17.9 million** in the prior year[140](index=140&type=chunk) - Working capital used cash of **$206.9 million** in fiscal year 2019, driven by increases in inventories and decreases in accounts payable and accrued expenses, partially offset by a decrease in accounts receivable[140](index=140&type=chunk) - Financing activities in fiscal year 2019 included **$342.0 million** net proceeds from accounts receivable securitization and **$85.0 million** from bank credit facilities, alongside **$447.9 million** in common stock repurchases and **$66.2 million** in dividends[142](index=142&type=chunk) - Investing activities in fiscal year 2019 included **$101.4 million** for capital expenditures and **$66.5 million** for acquisitions, partially offset by **$41.0 million** from real estate sales and **$123.5 million** from discontinued operations[144](index=144&type=chunk)[145](index=145&type=chunk) [Contractual Obligations](index=38&type=section&id=Contractual%20Obligations) This sub-section refers to the Annual Report for detailed contractual obligations, noting no material changes beyond normal debt and lease activities - No material changes to long-term debt and lease commitments were reported outside of normal borrowings and repayments, as detailed in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2018[146](index=146&type=chunk) - The Company does not currently have any material non-cancellable commitments for capital expenditures or inventory purchases[146](index=146&type=chunk) [Financing Transactions](index=38&type=section&id=Financing%20Transactions) This sub-section provides additional information on Avnet's financing arrangements, including debt covenant compliance and the use of factoring agreements for trade accounts receivable - Avnet was in compliance with all covenants under its Credit Facility and Securitization Program as of March 30, 2019, and June 30, 2018[147](index=147&type=chunk) - The Company sells certain trade accounts receivable on a non-recourse basis to third-party financial institutions as an alternative financing method outside the U.S., with cash proceeds classified as operating activities[149](index=149&type=chunk) [Liquidity](index=40&type=section&id=Liquidity) This sub-section assesses Avnet's overall liquidity position, including cash and cash equivalents, available borrowing capacity, and strategies for managing foreign cash balances and future capital needs Liquidity Metrics (Millions) | Metric | March 30, 2019 (Millions) | June 30, 2018 (Millions) | | :----------------------------------- | :------------------------ | :------------------------ | | Cash and cash equivalents | $725.3 | $621.1 | | Cash held outside the United States | $660.7 | $545.3 | | Total borrowing capacity (Credit Facility + Securitization Program) | $1,750.0 | N/A | | Total availability (as of March 30, 2019) | $1,210.0 | N/A | - Avnet generated **$492.0 million** in cash flows from operating activities from continuing operations over the trailing four fiscal quarters ended March 30, 2019[152](index=152&type=chunk) - Management believes available borrowing capacity and expected operating cash flows will be sufficient to meet future liquidity needs, with foreign cash balances generally used for working capital, capital expenditures, and acquisitions, and expected to be permanently reinvested outside the U.S.[153](index=153&type=chunk)[154](index=154&type=chunk) - The Company expects to continue strategic investments through acquisitions, make capital expenditures, and use cash for restructuring and integration expenses[154](index=154&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Avnet discusses its exposure to foreign currency and interest rate risks, outlining mitigation strategies with no material changes since the prior fiscal year-end [Market Risk Disclosures](index=41&type=section&id=Market%20Risk%20Disclosures) This section discusses Avnet's exposure to market risks, primarily foreign currency and interest rates, and mitigation strategies, noting no material changes since the prior fiscal year-end - Avnet aims to reduce earnings and cash flow volatility from foreign currency exchange rate changes through natural hedging and derivative financial instruments (economic hedges)[158](index=158&type=chunk) - The Company's exposure to market risks has not materially changed since June 30, 2018, with the majority of foreign currency exchange exposures economically hedged[159](index=159&type=chunk) - For interest rate risk, Avnet maintains a combination of fixed and variable rate debt; as of March 30, 2019, **72% of debt was fixed-rate** and **28% was variable-rate**[160](index=160&type=chunk) - A hypothetical **1.0% increase in interest rates** would result in a **$1.5 million decrease** in income from continuing operations before income taxes for the third quarter of fiscal year 2019[160](index=160&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) [Evaluation of Disclosure Controls and Procedures](index=41&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Avnet's management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of March 30, 2019 - Avnet's management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of March 30, 2019[161](index=161&type=chunk) - No changes to the Company's internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the third quarter of fiscal year 2019[162](index=162&type=chunk) [PART II. OTHER INFORMATION](index=43&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) This section discloses Avnet's involvement in various legal proceedings, including environmental and compliance matters, and management's assessment of their potential financial impact - Avnet may incur future liability under environmental laws and regulations due to former manufacturing operations, including cleanup costs for contamination[163](index=163&type=chunk) - Management believes that the resolution of current legal matters will not have a material adverse effect on the Company's financial position or liquidity, but could be material to its results of operations in any one reporting period[165](index=165&type=chunk) - The Company has appropriately accrued for its share of estimable costs related to environmental and other compliance matters in its consolidated financial statements[164](index=164&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) This section outlines key risk factors that could materially affect Avnet's future operations, including competitive pressures, industry cycles, supplier relationships, international risks, and geopolitical events - Key risk factors include competitive pressures, industry down-cycles in semiconductors, relationships with key suppliers, and risks associated with international sales and operations (e.g., foreign currency fluctuations, repatriation of cash)[166](index=166&type=chunk) - Risks also encompass acquisitions, divestitures, adverse effects on the supply chain, cyber-attacks, general economic conditions, and geopolitical events such as Brexit, which may impact operations and financial condition[166](index=166&type=chunk)[167](index=167&type=chunk) - As of March 30, 2019, there have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2018[169](index=169&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details Avnet's common stock repurchase activities under its publicly announced share repurchase program during the third quarter of fiscal year 2019 - Avnet's Board of Directors approved a share repurchase program of up to **$2.45 billion** of common stock[170](index=170&type=chunk) Common Stock Repurchase Activities (Q3 Fiscal 2019) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares That May Yet Be Purchased | | :-------------------------- | :------------------------------- | :--------------------------- | :--------------------------------------------------------- | | December 31 – January 25 | 1,266,377 | $39.50 | $390,116,000 | | January 28 – February 22 | 277,154 | $44.19 | $377,869,000 | | February 25 – March 29 | 1,272,749 | $43.19 | $322,905,000 | - During the third quarter of fiscal year 2019, the Company repurchased a total of **2,816,280 shares** under the program[171](index=171&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL documents - The exhibits include certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[173](index=173&type=chunk) - XBRL Instance Document and Taxonomy Extension Documents (Schema, Definition, Calculation, Label, Presentation) are also filed as exhibits[173](index=173&type=chunk) [Signature Page](index=47&type=section&id=Signature%20Page) [Report Signature](index=47&type=section&id=Report%20Signature) This page formally concludes the Form 10-Q filing, signed by Avnet, Inc.'s Chief Financial Officer - The report was signed on April 26, 2019, by Thomas Liguori, Chief Financial Officer of Avnet, Inc.[177](index=177&type=chunk)

Avnet, Inc. (NASDAQ:AVT) Q3 2019 Earnings Conference Call April 25, 2019 4:30 PM ET Company Participants Ina McGuinness - Investor Relations Bill Amelio - Chief Executive Officer Tom Liguori - Chief Financial Officer Phil Gallagher - Global President, Electronic Components Conference Call Participants Adam Tindle - Raymond James Shawn Harrison - Longbow Research Joe Quatrochi - Wells Fargo Matt Sheerin - Stifel Steven Fox - Cross Research Tim Yang - Citi Mark Delaney - Goldman Sachs Adrienne Colby - Deutsch ...

Table of Contents 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 December 29, 2018 ☐ 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 jurisdict ...