Avnet(AVT) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Presents unaudited consolidated financial statements for Q1 FY2021, reporting a net loss of $18.9 million compared to a $41.8 million net income in the prior-year period Consolidated Balance Sheets Consolidated Balance Sheets (in millions) | Balance Sheet Items | Oct 3, 2020 | June 27, 2020 | | :--- | :--- | :--- | | Total Assets | $8,381.4 | $8,105.2 | | Total current assets | $6,602.2 | $6,328.8 | | Total Liabilities | $4,603.9 | $4,378.8 | | Total current liabilities | $2,766.4 | $2,280.4 | | Long-term debt | $1,195.2 | $1,424.8 | | Total Shareholders' Equity | $3,777.5 | $3,726.4 | Consolidated Statements of Operations Consolidated Statements of Operations (in millions, except per share) | Income Statement | Q1 FY2021 (ended Oct 3, 2020) | Q1 FY2020 (ended Sep 28, 2019) | | :--- | :--- | :--- | | Sales | $4,723.1 | $4,630.0 | | Gross Profit | $516.1 | $543.8 | | Operating Income | $18.5 | $62.7 | | Net (Loss) Income | $(18.9) | $41.8 | | Diluted (Loss) Earnings Per Share | $(0.19) | $0.40 | Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (in millions) | Cash Flow Activity | Q1 FY2021 (ended Oct 3, 2020) | Q1 FY2020 (ended Sep 28, 2019) | | :--- | :--- | :--- | | Net cash provided by operating activities | $122.4 | $195.6 | | Net cash used for investing activities | $(37.9) | $(42.4) | | Net cash used for financing activities | $(88.3) | $(22.8) | | Cash and cash equivalents at end of period | $483.1 | $664.1 | Notes to Consolidated Financial Statements - The first quarter of fiscal 2021 contained 14 weeks, compared to 13 weeks in the first quarter of fiscal 2020, which impacts year-over-year comparisons[19] - The company adopted Topic 326 (Credit Losses), resulting in a cumulative effect adjustment that increased the allowance for credit losses by $17.2 million ($14.5 million, net of tax)[21] Segment Sales (in millions) | Segment Sales | Q1 FY2021 | Q1 FY2020 | | :--- | :--- | :--- | | Electronic Components | $4,382.1 | $4,294.2 | | Farnell | $340.9 | $335.8 | | Total Sales | $4,723.1 | $4,630.0 | - During Q1 FY2021, the company initiated restructuring actions, recording $26.9 million in expenses related to severance and facility exit costs, primarily impacting over 150 employees[69][70] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes Q1 FY2021 financial results, noting a 2.0% reported sales increase to $4.72 billion, but a 6.0% organic sales decrease, with operating income falling 70.5% to $18.5 million Key Financial Metrics | Metric | Q1 FY2021 | Q1 FY2020 | | :--- | :--- | :--- | | Sales | $4.72B | $4.63B | | YoY Sales Growth (Reported) | 2.0% | - | | YoY Sales Growth (Organic, Constant Currency) | (6.0%) | - | | Gross Profit Margin | 10.9% | 11.7% | | Operating Income | $18.5M | $62.7M | | Adjusted Operating Income | $65.1M | $107.4M | - The decrease in organic sales was attributed to the negative impacts of the COVID-19 pandemic across all segments and regions, and lower sales from the Texas Instruments (TI) distribution agreement, which is set to terminate[84] - The company recorded restructuring, integration, and other expenses of $26.4 million in Q1 FY2021, which included a gain on a legal settlement of $8.2 million[99] - As of October 3, 2020, the company had a strong liquidity position with $483.1 million in cash and cash equivalents and approximately $1.48 billion of total availability under its credit facilities[116][117] Item 3. Quantitative and Qualitative Disclosures About Market Risk Reports no material changes in market risk exposure since FY2020, with 88% of debt at a fixed rate as of October 3, 2020 - The company's exposure to market risks associated with foreign currency exchange rates and interest rates has not changed materially since June 27, 2020[128] - As of October 3, 2020, 88% of the company's debt bears interest at a fixed rate, while 12% is at variable rates, with a hypothetical 1.0% interest rate increase resulting in a $0.4 million decrease in pre-tax income for the quarter[129] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of October 3, 2020, with no material changes to internal control over financial reporting - The Interim CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[130] - No material changes were made to the company's internal control over financial reporting during the first quarter of fiscal 2021[131] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal proceedings, not expected to materially impact financial position or liquidity - The company does not anticipate that any pending lawsuits, claims, or investigations will have a material adverse effect on its financial condition, liquidity, or results of operations[51][132] Item 1A. Risk Factors No material changes to risk factors from the 10-K, except for revised risks concerning the COVID-19 pandemic and logistics disruptions - The COVID-19 pandemic has negatively impacted the global economy and the company's operations, with its ultimate impact remaining uncertain until a vaccine is widely available[135][136] - Major disruptions to the company's global logistics capabilities, from IT issues, natural disasters, pandemics, or reliance on third-party transportation, could adversely impact operations and profitability[137] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q1 FY2021, Avnet did not repurchase any shares of its common stock, with $469.0 million remaining available under the program - The company did not repurchase any shares during the first quarter of fiscal 2021[138] - As of October 3, 2020, $469.0 million remained available under the company's share repurchase authorization[58][138] Item 6. Exhibits Lists exhibits filed with Form 10-Q, including CEO and CFO certifications under Sarbanes-Oxley Act Sections 302 and 906 - The report includes certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[140] Signature Page Confirms the official signing of the Form 10-Q report by the Chief Financial Officer on October 30, 2020 - The Form 10-Q report was duly signed on October 30, 2020, by Thomas Liguori, the Chief Financial Officer of Avnet, Inc[143][144]