Avnet(AVT) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents Avnet, Inc.'s unaudited consolidated financial statements, including balance sheets, statements of operations, comprehensive income, shareholders' equity, cash flows, and detailed notes Consolidated Balance Sheets The consolidated balance sheets detail Avnet, Inc.'s financial position at April 3, 2021, and June 27, 2020 | Metric | April 3, 2021 (Millions) | June 27, 2020 (Millions) | | :---------------------------------- | :------------------------ | :------------------------ | | ASSETS | | | | Total current assets | $6,604.6 | $6,328.8 | | Property, plant and equipment, net | $381.1 | $404.6 | | Goodwill | $838.5 | $773.7 | | Intangible assets, net | $33.8 | $65.4 | | Total assets | $8,365.9 | $8,105.2 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Total current liabilities | $2,885.9 | $2,280.4 | | Long-term debt | $895.9 | $1,424.8 | | Total liabilities | $4,428.0 | $4,378.8 | | Total shareholders' equity | $3,937.9 | $3,726.4 | | Total liabilities and shareholders' equity | $8,365.9 | $8,105.2 | Consolidated Statements of Operations The consolidated statements of operations detail financial performance for Q3 and nine months ended April 3, 2021, and March 28, 2020 | Metric | Q3 Ended April 3, 2021 (Millions) | Q3 Ended March 28, 2020 (Millions) | 9 Months Ended April 3, 2021 (Millions) | 9 Months Ended March 28, 2020 (Millions) | | :----------------------------------- | :--------------------------------- | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | | Sales | $4,916.7 | $4,309.8 | $14,307.9 | $13,474.6 | | Gross profit | $568.4 | $518.9 | $1,595.7 | $1,588.4 | | Operating income (loss) | $87.7 | $(115.8) | $163.4 | $(6.5) | | Income (loss) before taxes | $70.1 | $(158.1) | $81.2 | $(113.4) | | Net income (loss) | $107.5 | $(128.7) | $107.8 | $(83.2) | | Basic EPS | $1.08 | $(1.29) | $1.09 | $(0.82) | | Diluted EPS | $1.07 | $(1.29) | $1.08 | $(0.82) | Consolidated Statements of Comprehensive Income The consolidated statements of comprehensive income detail net income (loss) and other comprehensive income components for Q3 and nine months | Metric | Q3 Ended April 3, 2021 (Millions) | Q3 Ended March 28, 2020 (Millions) | 9 Months Ended April 3, 2021 (Millions) | 9 Months Ended March 28, 2020 (Millions) | | :----------------------------------- | :--------------------------------- | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net income (loss) | $107.5 | $(128.7) | $107.8 | $(83.2) | | Foreign currency translation and other | $(65.0) | $(96.4) | $145.4 | $(105.3) | | Pension adjustments, net | $4.0 | $3.2 | $17.6 | $10.1 | | Total comprehensive income (loss) | $46.4 | $(221.8) | $270.7 | $(178.4) | Consolidated Statements of Shareholders' Equity The consolidated statements of shareholders' equity detail changes in common stock, paid-in capital, retained earnings, and comprehensive loss | Metric | Balance, June 27, 2020 (Millions) | Balance, April 3, 2021 (Millions) | | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Common Stock - Shares | 98,793 | 99,489 | | Common Stock - Amount | $98.8 | $99.5 | | Additional Paid-In Capital | $1,594.1 | $1,611.1 | | Retained Earnings | $2,421.8 | $2,452.7 | | Accumulated Other Comprehensive (Loss) Income | $(388.4) | $(225.4) | | Total Shareholders' Equity | $3,726.4 | $3,937.9 | - Net income contributed $107.5 million to retained earnings in the quarter ended April 3, 2021, while cash dividends of $20.9 million were paid[16] Consolidated Statements of Cash Flows The consolidated statements of cash flows present cash generated from operating, investing, and financing activities for the nine months | Metric | 9 Months Ended April 3, 2021 (Millions) | 9 Months Ended March 28, 2020 (Millions) | | :------------------------------------------ | :--------------------------------------- | :--------------------------------------- | | Net cash flows provided by operating activities | $197.5 | $442.6 | | Net cash flows used for financing activities | $(308.4) | $(444.4) | | Net cash flows used for investing activities | $(51.2) | $(125.2) | | Effect of currency exchange rate changes | $7.8 | $(16.4) | | Cash and cash equivalents at end of period | $322.7 | $402.7 | Notes to Consolidated Financial Statements These notes provide additional information on financial statements, including accounting policies, acquisitions, receivables, debt, leases, and segment data 1. Basis of presentation and new accounting pronouncements This note outlines the basis for interim financial statements and discusses recently adopted and issued accounting pronouncements - The Company adopted ASU No. 2018-15 in Q1 fiscal 2021, which did not materially impact financial statements[23] - Topic 326 (Credit Losses) was adopted on June 28, 2020, increasing the allowance for credit losses by $17.2 million ($14.5 million net of tax) due to a shift from an incurred loss to an expected loss model[24] - The Company is evaluating ASU No. 2020-04 and ASU No. 2021-01 (Reference Rate Reform) but does not expect a material impact, and ASU No. 2019-12 (Income Taxes) and ASU No. 2018-14 (Defined Benefit Plans) are pending adoption in fiscal 2022[25][26][27] 2. Summary of significant accounting policies This note details the company's significant accounting policies, highlighting the updated methodology for receivables - Receivables are reported at amortized cost, net of an allowance for credit losses, estimated using historical data, past events, current conditions, and other relevant factors[29] 3. Acquisitions In the first quarter of fiscal 2021, the Company completed an asset acquisition, which was not material to its consolidated financial statements - An asset acquisition in the first quarter of fiscal 2021 had no material impact on the Company's consolidated financial statements[30] 4. Receivables The Company's receivables increased from $2,993.4 million at June 27, 2020, to $3,451.5 million at April 3, 2021 | Metric | April 3, 2021 (Millions) | June 27, 2020 (Millions) | | :------------------------ | :------------------------ | :------------------------ | | Receivables | $3,451.5 | $2,993.4 | | Allowance for Credit Losses | $(85.8) | $(65.0) | | Allowance for Credit Losses Activity | April 3, 2021 (Millions) | | :----------------------------------- | :------------------------ | | Balance at June 27, 2020 | $65.0 | | Effect of adoption of new credit loss accounting standard | $17.2 | | Credit Loss Provisions | $7.4 | | Receivables Write offs | $(5.7) | | Balance at April 3, 2021 | $85.8 | 5. Goodwill and intangible assets Goodwill increased to $838.5 million at April 3, 2021, while intangible assets, net, decreased to $33.8 million | Metric | Electronic Components (Millions) | Farnell (Millions) | Total (Millions) | | :----------------------------- | :------------------------------ | :------------------ | :---------------- | | Carrying value at June 27, 2020 | $297.8 | $475.9 | $773.7 | | Foreign currency translation | $12.1 | $52.6 | $64.7 | | Carrying value at April 3, 2021 | $310.0 | $528.5 | $838.5 | | Intangible Asset Type | April 3, 2021 Net Value (Millions) | June 27, 2020 Net Book Value (Millions) | | :-------------------- | :---------------------------------- | :--------------------------------------- | | Customer related | $12.7 | $34.2 | | Trade name | $14.5 | $19.2 | | Technology and other | $6.6 | $12.1 | | Total | $33.8 | $65.4 | - Intangible asset amortization expense was $5.3 million for Q3 fiscal 2021 (down from $21.0 million in Q3 fiscal 2020) and $35.7 million for the first nine months of fiscal 2021 (down from $62.2 million in the prior year)[41] 6. Debt Short-term debt significantly increased to $300.0 million at April 3, 2021, while long-term debt decreased to $895.9 million | Short-term Debt Type | April 3, 2021 Carrying Balance (Millions) | June 27, 2020 Carrying Balance (Millions) | | :--------------------------------- | :----------------------------------------- | :----------------------------------------- | | Bank credit facilities and other | $0.0 | $0.1 | | Public notes due December 2021 | $300.0 | — | | Total Short-term debt | $300.0 | $0.1 | | Long-term Debt Type | April 3, 2021 Carrying Balance (Millions) | June 27, 2020 Carrying Balance (Millions) | | :--------------------------------- | :----------------------------------------- | :----------------------------------------- | | Credit Facility (due June 2023) | — | $230.0 | | Public notes due December 2021 | — | $300.0 | | Public notes due December 2022 | $350.0 | $350.0 | | Public notes due April 2026 | $550.0 | $550.0 | | Other long-term debt | $1.3 | $1.5 | | Total Long-term debt | $895.9 | $1,424.8 | - The Company committed to an early redemption of $300 million of its 3.75% Public notes due December 2021, expecting a $5 million loss on debt extinguishment[46] - The Company's total debt carrying value was $1.20 billion at April 3, 2021, down from $1.42 billion at June 27, 2020[48] 7. Leases Total lease cost was $24.2 million for Q3 fiscal 2021, with future minimum operating lease payments totaling $371.4 million | Lease Cost Component | Q3 Ended April 3, 2021 (Millions) | Q3 Ended March 28, 2020 (Millions) | 9 Months Ended April 3, 2021 (Millions) | 9 Months Ended March 28, 2020 (Millions) | | :------------------- | :--------------------------------- | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | | Operating lease cost | $18.6 | $19.3 | $55.1 | $57.6 | | Variable lease cost | $5.6 | $5.5 | $17.3 | $15.6 | | Total lease cost | $24.2 | $24.8 | $72.4 | $73.2 | | Fiscal Year | Future Minimum Operating Lease Payments (Millions) | | :----------------------------- | :------------------------------------------------ | | Remainder of fiscal 2021 | $18.6 | | 2022 | $63.9 | | 2023 | $54.5 | | 2024 | $39.4 | | 2025 | $32.5 | | Thereafter | $162.4 | | Total future operating lease payments | $371.4 | | Total operating lease liabilities | $307.3 | 8. Derivative financial instruments The Company uses derivative financial instruments, primarily forward foreign exchange contracts, to hedge foreign currency risks - The Company uses forward foreign exchange contracts, typically with maturities of less than 60 days, to reduce foreign currency exchange rate risks[56] | Derivative Financial Instrument | April 3, 2021 Fair Value (Millions) | June 27, 2020 Fair Value (Millions) | | :---------------------------------------- | :----------------------------------- | :----------------------------------- | | Prepaid and other current assets | $14.8 | $19.0 | | Accrued expenses and other | $24.2 | $15.6 | | Net Derivative Financial Instrument (Loss) Gain | Q3 Ended April 3, 2021 (Millions) | 9 Months Ended April 3, 2021 (Millions) | | :---------------------------------------------- | :--------------------------------- | :--------------------------------------- | | Net derivative financial instrument (loss) gain | $(2.6) | $(13.2) | 9. Commitments and contingencies Management does not anticipate a material adverse effect on financial condition or liquidity from legal proceedings - Management believes current legal matters will not materially affect financial condition or liquidity, but could be material to results of operations in a single reporting period[61][62] - Aggregate estimated liabilities for compliance-related matters were $14.7 million as of April 3, 2021[62] - A gain on legal settlement of $8.2 million was recorded during the first nine months of fiscal 2021[63] 10. Income taxes The Company reported an effective tax benefit rate of 53.3% for Q3 fiscal 2021 and 32.7% for the first nine months - Effective tax rate on income before taxes was a benefit of 53.3% in Q3 fiscal 2021, favorably impacted by tax benefits from business value reduction and decreases to valuation allowances[64] - For the first nine months of fiscal 2021, the effective tax rate was a benefit of 32.7%, driven by similar factors including the mix of income in lower tax jurisdictions[65] 11. Pension plan The Company's noncontributory defined benefit pension plan reported a net periodic pension cost of $0.7 million for Q3 fiscal 2021 | Pension Cost Component | Q3 Ended April 3, 2021 (Millions) | 9 Months Ended April 3, 2021 (Millions) | | :----------------------------------- | :--------------------------------- | :--------------------------------------- | | Service cost | $3.9 | $11.8 | | Interest cost | $4.0 | $11.9 | | Expected return on plan assets | $(12.4) | $(37.3) | | Net periodic pension cost | $0.7 | $2.2 | - The Company contributed $12.0 million to the Plan during the first nine months of fiscal 2021 and anticipates an additional $4.0 million contribution for the remainder of fiscal 2021[69] 12. Shareholders' equity The Company has a $2.95 billion share repurchase program, with $469.0 million remaining as of April 3, 2021 - As of April 3, 2021, $469.0 million remained under the Company's $2.95 billion share repurchase authorization, with no repurchases made in Q3 fiscal 2021[70] - A dividend of $0.21 per common share was approved and paid in March 2021, amounting to $20.9 million[71] 13. Earnings per share Basic earnings per share for Q3 fiscal 2021 was $1.08, and diluted EPS was $1.07 | Metric | Q3 Ended April 3, 2021 | 9 Months Ended April 3, 2021 | | :-------------------------------------------------- | :--------------------- | :----------------------------- | | Net income (loss) (Millions) | $107.5 | $107.8 | | Weighted average common shares for basic EPS (Thousands) | 99,542 | 99,125 | | Weighted average common shares for diluted EPS (Thousands) | 100,247 | 100,013 | | Basic earnings (loss) per share | $1.08 | $1.09 | | Diluted earnings (loss) per share | $1.07 | $1.08 | 14. Additional cash flow information Non-cash investing activities included $5.2 million in capital expenditures incurred but not paid for the first nine months of fiscal 2021 | Metric | 9 Months Ended April 3, 2021 (Millions) | 9 Months Ended March 28, 2020 (Millions) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | | Capital expenditures incurred but not paid | $5.2 | $5.4 | | Interest paid | $61.1 | $88.5 | | Income tax net payments | $56.1 | $14.7 | - Cash and cash equivalents included $43.2 million in investment grade money market funds and overnight time deposits as of April 3, 2021[75] 15. Segment information Avnet operates through two reportable segments: Electronic Components (EC) and Farnell, with Asia/Pacific as the largest geographic region by sales - Avnet's two reportable segments are Electronic Components (EC) and Farnell, both operating in the Americas, EMEA, and Asia[77][99] | Segment | Q3 Ended April 3, 2021 Sales (Millions) | Q3 Ended March 28, 2020 Sales (Millions) | 9 Months Ended April 3, 2021 Sales (Millions) | 9 Months Ended March 28, 2020 Sales (Millions) | | :-------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Electronic Components | $4,520.6 | $3,974.7 | $13,245.1 | $12,472.5 | | Farnell | $396.1 | $335.1 | $1,062.8 | $1,002.1 | | Total Sales | $4,916.7 | $4,309.8 | $14,307.9 | $13,474.6 | | Geographic Area | Q3 Ended April 3, 2021 Sales (Millions) | Q3 Ended March 28, 2020 Sales (Millions) | 9 Months Ended April 3, 2021 Sales (Millions) | 9 Months Ended March 28, 2020 Sales (Millions) | | :---------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Americas | $1,161.0 | $1,203.6 | $3,468.1 | $3,605.9 | | EMEA | $1,585.6 | $1,512.5 | $4,412.7 | $4,409.3 | | Asia/Pacific | $2,170.1 | $1,593.7 | $6,427.2 | $5,459.4 | | Total Sales | $4,916.7 | $4,309.8 | $14,307.9 | $13,474.6 | 16. Restructuring expenses The Company incurred $39.9 million in restructuring expenses during the first nine months of fiscal 2021, primarily for severance | Restructuring Expense Category | Fiscal 2021 Restructuring Expenses (Millions) | Cash Payments (Millions) | Balance at April 3, 2021 (Millions) | | :----------------------------- | :--------------------------------------------- | :------------------------ | :----------------------------------- | | Severance | $37.0 | $(21.1) | $16.5 | | Facility Contract Costs | $2.9 | $(1.5) | $1.4 | | Total | $39.9 | $(22.6) | $17.8 | - Restructuring expenses in fiscal 2021 related to the reduction of over 300 employees across various functions, with $22.5 million for EC, $9.4 million for Farnell, and $8.0 million for Corporate[84] - Remaining restructuring liabilities from fiscal 2020 and prior totaled $8.2 million at April 3, 2021, with most expected to be paid by the end of fiscal 2021[87] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Avnet's financial condition and results of operations for Q3 and nine months of fiscal 2021 Overview Avnet is a global technology solutions company operating through two primary groups, Electronic Components and Farnell, across three major economic regions - Avnet is a global technology solutions company founded in 1921, serving 2.1 million customers in over 140 countries with over 1,400 technology suppliers[98] - The Company operates two primary groups: Electronic Components (EC) and Farnell, with operations in the Americas, EMEA, and Asia[99] - The Company did not experience any meaningful financial impact from the COVID-19 pandemic during the third quarter of fiscal 2021[101] Executive Summary Avnet reported a 14.1% increase in sales to $4.92 billion in Q3 fiscal 2021, with operating income significantly improving | Metric | Q3 Fiscal 2021 | Q3 Fiscal 2020 | Change (YoY) | | :-------------------------- | :------------- | :------------- | :----------- | | Sales | $4.92 billion | $4.31 billion | +14.1% | | Sales (constant currency) | | | +10.7% | | Gross profit margin | 11.6% | 12.0% | -48 bps | | Operating income | $87.7 million | $(115.8) million | +175.7% | | Operating income margin | 1.8% | -2.7% | +450 bps | | Adjusted operating income margin | 2.3% | 1.6% | +62 bps | - The increase in adjusted operating income margin is primarily due to increased sales and reductions in selling, general and administrative expenses, partially offset by a decrease in gross profit margin[103] Sales Avnet's sales increased by 14.1% to $4.92 billion in Q3 fiscal 2021, driven by growth in EC Asia and Farnell | Metric | Q3 Fiscal 2021 Sales (Millions) | 9 Months Fiscal 2021 Sales (Millions) | | :----------------------------------- | :------------------------------- | :------------------------------------- | | Avnet Sales As Reported | $4,916.7 | $14,307.9 | | Avnet Organic Sales Adj for TI | $4,915.1 | $13,709.7 | | EC Sales | $4,520.6 | $13,245.1 | | Farnell Sales | $396.1 | $1,062.8 | | Sales Growth Rate (YoY) | Q3 As Reported % Change | Q3 Organic Adj for TI (Constant Currency) % Change | 9 Months As Reported % Change | 9 Months Organic Adj for TI (Constant Currency) % Change | | :------------------------ | :---------------------- | :------------------------------------------------- | :---------------------------- | :------------------------------------------------------- | | Avnet | 14.1% | 22.0% | 6.2% | 9.5% | | Americas | (3.5)% | 4.9% | (3.8)% | (0.2)% | | EMEA | 4.8% | 6.5% | 0.1% | (1.8)% | | Asia | 36.2% | 50.3% | 17.7% | 25.4% | | EC | 13.7% | 22.9% | 6.2% | 10.4% | | Farnell | 18.2% | 12.3% | 6.1% | 0.2% | - The increase in sales was primarily driven by increased sales in the EC Asia region and sales growth at Farnell, despite lower sales of TI products[108][109] Gross Profit Gross profit for Q3 fiscal 2021 increased by 9.5% to $568.4 million, but the gross profit margin decreased by 48 basis points to 11.6% | Metric | Q3 Fiscal 2021 (Millions) | Q3 Fiscal 2020 (Millions) | 9 Months Fiscal 2021 (Millions) | 9 Months Fiscal 2020 (Millions) | | :----------------- | :------------------------- | :------------------------- | :------------------------------- | :------------------------------- | | Gross profit | $568.4 | $518.9 | $1,600.0 | $1,590.0 | | Gross profit margin | 11.6% | 12.0% | 11.2% | 11.8% | - The decrease in gross profit margin was primarily due to geographical market mix and, to a lesser extent, unfavorable product and customer mix[111][112] - Sales in higher gross profit margin western regions decreased from 63% in Q3 fiscal 2020 to 56% in Q3 fiscal 2021[111][112] Selling, General and Administrative Expenses Selling, general and administrative (SG&A) expenses decreased by 1.4% to $463.1 million in Q3 fiscal 2021 | Metric | Q3 Fiscal 2021 (Millions) | Q3 Fiscal 2020 (Millions) | 9 Months Fiscal 2021 (Millions) | 9 Months Fiscal 2020 (Millions) | | :----------------------------------- | :------------------------- | :------------------------- | :------------------------------- | :------------------------------- | | SG&A expenses | $463.1 | $469.6 | $1,380.0 | $1,390.0 | | SG&A as % of sales | 9.4% | 10.9% | 9.6% | 10.3% | | SG&A as % of gross profit | 81.5% | 90.5% | 86.3% | 87.6% | - The decrease in SG&A expenses was primarily due to cost savings from restructuring activities and lower amortization expense, partially offset by the impact of foreign currency due to a weakening U.S. Dollar[113][116] Restructuring, Integration, and Other Expenses The Company recorded $17.6 million in restructuring, integration, and other expenses in Q3 fiscal 2021 - Restructuring, integration, and other expenses totaled $17.6 million in Q3 fiscal 2021, with $5.4 million in restructuring costs expected to generate over $7.0 million in annual operating expense savings[118] - For the first nine months of fiscal 2021, these expenses amounted to $55.9 million, including $39.9 million in restructuring costs and $26.5 million in integration costs, offset by an $8.2 million gain on legal settlement[119] - The after-tax impact of these expenses was $13.5 million ($0.13 per diluted share) for Q3 and $44.6 million ($0.44 per diluted share) for the first nine months of fiscal 2021[118][119] Operating Income (Loss) Operating income for Q3 fiscal 2021 significantly increased to $87.7 million from a $115.8 million loss in the prior year | Metric | Q3 Fiscal 2021 (Millions) | Q3 Fiscal 2020 (Millions) | 9 Months Fiscal 2021 (Millions) | 9 Months Fiscal 2020 (Millions) | | :-------------------------- | :------------------------- | :------------------------- | :------------------------------- | :------------------------------- | | Operating income (loss) | $87.7 | $(115.8) | $163.4 | $(6.5) | | Adjusted operating income | $110.5 | $70.4 | $255.2 | $260.0 | - The 175.7% increase in operating income for Q3 fiscal 2021 was largely due to the $145.8 million goodwill and long-lived asset impairment expense in the prior year[120] - EC operating income margin increased by 49 basis points to 2.6%, while Farnell operating income margin decreased by 95 basis points to 6.0% year-over-year[120] Interest and Other Financing Expenses, Net and Other Income (Expense), Net Interest and other financing expenses decreased by 24.8% to $22.3 million in Q3 fiscal 2021 | Metric | Q3 Fiscal 2021 (Millions) | Q3 Fiscal 2020 (Millions) | 9 Months Fiscal 2021 (Millions) | 9 Months Fiscal 2020 (Millions) | | :----------------------------------- | :------------------------- | :------------------------- | :------------------------------- | :------------------------------- | | Interest and other financing expenses, net | $(22.3) | $(29.7) | $(66.1) | $(97.3) | | Other income (expense), net | $4.8 | $(12.6) | $(16.1) | $(9.6) | - The decrease in interest and other financing expenses was primarily related to lower outstanding borrowings during fiscal 2021[122] - Differences in other income (expense) were primarily due to a $15.2 million equity investment impairment expense in the first nine months of fiscal 2021 and foreign currency exchange rate differences[123] Income Tax Benefit The Company's effective tax rate was a benefit of 53.3% in Q3 fiscal 2021 and 32.7% for the first nine months - The effective tax rate was a benefit of 53.3% in Q3 fiscal 2021 and 32.7% for the first nine months of fiscal 2021[124] - Favorable impacts included tax benefits from business value reductions, decreases to valuation allowances, and the mix of income in lower tax jurisdictions[124] Net Income (Loss) Avnet reported net income of $107.5 million ($1.07 diluted EPS) for Q3 fiscal 2021, a significant improvement from a prior-year loss | Metric | Q3 Fiscal 2021 (Millions) | Q3 Fiscal 2020 (Millions) | 9 Months Fiscal 2021 (Millions) | 9 Months Fiscal 2020 (Millions) | | :------------------- | :------------------------- | :------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) | $107.5 | $(128.7) | $107.8 | $(83.2) | | Diluted EPS | $1.07 | $(1.29) | $1.08 | $(0.82) | LIQUIDITY AND CAPITAL RESOURCES Avnet's liquidity and capital resources are managed through operating cash flows, credit facilities, and other financing arrangements Cash Flow Operating cash flow for the first nine months of fiscal 2021 was $197.5 million, a decrease from $442.6 million in the prior year | Cash Flow Activity | 9 Months Fiscal 2021 (Millions) | 9 Months Fiscal 2020 (Millions) | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Net cash flows provided by operating activities | $197.5 | $442.6 | | Net cash flows used for financing activities | $(308.4) | $(444.4) | | Net cash flows used for investing activities | $(51.2) | $(125.2) | - Cash used for working capital and other was $112.0 million in the first nine months of fiscal 2021, including a $405.7 million increase in receivables, offset by a $63.0 million decrease in inventories and a $224.2 million increase in accounts payable[126] - Financing activities included a net repayment of $232.3 million under the Credit Facility and $62.4 million in common stock dividends paid[128] Contractual Obligations There are no material changes to the Company's long-term debt and lease commitments outside of normal course activities - No material changes to long-term debt and lease commitments outside of normal borrowings and repayments[130] - No material non-cancellable commitments for capital expenditures or inventory purchases outside the normal course of business[130] Financing Transactions Avnet was in compliance with all covenants under its $1.25 billion Credit Facility and Securitization Program as of April 3, 2021 - The Company was in compliance with all covenants under its Credit Facility and Securitization Program as of April 3, 2021[131] - Outstanding borrowings under bank credit facilities and other debt were $1.4 million at the end of Q3 fiscal 2021[131] - 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[132] Liquidity Avnet held $322.7 million in cash and cash equivalents as of April 3, 2021, with $243.1 million held outside the U.S | Metric | April 3, 2021 (Millions) | June 27, 2020 (Millions) | | :-------------------------- | :------------------------ | :------------------------ | | Cash and cash equivalents | $322.7 | $477.0 | | Cash held outside the United States | $243.1 | $411.2 | - Total borrowing capacity under the Credit Facility and Securitization Program was $1.70 billion, with $1.61 billion available as of April 3, 2021[135] - The Company has temporarily suspended share repurchases due to the impacts of the COVID-19 pandemic and the need to manage liquidity and leverage[140] Recently Issued Accounting Pronouncements This section refers to Note 1 of the consolidated financial statements for a description of recently issued accounting pronouncements - Refer to Note 1, 'Basis of presentation and new accounting pronouncements,' for details on recently issued accounting pronouncements[142] Item 3. Quantitative and Qualitative Disclosures About Market Risk Avnet manages market risks, primarily foreign currency exchange rates and interest rates, through economic hedges and a mix of fixed and variable rate debt - The Company uses financial arrangements, primarily economic hedges, to reduce earnings and cash flow volatility from foreign currency exchange rate fluctuations[143][144] - Approximately 100% of the Company's debt bears interest at a fixed rate, making it largely insensitive to hypothetical 1.0% increases in interest rates[145] Item 4. Controls and Procedures Avnet's management concluded that the Company's disclosure controls and procedures were effective as of April 3, 2021 - The Company's disclosure controls and procedures were evaluated and deemed effective as of April 3, 2021[146] - No material changes to internal control over financial reporting occurred during the third quarter of fiscal 2021[147] PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company regularly assesses legal proceedings and believes no particular pending matter requires specific public disclosure - No particular pending legal proceeding requires specific public disclosure[148] - Resolution of current legal and compliance matters is not expected to materially affect financial position or liquidity, but could be material to results of operations in any one reporting period[149] Item 1A. Risk Factors As of April 3, 2021, there have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K - No material changes to risk factors as of April 3, 2021, beyond those revised in previous 10-Q filings[150] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company's Board of Directors authorized a $2.95 billion share repurchase program in August 2019 - The Company has a $2.95 billion share repurchase program, with $469.0 million remaining as of April 3, 2021[151] - No shares were repurchased under the program during the third quarter of fiscal 2021[151] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and CFO and XBRL-related documents - Includes CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and XBRL documents (101.INS, 101.SCH, 101.DEF, 101.CAL, 101.LAB, 101.PRE)[153][154][155][156][157][158][159][160] Signature Page The report is duly signed on behalf of Avnet, Inc. by Thomas Liguori, Chief Financial Officer, on April 30, 2021 - The report was signed by Thomas Liguori, Chief Financial Officer of Avnet, Inc., on April 30, 2021[163]