Avnet(AVT) - 2024 Q1 - Quarterly Report

PART I Item 1. Financial Statements (Unaudited) This section presents Avnet, Inc.'s unaudited consolidated financial statements for Q1 FY2024, including balance sheets, statements of operations, comprehensive income, shareholders' equity, and cash flows, with detailed notes Consolidated Balance Sheets Total assets and liabilities slightly increased from July 1, 2023, to September 30, 2023, reaching $12.65 billion and $7.82 billion respectively, with shareholders' equity at $4.82 billion | Metric | Sep 30, 2023 (Millions) | Jul 1, 2023 (Millions) | | :-------------------------------- | :----------------------- | :---------------------- | | Total Assets | $12,646.5 | $12,477.2 | | Total Liabilities | $7,823.9 | $7,725.5 | | Total Shareholders' Equity | $4,822.6 | $4,751.7 | - Current assets increased to $10.91 billion from $10.75 billion, primarily driven by an increase in inventories[8] - Long-term debt increased to $3.10 billion from $2.99 billion[8] Consolidated Statements of Operations Q1 FY2024 sales decreased by 6.1% year-over-year, but net income increased by 13.6% to $209.3 million due to legal settlements, with diluted EPS rising to $2.25 | Metric | Q1 FY2024 (Millions) | Q1 FY2023 (Millions) | Change (YoY) | | :------------------------------------- | :-------------------- | :-------------------- | :----------- | | Sales | $6,335.6 | $6,750.1 | -6.1% | | Gross profit | $748.1 | $768.2 | -2.6% | | Operating income | $253.8 | $290.5 | -12.7% | | Net income | $209.3 | $184.3 | +13.6% | | Diluted EPS | $2.25 | $1.93 | +16.6% | | Cash dividends paid per common share | $0.31 | $0.29 | +6.9% | - A significant gain on legal settlements and other of $86.5 million was recorded in Q1 FY2024, contributing positively to income before taxes[11] - Interest and other financing expenses, net, increased substantially to $70.8 million from $45.1 million[11] Consolidated Statements of Comprehensive Income Total comprehensive income for Q1 FY2024 was $115.5 million, a significant improvement from a $7.5 million loss in the prior year, driven by reduced foreign currency translation loss and positive net income | Metric | Q1 FY2024 (Millions) | Q1 FY2023 (Millions) | | :----------------------------------- | :-------------------- | :-------------------- | | Net income | $209.3 | $184.3 | | Foreign currency translation and other | $(107.0) | $(201.7) | | Cross-currency swap | $11.8 | — | | Pension adjustments, net | $1.5 | $9.9 | | Total other comprehensive loss, net of tax | $(93.8) | $(191.8) | | Total comprehensive income (loss), net of tax | $115.5 | $(7.5) | - The foreign currency translation loss significantly decreased from $(201.7) million in Q1 FY2023 to $(107.0) million in Q1 FY2024[14] Consolidated Statements of Shareholders' Equity Shareholders' equity increased from $4.75 billion to $4.82 billion from July 1 to September 30, 2023, driven by net income, partially offset by other comprehensive loss, dividends, and share repurchases | Metric | Jul 1, 2023 (Millions) | Sep 30, 2023 (Millions) | | :----------------------------------- | :---------------------- | :----------------------- | | Total Shareholders' Equity | $4,751.7 | $4,822.6 | | Net income | $209.3 | $209.3 | | Other comprehensive loss | $(93.8) | $(93.8) | | Cash dividends | $(28.3) | $(28.3) | | Repurchases of common stock | $(27.0) | $(27.0) | - The company repurchased 559 thousand shares of common stock for $27.0 million during the quarter[17] - Cash dividends of $28.3 million were paid during the quarter[17] Consolidated Statements of Cash Flows Q1 FY2024 operating activities used $41.3 million, a significant improvement from the prior year, with financing providing $100.2 million and investing using $75.8 million, primarily for capital expenditures | Metric | Q1 FY2024 (Millions) | Q1 FY2023 (Millions) | | :----------------------------------- | :-------------------- | :-------------------- | | Net cash used for operating activities | $(41.3) | $(645.1) | | Net cash provided by financing activities | $100.2 | $588.4 | | Net cash used for investing activities | $(75.8) | $(20.9) | | Net decrease in cash and cash equivalents | $(9.6) | $(72.8) | - The decrease in cash used for operating activities was largely due to changes in working capital, including a smaller increase in inventories and a decrease in accounts receivable compared to the prior year[18] - Capital expenditures increased significantly to $76.1 million in Q1 FY2024 from $28.2 million in Q1 FY2023[18] Notes to Consolidated Financial Statements These notes detail accounting policies, significant financial statement items, and recent activities, covering new pronouncements, receivables, goodwill, debt, leases, derivatives, commitments, taxes, pensions, equity, EPS, cash flow, segments, and restructuring 1. Basis of presentation and new accounting pronouncements Unaudited interim financial statements adhere to GAAP, with the Q1 FY2024 adoption of ASU No. 2022-04 (Supplier Finance Programs) having no material impact, except for fiscal 2025 roll-forward information - The company adopted ASU No. 2022-04, Liabilities (subtopic 405-50): Supplier Finance Programs, in the first quarter of fiscal 2024[22] - The adoption of ASU No. 2022-04 did not have a material impact on the company's consolidated financial statements[22] 2. Receivables Receivables slightly decreased from $4.88 billion to $4.79 billion, while the allowance for credit losses marginally increased to $113.5 million, with credit loss provisions rising to $4.2 million in Q1 FY2024 | Metric | Sep 30, 2023 (Millions) | Jul 1, 2023 (Millions) | | :------------------------ | :----------------------- | :---------------------- | | Receivables | $4,793.2 | $4,876.6 | | Allowance for Credit Losses | $113.5 | $112.8 | | Metric | Q1 FY2024 (Millions) | Q1 FY2023 (Millions) | | :-------------------------- | :-------------------- | :-------------------- | | Balance at beginning of period | $112.8 | $113.9 | | Credit Loss Provisions | $4.2 | $1.4 | | Receivables Write Offs | $(1.0) | $(3.4) | | Balance at end of period | $113.5 | $106.6 | 3. Goodwill Goodwill decreased by $20.8 million to $759.8 million at September 30, 2023, primarily due to foreign currency translation impacts on Electronic Components and Farnell segments | Segment | Jul 1, 2023 (Millions) | Foreign Currency Translation (Millions) | Sep 30, 2023 (Millions) | | :-------------------- | :---------------------- | :--------------------------------------- | :----------------------- | | Electronic Components | $296.8 | $(4.7) | $292.1 | | Farnell | $483.8 | $(16.0) | $467.8 | | Total | $780.6 | $(20.8) | $759.8 | 4. Debt Total debt increased to $3.17 billion at September 30, 2023, from $3.06 billion, driven by higher Credit Facility borrowings, while the company remained compliant with all debt covenants | Debt Type | Sep 30, 2023 (Millions) | Jul 1, 2023 (Millions) | | :----------------------------------- | :----------------------- | :---------------------- | | Short-term debt | $68.6 | $70.6 | | Accounts receivable securitization program | $463.7 | $555.8 | | Credit Facility | $1,002.0 | $796.6 | | Public notes (various maturities) | $1,650.0 | $1,650.0 | | Long-term debt (carrying value) | $3,101.9 | $2,988.0 | | Total Debt (carrying value) | $3,170.5 | $3,058.7 | - The Credit Facility borrowings increased significantly from $796.6 million to $1.00 billion[33] - The company was in compliance with all covenants under the Credit Facility and Securitization Program as of September 30, 2023[34] 5. Leases Most leases are operating leases for real property, with a weighted-average remaining term of 8.0 years and a 3.8% discount rate as of September 30, 2023, and total lease cost remained stable | Metric | Q1 FY2024 (Millions) | Q1 FY2023 (Millions) | | :---------------- | :-------------------- | :-------------------- | | Operating lease cost | $15.5 | $16.6 | | Variable lease cost | $7.2 | $6.3 | | Total lease cost | $22.7 | $22.9 | | Metric | Sep 30, 2023 | | :--------------------------------------- | :----------- | | Weighted-average remaining lease term (years) | 8.0 | | Weighted-average discount rate | 3.8% | - Cash paid for operating lease liabilities was $13.9 million in Q1 FY2024[41] 6. Derivative financial instruments The company uses derivatives, including forward foreign exchange contracts and a cross-currency swap, to hedge foreign currency and interest rate risks, with the fair value of economic hedges and cross-currency swap liability decreasing - The company uses economic hedges (primarily forward foreign exchange contracts) to mitigate foreign currency exposure, with maturities typically less than 60 days[44] - A fixed-to-fixed rate cross-currency swap with a notional amount of $500.0 million (€472.6 million) was designated as a net investment hedge of European operations, maturing in March 2028[45] | Derivative Type | Sep 30, 2023 (Millions) | Jul 1, 2023 (Millions) | | :------------------------ | :----------------------- | :---------------------- | | Economic hedges (assets) | $17.2 | $69.1 | | Economic hedges (liabilities) | $37.9 | $68.6 | | Cross-currency swap (liabilities) | $11.0 | $22.8 | 7. Commitments and contingencies While involved in legal proceedings, management expects no material adverse effect on financial condition or liquidity, with an $86.5 million gain recorded in Q1 FY2024 from a capacitor manufacturer settlement - Management believes that the resolution of legal matters will not have a material adverse effect on the company's financial position or liquidity[52] - The company recorded an $86.5 million gain on legal settlements and other in Q1 FY2024 from a claim against a capacitor manufacturer[53] - Aggregate estimated liabilities for compliance-related matters were $22.7 million as of September 30, 2023[52] 8. Income taxes The effective tax rate for Q1 FY2024 was 24.0%, down from 25.0% in Q1 FY2023, unfavorably impacted by increased unrecognized tax benefit reserves, U.S. state taxes, and income mix in higher tax jurisdictions - The effective tax rate was 24.0% in Q1 FY2024, compared to 25.0% in Q1 FY2023[54][91][92] - Unfavorable impacts on the effective tax rate included increases to unrecognized tax benefit reserves, U.S. state taxes, and the mix of income in higher tax jurisdictions[54][91] 9. Pension plan The net periodic pension benefit improved to $(1.2) million in Q1 FY2024 from $(1.9) million, with the company contributing $4.0 million and expecting another $4.0 million for the remainder of fiscal 2024 | Metric | Q1 FY2024 (Millions) | Q1 FY2023 (Millions) | | :------------------------------------------ | :-------------------- | :-------------------- | | Service cost | $2.6 | $3.0 | | Interest cost | $6.1 | $6.7 | | Expected return on plan assets | $(10.0) | $(12.2) | | Net periodic pension benefit | $(1.2) | $(1.9) | - The company made $4.0 million in contributions to the pension plan during Q1 FY2024 and expects to contribute an additional $4.0 million in the remainder of fiscal 2024[57] 10. Shareholders' equity In Q1 FY2024, the company repurchased 0.6 million shares for $27.0 million, with $291.5 million remaining under authorization, and paid a cash dividend of $0.31 per share, totaling $28.3 million - The company repurchased 0.6 million shares for $27.0 million in Q1 FY2024[58] - As of September 30, 2023, $291.5 million remained under the share repurchase authorization[58] - A dividend of $0.31 per common share was approved and paid, totaling $28.3 million[58] 11. Earnings per share Basic EPS increased to $2.29 and diluted EPS to $2.25 in Q1 FY2024, up from $1.96 and $1.93 respectively in Q1 FY2023, driven by higher net income | Metric | Q1 FY2024 | Q1 FY2023 | | :------------------------------------------ | :-------- | :-------- | | Basic earnings per share | $2.29 | $1.96 | | Diluted earnings per share | $2.25 | $1.93 | | Weighted average common shares for basic EPS | 91,495 | 94,051 | | Weighted average common shares for diluted EPS | 93,178 | 95,636 | 12. Additional cash flow information Non-cash investing activities included $14.0 million in capital expenditures incurred but not paid, with supplemental cash flow showing interest payments of $81.4 million and income tax payments of $78.4 million in Q1 FY2024 | Metric | Q1 FY2024 (Millions) | Q1 FY2023 (Millions) | | :----------------------------------- | :-------------------- | :-------------------- | | Capital expenditures incurred but not paid | $14.0 | $11.9 | | Unsettled share repurchases | $2.7 | $4.4 | | Interest paid | $81.4 | $32.9 | | Income tax payments, net | $78.4 | $57.4 | - Cash and cash equivalents included $11.4 million in investment grade money market funds and overnight time deposits as of September 30, 2023[63] 13. Segment information EC and Farnell are reportable segments; EC sales decreased by 6.5% to $5.91 billion, Farnell sales by 1.1% to $421.2 million in Q1 FY2024, with EC operating income increasing and Farnell's decreasing significantly | Segment | Q1 FY2024 Sales (Millions) | Q1 FY2023 Sales (Millions) | Q1 FY2024 Operating Income (Millions) | Q1 FY2023 Operating Income (Millions) | | :-------------------- | :-------------------------- | :-------------------------- | :------------------------------------- | :------------------------------------- | | Electronic Components | $5,914.4 | $6,324.2 | $272.8 | $267.3 | | Farnell | $421.2 | $425.9 | $17.7 | $51.6 | | Total Sales | $6,335.6 | $6,750.1 | | | | Total Operating Income | | | $290.4 | $318.9 | - EC operating income margin increased by 38 basis points to 4.6%, while Farnell's operating income margin decreased by 792 basis points to 4.2%[88] - Geographically, Americas sales decreased by 6.3%, EMEA sales increased by 8.4%, and Asia sales decreased by 16.6% year-over-year[67] 14. Restructuring expenses Q1 FY2024 restructuring expenses totaled $7.1 million, including $2.7 million in severance for Farnell employee reductions, bringing the total restructuring liability to $18.3 million at September 30, 2023 | Metric | Jul 1, 2023 (Millions) | Q1 FY2024 Restructuring Expenses (Millions) | Cash Payments (Millions) | Sep 30, 2023 (Millions) | | :---------------------------------------- | :---------------------- | :------------------------------------------ | :------------------------ | :----------------------- | | Severance | $15.5 | $2.7 | $(0.2) | $17.8 | | Exit Facility Costs | $0.5 | — | — | $0.5 | | Total | $16.0 | $2.7 | $(0.2) | $18.3 | - Restructuring expenses in Q1 FY2024 included severance costs of $2.7 million for over 50 employees in the Farnell operating group[86] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 FY2024 financial condition and results, covering performance drivers, segment results, liquidity, and reconciliation of GAAP to non-GAAP financial measures - The company uses non-GAAP financial measures like 'adjusted operating income' to better assess and understand operating performance, excluding restructuring, integration, and other expenses, and amortization of acquired intangible assets[73][76] OVERVIEW Avnet, a global electronic component distributor, saw Q1 FY2024 consolidated sales and operating income decline, but net income increased due to a legal settlement Organization Avnet is a global electronic component distributor operating in over 140 countries through two main groups, Electronic Components (EC) and Farnell, across Americas, EMEA, and Asia - Avnet is a leading global electronic component technology distributor and solutions provider, serving customers in over 140 countries[77] - The company operates through two primary groups: Electronic Components (EC) and Farnell, both active in the Americas, EMEA, and Asia[78] - EC distributes semiconductors, interconnect, passive, electromechanical, and other integrated components, while Farnell distributes electronic components and industrial products via multi-channel sales[78] Results of Operations Q1 FY2024 consolidated sales decreased by 6.1% to $6.34 billion, and operating income fell by 12.7% to $253.8 million, but net income rose 13.6% to $209.3 million due to legal settlements Executive Summary Q1 FY2024 consolidated sales decreased by 6.1% to $6.34 billion, operating income fell by 12.7% to $253.8 million, while gross profit margin improved to 11.8% | Metric | Q1 FY2024 (Millions) | Q1 FY2023 (Millions) | Change (YoY) | | :----------------- | :------------------- | :------------------- | :----------- | | Consolidated Sales | $6,335.6 | $6,750.1 | -6.1% | | Gross Profit | $748.1 | $768.2 | -2.6% | | Operating Income | $253.8 | $290.5 | -12.7% | | Gross Profit Margin | 11.8% | 11.4% | +0.4 pp | | Operating Income Margin | 4.0% | 4.3% | -0.3 pp | Sales Q1 FY2024 consolidated sales decreased by 6.1% (7.8% in constant currency), with EC sales down 6.5% due to lower demand and Farnell sales down 1.1% due to declining demand and competitive pricing | Segment/Region | Sales Year-Year % Change | Sales Year-Year % Change in Constant Currency | | :--------------------- | :----------------------- | :-------------------------------------------- | | Avnet (Consolidated) | (6.1)% | (7.8)% | | Americas | (6.3)% | (6.3)% | | EMEA | 8.4% | 1.9% | | Asia | (16.6)% | (15.8)% | | EC | (6.5)% | (8.1)% | | Farnell | (1.1)% | (3.8)% | - The decrease in EC sales is primarily attributed to lower demand resulting from the normalization of electronic component supply[80] - Farnell's sales decline was due to decreased demand from high-service distributors and competitive pricing pressures[81] Gross Profit Gross profit decreased by 2.6% to $748.1 million, but the gross profit margin increased by 43 basis points to 11.8% in Q1 FY2024, with EC's margin improving and Farnell's declining | Metric | Q1 FY2024 (Millions) | Q1 FY2023 (Millions) | Change (YoY) | | :----------- | :------------------- | :------------------- | :----------- | | Gross Profit | $748.1 | $768.2 | -2.6% | | Gross Profit Margin | 11.8% | 11.4% | +0.4 pp | - EC gross profit margin increased due to a larger proportion of sales (60% vs. 55%) coming from higher-margin western regions[82] - Farnell gross profit margin decreased due to the unwinding of component shortage pricing premiums, a lower sales mix of on-the-board electronic components, and competitive pricing pressures[82] Selling, General and Administrative Expenses SG&A expenses increased by 2.0% to $487.3 million in Q1 FY2024, primarily due to foreign currency translation, rising to 7.7% of sales and 65.1% of gross profit due to decreased sales and gross profit | Metric | Q1 FY2024 (Millions) | Q1 FY2023 (Millions) | Change (YoY) | | :-------------------------------- | :------------------- | :------------------- | :----------- | | SG&A Expenses | $487.3 | $477.6 | +2.0% | | SG&A as % of Sales | 7.7% | 7.1% | +0.6 pp | | SG&A as % of Gross Profit | 65.1% | 62.2% | +2.9 pp | - The year-over-year increase in SG&A expenses was primarily a result of foreign currency translation[83] Restructuring, Integration and Other Expenses Q1 FY2024 restructuring, integration, and other expenses totaled $7.1 million, including $2.7 million in severance for Farnell employees, with an after-tax impact of $5.3 million, or $0.06 per diluted share | Metric | Q1 FY2024 (Millions) | | :---------------------------------------- | :------------------- | | Restructuring, integration and other expenses | $7.1 | | Severance costs | $2.7 | | Other expenses | $4.4 | | After-tax impact | $5.3 | | Per diluted share impact | $0.06 | Operating Income Operating income decreased by 12.7% to $253.8 million in Q1 FY2024, with margin falling to 4.0%, driven by lower sales, higher SG&A, and restructuring expenses, partially offset by favorable foreign currency | Metric | Q1 FY2024 (Millions) | Q1 FY2023 (Millions) | Change (YoY) | | :-------------------- | :------------------- | :------------------- | :----------- | | Operating Income | $253.8 | $290.5 | -12.7% | | Adjusted Operating Income | $261.7 | $293.3 | -10.8% | | Operating Income Margin | 4.0% | 4.3% | -0.3 pp | - EC's operating income margin increased by 38 basis points to 4.6%, while Farnell's decreased by 792 basis points to 4.2%[88] Interest and Other Financing Expenses, Net Interest and other financing expenses, net, significantly increased by $25.7 million to $70.8 million in Q1 FY2024, primarily due to higher outstanding borrowings and increased average borrowing rates | Metric | Q1 FY2024 (Millions) | Q1 FY2023 (Millions) | Change (YoY) | | :------------------------------------ | :------------------- | :------------------- | :----------- | | Interest and other financing expenses, net | $70.8 | $45.1 | +$25.7 | | Increase due to | Higher outstanding borrowings, increased average borrowing rates | | | Gain on Legal Settlements and other A pre-tax gain of $86.5 million ($66.1 million after tax, or $0.71 per diluted share) was recorded in Q1 FY2024 from the settlement of claims against capacitor manufacturers | Metric | Q1 FY2024 (Millions) | | :-------------------------------- | :------------------- | | Gain on legal settlements and other (pre-tax) | $86.5 | | After-tax impact | $66.1 | | Per diluted share impact | $0.71 | Income Tax The effective tax rate for Q1 FY2024 was 24.0%, down from 25.0% in Q1 FY2023, unfavorably impacted by increased unrecognized tax benefit reserves, U.S. state taxes, and income mix in higher tax jurisdictions | Metric | Q1 FY2024 | Q1 FY2023 | | :------------------ | :-------- | :-------- | | Effective tax rate | 24.0% | 25.0% | - Unfavorable impacts on the effective tax rate included increases to unrecognized tax benefit reserves, U.S. state taxes, and the mix of income in higher tax jurisdictions[91] Net Income Net income for Q1 FY2024 increased to $209.3 million, or $2.25 per diluted share, up from $184.3 million, or $1.93 per diluted share, in Q1 FY2023, primarily due to the gain on legal settlements | Metric | Q1 FY2024 (Millions) | Q1 FY2023 (Millions) | | :----------- | :------------------- | :------------------- | | Net Income | $209.3 | $184.3 | | Diluted EPS | $2.25 | $1.93 | LIQUIDITY AND CAPITAL RESOURCES Liquidity is supported by operating cash flows and borrowing capacity; Q1 FY2024 saw significantly less cash used in operations, cash provided by financing, and increased cash used in investing due to capital expenditures Cash Flow Operating cash flow significantly improved, using $41.3 million in Q1 FY2024 versus $645.1 million in Q1 FY2023, with financing providing $100.2 million and investing using $76.1 million for capital expenditures Cash Flow from Operating Activities Q1 FY2024 operating activities used $41.3 million, a substantial improvement from $645.1 million used in Q1 FY2023, driven by smaller inventory increases and decreased accounts receivable, partially offset by increased accounts payable | Metric | Q1 FY2024 (Millions) | Q1 FY2023 (Millions) | | :----------------------------------- | :------------------- | :------------------- | | Cash used for operations | $41.3 | $645.1 | | Cash used for working capital and other | $280.1 | $874.8 | | Increase in inventories | $371.6 | $559.0 | | Decrease in accounts receivable | $30.2 | (Increase of $419.9) | | Increase in accounts payable | $111.5 | $120.9 | Cash Flow from Financing Activities Q1 FY2024 financing activities provided $100.2 million, including $243.6 million from the Credit Facility, offset by Securitization Program repayments, other debt, $28.3 million in dividends, and $24.3 million in share repurchases | Metric | Q1 FY2024 (Millions) | Q1 FY2023 (Millions) | | :----------------------------------- | :------------------- | :------------------- | | Net proceeds from Credit Facility | $243.6 | $702.0 | | Repayment under Securitization Program | $(92.1) | (Proceeds of $152.2) | | Dividends paid | $(28.3) | $(27.0) | | Common stock repurchased | $(24.3) | $(152.4) | | Net cash provided by financing activities | $100.2 | $588.4 | Cash Flow from Investing Activities Cash used for investing activities increased to $76.1 million in Q1 FY2024 from $28.2 million in Q1 FY2023, primarily due to higher capital expenditures for EMEA distribution and warehouse expansions | Metric | Q1 FY2024 (Millions) | Q1 FY2023 (Millions) | | :-------------------- | :------------------- | :------------------- | | Capital expenditures | $76.1 | $28.2 | | Net cash used for investing activities | $76.1 | $28.2 | - The increase in capital expenditures is primarily due to distribution and warehouse expansions in EMEA[96] Contractual Obligations No material changes occurred in long-term debt or lease commitments since July 1, 2023, nor any material non-cancellable commitments for capital expenditures or inventory purchases outside the normal course of business - No material changes to long-term debt and lease commitments outside of normal course of business[97] - No material non-cancellable commitments for capital expenditures or inventory purchases outside of the normal course of business[97] Financing Transactions The company complied with all Credit Facility and Securitization Program covenants as of September 30, 2023, utilizing various lines of credit and factoring agreements for liquidity, with $68.6 million outstanding in short-term debt - The company was in compliance with all covenants under the Credit Facility and Securitization Program as of September 30, 2023[99] - Outstanding borrowings under other short-term debt were $68.6 million at the end of Q1 FY2024[99] - The company sells certain trade accounts receivable on a non-recourse basis to financial institutions for liquidity outside the U.S., with factoring fees recorded in 'Interest and other financing expenses, net'[100] Liquidity Cash and cash equivalents totaled $278.7 million at September 30, 2023, with $183.2 million held outside the U.S., and the company had $2.20 billion in total borrowing capacity and $291.5 million remaining for share repurchases | Metric | Sep 30, 2023 (Millions) | Jul 1, 2023 (Millions) | | :-------------------------- | :---------------------- | :--------------------- | | Cash and cash equivalents | $278.7 | $288.2 | | Cash held outside the U.S. | $183.2 | $194.5 | | Total borrowing capacity | $2,200.0 | | | Total committed availability | $733.3 | | - The company used $109.8 million in cash flows for operating activities over the trailing four fiscal quarters ended September 30, 2023[101] - As of September 30, 2023, $291.5 million remained under the share repurchase authorization[104] Recently Issued Accounting Pronouncements Details on recently issued accounting pronouncements are provided in Note 1, 'Basis of presentation and new accounting pronouncements,' to the consolidated financial statements - Details on recently issued accounting pronouncements are provided in Note 1 to the consolidated financial statements[107] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company manages interest rate and foreign currency risks with economic hedges and a mix of fixed and variable rate debt; a 1.0% interest rate increase would impact Q1 FY2024 income before taxes by $3.8 million - The company uses financial arrangements to economically hedge against interest rate and foreign currency exchange rate volatility[108] - As of September 30, 2023, 52% of the company's debt bears interest at a fixed rate and 48% at variable rates[110] - A hypothetical 1.0% increase in interest rates would result in a $3.8 million decrease in income before income taxes for Q1 FY2024[110] Item 4. Controls and Procedures The CEO and CFO confirmed the effectiveness of disclosure controls and procedures as of September 30, 2023, with no material changes to internal control over financial reporting during Q1 FY2024 - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2023[111] - No material changes to the company's internal control over financial reporting occurred during the first quarter of fiscal 2024[112] PART II Item 1. Legal Proceedings The company assesses legal proceedings, believing no specific public disclosure is required, and expects no material adverse effect on financial position or liquidity, though results of operations in a single period could be impacted - Management believes no particular pending legal proceeding requires specific public disclosure[114] - Resolution of current legal matters is not expected to have a material adverse effect on financial position or liquidity, but could be material to results of operations in a single reporting period[115] Item 1A. Risk Factors No material changes occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended July 1, 2023, as of September 30, 2023 - No material changes to the risk factors set forth in the company's Annual Report on Form 10-K for the fiscal year ended July 1, 2023, as of September 30, 2023[116] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q1 FY2024, the company repurchased 558,695 common shares for $27.0 million at an average price of $48.40, with $291.5 million remaining under the share repurchase authorization as of September 30, 2023 | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :------------------------ | :----------------------------- | :--------------------------- | | August 27 – September 30 | 558,695 | $48.40 | - Approximately $291.5 million of shares may yet be purchased under the publicly announced share repurchase program as of September 30, 2023[118] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including indemnification agreements, CEO and CFO certifications (Sarbanes-Oxley Act), and XBRL taxonomy documents - Exhibits include certifications from the CEO and CFO (31.1, 31.2, 32.1, 32.2) and XBRL related documents (101.INS, 101.SCH, 101.DEF, 101.CAL, 101.LAB, 101.PRE)[119] Signature Page The report was signed by Kenneth A. Jacobson, Chief Financial Officer of AVNET, INC., on November 3, 2023 - The report was signed by Kenneth A. Jacobson, Chief Financial Officer, on November 3, 2023[121]