Avnet Inc 10-Q for FY2020 Q3

Avnet Inc (AVT)

10-Q 2020-05-01 For: 2020-03-28

Added on April 09, 2026

About this 10-Q

Avnet Inc filed this 10-Q on May 1, 2020, covering the quarter ended March 28, 2020 (FY2020 Q3).

Headline figures

Quarter ended March 28, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $4.31B; down 8.3% from $4.7B a year earlier
Net loss: $128.66M; compared with net income of $88.05M a year earlier
Diluted EPS: -$1.29; compared with $0.81 a year earlier

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

For the quarterly period ended March 28, 2020

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

For the transition period from _____ to _____


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


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


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

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

	Page No.
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets at March 28, 2020 and June 29, 2019	2

Consolidated Statements of Operations for the third quarters and nine months ended March 28, 2020 and March 30, 2019	3

Consolidated Statements of Comprehensive Income for the third quarters and nine months ended March 28, 2020 and March 30, 2019	4

Consolidated Statements of Shareholders’ Equity for the third quarters and nine months ended March 28, 2020 and March 30, 2019	5

Consolidated Statements of Cash Flows for the nine months ended March 28, 2020 and March 30, 2019	6

Notes to Consolidated Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3. Quantitative and Qualitative Disclosures About Market Risk	32

Item 4. Controls and Procedures	33

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	33

Item 1A. Risk Factors	33

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 6. Exhibits	35

Signature Page	36


	March 28,		June 29,
	2020		2019
	(Thousands, except share
	amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	402,655	$	546,105
Receivables, less allowances of $50,874 and $53,499, respectively		2,987,791		3,168,369
Inventories		2,745,219		3,008,424
Prepaid and other current assets		180,956		153,438
Total current assets		6,316,621		6,876,336
Property, plant and equipment, net		413,371		452,171
Goodwill		760,939		876,728
Intangible assets, net		77,306		143,520
Operating lease assets (Note 5)		271,243		—
Other assets		250,248		215,801
Total assets	$	8,089,728	$	8,564,556
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	399,965	$	300,538
Accounts payable		1,733,673		1,864,342
Accrued expenses and other		418,654		413,696
Short-term operating lease liabilities (Note 5)		55,496		—
Total current liabilities		2,607,788		2,578,576
Long-term debt		1,194,240		1,419,922
Long-term operating lease liabilities (Note 5)		247,539		—
Other liabilities		362,883		425,585
Total liabilities		4,412,450		4,424,083
Commitments and contingencies (Note 7)
Shareholders’ equity:
Common stock $1.00 par; authorized 300,000,000 shares; issued 98,760,983 shares and 104,037,769 shares, respectively		98,761		104,038
Additional paid-in capital		1,587,294		1,573,005
Retained earnings		2,390,425		2,767,469
Accumulated other comprehensive loss		(399,202)		(304,039)
Total shareholders’ equity		3,677,278		4,140,473
Total liabilities and shareholders’ equity	$	8,089,728	$	8,564,556


	Third Quarters Ended				Nine Months Ended
	March 28,		March 30,		March 28,		March 30,
	2020		2019		2020		2019
	(Thousands, except per share amounts)
Sales	$	4,309,818	$	4,698,824	$	13,474,632	$	14,837,683
Cost of sales		3,790,885		4,074,629		11,886,247		12,946,706
Gross profit		518,933		624,195		1,588,385		1,890,977
Selling, general and administrative expenses		469,646		468,171		1,391,024		1,415,040
Goodwill and intangible asset impairment expense		145,836		—		145,836		—
Restructuring, integration and other expenses		19,211		2,939		58,073		79,986
Operating (loss) income		(115,760)		153,085		(6,548)		395,951
Other (expense) income, net		(12,608)		8,731		(8,162)		9,424
Interest and other financing expenses, net		(29,718)		(36,253)		(97,254)		(100,064)
Income (loss) from continuing operations before taxes		(158,086)		125,563		(111,964)		305,311
Income tax (benefit) expense		(29,425)		30,628		(30,270)		90,072
Income (loss) from continuing operations, net of tax		(128,661)		94,935		(81,694)		215,239
Loss from discontinued operations, net of tax		—		(6,887)		(1,548)		(7,066)
Net (loss) income		(128,661)		88,048		(83,242)		208,173

Earnings (loss) per share - basic:
Continuing operations	$	(1.29)	$	0.87	$	(0.81)	$	1.93
Discontinued operations		—		(0.06)		(0.01)		(0.06)
Net (loss) income per share basic		(1.29)		0.81		(0.82)		1.87

Earnings (loss) per share - diluted:
Continuing operations	$	(1.29)	$	0.87	$	(0.81)	$	1.91
Discontinued operations		—		(0.06)		(0.01)		(0.06)
Net (loss) income per share diluted		(1.29)		0.81		(0.82)		1.85

Shares used to compute earnings per share:
Basic		99,479		108,074		101,013		111,222
Diluted		99,479		108,822		101,013		112,252
Cash dividends paid per common share	$	0.21	$	0.20	$	0.63	$	0.60


									Accumulated
	Common		Common		Additional				Other		Total
	Stock-		Stock-		Paid-In		Retained		Comprehensive		Shareholders’
	Shares		Amount		Capital		Earnings		(Loss) Income		Equity
	(Thousands)
Balance, June 29, 2019		104,038	$	104,038	$	1,573,005	$	2,767,469	$	(304,039)	$	4,140,473
Net income		—		—		—		41,752		—		41,752
Translation adjustments and other		—		—		—		—		(102,146)		(102,146)
Pension liability adjustments, net		—		—		—		—		3,813		3,813
Cash dividends		—		—		—		(21,451)		—		(21,451)
Repurchases of common stock		(2,631)		(2,631)		—		(109,504)		—		(112,135)
Stock-based compensation		64		64		7,701		—		—		7,765
Balance, September 28, 2019		101,471	$	101,471	$	1,580,706	$	2,678,266	$	(402,372)	$	3,958,071
Net income		—		—		—		3,668		—		3,668
Translation adjustments and other		—		—		—		—		93,186		93,186
Pension liability adjustments, net		—		—		—		—		3,168		3,168
Cash dividends		—		—		—		(20,975)		—		(20,975)
Repurchases of common stock		(2,135)		(2,135)		—		(85,423)		—		(87,558)
Stock-based compensation		13		13		7,760		—		—		7,773
Balance, December 28, 2019		99,349	$	99,349	$	1,588,466	$	2,575,536	$	(306,018)	$	3,957,333
Net loss		—		—		—		(128,661)		—		(128,661)
Translation adjustments and other		—		—		—		—		(96,351)		(96,351)
Pension liability adjustments, net		—		—		—		—		3,167		3,167
Cash dividends		—		—		—		(20,810)		—		(20,810)
Repurchases of common stock		(1,104)		(1,104)		—		(35,640)		—		(36,744)
Stock-based compensation		516		516		(1,172)		—		—		(656)
Balance, March 28, 2020		98,761	$	98,761	$	1,587,294	$	2,390,425	$	(399,202)	$	3,677,278


	Electronic
	Components		Farnell		Total
	(Thousands)
Carrying value at June 29, 2019 ⁽¹⁾	$	390,896	$	485,832	$	876,728
Additions from acquisitions		30,562		—		30,562
Impairment of goodwill		(120,475)		—		(120,475)
Foreign currency translation		(5,970)		(19,906)		(25,876)
Carrying value at March 28, 2020 ⁽¹⁾	$	295,013	$	465,926	$	760,939


	March 28, 2020						June 29, 2019
	Acquired		Accumulated		Net Book		Acquired		Accumulated		Net Book
	Amount ⁽¹⁾		Amortization		Value		Amount		Amortization		Value
	(Thousands)
Customer related	$	290,199	$	(247,495)	$	42,704	$	292,266	$	(208,329)	$	83,937
Trade name		50,627		(29,810)		20,817		52,760		(24,752)		28,008
Technology and other		52,674		(38,889)		13,785		63,753		(32,178)		31,575
	$	393,500	$	(316,194)	$	77,306	$	408,779	$	(265,259)	$	143,520


Fiscal Year
Remainder of fiscal 2020	$	18,708
2021		36,410
2022		12,610
2023		4,795
2024		1,472
2025		3,311
Total	$	77,306


	Third Quarter		Nine Months
	Ended		Ended
	March 28, 2020
Operating lease cost	$	19,257	$	57,633
Variable lease cost		5,496		15,594
Total lease cost	$	24,753	$	73,227


Fiscal Year
Remainder of fiscal 2020	$	19,735
2021		58,995
2022		49,061
2023		42,079
2024		32,965
Thereafter		167,259
Total future operating lease payments		370,094
Total imputed interest on operating lease liabilities		(67,059)
Total operating lease liabilities	$	303,035


Fiscal Year
2020	$	68,710
2021		52,225
2022		42,069
2023		32,245
2024		23,305
Thereafter		85,196
Total lease payments	$	303,750


	March 28,		June 29,		March 28,		June 29,
	2020		2019		2020		2019
	Interest Rate				Carrying Balance
Bank credit facilities and other	4.76	%	1.02	%	$	65	$	538
Accounts receivable securitization program (due August 2020)	1.71	%	—			99,900		—
Public notes due June 2020	5.88	%	5.88	%		300,000		300,000
Short-term debt					$	399,965	$	300,538


	March 28,		June 29,		March 28,		June 29,
	2020		2019		2020		2019
	Interest Rate				Carrying Balance
Revolving credit facilities:
Accounts receivable securitization program	—		3.15	%	$	—	$	227,300
Credit Facility (due June 2023)	—		5.68	%		—		1,100
Public notes due:
December 2021	3.75	%	3.75	%		300,000		300,000
December 2022	4.88	%	4.88	%		350,000		350,000
April 2026	4.63	%	4.63	%		550,000		550,000
Other long-term debt	1.18	%	1.00	%		1,559		403
Long-term debt before discount and debt issuance costs						1,201,559		1,428,803
Discount and debt issuance costs – unamortized						(7,319)		(8,881)
Long-term debt					$	1,194,240	$	1,419,922


Operating Lease Term and Discount Rate
Weighted-average remaining lease term in years	9.6
Weighted-average discount rate	3.8	%


	Third Quarters Ended				Nine Months Ended
	March 28,		March 30,		March 28,		March 30,
	2020		2019		2020		2019
	(Thousands)
Service cost	$	3,786	$	3,582	$	11,358	$	11,050
Total net periodic pension cost within selling, general and administrative expenses		3,786		3,582		11,358		11,050

Interest cost		5,638		8,010		16,914		21,238
Expected return on plan assets		(12,668)		(16,003)		(38,003)		(42,605)
Amortization of prior service cost (credit)		534		(392)		1,603		(1,178)
Recognized net actuarial loss		3,658		2,091		10,972		7,161
Total net periodic pension benefit within other (expense) income, net		(2,838)		(6,294)		(8,514)		(15,384)

Net periodic pension cost (benefit)	$	948	$	(2,712)	$	2,844	$	(4,334)


Supplemental Cash Flow Information:
Cash paid for operating lease liabilities	$	46,418
Operating lease assets obtained from new operating lease liabilities		30,750


			Facility
			and Contract		Asset
	Severance		Exit Costs		Impairments		Total
	(Thousands)
Fiscal 2020 restructuring expenses	$	26,895	$	3,066	$	7,111	$	37,072
Cash payments		(18,141)		(798)		—		(18,939)
Non-cash amounts		—		—		(7,111)		(7,111)
Other, principally foreign currency translation		(68)		(39)		—		(107)
Balance at March 28, 2020	$	8,686	$	2,229	$	—	$	10,915


	Third Quarters Ended
							As Reported
	Sales		Sales		As Reported		and Organic
	as Reported		as Reported		and		Year-Year %
	and Organic		and Organic		Organic		Change in
	Fiscal		Fiscal		Year-Year		Constant
	2020		2019		% Change		Currency
	(Dollars in thousands)
Avnet	$	4,309,818	$	4,698,824	(8.3)	%	(7.3)	%
Avnet by region
Americas	$	1,203,605	$	1,297,220	(7.2)	%	(7.2)	%
EMEA		1,512,476		1,740,916	(13.1)		(10.4)
Asia		1,593,737		1,660,688	(4.0)		(4.2)
Avnet by operating group
EC	$	3,974,669	$	4,331,351	(8.2)	%	(7.3)	%
Farnell		335,149		367,473	(8.8)		(7.6)


				Total Number of	Approximate Dollar
	Total	Average		Shares Purchased	Value of Shares That
	Number	Price		as Part of Publicly	May Yet Be
	of Shares	Paid per		Announced Plans	Purchased under the
Period	Purchased	Share		or Programs	Plans or Programs
December 29 – January 25	—	$	—	—	$	505,736,000
January 26 – February 22	475,993	$	36.67	475,993	$	488,282,000
February 23 – March 28	628,000	$	30.72	628,000	$	468,992,000

Exhibit
Number		Exhibit
10.1*		Amendment No. 1 to Fourth Amended and Restated Receivables Purchase Agreement, dated February 28, 2020, among Avnet, Inc., Avnet Receivables Corporation, the companies and financial institutions party thereto and Wells Fargo Bank, N.A., as agent.

10.2*		First Amendment to the May 8, 2018 Amended and Restated Avnet Deferred Compensation Plan, dated February 6, 2020.

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

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

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

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

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

101.SCH*		XBRL Taxonomy Extension Schema Document.

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document.

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document.

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

	AVNET, INC.


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


	AVNET RECEIVABLES CORPORATION,
	as Buyer and as Seller

	By:	/s/ Ken Jacobson
	Name	Ken Jacobson
	Title	VP, Corporate Controller



	AVNET, INC., as Originator and as Servicer
	By:	/s/ Joseph L. Burke
	Name	Joseph L. Burke
	Title	VP and Treasurer


Commitment: $150,000,000	WELLS FARGO BANK, N.A.,
	as a Company and as a Financial Institution

	By:	/s/ Elizabeth R. Wagner
	Name:	Elizabeth R. Wagner
	Title:	Managing Director





	WELLS FARGO BANK, N.A.,
	as Agent

	By:	/s/ Elizabeth R. Wagner
	Name:	Elizabeth R. Wagner
	Title:	Managing Director

	TRUST
Commitment: $125,000,000	TRUST BANK, formerly known as Branch Banking
	and Trust Company,
	as a Company and as a Financial Institution

	By:	/s/ Ileana Chu
	Name:	Ileana Chu
	Title:	SVP


Commitment: $75,000,000	PNCBANK, NATIONAL ASSOCIATION, as a
	Company and as a Financial Institution


	By:	/s/ Nina Austin
	Name:	Nina Austin
	Title:	Senior Vice President


Commitment: $75,000,000	TRUIST BANK, as successor-by-merger to SunTrust
	Bank,
	as a Company and as a Financial Institution


	By:	/s/ Ileana Chu
	Name:	Ileana Chu
	Title:	SVP


	LIBERTY STREET FUNDING LLC,
	as a Company

	By:	/s/ Jill A. Russo
	Name:	Jill A. Russo
	Title:	Vice President


Commitment: $76,500,000	THE BANK OF NOVA SCOTIA,
	as a Financial Institution


	By:	/s/ Douglas Noe
	Name:	Douglas Noe
	Title:	Managing Director

General Electric Entity	Originator	General Electric Exclusion Date
[ ]	[Avnet, Inc.]	[ ]


	AVNET RECEIVABLES CORPORATION
	As Seller and Buyer

	By:
	Name
	Title



	AVNET, INC., as Servicer and Originator


	By:
	Name
	Title



	[SIGNATURES OF ADDITIONAL ORIGINATORS
	TO BE ADDED, AS AND IF APPLICABLE]




ACKNOWLEDGED:

WELLS FARGO BANK, N.A., as Agent


By:_______________________________________
Name:
Title:

i
	/s/ WILLIAM J. AMELIO
	William J. Amelio
	Chief Executive Officer