Avnet Inc 10-Q for FY2023 Q2

Avnet Inc (AVT)

10-Q 2023-02-03 For: 2022-12-31

Added on April 09, 2026

About this 10-Q

Avnet Inc filed this 10-Q on February 3, 2023, covering the quarter ended December 31, 2022 (FY2023 Q2).

Headline figures

Quarter ended December 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $6.72B; up 14.5% from $5.87B a year earlier
Net income: $243.89M; up 61.7% from net income of $150.82M a year earlier
Diluted EPS: $2.63; up 75.3% from $1.50 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 December 31, 2022

☐	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 (Unaudited)

Consolidated Balance Sheets at December 31, 2022 and July 2, 2022	2

Consolidated Statements of Operations for the second quarters and six months ended December 31, 2022 and January 1, 2022	3

Consolidated Statements of Comprehensive Income for the second quarters and six months ended December 31, 2022 and January 1, 2022	4

Consolidated Statements of Shareholders’ Equity for the second quarters and six months ended December 31, 2022 and January 1, 2022	5

Consolidated Statements of Cash Flows for the six months ended December 31, 2022 and January 1, 2022	6

Notes to Consolidated Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3. Quantitative and Qualitative Disclosures About Market Risk	23

Item 4. Controls and Procedures	24

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	24

Item 1A. Risk Factors	24

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 6. Exhibits	26

Signature Page	27


	December 31,		July 2,
	2022		2022

	(Thousands, except share
	amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	324,778	$	153,693
Receivables		4,789,402		4,301,002
Inventories		4,972,898		4,244,148
Prepaid and other current assets		216,487		177,783
Total current assets		10,303,565		8,876,626
Property, plant and equipment, net		378,269		315,204
Goodwill		755,030		758,833
Operating lease assets		229,537		227,138
Other assets		263,473		210,731
Total assets	$	11,929,874	$	10,388,532
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	209,401	$	174,422
Accounts payable		3,106,667		3,431,683
Accrued expenses and other		688,643		591,020
Short-term operating lease liabilities		52,944		54,529
Total current liabilities		4,057,655		4,251,654
Long-term debt		2,979,823		1,437,400
Long-term operating lease liabilities		198,986		199,418
Other liabilities		263,747		307,300
Total liabilities		7,500,211		6,195,772
Commitments and contingencies (Note 7)
Shareholders’ equity:
Common stock $1.00 par; authorized 300,000,000 shares; issued 90,735,161 shares and 95,701,630 shares, respectively		90,735		95,702
Additional paid-in capital		1,679,399		1,656,907
Retained earnings		3,088,989		2,921,399
Accumulated other comprehensive loss		(429,460)		(481,248)
Total shareholders’ equity		4,429,663		4,192,760
Total liabilities and shareholders’ equity	$	11,929,874	$	10,388,532


	Second Quarters Ended				Six Months Ended
	December 31,		January 1,		December 31,		January 1,
	2022		2022		2022		2022

	(Thousands, except per share amounts)
Sales	$	6,717,521	$	5,865,217	$	13,467,654	$	11,449,912
Cost of sales		5,933,421		5,152,182		11,915,381		10,077,185
Gross profit		784,100		713,035		1,552,273		1,372,727
Selling, general and administrative expenses		485,127		501,363		962,764		987,540
Restructuring, integration and other expenses		—		—		—		5,272
Operating income		298,973		211,672		589,509		379,915
Other income, net		1,476		1,737		1,800		1,327
Interest and other financing expenses, net		(59,020)		(21,630)		(104,118)		(44,474)
Gain on legal settlement (Note 7)		61,705		—		61,705		—
Income before taxes		303,134		191,779		548,896		336,768
Income tax expense		59,248		40,958		120,749		74,629
Net income	$	243,886	$	150,821	$	428,147	$	262,139

Earnings per share:
Basic	$	2.67	$	1.52	$	4.62	$	2.64
Diluted	$	2.63	$	1.50	$	4.55	$	2.60

Shares used to compute earnings per share:
Basic		91,192		99,032		92,621		99,340
Diluted		92,755		100,286		94,195		100,701
Cash dividends paid per common share	$	0.29	$	0.24	$	0.58	$	0.48


									Accumulated
	Common		Common		Additional				Other		Total
	Stock-		Stock-		Paid-In		Retained		Comprehensive		Shareholders’
	Shares		Amount		Capital		Earnings		(Loss) Income		Equity

	(Thousands)
Balance, July 2, 2022		95,702	$	95,702	$	1,656,907	$	2,921,399	$	(481,248)	$	4,192,760
Net income		—		—		—		184,261		—		184,261
Translation adjustments and other		—		—		—		—		(201,663)		(201,663)
Pension liability adjustments, net		—		—		—		—		9,866		9,866
Cash dividends		—		—		—		(26,998)		—		(26,998)
Repurchases of common stock		(3,445)		(3,445)		—		(144,457)		—		(147,902)
Stock-based compensation		72		72		8,939		—		—		9,011
Balance, October 1, 2022		92,329		92,329		1,665,846		2,934,205		(673,045)		4,019,335
Net income		—		—		—		243,886		—		243,886
Translation adjustments and other		—		—		—		—		243,252		243,252
Pension liability adjustments, net		—		—		—		—		333		333
Cash dividends		—		—		—		(26,307)		—		(26,307)
Repurchases of common stock		(1,629)		(1,629)		—		(62,795)		—		(64,424)
Stock-based compensation		35		35		13,553		—		—		13,588
Balance, December 31, 2022		90,735	$	90,735	$	1,679,399	$	3,088,989	$	(429,460)	$	4,429,663


	Electronic
	Components		Farnell		Total

	(Thousands)
Carrying value at July 2, 2022 ⁽¹⁾	$	291,526	$	467,307	$	758,833
Foreign currency translation		569		(4,372)		(3,803)
Carrying value at December 31, 2022 ⁽¹⁾	$	292,095	$	462,935	$	755,030


Fiscal Year
Remainder of fiscal 2023	$	32,757
2024		53,201
2025		42,838
2026		33,816
2027		22,376
Thereafter		114,900
Total future operating lease payments		299,888
Total imputed interest on operating lease liabilities		(47,958)
Total operating lease liabilities	$	251,930


	Quarter Ended				Six Months Ended
			Sales				Sales
			Year-Year %				Year-Year %
	Sales		Change in		Sales		Change in
	Year-Year		Constant		Year-Year		Constant
	% Change		Currency		% Change		Currency
Avnet	14.5	%	21.1	%	17.6	%	24.9	%
Avnet by region
Americas	20.8	%	20.8	%	26.8	%	26.8	%
EMEA	22.6		37.6		22.2		39.9
Asia	5.6		9.3		9.8		13.4
Avnet by operating group
EC	16.3	%	22.8	%	19.7	%	27.0	%
Farnell	(7.5)		(0.1)		(6.9)		0.8


				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
October 2 – October 29	1,150,198	$	38.48	1,150,198	$	339,120,000
October 30 – November 26	479,129	$	42.08	479,129	$	318,959,000
November 27 – December 31	—	$	—	—	$	318,959,000

Exhibit
Number		Exhibit

10.1		Amendment No. 6 to the Fourth Amended and Restated Receivables Purchase Agreement, dated as of December 16, 2022 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 21, 2022).

10.2*		Amendment No. 1 to Second Amended and Restated Credit Agreement, dated as of November 29, 2022, among Avnet, Inc., each subsidiary of the Company party thereto, Bank of America, N.A., as the administrative agent, and each lender party thereto.

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.


	Six Months Ended
	December 31,		January 1,
	2022		2022

	(Thousands)
Cash flows from operating activities:
Net income	$	428,147	$	262,139

Non-cash and other reconciling items:
Depreciation		39,411		43,876
Amortization		4,294		8,964
Amortization of operating lease assets		26,414		27,426
Deferred income taxes		(15,581)		(4,451)
Stock-based compensation		21,338		19,556
Other, net		7,199		10,281
Changes in (net of effects from businesses acquired and divested):
Receivables		(469,650)		(558,702)
Inventories		(686,884)		(359,755)
Accounts payable		(341,210)		328,574
Accrued expenses and other, net		20,021		(41,117)
Net cash flows used for operating activities		(966,501)		(263,209)

Cash flows from financing activities:
Borrowings under accounts receivable securitization, net		352,200		190,400
Borrowings under senior unsecured credit facility, net		1,132,245		109,669
Borrowings (repayments) under bank credit facilities and other debt, net		47,712		(1,550)
Repurchases of common stock		(221,282)		(45,570)
Dividends paid on common stock		(53,304)		(47,642)
Other, net		(1,048)		(6,069)
Net cash flows provided by financing activities		1,256,523		199,238

Cash flows from investing activities:
Purchases of property, plant and equipment		(111,436)		(22,116)
Other, net		(16,279)		68,270
Net cash flows (used) provided by investing activities		(127,715)		46,154

Effect of currency exchange rate changes on cash and cash equivalents		8,778		(14,056)

Cash and cash equivalents:


	December 31,		January 1,
	2022		2022

	(Thousands)
Balance at beginning of the period	$	113,902	$	88,160
Credit Loss Provisions		4,803		8,391
Credit Loss Recoveries		(456)		(321)
Receivables Write Offs		(12,476)		(4,930)
Foreign Currency Effect and Other		732		(1,726)
Balance at end of the period	$	106,505	$	89,574


	December 31,		July 2,		December 31,		July 2,
	2022		2022		2022		2022

	Interest Rate				Carrying Balance
Revolving credit facilities:
Accounts receivable securitization program (due December 2024)	5.21	%	2.55	%	$	650,000	$	297,800
Credit Facility (due August 2027)	4.37	%	—			1,189,742		—
Public notes due:
April 2026	4.63	%	4.63	%		550,000		550,000
May 2031	3.00	%	3.00	%		300,000		300,000
June 2032	5.50	%	5.50	%		300,000		300,000
Long-term debt before discount and debt issuance costs						2,989,742		1,447,800
Discount and debt issuance costs – unamortized						(9,919)		(10,400)
Long-term debt					$	2,979,823	$	1,437,400


	Six Months Ended
	December 31,		January 1,
	2022		2022
Operating Lease Term and Discount Rate
Weighted-average remaining lease term in years	8.4		8.9
Weighted-average discount rate	3.8	%	3.8	%

	AVNET, INC.


	By:	/s/ KENNETH A. JACOBSON
		Kenneth A. Jacobson
		Chief Financial Officer


	BORROWERS:

	AVNET, INC.

	By:	/s/ Joseph L. Burke
	Name:	Joseph L. Burke
	Title:	Vice President and Treasurer



	AVNET HOLDING EUROPE BV

	By:	/s/ Joseph L. Burke
	Name:	Joseph L. Burke
	Title:	Vice President and Treasurer


	ADMINISTRATIVE AGENT:

	BANK OF AMERICA, N.A.,
	as Administrative Agent

	By:	/s/ Elizabeth Uribe
	Name:	Elizabeth Uribe
	Title:	Assistant Vice President


	INCREASING LENDERS:

	BANK OF AMERICA, N.A.

	By:	/s/ Erhlich Bautista
	Name:	Erhlich Bautista
	Title:	Vice President

	BNP PARIBAS

	By:	/s/ Brendan Heneghan
	Name:	Brendan Heneghan
	Title:	Director

	By:	/s/ Nicolas Doche
	Name:	Nicolas Doche
	Title:	Vice President

	JPMORGAN CHASE BANK, N.A.

	By:	/s/ Zachary Quan
	Name:	Zachary Quan
	Title:	Vice President

	THE BANK OF NOVA SCOTIA

	By:	/s/ Khrystyna Manko
	Name:	Khrystyna Manko
	Title:	Director

	TRUIST BANK

	By:	/s/ Alfonso Brigham
	Name:	Alfonso Brigham
	Title:	Director

	BANCO SANTANDER, S.A., NEW YORK
	BRANCH

	By:	/s/ Andres Barbosa
	Name:	Andres Barbosa
	Title:	Managing Director

	By:	/s/ Rita Walz-Cuccioli
	Name:	Rita Walz-Cuccioli
	Title:	Executive Director

	COMMERZBANK AG, NEW YORK BRANCH

	By:	/s/ Mathew Ward
	Name:	Mathew Ward
	Title:	Managing Director

	By:	/s/ Robert Sullivan
	Name:	Robert Sullivan
	Title:	Vice President

	HSBC BANK USA, NATIONAL ASSOCIATION

	By:	/s/ Ilene Hernandez
	Name:	Ilene Hernandez
	Title:	Vice President

	SUMITOMO MITSUI BANKING CORPORATION

	By:	/s/ Irlen Mak
	Name:	Irlen Mak
	Title:	Director

	WELLS FARGO BANK, NATIONAL
	ASSOCIATION

	By:	/s/ Greg Strauss
	Name:	Greg Strauss
	Title:	Managing Director

	BANK OF CHINA, LOS ANGELES BRANCH

	By:	/s/ Jason Fu
	Name:	Jason Fu
	Title:	SVP

	DBS BANK LTD.

	By:	/s/ Kate Khoo
	Name:	Kate Khoo
	Title:	Vice President

	KBC BANK NV, NEW YORK BRANCH

	By:	/s/ Francis Payne
	Name:	Francis Payne
	Title:	Managing Director

	By:	/s/ Nicholas Philippides
	Name:	Nicholas Philippides
	Title:	Vice President

	STANDARD CHARTERED BANK

	By:	/s/ Kristopher Tracy
	Name:	Kristopher Tracy
	Title:	Director, Financing Solutions

	UNICREDIT BANK AG, NEW YORK BRANCH

	By:	/s/ Christine Macinnes
	Name:	Christine Macinnes
	Title:	Director

	By:	/s/ Laura Shelmerdine
	Name:	Laura Shelmerdine
	Title:	Director

	THE HUNTINGTON NATIONAL BANK

	By:	/s/ Scott Pritchett
	Name:	Scott Pritchett
	Title:	Assistant Vice President


	/s/ PHILIP R. GALLAGHER
	Philip R. Gallagher
	Chief Executive Officer


	/s/ KENNETH A. JACOBSON
	Kenneth A. Jacobson
	Chief Financial Officer