Avnet Inc 10-Q for FY2020 Q2

Avnet Inc (AVT)

10-Q 2020-01-24 For: 2019-12-28

Added on April 09, 2026

About this 10-Q

Avnet Inc filed this 10-Q on January 24, 2020, covering the quarter ended December 28, 2019 (FY2020 Q2).

Headline figures

Quarter ended December 28, 2019, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $4.53B; down 10.2% from $5.05B a year earlier
Net income: $3.67M; down 89.9% from net income of $36.4M a year earlier
Diluted EPS: $0.04; down 87.9% from $0.33 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 28, 2019

☐	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 December 28, 2019 and June 29, 2019	2

Consolidated Statements of Operations for the second quarters and six months ended December 28, 2019 and December 29, 2018	3

Consolidated Statements of Comprehensive Income for the second quarters and six months ended December 28, 2019 and December 29, 2018	4

Consolidated Statements of Shareholders’ Equity for the second quarters and six months ended December 28, 2019 and December 29, 2018	5

Consolidated Statements of Cash Flows for the six months ended December 28, 2019 and December 29, 2018	6

Notes to Consolidated Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3. Quantitative and Qualitative Disclosures About Market Risk	29

Item 4. Controls and Procedures	30

PART II. OTHER INFORMATION	30

Item 1. Legal Proceedings	30

Item 1A. Risk Factors	30

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 6. Exhibits	32

Signature Page	33


	December 28,		June 29,
	2019		2019
	(Thousands, except share
	amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	488,810	$	546,105
Receivables, less allowances of $49,642 and $53,499, respectively		2,977,773		3,168,369
Inventories		2,908,575		3,008,424
Prepaid and other current assets		161,343		153,438
Total current assets		6,536,501		6,876,336
Property, plant and equipment, net		431,410		452,171
Goodwill		916,058		876,728
Intangible assets, net		119,186		143,520
Operating lease assets (Note 5)		274,376		—
Other assets		247,581		215,801
Total assets	$	8,525,112	$	8,564,556
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	492,223	$	300,538
Accounts payable		1,802,484		1,864,342
Accrued expenses and other		398,486		413,696
Short-term operating lease liabilities (Note 5)		52,057		—
Total current liabilities		2,745,250		2,578,576
Long-term debt		1,194,115		1,419,922
Long-term operating lease liabilities (Note 5)		244,622		—
Other liabilities		383,792		425,585
Total liabilities		4,567,779		4,424,083
Commitments and contingencies (Note 7)
Shareholders’ equity:
Common stock $1.00 par; authorized 300,000,000 shares; issued 99,348,624 shares and 104,037,769 shares, respectively		99,349		104,038
Additional paid-in capital		1,588,466		1,573,005
Retained earnings		2,575,536		2,767,469
Accumulated other comprehensive loss		(306,018)		(304,039)
Total shareholders’ equity		3,957,333		4,140,473
Total liabilities and shareholders’ equity	$	8,525,112	$	8,564,556


	Second Quarters Ended				Six Months Ended
	December 28,		December 29,		December 28,		December 29,
	2019		2018		2019		2018
	(Thousands, except per share amounts)
Sales	$	4,534,806	$	5,048,980	$	9,164,814	$	10,138,859
Cost of sales		4,009,193		4,418,947		8,095,362		8,872,077
Gross profit		525,613		630,033		1,069,452		1,266,782
Selling, general and administrative expenses		464,873		471,723		921,377		946,868
Restructuring, integration and other expenses		14,265		62,260		38,863		77,048
Operating income		46,475		96,050		109,212		242,866
Other (expense) income, net		(485)		2,584		4,447		692
Interest and other financing expenses, net		(33,904)		(33,718)		(67,535)		(63,811)
Income from continuing operations before taxes		12,086		64,916		46,124		179,747
Income tax expense (benefit)		6,870		28,141		(844)		59,443
Income from continuing operations, net of tax		5,216		36,775		46,968		120,304
Loss from discontinued operations, net of tax		(1,548)		(374)		(1,548)		(179)
Net income		3,668		36,401		45,420		120,125

Earnings (loss) per share - basic:
Continuing operations	$	0.05	$	0.33	$	0.46	$	1.07
Discontinued operations		(0.01)		(0.00)		(0.01)		(0.01)
Net income per share basic		0.04		0.33		0.45		1.06

Earnings (loss) per share - diluted:
Continuing operations	$	0.05	$	0.33	$	0.45	$	1.06
Discontinued operations		(0.01)		(0.00)		(0.01)		(0.01)
Net income per share diluted		0.04		0.33		0.44		1.05

Shares used to compute earnings per share:
Basic		100,431		110,332		101,781		112,796
Diluted		101,302		111,462		102,839		113,967
Cash dividends paid per common share	$	0.21	$	0.20	$	0.42	$	0.40


									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


	Electronic
	Components		Farnell		Total
	(Thousands)
Carrying value at June 29, 2019 ⁽¹⁾	$	390,896	$	485,832	$	876,728
Additions from acquisitions		25,967		—		25,967
Foreign currency translation		361		13,002		13,363
Carrying value at December 28, 2019 ⁽¹⁾	$	417,224	$	498,834	$	916,058


	December 28, 2019						June 29, 2019
	Acquired		Accumulated		Net Book		Acquired		Accumulated		Net Book
	Amount		Amortization		Value		Amount		Amortization		Value
	(Thousands)
Customer related	$	312,666	$	(244,418)	$	68,248	$	292,266	$	(208,329)	$	83,937
Trade name		54,157		(29,713)		24,444		52,760		(24,752)		28,008
Technology and other		64,462		(37,968)		26,494		63,753		(32,178)		31,575
	$	431,285	$	(312,099)	$	119,186	$	408,779	$	(265,259)	$	143,520


Fiscal Year
Remainder of fiscal 2020	$	42,412
2021		43,446
2022		16,820
2023		8,118
2024		3,584
2025		4,806
Total	$	119,186


	Second Quarter		Six Months
	Ended		Ended
	December 28, 2019
Operating lease cost	$	19,574	$	38,376
Variable lease cost		4,829		10,097
Total lease cost	$	24,403	$	48,473


Fiscal Year
Remainder of fiscal 2020	$	33,538
2021		54,147
2022		44,733
2023		38,763
2024		30,806
Thereafter		164,179
Total future operating lease payments		366,166
Total imputed interest on operating lease liabilities		(69,487)
Total operating lease liabilities	$	296,679


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


	Six Months Ended
	December 28,		December 29,
	2019		2018
	(Thousands)
Cash flows from operating activities:
Net income	$	45,420	$	120,125
Less: Loss from discontinued operations, net of tax		(1,548)		(179)
Income from continuing operations		46,968		120,304

Non-cash and other reconciling items:
Depreciation		49,822		48,124
Amortization		41,257		41,220
Amortization of operating lease asset		31,354		—
Deferred income taxes		(15,518)		44,857
Stock-based compensation		14,503		17,077
Other, net		20,609		77,437
Changes in (net of effects from businesses acquired and divested):
Receivables		185,598		193,520
Inventories		94,182		(209,582)
Accounts payable		(52,711)		(205,254)
Accrued expenses and other, net		(71,858)		(140,495)
Net cash flows provided (used) for operating activities - continuing operations		344,206		(12,792)
Net cash flows used for operating activities - discontinued operations		—		(56,284)
Net cash flows provided (used) for operating activities		344,206		(69,076)

Cash flows from financing activities:
Borrowings (repayments) under accounts receivable securitization, net		(35,400)		366,000
Repayments under bank credit facilities and other debt, net		(1,376)		(59,420)
Repayments under senior unsecured credit facility, net		(1,301)		(595)
Repurchases of common stock		(198,630)		(335,404)
Dividends paid on common stock		(42,426)		(44,701)
Other, net		(4,887)		15,200
Net cash flows used for financing activities - continuing operations		(284,020)		(58,920)
Net cash flows used for financing activities		(284,020)		(58,920)

Cash flows from investing activities:
Purchases of property, plant and equipment		(44,252)		(70,186)
Acquisitions of businesses, net of cash acquired		(51,509)		(62,514)
Other, net		(13,098)		963


	December 28,		June 29,		December 28,		June 29,
	2019		2019		2019		2019
	Interest Rate				Carrying Balance
Bank credit facilities and other	1.94	%	1.02	%	$	323	$	538
Accounts receivable securitization program	2.55	%	—			191,900		—
Public notes due June 2020	5.88	%	5.88	%		300,000		300,000
Short-term debt					$	492,223	$	300,538


	December 28,		June 29,		December 28,		June 29,
	2019		2019		2019		2019
	Interest Rate				Carrying Balance
Revolving credit facilities:
Accounts receivable securitization program	—		3.15	%	$	—	$	227,300
Credit Facility	—		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	1.16	%	1.00	%		1,961		403
Long-term debt before discount and debt issuance costs						1,201,961		1,428,803
Discount and debt issuance costs – unamortized						(7,846)		(8,881)
Long-term debt					$	1,194,115	$	1,419,922


Operating Lease Term and Discount Rate
Weighted-average remaining lease term in years	9.7
Weighted-average discount rate	3.9	%


Supplemental Cash Flow Information:
Cash paid for operating lease liabilities	$	33,044
Operating lease assets obtained from new operating lease liabilities		18,560


			Facility
			and Contract		Asset
	Severance		Exit Costs		Impairments		Total
	(Thousands)
Fiscal 2020 restructuring expenses	$	19,776	$	1,018	$	7,032	$	27,826
Cash payments		(12,176)		—		—		(12,176)
Non-cash amounts		—		(2)		(7,032)		(7,034)
Other, principally foreign currency translation		(16)		—		—		(16)
Balance at December 28, 2019	$	7,584	$	1,016	$	—	$	8,600


	Second 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 ⁽¹⁾		2019 ⁽²⁾		% Change		Currency
	(Dollars in thousands)
Avnet	$	4,534,806	$	5,048,980	(10.2)	%	(9.4)	%
Avnet by region
Americas	$	1,186,582	$	1,300,423	(8.8)	%	(8.8)	%
EMEA		1,425,859		1,668,575	(14.6)		(12.1)
Asia		1,922,365		2,079,982	(7.6)		(7.7)
Avnet by operating group
EC	$	4,203,629	$	4,680,714	(10.2)	%	(9.5)	%
Farnell		331,177		368,266	(10.1)		(9.1)


				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
September 29 – October 26	756,562	$	40.88	756,562	$	562,369,000
October 27 – November 23	678,900	$	40.54	678,900	$	534,844,000
November 24 – December 28	699,929	$	41.59	699,929	$	505,736,000

Exhibit
Number		Exhibit

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

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