Avnet Inc. Files 10-Q for Q3 2024

TL;DR

AVT 10-Q filed: Financials for Sept 28, 2024 quarter out. Check it.

AI Summary

Avnet Inc. reported its 10-Q filing for the period ending September 28, 2024. The company's fiscal year ends on June 28th. Key financial data points such as Additional Paid-In Capital, Common Stock, and Retained Earnings are detailed for the periods ending September 28, 2024, and September 30, 2023.

Why It Matters

This filing provides investors with a detailed look at Avnet's financial health and performance during the reported quarter, influencing investment decisions.

Risk Assessment

Risk Level: low — This is a routine quarterly financial filing with no immediate red flags.

Key Numbers

• 2024-09-28 — Reporting Period End Date (Current quarter's financial data is reported as of this date.)
• 2023-09-30 — Prior Year Period End Date (Comparative financial data from the prior year's same quarter.)

Key Players & Entities

• AVNET INC (company) — Filer
• 20240928 (date) — Period of Report
• 20241101 (date) — Filed as of Date
• 0628 (date) — Fiscal Year End

FAQ

Key Financial Figures

• $1.00 — h registered: Common stock, par value $1.00 per share AVT Nasdaq Global Select

Filing Documents

• avt-20240928x10q.htm (10-Q) — 1145KB
• avt-20240928xex31d1.htm (EX-31.1) — 15KB
• avt-20240928xex31d2.htm (EX-31.2) — 15KB
• avt-20240928xex32d1.htm (EX-32.1) — 8KB
• avt-20240928xex32d2.htm (EX-32.2) — 8KB
• 0000008858-24-000041.txt ( ) — 5327KB
• avt-20240928.xsd (EX-101.SCH) — 32KB
• avt-20240928_cal.xml (EX-101.CAL) — 40KB
• avt-20240928_def.xml (EX-101.DEF) — 147KB
• avt-20240928_lab.xml (EX-101.LAB) — 325KB
• avt-20240928_pre.xml (EX-101.PRE) — 246KB
• avt-20240928x10q_htm.xml (XML) — 879KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements (Unaudited)

Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets at September 28, 2024, and June 29, 2024 2 Consolidated Statements of Operations for the first quarters ended September 28, 2024, and September 30, 2023 3 Consolidated Statements of Comprehensive Income for the first quarters ended September 28, 2024, and September 30, 2023 4 Consolidated Statements of Shareholders' Equity for the first quarters ended September 28, 2024, and September 30, 2023 5 Consolidated Statements of Cash Flows for the first quarters ended September 28, 2024, and September 30, 2023 6

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 7

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 23

Controls and Procedures

Item 4. Controls and Procedures 23

OTHER INFORMATION

PART II. OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 23

Risk Factors

Item 1A. Risk Factors 24

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24

Exhibits

Item 6. Exhibits 25 Signature Page 26 1 Table of Contents PART I FINANCIAL INFORMATION Item 1.

Financial Statements

Financial Statements AVNET, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) September 28, June 29, 2024 2024 (Thousands, except share amounts) ASSETS Current assets: Cash and cash equivalents $ 267,521 $ 310,941 Receivables 4,575,854 4,391,187 Inventories 5,614,102 5,468,730 Prepaid and other current assets 221,767 199,694 Total current assets 10,679,244 10,370,552 Property, plant and equipment, net 584,119 568,169 Goodwill 818,858 780,984 Operating lease assets 211,736 208,971 Other assets 303,607 280,471 Total assets $ 12,597,564 $ 12,209,147 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt $ 524,055 $ 492,711 Accounts payable 3,588,033 3,345,510 Accrued expenses and other 580,257 573,055 Short-term operating lease liabilities 55,538 53,993 Total current liabilities 4,747,883 4,465,269 Long-term debt 2,430,730 2,406,629 Long-term operating lease liabilities 175,330 173,886 Other liabilities 205,886 237,859 Total liabilities 7,559,829 7,283,643 Commitments and contingencies (Note 6) Shareholders' equity: Common stock $ 1.00 par; authorized 300,000,000 shares; issued 87,253,739 shares and 89,045,996 shares, respectively 87,254 89,046 Additional paid-in capital 1,736,027 1,721,369 Retained earnings 3,533,854 3,601,812 Accumulated other comprehensive loss ( 319,400 ) ( 486,723 ) Total shareholders' equity 5,037,735 4,925,504 Total liabilities and shareholders' equity $ 12,597,564 $ 12,209,147 See notes to consolidated financial statements. 2 Table of Contents AVNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) First Quarters Ended September 28, September 30, 2024 2023 (Thousands, except per share amounts) Sales $ 5,604,152 $ 6,335,648 Cost of sales 4,996,785 5,587,542 Gross profit 607,367 748,106 Selling, g

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of presentation and new accounting pronouncements In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all adjustments necessary to present fairly Avnet, Inc. and its consolidated subsidiaries' (collectively, the "Company" or "Avnet") financial position, results of operations, comprehensive income, and cash flows. All such adjustments are of a normal recurring nature. Certain reclassifications have been made to fiscal 2024 balances to correspond to the fiscal 2025 consolidated financial statement presentation. Preparing financial statements in accordance with generally accepted accounting principles in the United States ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Actual results may differ from these estimates and assumptions. Interim results of operations do not necessarily indicate the results to be expected for the full fiscal year. The information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the fiscal year ended June 29, 2024. Recently issued accounting pronouncements In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Tax Disclosures ("ASU No. 2023-09"), which updates income tax disclosures related to the effective income tax rate reconciliation and requires disclosure of income taxes paid by jurisdiction. ASU No. 2023-09 also provides further disclosure comparability. ASU No. 2023-09 will be effective for the Company in fiscal year 2026 and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU No. 2023-09 on its disclosures. In November 2023, the FASB issued ASU No. 2023-07, Segment reporting (Topic 280): Improvements to Reportab

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The Company had the following activity in the allowance for credit losses during the first quarters of fiscal 2025 and fiscal 2024: September 28, September 30, 2024 2023 (Thousands) Balance at beginning of the period $ 108,504 $ 112,843 Credit Loss Provisions 1,552 4,157 Credit Loss Recoveries 10 ( 364 ) Receivables Write Offs ( 1,170 ) ( 959 ) Foreign Currency Effect and Other 3,352 ( 2,188 ) Balance at end of the period $ 112,248 $ 113,489 Inventories The Company's inventories are primarily comprised of electronic components purchased from the Company's suppliers, which are available for sale to customers in the normal course of the Company's electronic component distribution business. Classified within inventories are electronic components held for supply chain service engagements (components) where the Company is acting as an agent on behalf of a customer or in some cases the component supplier. Given that these supply chain services involve purchasing, warehousing and providing logistics services for components as part of the services, the Company classifies the underlying components within inventories on the consolidated balance sheets. Components held for supply chain services where the Company is acting as an agent represented approximately 6 % of inventories as of September 28, 2024, and approximately 7 % of inventories as of June 29, 2024. 3. Goodwill The following table presents the change in goodwill by reportable segment for the first quarter ended September 28, 2024. Electronic Components Farnell Total (Thousands) Carrying value at June 29, 2024 (1) $ 295,957 $ 485,027 $ 780,984 Foreign currency translation 8,111 29,763 37,874 Carrying value at September 28, 2024 (1) $ 304,068 $ 514,790 $ 818,858 (1) Includes accumulated impairments of $ 1,482,677 from prior fiscal years. 8 Table of Contents AVNET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 4. Debt Short-term debt consists of the following (carrying balances in thousands): September 28, June 29, September 28, June 29, 2024 2024 2024 2024 Interest Rate Carrying Balance Revolving credit facilities: Accounts receivable securitization program (due December 2024) 5.70 % 6.19 % $ 443,000 $ 415,100 Other short-term debt 4.62 % 5.43 % 81,055 77,611 Short-term debt $ 524,055 $ 492,711 The Company has a trade accounts receivable securitization program (the "Securitization Program") in the United States with a group of financial institutions. The Securitization Program allows the Company to transfer, on an ongoing revolving basis, an undivided interest in a designated pool of trade accounts receivable, to provide security or collateral for borrowings of up to $ 700 million. The Securitization Program does not qualify for off balance sheet accounting treatment and any borrowings under the Securitization Program are recorded as debt in the consolidated balance sheets. Under the Securitization Program, the Company legally sells and isolates certain U.S. trade accounts receivable into a wholly owned and consolidated bankruptcy remote special purpose entity. Such receivables, which are recorded within "Receivables" in the consolidated balance sheets, totaled $ 1.01 billion and $ 1.05 billion at September 28, 2024, and June 29, 2024, respectively. The Securitization Program contains certain covenants relating to the quality of the receivables sold. Other short-term debt consists of various committed and uncommitted lines of credit and other forms of bank debt with financial institutions utilized primarily to support the ongoing working capital requirements of the Company, including its foreign operations. Long-term debt consists of the following (carrying balances in thousands): September 28, June 29, September 28, June 29, 2024 2024 2024

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) may select from various interest rate options, currencies, and maturities. The Credit Facility contains certain covenants, including various limitations on debt incurrence, share repurchases, dividends, investments, and capital expenditures. The Credit Facility also includes a financial covenant requiring the Company to maintain a leverage ratio not to exceed a certain threshold, which the Company was in compliance with as of September 28, 2024, and June 29, 2024. As of September 28, 2024, the carrying value and fair value of the Company's total debt was $ 2.95 billion. At June 29, 2024, the carrying value and fair value of the Company's total debt was $ 2.90 billion and $ 2.85 billion, respectively. Fair value for public notes was estimated based on quoted market prices (Level 1) and, for other forms of debt, fair value approximates carrying value due to the market based variable nature of the interest rates on those debt facilities (Level 2). 5. Derivative financial instruments Many of the Company's subsidiaries purchase and sell products in currencies other than their functional currencies, which subjects the Company to the risks associated with fluctuations in currency exchange rates. This foreign currency exposure relates primarily to international transactions where the currency collected from customers can be different from the currency used to purchase from suppliers. The Company's transactions are denominated primarily in the following currencies: U.S. Dollar, Euro, British Pound, Japanese Yen, Chinese Yuan, Taiwan Dollar, Canadian Dollar, and Mexican Peso. The Company also, to a lesser extent, has foreign operations transactions in other EMEA and Asian foreign currencies. The Company uses economic hedges to reduce this risk utilizing natural hedging ( i.e. , offsetting receivables and payables in the same foreign currency) and creating offsetting positions using derivative financial instrume

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The locations and fair values of the Company's derivative financial instruments in the Company's consolidated balance sheets are as follows: September 28, June 29, 2024 2024 (Thousands) Economic hedges Prepaid and other current assets $ 11,990 $ 12,116 Accrued expenses and other $ 17,073 $ 16,957 Cross-currency swap Other liabilities $ 35,851 $ 16,241 The locations of derivative financial instruments on the Company's consolidated statements of operations are as follows: First Quarters Ended September 28, September 30, 2024 2023 (Thousands) Economic hedges Other (expense) income, net $ 24,037 $ ( 2,103 ) Cross currency swap Interest and other financing expense, net $ 701 $ 1,013 6. Commitments and contingencies From time to time, the Company may become a party to, or be otherwise involved in, various lawsuits, claims, investigations, and other legal proceedings arising in the ordinary course of conducting its business. While litigation is subject to inherent uncertainties, management does not anticipate that any such matters will have a material adverse effect on the Company's financial condition, liquidity, or results of operations. The Company is also currently subject to various pending and potential legal matters and investigations relating to compliance with governmental laws and regulations. For certain of these matters, it is not possible to determine the ultimate outcome, and the Company cannot reasonably estimate the maximum potential exposure or the range of possible loss, particularly regarding matters in early stages. The Company currently believes that the resolution of such matters will not have a material adverse effect on the Company's financial position or liquidity but could possibly be material to its results of operations in any single reporting period. As of September 28, 2024, and June 29, 2024, the Company had aggre

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The Company's effective tax rate on its income before taxes was 21.1 % in the first quarter of fiscal 2025. During the first quarter of fiscal 2025, the Company's effective tax rate was unfavorably impacted primarily by (i) increases to unrecognized tax benefit reserves and audit settlements, (ii) the mix of income in higher tax jurisdictions, and (iii) increases to valuation allowances, partially offset by (iv) increases in tax attribute carryforwards. During the first quarter of fiscal 2024, the Company's effective tax rate on its income before taxes was 24.0 %. During the first quarter of fiscal 2024, the Company's effective tax rate was unfavorably impacted primarily by (i) increases to unrecognized tax benefit reserves net of settlements, (ii) U.S. state taxes, and (iii) the mix of income in higher tax jurisdictions. The Pillar Two rules published by the Organization for Economic Co-operation and Development (OECD) are effective for the Company in fiscal year 2025. The company does not expect Pillar Two taxes to have a significant impact on its income tax expense and is closely monitoring the potential impacts of further legislation, regulatory guidance, and regulations issued in the countries in which the Company does business. 8. Pension plan The Company has a noncontributory defined benefit pension plan that covers substantially all current and some former U.S. employees (the "Plan"). Components of net periodic pension cost for the Plan was as follows: First Quarters Ended September 28, September 30, 2024 2023 (Thousands) Service cost within selling, general and administrative expenses $ 2,870 $ 2,563 Interest cost 6,183 6,145 Expected return on plan assets ( 10,438 ) ( 9,985 ) Amortization of prior service cost 1 1 Recognized net actuarial loss 1,285 56 Total net periodic pension benefit within other (expense) income, net ( 2,969 ) ( 3,783 ) Net periodic

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Common stock dividend In August 2024, the Company's Board of Directors approved a dividend of $ 0.33 per common share and dividend payments of $ 28.9 million were made in September 2024. 10. Earnings per share First Quarters Ended September 28, September 30, 2024 2023 (Thousands, except per share data) Numerator: Net income $ 58,956 $ 209,268 Denominator: Weighted average common shares for basic earnings per share 88,092 91,495 Net effect of dilutive stock-based compensation awards 1,300 1,683 Weighted average common shares for diluted earnings per share 89,392 93,178 Basic earnings per share $ 0.67 $ 2.29 Diluted earnings per share $ 0.66 $ 2.25 Stock options excluded from earnings per share calculation due to an anti-dilutive effect — 122 11. Additional cash flow information Non-cash investing and financing activities and supplemental cash flow information were as follows: First Quarters Ended September 28, September 30, 2024 2023 (Thousands) Non-cash Investing Activities: Capital expenditures incurred but not paid $ 15,514 $ 13,967 Non-cash Financing Activities: Unsettled share repurchases $ 1,011 $ 2,718 Supplemental Cash Flow

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