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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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 _____

Commission File #1-4224

AVNET, INC.

(Exact name of registrant as specified in its charter)

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)

(480) 643-2000

(Registrant’s telephone number, including area code.)

N/A

(Former name, former address and former fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes þ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

  

Accelerated Filer

  

Non-accelerated Filer

Smaller Reporting Company

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of April 23, 2020, the total number of shares outstanding of the registrant’s Common Stock was 98,746,669 shares, net of treasury shares.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

INDEX

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

1

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

    

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

See notes to consolidated financial statements.

2

Table of Contents

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

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

See notes to consolidated financial statements.

3

Table of Contents

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Third Quarters Ended

Nine Months Ended

    

March 28,

    

March 30,

     

March 28,

    

March 30,

 

2020

2019

2020

2019

(Thousands)

Net (loss) income

$

(128,661)

$

88,048

$

(83,242)

$

208,173

Other comprehensive (loss) income, net of tax:

Foreign currency translation and other

 

(96,351)

 

1,193

 

(105,311)

 

(55,203)

Pension adjustments, net

 

3,167

 

1,249

 

10,148

 

6,212

Total comprehensive (loss) income

$

(221,845)

$

90,490

$

(178,405)

$

159,182

See notes to consolidated financial statements.

4

Table of Contents

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

    

    

    

    

    

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

    

    

    

    

    

Accumulated

    

Common

Common

Additional

Other

Total

Stock-

Stock-

Paid-In

Retained

Comprehensive

Shareholders’

Shares

Amount

Capital

Earnings

(Loss) Income

Equity

(Thousands)

Balance, June 30, 2018

 

115,825

$

115,825

$

1,528,713

$

3,235,894

$

(195,351)

$

4,685,081

Net income

 

 

 

 

83,724

 

 

83,724

Translation adjustments and other

 

 

 

 

 

8,801

 

8,801

Pension liability adjustments, net

756

756

Cash dividends

 

 

 

 

(22,932)

 

 

(22,932)

Repurchases of common stock

 

(3,315)

 

(3,315)

 

(153,582)

 

(156,897)

Effects of new accounting principles

(3,832)

(3,832)

Stock-based compensation

 

521

 

521

 

25,851

 

 

 

26,372

Balance, September 29, 2018

 

113,031

$

113,031

$

1,554,564

$

3,139,272

$

(185,794)

$

4,621,073

Net income

 

 

 

 

36,401

 

 

36,401

Translation adjustments and other

 

 

 

 

 

(65,197)

 

(65,197)

Pension liability adjustments, net

4,207

4,207

Cash dividends

 

 

 

 

(21,769)

 

 

(21,769)

Repurchases of common stock

 

(4,116)

 

(4,116)

 

(170,967)

 

(175,083)

Stock-based compensation

 

36

 

36

 

9,069

 

 

 

9,105

Balance, December 29, 2018

108,951

$

108,951

$

1,563,633

$

2,982,937

$

(246,784)

$

4,408,737

Net income

 

 

 

 

88,048

 

 

88,048

Translation adjustments and other

 

 

 

 

 

1,193

 

1,193

Pension liability adjustments, net

1,249

1,249

Cash dividends

 

 

 

 

(21,487)

 

 

(21,487)

Repurchases of common stock

 

(2,816)

 

(2,816)

 

(114,421)

 

(117,237)

Stock-based compensation

 

519

 

519

 

1,450

 

 

 

1,969

Balance, March 30, 2019

106,654

$

106,654

$

1,565,083

$

2,935,077

$

(244,342)

$

4,362,472

See notes to consolidated financial statements.

5

Table of Contents

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended

    

March 28,

    

March 30,

2020

2019

(Thousands)

Cash flows from operating activities:

Net (loss) income

$

(83,242)

$

208,173

Less: Loss from discontinued operations, net of tax

(1,548)

(7,066)

Income (loss) from continuing operations

(81,694)

215,239

Non-cash and other reconciling items:

Depreciation

 

75,535

 

72,692

Amortization

 

62,240

 

63,123

Amortization of operating lease assets

46,560

Deferred income taxes

 

(42,529)

 

45,286

Stock-based compensation

 

20,757

 

24,204

Goodwill and intangible asset impairment

 

145,836

 

Other, net

 

35,000

 

42,786

Changes in (net of effects from businesses acquired and divested):

Receivables

 

150,095

 

436,382

Inventories

 

227,996

 

(125,410)

Accounts payable

 

(112,923)

 

(399,526)

Accrued expenses and other, net

 

(84,263)

 

(118,347)

Net cash flows provided by operating activities - continuing operations

442,610

256,429

Net cash flows used for operating activities - discontinued operations

(56,284)

Net cash flows provided by operating activities

 

442,610

 

200,145

Cash flows from financing activities:

Borrowings (repayments) under accounts receivable securitization, net

 

(127,400)

 

342,000

Repayments under bank credit facilities and other debt, net

(1,639)

 

(11,386)

Borrowings (repayments) under senior unsecured credit facility, net

 

(1,194)

 

85,005

Repurchases of common stock

 

(235,830)

 

(447,901)

Dividends paid on common stock

 

(63,235)

 

(66,188)

Other, net

 

(15,132)

 

10,042

Net cash flows used for financing activities - continuing operations

(444,430)

(88,428)

Net cash flows used for financing activities

 

(444,430)

 

(88,428)

Cash flows from investing activities:

Purchases of property, plant and equipment

 

(61,156)

 

(101,383)

Acquisitions of businesses, net of cash acquired

 

(51,509)

 

(66,458)

Other, net

 

(12,547)

 

42,069

Net cash flows used for investing activities - continuing operations

(125,212)

(125,772)

Net cash flows provided by investing activities - discontinued operations

123,473

Net cash flows used for investing activities

 

(125,212)

 

(2,299)

Effect of currency exchange rate changes on cash and cash equivalents

 

(16,418)

 

(5,291)

Cash and cash equivalents:

— (decrease) increase

(143,450)

104,127

— at beginning of period

546,105

621,125

— at end of period

$

402,655

$

725,252

See notes to consolidated financial statements.

6

Table of Contents

AVNET, INC. AND SUBSIDIARIES
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.

The preparation of 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 are not necessarily indicative of 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, 2019.

Certain reclassifications have been made in prior periods to conform to the current period presentation.

Recently adopted accounting pronouncements

The Company adopted Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842),” and its related amendments (collectively “ASC 842”) on June 30, 2019 (the first day of fiscal 2020) using the modified transition approach without restating the comparative period consolidated financial statements. The standard requires lessees to recognize a right-of-use asset and a short-term and long-term lease liability for all leases.

The adoption of ASC 842 did not have a material impact on the Company’s consolidated statements of operations or retained earnings. The Company elected the package of practical expedients permitted under the transition guidance that allowed, among other things, the historical lease classification to be carried forward without reassessment and the hindsight practical expedient. The Company elected to not separate lease and non-lease components for its real estate leases. Refer to Note 5 for additional disclosures related to leases.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities” and its related amendments (collectively “ASC 815”), which improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements and makes certain targeted improvements to simplify the qualification and application of hedge accounting compared to historical GAAP. This update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The adoption of ASC 815 in the first quarter of fiscal 2020 did not have an impact on the Company’s consolidated financial statements.

Recently issued accounting pronouncements

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU No. 2020-04”), which provides optional guidance to ease the potential burden in accounting for reference rate reform on financial reporting. The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform if certain criteria are met. The company is currently evaluating the potential effects of adopting the provisions of ASU No. 2020-04.

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In January 2020, the FASB issued ASU No. 2020-01 - Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (“ASU No.2020-01”), which clarifies the interaction of the accounting for certain equity securities, equity method investments, and certain derivatives. ASU No. 2020-01 will be effective for the Company in the first quarter of fiscal 2022, and early adoption is permitted. The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2020-01.

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740), (“ASU No. 2019-12”) which removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU No. 2019-12 will be effective for the Company in the first quarter of fiscal 2022, and early adoption is permitted. Depending on the amendment, adoption may be applied on the retrospective, modified retrospective or prospective basis. The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2019-12.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other— Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force) ("ASU No. 2018-15"). ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop internal-use software. ASU No. 2018-15 is effective for the Company in the first quarter of fiscal 2021, with early adoption permitted, and is to be applied either retrospectively or prospectively. The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2018-15.

In August 2018, the FASB issued ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU No. 2018-14”). The new guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans, including removing certain previous disclosure requirements, adding certain new disclosure requirements, and clarifying certain other disclosure requirements. ASU No. 2018-14 will be effective for the Company in the first quarter of fiscal 2022, and early adoption is permitted. The Company’s planned adoption of ASU No. 2018-14 is not expected to have an impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU No. 2016-13") and also issued subsequent amendments to the initial guidance: ASU No. 2018-19, ASU No. 2019-04, ASU No. 2019-05, and ASU No. 2019-11 (collectively, Topic 326). Topic 326 revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. Topic 326 is effective for the Company in the first quarter of fiscal 2021, with early adoption permitted, and is to be applied using a modified retrospective approach. The Company is currently evaluating the potential effects of adopting the provisions of Topic 326.

8

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

2. Acquisitions and discontinued operations

Acquisitions

In the second quarter of fiscal 2020, the Company completed two acquisitions. The impact of these acquisitions was not material to the Company’s consolidated balance sheets or statements of operations and as a result, the Company has not disclosed the preliminary allocation of purchase price or the pro-forma impact of the acquisition.

See Note 3 for further discussion of impairment considerations related to goodwill and long-lived assets.

Discontinued Operations

In February 2017, the Company completed the sale of its Technology Solutions business (“TS business”) to Tech Data Corporation (the “Buyer”). The TS business and the financial impacts of the divestiture are classified as discontinued operations in all periods presented. In August 2018, the Company executed a settlement agreement with the Buyer resulting in a final sales price increase of $120.0 million and a final geographic allocation of the TS business sales price for tax reporting purposes. This incremental consideration received from the sale of the TS business as well as cash settlements from the resolution of indemnification claims and other cash reimbursements have been classified as cash flows from discontinued operations investing activities. Income tax payments related to the gain on sale of the TS business have been classified as cash flows from discontinued operations operating activities.

Under the contractual terms of the sale of the TS business, the Company has indemnified the Buyer for certain liabilities including tax related matters, which may result in future indemnification expenses and indemnification payments to the Buyer depending upon the outcome of those matters subject to indemnification.

3. Goodwill and intangible assets

Goodwill

The following table presents the change in goodwill by reportable segment for the nine months ended March 28, 2020.

  

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

(1)Includes accumulated impairment of $1,045,110 from fiscal 2009, $181,440 from fiscal 2018 and $137,396 from fiscal 2019

The Company evaluates each quarter if facts and circumstances indicate that it is more likely than not that the fair value of its reporting units is less than their carrying value, which would require the Company to perform an interim goodwill impairment test. Indicators the Company evaluates to determine whether an interim goodwill impairment test is necessary include, but are not limited to, (i) a sustained decrease in share price or market capitalization as of any fiscal quarter end, (ii) changes in macroeconomic or industry environments, (iii) the results of and the amount of time passed since the last goodwill impairment test and (iv) the long-term expected financial performance of its reporting units.

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Intangible Assets

The following table presents the Company’s acquired intangible assets at March 28, 2020 and June 29, 2019, respectively.

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

(1)Includes intangible asset impairment of $17,494 in the third quarter of fiscal 2020

Intangible asset amortization expense from continuing operations was $21.0 million and $21.9 million for the third quarters of fiscal 2020 and 2019, respectively, and $62.2 million and $63.1 million for the first nine months of fiscal 2020 and 2019, respectively. Intangible assets have a weighted average remaining useful life of approximately 2 years. The following table presents the estimated future amortization expense for the remainder of fiscal 2020 and the next five fiscal years (in thousands):

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

Goodwill and intangible asset impairment expense

An interim goodwill impairment test was performed as of March 28, 2020. The macroeconomic impacts of the global coronavirus pandemic (“COVID-19”) and the corresponding decline in the Company’s share price below tangible book value, were indicators in the third quarter of fiscal 2020, that goodwill was potentially not recoverable.

The Company recorded non-cash goodwill impairment expense of $120.5 million during the third quarter of fiscal 2020, related to reporting units in the Electronic Components (EC) reportable segment including goodwill in the Americas and goodwill associated with recent acquisitions. The impairment of goodwill in such reporting units was primarily the result of COVID-19 related impacts including the significant decline in market capitalization during the quarter as well as a reduction in expected future operating results.

In assessing goodwill for impairment in the third quarter of fiscal 2020, the Company was required to make significant judgments related to the fair value of its reporting units. The Company used a combination of an income approach, specifically a discounted cash flow methodology, and a market approach to estimate the fair value of its reporting units. The discounted cash flow methodology includes market participant assumptions for, among other factors, forecasted sales, gross profit margins, operating expenses, cash flows, perpetual growth rates and long-term discount rates, all of which required judgments and estimates by management that are inherently uncertain. The market approach methodology required significant assumptions related to comparable transactions, market multiples, capital structure and control

10

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

premiums. The interim goodwill impairment testing results were also reconciled with the Company’s market capitalization on and around March 28, 2020, as the final step in the impairment testing.

The Company also performed asset impairment testing over long-lived assets, including intangible assets and property, plant and equipment, as of March 28, 2020 due primarily to the same indicators that led to the interim goodwill impairment testing. As a result of such long-lived asset impairment testing, the Company recorded $25.3 million in impairment expense substantially all related to intangible assets.

Other impairment expense

During the third quarter of fiscal 2020, the Company also recorded $15.3 million of equity investment impairment expense classified within other (expense) income, net in the consolidated statements of operations.

4. Debt

Short-term debt consists of the following (carrying balances in thousands):

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

Bank credit facilities and other consists primarily of various committed and uncommitted lines of credit and other forms of bank debt with financial institutions utilized primarily to support the working capital requirements of the Company including its foreign operations.

The Company has a trade accounts receivable securitization program (the “Securitization Program”) in the United States with a group of financial institutions to allow 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 up to a maximum of $500 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 $756.7 million and $857.3 million at March 28, 2020 and June 29, 2019, respectively. The Securitization Program contains certain covenants relating to the quality of the receivables sold. The Securitization Program also requires the Company to maintain certain minimum interest coverage and leverage ratios, which the Company was in compliance with as of March 28, 2020, and June 29, 2019. Interest on borrowings is calculated using a one-month LIBOR rate plus a spread of 0.75%. The facility fee on the unused balance of the facility is up to 0.35%.

On March 31, 2020, the Company notified Wells Fargo Bank, N.A., as Trustee, that it has elected to redeem on April 30, 2020, all of its outstanding 5.875% Notes due June 15, 2020 (“Notes”) at a make-whole redemption price in accordance with the terms of the Notes and the indenture. On April 30, 2020, the Company redeemed $300 million in principal amount of the Notes with a combination of cash on hand and by drawing on its existing $1.25 billion senior unsecured revolving credit facility, which is scheduled to mature on June 28, 2023. The make-whole premium for the early redemption was not material.

11

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Long-term debt consists of the following (carrying balances in thousands):

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

Apri