# Avnet Inc: Form 10-Q for the period ended Apr 1, 2023

- Company: [Avnet Inc](/companies/avt.md) (CIK 8858)
- Form: 10-Q
- Filed: 2023-05-05
- Accepted by EDGAR: May 4, 2023, 21:53 ET
- Period: 2023-04-01
- Accession: 0000008858-23-000020
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/8858/000000885823000020/avt-20230401x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/8858/000000885823000020/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-04-01.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-04-01 | $6.51bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2022-07-03 to 2023-04-01 | $19.98bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-01-01 to 2023-04-01 | $5.70bn | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2022-07-03 to 2023-04-01 | $17.62bn | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-01-01 to 2023-04-01 | $811.8m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2022-07-03 to 2023-04-01 | $2.36bn | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-01-01 to 2023-04-01 | $498.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2022-07-03 to 2023-04-01 | $1.46bn | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-01-01 to 2023-04-01 | $313.6m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2022-07-03 to 2023-04-01 | $903.1m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-01-01 to 2023-04-01 | $71.7m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2022-07-03 to 2023-04-01 | $175.8m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-01-01 to 2023-04-01 | $56.2m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-07-03 to 2023-04-01 | $176.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-04-01 | $187.4m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-07-03 to 2023-04-01 | $615.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-01 to 2023-04-01 | $2.03 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2022-07-03 to 2023-04-01 | $6.58 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-01 to 2023-04-01 | $2.05 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-07-03 to 2023-04-01 | $6.67 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-04-01 | 92,456,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2022-07-03 to 2023-04-01 | 93,616,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2022-07-03 to 2023-04-01 | −$948.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2022-07-03 to 2023-04-01 | $137.8m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2023-01-01 to 2023-04-01 | $26.5m | us-gaap:PaymentsOfDividendsCommonStock |
| Dividends paid | 9 months, 2022-07-03 to 2023-04-01 | $79.8m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 9 months, 2022-07-03 to 2023-04-01 | $221.3m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-04-01 | $185.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-04-01 | $10.44bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-04-01 | $12.11bn | us-gaap:Assets |
| Current liabilities | at 2023-04-01 | $3.97bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-04-01 | $7.47bn | us-gaap:Liabilities |
| Long-term debt | at 2023-04-01 | $3.03bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-04-01 | $76.3m | us-gaap:DebtCurrent |
| Shareholders' equity | at 2023-04-01 | $4.64bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 25,125 characters.

For a description of the Company’s critical accounting policies and an understanding of Avnet and the significant factors that influenced the Company’s performance during the quarter ended April 1, 2023, this *Management’s Discussion and Analysis of Financial Condition and Results of Operations (“*MD&A”) should be read in conjunction with the consolidated financial statements, including the related notes, appearing in Item 1 of this Quarterly Report on Form 10-Q, as well as the Company’s Annual Report on Form 10-K for the fiscal year ended July 2, 2022.

The discussion of the Company’s results of operations includes references to the impact of foreign currency translation. When the U.S. Dollar strengthens and the stronger exchange rates are used to translate the results of operations of Avnet’s subsidiaries denominated in foreign currencies, the result is a decrease in U.S. Dollars of reported results. Conversely, when the U.S. Dollar weakens, the weaker exchange rates result in an increase in U.S. Dollars of reported results. In the discussion that follows, results excluding this impact, primarily for subsidiaries in Europe, the Middle East and Africa (“EMEA”) and Asia/Pacific (“Asia”), are referred to as “constant currency.”

In addition to disclosing financial results that are determined in accordance with generally accepted accounting principles in the U.S. (“GAAP”), the Company also discloses certain non-GAAP financial information, including:

- Operating income excluding (i) restructuring, integration and other expenses, (ii) Russian-Ukraine conflict related expenses, and (iii) amortization of acquired intangible assets is referred to as “adjusted operating income.”

The reconciliation of operating income to adjusted operating income is presented in the following table:

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Third Quarters Ended April 1, 2023 (Thousands) | ​ | ​ ​ April 2, 2022 | ​ ​ ​ | ​ ​ Nine Months Ended April 1, 2023 | ​ ​ | ​ ​ April 2, 2022 |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Operating income | ​ | $313,629 | ​ | $274,408 | ​ | $903,138 | ​ | $654,323 |
| Restructuring, integration and other expenses | ​ | — | ​ | — | ​ | — | ​ | 5,272 |
| Russian-Ukraine conflict related expenses | ​ | ​ — | ​ | ​ 26,261 | ​ | ​ — | ​ | ​ 26,261 |
| Amortization of acquired intangible assets and other | ​ | 876 | ​ | 3,074 | ​ | 5,175 | ​ | 12,109 |
| Adjusted operating income | ​ | $314,505 | ​ | $303,743 | ​ | $908,313 | ​ | $697,965 |

Management believes that providing this additional information is useful to financial statement users to better assess and understand operating performance, especially when comparing results with prior periods or forecasting performance for future periods, primarily because management typically monitors the business both including and excluding these adjustments to GAAP results. Management also uses these non-GAAP measures to establish operational goals and, in many cases, for measuring performance for compensation purposes. However, any analysis of results on a non-GAAP basis should be used as a complement to, and in conjunction with, results presented in accordance with GAAP.

### OVERVIEW

### Organization

Avnet, Inc., including its consolidated subsidiaries (collectively, the “Company” or “Avnet”), is a leading global technology distributor and solutions provider. Avnet has served customers’ evolving needs for an entire century. Avnet supports customers at each stage of a product’s lifecycle, from idea to design and from prototype to production. Avnet’s position at the center of the technology value chain enables it to accelerate the design and supply stages of product development so customers can realize revenue faster. Decade after decade, Avnet helps its customers and suppliers around the world realize the transformative possibilities of technology. Founded in 1921, the Company works with suppliers in every major technology segment to serve customers in more than 140 countries.

Avnet has two primary operating groups — Electronic Components (“EC”) and Farnell (“Farnell”). Both operating groups have operations in each of the three major economic regions of the world: (i) the Americas, (ii) EMEA, and (iii) Asia. EC markets and sells (i) semiconductors, (ii) interconnect, passive and electromechanical devices, and (iii) integrated components, to a diverse customer base serving many end-markets. Farnell distributes electronic components and industrial products to a diverse customer base utilizing multi-channel sales and marketing resources.

### Results of Operations

### Executive Summary

Sales of $6.51 billion in the third quarter of fiscal 2023 were 0.4% higher than the prior year third quarter sales of $6.49 billion. Excluding the impact of changes in foreign currency, sales increased 3.4% as compared to sales in the prior year third quarter with both EC and Farnell contributing to the increase.

Gross profit of $811.8 million and gross profit margin of 12.5% in the third quarter of fiscal 2023 were relatively flat compared to gross profit of $813.0 million and gross profit margin of 12.5% in the third quarter of fiscal 2022.

Operating income of $313.6 million was $39.2 million or 14.3% higher than the prior year third quarter operating income of $274.4 million. Operating income margin was 4.8% in the third quarter of fiscal 2023, as compared to 4.2% in the third quarter of fiscal 2022, an increase of 58 basis points. The increase in operating income margin is primarily the result of the decrease in operating expenses including the impact of foreign currency due to the strengthening of the U.S. Dollar compared to the prior year.

### Sales

The following table presents sales growth rates for the third quarter and first nine months of fiscal 2023 as compared to fiscal 2022 by geographic region and by operating group.

| ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ Quarter Ended ​ ​ Sales Year-Year % Change | ​ ​ ​ ​ ​ ​ | ​ ​ Sales Year-Year % Change in Constant Currency | ​ ​ ​ ​ ​ ​ | ​ ​ Nine Months Ended ​ ​ Sales Year-Year % Change | ​ ​ ​ ​ ​ ​ | ​ ​ Sales Year-Year % Change in Constant Currency |
| --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Avnet ​ | 0.4% | ​ | 3.4% | ​ | 11.4% | ​ | 17.1% |
| Avnet by region ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Americas ​ | 5.4% | ​ | 5.4% | ​ | 18.6% | ​ | 18.6% |
| EMEA ​ | 9.5 ​ | ​ | 15.4 ​ | ​ | 17.4 ​ | ​ | 30.6 ​ |
| Asia ​ | (10.1) ​ | ​ | (8.0) ​ | ​ | 3.1 ​ | ​ | 6.1 ​ |
| Avnet by operating group | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| EC ​ | 0.7% | ​ | 3.5% | ​ | 12.8% | ​ | 18.4% |
| Farnell ​ | (3.0) ​ | ​ | 1.4 ​ | ​ | (5.6) ​ | ​ | 1.0 ​ |

Sales of $6.51 billion for the third quarter of fiscal 2023 were up $26.5 million or 0.4% from the prior year third quarter sales of $6.49 billion. Sales in constant currency in the third quarter of fiscal 2023 increased by 3.4% year over year, reflecting sales growth in the Americas and EMEA regions, offset by seasonal declines in Asia primarily due to the typical impact of the Lunar New Year holidays.

EC sales of $6.06 billion in the third quarter of fiscal 2023 increased $40.5 million or 0.7% from the prior year third quarter sales of $6.02 billion. EC sales increased 3.5% year over year in constant currency. The increase in sales in the Company’s EC operating group is primarily due to overall stronger market demand and pricing for electronic components in the aerospace and defense, transportation, and industrial sectors.

Farnell sales for the third quarter of fiscal 2023 were $455.0 million, a decrease of $14.1 million or 3.0% from the prior year third quarter sales of $469.0 million. Farnell sales in constant currency in the third quarter of fiscal 2023 increased by 1.4% year over year.

Sales for the first nine months of fiscal 2023 were $19.98 billion, an increase of $2.04 billion as compared to sales of $17.94 billion for the first nine months of fiscal 2022, driven by strong demand across all regions in the EC operating group.

### Gross Profit

Gross profit for the third quarter of fiscal 2023 was $811.8 million, a decrease of $1.2 million or 0.2% from the third quarter of fiscal 2022 gross profit of $813.0 million. Gross profit margin of 12.5% was essentially flat with the third quarter of fiscal 2022. EC gross profit margin increased year over year primarily due to a higher percentage of sales coming from the higher-margin western regions. Sales in the higher gross profit margin western regions represented approximately 63% of sales in the third quarter of fiscal 2023 as compared to 59% during the third quarter of fiscal 2022. Farnell gross profit margin decreased year over year primarily driven by changes in market pricing and differences in product mix.

Gross profit and gross profit margin were $2.36 billion and 11.8%, respectively, for the first nine months of fiscal 2023 as compared with $2.19 billion and 12.2%, respectively, for the first nine months of fiscal 2022. The decline in gross profit margin during the first nine months of fiscal 2023 compared to the first nine months of fiscal 2022 is primarily due to unfavorable changes in product and customer mix.

### Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A expenses”) were $498.2 million in the third quarter of fiscal 2023, a decrease of $14.1 million or 2.8% from the third quarter of fiscal 2022. The year-over-year decrease in SG&A expenses was primarily a result of foreign currency translation from a strengthening U.S. Dollar.

Metrics that management monitors with respect to its operating expenses are SG&A expenses as a percentage of sales and as a percentage of gross profit. In the third quarter of fiscal 2023, SG&A expenses were 7.7% of sales and 61.4% of gross profit, as compared with 7.9% and 63.0%, respectively, in the third quarter of fiscal 2022. The year-over-year decrease in SG&A expense as a percentage of both sales and gross profit is primarily due to lower operating expenses and operating leverage realized with recent sales growth.

SG&A expenses for the first nine months of fiscal 2023 were $1.46 billion, or 7.3% of sales, as compared with $1.50 billion, or 8.4% of sales, in the first nine months of fiscal 2022. SG&A expenses as a percentage of gross profit for the first nine months of fiscal 2023 were 61.8% as compared with 68.6% in the first nine months of fiscal 2022. The decrease in SG&A expenses as a percentage of sales and gross profit is primarily due to operating leverage created from higher sales and from decreases in SG&A expenses primarily due to foreign currency translation from the strengthening of the U.S. Dollar.

### Russian-Ukraine Conflict Related Expenses

During the third quarter of fiscal 2022, the Company incurred $26.3 million of costs associated with the Russian-Ukraine conflict, primarily comprised of $17.2 million of expense for credit loss reserves for trade accounts receivable from Russian customers that are no longer considered collectible. The remaining expense is primarily related to product write-downs for Russia based customers and other Russian business operation wind-down costs.

### Operating Income

Operating income for the third quarter of fiscal 2023 was $313.6 million, an increase of $39.2 million, from the third quarter of fiscal 2022 operating income of $274.4 million. The year-over-year increase in operating income was primarily driven by the increase in sales and lower SG&A expenses. Adjusted operating income for the third quarter of fiscal 2023 was $314.5 million, an increase of $10.8 million or 3.5% from the third quarter of fiscal 2022.

EC operating income margin increased 64 basis points year over year to 5.0% and Farnell operating income margin decreased 589 basis points year over year to 9.0%. EC’s improvement in operating income margin is a result of increased sales and lower overall SG&A expenses year over year. The decrease in operating income margin at Farnell is primarily driven by a combination of lower sales and a lower gross profit margin, partially offset by lower operating expenses.

Operating income for the first nine months of fiscal 2023 was $903.1 million, an increase of $248.8 million from the first nine months of fiscal 2022 operating income of $654.3 million. The year-over-year increase in operating income was primarily driven by the increase in sales and lower SG&A expenses, partially offset by a lower gross profit margin. Adjusted operating income for the first nine months of fiscal 2023 was $908.3 million, an increase of $210.3 million or 30.1% from the first nine months of fiscal 2022.

### Interest and Other Financing Expenses, Net

Interest and other financing expenses in the third quarter of fiscal 2023 was $71.7 million, an increase of $45.8 million, as compared with interest and other financing expenses of $25.9 million in the third quarter of fiscal 2022. Interest and other financing expenses in the first nine months of fiscal 2023 was $175.8 million, an increase of $105.4 million, as compared with interest and other financing expenses of $70.4 million in the first nine months of fiscal 2022.

The increases in interest and other financing expenses in the third quarter and first nine months of fiscal 2023 compared to the third quarter and first nine months of fiscal 2022 is primarily a result of higher outstanding borrowings and increases in average borrowing rates during the first nine months of fiscal 2023 as compared to the first nine months of fiscal 2022.

### Gain on Legal Settlements

During the first nine months of fiscal 2023, the Company recorded a gain on legal settlements of $61.7 million before tax, $47.2 million after tax, and $0.51 per share on a diluted basis, in connection with the settlement of claims filed against certain manufacturers of capacitors.

### Income Tax

The below discussion of the effective tax rate for the periods presented in the statements of operations is in comparison to the 21% U.S. statutory federal income tax rate.

The Company’s effective tax rate on its income before taxes was 23.1% in the third quarter of fiscal 2023. During the third quarter of fiscal 2023, the Company’s effective tax rate was unfavorably impacted primarily by (i) U.S state taxes and (ii) the mix of income in higher tax jurisdictions, partially offset by (iii) decreases to unrecognized tax benefit reserves net of settlements.

During the third quarter of fiscal 2022, the Company’s effective tax rate on its income before taxes was 26.0%. During the third quarter of fiscal 2022, the Company’s effective tax rate was unfavorably impacted primarily by the mix of income in higher tax jurisdictions.

For the first nine months of fiscal 2023, the Company’s effective tax rate on its income before taxes was 22.3%. The effective tax rate for the first nine months of fiscal 2023 was unfavorably impacted primarily by (i) the mix of income in higher tax jurisdictions and (ii) U.S. state taxes, partially offset by (iii) decreases to unrecognized tax benefit reserves net of settlements.

During the first nine months of fiscal 2022, the Company’s effective tax rate on its income before taxes was 23.8%. The effective tax rate for the first nine months of fiscal 2022 was unfavorably impacted primarily by (i) the mix of income in higher tax jurisdictions and (ii) increases to valuation allowances.

### Net Income

As a result of the factors described in the preceding sections of this MD&A, the Company’s net income for the third quarter of fiscal 2023 was $187.4 million, or $2.03 per share on a diluted basis, as compared with $183.4 million, or $1.84 per share on a diluted basis, in the third quarter of fiscal 2022.

As a result of the factors described in the preceding sections of this MD&A, the Company’s net income for the first nine months of fiscal 2023 was $615.6 million, or $6.58 per share on a diluted basis, as compared with $445.6 million, or $4.44 per share on a diluted basis, in the first nine months of fiscal 2022.

### LIQUIDITY AND CAPITAL RESOURCES

### Cash Flow

#### Cash Flow from Operating Activities

During the first nine months of fiscal 2023, the Company used $948.2 million of cash flow for operations compared to $19.4 million of cash used for operations in the first nine months of fiscal 2022. These operating cash flows were comprised of: (i) cash flow generated from net income, adjusted for the impact of non-cash and other items, which includes depreciation and amortization expenses, deferred income taxes, stock-based compensation expense, amortization of operating lease assets, and other non-cash items, and (ii) cash flows used for working capital and other, excluding cash and cash equivalents. Cash used for working capital and other was $1.70 billion during the first nine months of fiscal 2023, including increases in accounts receivable of $320.1 million, and in inventories of $1.03 billion both to support sales growth in the first nine months of fiscal 2023, and decreases in accounts payable of $331.4 million, and in accrued expenses and other of $11.0 million. Comparatively, cash used for working capital and other was $660.8 million during the first nine months of fiscal 2022, including increases in accounts receivable of $881.0 million and in inventories of $550.0 million, partially offset by increases in accounts payable of $628.8 million, and in accrued expenses and other of $141.4 million. Included in accrued liabilities and other, net is $51.2 million of cash received from a gain on legal settlements during the first nine months of fiscal 2023.

#### Cash Flow from Financing Activities

During the first nine months of fiscal 2023, the Company received net proceeds of $498.6 million as a result of the issuance of $500.0 million of 6.25% Notes due March 2028, $764.0 million under the Credit Facility, and $261.0 million under the Securitization Program, and repaid of $90.3 million under other short-term debt. During the first nine months of fiscal 2023, the Company paid dividends on common stock of $79.8 million and repurchased $221.3 million of common stock.

During the first nine months of fiscal 2022, the Company received net proceeds of $57.4 million under the Securitization Program, and $118.0 million under other short-term debt. During the first nine months of fiscal 2022, the Company paid dividends on common stock of $73.3 million and repurchased $89.0 million of common stock.

#### Cash Flow from Investing Activities

During the first nine months of fiscal 2023, the Company used $137.8 million for capital expenditures primarily to support a new warehouse being built in EMEA as compared to $33.7 million for capital expenditures in the first nine months of fiscal 2022. During the first nine months of fiscal 2023 the Company used $16.3 million for other investing activities. During the first nine months of fiscal 2022, the Company received $84.3 million from investing activities related to the liquidation of Company owned life insurance policies.

### Contractual Obligations

For a detailed description of the Company’s long-term debt and lease commitments for the next five years and thereafter, see *Long-Term Contractual Obligations* appearing in Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended July 2, 2022. There are no material changes to this information outside of normal borrowings and repayments of long-term debt and operating lease payments. The Company does not currently have any material non-cancellable commitments for capital expenditures or inventory purchases outside of the normal course of business.

### Financing Transactions

See Note 4, “Debt” to the Company’s consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information on financing transactions including the Credit Facility, the Securitization Program, and other outstanding debt as of April 1, 2023. The Company was in compliance with all covenants under the Credit Facility and the Securitization Program as of April 1, 2023, and July 2, 2022.

The Company has various lines of credit, financing arrangements, and other forms of bank debt in the U.S. and various foreign locations to fund the short-term working capital, foreign exchange, overdraft, and letter of credit needs of its wholly owned subsidiaries. Outstanding borrowings under such forms of debt at the end of third quarter of fiscal 2023 was $76.3 million.

As an alternative form of liquidity outside of the United States, the Company sells certain of its trade accounts receivable on a non-recourse basis to financial institutions pursuant to factoring agreements. The Company accounts for these transactions as sales of receivables and presents cash proceeds as cash provided by operating activities in the consolidated statements of cash flows. Factoring fees for the sales of trade accounts receivable are recorded within “Interest and other financing expenses, net” and were not material to the consolidated financial statements.

### Liquidity

The Company held cash and cash equivalents of $185.9 million as of April 1, 2023, of which $90.0 million was held outside the United States. As of July 2, 2022, the Company held cash and cash equivalents of $153.7 million, of which $60.4 million was held outside of the United States.

During periods of weakening demand in the electronic components industry, the Company typically generates cash from operating activities. Conversely, the Company will use cash for working capital requirements during periods of higher growth. The Company used $1.15 billion in cash flows for operating activities over the trailing four fiscal quarters ended April 1, 2023.

Liquidity is subject to many factors, such as normal business operations and general economic, financial, competitive, legislative, and regulatory factors that are beyond the Company’s control. To the extent the cash balances held in foreign locations cannot be remitted back to the U.S. in a tax efficient manner, those cash balances are generally used for ongoing working capital, including the need to purchase inventories, capital expenditures and other foreign business needs. In addition, local government regulations may restrict the Company’s ability to move funds among various locations under certain circumstances. Management does not believe such restrictions would limit the Company’s ability to pursue its intended business strategy.

As of the end of the third quarter of fiscal 2023, the Company had a combined total borrowing capacity of $2.15 billion under the Credit Facility and the Securitization Program. There were $838.6 million of borrowings outstanding and $1.0 million in letters of credit issued under the Credit Facility, and $558.8 million outstanding under the Securitization Program, resulting in approximately $751.6 million of total committed availability as of April 1, 2023. Availability under the Securitization Program is subject to the Company having sufficient eligible trade accounts receivable in the United States to support desired borrowings.

During the third quarter and first nine months of fiscal 2023, the Company had an average daily balance outstanding of approximately $1.22 billion and $1.10 billion, respectively, under the Credit Facility and approximately $616.9 million and $515.5 million, respectively, under the Securitization Program.

As of April 1, 2023, the Company may repurchase up to an aggregate of $319.0 million of shares of the Company’s common stock through the share repurchase program approved by the Board of Directors. The Company may repurchase stock from time to time at the discretion of management, subject to strategic considerations, market conditions, and other factors. The Company may terminate or limit the share repurchase program at any time without prior notice. During the third quarter of fiscal 2023, the Company did not repurchase any shares.

The Company has historically paid quarterly cash dividends on shares of its common stock, and future dividends are subject to approval by the Board of Directors. During the third quarter of fiscal 2023, the Board of Directors approved a dividend of $0.29 per share, which resulted in $26.5 million of dividend payments during the quarter.

The Company continually monitors and reviews its liquidity position and funding needs. Management believes that the Company’s ability to generate operating cash flows through the liquidation of working capital in the future and available borrowing capacity, including capacity for the non-recourse sale of trade accounts receivable, will be sufficient to meet its future liquidity needs. Additionally, the Company believes that it has sufficient access to additional liquidity from the capital markets if necessary.

### Recently Issued Accounting Pronouncements

See Note 1, “Basis of presentation and new accounting pronouncements” to the Company’s consolidated financial statements included in this Quarterly Report on Form 10-Q for a description of recently issued accounting pronouncements.

## Market risk

As filed, 1,795 characters.

The Company seeks to reduce earnings and cash flow volatility associated with changes in foreign currency exchange rates by entering into financial arrangements that are intended to provide an economic hedge against all or a portion of the risks associated with such volatility. The Company continues to have exposure to such risks to the extent they are not economically hedged.

See Item 7A, *Quantitative and Qualitative Disclosures About Market Risk*, in the Company’s Annual Report on Form 10-K for the fiscal year ended July 2, 2022, for further discussion of market risks associated with foreign currency exchange rates and interest rates. Avnet’s exposure to such risks has not changed materially since July 2, 2022, as the Company continues to economically hedge the majority of its foreign currency exchange exposures. Thus, any increase or decrease in fair value of the Company’s forward foreign currency exchange contracts is generally offset by an opposite effect on the related economically hedged position. For interest rate risk, the Company continues to maintain a combination of fixed and variable rate debt to mitigate the exposure to fluctuations in market interest rates.

See *Liquidity and Capital Resources — Financing Transactions* appearing in Item 2 of this Quarterly Report on Form 10-Q for further discussion of the Company’s financing transactions and capital structure. As of April 1, 2023, approximately 53% of the Company’s debt bears interest at a fixed rate and 47% of the Company’s debt bears interest at variable rates. Therefore, a hypothetical 1.0% (100 basis points) increase in interest rates would result in a $3.7 million decrease in income before income taxes in the Company’s consolidated statement of operations for the third quarter of fiscal 2023.

## Controls and procedures

As filed, 1,467 characters.

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the reporting period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s disclosure controls and procedures are effective such that material information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to management, including the Company’s principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

During the third quarter of fiscal 2023, there were no changes to the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

### PART II

### OTHER INFORMATION

## Risk factors

As filed, 658 characters.

The discussion of the Company’s business and operations should be read together with the risk factors contained in Item 1A of its Annual Report on Form 10-K for the fiscal year ended July 2, 2022, which describe various risks and uncertainties to which the Company is or may become subject. These risks and uncertainties have the potential to affect the Company’s business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. As of April 1, 2023, there have been no material changes to the risk factors set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended July 2, 2022.

Filed May 5, 2023.
Source: SEC EDGAR, the filing index for accession 0000008858-23-000020. Last ingested by Listed: Oct 24, 2026, 14:51 ET. No prices; not investment advice.