Avtech Sweden Annual Report 2019

Plain-text annual report

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 10-K ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 29, 2019or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-4224Avnet, Inc.(Exact name of registrant as specified in its charter) New York(State or other jurisdiction of incorporation or organization) 11-1890605(I.R.S. Employer Identification No.) 2211 South 47th Street,Phoenix, Arizona(Address of principal executive offices) 85034(Zip Code) Registrant’s telephone number, including area code (480) 643-2000Securities 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 Securities registered pursuant to Section 12(g) of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑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 duringthe 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 thepast 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 ofRegulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ 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 anemerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” inRule 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 orrevised 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 ☑The aggregate market value (approximate) of the registrant’s common equity held by non-affiliates based on the closing price of a share of the registrant’scommon stock for Nasdaq Global Select Market composite transactions on December 28, 2018 (the last business day of the registrant’s most recently completed secondfiscal quarter) was $3,868,372,764.As of July 26, 2019, the total number of shares outstanding of the registrant’s Common Stock was 103,619,871 shares, net of treasury shares.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant’s definitive proxy statement (to be filed pursuant to Reg. 14A) relating to the Annual Meeting of Shareholders anticipated to be held onNovember 19, 2019, are incorporated herein by reference in Part III of this Report. Table of ContentsTABLE OF CONTENTS PagePART I Item 1. Business 3 Item 1A. Risk Factors 7 Item 1B. Unresolved Staff Comments 15 Item 2. Properties 15 Item 3. Legal Proceedings 16 Item 4. Mine Safety Disclosures 16 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities 16 Item 6. Selected Financial Data 19 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 35 Item 8. Financial Statements and Supplementary Data 36 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 36 Item 9A. Controls and Procedures 36 Item 9B. Other Information 36 PART III Item 10. Directors, Executive Officers and Corporate Governance 37 Item 11. Executive Compensation 37 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 37 Item 13. Certain Relationships and Related Transactions, and Director Independence 37 Item 14. Principal Accounting Fees and Services 37 PART IV Item 15. Exhibits and Financial Statement Schedules 38 2Table of Contents PART I Item 1. BusinessAvnet, Inc. (the “Company” or “Avnet”), is a global technology solutions company with an extensive ecosystemdelivering design, product, marketing and supply chain expertise for customers at every stage of the product lifecycle. Avnettransforms ideas into intelligent solutions, reducing the time, cost and complexities of bringing electronic products to marketaround the world. Founded in 1921 and incorporated in New York in 1955, the Company works with over 1,400 technologysuppliers to serve 2.1 million customers in more than 140 countries.For nearly a century, Avnet has helped its customers and suppliers realize the transformative possibilities of technologywhile continuously expanding the breadth and depth of its capabilities. Today, as technologies like the Internet of Things(“IoT”) continue to increase the complexity in product development, Avnet is once again redefining itself by offering whatcustomers need to bring their product to life through one partner. Over the past few years, Avnet significantly enhanced itsexpertise in design, supply chain and logistics by acquiring the capabilities to better serve customers in the earlier stages ofproduct development—encompassing research, prototyping and manufacturing—as well as acquiring expertise in softwaredevelopment, a critical component of an end-to-end IoT solution. These capabilities were acquired through the purchase ofPremier Farnell (“Farnell”) (fiscal 2017), Hackster.io (fiscal 2017), Dragon Innovation (fiscal 2018) and Softweb Solutions(fiscal 2019). Avnet’s ecosystem, which combines these newly acquired capabilities with Avnet’s historical design, supplychain and integrated solutions capabilities, is designed to match its customers’ needs along their entire product developmentjourney, providing both end-to-end and à la carte support options, as well as digital tools, to meet varying needs and buyingpreferences.Avnet can support every stage of the electronic product lifecycle and serves a wide range of customers: from startupsand mid-sized businesses to enterprise-level original equipment manufacturers (“OEMs”), electronic manufacturing services(“EMS”) providers and original design manufacturers (“ODMs”). Avnet works with customers of every size, in every corner ofthe world, to guide today’s ideas into tomorrow’s technology.Organizational StructureAvnet has two primary operating groups — Electronic Components (“EC”) and Farnell. Both operating groups haveoperations in each of the three major economic regions of the world: (i) the Americas, Europe, (ii) Middle East and Africa(“EMEA”) and (iii) Asia/Pacific (“Asia”). Each operating group has its own management team that includes senior executivesand leadership both at the global and regional levels, who manage various functions within such businesses. Each operatinggroup also has distinct financial reporting that is evaluated at the executive level on which operating decisions and strategicplanning and resource allocation for the Company as a whole are made. Divisions (“business units”) exist within eachoperating group that serve primarily as sales and marketing units to further streamline the sales efforts within each operatinggroup and enhance each operating group’s ability to work with its customers and suppliers, generally along more specificgeographies or product lines. However, each business unit relies heavily on the support services provided by the operatinggroups as well as centralized support at the corporate level.3Table of ContentsA description of each operating group is presented below. Further financial information by operating group is providedin Note 17 “Segment information” to the consolidated financial statements appearing in Item 15 of this Annual Report onForm 10-K.Electronic ComponentsAvnet’s EC operating group primarily supports high-volume customers. It markets, sells and distributes electroniccomponents including semiconductors, interconnect, passive and electromechanical, or “IP&E,” components and otherintegrated components from the world’s leading electronic component manufacturers.EC serves a variety of markets ranging from automotive to medical to defense and aerospace. It offers an array ofcustomer support options throughout the entire product lifecycle, including both turnkey and customized design, newproduct introduction, production, supply chain, logistics and post-sales services.Design Chain SolutionsEC offers design chain support that provides engineers with a host of technical design solutions, which helps ECsupport a broad range of customers seeking complex products and technologies. With access to a suite of design tools andengineering support from any point in the design cycle, customers can get product specifications along with evaluation kitsand reference designs that enable a broad range of applications from concept through detailed design including new productintroduction. EC also offers engineering and technical resources deployed globally to support product design, bill ofmaterials development, and technical education and training. By utilizing EC’s design chain support, customers canoptimize their component selection and accelerate their time to market. EC’s extensive product line card provides customersaccess to a diverse range of products from a complete spectrum of electronic component manufacturers.Supply Chain SolutionsEC’s supply chain solutions provide support and logistical services to OEMs, EMS providers and electroniccomponent manufacturers, enabling them to optimize supply chains on a local, regional or global basis. By combininginternal competencies in global warehousing and logistics, information technology and asset management with its globalfootprint and extensive partner relationships, EC’s supply chain solutions provide for a deeper level of engagement with itscustomers. These customers can manage their supply chains to meet the demands of a competitive global environmentwithout a commensurate investment in physical assets, systems and personnel. With supply chain planning tools and avariety of inventory management solutions, EC provides solutions that meet a customer’s just-in-time requirements andminimize risk in a variety of scenarios including lean manufacturing, demand flow and outsourcing.Avnet IntegratedEC provides integrated solutions including technical design, integration and assembly of embedded products, systemsand solutions primarily for industrial applications. EC also provides integrated solutions for intelligent and innovativeembedded display solutions, including touch and passive displays. In addition, EC develops and produces standard boardand industrial subsystems and application-specific devices that enable it to produce specialized systems tailored to specificcustomer requirements. EC serves OEMs that require embedded systems and solutions, including engineering, productprototyping, integration and other value-added services in the medical, telecommunications, industrial and digital editingmarkets.4Table of ContentsFarnellAvnet’s Farnell operating group supports primarily lower-volume customers that need electronic components quicklyto develop, prototype and test their products. It distributes a comprehensive portfolio of kits, tools, electronic componentsand industrial automation components, as well as test and measurement products to both engineers and entrepreneurs. Farnellbrings the latest products, services and development trends all together in element14, an industry-leading online communitywhere engineers collaborate to solve one another’s design challenges. In element14, members get consolidated informationon new technologies as well as access to experts and product specifications. Members can see what other engineers areworking on, learn from online training and get the help they need to optimize their own designs.Major ProductsOne of Avnet’s competitive strengths is the breadth and quality of the suppliers whose products it distributes. TexasInstruments products accounted for approximately 10% of the Company’s sales during fiscal 2019, and 11% of theCompany’s sales during fiscal 2018 and 2017, and was the only supplier from which sales of its products exceeded 10% ofconsolidated sales. Listed in the table below are the major product categories and the Company’s approximate sales of eachduring the past three fiscal years. Certain prior year amounts have been reclassified between major product categories toconform to the fiscal 2019 classification. Other consists primarily of test and measurement as well as maintenance, repair andoperations (MRO) products. Years Ended June 29, June 30, July 1, 2019 2018 2017 (Millions) Semiconductors $14,973.3 $14,890.9 $13,537.9 Interconnect, passive & electromechanical (IP&E) 3,516.0 3,227.0 2,736.1 Computers 533.1 461.9 504.2 Other 496.2 457.1 661.8 Sales $19,518.6 $19,036.9 $17,440.0 Competition & MarketsThe electronic components industry continues to be extremely competitive. The Company’s major competitorsinclude: Arrow Electronics, Inc., Future Electronics, World Peace Group, Mouser Electronics and Digi-Key Electronics. Thereare also certain smaller, specialized competitors who generally focus on narrower regions, markets, products or particularsectors. As a result of these factors, Avnet must remain competitive in its pricing of products.A key competitive factor in the electronic component distribution industry is the need to carry a sufficient amount andselection of inventory to meet customers’ rapid delivery requirements. To minimize its exposure related to inventory onhand, the majority of the Company’s products are purchased pursuant to non-exclusive distributor agreements, whichtypically provide certain protections for product obsolescence and price erosion. These agreements are generally cancelableupon 30 to 180 days’ notice and, in most cases, provide for or require inventory return privileges upon cancellation. In fiscal2017, certain suppliers terminated their distribution agreements with the Company, which did not result in any significantinventory write-downs as a result of such terminations. In addition, the Company enhances its competitive position byoffering a variety of value-added services, which are tailored to individual customer specifications and business needs, suchas point of use replenishment, testing, assembly, supply chain management and materials management.5Table of ContentsA competitive advantage is the breadth of the Company’s supplier product line card. Because of the number of Avnet’ssuppliers, many customers can simplify their procurement process and make all of their required purchases from Avnet, ratherthan purchasing from several different parties.SeasonalityHistorically, Avnet’s business and continuing operations has not been materially impacted by seasonality, with theexception of an impact on consolidated results from shifts in regional sales trends from Asia in the first half of a fiscal year tothe Americas and EMEA regions in the second half of a fiscal year. Number of EmployeesAt June 29, 2019, Avnet had approximately 15,500 employees compared to 15,400 employees at June 30, 2018, and15,700 employees at July 1, 2017.Available InformationThe Company files its annual report on Form 10-K, quarterly reports on Form 10-Q, Current Reports on Form 8-K,proxy statements and other documents, including registration statements, with the U.S. Securities and Exchange Commission(“SEC”) under the Securities Exchange Act of 1934 or the Securities Act of 1933, as applicable. The Company’s SEC filingsare available to the public on the SEC’s website at http://www.sec.gov and through The Nasdaq Global Select Market(“Nasdaq”), 165 Broadway, New York, New York 10006, on which the Company’s common stock is listed.A copy of any of the Company’s filings with the SEC, or any of the agreements or other documents that constituteexhibits to those filings, can be obtained by request directed to the Company at the following address and telephone number:Avnet, Inc.2211 South 47 StreetPhoenix, Arizona 85034(480) 643-2000Attention: Corporate SecretaryThe Company also makes these filings available, free of charge, through its website (see “Avnet Website” below).Avnet WebsiteIn addition to the information about the Company contained in this Report, extensive information about the Companycan be found at http://www.avnet.com, including information about its management team, products and services andcorporate governance practices.The corporate governance information on the Company’s website includes the Company’s Corporate GovernanceGuidelines, the Code of Conduct and the charters for each of the committees of its Board of Directors. In addition,amendments to these documents and waivers granted to directors and executive officers under the Code of Conduct, if any,will be posted in this area of the website. These documents can be accessed at http://www.avnet.com under the “Company —Investor Relations — Documents & Charters” caption. Printed versions can be obtained, free of charge, by writing to theCompany at the address listed above in “Available Information.”6thTable of ContentsIn addition, the Company’s filings with the SEC, as well as Section 16 filings made by any of the Company’s executiveofficers or directors with respect to the Company’s common stock, are available on the Company’s website(http://www.avnet.com under the “Company — Investor Relations — SEC Filings” caption) as soon as reasonablypracticable after the filing is electronically filed with, or furnished to, the SEC.These details about the Company’s website and its content are only for information. The contents of the Company’swebsite are not, nor shall they be deemed to be, incorporated by reference in this Report. Item 1A. Risk FactorsForward-Looking Statements and Risk FactorsThis Report contains forward-looking statements with respect to the financial condition, results of operations andbusiness of Avnet. These statements are generally identified by words like “believes,” “plans,” “expects,” “anticipates,”“should,” “will,” “may,” “estimates” or similar expressions. Forward-looking statements are subject to numerousassumptions, risks and uncertainties. Except as required by law, Avnet does not undertake any obligation to update anyforward-looking statements, whether as a result of new information, future events or otherwise. Factors that may cause actualresults to differ materially from those contained in the forward-looking statements include those discussed below.The factors discussed below make the Company’s operating results for future periods difficult to predict and, therefore,prior results are not necessarily indicative of results to be expected in future periods. Any of the below factors, or any otherfactors discussed elsewhere in this Report, may have an adverse effect on the Company’s financial results, operations,prospects and liquidity. The Company’s operating results have fluctuated in the past and likely will continue to do so. If theCompany’s operating results fall below its forecasts and the expectations of public market analysts and investors, the tradingprice of the Company’s common stock will likely decrease.Economic weakness and geopolitical uncertainty could adversely affect the Company’s results and prospects.The Company’s financial results, operations and prospects depend significantly on worldwide economic andgeopolitical conditions, the demand for its products and services, and the financial condition of its customers and suppliers.Economic weakness and geopolitical uncertainty, including the uncertainty caused by the United Kingdom’s planned exitfrom the European Union commonly referred to as “Brexit,” have in the past resulted, and may result in the future, indecreased sales, margins and earnings. Economic weakness and geopolitical uncertainty may also lead the Company toimpair assets, including goodwill, intangible assets and other long-lived assets, take restructuring actions and reduceexpenses in response to decreased sales or margins. The Company may not be able to adequately adjust its cost structure in atimely fashion, which may adversely impact its profitability. Uncertainty about economic conditions may increase foreigncurrency volatility in markets in which the Company transacts business, which may negatively impact the Company’sresults. Economic weakness and geopolitical uncertainty also make it more difficult for the Company to manage inventorylevels and/or collect customer receivables, which may result in provisions to create reserves, write-offs, reduced access toliquidity and higher financing costs.The Company is monitoring the Brexit negotiations and developing contingency plans, including changes to itslogistics operations and shipment routes and preparing for changes in trade facilitation regulations. While the specific termsand impact of Brexit are not yet known, Brexit may adversely impact the United Kingdom and/or the European Union andtherefore may have an adverse effect on the Company’s trade operations and financial results.The Company experiences significant competitive pressure, which may negatively impact its results.The market for the Company’s products and services is very competitive and subject to rapid technological advances,new market entrants, non-traditional competitors, changes in industry standards and changes in customer needs and7Table of Contentsconsumption models. Not only does the Company compete with other global distributors, it also competes for customers withregional distributors and some of the Company’s own suppliers that maintain direct sales efforts. In addition, as the Companyexpands its offerings and geographies, the Company may encounter increased competition from current or new competitors.The Company’s failure to maintain and enhance its competitive position could adversely affect its business and prospects.Furthermore, the Company’s efforts to compete in the marketplace could cause deterioration of gross profit margins and, thus,overall profitability.The size of the Company’s competitors vary across market sectors, as do the resources the Company has allocated to thesectors and geographic areas in which it does business. Therefore, some competitors may have greater resources or a moreextensive customer or supplier base than the Company has in one or more of its market sectors and geographic areas, whichmay result in the Company not being able to effectively compete in certain markets which could impact the Company’sprofitability and prospects.Changes in customer needs and consumption models could significantly affect the Company’s operating results.Changes in customer needs and consumption models may cause a decline in the Company’s billings, which wouldhave a negative impact on the Company’s financial results. While the Company attempts to identify changes in marketconditions as soon as possible, the dynamics of these industries make prediction of, and timely reaction to such changesdifficult. Future downturns in the semiconductor and embedded solutions industries could adversely affect the Company’soperating results and negatively impact the Company’s ability to maintain its current profitability levels. In addition, thesemiconductor industry has historically experienced periodic fluctuations in product supply and demand, often associatedwith changes in economic conditions, technology and manufacturing capacity. During fiscal years 2019, 2018, and 2017,sales of semiconductors represented approximately 77%, 78%, and 78% of the Company's consolidated sales, respectively,and the Company’s sales closely follow the strength or weakness of the semiconductor industry.Due to the Company’s increased online sales, system interruptions and delays that make its websites and servicesunavailable or slow to respond may reduce the attractiveness of its products and services to its customers. If the Company isunable to continually improve the efficiency of its systems, it could cause systems interruptions or delays and adverselyaffect the Company’s operating results.Failure to maintain or develop new relationships with key suppliers could adversely affect the Company’s sales.One of the Company’s competitive strengths is the breadth and quality of the suppliers whose products the Companydistributes. However, billings of products and services from one of the Company’s suppliers, Texas Instruments (“TI”),accounted for approximately 10% of the Company’s consolidated billings in fiscal 2019. Management expects TI’s productsand services to continue to account for roughly a similar percentage of the Company’s consolidated billings in fiscal 2020.The Company’s contracts with its suppliers vary in duration and are generally terminable by either party at will upon notice.To the extent any primary suppliers terminate or significantly reduce their volume of business with the Company in thefuture, because of a product shortage, an unwillingness to do business with the Company, changes in strategy or otherwise,the Company’s business and relationships with its customers could be negatively affected because its customers depend onthe Company’s distribution of technology hardware and software from the industry’s leading suppliers. In addition,suppliers’ strategy shifts or performance issues may negatively affect the Company’s financial results. The competitivelandscape has also experienced a consolidation among suppliers, which could negatively impact the Company’s profitabilityand customer base. Further, to the extent that any of the Company’s key suppliers modify the terms of their contractsincluding, without limitation, the terms regarding price protection, rights of return, rebates or other terms that protect orenhance the Company’s gross margins, it could negatively affect the Company’s results of operations, financial condition orliquidity.8Table of ContentsThe Company’s non-U.S. locations represent a significant portion of its sales and, consequently, the Company is exposed torisks associated with operating internationally that could adversely affect the Company’s operating results.During fiscal 2019, 2018, and 2017 approximately 75%, 76% and 72%, respectively, of the Company’s sales camefrom its operations outside the United States. As a result of the Company’s international operations, in particular those inemerging and developing economies, the Company’s operations are subject to a variety of risks that are specific tointernational operations, including, but not limited to, the following:·potential restrictions on the Company’s ability to repatriate funds from its foreign subsidiaries;·foreign currency and interest rate fluctuations and the impact on the Company’s results of operations;·compliance with foreign and domestic import and export regulations, data privacy regulations, business licensingrequirements, environmental regulations and anti-corruption laws, the failure of which could result in severepenalties including monetary fines, criminal proceedings and suspension of import or export privileges;·adoption or expansion of trade restrictions, including technology transfer restrictions, specific company sanctions,new and higher duties, tariffs or surcharges, or other import/export controls, unilaterally or bilaterally;·complex and changing tax laws and regulations;·regulatory requirements and prohibitions that differ between jurisdictions;·economic and political instability (including the uncertainty caused by Brexit), terrorism and potential militaryconflicts or civilian unrest;·fluctuations in freight costs, limitations on shipping and receiving capacity, and other disruptions in thetransportation and shipping infrastructure;·natural disasters and health concerns;·differing environmental regulations and employment practices and labor issues; and·the risk of non-compliance with local laws.In addition to the cost of compliance, the potential criminal penalties for violations of import or export regulations andanti-corruption laws by the Company or its third-party agents create heightened risks for the Company’s internationaloperations. In the event that a governing regulatory body determines that the Company has violated applicable import orexport regulations or anti-corruption laws, the Company could be fined significant sums, incur sizable legal defense costsand/or its import or export capabilities could be restricted, which could have a material and adverse effect on the Company’sbusiness. Additionally, allegations that the Company has violated a governmental regulation may negatively impact theCompany’s reputation, which may result in customers or suppliers being unwilling to do business with the Company. Whilethe Company has adopted measures and controls designed to ensure compliance with these laws, the Company cannot beassured that such measures will be adequate or that its business will not be materially and adversely impacted in the event ofan alleged violation.The Company transacts sales, pays expenses, owns assets and incurs liabilities in countries using currencies other thanthe U.S. Dollar. Because the Company’s consolidated financial statements are presented in U.S. Dollars, the Company musttranslate sales, income and expenses, as well as assets and liabilities, into U.S. Dollars at exchange rates in effect during eachreporting period. Therefore, increases or decreases in the exchange rates between the U.S. Dollar and other currencies affectthe Company’s reported amounts of sales, operating income, assets and liabilities denominated in foreign currencies. Inaddition, unexpected and dramatic changes in foreign currency exchange rates may negatively affect the Company’searnings from those markets. While the Company may use derivative financial instruments to further reduce9Table of Contentsits net exposure to foreign currency exchange rate fluctuations, there can be no assurance that fluctuations in foreigncurrency exchange rates will not materially affect the Company’s financial results. Further, foreign currency instability anddisruptions in the credit and capital markets may increase credit risks for some of the Company’s customers and may impairits customers’ ability to repay existing obligations.Recently, the U.S. government imposed new or higher tariffs on certain products imported into the U.S., and theChinese government imposed new or higher tariffs on certain products imported into China, which have increased the costsof procuring certain products the Company purchases from its suppliers. The higher tariffs, along with any additional tariffsor trade restrictions that may be implemented by the U.S. or by other countries on U.S. goods in the future, may result infurther increased costs and other related expenses. While the Company intends to reflect such increased costs in its sellingprices, such price increases may impact the Company’s sales and customer demand for certain products. In addition,increased operational expenses incurred in minimizing the number of products subject to the tariffs could adversely affect theoperating profits for certain of its business units. Neither such U.S. tariffs nor any retaliatory tariffs imposed by othercountries on U.S. goods have yet had a significant impact, but there can be no assurance that future actions or escalations thataffect trade relations will not occur or will not materially affect the Company’s sales and results of operations. To the extentthat Company sales or profitability are negatively affected by any such tariffs or other trade actions, the Company’s businessand results of operations may be materially adversely affected.If the Company’s internal information systems fail to function properly, or if the Company is unsuccessful in theimplementation, integration or upgrade of information systems, its business operations could suffer.The Company is dependent on its information systems to facilitate the day-to-day operations of the business and toproduce timely, accurate and reliable information on financial and operational results. Currently, the Company’s globaloperations are tracked with multiple information systems, some of which are subject to ongoing IT projects designed tostreamline or optimize the Company’s global information systems. These IT projects are extremely complex, in part, becauseof a wide range of processes, the multiple legacy systems used and the Company’s business operations. There is no guaranteethat the Company will be successful at all times in these efforts or that there will not be implementation or integrationdifficulties that will adversely affect the Company’s ability to complete business transactions and ensure accurate recordingand reporting of financial data. In addition, the Company may be unable to achieve the expected efficiencies and costsavings as a result of the IT projects, thus negatively impacting the Company’s financial results. A failure of any of theseinformation systems in a way described above or material difficulties in upgrading these information systems could have anadverse effect on the Company’s business, internal controls and reporting obligations under federal securities laws.The Company’s acquisition strategy may not produce the expected benefits, which may adversely affect the Company’sresults of operations.Avnet has made, and expects to continue to make, strategic acquisitions or investments in companies around the worldto further its strategic objectives and support key business initiatives. Acquisitions and investments involve risks anduncertainties, some of which may differ from those associated with Avnet’s historical operations. The risks relating to suchacquisitions and investments include, but are not limited to, risks relating to expanding into emerging markets and businessareas, adding additional product lines and services, impacting existing customer and supplier relationships, incurring costs orliabilities associated with the companies acquired, incurring potential impairment charges on acquired goodwill and otherintangible assets and diverting management’s attention from existing business operations. As a result, the Company’sprofitability may be negatively impacted. In addition, the Company may not be successful in integrating the acquiredbusinesses or the integration may be more difficult, costly or time-consuming than anticipated. Further, any litigationrelating to a potential acquisition will result in an increase in the expenses associated with the acquisition or cause a delay incompleting the acquisition, thereby impacting the Company’s profitability. The Company may experience disruptions thatcould, depending on the size of the acquisition, have an adverse effect on its business, especially where an10Table of Contentsacquisition target may have pre-existing compliance issues or pre-existing deficiencies or material weaknesses in internalcontrols over financial reporting. Furthermore, the Company may not realize all of the anticipated benefits from itsacquisitions, which could adversely affect the Company’s financial performance.Major disruptions to the Company’s logistics capability could have an adverse impact on the Company’s operations.The Company’s global logistics services are operated through specialized, centralized or outsourced distributioncenters around the globe. The Company also depends almost entirely on third-party transportation service providers for thedelivery of products to its customers. A major interruption or disruption in service at one or more of its distribution centersfor any reason (such as information technology upgrades and operating issues, warehouse modernization and relocationefforts, natural disasters, pandemics, or significant disruptions of services from the Company’s third-party transportationproviders) could cause cancellations or delays in a significant number of shipments to customers and, as a result, could havean adverse impact on the Company’s business partners, and on the Company’s business, operations and financialperformance.If the Company sustains cyber-attacks or other privacy or data security incidents that result in security breaches, it couldsuffer a loss of sales and increased costs, exposure to significant liability, reputational harm and other negativeconsequences.The Company’s information technology may be subject to cyber-attacks, security breaches or computer hacking.Experienced computer programmers and hackers may be able to penetrate the Company’s security controls andmisappropriate or compromise sensitive personal, proprietary or confidential information, create system disruptions or causeshutdowns. They also may be able to develop and deploy malicious software programs that attack the Company’s systems orotherwise exploit any security vulnerabilities. The Company’s systems and the data stored on those systems may also bevulnerable to security incidents or security attacks, acts of vandalism or theft, coordinated attacks by activist entities,misplaced or lost data, human errors, or other similar events that could negatively affect the Company’s systems and its data,as well as the data of the Company’s business partners. Further, outside parties may attempt to fraudulently induceemployees, customers or suppliers to disclose sensitive information in order to gain access to the Company’s data andinformation technology systems, otherwise known as phishing. Lastly, third parties, such as hosted solution providers, thatprovide services to the Company, could also be a source of security risk in the event of a failure of their own security systemsand infrastructure.The costs to eliminate or address the foregoing security threats and vulnerabilities before or after a cyber-incident couldbe significant. The Company’s remediation efforts may not be successful and could result in interruptions, delays orcessation of service, and loss of existing or potential suppliers or customers. In addition, breaches of the Company’s securitymeasures and the unauthorized dissemination of sensitive personal, proprietary or confidential information about theCompany, its business partners or other third parties could expose the Company to significant potential liability andreputational harm. As threats related to cyber-attacks develop and grow, the Company may also find it necessary to makefurther investments to protect its data and infrastructure, which may impact the Company’s profitability. Although theCompany has insurance coverage for protecting against cyber-attacks, it may not be sufficient to cover all possible claims,and the Company may suffer losses that could have a material adverse effect on its business. As a global enterprise, theCompany could also be negatively impacted by existing and proposed laws and regulations, as well as government policiesand practices related to cybersecurity, data privacy, data localization and data protection.Declines in the value of the Company’s inventory or unexpected order cancellations by the Company’s customers couldadversely affect its business, results of operations, financial condition and liquidity.The electronic components and integrated products industries are subject to rapid technological change, new and11Table of Contentsenhanced products, changes in customer needs and changes in industry standards and regulatory requirements, which cancontribute to a decline in value or obsolescence of inventory. Regardless of the general economic environment, it is possiblethat prices will decline due to a decrease in demand or an oversupply of products and, as a result of the price declines, theremay be greater risk of declines in inventory value. Although it is the policy of many of the Company’s suppliers to offercertain protections from the loss in value of inventory (such as price protection and limited rights of return), the Companycannot be assured that such policies will fully compensate for the loss in value, or that the suppliers will choose to, or be ableto, honor such agreements, some of which are not documented and, therefore, subject to the discretion of the supplier. Inaddition, the majority of the Company’s sales are made pursuant to individual purchase orders, rather than through long-termsales contracts. Where there is a contract, such contract is generally terminable at will upon notice. The Company cannot beassured that unforeseen new product developments, declines in the value of the Company’s inventory or unforeseen ordercancellations by its customers will not adversely affect the Company’s business, results of operations, financial condition orliquidity.Substantial defaults by the Company’s customers or suppliers on its accounts receivable or the loss of significant customerscould have a significant negative impact on the Company’s business, results of operations, financial condition or liquidity.A significant portion of the Company’s working capital consists of accounts receivable. If entities responsible for asignificant amount of accounts receivable were to cease doing business, direct their business elsewhere, become insolvent orunable to pay the amount they owe the Company, or were to become unwilling or unable to make such payments in a timelymanner, the Company’s business, results of operations, financial condition or liquidity could be adversely affected. Aneconomic or industry downturn could adversely affect the collectability of these accounts receivable, which could result inlonger payment cycles, increased collection costs and defaults in excess of management’s expectations. A significantdeterioration in the Company’s ability to collect on accounts receivable in the United States could also impact the cost oravailability of financing under its accounts receivable securitization program.The Company may not have adequate or cost-effective liquidity or capital resources which could adversely affect theCompany’s operations.The Company’s ability to satisfy its cash needs and implement its capital allocation strategy depends on its ability togenerate cash from operations and to access the financial markets, both of which are subject to general economic, financial,competitive, legislative, regulatory and other factors that are beyond the Company’s control.The Company may need to satisfy its cash needs through external financing. However, external financing may not beavailable on acceptable terms or at all. As of June 29, 2019, Avnet had total debt outstanding of approximately $1.72 billionunder various notes, secured borrowings and committed and uncommitted lines of credit with financial institutions. TheCompany needs cash to make interest payments on, and to repay, this indebtedness and for general corporate purposes, suchas funding its ongoing working capital and capital expenditure needs. Under the terms of any external financing, theCompany may incur higher than expected financing expenses and become subject to additional restrictions and covenants.Any material increase in the Company’s financing costs could have an adverse effect on its profitability.Under certain of its credit facilities, the Company is required to maintain certain specified financial ratios and passcertain financial tests. If the Company fails to meet these financial ratios and/or pass these tests, it may be unable to continueto utilize these facilities. If the Company is unable to utilize these facilities, it may not have sufficient cash available to makeinterest payments, to repay indebtedness or for general corporate needs. General economic or business conditions, domesticand foreign, may be less favorable than management expects and could adversely impact the Company’s sales or its ability tocollect receivables from its customers, which may impact access to the Company’s accounts receivable securitizationprogram.12Table of ContentsIn order to be successful, the Company must attract, retain, train, motivate and develop key employees, and failure to do socould adversely impact the Company’s results and strategic initiatives.Identifying, developing internally or hiring externally, training and retaining qualified employees are critical to theCompany’s future, and competition for experienced employees in the Company’s industry can be intense. Changingdemographics and labor work force trends may result in a loss of knowledge and skills as experienced workers leave theCompany. In addition, as global opportunities and industry demand shifts, and as the Company expands its offerings,realignment, training and hiring of skilled personnel may not be sufficiently rapid. From time to time the Company haseffected restructurings, which eliminate a number of positions. Even if such personnel are not directly affected by therestructuring effort, such terminations can have a negative impact on morale and the Company’s ability to attract and hirenew qualified personnel in the future. If the Company loses existing qualified personnel or is unable to hire new qualifiedpersonnel, as needed, the Company’s business, financial condition and results of operations could be seriously harmed.The agreements governing some of the Company’s financings contain various covenants and restrictions that limitmanagement’s discretion in operating the business and could prevent management from engaging in some activities thatmay be beneficial to the Company’s business.The agreements governing the Company’s financing, including its credit facility, accounts receivable securitizationprogram and the indentures governing the Company’s outstanding notes, contain various covenants and restrictions that, incertain circumstances, limit the Company’s ability, and the ability of certain subsidiaries, to:·grant liens on assets;·make restricted payments (including, under certain circumstances, paying dividends on common stock orredeeming or repurchasing common stock);·make certain investments;·merge, consolidate or transfer all or substantially all of the Company’s assets;·incur additional debt; or·engage in certain transactions with affiliates.As a result of these covenants and restrictions, the Company may be limited in the future in how it conducts its businessand may be unable to raise additional debt, repurchase common stock, pay a dividend, compete effectively or make furtherinvestments.The Company may become involved in legal proceedings that could cause it to incur substantial costs, divertmanagement’s efforts or require it to pay substantial damages or licensing fees.From time to time, the Company may become involved in legal proceedings, including government investigations, thatarise out of the ordinary conduct of the Company’s business, including matters involving intellectual property rights,commercial matters, merger-related matters, product liability and other actions. The Company may be obligated to indemnifyand defend its customers if the products or services the Company sells are alleged to infringe any third party’s intellectualproperty rights. While the Company may be able to seek indemnification from its suppliers for itself and its customers againstsuch claims, there is no assurance that it will be successful in realizing such indemnification or that the Company will befully protected against such claims. However, the Company is exposed to potential liability for technology and products thatit develops for which it has no indemnification protections. If an infringement claim against the Company is successful, theCompany may be required to pay damages or seek royalty or license arrangements, which may not be available oncommercially reasonable terms. The Company may have to stop selling certain products or13Table of Contentsservices, which could affect its ability to compete effectively. In addition, the Company’s expanding business activities mayinclude the assembly or manufacture of electronic component products and systems. Product defects, whether caused by adesign, assembly, manufacture or component failure or error, or manufacturing processes not in compliance with applicablestatutory and regulatory requirements may result in product liability claims, product recalls, fines and penalties. Productliability risks could be particularly significant with respect to aerospace, automotive and medical applications because of therisk of serious harm to users of such products. Legal proceedings could result in substantial costs and diversion ofmanagement’s efforts and other resources and could have an adverse effect on the Company’s operations and businessreputation.Changes in tax rules and regulations, changes in interpretation of tax rules and regulations, changes in businessperformance or unfavorable assessments from tax audits could adversely affect the Company’s effective tax rates, deferredtaxes, financial condition and results of operations.As a multinational corporation, the Company is subject to the tax laws and regulations of the United States and manyforeign jurisdictions. From time to time, regulations may be enacted that could adversely affect the Company’s tax positions.There can be no assurance that the Company’s cash flow, and in some cases the effective tax rate, will not be adverselyaffected by these potential changes in regulations or by changes in the interpretation of existing tax law and regulations.On December 22, 2017, the U.S. federal government enacted tax legislation (the “Tax Cuts and Jobs Act” or the “Act”)which includes provisions to lower the corporate income tax rate, impose new taxes on certain foreign earnings, limitdeductibility of certain U.S. costs and levy a one-time deemed repatriation tax on accumulated offshore earnings, amongothers. The Act is subject to interpretation and implementation guidance by both federal and state tax authorities, as well asamendments and technical corrections. Any or all of these could impact the Company unfavorably. Many countries are adopting provisions to align their international tax rules with the Base Erosion and Profit ShiftingProject, led by the Organisation for Economic Co-operation and Development, to standardize and modernize globalcorporate tax policy. These provisions, individually or as a whole, may negatively impact taxation of international business.The tax laws and regulations of the various countries where the Company has operations are extremely complex andsubject to varying interpretations. Although the Company believes that its historical tax positions are sound and consistentwith applicable laws, regulations and existing precedent, there can be no assurance that these tax positions will not bechallenged by relevant tax authorities or that the Company would be successful in defending against any such challenge.The Company’s future income tax expense could also be favorably or adversely affected by changes in the mix ofearnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities andchanges to its operating structure.If the Company fails to maintain effective internal controls, it may not be able to report its financial results accurately ortimely, or prevent or detect fraud, which could have an adverse effect on the Company’s business or the market price of theCompany’s securities.Effective internal controls over financial reporting are necessary for the Company to provide reliable financial reportsand to effectively prevent or detect fraud. If the Company cannot provide reliable financial reports and effectively prevent ordetect fraud, its brand and operating results could be harmed. Internal controls over financial reporting may not prevent ordetect misstatements because such controls are inherently limited; such limitations include the possibility of human error,the circumvention or overriding of controls, or fraud. Therefore, even effective internal controls cannot provide absoluteassurance with respect to the preparation and fair presentation of financial statements. In addition, if not properly maintainedand updated, internal controls over financial reporting may become inadequate. If the Company fails14Table of Contentsto maintain the adequacy of its internal controls, including any failure to implement required new or improved internalcontrols, or if the Company experiences difficulties in their implementation, the Company’s business and operating resultscould be harmed. Additionally, the Company may be subject to sanctions or investigations by regulatory authorities, and theCompany could fail to meet its reporting obligations, all of which could have an adverse effect on its business or the marketprice of the Company’s securities.Failure to comply with the requirements of environmental regulations could adversely affect the Company’s business.The Company is subject to various federal, state, local and foreign laws and regulations addressing environmental andother impacts from product disposal, use of hazardous materials in products, recycling of products at the end of their usefullife and other related matters. While the Company strives to ensure it is in full compliance with all applicable regulations,certain of these regulations impose liability without fault. Additionally, the Company may be held responsible for the prioractivities of an entity it acquired. Failure to comply with these regulations could result in substantial costs, fines and civil orcriminal sanctions, as well as third-party claims for property damage or personal injury. Further, environmental laws maybecome more stringent over time, imposing greater compliance costs and increasing risks and penalties associated withviolations. Item 1B. Unresolved Staff CommentsNot applicable. Item 2. PropertiesThe Company owns and leases approximately 2.1 million and 4.9 million square feet of space, respectively, of whichapproximately 26% is located in the United States. The following table summarizes certain of the Company’s key facilities: Approximate Leased Square or Location Footage Owned Primary Use Chandler, Arizona 400,000 Owned EC warehousing and value-added operations Tongeren, Belgium 390,000 Owned EC warehousing and value-added operations Leeds, United Kingdom 330,000 Owned Current Farnell warehousing and value-added operations Leeds, United Kingdom 360,000 Leased Future Farnell warehousing and value-added operations Poing, Germany 300,000 Owned EC warehousing and value-added operations Chandler, Arizona 150,000 Leased EC warehousing, integration and value-added operations Gaffney, South Carolina 220,000 Owned Farnell warehousing Hong Kong, China 210,000 Leased EC warehousing Phoenix, Arizona 180,000 Leased Corporate and EC Americas headquarters 15Table of Contents Item 3. Legal ProceedingsPursuant to SEC regulations, including but not limited to Item 103 of Regulation S-K, the Company regularly assessesthe status of and developments in pending environmental and other compliance related legal proceedings to determinewhether any such proceedings should be identified specifically in this discussion of legal proceedings, and has concludedthat no particular pending legal proceeding requires public disclosure. Based on the information known to date, managementbelieves that the Company has appropriately accrued in its consolidated financial statements for its share of the estimablecosts of environmental and other compliance related matters.The Company is also currently subject to various pending and potential legal matters and investigations relating tocompliance with governmental laws and regulations, including import/export and environmental matters. The Companycurrently believes that the resolution of such matters will not have a material adverse effect on the Company’s financialposition or liquidity, but could possibly be material to its results of operations in any one reporting period. Item 4. Mine Safety DisclosuresNot applicable. PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket InformationThe Company’s common stock is listed on the Nasdaq Global Select Market under the symbol AVT since May 2018and was traded on the New York Stock Exchange prior to that date.DividendsThe declaration and payment of future dividends will be at the discretion of the Board of Directors and will bedependent upon the Company’s financial condition, results of operations, capital requirements, and other factors the Boardof Directors considers relevant. In addition, certain of the Company’s debt facilities may restrict the declaration and paymentof dividends, depending upon the Company’s then current compliance with certain covenants.Record HoldersAs of July 26, 2019, there were 1,738 registered holders of record of Avnet’s common stock.16Table of ContentsStock Performance Graphs and Cumulative Total ReturnsThe graph below matches the cumulative 5-year total return of holders of Avnet’s common stock with the cumulativetotal returns of the Nasdaq Composite index and a customized peer group of seven companies that includes: Agilysys Inc.,Anixter International Inc., Arrow Electronics Inc., Insight Enterprises Inc., Scansource Inc., Synnex Corp and Tech Data Corp.The graph assumes that the value of the investment in Avnet’s common stock, in each index, and in the peer group(including reinvestment of dividends) was $100 on 6/28/2014 and tracks it through 6/29/2019. 6/28/2014 6/27/2015 7/2/2016 7/1/2017 6/30/2018 6/29/2019 Avnet, Inc. $100 $ 97.69 $ 94.98 $ 93.24 $104.75 $112.60 Nasdaq Composite 100 114.44 112.51 144.35 178.42 192.30 Peer Group 100 92.18 97.84 129.12 117.09 122.06 The stock price performance included in this graph is not necessarily indicative of future stock price performance.17Table of ContentsIssuer Purchases of Equity SecuritiesIn August 2018, the Company’s Board of Directors amended the Company’s existing share repurchase program toauthorize the repurchase of up to $2.45 billion of common stock in the open market or through privately negotiatedtransactions. The timing and actual number of shares repurchased will depend on a variety of factors such as share price,corporate and regulatory requirements, and prevailing market conditions. The following table includes the Company’smonthly purchases of Avnet’s common stock during the fourth fiscal quarter ended June 29, 2019, under the share repurchaseprogram, which is part of a publicly announced plan: 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 April 1 – April 26 571,322 $46.16 571,322 $296,530,000 April 29 – May 24 901,400 $43.90 901,400 $256,955,000 May 27 – June 28 1,199,579 $42.95 1,199,579 $205,429,000 18Table of Contents Item 6. Selected Financial DataThe following selected financial data has been derived from the Company’s consolidated financial statements. The dataset forth below should be read in conjunction with Management’s Discussion and Analysis of Financial Condition andResults of Operations and the consolidated financial statements and notes thereto. Years Ended June 29, June 30, July 1, July 2, June 27, 2019 2018 2017 2016 2015 (Millions, except for per share and ratio data) Consolidated Statements of Operations: Sales $19,518.6 $19,036.9 $17,440.0 $16,740.6 $17,655.3 Gross profit 2,486.1 2,527.2 2,369.4 2,077.9 2,210.1 Operating income 365.9 209.2 443.7 565.1 646.1 Income tax expense 62.2 288.0 47.1 87.1 86.1 Income (loss) from continuing operations 180.1 (142.9) 263.4 390.9 485.4 Income (loss) from discontinued operations (3.8) (13.5) 261.9 115.6 86.5 Net income (loss) 176.3 (156.4) 525.3 506.5 571.9 Per Share: Earnings - diluted: Earnings (loss) from continuing operations $1.63 $(1.19) $2.05 $2.93 $3.50 Earnings (loss) from discontinued operations (0.04) (0.11) 2.03 0.87 0.62 Earnings (loss) per share - diluted $1.59 $(1.30) $4.08 $3.80 $4.12 Cash dividends per share $0.80 $0.74 $0.70 $0.68 $0.64 Weighted-average shares outstanding - diluted 110,798 119,909 128,651 133,173 138,791 Consolidated Balance Sheets: Working capital $4,297.8 $4,641.1 $5,080.0 $4,061.5 $4,312.6 Total assets 8,564.6 9,596.8 9,699.6 11,239.8 10,800.0 Long-term debt 1,419.9 1,489.2 1,729.2 1,339.2 1,646.5 Shareholders’ equity 4,140.5 4,685.1 5,182.1 4,691.3 4,685.0 Ratios: Operating income as a percentage of sales 1.9% 1.1% 2.5% 3.4% 3.7% Net income (loss) as a percentage of sales 0.9% (0.8)% 3.0% 3.0% 3.2% Quick ratio 1.4:1 1.4:1 1.8:1 0.8:1 0.9:1 Current ratio 2.7:1 2.6:1 3.1:1 1.8:1 2.0:1 Total debt to capital ratio 29.4% 26.1% 25.6% 34.7% 29.7% (a)In February 2017, the Company completed the sale of its TS business and as such, the results of that business areclassified as discontinued operations in all periods presented.(b)The summary consolidated financial data for fiscal 2018 and prior has been retrospectively restated to reflect theCompany’s adoption of Accounting Standards Update No. 2017-07, Compensation - Retirement Benefits (Topic 715)-Improving the Presentation of Net Periodic Cost and Net Periodic Postretirement Benefit Cost ("ASU No. 2017-07").(c)All fiscal years presented include restructuring, integration and other expenses from continuing operations, whichtotaled $108.1 million in fiscal 2019, $145.1 million in fiscal 2018, $137.4 million in fiscal 2017, $44.8 million infiscal 2016, and $41.8 million in fiscal 2015.19(a)(b)(c)(d)(e)(f)Table of Contents(d)All fiscal years presented include amortization of acquired intangible assets and other, which totaled $84.3 million in2019, $91.9 million in fiscal 2018, $54.5 million in fiscal 2017, $9.8 million in fiscal 2016, and $18.1 million in fiscal2015.(e)Certain fiscal years presented were impacted by expense or income amounts that impact the comparability betweenyears including a goodwill impairment expense of $137.4 million in fiscal 2019, a goodwill impairment expense of$181.4 million and a one-time mandatory deemed repatriation tax expense of $230.0 million in fiscal 2018, and a gainon disposal of the TS business of $222.4 million after tax in fiscal 2017.(f)This calculation of working capital is defined as current assets less current liabilities. See the “Liquidity”section contained in Item 7 of this Annual Report on Form 10-K for further discussion on liquidity.Summary of quarterly results: First Second Third Fourth Fiscal Quarter Quarter Quarter Quarter Year (Millions, except per share amounts) 2019 Sales $5,089.9 $5,049.0 $4,698.8 $4,680.9 $19,518.6 Gross profit 636.8 630.0 624.2 595.1 2,486.1 Net income (loss) 83.7 36.4 88.0 (31.8) 176.3 Diluted earnings (loss) per share 0.72 0.33 0.81 (0.30) 1.59 2018 Sales $4,660.9 $4,521.6 $4,795.1 $5,059.2 $19,036.9 Gross profit 612.6 602.5 653.5 658.6 2,527.2 Net income (loss) 58.3 46.7 (320.1) 58.6 (156.4) Diluted earnings (loss) per share 0.47 0.39 (2.68) 0.50 (1.30) (a)Quarters may not total to the fiscal year due to rounding and differences in diluted share count.(b)First quarter of fiscal 2019 net income was impacted by restructuring, integration and other expenses of $11.5 millionafter tax, and a discrete income tax expense of $8.2 million. Second quarter results were impacted by restructuring,integration and other expenses of $46.6 million after tax and a discrete income tax expense of $16.7 million. Thirdquarter results were impacted by restructuring, integration and other expenses of $2.6 million after tax and a discreteincome tax expense of $4.1 million. Fourth quarter results were impacted by restructuring, integration and otherexpenses of $20.7 million after tax, a goodwill impairment of $118.8 million after tax and a discrete income tax benefitof $20.9 million.(c)First quarter of fiscal 2018 net income was impacted by restructuring, integration and other expenses of $29.6 millionafter tax, foreign currency gain and other expense of $6.5 million after tax and a discrete income tax benefit of $6.9million. Second quarter results were impacted by restructuring, integration and other expenses of $27.8 million after taxand a discrete income tax benefit of $8.0 million. Third quarter results were impacted by restructuring, integration andother expenses of $19.4 million after tax, a goodwill impairment of $181.4 million and a discrete income tax expense of$218.8 million. Fourth quarter results were impacted by restructuring, integration and other expenses of $26.9 millionafter tax and a discrete income tax expense of $14.5 million.20(a)(b)(c)Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsFor an understanding of Avnet and the significant factors that influenced the Company’s performance during the pastthree fiscal years, the following discussion should be read in conjunction with the description of the business appearing inItem 1 of this Report and the consolidated financial statements, including the related notes and schedule, and otherinformation appearing in Item 15 of this Report. The Company operates on a “52/53 week” fiscal year. Fiscal years 2019,2018 and 2017 all contain 52 weeks.There are references to the impact of foreign currency translation in the discussion of the Company’s results ofoperations. When the U.S. Dollar strengthens and the stronger exchange rates of the current year are used to translate theresults of operations of Avnet’s subsidiaries denominated in foreign currencies, the resulting impact is a decrease in U.S.Dollars of reported results. Conversely, when the U.S. Dollar weakens and the weaker exchange rates of the current year areused to translate the results of operations of Avnet’s subsidiaries denominated in foreign currencies, the resulting impact is anincrease in U.S. Dollars of reported results. In the discussion that follows, results excluding this impact, primarily forsubsidiaries in EMEA and Asia, are referred to as “constant currency.”In addition to disclosing financial results that are determined in accordance with generally accepted accountingprinciples in the U.S. (“GAAP”), the Company also discloses certain non-GAAP financial information, including:·Sales adjusted for certain items that impact the year-over-year analysis, which includes the impact of certainacquisitions by adjusting Avnet’s prior periods to include the sales of acquired businesses, as if the acquisitionshad occurred at the beginning of the earliest period presented. In addition, the prior year sales are adjusted fordivestitures by adjusting Avnet’s prior periods to exclude the sales of divested businesses as if the divestitures hadoccurred at the beginning of the earliest period presented. Sales taking into account these adjustments are referredto as “organic sales.”·Operating income excluding (i) restructuring, integration and other expenses (see Restructuring, Integration andOther Expenses in this MD&A), (ii) goodwill impairment expense and (iii) amortization of acquired intangibleassets and other is referred to as “adjusted operating income.” Adjusted operating income excludes the TS business,which is reported within discontinued operations for all periods presented.The reconciliation of operating income to adjusted operating income is presented in the following table: Years Ended June 29, June 30, July 1, 2019 2018 2017 (Thousands)Operating income $365,911 $209,218 $443,697Restructuring, integration and other expenses 108,144 145,125 137,415Goodwill impairment expense 137,396 181,440 —Amortization of acquired intangible assets and other 84,257 91,923 54,526Adjusted operating income $695,708 $627,706 $635,638 Management believes that providing this additional information is useful to readers to better assess and understandoperating 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 GAAPresults. Management also uses these non-GAAP measures to establish operational goals and, in many cases, for measuringperformance for compensation purposes. However, any analysis of results on a non-GAAP basis should be used as acomplement to, and in conjunction with, results presented in accordance with GAAP. 21Table of ContentsResults of OperationsExecutive SummarySales for fiscal 2019 were $19.52 billion, an increase of 2.5% from fiscal 2018 sales of $19.04 billion. Sales in constantcurrency increased by 4.4% year over year. EC sales in fiscal 2019 of $18.06 billion increased $516.9 million or 2.9% overthe prior year and sales in constant currency increased 4.8% year over year. This increase in sales was primarily related togrowth in the Americas, EMEA and Asia regions of 3.1%, 4.7% and 5.7%, respectively. Farnell sales of $1.46 billiondecreased 2.3% and sales in constant currency remained flat year over year.Gross profit margin of 12.7% decreased 54 basis points from fiscal 2018. The year-over-year decline was primarily dueto industry specific and macroeconomic conditions as both operating groups experienced gross margin declines in theEMEA and Asia regions, partially offset by increases in the Americas.Operating income was $365.9 million in fiscal 2019, representing a 74.9% increase compared with fiscal 2018operating income of $209.2 million. Operating income margin was 1.9% in fiscal 2019 as compared with 1.1% in fiscal 2018.Both years included goodwill impairment expense, amortization of acquired intangibles, and restructuring, integration andother expenses. Excluding these amounts from both years, adjusted operating income was $695.7 million, or 3.6% of sales, infiscal 2019 representing a $68.0 million and 27 basis point increase as compared with $627.7 million, or 3.3% of sales, infiscal 2018. The improvement in operating income margin was primarily the result of effective cost management, includingthe impact of cost reduction actions taken during fiscal 2018 for which the full benefit was realized during fiscal 2019.SalesThree-Year Analysis of Sales: By Operating Group and GeographyThe table below provides a year-over-year summary of sales for the Company and its operating groups. Years Ended Percent Change June 29, % of June 30, % of July 1, % of 2019 to 2018 to 2019 Total 2018 Total 2017 Total 2018 2017 (Dollars in millions) Sales by Operating Group: EC $18,060.3 92.5% $17,543.6 92.2% $16,474.1 94.5% 3.0% 6.5% Farnell (acquired Q2 fiscal2017) 1,458.3 7.5 1,493.3 7.8 965.9 5.5 (2.4) 54.6 $19,518.6 $19,036.9 $17,440.0 Sales by Geographic Region: Americas $5,135.8 26.3% $5,011.4 26.3% $5,163.9 29.6% 2.5% (3.0)%EMEA 6,762.9 34.6 6,790.9 35.7 5,912.9 33.9 (0.4) 14.8 Asia/Pacific 7,619.9 39.0 7,234.6 38.0 6,363.2 36.5 5.3 13.7 Total Avnet $19,518.6 $19,036.9 $17,440.0 22Table of ContentsFiscal 2019 Comparison to Fiscal 2018The table below provides a comparison of reported and organic sales for fiscal 2019 to fiscal 2018 sales to allow readersto better assess and understand the Company’s sales performance by operating group on a more comparable basis. 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 2019 2018 % Change Currency (Dollars in millions) Avnet $19,518.6 $19,036.9 2.5% 4.4%Avnet by region Americas $5,135.8 $5,011.4 2.5% 2.5%EMEA 6,762.9 6,790.9 (0.4) 4.2 Asia 7,619.9 7,234.6 5.3 5.8 Avnet by segment EC $18,060.3 $17,543.6 3.0% 4.8%Farnell 1,458.3 1,493.3 (2.4) 0.5 (1)Sales from the acquisition of Softweb were not material.Avnet’s sales for fiscal 2019 were $19.52 billion, an increase of $481.7 million, or 2.5%, from fiscal 2018 sales of$19.04 billion. Sales in constant currency increased 4.4% year over year with both operating groups in all three regionscontributing to the increase. EC sales in fiscal 2019 were $18.06 billion, representing a 2.9% increase over fiscal 2018 sales. Sales in constantcurrency increased 4.8% year over year and all three regions contributed to sales growth of 3.1%, 4.7%, and 5.7% in theAmericas, EMEA and Asia, respectively. From a sales by product perspective, sales of IP&E products grew faster thansemiconductors. Farnell sales in fiscal 2019 were $1.46 billion, a decrease of 2.3% over fiscal 2018 sales. Excluding the impact offoreign currency translation, Farnell sales in constant currency in fiscal 2019 were flat compared to fiscal 2018. Increases inthe first half of fiscal 2019 were offset by declines in the second half of fiscal 2019 as uncertainties related to industryspecific and macroeconomic conditions including the United Kingdom’s exit from the European Union (Brexit) impacteddemand. Sales in the United Kingdom represented approximately 24% and 25% of Farnell’s sales in fiscal 2019 and 2018,respectively.23(1)Table of ContentsFiscal 2018 Comparison to Fiscal 2017The Company acquired Farnell in fiscal 2017. The table below provides the comparison of reported and organic fiscal2018 sales to fiscal 2017 sales to allow readers to better assess and understand the Company’s sales performance. Organic Sales Sales as Reported Sales Organic Organic Year-Year % and Organic as Reported Sales Sales Change in Fiscal Fiscal Fiscal Year-Year Constant 2018 2017 Acquisitions 2017 % Change Currency (Dollars in millions) Avnet $19,036.9 $17,440.0 $378.3 $17,818.3 6.8% 3.6%Avnet by region Americas $5,011.4 $5,163.9 $154.4 $5,318.3 (5.8)% (5.8)%EMEA 6,790.9 5,912.9 178.9 6,091.8 11.5 2.5 Asia 7,234.6 6,363.2 45.0 6,408.2 12.9 12.7 Avnet by segment EC $17,543.6 $16,474.1 $ — $16,474.1 6.5% 3.4%Farnell 1,493.3 965.9 378.3 1,344.2 11.1 6.5 (1)Includes Farnell acquired on October 17, 2016, which has operations in each Avnet regionSales for fiscal 2018 were $19.04 billion, an increase of 9.2%, or $1.60 billion, from fiscal 2017 sales of $17.44 billion.The sales growth was primarily driven by the acquisition of Farnell and the impact of changes in foreign currency exchangerates as approximately $575 million of the increase in sales was attributable to the translation impact of changes in foreigncurrency exchange rates, primarily in EMEA. These increases in sales were partially offset by the impact of supplier channeland program changes, which occurred during fiscal 2017 into the first half of fiscal 2018. Organic sales in constant currencyincreased 3.6% year over year with both operating groups contributing to the increase.Gross Profit and Gross Profit MarginsGross profit in fiscal 2019 was $2.49 billion, a decrease of $41.1 million, or 1.6%, compared to fiscal 2018 andincreased 1.0% in constant currency. Gross profit margin of 12.7% in fiscal 2019 decreased 54 basis points from the prioryear primarily due to industry specific and macroeconomic conditions as well as a higher mix of sales from Asia in EC. ECsales in the Asia region represented 41% of sales in fiscal 2019 versus 40% in fiscal 2018.Gross profit in fiscal 2018 was $2.53 billion, an increase of $157.7 million, or 6.7%, compared to fiscal 2017. Thisincrease was due to the acquisition of Farnell and the impact of changes in foreign currency exchange rates, partially offsetby declines from supplier channel and program changes. Gross profit margin of 13.3% in fiscal 2018 decreased 31 basispoints from the prior year primarily due to supplier channel and program changes and due to a higher mix of sales comingfrom the lower gross profit margin EC Asia region, partially offset by fiscal 2018 including a full fiscal year of Farnell sales.Selling, General and Administrative ExpensesSelling, general and administrative expenses (“SG&A expenses”) in fiscal 2019 were $1.87 billion, a decrease of$116.8 million, or 5.9%, compared to fiscal 2018. Metrics that management monitors with respect to its operating expensesare SG&A expenses as a percentage of sales and as a percentage of gross profit. In fiscal 2019, SG&A expenses as a24(1)Table of Contentspercentage of sales were 9.6% and as a percentage of gross profit were 75.4%, as compared with 10.5% and 78.8%,respectively, in fiscal 2018. The year-over-year decrease in SG&A expenses was primarily due to the reduction of expensesresulting from management’s cost optimization and restructuring programs, the impact of changes in foreign currencytranslation year over year and due to lower Corporate costs, partially offset by an increase as a result of sales volume growth. SG&A expenses were $1.99 billion in fiscal 2018, an increase of $203.1 million, or 11.4%, compared to fiscal 2017.The year-over-year increase in SG&A expenses was primarily due to the acquisition of Farnell in October of fiscal 2017 andthe impact of changes in foreign currency exchange rates, partially offset by restructuring and integration actions taken infiscal 2018. In fiscal 2018, SG&A expenses as a percentage of sales were 10.5% and as a percentage of gross profit were78.8%, as compared with 10.3% and 75.5%, respectively, in fiscal 2017. The increase in SG&A expenses as a percentage ofgross profit is due primarily to the decline in gross profit margin year over year.Goodwill Impairment ExpensesDuring the fourth quarter of fiscal 2019, the Company recorded $137.4 million of goodwill impairment expense in theEC operating group related to reporting businesses in the Americas and Asia. In Fiscal 2018, the Company recorded $181.4million of goodwill impairment expense in the EC operating group related to a business in the Americas.See Note 7, “Goodwill and intangible assets” to the Company’s consolidated financial statements included in Item 15of this Annual Report on Form 10-K for additional information related to goodwill impairment expenses.Restructuring, Integration and Other ExpensesAs a result of management’s focus on improving operating efficiencies and further integrating the acquisition ofFarnell, the Company has incurred certain restructuring costs. These costs also related to the continued transformation of theCompany’s information technology, distribution center footprint and business operations including the re-prioritization ofits information technology initiatives and resources. In addition, the Company incurred integration, accelerated depreciationand other costs. Integration costs are primarily related to the integration of acquired businesses including Farnell, theintegration of certain regional and global businesses including Avnet after the sale of the TS business, and incremental costsincurred as part of the consolidation, relocation, sale and closure of warehouse and office facilities. Accelerated depreciationrelates to the incremental depreciation expense incurred related to the shortening of the estimated useful life for certaininformation technology assets. Other costs consist primarily of any other miscellaneous costs that relate to restructuring,integration and other expenses including acquisition related costs and a gain on the sale of real estate.The Company recorded $95.5 million for restructuring costs in fiscal 2019, and expects to realize approximately $50.0million in incremental annualized operating costs savings as a result of such restructuring actions. Restructuring expensesconsisted of $35.8 million for severance, $5.0 million for facility exit costs, and $54.7 million for non-cash asset impairmentsexpense primarily related to information technology software. The Company also incurred integration costs of $13.9million, accelerated depreciation of $11.3 million, and other costs of $3.9 million. These costs were partially offset by a gainon the sale of real estate of $15.5 million and a reversal of $1.0 million for changes in estimates for costs associated with prioryear restructuring actions. The after tax impact of restructuring, integration and other expenses were $81.4 million and $0.74per share on a diluted basis.During fiscal 2018, the Company took certain actions in an effort to reduce future operating expenses in response tocurrent market and Company specific conditions. These actions included restructuring and integration actions related to theacquisition of Farnell and the integration of certain regional and global businesses after the TS business divestiture.25Table of ContentsAdditionally, the Company incurred accelerated depreciation related to the incremental depreciation expense incurredrelated to the shortening of the estimated useful life of the Company’s ERP system in the Americas compared to depreciationexpense based on the original useful life of such ERP system, and other costs related to incremental amounts incurred by theCompany as a result of the Act and other restructuring and integration related activities.During fiscal 2018, the Company recorded restructuring, integration and other expenses of $145.1 million. TheCompany recorded $60.6 million for restructuring costs in fiscal 2018, and expects to realize approximately $84.3 million inincremental annualized operating costs savings as a result of such restructuring actions. Restructuring expenses consisted of$56.8 million for severance, $1.0 million for facility exit costs, $2.6 million for asset impairments, and $0.2 million for otherrestructuring expenses. Integration, accelerated depreciation and other costs were $20.9 million, $52.9 million and $12.0million, respectively. The Company also recorded a net benefit of $1.3 million for changes in estimates for restructuringliabilities established in prior fiscal years. The after tax impact of restructuring, integration and other expenses were $103.7million and $0.86 per share on a diluted basis.During fiscal 2017, the Company recorded restructuring, integration and other expenses of $137.4 million. TheCompany recorded $41.7 million for restructuring costs, and expects to realize approximately $45.0 million in incrementalannualized operating costs savings as a result of such restructuring actions. Restructuring expenses consisted of $36.1million for severance, $0.6 million for facility exit costs, $3.5 million for asset impairments, and $1.5 million for otherrestructuring expenses. Integration, accelerated depreciation and other costs including acquisition/divestiture costs were$37.9 million, $16.0 million and $44.9 million, respectively. The Company also recorded a net benefit of $3.1 million forchanges in estimates for restructuring liabilities established in prior fiscal years. The after tax impact of restructuring,integration and other expenses were $92.0 million and $0.73 per share on a diluted basis.See Note 18, “Restructuring expenses” to the Company’s consolidated financial statements included in Item 15 of thisAnnual Report on Form 10-K for additional information related to restructuring expenses. Operating IncomeDuring fiscal 2019, the Company had operating income of $365.9 million, representing a 74.9% increase as comparedwith fiscal 2018 operating income of $209.2 million. The year over year increase in operating income was primarily drivenby the reduction in operating expenses and from the increase in sales as compared to fiscal 2018, partially offset by thedecline in gross profit margin. Operating income margin was 1.9% in fiscal 2019 compared to 1.1% in fiscal 2018. Both yearsincluded goodwill impairment expense, amortization of acquired intangibles, and restructuring, integration and otherexpenses. Excluding these amounts, adjusted operating income was $695.7 million, or 3.6% of sales, in fiscal 2019 ascompared with $627.7 million, or 3.3% of sales, in fiscal 2018. The improvement in operating income margin was primarilythe result of effective cost management, including the impact of cost reduction actions taken during fiscal 2018 for which thefull benefit was realized during fiscal 2019.During fiscal 2018, the Company had operating income of $209.2 million, representing a 52.8% decrease as comparedwith fiscal 2017 operating income of $443.7 million. The year over year decrease in operating income was primarily drivenby goodwill impairment expense, partially offset by improvements at Farnell. Operating income margin was 1.1% in fiscal2018 compared to 2.5% in fiscal 2017. Both years included restructuring, integration and other expenses and theamortization of acquired intangible assets. Fiscal 2018 also includes goodwill impairment expense. Excluding theseamounts from both years, adjusted operating income was $627.7 million, or 3.3% of sales, in fiscal 2018 as compared with$635.6 million, or 3.6% of sales, in fiscal 2017.26Table of ContentsInterest and Other Financing Expenses, NetInterest and other financing expenses for fiscal 2019 was $134.9 million, an increase of $42.1 million, or 45.4%,compared with interest and other financing expenses of $92.7 million in fiscal 2018. The increase in interest and otherfinancing expenses in fiscal 2019 compared to fiscal 2018 was primarily related to increased expenses in foreign regions tofinance working capital needs including increases in average debt outstanding and from lower interest income frominvestments in cash equivalents between the fiscal years.Interest and other financing expenses for fiscal 2018 was $92.7 million, a decrease of $6.8 million, or 6.9%, comparedwith fiscal 2017. The decrease in interest and other financing expenses in fiscal 2018 compared to fiscal 2017 was primarilyrelated to the impact of the Company’s repayment of its outstanding term loans and borrowings on its revolving creditfacilities in the second half of fiscal 2017, which were used to help fund the Farnell acquisition.Other Income (Expense), netIn fiscal 2019, the Company had $11.2 million of other income as compared with $28.6 million of other income infiscal 2018. In fiscal 2019, the Company had other income related to the non-service components of the Company’s periodicpension costs of $24.1 million, partially offset by foreign currency losses of $11.8 million and other miscellaneous expenseof $1.1 million. In fiscal 2018, the Company had other income related to the non-service components of the Company’speriodic pension costs of $21.3 million and $7.3 million of foreign currency gains primarily related to the strengthening ofboth the Euro and British Pound compared to the U.S. Dollar during fiscal 2018 compared to fiscal 2017.In fiscal 2017, the Company had $33.7 million of other expenses related to the non-service components periodicpension expenses, expenses related to foreign currency hedging and other costs associated with the Company’s acquisitionof Farnell.Income Tax ExpenseAvnet’s effective tax rate on its income from continuing operations before income taxes was 25.7% in fiscal 2019 ascompared with an effective tax rate of 198.5% in fiscal 2018. The fiscal 2019 effective tax rate is lower than the fiscal 2018effective tax rate due primarily to the reduction in (i) the transition tax expense recorded under the requirements of the Act,and (ii) goodwill impairment.Avnet’s effective tax rate on its income from continuing operations before income taxes was 198.5% in fiscal 2018 ascompared with an effective tax rate of 15.2% in fiscal 2017. The fiscal 2018 effective tax rate is higher than the fiscal 2017effective tax rate due primarily to (i) the provisional transition tax expense recorded under the requirements of the Act infiscal 2018 and (ii) the goodwill impairment in fiscal 2018, which was not tax deductible, partially offset primarily by themix of income in lower tax jurisdictions.Avnet’s effective tax rate is primarily a function of the tax rates in the numerous jurisdictions in which it does businessapplied to the mix of income before taxes. The effective tax rate may vary year over year as a result of changes in taxrequirements in these jurisdictions, management’s evaluation of its ability to recognize its net deferred tax assets and theestablishment of liabilities for unfavorable outcomes of tax positions taken on certain matters that are common tomultinational enterprises and the actual outcome of those matters.See Note 10, “Income taxes” to the Company’s consolidated financial statements included in Item 15 of this AnnualReport on Form 10-K for additional information related to income taxes.27Table of ContentsIncome (Loss) from Discontinued OperationsLoss from discontinued operations was $3.8 million in fiscal 2019 compared to $13.5 million of loss from discontinuedoperations in fiscal 2018.Loss from discontinued operations was $13.5 million in fiscal 2018 compared to $261.9 million of income fromdiscontinued operations in fiscal 2017. The fiscal 2018 loss was primarily a result of settlement losses associated with theCompany’s pension plan due to former TS business employees requesting and receiving distributions from the Company’spension plan during fiscal 2018. The income from discontinued operations in fiscal 2017 was primarily the result of therecognition of the gain on sale and to a lesser extent the operating profits of the TS business in fiscal 2017 prior to theclosing of the sale at the end of February 2017.See Note 3, “Discontinued operations” to the Company’s consolidated financial statements included in Item 15 of thisAnnual Report on Form 10-K for additional information and detail on the financial results of discontinued operations.Net Income (Loss)As a result of the factors described in the preceding sections of this MD&A, the Company’s net income in fiscal 2019was $176.3 million, or $1.59 of earnings per share on a diluted basis, compared with net loss of $156.4 million, or $1.30 ofloss per share on a diluted basis, in fiscal 2018 and net income of $525.3 million, or $4.08 of earnings per share on a dilutedbasis, in fiscal 2017.Liquidity and Capital ResourcesCash FlowsCash Flows from Operating ActivitiesThe Company generated $591.1 million of cash from its operating activities in fiscal 2019 as compared to $253.5million in fiscal 2018. These operating cash flows from continuing operations are comprised of: (i) cash flows generated fromnet income from continuing operations, adjusted for the impact of non-cash and other items, which includes depreciation andamortization expense, impairment expense, deferred income taxes, stock-based compensation expense and other non-cashitems (including provisions for doubtful accounts and net periodic pension costs), and (ii) cash flows used for, or generatedfrom, working capital and other, excluding cash and cash equivalents. Cash used for working capital and other was $4.6million during fiscal 2019, including decreases in accounts receivable of $465.0 million and inventories of $81.9 millionoffset by decreases in accounts payable of $377.9 million and accrued expenses and other of $173.7 million. During fiscal 2018, the Company generated $253.5 million of cash from its operating activities as compared to $221.0million in fiscal 2017. Cash used for working capital and other was $6.2 million during fiscal 2018, including increases inaccounts receivable of $296.2 million and inventories of $308.7 million. The Company utilized cash to invest in inventorylevels primarily as a result of a strong book to bill and lengthening product lead times. The increase in cash used forinventories and accounts receivable was partially offset by increases in accounts payable of $409.6 million and accruedexpenses and other of $189.1 million.In fiscal 2019, the Company used $56.3 million of cash from discontinued operations operating activities and $589.7million in fiscal 2017 related to income taxes paid on the gain from the sale of the TS business in fiscal 2019.28Table of ContentsCash Flows from Financing ActivitiesDuring fiscal 2019, the Company received net proceeds of $122.3 million under the accounts receivable securitizationprogram and repaid $61.7 million under the Credit Facility. During fiscal 2019, the Company paid dividends on commonstock of $87.2 million and repurchased $568.7 million of common stock. Additionally, included in other, net isapproximately $20.2 million of cash received from the exercises of stock options.During fiscal 2018, the Company made net repayments of $37.0 million under the Company’s accounts receivablesecuritization program and $98.0 million from borrowings of various bank credit facilities. During fiscal 2018, the Companyreceived net proceeds of $8.9 million under the Company’s Credit Facility. In addition, during fiscal 2018, the Companypaid dividends on common stock of $88.3 million and repurchased $323.5 million of common stock under the Company’sshare repurchase program.During fiscal 2017, the Company received net proceeds of $296.4 million as a result of the issuance of $300.0 millionof 3.75% Notes due December 2021. Additionally, the Company received net proceeds of $530.8 million under a term loanand $27.9 million from borrowings of bank credit facilities and other debt. During fiscal 2017, the Company repaid $530.8million of notes and acquired debt, $511.4 million from borrowings under a term loan, $50.0 million under the Company’sCredit Facility and made net repayments of $588.0 million under the Company’s accounts receivable securitization program.In addition, during fiscal 2017, the Company used $88.7 million and $275.9 million of cash to pay dividends on commonstock and to repurchase common stock under the Company’s share repurchase program, respectively. Cash Flows from Investing ActivitiesDuring fiscal 2019, the Company used $122.7 million for capital expenditures primarily related to warehouse andfacilities, computer hardware and software purchases and information technology system development costs. The Companyused $56.4 million of cash for acquisitions, which is net of the cash acquired. Additionally, included in other, net is $41.7million of cash received from the sale of real estate in EMEA and Farnell in fiscal 2019. During fiscal 2019, the Companyreceived $123.5 million of cash from investing activities of discontinued operations from the sale of the TS business.During fiscal 2018, the Company used $155.9 million for capital expenditures primarily related to information systemdevelopment costs, computer hardware and software purchases and facilities costs. Additionally, the Company used $15.3million of cash for acquisitions, which is net of the cash acquired. During fiscal 2018, the Company realized $236.2 millionof cash from investing activities of discontinued operations, substantially all of which related to the sale of the marketablesecurities obtained as a component of the proceeds from the sale of the TS business.During fiscal 2017, the Company used $802.7 million of cash for acquisitions, which is net of cash acquired, and used$120.4 million for capital expenditures primarily related to information system development costs, computer hardware andsoftware purchases and facilities costs. During fiscal 2017, with the sale of the TS business, the Company received $2.24billion of cash proceeds from the sale of TS, net of cash divested, which is reflected as an investing activity fromdiscontinued operations.29Table of ContentsFinancing TransactionsThe Company uses a variety of financing arrangements, both short-term and long-term, to fund its operations inaddition to cash generated from operating activities. The Company also uses several sources of funding so that it does notbecome overly dependent on one source and to achieve a lower cost of funding through these different alternatives. Thesefinancing arrangements include public debt, short-term and long-term bank loans, a revolving credit facility (the “CreditFacility”) and an accounts receivable securitization program (the “Program”).The Company has various lines of credit and other forms of bank debt in the U.S. and various foreign locations to fundthe short-term working capital, foreign exchange, overdraft and letter of credit needs of its wholly owned subsidiaries. Avnetgenerally guarantees its subsidiaries’ obligations under such debt facilities. Outstanding borrowings under such forms of debtat the end of fiscal 2019 was $0.9 million.As an alternative form of financing outside of the United States, the Company sells certain of its trade accountsreceivable on a non-recourse basis to third-party financial institutions pursuant to factoring agreements. The Companyaccounts for these transactions as sales of receivables and presents cash proceeds as cash provided by operating activities inthe consolidated statements of cash flows. Factoring fees for the sales of receivables are recorded within “Interest and otherfinancing expenses, net” and were not material.See Note 8, “Debt” to the Company’s consolidated financial statements included in Item 15 of this Annual Report onForm 10-K for additional information on financing transactions including the Credit Facility, the Program and theoutstanding Notes as of June 29, 2019.Covenants and ConditionsThe Program requires the Company to maintain certain minimum interest coverage and leverage ratios in order tocontinue utilizing the Program. The Program also contains certain covenants relating to the quality of the receivables sold. Ifthese conditions are not met, the Company may not be able to borrow any additional funds and the financial institutions mayconsider this an amortization event, as defined in the Program agreements, which would permit the financial institutions toliquidate the accounts receivables sold to cover any outstanding borrowings. Circumstances that could affect the Company’sability to meet the required covenants and conditions of the Program include the Company’s ongoing profitability andvarious other economic, market and industry factors. Management does not believe that the covenants under the Programlimit the Company’s ability to pursue its intended business strategy or its future financing needs. The Company was incompliance with all covenants of the Program as of June 29, 2019.The Credit Facility contains certain covenants with various limitations on debt incurrence, share repurchases,dividends, investments and capital expenditures and also includes financial covenants requiring the Company to maintainminimum interest coverage and leverage ratios. Management does not believe that the covenants in the Credit Facility limitthe Company’s ability to pursue its intended business strategy or its future financing needs. The Company was in compliancewith all covenants of the Credit Facility as of June 29, 2019.See Liquidity below for further discussion of the Company’s availability under these various facilities.LiquidityThe Company had cash and cash equivalents of $546.1 million as of June 29, 2019, of which $476.6 million was heldoutside the United States. As of June 30, 2018, the Company had cash and cash equivalents of $621.1 million, of which$545.3 million was held outside of the United States.30Table of ContentsAs of June 29, 2019, there were $1.1 million in borrowings outstanding, $4.0 million in letters of credit issued underthe Credit Facility and $227.3 million outstanding under the Securitization Program. During fiscal 2019, the Company hadan average daily balance outstanding under the Credit Facility of approximately $68.7 million and $314.9 million under theSecuritization Program. During fiscal 2018, the Company had an average daily balance outstanding under the Credit Facilityof approximately $10.9 million and $206.0 million under the Securitization Program. The Company expects to renew orreplace the Securitization Program on similar terms, subject to market conditions, before its maturity in August 2020. TheCompany expects to redeem the $300.0 million of Notes due June 2020 either through the issuance of new notes or fromavailable borrowing capacity under the Credit Facility. As of June 29, 2019, the combined availability under the CreditFacility and the Program was $1.52 billion.During periods of weakening demand in the electronic components industry, the Company typically generates cashfrom operating activities. Conversely, the Company is more likely to use operating cash flows for working capitalrequirements during periods of higher growth. During fiscal 2019, the Company generated $591.1 million from operatingactivities from continuing operations.Liquidity is subject to many factors, such as normal business operations as well as general economic, financial,competitive, legislative, and regulatory factors that are beyond the Company’s control. To the extent the cash balances heldin foreign locations cannot be remitted back to the U.S. in a tax efficient manner, those cash balances are generally used forongoing working capital, capital expenditure needs and to support acquisitions. In addition, local government regulationsmay restrict the Company’s ability to move funds among various locations under certain circumstances. Management doesnot believe such restrictions would limit the Company’s ability to pursue its intended business strategy. Managementbelieves that Avnet’s available borrowing capacity including capacity for the non-recourse sale of accounts receivable andthe Company’s expected ability to generate operating cash flows in the future will be sufficient to meet its future liquidityneeds. The Company also may issue debt or equity securities in the future and management believes the Company will haveadequate access to the capital markets, if needed.As a result of tax law changes created from the Act, which created a regulatory environment more favorable torepatriation, the Company repatriated approximately $42.0 million and $248.3 million of foreign cash to the United States infiscal 2019 and 2018, respectively, which was used to repay outstanding revolving debt facilities.Historically the Company has made, and expects to continue to make, strategic investments through acquisitionactivity to the extent the investments strengthen Avnet’s competitive position, further its business strategies and meetmanagement’s financial thresholds. As the Company integrates Farnell, responds to current business environment challengesand pursues ways to become more efficient and cost effective, the Company expects to use cash for restructuring, integrationand other expenses. During fiscal 2020, as a result of implementing restructuring plans for $50 million of annual operatingcost savings, the Company expects to incur up to $35 million of restructuring costs primarily related to severance and leaseexit costs.In addition to continuing to make investments in acquisitions, as of June 29, 2019, the Company may repurchase up toan aggregate of $205.4 million of the Company’s common stock through a $2.45 billion share repurchase program approvedby the Board of Directors. The Company may repurchase stock from time to time at the discretion of management, subject tostrategic considerations, market conditions and other factors. The Company may terminate or limit the share repurchaseprogram at any time without prior notice. The timing and actual number of shares repurchased will depend on a variety offactors such as share price, corporate and regulatory requirements, and prevailing market conditions. Additionally, theCompany currently expects to pay quarterly cash dividends on shares of its common stock, subject to approval of the Boardof Directors. During fiscal 2019, the Company paid cash dividends of $87.2 million on its common stock or approximately$0.20 per share on a quarterly basis.31Table of ContentsThe Company also expects to make capital expenditures primarily related to distribution centers and facilities andinvestments in IT systems, technologies and tools.See Item 6, Selected Financial Data in Part II of this Annual Report on Form 10-K for additional information on theCompany’s liquidity and related ratios.Long-Term Contractual ObligationsThe Company has the following contractual obligations outstanding as of June 29, 2019 (in millions): Payments due by period Lessthan Morethan Contractual Obligations Total 1 year 1-3 years 3-5 years 5 years Long-term debt obligations $1,729.3 $300.6 $528.7 $350.0 $550.0 Interest expense on long-term debt obligations 289.7 78.0 108.1 58.0 45.6 Operating lease obligations 303.8 68.7 94.3 55.6 85.2 (1)Excludes unamortized discount and issuance costs on debt.(2)Represents interest expense due on debt by using fixed interest rates for fixed rate debt and assuming the same interestrate at the end of fiscal 2019 for variable rate debt.At June 29, 2019, the Company had an estimated liability for income tax contingencies of $147.2 million, which is notincluded in the above table. Cash payments associated with the settlement of these liabilities that are expected to be paidwithin the next 12 months is $12.3 million. The settlement period for the remaining amount of the unrecognized tax benefits,including related accrued interest and penalties, cannot be determined and therefore was not included in the table.The Company does not currently have any material long-term commitments for purchases of inventories from suppliersor for capital expenditures.Critical Accounting PoliciesThe Company’s consolidated financial statements have been prepared in accordance with GAAP. The preparation ofthese consolidated financial statements requires the Company to make estimates and assumptions that affect the reportedamounts of assets, liabilities, sales and expenses. These estimates and assumptions are based upon the Company’s continuousevaluation of available information including historical results and anticipated future events. Actual results may differmaterially from these estimates.The Securities and Exchange Commission defines critical accounting policies as those that are, in management’s view,most important to the portrayal of the Company’s financial condition and results of operations and that require significantjudgments and estimates. Management believes the Company’s most critical accounting policies at the end of fiscal 2019relate to:Valuation of InventoriesInventories are recorded at the lower of cost or estimated net realizable value. The Company’s inventories includeelectronic components sold into changing, cyclical and competitive markets wherein such inventories may be subject todeclines in market value or obsolescence.32(1)(2)Table of ContentsThe Company regularly evaluates inventories for expected customer demand, obsolescence, current market prices andother factors that may render inventories less marketable. Write-downs are recorded so that inventories reflect theapproximate net realizable value and take into account the Company’s contractual provisions with its suppliers, which mayprovide certain protections to the Company for product obsolescence and price erosion in the form of rights of return, stockrotation rights, obsolescence allowances and price protections. Because of the large number of products and suppliers and thecomplexity of managing the process around price protections and stock rotations, estimates are made regarding the netrealizable value of inventories. Additionally, assumptions about future demand, market conditions and decisions todiscontinue certain product lines impact the evaluation of whether to write-down inventories. If assumptions about futuredemand change or actual market conditions are less favorable than those assumed by management, management wouldevaluate whether additional write-downs of inventories are required. In any case, actual net realizable values could bedifferent from those currently estimated.Accounting for Income TaxesManagement’s judgment is required in determining income tax expense, unrecognized tax benefits and in measuringdeferred tax assets and liabilities and the valuation allowances recorded against net deferred tax assets. The recoverability ofthe Company’s net deferred tax assets is dependent upon its ability to generate sufficient future taxable income in certainjurisdictions. In addition, the Company considers historic levels and types of income, expectations and risk associated withestimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need forvaluation allowances. Should the Company determine that it is not able to realize all or part of its deferred tax assets in thefuture, additional valuation allowances may be recorded against the deferred tax assets with a corresponding increase toincome tax expense in the period such determination is made. Similarly, should the Company determine that it is able torealize all or part of its deferred tax assets that have an associated valuation allowance established, the Company may releasea valuation allowance with a corresponding benefit to income tax expense in the period such determination is made.The Company establishes contingent liabilities for potentially unfavorable outcomes of positions taken on certain taxmatters. These liabilities are based on management’s assessment of whether a tax benefit is more likely than not to besustained upon examination by tax authorities. There may be differences between the anticipated and actual outcomes ofthese matters that may result in changes in estimates to such liabilities. To the extent such changes in estimates are necessary,the Company’s effective tax rate may potentially fluctuate. In accordance with the Company’s accounting policy, accruedinterest and penalties related to unrecognized tax benefits are recorded as a component of income tax expense.In determining the Company’s income tax expense, management considers current tax regulations in the numerousjurisdictions in which it operates including the impact in the United States of the Act. The Company exercises judgment forinterpretation and application of such current tax regulations. Changes to such tax regulations or disagreements with theCompany’s interpretation or application by tax authorities in any of the Company’s major jurisdictions may have asignificant impact on the Company’s income tax expense.See Note 10 to the Company’s consolidated financial statements included in Item 15 of this Annual Report on Form10-K for further discussion on income tax expense, valuation allowances and unrecognized tax benefits. Recently Issued Accounting PronouncementsIn August 2018, the FASB issued Accounting Standards Update No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud ComputingArrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force) ("ASU No.33Table of Contents2018-15"). ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangementthat is a service contract with the requirements for capitalizing implementation costs incurred to develop internal-usesoftware. ASU No. 2018-15 is effective for the Company in the first quarter of fiscal 2021, with early adoption permitted, andis to be applied either retrospectively or prospectively. The Company is currently evaluating the potential effects of adoptingthe provisions of ASU No. 2018-15.In August 2018, the FASB issued Accounting Standards Update No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements forDefined Benefit Plans (“ASU No. 2018-14”). The new guidance modifies the disclosure requirements for employers thatsponsor defined benefit pension or other postretirement plans, including removing certain previous disclosure requirements,adding certain new disclosure requirements, and clarifying certain other disclosure requirements. The ASU will be effectivefor the Company in the first quarter of fiscal 2020, and early adoption is permitted. The adoption is not expected to have amaterial impact on the Condensed and Consolidated Financial Statements.In August 2017, the FASB issued Accounting Standards Update 2017-12, Derivatives and Hedging (Topic 815) -Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”), which improves the financial reporting ofhedging relationships to better portray the economic results of an entity’s risk management activities in its financialstatements and makes certain targeted improvements to simplify the qualification and application of hedge accountingcompared to current GAAP. This update is effective for the Company in the first quarter of fiscal 2020. The Company doesnot believe its adoption of this standard will have a material impact on its consolidated financial statements.In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments - CreditLosses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU No. 2016-13") and also issuedsubsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, and ASU 2019-05 (collectively, Topic 326).Topic 326 revises the methodology for measuring credit losses on financial instruments and the timing of when such lossesare recorded. Topic 326 is effective for the Company in the first quarter of 2020, with early adoption permitted, and is to beapplied using a modified retrospective approach. The company is currently evaluating the potential effects of adopting theprovisions of Topic 326.In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (“ASU 2016-02”) and issuedsubsequent amendments to the initial guidance: ASU 2017-13, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01(collectively, Topic 842). Topic 842 requires companies to generally recognize operating and financing lease liabilities onthe consolidated balance sheet and corresponding right-of-use assets created by those leases with lease terms of more than 12months. The Company will adopt Topic 842 when it becomes effective in the first quarter of fiscal 2020 using the modifiedretrospective transition method and record a cumulative effect adjustment as of the adoption date. The Company is currentlyevaluating the impact of its pending adoption of Topic 842 on its consolidated financial statements, including assessingcertain available practical expedients, and expects that most operating lease commitments substantially all related to theCompany’s real estate and vehicle leases will be subject to the new standard and recognized as operating lease liabilities andright-of-use assets upon adoption, which will materially increase total assets and total liabilities relative to such amountsprior to adoption. The Company does not expect the adoption to have a material impact on the consolidated statements ofoperations or consolidated statements of cash flows. The Company has established an implementation team inclusive ofexternal advisors and is in the process of gathering information specific to its current operating lease portfolio. TheCompany’s information gathering, analysis and evaluation of the new standard will continue through the adoption date ofTopic 842 in the first quarter of fiscal 2020. 34Table of Contents Item 7A. Quantitative and Qualitative Disclosures About Market RiskThe Company seeks to reduce earnings and cash flow volatility associated with changes in interest rates and foreigncurrency exchange rates by entering into financial arrangements, from time to time, which are intended to provide aneconomic hedge against all or a portion of the risks associated with such volatility. The Company continues to haveexposure to such risks to the extent they are not economically hedged.The following table sets forth the scheduled maturities of the Company’s debt outstanding at June 29, 2019 (dollars inmillions): Fiscal Year 2020 2021 2022 2023 2024 Thereafter Total Liabilities: Fixed rate debt $300.4 $0.2 $300.1 $350.0 $ — $550.0 $1,500.7 Floating rate debt $0.2 $228.4 $ — $ — $ — $ — $228.6 (1)Excludes unamortized discounts and issuance costs.The following table sets forth the carrying value and fair value of the Company’s debt and the average interest rates atJune 29, 2019, and June 30, 2018 (dollars in millions): Carrying Value Fair Value at Carrying Value Fair Value at at June 29, 2019 at June 29, 2019 at June 30,2018 June 30, 2018 Liabilities: Fixed rate debt $1,500.7 $1,565.2 $1,500.8 $1,520.4 Average interest rate 4.8% 4.8% Floating rate debt $228.6 $228.4 $165.0 $165.0 Average interest rate 3.2% 2.7% (1)Excludes unamortized discounts and issuance costs. Fair value was estimated primarily based upon quoted market pricesfor the Company’s public long-term notes.Many of the Company’s subsidiaries purchase and sell products in currencies other than their functional currencies.This subjects the Company to the risks associated with fluctuations in foreign currency exchange rates. The Companyreduces this risk by utilizing natural hedging (i.e., offsetting receivables and payables) as well as by creating offsettingpositions through the use of derivative financial instruments, primarily forward foreign currency exchange contractstypically with maturities of less than sixty days (“economic hedges”), but not greater than one year. The Company continuesto have exposure to foreign currency risks to the extent they are not hedged. The Company adjusts any economic hedges tofair value through the consolidated statements of operations primarily within “other (income) expense, net.” Therefore, thechanges in valuation of the underlying items being economically hedged are offset by the changes in fair value of theforward foreign currency exchange contracts. A hypothetical 10% change in foreign currency exchange rates under theforward foreign currency exchange contracts outstanding at June 29, 2019 would result in an increase or decrease ofapproximately $20.0 million to the fair value of the forward foreign currency exchange contracts, which would generally beoffset by an opposite effect on the underlying exposure being economically hedged. See Note 4 to the Company’sconsolidated financial statements included in Item 15 of this Annual Report on Form 10-K for further discussion onderivative financial instruments.35(1)(1)Table of Contents Item 8. Financial Statements and Supplementary DataThe financial statements and supplementary data are listed under Item 15 of this Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone. Item 9A. Controls and ProceduresDisclosure Controls and ProceduresThe Company’s management, including its Chief Executive Officer and Chief Financial Officer, have evaluated theeffectiveness 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 reporton Form 10-K. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as ofthe end of the period covered by this report on Form 10-K, the Company’s disclosure controls and procedures are effectivesuch that material information required to be disclosed by the Company in the reports that it files or submits under theExchange Act is recorded, processed, summarized and reported, within the time periods specified by the Securities andExchange Commission’s rules and forms and is accumulated and communicated to management, including the Company’sprincipal executive officer and principal financial officer, as appropriate to allow timely decisions regarding requireddisclosure.Management’s Report on Internal Control Over Financial ReportingThe Company’s management, including its Chief Executive Officer and Chief Financial Officer, is responsible forestablishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15(d)-15(f)under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles in the United States of America. Because of inherent limitations,internal control over financial reporting may not prevent or detect misstatements. Also, controls may become inadequatebecause of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Managementconducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of June 29, 2019.In making this assessment, management used the 2013 framework established in Internal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission and concluded that the Companymaintained effective internal control over financial reporting as of June 29, 2019. The Company’s independent registered public accounting firm, KPMG LLP, has audited the effectiveness of theCompany’s internal controls over financial reporting as of June 29, 2019, as stated in its audit report which is includedherein.Changes in Internal Control Over Financial ReportingDuring the fourth quarter of fiscal 2019, there were no changes to the Company’s internal control over financialreporting (as defined in Rules 13a-15(f) and 15(d)-15(f) of the Exchange Act) that have materially affected, or are reasonablylikely to materially affect, the Company’s internal control over financial reporting. Item 9B. Other InformationNot applicable.36Table of Contents PART III Item 10. Directors, Executive Officers and Corporate GovernanceThe information called for by Item 10 is incorporated in this Report by reference to the Company’s definitive proxystatement relating to the Annual Meeting of Stockholders anticipated to be held on November 19, 2019. Item 11. Executive CompensationThe information called for by Item 11 is incorporated in this Report by reference to the Company’s definitive proxystatement relating to the Annual Meeting of Stockholders anticipated to be held on November 19, 2019. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information called for by Item 12 is incorporated in this Report by reference to the Company’s definitive proxystatement relating to the Annual Meeting of Stockholders anticipated to be held on November 19, 2019. Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information called for by Item 13 is incorporated in this Report by reference to the Company’s definitive proxystatement relating to the Annual Meeting of Shareholders anticipated to be held on November 19, 2019. Item 14. Principal Accounting Fees and ServicesThe information called for by Item 14 is incorporated in this Report by reference to the Company’s definitive proxystatement relating to the Annual Meeting of Stockholders anticipated to be held on November 19, 2019.37Table of Contents PART IV Item 15. Exhibits and Financial Statement Schedulesa. The following documents are filed as part of this Report: Page 1. Consolidated Financial Statements: Report of Independent Registered Public Accounting Firm 40 Avnet, Inc. and Subsidiaries Consolidated Financial Statements: Consolidated Balance Sheets at June 29, 2019 and June 30, 2018 42 Consolidated Statements of Operations for the years ended June 29, 2019, June 30, 2018 and July 1, 2017 43 Consolidated Statements of Comprehensive Income for the years ended June 29, 2019, June 30, 2018 andJuly 1, 2017 44 Consolidated Statements of Shareholders’ Equity for the years ended June 29, 2019, June 30, 2018, andJuly 1, 2017 45 Consolidated Statements of Cash Flows for the years ended June 29, 2019, June 30, 2018 and July 1,2017 46 Notes to Consolidated Financial Statements 47 2. Financial Statement Schedule: Schedule II (Valuation and Qualifying Accounts) for the years ended June 29, 2019, June 30, 2018 andJuly 1, 2017 80 Schedules other than that above have been omitted because they are not applicable or the requiredinformation is shown in the financial statements or notes thereto 3. Exhibits 81 38Table of Contents SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has dulycaused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. AVNET, INC. Date: August 15, 2019By:/s/ WILLIAM J. AMELIO William J. Amelio Chief Executive Officer and Director KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby authorizes andappoints each of William J. Amelio and Thomas Liguori his or her attorneys-in-fact, for him or her in any and all capacities,to sign any amendments to this Report, and to file the same, with exhibits thereto, and other documents in connectiontherewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, ortheir substitute, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by thefollowing persons on behalf of the Registrant and in the capacities indicated on August 15, 2019. Signature Title /s/ WILLIAM J. AMELIOWilliam J. Amelio Chief Executive Officer and Director(Principal Executive Officer) /s/ RODNEY C. ADKINSRodney C. Adkins Chairman of the Board and Director /s/ MICHAEL A. BRADLEYMichael A. Bradley Director /s/ R. KERRY CLARKR. Kerry Clark Director /s/ BRENDA L. FREEMANBrenda L. Freeman Director /s/ JO ANN JENKINSJo Ann Jenkins Director /s/ OLEG KHAYKINOleg Khaykin Director /s/ JAMES A. LAWRENCEJames A. Lawrence Director /s/ AVID MODJTABAIAvid Modjtabai Director /s/ WILLIAM H. SCHUMANN, IIIWilliam H. Schumann, III Director /s/ THOMAS LIGUORIThomas Liguori Chief Financial Officer(Principal Financial Officer) /s/ KENNETH A. JACOBSONKenneth A. Jacobson Controller(Principal Accounting Officer) 39Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsAvnet, Inc.:Opinions on the Consolidated Financial Statements and Internal Control Over Financial ReportingWe have audited the accompanying consolidated balance sheets of Avnet, Inc. and subsidiaries (the “Company”) as of June29, 2019 and June 30, 2018, the related consolidated statements of operations, comprehensive income, shareholders’ equity,and cash flows for each of the years in the three-year period ended June 29, 2019, and the related notes and financialstatement schedule, (collectively, the “consolidated financial statements”). We also have audited the Company’s internalcontrol over financial reporting as of June 29, 2019, based on criteria established in Internal Control – IntegratedFramework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financialposition of the Company as of June 29, 2019 and June 30, 2018, and the results of its operations and its cash flows for each ofthe years in the three-year period ended June 29, 2019, in conformity with U.S. generally accepted accounting principles.Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as ofJune 29, 2019 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee ofSponsoring Organizations of the Treadway Commission.Change in Accounting PrincipleAs discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting forrevenue in 2019 due to the adoption of Financial Accounting Standards Codification (ASC) Topic 606, Revenue fromContracts with Customers.Basis for OpinionsThe Company’s management is responsible for these consolidated financial statements, for maintaining effective internalcontrol over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is toexpress an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal controlover financial reporting based on our audits. We are a public accounting firm registered with the Public CompanyAccounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company inaccordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and ExchangeCommission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and performthe audits to obtain reasonable assurance about whether the consolidated financial statements are free of materialmisstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained inall material respects.Our audits of the consolidated financial statements included performing procedures to assess the risks of materialmisstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respondto those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significantestimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Ouraudit of internal control over financial reporting included obtaining an understanding of internal control over financialreporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. Our audits also included performing such other40Table of Contentsprocedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for ouropinions.Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company’s internal control over financial reporting includes those policies andprocedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and thatreceipts and expenditures of the company are being made only in accordance with authorizations of management anddirectors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequatebecause of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP We have served as the Company’s auditor since 2002.Phoenix, ArizonaAugust 15, 201941Table of Contents AVNET, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS June 29, June 30, 2019 2018 (Thousands, except share amounts) ASSETS Current assets: Cash and cash equivalents $546,105 $621,125 Receivables, less allowances of $53,499 and $48,959, respectively 3,168,369 3,641,139 Inventories 3,008,424 3,141,822 Prepaid and other current assets 153,438 206,513 Total current assets 6,876,336 7,610,599 Property, plant and equipment, net 452,171 522,909 Goodwill 876,728 980,872 Intangible assets, net 143,520 219,913 Other assets 215,801 262,552 Total assets $8,564,556 $9,596,845 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Short-term debt $300,538 $165,380 Accounts payable 1,864,342 2,269,478 Accrued expenses and other 413,696 534,603 Total current liabilities 2,578,576 2,969,461 Long-term debt 1,419,922 1,489,219 Other liabilities 425,585 453,084 Total liabilities 4,424,083 4,911,764 Commitments and contingencies (Note 14) Shareholders’ equity: Common stock $1.00 par; authorized 300,000,000 shares; issued 104,037,769 sharesand 115,825,062 shares, respectively 104,038 115,825 Additional paid-in capital 1,573,005 1,528,713 Retained earnings 2,767,469 3,235,894 Accumulated other comprehensive loss (304,039) (195,351) Total shareholders’ equity 4,140,473 4,685,081 Total liabilities and shareholders’ equity $8,564,556 $9,596,845 See notes to consolidated financial statements.42Table of Contents AVNET, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS Years Ended June 29, June 30, July 1, 2019 2018 2017 (Thousands, except per share amounts)Sales $19,518,592 $19,036,892 $17,439,963Cost of sales 17,032,490 16,509,708 15,070,521Gross profit 2,486,102 2,527,184 2,369,442Selling, general and administrative expenses 1,874,651 1,991,401 1,788,330Goodwill impairment expense (Note 7) 137,396 181,440 —Restructuring, integration and other expenses 108,144 145,125 137,415Operating income 365,911 209,218 443,697Other income (expense), net 11,231 28,606 (33,717)Interest and other financing expenses, net (134,874) (92,747) (99,576)Income from continuing operations before taxes 242,268 145,077 310,404Income tax expense 62,157 287,966 47,053Income (loss) from continuing operations, net of tax 180,111 (142,889) 263,351Income (loss) from discontinued operations, net of tax (3,774) (13,535) 261,927Net income (loss) $176,337 $(156,424) $525,278 Earnings (loss) per share - basic: Continuing operations $1.64 $(1.19) $2.07Discontinued operations (0.03) (0.11) 2.06Net income (loss) per share basic $1.61 $(1.30) $4.13 Earnings (loss) per share - diluted: Continuing operations $1.63 $(1.19) $2.05Discontinued operations (0.04) (0.11) 2.03Net income (loss) per share diluted $1.59 $(1.30) $4.08 Shares used to compute earnings per share: Basic 109,820 119,909 127,032Diluted 110,798 119,909 128,651Cash dividends paid per common share $0.80 $0.74 $0.70 See notes to consolidated financial statements. 43Table of ContentsAVNET, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years Ended June 29, June 30, July 1, 2019 2018 2017 (Thousands) Net income (loss) $176,337 $(156,424) $525,278 Other comprehensive income (loss), net of tax: Foreign currency translation and other (63,621) 7,799 94,116 Impact of TS business divestiture (Note 3) — — 181,465 Pension adjustments, net (45,067) 40,716 1,328 Total comprehensive income (loss) $67,649 $(107,909) $802,187 See notes to consolidated financial statements.44Table of ContentsAVNET, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITYYears Ended June 29, 2019, June 30, 2018 and July 1, 2017 Accumulated Common Common Additional Other Total Stock- Stock- Paid-In Retained Comprehensive Shareholders’ Shares Amount Capital Earnings (Loss) Income Equity (Thousands) Balance, July 2, 2016 127,377 127,377 1,452,413 3,632,271 (520,775) 4,691,286 Net income — — — 525,278 — 525,278 Translation adjustments and other — — — — 275,581 275,581 Pension liability adjustments, net of tax of$1,181 — — — — 1,328 1,328 Cash dividends ($0.70 per share) — — — (88,657) — (88,657) Repurchases of common stock (6,355) (6,355) — (269,529) — (275,884) Stock-based compensation 2,059 2,059 51,077 — — 53,136 Balance, July 1, 2017 123,081 123,081 1,503,490 3,799,363 (243,866) 5,182,068 Net loss — — — (156,424) — (156,424) Translation adjustments and other — — — — 7,799 7,799 Pension liability adjustments, net of tax of$18,187 — — — — 40,716 40,716 Cash dividends ($0.74 per share) — — — (88,255) — (88,255) Repurchases of common stock (8,151) (8,151) — (318,790) — (326,941) Stock-based compensation 895 895 25,223 — — 26,118 Balance, June 30, 2018 115,825 115,825 1,528,713 3,235,894 (195,351) 4,685,081 Net income — — — 176,337 — 176,337 Translation adjustments and other — — — — (63,621) (63,621) Pension liability adjustments, net of tax of$14,988 — — — — (45,067) (45,067) Cash dividends ($0.80 per share) — — — (87,158) — (87,158) Repurchases of common stock (12,919) (12,919) — (553,772) — (566,691) Effects of new accounting principles — — — (3,832) (3,832) Stock-based compensation 1,132 1,132 44,292 — — 45,424 Balance, June 29, 2019 104,038 $104,038 $1,573,005 $2,767,469 $(304,039) $4,140,473 See notes to consolidated financial statements. 45Table of ContentsAVNET, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended June 29, June 30, July 1, 2019 2018 2017 (Thousands)Cash flows from operating activities: Net income (loss) $176,337 $(156,424) $525,278Less: Income (loss) from discontinued operations, net of tax (3,774) (13,535) 261,927Income (loss) from continuing operations, net of tax 180,111 (142,889) 263,351 Non-cash and other reconciling items: Depreciation 97,160 143,397 101,407Amortization 83,682 91,475 53,953Deferred income taxes 33,801 (87,141) (17,705)Stock-based compensation 30,098 23,990 47,686Goodwill impairment expense 137,396 181,440 —Asset impairment expense 54,687 5,538 3,824Other, net (21,265) 43,845 25,280Changes in (net of effects from businesses acquired and divested): Receivables 464,981 (296,175) (371,820)Inventories 81,929 (308,663) 84,408Accounts payable (377,855) 409,608 163,604Accrued expenses and other, net (173,671) 189,060 (132,941)Net cash flows provided by operating activities - continuing operations 591,054 253,485 221,047Net cash flows used for operating activities - discontinued operations (56,284) — (589,738)Net cash flows provided (used) by operating activities 534,770 253,485 (368,691) Cash flows from financing activities: Issuance of notes, net of issuance costs — — 296,374Repayment of notes — — (530,800)Borrowings (repayments) under accounts receivable securitization, net 122,300 (37,000) (588,000)Borrowings (repayments) under senior unsecured credit facility, net (61,738) 8,850 (50,029)Borrowings (repayments) under bank credit facilities and other debt, net 505 (97,954) 27,877Borrowings of term loans — — 530,756Repayments of term loans — — (511,358)Repurchases of common stock (568,712) (323,516) (275,884)Dividends paid on common stock (87,158) (88,255) (88,657)Other, net 12,127 (4,018) (1,870)Net cash flows used for financing activities - continuing operations (582,676) (541,893) (1,191,591)Net cash flows provided by financing activities - discontinued operations — — 3,447Net cash flows used for financing activities (582,676) (541,893) (1,188,144) Cash flows from investing activities: Purchases of property, plant and equipment (122,690) (155,873) (120,397)Acquisitions of businesses, net of cash acquired (56,417) (15,254) (802,744)Other, net 30,422 6,653 18,656Net cash flows used for investing activities - continuing operations (148,685) (164,474) (904,485)Net cash flows provided by investing activities - discontinued operations 123,473 236,205 2,242,959Net cash flows (used) provided by investing activities (25,212) 71,731 1,338,474 Effect of currency exchange rate changes on cash and cash equivalents (1,902) 1,418 23,267 Cash and cash equivalents: — decrease (75,020) (215,259) (195,094)— at beginning of period 621,125 836,384 1,031,478— at end of period $546,105 $621,125 $836,384 Additional cash flow information (Note 16) See notes to consolidated financial statements. 46Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of significant accounting policiesBasis of presentation — The accompanying consolidated financial statements include the accounts of Avnet, Inc. andall of its majority-owned and controlled subsidiaries (the “Company” or “Avnet”). All intercompany and intracompanyaccounts and transactions have been eliminated. Unless indicated otherwise, the information in the Notes to the consolidatedfinancial statements relates to the Company's continuing operations and does not include the results of discontinuedoperations.Reclassifications — Certain prior period amounts have been reclassified to conform to the current period presentationincluding the adoption of new accounting pronouncements.Fiscal year — The Company operates on a “52/53 week” fiscal year, which ends on the Saturday closest to June 30th.Fiscal 2019, 2018 and 2017 all contain 52 weeks. Unless otherwise noted, all references to “fiscal” or any other “year” shallmean the Company’s fiscal year.Management estimates — The preparation of financial statements in conformity with generally accepted accountingprinciples in the United States of America (“GAAP”) requires management to make estimates and assumptions that affectcertain reported amounts of assets and liabilities, reported amounts of sales and expenses and the disclosure of contingentassets and liabilities at the date of the consolidated financial statements. Actual results could differ materially from thoseestimates.Cash and cash equivalents — The Company considers all highly liquid investments with an original maturity of threemonths or less including money market funds to be cash equivalents.Inventories — Inventories, comprised principally of finished goods, are stated at the lower of cost or net realizablevalue, whichever is lower. The Company regularly reviews the cost of inventory against its estimated net realizable value,considering historical experience and any contractual rights of return, stock rotations, obsolescence allowances or priceprotections provided by the Company’s suppliers, and records a lower of cost or net realizable value write-down if anyinventories have a cost in excess of such inventories estimated net realizable value. The Company does not incorporate anynon-contractual protections when estimating the net realizable value of its inventories.Depreciation, amortization and useful lives — The Company reports property, plant and equipment at cost, lessaccumulated depreciation. Cost includes the price paid to acquire or construct the assets, required installation costs, interestcapitalized during the construction period, and any expenditure that substantially adds to the value of or substantiallyextends the useful life of an existing asset. Additionally, the Company capitalizes qualified costs related to software obtainedor developed for internal use as a component of property, plant and equipment. Software obtained for internal use hasgenerally been enterprise-level business operations, logistics and finance software that is customized to meet the Company’sspecific operational requirements. The Company begins depreciation and amortization (“depreciation”) for property, plantand equipment when an asset is both in the location and condition for its intended use.Property, plant, and equipment is depreciated using the straight-line method over its estimated useful lives. Theestimated useful lives for property, plant, and equipment are typically as follows: buildings — 30 years; machinery, fixturesand equipment — 2-10 years; information technology hardware and software — 2-10 years; and leasehold improvements —over the applicable lease term or economic useful life if shorter.47Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The Company amortizes intangible assets acquired in business combinations using the straight-line method over theestimated economic useful lives of the intangible assets from the date of acquisition, which is generally between 5-10 years.Long-lived assets impairment — Long-lived assets, including property, plant and equipment and intangible assets, arereviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset groupmay not be recoverable. For purposes of recognition and measurement of an impairment loss, long-lived assets are groupedwith other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flowsof other assets and liabilities (“asset group”). An impairment is recognized when the estimated undiscounted cash flowsexpected to result from the use of the asset group and its eventual disposition is less than its carrying amount. An impairmentis measured as the amount by which an asset group’s carrying value exceeds its estimated fair value. The Company considersa long-lived asset to be abandoned when it has ceased use of such abandoned asset and if the Company has no intent to useor repurpose the asset in the future. The Company continually evaluates the carrying value and the remaining economicuseful life of long-lived assets and will adjust the carrying value and remaining useful life if and when appropriate.Goodwill — Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair valueassigned to the individual assets acquired and liabilities assumed. The Company does not amortize goodwill, but insteadtests goodwill for impairment at least annually in the fourth quarter and, if necessary, records any impairment resulting fromsuch goodwill impairment testing as a component of operating expenses. Impairment testing is performed at the reportingunit level, which is defined as the same, or one level below, an operating segment. The Company will perform an interimimpairment test between required annual tests if facts and circumstances indicate that it is more likely than not that the fairvalue of a reporting unit that has goodwill is less than its carrying value.In performing goodwill impairment testing, the Company may first make a qualitative assessment of whether it is more-likely-than-not that a reporting unit’s fair value is less than its carrying value. If the qualitative assessment indicates it ismore-likely-than-not that a reporting unit’s fair value is not greater than its carrying value, the Company must perform aquantitative impairment test. The Company defines the fair value of a reporting unit as the price that would be received tosell the reporting unit as a whole in an orderly transaction between market participants as of the impairment test date. Todetermine the fair value of a reporting unit, the Company uses the income methodology of valuation, which includes thediscounted cash flow method, and the market methodology of valuation, which considers values of comparable businesses toestimate the fair value of the Company’s reporting units.Significant management judgment is required when estimating the fair value of the Company’s reporting units from amarket participant perspective including forecasting of future operating results and the discount rates used in the discountedcash flow method of valuation, and in the selection of comparable businesses and related market multiples that are used inthe market method of valuation. If the estimated fair value of a reporting unit exceeds the carrying value assigned to thatreporting unit, goodwill is not impaired. If the estimated fair value of a reporting unit is less than the carrying value assignedto that reporting unit, then a goodwill impairment loss is measured based on such difference.48Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Foreign currency translation — The assets and liabilities of foreign operations are translated into U.S. Dollars at theexchange rates in effect at the balance sheet date, with the related translation adjustments reported as a separate componentof shareholders’ equity and comprehensive income (loss). Results of operations are translated using the average exchangerates prevailing throughout the period. Transactions denominated in currencies other than the functional currency of theAvnet subsidiaries that are party to the transactions are remeasured at exchange rates in effect at the balance sheet date orupon settlement of the transaction. Gains and losses from such remeasurements are recorded in the consolidated statements ofoperations as a component of “Other income (expense), net.”Income taxes — The Company follows the asset and liability method of accounting for income taxes. Deferred incometax assets and liabilities are recognized for the estimated future tax impact of differences between the consolidated financialstatement carrying amounts of assets and liabilities and their respective tax bases. Deferred income tax assets and liabilitiesare measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recoveredor settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized within income taxexpense in the period in which the new rate is enacted. Based upon historical and estimated levels of future taxable incomeand analysis of other key factors, the Company may increase or decrease a valuation allowance against its deferred tax assets,as deemed necessary, to state such assets at their estimated net realizable value.The Company establishes contingent liabilities for potentially unfavorable outcomes of positions taken on certain taxmatters. These liabilities are based on management’s assessment of whether a tax benefit is more likely than not to besustained upon examination by the relevant tax authorities. There may be differences between the estimated and actualoutcomes of these matters that may result in future changes in estimates to such unrecognized tax benefits. To the extent suchchanges in estimates are required, the Company’s effective tax rate may potentially fluctuate as a result. In accordance withthe Company’s accounting policies, accrued interest and penalties related to unrecognized tax benefits are recorded as acomponent of income tax expense.Self-insurance — In the U.S., the Company is primarily self-insured for medical, workers’ compensation, and general,product and automobile liability costs; however, the Company also has stop-loss insurance policies in place to limit theCompany’s exposure to individual and aggregate claims made. Liabilities for these programs are estimated based uponoutstanding claims and claims estimated to be incurred but not yet reported based upon historical loss experience. Theseestimates are subject to variability due to changes in trends of losses for outstanding claims and incurred but not reportedclaims, including external factors such as the number of and cost of claims, benefit level changes and claim settlementpatterns.Revenue recognition — Refer to Note 2 herein for further discussion regarding revenue recognition and relatedaccounting policies. Vendor allowances and consideration — Consideration received from suppliers for price protection, product rebates,marketing/promotional activities, or any other programs are recorded when earned under the terms and conditions of suchsupplier programs as adjustments to product costs or selling, general and administrative expenses depending upon the natureand contractual requirements related to the consideration received. Some of these supplier programs require management tomake estimates and may extend over one or more reporting periods.49Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Comprehensive income (loss) — Comprehensive income (loss) represents net income for the year adjusted for certainchanges in shareholders’ equity. Accumulated comprehensive income (loss) items impacting comprehensive income (loss)includes foreign currency translation and the impact of the Company’s pension liability adjustments, net of tax.Stock-based compensation — The Company measures stock-based payments at fair value and generally recognizes theassociated operating expense in the consolidated statements of operations over the requisite service period (see Note 13). Astock-based payment is considered vested for accounting expense attribution purposes when the employee’s retention of theaward is no longer contingent on providing continued service. Accordingly, the Company recognizes all stock-basedcompensation expense for awards granted to retirement eligible employees over the period from the grant date to the dateretirement eligibility is achieved, if less than the stated requisite service period. The expense attribution approach forretirement eligible employees does not affect the overall amount of compensation expense recognized, but insteadaccelerates the recognition of such expense.Restructuring and exit activities — The determination of when the Company accrues for involuntary terminationbenefits under restructuring plans depends on whether the termination benefits are provided under an on-going benefitarrangement or under a one-time benefit arrangement. The Company accounts for on-going benefit arrangements inaccordance with Accounting Standards Codification 712 (“ASC 712”) Nonretirement Postemployment Benefits and accountsfor one-time benefit arrangements in accordance with ASC 420 Exit or Disposal Cost Obligations. If applicable, theCompany records such costs into operating expense over the terminated employee’s future service period beyond anyminimum retention period. Other costs associated with restructuring or exit activities may include contract termination costsincluding operating leases and impairments of long-lived assets, which are expensed in accordance with ASC 420 Exit orDisposal Cost Obligations and ASC 360 Property, Plant and Equipment, respectively.Business combinations — The Company accounts for business acquisitions using the acquisition method ofaccounting and records any identifiable definite-lived intangible assets separate from goodwill. Intangible assets arerecorded at their fair value based on estimates as of the date of acquisition. Goodwill is recorded as the residual amount of thepurchase price consideration less the fair value assigned to the individual identifiable assets acquired and liabilities assumedas of the date of acquisition. Contingent consideration, which represents an obligation of the Company to transfer additionalassets or equity interests to the former owner as part of the purchase price if specified future events occur or conditions aremet, is accounted for at the acquisition date fair value either as a liability or as equity depending on the terms of theacquisition agreement.Concentration of credit risk — Financial instruments that potentially subject the Company to a concentration of creditrisk principally consist of cash and cash equivalents, marketable securities and trade accounts receivable. The Companyinvests its excess cash primarily in overnight time deposits and institutional money market funds with highly rated financialinstitutions. To reduce credit risk, management performs ongoing credit evaluations of its customers’ financial conditionand, in some instances, has obtained credit insurance coverage to reduce such risk. The Company maintains reserves forpotential credit losses from customers, but has not historically experienced material losses related to individual customers orgroups of customers in any particular end market or geographic area.Fair value — The Company measures financial assets and liabilities at fair value based upon an exit price, representingthe amount that would be received from the sale of an asset or paid to transfer a liability, in an orderly transaction betweenmarket participants. ASC 820, Fair Value Measurements, requires inputs used in valuation techniques for measuring fairvalue on a recurring or non-recurring basis be assigned to a hierarchical level as follows: Level 1 are50Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) observable inputs that reflect quoted prices for identical assets or liabilities in active markets, Level 2 are observable market-based inputs or unobservable inputs that are corroborated by market data and Level 3 are unobservable inputs that are notcorroborated by market data. During fiscal 2019, 2018, and 2017, there were no transfers of assets measured at fair valuebetween the three levels of the fair value hierarchy. The carrying amounts of the Company’s financial instruments, includingcash equivalents, receivables and accounts payable approximate their fair values at June 29, 2019 due to the short-termnature of these assets and liabilities. At June 29, 2019, and June 30, 2018, the Company had $9.4 million and $6.1 million,respectively, of cash equivalents that were measured at fair value based upon Level 1 criteria. See Note 4 for discussion of thefair value of the Company’s derivative financial instruments, Note 8 for discussion of the fair value of the Company’s long-term debt and Note 11 for a discussion of the fair value of the Company’s pension plan assets. Derivative financial instruments — See Note 4 for discussion of the Company’s accounting policies related toderivative financial instruments.Investments — Equity investments in businesses or start-up companies (“ventures”) are accounted for using the equitymethod if the investment provides the company the ability to exercise significant influence, but not control, over theventures. All other equity investments, which consist of investments for which the Company does not possess the ability toexercise significant influence over the ventures, are measured at fair value, using quoted market prices, or at cost minusimpairment, if any, plus or minus changes resulting from observable price changes when fair value is not readilydeterminable. Investments in ventures are included in "Other assets" in the Company's consolidated balance sheets. Changesin fair value for investments in ventures, if any, are recorded in "Other income (expense), net" in the Company's consolidatedstatements of operations. As of June 29, 2019, the Company’s investments in ventures was not material to the consolidatedbalance sheets or consolidated statements of operations.Accounts receivable securitization — The Company has an accounts receivable securitization program whereby theCompany sells certain receivables and retains a subordinated interest and servicing rights to those receivables. Thesecuritization program does not qualify for off-balance sheet sales accounting and is accounted for as a secured financing asdiscussed further in Note 8.Recently adopted accounting pronouncements — In May 2014, the FASB issued Accounting Standards Update(“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), and collectively with itsrelated subsequent amendments, “Topic 606”). Topic 606 supersedes previous revenue recognition guidance and requiresthe Company to recognize revenue to depict the transfer of promised goods or services to customers in an amount thatreflects the consideration to which the Company expects to be entitled in exchange for such goods or services. The Companyadopted Topic 606 on July 1, 2018 using the modified retrospective transition method applied to those contracts which werenot completed as of July 1, 2018. Under this transition method, the Company’s results in the consolidated statements ofoperations for fiscal 2019 are presented under Topic 606, while the comparative results for the fiscal 2018 were notretrospectively adjusted, as such results were recognized in accordance with the revenue recognition policy discussed underSummary of Significant Accounting Policies in Note 1 of the Company’s Fiscal 2018 Annual Report on Form 10-K.51Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The adoption of Topic 606 did not have a material impact on the Company’s consolidated financial statements as ofthe adoption date and as of and for fiscal 2019. Substantially all of the Company’s sales continue to be recognized whenproducts are shipped from the Company’s facilities or delivered to customers, depending on the underlying contractualterms. For a nominal portion of the Company’s contracts where the accounting did change, the adoption of Topic 606resulted in an increase to the opening balance of retained earnings of $2.0 million as of July 1, 2018. This impact wasprimarily due to the acceleration of recognition of net sales and associated gross profit related to certain uncompletedcontracts for the manufacture of goods with no alternative use and for which the Company has an enforceable right topayment, including a reasonable profit margin, from the customer for performance completed to date. For these contracts, theCompany recognizes revenue over time as control of the goods transfers through the manufacturing process, rather than whenthe goods are delivered, title has transferred, and the risks and rewards of ownership are passed to the customer, as underprevious revenue recognition guidance.Refer to Note 2 herein for further discussion regarding revenue recognition under Topic 606 and related accountingpolicies.In March 2017, the FASB issued Accounting Standards Update No. 2017-07, Compensation - Retirement Benefits(Topic 715)- Improving the Presentation of Net Periodic Cost and Net Periodic Postretirement Benefit Cost ("ASU No. 2017-07"). ASU No. 2017-07 provides guidance on the capitalization, presentation and disclosure of net periodic pension costsrelated to postretirement benefit plans. The Company adopted this standard effective the first quarter of fiscal year 2019 on afull retrospective basis, which resulted in the retrospective reclassification of $21.3 million and $17.7 million, respectively,of non-service net periodic pension benefits for fiscal 2018 and 2017, respectively, from “Selling, general and administrativeexpenses” to “Other income (expense), net”.During the first quarter of fiscal 2019, the Company adopted ASU 2016-16 - Income Taxes (Topic 740): Intra-EntityTransfers of Assets Other Than Inventory. This update addresses the recognition of current and deferred income taxesresulting from an intra-entity transfer of any asset other than inventory. This update has been applied on a modifiedretrospective basis through a cumulative-effect adjustment directly to retained earnings. The adoption of this update resultedin a cumulative reduction to the opening balance of retained earnings of $5.8 million and a reduction to other assets of $5.8million.In February 2018, the FASB issued Accounting Standards Update 2018-02, Income Statement–ReportingComprehensive Income (Topic 220):-Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income(“ASU 2018-02”), which provides entities the option to reclassify accumulated other comprehensive income to retainedearnings for stranded tax effects resulting from the tax legislation enacted by the U.S. federal governments on December 22,2017 (the “Act”). The update also requires certain new disclosures regardless of the election. This update is effective forinterim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The update shouldbe applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the income taxrate change resulting from the Act is recognized. The Company has early adopted ASU 2018-02 during the third quarter offiscal 2019 and has elected not to reclassify any stranded tax effects from the Act to retained earnings. As a result, there wasno impact to the consolidated financial statements as a result of the adoption of ASU 2018-02.52Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 2. Revenue recognitionPrior to the adoption of Topic 606, the Company’s revenue recognition policy was in accordance with ASC Topic 605,Revenue Recognition. Effective July 1, 2018, the Company adopted Topic 606 using the modified retrospective transitionmethod, resulting in accounting policy changes surrounding revenue recognition which replace revenue recognition policiesdiscussed in the Summary of Significant Accounting Policies in Note 1 of the Company’s Fiscal 2018 Annual Report onForm 10-K. The adoption of Topic 606 did not have a material impact on the Company’s consolidated financial statements.The Company’s revenues are generated from the distribution and sale of electronic components includingsemiconductors, interconnect, passive and electromechanical (“IP&E”) devices and other integrated electronic componentsfrom the world’s leading electronic component manufacturers. The Company’s expertise in design, supply chain andlogistics enable it to sell to customers of all sizes from startups and mid-sized businesses to enterprise-level originalequipment manufacturers (“OEMs”), electronic manufacturing services (“EMS”) providers and original design manufacturers(“ODMs”). The Company sells to a variety of markets ranging from automotive to medical to defense and aerospace. TheCompany also sells integrated solutions including the assembly or manufacture of embedded electronic component productsand systems, touch and passive displays, and standard or specialized boards. The Company’s revenue arrangements primarilyconsist of performance obligations related to the transfer of promised products. The Company considers customer purchaseorders, which in some cases are governed by master agreements, to be the contracts with a customer. All revenue is generatedfrom contracts with customers. Refer to Note 17 herein for further discussion regarding the Company’s sales by major productcategory.Revenue is recognized at the point at which control of the underlying products are transferred to the customer, whichincludes determining whether products are distinct and separate performance obligations. For electronic component andrelated product sales, this generally occurs upon shipment of the products, however, this may occur at a later date dependingon the agreed upon sales terms, such as delivery at the customer's designated location, or when products that are consigned atcustomer locations are consumed. In limited instances, where products are not in stock and delivery times are critical, productis purchased from the supplier and drop-shipped to the customer. The Company typically takes control of the products whenshipped by the manufacturer and then recognizes revenue when control of the product transfers to the customer. TheCompany does not have material product warranty obligations as the assurance type product warranties provided by thecomponent manufacturers are passed through to the Company’s customers.For contracts related to the specialized manufacture of products for customers with no alternative use and for which theCompany has an enforceable right to payment, including a reasonable profit margin, the Company recognizes revenue overtime as control of the products transfer through the manufacturing process. The contract assets associated with suchspecialized manufacturing products are not material as these contracts represent less than 2% of the Company’s total sales.Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferringproducts. The Company estimates different forms of variable consideration at the time of sale based on historical experience,current conditions and contractual obligations. Revenue is recorded net of customer discounts and rebates. When theCompany offers the right or has a history of accepting returns of product, historical experience is utilized to establish aliability for the estimate of expected returns and an asset for the right to recover the product expected to be returned. Theseadjustments are made in the same period as the underlying sales transactions.53Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The Company considers the following indicators amongst others when determining whether it is acting as a principal inthe contract where revenue would be recorded on a gross basis: (i) the Company is primarily responsible for fulfilling thepromise to provide the specified products or services, (ii) the Company has inventory risk before the specified products havebeen transferred to a customer or after transfer of control to the customer and (iii) the Company has discretion in establishingthe price for the specified products or services. If a transaction does not meet the Company's indicators of being a principal inthe transaction, then the Company is acting as an agent in the transaction and the associated revenues are recognized on a netbasis.Sales and other tax amounts collected from customers for remittance to governmental authorities are excluded fromrevenue. The Company has elected to treat shipping and handling of product as a fulfillment activity. The practicalexpedient not to disclose information about remaining performance obligations has also been elected as these contracts havean original duration of one year or less. The Company does not have any payment terms that exceed one year from the pointit has satisfied the related performance obligations. 3. Acquisitions and Discontinued operationsAcquisition of Softweb SolutionsAt the end of December 2018, the Company acquired Softweb Solutions (“Softweb”) a privately held software andartificial intelligence company that delivers software solutions for Internet of Things (“IoT”) applications and systemsdesigned to increase efficiency, speed time to market, and help businesses transform. The impact of this acquisition was notmaterial to the Company’s consolidated balance sheets or statements of operations and as a result, the Company has notdisclosed the preliminary allocation of purchase price or the pro-forma impact of the acquisition.Discontinued OperationsIn February 2017, the Company completed the sale of its Technology Solutions (“TS”) business to Tech DataCorporation (the “Buyer”). The TS business and the financial impacts of the divestiture are classified as discontinuedoperations in all periods presented. In August 2018, the Company executed a settlement agreement with the Buyer resultingin a final adjustment of $120.0 million and a final geographic allocation of the TS business sales price for tax reportingpurposes. This incremental consideration received from the sale of the TS business as well as cash settlements from theresolution of indemnification claims and other cash reimbursements have been classified as cash flow from discontinuedoperations investing activities. Income tax payments related to the gain on sale of the TS business have been classified ascash flow from discontinued operations operating activities.Under the contractual terms of the sale of the TS business, the Company has indemnified the Buyer for certainliabilities including tax related matters, which may result in future indemnification expenses and indemnification paymentsto the Buyer depending upon the outcome of those matters subject to indemnification.Financial results of the TS business for fiscal 2017 including the gain on sale is presented as “Income (loss) fromdiscontinued operations, net of tax” on the Consolidated Statements of Operations and is summarized as follows: 54Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Year Ended July 1, 2017 (Thousands)Sales $5,432,140Cost of sales 4,883,945Gross profit 548,195Selling, general and administrative expenses 430,003Restructuring, integration and other expenses 7,280Operating income 110,912Interest and other expense, net (24,291)Income from discontinued operations before income taxes 86,621Income tax expense 47,050Income from discontinued operations, net of taxes 39,571Gain on sales of discontinued operations, net of tax 222,356Net income from discontinued operations, net of taxes $261,927Included within the estimated gain on sale of $222.4 million, net of tax, recorded in fiscal 2017, was $181.5 million ofexpense reclassified out of accumulated comprehensive income primarily related to TS business cumulative translationadjustments.Included within selling, general and administrative expenses of discontinued operations was $34.9 million of corporateexpenses specific to or benefiting the TS business for fiscal 2017.During fiscal 2019, the Company recorded $3.8 million of losses from discontinued operations, net of tax. Duringfiscal 2018, the Company recorded $13.5 million of losses from discontinued operations, net of tax, of which $14.9 millionrelated to pension settlement expenses associated with former TS employee pension withdrawals. 4. Derivative financial instrumentsMany of the Company’s subsidiaries purchase and sell products in currencies other than their functional currencies.This subjects the Company to the risks associated with fluctuations in foreign currency exchange rates. The Companyreduces this risk by utilizing natural hedging (e.g., offsetting receivables and payables in the same foreign currency) as wellas by creating offsetting positions through the use of derivative financial instruments, primarily forward foreign exchangecontracts typically with maturities of less than 60 days (“economic hedges”), but no longer than one year. The Companycontinues to have exposure to foreign currency risks to the extent they are not economically hedged. The Company adjustsany economic hedges to fair value through the consolidated statements of operations primarily within “Other income(expense), net.” The fair value of forward foreign exchange contracts, which are based upon Level 2 criteria under the ASC820 fair value hierarchy, are classified in the captions “Prepaid and other current assets” or “Accrued expenses and other,” asapplicable, in the accompanying consolidated balance sheets as of June 29, 2019, and June 30, 2018. The Company’s masternetting and other similar arrangements with various financial institutions related to derivative financial instruments allow forthe right of offset. The Company’s policy is to present derivative financial instruments with the same counterparty as either anet asset or liability when the right of offset exists.55Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The Company generally does not hedge its investments in its foreign operations. The Company does not enter intoderivative financial instruments for trading or speculative purposes and monitors the financial stability and credit standing ofits counterparties.The Company’s foreign currency exposure relates primarily to international transactions where the currency collectedfrom customers can be different from the currency used to purchase from suppliers. The Company’s foreign operationstransactions are denominated primarily in the following currencies: U.S. Dollar, Euro, British Pound, Japanese Yen, ChineseYuan, Taiwan Dollar, Canadian Dollar and Mexican Peso. The Company also, to a lesser extent, has foreign operationstransactions in other European and Asia/Pacific foreign currencies.The fair values of derivative financial instruments in the Company’s consolidated balance sheets are as follows: June 29, June 30, 2019 2018 (Thousands) Forward foreign currency exchange contracts not receiving hedge accountingtreatment recorded in: Prepaid and other current assets $5,511 $2,259 Accrued expenses and other 6,154 7,083 The amount recorded to other income (expense), net related to derivative financial instruments are as follows: Years Ended June 29, June 30, July 1, 2019 2018 2017 (Thousands)Net derivative financial instrument gain (loss) $84 $2,735 $(8,624)Under the Company’s economic hedging policies, gains and losses on the derivative financial instruments areclassified within the same line item in the consolidated statements of operations as the remeasurement of the underlyingassets or liabilities being economically hedged. 5. Shareholders’ equityAccumulated comprehensive (loss) incomeThe following table includes the balances within accumulated other comprehensive loss:June 29,June 30,July 1,201920182017(Thousands)Accumulated translation adjustments and other$(142,469)$(78,848)$(86,647)Accumulated pension liability adjustments, net of income taxes(161,570)(116,503)(157,219)Total accumulated other comprehensive loss$(304,039)$(195,351)$(243,866)56Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Amounts reclassified out of accumulated comprehensive loss, net of tax, to operating expenses and discontinuedoperations during fiscal 2019, 2018 and 2017 substantially all related to net periodic pension costs as discussed further inNote 11 and cumulative translation adjustment from the sale of the TS business discussed further in Note 3.Share repurchase programIn August 2018, the Company’s Board of Directors amended the Company’s existing share repurchase program toauthorize the repurchase of up to $2.45 billion of common stock in the open market or through privately negotiatedtransactions. The timing and actual number of shares repurchased will depend on a variety of factors such as share price,corporate and regulatory requirements, and prevailing market conditions. During fiscal 2019, the Company repurchased 12.9million shares under this program at an average market price of $43.86 per share for a total cost of $566.7 million.Repurchased shares were retired. Since the beginning of the repurchase program through the end of fiscal 2019, the Companyhas repurchased 58.8 million shares at an aggregate cost of $2.24 billion, and $205.4 million remains available for futurerepurchases under the share repurchase program.Common stock dividendDuring fiscal 2019, the Company paid dividends of $0.80 per common share and $87.2 million in total. 6. Property, plant and equipment, netProperty, plant and equipment are recorded at cost and consist of the following: June 29, 2019 June 30, 2018 (Thousands) Buildings $121,847 $132,511 Machinery, fixtures and equipment 224,838 200,231 Information technology hardware and software 799,324 677,179 Leasehold improvements 107,659 106,242 Depreciable property, plant and equipment, gross 1,253,668 1,116,163 Accumulated depreciation (886,062) (758,041) Depreciable property, plant and equipment, net 367,606 358,122 Land 23,874 41,984 Construction in progress 60,691 122,803 Property, plant and equipment, net $452,171 $522,909 Depreciation expense including accelerated depreciation related to property, plant and equipment was $97.2 million,$143.4 million and $101.4 million in fiscal 2019, 2018 and 2017, respectively. Interest expense capitalized during fiscal2019, 2018 and 2017 was not material.Included as a component of restructuring, integration and other expenses was $11.3 million and $52.9 million ofaccelerated depreciation expense for fiscal 2019 and 2018, respectively, associated with the changes in estimates of theuseful life of certain information technology hardware and software in the Americas.57Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 7. Goodwill and intangible assetsThe following table presents the change in goodwill balances by reportable segment for fiscal year 2019. Electronic Components(EC) Farnell Total (Thousands)Carrying value at June 30, 2018 $479,699 $501,173 $980,872Additions from acquisitions 52,403 — 52,403Impairment of goodwill (137,396) — (137,396)Foreign currency translation (3,810) (15,341) (19,151)Carrying value at June 29, 2019 $390,896 $485,832 $876,728(1) Includes accumulated impairment of $1,045.1 million from fiscal 2009 and $181.4 million from fiscal 2018(2)Includes accumulated impairment of $1,045.1 million from fiscal 2009, $181.4 million from fiscal 2018 and $137.4 million fromfiscal 2019During the fourth quarter of fiscal 2019, the Company performed an annual goodwill impairment test for all of itsreporting units that have goodwill using a quantitative impairment test. As a result of the goodwill impairment testing, theCompany recorded $137.4 million of non-cash goodwill impairment expense related to reporting units in the Americas andAsia regions of the EC reportable segment. The impairment of goodwill in such reporting units was primarily the result oflower than expected operating results in the second half of fiscal 2019 and a corresponding reduction of future expectedoperating results due primarily to recent industry specific and macroeconomic challenges and uncertainties.In assessing goodwill for impairment in the fourth quarter of fiscal 2019, the Company was required to make significantjudgments 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. Thediscounted cash flow methodology includes market participant assumptions for, among other factors, forecasted sales, grossprofit margins, operating expenses, cash flows, perpetual growth rates and long-term discount rates, all of which requiredjudgments and estimates by management which are inherently uncertain. The market approach methodology requiredsignificant assumptions related to comparable transactions, market multiples, capital structure and control premiums.In fiscal 2018, the Company impaired goodwill for a reporting unit in the Americas region of the EC reportablesegment and recorded $181.4 million of non-cash goodwill impairment expense.58(1)(2)Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The following table presents the Company’s acquired identifiable intangible assets: June 29, 2019 June 30, 2018 Acquired Accumulated Net Book Acquired Accumulated Net Book Amount Amortization Value Amount Amortization Value (Thousands) Customer related $292,266 $(208,329) $83,937 $300,126 $(148,416) $151,710 Trade name 52,760 (24,752) 28,008 54,391 (16,711) 37,680 Technology and other 63,753 (32,178) 31,575 52,793 (22,270) 30,523 $408,779 $(265,259) $143,520 $407,310 $(187,397) $219,913 Intangible asset amortization expense was $83.7 million, $91.5 million and $54.0 million for fiscal 2019, 2018 and2017, respectively. Intangible assets have a weighted average remaining useful life of approximately 2 years as of June 29,2019. The following table presents the estimated future amortization expense for the next five fiscal years and thereafter (inthousands): Fiscal Year 2020 $81,1772021 40,4202022 14,4512023 5,9662024 1,506Total $143,520 In connection with the annual goodwill impairment testing performed in the fourth quarter of fiscal 2019 and theresultant goodwill impairment, the Company also performed impairment testing for certain long-lived assets in the Americasand Asia regions of the EC reportable segment. As a result of such long-lived asset impairment testing, the Companyconcluded that long-lived assets were recoverable and were not impaired as of June 29, 2019. 8. DebtShort-term debt consists of the following (in thousands): June 29, 2019 June 30, 2018 June 29, 2019 June 30, 2018 Interest Rate Carrying Balance Bank credit facilities and other 1.02% 2.91% $538 $60,380 Accounts receivable securitization program — 2.63% — 105,000 Public notes due June 2020 5.88% — 300,000 — Short-term debt $300,538 $165,380 Bank credit facilities and other consist of various committed and uncommitted lines of credit and other forms of bankdebt with financial institutions utilized primarily to support the working capital requirements of the Company including itsforeign operations.59Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Long-term debt consists of the following (in thousands): June 29, 2019 June 30, 2018 June 29, 2019 June 30, 2018 Interest Rate Carrying Balance Revolving credit facilities: Accounts receivable securitization program 3.15% — $227,300 $ — Credit Facility 5.68% — 1,100 — Public notes due: June 2020 — 5.88% — 300,000 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 1.00% 1.26% 403 383 Long-term debt before discount and debtissuance costs 1,428,803 1,500,383 Discount and debt issuance costs – unamortized (8,881) (11,164) Long-term debt $1,419,922 $1,489,219 The Company has an accounts receivable securitization program (the “Securitization Program”) in the United Stateswith a group of financial institutions to allow the Company to transfer, on an ongoing revolving basis, an undivided interestin a designated pool of trade accounts receivable, to provide security or collateral for borrowings up to a maximum of $500.0million. The Securitization Program does not qualify for off-balance sheet accounting treatment and any borrowings underthe Securitization Program are recorded as debt in the consolidated balance sheets. Under the Securitization Program, theCompany legally sells and isolates certain U.S. trade accounts receivable into a wholly owned and consolidated bankruptcyremote special purpose entity. Such receivables, which are recorded within “Receivables” in the consolidated balance sheets,totaled $857.3 million and $790.5 million at June 29, 2019, and June 30, 2018, respectively. The Securitization Programcontains certain covenants relating to the quality of the receivables sold. The Securitization Program also requires theCompany to maintain certain minimum interest coverage and leverage ratios, which the Company was in compliance with asof June 29, 2019. The Securitization Program expires in August 2020 and as a result the Company has classified outstandingbalances as long-term debt as of June 29, 2019. There were $227.3 million in borrowings outstanding under the Program as ofJune 29, 2019, and $105.0 million as of June 30, 2018. Interest on borrowings is calculated using a one-month LIBOR rateplus a spread of 0.75%. The facility fee on the unused balance of the facility is up to 0.35%.60Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The Company has a five-year $1.25 billion senior unsecured revolving credit facility (the “Credit Facility”) with asyndicate of banks, consisting of revolving credit facilities and the issuance of up to $200.0 million of letters of credit and upto $300.0 million of loans in certain approved currencies, which expires in June 2023. Subject to certain conditions, theCredit Facility may be increased up to $1.50 billion. Under the Credit Facility, the Company may select from various interestrate options, currencies and maturities. The Credit Facility contains certain covenants including various limitations on debtincurrence, share repurchases, dividends, investments and capital expenditures. The Credit Facility also includes financialcovenants requiring the Company to maintain minimum interest coverage and leverage ratios, which the Company was incompliance with as of June 29, 2019. At June 29, 2019 and June 30, 2018 there were $4.0 million and $2.0 million,respectively, in letters of credit issued under the Credit Facility.Aggregate debt maturities for the next five fiscal years and thereafter are as follows (in thousands):2020 $300,538 2021 228,616 2022 300,141 2023 350,046 2024 — Thereafter 550,000 Subtotal 1,729,341 Discount and debt issuance costs – unamortized (8,881) Total debt $1,720,460 At June 29, 2019, the carrying value and fair value of the Company’s debt was $1.72 billion and $1.78 billion,respectively. At June 30, 2018, the carrying value and fair value of the Company’s debt was $1.65 billion and $1.67 billion,respectively. Fair value for the public notes was estimated based upon quoted market prices and for other forms of debt fairvalue approximates carrying value due to the market based variable nature of the interest rates on those debt facilities. 9. Accrued expenses and otherAccrued expenses and other consist of the following: June 29, 2019 June 30, 2018 (Thousands) Accrued salaries and benefits $198,969 $220,245 Accrued operating costs 107,621 98,801 Accrued interest and banking costs 17,257 16,505 Accrued restructuring costs 26,918 29,225 Accrued income taxes 12,313 108,386 Accrued property, plant and equipment 12,957 23,400 Accrued other 37,661 38,041 Total accrued expenses and other $413,696 $534,603 61Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 10. Income taxesThe components of income tax expense (“tax provision”) are included in the table below. The tax provision fordeferred income taxes results from temporary differences arising primarily from net operating losses, inventories valuation,receivables valuation, certain accrued amounts and depreciation and amortization, net of any changes to valuationallowances. Years Ended June 29, 2019 June 30, 2018 July 1, 2017 (Thousands) Current: Federal $(18,611) $255,810 $(45,351) State and local 8,523 (3,174) 4,209 Foreign 78,988 104,156 106,441 Total current taxes 68,900 356,792 65,299 Deferred: Federal 17,725 (70,172) (30,025) State and local 580 (10,551) (3,934) Foreign (25,048) 11,897 15,713 Total deferred taxes (6,743) (68,826) (18,246) Income tax expense $62,157 $287,966 $47,053 The tax provision is computed based upon income from continuing operations before income taxes from both U.S. andforeign operations. U.S. loss from continuing operations before income taxes was $68.5 million, $385.1 million and $174.3million, in fiscal 2019, 2018 and 2017, respectively, and foreign income from continuing operations before income taxes was$310.8 million, $530.2 million and $484.7 million in fiscal 2019, 2018 and 2017, respectively.See further discussion related to income tax expense for discontinued operations in Note 3.On December 22, 2017 the U.S. federal government enacted tax legislation (the “Act”) which includes provisions tolower the corporate income tax rate from 35% to 21%, impose new taxes on certain foreign earnings, limit deductibility ofcertain U.S. costs and levy a one-time deemed repatriation tax on accumulated offshore earnings, among other provisions.The law is subject to interpretation and implementation guidance by both federal and state tax authorities, as well asamendments and technical corrections. As a fiscal year-end taxpayer, certain provisions of the Act began to impact the Company in the second quarter of fiscal2018, while other provisions began to impact the Company beginning in fiscal 2019. Additionally, new guidance fromregulations, interpretation of the law and refinement of the Company’s estimates from ongoing analysis of tax positions maychange the amounts recorded. Any changes to the amounts recorded will be reflected in income tax expense in the periodthey are identified, and may be material.The Company changed its historical assertion as of June 29, 2019, so that all of its unremitted foreign earnings are nolonger permanently reinvested as certain foreign earnings are expected to be repatriated in the future. The Company believesany unrecorded liabilities related to this partial change in assertion are not material, and has recorded deferred tax liabilitiesfor those certain foreign earnings expected to be repatriated in the future.62Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Reconciliations of the federal statutory tax rate to the effective tax rates are as follows: Years Ended June 29, 2019 June 30, 2018 July 1, 2017 U.S. federal statutory rate 21.0% 28.0% 35.0% State and local income taxes, net of federal benefit 0.3 (6.1) (1.7) Tax on foreign income, net of valuation allowances (0.5) (23.5) (23.5) Establishment/(release) of valuation allowances, net of U.S. taxexpense (3.2) (0.1) 1.3 Change in unrecognized tax benefit reserves 17.9 (7.4) 3.6 Tax audit settlements 0.9 4.5 0.1 Impact of the Act - transition tax 7.1 158.5 — Impact of the Act - deferred tax effects (5.6) 4.2 — Impairment of investments, including goodwill (8.0) 35.1 — Other, net (4.2) 5.3 0.4 Effective tax rate - continuing operations 25.7% 198.5% 15.2% Tax rates on foreign income represents the impact of the difference between foreign rates and the U.S. federal statutoryrate applied to foreign income or loss, foreign income taxed in the U.S. at rates other than its’ statutory rate, and the impact ofvaluation allowances established against the Company’s otherwise realizable foreign deferred tax assets, which are primarilynet operating loss carry-forwards.Avnet’s effective tax rate on income before income taxes from continuing operations was 25.7% in fiscal 2019 ascompared with an effective tax rate of 198.5% in fiscal 2018. Included in the fiscal 2018 effective tax rate is a net tax benefitof $34.1 million related to the mix of income in lower tax jurisdictions. The fiscal 2019 effective tax rate is lower than thefiscal 2018 effective tax rate primarily due to the reduction in (i) the transition tax expense recorded under the requirementsof the Act, and (ii) goodwill impairment.The Company applies the guidance in ASC 740 Income Taxes, which requires management to use its judgment to theappropriate weighting of all available evidence when assessing the need for the establishment or the release of valuationallowances. As part of this analysis, the Company examines all available evidence on a jurisdiction by jurisdiction basis andweighs the positive and negative evidence when determining the need for full or partial valuation allowances. The evidenceconsidered for each jurisdiction includes, among other items: (i) the historic levels and types of income or losses over a rangeof time periods, which may extend beyond the most recent three fiscal years depending upon the historical volatility ofincome in an individual jurisdiction; (ii) expectations and risks associated with underlying estimates of future taxableincome, including considering the historical trend of down-cycles in the Company’s served industries; (iii) jurisdictionalspecific limitations on the utilization of deferred tax assets including when such assets expire; and (iv) prudent and feasibletax planning strategies.63Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The significant components of deferred tax assets and liabilities, included in “other assets” and “other liabilities” onthe consolidated balance sheets, are as follows: June 29, June 30, 2019 2018 (Thousands) Deferred tax assets: Federal, state and foreign net operating loss carry-forwards $241,747 $296,282 Depreciation and amortization 1,583 — Inventories valuation 28,441 26,125 Receivables valuation 9,138 8,332 Various accrued liabilities and other 41,268 39,419 322,177 370,158 Less — valuation allowances (231,463) (239,483) 90,714 130,675 Deferred tax liabilities: Depreciation and amortization — (84,250) Net deferred tax assets $90,714 $46,425 The Company had $70.1 million of income tax related deferred charges included as a component of “other assets” inthe consolidated balance sheet as of June 30, 2018, substantially all of which were reclassified to depreciation andamortization deferred tax assets in the table above, pursuant to the adoption of ASU 2016-16, as discussed in the significantaccounting policies.The change in valuation allowances in fiscal 2019 from fiscal 2018 was primarily related to the $5.3 million net releaseof valuation allowance as a result of changes to management’s expectation of its ability to realize certain tax assets.As of June 29, 2019, the Company had net operating and capital loss carry-forwards of approximately $1.27 billion, ofwhich $38.4 million will expire during fiscal 2020 and fiscal 2021, substantially all of which have full valuation allowances,$228.4 million have expiration dates ranging from fiscal 2022 to fiscal 2039, and the remaining $999.0 million have noexpiration date. A significant portion of these losses are not expected to be realized in the foreseeable future and havevaluation allowances against them. The carrying value of the Company’s net operating and capital loss carry-forwards isdependent upon the Company’s ability to generate sufficient future taxable income in certain foreign tax jurisdictions. Inaddition, the Company considers historic levels and types of income or losses, expectations and risk associated withestimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need forvaluation allowances as discussed further above.Estimated liabilities for unrecognized tax benefits are included in “Accrued expenses and other” and “Other liabilities”on the consolidated balance sheets. These contingent liabilities relate to various tax matters that result from uncertainties inthe application of complex income tax regulations in the numerous jurisdictions in which the Company operates. As of June29, 2019, unrecognized tax benefits were $147.2 million. The estimated liability for unrecognized tax benefits includedaccrued interest expense and penalties of $23.4 million and $22.2 million, net of applicable state tax benefits, as of the endof fiscal 2019 and 2018, respectively.64Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Reconciliations of the beginning and ending liability balances for unrecognized tax benefits are as follows: June 29, 2019 June 30, 2018 (Thousands) Balance at beginning of year $84,357 $91,451 Additions for tax positions taken in prior periods 44,429 18,085 Reductions for tax positions taken in prior periods (5,237) (16,774) Reductions related to tax rate change (254) — Additions for tax positions taken in current period 11,343 12,869 Reductions related to settlements with taxing authorities (2,001) (5,468) Reductions related to the lapse of applicable statutes of limitations (6,787) (11,951) Adjustments related to foreign currency translation (2,085) 565 Additions from acquisitions — (4,420) Balance at end of year $123,765 $84,357 The evaluation of income tax positions requires management to estimate the ability of the Company to sustain itsposition and estimate the final benefit to the Company. To the extent that these estimates do not reflect the actual outcomethere could be an impact on the consolidated financial statements in the period in which the position is settled, theapplicable statutes of limitations expire or new information becomes available as the impact of these events are recognized inthe period in which they occur. It is difficult to estimate the period in which the amount of a tax position will change assettlement may include administrative and legal proceedings whose timing the Company cannot control. The effects ofsettling tax positions with tax authorities and statute expirations may significantly impact the estimate for unrecognized taxbenefits. Within the next twelve months, the Company estimates that approximately $38.1 million of these liabilities forunrecognized tax benefits will be settled by the expiration of the statutes of limitations or through agreement with the taxauthorities for tax positions related to valuation matters and positions related to acquired entities. The expected cashpayment related to the settlement of these contingencies is approximately $12.3 million.65Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The Company conducts business globally and consequently files income tax returns in numerous jurisdictionsincluding those listed in the following table. It is also routinely subject to audit in these and other countries. The Company isno longer subject to audit in its major jurisdictions for periods prior to fiscal 2010. The years remaining subject to audit, bymajor jurisdiction, are as follows:Jurisdiction Fiscal Year United States (Federal and state) 2015 - 2019 Taiwan 2014 - 2019 Hong Kong 2013 - 2019 Germany 2010 - 2019 Singapore 2015 - 2019 Belgium 2016 - 2019 United Kingdom 2017 - 2019 Canada 2011 - 2019 In connection with the sale of the TS business during fiscal 2017, several legal entities were sold to the Buyer and post-closing tax obligations are the responsibility of the Buyer. Under the terms of the sale agreement, the Company stillmaintains responsibility for certain pre-closing taxes including any amounts that arise from audits or other judgmentsreceived from tax authorities. The Company believes that its current estimates related to tax reserves and unrecognized taxbenefits related to the TS business are reasonable, but future changes in facts and circumstances could results in significantchanges in estimates that impact tax expense from discontinued operations in the period of change. 11. Pension and retirement plansPension PlanThe Company has a noncontributory defined benefit pension plan that covers substantially all U.S. Employees, whichhas been combined with an acquired closed noncontributory defined benefit pension plan covering certain current or formerFarnell U.S. employees (the “Plan”).The Company’s Plan meets the definition of a defined benefit plan and as a result, the Company applies ASC 715pension accounting to the Plan. The Plan is a cash balance plan that is similar in nature to a defined contribution plan in thata participant’s benefit is defined in terms of stated account balances. The cash balance plan provides the Company with thebenefit of applying any earnings on the Plan’s investments beyond the fixed return provided to participants, toward theCompany’s future cash funding obligations. Employees are eligible to participate in the Plan following the first year ofservice during which they worked at least 1,000 hours.The Plan provides defined benefits pursuant to a cash balance feature whereby a participant accumulates a benefitbased upon a percentage of current salary, which varies with age, and interest credits. The Company uses its fiscal year end asthe measurement date for determining pension expense and benefit obligations for each fiscal year.66Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The following table outlines changes in benefit obligations, plan assets and the funded status of the Plan as of the endof fiscal 2019 and 2018: June 29, June 30, 2019 2018 (Thousands) Changes in benefit obligations: Benefit obligations at beginning of year $685,160 $772,068 Service cost 14,631 15,834 Interest cost 26,354 23,732 Actuarial loss (gain) 55,118 (35,560) Benefits paid (49,610) (23,499) Plan amendments 42 — Settlements paid — (67,415) Benefit obligations at end of year $731,695 $685,160 Changes in plan assets: Fair value of plan assets at beginning of year $659,038 $699,365 Actual return on plan assets 46,635 34,587 Benefits paid (49,610) (23,499) Settlements paid — (67,415) Contributions 8,000 16,000 Fair value of plan assets at end of year $664,063 $659,038 Funded status of the plan recognized as a non-current liability $(67,632) $(26,122) Amounts recognized in accumulated other comprehensive income: Unrecognized net actuarial losses $235,384 $182,633 Unamortized prior service cost 2,470 857 $237,854 $183,490 Other changes in plan assets and benefit obligations recognized in other comprehensiveincome: Net actuarial loss (gain) $62,002 $(15,461) Net prior service cost 42 — Amortization of net actuarial losses (9,251) (14,404) Amortization of prior service credits 1,571 1,573 Settlement expenses — (22,365) $54,364 $(50,657) Included in accumulated other comprehensive loss at June 29, 2019 is a before tax expense of $235.4 million of netactuarial losses that have not yet been recognized in net periodic pension cost, of which $14.6 million is expected to berecognized as a component of net periodic pension cost during fiscal 2020. Also included is a before tax net cost of$2.5 million of prior service costs that have not yet been recognized in net periodic pension costs, of which $2.1 million isexpected to be recognized as a component of net periodic pension costs during fiscal 2020. In connection with the sale of the TS business, a significant number of former TS business employees becameterminated vested employees under the Plan. During fiscal 2018, the aggregate amount of former employee withdrawals fromthe Plan exceeded the pension accounting settlement threshold for fiscal 2018, which required a settlement expense underASC 715 pension accounting. As a result, the Company recognized a $22.4 million of pension settlement expenses67Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) before taxes and $14.9 million after taxes in fiscal 2018, respectively, classified within income (loss) from discontinuedoperations.Assumptions used to calculate actuarial present values of benefit obligations are as follows: 2019 2018 Discount rate 3.5% 4.2% The discount rate selected by the Company for the Plan reflects the current rate at which the underlying liability couldbe settled at the measurement date as of June 29, 2019. The estimated discount rate in fiscal 2019 and fiscal 2018 was basedon the spot yield curve approach, which applies the individual spot rates from a highly rated bond yield curve to each futureyear’s estimated cash flows.Assumptions used to determine net benefit costs are as follows: 2019 2018 Discount rate 4.1%3.4%Expected return on plan assets 8.0%8.0%Components of net periodic pension cost from continuing and discontinued operations during the last three fiscal yearsare as follows, which reflect the adoption of ASU 2017-07 as discussed further in Note 1: Years Ended June 29, June 30, July 1, 2019 2018 2017 (Thousands) Service cost $14,631 $15,834 $29,623 Total net periodic pension cost within selling, generaland administrative expenses 14,631 15,834 29,623 Interest cost 26,354 23,732 19,323 Expected return on plan assets (53,518) (54,686) (49,279) Amortization of prior service credits (1,571) (1,573) (1,573) Recognized net actuarial loss 9,251 14,404 14,440 Curtailment recognition of prior service credit — — (614) Total net periodic pension benefit within other income,net (19,484) (18,123) (17,703) Net periodic pension (benefit) cost $(4,853) $(2,289) $11,920 (1)Includes discontinued operationsThe Company made $8.0 million and $16.0 million of contributions in fiscal 2019 and fiscal 2018, respectively, andexpects to make approximately $16.0 million of contributions in fiscal 2020.68(1)Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Benefit payments are expected to be paid to Plan participants as follows for the next five fiscal years and the aggregatefor the five years thereafter (in thousands):2020$45,965 2021 38,416 2022 43,216 2023 45,784 2024 47,488 2025 through 2029 263,663 The Plan’s assets are held in trust and were allocated as follows as of the measurement date at the end of fiscal 2019 and2018: 2019 2018 Equity securities 58% 60% Fixed income debt securities 42% 39% Cash and cash equivalents —% 1% The general investment objectives of the Plan are to maximize returns through a diversified investment portfolio inorder to earn annualized returns that meet the long-term cost of funding the Plan’s pension obligations while maintainingreasonable and prudent levels of risk. The target rate of return on the Plan’s assets in fiscal 2020 is currently 7.7%, whichrepresents the average rate of earnings expected on the funds invested or to be invested to provide for the benefits includedin the benefit obligation based upon the targeted investment allocations. This assumption has been determined bycombining expectations regarding future rates of return for the investment portfolio along with the historical and expecteddistribution of investments by asset class and the historical rates of return for each of those asset classes. The mix of equitysecurities is typically diversified to obtain a blend of domestic and international investments covering multiple industries.The Plan’s assets do not include any material investments in Avnet common stock. The Plan’s investments in debt securitiesare also diversified across both public and private fixed income securities with varying maturities. As of June 29, 2019, theCompany’s target allocation for the Plan’s investment portfolio is for equity securities, both domestic and international, torepresent approximately 65% of the portfolio. The majority of the remaining portfolio of investments is to be invested infixed income debt securities with various maturities.The following table sets forth the fair value of the Plan’s investments as of June 29, 2019: Level 1 Level 2 Level 3 Total (Thousands) Cash and cash equivalents $2,441 $ — $ — $2,441 Equities: U.S. common stocks — 254,139 — 254,139 International common stocks — 131,847 — 131,847 Fixed Income: U.S. government agencies — 97,015 — 97,015 U.S. and international corporate bonds — 153,891 — 153,891 Other — 24,730 — 24,730 Total $2,441 $661,622 $ — $664,063 69Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The following table sets forth the fair value of the Plan’s investments as of June 30, 2018: Level 1 Level 2 Level 3 Total (Thousands) Cash and cash equivalents $7,291 $ — $ — $7,291 Equities: U.S. common stocks — 262,066 — 262,066 International common stocks — 133,564 — 133,564 Fixed Income: U.S. government agencies — 96,414 — 96,414 U.S. and international corporate bonds — 133,645 — 133,645 Other — 26,058 — 26,058 Total $7,291 $651,747 $ — $659,038 The fair value of the Plan’s investments in equity and fixed income investments are stated at unit value, or theequivalent of net asset value, which is a practical expedient for estimating the fair values of those investments. Each of theseinvestments may be redeemed daily without notice and there were no material unfunded commitments as of June 29, 2019. 12. Operating leasesThe Company leases many of its operating facilities and is also committed under other lease agreements substantiallyall for vehicles. Rent expense charged to operating expenses during the last three fiscal years is as follows: Years Ended June 29, June 30, July 1, 2019 2018 2017 (Thousands) Rent expense under operating leases $75,188 $75,006 $71,814 The aggregate future minimum operating lease commitments, principally for office and warehouse space, in fiscal 2020through 2024 and thereafter, are as follows (in thousands): 2020 $68,710 2021 52,225 2022 42,069 2023 32,245 2024 23,305 Thereafter 85,196 Total $303,750 70Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 13. Stock-based compensationThe Company measures all stock-based payments at fair value and recognizes related expense within operatingexpenses in the consolidated statements of operations over the requisite service period (generally the vesting period). Duringfiscal 2019, 2018, and 2017, the Company recorded stock-based compensation expense of $30.1 million, $24.0 million, and$53.9 million, respectively, for all forms of stock-based compensation awards. Included in the fiscal 2017 expense was $6.2million of stock-based compensation related to discontinued operations and the divestiture of the TS business.Stock planAt June 29, 2019, the Company had 8.5 million shares of common stock reserved for stock-based payments, whichconsisted of 2.0 million shares for unvested or unexercised stock options, 4.6 million shares available for stock-based awardsunder plans approved by shareholders, 1.4 million shares for restricted stock units and performance share units granted butnot yet vested, and 0.5 million shares available for future purchases under the Company’s Employee Stock Purchase Plan.Stock optionsService based stock option grants have a contractual life of ten years, vest in 25% increments on each anniversary ofthe grant date, commencing with the first anniversary, and require an exercise price of 100% of the fair market value ofcommon stock at the date of grant. Stock-based compensation expense associated with all stock options during fiscal 2019,2018 and 2017 was $2.2 million, $(0.2) million and $5.8 million, respectively.The fair value of stock options is estimated as of the date of grant using the Black-Scholes model based on theassumptions in the following table. The assumption for the expected term is based on evaluations of historical and expectedfuture employee exercise behavior. The risk-free interest rate is based on U.S. Treasury rates as of the date of grant withmaturity dates approximately equal to the expected term at the grant date. The historical volatility of Avnet’s common stockis used as the basis for the volatility assumption. The Company estimates dividend yield based upon expectations of futuredividends compared to the market value of the Company’s stock as of the grant date. Years Ended June 29, June 30, July 1, 2019 2018 2017 Expected term (years) 6.0 6.0 6.0 Risk-free interest rate 2.8% 2.0% 1.9% Weighted average volatility 23.1% 26.3% 27.9% Dividend yield 1.8% 2.0% 1.5% 71Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The following is a summary of the changes in outstanding options for fiscal 2019: Weighted Weighted Average Average Remaining Shares Exercise Price Contractual Life Outstanding at June 30, 2018 2,321,787 $40.93 79 Months Granted 301,148 48.50 110 Months Exercised (559,796) 36.14 49 Months Forfeited or expired (826,500) 46.98 91 Months Outstanding at June 29, 2019 1,236,639 $40.90 78 Months Exercisable at June 29, 2019 545,166 $37.41 60 Months (1)The above table excludes the Performance Based Stock Options (“PBSOs”). Since the performance metrics for the PBSOs were not achievedby the end of calendar year 2018, as stated in the PBSO Terms and Conditions, although the shares have not yet been canceled, theCompany has excluded from the outstanding stock options above.The weighted-average grant-date fair values of stock options granted during fiscal 2019, 2018 and 2017 were $10.74,$8.33 and $9.46, respectively.At June 29, 2019, the aggregate intrinsic value of all outstanding stock option awards was $6.6 million and allexercisable stock option awards was $4.4 million. The following is a summary of the changes in non-vested stock options for the fiscal year 2019: Weighted Average Grant-Date Shares Fair Value Non-vested stock options at June 30, 2018 1,455,234 $11.05 Granted 301,148 10.74 Vested (238,409) 10.23 Forfeited (826,500) 12.05 Non-vested stock options at June 29, 2019 691,473 $10.00 (1)Included in forfeitures above are the PBSOs, as noted above in the changes in outstanding stock options tableAs of June 29, 2019, there was $3.2 million of total unrecognized compensation cost related to stock options, which isexpected to be recognized over a weighted-average period of 2.3 years. The total fair value of stock options vested, as of thevesting dates, during fiscal 2019, 2018 and 2017 were $5.7 million, $3.6 million and $3.3 million, respectively.Cash received from stock option exercises during fiscal 2019, 2018, and 2017 totaled $20.2 million, $9.2 million, and$25.2 million, respectively. The impact of these cash receipts is included in “Other, net” within financing activities in theaccompanying consolidated statements of cash flows.72(1)(1)(1)Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Restricted stock unitsDelivery of restricted stock units, and the associated compensation expense, is recognized over the vesting period andis generally subject to the employee’s continued service to the Company, except for employees who are retirement eligibleunder the terms of the restricted stock units. As of June 29, 2019, 0.9 million shares previously awarded have not yet vested.Stock-based compensation expense associated with restricted stock units was $23.7 million, $23.0 million and $42.4 millionfor fiscal years 2019, 2018 and 2017, respectively.The following is a summary of the changes in non-vested restricted stock units during fiscal 2019: Weighted Average Grant-Date Shares Fair Value Non-vested restricted stock units at June 30, 2018 1,036,160 $38.48 Granted 633,276 46.65 Vested (623,680) 41.16 Forfeited (136,579) 40.50 Non-vested restricted stock units at June 29, 2019 909,177 $42.03 As of June 29, 2019, there was $21.9 million of total unrecognized compensation expense related to non-vestedrestricted stock units, which is expected to be recognized over a weighted-average period of 2.2 years. The total fair value ofrestricted stock units vested during fiscal 2019, 2018 and 2017 was $25.7 million, $26.0 million and $54.6 million,respectively.Performance share unitsCertain eligible employees, including Avnet’s executive officers, may receive a portion of their long-term stock-basedcompensation through the performance share program, which allows for the vesting of shares based upon achievement ofcertain performance-based criteria (“Performance Share Program”). The Performance Share Program provides for the vestingto each grantee of a number of shares of Avnet’s common stock at the end of a three-year performance period based upon theCompany’s achievement of certain performance goals established by the Compensation Committee of the Board of Directorsfor each Performance Share Program three-year performance period. The performance goals consist of a combination ofmeasures including earnings per share, economic profit, return on capital employed and total shareholder return.During each of fiscal 2019, 2018 and 2017, the Company granted 0.2 million performance share units. The actualamount of performance share units vested at the end of each three-year period is measured based upon the actual level ofachievement of the defined performance goals and can range from 0% to 200% of the award grant. During fiscal 2019, 2018and 2017, the Company recognized stock-based compensation expense associated with the Performance Share Program of$2.8 million, $0.2 million and $4.6 million, respectively. 73Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 14. Commitments and contingenciesFrom 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 issubject to inherent uncertainties, management does not anticipate that any such matters will have a material adverse effect onthe 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 tocompliance with governmental laws and regulations, including import/export and environmental matters. For certain of thesematters it is not possible to determine the ultimate outcome, and the Company cannot reasonably estimate the maximumpotential exposure or the range of possible loss for such matters due primarily to being in the early stages of the relatedproceedings and investigations. The Company currently believes that the resolution of such matters will not have a materialadverse effect on the Company’s financial position or liquidity, but could possibly be material to its results of operations inany one reporting period. As of June 29, 2019, and June 30, 2018, the Company had aggregate estimated liabilities of $14.7 million and $14.2million, respectively, classified within accrued expenses and other for such compliance-related matters that were reasonablyestimable as of such dates. 15. Earnings per share Years Ended June 29, June 30, July 1, 2019 2018 2017 (Thousands, except per share data)Numerator: Income (loss) from continuing operations $180,111 $(142,889) $263,351Income (loss) from discontinued operations (3,774) (13,535) 261,927Net income (loss) $176,337 $(156,424) $525,278 Denominator: Weighted average common shares for basic earnings per share 109,820 119,909 127,032Net effect of dilutive stock based compensation awards 978 — 1,619Weighted average common shares for diluted earnings per share 110,798 119,909 128,651Basic earnings (loss) per share - continuing operations $1.64 $(1.19) $2.07Basic earnings (loss) per share - discontinued operations (0.03) (0.11) 2.06Basic earnings (loss) per share $1.61 $(1.30) $4.13Diluted earnings (loss) per share - continuing operations $1.63 $(1.19) $2.05Diluted earnings (loss) per share - discontinued operations (0.04) (0.11) 2.03Diluted earnings (loss) per share $1.59 $(1.30) $4.08Stock options excluded from earnings per share calculation due to anti-dilutive effect 410 1,495 1,038 For the fiscal year ended June 30, 2018, the diluted net loss per share is the same as the basis net loss per share as theeffect of all potential common shares would be anti-dilutive.74Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 16. Additional cash flow informationThe “Other, net” component of non-cash and other reconciling items within operating activities in the consolidatedstatements of cash flows consisted of the following during the last three fiscal years: June 29, June 30, July 1, 2019 2018 2017 (Thousands) Provision for doubtful accounts receivable $10,360 $6,033 $10,741 Periodic pension cost (4,256) 26,057 10,071 Other, net (27,369) 11,755 4,468 Total $(21,265) $43,845 $25,280 Non-cash investing and financing activities and supplemental cash flow information were as follows: Years Ended June 29, June 30, July 1, 2019 2018 2017 (Thousands) Non-cash Investing Activities: Capital expenditures incurred but not paid $12,957 $23,400 $6,490 Non-cash Financing Activities: Unsettled share repurchases $1,404 $3,425 $ — Supplemental Cash Flow Information: Interest $144,822 $99,929 $116,085 Income taxes - continuing and discontinued operations 172,834 113,130 404,497 The Company includes book overdrafts as part of accounts payable on its consolidated balance sheets and reflectschanges in such balances as part of cash flows from operating activities in its consolidated statements of cash flows. 17. Segment informationElectronic Components (“EC”) and Farnell are the Company’s reportable segments (“operating groups”). EC marketsand sells semiconductors and interconnect, passive and electromechanical devices and integrated components to a diversecustomer base serving many end-markets. Farnell distributes electronic components and related products to the electronicsystem design community utilizing multi-channel sales and marketing resources.75Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Years Ended June 29, June 30, July 1, 2019 2018 2017 (Millions) Sales: Electronic Components $18,060.3 $17,543.6 $16,474.1 Farnell 1,458.3 1,493.3 965.9 $19,518.6 $19,036.9 $17,440.0 Operating income: Electronic Components $614.9 $587.3 $661.0 Farnell 159.3 151.9 99.8 774.2 739.2 760.8 Corporate (78.5) (111.5) (125.2) Restructuring, integration and other expenses (108.1) (145.1) (137.4) Goodwill impairment (137.4) (181.4) — Amortization of acquired intangible assets and other (84.3) (91.9) (54.5) $365.9 $209.2 $443.7 Assets: Electronic Components $6,795.0 $7,510.1 $7,126.0 Farnell 1,580.3 1,598.7 1,489.6 Corporate 189.3 488.0 1,084.0 $8,564.6 $9,596.8 $9,699.6 Capital expenditures: Electronic Components $80.1 $127.5 $81.6 Farnell 34.0 19.1 15.7 Corporate 8.6 9.3 23.1 $122.7 $155.9 $120.4 Depreciation & amortization expense: Electronic Components $86.6 $133.3 $64.4 Farnell 88.5 94.5 53.7 Corporate 5.7 7.1 37.3 $180.8 $234.9 $155.4 Sales, by geographic area: Americas $5,135.8 $5,011.4 $5,163.9 EMEA 6,762.9 6,790.9 5,912.9 Asia/Pacific 7,619.9 7,234.6 6,363.2 $19,518.6 $19,036.9 $17,440.0 Property, plant and equipment, net, by geographic area: Americas $213.8 $276.2 $296.1 EMEA 200.4 204.8 186.1 Asia/Pacific 38.0 41.9 37.4 $452.2 $522.9 $519.6 (1)Corporate is not a reportable segment and represents certain centrally incurred overhead expenses and assets that are notincluded in the EC and Farnell measures of profitability or assets. Corporate amounts represent a reconciling itembetween segment measures of profitability or assets and total Avnet amounts reported in the consolidated financialstatements.76(1)(1)(1)(1)(2)(3)(4)(5)(6)Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (2)Includes sales in the United States of $4.80 billion, $4.64 billion and $4.80 billion for fiscal 2019, 2018 and 2017,respectively.(3)Includes sales in Germany and Belgium of $2.66 billion and $1.16 billion, respectively, for fiscal 2019. Includes sales inGermany and Belgium of $2.66 billion and $1.08 billion, respectively, for fiscal 2018. Includes sales in Germany andBelgium of $2.29 billion and $930.3 million, respectively, for fiscal 2017.(4)Includes sales of $3.20 billion, $2.52 billion and $1.02 billion in Taiwan, China (including Hong Kong) and Singapore,respectively, for fiscal 2019. Includes sales of $2.71 billion, $2.63 billion and $949.5 million in Taiwan, China(including Hong Kong) and Singapore, respectively, for fiscal 2018. Includes sales of $2.18 billion, $2.45 billion and$928.4 million in Taiwan, China (including Hong Kong) and Singapore, respectively, for fiscal 2017.(5)Includes property, plant and equipment, net, of $209.9 million, $271.4 million and $289.1 million in the United Statesfor fiscal 2019, 2018 and 2017, respectively.(6)Includes property, plant and equipment, net, of $95.2 million, $70.5 million and $25.2 million in Germany, the UK andBelgium, respectively, for fiscal 2019. Fiscal 2018 includes property, plant and equipment, net, of $99.4 million, $52.5million and $43.4 million in Germany, the UK and Belgium, respectively. Fiscal 2017 includes property, plant andequipment, net, of $85.6 million, $52.1 million in and $39.8 million in Germany, the UK and Belgium, respectively.Listed in the table below are the Company’s major product categories and the related sales for each of the past threefiscal years: Years Ended June 29, June 30, July 1, 2019 2018 2017 (Millions) Semiconductors $14,973.3 $14,890.9 $13,537.9 Interconnect, passive & electromechanical (IP&E) 3,516.0 3,227.0 2,736.1 Computers 533.1 461.9 504.2 Other 496.2 457.1 661.8 $19,518.6 $19,036.9 $17,440.0 77Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 18. Restructuring expensesFiscal 2019During fiscal 2019, the Company undertook restructuring actions in order to improve operating efficiencies and furtherintegrate the acquisition of Farnell. These restructuring actions included certain costs associated with the continuedtransformation of the Company’s information technology, distribution center footprint and business operations including there-prioritization of its information technology initiatives and resources. Restructuring expenses are included as a componentof restructuring, integration and other expenses in the Consolidated Statements of Operations. The activity related to therestructuring liabilities established during fiscal 2019 is presented in the following table: Facility and Contract Asset Severance Exit Costs Impairments Total (Thousands)Fiscal 2019 restructuring expenses $35,798 $5,034 $54,687 $95,519Cash payments (17,312) (1,601) — (18,913)Non-cash amounts — — (54,698) (54,698)Other, principally foreign currency translation 1,718 11 11 1,740Balance at June 29, 2019 $20,204 $3,444 $ — $23,648Severance expense recorded in fiscal 2019 related to the reduction, or planned reduction, of approximately 600employees, primarily in executive management, operations, information technology, warehouse, sales and business supportfunctions. Facility and contract exit costs primarily consist of liabilities for remaining lease obligations for exited facilitiesand for contractual termination costs. Asset impairments represents an asset impairment expense of $54.7 million relatesprimarily to software assets that were impaired as a result of the restructuring of information technology operations includingthe re-prioritization of information technology initiatives and resources. Of the $95.5 million in restructuring expensesrecorded during fiscal 2019, $92.4 million related to EC, $2.0 million related to Farnell and $1.1 million related to Corporateexecutive and business support functions. The Company expects the majority of the remaining amounts to be paid by theend of fiscal 2020.78Table of ContentsAVNET, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Fiscal 2018 and priorDuring fiscal 2018 and prior, the Company incurred restructuring expenses related to various restructuring actionsintended to achieve planned synergies from acquired businesses and to reduce future operating expenses. The fiscal 2019activity related to the restructuring liabilities from continuing operations established during fiscal 2018 and prior ispresented in the following table: Facility and Contract Asset Severance Exit Costs Impairments Total (Thousands) Balance at June 30, 2018 $25,918 $2,890 $416 $29,224 Cash payments (21,673) (983) — (22,656) Changes in estimates, net (2,501) (154) — (2,655) Non-cash amounts — 218 (416) (198) Other, principally foreign currency translation (411) (34) — (445) Balance at June 29, 2019 $1,333 $1,937 $ — $3,270 As of June 29, 2019, management expects the majority of the remaining severance, and facility exit liabilities related tofiscal 2018 and prior restructuring actions to be paid by the end of fiscal 2020. 79Table of Contents SCHEDULE IIAVNET, INC. AND SUBSIDIARIESVALUATION AND QUALIFYING ACCOUNTSYears Ended June 29, 2019, June 30, 2018, and July 1, 2017 Balance at Charged to Charged to Balance at Beginning of Expense Other End of Account Description Period (Income) Accounts Deductions Period (Thousands) Fiscal 2019 Allowance for doubtful accounts $48,959 $10,360 $ — $(5,820)(a)$53,499 Valuation allowance on tax loss carry-forwards 239,483 (5,274)(b) (2,746)(c) — 231,463 Fiscal 2018 Allowance for doubtful accounts 47,272 6,033 — (4,346)(a) 48,959 Valuation allowance on tax loss carry-forwards 241,687 (4,704)(d) 2,500(e) — 239,483 Fiscal 2017 Allowance for doubtful accounts 27,448 10,741 14,361(f) (5,278)(a) 47,272 Valuation allowance on tax loss carry-forwards 63,694 4,477(g) 173,516(h) — 241,687 (a)Uncollectible receivables written off.(b)Primarily represents a reduction due to the release of a valuation allowance.(c)Primarily related to impact of current year activities and foreign currency exchange on valuation allowances previouslyestablished in various foreign jurisdictions.(d)Primarily represents a reduction due to the release of a valuation allowance.(e)Primarily related to impact of prior year activities and foreign currency exchange on valuation allowances previouslyestablished in various foreign jurisdictions.(f)Amount relates to increases to the allowance for doubtful accounts from acquisition and divestiture activity and suchamounts were not charged to other accounts.(g)Primarily related to an increase of $8.8 million due to the establishment of valuation allowances and a reduction of $4.0million due to a release in valuation allowances.(h)Primarily related to the acquisition of Farnell and other tax attributes recorded for which the Company does not expectto realize a benefit. 80Table of Contents INDEX TO EXHIBITS ExhibitNumber Exhibit 2.1 Interest Purchase Agreement, dated as of September 19, 2016, by and among Avnet, Inc. and Tech Data Corporation(incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on September 20,2016). 2.2 First Amendment to Interest Purchase Agreement, dated as of February 27, 2017, by and between Avnet, Inc. and TechData Corporation (incorporated herein by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed onMarch 3, 2017). 3.1 Restated Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3(i) to the Company’sCurrent Report on Form 8-K filed on February 12, 2001). 3.2 By-laws of the Company, effective May 9, 2014 (incorporated herein by reference to Exhibit 3.1 to the Company’s CurrentReport on Form 8-K filed on May 12, 2014). 4.1*Description of Registrant’s Securities. 4.2 Indenture dated as of June 22, 2010, between the Company and Wells Fargo Bank, National Association, as Trustee,providing for the issuance of Debt Securities in one or more series (incorporated herein by reference to Exhibit 4.1 to theCompany’s Current Report on Form 8-K filed on June 22, 2010). 4.3 Officers’ Certificate establishing the terms of the 5.875% Notes due 2020 (incorporated herein by reference to Exhibit 4.2 tothe Company’s Current Report on Form 8-K filed on June 22, 2010). 4.4 Form of Officers’ Certificate establishing the terms of the 4.875% Notes due 2022 (incorporated herein by reference toExhibit 4.1 to the Company’s Current Report on Form 8-K filed on November 21, 2012). 4.5 Form of Officers’ Certificate establishing the terms of the 4.625% Notes due 2026 (incorporated herein by reference toExhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 22, 2016). 4.6 Form of Officers’ Certificate setting forth the terms of the 3.750% Notes due 2021 (incorporated herein by reference toExhibit 4.1 to the Company’s Current Report on Form 8-K filed on December 1, 2016). Note: The total amount of securities authorized under any other instrument that defines the rights of holders of theCompany’s long-term debt does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidatedbasis. Therefore, these instruments are not required to be filed as exhibits to this Report. The Company agrees to furnishcopies of such instruments to the Commission upon request. Executive Compensation Plans and Arrangements 10.1 Form of Letter Agreement between the Company and William Amelio, Thomas Liguori, Ken Arnold, Peter Bartolotta, PhilipGallagher and Michael O’Neill (incorporated herein by reference to Exhibit 10.2 to the Company’s Annual Report on Form10-K filed on August 17, 2017). 10.2 Form of Employment Agreement between the Company and MaryAnn Miller (incorporated herein by reference to Exhibit10.3 to the Company’s Annual Report on Form 10-K filed on August 9, 2013). 10.3 Form of Change of Control Agreement between the Company and William Amelio, Thomas Liguori, Ken Arnold, PeterBartolotta, Philip Gallagher, MaryAnn Miller and Michael O’Neill (incorporated herein by reference to Exhibit 10.3 to theCompany’s Current Report on Form 8-K filed on February 15, 2011). 10.4 Form of Indemnity Agreement between the Company and its directors and officers (incorporated herein by reference toExhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May 8, 2006). 10.5 Avnet Executive Severance Plan (Effective as of August 10, 2017) (incorporated herein by reference to Exhibit 10.1 to theCompany’s Quarterly Report on Form 10-Q filed on October 30, 2017).81Table of Contents 10.6 Avnet Supplemental Executive Officers’ Retirement Plan (2013 Restatement) (incorporated herein by reference to Exhibit10.13 to the Company’s Annual Report on Form 10-K filed on August 9, 2013). 10.7 Avnet Restoration Plan (2013 Restatement) (incorporated herein by reference to Exhibit 10.14 to the Company’s AnnualReport on Form 10-K filed on August 9, 2013). 10.8 Avnet, Inc. 2006 Stock Compensation Plan (Amended and Restated Effective Generally as of January 1, 2009)(incorporated herein by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on August 13, 2010). 10.9 Avnet, Inc. 2006 Stock Compensation Plan:(a) Form of non-qualified stock option term sheet(b) Form of incentive stock option term sheet(c) Form of performance stock unit term sheet (revised effective August 13, 2009 by (e) below)(d) Form of incentive stock term sheet.(incorporated herein by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on May 16, 2007).(e) Form of revised performance stock unit term sheet (incorporated herein by reference to Exhibit 99.1 to the Company’sCurrent Report on Form 8-K filed on August 20, 2009). 10.10 Avnet, Inc. 2010 Stock Compensation Plan (Amended and Restated Effective as of May 8, 2018). (incorporated herein byreference to Exhibit 10.8 to the Company’s Annual Report on Form 10-K filing on August 17, 2018). 10.11 Avnet, Inc. 2010 Stock Compensation Plan:(a) Form of non-qualified stock option term sheet(b) Form of incentive stock option term sheet(c) Form of performance stock unit term sheet(d) Form of restricted stock unit term sheet(incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 10, 2012). 10.12 Avnet, Inc. 2013 Stock Compensation and Incentive Plan (Amended and Restated Effective as of May 8,2018). (incorporated herein by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K filing on August17, 2018). 10.13 Avnet, Inc. 2013 Stock Compensation and Incentive Plan:(a) Form of restricted stock unit term sheet(b) Form of nonqualified stock option term sheet(c) Form of performance-based stock option term sheet(d) Form of performance stock unit term sheet(incorporated herein by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K filed on August 17,2017). 10.14 Avnet, Inc. 2016 Stock Compensation and Incentive Plan (Amended and Restated Effective as of May 8, 2018).(incorporated herein by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K filing on August 17,2018). Refer to Exhibit 10.13, above, for the form of awards under the 2016 Stock Compensation and Incentive Plan. 10.15 Avnet Deferred Compensation Plan (Amended and Restated Effective as of May 8, 2018). (incorporated herein by referenceto Exhibit 10.13 to the Company’s Annual Report on Form 10-K filing on August 17, 2018). 10.16 Avnet, Inc. Deferred Compensation Plan for Outside Directors (Amended and Restated Effective as of May 8, 2018)(incorporated herein by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K filing on August 17,2018). Bank Agreements 82Table of Contents10.17 Securitization Program (a) Second Amended and Restated Receivables Sale Agreement, dated August 16, 2018, between Avnet, Inc.and Avnet Receivables Corporation (incorporated herein by reference to Exhibit 10.2 to the Company’sCurrent Report on Form 8-K filed on August 17, 2018). (b) Fourth Amended and Restated Receivables Purchase Agreement, dated August 16, 2018, among Avnet,Inc., Avnet Receivables Corporation, the companies and financial institutions party thereto and Wells FargoBank, N.A., as agent (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report onForm 8-K filed on August 17, 2018). 10.18 Amended and Restated Credit Agreement dated as of June 28, 2018, among Avnet, Inc., each subsidiary of the Companyparty thereto, Bank of America, N.A., as administrative agent, and each lender party thereto (incorporated herein byreference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 2, 2018). 10.19 (a) Senior Unsecured Bridge Credit Agreement, dated as of July 27, 2016, between Avnet, Inc., the lenders party thereto andBank of America N.A., as administrative agent (incorporated herein by reference to Exhibit 10.1 to the Company’s CurrentReport on Form 8-K filed on July 28, 2016). (b) Amendment No. 1 to Senior Unsecured Bridge Credit Agreement, dated as of September 13, 2016, between Avnet, Inc.,the lenders party thereto and Bank of America N.A., as administrative agent (incorporated herein by reference to Exhibit10.2 to the Company’s Current Report on Form 8-K filed on September 15, 2016). (c) Amendment No. 2 and Waiver to Senior Unsecured Bridge Credit Agreement, dated as of October 24, 2016, betweenAvnet, Inc., the lenders party thereto and Bank of America N.A., as administrative agent (incorporated herein by reference toExhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 24, 2016). 10.20 Senior Unsecured Term Loan Credit Agreement, dated as of September 14, 2016, between Avnet, Inc., Avnet HoldingEurope BVBA, Tenva Group Holdings Limited, the lenders party thereto and Bank of America N.A., as administrativeagent (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September15, 2016). 21*List of subsidiaries of the Company as of June 29, 2019. 23.1*Consent of KPMG LLP. 24.1*Power of Attorney (incorporated by reference to the signature page of this Annual Report on Form 10-K). 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 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2**Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS*XBRL Instance Document. 101.SCH*XBRL Taxonomy Extension Schema 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. 101.DEF*XBRL Taxonomy Extension Definition Linkbase Document. *Filed herewith. **Furnished herewith.83EXHIBIT 4.1 Description of Capital StockThe following is a brief description of the common stock, par value $1.00 per share (“common stock”),of Avnet, Inc. (the “Company”), which is the only security of the Company registered pursuant toSection 12 of the Securities and Exchange Act of 1934, as amended. This description is not complete,and is qualified in its entirety by reference to the Company’s Restated Certificate of Incorporation(“Certificate of Incorporation”) and Bylaws, as amended through May 9, 2014 (“Bylaws”). GeneralThe Company’s Certificate of Incorporation provides that the Company is authorized to issueup to 300,000,000 shares of common stock, par value $1.00 per share. As of June 29, 2019,104,037,769 shares of common stock were issued and outstanding. All outstanding shares of commonstock are fully paid. The common stock is listed on the Nasdaq Global Select Market under the symbol“AVT”. The Certificate of Incorporation further provides that the Company is authorized to issue up to3,000,000 shares of preferred stock, to be issued in series. For each series of preferred stock, the Boardof Directors may fix the relative rights, preferences and limitations as between the shares of such series,the shares of other series of preferred stock, and the shares of common stock. As of June 29, 2019, noshares of preferred stock were outstanding.Non-AssessableThe holders of common stock are not subject to further calls or assessments.Voting RightsThe holders of common stock are entitled to one vote for each share at all meetings ofshareholders. There are no cumulative voting rights.Dividend RightsThe holders of common stock have equal rights to dividends from funds legally available forthe payment of dividends when, as and if declared by the Board of Directors. Liquidation RightsThe holders of common stock are entitled, upon liquidation, to share ratably in any distributionin which holders of common stock participate.No Redemptive, Conversion or Preemptive RightsThe common stock is not redeemable or convertible. The holders of common stock do not haveany preemptive rights to subscribe for, purchase or receive any shares of the Company’s stock.Approval of Certain Business Combinations and Reorganizations Any plan of merger or consolidation, any sale, lease, exchange or other disposition of all orsubstantially all of the Company’s assets not made in the usual or regular course of the Company’sbusiness, or any plan for a binding share exchange requires approval by the Company’s shareholdersholding a majority of the outstanding shares entitled to vote.Exhibit 21Avnet, Inc. Foreign and Domestic SubsidiariesCompany NameCountryAlpha 3 Manufacturing LtdUnited KingdomAVID Technologies, Inc.Delaware, United StatesAvnet (Asia Pacific Holdings) LimitedHong KongAvnet (Holdings) LtdUnited KingdomAvnet (NZ)New ZealandAvnet (Shanghai) LimitedChinaAvnet Abacus LimitedHong KongAvnet Asia Pte LtdSingaporeAvnet ASIC Israel LtdIsraelAvnet B.V.NetherlandsAvnet Bidco LimitedUnited KingdomAvnet Components Brasil Participações Ltda.BrazilAvnet Components Israel LimitedIsraelAvnet de Mexico, S.A. de C.V.MexicoAvnet Delaware Holdings, Inc.Delaware, United StatesAvnet Delaware LLCDelaware, United StatesAvnet do Brasil Ltda.BrazilAvnet Electronics Marketing (Australia) Pty LtdAustraliaAvnet Electronics Technology (China) LimitedChinaAvnet Electronics Technology (Shenzhen) LimitedChinaAvnet Electronics Turkey İthalat İhracat Sanayi ve Ticaret Limited ŞirketiTurkeyAvnet EMRussian FederationAvnet EM Holdings (Japan) Kabushiki KaishaJapanAvnet EM Sp. z.o.o.PolandAvnet Embedded Industria e Comercio LtdaBrazilAvnet EMG AGSwitzerlandAvnet EMG Elektronische Bauelemente GmbHAustriaAvnet EMG FranceFranceAvnet EMG GmbHGermanyAvnet EMG Italy S.r.l.ItalyAvnet EMG LtdUnited KingdomAvnet Europe Comm. VABelgiumAvnet Europe Executive BVBABelgiumAvnet Finance B.V.NetherlandsAvnet Finance International S.à r.l.LuxembourgAvnet Finance S.à r.l.LuxembourgAvnet Financial Services Asia LimitedHong KongAvnet France S.A.S.FranceAvnet Group Holdings LimitedUnited KingdomAvnet Holding Europe BVBABelgiumAvnet Holding Germany GmbHGermanyAvnet Holding South Africa (Pty) LimitedSouth AfricaAvnet Holdings UK LimitedUnited KingdomAvnet Holdings, LLCDelaware, United StatesAvnet Iberia S.L.U.SpainAvnet India Private LimitedIndiaAvnet International Holdings 1 BVBABelgiumAvnet International (Canada) Ltd.CanadaAvnet International Holdings 2 BVBelgiumAvnet International Holdings UK LimitedUnited KingdomAvnet International, LLCDelaware, United StatesAvnet Japan (Asia) LimitedSingaporeAvnet Japan (Thailand) Co., Ltd.ThailandAvnet Kabushiki KaishaJapanAvnet Korea, Inc.Korea, Republic ofAvnet LimitedIrelandAvnet Logistics B.V.B.A.BelgiumAvnet Logistics do Brasil Ltda.BrazilAvnet Logistics GmbHGermanyAvnet Logistics LimitedUnited KingdomAvnet Logistics Stutensee GmbHGermanyAvnet Malaysia Sdn BhdMalaysiaAvnet Mexicana S. de R.L. de C.V.MexicoAvnet Nortec ABSwedenAvnet Nortec ApSDenmarkAvnet Nortec ASNorwayAvnet Nortec OyFinlandAvnet Philippines Pty Ltd., Inc.PhilippinesAvnet Receivables CorporationDelaware, United StatesAvnet Schweiz GmbHSwitzerlandAvnet SellCo B.V.NetherlandsAvnet Services S. de R.L. de C.V.MexicoAvnet South Africa (Pty) LimitedSouth AfricaAvnet Sunrise LimitedHong KongAvnet Technology (Thailand) Ltd.ThailandAvnet Technology Electronics Marketing (Taiwan) Co., Ltd.TaiwanAvnet Technology Hong Kong LimitedHong KongAvnet Technology Solutions (China) LtdChinaAvnet Technology Solutions (Tianjin) LtdChinaAVT Holdings LLCDelaware, United StatesBeijing Vanda Yunda IT Services Co., LtdChinaBell Microproducts Brazil Holdings, LLCMinnesota, United StatesBell Microproducts Mexico Shareholder, LLCFlorida, United StatesCELDIS LIMITEDUnited KingdomCM Satellite Systems, Inc.New York, United StatesCOMBINED PRECISION COMPONENTS LIMITEDUnited KingdomDragon Innovation (HK) LimitedHong KongDragon Innovation Consulting (Shenzhen) Company LimitedChinaEBV Beteiligungs-Verwaltungs GmbHGermanyEBV Elektronik ApSDenmarkEBV Elektronik d.o.o.SerbiaEBV Elektronik EOODBulgariaEBV Elektronik GmbH & Co. KGGermanyEBV Elektronik International GmbHGermanyEBV Elektronik Israel (2008) Ltd.IsraelEBV Elektronik KftHungaryEBV Elektronik LimitedHong KongEBV Elektronik MRussian FederationEBV Elektronik OÜEstoniaEBV Elektronik S.r.l.ItalyEBV Elektronik S.R.L.RomaniaEBV Elektronik s.r.o.SlovakiaEBV Elektronik SASFranceEBV Elektronik sp. z o.o.PolandEBV Elektronik Spain S.L.SpainEBV Elektronik spol. s r.o.Czech RepublicEBV Elektronik Ticaret Limited SirketiTurkeyEBV Elektronik TOVUkraineEBV Elektronik, Druzba Za Posredovanje D.O.O.SloveniaEBV Elektronik, Unipessoal Lda,PortugalEBV Erste Holding GmbH & Co. KGGermanyEBV Management GmbHGermanyEBV Zweite Holding GmbH & Co. KGGermanyEBV-Elektronik GmbHAustriaElectrolink (PTY) LtdSouth AfricaElectron House (Overseas) LimitedUnited Kingdomelement 14 LimitedUnited Kingdomelement 14 sp. zooPolandelement14 Asia Pte. Ltd.Singaporeelement14 Co., Ltd.ThailandElement14 de Mexico, S. de R.L de C.VMexicoelement14 Electronics LimitedIrelandElement14 Finance UK LimitedUnited Kingdomelement14 Holding BVNetherlandselement14 India Pvt LimitedIndiaelement14 LimitedHong Kongelement14 LimitedNew Zealandelement14 Ltd.Korea, Republic ofelement14 Pte. Ltd.Singaporeelement14 Pty LtdAustraliaelement14 SDN. BHD.MalaysiaElement14 SPRLBelgiumElement14 UGGermanyElement14 US Holdings Inc.Delaware, United StatesElement14 US Holdings LLCDelaware, United StatesELEMENT14. S. de R.L. de C.VMexicoeluomeng Electronics (China) Co. LtdChinaELUOMENG LIMITEDHong KongELUOMENG LIMITED COMPANYTaiwanErste TENVA Property GmbH Gruber StraßeGermanyFARNELL (BELGIUM) N.V.BelgiumFARNELL (FRANCE) SASFranceFARNELL (NETHERLANDS) B.V.NetherlandsFARNELL AGSwitzerlandFARNELL COMPONENTS (IRELAND) LIMITEDIrelandFARNELL COMPONENTS (ISRAEL) LTDIsraelFARNELL COMPONENTS ABSwedenFARNELL COMPONENTS SLSpainFARNELL DANMARK A/SDenmarkFARNELL ELECTRONIC COMPONENTS LIMITEDUnited KingdomFARNELL FINANCE LIMITEDUnited KingdomFARNELL GMBHGermanyFARNELL HOLDING LIMITEDUnited KingdomFARNELL ITALIA SRLItalyFARNELL OVERSEASUnited KingdomImport Holdings LLCCalifornia, United StatesIN ONE WORLDWIDE LIMITEDUnited KingdomINONE HOLDINGS LIMITEDUnited KingdomKent One CorporationDelaware, United StatesMemec (NZ) LimitedNew ZealandMemec Group Holdings LimitedUnited KingdomMemec Group LimitedUnited KingdomMemec Holdings LimitedUnited KingdomMemec Pty LimitedAustraliaMexico Holdings LLCCalifornia, United StatesMSC (Malta) LimitedMaltaMSC Technologies GmbHGermanyMSC Technologies Systems GmbHGermanyNEWARK CORPORATIONIndiana, United StatesNEWARK ELECTRONICS CORPORATIONIllinois, United StatesOY FARNELL (FINLAND) ABFinlandPREMIER FARNELL (SCOTLAND) LIMITEDUnited KingdomPREMIER FARNELL CANADA LIMITEDCanadaPREMIER FARNELL CORP.Delaware, United StatesPREMIER FARNELL ELECTRONICS LIMITEDUnited KingdomPREMIER FARNELL FINANCE LIMITEDIrelandPREMIER FARNELL LIMITEDUnited KingdomPREMIER FARNELL PENSION FUNDING SCOTTISH LIMITED PARTNERSHIPUnited KingdomPREMIER FARNELL PENSION TRUSTEES LIMITEDUnited KingdomPREMIER FARNELL PROPERTIES INC.Ohio, United StatesPREMIER FARNELL UK LIMITEDUnited KingdomPREMIER INDUSTRIAL HOLLAND B.V.NetherlandsPride Well LimitedVirgin Islands, BritishPriya Softweb Solutions Pvt. Ltd.IndiaRTI Holdings LimitedHong KongSEC International Holding Company II, L.L.C.New Hampshire, UnitedStatesShanghai FR International Trading Co., Ltd.ChinaSHENZHEN EMBEST TECHNOLOGY CO., LTD.ChinaSociété Civile Immobilière du 22 rue de DamesFranceSoftweb Solutions, Inc.Illinois, United StatesSource Electronics (HK) LimitedHong KongSource Electronics (Shanghai) LimitedChinaSource Electronics Asia LimitedHong KongTekdata Interconnections LimitedUnited KingdomTelmil Electronics, Inc.Delaware, United StatesTenva Belgium Comm. VABelgiumTenva Financial Management B.V.B.A.BelgiumTenva Group Holdings Europe LimitedUnited KingdomTenva Properties BVBABelgiumThomas Kaubisch GmbHGermanyVanda Computer System Integration (Shanghai) Company LimitedChinaVenezuelan Partner B.V.NetherlandsYEL Electronics (China) LimitedHong KongYEL Electronics (Shanghai) LimitedChinaYEL Electronics (Shenzhen) LtdChinaYEL Electronics Hong Kong LimitedHong KongZWEITE TENVA Property GmbH Im TechnologieparkGermany Exhibit 23.1 Consent of Independent Registered Public Accounting Firm The Board of DirectorsAvnet, Inc.: We consent to the incorporation by reference in the registration statement Nos. 333-45267, 333-112062, 333-140903, 333-171291, 333-177787, 333-192289, 333-214887, 333-220133 and 333-228875 on Form S-8 and registration statement Nos.333-208009 and 333-227100 on Form S-3 of Avnet, Inc. of our report dated August 15, 2019, with respect to theconsolidated balance sheets of Avnet, Inc. as of June 29, 2019 and June 30, 2018, the related consolidated statements ofoperations, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period endedJune 29, 2019, and the related notes and financial statement schedule, and the effectiveness of internal control over financialreporting as of June 29, 2019, which report appears in the June 29, 2019 annual report on Form 10-K of Avnet, Inc. Our report refers to a change in the method of accounting for revenue in 2019 due to the adoption of Financial AccountingStandards Codification (ASC) Topic 606, Revenue from Contracts with Customers. /s/ KPMG LLP Phoenix, ArizonaAugust 15, 2019 Exhibit 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER I, William J. Amelio, certify that: 1.I have reviewed this annual report on Form 10-K of Avnet, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this report; 4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controlsand procedures (as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control overfinancial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to bedesigned under our supervision, to ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during the periodin which this report is being prepared; b.designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles; c.evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this reportour conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the periodcovered by this report based on such evaluation; and d.disclosed in this report any change in the registrant's internal control over financial reporting that occurredduring the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annualreport) that has materially affected, or is reasonably likely to materially affect, the registrant's internalcontrol over financial reporting; and 5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internalcontrol over financial reporting, to the registrant's auditors and the audit committee of the registrant's board ofdirectors (or persons performing equivalent functions): a.all significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,summarize and report financial information; and b.any fraud, whether or not material, that involves management or other employees who have a significantrole in the registrant's internal control over financial reporting. Date: August 15, 2019 /s/ WILLIAM J. AMELIO William J. Amelio Chief Executive Officer Exhibit 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER I, Thomas Liguori, certify that: 1.I have reviewed this annual report on Form 10-K of Avnet, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this report; 4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controlsand procedures (as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control overfinancial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to bedesigned under our supervision, to ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during theperiod in which this report is being prepared; b.designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles; c.evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the end ofthe period covered by this report based on such evaluation; and d.disclosed in this report any change in the registrant's internal control over financial reporting that occurredduring the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annualreport) that has materially affected, or is reasonably likely to materially affect, the registrant's internalcontrol over financial reporting; and 5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internalcontrol over financial reporting, to the registrant's auditors and the audit committee of the registrant's board ofdirectors (or persons performing equivalent functions): a.all significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,summarize and report financial information; and b.any fraud, whether or not material, that involves management or other employees who have a significantrole in the registrant's internal control over financial reporting. Date: August 15, 2019 /s/ THOMAS LIGUORI Thomas Liguori Chief Financial Officer Exhibit 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350(as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) In connection with the Annual Report on Form 10-K for the year ended June 29, 2019 (the “Report”), I, William J. Amelio,Chief Executive Officer of Avnet, Inc. (the “Company”) hereby certify that: 1.The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the SecuritiesExchange Act of 1934; and 2.The information contained in the Report fairly presents, in all material respects, the financial condition andresults of operations of the Company. Date: August 15, 2019/s/ WILLIAM J. AMELIOWilliam J. AmelioChief Executive Officer Exhibit 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350(as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) In connection with the Annual Report on Form 10-K for the year ended June 29, 2019 (the “Report”), I, Thomas Liguori,Chief Financial Officer of Avnet, Inc. (the “Company”) hereby certify that: 1.The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the SecuritiesExchange Act of 1934; and 2.The information contained in the Report fairly presents, in all material respects, the financial condition andresults of operations of the Company. Date: August 15, 2019 /s/ THOMAS LIGUORI Thomas Liguori Chief Financial Officer

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