SEC Filing | Avnet, Inc.

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 2, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File #1-4224

AVNET, INC.

(Exact name of registrant as specified in its charter)


New York				11-1890605
(State or other jurisdiction				(IRS Employer
of incorporation or organization)				Identification No.)


2211 South 47th Street, Phoenix, Arizona		85034
(Address of principal executive offices)		(Zip Code)

(480) 643-2000

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

N/A

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

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


Title of Each Class	Trading Symbol	Name of Each Exchange on Which registered:
Common stock, par value $1.00 per share	AVT	Nasdaq Global Select Market

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

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

Yes þ No ◻

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

Large Accelerated Filer ☑		Accelerated Filer ☐
Non-accelerated Filer ☐		Smaller Reporting Company ☐
Emerging Growth Company ☐

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

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

As of October 21, 2021, the total number of shares outstanding of the registrant’s Common Stock was 99,222,109 shares, net of treasury shares.

Table of Contents

AVNET, INC. AND SUBSIDIARIES

INDEX

	Page No.
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Consolidated Balance Sheets at October 2, 2021 and July 3, 2021	2

Consolidated Statements of Operations for the first quarters ended October 2, 2021 and October 3, 2020	3

Consolidated Statements of Comprehensive Income for the first quarters ended October 2, 2021 and October 3, 2020	4

Consolidated Statements of Shareholders’ Equity for the first quarters ended October 2, 2021 and October 3, 2020	5

Consolidated Statements of Cash Flows for the first quarters ended October 2, 2021 and October 3, 2020	6

Notes to Consolidated Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3. Quantitative and Qualitative Disclosures About Market Risk	25

Item 4. Controls and Procedures	26

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	26

Item 1A. Risk Factors	26

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	27

Item 6. Exhibits	28

Signature Page	29

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	October 2,		July 3,
	2021		2021

	(Thousands, except share
	amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	299,101	$	199,691
Receivables		3,720,296		3,576,130
Inventories		3,283,825		3,236,837
Prepaid and other current assets		161,845		150,763
Total current assets		7,465,067		7,163,421
Property, plant and equipment, net		351,873		368,452
Goodwill		823,953		838,105
Intangible assets, net		23,074		28,539
Operating lease assets		257,614		265,988
Other assets		289,728		260,917
Total assets	$	9,211,309	$	8,925,422
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	—	$	23,078
Accounts payable		2,467,743		2,401,357
Accrued expenses and other		588,340		572,457
Short-term operating lease liabilities		57,256		58,346
Total current liabilities		3,113,339		3,055,238
Long-term debt		1,389,689		1,191,329
Long-term operating lease liabilities		230,350		239,838
Other liabilities		332,332		354,833
Total liabilities		5,065,710		4,841,238
Commitments and contingencies (Note 7)
Shareholders’ equity:
Common stock $1.00 par; authorized 300,000,000 shares; issued 99,336,434 shares and 99,601,393 shares, respectively		99,336		99,601
Additional paid-in capital		1,631,667		1,622,160
Retained earnings		2,593,367		2,516,170
Accumulated other comprehensive loss		(178,771)		(153,747)
Total shareholders’ equity		4,145,599		4,084,184
Total liabilities and shareholders’ equity	$	9,211,309	$	8,925,422

See notes to consolidated financial statements.

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AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	First Quarters Ended
	October 2,		October 3,
	2021		2020

	(Thousands, except per share amounts)
Sales	$	5,584,695	$	4,723,059
Cost of sales		4,925,002		4,206,979
Gross profit		659,693		516,080
Selling, general and administrative expenses		486,178		471,158
Restructuring, integration and other expenses		5,272		26,420
Operating income		168,243		18,502
Other expense, net		(409)		(19,498)
Interest and other financing expenses, net		(22,844)		(22,301)
Income (loss) before taxes		144,990		(23,297)
Income tax expense (benefit)		33,672		(4,408)
Net income (loss)	$	111,318	$	(18,889)

Earnings (loss) per share:
Basic	$	1.12	$	(0.19)
Diluted	$	1.10	$	(0.19)

Shares used to compute earnings per share:
Basic		99,647		98,897
Diluted		101,116		98,897
Cash dividends paid per common share	$	0.24	$	0.21

See notes to consolidated financial statements.

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AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	First Quarters Ended
	October 2,		October 3,
	2021		2020

	(Thousands)
Net income (loss)	$	111,318	$	(18,889)
Other comprehensive income (loss), net of tax:
Foreign currency translation and other		(29,036)		90,373
Pension adjustments, net		4,012		9,623
Total comprehensive income	$	86,294	$	81,107

See notes to consolidated financial statements.

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AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)


									Accumulated
	Common		Common		Additional				Other		Total
	Stock-		Stock-		Paid-In		Retained		Comprehensive		Shareholders’
	Shares		Amount		Capital		Earnings		(Loss) Income		Equity

	(Thousands)
Balance, July 3, 2021		99,601	$	99,601	$	1,622,160	$	2,516,170	$	(153,747)	$	4,084,184
Net income		—		—		—		111,318		—		111,318
Translation adjustments and other		—		—		—		—		(29,036)		(29,036)
Pension liability adjustments, net		—		—		—		—		4,012		4,012
Cash dividends		—		—		—		(23,893)		—		(23,893)
Repurchases of common stock		(275)		(275)		—		(10,228)		—		(10,503)
Stock-based compensation		10		10		9,507		—		—		9,517
Balance, October 2, 2021		99,336	$	99,336	$	1,631,667	$	2,593,367	$	(178,771)	$	4,145,599


									Accumulated
	Common		Common		Additional				Other		Total
	Stock-		Stock-		Paid-In		Retained		Comprehensive		Shareholders’
	Shares		Amount		Capital		Earnings		(Loss) Income		Equity

	(Thousands)
Balance, June 27, 2020		98,793	$	98,793	$	1,594,140	$	2,421,845	$	(388,380)	$	3,726,398
Net loss		—		—		—		(18,889)		—		(18,889)
Translation adjustments and other		—		—		—		—		90,373		90,373
Pension liability adjustments, net		—		—		—		—		9,623		9,623
Cash dividends		—		—		—		(20,756)		—		(20,756)
Effects of new accounting principles, net		—		—		—		(14,480)		—		(14,480)
Stock-based compensation		51		51		5,191		—		—		5,242
Balance, October 3, 2020		98,844	$	98,844	$	1,599,331	$	2,367,720	$	(288,384)	$	3,777,511

See notes to consolidated financial statements.

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AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	First Quarters Ended
	October 2,		October 3,
	2021		2020

	(Thousands)
Cash flows from operating activities:
Net income (loss)	$	111,318	$	(18,889)

Non-cash and other reconciling items:
Depreciation		21,833		21,845
Amortization		5,210		20,117
Amortization of operating lease assets		13,751		14,079
Deferred income taxes		(3,259)		6,614
Stock-based compensation		9,178		4,961
Impairments		—		15,166
Other, net		2,603		10,898
Changes in (net of effects from businesses acquired and divested):
Receivables		(169,992)		(7,116)
Inventories		(73,971)		(136,426)
Accounts payable		85,217		228,740
Accrued expenses and other, net		(32,856)		(37,545)
Net cash flows (used) provided by operating activities		(30,968)		122,444

Cash flows from financing activities:
Borrowings under accounts receivable securitization, net		59,300		166,900
Borrowings (repayments) under senior unsecured credit facility, net		118,716		(234,190)
Borrowings (repayments) under bank credit facilities and other debt, net		(734)		(545)
Repurchases of common stock		(9,566)		—
Dividends paid on common stock		(23,893)		(20,756)
Other, net		(1,337)		281
Net cash flows provided (used) by financing activities		142,486		(88,310)

Cash flows from investing activities:
Purchases of property, plant and equipment		(12,025)		(19,998)
Acquisitions of assets and businesses		—		(18,700)
Other, net		318		753
Net cash flows used for investing activities		(11,707)		(37,945)

Effect of currency exchange rate changes on cash and cash equivalents		(401)		9,829

Cash and cash equivalents:
— increase		99,410		6,018
— at beginning of period		199,691		477,038
— at end of period	$	299,101	$	483,056

See notes to consolidated financial statements.

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AVNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of presentation and new accounting pronouncements

In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all adjustments necessary to present fairly Avnet, Inc. and its consolidated subsidiaries’ (collectively, the “Company” or “Avnet”) financial position, results of operations, comprehensive income and cash flows. All such adjustments are of a normal recurring nature.

Preparing financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Actual results may differ from these estimates and assumptions.

Interim results of operations do not necessarily indicate the results to be expected for the full fiscal year. The information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 3, 2021.

Fiscal year

The Company operates on a “52/53 week” fiscal year, and fiscal 2022 contains 52 weeks compared to fiscal 2021, which contained 53 weeks. As a result, the first quarter of fiscal 2022, contained 13 weeks compared to the first quarter of fiscal 2021, which contained 14 weeks.

Recently adopted accounting pronouncements

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) (“ASU No. 2019-12”), which simplifies the income tax accounting, eliminates certain exceptions within ASC Topic 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. Most amendments within ASU No. 2019-12 are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company’s adoption of ASU No. 2019-12 beginning the first quarter of fiscal 2022 did not have a material impact on the Company’s Consolidated Financial Statements.

Recently issued accounting pronouncements

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU No. 2020-04”), which provides optional guidance to ease the potential burden in accounting for reference rate reform on financial reporting. The new guidance provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU No. 2021-01”), to clarify certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting to apply to derivatives that are affected by the discounting transition. Both ASU No. 2020-04 and ASU No. 2021-01 are effective upon issuance through December 31, 2022. The Company is currently evaluating the effects of adopting the provisions of ASU No. 2020-04 and ASU No. 2021-01, but does not currently expect a material impact on the Company’s Consolidated Financial Statements.

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

2. Receivables

The Company’s receivables and allowance for credit losses were as follows:


	October 2,		July 3,
	2021		2021

	(Thousands)
Receivables	$	3,808,214	$	3,664,290
Allowance for Credit Losses		(87,918)		(88,160)

The Company had the following activity in the allowance for credit losses during the first quarters of fiscal 2022 and 2021:


	October 2,		October 3,
	2021		2020

	(Thousands)
Balance at beginning of the period	$	88,160	$	65,018
Effect of adopting credit loss accounting standard		—		17,205
Credit Loss Provisions		4,174		1,786
Credit Loss Recoveries		(276)		(126)
Receivables Write offs		(3,193)		(4,023)
Foreign Currency Effect and Other		(947)		1,667
Balance at end of the period	$	87,918	$	81,527

3. Goodwill and intangible assets

Goodwill

The following table presents the change in goodwill by reportable segment for the three months ended October 2, 2021.


	Electronic
	Components		Farnell		Total

	(Thousands)
Carrying value at July 3, 2021 ⁽¹⁾	$	310,582	$	527,523	$	838,105
Foreign currency translation		(3,489)		(10,663)		(14,152)
Carrying value at October 2, 2021 ⁽¹⁾	$	307,093	$	516,860	$	823,953

(1)	Includes accumulated impairments of $1,482,677 from prior fiscal years.

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Intangible Assets

The following table presents the Company’s acquired intangible assets at October 2, 2021 and July 3, 2021, respectively.


	October 2, 2021						July 3, 2021
	Acquired		Accumulated		Net Book		Acquired		Accumulated		Net Book
	Amount		Amortization		Value		Amount⁽¹⁾		Amortization		Value

	(Thousands)
Customer related	$	318,429	$	(307,121)	$	11,308	$	324,416	$	(312,392)	$	12,024
Trade name		56,024		(46,340)		9,684		57,184		(45,019)		12,165
Technology and other		56,697		(54,615)		2,082		57,809		(53,459)		4,350
	$	431,150	$	(408,076)	$	23,074	$	439,409	$	(410,870)	$	28,539

⁽¹⁾Acquired amount reduced by impairment of $17,473 from prior fiscal years.

Intangible asset amortization expense was $5.2 million and $20.1 million for the first quarters of fiscal 2022 and 2021, respectively.

The following table presents the estimated future amortization expense for the remainder of fiscal 2022 and the next five fiscal years (in thousands):


Fiscal Year
Remainder of fiscal 2022	$	10,037
2023		6,534
2024		3,191
2025		1,472
2026		1,472
2027		368
Total	$	23,074

4. Debt

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


	October 2,	July 3,		October 2,		July 3,
	2021	2021		2021		2021

	Interest Rate			Carrying Balance
Bank credit facilities and other	—	1.24	%	$	—	$	23,078
Short-term debt				$	—	$	23,078

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

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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


	October 2,		July 3,		October 2,		July 3,
	2021		2021		2021		2021

	Interest Rate				Carrying Balance
Revolving credit facilities:
Accounts receivable securitization program	0.83	%	—		$	82,200	$	—
Credit Facility (due June 2023)	1.18	%	—			115,891		—
Public notes due:
December 2022	4.88	%	4.88	%		350,000		350,000
April 2026	4.63	%	4.63	%		550,000		550,000
May 2031	3.00	%	3.00	%		300,000		300,000
Other long-term debt	1.40	%	1.22	%		792		1,185
Long-term debt before discount and debt issuance costs						1,398,883		1,201,185
Discount and debt issuance costs – unamortized						(9,194)		(9,856)
Long-term debt					$	1,389,689	$	1,191,329

In August 2021, the Company amended and extended for two years its trade accounts receivable securitization program (the “Securitization Program”) in the United States with a group of financial institutions. The Securitization Program allows the Company to transfer, on an ongoing revolving basis, an undivided interest in a designated pool of trade accounts receivable, to provide security or collateral for borrowings up to a maximum of $450 million. The Securitization Program does not qualify for off balance sheet accounting treatment and any borrowings under the Securitization Program are recorded as debt in the consolidated balance sheets. Under the Securitization Program, the Company legally sells and isolates certain U.S. trade accounts receivable into a wholly owned and consolidated bankruptcy remote special purpose entity. Such receivables, which are recorded within “Receivables” in the consolidated balance sheets, totaled $772.1 million and $717.4 million at October 2, 2021, and July 3, 2021, respectively. The Securitization Program contains certain covenants relating to the quality of the receivables sold. Interest on borrowings is calculated using a one-month LIBOR rate plus a spread of 0.75%. The facility fee on the unused balance of the facility is up to 0.35%.

The Company has a five-year $1.25 billion revolving credit facility (the “Credit Facility”) with a syndicate of banks, which expires in June 2023. It consists of revolving credit facilities and the issuance of up to $200.0 million of letters of credit and up to $300.0 million of loans in certain approved currencies, which expires in June 2023. Subject to certain conditions, the Credit Facility may be increased up to $1.50 billion. Under the Credit Facility, the Company may select from various interest rate options, currencies, and maturities. The Credit Facility contains certain covenants including various limitations on debt incurrence, share repurchases, dividends, investments, and capital expenditures. The Credit Facility also includes financial covenants requiring the Company to maintain minimum interest coverage and leverage ratios, which the Company was in compliance with as of October 2, 2021, and July 3, 2021.

As of October 2, 2021, and July 3, 2021, there were $1.2 million and $1.3 million, respectively, in letters of credit issued under the Credit Facility.

As of October 2, 2021, the carrying value and fair value of the Company’s total debt was $1.39 billion and $1.47 billion, respectively. At July 3, 2021, the carrying value and fair value of the Company’s total debt was $1.21 billion and $1.30 billion, respectively. Fair value for the public notes was estimated based upon quoted market prices and, for other forms of debt, fair value approximates carrying value due to the market based variable nature of the interest rates on those debt facilities.

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

5. Leases

Substantially all the Company’s leases are classified as operating leases and are predominately related to real property for distribution centers, office space, and integration facilities with a lease term of up to 17 years. The Company’s equipment leases are primarily for automobiles and equipment and are not material to the consolidated financial statements.

The components of lease cost related to the Company’s operating leases were as follows (in thousands):


	First Quarters Ended
	October 2,		October 3,
	2021		2020
Operating lease cost	$	17,847	$	18,402
Variable lease cost		6,118		6,288
Total lease cost	$	23,965	$	24,690

Future minimum operating lease payments as of October 2, 2021, are as follows (in thousands):


Fiscal Year
Remainder of fiscal 2022	$	50,480
2023		58,378
2024		41,960
2025		33,060
2026		28,426
Thereafter		133,533
Total future operating lease payments		345,837
Total imputed interest on operating lease liabilities		(58,231)
Total operating lease liabilities	$	287,606

Other information pertaining to operating leases consists of the following:


	First Quarters Ended
	October 2,		October 3,
	2021		2020
Operating Lease Term and Discount Rate
Weighted-average remaining lease term in years	9.0		9.3
Weighted-average discount rate	3.8	%	3.8	%

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Supplemental cash flow information related to the Company’s operating leases was as follows (in thousands):


	First Quarters Ended
	October 2,		October 3,
	2021		2020
Supplemental Cash Flow Information:
Cash paid for operating lease liabilities	$	14,826	$	14,710
Operating lease assets obtained from new operating lease liabilities		7,578		21,718

6. Derivative financial instruments

Many of the Company’s subsidiaries purchase and sell products in currencies other than their functional currencies, which subjects the Company to the risks associated with fluctuations in currency exchange rates. The Company uses economic hedges to reduce this risk utilizing natural hedging (i.e., offsetting receivables and payables in the same foreign currency) and creating offsetting positions through the use of derivative financial instruments (primarily forward foreign exchange contracts typically with maturities of less than 60 days, but no longer than one year). The Company continues to have exposure to foreign currency risks to the extent they are not economically hedged. The Company adjusts any economic hedges to fair value through the consolidated statements of operations primarily within “Other expense, net.” The fair value of forward foreign exchange contracts, which are based upon Level 2 criteria under the ASC 820 fair value hierarchy, are classified in the captions “Prepaid and other current assets” or “Accrued expenses and other,” as applicable, in the accompanying consolidated balance sheets as of October 2, 2021, and July 3, 2021. The Company’s master netting and other similar arrangements with various financial institutions related to derivative financial instruments allow for the right of offset. The Company’s policy is to present derivative financial instruments with the same counterparty as either a net asset or liability when the right of offset exists.

The Company generally does not hedge its investments in its foreign operations. The Company does not enter derivative financial instruments for trading or speculative purposes and monitors the financial stability and credit standing of its counterparties.

The Company’s foreign currency exposure relates primarily to international transactions where the currency collected from customers can be different from the currency used to purchase from suppliers. The Company’s foreign operations transactions are denominated primarily in the following currencies: U.S. Dollar, Euro, British Pound, Japanese Yen, Chinese Yuan, Taiwan Dollar, Canadian Dollar and Mexican Peso. The Company also, to a lesser extent, has foreign operations transactions in other EMEA and Asian foreign currencies.

The fair values of forward foreign currency exchange contracts not receiving hedge accounting treatment recorded in the Company’s consolidated balance sheets are as follows:


	October 2,		July 3,
	2021		2021

	(Thousands)
Prepaid and other current assets	$	6,835	$	15,722
Accrued expenses and other		13,557		23,994

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The amounts recorded to other income expense, net, related to derivative financial instruments for economic hedges are as follows:


	First Quarters Ended
	October 2,		October 3,
	2021		2020

	(Thousands)
Net derivative financial instrument loss	$	(8,771)	$	(7,816)

Under the Company’s economic hedging policies, gains and losses on the derivative financial instruments are classified within the same line item in the consolidated statements of operations as the remeasurement of the underlying assets or liabilities being economically hedged.

7. Commitments and contingencies

From time to time, the Company may become a party to, or be otherwise involved in, various lawsuits, claims, investigations and other legal proceedings arising in the ordinary course of conducting its business. While litigation is subject to inherent uncertainties, management does not anticipate that any such matters will have a material adverse effect on the Company’s financial condition, liquidity, or results of operations.

The Company is also currently subject to various pending and potential legal matters and investigations relating to compliance with governmental laws and regulations. For certain of these matters, it is not possible to determine the ultimate outcome, and the Company cannot reasonably estimate the maximum potential exposure or the range of possible loss, particularly regarding to matters in early stages. The Company currently believes that the resolution of such matters will not have a material adverse effect on the Company’s financial position or liquidity, but could possibly be material to its results of operations in any single reporting period.

As of October 2, 2021, and July 3, 2021, the Company had aggregate estimated liabilities of $14.7 million classified within accrued expenses and other for such compliance-related matters that were reasonably estimable as of such dates.

During the first quarter of fiscal 2021, the Company recorded a gain on legal settlement of $8.2 million, which is classified as a component of Restructuring, integration and other expenses.

8. Income taxes

The Company’s effective tax rate on its income before taxes was 23.2% in the first quarter of fiscal 2022. During the first quarter of fiscal 2022, the Company’s effective tax rate was unfavorably impacted primarily by increases to valuation allowances.

During the first quarter of fiscal 2021, the Company’s effective tax rate on its loss before taxes was a benefit of 18.9%. During the first quarter of fiscal 2021, the Company’s effective tax rate was unfavorably impacted primarily by increases to valuation allowances, partially offset by (i) the release of unrecognized tax benefit reserves and (ii) the mix of income in lower tax jurisdictions.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

9. Pension plan

The Company has a noncontributory defined benefit pension plan that covers substantially all current or former U.S. employees (the “Plan”). Components of net periodic pension cost for the Plan was as follows:


	First Quarters Ended
	October 2,		October 3,
	2021		2020

	(Thousands)
Service cost	$	3,752	$	3,938
Total net periodic pension cost within selling, general and administrative expenses		3,752		3,938

Interest cost		3,947		3,976
Expected return on plan assets		(12,284)		(12,420)
Amortization of prior service cost		1		75
Recognized net actuarial loss		4,086		5,151
Total net periodic pension benefit within other expense, net		(4,250)		(3,218)

Net periodic pension (benefit) cost	$	(498)	$	720

The Company made $8.0 million of contributions during the first quarter of fiscal 2022 and expects to make additional contributions to the Plan of up to $8.0 million in the remainder of fiscal 2022.

10. Shareholders’ equity

Share repurchase program

In August 2019, the Company’s Board of Directors amended the Company’s existing share repurchase program, increasing the cumulative total of authorized share repurchases to $2.95 billion of common stock in the open market or through privately negotiated transactions. The timing and actual number of shares repurchased will depend on a variety of factors such as share price, expected liquidity, expected compliance with financial debt convents, corporate and regulatory requirements, and prevailing market conditions. During the first quarter ended October 2, 2021, the Company repurchased 0.3 million shares under this program for a total cost of $10.5 million. As of October 2, 2021, the Company had $458.5 million remaining under its share repurchase authorization.

Common stock dividend

In August 2021, the Company’s Board of Directors approved a dividend of $0.24 per common share and dividend payments of $23.9 million were made in September 2021.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

11. Earnings per share


	First Quarters Ended
	October 2,		October 3,
	2021		2020

	(Thousands, except per share data)
Numerator:
Net income (loss)	$	111,318	$	(18,889)

Denominator:
Weighted average common shares for basic earnings per share		99,647		98,897
Net effect of dilutive stock-based compensation awards		1,469		—
Weighted average common shares for diluted earnings per share		101,116		98,897
Basic earnings (loss) per share	$	1.12	$	(0.19)
Diluted earnings (loss) per share	$	1.10	$	(0.19)
Stock options excluded from earnings per share calculation due to anti-dilutive effect		897		875

For the first quarter of fiscal 2021, the diluted net loss per share is the same as basic net loss per share as the effect of all potential common shares would be anti-dilutive.

12. Additional cash flow information

Non-cash investing and financing activities and supplemental cash flow information were as follows:


	First Quarters Ended
	October 2,		October 3,
	2021		2020

	(Thousands)
Non-cash Investing Activities:
Capital expenditures incurred but not paid	$	4,508	$	3,173
Non-cash Financing Activities:
Unsettled share repurchases	$	937		—
Supplemental Cash Flow Information:
Interest	$	11,636	$	12,538
Income tax net payments		27,977		19,258

Included in cash and cash equivalents as of October 2, 2021, and July 3, 2021, was $3.4 million and $3.8 million, respectively, of cash equivalents, which was primarily comprised of investment grade money market funds and overnight time deposits.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

13. Segment information

Electronic Components (“EC”) and Farnell (“Farnell”) are the Company’s reportable segments (“operating groups”). EC markets and sells semiconductors and interconnect, passive and electromechanical devices and integrated components to a diverse customer base serving many end-markets. Farnell distributes electronic components and related products to the electronic system design community utilizing multi-channel sales and marketing resources.


	First Quarters Ended
	October 2,		October 3,
	2021		2020

	(Thousands)
Sales:
Electronic Components	$	5,129,497	$	4,382,148
Farnell		455,198		340,911
		5,584,695		4,723,059
Operating income:
Electronic Components	$	162,462	$	84,440
Farnell		49,593		11,959
		212,055		96,399
Corporate		(33,301)		(31,302)
Restructuring, integration and other expenses		(5,272)		(26,420)
Amortization of acquired intangible assets and other		(5,239)		(20,175)
Operating income	$	168,243	$	18,502

Sales, by geographic area:
Americas ⁽¹⁾	$	1,258,811	$	1,205,695
EMEA ⁽²⁾		1,747,579		1,480,674
Asia/Pacific ⁽³⁾		2,578,305		2,036,690
Sales	$	5,584,695	$	4,723,059

⁽¹⁾	Includes sales from the United States of $1.16 billion and $1.13 billion for the first quarters ended October 2, 2021, and October 3, 2020, respectively.

⁽²⁾	Includes sales from Germany and Belgium of $697.1 million and $307.6 million, respectively, for the first quarter ended October 2, 2021. Includes sales from Germany and Belgium of $574.8 million and $294.4 million, respectively, for the first quarter ended October 3, 2020.

⁽³⁾

Includes sales from China (including Hong Kong), Taiwan and Singapore of $826.8 million, $1.20 billion and $264.0 million, respectively, for the first quarter ended October 2, 2021. Includes sales from China (including Hong Kong), Taiwan and Singapore of $631.8 million, $916.3 million and $272.0 million, respectively, for the first quarter ended October 3, 2020.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


	October 2,		July 3,
	2021		2021

	(Thousands)
Property, plant, and equipment, net, by geographic area:
Americas ⁽¹⁾	$	138,380	$	146,042
EMEA ⁽²⁾		178,887		185,753
Asia/Pacific