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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 April 2, 2022

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

For the transition period from _____ to _____

Commission File #1-4224

AVNET, INC.

(Exact name of registrant as specified in its charter)

New York

 

 

11-1890605

(State or other jurisdiction

 

 

(IRS Employer

of incorporation or organization)

 

 

Identification No.)

2211 South 47th Street, Phoenix, Arizona

 

85034

(Address of principal executive offices)

 

(Zip Code)

(480) 643-2000

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

N/A

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

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

Title of Each Class

 

Trading Symbol

 

Name of Each Exchange on Which registered:

Common stock, par value $1.00 per share

 

AVT

 

Nasdaq Global Select Market

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

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

Yes þ No

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

Large Accelerated Filer

  

Accelerated Filer

  

Non-accelerated Filer

Smaller Reporting Company

Emerging Growth Company

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

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

As of April 20, 2022, the total number of shares outstanding of the registrant’s Common Stock was 97,681,729 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 April 2, 2022 and July 3, 2021

2

Consolidated Statements of Operations for the third quarters and nine months ended April 2, 2022 and April 3, 2021

3

Consolidated Statements of Comprehensive Income for the third quarters and nine months ended April 2, 2022 and April 3, 2021

4

Consolidated Statements of Shareholders’ Equity for the third quarters and nine months ended April 2, 2022 and April 3, 2021

5

Consolidated Statements of Cash Flows for the nine months ended April 2, 2022 and April 3, 2021

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

27

Item 4. Controls and Procedures

27

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

28

Item 1A. Risk Factors

28

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

28

Item 6. Exhibits

29

Signature Page

30

1

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

    

April 2,

    

July 3,

 

2022

2021

 

(Thousands, except share

 

amounts)

 

ASSETS

Current assets:

Cash and cash equivalents

$

199,457

$

199,691

Receivables

 

4,164,573

 

3,576,130

Inventories

 

3,680,821

 

3,236,837

Prepaid and other current assets

 

172,792

 

150,763

Total current assets

 

8,217,643

 

7,163,421

Property, plant and equipment, net

 

323,420

 

368,452

Goodwill

 

805,384

 

838,105

Intangible assets, net

 

15,975

 

28,539

Operating lease assets

245,149

265,988

Other assets

 

174,102

 

260,917

Total assets

$

9,781,673

$

8,925,422

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Short-term debt

$

424,182

$

23,078

Accounts payable

 

2,968,845

 

2,401,357

Accrued expenses and other

616,079

572,457

Short-term operating lease liabilities

 

56,682

 

58,346

Total current liabilities

 

4,065,788

 

3,055,238

Long-term debt

 

922,041

 

1,191,329

Long-term operating lease liabilities

216,609

239,838

Other liabilities

 

320,515

 

354,833

Total liabilities

 

5,524,953

 

4,841,238

Commitments and contingencies (Note 7)

Shareholders’ equity:

Common stock $1.00 par; authorized 300,000,000 shares; issued 97,980,213 shares and 99,601,393 shares, respectively

 

97,980

 

99,601

Additional paid-in capital

 

1,644,715

 

1,622,160

Retained earnings

 

2,799,792

 

2,516,170

Accumulated other comprehensive loss

 

(285,767)

 

(153,747)

Total shareholders’ equity

 

4,256,720

 

4,084,184

Total liabilities and shareholders’ equity

$

9,781,673

$

8,925,422

See notes to consolidated financial statements.

2

Table of Contents

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Third Quarters Ended

Nine Months Ended

    

April 2,

    

April 3,

    

April 2,

    

April 3,

2022

2021

2022

2021

(Thousands, except per share amounts)

Sales

$

6,488,143

$

4,916,714

$

17,938,055

$

14,307,945

Cost of sales

 

5,675,110

 

4,348,364

 

15,752,295

 

12,712,262

Gross profit

 

813,033

 

568,350

 

2,185,760

 

1,595,683

Selling, general and administrative expenses

 

512,364

 

463,092

 

1,499,904

 

1,376,333

Russian-Ukraine conflict related expenses (Note 2)

26,261

26,261

Restructuring, integration and other expenses

 

 

17,574

 

5,272

 

55,943

Operating income

 

274,408

 

87,684

 

654,323

 

163,407

Other (expense) income, net

 

(469)

 

4,779

 

858

 

(16,052)

Interest and other financing expenses, net

 

(25,914)

 

(22,342)

 

(70,388)

 

(66,128)

Income before taxes

 

248,025

 

70,121

 

584,793

 

81,227

Income tax expense (benefit)

 

64,608

 

(37,363)

 

139,237

 

(26,532)

Net income

$

183,417

$

107,484

$

445,556

$

107,759

Earnings per share:

Basic

$

1.86

$

1.08

$

4.50

$

1.09

Diluted

$

1.84

$

1.07

$

4.44

$

1.08

Shares used to compute earnings per share:

Basic

 

98,659

 

99,542

 

99,113

 

99,125

Diluted

 

99,486

 

100,247

 

100,296

 

100,013

Cash dividends paid per common share

$

0.26

$

0.21

$

0.74

$

0.63

See notes to consolidated financial statements.

3

Table of Contents

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Third Quarters Ended

Nine Months Ended

    

April 2,

    

April 3,

     

April 2,

    

April 3,

2022

2021

2022

2021

(Thousands)

Net income

$

183,417

$

107,484

$

445,556

$

107,759

Other comprehensive income, net of tax:

Foreign currency translation and other

 

(66,033)

 

(65,021)

 

(144,052)

 

145,352

Pension adjustments, net

 

4,009

 

3,983

 

12,032

 

17,589

Total comprehensive income

$

121,393

$

46,446

$

313,536

$

270,700

See notes to consolidated financial statements.

4

Table of Contents

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

    

    

    

    

    

Accumulated

    

Common

Common

Additional

Other

Total

Stock-

Stock-

Paid-In

Retained

Comprehensive

Shareholders’

Shares

Amount

Capital

Earnings

(Loss) Income

Equity

(Thousands)

Balance, 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

Net income

 

 

 

 

150,821

 

 

150,821

Translation adjustments and other

 

 

 

 

 

(48,982)

 

(48,982)

Pension liability adjustments, net

4,010

4,010

Cash dividends

 

 

 

 

(23,749)

 

 

(23,749)

Repurchases of common stock

 

(921)

 

(921)

 

(34,421)

 

(35,342)

Stock-based compensation

 

15

 

15

 

10,854

 

 

 

10,869

Balance, January 1, 2022

98,430

98,430

1,642,521

2,686,018

(223,743)

4,203,226

Net income

 

 

 

 

183,417

 

 

183,417

Translation adjustments and other

 

 

 

 

 

(66,033)

 

(66,033)

Pension liability adjustments, net

4,009

4,009

Cash dividends

 

 

 

 

(25,612)

 

 

(25,612)

Repurchases of common stock

 

(1,101)

 

(1,101)

 

(44,031)

 

(45,132)

Stock-based compensation

 

651

 

651

 

2,194

 

 

 

2,845

Balance, April 2, 2022

97,980

$

97,980

$

1,644,715

$

2,799,792

$

(285,767)

$

4,256,720

    

    

    

    

    

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

Net income

 

 

 

 

19,163

 

 

19,163

Translation adjustments and other

 

 

 

 

 

120,000

 

120,000

Pension liability adjustments, net

3,983

3,983

Cash dividends

 

 

 

 

(20,756)

 

 

(20,756)

Stock-based compensation

 

18

 

18

 

10,814

 

 

 

10,832

Balance, January 2, 2021

98,862

98,862

1,610,145

2,366,127

(164,401)

3,910,733

Net income

 

 

 

 

107,484

 

 

107,484

Translation adjustments and other

 

 

 

 

 

(65,021)

 

(65,021)

Pension liability adjustments, net

3,983

3,983

Cash dividends

 

 

 

 

(20,888)

 

 

(20,888)

Stock-based compensation

 

627

 

627

 

969

 

 

 

1,596

Balance, April 3, 2021

99,489

$

99,489

$

1,611,114

$

2,452,723

$

(225,439)

$

3,937,887

See notes to consolidated financial statements.

5

Table of Contents

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended

    

April 2,

    

April 3,

2022

2021

(Thousands)

Cash flows from operating activities:

Net income

$

445,556

$

107,759

Non-cash and other reconciling items:

Depreciation

 

65,719

 

67,462

Amortization

 

12,034

 

35,730

Amortization of operating lease assets

40,298

42,054

Deferred income taxes

 

1,423

 

11,510

Stock-based compensation

 

28,638

 

22,293

Impairments

 

 

15,166

Other, net

 

47,667

 

7,558

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

Receivables

 

(880,957)

 

(405,700)

Inventories

 

(549,999)

 

63,017

Accounts payable

 

628,822

 

224,151

Accrued expenses and other, net

 

141,381

 

6,526

Net cash flows (used) provided by operating activities

 

(19,418)

 

197,526

Cash flows from financing activities:

Borrowings under accounts receivable securitization, net

 

57,400

 

Repayments under senior unsecured credit facility, net

 

(232,347)

Borrowings (repayments) under bank credit facilities and other debt, net

 

117,982

 

(2,192)

Repurchases of common stock

 

(88,952)

 

Dividends paid on common stock

 

(73,253)

 

(62,400)

Other, net

 

(16,853)

 

(11,455)

Net cash flows used for financing activities

 

(3,676)

 

(308,394)

Cash flows from investing activities:

Purchases of property, plant and equipment

 

(33,679)

 

(39,001)

Acquisitions of assets and businesses

 

 

(18,371)

Proceeds from liquidation of Company owned life insurance policies

 

84,343

 

Other, net

 

724

 

6,201

Net cash flows provided (used) for investing activities

 

51,388

 

(51,171)

Effect of currency exchange rate changes on cash and cash equivalents

 

(28,528)

 

7,750

Cash and cash equivalents:

— decrease

(234)

(154,289)

— at beginning of period

199,691

477,038

— at end of period

$

199,457

$

322,749

See notes to consolidated financial statements.

6

Table of Contents

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

1. Basis of presentation and new accounting pronouncements

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

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 nine months of fiscal 2022, contained 39 weeks compared to the first nine months of fiscal 2021, which contained 40 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 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 plans to adopt ASU 2020-04 and ASU 2021-01 when LIBOR is discontinued and does not currently expect a material impact on the Company’s consolidated financial statements.

7

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

2. Receivables and Russian-Ukraine conflict related expenses

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

April 2,

July 3,

2022

2021

(Thousands)

Receivables

$

4,279,564

$

3,664,290

Allowance for Credit Losses

(114,991)

(88,160)

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

April 2,

April 3,

2022

2021

(Thousands)

Balance at beginning of the period

$

88,160

$

65,018

Effect of adopting credit loss accounting standard

17,205

Credit Loss Provisions

21,746

7,370

Russian-Ukraine conflict Credit Loss Provisions

17,202

Credit Loss Recoveries

(300)

(192)

Receivables Write offs

(9,194)

(5,666)

Foreign Currency Effect and Other

(2,623)

2,054

Balance at end of the period

$

114,991

$

85,789

As a direct and incremental impact associated with the Russian invasion of Ukraine, the Company incurred $26.3 million of expense, primarily related to $17.2 million of credit loss provisions associated with accounts receivable from Russian customers that are no longer considered collectible. The remaining $9.1 million of expenses were related to product write downs and other costs associated with the wind-down of the Company’s business operations in Russia and Ukraine.

3. Goodwill and intangible assets

Goodwill

The following table presents the change in goodwill by reportable segment for the nine months ended April 2, 2022.

  

Electronic

  

  

Components

Farnell

Total

(Thousands)

Carrying value at July 3, 2021 (1)

$

310,582

$

527,523

$

838,105

Foreign currency translation

 

(9,057)

 

(23,664)

 

(32,721)

Carrying value at April 2, 2022 (1)

$

301,525

$

503,859

$

805,384

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

8

Table of Contents

AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Intangible Assets

The following table presents the Company’s acquired intangible assets at April 2, 2022 and July 3, 2021, respectively.

April 2, 2022

July 3, 2021

 

Acquired

Accumulated

Net Book

 Acquired 

 Accumulated 

 Net Book 

 

    

Amount

    

Amortization

    

Value

    

Amount(1)

    

Amortization

    

Value

 

(Thousands)

 

Customer related

$

311,226

$

(301,348)

$

9,878

$

324,416

$

(312,392)

$

12,024

Trade name

 

54,569

 

(49,486)

 

5,083

 

57,184

 

(45,019)

 

12,165

Technology and other

 

55,120

 

(54,106)

 

1,014

 

57,809

 

(53,459)

 

4,350

$

420,915

$

(404,940)

$

15,975

$

439,409

$

(410,870)

$

28,539

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

Intangible asset amortization expense was $3.1 million and $5.3 million for the third quarters of fiscal 2022 and 2021, respectively, and $12.0 million and $35.7 million for the first nine months 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

$

3,059

2023

6,428

2024

 

3,176

2025

 

1,472

2026

 

1,472

2027

 

368

Total

$

15,975

4. Debt

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

April 2,

July 3,

April 2,

July 3,

2022

   

2021

   

2022

   

2021

Interest Rate

Carrying Balance

 

Other short-term debt and accounts receivable securitization program

0.99

%

1.24

%

$

74,182

$

23,078

Public notes due December 2022

4.88

%

 

350,000

 

Short-term debt

$

424,182

$

23,078

Other short-term debt 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.

9

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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):

April 2,

July 3,

April 2,

July 3,

2022

    

2021

  

2022

  

2021

Interest Rate

Carrying Balance

 

Revolving credit facilities:

Accounts receivable securitization program

1.19

%

$

80,300

$

Credit Facility (due June 2023)

Public notes due:

December 2022

4.88

%

 

 

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

0.00

%

1.22

%

 

157

 

1,185

Long-term debt before discount and debt issuance costs

 

930,457

 

1,201,185

Discount and debt issuance costs – unamortized

 

(8,416)

 

(9,856)

Long-term debt

$

922,041

$

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 of 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 $1.09 billion and $717.4 million at April 2, 2022, 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. 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 April 2, 2022, and July 3, 2021.

As of April 2, 2022, 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 April 2, 2022, the carrying value and fair value of the Company’s total debt was $1.35 billion and $1.35 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.

10

Table of Contents

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 16 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):

Third Quarters Ended

Nine Months Ended

April 2,

April 3,

April 2,

April 3,

2022

  

2021

2022

  

2021

Operating lease cost

$

17,220

$

18,608

$

52,196

$

55,105

Variable lease cost