UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from _____ to _____ |
Commission File #
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction |
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| (IRS Employer | |
of incorporation or organization) |
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| Identification No.) |
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(Address of principal executive offices) |
| (Zip Code) |
(
(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: |
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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.
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).
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.
| Accelerated Filer ☐ |
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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
As of April 20, 2022, the total number of shares outstanding of the registrant’s Common Stock was
AVNET, INC. AND SUBSIDIARIES
INDEX
1
PART I
FINANCIAL INFORMATION
Item 1. | Financial Statements |
AVNET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| April 2, |
| July 3, |
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2022 | 2021 |
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(Thousands, except share |
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amounts) |
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ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | | $ | | |||
Receivables |
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Inventories |
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Prepaid and other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Goodwill |
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Intangible assets, net |
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Operating lease assets | | | |||||
Other assets |
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Total assets | $ | | $ | | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Short-term debt | $ | | $ | | |||
Accounts payable |
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Accrued expenses and other | | | |||||
Short-term operating lease liabilities |
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Total current liabilities |
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Long-term debt |
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Long-term operating lease liabilities | | | |||||
Other liabilities |
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Total liabilities |
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Commitments and contingencies (Note 7) | |||||||
Shareholders’ equity: | |||||||
Common stock $ |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
| ( |
| ( | |||
Total shareholders’ equity |
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Total liabilities and shareholders’ equity | $ | | $ | |
See notes to consolidated financial statements.
2
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) | ||||||||||||
$ | | $ | | $ | | $ | | |||||
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Gross profit |
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Selling, general and administrative expenses |
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Russian-Ukraine conflict related expenses (Note 2) | | — | | — | ||||||||
Restructuring, integration and other expenses |
| — |
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Operating income |
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Other (expense) income, net |
| ( |
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| ( | ||||
Interest and other financing expenses, net |
| ( |
| ( |
| ( |
| ( | ||||
Income before taxes |
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Income tax expense (benefit) |
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| ( |
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| ( | ||||
Net income | $ | | $ | | $ | | $ | | ||||
Earnings per share: | ||||||||||||
Basic | $ | | $ | | $ | | $ | | ||||
Diluted | $ | | $ | | $ | | $ | | ||||
Shares used to compute earnings per share: | ||||||||||||
Basic |
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Diluted |
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Cash dividends paid per common share | $ | | $ | | $ | | $ | |
See notes to consolidated financial statements.
3
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 | $ | | $ | | $ | | $ | | ||||
Other comprehensive income, net of tax: | ||||||||||||
Foreign currency translation and other |
| ( |
| ( |
| ( |
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Pension adjustments, net |
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Total comprehensive income | $ | | $ | | $ | | $ | |
See notes to consolidated financial statements.
4
AVNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
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| Accumulated |
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Common | Common | Additional | Other | Total | ||||||||||||||
Stock- | Stock- | Paid-In | Retained | Comprehensive | Shareholders’ | |||||||||||||
Shares | Amount | Capital | Earnings | (Loss) Income | Equity | |||||||||||||
(Thousands) | ||||||||||||||||||
Balance, July 3, 2021 |
| | $ | | $ | | $ | | $ | ( | $ | | ||||||
Net income |
| — |
| — |
| — |
| |
| — |
| | ||||||
Translation adjustments and other |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||||
Pension liability adjustments, net | — | — | — | — | | | ||||||||||||
Cash dividends |
| — |
| — |
| — |
| ( |
| — |
| ( | ||||||
Repurchases of common stock |
| ( |
| ( | — |
| ( | — |
| ( | ||||||||
Stock-based compensation |
| | | | — | — | | |||||||||||
Balance, October 2, 2021 |
| | | | | ( | | |||||||||||
Net income |
| — |
| — |
| — |
| |
| — |
| | ||||||
Translation adjustments and other |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||||
Pension liability adjustments, net | — | — | — | — | | | ||||||||||||
Cash dividends |
| — |
| — |
| — |
| ( |
| — |
| ( | ||||||
Repurchases of common stock |
| ( |
| ( | — |
| ( | — |
| ( | ||||||||
Stock-based compensation |
| |
| |
| |
| — |
| — |
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Balance, January 1, 2022 | | | | | ( | | ||||||||||||
Net income |
| — |
| — |
| — |
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| — |
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Translation adjustments and other |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||||
Pension liability adjustments, net | — | — | — | — | | | ||||||||||||
Cash dividends |
| — |
| — |
| — |
| ( |
| — |
| ( | ||||||
Repurchases of common stock |
| ( |
| ( | — |
| ( | — |
| ( | ||||||||
Stock-based compensation |
| |
| |
| |
| — |
| — |
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Balance, April 2, 2022 | | $ | | $ | | $ | | $ | ( | $ | |
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| Accumulated |
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Common | Common | Additional | Other | Total | ||||||||||||||
Stock- | Stock- | Paid-In | Retained | Comprehensive | Shareholders’ | |||||||||||||
Shares | Amount | Capital | Earnings | (Loss) Income | Equity | |||||||||||||
(Thousands) | ||||||||||||||||||
Balance, June 27, 2020 |
| | $ | | $ | | $ | | $ | ( | $ | | ||||||
Net loss |
| — |
| — |
| — |
| ( |
| — |
| ( | ||||||
Translation adjustments and other |
| — |
| — |
| — |
| — |
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Pension liability adjustments, net | — | — | — | — | | | ||||||||||||
Cash dividends |
| — |
| — |
| — |
| ( |
| — |
| ( | ||||||
Effects of new accounting principles, net | — |
| — |
| — |
| ( |
| — |
| ( | |||||||
Stock-based compensation |
| | | |
| — |
| — |
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Balance, October 3, 2020 |
| | | | | ( | | |||||||||||
Net income |
| — |
| — |
| — |
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| — |
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Translation adjustments and other |
| — |
| — |
| — |
| — |
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Pension liability adjustments, net | — | — | — | — | | | ||||||||||||
Cash dividends |
| — |
| — |
| — |
| ( |
| — |
| ( | ||||||
Stock-based compensation |
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| — |
| — |
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Balance, January 2, 2021 | | | | | ( | | ||||||||||||
Net income |
| — |
| — |
| — |
| |
| — |
| | ||||||
Translation adjustments and other |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||||
Pension liability adjustments, net | — | — | — | — | | | ||||||||||||
Cash dividends |
| — |
| — |
| — |
| ( |
| — |
| ( | ||||||
Stock-based compensation |
| |
| |
| |
| — |
| — |
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Balance, April 3, 2021 | | $ | | $ | | $ | | $ | ( | $ | |
See notes to consolidated financial statements.
5
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 | $ | | $ | | ||
Non-cash and other reconciling items: | ||||||
Depreciation |
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Amortization |
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Amortization of operating lease assets | | | ||||
Deferred income taxes |
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Stock-based compensation |
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Impairments |
| — |
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Other, net |
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Changes in (net of effects from businesses acquired and divested): | ||||||
Receivables |
| ( |
| ( | ||
Inventories |
| ( |
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Accounts payable |
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Accrued expenses and other, net |
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Net cash flows (used) provided by operating activities |
| ( |
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Cash flows from financing activities: | ||||||
Borrowings under accounts receivable securitization, net |
| |
| — | ||
Repayments under senior unsecured credit facility, net | — |
| ( | |||
Borrowings (repayments) under bank credit facilities and other debt, net |
| |
| ( | ||
Repurchases of common stock |
| ( |
| — | ||
Dividends paid on common stock |
| ( |
| ( | ||
Other, net |
| ( |
| ( | ||
Net cash flows used for financing activities |
| ( |
| ( | ||
Cash flows from investing activities: | ||||||
Purchases of property, plant and equipment |
| ( |
| ( | ||
Acquisitions of assets and businesses |
| — |
| ( | ||
Proceeds from liquidation of Company owned life insurance policies |
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| — | ||
Other, net |
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Net cash flows provided (used) for investing activities |
| |
| ( | ||
Effect of currency exchange rate changes on cash and cash equivalents |
| ( |
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Cash and cash equivalents: | ||||||
— decrease | ( | ( | ||||
— at beginning of period | | | ||||
— at end of period | $ | | $ | |
See notes to consolidated financial statements.
6
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
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 | $ | | $ | | ||
Allowance for Credit Losses | ( | ( |
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 | $ | | $ | | ||
Effect of adopting credit loss accounting standard | — | | ||||
Credit Loss Provisions | | | ||||
Russian-Ukraine conflict Credit Loss Provisions | | — | ||||
Credit Loss Recoveries | ( | ( | ||||
Receivables Write offs | ( | ( | ||||
Foreign Currency Effect and Other | ( | | ||||
Balance at end of the period | $ | | $ | |
As a direct and incremental impact associated with the Russian invasion of Ukraine, the Company incurred $
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) | $ | | $ | | $ | | |||
Foreign currency translation |
| ( |
| ( |
| ( | |||
Carrying value at April 2, 2022 (1) | $ | | $ | | $ | |
(1) | Includes accumulated impairments of $ |
8
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) |
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Customer related | $ | | $ | ( | $ | | $ | | $ | ( | $ | | |||||||
Trade name |
| |
| ( |
| |
| |
| ( |
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Technology and other |
| |
| ( |
| |
| |
| ( |
| | |||||||
$ | | $ | ( | $ | | $ | | $ | ( | $ | |
(1)Acquired amount reduced by impairment of $
Intangible asset amortization expense was $
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 | $ | | |
2023 | | ||
2024 |
| | |
2025 |
| | |
2026 |
| | |
2027 |
| | |
Total | $ | |
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 | | % | | % | $ | | $ | | |||||
Public notes due December 2022 | | % | — |
| |
| — | ||||||
Short-term debt | $ | | $ | |
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
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 | | % | — | $ | | $ | — | ||||||
Credit Facility (due June 2023) | — | — | — | — | |||||||||
Public notes due: | |||||||||||||
December 2022 | — | | % |
| — |
| | ||||||
April 2026 | | % | | % | | | |||||||
May 2031 | | % | | % | | | |||||||
Other long-term debt | | % | | % |
| |
| | |||||
Long-term debt before discount and debt issuance costs |
| |
| | |||||||||
Discount and debt issuance costs – unamortized |
| ( |
| ( | |||||||||
Long-term debt | $ | | $ | |
In August 2021, the Company amended and extended for
The Company has a
As of April 2, 2022, and July 3, 2021, there were $
As of April 2, 2022, the carrying value and fair value of the Company’s total debt was $
10
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
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 | $ | | $ | | $ | | $ | | ||||
Variable lease cost | |