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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

For a description of the Company’s critical accounting policies and an understanding of Avnet and the significant factors that influenced the Company’s performance during the past three fiscal years, the following discussion should be read in conjunction with the description of the business appearing in Item 1 of this Report and the consolidated financial statements, including the related notes and schedule, and other information appearing in Item 8 of this Report. The Company operates on a “52/53 week” fiscal year. Fiscal 2021 contains 53 weeks compared to 52 weeks in fiscal 2020. The extra week, which occurred in the first quarter of fiscal 2021, impacts the year-over-year analysis in this MD&A.

The discussion of the Company’s results of operations includes references to the impact of foreign currency translation. When the U.S. Dollar strengthens and the stronger exchange rates of the current year are used to translate the results 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 are used to translate the results of operations of Avnet’s subsidiaries denominated in foreign currencies, the resulting impact is an increase in U.S. Dollars of reported results. In the discussion that follows, results excluding this impact, primarily for subsidiaries in EMEA and Asia, are referred to as “constant currency.”

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

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

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended

​ July 3, June 27, June 29,

​ ​ (Thousands)

Goodwill and intangible asset impairment expense ​ ​ — ​ ​ 144,092 ​ ​ 137,396

Amortization of acquired intangible assets and other ​ 41,245 ​ 81,555 ​ 84,257

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

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Results of Operations

Significant Risks and Uncertainties

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, constrained work force participation, disrupted logistics and distribution systems, and created significant volatility and disruption of financial markets. As the scope and duration of the COVID-19 pandemic is unknown and the extent of its economic impact continues to evolve globally, there is uncertainty related to the ultimate impact it will have on the Company’s business, its employees, results of operations and financial condition, and to what extent the Company’s actions to mitigate such impacts will be successful and sufficient.

Executive Summary

Sales for fiscal 2021 were $19.53 billion, an increase of 10.8% from fiscal 2020 sales of $17.63 billion. Organic sales in constant currency increased 6.3% as compared to sales in the prior year. This increase in organic sales was predominately driven by organic sales growth in Asia as a result from strong demand as the electronic components industry recovered from declines in demand during fiscal 2020.

Gross profit margin of 11.5% decreased 23 basis points compared to 11.7% in fiscal 2020. This decline was primarily due to geographical market mix and, to a lesser extent, from unfavorable changes in product and customer mix.

Operating income was $281.4 million in fiscal 2021, representing an increase compared with fiscal 2020 operating loss of $4.6 million. Operating income margin was 1.4% in fiscal 2021 as compared to an operating loss in fiscal 2020 driven primarily by goodwill and long-lived asset impairment expense. Adjusted operating income margin was 2.1% in fiscal 2021 as compared to 1.7% in fiscal 2020, an increase of 36 basis points. This increase in adjusted operating income margin is primarily due to the increase in sales, partially offset by an increase in selling, general and administrative expenses and decrease in gross profit margin.

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Sales

Three-Year Analysis of Sales: By Operating Group and Geography

The table below provides a year-over-year summary of sales for the Company and its operating groups.

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended ​ Percent Change ​

​ ​ (Dollars in millions)

Sales by Operating Group: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Sales by Geographic Region: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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The table below provides the reconciliation of reported sales to organic sales for fiscal 2021 by region and by operating group. Reported sales were the same as organic sales in fiscal 2020.

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Organic

​ ​ Sales ​ ​ ​ Organic ​ ​ ​ Sales

​ ​ as Reported ​ Estimated ​ Sales ​ TI Sales ​ Adj for TI

​ ​ Fiscal ​ Extra ​ Fiscal ​ Fiscal ​ Fiscal

​ ​ (Dollars in millions)

Avnet by region ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Avnet by segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(1)The impact of the additional week of sales in the first quarter of fiscal 2021 is estimated.

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The table below provides reported and organic sales growth rates for fiscal 2021 as compared to fiscal 2020 by region and by operating group.

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Organic

​ ​ ​ ​ ​ Sales As ​ ​ ​ ​ Organic ​ Sales

​ ​ ​ ​ Reported ​ ​ ​ Sales ​ Adj for TI

​ ​ Sales As ​ Year-Year % ​ Organic ​ Year-Year % ​ Year-Year %

​ ​ Reported ​ Change in ​ Sales ​ Change in ​ Change in

​ ​ Year-Year ​ Constant ​ Year-Year ​ Constant ​ Constant

​ % Change Currency % Change Currency Currency(1)

Avnet by region ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Avnet by segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​

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Avnet’s sales for fiscal 2021 were $19.53 billion, an increase of $1.90 billion, or 10.8%, from fiscal 2020 sales of $17.63 billion. Organic sales in constant currency increased 6.3% as compared to sales in the prior year. The year-over-year increase in organic sales was primarily due to growth in Asia where demand for electronic components improved compared to fiscal 2020, partially offset by declines in the Americas and EMEA primarily due to the loss of the TI product line. Organic sales in constant currency excluding TI sales increased 14.8% year over year in fiscal 2021 with all regions contributing to the growth.

EC sales in fiscal 2021 were $18.03 billion, representing a 10.3% increase over fiscal 2020 sales. EC organic sales in constant currency increased 6.0% year over year driven by the Asia region. EC organic sales in constant currency excluding TI sales increased 15.3% year over year. The increase in sales in the Company’s EC operating group is primarily due to improvements in overall market demand as fiscal 2020 was a year where demand had declined due to an overall industry economic downturn.

Farnell sales in fiscal 2021 were $1.50 billion, an increase of $0.2 million or 16.2% over fiscal 2020 sales. Organic sales in constant currency increased 9.5% year-over-year. These increases were primarily a result of improved market demand in all three regions.

Gross Profit and Gross Profit Margin

Gross profit in fiscal 2021 was $2.24 billion, an increase of $177.2 million, or 8.6%, compared to fiscal 2020. Gross profit margin of 11.5% in fiscal 2021 decreased 23 basis points from fiscal 2020 driven primarily by a higher percentage of sales coming from the Asia region and, to a lesser extent, from unfavorable changes in product and customer mix. Sales in the higher margin western regions represented approximately 55% of sales in fiscal 2021 as compared to 60% during fiscal 2020.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A expenses”) in fiscal 2021 were $1.87 billion, an increase of

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$32.7 million, or 1.8%, compared to fiscal 2020. The year-over-year increase in SG&A expenses was primarily due to the impact of the extra week in the first quarter of fiscal 2021, the impact of foreign currency due to the weakening U.S. Dollar and from increases due to the growth in sales, partially offset by the cost savings from restructuring activities and lower amortization expense.

Metrics that management monitors with respect to its operating expenses are SG&A expenses as a percentage of sales and as a percentage of gross profit. In fiscal 2021, SG&A expenses as a percentage of sales were 9.6% and as a percentage of gross profit were 83.7%, as compared with 10.4% and 89.3%, respectively, in fiscal 2020. The decrease in SG&A expenses as a percentage of gross profit was primarily due to the operating leverage created from higher sales, cost savings from restructuring activities, and lower amortization expense, partially offset by foreign currency due to the weakening U.S. Dollar and from the decrease in gross profit margin.

Goodwill and Intangible Asset Impairment Expenses

The Company incurred $144.1 million of goodwill and intangible asset impairment expenses during fiscal 2020. See Note 7, “Goodwill, intangible assets and impairments” to the Company’s consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for additional information related to goodwill impairment and intangible asset impairment expenses.

Restructuring, Integration and Other Expenses

As a result of management’s focus on improving operating efficiencies and reducing operating costs, the Company has incurred certain restructuring, integration, and other costs. Restructuring costs primarily relate to the restructuring of the Company’s information technology, distribution center footprint, and business operations. Integration costs relate to the integration of certain regional and global businesses, including incremental costs incurred as part of the consolidation, relocation, sale and closure of distribution centers and office facilities. Other costs consist primarily of any other miscellaneous costs that relate to restructuring, integration, and other expenses, including acquisition related costs and specific and incremental costs incurred associated with the impacts of the COVID-19 pandemic.

The Company recorded $59.4 million for restructuring costs in fiscal 2021 and expects to realize approximately $50.0 million in incremental annualized operating costs savings as a result of such restructuring actions. Restructuring expenses consisted of $54.6 million for severance and $4.8 million for facility exit costs. The Company also incurred integration costs of $35.8 million, which was offset by a gain on legal settlement of $8.2 million and a reversal of $2.6 million for changes in estimates for costs associated with prior year restructuring actions. The after-tax impact of restructuring, integration, and other expenses were $66.9 million and $0.67 per share on a diluted basis.

See Note 18, “Restructuring expenses” to the Company’s consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for additional information related to restructuring expenses.

Operating Income (Loss)

Operating income for fiscal 2021 was $281.4 million, an increase of $286.0 million as compared with fiscal 2020 operating loss of $4.6 million, which included goodwill and long-lived asset impairment expense of $144.1 million. Operating income margin was 1.4% in fiscal 2021 compared to an operating loss in fiscal 2020. Adjusted operating income for fiscal 2021 was $407.0 million, an increase of $104.2 million or 34.4%, from fiscal 2020. The year-over-year increase in adjusted operating income was primarily driven by the increase in sales, partially offset by a lower gross profit margin and increases to SG&A expenses.

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Interest and Other Financing Expenses, Netand Other (Expense) Income, Net

Interest and other financing expenses for fiscal 2021 was $89.5 million, a decrease of $33.3 million, or 27.1%, compared with interest and other financing expenses of $122.7 million in fiscal 2020. The decrease in interest and other financing expenses in fiscal 2021 compared to fiscal 2020 was primarily related to lower outstanding borrowings during fiscal 2021 as compared to fiscal 2020.

In fiscal 2021, the Company had $19.0 million of other expense as compared with $2.2 million of other expense in fiscal 2020. In fiscal 2021, other expense included equity investment impairment expense, debt extinguishment costs, and foreign currency losses of $12.9 million offset by other insignificant miscellaneous other income items compared to equity investment impairment expense substantially all offset by foreign currency gains in fiscal 2020.

Income Tax Expense

Avnet’s effective tax rate on its income before income taxes was a benefit of 11.7% in fiscal 2021. The effective tax rate for fiscal 2021 was favorably impacted primarily by (i) a tax benefit arising from the reduction in fair value of certain businesses, resulting in losses that can be carried back under U.S. tax law and, (ii) the mix of income in lower tax jurisdictions, partially offset by (iii) increases to unrecognized tax benefit reserves.

See Note 10, “Income taxes” to the Company’s consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion on the effective tax rate.

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 2021 was $193.1 million, or $1.93 earnings per share on a diluted basis, compared with net loss of $31.1 million, or $0.31 of net loss per share on a diluted basis, in fiscal 2020.

Fiscal 2020 Comparison to Fiscal 2019

For comparison of the Company’s results of operations between fiscal 2020 and fiscal 2019, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended June 27, 2020 filed with the SEC on August 14, 2020.

Liquidity and Capital Resources

Cash Flows

Cash Flows from Operating Activities

The Company generated $90.9 million of cash from its operating activities in fiscal 2021 as compared to $730.2 million in fiscal 2020. These operating cash flows are comprised of: (i) cash flows generated from net income (loss), adjusted for the impact of non-cash and other items, which includes depreciation and amortization expense, deferred income taxes, stock-based compensation expense, amortization of operating lease assets and other non-cash items , and (ii) cash flows used for, or generated from, working capital and other, excluding cash and cash equivalents. Cash used for working capital and other to support sales growth was $372.5 million during fiscal 2021, including increases in accounts receivable of $615.4 million and inventories of $409.1 million, offset by increases in accounts payable of $621.0 million and accrued expenses and other of $30.9 million. Comparatively, cash generated from working capital and other was $335.1 million during fiscal 2020, including decreases in accounts receivable of $221.5 million and

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inventories of $266.8 million, partially offset by decreases in accounts payable of $107.0 million and accrued expenses and other of $46.2 million.

Cash Flows from Financing Activities

During fiscal 2021, the Company received net proceeds of $297.7 million as a result of the issuance of $300.0 million of 3.00% Notes due May 2031 and $22.9 million under the Securitization Program. During fiscal 2021, the Company repaid $305.1 million of notes and $231.7 million under the Credit Facility, and paid dividends on common stock of $84.3 million.

During fiscal 2020, the Company repaid $302.0 million of notes and $227.3 million under the Securitization Program and received net proceeds of $223.1 million under the Credit Facility. During fiscal 2020, the Company paid dividends on common stock of $84.0 million and repurchased $237.8 million of common stock.

Cash Flows from Investing Activities

During fiscal 2021, the Company used $50.4 million for capital expenditures primarily related to warehouse and facilities, and information technology hardware and software costs compared to $73.5 million in fiscal 2020. During fiscal 2021, the Company used $18.4 million of cash for acquisitions, which is net of the cash acquired, compared to $51.5 million of cash for acquisitions, which is net of the cash acquired, in fiscal 2020. In addition, the Company paid $12.8 million for other investing activities during fiscal 2020.

Financing Transactions

The Company uses a variety of financing arrangements, both short-term and long-term, to fund its operations in addition to cash generated from operating activities. The Company also uses several funding sources to avoid becoming overly dependent on one financing source, and to lower funding costs. These financing arrangements include public debt, short-term and long-term bank loans, a revolving credit facility (the “Credit Facility”), and an accounts receivable securitization program (the “Securitization Program”).

The Company has various lines of credit, financing arrangements and other forms of bank debt in the U.S. and various foreign locations to fund the short-term working capital, foreign exchange, overdraft, and letter of credit needs of its wholly owned subsidiaries. Outstanding borrowings under such forms of debt at the end of fiscal 2021 was $1.4 million.

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

See Note 8, “Debt” to the Company’s consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for additional information on financing transactions including the Credit Facility, the Securitization Program and the outstanding Notes as of July 3, 2021.

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Covenants and Conditions

The Company’s 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 maintain minimum interest coverage and leverage ratios. The Company was in compliance with all such covenants as of July 3, 2021.

The Company’s Securitization Program contains certain covenants relating to the quality of the receivables sold. If these conditions are not met, the Company may not be able to borrow any additional funds and the financial institutions may consider this an amortization event, as defined in the Securitization Program agreements, which would permit the financial institutions to liquidate the accounts receivables sold to cover any outstanding borrowings. Circumstances that could affect the Company’s ability to meet the required covenants and conditions of the Securitization Program include the Company’s ongoing profitability and various other economic, market, and industry factors. The Company was in compliance with all such covenants as of July 3, 2021.

Management does not believe that the covenants under the Credit Facility or Securitization Program limit the Company’s ability to pursue its intended business strategy or its future financing needs.

See Liquidity below for further discussion of the Company’s availability under these various facilities.

Liquidity

The Company had cash and cash equivalents of $199.7 million as of July 3, 2021, of which $150.5 million was held outside the United States. As of June 27, 2020, the Company had cash and cash equivalents of $477.0 million, of which $411.2 million was held outside of the United States.

As of July 3, 2021, there were no borrowings outstanding under the Credit Facility, with $1.3 million in letters of credit issued and $22.9 million outstanding under the Securitization Program. During fiscal 2021, the Company had an average daily balance outstanding under the Credit Facility of approximately $167.8 million and $173.6 million under the Securitization Program. As of July 3, 2021, the combined availability under the Credit Facility and the Securitization Program was $1.64 billion. Availability under the Securitization Program is subject to the Company having sufficient eligible trade accounts receivable in the United States to support desired borrowings.

In July 2021, the Company extended the maturity of the Securitization Program to August 31, 2021. The Company expects to renew the Securitization Program for two years on similar terms in the first quarter of fiscal 2022.

During periods of weakening demand in the electronic components industry, the Company typically generates cash from operating activities. Conversely, the Company is more likely to use operating cash flows for working capital requirements during periods of higher growth. The Company generated $90.9 million in cash flows from operating activities during the fiscal year ended July 3, 2021.

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

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The Company continually monitors and reviews its liquidity position and funding needs. Management believes that the Company’s ability to generate operating cash flows in the future and available borrowing capacity, including capacity for the non-recourse sale of trade accounts receivable, will be sufficient to meet its future liquidity needs. The Company may also renew or replace expiring debt arrangements in the future and management believes the Company will have adequate access to capital markets, if needed. The Company has historically generated operating cash flows and believes it will have the ability to do so in the future.

As a result of the evolving impacts of the COVID-19 pandemic and the related uncertain future business conditions, the Company in unlikely to make near-term strategic investments through acquisitions.

As of July 3, 2021, the Company may repurchase up to an aggregate of $469.0 million of the Company’s common stock through a $2.95 billion share repurchase program approved by the Board of Directors. The Company may repurchase stock from time to time at the discretion of management, subject to strategic considerations, market conditions, amended Credit Facility restrictions and other factors. The Company may terminate or limit the share repurchase program at any time without prior notice. As a result of the impacts of the COVID-19 pandemic and the corresponding need to manage liquidity and leverage, the Company has suspended share repurchases.

The Company has historically paid quarterly cash dividends on shares of its common stock, and future dividends are subject to approval by the Board of Directors. During the fourth quarter of fiscal 2021, the Board of Directors approved a dividend of $0.22 per share, which resulted in $21.9 million of dividend payments during the quarter.

Long-Term Contractual Obligations

The Company has the following contractual obligations outstanding as of July 3, 2021 (in millions):

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ Payments due by period

​ ​ ​ ​ ​ Less than ​ ​ ​ ​ ​ More than ​

Contractual Obligations ​ Total ​ 1 year ​ 1-3 years ​ 3-5 years ​ 5 years

​

(1) Excludes unamortized discount and issuance costs on debt.

(3) Excludes imputed interest on operating lease liabilities.

At July 3, 2021, the Company had an estimated liability for income tax contingencies of $145.1 million, which is not included in the above table. Cash payments associated with the settlement of these liabilities that are expected to be paid within the next 12 months is $2.4 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 suppliers or for capital expenditures.

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Critical Accounting Policies

The Company’s consolidated financial statements have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses. These estimates and assumptions are based upon the Company’s continual evaluation of available information, including historical results and anticipated future events. Actual results may differ materially 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 significant judgments and estimates. Management believes the Company’s most critical accounting policies at the end of fiscal 2021 relate to:

Valuation of Inventories

Inventories are recorded at the lower of cost or estimated net realizable value. Inventory cost includes the purchase price of finished goods and any freight cost incurred to receive the inventory into the Company’s distribution centers. The Company’s inventories include electronic components sold into changing, cyclical, and competitive markets, so inventories may decline in market value or become obsolete.

The Company regularly evaluates inventories for expected customer demand, obsolescence, current market prices, and other factors that may render inventories less marketable. Write-downs are recorded so that inventories reflect the estimated net realizable value and take into account the Company’s contractual provisions with its suppliers, which may provide certain protections to the Company for product obsolescence and price erosion in the form of rights of return, stock rotation rights, obsolescence allowances, and price protections. Because of the large number of products and suppliers and the complexity of managing the process around price protections and stock rotations, estimates are made regarding the net realizable value of inventories. Additionally, assumptions about future demand and market conditions, as well as decisions to discontinue certain product lines, impact the evaluation of whether to write-down inventories. If future demand change or actual market conditions are less favorable than assumed, then management evaluates whether additional write-downs of inventories are required. In any case, actual net realizable values could be different from those currently estimated.

Accounting for Income Taxes

Management’s judgment is required in determining income tax expenses and unrecognized tax benefits, in measuring deferred tax assets and liabilities, and valuing allowances recorded against net deferred tax assets. Recovering net deferred tax assets depends on the Company’s ability to generate sufficient future taxable income in certain jurisdictions. In addition, when assessing the need for valuation allowances, the Company considers historic levels and types of income, expectations and risk associated with estimates of future taxable income, and ongoing prudent and feasible tax planning strategies. If the Company determines that it cannot realize all or part of its deferred tax assets in the future, it may record additional valuation allowances against the deferred tax assets with a corresponding increase to income tax expense in the period such determination is made. Similarly, if the Company determines that it can realize all or part of its deferred tax assets that have an associated valuation allowance established, the Company may release a 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 tax matters. These liabilities are based on management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. The anticipated and actual outcomes of these matters may differ, which

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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 fluctuate. In accordance with the Company’s accounting policy, accrued interest 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 numerous jurisdictions in which it operates, including the impact of tax law and regulation changes in the jurisdictions the Company operates in. The Company exercises judgment for interpretation and application of such current tax regulations. Changes to such tax regulations or disagreements with the Company’s interpretation or application by tax authorities in any of the Company’s major jurisdictions may have a significant impact on the Company’s income tax expense.

See Note 10 to the Company’s consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion on income tax expense, valuation allowances and unrecognized tax benefits.

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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 generally accepted accounting principles 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.

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) (“ASU No. 2019-12”), which removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU No. 2019-12 will be effective for the Company in the first quarter of fiscal 2022, and early adoption is permitted. Depending on the amendment, adoption may be applied on a retrospective, modified retrospective, or prospective basis. The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2019-12.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

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

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The following table sets forth the scheduled maturities of the Company’s debt outstanding at July 3, 2021 (dollars in millions):

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Fiscal Year

Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Floating rate debt ​ $ 23.1 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 23.1 ​

(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 at July 3, 2021, and June 27, 2020 (dollars in millions):

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Carrying Value ​ Fair Value at ​ Carrying Value ​ Fair Value at

Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Average interest rate ​ 4.3 % ​ ​ ​ 4.5 % ​ ​ ​

Average interest rate ​ 1.2 % ​ ​ ​ 1.3 % ​ ​ ​

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 derivative financial instruments (primarily forward foreign currency exchange contracts typically with maturities of less than sixty days, but not greater than one year). The Company continues to be exposed to foreign currency risks to the extent they are not hedged. The Company adjusts any economic hedges to fair value through the consolidated statements of operations, primarily within “other (expense) income, net.” Therefore, the changes in valuation of the underlying items being economically hedged are offset by the changes in fair value of the forward foreign exchange contracts. A hypothetical 10% change in foreign currency exchange rates under the forward foreign currency exchange contracts outstanding at July 3, 2021, would result in an increase or decrease of approximately $170.0 million to the fair value of the forward foreign exchange contracts, which would generally be offset by an opposite effect on the underlying exposure being economically hedged. See Note 3 to the Company’s consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion on derivative financial instruments.

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Item 8. Financial Statements and Supplementary Data

Index to Financial Statements

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1. Consolidated Financial Statements: ​ ​

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​ Report of Independent Registered Public Accounting Firm ​ 33

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​ Avnet, Inc. and Subsidiaries Consolidated Financial Statements: ​ ​

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​ Consolidated Balance Sheets at July 3, 2021, and June 27, 2020 ​ 36

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​ Notes to Consolidated Financial Statements ​ 41

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2. Financial Statement Schedule: ​ ​

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Avnet, Inc.:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Avnet, Inc. and subsidiaries (the Company) as of July 3, 2021 and June 27, 2020, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended July 3, 2021, and the related notes and financial statement schedule II (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of July 3, 2021, based on criteria established in Internal Control – Integrated Framework (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 financial position of the Company as of July 3, 2021 and June 27, 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended July 3, 2021, 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 of July 3, 2021 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of June 30, 2019 due to the adoption of Financial Accounting Standards Board’s Accounting Standards Codification (ASC) Topic 842, Leases.

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for revenue as of July 1, 2018 due to the adoption of Financial Accounting Standards Board’s ASC Topic 606, Revenue from Contracts with Customers.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated

33

financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, 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 inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of accounting for income taxes

As discussed in Notes 1 and 10 to the consolidated financial statements, the Company recognized $109.4 million of deferred tax assets, net and income tax benefit of $20.2 million as of and for the year ended July 3, 2021. Additionally, as discussed in Note 10, the Company recognized income taxes receivable of $241.3 million as of July 3, 2021. The Company conducts business globally and consequently is subject to U.S. federal, state, and local income taxes as well as foreign income taxes in many of the jurisdictions in which it operates. The Company exercises judgment for the interpretation and application of such current tax regulations.

We identified the evaluation of accounting for income taxes as a critical audit matter. Evaluating the Company’s application of current tax regulations in various foreign jurisdictions and the impact of those regulations on foreign, U.S. federal, state and local income tax provisions required complex auditor judgment and the use of tax professionals with specialized skills.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s income tax process,

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including controls related to the application of current tax regulations in the various tax jurisdictions and impact on the Company’s tax provisions. We involved tax professionals with specialized skills and knowledge in various tax jurisdictions, who assisted in evaluating the Company’s analyses over the application of current tax regulations and the Company’s interpretation of tax laws and regulations in those jurisdictions.

​

/s/ KPMG LLP

​

​

We have served as the Company’s auditor since 2002.

Phoenix, Arizona

August 13, 2021

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​

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

​

​ ​ ​ ​ ​ ​ ​ ​

​ July 3, June 27,

​ ​ (Thousands, except share

​ ​ amounts)

ASSETS ​ ​ ​ ​ ​ ​ ​

Current assets: ​ ​ ​ ​ ​ ​ ​

LIABILITIES AND SHAREHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ ​

Current liabilities: ​ ​ ​ ​ ​ ​ ​

Short-term operating lease liabilities ​ 58,346 ​ 53,313 ​

Long-term operating lease liabilities ​ ​ 239,838 ​ ​ 253,719 ​

Commitments and contingencies (Note 14) ​ ​ ​ ​ ​ ​ ​

Shareholders’ equity: ​ ​ ​ ​ ​ ​ ​

Accumulated other comprehensive loss ​ (153,747) ​ (388,380) ​

Total liabilities and shareholders’ equity ​ $ 8,925,422 ​ $ 8,105,197 ​

​

See notes to consolidated financial statements.

​

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​

AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

​

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended

​ July 3, June 27, June 29,

​ ​ (Thousands, except per share amounts)

Goodwill and long-lived asset impairment expense ​ ​ — ​ ​ 144,092 ​ ​ 137,396

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Earnings (loss) per share: ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Shares used to compute earnings per share: ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash dividends paid per common share ​ $ 0.85 ​ $ 0.84 ​ $ 0.80

​

See notes to consolidated financial statements.

​

​

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AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended

​ ​ July 3, ​ June 27, ​ June 29,

​ ​ (Thousands)

Other comprehensive income (loss), net of tax: ​ ​ ​ ​ ​ ​ ​ ​ ​

​

See notes to consolidated financial statements.

​

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AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Years Ended July 3, 2021, June 27, 2020 and June 29, 2019

​

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​

​ ​ Common ​ Common ​ Additional ​ ​ ​ ​ Other ​ Total

​ ​ Stock- ​ Stock- ​ Paid-In ​ Retained ​ Comprehensive ​ Shareholders’

​ ​ Shares ​ Amount ​ Capital ​ Earnings ​ (Loss) Income ​ Equity

​ ​ (Thousands)

Translation adjustments and other ​ — ​ — ​ — ​ — ​ (63,621) ​ (63,621) ​

Cash dividends ($0.80 per share) ​ — ​ — ​ — ​ (87,158) ​ — ​ (87,158) ​

Translation adjustments and other ​ — ​ — ​ — ​ — ​ (56,682) ​ (56,682) ​

Cash dividends ($0.84 per share) ​ — ​ — ​ — ​ (83,975) ​ — ​ (83,975) ​

Translation adjustments and other ​ — ​ — ​ — ​ — ​ 152,678 ​ 152,678 ​

Cash dividends ($0.85 per share) ​ — ​ — ​ — ​ (84,309) ​ — ​ (84,309) ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​

See notes to consolidated financial statements.

​

​

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AVNET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

​

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended

​ July 3, June 27, June 29,

​ ​ (Thousands)

Cash flows from operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Non-cash and other reconciling items: ​ ​ ​ ​ ​ ​ ​ ​ ​

Amortization of operating lease assets ​ ​ 56,782 ​ ​ 60,656 ​ —

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash flows from financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​

Issuance of notes, net of discounts ​ 297,660 ​ — ​ —

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash flows from investing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​

Proceeds from sale of business ​ — ​ — ​ 123,473

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash and cash equivalents: ​ ​ ​ ​ ​ ​ ​ ​ ​

​

Additional cash flow information (Note 16)

​

See notes to consolidated financial statements.

​

​

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

​

1. Summary of significant accounting policies

Basis of presentation — The accompanying consolidated financial statements include the accounts of Avnet, Inc. and all of its majority-owned and controlled subsidiaries (the “Company” or “Avnet”). All intercompany and intracompany accounts and transactions have been eliminated.

Reclassifications — Certain prior period amounts have been reclassified or combined to conform to the current period presentation including 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 2021 contains 53 weeks compared to 52 weeks in fiscal 2020 and 2019. Unless otherwise noted, all references to “fiscal” or “year” shall mean the Company’s fiscal year.

Management estimates — The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, reported amounts of sales and expenses and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ materially from those estimates.

Cash and cash equivalents — The Company considers all highly liquid investments with an original maturity of three months or less including money market funds to be cash equivalents.

Receivables – On June 28, 2020, the Company adopted ASC 326, which revises the methodology for measuring credit losses on financial instruments including trade accounts receivable and the timing of when such losses are recorded. The Company adopted ASC 326 using a modified retrospective approach with a cumulative effect adjustment to the opening balance of retained earnings, which increased the allowance for credit losses by $17.2 million ($14.5 million, net of tax of $2.7 million). Increases in the allowance for credit losses relate to the required change from an incurred loss model to an expected loss model, and the related change in timing of loss recognition where an allowance for credit losses is now applied at the time the asset, or pool of assets, is recognized.

Receivables, predominately comprised of trade accounts and notes receivable, are reported at amortized cost, net of the allowance for credit losses in the consolidated balance sheets. The allowance for credit losses is a valuation account that is deducted from the receivables’ amortized cost basis to present the net amount expected to be collected. The Company estimates the allowance for credit losses using relevant available information about expected credit losses, including information about historical credit losses, past events, current conditions, and other factors which may affect the collectability of receivables. Adjustments to historical loss information are made for differences in current receivable- specific risk characteristics, such as changes in customer behavior, economic and industry changes, or other relevant factors. Expected credit losses are estimated on a pooled basis when similar risk characteristics exist.

Inventories — Inventories, comprised principally of finished goods, are stated at the lower of cost or net realizable value. Inventory cost includes the purchase price of finished goods and any freight cost incurred to receive the inventory into the Company’s distribution centers. 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, excess, and obsolescence allowances, or price protections provided by the Company’s suppliers. It records the lower of cost or net

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

​

realizable value write-down if any inventories have a cost in excess of such inventories’ estimated net realizable value. The Company does not incorporate any non-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, less accumulated depreciation. Cost includes the price paid to acquire or construct the assets, required installation costs, interest capitalized during the construction period, and any expenditure that substantially adds to the value or substantially extends the useful life of an existing asset. Additionally, the Company capitalizes qualified costs related to software obtained or developed for internal use as a component of property, plant, and equipment. Software obtained for internal use has generally been enterprise-level business operations, logistics, and finance software that is customized to meet the Company’s specific operational requirements. The Company begins depreciation and amortization (“depreciation”) for property, plant, and 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. The estimated useful lives for property, plant, and equipment are typically as follows: buildings (30 years); machinery, fixtures and 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).

The Company amortizes intangible assets acquired in business combinations or asset combinations using the straight-line method over the estimated economic useful lives of the intangible assets from the date of acquisition, which is generally between 5-10 years.

Long-lived asset impairment — Long-lived assets, including property, plant, equipment, intangible assets and operating lease assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. For purposes of recognition and measurement of an impairment loss, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities (“asset group”). An impairment is recognized when the estimated undiscounted cash flows expected to result from the use of the asset group and its eventual disposition is less than its carrying amount. An impairment is measured as the amount by which an asset group’s carrying value exceeds its estimated fair value. The Company considers a long-lived asset to be abandoned when it has ceased use of such abandoned asset and if the Company has no intent to use or repurpose the asset in the future. The Company continually evaluates the carrying value and the remaining economic useful life of long-lived assets and adjusts the carrying value and remaining useful life when appropriate.

Leases — On June 30, 2019, the Company adopted ASC 842 using the modified transition approach without restating the comparative period consolidated financial statements. ASC 842 requires lessees to recognize a right-of-use asset and a short-term and long-term lease liability for all leases. The adoption of ASC 842 did not have a material impact on the Company’s consolidated statements of operations or retained earnings. The Company elected the package of practical expedients permitted under the transition guidance that allowed, among other things, the historical lease classification to be carried forward without reassessment and the hindsight practical expedient. The Company elected to not separate lease and non-lease components for its real estate leases.

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

​

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 distribution center and office equipment, and are not material to the consolidated financial statements.

The Company determines if an arrangement contains a lease at inception based on whether it conveys the right to control the use of an identified asset in exchange for consideration. Lease right-of-use assets (“operating lease assets”) and associated liabilities (“operating lease liabilities”) are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Certain lease agreements may include one or more options to extend or terminate a lease. Lease terms are inclusive of these options if it is reasonably certain that the Company will exercise such options.

The Company’s leases generally do not provide a readily determinable implicit borrowing rate, as such, the discount rate used to calculate present value is based upon an estimate of the Company’s secured borrowing rate. The estimated secured borrowing rates used at the date of adoption for each lease vary in accordance with the lease term and the currency of the lease payments. Lease cost is recognized on a straight-line basis over the lease term and is included as a component of “Selling, general, and administrative expenses” in the consolidated statements of operations. Lease payments are primarily fixed; however, certain lease agreements contain variable payments, which are expensed as incurred and not included in the measurement of operating lease assets and liabilities.

Goodwill — Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair value assigned to the individual assets acquired and liabilities assumed. The Company does not amortize goodwill, but instead tests goodwill for impairment at least annually in the fourth quarter. If necessary, the Company records any impairment resulting from such goodwill impairment testing as a component of operating expenses included within goodwill and intangible asset impairment expenses in the consolidated statements of operations. Impairment testing is performed at the reporting unit level, which is defined as the same, or one level below, an operating segment. The Company will perform an interim impairment test between required annual tests if facts and circumstances indicate that it is more-likely-than-not that the fair value 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 is more-likely-than-not that a reporting unit’s fair value is not greater than its carrying value, the Company must perform a quantitative impairment test. The Company defines the fair value of a reporting unit as the price that would be received to sell the reporting unit as a whole in an orderly transaction between market participants as of the impairment test date. To determine the fair value of a reporting unit, the Company uses the income methodology of valuation, which includes the discounted cash flow method, and the market methodology of valuation, which considers values of comparable businesses to estimate 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 a market participant perspective (including forecasting of future operating results and the discount rates used in the discounted cash flow method of valuation) and in the selection of comparable businesses and related market multiples that are used in the market method of valuation. If the estimated fair value of a reporting unit exceeds the carrying value assigned to that reporting unit, goodwill is not impaired. If the reverse is true, then the Company measures a goodwill impairment loss based on such difference.

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

​

Foreign currency translation — The assets and liabilities of foreign operations are translated into U.S. Dollars at the exchange rates in effect at each balance sheet date, with the related translation adjustments reported as a separate component of shareholders’ equity and comprehensive income (loss). Results of operations are translated using the average exchange rates prevailing throughout the reporting period. Transactions denominated in currencies other than the functional currency of the Avnet subsidiaries that are party to the transactions are remeasured at exchange rates in effect at each balance sheet date or upon settlement of the transaction. Gains and losses from such remeasurements are recorded in the consolidated statements of operations as a component of “Other (expense) income, net.”

Income taxes — The Company follows the asset and liability method of accounting for income taxes. Deferred income tax assets and liabilities are recognized for the estimated future tax impact of differences between the consolidated financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized within income tax expense in the period in which the new rate is enacted. Based upon historical and estimated levels of future taxable income and analysis of other key factors, the Company may increase or decrease a valuation allowance against its deferred tax assets, as deemed necessary, to adjust such assets to their estimated net realizable value.

The Company establishes contingent liabilities for potentially unfavorable outcomes of positions taken on certain tax matters. These liabilities are based on management’s assessment of whether a tax benefit is more-likely-than-not to be sustained upon examination by the relevant tax authorities. Differences between the estimated and actual outcomes of these matters may result in future changes in estimates to such unrecognized tax benefits. Any such changes in estimates may impact the Company’s effective tax rate. In accordance with the Company’s accounting policies, accrued interest and penalties related to unrecognized tax benefits are recorded as a component of income tax expense.

Revenue recognition — On July 1, 2018, the Company adopted ASC 606 using the modified retrospective transition method applied to those contracts which were not completed as of July 1, 2018. ASC 606 supersedes previous revenue recognition guidance and requires the Company to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for such goods or services. The adoption of ASC 606 did not have a material impact on the Company’s consolidated financial statements as of the adoption date and as of and for fiscal 2019.

Revenue is recognized at the point at which control of the underlying products are transferred to the customer, which includes determining whether products are distinct and separate performance obligations. For electronic component and related product sales, transfer of control to the customer generally occurs upon product shipment, but it may occur at a later date depending on the agreed upon sales terms (such as delivery at the customer's designated location, or when products that are consigned at customer locations are consumed). In limited instances, where products are not in stock and delivery times are critical, product is purchased from the supplier and drop-shipped to the customer. The Company typically takes control of the products when shipped by the manufacturer and then recognizes revenue when control of the product transfers to the customer. The Company does not have material product warranty obligations, because the assurance type product warranties provided by the component manufacturers are passed through to the Company’s customers.

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AVNET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

​

For contracts related to the specialized manufacture of products for customers with no alternative use and for which the Company has an enforceable right to payment, including a reasonable profit margin, the Company recognizes revenue over time as control of the products transfer through the manufacturing process. The contract assets associated with such specialized manufacturing products are not material.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products. 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 the Company offers the right or has a history of accepting returns of product, historical experience is utilized to establish a liability for the estimate of expected returns and an asset for the right to recover the product expected to be returned. These adjustments are made in the same period as the underlying sales transactions.

The Company considers the following indicators amongst others when determining whether it is acting as a principal in the contract where revenue would be recorded on a gross basis: (i) the Company is primarily responsible for fulfilling the promise to provide the specified products or services; (ii) the Company has inventory risk before the specified products have been transferred to a customer or after transfer of control to the customer; and (iii) the Company has discretion in establishing the price for the specified products or services. If a transaction does not meet the Company’s indicators of being a principal in the transaction, then the Company is acting as an agent in the transaction and the associated revenues are recognized on a net basis.

Sales and other tax amounts collected from customers for remittance to governmental authorities are excluded from revenue. The Company has elected to treat shipping and handling of product as a fulfillment activity. The practical expedient not to disclose information about remaining performance obligations has also been elected as these contracts have an original duration of one year or less. The Company does not have any payment terms that exceed one year from the point it has satisfied the related performance obligations.

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 such supplier programs) as adjustments to product costs or selling, general and administrative expenses, depending upon the nature and contractual requirements related to the consideration received. Some of these supplier programs require management to make estimates and may extend over more than one reporting periods.

Comprehensive income (loss) — Comprehensive income (loss) represents net income for the year adjusted for certain changes 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 the associated operating expense in the consolidated statements of operations over the requisite service period (see Note 13). A stock-based payment is considered vested for accounting expense attribution purposes when the employee’s retention of the award is no longer contingent on providing continued service. Accordingly, the Company recognizes all stock-based compensation expense for awards granted to retirement eligible employees over the period from the grant date to the date retirement eligibility is achieved, if less than the stated requisite service period. The expense attribution

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

​

approach for retirement eligible employees does not affect the overall amount of compensation expense recognized, but instead accelerates the recognition of such expense.

Restructuring and exit activities —The determination of when the Company accrues for involuntary termination benefits under restructuring plans depends on whether the termination benefits are provided under an on-going benefit arrangement or under a one-time benefit arrangement. The Company accounts for on-going benefit arrangements in accordance with Accounting Standards Codification 712 (“ASC 712”) Nonretirement Postemployment Benefits and accounts for one-time benefit arrangements in accordance with ASC 420 Exit or Disposal Cost Obligations. If applicable, the Company records such costs into operating expense over the terminated employee’s future service period beyond any minimum retention period. Other costs associated with restructuring or exit activities may include contract termination costs and impairments of long-lived assets, which are expensed in accordance with ASC 420 Exit or Disposal Cost Obligations and ASC 360 Property, Plant and Equipment, respectively.

Business combinations —The Company accounts for business acquisitions using the acquisition method of accounting and records any identifiable definite-lived intangible assets separate from goodwill. Intangible assets are recorded at their fair value, based on estimates as of the acquisition date. Goodwill is recorded as the residual amount of the purchase price consideration less the fair value assigned to the individual identifiable assets acquired and liabilities assumed as of the acquisition date. Contingent consideration (which represents an obligation of the Company to make additional payments or equity interests to the former owner as part of the purchase price if specified future events occur or conditions are met) is accounted for at the fair value as of the acquisition date, either as a liability or as equity depending on the terms of the acquisition agreement.

Concentration of credit risk — Financial instruments that potentially subject the Company to a concentration of credit risk principally consist of cash and cash equivalents, marketable securities, and trade accounts receivable. The Company invests its excess cash primarily in overnight time deposits and institutional money market funds with highly rated financial institutions. To reduce credit risk, management performs ongoing credit evaluations of its customers’ financial condition and, in some instances, has obtained credit insurance coverage to reduce such risk. The Company maintains reserves for potential credit losses from customers, but has not historically experienced material losses related to individual customers or groups 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, representing the amount that would be received from the sale of an asset, or paid to transfer a liability, in an orderly transaction between market participants. ASC 820, Fair Value Measurements, requires inputs used in valuation techniques for measuring fair value on a recurring or non-recurring basis be assigned to a hierarchical level as follows: Level 1 are 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 not corroborated by market data. During fiscal 2021, 2020, and 2019, there were no transfers of assets measured at fair value between the three levels of the fair value hierarchy. The carrying amounts of the Company’s financial instruments, including cash equivalents, receivables, and accounts payable approximate their fair values at July 3, 2021, due to the short-term nature of these assets and liabilities. At July 3, 2021, and June 27, 2020, the Company had $3.8 million and $20.9 million, respectively, of cash equivalents that were measured at fair value based upon Level 1 criteria. See Note 3 for discussion of the fair 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

​

Derivative financial instruments — See Note 3 for discussion of the Company’s accounting policies related to derivative financial instruments.

Investments — Equity investments in businesses or start-up companies (“ventures”) are accounted for using the equity method if the investment provides the Company the ability to exercise significant influence, but not control, over the ventures. All other equity investments, which consist of investments for which the Company does not possess the ability to exercise significant influence over the ventures, are measured at fair value, using quoted market prices, or at cost minus impairment, if any, plus or minus changes resulting from observable price changes when fair value is not readily determinable. Investments in ventures are included in “Other assets” in the Company’s consolidated balance sheets. Changes in fair value, including impairments for investments in ventures, if any, are recorded in “Other (expense) income, net” in the Company’s consolidated statements of operations. As of July 3, 2021, the Company’s investments in ventures was not material to the consolidated balance sheets or consolidated statements of operations.

Accounts receivable securitization — The Company has an accounts receivable securitization program whereby the Company sells certain receivables and retains a subordinated interest and servicing rights to those receivables. The securitization program does not qualify for off-balance sheet sales accounting and is accounted for as a secured financing as discussed further in Note 8.

Recently adopted accounting pronouncements — In August 2018, the FASB issued ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU No. 2018-14”). The new guidance modifies the disclosure requirements for employers that sponsor 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 adoption of ASU No. 2018-14 in the fourth quarter of fiscal 2021 did not have a material impact on the Company’s consolidated financial statement disclosures.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other— Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force) (“ASU No. 2018-15”). ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop internal-use software. The adoption of ASU No. 2018-15 in the first quarter of fiscal 2021 did not have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU No. 2016-13”) and also issued subsequent amendments to the initial guidance: ASU No. 2018-19, ASU No. 2019-04, ASU No. 2019-05, and ASU No. 2019-11 (collectively, Topic 326). Topic 326 revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. On June 28, 2020, the Company adopted Topic 326 using a modified retrospective approach with a cumulative effect adjustment to the opening balance of retained earnings, which increased the allowance for credit losses by $17.2 million ($14.5 million, net of tax of $2.7 million). Increases in the allowance for credit losses relate to the required change from an incurred loss model to an expected loss model, and the related change in timing of loss recognition where an allowance for credit losses is now applied at the time the asset, or pool of assets, is recognized.

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2. Acquisitions

In the first quarter of fiscal 2021, the Company completed an asset acquisition. The impact of this asset acquisition was not material to the Company’s consolidated balance sheets or statements of operations.

​

​

3. 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) income, 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 July 3, 2021 and June 27, 2020. 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 exchange contracts not receiving hedge accounting treatment recorded in the Company’s consolidated balance sheets are as follows:

​

​ ​ ​ ​ ​ ​ ​ ​

​ ​ July 3, June 27,

​ ​ (Thousands) ​

Prepaid and other current assets ​ $ 15,722 ​ $ 18,989 ​

​

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

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ Years Ended

​ ​ July 3, June 27, June 29,

​ ​ ​ (Thousands)

Net derivative financial instrument (loss) gain ​ $ (21,605) ​ $ 12,739 ​ $ 84

​

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.

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4. Shareholders’ equity

Accumulated comprehensive loss

The following table includes the balances within accumulated other comprehensive loss:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ July 3, June 27, June 29,

​ ​ (Thousands)

​

Substantially all amounts reclassified out of accumulated comprehensive loss, net of tax, to operating expenses during fiscal 2021, 2020, and 2019 related to net periodic pension costs as discussed further in Note 11.

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 fiscal 2021, the Company did not repurchase any shares under this program. As of July 3, 2021, the Company had $469.0 million remaining under its share repurchase authorization.

Common stock dividend

During fiscal 2021, the Company paid dividends of $0.85 per common share and $84.3 million in total.

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5. Receivable

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

​ ​ ​ ​ ​ ​ ​

​ ​ July 3, ​ June 27,

​ ​ (Thousands)

Allowance for Credit Losses ​ ​ (88,160) ​ ​ (65,018)

The Company had the following activity in the allowance for credit losses during fiscal 2021:

​ ​ ​ ​

​ ​ July 3,

​ ​ (Thousands)

Effect of adoption of new credit loss accounting standard (Note 1) ​ ​ 17,205

Credit Loss Provisions ​ ​ 18,429

Credit Loss Recoveries ​ ​ (2,587)

Receivables Write offs ​ ​ (6,240)

Foreign Currency Effect and Other ​ ​ (3,665)

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​

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​

​

​

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6. Property, plant and equipment, net

Property, plant and equipment are recorded at cost, less accumulated depreciation, and consist of the following:

​

​ ​ ​ ​ ​ ​ ​ ​

​ ​ (Thousands)

Information technology hardware and software ​ 835,374 ​ 809,182 ​

Depreciable property, plant and equipment, gross ​ 1,341,186 ​ 1,292,572 ​

Depreciable property, plant and equipment, net ​ 341,301 ​ 354,570 ​

​

Depreciation expense, including accelerated depreciation related to property, plant, and equipment, was $90.9 million, $101.1 million and $97.2 million in fiscal 2021, 2020, and 2019, respectively. Interest expense capitalized during fiscal 2021, 2020, and 2019 was not material.

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​

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7. Goodwill, intangible assets, and impairments

The following table presents the change in goodwill balances by reportable segment for fiscal year 2021.

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ Electronic ​ ​ ​

​ ​ Components ​ Farnell ​ Total

​ ​ (Thousands)

The Company evaluates each quarter if facts and circumstances indicate that it is more-likely-than-not that the fair value of its reporting units is less than their carrying value, which would require the Company to perform an interim goodwill impairment test. Indicators the Company evaluates to determine whether an interim goodwill impairment test is necessary include, but are not limited to, (i) a sustained decrease in share price or market capitalization as of any fiscal quarter end, (ii) changes in macroeconomic or industry environments, (iii) the results of, and the amount of time passed since, the last goodwill impairment test, and (iv) the long-term expected financial performance of its reporting units.

The following table presents the Company’s acquired identifiable intangible assets:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Acquired ​ Accumulated ​ Net Book ​ Acquired ​ Accumulated ​ Net Book

​ Amount Amortization Value Amount(1) Amortization Value

​ ​ (Thousands)

(1) Acquired amount reduced by impairment of $17,473 from fiscal 2020.

Intangible asset amortization expense was $41.0 million, $81.1 million, and $83.7 million for fiscal 2021, 2020, and 2019, respectively. Intangible assets have a weighted average remaining useful life of less than 3 years as of July 3, 2021.

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

​ ​ ​ ​

Fiscal Year ​

Thereafter ​ 368

​

In fiscal 2021, the Company recorded $15.2 million of equity investment impairment expense classified within other (expense) income, net in the consolidated statements of operations.

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8. Debt

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

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ July 3, ​ June 27, ​ July 3, ​ June 27, ​

​ ​ Interest Rate ​ Carrying Balance

Short-term debt ​ ​ ​ ​ ​ ​ ​ $ 23,078 ​ $ 51 ​

​

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

In July 2020, the Company amended, and extended for one year, 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 $450.0 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 $717.4 million and $703.8 million at July 3, 2021, and June 27, 2020, respectively. The Securitization Program contains certain covenants relating to the quality of the receivables sold. There was $22.9 million and no borrowings outstanding under the Securitization Program as of July 3, 2021, and as of June 27, 2020, respectively. Interest on borrowings is calculated using a one-month LIBOR rate plus a spread of 1.05%. The facility fee on the unused balance of the facility is up to 0.40%.

In July 2021, the Company extended the maturity of the Securitization Program from July 30, 2021 to August 31, 2021.

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During the fourth quarter of fiscal 2021, the Company redeemed the $300.0 million of outstanding 3.75% Notes due in December 2021 at a make-whole redemption price of $305.0 million and the Company issued $300.0 million of 3.00% Notes due in May 2031.

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

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ July 3, ​ June 27, ​ July 3, ​ June 27, ​

​ ​ Interest Rate ​ Carrying Balance

Revolving credit facilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Credit Facility (due June 2023) ​ — ​ ​ 1.28 % ​ $ — ​ $ 230,000 ​

Public notes due: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Discount and debt issuance costs – unamortized ​ ​ ​ ​ ​ ​ ​ (9,856) ​ (6,700) ​

​

The Company has a five-year $1.25 billion Credit Facility with a syndicate of banks, which expires in June 2023. It consists of revolving credit facilities and up to $200.0 million in 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 July 3, 2021. At July 3, 2021, and June 27, 2020, there were $1.3 million and $1.6 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):

​

​ ​ ​ ​ ​

Discount and debt issuance costs – unamortized ​ (9,856) ​

​

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. At June 27, 2020, the carrying value and fair value of the Company’s total debt was $1.42 billion and $1.52 billion, respectively. Fair value for the public notes was estimated based upon quoted market prices and for other forms

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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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9. Accrued expenses and other

Accrued expenses and other consist of the following:

​