AVNET INC filed 10-K on Aug 15, 2019

AVNET INC files 10-K in a filing on Aug 15.

Farnell Avnet’s Farnell operating group supports primarily lower-volume customers that need electronic components quickly to develop, prototype and test their products. It distributes a comprehensive portfolio of kits, tools, electronic components and industrial automation components, as well as test and measurement products to both engineers and entrepreneurs. Farnell brings the latest products, services and development trends all together in element14, an industry-leading online community where engineers collaborate to solve one another’s design challenges. In element14, members get consolidated information on new technologies as well as access to experts and product specifications. Members can see what other engineers are working on, learn from online training and get the help they need to optimize their own designs. Major Products One of Avnet’s competitive strengths is the breadth and quality of the suppliers whose products it distributes. Texas Instruments products accounted for approximately 10% of the Company’s sales during fiscal 2019, and 11% of the Company’s sales during fiscal 2018 and 2017, and was the only supplier from which sales of its products exceeded 10% of consolidated sales. Listed in the table below are the major product categories and the Company’s approximate sales of each during the past three fiscal years. Certain prior year amounts have been reclassified between major product categories to conform to the fiscal 2019 classification. Other consists primarily of test and measurement as well as maintenance, repair and operations (MRO) products. Competition & Markets The electronic components industry continues to be extremely competitive. The Company’s major competitors include: Arrow Electronics, Inc., Future Electronics, World Peace Group, Mouser Electronics and Digi-Key Electronics. There are also certain smaller, specialized competitors who generally focus on narrower regions, markets, products or particular sectors. As a result of these factors, Avnet must remain competitive in its pricing of products. A key competitive factor in the electronic component distribution industry is the need to carry a sufficient amount and selection of inventory to meet customers’ rapid delivery requirements. To minimize its exposure related to inventory on hand, the majority of the Company’s products are purchased pursuant to non-exclusive distributor agreements, which typically provide certain protections for product obsolescence and price erosion. These agreements are generally cancelable upon 30 to 180 days’ notice and, in most cases, provide for or require inventory return privileges upon cancellation. In fiscal 2017, certain suppliers terminated their distribution agreements with the Company, which did not result in any significant inventory write-downs as a result of such terminations. In addition, the Company enhances its competitive position by offering a variety of value-added services, which are tailored to individual customer specifications and business needs, such as point of use replenishment, testing, assembly, supply chain management and materials management.

One of Avnet’s competitive strengths is the breadth and quality of the suppliers whose products it distributes. Texas Instruments products accounted for approximately 10% of the Company’s sales during fiscal 2019, and 11% of the Company’s sales during fiscal 2018 and 2017, and was the only supplier from which sales of its products exceeded 10% of consolidated sales. Listed in the table below are the major product categories and the Company’s approximate sales of each during the past three fiscal years. Certain prior year amounts have been reclassified between major product categories to conform to the fiscal 2019 classification. Other consists primarily of test and measurement as well as maintenance, repair and operations (MRO) products.

consumption models. Not only does the Company compete with other global distributors, it also competes for customers with regional distributors and some of the Company’s own suppliers that maintain direct sales efforts. In addition, as the Company expands its offerings and geographies, the Company may encounter increased competition from current or new competitors. The Company’s failure to maintain and enhance its competitive position could adversely affect its business and prospects. Furthermore, the Company’s efforts to compete in the marketplace could cause deterioration of gross profit margins and, thus, overall profitability. The size of the Company’s competitors vary across market sectors, as do the resources the Company has allocated to the sectors and geographic areas in which it does business. Therefore, some competitors may have greater resources or a more extensive customer or supplier base than the Company has in one or more of its market sectors and geographic areas, which may result in the Company not being able to effectively compete in certain markets which could impact the Company’s profitability and prospects. Changes in customer needs and consumption models could significantly affect the Company’s operating results. Changes in customer needs and consumption models may cause a decline in the Company’s billings, which would have a negative impact on the Company’s financial results. While the Company attempts to identify changes in market conditions as soon as possible, the dynamics of these industries make prediction of, and timely reaction to such changes difficult. Future downturns in the semiconductor and embedded solutions industries could adversely affect the Company’s operating results and negatively impact the Company’s ability to maintain its current profitability levels. In addition, the semiconductor industry has historically experienced periodic fluctuations in product supply and demand, often associated with changes in economic conditions, technology and manufacturing capacity. During fiscal years 2019, 2018, and 2017, sales of semiconductors represented approximately 77%, 78%, and 78% of the Company’s consolidated sales, respectively, and the Company’s sales closely follow the strength or weakness of the semiconductor industry. Due to the Company’s increased online sales, system interruptions and delays that make its websites and services unavailable or slow to respond may reduce the attractiveness of its products and services to its customers. If the Company is unable to continually improve the efficiency of its systems, it could cause systems interruptions or delays and adversely affect the Company’s operating results. Failure to maintain or develop new relationships with key suppliers could adversely affect the Company’s sales. One of the Company’s competitive strengths is the breadth and quality of the suppliers whose products the Company distributes. However, billings of products and services from one of the Company’s suppliers, Texas Instruments (“TI”), accounted for approximately 10% of the Company’s consolidated billings in fiscal 2019. Management expects TI’s products and services to continue to account for roughly a similar percentage of the Company’s consolidated billings in fiscal 2020. The Company’s contracts with its suppliers vary in duration and are generally terminable by either party at will upon notice. To the extent any primary suppliers terminate or significantly reduce their volume of business with the Company in the future, because of a product shortage, an unwillingness to do business with the Company, changes in strategy or otherwise, the Company’s business and relationships with its customers could be negatively affected because its customers depend on the Company’s distribution of technology hardware and software from the industry’s leading suppliers. In addition, suppliers’ strategy shifts or performance issues may negatively affect the Company’s financial results. The competitive landscape has also experienced a consolidation among suppliers, which could negatively impact the Company’s profitability and customer base. Further, to the extent that any of the Company’s key suppliers modify the terms of their contracts including, without limitation, the terms regarding price protection, rights of return, rebates or other terms that protect or enhance the Company’s gross margins, it could negatively affect the Company’s results of operations, financial condition or liquidity.

Changes in customer needs and consumption models may cause a decline in the Company’s billings, which would have a negative impact on the Company’s financial results. While the Company attempts to identify changes in market conditions as soon as possible, the dynamics of these industries make prediction of, and timely reaction to such changes difficult. Future downturns in the semiconductor and embedded solutions industries could adversely affect the Company’s operating results and negatively impact the Company’s ability to maintain its current profitability levels. In addition, the semiconductor industry has historically experienced periodic fluctuations in product supply and demand, often associated with changes in economic conditions, technology and manufacturing capacity. During fiscal years 2019, 2018, and 2017, sales of semiconductors represented approximately 77%, 78%, and 78% of the Company’s consolidated sales, respectively, and the Company’s sales closely follow the strength or weakness of the semiconductor industry.

One of the Company’s competitive strengths is the breadth and quality of the suppliers whose products the Company distributes. However, billings of products and services from one of the Company’s suppliers, Texas Instruments (“TI”), accounted for approximately 10% of the Company’s consolidated billings in fiscal 2019. Management expects TI’s products and services to continue to account for roughly a similar percentage of the Company’s consolidated billings in fiscal 2020. The Company’s contracts with its suppliers vary in duration and are generally terminable by either party at will upon notice. To the extent any primary suppliers terminate or significantly reduce their volume of business with the Company in the future, because of a product shortage, an unwillingness to do business with the Company, changes in strategy or otherwise, the Company’s business and relationships with its customers could be negatively affected because its customers depend on the Company’s distribution of technology hardware and software from the industry’s leading suppliers. In addition, suppliers’ strategy shifts or performance issues may negatively affect the Company’s financial results. The competitive landscape has also experienced a consolidation among suppliers, which could negatively impact the Company’s profitability and customer base. Further, to the extent that any of the Company’s key suppliers modify the terms of their contracts including, without limitation, the terms regarding price protection, rights of return, rebates or other terms that protect or enhance the Company’s gross margins, it could negatively affect the Company’s results of operations, financial condition or liquidity.

Results of Operations Executive Summary Sales for fiscal 2019 were $19.52 billion, an increase of 2.5% from fiscal 2018 sales of $19.04 billion. Sales in constant currency increased by 4.4% year over year. EC sales in fiscal 2019 of $18.06 billion increased $516.9 million or 2.9% over the prior year and sales in constant currency increased 4.8% year over year. This increase in sales was primarily related to growth in the Americas, EMEA and Asia regions of 3.1%, 4.7% and 5.7%, respectively. Farnell sales of $1.46 billion decreased 2.3% and sales in constant currency remained flat year over year. Gross profit margin of 12.7% decreased 54 basis points from fiscal 2018. The year-over-year decline was primarily due to industry specific and macroeconomic conditions as both operating groups experienced gross margin declines in the EMEA and Asia regions, partially offset by increases in the Americas. Operating income was $365.9 million in fiscal 2019, representing a 74.9% increase compared with fiscal 2018 operating income of $209.2 million. Operating income margin was 1.9% in fiscal 2019 as compared with 1.1% in fiscal 2018. Both years included goodwill impairment expense, amortization of acquired intangibles, and restructuring, integration and other expenses. Excluding these amounts from both years, adjusted operating income was $695.7 million, or 3.6% of sales, in fiscal 2019 representing a $68.0 million and 27 basis point increase as compared with $627.7 million, or 3.3% of sales, in fiscal 2018. The improvement in operating income margin was primarily the result of effective cost management, including the impact of cost reduction actions taken during fiscal 2018 for which the full benefit was realized during fiscal 2019. 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.

Sales for fiscal 2019 were $19.52 billion, an increase of 2.5% from fiscal 2018 sales of $19.04 billion. Sales in constant currency increased by 4.4% year over year. EC sales in fiscal 2019 of $18.06 billion increased $516.9 million or 2.9% over the prior year and sales in constant currency increased 4.8% year over year. This increase in sales was primarily related to growth in the Americas, EMEA and Asia regions of 3.1%, 4.7% and 5.7%, respectively. Farnell sales of $1.46 billion decreased 2.3% and sales in constant currency remained flat year over year.

Gross profit margin of 12.7% decreased 54 basis points from fiscal 2018. The year-over-year decline was primarily due to industry specific and macroeconomic conditions as both operating groups experienced gross margin declines in the EMEA and Asia regions, partially offset by increases in the Americas.

Operating income was $365.9 million in fiscal 2019, representing a 74.9% increase compared with fiscal 2018 operating income of $209.2 million. Operating income margin was 1.9% in fiscal 2019 as compared with 1.1% in fiscal 2018. Both years included goodwill impairment expense, amortization of acquired intangibles, and restructuring, integration and other expenses. Excluding these amounts from both years, adjusted operating income was $695.7 million, or 3.6% of sales, in fiscal 2019 representing a $68.0 million and 27 basis point increase as compared with $627.7 million, or 3.3% of sales, in fiscal 2018. The improvement in operating income margin was primarily the result of effective cost management, including the impact of cost reduction actions taken during fiscal 2018 for which the full benefit was realized during fiscal 2019.

Fiscal 2019 Comparison to Fiscal 2018 The table below provides a comparison of reported and organic sales for fiscal 2019 to fiscal 2018 sales to allow readers to better assess and understand the Company’s sales performance by operating group on a more comparable basis. Avnet’s sales for fiscal 2019 were $19.52 billion, an increase of $481.7 million, or 2.5%, from fiscal 2018 sales of $19.04 billion. Sales in constant currency increased 4.4% year over year with both operating groups in all three regions contributing to the increase. EC sales in fiscal 2019 were $18.06 billion, representing a 2.9% increase over fiscal 2018 sales. Sales in constant currency increased 4.8% year over year and all three regions contributed to sales growth of 3.1%, 4.7%, and 5.7% in the Americas, EMEA and Asia, respectively. From a sales by product perspective, sales of IP&E products grew faster than semiconductors. Farnell sales in fiscal 2019 were $1.46 billion, a decrease of 2.3% over fiscal 2018 sales. Excluding the impact of foreign currency translation, Farnell sales in constant currency in fiscal 2019 were flat compared to fiscal 2018. Increases in the first half of fiscal 2019 were offset by declines in the second half of fiscal 2019 as uncertainties related to industry specific and macroeconomic conditions including the United Kingdom’s exit from the European Union (Brexit) impacted demand. Sales in the United Kingdom represented approximately 24% and 25% of Farnell’s sales in fiscal 2019 and 2018, respectively.

Avnet’s sales for fiscal 2019 were $19.52 billion, an increase of $481.7 million, or 2.5%, from fiscal 2018 sales of $19.04 billion. Sales in constant currency increased 4.4% year over year with both operating groups in all three regions contributing to the increase.

EC sales in fiscal 2019 were $18.06 billion, representing a 2.9% increase over fiscal 2018 sales. Sales in constant currency increased 4.8% year over year and all three regions contributed to sales growth of 3.1%, 4.7%, and 5.7% in the Americas, EMEA and Asia, respectively. From a sales by product perspective, sales of IP&E products grew faster than semiconductors.

Farnell sales in fiscal 2019 were $1.46 billion, a decrease of 2.3% over fiscal 2018 sales. Excluding the impact of foreign currency translation, Farnell sales in constant currency in fiscal 2019 were flat compared to fiscal 2018. Increases in the first half of fiscal 2019 were offset by declines in the second half of fiscal 2019 as uncertainties related to industry specific and macroeconomic conditions including the United Kingdom’s exit from the European Union (Brexit) impacted demand. Sales in the United Kingdom represented approximately 24% and 25% of Farnell’s sales in fiscal 2019 and 2018, respectively.

Sales for fiscal 2018 were $19.04 billion, an increase of 9.2%, or $1.60 billion, from fiscal 2017 sales of $17.44 billion. The sales growth was primarily driven by the acquisition of Farnell and the impact of changes in foreign currency exchange rates as approximately $575 million of the increase in sales was attributable to the translation impact of changes in foreign currency exchange rates, primarily in EMEA. These increases in sales were partially offset by the impact of supplier channel and program changes, which occurred during fiscal 2017 into the first half of fiscal 2018. Organic sales in constant currency increased 3.6% year over year with both operating groups contributing to the increase.

Gross profit in fiscal 2019 was $2.49 billion, a decrease of $41.1 million, or 1.6%, compared to fiscal 2018 and increased 1.0% in constant currency. Gross profit margin of 12.7% in fiscal 2019 decreased 54 basis points from the prior year primarily due to industry specific and macroeconomic conditions as well as a higher mix of sales from Asia in EC. EC sales in the Asia region represented 41% of sales in fiscal 2019 versus 40% in fiscal 2018.

Gross profit in fiscal 2018 was $2.53 billion, an increase of $157.7 million, or 6.7%, compared to fiscal 2017. This increase was due to the acquisition of Farnell and the impact of changes in foreign currency exchange rates, partially offset by declines from supplier channel and program changes. Gross profit margin of 13.3% in fiscal 2018 decreased 31 basis points from the prior year primarily due to supplier channel and program changes and due to a higher mix of sales coming from the lower gross profit margin EC Asia region, partially offset by fiscal 2018 including a full fiscal year of Farnell sales.

percentage of sales were 9.6% and as a percentage of gross profit were 75.4%, as compared with 10.5% and 78.8%, respectively, in fiscal 2018. The year-over-year decrease in SG&A expenses was primarily due to the reduction of expenses resulting from management’s cost optimization and restructuring programs, the impact of changes in foreign currency translation year over year and due to lower Corporate costs, partially offset by an increase as a result of sales volume growth. SG&A expenses were $1.99 billion in fiscal 2018, an increase of $203.1 million, or 11.4%, compared to fiscal 2017. The year-over-year increase in SG&A expenses was primarily due to the acquisition of Farnell in October of fiscal 2017 and the impact of changes in foreign currency exchange rates, partially offset by restructuring and integration actions taken in fiscal 2018. In fiscal 2018, SG&A expenses as a percentage of sales were 10.5% and as a percentage of gross profit were 78.8%, as compared with 10.3% and 75.5%, respectively, in fiscal 2017. The increase in SG&A expenses as a percentage of gross profit is due primarily to the decline in gross profit margin year over year. Goodwill Impairment Expenses During the fourth quarter of fiscal 2019, the Company recorded $137.4 million of goodwill impairment expense in the EC operating group related to reporting businesses in the Americas and Asia. In Fiscal 2018, the Company recorded $181.4 million of goodwill impairment expense in the EC operating group related to a business in the Americas. See Note 7, “Goodwill and intangible assets” to the Company’s consolidated financial statements included in Item 15 of this Annual Report on Form 10-K for additional information related to goodwill impairment expenses. Restructuring, Integration and Other Expenses As a result of management’s focus on improving operating efficiencies and further integrating the acquisition of Farnell, the Company has incurred certain restructuring costs. These costs also related to the continued transformation of the Company’s information technology, distribution center footprint and business operations including the re-prioritization of its information technology initiatives and resources. In addition, the Company incurred integration, accelerated depreciation and other costs. Integration costs are primarily related to the integration of acquired businesses including Farnell, the integration of certain regional and global businesses including Avnet after the sale of the TS business, and incremental costs incurred as part of the consolidation, relocation, sale and closure of warehouse and office facilities. Accelerated depreciation relates to the incremental depreciation expense incurred related to the shortening of the estimated useful life for certain information technology assets. Other costs consist primarily of any other miscellaneous costs that relate to restructuring, integration and other expenses including acquisition related costs and a gain on the sale of real estate. The Company recorded $95.5 million for restructuring costs in fiscal 2019, and expects to realize approximately $50.0 million in incremental annualized operating costs savings as a result of such restructuring actions. Restructuring expenses consisted of $35.8 million for severance, $5.0 million for facility exit costs, and $54.7 million for non-cash asset impairments expense primarily related to information technology software. The Company also incurred integration costs of $13.9 million, accelerated depreciation of $11.3 million, and other costs of $3.9 million. These costs were partially offset by a gain on the sale of real estate of $15.5 million and a reversal of $1.0 million for changes in estimates for costs associated with prior year restructuring actions. The after tax impact of restructuring, integration and other expenses were $81.4 million and $0.74 per share on a diluted basis. During fiscal 2018, the Company took certain actions in an effort to reduce future operating expenses in response to current market and Company specific conditions. These actions included restructuring and integration actions related to the acquisition of Farnell and the integration of certain regional and global businesses after the TS business divestiture.

percentage of sales were 9.6% and as a percentage of gross profit were 75.4%, as compared with 10.5% and 78.8%, respectively, in fiscal 2018. The year-over-year decrease in SG&A expenses was primarily due to the reduction of expenses resulting from management’s cost optimization and restructuring programs, the impact of changes in foreign currency translation year over year and due to lower Corporate costs, partially offset by an increase as a result of sales volume growth.

SG&A expenses were $1.99 billion in fiscal 2018, an increase of $203.1 million, or 11.4%, compared to fiscal 2017. The year-over-year increase in SG&A expenses was primarily due to the acquisition of Farnell in October of fiscal 2017 and the impact of changes in foreign currency exchange rates, partially offset by restructuring and integration actions taken in fiscal 2018. In fiscal 2018, SG&A expenses as a percentage of sales were 10.5% and as a percentage of gross profit were 78.8%, as compared with 10.3% and 75.5%, respectively, in fiscal 2017. The increase in SG&A expenses as a percentage of gross profit is due primarily to the decline in gross profit margin year over year.

Additionally, the Company incurred accelerated depreciation related to the incremental depreciation expense incurred related to the shortening of the estimated useful life of the Company’s ERP system in the Americas compared to depreciation expense based on the original useful life of such ERP system, and other costs related to incremental amounts incurred by the Company as a result of the Act and other restructuring and integration related activities. During fiscal 2018, the Company recorded restructuring, integration and other expenses of $145.1 million. The Company recorded $60.6 million for restructuring costs in fiscal 2018, and expects to realize approximately $84.3 million in incremental annualized operating costs savings as a result of such restructuring actions. Restructuring expenses consisted of $56.8 million for severance, $1.0 million for facility exit costs, $2.6 million for asset impairments, and $0.2 million for other restructuring expenses. Integration, accelerated depreciation and other costs were $20.9 million, $52.9 million and $12.0 million, respectively. The Company also recorded a net benefit of $1.3 million for changes in estimates for restructuring liabilities established in prior fiscal years. The after tax impact of restructuring, integration and other expenses were $103.7 million and $0.86 per share on a diluted basis. During fiscal 2017, the Company recorded restructuring, integration and other expenses of $137.4 million. The Company recorded $41.7 million for restructuring costs, and expects to realize approximately $45.0 million in incremental annualized operating costs savings as a result of such restructuring actions. Restructuring expenses consisted of $36.1 million for severance, $0.6 million for facility exit costs, $3.5 million for asset impairments, and $1.5 million for other restructuring expenses. Integration, accelerated depreciation and other costs including acquisition/divestiture costs were $37.9 million, $16.0 million and $44.9 million, respectively. The Company also recorded a net benefit of $3.1 million for changes in estimates for restructuring liabilities established in prior fiscal years. The after tax impact of restructuring, integration and other expenses were $92.0 million and $0.73 per share on a diluted basis. See Note 18, “Restructuring expenses” to the Company’s consolidated financial statements included in Item 15 of this Annual Report on Form 10-K for additional information related to restructuring expenses. Operating Income During fiscal 2019, the Company had operating income of $365.9 million, representing a 74.9% increase as compared with fiscal 2018 operating income of $209.2 million. The year over year increase in operating income was primarily driven by the reduction in operating expenses and from the increase in sales as compared to fiscal 2018, partially offset by the decline in gross profit margin. Operating income margin was 1.9% in fiscal 2019 compared to 1.1% in fiscal 2018. Both years included goodwill impairment expense, amortization of acquired intangibles, and restructuring, integration and other expenses. Excluding these amounts, adjusted operating income was $695.7 million, or 3.6% of sales, in fiscal 2019 as compared with $627.7 million, or 3.3% of sales, in fiscal 2018. The improvement in operating income margin was primarily the result of effective cost management, including the impact of cost reduction actions taken during fiscal 2018 for which the full benefit was realized during fiscal 2019. During fiscal 2018, the Company had operating income of $209.2 million, representing a 52.8% decrease as compared with fiscal 2017 operating income of $443.7 million. The year over year decrease in operating income was primarily driven by goodwill impairment expense, partially offset by improvements at Farnell. Operating income margin was 1.1% in fiscal 2018 compared to 2.5% in fiscal 2017. Both years included restructuring, integration and other expenses and the amortization of acquired intangible assets. Fiscal 2018 also includes goodwill impairment expense. Excluding these amounts from both years, adjusted operating income was $627.7 million, or 3.3% of sales, in fiscal 2018 as compared with $635.6 million, or 3.6% of sales, in fiscal 2017.

During fiscal 2019, the Company had operating income of $365.9 million, representing a 74.9% increase as compared with fiscal 2018 operating income of $209.2 million. The year over year increase in operating income was primarily driven by the reduction in operating expenses and from the increase in sales as compared to fiscal 2018, partially offset by the decline in gross profit margin. Operating income margin was 1.9% in fiscal 2019 compared to 1.1% in fiscal 2018. Both years included goodwill impairment expense, amortization of acquired intangibles, and restructuring, integration and other expenses. Excluding these amounts, adjusted operating income was $695.7 million, or 3.6% of sales, in fiscal 2019 as compared with $627.7 million, or 3.3% of sales, in fiscal 2018. The improvement in operating income margin was primarily the result of effective cost management, including the impact of cost reduction actions taken during fiscal 2018 for which the full benefit was realized during fiscal 2019.

During fiscal 2018, the Company had operating income of $209.2 million, representing a 52.8% decrease as compared with fiscal 2017 operating income of $443.7 million. The year over year decrease in operating income was primarily driven by goodwill impairment expense, partially offset by improvements at Farnell. Operating income margin was 1.1% in fiscal 2018 compared to 2.5% in fiscal 2017. Both years included restructuring, integration and other expenses and the amortization of acquired intangible assets. Fiscal 2018 also includes goodwill impairment expense. Excluding these amounts from both years, adjusted operating income was $627.7 million, or 3.3% of sales, in fiscal 2018 as compared with $635.6 million, or 3.6% of sales, in fiscal 2017.

Interest and Other Financing Expenses, Net Interest and other financing expenses for fiscal 2019 was $134.9 million, an increase of $42.1 million, or 45.4%, compared with interest and other financing expenses of $92.7 million in fiscal 2018. The increase in interest and other financing expenses in fiscal 2019 compared to fiscal 2018 was primarily related to increased expenses in foreign regions to finance working capital needs including increases in average debt outstanding and from lower interest income from investments in cash equivalents between the fiscal years. Interest and other financing expenses for fiscal 2018 was $92.7 million, a decrease of $6.8 million, or 6.9%, compared with fiscal 2017. The decrease in interest and other financing expenses in fiscal 2018 compared to fiscal 2017 was primarily related to the impact of the Company’s repayment of its outstanding term loans and borrowings on its revolving credit facilities in the second half of fiscal 2017, which were used to help fund the Farnell acquisition. Other Income (Expense), net In fiscal 2019, the Company had $11.2 million of other income as compared with $28.6 million of other income in fiscal 2018. In fiscal 2019, the Company had other income related to the non-service components of the Company’s periodic pension costs of $24.1 million, partially offset by foreign currency losses of $11.8 million and other miscellaneous expense of $1.1 million. In fiscal 2018, the Company had other income related to the non-service components of the Company’s periodic pension costs of $21.3 million and $7.3 million of foreign currency gains primarily related to the strengthening of both the Euro and British Pound compared to the U.S. Dollar during fiscal 2018 compared to fiscal 2017. In fiscal 2017, the Company had $33.7 million of other expenses related to the non-service components periodic pension expenses, expenses related to foreign currency hedging and other costs associated with the Company’s acquisition of Farnell. Income Tax Expense Avnet’s effective tax rate on its income from continuing operations before income taxes was 25.7% in fiscal 2019 as compared with an effective tax rate of 198.5% in fiscal 2018. The fiscal 2019 effective tax rate is lower than the fiscal 2018 effective tax rate due primarily to the reduction in (i) the transition tax expense recorded under the requirements of the Act, and (ii) goodwill impairment. Avnet’s effective tax rate on its income from continuing operations before income taxes was 198.5% in fiscal 2018 as compared with an effective tax rate of 15.2% in fiscal 2017. The fiscal 2018 effective tax rate is higher than the fiscal 2017 effective tax rate due primarily to (i) the provisional transition tax expense recorded under the requirements of the Act in fiscal 2018 and (ii) the goodwill impairment in fiscal 2018, which was not tax deductible, partially offset primarily by the mix of income in lower tax jurisdictions. Avnet’s effective tax rate is primarily a function of the tax rates in the numerous jurisdictions in which it does business applied to the mix of income before taxes. The effective tax rate may vary year over year as a result of changes in tax requirements in these jurisdictions, management’s evaluation of its ability to recognize its net deferred tax assets and the establishment of liabilities for unfavorable outcomes of tax positions taken on certain matters that are common to multinational enterprises and the actual outcome of those matters. See Note 10, “Income taxes” to the Company’s consolidated financial statements included in Item 15 of this Annual Report on Form 10-K for additional information related to income taxes.

Interest and other financing expenses for fiscal 2019 was $134.9 million, an increase of $42.1 million, or 45.4%, compared with interest and other financing expenses of $92.7 million in fiscal 2018. The increase in interest and other financing expenses in fiscal 2019 compared to fiscal 2018 was primarily related to increased expenses in foreign regions to finance working capital needs including increases in average debt outstanding and from lower interest income from investments in cash equivalents between the fiscal years.

Interest and other financing expenses for fiscal 2018 was $92.7 million, a decrease of $6.8 million, or 6.9%, compared with fiscal 2017. The decrease in interest and other financing expenses in fiscal 2018 compared to fiscal 2017 was primarily related to the impact of the Company’s repayment of its outstanding term loans and borrowings on its revolving credit facilities in the second half of fiscal 2017, which were used to help fund the Farnell acquisition.

Avnet’s effective tax rate on its income from continuing operations before income taxes was 25.7% in fiscal 2019 as compared with an effective tax rate of 198.5% in fiscal 2018. The fiscal 2019 effective tax rate is lower than the fiscal 2018 effective tax rate due primarily to the reduction in (i) the transition tax expense recorded under the requirements of the Act, and (ii) goodwill impairment.

Avnet’s effective tax rate on its income from continuing operations before income taxes was 198.5% in fiscal 2018 as compared with an effective tax rate of 15.2% in fiscal 2017. The fiscal 2018 effective tax rate is higher than the fiscal 2017 effective tax rate due primarily to (i) the provisional transition tax expense recorded under the requirements of the Act in fiscal 2018 and (ii) the goodwill impairment in fiscal 2018, which was not tax deductible, partially offset primarily by the mix of income in lower tax jurisdictions.

Cash Flows from Financing Activities During fiscal 2019, the Company received net proceeds of $122.3 million under the accounts receivable securitization program and repaid $61.7 million under the Credit Facility. During fiscal 2019, the Company paid dividends on common stock of $87.2 million and repurchased $568.7 million of common stock. Additionally, included in other, net is approximately $20.2 million of cash received from the exercises of stock options. During fiscal 2018, the Company made net repayments of $37.0 million under the Company’s accounts receivable securitization program and $98.0 million from borrowings of various bank credit facilities. During fiscal 2018, the Company received net proceeds of $8.9 million under the Company’s Credit Facility. In addition, during fiscal 2018, the Company paid dividends on common stock of $88.3 million and repurchased $323.5 million of common stock under the Company’s share repurchase program. During fiscal 2017, the Company received net proceeds of $296.4 million as a result of the issuance of $300.0 million of 3.75% Notes due December 2021. Additionally, the Company received net proceeds of $530.8 million under a term loan and $27.9 million from borrowings of bank credit facilities and other debt. During fiscal 2017, the Company repaid $530.8 million of notes and acquired debt, $511.4 million from borrowings under a term loan, $50.0 million under the Company’s Credit Facility and made net repayments of $588.0 million under the Company’s accounts receivable securitization program. In addition, during fiscal 2017, the Company used $88.7 million and $275.9 million of cash to pay dividends on common stock and to repurchase common stock under the Company’s share repurchase program, respectively. Cash Flows from Investing Activities During fiscal 2019, the Company used $122.7 million for capital expenditures primarily related to warehouse and facilities, computer hardware and software purchases and information technology system development costs. The Company used $56.4 million of cash for acquisitions, which is net of the cash acquired. Additionally, included in other, net is $41.7 million of cash received from the sale of real estate in EMEA and Farnell in fiscal 2019. During fiscal 2019, the Company received $123.5 million of cash from investing activities of discontinued operations from the sale of the TS business. During fiscal 2018, the Company used $155.9 million for capital expenditures primarily related to information system development costs, computer hardware and software purchases and facilities costs. Additionally, the Company used $15.3 million of cash for acquisitions, which is net of the cash acquired. During fiscal 2018, the Company realized $236.2 million of cash from investing activities of discontinued operations, substantially all of which related to the sale of the marketable securities obtained as a component of the proceeds from the sale of the TS business. During fiscal 2017, the Company used $802.7 million of cash for acquisitions, which is net of cash acquired, and used $120.4 million for capital expenditures primarily related to information system development costs, computer hardware and software purchases and facilities costs. During fiscal 2017, with the sale of the TS business, the Company received $2.24 billion of cash proceeds from the sale of TS, net of cash divested, which is reflected as an investing activity from discontinued operations.

During fiscal 2017, the Company received net proceeds of $296.4 million as a result of the issuance of $300.0 million of 3.75% Notes due December 2021. Additionally, the Company received net proceeds of $530.8 million under a term loan and $27.9 million from borrowings of bank credit facilities and other debt. During fiscal 2017, the Company repaid $530.8 million of notes and acquired debt, $511.4 million from borrowings under a term loan, $50.0 million under the Company’s Credit Facility and made net repayments of $588.0 million under the Company’s accounts receivable securitization program. In addition, during fiscal 2017, the Company used $88.7 million and $275.9 million of cash to pay dividends on common stock and to repurchase common stock under the Company’s share repurchase program, respectively.

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. The following table sets forth the scheduled maturities of the Company’s debt outstanding at June 29, 2019 (dollars in millions): The following table sets forth the carrying value and fair value of the Company’s debt and the average interest rates at June 29, 2019, and June 30, 2018 (dollars in millions): Many of the Company’s subsidiaries purchase and sell products in currencies other than their functional currencies. This subjects the Company to the risks associated with fluctuations in foreign currency exchange rates. The Company reduces this risk by utilizing natural hedging (i.e., offsetting receivables and payables) as well as by creating offsetting positions through the use of derivative financial instruments, primarily forward foreign currency exchange contracts typically with maturities of less than sixty days (“economic hedges”), but not greater than one year. The Company continues to have exposure 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 (income) expense, 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 currency exchange contracts. A hypothetical 10% change in foreign currency exchange rates under the forward foreign currency exchange contracts outstanding at June 29, 2019 would result in an increase or decrease of approximately $20.0 million to the fair value of the forward foreign currency exchange contracts, which would generally be offset by an opposite effect on the underlying exposure being economically hedged. See Note 4 to the Company’s consolidated financial statements included in Item 15 of this Annual Report on Form 10-K for further discussion on derivative financial instruments.

Many of the Company’s subsidiaries purchase and sell products in currencies other than their functional currencies. This subjects the Company to the risks associated with fluctuations in foreign currency exchange rates. The Company reduces this risk by utilizing natural hedging (i.e., offsetting receivables and payables) as well as by creating offsetting positions through the use of derivative financial instruments, primarily forward foreign currency exchange contracts typically with maturities of less than sixty days (“economic hedges”), but not greater than one year. The Company continues to have exposure 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 (income) expense, 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 currency exchange contracts. A hypothetical 10% change in foreign currency exchange rates under the forward foreign currency exchange contracts outstanding at June 29, 2019 would result in an increase or decrease of approximately $20.0 million to the fair value of the forward foreign currency exchange contracts, which would generally be offset by an opposite effect on the underlying exposure being economically hedged. See Note 4 to the Company’s consolidated financial statements included in Item 15 of this Annual Report on Form 10-K for further discussion on derivative financial instruments.

2. Revenue recognition Prior to the adoption of Topic 606, the Company’s revenue recognition policy was in accordance with ASC Topic 605, Revenue Recognition. Effective July 1, 2018, the Company adopted Topic 606 using the modified retrospective transition method, resulting in accounting policy changes surrounding revenue recognition which replace revenue recognition policies discussed in the Summary of Significant Accounting Policies in Note 1 of the Company’s Fiscal 2018 Annual Report on Form 10-K. The adoption of Topic 606 did not have a material impact on the Company’s consolidated financial statements. The Company’s revenues are generated from the distribution and sale of electronic components including semiconductors, interconnect, passive and electromechanical (“IP&E”) devices and other integrated electronic components from the world’s leading electronic component manufacturers. The Company’s expertise in design, supply chain and logistics enable it to sell to customers of all sizes from startups and mid-sized businesses to enterprise-level original equipment manufacturers (“OEMs”), electronic manufacturing services (“EMS”) providers and original design manufacturers (“ODMs”). The Company sells to a variety of markets ranging from automotive to medical to defense and aerospace. The Company also sells integrated solutions including the assembly or manufacture of embedded electronic component products and systems, touch and passive displays, and standard or specialized boards. The Company’s revenue arrangements primarily consist of performance obligations related to the transfer of promised products. The Company considers customer purchase orders, which in some cases are governed by master agreements, to be the contracts with a customer. All revenue is generated from contracts with customers. Refer to Note 17 herein for further discussion regarding the Company’s sales by major product category. 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, this generally occurs upon shipment of the products, however, this 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 as the assurance type product warranties provided by the component manufacturers are passed through to the Company’s customers. For contracts related to the specialized manufacture of products for customers with no alternative use and for which 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 as these contracts represent less than 2% of the Company’s total sales. Revenue is measured as the amount of consideration the Company expects to receive in exchange for 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.

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 as these contracts represent less than 2% of the Company’s total sales.

Long-term debt consists of the following (in thousands): The Company has an accounts receivable securitization program (the “Securitization Program”) in the United States with a group of financial institutions to allow 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 $500.0 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 $857.3 million and $790.5 million at June 29, 2019, and June 30, 2018, respectively. The Securitization Program contains certain covenants relating to the quality of the receivables sold. The Securitization Program also requires the Company to maintain certain minimum interest coverage and leverage ratios, which the Company was in compliance with as of June 29, 2019. The Securitization Program expires in August 2020 and as a result the Company has classified outstanding balances as long-term debt as of June 29, 2019. There were $227.3 million in borrowings outstanding under the Program as of June 29, 2019, and $105.0 million as of June 30, 2018. Interest on borrowings is calculated using a one-month LIBOR rate plus a spread of 0.75%. The facility fee on the unused balance of the facility is up to 0.35%.

The Company has an accounts receivable securitization program (the “Securitization Program”) in the United States with a group of financial institutions to allow 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 $500.0 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 $857.3 million and $790.5 million at June 29, 2019, and June 30, 2018, respectively. The Securitization Program contains certain covenants relating to the quality of the receivables sold. The Securitization Program also requires the Company to maintain certain minimum interest coverage and leverage ratios, which the Company was in compliance with as of June 29, 2019. The Securitization Program expires in August 2020 and as a result the Company has classified outstanding balances as long-term debt as of June 29, 2019. There were $227.3 million in borrowings outstanding under the Program as of June 29, 2019, and $105.0 million as of June 30, 2018. Interest on borrowings is calculated using a one-month LIBOR rate plus a spread of 0.75%. The facility fee on the unused balance of the facility is up to 0.35%.

10. Income taxes The components of income tax expense (“tax provision”) are included in the table below. The tax provision for deferred income taxes results from temporary differences arising primarily from net operating losses, inventories valuation, receivables valuation, certain accrued amounts and depreciation and amortization, net of any changes to valuation allowances. The tax provision is computed based upon income from continuing operations before income taxes from both U.S. and foreign operations. U.S. loss from continuing operations before income taxes was $68.5 million, $385.1 million and $174.3 million, in fiscal 2019, 2018 and 2017, respectively, and foreign income from continuing operations before income taxes was $310.8 million, $530.2 million and $484.7 million in fiscal 2019, 2018 and 2017, respectively. See further discussion related to income tax expense for discontinued operations in Note 3. On December 22, 2017 the U.S. federal government enacted tax legislation (the “Act”) which includes provisions to lower the corporate income tax rate from 35% to 21%, impose new taxes on certain foreign earnings, limit deductibility of certain U.S. costs and levy a one-time deemed repatriation tax on accumulated offshore earnings, among other provisions. The law is subject to interpretation and implementation guidance by both federal and state tax authorities, as well as amendments and technical corrections. As a fiscal year-end taxpayer, certain provisions of the Act began to impact the Company in the second quarter of fiscal 2018, while other provisions began to impact the Company beginning in fiscal 2019. Additionally, new guidance from regulations, interpretation of the law and refinement of the Company’s estimates from ongoing analysis of tax positions may change the amounts recorded. Any changes to the amounts recorded will be reflected in income tax expense in the period they are identified, and may be material. The Company changed its historical assertion as of June 29, 2019, so that all of its unremitted foreign earnings are no longer permanently reinvested as certain foreign earnings are expected to be repatriated in the future. The Company believes any unrecorded liabilities related to this partial change in assertion are not material, and has recorded deferred tax liabilities for those certain foreign earnings expected to be repatriated in the future.

On December 22, 2017 the U.S. federal government enacted tax legislation (the “Act”) which includes provisions to lower the corporate income tax rate from 35% to 21%, impose new taxes on certain foreign earnings, limit deductibility of certain U.S. costs and levy a one-time deemed repatriation tax on accumulated offshore earnings, among other provisions. The law is subject to interpretation and implementation guidance by both federal and state tax authorities, as well as amendments and technical corrections.

Reconciliations of the federal statutory tax rate to the effective tax rates are as follows: Tax rates on foreign income represents the impact of the difference between foreign rates and the U.S. federal statutory rate applied to foreign income or loss, foreign income taxed in the U.S. at rates other than its’ statutory rate, and the impact of valuation allowances established against the Company’s otherwise realizable foreign deferred tax assets, which are primarily net operating loss carry-forwards. Avnet’s effective tax rate on income before income taxes from continuing operations was 25.7% in fiscal 2019 as compared with an effective tax rate of 198.5% in fiscal 2018. Included in the fiscal 2018 effective tax rate is a net tax benefit of $34.1 million related to the mix of income in lower tax jurisdictions. The fiscal 2019 effective tax rate is lower than the fiscal 2018 effective tax rate primarily due to the reduction in (i) the transition tax expense recorded under the requirements of the Act, and (ii) goodwill impairment. The Company applies the guidance in ASC 740 Income Taxes, which requires management to use its judgment to the appropriate weighting of all available evidence when assessing the need for the establishment or the release of valuation allowances. As part of this analysis, the Company examines all available evidence on a jurisdiction by jurisdiction basis and weighs the positive and negative evidence when determining the need for full or partial valuation allowances. The evidence considered for each jurisdiction includes, among other items: (i) the historic levels and types of income or losses over a range of time periods, which may extend beyond the most recent three fiscal years depending upon the historical volatility of income in an individual jurisdiction; (ii) expectations and risks associated with underlying estimates of future taxable income, including considering the historical trend of down-cycles in the Company’s served industries; (iii) jurisdictional specific limitations on the utilization of deferred tax assets including when such assets expire; and (iv) prudent and feasible tax planning strategies.

Avnet’s effective tax rate on income before income taxes from continuing operations was 25.7% in fiscal 2019 as compared with an effective tax rate of 198.5% in fiscal 2018. Included in the fiscal 2018 effective tax rate is a net tax benefit of $34.1 million related to the mix of income in lower tax jurisdictions. The fiscal 2019 effective tax rate is lower than the fiscal 2018 effective tax rate primarily due to the reduction in (i) the transition tax expense recorded under the requirements of the Act, and (ii) goodwill impairment.

The general investment objectives of the Plan are to maximize returns through a diversified investment portfolio in order to earn annualized returns that meet the long-term cost of funding the Plan’s pension obligations while maintaining reasonable and prudent levels of risk. The target rate of return on the Plan’s assets in fiscal 2020 is currently 7.7%, which represents the average rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the benefit obligation based upon the targeted investment allocations. This assumption has been determined by combining expectations regarding future rates of return for the investment portfolio along with the historical and expected distribution of investments by asset class and the historical rates of return for each of those asset classes. The mix of equity securities is typically diversified to obtain a blend of domestic and international investments covering multiple industries. The Plan’s assets do not include any material investments in Avnet common stock. The Plan’s investments in debt securities are also diversified across both public and private fixed income securities with varying maturities. As of June 29, 2019, the Company’s target allocation for the Plan’s investment portfolio is for equity securities, both domestic and international, to represent approximately 65% of the portfolio. The majority of the remaining portfolio of investments is to be invested in fixed income debt securities with various maturities.

13. Stock-based compensation The Company measures all stock-based payments at fair value and recognizes related expense within operating expenses in the consolidated statements of operations over the requisite service period (generally the vesting period). During fiscal 2019, 2018, and 2017, the Company recorded stock-based compensation expense of $30.1 million, $24.0 million, and $53.9 million, respectively, for all forms of stock-based compensation awards. Included in the fiscal 2017 expense was $6.2 million of stock-based compensation related to discontinued operations and the divestiture of the TS business. Stock plan At June 29, 2019, the Company had 8.5 million shares of common stock reserved for stock-based payments, which consisted of 2.0 million shares for unvested or unexercised stock options, 4.6 million shares available for stock-based awards under plans approved by shareholders, 1.4 million shares for restricted stock units and performance share units granted but not yet vested, and 0.5 million shares available for future purchases under the Company’s Employee Stock Purchase Plan. Stock options Service based stock option grants have a contractual life of ten years, vest in 25% increments on each anniversary of the grant date, commencing with the first anniversary, and require an exercise price of 100% of the fair market value of common stock at the date of grant. Stock-based compensation expense associated with all stock options during fiscal 2019, 2018 and 2017 was $2.2 million, $(0.2) million and $5.8 million, respectively. The fair value of stock options is estimated as of the date of grant using the Black-Scholes model based on the assumptions in the following table. The assumption for the expected term is based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rate is based on U.S. Treasury rates as of the date of grant with maturity dates approximately equal to the expected term at the grant date. The historical volatility of Avnet’s common stock is used as the basis for the volatility assumption. The Company estimates dividend yield based upon expectations of future dividends compared to the market value of the Company’s stock as of the grant date.

Service based stock option grants have a contractual life of ten years, vest in 25% increments on each anniversary of the grant date, commencing with the first anniversary, and require an exercise price of 100% of the fair market value of common stock at the date of grant. Stock-based compensation expense associated with all stock options during fiscal 2019, 2018 and 2017 was $2.2 million, $(0.2) million and $5.8 million, respectively.

Restricted stock units Delivery of restricted stock units, and the associated compensation expense, is recognized over the vesting period and is generally subject to the employee’s continued service to the Company, except for employees who are retirement eligible under the terms of the restricted stock units. As of June 29, 2019, 0.9 million shares previously awarded have not yet vested. Stock-based compensation expense associated with restricted stock units was $23.7 million, $23.0 million and $42.4 million for fiscal years 2019, 2018 and 2017, respectively. The following is a summary of the changes in non-vested restricted stock units during fiscal 2019: As of June 29, 2019, there was $21.9 million of total unrecognized compensation expense related to non-vested restricted stock units, which is expected to be recognized over a weighted-average period of 2.2 years. The total fair value of restricted stock units vested during fiscal 2019, 2018 and 2017 was $25.7 million, $26.0 million and $54.6 million, respectively. Performance share units Certain eligible employees, including Avnet’s executive officers, may receive a portion of their long-term stock-based compensation through the performance share program, which allows for the vesting of shares based upon achievement of certain performance-based criteria (“Performance Share Program”). The Performance Share Program provides for the vesting to each grantee of a number of shares of Avnet’s common stock at the end of a three-year performance period based upon the Company’s achievement of certain performance goals established by the Compensation Committee of the Board of Directors for each Performance Share Program three-year performance period. The performance goals consist of a combination of measures including earnings per share, economic profit, return on capital employed and total shareholder return. During each of fiscal 2019, 2018 and 2017, the Company granted 0.2 million performance share units. The actual amount of performance share units vested at the end of each three-year period is measured based upon the actual level of achievement of the defined performance goals and can range from 0% to 200% of the award grant. During fiscal 2019, 2018 and 2017, the Company recognized stock-based compensation expense associated with the Performance Share Program of $2.8 million, $0.2 million and $4.6 million, respectively.

During each of fiscal 2019, 2018 and 2017, the Company granted 0.2 million performance share units. The actual amount of performance share units vested at the end of each three-year period is measured based upon the actual level of achievement of the defined performance goals and can range from 0% to 200% of the award grant. During fiscal 2019, 2018 and 2017, the Company recognized stock-based compensation expense associated with the Performance Share Program of $2.8 million, $0.2 million and $4.6 million, respectively.

ExhibitNumber Exhibit 2.1 Interest Purchase Agreement, dated as of September 19, 2016, by and among Avnet, Inc. and Tech Data Corporation (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on September 20, 2016). 2.2 First Amendment to Interest Purchase Agreement, dated as of February 27, 2017, by and between Avnet, Inc. and Tech Data Corporation (incorporated herein by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed on March 3, 2017). 3.1 Restated Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3(i) to the Company’s Current Report on Form 8-K filed on February 12, 2001). 3.2 By-laws of the Company, effective May 9, 2014 (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 12, 2014). 4.1 * Description of Registrant’s Securities. 4.2 Indenture dated as of June 22, 2010, between the Company and Wells Fargo Bank, National Association, as Trustee, providing for the issuance of Debt Securities in one or more series (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 22, 2010). 4.3 Officers’ Certificate establishing the terms of the 5.875% Notes due 2020 (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on June 22, 2010). 4.4 Form of Officers’ Certificate establishing the terms of the 4.875% Notes due 2022 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on November 21, 2012). 4.5 Form of Officers’ Certificate establishing the terms of the 4.625% Notes due 2026 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 22, 2016). 4.6 Form of Officers’ Certificate setting forth the terms of the 3.750% Notes due 2021 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on December 1, 2016). Note: The total amount of securities authorized under any other instrument that defines the rights of holders of the Company’s long-term debt does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. Therefore, these instruments are not required to be filed as exhibits to this Report. The Company agrees to furnish copies of such instruments to the Commission upon request. Executive Compensation Plans and Arrangements 10.1 Form of Letter Agreement between the Company and William Amelio, Thomas Liguori, Ken Arnold, Peter Bartolotta, Philip Gallagher and Michael O’Neill (incorporated herein by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K filed on August 17, 2017). 10.2 Form of Employment Agreement between the Company and MaryAnn Miller (incorporated herein by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K filed on August 9, 2013). 10.3 Form of Change of Control Agreement between the Company and William Amelio, Thomas Liguori, Ken Arnold, Peter Bartolotta, Philip Gallagher, MaryAnn Miller and Michael O’Neill (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on February 15, 2011). 10.4 Form of Indemnity Agreement between the Company and its directors and officers (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May 8, 2006). 10.5 Avnet Executive Severance Plan (Effective as of August 10, 2017) (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on October 30, 2017).

Officers’ Certificate establishing the terms of the 5.875% Notes due 2020 (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on June 22, 2010).

Form of Officers’ Certificate establishing the terms of the 4.875% Notes due 2022 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on November 21, 2012).

Form of Officers’ Certificate establishing the terms of the 4.625% Notes due 2026 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 22, 2016).

Form of Officers’ Certificate setting forth the terms of the 3.750% Notes due 2021 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on December 1, 2016).

Note: The total amount of securities authorized under any other instrument that defines the rights of holders of the Company’s long-term debt does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. Therefore, these instruments are not required to be filed as exhibits to this Report. The Company agrees to furnish copies of such instruments to the Commission upon request.

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