AVNET INC

Previous wording

Management believes that providing this additional information is useful to financial statement users 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 with and without these adjustments to GAAP results. Management also uses these non-GAAP measures to establish operational goals and, in

Current wording

Management believes that providing this additional information is useful to financial statement users 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 with and without 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 in conjunction with results presented in accordance with GAAP.

Previous wording

The Company’s operations subject it to tariffs and other trade protection measures. The U.S. administration has instituted certain changes, and may make additional changes, in trade policies that include the negotiation or termination of trade agreements, higher tariffs on imports into the U.S., and other measures affecting trade between the U.S. and other countries from which the Company imports. Due in part to these measures, some countries are changing their trade policies relating to goods imported from the U.S. These global trade disruptions and geopolitical tensions, together with any related downturns in the global economy, could dampen customer demand, increase market volatility, and impact currency exchange rates, all of which could materially and adversely affect the Company’s financial performance. Evaluating and complying with new and future trade measures diverts management’s attention from existing initiatives, which may negatively impact the Company’s business operations.

Current wording

The Company’s operations subject it to tariffs and other trade protection measures. The U.S. administration has instituted certain changes, and may make additional changes, in trade policies that include the negotiation or termination of trade agreements, higher tariffs on imports into the U.S., and other measures affecting trade between the U.S. and other countries from which the Company imports. Due in part to these measures, some countries are changing their trade policies relating to goods imported from the U.S. These global trade disruptions and geopolitical tensions, together with

Previous wording

The Company’s gross profit is primarily affected by sales volume, product mix, and geographic sales mix. Gross profit in fiscal 2025 was $2.38 billion, a decrease of $381.5 million, or 13.8%, from fiscal 2024 gross profit of $2.77 billion primarily due to lower sales volumes, as described above. Gross profit margin decreased to 10.7% in fiscal 2025 or 90 basis points from fiscal 2024 gross profit margin of 11.6%. The decrease in gross profit margin is primarily due to a shift in geographic sales mix to Asia. Sales in the higher margin western regions represented approximately 53% of sales in fiscal 2025, versus 60% of sales in fiscal 2024.

Current wording

The Company’s gross profit and gross margin are primarily affected by sales volume, product mix, customer mix and pricing, and geographic sales mix. Gross profit increased $496.9 million, or 20.8% to $2.88 billion in fiscal 2026, compared to $2.38 billion in fiscal 2025. This increase was primarily driven by higher sales in both operating groups, partially offset by year-over-year lower gross profit margin in the EC operating group. Gross profit margin decreased to 10.4% in fiscal 2026 or 31 basis points from fiscal 2025 gross profit margin of 10.7%.

Previous wording

Farnell gross profit margin decreased year over year, primarily due to lower sales of higher margin on-the-board electronic components.

Current wording

Farnell gross profit margin was 27.73% in fiscal 2026, up 168 basis points year over year, primarily due to a higher mix of on-the-board electronic components and, to a lesser extent, an increase in component pricing for certain memory-related products during fiscal 2026.

Previous wording

Selling, general and administrative expenses (“SG&A expenses”) in fiscal 2025 were $1.76 billion, a decrease of $107.1 million, or 5.7%, from fiscal 2024. The year-over-year decrease in SG&A expenses was primarily due to decreases in variable operating expenses associated with the decrease in sales volumes discussed above, from restructuring actions taken by the Company, and by the impact of changes in foreign currency translation rates.

Current wording

Selling, general and administrative expenses (“SG&A expenses”) in fiscal 2026 were $2.02 billion, an increase of $260.0 million, or 14.8%, from fiscal 2025. The year-over-year increase in SG&A expenses is primarily due to increases in variable operating expenses associated with higher sales volumes and the impact of changes in foreign currency translation rates.

Previous wording

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 2025, SG&A expenses as a percentage of sales were 7.9% and as a percentage of gross profit were 73.9%, as compared with 7.9% and 67.6%, respectively, in fiscal 2024. The increases in SG&A expenses as a percentage of gross profit resulted primarily from the decreases in sales and gross profit without a proportional reduction in SG&A expenses, resulting in lower operating leverage.

Current wording

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 2026, SG&A expenses were 7.3% of sales 70.2% of gross profit, compared with 7.9% and 73.9%, respectively, in fiscal 2025. The year-over-year decrease in SG&A expenses as a percentage of sales and gross profit was primarily due to increased sales without a corresponding increase in SG&A expenses, partially offset by the decline in gross profit margin in EC as discussed above.

Previous wording

The after-tax impact of restructuring, integration, and other expenses were $87.6 million and $1.01 per share on a diluted basis.

Current wording

The after-tax impact of restructuring, integration, and other expenses were $96.1 million and $1.15 per share on a diluted basis.

Previous wording

use. The Company also recorded $14.5 million of integration costs, a benefit of $6.0 million for changes in estimates for costs associated with prior year restructuring actions, and $43.7 million of other costs primarily related to the estimated contingent liability associated with an ongoing consumption tax audit in Mexico.

Current wording

During fiscal 2025 the Company recorded restructuring, integration, and other expenses of $108.3 million, which consists of restructuring costs of $56.1 million, integration and other costs of $14.5 million, a benefit of $6.0 million for changes in estimates for costs associated with prior year restructuring actions, and $43.7 million of other costs primarily related to the estimated contingent liability associated with the consumption tax audit in Mexico.

Previous wording

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

Current wording

Interest and Other Financing Expenses, Net and Other Expense, Net

Previous wording

Interest and other financing expenses for fiscal 2025 was $246.4 million, a decrease of $36.5 million, or 12.9%, compared with interest and other financing expenses of $282.9 million in fiscal 2024. The decrease in interest and other financing expenses in fiscal 2025 compared to fiscal 2024 is primarily a result of lower outstanding borrowings and average borrowing rates.

Current wording

Interest and other financing expenses for fiscal 2026 was $250.7 million, an increase of $4.3 million, or 1.8%, compared with interest and other financing expenses of $246.4 million in fiscal 2025. The increase in interest and other financing expenses in fiscal 2026 compared to fiscal 2025 is primarily a result of higher average borrowings.

Previous wording

The Company had other expense of $17.3 million in fiscal 2025, compared to other expense of $15.7 million in fiscal 2024. The increase in other expenses is primarily due to foreign currency translation losses.

Current wording

The Company had other expenses of $6.6 million in fiscal 2026, compared to other expenses of $17.3 million in fiscal 2025. The decrease in other expenses is primarily due to differences in foreign currency translation losses between the years.

Previous wording

Income tax expenses were $10.4 million in fiscal 2025, reflecting an effective tax rate of 4.1% as compared to income tax expenses of $133.6 million in fiscal 2024, reflecting an effective tax rate of 21.1%. The decrease in the effective tax rate in fiscal 2025 as compared to fiscal 2024 was primarily due to the increases in tax attribute carryforwards, partially offset by increases to valuation allowances.

Current wording

Income tax expenses were $133.0 million in fiscal 2026, reflecting an effective tax rate of 28.5% as compared to income tax expenses of $10.4 million in fiscal 2025, reflecting an effective tax rate of 4.1%. The increase in the effective tax rate in fiscal 2026 as compared to fiscal 2025 was primarily related to the tax attribute carryforwards that were generated in fiscal 2025, but not in fiscal 2026.

Previous wording

As a result of the factors described in the preceding sections of this MD&A, the Company’s net income in fiscal 2025 was $240.2 million, or earnings per share on a diluted basis of $2.75, compared with fiscal 2024 net income of $498.7 million, or earnings per share on a diluted basis of $5.43.

Current wording

As a result of the factors described in the preceding sections of this MD&A, the Company’s net income in fiscal 2026 was $334.4 million, or earnings per share on a diluted basis of $4.01, compared with fiscal 2025 net income of $240.2 million, or earnings per share on a diluted basis of $2.75.

Previous wording

Net cash provided by operating activities was $724.5 million during fiscal 2025, compared to net cash provided by operating activities of $690.0 million during fiscal 2024. The $34.5 million increase in net cash provided by operating activities year over year is primarily due to improvements in cash used for working capital and other as working capital levels have begun to be more in line with sales including the reduction of inventories, offset by lower cash provided by net income. Cash generated by working capital and other was $402.2 million during fiscal 2025, compared to cash generated by working capital of $11.2 million during fiscal 2024, with the difference attributable primarily to decreases in inventory purchases and the timing of payments for inventory purchases. The Company also had decreases in accounts receivable due to cash collections and lower sales when compared to the prior fiscal year. Included in other, net was a gain of $9.2 million recognized on the sale of a building during fiscal 2025. The Company received $90.7 million of cash from legal settlements during fiscal 2024.

Current wording

Net cash used for operating activities was $280.9 million in fiscal 2026, compared with net cash provided by operating activities of $724.5 million in fiscal 2025. The $1.01 billion year-over-year decrease in operating cash flow was primarily due to cash used for working capital in fiscal 2026 to support sales growth. Cash used for working capital and other was $802.4 million during fiscal 2026, compared with cash generated from working capital of $402.2 million in fiscal 2025, primarily reflecting higher inventory purchases, the timing of payments for inventory purchases and higher accounts receivable due to increased sales and cash collection timing. The Company used $61.4 million of cash from operations to settle the consumption tax audit in Mexico during fiscal 2026. Other, net in fiscal 2025 included a $9.2 million gain recognized on the sale of a building during fiscal 2025.

Previous wording

Net repayments of debt totaled $274.9 million during fiscal 2025, including the repayment of $357.3 million under the Credit Facility, and $2.5 million for other debt, offset by net proceeds of $84.9 million under the Securitization Program. This compares to $156.5 million of net repayments during fiscal 2024. The Company paid cash dividends to shareholders of $1.32 per share, or $113.3 million, during fiscal 2025 as compared to $1.24 per share, or $112.0 million, during fiscal 2024. The Company has repurchased $303.5 million of common stock under the share repurchase plan during fiscal 2025 compared to $162.7 million during fiscal 2024.

Current wording

The Company repurchased $138.3 million of common stock under its share repurchase plan during fiscal 2026, compared with $303.5 million during fiscal 2025. The Company paid cash dividends of $1.40 per share, or $114.4 million, during fiscal 2026, compared with $1.32 per share, or $113.3 million, during fiscal 2025.

Previous wording

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

Current wording

The Company maintains a diversified financing structure, including both short-term and long-term arrangements to support its operating requirements and supplement cash generated from operating activities. The Company seeks to reduce reliance on any single source of financing and to lower overall funding costs. These arrangements include public debt (“Notes”), convertible debt, short-term and long-term bank and term loans, a revolving credit facility (the “Credit Facility”), and an accounts receivable securitization program (the “Securitization Program”).

Previous wording

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, capital expenditure, and letter of credit needs of its wholly owned subsidiaries. Outstanding borrowings under such forms of debt at the end of fiscal 2025 was $24.9 million.

Current wording

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 working capital, foreign exchange, overdraft, capital expenditure, and letter of credit needs of its wholly owned subsidiaries. Outstanding borrowings under such forms of debt at the end of fiscal 2026 was $162.6 million.

Previous wording

As an alternative form of liquidity outside of the United States, the Company sells certain of its trade accounts receivable on a non-recourse basis to 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 receivable are classified within “Interest and other financing expenses, net” of the consolidated financial statements.

Current wording

As an alternative form of liquidity outside of the United States, primarily in the Asia region, the Company sells certain of its trade accounts receivable on a non-recourse basis to 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. Fees for the sales of trade accounts receivable are classified within “Interest and other financing expenses, net” in the consolidated financial statements.

Previous wording

The Company’s Credit Facility contains certain covenants with various limitations on debt incurrence, share repurchases, dividends, investments and capital expenditures, and also includes a financial covenant requiring the Company to maintain a leverage ratio below a certain threshold. The Company was in compliance with all such covenants as of June 28, 2025.

Current wording

The Company’s Credit Facility includes covenants that limit, among other items, the Company’s ability to incur debt, repurchase shares, pay dividends, make investments and incur capital expenditures. The Credit Facility also includes a financial covenant requiring the Company to maintain a leverage ratio below a specified threshold. The Company was in compliance with all such covenants as of June 27, 2026.

Previous wording

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 June 28, 2025.

Current wording

deem the noncompliance an amortization event under the Securitization Program agreements, which would permit the financial institutions to liquidate the accounts receivables to cover any outstanding borrowings. Circumstances that could affect the Company’s ability to satisfy these covenants and related conditions may be affected by the Company’s ongoing profitability, as well as other economic, market, and industry factors. The Company was in compliance with all such covenants as of June 27, 2026.

Previous wording

The Company held cash and cash equivalents of $192.4 million as of June 28, 2025, of which $181.8 million was held outside the United States. As of June 29, 2024, the Company held cash and cash equivalents of $310.9 million, of which $179.6 million was held outside of the United States.

Current wording

The Company held cash and cash equivalents of $155.4 million as of June 27, 2026, of which $146.4 million was held outside the United States. As of June 28, 2025, the Company held cash and cash equivalents of $192.4 million, of which $181.8 million was held outside of the United States.

Previous wording

During periods of weakening demand in the electronic components industry, the Company typically generates cash from operating activities. Conversely, the Company will use cash for working capital requirements during periods of higher growth. The Company generated $724.5 million in cash flows for operating activities during the fiscal year ended June 28, 2025.

Current wording

During periods of weakening demand in the electronic components industry, the Company typically generates cash from operating activities. Conversely, during periods of higher growth, the Company generally uses cash to fund working capital requirements. For the fiscal year ended June 27, 2026, the Company used $280.9 million of cash in operating activities.

Previous wording

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. Cash balances held in foreign locations that cannot be remitted back to the U.S. in a tax efficient manner are generally used for ongoing working capital, including the need to purchase inventories, 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.

Current wording

The Company’s liquidity is affected by a variety of factors, including normal business operations and general economic, financial, competitive, legislative and regulatory conditions, many of which are outside the Company’s control. Cash balances held outside the United States that cannot be remitted in a tax-efficient manner are generally used to support local working capital requirements, including inventory purchases, capital expenditures and other foreign business needs. In addition, local government regulations may restrict the Company’s ability to transfer funds among jurisdictions under certain circumstances. Management does not believe these restrictions would limit the Company’s ability to execute its intended business strategy.

Previous wording

As of June 28, 2025, there were $411.6 million of borrowings outstanding under the Credit Facility and $0.9 million in letters of credit issued, and $500.0 million outstanding under the Securitization Program. During fiscal 2025, the Company had an average daily balance outstanding under the Credit Facility of approximately $1.00 billion and $490.5 million under the Securitization Program. During fiscal 2024, the Company had an average daily balance outstanding under the Credit Facility of approximately $1.17 billion and $596.7 million under the Securitization Program. The Company expects to redeem the $550.0 million of 4.63% Notes due April 2026 either through the issuance of new debt or from available borrowing capacity under the Credit Facility. As of June 28, 2025, the combined availability under the Credit Facility and the Securitization Program was $1.09 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.

Current wording

As of June 27, 2026, there were $557.0 million of borrowings outstanding under the Credit Facility and $0.8 million in letters of credit issued, and $500.0 million outstanding under the Securitization Program. During fiscal 2026, the Company had an average daily balance outstanding under the Credit Facility of approximately $744.8 million and $476.8 million under the Securitization Program. During fiscal 2025, the Company had an average daily balance outstanding under the Credit Facility of approximately $1.00 billion and $490.5 million under the Securitization

Previous wording

The Company purchases inventories in the normal course of business throughout the year through the issuance of purchase orders to suppliers. During fiscal 2025, the Company’s cost of sales, substantially all of which related to the underlying purchase of inventories was $19.8 billion and the Company had $5.2 billion of inventories as of June 28, 2025. The Company expects to continue to purchase sufficient inventory to meet its customers’ demands in fiscal year 2026, some of which relates to outstanding purchase orders at the end of fiscal 2025. Outstanding purchase orders with suppliers may be non-cancellable/non-returnable at the point such orders are issued or may become non-cancellable at some point in the future, typically within 30 days to 90 days from the requested delivery date of inventories.

Current wording

The Company purchases inventories in the normal course of business throughout the year through the issuance of purchase orders to suppliers. During fiscal 2026, the Company’s cost of sales, substantially all of which related to the underlying purchase of inventories was $24.8 billion and the Company had $6.1 billion of inventories as of June 27, 2026. The Company expects to continue to purchase sufficient inventory to meet its customers’ demands in fiscal year 2027, some of which relates to outstanding purchase orders at the end of fiscal 2026. Outstanding purchase orders with suppliers may be non-cancellable/non-returnable at the point where such orders are issued or may become non-cancellable at some point in the future, typically within 30 days to 90 days from the requested delivery date of inventories.

Previous wording

At June 28, 2025, the Company had an estimated liability for income tax contingencies of $120.5 million, which is not included in the above table. Immaterial cash payments associated with the settlement of these liabilities are expected to be paid within the next 12 months. 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.

Current wording

At June 27, 2026, the Company had an estimated liability for income tax contingencies of $123.9 million, which is not included in the above table. 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.

Previous wording

As of June 28, 2025, the Company may repurchase up to an aggregate of $364.1 million of shares of the Company’s common stock through the 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 including share price and other factors. The Company may terminate or limit the share repurchase program at any time without prior notice. During fiscal 2025, the Company repurchased $301.4 million of common stock.

Current wording

As of June 27, 2026, the Company may repurchase up to an aggregate of $225.8 million of shares of the Company’s common stock through the 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 including share price and other factors. The Company may terminate or limit the share repurchase program at any time without prior notice. During fiscal 2026, the Company repurchased $138.3 million of common stock.

Previous wording

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 2025, the Board of Directors approved a dividend of $0.33 per share, which resulted in $27.7 million of dividend payments during the quarter.

Current wording

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 2026, the Board of Directors approved a dividend of $0.35 per share, which resulted in $28.7 million of dividend payments during the quarter.

Previous wording

provide certain protections to the Company for product obsolescence and price erosion in the form of rights of return, stock rotation rights, obsolescence allowances, industry specific supplier rebate programs and price protections. Because of the large number of products and suppliers and the complexity of managing the process around price protections, supplier rebate programs 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 changes 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.

Current wording

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, industry specific supplier rebate programs and price protections. Because of the large number of products and suppliers and the complexity of managing the process around price protections, supplier rebate programs 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 changes 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.