In addition to disclosing financial results that are determined in accordance with generally accepted accounting principles in the United States (“GAAP”), the Company also discloses certain non-GAAP financial information including (i) adjusted operating income, (ii) adjusted other income (expense), (iii) adjusted income tax expense, (iv) adjusted income from continuing operations, (v) adjusted diluted earnings per share, and (vi) sales adjusted for the impact of acquisitions and other items (as defined in the Organic Sales section of this document).

There are also references to the impact of foreign currency in the discussion of the Company’s results of operations. When the U.S. Dollar strengthens and the stronger exchange rates of the current year are used to translate the results of operations of Avnet’s subsidiaries denominated in foreign currencies, the resulting impact is a decrease in U.S. Dollars of reported results. Conversely, when the U.S. Dollar weakens and the weaker exchange rates of the current year are used to translate the results of operations of Avnet’s subsidiaries denominated in foreign currencies, the resulting impact is an increase in U.S. Dollars of reported results. In the discussion of the Company’s results of operations, results excluding this impact are referred to as “constant currency.” Management believes organic sales and sales in constant currency are useful measures for evaluating current period performance as compared with prior periods and for understanding underlying trends. In order to determine the translation impact of changes in foreign currency exchange rates on sales, income or expense items for subsidiaries reporting in currencies other than the U.S. Dollar, the Company adjusts the average exchange rates used in current periods to be consistent with the average exchange rates in effect during the comparative period.

Management believes that operating income adjusted for restructuring, integration and other expenses, goodwill impairment expense and amortization of acquired intangible assets and other, are useful measures to help investors better assess and understand the Company’s operating performance. This is especially the case when comparing results with previous periods or forecasting performance for future periods, primarily because management views the excluded items to be outside of Avnet’s normal operating results or non-cash in nature. Management analyzes operating income without the impact of these items as well as other income (expense) excluding certain amounts as an indicator of ongoing margin performance and underlying trends in the business. Management also uses these non-GAAP measures to establish operational goals and, in many cases, for measuring performance for compensation purposes. Management measures operating income for our reportable segments excluding restructuring, integration and other expenses, goodwill impairment expense and amortization of acquired intangible assets and other.

Additional non-GAAP metrics management uses is adjusted operating income margin, which is defined as adjusted operating income (as defined above) divided by sales.

Management also believes income tax expense, income from continuing operations and diluted earnings per share from continuing operations adjusted for the impact of the items described above and certain items impacting other expense and income tax expense are useful to investors because they provide a measure of the Company’s net profitability on a more comparable basis to historical periods and provide a more meaningful basis for forecasting future performance. Additionally, because of management’s focus on generating shareholder value, of which net profitability is a primary driver, management believes income from continuing operations and diluted earnings per share from continuing operations excluding the impact of these items provides an important measure of the Company’s net profitability for the investing public.

Any analysis of results and outlook on a non-GAAP basis should be used as a complement to, and in conjunction with, results presented in accordance with GAAP.

		Quarter Ended
		September 29, 2018*
		($ in thousands, except per share amounts)
GAAP selling, general and administrative expenses - continuing operations		$	475,146
Amortization of intangible assets and other - continuing operations			(20,927	)
Adjusted operating expenses - continuing operations			454,219
GAAP operating income - continuing operations		$	146,816
Restructuring, integration and other expenses - continuing operations			14,788
Amortization of intangible assets and other - continuing operations			20,927
Adjusted operating income - continuing operations			182,531
GAAP income before income taxes- continuing operations		$	114,831
Restructuring, integration and other expenses - continuing operations			14,788
Amortization of intangible assets and other - continuing operations			20,927
Adjusted income before income taxes - continuing operations			150,546
GAAP income tax expense - continuing operations		$	31,302
Restructuring, integration and other expenses - continuing operations			3,320
Amortization of intangible assets and other - continuing operations			4,478
Discrete income tax expense items, net - continuing operations			(8,238	)
Adjusted income tax expense - continuing operations			30,862
GAAP income - continuing operations		$	83,529
Restructuring, integration and other expenses (net of tax) - continuing operations			11,468
Amortization of intangible assets and other (net of tax) - continuing operations			16,449
Discrete income tax expense items, net - continuing operations			8,238
Adjusted income - continuing operations			119,684
GAAP diluted earnings per share - continuing operations		$	0.72
Restructuring, integration and other expenses (net of tax) - continuing operations			0.10
Amortization of intangible assets and other (net of tax) - continuing operations			0.14
Discrete income tax expense items, net - continuing operations			0.07
Adjusted diluted EPS - continuing operations			1.03

* May not foot due to rounding

			Fiscal				Quarters Ended
			Year to Date				June 30,				March 31,				December 30,				September 30,
			2018*				2018*				2018*				2017*				2017*
			($ in thousands, except per share amounts)
GAAP selling, general and administrative expenses - continuing operations (1)			$	1,991,401			$	500,257			$	505,471			$	484,082			$	501,593
Amortization of intangible assets and other - continuing operations				(91,923	)			(21,736	)			(22,725	)			(21,877	)			(25,585	)
Adjusted operating expenses - continuing operations (1)				1,899,478				478,521				482,746				462,204				476,007
GAAP operating income (loss) - continuing operations (1)			$	209,218			$	121,527			$	(58,494	)		$	81,617			$	64,568
Restructuring, integration and other expenses - continuing operations				145,125				36,848				25,120				36,762				46,394
Goodwill impairment expense - continuing operations				181,440				-				181,440				-				-
Amortization of intangible assets and other - continuing operations				91,923				21,736				22,725				21,877				25,585
Adjusted operating income - continuing operations (1)				627,706				180,111				170,791				140,256				136,547
GAAP other income (expense), net - continuing operations (1)			$	28,606			$	(3,526	)		$	9,862			$	3,349			$	18,921
Foreign currency (gain) loss and other expenses- continuing operations				(9,762	)			(559	)			137				546				(9,886	)
Adjusted other income (expense), net - continuing operations (1)				18,844				(4,085	)			9,999				3,895				9,035
GAAP income (loss) before income taxes- continuing operations			$	145,077			$	93,526			$	(72,063	)		$	62,140			$	61,474
Restructuring, integration and other expenses - continuing operations				145,125				36,848				25,120				36,762				46,394
Goodwill impairment expense - continuing operations				181,440				-				181,440				-				-
Amortization of intangible assets and other - continuing operations				91,923				21,736				22,725				21,877				25,585
Foreign currency (gain) loss and other expenses- continuing operations				(9,762	)			(559	)			137				546				(9,886	)
Adjusted income before income taxes - continuing operations				553,803				151,551				157,359				121,325				123,567
GAAP income tax expense - continuing operations			$	287,966			$	35,787			$	243,541			$	5,346			$	3,292
Restructuring, integration and other expenses - continuing operations				41,460				9,921				5,757				9,004				16,778
Amortization of intangible assets and other - continuing operations				18,556				4,376				4,575				4,405				5,200
Foreign currency (gain) loss and other expenses- continuing operations				(3,494	)			(180	)			33				84				(3,431	)
Discrete income tax (expense) benefit items, net - continuing operations				(218,444	)			(14,549	)			(218,810	)			8,017				6,898
Adjusted income tax expense - continuing operations				126,044				35,355				35,096				26,856				28,737
GAAP income (loss) - continuing operations			$	(142,889	)		$	57,739			$	(315,604	)		$	56,794			$	58,182
Restructuring, integration and other expenses (net of tax) - continuing operations				103,665				26,927				19,363				27,758				29,616
Goodwill impairment expense (net of tax) - continuing operations				181,440				-				181,440				-				-
Amortization of intangible assets and other (net of tax) - continuing operations				73,367				17,360				18,150				17,472				20,385
Foreign currency (gain) loss and other expenses (net of tax) - continuing operations				(6,268	)			(379	)			104				462				(6,455	)
Discrete income tax expense (benefit) items, net - continuing operations				218,444				14,549				218,810				(8,017	)			(6,898	)
Adjusted income - continuing operations				427,759				116,196				122,263				94,469				94,829
GAAP diluted earnings (loss) per share - continuing operations			$	(1.19	)		$	0.49			$	(2.64	)		$	0.47			$	0.47
Restructuring, integration and other expenses (net of tax) - continuing operations				0.86				0.23				0.16				0.23				0.24
Goodwill impairment expense (net of tax) - continuing operations				1.52				-				1.52				-				-
Amortization of intangible assets and other (net of tax) - continuing operations				0.61				0.15				0.15				0.14				0.16
Foreign currency (gain) loss and other expenses (net of tax) - continuing operations				(0.05	)			-				-				-				(0.05	)
Discrete income tax expense (benefit) items, net - continuing operations				1.82				0.12				1.83				(0.07	)			(0.06	)
Adjusted diluted EPS - continuing operations				3.57				0.99				1.02				0.78				0.76

(1) Certain prior year amounts in the Company’s measurement of operating income have been recasted to reflect the adoption of new accounting standards during fiscal 2018.

* May not foot/crossfoot due to rounding

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