Accounts Receivable

9 Months Ended

Sep. 30, 2023

Accounts Receivable

Accounts Receivable

Note E – Accounts Receivable

Accounts receivable, net, consists of the following:

	September 30,		December 31,
(thousands)	2023		2022
Accounts receivable	$	10,807,108	$	12,416,114
Allowances for doubtful accounts		(143,944)		(93,397)
Accounts receivable, net	$	10,663,164	$	12,322,717

Changes in the allowance for doubtful accounts consists of the following:

	Nine Months Ended
	September 30,		October 1,
(thousands)	2023		2022
Balance at beginning of period	$	93,397	$	75,901
Charged to income		64,701		26,869
Translation adjustments		(575)		(3,660)
Writeoffs		(13,579)		(9,885)
Balance at end of period	$	143,944	$	89,225

The company monitors the current credit condition of its customers and other available information about expected credit losses in estimating its allowance for credit losses. During the first nine months of 2023, increases to the allowance for credit losses charged to income were $37.8 million higher than the prior year period, primarily due to the aging of receivables of certain customers, and the corresponding increase to the allowance in accordance with the company’s policies. With the exception of these few customers, as of September 30, 2023, the company has not experienced significant changes in customers’ payment trends or significant deterioration in customers’ credit risk.

The company has an EMEA asset securitization program under which it continuously sells its interest in designated pools of trade accounts receivable of certain of its subsidiaries in the Europe, Middle East, and Africa (“EMEA”) region, at a discount, to a special purpose entity, which in turn sells certain of the receivables to unaffiliated financial institutions and conduits administered by such unaffiliated financial institutions (“unaffiliated financial institutions”) on a monthly basis. The company may sell up to €600.0 million under the EMEA asset securitization program, which matures in December 2025, subject to extension in accordance with its terms. In July 2023, the company amended a provision in the EMEA asset securitization program to update certain financial ratios. The program is conducted through Arrow EMEA Funding Corp B.V., an entity structured to be bankruptcy remote. The company is deemed the primary beneficiary of Arrow EMEA Funding Corp B.V. as the company has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive the benefits that could potentially be significant to the entity from the transfer of the trade accounts receivable into the special purpose entity. Accordingly, Arrow EMEA Funding Corp B.V. is included in the company’s consolidated financial statements.

Sales of accounts receivable to unaffiliated financial institutions under the EMEA asset securitization program:

	Quarter Ended				Nine Months Ended
	September 30,		October 1,		September 30,		October 1,
(thousands)	2023		2022		2023		2022
EMEA asset securitization, sales of accounts receivable	$	815,812	$	834,456	$	2,486,022	$	1,943,723

Receivables sold to unaffiliated financial institutions under the program are excluded from “Accounts receivable, net” on the company’s consolidated balance sheets, and cash receipts are reflected as cash provided by operating activities on the consolidated statements of cash flows. The purchase price is paid in cash when the receivables are sold. Certain unsold

receivables held by Arrow EMEA Funding Corp B.V. are pledged as collateral to unaffiliated financial institutions. These unsold receivables are included in “Accounts receivable, net” on the company’s consolidated balance sheets.

The company continues servicing the receivables which were sold and in exchange receives a servicing fee under the program. The company does not record a servicing asset or liability on the company’s consolidated balance sheets as the company estimates that the fee it receives to service these receivables approximates the fair market compensation to provide the servicing activities.

Other amounts related to the EMEA asset securitization program:

	September 30,		December 31,
(thousands)	2023		2022
Receivables sold to unaffiliated financial institutions that were uncollected	$	612,321	$	628,930
Collateralized accounts receivable held by Arrow EMEA funding Corp B.V.		933,752		932,243

Any accounts receivable held by Arrow EMEA Funding Corp B.V. would likely not be available to other creditors of the company in the event of bankruptcy or insolvency proceedings if there are outstanding balances under the EMEA asset securitization program. The assets of the special purpose entity cannot be used by the company for general corporate purposes. Additionally, the financial obligations of Arrow EMEA Funding Corp B.V. to the unaffiliated financial institutions under the program are limited to the assets it owns and there is no recourse to Arrow Electronics, Inc. for receivables that are uncollectible as a result of the insolvency or the inability to pay of the account debtors.

The EMEA asset securitization program includes terms and conditions that limit the incurrence of additional borrowings and require that certain financial ratios be maintained at designated levels. As of September 30, 2023, the company was in compliance with all such financial covenants.