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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 30, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to            

Commission file number 1-4482

ARROW ELECTRONICS, INC.

(Exact name of registrant as specified in its charter)

New York

    

11-1806155

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification Number)

9151 East Panorama Circle

    

80112

Centennial CO

(Zip Code)

(Address of principal executive offices)

(303) 824-4000

(Registrant’s telephone number, including area code)

No Changes

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of the exchange on which registered

Common Stock, $1 par value

ARW

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes    No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes    No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes    No 

There were 53,229,856 shares of Common Stock outstanding as of April 25, 2024.

Table of Contents

ARROW ELECTRONICS, INC.

Table of Contents

    

    

Part I.

Financial Information

Item 1.

Financial Statements

Consolidated Statements of Operations

3

Consolidated Statements of Comprehensive Income

4

Consolidated Balance Sheets

5

Consolidated Statements of Cash Flows

6

Consolidated Statements of Equity

7

Notes to Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

34

Item 4.

Controls and Procedures

34

Part II.

Other Information

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 5.

Other Information

35

Item 6.

Exhibits

36

Signature

37

2

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except per share data)

(Unaudited)

Quarter Ended

March 30,

April 1,

    

2024

    

2023

    

Sales

$

6,924,260

$

8,736,428

Cost of sales

 

6,066,434

 

7,622,606

Gross profit

 

857,826

 

1,113,822

Operating expenses:

 

  

 

  

Selling, general, and administrative

 

583,326

 

642,431

Depreciation and amortization

 

41,727

 

46,679

Restructuring, integration, and other

 

46,856

 

2,560

 

671,909

 

691,670

Operating income

 

185,917

 

422,152

Equity in losses of affiliated companies

 

(344)

 

(80)

Gain on investments, net

 

98

 

10,311

Employee benefit plan expense, net

 

(933)

 

(853)

Interest and other financing expense, net

 

(79,604)

 

(79,658)

Income before income taxes

 

105,134

 

351,872

Provision for income taxes

 

22,036

 

76,547

Consolidated net income

 

83,098

 

275,325

Noncontrolling interests

 

(503)

 

1,575

Net income attributable to shareholders

$

83,601

$

273,750

Net income per share:

 

  

 

  

Basic

$

1.54

$

4.66

Diluted

$

1.53

$

4.60

Weighted-average shares outstanding:

 

  

 

  

Basic

 

54,251

 

58,731

Diluted

 

54,815

 

59,479

See accompanying notes.

3

Table of Contents

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

Quarter Ended

March 30,

April 1,

   

2024

   

2023

    

Consolidated net income

$

83,098

$

275,325

Other comprehensive income (loss):

 

  

 

  

Foreign currency translation adjustment and other, net of taxes

 

(99,275)

 

11,285

Gain (loss) on foreign exchange contracts designated as net investment hedges, net of taxes

 

3,598

 

(433)

Gain (loss) on interest rate swaps designated as cash flow hedges, net of taxes

 

529

 

(3,709)

Employee benefit plan items, net of taxes

 

(91)

 

(272)

Other comprehensive (loss) income

 

(95,239)

 

6,871

Comprehensive (loss) income

 

(12,141)

 

282,196

Less: Comprehensive (loss) income attributable to noncontrolling interests

 

(1,651)

 

4,652

Comprehensive (loss) income attributable to shareholders

$

(10,490)

$

277,544

See accompanying notes.

4

Table of Contents

ARROW ELECTRONICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands except par value)

(Unaudited)

March 30,

December 31,

    

2024

    

2023

    

ASSETS

    

  

    

  

    

Current assets:

 

  

 

  

 

Cash and cash equivalents

$

242,810

$

218,053

Accounts receivable, net

 

11,062,608

 

12,238,073

Inventories

 

4,797,053

 

5,187,225

Other current assets

 

798,591

 

684,126

Total current assets

 

16,901,062

 

18,327,477

Property, plant, and equipment, at cost:

 

  

 

  

Land

 

5,691

 

5,691

Buildings and improvements

 

196,291

 

195,579

Machinery and equipment

 

1,624,409

 

1,632,606

 

1,826,391

 

1,833,876

Less: Accumulated depreciation and amortization

 

(1,309,303)

 

(1,303,136)

Property, plant, and equipment, net

 

517,088

 

530,740

Investments in affiliated companies

 

58,868

 

62,741

Intangible assets, net

 

119,274

 

127,440

Goodwill

 

2,054,536

 

2,050,426

Other assets

 

612,048

 

627,344

Total assets

$

20,262,876

$

21,726,168

LIABILITIES AND EQUITY

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

8,940,313

$

10,070,015

Accrued expenses

 

1,474,605

 

1,463,915

Short-term borrowings, including current portion of long-term debt

 

945,698

 

1,653,954

Total current liabilities

 

11,360,616

 

13,187,884

Long-term debt

 

2,632,250

 

2,153,553

Other liabilities

 

500,672

 

507,424

Contingencies (Note L)

Equity:

 

  

 

  

Shareholders’ equity:

 

  

 

  

Common stock, par value $1:

 

  

 

  

Authorized - 160,000 shares in both 2024 and 2023

 

  

 

  

Issued - 57,955 and 57,691 shares in 2024 and 2023

 

57,955

 

57,691

Capital in excess of par value

 

565,166

 

553,340

Treasury stock (4,725 and 3,880 shares in 2024 and 2023, respectively), at cost

 

(405,663)

 

(297,745)

Retained earnings

 

5,873,818

 

5,790,217

Accumulated other comprehensive loss

 

(392,130)

 

(298,039)

Total shareholders’ equity

 

5,699,146

 

5,805,464

Noncontrolling interests

 

70,192

 

71,843

Total equity

 

5,769,338

 

5,877,307

Total liabilities and equity

$

20,262,876

$

21,726,168

See accompanying notes.

5

Table of Contents

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Quarter Ended

March 30,

April 1,

    

2024

    

2023

    

Cash flows from operating activities:

    

  

    

  

    

Consolidated net income

$

83,098

$

275,325

Adjustments to reconcile consolidated net income to net cash provided by operations:

 

  

 

  

Depreciation and amortization

 

41,727

 

46,679

Amortization of stock-based compensation

 

13,447

 

19,497

Equity in losses of affiliated companies

 

344

 

80

Deferred income taxes

 

(2,801)

 

(7,530)

Loss (gain) on investments, net

 

13

 

(10,311)

Other

 

1,189

 

1,321

Change in assets and liabilities, net of effects of acquired businesses:

 

 

  

Accounts receivable, net

 

1,057,676

 

1,701,889

Inventories

 

362,813

 

(199,521)

Accounts payable

 

(1,077,786)

 

(1,504,701)

Accrued expenses

 

21,053

 

(132,316)

Other assets and liabilities

 

(97,563)

 

33,392

Net cash provided by operating activities

 

403,210

 

223,804

Cash flows from investing activities:

 

  

 

  

Acquisition of property, plant, and equipment

 

(29,535)

 

(20,114)

Other

 

5,139

 

10,867

Net cash used for investing activities

 

(24,396)

 

(9,247)

Cash flows from financing activities:

 

  

 

  

Change in short-term and other borrowings

 

(709,675)

 

(146,050)

Proceeds from long-term bank borrowings, net

 

477,032

 

34,360

Net proceeds from note offering

 

 

498,600

Redemption of notes

 

 

(300,000)

Proceeds from exercise of stock options

 

2,929

 

5,934

Repurchases of common stock

 

(87,948)

 

(303,801)

Net cash used for financing activities

 

(317,662)

 

(210,957)

Effect of exchange rate changes on cash

 

(36,395)

 

25,039

Net increase in cash and cash equivalents

 

24,757

 

28,639

Cash and cash equivalents at beginning of period

218,053

176,915

Cash and cash equivalents at end of period

$

242,810

$

205,554

See accompanying notes.

6

Table of Contents

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands)

(Unaudited)

    

    

    

    

    

Accumulated 

    

    

Common 

Capital in 

Other 

Stock at Par

Excess of Par

Treasury 

Retained 

Comprehensive 

Noncontrolling 

 

Value

 

Value

Stock

Earnings

 

Loss

Interests

Total

Balance at December 31, 2023

$

57,691

$

553,340

$

(297,745)

$

5,790,217

$

(298,039)

$

71,843

$

5,877,307

Consolidated net income (loss)

 

 

 

 

83,601

 

 

(503)

 

83,098

Other comprehensive loss

 

 

 

 

 

(94,091)

 

(1,148)

 

(95,239)

Amortization of stock-based compensation

 

 

13,447

 

 

 

 

 

13,447

Shares issued for stock-based compensation awards

 

264

 

(1,621)

 

4,286

 

 

 

 

2,929

Repurchases of common stock

 

 

 

(112,204)

 

 

 

 

(112,204)

Balance at March 30, 2024

$

57,955

$

565,166

$

(405,663)

$

5,873,818

$

(392,130)

$

70,192

$

5,769,338

    

    

    

    

    

Accumulated 

    

    

Common 

Capital in 

Other 

Stock at Par 

Excess of Par 

Treasury 

Retained 

Comprehensive 

Noncontrolling 

Value

Value

Stock

Earnings

 

Loss

Interests

Total

Balance at December 31, 2022

$

125,424

$

1,208,708

$

(4,637,345)

$

9,214,832

$

(365,262)

$

64,996

$

5,611,353

Consolidated net income

 

 

 

 

273,750

 

 

1,575

 

275,325

Other comprehensive income

 

 

 

 

 

3,794

 

3,077

 

6,871

Amortization of stock-based compensation

 

 

19,497

 

 

 

 

 

19,497

Shares issued for stock-based compensation awards

 

 

(25,071)

 

31,005

 

 

 

 

5,934

Repurchases of common stock

 

 

 

(318,800)

 

 

 

 

(318,800)

Balance at April 1, 2023

$

125,424

$

1,203,134

$

(4,925,140)

$

9,488,582

$

(361,468)

$

69,648

$

5,600,180

See accompanying notes.

7

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Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Index to Notes

    

Page

9

9

10

11

11

13

14

16

19

19

20

21

22

8

Table of Contents

Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note A – Basis of Presentation

The accompanying consolidated financial statements of Arrow Electronics, Inc. (the “company”) were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for a fair presentation of the consolidated financial position and results of operations at, and for the periods presented. The consolidated results of operations for the interim periods are not necessarily indicative of results for the full year.

These consolidated financial statements do not include all of the information or notes necessary for a complete presentation and, accordingly, should be read in conjunction with the company’s audited consolidated financial statements and accompanying notes for the year ended December 31, 2023, as filed in the company’s Annual Report on Form 10-K.

Quarter End

The company operates on a quarterly calendar that closes on the Saturday closest to the end of the calendar quarter, except for the fourth quarter, which closes on December 31, 2024.

Reclassification

Certain prior period amounts were reclassified to conform to the current period presentation. These reclassifications did not have a material impact on previously reported amounts.

Note B – Impact of Recently Issued Accounting Standards

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). Upon adoption of ASU 2023-09, the company will disclose specific new categories in its income tax rate reconciliation and provide additional information for reconciling items above a quantitative threshold. The company will also disclose the amount of income taxes paid disaggregated by federal, state, and foreign taxes, and also disaggregated by individual jurisdictions in which income taxes paid were above a threshold. The company expects these amendments will first be applied in the company’s annual report on form 10-K for the fiscal year ending December 31, 2025, on a prospective basis.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). Upon adoption of ASU 2023-07, the company will disclose significant segment expenses, the title and position of the chief operating decision maker (“CODM”), and an explanation of how the reported measure of segment profit or loss is used by the CODM to assess segment performance and make resource allocation decisions. These amendments will first be applied in the company’s annual report on form 10-K for the fiscal year ending December 31, 2024, and will be applied retrospectively for all prior periods presented in the financial statements.

9

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Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note C – Goodwill and Intangible Assets

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. The company tests goodwill and other indefinite-lived intangible assets for impairment annually as of the first day of the fourth quarter, or more frequently if indicators of potential impairment exist.

Goodwill of companies acquired, allocated to the company’s reportable segments, is as follows:

    

Global 

    

    

(thousands)

Components

Global ECS

Total

Balance as of December 31, 2023 (a)

$

875,194

$

1,175,232

$

2,050,426

Acquisitions

17,275

17,275

Foreign currency translation adjustment

 

(3,959)

 

(9,206)

 

(13,165)

Balance as of March 30, 2024 (a)

$

888,510

$

1,166,026

$

2,054,536

(a)The total carrying value of goodwill as of March 30, 2024, and December 31, 2023 in the table above is reflected net of $1.6 billion of accumulated impairment charges, of which $1.3 billion was recorded in the global components reportable segment and $301.9 million was recorded in the global enterprise computing solutions (“ECS”) reportable segment.

Intangible assets, net, are comprised of the following as of March 30, 2024:

    

Gross 

    

    

Carrying 

Accumulated 

(thousands)

Amount

Amortization

Net

Customer relationships

$

257,263

$

(160,240)

$

97,023

Amortizable trade name

 

73,359

 

(51,108)

 

22,251

$

330,622

$

(211,348)

$

119,274

Intangible assets, net, are comprised of the following as of December 31, 2023:

    

Gross 

    

    

Carrying 

Accumulated 

(thousands)

Amount

Amortization

Net

Customer relationships

$

258,337

$

(156,141)

$

102,196

Amortizable trade name

 

73,811

 

(48,567)

 

25,244

$

332,148

$

(204,708)

$

127,440

During the first quarter of 2024 and 2023, the company recorded amortization expense related to identifiable intangible assets of $7.5 million and $8.0 million, respectively.

10

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Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note D – Investments in Affiliated Companies

The company owns a 50% interest in two joint ventures with Marubun Corporation (collectively “Marubun/Arrow”) and a 50% interest in one other joint venture. These investments are accounted for using the equity method.

The following table presents the company’s investment in affiliated companies:

    

March 30,

    

December 31,

(thousands)

2024

2023

Marubun/Arrow

$

46,810

$

50,779

Other

 

12,058

 

11,962

$

58,868

$

62,741

The equity in losses of affiliated companies consists of the following:

Quarter Ended

March 30,

April 1,

(thousands)

    

2024

    

2023

Marubun/Arrow

$

(534)

$

(397)

Other

 

190

 

317

$

(344)

$

(80)

Under the terms of various joint venture agreements, the company is required to pay its pro-rata share of the third-party debt of the joint ventures in the event that the joint ventures are unable to meet their obligations. There were no outstanding borrowings under the third-party debt agreements of the joint ventures as of March 30, 2024, and December 31, 2023.

Note E – Accounts Receivable

Accounts receivable, net, consists of the following:

March 30,

December 31,

(thousands)

    

2024

    

2023

Accounts receivable

$

11,207,057

$

12,384,553

Allowance for credit losses

 

(144,449)

 

(146,480)

Accounts receivable, net

$

11,062,608

$

12,238,073

The following table is a rollforward for the company’s allowance for credit losses:

Quarter Ended

March 30,

April 1,

(thousands)

    

2024

    

2023

Balance at beginning of period

$

146,480

$

93,397

Charged to income

 

2,879

 

14,991

Translation adjustments

 

(861)

 

388

Write-offs

 

(4,049)

 

(5,083)

Balance at end of period

$

144,449

$

103,693

The company monitors the current credit condition of its customers in estimating the expected credit losses and has not experienced significant changes in customers’ payment trends or significant deterioration in customers’ credit risk as of March 30, 2024.

11

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Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

EMEA Asset Securitization

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 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 February 2024, the company amended provisions 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

March 30,

April 1,

(thousands)

    

2024

    

2023

EMEA asset securitization, sales of accounts receivable

$

539,880

$

817,833

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 in the “Cash provided by operating activities” section of 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:

March 30,

December 31,

(thousands)

    

2024

    

2023

Receivables sold to unaffiliated financial institutions that were uncollected

$

425,240

$

529,266

Collateralized accounts receivable held by Arrow EMEA funding Corp B.V.

 

911,615

 

805,788

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 an account debtor’s insolvency or inability to pay.

12

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Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 March 30, 2024, the company was in compliance with all such financial covenants.

Factoring

In the normal course of business, certain of the company’s subsidiaries have factoring agreements to sell, with limited or no recourse, selected trade accounts receivable to financial institutions and accounts for these transactions as sales of the related receivables. The receivables 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 company typically does not retain financial or legal interests in these receivables. Factoring fees for the sales of accounts receivables are included in “Interest and other financing expense, net” in the consolidated statements of operations. The company continues servicing the receivables which were sold.

Sales of trade accounts receivable under the company’s factoring programs:

Quarter Ended

March 30,

April 1,

(thousands)

2024

2023

Sales of accounts receivable under the factoring programs

$

208,560

$

382,278

Other amounts under the company’s factoring programs:

March 30,

December 31,

(thousands)

2024

2023

Receivables sold under the factoring programs that were uncollected

$

259,236

$

375,940

Note F – Supplier Finance Programs

At the request of certain of the company’s suppliers, the company has entered into agreements (“supplier finance programs”) with third-party finance providers, which facilitate the participating suppliers’ ability to sell their receivables from the company to the third-party financial institutions, at the sole discretion of the suppliers. For agreeing to participate in these programs, the company seeks to secure improved standard payment terms with its suppliers. The company is not involved in negotiating terms of the arrangements between its suppliers and the financial institutions and has no economic interest in a supplier’s decision to enter into these agreements, or sell receivables from the company. The company’s rights and obligations to its suppliers, including amounts due, are not impacted by suppliers’ decisions to sell amounts under the arrangements. However, the company agrees to make all payments to the third-party financial institutions, and the company’s right to offset balances due from suppliers against payment obligations is restricted by the agreements for those payment obligations that have been sold by suppliers. As of March 30, 2024, and December 31, 2023, the company had $899.4 million and $1.1 billion, respectively, in obligations outstanding under these programs included in “Accounts payable” on the company’s consolidated balance sheets and all activity related to the obligations is presented within operating activities on the consolidated statements of cash flows.

13

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Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note G – Debt

Short-term borrowings, including current portion of long-term debt, consist of the following:

March 30,

December 31,

(thousands)

    

2024

    

2023

3.25% notes, due September 2024

$

499,505

$

499,224

Commercial paper

 

427,763

 

1,121,882

Other short-term borrowings

 

18,430

 

32,848

$

945,698

$

1,653,954

The company has $500.0 million in uncommitted lines of credit. There were no outstanding borrowings under the uncommitted lines of credit at March 30, 2024 and December 31, 2023. These borrowings were provided on a short-term basis and their maturity was agreed upon between the company and the lender. The uncommitted lines of credit had a weighted-average effective interest rate of 5.82% and 5.83% at March 30, 2024 and December 31, 2023, respectively.

The company has a commercial paper program, and the maximum aggregate balance of commercial paper outstanding may not exceed the borrowing capacity of $1.2 billion. Amounts outstanding under the commercial paper program are backstopped by available commitments under the company’s revolving credit facility. There were $427.8 million in outstanding borrowings under this program at March 30, 2024 and $1.1 billion in outstanding borrowings at December 31, 2023. The commercial paper program had an effective interest rate of 5.80% and 5.90% at March 30, 2024 and December 31, 2023, respectively.

Long-term debt consists of the following:

March 30,

December 31,

(thousands)

    

2024

    

2023

Revolving Credit Facility

$

50,000

$

North American asset securitization program

625,000

198,000

4.00% notes, due 2025

 

349,245

 

349,061

6.125% notes, due 2026 (a) (b)

498,343

497,661

7.50% senior debentures, due 2027

 

110,205

 

110,184

3.875% notes, due 2028

 

497,264

 

497,098

2.95% notes, due 2032

 

495,172

 

495,039

Other obligations with various interest rates and due dates

 

7,021

 

6,510

$

2,632,250

$

2,153,553

(a)Upon issuance of the 6.125% notes due March 2026, the company entered into an interest rate swap, which effectively converted the 6.125% notes to floating rate notes based on the secured overnight financing rate (“SOFR”) + 0.508%, or an effective interest rate of 5.83% as of March 30, 2024. In March 2024, the company received a notice from the swap counterparty to terminate the swap without penalty. The effective date of cancellation was April 1, 2024. Refer to Note H.
(b)In April 2024, the company completed the sale of $500.0 million principal amount of 5.875% notes due April 2034.  The net proceeds of the offering of $498.6 million were used for general corporate purposes and to repay the $500.0 million principal amount of its 6.125% notes due March 2026.

The 7.50% senior debentures are not redeemable prior to their maturity. All other notes may be called at the option of the company subject to “make whole” clauses with the exception of the 6.125% notes which were called at par in April 2024.

14

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Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The estimated fair market value of long-term debt, using quoted market prices, is as follows:

March 30,

December 31,

(thousands)

    

2024

    

2023

4.00% notes, due 2025

$

344,500

$

343,500

6.125% notes, due 2026

499,500

502,000

7.50% senior debentures, due 2027

 

116,000

 

117,000

3.875% notes, due 2028

 

475,000

 

475,000

2.95% notes, due 2032

 

420,000

 

425,000

The carrying amount of the company’s other short-term borrowings, uncommitted lines of credit, revolving credit facility, 3.25% notes due in 2024, North American asset securitization program, commercial paper, and other obligations approximate their fair value.

The company has a $2.0 billion revolving credit facility maturing in September 2026. The facility may be used by the company for general corporate purposes including working capital in the ordinary course of business, letters of credit, repayment, prepayment or purchase of long-term indebtedness, acquisitions, and as support for the company’s commercial paper program, as applicable. Interest on borrowings under the revolving credit facility is calculated using a base rate or SOFR, plus a spread (1.08% at March 30, 2024), which is based on the company’s credit ratings, plus a credit spread adjustment of 0.10% or an effective interest rate of 6.44% at March 30, 2024. The facility fee, which is based on the company’s credit ratings, was 0.175% of the total borrowing capacity at March 30, 2024. The company had $50.0 million in outstanding borrowings under the revolving credit facility at March 30, 2024 and no outstanding borrowings under the revolving credit facility at December 31, 2023.

The company has a North American asset securitization program collateralized by accounts receivable of certain of its subsidiaries. The company may borrow up to $1.5 billion under the program which matures in September 2025. The program is conducted through Arrow Electronics Funding Corporation (“AFC”), a wholly-owned, bankruptcy remote subsidiary. The North American asset securitization program does not qualify for sale treatment. Accordingly, the accounts receivable and related debt obligation remain on the company’s consolidated balance sheets. Interest on borrowings is calculated using a base rate plus a spread (0.40% at March 30, 2024) plus a credit spread adjustment of 0.10% or an effective interest rate of 6.44% at March 30, 2024. The facility fee is 0.40% of the total borrowing capacity.

The company had $625.0 million and $198.0 million in outstanding borrowings under the North American asset securitization program at March 30, 2024 and December 31, 2023, respectively, which was included in “Long-term debt” on the company’s consolidated balance sheets. Total collateralized accounts receivable of approximately $2.3 billion and $2.7 billion were held by AFC and were included in Accounts receivable, net” on the company’s consolidated balance sheets at March 30, 2024 and December 31, 2023, respectively. Any accounts receivable held by AFC would likely not be available to other creditors of the company in the event of bankruptcy or insolvency proceedings of the company before repayment of any outstanding borrowings under the North American asset securitization program.

Both the revolving credit facility and North American asset securitization program include terms and conditions that limit the incurrence of additional borrowings and require that certain financial ratios be maintained at designated levels. As of March 30, 2024, the company was in compliance with all such financial covenants.

Interest and dividend income of $19.5 million and $14.3 million for the first quarter of 2024 and 2023, respectively, were recorded in “Interest and other financing expense, net” within the company’s consolidated statements of operations.

15

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Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note H – Financial Instruments Measured at Fair Value

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The company utilizes a fair value hierarchy, which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The fair value hierarchy has three levels of inputs that may be used to measure fair value:

Level 1

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2

Quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3

Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable.

The following table presents assets (liabilities) measured at fair value on a recurring basis at March 30, 2024:

(thousands)

    

Balance Sheet Location

    

Level 1

    

Level 2

    

Level 3

    

Total

Cash equivalents (a)

 

Cash and cash equivalents

$

10,689

$

$

$

10,689

Equity investments (b)

 

Other assets

 

53,211

 

 

 

53,211

Foreign exchange contracts designated as net investment hedges

 

Other assets / other current assets

 

 

53,778

 

 

53,778

$

63,900

$

53,778

$

$

117,678

The following table presents assets (liabilities) measured at fair value on a recurring basis at December 31, 2023:

(thousands)

    

Balance Sheet Location

    

Level 1

    

Level 2

    

Level 3

    

Total

Cash equivalents (a)

 

Cash and cash equivalents

$

8,729

$

$

$

8,729

Equity investments (b)

 

Other assets

 

57,625

 

 

 

57,625

Interest rate swap designated as fair value hedge

 

Other liabilities

 

 

(454)

 

 

(454)

Foreign exchange contracts designated as net investment hedges

 

Other assets / other current assets

 

 

47,245

 

 

47,245

$

66,354

$

46,791

$

$

113,145

(a)Cash equivalents include highly liquid investments with an original maturity of less than three months.
(b)The company has an 8.4% equity ownership interest in Marubun Corporation and a portfolio of mutual funds with quoted market prices. The company recorded unrealized (losses) gains of ($3.6) million and $8.5 million for the first quarter of 2024 and 2023, respectively, on equity securities held at the end of the quarter.

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to goodwill and identifiable intangible assets (refer to Note C). The company tests these assets for impairment if indicators of potential impairment exist or at least annually if indefinite-lived.

Derivative Instruments

The company uses various financial instruments, including derivative instruments, for purposes other than trading. Certain derivative instruments are designated at inception as hedges and measured for effectiveness both at inception and on an ongoing basis. Derivative instruments not designated as hedges are carried at fair value on the consolidated balance sheets with changes in fair value recognized in earnings.

16

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Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Interest Rate Swaps

The company manages the risk of variability in interest rates of future expected debt issuances by entering into various forward-starting interest rate swaps, designated as cash flow hedges. Changes in fair value of interest rate swaps designated as cash flow hedges are recorded in the shareholders’ equity section in the company’s consolidated balance sheets in “Accumulated other comprehensive loss” and will be reclassified into income over the life of the anticipated debt issuance or in the period the hedged forecasted cash flows are deemed no longer probable to occur. Reclassified gains and losses are recorded within the line item “Interest and other financing expense, net” in the consolidated statements of operations. The fair value of interest rate swaps are estimated using a discounted cash flow analysis on the expected cash flows of each derivative using observable inputs, including interest rate curves and credit spreads.

In June 2023, the company terminated its outstanding forward-starting interest rate swaps and received a cash payment of $56.7 million, which was reported in the “Cash flows from financing activities” section of the consolidated statements of cash flows. The forecasted transactions related to the swaps continued to be probable to occur by December 31, 2025, and the $56.7 million gain on the termination of the interest rate swaps remained in “Accumulated other comprehensive loss” on the company’s consolidated balance sheets at March 30, 2024. In April 2024, the forecasted bond issuance occurred, and the $56.7 million gain will be amortized to "Interest and other financing expense, net" in the company's consolidated statement of operations over the 10-year life of the bond.

The company occasionally enters into interest rate swap transactions, designated as fair value hedges, that convert certain fixed-rate debt to variable-rate debt in order to manage its targeted mix of fixed- and floating-rate debt. For qualifying interest rate fair value hedges, gains or losses on derivatives are included in “Interest and other financing expense, net” in the consolidated statements of operations. The change in fair value of the hedged item attributable to the risk being hedged is reported as an adjustment to its carrying value and is also included in “Interest and other financing expense, net”.

As of December 31, 2023, the company had one outstanding interest rate swap designated as a fair value hedge of its 6.125% notes due in March 2026, the terms of which were as follows:

    

    

Notional Amount

    

Interest Rate due

    

 Interest Rate due to 

Trade Date

Maturity Date

(thousands)

from Counterparty

Counterparty

February 2023

March 2026

$

500,000

6.125%

SOFR+0.508%

The counterparty to the interest rate swap had the option to cancel the swaps after one year, without penalty. In March 2024, the counterparty cancelled the swap and the company de-designated the fair value hedging relationship.

Foreign Exchange Contracts

The company’s foreign currency exposure relates primarily to international transactions where the currency collected from customers can be different from the currency used to purchase the product. The company’s primary exposures to such transactions are denominated primarily in the following currencies: Euro, Indian Rupee, and Chinese Renminbi. The company enters into foreign exchange forward, option, or swap contracts (collectively, the “foreign exchange contracts”) to facilitate the hedging of foreign currency exposures resulting from inventory purchases and sales and mitigate the impact of changes in foreign currency exchange rates related to these transactions. Foreign exchange contracts generally have terms of no more than six months. The company does not enter into foreign exchange contracts for trading purposes. The risk of loss on a foreign exchange contract is the risk of nonperformance by the counterparties, which the company minimizes by limiting its counterparties to major financial institutions. The fair value of the foreign exchange contracts is estimated using foreign currency spot rates and forward rates quotes by third-party financial institutions. The notional amount of the foreign exchange contracts inclusive of foreign exchange contracts designated as a net investment hedge at March 30, 2024 and December 31, 2023 was $1.1 billion and $1.0 billion, respectively.

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Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Gains and losses related to non-designated foreign currency exchange contracts are recorded in “Cost of sales” on the company’s consolidated statements of operations. Gains and losses related to foreign currency exchange contracts designated as cash flow hedges are recorded in “Cost of sales,” “Selling, general, and administrative,” and “Interest and other financing expense, net” based upon the nature of the underlying hedged transaction, on the company’s consolidated statements of operations. Gains or losses on these contracts are deferred and recognized when the underlying future purchase or sale is recognized or when the corresponding asset or liability is revalued, and were not material to the financial statements for the periods presented.

At March 30, 2024 and December 31, 2023, the following foreign exchange contracts were designated as net investment hedges, hedging a portion of the company’s net investments in subsidiaries with Euro-denominated net assets:

Maturity Date

Notional Amount (thousands)

September 2024

 

EUR

50,000

April 2025

 

EUR

100,000

January 2028

 

EUR

100,000

Total

 

EUR

250,000

The change in the fair value of derivatives designated as net investment hedges are recorded in “foreign currency translation adjustment” (“CTA”) within “Accumulated other comprehensive loss” on the company’s consolidated balance sheets. Amounts excluded from the assessment of hedge effectiveness are included in “Interest and other financing expense, net” on the company’s consolidated statements of operations.

During the first quarter of 2023, a foreign exchange contract designated as a net investment hedge matured and the company received $10.7 million, which is reported in the “Cash flows from investing activities” section of the consolidated statements of cash flows.

The effects of derivative instruments on the company’s consolidated statements of operations and other comprehensive income are as follows:

Quarter Ended

March 30,

April 1,

(thousands)

    

Income Statement Line

    

2024

    

2023

Gain (Loss) Recognized in Income

 

  

 

  

 

  

Foreign exchange contracts, net investment hedge (a)

 

Interest Expense

$

1,804

$

2,048

Interest rate swaps, cash flow hedge

 

Interest Expense

 

(695)

 

(839)

Interest rate swap, fair value hedge (b)

 

Interest Expense

 

454

 

2,742

Total

 

  

$

1,563

$

3,951

Gain (Loss) Recognized in Other Comprehensive Income (Loss) before reclassifications, net of tax

 

  

 

  

 

  

Foreign exchange contracts, net investment hedge (c)

 

  

$

4,970

$

1,125

Interest rate swaps, cash flow hedge

 

  

 

 

(4,347)

Total

 

  

$

4,970

$

(3,222)

(a)Represents derivative amounts excluded from the assessment of effectiveness for the net investment hedges reclassified from CTA to “Interest and other financing expenses, net”.
(b)The cumulative amount of fair value hedging adjustments to the carrying value of hedged debt instruments totaled a loss of $0.4 million and $2.5 million for the first quarter of 2024 and 2023, respectively.
(c)Includes derivative gains (losses) excluded from the assessment of effectiveness for the net investment hedges and recognized in other comprehensive income, net of tax, of $0.2 million and ($1.7) million for the first quarter of 2024 and 2023, respectively, which were excluded from the assessment of effectiveness for the net investment hedges and recognized in other comprehensive income (loss), net of tax.

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Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Other

The carrying amount of “cash and cash equivalents”, “accounts receivable, net”, and “accounts payable” approximate their fair value due to the short maturities of these financial instruments.

Note I – Restructuring, Integration, and Other

Restructuring initiatives and integration costs are due to the company's continued efforts to lower costs, drive operational efficiency, integrate acquired businesses, and the consolidation of certain operations, as necessary. The following table presents the components of the restructuring, integration, and other:

Quarter Ended

March 30,

April 1,

(thousands)

    

2024

    

2023

Restructuring and integration (credits) charges

$

(364)

$

1,141

Other charges

 

47,220

 

1,419

$

46,856

$

2,560

Other Charges

Other charges include $42.8 million related to termination of personnel as a part of operating expense reduction initiatives not related to exit or disposal activities. As of March 30, 2024, the accrued liabilities related to the operating expense reduction initiatives totaled $32.1 million and substantially all accrued amounts are expected to be spent in cash within one year.

Note J – Net Income per Share

Basic net income per share is computed by dividing net income attributable to shareholders by the weighted-average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. The dilutive effect of equity awards is calculated using the treasury stock method.

The following table presents the computation of net income per share on a basic and diluted basis:

Quarter Ended

March 30,

April 1,

(thousands except per share data)

    

2024

    

2023

Net income attributable to shareholders

$

83,601

$

273,750

Weighted-average shares outstanding - basic

 

54,251

 

58,731

Net effect of various dilutive stock-based compensation awards

 

564

 

748

Weighted-average shares outstanding - diluted

 

54,815

 

59,479

Net income per share:

 

  

 

  

Basic

$

1.54

$

4.66

Diluted (a)

$

1.53

$

4.60

(a) Equity awards excluded from diluted net income per share as their effect would have been anti-dilutive

128

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Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note K – Shareholders’ Equity

Accumulated Other Comprehensive (Loss) Income

The following table presents the changes in Accumulated other comprehensive (loss) income, excluding noncontrolling interests:

Quarter Ended

March 30,

April 1,

(thousands)

    

2024

    

2023

Foreign Currency Translation Adjustment and Other:

  

  

Other comprehensive (loss) income before reclassifications (a)

$

(98,172)

$

8,008

Amounts reclassified into income

 

45

 

200

Unrealized Gain on Foreign Exchange Contracts Designated as Net Investment Hedges, Net:

 

 

  

Other comprehensive income before reclassifications (b)

 

4,970

 

1,125

Amounts reclassified into income

 

(1,372)

 

(1,558)

Unrealized Gain on Interest Rate Swaps Designated as Cash Flow Hedges, Net:

 

  

 

  

Other comprehensive loss before reclassifications (b)

 

 

(4,347)

Amounts reclassified into income

 

529

 

638

Employee Benefit Plan Items, Net:

 

  

 

  

Amounts reclassified into income

 

(91)

 

(272)

Net change in Accumulated other comprehensive (loss) income

$

(94,091)

$

3,794

(a)Foreign currency translation adjustment includes intra-entity foreign currency transactions that are of a long-term investment nature of $6.8 million and $5.6 million for the first quarter of 2024 and 2023, respectively.
(b)For additional information related to net investment hedges and interest rate swaps refer to Note H.

Common Stock Outstanding Activity

The following tables set forth the activity in the number of shares outstanding:

    

Common 

    

    

Common 

Stock 

Treasury 

Stock 

(thousands)

Issued

Stock

Outstanding

Common stock outstanding at December 31, 2023

 

57,691

 

3,880

 

53,811

Shares issued for stock-based compensation awards

 

264

 

(57)

 

321

Repurchases of common stock

 

 

902

 

(902)

Common stock outstanding at March 30, 2024

 

57,955

 

4,725

 

53,230

    

Common 

    

    

Common 

Stock 

Treasury 

Stock 

(thousands)

Issued

Stock

Outstanding

Common stock outstanding at December 31, 2022

 

125,424

 

66,175

 

59,249

Shares issued for stock-based compensation awards

 

 

(313)

 

313

Repurchases of common stock

 

 

2,564

 

(2,564)

Common stock outstanding at April 1, 2023

 

125,424

 

68,426

 

56,998

During the year ended December 31, 2023, the company retired 67.7 million shares of treasury stock. Refer to Note 10  “Shareholders’ Equity” in the company’s Annual Report on Form 10-K for the year ended December 31, 2023.

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Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Share-Repurchase Program

The following table shows the company’s share-repurchase program as of March 30, 2024:

    

    

    

Approximate

Dollar Value of

Dollar Value

Dollar Value of

Shares that May

Approved for

Shares

Yet be Purchased

Share-Repurchase Details by Month of Board Approval (thousands)

Repurchase

Repurchased

Under the Program

September 2022

$

600,000

$

600,000

$

January 2023

 

1,000,000

 

524,590

 

475,410

Total (a)

$

1,600,000

$

1,124,590

$

475,410

(a)The dollar value of shares repurchased includes an accrual of $0.7 million for excise taxes during the first quarter of 2024 which is recorded within “Treasury stock” on the company’s consolidated balance sheets.

The company repurchased 0.8 million shares of its common stock for $100.0 million and 2.6 million shares of its common stock for $300.2 million in the first quarter of 2024 and 2023, respectively, under the company’s share-repurchase program, excluding excise taxes. As of March 30, 2024, approximately $475.4 million remained available for repurchase under the share-repurchase program. The company’s share-repurchase program does not have an expiration date.

Note L – Contingencies

Environmental Matters

In connection with the purchase of Wyle Electronics (“Wyle”) in August 2000, the company entered into a settlement agreement under which, the company accepted responsibility for any potential subsequent costs incurred for environmental clean-up associated with any then-existing contamination or violation of environmental regulations. The company is aware of two facilities (in Huntsville, Alabama (the “Huntsville Site”) and Norco, California (the “Norco Site”)) at which contaminated soil and groundwater was identified and required environmental remediation.

As successor-in-interest to Wyle, the company is the beneficiary of various Wyle insurance policies that covered liabilities arising out of operations at Norco and Huntsville. To date, the company has recovered approximately $47.3 million from certain insurance carriers relating to environmental clean-up matters at the Norco and Huntsville sites, and continues to pursue additional recoveries from one insurer related solely to the Huntsville site. The company has not recorded a receivable for any potential future insurance recoveries related to the Norco and Huntsville environmental matters, as the realization of the claims for recovery are not deemed probable at this time.

Costs are recorded for environmental matters when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Environmental liabilities are included in “Accrued expenses” and “Other liabilities” on the company’s consolidated balance sheets. The company has determined that there is no amount within the environmental liability ranges discussed below that is a better estimate than any other amount, and therefore has recorded the accruals at the minimum amount of the ranges. The liabilities were estimated based on current costs and are not discounted. The costs related to these environmental matters (referred to as “environmental costs”) include remediation, project management, regulatory oversight, and investigative and feasibility study activities.

The company expects the liabilities associated with such ongoing remediation to be resolved over an extended period of time and the accruals for environmental liabilities are adjusted periodically as facts and circumstances change, assessment and remediation efforts progress, or as additional technical or legal information becomes available. Environmental liabilities are difficult to assess and estimate due to various unknown factors such as the timing and extent of remediation,

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Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

improvements in remediation technologies, orders by administrative agencies, and the extent to which environmental laws and regulations may change in the future. Accordingly, the company cannot presently estimate the ultimate potential costs related to the Huntsville and Norco sites.

Environmental Matters - Huntsville

In February 2015, the company and the Alabama Department of Environmental Management (“ADEM”) finalized and executed a consent decree in connection with the Huntsville Site. Characterization of the extent of contaminated soil and groundwater is complete and has been approved by ADEM. Health-risk evaluations and a Corrective Action Development Plan were approved by ADEM in 2018, opening the way for pilot testing of on-site remediation in late 2019. Due to the effectiveness of the pilot testing, the pilot testing process has been expanded and remains underway with annual application of bioremediation reagents, semi-annual groundwater monitoring, as well as data collection to direct future bioremediation injections. Approximately $8.8 million has been spent to date.  The subsequent environmental costs at the site are estimated to be between $5.6 million and $17.3 million.

Environmental Matters - Norco

In October 2003, the company entered into a consent decree with Wyle Laboratories and the California Department of Toxic Substance Control (“DTSC”) in connection with the Norco Site. In September 2013, the DTSC approved the final Remedial Action Plan (“RAP”) for actions in five on-site areas and one off-site area. As of 2018, the remediation measures described in the RAP had been implemented. Routine progress monitoring of groundwater and soil gas continue on-site and off-site. Approximately $83.8 million has been spent to date.  The subsequent environmental costs at the site are estimated to be between $21.5 million and $37.7 million.

It is reasonably possible that the company will need to adjust the liabilities noted above for the Norco and Huntsville sites to reflect the effects of new or additional information, to the extent that such information impacts the costs, timing or duration of the required actions. Future changes in estimates of the costs, timing or duration of the required actions could have a material adverse effect on the company’s consolidated financial position, results of operations or cash flows.

Other

From time to time, in the normal course of business, the company may become liable with respect to other pending and threatened litigation, environmental, regulatory, labor, product, and tax matters. While such matters are subject to inherent uncertainties, it is not currently anticipated that any such matters will materially impact the company’s consolidated financial position, liquidity, or results of operations.

Note M – Segment and Geographic Information

The company is a global provider of products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions. The company has one of the world’s broadest portfolios of product offerings available from leading electronic components and enterprise computing solutions suppliers, coupled with a range of services, solutions and tools that enables its suppliers to distribute their technologies and help its industrial and commercial customers to source, build upon, and leverage these technologies to grow their businesses, reduce their time to market, and enhance their overall competitiveness. The company is a trusted partner in a complex value chain and is uniquely positioned through its electronics components and IT content portfolios to increase value for stakeholders.

The company has two reportable segments, the global components business and the global enterprise computing solutions (“ECS”) business. The company’s global components business, enabled by a comprehensive range of value-added capabilities and services, markets, and distributes electronic components to original equipment manufacturers (“OEMs”) and contract manufacturers (“CMs”). The company’s global ECS business is a leading value-added provider of

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Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

comprehensive computing solutions and services. The global ECS portfolio of computing solutions includes datacenter, cloud, security, and analytics solutions. Global ECS brings broad market access, extensive supplier relationships, scale, and resources to help its value-added resellers (“VARs”) and managed service providers (“MSPs”) meet the needs of their end-users.

As a result of the company’s philosophy of maximizing operating efficiencies through the centralization of certain functions, operating income for the reportable segments excludes unallocated corporate overhead costs, depreciation on corporate fixed assets, and restructuring, integration, and other costs, as they are not attributable to the individual reportable segments and are included in the corporate line item.

Sales, by reportable segment by geographic area, are as follows:

Quarter Ended

March 30,

April 1,

(thousands)

    

2024

    

2023

Sales:

 

  

 

  

Components:

 

  

 

  

Americas

$

1,596,692

$

2,233,453

EMEA

 

1,656,507

 

2,246,145

Asia/Pacific

 

1,938,218

 

2,376,195

Global components

$

5,191,417

$

6,855,793

ECS:

 

  

 

  

Americas

$

907,748

$

998,114

EMEA

 

825,095

 

882,521

Global ECS

$

1,732,843

$

1,880,635

Consolidated

$

6,924,260

$

8,736,428

Operating income (loss), by reportable segment, are as follows:

Quarter Ended

March 30,

April 1,

(thousands)

    

2024

    

2023

Operating income (loss):

 

  

 

  

Global components (a)

$

225,562

$

417,539

Global ECS

 

71,459

 

81,099

Corporate (b)

 

(111,104)

 

(76,486)

Consolidated

$

185,917

$

422,152

(a)Global components operating income includes charges of $10.5 million in inventory write downs related to the wind down of a business.
(b)Corporate operating income (loss) includes restructuring, integration, and other charges of $46.9 million and $2.6 million for the first quarter of 2024 and 2023, respectively. Restructuring, integration, and other charges for the first quarter of 2024 include charges of $42.8 million related to termination of personnel as a part of operating expense reduction initiatives. Refer to Note I.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Information Relating to Forward-Looking Statements

This report includes “forward-looking statements,” as the term is defined under the federal securities laws. Forward-looking statements are those statements which are not statements of historical fact. These forward-looking statements can be identified by forward-looking words such as “expects,” “anticipates,” “intends,” “plans,” “may,” “will,” “believes,” “seeks,” “estimates,” and similar expressions. These forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which could cause actual results or facts to differ materially from such statements for a variety of reasons, including, but not limited to: unfavorable economic conditions; disruptions or inefficiencies in the supply chain; political instability; impacts of military conflict and sanctions; industry conditions; changes in product supply, pricing and customer demand; competition; other vagaries in the global components and the global enterprise computing solutions (“ECS”) markets; deteriorating economic conditions, including economic recession, inflation, tax rates, foreign currency exchange rates, or the availability of capital; the effects of natural or man-made catastrophic events; changes in relationships with key suppliers; increased profit margin pressure; changes in legal and regulatory matters; non-compliance with certain regulations, such as export, antitrust, and anti-corruption laws; foreign tax and other loss contingencies; breaches of security or privacy of business information; outbreaks, epidemics, pandemics, or public health crises; and the company’s ability to generate positive cash flow. For a further discussion of these and other factors that could cause the company’s future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q and the company’s most recent Annual Report on Form 10-K, as well as in other filings the company makes with the Securities and Exchange Commission. Shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The company undertakes no obligation to update publicly or revise any of the forward-looking statements.

Certain Non-GAAP Financial Information

In addition to disclosing financial results that are determined in accordance with accounting principles generally accepted in the United States (“GAAP”), the company also discloses certain non-GAAP financial information in the sections below captioned “Sales”, “Gross Profit”, “Operating Expenses”, “Operating Income”, “Income Tax”, and “Net Income Attributable to Shareholders”. Refer to these sections below for reconciliations of non-GAAP financial measures to the most directly comparable reported GAAP financial measures. Non-GAAP financial information includes the following:

Non-GAAP sales (referred to as “sales on a constant currency basis”) exclude the impact of changes in foreign currencies by retranslating prior period results at current period foreign exchange rates.
Non-GAAP gross profit excludes inventory write downs related to the wind down of a business within the global components reportable segment (“impact of wind down to inventory”) and impact of changes in foreign currencies.
Non-GAAP operating expenses exclude identifiable intangible asset amortization, restructuring, integration, and other, and the impact of changes in foreign currencies.
Non-GAAP operating income excludes identifiable intangible asset amortization, restructuring, integration, and other, and impact of wind down to inventory.
Non-GAAP effective tax rate and non-GAAP net income attributable to shareholders exclude identifiable intangible asset amortization, restructuring, integration, and other, impact of wind down to inventory, and gain on investments, net.

Management believes that providing this additional information is useful to the reader to better assess and understand the company’s operating performance and future prospects in the same manner as management, especially when comparing results with previous periods. Management typically monitors the business as adjusted for these items, in addition to GAAP results, to understand and compare operating results across accounting periods, for internal budgeting purposes, for short-term and long-term operating plans, and to evaluate the company’s financial performance. However, analysis of results on a non-GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with GAAP. For a discussion of what is included within “Restructuring, integration, and other” and “Gain on investments, net” refer to the similarly captioned sections of this item below.

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Table of Contents

Overview

The company is a global provider of products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions. The company has one of the world’s broadest portfolios of product offerings available from leading electronic components and enterprise computing solutions suppliers, coupled with a range of services, solutions and tools that enables its suppliers to distribute their technologies and help its industrial and commercial customers to source, build upon, and leverage these technologies to grow their businesses, reduce their time to market, and enhance their overall competitiveness. The company is a trusted partner in a complex value chain and is uniquely positioned through its electronics components and IT content portfolios to increase value for stakeholders. The company has two reportable segments, the global components reportable segment and the global ECS reportable segment. The company’s global components reportable segment, enabled by a comprehensive range of value-added capabilities and services, markets and distributes electronic components to original equipment manufacturers (“OEMs”) and contract manufacturers (“CMs”). The company’s global ECS reportable segment is a leading value-added provider of comprehensive computing solutions and services. Its portfolio of computing solutions includes datacenter, cloud, security, and analytics solutions. Global ECS brings broad market access, extensive supplier relationships, scale, and resources to help its value-added resellers (“VARs”) and managed service providers (“MSPs”) meet the needs of their end-users. For the first quarter of 2024, approximately 75% and 25% of the company’s sales were from the global components reportable segment and the global ECS reportable segment, respectively.

The company’s strategic initiatives include the following:

Offering a variety of value-added services in the global components reportable segment, including demand creation, design, engineering, global marketing and integration services to promote the future sale of suppliers’ products, which generally lead to longer and more profitable relationships with its suppliers and customers.
Providing global supply chain service offerings such as procurement, logistics, warehousing, and insights from data analytics within the global components reportable segment.
Enabling customer cloud solutions through the global ECS reportable segments’ cloud marketplace and management platform, ArrowSphere, which helps VARs and MSPs to manage, differentiate, and scale their cloud businesses while providing the business intelligence that IT solution providers need to drive growth.

The company’s long-term financial objectives are to grow sales faster than the market, increase the markets served, grow profits faster than sales, generate earnings per share growth in excess of competitors’ earnings per share growth and market expectations, grow earnings per share at a rate that provides the capital necessary to support the company’s business strategy, allocate and deploy capital effectively so that return on invested capital exceeds the company’s cost of capital, and increase return on invested capital. To achieve its objectives, the company seeks to capture significant opportunities to grow across products, markets, and geographies. To supplement its organic growth strategy, the company continually evaluates strategic acquisitions to broaden its product and value-added service offerings, increase its market penetration, and expand its geographic reach.

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Table of Contents

Executive Summary

Quarter Ended

March 30,

April 1,

(millions except per share data)

2024

2023

Change

Consolidated sales

$

6,924

$

8,736

(20.7)

%

Global components sales

$

5,191

$

6,856

(24.3)

%

Global ECS sales

$

1,733

$

1,881

(7.9)

%

Gross profit margin

12.4

%

12.7

%

(30)

bps

Non-GAAP gross profit margin

12.5

%

12.7

%

(20)

bps

Operating income

$

186

$

422

(56.0)

%

Operating income margin

2.7

%

4.8

%

(210)

bps

Non-GAAP operating income

$

251

$

433

(42.0)

%

Non-GAAP operating income margin

3.6

%

5.0

%

(140)

bps

Net income attributable to shareholders

$

84

$

274

(69.5)

%

Earnings per share attributable to shareholders - diluted

$

1.53

$

4.60

(66.7)

%

Non-GAAP net income attributable to shareholders

$

132

$

274

(51.8)

%

Non-GAAP earnings per share attributable to shareholders - diluted

$

2.41

$

4.60

(47.6)

%

Business environment and other trends:

During the first quarter of 2024, the global components reportable segment continued to experience a cyclical downturn characterized by elevated customer inventory levels, and a challenging global macroeconomic environment, contributing to lower demand for the company’s products. These trends could continue throughout 2024 and the duration and severity of the current downturn are highly uncertain.
Customers of the company’s global ECS reportable segment continue shifting preferences away from traditional, and on-premises solutions, and towards more “as a service” and cloud-based, or hybrid, solutions. These changes in product mix impact sales as an increased proportion of the company's revenue is recorded on a net basis compared to a gross basis. Refer to Note 1 “Summary of Significant Accounting Policies” in the company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Results of Operations

Sales by reportable segment

Following is an analysis of the company’s sales by reportable segment:

Quarter Ended

    

 

March 30,

April 1,

(millions)

2024

    

2023

    

Change

Consolidated sales, as reported

$

6,924

$

8,736

 

(20.7)

%

Impact of changes in foreign currencies

 

 

9

 

  

Consolidated sales, constant currency

$

6,924

$

8,746

 

(20.8)

%

Global components sales, as reported

$

5,191

$

6,856

 

(24.3)

%

Impact of changes in foreign currencies

 

 

(4)

 

  

Global components sales, constant currency

$

5,191

$

6,852

 

(24.2)

%

Global ECS sales, as reported

$

1,733

$

1,881

 

(7.9)

%

Impact of changes in foreign currencies

 

 

14

 

  

Global ECS sales, constant currency

$

1,733

$

1,894

 

(8.5)

%

The sum of the components for sales, as reported, and sales on a constant currency basis may not agree to totals, as presented, due to rounding.

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Table of Contents

Reportable segment sales by geographic region

Following is an analysis of the company’s reportable segment sales by geographic region:

Quarter Ended

March 30,

April 1,

2024

2023

(millions)

Sales

% of Sales

Sales

% of Sales

Change

Americas components sales

$

1,597

23.1

%

$

2,233

25.6

%

(28.5)

%

EMEA components sales

1,657

23.9

%

2,246

25.7

%

(26.3)

%

Asia/Pacific components sales

1,938

28.0

%

2,376

27.2

%

(18.4)

%

Global components sales

$

5,191

75.0

%

$

6,856

78.5

%

(24.3)

%

Americas ECS sales

$

908

13.1

%

$

998

11.4

%

(9.1)

%

EMEA ECS sales

825

11.8

%

883

10.1

%

(6.5)

%

Global ECS sales

$

1,733

25.0

%

$

1,881

21.5

%

(7.9)

%

Consolidated sales

$

6,924

100.0

%

$

8,736

100.0

%

(20.7)

%

The sum of the components for sales by geographic region and consolidated sales may not agree to totals, as presented, due to rounding.

During the first quarter of 2024, global components sales decreased compared to the year-earlier period primarily due to the following impacts:

sales declines in the Americas region primarily due to decreased demand for most major verticals, particularly industrial and communications;
sales declines in the EMEA region primarily due to decreased demand for the industrial and transportation verticals;
sales declines in the Asia/Pacific region primarily due to decreased demand for the industrial vertical.

During the first quarter of 2024, global ECS sales decreased in both regions compared to the year-earlier period primarily due to a shift in sales mix towards products such as software as-a-service and cloud-based solutions where sales are recorded on a net basis and somewhat softer demand in the Americas region.

Substantially all of the company’s sales are made on an order-by-order basis, rather than through long-term sales contracts. As such, the nature of the company’s business does not provide for the visibility of material forward-looking information from its customers and suppliers beyond a few months.

Gross Profit

Following is an analysis of the company’s consolidated gross profit:

Quarter Ended

    

March 30,

April 1,

(millions)

2024

    

2023

    

Change

Gross profit, as reported

$

858

$

1,114

 

(23.0)

%  

Impact of wind down to inventory

10

Impact of changes in foreign currencies

 

 

1

 

  

 

Non-GAAP gross profit

$

868

$

1,115

 

(22.1)

%  

Gross profit as a percentage of sales, as reported

 

12.4

%  

 

12.7

%  

(30)

 bps

Non-GAAP gross profit as a percentage of sales

 

12.5

%  

 

12.8

%  

(30)

 bps

The sum of the components for non-GAAP gross profit may not agree to totals, as presented, due to rounding.

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The decrease in gross profit related primarily to declining demand and gross profit margins for the first quarter of 2024.

Global components gross profit margins decreased during the first quarter of 2024, compared with the year-earlier period, due to product mix shifting toward lower margin products. Global components supply chain services offerings continued to have a positive impact on gross margins.
Global ECS gross profit margins increased during the first quarter of 2024, compared with the year-earlier period, due to product mix shifting towards a higher proportion of revenue recognized on a net basis in the current year partially offset by softer margins in the Americas region as the company works to optimize the customer mix and supplier line card to better serve the mid-market.

Operating Expenses

Following is an analysis of the company’s consolidated operating expenses:

Quarter Ended

    

March 30,

April 1,

(millions)

2024

    

2023

    

Change

Operating expenses, as reported

$

672

$

692

 

(2.9)

%  

Identifiable intangible asset amortization

 

(8)

 

(8)

 

  

 

Restructuring, integration, and other

 

(47)

 

(3)

 

  

 

Impact of changes in foreign currencies

 

 

1

 

  

 

Non-GAAP operating expenses

$

618

$

682

 

(9.5)

%  

Operating expenses as a percentage of sales

 

9.7

%  

 

7.9

%  

180

 bps

Non-GAAP operating expenses as a percentage of sales, constant currency

 

8.9

%  

 

7.8

%  

110

 bps

The sum of the components for non-GAAP operating expenses may not agree to totals, as presented, due to rounding.

The declines in operating expenses for the first quarter of 2024, relative to the year-earlier period, were primarily related to lower variable costs, primarily sales incentives, in line with the decrease in sales discussed above, partially offset by a $44.3 million increase in restructuring, integration and other (see discussion below).

Restructuring, Integration, and Other

Restructuring initiatives and integration costs are due to the company’s continued efforts to lower costs, drive operational efficiency, integrate acquired businesses, and consolidate certain operations, as necessary. The company recorded restructuring, integration, and other charges as follows:

Quarter Ended

March 30,

April 1,

(millions)

2024

    

2023

Restructuring and integration charges

$

-

$

1

Other charges

47

2

Total

$

47

$

3

Other charges for the first quarter of 2024, include $42.8 million in charges related to the termination of personnel as a part of the operating expense reduction initiatives.

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Operating Income

Following is an analysis of the company’s consolidated operating income, and operating income for the company’s two reportable segments:

Quarter Ended

    

March 30,

April 1,

(millions)

2024

    

2023

    

Change

Consolidated operating income, as reported

$

186

$

422

 

(56.0)

%  

Identifiable intangible asset amortization

 

8

 

8

 

  

 

Restructuring, integration, and other

 

47

 

3

 

  

 

Impact of wind down to inventory

10

Non-GAAP consolidated operating income

$

251

$

433

 

(42.0)

%  

Consolidated operating income as a percentage of sales

 

2.7

%  

 

4.8

%  

(210)

 bps

Non-GAAP consolidated operating income as a percentage of sales

 

3.6

%  

 

5.0

%  

(140)

 bps

Global components operating income, as reported

$

226

$

418

 

(46.0)

%  

Identifiable intangible asset amortization

 

6

 

7

 

  

 

Impact of wind down to inventory

10

Non-GAAP global components operating income

$

243

$

424

 

(42.8)

%  

Global components operating income as a percentage of sales

 

4.3

%  

 

6.1

%  

(180)

 bps

Non-GAAP global components operating income as a percentage of sales

 

4.7

%  

 

6.2

%  

(150)

 bps

Global ECS operating income, as reported

$

71

$

81

 

(11.9)

%  

Identifiable intangible asset amortization

 

1

 

1

 

  

 

Non-GAAP global ECS operating income

$

73

$

82

 

(11.9)

%  

Global ECS operating income as a percentage of sales

 

4.1

%  

 

4.3

%  

(20)

 bps

Non-GAAP global ECS operating income as a percentage of sales

 

4.2

%  

 

4.4

%  

(20)

 bps

The sum of the components of consolidated operating income do not agree to totals, as presented, because unallocated corporate amounts are not included in the table above. Refer to Note M “Segment and Geographic Information” of the Notes to the Consolidated Financial Statements for further discussion.

The decrease in consolidated operating income as a percentage of sales for the first quarter of 2024 relates primarily to the changes in sales and gross profit margins discussed above.

Gain on Investments, Net

Quarter Ended

March 30,

April 1,

(millions)

2024

    

2023

Gain on investments, net

$

$

10

Gain on investments, net is primarily related to the changes in fair value of assets related to the Arrow SERP pension plan, which consist primarily of life insurance policies and mutual fund assets, as well as changes in the fair value of the company’s investment in Marubun Corporation, refer to Note H “Financial Instruments Measured at Fair Value” of the Notes to the Consolidated Financial Statements.

Interest and Other Financing Expense, Net

The company recorded net interest and other financing expense as follows:

Quarter Ended

March 30,

April 1,

(millions)

2024

    

2023

Interest and other financing expense, net

$

(80)

$

(80)

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Interest expenses were mostly flat compared to the year-earlier period. Refer to the section below titled “Liquidity and Capital Resources” for more information on changes in borrowings.

Income Tax

Income taxes for the interim periods presented have been included in the accompanying consolidated financial statements on the basis of an estimated annual effective tax rate. The determination of the consolidated provision for income taxes requires management to make certain judgments and estimates. Changes in the estimated level of annual pre-tax earnings, tax laws, and changes resulting from tax audits can affect the overall effective income tax rate, which impacts the level of income tax expense and net income. Judgments and estimates related to the company’s projections and assumptions are inherently uncertain, therefore, actual results could differ from projections.

Following is an analysis of the company’s consolidated effective income tax rate:

Quarter Ended

March 30,

April 1,

2024

    

2023

 

Effective income tax rate

21.0

%  

21.8

%

Identifiable intangible asset amortization

0.2

%  

0.1

%

Restructuring, integration, and other

1.2

%

0.1

%

Impact of wind down to inventory

0.3

%  

%  

Gain on investments, net

%

(0.1)

%

Non-GAAP effective income tax rate

22.6

%  

21.8

%

The sum of the components for non-GAAP effective income tax rate may not agree to totals, as presented, due to rounding.

The change in the effective tax rate for the first quarter of 2024, compared to the year-earlier period, is primarily due to the changes in the mix of tax jurisdictions where taxable income is generated, tax law changes, utilization of tax credits in certain jurisdictions, and liabilities for uncertain tax positions.

Net Income Attributable to Shareholders

Following is an analysis of the company’s consolidated net income attributable to shareholders:

Quarter Ended

March 30,

April 1,

(millions)

2024

    

2023

Net income attributable to shareholders, as reported

$

84

$

274

Identifiable intangible asset amortization*

 

7

 

8

Restructuring, integration, and other

 

47

 

3

Gain on investments, net

 

 

(10)

Impact of wind down to inventory

10

Tax effect of adjustments above

 

(16)

 

Non-GAAP net income attributable to shareholders

$

132

$

274

The sum of the components for non-GAAP net income attributable to shareholders may not agree to totals, as presented, due to rounding.

* Identifiable intangible asset amortization excludes amortization attributable to the noncontrolling interest.

The decrease in net income attributable to shareholders in the first quarter of 2024 compared to the year-earlier period, relates primarily to changes in sales and gross margins as discussed above.

Liquidity and Capital Resources

Management believes that the company’s current cash availability, its current borrowing capacity under its revolving credit facility and asset securitization programs, and its expected ability to generate future operating cash flows are sufficient to meet its projected cash flow needs for the next 12 months and the foreseeable future. The company’s current committed

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and undrawn liquidity stands at over $2.4 billion in addition to $242.8 million of cash on hand at March 30, 2024. The company also may issue debt or equity securities in the future and management believes the company will have adequate access to the capital markets, if needed. The company continually evaluates its liquidity requirements and would seek to amend its existing borrowing capacity or access the financial markets as deemed necessary.

The company’s principal sources of liquidity are existing cash and cash equivalents, cash generated from operations and cash provided by its revolving credit facilities and debt. The company’s principal uses of liquidity include cash used in operations, investments to grow working capital, scheduled interest and principal payments on its borrowings, and the return of cash to shareholders through share repurchases.

The following table presents selected financial information related to liquidity:

March 30,

December 31,

(millions)

    

2024

    

2023

    

Change

Working capital

$

6,919

$

7,355

$

(436)

Cash and cash equivalents

 

243

 

218

 

25

Short-term debt

 

946

 

1,654

 

(708)

Long-term debt

 

2,632

 

2,154

 

478

Working Capital

The company maintains a significant investment in working capital which the company defines as accounts receivable, net, plus inventories less accounts payable. The change in working capital during the first quarter of 2024, was primarily attributable to decreases in inventory.

Working capital as a percentage of sales, which is defined as working capital divided by annualized quarterly sales, increased to 25.0% for the first three months of 2024, compared to 20.6% in the year-earlier period. The increase was primarily due to lower sales.  

Cash and Cash Equivalents

Cash equivalents consist of highly liquid investments, which are readily convertible into cash, with original maturities of three months or less. At March 30, 2024 and December 31, 2023, the company had cash and cash equivalents of $242.8 million and $218.1 million, respectively, of which $231.0 million and $160.0 million, respectively, were held outside the United States.

The company has $4.9 billion of undistributed earnings of its foreign subsidiaries which it deems indefinitely reinvested, and recognizes that it may be subject to additional foreign taxes and U.S. state income taxes, if it reverses its indefinite reinvestment assertion on these foreign earnings. The company also has $2.1 billion of foreign earnings that are not deemed permanently reinvested and are available for distribution in future periods as of March 30, 2024.

Revolving Credit Facilities and Debt

The following tables summarize the company’s credit facilities by category:

Outstanding Borrowings

Borrowing 

March 30,

December 31,

(millions)

    

Capacity

    

2024

    

2023

North American asset securitization program

$

1,500

$

625

$

198

Revolving credit facility

 

2,000

 

50

 

Commercial paper program (a)

 

1,200

 

428

 

1,122

Uncommitted lines of credit

 

500

 

 

(a)Amounts outstanding under the commercial paper program are backstopped by available commitments under the company’s revolving credit facility.

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Average Daily Balance Outstanding

Three Months Ended

Effective Interest Rate

March 30,

April 1,

March 30,

April 1,

(millions)

    

2024

    

2023

    

2024

2023

North American asset securitization program

$

724

$

1,291

6.44

%

5.30

%

Revolving credit facility

 

5

 

274

6.44

%

5.88

%

Commercial paper program

 

657

 

762

5.80

%

5.90

%

Uncommitted lines of credit

 

287

 

11

5.82

%

5.41

%

The company also 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 EMEA region. Receivables sold under the program are excluded from “Accounts receivable, net” and no corresponding liability is recorded on the company’s consolidated balance sheets. During the first three months of 2024 and 2023, the average daily balance outstanding under the EMEA asset securitization program was $457.1 million and $636.4 million, respectively. Refer to Note E “Accounts Receivable” of the Notes to the Consolidated Financial Statements for further discussion.

The following table summarizes recent events impacting the company’s capital resources:

(millions)

    

Activity

    

Date

    

Notional Amount

5.875% notes, due April 2034

Issued

April 2024

$

500

6.125% notes, due March 2026

Repaid

April 2024

$

500

Uncommitted lines of credit

Increase in Capacity

May 2023

$

300

4.50% notes, due March 2023

Repaid

March 2023

$

300

6.125% notes, due March 2026 (a)

Issued

March 2023

$

500

(a)Upon issuance of the 6.125% notes due March 2026, the company entered into an interest rate swap, which effectively converted the 6.125% notes to floating rate notes based on SOFR + 0.508%. In March 2024, the company received a notice from the swap counterparty to terminate the swap. The effective date of cancellation was April 1, 2024. See “Interest Rate Swaps” under Note H “Financial Instruments Measured at Fair Value” of the Notes to the Consolidated Financial Statements for further discussion.

Refer to Note G “Debt” of the Notes to the Consolidated Financial Statements for further discussion of the company’s short-term and long-term debt and available financing.

Cash Flows

The following table summarizes the company’s cash flows by category for the periods presented:

March 30,

April 1,

(millions)

    

2024

    

2023

    

Change

Net cash provided by operating activities

$

403

$

224

$

179

Net cash used for investing activities

 

(24)

 

(9)

 

(15)

Net cash used for financing activities

 

(318)

 

(211)

 

(107)

Cash Flows from Operating Activities

The net amount of cash provided by the company’s operating activities during the first three months of 2024 and 2023 was $403.2 million and $223.8 million, respectively. The change in cash provided by operating activities during 2024, compared to the year-earlier period, related primarily to the company’s historical counter-cyclical cash flow as the company generates cash flow in periods of lower demand due to reduced investments in working capital.

Cash Flows from Investing Activities

The net amount of cash used for investing activities during the first three months of 2024 and 2023 was $24.4 million and $9.2 million, respectively.

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Cash Flows from Financing Activities

The net amount of cash used for financing activities was $317.7 million during the first three months of 2024 compared to $211.0 million used for financing activities in the year-earlier period. The change in cash used for financing activities related primarily to more repayment of debt offset partially by lower share repurchases.

Capital Expenditures

Capital expenditures for the first quarter of 2024 and 2023 were $29.5 million and $20.1 million, respectively. The company expects capital expenditures to be approximately $90.0 million for fiscal year 2024.

Share-Repurchase Program

The company repurchased 0.8 million shares of its common stock for $100.0 million and 2.6 million shares of its common stock for $300.2 million in the first quarter of 2024 and 2023, respectively, under its share-repurchase program, excluding excise taxes. During the first three months of 2024, the company accrued $0.7 million of excise tax, which is recorded within “Treasury stock” on the company’s consolidated balance sheets and reduces the share-repurchase authorization. As of March 30, 2024, approximately $475.4 million remained available for repurchase under the share-repurchase program. The share-repurchase authorization does not have an expiration date and the pace of the repurchase activity will depend on factors such as the company’s working capital needs, cash requirements for acquisitions, debt repayment obligations or repurchases of debt, share price, and economic and market conditions. The share-repurchase program may be accelerated, suspended, delayed, or discontinued at any time subject to the approval of the company’s Board of Directors.

Contractual Obligations

The company has contractual obligations for short-term and long-term debt, interest on short-term and long-term debt, purchase obligations, operating leases, and other sources and uses of capital that are summarized in the sections titled “Contractual Obligations” and “Additional Capital Requirements and Sources” in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in the company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Refer to the section above titled “Revolving Credit Facilities and Debt” for updates to the company’s short-term and long-term debt obligations. Refer to Note H “Financial Instruments Measured at Fair Value” of the Notes to Consolidated Financial Statements for further discussion on hedging activities. As of March 30, 2024, there were no other material changes to the contractual obligations of the company.

Critical Accounting Estimates

The company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the company to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosure of contingent assets and liabilities. The company evaluates its estimates on an ongoing basis. The company bases its estimates on historical experience and on various other assumptions that are believed reasonable under the circumstances; the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

There have been no significant changes to the company’s critical accounting estimates during the three months ended March 30, 2024. Refer to the section titled “Critical Accounting Estimates” in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in the company’s Annual Report on Form 10-K for the year ended December 31, 2023.

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Table of Contents

Impact of Recently Issued Accounting Standards

See Note B “Impact of Recently Issued Accounting Standards” of the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements, including the anticipated dates of adoption and the effects on the company’s consolidated financial position and results of operations.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

During the three months ended March 30, 2024, there were no material changes in market risk for changes in foreign currency exchange rates and interest rates from the information provided in Part II, Item 7A – Quantitative and Qualitative Disclosures About Market Risk in the company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The company’s management, under the supervision and with the participation of the company’s Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the company’s disclosure controls and procedures as of March 30, 2024 (the “Evaluation”). Based upon the Evaluation, the company’s Chief Executive Officer and Chief Financial Officer concluded that the company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) were effective as of March 30, 2024.

Changes in Internal Control over Financial Reporting

There were no changes in the company’s internal control over financial reporting during the company’s most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

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Table of Contents

PART II. OTHER INFORMATION

Item 1.Legal Proceedings

The information set forth in Note L “Contingencies” in Notes to Consolidated Financial Statements in Item 1 Part I of this Report, is incorporated herein by reference.

Item 1A.Risk Factors

There have been no material changes to the company’s risk factors from those discussed in Part I, Item 1A - Risk Factors in the company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

The following table shows the share-repurchase activity for the quarter ended March 30, 2024:

    

    

    

    

Approximate

Total Number of

Dollar Value of

Shares

Shares that May

Total

Purchased as

Yet be

Number of

Average

Part of Publicly

Purchased

Shares

Price Paid

Announced

Under the

(thousands except share and per share data)

    

Purchased

    

per Share (a)

    

Program

    

Programs (b)

January 1 through January 27, 2024

 

$

 

$

576,154

January 28 through February 24, 2024

 

 

 

 

576,154

February 25 through March 30, 2024

 

802,225

 

124.65

 

802,225

 

475,410

Total

 

802,225

 

 

802,225

 

  

(a)Average price paid per share excludes 1% excise tax on stock repurchases.
(b)The company’s share-repurchase program does not have an expiration date. As of March 30, 2024, the total authorized dollar value of shares available for repurchase was $1.6 billion of which $1.1 billion has been utilized, while the $475.4 million in the table represents the remaining amount available for repurchase under the program.

Item 5.Other Information

Trading Arrangements

During the quarter ended March 30, 2024, none of the company’s directors or officers adopted, amended, or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement”, as those terms are defined in Regulation S-K, Item 408.

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Table of Contents

Item 6.Exhibits

Exhibit

Number

    

Exhibit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101*

 

Inline XBRL Document Set for the consolidated financial statements and accompanying notes in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q.

 

 

 

104*

 

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*

: Filed herewith.

**

: Furnished herewith.

+

: Indicates a management contract or compensatory plan or arrangement.

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Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ARROW ELECTRONICS, INC.

Date:

May 2, 2024

By:

/s/ Rajesh K. Agrawal

Rajesh K. Agrawal

Senior Vice President and Chief Financial Officer

(Duly Authorized Officer and Principal Financial Officer)

/s/ Yun Cho

Yun Cho

Vice President, Corporate Controller, and Chief Accounting Officer

(Principal Accounting Officer)

37