Accounts Receivable

6 Months Ended

Jun. 29, 2024

Accounts Receivable

Accounts Receivable

Note E – Accounts Receivable

Accounts receivable, net, consists of the following:

	June 29,		December 31,
(thousands)	2024		2023
Accounts receivable	$	11,004,433	$	12,384,553
Allowance for credit losses		(117,932)		(146,480)
Accounts receivable, net	$	10,886,501	$	12,238,073

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

	Six Months Ended
	June 29,		July 1,
(thousands)	2024		2023
Balance at beginning of period	$	146,480	$	93,397
Charged to income		(12,204)		21,256
Translation adjustments		(1,331)		541
Write-offs		(15,013)		(8,928)
Balance at end of period	$	117,932	$	106,266

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 June 29, 2024. For the six months ended June 29, 2024, the net benefit recorded to income of $12.2 million includes a $20.0 million reversal of an allowance previously recorded in the ECS reportable segment for aged receivables that were collected during the second quarter of 2024.

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. 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				Six Months Ended
	June 29,		July 1,		June 29,		July 1,
(thousands)	2024		2023		2024		2023
EMEA asset securitization, sales of accounts receivable	$	477,779	$	852,377	$	1,017,659	$	1,670,210

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:

	June 29,		December 31,
(thousands)	2024		2023
Receivables sold to unaffiliated financial institutions that were uncollected	$	380,694	$	529,266
Collateralized accounts receivable held by Arrow EMEA funding Corp B.V.		663,017		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.

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 June 29, 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				Six Months Ended
	June 29,		July 1,		June 29,		July 1,
(thousands)	2024		2023		2024		2023
Sales of accounts receivable under the factoring programs	$	239,361	$	418,160	$	447,921	$	800,438

Other amounts under the company’s factoring programs:

	June 29,		December 31,
(thousands)	2024		2023
Receivables sold under the factoring programs that were uncollected	$	216,653	$	375,940