Accounts Receivable

9 Months Ended

Sep. 28, 2024

Accounts Receivable

Accounts Receivable

Note E – Accounts Receivable

Accounts receivable, net, consists of the following:

	September 28,		December 31,
(thousands)	2024		2023
Accounts receivable	$	11,829,666	$	12,384,553
Allowance for credit losses		(103,065)		(146,480)
Accounts receivable, net	$	11,726,601	$	12,238,073

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

	Nine Months Ended
	September 28,		September 30,
(thousands)	2024		2023
Balance at beginning of period	$	146,480	$	93,397
(Credited) charged to income		(16,866)		64,701
Translation adjustments		(102)		(575)
Write-offs		(26,447)		(13,579)
Balance at end of period	$	103,065	$	143,944

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

September 28, 2024. The change in amounts charged to income for the allowance for credit losses relates primarily to charges of $25.4 million recorded during the first nine months of 2023 related to one customer within the global ECS reportable segment, of which $20.0 million was subsequently reversed upon recovery 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				Nine Months Ended
	September 28,		September 30,		September 28,		September 30,
(thousands)	2024		2023		2024		2023
EMEA asset securitization, sales of accounts receivable	$	437,052	$	815,812	$	1,454,711	$	2,486,022

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 are set forth below:

	September 28,		December 31,
(thousands)	2024		2023
Receivables sold to unaffiliated financial institutions that were uncollected	$	348,324	$	529,266
Collateralized accounts receivable held by Arrow EMEA funding Corp B.V.		618,086		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 September 28, 2024, the company was in compliance with all such financial covenants. As of September 28, 2024, and the date of issuance of the financial statements in this Quarterly Report on Form 10-Q, the company was out of compliance with certain operational covenants in its EMEA asset securitization program due to an administrative error. As a result, the participating banks have the right to declare the occurrence of an early amortization event, which would result in the cessation of further amounts being sold under the program. All participating banks have agreed to waivers and the parties are in the process of formalizing an amendment to the program which would return the company to compliance.

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				Nine Months Ended
	September 28,		September 30,		September 28,		September 30,
(thousands)	2024		2023		2024		2023
Sales of accounts receivable under the factoring programs	$	238,388	$	341,096	$	686,309	$	1,141,533

Other amounts under the company’s factoring programs:

	September 28,		December 31,
(thousands)	2024		2023
Receivables sold under the factoring programs that were uncollected	$	183,210	$	375,940