UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
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There were
ARROW ELECTRONICS, INC.
Table of Contents
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 | ||
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2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
Quarter Ended | Nine Months Ended | ||||||||||||
September 30, | October 1, | September 30, | October 1, | ||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 |
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Sales | $ | | $ | | $ | | $ | | |||||
Cost of sales |
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Gross profit |
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Operating expenses: |
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Selling, general, and administrative expenses |
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Depreciation and amortization |
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Restructuring, integration, and other charges (Note K) |
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Operating income |
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Equity in earnings of affiliated companies |
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(Loss) gain on investments, net |
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Employee benefit plan expense, net |
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Interest and other financing expense, net |
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Income before income taxes |
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Provision for income taxes |
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Consolidated net income |
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Noncontrolling interests |
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Net income attributable to shareholders | $ | | $ | | $ | | $ | | |||||
Net income per share: |
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Basic | $ | | $ | | $ | | $ | | |||||
Diluted | $ | | $ | | $ | | $ | | |||||
Weighted-average shares outstanding: |
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Basic |
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Diluted |
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See accompanying notes.
3
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
Quarter Ended | Nine Months Ended | ||||||||||||
September 30, | October 1, | September 30, | October 1, | ||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 |
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Consolidated net income | $ | | $ | | $ | | $ | | |||||
Other comprehensive loss: |
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Foreign currency translation adjustment and other, net of taxes |
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Unrealized gain on foreign exchange contracts designated as net investment hedges, net of taxes |
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Unrealized gain on interest rate swaps designated as cash flow hedges, net of taxes |
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Employee benefit plan items, net of taxes |
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Other comprehensive loss |
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Comprehensive income |
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Less: Comprehensive income (loss) attributable to noncontrolling interests |
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Comprehensive income attributable to shareholders | $ | | $ | | $ | | $ | |
See accompanying notes.
4
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except par value)
(Unaudited)
September 30, | December 31, | ||||||
| 2023 |
| 2022 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents | $ | | $ | | |||
Accounts receivable, net |
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Inventories |
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Other current assets |
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Total current assets |
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Property, plant, and equipment, at cost: |
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Land |
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Buildings and improvements |
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Machinery and equipment |
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Less: Accumulated depreciation and amortization |
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Property, plant, and equipment, net |
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Investments in affiliated companies |
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Intangible assets, net |
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Goodwill |
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Other assets |
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Total assets | $ | | $ | | |||
LIABILITIES AND EQUITY |
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Current liabilities: |
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Accounts payable | $ | | $ | | |||
Accrued expenses |
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Short-term borrowings, including current portion of long-term debt |
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Total current liabilities |
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Long-term debt |
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Other liabilities |
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Commitments and contingencies (Note K) | |||||||
Equity: |
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Shareholders’ equity: |
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Common stock, par value $ |
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Authorized - |
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Issued - |
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Capital in excess of par value |
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Treasury stock ( |
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Retained earnings |
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Accumulated other comprehensive loss |
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Total shareholders’ equity |
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Noncontrolling interests |
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Total equity |
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Total liabilities and equity | $ | | $ | |
See accompanying notes.
5
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended | |||||||
September 30, | October 1, | ||||||
| 2023 |
| 2022 |
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Cash flows from operating activities: |
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Consolidated net income | $ | | $ | | |||
Adjustments to reconcile consolidated net income to net cash provided by (used for) operations: |
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Depreciation and amortization |
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Amortization of stock-based compensation |
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Equity in earnings of affiliated companies |
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Deferred income taxes |
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(Gain) loss on investments, net |
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Other |
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Change in assets and liabilities: |
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Accounts receivable, net |
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Inventories |
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Accounts payable |
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Accrued expenses |
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Other assets and liabilities |
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Net cash provided by (used for) operating activities |
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Cash flows from investing activities: |
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Acquisition of property, plant, and equipment |
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Proceeds from collections of notes receivable |
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Proceeds from settlement of net investment hedge |
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Net cash used for investing activities |
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Cash flows from financing activities: |
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Change in short-term and other borrowings |
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(Repayments of) proceeds from long-term bank borrowings, net |
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Net proceeds from note offering |
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Redemption of notes |
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Proceeds from exercise of stock options |
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Repurchases of common stock |
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Settlement of forward-starting interest rate swap |
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Other |
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Net cash (used for) provided by financing activities |
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Effect of exchange rate changes on cash |
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Net increase in cash and cash equivalents |
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Cash and cash equivalents at beginning of period | | | |||||
Cash and cash equivalents at end of period | $ | | $ | |
See accompanying notes.
6
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(Unaudited)
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| Accumulated |
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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 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | $ | | |||||||
Consolidated net income |
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Other comprehensive income |
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Amortization of stock-based compensation |
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Shares issued for stock-based compensation awards |
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Repurchases of common stock |
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Balance at April 1, 2023 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | $ | | |||||||
Consolidated net income | | | | | | | | ||||||||||||||
Other comprehensive income (loss) | |
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Amortization of stock-based compensation | |
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Shares issued for stock-based compensation awards | |
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Repurchases of common stock | |
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Distributions | |
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Balance at July 1, 2023 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | $ | | |||||||
Consolidated net income |
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Other comprehensive loss |
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Amortization of stock-based compensation |
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Shares issued for stock-based compensation awards |
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Repurchases of common stock |
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Balance at September 30, 2023 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | $ | |
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| Accumulated |
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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, 2021 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | $ | | |||||||
Consolidated net income |
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Other comprehensive loss |
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Amortization of stock-based compensation |
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Shares issued for stock-based compensation awards |
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Repurchases of common stock |
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Balance at April 2, 2022 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | $ | | |||||||
Consolidated net income |
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Other comprehensive loss |
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Amortization of stock-based compensation |
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Shares issued for stock-based compensation awards |
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Repurchases of common stock |
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Distributions |
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Balance at July 2, 2022 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | $ | | |||||||
Consolidated net income |
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Other comprehensive loss |
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Amortization of stock-based compensation |
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Shares issued for stock-based compensation awards |
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Repurchases of common stock |
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Balance at October 1, 2022 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | $ | |
See accompanying notes.
7
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, 2022, 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, 2023.
Note B – Impact of Recently Issued Accounting Standards
In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50) Disclosure of Supplier Finance Program Obligations (“ASU No. 2022-04”). ASU No. 2022-04 requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, and potential magnitude. Effective January 1, 2023, the company adopted the provisions of ASU No. 2022-04 on a retrospective basis. As a result, the company disclosed key terms and amounts outstanding under its supplier finance programs (refer to Note F).
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 business segments, is as follows:
| Global |
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(thousands) | Components | Global ECS | Total | ||||||
Balance as of December 31, 2022 (a) | $ | | $ | | $ | | |||
Foreign currency translation adjustment |
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Balance as of September 30, 2023 (a) | $ | | $ | | $ | |
(a) | The total carrying value of goodwill as of September 30, 2023, and December 31, 2022 in the table above is reflected net of $ |
8
Intangible assets, net, are comprised of the following as of September 30, 2023:
| Gross |
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Carrying | Accumulated | ||||||||
(thousands) | Amount | Amortization | Net | ||||||
Customer relationships | $ | | $ | ( | $ | | |||
Amortizable trade name |
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$ | | $ | ( | $ | |
Intangible assets, net, are comprised of the following as of December 31, 2022:
| Gross |
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Carrying | Accumulated | ||||||||
(thousands) | Amount | Amortization | Net | ||||||
Customer relationships | $ | | $ | ( | $ | | |||
Amortizable trade name |
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$ | | $ | ( | $ | |
During the third quarter of 2023 and 2022, the company recorded amortization expense related to identifiable intangible assets of $
Note D – Investments in Affiliated Companies
The company owns a
The following table presents the company’s investment in affiliated companies:
| September 30, |
| December 31, | |||
(thousands) | 2023 | 2022 | ||||
Marubun/Arrow | $ | |