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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 June 29, 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 52,944,169 shares of Common Stock outstanding as of July 25, 2024.

Table of Contents

ARROW ELECTRONICS, INC.

Table of Contents

    

    

Part I.

Financial Information

Item 1.

Financial Statements

Consolidated Statements of Operations

4

Consolidated Statements of Comprehensive Income

5

Consolidated Balance Sheets

6

Consolidated Statements of Cash Flows

7

Consolidated Statements of Equity

8

Notes to Consolidated Financial Statements

9

Item 2.

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

26

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

37

Item 4.

Controls and Procedures

38

Part II.

Other Information

Item 1.

Legal Proceedings

39

Item 1A.

Risk Factors

39

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

39

Item 5.

Other Information

39

Item 6.

Exhibits

40

Signature

41

2

Table of Contents

ARROW ELECTRONICS, INC.

Glossary of Selected Abbreviated Terms*

Abbreviated Term

Defined Term

AFC

Arrow Electronics Funding Corporation

ASU

Accounting Standard Update

CMs

Contract Manufacturers

CODM

Chief Operating Decision Maker

CTA

Foreign Currency Translation Adjustment

ECS

Enterprise Computing Solutions

EMEA

Europe, the Middle East, and Africa

FASB

Financial Accounting Standards Board

GAAP

Generally Accepted Accounting Principles

MSPs

Managed Service Providers

OEMs

Original Equipment Manufacturers

SOFR

Secured Overnight Financing Rate

U.S. or United States

United States of America

VARs

Value-Added Resellers

2.95% notes

2.95% notes, due 2032

3.25% notes

3.25% notes, due September 2024

3.875% notes

3.875% notes, due 2028

4.00% notes

4.00% notes, due 2025

5.875% notes

5.875% notes, due 2034

6.125% notes

6.125% notes, due 2026

7.50% notes

7.50% senior debentures, due 2027

* Terms used, but not defined, within the body of the Form 10-Q are defined in this Glossary.

3

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

Six Months Ended

June 29,

July 1,

June 29,

July 1,

    

2024

    

2023

    

2024

    

2023

    

Sales

$

6,892,868

$

8,514,516

$

13,817,128

$

17,250,944

Cost of sales

 

6,046,424

 

7,448,467

 

12,112,858

 

15,071,073

Gross profit

 

846,444

 

1,066,049

 

1,704,270

 

2,179,871

Operating expenses:

 

  

 

  

 

  

 

  

Selling, general, and administrative

 

552,595

 

617,202

 

1,135,921

 

1,259,633

Depreciation and amortization

 

41,037

 

46,264

 

82,764

 

92,943

Restructuring, integration, and other

 

40,537

 

10,333

 

87,393

 

12,893

 

634,169

 

673,799

 

1,306,078

 

1,365,469

Operating income

 

212,275

 

392,250

 

398,192

 

814,402

Equity in earnings of affiliated companies

 

1,254

 

3,061

 

910

 

2,981

(Loss) gain on investments, net

 

(4,615)

 

497

 

(4,517)

 

10,808

Loss on extinguishment of debt

(1,657)

(1,657)

Employee benefit plan expense, net

 

(980)

 

(803)

 

(1,913)

 

(1,656)

Interest and other financing expense, net

 

(66,891)

 

(84,834)

 

(146,495)

 

(164,492)

Income before income taxes

 

139,386

 

310,171

 

244,520

 

662,043

Provision for income taxes

 

29,762

 

72,380

 

51,798

 

148,927

Consolidated net income

 

109,624

 

237,791

 

192,722

 

513,116

Noncontrolling interests

 

926

 

1,232

 

423

 

2,807

Net income attributable to shareholders

$

108,698

$

236,559

$

192,299

$

510,309

Net income per share:

 

  

 

  

 

  

 

  

Basic

$

2.03

$

4.17

$

3.56

$

8.84

Diluted

$

2.01

$

4.12

$

3.53

$

8.74

Weighted-average shares outstanding:

 

  

 

  

 

  

 

  

Basic

 

53,640

 

56,720

 

53,944

 

57,726

Diluted

 

54,181

 

57,355

 

54,496

 

58,409

See accompanying notes.

4

Table of Contents

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

Quarter Ended

Six Months Ended

June 29,

July 1,

June 29,

July 1,

   

2024

   

2023

   

2024

   

2023

    

Consolidated net income

$

109,624

$

237,791

$

192,722

$

513,116

Other comprehensive income (loss):

 

  

 

  

 

  

 

  

Foreign currency translation adjustment and other, net of taxes

 

(24,416)

 

(1,343)

 

(123,691)

 

9,942

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

 

1,378

 

(4,043)

 

4,976

 

(4,476)

(Loss) gain on interest rate swaps designated as cash flow hedges, net of taxes

 

(226)

 

5,447

 

303

 

1,738

Employee benefit plan items, net of taxes

 

(502)

 

(298)

 

(593)

 

(570)

Other comprehensive (loss) income

 

(23,766)

 

(237)

 

(119,005)

 

6,634

Comprehensive income

 

85,858

 

237,554

 

73,717

 

519,750

Less: Comprehensive income (loss) attributable to noncontrolling interests

 

696

 

(1,377)

 

(955)

 

3,275

Comprehensive income attributable to shareholders

$

85,162

$

238,931

$

74,672

$

516,475

See accompanying notes.

5

Table of Contents

ARROW ELECTRONICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands except par value)

(Unaudited)

June 29,

December 31,

    

2024

    

2023

    

ASSETS

    

  

    

  

    

Current assets:

 

  

 

  

 

Cash and cash equivalents

$

213,009

$

218,053

Accounts receivable, net

 

10,886,501

 

12,238,073

Inventories

 

4,654,793

 

5,187,225

Other current assets

 

1,010,942

 

684,126

Total current assets

 

16,765,245

 

18,327,477

Property, plant, and equipment, at cost:

 

  

 

  

Land

 

5,691

 

5,691

Buildings and improvements

 

190,109

 

195,579

Machinery and equipment

 

1,623,869

 

1,632,606

 

1,819,669

 

1,833,876

Less: Accumulated depreciation and amortization

 

(1,319,945)

 

(1,303,136)

Property, plant, and equipment, net

 

499,724

 

530,740

Investments in affiliated companies

 

60,400

 

62,741

Intangible assets, net

 

112,470

 

127,440

Goodwill

 

2,052,701

 

2,050,426

Other assets

 

617,226

 

627,344

Total assets

$

20,107,766

$

21,726,168

LIABILITIES AND EQUITY

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

8,770,862

$

10,070,015

Accrued expenses

 

1,687,273

 

1,463,915

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

 

860,538

 

1,653,954

Total current liabilities

 

11,318,673

 

13,187,884

Long-term debt

 

2,479,313

 

2,153,553

Other liabilities

 

495,730

 

507,424

Contingencies (Note L)

Equity:

 

  

 

  

Shareholders’ equity:

 

  

 

  

Common stock, par value $1:

 

  

 

  

Authorized - 160,000 shares in both 2024 and 2023

 

  

 

  

Issued - 58,046 and 57,691 shares in 2024 and 2023

 

58,046

 

57,691

Capital in excess of par value

 

574,530

 

553,340

Treasury stock (5,101 and 3,880 shares in 2024 and 2023, respectively), at cost

 

(456,123)

 

(297,745)

Retained earnings

 

5,982,516

 

5,790,217

Accumulated other comprehensive loss

 

(415,666)

 

(298,039)

Total shareholders’ equity

 

5,743,303

 

5,805,464

Noncontrolling interests

 

70,747

 

71,843

Total equity

 

5,814,050

 

5,877,307

Total liabilities and equity

$

20,107,766

$

21,726,168

See accompanying notes.

6

Table of Contents

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended

June 29,

July 1,

    

2024

    

2023

    

Cash flows from operating activities:

    

  

    

  

    

Consolidated net income

$

192,722

$

513,116

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

 

  

 

  

Depreciation and amortization

 

82,764

 

92,943

Amortization of stock-based compensation

 

21,700

 

28,349

Equity in earnings of affiliated companies

 

(910)

 

(2,981)

Deferred income taxes

 

(7,398)

 

(33,399)

Loss on extinguishment of debt

1,657

Loss (gain) on investments, net

 

4,763

 

(10,808)

Other

 

4,864

 

2,986

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

 

 

  

Accounts receivable, net

 

1,213,562

 

1,324,772

Inventories

 

493,474

 

(141,373)

Accounts payable

 

(1,237,812)

 

(1,513,259)

Accrued expenses

 

273,043

 

(215,583)

Other assets and liabilities

 

(319,038)

 

52,237

Net cash provided by operating activities

 

723,391

 

97,000

Cash flows from investing activities:

 

  

 

  

Acquisition of property, plant, and equipment

 

(51,636)

 

(37,105)

Other

 

6,452

 

10,962

Net cash used for investing activities

 

(45,184)

 

(26,143)

Cash flows from financing activities:

 

  

 

  

Change in short-term and other borrowings

 

(1,144,520)

 

198,339

Proceeds from (repayments of) long-term bank borrowings, net

 

673,607

 

(9,426)

Net proceeds from note offering

 

494,678

 

496,268

Redemption of notes

 

(500,000)

 

(300,000)

Proceeds from exercise of stock options

 

4,768

 

16,381

Repurchases of common stock

 

(163,301)

 

(516,217)

Settlement of forward-starting interest rate swap

 

 

56,711

Other

 

(141)

 

(142)

Net cash used for financing activities

 

(634,909)

 

(58,086)

Effect of exchange rate changes on cash

 

(48,342)

 

50,696

Net (decrease) increase in cash and cash equivalents

 

(5,044)

 

63,467

Cash and cash equivalents at beginning of period

218,053

176,915

Cash and cash equivalents at end of period

$

213,009

$

240,382

See accompanying notes.

7

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

Consolidated net income

108,698

926

109,624

Other comprehensive loss

 

 

 

 

(23,536)

 

(230)

 

(23,766)

Amortization of stock-based compensation

 

8,253

 

 

 

 

 

8,253

Shares issued for stock-based compensation awards

91

 

1,111

 

637

 

 

 

 

1,839

Repurchases of common stock

 

 

(51,097)

 

 

 

 

(51,097)

Distributions

 

 

 

 

 

(141)

 

(141)

Balance at June 29, 2024

$

58,046

$

574,530

$

(456,123)

$

5,982,516

$

(415,666)

$

70,747

$

5,814,050

    

    

    

    

    

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

Consolidated net income

 

 

 

 

236,559

 

 

1,232

 

237,791

Other comprehensive income (loss)

 

 

 

 

 

2,372

 

(2,609)

 

(237)

Amortization of stock-based compensation

 

 

8,852

 

 

 

 

 

8,852

Shares issued for stock-based compensation awards

 

 

(8,922)

 

19,369

 

 

 

 

10,447

Repurchases of common stock

 

 

 

(202,417)

 

 

 

 

(202,417)

Distributions

 

 

 

 

 

 

(142)

 

(142)

Balance at July 1, 2023

$

125,424

$

1,203,064

$

(5,108,188)

$

9,725,141

$

(359,096)

$

68,129

$

5,654,474

See accompanying notes.

8

Table of Contents

Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Index to Notes

    

Page

10

10

11

12

12

14

15

17

20

21

22

23

24

9

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 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 FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. Upon adoption of this ASU, 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. Upon adoption of this ASU, the company will disclose significant segment expenses, the title and position of the 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.

10

Table of Contents

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

18,454

18,454

Foreign currency translation adjustment

 

(5,464)

 

(10,715)

 

(16,179)

Balance as of June 29, 2024 (a)

$

888,184

$

1,164,517

$

2,052,701

(a)The total carrying value of goodwill as of June 29, 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 ECS reportable segment.

Intangible assets, net, are comprised of the following as of June 29, 2024:

    

Gross 

    

    

Carrying 

Accumulated 

(thousands)

Amount

Amortization

Net

Customer relationships

$

254,056

$

(161,939)

$

92,117

Amortizable trade name

 

74,003

 

(53,650)

 

20,353

$

328,059

$

(215,589)

$

112,470

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 second quarter of 2024 and 2023, the company recorded amortization expense related to identifiable intangible assets of $7.5 million and $7.9 million, respectively. During the first six months of 2024 and 2023, amortization expense related to identifiable intangible assets was $15.0 million and $15.9 million, respectively.

11

Table of Contents

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:

    

June 29,

    

December 31,

(thousands)

2024

2023

Marubun/Arrow

$

47,350

$

50,779

Other

 

13,050

 

11,962

$

60,400

$

62,741

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

Quarter Ended

Six Months Ended

June 29,

July 1,

June 29,

July 1,

(thousands)

    

2024

    

2023

2024

    

2023

Marubun/Arrow

$

620

$

2,365

$

86

$

1,968

Other

 

634

 

696

824

 

1,013

$

1,254

$

3,061

$

910

$

2,981

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 June 29, 2024 and December 31, 2023.

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: