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 | 26 | ||
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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
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 |
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| 2023 |
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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 |
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Depreciation and amortization |
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Restructuring, integration, and other |
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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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Loss on extinguishment of debt | ( | | ( | | |||||||||
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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Diluted |
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See accompanying notes.
4
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 |
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| 2023 |
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Consolidated net income | $ | | $ | | $ | | $ | | |||||
Other comprehensive income (loss): |
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Foreign currency translation adjustment and other, net of taxes |
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Gain (loss) on foreign exchange contracts designated as net investment hedges, net of taxes |
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(Loss) 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) income |
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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.
5
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except par value)
(Unaudited)
June 29, | December 31, | ||||||
| 2024 |
| 2023 |
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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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Contingencies (Note L) | |||||||
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.
6
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended | |||||||
June 29, | July 1, | ||||||
| 2024 |
| 2023 |
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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 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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Loss on extinguishment of debt | | | |||||
Loss (gain) on investments, net |
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Other |
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Change in assets and liabilities, net of effects of acquired businesses: |
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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 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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Other |
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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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Proceeds from (repayments of) 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 financing activities |
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Effect of exchange rate changes on cash |
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Net (decrease) 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.
7
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(Unaudited)
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Common | Capital in | Other | |||||||||||||||||||
Stock at Par | Excess of Par | Treasury | Retained | Comprehensive | Noncontrolling | ||||||||||||||||
| Value |
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| Loss | Interests | Total | ||||||||||||
Balance at December 31, 2023 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | $ | | |||||||
Consolidated net income (loss) |
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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 March 30, 2024 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | $ | | |||||||
Consolidated net income | | | | | | | | ||||||||||||||
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 June 29, 2024 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | $ | |
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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 |
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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 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | $ | |
See accompanying notes.
8
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
9
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
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 |
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(thousands) | Components | Global ECS | Total | ||||||
Balance as of December 31, 2023 (a) | $ | | $ | | $ | | |||
Acquisitions | | | | ||||||
Foreign currency translation adjustment |
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Balance as of June 29, 2024 (a) | $ | | $ | | $ | |
(a) | The total carrying value of goodwill as of June 29, 2024 and December 31, 2023, in the table above is reflected net of $ |
Intangible assets, net, are comprised of the following as of June 29, 2024:
| 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, 2023:
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Carrying | Accumulated | ||||||||
(thousands) | Amount | Amortization | Net | ||||||
Customer relationships | $ | | $ | ( | $ | | |||
Amortizable trade name |
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$ | | $ | ( | $ | |
During the second quarter of 2024 and 2023, the company recorded amortization expense related to identifiable intangible assets of $
11
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note D – Investments in Affiliated Companies
The company owns a
The following table presents the company’s investment in affiliated companies:
| June 29, |
| December 31, | |||
(thousands) | 2024 | 2023 | ||||
Marubun/Arrow | $ | | $ | | ||
Other |
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$ | | $ | |
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 | $ | | $ | | $ | | $ | | ||||
Other |
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$ | | $ | | $ | | $ | |
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
Note E – Accounts Receivable
Accounts receivable, net, consists of the following:
June 29, | December 31, | |||||
(thousands) |
| 2024 |
| 2023 | ||
Accounts receivable | $ | | $ | | ||
Allowance for credit losses |
| ( |
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Accounts receivable, net | $ | | $ | |
The following table is a rollforward for the company’s allowance for credit losses: