Arrow Electronics Q2 2024 10-Q Filing

TL;DR

**ARROW Q2 2024 10-Q FILED. FINANCIALS OUT.**

AI Summary

Arrow Electronics, Inc. filed its 10-Q for the period ending June 29, 2024. The filing details financial performance and operational updates for the second quarter of 2024. Key financial data and disclosures related to common stock and treasury stock are presented.

Why It Matters

This filing provides investors with the latest financial snapshot of Arrow Electronics, crucial for understanding the company's performance and making informed investment decisions.

Risk Assessment

Risk Level: low — This is a routine quarterly financial filing with no immediate red flags.

Key Numbers

• 2024 Q2 — Fiscal Quarter (Reporting period for this 10-Q filing.)
• 1231 — Fiscal Year End (Arrow Electronics' annual fiscal year end.)

Key Players & Entities

• ARROW ELECTRONICS, INC. (company) — Filer
• 20240629 (date) — Reporting Period End Date
• 20240801 (date) — Filing Date

FAQ

Key Financial Figures

• $1 — ange on which registered Common Stock, $1 par value ARW New York Stock Exchan

Filing Documents

• arw-20240629x10q.htm (10-Q) — 2674KB
• arw-20240629xex31dia.htm (EX-31.IA) — 14KB
• arw-20240629xex31dib.htm (EX-31.IB) — 14KB
• arw-20240629xex32di.htm (EX-32.I) — 8KB
• arw-20240629xex32dii.htm (EX-32.II) — 8KB
• 0001558370-24-010531.txt ( ) — 9303KB
• arw-20240629.xsd (EX-101.SCH) — 45KB
• arw-20240629_cal.xml (EX-101.CAL) — 55KB
• arw-20240629_def.xml (EX-101.DEF) — 189KB
• arw-20240629_lab.xml (EX-101.LAB) — 441KB
• arw-20240629_pre.xml (EX-101.PRE) — 295KB
• arw-20240629x10q_htm.xml (XML) — 1902KB

Financial Statements

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

Notes to Consolidated Financial Statements 9 Item 2.

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

Management's Discussion and Analysis of Financial Condition and Results of Operations 26 Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 37 Item 4.

Controls and Procedures

Controls and Procedures 38 Part II. Other Information Item 1.

Legal Proceedings

Legal Proceedings 39 Item 1A.

Risk Factors

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

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Index to Notes Page Note A. Basis of Presentation 10 Note B. Impact of Recently Issued Accounting Standards 10 Note C. Goodwill and Intangible Assets 11 Note D. Investments in Affiliated Companies 12 Note E. Accounts Receivable 12 Note F. Supplier Finance Programs 14 Note G. Debt 15 Note H. Financial Instruments Measured at Fair Value 17 Note I. Restructuring, Integration, and Other 20 Note J. Net Income per Share 21 Note K. Shareholders' Equity 22 Note L. Contingencies 23 Note M. Segment and Geographic Information 24 9 Table of Contents Index to Notes ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 compan

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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: 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 12 Table of Contents Index to Notes ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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 $

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