Arrow Electronics Files Q3 2024 10-Q

TL;DR

**ARROW Q3 10-Q FILED: Financials and stock details updated.**

AI Summary

Arrow Electronics, Inc. filed its 10-Q for the period ending September 28, 2024. The filing details financial performance and operational updates for the third quarter of 2024. Key financial data and stock information are presented, reflecting the company's ongoing business activities and reporting requirements.

Why It Matters

This filing provides investors and analysts with the latest financial performance data for Arrow Electronics, crucial for understanding the company's current health and future prospects.

Risk Assessment

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

Key Players & Entities

• ARROW ELECTRONICS, INC. (company) — Filer
• 20240928 (date) — Reporting period end date
• 20241031 (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-20240928x10q.htm (10-Q) — 2844KB
• arw-20240928xex31dia.htm (EX-31.IA) — 14KB
• arw-20240928xex31dib.htm (EX-31.IB) — 14KB
• arw-20240928xex32di.htm (EX-32.I) — 8KB
• arw-20240928xex32dii.htm (EX-32.II) — 8KB
• 0001558370-24-014006.txt ( ) — 9704KB
• arw-20240928.xsd (EX-101.SCH) — 47KB
• arw-20240928_cal.xml (EX-101.CAL) — 55KB
• arw-20240928_def.xml (EX-101.DEF) — 198KB
• arw-20240928_lab.xml (EX-101.LAB) — 451KB
• arw-20240928_pre.xml (EX-101.PRE) — 304KB
• arw-20240928x10q_htm.xml (XML) — 1999KB

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 10 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 29 Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 42 Item 4.

Controls and Procedures

Controls and Procedures 42 Part II. Other Information Item 1.

Legal Proceedings

Legal Proceedings 43 Item 1A.

Risk Factors

Risk Factors 43 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 43 Item 5. Other Information 43 Item 6. Exhibits 44 Signature 45 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 CODM Chief Operating Decision Maker CTA Foreign Currency Translation Adjustment ECS Enterprise Computing Solutions EMEA Europe, the Middle East, and Africa EMS Electronics Manufacturing Services 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 * 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 Nine Months Ended September 28, September 30, September 28, September 30, 2024 2023 2024 2023 Sales $ 6,823,319 $ 8,007,019 $ 20,640,447 $ 25,257,963 Cost of sales 6,038,491 7,027,422 18,151,349 22,098,495 Gross profit 784,828 979,597 2,489,098 3,159,468 Operating expenses: Selling, general, and administrative 534,508 563,150 1,670,429 1,822,783 Depreciation and amortization 40,592 45,005 123,356 137,948 Restructuring, integration, and other 34,466 31,359 121,859 44,252 609,566 639,514 1,915,644 2,004,983 Operating income 175,262 340,083 573,454 1,154,485 Equity in earnings of affiliated companies 1,002 1,392 1,912 4,373 Gain (loss) on investments, net 3,757 ( 6,159 ) ( 760 ) 4,649 Loss on extinguishment of debt — — ( 1,657 ) — Employee benefit plan expense, net ( 979 ) ( 854 ) ( 2,892 ) ( 2,510 ) Interest and other financing expense, net ( 62,947 ) ( 82,180 ) ( 209,442 ) ( 246,672 ) Income before income taxes 116,095 252,282 360,615 914,325 Provision for income taxes 15,198 52,241 66,996 201,168 Consolidated net income 100,897 200,041 293,619 713,157 Noncontrolling interests 330 1,382 753 4,189 Net income attributable to shareholders $ 100,567 $ 198,659 $ 292,866 $ 708,968 Net income per share: Basic $ 1.90 $ 3.57 $ 5.48 $ 12.43 Diluted $ 1.88 $ 3.53 $ 5.42 $ 12.28 Weighted-average shares outstanding: Basic 53,010 55,597 53,476 57,021 Diluted 53,475 56,298 53,999 57,715 See accompanying notes. 4 Table of Contents ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (Unaudited) Quarter Ended Nine Months Ended September 28, September 30,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Index to Notes Page Note A. Basis of Presentation 11 Note B. Impact of Recently Issued Accounting Standards 11 Note C. Goodwill and Intangible Assets 12 Note D. Investments in Affiliated Companies 13 Note E. Accounts Receivable 13 Note F. Supplier Finance Programs 15 Note G. Debt 16 Note H. Financial Instruments Measured at Fair Value 18 Note I. Restructuring, Integration, and Other 21 Note J. Net Income per Share 23 Note K. Shareholders' Equity 24 Note L. Contingencies 25 Note M. Segment and Geographic Information 26 10 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 18,501 — 18,501 Foreign currency translation adjustment 1,041 14,192 15,233 Balance as of September 28, 2024 (a) $ 894,736 $ 1,189,424 $ 2,084,160 (a) The total carrying value of goodwill as of September 28, 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 September 28, 2024: Gross Carrying Accumulated (thousands) Amount Amortization Net Customer relationships $ 255,731 $ ( 168,228 ) $ 87,503 Amortizable trade name 74,002 ( 56,192 ) 17,810 $ 329,733 $ ( 224,420 ) $ 105,313 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 third quarter of 2024 and 2023, the company recorded amortization expense related to identifiable intangible assets of $ 7.3 million and $ 7.9 million, respectively. During the first nine

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: September 28, December 31, (thousands) 2024 2023 Marubun/Arrow $ 47,414 $ 50,779 Other 14,092 11,962 $ 61,506 $ 62,741 The equity in earnings of affiliated companies consists of the following: Quarter Ended Nine Months Ended September 28, September 30, September 28, September 30, (thousands) 2024 2023 2024 2023 Marubun/Arrow $ 528 $ 978 $ 614 $ 2,946 Other 474 414 1,298 1,427 $ 1,002 $ 1,392 $ 1,912 $ 4,373 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 September 28, 2024 and December 31, 2023. 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 m

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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 rec

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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 receivabl

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