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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
For the quarterly period ended September 30, 2023
OR
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) |
9201 East Dry Creek Road |
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80112 |
Centennial CO |
|
(Zip Code) |
(Address of principal executive offices) |
|
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(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 54,159,399 shares of Common Stock outstanding as of October 26, 2023.
ARROW ELECTRONICS, INC.
Table of Contents
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6 |
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7 |
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8 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
23 |
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33 |
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34 |
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35 |
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35 |
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35 |
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36 |
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37 |
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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)
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Quarter Ended |
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Nine Months Ended |
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||||||||
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September 30, |
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October 1, |
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September 30, |
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October 1, |
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||||
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2023 |
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2022 |
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2023 |
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2022 |
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Sales |
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$ |
8,007,019 |
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$ |
9,266,432 |
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$ |
25,257,963 |
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$ |
27,801,399 |
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Cost of sales |
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7,027,422 |
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8,079,520 |
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22,098,495 |
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24,170,769 |
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Gross profit |
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979,597 |
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1,186,912 |
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3,159,468 |
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3,630,630 |
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Operating expenses: |
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Selling, general, and administrative expenses |
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563,150 |
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634,353 |
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1,822,783 |
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1,931,918 |
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Depreciation and amortization |
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45,005 |
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46,230 |
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137,948 |
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141,787 |
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Restructuring, integration, and other charges (Note K) |
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31,359 |
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3,635 |
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44,252 |
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11,027 |
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639,514 |
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684,218 |
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2,004,983 |
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2,084,732 |
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Operating income |
|
|
340,083 |
|
|
502,694 |
|
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1,154,485 |
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1,545,898 |
|
Equity in earnings of affiliated companies |
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|
1,392 |
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1,718 |
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4,373 |
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4,726 |
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(Loss) gain on investments, net |
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|
(6,159) |
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(3,480) |
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4,649 |
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(11,213) |
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Employee benefit plan expense, net |
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(854) |
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(890) |
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(2,510) |
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(2,614) |
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Interest and other financing expense, net |
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(82,180) |
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(50,936) |
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(246,672) |
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(123,427) |
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Income before income taxes |
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252,282 |
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449,106 |
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914,325 |
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1,413,370 |
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Provision for income taxes |
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52,241 |
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105,500 |
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201,168 |
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332,273 |
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Consolidated net income |
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200,041 |
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343,606 |
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713,157 |
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1,081,097 |
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Noncontrolling interests |
|
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1,382 |
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1,207 |
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4,189 |
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3,615 |
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Net income attributable to shareholders |
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$ |
198,659 |
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$ |
342,399 |
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$ |
708,968 |
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$ |
1,077,482 |
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Net income per share: |
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Basic |
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$ |
3.57 |
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$ |
5.33 |
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$ |
12.43 |
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$ |
16.31 |
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Diluted |
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$ |
3.53 |
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$ |
5.27 |
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$ |
12.28 |
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$ |
16.12 |
|
Weighted-average shares outstanding: |
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Basic |
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55,597 |
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64,228 |
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57,021 |
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66,055 |
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Diluted |
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56,298 |
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64,979 |
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57,715 |
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66,845 |
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See accompanying notes.
3
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
|
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Quarter Ended |
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Nine Months Ended |
|
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September 30, |
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October 1, |
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September 30, |
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October 1, |
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||||
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2023 |
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2022 |
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2023 |
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2022 |
|
||||
Consolidated net income |
|
$ |
200,041 |
|
$ |
343,606 |
|
$ |
713,157 |
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$ |
1,081,097 |
|
Other comprehensive loss: |
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Foreign currency translation adjustment and other, net of taxes |
|
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(108,846) |
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(202,716) |
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(98,904) |
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(473,826) |
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Unrealized gain on foreign exchange contracts designated as net investment hedges, net of taxes |
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4,077 |
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11,347 |
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(399) |
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25,023 |
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Unrealized gain on interest rate swaps designated as cash flow hedges, net of taxes |
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519 |
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7,303 |
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2,257 |
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27,187 |
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Employee benefit plan items, net of taxes |
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(261) |
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117 |
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(831) |
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305 |
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Other comprehensive loss |
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(104,511) |
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(183,949) |
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(97,877) |
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(421,311) |
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Comprehensive income |
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95,530 |
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159,657 |
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615,280 |
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659,786 |
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Less: Comprehensive income (loss) attributable to noncontrolling interests |
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85 |
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(878) |
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3,360 |
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(1,475) |
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Comprehensive income attributable to shareholders |
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$ |
95,445 |
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$ |
160,535 |
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$ |
611,920 |
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$ |
661,261 |
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See accompanying notes.
4
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except par value)
(Unaudited)
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September 30, |
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December 31, |
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2023 |
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2022 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
333,294 |
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$ |
176,915 |
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Accounts receivable, net |
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10,663,164 |
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12,322,717 |
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Inventories |
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5,805,520 |
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5,319,369 |
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Other current assets |
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503,982 |
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521,339 |
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Total current assets |
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17,305,960 |
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18,340,340 |
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Property, plant, and equipment, at cost: |
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Land |
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5,691 |
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5,691 |
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Buildings and improvements |
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185,790 |
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184,211 |
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Machinery and equipment |
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1,616,937 |
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1,583,661 |
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1,808,418 |
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1,773,563 |
|
Less: Accumulated depreciation and amortization |
|
|
(1,272,214) |
|
|
(1,177,107) |
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Property, plant, and equipment, net |
|
|
536,204 |
|
|
596,456 |
|
Investments in affiliated companies |
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63,049 |
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65,112 |
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Intangible assets, net |
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134,811 |
|
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159,137 |
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Goodwill |
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2,021,987 |
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2,027,626 |
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Other assets |
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576,349 |
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574,511 |
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Total assets |
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$ |
20,638,360 |
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$ |
21,763,182 |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
9,090,554 |
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$ |
10,460,419 |
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Accrued expenses |
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1,256,815 |
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1,339,302 |
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Short-term borrowings, including current portion of long-term debt |
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1,588,662 |
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589,883 |
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Total current liabilities |
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11,936,031 |
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12,389,604 |
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Long-term debt |
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2,615,001 |
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3,182,964 |
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Other liabilities |
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533,853 |
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579,261 |
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Commitments and contingencies (Note K) |
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Equity: |
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Shareholders’ equity: |
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Common stock, par value $1: |
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Authorized - 160,000 shares in both 2023 and 2022 |
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Issued - 125,424 shares in both 2023 and 2022 |
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125,424 |
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125,424 |
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Capital in excess of par value |
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1,205,788 |
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1,208,708 |
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Treasury stock (71,269 and 66,175 shares in 2023 and 2022, respectively), at cost |
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(5,307,441) |
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(4,637,345) |
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Retained earnings |
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9,923,800 |
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9,214,832 |
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Accumulated other comprehensive loss |
|
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(462,310) |
|
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(365,262) |
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Total shareholders’ equity |
|
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5,485,261 |
|
|
5,546,357 |
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Noncontrolling interests |
|
|
68,214 |
|
|
64,996 |
|
Total equity |
|
|
5,553,475 |
|
|
5,611,353 |
|
Total liabilities and equity |
|
$ |
20,638,360 |
|
$ |
21,763,182 |
|
See accompanying notes.
5
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
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Nine Months Ended |
|
||||
|
|
September 30, |
|
October 1, |
|
||
|
|
2023 |
|
2022 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
|
Consolidated net income |
|
$ |
713,157 |
|
$ |
1,081,097 |
|
Adjustments to reconcile consolidated net income to net cash provided by (used for) operations: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
137,948 |
|
|
141,787 |
|
Amortization of stock-based compensation |
|
|
34,868 |
|
|
35,009 |
|
Equity in earnings of affiliated companies |
|
|
(4,373) |
|
|
(4,726) |
|
Deferred income taxes |
|
|
(53,038) |
|
|
1,468 |
|
(Gain) loss on investments, net |
|
|
(4,649) |
|
|
11,213 |
|
Other |
|
|
4,078 |
|
|
2,673 |
|
Change in assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
1,585,521 |
|
|
(628,974) |
|
Inventories |
|
|
(525,020) |
|
|
(1,011,763) |
|
Accounts payable |
|
|
(1,355,777) |
|
|
166,602 |
|
Accrued expenses |
|
|
(88,348) |
|
|
192,759 |
|
Other assets and liabilities |
|
|
(25,660) |
|
|
(128,909) |
|
Net cash provided by (used for) operating activities |
|
|
418,707 |
|
|
(141,764) |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Acquisition of property, plant, and equipment |
|
|
(57,775) |
|
|
(54,780) |
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Proceeds from collections of notes receivable |
|
|
237 |
|
|
20,805 |
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Proceeds from settlement of net investment hedge |
|
|
10,725 |
|
|
— |
|
Net cash used for investing activities |
|
|
(46,813) |
|
|
(33,975) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
Change in short-term and other borrowings |
|
|
802,032 |
|
|
276,516 |
|
(Repayments of) proceeds from long-term bank borrowings, net |
|
|
(566,734) |
|
|
1,238,268 |
|
Net proceeds from note offering |
|
|
496,268 |
|
|
— |
|
Redemption of notes |
|
|
(300,000) |
|
|
(350,000) |
|
Proceeds from exercise of stock options |
|
|
16,824 |
|
|
16,434 |
|
Repurchases of common stock |
|
|
(719,708) |
|
|
(725,254) |
|
Settlement of forward-starting interest rate swap |
|
|
56,711 |
|
|
— |
|
Other |
|
|
(142) |
|
|
(137) |
|
Net cash (used for) provided by financing activities |
|
|
(214,749) |
|
|
455,827 |
|
Effect of exchange rate changes on cash |
|
|
(766) |
|
|
(168,297) |
|
Net increase in cash and cash equivalents |
|
|
156,379 |
|
|
111,791 |
|
Cash and cash equivalents at beginning of period |
|
|
176,915 |
|
|
222,194 |
|
Cash and cash equivalents at end of period |
|
$ |
333,294 |
|
$ |
333,985 |
|
See accompanying notes.
6
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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Accumulated |
|
|
|
|
|
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|
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Common |
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Capital in |
|
|
|
|
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Other |
|
|
|
|
|
||||||
|
|
Stock at Par |
|
Excess of Par |
|
Treasury |
|
Retained |
|
Comprehensive |
|
Noncontrolling |
|
|
|
||||||
|
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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 |
Consolidated net income |
|
|
— |
|
|
— |
|
|
— |
|
|
198,659 |
|
|
— |
|
|
1,382 |
|
|
200,041 |
Other comprehensive loss |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(103,214) |
|
|
(1,297) |
|
|
(104,511) |
Amortization of stock-based compensation |
|
|
— |
|
|
6,519 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
6,519 |
Shares issued for stock-based compensation awards |
|
|
— |
|
|
(3,795) |
|
|
4,238 |
|
|
— |
|
|
— |
|
|
— |
|
|
443 |
Repurchases of common stock |
|
|
— |
|
|
— |
|
|
(203,491) |
|
|
— |
|
|
— |
|
|
— |
|
|
(203,491) |
Balance at September 30, 2023 |
|
$ |
125,424 |
|
$ |
1,205,788 |
|
$ |
(5,307,441) |
|
$ |
9,923,800 |
|
$ |
(462,310) |
|
$ |
68,214 |
|
$ |
5,553,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2021 |
|
$ |
125,424 |
|
$ |
1,189,845 |
|
$ |
(3,629,265) |
|
$ |
7,787,948 |
|
$ |
(191,657) |
|
$ |
58,551 |
|
$ |
5,340,846 |
Consolidated net income |
|
|
— |
|
|
— |
|
|
— |
|
|
364,749 |
|
|
— |
|
|
1,247 |
|
|
365,996 |
Other comprehensive loss |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(41,312) |
|
|
(869) |
|
|
(42,181) |
Amortization of stock-based compensation |
|
|
— |
|
|
17,351 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
17,351 |
Shares issued for stock-based compensation awards |
|
|
— |
|
|
(20,601) |
|
|
31,903 |
|
|
— |
|
|
— |
|
|
— |
|
|
11,302 |
Repurchases of common stock |
|
|
— |
|
|
— |
|
|
(264,431) |
|
|
— |
|
|
— |
|
|
— |
|
|
(264,431) |
Balance at April 2, 2022 |
|
$ |
125,424 |
|
$ |
1,186,595 |
|
$ |
(3,861,793) |
|
$ |
8,152,697 |
|
$ |
(232,969) |
|
$ |
58,929 |
|
$ |
5,428,883 |
Consolidated net income |
|
|
— |
|
|
— |
|
|
— |
|
|
370,334 |
|
|
— |
|
|
1,161 |
|
|
371,495 |
Other comprehensive loss |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(193,045) |
|
|
(2,136) |
|
|
(195,181) |
Amortization of stock-based compensation |
|
|
— |
|
|
13,885 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
13,885 |
Shares issued for stock-based compensation awards |
|
|
— |
|
|
(1,950) |
|
|
6,320 |
|
|
— |
|
|
— |
|
|
— |
|
|
4,370 |
Repurchases of common stock |
|
|
— |
|
|
— |
|
|
(225,032) |
|
|
— |
|
|
— |
|
|
— |
|
|
(225,032) |
Distributions |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(137) |
|
|
(137) |
Balance at July 2, 2022 |
|
$ |
125,424 |
|
$ |
1,198,530 |
|
$ |
(4,080,505) |
|
$ |
8,523,031 |
|
$ |
(426,014) |
|
$ |
57,817 |
|
$ |
5,398,283 |
Consolidated net income |
|
|
— |
|
|
— |
|
|
— |
|
|
342,399 |
|
|
— |
|
|
1,207 |
|
|
343,606 |
Other comprehensive loss |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(181,864) |
|
|
(2,085) |
|
|
(183,949) |
Amortization of stock-based compensation |
|
|
— |
|
|
3,773 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3,773 |
Shares issued for stock-based compensation awards |
|
|
— |
|
|
(1,118) |
|
|
1,880 |
|
|
— |
|
|
— |
|
|
— |
|
|
762 |
Repurchases of common stock |
|
|
— |
|
|
— |
|
|
(259,789) |
|
|
— |
|
|
— |
|
|
— |
|
|
(259,789) |
Balance at October 1, 2022 |
|
$ |
125,424 |
|
$ |
1,201,185 |
|
$ |
(4,338,414) |
|
$ |
8,865,430 |
|
$ |
(607,878) |
|
$ |
56,939 |
|
$ |
5,302,686 |
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 |
|
|
|
|
|||
(thousands) |
|
Components |
|
Global ECS |
|
Total |
|||
Balance as of December 31, 2022 (a) |
|
$ |
873,003 |
|
$ |
1,154,623 |
|
$ |
2,027,626 |
Foreign currency translation adjustment |
|
|
(3,875) |
|
|
(1,764) |
|
|
(5,639) |
Balance as of September 30, 2023 (a) |
|
$ |
869,128 |
|
$ |
1,152,859 |
|
$ |
2,021,987 |
| (a) | The total carrying value of goodwill as of September 30, 2023, and December 31, 2022 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 business segment and $302.9 million was recorded in the global enterprise computing solutions (“ECS”) business segment. |
8
Intangible assets, net, are comprised of the following as of September 30, 2023:
|
|
Gross |
|
|
|
|
|||
|
|
Carrying |
|
Accumulated |
|
|
|||
(thousands) |
|
Amount |
|
Amortization |
|
Net |
|||
Customer relationships |
|
$ |
263,968 |
|
$ |
(157,138) |
|
$ |
106,830 |
Amortizable trade name |
|
|
74,006 |
|
|
(46,025) |
|
|
27,981 |
|
|
$ |
337,974 |
|
$ |
(203,163) |
|
$ |
134,811 |
Intangible assets, net, are comprised of the following as of December 31, 2022:
|
|
Gross |
|
|
|
|
|||
|
|
Carrying |
|
Accumulated |
|
|
|||
(thousands) |
|
Amount |
|
Amortization |
|
Net |
|||
Customer relationships |
|
$ |
268,180 |
|
$ |
(144,655) |
|
$ |
123,525 |
Amortizable trade name |
|
|
74,011 |
|
|
(38,399) |
|
|
35,612 |
|
|
$ |
342,191 |
|
$ |
(183,054) |
|
$ |
159,137 |
During the third quarter of 2023 and 2022, the company recorded amortization expense related to identifiable intangible assets of $7.9 million and $8.7 million, respectively. During the first nine months of 2023 and 2022, amortization expense related to identifiable intangible assets was $23.8 million and $26.5 million, respectively.
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 30, |
|
December 31, |
||
(thousands) |
|
2023 |
|
2022 |
||
Marubun/Arrow |
|
$ |
51,790 |
|
$ |
54,292 |
Other |
|
|
11,259 |
|
|
10,820 |
|
|
$ |
63,049 |
|
$ |
65,112 |
The equity in earnings (losses) of affiliated companies consists of the following:
|
|
Quarter Ended |
|
Nine Months Ended |
||||||||
|
|
September 30, |
|
October 1, |
|
September 30, |
|
October 1, |
||||
(thousands) |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||
Marubun/Arrow |
|
$ |
978 |
|
$ |
1,374 |
|
$ |
2,946 |
|
$ |
3,914 |
Other |
|
|
414 |
|
|
344 |
|
|
1,427 |
|
|
812 |
|
|
$ |
1,392 |
|
$ |
1,718 |
|
$ |
4,373 |
|
$ |
4,726 |
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 30, 2023, and December 31, 2022.
9
Note E – Accounts Receivable
Accounts receivable, net, consists of the following:
|
|
September 30, |
|
December 31, |
|
||
(thousands) |
|
2023 |
|
2022 |
|
||
Accounts receivable |
|
$ |
10,807,108 |
|
$ |
12,416,114 |
|
Allowances for doubtful accounts |
|
|
(143,944) |
|
|
(93,397) |
|
Accounts receivable, net |
|
$ |
10,663,164 |
|
$ |
12,322,717 |
|
Changes in the allowance for doubtful accounts consists of the following:
|
|
Nine Months Ended |
|
||||
|
|
September 30, |
|
October 1, |
|
||
(thousands) |
|
2023 |
|
2022 |
|
||
Balance at beginning of period |
|
$ |
93,397 |
|
$ |
75,901 |
|
Charged to income |
|
|
64,701 |
|
|
26,869 |
|
Translation adjustments |
|
|
(575) |
|
|
(3,660) |
|
Writeoffs |
|
|
(13,579) |
|
|
(9,885) |
|
Balance at end of period |
|
$ |
143,944 |
|
$ |
89,225 |
|
The company monitors the current credit condition of its customers and other available information about expected credit losses in estimating its allowance for credit losses. During the first nine months of 2023, increases to the allowance for credit losses charged to income were $37.8 million higher than the prior year period, primarily due to the aging of receivables of certain customers, and the corresponding increase to the allowance in accordance with the company’s policies. With the exception of these few customers, as of September 30, 2023, the company has not experienced significant changes in customers’ payment trends or significant deterioration in customers’ credit risk.
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 Europe, Middle East, and Africa (“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. In July 2023, the company amended a provision in the EMEA asset securitization program to update certain financial ratios. 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 30, |
|
October 1, |
|
September 30, |
|
October 1, |
|
||||
(thousands) |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
||||
EMEA asset securitization, sales of accounts receivable |
|
$ |
815,812 |
|
$ |
834,456 |
|
$ |
2,486,022 |
|
$ |
1,943,723 |
|
Receivables sold to unaffiliated financial institutions under the program 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 purchase price is paid in cash when the receivables are sold.
10
Certain unsold receivables held by Arrow EMEA Funding Corp B.V. are pledged as collateral to unaffiliated financial institutions. These unsold receivables are included in “Accounts receivable, net” on the company’s consolidated balance sheets.
The company continues servicing the receivables which were sold and in exchange receives a servicing fee under the program. The company does not record a servicing asset or liability on the company’s consolidated balance sheets as the company estimates that the fee it receives to service these receivables approximates the fair market compensation to provide the servicing activities.
Other amounts related to the EMEA asset securitization program:
|
|
September 30, |
|
December 31, |
||
(thousands) |
|
2023 |
|
2022 |
||
Receivables sold to unaffiliated financial institutions that were uncollected |
|
$ |
612,321 |
|
$ |
628,930 |
Collateralized accounts receivable held by Arrow EMEA funding Corp B.V. |
|
|
933,752 |
|
|
932,243 |
Any accounts receivable held by Arrow EMEA Funding Corp B.V. would likely not be available to other creditors of the company in the event of bankruptcy or insolvency proceedings if there are outstanding balances under the EMEA asset securitization program. The assets of the special purpose entity cannot be used by the company for general corporate 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 the insolvency or the inability to pay of the account debtors.
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 30, 2023, the company was in compliance with all such financial covenants.
Note F – Supplier Finance Programs
At the request of certain of the company’s suppliers, the company has entered into agreements (“supplier finance programs”) with third-party finance providers, which facilitate the participating suppliers’ ability to sell their receivables from the company to the third-party financial institutions, at the sole discretion of the suppliers. For agreeing to participate in these programs, the company seeks to secure improved standard payment terms with its suppliers. The company is not involved in negotiating terms of the arrangements between its suppliers and the financial institutions and has no economic interest in a supplier’s decision to enter into these agreements, or sell receivables from the company. The company’s rights and obligations to its suppliers, including amounts due, are not impacted by suppliers’ decisions to sell amounts under the arrangements. However, the company agrees to make all payments to the third-party financial institutions, and the company’s right to offset balances due from suppliers against payment obligations is restricted by the agreements for those payment obligations that have been sold by suppliers. As of September 30, 2023, and December 31, 2022, the company had $944.2 million and $1.5 billion, respectively, in obligations outstanding under these programs included in “Accounts payable” on the company’s consolidated balance sheets and all activity related to the obligations is presented within operating activities on the consolidated statements of cash flows.
11
Note G – Debt
Short-term borrowings, including current portion of long-term debt, consist of the following:
|
|
September 30, |
|
December 31, |
||
(thousands) |
|
2023 |
|
2022 |
||
4.50% notes, due March 2023 |
|
$ |
— |
|
$ |
299,895 |
3.25% notes, due September 2024 |
|
|
498,944 |
|
|
— |
Uncommitted lines of credit |
|
|
50,000 |
|
|
78,000 |
Commercial paper |
|
|
903,223 |
|
|
173,407 |
Other short-term borrowings |
|
|
136,495 |
|
|
38,581 |
|
|
$ |
1,588,662 |
|
$ |
589,883 |
The company has $500.0 million in uncommitted lines of credit. In May 2023, the company increased the borrowing capacity on its uncommitted lines from $200.0 million to $500.0 million. There were $50.0 million and $78.0 million in outstanding borrowings under the uncommitted lines of credit at September 30, 2023 and December 31, 2022, respectively. These borrowings were provided on a short-term basis and the maturity is agreed upon between the company and the lender. The uncommitted lines of credit had an effective interest rate of 6.42% and 5.22% at September 30, 2023 and December 31, 2022, respectively.
The company has a commercial paper program, and the maximum aggregate balance of commercial paper outstanding may not exceed the borrowing capacity of $1.2 billion. Amounts outstanding under the commercial paper program are backstopped by available commitments under the company’s revolving credit facility. The company had $903.2 million in outstanding borrowings under this program at September 30, 2023 and $173.4 million in outstanding borrowings at December 31, 2022. The commercial paper program had an effective interest rate of 5.95% and 5.15% at September 30, 2023 and December 31, 2022, respectively.
Long-term debt consists of the following:
|
|
September 30, |
|
December 31, |
||
(thousands) |
|
2023 |
|
2022 |
||
Revolving Credit Facility |
|
$ |
54,000 |
|
$ |
— |
North American asset securitization program |
|
|
605,000 |
|
|
1,235,000 |
3.25% notes, due 2024 |
|
|
— |
|
|
498,122 |
4.00% notes, due 2025 |
|
|
348,879 |
|
|
348,344 |
6.125% notes, due 2026 |
|
|
496,304 |
|
|
— |
7.50% senior debentures, due 2027 |
|
|
110,164 |
|
|
110,103 |
3.875% notes, due 2028 |
|
|
496,933 |
|
|
496,448 |
2.95% notes, due 2032 |
|
|
494,908 |
|
|
494,522 |
Other obligations with various interest rates and due dates |
|
|
8,813 |
|
|
425 |
|
|
$ |
2,615,001 |
|
$ |
3,182,964 |
The 7.50% senior debentures are not redeemable prior to their maturity. The 6.125% notes have a call option which allows for redemption at par, without penalty, on or after March 1, 2024. All other notes may be called at the option of the company subject to “make whole” clauses.
12
The estimated fair market value of long-term debt, using quoted market prices, is as follows:
|
|
September 30, |
|
December 31, |
||
(thousands) |
|
2023 |
|
2022 |
||
3.25% notes, due 2024 |
|
$ |
— |
|
$ |
481,500 |
4.00% notes, due 2025 |
|
|
339,000 |
|
|
338,000 |
6.125% notes, due 2026 |
|
|
498,000 |
|
|
— |
7.50% senior debentures, due 2027 |
|
|
114,000 |
|
|
116,500 |
3.875% notes, due 2028 |
|
|
457,000 |
|
|
456,000 |
2.95% notes, due 2032 |
|
|
390,500 |
|
|
395,500 |
The carrying amount of the company’s other short-term borrowings, uncommitted lines of credit, revolving credit facility, 3.25% notes due in 2024, North American asset securitization program, commercial paper, and other obligations approximate their fair value.
The company has a $2.0 billion revolving credit facility maturing in September 2026. The facility may be used by the company for general corporate purposes including working capital in the ordinary course of business, letters of credit, repayment, prepayment or purchase of long-term indebtedness, acquisitions, and as support for the company’s commercial paper program, as applicable. Interest on borrowings under the revolving credit facility is calculated using a base rate or a secured overnight financing rate (“SOFR”), plus a spread (1.08% at September 30, 2023), which is based on the company’s credit ratings, plus a credit spread adjustment of 0.10% or an effective interest rate of 6.42% at September 30, 2023. The facility fee, which is based on the company’s credit ratings, was 0.175% of the total borrowing capacity at September 30, 2023. The company had $54.0 million in outstanding borrowings under the revolving credit facility at September 30, 2023 and no outstanding borrowings under the revolving credit facility at December 31, 2022.
The company has a North American asset securitization program collateralized by accounts receivable of certain of its subsidiaries. The company may borrow up to $1.5 billion under the program which matures in September 2025. The program is conducted through Arrow Electronics Funding Corporation (“AFC”), a wholly-owned, bankruptcy remote subsidiary. The North American asset securitization program does not qualify for sale treatment. Accordingly, the accounts receivable and related debt obligation remain on the company’s consolidated balance sheets. Interest on borrowings is calculated using a base rate plus a spread (0.40% at September 30, 2023) plus a credit spread adjustment of 0.10% or an effective interest rate of 5.82% at September 30, 2023. The facility fee is 0.40% of the total borrowing capacity.
The company had $605.0 million and $1.2 billion in outstanding borrowings under the North American asset securitization program at September 30, 2023 and December 31, 2022, respectively, which was included in “Long-term debt” on the company’s consolidated balance sheets. Total collateralized accounts receivable of approximately $2.4 billion and $3.1 billion were held by AFC and were included in “Accounts receivable, net” on the company’s consolidated balance sheets at September 30, 2023 and December 31, 2022, respectively. Any accounts receivable held by AFC would likely not be available to other creditors of the company in the event of bankruptcy or insolvency proceedings of the company before repayment of any outstanding borrowings under the North American asset securitization program.
Both the revolving credit facility and North American asset securitization program include terms and conditions that limit the incurrence of additional borrowings and require that certain financial ratios be maintained at designated levels. As of September 30, 2023, the company was in compliance with all such financial covenants.
During the first quarter of 2023, the company completed the sale of $500.0 million principal amount of 6.125% notes due in March 2026. The notes have a call option which allows for redemption at par, without penalty, on or after March 1, 2024. The net proceeds of the offering of $496.3 million were used to repay the $300.0 million principal amount of its 4.50% notes due March 2023 and for general corporate purposes. On the issuance date, the company entered into an interest rate swap, which effectively converts the 6.125% notes to a floating rate based on daily compounding SOFR + 0.508%. Refer to Note H for additional information.
13
During February 2022, the company repaid $350.0 million principal amount of its 3.50% notes due April 2022.
In the normal course of business, certain of the company’s subsidiaries have agreements to sell, without recourse, selected trade receivables to financial institutions. The company does not retain financial or legal interests in these receivables, and, accordingly they are accounted for as sales of the related receivables, and the receivables are removed from the company’s consolidated balance sheets.
Interest and dividend income of $16.9 million and $47.6 million for the third quarter and first nine months of 2023, respectively, and $8.3 million and $18.8 million for the third quarter and first nine months of 2022, respectively were recorded in “Interest and other financing expense, net” within the company’s consolidated statements of operations.
Note H – Financial Instruments Measured at Fair Value
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The company utilizes a fair value hierarchy, which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The fair value hierarchy has three levels of inputs that may be used to measure fair value:
Level 1 |
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
Level 2 |
Quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. |
Level 3 |
Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable. |
The following table presents assets measured at fair value on a recurring basis at September 30, 2023:
(thousands) |
|
Balance Sheet Location |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
||||
Cash equivalents (a) |
|
Cash and cash equivalents |
|
$ |
9,954 |
|
$ |
— |
|
$ |
— |
|
$ |
9,954 |
Equity investments (b) |
|
Other assets |
|
|
47,482 |
|
|
— |
|
|
— |
|
|
47,482 |
Interest rate swap designated as fair value hedge |
|
Other liabilities |
|
|
— |
|
|
(2,043) |
|
|
— |
|
|
(2,043) |
Foreign exchange contracts designated as net investment hedges |
|
Other assets/other current assets |
|
|
— |
|
|
55,369 |
|
|
— |
|
|
55,369 |
|
|
|
|
$ |
57,436 |
|
$ |
53,326 |
|
$ |
— |
|
$ |
110,762 |
The following table presents assets measured at fair value on a recurring basis at December 31, 2022:
(thousands) |
|
Balance Sheet Location |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
||||
Cash equivalents (a) |
|
Cash and cash equivalents/other assets |
|
$ |
6,596 |
|
$ |
— |
|
$ |
— |
|
$ |
6,596 |
Equity investments (b) |
|
Other assets |
|
|
50,614 |
|
|
— |
|
|
— |
|
|
50,614 |
Interest rate swaps designated as cash flow hedges |
|
Other assets |
|
|
— |
|
|
55,942 |
|
|
— |
|
|
55,942 |
Foreign exchange contracts designated as net investment hedges |
|
Other assets/other current assets |
|
|
— |
|
|
60,962 |
|
|
— |
|
|
60,962 |
|
|
|
|
$ |
57,210 |
|
$ |
116,904 |
|
$ |
— |
|
$ |
174,114 |
| (a) | Cash equivalents include highly liquid investments with an original maturity of less than three months. |
| (b) | The company has an 8.4% equity ownership interest in Marubun Corporation and a portfolio of mutual funds with quoted market prices. The company recorded an unrealized (loss) gain of ($4.2) million and $1.6 million for the third quarter and first nine months of 2023, respectively, on equity securities held at the end of the quarter. The company recorded an unrealized loss of ($2.1) million and ($12.4) million for the third quarter and first nine months of 2022, respectively, on equity securities held at the end of the quarter. |
14
Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to goodwill and identifiable intangible assets (refer to Note C). The company tests these assets for impairment if indicators of potential impairment exist or at least annually if indefinite-lived.
Derivative Instruments
The company uses various financial instruments, including derivative instruments, for purposes other than trading. Certain derivative instruments are designated at inception as hedges and measured for effectiveness both at inception and on an ongoing basis. Derivative instruments not designated as hedges are carried at fair value on the consolidated balance sheets with changes in fair value recognized in earnings.
Interest Rate Swaps
The company manages the risk of variability in interest rates of future expected debt issuances by entering into various forward-starting interest rate swaps, designated as cash flow hedges. Changes in fair value of interest rate swaps designated as cash flow hedges are recorded in the shareholders’ equity section on the company’s consolidated balance sheets in “Accumulated other comprehensive loss” and will be reclassified into income over the life of the anticipated debt issuance or in the period the hedged forecasted cash flows are deemed no longer probable to occur. Reclassified gains and losses are recorded within the line item “Interest and other financing expense, net” in the consolidated statements of operations. The fair value of interest rate swaps is estimated using a discounted cash flow analysis on the expected cash flows of each derivative based on observable inputs, including interest rate curves and credit spreads.
In June 2023, the company terminated its outstanding forward-starting interest rate swaps and received a cash payment of $56.7 million, which is reported in the “Cash flows from financing activities” section of the consolidated statements of cash flows. The forecasted transactions related to the swaps continue to be probable to occur by December 31, 2025 and the $56.7 million gain on the termination of the interest rate swaps will remain in “Accumulated other comprehensive loss” on the company’s consolidated balance sheets.
At December 31, 2022, the company had the following outstanding interest rate swaps designated as cash flow hedges:
|
|
|
|
Notional Amount |
|
Weighted-Average |
|
Date Range of |
|
Trade Date |
|
Maturity Date |
|
(thousands) |
|
Interest Rate |
|
Forecasted Transaction |
|
April 2020 |
|
December 2024 |
|
$ |
300,000 |
|
0.97% |
|
Jan 2023 - Dec 2025 |
The company occasionally enters into interest rate swap transactions, designated as fair value hedges, that convert certain fixed-rate debt to variable-rate debt in order to manage its targeted mix of fixed- and floating-rate debt. For qualifying interest rate fair value hedges, gains or losses on derivatives are included in “Interest and other financing expense, net” in the consolidated statements of operations. The change in fair value of the hedged item attributable to the risk being hedged is reported as an adjustment to its carrying value and is also included in “Interest and other financing expense, net”. When a derivative is no longer designated as a hedge, any remaining difference between the carrying value and par value of the hedged item is amortized in “Interest and other financing expense, net” over the remaining life of the hedged item using the effective interest method.
As of September 30, 2023, the company had one outstanding interest rate swap designated as a fair value hedge, the terms of which are as follows:
|
|
|
|
Notional Amount |
|
Interest Rate due |
|
Interest Rate due to |
|
Trade Date |
|
Maturity Date |
|
(thousands) |
|
from Counterparty |
|
Counterparty |
|
February 2023 |
|
March 2026 |
|
$ |
500,000 |
|
6.125% |
|
SOFR+0.508% |
The counterparty to the interest rate swap has the option to cancel the swaps after one year, without penalty.
15
Foreign Exchange Contracts
The company’s foreign currency exposure relates primarily to international transactions where the currency collected from customers can be different from the currency used to purchase the product. The company’s primary exposures to such transactions are denominated in the following currencies: Euro, Indian Rupee, and Chinese Renminbi. The company enters into foreign exchange forward, option, or swap contracts (collectively, the “foreign exchange contracts”) to facilitate the hedging of foreign currency exposures resulting from inventory purchases and sales and mitigate the impact of changes in foreign currency exchange rates related to these transactions. Foreign exchange contracts generally have terms of no more than six months. The company does not enter into foreign exchange contracts for trading purposes. The risk of loss on a foreign exchange contract is the risk of nonperformance by the counterparties, which the company minimizes by limiting its counterparties to major financial institutions. The fair value of the foreign exchange contracts is estimated using foreign currency spot rates and forward rates quotes by third-party financial institutions. The notional amount of the foreign exchange contracts inclusive of foreign exchange contracts designated as a net investment hedge at September 30, 2023 and December 31, 2022 was $1.1 billion and $1.3 billion, respectively.
Gains and losses related to non-designated foreign currency exchange contracts are recorded in “Cost of sales” on the company’s consolidated statements of operations. Gains and losses related to foreign currency exchange contracts designated as cash flow hedges are recorded in “Cost of sales,” “Selling, general, and administrative expenses,” and “Interest and other financing expense, net” based upon the nature of the underlying hedged transaction, on the company’s consolidated statements of operations. Gains or losses on these contracts are deferred and recognized when the underlying future purchase or sale is recognized or when the corresponding asset or liability is revalued, and were not material to the financial statements for the periods presented.
The following foreign exchange contracts were designated as net investment hedges, hedging a portion of the company’s net investments in subsidiaries with Euro-denominated net assets:
|
|
Notional Amount (thousands) |
||||
Maturity Date |
|
September 30, 2023 |
|
December 31, 2022 |
||
March 2023 |
|
EUR |
— |
|
EUR |
50,000 |
September 2024 |
|
EUR |
50,000 |
|
EUR |
50,000 |
April 2025 |
|
EUR |
100,000 |
|
EUR |
100,000 |
January 2028 |
|
EUR |
100,000 |
|
EUR |
100,000 |
Total |
|
EUR |
250,000 |
|
EUR |
300,000 |
The change in the fair value of derivatives designated as net investment hedges are recorded in “foreign currency translation adjustment” (“CTA”) within “Accumulated other comprehensive loss” on the company’s consolidated balance sheets. Amounts excluded from the assessment of hedge effectiveness are included in “Interest and other financing expense, net” on the company’s consolidated statements of operations.
During the first quarter of 2023, a foreign exchange contract designated as a net investment hedge matured and the company received $10.7 million, which is reported in the “Cash flows from investing activities” section of the consolidated statements of cash flows.
16
The effects of derivative instruments on the company’s consolidated statements of operations and other comprehensive income are as follows:
|
|
|
|
Quarter Ended |
|
Nine Months Ended |
||||||||
|
|
|
|
September 30, |
|
October 1, |
|
September 30, |
|
October 1, |
||||
(thousands) |
|
Income Statement Line |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||
Gain (Loss) Recognized in Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts, net investment hedge (a) |
|
Interest Expense |
|
$ |
1,804 |
|
$ |
2,202 |
|
$ |
5,656 |
|
$ |
6,604 |
Interest rate swaps, cash flow hedge |
|
Interest Expense |
|
|
(683) |
|
|
(906) |
|
|
(2,199) |
|
|
(2,671) |
Interest rate swap, fair value hedge (b) |
|
Interest Expense |
|
|
(247) |
|
|
— |
|
|
(2,043) |
|
|
— |
Total |
|
|
|
$ |
874 |
|
$ |
1,296 |
|
$ |
1,414 |
|
$ |
3,933 |
Gain (Loss) Recognized in Other Comprehensive Income (Loss) before reclassifications, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts, net investment hedge (c) |
|
|
|
$ |
5,448 |
|
$ |
13,016 |
|
$ |
3,902 |
|
$ |
30,031 |
Interest rate swaps, cash flow hedge |
|
|
|
|
— |
|
|
6,616 |
|
|
585 |
|
|
25,161 |
Total |
|
|
|
$ |
5,448 |
|
$ |
19,632 |
|
$ |
4,487 |
|
$ |
55,192 |
| (a) | Represents derivative amounts excluded from the assessment of effectiveness for the net investment hedges reclassified from CTA to “Interest and other financing expenses, net”. |
| (b) | The amount of fair value hedging adjustments to the carrying value of hedged debt instruments totaled a gain of $0.2 million and $1.1 million for the third quarter and first nine months of 2023, respectively. |
| (c) | Includes derivative losses of $0.9 million and $1.0 million for the third quarter of 2023 and 2022, respectively, and $4.3 million and $3.5 million for the first nine months of 2023 and 2022, respectively, which were excluded from the assessment of effectiveness for the net investment hedges and recognized in other comprehensive income (loss), net of tax. |
Other
The carrying amount of “cash and cash equivalents”, “accounts receivable, net”, and “accounts payable” approximate their fair value due to the short maturities of these financial instruments.
Note I – Net Income per Share
Basic net income per share is computed by dividing net income attributable to shareholders by the weighted-average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. The dilutive effect of equity awards is calculated using the treasury stock method.
17
The following table presents the computation of net income per share on a basic and diluted basis:
|
|
Quarter Ended |
|
Nine Months Ended |
|
||||||||
|
|
September 30, |
|
October 1, |
|
September 30, |
|
October 1, |
|
||||
(thousands except per share data) |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
||||
Net income attributable to shareholders |
|
$ |
198,659 |
|
$ |
342,399 |
|
$ |
708,968 |
|
$ |
1,077,482 |
|
Weighted-average shares outstanding - basic |
|
|
55,597 |
|
|
64,228 |
|
|
57,021 |
|
|
66,055 |
|
Net effect of various dilutive stock-based compensation awards |
|
|
701 |
|
|
751 |
|
|
694 |
|
|
790 |
|
Weighted-average shares outstanding - diluted |
|
|
56,298 |
|
|
64,979 |
|
|
57,715 |
|
|
66,845 |
|
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
3.57 |
|
$ |
5.33 |
|
$ |
12.43 |
|
$ |
16.31 |
|
Diluted (a) |
|
$ |
3.53 |
|
$ |
5.27 |
|
$ |
12.28 |
|
$ |
16.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Equity awards excluded from diluted net income per share as their effect would have been anti-dilutive |
|
|
- |
|
|
203 |
|
|
43 |
|
|
53 |
|
Note J – Shareholders’ Equity
Accumulated Other Comprehensive Income (Loss)
The following table presents the changes in Accumulated other comprehensive income (loss), excluding noncontrolling interests:
|
|
Quarter Ended |
|
Nine Months Ended |
||||||||
|
|
September 30, |
|
October 1, |
|
September 30, |
|
October 1, |
||||
(thousands) |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||
Foreign Currency Translation Adjustment and Other: |
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss before reclassifications (a) |
|
$ |
(107,891) |
|
$ |
(200,163) |
|
$ |
(98,801) |
|
$ |
(467,465) |
Amounts reclassified into income |
|
|
342 |
|
|
(468) |
|
|
726 |
|
|
(1,271) |
Unrealized Gain on Foreign Exchange Contracts Designated as Net Investment Hedges, Net: |
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income before reclassifications (b) |
|
|
5,448 |
|
|
13,016 |
|
|
3,902 |
|
|
30,031 |
Amounts reclassified into income |
|
|
(1,371) |
|
|
(1,669) |
|
|
(4,301) |
|
|
(5,008) |
Unrealized Gain on Interest Rate Swaps Designated as Cash Flow Hedges, Net: |
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income before reclassifications (b) |
|
|
— |
|
|
6,616 |
|
|
585 |
|
|
25,161 |
Amounts reclassified into income |
|
|
519 |
|
|
687 |
|
|
1,672 |
|
|
2,026 |
Employee Benefit Plan Items, Net: |
|
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified into income |
|
|
(261) |
|
|
117 |
|
|
(831) |
|
|
305 |
Net change in Accumulated other comprehensive loss |
|
$ |
(103,214) |
|
$ |
(181,864) |
|
$ |
(97,048) |
|
$ |
(416,221) |
| (a) | Foreign currency translation adjustment includes intra-entity foreign currency transactions that are of a long-term investment nature of ($21.0) million and $7.1 million for the third quarter and first nine months of 2023, and $20.2 million and $48.5 million for the third quarter and first nine months of 2022, respectively. |
| (b) | For additional information related to net investment hedges and interest rate swaps refer to Note H. |
18
Common Stock Outstanding Activity
The following table sets forth the activity in the number of shares outstanding:
|
|
Common |
|
|
|
Common |
|
|
Stock |
|
Treasury |
|
Stock |
(thousands) |
|
Issued |
|
Stock |
|
Outstanding |
Common stock outstanding at December 31, 2022 |
|
125,424 |
|
66,175 |
|
59,249 |
Shares issued for stock-based compensation awards |
|
— |
|
(313) |
|
313 |
Repurchases of common stock |
|
— |
|
2,564 |
|
(2,564) |
Common stock outstanding at April 1, 2023 |
|
125,424 |
|
68,426 |
|
56,998 |
Shares issued for stock-based compensation awards |
|
— |
|
(264) |
|
264 |
Repurchases of common stock |
|
— |
|
1,600 |
|
(1,600) |
Common stock outstanding at July 1, 2023 |
|
125,424 |
|
69,762 |
|
55,662 |
Shares issued for stock-based compensation awards |
|
— |
|
(45) |
|
45 |
Repurchases of common stock |
|
— |
|
1,552 |
|
(1,552) |
Common stock outstanding at September 30, 2023 |
|
125,424 |
|
71,269 |
|
54,155 |
|
|
Common |
|
|
|
Common |
|
|
Stock |
|
Treasury |
|
Stock |
(thousands) |
|
Issued |
|
Stock |
|
Outstanding |
Common stock outstanding at December 31, 2021 |
|
125,424 |
|
57,358 |
|
68,066 |
Shares issued for stock-based compensation awards |
|
— |
|
(385) |
|
385 |
Repurchases of common stock |
|
— |
|
2,015 |
|
(2,015) |
Common stock outstanding at April 2, 2022 |
|
125,424 |
|
58,988 |
|
66,436 |
Shares issued for stock-based compensation awards |
|
— |
|
(96) |
|
96 |
Repurchases of common stock |
|
— |
|
1,929 |
|
(1,929) |
Common stock outstanding at July 2, 2022 |
|
125,424 |
|
60,821 |
|
64,603 |
Shares issued for stock-based compensation awards |
|
— |
|
(25) |
|
25 |
Repurchases of common stock |
|
— |
|
2,528 |
|
(2,528) |
Common stock outstanding at October 1, 2022 |
|
125,424 |
|
63,324 |
|
62,100 |
Share-Repurchase Program
The following table shows the company’s share-repurchase program as of September 30, 2023:
|
|
|
|
|
|
Approximate |
|||
|
|
|
|
|
|
Dollar Value of |
|||
|
|
Dollar Value |
|
Dollar Value of |
|
Shares that May |
|||
|
|
Approved for |
|
Shares |
|
Yet be Purchased |
|||
Share-Repurchase Details by Month of Board Approval (thousands) |
|
Repurchase |
|
Repurchased |
|
Under the Program |
|||
July 2021 |
|
$ |
600,000 |
|
$ |
600,000 |
|
$ |
— |
December 2021 |
|
|
600,000 |
|
|
600,000 |
|
|
— |
September 2022 |
|
|
600,000 |
|
|
600,000 |
|
|
— |
January 2023 |
|
|
1,000,000 |
|
|
378,414 |
|
|
621,586 |
Total (a) |
|
$ |
2,800,000 |
|
$ |
2,178,414 |
|
$ |
621,586 |
| (a) | The dollar value of shares repurchased includes an accrual of $6.2 million for excise taxes during the first nine months of 2023 which is recorded within “Treasury stock” on the company’s consolidated balance sheets. |
The company repurchased 1.6 million shares and 5.7 million shares of common stock for $200.0 million and $700.9 million, in the third quarter and first nine months of 2023, respectively, under the share-repurchase program, excluding excise taxes. On January 31, 2023, the company’s Board of Directors approved a $1.0 billion increase to the company’s share-repurchase program. As of September 30, 2023, approximately $621.6 million remained available for repurchase under the share-repurchase program. The company’s share-repurchase program does not have an expiration date.
19
Note K – Contingencies
Environmental Matters
In connection with the purchase of Wyle Electronics (“Wyle”) in August 2000, the company entered into a settlement agreement under which, the company accepted responsibility for any potential subsequent costs incurred for environmental clean-up associated with any then-existing contamination or violation of environmental regulations. The company is aware of two facilities (in Huntsville, Alabama (the “Huntsville Site”) and Norco, California (the “Norco Site”)) at which contaminated soil and groundwater was identified and required environmental remediation.
As successor-in-interest to Wyle, the company is the beneficiary of various Wyle insurance policies that covered liabilities arising out of operations at Norco and Huntsville. To date, the company has recovered approximately $47.2 million from certain insurance carriers relating to environmental clean-up matters at the Norco and Huntsville sites, and continues to pursue additional recoveries from one insurer related solely to the Huntsville site. The company has not recorded a receivable for any potential future insurance recoveries related to the Norco and Huntsville environmental matters, as the realization of the claims for recovery are not deemed probable at this time.
Costs are recorded for environmental matters when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Environmental liabilities are included in “Accrued expenses” and “Other liabilities” on the company’s consolidated balance sheets. The company has determined that there is no amount within the environmental liability ranges discussed below that is a better estimate than any other amount, and therefore has recorded the accruals at the minimum amount of the ranges. The liabilities were estimated based on current costs and are not discounted. The costs related to these environmental matters (referred to as “environmental costs”) include remediation, project management, regulatory oversight, and investigative and feasibility study activities.
The company expects the liabilities associated with such ongoing remediation to be resolved over an extended period of time and the accruals for environmental liabilities are adjusted periodically as facts and circumstances change, assessment and remediation efforts progress, or as additional technical or legal information becomes available. Environmental liabilities are difficult to assess and estimate due to various unknown factors such as the timing and extent of remediation, improvements in remediation technologies, orders by administrative agencies, and the extent to which environmental laws and regulations may change in the future. Accordingly, the company cannot presently estimate the ultimate potential costs related to the Huntsville and Norco sites.
During the third quarter and first nine months of 2023, the company recorded charges of $20.9 million and $23.3 million, respectively, related to increases in the environmental liabilities for the Norco and Huntsville sites. The company recorded charges of $1.9 million and $2.2 million, for the third quarter and first nine months of 2022. These costs are included in “Restructuring, integration, and other charges” on the company’s consolidated statements of operations.
Environmental Matters - Huntsville
In February 2015, the company and the Alabama Department of Environmental Management (“ADEM”) finalized and executed a consent decree in connection with the Huntsville Site. Characterization of the extent of contaminated soil and groundwater is complete and has been approved by ADEM. Health-risk evaluations and a Corrective Action Development Plan were approved by ADEM in 2018, opening the way for pilot testing of on-site remediation in late 2019. Due to the effectiveness of the pilot testing, the pilot testing process has been expanded and remains underway with annual application of bioremediation reagents, semi-annual groundwater monitoring, as well as data collection to direct future bioremediation injections. Approximately $8.6 million has been spent to date. The subsequent environmental costs at the site are estimated to be between $5.8 million and $17.5 million.
20
Environmental Matters - Norco
In October 2003, the company entered into a consent decree with Wyle Laboratories and the California Department of Toxic Substance Control (“DTSC”) in connection with the Norco Site. In September 2013, the DTSC approved the final Remedial Action Plan (“RAP”) for actions in five on-site areas and one off-site area. As of 2018, the remediation measures described in the RAP had been implemented. Routine progress monitoring of groundwater and soil gas continue on-site and off-site. Approximately $82.2 million has been spent to date. The subsequent environmental costs at the site are estimated to be between $23.0 million and $39.3 million.
It is reasonably possible that the company will need to adjust the liabilities noted above for the Norco and Huntsville sites to reflect the effects of new or additional information, to the extent that such information impacts the costs, timing or duration of the required actions. Future changes in estimates of the costs, timing or duration of the required actions could have a material adverse effect on the company’s consolidated financial position, results of operations or cash flows.
Other
During the third quarter of 2023, the company received $62.2 million in settlement funds in connection with claims filed against certain manufacturers of aluminum, tantalum, and film capacitors who allegedly colluded to fix the price of capacitors from 2001 through 2014. These amounts were recorded as a reduction to “Selling, general, and administrative expenses” in the company’s consolidated statements of operations.
From time to time, in the normal course of business, the company may become liable with respect to other pending and threatened litigation, environmental, regulatory, labor, product, and tax matters. While such matters are subject to inherent uncertainties, it is not currently anticipated that any such matters will materially impact the company’s consolidated financial position, liquidity, or results of operations.
Note L – Segment and Geographic Information
The company is a global provider of products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions. The company has one of the world’s broadest portfolios of product offerings available from leading electronic components and enterprise computing solutions suppliers, coupled with a range of services, solutions and tools that enables its suppliers to distribute their technologies and help its industrial and commercial customers to source, build upon, and leverage these technologies to grow their businesses, reduce their time to market, and enhance their overall competitiveness. The company is a trusted partner in a complex value chain and is uniquely positioned through its electronics components and IT content portfolios to increase value for stakeholders.
The company has two business segments, the global components business segment and the global enterprise computing solutions (“ECS”) business segment. The company’s global components business segment, enabled by a comprehensive range of value-added capabilities and services, markets and distributes electronic components to original equipment manufacturers (“OEMs”) and contract manufacturers (“CMs”). The company’s global ECS business segment is a leading value-added provider of comprehensive computing solutions and services. The global ECS portfolio of computing solutions includes datacenter, cloud, security, and analytics solutions. Global ECS brings broad market access, extensive supplier relationships, scale, and resources to help its value-added resellers (“VARs”) and managed service providers (“MSPs”) meet the needs of their end-users.
As a result of the company’s philosophy of maximizing operating efficiencies through the centralization of certain functions, operating income for the segments excludes unallocated corporate overhead costs, depreciation on corporate fixed assets, and restructuring, integration and other costs, as they are not attributable to the individual operating segments and are included in the corporate line item.
21
Sales, by segment by geographic area, are as follows:
|
|
Quarter Ended |
|
Nine Months Ended |
|
||||||||
|
|
September 30, |
|
October 1, |
|
September 30, |
|
October 1, |
|
||||
(thousands) |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
||||
Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Components: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
1,869,934 |
|
$ |
2,445,647 |
|
$ |
6,169,949 |
|
$ |
7,265,552 |
|
EMEA |
|
|
1,987,423 |
|
|
1,935,827 |
|
|
6,387,047 |
|
|
5,671,234 |
|
Asia/Pacific |
|
|
2,387,835 |
|
|
2,918,873 |
|
|
7,226,871 |
|
|
9,024,188 |
|
Global components |
|
$ |
6,245,192 |
|
$ |
7,300,347 |
|
$ |
19,783,867 |
|
$ |
21,960,974 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ECS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
1,015,924 |
|
$ |
1,234,158 |
|
$ |
3,014,544 |
|
$ |
3,442,803 |
|
EMEA |
|
|
745,903 |
|
|
731,927 |
|
|
2,459,552 |
|
|
2,397,622 |
|
Global ECS |
|
$ |
1,761,827 |
|
$ |
1,966,085 |
|
$ |
5,474,096 |
|
$ |
5,840,425 |
|
Consolidated |
|
$ |
8,007,019 |
|
$ |
9,266,432 |
|
$ |
25,257,963 |
|
$ |
27,801,399 |
|
Operating income (loss), by segment, are as follows:
|
|
Quarter Ended |
|
Nine Months Ended |
|
||||||||
|
|
September 30, |
|
October 1, |
|
September 30, |
|
October 1, |
|
||||
(thousands) |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
||||
Operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Global components (a) |
|
$ |
379,053 |
|
$ |
494,587 |
|
$ |
1,177,906 |
|
$ |
1,518,423 |
|
Global ECS (b) |
|
|
54,624 |
|
|
83,976 |
|
|
221,951 |
|
|
253,744 |
|
Corporate (c) |
|
|
(93,594) |
|
|
(75,869) |
|
|
(245,372) |
|
|
(226,269) |
|
Consolidated |
|
$ |
340,083 |
|
$ |
502,694 |
|
$ |
1,154,485 |
|
$ |
1,545,898 |
|
| (a) | Global components operating income includes $62.2 million in settlement charges recorded as a reduction to operating expense for the third quarter and first nine months of 2023. Refer to Note K for additional information. Charges to increase the allowance for credit losses increased $16.8 million and $11.0 million for the third quarter and first nine months of 2023, respectively, relative to the year-earlier periods. |
| (b) | Global ECS operating income includes charges to increase the allowance for credit losses, which increased by $20.0 million and $26.8 million for the third quarter and first nine months of 2023, respectively, relative to the year-earlier periods. |
| (c) | Corporate operating loss includes restructuring, integration, and other charges of $31.4 million and $44.3 million for the third quarter and first nine months of 2023, respectively, and $3.6 million and $11.0 million for the third quarter and first nine months of 2022, respectively. |
22
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Information Relating to Forward-Looking Statements
This report includes “forward-looking statements,” as the term is defined under the federal securities laws. Forward-looking statements are those statements which are not statements of historical fact. These forward-looking statements can be identified by forward-looking words such as “expects,” “anticipates,” “intends,” “plans,” “may,” “will,” “believes,” “seeks,” “estimates,” and similar expressions. These forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which could cause actual results or facts to differ materially from such statements for a variety of reasons, including, but not limited to: unfavorable economic conditions; disruptions or inefficiencies in the supply chain; political instability; impacts of military conflict and sanctions, industry conditions; changes in product supply, pricing and customer demand; competition; other vagaries in the global components and the global enterprise computing solutions (“ECS”) markets; deteriorating economic conditions, including economic recession, inflation, tax rates, foreign currency exchange rates, or the availability of capital; the effects of natural or man-made catastrophic events; changes in relationships with key suppliers; increased profit margin pressure; changes in legal and regulatory matters; non-compliance with certain regulations, such as export, antitrust, and anti-corruption laws; foreign tax and other loss contingencies; outbreaks, epidemics, pandemics, or public health crises; and the company’s ability to generate positive cash flow. For a further discussion of these and other factors that could cause the company’s future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q and the company’s most recent Annual Report on Form 10-K, as well as in other filings the company makes with the Securities and Exchange Commission. Shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The company undertakes no obligation to update publicly or revise any of the forward-looking statements.
Certain Non-GAAP Financial Information
In addition to disclosing financial results that are determined in accordance with accounting principles generally accepted in the United States (“GAAP”), the company also discloses certain non-GAAP financial information in the sections below captioned “Sales”, “Gross Profit”, “Operating Expenses”, “Operating Income”, “Income Tax”, and “Net Income Attributable to Shareholders”. Refer to these sections below for reconciliations of non-GAAP financial measures to the most directly comparable reported GAAP financial measures. Non-GAAP financial information includes the following:
| ● | Non-GAAP sales and non-GAAP gross profit (referred to as “sales on a constant currency basis” and “gross profit on a constant currency basis”) excludes the impact of changes in foreign currencies by retranslating prior period results at current period foreign exchange rates. |
| ● | Non-GAAP operating expenses excludes identifiable intangible asset amortization, restructuring, integration, and other charges, and the impact of changes in foreign currencies. |
| ● | Non-GAAP operating income excludes identifiable intangible asset amortization and restructuring, integration, and other charges. |
| ● | Non-GAAP effective tax rate and non-GAAP net income attributable to shareholders exclude identifiable intangible asset amortization, restructuring, integration, and other charges, (loss) gain on investments, net, and the impact of tax legislation changes. |
Management believes that providing this additional information is useful to the reader to better assess and understand the company’s operating performance and future prospects in the same manner as management, especially when comparing results with previous periods. Management typically monitors the business as adjusted for these items, in addition to GAAP results, to understand and compare operating results across accounting periods, for internal budgeting purposes, for short-term and long-term operating plans, and to evaluate the company’s financial performance. However, analysis of results on a non-GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with GAAP. For a discussion of what is included within “Restructuring, integration, and other charges” and “(Loss) gain on investments, net” refer to the similarly captioned sections of this item below.
23
Overview
The company is a global provider of products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions. The company has one of the world’s broadest portfolios of product offerings available from leading electronic components and enterprise computing solutions suppliers, coupled with a range of services, solutions and tools that enables its suppliers to distribute their technologies and help its industrial and commercial customers to source, build upon, and leverage these technologies to grow their businesses, reduce their time to market, and enhance their overall competitiveness. The company is a trusted partner in a complex value chain and is uniquely positioned through its electronics components and IT content portfolios to increase value for stakeholders. The company has two business segments, the global components business segment and the global ECS business segment. The company’s global components business segment, enabled by a comprehensive range of value-added capabilities and services, markets and distributes electronic components to original equipment manufacturers (“OEMs”) and contract manufacturers (“CMs”). The company’s global ECS business segment is a leading value-added provider of comprehensive computing solutions and services. The global ECS portfolio of computing solutions includes datacenter, cloud, security, and analytics solutions. Global ECS brings broad market access, extensive supplier relationships, scale, and resources to help its value-added resellers (“VARs”) and managed service providers (“MSPs”) meet the needs of their end-users. For the third quarter of 2023, approximately 78% and 22% of the company’s sales were from the global components business and the global ECS business, respectively.
The company’s strategic initiatives include the following:
| ● | Offering a variety of value-added demand creation services in the global components business, including design, engineering, and global marketing and integration services to promote the future sale of suppliers’ products, which generally lead to longer and more profitable relationships with its suppliers and customers. |
| ● | Providing global supply chain service offerings such as procurement, logistics, warehousing, and insights from data analytics. |
| ● | Enabling customer cloud solutions through the global ECS business’ cloud marketplace and management platform, ArrowSphere, which helps VARs and MSPs to manage, differentiate, and scale their cloud businesses while providing the business intelligence that IT solution providers need to drive growth. |
The company’s financial objectives are to grow sales faster than the market, increase the markets served, grow profits faster than sales, generate earnings per share growth in excess of competitors’ earnings per share growth and market expectations, grow earnings per share at a rate that provides the capital necessary to support the company’s business strategy, allocate and deploy capital effectively so that return on invested capital exceeds the company’s cost of capital, and increase return on invested capital. To achieve its objectives, the company seeks to capture significant opportunities to grow across products, markets, and geographies. To supplement its organic growth strategy, the company continually evaluates strategic acquisitions to broaden its product and value-added service offerings, increase its market penetration, and expand its geographic reach.
Executive Summary
Consolidated sales for the third quarter and the first nine months of 2023 decreased by 13.6% and 9.1%, respectively, compared with the year-earlier periods. The decrease for the third quarter of 2023 was driven by a 14.5% decrease in the global components business segment sales and a 10.4% decrease in the global ECS business segment sales compared with the year-earlier period. The decrease for the first nine months of 2023 was driven by a 9.9% decrease in the global components business segment sales and a 6.3% decrease in global ECS business segment sales, compared with the year-earlier periods. Consolidated sales on a constant currency basis decreased 14.9% and 8.9% for the third quarter and the first nine months of 2023, respectively, compared with the year-earlier periods.
The company reported net income attributable to shareholders of $198.7 million and $709.0 million in the third quarter and the first nine months of 2023, respectively, compared with $342.4 million and $1.1 billion in the year-earlier periods. Non-GAAP net income attributable to shareholders for the third quarter and the first nine months of 2023 was $233.1 million and $757.4 million, respectively, compared with $354.1 million and $1.1 billion in the year-earlier periods.
24
Non-GAAP net income attributable to shareholders is adjusted for the following items:
Third quarters of 2023 and 2022:
| ● | restructuring, integration, and other charges of $31.4 million in 2023 and $3.6 million in 2022; |
| ● | identifiable intangible asset amortization of $7.9 million in 2023 and $8.7 million in 2022; and |
| ● | net loss on investments of $6.2 million in 2023 and $3.5 million in 2022. |
First nine months of 2023 and 2022:
| ● | restructuring, integration, and other charges of $44.3 million in 2023 and $11.0 million in 2022; |
| ● | identifiable intangible asset amortization of $23.8 million in 2023 and $26.5 million in 2022; |
| ● | net gain on investments of $4.6 million in 2023 and net loss on investments of $11.2 million in 2022; and |
| ● | impact of tax legislation changes of $0.9 million in 2023. |
Other activity impacting both GAAP and non-GAAP net income attributable to shareholders included:
| ● | $62.2 million in legal settlements which were recorded as a decrease to operating expenses for the third quarter of 2023; and |
| ● | increases of $36.8 million and $37.8 million in charges taken to increase the allowance for credit losses for the third quarter and first nine months of 2023, respectively, when compared to the year-earlier periods. |
During the third quarter of 2023, changes in foreign currencies increased sales by approximately $145.7 million, operating income by $7.9 million and earnings per share on a diluted basis by $0.07, compared to the year-earlier periods. During the first nine months of 2023, changes in foreign currencies reduced sales by approximately $74.6 million, operating income by $6.5 million, and earnings per share on a diluted basis by $0.09, compared to the year-earlier periods.
Sales
Substantially all of the company’s sales are made on an order-by-order basis, rather than through long-term sales contracts. As such, the nature of the company’s business does not provide for the visibility of material forward-looking information from its customers and suppliers beyond a few months. Following is an analysis of consolidated net sales, and net sales for the company’s two business segments:
|
|
Quarter Ended |
|
|
|
|
Nine Months Ended |
|
|
|
|
||||||||
|
|
September 30, |
|
October 1, |
|
% |
|
|
September 30, |
|
October 1, |
|
% |
|
|
||||
(millions) |
|
2023 |
|
2022 |
|
Change |
|
|
2023 |
|
2022 |
|
Change |
|
|
||||
Consolidated sales, as reported |
|
$ |
8,007 |
|
$ |
9,266 |
|
(13.6) |
% |
|
$ |
25,258 |
|
$ |
27,801 |
|
(9.1) |
% |
|
Impact of changes in foreign currencies |
|
|
— |
|
|
146 |
x |
|
|
|
|
— |
|
|
(75) |
|
|
|
|
Consolidated sales, constant currency |
|
$ |
8,007 |
|
$ |
9,412 |
|
(14.9) |
% |
|
$ |
25,258 |
|
$ |
27,727 |
|
(8.9) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global components sales, as reported |
|
$ |
6,245 |
|
$ |
7,300 |
|
(14.5) |
% |
|
$ |
19,784 |
|
$ |
21,961 |
|
(9.9) |
% |
|
Impact of changes in foreign currencies |
|
|
— |
|
|
96 |
|
|
|
|
|
— |
|
|
(68) |
|
|
|
|
Global components sales, constant currency |
|
$ |
6,245 |
|
$ |
7,397 |
|
(15.6) |
% |
|
$ |
19,784 |
|
$ |
21,893 |
|
(9.6) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global ECS sales, as reported |
|
$ |
1,762 |
|
$ |
1,966 |
|
(10.4) |
% |
|
$ |
5,474 |
|
$ |
5,840 |
|
(6.3) |
% |
|
Impact of changes in foreign currencies |
|
|
— |
|
|
49 |
|
|
|
|
|
— |
|
|
(6) |
|
|
|
|
Global ECS sales, constant currency |
|
$ |
1,762 |
|
$ |
2,015 |
|
(12.6) |
% |
|
$ |
5,474 |
|
$ |
5,834 |
|
(6.2) |
% |
|
The sum of the components for sales, as reported, and sales on a constant currency basis may not agree to totals, as presented, due to rounding.
25
During the third quarter and first nine months of 2023, global components sales decreased compared to the year-earlier period primarily due to the following impacts:
| ● | sales declines in the Americas region of 23.5% and 15.1%, respectively, primarily due to decreases in shortage market activity and softer demand in most major verticals, particularly transportation, communications, and computer and data processing; |
| ● | sales declines in the Asia/Pacific region of 18.2% and 19.9%, respectively, primarily due to softer demand and lower volumes in most verticals; |
| ● | partially offset by growth in the EMEA region of 2.7% and 12.6%, respectively, primarily due to an increase in industrial and defense. |
Sales from the global ECS business decreased 10.4% and 6.3% in the third quarter and the first nine months of 2023, respectively, relative to the year-earlier periods, primarily due to a shift in product mix away from hardware to more software and cloud solutions, resulting in a higher proportion of revenue recognized where the company assumes an agency relationship and revenue is recognized in the amount of the net fee. In the Americas regions, sales declined 17.7% and 12.4%, respectively, primarily due to a decrease in demand, particularly for storage and compute. In the EMEA region, sales increased 1.9% and 2.6%, respectively, primarily due to strong demand, offset partially by a shift in product mix. Demand was strong in EMEA for cyber-security solutions and other software, and cloud-based solutions enabled by the company’s ArrowSphere platform.
Gross Profit
Following is an analysis of the company’s consolidated gross profit:
|
|
Quarter Ended |
|
|
|
|
Nine Months Ended |
|
|
|
|
||||||||
|
|
September 30, |
|
October 1, |
|
% |
|
|
September 30, |
|
October 1, |
|
% |
|
|
||||
(millions) |
|
2023 |
|
2022 |
|
Change |
|
|
2023 |
|
2022 |
|
Change |
|
|
||||
Gross profit, as reported |
|
$ |
980 |
|
$ |
1,187 |
|
(17.5) |
% |
|
$ |
3,159 |
|
$ |
3,631 |
|
(13.0) |
% |
|
Impact of changes in foreign currencies |
|
|
— |
|
|
19 |
|
|
|
|
|
— |
|
|
(10) |
|
|
|
|
Gross profit, constant currency |
|
$ |
980 |
|
$ |
1,206 |
|
(18.8) |
% |
|
$ |
3,159 |
|
$ |
3,621 |
|
(12.8) |
% |
|
Gross profit as a percentage of sales, as reported |
|
|
12.2 |
% |
|
12.8 |
% |
(60) |
bps |
|
|
12.5 |
% |
|
13.1 |
% |
(60) |
bps |
|
Gross profit as a percentage of sales, constant currency |
|
|
12.2 |
% |
|
12.8 |
% |
(60) |
bps |
|
|
12.5 |
% |
|
13.1 |
% |
(60) |
bps |
|
The sum of the components for gross profit on a constant currency basis may not agree to totals, as presented, due to rounding.
The decrease in gross profit for the third quarter and the first nine months of 2023 related to declines in the global components business, partially offset by slight increases in gross profit from the global ECS business.
The decrease in gross profit margins during the third quarter and the first nine months of 2023, compared with the year-earlier periods, related primarily to declines in shortage market activity in the Americas region of the global components business and softer demand and product mix shifting toward lower margin products in the Asia/Pacific region of the global components business. The decrease was partially offset by higher margins in the Americas and EMEA regions of the global ECS businesses due to product mix shifting towards a higher proportion of revenue recognized where the company assumes an agency relationship and revenue is recognized in the amount of the net fee. Global components supply chain services offerings continued to have a positive impact on gross margins.
26
Operating Expenses
Following is an analysis of the company’s consolidated operating expenses:
|
|
Quarter Ended |
|
|
|
|
Nine Months Ended |
|
|
|
|
||||||||
|
|
September 30, |
|
October 1, |
|
% |
|
|
September 30, |
|
October 1, |
|
% |
|
|
||||
(millions) |
|
2023 |
|
2022 |
|
Change |
|
|
2023 |
|
2022 |
|
Change |
|
|
||||
Operating expenses, as reported |
|
$ |
640 |
|
$ |
684 |
|
(6.5) |
% |
|
$ |
2,005 |
|
$ |
2,085 |
|
(3.8) |
% |
|
Identifiable intangible asset amortization |
|
|
(8) |
|
|
(9) |
|
|
|
|
|
(24) |
|
|
(27) |
|
|
|
|
Restructuring, integration, and other charges |
|
|
(31) |
|
|
(4) |
|
|
|
|
|
(44) |
|
|
(11) |
|
|
|
|
Impact of changes in foreign currencies |
|
|
— |
|
|
12 |
|
|
|
|
|
— |
|
|
(3) |
|
|
|
|
Non-GAAP operating expenses |
|
$ |
600 |
|
$ |
684 |
|
(12.2) |
% |
|
$ |
1,937 |
|
$ |
2,044 |
|
(5.2) |
% |
|
Operating expenses as a percentage of sales |
|
|
8.0 |
% |
|
7.4 |
% |
60 |
bps |
|
|
7.9 |
% |
|
7.5 |
% |
40 |
bps |
|
Non-GAAP operating expenses as a percentage of sales, constant currency |
|
|
7.5 |
% |
|
7.3 |
% |
20 |
bps |
|
|
7.7 |
% |
|
7.4 |
% |
30 |
bps |
|
The sum of the components for non-GAAP operating expenses may not agree to totals, as presented, due to rounding.
The declines in operating expenses for the third quarter and first nine months of 2023, relative to the year-earlier periods, were primarily related to lower variable costs, in line with the decrease in sales discussed above, and due to $62.2 million in settlement funds received in connection with certain legal matters, which were recorded as a reduction of operating expenses. The decreases for the third quarter and first nine months of 2023 were partially offset by increases in charges taken for the allowance for credit losses of $36.8 million and $37.8 million, respectively, primarily due to an increase in the reserves associated with a limited number of customers, and an increase in restructuring, integration, and other charges of $27.7 million and $33.2 million, respectively (see discussion below). Refer to Note K, “Contingencies” of the Notes to the Consolidated Financial Statements, for discussion of the legal settlement funds received.
Restructuring, Integration, and Other Charges
Restructuring initiatives and integration costs are due to the company’s continued efforts to lower costs, drive operational efficiency, integrate acquired businesses, and consolidate certain operations, as necessary.
The company recorded restructuring, integration, and other charges as follows:
|
|
Quarter Ended |
|
|
|
|
Nine Months Ended |
||||||||
|
|
September 30, |
|
October 1, |
|
|
|
|
September 30, |
|
October 1, |
||||
(millions) |
|
2023 |
|
2022 |
|
|
|
|
2023 |
|
2022 |
||||
Restructuring and integration charges |
|
$ |
1.5 |
|
$ |
2.2 |
|
|
|
|
$ |
9.9 |
|
$ |
7.5 |
Other charges |
|
|
29.9 |
|
|
1.4 |
|
|
|
|
|
34.4 |
|
|
3.5 |
Total |
|
$ |
31.4 |
|
$ |
3.6 |
|
|
|
|
$ |
44.3 |
|
$ |
11.0 |
For the third quarter and first nine months of 2023, other charges include $20.9 million and $23.3 million, respectively, related to an increase in environmental liabilities. Refer to Note K, “Contingencies” of the Notes to the Consolidated Financial Statements for further discussion.
27
Operating Income
Following is an analysis of the company’s consolidated operating income, and operating income for the company’s two business segments:
|
|
Quarter Ended |
|
|
|
|
Nine Months Ended |
|
|
|
|
||||||||
|
|
September 30, |
|
October 1, |
|
% |
|
|
September 30, |
|
October 1, |
|
% |
|
|
||||
(millions) |
|
2023 |
|
2022 |
|
Change |
|
|
2023 |
|
2022 |
|
Change |
|
|
||||
Consolidated operating income, as reported |
|
$ |
340 |
|
$ |
503 |
|
(32.3) |
% |
|
$ |
1,154 |
|
$ |
1,546 |
|
(25.3) |
% |
|
Identifiable intangible asset amortization |
|
|
8 |
|
|
9 |
|
|
|
|
|
24 |
|
|
27 |
|
|
|
|
Restructuring, integration, and other charges |
|
|
31 |
|
|
4 |
|
|
|
|
|
44 |
|
|
11 |
|
|
|
|
Non-GAAP consolidated operating income |
|
$ |
379 |
|
$ |
515 |
|
(26.3) |
% |
|
$ |
1,222 |
|
$ |
1,583 |
|
(22.8) |
% |
|
Consolidated operating income as a percentage of sales |
|
|
4.2 |
% |
|
5.4 |
% |
(120) |
bps |
|
|
4.6 |
% |
|
5.6 |
% |
(100) |
bps |
|
Non-GAAP consolidated operating income as a percentage of sales |
|
|
4.7 |
% |
|
5.6 |
% |
(90) |
bps |
|
|
4.8 |
% |
|
5.7 |
% |
(90) |
bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global components operating income, as reported |
|
$ |
379 |
|
$ |
495 |
|
(23.4) |
% |
|
$ |
1,178 |
|
$ |
1,518 |
|
(22.4) |
% |
|
Identifiable intangible asset amortization |
|
|
7 |
|
|
7 |
|
|
|
|
|
20 |
|
|
20 |
|
|
|
|
Non-GAAP global components operating income |
|
$ |
386 |
|
$ |
501 |
|
(23.1) |
% |
|
$ |
1,198 |
|
$ |
1,539 |
|
(22.1) |
% |
|
Global components operating income as a percentage of sales |
|
|
6.1 |
% |
|
6.8 |
% |
(70) |
bps |
|
|
6.0 |
% |
|
6.9 |
% |
(90) |
bps |
|
Non-GAAP global components operating income as a percentage of sales |
|
|
6.2 |
% |
|
6.9 |
% |
(70) |
bps |
|
|
6.1 |
% |
|
7.0 |
% |
(90) |
bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global ECS operating income, as reported |
|
$ |
55 |
|
$ |
84 |
|
(35.0) |
% |
|
$ |
222 |
|
$ |
254 |
|
(12.5) |
% |
|
Identifiable intangible asset amortization |
|
|
1 |
|
|
2 |
|
|
|
|
|
4 |
|
|
6 |
|
|
|
|
Non-GAAP global ECS operating income |
|
$ |
56 |
|
$ |
86 |
|
(35.0) |
% |
|
$ |
226 |
|
$ |
260 |
|
(13.2) |
% |
|
Global ECS operating income as a percentage of sales |
|
|
3.1 |
% |
|
4.3 |
% |
(120) |
bps |
|
|
4.1 |
% |
|
4.3 |
% |
(20) |
bps |
|
Non-GAAP global ECS operating income as a percentage of sales |
|
|
3.2 |
% |
|
4.4 |
% |
(120) |
bps |
|
|
4.1 |
% |
|
4.5 |
% |
(40) |
bps |
|
The sum of the components of consolidated operating income do not agree to totals, as presented, because operating income for the corporate segment is not included in the table above. Refer to Note L “Segment and Geographic Information” of the Notes to the Consolidated Financial Statements for further discussion.
The decrease in consolidated operating income as a percentage of sales for the third quarter and the first nine months of 2023 relates primarily to the changes in gross profit margins and operating expenses discussed above. During the third quarter of 2023, changes in foreign currencies increased operating income by $7.9 million when compared to the year-earlier period. During the first nine months of 2023, changes in foreign currencies reduced operating income by $6.5 million when compared to the year-earlier periods.
The decrease in global components operating income for the third quarter and first nine months of 2023 relates primarily to the declines in sales and gross margins discussed above and increases in charges taken for the allowance for credit losses of $16.8 million and $11.0 million, respectively. The decreases were offset partially by $62.2 million in legal settlements recorded as a decrease to operating expense. The decrease in global ECS operating income for the third quarter and first nine months of 2023 relates primarily to increases in charges taken for the allowance for credit losses of $20.0 million and $26.8 million, respectively, offset partially by the increases in gross profit discussed above.
28
(Loss) Gain on Investments, Net
The company recorded gains and losses on investments as follows:
|
|
Quarter Ended |
|
|
|
|
Nine Months Ended |
||||||||
|
|
September 30, |
|
October 1, |
|
|
|
|
September 30, |
|
October 1, |
||||
(millions) |
|
2023 |
|
2022 |
|
|
|
|
2023 |
|
2022 |
||||
(Loss) gain on investments, net |
|
$ |
(6.2) |
|
$ |
(3.5) |
|
|
|
|
$ |
4.6 |
|
$ |
(11.2) |
Gains and losses on investments are primarily related to the changes in fair value of assets related to the Arrow SERP pension plan, which consist primarily of life insurance policies and mutual fund assets, as well as changes in the fair value of the company’s investment in Marubun Corporation, refer to Note H “Financial Instruments Measured at Fair Value”.
Interest and Other Financing Expense, Net
The company recorded net interest and other financing expense as follows:
|
|
Quarter Ended |
|
|
|
|
Nine Months Ended |
||||||||
|
|
September 30, |
|
October 1, |
|
|
|
|
September 30, |
|
October 1, |
||||
(millions) |
|
2023 |
|
2022 |
|
|
|
|
2023 |
|
2022 |
||||
Interest and other financing expense, net |
|
$ |
(82.2) |
|
$ |
(50.9) |
|
|
|
|
$ |
(246.7) |
|
$ |
(123.4) |
The increase for the third quarter and the first nine months of 2023 primarily relates to higher interest rates on outstanding borrowings and floating rate credit facilities, and higher average daily borrowings. Refer to the section below titled “Liquidity and Capital Resources” for more information on changes in borrowings.
Income Tax
Income taxes for the interim periods presented have been included in the accompanying consolidated financial statements on the basis of an estimated annual effective tax rate. The determination of the consolidated provision for income taxes requires management to make certain judgments and estimates. Changes in the estimated level of annual pre-tax earnings, tax laws, and changes resulting from tax audits can affect the overall effective income tax rate, which impacts the level of income tax expense and net income. Judgments and estimates related to the company’s projections and assumptions are inherently uncertain, therefore, actual results could differ from projections.
Following is an analysis of the company’s consolidated effective income tax rate:
|
|
|
Quarter Ended |
|
|
|
|
|
Nine Months Ended |
|
|
|
|
||||||
|
|
|
September 30, |
|
|
October 1, |
|
|
|
|
|
September 30, |
|
|
October 1, |
|
|
|
|
|
|
|
2023 |
|
|
2022 |
|
|
|
|
|
2023 |
|
|
2022 |
|
|
|
|
Effective income tax rate |
|
|
20.7 |
% |
|
23.5 |
% |
|
|
|
|
22.0 |
% |
|
23.5 |
% |
|
|
|
Identifiable intangible asset amortization |
|
|
0.1 |
% |
|
— |
% |
|
|
|
|
0.1 |
% |
|
— |
% |
|
|
|
Restructuring, integration, and other charges |
|
|
0.3 |
% |
|
— |
% |
|
|
|
|
0.1 |
% |
|
— |
% |
|
|
|
(Loss) gain on investments, net |
|
|
0.1 |
% |
|
— |
% |
|
|
|
|
— |
% |
|
— |
% |
|
|
|
Impact of tax legislation changes |
|
|
— |
% |
|
— |
% |
|
|
|
|
(0.1) |
% |
|
— |
% |
|
|
|
Non-GAAP effective income tax rate |
|
|
21.2 |
% |
|
23.5 |
% |
|
|
|
|
22.1 |
% |
|
23.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The sum of the components for non-GAAP effective income tax rate may not agree to totals, as presented, due to rounding.
29
The company’s effective tax rate deviates from the statutory U.S. federal income tax rate mainly due to the mix of foreign taxing jurisdictions in which the company operates and where its foreign subsidiaries generate taxable income, among other things. The change in the effective tax rate for the third quarter and the first nine months of 2023, compared to the year-earlier periods, is primarily due to the changes in the mix of tax jurisdictions where taxable income is generated and discrete items, such as utilization of tax credits in certain jurisdictions, changes in valuation allowances, and liabilities for uncertain tax positions.
Net Income Attributable to Shareholders
Following is an analysis of the company’s consolidated net income attributable to shareholders:
|
|
Quarter Ended |
|
|
|
|
Nine Months Ended |
||||||||
|
|
September 30, |
|
October 1, |
|
|
|
|
September 30, |
|
October 1, |
||||
(millions) |
|
2023 |
|
2022 |
|
|
|
|
2023 |
|
2022 |
||||
Net income attributable to shareholders, as reported |
|
$ |
199 |
|
$ |
342 |
|
|
|
|
$ |
709 |
|
$ |
1,077 |
Identifiable intangible asset amortization* |
|
|
8 |
|
|
8 |
|
|
|
|
|
23 |
|
|
26 |
Restructuring, integration, and other charges |
|
|
31 |
|
|
4 |
|
|
|
|
|
44 |
|
|
11 |
Loss (gain) on investments, net |
|
|
6 |
|
|
3 |
|
|
|
|
|
(5) |
|
|
11 |
Tax effect of adjustments above |
|
|
(11) |
|
|
(4) |
|
|
|
|
|
(15) |
|
|
(12) |
Impact of tax legislation changes |
|
|
— |
|
|
— |
|
|
|
|
|
1 |
|
|
— |
Non-GAAP net income attributable to shareholders |
|
$ |
233 |
|
$ |
354 |
|
|
|
|
$ |
757 |
|
$ |
1,114 |
* Identifiable intangible asset amortization also excludes amortization related to the noncontrolling interest.
The sum of the components for non-GAAP net income attributable to shareholders may not agree to totals, as presented, due to rounding.
The decrease in net income attributable to shareholders in the third quarter and the first nine months of 2023 compared to the year-earlier periods, relates primarily to decreased sales, gross margins, operating expenses, and higher interest expense, as discussed above. In the third quarter of 2023, changes in foreign currencies increased net income by approximately $4.8 million, when compared to the year-earlier period. In the first nine months of 2023, changes in foreign currencies reduced net income by approximately $5.7 million, respectively, when compared to the year-earlier period.
Liquidity and Capital Resources
Management believes that the company’s current cash availability, its current borrowing capacity under its revolving credit facility and asset securitization programs, and its expected ability to generate future operating cash flows are sufficient to meet its projected cash flow needs for the next 12 months and the foreseeable future. The company’s current committed and undrawn liquidity stands at over $1.9 billion in addition to $333.3 million of cash on hand at September 30, 2023. The company also may issue debt or equity securities in the future and management believes the company will have adequate access to the capital markets, if needed. The company continually evaluates its liquidity requirements and would seek to amend its existing borrowing capacity or access the financial markets as deemed necessary.
The company’s principal sources of liquidity are existing cash and cash equivalents, cash generated from operations and cash provided by its revolving credit facilities and debt. The company’s principal uses of liquidity include cash used in operations, investments to grow working capital, scheduled interest and principal payments on its borrowings, and the return of cash to shareholders through share repurchases.
The following table presents selected financial information related to liquidity:
|
|
September 30, |
|
December 31, |
|
|
|
|
||
(millions) |
|
2023 |
|
2022 |
|
Change |
|
|||
Working capital |
|
$ |
7,378 |
|
$ |
7,182 |
|
$ |
196 |
|
Cash and cash equivalents |
|
|
333 |
|
|
177 |
|
|
156 |
|
Short-term debt |
|
|
1,589 |
|
|
590 |
|
|
999 |
|
Long-term debt |
|
|
2,615 |
|
|
3,183 |
|
|
(568) |
|
30
Working Capital
The company maintains a significant investment in working capital which the company defines as accounts receivable, net, plus inventories less accounts payable. The change in working capital during the first nine months of 2023, was primarily attributable to decreases in accounts payable and increases in inventory, offset by lower accounts receivable.
Working capital as a percentage of sales, which is defined as working capital divided by annualized quarterly sales, increased to 23.0% for the third quarter of 2023, compared to 18.2% in the year-earlier period. The increase was primarily due to lower sales and higher inventory.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments, which are readily convertible into cash, with original maturities of three months or less. At September 30, 2023 and December 31, 2022, the company had cash and cash equivalents of $333.3 million and $176.9 million, respectively, of which $163.3 million and $160.8 million, respectively, were held outside the United States.
The company has $4.1 billion of undistributed earnings of its foreign subsidiaries which it deems indefinitely reinvested, and recognizes that it may be subject to additional foreign taxes and U.S. state income taxes, if it reverses its indefinite reinvestment assertion on these foreign earnings. The company has $2.0 billion of foreign earnings that are not deemed permanently reinvested and are available for distribution in future periods as of September 30, 2023.
Revolving Credit Facilities and Debt
The following tables summarize the company’s credit facilities by category:
|
|
|
|
|
Outstanding Borrowings |
||||
|
|
Borrowing |
|
September 30, |
|
December 31, |
|||
(millions) |
|
Capacity |
|
2023 |
|
2022 |
|||
North American asset securitization program |
|
$ |
1,500 |
|
$ |
605 |
|
$ |
1,235 |
Revolving credit facility |
|
|
2,000 |
|
|
54 |
|
|
— |
Commercial paper program (a) |
|
|
1,200 |
|
|
903 |
|
|
173 |
Uncommitted lines of credit |
|
|
500 |
|
|
50 |
|
|
78 |
| (a) | Amounts outstanding under the commercial paper program are backstopped by available commitments under the company’s revolving credit facility. |
|
|
Average Daily Balance Outstanding |
|
|
|
|
|
|
||||
|
|
Nine Months Ended |
|
|
Effective Interest Rate |
|
||||||
|
|
September 30, |
|
October 1, |
|
|
September 30, |
|
October 1, |
|
||
(millions) |
|
2023 |
|
2022 |
|
|
2023 |
|
2022 |
|
||
North American asset securitization program |
|
$ |
1,161 |
|
$ |
903 |
|
|
5.82 |
% |
3.54 |
% |
Revolving credit facility |
|
|
173 |
|
|
190 |
|
|
6.42 |
% |
3.23 |
% |
Commercial paper program |
|
|
717 |
|
|
451 |
|
|
5.95 |
% |
3.85 |
% |
Uncommitted lines of credit |
|
|
144 |
|
|
5 |
|
|
6.42 |
% |
3.44 |
% |
The company also has an EMEA asset securitization program under which it continuously sells its interest in designated pools of trade accounts receivables of certain of its subsidiaries in the EMEA region. Receivables sold under the program are excluded from “Accounts receivable, net” and no corresponding liability is recorded on the company’s consolidated balance sheets. During the first nine months of 2023 and 2022, the average daily balance outstanding under the EMEA asset securitization program was $644.6 million and $430.5 million, respectively. Refer to Note E “Accounts Receivable” of the Notes to the Consolidated Financial Statements for further discussion.
31
The following table summarizes recent events impacting the company’s capital resources:
(millions) |
|
Activity |
|
Date |
|
Notional Amount |
|
Uncommitted lines of credit |
|
Increase in Capacity |
|
May 2023 |
|
$ |
300 |
4.50% notes, due March 2023 |
|
Repaid |
|
March 2023 |
|
$ |
300 |
6.125% notes, due March 2026 (a) |
|
Issued |
|
March 2023 |
|
$ |
500 |
3.50% notes, due April 2022 |
|
Repaid |
|
February 2022 |
|
$ |
350 |
North American asset securitization program |
|
Increase in Capacity |
|
September 2022 |
|
$ |
250 |
EMEA asset securitization program |
|
Increase in Capacity |
|
September 2022 |
|
€ |
200 |
| (a) | Upon issuance of the 6.125% notes due March 2026, the company entered into an interest rate swap, which effectively converts the 6.125% notes to floating rate notes based on SOFR + 0.508%. |
Refer to Note G, “Debt” of the Notes to the Consolidated Financial Statements for further discussion of the company’s short-term and long-term debt and available financing.
Cash Flows
The following table summarizes the company’s cash flows by category for the periods presented:
|
|
September 30, |
|
October 1, |
|
|
|
||
(millions) |
|
2023 |
|
2022 |
|
Change |
|||
Net cash provided by (used for) operating activities |
|
$ |
419 |
|
$ |
(142) |
|
$ |
561 |
Net cash used for investing activities |
|
|
(47) |
|
|
(34) |
|
|
(13) |
Net cash (used for) provided by financing activities |
|
|
(215) |
|
|
456 |
|
|
(671) |
Cash Flows from Operating Activities
The net amount of cash provided by the company’s operating activities during the first nine months of 2023 was $418.7 million and the net amount of cash used for the company’s operating activities during the first nine months of 2022 was $141.8 million. The change in cash provided by operating activities during 2023, compared to the year-earlier period, related primarily to the company’s historical counter-cyclical cash flow as the company generates cash flow in periods of decreased demand growth.
Cash Flows from Investing Activities
The net amount of cash used for investing activities during the first nine months of 2023 and 2022 was $46.8 million and $34.0 million, respectively. The change in cash used for investing activities related primarily to settlement proceeds from derivative contracts in 2023.
Cash Flows from Financing Activities
The net amount of cash used for financing activities was $214.7 million during the first nine months of 2023 compared to $455.8 million provided by financing activities in the year-earlier period. The change in cash used for financing activities related primarily to an increase in repayments of long-term bank borrowings offset by proceeds from notes issued in the first quarter of 2023, the settlement of interest rate swaps in the second quarter of 2023, and the increase in short-term borrowings in the third quarter of 2023.
Capital Expenditures
Capital expenditures for the first nine months of 2023 and 2022 were $57.8 million and $54.8 million, respectively. The company expects capital expenditures to be approximately $80.0 million for fiscal year 2023.
32
Share-Repurchase Program
The company repurchased 5.7 million shares of common stock for $700.9 million and 6.5 million shares of common stock for $734.4 million in the first nine months of 2023 and 2022, respectively, under the share-repurchase program, excluding excise taxes. During the first nine months of 2023, the company accrued $6.2 million of excise tax, which is recorded within “Treasury stock” on the company’s consolidated balance sheets and reduces the share-repurchase authorization. On January 31, 2023, the company’s Board of Directors approved a $1.0 billion increase to the company’s share-repurchase program. As of September 30, 2023, approximately $621.6 million remained available for repurchase. The share-repurchase authorization does not have an expiration date and the pace of the repurchase activity will depend on factors such as the company’s working capital needs, cash requirements for acquisitions, debt repayment obligations or repurchases of debt, share price, and economic and market conditions. The share-repurchase program may be accelerated, suspended, delayed, or discontinued at any time subject to the approval of the company’s Board of Directors.
Contractual Obligations
The company has contractual obligations for short-term and long-term debt, interest on short-term and long-term debt, purchase obligations, operating leases, and other sources and uses of capital that are summarized in the sections titled “Contractual Obligations” and “Additional Capital Requirements and Sources” in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in the company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Refer to the section above titled “Revolving Credit Facilities and Debt” for updates to the company’s short-term and long-term debt obligations. Refer to Note H, “Financial Instruments Measured at Fair Value” of the Notes to Consolidated Financial Statements for further discussion on hedging activities. As of September 30, 2023, there were no other material changes to the contractual obligations of the company.
Critical Accounting Estimates
The company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the company to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosure of contingent assets and liabilities. The company evaluates its estimates on an ongoing basis. The company bases its estimates on historical experience and on various other assumptions that are believed reasonable under the circumstances; the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There have been no significant changes to the company’s critical accounting estimates during the first nine months of 2023. Refer to the section titled “Critical Accounting Estimates” in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in the company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Impact of Recently Issued Accounting Standards
See Note B, “Impact of Recently Issued Accounting Standards” of the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements, including the anticipated dates of adoption and the effects on the company’s consolidated financial position and results of operations.
Item 3.Quantitative and Qualitative Disclosures About Market Risk
There were no material changes in market risk for changes in foreign currency exchange rates and interest rates from the information provided in Part II, Item 7A – Quantitative and Qualitative Disclosures About Market Risk in the company’s Annual Report on Form 10-K for the year ended December 31, 2022.
33
Item 4.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The company’s management, under the supervision and with the participation of the company’s Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the company’s disclosure controls and procedures as of September 30, 2023 (the “Evaluation”). Based upon the Evaluation, the company’s Chief Executive Officer and Chief Financial Officer concluded that the company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) were effective as of September 30, 2023.
Changes in Internal Control over Financial Reporting
There were no changes in the company’s internal control over financial reporting during the company’s most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.
34
PART II. OTHER INFORMATION
Item 1.Legal Proceedings
The information set forth in Note K “Contingencies” in Notes to Consolidated Financial Statements in Item 1 Part I of this Report, is incorporated herein by reference.
Item 1A.Risk Factors
There have been no material changes to the company’s risk factors from those discussed in Part I, Item 1A - Risk Factors in the company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
The following table shows the share-repurchase activity for the quarter ended September 30, 2023:
|
|
|
|
|
|
|
|
|
Approximate |
|
|
|
|
|
|
|
|
Total Number of |
|
Dollar Value of |
|
|
|
|
|
|
|
|
Shares |
|
Shares that May |
|
|
|
Total |
|
|
|
|
Purchased as |
|
Yet be |
|
|
|
Number of |
|
Average |
|
Part of Publicly |
|
Purchased |
||
|
|
Shares |
|
Price Paid |
|
Announced |
|
Under the |
||
(thousands except share and per share data) |
|
Purchased |
|
per Share (a) |
|
Program |
|
Programs (b) |
||
July 2 through July 29, 2023 |
|
— |
|
$ |
— |
|
— |
|
$ |
823,520 |
July 30 through August 26, 2023 |
|
660,594 |
|
|
128.67 |
|
660,594 |
|
|
738,520 |
August 27 through September 30, 2023 |
|
892,440 |
|
|
128.86 |
|
892,440 |
|
|
621,586 |
Total |
|
1,553,034 |
|
|
|
|
1,553,034 |
|
|
|
| (a) | Average price paid per share excludes 1% excise tax on stock repurchases. |
| (b) | On January 31, 2023, the company’s Board of Directors approved a $1.0 billion increase to the company’s share-repurchase program. The company’s share-repurchase program does not have an expiration date. As of September 30, 2023, the total authorized dollar value of shares available for repurchase was $2.8 billion of which $2.2 billion has been utilized, while the $621.6 million in the table represents the remaining amount available for repurchase under the program. |
Item 5.Other Information
Trading Arrangements
During the quarter ended September 30, 2023, none of the company’s directors or officers adopted, amended, or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement”, as those terms are defined in Regulation S-K, Item 408.
35
Item 6.Exhibits
* |
: Filed herewith. |
** |
: Furnished herewith. |
+ |
: Indicates a management contract or compensatory plan or arrangement. |
36
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
ARROW ELECTRONICS, INC. |
|
|
|
|
|
Date: |
November 2, 2023 |
By: |
/s/ Rajesh K. Agrawal |
|
|
|
Rajesh K. Agrawal |
|
|
|
Senior Vice President and Chief Financial Officer |
|
|
|
(Duly Authorized Officer and Principal Financial Officer) |
|
|
|
|
|
|
|
/s/ Richard A. Seidlitz |
|
|
|
Richard A. Seidlitz |
|
|
|
Vice President, Corporate Controller, and Principal Accounting Officer |
|
|
|
|
37
Exhibit 10(a)
[*****] Indicates omitted information. This redacted information has been excluded because it is both (i) not material and (ii) of the type that the registrant treats as private and confidential.
THIS OMNIBUS DEED OF AMENDMENT NO. 3 (this "Amendment") is dated July _21 , 2023 and made among ARROW EMEA FUNDING CORP B.V., a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of The Netherlands, as the SPV (the "SPV"), BNP PARIBAS ("BNPP"), a societe anonyme incorporated under the laws of France, as the Administrative Agent (in such capacity, the "Administrative Agent"), and as Purchaser Agent for the BNP Purchaser Group (in such capacity, the "BNPP Purchaser Agent"), ING BELGIUM S.A./N.V., a public limited liability company (societe anonyme/naamloze vennootschap) organised under the laws of Belgium, as Purchaser Agent for the ING Purchaser Group (the "ING Purchaser Agent"), U.S. BANK TRUSTEES LIMITED, a limited liability company incorporated under the laws of England and Wales, as the Security Trustee (the "Security Trustee"), ARROW ELECTRONICS (UK) LIMITED, a limited liability company incorporated under the laws of England and Wales, as Collection Account Trustee ("Arrow UK"), and ELAVON FINANCIAL SERVICES DAC, a designated activity company registered in Ireland, as the Paying Agent (the "Paying Agent"), and ARROW ELECTRONICS, INC., a corporation organised under the laws of the State of New York, as the Parent (the "Parent"). Each Person above shall be a "Party" and together shall be the "Parties".
WITNESSETH
WHEREAS, the SPV, the Administrative Agent, the BNPP Purchaser Agent, Matchpoint Finance PLC, the ING Purchaser Agent, Mont Blanc Capital Corp, Arrow UK, Arrow Central Europe GMBH, the Parent, Arrow Electronics FC B.V., the Security Trustee and the Paying Agent have entered into that certain Master Framework Agreement, dated as of January 27, 2020 (as amended from time to time up to the date of this Amendment, the "Master Framework Agreement");
WHEREAS, the SPV, the Administrative Agent, the BNPP Purchaser Agent, Matchpoint Finance PLC, the ING Purchaser Agent, Mont Blanc Capital Corp, Arrow UK, Arrow Central Europe GMBH, the Security Trustee and the Paying Agent have entered into that certain Receivables Transfer Agreement, dated as of January 27, 2020 (as amended from time to time up to the date of this Amendment, the "Receivables Transfer Agreement");
WHEREAS, the SPV, Arrow UK and the Security Trustee have entered into that certain English Declaration of Trust (English Collection Accounts), dated as of January 27, 2020 (as amended up to the date of this Amendment, together with the Receivables Transfer Agreement, the "Agreements" and each Agreement, reflecting the amendment of such Agreement effected or proposed to be effected pursuant to this Amendment, the "Amended Agreements");
WHEREAS, the Parties desire to amend the Agreements to which they are a party as provided herein; and
NOW THEREFORE, the Parties agree as follows.
THIS DEED WITNESSES that:
| 1. | DEFINITIONS AND INTERPRETATION |
| 1.1 | Terms defined in the Amended Agreements |
Terms defined in each Amended Agreement but not in this Amendment shall have the same meaning in this Amendment as in such Amended Agreement or, if not defined therein, in the Master Framework Agreement.
| 1.2 | Interpretation |
The principles of interpretation set out in Clause 2.2 (Interpretation) of the Master Framework Agreement apply to this Amendment, mutatis mutandis, as if fully set forth herein.
| 2. | AMENDMENTS TO THE AGREEMENTS |
| 2.1 | Amendment of Receivables Transfer Agreement. The Parties to the Receivables Transfer Agreement hereby agree that with effect from the Effective Date, the Receivables Transfer Agreement is amended as follows: |
| (a) | Clause 6.1(f)(ii) of the Receivables Transfer Agreement shall be amended in its entirety to read as follows: |
"(ii) the average of the Delinquency Ratios for any three (3) consecutive Month End Dates shall (A) during the period of time from and including July 29, 2023, to but excluding January 1, 2024, exceed 2.00%, and (B) at any other
time, exceed 1.60%,"
| (b) | Schedule 3 to the Receivables Transfer Agreement shall be amended in its entirety and replaced with Annex A attached hereto. |
| 2.2 | Amendment of English Declaration of Trust (English Collection Accounts). The Parties to the English Declaration of Trust (English Collection Accounts) hereby agree that with effect from the Effective Date, in order to the include the additional English Collection Account as a new Trust Account under the English Declaration of Trust (English Collection Accounts), the English Declaration of Trust (English Collection Accounts)shall be amended as follows: |
""Revocation Notice" means a notice substantially in the form attached as Exhibit A (Revocation Notice) to Schedule 2 (Notice of Declaration of Trust) or such other form as the Security Trustee may agree in its discretion;"
| (c) | Schedule 2 to the English Declaration of Trust (English Collection Accounts) shall be amended in its entirety and replaced with Annex C attached hereto. |
"4. Notice of Declaration of Trust The Collection Account Trustee shall:
| 3. | EFFECTIVENESS |
| 3.1 | Effective Date |
Subject to Clause 3.3 below, this Amendment shall become effective on the date hereof (the "Effective Date"), provided that the Administrative Agent shall have received a counterpart (or counterparts) of this Amendment executed and delivered by each of the Parties. All covenants, agreements, representations and warranties made herein and in each Agreement shall survive the execution and delivery of this Amendment and shall continue in full force and effect.
| 3.2 | Status |
This Amendment is designated as a Transaction Document.
| 3.3 | Continuing effect; Further Assurances |
754069545
| 4. | CERTAIN REPRESENTATIONS/REAFFIRMATIONS |
| 4.1 | The SPV and each Arrow Party that is a party hereto hereby represents and warrants to each of the other Parties that: |
754069545
| 4.2 | The Parent is a party to the Amendment for the purposes of confirming the Parent Undertaking Agreement remains in full force and effect. By its signature below, the Parent hereby affirms, agrees and acknowledges, as of the Effective Date, that (a) all of the terms and conditions set forth in the Parent Undertaking Agreement and all of the covenants made by the Parent therein are hereby confirmed and ratified, and (b) all of its obligations under the Parent Undertaking Agreement shall continue and remain in full force and effect, notwithstanding the amendments set forth in Clause 2 (Amendments to the Agreements) of this Amendment. |
| 5. | CONFIRMATIONS |
The SPV confirms to the Administrative Agent, each Purchaser Agent and each other Secured Party that:
| 6. | MISCELLANEOUS |
| 6.1 | Costs and Expenses |
The SPV shall promptly on demand pay (or cause to be paid) the Administrative Agent, each Purchaser and each other Secured Party the amount of all costs and expenses (including legal fees) incurred by any of them in connection with the negotiation, preparation, printing and execution of this Amendment and any other documents referred to in this Amendment. The SPV shall pay (or cause to be paid) all costs and expenses (including legal fees) referred to in the immediately preceding sentence and invoiced on or prior to the date hereof within thirty (30) days of the Effective Date.
| 6.2 | Counterparts |
This Amendment may be executed in any number of counterparts, and this has the same effect as if the signatures (and if applicable, seals) on the counterparts were on a single copy of this Amendment. Delivery by electronic mail of an executed signature page of this Amendment shall be effective as delivery of an executed counterpart of this Amendment.
| 6.3 | Third Party Rights |
Except in respect of the Secured Parties not party to this Amendment, which Persons (including, for the avoidance of doubt, their respective successors and permitted assigns) are intended to have the benefit of (but shall not enforce other than via the Administrative Agent) this Amendment pursuant to the Contracts (Rights of Third Parties) Act 1999, a Person who is not a Party has no rights under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Amendment.
754069545
| 6.4 | Notices |
The provisions of Clause 4.1 (Notices) of the Master Framework Agreement shall apply to this Amendment as if set out in full again here, with such changes as are appropriate to fit this context.
| 6.5 | GOVERNING LAW |
This Amendment and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with the laws of England.
| 6.6 | Jurisdiction of the English Courts |
6.5 (Governing Law) and this Clause 6.6), or the transactions contemplated hereby, and, for such purposes, irrevocably submits to the exclusive jurisdiction of such courts.
| 6.7 | Limited Recourse and No Proceedings |
| 6.8 | Binding Effect |
This Amendment shall be binding on the parties hereto and their respective successors and assigns; provided that the SPV may not assign any of its rights or delegate any of its duties under this Amendment without the prior written consent of the Majority Purchasers.
754069545
| 6.9 | Partial Invalidity |
If, at any time, any provision of this Amendment is or becomes illegal, invalid or unenforceable in any respect under any Law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of that provision under the Law of any other jurisdiction will in any way be affected or impaired.
| 6.10 | Instruction to Security Trustee and Paying Agent |
The Administrative Agent (at the direction of the Specified Purchasers, which each Specified Purchaser provides by entering into this Amendment) hereby instructs the Security Trustee and the Paying Agent (and instructs the SPV to instruct the Paying Agent, which the SPV does by entering into this Amendment) to execute and deliver this Amendment.
[Signature Pages Follow]
754069545
IN WITNESS WHEREOF, this Amendment has been executed as a deed by the parties hereto on the date first above written.
ARROW EMEA FUNDING CORP B.V., as the SPV
By: Intertrust Management B.V., as Managing Director
By:
Name: Diederick Slotboom
Title: Proxyholder
By:
Name: Peter van der Linden
Title:Proxyholder
Omnibus Amendment No. 3
754069545
EXECUTED as a deed by , ) duly authorised for and on behalf)
f ARROW ELECTRONICS (UK))
LIMITED)
EXECUTED as a deed by , ) duly authorised for and on behalf)
f ARROW ELECTRONICS (UK))
LIMITED)
Omnibus Amendment No. 3
754069545
Administrative Agent and Purchaser Agent for the BNPP Purchaser Group
Executed as a deed by BNP Paribas, a company incorporated in France, acting by
____________
_______________
and who, in accordance with the laws of
that territory, are acting under the authority of that company.
Signature in the name of the company:BNP Paribas
Signature of
Signature of
Renaud Chalmet
Signature numérique de Emilie Astier
D_a_t_e _: _: 3.07.20
14:52:42 +02'00'
Digitally signed by Renaud Chalmet Purchaser Agent for the ING Purchaser Group
Dat_e_: 2:023.07.20 15:51:04 +01'00'
Omnibus Amendment No. 3
/.*03/./
By:C:::_....--/s/ Ellen Aelvoet ---
Name· Ellen Aelvoet
Title: Head of Wholesale Banking BeLux
ING BELGIUM S.A./N.V.
/s/ Hans De Munck
By: Hans De Munck (Jul 20, 202317:59 GMT+2)
Name:Hans De Munck Title CFO
Signature of
Witness:
Name of
Witness
Add1essof'b£i'INC:\\/L.A \V l(,
Witness·\')" o""P1 f\P\, Ne M
Occupation of£ M N.o 'i E € U.S. BANK TRUSTEES LIMITED& Pb cWT
Witness:
Ommbus Amendment No 3
754069545
GTRdaXch HadbcTT
CP\T4 HXc[T4
By:
CP\T4
Title:
By:
Omnibus Amendment No. 3
1/.*03/./
ELAVON FINANCIAL SERVICES DAC& Pb cWT EPhX]V 6VT]c
CP\T HXc[T4
By:
CP\T4
Title:
By:
Omnibus Amendment No. 3
1/.*03/./
ARROW ELECTRONICS, INC., as the Parent
By:
Name: Title:
Brad Windbigler
Vice President, Treasurer
By:
Name: Garrett Judge
Title:
Treasury Director
754069545
Omnibus Amendment No. 3
754069545
ANNEX A to Omnibus Amendment No. 3
COLLECTION ACCOUNTS
SCHEDULE 3 ACCOUN
754069545
Arrow Electronics (UK) Limited
[*****]
SPV ACCOUNTS
[*****]
754069545
ANNEX B to Omnibus Amendment No. 3
SCHEDULE 1 TRUST ACCOUNTS
Account Holder |
Collection Account Bank |
IBAN |
Currency |
Location of Trust Account |
Arrow Electronics (UK) Limited |
[*****] |
[*****] |
British Pound |
United Kingdom |
Arrow Electronics (UK) Limited |
[*****] |
[*****] |
US Dollar |
United Kingdom |
Arrow Electronics (UK) Limited |
[*****] |
[*****] |
British Pound |
United Kingdom |
Arrow Electronics (UK) Limited |
[*****] |
[*****] |
British Pound |
United Kingdom |
754069545
ANNEX C to Omnibus Amendment No. 3
SCHEDULE 2
NOTICE OF DECLARATION OF TRUST
From: ARROW ELECTRONICS (UK) LIMITED (the "Collection Account Trustee") Kao 1 Kao Park
Hockham Way Harlow CM17 9NA Essex
United Kingdom
To:[RELEVANT BANK] (the "Bank")
[Address] [Address] [Address]
Cc:ARROW EMEA FUNDING CORP B.V. (the "SPV")
Basisweg 10
143 AP Amsterdam The Netherlands
U.S. BANK TRUSTEES LIMITED (the "Security Trustee") 125 Old Broad Street
London EC2N 1AR United Kingdom
[Date]
Dear Sirs
ACCOUNT HOLDER |
IBAN |
CURRENCY |
LOCATION OF THE TRUST ACCOUNTS |
|
|
|
|
|
|
|
|
|
|
|
|
(the "Trust Accounts").
754069545
| 4. | In accordance with the above, we require you to acknowledge: |
| (a) | the declaration of trust by us in respect of the Trust Accounts; |
754069545
Yours faithfully
ARROW ELECTRONICS (UK) LIMITED
754069545
ACKNOWLEDGMENT OF COLLECTION ACCOUNT BANK
[TO BE PRINTED ON RELEVANT BANK’S LETTERHEAD]
From: [RELEVANT BANK]
[Address] [Address] [Address]
To: |
ARROW ELECTRONICS (UK) LIMITED (the "Collection Account Trustee") Kao 1 Kao Park |
Hockham Way Harlow CM17 9NA Essex
United Kingdom
Cc:ARROW EMEA FUNDING CORP B.V. (the "SPV")
Basisweg 10
143 AP Amsterdam The Netherlands
U.S. BANK TRUSTEES LIMITED (the "Security Trustee") 125 Old Broad Street
London EC2N 1AR United Kingdom
Dear Sirs,
[Date]
Notice of a declaration of trust dated [DATE] 2020 (as amended, the "Declaration of Trust") addressed to us by the Collection Account Trustee and attached hereto (the "Notice").
We refer to the Notice relating to the accounts details of which are set out below the "Trust Accounts"):
ACCOUNT HOLDER |
IBAN |
CURRENCY |
LOCATION OF THE TRUST ACCOUNTS |
|
|
|
|
|
|
|
|
|
|
|
|
We confirm that:
754069545
We do not confirm or agree to any of the other matters set out in the Notice. Our acknowledgement of the Notice is subject to the following conditions:
754069545
This letter and any non-contractual obligations arising out of or in connection with this letter are governed by the laws of England.
Yours faithfully
Name:
Position:
For and on behalf of [Relevant Bank]
754069545
EXHIBIT A
Form of Revocation Notice
[Date]
From: U.S. BANK TRUSTEES LIMITED (the "Security Trustee") 125 Old Broad Street
London EC2N 1AR United Kingdom
To:[RELEVANT BANK]
[Address] [Address] [Address]
Cc: |
ARROW ELECTRONICS (UK) LIMITED (the "Collection Account Trustee") Kao 1 Kao Park |
Hockham Way Harlow CM17 9NA Essex
United Kingdom
ARROW EMEA FUNDING CORP B.V. (the "SPV")
Basisweg 10
143 AP Amsterdam The Netherlands
Account Details:
ACCOUNT HOLDER |
IBAN |
CURRENCY |
LOCATION OF THE TRUST ACCOUNTS |
|
|
|
|
|
|
|
|
|
|
|
|
(the "Trust Accounts"). Dear Sirs
We refer to the letter delivered to you by the Collection Account Trustee in relation to the Trust Accounts.
We hereby give you notice that, with immediate effect, no instructions given by the Collection Account Trustee in respect of the operation of, and payments into and out of the Trust Accounts should be acted upon and you should only accept instructions signed or given by [•] at U.S. BANK TRUSTEES LIMITED (acting in its capacity as Security Trustee).
754069545
Yours faithfully
U.S. BANK TRUSTEES LIMITED
Enclosed:Signed Acknowledgement
754069545
Exhibit 10(b)
EXECUTIVE CHANGE IN CONTROL RETENTION AGREEMENT
(as adopted September 13, 2023, and effective August 7, 2023, prospectively)
THIS AGREEMENT by and between Arrow Electronics, Inc., a New York corporation (the “Company”), and EXECUTIVE_NAME (the “Executive”) is made as of EFFECTIVE_DATE (the “Effective Date”).
WHEREAS, the Company recognizes that, as is the case with many publicly-held corporations, the possibility of a change in control of the Company exists and that such possibility, and the uncertainty and questions which it may raise among key personnel, may result in the departure or distraction of key personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board of Directors of the Company (the “Board”) has determined that appropriate steps should be taken to reinforce and encourage the continued employment and dedication of the Company’s key personnel without distraction from the possibility of a change in control of the Company and related events and circumstances.
NOW, THEREFORE, as an inducement for and in consideration of Executive remaining in its employ, the Company agrees that Executive shall receive the severance benefits set forth in this Agreement in the event Executive’s employment with the Company is terminated under the circumstances described below.
| 1. | Key Definitions. |
As used herein, the following terms shall have the following respective meanings.
provided, that a transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially similar proportions by the Persons who hold the Company’s securities immediately before such transaction.
2
3
2.Employment Status; Termination Following Change in Control.
2.1Term of Agreement; Not an Employment Contract. The term of this Agreement shall begin on the Effective Date and shall continue in effect, with respect to a Change in Control Date that occurs during Executive’s period of employment with the Company, and for such periods following any such Change in Control Date as expressly provided herein. Executive acknowledges that this Agreement does not constitute a contract of employment or impose on the Company any obligation to retain Executive as an employee and that this Agreement does not prevent Executive from terminating employment at any time. If Executive’s employment with the Company terminates for any reason and subsequently a Change in Control shall occur, Executive shall not be entitled to any benefits hereunder except as otherwise provided pursuant to Section 1.4.
2.2Termination of Employment.
(a)If the Change in Control Date occurs, any termination of Executive’s employment by the Company or by Executive within twenty-four (24) months following the Change in Control Date (other than due to the death of Executive) shall be communicated by a written notice to the other party hereto (the “Notice of Termination”), given in accordance with Section 7. Any Notice of Termination shall: (i) indicate the specific termination provision (if any) of this Agreement relied upon by the party giving such notice, (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated and (iii) specify the Date of Termination (as defined below). The effective date of an employment termination (the “Date of Termination”) shall be the close of business on the date specified in the Notice of Termination (which date may not be less than fifteen (15) days or more than thirty (30) days after the date of delivery of such Notice of Termination), in the case of a termination other than one due to Executive’s Disability, or the date of Executive’s death, as the case may be. In the event the Company fails to satisfy the requirements of Section 2.2(a) regarding a Notice of Termination, the purported termination of Executive’s employment pursuant to such Notice of Termination shall not be effective for purposes of this Agreement.
(b)The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting any such fact or circumstance in enforcing Executive’s or the Company’s rights hereunder.
(c)Any Notice of Termination for Cause given by the Company must be given within ninety (90) days of the occurrence of the event(s) or circumstance(s) which constitute(s) Cause. Prior to any Notice of Termination for Cause being given (and prior to any termination for Cause being effective), Executive shall be entitled to a hearing before the Board at which Executive may, at Executive’s election, be represented by counsel and at which Executive shall have a reasonable opportunity to be heard. Such hearing shall be held on not less than fifteen (15) days prior written notice to Executive stating the Board’s intention to terminate Executive for Cause and stating in detail the particular event(s) or circumstance(s) which the Board believes constitutes Cause for termination.
(d)Any Notice of Termination for Good Reason given by Executive must be given within ninety (90) days of the occurrence of the event(s) or circumstance(s) which constitute(s) Good Reason.
3.Benefits to Executive.
3.1Compensation. If the Change in Control Date occurs and Executive’s employment with the Company terminates within twenty-four (24) months following the Change in Control Date, Executive shall be entitled to the following benefits:
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(a)Termination Without Cause or for Good Reason. If Executive’s employment with the Company is terminated by the Company (other than for Cause, Disability, or death) or by Executive for Good Reason within twenty-four (24) months following the Change in Control Date, then Executive shall be entitled to the following benefits:
(i)the Company shall pay to Executive a lump-sum cash payment on the Release Effective Date in the aggregate of the following amounts:
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(b)Resignation without Good Reason; Termination for Cause or by Reason of Death or Disability. If Executive voluntarily terminates Executive’s employment with the Company within twenty-four (24) months following the Change in Control Date, excluding a termination for Good Reason, or if Executive’s employment with the Company is terminated by reason of Executive’s death or Disability within twenty-four (24) months following the Change in Control Date, then the Company shall (i) pay Executive (or Executive’s estate, if applicable), a lump sum cash payment within thirty (30) days after the Date of Termination, in an amount equal to the Accrued Obligations and (ii) timely pay or provide to Executive the Other Benefits.
3.2Equity Compensation. For the avoidance of doubt, in addition to the rights and benefits otherwise provided under this Agreement, Executive shall be entitled to all rights and benefits set forth under any of the Company’s equity compensation plans (and applicable award agreements), including upon a Change in Control, which shall be governed by the terms and conditions of such plans and award agreements.
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3.3Parachute Payments. Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the “Code”)) to or for the benefit of Executive, whether paid or payable pursuant to this Agreement (including, without limitation, the accelerated vesting of any equity or incentive awards held by Executive) or otherwise would be subject to the excise tax imposed by Section 4999 of the Code, then Executive shall be entitled to receive (A) the greatest amount so that no portion the payments shall be an excess parachute payment (the “Limited Amount”), or (B) if the amount of payments otherwise paid or provided (without regard to clause (A)) reduced by all taxes applicable thereto (including, for the avoidance of doubt, the excise tax imposed by Section 4999 of the Code) would be greater than the Limited Amount reduced by all taxes applicable thereto, then the amount of payments shall be the amount otherwise payable. Any reductions described in the preceding sentence shall be done in the manner that is least economically disadvantageous to Executive. Where the decision to cut back between two amounts is economically equivalent, but the amounts are payable at different times, the amounts will be reduced on a pro rata basis.
3.4Compliance with Section 409A.
(a)Six Month Delay for Specified Employees. If any payment, compensation or other benefit provided to Executive in connection with Executive’s employment termination is determined, in whole or in part, to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code and Executive is a specified employee as defined in Section 409A(2)(B)(i), no part of such payments shall be paid before the day that is six (6) months plus one (1) day after Executive’s employment is terminated (the “New Payment Date”). The aggregate of any payments that otherwise would have been paid to Executive during the period between the date of termination and the New Payment Date shall be paid to Executive in a lump sum on such New Payment Date. Thereafter, any payments that remain outstanding as of the day immediately following the New Payment Date shall be paid without delay over the time period originally scheduled, in accordance with the terms of this Agreement.
(b) Compliance. To the extent applicable, it is intended that this Agreement comply with the provisions of Section 409A of the Code, so as to prevent inclusion in gross income of any amounts payable or benefits provided hereunder in a taxable year that is prior to the taxable year or years in which such amounts or benefits would otherwise actually be distributed, provided or otherwise made available to Executive. This Agreement shall be construed, administered, and governed in a manner consistent with this intent. If and to the extent that any payment or benefit under this Agreement is determined by the Company to constitute “non-qualified deferred compensation” subject to Section 409A of the Code and is payable to Executive by reason of Executive’s termination of employment, then such payment or benefit shall be made or provided to Executive only upon a “separation from service” as defined for purposes of Section 409A of the Code. Each severance payment under this Agreement will be considered a “separate payment” and not one of a series of payments for purposes of Section 409A of the Code. In no event will the Company or its affiliates be liable for any additional tax, interest, or penalties that may be imposed on Executive under Section 409A of the Code or any damages for failing to comply with Section 409A of the Code.
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3.5Mitigation. Executive shall not be required to mitigate the amount of any payment or benefits provided for in this Section 3 by seeking other employment or otherwise. Further, the amount of any payment or benefits provided for in this Section 3 shall not be reduced by any compensation earned by Executive as a result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by Executive to the Company or otherwise.
3.6Release.
(a)As a condition precedent to receiving the payments and benefits as provided in Section 3.1, Executive agrees to execute (and not revoke) a general release of claims (the “Release”), in the form attached as Exhibit A hereto. If Executive fails to execute and deliver the Release, or revokes the Release, Executive agrees that Executive shall not be entitled to receive the payments and benefits described in Section 3.1. For purposes of this Agreement, the Release shall be considered to have been executed by Executive if it is signed by Executive’s legal representative in the case of legal incompetence or on behalf of Executive’s estate in the case of Executive’s death.
(b) Payment of any amounts described hereunder that are subject to the Release will begin on the sixtieth (60th) day following the Date of Termination (the “Release Effective Date”), with the first such payment to include any amounts attributable to payroll intervals occurring prior to such date, provided, however, that, to the extent that the payments are exempt from Section 409A, such exempt payments shall be made beginning with the first payroll date following the effectiveness of the Release.
4.Restrictive Covenants Agreement. In consideration of Executive’s employment by the Company and the rights and benefits of Employee provided by the Agreement, on the Effective Date, Employee will enter into the Restrictive Covenants Agreement in the form attached as Exhibit B hereto.
5.Dispute Resolution.
5.1Governing Law/Dispute Resolution. This Agreement shall be construed and governed in all respects according to the laws of the State of Colorado without regard to principles of conflict of laws. Any dispute or controversy arising under or in connection with this Agreement or Executive’s employment with the Company shall be settled exclusively by arbitration, conducted before a single arbitrator in Denver, Colorado in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association then in effect. The decision of the arbitrator will be final and binding upon the parties hereto. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. The parties acknowledge and agree that in connection with any such arbitration and regardless of outcome, each party shall pay all of its own costs and expenses, including attorneys’ fees. Notwithstanding the foregoing, any action for injunctive relief under the Restrictive Covenants Agreement shall be settled exclusively by a state or Federal court located in the State of Colorado.
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5.2Expenses. Promptly upon request, but no later than ninety (90) days after the fees and expenses are incurred, the Company shall pay all reasonable legal fees and related expenses incurred by Executive in connection with the Agreement following a Change in Control of the Company including, without limitation, all such fees and expenses, if any, incurred in contesting or disputing any such termination, in seeking advice with respect to the matters set forth in Section 3.2 or in seeking to obtain or enforce any right or benefit provided by this Agreement.
6.Successors.
6.1Successor to Company. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain an assumption of this Agreement at or prior to the effectiveness of any succession shall be a breach of this Agreement and shall constitute Good Reason if Executive elects to terminate employment, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, “Company” shall mean the Company as defined above and any successor to its business or assets as aforesaid, which assumes and agrees to perform this Agreement, by operation of law or otherwise.
6.2Successor to Executive. This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If Executive should die while any amount would still be payable to Executive or Executive’s family hereunder if Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of Executive’s estate.
7.Notice. All notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid and addressed, to Executive at the address on record with the Company, or to the Company directed to the attention of the Chairman or the Board or the President of the Company, with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of a change of address shall be effective only upon receipt.
8.Miscellaneous.
8.1Severability. In the event that one or more provisions in this Agreement are deemed invalid, illegal, or unenforceable, the court making such determination shall modify the provisions to effect the original intent of the Parties to the maximum extent permissible, and the remaining provisions will continue in full force and effect. If any such provisions are deemed invalid, illegal, or unenforceable and cannot be reformed, those provisions shall be considered severable, and the remaining provisions will continue in full force and effect.
8.2Waivers. No waiver by Executive at any time of any breach of, or compliance with, any provision of this Agreement to be performed by the Company shall be deemed a waiver of that or any other provision at any subsequent time.
8.3Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original but both of which together shall constitute one and the same instrument.
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8.4Tax Withholding. Any payments provided for hereunder shall be paid net of any applicable tax withholding required under federal, state, or local law.
8.5Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations, or warranties, whether oral or written, by any officer, employee, or representative of any party hereto in respect of the subject matter contained herein; and any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and canceled.
8.6Amendments. This Agreement may be amended or modified only by a written instrument executed by both the Company and Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal as of the day and year first set forth above.
ARROW ELECTRONICS, INC.
Gretchen Zech
Senior Vice President, Chief Governance, Sustainability, and Human Resources Officer
EXECUTIVE:
________________________________________________________
EXECUTIVE_NAMEDATE
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EXHIBIT A
RELEASE
EXECUTIVE_NAME (“Executive”) hereby executes this Release of Claims (this “Release”) as of the date hereof, pursuant to the terms of the Executive Change in Control Retention Agreement of Arrow Electronics, Inc. (the “Company”), as in effect on the date hereof (the “Change in Control Agreement”). As of the date hereof, Executive and the Company have also entered into a Restrictive Covenants Agreement (the “Restrictive Covenants Agreement”) pursuant to the terms of the Change in Control Agreement.
1.Executive Change in Control Agreement
Executive has been terminated from employment with the Company under circumstances that entitle Executive to certain rights and benefits under the Change in Control Agreement, subject to the terms of this Release. The rights and benefits of Executive under the Change in Control Agreement are in consideration of and subject to Executive’s execution, nonrevocation, and compliance with the terms of this Release.
2.Release of Claims by Executive
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BY EXECUTIVE’S SIGNATURE BELOW, EXECUTIVE ACKNOWLEDGES THAT:
[Signature page follows]
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IN WITNESS WHEREOF, Executive has acknowledged, executed, and delivered this Release as of _________________.
ARROW ELECTRONICS, INC.
____________________________
EXECUTIVE:
____________________________
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EXHIBIT B
RESTRICTIVE COVENANTS AGREEMENT
THIS RESTRICTIVE COVENANTS AGREEMENT (the “Agreement”) is made as of EFFECTIVE_DATE, (the “Effective Date”) by and between Arrow Electronics Inc. (the “Company”) and EXECUTIVE_NAME (“Executive”), pursuant to the terms of the Executive Change in Control Retention Agreement as in effect on the date hereof (the “Change in Control Agreement”).
WHEREAS, Executive acknowledges and recognizes the highly competitive nature of the business of the Company;
WHEREAS, Executive acknowledges that Executive has been and/or will be provided with access to the Company’s trade secrets and other confidential and proprietary information and will be provided with the opportunity to develop relationships with clients, prospective clients, employees, and other agents of the Company, which, in each case, Executive acknowledges and agrees constitutes valuable assets of the Company;
WHEREAS, in connection with Executive’s execution of the Change in Control Agreement, Executive agrees to be subject to the restrictive covenants as set forth in this Agreement;
NOW, THEREFORE, for good and valuable consideration, including Executive’s rights under the Change in Control Agreement, as of the Effective Date, the parties agree as follows:
| 1. | Restrictive Covenants. |
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2.Enforcement
3.Consideration. Executive acknowledges that Executive’s severance entitlements under the Change in Control Retention Agreement between the Company and Executive constitute valid consideration for the promises and commitments made in this Agreement.
4.General Terms
(a)Integration, Governing Law, Choice of Forum. This Agreement shall be construed and governed in all respects according to the laws of the State of Colorado without regard to principles of conflict of laws. Any action for injunctive relief under this Agreement shall be settled exclusively by a state or Federal court located in the State of Colorado. Any other dispute or controversy arising under or in connection with this Agreement or Executive’s employment with the Company shall be settled exclusively by arbitration, conducted before a single arbitrator in Denver, Colorado in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association then in effect. The decision of the arbitrator will be final and binding upon the parties hereto. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. The parties acknowledge and agree that in connection with any such arbitration and regardless of the outcome, each party shall pay all of its own costs and expenses, including attorneys’ fees.
(b)Severability. In the event that one or more provisions in this Agreement are deemed invalid, illegal, or unenforceable, the court making such determination shall modify the provisions to effect the original intent of the Parties to the maximum extent permissible, and the remaining provisions will continue in full force and effect. If any such provisions are deemed invalid, illegal, or unenforceable and cannot be reformed, those provisions shall be considered severable, and the remaining provisions will continue in full force and effect.
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(c) Non-Assignment. This Agreement, and the rights and obligations hereunder, may not be assigned by the Company or Executive without written consent signed by the other party, provided that the Company may assign the Agreement to any successor that continues the business of the Company. This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the parties hereto.
(d) Headings. The headings in this Agreement are included for the convenience of reference only and shall not affect the interpretation of this Agreement.
(e)Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and Executive have acknowledged, executed, and delivered this Agreement as of the date noted below.
ARROW ELECTRONICS, INC.
Gretchen Zech
Senior Vice President, Chief Governance, Sustainability, and Human Resources Officer
EXECUTIVE:
________________________________________________________
EXECUTIVE_NAMEDATE
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ADDENDUM
Colorado Revised Statutes § 24-34-407
Each Party to this Agreement expressly attests that this Agreement complies with Colorado Revised Statutes § 24-34-407(1).
Agreed, acknowledged, and accepted:
ARROW ELECTRONICS, INC.
__________________
Gretchen ZechDate
Senior Vice President, Chief Governance,
Sustainability, and Human Resources Officer
EXECUTIVE:
___________________________________________
EXECUTIVE NAMEDate
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Exhibit 10(c)
ARROW ELECTRONICS, INC.
EXECUTIVE SEVERANCE POLICY
(as adopted September 13, 2023, and effective August 7, 2023, prospectively)
This Arrow Electronics, Inc. Executive Severance Policy has been adopted by the Compensation Committee of the Board of Directors of the Company to apply to selected executive employees of the Company. In consideration of employment or continued employment, Executives will be eligible for coverage under the Policy for the payment of severance benefits upon termination of employment under certain circumstances, subject to the conditions set forth below. This Policy shall be effective as of the Effective Date as provided herein.
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(i)Pro-Rata Bonus. The Company will pay Executive a payment equal to the product of (A) the Annual Bonus, if any, that Executive would have earned for the calendar year in which the Date of Termination occurs, based on achievement of the applicable performance goals for each such calendar year, as uniformly applied to other Executives who remain employed and (B) a fraction, the numerator of which is the number of days Executive was employed by the Company during the calendar year of termination, and the denominator of which is the number of days in such calendar year (the “Pro-Rata Bonus”). This amount shall be paid on the date that Annual Bonuses are normally paid, but in no event later than March 15th of the year following the year in which the Date of Termination occurs;
(ii)Bonus for Severance Period. The Company will pay Executive the Annual Bonus, if any, that Executive would have earned during the Severance Period (including pro rata portions for partial years during the Severance Period), based on the Company’s achievement of the applicable performance goals for each such calendar year, as uniformly applied to other Executives who remain employed, but adjusted to assume 0% achievement on “MBO/market share” performance measures (or comparable substitute measures). This amount shall be paid on the date that Annual Bonuses are normally paid, but in no event later than March 15th of the year following the year to which the applicable Annual Bonus relates.
(i)Continued Vesting of Awards. Notwithstanding anything to the contrary provided in the applicable award agreement, any equity-based awards held by Executive immediately prior to the Date of Termination under the Company’s equity incentive compensation plans, including, without limitation, stock options, restricted stock units, and performance stock units, will continue to vest in accordance with their respective vesting schedules for the duration of the Severance Period, without regard to Executive’s continued employment and based, if applicable, on the Company’s achievement of the relevant performance goals for the relevant period, as uniformly applied to other Executives who remain employed and hold equity awards. Any Company equity-based awards that are not vested prior to the expiration of the Severance Period shall be forfeited.
(ii)Exercise Period of Stock Options. Any vested stock options (by reason of Section 3.3(i) or otherwise) will remain exercisable until the expiration of the Severance Period or, if earlier, the original expiration date of such stock option as provided in the applicable award agreement, without regard to any other post-termination of employment exercise period specified therein.
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(i)Accelerated Vesting of Awards. Notwithstanding anything to the contrary provided in the applicable award agreement, all unvested equity-based awards, including, without limitation, stock options, restricted stock units or shares, and performance stock units or shares, shall vest immediately as of the date of death or Disability, as applicable.
(ii)Exercise Period of Stock Options. Any vested stock options (by reason of Section 4.2(i) or otherwise) will remain exercisable until the expiration date of such stock option as provided in the applicable award agreement, without regard to any other post-termination of employment exercise period specified therein.
(iii)Performance Stock Units. Notwithstanding anything to the contrary provided in the applicable award agreement, any shares to which Executive is entitled by reason of a vested performance stock unit (by reason of Section 4.2(i) or otherwise) shall be delivered to Executive within 30 days of the date of death or Disability as follows: (a) if the date of death or Disability occurs before the end of the applicable performance cycle, Executive shall be entitled to the target number of performance stock units specified in the applicable award agreement; or (b) if the date of death or Disability occurs after the end of the applicable performance cycle, Executive shall be entitled to a number of performance stock units determined by reference to the Company’s actual performance for that cycle.
(iv)Accrued Rights. Within fifteen (15) days following the date of death or Disability, the Company will pay or provide Executive with all Accrued Rights.
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EXHIBIT A
RELEASE
EXECUTIVE_NAME (“Executive”) hereby executes this Release of Claims (this “Release”) as of the date hereof, pursuant to the terms of Executive Severance Policy of Arrow Electronics, Inc. (the “Company”), as in effect on the date hereof (the “Severance Policy”). As of the date hereof, Executive and the Company have also entered into a Restrictive Covenants Agreement (the “Restrictive Covenants Agreement”) pursuant to the terms of the Severance Policy.
1.Executive Severance Policy
Executive has been terminated from employment with the Company under circumstances that entitle Executive to certain rights and benefits under the Severance Policy, subject to the terms of this Release. The rights and benefits of Executive under the Severance Policy are in consideration of and subject to Executive’s execution, nonrevocation, and compliance with the terms of this Release.
2.Release of Claims by Executive
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BY EXECUTIVE’S SIGNATURE BELOW, EXECUTIVE ACKNOWLEDGES THAT:
[Signature page follows]
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IN WITNESS WHEREOF, Executive has acknowledged, executed and delivered this Release as of _____________.
ARROW ELECTRONICS, INC.
____________________________
EXECUTIVE:
____________________________
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EXHIBIT B
RESTRICTIVE COVENANTS AGREEMENT
THIS RESTRICTIVE COVENANTS AGREEMENT (the “Agreement”) is made as of EFFECTIVE_DATE, (the “Effective Date”) by and between Arrow Electronics Inc. (the “Company”) and EXECUTIVE_NAME (“Executive”), pursuant to the terms of Executive Severance Policy as in effect on the date hereof (the “Severance Policy”).
WHEREAS, Executive acknowledges and recognizes the highly competitive nature of the business of the Company;
WHEREAS, Executive acknowledges that Executive has been and/or will be provided with access to the Company’s trade secrets and other confidential and proprietary information and will be provided with the opportunity to develop relationships with clients, prospective clients, employees, and other agents of the Company, which, in each case, Executive acknowledges and agrees constitutes valuable assets of the Company;
WHEREAS, in connection with Executive’s execution of the Severance Policy, Executive agrees to be subject to the restrictive covenants as set forth in this Agreement;
NOW. THEREFORE, for good and valuable consideration, including Executive’s rights under the Severance Policy, as of the Effective Date, the parties agree as follows:
| 1. | Restrictive Covenants. |
(a)Disclosure of Company Information. During the period of Executive’s employment with the Company (the “Period of Employment”) and for all periods thereafter, Executive will not, directly or indirectly, use, attempt to use, disclose, or otherwise make known Company Information (as defined below) to any person or entity (other than to the Board of Directors of the Company or otherwise in the course of the business of the Company, its subsidiaries or affiliates and except as may be required by applicable law).
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2.Enforcement
(a)Executive acknowledges and agrees that the Restricted Period is reasonable and properly required for the adequate protection of the business and the goodwill of the Company. In the event the Restricted Period is deemed to be unreasonable by any court of competent jurisdiction, Executive agrees to the reduction of the Restricted Period to such period which such court shall deem reasonable. Executive acknowledges that the Company has no adequate remedy at law and will be irreparably harmed if Executive breaches or threatens to breach the provisions of this Agreement, and, therefore, agrees that the Company shall be entitled to injunctive relief to prevent any breach or threatened breach of this Agreement, and that the Company shall be entitled to specific performance of the terms of this Agreement in addition to any other legal or equitable remedy it may have. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity that it may have or any other rights that it may have under any other agreement.
(b)Except as expressly herein provided, nothing contained herein is intended to prevent Executive, at any time after the effective date of Executive’s termination, from either (i) being gainfully employed or (ii) exercising Executive’s skills and abilities, provided in either case the provisions of this Agreement are complied with.
3.Consideration. Executive acknowledges that Executive’s severance entitlements under the Severance Policy between the Company and Executive constitute valid consideration for the promises and commitments made in this Agreement.
4.General Terms
(a)Integration, Governing Law, Choice of Forum. This Agreement shall be construed and governed in all respects according to the laws of the State of Colorado without regard to principles of conflict of laws. Any action for injunctive relief under this Agreement shall be settled exclusively by a state or Federal court located in the State of Colorado. Any other dispute or controversy arising under or in connection with this Agreement or Executive’s employment with the Company shall be settled exclusively by arbitration, conducted before a single arbitrator in Denver, Colorado in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association then in effect.
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The decision of the arbitrator will be final and binding upon the parties hereto. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. The parties acknowledge and agree that in connection with any such arbitration and regardless of the outcome, each party shall pay all of its own costs and expenses, including attorneys’ fees.
(b)Severability. In the event that one or more provisions in this Agreement are deemed invalid, illegal, or unenforceable, the court making such determination shall modify the provisions to effect the original intent of the Parties to the maximum extent permissible, and the remaining provisions will continue in full force and effect. If any such provisions are deemed invalid, illegal, or unenforceable and cannot be reformed, those provisions shall be considered severable, and the remaining provisions will continue in full force and effect.
(c)Non-Assignment. This Agreement, and the rights and obligations hereunder, may not be assigned by the Company or Executive without written consent signed by the other party, provided that the Company may assign the Agreement to any successor that continues the business of the Company. This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the parties hereto.
(d) Headings. The headings in this Agreement are included for the convenience of reference only and shall not affect the interpretation of this Agreement.
(e)Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.
[Signature page follows]
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IN WITNESS WHEREOF, the Company and Executive have acknowledged, executed, and delivered this Agreement as of the date noted below.
ARROW ELECTRONICS, INC.
Gretchen Zech
Senior Vice President, Chief Governance, Sustainability, and Human Resources Officer
EXECUTIVE:
________________________________________________________
EXECUTIVE_NAMEDATE
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ADDENDUM
Colorado Revised Statutes § 24-34-407
Each Party to this Agreement expressly attests that this Agreement complies with Colorado Revised Statutes § 24-34-407(1).
Agreed, acknowledged, and accepted:
ARROW ELECTRONICS, INC.
__________________
Gretchen ZechDate
Senior Vice President, Chief Governance,
Sustainability, and Human Resources Officer
EXECUTIVE:
___________________________________________
EXECUTIVE NAMEDate
4879-0202-8850, v. 1
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Exhibit 10(d)
FORM OF SEPARATION AND RELEASE AGREEMENT
This Separation and Release Agreement (this “Separation Agreement”) is made and entered into by and between Arrow Electronics, Inc., a New York Corporation with its principal office at_________________________ (“Arrow” and, together with its subsidiaries and affiliates, the “Company”), and ___________ (the “Executive”), residing at _________________________.
WHEREAS, the parties are subject to a certain document entitled “Arrow Electronics, Inc. Executive Severance Policy” with an effective date for the Executive of ___________ (the “Severance Policy”);
WHEREAS, the parties have determined by mutual agreement that the employment of the Executive with the Company shall terminate effective ____________ (the “Termination Date”);
WHEREAS, the parties agree that the Executive’s termination will be treated as a Termination without Cause for purposes of the Severance Policy;
WHEREAS, the parties have decided to resolve any and all disputes which may presently exist or which may later arise out of the circumstances surrounding the Executive’s employment with or termination from the Company;
NOW, THEREFORE, in consideration of the premises and mutual promises herein contained, the parties agree as follows:
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These provisions do not prevent the Executive from enforcing the Executive’s Section 7 rights under the National Labor Relations Act (“NLRA”).
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If to the Company:
Attention: ________________
If to the Executive:
_____________________
_____________________
_____________________
or such other address as either party may have furnished to the other in writing in accordance herewith, except that a notice of a change of address shall be effective only upon receipt.
For the avoidance of doubt, the Executive Restrictive Covenants Agreement attached hereto as Exhibit B is separate from the subject matter of this Separation Agreement, and the parties intend for it to remain in effect. In the event of any conflict between this Separation Agreement and the Executive Restrictive Covenants Agreement, except as described in Paragraph 27 below, the parties intend for the Executive Restrictive Covenants Agreement to control.
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Please indicate the Executive’s agreement to the foregoing by signing, dating, and returning a copy of this Separation Agreement to the ________________, Arrow Electronics, Inc. The Company will sign and return a copy of the fully executed Separation Agreement to the Executive’s address, referenced above.
IN WITNESS WHEREOF, the parties have hereunto set their hands the day and date written below.
Agreed, acknowledged, and accepted:
EXECUTIVE
Date
ARROW ELECTRONICS, INC.
Date
8
EXHIBIT A
RELEASE OF CLAIMS
___________ (the “Executive”) hereby executes this Release of Claims (this “Release”) as of the date hereof, pursuant to the terms of the Separation and Release Agreement between the Executive and Arrow Electronics, Inc., a New York Corporation with its principal office at _________________, (“Arrow” and, together with its subsidiaries and affiliates, the “Company”), to which this Release is attached (the “Separation Agreement”). The Separation Agreement provides the Executive with certain significant benefits, subject to the Executive’s executing this Release (among other conditions set forth in the Separation Agreement). The Executive and the Company also have entered into a Restrictive Covenants Agreement (the “Restrictive Covenants Agreement”) pursuant to the terms of the Severance Policy.
9
BY THE EXECUTIVE’S SIGNATURE BELOW, THE EXECUTIVE ACKNOWLEDGES THAT:
10
IN WITNESS WHEREOF, the Executive has acknowledged, executed, and delivered this Release as of the date indicated below.
EXECUTIVE:
___________________________________________
Date
11
EXHIBIT B
RESTRICTIVE COVENANTS AGREEMENT
THIS RESTRICTIVE COVENANTS AGREEMENT (the “Agreement”) is made as of ___________, (the “Effective Date”) by and between Arrow Electronics Inc. (the “Company”) and ___________ (“Executive”), pursuant to the terms of Executive Severance Policy as in effect on the date hereof (the “Severance Policy”).
WHEREAS, Executive acknowledges and recognizes the highly competitive nature of the business of the Company;
WHEREAS, Executive acknowledges that Executive has been and/or will be provided with access to the Company’s trade secrets and other confidential and proprietary information and will be provided with the opportunity to develop relationships with clients, prospective clients, employees, and other agents of the Company, which, in each case, Executive acknowledges and agrees constitutes valuable assets of the Company;
WHEREAS, in connection with Executive’s execution of the Severance Policy, Executive agrees to be subject to the restrictive covenants as set forth in this Agreement;
NOW. THEREFORE, for good and valuable consideration, including Executive’s rights under the Severance Policy, as of the Effective Date, the parties agree as follows:
(a)Disclosure of Company Information. During the period of Executive’s employment with the Company (the “Period of Employment”) and for all periods thereafter, Executive will not, directly or indirectly, use, attempt to use, disclose, or otherwise make known Company Information (as defined below) to any person or entity (other than to the Board of Directors of the Company or otherwise in the course of the business of the Company, its subsidiaries or affiliates and except as may be required by applicable law).
12
13
14
2.Enforcement
3.Consideration. Executive acknowledges that Executive’s severance entitlements under the Severance Policy between the Company and Executive constitute valid consideration for the promises and commitments made in this Agreement.
15
4.General Terms
(a)Integration, Governing Law, Choice of Forum. This Agreement shall be construed and governed in all respects according to the laws of the State of Colorado without regard to principles of conflict of laws. Any action for injunctive relief under this Agreement shall be settled exclusively by a state or Federal court located in the State of Colorado. Any other dispute or controversy arising under or in connection with this Agreement or Executive’s employment with the Company shall be settled exclusively by arbitration, conducted before a single arbitrator in Denver, Colorado in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association then in effect. The decision of the arbitrator will be final and binding upon the parties hereto. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. The parties acknowledge and agree that in connection with any such arbitration and regardless of the outcome, each party shall pay all of its own costs and expenses, including attorneys’ fees.
(b)Severability. In the event that one or more provisions in this Agreement are deemed invalid, illegal, or unenforceable, the court making such determination shall modify the provisions to effect the original intent of the Parties to the maximum extent permissible, and the remaining provisions will continue in full force and effect. If any such provisions are deemed invalid, illegal, or unenforceable and cannot be reformed, those provisions shall be considered severable, and the remaining provisions will continue in full force and effect.
(c)Non-Assignment. This Agreement, and the rights and obligations hereunder, may not be assigned by the Company or Executive without written consent signed by the other party, provided that the Company may assign the Agreement to any successor that continues the business of the Company. This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the parties hereto.
(d) Headings. The headings in this Agreement are included for the convenience of reference only and shall not affect the interpretation of this Agreement.
(e)Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and Executive have acknowledged, executed, and delivered this Agreement as of the date noted below.
ARROW ELECTRONICS, INC.
___________________________________________
Date
EXECUTIVE:
___________________________________________
Date
16
ADDENDUM
Colorado Revised Statutes § 24-34-407
Each Party to this Agreement expressly attests that this Agreement complies with Colorado Revised Statutes § 24-34-407(1).
Agreed, acknowledged, and accepted:
ARROW ELECTRONICS, INC.
___________________________________________
Date
EXECUTIVE:
___________________________________________
Date
17
Exhibit 31(i)(A)
Arrow Electronics, Inc.
Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
I, Sean J. Kerins, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of Arrow Electronics, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: November 2, 2023 |
|
By: |
/s/ Sean J. Kerins |
|
|
|
Sean J. Kerins |
|
|
|
President and Chief Executive Officer |
Exhibit 31(i)(B)
Arrow Electronics, Inc.
Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
I, Rajesh K. Agrawal, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of Arrow Electronics, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: November 2, 2023 |
|
By: |
/s/ Rajesh K. Agrawal |
|
|
|
Rajesh K. Agrawal |
|
|
|
Senior Vice President and Chief Financial Officer |
Exhibit 32(i)
Arrow Electronics, Inc.
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”)
In connection with the Quarterly Report on Form 10-Q of Arrow Electronics, Inc. (the "company") for the quarter ended September 30, 2023 (the "Report"), I, Sean J. Kerins, President and Chief Executive Officer of the company, certify, pursuant to the requirements of Section 906, that, to the best of my knowledge:
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company. |
Date: November 2, 2023 |
|
By: |
/s/ Sean J. Kerins |
|
|
|
Sean J. Kerins |
|
|
|
President and Chief Executive Officer |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the company and will be retained by the company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32(ii)
Arrow Electronics, Inc.
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”)
In connection with the Quarterly Report on Form 10-Q of Arrow Electronics, Inc. (the "company") for the quarter ended September 30, 2023 (the "Report"), I, Rajesh K. Agrawal, Senior Vice President and Chief Financial Officer of the company, certify, pursuant to the requirements of Section 906, that, to the best of my knowledge:
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company. |
Date: November 2, 2023 |
|
By: |
/s/ Rajesh K. Agrawal |
|
|
|
Rajesh K. Agrawal |
|
|
|
Senior Vice President and Chief Financial Officer |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the company and will be retained by the company and furnished to the Securities and Exchange Commission or its staff upon request.