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Washington, D.C.  20549

FORM 10-Q

For the quarterly period ended July 1, 2023

For the transition period from            to           

Commission file number 1-4482

ARROW ELECTRONICS, INC.

(Exact name of registrant as specified in its charter)

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

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 x   No o

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 x   No o

 

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:

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes ☐   No x

There were 55,662,614 shares of Common Stock outstanding as of July 27, 2023.

 

 

Item 1.     Financial Statements

						Quarter Ended												Six Months Ended
						July 1, 2023						July 2, 2022						July 1, 2023						July 2, 2022
Sales						$	8,514,516					$	9,460,842					$	17,250,944					$	18,534,967
Cost of sales						7,448,467						8,224,628						15,071,073						16,091,249
Gross profit						1,066,049						1,236,214						2,179,871						2,443,718
Operating expenses:
Selling, general, and administrative expenses						617,202						653,640						1,259,633						1,297,565
Depreciation and amortization						46,264						47,252						92,943						95,557
Restructuring, integration, and other charges						10,333						2,494						12,893						7,392
						673,799						703,386						1,365,469						1,400,514
Operating income						392,250						532,828						814,402						1,043,204
Equity in earnings of affiliated companies						3,061						2,165						2,981						3,008
Gain (loss) on investments, net						497						(9,744)						10,808						(7,733)
Employee benefit plan expense, net						(803)						(835)						(1,656)						(1,724)
Interest and other financing expense, net						(84,834)						(38,506)						(164,492)						(72,491)
Income before income taxes						310,171						485,908						662,043						964,264
Provision for income taxes						72,380						114,413						148,927						226,773
Consolidated net income						237,791						371,495						513,116						737,491
Noncontrolling interests						1,232						1,161						2,807						2,408
Net income attributable to shareholders						$	236,559					$	370,334					$	510,309					$	735,083
Net income per share:
Basic						$	4.17					$	5.60					$	8.84					$	10.98
Diluted						$	4.12					$	5.54					$	8.74					$	10.84
Weighted-average shares outstanding:
Basic						56,720						66,078						57,726						66,964
Diluted						57,355						66,851						58,409						67,797

 

 

    

						July 1, 2023						December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents						$	240,382					$	176,915
Accounts receivable, net						11,035,898						12,322,717
Inventories						5,452,198						5,319,369
Other current assets						402,729						521,339
Total current assets						17,131,207						18,340,340
Property, plant, and equipment, at cost:
Land						5,691						5,691
Buildings and improvements						186,648						184,211
Machinery and equipment						1,612,005						1,583,661
						1,804,344						1,773,563
Less: Accumulated depreciation and amortization						(1,246,125)						(1,177,107)
Property, plant, and equipment, net						558,219						596,456
Investments in affiliated companies						62,138						65,112
Intangible assets, net						142,917						159,137
Goodwill						2,044,214						2,027,626
Other assets						597,204						574,511
Total assets						$	20,535,899					$	21,763,182
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable						$	8,981,212					$	10,460,419
Accrued expenses						1,199,924						1,339,302
Short-term borrowings, including current portion of long-term debt						488,168						589,883
Total current liabilities						10,669,304						12,389,604
Long-term debt						3,672,828						3,182,964
Other liabilities						539,293						579,261
Equity:
Shareholders’ equity:
Common stock, par value $1:
Authorized - 160,000 shares in both 2023 and 2022
Issued - 125,424 shares in both 2023 and 2022						125,424						125,424
Capital in excess of par value						1,203,064						1,208,708
Treasury stock (69,762 and 66,175 shares in 2023 and 2022, respectively), at cost						(5,108,188)						(4,637,345)
Retained earnings						9,725,141						9,214,832
Accumulated other comprehensive loss						(359,096)						(365,262)
Total shareholders’ equity						5,586,345						5,546,357
Noncontrolling interests						68,129						64,996
Total equity						5,654,474						5,611,353
Total liabilities and equity						$	20,535,899					$	21,763,182

            

 

 

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.

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).

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:

(a)     The total carrying value of goodwill as of July 1, 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 $301.9 million was recorded in the global enterprise computing solutions ("ECS") business segment.

Intangible assets, net, are comprised of the following as of July 1, 2023:

Intangible assets, net, are comprised of the following as of December 31, 2022:

During the second quarter of 2023 and 2022, the company recorded amortization expense related to identifiable intangible assets of $7.9 million and $8.8 million, respectively. During the first six months of 2023 and 2022, amortization expense related to identifiable intangible assets was $15.9 million and $17.8 million, respectively.

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:

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

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 July 1, 2023 and December 31, 2022.

Accounts receivable, net, consists of the following:

Changes in the allowance for doubtful accounts consists of the following:

The company monitors the current credit condition of its customers in estimating the expected credit losses and has not experienced significant changes in customers’ payment trends or significant deterioration in customers’ credit risk as of July 1, 2023.

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:

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. 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:

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 July 1, 2023, the company was in compliance with all such financial covenants.

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 July 1, 2023, and December 31, 2022, the company had $1.1 billion 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.

Short-term borrowings, including current portion of long-term debt, consist of the following:

Other short-term borrowings are primarily utilized to support working capital requirements. The weighted-average effective interest rate on these borrowings was 6.45% and 1.98% at July 1, 2023 and December 31, 2022, respectively.

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 no outstanding borrowings under the uncommitted lines of credit at July 1, 2023 and $78.0 million in outstanding borrowings under the uncommitted lines of credit at December 31, 2022. 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 a weighted-average effective interest rate of 5.62% and 5.22% at July 1, 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 $449.2 million in outstanding borrowings under this program at July 1, 2023 and $173.4 million in outstanding borrowings at December 31, 2022. The commercial paper program had an effective interest rate of 5.78% and 5.15% at July 1, 2023 and December 31, 2022, respectively.

Long-term debt consists of the following:

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.

The estimated fair market value of long-term debt, using quoted market prices, is as follows:

The carrying amount of the company's other short-term borrowings, uncommitted lines of credit, revolving credit facility, 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 July 1, 2023), which is based on the company's credit ratings, plus a credit spread adjustment of 0.10% or a weighted-average interest rate of 6.09% at July 1, 2023. The facility fee, which is based on the company’s credit ratings, was 0.175% of the total borrowing capacity at July 1, 2023. The company had no outstanding borrowings under the revolving credit facility at July 1, 2023 and 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 July 1, 2023) plus a credit spread adjustment of 0.10% or an effective interest rate of 5.64% at July 1, 2023. The facility fee is 0.40% of the total borrowing capacity.

The company had $1.2 billion in outstanding borrowings under the North American asset securitization program at July 1, 2023 and December 31, 2022, which was included in "Long-term debt" on the company’s consolidated balance sheets. Total collateralized accounts receivable of approximately $2.8 billion and $3.1 billion were held by AFC and were included in "Accounts receivable, net" on the company’s consolidated balance sheets at July 1, 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 July 1, 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.

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 $16.4 million and $30.7 million for the second quarter and first six months of 2023, respectively, and $6.0 million and $10.5 million for the second quarter and first six months of 2022, respectively were recorded in "Interest and other financing expense, net" within the company's consolidated statements of operations.

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 July 1, 2023:

The following table presents assets measured at fair value on a recurring basis at December 31, 2022:

(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 $(2.5) million and $6.0 million for the second quarter and first six months of 2023 on equity securities held at the end of the quarter. The company recorded an unrealized loss of $(5.0) million and $(10.7) million for the second quarter and first six months of 2022, respectively, on equity securities held at the end of the quarter.

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.

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 marked-to-market each reporting period with any unrealized gains or losses 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:

The company occasionally enters into interest rate swap transactions 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 July 1, 2023, the company had one outstanding interest rate swap designated as a fair value hedge, the terms of which are as follows:

The counterparty to the interest rate swap has the option to cancel the swaps after one year, without penalty.

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 July 1, 2023 and December 31, 2022 was $1.2 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 to hedge a portion of the company's net investments in subsidiaries with Euro-denominated assets:

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.

The effects of derivative instruments on the company’s consolidated statements of operations and other comprehensive income are as follows:

(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 $3.4 million and $0.9 million for the second quarter and first six months of 2023, respectively.

(c)Includes derivative (losses) gains of $(1.6) million and $2.5 million for the second quarter of 2023 and 2022, respectively, and $(3.4) million and $(2.5) million for the first six 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.

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.

The following table presents the computation of net income per share on a basic and diluted basis:

(a)For the second quarter of 2023 no stock-based compensation awards were excluded from computation of net income per share on a diluted basis. For the first six months of 2023 stock-based compensation awards of 1.6 thousand shares were excluded from computation of net income per share on a diluted basis as their effect was anti-dilutive. Stock-based compensation awards for the issuance of 176.8 thousand shares and 48.5 thousand shares for the second quarter and first six months of 2022, respectively, were excluded from the computation of net income per share on a diluted basis as their effect was anti-dilutive.

Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in Accumulated other comprehensive income (loss), excluding noncontrolling interests:

(a)     Foreign currency translation adjustment includes intra-entity foreign currency transactions that are of a long-term investment nature of $(22.5) million and $(16.8) million for the second quarter and first six months of 2023, and $36.6 million and $28.4 million for the second quarter and first six months of 2022, respectively.

(b)     For additional information related to net investment hedges and interest rate swaps refer to Note H.

Common Stock Outstanding Activity

The following table sets forth the activity in the number of shares outstanding: