UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 27, 2020~~July 3, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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

80112

Centennial

(Zip Code)

(Address of principal executive offices)


(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 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:

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. 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 ~~77,626,656~~71,819,300 shares of Common Stock outstanding as of July ~~23, 2020.~~29, 2021.

ARROW ELECTRONICS, INC.

INDEX

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except per share data)

(Unaudited)


		Quarter Ended						Six Months Ended							Quarter Ended				Six Months Ended
		June 27, 2020		June 29, 2019		June 27, 2020		June 29, 2019			July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020
Sales	Sales	$	6,606,494	$	7,344,548	$	12,987,911	$	14,500,539	Sales	$	8,562,631	$	6,606,494	$	16,948,550	$	12,987,911
Cost of sales	Cost of sales	5,856,031		6,529,639		11,509,057		12,823,942		Cost of sales	7,562,526		5,856,031		15,018,335		11,509,057
Gross profit	Gross profit	750,463		814,909		1,478,854		1,676,597		Gross profit	1,000,105		750,463		1,930,215		1,478,854
Operating expenses:	Operating expenses:									Operating expenses:
Selling, general, and administrative expenses	Selling, general, and administrative expenses	501,470		599,212		1,035,309		1,155,288		Selling, general, and administrative expenses	602,084		501,470		1,176,651		1,035,309
Depreciation and amortization	Depreciation and amortization	46,812		46,982		93,922		94,508		Depreciation and amortization	48,539		46,812		98,870		93,922
Loss on disposition of businesses, net		—		—		—		866
Impairments (Notes D and E)		4,918		697,993		4,918		697,993

Impairments										Impairments	4,482		4,918		4,482		4,918
Restructuring, integration, and other charges	Restructuring, integration, and other charges	650		19,912		9,788		31,572		Restructuring, integration, and other charges	4,478		650		10,187		9,788
		553,850		1,364,099		1,143,937		1,980,227			659,583		553,850		1,290,190		1,143,937
Operating income (loss)		196,613		(549,190)		334,917		(303,630)
Operating income										Operating income	340,522		196,613		640,025		334,917
Equity in earnings (losses) of affiliated companies	Equity in earnings (losses) of affiliated companies	(283)		382		247		(1,085)		Equity in earnings (losses) of affiliated companies	190		(283)		1,034		247
Gain (loss) on investments, net	Gain (loss) on investments, net	10,901		1,390		(5,909)		6,738		Gain (loss) on investments, net	6,726		10,901		9,519		(5,909)

Employee benefit plan expense		(1,173)		(1,139)		(2,282)		(2,278)
Employee benefit plan expense, net										Employee benefit plan expense, net	(1,438)		(1,173)		(2,668)		(2,282)
Interest and other financing expense, net	Interest and other financing expense, net	(31,867)		(51,563)		(75,135)		(103,544)		Interest and other financing expense, net	(30,685)		(31,867)		(64,341)		(75,135)
Income (loss) before income taxes		174,191		(600,120)		251,838		(403,799)
Provision (benefit) for income taxes		40,854		(52,369)		68,746		1,538
Consolidated net income (loss)		133,337		(547,751)		183,092		(405,337)
Income before income taxes										Income before income taxes	315,315		174,191		583,569		251,838
Provision for income taxes										Provision for income taxes	74,113		40,854		135,139		68,746
Consolidated net income										Consolidated net income	241,202		133,337		448,430		183,092
Noncontrolling interests	Noncontrolling interests	533		1,215		785		2,894		Noncontrolling interests	561		533		1,468		785
Net income (loss) attributable to shareholders		$	132,804	$	(548,966)	$	182,307	$	(408,231)
Net income (loss) per share:
Net income attributable to shareholders										Net income attributable to shareholders	$	240,641	$	132,804	$	446,962	$	182,307
Net income per share:										Net income per share:
Basic	Basic	$	1.69	$	(6.48)	$	2.29	$	(4.80)	Basic	$	3.27	$	1.69	$	6.02	$	2.29
Diluted	Diluted	$	1.68	$	(6.48)	$	2.28	$	(4.80)	Diluted	$	3.23	$	1.68	$	5.94	$	2.28
Weighted-average shares outstanding:	Weighted-average shares outstanding:									Weighted-average shares outstanding:
Basic	Basic	78,677		84,652		79,527		85,022		Basic	73,693		78,677		74,294		79,527
Diluted	Diluted	79,226		84,652		80,113		85,022		Diluted	74,611		79,226		75,197		80,113

See accompanying notes.

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

(In thousands)

(Unaudited)


		Quarter Ended						Six Months Ended							Quarter Ended				Six Months Ended
		June 27, 2020		June 29, 2019		June 27, 2020		June 29, 2019			July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020
Consolidated net income (loss)		$	133,337	$	(547,751)	$	183,092	$	(405,337)
Consolidated net income										Consolidated net income	$	241,202	$	133,337	$	448,430	$	183,092
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):

Foreign currency translation adjustment and other		36,636		16,021		(40,707)		20,463
Foreign currency translation adjustment and other, net of taxes										Foreign currency translation adjustment and other, net of taxes	13,699		36,636		(48,222)		(40,707)
Unrealized gain (loss) on foreign exchange contracts designated as net investment hedges, net of taxes	Unrealized gain (loss) on foreign exchange contracts designated as net investment hedges, net of taxes	(2,031)		(1,427)		13,946		4,106		Unrealized gain (loss) on foreign exchange contracts designated as net investment hedges, net of taxes	223		(2,031)		5,529		13,946
Unrealized gain (loss) on interest rate swaps designated as cash flow hedges, net of taxes	Unrealized gain (loss) on interest rate swaps designated as cash flow hedges, net of taxes	15		(6,606)		(28,382)		(6,366)		Unrealized gain (loss) on interest rate swaps designated as cash flow hedges, net of taxes	(19,360)		15		16,992		(28,382)
Employee benefit plan items, net of taxes	Employee benefit plan items, net of taxes	(2,374)		85		(126)		404		Employee benefit plan items, net of taxes	1,148		(2,374)		982		(126)
Other comprehensive income (loss)	Other comprehensive income (loss)	32,246		8,073		(55,269)		18,607		Other comprehensive income (loss)	(4,290)		32,246		(24,719)		(55,269)
Comprehensive income (loss)		165,583		(539,678)		127,823		(386,730)
Comprehensive income										Comprehensive income	236,912		165,583		423,711		127,823
Less: Comprehensive income attributable to non-controlling interests	Less: Comprehensive income attributable to non-controlling interests	784		1,730		794		2,761		Less: Comprehensive income attributable to non-controlling interests	1,011		784		65		794
Comprehensive income (loss) attributable to shareholders		$	164,799	$	(541,408)	$	127,029	$	(389,491)
Comprehensive income attributable to shareholders										Comprehensive income attributable to shareholders	$	235,901	$	164,799	$	423,646	$	127,029

See accompanying notes.

ARROW ELECTRONICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands except par value)

(Unaudited)


		June 27, 2020		December 31, 2019			July 3, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	205,828	$	300,103	Cash and cash equivalents	$	244,070	$	373,615
Accounts receivable, net	Accounts receivable, net	7,954,038		8,482,687		Accounts receivable, net	8,846,715		9,205,343
Inventories	Inventories	3,420,912		3,477,120		Inventories	3,636,082		3,287,308
Other current assets	Other current assets	213,190		266,249		Other current assets	355,757		286,633
Total current assets	Total current assets	11,793,968		12,526,159		Total current assets	13,082,624		13,152,899
Property, plant, and equipment, at cost:	Property, plant, and equipment, at cost:					Property, plant, and equipment, at cost:
Land	Land	7,743		7,793		Land	5,691		7,940
Buildings and improvements	Buildings and improvements	188,563		173,370		Buildings and improvements	184,676		207,614
Machinery and equipment	Machinery and equipment	1,501,919		1,481,525		Machinery and equipment	1,530,544		1,553,371
		1,698,225		1,662,688			1,720,911		1,768,925
Less: Accumulated depreciation and amortization	Less: Accumulated depreciation and amortization	(900,035)		(859,578)		Less: Accumulated depreciation and amortization	(993,500)		(969,320)
Property, plant, and equipment, net	Property, plant, and equipment, net	798,190		803,110		Property, plant, and equipment, net	727,411		799,605
Investments in affiliated companies	Investments in affiliated companies	80,756		86,942		Investments in affiliated companies	68,937		76,358
Intangible assets, net	Intangible assets, net	249,528		271,903		Intangible assets, net	214,261		233,819
Goodwill	Goodwill	2,052,128		2,061,322		Goodwill	2,106,182		2,115,469
Other assets	Other assets	629,891		651,360		Other assets	643,358		675,761
Total assets	Total assets	$	15,604,461	$	16,400,796	Total assets	$	16,842,773	$	17,053,911
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	6,967,180	$	7,046,221	Accounts payable	$	7,625,844	$	7,937,889
Accrued expenses	Accrued expenses	920,929		880,507		Accrued expenses	1,089,866		1,034,361
Short-term borrowings, including current portion of long-term debt	Short-term borrowings, including current portion of long-term debt	244,323		331,431		Short-term borrowings, including current portion of long-term debt	356,986		158,633
Total current liabilities	Total current liabilities	8,132,432		8,258,159		Total current liabilities	9,072,696		9,130,883
Long-term debt	Long-term debt	2,098,369		2,640,129		Long-term debt	1,884,393		2,097,940
Other liabilities	Other liabilities	623,712		636,115		Other liabilities	661,223		676,136
Commitments and contingencies (Note M)
Commitments and contingencies (Note J)						Commitments and contingencies (Note J)	0		0
Equity:	Equity:					Equity:
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Common stock, par value $1:	Common stock, par value $1:					Common stock, par value $1:
Authorized - 160,000 shares in both 2020 and 2019, respectively
Issued - 125,424 shares in both 2020 and 2019, respectively		125,424		125,424
Authorized - 160,000 shares in both 2021 and 2020						Authorized - 160,000 shares in both 2021 and 2020
Issued - 125,424 shares in both 2021 and 2020						Issued - 125,424 shares in both 2021 and 2020	125,424		125,424
Capital in excess of par value	Capital in excess of par value	1,151,895		1,150,006		Capital in excess of par value	1,175,470		1,165,850
Treasury stock (47,806 and 44,804 shares in 2020 and 2019, respectively), at cost		(2,542,629)		(2,332,548)
Treasury stock (53,286 and 50,581 shares in 2021 and 2020, respectively), at cost						Treasury stock (53,286 and 50,581 shares in 2021 and 2020, respectively), at cost	(3,134,484)		(2,776,821)
Retained earnings	Retained earnings	6,277,620		6,131,248		Retained earnings	7,126,713		6,679,751
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(317,489)		(262,211)		Accumulated other comprehensive loss	(128,201)		(104,885)
Total shareholders’ equity	Total shareholders’ equity	4,694,821		4,811,919		Total shareholders’ equity	5,164,922		5,089,319
Noncontrolling interests	Noncontrolling interests	55,127		54,474		Noncontrolling interests	59,539		59,633
Total equity	Total equity	4,749,948		4,866,393		Total equity	5,224,461		5,148,952
Total liabilities and equity	Total liabilities and equity	$	15,604,461	$	16,400,796	Total liabilities and equity	$	16,842,773	$	17,053,911

See accompanying notes.

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


		Six Months Ended							Six Months Ended
		June 27, 2020		June 29, 2019			July 3, 2021		June 27, 2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Consolidated net income (loss)		$	183,092	$	(405,337)
Adjustments to reconcile consolidated net income (loss) to net cash provided by operations:
Consolidated net income						Consolidated net income	$	448,430	$	183,092
Adjustments to reconcile consolidated net income to net cash provided by operations:						Adjustments to reconcile consolidated net income to net cash provided by operations:
Depreciation and amortization	Depreciation and amortization	93,922		94,508		Depreciation and amortization	98,870		93,922
Amortization of stock-based compensation	Amortization of stock-based compensation	22,317		27,629		Amortization of stock-based compensation	21,967		22,317
Equity in (earnings) losses of affiliated companies		(247)		1,085
Equity in earnings of affiliated companies						Equity in earnings of affiliated companies	(1,034)		(247)
Deferred income taxes	Deferred income taxes	46,345		(71,846)		Deferred income taxes	12,069		46,345
Impairments	Impairments	4,918		697,993		Impairments	4,482		4,918

(Gain) loss on investments, net		5,925		(6,738)

Loss (gain) on investments, net						Loss (gain) on investments, net	(9,519)		5,925
Other	Other	48		11,956		Other	1,651		48
Change in assets and liabilities, net of effects of acquired and disposed businesses:	Change in assets and liabilities, net of effects of acquired and disposed businesses:					Change in assets and liabilities, net of effects of acquired and disposed businesses:
Accounts receivable, net	Accounts receivable, net	446,168		895,553		Accounts receivable, net	283,042		446,168
Inventories	Inventories	52,927		278,142		Inventories	(370,212)		52,927
Accounts payable	Accounts payable	(51,027)		(1,346,176)		Accounts payable	(277,663)		(51,027)
Accrued expenses	Accrued expenses	71,043		(71,394)		Accrued expenses	83,102		71,043
Other assets and liabilities	Other assets and liabilities	9,679		(28,956)		Other assets and liabilities	(18,341)		9,679
Net cash provided by operating activities	Net cash provided by operating activities	885,110		76,419		Net cash provided by operating activities	276,844		885,110
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:

Proceeds from disposition of businesses		—		9,460
Acquisition of property, plant, and equipment	Acquisition of property, plant, and equipment	(59,542)		(81,636)		Acquisition of property, plant, and equipment	(41,109)		(59,542)

Proceeds from sale of property, plant, and equipment						Proceeds from sale of property, plant, and equipment	22,171		0
Other	Other	(5,466)		2,940		Other	0		(5,466)
Net cash used for investing activities	Net cash used for investing activities	(65,008)		(69,236)		Net cash used for investing activities	(18,938)		(65,008)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Change in short-term and other borrowings	Change in short-term and other borrowings	(7,189)		(173,356)		Change in short-term and other borrowings	(14,831)		(7,189)
Proceeds from (repayments of) long-term bank borrowings, net	Proceeds from (repayments of) long-term bank borrowings, net	(411,690)		118,977		Proceeds from (repayments of) long-term bank borrowings, net	134,241		(411,690)

Redemption of notes	Redemption of notes	(209,366)		—		Redemption of notes	(130,860)		(209,366)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	3,730		9,622		Proceeds from exercise of stock options	41,317		3,730
Repurchases of common stock	Repurchases of common stock	(231,739)		(200,924)		Repurchases of common stock	(411,327)		(231,739)
Settlement of forward-starting interest rate swap	Settlement of forward-starting interest rate swap	(48,378)		—		Settlement of forward-starting interest rate swap	0		(48,378)
Other	Other	(141)		(147)		Other	(159)		(141)
Net cash used for financing activities	Net cash used for financing activities	(904,773)		(245,828)		Net cash used for financing activities	(381,619)		(904,773)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(9,604)		(693)		Effect of exchange rate changes on cash	(5,832)		(9,604)
Net decrease in cash and cash equivalents	Net decrease in cash and cash equivalents	(94,275)		(239,338)		Net decrease in cash and cash equivalents	(129,545)		(94,275)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	300,103		509,327		Cash and cash equivalents at beginning of period	373,615		300,103
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	205,828	$	269,989	Cash and cash equivalents at end of period	$	244,070	$	205,828

See accompanying notes.

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands)

(Unaudited)


		Common Stock at Par Value		Capital in Excess of Par Value		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total			Common Stock at Par Value		Capital in Excess of Par Value		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total
Balance at December 31, 2019		$	125,424	$	1,150,006	$	(2,332,548)	$	6,131,248	$	(262,211)	$	54,474	$	4,866,393
Effect of new accounting principles		—		—		—		(35,935)		—		—		(35,935)
Balance at December 31, 2020																Balance at December 31, 2020	$	125,424	$	1,165,850	$	(2,776,821)	$	6,679,751	$	(104,885)	$	59,633	$	5,148,952
Consolidated net income	Consolidated net income	—		—		—		49,503		—		252		49,755		Consolidated net income	0		0		0		206,321		0		907		207,228
Other comprehensive loss	Other comprehensive loss	—		—		—		—		(87,273)		(242)		(87,515)		Other comprehensive loss	0		0		0		0		(18,576)		(1,853)		(20,429)
Amortization of stock-based compensation	Amortization of stock-based compensation	—		13,920		—		—		—		—		13,920		Amortization of stock-based compensation	0		13,223		0		0		0		0		13,223
Shares issued for stock-based compensation awards	Shares issued for stock-based compensation awards	—		(18,182)		20,162		—		—		—		1,980		Shares issued for stock-based compensation awards	0		(12,519)		38,610		0		0		0		26,091
Repurchases of common stock	Repurchases of common stock	—		—		(158,989)		—		—		—		(158,989)		Repurchases of common stock	0		0		(160,619)		0		0		0		(160,619)

Balance at March 28, 2020		$	125,424	$	1,145,744	$	(2,471,375)	$	6,144,816	$	(349,484)	$	54,484	$	4,649,609
Balance at April 3, 2021																Balance at April 3, 2021	$	125,424	$	1,166,554	$	(2,898,830)	$	6,886,072	$	(123,461)	$	58,687	$	5,214,446
Consolidated net income	Consolidated net income	—		—		—		132,804		—		533		133,337		Consolidated net income	0		0		0		240,641		0		561		241,202
Other comprehensive income		—		—		—		—		31,995		251		32,246
Other comprehensive income (loss)																Other comprehensive income (loss)	0		0		0		0		(4,740)		450		(4,290)
Amortization of stock-based compensation	Amortization of stock-based compensation	—		8,397		—		—		—		—		8,397		Amortization of stock-based compensation	0		8,744		0		0		0		0		8,744
Shares issued for stock-based compensation awards	Shares issued for stock-based compensation awards	—		(2,246)		3,996		—		—		—		1,750		Shares issued for stock-based compensation awards	0		172		15,054		0		0		0		15,226
Repurchases of common stock	Repurchases of common stock	—		—		(75,250)		—		—		—		(75,250)		Repurchases of common stock	0		0		(250,708)		0		0		0		(250,708)
Distributions	Distributions	—		—		—		—		—		(141)		(141)		Distributions	0		0		0		0		0		(159)		(159)
Balance at June 27, 2020		$	125,424	$	1,151,895	$	(2,542,629)	$	6,277,620	$	(317,489)	$	55,127	$	4,749,948
Balance at July 3, 2021																Balance at July 3, 2021	$	125,424	$	1,175,470	$	(3,134,484)	$	7,126,713	$	(128,201)	$	59,539	$	5,224,461

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands)

(Unaudited)


		Common Stock at Par Value		Capital in Excess of Par Value		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total			Common Stock at Par Value		Capital in Excess of Par Value		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total
Balance at December 31, 2018		$	125,424	$	1,135,934	$	(1,972,254)	$	6,335,335	$	(299,449)	$	51,376	$	5,376,366

Balance at December 31, 2019																Balance at December 31, 2019	$	125,424	$	1,150,006	$	(2,332,548)	$	6,131,248	$	(262,211)	$	54,474	$	4,866,393
Effect of new accounting principles																Effect of new accounting principles	—		—		—		(35,935)		—		—		(35,935)
Consolidated net income	Consolidated net income	—		—		—		140,735		—		1,679		142,414		Consolidated net income	0		0		0		49,503		0		252		49,755
Other comprehensive income (loss)		—		—		—		—		11,182		(648)		10,534
Other comprehensive loss																Other comprehensive loss	0		0		0		0		(87,273)		(242)		(87,515)
Amortization of stock-based compensation	Amortization of stock-based compensation	—		19,090		—		—		—		—		19,090		Amortization of stock-based compensation	0		13,920		0		0		0		0		13,920
Shares issued for stock-based compensation awards	Shares issued for stock-based compensation awards	—		(26,267)		33,198		—		—		—		6,931		Shares issued for stock-based compensation awards	0		(18,182)		20,162		0		0		0		1,980
Repurchases of common stock	Repurchases of common stock	—		—		(53,925)		—		—		—		(53,925)		Repurchases of common stock	0		0		(158,989)		0		0		0		(158,989)

Balance at March 30, 2019		$	125,424	$	1,128,757	$	(1,992,981)	$	6,476,070	$	(288,267)	$	52,407	$	5,501,410
Consolidated net income (loss)		—		—		—		(548,966)		—		1,215		(547,751)
Balance at March 28, 2020																Balance at March 28, 2020	$	125,424	$	1,145,744	$	(2,471,375)	$	6,144,816	$	(349,484)	$	54,484	$	4,649,609
Consolidated net income																Consolidated net income	0		0		0		132,804		0		533		133,337
Other comprehensive income	Other comprehensive income	—		—		—		—		7,558		515		8,073		Other comprehensive income	0		0		0		0		31,995		251		32,246
Amortization of stock-based compensation	Amortization of stock-based compensation	—		8,539		—		—		—		—		8,539		Amortization of stock-based compensation	0		8,397		0		0		0		0		8,397
Shares issued for stock-based compensation awards	Shares issued for stock-based compensation awards	—		(647)		3,340		—		—		—		2,693		Shares issued for stock-based compensation awards	0		(2,246)		3,996		0		0		0		1,750
Repurchases of common stock	Repurchases of common stock	—		—		(150,102)		—		—		—		(150,102)		Repurchases of common stock	0		0		(75,250)		0		0		0		(75,250)
Distributions	Distributions	—		—		—		—		—		(147)		(147)		Distributions	0		0		0		0		0		(141)		(141)
Balance at June 29, 2019		$	125,424	$	1,136,649	$	(2,139,743)	$	5,927,104	$	(280,709)	$	53,990	$	4,822,715
Balance at June 27, 2020																Balance at June 27, 2020	$	125,424	$	1,151,895	$	(2,542,629)	$	6,277,620	$	(317,489)	$	55,127	$	4,749,948

See accompanying notes.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

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, ~~2019,~~2020, 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, ~~2020.~~2021.

Reclassification

Certain prior period amounts were reclassified to conform to the current period presentation. These reclassifications did not have a material impact on previously reported amounts.

Note B ~~– Impact of Recently Issued Accounting Standards~~

~~In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-04,~~ ~~Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~ ~~("ASU No. 2020-04")~~. ASU No. 2020-04 provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued. The amendments in the ASU are effective for all entities as of March 12, 2020 through December 31, 2022. The company adopted the provisions of ASU No. 2020-04 on a prospective basis in March 2020.

~~In June 2016, the FASB issued ASU No. 2016-13,~~ ~~Financial Instruments - Credit Losses~~ ("Topic 326"). Topic 326 revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. On January 1, 2020, the company adopted Topic 326 using a modified retrospective approach with a cumulative effect adjustment to the opening balance of retained earnings, which increased the allowance for credit losses by $47,011 ($35,935 net of tax). Increases in the allowance for credit losses relate to the required change from an incurred loss model to an expected loss model, and the related change in timing of loss recognition where an allowance for credit losses is now applied to all receivables, at a rate dependent on the credit characteristics of the collective pool each customer is in. Refer to Notes C and G.

~~Note C – Significant Accounting Policies~~

Except for the changes below, no material changes have been made to the company’s significant accounting policies disclosed in Note 1, Summary of Significant Accounting Policies, in its Annual Report on Form 10-K, filed on February 13, 2020, for the year ended December 31, 2019.

~~Trade accounts and notes receivable~~

Trade accounts and notes receivable are reported at amortized cost, net of the allowance for credit losses in the consolidated balance sheets. The allowance for credit losses is a valuation account that is deducted from the receivables' amortized cost basis to present the net amount expected to be collected. Receivables are written off against the allowance when management believes the receivable balance is confirmed to be uncollectible.

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands except per share data)~~

~~(Unaudited)~~

Management estimates the allowance for credit losses using relevant available information about expected credit losses and an age-based reserve model. Inputs to the model include information about historical credit losses, customer credit ratings, past events, current conditions, and reasonable and supportable forecasts. Adjustments to historical loss information are made for differences in current receivable-specific risk characteristics such as changes in the economic and industry environment, or other relevant factors.

Expected credit losses are estimated on a collective (pool) basis, when similar risk characteristics exist, based on customer credit ratings, which include both externally acquired as well as internally determined credit ratings. Receivables that do not share risk characteristics are evaluated on an individual basis.

~~Note D – Impairment of Long-Lived Assets~~

During the second quarter of 2019, the company committed to a plan to close its personal computer and mobility asset disposition business within the global components business segment. In light of the plan, the company performed an impairment analysis of the long-lived assets of the personal computer and mobility asset disposition business in accordance with Accounting Standards Codification ("ASC") topic 360 and recorded a pre-tax impairment charge of $74,908 to write-down certain assets of the personal computer and mobility asset disposition business to estimated fair value in the second quarter of 2019. The company also recorded $4,918 and $6,910 in impairment charges related to various other long-lived assets in the second quarters of 2020 and 2019, respectively, unrelated to the personal computer and mobility asset disposition business.

~~Note E~~ – 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
Components Global ECS Total
Balance as of December 31, 2019 (a) $ 883,496 $ 1,177,826 $ 2,061,322
Foreign currency translation adjustment (1,363) (7,831) (9,194)
Balance as of June 27, 2020 (a) $ 882,133 $ 1,169,995 $ 2,052,128


	Global Components		Global ECS		Total
Balance as of December 31, 2020 (a)	$	894,975	$	1,220,494	$	2,115,469

Foreign currency translation adjustment	(5,812)		(3,475)		(9,287)
Balance as of July 3, 2021 (a)	$	889,163	$	1,217,019	$	2,106,182

(a) The total carrying value of goodwill as of ~~June 27, 2020~~July 3, 2021 and December 31, ~~2019~~2020 in the table above is reflected net of $1,588,955 of accumulated impairment charges, of which $1,287,100 was recorded in the global components business segment and $301,855 was recorded in the global enterprise computing solutions ("ECS") business segment.

Intangible assets, net, are comprised of the following as of July 3, 2021:


	Weighted-Average Life	Gross Carrying Amount		Accumulated Amortization		Net
Customer relationships	12 years	$	330,587	$	(167,177)	$	163,410
Amortizable trade name	8 years	74,000		(23,149)		50,851
		$	404,587	$	(190,326)	$	214,261

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Intangible assets, net, are comprised of the following as of December 31, 2020:


	Weighted-Average Life	Gross Carrying Amount		Accumulated Amortization		Net

Customer relationships	12 years	$	335,027	$	(157,151)	$	177,876
Amortizable trade name	8 years	74,008		(18,065)		55,943

		$	409,035	$	(175,216)	$	233,819

During the second quarter of 2021 and 2020, the company recorded amortization expense related to identifiable intangible assets of $9,316 and $9,734, respectively. During the first ~~quarter~~six months of 2021 and 2020, ~~as a result of significant declines~~amortization expense related to identifiable intangible assets was $18,642 and $19,689, respectively.

Note C – Investments in macroeconomic conditions and equity valuations, and the implementation of regulatory restrictions brought forth by the COVID-19 pandemic, and due to historically low head-room, the company determined that it was more likely than not that an impairment may exist within the Americas components and eInfochips reporting units. The company performed a quantitative goodwill impairment test for these reporting units and determined goodwill was not impaired. As of March 28, 2020, the fair value of the Americas components and eInfochips reporting units, within the global components business segment, exceeded their carrying values by less than 10%.Affiliated Companies

The company ~~estimated~~owns a 50% interest in each of the ~~fair value of these reporting units~~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 ~~income approach. For~~equity method.

The following table presents the ~~purposes~~company’s investment in affiliated companies:


	July 3, 2021		December 31, 2020
Marubun/Arrow	$	57,921	$	65,943
Other	11,016		10,415
	$	68,937	$	76,358

The equity in earnings (losses) of affiliated companies consists of the ~~income approach, fair value was determined based on~~following:


	Quarter Ended				Six Months Ended
	July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020
Marubun/Arrow	$	35	$	(217)	$	892	$	228
Other	155		(66)		142		19
	$	190	$	(283)	$	1,034	$	247

Under the ~~present value~~terms of ~~estimated future cash flows, discounted at an appropriate risk adjusted rate. The fair value conclusions~~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 0 outstanding borrowings under the third-party debt agreements of the joint ventures as of ~~March 28, 2020 for the Americas components~~July 3, 2021 and eInfochips reporting units are highly sensitive to changes in the assumptions used in the income approach which include forecasted revenues, gross profit margins, operating income margins, working capital cash flow, forecasted capital expenditures, perpetual growth rates, and long-term discount rates, among others, all of which require significant judgments by management. The company has used recent historical performance, current forecasted financial information, and broad-based industry and economic statistics as a basis to estimate the key assumptions utilized in the discounted cash flow model. These key assumptions are inherently uncertain and require a high degree of estimation and judgment and are subject to change based on future changes, industry and global economic and geo-political conditions, and the timing and successDecember 31, 2020.

Note D – Accounts Receivable

Accounts receivable, net, consists of the ~~implementation of current strategic initiatives. The impact of the COVID-19 pandemic on estimated future cash flows is highly uncertain and will largely depend on the~~following:


	July 3, 2021		December 31, 2020
Accounts receivable	$	8,928,335	$	9,298,135
Allowances for doubtful accounts	(81,620)		(92,792)
Accounts receivable, net	$	8,846,715	$	9,205,343

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

~~outcome of future events, which could result in a goodwill impairment going forward. The impacts of COVID-19 were considered~~Changes in the interim impairment analysis as of March 28, 2020 through the use of probability weighted cash flow scenarios and an increase in the discount rates. The company concluded no further indicators of potential impairment existed, and as such, no interim impairment test was required at June 27, 2020.

During the second quarter of 2019, as a result of the company's downward revision of forecasted future earnings and the decision to wind down the company's personal computer and mobility asset disposition business, the company determined that it was more likely than not that an impairment may exist within the Americas components and Asia-Pacific components reporting units. The company evaluated its other four reporting units and concluded an interim impairment analysis was not required based on the results of those reporting units and historical levels of headroom in each of those reporting units. The interim goodwill impairment analysis resulted in a partial goodwill impairment charge of $509,000 ($457,806 net of tax) with approximately $600,000 of goodwill remaining within the Americas components reporting unit and a full impairment charge of $61,175 ($61,175 net of tax) within the Asia-Pacific components reporting unit.

~~Intangible assets, net, are comprised of the following as of June 27, 2020:~~

Weighted-Average Life Gross Carrying Amount Accumulated Amortization Net
Customer relationships 11 years $ 350,931 $ (162,429) $ 188,502
Amortizable trade name 8 years 74,007 (12,981) 61,026
$ 424,938 $ (175,410) $ 249,528

~~Intangible assets, net, are comprised of the following as of December 31, 2019:~~

Weighted-Average Life Gross Carrying Amount Accumulated Amortization Net
Customer relationships 12 years $ 354,305 $ (148,632) $ 205,673
Amortizable trade name 8 years 76,407 (10,177) 66,230
$ 430,712 $ (158,809) $ 271,903

During the second quarter of 2019, the company initiated actions to further integrate two global components businesses. These businesses held indefinite-lived trade names with a carrying value of $101,000. As a result of the company’s decision to integrate these brands, we determined the useful lives of the trade names were no longer indefinite. Subsequent to the second quarter of 2019, the company began amortizing these trade names over their estimated remaining useful lives. The trade names were tested for impairment during the second quarter of 2019 as a result of the change in estimated useful lives. The company estimated the fair value of the trade names to be $55,000 using the relief from royalty method and recorded a non-cash impairment charge of $46,000 ($34,653 net of tax). The drivers of the impairment were primarily due to the shortened useful lives of the asset and a decline of the forecasted revenues attributable to the trade names as integration to the Arrow brand occurs over the estimated remaining useful lives.

During the second quarter of 2020 and 2019, the company recorded amortization expense related to identifiable intangible assets of $9,734 and $11,413, respectively. During the first six months of 2020 and 2019, amortization expense related to identifiable intangible assets was $19,689 and $23,343, respectively.

~~Note F – 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.

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands except per share data)~~

~~(Unaudited)~~

~~The following table presents the company’s investment in affiliated companies:~~

June 27,
2020 December 31,
2019
Marubun/Arrow $ 71,957 $ 76,574
Other 8,799 10,368
$ 80,756 $ 86,942

~~The equity in earnings (losses) of affiliated companies consists of the following:~~

Quarter Ended Six Months Ended
June 27,
2020 June 29,
2019 June 27,
2020 June 29,
2019
Marubun/Arrow $ (217) $ 227 $ 228 $ 1,453
Other (66) 155 19 (2,538)
$ (283) $ 382 $ 247 $ (1,085)

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. At June 27, 2020 and December 31, 2019, the company’s pro-rata share of this debt was approximately $3,100 and $1,700, respectively. The company believes there is sufficient equity in each of the joint ventures to meet the obligations.

~~Note G – Accounts Receivable~~

~~Accounts receivable, net, consists of the following:~~

June 27,
2020 December 31,
2019
Accounts receivable $ 8,052,930 $ 8,552,120
Allowances for doubtful accounts (98,892) (69,433)
$ 7,954,038 $ 8,482,687

~~The company has notes receivable with certain customers, which are included in “Accounts receivable, net” in the company’s consolidated balance sheets.~~

~~Allowances~~allowance for doubtful accounts consists of the following:


~~Balance at December 31, 2019~~	$	~~69,433~~
~~Effect of adoption of ASU No. 2016-13 (Note B)~~	~~47,011~~
~~Charged to income~~	~~19,475~~
~~Translation Adjustments~~	~~(1,817)~~
~~Writeoffs~~	~~(35,210)~~
~~Balance at June 27, 2020~~	$	~~98,892~~


	Six Months Ended
	July 3, 2021		June 27, 2020
Balance at beginning of period	$	92,792	$	69,433
Effect of adoption of ASU No. 2016-13	0		47,011
Charged to income	1,544		19,475
Translation Adjustments	(536)		(1,817)
Writeoffs	(12,180)		(35,210)
Balance at end of period	$	81,620	$	98,892

~~The global economic impact from COVID-19 may adversely affect the credit condition of some of our customers.~~ The company has considered the current credit condition of its customers in estimating the expected credit losses and has not experienced significant changes in customers’ payment trends or significant deterioration in customers’ credit risk as of ~~June 27, 2020.~~July 3, 2021. The global economic impact from COVID-19 may adversely affect the credit condition of some customers. The impact of COVID-19 on ~~our~~ customers’ credit condition is highly uncertain and will largely depend on the outcome of future events, which could cause credit losses to increase.

During ~~the first quarter of~~ 2020, the company entered into an EMEA (Europe, the Middle East, and Africa) asset securitization program under which it will continuously sell its interest in designated pools of trade accounts receivables of certain of its subsidiaries in the EMEA region, at a discount, to a special purpose entity, which in turn sells certain of the receivables to

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands except per share data)~~

~~(Unaudited)~~

unaffiliated financial institutions and conduits administered by such unaffiliated financial institutions ("unaffiliated financial institutions") on a monthly basis. The company may sell up to €400,000 under the EMEA asset securitization program, which matures in January 2023, subject to extension in accordance with its terms. The program is conducted through Arrow EMEA Funding Corp B.V., an entity structured to be bankruptcy remote. The company is deemed the primary beneficiary of Arrow EMEA Funding Corp B.V. as the company has both (i) the power to direct the activities that most significantly impact the entity’s economic performance and (ii) 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 receivables into the special purpose entity. Accordingly, Arrow EMEA Funding Corp B.V. is included in the company’s consolidated financial statements.

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 onby Arrow EMEA Funding Corp B.V. are pledged as collateral to unaffiliated financial institutions. These unsold receivables are included in “Accounts receivable, net” in 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.

During the second quarter and first six months of 2021 and 2020, the company sold approximately ~~€410,770~~$545,221 and ~~€899,491, or~~$1,062,263, and $448,913 and $977,366, respectively, of accounts receivables to unaffiliated financial institutions under the EMEA asset securitization program. ~~There were €292,403, or $324,227,~~

Other amounts related to the EMEA asset securitization program consist of receivables sold to unaffiliated financial institutions that were uncollected as of June 27, 2020. Total collateralized accounts receivables of approximately €173,786, or $192,554, were held by Arrow EMEA Funding Corp B.V. at June 27, 2020. the following:





	July 3, 2021		December 31, 2020
Receivables sold to unaffiliated financial institutions that were uncollected	$	400,684	$	397,914
Collateralized accounts receivable held by Arrow EMEA funding Corp B.V.	655,451		551,843

Any accounts receivables 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.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Additionally, the financial obligations of Arrow EMEA Funding Corp B.V. to the unaffiliated financial institution under the program are limited to the assets it owns and there is no recourse to the company for receivables that are uncollectible as a result of the insolvency or 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. ~~The~~As of July 3, 2021, the company was in ~~material~~ compliance with all ~~covenants as of June 27, 2020 and is currently not aware of any events that would cause non-compliance with any covenants in the future.~~such financial covenants.

Note HE – Debt

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


		June 27, 2020		December 31, 2019			July 3, 2021		December 31, 2020
6.00% notes, due April 2020		$	—	$	209,322
5.125% notes, due March 2021	5.125% notes, due March 2021	130,764		—		5.125% notes, due March 2021	$	0	$	130,836
Borrowings on lines of credit		75,000		60,000
3.50% notes, due April 2022						3.50% notes, due April 2022	349,345		0

Other short-term borrowings	Other short-term borrowings	38,559		62,109		Other short-term borrowings	7,641		27,797
		$	244,323	$	331,431		$	356,986	$	158,633

Other short-term borrowings are primarily utilized to support working capital requirements. The weighted-average interest rate on these borrowings was ~~3.27%~~1.67% and ~~2.76%~~1.73% at ~~June 27, 2020~~July 3, 2021 and December 31, ~~2019,~~2020, respectively.

The company has $200,000 in uncommitted lines of credit. There were ~~$75,000 and $60,000 of~~ o~~utstanding~~no outstanding borrowings under the uncommitted lines of credit at ~~June 27, 2020~~July 3, 2021 and December 31, ~~2019, respectively.~~2020. These borrowings ~~were~~are provided on a short-term basis and the maturity is agreed upon between the company and the lender. The lines had a weighted-average effective interest rate of ~~1.55%~~1.50% and ~~2.61%~~1.53% at ~~June 27, 2020~~July 3, 2021 and December 31, ~~2019,~~2020, respectively.

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands except per share data)~~

~~(Unaudited)~~

The company has a commercial paper program and the maximum aggregate balance of commercial paper outstanding may not exceed the borrowing capacity of $1,200,000. The company had no0 outstanding borrowings under this program at ~~June 27, 2020~~July 3, 2021 and December 31, ~~2019.~~2020. The program had a weighted-average effective interest rate of ~~2.01%~~.28% and ~~2.24%~~.30% at ~~June 27, 2020~~July 3, 2021 and December 31, ~~2019,~~2020, respectively.

Long-term debt consists of the following:

June 27,
2020 December 31,
2019
Revolving credit facility $ — $ 10,000
North American asset securitization program — 400,000
5.125% notes, due 2021 — 130,691
3.50% notes, due 2022 348,499 348,088
4.50% notes, due 2023 298,421 298,148
3.25% notes, due 2024 495,536 495,045
4.00% notes, due 2025 346,680 346,368
7.50% senior debentures, due 2027 109,898 109,857
3.875% notes, due 2028 494,933 494,648
Other obligations with various interest rates and due dates 4,402 7,284
$ 2,098,369 $ 2,640,129


	July 3, 2021		December 31, 2020

North American asset securitization program	$	135,000	$	0
3.50% notes, due 2022	0		348,918
4.50% notes, due 2023	298,989		298,701
3.25% notes, due 2024	496,542		496,034
4.00% notes, due 2025	347,325		346,999
7.50% senior debentures, due 2027	109,980		109,939
3.875% notes, due 2028	495,520		495,223
Other obligations with various interest rates and due dates	1,037		2,126
	$	1,884,393	$	2,097,940

The 7.50% senior debentures are not redeemable prior to their maturity. All other notes may be called at the option of the company subject to “make whole” clauses.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

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


		June 27, 2020		December 31, 2019			July 3, 2021		December 31, 2020

3.50% notes, due 2022	3.50% notes, due 2022	$	360,000	$	358,500	3.50% notes, due 2022	$	0	$	360,500
4.50% notes, due 2023	4.50% notes, due 2023	319,500		316,000		4.50% notes, due 2023	315,500		321,500
3.25% notes, due 2024	3.25% notes, due 2024	528,000		515,500		3.25% notes, due 2024	532,500		540,500
4.00% notes, due 2025	4.00% notes, due 2025	375,500		367,000		4.00% notes, due 2025	380,500		383,000
7.50% senior debentures, due 2027	7.50% senior debentures, due 2027	129,500		135,000		7.50% senior debentures, due 2027	140,000		140,000
3.875% notes, due 2028	3.875% notes, due 2028	521,000		516,500		3.875% notes, due 2028	561,000		564,000

The carrying amount of the company’s short-term borrowings in various countries, revolving credit facility, ~~5.125%~~3.50% notes due ~~March 2021,~~April 2022, North American asset securitization program, commercial paper, and other obligations approximate their fair value.

The company has a $2,000,000 revolving credit facility maturing in December 2023. This 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 Eurocurrency rate plus a spread (1.18% at ~~June 27, 2020)~~July 3, 2021), which is based on the company’s credit ratings, or an effective interest rate of 1.24% at ~~June 27, 2020.~~July 3, 2021. The facility fee, which is based on the company’s credit ratings, was .20% of the total borrowing capacity at ~~June 27, 2020.~~July 3, 2021. The company had no ~~outstanding borrowings and $10,000 in~~ outstanding borrowings under the revolving credit facility at ~~June 27, 2020~~July 3, 2021 and December 31, ~~2019,~~2020, respectively.

The company has a North American asset securitization program collateralized by accounts receivable of certain of its subsidiaries. ~~The~~In March 2021, the company ~~may borrow up~~amended its asset securitization program and, among other things, increased its borrowing capacity from $1,200,000 to ~~$1,200,000 under the program, which matures~~$1,250,000 and extended its term to mature in ~~June 2021.~~March 2024. 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

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands except per share data)~~

~~(Unaudited)~~

related debt obligation remain on the company’s consolidated balance sheets. Interest on borrowings is calculated using a base rate or a commercial paper rate plus a spread ~~(.40%~~(.45% at ~~June 27, 2020)~~July 3, 2021), or an effective interest rate of ~~.87%~~.56% at ~~June 27, 2020.~~July 3, 2021. The facility fee is .40% of the total borrowing capacity.

~~At June 27, 2020, the~~The company had ~~no outstanding borrowings under the North American asset securitization program. At December 31, 2019, the company had $400,000~~$135,000 in outstanding borrowings under the North American asset securitization program at July 3, 2021, which was included in “Long-term debt” in the company’s consolidated balance sheets. There was no outstanding borrowings under the North American asset securitization program at December 31, 2020. Total collateralized accounts receivable of approximately ~~$2,073,200~~$2,168,900 and ~~$2,217,800~~$2,207,700 were held by AFC and were included in “Accounts receivable, net” in the company’s consolidated balance sheets at ~~June 27, 2020~~July 3, 2021 and December 31, ~~2019,~~2020, 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 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. ~~The~~As of July 3, 2021, the company was in ~~material~~ compliance with all ~~covenants as~~such financial covenants.

During March 2021, the company repaid $130,860 principal amount of ~~June 27, 2020 and is currently not aware of any events that would cause non-compliance with any covenants in the future.~~ its 5.125% notes due March 2021.

During April 2020, the company repaid $209,366 principal amount of its 6.00% notes due April 2020.

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.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Interest and other financing expense, net, includes interest and dividend income of $3,745 and $7,851 for the second quarter and first six months of 2021, respectively and $3,461 and $13,426 for the second quarter and first six months of 2020, respectively. ~~Interest and other financing expense, net, includes interest and dividend income of $14,492 and $28,537 for the second quarter and first six months 2019, respectively.~~

Note IF – 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.

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands except per share data)~~

~~(Unaudited)~~

The following table presents assets (liabilities) measured at fair value on a recurring basis at ~~June 27, 2020:~~July 3, 2021:

Balance Sheet
Location Level 1 Level 2 Level 3 Total
Cash equivalents (a) Cash and cash equivalents/
other assets $ 21,480 $ — $ — $ 21,480
Equity investments (b) Other assets 37,903 — — 37,903
Interest rate swaps Other assets — 558 — 558
Interest rate swaps Other liabilities — (3,029) — (3,029)
Foreign exchange contracts Other current assets/
other assets — 47,867 — 47,867
Foreign exchange contracts Accrued expenses — (2,595) — (2,595)
$ 59,383 $ 42,801 $ — $ 102,184


	Balance Sheet Location	Level 1		Level 2		Level 3		Total
Cash equivalents (a)	Cash and cash equivalents	$	5,338	$	0	$	0	$	5,338
Equity investments (b)	Other assets	54,730		0		0		54,730
Interest rate swaps designated as cash flow hedges	Other assets	0		43,085		0		43,085

Foreign exchange contracts designated as net investment hedges	Other assets	0		24,444		0		24,444



		$	60,068	$	67,529	$	0	$	127,597

The following table presents assets (liabilities) measured at fair value on a recurring basis at December 31, ~~2019:~~2020:

Balance Sheet
Location Level 1 Level 2 Level 3 Total
Cash equivalents (a) Cash and cash equivalents/
other assets $ 18,579 $ — $ — $ 18,579
Equity investments (b) Other assets 44,677 — — 44,677
Interest rate swaps Other liabilities — (11,574) — (11,574)
Foreign exchange contracts Other current assets/
other assets — 24,092 — 24,092
Foreign exchange contracts Accrued expenses — (2,132) — (2,132)
$ 63,256 $ 10,386 $ — $ 73,642


	Balance Sheet Location	Level 1		Level 2		Level 3		Total
Cash equivalents (a)	Cash and cash equivalents/ other assets	$	6,062	$	0	$	0	$	6,062
Equity investments (b)	Other assets	45,879		0		0		45,879

Interest rate swaps designated as cash flow hedges	Other assets	0		20,983		0		20,983
Foreign exchange contracts designated as net investment hedges	Other assets	0		12,760		0		12,760



		$	51,941	$	33,743	$	0	$	85,684

(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 gain of ~~$4,964~~$3,840 and ~~an unrealized loss of $5,031~~$5,241 for the second quarter and first six months of ~~2020,~~2021, respectively, on equity securities held at the end of the quarter. The company recorded an unrealized gain of $8$4,964 and ~~$1,842~~unrealized loss of $5,031 for the second quarter and first six months of ~~2019,~~2020, 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 ~~and long-lived assets~~ (see ~~Notes D and E)~~Note B). The company tests these assets for impairment if indicators of potential impairment exist or at least annually if indefinite lived.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

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 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 are recorded in the shareholders’ equity section in 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. Gains and losses on interest rate swaps 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 ~~are~~is estimated using ~~market quotes.~~

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands except per share data)~~

~~(Unaudited)~~

a discounted cash flow analysis on the expected cash flows of each derivative based on observable inputs, including interest rate curves and credit spreads.

At ~~June 27,~~July 3, 2021 and December 31, 2020, the company had the following outstanding interest rate swaps designated as cash flow hedges:

Trade Date

Maturity Date

Notional Amount

Weighted Average Interest Rate

Date Range of Forecasted Transaction

April 2020

December 2024

$300,000

0.97%

Jan 2023 - Dec 2025

May 2020

June 2022

$300,000

0.90%

Jan 2021 - Jun 2023

~~At December 31, 2019 the company had the following outstanding interest rate swaps designated as cash flow hedges:~~

Trade Date Maturity Date Notional Amount Weighted Average Interest Rate Date Range of Forecasted Transaction
May 2019 June 2020 $300,000 2.33% Sep 2019 - Jun 2020

In May 2019, the company entered into a series of ten-year forward-starting interest rate swaps (the “2019 swaps”). The 2019 swaps were designated as cash flow hedges managing the risk of variability in interest rates of future expected debt issuance by June 2020. In February 2020, the company determined that certain of the forecasted cash flows were no longer probable and de-designated the hedging relationship. In February 2020, the company re-designated the 2019 swaps in a new cash flow hedge ~~managing~~to manage the risk of variability in interest rates of future expected debt issuance by June 2023. In May 2020, the company terminated the 2019 swaps for a cash payment of $48,378, which iswas reported in the ~~"cash~~“cash flows from financing ~~activities"~~activities” section of the consolidated statements of cash flows. During the first six months ~~ended June 27,~~of 2020, losses of $1,194, before taxes, were reclassified from “Accumulated other comprehensive loss” ~~("AOCI"~~(“AOCI”) to “Interest and other financing expense, net” related to forecasted cash flows that were deemed no longer probable to occur. At ~~June 27, 2020~~July 3, 2021 losses of ~~$35,796,~~$34,751, net of taxes, remained in AOCI related to the ~~May~~ 2019 swaps.

During the second quarter and six months ended June 27, 2020, losses of $243 and $29,799, respectively, related to interest rate swaps were recorded in other comprehensive loss, net of taxes. During the second quarter ended June 29, 2019, losses of $6,849 related to interest rate swaps were recorded in other comprehensive loss, net of taxes.

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 transactions in its foreign operations are denominated primarily in the following currencies: Euro, Indian Rupee, Chinese Renminbi, ~~Indian Rupee,~~ Canadian Dollar, and British Pound. 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. 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. 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 ~~are~~is estimated using ~~market quotes.~~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 ~~June 27, 2020~~July 3, 2021 and December 31, ~~2019~~2020 was ~~$1,031,031~~$1,109,433 and ~~$929,966,~~$914,930, respectively.

Gains and losses related to non-designated foreign currency exchange contracts are recorded in ~~“Cost~~"Cost of ~~sales”~~sales" in 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, in the company’s consolidated statements of operations and were not material for the second quarter and first six months of 2020 and 2019.

1715

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

~~During~~cash flow hedges are recorded in "Cost of sales," "Selling, general, and administrative expenses," and "Interest and other financing expense, net" based upon the ~~first quarter~~nature of ~~2019,~~the underlying hedged transaction, in the company’s consolidated statements of operations.

At July 3, 2021 and December 31, 2020 the company ~~entered into a series of~~had foreign exchange contracts to sell Euro and buy United States Dollars, with various maturity dates as noted in the table below:


Maturity Date						Notional Amount
March 2023						EUR 50,000
September 2024						EUR 50,000
April 2025						EUR 100,000
January 2028						EUR 100,000
Total						EUR 300,000

The contracts above have been designated as a net investment hedge which is in place to hedge a portion of the company’s net investment in subsidiaries with euro-denominated net assets. The change in the fair value of derivatives designated as net investment hedges are recorded in “~~foreign~~“foreign currency translation adjustment” (“(“CTA”) within “~~Accumulated~~“Accumulated other comprehensive loss” in the company’s consolidated balance sheets. Amounts excluded from the assessment of hedge effectiveness are included in “~~Interest~~“Interest and other financing expense, net” in the company’s consolidated statements of operations.

The total gains (losses) recorded in CTA within other comprehensive loss related to net investment hedges were $(361) and $17,286 for the second quarter and first six months of 2020, and $224 and $6,816 for the second quarter and first six months of 2019, net of taxes, respectively. Derivative amounts excluded from the assessment of effectiveness for the net investment hedges and recognized in other comprehensive income (net of tax) were gains (losses) of $519 and $18,513 for the second quarter and first six months of 2020, $3,634 and $4,776 for the second quarter and first six months of 2019, respectively. Derivative amounts excluded from the assessment of effectiveness for the net investment hedges reclassified from CTA to "Interest and other financing expenses, net" were gains of $2,201 and $4,402 for the second quarter and first six months of 2020, and $2,192 and $3,598 for the second quarter and first six months of 2019, respectively. The company recorded an asset of $44,504 and $21,718 as of June 27, 2020 and December 31, 2019, respectively, related to the net investment hedges.

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


		Quarter Ended						Six Months Ended									Income Statement Line				Quarter Ended								Six Months Ended
		June 27, 2020		June 29, 2019		June 27, 2020		June 29, 2019			Income Statement Line		July 3, 2021								July 3, 2021				June 27, 2020
Gain (Loss) Recognized in Income	Gain (Loss) Recognized in Income									Gain (Loss) Recognized in Income
Foreign exchange contracts		$	4,128	$	774	$	8,621	$	4,263
Interest rate swaps		(338)		(322)		(1,867)		(641)
Foreign exchange contracts, net investment hedge (a)										Foreign exchange contracts, net investment hedge (a)		Interest Expense			$	2,201			$	2,201			$	4,402			$	4,402
Interest rate swaps, cash flow hedge										Interest rate swaps, cash flow hedge	Interest Expense		(356)				(338)				(707)				(1,867)
Total	Total	$	3,790	$	452	$	6,754	$	3,622	Total			$	1,845			$	1,863			$	3,695			$	2,535
Gain (Loss) Recognized in Other Comprehensive Income (Loss) before reclassifications, net of tax	Gain (Loss) Recognized in Other Comprehensive Income (Loss) before reclassifications, net of tax									Gain (Loss) Recognized in Other Comprehensive Income (Loss) before reclassifications, net of tax
Foreign exchange contracts		$	897	$	1,294	$	16,997	$	7,247
Interest rate swaps		(243)		(6,849)		(29,799)		(6,849)
Foreign exchange contracts, net investment hedge (b)										Foreign exchange contracts, net investment hedge (b)			$	1,895			$	(361)			$	8,873			$	17,286
Interest rate swaps, cash flow hedge										Interest rate swaps, cash flow hedge			(19,620)				(243)				$	16,465			$	(29,799)
Total	Total	$	654	$	(5,555)	$	(12,802)	$	398	Total			$	(17,725)			$	(604)			$	25,338			$	(12,513)

(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)Includes derivative gains (losses) excluded from the assessment of effectiveness for the net investment hedges and recognized in other comprehensive income (loss) (net of tax) of $4,318 and $519 for the second quarter of 2021 and 2020, respectively, and $(773) and $18,513 for the six months ended July 3, 2021 and June 27, 2020, respectively.

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.

1816

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Note JG – Restructuring, Integration, and Other Charges

Restructuring initiatives and integration costs are due to the ~~company’s~~company's continued efforts to lower ~~cost and~~costs, drive operational ~~efficiency. Integration costs are primarily related to the integration of~~efficiency, integrate any acquired businesses, ~~within the company’s pre-existing business~~ and the consolidation of certain ~~operations.~~operations, as necessary. The following table presents the components of the restructuring, integration, and other charges:


		Quarter Ended						Six Months Ended							Quarter Ended				Six Months Ended
		June 27, 2020		June 29, 2019		June 27, 2020		June 29, 2019			July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020
Restructuring and integration charges - current period actions	Restructuring and integration charges - current period actions	$	1,284	$	5,071	$	4,989	$	8,078	Restructuring and integration charges - current period actions	$	5,161	$	1,284	$	10,011	$	4,989
Restructuring and integration charges (credits) - actions taken in prior periods	Restructuring and integration charges (credits) - actions taken in prior periods	(2,054)		1,424		(533)		1,363		Restructuring and integration charges (credits) - actions taken in prior periods	94		(2,054)		1,494		(533)
Other charges		1,420		13,417		5,332		22,131
Other charges (credits)										Other charges (credits)	(777)		1,420		(1,318)		5,332
		$	650	$	19,912	$	9,788	$	31,572		$	4,478	$	650	$	10,187	$	9,788

Restructuring and Integration Accrual Summary

The restructuring and integration accrual was ~~$6,937~~$12,433 and ~~$9,667~~$9,735 at ~~June 27, 2020~~July 3, 2021 and December 31, ~~2019,~~2020, respectively. During the second quarter and first six months of ~~2020,~~2021, the company made ~~$2,250~~$4,638 and ~~$6,413~~$8,747 of payments related to restructuring and integration ~~accruals, respectively.~~accruals. Substantially all amounts accrued at ~~June 27, 2020,~~July 3, 2021, and all restructuring and integration charges for the first six months of ~~2020,~~2021, relate to the termination of personnel and are expected to be spent in cash within two years.

~~Other Charges~~

Included in restructuring, integration, and other charges for the second quarter and the first six months of 2020 are other expenses of $1,420 and $5,332, respectively. The following items were included in other charges and credits recorded to restructuring, integration, and other charges for the second quarter and six months ended June 27, 2020:

•personnel charges for the second quarter and first six months of 2020 of $591 and $3,030 related to the operating expense reduction program previously disclosed on July 15, 2019. The accrual related to the operating expense reduction program was $17,314 at June 27, 2020, and all accrued amounts are expected to be paid within five years.

Included in restructuring, integration, and other charges for the second quarter and first six months of 2019 are other expenses of $13,417 and $22,131, respectively. The following items were included in other charges and credits recorded to restructuring, integration, and other charges for the second quarter and six months ended June 29, 2019:

•~~relocation and other charges associated with centralization efforts to maximize operating efficiencies for the second quarter and first six months of $3,174 and $8,733, respectively.~~

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands except per share data)~~

~~(Unaudited)~~

Note KH – Net Income ~~(Loss)~~ per Share

The following table presents the computation of net income ~~(loss)~~ per share on a basic and diluted basis (shares in thousands):


		Quarter Ended						Six Months Ended							Quarter Ended				Six Months Ended
		June 27, 2020		June 29, 2019		June 27, 2020		June 29, 2019			July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020
Net income (loss) attributable to shareholders		$	132,804	$	(548,966)	$	182,307	$	(408,231)
Net income attributable to shareholders										Net income attributable to shareholders	$	240,641	$	132,804	$	446,962	$	182,307
Weighted-average shares outstanding - basic	Weighted-average shares outstanding - basic	78,677		84,652		79,527		85,022		Weighted-average shares outstanding - basic	73,693		78,677		74,294		79,527
Net effect of various dilutive stock-based compensation awards	Net effect of various dilutive stock-based compensation awards	549		—		586		—		Net effect of various dilutive stock-based compensation awards	918		549		903		586
Weighted-average shares outstanding - diluted	Weighted-average shares outstanding - diluted	$	79,226	$	84,652	$	80,113	$	85,022	Weighted-average shares outstanding - diluted	74,611		79,226		75,197		80,113
Net income (loss) per share:
Net income per share:										Net income per share:
Basic	Basic	$	1.69	$	(6.48)	$	2.29	$	(4.80)	Basic	$	3.27	$	1.69	$	6.02	$	2.29
Diluted (a)	Diluted (a)	$	1.68	$	(6.48)	$	2.28	$	(4.80)	Diluted (a)	$	3.23	$	1.68	$	5.94	$	2.28

(a)Stock-based compensation awards for the issuance of 2,903 and 1,741 shares for the second quarter and first six months of 2021 and 1,625 and 1,471 shares for the second quarter and first six months of 2020, respectively, were excluded from the computation of net income per share on a diluted basis as their effect was anti-dilutive. As the company reported a net loss attributable to shareholders for the second quarter and first six months of 2019, basic and diluted net loss per share attributable to shareholders are the same and stock-based compensation awards for the issuance of 1,961 and 1,810 shares, respectively, were excluded from the computation of net loss per share on a diluted basis as their effect was anti-dilutive.

~~Note L – Shareholders’ Equity~~

~~Accumulated Other Comprehensive Loss~~

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

Quarter Ended Six Months Ended
June 27,
2020 June 29,
2019 June 27,
2020 June 29,
2019
Foreign Currency Translation Adjustment and Other:
Other comprehensive gain (loss) before reclassifications (a) $ 36,940 $ 15,560 $ (40,267) $ 20,836
Amounts reclassified into income (555) (54) (449) (240)
Unrealized Gain (Loss) on Foreign Exchange Contracts Designated as Net Investment Hedges, Net:
Other comprehensive income (loss) before reclassifications (361) 224 17,286 6,816
Amounts reclassified into income (1,670) (1,651) (3,340) (2,710)
Unrealized Loss on Interest Rate Swaps Designated as Cash Flow Hedges, Net:
Other comprehensive loss before reclassifications (243) (6,849) (29,799) (6,849)
Amounts reclassified into income 258 243 1,417 483
Employee Benefit Plan Items, Net:
Amounts reclassified into income (2,374) 85 (126) 404
Net change in Accumulated other comprehensive income (loss) $ 31,995 $ 7,558 $ (55,278) $ 18,740

2017

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Note I – Shareholders’ Equity

Accumulated Other Comprehensive Income (Loss)

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


	Quarter Ended				Six Months Ended
	July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020
Foreign Currency Translation Adjustment and Other:
Other comprehensive gain (loss) before reclassifications (a)	$	13,594	$	36,940	$	(45,954)	$	(40,267)
Amounts reclassified into income	(345)		(555)		(865)		(449)
Unrealized Gain on Foreign Exchange Contracts Designated as Net Investment Hedges, Net:
Other comprehensive income (loss) before reclassifications	1,895		(361)		8,873		17,286
Amounts reclassified into income	(1,672)		(1,670)		(3,344)		(3,340)
Unrealized Gain (Loss) on Interest Rate Swaps Designated as Cash Flow Hedges, Net:
Other comprehensive income (loss) before reclassifications	(19,620)		(243)		16,465		(29,799)
Amounts reclassified into income	260		258		527		1,417
Employee Benefit Plan Items, Net:

Amounts reclassified into income	1,148		(2,374)		982		(126)


Net change in Accumulated other comprehensive income (loss)	$	(4,740)	$	31,995	$	(23,316)	$	(55,278)

(a) Includes intra-entity foreign currency transactions that are of a long-term investment nature of $1,360 and $(1,237) for the second quarter and first six months of 2021 and $(5,183) and $4,134 for the second quarter and first six months of 2020, ~~and $(9,079) and $780 for the second quarter and first six months of 2019,~~ respectively.

Share-Repurchase Program

The following table shows the company’s Board of Directors (the “Board”) approved share-repurchase programs as of ~~June 27, 2020:~~July 3, 2021:


Month of Board Approval	Month of Board Approval	Dollar Value Approved for Repurchase		Dollar Value of Shares Repurchased		Approximate Dollar Value of Shares that May Yet be Purchased Under the Program		Month of Board Approval	Dollar Value Approved for Repurchase		Dollar Value of Shares Repurchased		Approximate Dollar Value of Shares that May Yet be Purchased Under the Program
December 2016		$	400,000	$	400,000	$	—

December 2018	December 2018	600,000		486,572		113,428		December 2018	$	600,000	$	600,000	$	0
July 2020								July 2020	600,000		536,533		63,467
Total	Total	$	1,000,000	$	886,572	$	113,428	Total	$	1,200,000	$	1,136,533	$	63,467

~~The amounts repurchased during 2020 were pursuant to the company’s $600,000 share-repurchase program that was approved by the Board on December 11, 2018. During~~On July ~~2020,~~21, 2021, the company's Board approved an additional $600,000 share-repurchase program. ~~The 2018 and 2020 share-repurchase programs have no fixed expiration dates and are discretionary in nature. The Board has the ability to modify, suspend, or discontinue the programs at any time.~~

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Note MJ – Contingencies

Environmental Matters

In connection with the purchase of Wyle Electronics ("Wyle") in August 2000, the company acquired certain of the then outstanding obligations of Wyle, including Wyle's indemnification obligations to the purchasers of its Wyle Laboratories division for environmental clean-up costs associated with any then existing contamination or violation of environmental regulations. Under the terms of the company's purchase of Wyle from the sellers, the sellers agreed to indemnify the company for certain costs associated with the Wyle environmental obligations, among other things. In 2012, the company entered into a settlement agreement with the sellers pursuant to which the sellers paid $110,000 and the company released the sellers from their indemnification obligation. As part of the settlement agreement the company accepted responsibility for any potential subsequent costs incurred related to the Wyle matters. The company is aware of two Wyle Laboratories facilities (in Huntsville, Alabama and Norco, California) at which contaminated groundwater was identified and ~~will~~ require environmental remediation. In addition, the company was named as a defendant in several lawsuits related to the Norco facility and a third site in El Segundo, California which have ~~now~~ been settled to the satisfaction of the parties.

The company expects these environmental liabilities to be resolved over an extended period of 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. 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, 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 these sites until such time as a substantial portion of the investigation at the sites is completed and remedial action plans are developed and, in some instances, implemented. To the extent that future environmental costs exceed amounts currently accrued by the company, net income would be adversely impacted and such impact could be material.

Accruals for environmental liabilities are included in “Accrued expenses” and “Other liabilities” in the company’s consolidated balance sheets. The company has determined that there is no amount within the environmental liability range that is a better estimate than any other amount, and therefore has recorded the accruals at the minimum amount of the ranges.

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands except per share data)~~

~~(Unaudited)~~

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 ~~$37,000~~$42,000 from certain insurance carriers relating to environmental clean-up matters at the Norco ~~site.~~and Huntsville sites. The company ~~is considering the best way to pursue its potential claims~~filed suit against two insurers regarding liabilities arising out of operations at ~~Huntsville.~~Huntsville and reached a confidential settlement with one of the insurers during the third quarter of 2020. The resolution of ~~these matters~~this matter against the remaining insurer will likely take several years. 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.

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, Alabama 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. Pilot testing is currently ~~underway.~~underway, and the extent and timing of future testing and further remediation procedures will be dependent on the outcome of the results of testing currently being performed. Approximately ~~$6,900~~$7,500 was spent to date and the company currently anticipates no additional investigative and related expenditures. The cost of subsequent remediation at the site is estimated to be between ~~$3,500~~$3,000 and ~~$10,000.~~$11,000.

Despite the amount of work undertaken and planned to date, the company is unable to estimate any potential costs in addition to those discussed above because the complete scope of the work is not yet known, and, accordingly, the associated costs have yet to be determined.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Environmental Matters - Norco

In October 2003, the company entered into a consent decree with Wyle Laboratories and the California Department of Toxic Substance Control ~~(the “DTSC”~~(“DTSC”) in connection with the Norco site. Subsequent to the decree, a Remedial Investigation Work Plan was approved by DTSC in April 2005, the required investigations were performed, and a final Remedial Investigation Report was submitted early in 2008. In 2008, a hydraulic containment system ~~(“HCS”~~(the “HCS”) was installed as an interim remedial measure to capture and treat groundwater before it moves into the adjacent off-site area. In September 2013, the DTSC approved the final Remedial Action Plan ~~(“RAP”~~(the “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 and were being monitored. A Five Year Review (“FYR”) of the HCS submitted to DTSC in December 2016 found that while significant progress was made in on-site and off-site groundwater remediation, contaminants were not sufficiently reduced in a key off-site area identified in the RAP. This exception triggered the need for additional off-site remediation that began in 2018 and was completed in mid-2019. Routine progress monitoring of groundwater and soil gas continue on-site and off-site.

Approximately ~~$75,100~~$77,000 was spent to date on remediation, project management, regulatory oversight, and investigative and feasibility study activities. The company currently estimates that these activities will give rise to an additional ~~$6,800~~$4,700 to ~~$17,700.~~$17,000. Project management and regulatory oversight include costs incurred by project consultants for project management and costs billed by DTSC to provide regulatory oversight.

Despite the amount of work undertaken and planned to date, the company is unable to estimate any potential costs in addition to those discussed above because the complete scope of the work under the RAP is not yet known, and, accordingly, the associated costs have yet to be determined.

Other

In the second quarter and first six months of 2021, the company received $8,166 and $12,477, respectively, 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 within “Selling, general, and administrative expenses” in the company’s consolidated statements of operations. The company has related on-going disputes with other manufacturers and may receive additional funds in the future. The company is unable to estimate additional amounts that may be received in the future and as such has not recorded a receivable at this time.

During the second quarter of 2020, the company recorded reserves and other adjustments of approximately $32,700 primarily related to foreign tax and other loss contingencies. These reserves are principally associated with transactional taxes on activity from several prior years, not significant to any one year.

In 2019, the company determined that from 2015 to 2019 a limited number of non-executive employees, without first obtaining required authorization from the company or the United States government, had facilitated product shipments with an aggregate total invoiced value of approximately $4,770, to resellers for reexports to persons covered by the Iran Threat Reduction and Syria Human Rights Act of 2012 or other United States sanctions and export control laws. The company has voluntarily reported these activities to the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”) and the United States Department of Commerce’s Bureau of Industry and Security (“BIS”), and conducted an internal investigation and terminated or disciplined the employees involved. BIS has closed its investigation and issued the company a warning letter without referring the matter for further proceedings. No penalties have been imposed by BIS. The company has cooperated

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands except per share data)~~

~~(Unaudited)~~

fully and intends to continue to cooperate fully with OFAC with respect to its ongoing review, which may result in the imposition of penalties, which ~~we are~~the company is currently not able to estimate.

During the first six months of 2020, the company recorded reserves and other adjustments of approximately $32,700 primarily related to foreign tax and other loss contingencies. These reserves are principally associated with transactional taxes on activity from several prior years, not significant to any one year.

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.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Note NK – 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 distributes electronic components to original equipment manufacturers and contract manufacturers through its global components business segment and provides enterprise computing solutions to value-added resellers and managed service providers through its global ECS business segment. As a result of the company’s philosophy of maximizing operating efficiencies through the centralization of certain functions, selected fixed assets and related depreciation, as well as borrowings, are not directly attributable to the individual operating segments and are included in the corporate business segment. Sales to external customers are based on the company location that maintains the customer relationship and transacts the external sale.

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars in thousands except per share data)~~

~~(Unaudited)~~

Sales, by segment by geographic area, are as follows:

Quarter Ended Six Months Ended
June 27,
2020 June 29,
2019 June 27,
2020 June 29,
2019
Components:
Americas $ 1,488,901 $ 1,876,799 $ 3,041,699 $ 3,783,828
EMEA (a) 1,118,417 1,415,888 2,428,407 2,919,254
Asia/Pacific 2,113,937 1,978,248 3,801,750 3,759,780
Global components $ 4,721,255 $ 5,270,935 $ 9,271,856 $ 10,462,862
ECS:
Americas $ 1,223,256 $ 1,372,456 $ 2,351,944 $ 2,573,363
EMEA (a) 661,983 701,157 1,364,111 1,464,314
Global ECS $ 1,885,239 $ 2,073,613 $ 3,716,055 $ 4,037,677
Consolidated (b) $ 6,606,494 $ 7,344,548 $ 12,987,911 $ 14,500,539


	Quarter Ended				Six Months Ended
	July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020
Components:
Americas	$	1,970,756	$	1,488,901	$	3,671,929	$	3,041,699
EMEA	1,490,662		1,118,417		3,059,264		2,428,407
Asia/Pacific	3,149,343		2,113,937		6,322,821		3,801,750
Global components	$	6,610,761	$	4,721,255	$	13,054,014	$	9,271,856

ECS:
Americas	$	1,167,355	$	1,223,256	$	2,318,693	$	2,351,944
EMEA	784,515		661,983		1,575,843		1,364,111
Global ECS	$	1,951,870	$	1,885,239	$	3,894,536	$	3,716,055
Consolidated (a)	$	8,562,631	$	6,606,494	$	16,948,550	$	12,987,911

(a)~~Defined as Europe, the Middle East, and Africa.~~

~~(b)~~Includes sales related to the United States of $2,830,071 and $5,328,069 for the second quarter and first six months of 2021 and $2,463,885 and $4,875,972 for the second quarter and first six months of 2020, respectively.

Operating income, by segment, are as follows:


	Quarter Ended				Six Months Ended
	July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020
Operating income (loss):
Global components (a)	$	327,036	$	181,836	$	616,419	$	346,603
Global ECS (b)	81,099		72,921		158,458		115,354
Corporate (c)	(67,613)		(58,144)		(134,852)		(127,040)
Consolidated	$	340,522	$	196,613	$	640,025	$	334,917

(a)Global components operating income includes $8,166 and ~~$2,902,393 and $5,684,428~~$12,477 related to proceeds from legal settlements for the second quarter and first six months ~~2019, respectively.~~

~~Operating income (loss), by segment, are as follows:~~

Quarter Ended Six Months Ended
June 27,
2020 June 29,
2019 June 27,
2020 June 29,
2019
Operating income (loss):
Global components (c) $ 181,836 $ (566,116) $ 346,603 $ (331,584)
Global ECS (d) 72,921 98,388 115,354 185,106
Corporate (e) (58,144) (81,462) (127,040) (157,152)
Consolidated $ 196,613 $ (549,190) $ 334,917 $ (303,630)

~~(c)~~of 2021, respectively (Refer to Note J). Global components operating income ~~includes impairments of $697,993~~ for the second quarter ~~and first six months 2019. Also included~~of 2021 includes $4,482 in ~~the second quarter of 2019 is a non-recurring charge of $20,114~~impairment charges related to a subset of inventory held by its digital business and a non-recurring charge of $15,851 related to the receivables and inventory of its financing solutions business. During the second quarter of 2019 the company made the decision to narrow its digital inventory offerings and will no longer provide notes to its components customers.various long lived assets.

~~(d)~~(b)Global ECS operating income ~~for the first six months of 2020~~ includes reserves and other adjustments of approximately $29,858 primarily related to foreign tax and other loss ~~contingencies.~~contingencies for the first six months of 2020. These reserves are principally associated with transactional taxes on activity from several prior years, not significant to any one year. Global ECS operating income for the second quarter of 2020 includes $4,918 in impairment charges related to various long-lived assets.

~~(e)~~Includes restructuring, integration, and other charges of $650 and $9,788 for the second quarter and first six months of 2020 and $19,912 and $31,572 for the second quarter and first six months 2019, respectively. Also included in the first six months of 2019 was a net loss on disposition of businesses of $866.

2421

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

~~Total assets, by segment, is as follows:~~

June 27,
2020 December 31,
2019
Global components $ 10,466,895 $ 10,253,006
Global ECS 4,403,385 5,479,919
Corporate 734,181 667,871
Consolidated $ 15,604,461 $ 16,400,796

(c)

~~Net property, plant,~~Corporate operating income includes restructuring, integration, and ~~equipment, by geographic area, is as follows:~~

June 27,
2020 December 31,
2019
Americas (f) $ 566,705 $ 594,357
EMEA 177,158 157,550
Asia/Pacific 54,327 51,203
Consolidated $ 798,190 $ 803,110

~~(f)Includes net property, plant,~~other charges of $4,478 and ~~equipment related to~~$10,187 for the ~~United States~~second quarter and first six months of ~~$564,435~~2021 and ~~$591,818 at June 27,~~$650 and $9,788 for the second quarter and first six months of 2020, ~~and December 31, 2019,~~ respectively.

~~Note O – Income Taxes~~

~~The principal causes of the difference between the U.S. federal statutory tax rate of 21% and effective income tax rates are as follows:~~

Quarter Ended Six Months Ended
June 27,
2020 June 29,
2019 June 27,
2020 June 29,
2019
Provision (benefit) at statutory tax rate $ 36,580 $ (126,025) $ 52,886 $ (84,798)
State taxes, net of federal benefit 2,083 (11,533) 4,091 (7,504)
International effective tax rate differential 2,147 3,238 915 8,217
U.S. Tax on foreign earnings 30 4,953 3,166 9,880
Changes in tax accruals 1,387 902 7,595 920
Tax credits (756) (1,971) (1,511) (4,001)
Non-deductible portion of impairment of goodwill — 76,153 — 76,153
Other (617) 1,914 1,604 2,671
Provision (benefit) for income taxes $ 40,854 $ (52,369) $ 68,746 $ 1,538

2522

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: potential adverse effects of the ongoing global COVID-19 pandemic, including actions taken to contain or mitigate the impact of COVID-19, 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, 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, and the company's ability to generate cash flow. For a further discussion of these and other factors that could cause Arrow Electronics, Inc.'s (the “company”) 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.

Overview

~~Arrow Electronics, Inc. (the “company”)~~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 help industrial and commercial customers introduce innovative products, reduce their time to market, and enhance their overall competitiveness. The company has two business segments, the global components business segment and the global ~~enterprise computing solutions (“ECS”)~~ECS business segment. The company distributes electronic components to original equipment manufacturers ~~(“OEMs”)~~ and contract manufacturers ~~(“CMs”)~~ through its global components business segment and provides enterprise computing solutions to value-added resellers, ~~(“VARs”)~~ and managed service providers ~~(“MSPs”)~~ through its global ECS business segment. For the second quarter of ~~2020,~~2021, approximately ~~71%~~77% of the company’s sales were from the global components business segment, and approximately ~~29%~~23% of the company’s sales were from the global ECS business segment.

The company’s financial objectives are to grow sales faster than the market, increase the markets served, grow profits faster than sales, 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 second quarter and first six months of ~~2020 decreased~~2021 increased by ~~10.0%~~29.6% and ~~10.4%~~30.5%, respectively, compared with the year-earlier periods. The ~~decrease~~increase for the second quarter of ~~2020~~2021 was driven by a ~~10.4% decrease~~40.0% increase in the global components business segment sales and a ~~9.1% decrease~~3.5% increase in the global ECS business segment sales. The ~~decrease~~increase for the first six months of ~~2020~~2021 was driven by ~~an 11.4% decrease~~a 40.8% increase in the global components business segment sales and a ~~8.0% decrease~~4.8% increase in the global ECS business segment sales. Adjusted for the change in foreign currencies, ~~and the closure of the company's personal computer and mobility asset disposition business (referred to as “impact of wind down”),~~non-GAAP consolidated sales ~~as adjusted decreased 8.3%~~increased 25.5% and ~~8.5%~~26.4% for the second quarter and first six months of ~~2020,~~2021, respectively, compared with the year-earlier periods.

~~Net~~The company reported net income attributable to shareholders ~~increased to $132.8~~of $240.6 million and ~~$182.3~~$447.0 million in the second quarter and first six months of ~~2020,~~2021, respectively, compared with ~~a net loss attributable to shareholders of $549.0~~$132.8 million and ~~$408.2~~$182.3 million in the year-earlier periods. The following items impacted the comparability of the company’s results:

Second quarters of ~~2020~~2021 and ~~2019:~~2020:

•restructuring, integration, and other charges of $4.5 million in 2021 and $0.7 million in ~~2020 and $19.9 million in 2019 (excluding the impact of wind down);~~2020;

•identifiable intangible asset amortization of $9.3 million in 2021 and $9.7 million in ~~2020 and $8.7 million in 2019 (excluding the impact of wind down);~~2020;

•impairments of long-lived assets of $4.5 million in 2021 and $4.9 million in ~~2020 and goodwill and other impairments of $623.1 million in 2019;~~2020;

•gains from wind down of business of $11.8 million in ~~2020 and losses from wind down of business of $104.2 million, inclusive of $74.9 million of impairments of long-lived assets in 2019;~~

•~~Digital inventory write-downs of $20.1 million in 2019;~~2020;

•Arrow Financing Solutions (“AFS”) notes receivable reserves of $0.2 million in ~~2020 and AFS notes receivable reserves and inventory write-downs of $15.9 million in 2019;~~2020; and

•net gain on investments of $6.7 million in 2021 and net gain on investments of $10.9 million in ~~2020 and $1.4 million in 2019.~~2020.

First six months of ~~2020~~2021 and ~~2019:~~2020:

•restructuring, integration, and other charges of $10.2 million in 2021 and $9.8 million in ~~2020 and $31.0 million in 2019 (excluding the impact of wind down);~~2020;

•identifiable intangible asset amortization of $18.6 million in 2021 and $19.7 million in ~~2020 and $17.8 million in 2019 (excluding the impact of wind down);~~2020;

•impairments of long-lived assets of $4.5 million in 2021 and $4.9 million in ~~2020 and goodwill and other impairments $623.1 million in 2019;~~2020;

•gains from wind down of business of $11.8 million in ~~2020 and losses from wind down of business of $114.4 million, inclusive of $74.9 million of impairments of long-lived assets in 2019;~~

•~~Digital inventory write-downs of $20.1 million in 2019;~~2020;

•AFS notes receivable recoveries of $0.7 million in ~~2020 and AFS notes receivable reserves and inventory write-downs of $15.9 million in 2019;~~2020;

•tax expense related to legislation changes of $3.6 million in ~~2020~~2020; and ~~$3.5 million in 2019;~~

•net gain on investments of $9.5 million in 2021 and net loss on investments of $5.9 million in ~~2020 and net gain on investments of $6.7 million in 2019; and~~

•~~loss on disposition of businesses, net, of $0.9 million in 2019.~~2020.

Excluding the aforementioned items, non-GAAP net income attributable to shareholders for the second quarter and first six months of ~~2020 decreased~~2021 increased to ~~$126.1~~$249.3 million and ~~$205.1~~$464.9 million, respectively, compared with ~~$136.6~~$126.1 million and ~~$300.3~~$205.0 million in the year-earlier periods. Net income in the ~~first six months~~second quarter of 2020 also included charges of approximately $32.7 million, net of tax, primarily related to foreign tax and other loss contingencies within the ~~Global~~global ECS business.

Impact of the COVID-19 Pandemic

~~On March 10, 2020, the World Health Organization declared the outbreak of the~~The global COVID-19 ~~coronavirus~~pandemic continues to ~~be a pandemic. COVID-19 has~~create significant macroeconomic uncertainty, volatility and disruption, including supply constraints, extended lead times, and unpredictability across many markets. Supply chain constraints are being caused ~~substantial disruption to travel, business activities, and global supply chains, significant volatility~~by shortages in ~~global financial~~electronics components markets and supply chain logistical issues resulting in extended lead times and unpredictability, which has ~~resulted in a dramatic increase in unemployment, particularly in~~impacted the ~~U.S.~~

Tobusiness. Despite these challenges, to date the company has ~~experienced some limitations in employee resources resulting from travel restrictions and “stay at home” orders. Despite these restrictions, the company continues to~~ efficiently ~~manage~~managed the global supply chain requirements of ~~our~~ customers and ~~suppliers. Throughout 2020,~~suppliers, and as a result, during the ~~company has experienced strong~~second quarter of 2021 the company's global components business benefited from rising demand and higher prices for ~~solutions that enable business continuity and work from home capabilities.~~ certain products leading to improved profit margins globally.

Management is actively monitoring the impact of the global situation on its financial condition, liquidity, operations, suppliers, industry and workforce.

The extent to which COVID-19 will continue to impact the company’s results will depend primarily on future developments, including the severity and duration of the crisis, and the impact of actions taken and that will be taken to contain COVID-19 or treat its impact, among others. These future developments are highly uncertain and cannot be predicted with confidence. The global economic impact from COVID-19 may adversely affect the company's results of operations in the future and may affect the credit condition of some ~~of our~~ customers, which could increase delays in customer payments and credit losses.

Accordingly, current results and financial condition discussed herein may not be indicative of future operating results and trends. See the risk factors regarding the impacts of the COVID-19 pandemic included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Impact on Q3 2021

As a result of the supply chain constraints and timing of quarter end for the second quarter of 2021, we expect global components sales in the third quarter of 2021 to be slightly below second quarter 2021 sales.

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, including:

•~~Sales,~~Non-GAAP sales, non-GAAP gross profit, and non-GAAP operating expenses ~~as adjusted for~~exclude the impact of changes in foreign currencies (referred to as ~~"changes~~“changes in foreign ~~currencies"~~currencies”) by re-translating prior period results at current period foreign exchange rates, the impact of dispositions by adjusting the company’s operating results for businesses disposed, as if the dispositions had occurred at the beginning of the earliest period presented (referred to as "dispositions"),rates; the impact of the company’s personal computer and mobility asset disposition business (referred to as ~~"wind down"~~“wind down”)~~, the impact of inventory write-downs related to the digital business (referred to as “digital inventory write-downs and recoveries”),~~; and the impact of ~~the~~ notes receivable ~~reserves and inventory write-downs~~recoveries related to the AFS business (referred to as “AFS notes receivable ~~reserves and~~ recoveries” ~~and “AFS inventory write-downs and recoveries,” respectively)~~).

•~~Operating~~Non-GAAP operating income ~~as adjusted to exclude~~excludes identifiable intangible asset amortization, restructuring, integration, and other charges, ~~loss on disposition of businesses, net,~~ AFS notes receivable ~~reserves and credits and inventory write-downs and~~ recoveries, ~~digital inventory write-downs and recoveries, the impact~~impairments of ~~non-cash charges related to goodwill, trade names, and~~ long-lived assets, and the impact of wind down.

•~~Net~~Non-GAAP effective tax rate and non-GAAP net income attributable to shareholders ~~as adjusted to~~ exclude identifiable intangible asset amortization, restructuring, integration, and other charges, ~~loss on disposition of businesses, net,~~ AFS notes receivable ~~reserves and credits and inventory write-downs and recoveries, digital inventory write-downs and~~ recoveries, net gains and losses on investments, ~~the impact of non-cash charges related to goodwill, trade names, and long-lived assets,~~ certain tax adjustments, impairments of long-lived assets, and the impact of wind down.

Management believes that providing this additional information is useful to the reader to better assess and understand the company’s operating performance, especially when comparing results with previous periods, primarily because management typically monitors the business adjusted for these items in addition to GAAP results. 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.

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 net sales by reportable segment (in millions):

Quarter Ended Six Months Ended
June 27,
2020 June 29,
2019 %
Change June 27,
2020 June 29,
2019 %
Change
Consolidated sales, as reported $ 6,606 $ 7,345 (10.0)% $ 12,988 $ 14,501 (10.4) %
Impact of changes in foreign currencies — (65) — (139)
Impact of dispositions and wind down — (78) — (172)
Consolidated sales, as adjusted* $ 6,606 $ 7,201 (8.3)% $ 12,988 $ 14,190 (8.5) %
Global components sales, as reported $ 4,721 $ 5,271 (10.4)% $ 9,272 $ 10,463 (11.4) %
Impact of changes in foreign currencies — (40) — (89)
Impact of wind down — (78) — (161)
Global components sales, as adjusted $ 4,721 $ 5,153 (8.4)% $ 9,272 $ 10,213 (9.2) %
Global ECS sales, as reported $ 1,885 $ 2,074 (9.1)% $ 3,716 $ 4,038 (8.0) %
Impact of changes in foreign currencies — (25) — (50)
Impact of dispositions — — — (11)
Global ECS sales, as adjusted $ 1,885 $ 2,049 (8.0)% $ 3,716 $ 3,977 (6.6) %

* The sum of the components for sales, as adjusted, may not agree to totals, as presented, due to rounding.


	Quarter Ended					Six Months Ended
	July 3, 2021		June 27, 2020		% Change	July 3, 2021		June 27, 2020		% Change
Consolidated sales, as reported	$	8,563	$	6,606	29.6%	$	16,949	$	12,988	30.5	%
Impact of changes in foreign currencies	—		219			—		421


Non-GAAP consolidated sales	$	8,563	$	6,825	25.5%	$	16,949	$	13,409	26.4	%

Global components sales, as reported	$	6,611	$	4,721	40.0%	$	13,054	$	9,272	40.8	%
Impact of changes in foreign currencies	—		133			—		263


Non-GAAP global components sales	$	6,611	$	4,854	36.2%	$	13,054	$	9,535	36.9	%

Global ECS sales, as reported	$	1,952	$	1,885	3.5%	$	3,895	$	3,716	4.8	%
Impact of changes in foreign currencies	—		85			—		158


Non-GAAP global ECS sales	$	1,952	$	1,971	(1.0)%	$	3,895	$	3,874	0.5	%

Consolidated sales for the second quarter and first six months of ~~2020 decreased~~2021 increased by ~~$738.1 million,~~$2.0 billion, or ~~10.0%~~29.6%, and ~~$1.5~~$4.0 billion, or ~~10.4%~~30.5%, respectively, compared with the year-earlier periods. The ~~decrease~~increase for the second quarter of ~~2020~~2021 was driven by ~~a decrease~~an increase in global components segment sales of ~~$549.7 million,~~$1.9 billion, or ~~10.4%~~40.0% and ~~a decrease~~an increase in global ECS business segment sales of ~~$188.4~~$66.6 million, or ~~9.1%~~3.5%. The ~~decrease~~increase for the first six months of ~~2020~~2021 was driven by ~~a decrease~~an increase in global components segment sales of ~~$1.2~~$3.8 billion, or ~~11.4%~~40.8%, and ~~a decrease~~an increase in global ECS business segment sales of ~~$321.6~~$178.5 million, or ~~8.0%~~4.8%. ~~Adjusted~~Non-GAAP consolidated sales, adjusted for the impact of changes in foreign currencies, increased 25.5% and ~~dispositions and wind down, consolidated sales decreased 8.3% and 8.5%~~26.4% for the second quarter and first six months of ~~2020,~~2021, respectively, compared with the year-earlier periods.

~~Compared with the year-earlier period,~~The global components business ~~segment~~capitalized on strong demand in all regions from higher sales volumes and favorable pricing in all regions. This was especially true in the Asia/Pacific region where sales for the second quarter and first six months of ~~2020 decreased $549.7 million, or 10.4%~~2021 increased 49% and 66%, and $1.2 billion, or 11.4%, respectively, as reported, and decreased $431.7 million, or 8.4%, and $941.3 million, or 9.2%, respectively, as adjusted for the impact of changes in foreign currencies and the wind down. Decreases were primarily due to lower sales volumes in therespectively. The Americas and EMEA regions ~~driven by softer demand in~~each grew more than 20% during the ~~automotive~~second quarter of 2021 on both a GAAP and ~~aerospace industries, partially offset by stronger demand in the APAC components region.~~

~~Compared with the year-earlier period, global ECS business segment sales for~~non-GAAP basis. Increases during the second quarter and first six months of ~~2020 decreased $188.4 million, or 9.1%,~~2021 related to many product lines, however the company noted particularly strong demand in the industrial, automotive, communications, consumer electronics, data networking, and ~~decreased by $321.6 million, or 8.0%, respectively, as reported,~~the aerospace and ~~decreased $163.3 million, or 8.0%,~~defense verticals. Changes in foreign exchange rates contributed favorably to results in the EMEA and ~~decreased by $260.6 million, or 6.6%, respectively, as adjusted~~Americas regions during 2021.

Increases in sales for the ~~impact of changes in foreign currencies and dispositions. Decreases in sales~~global ECS business were primarily due to ~~lower~~higher sales volumes driven by ~~softer~~stronger demand for ~~servers~~information technology hardware and ~~networking solutions, offset partially~~storage. Results in Q2 2021 were negatively impacted by ~~strong demand in~~minor supply chain constraints with certain products that the ~~network security and storage verticals.~~company anticipates resolving during the third quarter.

2825

Gross Profit

Following is an analysis of gross profit (in millions):

Quarter Ended Six Months Ended
June 27,
2020 June 29,
2019 % Change June 27,
2020 June 29,
2019 % Change
Consolidated gross profit, as reported $ 750 $ 815 (7.9)% $ 1,479 $ 1,677 (11.8)%
Impact of changes in foreign currencies — (9) — (20)
Impact of dispositions and wind down (11) 4 (11) (5)
Digital and AFS inventory write-downs — 22 — 22
Consolidated gross profit, as adjusted* $ 740 $ 832 (11.1)% $ 1,468 $ 1,674 (12.3)%
Consolidated gross profit as a percentage of sales, as reported 11.4 % 11.1 % 30 bps 11.4 % 11.6 % (20) bps
Consolidated gross profit as a percentage of sales, as adjusted 11.2 % 11.6 % (40) bps 11.3 % 11.8 % (50) bps


	Quarter Ended							Six Months Ended
	July 3, 2021			June 27, 2020			% Change	July 3, 2021			June 27, 2020			% Change
Consolidated gross profit, as reported	$	1,000		$	750		33.3%	$	1,930		$	1,479		30.5%
Impact of changes in foreign currencies	—			29				—			57

Impact of wind down	—			(11)				—			(11)

Non-GAAP consolidated gross profit*	$	1,000		$	769		30.1%	$	1,930		$	1,525		26.5%
Consolidated gross profit as a percentage of sales, as reported	11.7		%	11.4		%	30 bps	11.4		%	11.4		%	flat
Non-GAAP consolidated gross profit as a percentage of non-GAAP sales	11.7		%	11.3		%	40 bps	11.4		%	11.4		%	flat

* The sum of the components for non-GAAP gross profit ~~as adjusted~~ may not agree to totals, as presented, due to rounding.

The company recorded gross profit of ~~$750.5 million~~$1.0 billion and ~~$1.5~~$1.9 billion in the second quarter and first six months of ~~2020~~2021, respectively, compared with ~~$814.9~~$750.5 million and ~~$1.7~~$1.5 billion in the year-earlier periods. ~~Adjusted for the impact of changes in foreign currencies, dispositions and wind down, and the digital and AFS inventory write-down, gross profit decreased 11.1% and 12.3%, in~~During the second quarter and first six months of ~~2020,~~2021, gross profit increased 33.3% and 30.5%, respectively on a GAAP basis, and 30.1% and 26.5%, respectively, on a non-GAAP basis, compared with the year-earlier periods. Gross profit margins in the second quarter increased by approximately 30 bps and 40 bps on a GAAP and non-GAAP basis respectively, and were flat for the first six months of ~~2020, as adjusted, decreased by approximately 40 bps and 50 bps, respectively,~~2021, compared with the year-earlier ~~periods primarily due to~~periods. The increases in gross profit margins during the second quarter are significant given the shift in regional mix ~~with APAC~~to more Asia/Pacific components sales, which generally have a lower gross profit margin than components sales in the EMEA and Americas regions, contributing ~~45% and 41%~~48% of global components sales for the second quarter and first six months of ~~2020, respectively,~~2021, compared with ~~38%~~45% and ~~36%~~41% of global components sales for the year-earlier periods. This result is largely due to significant improvements in pricing and margins during the second quarter in both the Asia/Pacific and Americas regions, due in part to the current market conditions and the global supply chain issues discussed above. Growing demand in services offerings globally continued to have a positive impact on gross margins during the second quarter and first six months of 2021 compared with the year-earlier periods.

Selling, General, and Administrative Expenses and Depreciation and Amortization

Following is an analysis of operating expenses (in millions):


		Quarter Ended										Six Months Ended											Quarter Ended							Six Months Ended
		June 27, 2020			June 29, 2019			% Change	June 27, 2020			June 29, 2019			% Change		July 3, 2021			June 27, 2020			% Change	July 3, 2021			June 27, 2020			% Change
Selling, general, and administrative expenses, as reported	Selling, general, and administrative expenses, as reported	$	501		$	599		(16.3)%	$	1,035		$	1,155		(10.4)%	Selling, general, and administrative expenses, as reported	$	602		$	501		20.1%	$	1,177		$	1,035		13.7%
Depreciation and amortization, as reported	Depreciation and amortization, as reported	47			47			flat	94			95			(0.6)%	Depreciation and amortization, as reported	49			47			3.7%	99			94			5.3%
Operating expenses, as reported	Operating expenses, as reported	$	548		$	646		(15.2)%	$	1,129		$	1,250		(9.6)%	Operating expenses, as reported	$	651		$	548		18.7%	$	1,276		$	1,129		13.0%
Impact of changes in foreign currencies	Impact of changes in foreign currencies	—			(8)				—			(16)				Impact of changes in foreign currencies	—			20				—			35

Impact of dispositions and wind down		1			(25)				1			(44)
AFS notes receivable (reserves) recoveries		—			(14)				1			(14)
Operating expenses, as adjusted*		$	549		$	599		(8.3)%	$	1,131		$	1,177		(3.9)%
Impact of wind down																Impact of wind down	—			1				—			1
AFS notes receivable recoveries																AFS notes receivable recoveries	—			—				—			1
Non-GAAP operating expenses*																Non-GAAP operating expenses*	$	651		$	570		14.2%	$	1,276		$	1,166		9.4%
Operating expenses as a percentage of sales, as reported	Operating expenses as a percentage of sales, as reported	8.3		%	8.8		%	(50) bps	8.7		%	8.6		%	10 bps	Operating expenses as a percentage of sales, as reported	7.6		%	8.3		%	(70) bps	7.5		%	8.7		%	(120) bps
Operating expenses as a percentage of sales, as adjusted		8.3		%	8.3		%	flat	8.7		%	8.3		%	40 bps
Non-GAAP operating expenses as a percentage of non-GAAP sales																Non-GAAP operating expenses as a percentage of non-GAAP sales	7.6		%	8.3		%	(70) bps	7.5		%	8.7		%	(120) bps

*The sum of the components for selling, general, and administrative expenses and depreciation and amortization, as reported, and ~~as adjusted~~non-GAAP operating expenses may not agree to totals, as presented, due to rounding.

Selling, general, and administrative expenses ~~decreased~~increased by ~~$97.7~~$100.6 million, or ~~16.3%~~20.1%, and ~~$120.0~~$141.3 million, or ~~10.4%~~13.7%, ~~respectively,~~ in the second quarter and first six months of ~~2020,~~2021, respectively, on a sales ~~decrease~~increase of ~~10.0%~~29.6% and ~~10.4%~~30.5% compared with the year-earlier periods. ~~Selling, general, and administrative expenses as a percentage of sales were 7.6% and 8.0% for~~In the second quarter and first six months of ~~2020 compared~~2021, the company received $8.2 million and $12.5 million, respectively, in settlement funds in connection with ~~8.2%~~certain class action claims (Refer to Note J), which were recorded within selling, general, and ~~8.0% in the year-earlier periods.~~

administrative expenses. Depreciation and amortization expense as a percentage of operating expenses was ~~8.5%~~7.5% and ~~8.3%~~7.8% for the second quarter and first six months of ~~2020,~~2021, respectively, compared with ~~7.3%~~8.5% and ~~7.6%~~8.3% in the year-earlier periods. Included in depreciation and

amortization expense is identifiable intangible asset amortizationof ~~$9.7~~$9.3 million and ~~$19.7~~$18.6 million for the second quarter and first six months of ~~2020,~~2021, respectively, compared to ~~$11.4~~$9.7 million and ~~$23.3~~$19.7 million in the year-earlier periods.

~~Adjusted for~~The decreases in operating expense as a percentage of sales relate primarily to operating leverage the ~~impact of changes in foreign currencies, dispositions~~company generates when sales are growing and ~~wind down,~~the settlement funds discussed above. These were partially offset by investments to grow the company's sales force, higher variable costs, and ~~AFS notes receivable reserves and credits,~~some increased costs related to the global supply chain environment.

Non-GAAP operating expenses ~~decreased 8.3%~~increased 14.2% and ~~3.9%~~9.4% for the second quarter and first six months of ~~2020~~2021, respectively, compared with the year-earlier periods. ~~Operating~~Non-GAAP operating expense, ~~as adjusted,~~ as a percentage of non-GAAP sales, ~~as adjusted, was flat~~decreased 70 bps and ~~increased 40~~120 bps for the second quarter and first six months of ~~2020,~~2021, respectively, compared with the year-earlier ~~periods~~

~~Impairments~~

During the second quarter of 2019, the company committed to a plan to close its personal computer and mobility asset disposition business within the global components business segment. In light of the plan, the company performed an impairment analysis of the long-lived assets of the personal computer and mobility asset disposition business in accordance with ASC 360 and recorded a pre-tax impairment charge of $74.9 million to write-down certain assets to estimated fair value. The company also recorded $4.9 million and $6.9 million in impairment charges related to various other long-lived assets in the second quarters of 2020 and 2019, respectively, unrelated to the personal computer and mobility asset disposition business.

During the second quarter of 2019, as a result of the company’s downward revision of forecasted future earnings previously disclosed on July 15, 2019 and the decision to wind down the company’s personal computer and mobility asset disposition business, the company determined that it was more likely than not that an impairment may exist within the Americas components and Asia-Pacific components reporting units. The company evaluated its other four reporting units and concluded an interim impairment analysis was not required based on the results of those reporting units and historical levels of headroom in each of those reporting units. The interim goodwill impairment analysis related to the Americas components reporting unit resulted in partial goodwill impairment charge of $509.0 million ($457.8 million net of tax) with $601.3 million of goodwill remaining in the reporting unit and full impairment of $61.2 million ($61.2 million net of tax) within the Asia-Pacific components reporting unit.

The company estimated the fair value of these reporting units using the income approach. For the purposes of the income approach, fair value was determined based on the present value of estimated future cash flows, discounted at an appropriate risk adjusted rate. The fair value conclusion as of June 29, 2019 for the Americas components reporting unit is highly sensitive to changes in the assumptions used in the income approach which include forecasted revenues, gross profit margins, operating income margins, working capital cash flow, forecasted capital expenditures, perpetual growth rates, and long-term discount rates, among others, all of which require significant judgments by management.

During the second quarter of 2019, the company initiated actions to further integrate two global components businesses. These businesses held indefinite-lived trade names with a carrying value of $101.0 million. As a result of the company’s decision to integrate these brands, we determined the useful lives of the trade names were no longer indefinite. The company began amortizing these trade names over their estimated remaining useful life. The trade names were tested for impairment during the second quarter as a result of the change in estimated useful lives. The company estimated the fair value of the trade names to be $55.0 million using the relief from royalty method and recorded a non-cash impairment charge of $46.0 million ($34.7 million net of tax). The drivers of the impairment were primarily due to the shortened useful lives of the asset and a decline of the forecasted revenues attributable to the trade name as integration to the Arrow brand occurs over the estimated remaining useful life.periods.

Restructuring, Integration, and Other Charges

Restructuring initiatives ~~relate~~and integration costs are due to the ~~company’s~~company's continued efforts to lower ~~cost and~~costs, drive operational ~~efficiency.Integration costs are primarily related to the integration of~~efficiency, integrate any acquired businesses, ~~within the company’s pre-existing business~~ and the consolidation of certain ~~operations.~~

~~2020 Charges~~

operations, as necessary. The company recorded restructuring, integration, and other charges of $4.5 million and $10.2 million, and $0.7 million and $9.8 million for the second quarter and first six months of 2021 and 2020, which includes $1.3 million and $5.0 million related to initiatives taken by the company during 2020 to improve operating efficiencies and personnel charges of $0.6 million and $3.0 million for the second quarter and first six months of 2020 related to the operating expense reduction program previously disclosed in July 2019.

~~2019 Charges~~

The company recorded restructuring, integration, and other charges of $19.9 million and $31.6 million for the second quarter and first six months of 2019, respectively, which includes $5.1 million and $8.1 million related to initiatives taken by the company during 2019, to improve operating efficiencies, and $3.2 million and $8.7 million, respectively, in charges related to relocation and other centralization efforts to maximize operating efficiencies. The restructuring and integration charges of $5.1 million and $8.1 million for the second quarter and first six months of 2019, respectively, relates primarily to the termination of personnel.respectively.

As of ~~June 27, 2020,~~July 3, 2021, the company does not anticipate there will be any material adjustments relating to the aforementioned restructuring and integration plans. Refer to Note J,G, “Restructuring, Integration, and Other Charges,” of the Notes to the Consolidated Financial Statements for further discussion of the company’s restructuring and integration activities.

Operating Income

Following is an analysis of operating income (in millions):

Quarter Ended Six Months Ended
June 27,
2020 June 29,
2019 %
Change June 27,
2020 June 29,
2019 %
Change
Consolidated operating income, as reported $ 197 $ (549) 135.8% $ 335 $ (304) 210.3%
Identifiable intangible asset amortization** 10 9 20 18
Restructuring, integration, and other charges** 1 20 10 31
Loss on disposition of businesses, net — — — 1
AFS notes receivable reserves (recoveries) and inventory write-downs — 16 (1) 16
Digital inventory write-downs — 20 — 20
Goodwill and other impairments 5 623 5 623
Impact of wind down** (12) 104 (12) 114
Consolidated operating income, as adjusted* $ 200 $ 243 (17.5)% $ 357 $ 520 (31.3)%
Consolidated operating income as a percentage of sales, as reported 3.0 % (7.5) % 1050 bps 2.6 % (2.1) % 470 bps
Consolidated operating income, as adjusted, as a percentage of sales, as reported, excluding wind down 3.0 % 3.3 % (30) bps 2.7 % 3.6 % (90) bps


	Quarter Ended							Six Months Ended
	July 3, 2021			June 27, 2020			% Change	July 3, 2021			June 27, 2020			% Change
Consolidated operating income, as reported	$	341		$	197		73.2%	$	640		$	335		91.1	%
Identifiable intangible asset amortization	9			10				19			20
Restructuring, integration, and other charges	4			1				10			10

AFS notes receivable recoveries	—			—				—			(1)

Impairments	4			5				4			5
Impact of wind down	—			(12)				—			(12)
Non-GAAP consolidated operating income*	$	359		$	200		79.1%	$	673		$	357		88.7%
Consolidated operating income as a percentage of sales, as reported	4.0		%	3.0		%	100 bps	3.8		%	2.6		%	120 bps
Non-GAAP consolidated operating income, as a percentage of sales, excluding wind down	4.2		%	3.0		%	120 bps	4.0		%	2.7		%	130 bps

* The sum of the components of non-GAAP consolidated operating income ~~as adjusted,~~ may not agree to totals, as presented, due to rounding.

The company recorded operating income of $340.5 million, or 4.0% of sales, and operating income of $640.0 million, or 3.8% of sales, in the second quarter and first six months of 2021, respectively, compared with operating income of $196.6 million, or 3.0% of sales, and an operating income of $334.9 million, or 2.6% of sales, in the year-earlier periods. Non-GAAP operating income was $358.8 million, or 4.2% of sales, and $673.3 million, or 4.0% of sales, in the second quarter and first six months of ~~2020, respectively,~~2021 compared with non-GAAP operating ~~loss~~income of ~~$549.2 million, or (7.5)% of sales, and an operating loss of $303.6 million, or (2.1)% of sales, in the year-earlier periods. Operating income, as adjusted, was~~ $200.3 million, or 3.0% of sales, and $356.8 million, or 2.7% of sales, in the ~~second quarter and first six months of 2020, respectively, compared with~~year-earlier periods.

Non-GAAP operating income, as adjusted, of $242.7 million, or 3.3% of sales, and $519.5 million, or 3.6% of sales, in the year-earlier periods. Operating income, as adjusted, decreased 17.5% and 31.3% for the second quarter and first six months of 2020, respectively, compared with the year-earlier periods, on a sales decrease of 8.3% and 8.5% compared with the year-earlier periods. Operating income, as adjusted as a percentage of sales, ~~decreased 30~~increased 120 bps and 90130 bps for the second quarter and first six months of ~~2020,~~2021, respectively, primarily due to ~~the decreases~~increases in sales ~~across both~~volumes and prices from the ~~Global Components and Global ECS businesses, and~~global components business, the greater operating expense leverage from higher sales volumes in all regions, partially offset by the impact to gross profit resulting from a shift in regional mix. The increase in operating margins is also impacted by reserves and other adjustments related to foreign tax and other loss contingencies recorded within the ~~Global~~global ECS ~~business.~~business during the first quarter of 2020 (Refer to Note J). These reserves are principally associated with transactional taxes on activity from several prior years, not significant to any one year. ~~These~~During the second quarter and first six months of 2021, respectively, changes in foreign currencies had positive impacts on operating ~~margin declines were partially offset by a reduction in operating costs~~income of approximately $8.4 million and ~~corporate overhead due~~$21.0 million when compared to the ~~operating expense reduction program announced in July 2019.~~year-earlier periods.

Gain (Loss) on Investments, Net

~~The company recorded gains of $10.9 million and losses of $5.9 million on investments during~~During the second quarter and first six months of 2021 and 2020, respectively, ~~compared to gains~~the company recorded a gain of ~~$1.4~~$6.7 million and ~~$6.7~~$9.5 million ~~in the year earlier periods. These gains~~ and

~~losses~~ a gain of $10.9 million and loss of $5.9 million, respectively, which are ~~due~~primarily related to changes in fair value of assets related to the Arrow SERP pension plan, which consist primarily of life insurance policies and mutual fund assets.

Interest and Other Financing Expense, Net

The company recorded net interest and other financing expense of ~~$31.9~~$30.7 million and ~~$75.1~~$64.3 million for the second quarter and first six months of ~~2020,~~2021, respectively, compared with ~~$51.6~~$31.9 million and ~~$103.5~~$75.1 million in the year-earlier periods. The decrease for the second quarter and first six months of ~~2020~~2021 primarily relates to lower borrowings and interest rates on short term credit facilities, partially offset ~~partially~~ by ~~decreased~~a decrease in interest income. The decrease in interest income is primarily attributable to lower average cash balances and lower interest rates within the ~~company’s~~company's cash pooling arrangements.

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.

For the second quarter and first six months of ~~2020,~~2021, the company recorded a provision for income taxes of $74.1 million and $135.1 million, respectively, an effective tax rate of 23.5% and 23.2%, compared to a provision of $40.9 million and $68.7 million, an effective tax rate of 23.5% and 27.3%, during the second quarter and first six months of 2020, respectively. The company’s ~~provision for income taxes and~~non-GAAP effective tax rate for the second quarter and first six months of ~~2020 were impacted by the previously discussed restructuring, integration,~~2021 was 23.5% and other charges, identifiable intangible asset amortization, the impact of tax legislation changes, gain (loss) on investments, AFS reserves and credits, impairments of long-lived assets, and the impact of wind down. Excluding the impact of the aforementioned items, the company’s23.2%, respectively, compared to a non-GAAP effective tax rate of 24.1% and 26.3% for the second quarter and first six months of 2020, was 24.1% and 26.3%, respectively. Included in the effective tax rate for the first six months of 2020 are approximately $7.4 million in discrete tax items related to the foreign tax and other loss contingencies.

For the second quarter and first six months of 2019, the company recorded a benefit for income taxes of $52.4 million, an effective tax rate of 8.7%, and a provision for income taxes of $1.5 million, an effective tax rate of 0.4%, respectively. The company's provision for income taxes and effective tax rate for the second quarter and first six months of 2019 were impacted by the previously discussed restructuring, integration, and other charges, identifiable intangible asset amortization, loss on disposition of businesses, the impact of U.S. tax reform, gain on investments, AFS write-downs, digital write-downs, impairments of goodwill and other long-lived assets, and the impact of the wind down. Excluding the impact of the aforementioned items, the company’s effective tax rate for the second quarter and first six months of 2019 was 27.5% and 26.5%, respectively.

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 ~~increase~~change in the effective tax rate from ~~8.7%~~23.5% and 27.3% for the second quarter and first six months of ~~2019~~2020, respectively, to 23.5% and 23.2% for the second quarter and first six months of ~~2020~~2021, respectively, is primarily driven by discrete items, such as the out-of-period tax contingencies, and changes in the mix of tax jurisdictions where taxable income is ~~generated as well as~~generated. The non-GAAP effective tax rate for the first six months of 2020 includes approximately $7.4 million in discrete tax items ~~such as~~related to the ~~non-deductible portion of goodwill impairments~~foreign tax and ~~changes in U.S. tax rules.~~other loss contingencies.

3228

Net Income ~~(Loss)~~ Attributable to Shareholders

Following is an analysis of net income ~~(loss)~~ attributable to shareholders (in millions):

Quarter Ended Six Months Ended
June 27,
2020 June 29,
2019 June 27,
2020 June 29,
2019
Net income (loss) attributable to shareholders, as reported $ 133 $ (549) $ 182 $ (408)
Identifiable intangible asset amortization** 10 8 19 17
Restructuring, integration, and other charges** 1 20 10 31
Loss on disposition of businesses, net — — — 1
(Gain) loss on investments, net (11) (1) 6 (7)
AFS notes receivable reserves (recoveries) and inventory write-downs — 16 (1) 16
Digital inventory write-downs — 20 — 20
Goodwill and other impairments 5 623 5 623
Impact of wind down** (12) 104 (12) 115
Tax effect of adjustments above 1 (105) (8) (111)
Impact of tax legislation changes — — 4 4
Net income attributable to shareholders, as adjusted* $ 126 $ 137 $ 205 $ 300


	Quarter Ended				Six Months Ended
	July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020
Net income attributable to shareholders, as reported	$	241	$	133	$	447	$	182
Identifiable intangible asset amortization*	9		10		18		19
Restructuring, integration, and other charges	4		1		10		10

(Gain) loss on investments, net	(7)		(11)		(10)		6
AFS notes receivable recoveries	—		—		—		(1)

Impairments	4		5		4		5
Impact of wind down	—		(12)		—		(12)


Tax effect of adjustments above	(3)		1		(6)		(8)
Impact of tax legislation changes	—		—		—		4
Non-GAAP net income attributable to shareholders**	$	249	$	126	$	465	$	205

* ~~The sum of the components for net income attributable to shareholders, as adjusted, may not agree to totals, as presented, due to rounding.~~

** Amounts presented for restructuring, integration, and other charges, and identifiable intangible amortization exclude amounts related to the personal computer and mobility asset disposition business, which are reported within the impact of wind down. 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 company recorded net income attributable to shareholders of ~~$132.8~~$240.6 million and ~~$182.3~~$447.0 million in the second quarter and first six months of ~~2020,~~2021, respectively, compared with ~~a net loss attributable to shareholders of $549.0~~$132.8 million and ~~$408.2~~$182.3 million in the year-earlier periods. ~~Net~~Non-GAAP net income attributable to shareholders ~~as adjusted,~~ was ~~$126.1~~$249.3 million and ~~$205.1~~$464.9 million for the second quarter and first six months of ~~2020,~~2021, respectively, compared with ~~$136.6~~$126.1 million and ~~$300.3~~$205.0 million in the year-earlier periods. During the second quarter and first six months of 2021, changes in foreign currencies had positive impacts on net income of approximately $6.0 million and $15.5 million when compared to the year-earlier periods.

Liquidity and Capital Resources

At ~~June 27, 2020~~July 3, 2021 and December 31, ~~2019,~~2020, the company had cash and cash equivalents of ~~$205.8~~$244.1 million and ~~$300.1~~$373.6 million, respectively, of which ~~$183.2~~$234.6 million and ~~$277.7~~$140.1 million, respectively, were held outside the United States. Liquidity is affected by many factors, some of which are based on normal ongoing operations of the company’s business and some of which arise from fluctuations related to global economics and markets. Cash balances are generated and held in many locations throughout the world.

To achieve greater cash management agility and to further advance business objectives, during the fourth quarter of 2019, the company reversed its assertion to indefinitely reinvest a certain portion of its foreign earnings, of which approximately ~~$2.4~~$2.3 billion are available for distribution in future periods as of ~~June 27, 2020.~~July 3, 2021. The company continues to indefinitely reinvest the residual ~~$1.1~~$2.0 billion of undistributed earnings of its foreign subsidiaries. If the indefinitely reinvested earnings were to be distributed to the United States, the company would be required to pay withholding and other taxes. Additionally, local government regulations may restrict the company’s ability to move cash balances to meet cash needs under certain circumstances. However, the company currently does not expect such regulations and restrictions to impact its ability to make acquisitions or to conduct operations throughout the global organization.

During the first six months of 2021, the net amount of cash provided by the company’s operating activities was $276.8 million, the net amount of cash used for investing activities was $18.9 million, and the net amount of cash used for financing activities was $381.6 million. The effect of exchange rate changes on cash was a decrease of $5.8 million.

During the first six months of 2020, the net amount of cash provided by the company’s operating activities was $885.1 million, the net amount of cash used for investing activities was $65.0 million, and the net amount of cash used for financing activities was $904.8 million. The effect of exchange rate changes on cash was a decrease of $9.6 million.

During the first six months of 2019, the net amount of cash provided by the company’s operating activities was $76.4 million, the net amount of cash used for investing activities was $69.2 million, and the net amount of cash used for financing activities was $245.8 million. The effect of exchange rate changes on cash was a decrease of $0.7 million.

Cash Flows from Operating Activities

The company maintains a significant investment in accounts receivable and inventories. As a percentage of total assets, accounts receivable and inventories were approximately ~~72.9%~~74.1% at ~~June 27, 2020~~July 3, 2021 and ~~72.9%~~73.3% at December 31, ~~2019.~~2020.

The net amount of cash provided by the company’s operating activities during the first six months of 2021 and 2020 was $276.8 million and $885.1 million, ~~and was~~respectively. The change relates primarily ~~due~~ to ~~earnings~~income from operations ~~adjusted for non-cash items and sales~~offset by the timing of ~~accounts receivables under the EMEA asset securitization program (see Note G), resulting in a $324.2 million operating net cash inflow.~~payments.

The ~~net amount of~~change in cash provided by ~~the company’s~~ operating activities during 2021, compared to the ~~first six months of 2019 was $76.4 million and was~~year earlier period, relates primarily ~~due~~ to ~~a decrease in inventory purchased,~~ the timing of payments, increasing growth in customer demand in certain regions, and ana corresponding increase in ~~earnings from operations adjusted for non-cash items.~~

~~In response to~~working capital, including inventory, which is consistent with the ~~COVID-19 pandemic, many countries have enacted economic aid programs, including the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)~~company's historical counter-cyclical cash flow in the United States. These programs include, among other things, deferrals of payroll taxes, indirect taxes, and corporate income tax. The deferred tax payment dates vary by jurisdiction and would generally be paid during the last quarter of 2020 or the first two quarters of 2021. Due to the expediency with which ~~these stimulus programs have been enacted and the number of tax authorities involved, there is a high degree of uncertainty around their implementation. However,~~ the company ~~intends to apply any COVID-19 related tax law changes and tax incentives made available by respective countries during 2020.~~generates less cash flow in periods of increased demand.

Working capital as a percentage of sales, which the company defines as accounts receivable, net, plus inventory, net, less accounts payable, divided by annualized sales, was 14.2% in the second quarter of 2021 compared with 16.7% in the second quarter of ~~2020 compared with 18.1% in the second quarter of 2019.~~2020.

Cash Flows from Investing Activities

The net amount of cash used for investing activities during the first six months of 2021 was $18.9 million. The primary source of cash from investing activities was $22.2 million of proceeds from the sale of a distribution warehouse in the EMEA region. The primary use of cash for investing activities included $41.1 million for capital expenditures. Capital expenditures for the first six months of 2021 primarily include expenditures related to investments in internally developed software and website functionality and the build out of the company's distribution centers.

The net amount of cash used for investing activities during the first six months of 2020 was $65.0 million. The primary use of cash ~~for~~from investing activities included $59.5 million for capital expenditures. Capital expenditures for the first six months of 2020 ~~primarily~~ include expenditures related to the build out of the company's distribution centers and investments in internally developed software.

Cash Flows from Financing Activities

The net amount of cash used for ~~investing~~financing activities during the first six months of ~~2019~~2021 was ~~$69.2~~$381.6 million. The uses of cash from ~~investing~~financing activities included ~~$81.6~~$411.3 million of repurchases of common stock, $130.9 million of repayments of the principal amount of the company's 5.125% notes due March 2021, and $14.8 million of net payments for ~~capital expenditures and the~~short-term borrowings. The primary sources of cash from ~~investing~~financing activities ~~included $9.5~~during the second quarter of 2021 were $134.2 million of net proceeds from long-term borrowings and $41.3 million of proceeds from the ~~sale~~exercise of businesses. Capital expenditures for the first six months of 2019 are related to investments in internally developed software and website functionality related to the digital business and the build out of a new distribution center within the EMEA region.

~~Cash Flows from Financing Activities~~stock options.

The net amount of cash used for financing activities during the first six months of 2020 was $904.8 million. The uses of cash from financing activities included $7.2 million of net payments ~~for~~from short-term borrowings, $411.7 million of net payments for ~~long term~~long-term bank borrowings, $48.4 million of payments upon the settlement of forward starting interest rate swaps, $209.4 million of repayments of the principal amount of the company's 6.00% notes due April 2020, and $231.7 million of repurchases of common stock. The primary source of cash from financing activities during the second quarter of 2020 was $3.7 ~~million of proceeds from the exercise of stock options.~~

The net amount of cash used for financing activities during the first six months of 2019 was $245.8 million. The uses of cash from financing activities included $173.4 million of net payments from short-term borrowings and $200.9 million of repurchases of common stock. The sources of cash from financing activities during the first six months of 2019 were $119.0 million of net proceeds from long-term bank borrowings and $9.6 million of proceeds from the exercise of stock options.

The company has a $2.0 billion revolving credit facility maturing in December 2023. This 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 Eurocurrency rate plus a spread (1.18% at ~~June 27, 2020)~~July 3, 2021), which is based on the company’s credit ratings, or an effective interest rate of 1.24% at ~~June 27, 2020.~~July 3, 2021. The facility fee, which is based on the company’s credit ratings, was .20% of the total borrowing capacity at ~~June 27, 2020.~~July 3, 2021. The company had no ~~outstanding borrowings and $10.0 million in~~ outstanding borrowings under the revolving credit facility at

~~June 27, 2020~~ July 3, 2021 and December 31, ~~2019,~~2020, respectively. During the first six months of ~~2020~~2021 and ~~2019,~~2020, the average daily balance outstanding under the revolving credit facility was ~~$24.0~~$12.5 million and ~~$43.3~~$24.0 million, 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. The company had no outstanding borrowings under this program at ~~June 27, 2020~~July 3, 2021 and December 31, ~~2019,~~2020, respectively. During the first six months of ~~2020~~2021 and ~~2019,~~2020, the average daily balance outstanding under the commercial paper program was ~~$94.4~~$171.4 million and ~~$848.6~~$94.4 million, respectively. The program had a weighted-average effective interest rate of ~~2.01%~~.28% at ~~June 27, 2020.~~July 3, 2021.

The company has a North American asset securitization program collateralized by accounts receivable of certain of its ~~subsidiaries, which matures June 2021. The~~subsidiaries. In March 2021, the company ~~may borrow up to~~amended its asset securitization program and, among other things, increased its borrowing capacity from $1.2 billion ~~under the North American asset securitization program.~~to $1.25 billion and extended its term to mature to March 2024. The program is conducted

through Arrow Electronics Funding Corporation (“AFC”), a wholly-owned, bankruptcy remote subsidiary. The 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, or a commercial paper rate, plus a spread ~~(.40%~~(.45% at ~~June 27, 2020)~~July 3, 2021), or an effective interest rate of ~~.87%~~.56% at ~~June 27, 2020.~~July 3, 2021. The facility fee is .40% of the total borrowing capacity. At ~~June 27, 2020,~~July 3, 2021, the company had no$135.0 million of outstanding borrowings under the North American asset securitization program. At December 31, ~~2019,~~2020, the company had ~~$400.0 million in~~no outstanding borrowings under the North American asset securitization program. During the first six months of ~~2020~~2021 and ~~2019,~~2020, the average daily balance outstanding under the North American asset securitization program was ~~$509.9~~$280.6 million and ~~$1.1 billion,~~$509.9 million, respectively.

The company has $200.0 million in uncommitted lines of credit. There were ~~$75.0 million and $60.0 million of~~no outstanding borrowings under the uncommitted lines of credit at ~~June 27, 2020~~July 3, 2021 and December 31, ~~2019,~~2020, respectively. These borrowings ~~were~~are provided on a short-term basis and the maturity is agreed upon between the company and the lender. The lines had a weighted-average effective interest rate of ~~1.55%~~1.50% at ~~June 27, 2020.~~July 3, 2021. During the first six months of ~~2020~~2021 and ~~2019,~~2020, the average daily balance outstanding under the uncommitted lines of credit was ~~$10.0~~$0.2 million and ~~$13.4~~$10.0 million, respectively.

In May 2019, the company entered into a series of ten-year forward-starting interest rate swaps (the “2019 swaps”), which locked in an average treasury rate of 2.33% on a total aggregate notional amount of $300.0 million. The 2019 swaps were designated as cash flow hedges managing the risk of variability in interest rates of future expected debt issuance by June 2020. In February 2020, the company determined that certain of the forecasted cash flows were no longer probable and de-designated the hedging relationship. In February 2020, the company re-designated the 2019 swaps in a new cash flow hedge managing the risk of variability in interest rates of future expected debt issuance by June 2023. ~~In May 2020, the company cash settled and terminated the May 2019 swaps for a total of $48.4 million.~~

In April 2020, the company entered into a series of ten-year forward-starting interest rate swaps (the “April 2020 swaps”), which locked in an average swap rate of 0.97% on a total aggregate notional amount of $300.0 million and expire in December 2024. The April 2020 swaps were designated as cash flow hedges managing the risk of variability in interest rates of future expected debt issuance by December 2025.

In May 2020, the company entered into a series of ten-year forward-starting interest rate swaps (the “May 2020 swaps”), which locked in an average swap rate of 0.90% on a total aggregate notional amount of $300.0 million and expire in June 2022. The May 2020 swaps were designated as cash flow hedges managing the risk of variability in interest rates of future expected debt issuance by June 2023.

During March 2021, the company repaid $130.9 million principal amount of its 5.125% notes due March 2021.

During April 2020, the company repaid $209.4 million principal amount of its 6.00% notes due April 2020.

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.

~~The global economic impact from COVID-19 may adversely affect the company’s ability to access capital markets.~~ 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 foreseeable future. The company's current committed and undrawn liquidity stands at over ~~$3.2~~$3.4 billion in addition to ~~$205.8~~$244.1 million of cash on hand at ~~June 27, 2020.~~July 3, 2021. 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.

Contractual Obligations

The company has contractual obligations for short-term and long-term debt, interest on short-term and long-term debt, operating leases, purchase obligations, and certain other long-term liabilities that were summarized in a table of Contractual Obligations in the company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. Since December 31, ~~2019,~~2020, there were no material changes to the contractual obligations of the company outside the ordinary course of the company’s business, except as follows:

•During the first quarter of ~~2020,~~2021, the company ~~entered into an EMEA asset securitization program under which it will continuously sell its interest in designated pools of trade accounts receivables of certain~~repaid $130.9 million principal amount of its subsidiaries in the EMEA region, at a discount, to a special purpose entity, which in turn sells certain of the receivables to unaffiliated financial institutions and conduits administered by such unaffiliated financial institutions on a monthly basis. The company may sell up to €400.0 million under the EMEA asset securitization program, which matures in January 2023, subject to extension in accordance with its terms. The company continues servicing the receivables which were sold and in exchange receives a servicing fee under the program. During the second quarter and first six months of 2020, the company sold approximately €410.8 million and €899.5 million, or $448.9 million and $977.4 million, of accounts receivables to unaffiliated financial institutions under the EMEA securitization program. Total collateralized accounts receivables of approximately €173.8 million, or $192.6 million, were held by Arrow EMEA Funding Corp B.V. at June 27, 2020 (see Note G).5.125% notes due March 2021.

•

During the first quarter of 2021, the company amended its asset securitization program and, among other things, increased its borrowing capacity from $1.2 billion to $1.25 billion and extended its term to mature in March 2024. The company had $135.0 million in outstanding borrowings under the North American asset securitization program at July 3, 2021 and no outstanding borrowings under the North American asset securitization program at December 31, 2020.

Share-Repurchase Programs

The following table shows the company’s Board approved share-repurchase programs as of ~~June 27, 2020~~July 3, 2021 (in thousands):


Month of Board Approval	Month of Board Approval	Dollar Value Approved for Repurchase		Dollar Value of Shares Repurchased		Approximate Dollar Value of Shares that May Yet be Purchased Under the Program		Month of Board Approval	Dollar Value Approved for Repurchase		Dollar Value of Shares Repurchased		Approximate Dollar Value of Shares that May Yet be Purchased Under the Program
December 2016		$	400,000	$	400,000	$	—

December 2018	December 2018	600,000		486,572		113,428		December 2018	$	600,000	$	600,000	$	—
July 2020								July 2020	600,000		536,533		63,467
Total	Total	$	1,000,000	$	886,572	$	113,428	Total	$	1,200,000	$	1,136,533	$	63,467

Off-Balance Sheet Arrangements

During the first quarter of 2020, the company entered into an EMEA asset securitization program under which it will continuously sell its interest in designated pools of trade accounts receivables of certain of its subsidiaries in the EMEA region, at a discount, to a special purpose entity, which in turn sells certain of the receivables to unaffiliated financial institutions and conduits administered by such unaffiliated financial institutions on a monthly basis. ~~The company may sell up~~Refer to ~~€400.0 million under~~Note D "Accounts Receivables" of the Notes to the Consolidated Financial Statements for further discussion of the EMEA asset securitization program, which matures in January 2023, subject to extension in accordance with its terms. The program is conducted through Arrow EMEA Funding Corp B.V., an entity structured to be bankruptcy remote. The company is deemed the primary beneficiary of Arrow EMEA Funding Corp B.V. as the company has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive the benefits that could potentially be significant to the entity from the transfer of the trade accounts receivables into the special purpose entity. Accordingly, Arrow EMEA Funding Corp B.V. is included in the company’s consolidated financial statements.

Receivables sold 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 on Arrow EMEA Funding Corp B.V. are pledged as collateral to unaffiliated financial institutions. These unsold receivables are included in “Accounts receivable, net” in 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.

During the second quarter and first six months of 2020, the company sold approximately €410.8 million and €899.5 million, or $448.9 million and $977.4 million, of accounts receivables to unaffiliated financial institutions under the EMEA securitization program. There were €292.4 million, or $324.2 million, of receivables sold to unaffiliated financial institutions that were uncollected as of June 27, 2020. Total collateralized accounts receivables of approximately €173.8 million, or $192.6 million, were held by Arrow EMEA Funding Corp B.V. at June 27, 2020. Any accounts receivables 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 institution under the program are limited to the assets it owns and there is no recourse to the company for receivables that are uncollectible as a result of the insolvency or 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. The company was in material compliance with all covenants as of June 27, 2020 and is currently not aware of any events that would cause non-compliance with any covenants in the future.

Critical Accounting Policies and 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.

On January 1, 2020, the company adopted Topic 326 using a modified retrospective approach with a cumulative effect adjustment to the opening balance of retained earnings, which increased the allowance for credit losses by $47.0 million ($35.9 million net of tax). Increases in the allowance for credit losses relate to the required change from an incurred loss model to an expected loss model, and the related change in timing of loss recognition where an allowance for credit losses is now applied to all receivables, at a rate dependent on the credit characteristics of the collective pool each customer is in. Refer to Notes B, C, and G.

During the first quarter of 2020, as a result of significant declines in macroeconomic conditions and equity valuations, and the implementation of regulatory restrictions brought forth by the COVID-19 pandemic, and due to historically low head-room, the company determined that it was more likely than not that an impairment may exist within the Americas components and eInfochips reporting units. The company performed a quantitative goodwill impairment test for these reporting units and determined goodwill was not impaired. As of March 28, 2020, the fair value of the Americas components and eInfochips reporting units, within the global components business segment, exceeded their carrying values by less than 10%. Refer to Note E.

There were no ~~additional~~significant changes during the second quarter of ~~2020~~2021 to the items disclosed as Critical Accounting Policies and Estimates in 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, ~~2019.~~

~~Impact of Recently Issued Accounting Standards~~

See Note B and Note C 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.

~~Information Relating to Forward-Looking Statements~~

This report includes forward-looking statements that 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: potential adverse effects of the ongoing global COVID-19 coronavirus pandemic, including actions taken to contain or treat COVID-19, industry conditions, changes in product supply, pricing and customer demand, competition, other vagaries in the global components and global ECS markets, changes in relationships with key suppliers, increased profit margin pressure, changes in legal and regulatory matters, non-compliance with certain regulations, such as export, anti-trust, and anti-corruption laws, foreign tax and other loss contingencies, and the company's ability to generate 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 the company's Annual Report on Form 10-K for the year ended December 31, 2019. 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. 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.

2020.

3832

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 Item 7A – Quantitative and Qualitative Disclosures About Market Risk in the company’s Annual Report on ~~Form10-K~~Form 10-K for the year ended December 31, ~~2019.~~2020.

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 ~~June 27, 2020~~July 3, 2021 (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) ~~are effective.~~were effective as of July 3, 2021.

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.

3933

PART II. OTHER INFORMATION

Item 1A. Risk Factors

~~The following is intended to restate and supplement the Risk Factor entitled “General business conditions are vulnerable to the effects of epidemics, such as COVID-19, which could materially disrupt the company’s business~~,” which was incorporated in and a part of the company’s 10-K for the year ended December 31, 2019. Based on recent events, this Risk Factor is currently viewed as a significant risk to the company. Aside from the foregoing, thereThere were no material changes to the company’s risk factors as discussed in Item 1A - Risk Factors in the company’s Annual

Report on Form 10-K for the year ended December 31, ~~2019.~~

General business conditions are vulnerable to the effects of epidemics and pandemics, such as the COVID-19 pandemic, which could materially disrupt the company’s business and have a negative impact on the company’s financial results and financial condition.

The company is vulnerable to the general economic effects of epidemics, pandemics and other public health crises, such as the COVID-19 pandemic. Due to the recent outbreak of COVID-19, there has been a substantial curtailment of travel and business activities, which is causing significant disruptions to the U.S. and global economy. The extent to which COVID-19 impacts the company’s results will depend primarily on future developments, which are highly uncertain and cannot be predicted with confidence, including the severity and duration of the crisis and the impact of actions taken and that will be taken to contain COVID-19 or treat its impact, among others. For example, if COVID-19 continues to spread, the company may need to limit operations or implement additional restrictions as a result of widespread government restrictions. In addition, a U.S. or global recession or a banking crisis triggered by the COVID-19 pandemic could have a material adverse effect on the company’s business, financial results and financial condition, including by reducing the demand for our products and services, increasing customer defaults and reducing our access to capital.

To date, the company has experienced limitations in employee resources resulting from travel restrictions and “stay at home” orders. Despite these restrictions, the company continues to efficiently manage the global supply chain requirements of our customers and suppliers.2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table shows the share-repurchase activity for the quarter ended ~~June 27, 2020~~July 3, 2021 (in thousands except share and per share data):

Month
Total
Number of
Shares
Purchased (a)
Average
Price Paid
per Share
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Program (b)(c)
Approximate
Dollar Value of
Shares that May
Yet be
Purchased
Under the
Programs
March 29 through April 25, 2020 — $ — — $ 188,426
April 26 through May 23, 2020 548,041 64.32 544,137 153,427
May 24 through June 27, 2020 577,789 69.23 577,789 113,428
Total 1,125,830 1,121,926


Month	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares that May Yet be Purchased Under the Programs (a)
April 4 through May 1, 2021	214,937	$	116.31	214,937	$	288,467
May 2 through May 29, 2021	803,246	119.51		803,246	192,467
May 30 through July 3, 2021	1,100,682	117.19		1,100,682	63,467
Total	2,118,865			2,118,865

(a)~~Includes share repurchases~~As of July 3, 2021, the company was authorized to purchase up to $600,000 of the company's common stock under the share-repurchase program ~~and those associated with shares withheld from employees for stock-based awards, as permitted by the Omnibus Incentive Plan, in order to satisfy the required tax withholding obligations.~~

~~(b)~~The difference between the “total number of shares purchased” and the “total number of shares purchased as part of publicly announced program” for the quarter ended June 27, 2020 is 3,904 shares, which relate to shares withheld from employees for stock-based awards, as permitted by the Omnibus Incentive Plan, in order to satisfy the required tax withholding obligations. The purchase of these shares were not made pursuant to any publicly announced repurchase plan.

~~(c)The amounts repurchased were pursuant to the company’s $600,000 share-repurchase program~~ that was ~~approved by~~announced in July 2020, of which $536,533 had been utilized, the ~~Board on December 11, 2018. During~~remaining $63,467 in the table represents the amount available to repurchase shares under the program as of July ~~2020,~~3, 2021. On July 21, 2021, the company's Board approved an additional $600,000 share-repurchase program.

program. The 2018 and 2020 share-repurchase programs have no fixed expiration dates and are discretionary in nature. The Board has the ability to modify, suspend, or discontinue the programs at any time.

4134

Item 6. Exhibits


Exhibit Number						Exhibit

3131(i)~~(i)~~						Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~31(~~31(ii)~~ii)~~						Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32(i)**						Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32(ii)**						Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~10(a)*†~~						~~Amendment No.1, dated as of May 29, 2020, to the Third Amended and Restated Credit Agreement, dated as of December 14, 2018.~~

101.SCH*						Inline XBRL Taxonomy Extension Schema ~~Document.~~Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Documents.

101.DEF*						Inline XBRL Taxonomy Definition Linkbase Document.

104*						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* : Filed herewith.

** : Furnished herewith.

~~† : Certain portions of this exhibit have been redacted in accordance with Item 601(b)(10) of Regulation S-K.~~

4235

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:

~~July 30, 2020~~August 5, 2021

By:

/s/ Chris D. Stansbury

Chris D. Stansbury

Senior Vice President and Chief Financial Officer

(Principal Financial Officer)

4336


	June 27, 2020		December 31, 2019
Revolving credit facility	$	—	$	10,000
North American asset securitization program	—		400,000
5.125% notes, due 2021	—		130,691
3.50% notes, due 2022	348,499		348,088
4.50% notes, due 2023	298,421		298,148
3.25% notes, due 2024	495,536		495,045
4.00% notes, due 2025	346,680		346,368
7.50% senior debentures, due 2027	109,898		109,857
3.875% notes, due 2028	494,933		494,648
Other obligations with various interest rates and due dates	4,402		7,284
	$	2,098,369	$	2,640,129


	June 27, 2020		December 31, 2019
Americas (f)	$	566,705	$	594,357
EMEA	177,158		157,550
Asia/Pacific	54,327		51,203
Consolidated	$	798,190	$	803,110


Month	Total Number of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program (b)(c)	Approximate Dollar Value of Shares that May Yet be Purchased Under the Programs
March 29 through April 25, 2020	—	$	—	—	$	188,426
April 26 through May 23, 2020	548,041	64.32		544,137	153,427
May 24 through June 27, 2020	577,789	69.23		577,789	113,428
Total	1,125,830			1,121,926