10-Q 1 arw-20240330x10q.htm 10-Q
0000007536--12-312024Q1ARROW ELECTRONICS, INC.P10Yfalse0000007536us-gaap:TreasuryStockCommonMember2023-01-012023-12-310000007536arw:ExciseTaxShareRepurchasesMember2024-01-012024-03-300000007536us-gaap:TreasuryStockCommonMember2024-01-012024-03-300000007536us-gaap:CommonStockMember2024-01-012024-03-300000007536arw:CommonStockIssuedMember2024-01-012024-03-300000007536us-gaap:TreasuryStockCommonMember2023-01-012023-04-010000007536us-gaap:CommonStockMember2023-01-012023-04-010000007536arw:CommonStockIssuedMember2023-01-012023-04-010000007536us-gaap:TreasuryStockCommonMember2024-03-300000007536us-gaap:RetainedEarningsMember2024-03-300000007536us-gaap:NoncontrollingInterestMember2024-03-300000007536us-gaap:CommonStockMember2024-03-300000007536us-gaap:AdditionalPaidInCapitalMember2024-03-300000007536us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-300000007536us-gaap:TreasuryStockCommonMember2023-12-310000007536us-gaap:RetainedEarningsMember2023-12-310000007536us-gaap:NoncontrollingInterestMember2023-12-310000007536us-gaap:CommonStockMember2023-12-310000007536us-gaap:AdditionalPaidInCapitalMember2023-12-310000007536us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310000007536us-gaap:TreasuryStockCommonMember2023-04-010000007536us-gaap:RetainedEarningsMember2023-04-010000007536us-gaap:NoncontrollingInterestMember2023-04-010000007536us-gaap:CommonStockMember2023-04-010000007536us-gaap:AdditionalPaidInCapitalMember2023-04-010000007536us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-04-010000007536us-gaap:TreasuryStockCommonMember2022-12-310000007536us-gaap:RetainedEarningsMember2022-12-310000007536us-gaap:NoncontrollingInterestMember2022-12-310000007536us-gaap:CommonStockMember2022-12-310000007536us-gaap:AdditionalPaidInCapitalMember2022-12-310000007536us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310000007536us-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2024-01-012024-03-300000007536us-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2024-01-012024-03-300000007536us-gaap:OperatingSegmentsMemberus-gaap:EMEAMemberarw:GlobalEcsMember2024-01-012024-03-300000007536us-gaap:OperatingSegmentsMemberus-gaap:EMEAMemberarw:GlobalComponentsMember2024-01-012024-03-300000007536us-gaap:OperatingSegmentsMembersrt:AsiaPacificMemberarw:GlobalComponentsMember2024-01-012024-03-300000007536us-gaap:OperatingSegmentsMembersrt:AmericasMemberarw:GlobalEcsMember2024-01-012024-03-300000007536us-gaap:OperatingSegmentsMembersrt:AmericasMemberarw:GlobalComponentsMember2024-01-012024-03-300000007536us-gaap:OperatingSegmentsMember2024-01-012024-03-300000007536us-gaap:OperatingSegmentsMemberus-gaap:EMEAMemberarw:GlobalEcsMember2023-01-012023-04-010000007536us-gaap:OperatingSegmentsMemberus-gaap:EMEAMemberarw:GlobalComponentsMember2023-01-012023-04-010000007536us-gaap:OperatingSegmentsMembersrt:AsiaPacificMemberarw:GlobalComponentsMember2023-01-012023-04-010000007536us-gaap:OperatingSegmentsMembersrt:AmericasMemberarw:GlobalEcsMember2023-01-012023-04-010000007536us-gaap:OperatingSegmentsMembersrt:AmericasMemberarw:GlobalComponentsMember2023-01-012023-04-010000007536us-gaap:OperatingSegmentsMember2023-01-012023-04-010000007536arw:NotesDueInApril2034Member2024-03-312024-04-300000007536arw:ShareRepurchaseProgramMember2024-01-012024-03-300000007536arw:ShareRepurchaseProgramMember2023-01-012023-04-010000007536us-gaap:NotesPayableOtherPayablesMember2024-03-300000007536us-gaap:NotesPayableOtherPayablesMember2023-12-310000007536arw:OtherComprehensiveIncomeBeforeReclassificationsMemberarw:IntraEntityForeignCurrencyTransactionsMember2024-01-012024-03-300000007536arw:OtherComprehensiveIncomeBeforeReclassificationsMember2024-01-012024-03-300000007536arw:OtherComprehensiveIncomeBeforeReclassificationsMemberarw:IntraEntityForeignCurrencyTransactionsMember2023-01-012023-04-010000007536arw:OtherComprehensiveIncomeBeforeReclassificationsMember2023-01-012023-04-010000007536us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-300000007536arw:UnrealizedGainLossOnInterestRateSwapsDesignatedAsCashFlowHedgesNetMember2024-01-012024-03-300000007536us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2023-01-012023-04-010000007536arw:UnrealizedGainLossOnInterestRateSwapsDesignatedAsCashFlowHedgesNetMember2023-01-012023-04-010000007536us-gaap:OperatingSegmentsMemberarw:GlobalEcsMember2024-01-012024-03-300000007536us-gaap:OperatingSegmentsMemberarw:GlobalComponentsMember2024-01-012024-03-300000007536us-gaap:CorporateMember2024-01-012024-03-300000007536us-gaap:OperatingSegmentsMemberarw:GlobalEcsMember2023-01-012023-04-010000007536us-gaap:OperatingSegmentsMemberarw:GlobalComponentsMember2023-01-012023-04-010000007536us-gaap:CorporateMember2023-01-012023-04-010000007536us-gaap:RevolvingCreditFacilityMember2023-12-310000007536us-gaap:LineOfCreditMember2023-12-310000007536us-gaap:LineOfCreditMember2024-03-300000007536arw:OtherJointVentureMember2024-01-012024-03-300000007536arw:MarubunArrowMember2024-01-012024-03-300000007536arw:OtherJointVentureMember2023-01-012023-04-010000007536arw:MarubunArrowMember2023-01-012023-04-010000007536arw:GlobalEcsMember2024-01-012024-03-300000007536arw:GlobalComponentsMember2024-01-012024-03-300000007536arw:GlobalEcsMember2024-03-300000007536arw:GlobalComponentsMember2024-03-300000007536arw:GlobalEcsMember2023-12-310000007536arw:GlobalComponentsMember2023-12-3100000075362023-06-012023-06-300000007536arw:OtherJointVentureMember2023-12-310000007536arw:MarubunArrowMember2023-12-310000007536arw:MarubunMember2024-03-300000007536arw:MaturitySeptember2024Memberus-gaap:ForeignExchangeForwardMember2024-03-300000007536arw:MaturityJanuary2028Memberus-gaap:ForeignExchangeForwardMember2024-03-300000007536arw:MaturityApril2025Memberus-gaap:ForeignExchangeForwardMember2024-03-300000007536arw:AllMaturitiesMemberus-gaap:ForeignExchangeForwardMember2024-03-300000007536arw:MaturitySeptember2024Memberus-gaap:ForeignExchangeForwardMember2023-12-310000007536arw:MaturityJanuary2028Memberus-gaap:ForeignExchangeForwardMember2023-12-310000007536arw:MaturityApril2025Memberus-gaap:ForeignExchangeForwardMember2023-12-310000007536arw:AllMaturitiesMemberus-gaap:ForeignExchangeForwardMember2023-12-310000007536us-gaap:InterestRateSwapMemberus-gaap:FairValueHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2024-01-012024-03-300000007536us-gaap:InterestRateSwapMemberus-gaap:FairValueHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2023-01-012023-04-010000007536us-gaap:InterestRateSwapMemberus-gaap:FairValueHedgingMember2024-03-300000007536us-gaap:InterestRateSwapMember2024-03-312024-04-300000007536us-gaap:RevolvingCreditFacilityMember2024-03-300000007536arw:SeniorDebenturesDueIn2027Member2024-03-300000007536arw:NotesDueIn2032Member2024-03-300000007536arw:NotesDueIn2028Member2024-03-300000007536arw:NotesDueIn2026Member2024-03-300000007536arw:NotesDueIn2025Member2024-03-300000007536arw:SeniorDebenturesDueIn2027Member2023-12-310000007536arw:NotesDueIn2032Member2023-12-310000007536arw:NotesDueIn2028Member2023-12-310000007536arw:NotesDueIn2026Member2023-12-310000007536arw:NotesDueIn2025Member2023-12-310000007536arw:NotesDueInApril2034Member2024-04-300000007536arw:NotesDueIn2026Member2024-04-300000007536us-gaap:RevolvingCreditFacilityMember2024-01-012024-03-300000007536arw:NorthAmericanAssetSecuritizationProgramMember2024-01-012024-03-300000007536arw:NotesDueIn2024Member2024-03-300000007536arw:NotesDueIn2024Member2023-12-310000007536us-gaap:TreasuryStockCommonMember2024-03-300000007536us-gaap:CommonStockMember2024-03-300000007536arw:CommonStockIssuedMember2024-03-300000007536us-gaap:TreasuryStockCommonMember2023-12-310000007536us-gaap:CommonStockMember2023-12-310000007536arw:CommonStockIssuedMember2023-12-310000007536us-gaap:TreasuryStockCommonMember2023-04-010000007536us-gaap:CommonStockMember2023-04-010000007536arw:CommonStockIssuedMember2023-04-010000007536us-gaap:TreasuryStockCommonMember2022-12-310000007536us-gaap:CommonStockMember2022-12-310000007536arw:CommonStockIssuedMember2022-12-310000007536us-gaap:CommercialPaperMember2024-03-300000007536us-gaap:CommercialPaperMember2023-12-3100000075362023-04-0100000075362022-12-310000007536us-gaap:TreasuryStockCommonMember2024-01-012024-03-300000007536us-gaap:RetainedEarningsMember2024-01-012024-03-300000007536us-gaap:NoncontrollingInterestMember2024-01-012024-03-300000007536us-gaap:CommonStockMember2024-01-012024-03-300000007536us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-300000007536us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-300000007536us-gaap:TreasuryStockCommonMember2023-01-012023-04-010000007536us-gaap:RetainedEarningsMember2023-01-012023-04-010000007536us-gaap:NoncontrollingInterestMember2023-01-012023-04-010000007536us-gaap:CommonStockMember2023-01-012023-04-010000007536us-gaap:AdditionalPaidInCapitalMember2023-01-012023-04-010000007536us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-04-010000007536arw:NorthAmericanAssetSecuritizationProgramMember2024-03-300000007536arw:NorthAmericanAssetSecuritizationProgramMember2023-12-310000007536us-gaap:VariableInterestEntityPrimaryBeneficiaryMemberus-gaap:AssetPledgedAsCollateralMember2024-03-300000007536us-gaap:VariableInterestEntityPrimaryBeneficiaryMemberus-gaap:AssetPledgedAsCollateralMember2023-12-3100000075362024-04-250000007536us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2024-03-300000007536us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2024-03-300000007536us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2024-03-300000007536us-gaap:FairValueMeasurementsRecurringMember2024-03-300000007536us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000007536us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000007536us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000007536us-gaap:FairValueMeasurementsRecurringMember2023-12-310000007536arw:SharesApprovedSeptember2022Member2024-03-300000007536arw:SharesApprovedJanuary2023Member2024-03-3000000075362023-01-012023-12-310000007536arw:OtherJointVentureMember2024-03-300000007536arw:MarubunArrowMember2024-03-300000007536us-gaap:TradeNamesMember2024-03-300000007536us-gaap:CustomerRelationshipsMember2024-03-300000007536us-gaap:TradeNamesMember2023-12-310000007536us-gaap:CustomerRelationshipsMember2023-12-3100000075362023-12-310000007536us-gaap:InterestRateSwapMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2024-01-012024-03-300000007536us-gaap:NetInvestmentHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2024-01-012024-03-300000007536us-gaap:InterestRateSwapMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2023-01-012023-04-010000007536us-gaap:NetInvestmentHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2023-01-012023-04-0100000075362024-03-300000007536arw:NorcoSiteMemberarw:RemediationProjectManagementRegulatoryOversightAndInvestigativeAndFeasibilityStudiesMember2024-01-012024-03-300000007536arw:HuntsvilleSiteMember2024-01-012024-03-3000000075362024-01-012024-03-3000000075362023-01-012023-04-01iso4217:USDiso4217:EURarw:itemxbrli:sharesiso4217:USDxbrli:sharesxbrli:purearw:segment

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 March 30, 2024

OR

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)

9151 East Panorama Circle

    

80112

Centennial CO

(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    No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes    No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes    No 

There were 53,229,856 shares of Common Stock outstanding as of April 25, 2024.

ARROW ELECTRONICS, INC.

Table of Contents

    

    

Part I.

Financial Information

Item 1.

Financial Statements

Consolidated Statements of Operations

3

Consolidated Statements of Comprehensive Income

4

Consolidated Balance Sheets

5

Consolidated Statements of Cash Flows

6

Consolidated Statements of Equity

7

Notes to Consolidated Financial Statements

9

Item 2.

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

24

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

34

Item 4.

Controls and Procedures

34

Part II.

Other Information

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 5.

Other Information

35

Item 6.

Exhibits

36

Signature

37

2

PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except per share data)

(Unaudited)

Quarter Ended

March 30,

April 1,

    

2024

    

2023

    

Sales

$

6,924,260

$

8,736,428

Cost of sales

 

6,066,434

 

7,622,606

Gross profit

 

857,826

 

1,113,822

Operating expenses:

 

  

 

  

Selling, general, and administrative

 

583,326

 

642,431

Depreciation and amortization

 

41,727

 

46,679

Restructuring, integration, and other

 

46,856

 

2,560

 

671,909

 

691,670

Operating income

 

185,917

 

422,152

Equity in losses of affiliated companies

 

(344)

 

(80)

Gain on investments, net

 

98

 

10,311

Employee benefit plan expense, net

 

(933)

 

(853)

Interest and other financing expense, net

 

(79,604)

 

(79,658)

Income before income taxes

 

105,134

 

351,872

Provision for income taxes

 

22,036

 

76,547

Consolidated net income

 

83,098

 

275,325

Noncontrolling interests

 

(503)

 

1,575

Net income attributable to shareholders

$

83,601

$

273,750

Net income per share:

 

  

 

  

Basic

$

1.54

$

4.66

Diluted

$

1.53

$

4.60

Weighted-average shares outstanding:

 

  

 

  

Basic

 

54,251

 

58,731

Diluted

 

54,815

 

59,479

See accompanying notes.

3

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

Quarter Ended

March 30,

April 1,

   

2024

   

2023

    

Consolidated net income

$

83,098

$

275,325

Other comprehensive income (loss):

 

  

 

  

Foreign currency translation adjustment and other, net of taxes

 

(99,275)

 

11,285

Gain (loss) on foreign exchange contracts designated as net investment hedges, net of taxes

 

3,598

 

(433)

Gain (loss) on interest rate swaps designated as cash flow hedges, net of taxes

 

529

 

(3,709)

Employee benefit plan items, net of taxes

 

(91)

 

(272)

Other comprehensive (loss) income

 

(95,239)

 

6,871

Comprehensive (loss) income

 

(12,141)

 

282,196

Less: Comprehensive (loss) income attributable to noncontrolling interests

 

(1,651)

 

4,652

Comprehensive (loss) income attributable to shareholders

$

(10,490)

$

277,544

See accompanying notes.

4

ARROW ELECTRONICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands except par value)

(Unaudited)

March 30,

December 31,

    

2024

    

2023

    

ASSETS

    

  

    

  

    

Current assets:

 

  

 

  

 

Cash and cash equivalents

$

242,810

$

218,053

Accounts receivable, net

 

11,062,608

 

12,238,073

Inventories

 

4,797,053

 

5,187,225

Other current assets

 

798,591

 

684,126

Total current assets

 

16,901,062

 

18,327,477

Property, plant, and equipment, at cost:

 

  

 

  

Land

 

5,691

 

5,691

Buildings and improvements

 

196,291

 

195,579

Machinery and equipment

 

1,624,409

 

1,632,606

 

1,826,391

 

1,833,876

Less: Accumulated depreciation and amortization

 

(1,309,303)

 

(1,303,136)

Property, plant, and equipment, net

 

517,088

 

530,740

Investments in affiliated companies

 

58,868

 

62,741

Intangible assets, net

 

119,274

 

127,440

Goodwill

 

2,054,536

 

2,050,426

Other assets

 

612,048

 

627,344

Total assets

$

20,262,876

$

21,726,168

LIABILITIES AND EQUITY

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

8,940,313

$

10,070,015

Accrued expenses

 

1,474,605

 

1,463,915

Short-term borrowings, including current portion of long-term debt

 

945,698

 

1,653,954

Total current liabilities

 

11,360,616

 

13,187,884

Long-term debt

 

2,632,250

 

2,153,553

Other liabilities

 

500,672

 

507,424

Contingencies (Note L)

Equity:

 

  

 

  

Shareholders’ equity:

 

  

 

  

Common stock, par value $1:

 

  

 

  

Authorized - 160,000 shares in both 2024 and 2023

 

  

 

  

Issued - 57,955 and 57,691 shares in 2024 and 2023

 

57,955

 

57,691

Capital in excess of par value

 

565,166

 

553,340

Treasury stock (4,725 and 3,880 shares in 2024 and 2023, respectively), at cost

 

(405,663)

 

(297,745)

Retained earnings

 

5,873,818

 

5,790,217

Accumulated other comprehensive loss

 

(392,130)

 

(298,039)

Total shareholders’ equity

 

5,699,146

 

5,805,464

Noncontrolling interests

 

70,192

 

71,843

Total equity

 

5,769,338

 

5,877,307

Total liabilities and equity

$

20,262,876

$

21,726,168

See accompanying notes.

5

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Quarter Ended

March 30,

April 1,

    

2024

    

2023

    

Cash flows from operating activities:

    

  

    

  

    

Consolidated net income

$

83,098

$

275,325

Adjustments to reconcile consolidated net income to net cash provided by operations:

 

  

 

  

Depreciation and amortization

 

41,727

 

46,679

Amortization of stock-based compensation

 

13,447

 

19,497

Equity in losses of affiliated companies

 

344

 

80

Deferred income taxes

 

(2,801)

 

(7,530)

Loss (gain) on investments, net

 

13

 

(10,311)

Other

 

1,189

 

1,321

Change in assets and liabilities, net of effects of acquired businesses:

 

 

  

Accounts receivable, net

 

1,057,676

 

1,701,889

Inventories

 

362,813

 

(199,521)

Accounts payable

 

(1,077,786)

 

(1,504,701)

Accrued expenses

 

21,053

 

(132,316)

Other assets and liabilities

 

(97,563)

 

33,392

Net cash provided by operating activities

 

403,210

 

223,804

Cash flows from investing activities:

 

  

 

  

Acquisition of property, plant, and equipment

 

(29,535)

 

(20,114)

Other

 

5,139

 

10,867

Net cash used for investing activities

 

(24,396)

 

(9,247)

Cash flows from financing activities:

 

  

 

  

Change in short-term and other borrowings

 

(709,675)

 

(146,050)

Proceeds from long-term bank borrowings, net

 

477,032

 

34,360

Net proceeds from note offering

 

 

498,600

Redemption of notes

 

 

(300,000)

Proceeds from exercise of stock options

 

2,929

 

5,934

Repurchases of common stock

 

(87,948)

 

(303,801)

Net cash used for financing activities

 

(317,662)

 

(210,957)

Effect of exchange rate changes on cash

 

(36,395)

 

25,039

Net increase in cash and cash equivalents

 

24,757

 

28,639

Cash and cash equivalents at beginning of period

218,053

176,915

Cash and cash equivalents at end of period

$

242,810

$

205,554

See accompanying notes.

6

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands)

(Unaudited)

    

    

    

    

    

Accumulated 

    

    

Common 

Capital in 

Other 

Stock at Par

Excess of Par

Treasury 

Retained 

Comprehensive 

Noncontrolling 

 

Value

 

Value

Stock

Earnings

 

Loss

Interests

Total

Balance at December 31, 2023

$

57,691

$

553,340

$

(297,745)

$

5,790,217

$

(298,039)

$

71,843

$

5,877,307

Consolidated net income (loss)

 

 

 

 

83,601

 

 

(503)

 

83,098

Other comprehensive loss

 

 

 

 

 

(94,091)

 

(1,148)

 

(95,239)

Amortization of stock-based compensation

 

 

13,447

 

 

 

 

 

13,447

Shares issued for stock-based compensation awards

 

264

 

(1,621)

 

4,286

 

 

 

 

2,929

Repurchases of common stock

 

 

 

(112,204)

 

 

 

 

(112,204)

Balance at March 30, 2024

$

57,955

$

565,166

$

(405,663)

$

5,873,818

$

(392,130)

$

70,192

$

5,769,338

    

    

    

    

    

Accumulated 

    

    

Common 

Capital in 

Other 

Stock at Par 

Excess of Par 

Treasury 

Retained 

Comprehensive 

Noncontrolling 

Value

Value

Stock

Earnings

 

Loss

Interests

Total

Balance at December 31, 2022

$

125,424

$

1,208,708

$

(4,637,345)

$

9,214,832

$

(365,262)

$

64,996

$

5,611,353

Consolidated net income

 

 

 

 

273,750

 

 

1,575

 

275,325

Other comprehensive income

 

 

 

 

 

3,794

 

3,077

 

6,871

Amortization of stock-based compensation

 

 

19,497

 

 

 

 

 

19,497

Shares issued for stock-based compensation awards

 

 

(25,071)

 

31,005

 

 

 

 

5,934

Repurchases of common stock

 

 

 

(318,800)

 

 

 

 

(318,800)

Balance at April 1, 2023

$

125,424

$

1,203,134

$

(4,925,140)

$

9,488,582

$

(361,468)

$

69,648

$

5,600,180

See accompanying notes.

7

Table of Contents

Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note A – Basis of Presentation

The accompanying consolidated financial statements of Arrow Electronics, Inc. (the “company”) were prepared in accordance with 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, 2023, as filed in the company’s Annual Report on Form 10-K.

Quarter End

The company operates on a quarterly calendar that closes on the Saturday closest to the end of the calendar quarter, except for the fourth quarter, which closes on December 31, 2024.

Reclassification

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

Note B – Impact of Recently Issued Accounting Standards

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). Upon adoption of ASU 2023-09, the company will disclose specific new categories in its income tax rate reconciliation and provide additional information for reconciling items above a quantitative threshold. The company will also disclose the amount of income taxes paid disaggregated by federal, state, and foreign taxes, and also disaggregated by individual jurisdictions in which income taxes paid were above a threshold. The company expects these amendments will first be applied in the company’s annual report on form 10-K for the fiscal year ending December 31, 2025, on a prospective basis.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). Upon adoption of ASU 2023-07, the company will disclose significant segment expenses, the title and position of the chief operating decision maker (“CODM”), and an explanation of how the reported measure of segment profit or loss is used by the CODM to assess segment performance and make resource allocation decisions. These amendments will first be applied in the company’s annual report on form 10-K for the fiscal year ending December 31, 2024, and will be applied retrospectively for all prior periods presented in the financial statements.

9

Table of Contents

Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note C – Goodwill and Intangible Assets

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. The company tests goodwill and other indefinite-lived intangible assets for impairment annually as of the first day of the fourth quarter, or more frequently if indicators of potential impairment exist.

Goodwill of companies acquired, allocated to the company’s reportable segments, is as follows:

    

Global 

    

    

(thousands)

Components

Global ECS

Total

Balance as of December 31, 2023 (a)

$

875,194

$

1,175,232

$

2,050,426

Acquisitions

17,275

17,275

Foreign currency translation adjustment

 

(3,959)

 

(9,206)

 

(13,165)

Balance as of March 30, 2024 (a)

$

888,510

$

1,166,026

$

2,054,536

(a)The total carrying value of goodwill as of March 30, 2024, and December 31, 2023 in the table above is reflected net of $1.6 billion of accumulated impairment charges, of which $1.3 billion was recorded in the global components reportable segment and $301.9 million was recorded in the global enterprise computing solutions (“ECS”) reportable segment.

Intangible assets, net, are comprised of the following as of March 30, 2024:

    

Gross 

    

    

Carrying 

Accumulated 

(thousands)

Amount

Amortization

Net

Customer relationships

$

257,263

$

(160,240)

$

97,023

Amortizable trade name

 

73,359

 

(51,108)

 

22,251

$

330,622

$

(211,348)

$

119,274

Intangible assets, net, are comprised of the following as of December 31, 2023:

    

Gross 

    

    

Carrying 

Accumulated 

(thousands)

Amount

Amortization

Net

Customer relationships

$

258,337

$

(156,141)

$

102,196

Amortizable trade name

 

73,811

 

(48,567)

 

25,244

$

332,148

$

(204,708)

$

127,440

During the first quarter of 2024 and 2023, the company recorded amortization expense related to identifiable intangible assets of $7.5 million and $8.0 million, respectively.

10

Table of Contents

Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note D – Investments in Affiliated Companies

The company owns a 50% interest in two joint ventures with Marubun Corporation (collectively “Marubun/Arrow”) and a 50% interest in one other joint venture. These investments are accounted for using the equity method.

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

    

March 30,

    

December 31,

(thousands)

2024

2023

Marubun/Arrow

$

46,810

$

50,779

Other

 

12,058

 

11,962

$

58,868

$

62,741

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

Quarter Ended

March 30,

April 1,

(thousands)

    

2024

    

2023

Marubun/Arrow

$

(534)

$

(397)

Other

 

190

 

317

$

(344)

$

(80)

Under the terms of various joint venture agreements, the company is required to pay its pro-rata share of the third-party debt of the joint ventures in the event that the joint ventures are unable to meet their obligations. There were no outstanding borrowings under the third-party debt agreements of the joint ventures as of March 30, 2024, and December 31, 2023.

Note E – Accounts Receivable

Accounts receivable, net, consists of the following:

March 30,

December 31,

(thousands)

    

2024

    

2023

Accounts receivable

$

11,207,057

$

12,384,553

Allowance for credit losses

 

(144,449)

 

(146,480)

Accounts receivable, net

$

11,062,608

$

12,238,073

The following table is a rollforward for the company’s allowance for credit losses:

Quarter Ended

March 30,

April 1,

(thousands)

    

2024

    

2023

Balance at beginning of period

$

146,480

$

93,397

Charged to income

 

2,879

 

14,991

Translation adjustments

 

(861)

 

388

Write-offs

 

(4,049)

 

(5,083)

Balance at end of period

$

144,449

$

103,693

The company monitors the current credit condition of its customers in estimating the expected credit losses and has not experienced significant changes in customers’ payment trends or significant deterioration in customers’ credit risk as of March 30, 2024.

11

Table of Contents

Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

EMEA Asset Securitization

The company has an EMEA asset securitization program under which it continuously sells its interest in designated pools of trade accounts receivable of certain of its subsidiaries in the EMEA region at a discount to a special purpose entity, which in turn sells certain of the receivables to unaffiliated financial institutions and conduits administered by such unaffiliated financial institutions (“unaffiliated financial institutions”) on a monthly basis. The company may sell up to €600.0 million under the EMEA asset securitization program, which matures in December 2025, subject to extension in accordance with its terms. In February 2024, the company amended provisions in the EMEA asset securitization program to update certain financial ratios. The program is conducted through Arrow EMEA Funding Corp B.V., an entity structured to be bankruptcy remote. The company is deemed the primary beneficiary of Arrow EMEA Funding Corp B.V. as the company has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive the benefits that could potentially be significant to the entity from the transfer of the trade accounts receivable into the special purpose entity. Accordingly, Arrow EMEA Funding Corp B.V. is included in the company’s consolidated financial statements.

Sales of accounts receivable to unaffiliated financial institutions under the EMEA asset securitization program:

Quarter Ended

March 30,

April 1,

(thousands)

    

2024

    

2023

EMEA asset securitization, sales of accounts receivable

$

539,880

$

817,833

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 in the “Cash provided by operating activities” section of the consolidated statements of cash flows. The purchase price is paid in cash when the receivables are sold. Certain unsold receivables held by Arrow EMEA Funding Corp B.V. are pledged as collateral to unaffiliated financial institutions. These unsold receivables are included in “Accounts receivable, net” on the company’s consolidated balance sheets.

The company continues servicing the receivables which were sold and in exchange receives a servicing fee under the program. The company does not record a servicing asset or liability on the company’s consolidated balance sheets as the company estimates that the fee it receives to service these receivables approximates the fair market compensation to provide the servicing activities.

Other amounts related to the EMEA asset securitization program:

March 30,

December 31,

(thousands)

    

2024

    

2023

Receivables sold to unaffiliated financial institutions that were uncollected

$

425,240

$

529,266

Collateralized accounts receivable held by Arrow EMEA funding Corp B.V.

 

911,615

 

805,788

Any accounts receivable held by Arrow EMEA Funding Corp B.V. would likely not be available to other creditors of the company in the event of bankruptcy or insolvency proceedings if there are outstanding balances under the EMEA asset securitization program. The assets of the special purpose entity cannot be used by the company for general corporate purposes. Additionally, the financial obligations of Arrow EMEA Funding Corp B.V. to the unaffiliated financial institutions under the program are limited to the assets it owns and there is no recourse to Arrow Electronics, Inc. for receivables that are uncollectible as a result of an account debtor’s insolvency or inability to pay.

12

Table of Contents

Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The EMEA asset securitization program includes terms and conditions that limit the incurrence of additional borrowings and require that certain financial ratios be maintained at designated levels. As of March 30, 2024, the company was in compliance with all such financial covenants.

Factoring

In the normal course of business, certain of the company’s subsidiaries have factoring agreements to sell, with limited or no recourse, selected trade accounts receivable to financial institutions and accounts for these transactions as sales of the related receivables. The receivables are excluded from “Accounts receivable, net” on the company’s consolidated balance sheets and cash receipts are reflected as “Cash provided by operating activities” on the consolidated statements of cash flows. The company typically does not retain financial or legal interests in these receivables. Factoring fees for the sales of accounts receivables are included in “Interest and other financing expense, net” in the consolidated statements of operations. The company continues servicing the receivables which were sold.

Sales of trade accounts receivable under the company’s factoring programs:

Quarter Ended

March 30,

April 1,

(thousands)

2024

2023

Sales of accounts receivable under the factoring programs

$

208,560

$

382,278

Other amounts under the company’s factoring programs:

March 30,

December 31,

(thousands)

2024

2023

Receivables sold under the factoring programs that were uncollected

$

259,236

$

375,940

Note F – Supplier Finance Programs

At the request of certain of the company’s suppliers, the company has entered into agreements (“supplier finance programs”) with third-party finance providers, which facilitate the participating suppliers’ ability to sell their receivables from the company to the third-party financial institutions, at the sole discretion of the suppliers. For agreeing to participate in these programs, the company seeks to secure improved standard payment terms with its suppliers. The company is not involved in negotiating terms of the arrangements between its suppliers and the financial institutions and has no economic interest in a supplier’s decision to enter into these agreements, or sell receivables from the company. The company’s rights and obligations to its suppliers, including amounts due, are not impacted by suppliers’ decisions to sell amounts under the arrangements. However, the company agrees to make all payments to the third-party financial institutions, and the company’s right to offset balances due from suppliers against payment obligations is restricted by the agreements for those payment obligations that have been sold by suppliers. As of March 30, 2024, and December 31, 2023, the company had $899.4 million and $1.1 billion, respectively, in obligations outstanding under these programs included in “Accounts payable” on the company’s consolidated balance sheets and all activity related to the obligations is presented within operating activities on the consolidated statements of cash flows.

13

Table of Contents

Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note G – Debt

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

March 30,

December 31,

(thousands)

    

2024

    

2023

3.25% notes, due September 2024

$

499,505

$

499,224

Commercial paper

 

427,763

 

1,121,882

Other short-term borrowings

 

18,430

 

32,848

$

945,698

$

1,653,954

The company has $500.0 million in uncommitted lines of credit. There were no outstanding borrowings under the uncommitted lines of credit at March 30, 2024 and December 31, 2023. These borrowings were provided on a short-term basis and their maturity was agreed upon between the company and the lender. The uncommitted lines of credit had a weighted-average effective interest rate of 5.82% and 5.83% at March 30, 2024 and December 31, 2023, respectively.

The company has a commercial paper program, and the maximum aggregate balance of commercial paper outstanding may not exceed the borrowing capacity of $1.2 billion. Amounts outstanding under the commercial paper program are backstopped by available commitments under the company’s revolving credit facility. There were $427.8 million in outstanding borrowings under this program at March 30, 2024 and $1.1 billion in outstanding borrowings at December 31, 2023. The commercial paper program had an effective interest rate of 5.80% and 5.90% at March 30, 2024 and December 31, 2023, respectively.

Long-term debt consists of the following:

March 30,

December 31,

(thousands)

    

2024

    

2023

Revolving Credit Facility

$

50,000

$

North American asset securitization program

625,000

198,000

4.00% notes, due 2025

 

349,245

 

349,061

6.125% notes, due 2026 (a) (b)

498,343

497,661

7.50% senior debentures, due 2027

 

110,205

 

110,184

3.875% notes, due 2028

 

497,264

 

497,098

2.95% notes, due 2032

 

495,172

 

495,039

Other obligations with various interest rates and due dates

 

7,021

 

6,510

$

2,632,250

$

2,153,553

(a)Upon issuance of the 6.125% notes due March 2026, the company entered into an interest rate swap, which effectively converted the 6.125% notes to floating rate notes based on the secured overnight financing rate (“SOFR”) + 0.508%, or an effective interest rate of 5.83% as of March 30, 2024. In March 2024, the company received a notice from the swap counterparty to terminate the swap without penalty. The effective date of cancellation was April 1, 2024. Refer to Note H.
(b)In April 2024, the company completed the sale of $500.0 million principal amount of 5.875% notes due April 2034.  The net proceeds of the offering of $498.6 million were used for general corporate purposes and to repay the $500.0 million principal amount of its 6.125% notes due March 2026.

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 with the exception of the 6.125% notes which were called at par in April 2024.

14

Table of Contents

Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

March 30,

December 31,

(thousands)

    

2024

    

2023

4.00% notes, due 2025

$

344,500

$

343,500

6.125% notes, due 2026

499,500

502,000

7.50% senior debentures, due 2027

 

116,000

 

117,000

3.875% notes, due 2028

 

475,000

 

475,000

2.95% notes, due 2032

 

420,000

 

425,000

The carrying amount of the company’s other short-term borrowings, uncommitted lines of credit, revolving credit facility, 3.25% notes due in 2024, North American asset securitization program, commercial paper, and other obligations approximate their fair value.

The company has a $2.0 billion revolving credit facility maturing in September 2026. The facility may be used by the company for general corporate purposes including working capital in the ordinary course of business, letters of credit, repayment, prepayment or purchase of long-term indebtedness, acquisitions, and as support for the company’s commercial paper program, as applicable. Interest on borrowings under the revolving credit facility is calculated using a base rate or SOFR, plus a spread (1.08% at March 30, 2024), which is based on the company’s credit ratings, plus a credit spread adjustment of 0.10% or an effective interest rate of 6.44% at March 30, 2024. The facility fee, which is based on the company’s credit ratings, was 0.175% of the total borrowing capacity at March 30, 2024. The company had $50.0 million in outstanding borrowings under the revolving credit facility at March 30, 2024 and no outstanding borrowings under the revolving credit facility at December 31, 2023.

The company has a North American asset securitization program collateralized by accounts receivable of certain of its subsidiaries. The company may borrow up to $1.5 billion under the program which matures in September 2025. The program is conducted through Arrow Electronics Funding Corporation (“AFC”), a wholly-owned, bankruptcy remote subsidiary. The North American asset securitization program does not qualify for sale treatment. Accordingly, the accounts receivable and related debt obligation remain on the company’s consolidated balance sheets. Interest on borrowings is calculated using a base rate plus a spread (0.40% at March 30, 2024) plus a credit spread adjustment of 0.10% or an effective interest rate of 6.44% at March 30, 2024. The facility fee is 0.40% of the total borrowing capacity.

The company had $625.0 million and $198.0 million in outstanding borrowings under the North American asset securitization program at March 30, 2024 and December 31, 2023, respectively, which was included in “Long-term debt” on the company’s consolidated balance sheets. Total collateralized accounts receivable of approximately $2.3 billion and $2.7 billion were held by AFC and were included in Accounts receivable, net” on the company’s consolidated balance sheets at March 30, 2024 and December 31, 2023, respectively. Any accounts receivable held by AFC would likely not be available to other creditors of the company in the event of bankruptcy or insolvency proceedings of the company before repayment of any outstanding borrowings under the North American asset securitization program.

Both the revolving credit facility and North American asset securitization program include terms and conditions that limit the incurrence of additional borrowings and require that certain financial ratios be maintained at designated levels. As of March 30, 2024, the company was in compliance with all such financial covenants.

Interest and dividend income of $19.5 million and $14.3 million for the first quarter of 2024 and 2023, respectively, were recorded in “Interest and other financing expense, net” within the company’s consolidated statements of operations.

15

Table of Contents

Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note H – Financial Instruments Measured at Fair Value

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The company utilizes a fair value hierarchy, which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The fair value hierarchy has three levels of inputs that may be used to measure fair value:

Level 1

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2

Quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3

Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable.

The following table presents assets (liabilities) measured at fair value on a recurring basis at March 30, 2024:

(thousands)

    

Balance Sheet Location

    

Level 1

    

Level 2

    

Level 3

    

Total

Cash equivalents (a)

 

Cash and cash equivalents

$

10,689

$

$

$

10,689

Equity investments (b)

 

Other assets

 

53,211

 

 

 

53,211

Foreign exchange contracts designated as net investment hedges

 

Other assets / other current assets

 

 

53,778

 

 

53,778

$

63,900

$

53,778

$

$

117,678

The following table presents assets (liabilities) measured at fair value on a recurring basis at December 31, 2023:

(thousands)

    

Balance Sheet Location

    

Level 1

    

Level 2

    

Level 3

    

Total

Cash equivalents (a)

 

Cash and cash equivalents

$

8,729

$

$

$

8,729

Equity investments (b)

 

Other assets

 

57,625

 

 

 

57,625

Interest rate swap designated as fair value hedge

 

Other liabilities

 

 

(454)

 

 

(454)

Foreign exchange contracts designated as net investment hedges

 

Other assets / other current assets

 

 

47,245

 

 

47,245

$

66,354

$

46,791

$

$

113,145

(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 unrealized (losses) gains of ($3.6) million and $8.5 million for the first quarter of 2024 and 2023, respectively, on equity securities held at the end of the quarter.

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to goodwill and identifiable intangible assets (refer to Note C). The company tests these assets for impairment if indicators of potential impairment exist or at least annually if indefinite-lived.

Derivative Instruments

The company uses various financial instruments, including derivative instruments, for purposes other than trading. Certain derivative instruments are designated at inception as hedges and measured for effectiveness both at inception and on an ongoing basis. Derivative instruments not designated as hedges are carried at fair value on the consolidated balance sheets with changes in fair value recognized in earnings.

16

Table of Contents

Index to Notes

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Interest Rate Swaps

The company manages the risk of variability in interest rates of future expected debt issuances by entering into various forward-starting interest rate swaps, designated as cash flow hedges. Changes in fair value of interest rate swaps designated as cash flow hedges are recorded in the shareholders’ equity section 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. Reclassified gains and losses are recorded within the line item “Interest and other financing expense, net” in the consolidated statements of operations. The fair value of interest rate swaps are estimated using a discounted cash flow analysis on the expected cash flows of each derivative using observable inputs, including interest rate curves and credit spreads.

In June 2023, the company terminated its outstanding forward-starting interest rate swaps and received a cash payment of $56.7 million, which was reported in the “Cash flows from financing activities” section of the consolidated statements of cash flows. The forecasted transactions related to the swaps continued to be probable to occur by December 31, 2025, and the $56.7 million gain on the termination of the interest rate swaps remained in “Accumulated other comprehensive loss” on the company’s consolidated balance sheets at March 30, 2024. In April 2024, the forecasted bond issuance occurred, and the $56.7 million gain will be amortized to "Interest and other financing expense, net" in the company's consolidated statement of operations over the 10-year life of the bond.

The company occasionally enters into interest rate swap transactions, designated as fair value hedges, that convert certain fixed-rate debt to variable-rate debt in order to manage its targeted mix of fixed- and floating-rate debt. For qualifying interest rate fair value hedges, gains or losses on derivatives are included in “Interest and other financing expense, net” in the consolidated statements of operations. The change in fair value of the hedged item attributable to the risk being hedged is reported as an adjustment to its carrying value and is also included in “Interest and other financing expense, net”.

As of December 31, 2023, the company had one outstanding interest rate swap designated as a fair value hedge of its 6.125% notes due in March 2026, the terms of which were as follows: