UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended September ~~30, 2017~~28, 2019



o☐	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.~~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 ~~Centennial, Colorado~~			80112
Centennial	CO		(Zip Code)
(Address of principal executive offices)		~~(Zip Code)~~

~~(303)~~



(303)	824-4000

(~~Registrant's~~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

~~Yes~~ x No o

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ 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~~“large accelerated filer,~~" "accelerated~~” “accelerated filer,~~" "smaller~~” “smaller reporting company,"” and ~~"emerging~~“emerging growth ~~company"~~company” in Rule 12b-2 of the Exchange Act:



Large accelerated filerx	☒	Accelerated filero	☐
Non-accelerated filero ~~(do not check if a smaller reporting company)~~	☐	Smaller reporting companyo	☐
		Emerging growth companyo	☐

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

~~Yes~~ o No x

There were ~~87,973~~81,448,606 shares of Common Stock outstanding as of October ~~30, 2017.~~31, 2019.

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				Nine Months Ended				Quarter Ended						Nine Months Ended
	September 30, 2017		October 1, 2016		September 30, 2017		October 1, 2016		September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Sales	$	6,953,740	$	5,936,092	$	19,178,638	$	17,382,370	$	7,078,118		$	7,490,445		$	21,578,657		$	21,758,586
Cost of sales	6,110,382		5,162,930		16,751,427		15,061,519		6,279,277			6,566,667			19,103,219			19,033,044
Gross profit	843,358		773,162		2,427,211		2,320,851		798,841			923,778			2,475,438			2,725,542
Operating expenses:
Selling, general, and administrative expenses	552,896		510,017		1,600,762		1,534,534		522,446			575,751			1,677,734			1,719,108
Depreciation and amortization	38,574		40,194		113,096		121,516		45,231			45,532			139,739			139,201
Loss on disposition of businesses, net (Note D)									14,573			2,042			15,439			3,604
Impairments (Notes D and E)									253			—			698,246			—
Restructuring, integration, and other charges	15,896		24,267		55,817		61,161		43,120			10,143			74,692			50,497
	607,366		574,478		1,769,675		1,717,211		625,623			633,468			2,605,850			1,912,410
Operating income	235,992		198,684		657,536		603,640
Equity in earnings of affiliated companies	1,216		1,311		2,865		5,394
Loss on investment, net	15,000		—		14,250		—
Loss on extinguishment of debt	786		—		59,545		—
Operating income (loss)									173,218			290,310			(130,412		)	813,132
Equity in losses of affiliated companies									(1,070		)	(652		)	(2,155		)	(808		)
Gain (loss) on investments, net									1,126			1,070			7,864			(3,945		)
Employee benefit plan expense									(1,071		)	(1,296		)	(3,349		)	(3,784		)
Interest and other financing expense, net	39,748		37,229		120,179		111,828		(49,882		)	(54,205		)	(153,426		)	(160,187		)
Income before income taxes	181,674		162,766		466,427		497,206
Income (loss) before income taxes									122,321			235,227			(281,478		)	644,408
Provision for income taxes	46,199		44,931		114,998		137,441		29,340			57,054			30,878			155,325
Consolidated net income	135,475		117,835		351,429		359,765
Consolidated net income (loss)									92,981			178,173			(312,356		)	489,083
Noncontrolling interests	845		108		3,352		1,533		850			1,640			3,744			3,541
Net income attributable to shareholders	$	134,630	$	117,727	$	348,077	$	358,232
Net income per share:
Net income (loss) attributable to shareholders									$	92,131		$	176,533		$	(316,100	)	$	485,542
Net income (loss) per share:
Basic	$	1.52	$	1.29	$	3.92	$	3.92	$	1.11		$	2.02		$	(3.75	)	$	5.53
Diluted	$	1.50	$	1.28	$	3.87	$	3.87	$	1.10		$	1.99		$	(3.75	)	$	5.47
Weighted-average shares outstanding:
Basic	88,453		90,937		88,870		91,412		82,711			87,602			84,246			87,785
Diluted	89,540		91,938		89,936		92,487		83,397			88,608			84,246			88,759

See accompanying notes.

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

Quarter Ended Nine Months Ended
September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016
Consolidated net income $ 135,475
$ 117,835
$ 351,429
$ 359,765
Other comprehensive income:
Foreign currency translation adjustment and other 54,951
16,336
225,431
38,005
Unrealized gain (loss) on investment securities, net 1,357
1,273
4,639
(2,408 )
Unrealized gain (loss) on interest rate swaps designated as cash flow hedges, net (2,093 ) 94
(2,543 ) 278
Employee benefit plan items, net 492
814
1,403
5,578
Other comprehensive income 54,707
18,517
228,930
41,453
Comprehensive income 190,182
136,352
580,359
401,218
Less: Comprehensive income attributable to noncontrolling interests 2,049
576
7,743
2,791
Comprehensive income attributable to shareholders $ 188,133
$ 135,776
$ 572,616
$ 398,427



	Quarter Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Consolidated net income (loss)	$	92,981		$	178,173		$	(312,356	)	$	489,083
Other comprehensive income (loss):
Foreign currency translation adjustment and other	(82,809		)	(38,008		)	(62,346		)	(139,846		)
Unrealized gain on foreign exchange contracts designated as net investment hedges, net of taxes	11,389			—			15,495			—
Unrealized gain (loss) on interest rate swaps designated as cash flow hedges, net of taxes	(9,114		)	234			(15,480		)	693
Employee benefit plan items, net of taxes	45			389			449			1,284
Other comprehensive loss	(80,489		)	(37,385		)	(61,882		)	(137,869		)
Comprehensive income (loss)	12,492			140,788			(374,238		)	351,214
Less: Comprehensive income (loss) attributable to noncontrolling interests	(562		)	1,497			2,199			1,486
Comprehensive income (loss) attributable to shareholders	$	13,054		$	139,291		$	(376,437	)	$	349,728

See accompanying notes.

ARROW ELECTRONICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands except par value)

(Unaudited)


	September 30, 2017			December 31, 2016
	(Unaudited)						September 28, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	584,339		$	534,320		$	262,254		$	509,327
Accounts receivable, net	7,070,629			6,746,687			7,841,851			8,945,463
Inventories	3,168,769			2,855,645			3,503,481			3,878,678
Other current assets	215,431			180,069			232,062			274,832
Total current assets	11,039,168			10,316,721			11,839,648			13,608,300
Property, plant, and equipment, at cost:
Land	12,852			23,456			7,746			7,882
Buildings and improvements	158,865			175,141			164,544			158,712
Machinery and equipment	1,306,891			1,297,657			1,438,600			1,425,933
	1,478,608			1,496,254			1,610,890			1,592,527
Less: Accumulated depreciation and amortization	(663,229		)	(739,955		)	(805,626		)	(767,827		)
Property, plant, and equipment, net	815,379			756,299			805,264			824,700
Investments in affiliated companies	86,626			88,401			85,399			83,693
Intangible assets, net	307,385			336,882			277,720			372,644
Goodwill	2,470,576			2,392,220			2,041,073			2,624,690
Other assets	337,832			315,843			640,607			270,418
Total assets	$	15,056,966		$	14,206,366		$	15,689,711		$	17,784,445
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	5,799,723		$	5,774,151		$	6,181,408		$	7,631,879
Accrued expenses	799,066			821,244			833,390			912,292
Short-term borrowings, including current portion of long-term debt	380,208			93,827			356,843			246,257
Total current liabilities	6,978,997			6,689,222			7,371,641			8,790,428
Long-term debt	2,802,960			2,696,334			2,942,293			3,239,115
Other liabilities	349,717			355,190			631,530			378,536
Commitments and contingencies (Note L)
Commitments and contingencies (Note N)
Equity:
Shareholders' equity:
Shareholders’ equity:
Common stock, par value $1:
Authorized - 160,000 shares in both 2017 and 2016
Issued - 125,424 shares in both 2017 and 2016	125,424			125,424
Authorized - 160,000 shares in both 2019 and 2018, respectively
Issued - 125,424 shares in both 2019 and 2018, respectively							125,424			125,424
Capital in excess of par value	1,107,125			1,112,114			1,143,830			1,135,934
Treasury stock (37,463 and 36,511 shares in 2017 and 2016, respectively), at cost	(1,739,473		)	(1,637,476		)
Treasury stock (43,660 and 40,233 shares in 2019 and 2018, respectively), at cost							(2,237,884		)	(1,972,254		)
Retained earnings	5,545,307			5,197,230			6,019,235			6,335,335
Accumulated other comprehensive loss	(159,315		)	(383,854		)	(359,786		)	(299,449		)
Total shareholders' equity	4,879,068			4,413,438
Total shareholders’ equity							4,690,819			5,324,990
Noncontrolling interests	46,224			52,182			53,428			51,376
Total equity	4,925,292			4,465,620			4,744,247			5,376,366
Total liabilities and equity	$	15,056,966		$	14,206,366		$	15,689,711		$	17,784,445

See accompanying notes.

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended						Nine Months Ended
	September 30, 2017			October 1, 2016			September 28, 2019			September 29, 2018
Cash flows from operating activities:
Consolidated net income	$	351,429		$	359,765
Adjustments to reconcile consolidated net income to net cash provided by operations:
Consolidated net income (loss)							$	(312,356	)	$	489,083
Adjustments to reconcile consolidated net income (loss) to net cash provided by operations:
Depreciation and amortization	113,096			121,516			139,739			139,201
Amortization of stock-based compensation	30,301			29,783			34,749			38,104
Equity in earnings of affiliated companies	(2,865		)	(5,394		)
Loss on extinguishment of debt	59,545			—
Equity in losses of affiliated companies							2,155			808
Deferred income taxes	13,262			30,191			(65,484		)	17,769
Loss on investments, net	14,250			—
Impairments							698,246			—
Loss on disposition of businesses, net							15,439			3,604
(Gain) loss on investments, net							(7,622		)	3,945
Other	7,415			4,464			10,814			6,056
Change in assets and liabilities, net of effects of acquired businesses:
Change in assets and liabilities, net of effects of acquired and disposed businesses:
Accounts receivable	(59,084		)	335,455			916,908			(254,417		)
Inventories	(255,820		)	(117,674		)	342,610			(456,050		)
Accounts payable	(113,804		)	(513,365		)	(1,349,189		)	171,697
Accrued expenses	(41,810		)	(102,915		)	(71,124		)	15,177
Other assets and liabilities	(114,136		)	(1,121		)	8,308			(165,421		)
Net cash provided by operating activities	1,779			140,705			363,193			9,556
Cash flows from investing activities:
Cash consideration paid for acquired businesses	(3,628		)	(68,946		)
Cash consideration paid for acquired businesses, net of cash acquired							—			(331,563		)
Proceeds from (cash paid on) disposition of a businesses							(1,325		)	32,013
Acquisition of property, plant, and equipment	(149,597		)	(126,341		)	(113,080		)	(104,897		)
Proceeds from sale of property, plant, and equipment	24,433			—
Other	(2,467		)	(12,000		)	(5,555		)	(11,000		)
Net cash used for investing activities	(131,259		)	(207,287		)	(119,960		)	(415,447		)
Cash flows from financing activities:
Change in short-term and other borrowings	(14,423		)	31,941			(93,129		)	104,158
Proceeds from (repayments of) long-term bank borrowings, net	(82,766		)	320,000			(96,960		)	420,755
Proceeds from note offerings, net	987,144			—
Redemption of notes	(555,886		)	—			—			(300,000		)
Proceeds from exercise of stock options	21,423			16,686			11,710			7,919
Repurchases of common stock	(149,125		)	(167,178		)	(304,194		)	(93,173		)
Purchase of shares from noncontrolling interest	(23,350		)	—
Other	(1,620		)	(3,000		)	(147		)	(1,174		)
Net cash provided by financing activities	181,397			198,449
Net cash provided by (used for) financing activities							(482,720		)	138,485
Effect of exchange rate changes on cash	(1,898		)	(20,542		)	(7,586		)	11,514
Net increase in cash and cash equivalents	50,019			111,325
Net decrease in cash and cash equivalents							(247,073		)	(255,892		)
Cash and cash equivalents at beginning of period	534,320			273,090			509,327			730,083
Cash and cash equivalents at end of period	$	584,339		$	384,415		$	262,254		$	474,191

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
Balance at December 31, 2018	$	125,424	$	1,135,934		$	(1,972,254	)	$	6,335,335		$	(299,449	)	$	51,376		$	5,376,366
Consolidated net income	—		—			—			140,735			—			1,679			142,414
Other comprehensive income (loss)	—		—			—			—			11,182			(648		)	10,534
Amortization of stock-based compensation	—		19,090			—			—			—			—			19,090
Shares issued for stock-based compensation awards	—		(26,267		)	33,198			—			—			—			6,931
Repurchases of common stock	—		—			(53,925		)	—			—			—			(53,925		)
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		)
Other comprehensive income	—		—			—			—			7,558			515			8,073
Amortization of stock-based compensation	—		8,539			—			—			—			—			8,539
Shares issued for stock-based compensation awards	—		(647		)	3,340			—			—			—			2,693
Repurchases of common stock	—		—			(150,102		)	—			—			—			(150,102		)
Distributions	—		—			—			—			—			(147		)	(147		)
Balance at June 29, 2019	$	125,424	$	1,136,649		$	(2,139,743	)	$	5,927,104		$	(280,709	)	$	53,990		$	4,822,715
Consolidated net income	—		—			—			92,131			—			850			92,981
Other comprehensive loss	—		—			—			—			(79,077		)	(1,412		)	(80,489		)
Amortization of stock-based compensation	—		7,120			—			—			—			—			7,120
Shares issued for stock-based compensation awards	—		61			2,026			—			—			—			2,087
Repurchases of common stock	—		—			(100,167		)	—			—			—			(100,167		)
Balance at September 28, 2019	$	125,424	$	1,143,830		$	(2,237,884	)	$	6,019,235		$	(359,786	)	$	53,428		$	4,744,247

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
Balance at December 31, 2017	$	125,424	$	1,114,167		$	(1,762,239	)	$	5,596,786	$	(124,883	)	$	48,685		$	4,997,940
Effect of new accounting principles	—		—			—			22,354		(22,354		)	—			—
Consolidated net income	—		—			—			139,094		—			776			139,870
Other comprehensive income (loss)	—		—			—			—		45,732			(255		)	45,477
Amortization of stock-based compensation	—		13,043			—			—		—			—			13,043
Shares issued for stock-based compensation awards	—		(22,102		)	27,099			—		—			—			4,997
Repurchases of common stock	—		—			(52,513		)	—		—			—			(52,513		)
Balance at March 31, 2018	$	125,424	$	1,105,108		$	(1,787,653	)	$	5,758,234	$	(101,505	)	$	49,206		$	5,148,814
Consolidated net income	—		—			—			169,915		—			1,125			171,040
Other comprehensive loss	—		—			—			—		(144,304		)	(1,658		)	(145,962		)
Amortization of stock-based compensation	—		12,619			—			—		—			—			12,619
Shares issued for stock-based compensation awards	—		(338		)	1,329			—		—			—			991
Repurchases of common stock	—		—			(20,038		)	—		—			—			(20,038		)
Distributions	—		—			—			—		—			(157		)	(157		)
Balance at June 30, 2018	$	125,424	$	1,117,389		$	(1,806,362	)	$	5,928,149	$	(245,809	)	$	48,516		$	5,167,307
Consolidated net income	—		—			—			176,533		—			1,640			178,173
Other comprehensive loss	—		—			—			—		(37,242		)	(141		)	(37,383		)
Amortization of stock-based compensation	—		12,632			—			—		—			—			12,632
Shares issued for stock-based compensation awards	—		(676		)	2,611			—		—			—			1,935
Repurchases of common stock	—		—			(20,622		)	—		—			—			(20,622		)
Balance at September 29, 2018	$	125,424	$	1,129,345		$	(1,824,373	)	$	6,104,682	$	(283,051	)	$	50,015		$	5,302,042

See accompanying notes.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIALSTATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Note A – Basis of Presentation

The accompanying consolidated financial statements of Arrow Electronics, Inc. (the ~~"company"~~“company”) were prepared in accordance with accounting principles generally accepted in the United States 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~~company’s audited consolidated financial statements and accompanying notes for the year ended December 31, ~~2016,~~2018, as filed in the ~~company's~~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.

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 August ~~2017,~~2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2018-15, Intangibles—Goodwill and Other— Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (a consensus of the FASB Emerging Issues Task Force) (“ASU No. 2018-15”). ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop internal-use software. ASU No. 2018-15 is effective for the company in the first quarter of 2020, with early adoption permitted, and is to be applied either retrospectively or prospectively. The company is currently evaluating the potential effects of adopting the provisions of ASU No. 2018-15. The adoption is not expected to be material to the consolidated financial statements.

In August 2017, the FASB issued Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815) (" (“ASU No. ~~2017-12"~~2017-12”). ASU No. 2017-12 simplifies certain aspects of hedge accounting and results in a more accurate portrayal of the economics of an entity’s risk management activities in its financial statements. ~~ASU No. 2017-12 is effective for the company in the first quarter of~~On January 1, 2019, ~~with early adoption permitted, and is to be applied on a modified retrospective basis. The company is currently evaluating the potential effects of adopting the provisions of ASU No. 2017-12.~~

~~In May 2017, the FASB issued Accounting Standards Update No. 2017-09,~~ ~~Compensation - Stock Compensation~~ (Topic 718) ("ASU No. 2017-09"). ASU No. 2017-09 clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Effective April 2, 2017, the company adopted the provisions of ASU No. ~~2017-09 on a prospective basis. The adoption of the provisions of ASU No. 2017-09 did not materially impact the company's consolidated financial position or results of operations.~~

~~In March 2017, the FASB issued Accounting Standards Update No. 2017-07,~~ ~~Compensation - Retirement Benefits~~ (Topic 715) ("ASU No. 2017-07"). ASU No. 2017-07 requires that the service cost component of pension expense be included in the same line item as other compensation costs arising from services rendered by employees, with the other components of pension expense being classified outside of a subtotal of income from operations. ASU No. 2017-07 is effective for the company in the first quarter of 2018 and is to be applied retrospectively for the presentation requirements and prospectively for the capitalization of the service cost component requirements. The adoption of the provisions of ASU No. 2017-07 is not expected to have a material impact on the company's consolidated financial position or results of operations.

~~In January 2017, the FASB issued Accounting Standards Update No. 2017-04,~~ ~~Intangibles - Goodwill and Other~~ (Topic 350) ("ASU No. 2017-04"). ASU No. 2017-04 eliminates step 2 from the annual goodwill impairment test. Effective January 1, 2017, the company adopted the provisions of ASU No. 2017-04 on a prospective basis. The adoption of the provisions of ASU No. 2017-04 would not materially impact the company's consolidated financial position or results of operations unless step 1 of the annual goodwill impairment test fails.

~~In October 2016, the FASB issued Accounting Standards Update No. 2016-16,~~ ~~Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory~~ (Topic 740) ("ASU No. 2016-16"). ASU No. 2016-16 clarifies the accounting for the current and deferred income taxes for an intra-entity transfer of an asset other than inventory. Effective April 2, 2017, the company adopted the provisions

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

~~of ASU No. 2016-16~~2017-12 on a modified retrospective basis. The adoption of the provisions of ASU No. ~~2016-16~~2017-12 did not materially impact the ~~company's~~company’s consolidated financial position or results of operations.

~~In August 2016, the FASB issued Accounting Standards Update No. 2016-15,~~ ~~Statement of Cash Flows~~ (Topic 230) ("ASU No. 2016-15"). ASU No. 2016-15 addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows. Effective January 1, 2017, the company adopted the provisions of ASU No. 2016-15 on a retrospective basis. The adoption of the provisions of ASU No. 2016-15 did not materially impact the company's consolidated financial position or results of operations.

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses ~~(Topic 326) ("ASU No. 2016-13"~~ (“Topic 326”). ~~ASU No. 2016-13~~Topic 326 revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. ~~ASU No. 2016-13 is effective for~~Effective January 1, 2020, the company inwill adopt the ~~first quarter of 2020, with early adoption permitted, and is to be applied~~update using a modified retrospective ~~approach.~~approach with a cumulative-effect adjustment to retained earnings. The company is currently evaluating the potential effects of adopting the provisions of ~~ASU No. 2016-13.~~Topic 326.

~~In March 2016, the FASB issued Accounting Standards Update No. 2016-09,~~ ~~Stock Compensation - Improvements to Employee Share-Based Payment Accounting~~ (Topic 718) ("ASU No. 2016-09"). ASU No. 2016-09 revises the accounting treatment for excess tax benefits, minimum statutory tax withholding requirements, and forfeitures related to share-based awards. Effective January 1, 2017, the company adopted the recognition of excess tax benefits and tax deficiencies on a prospective basis and reclassified excess tax benefits in the consolidated statements of cash flows on a retrospective basis. The company elected to continue to estimate forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period. The adoption of the provisions of ASU No. 2016-09 did not materially impact the company's consolidated financial position or results of operations.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases ~~(Topic~~(Topic 842) ("(“ASU No. ~~2016-02"~~2016-02”). ASU No. 2016-02 requires the entity to recognize the assets and liabilities for the rights and obligations created by leased assets. Leases will be classified as either finance or operating, with classification affecting expense recognition in the income statement. ASU No. 2016-02 is effective for the company in the first quarter of 2019, with early adoption permitted, and is to be applied using a modified retrospective approach. While the company continues to evaluate the effects of adopting the provisions of ASU No. 2016-02, the company expects most existing operating lease commitments will be recognized as operating lease liabilities and right-of-use assets upon adoption.

In ~~January 2016, the FASB issued Accounting Standards Update No. 2016-01,~~ ~~Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities~~ (Topic 825) ("ASU No. 2016-01"). ASU No. 2016-01 revises the classification and measurement of investments in certain equity investments and the presentation of certain fair value changes for certain financial liabilities measured at fair value. ASU No. 2016-01 requires the change in fair value of many equity investments to be recognized in net income. ASU No. 2016-01 is effective for the company in the first quarter ofJuly 2018, ~~with early adoption permitted, and is to be applied prospectively. The company is currently evaluating the potential effects of adopting the provisions of ASU No. 2016-01.~~

~~In May 2014, the FASB issued Accounting Standards Update No. 2014-09,~~ ~~Revenue from Contracts with Customers~~ (Topic 606) ("ASU No. 2014-09"). ASU No. 2014-09 supersedes all existing revenue recognition guidance. Under ASU No. 2014-09, an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 is effective for the company in the first quarter of 2018, with early adoption permitted in the first quarter of 2017. ASU No. 2014-09 allows for either full retrospective or modified retrospective adoption. In March, April, May, and December 2016, the FASB issued ASU No. ~~2016-08,~~ ~~Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net)~~ ~~("ASU No. 2016-08"); ASU No. 2016-10,~~ ~~Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing~~ ~~("ASU No. 2016-10"); ASU No. 2016-12,~~ ~~Revenue from Contracts with Customers: Narrow-Scope~~2018-10, Codification Improvements ~~and Practical Expedients~~ ~~("ASU No. 2016-12");~~to Topic 842, Leases, and ASU No. ~~2016-19,~~ ~~Technical Corrections and Improvements~~ ("2018-11, Leases (Topic 842) Targeted Improvements. In March 2019, the FASB issued ASU No. ~~2016-19"), respectively. ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12, and ASU No. 2016-19~~2019-01, Codification Improvements to Topic 842, Leases. These ASU’s provide supplemental adoption guidance and clarification to ASU No. ~~2014-09,~~2016-02, and must be adopted concurrently with the adoption of ASU No. ~~2014-09. The~~2016-02, cumulatively referred to as “Topic 842.”

On January 1, 2019, the company ~~is currently evaluating~~adopted Topic 842 applying the ~~potential effects~~optional transition method, which allows an entity to apply the new standard at the adoption date with a cumulative effect adjustment to the opening balance of ~~adopting~~retained earnings in the ~~provisions~~period of ~~ASU No. 2014-09, ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12, and ASU No. 2016-19.~~

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

adoption. In ~~2014,~~addition, the company ~~established an implementation team (“team”)~~elected a package of practical expedients and ~~engaged external advisers to develop a multi-phase plan to assess~~ the ~~company’s business~~short-term lease exception outlined in Topic 842. The company also implemented internal controls and ~~contracts, as well as any changes to processes or~~ systems to ~~adopt~~enable the ~~requirements~~preparation of financial information on adoption. As a result of adopting Topic 842, the ~~new revenue standard. The team has updated~~company recognized assets and liabilities for the ~~assessment for new ASU updates~~rights and for newly acquired businesses. The team is in the process of finalizing its conclusions on several aspects of the standard including principal versus agent considerations, identification of performance obligations ~~and the determination of when control of goods and services transfers~~created by operating leases, refer to ~~the company’s customers. Additionally, the team is in the process of evaluating the impact of the expanded disclosure requirements.~~Note C & L.

Note C – ~~Acquisitions~~Significant Accounting Policies

~~2017 Acquisitions~~Except for the changes below and the impairments disclosed in Notes D and E, 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 7, 2019, for the year ended December 31, 2018.

~~During~~Leases

The company determines if a contract contains a lease at inception based on whether it conveys the ~~first nine months~~right to control the use of ~~2017,~~an identified asset. Substantially all of the company’s leases are classified as operating leases. The company has determined that operating lease right-of-use assets will be recorded to “Other assets” and lease liabilities will be recorded to “Other liabilities” and “Accrued expenses” in the consolidated balance sheets. Lease expense will be recorded to “Selling, general, and administrative expenses” in the consolidated statements of operations. Operating lease payments will be recorded to “Operating cash flows” in the consolidated statements of cash flows.

Operating lease right-of-use assets and lease liabilities are recognized based on the net present value of future minimum lease payments over the lease term starting on the commencement date. The company generally is not able to determine the rate implicit in its leases and, as such, will apply an incremental borrowing rate based on the company’s cost of borrowing for the relevant terms of each lease. Lease expense for minimum lease payments are recognized on a straight-line basis over the lease term. Lease terms may include an option to extend or terminate a lease if it is reasonably certain that the company ~~acquired an additional 11.9%~~will exercise such options. The company has elected the practical expedient to not separate lease components from non-lease components, and also has elected not to record a right-of-use asset or lease liability for leases which, at inception, have a term of twelve months or less. Variable lease payments are recognized in the ~~noncontrolling interest common shares of Data Modul AG~~period in which the obligation for ~~$23,350, increasing the company's ownership interest in Data Modul to 69.2%. The impact of this acquisition was not material to the company's consolidated financial position or results of operations.~~those payments is incurred.

~~2016 Acquisitions~~

During 2016, the company completed three acquisitions for $63,869, net of cash acquired. The impact of these acquisitions was not material to the company's consolidated financial position or results of operations. The pro forma impact of the 2016 acquisitions on the consolidated results of operations of the company for the first nine months of 2016, as though the acquisitions occurred on January 1, 2016, was also not material.

Note D – Impairment of Long-Lived Assets and Loss on Disposition of Businesses

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 $74,908 to write-down certain assets of the personal computer and mobility asset disposition business to estimated fair value in the second quarter of 2019. During the third quarter and first nine months of 2019, the company also recorded $253 and $7,163, respectively, in impairment charges related to various other fixed assets, unrelated to the personal computer and mobility asset disposition business.

During the third quarter of 2019, the company completed the disposition of two foreign subsidiaries related to the personal computer and mobility asset disposition business. As a result of the disposition, the company recognized a net loss of $14,573, primarily related to the reclassification of cumulative translation adjustment to earnings upon the sale.

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~~During the second quarter of ~~companies acquired, allocated~~2019, as a result of the company’s downward revision of forecasted future earnings previously disclosed in Item 2.02 Form 8-K filed 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 ~~company's business segments, is as follows:~~

Global
Components
Global ECS Total
Balance as of December 31, 2016 (a) $ 1,239,741
$ 1,152,479
$ 2,392,220
Acquisitions and related adjustments (102 ) 6,251
6,149
Foreign currency translation adjustment 17,451
54,756
72,207
Balance as of September 30, 2017 (a) $ 1,257,090
$ 1,213,486
$ 2,470,576


~~(a)~~	~~The total carrying value of goodwill for all periods in the table above is reflected net of~~ ~~$1,018,780~~ ~~of accumulated impairment charges, of which~~ ~~$716,925~~ ~~was recorded in the global components business segment and~~ ~~$301,855~~ ~~was recorded in the global ECS business segment.~~

~~Intangible assets, net, are comprised of the following as of~~ ~~September 30, 2017~~:

Weighted-Average Life Gross Carrying Amount Accumulated Amortization Net
Non-amortizable trade names indefinite $ 101,000
$ —
$ 101,000
Customer relationships 10 years 476,656
(274,847 ) 201,809
Developed technology 5 years 6,340
(2,973 ) 3,367
Amortizable trade name 5 years 2,409
(1,200 ) 1,209
$ 586,405
$ (279,020 ) $ 307,385

Americas components reporting

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

unit resulted in partial goodwill impairment charge of $509,000 ($457,806 net of tax) with approximately $600,000 of goodwill remaining in the reporting unit and full impairment of $61,175 ($61,175 net of tax) within the Asia-Pacific 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. As the Americas components reporting unit had 0% excess fair value over the carrying value of the reporting unit as of June 29, 2019, the remaining approximately $600,000 of goodwill is susceptible to future period impairments. For example, a 100 basis point decrease in forecasted gross profit margin could result in a full impairment of the remaining approximately $600,000 of goodwill, absent other inputs improving. 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 based on an evaluation of historical performance, current industry and global economic and geo-political conditions, and the timing and success of the implementation of current strategic initiatives. The company concluded no further indicators of potential impairment existed, and as such, no interim impairment test was required at September 28, 2019. The company tests goodwill for impairment annually as of the first day of the fourth quarter.

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



	Global Components			Global ECS			Total
Balance as of December 31, 2018 (a)	$	1,437,501		$	1,187,189		$	2,624,690
Impairments and dispositions	(570,175		)	(1,386		)	(571,561		)
Foreign currency translation adjustment	10,673			(22,729		)	(12,056		)
Balance as of September 28, 2019 (b)	$	877,999		$	1,163,074		$	2,041,073


(a)	The total carrying value of goodwill as of December 31, 2018 in the table above is reflected net of $1,018,780 of accumulated impairment charges, of which $716,925 was recorded in the global components business segment and $301,855 was recorded in the global enterprise computing solutions (“ECS”) business segment.


(b)	The total carrying value of goodwill as of September 28, 2019 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 ECS business segment.

Intangible assets, net, are comprised of the following as of September 28, 2019:



	Weighted-Average Life	Gross Carrying Amount		Accumulated Amortization			Net
Customer relationships	10 years	$	426,564	$	(217,736	)	$	208,828
Amortizable trade name	8 years	76,407		(7,515		)	68,892
		$	502,971	$	(225,251	)	$	277,720

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, ~~2016:~~2018:



	Weighted-Average Life	Gross Carrying Amount		Accumulated Amortization			Net
Non-amortizable trade names	indefinite	$	101,000	$	—		$	101,000
Customer relationships	11 years	475,050		(221,822		)	253,228
Developed technology	5 years	6,340		(4,311		)	2,029
Amortizable trade name	9 years	19,940		(3,553		)	16,387
		$	602,330	$	(229,686	)	$	372,644

Weighted-Average Life Gross Carrying Amount Accumulated Amortization Net
Non-amortizable trade names indefinite $ 101,000
$ —
$ 101,000
Customer relationships 10 years 476,176
(247,206 ) 228,970
Developed technology 5 years 9,140
(4,435 ) 4,705
Other intangible assets (b) 6,721
(4,514 ) 2,207
$ 593,037
$ (256,155 ) $ 336,882

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 as of June 29, 2019, and began amortizing these trade names over their estimated remaining useful lives. The trade names were tested for impairment 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) during the second quarter of 2019. 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.


~~(b)~~	~~Consists of non-competition agreements, sales backlog, and an amortizable trade name with useful lives ranging from two to five years.~~

During the third ~~quarters~~quarter and first nine months of ~~2017 and 2016,~~2019, the company recorded amortization expense related to identifiable intangible assets of ~~$12,645~~$10,443 and ~~$13,893,~~$33,786, respectively.

During the third quarter and first nine months of ~~2017 and 2016, the company recorded~~2018, amortization expense related to identifiable intangible assets ~~of $37,909~~was $11,620 and ~~$41,252,~~$37,095, respectively.

Note EF – Investments in Affiliated Companies

The company owns a 50% interest in several joint ventures with Marubun Corporation (collectively ~~"Marubun/Arrow"~~“Marubun/Arrow”) and several interests ranging from ~~43%~~19% to 50% in other joint ventures and equity method investments. These investments are accounted for using the equity method.

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



	September 28, 2019		December 31, 2018
Marubun/Arrow	$	75,455	$	73,253
Other	9,944		10,440
	$	85,399	$	83,693

September 30,
2017 December 31,
2016
Marubun/Arrow $ 68,179
$ 65,237
Other 18,447
23,164
$ 86,626
$ 88,401

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



	Quarter Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Marubun/Arrow	$	160		$	1,983		$	1,613		$	4,557
Other	(1,230		)	(2,635		)	(3,768		)	(5,365		)
	$	(1,070	)	$	(652	)	$	(2,155	)	$	(808	)

Quarter Ended Nine Months Ended
September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016
Marubun/Arrow $ 1,886
$ 1,549
$ 5,168
$ 5,059
Other (670 ) (238 ) (2,303 ) 335
$ 1,216
$ 1,311
$ 2,865
$ 5,394

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 September ~~30, 2017,~~28, 2019 and December 31, 2018, the ~~company's~~company’s pro-rata share of this debt was approximately ~~$850. There were no outstanding borrowings under the third party debt agreements of the joint ventures as of December 31, 2016.~~$6,750 and $2,860, respectively. The company believes there is sufficient equity in each of the joint ventures to meet the obligations.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Note FG – Accounts Receivable

Accounts receivable, net, consists of the following:



	September 28, 2019			December 31, 2018
Accounts receivable	$	7,906,758		$	9,021,051
Allowances for doubtful accounts	(64,907		)	(75,588		)
	$	7,841,851		$	8,945,463

September 30,
2017 December 31,
2016
Accounts receivable $ 7,124,677
$ 6,798,943
Allowances for doubtful accounts (54,048 ) (52,256 )
Accounts receivable, net $ 7,070,629
$ 6,746,687

The company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The allowances for doubtful accounts are determined using a combination of factors, including the length of time the receivables are outstanding, the current business environment, and historical experience. The company also has notes receivables with certain ~~customers. As of September 30, 2017 and December 31, 2016,~~customers, which are included in “Accounts receivable, net” in the ~~company has one customer with a combined note and accounts receivable~~company’s consolidated balance of approximately $27,850 and $20,000, respectively. The customer became delinquent on its repayment of the note during the fourth quarter of 2016. The company believes that it will recover all amounts due; however, it is possible that it could incur a loss.sheets.

Note GH – Debt

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



	September 28, 2019		December 31, 2018
6.00% notes, due 2020	$	209,278	$	—
Borrowings on lines of credit	75,000		180,000
Other short-term borrowings	72,565		66,257
	$	356,843	$	246,257

September 30,
2017 December 31,
2016
3.00% notes, due 2018 $ 299,643
$ —
Other short-term borrowings 80,565
93,827
$ 380,208
$ 93,827

Other short-term borrowings are primarily utilized to support working capital requirements. The weighted-average interest rate on these borrowings was ~~2.7%~~4.35% and ~~2.4%~~2.49% at September ~~30, 2017~~28, 2019 and December 31, ~~2016,~~2018, respectively.

~~Long-term debt consists~~The company has $200,000 in uncommitted lines of credit. There were $75,000 and $180,000 of outstanding borrowings under the ~~following:~~uncommitted lines of credit at September 28, 2019 and December 31, 2018, respectively. These borrowings were 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 2.88% and 3.39% at September 28, 2019 and December 31, 2018, respectively.

September 30,
2017 December 31,
2016
Revolving credit facility $ 96,200
$ —
Asset securitization program 255,000
460,000
6.875% senior debentures, due 2018 —
199,348
3.00% notes, due 2018 —
299,013
6.00% notes, due 2020 208,928
299,183
5.125% notes, due 2021 130,364
248,843
3.50% notes, due 2022 346,330
345,776
4.50% notes, due 2023 297,001
296,646
3.25% notes, due 2024 492,846
—
4.00% notes, due 2025 345,040
344,625
7.50% senior debentures, due 2027 109,673
198,514
3.875% notes, due 2028 493,449
—
Interest rate swaps designated as fair value hedges 180
152
Other obligations with various interest rates and due dates 27,949
4,234
$ 2,802,960
$ 2,696,334
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 no outstanding borrowings under this program at September 28, 2019 and December 31, 2018. The program had a weighted-average effective interest rate of 2.74% and 2.93% at September 28, 2019 and December 31, 2018, respectively.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Long-term debt consists of the following:



	September 28, 2019		December 31, 2018
Revolving credit facility	$	35,000	$	—
Asset securitization program	680,000		810,000
6.00% notes, due 2020	—		209,147
5.125% notes, due 2021	130,655		130,546
3.50% notes, due 2022	347,885		347,288
4.50% notes, due 2023	298,014		297,622
3.25% notes, due 2024	494,803		494,091
4.00% notes, due 2025	346,214		345,762
7.50% senior debentures, due 2027	109,837		109,776
3.875% notes, due 2028	494,507		494,095
Other obligations with various interest rates and due dates	5,378		788
	$	2,942,293	$	3,239,115

The 7.50% senior debentures are not redeemable prior to their maturity. ~~The 3.00% notes, 6.00% notes, 5.125% notes, 3.50% notes, 4.50% notes, 3.25% notes, 4.00% notes, and 3.875% notes,~~All other notes may be called at the option of the company subject to ~~"make whole"~~“make whole” clauses.

The estimated fair market value, using quoted market prices, is as follows:



	September 28, 2019		December 31, 2018
6.00% notes, due 2020	$	213,000	$	214,500
5.125% notes, due 2021	135,000		134,500
3.50% notes, due 2022	357,500		345,000
4.50% notes, due 2023	315,500		303,500
3.25% notes, due 2024	508,000		467,000
4.00% notes, due 2025	364,000		340,500
7.50% senior debentures, due 2027	136,000		128,000
3.875% notes, due 2028	512,500		458,500

September 30,
2017 December 31,
2016
6.875% senior debentures, due 2018 $ —
$ 212,500
3.00% notes, due 2018 301,500
303,500
6.00% notes, due 2020 226,500
325,500
5.125% notes, due 2021 140,500
265,500
3.50% notes, due 2022 358,000
349,500
4.50% notes, due 2023 318,500
305,500
3.25% notes, due 2024 494,000
—
4.00% notes, due 2025 357,500
345,000
7.50% senior debentures, due 2027 136,500
238,000
3.875% notes, due 2028 499,000
—

The carrying amount of the ~~company's~~company’s short-term borrowings in various countries, revolving credit facility, asset securitization program, commercial paper, and other obligations approximate their fair value.

The company has a ~~$1,800,000~~$2,000,000 revolving credit facility maturing in December ~~2021.~~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~~company’s commercial paper program, as applicable. Interest on borrowings under the revolving credit facility is calculated using a base rate or a ~~euro currency~~Eurocurrency rate plus a spread (1.18% at September ~~30, 2017)~~28, 2019), which is based on the ~~company's~~company’s credit ratings, or an effective interest rate of ~~2.36%~~3.00% at September ~~30, 2017.~~28, 2019. The facility fee, which is based on the ~~company's~~company’s credit ratings, was .20% of the total borrowing capacity at September ~~30, 2017.~~28, 2019. The company had ~~$96,200~~$35,000 in outstanding borrowings under the revolving credit facility at September ~~30, 2017. The company had~~28, 2019 and no outstanding borrowings under the revolving credit facility at December 31, ~~2016.~~2018.

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 no outstanding borrowings under this program at September 30, 2017 and December 31, 2016. The program had an effective interest rate of 1.74% for the third quarter of 2017.

The company has an asset securitization program collateralized by accounts receivable of certain of its subsidiaries. The company may borrow up to ~~$910,000~~$1,200,000 under the asset securitization program, which matures in ~~September 2019.~~June 2021. The asset securitization program is conducted through Arrow Electronics Funding Corporation ~~("AFC"~~(“AFC”), a wholly-owned, bankruptcy remote subsidiary. The asset securitization program does not qualify for true sale treatment. Accordingly, the accounts receivable and related debt obligation remain on the ~~company's~~company’s consolidated balance sheets. Interest on borrowings is calculated using a base rate ~~or a commercial paper rate~~ plus a spread (.40% at September ~~30, 2017)~~28, 2019), ~~which is based on the company's credit ratings,~~ or an effective interest rate of ~~1.73%~~2.49% at September ~~30, 2017.~~28, 2019. The facility fee is .40%. of the total borrowing capacity.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

At September ~~30, 2017~~28, 2019 and December 31, ~~2016,~~2018, the company had ~~$255,000~~$680,000 and ~~$460,000,~~$810,000, respectively, in outstanding borrowings under the asset securitization program, which was included in ~~"Long-term debt"~~“Long-term debt” in the ~~company's~~company’s consolidated balance sheets. Total collateralized accounts receivable of approximately ~~$2,187,751~~$2,539,493 and ~~$2,045,464,~~$2,754,400, respectively, were held by AFC and were included in ~~"Accounts~~“Accounts receivable, ~~net"~~net” in the ~~company's~~company’s consolidated balance sheets. 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 asset securitization program.

Both the revolving credit facility and 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 company was in compliance with all covenants as of September 28, 2019 and is currently not aware of any events that would cause non-compliance with any covenants in the future.

During 2018, the company redeemed $300,000 principal amount of its 3.00% notes due March 2018.

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. Financing costs related to these transactions were not material and are included in “Interest and other financing expense, net” in the company’s consolidated statements of operations.

Interest and other financing expense, net, includes interest and dividend income of $13,501 and $42,038 for the third quarter and first nine months of 2019, respectively. Interest and other financing expense, net, includes interest and dividend income of $12,986 and $33,543 for the third quarter and first nine months of 2018, respectively.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

~~covenants as of September 30, 2017 and is currently not aware of any events that would cause non-compliance with any covenants in the future.~~

~~The company has a $100,000 uncommitted line of credit. The company had no outstanding borrowings under the uncommitted line of credit at September 30, 2017 and December 31, 2016.~~

During June 2017, the company completed the sale of $500,000 principal amount of 3.875% notes due in 2028. The net proceeds of the offering of $494,625 were used to redeem the company's 6.875% senior debenture due June 2018 and refinance a portion of the company’s 6.00% notes due April 2020, 5.125% notes due March 2021, and 7.50% notes due January 2027. The company recorded a loss on extinguishment of debt of $59,545 in the first nine months of 2017.

During September 2017, the company completed the sale of $500,000 principal amount of 3.25% notes due in 2024. The net proceeds of the offering of $493,810 are expected to be used to redeem the company's debt obligations and for general corporate purposes.

Interest and other financing expense, net, includes interest and dividend income of $8,121 and $23,487 for the third quarter and first nine months of 2017, respectively. Interest and other financing expense, net, includes interest and dividend income of $5,040 and $13,626 for the third quarter and first nine months of 2016, respectively.

Note HI – 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 September ~~30, 2017~~:28, 2019:


	Balance Sheet Location	Level 1		Level 2			Level 3			Total			Balance Sheet Location	Level 1		Level 2			Level 3		Total
Cash equivalents(a)	Other assets	$	854	$	—		$	—		$	854		Cash and cash equivalents/ other assets	$	19,847	$	—		$	—	$	19,847
Available-for-sale securities	Other assets	45,112		—			—			45,112
Equity investments (b)													Other assets	43,071		—			—		43,071
Interest rate swaps	Other assets	—		180			—			180			Other liabilities	—		(21,534		)	—		(21,534		)
Foreign exchange contracts	Other current assets	—		6,809			—			6,809			Other current assets/ other assets	—		30,533			—		30,533
Foreign exchange contracts	Accrued expenses	—		(6,733		)	—			(6,733		)	Accrued expenses	—		(1,431		)	—		(1,431		)
Contingent consideration	Accrued expenses	—		—			(3,100		)	(3,100		)
		$	45,966	$	256		$	(3,100	)	$	43,122			$	62,918	$	7,568		$	—	$	70,486

The following table presents assets (liabilities) measured at fair value on a recurring basis at December 31, 2018:



	Balance Sheet Location	Level 1		Level 2			Level 3		Total
Cash equivalents (a)	Cash and cash equivalents/ other assets	$	22,883	$	—		$	—	$	22,883
Equity investments (b)	Other assets	38,045		—			—		38,045
Interest rate swaps	Other liabilities	—		(589		)	—		(589		)
Foreign exchange contracts	Other current assets	—		4,163			—		4,163
Foreign exchange contracts	Accrued expenses	—		(2,384		)	—		(2,384		)
		$	60,928	$	1,190		$	—	$	62,118


(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 $378 and $2,220 for the third quarter and nine months ended September 28, 2019, respectively, on equity securities held at the end of the quarter. The company recorded an unrealized gain of $272 and an unrealized loss of $6,971 for the third quarter and nine months ended September 29, 2018, 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, identifiable intangible assets, and long-lived assets (see Notes D and E). 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)

~~The following table presents assets (liabilities) measured at fair value on a recurring basis at~~ ~~December 31, 2016~~:

Balance Sheet
Location Level 1 Level 2 Level 3 Total
Cash equivalents Other assets $ 2,660
$ —
$ —
$ 2,660
Available-for-sale securities Other assets 37,915
—
—
37,915
Interest rate swaps Other assets —
152
—
152
Foreign exchange contracts Other current assets —
4,685
—
4,685
Foreign exchange contracts Accrued expenses —
(3,444 ) —
(3,444 )
Contingent consideration Accrued expenses
/ Other liabilities —
—
(4,027 ) (4,027 )
$ 40,575
$ 1,393
$ (4,027 ) $ 37,941

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

~~During the first nine months of 2017 and 2016, there were no transfers of assets (liabilities) measured at fair value between the three levels of the fair value hierarchy.~~

~~Available-For-Sale Securities~~

The company has an 8.4% equity ownership interest in Marubun Corporation ("Marubun") and a portfolio of mutual funds with quoted market prices, all of which are accounted for as available-for-sale securities.

~~The fair value of the company's available-for-sale securities is as follows:~~

September 30, 2017 December 31, 2016
Marubun Mutual Funds Marubun Mutual Funds
Cost basis $ 10,016
$ 17,743
$ 10,016
$ 18,097
Unrealized holding gain 7,763
9,590
3,806
5,996
Fair value $ 17,779
$ 27,333
$ 13,822
$ 24,093

~~The unrealized holding gains on these investments are included in "Accumulated other comprehensive loss" in the shareholders' equity section in the company's consolidated balance sheets.~~

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 occasionally enters into interest rate swap transactions that convert certain fixed-rate debt to variable-rate debt or variable-rate debt to fixed-rate debt in order to manage its targeted mix of fixed- and floating-rate debt. The company uses the hypothetical derivative method to assess the effectiveness of its interest rate swaps designated as fair value hedges on a quarterly basis. The ~~effective portion of the~~ change in the fair value of interest rate swaps designated as fair value hedges is recorded as a change to the carrying value of the related hedged debt, and the ~~effective portion of the~~ change in fair value of interest rate swaps designated as cash flow hedges is recorded in the ~~shareholders'~~shareholders’ equity section in the ~~company's~~company’s consolidated balance sheets in ~~"Accumulated~~“Accumulated other comprehensive loss.~~" The ineffective portion~~”

As of September 28, 2019 and December 31, 2018, the company had one outstanding interest rate swap designated as a fair value hedge, the terms of which are as follows:

In May 2019, the company entered into a series of ten-year forward-starting interest rate swaps ~~if any, is recorded~~(the “2019 swaps”) which locked in ~~"Interest and other financing expense, net" in the company's consolidated statements~~an average treasury rate of ~~operations. As~~2.33% on a total aggregate notional amount of ~~September 30, 2017 and December 31, 2016, all outstanding interest rate~~$300,000. The 2019 swaps were designated as cash flow hedges and managed the risk associated with changes in treasury rates and the impact of future interest payments on anticipated debt issuances to replace the company’s 6% notes due to mature in April 2020. The changes in fair value ~~hedges.~~of the 2019 swaps is 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. Losses of $9,360 and $16,209 related to the 2019 swaps were recorded in other comprehensive loss, net of taxes, for the third quarter and first nine months of 2019. The 2019 swaps had a fair value of $(21,517) as of September 28, 2019.

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

~~The terms of our outstanding interest rate swap contracts at September 30, 2017 are as follows:~~

Maturity Date Notional Amount Interest rate due from counterparty Interest rate due to counterparty
April 2020 50,000 6.000% 6 mo. USD LIBOR + 3.896%

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, Chinese Renminbi, Indian Rupee, British Pound, ~~Taiwan Dollar,~~ and ~~Australian~~Canadian Dollar. The company enters into foreign exchange forward, option, or swap contracts (collectively, the ~~"foreign~~“foreign exchange ~~contracts"~~contracts”) ~~to mitigate the impact of changes in foreign currency exchange rates. These contracts are executed~~ 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 ~~designated~~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 estimated using market quotes. The notional amount of the foreign exchange contracts at September ~~30, 2017~~28, 2019 and December 31, ~~2016~~2018 was ~~$447,484~~$914,137 (inclusive of foreign exchange contracts designated as a net investment hedge) and ~~$460,233,~~$607,747, respectively.

Gains and losses related to non-designated foreign currency exchange contracts are recorded in ~~"Cost~~“Cost of ~~sales"~~sales” in the ~~company's~~company’s consolidated statements of operations. Gains and losses related to ~~designated~~ foreign currency exchange contracts designated as cash flow hedges are recorded in ~~"Cost~~“Cost of ~~sales", "Selling,~~sales,” “Selling, general, and administrative ~~expenses",~~expenses,” and ~~"Interest~~“Interest and other financing expense, ~~net"~~net” based upon the nature of the underlying hedged transaction, in the ~~company's~~company’s consolidated statements of operations and were not material for the third quarter and first nine months of ~~2017~~2019 and ~~2016.~~2018.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

During the first quarter of 2019, the company entered into a series of 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 will be recorded in “foreign currency translation adjustment” (“CTA”) within “Accumulated other comprehensive loss” in the company’s consolidated balance sheets. Amounts excluded from the assessment of hedge effectiveness will be included in “Interest and other financing expense, net” in the company’s consolidated statements of operations.

The gains recorded in CTA within other comprehensive loss related to net investment hedges were $13,249 and $20,065 for the third quarter and nine months ended September 28, 2019, net of taxes, respectively. For the third quarter and nine months ended September 28, 2019 gains of $2,193 and $5,791 for outstanding net investment hedges were reclassified from CTA to “Interest and other financing expense, net” in the company’s consolidated statements of operations. The net investment hedges had a fair value of $25,425 as of September 28, 2019.

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



	Quarter Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Gain (Loss) Recognized in Income
Foreign exchange contracts	$	7,642		$	3,565		$	11,905		$	4,083
Interest rate swaps	(327		)	(311		)	(968		)	(922		)
Total	$	7,315		$	3,254		$	10,937		$	3,161
Gain (Loss) Recognized in Other Comprehensive Loss before reclassifications, net of tax
Foreign exchange contracts	$	13,248		$	(1,212	)	$	20,495		$	(2,348	)
Interest rate swaps	(9,360		)	—			(16,209		)	—
Total	$	3,888		$	(1,212	)	$	4,286		$	(2,348	)

Quarter Ended Nine Months Ended
September 30,
2017
October 1,
2016 September 30,
2017 October 1,
2016
Loss Recognized in Consolidated Net Income
Foreign exchange contracts $ (4,283 ) $ (2,394 ) $ (15,445 ) $ (1,873 )
Interest rate swaps (210 ) (153 ) (532 ) (452 )
Total $ (4,493 ) $ (2,547 ) $ (15,977 ) $ (2,325 )
Loss Recognized in Other Comprehensive Income before reclassifications
Foreign exchange contracts $ (374 ) $ (55 ) $ (1,241 ) $ (588 )
Interest rate swaps $ (3,619 ) $ —
$ (4,672 ) $ —

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.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Note IJ – Restructuring, Integration, and Other Charges

~~The following table presents the components of the restructuring, integration, and other charges:~~

Quarter Ended Nine Months Ended
September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016
Restructuring and integration charges - current period actions $ 12,050
$ 12,028
$ 34,296
$ 22,131
Restructuring and integration charges (credits) - actions taken in prior periods 250
(487 ) 6,348
3,474
Other charges 3,596
12,726
15,173
35,556
$ 15,896
$ 24,267
$ 55,817
$ 61,161

~~2017~~Restructuring ~~and Integration Charges~~

~~The following table presents the components of the 2017 restructuring and integration charges and activity in the related restructuring and integration accrual for the first nine months of 2017:~~

Personnel
Costs
Facilities Costs Other Total
Restructuring and integration charges $ 29,030
$ 4,222
$ 1,044
$ 34,296
Payments (14,203 ) (2,575 ) (834 ) (17,612 )
Foreign currency translation 868
83
20
971
Balance as of September 30, 2017 $ 15,695
$ 1,730
$ 230
$ 17,655

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

~~2016~~ ~~Restructuring and Integration Charges~~

The following table presents the ~~activity in~~components of the restructuring, integration, and other charges:



	Quarter Ended					Nine Months Ended
	September 28, 2019			September 29, 2018		September 28, 2019		September 29, 2018
Restructuring and integration charges - current period actions	$	12,484		$	4,102	$	20,562	$	24,332
Restructuring and integration charges (credits) - actions taken in prior periods	(174		)	1,172		1,189		5,452
Other charges	30,810			4,869		52,941		20,713
	$	43,120		$	10,143	$	74,692	$	50,497

Restructuring and Integration Accrual Summary

The restructuring and integration accrual was $18,280 and $25,829 at September 28, 2019 and December 31, 2018, respectively. A transition adjustment of $9,968 was recorded on January 1, 2019 to reclassify restructuring and integration accruals for facilities costs by adjusting the related lease right-of-use assets recorded upon adoption of ASU No. 2016-02, Topic 842. During the third quarter and the first nine months ended September 28, 2019, the company made $7,096 and $19,073, respectively, of ~~2017~~payments related to restructuring and integration ~~actions taken~~accruals. Substantially all amounts accrued at September 28, 2019 and all restructuring and integration charges for the nine months ending September 28, 2019 relate to the termination of personnel. Substantially all amounts accrued at September 28, 2019 are expected to be spent in ~~2016:~~cash within two years. The company expects to incur additional non-recurring charges of approximately $3,500 through the first half of 2020 in conjunction with the closure of its personal computer and mobility asset disposition business within the global components business segment.

Personnel
Costs
Facilities Costs Other Total
Balance as of December 31, 2016 $ 11,694
$ 3,793
$ 316
$ 15,803
Restructuring and integration charges (credits) 6,422
(472 ) (18 ) 5,932
Payments (11,347 ) (2,688 ) (119 ) (14,154 )
Foreign currency translation 436
187
31
654
Balance as of September 30, 2017 $ 7,205
$ 820
$ 210
$ 8,235
Other Charges

~~Restructuring and Integration Accruals Related to Actions Taken Prior to~~ ~~2016~~

Included in restructuring, integration, and other charges for the third quarter and the first nine months of ~~2017~~2019 are other expenses of $30,810 and $52,941, respectively. The following items were included in other charges and credits recorded to restructuring, integration, and ~~integration~~other charges for the third quarter and nine months ended September 28, 2019:

acquisition-related charges for the third quarter and first nine months of ~~$416~~$442 and $1,687, respectively, related to ~~restructuring and integration actions taken prior to 2016. The restructuring and integration charge (credits) includes adjustments to personnel costs of $773, facilities costs of $(337),~~professional and other fees directly related to recent acquisition activity as well as contingent consideration for acquisitions completed in prior years;

relocation and other charges (credits) associated with centralization efforts to maximize operating efficiencies for the third quarter and first nine months of $(1,039) and $7,694, respectively; and

personnel charges for the third quarter and first nine months of $30,906 related to the operating expense reduction program previously disclosed in Item 2.02 Form 8-K filed on July 15, 2019. The company expects to incur $24,100 of additional cash charges for personnel and contract termination costs through the first half of ~~$(20).~~2020. The ~~restructuring and integration accruals~~accrual related to the operating expense reduction program was $22,424 at September ~~30, 2017~~28, 2019, and all accrued amounts are expected to be paid within one year.

Included in restructuring, integration, and other charges for the third quarter and first nine months of 2018 are other expenses of $4,869 and $20,713, respectively. The following items were included in other charges and credits recorded to restructuring, integration, and other charges for the third quarter and nine months ended September 29, 2018:

acquisition related charges for the third quarter and first nine months of $1,422 and $8,960, respectively, related to ~~actions taken~~professional and other fees directly related to recent acquisition activity as well as contingent consideration for acquisitions completed in prior ~~to 2016 of $3,558 include accruals for personnel costs of $2,560, accruals for facilities costs of $870, and accruals for other costs of $128.~~years.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

~~Restructuring and Integration Accrual Summary~~

~~The restructuring and integration accruals aggregate to $29,448 at September 30, 2017, all of which are expected to be spent in cash, and are expected to be utilized as follows:~~

~~The accruals for personnel costs totaling $25,460 relate to the termination of personnel that have scheduled payouts of $20,918 in 2017, $3,917 in 2018, $601 in 2019, and $24 in 2020.~~

The accruals for facilities totaling $3,420 relate to vacated leased properties that have scheduled payments of $2,297 in 2017, $507 in 2018, $112 in 2019, $108 in 2020, $104 in 2021, and $292 thereafter.

~~Other accruals of $568 are expected to be spent within one year.~~

~~Other Charges~~

Included in restructuring, integration, and other charges for the third quarter and first nine months of 2017 are other expenses of $3,596 and $15,173, respectively. The other charge include acquisition related charges for the third quarter and first nine months of 2017 of $559 and $4,562, respectively, related to contingent consideration for acquisitions completed in prior years which were conditional upon the financial performance of the acquired companies and the continued employment of the selling shareholders, as well as professional and other fees directly related to recent acquisition activity. In the third quarter and first nine months of 2017, the company recorded a net loss on real estate transactions of $319 and $3,131, respectively, and incurred an additional expense of $65 and $2,013, respectively, to increase its accrual for the Wyle Laboratories ("Wyle") environmental obligation (see Note L).

Included in restructuring, integration, and other charges for the third quarter and first nine months of 2016 are other expenses of $12,726 and $35,556, respectively. Included in these other charges for the third quarter and first nine months of 2016 are expenses related to a fraud loss that the company recorded, net of insurance recoveries, of $507 and $4,449, respectively. The charges for the third quarter and first nine months of 2016 of $2,679 and $7,645, respectively, related to contingent consideration for acquisitions completed in prior years which were conditional upon the financial performance of the acquired companies and the continued employment of the selling shareholders, as well as professional and other fees directly related to recent acquisition activity. In the third quarter and first nine months of 2016, the company released a $2,376 legal reserve related to the Tekelec Matter and incurred an additional expense of $11,744 to increase its accrual for the Wyle environmental obligation (see Note L). During 2016, the company adopted an amendment to its Wyle defined benefit plan and incurred a settlement expense of $12,211 during the third quarter and first nine months of 2016.

In January 2016, the company determined that it was the target of criminal fraud by persons impersonating a company executive, which resulted in unauthorized transfers of cash from a company account in Europe to outside bank accounts in Asia. Legal actions by the company and law enforcement are ongoing. The information gathered by the company indicates that this was an isolated event not associated with a security breach or loss of data. Additionally, no officers or employees of the company were involved in the fraud.

Note JK – 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				Nine Months Ended
	September 28, 2019		September 29, 2018		September 28, 2019			September 29, 2018
Net income (loss) attributable to shareholders	$	92,131	$	176,533	$	(316,100	)	$	485,542
Weighted-average shares outstanding - basic	82,711		87,602		84,246			87,785
Net effect of various dilutive stock-based compensation awards	686		1,006		—			974
Weighted-average shares outstanding - diluted	83,397		88,608		84,246			88,759
Net income (loss) per share:
Basic	$	1.11	$	2.02	$	(3.75	)	$	5.53
Diluted (a)	$	1.10	$	1.99	$	(3.75	)	$	5.47

Quarter Ended Nine Months Ended
September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016
Net income attributable to shareholders $ 134,630
$ 117,727
$ 348,077
$ 358,232
Weighted-average shares outstanding - basic 88,453
90,937
88,870
91,412
Net effect of various dilutive stock-based compensation awards 1,087
1,001
1,066
1,075
Weighted-average shares outstanding - diluted 89,540
91,938
89,936
92,487
Net income per share:

Basic $ 1.52
$ 1.29
$ 3.92
$ 3.92
Diluted (a) $ 1.50
$ 1.28
$ 3.87
$ 3.87

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

(a)

As the company reported a net loss attributable to shareholders for the first nine 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 1,886 shares were excluded from the computation of net income per share on a diluted basis as their effect was anti-dilutive. Stock-based compensation awards for the issuance of ~~396~~1,086 shares for the third quarter of 2019, and ~~363~~582 and 540 shares for the third quarter and first nine months of ~~2017 and 824 and 821 shares for the third quarter and first nine months 2016,~~2018, respectively, were excluded from the computation of net income per share on a diluted basis as their effect was anti-dilutive.

Note L - Lease Commitments

~~Note K – Shareholders' Equity~~

The company leases certain office, distribution, and other property under non-cancelable operating leases expiring at various dates through 2033. Substantially all leases are classified as operating leases. During the third quarter and first nine months of 2019, the company recorded operating lease cost of $29,950 and $79,940, respectively.

~~Accumulated Other Comprehensive Income (Loss)~~

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

Quarter Ended Nine Months Ended
September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016
Foreign Currency Translation Adjustment and Other:
Other comprehensive income (loss) before reclassifications (a) $ 57,988
$ 15,822
$ 227,928
$ 35,610
Amounts reclassified into income (4,241 ) 46
(6,888 ) 1,137
Unrealized Gain (Loss) on Investment Securities, Net:
Other comprehensive income (loss) before reclassifications 1,357
1,273
4,639
(2,408 )
Amounts reclassified into income —
—
—
—
Unrealized Gain (Loss) on Interest Rate Swaps Designated as Cash Flow Hedges, Net:
Other comprehensive loss before reclassifications (2,223 ) —
(2,870 ) —
Amounts reclassified into income 130
94
327
278
Employee Benefit Plan Items, Net:
Other comprehensive income (loss) before reclassifications (51 ) 25
(94 ) 97
Amounts reclassified into income (loss) 543
789
1,497
5,481
Net change in Accumulated other comprehensive income (loss) $ 53,503
$ 18,049
$ 224,539
$ 40,195



~~(a)~~	Includes intra-entity foreign currency transactions that are of a long-term investment nature of $(11,193) and $(50,512) for the third quarter and first nine months of 2017 and $(9,273) and $(38,092) for the third quarter and first nine months of 2016, respectively.

~~Share-Repurchase Program~~

The following ~~table shows~~amounts were recorded in the ~~company's Board of Directors (the "Board") approved share-repurchase programs as of~~consolidated balance sheets at September ~~30, 2017:~~28, 2019:



	September 28, 2019
Operating Leases
Right-of-use asset	$	294,722

Lease liability - current	59,997
Lease liability - non-current	278,191
Total operating lease liabilities	$	338,188

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
September 2015 $ 400,000
$ 400,000
$ —
December 2016 400,000
16,081
383,919
Total $ 800,000
$ 416,081
$ 383,919

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Maturities of operating lease liabilities at September 28, 2019 were as follows:



	September 28, 2019
2019	$	31,117
2020	79,814
2021	63,428
2022	49,874
2023	39,302
Thereafter	167,937
Total lease payments	431,472
Less: imputed interest	(93,284		)
Total	$	338,188

Other information pertaining to leases consists of the following:



	September 28, 2019
Supplemental Cash Flow Information
Cash paid for amounts included in the measurement of operating lease liabilities	$	74,752
Right-of-use assets obtained in exchange for operating lease obligations	49,349

Operating Lease Term and Discount Rate
Weighted-average remaining lease term in years	7
Weighted-average discount rate	5.1		%

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Note LM – Shareholders’ Equity

Accumulated Other Comprehensive Loss

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



	Quarter Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Foreign Currency Translation Adjustment and Other:
Other comprehensive loss before reclassifications (a)	$	(97,605	)	$	(37,858	)	$	(76,769	)	$	(137,661	)
Amounts reclassified into income	16,208			(7		)	15,968			(130		)
Unrealized Gain (Loss) on Foreign Exchange Contracts Designated as Net Investment Hedges, Net:
Other comprehensive income before reclassifications	13,249			—			20,065			—
Amounts reclassified into income	(1,860		)	—			(4,570		)	—
Unrealized Gain (Loss) on Interest Rate Swaps Designated as Cash Flow Hedges, Net:
Other comprehensive loss before reclassifications	(9,360		)	—			(16,209		)	—
Amounts reclassified into income	246			234			729			693
Employee Benefit Plan Items, Net:
Amounts reclassified into income	45			389			449			1,284
Other:
Retained earnings adjustment (b)	—			—			—			(22,354		)
Net change in Accumulated other comprehensive loss	$	(79,077	)	$	(37,242	)	$	(60,337	)	$	(158,168	)


(a)	Includes intra-entity foreign currency transactions that are of a long-term investment nature of $(7,251) and $(8,032) for the third quarter and first nine months of 2019 and $508 and $3,358 for the third quarter and first nine months of 2018, respectively.


(b)	Amounts relate to unrealized gains and losses on investments and stranded tax effects reclassified from “Accumulated other comprehensive loss” to “Retained earnings” in accordance with ASU No. 2018-02 and ASU No. 2016-01.

Share-Repurchase Program

The following table shows the company’s Board of Directors (the “Board”) approved share-repurchase programs as of September 28, 2019:



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	600,000		161,463		438,537
Total	$	1,000,000	$	561,463	$	438,537

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Note N – Contingencies

Environmental Matters

In connection with the purchase of Wyle in August 2000, the company acquired certain of the then outstanding obligations of Wyle, including ~~Wyle's~~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~~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 ~~fully~~ 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"~~“Accrued expenses” and ~~"Other liabilities"~~“Other liabilities” in the ~~company's~~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.

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 from certain insurance carriers relating to environmental clean-up matters at the Norco site. The company is considering the best way to pursue its potential claims against insurers regarding liabilities arising out of operations at Huntsville. The resolution of these matters 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. The company believes the settlement amount together with potential recoveries from various insurance policies covering environmental remediation and related litigation will be sufficient to cover any potential future costs related to the Wyle acquisition; however, it is possible unexpected costs beyond those anticipated could occur.

Environmental Matters - Huntsville

In February 2015, the company and the Alabama Department of Environmental Management ~~("ADEM"~~(“ADEM”) finalized and executed a consent decree in connection with the Huntsville, Alabama site. Characterization of the extent of contaminated soil and groundwater ~~continues at the site. Under the direction of the ADEM, approximately $5,900~~is complete and has been approved by ADEM. Approximately $6,600 was spent to ~~date. The pace of the ongoing remedial investigations, project management,~~date and ~~regulatory oversight is likely to increase somewhat and, though the complete scope of the activities is not yet known,~~ the company currently ~~estimates~~anticipates no additional investigative and related ~~expenditures at the site of approximately $300 to $600.~~expenditures. The nature and scope of ~~both feasibility studies and~~ subsequent remediation at the site has not yet been determined, but assuming the outcome includes source control and certain other measures, the cost is estimated to be between ~~$4,400~~$3,800 and $10,000.

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. In April 2005, a Remedial Investigation Work Plan was approved by DTSC that provided for site-wide characterization of known and potential environmental issues. Investigations performed in connection with this work plan and a series of subsequent technical memoranda continued until the filing of a final Remedial Investigation Report early in 2008. Work is under way pertaining to the remediation of contaminated groundwater at certain areas on the Norco site and of soil gas in a limited area immediately adjacent to the site. In 2008, a hydraulic containment system (“HCS”) was installed to capture and treat groundwater before it moves into the adjacent offsite area. In September 2013, the DTSC approved the final Remedial Action Plan ~~("RAP"~~(“RAP”) and work is currently progressing under the RAP. The ~~approval of the~~approved RAP ~~includes~~included the potential for additional ~~remediation~~remedial action after the five year review of the ~~hydraulic containment system~~HCS if the review ~~finds~~found that contaminants ~~have~~were not ~~been~~ sufficiently reduced in the offsite area. The HCS five year review submitted to DTSC in December 2016 identified significant reductions in contaminants offsite except in a key area identified in the RAP. This exception triggered the need for additional offsite remediation that began in 2018.

Approximately ~~$55,800~~$73,800 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 ~~$19,000~~$8,000 to ~~$29,800.~~$18,750. 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 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”), conducted an internal investigation and terminated or disciplined the employees involved. The company has cooperated fully and intends to continue to cooperate fully with OFAC and BIS with respect to their review, which may result in the imposition of penalties, which we are currently not able to estimate.

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~~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 MO – 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~~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, ~~and operating~~by segment by geographic area, are as follows:



	Quarter Ended				Nine Months Ended
	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
Components:
Americas	$	1,738,710	$	2,060,920	$	5,522,538	$	5,795,500
EMEA (a)	1,304,109		1,399,435		4,223,363		4,325,793
Asia/Pacific	2,006,061		1,920,723		5,765,841		5,474,081
Global components	$	5,048,880	$	5,381,078	$	15,511,742	$	15,595,374

ECS:
Americas	$	1,418,914	$	1,457,719	$	3,992,277	$	4,040,164
EMEA (a)	610,324		651,648		2,074,638		2,123,048
Global ECS	$	2,029,238	$	2,109,367	$	6,066,915	$	6,163,212
Consolidated (b)	$	7,078,118	$	7,490,445	$	21,578,657	$	21,758,586


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


(b)	Includes sales related to the United States of $2,875,687 and $8,560,115 for the third quarter and first nine months of 2019 and $3,181,227 and $8,799,364 for the third quarter and first nine months of 2018, respectively.

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


	Quarter Ended						Nine Months Ended						Quarter Ended						Nine Months Ended
	September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016			September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Sales:
Global components	$	4,864,361		$	3,904,447		$	13,385,514		$	11,413,348
Operating income (loss):
Global components (c)													$	171,591		$	271,939		$	(159,993	)	$	755,325
Global ECS	2,089,379			2,031,645			5,793,124			5,969,022			92,375			82,187			277,481			275,410
Corporate (d)													(90,748		)	(63,816		)	(247,900		)	(217,603		)
Consolidated	$	6,953,740		$	5,936,092		$	19,178,638		$	17,382,370		$	173,218		$	290,310		$	(130,412	)	$	813,132
Operating income (loss):
Global components	$	212,993		$	175,507		$	583,690		$	524,662
Global ECS	94,797			96,181			282,379			283,792
Corporate (a)	(71,798		)	(73,004		)	(208,533		)	(204,814		)
Consolidated	$	235,992		$	198,684		$	657,536		$	603,640

(c)

Global components operating income includes impairments of $253 and $698,246 for the third quarter and first nine months of 2019, respectively. Also included are non-recurring charges of $1,101 and $21,215 in the third quarter and first nine months of 2019, respectively, related to a subset of inventory held by its digital business and a non-recurring charge (credit) of $(664) and $15,187 in the third quarter and first nine months of 2019, respectively, related to the receivables and inventory of its financing solutions business. The company has made the decision to narrow its digital inventory offerings and will no longer provide notes to its components customers. Also included are restructuring, integration, and other charges of $12,034 and a loss on disposition of businesses, net, of $14,573 for the third quarter and first nine months of 2019.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)


~~(a)~~(d)	Includes restructuring, integration, and other charges of ~~$15,896~~$31,086 and ~~$55,817~~$62,658 for the third quarter and first nine months of ~~2017~~2019 and ~~$24,267~~$10,143 and ~~$61,161~~$50,497 for the third quarter and first nine months of ~~2016,~~2018, respectively. Also includes a loss on disposition of businesses of $866 for the first nine months of 2019.

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



	September 28, 2019		December 31, 2018
Global components	$	10,447,811	$	11,425,579
Global ECS	4,518,883		5,632,102
Corporate	723,017		726,764
Consolidated	$	15,689,711	$	17,784,445

September 30,
2017 December 31,
2016
Global components $ 9,674,716
$ 8,360,926
Global ECS 4,590,887
5,053,172
Corporate 791,363
792,268
Consolidated $ 15,056,966
$ 14,206,366

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

Quarter Ended Nine Months Ended
September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016
Americas (b) $ 3,217,537
$ 2,897,810
$ 8,829,813
$ 8,327,845
EMEA (c) 1,886,440
1,548,067
5,406,330
4,990,973
Asia/Pacific 1,849,763
1,490,215
4,942,495
4,063,552
Consolidated $ 6,953,740
$ 5,936,092
$ 19,178,638
$ 17,382,370


~~(b)~~	Includes sales related to the United States of $2,959,857 and $8,060,819 for the third quarter and first nine months of 2017 and $2,677,954 and $7,665,313 for the third quarter and first nine months of 2016, respectively.


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

Net property, plant, and equipment, by geographic area, is as follows:



	September 28, 2019		December 31, 2018
Americas (e)	$	614,722	$	673,228
EMEA	138,564		110,996
Asia/Pacific	51,978		40,476
Consolidated	$	805,264	$	824,700

September 30,
2017 December 31,
2016
Americas (d) $ 671,668
$ 631,386
EMEA 104,028
90,834
Asia/Pacific 39,683
34,079
Consolidated $ 815,379
$ 756,299


~~(d)~~(e)	Includes net property, plant, and equipment related to the United States of ~~$666,511~~$612,258 and ~~$626,964~~$670,201 at September ~~30, 2017~~28, 2019 and December 31, ~~2016,~~2018, respectively.

Note NP – ~~Subsequent Event~~Income Taxes

~~In October 2017,~~The principal causes of the ~~company entered into a settlement for a portion~~difference between the U.S. federal statutory tax rate of ~~its Wyle defined benefit plan. Participants will receive benefits through an insurance annuity contract. The company expects to recognize a settlement expense during the fourth quarter of 2017.~~21% and effective income tax rates are as follows:



	Quarter Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Provision (benefit) at statutory tax rate	$	25,687		$	49,398		$	(59,110	)	$	135,326
State taxes, net of federal benefit	(1,030		)	4,255			(8,534		)	12,238
International effective tax rate differential	4,774			1,574			12,991			4,372
U.S. tax (benefit) on foreign earnings	(6,860		)	2,001			3,020			10,213
Changes in tax accruals	2,954			(3,234		)	3,874			(1,941		)
Tax credits	1,834			(2,486		)	(2,167		)	(6,223		)
Non-deductible portion of impairment of goodwill	—			—			76,153			—
Tax Act’s impact on deferred taxes (a)	—			—			—			(4,340		)
Other	1,981			5,546			4,651			5,680
Provision for income taxes	$	29,340		$	57,054		$	30,878		$	155,325


(a)	Tax benefit related to the net change in deferred tax liabilities stemming from the U.S. federal government enacting tax legislation reducing the U.S. federal tax rate from 35% to 21%.


Item 2.	~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Arrow Electronics, Inc. (the ~~"company"~~“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 first nine months of ~~2017,~~2019, approximately ~~70%~~72% of the ~~company's~~company’s sales were from the global components business segment and approximately ~~30%~~28% of the ~~company's~~company’s sales were from the global ECS business segment.

The ~~company's~~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/or~~and expand its geographic reach.

Executive Summary

Consolidated sales for the third quarter and first nine months of ~~2017 increased~~2019 decreased by ~~17.1%~~5.5% and ~~10.3%~~0.8%, respectively, compared with the year-earlier ~~period.~~periods. The ~~increase~~decrease for the third quarter of ~~2017~~2019 was driven by ~~an increase~~a 6.2% decrease in the global components business segment sales ~~of 24.6%~~ and ~~an increase~~a 3.8% decrease in ~~the~~ global ECS business segment ~~sales of 2.8%.~~sales. The ~~increase~~decrease for the first nine months of ~~2017~~2019 was driven by ~~an increase~~a 0.5% decrease in the global components business segment sales ~~of 17.3% offset by~~and a 1.6% decrease in the global ECS business segment ~~sales of 2.9%.~~sales. Adjusted for the change in foreign currencies, dispositions, and ~~acquisitions,~~the wind down, consolidated sales decreased 3.5% for the third quarter of 2019 and increased ~~15.5%~~2.0% for the first nine months of 2019, compared with the year-earlier periods.

The company committed to a plan to close the company’s personal computer and ~~10.3%~~mobility asset disposition business (referred to as the “wind down”), whose past results have been included as part of the global components business segment. As a result of the wind down, the company incurred non-recurring charges of $26.1 million and $101.6 million for the third quarter and first nine months ~~respectively,~~ of ~~2017 compared with~~2019, and expects to incur additional non-recurring charges of approximately $3.5 million through the ~~year-earlier period.~~first half of 2020. The charges include $74.9 million of non-cash impairments of certain long-lived and intangible assets, loss on disposition of businesses, net, of $14.6 million, cash personnel charges, and other exit and disposal costs. The company expects that operations will cease and the remaining wind down of the personal computer and mobility asset disposition business will be substantially complete by the end of 2019.

~~Net income attributable to shareholders increased to $134.6~~The company recorded a non-cash charge of $1.1 million and ~~decreased to $348.1~~$21.2 million, in the third quarter and first nine months of ~~2017,~~2019, respectively, primarily related to a subset of inventory held by its digital business within global components. The company made the decision to narrow its digital inventory offerings during Q2 2019 and is disposing of its existing inventory of these products and does not expect to fully realize their carrying values.

The company recorded a charge (credit) of $(0.7) million and $15.2 million in the third quarter and first nine months of 2019, respectively, related to the receivables and inventory of its Arrow Financing Solutions business (“AFS”) within global components. This business provided financing in the form of notes to start-ups as a strategy to capture new business opportunities. The company decided that it will no longer provide notes to its components customers. The company expects that this decision will adversely impact the ability of the customers to repay their notes and trade receivables. During the second quarter of 2019, the company recorded reserves on the receivables and write-downs on customer specific inventory for which the company has no alternative use.

The company reported net income (loss) attributable to shareholders of $92.1 million and $(316.1) million in the third quarter and first nine months of 2019, respectively, compared ~~to $117.7~~with $176.5 million and ~~$358.2~~$485.5 million in the year-earlier periods. The following items impacted the comparability of the ~~company's~~company’s results:

Thirdquarters of~~2017~~ 2019 and ~~2016:~~2018:


•	impairments of $0.7 million in 2019;

~~loss on extinguishment~~losses from wind down of ~~debt~~business of ~~$0.8~~$36.8 million in ~~2017;~~2019 and $0.6 million in 2018;

Digital inventory write-downs, net of $1.1 million in 2019;

AFS notes receivables and inventory recoveries of $0.7 million in 2019;

restructuring, integration, and other charges (excluding the impact of ~~$15.9~~wind down) of $31.1 million in ~~2017~~2019 and ~~$24.3~~$9.6 million in ~~2016;~~2018;

identifiable intangible asset amortization (excluding the impact of ~~$12.6~~wind down) of $10.3 million in ~~2017~~2019 and ~~$13.9~~$8.8 million in ~~2016;~~2018;

net gain on investments of $1.1 million in 2019 and $1.1 million in 2018; and

loss on ~~investment,~~disposition of businesses, net, of ~~$15.0~~$2.0 million in ~~2017~~2018.

First nine monthsof~~2017~~ 2019 and ~~2016:~~2018:

~~loss on extinguishment~~goodwill and other impairments of ~~debt of $59.5~~$623.8 million in ~~2017;~~2019;

losses from wind down of business of $151.4 million and $15.6 million in 2018;

Digital inventory write-downs, net of $21.2 million in 2019;

AFS notes receivables reserves and inventory write-downs, net of $15.2 million in 2019;

restructuring, integration, and other charges (excluding the impact of ~~$55.8~~wind down) of $62.1 million in ~~2017~~2019 and ~~$61.2~~$38.2 million in ~~2016;~~2018;

identifiable intangible asset amortization (excluding the impact of ~~$37.9~~wind down) of $28.1 million in ~~2017~~2019 and ~~$41.3~~$28.7 million in ~~2016;~~2018;

impact of U.S. tax reform of $3.5 million in 2019;

net gain on investments of $7.9 million in 2019 and net loss on investments of $3.9 million in 2018; and

loss on ~~investment,~~disposition of businesses, net, of ~~$14.3~~$0.9 million in ~~2017~~2019 and $3.6 million in 2018.

Excluding the aforementioned items, net income attributable to shareholders for the third quarter and first nine months of ~~2017 increased~~2019 decreased to ~~$162.9~~$154.8 million and ~~$455.3~~$455.1 million, respectively, compared with ~~$143.1~~$190.9 million and ~~$428.1~~$551.0 million in the year-earlier periods.

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"~~(“GAAP”), the company also discloses certain non-GAAP financial information, including:

Sales, ~~income, or expense items~~gross profit, and operating expenses as adjusted for the impact of changes in foreign currencies (referred to as ~~"impact of~~ changes in foreign ~~currencies") and~~currencies) by re-translating prior period results at current period foreign exchange rates, the impact of ~~acquisitions~~dispositions by adjusting the ~~company's~~company’s operating results for businesses ~~acquired, including the amortization expense related to acquired intangible assets,~~disposed, as if the ~~acquisitions~~dispositions had occurred at the beginning of the earliest period presented (referred to as ~~"impact~~dispositions), the impact of ~~acquisitions"~~the company’s personal computer and mobility asset disposition business (referred to as 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 related to the AFS business (referred to as “AFS notes receivable reserves and credits” and “AFS inventory write-downs and recoveries,” respectively).

Operating income as adjusted to exclude identifiable intangible asset amortization, ~~and~~ restructuring, integration, and other ~~charges;~~charges, and 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 of non-cash charges related to goodwill, trade names, and property, plant and equipment, and the impact of wind down.

Net income attributable to shareholders as adjusted to exclude identifiable intangible asset amortization, restructuring, integration, and other charges, and loss on ~~extinguishment~~disposition of ~~debt, loss on investment,~~businesses, net, AFS notes receivable reserves and ~~other charges.~~credits and inventory write-downs and recoveries, digital inventory write-downs and recoveries, the impact of non-cash charges related to goodwill, trade names, and property, plant, and equipment, the impact of wind down, and the impact of U.S. tax reform.

Management believes that providing this additional information is useful to the reader to better assess and understand the ~~company's~~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~~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~~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 Nine Months Ended
September 30,
2017 October 1,
2016
%
Change
September 30,
2017 October 1,
2016
%
Change
Consolidated sales, as reported $ 6,954
$ 5,936
17.1 % $ 19,179
$ 17,382
10.3 %
Impact of changes in foreign currencies —
83
—
(47 )
Impact of acquisitions —
1
—
48

Consolidated sales, as adjusted $ 6,954
$ 6,020
15.5 % $ 19,179
$ 17,383
10.3 %

Global components sales, as reported $ 4,864
$ 3,904
24.6 % $ 13,386
$ 11,413
17.3 %
Impact of changes in foreign currencies —
56
—
(13 )
Impact of acquisitions —
1
—
10

Global components sales, as adjusted $ 4,864
$ 3,961
22.8 % $ 13,386
$ 11,410
17.3 %

Global ECS sales, as reported $ 2,089
$ 2,032
2.8 % $ 5,793
$ 5,969
(2.9 )%
Impact of changes in foreign currencies —
27
—
(34 )
Impact of acquisitions —
—
—
38

Global ECS sales, as adjusted $ 2,089
$ 2,059
1.5 % $ 5,793
$ 5,973
(3.0 )%



	Quarter Ended								Nine Months Ended
	September 28, 2019			September 29, 2018			% Change		September 28, 2019			September 29, 2018			% Change

Consolidated sales, as reported*	$	7,078		$	7,490		(5.5	)%	$	21,579		$	21,759		(0.8	)%
Impact of changes in foreign currencies	—			(103		)			—			(448		)
Impact of dispositions and wind down	(60		)	(116		)			(232		)	(378		)
Consolidated sales, as adjusted*	$	7,018		$	7,271		(3.5	)%	$	21,346		$	20,933		2.0	%

Global components sales, as reported*	$	5,049		$	5,381		(6.2	)%	$	15,512		$	15,595		(0.5	)%
Impact of changes in foreign currencies	—			(68		)			—			(297		)
Impact of dispositions and wind down	(60		)	(105		)			(221		)	(313		)
Global components sales, as adjusted	$	4,989		$	5,208		(4.2	)%	$	15,291		$	14,985		2.0	%

Global ECS sales, as reported*	$	2,029		$	2,109		(3.8	)%	$	6,067		$	6,163		(1.6	)%
Impact of changes in foreign currencies	—			(36		)			—			(151		)
Impact of dispositions	—			(11		)			(11		)	(65		)
Global ECS sales, as adjusted	$	2,029		$	2,062		(1.6	)%	$	6,056		$	5,947		1.8	%

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

Consolidated sales for the third quarter and first nine months of ~~2017 increased~~2019 decreased by ~~$1.02 billion,~~$412.3 million, or ~~17.1%~~5.5%, and ~~$1.80 billion,~~decreased by $179.9 million, or ~~10.3%~~0.8%, respectively, compared with the year-earlier period. The ~~increase~~decrease for the third quarter of ~~2017~~2019 was driven by ~~an increase~~a decrease in global components segment sales of $332.2 million, or 6.2% and global ECS business segment sales of $80.1 million, or 3.8%. The decrease for the first nine months of 2019 was driven by a decrease in global components business segment sales of ~~$959.9~~$83.6 million, or ~~24.6%,~~0.5% and ~~an increase in~~ global ECS business segment sales of ~~$57.7~~$96.3 million, or 2.8%. The increase for the first nine months of 2017 was driven by an increase in global components business segment sales of $1.97 billion, or 17.3%, offset by a decrease in global ECS business segment sales of $175.9 million, or 2.9%1.6%. Adjusted for the impact of changes in foreign currencies and ~~acquisitions,~~dispositions and wind down, consolidated sales decreased 3.5% and increased ~~15.5% and 10.3%~~2.0% for the third quarter and first nine months of ~~2017,~~2019, respectively, compared with the year-earlier periods.

In the global components business segment, sales for the third quarter and first nine months of ~~2017 increased $959.9~~2019 decreased by $332.2 million, or ~~24.6%~~6.2%, and ~~$1.97 billion,~~$83.6 million, or ~~17.3%~~0.5%, respectively, compared with the year-earlier periods, with ~~over 20% sales growth across all~~broad declines in demand in the Americas and EMEA regions ~~for~~partially offset by stronger demand in the ~~third quarter of 2017. The increase for the third quarter and the first nine months is attributable to suppliers awarding additional business to the company.~~Asia region. Adjusted for the impact of changes in foreign currencies and ~~acquisitions,~~wind down, the ~~company's~~company’s global components business segment sales decreased by 4.2% and increased ~~by 22.8% and 17.3%~~2.0% for the third quarter and first nine months of ~~2017,~~2019, respectively, compared with the year-earlier periods.

In the global ECS business segment, sales for the third quarter and first nine months of ~~2017 increased $57.7~~2019 decreased $80.1 million, or ~~2.8%~~3.8%, and ~~decreased $175.9~~$96.3 million, or ~~2.9%~~1.6%, respectively, compared with the year-earlier ~~period.~~periods. The ~~increase for~~decreases during the third quarter ~~sales relates primarily to the increased demand in the EMEA region. The decrease for~~and first nine months ~~relates~~of 2019 are primarily attributable to ~~decreased~~falling demand in ~~the Americas regions.~~industry standard servers and networking equipment, offset partially by strong growth in software. Adjusted for the impact of changes in foreign currencies and ~~acquisitions,~~dispositions, the ~~company's~~company’s global ECS business segment sales decreased 1.6% and increased ~~1.5% and decreased 3.0%~~1.8% for the third quarter and first nine months of ~~2017,~~2019, respectively, compared with year-earlier periods.

Gross Profit

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


																	Quarter Ended							Nine Months Ended
	Quarter Ended								Nine Months Ended								September 28, 2019			September 29, 2018			% Change	September 28, 2019			September 29, 2018			% Change
	September 30, 2017			October 1, 2016			% Change		September 30, 2017			October 1, 2016			% Change
Consolidated gross profit, as reported	$	843		$	773		9.1	%	$	2,427		$	2,321		4.6	%	$	799		$	924		(13.5)%	$	2,475		$	2,726		(9.2)%
Impact of changes in foreign currencies	—			12					—			(9		)			—			(15		)		—			(66		)
Impact of acquisitions	—			1					—			13
Consolidated gross profit, as adjusted	$	843		$	786		7.3	%	$	2,427		$	2,325		4.4	%
Impact of dispositions and wind down																	(4		)	(19		)		(8		)	(65		)
Digital and AFS inventory write-downs and credits																	1			—				23			—
Consolidated gross profit, as adjusted*																	$	796		$	890		(10.5)%	$	2,490		$	2,594		(4.0)%
Consolidated gross profit as a percentage of sales, as reported	12.1		%	13.0		%	(90) bps		12.7		%	13.4		%	(70) bps		11.3		%	12.3		%	(100) bps	11.5		%	12.5		%	(100) bps
Consolidated gross profit as a percentage of sales, as adjusted	12.1		%	13.1		%	(100) bps		12.7		%	13.4		%	(70) bps		11.3		%	12.2		%	(90) bps	11.7		%	12.4		%	(70) bps

* The sum of the components for gross profit as reported and as adjusted may not agree to totals, as presented, due to rounding.

The company recorded gross profit of ~~$843.4~~$798.8 million and ~~$2.43~~$2.48 billion in the third quarter and first nine months of ~~2017,~~2019, respectively, compared with ~~$773.2~~$923.8 million and ~~$2.32~~$2.73 billion in the year-earlier periods. ~~The increase~~

Adjusted for the impact of changes in foreign currencies, dispositions, and the Digital and AFS inventory write-downs, net, gross profit ~~was primarily due to increased demand~~decreased 10.5% and ~~supplier awards~~4.0% in the ~~components business.~~third quarter and first nine months of 2019, respectively, compared with the year-earlier periods. Gross profit margins in the third quarter and first nine months of ~~2017~~2019, as adjusted, decreased by approximately 90 bps and 70 bps, respectively, compared with the year-earlier periods primarily due to ~~an increase~~a shift in ~~lower margin distribution services.~~product mix as well as regional mix.

Selling, General, and Administrative Expenses and Depreciation and Amortization

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


																	Quarter Ended							Nine Months Ended
	Quarter Ended								Nine Months Ended								September 28, 2019			September 29, 2018			% Change	September 28, 2019			September 29, 2018			% Change
	September 30, 2017			October 1, 2016			% Change		September 30, 2017			October 1, 2016			% Change
Selling, general, and administrative expenses, as reported	$	553		$	510		8.4	%	$	1,601		$	1,535		4.3	%	$	522		$	576		(9.3)%	$	1,678		$	1,719		(2.4)%
Depreciation and amortization, as reported	39			40			(4.0	)%	113			122			(6.9	)%	45			46			(0.7)%	140			139			flat
Operating expenses, as reported*	591			550			7.5	%	1,714			1,656			3.5	%	$	568		$	621		(8.6)%	$	1,817		$	1,858		(2.2)%
Impact of changes in foreign currencies	—			8					—			(7		)			—			(9		)		—			(43		)
Impact of acquisitions	—			1					—			9
Impact of dispositions and wind down																	(14		)	(19		)		(58		)	(69		)
AFS notes receivable (reserves) and credits																	1			—				(13		)	—
Operating expenses, as adjusted*	$	591		$	559		5.8	%	$	1,714		$	1,658		3.4	%	$	554		$	593		(6.5)%	$	1,746		$	1,746		flat
Operating expenses as a percentage of sales, as reported	8.5		%	9.3		%	(80) bps		8.9		%	9.5		%	(60) bps		8.0		%	8.3		%	(30) bps	8.4		%	8.5		%	(10) bps
Operating expenses as a percentage of sales, as adjusted	8.5		%	9.3		%	(80) bps		8.9		%	9.5		%	(60) bps		7.9		%	8.2		%	(30) bps	8.2		%	8.3		%	(10) bps

* The sum of the components for ~~consolidated operating expenses~~gross profit as reported and as adjusted may not agree to totals, as presented, due to rounding.

Selling, general, and administrative expenses ~~increased~~decreased by ~~$42.9~~$53.3 million, or ~~8.4%~~9.3%, and ~~$66.2~~$41.4 million, or ~~4.3%~~2.4%, respectively, in the third quarter and first nine months of ~~2017, respectively,~~2019 on a sales ~~increase~~decrease of ~~17.1%~~5.5% and ~~10.3%~~0.8% compared with the year-earlier periods. Selling, general, and administrative expenses as a percentage of sales were ~~8.0%~~7.4% and ~~8.3%~~7.8% for the third quarter and first nine months of ~~2017,~~2019, respectively, compared with ~~8.6%~~7.7% and ~~8.8%~~7.9% in the year-earlier periods.

Depreciation and amortization expense as a percentage of operating expenses was ~~6.5%~~8.0% and ~~6.6%~~7.7% for the third quarter and first nine months of ~~2017,~~2019, respectively, compared with 7.3% and 7.5% in ~~both of~~ the ~~prior year~~year-earlier periods. Included in depreciation and amortization expense is identifiable intangible asset amortization of ~~$12.6~~$10.4 million and ~~$37.9~~$33.8 million for the third quarter and first nine months of ~~2017,~~2019, respectively, compared to ~~$13.9~~$11.6 million and ~~$41.3~~$37.1 million in the year-earlier periods.

Adjusted for the impact of changes in foreign currencies, dispositions, and ~~acquisitions,~~AFS notes receivables reserves and credits, operating expenses ~~increased 5.8%~~decreased 6.5% and ~~3.4%~~were flat for the third quarter and first nine months of ~~2017,~~2019, respectively, compared with the year-earlier periods. Operating expense as a percentage of sales decreased 30 bps and 10 bps for the third quarter and first nine months of 2019, respectively, compared with the year-earlier periods. The decline in operating expense as a percentage of sales reflects the operational efficiencies the company achieved to align costs to the business mix.

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 of the personal computer and mobility asset disposition business to estimated fair value in the second quarter of 2019.

During the second quarter of 2019, as a result of the company’s downward revision of forecasted future earnings previously disclosed in Item 2.02 Form 8-K filed 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 approximately $600.0 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 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. As the Americas components reporting unit has 0% excess fair value over the carrying value of the reporting unit as of June 29, 2019, the remaining approximately $600.0 million of goodwill is susceptible to future period impairments. For example, a 100 basis point decrease in forecasted gross profit margin could result in a full impairment of the remaining approximately $600.0 million of goodwill, absent other inputs improving. 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 based on an evaluation of historical performance, current industry and global economic and geo-political conditions, and the timing and success of the implementation of current strategic initiatives. The company concluded no further indicators of potential impairment existed, and as such, no interim impairment test was required at September 28, 2019.

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 will begin 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.

Restructuring, Integration, and Other Charges

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

~~2017~~2019 Charges

The company recorded restructuring, integration, and other charges of ~~$15.9~~$43.1 million and ~~$55.8~~$74.7 million for the third quarter and first nine months of ~~2017, respectively. For the third quarter and first nine months of 2017, restructuring and integration charges of $12.1~~2019, respectively, which includes $12.5 million and ~~$34.3~~$20.6 million ~~respectively,~~ related to initiatives taken by the company during ~~2017~~2019 to improve operating efficiencies and ~~$0.6 million and $4.6 million, respectively,~~personnel charges of acquisition-related expenses. In the third quarter and first nine months of 2017, the company recorded a net loss on real estate transactions of $0.3 million and $3.1 million, respectively, and incurred an additional expense of $0.1 million and $2.0 million, respectively, to increase its accrual for the Wyle environmental obligation.

~~The restructuring and integration charge of $12.1 million and $34.3~~$30.9 million for the third quarter and first nine months of ~~2017,~~2019 related to the operating expense reduction program previously disclosed in Item 2.02 Form 8-K filed on July 15, 2019. The company expects to incur additional non-recurring charges of approximately $3.5 million through the first half of 2020 in conjunction with the close of its personal computer and mobility asset disposition business (referred to as the “wind down”) within the global components business segment. The company also expects to incur $24.1 million of additional cash charges through the first half of 2020 for personnel and contract termination costs related to the operating expense reduction program.

respectively, includes personnel costs of $10.4 million and $29.0 million. Also included therein for both the third quarter and first nine months of 2017, respectively, are facilities costs of $1.3 million and $4.2 million and other costs of $0.4 million and $1.0 million.

2018 Charges

~~2016~~ ~~Charges~~

The company recorded restructuring, integration, and other charges of ~~$24.3~~$10.1 million and ~~$61.2~~$50.5 million for the third quarter and first nine months of ~~2016, respectively. For the third quarter and first nine months of 2016, restructuring and integration charges of $12.0~~2018, respectively, which includes $4.1 million and ~~$22.1~~$24.3 million ~~respectively,~~ related to initiatives taken by the company during 2018 to improve operating ~~efficiencies. For the first nine months of 2016, the company recorded a fraud loss, net of insurance recoveries, of $4.4 million. Also included in the third quarter~~efficiencies and ~~first nine months of 2016 are~~ acquisition-related expenses of ~~$2.7~~$1.4 million and ~~$7.6~~$9.0 million, respectively, and a pension settlement charge of $12.2 million for both the third quarter and first nine months of 2016. In the third quarter and first nine months of 2016, the company released a $2.4 million legal reserve related to the Tekelec Matter and incurred an additional expense of $11.7 million to increase its accrual for the Wyle environmental obligation.

respectively. The restructuring and integration ~~charge~~charges of ~~$12.0~~$4.1 million and ~~$22.1~~$24.3 million for the third quarter and first nine months of ~~2016,~~2018, respectively, includes personnel costs of ~~$10.5~~$4.3 million and ~~$18.0 million. Also included therein for both the third quarter and first nine months of 2016 are~~$14.8 million, facilities costs of ~~$0.7~~$(0.1) million and ~~$3.2~~$9.5 million, and other costs of ~~$0.9~~$(0.1) million and ~~$1.0~~$0.1 million, respectively.

As of September ~~30, 2017,~~28, 2019, the company does not anticipate there will be any material adjustments relating to the aforementioned restructuring and integration plans. Refer to Note ~~I, "Restructuring,~~J, “Restructuring, Integration, and Other Charges,"” of the Notes to the Consolidated Financial Statements for further discussion of the ~~company's~~company’s restructuring and integration activities.

Loss on Disposition of Businesses, Net

During the third quarter and first nine months of 2019, the company recorded a loss on disposition of businesses of $14.6 million and $15.4 million, respectively, primarily related to the reclassification of cumulative translation adjustment to earnings upon the sale of two businesses which were part of the company’s personal computer and mobility asset disposition business.

During the third quarter and first nine months of 2018, the company recorded a loss on disposition of businesses of $2.0 million and $3.6 million, respectively, related to the sale of two non-strategic businesses.

Operating Income

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


	Quarter Ended								Nine Months Ended								Quarter Ended							Nine Months Ended
	September 30, 2017			October 1, 2016			% Change		September 30, 2017			October 1, 2016			% Change		September 28, 2019			September 29, 2018			% Change	September 28, 2019			September 29, 2018			% Change
Consolidated operating income, as reported	$	236		$	199		18.8	%	$	658		$	604		8.9	%
Identifiable intangible asset amortization	13			14					38			41
Restructuring, integration, and other charges	16			24					56			61

Consolidated operating income (loss), as reported																	$	173		$	290		(40.3)%	$	(130	)	$	813		(116.0)%
Identifiable intangible asset amortization**																	10			9				28			29
Restructuring, integration, and other charges**																	31			10				62			38
Loss on disposition of businesses, net**																	—			2				1			4
AFS notes receivable reserve and inventory write-downs (credits)																	(1		)	—				15			—
Digital inventory write-downs																	1			—				21			—
Goodwill and other impairments**																	1			—				624			—
Impact of wind down**																	37			1				151			15
Consolidated operating income, as adjusted*	$	265		$	237		11.7	%	$	751		$	706		6.4	%	$	253		$	311		(18.9)%	$	772		$	899		(14.1)%
Consolidated operating income as a percentage of sales, as reported	3.4		%	3.3		%	10 bps		3.4		%	3.5		%	(10) bps		2.4		%	3.9		%	(150) bps	(0.6		)%	3.7		%	(430) bps
Consolidated operating income, as adjusted, as a percentage of sales, as reported	3.8		%	4.0		%	(20) bps		3.9		%	4.1		%	(20) bps		3.6		%	4.2		%	(60) bps	3.6		%	4.1		%	(50) bps

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

The company recorded operating income of ~~$236.0~~$173.2 million, or ~~3.4%~~2.4% of sales, and ~~$657.5~~an operating loss of $130.4 million, or ~~3.4%~~(0.6)% of sales, in the third quarter and first nine months of ~~2017,~~2019, respectively, compared with operating income of ~~$198.7~~$290.3 million, or ~~3.3%~~3.9% of sales, and ~~$603.6~~$813.1 million, or ~~3.5%~~3.7% of sales, in the year-earlier periods. ~~Excluding identifiable intangible asset amortization and restructuring, integration, and other charges, operating~~Operating income, as adjusted, was ~~$264.5~~$252.6 million, or ~~3.8%~~3.6% of sales, and ~~$751.3~~$772.1 million, or ~~3.9%~~3.6% of sales, in the third quarter and first nine months of ~~2017,~~2019, respectively, compared with operating income, as adjusted, of ~~$236.8~~$311.4 million, or ~~4.0%~~4.2% of sales, and ~~$706.1~~$899.1 million, or 4.1% of sales, in the year-earlier periods. Operating income, as adjusted, ~~increased 11.7%~~decreased 18.9% and ~~6.4 %~~14.1% for the third quarter and first nine months of ~~2017,~~2019, respectively, compared with the year-earlier periods, on a sales ~~increase~~decrease of ~~17.1%~~5.5% and ~~10.3%, respectively,~~0.8% compared with the year-earlier periods. Operating income, as adjusted as a percentage of sales, decreased 2060 bps and 50 bps for ~~both~~ the third quarter and first nine months of ~~2017, respectively, compared with~~2019, respectively. Operating margins declines were primarily due to the ~~year-earlier periods, due primarily to increased sales in low margin~~ global components ~~businesses~~business, with product mix shifting towards lower margin products and ~~decreased demand~~away from engineering and design services, as well as regional mix due to growth in Asia, offset by operating margin improvement in the global ECS business ~~largely offset~~driven by favorable product mix.

Gain (Loss) on Investments, Net

During the ~~company's ability~~third quarter and first nine months of 2019, the company recorded a gain of $1.1 million and $7.9 million, respectively, compared to ~~efficiently manage operating costs.~~a gain of $1.1 million and a loss of $3.9 million, in the year-earlier periods. The changes related to changes in fair value of certain investments.

Interest and Other Financing Expense, Net

The company recorded net interest and other financing expense of ~~$39.7~~$49.9 million and ~~$120.2~~$153.4 million for the third quarter and first nine months of ~~2017,~~2019, respectively, compared with ~~$37.2~~$54.2 million and ~~$111.8~~$160.2 million in the year-earlier periods. The ~~increase~~decrease for the

third quarter of 2019 primarily relates to lower borrowings during the quarter, slightly lower interest rates on floating rate debt, and amortization of amounts excluded from the assessment of hedge effectiveness for net investment hedges (see Note I). The decrease for the first nine months of ~~2017 was~~2019 primarily ~~due~~relates to ~~higher~~lower average long-term debt outstanding, ~~and~~ an increase in ~~variable~~ interest ~~rates, offset partially by increased~~and dividend income, and amortization of amounts excluded from the assessment of hedge effectiveness for net investment hedges (see Note I). The increase in interest ~~income.~~and dividend income is attributable to an increase in the average cash balances with the company’s cash pooling arrangements.

~~Other~~

~~During the third quarter and first nine months of 2017, the company recorded a loss on investment of $15.0 million related to a full impairment of a cost method investment.~~

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 third quarter and first nine months of ~~2017,~~2019, the company recorded a provision for income taxes of ~~$46.2~~$29.3 million, an effective tax rate of ~~25.4%~~24.0%, and ~~$115.0~~$30.9 million, an effective tax rate of ~~24.7%~~(11.0)%, respectively. The ~~company's~~company’s provision for income taxes and effective tax rate for the third quarter and first nine months of ~~2017~~2019 were impacted by the previously discussed restructuring, integration, and other charges, ~~including, among other things,~~ identifiable intangible asset amortization, loss on ~~extinguishment~~disposition of ~~debt,~~businesses, net, the impact of U.S. tax reform, gain on investments, AFS reserves and ~~loss on sale~~credits, Digital inventory write downs, impairments of ~~investment.~~goodwill and other long-lived assets, and impact of the wind down. Excluding the impact of the aforementioned items, the ~~company's~~company’s effective tax rate for the third quarter and first nine months of ~~2017~~2019 was ~~27.5%~~22.3% and ~~27.6%~~25.1%, respectively.

For the third quarter and first nine months of ~~2016,~~2018, the company recorded a provision for income taxes of ~~$44.9~~$57.1 million, an effective tax rate of ~~27.6%~~24.3%, and ~~$137.4~~$155.3 million, an effective tax rate of ~~27.6%~~24.1%, respectively. The ~~company's~~company’s provision for income taxes and effective tax rate for the third quarterandfirst nine months of ~~2016~~2018 were impacted by the previously discussed restructuring, integration, and other charges, ~~and~~ identifiable intangible asset ~~amortization.~~amortization, loss on disposition of businesses, net, loss on investments, and impact of the wind down. Excluding the impact of the aforementioned items, the ~~company's~~company’s effective tax rate for the third quarter and first nine months of ~~2016~~2018 was ~~28.5%~~24.5% and ~~28.2%~~24.4%, 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.~~income, among other things. The decrease in the effective tax rate from ~~27.6%~~24.1% for the first nine months of 2018 to (11.0)% for the first nine months of 2019 is primarily driven by impairments of goodwill and other long-lived assets discussed above, changes in mix of the tax jurisdictions where taxable income is generated, discrete items, and changes in the U.S. tax rules. The decrease in the effective tax rate from 24.3% for the third quarter of ~~2016~~2018 to ~~25.4%~~24.0% for the third quarter of ~~2017~~2019 is primarily driven by ~~an increase~~changes in mix of the tax jurisdictions where taxable income is generated, discrete items, and changes in the ~~taxable income in lower~~U.S. tax ~~jurisdictions and discrete items.~~rules (see Note P).

Net Income Attributable to Shareholders

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

Quarter Ended Nine Months Ended
September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016
Net income attributable to shareholders, as reported $ 135
$ 118
$ 348
$ 358
Identifiable intangible asset amortization* 12
13
37
40
Restructuring, integration, and other charges 16
24
56
61
Loss on extinguishment of debt 1
—
60
—
Loss on investment 15
—
14
—
Tax effect of adjustments above (16 ) (12 ) (60 ) (31 )
Net income attributable to shareholders, as adjusted $ 163
$ 143
$ 455
$ 428



	Quarter Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018

Net income (loss) attributable to shareholders, as reported	$	92		$	177		$	(316	)	$	486
Identifiable intangible asset amortization**	10			9			27			28
Restructuring, integration, and other charges**	31			10			62			38
Loss on disposition of businesses, net**	—			2			1			4
(Gain) loss on investments, net	(1		)	(1		)	(8		)	4
AFS notes receivable reserves and inventory write-downs (credits)	(1		)	—			15			—
Digital inventory write-downs and credits	1			—			21			—
Goodwill and other impairments**	1			—			624			—
Impact of wind-down**	37			1			151			16
Tax effect of adjustments above	(15		)	(5		)	(126		)	(24		)
Impact of U.S. tax reform	—			—			4			—
Net income attributable to shareholders, as adjusted *	$	155		$	191		$	455		$	551

* 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, goodwill and other impairments, loss on disposition of businesses, net, 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 ~~does not include~~also excludes amortization related to the noncontrolling ~~interest~~interest.

The company recorded net income attributable to shareholders of ~~$134.6~~$92.1 million and ~~$348.1~~a net loss attributable to shareholders of $316.1 million in the third quarter and first nine months of ~~2017,~~2019, respectively, compared with ~~$117.7~~net income attributable to shareholders of $176.5 million and ~~$358.2~~$485.5 million in the year-earlier periods. Net income attributable to shareholders, as adjusted, was ~~$162.9~~$154.8 million and ~~$455.3~~$455.1 million for the third quarter and first nine months of ~~2017,~~2019, respectively, compared with ~~$143.1~~$190.9 million and ~~$428.1~~$551.0 million in the year-earlier periods.

Liquidity and Capital Resources

At September ~~30, 2017~~28, 2019 and December 31, ~~2016,~~2018, the company had cash and cash equivalents of ~~$584.3~~$262.3 million and ~~$534.3~~$509.3 million, respectively, of which ~~$319.5~~$229.3 million and ~~$320.0~~$394.4 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~~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. It is the ~~company's~~company’s current intent to permanently reinvest these funds outside the United States and its current plans do not demonstrate a need to repatriate them to fund its United States operations. If these funds were needed for the ~~company's~~company’s operations in the United States, itthe company would be required to ~~record~~pay withholding and ~~pay significant United States income~~other taxes related to ~~repatriate~~distribution of these funds. Additionally, local government regulations may restrict the ~~company's~~company’s ability to move cash balances to meet cash needs under certain circumstances. The company currently does not expect such regulations and restrictions to impact its ability to make acquisitions or to ~~pay vendors and~~ conduct operations throughout the global organization.

During the first nine months of ~~2017,~~2019, the net amount of cash provided by the ~~company's~~company’s operating activities was ~~$1.8~~$363.2 million, the net amount of cash used for investing activities was ~~$131.3~~$120.0 million, and the net amount of cash ~~provided by~~used for financing activities was ~~$181.4~~$482.7 million. The effect of exchange rate changes on cash was a decrease of ~~$1.9~~$7.6 million.

During the first nine months of ~~2016,~~2018, the net amount of cash provided by the ~~company's~~company’s operating activities was ~~$140.7~~$9.6 million, the net amount of cash used for investing activities was ~~$207.3~~$415.4 million, and the net amount of cash provided by financing activities was ~~$198.4~~$138.5 million. The effect of exchange rate changes on cash was ~~a decrease~~an increase of ~~$20.5~~$11.5 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 ~~68.0%~~72.3% at September ~~30, 2017~~28, 2019 and ~~67.6%~~72.1% at December 31, ~~2016.~~2018.

The net amount of cash provided by the ~~company's~~company’s operating activities during the first nine months of ~~2017~~2019 was ~~$1.8~~$363.2 million and was primarily due to ~~an an increase in earnings~~income from ~~operations adjusted for non-cash items, offset, in part, by an increase in working capital.~~

operations. The net amount of cash provided by the ~~company's~~company’s operating activities during the first nine months of ~~2016~~2018 was ~~$140.7~~$9.6 million and was primarily due to an increase in earnings from operations adjusted for non-cash items, offset, in part, by an increase in working capital to support the increase in sales.

The change in cash provided by operating activities during the first nine months of 2019, compared to the year earlier period, relates primarily to decreased customer demand and a corresponding reduction in working capital, including inventory, which is consistent with the company's historical countercyclical cash flow in which the company generates strong cash flow in periods of decreased 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 ~~17.4%~~18.2% in the third quarter of ~~2017~~2019 compared with ~~16.3%~~16.9% in the third quarter of ~~2016.~~2018.

Cash Flows from Investing Activities

The net amount of cash used for investing activities during the first nine months of ~~2017~~2019 was ~~$131.3~~$120.0 million. The primary use of cash ~~from~~for investing activities included ~~$149.6~~$113.1 million for capital expenditures. ~~The sources of cash from investing activities included $24.4 million of proceeds from the sale of buildings. Included in capital~~Capital expenditures for the first nine months of ~~2017 is $44.6 million~~2019 are related to investments in internally developed software and website functionality related to the ~~company's global enterprise resource planning ("ERP") initiative.~~digital business and the build out of a new distribution center within the EMEA region.

The net amount of cash used for investing activities during the first nine months of ~~2016~~2018 was ~~$207.3~~$415.4 million. The uses of cash from investing activities included ~~$68.9~~$331.6 million of cash consideration paid ~~net of cash~~for acquired ~~for the acquisition of three~~ businesses and ~~$126.3~~$104.9 million for capital expenditures. ~~Included in capital~~The sources of cash from investing activities included $32.0 million of proceeds from the sale of businesses. Capital expenditures for the ~~third quarter~~first nine months of ~~2016 is $45.6 million~~2018 are related to relocation and infrastructure upgrades of the ~~company's global ERP initiative.~~company’s data centers, and continued development of Digital and Cloud capabilities.

Cash Flows from Financing Activities

The net amount of cash used for financing activities during the first nine months of 2019 was $482.7 million. The uses of cash from financing activities included $93.1 million of net payments for short-term borrowings, $97.0 million of net payments for long term borrowings, and $304.2 million of repurchases of common stock. The primary source of cash from financing activities during the first nine months of 2019 was $11.7 million of proceeds from the exercise of stock options.

The net amount of cash provided by financing activities during the first nine months of ~~2017~~2018 was ~~$181.4~~$138.5 million. The uses of cash from financing activities included ~~$555.9~~$300.0 million of payments for the redemption of notes ~~$149.1~~and $93.2 million of repurchases of common ~~stock, $14.4 million and $82.8 million of net payments from short-term and long-term bank borrowings, respectively, and $23.4 million of payments to acquire additional shares of Data Modul AG.~~stock. The sources of cash from financing activities during the ~~third quarter~~first nine months of ~~2017~~2018 were ~~$987.1~~$420.8 million of net proceeds from ~~note offerings~~long-term bank borrowings, $104.2 million of net proceeds from short-term borrowings, and ~~$21.4~~$7.9 million of proceeds from the exercise of stock options.

The net amount of cash provided by financing activities during the first nine months of 2016 was $198.4 million. The uses of cash from financing activities included $167.2 million of repurchases of common stock and $3.0 million of other acquisition related payments. The sources of cash from financing activities during the third quarter of 2016 were $31.9 million and $320.0 million of net proceeds from short-term and long-term bank borrowings, respectively, and $16.7 million of proceeds from the exercise of stock options.

The company has a ~~$1.8~~$2.0 billion revolving credit facility maturing in December ~~2021.~~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~~company’s commercial paper program, as applicable. Interest on borrowings under the revolving credit facility is calculated using a base rate or a ~~euro currency~~Eurocurrency rate plus a spread (1.18% at September ~~30, 2017)~~28, 2019), which is based on the ~~company's~~company’s credit ratings, or an effective interest rate of ~~2.36%~~3.00% at September ~~30, 2017.~~28, 2019. The facility fee, which is based on the ~~company's~~company’s credit ratings, was .20% of the total borrowing capacity at September ~~30, 2017.~~28, 2019. The company had ~~$96.2~~$35.0 million in outstanding borrowings under the revolving credit facility at September ~~30, 2017. There were~~28, 2019 and no outstanding borrowings under the revolving credit facility at December 31, ~~2016.~~2018. During the first nine months of ~~2017~~2019 and ~~2016,~~2018, the average daily balance outstanding under the revolving credit facility was ~~$18.9~~$35.0 million and ~~$6.8~~$60.3 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 September ~~30, 2017~~28, 2019 and December 31, ~~2016.~~2018, respectively. During the first nine months of ~~2017~~2019 and ~~2016,~~2018, the average daily balance outstanding under the commercial paper program was ~~$613.5~~$790.2 million and ~~$261.4~~$799.4 million, respectively. The program had a weighted-average effective interest rate of 2.74% at September 28, 2019.

The company has an asset securitization program collateralized by accounts receivable of certain of its ~~subsidiaries.~~subsidiaries, which matures June 2021. The company may borrow up to ~~$910.0 million~~$1.2 billion under the asset securitization ~~program, which matures in September 2019.~~program. The asset securitization program is conducted through Arrow Electronics Funding Corporation (“AFC”), a wholly-owned, bankruptcy remote subsidiary. The asset securitization program does not qualify for true sale treatment. Accordingly, the accounts receivable and related debt obligation remain on the ~~company's~~company’s consolidated balance sheets. Interest on borrowings is calculated using a base rate ~~or a commercial paper rate~~ plus a spread (.40% at September ~~30, 2017)~~28, 2019), ~~which is based on the company's credit ratings,~~ or an effective interest rate of ~~1.73%~~2.49% at September ~~30, 2017.~~28, 2019. The facility fee is .40%. of the total borrowing capacity. The company had ~~$255.0~~$680.0 million and ~~$460.0~~$810.0 million in outstanding borrowings under the asset securitization program at September ~~30, 2017~~28, 2019 and December 31, ~~2016,~~2018, respectively. During the first nine months of ~~2017~~2019 and ~~2016,~~2018, the average daily balance outstanding under the asset securitization program was ~~$714.7 million~~$1.0 billion and ~~$616.8~~$925.8 million, respectively.

Both the revolving credit facility and 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 company was in compliance with all covenants as of September ~~30, 2017~~28, 2019 and is currently not aware of any events that would cause non-compliance with any covenants in the future.

The company has ~~a $100.0~~$200.0 million in uncommitted ~~line~~lines of credit. ~~The company had no~~There were $75.0 million and $180.0 million of outstanding borrowings under the uncommitted ~~line~~lines of credit at September ~~30, 2017~~28, 2019 and December 31, ~~2016.~~2018, respectively. These borrowings were 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 2.88% at September 28, 2019. During the first nine months of ~~2017~~2019 and ~~2016,~~2018, the average daily balance outstanding under the uncommitted ~~line~~lines of credit was ~~$6.8~~$17.9 million and ~~$27.9~~$23.1 million, respectively.

During ~~June 2017,~~March 2018, the company ~~completed the sale of $500.0~~redeemed $300.0 million principal amount of ~~3.875%~~its 3.00% notes due March 2018.

In May 2019, the company entered into a series of ten-year forward-starting interest rate swaps (the “2019 swaps”) which locked in ~~2028.~~an average treasury rate of 2.33% on a total aggregate notional amount of $300.0 million. The ~~net proceeds~~2019 swaps were designated as cash flow hedges and managed the risk associated with changes in treasury rates and the impact of ~~the offering of $494.6 million were used~~future interest payments on anticipated debt issuances to ~~redeem the company's 6.875% senior debenture due June 2018 and refinance a portion of~~replace the company’s 6.00% notes due to mature in April ~~2020, 5.125% notes due March 2021, and 7.50% notes due January 2027.~~2020. The ~~company~~fair value of the 2019 swaps is recorded ~~a loss on extinguishment of debt of $59.5 million~~ in the shareholders’ equity section in the company’s consolidated balance sheets in “Accumulated other comprehensive income (loss)” and will be reclassified into income over the life of the anticipated debt issuance. Losses of $9.4 million and $16.2 million related to the 2019 swaps were recorded in other comprehensive income (loss), net of taxes, for the third quarter and first nine months of ~~2017.~~2019. The 2019 swaps had a fair value of $(21.5) million as of September 28, 2019.

During September 2017, the company completed the sale of $500.0 million principal amount of 3.25% notes due in 2024. The net proceeds of the offering of $493.8 million are expected to be used to redeem the company's debt obligations and for general corporate purposes.

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. Financing costs related to these transactions were not material and are included in ~~"Interest~~“Interest and other financing expense, ~~net"~~net” in the company’s consolidated statements of operations.

The company filed a shelf registration statement with the Securities and Exchange Commission in September 2015, as amended in June 2017, registering debt securities, preferred stock, common stock, and warrants of Arrow Electronics, Inc. that may be issued by the company from time to time. As set forth in the shelf registration statement, the net proceeds from the sale of the offered

securities may be used by the company for general corporate purposes, including repayment of borrowings, working capital, capital expenditures, acquisitions, and stock repurchases, or for such other purposes as may be specified in the applicable prospectus supplement.

Management believes that the ~~company's~~company’s current cash availability, its current borrowing capacity under its revolving credit facility and asset securitization program, and its expected ability to generate future operating cash flows ~~and the company's access to capital markets~~ are sufficient to meet its projected cash flow needs for the foreseeable future. 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, ~~capital leases,~~ operating leases, purchase obligations, and certain other long-term liabilities that were summarized in a table of Contractual Obligations in the ~~company's~~company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018. Since December 31, ~~2016,~~2018, there were no material changes to the contractual obligations of the company outside the ordinary course of the company’s ~~business, except as follows:~~business.

~~During the second quarter of 2017, the company completed the sale of $500.0 million principal amount of 3.875% notes due in 2028;~~

During the second quarter of 2017, the company redeemed $200.0 million of the company's 6.875% senior debenture due June 2018 and refinanced $90.6 million of the 6.00% notes due April 2020, $119.1 million of the 5.125% notes due March 2021, and $89.6 million of the 7.50% notes due January 2027; and

~~During the third quarter of 2017, the company completed the sale of $500.0 million principal amount of 3.25% notes due in 2024.~~

Share-Repurchase Programs

The following table shows the ~~company's~~company’s Board approved share-repurchase programs as of September ~~30, 2017~~28, 2019 (in thousands):


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		Dollar Value Approved for Repurchase		Dollar Value of Shares Repurchased		Approximate Dollar Value of Shares that May Yet be Purchased Under the Program
September 2015	$	400,000	$	400,000	$	—
December 2016	400,000		16,081		383,919		$	400,000	$	400,000	$	—
December 2018							600,000		161,463		438,537
Total	$	800,000	$	416,081	$	383,919	$	1,000,000	$	561,463	$	438,537

Off-Balance Sheet Arrangements

The company has no off-balance sheet financing or unconsolidated special purpose entities.

Critical Accounting Policies and Estimates

The ~~company's~~company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the company to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosure of contingent assets and liabilities. The company evaluates its estimates on an ongoing basis. The company bases its estimates on historical experience and on various other assumptions that are believed reasonable under the circumstances; the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

~~There~~Except for the impairments disclosed in Notes D and E, there were no significant changes during the first nine months of ~~2017~~2019 to the items disclosed as Critical Accounting Policies and Estimates in ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations in the ~~company's~~company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018 (See Notes B and C).

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~~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: industry conditions, ~~the company's implementation of its new enterprise resource planning system,~~ 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, the effects of additional actions taken to become more efficient or lower costs, risks related to the integration of acquired businesses, changes in legal and regulatory matters, and the company’s ability to generate additional cash flow. 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,"~~“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.


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~~company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018.


Item 4.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The company’s management, under the supervision and with the participation of the company’s Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the company’s disclosure controls and procedures as of September ~~30, 2017~~28, 2019 (the ~~"Evaluation"~~“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.

Changes in Internal Control over Financial Reporting

There ~~was~~were no ~~change~~changes in the ~~company's~~company’s internal control over financial reporting ~~that occurred~~ during the ~~company's~~company’s most recent fiscal quarter that ~~has~~ materially affected, or isare reasonably likely to materially affect, the ~~company's~~company’s internal control over financial reporting.

PART II. OTHER INFORMATION


Item 1A.	Risk Factors

There were no material changes to the ~~company's~~company’s risk factors as discussed in Item 1A - Risk Factors in the ~~company's~~company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018.


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

~~In September 2015 and December 2016, the company's Board approved a repurchase of up to $400 million of the company's common stock.~~

The following table shows the share-repurchase activity for the quarter ended September ~~30, 2017~~28, 2019 (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)

Approximate
Dollar Value of
Shares that May
Yet be
Purchased
Under the
Programs
July 2 through July 29, 2017 —
$ —
—
$ 408,913,216
July 30 through August 26, 2017 173,548
75.84
171,500
395,919,107
August 27 through September 30, 2017 157,864
77.92
154,090
383,919,118
Total 331,412

325,590



Month	Total Number of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program (b)	Approximate Dollar Value of Shares that May Yet be Purchased Under the Programs
June 30 through July 27, 2019	602,722	$	69.35	602,722	$	496,740
July 28 through August 24, 2019	314,105	70.39		311,905	474,789
August 25 through September 28, 2019	499,463	72.60		499,345	438,537
Total	1,416,290			1,413,972


(a)	Includes share repurchases 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~~“total number of shares ~~purchased"~~purchased” and the ~~"total~~“total number of shares purchased as part of publicly announced ~~program"~~program” for the quarter ended September ~~30, 2017~~28, 2019 is ~~5,822~~2,318 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.


Item 5.	Other Information

Disclosure Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 and Section 13(r) of the Exchange Act. During the third quarter ended September 28, 2019, the company determined that a limited number of non-executive employees in subsidiaries with offices located in the People’s Republic of China had initiated fifteen (15) unauthorized shipments of general purpose electronic components to resellers for re-export to customers located in the Islamic Republic of Iran between January 2017 and December 2018. These shipments require disclosure pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 and Section 13(r) of the Exchange Act.

The aggregate gross revenue for these shipments was approximately sixty-five thousand six hundred and eighty-nine dollars, $66, the aggregate gross profit was three thousand nine hundred and five dollars, $4, and the aggregate net profit was de minimus. Promptly upon learning of these shipments, the company notified OFAC and BIS of the activities, conducted an internal investigation and terminated or disciplined the employees involved.

These shipments were not made in accordance with the company’s internal policies and procedures and the company does not intend to continue this activity and has been improving and will continue to improve procedural protections designed to prevent similar transactions from occurring in the future.


Item 6.	Exhibits



Exhibit Number		Exhibit

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

31(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.

~~101.INS~~		~~XBRL Instance Document.~~

101.SCH		XBRL Taxonomy Extension Schema Document.

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Documents.

101.DEF		XBRL Taxonomy Definition Linkbase Document.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		ARROW ELECTRONICS, INC.

Date:	November ~~2, 2017~~7, 2019	By:	/s/ Chris D. Stansbury
			Chris D. Stansbury
			Senior Vice President and Chief Financial Officer

3643




Part I.	Financial Information

	Item 1.	Financial Statements
		Consolidated Statements of Operations	3
		Consolidated Statements of Comprehensive Income (Loss)	4
		Consolidated Balance Sheets	5
		Consolidated Statements of Cash Flows	6
		Consolidated Statements of Equity	7
		Notes to Consolidated Financial Statements	79

	Item 2.	~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	2227

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3239

	Item 4.	Controls and Procedures	3339

Part II.	Other Information

	Item 1A.	Risk Factors	3440

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3440

	Item 6.5.	~~Exhibits~~Other Information	3541

	Item 6.	Exhibits	42

Signature			3643



	September 30, 2017		December 31, 2016
3.00% notes, due 2018	$	299,643	$	—
Other short-term borrowings	80,565		93,827
	$	380,208	$	93,827



	September 30, 2017		December 31, 2016
6.875% senior debentures, due 2018	$	—	$	212,500
3.00% notes, due 2018	301,500		303,500
6.00% notes, due 2020	226,500		325,500
5.125% notes, due 2021	140,500		265,500
3.50% notes, due 2022	358,000		349,500
4.50% notes, due 2023	318,500		305,500
3.25% notes, due 2024	494,000		—
4.00% notes, due 2025	357,500		345,000
7.50% senior debentures, due 2027	136,500		238,000
3.875% notes, due 2028	499,000		—



	September 30, 2017				December 31, 2016
	Marubun		Mutual Funds		Marubun		Mutual Funds
Cost basis	$	10,016	$	17,743	$	10,016	$	18,097
Unrealized holding gain	7,763		9,590		3,806		5,996
Fair value	$	17,779	$	27,333	$	13,822	$	24,093



	Personnel Costs			Facilities Costs			Other			Total
Restructuring and integration charges	$	29,030		$	4,222		$	1,044		$	34,296
Payments	(14,203		)	(2,575		)	(834		)	(17,612		)
Foreign currency translation	868			83			20			971
Balance as of September 30, 2017	$	15,695		$	1,730		$	230		$	17,655



	September 30, 2017		December 31, 2016
Americas (d)	$	671,668	$	631,386
EMEA	104,028		90,834
Asia/Pacific	39,683		34,079
Consolidated	$	815,379	$	756,299

Maturity Date

Notional Amount

Interest rate due from counterparty

Interest rate due to counterparty

April 2020

6 mo. USD LIBOR + 3.896%