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 ~~June~~March 30, ~~2018~~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
(Address of principal executive offices)	(Zip Code)

(303) 824-4000

(Registrant's telephone number, including area code)

No Changes

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically ~~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 accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:



Large accelerated filer x	Accelerated filer o
Non-accelerated filer o ~~(do not check if a smaller reporting company)~~	Smaller reporting company o
	Emerging growth company o

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 o No x

There were ~~87,388,912~~84,721,190 shares of Common Stock outstanding as of ~~July 31, 2018.~~April 29, 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					Six Months Ended
	June 30, 2018			July 1, 2017		June 30, 2018			July 1, 2017		Quarter Ended
				(Adjusted)					(Adjusted)		March 30, 2019			March 31, 2018
Sales	$	7,392,528		$	6,422,226	$	14,268,141		$	12,159,006	$	7,155,991		$	6,875,613
Cost of sales	6,459,708			5,598,202		12,466,377			10,573,785		6,294,303			6,006,669
Gross profit	932,820			824,024		1,801,764			1,585,221		861,688			868,944
Operating expenses:
Selling, general, and administrative expenses	580,388			531,781		1,143,357			1,047,307		556,076			562,969
Depreciation and amortization	46,422			37,381		93,669			74,522		47,526			47,247
Loss on disposition of businesses, net	—			—		1,562			—		866			1,562
Restructuring, integration, and other charges	19,183			24,416		40,354			39,921		11,660			21,171
	645,993			593,578		1,278,942			1,161,750		616,128			632,949
Operating income	286,827			230,446		522,822			423,471		245,560			235,995
Equity in earnings (losses) of affiliated companies	517			724		(156		)	1,649
Equity in losses of affiliated companies											(1,467		)	(673		)
Gain (loss) on investments, net	(2,563		)	2,263		(5,015		)	4,245		5,348			(2,452		)
Loss on extinguishment of debt	—			58,759		—			58,759
Post-retirement expense	1,257			1,897		2,488			3,697
Employee benefit plan expense											1,139			1,231
Interest and other financing expense, net	60,803			42,538		105,982			80,787		51,981			45,179
Income before income taxes	222,721			130,239		409,181			286,122		196,321			186,460
Provision for income taxes	51,681			29,592		98,271			69,156		53,907			46,590
Consolidated net income	171,040			100,647		310,910			216,966		142,414			139,870
Noncontrolling interests	1,125			925		1,901			2,507		1,679			776
Net income attributable to shareholders	$	169,915		$	99,722	$	309,009		$	214,459	$	140,735		$	139,094
Net income per share:
Basic	$	1.94		$	1.12	$	3.52		$	2.41	$	1.65		$	1.58
Diluted	$	1.92		$	1.11	$	3.48		$	2.38	$	1.63		$	1.56
Weighted-average shares outstanding:
Basic	87,802			88,876		87,878			89,079		85,400			87,955
Diluted	88,652			89,837		88,841			90,146		86,319			89,035

See accompanying notes.

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Quarter Ended						Six Months Ended
	June 30, 2018			July 1, 2017			June 30, 2018			July 1, 2017			Quarter Ended
				(Adjusted)						(Adjusted)			March 30, 2019		March 31, 2018
Consolidated net income	$	171,040		$	100,647		$	310,910		$	216,966		$	142,414	$	139,870
Other comprehensive income:
Foreign currency translation adjustment and other	(146,807		)	133,544			(101,838		)	170,377			4,442		44,969
Unrealized gain on investment securities, net	—			1,554			—			3,282
Unrealized gain (loss) on interest rate swaps designated as cash flow hedges, net	231			(547		)	459			(450		)
Employee benefit plan items, net	613			505			895			911
Other comprehensive income (loss)	(145,963		)	135,056			(100,484		)	174,120
Unrealized gain on foreign exchange contracts designated as net investment hedges, net of taxes													5,533		—
Unrealized gain on interest rate swaps designated as cash flow hedges, net of taxes													240		228
Employee benefit plan items, net of taxes													319		282
Other comprehensive income													10,534		45,479
Comprehensive income	25,077			235,703			210,426			391,086			152,948		185,349
Less: Comprehensive income (loss) attributable to noncontrolling interests	(534		)	3,525			(11		)	5,694
Less: Comprehensive income attributable to noncontrolling interests													1,031		523
Comprehensive income attributable to shareholders	$	25,611		$	232,178		$	210,437		$	385,392		$	151,917	$	184,826

See accompanying notes.

ARROW ELECTRONICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands except par value)

(Unaudited)


	June 30, 2018			December 31, 2017
				(Adjusted)			March 30, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	330,519		$	730,083		$	351,899		$	509,327
Accounts receivable, net	8,076,896			8,125,588			7,902,516			8,945,463
Inventories	3,775,884			3,302,518			3,734,905			3,878,678
Other current assets	278,995			256,028			264,564			274,832
Total current assets	12,462,294			12,414,217			12,253,884			13,608,300
Property, plant, and equipment, at cost:
Land	13,199			12,866			7,845			7,882
Buildings and improvements	158,686			160,664			157,326			158,712
Machinery and equipment	1,371,844			1,330,730			1,428,758			1,425,933
	1,543,729			1,504,260			1,593,929			1,592,527
Less: Accumulated depreciation and amortization	(707,928		)	(665,785		)	(774,325		)	(767,827		)
Property, plant, and equipment, net	835,801			838,475			819,604			824,700
Investments in affiliated companies	86,186			88,347			85,296			83,693
Intangible assets, net	328,964			286,215			369,291			372,644
Goodwill	2,673,117			2,470,047			2,632,451			2,624,690
Other assets	362,446			361,966			670,226			270,418
Total assets	$	16,748,808		$	16,459,267		$	16,830,752		$	17,784,445
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	6,487,686		$	6,756,830		$	6,034,457		$	7,631,879
Accrued expenses	790,809			841,675			860,982			912,292
Short-term borrowings, including current portion of long-term debt	114,908			356,806			138,686			246,257
Total current liabilities	7,393,403			7,955,311			7,034,125			8,790,428
Long-term debt	3,690,327			2,933,045			3,575,891			3,239,115
Other liabilities	497,771			572,971			719,326			378,536
Commitments and contingencies (Note M)
Commitments and contingencies (Note N)
Equity:
Shareholders' equity:
Common stock, par value $1:
Authorized - 160,000 shares in both 2018 and 2017, respectively
Issued - 125,424 shares in both 2018 and 2017, respectively	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	1,117,389			1,114,167			1,128,757			1,135,934
Treasury stock (38,040 and 37,733 shares in 2018 and 2017, respectively), at cost	(1,806,362		)	(1,762,239		)
Treasury stock (40,251 and 40,233 shares in 2019 and 2018, respectively), at cost							(1,992,981		)	(1,972,254		)
Retained earnings	5,928,149			5,596,786			6,476,070			6,335,335
Accumulated other comprehensive loss	(245,809		)	(124,883		)	(288,267		)	(299,449		)
Total shareholders' equity	5,118,791			4,949,255			5,449,003			5,324,990
Noncontrolling interests	48,516			48,685			52,407			51,376
Total equity	5,167,307			4,997,940			5,501,410			5,376,366
Total liabilities and equity	$	16,748,808		$	16,459,267		$	16,830,752		$	17,784,445

See accompanying notes.

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended
	June 30, 2018			July 1, 2017			Three Months Ended
				(Adjusted)			March 30, 2019			March 31, 2018
Cash flows from operating activities:
Consolidated net income	310,910			216,966			$	142,414		$	139,870
Adjustments to reconcile consolidated net income to net cash used for operations:
Depreciation and amortization	93,669			74,522			47,526			47,247
Amortization of stock-based compensation	25,662			21,391			19,090			13,043
Equity in (earnings) losses of affiliated companies	156			(1,649		)
Loss on extinguishment of debt	—			58,759
Equity in losses of affiliated companies							1,467			673
Deferred income taxes	12,706			11,825			6,968			(2,818		)
(Gain) loss on investments, net							(5,348		)	2,452
Other	10,622			5,208			5,575			3,465
Change in assets and liabilities, net of effects of acquired and disposed businesses:
Accounts receivable	(73,647		)	419,229			949,989			789,843
Inventories	(499,917		)	(149,945		)	134,402			(260,620		)
Accounts payable	(240,725		)	(601,708		)	(1,540,008		)	(691,818		)
Accrued expenses	(516		)	(90,332		)	(50,292		)	(22,087		)
Other assets and liabilities	(123,769		)	(97,376		)	(40,782		)	(94,327		)
Net cash used for operating activities	(484,849		)	(133,110		)	(328,999		)	(75,077		)
Cash flows from investing activities:
Cash consideration paid for acquired businesses, net of cash acquired	(331,563		)	(2,534		)	—			(331,467		)
Proceeds from disposition of businesses	34,291			—			—			34,291
Acquisition of property, plant, and equipment	(66,551		)	(101,906		)	(33,815		)	(34,735		)
Proceeds from sale of property, plant, and equipment	—			24,433
Other	(8,000		)	(3,000		)	2,940			(4,500		)
Net cash used for investing activities	(371,823		)	(83,007		)	(30,875		)	(336,411		)
Cash flows from financing activities:
Change in short-term and other borrowings	59,613			40,274			(107,244		)	(18,387		)
Proceeds from long-term bank borrowings, net	759,334			241,818			335,023			601,386
Proceeds from note offerings, net	—			494,625
Redemption of notes	(300,000		)	(558,100		)	—			(300,000		)
Proceeds from exercise of stock options	5,985			20,697			6,931			4,997
Repurchases of common stock	(72,551		)	(123,663		)	(53,925		)	(52,513		)
Purchase of shares from noncontrolling interest	—			(23,350		)
Other	(156		)	(945		)
Net cash provided by financing activities	452,225			91,356			180,785			235,483
Effect of exchange rate changes on cash	4,883			10,359			21,661			(5,434		)
Net decrease in cash and cash equivalents	(399,564		)	(114,402		)	(157,428		)	(181,439		)
Cash and cash equivalents at beginning of period	730,083			534,320			509,327			730,083
Cash and cash equivalents at end of period	$	330,519		$	419,918		$	351,899		$	548,644

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



	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

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") 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 audited consolidated financial statements and accompanying notes for the year ended December 31, ~~2017,~~2018, as filed in the company's Annual Report on Form 10-K.

Quarter End

The company operates on a quarterly calendar that closes on the Saturday closest to the end of the calendar quarter.

Reclassification

Certain prior period amounts were reclassified to conform to the current period ~~presentation (See Note B).~~presentation. These reclassifications ~~are included in the footnote tables for the second quarter and six months ended June 30, 2018.~~did not have a material impact on previously reported amounts.

Note B – Impact of Recently Issued Accounting Standards

In ~~February~~August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. ~~2018-02,~~ ~~Income Statement - Reporting Comprehensive Income~~ ~~(Topic 220)~~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. ~~2018-02"~~2018-15"). ASU No. ~~2018-02 provides financial statement preparers with an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings~~2018-15 aligns the requirements for capitalizing implementation costs incurred in ~~each period~~a hosting arrangement that is ~~impacted by U.S. federal government tax legislation enacted in 2017 (the "Tax Act"). Effective January 1, 2018,~~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 ~~adopted~~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. ~~2018-02 on a prospective basis as an adjustment~~2018-15. The adoption is not expected to ~~retained earnings of $4,116.~~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"). 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 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 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. EffectiveOn January 1, ~~2018,~~2019, the company adopted the provisions of ASU No. ~~2017-07~~2017-12 on a modified retrospective ~~basis for~~basis. The adoption of the ~~presentation requirements.~~provisions of ASU No. 2017-12 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~~(Topic 326) ("ASU No. 2016-13"). ASU No. 2016-13 revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, and in April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. These ASU's provide supplemental guidance and clarification to ASU No. 2016-13 and must be adopted concurrently with the adoption of ASU No. 2016-13, cumulatively referred to as “Topic 326.” Topic 326 is effective for the company in the first quarter of 2020, with early adoption permitted, and is to be applied using a modified retrospective approach. The company is currently evaluating the potential effects of adopting the provisions of ~~ASU No. 2016-13.~~Topic 326.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) ("ASU No. 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. In July 2018 the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, and ASU No. 2018-11, Leases (Topic 842) Targeted Improvements. In March 2019, the FASB issued ASU No. 2019-01 Codification Improvements~~, which~~ to Topic 842, Leases.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

These ASU's provide supplemental adoption guidance and clarification to ASU No. 2016-02, and must be adopted concurrently with the adoption of ASU No. 2016-02, cumulatively referred to as “Topic 842”.

On January 1, 2019, the company adopted Topic 842 ~~is effective for~~

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Dollars~~applying the 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 retained earnings in ~~thousands except per share data)~~

~~(Unaudited)~~

the period of adoption. In addition, the company elected a package of practical expedients and the short-term lease exception outlined in Topic 842. The company also implemented internal controls and key systems to enable the ~~first quarter~~preparation of ~~2019, with early adoption permitted, and is to be applied using~~financial information on adoption. As a ~~modified retrospective approach. While the company continues to evaluate the effects~~result of adopting ~~the provisions of~~ Topic 842, the company ~~expects most existing operating lease commitments will be~~ recognized ~~as operating lease~~assets and 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. Effective January 1, 2018, the company adopted the provisions of ASU No. 2016-01 on a prospective basis as an adjustment to retained earnings of $18,238.

~~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. 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 Improvements and Practical Expedients~~ ~~("ASU No. 2016-12"); and ASU No. 2016-19,~~ ~~Technical Corrections and Improvements~~ ("ASU No. 2016-19"), respectively. ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12, and ASU No. 2016-19 provide supplemental adoption guidance and clarification to ASU No. 2014-09, and must be adopted concurrently with the adoption of ASU No. 2014-09, cumulatively referred to as "Topic 606".

On January 1, 2018, the company adopted Topic 606 applying the full retrospective method. The primary impact of adoption relates to the application of gross versus net indicators and the determination of whether goods and services are distinct. In addition, the company is deferring certain revenue due to the determination of when transfer of control occurs. The deferrals are expected to be recognized within a year of the transaction date.

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

~~The following table presents the effect of the adoption of Topic 606, ASU No. 2017-07, and other prior period reclassifications.~~

Quarter Ended July 1, 2017 Six Months Ended July 1, 2017
As Previously Reported Adjustments** Adjusted for New Standards As Previously Reported Adjustments** Adjusted for New Standards
Sales $ 6,465,346

$ (43,120 )
$ 6,422,226
$ 12,224,898
$ (65,892 ) $ 12,159,006
Cost of sales 5,641,380

(43,178 )
5,598,202
10,641,045
(67,260 ) 10,573,785
Gross profit 823,966

58

824,024
1,583,853
1,368
1,585,221
Operating expenses:

Selling, general, and administrative expenses 532,347

(566 )
531,781
1,047,866
(559 ) 1,047,307
Depreciation and amortization 37,381

—

37,381
74,522
—
74,522
Restructuring, integration, and other charges 24,416

—

24,416
39,921
—
39,921
594,144

(566 )
593,578
1,162,309
(559 ) 1,161,750
Operating income 229,822

624

230,446
421,544
1,927
423,471
Equity in earnings of affiliated companies 724

—

724
1,649
—
1,649
Gain on investments, net 750

1,513

2,263
750
3,495
4,245
Loss on extinguishment of debt 58,759

—

58,759
58,759
—
58,759
Post-retirement expense —

1,897

1,897
—
3,697
3,697
Interest and other financing expense, net 42,358

180

42,538
80,431
356
80,787
Income before income taxes 130,179

60

130,239
284,753
1,369
286,122
Provision for income taxes 29,575

17

29,592
68,799
357
69,156
Consolidated net income 100,604

43

100,647
215,954
1,012
216,966
Noncontrolling interests 925

—

925
2,507
—
2,507
Net income attributable to shareholders $ 99,679

$ 43

$ 99,722
$ 213,447
$ 1,012
$ 214,459
Net income per share:
Basic* $ 1.12

$ —

$ 1.12
$ 2.40
$ 0.01
$ 2.41
Diluted* $ 1.11

$ —

$ 1.11
$ 2.37
$ 0.01
$ 2.38

* The sum of the as previously reported and as adjusted may not agree to totals, as presented, due to rounding.

** Topic 606 impacted sales and cost of sales. ASU No. 2017-07 and other reclassifications impacted operating and non-operating expenses.

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

~~The following table presents the effect of the adoption of Topic 606, ASU No. 2017-07, and other prior period reclassifications for 2017.~~

First Quarter Second Quarter Third Quarter Fourth Quarter Year to Date
As Previously Reported Adjusted for New Standards As Previously Reported Adjusted for New Standards As Previously Reported Adjusted for New Standards As Previously Reported Adjusted for New Standards As Previously Reported Adjusted for New Standards
2017
Sales $ 5,759,552
$ 5,736,780
$ 6,465,346
$ 6,422,226
$ 6,953,740
$ 6,856,108
$ 7,633,870
$ 7,539,449
$ 26,812,508
$ 26,554,563
Cost of sales 4,999,665
4,975,583
5,641,380
5,598,202
6,110,382
6,013,541
6,703,742
6,610,269
23,455,169
23,197,595
Operating income 191,722
193,025
229,822
230,446
235,992
235,441
270,914
286,824
928,450
945,736
Net income attributable to shareholders $ 113,768
$ 114,737
$ 99,679
$ 99,722
$ 134,630
$ 134,064
$ 53,885
$ 53,653
$ 401,962
$ 402,176

~~Operating income~~ for the ~~fourth quarter of 2017 was impacted~~rights and obligations created by ~~a reclassification of pension settlement expense of $16,706 due~~operating leases, refer to ~~the implementation of ASU No. 2017-07. The settlement expense was moved to "post-retirement expense", which is classified as non-operating on the statement of operations.~~Note L.

Note C – Significant Accounting Policies

Except for the changes below, no material changes have been made to the company's significant accounting policies disclosed in Note 1, Summary of Significant Accounting Policies, in its Annual Report on Form 10-K, filed on February ~~6, 2018,~~7, 2019, for the year ended December 31, ~~2017.~~2018.

~~Revenue Recognition~~Leases

~~Revenue is recognized~~The company determines if a contract contains a lease at inception based on whether it conveys the ~~point at which~~right to control the use of an identified asset. Substantially all of the ~~underlying goods or services~~company's leases are transferred to the customer, which included determining whether goods and services are distinct and separate performance obligations, which may require significant judgment. Satisfaction of the company’s performance obligations occur upon the transfer of control of goods or services, either from the company’s facilities or directly from suppliers to customers.classified as operating leases. The company ~~considers customer purchase orders, which~~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 ~~some cases~~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 ~~governed by master agreements, to be~~recognized based on the ~~contracts with a customer. All revenue~~net present value of future minimum lease payments over the lease term starting on the commencement date. The company generally is ~~generated from contracts with customers.~~

~~In determining the transaction price, the company evaluates whether the price is subject to refund or adjustment~~not able to determine the ~~net consideration~~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 ~~which~~extend or terminate a lease if it is reasonably certain that the company ~~expects~~will exercise such options. The company has elected the practical expedient to ~~receive. The amount~~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 consideration received and revenue recognized by the company vary due to contractually defined incentives and return rights that are held by customers. These adjustments are made in the same period as the underlying transactions.

~~Investments~~

~~The change in fair value of equity investments, for which the company does not possess the ability to exercise significant influence,~~twelve months or less. Variable lease payments are recognized in ~~net income. The fair value of these equity investments are based upon readily determinable fair values (Note I).~~the period in which the obligation for those payments is incurred.

Note D – Acquisitions

2018 Acquisitions

~~On January 8,~~In 2018, the company acquired eInfochips for a purchase price of $327,628, which included $14,769 of cash acquired. eInfochips services customers at every phase of technology deployment, including custom hardware and software, and new Internet of Things based business models. eInfochips is recorded in the company's global components business segment.

~~Since the date of the acquisition, eInfochips sales of $40,856 were included in the company's consolidated results of operations.~~

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

The purchase price allocation is preliminary and subject to adjustment based on our final assessment of fair value of the acquired assets and liabilities. Items initially estimated and subject to change upon finalization of the valuation include goodwill, intangibles, and deferred taxes.

The following table summarizes the ~~preliminary~~ allocation of the net consideration paid to the fair value of the assets acquired and liabilities assumed for the eInfochips acquisition:



Accounts receivable, net	$	13,670
Inventories	1,512
Property, plant, and equipment	3,485
Other assets	46,488
Identifiable intangible assets	128,000
Goodwill	197,126
Accounts payable	(520		)
Accrued expenses	(33,836		)
Deferred tax liability	(41,474		)
Other liabilities	(1,592		)
Cash consideration paid, net of cash acquired	$	312,859

Accounts receivable, net $ 13,701
Inventories 1,512
Property, plant, and equipment 4,557
Other assets 28,033
Identifiable intangible assets 71,710
Goodwill 225,937
Accounts payable (521 )
Accrued expenses (8,595 )
Deferred tax liability (21,969 )
Other liabilities (1,506 )
Cash consideration paid, net of cash acquired $ 312,859

In connection with the eInfochips acquisition, the company allocated ~~$71,710~~$109,000 and $19,000 to customer relationships and trade name with a ~~weighted-average~~ life of ~~9 years.~~15 years and 10 years, respectively.

The goodwill related to the eInfochips acquisition represents the expected synergies from combining operations and was recorded in the company's global components business ~~segment.~~segment and is not tax deductible.

During ~~the first six months of~~ 2018, the company completed one additional acquisition with a purchase price of approximately $18,704, net of cash acquired. The impact of this acquisition was not material to the company's consolidated financial position or results of operations.

The following table summarizes the company's unaudited consolidated results of operations for the second quarter and first six months of 2017, as well as the unaudited pro forma consolidated results of operations of the company, as though the 2018 acquisitions occurred on January 1, 2017:

Quarter Ended Six Months Ended
July 1, 2017 July 1, 2017
As Reported Pro Forma As Reported Pro Forma
Sales $ 6,422,226
$ 6,460,139
$ 12,159,006
$ 12,234,218
Net income attributable to shareholders 99,722
100,410
214,459
215,632
Net income per share:
Basic $ 1.12
$ 1.13
$ 2.41
$ 2.42
Diluted $ 1.11
$ 1.12
$ 2.38
$ 2.39

~~2017 Acquisitions~~

During 2017, the company acquired an additional 11.9% of the noncontrolling interest common shares of Data Modul AG 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. In addition, the company completed two acquisitions for $3,628, 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 2017 acquisitions on the consolidated results of operations of the company for 2017, as though the acquisitions occurred on January 1, 2017, was also not material.

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

Note E – Goodwill and Intangible Assets

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

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



	Global Components		Global ECS			Total
Balance as of December 31, 2018 (a)	$	1,437,501	$	1,187,189		$	2,624,690
Dispositions and related adjustments	—		(1,386		)	(1,386		)
Foreign currency translation adjustment	15,869		(6,722		)	9,147
Balance as of March 30, 2019 (a)	$	1,453,370	$	1,179,081		$	2,632,451

Global
Components
Global ECS Total
Balance as of December 31, 2017 (a) $ 1,264,869
$ 1,205,178
$ 2,470,047
Acquisitions and related adjustments 225,937
14,175
240,112
Foreign currency translation adjustment (17,896 ) (19,146 ) (37,042 )
Balance as of June 30, 2018 (a) $ 1,472,910
$ 1,200,207
$ 2,673,117


(a)	The total carrying value of goodwill ~~for all periods~~as of March 30, 2019 and December 31, 2018 in the table above is reflected net of ~~$1,026,702~~$1,018,780 of accumulated impairment charges, of which $716,925 was recorded in the global components business segment and ~~$309,777~~$301,855 was recorded in the global enterprise computing solutions ("ECS") business segment.

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 ~~June~~March 30, ~~2018~~2019:



	Weighted-Average Life	Gross Carrying Amount		Accumulated Amortization			Net
Non-amortizable trade names	indefinite	$	101,000	$	—		$	101,000
Customer relationships	11 years	482,084		(232,649		)	249,435
Developed technology	5 years	6,340		(4,596		)	1,744
Amortizable trade name	9 years	21,407		(4,295		)	17,112
		$	610,831	$	(241,540	)	$	369,291

Weighted-Average Life Gross Carrying Amount Accumulated Amortization Net
Non-amortizable trade names indefinite $ 101,000
$ —
$ 101,000
Customer relationships 10 years 426,441
(201,988 ) 224,453
Developed technology 5 years 6,340
(3,677 ) 2,663
Amortizable trade name 5 years 2,408
(1,560 ) 848
$ 536,189
$ (207,225 ) $ 328,964

Intangible assets, net, are comprised of the following as of December 31, ~~2017:~~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 440,167
(259,337 ) 180,830
Developed technology 5 years 6,340
(3,043 ) 3,297
Amortizable trade name 5 years 2,409
(1,321 ) 1,088
$ 549,916
$ (263,701 ) $ 286,215

During the ~~second~~first quarter of ~~2018~~2019 and ~~2017,~~2018, the company recorded amortization expense related to identifiable intangible assets of ~~$11,955~~$11,930 and ~~$12,364, respectively. During the first six months of 2018 and 2017, amortization expense related to identifiable intangible assets was $25,475 and $25,264,~~$13,520, respectively.

Note F – Investments in Affiliated Companies

The company owns a 50% interest in several joint ventures with Marubun Corporation (collectively "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.

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

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



	March 30, 2019		December 31, 2018
Marubun/Arrow	$	75,107	$	73,253
Other	10,189		10,440
	$	85,296	$	83,693

June 30,
2018 December 31,
2017
Marubun/Arrow $ 71,857
$ 70,167
Other 14,329
18,180
$ 86,186
$ 88,347

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



	Quarter Ended
	March 30, 2019			March 31, 2018
Marubun/Arrow	$	1,226		$	1,091
Other	(2,693		)	(1,764		)
	$	(1,467	)	$	(673	)

Quarter Ended Six Months Ended
June 30,
2018 July 1,
2017 June 30,
2018 July 1,
2017
Marubun/Arrow $ 1,483
$ 1,617
$ 2,574
$ 3,282
Other (966 ) (893 ) (2,730 ) (1,633 )
$ 517
$ 724
$ (156 ) $ 1,649

Under the terms of various joint venture agreements, the company is required to pay its pro-rata share of the third party debt of the joint ventures in the event that the joint ventures are unable to meet their obligations. At ~~June~~March 30, 2019, the company's pro-rata share of this debt was approximately $6,100. At December 31, 2018, the company's pro-rata share of this debt was approximately ~~$3,140. There were no outstanding borrowings under the third party debt agreements of the joint ventures as of December 31, 2017.~~$2,860. 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 G – Accounts Receivable

Accounts receivable, net, consists of the following:



	March 30, 2019			December 31, 2018
Accounts receivable	$	7,962,977		$	9,021,051
Allowances for doubtful accounts	(60,461		)	(75,588		)
	$	7,902,516		$	8,945,463

June 30,
2018 December 31,
2017
Accounts receivable $ 8,138,078
$ 8,181,879
Allowances for doubtful accounts (61,182 ) (56,291 )
$ 8,076,896
$ 8,125,588

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, which are included in "Accounts receivable, net" in the company's consolidated balance sheets. One such customer, with a combined note and accounts receivable balance of approximately $24,252 and $24,600 as of June 30, 2018 and December 31, 2017, respectively, became delinquent on its repayment of the note during the fourth quarter of 2016. The company believes that it has adequately reserved for potential losses; however, it is possible that it could incur a loss in excess of the reserve.

Note H – Debt

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



	March 30, 2019		December 31, 2018
Borrowings on lines of credit	$	—	$	180,000
Commercial paper	74,836		—
Other short-term borrowings	63,850		66,257
	$	138,686	$	246,257

June 30,
2018 December 31,
2017
3.00% notes, due 2018 $ —
$ 299,857
Borrowings on lines of credit 70,000
—
Other short-term borrowings 44,908
56,949
$ 114,908
$ 356,806

Other short-term borrowings are primarily utilized to support working capital requirements. The weighted-average interest rate on these borrowings was 2.96% and 2.49% at March 30, 2019 and December 31, 2018, respectively.

The company has $200,000 in uncommitted lines of credit. There were no outstanding borrowings under the uncommitted lines of credit at March 30, 2019. There were $180,000 of outstanding borrowings under the uncommitted lines of credit at December 31, 2018. 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 3.49% and 3.39% at March 30, 2019 and December 31, 2018, respectively.

The company has a commercial paper program and the maximum aggregate balance of commercial paper outstanding may not exceed the borrowing capacity of $1,200,000. The company had $74,836 in outstanding borrowings under this program at March 30, 2019 and no outstanding borrowings at December 31, 2018. The program had a weighted average effective interest rate of 2.98% and 2.93% at March 30, 2019 and December 31, 2018, respectively.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Other short-term borrowings are primarily utilized to support working capital requirements. The weighted-average interest rate on these borrowings was 2.3% and 2.6% at June 30, 2018 and December 31, 2017, respectively.

Long-term debt consists of the following:



	March 30, 2019		December 31, 2018
Revolving credit facility	$	55,000	$	—
Asset securitization program	1,090,000		810,000
6.00% notes, due 2020	209,191		209,147
5.125% notes, due 2021	130,582		130,546
3.50% notes, due 2022	347,485		347,288
4.50% notes, due 2023	297,751		297,622
3.25% notes, due 2024	494,327		494,091
4.00% notes, due 2025	345,911		345,762
7.50% senior debentures, due 2027	109,796		109,776
3.875% notes, due 2028	494,231		494,095
Other obligations with various interest rates and due dates	1,617		788
	$	3,575,891	$	3,239,115

June 30,
2018 December 31,
2017
Revolving credit facility $ 57,700
$ —
Asset securitization program 1,200,000
490,000
6.00% notes, due 2020 209,059
208,971
5.125% notes, due 2021 130,473
130,400
3.50% notes, due 2022 346,899
346,518
4.50% notes, due 2023 297,369
297,122
3.25% notes, due 2024 493,618
493,161
4.00% notes, due 2025 345,469
345,182
7.50% senior debentures, due 2027 109,735
109,694
3.875% notes, due 2028 493,826
493,563
Other obligations with various interest rates and due dates 6,179
18,434
$ 3,690,327
$ 2,933,045

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

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



	March 30, 2019	December 31, 2018
6.00% notes, due 2020	214,500	214,500
5.125% notes, due 2021	135,500	134,500
3.50% notes, due 2022	353,000	345,000
4.50% notes, due 2023	311,500	303,500
3.25% notes, due 2024	484,500	467,000
4.00% notes, due 2025	351,000	340,500
7.50% senior debentures, due 2027	130,000	128,000
3.875% notes, due 2028	484,000	458,500

June 30,
2018 December 31,
2017
3.00% notes, due 2018 $ —
$ 300,500
6.00% notes, due 2020 218,000
224,000
5.125% notes, due 2021 135,500
139,000
3.50% notes, due 2022 345,500
355,000
4.50% notes, due 2023 304,500
315,500
3.25% notes, due 2024 468,000
491,000
4.00% notes, due 2025 342,500
356,500
7.50% senior debentures, due 2027 131,500
138,500
3.875% notes, due 2028 473,500
501,000

The carrying amount of the 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 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 ~~June~~March 30, ~~2018)~~2019), which is based on the company's credit ratings, or an effective interest rate of ~~2.41%~~3.56% at ~~June~~March 30, ~~2018.~~2019. The facility fee, which is based on the company's credit ratings, was .20% of the total borrowing capacity at ~~June~~March 30, ~~2018.~~2019. The company had ~~$57,700~~$55,000 in outstanding borrowings under the revolving credit facility at ~~June~~March 30, ~~2018.~~2019. The company had no outstanding borrowings under the revolving credit facility at December 31, ~~2017.~~

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

The company has a commercial paper program and the maximum aggregate balance of commercial paper outstanding may not exceed the borrowing capacity of $1,200,000. The company had no outstanding borrowings under this program at June 30, 2018 and December 31, 2017. The program had an effective interest rate of 2.56% for the second quarter of 2018.

The company has an asset securitization program collateralized by accounts receivable of certain of its subsidiaries. ~~In June 2018,~~The company may borrow up to $1,200,000 under the ~~company amended its~~ asset securitization program, ~~and, among other things, increased its borrowing capacity from $910,000 to $1,200,000 and extended its term to mature to~~which matures in June 2021. 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 consolidated balance sheets. Interest on borrowings is calculated using a base rate plus a spread (.40% at ~~June~~March 30, ~~2018)~~2019), or an effective interest rate of ~~2.57%~~2.94% at ~~June~~March 30, ~~2018.~~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 ~~June~~March 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the company had ~~$1,200,000~~$1,090,000 and ~~$490,000,~~$810,000, respectively, in outstanding borrowings under the asset securitization program, which was included in "Long-term debt" in the company's consolidated balance sheets. Total collateralized accounts receivable of approximately ~~$2,525,100~~$2,436,800 and ~~$2,270,500,~~$2,754,400, respectively, were held by AFC and were included in "Accounts receivable, net" in the 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 ~~June~~March 30, ~~2018~~2019 and is currently not aware of any events that would cause non-compliance with any covenants in the future.

The company has $200,000 in uncommitted lines of credit. There were $70,000 of outstanding borrowings under the uncommitted lines of credit at June 30, 2018 and no outstanding borrowings at December 31, 2017. These borrowings were provided on a short-term basis and the maturity is agreed upon between the company and the lender. The lines had an effective interest rate of 2.79% at June 30, 2018.

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

~~During June 2017,~~In the ~~company completed the sale~~normal course 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~~business, certain of the company’s ~~6.00% notes due April 2020, 5.125% notes due March 2021, and 7.50% notes due January 2027.~~subsidiaries have agreements to sell, without recourse, selected trade receivables to financial institutions. The company ~~recorded a loss on extinguishment of debt of $58,759~~does not retain financial or legal interests in these receivables, and, accordingly they are accounted for ~~the first six 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~~as sales of the ~~offering~~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 ~~$493,810 were used to redeem the company's debt obligations and for general corporate purposes.~~operations.

Interest and other financing expense, net, includes interest and dividend income of ~~$11,303~~$14,045 and ~~$20,557~~$9,255 for the ~~second~~first quarter of 2019 and ~~first six months of~~ 2018, respectively. ~~Interest and other financing expense, net, includes interest and dividend income of $7,084 and $15,010 for the second quarter and first six months of 2017, respectively.~~

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Note I – 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 ~~June~~March 30, ~~2018~~:2019:


	Balance Sheet Location	Level 1		Level 2			Level 3			Total			Balance Sheet Location	Level 1		Level 2			Level 3		Total
Cash equivalents (a)	Cash and cash equivalents/ other assets	$	16,292	$	—		$	—		$	16,292		Cash and cash equivalents/ other assets	$	21,738	$	—		$	—	$	21,738
Equity investments (b)	Other assets	45,683		—			—			45,683			Other assets	42,753		—			—		42,753
Interest rate swaps	Other liabilities	—		(679		)	—			(679		)	Other liabilities	—		(557		)	—		(557		)
Foreign exchange contracts	Other current assets	—		8,907			—			8,907			Other current assets	—		12,925			—		12,925
Foreign exchange contracts	Accrued expenses	—		(2,383		)	—			(2,383		)	Accrued expenses	—		(998		)	—		(998		)
Contingent consideration	Accrued expenses	—		—			(3,184		)	(3,184		)
		$	61,975	$	5,845		$	(3,184	)	$	64,636			$	64,491	$	11,370		$	—	$	75,861

The following table presents assets (liabilities) measured at fair value on a recurring basis at December 31, ~~2017~~: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

Balance Sheet
Location Level 1 Level 2 Level 3 Total
Cash equivalents (c)
Cash and cash equivalents/
other assets
$ 3,267
$ 286,671
$ —
$ 289,938
Equity investments (b) Other assets 52,683
—
—
52,683
Interest rate swaps Other liabilities —
(149 ) —
(149 )
Foreign exchange contracts Other current assets —
5,499
—
5,499
Foreign exchange contracts Accrued expenses —
(8,581 ) —
(8,581 )
Contingent consideration Accrued expenses —
—
(3,176 ) (3,176 )
$ 55,950
$ 283,440
$ (3,176 ) $ 336,214


(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.

~~(c)~~

~~Cash equivalents~~ The company recorded an unrealized gain of $1,824 and an unrealized loss of $2,579 for the first quarter of 2019 and 2018, respectively, on equity securities held at ~~December 31, 2017 included $286,671 invested in certificates~~the end of ~~deposit, with an original maturity of less than three months, held in anticipation of our acquisition of eInfochips, which closed in January 2018 (see Note D).~~each quarter.

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

~~During the second quarter and first six months of 2018 and 2017, there were no transfers of assets (liabilities) measured at fair value between the three levels of the fair value hierarchy.~~

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

Derivative Instruments

The company uses various financial instruments, including derivative instruments, for purposes other than trading. Certain derivative instruments are designated at inception as hedges and measured for effectiveness both at inception and on an ongoing basis. Derivative instruments not designated as hedges are marked-to-market each reporting period with any unrealized gains or losses recognized in earnings.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

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' equity section in the company's consolidated balance sheets in "Accumulated other comprehensive ~~loss.~~income." ~~The ineffective portion of the interest rate swaps, if any, is recorded in "Interest and other financing expense, net" in the company's consolidated statements of operations.~~ As of ~~June~~March 30, ~~2018~~2019 and December 31, ~~2017,~~2018, all outstanding interest rate swaps were designated as fair value hedges.

The terms of our outstanding interest rate swap contracts at ~~June~~March 30, ~~2018~~2019 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,~~British Pound, Indian Rupee, ~~British Pound, Swedish Krona,~~Canadian Dollar, and ~~Australian Dollar.~~Chinese Renminbi. The company enters into foreign exchange forward, option, or swap contracts (collectively, the "foreign exchange contracts") to mitigate the impact of changes in foreign currency exchange ~~rates.~~rates related to these transactions. These contracts are executed to facilitate the hedging of foreign currency exposures resulting from inventory purchases and sales and generally have terms of no more than six months. Gains or losses on these contracts are deferred and recognized when the underlying future purchase or sale is recognized or when the corresponding asset or liability is revalued. The company does not enter into foreign exchange contracts for trading purposes. The risk of loss on a foreign exchange contract is the risk of nonperformance by the counterparties, which the company minimizes by limiting its counterparties to major financial institutions. The fair value of the foreign exchange contracts are estimated using market quotes. The notional amount of the foreign exchange contracts at ~~June~~March 30, ~~2018~~2019 and December 31, ~~2017~~2018 was ~~$596,899~~$867,361 and ~~$504,084,~~$607,747, respectively.

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

During the first ~~six months~~quarter of ~~2018~~2019, the company entered into a series of foreign exchange contracts to sell Euro and ~~2017.~~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.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

The gains (losses) recorded in CTA within other comprehensive income (loss) related to net investment hedges was $6,592 for the three months ended March 30, 2019, net of taxes. For the three months ended March 30, 2019, gains of $1,406 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 effects of derivative instruments on the company's consolidated statements of operations and other comprehensive income are as follows:



	Quarter Ended
	March 30, 2019			March 31, 2018
Gain (Loss) Recognized in Income
Foreign exchange contracts	$	3,489		$	(5,742	)
Interest rate swaps	(319		)	(303		)
Total	$	3,170		$	(6,045	)
Gain (Loss) Recognized in Other Comprehensive Income before reclassifications, net of tax
Foreign exchange contracts	$	5,953		$	(1,078	)

Quarter Ended Six Months Ended
June 30,
2018
July 1,
2017 June 30,
2018 July 1,
2017
Gain (Loss) Recognized in Consolidated Net Income
Foreign exchange contracts $ 6,260
$ (2,223 ) $ 518
$ (11,162 )
Interest rate swaps (308 ) (163 ) (611 ) (321 )
Total $ 5,952
$ (2,386 ) $ (93 ) $ (11,483 )
Gain (Loss) Recognized in Other Comprehensive Income before reclassifications
Foreign exchange contracts $ (58 ) $ (1,043 ) $ (1,135 ) $ (867 )
Interest rate swaps $ —
$ (1,053 ) $ —
$ (1,053 )

Other

The carrying amount of cash and cash equivalents, accounts receivable, net, and accounts payable approximate their fair value due to the short maturities of these financial instruments.

Note J – Restructuring, Integration, and Other Charges

Restructuring initiatives are due to the 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 pre-existing business and the consolidation of certain operations. The following table presents the components of the restructuring, integration, and other charges:



	Quarter Ended
	March 30, 2019			March 31, 2018
Restructuring and integration charges - current period actions	$	3,007		$	11,432
Restructuring and integration charges - actions taken in prior periods	(61		)	1,349
Other charges	8,714			8,390
	$	11,660		$	21,171

Quarter Ended Six Months Ended
June 30,
2018 July 1,
2017 June 30,
2018 July 1,
2017
Restructuring and integration charges - current period actions $ 8,798
$ 14,263
$ 20,230
$ 22,246
Restructuring and integration charges - actions taken in prior periods 2,931
3,996
4,280
6,098
Other charges 7,454
6,157
15,844
11,577
$ 19,183
$ 24,416
$ 40,354
$ 39,921

~~2018~~Restructuring and Integration ~~Charges~~Accrual Summary

The ~~following table presents the components of the 2018 restructuring and integration charges and activity in the related~~ restructuring and integration accrual was $10,802 and $25,829 at March 30, 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 ~~first six~~related lease right-of-use assets recorded upon adoption of ASU No. 2016-02, Topic 842. During the three months ended, March 30, 2019, the company made $6,735 of ~~2018:~~payments related to restructuring and integration accruals. Substantially all amounts accrued at March 30, 2019 relate to the termination of personnel and are expected to be spent in cash within one year.

Personnel
Costs
Facilities Costs Other Total
Restructuring and integration charges $ 10,496
$ 9,560
$ 174
$ 20,230
Payments (7,592 ) (1,820 ) (18 ) (9,430 )
Foreign currency translation (85 ) (151 ) (4 ) (240 )
Balance as of June 30, 2018 $ 2,819
$ 7,589
$ 152
$ 10,560

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Other Charges

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

~~The following table presents the activity in the restructuring and integration accrual for the first six months of 2018 related to restructuring and integration actions taken in 2017:~~

Personnel
Costs
Facilities Costs Other Total
Balance as of December 31, 2017 $ 15,276
$ 4,874
$ 100
$ 20,250
Restructuring and integration charges 1,308
2,267
(7 ) 3,568
Payments (10,106 ) (1,934 ) (25 ) (12,065 )
Foreign currency translation (67 ) (129 ) (4 ) (200 )
Balance as of June 30, 2018 $ 6,411
$ 5,078
$ 64
$ 11,553

~~Restructuring and Integration Accruals Related to Actions Taken Prior to~~ ~~2017~~

Included in restructuring, integration, and other charges for the first ~~six~~quarter of 2019 are other expenses of $8,714. The following items were included in other charges and credits recorded to restructuring, integration, and other charges for the three months ended March 30, 2019:

acquisition-related charges for the first quarter of ~~2018 are restructuring and integration charges of $712~~$1,022 related to ~~restructuring and integration actions taken prior to 2017. The restructuring and integration charge (credits) includes adjustments to personnel costs of $(91) and facilities costs of $818,~~professional and other ~~costs of $(15). The restructuring and integration accruals at June 30, 2018~~fees directly related to ~~actions taken~~recent acquisition activity as well as contingent consideration for acquisitions completed in prior years.

$5,559 in charges related to ~~2017 of~~ ~~$8,994~~ ~~include accruals for personnel costs of~~ ~~$7,585, accruals for facilities costs of~~ ~~$1,281~~,relocation and ~~accruals for~~ other ~~costs of~~ ~~$128~~.centralization efforts to maximize operating efficiencies.

~~Restructuring and Integration Accrual Summary~~

~~The restructuring and integration accruals aggregate to $31,107 at June 30, 2018, all of which are expected to be spent in cash, and are expected to be utilized as follows:~~

~~The accruals for personnel costs totaling $16,815 relate to the termination of personnel that have scheduled payouts of $11,087 in 2018, $4,268 in 2019, $1,402 in 2020, and $58 in 2021.~~

The accruals for facilities totaling $13,948 relate to vacated leased properties that have scheduled payments of $3,911 in 2018, $2,780 in 2019, $2,185 in 2020, $1,367 in 2021, $1,068 in 2022, and $2,637 thereafter.

~~Other accruals of $344 are expected to be spent within one year.~~

~~Other Charges~~

Included in restructuring, integration, and other charges for the ~~second~~first quarter ~~and first six months~~ of 2018 are other expenses of ~~$7,454~~$8,390. The following items represent other charges and ~~$15,844, respectively. Included in these expenses are acquisition-related~~credits recorded to restructuring, integration, and other charges for the three months ended March 31, 2018:

acquisition related charges for the first quarter of ~~$1,384 and $7,538, respectively,~~$6,154 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.~~

Included in restructuring, integration, and other charges for the second quarter and first six months of 2017 are other expenses of $6,157 and $11,577, respectively. Included in these expenses are acquisition-related charges of $1,324 and $4,003, respectively, related toactivity as well as 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.years.

~~ARROW ELECTRONICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

Note K – Net Income per Share

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



	Quarter Ended
	March 30, 2019		March 31, 2018
Net income attributable to shareholders	$	140,735	$	139,094
Weighted-average shares outstanding - basic	85,400		87,955
Net effect of various dilutive stock-based compensation awards	919		1,080
Weighted-average shares outstanding - diluted	86,319		89,035
Net income per share:
Basic	$	1.65	$	1.58
Diluted (a)	$	1.63	$	1.56

Quarter Ended Six Months Ended
June 30,
2018 July 1,
2017 June 30,
2018 July 1,
2017
Net income attributable to shareholders $ 169,915
$ 99,722
$ 309,009
$ 214,459
Weighted-average shares outstanding - basic 87,802
88,876
87,878
89,079
Net effect of various dilutive stock-based compensation awards 850
961
963
1,067
Weighted-average shares outstanding - diluted 88,652
89,837
88,841
90,146
Net income per share:

Basic $ 1.94
$ 1.12
$ 3.52
$ 2.41
Diluted (a) $ 1.92
$ 1.11
$ 3.48
$ 2.38


(a)	Stock-based compensation awards for the issuance of ~~915~~903 and ~~515~~415 shares for the ~~second~~first quarter of 2019 and ~~first six months of~~ 2018, ~~and 432 and 328 shares for the second quarter and first six months of 2017,~~ respectively, were excluded from the computation of net income per share on a diluted basis as their effect was anti-dilutive.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Note L - Lease Commitments

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 first quarter of 2019, the company recorded operating lease cost of $26,726.

The following amounts were recorded in the consolidated balance sheets at March 30, 2019:



	March 30, 2019
Operating Leases
Right-of-use asset	$	349,077

Lease liability - current	68,603
Lease liability - non-current	302,283
Total operating lease liabilities	$	370,886

Maturities of operating lease liabilities at March 30, 2019 were as follows:



	March 30, 2019
2019	$	75,827
2020	76,035
2021	59,166
2022	46,851
2023	37,177
Thereafter	160,022
Total lease payments	455,078
Less imputed interest	(84,192		)
Total	$	370,886

Other information pertaining to leases consists of the following:



	March 30, 2019
Supplemental Cash Flow Information
Cash paid for amounts included in the measurement of operating lease liabilities:	$	37,513
Right-of-use assets obtained in exchange for operating lease obligations:	35,573

Operating Lease Term and Discount Rate
Weighted average remaining lease term in years	8
Weighted average discount rate	5.2		%

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Note M – Shareholders' Equity

Accumulated Other Comprehensive Income (Loss)

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


	Quarter Ended						Six Months Ended						Quarter Ended
	June 30, 2018			July 1, 2017			June 30, 2018			July 1, 2017			March 30, 2019			March 31, 2018
Foreign Currency Translation Adjustment and Other:
Other comprehensive income (loss) before reclassifications (a)	$	(146,203	)	$	132,256		$	(99,803	)	$	169,837
Other comprehensive income before reclassifications (a)													$	5,276		$	46,400
Amounts reclassified into income	1,055			(1,312		)	(123		)	(2,647		)	(186		)	(1,178		)
Unrealized Gain (Loss) on Investment Securities, Net:
Unrealized Gain (Loss) on Foreign Exchange Contracts Designated as Net Investment Hedges, Net:
Other comprehensive income before reclassifications	—			1,554			—			3,282			6,592			—
Amounts reclassified into income	—			—			—			—			(1,059		)	—
Unrealized Gain (Loss) on Interest Rate Swaps Designated as Cash Flow Hedges, Net:
Other comprehensive loss before reclassifications	—			(647		)	—			(647		)
Amounts reclassified into income	231			100			459			197			240			228
Employee Benefit Plan Items, Net:
Other comprehensive loss before reclassifications	—			(48		)	—			(43		)
Amounts reclassified into income	613			553			895			954			319			282
Other:
Reclassification to retained earnings (b)	—			—			(22,354		)	—
Retained earnings adjustment (b)													—			(22,354		)
Net change in Accumulated other comprehensive income (loss)	$	(144,304	)	$	132,456		$	(120,926	)	$	170,933		$	11,182		$	23,378


(a)	Includes intra-entity foreign currency transactions that are of a long-term investment nature of ~~$26,698~~$9,859 and ~~$14,774~~$(11,924) for the ~~second~~first quarter of 2019 and ~~first six months of~~ 2018, ~~and $(36,503) and $(36,180) for the second quarter and first six months of 2017,~~ respectively.


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

Share-Repurchase Program

The following table shows the company's Board of Directors (the "Board") approved share-repurchase programs as of ~~June~~March 30, ~~2018:~~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	$	311,395	$	88,605
December 2018	600,000		—		600,000
Total	$	1,000,000	$	311,395	$	688,605

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
$ 101,361
$ 298,639

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

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

The company expects these environmental liabilities to be resolved over an extended period of time. Costs are recorded for environmental matters when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Accruals for environmental liabilities are adjusted periodically as facts and circumstances change, assessment and remediation efforts progress, or as additional technical or legal information becomes available. Environmental liabilities are difficult to assess and estimate due to various unknown factors such as the timing and extent of remediation, improvements in remediation technologies, and the extent to which environmental laws and regulations may change in the future. Accordingly, the company cannot presently 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" and "Other liabilities" in the company's consolidated balance sheets. The company has determined that there is no amount within the environmental liability range that is a better estimate than any other amount, and therefore has recorded the accruals at the minimum amount of the ranges.

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") finalized and executed a consent decree in connection with the Huntsville, Alabama site. Characterization of the extent of contaminated soil and groundwater is complete and has been approved by ADEM. Approximately ~~$5,900~~$6,300 was spent to date and the company currently anticipates no additional investigative and related expenditures. The nature and scope of 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 ~~$4,300~~$4,100 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") 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") 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 ~~$63,200~~$71,100 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 ~~$16,000~~$10,800 to ~~$26,700.~~$21,500. 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

From time to time, in the normal course of business, the company may become liable with respect to other pending and threatened litigation, environmental, regulatory, labor, product, and tax matters. While such matters are subject to inherent uncertainties, it is not currently anticipated that any such matters will materially impact the company's consolidated financial position, liquidity, or results of operations.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Note NO – Segment and Geographic Information

The company is a global provider of products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions. The company distributes electronic components to original equipment manufacturers and contract manufacturers through its global components business segment and provides enterprise computing solutions to value-added resellers and managed service providers through its global ECS business segment. As a result of the company's philosophy of maximizing operating efficiencies through the centralization of certain functions, selected fixed assets and related depreciation, as well as borrowings, are not directly attributable to the individual operating segments and are included in the corporate business segment.

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


	Quarter Ended				Six Months Ended				Quarter Ended
	June 30, 2018		July 1, 2017		June 30, 2018		July 1, 2017		March 30, 2019		March 31, 2018
Components:
Americas	$	1,937,882	$	1,700,241	$	3,734,580	$	3,263,786	$	1,907,029	$	1,796,698
EMEA (a)	1,447,972		1,192,393		2,926,358		2,310,672		1,503,366		1,478,386
Asia/Pacific	1,898,510		1,569,716		3,553,358		2,946,695		1,781,532		1,654,848
Global components	$	5,284,364	$	4,462,350	$	10,214,296	$	8,521,153	$	5,191,927	$	4,929,932

ECS:
Americas	$	1,387,034	$	1,307,245	$	2,582,445	$	2,401,888	$	1,200,907	$	1,195,411
EMEA	721,130		652,631		1,471,400		1,235,965
EMEA (a)									763,157		750,270
Global ECS	$	2,108,164	$	1,959,876	$	4,053,845	$	3,637,853	$	1,964,064	$	1,945,681
Consolidated (b)	$	7,392,528	$	6,422,226	$	14,268,141	$	12,159,006	$	7,155,991	$	6,875,613


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


(b)	Includes sales related to the United States of ~~$2,968,469~~$2,782,035 and ~~$5,618,137~~$2,649,668 for the ~~second~~first quarter of 2019 and ~~first six months of~~ 2018, ~~and $2,667,958 and $5,010,086 for the second quarter and first six months of 2017,~~ respectively.

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


	Quarter Ended						Six Months Ended						Quarter Ended
	June 30, 2018			July 1, 2017			June 30, 2018			July 1, 2017			March 30, 2019			March 31, 2018
Operating income (loss):
Global components	$	253,840		$	197,164		$	483,386		$	370,697		$	234,532		$	229,546
Global ECS	109,417			106,761			193,223			188,950			86,718			83,806
Corporate (c)	(76,430		)	(73,479		)	(153,787		)	(136,176		)	(75,690		)	(77,357		)
Consolidated	$	286,827		$	230,446		$	522,822		$	423,471		$	245,560		$	235,995

(c)

Includes restructuring, integration, and other charges of ~~$19,183~~$11,660 and ~~$40,354~~$21,171 for the ~~second~~first quarter of 2019 and 2018, respectively. Also included in the first ~~six months~~quarter of 2019 and 2018 ~~and $24,416 and $39,921 for the second quarter and first six months of 2017, respectively, as well as~~was a net loss on the disposition of businesses of $866 and $1,562, ~~for the first six months of 2018.~~respectively.

ARROW ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(Unaudited)

Total assets, by segment, is as follows:



	March 30, 2019		December 31, 2018
Global components	$	11,479,107	$	11,425,579
Global ECS	4,567,305		5,632,102
Corporate	784,340		726,764
Consolidated	$	16,830,752	$	17,784,445

June 30,
2018 December 31,
2017
Global components $ 11,630,360
$ 10,229,168
Global ECS 4,491,916
5,426,675
Corporate 626,532
803,424
Consolidated $ 16,748,808
$ 16,459,267

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



	March 30, 2019		December 31, 2018
Americas (d)	$	659,608	$	673,228
EMEA	119,105		110,996
Asia/Pacific	40,891		40,476
Consolidated	$	819,604	$	824,700

June 30,
2018 December 31,
2017
Americas (d) $ 687,594
$ 688,637
EMEA 106,226
108,232
Asia/Pacific 41,981
41,606
Consolidated $ 835,801
$ 838,475


(d)	Includes net property, plant, and equipment related to the United States of ~~$683,460~~$656,736 and ~~$683,988~~$670,201 at ~~June~~March 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.


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

Overview

Arrow Electronics, Inc. (the "company") is a global provider of products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions. The company has one of the world’s broadest portfolios of product offerings available from leading electronic components and enterprise computing solutions suppliers, coupled with a range of services, solutions, and tools that help industrial and commercial customers introduce innovative products, reduce their time to market, and enhance their overall competitiveness. The company has two business segments, the global components business segment and the global enterprise computing solutions ("ECS") 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 ~~six months~~quarter of ~~2018,~~2019, approximately ~~72%~~73% of the company's sales were from the global components business segment and approximately ~~28%~~27% of the company's sales were from the global ECS business segment.

The company's financial objectives are to grow sales faster than the market, increase the markets served, grow profits faster than sales, and increase return on invested capital. To achieve its objectives, the company seeks to capture significant opportunities to grow across products, markets, and geographies. To supplement its organic growth strategy, the company continually evaluates strategic acquisitions to broaden its product and value-added service offerings, increase its market penetration, and expand its geographic reach.

Executive Summary

Consolidated sales for the ~~second~~first quarter ~~and first six months~~ of ~~2018~~2019 increased by ~~15.1% and 17.3%, respectively,~~4.1% compared with the year-earlier ~~periods.~~period. The increase for the ~~second~~first quarter of ~~2018~~2019 was driven by ana increase in the global components business segment sales of ~~18.4%~~5.3% and ana increase in the global ECS business segment sales of ~~7.6%. The increase for the first six months of 2018 was driven by an increase in the global components business segment sales of 19.9% and an increase in the global ECS business segment sales of 11.4%~~0.9%. Adjusted for the change in foreign currencies ~~acquisitions,~~ and dispositions consolidated sales increased ~~13.0% and 13.7%~~7.6% for the ~~second~~first quarter ~~and first six months~~ of ~~2018, respectively,~~2019 compared with the year-earlier ~~periods.~~period.

Net income attributable to shareholders increased to ~~$169.9 million and $309.0~~$140.7 million in the ~~second~~first quarter ~~and first six months~~ of ~~2018, respectively,~~2019 compared to ~~$99.7 million and $214.5~~$139.1 million in the year-earlier ~~periods.~~period. The following items impacted the comparability of the company's results:

~~Second quarters of 2018 and 2017:~~

restructuring, integration, and other charges of ~~$19.2~~$11.7 million in ~~2018~~2019 and ~~$24.4~~$21.2 million in ~~2017;~~2018;

identifiable intangible asset amortization of ~~$12.0~~$11.9 million in ~~2018~~2019 and ~~$12.4~~$13.5 million in ~~2017;~~2018;

net gain ~~(loss)~~ on investments ~~net,~~ of ~~$(2.6)~~$5.3 million in ~~2018~~2019 and ~~$2.3~~net loss on investments of $2.5 million in ~~2017; and~~

~~loss on extinguishment of debt of $58.8 million in 2017~~

~~First six months of 2018 and 2017:~~

2018;

loss on disposition of businesses, net, of $0.9 million in 2019 and $1.6 million in 2018;

~~restructuring, integration, and other charges of $40.4 million in 2018 and $39.9 million in 2017;~~

~~identifiable intangible asset amortization of $25.5 million in 2018 and $25.3 million in 2017;~~

~~gain (loss) on investments, net, of $(5.0) million in 2018 and $4.2 million in 2017;~~ and


•	Impact of U.S. tax reform of $3.5 million in 2019.

~~loss on extinguishment of debt of $58.8 million in 2017~~

Excluding the aforementioned items, net income attributable to shareholders for the ~~second~~first quarter ~~and first six months~~ of ~~2018 increased~~2019 decreased to ~~$194.9~~$158.5 million ~~and $362.7 million, respectively,~~ compared with ~~$159.1 million and $291.2~~$167.7 million in the year-earlier ~~periods.~~period.

Certain Non-GAAP Financial Information

In addition to disclosing financial results that are determined in accordance with accounting principles generally accepted in the United States ("GAAP"), the company also discloses certain non-GAAP financial information, including:

Sales, income, or expense items as adjusted for the impact of changes in foreign currencies (referred to as "impact of changes in foreign currencies")~~, the impact of acquisitions~~ by ~~adjusting the company's operating~~re-translating prior period results ~~for businesses acquired, including the amortization expense related to acquired intangible assets, as if the acquisitions had occurred~~ at ~~the beginning of the earliest~~current period ~~presented (referred to as "impact of acquisitions"),~~foreign exchange rates and the impact of dispositions by adjusting the company's operating results for businesses disposed, as if the dispositions had occurred at the beginning of the earliest period presented (referred to as "impact of dispositions");

Operating income as adjusted to exclude identifiable intangible asset amortization, restructuring, integration, and other charges, and loss on disposition of businesses, net; and

Net income attributable to shareholders as adjusted to exclude identifiable intangible asset amortization, restructuring, integration, and other charges, loss on disposition of businesses, net, gain (loss) on investments, net, and ~~loss on extinguishment~~the impact of ~~debt.~~U.S. tax reform.

Management believes that providing this additional information is useful to the reader to better assess and understand the company's operating performance, especially when comparing results with previous periods, primarily because management typically monitors the business adjusted for these items in addition to GAAP results. However, analysis of results on a non-GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with GAAP.

Sales

Substantially all of the company's sales are made on an order-by-order basis, rather than through long-term sales contracts. As such, the nature of the company's business does not provide for the visibility of material forward-looking information from its customers and suppliers beyond a few months.

Following is an analysis of net sales by reportable segment (in millions):


	Quarter Ended							Six Months Ended								Quarter Ended
	June 30, 2018		July 1, 2017			% Change		June 30, 2018			July 1, 2017			% Change		March 30, 2019			March 31, 2018			% Change

Consolidated sales, as reported	$	7,393	$	6,422		15.1	%	$	14,268		$	12,159		17.3	%	$	7,156		$	6,876		4.1	%
Impact of changes in foreign currencies	—		140					—			409					—			(197		)
Impact of acquisitions	—		38					—			75
Impact of dispositions	—		(57		)			(27		)	(115		)			(11		)	(41		)
Consolidated sales, as adjusted	$	7,393	$	6,543		13.0	%	$	14,241		$	12,528		13.7	%	$	7,145		$	6,638		7.6	%

Global components sales, as reported	$	5,284	$	4,462		18.4	%	$	10,214		$	8,521		19.9	%	$	5,192		$	4,930		5.3	%
Impact of changes in foreign currencies	—		90					—			265					—			(130		)
Impact of acquisitions	—		21					—			42
Impact of dispositions	—		—					—			—
Global components sales, as adjusted*	$	5,284	$	4,574		15.5	%	$	10,214		$	8,829		15.7	%
Global components sales, as adjusted																$	5,192		$	4,800		8.2	%

Global ECS sales, as reported	$	2,108	$	1,960		7.6	%	$	4,054		$	3,638		11.4	%	$	1,964		$	1,946		0.9	%
Impact of changes in foreign currencies	—		49					—			143					—			(67		)
Impact of acquisitions	—		17					—			33
Impact of dispositions	—		(57		)			(27		)	(115		)			(11		)	(41		)
Global ECS sales, as adjusted*	$	2,108	$	1,968		7.1	%	$	4,026		$	3,699		8.8	%
Global ECS sales, as adjusted																$	1,953		$	1,838		6.3	%

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

Consolidated sales for the ~~second~~first quarter ~~and first six months~~ of ~~2018~~2019 increased by ~~$970.3~~$280.4 million, or ~~15.1%, and $2.11 billion, or 17.3%, respectively,~~4.1% compared with the year-earlier ~~periods.~~period. The increase for the ~~second~~first quarter of ~~2018~~2019 was driven by an increase in global components business segment sales of ~~$822.0~~$262.0 million, or ~~18.4%~~5.3%, and ana increase in global ECS business segment sales of ~~$148.3~~$18.4 million, or ~~7.6%~~0.9%. The increase for the first six months of 2018 was driven by an increase in global components business segment sales of $1.69 billion, or 19.9%, and an increase in global ECS business segment sales of $416.0 million, or 11.4%.

Adjusted for the impact of changes in foreign currencies, acquisitions, and dispositions, consolidated sales increased 13.0% and 13.7% for the second quarter and first six months of 2018, respectively, compared with the year-earlier periods.

~~In the global components business segment, sales for the second quarter and first six months~~of 2018 increased $822.0 million, or 18.4%, and $1.69 billion, or 19.9%, respectively, compared with the year-earlier periods, with double digit sales growth across all regions. Increases during the second quarter and first six months of 2018 are attributable to suppliers awarding additional business to the company, with strong demand growth from industrial, transportation, and aerospace and defense customers. Adjusted for the impact of changes in foreign currencies and ~~acquisitions,~~dispositions, consolidated sales increased 7.6% for the first quarter of 2019 compared with the year-earlier period.

In the global components business segment, sales for the first quarter of 2019 increased $262.0 million, or 5.3% compared with the year-earlier period, with the growth spread across all three regions. The increase during the first quarter of 2019 is attributable to suppliers awarding additional business to the company and demand growth for lower cost commodity parts. Adjusted for the impact of changes in foreign currencies, the company's global components business segment sales increased by ~~15.5% and 15.7%~~8.2% for the ~~second~~first quarter ~~and first six months~~ of ~~2018, respectively,~~2019 compared with the year-earlier ~~periods.~~period.

In the global ECS business segment, sales for the ~~second~~first quarter ~~and first six months~~of ~~2018~~2019 increased ~~$148.3~~$18.4 million, or ~~7.6%, and $416.0 million, or 11.4%, respectively,~~0.9% compared with the year-earlier ~~periods, with increased demand in both the Americas and EMEA regions. Increases~~period. The increase during the ~~second~~first quarter ~~and first six months~~ of ~~2018 are~~2019 is primarily attributable to ~~new customer wins from competitors and strong~~ demand growth in ~~the hardware categories of~~servers, infrastructure software, storage, and ~~industry-standard servers, and in infrastructure software.~~security. Adjusted for the impact of changes in foreign currencies ~~acquisitions,~~ and dispositions, the company's global ECS business segment sales increased ~~7.1% and 8.8%~~6.3% for the ~~second~~first quarter ~~and first six months~~ of ~~2018, respectively,~~2019 compared with year-earlier ~~periods.~~period.

Gross Profit

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


	Quarter Ended								Six Months Ended								Quarter Ended
	June 30, 2018			July 1, 2017			% Change		June 30, 2018			July 1, 2017			% Change		March 30, 2019			March 31, 2018			% Change

Consolidated gross profit, as reported	$	933		$	824		13.2	%	$	1,802		$	1,585		13.7	%	$	862		$	869		(0.8	)%
Impact of changes in foreign currencies	—			18					—			57					—			(29		)
Impact of acquisitions	—			12					—			24
Impact of dispositions	—			(16		)			(6		)	(31		)			(1		)	(7		)
Consolidated gross profit, as adjusted*	$	933		$	839		11.2	%	$	1,796		$	1,635		9.9	%	$	861		$	832		3.4	%
Consolidated gross profit as a percentage of sales, as reported	12.6		%	12.8		%	(20) bps		12.6		%	13.0		%	(40) bps		12.0		%	12.6		%	(60) bps
Consolidated gross profit as a percentage of sales, as adjusted	12.6		%	12.8		%	(20) bps		12.6		%	13.1		%	(50) bps		12.0		%	12.5		%	(50) 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 ~~$932.8~~$861.7 million ~~and $1.80 billion~~ in the ~~second~~first quarter ~~and first six months~~ of ~~2018, respectively,~~2019 compared with ~~$824.0~~$868.9 million ~~and $1.59 billion~~ in the year-earlier ~~periods. The increases~~period. Adjusted for the impact of changes in foreign currencies and dispositions, gross profit ~~dollars were primarily due to~~ increased ~~demand~~3.4% in the ~~global components business.~~first quarter of 2019 compared with the year-earlier period. Gross profit margins in the ~~second~~first quarter ~~and first six months~~of ~~2018~~2019 decreased by approximately 2060 bps ~~and 40 bps, respectively,~~ compared with the year-earlier ~~periods~~period primarily due to ~~lower margins in the Global ECS business due to~~unfavorable product mix. Gross margins in the Global Components business during the second quarter and first six months of 2018 were consistent with comparable prior periods, and increased slightly during the second quarter. Margin stabilization in the Global Components business is partially related to increases in design services due to our investments in engineering and technical sales resources.

Selling, General, and Administrative Expenses and Depreciation and Amortization

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


	Quarter Ended								Six Months Ended								Quarter Ended
	June 30, 2018			July 1, 2017			% Change		June 30, 2018			July 1, 2017			% Change		March 30, 2019			March 31, 2018			% Change

Selling, general, and administrative expenses, as reported	$	580		$	532		9.1	%	$	1,143		$	1,047		9.2	%	$	556		$	563		(1.2	)%
Depreciation and amortization, as reported	46			37			24.2	%	94			75			25.7	%	48			47			0.6	%
Operating expenses, as reported*	627			569			10.1	%	1,237			1,122			10.3	%
Operating expenses, as reported																	$	604		$	610		(1.1	)%
Impact of changes in foreign currencies	—			14					—			41					—			(19		)
Impact of acquisitions	—			8					—			15
Impact of dispositions	—			(15		)			(7		)	(29		)			(1		)	(8		)
Operating expenses, as adjusted	$	627		$	576		8.8	%	$	1,230		$	1,149		7.1	%	$	603		$	583		3.4	%
Operating expenses as a percentage of sales, as reported	8.5		%	8.9		%	(40) bps		8.7		%	9.2		%	(50) bps		8.4		%	8.9		%	(50) bps
Operating expenses as a percentage of sales, as adjusted	8.5		%	8.8		%	(30) bps		8.6		%	9.2		%	(60) bps		8.4		%	8.8		%	(40) bps

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

Selling, general, and administrative expenses ~~increased~~decreased by ~~$48.6~~$6.9 million, or ~~9.1%, and $96.1 million, or 9.2%, respectively,~~1.2% in the ~~second~~first quarter ~~and first six months~~ of ~~2018~~2019 on a sales increase of ~~15.1% and 17.3%~~4.1% compared with the year-earlier ~~periods.~~period. Selling, general, and administrative expenses as a percentage of sales were ~~7.9% and 8.0%~~7.8% for the ~~second~~first quarter ~~and first six months~~ of ~~2018, respectively,~~2019 compared with ~~8.3% and 8.6%~~8.2% in the year-earlier ~~periods.~~period.

Depreciation and amortization expense as a percentage of operating expenses was ~~7.4% and 7.6%~~7.9% for the second quarter and first six months of 2018, respectively, compared with 6.6% in both year-earlier periods. During the second quarter and first six months of 2018 the company recorded $6.2 million and $12.2 million, respectively, of depreciation related to a global enterprise resource tool ("ERP") placed into service during the first quarter of ~~2018.~~2019 compared with 7.7% in the year-earlier period. Included in depreciation and amortization expense is identifiable intangible asset amortization of ~~$12.0 million and $25.5~~$11.9 million for the ~~second~~first quarter ~~and first six months~~ of ~~2018, respectively,~~2019 compared to ~~$12.4 million and $25.3~~$13.5 million in the year-earlier ~~periods.~~

period. Adjusted for the impact of changes in foreign currencies ~~acquisitions,~~ and dispositions, operating expenses increased ~~8.8% and 7.1%~~3.4% for the ~~second~~first quarter ~~and first six months~~of ~~2018, respectively,~~2019 compared with the year-earlier ~~periods.~~period.

Restructuring, Integration, and Other Charges

Restructuring initiatives relate to the 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 pre-existing business and the consolidation of certain operations.

~~2018~~2019 Charges

The company recorded restructuring, integration, and other charges of ~~$19.2 million and $40.4~~$11.7 million for the ~~second~~first quarter of 2019, which includes $3.0 million related to initiatives taken by the company during 2019 to improve operating efficiencies, $1.0 million of acquisition-related expenses, and ~~first six months of 2018, respectively. For the second quarter~~$5.6 million in charges related to relocation and ~~first six months of 2018,~~other centralization efforts to maximize operating efficiencies. The restructuring and integration charge of $3.0 million for the first quarter of 2019 relates primarily to the termination of personnel.

2018 Charges

The company recorded restructuring, integration, and other charges of ~~$8.8~~$21.2 million ~~and $20.2~~for the first quarter of 2018, which includes $11.4 million ~~respectively,~~ related to initiatives taken by the company during 2018 to improve operating efficiencies and ~~$1.4 million and $7.5 million, respectively, consisted~~acquisition-related expenses of ~~acquisition-related expenses.~~

$6.2 million. The restructuring and integration charge of ~~$8.8 million and $20.2~~$11.4 million for the ~~second~~first quarter ~~and first six months~~ of 2018 ~~respectively,~~ includes personnel costs of ~~$6.0 million and $10.5~~$4.5 million, facilities costs of ~~$2.8 million and $9.6~~$6.8 million, and other costs of $0.1 million and $0.2 million, respectively. These restructuring initiatives are due to the 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 pre-existing business and the consolidation of certain operations.million.

~~2017~~ ~~Charges~~

The company recorded restructuring, integration, and other charges of $24.4 million and $39.9 million for the second quarter and first six months of 2017, respectively. For the second quarter and first six months of 2017, restructuring and integration charges for $14.3 million and $22.2 million, respectively, related to initiatives taken by the company during 2017 to improve operating efficiencies and $1.3 million and $4.0 million, respectively, of acquisition-related expenses.

~~The restructuring and integration charge of $14.3 million and $22.2 million~~for the second quarter and first six months of 2017, respectively, includes personnel costs of $13.9 million and $18.7 million, respectively. Also included therein for both second quarter and first six months of 2017, respectively, are facilities costs of $0.3 million and $3.0 million and other costs of $0.1 million and $0.6 million. These restructuring initiatives are due to the 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 pre-existing business and the consolidation of certain operations.

As of ~~June~~March 30, ~~2018,~~2019, the company does not anticipate there will be any material adjustments relating to the aforementioned restructuring and integration plans. Refer to Note J, "Restructuring, Integration, and Other Charges," of the Notes to the Consolidated Financial Statements for further discussion of the company's restructuring and integration activities.

Operating Income

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


	Quarter Ended								Six Months Ended								Quarter Ended
	June 30, 2018			July 1, 2017			% Change		June 30, 2018			July 1, 2017			% Change		March 30, 2019			March 31, 2018			% Change

Consolidated operating income, as reported	$	287		$	230		24.5	%	$	523		$	423		23.5	%	$	246		$	236		4.1	%
Identifiable intangible asset amortization	12			12					25			25					12			14
Restructuring, integration, and other charges	19			24					40			40					12			21
Loss on disposition of businesses	—			—					2			—
Loss on disposition of businesses, net																	1			2
Consolidated operating income, as adjusted*	$	318		$	267		19.0	%	$	590		$	489		20.8	%	$	270		$	272		(0.8	)%
Consolidated operating income as a percentage of sales, as reported	3.9		%	3.6		%	30 bps		3.7		%	3.5		%	20 bps		3.4		%	3.4		%	flat
Consolidated operating income, as adjusted, as a percentage of sales, as reported	4.3		%	4.2		%	10 bps		4.1		%	4.0		%	10 bps		3.8		%	4.0		%	(20) 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 ~~$286.8~~$245.6 million, or ~~3.9% of sales, and $522.8 million, or 3.7%~~3.4% of sales in the ~~second~~first quarter ~~and first six months~~ of ~~2018, respectively,~~2019 compared with operating income of ~~$230.4~~$236.0 million, or ~~3.6%, and $423.5 million, or 3.5%~~3.4% of sales in the year-earlier ~~periods.~~period. Excluding identifiable intangible asset amortization, restructuring, integration, and other charges, and loss on disposition of businesses, net, operating income, as adjusted, was ~~$318.0~~$270.0 million, or ~~4.3% of sales, and $590.2 million, or 4.1%~~3.8% of sales in the ~~second~~first quarter ~~and first six months~~ of ~~2018, respectively,~~2019 compared with operating income, as adjusted, of ~~$267.2 million, or 4.2% of sales, and $488.7~~$272.2 million, or 4.0% of sales in the year-earlier ~~periods.~~period. Operating income, as adjusted, ~~increased 19.0% and 20.8%~~decreased 0.8% for the ~~second~~first quarter ~~and first six months~~ of ~~2018, respectively,~~2019 compared with the year-earlier ~~periods,~~period, on a sales increase of ~~15.1% and 17.3%, respectively,~~4.1% compared with the year-earlier ~~periods.~~period. Operating income, as adjusted as a percentage of sales, ~~increased 10 bps and 10~~decreased 20 bps for the ~~second~~first quarter ~~and first six months~~ of ~~2018, respectively,~~2019 compared with the year-earlier ~~periods.~~period.

Operating income growth was ~~well~~ in ~~excess of~~line with sales growth for the ~~second~~first quarter ~~and first six months~~ of ~~2018,~~2019 compared with the year-earlier period, due to the company's ability to efficiently manage operating ~~costs and improve leverage in~~costs. Operating margin decreases from both the global components ~~business by delivering more value-added services~~ and ~~selling more of the company's extensive line card.~~

~~The sales increases in the~~ global ECS ~~business for~~businesses were partially offset by lower spending from corporate.

Gain (Loss) on Investments, Net

During the ~~second~~first quarter of 2019 and ~~first six months~~2018, the company recorded a gain of ~~2018 were dilutive~~$5.3 million and a loss of $2.5 million related to ~~operating margins and reflect the shift~~changes in ~~product mix towards hardware sales.~~fair value of certain investments, respectively.

Interest and Other Financing Expense, Net

The company recorded net interest and other financing expense of ~~$60.8 million and $106.0~~$52.0 million for the ~~second~~first quarter ~~and first six months~~ of ~~2018, respectively,~~2019 compared with ~~$42.5 million and $80.8~~$45.2 million in the year-earlier ~~periods.~~period. The increase for the ~~second~~first quarter ~~and first six months~~ of ~~2018~~2019 was primarily due to higher average debt outstanding and an increase in variable interest rates.

~~Other~~

~~During the first six months of 2018, the company recorded a net loss on disposition of businesses of $1.6 million related to the sale of two non-strategic businesses.~~

~~During the second quarter and first six months of 2018, the company recorded a loss of $2.6 million and $5.0 million related to changes in fair value of certain investments, respectively.~~

~~During the second quarter and first six months of 2017, the company recorded a gain of $2.3 million and $4.2 million related to changes in fair value of certain investments, respectively.~~

During the first six months of 2017, the company completed the sale of $500 principal amount of 3.875% notes due 2028. The net proceeds of the offering of $494.6 million 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 $58.8 million in the second quarter and first six months of 2017.

Income Tax

Income taxes for the interim periods presented have been included in the accompanying consolidated financial statements on the basis of an estimated annual effective tax rate. The determination of the consolidated provision for income taxes requires management to make certain judgments and estimates. Changes in the estimated level of annual pre-tax earnings, tax laws, and changes resulting from tax audits can affect the overall effective income tax rate, which impacts the level of income tax expense and net income. Judgments and estimates related to the company’s projections and assumptions are inherently uncertain; therefore, actual results could differ from projections.

For the ~~second~~first quarter ~~and first six months~~of ~~2018,~~2019, the company recorded a provision for income taxes of ~~$51.7~~$53.9 million and an effective tax rate of ~~23.2%, and $98.3 million, and effective tax rate of 24.0%, respectively.~~27.5%. The company's provision for income taxes and effective tax rate for the ~~second~~first quarter of 2019 were impacted by the previously discussed restructuring, integration, and other charges, identifiable intangible asset amortization, loss on disposition of businesses, the impact of U.S. tax reform, and gain on investments. Excluding the impact of the aforementioned items, the company's effective tax rate for the first ~~six months~~ quarter of 2019 was 25.6%.

For the first quarter of 2018, the company recorded a provision for income taxes of $46.6 million and an effective tax rate of 25.0%. The company's provision for income taxes and effective tax rate for the first quarterof 2018 were impacted by the previously discussed restructuring, integration, and other charges, identifiable intangible asset amortization, loss on disposition of businesses, and loss on investments. Excluding the impact of the aforementioned items, the company's effective tax rate for the ~~second~~first quarter ~~and first six months~~ of 2018 was ~~23.5% and 24.2%, respectively.~~ 25.1%.

For the second quarter and first six months of 2017, the company recorded a provision for income taxes of $29.6 million, an effective tax rate of 22.7%, and $69.2 million, and effective tax rate of 24.2%, respectively. The company's provision for income taxes and effective tax rate for the second quarter and first six monthsof 2017 were impacted by the previously discussed restructuring, integration, and other charges, identifiable intangible asset amortization, loss on extinguishment of debt, and gain on investments. Excluding the impact of the aforementioned items, the company's effective tax rate for the second quarter and first six months of 2017 was 28.3%. and 27.5%, respectively.

The company’s effective tax rate deviates from the statutory U.S. federal income tax rate mainly due to the mix of foreign taxing jurisdictions in which the company operates and where its foreign subsidiaries generate taxable income. The increase in the effective tax rate from ~~22.7%~~25.0% for the ~~second~~first quarter of ~~2017~~2018 to ~~23.2%~~27.5% for the ~~second~~first quarter of ~~2018~~2019 is primarily driven by the change in mix of the tax jurisdictions where taxable income is generated, discrete items, and changes in the U.S. tax rules.

On December 22, 2017, the U.S. federal government enacted comprehensive tax legislation (the “Tax Act”), which significantly revised the U.S. corporate income tax law by, among other things, lowering the U.S. federal corporate income tax rate from 35% to 21%, implementing a territorial tax system, imposing a one-time transition tax on accumulated foreign unremitted earnings, and setting limitations on deductibility of certain costs (e.g., interest expense).

In the fourth quarter of 2017, the company recorded a provision amount, which is a reasonable estimate of the Tax Act’s impact of $124.7 million pursuant to the guidance provided by the U.S. Securities and Exchange Commission’s Staff Accounting Bulletin

(“SAB 118”), which allows the company a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related provisional tax impacts. Accordingly, the company is continuing to assess the related tax impacts under SAB 118 and has not made any adjustments during the first six months of 2018 to the reasonable estimate of $124.7 million previously recorded in the fourth quarter of 2017.

Net Income Attributable to Shareholders

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


	Quarter Ended						Six Months Ended						Quarter Ended
	June 30, 2018			July 1, 2017			June 30, 2018			July 1, 2017			March 30, 2019			March 31, 2018

Net income attributable to shareholders, as reported	$	170		$	100		$	309		$	214		$	141		$	139
Identifiable intangible asset amortization*	12			12			25			25			12			13
Restructuring, integration, and other charges	19			24			40			40			12			21
Loss on disposition of businesses, net													1			2
(Gain) loss on investments, net	3			(2		)	5			(4		)	(5		)	2
Loss on extinguishment of debt	—			59			—			59
Loss on disposition of businesses, net	—			—			2			—
Tax effect of adjustments above	(8		)	(34		)	(18		)	(42		)	(5		)	(10		)
Impact of U.S. tax reform													4			—
Net income attributable to shareholders, as adjusted **	$	195		$	159		$	363		$	291		$	158		$	168

* Identifiable intangible asset amortization does not include amortization related to the noncontrolling ~~interest~~interest.

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

The company recorded net income attributable to shareholders of ~~$169.9 million and $309.0~~$140.7 million in the ~~second~~first quarter ~~and first six months~~ of ~~2018, respectively,~~2019 compared with ~~$99.7 million and $214.5~~$139.1 million in the year-earlier ~~periods.~~period. Net income attributable to shareholders, as adjusted, was ~~$194.9 million and $362.7~~$158.5 million for the ~~second~~first quarter ~~and first six months~~ of ~~2018, respectively,~~2019 compared with ~~$159.1 million and $291.2~~$167.7 million in the year-earlier ~~periods.~~period.

Liquidity and Capital Resources

At ~~June~~March 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the company had cash and cash equivalents of ~~$330.5~~$351.9 million and ~~$730.1~~$509.3 million, respectively, of which ~~$268.6~~$336.2 million and ~~$465.4~~$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 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 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 operations in the United States, the company would be required to pay ~~witholding~~withholding and other taxes related to distribution of these funds. Additionally, local government regulations may restrict the 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 conduct operations throughout the global organization.

During the first ~~six months~~quarter of 2019, the net amount of cash used for the company's operating activities was $329.0 million, the net amount of cash used for investing activities was $30.9 million, and the net amount of cash provided by financing activities was $180.8 million. The effect of exchange rate changes on cash was an increase of $21.7 million.

During the first quarter of 2018, the net amount of cash used for the company's operating activities was ~~$484.8~~$75.1 million, the net amount of cash used for investing activities was ~~$371.8~~$336.4 million, and the net amount of cash provided by financing activities was ~~$452.2~~$235.5 million. The effect of exchange rate changes on cash was ~~an increase~~a decrease of ~~$4.9~~$5.4 million.

During the first six months of 2017, the net amount of cash used for the company's operating activities was $133.1 million, the net amount of cash used for investing activities was $83.0 million, and the net amount of cash provided by financing activities was $91.4 million. The effect of exchange rate changes on cash was an increase of $10.4 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 ~~70.8%~~69.1% at ~~June~~March 30, ~~2018~~2019 and ~~69.4%~~72.1% at December 31, ~~2017.~~2018.

The net amount of cash used for the company's operating activities during the first ~~six months~~quarter of 2019 was $329.0 million and was primarily due to the timing of inventory purchases early in the quarter coupled with lower demand levels and slower payments by customers later in the quarter.

The net amount of cash used for the company's operating activities during the first quarter of 2018 was ~~$484.8~~$75.1 million and was primarily due to an increase in working capital to support the increase in sales, offset, in part, by an increase in earnings from operations adjusted for non-cash items.

The net amount of cash used for the company's operating activities during the first six months of 2017 was $133.1 million and was primarily due to an increase in working capital to support the increase in sales, offset, in part, by an increase in earnings from operations adjusted for non-cash items.

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 ~~18.1%~~19.6% in the ~~second~~first quarter of ~~2018~~2019 compared with ~~16.7%~~17.6% in the ~~second~~first quarter of ~~2017.~~2018.

Cash Flows from Investing Activities

The net amount of cash used for investing activities during the first ~~six months~~quarter of ~~2018~~2019 was ~~$371.8~~$30.9 million. The ~~use~~uses of cash from investing activities included ~~$331.6~~$33.8 million for capital expenditures. Capital expenditures for the first quarter of 2019 are related to investments in internally developed software and website functionality related to the digital business.

The net amount of cash used for investing activities during the first quarter of 2018 was $336.4 million. The uses of cash from investing activities included $331.5 million for cash consideration paid for acquired businesses and ~~$66.6~~$34.7 million for capital expenditures. The sources of cash from investing activities included $34.3 million of proceeds from the sale of businesses. Capital expenditures for the first six months of 2018 are related to implementation of the company's new ERP system, relocation and infrastructure upgrades of the company’s data centers, and continued development of online Digital and Cloud capabilities.

The net amount of cash used for investing activities during the first six months of 2017 was $83.0 million. The uses of cash from investing activities included $101.9 million for capital expenditures. The sources of cash from investing activities included $24.4 million of proceeds from the sale of property, plant, and equipment. Included in capital expenditures for the first ~~six months~~quarter of ~~2017~~2018 was ~~$30.3~~$7.4 million related to the company's ~~global~~ ERP ~~initiative.~~system. The company completed the implementation of its new ERP system during Q1 2018.

Cash Flows from Financing Activities

The net amount of cash provided by financing activities during the first ~~six months~~quarter of 2019 was $180.8 million. The uses of cash from financing activities included $107.2 million of net payments from short-term borrowings and $53.9 million of repurchases of common stock. The sources of cash from financing activities during the first quarter of 2019 were $335.0 million of net proceeds from long-term bank borrowings and $6.9 million of proceeds from the exercise of stock options.

The net amount of cash provided by financing activities during the first quarter of 2018 was ~~$452.2~~$235.5 million. The uses of cash from financing activities included $300.0 million of payments for the redemption of notes, ~~and $72.6~~$52.5 million of repurchases of common ~~stock.~~stock, and $18.4 million of net payments from short-term borrowings. The sources of cash from financing activities during the first ~~six months~~ quarter

of 2018 were ~~$759.3~~$601.4 million of ~~net~~ proceeds from long-term bank borrowings ~~$59.6 million of net proceeds from short-term borrowings,~~ and ~~$6.0~~$5.0 million of proceeds from the exercise of stock options.

~~The net~~During March 2018, the company redeemed $300.0 million principal amount of ~~cash provided by financing activities during~~ the ~~first six months of 2017 was $91.4 million. The uses of cash from financing activities included $558.1 million of payments for the redemption of~~its 3.00% notes $123.7 million of repurchases of common stock and $23.4 million of payments to acquire additional shares of Data Modul AG. The sources of cash from financing activities during the first six months of 2017 were $494.6 million of net proceeds from note offering, $40.3 million and $241.8 million of net proceeds from short-term and long-term bank borrowings, respectively, and $20.7 million of proceeds from the exercise of stock options.due March 2018.

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 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 ~~June~~March 30, ~~2018)~~2019), which is based on the company's credit ratings, or an effective interest rate of ~~2.41%~~3.56% at ~~June~~March 30, ~~2018.~~2019. The facility fee, which is based on the company's credit ratings, was .20% of the total borrowing capacity at ~~June~~March 30, ~~2018.~~2019. The company had ~~$57.7~~$55.0 million in outstanding borrowings under the revolving credit facility at ~~June~~March 30, ~~2018.~~2019. There were no outstanding borrowings under the revolving credit facility at December 31, ~~2017.~~2018. During the first ~~six months~~quarter of ~~2018~~2019 and ~~2017,~~2018, the average daily balance outstanding under the revolving credit facility was ~~$68.6~~$43.0 million and ~~$16.2~~$69.4 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 $74.8 million in outstanding borrowings under this program at March 30, 2019 and no outstanding borrowings under this program at ~~June 30, 2018 and~~ December 31, ~~2017.~~2018. During the first ~~six months~~quarter of ~~2018~~2019 and ~~2017,~~2018, the average daily balance outstanding under the commercial paper program was ~~$768.2~~$836.0 million and ~~$571.0~~$664.8 million, respectively. The program had ana weighted average effective interest rate of ~~2.56% for the second quarter of 2018.~~2.98% at March 30, 2019.

The company has an asset securitization program collateralized by accounts receivable of certain of its ~~subsidiaries. In~~subsidiaries, which matures June ~~2018,~~

~~the~~2021. The company ~~amended its asset securitization program and, among other things, increased its borrowing capacity from $910.0 million~~may borrow up to $1.2 billion ~~and extended its term to mature to June 2021.~~under the asset securitization 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 consolidated balance sheets. Interest on borrowings is calculated using a base rate plus a spread (.40% at ~~June~~March 30, ~~2018)~~2019), or an effective interest rate of ~~2.57%~~2.94% at ~~June~~March 30, ~~2018.~~2019. The facility fee is .40% of the total borrowing capacity. The company had ~~$1.2~~$1.1 billion and ~~$490.0~~$810.0 million in outstanding borrowings under the asset securitization program at ~~June~~March 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. During the first ~~six months~~quarter of ~~2018~~2019 and ~~2017,~~2018, the average daily balance outstanding under the asset securitization program was ~~$847.8 million~~$1.1 billion and ~~$721.6~~$794.7 million, respectively.

The company has $200.0 million in uncommitted lines of credit. There were ~~$70.0~~no outstanding borrowings and $180.0 million of outstanding borrowings under the uncommitted lines of credit at ~~June~~March 30, ~~2018~~2019 and ~~no outstanding borrowings at~~ December 31, ~~2017.~~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 ana weighted average effective interest rate of ~~2.79%~~3.49% at ~~June~~March 30, ~~2018.~~2019. During the first ~~six months~~quarter of ~~2018~~2019 and ~~2017,~~2018, the average daily balance outstanding under the uncommitted lines of credit was ~~$26.2~~$9.7 million and ~~$10.1~~$13.6 million, respectively.

~~During March 2018, the company redeemed $300.0 million principal amount of the its 3.00% notes due March 2018.~~

During June 2017, the company completed the sale of $500.0 million principal amount of 3.875% notes due in 2028. The net proceeds of the offering of $494.6 million 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 $58.8 million in the first six months of 2017.

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 were 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 and other financing expense, net" in the company’s consolidated statements of operations.

Management believes that the 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 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 Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. Since December 31, ~~2017,~~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 first quarter of 2018, the company redeemed $300.0 million of the 3.00% notes due 2018.~~

During the second quarter of 2018, the company amended its asset securitization program and, among other things, increased its borrowing capacity from $910.0 million to $1.2 billion and extended its term to mature to June 2021. At June 30, 2018 and December 31, 2017, the company had $1.2 billion and $490.0 million, respectively, in outstanding borrowings under the asset securitization program.

Share-Repurchase Programs

The following table shows the company's Board approved share-repurchase programs as of ~~June~~March 30, ~~2018~~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
December 2016	$	400,000	$	101,361	$	298,639	$	400,000	$	311,395	$	88,605
December 2018							600,000		—		600,000
Total							$	1,000,000	$	311,395	$	688,605

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

On January 1, 2018, the company adopted Topic 606 applying the full retrospective method. The adoption of Topic 606 did not have a significant impact on prior periods revenue recognition. The primary impact of adoption relates to the application of gross versus net indicators and the determination of when goods and services are distinct. In addition, the company is deferring certain revenue due to a change in the determination of transfer of control. These changes result from clarified guidance in Topic 606. The deferrals are expected to become revenue within a year of the transaction date. The impact of the adoption to sales, cost of sales, gross profit, and net income are presented in Note B.

On January 1, 2018, the company adopted ASU No. 2016-01 and adjusted retained earnings. The primary impact of adoption will require the change in fair value of equity investments, for which the company does not possess the ability to exercise significant influence, to be recognized in net income. The fair values of these equity investments are based upon readily determinable fair values.

There were no ~~additional~~significant changes during the first ~~six months~~quarter of ~~2018~~2019 to the items disclosed as Critical Accounting Policies and Estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in the company's Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 (See Note 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 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 ERP 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," 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 Annual Report on Form 10-K for the year ended December 31, ~~2017.~~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 ~~June~~March 30, ~~2018~~2019 (the "Evaluation"). Based upon the Evaluation, the company’s Chief Executive Officer and Chief Financial Officer concluded that the company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) are effective.

Changes in Internal Control over Financial Reporting

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

PART II. OTHER INFORMATION


Item 1A.	Risk Factors

~~New tariffs may result in increased prices and could adversely affect our business and results of operations.~~

Recently, the U.S. government imposed tariffs on certain products imported into the U.S. which have increased the prices of many of the products that the company purchases from its suppliers. The new tariffs, along with any additional tariffs or trade restrictions that may be implemented by the U.S. or other countries, could result in further increased prices. While the company intends to pass price increases on to our customers, the effect of tariffs on prices may impact sales and results of operations. Retaliatory tariffs imposed by other countries on U.S. goods have not yet had a significant impact, but we cannot predict further developments. The tariffs and the additional operational costs incurred in minimizing the number of products subject to the tariffs could adversely affect the operating profits for certain of our businesses and customer demand for certain products which could have an adverse effect on our business and results of operations.

There were no ~~other~~ material changes to the company's risk factors as discussed in Item 1A - Risk Factors in the company's Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.


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

The following table shows the share-repurchase activity for the quarter ended ~~June~~March 30, ~~2018~~2019:

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
April 1 through April 28, 2018 —
$ —
—
$ 318,639,054
April 29 through May 26, 2018 264,234
75.84
263,723
298,639,307
May 27 through June 30, 2018 —
—
—
298,639,307
Total 264,234

263,723



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
January 1 through January 26, 2019	235,276	$	72.25	235,276	$	711,613
January 27 through February 23, 2019	339,126	80.84		170,749	697,966
February 24 through March 30, 2019	118,308	80.39		116,373	688,605
Total	692,710			522,398


(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 number of shares purchased" and the "total number of shares purchased as part of publicly announced program" for the quarter ended ~~June~~March 30, ~~2018~~2019 is ~~511~~170,312 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 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.

10(a)		Form of Performance Stock Unit Award Agreement under the Arrow Electronics, Inc. ~~Executive Deferred Compensation~~2004 Omnibus Incentive Plan (as amended ~~and restated effective July 1, 2018.~~through February 17, 2015).

~~101.INS~~ 10(b)		~~XBRL Instance Document.~~ Form of Restricted Stock Unit Award Agreement under the Arrow Electronics, Inc. 2004 Omnibus Incentive Plan (as amended through February 17, 2015).

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:	~~August~~May 2, ~~2018~~2019	By:	/s/ Chris D. Stansbury
			Chris D. Stansbury
			Senior Vice President and Chief Financial Officer

4036




Part I.	Financial Information

	Item 1.	Financial Statements
		Consolidated Statements of Operations	3
		Consolidated Statements of Comprehensive Income	4
		Consolidated Balance Sheets	5
		Consolidated Statements of Cash Flows	6
		Consolidated Statements of Equity	7
		Notes to Consolidated Financial Statements	78

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2625

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3733

	Item 4.	Controls and Procedures	3733

Part II.	Other Information

	Item 1A.	Risk Factors	3834

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3834

	Item 6.	Exhibits	3935

Signature			4036



	Quarter Ended July 1, 2017							Six Months Ended July 1, 2017
	As Previously Reported		Adjustments**			Adjusted for New Standards		As Previously Reported		Adjustments**			Adjusted for New Standards
Sales	$	6,465,346	$	(43,120	)	$	6,422,226	$	12,224,898	$	(65,892	)	$	12,159,006
Cost of sales	5,641,380		(43,178		)	5,598,202		10,641,045		(67,260		)	10,573,785
Gross profit	823,966		58			824,024		1,583,853		1,368			1,585,221
Operating expenses:
Selling, general, and administrative expenses	532,347		(566		)	531,781		1,047,866		(559		)	1,047,307
Depreciation and amortization	37,381		—			37,381		74,522		—			74,522
Restructuring, integration, and other charges	24,416		—			24,416		39,921		—			39,921
	594,144		(566		)	593,578		1,162,309		(559		)	1,161,750
Operating income	229,822		624			230,446		421,544		1,927			423,471
Equity in earnings of affiliated companies	724		—			724		1,649		—			1,649
Gain on investments, net	750		1,513			2,263		750		3,495			4,245
Loss on extinguishment of debt	58,759		—			58,759		58,759		—			58,759
Post-retirement expense	—		1,897			1,897		—		3,697			3,697
Interest and other financing expense, net	42,358		180			42,538		80,431		356			80,787
Income before income taxes	130,179		60			130,239		284,753		1,369			286,122
Provision for income taxes	29,575		17			29,592		68,799		357			69,156
Consolidated net income	100,604		43			100,647		215,954		1,012			216,966
Noncontrolling interests	925		—			925		2,507		—			2,507
Net income attributable to shareholders	$	99,679	$	43		$	99,722	$	213,447	$	1,012		$	214,459
Net income per share:
Basic*	$	1.12	$	—		$	1.12	$	2.40	$	0.01		$	2.41
Diluted*	$	1.11	$	—		$	1.11	$	2.37	$	0.01		$	2.38



	First Quarter				Second Quarter				Third Quarter				Fourth Quarter				Year to Date
	As Previously Reported		Adjusted for New Standards		As Previously Reported		Adjusted for New Standards		As Previously Reported		Adjusted for New Standards		As Previously Reported		Adjusted for New Standards		As Previously Reported		Adjusted for New Standards
2017
Sales	$	5,759,552	$	5,736,780	$	6,465,346	$	6,422,226	$	6,953,740	$	6,856,108	$	7,633,870	$	7,539,449	$	26,812,508	$	26,554,563
Cost of sales	4,999,665		4,975,583		5,641,380		5,598,202		6,110,382		6,013,541		6,703,742		6,610,269		23,455,169		23,197,595
Operating income	191,722		193,025		229,822		230,446		235,992		235,441		270,914		286,824		928,450		945,736
Net income attributable to shareholders	$	113,768	$	114,737	$	99,679	$	99,722	$	134,630	$	134,064	$	53,885	$	53,653	$	401,962	$	402,176



Accounts receivable, net	$	13,701
Inventories	1,512
Property, plant, and equipment	4,557
Other assets	28,033
Identifiable intangible assets	71,710
Goodwill	225,937
Accounts payable	(521		)
Accrued expenses	(8,595		)
Deferred tax liability	(21,969		)
Other liabilities	(1,506		)
Cash consideration paid, net of cash acquired	$	312,859



	Quarter Ended				Six Months Ended
	July 1, 2017				July 1, 2017
	As Reported		Pro Forma		As Reported		Pro Forma
Sales	$	6,422,226	$	6,460,139	$	12,159,006	$	12,234,218
Net income attributable to shareholders	99,722		100,410		214,459		215,632
Net income per share:
Basic	$	1.12	$	1.13	$	2.41	$	2.42
Diluted	$	1.11	$	1.12	$	2.38	$	2.39



	June 30, 2018		December 31, 2017
3.00% notes, due 2018	$	—	$	299,857
Borrowings on lines of credit	70,000		—
Other short-term borrowings	44,908		56,949
	$	114,908	$	356,806



	Personnel Costs			Facilities Costs			Other			Total
Restructuring and integration charges	$	10,496		$	9,560		$	174		$	20,230
Payments	(7,592		)	(1,820		)	(18		)	(9,430		)
Foreign currency translation	(85		)	(151		)	(4		)	(240		)
Balance as of June 30, 2018	$	2,819		$	7,589		$	152		$	10,560

Maturity Date

Notional Amount

Interest rate due from counterparty

Interest rate due to counterparty

April 2020

6 mo. USD LIBOR + 3.896%