Debt

3 Months Ended

Mar. 30, 2024

Debt

Debt

Note G – Debt

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

	March 30,		December 31,
(thousands)	2024		2023
3.25% notes, due September 2024	$	499,505	$	499,224
Commercial paper		427,763		1,121,882
Other short-term borrowings		18,430		32,848
	$	945,698	$	1,653,954

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

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

Long-term debt consists of the following:

	March 30,		December 31,
(thousands)	2024		2023
Revolving Credit Facility	$	50,000	$	—
North American asset securitization program		625,000		198,000
4.00% notes, due 2025		349,245		349,061
6.125% notes, due 2026 (a) (b)		498,343		497,661
7.50% senior debentures, due 2027		110,205		110,184
3.875% notes, due 2028		497,264		497,098
2.95% notes, due 2032		495,172		495,039
Other obligations with various interest rates and due dates		7,021		6,510
	$	2,632,250	$	2,153,553

(a) Upon issuance of the 6.125% notes due March 2026, the company entered into an interest rate swap, which effectively converted the 6.125% notes to floating rate notes based on the secured overnight financing rate (“SOFR”) + 0.508%, or an effective interest rate of 5.83% as of March 30, 2024. In March 2024, the company received a notice from the swap counterparty to terminate the swap without penalty. The effective date of cancellation was April 1, 2024. Refer to Note H.

(b) In April 2024, the company completed the sale of $500.0 million principal amount of 5.875% notes due April 2034.  The net proceeds of the offering of $498.6 million were used for general corporate purposes and to repay the $500.0 million principal amount of its 6.125% notes due March 2026.

The 7.50% senior debentures are not redeemable prior to their maturity. All other notes may be called at the option of the company subject to “make whole” clauses with the exception of the 6.125% notes which were called at par in April 2024.

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

	March 30,		December 31,
(thousands)	2024		2023
4.00% notes, due 2025	$	344,500	$	343,500
6.125% notes, due 2026		499,500		502,000
7.50% senior debentures, due 2027		116,000		117,000
3.875% notes, due 2028		475,000		475,000
2.95% notes, due 2032		420,000		425,000

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

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

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

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

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

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