XML 24 R14.htm IDEA: XBRL DOCUMENT v3.23.2
Debt
 6 Months Ended
Jul. 01, 2023
Debt Disclosure [Abstract]  
Debt [Text Block] Debt
Short-term borrowings, including current portion of long-term debt, consist of the following:
(thousands)July 1,
2023		December 31,
2022
4.50% notes, due March 2023
$— $299,895 
Uncommitted lines of credit— 78,000 
Commercial paper449,232 173,407 
Other short-term borrowings38,936 38,581 
 $488,168 $589,883 

Other short-term borrowings are primarily utilized to support working capital requirements. The weighted-average effective interest rate on these borrowings was 6.45% and 1.98% at July 1, 2023 and December 31, 2022, respectively.

The company has $500.0 million in uncommitted lines of credit. In May 2023, the company increased the borrowing capacity on its uncommitted lines from $200.0 million to $500.0 million. There were no outstanding borrowings under the uncommitted lines of credit at July 1, 2023 and $78.0 million in outstanding borrowings under the uncommitted lines of credit at December 31, 2022. These borrowings were provided on a short-term basis and the maturity is agreed upon between the company and the lender. The uncommitted lines of credit had a weighted-average effective interest rate of 5.62% and 5.22% at July 1, 2023 and December 31, 2022, 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. The company had $449.2 million in outstanding borrowings under this program at July 1, 2023 and $173.4 million in outstanding borrowings at December 31, 2022. The commercial paper program had an effective interest rate of 5.78% and 5.15% at July 1, 2023 and December 31, 2022, respectively.
Long-term debt consists of the following:
(thousands)July 1,
2023		December 31,
2022
North American asset securitization program$1,220,000 $1,235,000 
3.25% notes, due 2024
498,668 498,122 
4.00% notes, due 2025
348,699 348,344 
6.125% notes, due 2026
496,268 — 
7.50% senior debentures, due 2027
110,143 110,103 
3.875% notes, due 2028
496,769 496,448 
2.95% notes, due 2032
494,778 494,522 
Other obligations with various interest rates and due dates7,503 425 
 $3,672,828 $3,182,964 

The 7.50% senior debentures are not redeemable prior to their maturity. The 6.125% notes have a call option which allows for redemption at par, without penalty, on or after March 1, 2024. All other notes may be called at the option of the company subject to "make whole" clauses.

The estimated fair market value of long-term debt, using quoted market prices, is as follows:
(thousands)July 1,
2023		December 31,
2022
3.25% notes, due 2024
$483,500 $481,500 
4.00% notes, due 2025
339,000 338,000 
6.125% notes, due 2026
499,500 — 
7.50% senior debentures, due 2027
116,500 116,500 
3.875% notes, due 2028
463,500 456,000 
2.95% notes, due 2032
413,500 395,500 

The carrying amount of the company's other short-term borrowings, uncommitted lines of credit, revolving credit facility, 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 a secured overnight financing rate ("SOFR"), plus a spread (1.08% at July 1, 2023), which is based on the company's credit ratings, plus a credit spread adjustment of 0.10% or a weighted-average interest rate of 6.09% at July 1, 2023. The facility fee, which is based on the company’s credit ratings, was 0.175% of the total borrowing capacity at July 1, 2023. The company had no outstanding borrowings under the revolving credit facility at July 1, 2023 and December 31, 2022.

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 July 1, 2023) plus a credit spread adjustment of 0.10% or an effective interest rate of 5.64% at July 1, 2023. The facility fee is 0.40% of the total borrowing capacity.

The company had $1.2 billion in outstanding borrowings under the North American asset securitization program at July 1, 2023 and December 31, 2022, which was included in "Long-term debt" on the company’s consolidated balance sheets. Total collateralized accounts receivable of approximately $2.8 billion and $3.1 billion were held by AFC and were included in
"Accounts receivable, net" on the company’s consolidated balance sheets at July 1, 2023 and December 31, 2022, 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 July 1, 2023, the company was in compliance with all such financial covenants.

During the first quarter of 2023, the company completed the sale of $500.0 million principal amount of 6.125% notes due in March 2026. The notes have a call option which allows for redemption at par, without penalty, on or after March 1, 2024. The net proceeds of the offering of $496.3 million were used to repay the $300.0 million principal amount of its 4.50% notes due March 2023 and for general corporate purposes. On the issuance date, the company entered into an interest rate swap, which effectively converts the 6.125% notes to a floating rate based on daily compounding SOFR + 0.508%. Refer to Note H for additional information.

During February 2022, the company repaid $350.0 million principal amount of its 3.50% notes due April 2022.

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.

Interest and dividend income of $16.4 million and $30.7 million for the second quarter and first six months of 2023, respectively, and $6.0 million and $10.5 million for the second quarter and first six months of 2022, respectively were recorded in "Interest and other financing expense, net" within the company's consolidated statements of operations.