ARROW ELECTRONICS, INC. Information Relating to Forward-Looking Statements
This report includes "forward-looking statements," as the term is defined under
the federal securities laws. 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. These forward-looking statements 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: potential adverse effects of the ongoing global COVID-19
pandemic, including actions taken to contain or mitigate the impact of COVID-19,
industry conditions, changes in product supply, pricing and customer demand,
competition, other vagaries in the global components and the global enterprise
computing solutions ("ECS") markets, changes in relationships with key
suppliers, increased profit margin pressure, changes in legal and regulatory
matters, non-compliance with certain regulations, such as export, antitrust, and
anti-corruption laws, foreign tax and other loss contingencies, and the
company's ability to generate cash flow. For a further discussion of these and
other factors that could cause Arrow Electronics, Inc.'s (the "company") future
results to differ materially from any forward-looking statements, see the
section entitled "Risk Factors" in this Quarterly Report on Form 10-Q and the
company's most recent Annual Report on Form 10-K, as well as in other filings
the company makes with the Securities and Exchange Commission . 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.
Certain Non-GAAP Financial Information
In addition to disclosing financial results that are determined in accordance with accounting principles generally accepted inthe United States ("GAAP"), the company also discloses certain non-GAAP financial information, including: •Non-GAAP sales, non-GAAP gross profit, and non-GAAP operating expenses exclude the impact of changes in foreign currencies (referred to as "changes in foreign currencies") by re-translating prior period results at current period foreign exchange rates; the impact of the company's personal computer and mobility asset disposition business (referred to as "wind down"); and the impact of notes receivable recoveries related to the Arrow Financing Solutions ("AFS") business (referred to as "AFS notes receivable recoveries"). •Non-GAAP operating income excludes identifiable intangible asset amortization, restructuring, integration, and other charges (credits), AFS notes receivable recoveries, impairments of long-lived assets, and the impact of wind down. •Non-GAAP effective tax rate and non-GAAP net income attributable to shareholders exclude identifiable intangible asset amortization, restructuring, integration, and other charges (credits), AFS notes receivable recoveries, net gains and losses on investments, certain tax adjustments, impairments of long-lived assets, pension settlement gain, and the impact of wind down. 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. Overview 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 ECS business segment. 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. For the third quarter of 2021, approximately 78% of the company's sales were from the global components business segment, and approximately 22% 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 23 -------------------------------------------------------------------------------- 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 third quarter and first nine months of 2021 increased by 17.7% and 25.9%, respectively, compared with the year-earlier periods. The increase for the third quarter of 2021 was driven by a 24.8% increase in the global components business segment sales offset by a 1.8% decrease in the global ECS business segment sales. The increase for the first nine months of 2021 was driven by a 35.0% increase in the global components business segment sales and a 2.5% increase in the global ECS business segment sales. Adjusted for the change in foreign currencies, non-GAAP consolidated sales increased 16.8% and 23.0% for the third quarter and first nine months of 2021, respectively, compared with the year-earlier periods.
The company reported net income attributable to shareholders of
Third quarters of 2021 and 2020:
•restructuring, integration, and other credits of$3.0 million in 2021 and$2.8 million in 2020; •identifiable intangible asset amortization of$9.2 million in 2021 and$9.4 million in 2020; •impairments of long-lived assets of$2.3 million in 2020; •gains from wind down of business of$2.5 million in 2020; •pension settlement gain of$1.8 million in 2020; •tax benefit related to legislation changes and other non-recurring tax adjustments of$4.9 million in 2020; •AFS notes receivable reserves of$0.2 million in 2020; and •net gain on investments of$1.4 million in 2021 and$2.7 million in 2020.
First nine months of 2021 and 2020:
•restructuring, integration, and other charges of$7.2 million in 2021 and$6.9 million in 2020; •identifiable intangible asset amortization of$27.8 million in 2021 and$29.0 million in 2020; •impairments of long-lived assets of$4.5 million in 2021 and$7.2 million in 2020; •gains from wind down of business of$14.3 million in 2020; •AFS notes receivable recoveries of$1.0 million in 2020; •tax benefit related to legislation changes and other non-recurring tax adjustments of$1.3 million in 2020; •pension settlement gain of$1.8 million in 2020; and •net gain on investments of$10.9 million in 2021 and net loss on investments of$3.2 million in 2020. Excluding the aforementioned items, non-GAAP net income attributable to shareholders for the third quarter and first nine months of 2021 increased to$293.3 million and$758.2 million , respectively, compared with$162.1 million and$367.2 million in the year-earlier periods. Net income in the first nine months of 2020 also included charges of approximately$32.7 million , net of tax, primarily related to foreign tax and other loss contingencies within the global ECS business.
Impact of the COVID-19 Pandemic
The global COVID-19 pandemic continues to create significant macroeconomic
uncertainty, volatility and disruption, including supply constraints, extended
lead times, and unpredictability across many markets. Supply chain constraints
are being caused by shortages in electronics components markets and supply chain
logistical issues resulting in extended lead times and unpredictability, which
has impacted the business. Despite these challenges, to date the company has
efficiently managed the global supply chain requirements of customers and
suppliers, and as a result, during the second and third quarters of 2021 the
company's global components business benefited from rising demand and higher
prices for certain products leading to improved profit margins globally.
Management is actively monitoring the impact of the global situation on its
financial condition, liquidity, operations, suppliers, industry and workforce.
The extent to which COVID-19 and related supply constraints will continue to
impact the company's results will depend primarily on future developments,
including the severity and duration of the crisis, and the impact of actions
taken and that will be taken to contain COVID-19 or treat its impact, among
others. These future developments are highly uncertain and cannot be predicted
with confidence, however, we currently expect component supply to remain well
below demand
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in the coming quarters and through the better part of 2022. The global economic
impact from COVID-19 may adversely affect the company's results of operations in
the future and may affect the credit condition of some customers, which could
increase delays in customer payments and credit losses.
Accordingly, current results and financial condition discussed herein may not be
indicative of future operating results and trends. See the risk factors
regarding the impacts of the COVID-19 pandemic included in the company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2020 .
Impact on the fourth quarter of 2021
As a result of the supply chain constraints and timing of seasonal builds of electronic devices, we expect global components sales in the fourth quarter of 2021 to be slightly below third quarter 2021 sales.
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 Nine Months Ended
October 2, September 26, % October 2, September 26, %
2021 2020 Change 2021 2020 Change
Consolidated sales, as reported
17.7%$ 25,461 $ 20,219 25.9 % Impact of changes in foreign currencies - 55 - 476
Non-GAAP consolidated sales*
16.8%$ 25,461 $ 20,695 23.0 % Global components sales, as reported$ 6,624 $ 5,308 24.8%$ 19,678 $ 14,580 35.0 % Impact of changes in foreign currencies - 35 - 298
Non-GAAP global components sales*
24.0%$ 19,678 $ 14,878 32.3 %
Global ECS sales, as reported
(1.8)%$ 5,783 $ 5,640 2.5 % Impact of changes in foreign currencies - 20 - 178
Non-GAAP global ECS sales*
(2.8)%$ 5,783 $ 5,818 (0.6) %
* The sum of the components for sales, as reported, and non-GAAP sales may not agree to totals, as presented, due to rounding.
Consolidated sales for the third quarter and first nine months of 2021 increased by$1.3 billion , or 17.7%, and$5.2 billion , or 25.9%, respectively, compared with the year-earlier periods. The increase for the third quarter of 2021 was driven by an increase in global components segment sales of$1.3 billion , or 24.8% offset by a decrease in global ECS business segment sales of$35.1 million , or 1.8%. The increase for the first nine months of 2021 was driven by an increase in global components segment sales of$5.1 billion , or 35.0%, and an increase in global ECS business segment sales of$143.4 million , or 2.5%. Non-GAAP consolidated sales, adjusted for the impact of changes in foreign currencies, increased 16.8% and 23.0% for the third quarter and first nine months of 2021, respectively, compared with the year-earlier periods. The global components business capitalized on strong demand in all regions from higher sales volumes and favorable pricing in all regions.Asia/Pacific region sales for the third quarter and first nine months of 2021 increased 16% and 46%, respectively. TheAmericas and EMEA regions each grew more than 30% during the third quarter of 2021. Increases during the third quarter of 2021 related to many product lines, however the company noted particularly strong demand in the transportation, industrial, communications, computing and data networking verticals. Changes in foreign exchange rates contributed favorably to results in the EMEA region during 2021. 25 -------------------------------------------------------------------------------- Increases in sales for the global ECS business for the first nine months of 2021 were primarily due to higher sales volumes in the EMEA region driven by stronger demand for information technology hardware and cloud based software. Results in the third quarter of 2021 were negatively impacted by supply chain constraints. Gross Profit
Following is an analysis of gross profit (in millions):
Quarter Ended Nine Months Ended
October 2, September 26, October 2, September 26,
2021 2020 % Change 2021 2020 % Change
Consolidated gross profit, as
reported $ 1,076 $ 789 36.4% $ 3,006 $ 2,267 32.6%
Impact of changes in foreign
currencies - 6 - 63
Impact of wind down - - - (11)
Non-GAAP consolidated gross
profit* $ 1,076 $ 794 35.4% $ 3,006 $ 2,320 29.6%
Consolidated gross profit as a
percentage of sales, as reported 12.6 % 10.9 % 170 bps 11.8 % 11.2 % 60 bps
Non-GAAP consolidated gross
profit as a percentage of
non-GAAP sales 12.6 % 10.9 % 170 bps 11.8 % 11.2 % 60 bps
* The sum of the components for non-GAAP gross profit may not agree to totals, as presented, due to rounding.
The company recorded gross profit of$1.1 billion and$3.0 billion in the third quarter and first nine months of 2021, respectively, compared with$788.6 million and$2.3 billion in the year-earlier periods. During the third quarter and first nine months of 2021, gross profit increased 36.4% and 32.6%, respectively, on a GAAP basis, and 35.4% and 29.6%, respectively, on a non-GAAP basis, compared with the year-earlier periods. Gross profit margins in the third quarter and first nine months increased by 170 bps and 60 bps, on a GAAP and non-GAAP basis respectively, compared with the year-earlier periods. The increases in gross profit margins during the third quarter related primarily to significant improvements in pricing and margins during the third quarter in both theAsia/Pacific andAmericas regions, due in part to the current market conditions, product mix, and the global supply chain issues discussed above, as well as the company's ability to secure inventory to meet the strong demand. Growing demand in services offerings globally continued to have a positive impact on gross margins during the third quarter and first nine months of 2021 compared with the year-earlier periods.
The company is currently experiencing benefits to gross margins in the global components business due to the factors discussed above, which may not be representative of future trends or conditions. As such, the current gross margins may not be sustainable.
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--------------------------------------------------------------------------------Selling, General, and Administrative Expenses and Depreciation and Amortization
Following is an analysis of operating expenses (in millions):
Quarter Ended Nine Months Ended
October 2, September 26, % October 2, September 26, %
2021 2020 Change 2021 2020 Change
Selling, general, and
administrative expenses, as
reported $ 626 $ 504 24.1% $ 1,803 $ 1,540 17.1%
Depreciation and amortization,
as reported 48 47 2.8% 147 141 4.5%
Operating expenses, as reported*
22.3%$ 1,949 $ 1,680 16.0% Impact of changes in foreign currencies - 6 - 41 Impact of wind down - 2 - 3 AFS notes receivable recoveries - - - 1
Non-GAAP operating expenses*
20.6%$ 1,949 $ 1,725 13.0% Operating expenses as a percentage of sales, as reported 7.9 % 7.6 % 30 bps 7.7 % 8.3 % (60) bps Non-GAAP operating expenses as a percentage of non-GAAP sales 7.9 % 7.7 % 20 bps 7.7 % 8.3 % (60) bps *The sum of the components for selling, general, and administrative expenses and depreciation and amortization, as reported, and non-GAAP operating expenses may not agree to totals, as presented, due to rounding. Selling, general, and administrative expenses increased by$121.7 million , or 24.1%, and$263.0 million , or 17.1%, in the third quarter and first nine months of 2021, respectively, on a sales increase of 17.7% and 25.9% compared with the year-earlier periods. Operating expense, as a percentage of sales, increased 30 bps and decreased 60 bps for the third quarter and first nine months of 2021, respectively, compared with the year-earlier periods. Non-GAAP operating expense, as a percentage of non-GAAP sales, increased 20 bps and decreased 60 bps for the third quarter and first nine months of 2021, respectively, compared with the year-earlier periods. During the first nine months of 2021 and 2020, the company received$12.5 million and$2.4 million , respectively, in settlement funds in connection with certain class action claims (Refer to Note J), which were recorded within selling, general, and administrative expenses. Increases in operating expense as a percentage of sales during the third quarter of 2021 relate primarily to investments to grow the company's sales, higher variable costs related to higher margin product and services sold during the quarter, and some increased costs related to the global supply chain environment. Decreases in operating expense as a percentage of sales during the first nine months of 2021 relate primarily to operating leverage the company generates when sales are growing, and the settlement funds discussed above, partially offset by the increases in costs experienced during the third quarter of 2021. Depreciation and amortization expense as a percentage of operating expenses was 7.1% and 7.5% for the third quarter and first nine months of 2021, respectively, compared with 8.5% and 8.4% in the year-earlier periods. Included in depreciation and amortization expense is identifiable intangible asset amortization of$9.2 million and$27.8 million for the third quarter and first nine months of 2021, respectively, compared to$9.4 million and$29.0 million in the year-earlier periods.
Restructuring, Integration, and Other Charges (Credits)
Restructuring initiatives and integration costs are due to the company's continued efforts to lower costs, drive operational efficiency, integrate any acquired businesses, and the consolidation of certain operations, as necessary. The company recorded restructuring, integration, and other charges (credits) of$(3.0) million and$7.2 million , and$(2.8) million and$6.9 million for the third quarter and first nine months of 2021 and 2020, respectively.
As of
27
--------------------------------------------------------------------------------Operating Income
Following is an analysis of operating income (in millions):
Quarter Ended Nine Months Ended
October 2, September 26, % October 2, September 26, %
2021 2020 Change 2021 2020 Change
Consolidated operating
income, as reported $ 405 $ 238 70.0% $ 1,045 $ 573 82.3 %
Identifiable intangible asset
amortization 9 9 28 29
Restructuring, integration,
and other charges (credits) (3) (3) 7 7
AFS notes receivable
recoveries - - - (1)
Impairments - 2 4 7
Impact of wind down - (2) - (14)
Non-GAAP consolidated
operating income* $ 411 $ 244 68.3% $ 1,084 $ 601 80.4%
Consolidated operating income
as a percentage of sales, as
reported 4.8 % 3.3 % 150 bps 4.1 % 2.8 % 130 bps
Non-GAAP consolidated
operating income, as a
percentage of sales,
excluding wind down 4.8 % 3.4 % 140 bps 4.3 % 3.0 % 130 bps
The company recorded operating income of $404.9 million , or 4.8% of sales, and
operating income of $1.0 billion , or 4.1% of sales, in the third quarter and
first nine months of 2021, respectively, compared with operating income of
$238.2 million , or 3.3% of sales, and operating income of $573.1 million , or
2.8% of sales, in the year-earlier periods. Non-GAAP operating income was $411.0
million , or 4.8% of sales, and $1.1 billion , or 4.3% of sales, in the third
quarter and first nine months of 2021, compared with non-GAAP operating income
of $244.3 million , or 3.4% of sales, and $601.0 million , or 3.0% of sales, in
the year-earlier periods.
Non-GAAP operating income, as a percentage of sales, increased 140 bps and 130
bps for the third quarter and first nine months of 2021, respectively, primarily
due to increases in sales volumes and prices from the global components
business. The increase in operating margins are also impacted by the reserves
and other adjustments related to foreign tax and other loss contingencies
recorded within the global ECS business during the first quarter of 2020 (Refer
to Note J). These reserves are principally associated with transactional taxes
on activity from several prior years, not significant to any one year. During
the third quarter and first nine months of 2021, respectively, changes in
foreign currencies had a positive impact on operating income of approximately
$0.4 million and $21.4 million when compared to the year-earlier periods.
Gain (Loss) on Investments, Net
During the third quarter and first nine months of 2021 and 2020, respectively, the company recorded a gain of$1.4 million and$10.9 million , and a gain of$2.7 million and loss of$3.2 million , respectively, which are primarily related to changes in fair value of assets related to the Arrow SERP pension plan, which consist primarily of life insurance policies and mutual fund assets.
Interest and Other Financing Expense, Net
The company recorded net interest and other financing expense of$32.7 million and$97.0 million for the third quarter and first nine months of 2021, respectively, compared with$30.5 million and$105.6 million in the year-earlier periods. The increase for the third quarter of 2021 primarily relates to higher borrowings and interest rates on short term credit facilities. The decrease for the first nine months of 2021 primarily relates to lower borrowings and interest rates on short term credit facilities, partially offset by a decrease in interest income. The decrease in interest income is primarily attributable to lower average cash balances and lower interest rates within the company's cash pooling arrangements. 28 --------------------------------------------------------------------------------
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.
Following is an analysis of effective income tax rate:
Quarter Ended Nine Months Ended
October 2, September 26, October 2, September 26,
2021 2020 2021 2020
Effective income tax rate 22.2 % 21.2 % 22.8 % 24.5 %
Identifiable intangible asset amortization 0.1 % 0.2 % 0.1 % 0.1 %
Restructuring, integration, and other
charges (credits) - % (0.1) % - % 0.1 %
Impairments - % - % - % 0.1 %
Impact of wind down - % (0.1) % - % 0.1 %
Pension settlement gain - % (0.1) % - % - %
Impact of tax legislation changes - % 2.3 % - % 0.3 %
Non-GAAP effective income tax rate* 22.3 % 23.6 % 22.8 % 25.1 %
* The sum of the components for non-GAAP effective income tax rate may not agree to totals, as presented, due to rounding.
The company's effective tax rate deviates from the statutoryU.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, among other things. The change in the effective tax rate from 21.2% and 24.5% for the third quarter and first nine months of 2020, respectively, to 22.2% and 22.8% for the third quarter and first nine months of 2021, respectively, is primarily driven by discrete items, such as the out-of-period tax contingencies, and changes in the mix of tax jurisdictions where taxable income is generated. The non-GAAP effective tax rate for the first nine months of 2020 includes approximately$7.4 million in discrete tax items related to the foreign tax and other loss contingencies.
Net Income Attributable to Shareholders
Following is an analysis of net income attributable to shareholders (in
millions):
Quarter Ended Nine Months Ended
October 2, September 26, October 2, September 26,
2021 2020 2021 2020
Net income attributable to shareholders, as
reported $ 290 $ 166 $ 737 $ 348
Identifiable intangible asset amortization* 9 9 27 28
Restructuring, integration, and other
charges (credits) (3) (3) 7 7
(Gain) loss on investments, net (1) (3) (11) 3
AFS notes receivable recoveries - - - (1)
Impairments - 2 4 7
Impact of wind down - (2) - (14)
Pension settlement gain - (2) - (2)
Tax effect of adjustments above (1) - (7) (9)
Impact of tax legislation changes - (5) - (1)
Non-GAAP net income attributable to
shareholders** $ 293 $
162
* Identifiable intangible asset amortization also excludes amortization related to the noncontrolling interest. ** The sum of the components for non-GAAP net income attributable to shareholders may not agree to totals, as presented, due to rounding.
The company recorded net income attributable to shareholders of
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income attributable to shareholders was $293.3 million and $758.2 million for
the third quarter and first nine months of 2021, respectively, compared with
$162.1 million and $367.2 million in the year-earlier periods. During the third
quarter and first nine months of 2021, changes in foreign currencies had a
positive impact on net income of approximately $0.2 million and $15.8 million
when compared to the year-earlier periods.
Liquidity and Capital Resources
AtOctober 2, 2021 andDecember 31, 2020 , the company had cash and cash equivalents of$215.9 million and$373.6 million , respectively, of which$203.1 million and$140.1 million , respectively, were held outsidethe 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. To achieve greater cash management agility and to further advance business objectives, during the fourth quarter of 2019, the company reversed its assertion to indefinitely reinvest a certain portion of its foreign earnings, of which approximately$2.3 billion are available for distribution in future periods as ofOctober 2, 2021 . The company continues to indefinitely reinvest$2.3 billion of undistributed earnings of its foreign subsidiaries. If the indefinitely reinvested earnings were to be distributed tothe United States , the company would be required to pay withholding and other taxes. Additionally, local government regulations may restrict the company's ability to move cash balances to meet cash needs under certain circumstances. However, 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 nine months of 2021, the net amount of cash provided by the company's operating activities was$391.1 million , the net amount of cash used for investing activities was$39.7 million , and the net amount of cash used for financing activities was$474.4 million . The effect of exchange rate changes on cash was a decrease of$34.7 million . During the first nine months of 2020, the net amount of cash provided by the company's operating activities was$1.2 billion , the net amount of cash used for investing activities was$104.1 million , and the net amount of cash used for financing activities was$1.1 billion . The effect of exchange rate changes on cash was an increase of$5.4 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 75.5% at
The net amount of cash provided by the company's operating activities during the first nine months of 2021 and 2020 was$391.1 million and$1.2 billion , respectively. The change in cash provided by operating activities during 2021, compared to the year-earlier period, relates primarily to the timing of payments, increasing growth in customer demand in certain regions, and a corresponding increase in working capital, including inventory, which is consistent with the company's historical counter-cyclical cash flow in which the company generates less cash flow in periods of increased demand. Working capital as a percentage of sales, which the company defines as accounts receivable, net, plus inventory, net, less accounts payable, divided by annualized sales, was 15.2% in the third quarter of 2021 compared with 15.0% in the third quarter of 2020.
Cash Flows from Investing Activities
The net amount of cash used for investing activities during the first nine months of 2021 was$39.7 million . The primary source of cash from investing activities was$22.2 million of proceeds from the sale of a distribution warehouse in the EMEA region. The primary use of cash for investing activities included$62.3 million for capital expenditures. Capital expenditures for the first nine months of 2021 primarily include expenditures related to investments in internally developed software and website functionality and the build out of the company's distribution centers. The net amount of cash used for investing activities during the first nine months of 2020 was$104.1 million . The primary use of cash from investing activities included$89.6 million for capital expenditures. Capital expenditures for the first nine months of 2020 primarily include expenditures related to the build out of the company's distribution centers and investments in internally developed software. 30 --------------------------------------------------------------------------------
Cash Flows from Financing Activities
The net amount of cash used for financing activities during the first nine months of 2021 was$474.4 million . The uses of cash from financing activities included$661.5 million of repurchases of common stock,$130.9 million of repayments of the principal amount of the company's 5.125% notes dueMarch 2021 , and$16.0 million of net payments for short-term borrowings. The primary sources of cash from financing activities during the third quarter of 2021 were$289.2 million of net proceeds from long-term borrowings and$44.9 million of proceeds from the exercise of stock options. The net amount of cash used for financing activities during the first nine months of 2020 was$1.1 billion . The uses of cash from financing activities included$86.2 million of net payments from short-term borrowings,$411.4 million of net payments for long-term borrowings,$48.4 million of payments upon the settlement of forward starting interest rate swaps,$209.4 million of repayments of the principal amount of the company's 6.00% notes dueApril 2020 , and$384.8 million of repurchases of common stock. The primary source of cash from financing activities during the third quarter of 2020 was$6.0 million of proceeds from the exercise of stock options. The company has a$2.0 billion revolving credit facility that 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. InSeptember 2021 , the company amended its revolving credit facility and, among other things, extended its term to mature inSeptember 2026 . Interest on borrowings under the revolving credit facility is calculated using a base rate or a Eurocurrency rate plus a spread (1.08% atOctober 2, 2021 ), which is based on the company's credit ratings, or an effective interest rate of 1.22% atOctober 2, 2021 . The facility fee, which is based on the company's credit ratings, was .175% of the total borrowing capacity atOctober 2, 2021 . The company had$35.0 million in outstanding borrowings under the revolving credit facility atOctober 2, 2021 and no outstanding borrowings under the revolving credit facility atDecember 31, 2020 . During the first nine months of 2021 and 2020, the average daily balance outstanding under the revolving credit facility was$10.9 million and$20.5 million , respectively. The company has a commercial paper program and the maximum aggregate balance of commercial paper outstanding may not exceed the borrowing capacity of$1.2 billion . The company had no outstanding borrowings under this program atOctober 2, 2021 andDecember 31, 2020 , respectively. During the first nine months of 2021 and 2020, the average daily balance outstanding under the commercial paper program was$225.4 million and$62.6 million , respectively. The program had a weighted-average effective interest rate of .28% atOctober 2, 2021 . The company has a North American asset securitization program collateralized by accounts receivable of certain of its subsidiaries. InMarch 2021 , the company amended its asset securitization program and, among other things, increased its borrowing capacity from$1.2 billion to$1.25 billion and extended its term to mature toMarch 2024 . The program is conducted throughArrow Electronics Funding Corporation ("AFC"), a wholly-owned, bankruptcy remote subsidiary. The 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, or a commercial paper rate, plus a spread (.45% atOctober 2, 2021 ), or an effective interest rate of .55% atOctober 2, 2021 . The facility fee is .40% of the total borrowing capacity. AtOctober 2, 2021 , the company had$255.0 million of outstanding borrowings under the North American asset securitization program. AtDecember 31, 2020 , the company had no outstanding borrowings under the North American asset securitization program. During the first nine months of 2021 and 2020, the average daily balance outstanding under the North American asset securitization program was$331.5 million and$396.9 million , respectively. 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 ofOctober 2, 2021 , the company was in compliance with all such financial covenants. The company has$200.0 million in uncommitted lines of credit. There were no outstanding borrowings under the uncommitted lines of credit atOctober 2, 2021 andDecember 31, 2020 , respectively. These borrowings are 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 1.50% atOctober 2, 2021 . During the first nine months of 2021 and 2020, the average daily balance outstanding under the uncommitted lines of credit was$0.1 million and$7.9 million , respectively. InMay 2019 , the company entered into a series of ten-year forward-starting interest rate swaps (the "2019 swaps"), which locked in an average treasury rate of 2.33% on a total aggregate notional amount of$300.0 million . The 2019 swaps were designated as cash flow hedges managing the risk of variability in interest rates of future expected debt issuance byJune 2020 . InFebruary 2020 , the company determined that certain of the forecasted cash flows were no longer probable and de-designated the hedging 31 -------------------------------------------------------------------------------- relationship. InFebruary 2020 , the company re-designated the 2019 swaps in a new cash flow hedge managing the risk of variability in interest rates of future expected debt issuance byJune 2023 . InApril 2020 , the company entered into a series of ten-year forward-starting interest rate swaps (the "April 2020 swaps"), which locked in an average swap rate of 0.97% on a total aggregate notional amount of$300.0 million and expire inDecember 2024 . TheApril 2020 swaps were designated as cash flow hedges managing the risk of variability in interest rates of future expected debt issuance byDecember 2025 . InMay 2020 , the company entered into a series of ten-year forward-starting interest rate swaps (the "May 2020 swaps"), which locked in an average swap rate of 0.90% on a total aggregate notional amount of$300.0 million and expire inJune 2022 . TheMay 2020 swaps were designated as cash flow hedges managing the risk of variability in interest rates of future expected debt issuance byJune 2023 .
During
During
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. Management believes that the company's current cash availability, its current borrowing capacity under its revolving credit facility and asset securitization programs, 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's current committed and undrawn liquidity stands at over$3.0 billion in addition to$215.9 million of cash on hand atOctober 2, 2021 . 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, 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 endedDecember 31, 2020 . SinceDecember 31, 2020 , there were no material changes to the contractual obligations of the company outside the ordinary course of the company's business, except as follows:
•During the first quarter of 2021, the company repaid
•During the first quarter of 2021, the company amended its asset securitization program and, among other things, increased its borrowing capacity from$1.2 billion to$1.25 billion and extended its term to mature inMarch 2024 . The company had$255.0 million in outstanding borrowings under the North American asset securitization program atOctober 2, 2021 and no outstanding borrowings under the North American asset securitization program atDecember 31, 2020 . •During the third quarter of 2021, the company amended its revolving credit facility and, among other things, extended its term to mature inSeptember 2026 . The company had$35.0 million in outstanding borrowings under the revolving credit facility atOctober 2, 2021 and no outstanding borrowings under the revolving credit facility atDecember 31, 2020 . 32 --------------------------------------------------------------------------------
Share-Repurchase Programs
The following table shows the company's Board approved share-repurchase programs
as of
Approximate
Dollar Value of
Shares that May
Yet be
Dollar Value Dollar Value of Purchased
Approved for Shares Under the
Month of Board Approval Repurchase Repurchased ProgramDecember 2018$ 600,000 $ 600,000 $ - July 2020 600,000 600,000 - July 2021 600,000 186,532 413,468 Total$ 1,800,000 $ 1,386,532 $ 413,468
Off-Balance Sheet Arrangements
During the first quarter of 2020, the company entered into an EMEA asset securitization program under which it will continuously sell its interest in designated pools of trade accounts receivables of certain of its subsidiaries in the EMEA region, at a discount, to a special purpose entity, which in turn sells certain of the receivables to unaffiliated financial institutions and conduits administered by such unaffiliated financial institutions on a monthly basis. Refer to Note D "Accounts Receivables" of the Notes to the Consolidated Financial Statements for further discussion of the EMEA asset securitization program.
Critical Accounting Policies and Estimates
The company's consolidated financial statements are prepared in accordance with accounting principles generally accepted inthe United States . The preparation of these financial statements requires the company to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosure of contingent assets and liabilities. The company evaluates its estimates on an ongoing basis. The company bases its estimates on historical experience and on various other assumptions that are believed reasonable under the circumstances; the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There were no significant changes during the third quarter of 2021 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 endedDecember 31, 2020 . 33
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