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 causeArrow 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 theSecurities 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. 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 second quarter of 2021, approximately 77% of the company's sales were from the global components business segment, and approximately 23% 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 quarter and first six months of 2021 increased by 29.6% and 30.5%, respectively, compared with the year-earlier periods. The increase for the second quarter of 2021 was driven by a 40.0% increase in the global components business segment sales and a 3.5% increase in the global ECS business segment sales. The increase for the first six months of 2021 was driven by a 40.8% increase in the global components business segment sales and a 4.8% increase in the global ECS business segment sales. Adjusted for the change in foreign currencies, non-GAAP consolidated sales increased 25.5% and 26.4% for the second quarter and first six months of 2021, respectively, compared with the year-earlier periods.
The company reported net income attributable to shareholders of
Second quarters of 2021 and 2020:
•restructuring, integration, and other charges of$4.5 million in 2021 and$0.7 million in 2020; •identifiable intangible asset amortization of$9.3 million in 2021 and$9.7 million in 2020; •impairments of long-lived assets of$4.5 million in 2021 and$4.9 million in 2020; 23 -------------------------------------------------------------------------------- •gains from wind down of business of$11.8 million in 2020; •Arrow Financing Solutions ("AFS") notes receivable reserves of$0.2 million in 2020; and •net gain on investments of$6.7 million in 2021 and net gain on investments of$10.9 million in 2020.
First six months of 2021 and 2020:
•restructuring, integration, and other charges of$10.2 million in 2021 and$9.8 million in 2020; •identifiable intangible asset amortization of$18.6 million in 2021 and$19.7 million in 2020; •impairments of long-lived assets of$4.5 million in 2021 and$4.9 million in 2020; •gains from wind down of business of$11.8 million in 2020; •AFS notes receivable recoveries of$0.7 million in 2020; •tax expense related to legislation changes of$3.6 million in 2020; and •net gain on investments of$9.5 million in 2021 and net loss on investments of$5.9 million in 2020. Excluding the aforementioned items, non-GAAP net income attributable to shareholders for the second quarter and first six months of 2021 increased to$249.3 million and$464.9 million , respectively, compared with$126.1 million and$205.0 million in the year-earlier periods. Net income in the second quarter 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 quarter 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 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. 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 endedDecember 31, 2020 .
Impact on Q3 2021
As a result of the supply chain constraints and timing of quarter end for the second quarter of 2021, we expect global components sales in the third quarter of 2021 to be slightly below second quarter 2021 sales.
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 AFS business (referred to as "AFS notes receivable recoveries"). •Non-GAAP operating income excludes identifiable intangible asset amortization, restructuring, integration, and other charges, 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, AFS notes receivable recoveries, net gains and losses on investments, certain tax adjustments, impairments of long-lived assets, and the impact of wind down. 24 -------------------------------------------------------------------------------- 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 July 3, June 27, % July 3, June 27, % 2021 2020 Change 2021 2020 Change Consolidated sales, as reported$ 8,563 $ 6,606 29.6%$ 16,949 $ 12,988 30.5 % Impact of changes in foreign currencies - 219 - 421 Non-GAAP consolidated sales$ 8,563 $ 6,825 25.5%$ 16,949 $ 13,409 26.4 % Global components sales, as reported$ 6,611 $ 4,721 40.0%$ 13,054 $ 9,272 40.8 % Impact of changes in foreign currencies - 133 - 263 Non-GAAP global components sales$ 6,611 $ 4,854 36.2%$ 13,054 $ 9,535 36.9 % Global ECS sales, as reported$ 1,952 $ 1,885 3.5%$ 3,895 $ 3,716 4.8 % Impact of changes in foreign currencies - 85 - 158 Non-GAAP global ECS sales$ 1,952 $ 1,971 (1.0)%$ 3,895 $ 3,874 0.5 % Consolidated sales for the second quarter and first six months of 2021 increased by$2.0 billion , or 29.6%, and$4.0 billion , or 30.5%, respectively, compared with the year-earlier periods. The increase for the second quarter of 2021 was driven by an increase in global components segment sales of$1.9 billion , or 40.0% and an increase in global ECS business segment sales of$66.6 million , or 3.5%. The increase for the first six months of 2021 was driven by an increase in global components segment sales of$3.8 billion , or 40.8%, and an increase in global ECS business segment sales of$178.5 million , or 4.8%. Non-GAAP consolidated sales, adjusted for the impact of changes in foreign currencies, increased 25.5% and 26.4% for the second quarter and first six months of 2021, respectively, compared with the year-earlier periods. The global components business capitalized on strong demand in all regions from higher sales volumes and favorable pricing in all regions. This was especially true in theAsia/Pacific region where sales for the second quarter and first six months of 2021 increased 49% and 66%, respectively. TheAmericas and EMEA regions each grew more than 20% during the second quarter of 2021 on both a GAAP and non-GAAP basis. Increases during the second quarter and first six months of 2021 related to many product lines, however the company noted particularly strong demand in the industrial, automotive, communications, consumer electronics, data networking, and the aerospace and defense verticals. Changes in foreign exchange rates contributed favorably to results in the EMEA andAmericas regions during 2021. Increases in sales for the global ECS business were primarily due to higher sales volumes driven by stronger demand for information technology hardware and storage. Results in Q2 2021 were negatively impacted by minor supply chain constraints with certain products that the company anticipates resolving during the third quarter. 25 --------------------------------------------------------------------------------
Gross Profit
Following is an analysis of gross profit (in millions):
Quarter Ended Six Months Ended July 3, June 27, July 3, June 27, 2021 2020 % Change 2021 2020 % Change Consolidated gross profit, as reported$ 1,000 $ 750 33.3%$ 1,930 $ 1,479 30.5% Impact of changes in foreign currencies - 29 - 57 Impact of wind down - (11) - (11) Non-GAAP consolidated gross profit*$ 1,000 $ 769 30.1%$ 1,930 $ 1,525 26.5% Consolidated gross profit as a percentage of sales, as reported 11.7 % 11.4 % 30 bps 11.4 % 11.4 % flat Non-GAAP consolidated gross profit as a percentage of non-GAAP sales 11.7 % 11.3 % 40 bps 11.4 % 11.4 % flat
* 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$1.0 billion and$1.9 billion in the second quarter and first six months of 2021, respectively, compared with$750.5 million and$1.5 billion in the year-earlier periods. During the second quarter and first six months of 2021, gross profit increased 33.3% and 30.5%, respectively on a GAAP basis, and 30.1% and 26.5%, respectively, on a non-GAAP basis, compared with the year-earlier periods. Gross profit margins in the second quarter increased by approximately 30 bps and 40 bps on a GAAP and non-GAAP basis respectively, and were flat for the first six months of 2021, compared with the year-earlier periods. The increases in gross profit margins during the second quarter are significant given the shift in regional mix to moreAsia/Pacific components sales, which generally have a lower gross profit margin than components sales in the EMEA andAmericas regions, contributing 48% of global components sales for the second quarter and first six months of 2021, compared with 45% and 41% of global components sales for the year-earlier periods. This result is largely due to significant improvements in pricing and margins during the second quarter in both theAsia/Pacific andAmericas regions, due in part to the current market conditions and the global supply chain issues discussed above. Growing demand in services offerings globally continued to have a positive impact on gross margins during the second quarter and first six months of 2021 compared with the year-earlier periods.
Selling, General, and Administrative Expenses and Depreciation and Amortization
Following is an analysis of operating expenses (in millions):
Quarter Ended Six Months Ended July 3, June 27, % July 3, June 27, % 2021 2020 Change 2021 2020 Change Selling, general, and administrative expenses, as reported$ 602 $ 501 20.1%$ 1,177 $ 1,035 13.7% Depreciation and amortization, as reported 49 47 3.7% 99 94 5.3% Operating expenses, as reported$ 651 $ 548 18.7%$ 1,276 $ 1,129 13.0% Impact of changes in foreign currencies - 20 - 35 Impact of wind down - 1 - 1 AFS notes receivable recoveries - - - 1 Non-GAAP operating expenses*$ 651 $ 570 14.2%$ 1,276 $ 1,166 9.4% Operating expenses as a percentage of sales, as reported 7.6 % 8.3 % (70) bps 7.5 % 8.7 % (120) bps Non-GAAP operating expenses as a percentage of non-GAAP sales 7.6 % 8.3 % (70) bps 7.5 % 8.7 % (120) 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. 26 -------------------------------------------------------------------------------- Selling, general, and administrative expenses increased by$100.6 million , or 20.1%, and$141.3 million , or 13.7%, in the second quarter and first six months of 2021, respectively, on a sales increase of 29.6% and 30.5% compared with the year-earlier periods. In the second quarter and first six months of 2021, the company received$8.2 million and$12.5 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. Depreciation and amortization expense as a percentage of operating expenses was 7.5% and 7.8% for the second quarter and first six months of 2021, respectively, compared with 8.5% and 8.3% in the year-earlier periods. Included in depreciation and amortization expense is identifiable intangible asset amortization of$9.3 million and$18.6 million for the second quarter and first six months of 2021, respectively, compared to$9.7 million and$19.7 million in the year-earlier periods. The decreases in operating expense as a percentage of sales relate primarily to operating leverage the company generates when sales are growing and the settlement funds discussed above. These were partially offset by investments to grow the company's sales force, higher variable costs, and some increased costs related to the global supply chain environment. Non-GAAP operating expenses increased 14.2% and 9.4% for the second quarter and first six months of 2021, respectively, compared with the year-earlier periods. Non-GAAP operating expense, as a percentage of non-GAAP sales, decreased 70 bps and 120 bps for the second quarter and first six months of 2021, respectively, compared with the year-earlier periods.
Restructuring, Integration, and Other Charges
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 of$4.5 million and$10.2 million , and$0.7 million and$9.8 million for the second quarter and first six months of 2021 and 2020, respectively. As ofJuly 3, 2021 , the company does not anticipate there will be any material adjustments relating to the aforementioned restructuring and integration plans. Refer to Note G, "Restructuring, Integration, and Other Charges," of the Notes to the Consolidated Financial Statements for further discussion of the company's restructuring and integration activities.
Operating Income
Following is an analysis of operating income (in millions):
Quarter Ended Six Months Ended July 3, June 27, % July 3, June 27, % 2021 2020 Change 2021 2020 Change Consolidated operating income, as reported$ 341 $ 197 73.2%$ 640 $ 335 91.1 % Identifiable intangible asset amortization 9 10 19 20 Restructuring, integration, and other charges 4 1 10 10 AFS notes receivable recoveries - - - (1) Impairments 4 5 4 5 Impact of wind down - (12) - (12) Non-GAAP consolidated operating income*$ 359 $ 200 79.1%$ 673 $ 357 88.7% Consolidated operating income as a percentage of sales, as reported 4.0 % 3.0 % 100 bps 3.8 % 2.6 % 120 bps Non-GAAP consolidated operating income, as a percentage of sales, excluding wind down 4.2 % 3.0 % 120 bps 4.0 % 2.7 % 130 bps
* The sum of the components of non-GAAP consolidated operating income may not agree to totals, as presented, due to rounding.
27 -------------------------------------------------------------------------------- The company recorded operating income of$340.5 million , or 4.0% of sales, and operating income of$640.0 million , or 3.8% of sales, in the second quarter and first six months of 2021, respectively, compared with operating income of$196.6 million , or 3.0% of sales, and operating income of$334.9 million , or 2.6% of sales, in the year-earlier periods. Non-GAAP operating income was$358.8 million , or 4.2% of sales, and$673.3 million , or 4.0% of sales, in the second quarter and first six months of 2021 compared with non-GAAP operating income of$200.3 million , or 3.0% of sales, and$356.8 million , or 2.7% of sales, in the year-earlier periods. Non-GAAP operating income, as a percentage of sales, increased 120 bps and 130 bps for the second quarter and first six months of 2021, respectively, primarily due to increases in sales volumes and prices from the global components business, the greater operating expense leverage from higher sales volumes in all regions, partially offset by the impact to gross profit resulting from a shift in regional mix. The increase in operating margins is also impacted by 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 second quarter and first six months of 2021, respectively, changes in foreign currencies had positive impacts on operating income of approximately$8.4 million and$21.0 million when compared to the year-earlier periods.
Gain (Loss) on Investments, Net
During the second quarter and first six months of 2021 and 2020, respectively, the company recorded a gain of$6.7 million and$9.5 million and a gain of$10.9 million and loss of$5.9 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$30.7 million and$64.3 million for the second quarter and first six months of 2021, respectively, compared with$31.9 million and$75.1 million in the year-earlier periods. The decrease for the second quarter and first six 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.
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 quarter and first six months of 2021, the company recorded a provision for income taxes of$74.1 million and$135.1 million , respectively, an effective tax rate of 23.5% and 23.2%, compared to a provision of$40.9 million and$68.7 million , an effective tax rate of 23.5% and 27.3% during the second quarter and first six months of 2020, respectively. The company's non-GAAP effective tax rate for the second quarter and first six months of 2021 was 23.5% and 23.2%, respectively, compared to a non-GAAP effective tax rate of 24.1% and 26.3% for the second quarter and first six months of 2020, respectively. 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 23.5% and 27.3% for the second quarter and first six months of 2020, respectively, to 23.5% and 23.2% for the second quarter and first six 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 six months of 2020 includes approximately$7.4 million in discrete tax items related to the foreign tax and other loss contingencies. 28 --------------------------------------------------------------------------------
Net Income Attributable to Shareholders
Following is an analysis of net income attributable to shareholders (in millions):
Quarter Ended Six Months Ended July 3, June 27, July 3, June 27, 2021 2020 2021 2020 Net income attributable to shareholders, as reported$ 241 $ 133 $ 447 $ 182 Identifiable intangible asset amortization* 9 10 18 19 Restructuring, integration, and other charges 4 1 10 10 (Gain) loss on investments, net (7) (11) (10) 6 AFS notes receivable recoveries - - - (1) Impairments 4 5 4 5 Impact of wind down - (12) - (12) Tax effect of adjustments above (3) 1 (6) (8) Impact of tax legislation changes - - - 4 Non-GAAP net income attributable to shareholders**$ 249 $ 126 $ 465 $ 205 * 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$240.6 million and$447.0 million in the second quarter and first six months of 2021, respectively, compared with$132.8 million and$182.3 million in the year-earlier periods. Non-GAAP net income attributable to shareholders was$249.3 million and$464.9 million for the second quarter and first six months of 2021, respectively, compared with$126.1 million and$205.0 million in the year-earlier periods. During the second quarter and first six months of 2021, changes in foreign currencies had positive impacts on net income of approximately$6.0 million and$15.5 million when compared to the year-earlier periods.
Liquidity and Capital Resources
AtJuly 3, 2021 andDecember 31, 2020 , the company had cash and cash equivalents of$244.1 million and$373.6 million , respectively, of which$234.6 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 ofJuly 3, 2021 . The company continues to indefinitely reinvest the residual$2.0 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 six months of 2021, the net amount of cash provided by the company's operating activities was$276.8 million , the net amount of cash used for investing activities was$18.9 million , and the net amount of cash used for financing activities was$381.6 million . The effect of exchange rate changes on cash was a decrease of$5.8 million . During the first six months of 2020, the net amount of cash provided by the company's operating activities was$885.1 million , the net amount of cash used for investing activities was$65.0 million , and the net amount of cash used for financing activities was$904.8 million . The effect of exchange rate changes on cash was a decrease of$9.6 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 74.1% at
29 -------------------------------------------------------------------------------- The net amount of cash provided by the company's operating activities during the first six months of 2021 and 2020 was$276.8 million and$885.1 million , respectively. The change relates primarily to income from operations offset by the timing of payments. 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 14.2% in the second quarter of 2021 compared with 16.7% in the second quarter of 2020.
Cash Flows from Investing Activities
The net amount of cash used for investing activities during the first six months of 2021 was$18.9 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$41.1 million for capital expenditures. Capital expenditures for the first six 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 six months of 2020 was$65.0 million . The primary use of cash from investing activities included$59.5 million for capital expenditures. Capital expenditures for the first six months of 2020 include expenditures related to the build out of the company's distribution centers and investments in internally developed software.
Cash Flows from Financing Activities
The net amount of cash used for financing activities during the first six months of 2021 was$381.6 million . The uses of cash from financing activities included$411.3 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$14.8 million of net payments for short-term borrowings. The primary sources of cash from financing activities during the second quarter of 2021 were$134.2 million of net proceeds from long-term borrowings and$41.3 million of proceeds from the exercise of stock options. The net amount of cash used for financing activities during the first six months of 2020 was$904.8 million . The uses of cash from financing activities included$7.2 million of net payments from short-term borrowings,$411.7 million of net payments for long-term bank 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$231.7 million of repurchases of common stock. The primary source of cash from financing activities during the second quarter of 2020 was$3.7 million of proceeds from the exercise of stock options. The company has a$2.0 billion revolving credit facility maturing inDecember 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 Eurocurrency rate plus a spread (1.18% atJuly 3, 2021 ), which is based on the company's credit ratings, or an effective interest rate of 1.24% atJuly 3, 2021 . The facility fee, which is based on the company's credit ratings, was .20% of the total borrowing capacity atJuly 3, 2021 . The company had no outstanding borrowings under the revolving credit facility atJuly 3, 2021 andDecember 31, 2020 , respectively. During the first six months of 2021 and 2020, the average daily balance outstanding under the revolving credit facility was$12.5 million and$24.0 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 atJuly 3, 2021 andDecember 31, 2020 , respectively. During the first six months of 2021 and 2020, the average daily balance outstanding under the commercial paper program was$171.4 million and$94.4 million , respectively. The program had a weighted-average effective interest rate of .28% atJuly 3, 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 30 -------------------------------------------------------------------------------- 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% atJuly 3, 2021 ), or an effective interest rate of .56% atJuly 3, 2021 . The facility fee is .40% of the total borrowing capacity. AtJuly 3, 2021 , the company had$135.0 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 six months of 2021 and 2020, the average daily balance outstanding under the North American asset securitization program was$280.6 million and$509.9 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 ofJuly 3, 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 atJuly 3, 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% atJuly 3, 2021 . During the first six months of 2021 and 2020, the average daily balance outstanding under the uncommitted lines of credit was$0.2 million and$10.0 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 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$3.4 billion in addition to$244.1 million of cash on hand atJuly 3, 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. 31 --------------------------------------------------------------------------------
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$135.0 million in outstanding borrowings under the North American asset securitization program atJuly 3, 2021 and no outstanding borrowings under the North American asset securitization program atDecember 31, 2020 .
Share-Repurchase Programs
The following table shows the company's Board approved share-repurchase programs
as of
Approximate Dollar Value of Shares that May Yet be Dollar Value Dollar Value of Purchased Approved for Shares Under the Month of Board Approval Repurchase Repurchased Program
December 2018$ 600,000 $ 600,000 $ - July 2020 600,000 536,533 63,467 Total$ 1,200,000 $ 1,136,533 $ 63,467
On
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 second 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 . 32
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