ARW 10-K & 10-Q changes, risk factors and insider trading

Accordingly, the company’s revenues and profitability, particularly in its global components reportable segment, have been, and may be, and have been, adversely affected by weakness in the semiconductor market. During 2023, the company’s global components reportable segment entered a cyclical downturn that endured throughout 2024 and part of 2025, characterized by declining sales due to elevated customer inventory levels, which were largely a result of the normalization of shortages in electronic components markets towardstoward the end of 2022. ThisA cyclical downturn continuedin throughoutsemiconductor 2024, and its duration and severity,markets and the relatedtechnology industry has adversely impacted the company’s business and financial results in the past, and a recurrence of such conditions in the future could have a material adverse impactseffect on the company’s resultsbusiness, ofprofitability, operations,and, remainconsequently, uncertainstock and difficult to predict. Additionally, economic weakness could cause a decline in spending in information technology, which could reduce demand for semiconductor-related products and services, thereby negatively impacting the company’s ECS reportable segment.price.

Most of the company’s sales are made on an order-by-order basis, rather than through long-term sales contracts. The company generally works with its customers to develop non-binding forecasts for future orders. Based on such non-binding forecasts, the company makes commitments regarding the level of business that it will seek and accept, the inventory that it purchases, and the levels of utilization of personnel and other resources. A variety of conditions over which the company has little or no control, both specific to each customer or generally affecting each customer’s industry or the broader market, may cause customers to cancel, reduce, or delay orders that were either previously made or anticipated, file for bankruptcy protection,protection; or default on their payments owed to the company.company, Significant or numerous cancellations, reductions, or delays in orders by customers, loss of customers, changes in pricing and sourcing, and/or customer defaults on paymentswhich could materially adversely affect the company’s business.

In 2024, the company began a multi-year restructuring plan (the “Operating Expense Efficiency Plan” or the “Plan”) designed to improve operational efficiency through various measures.measures, Referincluding reduction and relocation of parts of the company’s employee workforce. For further discussion of the Plan, refer to Note 9 of the Notes to the Consolidated Financial Statements for discussion of the- “OperatingRestructuring, ExpenseIntegration, Efficiencyand Plan.Other” within Item 8.

The Operating Expense Efficiency Plan could adversely impact the company due to any of the following: a decrease in employee morale; difficulty hiring qualified employees in other regions; current cost-effective regions becoming more expensive; inefficiency due to geographic segmentation of employees and operations; disruptions in operations; unanticipated delays encountered in finalizing the scope of, and implementing, the restructuring; failure to achieve targeted cost savings; failure to meet operational targets and customer requirements; failure to manage supplier relationships; and failure to maintain adequate internal control over financial reporting. These risks are further complicated by the company’s extensive international operations, which subject the company to different legal and regulatory requirements that govern the extent and speed of the company’s ability to reduce or consolidate its operations and workforce. See also “The company’s success depends upon its ability to attract, retain, motivate, and developmotivate key executive and employee talent and the strategies they develop and implementtalent.”.

The company’s effective tax rate may be adversely affected by fluctuations in the geographic distribution of earnings, which may subject earnings to different or multiple statutory tax rates. Shifts in the business environment or changes in tax laws and regulations in each jurisdiction in which the company operates may also adversely affect the company’s effective tax rate. For further details on the company’s deferred tax assets and liabilities and uncertain tax positions, refer to Note 1 – “Summary of theSignificant NotesAccounting toPolicies” thewithin ConsolidatedItem Financial Statements.8.

The company is regularly audited by U.S. and foreign tax authorities. Although the company provisions for income taxes and tax estimates, the final resolution of these audits may differ, in some cases materially, from the estimates reflected in the company'scompany’s financial results. Additionally, economic and political pressures to increase tax revenue by various jurisdictions may make resolving tax disputes more challenging than in the past.challenging.

From time to time, the company has, and may continue toto, evaluate potential acquisitions, divestitures, joint ventures, or other strategic transactions that could further the company’s strategic objectives.transactions. As part of the company’s history and growth strategy, it has acquired other businesses and continues to evaluate strategic opportunities to acquire additional businesses from time to time. The company has also in the past, and may in the future, divest or reduce its investment in certain businesses and product lines. Acquisitions and divestitures involve numerous risks, including:

The company relies on its information systems to support daily operations and generate timely, accurate, and reliable financial and operational data. The company’s current global operations reside on multiple technology platforms, some of which are currently undergoing projects intended to streamline or optimize these platforms. The size and complexity of the company’s information systems make them vulnerable to breakdown, defective software updates from the company’s information-technologyIT vendors, failure to keep software updated and current, and ransomware attacks. Failure to properly or adequately address such issues could impact the company’s ability to perform necessary business operations, which could materially adversely affect the company’s business.

Technologies used in or integrated into the company’s operations, such as cloud-based services, artificial intelligence,AI, and automation, may cause an adverse shift in the way the company’s existing business operations are conducted. In addition, AI algorithms may be flawed. Datasets used to train the models which support the company’s AI offerings or internal use may be insufficient or contain biased information or lead to unexpected or unintended outcomes, which could erode trust in the company’s AI systems and subject the company to competitive harm, regulatory action, and legal liability.

The company is subject to lawslaws, regulations, and regulationsexecutive orders that could have a negative impact on ourthe company’s business, including, without limitation, U.S. and certain foreign export and import controls, tariffs, sanctions, embargoes, international trade restrictions, anti-corruption laws, anti-bribery laws, and anti-money laundering laws and regulations, as well as tariffs and trade protectionism.laws. In the event of non-compliance, the company cancould face serious consequences,consequences whichthat cancould harm its business.

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 or current fact. These forward-looking statements can be identified by forward-looking words such as “expects,” “anticipates,” “intends,” “plans,” “may,” “will,” “would,” “could,” “believes,” “seeks,” “projected,” “potential,” “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: theunfavorable incurrenceeconomic ofconditions additionalor chargeschanges, notincluding currently contemplated and failure to realize contemplated cost savings due to unanticipated eventsthose that may occur, includingoccur in connection with the implementation of the company’s restructuring plan; unfavorable economic conditions; disruptions, shortages, or inefficiencies in the supply chain; political instability and changes; impacts of military conflict and sanctions; industry conditions; changes in product supply, pricing and customer demand; trade protection measures, tariffs, and other restrictions, duties, and value-added taxes; competition; other vagaries in the global components and the global ECS markets; deteriorating economic conditions, including economic recession, inflation, tax rates, foreign currency exchange rates, or the availability of capital; thepolitical effectsinstability and changes; impacts of naturalmilitary conflict and sanctions; trade protection measures, tariffs, increased trade tensions, trade agreements and policies, and other restrictions, duties, and value-added taxes, and the associated macroeconomic impacts; disruptions, shortages, or man-madeinefficiencies catastrophicin eventsthe supply chain; non-compliance with certain laws, regulations, or executive orders, such as trade, export, antitrust, and anti-corruption laws, or regulatory restrictions relating to the company or its subsidiaries or the permissibility of third-parties to transact therewith; the inability to realize sufficient sales to cover non-cancellable purchase obligations under certain ECS distribution agreements; management transitions, including the company’s search for a permanent CEO; the incurrence of unanticipated charges or failure to realize contemplated cost savings in connection with the Operating Expense Efficiency Plan; changes in product supply, pricing, and customer demand; increased profit-margin pressure resulting from industry conditions, competition, or other factors; changes in relationships with key suppliers; increasedother profitvagaries marginin pressurethe global components and the global ECS markets; changes into legalapplicable and regulatory matters; non-compliance with certainlaws, regulations, suchexecutive as export, antitrust, and anti-corruption laws; foreign tax and other loss contingencies; breaches of securityorders, or privacyrules of business information and information system failures, including relatedrelating to currentgovernment or future implementations, integrations and upgrades; outbreaks, epidemics, pandemics, or public health crises; future regulatory trendscontractors and the resulting legal and reputationreputational exposure, including but not limited to those relating to environmental, social, governance, cybersecurity, data privacy, and artificial intelligence issues; commercial disputes, patent infringement claims, product liability lawsuits, or other legal proceedings; foreign tax and other loss contingencies; failure, disruption, or compromise of the company’s information systems or those of a third-party service provider, including unauthorized use or disclosure of company, supplier, or customer information; outbreaks, epidemics, pandemics, or public health crises; the effects of natural or man-made catastrophic events; and the company’s ability to generate positive cash flow. For a further discussion of these and other factors that could cause the company’s future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in this Annual Report on Form 10-K, as well as in other filings the company makes with the Securities and Exchange Commission.SEC. 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.

In addition to disclosing financial results that are determined in accordance with GAAP, the company also discloses certain non-GAAP financial information in the sections below captioned “SalesSales,”, “Gross ProfitProfit,”, “Operating ExpensesExpenses,”, “Operating Income,” “Income Tax,” and “Net Income Attributable to ShareholdersShareholders.”. Refer to these sections below for reconciliations of non-GAAP financial measures to the most directly comparable reported GAAP financial measures. Non-GAAP financial information includes the following:

Management believes that providing this additional information is useful to the reader to better assess and understand the company’s operating performance and future prospects in the same manner as management, especially when comparing results with previous periods. Management typically monitors the business as adjusted for these items, in addition to GAAP results, to understand and compare operating results across accounting periods, for internal budgeting purposes, for short-term and long-term operating plans, and to evaluate the company’s financial performance. 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. For a discussion of what is included within “Restructuring, integration, and other” and “Gain (Lossloss) gain on investments, net” refer to the similarly captioned sections of this item below.

Management uses gross billings as an operational metric to monitor the operating performance of its global ECS reportable segment,ECS, including sales performance by geographic region, as it provides meaningful supplemental information in evaluating the overall performance of the global ECS business. The company uses this key metric to develop financial forecasts, make strategic decisions, and prepare and approve annual budgets. Gross billings represent amounts invoiced to customers for goods and services during a specified period and dodoes not include the impact of recording sales on a net basis or sales adjustments, such as trade discounts and other allowances. Refer to Note 1 - “Summary of Significant Accounting Policies” towithin theItem consolidated financial statements8 for further discussion of the company’s revenue recognition policies. The use of gross billings has certain limitations as an analytical tool and should not be considered in isolation or as a substitute for revenue.

ArrowThe company sources and engineers technology for thousands of leading manufacturers, services providers, and users of 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. CoupledThe company’s revenues originate primarily from the sales of semiconductor products, IP&E components, and IT hardware and software. Equipped with a range of services, solutions, and tools, the company enables its suppliers to distribute their technologies and helphelps its industrial and commercial customers source, build, and leverage these technologies, reduce their time to market, grow their businesses, and enhance their overall competitiveness. The company is a trusted partner in a complex value chain and is uniquely positioned through its electronicselectronic components and IT content portfolios to increaseenhance value and market opportunities for stakeholders.

The company has two reportable segments, the global components reportable segment and the global ECSECS. reportableGlobal segment. The company’s global components reportable segment,components, enabled by aan comprehensiveextensive rangeportfolio of value-added capabilities and services, markets,markets and distributes electronic components primarily to OEMs and EMS providers. The company’s globalGlobal ECS reportable segment is a leading value-added provider of comprehensive computing solutions and services. Its portfolio of computing solutions includes datacenter, cloud, security, and analytics solutions. Global ECS bringsoffers broad market access, extensive supplier relationships, scale, and resourcesvalue-added solutions to helpenable its VARs and MSPs to meet the needs of their end-users. ForIn 2024,2025, approximately 72%70% and 28%30% of the company’s sales were from the global components reportable segment and the global ECS reportable segment,ECS, respectively.

The company’s strategic initiatives include the following:

The sum of the componentssubtotals forand percentages within sales, as reported, and sales on a constant currency basis may not agree to totals, as presented, due to rounding.

The sum ofsubtotals theand componentspercentages forwithin sales by geographic region and consolidated sales may not agree to totals, as presented, due to rounding.

During 2024,2025, the global ECS reportable segmentconsolidated sales increased compared to the year-earlier period primarily due to thechanges followingin impacts:foreign currencies as well as;

TheFollowing followingis tablean summarizesanalysis of gross billings by geographic region for the global ECS reportable segment for the years ended December 31:

The sum of the componentssubtotals forand percentages within global ECS gross billings may not agree to totals, as presented, due to rounding.

Following is an analysis of the company’s consolidated gross profit by reportable segment for the years ended December 31:

The sum of the componentssubtotals forand percentages within non-GAAP gross profit may not agree to totals, as presented, due to rounding.

Global components gross profit margins decreased during 2023,2025, compared with the year-earlier period, due to declinesregional mix shifting toward the Asia/Pacific region which generally has lower margins compared to Americas and EMEA regions as well as changes in shortagecustomer marketmix activitywithin in the AmericasEMEA region and product mix shifting toward lower margin products withinin the Asia/PacificAmericas region. Global components supply chain services offerings continued to have a positive impact on gross profit margins.

Global ECS gross profit margins increaseddecreased during 2023,2025, compared with the year-earlier period, due to product$18.3 million in net losses related to underperformance of certain non-cancellable multi-year purchase obligations and a shift in sales mix shifting towards amore higher proportion of revenuesales recognized on a netgross basis.basis in the EMEA region. Refer to Note 1 - “Summary of Significant Accounting Policies” inwithin thisItem Annual Report on Form 10-K.8.

Following is an analysis of the company’s consolidated operating expenses for the years ended December 31:

The sum of the componentssubtotals ofand percentages within consolidated operating expenses may not agree to totals, as presented, due to rounding.

Corporate operatingOperating expenses increased during 20242025 compared to the year-earlier periodperiod, primarily due to the following:

TheRestructuring followinginitiatives tableand presentsintegration costs are related to the componentscompany’s ofcontinued theefforts to lower costs, drive operational efficiency and consolidate certain operations, as necessary. The company recorded restructuring, integration, and other charges as follows for the years ended December 31:

The sum of the componentssubtotals forwithin restructuring, integration, and other may not agree to totals, as presented, due to rounding.

Refer to Note 9,9 - “Restructuring, Integration, and Other” ofwithin theItem Notes to the Consolidated Financial Statements8 for further discussion of the company’s restructuring and integration activities.

Following is an analysis of the company’s consolidated operating income, and operating income for the company’s twoby reportable segmentssegment for the years ended December 31:

The sum of the componentssubtotals ofand percentages within consolidated operating income do not agree to totals, as presented, because unallocated corporate amounts are not included in the table above. Refer to Note 16 - “Segment and Geographic Information” ofwithin theItem Notes to the Consolidated Financial Statements8 for furthera discussion.reconciliation.

The decrease in consolidated operating income as a percentage of sales during 20242025 relates primarily to the changes in sales, gross profit marginsmargins, and operating expenses discussed above.

Gain (Lossloss) Gain on Investments, Net

The decreasesdecrease in interest and other financing expenses, net for 20242025 is primarily related to lower interest rates and lower average daily borrowings on floating rate credit facilities. Refer to the section below titled “Liquidity and Capital Resources” for more information on changes in borrowings.

The sum of the componentssubtotals forand percentages within non-GAAP effective income tax rate may not agree to totals, as presented, due to rounding.

The sum of the componentssubtotals forwithin non-GAAP net income attributable to shareholders may not agree to totals, as presented, due to rounding.

The decreaseincrease in net income attributable to shareholders in 20242025 compared to the year-earlier period relates primarily to gain on investments, net, changes in sales,sales and gross margins, operating expenses, interest and other financing expenses, net, and income tax as discussed above.above, and the impact of TCJA Tax Act settlements.

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 next 12 months and the foreseeable future. The company’s committed and undrawn liquidity stands at over $2.8$2.5 billion in addition to $188.8$306.5 million of cash on hand at December 31, 2024.2025. 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 deemedif necessary.

The company’s principal sources of liquidity are existing cash and cash equivalents, cash generated from operationsoperations, and cash provided by its revolving credit facilities and debt. The company’s principal uses of liquidity include cash used in operations, investments to grow working capital, scheduled interest and principal payments on its borrowings, and the return of cash to shareholders through share repurchases.

Working capital, as a percentage of sales, which is defined as working capital divided by annualized quarterly sales, decreased to 21.3% at December 31, 2025 compared to 23.0% at December 31, 2024 compared to 23.4% at December 31, 2023. The decrease was primarily due to lower inventory.2024. Sales for the fourth quarter of 20242025 and 20232024 were $7.3$8.7 billion and $7.8$7.3 billion, respectively. The decrease in working capital as a percentage of sales was primarily due to the increase in sales.

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 or current fact. These forward-looking statements can be identified by forward-looking words such as “expects,” “anticipates,” “intends,” “plans,” “may,” “will,” “would,” “could,” “believes,” “seeks,” “projected,” “potential,” “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: unfavorable economic conditions or changes, including those that may occur in connection with recession, inflation, tax rates, foreign currency exchange rates, or the availability of capital; impacts of military conflict and sanctions; political instability and changes; trade protection measures, tariffs, increased trade tensions, trade agreements and policies, and other restrictions, duties, and value-added taxes, and the associated macroeconomic impacts; disruptions, shortages, or inefficiencies in the supply chain; non-compliance with certain laws, regulations, or executive orders, such as trade, export, antitrust, and anti-corruption laws, or regulatory restrictions relating to the company or its subsidiaries or the permissibility of third-partiesthird parties to transact therewith; the inability to realize sufficient sales to cover non-cancellable purchase obligations under certain ECS distribution agreements; changes in relationships with key suppliers; management transitions, including the company’s search for a permanent CEO; the incurrence of unanticipated charges or failure to realize contemplated cost savings in connection with the Operating Expense Efficiency Plan; changes in product supply, pricing, and customer demand; increased profit-margin pressure resulting from industry conditions, competition, or other factors; changes in relationships with key suppliers; other vagaries in the Global Components and the Global ECS markets; changes to applicable laws, regulations, executive orders, or rules relating to government contractors and the resulting legal and reputational exposure, including but not limited to those relating to environmental, social, governance, cybersecurity, data privacy, and artificial intelligence issues; commercial disputes, patent infringement claims, product liability lawsuits, or other legal proceedings; foreign tax and other loss contingencies; failure, disruption, or compromise of the company’s information systems or those of a third-party service provider, including unauthorized use or disclosure of company, supplier, or customer information; outbreaks, epidemics, pandemics, or public health crises; the effects of natural or man-made catastrophic events; and the company’s ability to generate positive cash flow. For a further discussion of these and other factors that could cause the company’s 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.

In addition to disclosing financial results that are determined in accordance with GAAP, the company also discloses certain non-GAAP financial information in the sections below captioned “Sales,Sales by Reportable Segment,” “Gross Profit,” “Operating Expenses,” “Operating Income,” “Income Tax,” and “Net Income Attributable to Shareholders.” Refer to these sections below for reconciliations of non-GAAP financial measures to the most directly comparable reported GAAP financial measures. Non-GAAP financial information includes the following:

Management believes that providing this additional information is useful to better assess and understand the company’s operating performance and future prospects in the same manner as management, especially when comparing results with previous periods. Management typically monitors the business as adjusted for these items, in addition to GAAP results, to understand and compare operating results across accounting periods, for internal budgeting purposes, for short-term and long-term operating plans, and to evaluate the company’s financial performance. 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. For a discussion of what is included within “Restructuring, integration, and other” and “Gain on investments, net” refer to the similarly captioned sections of thisthese itemitems below.

The company has two reportable segments, Global Components and Global ECS. Global Components, enabled by an extensive portfolio of value-added capabilities and services, markets and distributes electronic components primarily to OEMs and EMS providers. Global ECS is a leading value-added provider of comprehensive computing solutions and services. Its portfolio includes datacenter, cloud, security, and analytics solutions. Global ECS offers broad market access, extensive supplier relationships, scale, and value-added solutions to enable its VARs and MSPs to meet the needs of their end-users. For the firstsecond quarter of 2026, approximately 70%74% and 30%26% of the company’s sales were from Global Components and Global ECS, respectively.

During the second quarter and first quartersix months of 2026, compared to the year-earlier periods, changes in foreign currencies increased sales by approximately $273.5$93.5 million, and $367.0 million, respectively, and increased operating income by $6.9$4.0 million and $10.9 million, respectively. During the second quarter and first six months of 2026, changes in foreign currencies increased earnings per share on a diluted basis by $0.07$0.09 and $0.16, respectively, compared to the year-earlier period.periods.

The increase in Global Components sales for the second quarter and first six months of 2026, compared to the year-earlier period,periods, was primarily due to increased demand related to sustained market strength and AI related growth, most notably in the following verticals:

The increase in Global ECS sales for the second quarter and first six months of 2026, compared to the year-earlier period,periods, was primarily attributable to growth across most major technologies, most notably, cloud-based solutionssolutions, infrastructure software, and infrastructure software.compute. Additionally, as a result of the timing of the quarter end, the first quartersix months of 2026 included fourthree extra shipping days compared to the first quartersix months of 2025, which increased Global ECS sales.

The increase in consolidated sales for the second quarter and first six months of 2026, compared to the year-earlier periodperiods was also impacted by changes in foreign currencies relative to the U.S. dollar.

Global Components gross profit margins increased during the second quarter and first quartersix months of 2026, compared with the year-earlier period,periods, driven by favorable product and value-added services mix as a result of changes in sales discussed above. Global Components supply chain services offerings continued to have a positive impact on gross profit margins.

Global ECS gross profit margins decreased during the second quarter and first six months of 2026, compared with the year-earlier period,periods, primarily due to supplier$26.6 mixmillion and a$48.3 $21.7million, millionrespectively, lossin losses related to underperformance of a certain non-cancellable multi-year purchase obligation.obligations.

Operating expenses increased duringDuring the firstsecond quarter and first six months of 20262026, compared to the year-earlier period, primarily due to an increase inperiods:

AsOn October 31, 2024, in response to evolving business needs and as part of an initiative to optimize operating expenses, the company announced a resultmulti-year restructuring plan (the “Operating Expense Efficiency Plan” or “the Plan”), which was substantially complete as of July 4, 2026. Under the Plan, the company expectsincurred pre-tax restructuring charges of approximately $200.0 million and is on target to reduce annual operating expenses by approximately $90.0 million to $100.0 million by the end of fiscal year 2026. The company is reinvesting a portion of these savings into various strategic initiatives as well as variable costs to support sales growth. TheFor estimatesmore ofdetails chargeson orthe savingsPlan, relatedrefer to Part II, Item 8 - Note 9 “Restructuring, Integration and Other” in the Plancompany’s couldAnnual differReport materiallyon fromForm actual10-K chargesfor orthe savingsyear recognized.ended December 31, 2025.

The increase in consolidated operating income as a percentage of sales for the second quarter and first quartersix months of 2026 compared to the year-earlier periodperiods relates primarily to the changes in sales and gross profit margins discussed above.

The decrease in interest and other financing expenses, net for the second quarter and first quartersix months of 2026 compared to the year-earlier periodperiods, is primarily related to lower average daily borrowings, reduced interest cost as a result of additional cash within cash pooling accounts.accounts, and interest income on outstanding tariff receivables collected during the period related to the Global Components supply chain services offerings. Refer to the section below titled “Liquidity and Capital Resources” for more information on changes in borrowings.

The year-over-year change in the effective tax rate for the second quarter and first six months of 2026 was primarily driven by a shift in jurisdictional mix of earnings, the impact of foreign currency exchange rate fluctuations in certain locations, the tax treatment of stock-based compensation, and adjustments to reserves for uncertain tax positions.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, significantly amending U.S. federal tax law, including changes to international tax provisions, expensing of research and experimental expenditures, depreciation, and interest deduction rules. The companyOBBBA doeshas not expect the OBBBA to havehad a material impact on itsthe company’s effective tax rate.

* For the second quarter and first quartersix months of 2025, identifiable intangible asset amortization excludes amortization attributable to the noncontrolling interests.

The increase in net income attributable to shareholders in the second quarter and first quartersix months of 2026 compared to the year-earlier periodperiods relates primarily to changes in salessales, gross profit, and grossinterest marginsand asother financing expense, net, partially offset by the decrease in gain on investments, net discussed above.

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 next 12 months and the foreseeable future. The company’s current committed and undrawn liquidity stands at approximately $3.2$3.5 billion in addition to $286.5$244.6 million of cash on hand at AprilJuly 4, 2026. 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 may seek to amend its existing borrowing capacity or access the financial markets as deemed necessary.

The company’s principal sources of liquidity are existing cash and cash equivalents, cash generated from operationsoperations, and cash provided by its revolving credit facilities and debt. The company’s principal uses of liquidity include cash used in operations, investments to grow working capital, scheduled interest and principal payments on its borrowings, and the return of cash to shareholders through share repurchases.

The company maintains a significant investment in working capital, which the company defines as accounts receivable, net, plus inventories less accounts payable. The decrease in working capital during the first quartersix months of 2026, compared to the year-earlier period,2026 was primarily attributable to the timing of settlements, most notably within the Global Components supply chain services offerings. Refer to Note E “Accounts Receivable” of the Notes to the Consolidated Financial Statements. The decrease in working capital is partially offset by higher inventory purchases to support future sales growth.

Working capital as a percentage of sales, which is defined as working capital divided by annualized quarterly sales, decreased to 18.3%17.1% for the firstsecond quarter of 2026, compared to 23.3%22.5% in the year-earlier period. The decrease in working capital as a percentage of sales was primarily due to increased sales.

Cash equivalents consist of highly liquid investments, which are readily convertible into cash, with original maturities of three months or less. At AprilJuly 4, 20262026, and December 31, 2025, the company had cash and cash equivalents of $286.5$244.6 million and $306.5 million, respectively, of which $264.2$214.2 million and $241.6 million, respectively, were held outside the United States.

The company has $5.7$6.0 billion of undistributed earnings of its foreign subsidiaries which it deems indefinitely reinvested, and recognizes that it may be subject to additional foreign taxes and U.S. state income taxes if it reverses its indefinite reinvestment assertion on these foreign earnings. The company also has $2.2 billion of foreign earnings that are not deemed permanently reinvested and are available for distribution in future periods as of AprilJuly 4, 2026.

The company also has an EMEA asset securitization program under which it continuously sells its interest in designated pools of trade accounts receivable of certain of its subsidiaries in the EMEA region. Receivables sold under the program are excluded from “Accounts receivable, net” and no corresponding liability is recorded on the company’s consolidated balance sheets. During the first quartersix months of 2026 and 2025, the average daily balance outstanding under the EMEA asset securitization program was $347.5$393.4 million and $307.9$321.7 million, respectively. Refer to Note E “Accounts Receivable” of the Notes to the Consolidated Financial Statements for further discussion.

The net amount of cash provided by the company’s operating activities during the first quartersix months of 2026 and 2025 was $699.8$1.0 millionbillion and $351.7$145.8 million, respectively. The change in cash provided by operating activities during 2026, compared to the year-earlier period, relates primarily to changestiming of settlements, most notably within the Global Components supply chain services offerings, and increase in income from operationsoperations, andpartially timingoffset ofby settlementhigher ofinventory accruedpurchases expensesto andsupport otherfuture assetssales and liabilities.growth. The fluctuations in both “Accounts receivable, net” and “Accounts payable” are primarily related to the Global Components supply chain services offerings and are typically correlated as the company acts as an intermediary in the transaction and remits payments to the supplier upon receipt from the customer. Refer to Note E “Accounts Receivable” of the Notes to the Consolidated Financial Statements.

The net amount of cash used for financing activities during the first quartersix months of 2026 and 2025 was $648.7$980.8 million and $342.1$415.9 million, respectively. The change in cash used for financing activities relates primarily due to an increase in repayments of long-term bank borrowings, net partially offset by a decrease in short-term borrowings in 2026.

The company repurchased 0.2 million shares of its common stock for $25.0 million and 0.5 million shares of its common stock for $49.9 million in the first quarter of 2026 and 2025, respectively, under its share repurchase program, excluding excise taxes. As of April 4, 2026, approximately $147.9 million remained available for repurchase under the share repurchase program. The share repurchase authorization does not have an expiration date and the pace of the repurchase activity will depend on factors such as the company’s working capital needs, cash requirements for acquisitions, debt repayment obligations or repurchases of debt, share price, and economic and market conditions. The share repurchase program may be accelerated, suspended, delayed, or discontinued at any time subject to the approval of the company’s Board of Directors.

As of AprilJuly 4, 2026, the company had purchase obligations of $26.0$30.3 billion, which represent an estimate of non-cancellable inventory purchase orders, future payments under IT distribution arrangements, and other contractual obligations related to information technology and facilities with $13.8$13.7 billion expected to be paid in the nineremaining six months of 2026, $4.0$5.9 billion in 2027, $2.5$2.9 billion in 2028, $2.0$2.1 billion in 2029, $1.6$1.5 billion in 2030, and $1.2$4.2 billion in 2031.2031 and thereafter. Some of these purchase obligations relate to sales where the company acts as an agent in the transaction. Refer to discussion of the company’s revenue recognition policy in Note 1 “Summary of Significant Accounting Policies” in the company’s Annual Report on Form 10-K for the year ended December 31, 2025.

With the exception of the item noted above, there were no other material changes to “Contractual Obligations” and “Additional Capital Requirements and Sources” of the company as of AprilJuly 4, 2026.

There have been no significant changes to the company’s critical accounting estimates for the quartersix months ended AprilJuly 4, 2026. For more information, refer to the section titled “Critical Accounting Estimates” in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in the company’s Annual Report on Form 10-K for the year ended December 31, 2025.