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: disruptions or inefficiencies in the supply chain, including any potential adverse effects of the ongoing global COVID-19 pandemic, impacts of the conflict inUkraine , 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, deteriorating economic conditions, including economic recession, inflation, tax rates, foreign currency exchange rates, or the availability of capital, 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 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 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.
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: •Sales and gross profit on a constant currency basis excludes 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. •Non-GAAP operating expenses excludes restructuring, integration, and other charges, and the impact of changes in foreign currencies. •Non-GAAP operating income excludes identifiable intangible asset amortization, and restructuring, integration, and other charges. •Non-GAAP effective tax rate and non-GAAP net income attributable to shareholders exclude identifiable intangible asset amortization, restructuring, integration, and other charges, and net gains and losses on investments. 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- 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, in conjunction with, and not as a substitute for, 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 ("OEMs") and contract
manufacturers ("CMs") through its global components business segment and
provides enterprise computing solutions to value-added resellers ("VARs") and
managed service providers ("MSPs") through its global ECS business segment. For
the third quarter of 2022, approximately 79% of the company's sales were from
the global components business segment, and approximately 21% of the company's
sales were from the global ECS business segment.
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The company's strategic initiatives include the following:
•Offering a variety of value added demand creation services in the global components business, including design, engineering, global marketing and integration services to promote the future sale of suppliers' products, which generally lead to longer and more profitable relationships with our suppliers and customers. •Also within the global components business, continuing to develop global supply chain service offerings such as procurement, logistics, warehousing, and insights from data analytics. •Enabling customer cloud solutions through the global ECS business' cloud marketplace and management platform, ArrowSphere, which helps VARs and MSPs to manage, differentiate, and scale their cloud businesses while providing the business intelligence that IT solution providers need to drive growth. The company's financial objectives are to grow sales faster than the market, increase the markets served, grow profits faster than sales, generate earnings per share growth in excess of competitors' earnings per share growth and market expectations, grow earnings per share at a rate that provides the capital necessary to support the company's business strategy, allocate and deploy capital effectively so that return on invested capital exceeds the company's cost of capital, 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 third quarter and first nine months of 2022 increased by 8.9% and 9.2%, respectively, compared with the year-earlier periods. The increase for the third quarter of 2022 was driven by a 10.2% increase in the global components business segment sales and a 4.1% increase in global ECS business segment sales. The increase for the first nine months of 2022 was driven by an 11.6% increase in the global components business segment sales and a 1.0% increase in global ECS business segment sales. Consolidated sales on a constant currency basis increased 13.9% and 12.8% for the third quarter and first nine months of 2022, respectively, compared with the year-earlier periods. The company reported net income attributable to shareholders of$342.4 million and$1.1 billion in the third quarter and first nine months of 2022, respectively, compared with$290.0 million and$737.0 million in the year-earlier periods. Non-GAAP net income attributable to shareholders for the third quarter and first nine months of 2022 was$354.1 million and$1.1 billion , respectively, compared with$293.3 million and$758.2 million in the year-earlier periods. Non-GAAP net income attributable to shareholders is adjusted for the following items:
Third quarters of 2022 and 2021:
•restructuring, integration, and other charges (credits) of$3.6 million in 2022 and$(3.0) million in 2021; •identifiable intangible asset amortization of$8.7 million in 2022 and$9.2 million in 2021; and •net loss on investments of$3.5 million in 2022 and net gain on investments of$1.4 million in 2021.
First nine months of 2022 and 2021:
•restructuring, integration, and other charges (credits) of$11.0 million in 2022 and$11.6 million in 2021; •identifiable intangible asset amortization of$26.5 million in 2022 and$27.8 million in 2021; and •net loss on investments of$11.2 million in 2022 and net gain on investments of$10.9 million in 2021. During the third quarter of 2022, changes in foreign currencies reduced growth by approximately$379.7 million on sales,$18.1 million on operating income and$0.17 on earnings per share on a diluted basis compared to the third quarter of 2021. During the first nine months of 2022, changes in foreign currencies reduced growth by approximately$821.8 million on sales,$38.4 million on operating income and$0.35 on earnings per share on a diluted basis compared to the year-earlier period.
Significant trends impacting our business:
Below is a discussion of significant trends impacting our business. See discussion regarding the impacts of these and other risks included in Item 1A, Risk Factors, within the company's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 and Item 1A, Risk Factors, in this Quarterly Report on Form 10-Q. 24
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Supply chain constraints and components shortages
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 company's global operations. Despite these challenges, the company believes it has efficiently managed the global supply chain requirements of customers and suppliers to date. The global components business has benefited from rising demand and higher prices for certain products leading to higher sales revenues and improved profit margins globally. Accordingly, current results and financial condition discussed herein may not be indicative of future operating results and trends. Management is actively monitoring the impact of changes in supply and demand, as well as supply chain logistical issues, on its financial condition, liquidity, operations, suppliers, customer, industry, and workforce. Prices remained elevated during the third quarter of 2022 as supply constraints continued. Gross profit margins in the global components business expanded during the third quarter and first nine months of 2022, relative to year-earlier periods. In addition to increased sales and margins, inflationary pressures along with improved supply, have contributed to higher inventory levels on the company's consolidated balance sheet, which increased by$881.4 million as ofOctober 1, 2022 , relative toDecember 31, 2021 . The extent to which these issues will continue to impact the company's results will depend primarily on future developments, including the severity and duration of the current conditions, and the impact of actions taken and that will be taken to address supply chain constraints and continued customer demand, among others. These future developments are highly uncertain and cannot be predicted with confidence.
Impacts of changing foreign currency exchange rates
As a large global organization, the company's consolidated results of operations and financial position are impacted by changes in foreign currency exchange rates through the translation of the company's international financial statements intoU.S. dollars. Our non-U.S. dollar results of operations are negatively impacted during periods when theU.S. dollar strengthens and positively impacted during periods when theU.S. dollar weakens. During 2022, theU.S. dollar strengthened substantially against most other currencies, and as a result, during the third quarter and first nine months of 2022, changes in foreign currencies reduced earnings per share growth by$0.17 and$0.35 , respectively, on a diluted basis compared with the year-earlier periods. These exposures may change over time and changes in foreign currency exchange rates could materially impact the company's financial results in the future.
COVID-19 Pandemic Update
As the ongoing COVID-19 pandemic has evolved, we continue to monitor and evaluate the impact on our business operations on a regional, national and global basis. The COVID-19 pandemic continues to create macroeconomic uncertainty, volatility and disruption, including supply constraints, extended lead times, and unpredictability across many markets.
During the first nine months of 2022, certain of our distribution centers and customers' facilities located in theAsia/Pacific region experienced COVID-19 related lockdowns. As a result, the global components business in theAsia/Pacific region experienced some delays in fulfilling orders, receiving inventory and exacerbated supply chain constraints. Similar disruptions could occur in the future. 25
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Sales
Substantially all of the company's sales are made on an order-by-order basis, rather than through long-term sales contracts. As such, the nature of the company's business does not provide for the visibility of material forward-looking information from its customers and suppliers beyond a few months. Following is an analysis of net sales by reportable segment:
Quarter Ended Nine Months Ended
October 1, October 2, % October 1, October 2, %
(millions) 2022 2021 Change 2022 2021 Change
Consolidated sales, as reported
8.9%$ 27,801 $ 25,461 9.2 % Impact of changes in foreign currencies - (380) - (822) Consolidated sales, constant currency$ 9,266 $ 8,133 13.9%$ 27,801 $ 24,639 12.8 % Global components sales, as reported$ 7,300 $ 6,624 10.2%$ 21,961 $ 19,678 11.6 % Impact of changes in foreign currencies - (273) - (565) Global components sales, constant currency$ 7,300 $ 6,351 15.0%$ 21,961 $ 19,113 14.9 % Global ECS sales, as reported$ 1,966 $ 1,888 4.1%$ 5,840 $ 5,783 1.0 % Impact of changes in foreign currencies - (106) - (257)
Global ECS sales, constant currency
10.3%$ 5,840 $ 5,526 5.7 %
The sum of the components for sales, as reported, and sales on a constant currency basis may not agree to totals, as presented, due to rounding.
Consolidated sales for the third quarter and first nine months of 2022 increased by$754.0 million , or 8.9%, and$2.3 billion , or 9.2%, respectively, compared with the year-earlier periods. The increase for the third quarter of 2022 was driven by an increase in global components segment sales of$676.4 million , or 10.2% and an increase in global ECS business segment sales of$77.6 million , or 4.1%. The increase for the first nine months of 2022 was driven by an increase in global components segment sales of$2.3 billion , or 11.6% and an increase in global ECS business segment sales of$57.4 million , or 1.0%. Consolidated sales, on a constant currency basis, increased 13.9% and 12.8% for the third quarter and first nine months of 2022 compared with the year-earlier periods. The company is seeing some increased supply in both the global components and global ECS businesses. Third quarter 2022 global components sales growth compared to the year-earlier period was primarily due to a mix of stronger demand and improved supply driving both higher sales volumes and favorable pricing, offset partially by the impact of changes in foreign exchange rates. Growth in sales for the period was greater than 20% in both theAmericas and EMEA regions and increased in most major verticals.Asia/Pacific sales decreased by 3% due to lower volumes in most verticals, offset partially by increased prices. Sales from the global ECS business benefited from a healthy IT demand environment in the third quarter of 2022 relative to the year-earlier period, especially in the EMEA region which saw strength across the region in all technologies; however, sales were reduced by changes in foreign exchange rates. TheAmericas region saw growth in the compute, data intelligence, and storage technologies. Gross Profit
Following is an analysis of gross profit:
Quarter Ended Nine Months Ended
October 1, October 2, October 1, October 2,
(millions) 2022 2021 % Change 2022 2021 % Change
Consolidated gross profit, as
reported $ 1,187 $ 1,076 10.3% $ 3,631 $ 3,006 20.8%
Impact of changes in foreign
currencies - (51) - (111)
Consolidated gross profit, constant
currency $ 1,187 $ 1,024 15.9% $ 3,631 $ 2,895 25.4%
Consolidated gross profit as a
percentage of sales, as reported 12.8 % 12.6 % 20 bps 13.1 % 11.8 % 130 bps
Consolidated gross profit as a
percentage of sales, constant
currency 12.8 % 12.6 % 20 bps 13.1 % 11.8 % 130 bps
The sum of the components for gross profit on a constant currency basis may not agree to totals, as presented, due to rounding.
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The company recorded gross profit of$1.2 billion and$3.6 billion in the third quarter and first nine months of 2022, respectively, compared with$1.1 billion and$3.0 billion in the year-earlier periods. During the third quarter and first nine months of 2022, gross profit increased 10.3% and 20.8%, respectively on a GAAP basis, and 15.9% and 25.4%, respectively, on a constant currency basis, compared with the year-earlier periods. Gross profit margins in the third quarter increased by 20 bps compared with the year-earlier period. Gross profit margins in the first nine months increased by 130 bps compared with the year-earlier period. The increases in gross profit margins during the third quarter and first nine months of 2022, compared with the year-earlier periods, related primarily to improvements in pricing and margins inAsia/Pacific region of the global components business, due to product mix shifting towards higher margin products, and the global supply chain issues discussed above. Margins in theAmericas and EMEA region somewhat softened primarily due to product mix shifting towards lower margin products. Global supply chain services offerings continued to have a positive impact on gross margins during the third quarter and first nine months of 2022.
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.
Gross profit margins from the global ECS business also increased compared to the year-earlier periods.
Selling, General, and Administrative Expenses and Depreciation and Amortization
Following is an analysis of operating expenses:
Quarter Ended Nine Months Ended
October 1, October 2, % October 1, October 2, %
(millions) 2022 2021 Change 2022 2021 Change
Selling, general, and administrative
expenses, as reported $ 634 $ 626 1.4% $ 1,932 $ 1,803 7.2%
Depreciation and amortization, as
reported 46 48 (3.8)% 142 147 (3.5)%
Operating expenses* $ 681 $ 674 1.0% $ 2,074 $ 1,949 6.4%
Impact of changes in foreign
currencies - (33) - (72)
Non-GAAP operating expenses $ 681 $ 641 6.2% $ 2,074 $ 1,878 10.4%
Operating expenses as a percentage
of sales 7.3 % 7.9 % (60) bps 7.5 % 7.7 % (20) bps
Non-GAAP operating expenses as a
percentage of non-GAAP sales 7.3 % 7.9 % (60) bps 7.5 % 7.6 % (10) bps
* Operating expenses discussed here are presented before restructuring,
integration, and other charges.
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 $8.5 million , or
1.4%, and $129.4 million , or 7.2% in the third quarter and first nine months of
2022, respectively, on a sales increase of 8.9% and 9.2% compared with the
year-earlier periods. Selling, general, and administrative expenses, as a
percentage of sales, was 6.8% and 6.9% for the third quarter and first nine
months of 2022, respectively, compared with 7.4% and 7.1% in the year-earlier
periods. In the first nine months of 2021, the company received $12.5 million in
settlement funds in connection with certain class action claims (Refer to Note
K), which were recorded as a benefit within selling, general, and administrative
expenses.
Decreases in operating expense as a percentage of sales during the first nine
months of 2022 relate primarily to operating leverage the company generates when
sales are growing. The decreases were also related to certain investments to
grow the company's sales during the third quarter of 2021, partially offset by
the settlement funds discussed above.
Depreciation and amortization expense as a percentage of operating expenses was
6.8% and 6.8% for the third quarter and first nine months of 2022 compared with
7.1% and 7.5% in the year-earlier periods. Included in depreciation and
amortization expense is identifiable intangible asset amortization of $8.7
million and $26.5 million for the third quarter and first nine months of 2022
compared to $9.2 million and $27.8 million in the year-earlier periods.
Operating expenses as a percentage of sales during the third quarter and first
nine months of 2022, respectively, was 7.3% and 7.5% compared to 7.9% and 7.7%
in the year-earlier periods.
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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 consolidate certain operations, as necessary. The company recorded restructuring, integration, and other charges (credits) of$3.6 million and$11.0 million , and$(3.0) million and$11.6 million for the third quarter and first nine months of 2022 and 2021, respectively. The other charges include$4.5 million in impairment related to various long lived assets recorded during the first nine months of 2021.
As of
Operating Income
Following is an analysis of operating income:
Quarter Ended Nine Months Ended
October 1, October 2, % October 1, October 2, %
(millions) 2022 2021 Change 2022 2021 Change
Consolidated operating income, as
reported $ 503 $ 405 24.2% $ 1,546 $ 1,045 47.9 %
Identifiable intangible asset
amortization 9 9 27 28
Restructuring, integration, and
other charges (credits) 4 (3) 11 12
Non-GAAP consolidated operating
income $ 515 $ 411 25.3% $ 1,583 $ 1,084 46.0%
Consolidated operating income as a
percentage of sales, as reported 5.4 % 4.8 % 60 bps 5.6 % 4.1 % 150 bps
Non-GAAP consolidated operating
income, as a percentage of sales 5.6 % 4.8 % 80 bps 5.7 % 4.3 % 140 bps
The sum of the components of non-GAAP consolidated operating income may not agree to totals, as presented, due to rounding.
The company recorded operating income of$502.7 million , or 5.4% of sales, and operating income of$1.5 billion , or 5.6% of sales, in the third quarter and first nine months of 2022, respectively, compared with 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 year-earlier periods. Non-GAAP operating income was$515.0 million , or 5.6% of sales, and$1.6 billion , or 5.7% of sales, in the third quarter and first nine months of 2022, compared with non-GAAP operating income of$411.0 million , or 4.8% of sales, and$1.1 billion , or 4.3% of sales, in the year-earlier periods. During the third quarter and first nine months of 2022, changes in foreign currencies reduced operating income growth by approximately$18.1 million and$38.4 million , respectively, when compared to the year-earlier periods.
Gain (Loss) on Investments, Net
During the third quarter and first nine months of 2022 and 2021, the company recorded a loss of$3.5 million and$11.2 million and a gain of$1.4 million and$10.9 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$50.9 million and$123.4 million for the third quarter and first nine months of 2022 compared with$32.7 million and$97.0 million in the year-earlier periods. The increase for the third quarter and first nine months of 2022 primarily relates to higher borrowings and interest rates on credit facilities. 28
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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 the company's effective income tax rate:
Quarter Ended Nine Months Ended
October 1, October 2, October 1, October 2,
2022 2021 2022 2021
Effective income tax rate 23.5 % 22.2 % 23.5 % 22.8 %
Identifiable intangible asset amortization - % 0.1 % - % 0.1 %
Non-GAAP effective income tax rate 23.5 % 22.3 % 23.5 % 22.8 %
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 22.2% and 22.8% for the third quarter and first nine months of 2021, respectively, to 23.5% for the third quarter and first nine months of 2022, is primarily driven by discrete items, such as stock-based compensation, and changes in the mix of tax jurisdictions where taxable income is generated.
Net Income Attributable to Shareholders
Following is an analysis of net income attributable to shareholders:
Quarter Ended Nine Months Ended
October 1, October 2, October 1, October 2,
(millions) 2022 2021 2022 2021
Net income attributable to shareholders, as
reported $ 342 $ 290 $ 1,077 $ 737
Identifiable intangible asset amortization* 8 9 26 27
Restructuring, integration, and other
charges 4 (3) 11 12
(Gain) loss on investments, net 3 (1) 11 (11)
Tax effect of adjustments above (4) (1) (12) (7)
Non-GAAP net income attributable to
shareholders $ 354 $ 293 $ 1,114 $ 758
* 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 $342.4 million
and $1.1 billion in the third quarter and first nine months of 2022 compared
with $290.0 million and $737.0 million in the year-earlier periods. Non-GAAP net
income attributable to shareholders was $354.1 million and $1.1 billion for the
third quarter and first nine months of 2022 compared with $293.3 million and
$758.2 million in the year-earlier periods. During the third quarter and first
nine months of 2022, changes in foreign currencies reduced net income growth by
approximately $11.8 million and $25.7 million when compared to the year-earlier
periods.
Liquidity and Capital Resources
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 over$2.0 billion in addition to$334.0 million of cash on hand atOctober 1, 2022 . 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. 29
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The company's principal sources of liquidity are existing cash and cash
equivalents, cash generated from operations 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 our borrowings, and the return of cash to shareholders
through share repurchases.
The following table presents selected financial information related to
liquidity:
October 1, December 31,
(millions) 2022 2021 Change
Working capital $ 6,762 $ 5,709 $ 1,053
Cash and cash equivalents 334 222 112
Short-term debt 605 383 222
Long-term debt 3,187 2,244 943
Working Capital
The company maintains a significant investment in working capital which the
company defines as accounts receivable, net, plus inventories less accounts
payable. The change in working capital during the first nine months of 2022 was
primarily attributable to increases in inventories. The company continues to
invest in inventories to help mitigate the impact of supply shortages and
support growth. Additionally, inflationary pressures along with improved supply,
have contributed to higher inventory levels on the company's consolidated
balance sheet, which increased by $881.4 million as of October 1, 2022 , relative
to December 31, 2021 .
Working capital as a percentage of sales, which is defined as working capital
divided by annualized sales, increased to 18.2% for the first nine months of
2022, compared to 15.2% in the year-earlier period. The increase was primarily
due to higher inventory related to the factors discussed above.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments, which are readily convertible into cash, with original maturities of three months or less. AtOctober 1, 2022 andDecember 31, 2021 , the company had cash and cash equivalents of$334.0 million and$222.2 million , respectively, of which$136.4 million and$211.6 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. 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$1.9 billion are still available for distribution in future periods as ofOctober 1, 2022 . The company has not reversed its assertion to indefinitely reinvest the residual$2.9 billion of undistributed earnings of its foreign subsidiaries and recognizes that it may be subject to additional foreign taxes andU.S. state income taxes if it reverses its indefinite reinvestment assertion on these foreign earnings.
Revolving Credit Facilities and Debt
The following table summarizes the company's credit facilities by category:
Average Daily Balance Outstanding
Outstanding Borrowings Nine Months Ended
Borrowing October 1, December 31, October 1, October 2,
(millions) Capacity 2022 2021 2022 2021
North American asset
securitization program $ 1,500 $ 1,240 $ - $ 903 $ 332
Revolving credit facility 2,000 - - 14 11
Commercial paper program (a) 1,200 265 - 451 225
Uncommitted lines of credit 200 - - 5 -
(a) Amounts outstanding under the commercial paper program are backstopped by available commitments under the company's revolving credit facility.
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The company also has an EMEA asset securitization program under which it continuously sells its interest in designated pools of trade accounts receivables 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 nine months of 2022 and 2021, the average daily balance outstanding under the EMEA asset securitization program was$430.5 million and$399.0 million , respectively. Refer to Note E "Accounts Receivables" of the Notes to the Consolidated Financial Statements for further discussion. The following table summarizes recent events impacting the company's capital resources: (millions) Activity Date Notional Amount 3.50% notes, due April 2022 Repaid February 2022 $ 350 2.95% notes, due February 2032 Issued December 2021 $ 500 5.125% notes, due March 2021 Repaid March 2021 $ 131
North American asset securitization program Increase in Capacity
September 2022 $ 250
EMEA asset securitization program Increase in Capacity September 2022 € 200
Refer to Note F, "Debt" of the Notes to the Consolidated Financial Statements for further discussion of the company's short-term and long-term debt and available financing.
Cash Flows
The following table summarizes the company's cash flows by category for the
periods presented:
October 1, October 2,
(millions) 2022 2021 Change
Net cash provided by (used for) operating
activities $ (142) $ 391 $ (533)
Net cash used for investing activities (34) (40) 6
Net cash provided by (used for) financing
activities 456 (474) 930
Cash Flows from Operating Activities
The net amount of cash used for the company's operating activities during the first nine months of 2022 was$141.8 million and the net amount of cash provided by the company's operating activities during the first nine months of 2021 was$391.1 million . The change in cash used for operating activities during 2022, compared to the year-earlier period, related primarily to increases in inventories and the timing of payments received from customers, offset partially by the initial sales of accounts receivables under the increased capacity of the EMEA asset securitization program (see Note E), which increased operating cash flows by approximately$130 million in 2022.
Cash Flows from Investing Activities
The net amount of cash used for investing activities during the first nine months of 2022 and 2021 was$34.0 million and$39.7 million , respectively. The change in cash used for investing activities related primarily to proceeds from the sale of property plant and equipment during the first nine months of 2021, offset largely by proceeds from collection of notes receivable during the first nine months of 2022.
Cash Flows from Financing Activities
The net amount of cash provided by financing activities was$455.8 million during the first nine months of 2022 compared to a use of$474.4 million in the year-earlier period. The change in cash provided by financing activities related primarily to higher net proceeds from long- and short-term bank borrowings during the first nine months of 2022, offset partially by increased cash used for redemption of notes and repurchases of common stock. 31
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Index
Capital Expenditures
Capital expenditures for the first nine months of 2022 and 2021 were
Share-Repurchase Program
The company repurchased 6.5 million shares of common stock for$734.4 million and 5.7 million shares of common stock for$650.0 million in the first nine months of 2022 and 2021, respectively. InSeptember 2022 , the company's Board of Directors approved a$600.0 million increase to the company's share-repurchase program. As ofOctober 1, 2022 , approximately$629.0 million remained available for repurchase. The stock-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 and dividend payments, debt repayment obligations or repurchases of debt, stock price, and economic and market conditions. The stock-repurchase program may be accelerated, suspended, delayed or discontinued at any time subject to the approval by the company's Board of Directors. Contractual Obligations The company has contractual obligations for short-term and long-term debt, interest on short-term and long-term debt, purchase obligations, and operating leases that are summarized in the section titled "Contractual Obligations" in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operation's in the company's Annual Report on Form 10-K for the year endedDecember 31, 2021 . Refer to the section above titled "Revolving Credit Facilities and Debt" for updates to our short-term and long-term debt obligations. As ofOctober 1, 2022 , there were no other material changes to the contractual obligations of the company. Critical Accounting 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 have been no significant changes to our critical accounting estimates
during the first nine months of 2022. Refer to the section titled "Critical
Accounting Estimates" in Part II, Item 7, Management's Discussion and Analysis
of Financial Condition and Results of Operation's, in the company's Annual
Report on Form 10-K for the year ended
Impact of Recently Issued Accounting Standards
See Note B of the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements, including the anticipated dates of adoption and the effects on the company's consolidated financial position and results of operations.
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