Press release

Arrow Electronics Reports Fourth-Quarter and Year-End 2019 Results

0
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Arrow Electronics, Inc. (NYSE:ARW) today reported fourth-quarter 2019 sales of $7.34 billion, a decrease of 7 percent from sales of $7.92 billion in the fourth quarter of 2018. Fourth-quarter sales as adjusted decreased 5%. The company reported fourth-quarter net income of $112 million, or $1.36 per share on a diluted basis, compared with net income of $231 million, or $2.63 per share on a diluted basis, in the fourth quarter of 2018. Excluding certain items1, net income would have been $181 million, or $2.20 per share on a diluted basis, in the fourth quarter of 2019, compared with net income of $227 million, or $2.59 per share on a diluted basis, in the fourth quarter of 2018. In the fourth quarter of 2019, changes in foreign currencies had negative impacts on growth of approximately $65 million or 1 percent on sales and $.04 or 1 percent on earnings per share on a diluted basis compared to the fourth quarter of 2018.

“Arrow’s commitment to delivering unmatched engineering and design services to customers on behalf of our suppliers is serving the company well during the ongoing industry correction,” said Michael J. Long, chairman, president, and chief executive officer. “Global components’ sales and margin performance continue to demonstrate greater resiliency compared to past economic and semiconductor industry corrections. As we prepare for economic recovery, we continue to increase the scale of our Asia components business, which we expect to lead to greater profit. Arrow is well positioned to accelerate profit growth and expansion as soon as demand from end-customers stabilizes and improves.”

Global components fourth-quarter sales of $4.74 billion decreased 10 percent year over year. Sales, as adjusted, decreased 8 percent year over year. Asia-Pacific components sales increased 4 percent year over year. Europe components sales decreased 16 percent year over year. Sales in the region, as adjusted, decreased 12 percent year over year. Americas components sales decreased 19 percent year over year. Sales in the region, as adjusted, decreased 16 percent year over year. Global components fourth-quarter operating income was $150 million. Fourth-quarter operating income, excluding amortization of intangibles expense, as adjusted, was $172 million.

“During the fourth quarter, and throughout 2019, Arrow’s enterprise computing solutions focused on accelerating the evolution toward selling advanced, next-generation software and hardware architectures,” added Mr. Long. “We believe our line card and capabilities are well positioned to assure mutual success for suppliers, VARs and MSPs, and their customers as we begin the new decade.”

Global enterprise computing solutions fourth-quarter sales of $2.60 billion decreased 2 percent year over year. Global enterprise computing solutions sales, as adjusted, decreased 1 percent year over year. Europe sales increased 1 percent year over year. Sales in the region, as adjusted, increased 4 percent year over year. Americas sales decreased 4 percent year over year. Sales in the region, as adjusted, decreased 3 percent year over year. Global enterprise computing solutions fourth-quarter operating income was $149 million. Fourth-quarter operating income, excluding amortization of intangibles expense, as adjusted, was $156 million. Fourth-quarter operating income as a percentage of sales increased 20 basis points year over year.

FULL-YEAR RESULTS

Full-year 2019 sales of $28.92 billion decreased 3 percent from sales of $29.68 billion in 2018. Net loss for 2019 was $204 million, or $(2.44) per share, compared with net income of $716 million, or $8.10 per share on a diluted basis, in 2018. Excluding certain items1, net income would have been $636 million, or $7.55 per share on a diluted basis, in 2019 compared with net income of $778 million, or $8.79 per share on a diluted basis, in 2018. In 2019, changes in foreign currencies had negative impacts on growth of approximately $513 million, or 2 percent on sales, and $.23, or 2 percent, on earnings per share on a diluted basis compared to 2018.

“With our flexibility, Arrow was able to adapt to changing market conditions in 2019,” said Chris Stansbury, senior vice president and chief financial officer. “Fourth-quarter and full-year 2019 cash flow provided by operating activities were $495 million and $858 million, respectively. Disciplined working capital management, continued profitability from our leading positions in the markets we serve, and efficiencies from our largely complete cost optimization activities, were all key drivers in generating our strong cash flow. We remain committed to returning excess cash to shareholders, and returned approximately $100 million to shareholders through our stock repurchase program during the fourth quarter, and approximately $390 million in 2019. At the end of the year, we had approximately $339 million of remaining authorization under our share repurchase program.”

FIRST-QUARTER 2020 OUTLOOK

  • Consolidated sales of $6.225 billion to $6.625 billion, with global components sales of $4.55 billion to $4.75 billion, and global enterprise computing solutions sales of $1.675 billion to $1.875 billion
  • Earnings per share on a diluted basis of $.99 to $1.29, and earnings per share on a diluted basis, excluding certain items1 of $1.29 to $1.39 per share, assuming an average tax rate of approximately 24.5 percent compared to the long-term range of 23 to 25 percent, and average diluted shares outstanding of 82 million
  • Interest expense of approximately $52 million
  • Expecting average USD-to-Euro exchange rate of $1.12 to €1; changes in foreign currencies to negatively impact sales growth by approximately $30 million, and earnings per share on a diluted basis by $.01 compared to the first quarter of 2019

“As we look to the first quarter, we are seeing some delays and extended lead times of products manufactured in China due to business and transportation shutdowns, as well as the extension of the New Year Holiday week mandated by the Chinese government. The situation in that region remains uncertain, and we are monitoring conditions closely. Currently, we are not able to quantify the potential impacts to our first-quarter outlook,” said Mr. Stansbury.

“Separately, our first quarter of 2020 will close on March 28, 2020, two days earlier than the first quarter of 2019, and three days before the end of the calendar month. We expect this will negatively impact sales by approximately $225 million, and earnings per share on a diluted basis by approximately $.11 compared to the first quarter of 2019. The earlier closing date will only impact global enterprise computing solutions. Additionally, while the second and third quarters of 2020 will close two days earlier than the second and third quarters of 2019, we expect impacts to year-over-year comparisons should be negligible. We anticipate the fourth quarter of 2020 will benefit by the corresponding amounts lost from the first quarter.”

Please refer to the CFO commentary, which can be found at investor.arrow.com, as a supplement to the company’s earnings release.

Arrow Electronics guides innovation forward for over 175,000 leading technology manufacturers and service providers. With 2019 sales of $29 billion, Arrow develops technology solutions that improve business and daily life. Learn more at fiveyearsout.com.

1 A reconciliation of non-GAAP adjusted financial measures, including sales, as adjusted, gross profit, operating income, as adjusted, net income attributable to shareholders, as adjusted, and net income per share, as adjusted, to GAAP financial measures is presented in the reconciliation tables included herein.

Information Relating to Forward-Looking Statements

This press release includes forward-looking statements that 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: industry conditions, changes in product supply, pricing and customer demand, competition, other vagaries in the global components and global enterprise computing solutions 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, anti-trust, and anti-corruption laws, the company’s ability to generate cash flow, and disruptions in the company’s business due to epidemics (such as the coronavirus). 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. 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.

For a further discussion of factors to consider in connection with these forward-looking statements, investors should refer to Item 1A Risk Factors of the company’s Annual Report on Form 10-K for the year ended Dec. 31, 2019.

Certain Non-GAAP Financial Information

In addition to disclosing financial results that are determined in accordance with accounting principles generally accepted in the United States (“GAAP”), the company also provides certain non-GAAP financial information relating to sales, operating income, net income attributable to shareholders, and net income per basic and diluted share.

The company provides sales, gross profit, and operating expenses as adjusted for 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 dispositions by adjusting the company’s operating results for businesses disposed, as if the dispositions had occurred at the beginning of the earliest period presented (referred to as dispositions), the impact of the company’s personal computer and mobility asset disposition business (referred to as wind down), the impact of inventory write-downs related to the digital business (referred to as “digital inventory write-downs and recoveries”), and the impact of the notes receivable reserves and inventory write-downs related to the AFS business (referred to as “AFS notes receivable reserves and credits” and “AFS inventory write-downs and recoveries,” respectively). Operating income is adjusted to exclude identifiable intangible asset amortization, restructuring, integration, and other charges, loss on disposition of businesses, net, AFS notes receivable reserves and credits and inventory write-downs and recoveries, digital inventory write-downs and recoveries, the impact of non-cash charges related to goodwill, trade names, and long-lived assets, and the impact of wind down. Net income attributable to shareholders as adjusted to exclude identifiable intangible asset amortization, restructuring, integration, and other charges, and loss on disposition of businesses, net, AFS notes receivable reserves and credits and inventory write-downs and recoveries, digital inventory write-downs and recoveries, the impact of non-cash charges related to goodwill, trade names, and long-lived assets, the impact of wind down, pension settlements, net gains and losses on investments, and certain tax adjustments including related interest expense. A reconciliation of the company’s non-GAAP financial information to GAAP is set forth in the tables below.

The company believes that such non-GAAP financial information is useful to investors to assist in assessing and understanding the company’s operating performance and underlying trends in the company’s business because management considers these items referred to above to be outside the company’s core operating results. This non-GAAP financial information is among the primary indicators management uses as a basis for evaluating the company’s financial and operating performance. In addition, the company’s Board of Directors may use this non-GAAP financial information in evaluating management performance and setting management compensation.

The presentation of this additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for, or alternative to, sales, operating income, net income and net income per basic and diluted share determined in accordance with GAAP. Analysis of results and outlook on a non-GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with GAAP.

 

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except per share data)

 

 

 

 

 

Quarter Ended

 

Year Ended

 

December 31,

2019

 

December 31,

2018

 

December 31,

2019

 

December 31,

2018

 

(Unaudited)

 

(Unaudited)

 

 

 

 

Sales

$

7,338,190

 

 

$

7,918,182

 

 

$

28,916,847

 

 

$

29,676,768

 

Cost of sales

6,515,247

 

 

6,942,812

 

 

25,618,466

 

 

25,975,856

 

Gross profit

822,943

 

 

975,370

 

 

3,298,381

 

 

3,700,912

 

Operating expenses:

 

 

 

 

 

 

 

Selling, general, and administrative expenses

513,878

 

 

583,943

 

 

2,191,612

 

 

2,303,051

 

Depreciation and amortization

50,051

 

 

47,183

 

 

189,790

 

 

186,384

 

Loss on disposition of businesses, net

5,813

 

 

 

 

21,252

 

 

3,604

 

Impairments

 

 

 

 

698,246

 

 

 

Restructuring, integration, and other charges

15,093

 

 

9,864

 

 

89,785

 

 

60,361

 

 

584,835

 

 

640,990

 

 

3,190,685

 

 

2,553,400

 

Operating income

238,108

 

 

334,380

 

 

107,696

 

 

1,147,512

 

Equity in earnings (losses) of affiliated companies

(610

)

 

(1,524

)

 

(2,765

)

 

(2,332

)

Gain (loss) on investments, net 

3,967

 

 

(10,221

)

 

11,831

 

 

(14,166

)

Employee benefit plan expense

(21,500

)

 

(3,086

)

 

(24,849

)

 

(6,870

)

Interest and other financing expense, net

(50,317

)

 

(54,584

)

 

(203,743

)

 

(214,771

)

Income (loss) before income taxes

169,648

 

 

264,965

 

 

(111,830

)

 

909,373

 

Provision for income taxes

57,460

 

 

32,474

 

 

88,338

 

 

187,799

 

Consolidated net income (loss)

112,188

 

 

232,491

 

 

(200,168

)

 

721,574

 

Noncontrolling interests

175

 

 

1,838

 

 

3,919

 

 

5,379

 

Net income (loss) attributable to shareholders

$

112,013

 

 

$

230,653

 

 

$

(204,087

)

 

$

716,195

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

Basic

$

1.37

 

 

$

2.66

 

 

$

(2.44

)

 

$

8.19

 

Diluted

$

1.36

 

 

$

2.63

 

 

$

(2.44

)

 

$

8.10

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

81,613

 

 

86,559

 

 

83,568

 

 

87,476

 

Diluted

82,493

 

 

87,561

 

 

83,568

 

 

88,444

 

 

ARROW ELECTRONICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands except par value)

 

 

 

 

 

 

 

December 31,

2019

 

December 31,

2018

 

 

 

 

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

300,103

 

 

$

509,327

 

Accounts receivable, net

8,482,687

 

 

8,945,463

 

Inventories

3,477,120

 

 

3,878,678

 

Other current assets

266,249

 

 

274,832

 

Total current assets

12,526,159

 

 

13,608,300

 

Property, plant, and equipment, at cost:

 

 

 

Land

7,793

 

 

7,882

 

Buildings and improvements

173,370

 

 

158,712

 

Machinery and equipment

1,481,525

 

 

1,425,933

 

 

1,662,688

 

 

1,592,527

 

Less: Accumulated depreciation and amortization

(859,578

)

 

(767,827

)

Property, plant, and equipment, net

803,110

 

 

824,700

 

Investments in affiliated companies

86,942

 

 

83,693

 

Intangible assets, net

271,903

 

 

372,644

 

Goodwill

2,061,322

 

 

2,624,690

 

Other assets

651,360

 

 

270,418

 

Total assets

$

16,400,796

 

 

$

17,784,445

 

LIABILITIES AND EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

7,046,221

 

 

$

7,631,879

 

Accrued expenses

880,507

 

 

912,292

 

Short-term borrowings, including current portion of long-term debt

331,431

 

 

246,257

 

Total current liabilities

8,258,159

 

 

8,790,428

 

Long-term debt

2,640,129

 

 

3,239,115

 

Other liabilities

636,115

 

 

378,536

 

Equity:

 

 

 

Shareholders’ equity:

 

 

 

Common stock, par value $1:

 

 

 

Authorized – 160,000 shares in both 2019 and 2018

 

 

 

Issued – 125,424 shares in both 2019 and 2018

125,424

 

 

125,424

 

Capital in excess of par value

1,150,006

 

 

1,135,934

 

Treasury stock (44,804 and 40,233 shares in 2019 and 2018, respectively), at cost

(2,332,548

)

 

(1,972,254

)

Retained earnings

6,131,248

 

 

6,335,335

 

Accumulated other comprehensive loss

(262,211

)

 

(299,449

)

Total shareholders’ equity

4,811,919

 

 

5,324,990

 

Noncontrolling interests

54,474

 

 

51,376

 

Total equity

4,866,393

 

 

5,376,366

 

Total liabilities and equity

$

16,400,796

 

 

$

17,784,445

 

 

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

Quarter Ended

 

 

December 31, 2019

 

December 31, 2018

Cash flows from operating activities:

 

 

 

Consolidated net income

$

112,188

 

 

$

232,491

 

Adjustments to reconcile consolidated net income to net cash provided by operations:

 

 

 

Depreciation and amortization

50,051

 

 

47,183

 

Amortization of stock-based compensation

6,321

 

 

8,134

 

Equity in (earnings) losses of affiliated companies

610

 

 

1,524

 

Deferred income taxes

15,196

 

 

(16,533

)

(Gain) loss on investment, net

(3,840

)

 

10,221

 

Loss on disposition of businesses, net

5,813

 

 

 

Pension settlement expense

20,111

 

 

 

Other

(155

)

 

3,142

 

Change in assets and liabilities, net of effects of acquired and disposed businesses:

 

 

 

Accounts receivable

(578,059

)

 

(752,891

)

Inventories

40,448

 

 

(162,825

)

Accounts payable

827,614

 

 

764,726

 

Accrued expenses

43,649

 

 

96,946

 

Other assets and liabilities

(45,145

)

 

31,016

 

Net cash provided by operating activities

494,802

 

 

263,134

 

 

 

 

 

Cash flows from investing activities:

 

 

 

Proceeds from (cash paid on) disposition of businesses

(11,769

)

 

 

Acquisition of property, plant, and equipment

(30,111

)

 

(30,439

)

Proceeds from sale of property, plant, and equipment

 

 

5,421

 

Cash paid for customer relationship intangible asset

(7,616

)

 

(20,000

)

Other

(4,127

)

 

(2,500

)

Net cash used for investing activities

(53,623

)

 

(47,518

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Change in short-term and other borrowings

(20,794

)

 

88,034

 

Proceeds from (repayment of) long-term bank borrowings, net

(308,047

)

 

(114,120

)

Proceeds from exercise of stock options

5,201

 

 

900

 

Repurchases of common stock

(100,009

)

 

(150,132

)

Net cash used for financing activities

(423,649

)

 

(175,318

)

Effect of exchange rate changes on cash

20,319

 

 

(5,162

)

Net increase in cash and cash equivalents

37,849

 

 

35,136

 

Cash and cash equivalents at beginning of period

262,254

 

 

474,191

 

Cash and cash equivalents at end of period

$

300,103

 

 

$

509,327

 

 

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

 

Year Ended

 

 

December 31,

2019

 

December 31,

2018

Cash flows from operating activities:

 

 

 

Consolidated net income (loss)

$

(200,168

)

 

$

721,574

 

Adjustments to reconcile consolidated net income to net cash provided by operations:

 

 

 

Depreciation and amortization

189,790

 

 

186,384

 

Amortization of stock-based compensation

41,070

 

 

46,238

 

Equity in (earnings) losses of affiliated companies

2,765

 

 

2,332

 

Deferred income taxes

(50,288

)

 

1,236

 

(Gain) loss on investment, net

(11,462

)

 

14,166

 

Loss on disposition of businesses, net

21,252

 

 

3,604

 

Pension settlement expense

20,111

 

 

1,665

 

Impairments

698,246

 

 

 

Other

10,659

 

 

9,198

 

Change in assets and liabilities, net of effects of acquired and disposed businesses:

 

 

 

Accounts receivable

338,849

 

 

(1,007,308

)

Inventories

383,058

 

 

(618,875

)

Accounts payable

(521,575

)

 

936,423

 

Accrued expenses

(27,475

)

 

112,123

 

Other assets and liabilities

(36,837

)

 

(136,070

)

Net cash provided by operating activities

857,995

 

 

272,690

 

 

 

 

 

Cash flows from investing activities:

 

 

 

Cash consideration paid for acquired businesses, net of cash acquired

 

 

(331,563

)

Proceeds from (cash paid on) disposition of businesses

(13,094

)

32,013

 

Acquisition of property, plant, and equipment

(143,191

)

 

(135,336

)

Proceeds from sale of property, plant and equipment

 

 

5,421

 

Cash paid for customer relationship intangible asset

(7,616

)

 

(20,000

)

Other

(9,682

)

 

(13,500

)

Net cash used for investing activities

(173,583

)

 

(462,965

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Change in short-term and other borrowings

(113,923

)

 

192,192

 

Proceeds from (repayments of) long-term bank borrowings, net

(405,007

)

 

306,635

 

Redemption of notes

 

 

(300,000

)

Proceeds from exercise of stock options

16,911

 

 

8,819

 

Repurchases of common stock

(404,203

)

 

(243,305

)

Other

(147

)

 

(1,174

)

Net cash provided by (used for) financing activities

(906,369

)

 

(36,833

)

Effect of exchange rate changes on cash

12,733

 

 

6,352

 

Net decrease in cash and cash equivalents

(209,224

)

 

(220,756

)

Cash and cash equivalents at beginning of period

509,327

 

 

730,083

 

Cash and cash equivalents at end of period

$

300,103

 

 

$

509,327

 

 

ARROW ELECTRONICS, INC.

NON-GAAP SALES RECONCILIATION

(In thousands)

(Unaudited)

 

 

Quarter Ended

 

 

 

 

December 31,

2019

 

December 31,

2018

 

% Change

 

 

 

 

 

 

Consolidated sales, as reported

$

7,338,190

 

 

$

7,918,182

 

 

(7.3

)%

Impact of changes in foreign currencies

 

 

(65,384

)

 

 

Impact of dispositions and wind down

(19,375

)

 

(118,184

)

 

 

Consolidated sales, as adjusted

$

7,318,815

 

 

$

7,734,614

 

 

(5.4

)%

 

 

 

 

 

 

Global components sales, as reported

$

4,738,993

 

 

$

5,261,477

 

 

(9.9

)%

Impact of changes in foreign currencies

 

 

(40,608

)

 

 

Impact of dispositions and wind down

(19,375

)

 

(102,965

)

 

 

Global components sales, as adjusted

$

4,719,618

 

 

$

5,117,904

 

 

(7.8

)%

 

 

 

 

 

 

Americas components sales, as reported

$

1,644,757

 

 

$

2,021,033

 

 

(18.6

)%

Impact of changes in foreign currencies

 

 

(214

)

 

 

Impact of dispositions and wind down

(19,239

)

 

(78,246

)

 

 

Americas components sales, as adjusted

$

1,625,518

 

 

$

1,942,573

 

 

(16.3

)%

 

 

 

 

 

 

Europe components sales, as reported

$

1,189,016

 

 

$

1,407,429

 

 

(15.5

)%

Impact of changes in foreign currencies

 

 

(36,312

)

 

 

Impact of dispositions and wind down

(136

)

 

(24,719

)

 

 

Europe components sales, as adjusted

$

1,188,880

 

 

$

1,346,398

 

 

(11.7

)%

 

 

 

 

 

 

Asia components sales, as reported

$

1,905,220

 

 

$

1,833,015

 

 

3.9

%

Impact of changes in foreign currencies

 

 

(4,082

)

 

 

Asia components sales, as adjusted

$

1,905,220

 

 

$

1,828,933

 

 

4.2

%

 

 

 

 

 

 

Global ECS sales, as reported

$

2,599,197

 

 

$

2,656,705

 

 

(2.2

)%

Impact of changes in foreign currencies

 

 

(24,776

)

 

 

Impact of dispositions

 

 

(15,219

)

 

 

Global ECS sales, as adjusted

$

2,599,197

 

 

$

2,616,710

 

 

(0.7

)%

 

 

 

 

 

 

Europe ECS sales, as reported

$

959,449

 

 

$

954,343

 

 

0.5

%

Impact of changes in foreign currencies

 

 

(20,834

)

 

 

Impact of dispositions

 

 

(15,219

)

 

 

Europe ECS sales, as adjusted

$

959,449

 

 

$

918,290

 

 

4.5

%

 

 

 

 

 

 

Americas ECS sales, as reported

$

1,639,748

 

 

$

1,702,362

 

 

(3.7

)%

Impact of changes in foreign currencies

 

 

(3,942

)

 

 

Americas ECS sales, as adjusted

$

1,639,748

 

 

$

1,698,420

 

 

(3.5

)%

 

ARROW ELECTRONICS, INC.

NON-GAAP SALES RECONCILIATION

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

Year Ended

 

 

 

 

December 31,

2019

 

December 31,

2018

 

% Change

 

 

 

 

 

 

Consolidated sales, as reported

$

28,916,847

 

 

$

29,676,768

 

 

(2.6

)%

Impact of changes in foreign currencies

 

 

(513,217

)

 

 

Impact of dispositions and wind down

(251,614

)

 

(496,108

)

 

 

Consolidated sales, as adjusted

$

28,665,233

 

 

$

28,667,443

 

 

flat

 

 

 

 

 

 

Global components sales, as reported

$

20,250,735

 

 

$

20,856,851

 

 

(2.9

)%

Impact of changes in foreign currencies

 

 

(337,828

)

 

 

Impact of dispositions and wind down

(240,473

)

 

(415,707

)

 

 

Global components sales, as adjusted

$

20,010,262

 

 

$

20,103,316

 

 

(0.5

)%

 

 

 

 

 

 

Americas components sales, as reported

$

7,167,295

 

 

$

7,816,533

 

 

(8.3

)%

Impact of changes in foreign currencies

 

 

(4,496

)

 

 

Impact of dispositions and wind down

(189,963

)

 

(310,198

)

 

 

Americas components sales, as adjusted

$

6,977,332

 

 

$

7,501,839

 

 

(7.0

)%

 

 

 

 

 

 

Europe components sales, as reported

$

5,412,379

 

 

$

5,733,222

 

 

(5.6

)%

Impact of changes in foreign currencies

 

 

(292,551

)

 

 

Impact of dispositions and wind down

(50,510

)

 

(105,509

)

 

 

Europe components sales, as adjusted

$

5,361,869

 

 

$

5,335,162

 

 

0.5

%

 

 

 

 

 

 

Asia components sales, as reported

$

7,671,061

 

 

$

7,307,096

 

 

5.0

%

Impact of changes in foreign currencies

 

 

(40,781

)

 

 

Asia components sales, as adjusted

$

7,671,061

 

 

$

7,266,315

 

 

5.6

%

 

 

 

 

 

 

Global ECS sales, as reported

$

8,666,112

 

 

$

8,819,917

 

 

(1.7

)%

Impact of changes in foreign currencies

 

 

(175,389

)

 

 

Impact of dispositions

(11,141

)

 

(80,401

)

 

 

Global ECS sales, as adjusted

$

8,654,971

 

 

$

8,564,127

 

 

1.1

%

 

 

 

 

 

 

Europe ECS sales, as reported

$

3,034,087

 

 

$

3,077,391

 

 

(1.4

)%

Impact of changes in foreign currencies

 

 

(145,468

)

 

 

Impact of dispositions

(11,141

)

 

(52,908

)

 

 

Europe ECS sales, as adjusted

$

3,022,946

 

 

$

2,879,015

 

 

5.0

%

 

 

 

 

 

 

Americas ECS sales, as reported

$

5,632,025

 

 

$

5,742,526

 

 

(1.9

)%

Impact of changes in foreign currencies

 

 

(29,921

)

 

 

Impact of dispositions

 

 

(27,493

)

 

 

Americas ECS sales, as adjusted

$

5,632,025

 

 

$

5,685,112

 

 

(0.9

)%

 

ARROW ELECTRONICS, INC.

NON-GAAP EARNINGS RECONCILIATION

(In thousands except per share data)

(Unaudited)

 

Three months ended December 31, 2019

 

 

Reported

GAAP

measure

 

Intangible

amortization

expense

 

Restructuring

& Integration

charges

 

AFS Write

Downs

 

Digital Write

Downs

 

Impact of

Wind

Down(6)

 

Tax

adjustments(7)

 

Other(1)

 

Non-GAAP

measure

Sales

$

7,338,190

 

$

 

$

 

$

 

$

 

$

(19,375

)

$

 

$

 

$

7,318,815

 

Gross Profit

822,943

 

 

 

 

1,117

 

5,388

 

 

 

829,448

 

Operating income

238,108

 

14,311

 

16,350

 

2,850

 

1,117

 

10,912

 

 

1,002

 

284,650

 

Income before income taxes

169,648

 

14,311

 

16,350

 

2,850

 

1,117

 

10,942

 

 

17,919

 

233,137

 

Provision for income taxes

57,460

 

4,050

 

3,042

 

607

 

156

 

(18,380

)

1,806

 

2,700

 

51,441

 

Consolidated net income

112,188

 

10,261

 

13,308

 

2,243

 

961

 

29,322

 

(1,806

)

15,219

 

181,696

 

Noncontrolling interests

175

 

138

 

 

 

 

 

 

 

313

 

Net income attributable to shareholders

$

112,013

 

$

10,123

 

$

13,308

 

$

2,243

 

$

961

 

$

29,322

 

$

(1,806

)

$

15,219

 

$

181,383

 

Net income per diluted share(5)

$

1.36

 

$

0.12

 

$

0.16

 

$

0.03

 

$

0.01

 

$

0.36

 

$

(0.02

)

$

0.18

 

$

2.20

 

Effective tax rate

33.9

%

 

 

 

 

 

 

 

22.1

%

 

 

 

 

 

 

 

 

 

 

Three months ended December 31, 2018

 

 

Reported

GAAP

measure

 

Intangible

amortization

expense

 

Restructuring

& Integration

charges

 

AFS Write

Downs

 

Digital Write

Downs

 

Impact of

Wind

Down(6)

 

Tax

adjustments(7)

 

Other(2)

 

Non-GAAP

measure

Sales

$

7,918,182

 

$

 

$

 

$

 

$

 

$

(102,965

)

$

 

$

 

$

7,815,217

 

Gross Profit

975,370

 

 

 

 

 

(16,947

)

 

 

958,423

 

Operating income

334,380

 

9,493

 

11,126

 

 

 

4,471

 

 

 

359,470

 

Income before income taxes

264,965

 

9,493

 

11,126

 

 

 

4,114

 

 

11,886

 

301,584

 

Provision for income taxes

32,474

 

2,772

 

4,786

 

 

 

1,635

 

28,323

 

3,025

 

73,015

 

Consolidated net income

232,491

 

6,721

 

6,340

 

 

 

2,479

 

(28,323

)

8,861

 

228,569

 

Noncontrolling interests

1,838

 

142

 

 

 

 

 

 

 

1,980

 

Net income attributable to shareholders

$

230,653

 

$

6,579

 

$

6,340

 

$

 

$

 

$

2,479

 

$

(28,323

)

$

8,861

 

$

226,589

 

Net income per diluted share(5)

$

2.63

 

$

0.08

 

$

0.07

 

$

 

$

 

$

0.03

 

$

(0.32

)

$

0.10

 

$

2.59

 

Effective tax rate

12.3

%

 

 

 

 

 

 

 

24.2

%

 

NON-GAAP EARNINGS RECONCILIATION

(In thousands except per share data)

(Unaudited)

 

Year ended December 31, 2019

 

 

Reported

GAAP

measure

 

Intangible

amortization

expense

 

Restructuring

& Integration

charges

 

AFS Write

Downs

 

Digital Write

Downs

 

Impairments(4)

 

Impact of

Wind

Down(6)

 

Tax

adjustments(7)

 

Other(1)

 

Non-GAAP

measure

Sales

$

28,916,847

 

$

 

$

 

$

 

$

 

$

 

$

(240,473

)

$

 

$

 

$

28,676,374

 

Gross Profit

3,298,381

 

 

 

1,868

 

22,332

 

 

(1,975

)

 

 

3,320,606

 

Operating income

107,696

 

42,383

 

78,429

 

18,037

 

22,332

 

623,796

 

162,244

 

 

1,868

 

1,056,785

 

Income before income taxes

(111,830

)

42,383

 

78,429

 

18,037

 

22,332

 

623,796

 

162,356

 

 

10,921

 

846,424

 

Provision for income taxes

88,338

 

11,913

 

19,540

 

4,339

 

5,390

 

64,246

 

12,631

 

(1,696

)

750

 

205,451

 

Consolidated net income

(200,168

)

30,470

 

58,889

 

13,698

 

16,942

 

559,550

 

149,725

 

1,696

 

10,171

 

640,973

 

Noncontrolling interests

3,919

 

558

 

 

 

 

 

 

 

 

4,477

 

Net income attributable to shareholders

$

(204,087

)

$

29,912

 

$

58,889

 

$

13,698

 

$

16,942

 

$

559,550

 

$

149,725

 

$

1,696

 

$

10,171

 

$

636,496

 

Net income per diluted share(5)

$

(2.44

)

$

0.36

 

$

0.70

 

$

0.16

 

$

0.20

 

$

6.70

 

$

1.79

 

$

0.02

 

$

0.12

 

$

7.55

 

Effective tax rate

(79.0

)%

 

 

 

 

 

 

 

 

24.3

%

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2018

 

 

Reported

GAAP

measure

 

Intangible

amortization

expense

 

Restructuring

& Integration

charges

 

AFS Write

Downs

 

Digital Write

Downs

 

Impairments

 

Impact of

Wind

Down(6)

 

Tax

adjustments(7)

 

Other(3)

 

Non-GAAP

measure

Sales

$

29,676,768

 

$

 

$

 

$

 

$

 

$

 

$

(415,707

)

$

 

$

 

$

29,261,061

 

Gross Profit

3,700,912

 

 

 

 

 

 

(71,091

)

 

 

3,629,821

 

Operating income

1,147,512

 

38,215

 

49,297

 

 

 

 

19,910

 

 

3,604

 

1,258,538

 

Income before income taxes

909,373

 

38,215

 

49,297

 

 

 

 

19,675

 

 

19,435

 

1,035,995

 

Provision for income taxes

187,799

 

10,782

 

14,815

 

 

 

 

6,031

 

28,323

 

4,678

 

252,428

 

Consolidated net income

721,574

 

27,433

 

34,482

 

 

 

 

13,644

 

(28,323

)

14,757

 

783,567

 

Noncontrolling interests

5,379

 

589

 

 

 

 

 

 

 

 

5,968

 

Net income attributable to shareholders

$

716,195

 

$

26,844

 

$

34,482

 

$

 

$

 

$

 

$

13,644

 

$

(28,323

)

$

14,757

 

777,599

 

Net income per diluted share(5)

$

8.10

 

$

0.30

 

$

0.39

 

$

 

$

 

$

 

$

0.15

 

$

(0.32

)

$

0.17

 

$

8.79

 

Effective tax rate

20.7

%

 

 

 

 

 

 

 

 

24.4

%

(1)

Other includes loss on disposition of businesses, net, gain (loss) on investments, net, interest related to uncertain tax position related to the Tax Act and pension settlement.

(2)

Other includes gain (loss) on investments, net, and pension settlement.

(3)

Other includes loss on disposition of businesses, net, gain (loss) on investments, net, and pension settlement.

(4)

Impairments include goodwill impairments of $570,175, tradename impairments of $46,000, and $7,621 in impairment charges related to various other long-lived assets.

(5)

For the year ended December 31, 2019, the non-GAAP net income per diluted share calculation includes 752 thousand shares that were excluded from the GAAP net income per diluted share calculation. Additionally, in all periods presented the sum of the components for diluted EPS, as adjusted may not agree to totals, as presented, due to rounding.

(6)

Amounts for restructuring, integration, and other charges, identifiable intangible asset amortization, loss on disposition of businesses, net, certain tax adjustments, and impairments related to the personal computer and mobility asset disposition business are included in “impact of wind down” above.

(7)

Includes income tax expense related to repatriation of foreign earnings and the Tax Act.

 

ARROW ELECTRONICS, INC.

SEGMENT INFORMATION

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

Quarter Ended

 

Year Ended

 

 

December 31,

2019

 

December 31,

2018

 

December 31,

2019

 

December 31,

2018

Sales:

 

 

 

 

 

 

 

Global components

$

4,738,993

 

 

$

5,261,477

 

 

$

20,250,735

 

 

$

20,856,851

 

Global ECS

2,599,197

 

 

2,656,705

 

 

8,666,112

 

 

8,819,917

 

Consolidated

$

7,338,190

 

 

$

7,918,182

 

 

$

28,916,847

 

 

$

29,676,768

 

Operating income (loss):

 

 

 

 

 

 

 

Global components

$

149,794

 

 

$

252,313

 

 

$

(10,199

)

 

$

1,007,638

 

Global ECS

148,711

 

 

152,195

 

 

426,192

 

 

427,605

 

Corporate (a)

(60,397

)

 

(70,128

)

 

(308,297

)

 

(287,731

)

Consolidated

$

238,108

 

 

$

334,380

 

 

$

107,696

 

 

$

1,147,512

 

(a)

Includes restructuring, integration, and other charges of $16.4 million and $79.0 million for the fourth quarter and year ended December 31, 2019 and $11.1 million and $49.3 million for the fourth quarter and year ended December 31, 2018, respectively. Also included is a net loss on disposition of $1.0 million and $1.9 million for the fourth quarter and year ended December 31, 2019 and $3.6 million for the year ended December 31, 2018, respectively.

 

NON-GAAP SEGMENT RECONCILIATION

 

 

 

 

 

 

 

Quarter Ended

 

Year Ended

 

 

December 31,

2019

 

December 31,

2018

 

December 31,

2019

 

December 31,

2018

Global components operating income, as reported

$

149,794

 

 

$

252,313

 

 

$

(10,199

)

 

$

1,007,638

 

Intangible assets amortization expense (b)

7,135

 

 

6,600

 

 

26,594

 

 

24,226

 

Impairments (b)

 

 

 

 

623,796

 

 

 

Impact of wind-down (b)

10,912

 

 

5,733

 

 

161,664

 

 

8,846

 

AFS notes receivable reserve

2,850

 

 

 

 

18,037

 

 

 

Digital inventory reserve

1,117

 

 

 

 

22,332

 

 

 

Global components operating income, as adjusted

$

171,808

 

 

$

264,646

 

 

$

842,224

 

 

$

1,040,710

 

Global ECS operating income, as reported

$

148,711

 

 

$

152,195

 

 

$

426,192

 

 

$

427,605

 

Intangible assets amortization expense

7,176

 

 

2,893

 

 

15,789

 

 

13,989

 

Global ECS operating income, as adjusted

$

155,887

 

 

$

155,088

 

 

$

441,981

 

 

$

441,594

 

(b)

Restructuring, integration, and other charges, identifiable intangible asset amortization, loss on disposition of businesses, net, and impairments related to the personal computer and mobility asset disposition business are included in “impact of wind down” above.