Arrow Electronics Reports Third-Quarter 2019 Results

-- Cash Provided by Operating Activities of $287 Million --

-- Repurchased $100 Million of Common Stock --

CENTENNIAL, Colo.--()--Arrow Electronics, Inc. (NYSE:ARW) today reported third-quarter 2019 sales of $7.08 billion, a decrease of 6 percent from sales of $7.49 billion in the third quarter of 2018. Third-quarter sales, as adjusted, decreased 3 percent year over year. Third-quarter net income of $92 million, or $1.10 per share on a diluted basis, compared with net income of $177 million, or $1.99 per share on a diluted basis, in the third quarter of 2018. Excluding certain items1, net income would have been $155 million, or $1.86 per share on a diluted basis, in the third quarter of 2019, compared with net income of $191 million, or $2.15 per share on a diluted basis, in the third quarter of 2018. In the third quarter of 2019, changes in foreign currencies negatively impacted growth by approximately $103 million or 1 percent on sales and $.04 or 2 percent on earnings per share on a diluted basis compared to the third quarter of 2018.

Global components third-quarter sales of $5.05 billion decreased 6 percent year over year. Sales, as adjusted, decreased 4 percent year over year. Asia-Pacific components sales increased 4 percent year over year. Sales in the region, as adjusted, increased 5 percent year over year. Europe components sales decreased 7 percent year over year. Sales in the region, as adjusted, decreased 2 percent year over year. Americas components sales decreased 16 percent year over year. Sales in the region, as adjusted, decreased 15 percent year over year. Global components third-quarter operating income was $172 million. Third-quarter operating income, excluding amortization of intangibles expense, as adjusted, was $217 million.

“Arrow’s focused execution contributed to our bottom-line performance in the third quarter, despite continued challenging demand conditions in the Americas and Europe,” said Michael J. Long, chairman, president, and chief executive officer. “By harnessing our internal efficiencies, we were able to realize significant savings to reinvest in our omnichannel engineering services, and strengthen our position as a consistent, reliable provider of design, engineering and supply chain solutions. I am confident that our diversified business model and forward-looking approach to investing will not only allow us to emerge from the current market correction in a position of strength, but also to generate enhanced profits and returns well into the future.”

Global enterprise computing solutions third-quarter sales of $2.03 billion decreased 4 percent year over year. Sales, as adjusted, decreased 2 percent year over year. Europe enterprise computing solutions sales decreased 6 percent year over year. Sales in the region, as adjusted, were flat year over year. Americas enterprise computing solutions sales decreased 3 percent year over year. Sales in the region, as adjusted, decreased 2 percent year over year. Global enterprise computing solutions third-quarter operating income was $92 million. Third-quarter operating income, excluding amortization of intangibles expense, as adjusted, was $95 million.

“We are pleased that enterprise computing solutions’ execution in the marketplace drove 12 percent operating income growth in the third quarter. Operating income growth demonstrates our success in selling advanced, higher-value solutions utilizing next-generation software and hardware architectures,” said Mr. Long.

“Third-quarter cash provided by operating activities was $287 million. Our robust cash flow was bolstered by our disciplined working capital management, continued healthy profits from our leading positions in the markets we serve, and efficiencies from our previously announced cost optimization program,” said Chris Stansbury, senior vice president and chief financial officer. “We remain committed to returning excess cash to shareholders. Accordingly, Arrow returned approximately $100 million to shareholders through our stock repurchase program during the third quarter. At the end of the quarter, we had approximately $439 million of remaining authorization under our share repurchase program.”

GUIDANCE

Arrow Electronics’ fourth-quarter outlook excludes the financial results from the PC and mobility asset disposition business.

“As we look to the fourth quarter, we expect total sales to range between $7.125 billion and $7.525 billion, with global components sales between $4.625 billion and $4.825 billion, and global enterprise computing solutions sales between $2.5 billion and $2.7 billion. We expect earnings per share on a diluted basis to range from $1.82 to $1.98, and earnings per share on a diluted basis, excluding certain items1, to range from $2.10 to $2.26 per share. Our guidance assumes interest and other expense will total approximately $52 million, an average tax rate at the low end of the updated long-term range of 23 percent to 25 percent, and average diluted shares outstanding of approximately 83 million. We are expecting the average USD-to-Euro exchange rate for the fourth quarter to be approximately $1.10 to €1. We estimate changes in foreign currencies will have negative impacts on growth of approximately $100 million, or 1 percent on sales, and $.05, or 2 percent, on earnings per share on a diluted basis compared to the fourth quarter of 2018,” said Mr. Stansbury.

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 200,000 leading technology manufacturers and service providers. With 2018 sales of $30 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, the company's implementation of its new enterprise resource planning system, 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, the effects of additional actions taken to become more efficient or lower costs, risks related to the integration of acquired businesses, changes in legal and regulatory matters, and the company’s ability to generate additional cash flow. 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, 2018.

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 expense on a non-GAAP basis 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 recoveries” and “AFS inventory write-downs and recoveries” respectively). Operating income is adjusted to exclude identifiable intangible asset amortization, restructuring, integration, and other charges, and loss on disposition of businesses, net, AFS notes receivable reserves and recoveries and inventory write-downs and recoveries, digital inventory write-downs and recoveries, the impact of non-cash charges related to goodwill, trade names, and property, plant and equipment, and the impact of wind down. Net income attributable to shareholders, and net income per basic and diluted share are adjusted to exclude identifiable intangible asset amortization, restructuring, integration, and other charges, and loss on disposition of businesses, net, AFS notes receivable reserves and recoveries and inventory write-downs and recoveries, digital inventory write-downs and recoveries, the impact of non-cash charges related to goodwill, trade names, and property, plant and equipment, the impact of wind down, and the impact of U.S. tax reform. 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)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Nine Months Ended

 

 

September 28,
2019

 

September 29,
2018

 

September 28,
2019

 

September 29,
2018

 

 

 

 

 

 

 

 

 

Sales

 

$

7,078,118

 

 

$

7,490,445

 

 

$

21,578,657

 

 

$

21,758,586

 

Cost of sales

 

6,279,277

 

 

6,566,667

 

 

19,103,219

 

 

19,033,044

 

Gross profit

 

798,841

 

 

923,778

 

 

2,475,438

 

 

2,725,542

 

Operating expenses:

 

 

 

 

 

 

 

 

Selling, general, and administrative expenses

 

522,446

 

 

575,751

 

 

1,677,734

 

 

1,719,108

 

Depreciation and amortization

 

45,231

 

 

45,532

 

 

139,739

 

 

139,201

 

Loss on disposition of businesses, net

 

14,573

 

 

2,042

 

 

15,439

 

 

3,604

 

Impairments

 

253

 

 

 

 

698,246

 

 

 

Restructuring, integration, and other charges

 

43,120

 

 

10,143

 

 

74,692

 

 

50,497

 

 

 

625,623

 

 

633,468

 

 

2,605,850

 

 

1,912,410

 

Operating income (loss)

 

173,218

 

 

290,310

 

 

(130,412

)

 

813,132

 

Equity in losses of affiliated companies

 

(1,070

)

 

(652

)

 

(2,155

)

 

(808

)

Gain (loss) on investments, net

 

1,126

 

 

1,070

 

 

7,864

 

 

(3,945

)

Employee benefit plan expense

 

(1,071

)

 

(1,296

)

 

(3,349

)

 

(3,784

)

Interest and other financing expense, net

 

(49,882

)

 

(54,205

)

 

(153,426

)

 

(160,187

)

Income (loss) before income taxes

 

122,321

 

 

235,227

 

 

(281,478

)

 

644,408

 

Provision for income taxes

 

29,340

 

 

57,054

 

 

30,878

 

 

155,325

 

Consolidated net income (loss)

 

92,981

 

 

178,173

 

 

(312,356

)

 

489,083

 

Noncontrolling interests

 

850

 

 

1,640

 

 

3,744

 

 

3,541

 

Net income (loss) attributable to shareholders

 

$

92,131

 

 

$

176,533

 

 

$

(316,100

)

 

$

485,542

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

Basic

 

$

1.11

 

 

$

2.02

 

 

$

(3.75

)

 

$

5.53

 

Diluted

 

$

1.10

 

 

$

1.99

 

 

$

(3.75

)

 

$

5.47

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

82,711

 

 

87,602

 

 

84,246

 

 

87,785

 

Diluted

 

83,397

 

 

88,608

 

 

84,246

 

 

88,759

 

 

ARROW ELECTRONICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands except par value)

(Unaudited)

 

 

 

 

 

September 28, 2019

 

December 31, 2018

 

 

 

 

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

262,254

 

 

$

509,327

 

Accounts receivable, net

7,841,851

 

 

8,945,463

 

Inventories

3,503,481

 

 

3,878,678

 

Other current assets

232,062

 

 

274,832

 

Total current assets

11,839,648

 

 

13,608,300

 

Property, plant, and equipment, at cost:

 

 

 

Land

7,746

 

 

7,882

 

Buildings and improvements

164,544

 

 

158,712

 

Machinery and equipment

1,438,600

 

 

1,425,933

 

 

1,610,890

 

 

1,592,527

 

Less: Accumulated depreciation and amortization

(805,626

)

 

(767,827

)

Property, plant, and equipment, net

805,264

 

 

824,700

 

Investments in affiliated companies

85,399

 

 

83,693

 

Intangible assets, net

277,720

 

 

372,644

 

Goodwill

2,041,073

 

 

2,624,690

 

Other assets

640,607

 

 

270,418

 

Total assets

$

15,689,711

 

 

$

17,784,445

 

LIABILITIES AND EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

6,181,408

 

 

$

7,631,879

 

Accrued expenses

833,390

 

 

912,292

 

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

356,843

 

 

246,257

 

Total current liabilities

7,371,641

 

 

8,790,428

 

Long-term debt

2,942,293

 

 

3,239,115

 

Other liabilities

631,530

 

 

378,536

 

Commitments and contingencies

 

 

 

Equity:

 

 

 

Shareholders’ equity:

 

 

 

Common stock, par value $1:

 

 

 

Authorized - 160,000 shares in both 2019 and 2018, respectively

 

 

 

Issued - 125,424 shares in both 2019 and 2018, respectively

125,424

 

 

125,424

 

Capital in excess of par value

1,143,830

 

 

1,135,934

 

Treasury stock (43,660 and 40,233 shares in 2019 and 2018, respectively), at cost

(2,237,884

)

 

(1,972,254

)

Retained earnings

6,019,235

 

 

6,335,335

 

Accumulated other comprehensive loss

(359,786

)

 

(299,449

)

Total shareholders’ equity

4,690,819

 

 

5,324,990

 

Noncontrolling interests

53,428

 

 

51,376

 

Total equity

4,744,247

 

 

5,376,366

 

Total liabilities and equity

$

15,689,711

 

 

$

17,784,445

 

 

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Quarter Ended

 

September 28, 2019

 

September 29, 2018

Cash flows from operating activities:

 

 

 

Consolidated net income (loss)

$

92,981

 

 

$

178,173

 

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

 

 

 

Depreciation and amortization

45,231

 

 

45,532

 

Amortization of stock-based compensation

7,120

 

 

12,442

 

Equity in losses of affiliated companies

1,070

 

 

652

 

Deferred income taxes

6,362

 

 

5,063

 

Impairments

253

 

 

 

Loss on disposition of businesses, net

14,573

 

 

2,042

 

(Gain) loss on investments, net

(884

)

 

(1,070

)

Other

(276

)

 

2,011

 

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

 

 

 

Accounts receivable

21,355

 

 

(180,770

)

Inventories

64,468

 

 

43,867

 

Accounts payable

(3,013

)

 

412,422

 

Accrued expenses

270

 

 

15,693

 

Other assets and liabilities

37,264

 

 

(41,652

)

Net cash provided by operating activities

286,774

 

 

494,405

 

Cash flows from investing activities:

 

 

 

Cash paid on disposition of businesses

(10,785

)

 

(2,278

)

Acquisition of property, plant, and equipment

(31,444

)

 

(38,346

)

Other

(8,495

)

 

(3,000

)

Net cash used for investing activities

(50,724

)

 

(43,624

)

Cash flows from financing activities:

 

 

 

Change in short-term and other borrowings

80,227

 

 

44,545

 

Repayments of long-term bank borrowings, net

(215,937

)

 

(338,579

)

Proceeds from exercise of stock options

2,088

 

 

1,934

 

Repurchases of common stock

(103,270

)

 

(20,622

)

Other

 

 

(1,018

)

Net cash used for financing activities

(236,892

)

 

(313,740

)

Effect of exchange rate changes on cash

(6,893

)

 

6,631

 

Net increase (decrease) in cash and cash equivalents

(7,735

)

 

143,672

 

Cash and cash equivalents at beginning of period

269,989

 

 

330,519

 

Cash and cash equivalents at end of period

$

262,254

 

 

$

474,191

 

 

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

Nine Months Ended

 

 

September 28, 2019

 

September 29, 2018

Cash flows from operating activities:

 

 

 

Consolidated net income (loss)

$

(312,356

)

 

$

489,083

 

Adjustments to reconcile consolidated net income (loss) to net cash provided by operations:

 

 

 

Depreciation and amortization

139,739

 

 

139,201

 

Amortization of stock-based compensation

34,749

 

 

38,104

 

Equity in losses of affiliated companies

2,155

 

 

808

 

Deferred income taxes

(65,484

)

 

17,769

 

Impairments

698,246

 

 

 

Loss on disposition of businesses, net

15,439

 

 

3,604

 

(Gain) loss on investments, net

(7,622

)

 

3,945

 

Other

10,814

 

 

6,056

 

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

 

 

 

Accounts receivable

916,908

 

 

(254,417

)

Inventories

342,610

 

 

(456,050

)

Accounts payable

(1,349,189

)

 

171,697

 

Accrued expenses

(71,124

)

 

15,177

 

Other assets and liabilities

8,308

 

 

(165,421

)

Net cash provided by operating activities

363,193

 

 

9,556

 

Cash flows from investing activities:

 

 

 

Cash consideration paid for acquired businesses, net of cash acquired

 

 

(331,563

)

Proceeds from (cash paid on) disposition of a businesses

(1,325

)

 

32,013

 

Acquisition of property, plant, and equipment

(113,080

)

 

(104,897

)

Other

(5,555

)

 

(11,000

)

Net cash used for investing activities

(119,960

)

 

(415,447

)

Cash flows from financing activities:

 

 

 

Change in short-term and other borrowings

(93,129

)

 

104,158

 

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

(96,960

)

 

420,755

 

Redemption of notes

 

 

(300,000

)

Proceeds from exercise of stock options

11,710

 

 

7,919

 

Repurchases of common stock

(304,194

)

 

(93,173

)

Other

(147

)

 

(1,174

)

Net cash provided by (used for) financing activities

(482,720

)

 

138,485

 

Effect of exchange rate changes on cash

(7,586

)

 

11,514

 

Net decrease in cash and cash equivalents

(247,073

)

 

(255,892

)

Cash and cash equivalents at beginning of period

509,327

 

 

730,083

 

Cash and cash equivalents at end of period

$

262,254

 

 

$

474,191

 

 

ARROW ELECTRONICS, INC.

NON-GAAP SALES RECONCILIATION

(In thousands)

(Unaudited)

 

 

Quarter Ended

 

 

 

 

September 28,
2019

 

September 29,
2018

 

% Change

 

 

 

 

 

 

Consolidated sales, as reported

$

7,078,118

 

 

$

7,490,445

 

 

(5.5

)%

Impact of changes in foreign currencies

 

 

(103,498

)

 

 

Impact of dispositions and wind down

(60,130

)

 

(116,316

)

 

 

Consolidated sales, as adjusted

$

7,017,988

 

 

$

7,270,631

 

 

(3.5

)%

 

 

 

 

 

 

Global components sales, as reported

$

5,048,880

 

 

$

5,381,078

 

 

(6.2

)%

Impact of changes in foreign currencies

 

 

(67,659

)

 

 

Impact of dispositions and wind down

(60,130

)

 

(104,958

)

 

 

Global components sales, as adjusted

$

4,988,750

 

 

$

5,208,461

 

 

(4.2

)%

 

 

 

 

 

 

Americas Components sales, as reported

$

1,738,710

 

 

$

2,060,920

 

 

(15.6

)%

Impact of changes in foreign currencies

 

 

(145

)

 

 

Impact of dispositions and wind down

(46,998

)

 

(79,598

)

 

 

Americas Components sales, as adjusted

$

1,691,712

 

 

$

1,981,177

 

 

(14.6

)%

 

 

 

 

 

 

Europe components sales, as reported

$

1,304,109

 

 

$

1,399,435

 

 

(6.8

)%

Impact of changes in foreign currencies

 

 

(60,123

)

 

 

Impact of dispositions and wind down

(13,132

)

 

(25,360

)

 

 

Europe components sales, as adjusted

$

1,290,977

 

 

$

1,313,952

 

 

(1.7

)%

 

 

 

 

 

 

Asia components sales, as reported

$

2,006,061

 

 

$

1,920,723

 

 

4.4

%

Impact of changes in foreign currencies

 

 

(7,391

)

 

 

Asia components sales, as adjusted

$

2,006,061

 

 

$

1,913,332

 

 

4.8

%

 

 

 

 

 

 

Global ECS sales, as reported

$

2,029,238

 

 

$

2,109,367

 

 

(3.8

)%

Impact of changes in foreign currencies

 

 

(35,839

)

 

 

Impact of dispositions

 

 

(11,358

)

 

 

Global ECS sales, as adjusted

$

2,029,238

 

 

$

2,062,170

 

 

(1.6

)%

 

 

 

 

 

 

Europe ECS sales, as reported

$

610,324

 

 

$

651,648

 

 

(6.3

)%

Impact of changes in foreign currencies

 

 

(30,579

)

 

 

Impact of dispositions

 

 

(11,358

)

 

 

Europe ECS sales, as adjusted

$

610,324

 

 

$

609,711

 

 

0.1

%

 

 

 

 

 

 

Americas ECS sales, as reported

$

1,418,914

 

 

$

1,457,719

 

 

(2.7

)%

Impact of changes in foreign currencies

 

 

(5,260

)

 

 

Americas ECS sales, as adjusted

$

1,418,914

 

 

$

1,452,459

 

 

(2.3

)%

 

ARROW ELECTRONICS, INC.

NON-GAAP SALES RECONCILIATION

(In thousands)

(Unaudited)

 

 

Nine Months Ended

 

 

 

 

September 28,
2019

 

September 29,
2018

 

% Change

 

 

 

 

 

 

Consolidated sales, as reported

$

21,578,657

 

 

$

21,758,586

 

 

(0.8

)%

Impact of changes in foreign currencies

 

 

(447,833

)

 

 

Impact of dispositions and wind down

(232,239

)

 

(377,924

)

 

 

Consolidated sales, as adjusted

$

21,346,418

 

 

$

20,932,829

 

 

2.0

%

 

 

 

 

 

 

Global components sales, as reported

$

15,511,742

 

 

$

15,595,374

 

 

(0.5

)%

Impact of changes in foreign currencies

 

 

(297,220

)

 

 

Impact of dispositions and wind down

(221,098

)

 

(312,742

)

 

 

Global components sales, as adjusted

$

15,290,644

 

 

$

14,985,412

 

 

2.0

%

 

 

 

 

 

 

Americas Components sales, as reported

$

5,522,538

 

 

$

5,795,500

 

 

(4.7

)%

Impact of changes in foreign currencies

 

 

(4,284

)

 

 

Impact of dispositions and wind down

(170,724

)

 

(231,952

)

 

 

Americas Components sales, as adjusted

$

5,351,814

 

 

$

5,559,264

 

 

(3.7

)%

 

 

 

 

 

 

Europe components sales, as reported

$

4,223,363

 

 

$

4,325,793

 

 

(2.4

)%

Impact of changes in foreign currencies

 

 

(256,237

)

 

 

Impact of dispositions and wind down

(50,374

)

 

(80,790

)

 

 

Europe components sales, as adjusted

$

4,172,989

 

 

$

3,988,766

 

 

4.6

%

 

 

 

 

 

 

Asia components sales, as reported

$

5,765,841

 

 

$

5,474,081

 

 

5.3

%

Impact of changes in foreign currencies

 

 

(36,699

)

 

 

Asia components sales, as adjusted

$

5,765,841

 

 

$

5,437,382

 

 

6.0

%

 

 

 

 

 

 

Global ECS sales, as reported

$

6,066,915

 

 

$

6,163,212

 

 

(1.6

)%

Impact of changes in foreign currencies

 

 

(150,613

)

 

 

Impact of dispositions

(11,141

)

 

(65,182

)

 

 

Global ECS sales, as adjusted

$

6,055,774

 

 

$

5,947,417

 

 

1.8

%

 

 

 

 

 

 

Europe ECS sales, as reported

$

2,074,638

 

 

$

2,123,048

 

 

(2.3

)%

Impact of changes in foreign currencies

 

 

(124,634

)

 

 

Impact of dispositions

(11,141

)

 

(37,689

)

 

 

Europe ECS sales, as adjusted

$

2,063,497

 

 

$

1,960,725

 

 

5.2

%

 

 

 

 

 

 

Americas ECS sales, as reported

$

3,992,277

 

 

$

4,040,164

 

 

(1.2

)%

Impact of changes in foreign currencies

 

 

(25,979

)

 

 

Impact of dispositions

 

 

(27,493

)

 

 

Americas ECS sales, as adjusted

$

3,992,277

 

 

$

3,986,692

 

 

0.1

%

 

ARROW ELECTRONICS, INC.

NON-GAAP EARNINGS RECONCILIATION

(In thousands except per share data)

(Unaudited)

 

Three months ended September 28, 2019

 

 

Reported
GAAP
measure

 

Intangible
amortization
expense

 

Restructuring
& Integration
charges

 

AFS Write
Downs

 

Digital Write
Downs

 

Impairments

 

Impact of
Wind Down(6)

 

Other(1)

 

Non-GAAP
measure

Sales

$

7,078,118

 

$

 

$

 

$

 

$

 

$

 

$

(60,130

)

$

 

$

7,017,988

 

Gross Profit

798,841

 

 

 

 

1,101

 

 

(3,541

)

 

796,401

 

Operating income

173,218

 

10,265

 

31,087

 

(664

)

1,101

 

711

 

36,917

 

 

252,635

 

Income before income taxes

122,321

 

10,265

 

31,087

 

(664

)

1,101

 

711

 

36,842

 

(1,126

)

200,537

 

Provision for income taxes

29,340

 

2,860

 

8,922

 

(178

)

272

 

 

3,753

 

(249

)

44,720

 

Consolidated net income

92,981

 

7,405

 

22,165

 

(486

)

829

 

711

 

33,089

 

(877

)

155,817

 

Noncontrolling interests

850

 

138

 

 

 

 

 

 

 

988

 

Net income attributable to shareholders

$

92,131

 

$

7,267

 

$

22,165

 

$

(486

)

$

829

 

$

711

 

$

33,089

 

$

(877

)

$

154,829

 

Net income per diluted share

$

1.10

 

$

0.09

 

$

0.27

 

$

(0.01

)

$

0.01

 

$

0.01

 

$

0.40

 

$

(0.01

)

$

1.86

 

Effective tax rate

24.0

%

 

 

 

 

 

 

 

22.3

%

Three months ended September 29, 2018

 

 

Reported
GAAP
measure

 

Intangible
amortization
expense

 

Restructuring
& Integration
charges

 

AFS Write
Downs

 

Digital Write
Downs

 

Impairments

 

Impact of
Wind Down(6)

 

Other(2)

 

Non-GAAP
measure

Sales

$

7,490,445

 

$

 

$

 

$

 

$

 

$

 

$

(104,958

)

$

 

$

7,385,487

 

Gross Profit

923,778

 

 

 

 

 

 

(17,397

)

 

906,381

 

Operating income

290,310

 

8,845

 

9,611

 

 

 

 

611

 

2,042

 

311,419

 

Income before income taxes

235,227

 

8,845

 

9,611

 

 

 

 

633

 

972

 

255,288

 

Provision for income taxes

57,054

 

2,539

 

2,454

 

 

 

 

304

 

240

 

62,591

 

Consolidated net income

178,173

 

6,306

 

7,157

 

 

 

 

329

 

732

 

192,697

 

Noncontrolling interests

1,640

 

145

 

 

 

 

 

 

 

1,785

 

Net income attributable to shareholders

$

176,533

 

$

6,161

 

$

7,157

 

$

 

$

 

$

 

$

329

 

$

732

 

$

190,912

 

Net income per diluted share

$

1.99

 

$

0.07

 

$

0.08

 

$

 

$

 

$

 

$

 

$

0.01

 

$

2.15

 

Effective tax rate

24.3

%

 

 

 

 

 

 

 

24.5

%

 

ARROW ELECTRONICS, INC.

NON-GAAP EARNINGS RECONCILIATION

(In thousands except per share data)

(Unaudited)

 

Nine months ended September 28, 2019

 

 

Reported
GAAP
measure

 

Intangible
amortization
expense

 

Restructuring
& Integration
charges

 

AFS Write
Downs

 

Digital Write
Downs

 

Impairments(4)

 

Impact of
Wind Down(6)

 

Other(3)

 

Non-GAAP
measure

Sales

$

21,578,657

 

$

 

$

 

$

 

$

 

$

 

$

(221,098

)

$

 

$

21,357,559

 

Gross Profit

2,475,438

 

 

 

1,868

 

21,215

 

 

(7,363

)

 

2,491,158

 

Operating income

(130,412

)

28,072

 

62,079

 

15,187

 

21,215

 

623,796

 

151,332

 

866

 

772,135

 

Income before income taxes

(281,478

)

28,072

 

62,079

 

15,187

 

21,215

 

623,796

 

151,414

 

(6,998

)

613,287

 

Provision for income taxes

30,878

 

7,863

 

16,498

 

3,732

 

5,234

 

64,246

 

31,011

 

(5,452

)

154,010

 

Consolidated net income

(312,356

)

20,209

 

45,581

 

11,455

 

15,981

 

559,550

 

120,403

 

(1,546

)

459,277

 

Noncontrolling interests

3,744

 

420

 

 

 

 

 

 

 

4,164

 

Net income attributable to shareholders

$

(316,100

)

$

19,789

 

$

45,581

 

$

11,455

 

$

15,981

 

$

559,550

 

$

120,403

 

$

(1,546

)

$

455,113

 

Net income per diluted share(5)

$

(3.75

)

$

0.23

 

$

0.54

 

$

0.14

 

$

0.19

 

$

6.64

 

$

1.43

 

$

(0.02

)

$

5.36

 

Effective tax rate

(11.0

)%

 

 

 

 

 

 

 

25.1

%

 

 

 

 

 

 

 

 

 

 

Nine months ended September 29, 2018

 

 

Reported
GAAP
measure

 

Intangible
amortization
expense

 

Restructuring
& Integration
charges

 

AFS Write
Downs

 

Digital Write
Downs

 

Impairments

 

Impact of
Wind Down(6)

 

Other(2)

 

Non-GAAP
measure

Sales

$

21,758,586

 

$

 

$

 

$

 

$

 

$

 

$

(312,742

)

$

 

$

21,445,844

 

Gross Profit

2,725,542

 

 

 

 

 

 

(54,144

)

 

2,671,398

 

Operating income

813,132

 

28,722

 

38,171

 

 

 

 

15,439

 

3,604

 

899,068

 

Income before income taxes

644,408

 

28,722

 

38,171

 

 

 

 

15,561

 

7,549

 

734,411

 

Provision for income taxes

155,325

 

8,010

 

10,029

 

 

 

 

4,396

 

1,653

 

179,413

 

Consolidated net income

489,083

 

20,712

 

28,142

 

 

 

 

11,165

 

5,896

 

554,998

 

Noncontrolling interests

3,541

 

447

 

 

 

 

 

 

 

3,988

 

Net income attributable to shareholders

$

485,542

 

$

20,265

 

$

28,142

 

$

 

$

 

$

 

$

11,165

 

$

5,896

 

$

551,010

 

Net income per diluted share(5)

$

5.47

 

$

0.23

 

$

0.32

 

$

 

$

 

$

 

$

0.13

 

$

0.07

 

$

6.21

 

Effective tax rate

24.1

%

 

 

 

 

 

 

 

24.4

%

(1)

Other includes gain (loss) on investments, net

(2)

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

(3)

Other includes loss on disposition of businesses, net, gain (loss) on investments, net, and impact of tax act.

(4)

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

(5)

For the nine months ended September 28, 2019, the non-GAAP net income per diluted share calculation includes 727 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, and impairments related to the personal computer and mobility asset disposition business are included in “impact of wind down” above.

ARROW ELECTRONICS, INC.

SEGMENT INFORMATION

(In thousands)

(Unaudited)

 

 

 

 

 

Quarter Ended

 

Nine Months Ended

 

September 28,
2019

 

September 29,
2018

 

September 28,
2019

 

September 29,
2018

Sales:

 

 

 

 

 

 

 

Global components

$

5,048,880

 

 

$

5,381,078

 

 

$

15,511,742

 

 

$

15,595,374

 

Global ECS

2,029,238

 

 

2,109,367

 

 

6,066,915

 

 

6,163,212

 

Consolidated

$

7,078,118

 

 

$

7,490,445

 

 

$

21,578,657

 

 

$

21,758,586

 

Operating income (loss):

 

 

 

 

 

 

 

Global components

$

171,591

 

 

$

271,939

 

 

$

(159,993

)

 

$

755,325

 

Global ECS

92,375

 

 

82,187

 

 

277,481

 

 

275,410

 

Corporate (a)

(90,748

)

 

(63,816

)

 

(247,900

)

 

(217,603

)

Consolidated

$

173,218

 

 

$

290,310

 

 

$

(130,412

)

 

$

813,132

 

(a)

Includes restructuring, integration, and other charges of $31,086 and $62,658 for the third quarter and first nine months of 2019 and $10,143 and $50,497 for the third quarter and first nine months of 2018, respectively. Also includes a loss on disposition of business of $866 for the first nine months of 2019.

NON-GAAP SEGMENT RECONCILIATION

 

 

 

 

 

 

 

Quarter Ended

 

Nine Months Ended

 

 

September 28,
2019

 

September 29,
2018

 

September 28,
2019

 

September 29,
2018

 

 

 

 

 

 

 

 

Global components operating income, as reported

$

171,591

 

 

$

271,939

 

 

$

(159,993

)

 

$

755,325

 

Intangible assets amortization expense (b)

7,398

 

 

5,931

 

 

19,458

 

 

17,626

 

Impairments (b)

711

 

 

 

 

623,796

 

 

 

Impact of wind-down (b)

36,917

 

 

79

 

 

150,752

 

 

3,113

 

AFS notes receivable reserve

(664

)

 

 

 

15,187

 

 

 

Digital inventory reserve

1,101

 

 

 

 

21,215

 

 

 

Global components operating income, as adjusted

$

217,054

 

 

$

277,949

 

 

$

670,415

 

 

$

776,064

 

 

 

 

 

 

 

 

 

Global ECS operating income, as reported

$

92,375

 

 

$

82,187

 

 

$

277,481

 

 

$

275,410

 

Intangible assets amortization expense

2,866

 

 

2,914

 

 

8,613

 

 

11,096

 

Global ECS operating income, as adjusted

$

95,241

 

 

$

85,101

 

 

$

286,094

 

 

$

286,506

 

(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.

 

Contacts

Steven O’Brien
Vice President, Investor Relations
303-824-4544

Media Contact:
John Hourigan
Vice President, Global Communications
303-824-4586

Contacts

Steven O’Brien
Vice President, Investor Relations
303-824-4544

Media Contact:
John Hourigan
Vice President, Global Communications
303-824-4586