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Arrow Electronics Reports Second-Quarter 2020 Results

·16 min read

-- Cash Provided by Operating Activities of $418 Million --

-- Announces Additional $600 Million Share Repurchase Program --

Arrow Electronics, Inc. (NYSE:ARW) today reported second-quarter 2020 sales of $6.61 billion, a decrease of 10 percent from sales of $7.34 billion in the second quarter of 2019. Second-quarter sales, as adjusted, decreased 8 percent year over year. Second-quarter net income of $133 million, or $1.68 per share on a diluted basis, compared with a net loss of $(549) million, or $(6.48) per share on a diluted basis, in the second quarter of 2019. Excluding certain items1, net income, as adjusted, was $126 million, or $1.59 per share on a diluted basis, in the second quarter of 2020, compared with net income, as adjusted, of $137 million, or $1.60 per share on a diluted basis, in the second quarter of 2019.

"Arrow has again proven to be a source of reliability and stability for suppliers and customers amidst supply chain disruptions and an uncertain economic backdrop. Our efforts to expand our engineering and design expertise both prior to and during the COVID-19 pandemic are helping customers quickly get back to business," said Michael J. Long, chairman, president, and chief executive officer. "In turn, our vital position in the technology ecosystem, and our ever-expanding capabilities drove results above our expectations."

Global components second-quarter sales of $4.72 billion decreased 10 percent year over year. Sales, as adjusted, decreased 8 percent year over year. Asia-Pacific components sales increased 7 percent year over year. Europe components sales decreased 21 percent year over year. Sales in the region, as adjusted, decreased 18 percent year over year. Americas components sales decreased 21 percent year over year. Sales in the region, as adjusted, decreased 18 percent year over year. Global components second-quarter operating income was $182 million. Second-quarter operating income, as adjusted, was $177 million.

"Arrow is harnessing data from billions of transactions with thousands of customers to sell and deliver the products and solutions that our customers want when they need them," continued Mr. Long. "Sales were above the high end of our expectation driven by Asia that has seen a remarkable rebound in manufacturing activity due to earlier pandemic onset and recovery."

Global enterprise computing solutions second-quarter sales of $1.89 billion decreased 9 percent year over year. Sales, as adjusted, decreased 8 percent year over year. Europe enterprise computing solutions sales decreased 6 percent year over year. Sales in the region, as adjusted, decreased 4 percent year over year. Americas enterprise computing solutions sales decreased 11 percent year over year. Global enterprise computing solutions second-quarter operating income was $73 million. Second-quarter operating income, as adjusted, was $80 million.

"In terms of product segments, demand remains strong for the software, cloud, and security solutions needed to enable business continuity and remote working," said Mr. Long. "We continue to evolve our portfolio to areas with greater long-term growth potential."

"With financial returns improving and the effective management of our balance sheet and cash flow, we enhanced our commitment to returning excess cash to shareholders through a new $600 million repurchase authorization," said Chris Stansbury, senior vice president and chief financial officer. "Our liquidity position remains the best in our company’s history and improved further, with more than $3.2 billion of undrawn committed borrowing capacity in addition to cash on hand."

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

THIRD-QUARTER 2020 OUTLOOK

  • Consolidated sales of $6.325 billion to $6.925 billion, with global components sales of $4.675 billion to $4.975 billion, and global enterprise computing solutions sales of $1.65 billion to $1.95 billion

  • Earnings per share on a diluted basis of $1.34 to $1.50, and earnings per share on a diluted basis, excluding certain items1 of $1.54 to $1.70 per share

  • Average tax rate of approximately 24 percent compared to the long-term range of 23 to 25 percent

  • Average diluted shares outstanding of 78.5 million

  • Interest expense of approximately $33 million

Third-Quarter 2020 Outlook

Reported GAAP
measure

Intangible amortization
expense

Restructuring &
integration charges

Non-GAAP measure

Net income per diluted share

$1.34 - $1.50

$0.10

$0.10

$1.54 - $1.70

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.

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: potential adverse effects of the ongoing global coronavirus pandemic, including actions taken to contain or treat the coronavirus, industry conditions, changes in product supply, pricing and customer demand, competition, other vagaries in the global components and global ECS markets, changes in relationships with key suppliers, increased profit margin pressure, changes in legal and regulatory matters, non-compliance with certain regulations, such as export, anti-trust, 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 the company's Annual Report on Form 10-K for the year ended December 31, 2019 and the risk factor update in Form 10-Q for the quarter ended June 27, 2020. 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.

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 recoveries" 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, and net income per basic and diluted share are 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, net gains and losses on investments, the impact of non-cash charges related to goodwill, trade names, and long-lived assets, certain tax adjustments, and the impact of wind down. 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

Six Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Sales

$

6,606,494

$

7,344,548

$

12,987,911

$

14,500,539

Cost of sales

5,856,031

6,529,639

11,509,057

12,823,942

Gross profit

750,463

814,909

1,478,854

1,676,597

Operating expenses:

Selling, general, and administrative expenses

501,470

599,212

1,035,309

1,155,288

Depreciation and amortization

46,812

46,982

93,922

94,508

Loss on disposition of businesses, net

866

Impairments

4,918

697,993

4,918

697,993

Restructuring, integration, and other charges

650

19,912

9,788

31,572

553,850

1,364,099

1,143,937

1,980,227

Operating income (loss)

196,613

(549,190

)

334,917

(303,630

)

Equity in earnings (losses) of affiliated companies

(283

)

382

247

(1,085

)

Gain (loss) on investments, net

10,901

1,390

(5,909

)

6,738

Employee benefit plan expense

(1,173

)

(1,139

)

(2,282

)

(2,278

)

Interest and other financing expense, net

(31,867

)

(51,563

)

(75,135

)

(103,544

)

Income (loss) before income taxes

174,191

(600,120

)

251,838

(403,799

)

Provision (benefit) for income taxes

40,854

(52,369

)

68,746

1,538

Consolidated net income (loss)

133,337

(547,751

)

183,092

(405,337

)

Noncontrolling interests

533

1,215

785

2,894

Net income (loss) attributable to shareholders

$

132,804

$

(548,966

)

$

182,307

$

(408,231

)

Net income (loss) per share:

Basic

$

1.69

$

(6.48

)

$

2.29

$

(4.80

)

Diluted

$

1.68

$

(6.48

)

$

2.28

$

(4.80

)

Weighted-average shares outstanding:

Basic

78,677

84,652

79,527

85,022

Diluted

79,226

84,652

80,113

85,022

ARROW ELECTRONICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands except par value)

(Unaudited)

June 27, 2020

December 31, 2019

ASSETS

Current assets:

Cash and cash equivalents

$

205,828

$

300,103

Accounts receivable, net

7,954,038

8,482,687

Inventories

3,420,912

3,477,120

Other current assets

213,190

266,249

Total current assets

11,793,968

12,526,159

Property, plant, and equipment, at cost:

Land

7,743

7,793

Buildings and improvements

188,563

173,370

Machinery and equipment

1,501,919

1,481,525

1,698,225

1,662,688

Less: Accumulated depreciation and amortization

(900,035)

(859,578)

Property, plant, and equipment, net

798,190

803,110

Investments in affiliated companies

80,756

86,942

Intangible assets, net

249,528

271,903

Goodwill

2,052,128

2,061,322

Other assets

629,891

651,360

Total assets

$

15,604,461

$

16,400,796

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

6,967,180

$

7,046,221

Accrued expenses

920,929

880,507

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

244,323

331,431

Total current liabilities

8,132,432

8,258,159

Long-term debt

2,098,369

2,640,129

Other liabilities

623,712

636,115

Commitments and contingencies

Equity:

Shareholders’ equity:

Common stock, par value $1:

Authorized - 160,000 shares in both 2020 and 2019, respectively

Issued - 125,424 shares in both 2020 and 2019, respectively

125,424

125,424

Capital in excess of par value

1,151,895

1,150,006

Treasury stock (47,806 and 44,804 shares in 2020 and 2019, respectively), at cost

(2,542,629)

(2,332,548)

Retained earnings

6,277,620

6,131,248

Accumulated other comprehensive loss

(317,489)

(262,211)

Total shareholders’ equity

4,694,821

4,811,919

Noncontrolling interests

55,127

54,474

Total equity

4,749,948

4,866,393

Total liabilities and equity

$

15,604,461

$

16,400,796

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Quarter Ended

June 27, 2020

June 29, 2019

Cash flows from operating activities:

Consolidated net income (loss)

$

133,337

$

(547,751

)

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

Depreciation and amortization

46,812

46,982

Amortization of stock-based compensation

8,397

8,539

Equity in (earnings) losses of affiliated companies

283

(382

)

Deferred income taxes

13,732

(78,814

)

Impairments

4,918

697,993

Gain on investments, net

(10,885

)

(1,390

)

Other

253

6,381

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

Accounts receivable, net

(112,437

)

(54,436

)

Inventories

(80,465

)

143,740

Accounts payable

292,024

193,832

Accrued expenses

102,369

(21,102

)

Other assets and liabilities

19,907

11,826

Net cash provided by operating activities

418,245

405,418

Cash flows from investing activities:

Proceeds from disposition of businesses

9,460

Acquisition of property, plant, and equipment

(31,571

)

(47,821

)

Net cash used for investing activities

(31,571

)

(38,361

)

Cash flows from financing activities:

Change in short-term and other borrowings

77,165

(66,112

)

Repayments of long-term bank borrowings, net

(123,113

)

(216,046

)

Redemption of notes

(209,366

)

Proceeds from exercise of stock options

1,750

2,691

Repurchases of common stock

(72,750

)

(146,999

)

Settlement of forward-starting interest rate swap

(48,378

)

Other

(141

)

(147

)

Net cash used for financing activities

(374,833

)

(426,613

)

Effect of exchange rate changes on cash

(7,011

)

(22,354

)

Net increase (decrease) in cash and cash equivalents

4,830

(81,910

)

Cash and cash equivalents at beginning of period

200,998

351,899

Cash and cash equivalents at end of period

$

205,828

$

269,989

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended

June 27, 2020

June 29, 2019

Cash flows from operating activities:

Consolidated net income (loss)

$

183,092

$

(405,337)

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

Depreciation and amortization

93,922

94,508

Amortization of stock-based compensation

22,317

27,629

Equity in (earnings) losses of affiliated companies

(247)

1,085

Deferred income taxes

46,345

(71,846)

Impairments

4,918

697,993

(Gain) loss on investments, net

5,925

(6,738)

Other

48

11,956

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

Accounts receivable, net

446,168

895,553

Inventories

52,927

278,142

Accounts payable

(51,027)

(1,346,176)

Accrued expenses

71,043

(71,394)

Other assets and liabilities

9,679

(28,956)

Net cash provided by operating activities

885,110

76,419

Cash flows from investing activities:

Proceeds from disposition of businesses

9,460

Acquisition of property, plant, and equipment

(59,542)

(81,636)

Other

(5,466)

2,940

Net cash used for investing activities

(65,008)

(69,236)

Cash flows from financing activities:

Change in short-term and other borrowings

(7,189)

(173,356)

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

(411,690)

118,977

Redemption of notes

(209,366)

Proceeds from exercise of stock options

3,730

9,622

Repurchases of common stock

(231,739)

(200,924)

Settlement of forward-starting interest rate swap

(48,378)

Other

(141)

(147)

Net cash used for financing activities

(904,773)

(245,828)

Effect of exchange rate changes on cash

(9,604)

(693)

Net decrease in cash and cash equivalents

(94,275)

(239,338)

Cash and cash equivalents at beginning of period

300,103

509,327

Cash and cash equivalents at end of period

$

205,828

$

269,989

ARROW ELECTRONICS, INC.

NON-GAAP SALES RECONCILIATION

(In thousands)

(Unaudited)

Quarter Ended

June 27, 2020

June 29, 2019

% Change

Consolidated sales, as reported

$

6,606,494

$

7,344,548

(10.0

)

%

Impact of changes in foreign currencies

(65,177

)

Impact of wind down

(77,914

)

Consolidated sales, as adjusted

$

6,606,494

$

7,201,457

(8.3

)

%

Global components sales, as reported

$

4,721,255

$

5,270,935

(10.4

)

%

Impact of changes in foreign currencies

(40,092

)

Impact of wind down

(77,914

)

Global components sales, as adjusted

$

4,721,255

$

5,152,929

(8.4

)

%

Americas Components sales, as reported

$

1,488,901

$

1,876,799

(20.7

)

%

Impact of changes in foreign currencies

(2,372

)

Impact of wind down

(60,860

)

Americas Components sales, as adjusted

$

1,488,901

$

1,813,567

(17.9

)

%

Europe components sales, as reported

$

1,118,417

$

1,415,888

(21.0

)

%

Impact of changes in foreign currencies

(29,548

)

Impact of wind down

(17,054

)

Europe components sales, as adjusted

$

1,118,417

$

1,369,286

(18.3

)

%

Asia components sales, as reported

$

2,113,937

$

1,978,248

6.9

%

Impact of changes in foreign currencies

(8,172

)

Asia components sales, as adjusted

$

2,113,937

$

1,970,076

7.3

%

Global ECS sales, as reported

$

1,885,239

$

2,073,613

(9.1

)

%

Impact of changes in foreign currencies

(25,085

)

Global ECS sales, as adjusted

$

1,885,239

$

2,048,528

(8.0

)

%

Europe ECS sales, as reported

$

661,983

$

701,157

(5.6

)

%

Impact of changes in foreign currencies

(14,983

)

Europe ECS sales, as adjusted

$

661,983

$

686,174

(3.5

)

%

Americas ECS sales, as reported

$

1,223,256

$

1,372,456

(10.9

)

%

Impact of changes in foreign currencies

(10,102

)

Americas ECS sales, as adjusted

$

1,223,256

$

1,362,354

(10.2

)

%

ARROW ELECTRONICS, INC.

NON-GAAP SALES RECONCILIATION

(In thousands)

(Unaudited)

Six Months Ended

June 27, 2020

June 29, 2019

% Change

Consolidated sales, as reported

$

12,987,911

$

14,500,539

(10.4

)

%

Impact of changes in foreign currencies

(138,687

)

Impact of wind down and dispositions

(172,109

)

Consolidated sales, as adjusted

$

12,987,911

$

14,189,743

(8.5

)

%

Global components sales, as reported

$

9,271,856

$

10,462,862

(11.4

)

%

Impact of changes in foreign currencies

(88,771

)

Impact of wind down

(160,968

)

Global components sales, as adjusted

$

9,271,856

$

10,213,123

(9.2

)

%

Americas Components sales, as reported

...

$

3,041,699

$

3,783,828

(19.6

)

%

Impact of changes in foreign currencies

(3,760

)

Impact of wind down

(123,726

)

Americas Components sales, as adjusted

$

3,041,699

$

3,656,342

(16.8

)

%

Europe components sales, as reported

$

2,428,407

$

2,919,254

(16.8

)

%

Impact of changes in foreign currencies

(69,049

)

Impact of wind down

(37,242

)

Europe components sales, as adjusted

$

2,428,407

$

2,812,963

(13.7

)

%

Asia components sales, as reported

$

3,801,750

$

3,759,780

1.1

%

Impact of changes in foreign currencies

(15,962

)

Asia components sales, as adjusted

$

3,801,750

$

3,743,818

1.5

%

Global ECS sales, as reported

$

3,716,055

$

4,037,677

(8.0

)

%

Impact of changes in foreign currencies

(49,916

)

Impact of dispositions

(11,141

)

Global ECS sales, as adjusted

$

3,716,055

$

3,976,620

(6.6

)

%

Europe ECS sales, as reported

$

1,364,111

$

1,464,314

(6.8

)

%

Impact of changes in foreign currencies

(33,663

)

Impact of dispositions

(11,141

)

Europe ECS sales, as adjusted

$

1,364,111

$

1,419,510

(3.9

)

%

Americas ECS sales, as reported

$

2,351,944

$

2,573,363

(8.6

)

%

Impact of changes in foreign currencies

(16,253

)

Americas ECS sales, as adjusted

$

2,351,944

$

2,557,110

(8.0

)

%

ARROW ELECTRONICS, INC.

NON-GAAP EARNINGS RECONCILIATION

(In thousands except per share data)

(Unaudited)

Three months ended June 27, 2020

Reported
GAAP
measure

Intangible
amortization
expense

Restructuring
& Integration
charges

AFS Write
Downs

Digital
Write
Downs

Impairments(1)

Impact of Wind
Down

Other(2)

Non-GAAP
measure

Sales

$

6,606,494

$

$

$

$

$

$

$

$

6,606,494

Gross Profit

750,463

(10,696

)

739,767

Operating income

196,613

9,734

650

197

4,918

(11,824

)

200,288

Income before income taxes

174,191

9,734

650

197

4,918

(11,814

)

(10,901

)

166,975

Provision for income taxes

40,854

2,501

313

47

1,800

(2,662

)

(2,631

)

40,222

Consolidated net income

133,337

7,233

337

150

3,118

(9,152

)

(8,270

)

126,753

Noncontrolling interests

533

137

670

Net income attributable to shareholders

$

132,804

$

7,096

$

337

$

150

$

$

3,118

$

(9,152

)

$

(8,270

)

126,083

Net income per diluted share(6)

$

1.68

$

0.09

$

$

$

$

0.04

$

(0.12

)

$

(0.10

)

$

1.59

Effective tax rate

23.5

%

24.1

%

Three months ended June 29, 2019

Reported
GAAP
measure

Intangible

amortization
expense(3)

Restructuring
& Integration
charges(3)

AFS Write
Downs

Digital
Write
Downs

Impairments(4)

Impact of Wind
Down(3)

Other(2)

Non-GAAP
measure

Sales

$

7,344,548

$

$

$

$

$

$

(77,914

)

$

$

7,266,634

Gross Profit

814,909

1,868

20,114

4,305

841,196

Operating income (loss)

(549,190

)

8,665

19,906

15,851

20,114

623,085

104,219

242,650

Income (loss) before income taxes

(600,120

)

8,665

19,906

15,851

20,114

623,085

104,229

(1,390

)

190,340

Provision for income taxes

(52,369

)

2,463

4,865

3,910

4,962

64,246

24,730

(382

)

52,425

Consolidated net income (loss)

(547,751

)

6,202

15,041

11,941

15,152

558,839

79,499

(1,008

)

137,915

Noncontrolling interests

1,215

140

1,355

Net income (loss) attributable to shareholders

$

(548,966

)

$

6,062

$

15,041

$

11,941

$

15,152

$

558,839

$

79,499

$

(1,008

)

$

136,560

Net income (loss) per diluted share(6)

$

(6.48

)

$

0.07

$

0.18

$

0.14

$

0.18

$

6.60

$

0.94

$

(0.01

)

$

1.60

Effective tax rate

8.7

%

27.5

%

ARROW ELECTRONICS, INC.

NON-GAAP EARNINGS RECONCILIATION

(In thousands except per share data)

(Unaudited)

Six months ended June 27, 2020

Reported GAAP
measure

Intangible
amortization
expense

Restructuring
& Integration
charges

AFS Write
Downs

Digital
Write
Downs

Impairments(1)

Impact of
Wind Down

Non-
recurring
tax items

Other(2)

Non-GAAP
measure

Sales

$

12,987,911

$

$

$

$

$

$

$

$

$

12,987,911

Gross Profit

1,478,854

(10,696

)

1,468,158

Operating income

334,917

19,689

9,788

(723

)

4,918

(11,824

)

356,765

Income before income taxes

251,838

19,689

9,788

(723

)

4,918

(11,814

)

5,909

279,605

Provision for income taxes

68,746

5,065

2,884

(175

)

1,800

(2,662

)

(3,615

)

1,426

73,469

Consolidated net income

183,092

14,624

6,904

(548

)

3,118

(9,152

)

3,615

4,483

206,136

Noncontrolling interests

785

274

1,059

Net income attributable to shareholders

$

182,307

$

14,350

$

6,904

$

(548

)

$

$

3,118

$

(9,152

)

$

3,615

$

4,483

$

205,077

Net income per diluted share(6)

$

2.28

$

0.18

$

0.09

$

(0.01

)

$

$

0.04

$

(0.11

)

$

0.05

$

0.06

$

2.56

Effective tax rate

27.3

%

26.3

%

Six months ended June 29, 2019

Reported GAAP
measure

Intangible
amortization
expense(3)

Restructuring
& Integration
charges(3)

AFS Write
Downs

Digital
Write
Downs

Impairments(4)

Impact of
Wind Down(3)

Non-
recurring
tax items

Other(5)

Non-GAAP
measure

Sales

$

14,500,539

$

$

$

$

$

$

(160,968

)

$

$

$

14,339,571

Gross Profit

1,676,597

1,868

20,114

(3,822

)

1,694,757

Operating income (loss)

(303,630

)

17,807

30,992

15,851

20,114

623,085

114,415

866

519,500

Income (loss) before income taxes

(403,799

)

17,807

30,992

15,851

20,114

623,085

114,572

(5,872

)

412,750

Provision for income taxes

1,538

5,003

7,576

3,910

4,962

64,246

27,258

(3,502

)

(1,701

)

109,290

Consolidated net income (loss)

(405,337

)

12,804

23,416

11,941

15,152

558,839

87,314

3,502

(4,171

)

303,460

Noncontrolling interests

2,894

282

3,176

Net income (loss) attributable to shareholders

$

(408,231

)

$

12,522

$

23,416

$

11,941

$

15,152

$

558,839

$

87,314

$

3,502

$

(4,171

)

$

300,284

Net income (loss) per diluted share(6)

$

(4.80

)

$

0.15

$

0.28

$

0.14

$

0.18

$

6.57

$

1.03

$

0.04

$

(0.05

)

$

3.50

Effective tax rate

(0.4

)

%

26.5

%

(1) Impairments includes $4,918 in impairment charges related to various other long-lived assets unrelated to the personal computer and mobility asset disposition business.

(2) Other includes (gain) loss on investments, net

(3) Amounts for restructuring, integration, and other charges, and identifiable intangible asset amortization related to the personal computer and mobility asset disposition business are included in "impact of wind down" above.

(4) Impairments include goodwill impairments of $570,175, tradename impairments of $46,000, and $6,910 in impairment charges related to various other long-lived assets.

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

(6) For the three months and six months ended June 29, 2019, the non-GAAP net income per diluted share calculation includes 649 thousand shares and 758 thousand shares, respectively, 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.

ARROW ELECTRONICS, INC.

SEGMENT INFORMATION

(In thousands)

(Unaudited)

Quarter Ended

Six Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Sales:

Global components

$

4,721,255

$

5,270,935

$

9,271,856

$

10,462,862

Global ECS

1,885,239

2,073,613

3,716,055

4,037,677

Consolidated

$

6,606,494

$

7,344,548

$

12,987,911

$

14,500,539

Operating income (loss):

Global components

$

181,836

$

(566,116

)

$

346,603

$

(331,584

)

Global ECS (a)

72,921

98,388

115,354

185,106

Corporate (b)

(58,144

)

(81,462

)

(127,040

)

(157,152

)

Consolidated

$

196,613

$

(549,190

)

$

334,917

$

(303,630

)

(a)

Includes reserves and other adjustments of approximately $29.9 million primarily related to foreign tax and other loss contingencies for the first six months of 2020. These reserves are principally associated with transactional taxes on activity from several prior years, not significant to any one year.

(b)

Includes restructuring, integration, and other charges of $0.7 million and $9.8 million for the second quarter and first six months of 2020, and $19.9 million and $31.6 million for the second quarter and first six months of 2019, respectively.

NON-GAAP SEGMENT RECONCILIATION

Quarter Ended

Six Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Global components operating income (loss), as reported

$

181,836

$

(566,116)

$

346,603

$

(331,584)

Intangible assets amortization expense (c)

7,259

5,807

14,639

12,060

Impairments

623,085

623,085

Impact of wind-down (c)

(11,824)

104,213

(11,824)

113,835

AFS notes receivable reserve

197

15,851

(723)

15,851

Digital inventory reserve

20,114

20,114

Global components operating income, as adjusted

$

177,468

$

202,954

$

348,695

$

453,361

Global ECS operating income, as reported

$

72,921

$

98,388

$

115,354

$

185,106

Intangible assets amortization expense

2,475

2,858

5,050

5,747

Impairments

4,918

4,918

Global ECS operating income, as adjusted

$

80,314

$

101,246

$

125,322

$

190,853

(c)

Impact of wind down includes intangible asset amortization expense related to the personal computer and mobility asset disposition business. Impact of wind down excludes restructuring, integration, and other charges as they are reported on the corporate entity.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200730005322/en/

Contacts

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

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