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Arrow Electronics Reports First-Quarter 2021 Results

Arrow Electronics, Inc. (NYSE:ARW) today reported first-quarter 2021 sales of $8.39 billion, an increase of 31 percent from sales of $6.38 billion in the first quarter of 2020. First-quarter net income was $206 million, or $2.72 per share on a diluted basis, compared with a net income of $50 million, or $0.61 per share on a diluted basis, in the first quarter of 2020. Non-GAAP net income1 was $216 million, or $2.84 per share on a diluted basis, in the first quarter of 2021, compared with non-GAAP net income of $79 million, or $0.97 per share on a diluted basis, in the first quarter of 2020.

“Arrow’s commitment to guiding innovation forward on behalf of our customers and suppliers enabled us to deliver record results in the quarter. I am incredibly impressed with our team’s execution as we continued to help customers across key industries thrive and benefit by delivering the products, services and solutions they need,” said Michael J. Long, chairman, president, and chief executive officer. “Our continually evolving business model has adapted well to significant swings in demand and shifts in business priorities over the last year, and we look forward to further building on this strong momentum in the months ahead.”

Global components first-quarter sales of $6.44 billion reflected an increase of 42 percent year over year. Asia-Pacific components sales increased 88 percent year over year. Americas components first-quarter sales increased 10 percent year over year. Europe components first-quarter sales increased 20 percent year over year and non-GAAP sales in the region increased 10 percent year over year. Global components first-quarter operating income was $289 million and first-quarter non-GAAP operating income was $296 million.

“Strength and stability are the hallmarks of our global components business. Sales were above the high-end of our expectations for the fourth consecutive quarter, and, importantly, we are realizing robust operating leverage on our sales growth,” said Mr. Long. “We see current supply challenges as transitory and expect more balance with demand in the coming quarters.”

Global enterprise computing solutions first-quarter sales of $1.94 billion reflected an increase of 6 percent year over year and non-GAAP sales increased 2 percent year over year. Europe enterprise computing solutions first-quarter sales increased 13 percent year over year and non-GAAP sales in the region increased 4 percent year over year. Americas enterprise computing solutions first-quarter sales increased 2 percent year over year. Global enterprise computing solutions first-quarter operating income was $77 million and first-quarter non-GAAP operating income was $80 million.

Mr. Long said, “First-quarter global enterprise computing solutions sales were in-line with our prior outlook. We are seeing early indications that spending priorities are shifting to more complex projects with transformational business outcomes that are well-suited for our enterprise capabilities.”

“Our financial returns continue to improve meaningfully,” said Chris Stansbury, senior vice president and chief financial officer. “Through our disciplined working capital management, we are well-positioned to continue realizing operational leverage and converting growing profits to free cash flow in future quarters. As always, we remain committed to improving value to shareholders. During the first quarter, we repurchased approximately $150 million of shares through our stock repurchase program, ending the quarter with approximately $313 million of remaining authorization. Our balance sheet and liquidity position remain strong, and we are pleased to report return on invested capital increased year over year for the fourth straight quarter.”

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

SECOND-QUARTER 2021 OUTLOOK

  • Consolidated sales of $8.1 billion to $8.7 billion, with global components sales of $6.3 billion to $6.6 billion, and global enterprise computing solutions sales of $1.8 billion to $2.1 billion
  • Net income per share on a diluted basis of $2.67 to $2.83, and non-GAAP net income per share on a diluted basis1 of $2.82 to $2.98
  • Average tax rate of approximately 23 percent compared to the long-term range of 23 to 25 percent
  • Average diluted shares outstanding of 75 million
  • Interest expense of approximately $33 million
  • Expecting average USD-to-Euro exchange rate of $1.18 to €1; changes in foreign currencies to increase sales by approximately $150 million, and earnings per share on a diluted basis by $.08 compared to the second quarter of 2020

Second-Quarter 2021 Outlook

Reported GAAP measure

Intangible amortization expense

Restructuring & integration charges

Non-GAAP measure

Net income per diluted share

$2.67 - $2.83

$.10

$.05

$2.82 - $2.98

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 180,000 leading technology manufacturers and service providers. With 2020 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, as the term is defined under the federal securities laws, including but not limited to statements regarding: Arrow’s future financial performance, including its outlook on financial results for the second quarter of fiscal 2021, such as sales, net income per diluted share, non-GAAP net income per diluted share, average tax rate, average diluted shares outstanding, interest expense, average USD-to-Euro exchange rate, impact to sales due to changes in foreign currencies, intangible amortization expense per diluted share, restructuring and integration charges per diluted share, and expectation regarding market demand. These forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which could cause actual results or facts to differ materially from such statements for a variety of reasons, including, but not limited to: potential adverse effects of the ongoing global COVID-19 pandemic, including actions taken to contain or treat COVID-19, 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, foreign currency fluctuation, 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 periodic reports on Form 10-K and Form 10-Q and subsequent filings made with the Securities and Exchange Commission. Shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The company undertakes no obligation to update publicly or revise any of the forward-looking statements.

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 non-GAAP sales, gross profit, operating income, income before income taxes, provision for income taxes, net income, and net income per share on a diluted basis which are adjusted GAAP measures 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 and the impact of notes receivable reserves and recoveries related to the AFS business (referred to as “AFS notes receivable reserves and recoveries”). Non-GAAP operating income excludes identifiable intangible asset amortization, restructuring, integration, and other charges, AFS notes receivable reserves and recoveries. Non-GAAP effective tax rate excludes identifiable intangible asset amortization, restructuring, integration, and other charges, gain (loss) on investments, net, the impact of tax legislation charges, and AFS notes receivable recoveries. Net income attributable to shareholders, and net income per basic and diluted share as adjusted to exclude identifiable intangible asset amortization, restructuring, integration, and other charges, AFS notes receivable reserves and recoveries, net gains and losses on investments, and certain tax adjustments.

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 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.

A reconciliation of the company’s non-GAAP financial information to GAAP is set forth in the tables below.

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except per share data)

(Unaudited)

Quarter Ended

April 3, 2021

March 28, 2020

Sales

$

8,385,919

$

6,381,417

Cost of sales

7,455,809

5,653,026

Gross profit

930,110

728,391

Operating expenses:

Selling, general, and administrative expenses

574,567

533,839

Depreciation and amortization

50,331

47,110

Restructuring, integration, and other charges

5,709

9,138

630,607

590,087

Operating income

299,503

138,304

Equity in earnings of affiliated companies

844

530

Gain (loss) on investments, net

2,793

(16,810

)

Employee benefit plan (expense) credit

(1,230

)

(1,109

)

Interest and other financing expense, net

(33,656

)

(43,268

)

Income before income taxes

268,254

77,647

Provision for income taxes

61,026

27,892

Consolidated net income

207,228

49,755

Noncontrolling interests

907

252

Net income attributable to shareholders

$

206,321

$

49,503

Net income (loss) per share:

Basic

$

2.76

$

0.62

Diluted

$

2.72

$

0.61

Weighted-average shares outstanding:

Basic

74,882

80,407

Diluted

75,794

81,108

ARROW ELECTRONICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands except par value)

(Unaudited)

April 3, 2021

December 31, 2020

ASSETS

Current assets:

Cash and cash equivalents

$

227,701

$

373,615

Accounts receivable, net

8,503,010

9,205,343

Inventories

3,275,389

3,287,308

Other current assets

360,968

286,633

Total current assets

12,367,068

13,152,899

Property, plant, and equipment, at cost:

Land

5,691

7,940

Buildings and improvements

177,615

207,614

Machinery and equipment

1,521,489

1,553,371

1,704,795

1,768,925

Less: Accumulated depreciation and amortization

(957,257

)

(969,320

)

Property, plant, and equipment, net

747,538

799,605

Investments in affiliated companies

77,330

76,358

Intangible assets, net

223,848

233,819

Goodwill

2,101,938

2,115,469

Other assets

655,838

675,761

Total assets

$

16,173,560

$

17,053,911

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

7,045,759

$

7,937,889

Accrued expenses

985,928

1,034,361

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

361,327

158,633

Total current liabilities

8,393,014

9,130,883

Long-term debt

1,903,848

2,097,940

Other liabilities

662,252

676,136

Commitments and contingencies

Equity:

Shareholders’ equity:

Common stock, par value $1:

Authorized - 160,000 shares in both 2021 and 2020

Issued - 125,424 shares in both 2021 and 2020

125,424

125,424

Capital in excess of par value

1,166,554

1,165,850

Treasury stock (51,426 and 50,581 shares in 2021 and 2020, respectively), at cost

(2,898,830

)

(2,776,821

)

Retained earnings

6,886,072

6,679,751

Accumulated other comprehensive loss

(123,461

)

(104,885

)

Total shareholders’ equity

5,155,759

5,089,319

Noncontrolling interests

58,687

59,633

Total equity

5,214,446

5,148,952

Total liabilities and equity

$

16,173,560

$

17,053,911

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Quarter Ended

April 3, 2021

March 28, 2020

Cash flows from operating activities:

Consolidated net income

$

207,228

$

49,755

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

Depreciation and amortization

50,331

47,110

Amortization of stock-based compensation

13,223

13,920

Equity in (earnings) losses of affiliated companies

(844

)

(530

)

Deferred income taxes

13,663

32,613

Gain on investments, net

(2,793

)

16,810

Other

1,374

(205

)

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

Accounts receivable, net

596,777

558,605

Inventories

(13,147

)

133,392

Accounts payable

(840,124

)

(343,051

)

Accrued expenses

3,643

(31,326

)

Other assets and liabilities

(33,867

)

(10,228

)

Net cash provided by operating activities

(4,536

)

466,865

Cash flows from investing activities:

Acquisition of property, plant, and equipment

(20,180

)

(27,971

)

Proceeds from sale of property, plant, and equipment

22,171

Other

(5,466

)

Net cash used for investing activities

1,991

(33,437

)

Cash flows from financing activities:

Change in short-term and other borrowings

(12,452

)

(84,354

)

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

154,674

(288,577

)

Redemption of notes

(130,860

)

Proceeds from exercise of stock options

26,091

1,980

Repurchases of common stock

(160,619

)

(158,989

)

Net cash used for financing activities

(123,166

)

(529,940

)

Effect of exchange rate changes on cash

(20,203

)

(2,593

)

Net increase (decrease) in cash and cash equivalents

(145,914

)

(99,105

)

Cash and cash equivalents at beginning of period

373,615

300,103

Cash and cash equivalents at end of period

$

227,701

$

200,998

ARROW ELECTRONICS, INC.

NON-GAAP SALES RECONCILIATION

(In thousands)

(Unaudited)

Quarter Ended

April 3, 2021

March 28, 2020

% Change

Consolidated sales, as reported

$

8,385,919

$

6,381,417

31.4

%

Impact of changes in foreign currencies

202,672

Non-GAAP consolidated sales

$

8,385,919

$

6,584,089

27.4

%

Global components sales, as reported

$

6,443,253

$

4,550,601

41.6

%

Impact of changes in foreign currencies

130,299

Non-GAAP global components sales

$

6,443,253

$

4,680,900

37.6

%

Americas Components sales, as reported

$

1,701,173

$

1,552,798

9.6

%

Impact of changes in foreign currencies

(290

)

Non-GAAP Americas Components sales

$

1,701,173

$

1,552,508

9.6

%

Europe components sales, as reported

$

1,568,602

$

1,309,990

19.7

%

Impact of changes in foreign currencies

115,285

Non-GAAP Europe components sales

$

1,568,602

$

1,425,275

10.1

%

Asia components sales, as reported

$

3,173,478

$

1,687,813

88.0

%

Impact of changes in foreign currencies

15,304

Non-GAAP Asia components sales

$

3,173,478

$

1,703,117

86.3

%

Global ECS sales, as reported

$

1,942,666

$

1,830,816

6.1

%

Impact of changes in foreign currencies

72,373

Non-GAAP global ECS sales

$

1,942,666

$

1,903,189

2.1

%

Europe ECS sales, as reported

$

791,328

$

702,128

12.7

%

Impact of changes in foreign currencies

59,801

Non-GAAP Europe ECS sales

$

791,328

$

761,929

3.9

%

Americas ECS sales, as reported

$

1,151,338

$

1,128,688

2.0

%

Impact of changes in foreign currencies

12,572

Non-GAAP Americas ECS sales

$

1,151,338

$

1,141,260

0.9

%

ARROW ELECTRONICS, INC.

NON-GAAP EARNINGS RECONCILIATION

(In thousands except per share data)

(Unaudited)

Three months ended April 3, 2021

Reported

GAAP

measure

Intangible

amortization

expense

Restructuring

& Integration

charges

AFS Reserves & Recoveries

Non-recurring tax items

Other(1)

Non-GAAP

measure

Sales

$

8,385,919

$

$

$

$

$

$

8,385,919

Gross Profit

930,110

930,110

Operating income

299,503

9,326

5,709

314,538

Income before income taxes

268,254

9,326

5,709

(2,793

)

280,496

Provision for income taxes

61,026

2,385

1,166

(672

)

63,905

Consolidated net income

207,228

6,941

4,543

(2,121

)

216,591

Noncontrolling interests

907

150

1,057

Net income attributable to shareholders

$

206,321

$

6,791

$

4,543

$

$

$

(2,121

)

215,534

Net income per diluted share

$

2.72

$

0.09

$

0.06

$

$

$

(0.03

)

$

2.84

Effective tax rate (2)

22.7

%

22.8

%

Three months ended March 28, 2020

Reported

GAAP

measure

Intangible

amortization

expense

Restructuring

& Integration

charges

AFS Reserves & Recoveries

Non-recurring tax items

Other(1)

Non-GAAP

measure

Sales

$

6,381,417

$

$

$

$

$

$

6,381,417

Gross Profit

728,391

728,391

Operating income

138,304

9,955

9,138

(920

)

156,477

Income before income taxes

77,647

9,955

9,138

(920

)

16,810

112,630

Provision for income taxes

27,892

2,564

2,571

(222

)

(3,615

)

4,057

33,247

Consolidated net income

49,755

7,391

6,567

(698

)

3,615

12,753

79,383

Noncontrolling interests

252

137

389

Net income attributable to shareholders

$

49,503

$

7,254

$

6,567

$

(698

)

$

3,615

$

12,753

$

78,994

Net income per diluted share

$

0.61

$

0.09

$

0.08

$

(0.01

)

$

0.04

$

0.16

$

0.97

Effective tax rate (2)

35.9

%

29.5

%

(1) Other includes (gain) loss on investments, net.

(2) The items as shown in this table, represent the reconciling items for the tax rate as reported by GAAP measure and as a non-GAAP measure.

ARROW ELECTRONICS, INC.

SEGMENT INFORMATION

(In thousands)

(Unaudited)

Quarter Ended

April 3, 2021

March 28, 2020

Sales:

Global components

$

6,443,253

$

4,550,601

Global ECS

1,942,666

1,830,816

Consolidated

$

8,385,919

$

6,381,417

Operating income (loss):

Global components

$

289,383

$

164,767

Global ECS (a)

77,359

42,433

Corporate (b)

(67,239

)

(68,896

)

Consolidated

$

299,503

$

138,304

(a)

Includes reserves and other adjustments of approximately $29.9 million primarily related to foreign tax and other loss contingencies for the first quarter 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 $5.7 million for the first quarter of 2021, and $9.1 million for the first quarter of 2020, respectively.

NON-GAAP SEGMENT RECONCILIATION

Quarter Ended

April 3, 2021

March 28, 2020

Global components operating income (loss), as reported

$

289,383

$

164,767

Intangible assets amortization expense

7,004

7,380

AFS notes receivable reserve (recoveries)

(920

)

Global components non-GAAP operating income

$

296,387

$

171,227

Global ECS operating income, as reported

$

77,359

$

42,433

Intangible assets amortization expense

2,322

2,575

Global ECS non-GAAP operating income

$

79,681

$

45,008

Contacts:

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

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