ARW - Arrow Electronics Reports First-Quarter 2019 Results

Arrow Electronics, Inc. (NYSE:ARW) today reported first-quarter 2019 sales of $7.16 billion, an increase of 4 percent from sales of $6.88 billion in the first quarter of 2018. First-quarter net income of $141 million or $1.63 per share on a diluted basis, compared with net income of $139 million, or $1.56 per share on a diluted basis, in the first quarter of 2018. Excluding certain items¹, net income would have been $158 million, or $1.84 per share on a diluted basis, in the first quarter of 2019, compared with net income of $168 million, or $1.88 per share on a diluted basis, in the first quarter of 2018. In the first quarter of 2019, changes in foreign currencies had negative impacts on growth of approximately $197 million or 3 percent on sales and $.09 or 5 percent on earnings per share on a diluted basis compared to the first quarter of 2018.

Global components first-quarter sales of $5.19 billion increased 5 percent year over year. Sales, as adjusted, increased 8 percent year over year. Americas components sales increased 6 percent year over year. Europe components sales increased 2 percent year over year. Sales in the region, as adjusted, increased 10 percent year over year. Asia-Pacific components sales increased 8 percent year over year. Global components first-quarter operating income increased 2 percent year over year. Operating income, as adjusted, increased 6 percent year over year.

“Higher sales volumes in the first quarter allowed us to leverage our operating expenses, assure profitability, and will lead to higher cash flow in the coming quarters,” said Michael J. Long, chairman, president, and chief executive officer. “The demand environment changed in the first quarter with customers in all regions adjusting their inventories by purchasing fewer high-value components, and more tightly managing their working capital and cash.”

Global enterprise computing solutions first-quarter sales of $1.96 billion increased 1 percent year over year. Sales, as adjusted, increased 6 percent year over year. Americas enterprise computing solutions sales were flat year over year. Sales in the region, as adjusted, increased 4 percent year over year. Europe enterprise computing solutions sales increased 2 percent year over year. Sales in the region, as adjusted, increased 10 percent year over year. Global enterprise computing solutions first-quarter operating income increased 3 percent year over year and increased 1 percent year over year excluding amortization of intangibles expense. Global enterprise computing solutions operating income excluding amortization of intangibles expense, as adjusted, increased 3 percent year over year.

“Enterprise computing solutions returned to profitable growth in the first quarter from our efforts to better align with next-generation hardware and software technologies, and to capture incremental business from nontraditional systems integrator and operational technology provider customers,” said Mr. Long.

“First-quarter cash flow from operations was negative $329 million. We expect to adjust our working capital investments to current market conditions and drive further improvements to cash flow and in returns in the coming quarters,” said Chris Stansbury, senior vice president and chief financial officer. “We remain committed to returning excess cash to shareholders. During the first quarter, we returned approximately $40 million to shareholders through our stock repurchase program. We had approximately $689 million of remaining authorization under our share repurchase program at the end of the first quarter.”

GUIDANCE

“As we look to the second quarter, we believe that total sales will be between $7.525 billion and $7.925 billion, with global components sales between $5.5 billion and $5.7 billion, and global enterprise computing solutions sales between $2.025 billion and $2.225 billion. As a result of this outlook, we expect earnings per share on a diluted basis to be in the range of $1.71 to $1.83, and earnings per share on a diluted basis, excluding certain items¹, to be in the range of $1.94 to $2.06 per share. Our guidance assumes interest expense will total approximately $57 million. Our guidance also assumes an average tax rate at the high end of the long-term range of 23.5 percent to 25.5 percent, and average diluted shares outstanding of approximately 86 million. We are expecting the average USD-to-Euro exchange rate for the second quarter to be approximately $1.12 to €1. We estimate changes in foreign currencies will have a negative impact on growth of approximately $138 million, or 2 percent on sales, and $.07, or 3 percent, on earnings per share on a diluted basis compared to the second 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.

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, income, or expense on a non-GAAP basis adjusted for the impact of changes in foreign currencies and the impact of dispositions by adjusting the company's operating results, including the amortization expense related to disposed intangible assets, as if the dispositions had occurred at the beginning of the earliest period presented (referred to as "impact of dispositions"). Operating income, net income attributable to shareholders, and net income per basic and diluted share are adjusted to exclude identifiable intangible amortization, restructuring, integration, and other charges, and certain charges, credits, gains, and losses that the company believes impact the comparability of its results of operations. These charges, credits, gains, and losses arise out of the company’s efficiency enhancement initiatives, acquisitions/dispositions (including intangible assets amortization expense), and financing activities. 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20190502005229/en/