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Arrow Electronics Reports First-Quarter 2022 Results

2022-05-05 08:00 ET - News Release

-- Record Sales, Gross Profit, Operating Income, and Earnings Per Share --
-- First-Quarter Earnings Per Share of $5.31; Non-GAAP Earnings Per Share of $5.43 --


Company Website: https://fiveyearsout.com
CENTENNIAL, Colo. -- (Business Wire)

Arrow Electronics, Inc. (NYSE:ARW) today reported first-quarter 2022 sales of $9.07 billion, an increase of 8 percent from sales of $8.39 billion in the first quarter of 2021. First-quarter net income was $365 million, or $5.31 per share on a diluted basis, compared with a net income of $206 million, or $2.72 per share on a diluted basis, in the first quarter of 2021. Non-GAAP net income1 was $373 million, or $5.43 per share on a diluted basis, in the first quarter of 2022, compared with non-GAAP net income of $216 million, or $2.84 per share on a diluted basis, in the first quarter of 2021.

"Arrow's unwavering commitment to our customers' success continues to foster expanding opportunities for our own business in the areas of supply chain as a service, designed and engineered value-enhancing solutions, and secure management of mission-critical software workloads," said Michael J. Long, chairman, president, and chief executive officer. "At Arrow, we continue to enhance the solutions and services we provide as the markets we serve change at an increasingly rapid pace. Our record results this quarter demonstrate that we remain ahead of the curve, supported by the best team in the industry. We expect component supply to remain well below demand in the coming quarters and through the better part of 2022."

Global components first-quarter sales of $7.20 billion reflected an increase of 12 percent year over year and non-GAAP sales increased 13 percent year over year. Asia-Pacific components first-quarter sales decreased 8 percent year over year. Americas components first-quarter sales increased 38 percent year over year. Europe components first-quarter sales increased 23 percent year over year and non-GAAP sales in the region increased 31 percent year over year. Global components first-quarter operating income was $499 million, and first-quarter non-GAAP operating income was $506 million.

"The current market environment has enabled the global components business to showcase our experience and industry knowledge that makes us uniquely positioned to help our customers navigate today's challenges. This includes helping to mitigate production risks and facilitate a continuous stream of products to market," said Mr. Long.

Global enterprise computing solutions ("ECS") first-quarter sales of $1.88 billion reflected a decrease of 3 percent year over year and non-GAAP sales decreased 1 percent year over year. Europe enterprise computing solutions first-quarter sales increased 5 percent year over year and non-GAAP sales in the region increased 11 percent year over year. Americas enterprise computing solutions first-quarter sales decreased 9 percent year over year. Global enterprise computing solutions first-quarter operating income was $86 million, and first-quarter non-GAAP operating income was $88 million.

"Demand for complex IT solutions continues to grow, and we expect to see significant upside in this area when near-term project postponements and incompletions resulting from supply chain challenges are resolved," said Mr. Long.

"Our return on invested capital remains favorable, and our leverage ratios are near their lowest levels in ten years," said Rick Seidlitz, vice president and interim principal financial officer. "Our strong profitability and the effective management of our balance sheet enabled us to deliver on our commitment to return cash to shareholders through the repurchase of approximately $250 million of shares for the fourth consecutive quarter, bringing total cash returned to shareholders over the last 12 months to approximately $1 billion. Our current repurchase authorization stands at approximately $513 million."

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 2022 OUTLOOK

  • Consolidated sales of $9.04 billion to $9.64 billion, with global components sales of $7.29 billion to $7.59 billion, and global enterprise computing solutions sales of $1.75 billion to $2.05 billion
  • Net income per share on a diluted basis of $5.32 to $5.48, and non-GAAP net income per share on a diluted basis of $5.48 to $5.64
  • Average tax rate of approximately 23.5 percent compared to the long-term range of 23 to 25 percent
  • Average diluted shares outstanding of 67 million
  • Interest expense of approximately $36 million
  • Expecting average USD-to-Euro exchange rate of $1.08 to euros1; changes in foreign currencies to decrease sales by approximately $300 million, and earnings per share on a diluted basis by $.20 compared to the second quarter of 2021

Second-Quarter 2022 Outlook

Reported GAAP
measure

Intangible amortization
expense

Restructuring &
integration charges

Non-GAAP measure

Net income per diluted share

$5.32 - $5.48

$.10

$.06

$5.48 to $5.64

Please refer to the CFO commentary, which can be found at investor.arrow.com, as a supplement to the company's earnings release. The company uses its website as a tool to disclose important information about the company and comply with its disclosure obligations under Regulation Fair Disclosure.

Arrow Electronics guides innovation forward for over 220,000 leading technology manufacturers and service providers. With 2021 sales of $34 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 the statements contained in quotes of Arrow's executives and statements regarding: Arrow's future financial performance, including its outlook on financial results for the second quarter of fiscal 2022, 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 mitigate the impact of COVID-19, impacts of the conflict in Ukraine, industry conditions, changes in product supply, pricing and customer demand, the global supply chain disruption, economic conditions, inflationary pressures, competition, other vagaries in the global components and the 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, antitrust, 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 The company provides non-GAAP sales, gross profit, operating income, income before income taxes, provision for income taxes, net income, noncontrolling interests, net income attributable to shareholders, and net income per share on a diluted basis, which are non-GAAP measures 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, identifiable intangible asset amortization, restructuring, integration, and other charges, and net gains and losses on investments. Management believes that providing this additional information is useful to the reader to better assess and understand the company's operating performance, especially when comparing results with previous periods, primarily because management typically monitors the business adjusted for these items in addition to GAAP results. However, analysis of results 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 2, 2022

April 3, 2021

Sales

$

9,074,125

$

8,385,919

Cost of sales

7,866,621

7,455,809

Gross profit

1,207,504

930,110

Operating expenses:

Selling, general, and administrative expenses

643,925

574,567

Depreciation and amortization

48,305

50,331

Restructuring, integration, and other charges

4,898

5,709

697,128

630,607

Operating income

510,376

299,503

Equity in earnings of affiliated companies

843

844

Gain on investments, net

2,011

2,793

Employee benefit plan expense, net

(889

)

(1,230

)

Interest and other financing expense, net

(33,985

)

(33,656

)

Income before income taxes

478,356

268,254

Provision for income taxes

112,360

61,026

Consolidated net income

365,996

207,228

Noncontrolling interests

1,247

907

Net income attributable to shareholders

$

364,749

$

206,321

Net income per share:

Basic

$

5.38

$

2.76

Diluted

$

5.31

$

2.72

Weighted-average shares outstanding:

Basic

67,840

74,882

Diluted

68,749

75,794

ARROW ELECTRONICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands except par value)

(Unaudited)

April 2, 2022

December 31, 2021

ASSETS

Current assets:

Cash and cash equivalents

$

242,791

$

222,194

Accounts receivable, net

10,621,942

11,123,946

Inventories

4,645,116

4,201,965

Other current assets

431,635

345,218

Total current assets

15,941,484

15,893,323

Property, plant, and equipment, at cost:

Land

5,691

5,736

Buildings and improvements

185,000

186,097

Machinery and equipment

1,533,688

1,523,919

1,724,379

1,715,752

Less: Accumulated depreciation and amortization

(1,066,180

)

(1,032,941

)

Property, plant, and equipment, net

658,199

682,811

Investments in affiliated companies

65,239

63,695

Intangible assets, net

185,753

195,029

Goodwill

2,067,249

2,080,371

Other assets

594,929

620,311

Total assets

$

19,512,853

$

19,535,540

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

9,110,391

$

9,617,084

Accrued expenses

1,243,853

1,326,386

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

317,399

382,619

Total current liabilities

10,671,643

11,326,089

Long-term debt

2,790,819

2,244,443

Other liabilities

621,508

624,162

Equity:

Shareholders' equity:

Common stock, par value $1:

Authorized - 160,000 shares in both 2022 and 2021

Issued - 125,424 shares in both 2022 and 2021

125,424

125,424

Capital in excess of par value

1,186,595

1,189,845

Treasury stock (58,987 and 57,358 shares in 2022 and 2021, respectively), at cost

(3,861,793

)

(3,629,265

)

Retained earnings

8,152,697

7,787,948

Accumulated other comprehensive loss

(232,969

)

(191,657

)

Total shareholders' equity

5,369,954

5,282,295

Noncontrolling interests

58,929

58,551

Total equity

5,428,883

5,340,846

Total liabilities and equity

$

19,512,853

$

19,535,540

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Quarter Ended

April 2, 2022

April 3, 2021

Cash flows from operating activities:

Consolidated net income

$

365,996

$

207,228

Adjustments to reconcile consolidated net income to net cash used for operations:

Depreciation and amortization

48,305

50,331

Amortization of stock-based compensation

17,351

13,223

Equity in earnings of affiliated companies

(843

)

(844

)

Deferred income taxes

1,352

13,663

Gain on investments, net

(2,011

)

(2,793

)

Other

686

1,374

Change in assets and liabilities:

Accounts receivable, net

430,710

596,777

Inventories

(460,902

)

(13,147

)

Accounts payable

(477,825

)

(840,124

)

Accrued expenses

(43,641

)

3,643

Other assets and liabilities

(79,426

)

(33,867

)

Net cash used for operating activities

(200,248

)

(4,536

)

Cash flows from investing activities:

Acquisition of property, plant, and equipment

(19,270

)

(20,180

)

Proceeds from sale of property, plant, and equipment

-

22,171

Proceeds from collections of notes receivable

20,169

-

Net cash provided by investing activities

899

1,991

Cash flows from financing activities:

Change in short-term and other borrowings

(14,293

)

(12,452

)

Proceeds from long-term bank borrowings, net

845,000

154,674

Redemption of notes

(350,000

)

(130,860

)

Proceeds from exercise of stock options

11,302

26,091

Repurchases of common stock

(264,431

)

(160,619

)

Net cash provided by (used for) financing activities

227,578

(123,166

)

Effect of exchange rate changes on cash

(7,632

)

(20,203

)

Net increase (decrease) in cash and cash equivalents

20,597

(145,914

)

Cash and cash equivalents at beginning of period

222,194

373,615

Cash and cash equivalents at end of period

$

242,791

$

227,701

ARROW ELECTRONICS, INC.

NON-GAAP SALES RECONCILIATION

(In thousands)

(Unaudited)

Quarter Ended

April 2, 2022

April 3, 2021

% Change

Consolidated sales, as reported

$

9,074,125

$

8,385,919

8.2

%

Impact of changes in foreign currencies

-

(151,551

)

Non-GAAP consolidated sales

$

9,074,125

$

8,234,368

10.2

%

Global components sales, as reported

$

7,199,075

$

6,443,253

11.7

%

Impact of changes in foreign currencies

-

(100,301

)

Non-GAAP global components sales

$

7,199,075

$

6,342,952

13.5

%

Americas components sales, as reported

$

2,340,543

$

1,701,173

37.6

%

Impact of changes in foreign currencies

-

(772

)

Non-GAAP Americas components sales

$

2,340,543

$

1,700,401

37.6

%

Asia components sales, as reported

$

2,931,529

$

3,173,478

(7.6

) %

Impact of changes in foreign currencies

-

(630

)

Non-GAAP Asia components sales

$

2,931,529

$

3,172,848

(7.6

) %

Europe components sales, as reported

$

1,927,003

$

1,568,602

22.8

%

Impact of changes in foreign currencies

-

(98,899

)

Non-GAAP Europe components sales

$

1,927,003

$

1,469,703

31.1

%

Global ECS sales, as reported

$

1,875,050

$

1,942,666

(3.5

) %

Impact of changes in foreign currencies

-

(51,250

)

Non-GAAP global ECS sales

$

1,875,050

$

1,891,416

(0.9

) %

Americas ECS sales, as reported

$

1,047,849

$

1,151,338

(9.0

) %

Impact of changes in foreign currencies

-

(2,453

)

Non-GAAP Americas ECS sales

$

1,047,849

$

1,148,885

(8.8

) %

Europe ECS sales, as reported

$

827,201

$

791,328

4.5

%

Impact of changes in foreign currencies

-

(48,797

)

Non-GAAP Europe ECS sales

$

827,201

$

742,531

11.4

%

ARROW ELECTRONICS, INC.

NON-GAAP EARNINGS RECONCILIATION

(In thousands except per share data)

(Unaudited)

Three months ended April 2, 2022

Reported

GAAP

measure

Intangible

amortization

expense

Restructuring

& Integration

charges

Other(1)

Non-GAAP

measure

Sales

$9,074,125

$

-

$

-

$

-

$9,074,125

Gross Profit

1,207,504

-

-

-

1,207,504

Operating income

510,376

9,018

4,898

-

524,292

Income before income taxes

478,356

9,018

4,898

(2,011

)

490,261

Provision for income taxes

112,360

2,310

1,205

(486

)

115,389

Consolidated net income

365,996

6,708

3,693

(1,525

)

374,872

Noncontrolling interests

1,247

140

-

-

1,387

Net income attributable to shareholders

$364,749

$6,568

$3,693

($1,525

)

$373,485

Net income per diluted share (3)

$5.31

$0.10

$0.05

($0.02

)

$5.43

Effective tax rate (2)

23.5

%

23.5

%

Three months ended April 3, 2021

Reported

GAAP

measure

Intangible

amortization

expense

Restructuring

& Integration

charges

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

%

(1) Other includes gain 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.

(3) 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

April 2, 2022

April 3, 2021

Sales:

Global components

$

7,199,075

$

6,443,253

Global ECS

1,875,050

1,942,666

Consolidated

$

9,074,125

$

8,385,919

Operating income (loss):

Global components (a)

$

499,342

$

289,383

Global ECS

85,798

77,359

Corporate (b)

(74,764

)

(67,239

)

Consolidated

$

510,376

$

299,503

(a)

Global components operating income includes $4.3 million related to proceeds from legal settlements for the first quarter of 2021.

(b)

Corporate operating income includes restructuring, integration, and other charges of $4.9 million for the first quarter of 2022 and $5.7 million for the first quarter of 2021.

NON-GAAP SEGMENT RECONCILIATION

Quarter Ended

April 2, 2022

April 3, 2021

Global components operating income, as reported

$

499,342

$

289,383

Intangible assets amortization expense

6,873

7,004

Global components non-GAAP operating income

$

506,215

$

296,387

Global ECS operating income, as reported

$

85,798

$

77,359

Intangible assets amortization expense

2,145

2,322

Global ECS non-GAAP operating income

$

87,943

$

79,681

Contacts:

Contact:

Richard Seidlitz,
Vice President, Principal Accounting Officer, Interim Principal Financial Officer
303-305-4936

Media Contact:

John Hourigan,
Vice President, Global Communications
303-824-4586

Source: Arrow Electronics

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