ARW Arrow Electronics Inc

-- Record First-Quarter Sales and Earnings Per Share --

-- First-Quarter Earnings Per Share of $1.26; Non-GAAP Earnings Per Share of $1.46 --

Arrow Electronics, Inc. (NYSE:ARW) today reported first-quarter 2017 net income of $114 million, or $1.26 per share on a diluted basis, compared with net income of $106 million, or $1.14 per share on a diluted basis, in the first quarter of 2016. Excluding certain items1, net income would have been $132 million in the first quarter of 2017, unchanged from the first quarter of 2016. Excluding certain items1, net income would have been $1.46 per share on a diluted basis, in the first quarter of 2017, compared with $1.43 per share on a diluted basis, in the first quarter of 2016. First-quarter sales of $5.76 billion increased 5 percent from sales of $5.47 billion in the prior year. In the first quarter of 2017, changes in foreign currencies had negative impacts on growth of approximately $73 million or 1 percent on sales and $.03 or 2 percent on earnings per share on a diluted basis compared to the first quarter of 2016.

“Customers and suppliers are migrating to our platform of online and offline component distribution, on-premise and off-premise software-led solutions, and our sustainable technology solutions,” said Michael J. Long, chairman, president, and chief executive officer. “Our unique approach drove record first-quarter earnings per share and record first-quarter sales that were at the high end of our expectation.”

Global components first-quarter sales of $4.06 billion grew 10 percent year over year. First-quarter sales, as adjusted, grew 12 percent year over year. Americas components sales grew 9 percent year over year. Asia-Pacific components sales grew 17 percent year over year. Europe components sales grew 6 percent year over year. Sales in the region, as adjusted, grew 10 percent year over year. Global components first-quarter operating income grew 1 percent year over year. “Global components sales exceeded the high end of our expectation for the second quarter in a row driven by our differentiated value proposition,” said Mr. Long.

Global enterprise computing solutions first-quarter sales of $1.7 billion declined 5 percent year over year. Global enterprise computing solutions first-quarter operating income grew 3 percent year over year and grew 4 percent year over year excluding amortization of intangibles expense. “ECS’ growth was driven by our industry-leading software solutions, and we continue to believe operating income is the best measure of this business,” added Mr. Long.

“First-quarter cash flow from operations was negative $21 million. While seasonally negative, cash flow from operations improved compared to the prior-year first quarter despite substantial working capital investments to support our growth,” 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 $56 million to shareholders through our stock repurchase program. We had approximately $464 million of remaining authorization under our share repurchase programs at the end of the first quarter.”

1 A reconciliation of non-GAAP adjusted financial measures, including sales, as adjusted, 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.

GUIDANCE

“As we look to the second quarter, we believe that total sales will be between $5.975 billion and $6.375 billion, with global components sales between $4.05 billion and $4.25 billion, and global enterprise computing solutions sales between $1.925 billion and $2.125 billion. As a result of this outlook, we expect earnings per share on a diluted basis, to be in the range of $1.50 to $1.62, and earnings per share on a diluted basis, excluding any charges, to be in the range of $1.70 to $1.82 per share. Our guidance assumes an average tax rate toward the higher end of our longer term range of 27 to 29 percent and average diluted shares outstanding are expected to be 90 million. We are expecting the average USD-to-Euro exchange rate for the second quarter to be approximately $1.07 to €1. We estimate changes in foreign currencies will have negative impacts on growth of approximately $110 million, or 2 percent on sales, and $.05, or 3 percent, on earnings per share on a diluted basis compared to the second quarter of 2016,” said Mr. Stansbury. “Based on our strong growth and disciplined operating expense management, we expect second-quarter earnings per share, at the midpoint, to grow 10 percent year over year adjusted for acquisitions and changes in foreign currencies,” added 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 (www.arrow.com) is a global provider of products, services and solutions to industrial and commercial users of electronic components and enterprise computing solutions. Arrow serves as a supply channel partner for more than 125,000 original equipment manufacturers, contract manufacturers and commercial customers through a global network of more than 465 locations serving over 90 countries.

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, 2016.

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 acquisitions by adjusting the company's operating results for businesses acquired, including the amortization expense related to acquired intangible assets, as if the acquisitions had occurred at the beginning of the earliest period presented (referred to as "impact of acquisitions"). 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 and acquisitions (including intangible assets amortization expense). 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 April 1, 2017   April 2, 2016   Sales $ 5,759,552   $ 5,474,177 Costs and expenses: Cost of sales 4,999,665 4,725,279 Selling, general, and administrative expenses 515,519 505,813 Depreciation and amortization 37,141 40,933 Restructuring, integration, and other charges 15,505   20,788 5,567,830   5,292,813 Operating income 191,722 181,364 Equity in earnings of affiliated companies 925 1,856 Interest and other financing expense, net 38,073   35,575 Income before income taxes 154,574 147,645 Provision for income taxes 39,224   41,053 Consolidated net income 115,350 106,592 Noncontrolling interests 1,582   357 Net income attributable to shareholders $ 113,768   $ 106,235   Net income per share: Basic 1.27 1.16 Diluted 1.26 1.14   Weighted average shares outstanding: Basic 89,262 91,514 Diluted 90,541 92,787   ARROW ELECTRONICS, INC. CONSOLIDATED BALANCE SHEETS (In thousands except par value)     April 1, 2017 December 31, 2016   ASSETS Current assets: Cash and cash equivalents $ 521,562 $ 534,320 Accounts receivable, net 5,867,182 6,746,687 Inventories, net 2,905,502 2,855,645 Other current assets 190,257   180,069   Total current assets 9,484,503   10,316,721   Property, plant, and equipment, at cost: Land 15,359 23,456 Buildings and improvements 190,179 175,141 Machinery and equipment 1,345,427   1,297,657   1,550,965 1,496,254 Less: Accumulated depreciation and amortization (764,369 ) (739,955 ) Property, plant, and equipment, net 786,596   756,299   Investments in affiliated companies 88,376 88,401 Intangible assets, net 325,920 336,882 Goodwill 2,405,160 2,392,220 Other assets 328,820   315,843   Total assets $ 13,419,375   $ 14,206,366   LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 4,820,086 $ 5,774,151 Accrued expenses 741,449 821,244 Short-term borrowings, including current portion of long-term debt 471,753   93,827   Total current liabilities 6,033,288   6,689,222   Long-term debt 2,459,849 2,696,334 Other liabilities 369,431 355,190 Equity: Shareholders' equity: Common stock, par value $1: Authorized – 160,000 shares in both 2017 and 2016 Issued – 125,424 shares in both 2017 and 2016 125,424 125,424 Capital in excess of par value 1,089,724 1,112,114 Treasury stock (36,519 and 36,511 shares in 2017 and 2016, respectively), at cost (1,664,779 ) (1,637,476 ) Retained earnings 5,310,998 5,197,230 Accumulated other comprehensive loss (345,355 ) (383,854 ) Total shareholders' equity 4,516,012 4,413,438 Noncontrolling interests 40,795   52,182   Total equity 4,556,807   4,465,620   Total liabilities and equity $ 13,419,375   $ 14,206,366     ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)   Quarter Ended April 1, 2017   April 2, 2016 Cash flows from operating activities: Consolidated net income $ 115,350 $ 106,592 Adjustments to reconcile consolidated net income to net cash provided by operations: Depreciation and amortization 37,141 40,933 Amortization of stock-based compensation 11,575 8,877 Equity in earnings of affiliated companies (925 ) (1,856 ) Deferred income taxes 13,938 22,555 Other 3,251 1,462 Change in assets and liabilities, net of effects of acquired businesses: Accounts receivable 926,901 996,738 Inventories (38,185 ) 44,611 Accounts payable (982,355 ) (1,036,094 ) Accrued expenses (93,619 ) (160,693 ) Other assets and liabilities (13,962 ) (56,768 ) Net cash used for operating activities (20,890 ) (33,643 )   Cash flows from investing activities: Cash consideration paid for acquired businesses — (46,490 ) Acquisition of property, plant, and equipment (62,118 ) (49,261 ) Proceeds from sale of property, plant, and equipment 7,886   —   Net cash used for investing activities (54,232 ) (95,751 )   Cash flows from financing activities: Change in short-term and other borrowings 76,402 470 Proceeds from long-term bank borrowings, net 62,500 265,000 Proceeds from exercise of stock options 17,259 5,705 Repurchases of common stock (68,847 ) (18,684 ) Purchase of shares from noncontrolling interest (23,350 ) — Other —   (1,817 ) Net cash provided by financing activities 63,964   250,674   Effect of exchange rate changes on cash (1,600 ) 285   Net increase (decrease) in cash and cash equivalents (12,758 ) 121,565 Cash and cash equivalents at beginning of period 534,320   273,090   Cash and cash equivalents at end of period $ 521,562   $ 394,655     ARROW ELECTRONICS, INC. NON-GAAP SALES RECONCILIATION (In thousands) (Unaudited)   Quarter Ended   April 1, 2017   April 2, 2016 % Change   Consolidated sales, as reported $ 5,759,552 $ 5,474,177 5.2 % Impact of changes in foreign currencies — (73,042 ) Impact of acquisitions —   42,599   Consolidated sales, as adjusted $ 5,759,552   $ 5,443,734   5.8 %   Global components sales, as reported $ 4,058,803 $ 3,675,929 10.4 % Impact of changes in foreign currencies — (40,351 ) Impact of acquisitions —   4,162   Global components sales, as adjusted $ 4,058,803   $ 3,639,740   11.5 %   Europe components sales, as reported $ 1,118,279 $ 1,058,432 5.7 % Impact of changes in foreign currencies — (45,320 ) Impact of acquisitions —   —   Europe components sales, as adjusted $ 1,118,279   $ 1,013,112   10.4 %   Asia components sales, as reported $ 1,376,979 $ 1,177,868 16.9 % Impact of changes in foreign currencies — 3,868 Impact of acquisitions —   —   Asia components sales, as adjusted $ 1,376,979   $ 1,181,736   16.5 %   Global ECS sales, as reported $ 1,700,749 $ 1,798,248 (5.4 )% Impact of changes in foreign currencies — (32,691 ) Impact of acquisitions —   38,437   Global ECS sales, as adjusted $ 1,700,749   $ 1,803,994   (5.7 )%   Europe ECS sales, as reported $ 567,562 $ 607,448 (6.6 )% Impact of changes in foreign currencies — (38,064 ) Impact of acquisitions —   —   Europe ECS sales, as adjusted $ 567,562   $ 569,384   (0.3 )%   Americas ECS sales, as reported $ 1,133,187 $ 1,190,800 (4.8 )% Impact of changes in foreign currencies — 5,373 Impact of acquisitions —   38,437   Americas ECS sales, as adjusted $ 1,133,187   $ 1,234,610   (8.2 )%   ARROW ELECTRONICS, INC. NON-GAAP EARNINGS RECONCILIATION (In thousands except per share data) (Unaudited)   Three months ended April 1, 2017   ReportedGAAPmeasure   Intangibleamortizationexpense   Restructuring& Integrationcharges   Non-GAAPmeasure Operating income $ 191,722 $ 12,900 $ 15,505 $ 220,127 Income before income taxes 154,574 12,900 15,505 182,979 Provision for income taxes 39,224 4,561 4,997 48,782 Consolidated net income 115,350 8,339 10,508 134,197 Noncontrolling interests 1,582 251 — 1,833 Net income attributable to shareholders $ 113,768 $ 8,088 $ 10,508 $ 132,364 Net income per diluted share 1.26 0.09 0.12 1.46 Effective tax rate 25.4 % 26.7 %                   Three months ended April 2, 2016 ReportedGAAPmeasure Intangibleamortizationexpense Restructuring& Integrationcharges Non-GAAPmeasure Operating income $ 181,364 12,913 20,788 215,065 Income before income taxes 147,645 12,913 20,788 181,346 Provision for income taxes 41,053 2,279 5,434 48,766 Consolidated net income 106,592 10,634 15,354 132,580 Noncontrolling interests 357 — — 357 Net income attributable to shareholders $ 106,235 10,634 15,354 132,223 Net income per diluted share 1.14 0.11 0.17 1.43 Effective tax rate 27.8 % 26.9 %   ARROW ELECTRONICS, INC. SEGMENT INFORMATION (In thousands) (Unaudited)     Quarter Ended April 1, 2017   April 2, 2016 Sales: Global components $ 4,058,803 $ 3,675,929 Global ECS 1,700,749   1,798,248  

Consolidated

$ 5,759,552   $ 5,474,177   Operating income (loss): Global components $ 173,533 $ 170,770 Global ECS 80,879 78,212 Corporate (a) (62,690 ) (67,618 ) Consolidated $ 191,722   $ 181,364    

(a) Includes restructuring, integration, and other charges of $15.5 million and $20.8 million for the first quarters of 2017 and 2016, respectively.

  NON-GAAP SEGMENT RECONCILIATION   Quarter Ended April 1, 2017 April 2, 2016 Global components operating income, as reported $ 173,533 $ 170,770 Intangible assets amortization expense 7,399   7,900   Global components operating income, as adjusted $ 180,932   $ 178,670   Global ECS operating income, as reported $ 80,879 $ 78,212 Intangible assets amortization expense 5,501   5,013   Global ECS operating income, as adjusted $ 86,380   $ 83,225    

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Arrow Electronics, Inc.Contact:Steven O’Brien, 303-824-4544Vice President, Investor RelationsorMedia Contact:John Hourigan, 303-824-4586Vice President, Global Communications