ARW Arrow Electronics Inc

– First-Quarter 2016 Non-GAAP Earnings Per Share of $1.43 –– Trailing 12-Month Cash Flow from Operations of $860 Million –

Arrow Electronics, Inc. (NYSE:ARW) today reported first-quarter 2016 net income of $106.2 million, or $1.14 per share on a diluted basis, compared with net income of $106.1 million, or $1.09 per share on a diluted basis, in the first quarter of 2015. Excluding certain items1, net income would have been $132.2 million, or $1.43 per share on a diluted basis, in the first quarter of 2016, compared with net income of $127.8 million, or $1.32 per share on a diluted basis, in the first quarter of 2015. First-quarter sales of $5.47 billion increased 9 percent from sales of $5 billion in the prior year. First-quarter sales, adjusted for the impact of acquisitions and changes in foreign currencies, increased 4 percent year over year.

“We continued our strong momentum into 2016 by producing record first-quarter sales and earnings per share. Our global components and enterprise computing solutions businesses produced growth in all regions, delivering earnings per share of $1.43,” said Michael J. Long, chairman, president, and chief executive officer. “We attribute our strong performance to our strategic investments in customer-facing talent and resources, as well as our focus on design and value-added services for global components and our solution-selling approach for enterprise computing solutions.”

Global components first-quarter sales of $3.68 billion grew 10 percent year over year. First-quarter sales, as adjusted, grew 4 percent year over year. Americas components sales grew 3 percent year over year. Europe components sales grew 15 percent year over year. Sales in the region, as adjusted, grew 9 percent year over year. Asia-Pacific components sales grew 15 percent year over year. Sales in the region, as adjusted, grew 2 percent year over year. “Europe has delivered six straight quarters of strong growth, and Americas returned to growth as we anticipated. In Asia, growth by our core small-to-medium-sized manufacturing customers was better than we anticipated,” added Mr. Long.

Global enterprise computing solutions first-quarter sales of $1.8 billion grew 9 percent year over year. First-quarter sales, as adjusted, grew 3 percent year over year. Americas sales grew 11 percent year over year. Sales in the region, as adjusted, grew 2 percent year over year. Europe sales grew 4 percent year over year. Sales in the region, as adjusted, grew 6 percent year over year. “Enterprise computing solutions posted record first-quarter sales, operating income, and operating margin,” said Mr. Long.

“First-quarter cash flow from operations was a negative $37 million. While seasonally negative, we showed substantial improvement when compared to the past three years. Trailing 12-month cash flow from operations was $860 million,” said Paul J. Reilly, executive vice president, finance and operations, and chief financial officer. “Our strong balance sheet and cash flow allowed us to continue investing in organic growth, and provided us with the opportunity to deploy capital toward our strategic initiatives. We will continue to return excess capital to shareholders.”

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 $5.825 billion and $6.225 billion, with global components sales between $3.75 billion and $3.95 billion, and global enterprise computing solutions sales between $2.075 billion and $2.275 billion. As a result of this outlook, we expect earnings per share on a diluted basis, excluding any charges, to be in the range of $1.59 to $1.71 per share. Our guidance assumes an average tax rate in the range of 27 to 29 percent and average diluted shares outstanding are expected to be 93 million. We are expecting the average USD-to-Euro exchange rate for the first quarter to be approximately $1.13 to €1,” said Mr. Reilly.

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 100,000 original equipment manufacturers, contract manufacturers, and commercial customers through a global network of more than 460 locations serving over 85 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 December 31, 2015.

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 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 for 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 (including intangible assets amortization expense), loss on prepayment of debt, and (gain)/loss on investments. 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 2,

2016

          March 28,

2015

  Sales $ 5,474,177 $ 5,002,385 Costs and expenses: Cost of sales 4,725,279 4,317,063 Selling, general, and administrative expenses 505,813 454,530 Depreciation and amortization 40,933 37,162 Restructuring, integration, and other charges   20,788   16,196   5,292,813   4,824,951 Operating income 181,364 177,434 Equity in earnings of affiliated companies 1,856 1,313 Interest and other financing expense, net 35,575 30,854 Other expense, net   -   935 Income before income taxes 147,645 146,958 Provision for income taxes   41,053   40,867 Consolidated net income 106,592 106,091 Noncontrolling interests   357   33 Net income attributable to shareholders $ 106,235 $ 106,058   Net income per share:

Basic

$ 1.16 $ 1.11 Diluted $ 1.14 $ 1.09   Weighted-average shares outstanding: Basic 91,514 95,920 Diluted 92,787 97,125                              

ARROW ELECTRONICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands except par value)

  April 2, December 31, 2016 2015 ASSETS (unaudited) Current assets: Cash and cash equivalents $ 394,655 $ 273,090 Accounts receivable, net 5,256,022 6,161,418 Inventories 2,441,798 2,466,490 Other current assets   335,095     285,473   Total current assets   8,427,570     9,186,471   Property, plant, and equipment, at cost: Land 23,630 23,547 Buildings and improvements 167,558 162,011 Machinery and equipment   1,296,817     1,250,115   1,488,005 1,435,673 Less: Accumulated depreciation and amortization   (762,685 )   (735,495 ) Property, plant, and equipment, net   725,320     700,178   Investments in affiliated companies 74,553 73,376 Intangible assets, net 383,503 389,326 Cost in excess of net assets of companies acquired 2,437,034 2,368,832 Other assets   304,807     303,747   Total assets $ 12,352,787   $ 13,021,930     LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 4,206,658 $ 5,192,665 Accrued expenses 668,002 819,463 Short-term borrowings, including current portion of long-term debt   46,143     44,024   Total current liabilities   4,920,803     6,056,152     Long-term debt 2,649,042 2,380,575 Other liabilities 408,829 390,392 Equity: Shareholders' equity: Common stock, par value $1: Authorized – 160,000 shares in both 2016 and 2015 Issued – 125,424 shares in both 2016 and 2015 125,424 125,424 Capital in excess of par value 1,082,103 1,107,314 Treasury stock (33,801 and 34,501 shares in 2016 and 2015, respectively), at cost (1,454,687 ) (1,480,069 ) Retained earnings 4,780,715 4,674,480 Accumulated other comprehensive loss   (214,175 )   (284,706 ) Total shareholders' equity 4,319,380 4,142,443 Noncontrolling interests   54,733     52,368   Total equity   4,374,113     4,194,811   Total liabilities and equity $ 12,352,787   $ 13,021,930                      

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

  Quarter Ended April 2,

2016

          March 28,

2015

Cash flows from operating activities: Consolidated net income $ 106,592 $ 106,091 Adjustments to reconcile consolidated net income to net cash used for operations: Depreciation and amortization 40,933 37,162 Amortization of stock-based compensation 8,877 9,920 Equity in earnings of affiliated companies (1,856 ) (1,313 ) Deferred income taxes 22,555 12,391 Excess tax benefits from stock-based compensation arrangements (4,132 ) (5,657 ) Other 1,462 1,730 Change in assets and liabilities, net of effects of acquired businesses: Accounts receivable 996,738 935,271 Inventories 44,611 48,574 Accounts payable (1,036,094 ) (1,279,437 ) Accrued expenses (160,693 ) (109,156 ) Other assets and liabilities   (55,585 )   2,828   Net cash used for operating activities   (36,592 )   (241,596 ) Cash flows from investing activities: Cash consideration paid for acquired businesses (46,490 ) (133,089 ) Acquisition of property, plant, and equipment (49,261 ) (31,150 ) Other   -     2,008   Net cash used for investing activities   (95,751 )   (162,231 ) Cash flows from financing activities: Change in short-term and other borrowings 470 1,234 Proceeds from (repayments of)long-term bank borrowings, net 265,000 (48,400 ) Net proceeds from note offering - 688,162 Redemption of notes - (254,313 ) Proceeds from exercise of stock options 5,705 12,576 Excess tax benefits from stock-based compensation arrangements 4,132 5,657 Repurchases of common stock (18,684 ) (78,561 ) Other   (3,000 )   (3,000 ) Net cash provided by financing activities   253,623     323,355   Effect of exchange rate changes on cash   285     (14,590 ) Net increase (decrease) in cash and cash equivalents 121,565 (95,062 ) Cash and cash equivalents at beginning of period   273,090     400,355   Cash and cash equivalents at end of period $ 394,655   $ 305,293                      

ARROW ELECTRONICS, INC.

NON-GAAP SALES RECONCILIATION

(In thousands)

(Unaudited)

  Quarter Ended April 2,

2016

          March 28,

2015

% Change   Consolidated sales, as reported $ 5,474,177 $ 5,002,385 9.4 % Impact of changes in foreign currencies - (63,227 ) Impact of acquisitions   38,437   368,154   Consolidated sales, as adjusted $ 5,512,614 $ 5,307,312   3.9 %   Global components sales, as reported $ 3,675,929 $ 3,346,763 9.8 % Impact of changes in foreign currencies - (42,016 ) Impact of acquisitions   -   217,406   Global components sales, as adjusted $ 3,675,929 $ 3,522,153   4.4 %   Europe components sales, as reported $ 1,058,432 $ 923,261 14.6 % Impact of changes in foreign currencies - (24,299 ) Impact of acquisitions   -   74,083   Europe components sales, as adjusted $ 1,058,432 $ 973,045   8.8 %   Asia components sales, as reported $ 1,177,868 $ 1,025,914 14.8 % Impact of changes in foreign currencies - (13,859 ) Impact of acquisitions   -   139,977   Asia components sales, as adjusted $ 1,177,868 $ 1,152,032   2.2 %   Global ECS sales, as reported $ 1,798,248 $ 1,655,622 8.6 % Impact of changes in foreign currencies - (21,211 ) Impact of acquisitions   38,437   150,749   Global ECS sales, as adjusted $ 1,836,685 $ 1,785,160   2.9 %   Europe ECS sales, as reported $ 607,448 $ 581,662 4.4 % Impact of changes in foreign currencies - (7,499 ) Impact of acquisitions   -   -   Europe ECS sales, as adjusted $ 607,448 $ 574,163   5.8 %   Americas ECS sales, as reported $ 1,190,800 $ 1,073,960 10.9 % Impact of changes in foreign currencies - (13,712 ) Impact of acquisitions   38,437   150,749   Americas ECS sales, as adjusted $ 1,229,237 $ 1,210,997   1.5 %       ARROW ELECTRONICS, INC. NON-GAAP EARNINGS RECONCILIATION (In thousands except per share data) (Unaudited)                   Quarter Ended April 2,

2016

          March 28,

2015

  Operating income, as reported $ 181,364 $ 177,434 Intangible assets amortization expense 12,913 11,107 Restructuring, integration, and other charges   20,788   16,196   Operating income, as adjusted $ 215,065 $ 204,737     Net income attributable to shareholders, as reported $ 106,235 $ 106,058 Intangible assets amortization expense 10,634 9,029 Restructuring, integration, and other charges 15,354 12,569 Loss on prepayment of debt - 1,808 Gain on investments   -   (1,667 ) Net income attributable to shareholders, as adjusted $ 132,223 $ 127,797     Net income per basic share, as reported $ 1.16 $ 1.11 Intangible assets amortization expense .12 .09 Restructuring, integration, and other charges .17 .13 Loss on prepayment of debt - .02 Gain on investments   -   (.02 ) Net income per basic share, as adjusted $ 1.44 $ 1.33     Net income per diluted share, as reported $ 1.14 $ 1.09 Intangible assets amortization expense .11 .09 Restructuring, integration, and other charges .17 .13 Trade name impairment charge - .02 Gain on investments   -   (.02 ) Net income per diluted share, as adjusted $ 1.43 $ 1.32    

The sum of the components for basic and diluted net income per share, as adjusted, may not agree to totals, as presented, due to rounding.

                   

ARROW ELECTRONICS, INC.

SEGMENT INFORMATION

(In thousands)

(Unaudited)

  Quarter Ended April 2,

2016

          March 28,

2015

Sales: Global components $ 3,675,929 $ 3,346,763 Global ECS   1,798,248     1,655,622   Consolidated $ 5,474,177   $ 5,002,385     Operating income (loss): Global components $ 170,770 $ 164,895 Global ECS 78,212 67,517 Corporate (a)   (67,618 )   (54,978 ) Consolidated $ 181,364   $ 177,434     (a)     Includes restructuring, integration, and other charges of $20.8 million and $16.2 million for the first quarters of 2016 and 2015, respectively.                  

NON-GAAP SEGMENT RECONCILIATION

  Quarter Ended April 2,

2016

          March 28,

2015

Global components operating income, as reported $ 170,770 $ 164,895 Intangible assets amortization expense   7,900   5,782 Global components operating income, as adjusted $ 178,670 $ 170,677   Global ECS operating income, as reported $ 78,212 $ 67,517 Intangible assets amortization expense   5,013   5,325 Global ECS operating income, as adjusted $ 83,225 $ 72,842  

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Arrow Electronics, Inc.Steven O’BrienDirector, Investor Relations303-824-4544orPaul J. ReillyExecutive Vice President, Finance and Operations, andChief Financial Officer631-847-1872orMedia Contact:John HouriganVice President, Global Communications303-824-4586