Arrow Electronics Reports First-Quarter Non-GAAP Earnings Per Share of $1.22

Arrow Electronics, Inc. (NYSE:ARW) today reported first-quarter 2014 net income of $107.1 million, or $1.06 per share on a diluted basis, compared with net income of $77.9 million, or $.72 per share on a diluted basis in the first quarter of 2013. Excluding certain items¹ in both the first quarters of 2014 and 2013, net income of $124.0 million, or $1.22 per share on a diluted basis, in the first quarter of 2014 compared with net income of $103.1 million, or $.96 per share on a diluted basis, in the first quarter of 2013. First quarter sales of $5.08 billion increased 5 percent from sales of $4.85 billion in the prior year. Sales, as adjusted, decreased 1 percent year over year.

“We continued to execute on our strategic initiatives in the first quarter. Earnings per share of $1.22 were above the midpoint of our guidance, while sales of $5.1 billion were slightly below our expectations. Global components delivered good growth. Business conditions for enterprise computing solutions were mixed; however, demand improved in April. We were pleased with the profitability performance across our businesses that resulted in 28 percent earnings-per-share growth,” said Michael J. Long, chairman, president, and chief executive officer.

Global components first-quarter sales of $3.42 billion increased 7 percent year over year. Sales, as adjusted, grew 4 percent year over year. Americas sales increased 1 percent year over year. European sales grew 12 percent year over year. Sales in Europe, as adjusted, grew 7 percent, the fourth consecutive quarter of year-over-year growth for the region on an as-adjusted basis. Sales in the Asia-Pacific region increased 12 percent year over year, with strength in the core business.

Global enterprise computing solutions first-quarter sales of $1.66 billion were flat year over year. Sales, as adjusted, decreased 11 percent year over year, as storage and servers experienced lower demand globally. Trends in the Americas and Europe were consistent, characterized by growth in our software and security product lines.

“With $124 million in cash flow from operations in the first quarter, we again meaningfully exceeded our cash flow target,” said Paul J. Reilly, executive vice president, finance and operations, and chief financial officer. “The highly effective management of our balance sheet and related strong cash flow provided us with the opportunity to both deploy capital toward our strategic initiatives and return approximately $75 million to shareholders through our stock repurchase program.”

GUIDANCE

“As we look to the second quarter, we would expect market conditions for our global components business to remain consistent with the first quarter. We expect some recovery in the markets served by our enterprise computing solutions business. We believe that total sales will be between $5.45 billion and $5.85 billion, with global components sales between $3.45 billion and $3.65 billion and global enterprise computing solutions sales between $2 billion and $2.2 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 $1.35 to $1.47 per share. Our guidance assumes an average tax rate in the range of 27 to 29 percent, average diluted shares outstanding are expected to be 101 million, and the average USD to Euro exchange rate for the second quarter is 1.38 to 1,” said Mr. Reilly.

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.

Please refer to the CFO commentary as a supplement to the company’s earnings release, which can be found at www.arrow.com/investor.

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 in 58 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, 2013.

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 prior periods to include the sales of businesses acquired as if the acquisitions had occurred at the beginning of the 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), and prepayment of debt. 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.