Arrow Electronics Reports Fourth-Quarter Non-GAAP Earnings Per Share of $1.88

Arrow Electronics, Inc. (NYSE:ARW) today reported fourth-quarter 2014 net income of $116.2 million, or $1.18 per share on a diluted basis, compared with net income of $134.8 million, or $1.32 per share on a diluted basis, in the fourth quarter of 2013. Excluding certain items¹ in the fourth quarters of 2014 and 2013, net income would have been $184.4 million, or $1.88 per share on a diluted basis, in the fourth quarter of 2014, compared with net income of $172.0 million, or $1.69 per share on a diluted basis, in the fourth quarter of 2013. Fourth-quarter sales of $6.40 billion increased 4 percent from sales of $6.15 billion in the prior year.

“In the fourth quarter we produced record results, completing an outstanding year. Earnings per share of $1.88 were above our expectations, with sales of $6.4 billion above the midpoint of our guidance. Our global components and enterprise computing solutions segments both delivered sales and operating income growth. The stable demand environment for global components matched our expectations. Our focus on the higher value portion of the datacenter resulted in record operating income for our enterprise computing solutions business,” said Michael J. Long, chairman, president, and chief executive officer.

Global components fourth-quarter sales of $3.59 billion increased 4 percent year over year. Sales, as adjusted, grew 5 percent year over year. Americas components sales increased 4 percent year over year. Europe components sales grew 1 percent year over year and the region grew 8 percent year over year on an as-adjusted basis. Components sales in the Asia-Pacific region increased 8 percent year over year.

Global enterprise computing solutions fourth-quarter sales of $2.81 billion grew 3 percent year over year. Americas sales grew 9 percent year over year. Europe sales declined 6 percent year over year and the region declined 3 percent year over year on an as-adjusted basis. Both Americas and Europe continued to experience strong growth in software and services.

FULL-YEAR RESULTS

Arrow’s net income for 2014 was $498.0 million, or $4.98 per share on a diluted basis, compared with net income of $399.4 million, or $3.85 per share on a diluted basis, in 2013. Excluding certain items¹ in 2014 and 2013, net income would have been $593.0 million, or $5.93 per share on a diluted basis, in 2014, compared with net income of $519.0 million, or $5.01 per share on a diluted basis, in 2013. 2014 sales of $22.77 billion increased 7 percent from sales of $21.36 billion in 2013. Sales, as adjusted, increased 3 percent year over year.

“We delivered strong leverage on our sales in 2014, with operating income, as adjusted, up 12 percent year over year to $924 million, and diluted earnings per share up 19 percent year over year to $5.93,” said Mr. Long.

“Cash flow from operations was $673 million in 2014 as we again exceeded our cash flow target with returns advancing over the prior year,” said Paul J. Reilly, executive vice president, finance and operations, and chief financial officer. “The strong management of our balance sheet and cash flow provided the opportunity for Arrow to return approximately $290 million to shareholders through our stock repurchase program and to continue to make strategic acquisitions in 2014.”

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 first quarter, we believe that total sales will be between $4.9 billion and $5.3 billion, with global components sales between $3.35 billion and $3.55 billion, and global enterprise computing solutions sales between $1.55 billion and $1.75 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 $1.27 to $1.39 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 98 million, and the average USD to Euro exchange rate for the first quarter to be 1.14 to 1. The weaker Euro will have a negative impact of $285 million or 5 percent on sales and a negative impact of $.08 or 6 percent on earnings per share on a diluted basis, when compared with the first quarter of 2014. The weaker Euro will have a negative impact of $175 million or 3 percent on sales and a negative impact of $.06 or 4 percent on earnings per share on a diluted basis when compared with the fourth quarter of 2014,” said Mr. Reilly.

Please refer to the CFO commentary, which can be found at www.arrow.com/investor, 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 in 56 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, 2014.

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 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), trade name impairment charge, sale of investment, prepayment of debt, and adjustments related to certain tax matters. 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.