Document

CENTENNIAL, Colo.--(BUSINESS WIRE)-Nov. 4, 2021--Arrow Electronics, Inc. (NYSE:ARW) today reported third-quarter 2021 sales of $8.51 billion, an increase of 18 percent from sales of $7.23 billion in the third quarter of 2020. Third-quarter net income was $290 million, or $4.00 per share on a diluted basis, compared with a net income of $166 million, or $2.13 per share on a diluted basis, in the third quarter of 2020. Non-GAAP net income1 was $293 million, or $4.04 per share on a diluted basis, in the third quarter of 2021, compared with non-GAAP net income of $162 million, or $2.08 per share on a diluted basis, in the third quarter of 2020.

“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. “The value we deliver to customers and suppliers is inexorably linked to the value we capture for all of our stakeholders, which is enabling us to navigate through the near-term supply challenges. We expect component supply to remain well below demand in the coming quarters and through the better part of 2022.”

Global components third-quarter sales of $6.62 billion reflected an increase of 25 percent year over year and non-GAAP sales increased 24 percent year over year. Asia-Pacific components third-quarter sales increased 16 percent year over year and non-GAAP sales in the region increased 15 percent year over year. Americas components third-quarter sales increased 33 percent year over year. Europe components third-quarter sales increased 33 percent year over year and non-GAAP sales in the region increased 32 percent year over year. Global components third-quarter operating income was $385 million, and third-quarter non-GAAP operating income was $392 million.

Global enterprise computing solutions third-quarter sales of $1.89 billion reflected a decrease of 2 percent year over year and non-GAAP sales decreased 3 percent year over year. Europe enterprise computing solutions third-quarter sales increased 5 percent year over year and non-GAAP sales in the region increased 3 percent year over year. Americas enterprise computing solutions third-quarter sales decreased 6 percent year over year. Global enterprise computing solutions third-quarter operating income was $77 million, and third-quarter non-GAAP operating income was $79 million.

“We are taking advantage of the current environment to enhance the returns profile of our business while further solidifying our balance sheet. Our return on invested capital increased year over year for the sixth straight quarter, and our leverage ratios are at the lowest levels in ten years,” said Chris Stansbury, senior vice president and chief financial officer. “Our strong profitability, positive cash flow from operations, 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 second consecutive quarter. Our current repurchase authorization stands at approximately $413 million.”

This press release includes “forward-looking” statements, as the term is defined under the federal securities laws, including but not limited to statements regarding: Arrow’s future financial performance, including its outlook on financial results for the fourth quarter of fiscal 2021, 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 treat COVID-19, industry conditions, 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, foreign currency fluctuation, changes in legal and regulatory matters, non-compliance with certain regulations, such as export, anti-trust, 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.

The company provides non-GAAP sales, gross profit, operating income, income before income taxes, provision for income taxes, net income, 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, the impact of notes receivable reserves and recoveries related to the AFS business (referred to as “AFS notes receivable reserves and recoveries”), identifiable intangible asset amortization, restructuring, integration, and other charges, impairments of long-lived assets, the impact of wind down, gains and losses on investments, the impact of tax legislation changes, and pension settlement gains and losses.


ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)

	Quarter Ended				Nine Months Ended
	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020

Sales	$	8,512,391	$	7,231,260	$	25,460,941	$	20,219,171
Cost of sales	7,436,619		6,442,670		22,454,954		17,951,727
Gross profit	1,075,772		788,590		3,005,987		2,267,444
Operating expenses:
Selling, general, and administrative expenses	625,883		504,211		1,802,534		1,539,520
Depreciation and amortization	48,054		46,732		146,924		140,654

Impairments	—		2,305		4,482		7,223
Restructuring, integration, and other charges (credits)	(3,030)		(2,840)		7,157		6,948
	670,907		550,408		1,961,097		1,694,345
Operating income	404,865		238,182		1,044,890		573,099
Equity in earnings of affiliated companies	1,151		61		2,185		308
Gain (loss) on investments, net	1,386		2,726		10,905		(3,183)

Employee benefit plan (expense) credit, net	(1,256)		595		(3,924)		(1,687)
Interest and other financing expense, net	(32,667)		(30,461)		(97,008)		(105,596)
Income before income taxes	373,479		211,103		957,048		462,941
Provision for income taxes	82,929		44,707		218,068		113,453
Consolidated net income	290,550		166,396		738,980		349,488
Noncontrolling interests	523		336		1,991		1,121
Net income attributable to shareholders	$	290,027	$	166,060	$	736,989	$	348,367

Net income per share:
Basic	$	4.05	$	2.15	$	10.04	$	4.42
Diluted	$	4.00	$	2.13	$	9.92	$	4.39

Weighted-average shares outstanding:
Basic	71,671		77,390		73,426		78,807
Diluted	72,571		78,086		74,313		79,404


ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except par value)
(Unaudited)

	October 2, 2021		December 31, 2020

ASSETS
Current assets:
Cash and cash equivalents	$	215,932	$	373,615
Accounts receivable, net	9,329,427		9,205,343
Inventories	3,834,988		3,287,308
Other current assets	345,317		286,633
Total current assets	13,725,664		13,152,899
Property, plant, and equipment, at cost:
Land	5,691		7,940
Buildings and improvements	188,205		207,614
Machinery and equipment	1,537,671		1,553,371
	1,731,567		1,768,925
Less: Accumulated depreciation and amortization	(1,026,172)		(969,320)
Property, plant, and equipment, net	705,395		799,605
Investments in affiliated companies	69,022		76,358
Intangible assets, net	204,458		233,819
Goodwill	2,090,248		2,115,469
Other assets	635,673		675,761
Total assets	$	17,430,460	$	17,053,911
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	8,005,207	$	7,937,889
Accrued expenses	1,142,753		1,034,361
Short-term borrowings, including current portion of long-term debt	353,915		158,633
Total current liabilities	9,501,875		9,130,883
Long-term debt	2,039,761		2,097,940
Other liabilities	651,196		676,136

Equity:
Shareholders’ equity:
Common stock, par value $1:
Authorized - 160,000 shares in both 2021 and 2020
Issued - 125,424 shares in both 2021 and 2020	125,424		125,424
Capital in excess of par value	1,183,009		1,165,850
Treasury stock (55,370 and 50,581 shares in 2021 and 2020, respectively), at cost	(3,380,984)		(2,776,821)
Retained earnings	7,416,740		6,679,751
Accumulated other comprehensive loss	(165,711)		(104,885)
Total shareholders’ equity	5,178,478		5,089,319
Noncontrolling interests	59,150		59,633
Total equity	5,237,628		5,148,952
Total liabilities and equity	$	17,430,460	$	17,053,911


ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Quarter Ended
	October 2, 2021		September 26, 2020
Cash flows from operating activities:
Consolidated net income	$	290,550	$	166,396
Adjustments to reconcile consolidated net income to net cash provided by operations:
Depreciation and amortization	48,054		46,732
Amortization of stock-based compensation	7,639		6,285
Equity in earnings of affiliated companies	(1,151)		(61)
Deferred income taxes	(2,715)		(7,369)
Impairments	—		2,305



Gain on investments, net	(1,301)		(2,727)



Other	1,539		3,995
Change in assets and liabilities, net of effects of acquired and disposed businesses:
Accounts receivable, net	(545,314)		87,402
Inventories	(211,554)		207,646
Accounts payable	413,992		(176,973)
Accrued expenses	91,481		(41,889)
Other assets and liabilities	23,026		(17,015)
Net cash provided by operating activities	114,246		274,727
Cash flows from investing activities:


Acquisition of property, plant, and equipment	(21,176)		(30,013)

Other	373		(9,116)
Net cash used for investing activities	(20,803)		(39,129)
Cash flows from financing activities:
Change in short-term and other borrowings	(1,155)		(78,966)
Proceeds from long-term bank borrowings, net	154,994		328


Proceeds from exercise of stock options	3,621		2,233
Repurchases of common stock	(250,221)		(153,011)


Net cash used for financing activities	(92,761)		(229,416)
Effect of exchange rate changes on cash	(28,820)		15,009
Net increase (decrease) in cash and cash equivalents	(28,138)		21,191
Cash and cash equivalents at beginning of period	244,070		205,828
Cash and cash equivalents at end of period	$	215,932	$	227,019


ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Nine Months Ended
	October 2, 2021		September 26, 2020
Cash flows from operating activities:
Consolidated net income	$	738,980	$	349,488
Adjustments to reconcile consolidated net income to net cash provided by operations:
Depreciation and amortization	146,924		140,654
Amortization of stock-based compensation	29,606		28,602
Equity in earnings of affiliated companies	(2,185)		(308)
Deferred income taxes	9,354		38,976
Impairments	4,482		7,223



Loss (gain) on investments, net	(10,820)		3,198



Other	3,190		4,043
Change in assets and liabilities, net of effects of acquired and disposed businesses:
Accounts receivable, net	(262,272)		533,570
Inventories	(581,766)		260,573
Accounts payable	136,329		(228,000)
Accrued expenses	174,583		29,154
Other assets and liabilities	4,685		(7,336)
Net cash provided by operating activities	391,090		1,159,837
Cash flows from investing activities:


Acquisition of property, plant, and equipment	(62,285)		(89,555)
Proceeds from sale of property, plant, and equipment	22,171		—
Other	373		(14,582)
Net cash used for investing activities	(39,741)		(104,137)
Cash flows from financing activities:
Change in short-term and other borrowings	(15,986)		(86,155)
Proceeds from (repayments of) long-term bank borrowings, net	289,235		(411,362)

Redemption of notes	(130,860)		(209,366)
Proceeds from exercise of stock options	44,938		5,963
Repurchases of common stock	(661,548)		(384,750)
Settlement of forward-starting interest rate swap	—		(48,378)
Other	(159)		(141)
Net cash used for financing activities	(474,380)		(1,134,189)
Effect of exchange rate changes on cash	(34,652)		5,405
Net decrease in cash and cash equivalents	(157,683)		(73,084)
Cash and cash equivalents at beginning of period	373,615		300,103
Cash and cash equivalents at end of period	$	215,932	$	227,019


ARROW ELECTRONICS, INC.
NON-GAAP SALES RECONCILIATION
(In thousands)
(Unaudited)
	Quarter Ended
	October 2, 2021		September 26, 2020		% Change

Consolidated sales, as reported	$	8,512,391	$	7,231,260	17.7	%
Impact of changes in foreign currencies	—		54,931


Non-GAAP consolidated sales	$	8,512,391	$	7,286,191	16.8	%

Global components sales, as reported	$	6,623,926	$	5,307,737	24.8	%
Impact of changes in foreign currencies	—		34,663


Non-GAAP global components sales	$	6,623,926	$	5,342,400	24.0	%

Americas components sales, as reported	$	2,018,551	$	1,515,962	33.2	%
Impact of changes in foreign currencies	—		78


Non-GAAP Americas components sales	$	2,018,551	$	1,516,040	33.1	%

Asia components sales, as reported	$	3,009,390	$	2,595,103	16.0	%
Impact of changes in foreign currencies	—		18,496


Non-GAAP Asia components sales	$	3,009,390	$	2,613,599	15.1	%

Europe components sales, as reported	$	1,595,985	$	1,196,672	33.4	%
Impact of changes in foreign currencies	—		16,089


Non-GAAP Europe components sales	$	1,595,985	$	1,212,761	31.6	%

Global ECS sales, as reported	$	1,888,465	$	1,923,523	(1.8)	%
Impact of changes in foreign currencies	—		20,268


Non-GAAP global ECS sales	$	1,888,465	$	1,943,791	(2.8)	%

Americas ECS sales, as reported	$	1,203,663	$	1,273,791	(5.5)	%
Impact of changes in foreign currencies	—		5,769


Non-GAAP Americas ECS sales	$	1,203,663	$	1,279,560	(5.9)	%

Europe ECS sales, as reported	$	684,802	$	649,732	5.4	%
Impact of changes in foreign currencies	—		14,499


Non-GAAP Europe ECS sales	$	684,802	$	664,231	3.1	%


ARROW ELECTRONICS, INC.
NON-GAAP SALES RECONCILIATION
(In thousands)
(Unaudited)
	Nine Months Ended
	October 2, 2021		September 26, 2020		% Change

Consolidated sales, as reported	$	25,460,941	$	20,219,171	25.9	%
Impact of changes in foreign currencies	—		476,218


Non-GAAP Consolidated sales	$	25,460,941	$	20,695,389	23.0	%

Global components sales, as reported	$	19,677,940	$	14,579,593	35.0	%
Impact of changes in foreign currencies	—		298,100


Non-GAAP Global components sales	$	19,677,940	$	14,877,693	32.3	%

Americas components sales, as reported	$	5,690,480	$	4,557,661	24.9	%
Impact of changes in foreign currencies	—		425


Non-GAAP Americas components sales	$	5,690,480	$	4,558,086	24.8	%

Asia components sales, as reported	$	9,332,211	$	6,396,853	45.9	%
Impact of changes in foreign currencies	—		60,105


Non-GAAP Asia components sales	$	9,332,211	$	6,456,958	44.5	%

Europe components sales, as reported	$	4,655,249	$	3,625,079	28.4	%
Impact of changes in foreign currencies	—		237,570


Non-GAAP Europe components sales	$	4,655,249	$	3,862,649	20.5	%

Global ECS sales, as reported	$	5,783,001	$	5,639,578	2.5	%
Impact of changes in foreign currencies	—		178,118


Non-GAAP Global ECS sales	$	5,783,001	$	5,817,696	(0.6)	%

Americas ECS sales, as reported	$	3,522,356	$	3,625,735	(2.9)	%
Impact of changes in foreign currencies	—		37,655


Non-GAAP Americas ECS sales	$	3,522,356	$	3,663,390	(3.8)	%

Europe ECS sales, as reported	$	2,260,645	$	2,013,843	12.3	%
Impact of changes in foreign currencies	—		140,463


Non-GAAP Europe ECS sales	$	2,260,645	$	2,154,306	4.9	%


ARROW ELECTRONICS, INC.
NON-GAAP EARNINGS RECONCILIATION
(In thousands except per share data)
(Unaudited)

Three months ended October 2, 2021
	Reported GAAP measure			Intangible amortization expense		Restructuring & Integration charges		AFS Reserves & Recoveries		Impairments		Impact of Wind Down		Other(1)		Non-GAAP measure
Sales	$	8,512,391		$	—	$	—	$	—	$	—	$	—	$	—	$	8,512,391
Gross Profit	1,075,772			—		—		—		—		—		—		1,075,772
Operating income	404,865			9,202		(3,030)		—		—		—		—		411,037
Income before income taxes	373,479			9,202		(3,030)		—		—		—		(1,386)		378,265
Provision for income taxes	82,929			2,353		(689)		—		—		—		(334)		84,259
Consolidated net income	290,550			6,849		(2,341)		—		—		—		(1,052)		294,006
Noncontrolling interests	523			147		—		—		—		—		—		670
Net income attributable to shareholders	$	290,027		$	6,702	$	(2,341)	$	—	$	—	$	—	$	(1,052)	$	293,336
Net income per diluted share (3)	$	4.00		$	0.09	$	(0.03)	$	—	$	—	$	—	$	(0.01)	$	4.04
Effective tax rate (4)	22.2		%													22.3		%

Three months ended September 26, 2020
	Reported GAAP measure			Intangible amortization expense		Restructuring & Integration charges		AFS Reserves & Recoveries		Impairments		Impact of Wind Down		Other(3)		Non-GAAP measure
Sales	$	7,231,260		$	—	$	—	$	—	$	—	$	—	$	—	$	7,231,260
Gross Profit	788,590			—		—		—		—		(475)		—		788,115
Operating income	238,182			9,352		(2,840)		(233)		2,305		(2,487)		—		244,279
Income before income taxes	211,103			9,352		(2,840)		(233)		2,305		(2,478)		(4,495)		212,714
Provision for income taxes	44,707			2,396		(665)		(56)		556		(583)		3,797		50,152
Consolidated net income	166,396			6,956		(2,175)		(177)		1,749		(1,895)		(8,292)		162,562
Noncontrolling interests	336			146		—		—		—		—		—		482
Net income attributable to shareholders	$	166,060		$	6,810	$	(2,175)	$	(177)	$	1,749	$	(1,895)	$	(8,292)	$	162,080
Net income per diluted share (4)	$	2.13		$	0.09	$	(0.03)	$	—	$	0.02	$	(0.02)	$	(0.11)	$	2.08
Effective tax rate (5)	21.2		%													23.6		%


ARROW ELECTRONICS, INC.
NON-GAAP EARNINGS RECONCILIATION
(In thousands except per share data)
(Unaudited)

Nine months ended October 2, 2021
	Reported GAAP measure			Intangible amortization expense		Restructuring & Integration charges		AFS Reserves & Recoveries		Impairments		Impact of Wind Down		Other(2)		Non-GAAP measure
Sales	$	25,460,941		$	—	$	—	$	—	$	—	$	—	$	—	$	25,460,941
Gross Profit	3,005,987			—		—		—		—		—		—		3,005,987
Operating income	1,044,890			27,844		7,157		—		4,482		—		—		1,084,373
Income before income taxes	957,048			27,844		7,157		—		4,482		—		(10,724)		985,807
Provision for income taxes	218,068			7,120		1,487		—		1,078		—		(2,581)		225,172
Consolidated net income	738,980			20,724		5,670		—		3,404		—		(8,143)		760,635
Noncontrolling interests	1,991			447		—		—		—		—		—		2,438
Net income attributable to shareholders	$	736,989		$	20,277	$	5,670	$	—	$	3,404	$	—	$	(8,143)	$	758,197
Net income per diluted share (4)	$	9.92		$	0.27	$	0.08	$	—	$	0.05	$	—	$	(0.11)	$	10.20
Effective tax rate (5)	22.8		%													22.8		%

Nine months ended September 26, 2020
	Reported GAAP measure			Intangible amortization expense		Restructuring & Integration charges		AFS Reserves & Recoveries		Impairments		Impact of Wind Down		Other(3)		Non-GAAP measure
Sales	$	20,219,171		$	—	$	—	$	—	$	—	$	—	$	—	$	20,219,171
Gross Profit	2,267,444			—		—		—		—		(11,171)		—		2,256,273
Operating income	573,099			29,041		6,948		(956)		7,223		(14,311)		—		601,044
Income before income taxes	462,941			29,041		6,948		(956)		7,223		(14,292)		1,414		492,319
Provision for income taxes	113,453			7,461		2,219		(231)		2,356		(3,245)		1,608		123,621
Consolidated net income	349,488			21,580		4,729		(725)		4,867		(11,047)		(194)		368,698
Noncontrolling interests	1,121			420		—		—		—		—		—		1,541
Net income attributable to shareholders	$	348,367		$	21,160	$	4,729	$	(725)	$	4,867	$	(11,047)	$	(194)	$	367,157
Net income per diluted share (4)	$	4.39		$	0.27	$	0.06	$	(0.01)	$	0.06	$	(0.14)	$	—	$	4.62
Effective tax rate (5)	24.5		%													25.1		%



























(1) Other includes gain on investments, net.
(2) Other includes gain on investments, net and pension settlement loss.
(3) Other includes (gain) loss on investments, net, non-recurring tax items, and pension settlement gain.
(4) In all periods presented the sum of the components for diluted EPS, as adjusted may not agree to totals, as presented, due to rounding.
(5) 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.


ARROW ELECTRONICS, INC.
SEGMENT INFORMATION
(In thousands)
(Unaudited)

	Quarter Ended				Nine Months Ended
	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
Sales:
Global components	$	6,623,926	$	5,307,737	$	19,677,940	$	14,579,593
Global ECS	1,888,465		1,923,523		5,783,001		5,639,578
Consolidated	$	8,512,391	$	7,231,260	$	25,460,941	$	20,219,171
Operating income (loss):
Global components (a)	$	385,353	$	203,603	$	1,001,772	$	550,206
Global ECS (b)	76,793		82,529		235,251		197,883
Corporate (c)	(57,281)		(47,950)		(192,133)		(174,990)
Consolidated	$	404,865	$	238,182	$	1,044,890	$	573,099


NON-GAAP SEGMENT RECONCILIATION

	Quarter Ended				Nine Months Ended
	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020

Global components operating income, as reported	$	385,353	$	203,603	$	1,001,772	$	550,206
Intangible assets amortization expense	6,974		7,014		20,973		21,653
Impairments	—		—		4,482		—
Impact of wind down	—		(2,487)		—		(14,311)
AFS notes receivable recoveries	—		(233)		—		(956)

Global components non-GAAP operating income	$	392,327	$	207,897	$	1,027,227	$	556,592

Global ECS operating income, as reported	$	76,793	$	82,529	$	235,251	$	197,883
Intangible assets amortization expense	2,228		2,338		6,871		7,388
Impairments	—		—		—		4,918
Global ECS non-GAAP operating income	$	79,021	$	84,867	$	242,122	$	210,189


Fourth-Quarter 2021 Outlook
	Reported GAAP measure	Intangible amortization expense	Restructuring & integration charges	Non-GAAP measure
Net income per diluted share	$4.19 - $4.35	$.09	$.09	$4.37 - $4.53


ARROW ELECTRONICS, INC. 9201 E. DRY CREEK ROAD CENTENNIAL, CO 80112 303-824-4000						NEWS