Press Release Details

-- Fourth Quarter Non-GAAP Diluted Earnings per Share Advance 31% to Record $1.69 --

-- Cash Flow from Operations of $215 Million in the Fourth Quarter --

ENGLEWOOD, Colo.--(BUSINESS WIRE)--Feb. 5, 2014-- Arrow Electronics Inc. (NYSE:ARW) today reported fourth quarter 2013 net income of $134.8 million, or $1.32 per share on a diluted basis, compared with net income of $174.7 million, or $1.62 per share on a diluted basis in the fourth quarter of 2012. Excluding certain items in both the fourth quarters of 2013 and 2012¹, net income of $172.0 million, or $1.69 per share on a diluted basis, in the fourth quarter of 2013 compared with net income of $139.7 million, or $1.29 per share on a diluted basis, in the fourth quarter of 2012.

Fourth quarter sales of $6.15 billion increased 14 percent from sales of $5.40 billion in the prior year. Sales, as adjusted, increased 8 percent year over year.

“An outstanding fourth quarter capped off a good year for Arrow. Both sales and non-GAAP earnings per share were ahead of our expectations, and we, again, generated strong cash flow. Operating margins grew in both businesses year over year, and we posted record operating income in the fourth quarter,” said Michael J. Long, chairman, president, and chief executive officer.

Global components fourth-quarter sales of $3.44 billion increased 8 percent year over year. Sales, as adjusted, increased 6 percent year over year. Sales in the Asia-Pacific region increased 9 percent year over year, with significant contributions from China. In the Americas, sales increased 3 percent year over year. European sales, as adjusted, were up 10 percent year over year.

Global enterprise computing solutions (“ECS”) fourth-quarter sales of $2.72 billion increased 23 percent year over year. Sales, as adjusted, increased 12 percent year over year, as storage, software, and services advanced at double digit growth rates globally. In the Americas, sales grew 19 percent year over year as our value-added service offering creates a differentiated value proposition for our suppliers and customers. In Europe sales, as adjusted, advanced 5 percent year over year.

FULL YEAR

Arrow’s net income for 2013 was $399.4 million, or $3.85 per share on a diluted basis, compared with net income of $506.3 million, or $4.56 per share on a diluted basis in 2012. Excluding certain items in both 2013 and 2012¹, net income of $519.0 million, or $5.01 per share on a diluted basis, in 2013 compared with net income of $517.8 million, or $4.66 per share on a diluted basis, in 2012.

2013 sales of $21.36 billion increased 5 percent from sales of $20.41 billion in 2012. Sales, as adjusted, increased 3 percent year over year.

“We were able to drive current year results, with operating income, as adjusted, up $14 million year over year to $823 million. We also invested in our future, funding organic growth programs and completing acquisitions to accelerate our strategy, as well as return significant capital to our shareholders, said Mr. Long.”

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.

“With $451 million in cash flow from operations in 2013, 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 do both strategic acquisitions and return approximately $350 million to shareholders through our stock repurchase program in 2013.”

GUIDANCE

We expect no meaningful change to the markets we serve in the first quarter of 2014.

“As we look to the first quarter, we believe that total sales will be between $5.1 billion and $5.5 billion, with global components sales between $3.3 billion and $3.5 billion and global enterprise computing solutions sales between $1.8 billion and $2.0 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 $1.14 to $1.26 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 102 million, and the average USD to Euro exchange rate for the first quarter is 1.35 to 1,” said Mr. Reilly.

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 ECS 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 certain other items that impact the year over year comparison. These other items include a prospective revision of sales related to a fulfillment contract to present these revenues on an agency basis as net fees, as compared to presenting gross sales (referred to as “change in presentation of sales” which had no impact on profitability or cash flow) 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), 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.

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.

Source: Arrow Electronics Inc.

Arrow Electronics Inc.
Greg Hanson
Vice President and Treasurer
303-824-4537
or
Paul J. Reilly
Executive Vice President, Finance and Operations & Chief Financial Officer
631-847-1872
or
Media:
John Hourigan
Vice President, Global Communications
303-824-4586